CC 2016-01-26_09c Accept CAFRMEMORANDUM
TO: CITY COUNCIL
FROM: DEBORAH MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES
BY: RYAN CORNELL, ACCOUNTING MANAGER
SUBJECT: CONSIDERATION OF ACCEPTANCE OF THE COMPREHENSIVE
ANNUAL FINANCIAL REPORT
DATE: JANUARY 26 , 2016
RECOMMENDATION:
It is recommended that the City Council receive and file the Comprehensive Annual
Financial Report (CAFR) for the fiscal year ended June 30, 2015.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
There is no financial impact from this action.
BACKGROUND:
On April 22, 2014, the City Council awarded an agreement for consultant services to Moss,
Levy & Hartzheim, LLP to audit the City’s financial records for the fiscal year ended June
30, 2015. Audit services are retained for two reasons: first, to have an independent review
of internal control; and secondly, to ensure that the resulting financial reports fairly
represent the financial position of the City.
ANALYSIS OF ISSUES:
Generally accepted accounting principles (GAAP) provide the criteria for judging whether a
financial report is fairly presented. In defining the minimum standard of acceptable basic
financial reporting for state and local governments, GAAP mandate a complete set of basic
financial statements, including accompanying note disclosures, as well as the presentation
of certain required supplementary information. GAAP encourages government agencies to
present this information within the Comprehensive Annual Financial Report (CAFR).
The CAFR is a more detailed financial report beyond just the basic financial statements. It
is made up of three basic sections:
• The introductory section: provides general information of the City which includes
the letter of transmittal, list of principal officials, and organizational chart.
Item 9.c. - Page 1
• The financial section: provides the overall financial information of the City which
includes the report of the independent auditor, management’s discussion and
analysis (a narrative of the City finances), the basic financial statements,
required supplementary information and other supplementary schedules and
statements.
• The statistical section: provides a broad range of operational, economic, and
historical data that provides a context for assessing the City’s economic
condition. This section provides information about the City’s general financial
trends, revenue capacity, debt capacity, economic and demographic trends, and
operating information.
The auditors conducted testing of internal controls in June 2015. The procedures for
receiving and disbursing cash, the accounting methodology used to record transactions,
the separation of duties to avert collusion, and asset securities were reviewed. As a result
of this testing, there was one internal control issues/events noted.
• In certain circumstances, cash disbursements related to credit card purchases
were reviewed and approved by the same employee making the purchase.
Administrative Services staff has already communicated the deficiency to City
staff but will also formally update both the credit card and purchasing policy. For
further detail, see Attachment No. 2, Independent Auditors’ Report on Internal
Control over Financial Reporting and on Compliance and Other Matters Based
on an Audit of Financial Statements Performed in Accordance with “Government
Auditing Standards.”
In October 2015, an audit was conducted on net position of the City at June 30, 2015.
Documentation in support of the assets, liabilities, and fund balance of all the funds in the
City were examined and verified. This process assures an impartial review and
substantiation of the City’s net position. The result of this review is the City’s CAFR.
The City’s CAFR is in compliance with newly effective Government Accounting Standards
Board (GASB) pronouncements. The implementation of GASB Statement No. 68,
Accounting and Financial Reporting for Pensions and Statement No. 71, Pension
Transition for Contributions Made Subsequent to the Measurement Date had an impact on
the City’s financial statements this year. GASB Statement No. 68 changes the existing
framework for accounting and financial reporting of pension costs and obligations, which
will be addressed in greater detail later in this report. Statement No. 71 provides further
guidance on how to implement Statement No. 68 in the first year so as not to understate or
overstate the City’s net position. More information is available in Note 1, subsection O of
the Notes to the Basic Financial Statements on page B-48 and Note 11, beginning on page
B-59.
Item 9.c. - Page 2
As presented in the CAFR, the City’s combined net position at June 30, 2015 decreased
by 9.5% from $91.8 million to $83.1 million. This decrease is largely due to GASB
Statement No. 68. This Statement is intended to improve accounting and financial
reporting related to pension liability and established standards for measuring and
recognizing liabilities, deferred outflows/inflows of resources, and pension expense. With
implementation of GASB Statement No. 68, a $14.9 million long-term liability has been
reported on the City’s balance sheet that previously had not been reported. This does not
represent a new liability, but rather, a new reporting requirement.
Net position of all funds reflects all the assets and liabilities of the City. It includes the
City’s investment in capital assets such as parks, bridges and roads as well as the
liabilities or obligations to pay vendors, employees and debt service payments. The net
position is the mathematical difference between assets and liabilities, but it doesn’t
necessarily reflect the economic health of an organization. In the City’s case, 90% of the
total net position reflects capital assets. While these assets are important, they can’t be
used to fund the day-to-day operations of the City and, therefore, may not be the most
useful measure of the City’s liquidity. It may be more useful to compare unassigned fund
balance plus the amount committed for economic stabilization (reserves) to get a sense of
the City’s ability to pay for ongoing operations. In the General Fund, this amount
represents 27.8% of total expenditures, which exceeds the City’s reserve goal of 20%.
For financial reporting purposes, the additional ½ percent local sales tax revenue approved
by voters in 2006 is combined with the General Fund. The combined funds, as shown in
the table on the following page, reports revenues and other financing sources of $18.5
-
10
20
30
40
50
60
70
80
90
100
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Fiscal Year
Net Position by Component
(in Milllions)
Unrestricted Restricted Net investment in capital assets
Item 9.c. - Page 3
million, expenditures of $14.0 million, and transfers out of $3.7 million. As a result, there
was an increase to the fund balance of $929,426 during the 2014-15 fiscal year.
The General Fund’s total fund balance is $6.2 million or 40% of expenditures (including
transfers out). However, some fund balances are considered nonspendable because it is
held as inventory ($6,863) or reflects prepaid items ($109,619). Additionally, $574,823 is
designated for completing capital projects or meeting other commitments in the future. Of
the remaining $5.5 million fund balance, the City has committed $3.0 million to reserve for
economic stabilization. This leaves an unassigned General Fund balance of $2.5 million
that is available for appropriation for City programs and projects.
General Fund
Local Sales
Tax Fund Total
Beginning Fund Balance, 7/1/14 $ 5,089,820 $ 1,685,507 $ 6,775,327
Revenues 13,351,706 2,066,012 15,417,718
Expenditures (13,746,616) (203,899) (13,950,515)
Other Financing Sources/(Uses) 1,468,276 (2,006,053) (537,777)
Net Change in Fund Balance $ 1,073,366 $ (143,940) $ 929,426
General Fund
Local Sales
Tax Fund Total
Fund Balance:
Nonspendable $ 116,482 $ 14,340 $ 130,822
Committed for capital projects 818,003 818,003
Committed for economic
stabilization (reserves) 3,007,971 3,007,971
Assigned 574,823 709,224 1,284,047
Unassigned 2,463,910 2,463,910
Ending Fund Balance, 6/30/15 $ 6,163,186 $ 1,541,567 $ 7,704,753
Auditors may issue three different types of opinions at the conclusion of an audit; an
unqualified, qualified, or adverse opinion. An unqualified opinion assures the reader that
the information presented in the CAFR fairly represents the financial position of the City. A
qualified opinion states that the information is fairly presented except for a particular issue.
An adverse opinion indicates that the agency has major accounting and/or internal control
issues and no reliance may be placed on the financial statements. The Administrative
Services Department staff is proud to report that for the fiscal year ended June 30, 2015,
the City of Arroyo Grande received an unqualified opinion.
Item 9.c. - Page 4
ALTERNATIVES:
The following alternatives are provided for City Council consideration:
- Approve staff recommendations and receive and file the Comprehensive Annual
Financial Report;
- Do not approve staff recommendations;
- Modify staff recommendations and approve;
- Provide direction to staff.
ADVANTAGES:
By receiving and filing the Comprehensive Annual Financial Report, the City will be
accepting the auditors’ unqualified opinion. As mentioned above, an unqualified opinion
assures the reader that the information presented in the CAFR fairly represents the
financial position of the City.
DISADVANTAGES:
There are no disadvantages in relation to the recommended action.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted in front of City Hall on Thursday, January 21, 2016. The Agenda
and report were posted on the City’s website on Friday, January 22, 2016. No public
comments were received.
Attachments:
1) Comprehensive Annual Financial Report (on file in the Administrative Services
and Legislative and Information Services Departments for public review, as well
as on the City’s website at www.arroyogrande.org)
2) Independent Auditors’ Report on Internal Control over Financial Reporting and
on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards.
Item 9.c. - Page 5
Comprehensive
Annual Financial
Report
City of Arroyo Grande
For the Fiscal Year Ending June 30, 2015
2015
Department of Administrative Services
300 E Branch Street ‐ Arroyo Grande, CA ‐ 93420
(805) 473‐5400
Item 9.c. - Page 6
City of Arroyo Grande
CALIFORNIA
Comprehensive Annual
Financial Report
For the Fiscal Year Ended June 30, 2015
Prepared by the Department of Administrative Services
Item 9.c. - Page 7
City of Arroyo Grande
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Table of Contents
For the Fiscal Year Ended June 30, 2015
i
INTRODUCTORY SECTION
Letter of Transmittal ................................................................................................................................................................ A‐1
Directory of Officials ................................................................................................................................................................ A‐5
Organization of City Government ............................................................................................................................................ A‐6
FINANCIAL SECTION
Independent Auditors’ Report .................................................................................................................................................. B‐1
Management’s Discussion and Analysis (unaudited) ............................................................................................................... B‐3
Basic Financial Statements
Government‐wide Financial Statements:
Statement of Net Position ............................................................................................................................................ B‐18
Statement of Activities .................................................................................................................................................. B‐20
Fund Financial Statements:
Description of Major Governmental Funds .................................................................................................................. B‐23
Balance Sheet – Governmental Funds .......................................................................................................................... B‐24
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ................................. B‐27
Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds .................................. B‐28
Reconciliation of the Statement of Revenues, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities ..................................................................... B‐30
Description of Major Proprietary Funds ....................................................................................................................... B‐33
Statement of Net Position – Proprietary Funds ............................................................................................................ B‐34
Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds ................................................ B‐35
Statement of Cash Flows – Proprietary Funds .............................................................................................................. B‐36
Description of Fiduciary Funds ...................................................................................................................................... B‐39
Statement of Fiduciary Net Position ............................................................................................................................. B‐40
Statement of Changes in Fiduciary Net Position ........................................................................................................... B‐41
Notes to Basic Financial Statements ................................................................................................................................ B‐42
Required Supplementary Information (unaudited)
Budgetary Information – Major Governmental Funds:
General Fund ................................................................................................................................................................. B‐71
Special Gasoline Tax Fund ............................................................................................................................................. B‐73
Transportation Impact Fees Fund ................................................................................................................................. B‐74
In‐Lieu Affordable Housing Fund .................................................................................................................................. B‐75
Community Development Block Grant (CDBG) Fund .................................................................................................... B‐76
Other Postemployment Benefits – Schedule of Funding Progress .................................................................................. B‐77
Net Pension Liability – Schedule of Proportionate Share ................................................................................................ B‐78
Net Pension Liability – Schedule of Contributions ........................................................................................................... B‐79
Supplemental Information
Description of Nonmajor Governmental Funds ............................................................................................................... B‐80
Nonmajor Governmental Funds:
Combining Balance Sheet ............................................................................................................................................. B‐82
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ..................................................... B‐86
Agency Funds:
Statement of Changes in Assets and Liabilities ............................................................................................................. B‐90
Item 9.c. - Page 8
City of Arroyo Grande
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Table of Contents
For the Fiscal Year Ended June 30, 2015
ii
STATISTICAL SECTION (unaudited)
Net Position by Component – Last Ten Fiscal Years ................................................................................................................. C‐2
Change in Net Position – Last Ten Fiscal Years ......................................................................................................................... C‐4
Fund Balances of Governmental Funds – Last Ten Fiscal Years ................................................................................................ C‐8
Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years ........................................................................... C‐10
General Governmental Tax Revenues by Source – Last Ten Fiscal Years ............................................................................... C‐12
Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ............................................................... C‐13
Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years.............................................................. C‐14
Principal Property Taxpayers – Current Fiscal Year and Nine Fiscal Years Ago ...................................................................... C‐16
Secured Property Tax Roll Levies and Collections – Last Ten Fiscal Years .............................................................................. C‐18
Taxable Sales by Category – Last Ten Calendar Years ............................................................................................................ C‐20
Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ................................................................................................... C‐22
Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years ..................................................................................... C‐24
Direct and Overlapping Debt .................................................................................................................................................. C‐25
Legal Debt Margin Information – Last Ten Fiscal Years .......................................................................................................... C‐26
Demographic Statistics – Last Ten Calendar Years ................................................................................................................. C‐28
Full‐Time Equivalent City Government Employees by Function ............................................................................................. C‐29
Operating Indicators by Function – Last Ten Fiscal Years ....................................................................................................... C‐30
Capital Asset Statistics by Function – Last Ten Fiscal Years .................................................................................................... C‐32
Item 9.c. - Page 9
Introductory Section
Accounting and financial reporting
standards prescribe that the
introductory section of the CAFR
contains the following: letter of
transmittal, list of principal officials, and
organizational chart.
Item 9.c. - Page 10
AA rr rr oo yy oo GG rr aa nn dd ee
ADMINISTRATIVE SERVICES • 300 E. Branch Street • Arroyo Grande, California 93420
Phone: (805) 473-5400 • Fax: (805) 473-0386 • E-mail: agcity@arroyogrande.org • Website: www.arroyogrande.org
CITY OF
CALIFORNIA
December 18, 2015
To the Honorable Mayor, Member of the City Council, and the Citizens of the City of Arroyo Grande
State law requires that all general‐purpose local governments publish within six months of the close of the fiscal year a
complete set of financial statements presented in conformity with accounting principles generally accepted in the
United States of America (GAAP) and audited in accordance with auditing standards generally accepted in the United
States of America by a licensed certified public accountant. Pursuant to the requirement, we hereby issue this annual
financial report of the City of Arroyo Grande (the City) for the fiscal year ended June 30, 2015.
This report consists of management’s representations concerning the finances of the City. Consequently, management
assumes full responsibility for the completeness and reliability of all of the information presented in this report. To
provide a reasonable basis for making these representations, management of the City has established a comprehensive
internal control framework that is designed both to protect the City’s assets from loss, theft, or misuse and to compile
sufficient reliable information for the preparation of the City’s financial statements in conformity with GAAP. Because
the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls
has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from
material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is
complete and reliable in all material respects.
The City’s financial statements have been audited by Moss, Levy & Hartzheim LLP, a licensed certified public accountant
firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City
for the fiscal year ended June 30, 2015 are free of material misstatements. The 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; and evaluating the overall financial statement
presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for
rendering an unmodified opinion that the City’s financial statements for the fiscal year ended June 30, 2015 are fairly
presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the
financial section of this report.
The independent audit of the City’s financial statements is part of a broader, federally mandated “Single Audit” designed
to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require that
agencies expending more than $500,000 in federal monies, be required to have the independent auditor report not only
on the fair presentation of the financial statements, but also on the audited government’s internal controls and
compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the
administration of federal awards. The City did not expend the minimum amount of federal awards and was thus not
subject to a Single Audit Report.
Management has provided a narrative introduction, overview, and analysis to accompany the basic financial statements
in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the
MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the
independent auditors.
A‐1
Item 9.c. - Page 11
A‐ 2
Profile of the Government
The City of Arroyo Grande is located five miles inland from the central California coastline. Incorporated in 1911, the City
contains acres of agriculturally productive land in a valley created by the Arroyo Grande Creek. The City currently
occupies a land area of 5.45 square miles and serves a population of approximately 17,300.
The City is empowered to levy a property tax on both real and personal properties located within its boundaries. It’s
also empowered by State statute to extend its corporate limits by annexation, which occurs periodically when deemed
appropriate by the City Council.
The City has operated under the council‐manager form of government since 1911. Policy‐making and legislative
authority are vested in a governing council consisting of the mayor and four other members. The governing council is
responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring both
the City’s manager and attorney. The City’s manager is responsible for carrying out the policies and ordinances of the
City Council, for overseeing the day‐to‐day operations of the City, and for appointing the heads of the various
departments. The Council is elected on a non‐partisan basis. Council members serve four‐year staggered terms and the
mayor is elected to serve a two‐year term. The mayor and the council members are elected at large.
The City provides a full range of services including: police protection, the construction and maintenance of streets and
other infrastructure, and recreational activities and cultural events. Certain utility services are provided by the City
through the Water and Sewer Funds, which is a division of the Public Works department.
The annual budget serves as the foundation for the City’s financial planning and control. All departments and divisions
are required to submit requests for appropriations to the City Manager. These requests are used as the starting point
for developing a proposed budget. The City Manager then presents this proposed budget to the City Council for review
prior to June 1st. The City Council is required to hold public hearings on the proposed budget and to adopt a final budget
by no later than June 30th, the close of the City’s fiscal year. The appropriated budget is prepared by fund, department
(e.g. public works), and division (e.g. automotive shop). Department directors may make transfers of appropriations
within a department. Transfers of appropriations between departments or changes in appropriations that affect the
fund balance, require the approval of the City Council.
Factors Affecting Financial Condition
The information presented in the financial statements is perhaps best understood when it is considered from the
broader perspective of the specific environment within which the City operates.
Local Economy
The City continues to experience economic recovery, with increases in all major tax revenue sources. The formation of a
local Tourism Business Improvement District is beginning to impact local hotels and motels, as well as other businesses
that are related to tourism. Development activity in the City has begun to increase, with steady increases projected into
next fiscal year. In addition, home prices have and sales tax revenues are increasing. Further detail on the City
demographics can be found in the Statistical Section of the report.
Long‐Term Financial Planning
The City completed a 10‐year fiscal forecast that acknowledges continued investment in the City’s infrastructure as an
important goal. Numerous Capital Improvement Plan (CIP) projects were completed during the fiscal year to improve the
City’s infrastructure, facilities and parks, improve drainage problems and improve the overall look of the community.
The following list of projects approved in the FY 2013‐14 & FY 2014‐15 Biennial Budget will impact the community.
Item 9.c. - Page 12
A‐ 3
Parks – Construction of ADA improvements at the Soto Sports Complex will be accomplished through the use of
Community Development Block Grant funds.
Miscellaneous Projects – There is approximately $3 million budgeted towards the City’s Police Department renovation
and expansion. Additionally, approximately $600,000 is budgeted for remodeling and expanding the City’s Corporation
Yard.
Street Projects – The environmental report for the Brisco Road‐Halcyon Road/Route 101 Interchange project is
scheduled to be completed. In addition, several pavement rehabilitation projects are scheduled to improve the City’s
streets.
Bridge Projects – The Bridge Street bridge rehabilitation, Traffic Way bridge scour and the reinforcement of the historic
Swinging Bridge are all programmed.
Water & Sewer Projects – Various waterline upgrades, the Leanna Drive creek crossing upgrade, lift station No. 4
rehabilitation, and the upgrade of the Pike sewer lines are budgeted.
Cash Management Policies and Practices
Cash temporarily idle during the fiscal year was primarily invested in the Local Agency Investment Fund (LAIF), a State
investment pool. This pool offers the City liquidity, safety, and a higher rate of interest than could be found with local
banks. The average yield on investments was 0.249% during the past fiscal year. Investment income includes
appreciation in the fair value of LAIF at fiscal year‐end. Increases in fair value during the current fiscal year, however, do
not necessarily represent trends that will continue; nor is it always possible to realize such amounts.
Risk Management
The City joined the California Joint Powers Insurance Authority (CJPIA) in July of 2003, for the purpose of pooling liability
risks. The CJPIA was formed under the Joint Powers Agreement (JPA) provisions of the State law. The Fund is directed
by a board of directors comprised of a representative appointed by the city council of each member agency. The
Insurance Fund derives its revenues from contributions established for each city at the beginning of each policy year.
The contributions are established by the board of directors based on the recommendations of the JPA’s program
administrators and actuaries using recognized insurance experience rating techniques.
In addition, various control techniques, including employee accident prevention training, have been implemented during
the year to minimize accident‐related losses. The third‐party coverage is currently maintained for individual workers’
compensation claims in excess of $350,000, while the City participates in a shared risk pool for liability claims above
$30,000. During FY 2003‐04, the City began the process of joining the California Joint Powers Insurance Authority for
workers’ compensation coverage.
Pension and Other Postemployment Benefits
The City participates in the defined benefit pension plan administered by the California Public Retirement Agency
(CalPERS) for all full‐time employees. Each fiscal year, the Agency calculates the amount of the annual contribution the
City must make to the pension plan to ensure the plan will be able to fully meet its obligation to retired employees on a
timely basis.
The City also provides postretirement health benefits for certain retirees and their dependents. As of the end of the
current fiscal year, there were forty‐eight (48) retired employees receiving these benefits, which are financed on a pay‐
as‐you‐go‐basis.
Item 9.c. - Page 13
A‐ 4
Additional information on the City’s pension arrangements and postemployment benefits can be found in NOTE 8 –
LONG‐TERM DEBT, NOTE 11 – DEFINED BENEFIT RETIREMENT PLAN and NOTE 12 – POSTEMPLOYMENT BENEFITS in the
notes to the basic financial statements.
Acknowledgements
The preparation of this report would not have been possible without the efficient and dedicated services of the entire
staff of the administrative services department. We would like to express our appreciation to all members of the
department who assisted and contributed to the preparation of this report. Credit also must be given to the Mayor and
City Council for their diligent support for maintaining the highest standards of professionalism in the management of the
City of Arroyo Grande’s finances.
Respectfully submitted,
___________________________
Deborah Malicoat
Director of Administrative Services
APPROVED FOR SUBMITTAL TO CITY COUNCIL:
___________________________
Diane Thompson
City Manager
Item 9.c. - Page 14
City of Arroyo Grande
DIRECTORY OF OFFICIALS
A‐ 5
ELECTED OFFICIALS
Mayor ................................................................................................................................................... Jim Hill
Mayor Pro Tem ..................................................................................................................... Kristen Barneich
Council Member ............................................................................................................................. Tim Brown
Council Member ................................................................................................................... Barbara Harmon
Council Member ............................................................................................................................ Jim Guthrie
ADMINISTRATIVE PERSONNEL
City Manager ........................................................................................................................ Diane Thompson
City Attorney ...................................................................................................................... Heather Whitham
Director of Administrative Services /City Treasurer .......................................................... Deborah Malicoat
Director of Community Development .................................................................................... Teresa McClish
Director of Legislative and Information Services Director/City Clerk ..................................... Kelly Wetmore
Police Chief ............................................................................................................................... Steve Annibali
Director of Public Works ....................................................................................................... Geoffrey English
Director of Recreation Services ................................................................................................... John Rogers
Item 9.c. - Page 15
City of Arroyo Grande
ORGANIZATION OF CITY GOVERNMENT
A‐ 6
Citizens of
Arroyo Grande
City Council
Boards &
Commissions City Manager
Administrative
Services
Finance
Human
Resource
Community
Development
Building & Life
Safety
Engineering
Planning
Legislative &
Information
Services
City Clerk
Information
Techology
Police
Patrol Services
Support
Services
Public Works
Capital
Projects
Maintenance
Services
Utility
Recreation
Services
Chidren in
Motion
Preschool
Special Events
Sports
Leagues
City Attorney
Item 9.c. - Page 16
Financial Section
The financial section of the CAFR
includes the following elements: report
of the independent auditor,
management’s discussion and analysis,
basic financial statements (including
notes), required supplementary
information and related notes,
combining statements (nonmajor
funds), and individual fund financial
statements and schedules.
Item 9.c. - Page 17
Moss, Levy & Hartzheim LLP
Certified Public Accountants
2400 Professional Parkway, Suite 205 Santa Maria, CA 93455 Tel 805.925.2579 Fax 805.925.2147 mlhcpas.com BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
INDEPENDENT AUDITORS’ REPORT City Council of the City of Arroyo Grande Arroyo Grande, 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 City of Arroyo Grande (City), as and for the fiscal year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Arroyo Grande, as of June 30, 2015, and the respective changes in financial position, and cash flows when applicable thereof, for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in note 1 to the basic financial statements effective July 1, 2014, the City of Arroyo Grande adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date . Our opinion is not modified with respect to this matter. B-1
Item 9.c. - Page 18
Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages B-3 through B-16, the budgetary comparison information on pages B-71 through B-76, the schedule of funding progress for the other postemployment benefits on page B-77, the schedule of proportionate share of net pension liability on page B-78, and the schedule of contributions on page B-79 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Arroyo Grande’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, agency funds financial statements, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and the agency funds statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and agency funds financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2015, on our consideration of the City of Arroyo Grande’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Santa Maria, California December 18, 2015 B-2
Item 9.c. - Page 19
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 3
The management’s discussion and analysis of the City of Arroyo Grande provides an overall review of the City’s financial activities for
the fiscal year ended June 30, 2015. The intent of this discussion and analysis is to look at the City’s financial performance as a
whole. Readers should review the discussion and analysis in conjunction with the basic financial statements, as well as the notes to
the basic financial statements to enhance their understanding of the City’s financial performance.
The Council approved citywide goals during the process of developing the fiscal year 2014‐15 biennial budget. Goals were based on
maintaining existing service levels and also reflected the previously established Critical Needs Action Plan, which identified agreed‐
upon major citywide priorities. The approved major citywide goals are:
Complete design and pursue approval of State and Federal funding for the Brisco Road Interchange project.
Fully fund and construct the pavement management program to establish and maintain a schedule of improving all
streets in the City on a 7‐year cycle.
Continue an escalated sidewalk repair program.
Address the Police and Corporation Yard facility needs.
Implement recommendations to address the City’s water needs through a combination of conservation measures,
potential recycling efforts and additional water supply that may become available.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal year ended June 30, 2015, are as follows:
The City has finished the fiscal year with General Fund revenues exceeding expenditures. The General Fund’s fund
balance is $7.7 million which is an increase of just under $1 million, or 14%. This fund balance amount has exceeded
the City’s reserve policy goal of 20% of appropriated General Fund expenditures. Of the $7.7 million in fund balance,
approximately $2.5 million is “unassigned” fund balance which is immediately available to City Council discretion.
In total, the Water and Sewer funds have finished the fiscal year with revenues exceeding expenses and, as a result,
both funds have reserves exceeding the policy goal of 90‐days of operating expenses, plus an appropriation of capital
improvements equal to $500,000, and a debt service reserve equal to one year of annual debt service.
The City completed capital improvement projects including:
o Police Department Building Renovation and Expansion
o Hoosegow Park Improvements
o Larchmont Street Improvements
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of a series of financial statements, schedules and notes to those statements. These statements are
organized so the reader can understand the City as a financial whole, an entire operating entity. These statements then proceed to
provide an increasingly detailed look at specific financial activities. This annual report consists of three basic sections – introductory
section, financial section (which consists of this discussion and analysis) and a statistical section.
The basic financial statements include two kinds of statements that present different views of the City:
The first two statements are government‐wide financial statements that provide both long‐term and short‐term
information about the City’s overall financial status.
The remaining statements are fund financial statements that focus on individual parts of the government, reporting the
City’s operations in more detail than the government‐wide financial statements.
The financial statements also include notes that explain some of the information in the financial statements and provide more
detailed data.
Item 9.c. - Page 20
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 4
FINANCIAL ANALYSIS OF THE CITY AS A WHOLE
Government‐wide financial statements report information about the City as a whole using accounting methods similar to those used
by private‐sector companies (all fiscal year revenues and expenses are accounted for regardless of when the cash is received or
paid). The statement of net position includes all of the City’s assets, deferred outflows of resources, liabilities and deferred inflows
of resources; the statement of activities also reports the City’s net position but more specifically how it has changed (revenues and
expenses). Net position is the difference between all of the City’s assets added to deferred outflows of resources and liabilities
added to the deferred inflows of resources. Net position is one of the ways to measure the City’s financial health or position.
Over time, increases or decreases in the City’s net position is an indicator of whether its financial health is improving or
deteriorating, respectively. To assess the overall health of the City, you also need to consider additional non‐financial factors such as
changes in the City’s tax base, facility condition, required educational programs, and other factors.
The City’s combined net position for the past 10 fiscal years is presented in the graph below:
Net position decreased during the 2014‐15 fiscal year from $91.8 million to $83.1 million, or by 9.5%. This decrease is largely due to
a new accounting pronouncement; GASB Statement No. 68. This Statement improves accounting and financial reporting related to
pension liability and establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows
of resources, and pension expense. With implementation of GASB Statement No. 68, a $14.9 million long‐term liability has been
reported that previously had not been. This is not a new liability; it just has now been required to be reported. Additional
information and the impact on the City’s financial statements is explained in Note 11 – Defined Benefit Pension Plan in the Notes to
the Basic Financial Statements. Further reasons for the changes in net position are explained in the following pages.
‐
10
20
30
40
50
60
70
80
90
100
2006200720082009201020112012201320142015
Fiscal Year
Net Position by Component
(in Milllions)
Unrestricted Restricted Net investment in capital assets
Item 9.c. - Page 21
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 5
The government‐wide financial statements of the City are divided into two categories:
Governmental activities: Most of the City’s basic services are included here, such as the general government,
community development, police, public works and recreation services. Property and sales taxes, user fees, interest
income, franchise fees, and state and federal grants finance these types of activities.
Business‐type activities: The City charges a fee to customers to cover all or most of the cost of certain services it
provides. The City’s water, Lopez treatment and sewer systems are reported in this category.
GOVERNMENTAL ACTIVITIES
The City’s net position of governmental activities at June 30, 2015, 2014 and 2013 are as follows:
FYE 2015 FYE 2014 FYE 2013
Variance
CY to PY
% Change
CY to PY
Assets:
Current and other assets $ 19,187,309 $ 17,893,099 $ 16,900,814 $ 1,294,210 7.2%
Capital assets, net 42,075,504 40,060,975 64,948,297 2,014,529 5.0%
Total assets 61,262,81357,954,07481,849,111 3,308,739 5.7%
Deferred Outflows of Resources:
Deferred pension obligation 1,569,515 ‐‐1,569,515 100.0%
Total DOR 1,569,515 ‐‐1,569,515 100.0%
Liabilities:
Long‐term liabilities outstanding 17,687,841 8,875,240 9,225,198 8,812,601 99.3%
Other liabilities 1,772,6071,397,4461,694,790 375,16126.8%
Total liabilities 19,460,448 10,272,686 10,919,988 9,187,762 89.4%
Deferred Inflows of Resources:
Deferred pension obligation 2,965,802 ‐‐2,965,802 100.0%
Total DIR 2,965,802 ‐‐2,965,802 100.0%
Net Position:
Net investment in capital assets 39,466,98637,123,16662,073,344 2,343,820 6.3%
Restricted 7,757,993 7,580,876 6,990,307 177,117 2.3%
Unrestricted (6,818,901)2,977,3461,865,472(9,796,247)(329.0)%
Total net position $ 40,406,078 $ 47,681,388 $ 70,929,123 $ (7,275,310)(15.3)%
As discussed earlier, the Governmental Accounting Standards Board Statement No. 68 established guidelines regarding how the City
reports pension liability. Pension liability has always existed, however it has not been required to be reported in the financial
statements until the 2014‐15 fiscal year. At June 30, 2015, the City reported net pension liability of $13.6 million for governmental
activities. Had this standard not been implemented, the City would have reported net position approximately 5% more than in the
fiscal year 2013‐14, which is mainly attributed to its investment in infrastructure and capital assets.
The City continues to utilize revenue from the 2006 Local Sales Tax Measure for the purposes of capital projects and infrastructure
improvements. During the 2014‐15 fiscal year, the City completed $3.7 million in capital projects including; $3.1 million for the
police station remodel, $125,000 for the Hoosegow Park improvements, $185,000 for Larchmont Street improvements and $160,000
for information technology upgrades (including a new phone system and virtual server systems).
Item 9.c. - Page 22
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 6
The City’s statement of activities of governmental activities at June 30, 2015, 2014 and 2013 are as follows:
FYE 2015 FYE 2014 FYE 2013
Variance
CY to PY
% Change
CY to PY
Revenues
Program revenues:
Charges for services $ 2,312,301 $ 1,449,387 $ 1,643,186 $ 862,914 59.5%
Grants and contributions 1,732,737 2,052,641 1,942,127 (319,904)(15.6)%
General revenues:
Property taxes 6,832,769 6,564,035 6,232,026 268,734 4.1%
Other taxes 6,461,683 6,104,437 5,676,811 357,246 5.9%
Other revenues 1,375,690 1,002,683 895,569 373,007 37.2%
Total revenues 18,715,180 17,173,183 16,389,719 1,541,997 9.0%
Expenses
General government 4,991,206 4,206,267 4,442,707 784,939 18.7%
Community development 2,017,973 1,596,223 1,934,076 421,750 26.4%
Public safety 5,905,903 5,804,569 5,594,859 101,334 1.8%
Recreation 860,010 817,557 765,563 42,453 5.2%
Public works 1,746,040 1,703,736 1,313,371 42,304 2.5%
Streets and roads 2,230,930 2,746,128 2,266,016 (515,198)(18.8)%
Interest on long‐term debt 111,507 109,800 (111,507)(100.0)%
Total expenses 17,752,062 16,985,987 16,426,392 766,075 4.5%
Income (deficiency) before
transfers 963,118 187,196 (36,673) 775,922 414.5%
Transfers from (to) business‐type
activity 2,297,653(23,434,931)1,468,937 25,732,584 (109.8)%
Change in net position 3,260,771 (23,247,735)1,432,264 26,508,506 (114.0)%
Ending net position $ 40,406,078 $ 47,681,388 $ 70,929,123 $ (7,275,310)(15.3)%
During the 2014‐15 fiscal year, the City’s total revenue increased by 9.0% to $18.7 million and expenses increased by 4.5% to $17.8
million.
The City’s significant source of revenue is derived by property and sales taxes. These taxes have had significant increases in the past
several fiscal years. During the 2014‐15 fiscal year, these taxes generated $11.5 million, or 61.3% of total revenue. This was an
increase of over $320,000 when compared to the 2013‐14 fiscal year and over $965,000 increase when compared to the 2012‐13
fiscal year. Because these taxes are the significant sources of City income, fluctuations to these taxes can have a dramatic change in
the services the City can provide. The table on the following page shows the increases and decreases in property and sales taxes for
the past ten fiscal years:
Item 9.c. - Page 23
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 7
Ongoing property tax revenues have steadily increased for the past five fiscal years and are projected to continue a modest but
steady increase for the upcoming years. In addition, sales tax and transient occupancy tax are expected to increase, however, not at
the same growth as experienced in the past two fiscal years.
The City charged $2.3 million for services to users and developers in the 2014‐15 fiscal year and makes up approximately 12% of
total revenue for the City. A significant increase from the 2013‐14 fiscal year of 60%, the City received a boost from impact fees and
charges collected from property development as well as funds received from participants involved in recreation activities. This is the
most significant indicator on how the economy has recovered. The Community Development Department which includes the
Planning, Engineering and Building divisions reported revenues of $900,000 in the 2014‐15 fiscal year but only $300,000 in the 2009‐
10 fiscal year. The Recreation Department’s Children in Motion program has increased revenues by $150,000 over the past five
fiscal years and special interest classes (i.e. quilting, baton twirling, tennis, etc.) by $100,000 during the same period.
The City’s long range financial plan has projected continued modest increases in revenues over the next 10‐years; however, recent
indicators have projected an economic decline beginning in 2017. In addition to the increase in revenues, the City has incurred
additional costs as explained below.
The cost of all governmental activities in the 2014‐15 fiscal year was $17.8 million, an increase of 4.5% in comparison to last fiscal
year. Because the City is a service oriented organization, the majority of the increases in expenses from one year to the next can be
attributed to employee‐related benefits including pensions and medical costs. Further analysis of the changes in employee‐related
expenditures is presented in the fund analysis of City’s funds section of this report.
‐
2
4
6
8
10
12
14
2006200720082009201020112012201320142015
Fiscal Year
Property & Sales Tax Revenue
Last 10 Fiscal Years
(In Millions)
Property Taxes Sales Tax
Item 9.c. - Page 24
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 8
As shown below, public safety, as consistent in the previous fiscal years, represents the City’s highest percent of expenses incurred
at 34%, followed by general government (which includes the City Clerk, Information Technology, City Council, City Manager, Finance
and Human Resources divisions) at 25%, public works (which consists of maintenance of parks and facilities not including utilities) at
10% and community development (which includes Planning, Engineering and Building) at 9%. These functions were subsidized by
taxes, investment income, miscellaneous income, and transfers from the business‐type activities.
The City continues to invest heavily in public safety; those activities cost the City approximately $5.9 million in the 2014‐15 fiscal
year. This does not include capital costs related to public safety such as the newly renovated police station (total cost of $3.1
million) because those costs are recognized as capital assets and depreciated over the estimated life of the building. The City is also
anticipating some much needed investment towards fire‐related infrastructure including fire engines. The City currently contributes
approximately $1.6 million towards the operations of the Five Cities Fire Authority. The Fire Authority has an aging fleet system and
in response, during the 2015‐16 fiscal year, the executive team will prepare a detailed analysis of what is needed and how it is
proposed to be funded. The City’s cost towards this effort is anticipated to effect the 2016‐17 fiscal year.
In addition, the City continues to contribute heavily to streets, roads and sidewalk renovations. Because most road work is repair
and/or maintenance, they are recognized as expenditures in the fiscal year incurred. For the 2014‐15 fiscal year, the City spent
approximately $2.2 million in street and road costs. This program is funded from the State’s gasoline taxes (which contributed
approximately $460,000) and is also funded from the additional one half cent sales tax the voters approved in 2006. During the
2014‐15 fiscal year the additional sales tax contributed approximately $800,000 towards street and road‐related projects. The City
continues to budget and contribute towards these efforts in the 5 to 10 year financial forecast.
‐
5
10
15
20
25
2006200720082009201020112012201320142015
Fiscal Year
Expenses by Function
Last 10 Fiscal Years
(In Millions)
Public Safety General Government Streets & Roads All Other
Item 9.c. - Page 25
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 9
BUSINESS‐TYPE ACTIVITIES
The City provides water services to a population of approximately 17,295 with 6,384 accounts. The City has two main sources of
water: ground water and surface water from Lopez Lake.
The net position of business‐type activities for the fiscal year ended June 30, 2015, 2014 and 2013 are as follows:
FYE 2015 FYE 2014 FYE 2013
Variance
CY to PY
% Change
CY to PY
Assets:
Current and other assets $ 9,496,825 $ 9,281,471 $ 6,989,282 $ 215,354 2.3%
Capital assets, net 35,182,925 35,352,785 10,268,542 (169,860)(0.5)%
Total assets 44,679,75044,634,25617,257,824 45,494 0.1%
Deferred Outflows of Resources:
Deferred pension obligation 116,294 116,294 100.0%
Total DOR 116,294 116,294 100.0%
Liabilities:
Long‐term liabilities outstanding 1,509,557 275,810 134,622 1,233,747 447.3%
Other liabilities 242,938203,204226,586 39,734 19.6%
Total liabilities 1,752,495 479,014 361,208 1,273,481 265.9%
Deferred Inflows of Resources:
Deferred pension obligation 296,149 296,149 100.0%
Total DIR 296,149 296,149 100.0%
Net Position:
Net investment in capital assets 35,100,75835,230,77810,268,542 (130,020)<(0.01)%
Restricted 1,158,896 1,196,593 (37,697)(3.2)%
Unrestricted 6,487,7467,727,8716,628,074(1,240,125)(16.0)%
Total net position $ 42,747,400 $ 44,155,242 $ 16,896,616 $ (1,407,842)(3.2)%
As shown above, the City’s net position decreased by 3.2%, from $44.2 million to $42.7 million. As mentioned in the government‐
wide section of this report, the majority of the decrease is due to pension liability being reported as a result of GASB Statement No.
68. Business‐type activities reported pension liability in the amount of $1.3 million that previously was not reported. Outside of the
changes from GASB Statement No. 68, there isn’t much of a change between the 2014‐15 fiscal year and the 2013‐14 fiscal year.
During the 2013‐14 fiscal year, the City reclassified sewer activities from governmental activities to business‐type activities because
those activities better represent how the activities are funded; from the users of the system. This is consistent with the water
activities and how the City prepares its biennial budget. This is the reason for the significant increase from the 2012‐13 fiscal year to
the 2014‐15 fiscal year. Approximately $25.7 million in capital assets were transferred to business‐type activities during this
transition.
In March 2014, the City Council approved the Water and Wastewater Financial Plan and Rate Study for the fiscal years 2014‐15 to
2018‐19. As a result of that study, the City increased its reserve requirements from 60‐days of operating and maintenance costs to
90‐days. This has provided a greater degree of flexibility because of revenue decreases due to conservation and other unforeseen
costs. In addition, the City continues to maintain a capital reserve of $500,000 and a debt service reserve equal to 1‐year of debt
service obligations (which is approximately $1.4 million).
Item 9.c. - Page 26
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 10
The City’s statement of activities of business‐type activities at June 30, 2015, 2014 and 2013 are as follows:
FYE 2015 FYE 2014 FYE 2013
Variance
CY to PY
% Change
CY to PY
Operating revenues $ 7,564,281 $ 8,121,879 $ 7,583,234 $ (557,598)(6.9)%
Operating expenses (5,298,934)(5,370,839)(4,980,783)(71,905)(1.3)%
Operating income 2,265,347 2,751,040 2,602,451 (485,693)(17.7)%
Non‐operating revenues 84,005 33,627 20,436 50,378 149.8%
Capital contributions 25,731,662 690,957 (25,731,662)(100.0)%
Transfers out (2,297,653)(2,296,731)(1,927,235)(922)<(0.1)%
Total non‐operating revenues,
contributions and transfers (2,213,648)23,468,558 (1,215,842)(25,682,206)(109.4)%
Change in net position $ 51,699 $ 26,219,598 $ 1,386,609 $ (26,167,899)(99.9)%
The business‐type activities had operating income of $2.3 million in the 2014‐15 fiscal year, whereas $2.8 million in the 2013‐14
fiscal year and $2.6 million in the 2012‐13 fiscal year. The decrease in operating expenses are minimal, however there was a
dramatic decrease in operating revenues of approximately $500,000 in the 2014‐15 fiscal year. In the Water and Wastewater
Financial Plan and Rate Study for the fiscal years 2014‐15 to 2018‐19, it was anticipated that the revenues for the system would
increase by 1%. However, due to the ongoing drought, customers began to reduce water consumption, which in turn reduced
revenues generated from users.
The City’s current rate structure includes both a monthly fixed charge (flat amount that does not change per billing cycle) and a
volumetric charge (which is dependent on the actual amount of water usage). The fixed charge generates approximately 37% of the
total revenue with 63% from the variable. So although the City has some level of stability from the fixed charge, the reduction in
consumption of water has had a significant effect on the overall revenues.
During the 2015‐16 fiscal year, the City Council approved a Stage 1 Water Shortage Emergency which has limited the amount of
water a customer may use without incurring financial penalties. The City had anticipated an overall revenue increase of 2% from
2014‐15 fiscal year, however it is projected that another shortfall of $500,000 will occur if no changes are made to the rates. It is
important to note that because the business‐type activities have held such a strong reserve balance, the City has been able to
continue maintenance and capital projects. Regardless, the City will be reviewing options of generating additional revenue as the
effects of the drought and the Stage 1 Water Shortage Emergency continues.
As mentioned on the previous page, the City reclassified sewer‐related activities from government activities to business‐type
activities. As a result, there was significant capital contribution revenue in the amount of $25.7 million that occurred in the 2013‐14
fiscal year. This is a one‐time reclassification and it is not anticipated that a significant contribution like this will happen in the near
future.
Item 9.c. - Page 27
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 11
FINANCIAL ANALYSIS OF THE CITY’S FUNDS
Fund Financial Statements
The fund financial statements provide more detailed information about the City’s most significant funds and not the City as a whole.
The City’s major governmental funds include: the General Fund, Special Gasoline Tax Fund, Transportation Impact Fees Fund, In‐Lieu
Affordable Housing Fund, Community Development Block Grant Fund, and the Capital Improvement Fund. Funds are accounting
devices that the City uses to keep track of specific sources of funding and spending for particular purposes.
Some funds are required by State law and by bond covenants.
Management establishes other funds to control and manage money for particular purposes or to show that it is
meeting legal responsibilities for using certain taxes, grants, and/or other money.
The City has three kinds of funds:
Governmental funds: Most of the City’s basic services are included in governmental funds which focus on how money
flows into and out of these funds and the balance left at fiscal year‐end that is available for spending. These funds are
reported using an accounting method called modified accrual accounting, which measures cash and all other financial
assets that can readily be converted to cash. The governmental funds statements provide a detailed short‐term view
of the City’s general governmental operations and the basic services it provides. Governmental fund information helps
determine whether there are more or fewer financial resources that can be spent in the near future to finance the
City’s programs. Because this information does not encompass the additional long‐term focus of the government‐wide
statements, additional information is provided in the financial statements that reconciles and explains the relationship
(or differences) between them.
Proprietary funds: When the City charges customers for the services it provides, these services are generally reported
in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of
Net Position and the Statement of Revenues, Expenses, and Changes in Net Position. In fact, the City’s proprietary
funds are the same as the business‐type activities reported in the government‐wide statements but provide more
detail and additional information, such as cash flows. The proprietary fund financial statements provide separate
information for the Water, Lopez and Sewer funds.
Fiduciary funds: The City is the trustee, or fiduciary, for the Downtown Parking Association, Sanitation District, and the
Successor Agency of the Former Redevelopment Agency. The City is responsible for ensuring that the assets reported
in these funds are used for their intended purposes.
Governmental Funds – The focus of the City of Arroyo Grande’s governmental funds is to provide information on near‐term inflows,
outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In
particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the
end of the fiscal year. At fiscal year‐end, the City’s governmental funds reported a combined fund balance of $15.8 million, an
increase of $1.3 million in comparison with the prior fiscal year. Of the total fund balance, 16% of this total amount ($2.5 million)
constitutes unassigned fund balance, which is available for spending at the City’s discretion. The remaining components of fund
balance consist of non‐spendable, restricted, committed and assigned and are present on the following page. For further
information on the definition of the fund balance classification, see Note 1, Subsection K – Fund Balances and Net Position.
Item 9.c. - Page 28
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 12
Fund Balances General Fund All Other Funds Total % of Total
Nonspendable $ 130,822 $ ‐ $ 130,822 0.8%
Restricted 7,793,037 7,793,037 49.2%
Committed 3,825,974 3,825,974 24.2%
Assigned 1,284,047 327,809 1,611,856 10.2%
Unassigned 2,463,910 2,463,910 15.6%
Total $ 7,704,753 $ 8,120,846 $ 15,825,599 100.0%
The General Fund is the chief operating fund of the City of Arroyo Grande. At the end of the current fiscal year, unassigned fund
balance was $2.5 million, while total fund balance reached $7.7 million. As a measure of the General Fund’s liquidity, it may be
useful to compare unassigned fund balance plus the economic stabilization piece of the committed fund to total fund expenditures.
Unassigned fund balance plus the economic stabilization represents 27.8% of total general fund expenditures. This exceeds the City
Council’s reserve goal of 20%.
Proprietary Funds – The City of Arroyo Grande’s proprietary funds provide the same type of information found in the Government‐
wide Financial Statements under business‐type activities, but includes a statement of cash flows. Factors concerning the finances of
these two funds have already been addressed in the discussion of the City of Arroyo Grande’s business‐type activities.
GENERAL FUND BUDGETARY HIGHLIGHTS
The City’s budget is prepared according to California law. The most significant budgeted fund is the General Fund. The City’s budget
is a flexible‐spending plan, which commits resources to the accomplishment of City Council goals and objectives.
City Council’s approval is required for changes impacting fund balances, such as increases to appropriations that are not offset by
matching increases to estimated revenue. Approval is also required for all budget transfers between departments/divisions that
alter fund balance. Semi‐annual reports are used to keep the City Council informed of key budget issues, forecasts, and required
changes. The budget amendments reported in the financial reports fall into three categories:
The carryover of appropriations for contracts, equipment, and/or projects approved in the previous fiscal year(s), but
not completed as of fiscal year‐end.
Increases or decreases in estimated revenues to reflect actual receipts of major revenues.
Additional appropriations for unforeseen, but necessary expenses or expenditures.
As discussed earlier, revenues are recovering and the City is benefitting from the widespread economic gains. Sales taxes are
increasing in all major categories, property taxes are trending upward and there has been increased registration in the City’s
recreation programs. Expenditures have largely remained at budgeted levels.
The overall difference between the original General Fund budget and the final amended budget was an increase of approximately
$200,000 in appropriations. This can mainly be attributed by the following: 1) the payout of accrued leave and severance costs
associated with departure of the previous City Manager, 2) the one‐time costs associated with an investigation by the Sintra Group,
3) the one‐time costs associated with additional consultant services relating to the City Manager recruitment, 4) the City entering
into a master fiber agreement with CCO SoCAL, LLC (Charter Communications) and 5) additional expenses related to special
recreation programs (which was offset with an increase in revenues).
Item 9.c. - Page 29
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 13
The City Council approved citywide goals during the process of developing the biennial budget. Goals were based on maintaining
existing service levels and also reflected the previously established Critical Needs Action Plan, which identified agreed‐upon major
citywide priorities. The approved major citywide goals are:
Refocused comprehensive Economic Development Plan.
Complete design and approval of the Brisco Road Interchange project.
Fully fund and construct the Pavement Management Program and establish and maintain a schedule of improving all
streets in the City on a 7‐year cycle.
Continue escalated sidewalk repair program.
Address the Recreation Services Department’s facility needs.
Implement recommendations to address the City’s water needs through a combination of conservation measures,
potential recycling efforts and additional water supply sources that may become available.
Prepare asset replacement schedules for all City infrastructure including buildings, drainage facilities, parks, vehicles,
and information technology.
Develop a long‐range financial plan with a focus on ensuring operational effectiveness and revenue generation
opportunities to help ensure long‐term fiscal sustainability.
CAPITAL ASSETS
The capital assets of the City are those which are used in the performance of the City’s functions, including but not limited to
infrastructure‐related assets. At June 30, 2015, capital assets, net of related debt, of the governmental activities totaled $39.4
million and the capital assets, net of related debt, of the business‐type activities totaled $35.1 million. Depreciation on capital assets
is recognized in the government‐wide financial statements.
The investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads,
highways, and bridges. The City’s investment in capital assets for the current fiscal year was 90% of total net position.
Description Original Cost
Accumulated
Depreciation Book Value
Governmental Activities:
Land $ 2,870,474 $ ‐$ 2,870,474
Infrastructure 6,379,188 6,379,188
Construction in Progress 3,032,689 3,032,689
Structures & Improvements 11,582,884 2,624,553 8,958,331
Machinery & Equipment 5,244,0553,390,2261,853,829
Infrastructure 40,023,063 21,042,070 18,980,993
Total $ 69,132,353 $ 27,056,849 $ 42,075,504
Item 9.c. - Page 30
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 14
Description Original Cost
Accumulated
Depreciation Book Value
Business‐Type Activities:
Land $ 56,730 $ ‐$ 56,730
Construction in Progress 335,061 335,061
Structures & Improvements 222,999218,580 4,419
Machinery & Equipment 961,398 543,910 417,488
Infrastructure 56,367,25821,998,03134,369,227
Total $ 57,943,446 $ 22,760,521 $ 35,182,925
Major capital asset events during the fiscal year include the following:
Completion of the Police Department Expansion project: ~$3.1 million funded by a combination of the General Fund,
2006 additional one‐half sales tax measure, State COPS grant funds, and developer impact fees.
Completion of the VoIP phone system: ~$120,000 funded by the General Fund.
Completion of the Hoosegow Park Improvements: ~$125,000 funded by CDBG funds (for the ADA improvement portion
of the project), the General Fund, and the donation from the Howard Mankins Trust.
Completion of the Larchmont Street Improvements. Total cost of project: ~$200,000
New annual programs are recommended through the biennial budget process. In the five‐year Capital Improvement Program from
fiscal years 2015‐16 through 2019‐20, the major capital projects include:
The purchase and construction of the Le Point Street Parking Lot expansion: Estimated total cost of project ‐ $900,000.
Council Chambers ADA Bathroom Retrofit and Audio/Video Improvement Project: Estimated total cost of project ‐
$410,000.
Both the Bridge Street Bridge and Traffic Way Bridge Improvements: Total cost of both projects is estimated to be $6.4
million to be funded through State grants.
Brisco Road Interchange Project – Depending on which alternative is selected, the total cost of improvements is
estimated to be between $14 million and $23 million.
East Branch Street Streetscape (specifically on East Branch Street from Mason Street to Paulding Circle) – Estimated
total cost of project is $558,000 which includes the installation of landscaped bulb‐outs and medians, bicycle lanes,
sidewalk infill, crosswalk enhancements, new street furniture, street trees, and ADA accessibility ramps.
Continued improvements with the Water and Sewer systems based on their specific master plans.
LONG‐TERM DEBT
At the end of the 2014‐15 fiscal year, the City had a variety of outstanding long‐term debt, totaling $17.7 million in governmental
activities and $1.5 million in business‐type activities. The City had total General Obligation debt outstanding of $1.1 million that is
backed by the full faith and credit of the City. Proceeds of the debt issuance were used for expanding the current fire station in
order to accommodate a full time fire staff. Voters approved the general obligation debt, which is to be repaid through a tax
assessment on property taxes, in November 2002. The City received an “A” rating from Standard & Poor’s for the general obligation
debt. The City also had total USDA loans payable outstanding of $1.1 million that was used to acquire the property and office
building for the location of City Hall offices. Lastly, the City’s most significant outstanding long‐term liability is the net pension
liability. A newly required reporting figure, the net pension liability is the difference between the total pension liability (the present
value of projected benefit payments to employees based on their past service) and the assets (mostly investments reported at fair
value) set aside to pay current employees, retirees, and beneficiaries.
Item 9.c. - Page 31
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 15
The City did not enter into any new long‐term debt in the 2014‐15 fiscal year. Debt payments in the amount of $329,291 for
governmental activities and $39,840 for business‐type activities were made during the fiscal year. The City is anticipating entering in
some vehicle leasing but no significant debt being encumbered.
Further detail on each debt can be found in Note 8 in the Notes to the Basic Financial Statements section. The following table
summarizes the long‐term debt of the City:
Debt
Description
Governmental Business‐Type FYE 2015
FYE 2014 One‐Year Long‐Term One‐Year Long‐Term One‐Year Long‐Term
GO Bond $ 1,140,000 $ 95,000 $ 955,000 $ ‐$ ‐ $ 95,000 $ 955,000
Capital Lease 672,660 210,925 133,613 40,563 41,604 251,488 175,217
Loan Payable 1,247,156 34,414 1,179,566 34,414 1,179,566
Comp Absence 931,010 840,107 86,085 926,192
Net Pension 18,092,069 13,626,702 1,266,091 14,892,793
OPEB 609,152 612,514 75,214 687,728
Total $22,6925,047 $ 340,339 $ 17,347,502 $ 40,563 $ 1,468,994 $ 380,902 $18,816,496
FINANCIAL ISSUES AND CONCERNS
The budget for the fiscal year 2015‐16 was approved by City Council on June 9, 2015 and represents a balanced and responsible
approach to meeting the City’s short and long‐term needs in a cost effective manner, will continue to fund the high quality services
provided to the community, and will invest in the future through capital improvements and maintenance activities.
As the City experiences continued revenue growth, it will be important to determine the highest priority uses of additional
resources. Over the past year, staff has worked to identify important priorities for funding and has identified deficiencies in service,
maintenance and/or investment that will require attention in the short and long‐term. It was staff’s recommendation that a
renewed focus on economic development and long‐range revenue plan, in addition to continuing to explore workforce efficiencies,
be considered. In addition, staff has addressed the following priorities in the 2015‐16 fiscal year budget:
Information Technology Specialist: As the information technology environment evolves, the workload to maintain that
environment and to remain proactive towards new technology has become a challenge. The addition of this personnel
will provide consistency in the IT division and ensure staff service and support expectations are met and that the IT
environment is shared beyond a single staff member.
Geographic Information System (GIS) Technician: The City has dedicated significant resources over the years, both fiscal
and personnel, to implement GIS citywide. However, without dedicated personnel, the development of the GIS data
and maintenance of the City’s GIS database has fallen on select staff members. The increasing development and
implementation of technology combined with ever increasing Federal and State mandates on the City has highlighted
the need to prioritize GIS in the City. From maintaining data on the City’s water and sewer systems, to mapping crime
activity, to updating accurate property information, GIS is a single tool to address needs from numerous departments.
Additional personnel costs have been added to include a Volunteer/Recreation Coordinator, additional Parks
Maintenance Worker and other job reclassifications.
Item 9.c. - Page 32
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2015
B ‐ 16
The Long‐Range Financial Plan assumes slowed growth beginning in the 2019‐20 fiscal year and negative growth beginning in the
2021‐22 fiscal year as comparable to the last recession. One of the objectives of the Long Range Financial Plan is to begin
development of contingency planning for the next economic downturn. Since the economy increases and decreases in cycles, it is
important to utilize long‐range financial planning to provide for consistent service level delivery. It is proposed to annually increase
reserves through accumulation of unexpended funds at the end of each fiscal year. In addition, as revenues increase and the City has
the ability to restore services reduced over the past few years, staff is attempting to do so largely through contracts and other
means that will provide the flexibility to expand and contract the organization in a timely manner when necessary due to economic
trends. The objective is to be prepared for the next economic downturn so adjustments can be made that will maintain stable
services and minimize the needs for layoffs or negotiated employee concessions.
CONTACTING THE CITY’S ADMINISTRATIVE SERVICES DEPARTMENT
This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the
City’s finances and to demonstrate the City’s accountability for the money it receives. If you have any questions about this report or
need additional financial information, contact Deborah Malicoat, Director of Administrative Services at 300 East Branch Street in
Arroyo Grande, California or by phone at (805) 473‐5400.
Item 9.c. - Page 33
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Item 9.c. - Page 34
City of Arroyo Grande
STATEMENT OF NET POSITION
June 30, 2015
ASSETS
Cash and investments $15,930,413 $6,458,815 $22,389,228
Receivables:
Accounts 257,550 1,248,886 1,506,436
Taxes1,104,247 1,104,247
Grant 79,690 79,690
Loan 1,624,147 1,624,147
Interest 10,893 7,188 18,081
Inventory 21,203 84,886 106,089
Prepaid items 159,166 1,697,050 1,856,216
Nondepreciable capital assets:
Land 2,870,474 56,730 2,927,204
Infrastructure 6,379,188 6,379,188
Construction in progress 3,032,689 335,061 3,367,750
Depreciable capital assets:
Structures and improvements 11,582,884 222,999 11,805,883
Equipment 5,244,055 961,398 6,205,453
Infrastructure 40,023,063 56,367,258 96,390,321
Accumulated depreciation (27,056,849) (22,760,521) (49,817,370)
Total assets 61,262,813 44,679,750 105,942,563
DEFERRED OUTFLOWS OF RESOURCES
Deferred pension 1,569,515 116,294 1,685,809
Total deferred outflows of resources 1,569,515 116,294 1,685,809
LIABILITIES
Accounts payable 568,447 87,169 655,616
Accrued wages and benefits 458,871 458,871
Interest payable 35,044 2,020 37,064
Deposits payable 401,996 113,989 515,985
Unearned revenue 308,249 39,760 348,009
Noncurrent liabilities:
Due within one year 340,339 40,563 380,902
Due in more than one year 17,347,502 1,468,994 18,816,496
Total liabilities 19,460,448 1,752,495 21,212,943
DEFERRED INFLOWS OF RESOURCES
Deferred pension 2,965,802 296,149 3,261,951
Total deferred inflows of resources 2,965,802 296,149 3,261,951
Governmental
Activities
Business‐Type
Activities Total
The notes to the basic financial statements are an integral part of this statement.
B‐18
Item 9.c. - Page 35
NET POSITION
Net investment in capital assets $39,466,986 $35,100,758 $74,567,744
Restricted for:
Access programming 160,164 160,164
Capital projects 1,158,896 1,158,896
Community development 789,040 789,040
Debt service 894,548 894,548
Landscape maintenance 461,212 461,212
Park construction 1,122,080 1,122,080
Public improvements 1,925,669 1,925,669
Public safety 308,080 308,080
Streets and roads 696,249 696,249
Water production 2,158,991 2,158,991
Unrestricted (7,576,941) 6,487,746 (1,089,195)
Total net position $40,406,078 $42,747,400 $83,153,478
Total
Governmental
Activities
Business‐Type
Activities
B‐19
Item 9.c. - Page 36
City of Arroyo Grande
STATEMENT OF ACTIVITIES
For the Fiscal Year Ended June 30, 2015
Governmental Activities:
General government $4,991,206 $22,615 $407,433 $‐
Community development 2,017,973 894,495 127,319
Public safety 5,905,903 135,134 89,828 106,230
Recreation services 860,010 743,589
Public works 1,746,040 418,772
Streets and roads 2,230,930 97,696 1,001,927
Total governmental activities 17,752,062 2,312,301 1,499,188 233,549
Business‐type Activities:
Water 1,306,742 6,497,466
Lopez 3,170,608
Sewer 821,584 1,066,815
Total business‐type activities 5,298,934 7,564,281
Total government $23,050,996 $9,876,582 $1,499,188 $233,549
General Revenues
Taxes:
Property taxes
Sales and use taxes
Transient lodging taxes
Franchise taxes
Business license tax
Investment income
Other
Transfers
Total general revenues and transfers
Change in net position
Net position at beginning of fiscal year
Prior period adjustments
Net position at beginning of fiscal year ‐ restated
Net position at end of fiscal year
Program Revenues
ExpensesCharges for Services
Operating
Contributions and
Grants
Capital Contributions
and Grants
The notes to the basic financial statements are an integral part of this statement.
B‐20
Item 9.c. - Page 37
$(4,561,158) $‐$(4,561,158)
(996,159) (996,159)
(5,574,711) (5,574,711)
(116,421) (116,421)
(1,327,268) (1,327,268)
(1,131,307) (1,131,307)
(13,707,024) (13,707,024)
5,190,724 5,190,724
(3,170,608) (3,170,608)
245,231 245,231
2,265,347 2,265,347
(13,707,024) 2,265,347 (11,441,677)
6,832,769 6,832,769
4,634,828 4,634,828
1,124,486 1,124,486
612,261 612,261
90,108 90,108
426,084 84,005 510,089
949,606 949,606
2,297,653 (2,297,653)
16,967,795 (2,213,648) 14,754,147
3,260,771 51,699 3,312,470
47,681,388 44,155,242 91,836,630
(10,536,081) (1,459,541) (11,995,622)
37,145,307 42,695,701 79,841,008
$40,406,078 $42,747,400 $83,153,478
Net (Expense) Revenue and Changes
in Net Position
Total
Governmental
Activities
Business‐type
Activities
B‐21
Item 9.c. - Page 38
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Item 9.c. - Page 39
City of Arroyo Grande
DESCRIPTION OF MAJOR GOVERNMENTAL FUNDS
B‐23
General Fund
This is the primary operating fund of the City, which accounts for resources and services traditionally associated
with government. The General Fund provides administrative, financial, police protection, community
development, public works, and recreation services to the community and other funds. The General Fund
accounts for revenues that have unrestricted uses and are not required legally or by contractual agreement to be
accounted for in another fund.
Special Gasoline Tax Fund
This fund accounts for receipts and expenditures of money apportioned by the State under Streets and Highway
Code sections 2105, 2106, 2107, and 2107.5. The use of gas tax revenues can only be used to construct and
maintain streets, roads and highways.
Transportation Impact Fees Fund
This fund accounts for developer impact fees (AB1600 fees) paid to protect the public health, safety, and welfare
by maintaining the existing level of public services for existing and future residents within the City of Arroyo
Grande.
In‐Lieu Affordable Housing Fund
This fund accounts for monies paid by developers in meeting the City's mandatory affordable housing
requirements.
CDBG Fund
This fund accounts for revenues and expenditures related to Community Development Block Grant (CDBG) Funds.
The program is a flexible program that provides the City with resources to address a wide range of unique
community development needs.
Capital Improvement Fund
This fund accounts for capital projects constructed within the City. Funding sources are provided from other City
funds through capital transfers; grant revenues from the federal and state governments; and other miscellaneous
sources. These funding sources are used to improve the City parks, drainage systems, streets, sewer pipelines, and
water systems.
Other Governmental Funds
This is the aggregate of all the Nonmajor governmental funds.
Item 9.c. - Page 40
City of Arroyo Grande
GOVERNMENTAL FUNDS
Balance Sheet
June 30, 2015
ASSETS
Cash and investments $7,337,272 $‐$1,842,092 $182,120
Accounts receivable 247,750
Taxes receivable 1,080,498
Grant receivable
Loan receivable 835,107
Interest receivable 5,068 6 1,515 163
Inventory 21,203
Prepaid items 109,619 49,547
Due from other funds 2,569
Total assets $8,803,979 $49,553 $1,843,607 $1,017,390
LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES
Liabilities:
Accounts payable $188,318 $15,984 $‐$‐
Accrued wages and benefits 458,871
Deposits payable 401,996
Unearned revenue 50,041
Due to other funds 2,569
Total liabilities 1,099,226 18,553
Deferred inflows of resources:
Deferred revenue 835,107
Total deferred inflows of resources 835,107
Fund Balances:
Nonspendable:
Inventory21,203
Prepaid items 109,619 49,547
Restricted for:
Access programming
Debt service
Landscape maintenance
Park construction
Public improvements 1,843,607
Public safety
Streets and roads
Water production
Committed for:
Capital projects 818,003
Economic stabilization 3,007,971
Assigned for:
Affordable housing 182,283
Capital projects 1,067,374
Post employment benefits 216,673
Tourism benefit
Unassigned 2,463,910 (18,547)
Total fund balances 7,704,753 31,000 1,843,607 182,283
Total liabilities, deferred inflows of
resources, and fund balances$8,803,979 $49,553 $1,843,607 $1,017,390
General Fund
Transportation
Impact Fees
Fund
In‐Lieu
Affordable
Housing Fund
Special Gasoline
Tax Fund
The notes to the basic financial statements are an integral part of this statement.
B‐24
Item 9.c. - Page 41
$‐$423,957 $6,144,972 $15,930,413
9,800 257,550
23,749 1,104,247
79,690 79,690
789,040 1,624,147
4,141 10,893
21,203
159,166
2,569
$789,040 $503,647 $6,182,662 $19,189,878
$‐$250,827 $113,318 $568,447
458,871
401,996
217,982 40,226 308,249
2,569
468,809 153,544 1,740,132
789,040 1,624,147
789,040 1,624,147
21,203
159,166
160,164 160,164
929,592 929,592
461,212 461,212
1,122,080 1,122,080
82,062 1,925,669
308,080 308,080
696,249 696,249
2,158,991 2,158,991
818,003
3,007,971
182,283
34,838 3,971 1,106,183
216,673
106,717 106,717
2,445,363
34,838 6,029,118 15,825,599
$789,040 $503,647 $6,182,662 $19,189,878
TotalCDBG Fund
Other
Governmental
Funds
Capital
Improvement
Fund
B‐25
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Item 9.c. - Page 43
City of Arroyo Grande
RECONCILIATION OF THE GOVERNMENTAL FUNDS ‐ BALANCE SHEET TO THE STATEMENT OF NET POSITION
June 30, 2015
The notes to the basic financial statements are an integral part of this statement.
B‐27
Total fund balances – governmental funds
In governmental funds, only current assets are reported. In the statement of net position, all
assets are reported, including capital assets and accumulated depreciation.
Capital assets at historical cost $ 69,132,353
Accumulated depreciation (27,056,849)
Net capital assets
In governmental funds, interest on long‐term debt is not recognized until the period in which it
matures and is paid. In the government‐wide statement of activities, it is recognized in the period
that it is incurred.
In governmental funds, certain receivables are deferred because they do not meet current
financial obligations. However, in government‐wide statement of activities, it is recognized in the
period that it is incurred.
In governmental funds, pension obligations are deferred because they do not meet current
financial obligations. However, in government‐wide statement of activities, deferred outflows
and deferred inflows of resources related to pensions are recorded. The difference between
deferred outflows of resources of $1,569,515 and deferred inflows of resources of $2,965,802 is:
In governmental funds, only current liabilities are reported. In the statement of net position, all
liabilities, including long‐term liabilities, are reported. Long‐term liabilities relating to
governmental activities consist of:
Compensated absences $ 840,107
General obligation bonds 1,050,000
Capital lease payable 344,538
CA energy loan payable 107,980
USDA loan payable 1,106,000
Net pension liability 13,626,702
Other postemployment benefits 612,514
Total long‐term liabilities
Total net position, governmental activities
$ 15,825,599
42,075,504
(35,044)
1,624,147
(1,396,287)
(17,687,841)
$ 40,406,078
Item 9.c. - Page 44
City of Arroyo Grande
GOVERNMENTAL FUNDS
Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Fiscal Year Ended June 30, 2015
REVENUES
Taxes and assessments $12,932,497 $‐$‐$‐
Licenses and permits 340,265
Fines and penalties 43,764
Use of money and property 349,521 30 20,107 1,923
Intergovernmental revenues 497,261 462,429
Charges for services 1,153,322 74,358 20,425
Other revenue 101,088 564 225,623
Total revenues 15,417,718 463,023 94,465 247,971
EXPENDITURES
Current:
General government 4,618,809
Community development 1,236,029 16,800 76,700
Public safety 5,356,518
Recreation services 866,808
Public works 1,596,715
Streets and road 596,575
Capital outlay 96,081 22,954
Debt service:
Principal 166,880 47,411
Interest and fiscal agent fees 12,675 2,136
Total expenditures 13,950,515 669,076 16,800 76,700
Excess of revenue over/(under)
expenditures 1,467,203 (206,053) 77,665 171,271
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 816,061 22,745
Transfers in 2,104,953 292,104
Transfers out (3,458,791) (77,796) (284,497)
Total other financing sources/(uses)(537,777) 237,053 (284,497)
Net change in fund balances 929,426 31,000 (206,832) 171,271
Fund balances ‐ July 1, 2014 6,775,327 2,050,439 11,012
Fund balances ‐ June 30, 2015 $7,704,753 $31,000 $1,843,607 $182,283
General Fund
Transportation
Impact Fees
Fund
In‐Lieu
Affordable
Housing Fund
Special Gasoline
Tax Fund
The notes to the basic financial statements are an integral part of this statement.
B‐28
Item 9.c. - Page 45
$‐$‐$419,565 $13,352,062
340,265
43,764
52,745 424,326
10,357 185,791 576,899 1,732,737
622,557 1,870,662
31,037 10,000 368,312
10,357 216,828 1,681,766 18,132,128
167,240 4,786,049
27,615 327,530 1,684,674
5,356,518
866,808
46,469 20,437 1,663,621
878,297 1,474,872
4,111,968 102,125 4,333,128
115,000 329,291
89,249 104,060
5,064,349 821,581 20,599,021
10,357 (4,847,521) 860,185 (2,466,893)
838,806
4,847,521 278,676 7,523,254
(10,357) (771,026) (4,602,467)
(10,357) 4,847,521 (492,350) 3,759,593
367,835 1,292,700
34,838 5,661,283 14,532,899
$‐$34,838 $6,029,118 $15,825,599
Other
Governmental
FundsTotalCDBG Fund
Capital
Improvement
Fund
B‐29
Item 9.c. - Page 46
City of Arroyo Grande
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the Fiscal Year Ended June 30, 2015
The notes to the basic financial statements are an integral part of this statement.
B‐30
Total net change in fund balances – governmental funds
In governmental funds, capital outlays are reported as expenditures. However, in the statement
of activities, the cost of those assets is allocated over their estimated useful lives as depreciation
expense. This is the amount by which additions to capital outlay of $4,284,434 is more than
depreciation expense $(1,465,850) in the period.
In governmental funds, the entire proceeds from disposal of capital assets are reported as
revenue. In the statement of activities, only the resulting gain or loss is reported. The difference
between proceeds from disposal of capital assets and the resulting loss is:
In governmental funds, transfers of capital assets from governmental activities to business‐type
activities are not reported. However, in the statement of activities, these transactions are
reported as transfers. For this fiscal year ended, governmental activities transferred $623,134 of
capital assets to business‐type activities.
In governmental funds, issuance and repayments of long‐term receivables are reported as
expenditures and other financing sources, respectively. In government‐wide statements, these
activities are reported as increases or decreases in assets. This is the amount by which
repayments exceed the issuance of note receivables in the period.
In governmental funds, the entire proceeds from the sale of note receivables are reported as
revenue. In the statement of activities, only the resulting gain or loss is reported. The difference
between the proceeds from the sale of notes receivable and the resulting loss is:
In governmental funds, certain revenues are deferred because the revenues are not collected
within the prescribed time period after fiscal year‐end. However, on the accrual basis used in the
statement of activities, those revenues are included:
In governmental funds, interest on long‐term debt is recognized in the period that it becomes due.
In the statement of activities, it is recognized in the period that it is incurred. Unmatured interest
owing at the end of the period, less matured interest paid during but owing from the prior period
was:
In governmental funds, proceeds and repayments of long‐term debt are reported as other
financing sources and expenditures, respectively. In the government‐wide statements, proceeds
and repayments of long‐term debt are reported as increases or decreases in liabilities,
respectively. This is the amount of repayments of debt in the period.
In the statement of activities, compensated absences are measured by the amounts earned during
the fiscal year. In governmental funds, however, expenditures for these items are measured by
the amount of financial resources used (essentially the amounts paid). For this fiscal year ended,
vacation used exceeded the amounts earned by:
In governmental funds, PERS contributions are reported as retirement expense. In the
government‐wide statements, contributions are reported as increases in deferred outflows of
resources and the actual change in pension liability as retirement expense. This is the amount of
PERS contributions plus the change in pension liability for the fiscal year.
$ 1,292,700
2,818,584
(180,921)
(623,134)
(5,291)
(373,338)
1,758
3,220
329,291
4,551
2,950,220
Item 9.c. - Page 47
City of Arroyo Grande
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the Fiscal Year Ended June 30, 2015
B‐31
In the statement of activities, difference between the changes in deferred outflows of resources
and deferred inflows of resources are reported as pension expense. In governmental funds, these
differences are not reported. This fiscal year, changes in deferred inflows of resources exceeded
changes in deferred outflows of resources by:
In the statement of activities, postemployment benefits are measured by the amounts earned
during the fiscal year. In governmental funds, expenditures for these items are measured by the
amount of financial resources used (essentially the amount paid). This fiscal year,
postemployment benefits earned were more than the amounts used by:
Change in net position – governmental activities
(2,886,056)
(70,813)
$ 3,260,771
Item 9.c. - Page 48
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Item 9.c. - Page 49
City of Arroyo Grande
DESCRIPTION OF MAJOR PROPRIETARY FUNDS
B‐33
Water Fund
This fund is used to account for the activities associated with the transmission and distribution of potable water by
the City to its users. This fund also accounts for the accumulation of water facility revenues to be used in capital
improvement projects in the City.
Lopez Fund
This fund is responsible for the purchase of water from Lopez Dam. The City has a 50.55% share of the water and
expense generated by Zone 3 – County of San Luis Obispo’s Flood Control and Water Conservation District.
Sewer Fund
This fund is used to account for maintenance of sewer lines connecting City residents to the South San Luis Obispo
County Sanitation District sewer plant. This fund also accounts for the accumulation of sewer facility revenues to
be used in capital improvement projects in the City.
Item 9.c. - Page 50
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Net Position
June 30, 2015
ASSETS
Current assets:
Cash and investments $4,994,102 $‐$1,464,713 $6,458,815
Receivables:
Accounts, net 1,080,389 168,497 1,248,886
Interest5,992 1,196 7,188
Inventory79,663 5,223 84,886
Prepaid items 21,806 1,669,376 5,868 1,697,050
Total current assets 6,181,952 1,669,376 1,645,497 9,496,825
Capital assets:
Nondepreciable assets 235,218 156,573 391,791
Depreciable assets, net 10,443,219 24,347,915 34,791,134
Total capital assets, net 10,678,437 24,504,488 35,182,925
Total assets 16,860,389 1,669,376 26,149,985 44,679,750
DEFERRED OUTFLOWS OF RESOURCES
Deferred pension 104,440 11,854 116,294
Total deferred outflows of resources 104,440 11,854 116,294
LIABILITIES
Current liabilities:
Accounts payable 79,736 7,433 87,169
Deposits payable 113,989 113,989
Interest payable 785 1,235 2,020
Unearned revenue 39,760 39,760
Debt due within one year 21,021 19,542 40,563
Total current liabilities 255,291 28,210 283,501
Noncurrent liabilities:
Compensated absences 77,312 8,773 86,085
Leases payable 21,409 20,195 41,604
OPEB liability 75,214 75,214
Net pension liability 1,155,494 110,597 1,266,091
Total noncurrent liabilities 1,329,429 139,565 1,468,994
Total liabilities 1,584,720 167,775 1,752,495
DEFERRED INFLOWS OF RESOURCES
Deferred pension 270,279 25,870 296,149
Total deferred inflows of resources 270,279 25,870 296,149
NET POSITION
Net investment in capital assets 10,657,028 24,484,293 35,141,321
Restricted for:
Capital projects 772,224 386,672 1,158,896
Unrestricted 3,680,578 1,669,376 1,097,229 6,447,183
Total net position $15,109,830 $1,669,376 $25,968,194 $42,747,400
TotalsLopez FundWater Fund Sewer Fund
The notes to the basic financial statements are an integral part of this statement.
B‐34
Item 9.c. - Page 51
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Revenues, Expenses, and Changes in Net Position
For the Fiscal Year Ended June 30, 2015
OPERATING REVENUES
Charges for services $6,404,159 $‐$1,066,296 $7,470,455
Distribution charges 58,104 58,104
Meter installations 11,769 11,769
Other revenue 23,434 519 23,953
Total operating revenues 6,497,466 1,066,815 7,564,281
OPERATING EXPENSES
Distribution 580,980 580,980
General 324,721 250,340 575,061
Lopez water contract 3,170,608 3,170,608
Production 149,291 149,291
Depreciation 251,750 571,244 822,994
Total operating expenses 1,306,742 3,170,608 821,584 5,298,934
Operating income (loss)5,190,724 (3,170,608) 245,231 2,265,347
NON‐OPERATING REVENUES
Interest income 67,790 1,623 14,592 84,005
Total non‐operating revenues 67,790 1,623 14,592 84,005
Income (loss) before capital
contributions and transfers 5,258,514 (3,168,985) 259,823 2,349,352
Capital contributions 466,561 156,573 623,134
Transfer in 2,955,748 2,955,748
Transfer out (5,004,983) (307,200) (564,352) (5,876,535)
Change in net position 720,092 (520,437) (147,956) 51,699
Net position ‐ July 1, 2014 15,722,890 2,189,813 26,242,539 44,155,242
Prior period adjustments (1,333,152) (126,389) (1,459,541)
Net position ‐ July 1, 2014 ‐ restated 14,389,738 2,189,813 26,116,150 42,695,701
Net position ‐ June 30, 2015 $15,109,830 $1,669,376 $25,968,194 $42,747,400
Water FundLopez Fund TotalsSewer Fund
The notes to the basic financial statements are an integral part of this statement.
B‐35
Item 9.c. - Page 52
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Cash Flows
For the Fiscal Year Ended June 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $6,301,259 $327,979 $1,091,219 $7,720,457
Payments to employees and suppliers (1,036,428) (4,839,984) (257,460) (6,133,872)
Other receipts 23,434 519 23,953
Net cash provided (used) by operating
activities 5,288,265 (4,512,005) 834,278 1,610,538
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Lease payments made (20,866) (18,974) (39,840)
Interest expense payments (153) (526) (679)
Purchase of capital assets (30,000) (30,000)
Transfers to capital improvement fund (508,155) (242,452) (750,607)
Net cash used by capital and
related financing activities (529,174) (291,952) (821,126)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers from/(to) other funds (4,496,828) 2,648,548 (321,900) (2,170,180)
Net cash provided (used) by noncapital
financing activities (4,496,828) 2,648,548 (321,900) (2,170,180)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 63,923 2,413 13,994 80,330
Net cash provided by investing
activities 63,923 2,413 13,994 80,330
Net increase (decrease) in cash and cash
equivalents 326,186 (1,861,044) 234,420 (1,300,438)
Cash and cash equivalents ‐ July 1 4,667,916 1,861,044 1,230,293 7,759,253
Cash and cash equivalents ‐ June 30 $4,994,102 $‐$1,464,713 $6,458,815
Water FundLopez Fund TotalsSewer Fund
The notes to the basic financial statements are an integral part of this statement.
B‐36
Item 9.c. - Page 53
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Cash Flows
For the Fiscal Year Ended June 30, 2015
Reconciliation of operating income (loss) to net
cash provided (used) by operating
activities:
Operating income (loss)$5,190,724 $(3,170,608) $245,231 $2,265,347
Adjustments to reconcile operating
activities:
Depreciation expense 251,750 571,244 822,994
Change in assets, deferred outflows of resources,
liabilities and deferred inflows of resources:
Receivables, net (184,903) 327,979 24,923 167,999
Inventory 16,219 715 16,934
Prepaid items (21,806) (1,669,376) (5,868) (1,697,050)
Deferred ouflows for pensions (7,165) (1,330) (8,495)
Accounts and other payables 30,760 (2,477) 28,283
Deposits payable 6,171 6,171
Deferred revenue 5,959 5,959
Compensated absences (2,553) 2,286 (267)
OPEB 7,763 7,763
Pension liability (274,933) (26,316) (301,249)
Deferred inflows for pensions 270,279 25,870 296,149
Net cash provided by
operating activities $5,288,265 $(4,512,005) $834,278 $1,610,538
Water FundLopez Fund TotalsSewer Fund
The notes to the basic financial statements are an integral part of this statement.
B‐37
Item 9.c. - Page 54
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Item 9.c. - Page 55
City of Arroyo Grande
DESCRIPTION OF FIDUCIARY FUNDS
B‐39
Private‐Purpose Trust Fund
Successor Agency to the Former Arroyo Grande Redevelopment Agency
This private‐purpose trust fund was created to hold the assets of the former redevelopment agency of the City of
Arroyo Grande until they are distributed to other units of state and local government after the payment of
enforceable obligations have been made.
Agency Funds
Sanitation District Fund
This agency fund accounts for the receipt and remittance of wastewater processing fees on behalf of the South San
Luis Obispo County Sanitation District. The City bills the wastewater processing fee through the utility bills,
collecting the fee from the City's utility customers.
Downtown Parking Fund
This agency fund collects assessments from Arroyo Grande Village merchants for the maintenance of the Village
parking lots for the Downtown Village Merchants Association.
Item 9.c. - Page 56
City of Arroyo Grande
STATEMENT OF FIDUCIARY NET POSITION
June 30, 2015
ASSETS
Cash and investments $1,073,704 $325,813 $1,399,517
Accounts receivable 44,259 44,259
Interest receivable 152 152
Prepaid items 52 52
Inventory ‐ land held for resale 860,928 860,928
Note receivable 1,341,606 1,341,606
Total assets 3,276,238 $370,276 3,646,514
LIABILITIES
Accounts payable 486 $‐486
Interest payable 109,316 109,316
Unearned revenue 528,896 528,896
Due to other agencies 370,276 370,276
Loans payable 759,544 759,544
Bonds payable 5,715,000 5,715,000
Total liabilities 7,113,242 $370,276 7,483,518
NET POSITION
Held in trust for:
Successor agency to the former
redevelopment agency (3,837,004) (3,837,004)
Total net position $(3,837,004) $(3,837,004)
Private‐Purpose
Trust Fund
Agency Funds Totals
Successor Agency to
the Former
Redevelopment
Agency
The notes to the basic financial statements are an integral part of this statement.
B‐40
Item 9.c. - Page 57
City of Arroyo Grande
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
Fiduciary Fund
For the Fiscal Year Ended June 30, 2015
ADDITIONS
Property taxes $782,168
Use of money and property 27,948
Total additions 810,116
DELETIONS
Administration 238,946
Contract services 11,451
Interest and fiscal agent fees 332,204
Loss on sale of note receivable 90,341
Total deletions 672,942
Net change in net position 137,174
Net position ‐ July 1, 2014 (3,974,178)
Net position ‐ June 30, 2015 $(3,837,004)
Successor Agency to
the Former
Redevelopment
Agency
Private‐Purpose
Trust Fund
The notes to the basic financial statements are an integral part of this statement.
B‐41
Item 9.c. - Page 58
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐42
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Arroyo Grande (City) have been prepared in conformity with accounting principles
generally accepted in the United States of America as applied to governmental units. The Government Accounting Standards Board
(GASB) is the accepted standard‐setting body for establishing governmental accounting and financial reporting principles. The more
significant City’s accounting policies are described below:
A. Reporting Entity
The City was incorporated in 1911, under the laws of the State of California. The City operates under a Council‐Manager form of
government, which includes an elected Mayor and a four‐member council. The accompanying basic financial statements
present the financial activity of the City, which is the primary government, along with the financial activities of its component
unit, which is an entity for which the City is financially accountable. Although they are separate legal entities, blended
component units are in substance part of the City’s operations and are reported as an integral part of the City’s basic financial
statements.
There are no component units in this report which meet the criteria of the GASB Statement No. 14, The Financial Reporting
Entity, as amended by GASB Statement No. 39 and GASB Statement No. 61.
B. Basis of Accounting and Presentation
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The
operations of each fund are accounted for with a separate set of self‐balancing accounts that comprise its assets, liabilities, fund
balances or net position, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and
accounted for in individual funds based upon the purposes for which the governmental resources are to be spent and the
means by which spending activities are controlled.
The government‐wide, proprietary funds and private‐purpose trust fund financial statements are reported using the economic
resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are
recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Assets equal liabilities and the
measurement of operations is not a focus of the agency funds.
Private‐sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both
the government‐wide and proprietary fund financial statements to the extent that those standards do not conflict with or
contradict guidance of GASB. Governments also have the option of following subsequent private‐sector guidance for their
business‐type activities and enterprise funds, subject to the same limitation. The City has elected not to follow subsequent
private‐sector guidance.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of
accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues
reported in the governmental funds to be available if the revenues are collected within sixty days after fiscal year‐end.
Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long‐term
debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent that they have
matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of long‐term debt and
acquisitions under capital leases are reported as other financing sources.
Non‐exchange transaction, in which the City gives or receives value without directly receiving or giving equal value in exchange,
include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in
the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year
in which all eligibility requirements have been satisfied.
Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and charges for services.
Item 9.c. - Page 59
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐43
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
B. Basis of Accounting and Presentation – continued
Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the terms of grant
agreements, the City may fund certain programs with a combination of cost‐reimbursement grants, categorical block grants,
and general revenues. Thus, either restricted and unrestricted fund balances or net position may be available to finance
program expenditures/expenses. The City’s policy is to first apply restricted grant resources to such programs, followed by
general revenues if necessary.
Government‐wide Statements
The Statement of Net Position and the Statement of Activities display information about the City. These statements include the
financial activities of the overall City government, except for fiduciary activities. Eliminations have been made to minimize the
double counting of internal activities. Government activities generally are financed through taxes, intergovernmental revenues,
and other non‐exchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the
City’s governmental activities. Direct expenses are those that are specifically associated with a program or function and,
therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods
or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a
particular program, and (c) fees, grants, and contributions that are restricted to financing the acquisition or construction of
capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements
The fund financial statements provide information about the City’s funds, including fiduciary funds. Separate statements for
each fund category‐governmental, proprietary and fiduciary‐are presented. The emphasis of fund financial statements is on
major individual funds, each of which is displayed in a separate column. All remaining governmental funds are aggregated and
reported as non‐major funds.
Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in
Net Position, and a Statement of Cash Flows for all proprietary funds. 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 Position. The Statement of Revenues, Expenses, and Changes in Fund Net
Position present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting,
revenues are recognized in the period in which they are earned while expenses are recognized in the period in which liability is
incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary operation of the fund. All
other revenues are reported as non‐operating revenues. Operating expenses are those expenses that are essential to the
primary operations of the fund. All other expenses are reported as non‐operating expenses.
Fiduciary funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private
organizations, other governmental units, and/or other funds. The City maintains two agency funds, Sanitation District and
Downtown Parking, and three private‐purpose trust funds, the Successor Agency to the Former Redevelopment Agency of
Arroyo Grande, Successor Agency to the Former Redevelopment Agency of Arroyo Grande – Housing Function, and
Redevelopment Obligation Retirement Fund.
C. Major Funds
GASB Statement No. 34 defines major funds and requires that the City’s major funds be identified and presented separately in
the fund financial statements. All other funds, called non‐major funds, are combined and reported in a single column,
regardless of their fund‐type.
Item 9.c. - Page 60
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐44
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
C. Major Funds – continued
Major funds are defined as funds that have assets, liabilities, revenues, or expenditures/expenses equal to or greater than (a)
ten percent of their fund‐type total and (b) five percent of all fund types total combined. The General Fund is always a major
fund. The City may also select other funds it believes should be presented as major funds.
The City reported the following major governmental funds in the accompanying financial statements:
General Fund – This is the primary operating fund of the City, which accounts for resources and services traditionally associated
with government. The General Fund provides administrative, financial, police protection, fire protection, community develop‐
ment, recreation, and maintenance services to the community.
Special Gasoline Tax Fund – This fund accounts for the receipts and expenditures of money apportioned by the State under
Streets and Highway Code sections 2105, 2106, 2107, and 2107.5. The use of gas tax revenue can only be used to construct and
maintain streets, roads, and highways.
Transportation Impact Fees Fund – This fund accounts for transportation impact fees collected.
In‐Lieu Affordable Housing Fund – This fund accounts for monies paid by developers in meeting the City’s mandatory affordable
housing requirement.
CDBG Fund – This fund accounts for revenues and expenditures related to Community Development Block Grant (CDBG) funds.
Capital Improvement Fund – This fund accounts for capital improvements projects performed by the City and the use of those
revenues.
The City reported the following major proprietary funds:
Water Fund – This fund accounts for the activities of providing water to residents of the City. This fund also accounts for the
accumulation of water facility revenues to be used in capital improvement projects in the City.
Sewer Fund – This fund is used to account for maintenance of sewer lines connecting City residents to the South San Luis Obispo
County Sanitation District sewer plant. Maintenance costs are funded by user charges. This fund also accounts for the
accumulation of sewer facility revenues to be used in capital improvement projects in the City.
Lopez Fund – This fund accounts for the activities associated with Lopez Lake and the water contract with the County of San Luis
Obispo.
D. Cash and Investments
The City pools its available cash for investment purposes. The City considers pooled cash and investments, with original
maturities of three months or less, to be cash equivalents.
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’s investments with fiscal agent required by bond indentures are stated at cost,
which approximate fair value.
Item 9.c. - Page 61
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐45
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
D. Cash and Investments – continued
The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF) which
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 investments. In addition, these structured notes
and asset‐backed securities are subject to market risk as to change in interest rates.
E. Capital Assets
Capital assets are defined as costs related to the acquisition or purchase of property, plant, equipment, and infrastructure
(roads, sidewalks, drainage systems, lighting systems, etc.). Capital assets are reported in the applicable governmental or
business‐type activities columns in the government‐wide financial statements. All capital assets are valued at historical cost or
estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair
value on the date contributed. It is City policy to capitalize all capital assets with costs exceeding $50,000 for infrastructure‐type
assets and $5,000 on all other assets and with useful lives exceeding two years.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset
are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed.
With the implementation of GASB Statement No. 34, the City has recorded all its public domain (infrastructure) capital assets,
which include roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems.
The purpose of depreciation is to spread the cost of capital assets equitable among all users over the life of these assets. The
amount charged to depreciation expense each fiscal year represents that fiscal year’s pro rata share of the cost of capital assets.
GASB Statement No. 34 requires that all capital assets with limited useful lives be depreciated over their estimated useful lives.
Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in
years and the result is charged to expense each fiscal year until the asset is fully depreciated. The City has assigned the useful
lives listed below to capital assets:
Machinery and equipment 5 – 15 years
Structures and improvements 10 – 50 years
Infrastructure 25 – 50 years
F. Interfund Transactions
Interfund transactions are reported as loans, services provided, reimbursements, or transfers. Loans are reported as interfund
receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be
at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund
incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund
transactions are treated as transfers. Transfers among governmental funds are netted as part of the reconciliation to the
government‐wide financial statements.
G. Unearned Revenue
Unearned revenue is recognized for transactions for which revenue has not yet been earned. Typical transactions for which
unearned revenue is recorded are grants received but not yet earned.
H. Deferred Outflows and Inflows of Resources
Pursuant to GASB Statement No. 63, “Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and
Net Position,” and GASB Statement No. 65, “Items Previously Reported as Assets and Liabilities,” the City recognizes deferred
outflows and inflows of resources.
Item 9.c. - Page 62
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐46
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
H. Deferred Outflows and Inflows of Resources – continued
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources.
A deferred outflow of resources is defined as a consumption of net position by the City that is applicable to a future reporting
period.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of
resources. A deferred inflow of resources is defined as an acquisition of net position by the City that is applicable to a future
reporting period.
I. Compensated Absences
In compliance with GASB Statement No. 16, the City has established a liability for accrued sick leave and vacation. All vacation is
accrued when incurred in the government‐wide and proprietary financial statements. This liability is calculated for current
employees at the current rates of pay. City employees accrue vacation and sick leave that vary in amounts, based primarily on
employment status and years of service. In the event of termination or retirement, employees are reimbursed for the total
value of their accumulated vacation days, annual leave and compensatory time. In the event of retirement, employees may
choose to be paid 50% of their unused sick leave, to a maximum of 450 hours at the current rate of pay. In addition, unused
accumulated sick leave may be converted to retirement credit per the City’s contract with the California Public Employees
Retirement System.
J. Long‐term Debt
In the government‐wide financial statements, proprietary fund, and private‐purpose trust fund types in the fund financial
statements, long‐term debt and other long‐term obligations are reported as liabilities in the applicable governmental activities,
business‐type activities, or proprietary fund type statement of net position.
In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period.
The face amount of the debt issued is reported as other financing resources. Premiums received on debt issuances are reported
as other financing sources while discounts on debt issuances are reported as other financing uses.
K. Fund Balances and Net Position
Fund balance is the difference between the assets and liabilities reported in the governmental funds. In compliance with GASB
Statement No. 54, the City has established the following fund balance types:
Non‐spendable – The non‐spendable fund balance classification includes amounts that cannot be spent because they are
either (a) not in spendable form or (b) legally or contractually required to be maintained intact.
Restricted – The restricted fund balance classification includes amounts that reflect constraints placed on the use of
resources (other than non‐spendable items) that are either (a) externally imposed by creditors (such as through debt
covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through
constitutional provisions or enabling legislation.
Committed – The committed fund balance classification includes amounts that can only be used for specific purposes
pursuant to constraints imposed by formal action of the City Council. Those committed amounts cannot be used for any
other purpose unless the government removes or changes the specified use by taking the same type of action (legislation,
resolution, ordinance, etc.) it employed to previously commit those amounts. Committed fund balance should also
incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for
use in satisfying those contractual requirements.
Item 9.c. - Page 63
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐47
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
K. Fund Balances and Net Position – continued
Assigned – The assigned fund balance classification includes amounts that are constrained by the government’s intent to be
used for specific purposes, but that are neither restricted nor committed. Such intent is to be established by (a) the City
Council itself or (b) the City Manager to which the City Council has delegated the authority to assign amounts to be used for
specific purposes.
Unassigned – The unassigned fund balance classification includes amounts that do not fall into one of the above four
categories. This classification represents fund balance that has not been assigned to other funds and that has not been
restricted, committed, or assigned for specific purposes within the General Fund. The General Fund is the only fund that
should report this category of fund balance. However, other governmental funds may report a negative balance in this
classification if there is an over‐spending for specific purposes for which amounts have been restricted, committed, or
assigned.
Governmental Accounting Standards Board Statement No. 63 requires that the difference between assets added to the deferred
outflows of resources and liabilities added to the deferred inflows of resources be reported as net position. Net position is
classified in the following categories:
Net Investment in Capital Assets – Net position that is net investment in capital assets consist of capital assets, net of
accumulated depreciation, and reduced by outstanding debt directly attributed to the acquisition, construction, or
improvement of the assets.
Restricted Net Position – The restricted net position is the portion of net position that has external constraints placed on it
by external creditors, grantors, contributors, laws, or regulations of other governments, or through constitutional
provisions or enabling legislation.
Unrestricted Net Position – The unrestricted net position classification is the amount remaining that does not fall into one of
the above two categories.
When an expenditure is incurred for which both restricted and unrestricted fund balances are available, it is the City’s policy
that the restricted fund balance be spent first followed by committed, then assigned, and, if applicable, unassigned.
The City has established a formal minimum general fund balance policy of 15% of appropriations, with the goal of maintaining
20% of appropriations.
L. Property Taxes
California Constitution Article XIII A limits the combined property tax rate to one percent of a property’s assessed valuation.
Additional taxes may be imposed with voters’ approval. Assessed value is calculated at one hundred percent of a property’s fair
value, as defined by Article XIII A, and may be increased by no more than two percent per year unless a change in ownership
occurs. The State Legislature has determined the method of distributing the one percent tax levy among the various taxing
jurisdictions.
Property tax revenues are recognized in the fiscal year for which taxes have been levied, and collected within sixty days of fiscal
year end. Property taxes are billed and collected as shown on the following page:
Item 9.c. - Page 64
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐48
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
L. Property Taxes – continued
Secured Unsecured
Valuation/Lien Dates January 1 January 1
Levy Dates July 1 July 1
Due Dates November 1 (50%) August 1
February 1 (50%)
Delinquency Dates December 10 (Nov) August 31
April 10 (Feb)
The City adopted an alternative method of property tax distribution (the “Teeter Plan”). Under this method, the City receives
100% of its secured property tax levied in exchange for foregoing any interest and penalties collected on delinquent taxes. The
City receives payments as a series of advances made by the County throughout the fiscal year. The secured property tax levy is
recognized as revenue upon receipt including the final payment, which generally is received within 60 days after the fiscal year
end.
M. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and
pension expense, information about the fiduciary net position of the City’s California Public Employees Retirement System
(PERS) plan and additions to or deductions from the PERS plan fiduciary net position have been determined on the same
basis as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are
recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
N. Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues, expenditures or expenses as appropriate. Actual results could differ from those estimates.
O. New Accounting Pronouncements
Governmental Accounting Standards Board Statement No. 68 – For the fiscal year ended June 30, 2015, the City implemented
Governmental GASB Statement No. 68, “Accounting and Financial Reporting for Pensions.” This Statement is effective for
periods beginning after June 15, 2014. The objective of this Statement is to improve accounting and financial reporting by state
and local governments for pensions. This Statement replaces the requirements of GASB Statement No. 27, “Accounting for
Pensions by State and Local Governmental Employers” as well as the requirements of GASB Statement No. 50, “Pension
Disclosures.” This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources,
deferred inflows of resources, and expenses related to pensions. Implementation of the GASB Statement No. 68 and the impact
on the City’s financial statements are explained in Note 11 ‐ Pension Plans and Note 17 ‐ Prior Period Adjustment.
Governmental Accounting Standards Board Statement No. 71 – For the fiscal year ended June 30, 2015, the City implemented
GASB Statement No. 71, “Pension Transition for Contributions Made Subsequent to the Measurement Date.” This Statement is
effective for periods beginning after June 15, 2014. The objective of this Statement is to address an issue regarding application
of the transition of GASB Statement No. 68, “Accounting and Financial Reporting for Pensions.” The issue relates to amounts
associated with contributions, if any, made by a state or local government employer or non‐employer contributing entity to a
defined benefit pension plan after the measurement date of the government’s beginning net pension liability. This statement
will eliminate the source of potential significant understatement of restated beginning net position and expense in the first year
of implementation of GASB Statement No. 68 in the accrual‐basis financial statements of employers and non‐employer
contributing entities. Implementation of the GASB Statement No. 71 and the impact on the City’s financial statements are
explained in Note 11 ‐ Pension Plans and Note 17 ‐ Prior Period Adjustment.
Item 9.c. - Page 65
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐49
NOTE 2 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY
Biennial budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for
governmental funds. The two‐year budget is legally adopted for all funds by the City Council prior to July 1 of odd years. The City
Manager first submits a preliminary budget in April of the odd year, which includes projected expenditures and the means of
financing them, to the City Council. As modified during public study sessions, the preliminary budget becomes the proposed budget.
Following public hearings on the proposed budget, the final annual budget is adopted by the City Council in June. After adoption of
the final budget, transfers of appropriations within a general fund department, or within other funds, can be made by the City
Manager. Budget modifications to any of the funds, increases or decreases to a fund’s overall budget, and all transfers in and out of
any funds, must be approved by the City Council. Numerous properly authorized amendments are made during the fiscal year.
Budgetary control is enhanced by integrating the budget into the general ledger accounts. Encumbrance accounting is employed
(e.g., purchase orders) to avoid expenditures over the budget. Encumbrances outstanding at the end of the fiscal year are
automatically budgeted in the following fiscal year.
NOTE 3 – CASH AND INVESTMENTS
The composition of cash and investments as of June 30, 2015, is as follows:
Cash in bank and on hand $490,385
Cash and investments held with fiscal agent 458,053
Investments 22,840,307
Total $23,788,745
Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted
under the terms of the City’s debt instruments or Agency’s agreements:
Cash and investments, statement of net position $22,389,228
Cash and investments, statement of fiduciary net position 1,399,517
Total $23,788,745
Investments Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code. The table also
identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentration of credit
risk.
Maximum Maximum
Maximum Percentage of Investment
Authorized Investment Type Maturity Portfolio in One Issuer
Local Agency Bonds 5 years None None
U.S. Treasury Obligations 5 years 60% None
U.S. Agency Securities 5 years None None
Bankers’ Acceptances 180 days 40% 30%
Commercial Paper 270 days 25% 10%
Negotiable Certificates of Deposit 5 years 20% None
Repurchase Agreements 1 year None None
Reverse Repurchase Agreements 92 days 20% of base value None
Medium‐Term Notes 5 years 30% None
Mutual Funds N/A 20% 10%
Money Market Mutual Funds N/A 20% 10%
Item 9.c. - Page 66
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐50
NOTE 3 – CASH AND INVESTMENTS – continued
Investments Authorized by the California Government Code and the City’s Investment Policy – continued
Maximum Maximum
Maximum Percentage of Investment
Authorized Investment Type Maturity Portfolio in One Issuer
Mortgage Pass‐Through Securities 5 years 20% None
County Pooled Investment Fund N/A None None
Local Agency Investment Fund (LAIF) N/A None None
JPA Pools (other investment pools) N/A None None
Guaranteed Investment Contract 15 months None None
Investments Authorized by Debt Agreements
Investments of note proceeds held by note trustees are governed by the provisions of the debt agreements, rather than the general
provisions of the California Government Code or the City’s investment policy. The table below identifies the investment types that
are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements that
address interest rate risk, credit risk, and concentration of credit risk.
Maximum Maximum
Maximum Percentage of Investment
Authorized Investment Type Maturity Portfolio in One Issuer
Money Market Accounts N/A None None
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the
longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways
that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments
and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time
as necessary to provide the cash flows and liquidity needed for operations. Information about the sensitivity of the fair values of the
City’s investments to market interest rate fluctuations is provided on the following page that shows the distribution of the City’s
investments by maturity:
Remaining Maturity (in Months)
Carrying
Amount
12 Months or
Less 13‐24 Months 25‐60 Months
More than 60
Months Investment Type
Local Agency Investment Fund $ 7,873,378 $7,873,378 $‐$ ‐ $‐
Certificates of Deposit 2,594,4821,605,482 249,000 740,000
U.S. Agency Securities 12,372,447 12,372,447
Held by Fiscal Agent:
Money Market Funds 458,053458,053
Total $ 458,053 $9,936,913 $249,000 $ 13,112,447 $‐
Item 9.c. - Page 67
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐51
NOTE 3 – CASH AND INVESTMENTS – continued
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is
measured by the assignment of rating by a nationally recognized statistical rating organization. Presented below is the minimum
rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the
actual rating as of fiscal year end for each investment type:
Minimum Exempt Rating as of Fiscal Year End
Carrying Legal From
Investment Type Amount Rating Disclosure AAA AA Not Rated
Local Agency Investment Fund $ 7,873,378 N/A $ ‐ $ ‐ $ ‐ $ 7,873,378
Certificates of Deposit 2,594,482 N/A 2,594,482
U.S. Agency Securities 12,372,447 N/A 12,372,447
Held by Fiscal Agent:
Money Market Funds 458,053 N/A 458,053
Total $ 23,298,360 $ ‐ $ 12,372,447 $ ‐ $ 10,925,913
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that
stipulated by the California Government Code.
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not
be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The
California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the
exposure to custodial credit risk for deposits, other than the following provision for deposits: The California Government Code
requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided
collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the
pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California
law also allows financial institutions to secure the City’s deposits by pledging first trust deed mortgage notes having a value of 150%
of the secured public deposits. None of the City’s deposits with financial institutions in excess of the Federal Depository Insurance
Corporation’s limits were held in uncollateralized accounts.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker‐dealer) to a
transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of
another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that
would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies
only to direct investments in marketable securities. Custodial credit risk does not apply to a local government’s indirect investment
in securities through the use of mutual funds or governmental investment pools (such as LAIF).
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code
under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the
accompanying basic financial statements at the amounts based upon the City’s pro‐rata share of the fair value provided by LAIF for
the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost basis.
Item 9.c. - Page 68
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐52
NOTE 4 – CAPITAL ASSETS
Capital asset activity for the fiscal year ended June 30, 2015, is as follows:
Transfers and
Balance Other Re‐ Balance
July 1, 2014 Additions Deletions classifications June 30, 2015
Governmental Activities
Nondepreciable capital assets
Land $ 2,870,474 $ ‐ $ ‐ $ ‐ $ 2,870,474
Infrastructure 6,379,188 6,379,188
Construction in progress 3,403,822 4,111,968 180,921 (4,302,180) 3,032,689
Total nondepreciable capital
assets 12,653,484 4,111,968 180,921 (4,302,180) 12,282,351
Depreciable capital assets
Structures and improvements 8,436,332 33,798 3,112,754 11,582,884
Equipment 5,039,980 138,668 189,029 254,436 5,244,055
Infrastructure 39,711,207 311,856 40,023,063
Total depreciable capital assets 53,187,519 172,466 189,029 3,679,046 56,850,002
Less accumulated depreciation 25,780,028 1,465,850 189,029 27,056,849
Net depreciable capital assets 27,407,491 (1,293,384) 3,679,046 29,793,153
Net capital assets $ 40,060,975 $ 2,818,584 $ 180,921 $ (623,134) $ 42,075,504
Transfers and
Balance Other Re‐ Balance
July 1, 2014 Additions Deletions classifications June 30, 2015
Business‐type Activities
Nondepreciable capital assets
Land $ 56,730 $ ‐ $ ‐ $ ‐ $ 56,730
Construction in progress 335,061 335,061
Total nondepreciable capital
assets 56,730 335,061 391,791
Depreciable capital assets
Structures and improvements 222,999 222,999
Equipment 931,398 30,000 961,398
Infrastructure 56,079,185 288,073 56,367,258
Total depreciable capital assets 57,233,582 30,000 288,073 57,551,655
Less accumulated depreciation 21,937,527 822,994 22,760,521
Net depreciable capital assets 35,296,055 (792,994) 288,073 34,791,134
Net capital assets $ 35,352,785 $ (792,994) $ ‐ $ 623,134 $ 35,182,925
Transfers and Other Reclassifications
During the 2014‐15 fiscal year, the City completed $3,679,046 in various capital projects and capital contributions to business‐type
activities were $623,134.
Item 9.c. - Page 69
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐53
NOTE 4 – CAPITAL ASSETS – continued
Depreciation Allocation
Depreciation expense was charged to functions and programs based on their usage of related assets. The amounts allocated to each
function or program is presented below:
Governmental Activities:
General government $ 120,237
Community development 1,317
Public safety 454,304
Public works 89,767
Streets and roads 800,225
Total depreciation expense – governmental activities $ 1,465,850
Business‐type Activities:
Water $ 251,750
Sewer 571,244
Total depreciation expense – business‐type activities $ 822,994
NOTE 5 – LOANS RECEIVABLE
On August 13, 1996, the City entered into a loan agreement with C‐Court Limited Partnership for the purpose of development of a
rental housing development located at 351 South Elm Street in the amount of $344,040 provided by the CDBG Fund. The note has a
term of 30‐years, with no interest bearing. The total amount of the loan is due at the end of the term.
On August 13, 1996, the City entered into a loan agreement with Oak Forest Association for the purpose of development of a 20‐unit
multifamily affordable housing development located at 163 South Elm Street in the amount of $445,000 provided by the CDBG Fund.
The note had a term of 30‐years, with no interest bearing. The total amount of the loan is due at the end of the term.
On July 25, 2006, the City entered into a loan agreement with the Redevelopment Agency of Arroyo Grande, subsequently the
Successor Agency of the Former Redevelopment Agency of Arroyo Grande, for the purpose of funding the cost of the acquisition of a
vacant lot on the north side of Faeh Street in the amount of $820,130. The loan originally called for interest to be accrued equal to
the rate earned by the City’s Local Agency Investment Fund, however, on February 23, 2010, the agreement was amended to no
longer accrue interest. The Department of Finance recognizes loans from Cities to Redevelopment Agencies as “enforceable
obligations” eligible for repayment, under provisions of the loan agreements pursuant to provisions included in Assembly Bill 1484,
once the Successor Agency receives a “Finding of Completion” from the Department of Finance, loan agreements between the
Redevelopment Agency and the City shall be deemed to be enforceable obligations provided that the Oversight Board makes a
finding that the loan was for legitimate redevelopment purposes. On May 14, 2013, the Oversight Board approved the legitimacy of
this loan. The total amount outstanding, including accrued interest at June 30, 2015, was $759,544.
On March 28, 2013, the Redevelopment Agency of Arroyo Grande, subsequently the Successor Agency of the Former
Redevelopment Agency of Arroyo Grande, entered into a loan agreement with Courtland Street Apartments, LP for the construction
of a 36‐unit affordable housing rental project and related improvements on the property located on the corner of Grand Avenue and
Courtland Avenue. On August 13, 2013, the City approved Amendment No. 1 to the Affordable Housing and Loan Agreement which
provides up to $400,000 of additional In‐Lieu Affordable Housing funds towards this project. The total amount outstanding,
including accrued interest at June 30, 2015, was $75,563.
Loans Receivable:
In‐Lieu Affordable Housing Fund $835,107
CDBG Fund 789,040
Total $1,624,147
Item 9.c. - Page 70
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐54
NOTE 6 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS
A. Interfund Transfers
The transfers in and out between funds during the fiscal year ended June 30, 2015, were as follows:
Transfer In Transfer Out
General Fund $2,104,953 $3,458,791
Special Gasoline Tax Fund 292,104 77,796
Transportation Impact Fees Fund 284,497
CDBG Fund 10,357
Capital Improvement Fund 4,847,521
Nonmajor Governmental Funds 278,676771,026
Water Fund 5,004,983
Lopez Fund 2,955,748 307,200
Sewer Fund 564,352
Total $2,955,748 $6,647,561
B. Interfund Loans
The due to and from other funds at June 30, 2015, were as follows:
Due From Due To
General Fund $2,569 $‐
Special Gasoline Tax Fund 2,569
Total $2,569 $2,569
NOTE 7 – DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
At June 30, 2015, deferred inflows of resources, reported in the governmental fund financial statements, consisted of the following:
Unavailable Loan Revenue:
In‐Lieu Affordable Housing Fund $837,357
CDBG Fund 789,040
Total $1,626,397
Information on deferred inflows and outflows of resources related to pension plans can be found in Note 11 ‐ Pension Plans.
NOTE 8 – LONG‐TERM DEBT
A. Compensated Absences
City employees accumulate earned but unused vacation and sick pay benefits, which can be converted to cash at termination of
employment. Since no means exists to reasonably estimate the amounts that might be liquidated with current available
financial resources, if any, they are reported as long‐term debt on the Statement of Net Position. No expenditure is reported for
these amounts in the funds statements. However, in the Statement of Activities the expenditure is allocated to each function
based on usage. The non‐current portion of these vested benefits (payable in accordance with various collective bargaining
agreements) at June 30, 2015, total $840,107 for governmental activities and $86,085 for business‐type activities.
Item 9.c. - Page 71
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐55
NOTE 8 – LONG‐TERM DEBT – continued
B. General Obligation Bonded Debt
The purpose of the bonds was to finance the expansion, construction, and retrofit of the City’s fire station. The outstanding
general obligation bonded debt of the City at June 30, 2015, is shown below:
Date of
Issue Interest Rates
Maturity
Date
Amount of
Original Issue
Outstanding
July 1, 2014
Redeemed
Current Year
Outstanding
June 30, 2015
2003 2.00 – 4.45% 2024 $1,900,000 $1,140,000 $ 90,000 $1,050,000
The annual requirements to amortize general obligation bonds payable is as follows:
Fiscal Year
Ending June 30
Principal Interest Total
2016 $95,000 $42,850 $ 137,850
2017 100,000 38,900 138,900
2018 105,000 34,672 139,672
2019 110,000 30,183 140,183
2020 115,000 25,429 140,429
2021‐2024 525,000 47,717 572,717
Total $1,050,000 $219,751 $ 1,269,751
C. Capital Leases Payable
The City is leasing police vehicles with De Lage Landen Public Finance LLC under an agreement which provides for title to pass
upon expiration of the lease period.
The City is leasing a platform fire truck with Oshkosh Capital under an agreement which provides for title to pass upon
expiration of the lease period.
The City is leasing a sewer vactor truck with Kansas State Bank of Manhattan which provides for the title to pass upon expiration
of the lease period.
The City is leasing ten (10) vehicles and certain information technology equipment and services related to the implementation
of a storage area network, server virtualization, and enterprise data backup solution with Santander Bank under an agreement
which provides for title to pass upon expiration of the lease period.
The future minimum payment obligation for the capital leases payable are shown below:
Fiscal Year
Ending June 30
De Lage
Landen
Oshkosh
Capital
Kansas State
Bank
Santander
Bank Total
2016 $ 71,840 $38,478 $15,002 $ 136,258 $261,578
2017 15,002 136,258 151,260
2018 28,260 28,260
Total 71,840 38,478 30,004 300,776 441,098
Less: amount
representing in interest
1,998 1,340 1,686 9,369 14,393
Present value of net
minimum payments
$ 69,842 $37,138 $28,318 $ 291,407 $426,705
Item 9.c. - Page 72
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐56
NOTE 8 – LONG‐TERM DEBT – continued
D. California Energy Resources Conservation and Development Commission Loan Payable
On July 7, 2010, the City entered into a loan agreement with the California Energy Resources Conservation and Development
Commission (CA Energy). The purpose of the loan was to partially fund the city‐wide energy savings project. The project
consisted of heating, ventilation, and air conditioning retrofits including equipment, building controls, lighting equipment, and
lighting controls, installation of vending machine misers, installation of LCD computer monitors, installation of computer
controls, and installation of LED streetlights. Installation occurred at all City owned buildings including city council chambers,
city hall, fire department, community center, corporate yard, Soto Field complex, and recreation services building.
The outstanding loan payable debt of the City at June 30, 2015 is shown below:
Date of
Issue Interest Rate
Maturity
Date
Amount of
Original Issue
Outstanding
July 1, 2014
Redeemed
Current Year
Outstanding
June 30, 2015
2011 3.00% 2026 $127,512 $116,156 $ 8,176 $107,980
The future minimum payment obligation for the loan payable is as follows:
Fiscal Year
Ending June 30
Principal Interest Total
2016 $8,414 $3,185 $ 11,599
2017 8,677 2,923 11,600
2018 8,939 2,660 11,599
2019 9,209 2,390 11,599
2020 9,482 2,117 11,599
2021‐2025 51,916 6,084 58,000
2026 11,343 257 11,600
Total $107,980 $19,616 $ 127,596
E. United States Department of Agriculture Loan Payable
On September 1, 2010, the City entered into a lease‐purchase agreement with the United States Department of Agriculture
(USDA). The purpose of this loan was to acquire the property and office building for the relocation of the City Hall offices. The
outstanding loan payable debt of the City at June 30, 2015 is shown below:
Date of
Issue Interest Rates
Maturity
Date
Amount of
Original Issue
Outstanding
July 1, 2014
Redeemed
Current Year
Outstanding
June 30, 2015
2011 3.75% 2041 $1,200,000 $1,131,000 $ 25,000 $1,106,000
Item 9.c. - Page 73
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐57
NOTE 8 – LONG‐TERM DEBT – continued
E. United States Department of Agriculture Loan Payable – continued
The future minimum payment obligation for the USDA loan payable is as follows:
Fiscal Year
Ending June 30
Principal Interest Total
2016 $26,000 $40,988 $ 66,988
2017 27,000 39,994 66,994
2018 28,000 38,963 66,963
2019 29,000 37,894 66,894
2020 30,000 36,788 66,788
2021‐2025 167,000 165,956 332,956
2026‐2030 201,000 131,531 332,531
2031‐2035 242,000 90,075 332,075
2036‐2040 291,000 40,294 331,294
2041 65,000 1,217 66,217
Total $1,106,000 $623,700 $ 1,729,700
F. Net Pension Liability
During the 2014‐15 fiscal year, GASB issued Statement No. 68 which required the City to measure and report the liabilities
associated with pension liability. See Note 11 for further detail.
G. Other Postemployment Benefits
During the 2003‐04 fiscal year, GASB issued Statement No. 45 which required the City to measure and report the liabilities
associated with other post‐employment benefits (OPEB). The City’s annual OPEB requirement for the fiscal year 2014‐15 was
determined to be $228,334. The City is currently funding the liability on a pay‐as‐you‐go basis and has set aside $216,673
towards fully funding this liability. See Note 12 for further detail.
H. Changes in Long‐Term Liabilities
Long‐term liability activity for the fiscal year ended June 30, 2015, is as follows:
Balance
July 1, 2014 Additions Deletions
Balance
June 30, 2015
Due Within
One Year
Governmental Activities
Compensated absences $ 844,658 $642,855 $647,406 $ 840,107 $‐
General obligation bonds 1,140,000 90,000 1,050,000 95,000
Capital leases payable 550,653 206,115344,538 210,925
CA energy loan payable 116,156 8,176 107,980 8,414
USDA loan payable 1,131,000 25,000 1,106,000 26,000
Net pension liability 16,524,729 ¹4,970,3317,868,358 13,626,702
OPEB 541,701 218,487147,674612,514
Total $ 20,848,897 $5,188,818 $8,992,729 $ 17,687,841 $340,339
Item 9.c. - Page 74
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐58
NOTE 8 – LONG‐TERM DEBT – continued
H. Changes in Long‐Term Liabilities – continued
Balance
July 1, 2014 Additions Deletions
Balance
June 30, 2015
Due Within
One Year
Business‐type Activities
Compensated absences $ 86,352 $44,224 $44,491 $ 86,085 $‐
Capital leases payable 122,007 39,840 82,167 40,563
Net pension liability 1,567,340 ¹477,565778,814 1,266,091
OPEB 67,451 9,847 2,084 75,214
Total $ 1,843,150 $487,412 $865,229 $ 1,509,557 $40,563
1 ‐ Denotes a prior period adjustment. See note 17 for further detail.
NOTE 9 – WATER SUPPLY CONTRACT
The City of Arroyo Grande has entered into a Water Supply Contract with the San Luis Obispo County Financing Authority (SLOCFA).
The SLOCFA was created on August 15, 2000, to issue bonds for the purpose of financing part or all of the costs of the purchase,
construction, expansion, improvement, or rehabilitation of any real or other tangible property. The SLOCFA issued $28,905,000
($13,200,000 of General Obligation Bonds and $15,705,000 Revenue Bonds) of Lopez Dam Improvement Bonds on October 1, 2000.
The City of Arroyo Grande is considered a participating agency of SLOCFA. The City’s share of the Water Supply Contract is 50.55%,
based upon such participating agency’s share of the quantity of water to be distributed by SLOCFA from the Lopez Dam. The City is
obligated to pay for the debt service of SLOCFA based on their water share, as stated above. The City is further obligated to make
contract payments until the fiscal year 2030.
The minimum contract payments only include the City’s portion of the Revenue Bonds. The General Obligation Bonds are not
included in the financial statements, because the SLOCFA collects the property tax revenue and makes the payment on behalf of the
City. However, in the event SLOCFA is disbanded, the City will be obligated to continue to pay its share of the remaining debt
service.
The future minimum contract payments for the debt service are shown below:
Fiscal Year
Ending June 30
Contract
Payment
2016 $536,243
2017 536,622
2018 538,575
2019 537,018
2020 537,189
2021‐2025 2,699,139
2026‐2030 2,716,504
Total $8,101,290
Item 9.c. - Page 75
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐59
NOTE 10 – JOINT POWERS AUTHORITY
The City of Arroyo Grande is a member of the Five Cities Fire Authority (FCFA), a joint powers authority between the Cities of Arroyo
Grande, Grover Beach, and the Oceano Community Services District. FCFA was formed on July 9, 2010 for the purpose of providing a
more efficient fire protection service within the City limits of Arroyo Grande and Grover Beach, as well as the towns of Oceano and
Halcyon, which are unincorporated areas of San Luis Obispo County. Each member contributes its pro rata share of operating costs
to FCFA based on a funding formula, calculated annually. The FCFA governing board consists of one member appointed from each
participating entity as determined by the respective City Council or Board of Directors. All financial decisions are made by this three‐
member board. The City of Arroyo Grande contributed $1,582,448 to FCFA during the fiscal year ended June 30, 2015 for fire
protection services. Separate financial statements may be obtained from the Five Cities Fire Authority at 140 Traffic Way in Arroyo
Grande, California 93420.
NOTE 11 – DEFINED BENEFIT PENSION PLAN
A. General Information about the Pension Plans
Plan Description, Benefits Provided and Employees Covered – The City of Arroyo Grande’s defined pension plan, Public
Employees’ Retirement System (PERS), provides retirement and disability benefits, annual cost‐of‐living adjustments, and death
benefits to plan members and beneficiaries. PERS is part of the Public Agency portion of the California Public Employees’
Retirement System (CalPERS), an agent multiple‐employer plan administered by CalPERS, which acts as a common investment
and administrative agent for participating public employers within the State of California. A menu of benefit provisions as well
as other requirements are established by State statutes with the Public Employees’ Retirement Law. The City selects optional
benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through local ordinance (other
local methods). CalPERS issue a separate comprehensive annual financial report. Copies of the CalPERS’ annual financial report
may be obtained from the CalPERS Executive Office – 400 P Street – Sacramento, CA 95814.
The defined benefit pension plan provisions and benefits at June 30, 2015 are summarized below:
Miscellaneous Employee Plan
Tier I Tier II Tier III (PEPRA)
Hire date
Prior to December
20, 2012
On or after
December 20,
2012*
On or after
January 1, 2013
Benefit formula 2.5% @ 55 2.0% @ 55 2.0% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments Monthly for life Monthly for life Monthly for life
Retirement age 55 55 57
Required employee contribution rates 8.000%7.000% 6.250%
Required employer contribution rates 24.550%11.032% 6.250%
Item 9.c. - Page 76
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐60
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
A. General Information about the Pension Plans – continued
Safety Employee Plan
Tier I Tier II Tier III (PEPRA)
Hire date
Prior to December
20, 2012
On or after
December 20,
2012*
On or after
January 1, 2013
Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments Monthly for life Monthly for life Monthly for life
Retirement age 50 55 57
Required employee contribution rates 9.000%9.000% 11.500%
Required employer contribution rates 53.345%21.367% 11.500%
*After January 1, 2013, second tier will only apply to employees transferring from another CalPERS agency
Contribution Description – Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the
employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on
the July 1 following notice of a change in the rate. The total plan contributions are determined through the CalPERS’ annual
actuarial valuation process. For public agency cost‐sharing plans covered by either the Miscellaneous or Safety risk pools, the
Plan’s actuarially determined rate is based on the estimated amount necessary to pay the Plan’s allocated share of the risk
pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to
contribute the difference between the actuarially determined rate and the contribution rate of employees. Contributions to the
pension plan from the City during the 2014‐15 fiscal year were $634,092 for the miscellaneous plan and $956,215 for the safety
plan.
At June 30, 2015, the City reported a liability of $7,674,458 for the miscellaneous plan and $7,218,335 for the safety plan for its
proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2014 and the total
pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City’s
proportion of the net pension liability was based on a projection of the City’s long‐term share of contributions to the pension
plan relative to the projected contributions of all pension plan participants, actuarially determined. At June 30, 2014, the City’s
proportion was 0.12329% for the miscellaneous plan and 0.116% for the safety plans, which was the same proportion measured
as of June 30, 2013.
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions
For the fiscal year ended June 30, 2015, the City recognized pension expense of $546,376 for the miscellaneous plan and
$966,172 for the safety plan. Pension expense represents the change in the net pension liability during the measurement
period, adjusted for actual contributions and the deferred recognition of changes in investment gains or losses, actuarial gains
or losses, actuarial assumptions or method, and plan benefits. At June 30, 2015, the City reported deferred outflows and
inflows of resources related to pension from the following resources:
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contributions subsequent to measurement date $1,590,307 $ ‐
Net difference between projected and actual earnings on
pension plan investment
3,186,642
Adjustment due to differences in proportions 95,502 75,309
Total $95,502 $ 3,261,951
Item 9.c. - Page 77
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐61
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions – continued
The reported deferred outflows of resources related to pensions in the amount of $1,590,307 resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the pension liability in the 2015‐16 fiscal year. The
additional amounts reported as deferred outflows and inflows of resources related to pensions will be recognized as pension
expense as follows:
Fiscal Year
Ending June 30 Amount
2016 $(789,449)
2017 (789,449)
2018 (790,888)
2019 (796,663)
Total $(3,166,449)
Actuarial Assumptions – The total pension liability for both the miscellaneous and safety plans in the June 30, 2013 actuarial
valuation was determined using the following actuarial assumptions:
Valuation Date June 30, 2013
Measurement Date June 30, 2014
Actuarial Cost Method Entry Age Normal
Actuarial Assumptions:
Discount Rate 7.50%
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative
Expenses; includes Inflation
Mortality Rate Table (1) Derived using CalPERS’ Membership Data for all Funds
Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing Power
Protection Allowance Floor on Purchasing Power applies,
2.75% thereafter
1 – The mortality table used was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using
Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report.
Discount Rate – The discount rate used to measure the total pension liability was 7.50%. To determine whether the municipal
bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely
result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the
tested plans run out of assets. Therefore, the current 7.50% discount rate is adequate and the use of the municipal bond rate
calculation is not necessary. The long‐term expected discount rate of 7.50% will be applied to all plans in the Public Employees
Retirement Fund. The stress test results are presented in a detailed report that can be obtained from the CalPERS website.
According to Paragraph 30 of the GASB Statement No. 68, the long‐term discount rate should be determined without reduction
valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return
excluding administrative expenses would have been 7.65%. Using this lower discount rate has resulted in a slightly higher total
pension liability and net pension liability. CalPERS checked the materiality threshold for the difference in calculation and did not
find it to be a material difference.
Item 9.c. - Page 78
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐62
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions – continued
CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management review cycle that is
scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper
stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for
GASB Statement No. 67 and 68 calculations through at least the 2017‐18 fiscal year. CalPERS will continue to check the
materiality of the difference in calculation.
The long‐term expected rate of return on pension plan investments was determined using a building‐block method in which
best‐estimated ranges of expected future real rates of return (expected returns, net pension plan investment expense and
inflation) are developed for each major asset class.
In determining the long‐term expected rate of return, CalPERS took into account both short‐term and long‐term market return
expectations as well as the expected pension fund cash flows. Using historical returns on all the funds’ asset classes, expected
compound returns were calculated over the short‐term (the first 10 years) and the long‐term (11 to 60 years) using a building‐
block approach. Using the expected nominal returns for both short‐term and long‐term, the present value of benefits were
calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived
at the same present value of benefits for cash flows as the one calculated using both short‐term and long‐term returns. The
expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest
one quarter of one percent.
The table below reflects the long‐term expected real rate of return by asset class. The rate of return was calculated using the
capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net
of administrative expenses.
Asset Class
New Strategic
Allocation
Real Return
Years 1‐10¹
Real Return
Years 11+²
Global Equity 47.0%5.25% 5.71%
Global Fixed Income 19.0%0.99% 2.43%
Inflation Sensitive 6.0%0.45% 3.36%
Private Equity 12.0%6.83% 6.95%
Real Estate 11.0%4.50% 5.13%
Infrastructure and Forestland 3.0%4.50% 5.09%
Liquidity 2.0%‐0.55% ‐1.05%
1 – An expected inflation of 2.5% used for this period
2 – An expected inflation of 3.0% used for this period
Item 9.c. - Page 79
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐63
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions – continued
Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following represents the City’s proportionate share
of the net pension liability calculated using the discount rate of 7.50%, as well as what the City’s proportionate share of the net
pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.50%) and one
percentage point higher (8.50%) than the current rate:
Plan’s Net Pension Liability
Discount Rate ‐1%
(6.50%)
Current Discount
Rate (7.50%)
Discount Rate
+1% (8.50%)
Miscellaneous Tier I $ 12,159,526 $ 7,674,415 $ 3,952,199
Miscellaneous Tier II 17 9 3
Miscellaneous Tier III (PEPRA) 61 34 12
Safety Tier I 10,856,921 7,199,012 4,185,052
Safety Tier II 33,176 19,278 7,828
Safety Tier III (PEPRA) 77 45 19
Total $ 23,049,778 $ 14,892,793 $ 8,145,113
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the
separately issued CalPERS financial reports.
C. Payable to the Pension Plan
At June 30, 2015, the City had no amount outstanding for contributions to the pension plan required for the 2014‐15 fiscal year.
NOTE 12 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
A. Plan Description
The City of Arroyo Grande provides post‐retirement health benefits, in accordance with State statutes, to all employees retiring
from the City and enrolled in an insurance program under the California Public Employees’ Medical and Hospital Care Act
(PEMHCA). The CalPERS PEMHCA plan is a defined contribution, multiple employer, and healthcare plan providing benefits to
active and retired employees. The healthcare plan is administered by the California Public Employees’ Retirement System.
Copies of the CalPERS annual financial report may be obtained from the Executive Office, 400 P Street, Sacramento, CA 95814.
B. Funding Policy
The City participates in the CalPERS Health Benefit Program where all employee groups were under the equal contribution
option. The City was required to contribute $119 per month during calendar year 2014 and $122 per month during calendar
year 2015 towards the cost of the retiree health insurance, which is the same amount contributed toward active employee
health insurance. In modifying the current retiree medical agreements, it was agreed that existing employees with a minimum
of five (5) years of full‐time service at the time of retirement and new employees with a minimum of ten (10) years of service
will receive a supplemental monthly payment (amount varies depending upon employee group and type of insurance). The
remaining balance of the premium is paid directly by the retirees to CalPERS. The mandatory employer contribution for active
and retiree health insurance is increased annually in accordance with PEMHCA regulation. Beginning on January 1, 2016, the
contribution amount will increase to $125 per month. During fiscal year 2014‐15, expenditures of $149,758 were recognized for
post‐retirement health insurance contributions on a pay‐as‐you‐go basis.
Item 9.c. - Page 80
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐64
NOTE 12 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS – continued
B. Funding Policy – continued
As required by GASB 45, an actuary will determine the City’s annual required contributions (ARC) at least once every three fiscal
years. The ARC is calculated in accordance with certain parameters, and includes (1) the normal cost for one year, and (2) a
component for amortization of the total unfunded actuarial accrued liability (UAAL) over a period not to exceed 30 years.
GASB 45 does not require pre‐funding of OPEB benefits, however, the City’s funding policy is to pay level contributions of
$200,000 each year. City has elected not to establish an irrevocable trust at this time but has begun to set aside funds towards
this liability. At June 30, 2015, the City has assigned $216,673 for post employment benefits in the General Fund’s fund balance.
C. Annual OPEB Cost
For the fiscal year 2014‐15, the City’s OPEB cost (expense) of $228,334 was less than the annual required contributions (ARC) of
$239,195 due to interest on OPEB obligations of $24,366 and the amortization adjustment to ARC of $(35,227). The City’s
annual OPEB cost, the annual OPEB cost contributed, the percentage of annual OPEB cost contributed to the plan, and the net
OPEB obligation of 2014‐15, is shown below:
Fiscal Year
Ending June 30
Annual
OPEB Cost
Annual
OPEB Cost
Contributed
% of Annual
OPEB Cost
Contributed
Net OPEB
Obligation
2008 $ 219,706 $64,53229% $ 155,174
2009 219,706 109,50350% 110,203
2010 219,706 128,61659% 91,090
2011 196,673 128,47465% 68,199
2012 195,647 140,38972% 55,258
2013 194,815 146,66675% 48,149
2014 229,780 148,70165% 81,079
2015 228,334 149,75866% 78,576
Total $ 1,704,367 $1,016,639 60% $ 687,728
The funded status of the plan as of July 1, 2013 (the last actuarial calculation), is as follows:
Actuarial accrued liability (AAL) $ 2,731,368
Actuarial value plan assets
Unfunded actuarial accrued liability (UAAL) $ 2,731,368
Funded ratio (actuarial value of plan assets/AAL) 0%
Covered payroll (active plan members) $ 5,407,283
UAAL as a percentage of covered payroll 51%
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the
probability of the occurrence of events that are far into the future. Examples include assumptions about future
employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and
the annual required contributions of the employer are subject to continual revisions as actual results are compared with
past expectations and new estimates are made about the future. The schedule of funding progress, presented as required
supplementary information following the notes to the basic financial statements, presents multiyear trend information that
shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued
liabilities for benefits.
Item 9.c. - Page 81
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐65
NOTE 12 – POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS – continued
D. Actuarial Methods and Assumptions
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the
employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern
of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions
used include techniques that are designed to reduce short‐term volatility in actuarial accrued liabilities and the actuarial value
of assets, consistent with the long‐term perspective of the calculations.
The actuarial valuation of plan assets, dated July 1, 2013, used the Projected Unit Credit cost method. The actuarial
assumptions included a 4.0 percent investment rate of return (net of administrative expenses) and an annual healthcare cost
trend rate of 8 percent initially, reduced by decrements to an ultimate rate of 5.0 percent after three years. These assumptions
reflect an implicit 4.0 percent general inflation assumption. The City’s unfunded actuarial accrued liability is being amortized as
a level dollar amount on an open basis over 30 years. The remaining amortization period as of July 1, 2013 was 30 years.
NOTE 13 – LIABILITY, WORKERS’ COMPENSATION, AND PURCHASED INSURANCE
A. Description of Self‐Insurance Pool Pursuant to Joint Powers Agreement
The City of Arroyo Grande is a member of the California Joint Powers Insurance Authority (Cal JPIA). The Cal JPIA is composed
of 118 public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et
seq. The purpose of the Cal JPIA is to arrange and administer programs for the pooling of self‐insured losses, to purchase excess
insurance or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The Cal JPIA
began covering claims of its members in 1978. Each member government has an elected official as its representative on the
Board of Directors. The Board operates through a nine‐member Executive Committee.
B. Self‐Insurance Programs of the Authority
Each member pays an annual contribution at the beginning of the coverage period. A retrospective adjustment is then
conducted annually thereafter, for coverage years 2012‐13 and prior. Retrospective adjustments are scheduled to continue
indefinitely on coverage years 2012‐13 and prior, until all claims incurred during those coverage years are closed, on a pool‐
wide basis. This subsequent cost re‐allocation among members, based on actual claim development, can result in adjustments
of either refunds or additional deposits required. Coverage years 2013‐14 and forward are not subject to routine annual
retrospective adjustment.
The total funding requirement for self‐insurance programs is estimated using actuarial models and pre‐funded through the
annual contribution. Costs are allocated to individual agencies based on exposure (payroll) and experience (claims) relative to
other members of the risk‐sharing pool. Additional information regarding the cost allocation methodology is provided below.
General Liability – In the liability program claims are pooled separately between police and general government exposures. (1)
The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for
each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first
layer of losses includes incurred costs up to $30,000 for each occurrence and is evaluated as a percentage of the pool’s total
incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $30,000 to $750,000 for each
occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. (4) Incurred costs from
$750,000 to $50 million, are distributed based on the outcome of cost allocation within the first and second loss layers.
For 2014‐15 the Cal JPIA’s pooled retention is $2 million per occurrence, with reinsurance to $20 million, and excess insurance
to $50 million. The Cal JPIA’s reinsurance contracts are subject to the following additional pooled retentions: (a) 50% of the
$2.5 million annual aggregate deductible in the $3 million x/s $2 million layer, (b) 50% quota share of the $3 million x/s $2
million layer, and (c) $3 million annual aggregate deductible in the $5 million x/s $10 million layer.
Item 9.c. - Page 82
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐66
NOTE 13 – LIABILITY, PROPERTY, AND WORKERS’ COMPENSATION PROTECTION – continued
B. Self‐Insurance Programs of the Authority – continued
The overall coverage limit for each member, including all layers of coverage, is $50 million per occurrence. Costs of covered
claims for subsidence losses have a sub‐limit of $30 million per occurrence.
Workers’ Compensation – In the workers’ compensation program claims are pooled separately between public safety and
general government exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A
variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight
applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $50,000 for each occurrence and
is evaluated as a percentage of the pool’s total incurred costs within the first layer. (3) The second layer of losses includes
incurred costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs
within the second layer. (4) Incurred costs from $100,000 to statutory limits distributed based on the outcome of cost
allocation within the first and second loss layers.
For 2014‐15 the Cal JPIA’s pooled retention is $2 million per occurrence, with reinsurance to statutory limits under California
Workers’ Compensation Law.
Employer’s Liability losses are pooled amount members to $2 million. Coverage from $2 million to $5 million is purchased as
part of a reinsurance policy, and Employer’s Liability losses from $5 million to $10 million are pooled amount members.
C. Purchase Insurance
Property Insurance – The City of Arroyo Grande participates in the all‐risk property protection of the Cal JPIA. This insurance
protection is underwritten by several insurance companies. The City’s property is currently insured according to a schedule of
covered property submitted by the City to the Cal JPIA. The City property currently has all‐risk property insurance protection in
the amount of $24,651,380. There is a $5,000 deductable per occurrence except for non‐emergency vehicle insurance which
has a $1,000 deductable. Premiums for the coverage are paid annually and are not subject to retroactive adjustments.
D. Adequacy of Protection
During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that
exceeded pooled or insured coverage. There were also no significant reductions in pooled or insured liability coverage from
coverage in the 2014‐15 fiscal year.
E. Self‐Insurance
The City retains the risk for workers’ compensation losses incurred prior to joining the Cal JPIA. Several member agencies of the
now dissolved Central Coast Cities Self‐Insurance Fund continue to participate in a non‐risk sharing arrangement for claims
management and the purchase of excess insurance. The participating agencies share a set of common guidelines and annually
set aside premiums to pay their individual losses within their self‐insured retentions. Losses are debited and investment income
is credited to specific member accounts. The City has not incurred any losses in excess of insurance coverage. Claims liabilities
in the governmental funds are generally liquidated by the General Fund.
The last actuarial study to determine the undiscounted outstanding claims liability was completed for the year ended June 30,
2015. The liability was estimated based on the actuarial study and considered claims asserted and paid, and the time limitation
for filing claims. There are no amounts estimated for claims incurred but not reported because the time limit for filing claims
has elapsed. The estimated asset (liability) at June 30, 2015 and the changes in those balances are shown on the following page:
Item 9.c. - Page 83
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐67
NOTE 13 – LIABILITY, PROPERTY, AND WORKERS’ COMPENSATION PROTECTION – continued
E. Self‐Insurance – continued
Cash, investments and current assets $81,817
Estimated claims liability (37,713)
Unpaid claims asset $44,104
Unpaid claims asset at July 1, 2014 $58,736
Revenues 241
Claim payments and related expenditures (14,875)
Change in fair market value 2
Unpaid claims asset at June 30, 2015 $44,104
NOTE 14 – REVENUE LIMITATIONS IMPOSED BY CALIFORNIA PROPOSITION 218
Proposition 218, which was approved by the voters in November 1996, will regulate the City’s ability to impose, increase, and extend
taxes, assessments, and fees. Any new, increased, or extended taxes, assessments, and fees subject to the provisions of Proposition
218, require voters’ approval before they can be implemented. Additionally, Proposition 218 provides that these taxes,
assessments, and fees are subject to the voters’ initiative process and may be rescinded in the future years by the voters.
NOTE 15 – SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (the Bill) that provides for the dissolution of all
redevelopment agencies in the State of California. This action impacted the reporting entity of the City that previously had reported
a redevelopment agency (RDA) within the reporting entity of the City as a blended component unit.
The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government will agree to
serve as the “successor agency” to hold the assets until they are distributed to other units of State and local government. On
January 10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with
the Bill as part of the City Resolution No. 4420.
After the enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter
into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can
only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished
projects that were subject to legally enforceable contractual commitments).
In future years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual
installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior
redevelopment agency have been paid in full and all assets have been liquidated.
The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between
redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers
is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required
to order the available assets to be transferred to the public body designated as the successor agency by the Bill.
Item 9.c. - Page 84
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐68
NOTE 15 – SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY – continued
Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City
are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on
this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible
that a legal determination may be made at a later date by appropriate judicial authority that would resolve this issue unfavorably to
the City.
A. Financial Reporting
In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all
redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012.
As a result, the assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund (private‐purpose
trust fund) in the financial statements of the City.
B. Cash and Investments
The RDA has pooled its cash and investments with the City in order to achieve a higher return on investment. Certain restricted
funds, which are held and invested by independent outside custodians through contractual agreements, are not pooled. These
restricted funds include cash with fiscal agents. See Note 3 for disclosure related to cash and investments pooled with the City
and the related custodial risk categorization.
Cash and investments at June 30, 2015, consisted of the following:
Total
Cash and investments pooled with the City $615,651
Restricted cash and investments held with fiscal agent 458,053
Total $1,073,704
C. Inventory – Land Held for Resale
On August 11, 2006, the RDA purchased a vacant lot at the corner of Faeh Street and El Camino Real in the amount of $825,129.
The RDA purchased the property because the location is a key site to the City’s economic development strategy and goals and
didn’t want the property to be sold as individual lots.
On June 22, 2010, the RDA transferred $980,000 to the General Fund, in exchange for land located on Pearwood Ave in which
the City purchased for approximately $35,799. The proposed sale and purchase price is based upon an appraisal conducted at
the time the project was proposed.
The RDA is currently holding both properties for resale. Inventory is valued at cost which approximates fair value.
D. Notes Receivable
On January 11, 2005, the RDA entered into a loan agreement with the Family Care Networks, Inc. for the acquisition and
development of property at 201 South Halcyon Road to be used for affordable housing for low and very low income households
in the amount of $50,000. The term of the loan agreement is 55 years and will be considered paid in full as long as the units are
maintained as affordable housing.
On December 9, 2008, the RDA entered into a purchase agreement with the Housing Authority of the City of San Luis Obispo
and purchased property utilizing low and moderate set‐aside funds. The property was then sold to the Housing Authority for
$285,000 in cash, plus $55,500 as a note receivable. This note is to be repaid when the property is sold.
Item 9.c. - Page 85
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐69
NOTE 15 – SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY – continued
D. Notes Receivable – continued
On December 14, 2010, the RDA entered into a loan agreement with Habitat for Humanity of San Luis Obispo County (Habitat
for Humanity) and purchased property utilizing low and moderate set‐aside funds in the amount of $260,000. Under the terms
of the agreement, as long as each home is sold to a qualified homebuyer (as defined in the agreement), a portion of the
outstanding balance of the loan shall be forgiven.
On March 28, 2013, the RDA entered into a loan agreement with Courtland Street Apartments, LP for the construction of a 36‐
unit affordable housing rental project and related improvements on the property located on the corner of Grand Avenue and
Courtland Avenue in the amount of $930,000 utilizing low and moderate set‐aside funds. The term of the loan agreement is 55
years with interest accruing on the outstanding principal balance at the rate of 3% per annum. Repayment of the loan shall
began on March 1, 2015. Total amount outstanding, including accrued interest at June 30, 2015, was $976,106.
E. Loans Payable
On July 25, 2006, the City entered into a loan agreement with the RDA for the purpose of funding the cost of the acquisition of a
vacant lot on the north side of Faeh Street in the amount of $820,130. The loan originally called for interest to be accrued equal
to the rate earned by the City’s Local Agency Investment Fund, however, on February 23, 2010, the agreement was amended to
no longer accrue interest. The Department of Finance recognizes loans from Cities to Redevelopment Agencies as “enforceable
obligations” eligible for repayment, under provisions of the loan agreements pursuant to provisions included in Assembly Bill
1484, once the Successor Agency receives a “Finding of Completion” from the Department of Finance, loan agreements
between the RDA and the City shall be deemed to be enforceable obligations provided that the Oversight Board makes a finding
that the loan was for legitimate redevelopment purposes. On May 14, 2013, the Oversight Board approved the legitimacy of
this loan. The total amount outstanding, including accrued interest at June 30, 2015, was $759,544.
F. Tax Allocation Bonds Payable
On May 1, 2007, the RDA issued $6,285,000 of 2007 tax allocation bonds. The purpose of the tax allocation bonds were to
repay debt and to provide funds for future improvement projects. The bonds bear an interest rate of 5.304% for a term bond of
$1,280,000, maturing on September 1, 2019, and an interest rate of 5.800% for a term bond of $5,005,000, maturing on
September 1, 2037. As of June 30, 2015, the principal balance outstanding was $5,715,000.
The future minimum payment obligation for the tax allocation bonds payable is as follows:
Fiscal Year
Ending June 30
Principal Interest Total
2016 $130,000 $324,501 $ 454,501
2017 135,000 317,473 452,473
2018 140,000 310,180 450,180
2019 150,000 302,489 452,489
2020 155,000 294,401 449,401
2021‐2025 925,000 1,323,125 2,248,125
2026‐2030 1,230,000 1,012,970 2,242,970
2031‐2035 1,630,000 601,170 2,231,170
2036‐2038 1,220,000 108,750 1,328,750
Total $5,715,000 $4,595,059 $ 10,310,059
Item 9.c. - Page 86
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2015
B‐70
NOTE 16 – CONTINGENCIES AND COMMITMENTS
The City is involved in various litigations. In the opinion of management and legal counsel, the disposition of all litigation pending
will not have a material effect on the City’s financial statements.
The City has received State and Federal funds for specific purposes that are subject to review and audit by the grantor agencies.
Although such audits could generate expenditure disallowances under the term of the grants, it is believed that any required
reimbursement will not be material.
The City has the following outstanding contracts listed below for uncompleted projects at June 30, 2015:
Project Name Amount
5416 ‐ Corporation Yard Upgrade $7,972
5432 ‐ Car Corral 1,754
5434 ‐ Paulding Wall 39,966
5603 ‐ W Branch/Oak Park Traffic Signal 2,665
5604 ‐ Traffic Way Bridge 8,622
5608 ‐ Bridge Street Bridge Rehabilitation 245,667
5638 ‐ Pavement Management Program 3,596
5642 ‐ Brisco Rd at US 101 Rehabilitation 65,935
5690 ‐ Alpine Street Overlay & Waterline 4,000
5778 ‐ Creek Preservation 58,637
5807 ‐ Crown Terrace Sewer Rehabilitation 21,251
5944 ‐ Water Well No. 11 Facilities 4,432
5948 ‐ Reservoir No. 3 & 4 Coating 595
Total $465,092
NOTE 17 – PRIOR PERIOD ADJUSTMENTS
Prior period adjustments of $10,536,081 and $1,459,541 were made which negatively effects the government‐wide statement of
activities under governmental activities and business‐type activities, respectively. As a result of GASB Statement No. 68 and 71,
measuring and recognizing liabilities, deferred outflows and inflows of resources and expenses related to pensions are now
reported.
Governmental
Activities
Business‐Type
Activities
PERS side fund $4,551,072 $‐
Deferred outflows of resources –pension 1,437,576 107,799
Net pension liability (16,524,729)(1,567,340)
Total $(10,536,081)$(1,459,541)
Implementation of GASB Statements No. 68 and 71 and the impact on the City’s financial statements are explained in more detail in
Note 11 – Defined Benefit Pension Plan.
Item 9.c. - Page 87
City of Arroyo Grande
BUDGETARY INFORMATION ‐ MAJOR GOVERNMENTAL FUNDS
General Fund
For the Fiscal Year Ended June 30, 2015
REVENUES
Taxes and assessments $12,239,052 $12,608,302 $12,932,497 $324,195
Licenses and permits 272,250 304,250 340,265 36,015
Fines and penalties 50,000 50,000 43,764 (6,236)
Use of money and property 312,220 302,220 349,521 47,301
Intergovernmental revenues 260,600 276,200 497,261 221,061
Charges for services 844,150 903,950 1,153,322 249,372
Other revenue 66,620 66,620 101,088 34,468
Total revenues 14,044,892 14,511,542 15,417,718 906,176
EXPENDITURES
General government
City council 112,600 112,600 88,748 (23,852)
City manager 476,940 619,440 565,763 (53,677)
City attorney 208,250 225,250 303,562 78,312
City clerk 377,190 378,190 363,311 (14,879)
Information technology 319,240 324,140 290,085 (34,055)
Finance and human resources 746,690 773,690 734,143 (39,547)
Non‐departmental 2,524,800 2,545,300 2,273,197 (272,103)
Community development
Planning 770,790 770,790 634,900 (135,890)
Engineering 370,130 378,880 349,735 (29,145)
Building and life safety 252,240 270,740 251,394 (19,346)
Public safety
Administration 887,480 880,275 972,081 91,806
Patrol services 3,145,639 3,151,139 3,154,109 2,970
Support services 1,512,085 1,410,290 1,229,943 (180,347)
Emergency operations center 3,000 3,000 385 (2,615)
Recreation services
Administration270,740 281,740 267,377 (14,363)
Preschool program 74,250 74,250 80,078 5,828
Special recreation programs 109,450 148,450 141,035 (7,415)
Children in Motion 321,700 321,700 318,949 (2,751)
Five Cities Youth Basketball 52,750 52,750 59,369 6,619
Public works
Administration 628,953 628,353 590,273 (38,080)
Park maintenance 518,747 525,047 523,884 (1,163)
Soto sports complex maintenance 165,600 165,600 158,455 (7,145)
Building maintenance 207,900 206,400 203,780 (2,620)
Automotive shop 119,325 119,675 120,323 648
Capital outlay 110,645 110,645 96,081 (14,564)
Debt service 241,965 241,965 179,555 (62,410)
Total expenditures 14,529,099 14,720,299 13,950,515 (769,784)
Excess of revenue over (under)
expenditures $(484,207) $(208,757) $1,467,203 $1,675,960
Continued on following page
Variance
Over/(Under)Actual AmountsOriginalFinal
Budget Amounts
B‐71
Item 9.c. - Page 88
City of Arroyo Grande
BUDGETARY INFORMATION ‐ MAJOR GOVERNMENTAL FUNDS
General Fund
For the Fiscal Year Ended June 30, 2015
Continued from previous page
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets$100,000 $684,500 $816,061 $131,561
Transfer in 2,095,180 2,099,680 2,104,953 5,273
Transfer out (3,714,082) (4,518,077) (3,458,791) 1,059,286
Total other financing sources
(uses)(1,518,902) (1,733,897) (537,777) 1,196,120
Net change in fund balance (2,003,109) (1,942,654) 929,426 2,872,080
Fund balance ‐ July 1, 2014 6,775,327 6,775,327 6,775,327
Fund balance ‐ June 30, 2015 $4,772,218 $4,832,673 $7,704,753 $2,872,080
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B‐72
Item 9.c. - Page 89
City of Arroyo Grande
BUDGETARY INFORMATION ‐ MAJOR GOVERNMENTAL FUNDS
Special Gasoline Tax Fund
For the Fiscal Year Ended June 30, 2015
REVENUES
Use of money and property $‐$‐$30 $30
Intergovernmental revenues 441,100 472,100 462,429 (9,671)
Other revenue 1,000 1,000 564 (436)
Total revenues 442,100 473,100 463,023 (10,077)
EXPENDITURES
Streets and roads 634,420 632,920 596,575 (36,345)
Capital outlay 31,000 22,954 (8,046)
Debt service 54,000 54,000 49,547 (4,453)
Total expenditures 688,420 717,920 669,076 (48,844)
Excess of revenue under
expenditures (246,320) (244,820) (206,053) 38,767
OTHER FINANCING SOURCES (USES)
Proceeds from sale of assets 22,745 22,745
Transfer in 322,620 322,620 292,104 (30,516)
Transfer out (76,300) (77,800) (77,796) 4
Total other financing sources
(uses)246,320 244,820 237,053 (7,767)
Net change in fund balance 31,000 31,000
Fund balance ‐ July 1, 2014
Fund balance ‐ June 30, 2015 $‐$‐$31,000 $31,000
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B‐73
Item 9.c. - Page 90
City of Arroyo Grande
BUDGETARY INFORMATION ‐ MAJOR GOVERNMENTAL FUNDS
Transportation Impact Fees Fund
For the Fiscal Year Ended June 30, 2015
REVENUES
Use of money and property $10,000 $10,000 $20,107 $10,107
Charges for services 50,000 50,000 74,358 24,358
Total revenues 60,000 60,000 94,465 34,465
EXPENDITURES
Community development 13,800 13,800 16,800 3,000
Total expenditures 13,800 13,800 16,800 3,000
Excess of revenue over
expenditures 46,200 46,200 77,665 31,465
OTHER FINANCING USES
Transfer out (1,128,805) (1,128,805) (284,497) 844,308
Total other financing uses (1,128,805) (1,128,805) (284,497) 844,308
Net change in fund balance (1,082,605) (1,082,605) (206,832) 875,773
Fund balance ‐ July 1, 2014 2,050,439 2,050,439 2,050,439
Fund balance ‐ June 30, 2015 $967,834 $967,834 $1,843,607 $875,773
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B‐74
Item 9.c. - Page 91
City of Arroyo Grande
BUDGETARY INFORMATION ‐ MAJOR GOVERNMENTAL FUNDS
In‐Lieu Affordable Housing Fund
For the Fiscal Year Ended June 30, 2015
REVENUES
Use of money and property $300 $300 $1,923 $1,623
Charges for services 20,425 20,425
Other revenue 225,623 225,623
Total revenues 300 300 247,971 247,671
EXPENDITURES
Community development 5,000 5,000 76,700 71,700
Total expenditures 5,000 5,000 76,700 71,700
Net change in fund balance (4,700) (4,700) 171,271 175,971
Fund balance ‐ July 1, 2014 11,012 11,012 11,012
Fund balance ‐ June 30, 2015 $6,312 $6,312 $182,283 $175,971
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B‐75
Item 9.c. - Page 92
City of Arroyo Grande
BUDGETARY INFORMATION ‐ MAJOR GOVERNMENTAL FUNDS
CDBG Fund
For the Fiscal Year Ended June 30, 2015
REVENUES
Intergovernmental revenues $35,949 $121,975 $10,357 $(111,618)
Total revenues 35,949 121,975 10,357 (111,618)
EXPENDITURES
Community development 17,318 30,171 (30,171)
Total expenditures 17,318 30,171 (30,171)
Excess of revenue over
expenditures 18,631 91,804 10,357 (81,447)
OTHER FINANCING USES
Transfer out (18,631) (91,804) (10,357) 81,447
Total other financing uses (18,631) (91,804) (10,357) 81,447
Net change in fund balance
Fund balance ‐ July 1, 2014
Fund balance ‐ June 30, 2015 $‐$‐$‐$‐
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B‐76
Item 9.c. - Page 93
City of Arroyo Grande
OTHER POSTEMPLOYMENT BENEFITS ‐ SCHEDULE OF FUNDING PROGRESS
For the Fiscal Year Ended June 30, 2015
Actuarial
Valuation
Date
07/01/07
UAAL as a
Percent‐
age of
Covered
Payroll
((b‐a)/c)
$‐1,835,537$
Actuarial
Accrued Liability
(AAL) Projected
Unit Cost (b)
1,835,537$
Actuarial
Valuation of
Assets (a)
31%
Covered Payroll
5,968,881$
Funded
Ratio (a/b)
0%
Unfunded AAL
(UAAL)(b‐a)
07/01/10 2,053,287$ 2,053,287$ 0%41%5,055,775$ $‐
0%5,407,283$ 51%07/01/13$‐2,731,368$ 2,731,368$
B‐77
Item 9.c. - Page 94
City of Arroyo Grande
NET PENSION LIABILITY ‐ SCHEDULE OF PROPORTIONATE SHARE
Last Ten Fiscal Years (1)
Tier I Tier II Tier III (PEPRA)
Proportion of the net pension liability 0.31052%0.00000%0.00000%
Proportionate share of the net pension liability 7,674,415$ 9$ 34$
Covered ‐ employee payroll 2,897,841$ 117,778$ 51,904$
Proportionate share of the net pension liability as
percentage of covered‐employee payroll 264.83%0.01%0.07%
Plan's fiduciary net position 26,133,957$ 48$ 166$
Plan's fiduciary net position as a percentage of the
plan's total pension liability 77.30%84.21%83.00%
Tier I Tier II Tier III (PEPRA)
Proportion of the net pension liability 0.19192%0.00031%0.00000%
Proportionate share of the net pension liability 7,199,012$ 19,278$ 45$
Covered ‐ employee payroll 1,745,627$ 348,670$ 60,262$
Proportionate share of the net pension liability as
percentage of covered‐employee payroll 412.40%5.53%0.07%
Plan's fiduciary net position 20,109,515$ 84,472$ 196$
Plan's fiduciary net position as a percentage of the
plan's total pension liability 73.64%81.42%81.33%
(1) The 2014‐15 fiscal year was the first year of implementation, therefore only one year is shown.
Miscellaneous Employee Plan
Safety Employee Plan
2015
B‐78
Item 9.c. - Page 95
City of Arroyo Grande
NET PENSION LIABILITY ‐ SCHEDULE OF CONTRIBUTIONS
Last Ten Fiscal Years (1)
Actuarially determined contribution $598,455 $24,795 $10,842
Contributions in relation to the actuarially
determined contribution (598,455) (24,795) (10,842)
Contribution deficiency (excess)$‐$‐$‐
Covered ‐ employee payroll $2,686,081 $236,456 $176,000
Contributions as a percentage of covered‐
employee payroll 22.28%10.49%6.16%
Actuarially determined contribution $945,522 $3,097 $7,596
Contributions in relation to the actuarially
determined contribution (945,522) (3,097) (7,596)
Contribution deficiency (excess)$‐$‐$‐
Covered ‐ employee payroll $1,975,465 $446,554 $74,149
Contributions as a percentage of covered‐
employee payroll 47.86%0.69%10.24%
Notes to Schedule
Valuation Date June 30, 2013
Measurement Date June 30, 2014
Actuarial Cost Method Entry Age Normal
Actuarial Assumptions:
Discount Rate 7.50%
Inflation 2.75%
Salary Increases Varies by Entry Age and Service
Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative
Expenses; includes Inflation
Morality Rate Table (2)Derived using CalPERS' Membership Data for all Fund
Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing Power Protection
Allowance Floor on Purchasing Power applies, 2.75%
thereafter
(1) The 2014‐15 fiscal year was the first year of implementation, therefore only one year is shown.
2015
(2) The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of
Actuaries Scale BB. For more details on this table, please refer to the 2014 experience report.
Miscellaneous Employee Plan
Tier I Tier IITier III (PEPRA)
Safety Employee Plan
Tier I Tier IITier III (PEPRA)
B‐79
Item 9.c. - Page 96
City of Arroyo Grande
DESCRIPTION OF NONMAJOR GOVERNMENTAL
B‐80
Special Revenue Funds
Fire Protection Impact Fees Fund
This fund accounts for impact fees collected from developers for the expansion of the existing fire station in order
to serve future development.
Public Access Television Fund
This fund accounts for fees collected from Charter Communications that are restricted for support of public,
education, and government access programming and equipment.
Police Protection Impact Fees Fund
This fund accounts for impact fees collected from developers for the expansion of the existing police facility in
order to serve future development.
Park Development Fund
This fund accounts for the receipts of park‐in‐lieu fees (Quimby) and grant revenues that are used for construction,
park acquisition, and development of park facilities.
Park Improvement Impact Fees Fund
Impact fees collected for park improvements are to be used to maintain the adopted level of service for
neighborhood and community parks of 4.0 acres per thousand population. This fund accounts for the receipt and
use of these monies.
Community Center Impact Fees Fund
This fund accounts for impact fees collected and used for recreation facilities in order to maintain the adopted
level of service of recreation/community center facilities of 542 square feet per thousand population.
Grace Lane Assessment District Fund
This fund accounts for revenue derived from annual assessments, which are used to pay the cost incurred by the
City for landscape maintenance.
Landscape Assessment Fund
This fund accounts for the landscape maintenance of parkways within tow housing tracts. A special benefit
assessment is levied on property owners to pay for landscape maintenance expenditures.
Parkside Assessment District Fund
This fund accounts for revenue derived from annual assessments, which are used to pay the cost incurred by the
City for landscape maintenance.
Traffic Signal Fund
This fund accounts for traffic signalization assessment levied against developments for the future cost of traffic
signals.
Traffic Circulation Fund
This fund accounts for developer traffic mitigation measure fees charged as a result of an environmental review.
Item 9.c. - Page 97
City of Arroyo Grande
DESCRIPTION OF NONMAJOR GOVERNMENTAL
B‐81
Special Revenue Funds – continued
Transportation Fund
This fund accounts for revenues from the Local Transportation Fund (LTF) and the South County Transit (SCT).
Expenditures are restricted to public transportation.
In‐Lieu Water Neutralization Fund
The City requires development projects that increase total water consumption in the City to “neutralize” that
demand by reducing water consumption in existing development by an equivalent amount. This fund accounts for
these funds collected by developers and is used towards the City’s water conservation efforts.
Construction Fund
This fund accounts for the accumulation of tax revenues levied on construction of residential dwelling units,
mobile home lots, and commercial buildings. Expenditures are restricted to public improvements, including but
not limited to, facilities, fire stations, fire‐fighting equipment, parks, street improvements, and equipment.
Drainage Fees Fund
This fund accounts for development drainage fees restricted to improving drainage within the City.
In‐Lieu Underground Utility Fund
This fund accounts for monies paid by developers in meeting the City's underground utility requirements.
Tourism Business Improvement District Fund
The purpose of the Tourism Business Improvement District (TBID) is to provide projects, programs and activities
that benefit lodging businesses located and operating within the City of Arroyo Grande. A two percent (2%)
assessment is levied on all lodging businesses of the rent charged by the operator per occupied room per night for
all transient occupancies. Revenue collected is used to promote the lodging industry within the City.
Water Availability Fund
Pursuant to the provisions of Section 38743 of the Government Code, water availability charges is a “special
charge” which is levied to each parcel of property not served with city water. These charges are restricted for the
sole purpose of expanding water supply such as desalination plant, recycled water, scalping plant, etc.
State COPS Grant Fund
This fund accounts for the receipt and use of monies from the State of California restricted to the purchase of
police equipment and technology for crime prevention.
Debt Service Funds
Fire Station GO Bond Fund
This fund is used to account for the accumulation of resources and payment of long‐term debt principal and
interest for general obligation bonds issued by the City to finance the expansion of the City Fire Station.
City Hall USDA Debt Service Fund
This fund is used to account for the accumulated resources and payment of long‐term debt principal and interest
for USDA loan payable issued by the City to finance for the relocation of City Hall.
Item 9.c. - Page 98
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Balance Sheet
June 30, 2015
ASSETS
Cash and investments $169,468 $160,037 $19,271 $1,002,058 $159,354
Receivables:
Accounts
Taxes
Interest133 127 15 775 119
Total assets $169,601 $160,164 $19,286 $1,002,833 $159,473
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $‐$‐$‐$‐$‐
Unearned revenue 40,226
Total liabilities 40,226
Fund Balances:
Restricted for:
Access programming 160,164
Debt service
Landscape maintenance
Park construction 962,607 159,473
Public improvements
Public safety 169,601 19,286
Streets and roads
Water production
Assigned for:
Capital projects
Tourism benefit
Total fund balances 169,601 160,164 19,286 962,607 159,473
Total liabilities and
fund balances $169,601 $160,164 $19,286 $1,002,833 $159,473
Park
Development
Special Revenue Funds
Fire Protection
Impact Fees
Police
Protection
Impact Fees
Public Access
Television
Park
Improvement
Impact Fees
B‐82
Item 9.c. - Page 99
$57,284 $61,324 $9,438 $391,059 $641,087 $54,601 $8,417
45 50 8 310 518 43 109
$57,329 $61,374 $9,446 $391,369 $641,605 $54,644 $8,526
$‐$110 $22 $845 $‐$‐$8,526
110 22 845 8,526
61,264 9,424 390,524
57,329
641,605 54,644
57,329 61,264 9,424 390,524 641,605 54,644
$57,329 $61,374 $9,446 $391,369 $641,605 $54,644 $8,526
Special Revenue Funds
Parkside
Assessment
District
Landscape
Assessment
District
Grace Lane
Assessment
District
Traffic
Circulation TransportationTraffic Signal
Community
Center Impact
Fees
B‐83
Item 9.c. - Page 100
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Balance Sheet
June 30, 2015
ASSETS
Cash and investments $335,643 $3,274 $21,439 $3,968 $82,863
Receivables:
Accounts 9,800
Taxes 21,827
Interest 157 3 17 3 57
Total assets $335,800 $3,277 $21,456 $3,971 $114,547
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $52,988 $‐$‐$‐$7,830
Unearned revenue
Total liabilities 52,988 7,830
Fund Balances:
Restricted for:
Access programming
Debt service
Landscape maintenance
Park construction
Public improvements 3,277 21,456
Public safety
Streets and roads
Water production 282,812
Assigned for:
Capital projects 3,971
Tourism benefit 106,717
Total fund balances 282,812 3,277 21,456 3,971 106,717
Total liabilities and
fund balances $335,800 $3,277 $21,456 $3,971 $114,547
Special Revenue Funds
In‐Lieu Water
Neutralization ConstructionDrainage Fees
In‐Lieu
Underground
Utility
Tourism
Business
Improvement
District
B‐84
Item 9.c. - Page 101
$1,874,680 $162,064 $5,217,329 $893,481 $34,162 $927,643 $6,144,972
9,800 9,800
21,827 1,922 1,922 23,749
1,499 126 4,114 27 27 4,141
$1,876,179 $162,190 $5,253,070 $895,403 $34,189 $929,592 $6,182,662
$‐$42,997 $113,318 $‐$‐$‐$113,318
40,226 40,226
42,997 153,544 153,544
160,164 160,164
895,403 34,189 929,592 929,592
461,212 461,212
1,122,080 1,122,080
82,062 82,062
119,193 308,080 308,080
696,249 696,249
1,876,179 2,158,991 2,158,991
3,971 3,971
106,717 106,717
1,876,179 119,193 5,099,526 895,403 34,189 929,592 6,029,118
$1,876,179 $162,190 $5,253,070 $895,403 $34,189 $929,592 $6,182,662
Total Nonmajor
Governmental
Funds
Debt Service
Total Special
Revenue Funds
Water
Availability
State COPS
Grant
Special Revenue Funds
Fire Station GO
Bonds
Total Debt
Service Funds
City Hall USDA
Debt Service
B‐85
Item 9.c. - Page 102
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Fiscal Year Ended June 30, 2015
REVENUES
Taxes and assessments $‐$‐$‐$‐$‐
Use of money and property 1,600 1,618 460 9,626 1,582
Intergovernmental revenues
Charges for services 31,542 9,470 7,448 273,276 83,790
Other revenue
Total revenues 33,142 11,088 7,908 282,902 85,372
EXPENDITURES
Current:
General government
Community development
Public works
Capital outlay
Debt service:
Principal
Interest and fiscal agent fees
Total expenditures
Excess of revenue over/
(under) expenditures 33,142 11,088 7,908 282,902 85,372
OTHER FINANCING SOURCES/(USES)
Transfers in
Transfers out (81,400) (88,197) (35,000)
Total other financing
sources/(uses)(81,400) (88,197) (35,000)
Net change in fund balances 33,142 11,088 (73,492) 194,705 50,372
Fund balances ‐ July 1, 2014 136,459 149,076 92,778 767,902 109,101
Fund balances ‐ June 30, 2015$169,601 $160,164 $19,286 $962,607 $159,473
Special Revenue Funds
Park
Development
Police
Protection
Impact Fees
Public Access
Television
Park
Improvement
Impact Fees
Fire Protection
Impact Fees
B‐86
Item 9.c. - Page 103
$‐$10,362 $5,440 $41,808 $‐$‐$‐
572 621 101 3,829 6,576 553 936
470,669
4,858 23,338
5,430 10,983 5,541 45,637 29,914 553 471,605
20,613
4,974 4,763 10,700
4,974 4,763 10,700 20,613
5,430 6,009 778 34,937 29,914 553 450,992
(2,604) (2,196) (3,804) (12,718) (450,992)
(2,604) (2,196) (3,804) (12,718) (450,992)
5,430 3,405 (1,418) 31,133 17,196 553
51,899 57,859 10,842 359,391 624,409 54,091
$57,329 $61,264 $9,424 $390,524 $641,605 $54,644 $‐
Special Revenue Funds
Transportation
Traffic
CirculationTraffic Signal
Grace Lane
Assessment
District
Community
Center Impact
Fees
Landscape
Assessment
District
Parkside
Assessment
District
B‐87
Item 9.c. - Page 104
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Fiscal Year Ended June 30, 2015
REVENUES
Taxes and assessments $‐$‐$‐$‐$202,291
Use of money and property 2,630 34 217 34 761
Intergovernmental revenues
Charges for services 85,497 3,738
Other revenue 10,000
Total revenues 88,127 34 217 3,772 213,052
EXPENDITURES
Current:
General government 146,627
Community development 327,530
Public works
Capital outlay
Debt service:
Principal
Interest and fiscal agent fees
Total expenditures 327,530 146,627
Excess of revenue over/
(under) expenditures (239,403) 34 217 3,772 66,425
OTHER FINANCING SOURCES/(USES)
Transfers in 200,000 5,000
Transfers out (3,000)
Total other financing
sources/(uses)200,000 2,000
Net change in fund balances (39,403) 34 217 3,772 68,425
Fund balances ‐ July 1, 2014 322,215 3,243 21,239 199 38,292
Fund balances ‐ June 30, 2015$282,812 $3,277 $21,456 $3,971 $106,717
ConstructionDrainage Fees
Special Revenue Funds
In‐Lieu
Underground
Utility
Tourism
Business
Improvement
District
In‐Lieu Water
Neutralization
B‐88
Item 9.c. - Page 105
$‐$‐$259,901 $159,664 $‐$159,664 $419,565
19,009 1,665 52,424 321 321 52,745
106,230 576,899 576,899
99,600 622,557 622,557
10,000 10,000
118,609 107,895 1,521,781 159,664 321 159,985 1,681,766
167,240 167,240
327,530 327,530
20,437 20,437
102,125 102,125 102,125
‐ 90,000 25,000 115,000 115,000
‐ 47,305 41,944 89,249 89,249
102,125 617,332 137,305 66,944 204,249 821,581
118,609 5,770 904,449 22,359 (66,623) (44,264) 860,185
205,000 73,676 73,676 278,676
(26,115) (65,000) (771,026) (771,026)
(26,115) (65,000) (566,026) 73,676 73,676 (492,350)
92,494 (59,230) 338,423 22,359 7,053 29,412 367,835
1,783,685 178,423 4,761,103 873,044 27,136 900,180 5,661,283
$1,876,179 $119,193 $5,099,526 $895,403 $34,189 $929,592 $6,029,118
Debt Service
Total Nonmajor
Governmental
Funds
Total Debt
Service Funds
State COPS
Grant
Total Special
Revenue Funds
Water
Availability
City Hall USDA
Debt Service
Fire Station GO
Bonds
Special Revenue Funds
B‐89
Item 9.c. - Page 106
City of Arroyo Grande
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the Fiscal Year Ended June 30, 2015
Sanitation District Fund
Cash and investments $151,197 $1,599,486 $1,598,335 $152,348
Accounts receivable 48,835 1,495,735 1,500,311 44,259
Total assets $200,032 $3,095,221 $3,098,646 $196,607
Due to other agencies $200,032 $3,095,221 $3,098,646 $196,607
Total liabilities $200,032 $3,095,221 $3,098,646 $196,607
Downtown Parking Fund
Cash and investments $192,871 $12,249 $31,655 $173,465
Interest receivable 91 745 684 152
Prepaid items 76 24 52
Total assets $193,038 $12,994 $32,363 $173,669
Accounts payable $‐$3,966 $3,966 $‐
Due to other agencies 193,038 9,028 28,397 173,669
Total liabilities $193,038 $12,994 $32,363 $173,669
Total Agency Funds
Cash and investments $344,068 $1,611,735 $1,629,990 $325,813
Accounts receivable 48,835 1,495,735 1,500,311 44,259
Interest receivable 91 745 684 152
Prepaid items 76 24 52
Total assets $393,070 $3,108,215 $3,131,009 $370,276
Accounts payable $‐$3,966 $3,966 $‐
Due to other agencies 393,070 3,104,249 3,127,043 370,276
Total liabilities $393,070 $3,108,215 $3,131,009 $370,276
Balance Balance
June 30, 2015AdditionsDeductionsJuly 1, 2014
B‐90
Item 9.c. - Page 107
Statistical Section
The statistical section offers operational,
economic, and historical data that
provide a context for assessing a
government’s economic condition. The
data includes: information on financial
trends, information on revenue capacity,
information on debt capacity,
demographic and economic
information, and operating information.
Item 9.c. - Page 108
THIS PAGE IS INTENTIONALLY LEFT BLANK
Item 9.c. - Page 109
City of Arroyo Grande
NET POSITION BY COMPONENT
Last Ten Fiscal Years
Governmental Activities
Net investment in capital assets $57,463,427 $51,452,482 $51,506,838 $52,059,524
Restricted294,162 872,226 916,560 969,659
Unrestricted8,204,641 13,859,907 15,736,998 15,799,496
Total governmental activities
net position 65,962,230 66,184,615 68,160,396 68,828,679
Business‐Type Activities
Net investment in capital assets 9,903,095 9,815,456 9,759,235 9,670,367
Restricted
Unrestricted 5,173,626 5,924,601 6,961,084 7,569,157
Total business‐type activities
net position 15,076,721 15,740,057 16,720,319 17,239,524
Primary Government
Net investment in capital assets 67,366,522 61,267,938 61,266,073 61,729,891
Restricted 294,162 872,226 916,560 969,659
Unrestricted 13,378,267 19,784,508 22,698,082 23,368,653
Total primary government net
position $81,038,951 $81,924,672 $84,880,715 $86,068,203
Source: City of Arroyo Grande Annual Financial Report
Fiscal Year
2006200720082009
C‐2
Item 9.c. - Page 110
$52,196,451 $54,012,699 $62,176,633 $62,107,039 $37,123,166 $39,466,986
937,284 8,179,991 7,221,859 7,374,485 7,580,876 7,726,993
15,491,347 7,584,426 6,370,870 2,520,322 2,977,346 (7,576,941)
68,625,082 69,777,116 75,769,362 72,001,846 47,681,388 39,617,038
9,532,740 10,057,743 9,816,684 10,268,542 35,230,778 35,141,321
1,196,593 1,158,896
7,518,372 6,686,297 6,057,411 6,628,074 7,727,871 6,487,746
17,051,112 16,744,040 15,874,095 16,896,616 44,155,242 42,787,963
61,729,191 64,070,442 71,993,317 72,375,581 72,353,944 74,608,307
937,284 8,179,991 7,221,859 7,374,485 8,777,469 8,885,889
23,009,719 14,270,723 12,428,281 9,148,396 10,705,217 (1,089,195)
$85,676,194 $86,521,156 $91,643,457 $88,898,462 $91,836,630 $82,405,001
2014 2015
Fiscal Year
2010 2011 2012 2013
C‐3
Item 9.c. - Page 111
City of Arroyo Grande
CHANGES IN NET POSITION
Last Ten Fiscal Years
Expenses
Governmental activities:
General government $4,855,828 $4,164,825 $4,240,653 $4,216,918
Community development 659,125 931,635 861,279 680,610
Public safety 6,792,337 7,378,307 7,521,516 8,090,323
Recreation 926,833 939,879 941,366 955,677
Public works 952,678 955,151 974,892 988,341
Streets and roads 1,316,248 2,706,738 3,341,886 2,447,914
Sewer 728,300 761,133 759,438 738,149
Interest on long‐term debt 74,092 163,460 457,271 460,671
Total governmental activities
expenses 16,305,441 18,001,128 19,098,301 18,578,603
Business‐type activities:
Water 1,150,492 1,159,014 1,236,610 1,324,507
Lopez
Sewer 1,681,126 2,176,061 2,363,814 2,834,416
Total business‐type activities
expenses 2,831,618 3,335,075 3,600,424 4,158,923
Total primary government
expenses $19,137,059 $21,336,203 $22,698,725 $22,737,526
Program Revenues
Governmental activities:
Charges for services:
General government $76,833 $71,054 $614,920 $142,082
Community development 539,819 337,350 288,672 218,197
Public safety 343,219 428,343 443,302 445,198
Recreation 907,846 850,546 627,707 695,501
Public works 343,406 268,285 28,815 31,824
Streets and roads 116,877 109,733 180,317 6,747
Sewer 724,196 684,026 760,618 767,717
Operating grants and contributions 1,367,767 1,649,482 2,297,131 1,740,668
Capital grants and contributions 807,813 673,932 664,433 577,876
Total governmental activities
program revenues 5,227,776 5,072,751 5,905,915 4,625,810
Business‐type activities:
Charges for services:
Water 2,192,318 2,192,075 2,336,545 2,284,127
Lopez
Sewer 2,350,934 2,667,329 3,395,713 3,673,952
Operating grants and contributions
Capital grants and contributions 1,792
Total business‐type activities
program revenues 4,545,044 4,859,404 5,732,258 5,958,079
Total primary government program
revenues $9,772,820 $9,932,155 $11,638,173 $10,583,889
Fiscal Year
2006 2007 2008 2009
C‐4
Item 9.c. - Page 112
$4,543,500 $4,786,979 $4,475,869 $4,442,707 $4,206,267 $4,991,206
983,321 3,224,094 1,578,940 1,934,076 1,596,223 2,017,973
7,290,559 5,795,069 5,708,603 5,594,859 5,804,569 5,905,903
850,711 759,139 723,234 765,563 817,557 860,010
828,852 830,914 1,439,738 1,313,371 1,703,736 1,746,040
3,044,033 1,835,373 2,600,752 2,266,016 2,746,128 2,230,930
858,806 798,287 793,207 821,609
462,435 499,825 318,960 109,800 111,507
18,862,217 18,529,680 17,639,303 17,248,001 16,985,987 17,752,062
1,732,341 2,168,569 2,142,321 2,490,896 2,304,928 1,306,742
2,271,238 3,170,608
2,772,836 2,592,965 2,679,699 2,215,526 794,673 821,584
4,505,177 4,761,534 4,822,020 4,706,422 5,370,839 5,298,934
$23,367,394 $23,291,214 $22,461,323 $21,954,423 $22,356,826 $23,050,996
$139,111 $50,355 $38,563 $47,652 $48,931 $22,615
292,480 498,223 403,679 699,553 507,718 894,495
384,106 188,407 168,502 74,388 39,093 135,134
675,828 694,090 650,897 597,230 735,369 743,589
75,165 84,964 86,198 179,908 117,252 418,772
52,290 96,409 16,561 44,455 1,024 97,696
788,165 828,302 925,213 1,089,899
2,169,381 2,154,143 731,446 875,502 1,387,188 1,499,188
888,102 1,751,549 1,509,016 1,066,625 665,453 233,549
5,464,628 6,346,442 4,530,075 4,675,212 3,502,028 4,045,038
2,508,136 2,794,504 3,443,240 4,236,880 4,997,374 6,497,466
1,973,699
3,265,221 2,895,218 2,552,516 2,252,208 1,150,806 1,066,815
4,187 2,760
135,071 690,957
5,773,357 5,828,980 5,998,516 7,180,045 8,121,879 7,564,281
$11,237,985 $12,175,422 $10,528,591 $11,855,257 $11,623,907 $11,609,319
2014 2015
Fiscal Year
2010 2011 2012 2013
C‐5
Item 9.c. - Page 113
City of Arroyo Grande
CHANGES IN NET POSITION
Last Ten Fiscal Years
Net revenue (expense)
Governmental activities $(11,077,665) $(12,928,377) $(13,192,386) $(13,952,793)
Business‐type activities 1,713,426 1,524,329 2,131,834 1,799,156
Total primary government net
expense$(9,364,239) $(11,404,048) $(11,060,552) $(12,153,637)
General Revenues and Other Changes in Net Position
Governmental activities:
Taxes:
Property taxes $4,572,642 $5,240,507 $5,295,263 $5,586,348
Sales and use taxes 3,674,807 3,800,667 5,280,813 4,658,777
Transient lodging taxes 434,986 449,474 437,164 389,067
Franchise taxes 566,000 588,841 621,987 639,776
Business license tax 79,701 81,821 80,990 79,111
Debt service
Investment income 476,461 701,918 893,125 589,734
Other revenue 1,294,708 1,236,158 1,363,029 1,285,769
Transfers 1,103,520 1,051,376 1,341,156 1,392,494
Extraordinary gain
Total governmental activities 12,202,825 13,150,762 15,313,527 14,621,076
Business‐type activities:
Investment income 116,742 190,383 199,398 112,543
Transfers (1,103,520) (1,051,376) (1,341,156) (1,392,494)
Total business‐type activities
revenues (986,778) (860,993) (1,141,758) (1,279,951)
Total primary government $11,216,047 $12,289,769 $14,171,769 $13,341,125
Change in Net Position
Governmental activities $1,125,160 $222,385 $2,121,141 $668,283
Business‐type activities 726,648 663,336 990,076 519,205
Total primary government $1,851,808 $885,721 $3,111,217 $1,187,488
Source: City of Arroyo Grande Annual Financial Report
Fiscal Year
2006 2007 2008 2009
C‐6
Item 9.c. - Page 114
$(13,397,589) $(12,183,238) $(13,109,228) $(12,572,789) $(13,483,959) $(13,707,024)
1,268,180 1,067,446 1,176,496 2,473,623 2,751,040 2,265,347
$(12,129,409) $(11,115,792) $(11,932,732) $(10,099,166) $(10,732,919) $(11,441,677)
$5,471,651 $5,379,176 $6,633,678 $6,232,026 $6,564,035 $6,832,769
4,252,903 4,781,774 4,127,541 4,269,905 4,583,049 4,634,828
348,014 390,472 630,379 746,333 840,602 1,124,486
604,325 539,673 570,172 575,495 595,161 612,261
80,283 79,663 84,925 85,078 85,625 90,108
337,724 389,292 333,962 330,551 375,843 426,084
606,653 479,514 773,180 565,018 626,840 949,606
1,492,439 1,888,403 2,070,466 1,468,937 (23,434,931) 2,297,653
2,641,541
13,193,992 13,927,967 17,865,844 14,273,343 (9,763,776) 16,967,795
35,847 30,483 24,025 17,835 33,627 84,005
(1,492,439) (1,888,403) (2,070,466) (1,468,937) 23,434,931 (2,297,653)
(1,456,592) (1,857,920) (2,046,441) (1,451,102) 23,468,558 (2,213,648)
$11,737,400 $12,070,047 $15,819,403 $12,822,241 $13,704,782 $14,754,147
$(203,597) $1,744,729 $4,756,616 $1,700,554 $(23,247,735) $3,260,771
(188,412) (790,474) (869,945) 1,022,521 26,219,598 51,699
$(392,009) $954,255 $3,886,671 $2,723,075 $2,971,863 $3,312,470
Fiscal Year
2012 2013 2014 201520102011
C‐7
Item 9.c. - Page 115
City of Arroyo Grande
FUND BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
General Fund
Reserved$1,108,791 $778,455 $794,186 $725,546
Unreserved1,250,287 1,116,751 2,272,789 2,726,035
Nonspendable
Committed
Assigned
Unassigned
Total general fund $2,359,078 $1,895,206 $3,066,975 $3,451,581
All Other Governmental Funds
Reserved $2,248,940 $2,641,882 $2,814,009 $2,919,758
Unreserved, reported in:
Special revenue funds 7,566,466 10,984,987 11,656,498 11,367,715
Debt service funds (2,616,734) 397,041 528,838 530,905
Nonspendable
Restricted
Committed
Assigned
Unassigned
Total all other governmental funds $7,198,672 $14,023,910 $14,999,345 $14,818,378
Source: City of Arroyo Grande Annual Financial Report
TheCityofArroyoGrandeimplementedGASBStatementNo.54forthefiscalyearendedJune30,2011.Information
prior to the implementation of GASB Statement No. 54 is not available.
Fiscal Year
2006 2007 2008 2009
C‐8
Item 9.c. - Page 116
$679,140 $‐$‐$‐$‐$‐
4,321,286
595,268 642,708 773,416 56,938 130,822
3,159,440 4,276,484 4,206,637 3,825,974
350,000 703,355 458,549 1,356,870 1,284,047
4,256,808 537,038 149,944 1,154,882 2,463,910
$5,000,426 $5,202,076 $5,042,541 $5,658,393 $6,775,327 $7,704,753
$2,896,080 $‐$‐$‐$‐$‐
10,181,391
(95,156)
73,782 45,523 24,110 49,547
8,513,465 7,262,107 7,412,863 7,673,231 7,762,037
65,565
3,529,431 711,439 1,208,489 84,341 327,809
83,163 (13,405) (10,060) (18,547)
$12,982,315 $12,199,841 $8,071,229 $8,635,402 $7,757,572 $8,120,846
2014 2015
Fiscal Year
2010 2011 2012 2013
C‐9
Item 9.c. - Page 117
City of Arroyo Grande
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
Revenues
Taxes and assessments $11,004,014 $12,023,398 $13,266,750 $12,703,434
Licenses and permits 321,112 251,710 197,526 175,202
Fines and penalties 119,993 120,693 116,999 104,320
Use of money and property 476,461 701,918 893,126 589,738
Intergovernmental revenues 1,516,844 1,388,559 2,230,140 1,175,605
Charges for services 2,353,582 2,177,104 2,320,190 1,987,517
Other revenue 536,868 508,756 853,555 633,781
Total revenues 16,328,874 17,172,138 19,878,286 17,369,597
Expenditures
Current:
General government 4,792,777 4,067,238 4,166,466 4,075,286
Community development 654,154 929,196 858,840 682,609
Public safety 6,500,678 7,040,983 7,194,758 7,035,372
Recreation 926,833 939,879 941,366 955,677
Parks and facilities 909,999 906,975 923,809 936,560
Streets and road 1,113,395 1,157,235 1,114,181 1,110,200
Sewer 228,243 261,076 248,806 224,587
Capital outlay 2,497,186 2,333,001 3,214,579 3,379,483
Debt service:
Principal 96,396 97,329 84,024 194,775
Interest and fiscal agent fees 70,723 102,185 382,013 448,702
Total expenditures 17,790,384 17,835,097 19,128,842 19,043,251
Excess of revenue over (under)
expenditures (1,461,510) (662,959) 749,444 (1,673,654)
Other Financing Sources (Uses)
Cost of issuance (312,051)
Proceeds from issuance of debt 6,285,000 484,799
Proceeds from sale of capital assets
Transfer in 3,687,453 3,440,859 4,752,885 5,116,137
Transfer out (2,583,933) (2,389,483) (3,355,125) (3,723,643)
Extraordinary loss
Total other financing sources
(uses)1,103,520 7,024,325 1,397,760 1,877,293
Net Change in Fund Balances $(357,990) $6,361,366 $2,147,204 $203,639
Debt service as a percentage of non‐
capital expenditures 1.10%1.30%3.02%4.28%
Source: City of Arroyo Grande Annual Financial Report
Fiscal Year
2006200720082009
C‐10
Item 9.c. - Page 118
$12,156,062 $12,745,313 $12,169,550 $11,965,499 $12,875,650 $13,352,062
207,801 194,743 206,319 259,153 262,929 340,265
77,145 66,724 71,605 52,299 45,012 43,764
337,724 389,292 333,962 312,551 364,460 424,326
2,053,958 2,755,945 2,372,614 1,258,892 2,052,641 1,732,737
2,105,522 2,095,895 1,925,491 2,733,085 1,449,387 1,870,662
227,969 138,094 604,371 151,312 111,723 142,689
17,166,181 18,386,006 17,683,912 16,732,791 17,161,802 17,906,505
4,432,039 4,920,805 4,358,806 4,664,317 4,469,132 4,786,049
983,321 1,592,094 1,567,283 1,241,020 1,595,790 1,684,674
6,965,253 5,248,185 5,337,305 5,136,154 5,329,649 5,356,518
850,711 759,139 720,797 758,822 808,823 866,808
780,493 778,575 1,350,922 1,288,515 1,558,905 1,663,621
1,162,452 1,090,471 1,877,833 1,544,570 1,947,648 1,474,872
267,933 273,818 273,296 257,073
2,855,174 7,667,405 4,594,942 2,115,032 2,484,378 4,333,128
199,775 1,135,709 367,342 242,294 358,308 329,291
448,835 491,151 289,407 111,670 111,623 104,060
18,945,986 23,957,352 20,737,933 17,359,467 18,664,256 20,599,021
(1,779,805) (5,571,346) (3,054,021) (626,676) (1,502,454) (2,692,516)
2,253,119 69,077 275,595 448,512
849,000 62,169 35,343 1,064,429
5,825,184 6,239,127 6,691,654 4,532,700 5,254,550 7,523,254
(4,332,745) (4,350,724) (4,621,188) (3,063,763) (2,957,819) (4,602,467)
(3,333,432)
1,492,439 4,990,522 (1,193,889) 1,806,701 2,780,586 3,985,216
$(287,366) $(580,824) $(4,247,910) $1,180,025 $1,278,132 $1,292,700
4.20%11.09%4.24%2.38%2.99%2.74%
2014 2015
Fiscal Year
2010 2011 2012 2013
C‐11
Item 9.c. - Page 119
City of Arroyo Grande
GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE
Last Ten Fiscal Years
20064,192,636$ 3,674,807$ 434,986$ 79,701$ 566,000$ 151,874$ 9,100,004$
20075,240,507 3,800,667 449,474 81,821 588,841 109,182 10,270,492
20085,201,904 5,280,813 437,164 80,990 621,987 93,359 11,716,217
20095,518,824 4,658,777 389,067 79,111 639,776 67,524 11,353,079
20105,408,201 4,252,903 348,014 80,283 604,325 63,450 10,757,176
20115,313,261 4,781,774 390,472 79,663 539,673 65,915 11,170,758
20126,563,217 4,127,541 630,379 84,925 570,172 70,461 12,046,695
20136,150,672 4,269,905 746,333 85,078 575,495 81,354 11,908,837
20146,564,035 4,583,049 840,602 85,625 595,161 105,396 12,773,868
20156,724,240 4,634,828 1,124,486 90,108 612,261 108,529 13,294,452
Includes all governmental fund types (i.e. general fund, special revenue funds, capital project funds, and debt service funds)
Source: City of Arroyo Grande Annual Financial Report
Total
Transient
Occupancy Tax
Property Tax
Transfer
Fiscal
YearProperty Taxes
Sales & Use
Tax
Business
Licenses
Franchise
Revenues
C‐12
Item 9.c. - Page 120
City of Arroyo Grande
ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
Last Ten Fiscal Years
2006 100%
20072,051,896,464 41,436,924 2,093,333,388 26,740,180 2,066,593,208 100%
20082,196,091,386 41,592,228 2,237,683,614 26,977,685 2,210,705,929 100%
20092,291,770,614 45,964,735 2,337,735,349 27,218,700 2,310,516,649 100%
20102,245,531,517 44,455,451 2,289,986,968 27,131,700 2,262,855,268 100%
20112,242,734,120 41,864,014 2,284,598,134 26,925,209 2,257,672,925 100%
20122,195,793,943 41,107,547 2,236,901,490 26,926,650 2,209,974,840 100%
20132,204,645,960 42,637,641 2,247,283,601 26,788,183 2,220,495,418 100%
20142,300,046,365 45,362,799 2,345,409,164 26,614,912 2,318,794,252 100%
20152,468,055,741 50,263,602 2,518,319,343 26,368,700 2,491,950,643 100%
Source: San Luis Obispo County Auditor‐Controller
Forcomparisonpurposes,grossassessedvaluationsincludehomeownersandotherexemptions.Althoughtheseexemptionsreducepropertytax
collections,therevenuelossisreimbursedbytheStateofCalifornia.Assuch,grossassessedvaluationistherevenuebaseusedinestablishing
property tax‐related revenues.
Assessed to
Property
ValueFiscal Year
Secured Gross
Assessed Value
Unsecured Gross
Assessed Value
Total Gross
Assessed ValueExemptionsNet Taxable Value
1,854,194,694$ 45,169,815$ 1,899,364,509$ 26,909,137$ 1,872,455,372$
C‐13
Item 9.c. - Page 121
City of Arroyo Grande
PROPERTY TAX RATES ‐ DIRECT AND OVERLAPPING GOVERNMENTS
Last Ten Fiscal Years
2006 1.00000 0.00222 0.02018 0.01109 0.01100 1.04449
2007 1.00000 0.00221 0.01934 0.01017 0.00964 1.04136
2008 1.00000 0.00220 0.02854 0.00967 0.00891 1.04932
2009 1.00000 0.00220 0.02854 0.00967 0.00820 1.04861
2010 1.00000 0.00220 0.02854 0.00967 0.00817 1.04858
2011 1.00000 0.00290 0.02914 0.00972 0.00817 1.04993
2012 1.00000 0.00300 0.02984 0.00972 0.00817 1.05073
2013 1.00000 0.00400 0.03954 0.00992 0.00817 1.06163
2014 1.00000 0.00400 0.03994 0.00992 0.00817 1.06203
2015 1.00000 0.00400 0.04094 0.00992 0.00606 1.06092
Source: HDL Coren & Cone, San Luis Obispo County Assessor
Fiscal Year
ValuationsareestablishedbytheCountyAssessoroftheCountyofSanLuisObispo,exceptforpropertyownedbyprivateutility
companies,whichisvaluedbytheStateofCalifornia.UndertheprovisionsofArticleXIIAoftheStateConstitution(Proposition13
adoptedbythevotersonJune6,1978)propertiesareassessedat100%offullvalueandsubsequentlyincreasedatamaximumrateof
2%peryear.TheCountycollectspropertytaxesanddistributestheappropriateamounttoeachcity.Each$1.00ofpropertytaxis
distributed to various local government agencies based upon fixed allocation factors.
San Luis Obispo
County Tax
Rate
State Water
Project Tax
Unified/High
Bond Lease
Lopez Dam
BondsFire BondsTotal Tax Rate
C‐14
Item 9.c. - Page 122
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Item 9.c. - Page 123
City of Arroyo Grande
PRINCIPAL PROPERTY TAXPAYERS
Current Fiscal Year and Nine Fiscal Years Ago
Rank
Sphear Investments LLC $26,955,083 1 1.07%
Haggen Property South LLC 19,272,403 2 0.77%
MSB Properties Inc.15,224,430 3 0.60%
Sunrise Terrace Associates 12,154,734 40.48%
Grand and Elm Properties LP 11,783,245 5 0.47%
Manfred G Freutel Trust 9,739,040 60.39%
1400 West Branch LLC 8,570,740 7 0.34%
EPT Arroyo Inc 7,236,308 8 0.29%
Ray B. Bunnell Trust 7,062,462 9 0.28%
Deblauw Properties LLC 6,543,813 10 0.26%
ESJ Centers LLC
Jasmine Place LLC
Catholic Healthcare West
Signature Real Estate Equities I LLC
Orradre Ranch A California LP
Juanita D McMullen Trust
Totals $124,542,258 4.95%
Source: HDL Coren & Cone
Residential
Commercial
Institutional
Commerical
Recreational
Commercial
Commercial
Commercial
Residential
Unsecured
Recreational
Taxpayer
Commercial
Commercial
Residential
Commerical
Commercial
2014‐15
Percentage of
Total Taxable
Assessed
ValuationType of BusinessAssessed Valuation
C‐16
Item 9.c. - Page 124
Rank
$‐‐‐
4,650,463 100.24%
9,998,985 20.53%
8,588,938 30.45%
6,268,864 50.33%
38,517,133 12.03%
6,398,389 40.34%
5,729,769 60.30%
5,513,203 70.29%
5,501,928 80.29%
4,951,406 90.26%
$96,119,078 5.06%
2005‐06
Percentage of
Total Taxable
Assessed
ValuationAssessed Valuation
C‐17
Item 9.c. - Page 125
City of Arroyo Grande
SECURED PROPERTY TAX ROLL LEVIES AND COLLECTIONS
Last Ten Fiscal Years
Fiscal Year
Total Secured Tax
Levy
Current Tax
Collections
Percent of Levy
Collected
Current Year
Delinquencies
Percent
Delinquent
20063,120,935$ 3,120,935$ 100%**
2007 3,452,422 3,452,422 100%**
2008 3,696,974 3,696,974 100%**
2009 3,855,626 3,855,626 100%**
2010 3,782,238 3,782,238 100%**
2011 3,777,302 3,777,302 100%**
2012 3,696,711 3,696,711 100%**
2013 3,715,390 3,715,390 100%**
2014 3,874,384 3,874,384 100%**
2015 4,164,044 4,164,044 100%**
Source: San Luis Obispo County Auditor‐Controller
*TheCityhaselectedtheTeeterPlanmethodofpropertytaxcollection,wherebytheCountyremits100%oftaxesleviedandpursues
collection and retains any delinquent taxes and related penalties and interest.
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Item 9.c. - Page 126
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Item 9.c. - Page 127
City of Arroyo Grande
TAXABLE SALES BY CATEGORY
Last Ten Calendar Years
(in thousands of dollars)
Food Stores $19,956 $21,162 $18,740 $18,165
Eating and Drinking Places 25,451 26,793 28,768 30,852
Building Materials 29,713 27,548 25,048 22,582
Auto Dealers and Supplies 52,255 44,230 37,143 27,909
Service Stations 43,092 43,626 44,032 48,613
Other Retail Stores 118,955 117,524 118,467 113,771
All Other Outlets 64,669 67,455 59,986 49,873
Total $354,091 $348,338 $332,184 $311,765
Source: State of California Board of Equalization and the Hdl Companies.
Duetoconfidentialityissues,thenamesofthetenlargestrevenuepayersarenotavailable.Thecategoriespresentedareintendedto
provide alternative information regarding the sources of the City's revenue.
2005 2006 2007 2008
C‐20
Item 9.c. - Page 128
$17,173 $15,773 $15,564 $16,098 $17,705 $18,047
29,880 29,949 32,738 37,136 36,314 42,140
19,148 18,676 19,806 20,429 22,848 25,855
22,528 24,753 30,056 33,789 40,123 41,161
34,574 36,817 42,795 45,431 43,831 42,938
113,694 112,340 113,172 115,587 119,916 118,561
44,284 46,231 47,300 46,302 50,130 54,064
$281,281 $284,539 $301,431 $314,772 $330,867 $342,766
201120122013201420092010
C‐21
Item 9.c. - Page 129
City of Arroyo Grande
RATIOS OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Fiscal Year
2006$1,765,000 $‐$41,353 $‐$‐
20071,695,000 6,285,000 14,024
20081,625,000 6,285,000
2009 1,550,000 6,275,000 375,023
2010 1,475,000 6,265,000 260,396
2011 1,395,000 6,165,000 312,405 1,327,512 27,182
2012 1,315,000 221,140 1,305,512 27,182
2013 1,230,000 365,861 1,279,092 27,182
2014 1,140,000 550,653 1,247,156
2015 1,050,000 344,538 1,213,980
Source: City of Arroyo Grande Annual Financial Report
General
Obligation Bonds
Tax Allocation
BondsCapital LeasesLoan Payable
Reimburse‐ment
Agreement
Governmental Activities
C‐22
Item 9.c. - Page 130
$315,488 $14,529 $2,136,370 0.11%128.70
216,617 4,927 8,215,568 0.36%490.22
111,582 8,021,582 0.34%470.86
8,200,023 0.37%480.10
8,000,396 0.35%466.63
9,227,099 0.40%531.36
2,868,834 0.13%165.91
2,902,135 0.13%166.84
122,007 3,059,816 0.13%176.52
82,167 2,690,685 0.11%155.58
Outstanding
Debt per CapitaSafe Water LoanCapital Leases
Total Primary
Government
Percent of
Estimated
Actual Value of
Taxable
Property
Business‐Type Activities
C‐23
Item 9.c. - Page 131
City of Arroyo Grande
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
Last Ten Fiscal Years
2006$1,765,000 $323,029 $1,441,971 $1,872,455,372 0.08%16,599 86.87
20071,695,000 415,430 1,279,570 2,066,593,208 0.06%16,759 76.35
20081,625,000 499,891 1,125,109 2,210,705,929 0.05%17,036 66.04
20091,550,000 568,811 981,189 2,310,516,649 0.04%17,080 57.45
20101,475,000 625,638 849,362 2,289,986,968 0.04%17,145 49.54
20111,395,000 677,881 717,119 2,284,598,134 0.03%17,365 41.30
20121,315,000 727,231 587,769 2,236,901,490 0.03%17,291 33.99
20131,230,000 818,400 411,600 2,247,283,601 0.02%17,395 23.66
20141,140,000 873,044 266,956 2,345,409,164 0.01%17,334 15.40
2015 1,050,000 895,403 154,597 2,518,319,343 0.01%17,295 8.94
Source: San Luis Obispo County Tax Assessor Rolls ‐ California Department of Finance
Fiscal
Year
Fire General Obligation Bond
General Bonded
Debt
Less: Amount
Available in
Debt Service
Funds
Net General
Bonded Debt
Estimated Actual
Taxable Value of
Property
Ratio of Net
Bonded
Debt to
Assessed
ValuePopulation
Net Bonded
Debt Per
Capita
C‐24
Item 9.c. - Page 132
City of Arroyo Grande
DIRECT AND OVERLAPPING DEBT
June 30, 2015
$9,155,000 33.611%$3,077,087
San Luis Obispo County Community College District 75,000,000 5.853%4,389,750
Lucia Mar Unified School District 28,773,020 21.283%6,123,762
City of Arroyo Grande 1,050,000 100.000%1,050,000
San Luis Obispo County Certificates of Participation 28,365,000 5.876%1,666,727
San Luis Obispo Pension Obligations 106,204,398 5.876%6,240,570
8,025,000 5.853%469,703
Lucia Mar Unified School District Certificates of Participation 8,035,000 21.283%1,710,089
Combined Total Debt $264,607,418 $24,727,688
Ratio to Assessed Valuation:
Direct Debt 0.04%
Total Direct and Overlapping Tax and Assessment Debt 0.58%
Combined Total Debt 1.21%
Assessed Valuation Calculation:
Net Taxable Value $2,518,319,343
Less: Redevelopment Agency Tax Increment (164,401,099)
Total Assessed Valuation $2,353,918,244
Source: California Municipal Statistics
San Luis Obispo Community College District Certificates of
Participation
Net Debt Outstanding
Percentage
Applicable to the
City
Amount Applicable to
the CityJurisdiction
San Luis Obispo County Flood Control and Water Conservation
District, Zone No. 3
C‐25
Item 9.c. - Page 133
City of Arroyo Grande
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
Debt Limit $71,226,169 $70,520,002 $76,003,136 $79,840,076
Total net debt applicable to limit
Legal debt margin $71,226,169 $70,520,002 $76,003,136 $79,840,076
0%10%9%9%
Source: San Luis Obispo County
Totalnetdebtapplicabletothelimitasa
percentage of debt limit
Fiscal Year
2006 2007 2008 2009
C‐26
Item 9.c. - Page 134
$79,151,950 $76,912,430 $81,390,806 $81,888,135 $85,681,844 $92,280,975
$79,151,950 $76,912,430 $81,390,806 $81,888,135 $85,681,844 $92,280,975
9%10%3%3%3%2%
Legal Debt Margin Calculation for Fiscal Year 2015
Assessed value $2,518,319,343
Debt limit ‐ 3.75% of total assessed value 94,436,975
Amount of debt applicable to limit (2,156,000)
Legal debt margin $92,280,975
2014 2015
Section43605ofCaliforniaGovernmentCodeestablishesalegaldebtlimitof15%ofgrossassessedvaluationformunicipalities.However,
thisprovisionwasenactedwhenassessedvaluationwasestablishedbasedon25%ofmarketvalue.EffectivewithFY1981‐82,taxable
propertyisassessedat100%ofmarketvalue.AlthoughthedebtlimitprovisionhasnotbeenamendedbytheStatesincethischange,the
percentagehasbeenproportionatelymodifiedto3.75%forthepurposesofthiscalculationforconsistencywiththeoriginalintentofthe
State’s limit.
Fiscal Year
2010 2011 2012 2013
C‐27
Item 9.c. - Page 135
City of Arroyo Grande
DEMOGRAPHIC STATISTICS
Last Ten Calendar Years
Year Population
2005 16,602 488,426$ 29,420$ 4.4%
2006 16,645 531,728 31,945 4.0%
2007 16,834 566,021 33,624 4.4%
2008 16,990 577,858 34,012 5.9%
2009 17,110 561,131 32,796 9.2%
2010 17,145 547,714 31,946 10.4%
2011 17,291 554,159 32,049 9.5%
2012 17,395 590,856 33,967 6.2%
2013 17,334 555,104 32,024 5.3%
2014 17,295 580,593 33,570 4.9%
Source: HDL Coren & Cone
Personal Income
(in thousands)
Per Capita
Personal Income
Unemployment
Rate
C‐28
Item 9.c. - Page 136
City of Arroyo Grande
FULL‐TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION
Last Ten Fiscal Years
2006200720082009201020112012201320142015
General government 10.8 10.7 10.5 10.6 10.6 10.7 10.5 10.4 10.5 9.8
Community development 15.8 17.0 16.2 13.4 10.8 10.5 9.2 9.7 9.1 10.0
Police 44.6 45.1 43.2 38.0 38.5 38.5 39.6 38.4 37.5 32.8
Recreation 20.0 19.0 18.8 18.9 16.5 11.9 11.4 11.5 11.9 13.1
Public works 11.2 10.5 10.3 10.0 10.1 11.1 10.9 9.8 9.8 11.2
Streets and roads 7.1 6.8 5.8 6.1 6.0 6.4 6.1 5.6 5.2 4.8
Sewer 1.3 2.6 3.8 4.4 3.2 2.0 1.9 1.0 0.5 2.1
Water 7.1 7.4 7.3 7.4 6.5 6.6 6.6 6.1 6.8 5.1
Total 117.9 119.1 115.9 108.8102.297.7 96.2 92.5 91.3 88.9
Source: City of Arroyo Grande payroll records
Fiscal Year
Function
C‐29
Item 9.c. - Page 137
City of Arroyo Grande
OPERATING INDICATORS BY FUNCTION
Last Ten Fiscal Years
20062007200820092010
General Government
Number of business licenses 1,935 1,900 1,713 1,705 1,622
Number of minutes transcribed 31 34 24 35 30
Number of agenda items processed 297 320 302 275 297
Number of recruitments 29 33 51 31 19
Police
Number of officers 27 27 27 27 26
Incidents recorded 14,448 12,456 12,518 14,150 17,072
Major crimes 510 500 498 395 478
Traffic collisions 442 479 325 450 429
Traffic enforcement activities 4,149 3,029 4,646 4,616 4,863
Arrests 584 697 609 364 631
Public Works
Miles of streets maintained 70 70 70 70 70
Miles of sewer maintained 65 66 66 66 66
Number of vehicles maintained 89 90 70 90 89
Pieces of equipment maintained 385 389 385 389 385
Number of street trees maintained 1,060 1,091 1,141 1,200 1,200
Street service request 550 560 560 560 550
Water customer accounts 6,208 6,422 6,449 6,457 6,304
Acre feet of water consumed 3,037 3,245 3,343 3,177 2,918
Miles of water lines maintained 68 69 69 69 69
In‐house capital projects constructed 3 3 3 3 3
Capital projects constructed 6 7 6 7 6
CIP studies initiated 2 ‐ 2 ‐ 2
CIP studies completed 1 1 1 1 1
Community Development
Number of planning commission agendas 26 20 17 20 18
Number of planning commission staff reports 80 58 37 58 36
Number of ARC agendas 15 13 12 13 12
Plan and map checks completed 13 8 8 8 13
Building permits issued 550 560 530 540 530
Building inspections conducted 3,400 4,500 3,508 4,500 3,400
Recreation Services
Registrations 11,500 11,650 11,000 11,650 11,500
Participants in City recreation sports 3,136 3,132 3,144 2,200 2,290
Number of programs/events/classes 72 73 114 91 72
Number of teams 294 301 306 281 255
Children in Motion enrollment 1,050 1,050 1,200 1,250 1,200
Source: City of Arroyo Grande budget records
Fiscal Year
C‐30
Item 9.c. - Page 138
20112012201320142015
1,654 1,654 1,690 1,775 1,760
44 30 33 23 41
295 246 231 296 340
18 10 14 18 15
26 26 24 27 23
16,145 17,250 18,275 18,809 17,203
444 313 458 508 500
432 410 253 378 340
4,013 4,295 4,058 3,758 2,967
605 574 695 568 675
70 70 70 70 70
66 69 70 70 70
90 86 67 60 55
389 350 300 295 285
1,200 1,200 1,200 1,210 1,218
560 263 352 376 423
6,312 6,525 6,545 6,578 6,384
2,746 2,868 2,862 2,868 2,481
69 87 87 87 87
2 3 ‐ 2 1
10 7 8 13 8
4 3 4 ‐ ‐
2 1 ‐ ‐ ‐
19 14 20 18 16
43 35 60 53 55
13 11 15 21 18
12 13 9 6 17
421 376 360 450 505
3,019 1,601 2,183 2,390 2,414
11,650 11,750 11,880 12,000 12,130
2,200 2,260 2,285 2,235 2,255
91 108 115 120 125
281 336 325 320 324
800 840 959 1,009 1,083
Fiscal Year
C‐31
Item 9.c. - Page 139
City of Arroyo Grande
CAPITAL ASSET STATISTICS BY FUNCTION
Last Ten Fiscal Years
2006200720082009201020112012201320142015
Police
Stations1 1 1 1 1 1 1 1 1 1
Patrol units 10 10 10 10 10 10 10 10 10 10
Motorcycles 2 2 2 2 2 2 2 2 2 2
Engineering/Streets
Streets (miles)70 70 70 70 70 70 70 70 70 70
Parks & Recreation
Parks 18 19 19 19 19 19 19 19 19 19
Acreage of parks 150.9 151.6 151.6151.6151.6151.6151.6151.6 151.6151.6
Community centers 2 2 2 2 2 2 2 2 2 2
Water
Water mains (miles)68 68 68 69 69 69 87 87 87 87
Water capacity**6.5 6.5 6.5 6.5 6.5 6.5 6.7 6.7 6.7 6.7
** ‐ In millions of gallons
Source: CBIZ GASB Statement No. 34 Infrastructure Inventory and Valuation City records
Fiscal Year
Function
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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIALREPORTINGANDONCOMPLIANCEANDOTHER MATTERSBASEDONANAUDITOFFINANCIALSTATEMENTS PERFORMEDINACCORDANCEWITH GOVERNMENTAUDITINGSTANDARDS
City Council of the City of Arroyo Grande ArroyoGrande,California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standardsapplicabletofinancialauditscontainedin GovernmentAuditingStandards issuedbytheComptrollerGeneralof theUnitedStates,thefinancialstatementsofthegovernmentalactivities,thebusiness-typeactivities,eachmajorfund,and theaggregateremainingfundinformationofCityofArroyoGrande(theCity),asofandforthefiscalyearendedJune30, 2015,andtherelatednotestothefinancialstatements,whichcollectivelycomprisetheCity’sbasicfinancialstatements, andhaveissuedourreportthereondatedDecember18,2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting(internalcontrol)todeterminetheauditproceduresthatareappropriateinthecircumstancesforthepurposeof expressingouropinionsonthefinancialstatements,butnotforthepurposeofexpressinganopinionontheeffectiveness oftheCity’sinternalcontrol.Accordingly,wedonotexpressanopinionontheeffectivenessoftheCity’sinternalcontrol. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, inthenormalcourseofperformingtheirassignedfunctions,toprevent,ordetectandcorrect,misstatementsonatimely basis.A materialweakness isadeficiency,oracombinationofdeficiencies,ininternalcontrol,suchthatthereisa reasonablepossibilitythatamaterialmisstatementoftheentity’sfinancialstatementswillnotbeprevented,ordetected andcorrectedonatimelybasis.A significantdeficiency isadeficiency,oracombinationofdeficiencies,ininternalcontrol thatislessseverethanamaterialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designedtoidentifyalldeficienciesininternalcontrolthatmightbematerialweaknessesor,significantdeficiencies.Given theselimitations,duringourauditwedidnotidentifyanydeficienciesininternalcontrolthatweconsidertobematerial weaknesses.However,materialweaknessesmayexistthathavenotbeenidentified.Wedididentifyadeficiencyin internalcontrol,describedintheaccompanyingscheduleoffindingsandquestionscoststhatweconsidertobea significantdeficiency,seeFinding2015-1. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement,weperformedtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrant agreements,noncompliancewithwhichcouldhaveadirectandmaterialeffectonthedeterminationoffinancialstatement amounts.However,providinganopiniononcompliancewiththoseprovisionswasnotanobjectiveofouraudit,and accordingly,wedonotexpresssuchanopinion.Theresultsofourtestsdisclosednoinstancesofnoncomplianceorother mattersthatarerequiredtobereportedunder GovernmentAuditingStandards.
1 2400 Professional Parkway, Suite 205 Santa Maria, CA 93455 Tel 805.925.2579 Fax 805.925.2147 mlhcpas.com BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
ATTACHMENT 2
Item 9.c. - Page 141
City of Arroyo Grande’s Response to Findings City of Arroyo Grande’s response to the findings identified in our audit described in the accompanying schedule of findings and questioned costs. City of Arroyo Grande’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Santa Maria, California December 18, 2015 2
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City of Arroyo Grande Schedule of Findings and Recommendations June 30, 2015 FINDING 2015-1 CASH DISBURSEMENTS Criteria: Internal control procedures for cash disbursement transactions should be in place so that all purchases, including employee reimbursements and credit card purchases, are reviewed by someone other than the person initiating the purchase. Condition: In certain circumstances, cash disbursements related to credit card purchases were reviewed and approved by the same employee making the purchase. Effect: This deficiency in internal controls increases the risk of misappropriation of assets to go undetected. Cause: The City’s purchasing policy allows for purchases under $5,000 to be reviewed and approved by Department Director or Department authority. It does not specify additional review required from someone other than the employee making the purchase. Recommendation: Revise the purchasing policy to specifically require that an approval by an appropriate level employee other than the employee making the purchase be required before the purchase is processed. Therefore, all purchases, regardless of price paid, will require an approval from somebody other than the purchaser. Corrective Action Plan: During the 2015-16 fiscal year, the City will update and implement both the purchasing policy and the credit card policy. The policy will detail the appropriate authorization and review of expenditures and will ensure additional review from someone other than the purchaser. 3
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City of Arroyo Grande Schedule of Prior Fiscal Year Findings and Recommendations June 30, 2015 FINDING 2014-1 CASH RECEIPTS Criteria: Adequate internal control procedures for cash receipt transactions require the collection and retention of sufficient documentation to allow for recalculation of any receipt. In addition, to ensure the correct accounting for cash received, the City should retain the ability to trace a receipt from the time it is billed and/or collected to the time it is deposited into the City’s bank account and vice-versa. Condition: Receipts tested in the Recreation Department’s Children in Motion program did not have adequate documentation to trace receipts received to the daily deposit. Effect: The lack of supporting documentation for cash receipts prohibited verification that all cash received was deposited into the local bank account and accounted for appropriately in the general ledger. Cause: In some circumstances, when the City receives payments for the Children in Motion program, the Recreation Department “batches” multiple payments received as one receipt into the cash register system. This batching process creates the inability to trace one individual payment to the bank deposit. Recommendation: Obtain and retain supporting documentation that provides what payments are included in each bank deposit for programs in order to reconcile cash receipts to cash deposited in the bank to protect against a misappropriation of cash that may go undetected. Current Status: Implemented. 4
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