Loading...
CC 2018-05-22_09c Attachment 1_CAFR Comprehensive Annual Financial Report For the Fiscal Year Ending June 30, 2017 City of Arroyo Grande, California Prepared by the Department of Administrative Services City of Arroyo Grande COMPREHENSIVE ANNUAL FINANCIAL REPORT Table of Contents For the Fiscal Year Ended June 30, 2015 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 1 City of Arroyo Grande COMPREHENSIVE ANNUAL FINANCIAL REPORT Table of Contents For the Fiscal Year Ended June 30, 2015 STATISTICAL SECTION (unaudited) Net Position by Component — Last Ten Fiscal Years Change in Net Position — Last Ten Fiscal Years Fund Balances of Governmental Funds — Last Ten Fiscal Years Changes in Fund Balances of Governmental Funds — Last Ten Fiscal Years General Governmental Tax Revenues by Source — Last Ten Fiscal Years Assessed and Estimated Actual Value of Taxable Property— Last Ten Fiscal Years Property Tax Rates — Direct and Overlapping Governments — Last Ten Fiscal Years Principal Property Taxpayers — Current Fiscal Year and Nine Fiscal Years Ago Secured Property Tax Roll Levies and Collections — Last Ten Fiscal Years Taxable Sales by Category — Last Ten Calendar Years Ratios of Outstanding Debt by Type — Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding — Last Ten Fiscal Years Direct and Overlapping Debt Legal Debt Margin Information — Last Ten Fiscal Years Demographic Statistics — Last Ten Calendar Years Full-Time Equivalent City Government Employees by Function Operating Indicators by Function — Last Ten Fiscal Years Capital Asset Statistics by Function — Last Ten Fiscal Years C-2 C-4 C-8 C-10 C-12 C-13 C-14 C-16 C-18 C-20 C-22 C-24 C-25 C-26 C-28 C-29 C-30 C-32 2 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. Arroyo Grande 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 May 22, 2018 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, 2017. 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, 2017 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, 2017 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 $750,000 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 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 17,736. 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 improvement, with increases in all major tax revenue sources. The formation of a local Tourism Business Improvement District is positively impacting local lodging establishments, as well as other businesses that are related to tourism. Development activity in the City has remained steady, with measured 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 2017-18 Budget will impact the community. A- 3 Parks – Construction of ADA improvements at the Soto Sports Complex will be accomplished through the use of Community Development Block Grant funds. In addition, replacement of the roof at the Strother Park restroom building is planned as well as the replacement of the large play structure at Strother Park. 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. Flood Protection and Drainage Projects – Several projects related to stormwater, storm drains, and flood protection are programmed, including the permitting for the removal of sedimentation at Equestrian Way and drainage solutions in the Sierra Drive/Hillcrest Drive neighborhood. Water & Sewer Projects – Various waterline upgrades, the design of the Lift Station No. 1 forcemain replacement 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 1.095% 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-two (42) retired employees receiving these benefits, which are financed on a pay-as- you-go-basis. City of Arroyo Grande DIRECTORY OF OFFICIALS A- 5 ELECTED OFFICIALS Mayor ................................................................................................................................................... Jim Hill Mayor Pro Tem .............................................................................................................................. Tim Brown Council Member .................................................................................................................... Kristen Barneich Council Member ................................................................................................................... Barbara Harmon Council Member .............................................................................................................................. Caren Ray ADMINISTRATIVE PERSONNEL City Manager ...................................................................................................................... James A. Bergman 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 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 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. Moss, Levy & Hartzheim L LP Certified Public A ccountants 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 of and for the fiscal year ended June 30, 2017, 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, 2017, and the respective changes in financial position, and cash flows where applicable thereof, for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. 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 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-15, the budgetary comparison information on pages B-73 through B-78, the schedule of funding progress for other postemployment benefits on page B-79, the schedule of proportionate share of net pension liability on page B-80, and the schedule of pension contributions on page B-81 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 financial 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 May 8, 2018, 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. Z4y. fD.Weitielazired X4P Santa Maria, California May 8, 2018 B-2 City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 3 The management’s discussion and analysis of the City of Arroyo Grande provides an overall review of the City’s financial acti vities for the fiscal year ended June 30, 2017. 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 f inancial statements, as well as the notes to the basic financial statements to enhance their understanding of the City’s financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for the fiscal year ended June 30, 2017, are as follows:  The City has finished the fiscal year with General Fund revenues exceeding expenditures by approximately $190,000, however, after transfers and other financing sources, the General Fund’s fund balance of $9.4 million reflects an increase of approximately $1.8 million. This fund balance amount has exceeded the City’s reserve policy goal of 20% of appropriated General Fund expenditures. Of the $9.4 million in fund balance, approximately $6.3 million is “unassigned” fund balance which is available at the City Council’s discretion.  In total, the Water and Sewer funds have finished the fiscal year with revenues exceeding expenses, a reversal from the previous year results, which were a result of significant water conservation due to the historic drought. 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 The property acquisition of the LePoint parking lot. o An upgrade to the audio/visual and broadcasting equipment in the Council Chamber, along with a remodel of the facility for Americans with Disabilities Act (ADA) improvements to the restrooms and a new roof. o Partnership with a local Eagle Scout to complete the installation of a play structure at Heritage Square Park. o The completion of a rain garden at Strother Park. 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 proc eed 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 provid e more detailed data. 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 positi on. City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 4 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 increased during the 2016-17 fiscal year from $84.7 million to $88.5 million, or by 4.5%. This overall increase is due to an increase in governmental activities and a slight decrease in business-type activities. The increase in governmental activities is largely due to changes in the deferred inflows and outflows of resources related to pensions. 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 o f certain services it provides. The City’s water, Lopez treatment, and sewer systems are reported in this category. City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 5 GOVERNMENTAL ACTIVITIES The City’s net position of governmental activities at June 30, 2017, 2016, and 2015 are as follows: The Governmental Accounting Standards Board Statement No. 68 established guidelines regarding how the City r eports 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, 2017, the City reported net pension liability of $15.4 million for governmental activities. Net pension liability is influenced by several factors, including the long -term rate of return earned by the pension system’s investments as well as the City’s share of the total pension fund’s assets and can fluctuate significantly from year to year. More infor mation on the long term pension obligations can be found in the Notes to the Financial Statements and the Required Suppleme ntary Information. The City continues to utilize revenue from the 2006 Local Sales Tax Measure for the purposes of capital projects and infrastructure improvements. During the 2016-17 fiscal year, the City utilized over $1.1 million of this funding to improve and maintain streets, over $100,000 to support public safety efforts, $500,000 toward the purchase of the Le Point Street parking lot, and $100,000 for stormwater and drainage projects. The Local Sales Tax Measure provi des approximately $2.2 million annually and is critical in the maintenance and improvement of the infrastructure throughout the community. Variance % Change CY to PY CY to PY Assets: Current and other assets $ 20,553,682 $ 19,888,925 $ 19,187,309 $ 664,757 3.3% Capital assets, net 42,996,103 42,135,296 42,075,504 860,807 2.0% Total assets 63,549,785 62,024,221 61,262,813 1,525,564 2.5% Deferred Outflows of Resources: Deferred pension obligation 5,191,361 3,278,204 1,569,515 1,913,157 58.4% Total DOR 5,191,361 3,278,204 1,569,515 1,913,157 58.4% Liabilities: Long-term liabilities outstanding 18,753,650 19,900,427 17,687,841 (1,146,777)-5.8% Other liabilities 1,532,765 1,414,443 1,772,607 118,322 8.4% Total liabilities 20,286,415 21,314,870 19,460,448 (1,028,455)-4.8% Deferred Inflows of Resources: Deferred pension obligation 1,318,073 1,497,071 2,965,802 (178,998)-12.0% Total DIR 1,318,073 1,497,071 2,965,802 (178,998)-12.0% Net Position: Net investment in capital assets 41,437,236 39,712,230 39,466,986 1,725,006 4.3% Restricted 8,375,502 5,531,798 8,516,033 2,843,704 51.4% Unrestricted (2,676,080)(2,753,544)(7,576,941) 77,464 2.8% Total net position $ 47,136,658 $ 42,490,484 $ 40,406,078 $ 4,646,174 10.9% FYE 2015FYE 2017 FYE 2016 City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 6 The City’s statement of activities of governmental activities at June 30, 2017, 2016, and 2015 are as follows: During the 2016-17 fiscal year, the City’s total revenue increased by 7.4% to $19.8 million and expenses decreased by 5.6% to $17.3 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 2016-17 fiscal year, these taxes generated $12.3 million, or 62% of total revenue. This was a decrease of about $17,000 when compared to the 2015-16 fiscal year and an increase of over $860,000 when compared to the 2014-15 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: Variance % Change CY to PY CY to PY Revenues Program revenues: Charges for services $ 3,163,969 $ 1,923,380 $ 2,312,301 $ 1,240,589 64.5% Grants and contributions 1,923,039 1,655,035 1,732,737 268,004 16.2% General revenues: Property taxes 6,494,953 7,133,641 6,832,769 (638,688)-9.0% Other taxes 7,699,664 7,073,964 6,461,683 625,700 8.8% Other revenues 584,271 609,902 1,375,690 (25,631)-4.2% Total revenues 19,865,896 18,395,922 18,715,180 1,469,974 8.0% Expenses: General government 5,659,730 5,397,817 4,991,206 261,913 4.9% Community development 1,604,701 1,850,925 2,017,973 (246,224)-13.3% Public safety 5,075,763 5,572,516 5,905,903 (496,753)-8.9% Recreation 705,766 960,669 860,010 (254,903)-26.5% Public works 1,777,425 1,892,337 1,746,040 (114,912)-6.1% Streets and roads 2,448,134 2,544,510 2,230,930 (96,376)-3.8% Interest on long-term debt 56,988 130,220 (73,232)-56.2% Total expenses 17,328,507 18,348,994 17,752,062 (1,020,487)-5.6% Income (deficiency) transfers 2,537,389 46,928 963,118 2,490,461 5307.0% Transfers from (to) business-type activity 2,108,785 2,037,478 2,297,653 71,307 3.5% Change in net position 4,646,174 2,084,406 3,260,771 2,561,768 122.9% Ending net position $ 47,136,658 $ 42,490,484 $ 40,406,078 $ 4,646,174 10.9% FYE 2017 FYE 2016 FYE 2015 City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 7 Property tax revenues have steadily increased for the past four fiscal years and are projected to continue a modest but steady increase for the upcoming years. During 2016-17, the City redeemed bonds that had been funded through a property tax allocation and no property tax was received for this purpose. This reduction in property tax revenues will be ongoing in future years; h owever significant interest savings was realized by paying the debt. 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 $3.2 million for services to users and developers in the 2016-17 fiscal year and makes up approximately 16% of total revenue for the City. This represents an increase of approximately $1.2 million from the prior fiscal year. The Community Development Department which includes the Planning, Engineering and Building divisions reported revenues of $1.2 million in the 2016-17 fiscal year but only $900,000 in the 2015-16 fiscal year. In addition, the 2016-17 fiscal year included approximately $300,000 in one-time charges for public works related services. 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 2019-20. In addition to the increase in revenues, the City has incurred additional costs as explained below. The cost of all governmental activities in the 201 6-17 fiscal year was $17.3 million, a decrease of 6% in comparison to last fiscal year. Because the City is a service oriented organization, the majority of the fluctuations in expenses from one year to the next can be attributed to employee-related benefits including pensions and medical costs. In the 2016-17 fiscal year, the Police Department experienced several staffing vacancies, generating much of the decrease from the prior year. Further analysis of the changes in employee-related expenditures is presented in the fund analysis of City’s funds section of this report. As shown on the following page, public safety and general government, represents the City’s highest percent of expenses incurred at 33%, followed by general government (which includes the City Clerk, Information Technology, City Council, City Manager, Finance and Human Resources divisio ns) at 30%, 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 10%. These functions were subsidized by taxes, investment income, miscellaneous income, and transfers from the business -type activities. City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 8 The City continues to invest heavily in public safety; those activities cost the City approximately $5.1 million in the 2016-17 fiscal year. This does not include capital cost s related to public safety such as the recently 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 C ity is also anticipating some much needed investment towards fire-related infrastructure including fire engines. The City currently contributes approximately $2.2 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 Five Cities Fire Authority board of directors entered into a lease purchase arrangement for the replacement of one fire engine, with a second replacement engine anticipated in fiscal year 2017 -18. 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 2016-17 fiscal year, the City spent approximately $2.4 million in street and road costs. This program is funded from the State’s gasoline taxes (which contributed approximately $355,000), transportation taxes (which contributed approximately $360,000) and is also funded from the additional one half cent sales tax the voters approved in 2006. During the 2016-17 fiscal year, the additional sales tax contributed over $1.1 million towards street and road-related projects. The City continues to budget and contribute to wards these efforts in the 5 to 10 year financial forecast. BUSINESS-TYPE ACTIVITIES The City provides water delivery and wastewater collection services to a population of approximately 17,700 with 6,400 accounts. The City has two main sources of water: ground water and surface water from Lopez Reservoir. Water treatment is handled by the County of San Luis Obispo and wastewater treatment is handled by the South San Luis Obispo County Sanitation District. The net position of business-type activities for the fiscal year ended June 30, 2017, 2016, and 2015 are as follows: - 5 10 15 20 25 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Fiscal Year Expenses by Function Last 10 Fiscal Years (in Millions) Public safety General government Streets and roads All other City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 9 As shown above, the City’s net position decreased by 1.9%, from $42.2 million to $41.4 million. As mentioned in the government- wide section of this report, pension liability is now being reported as a result of GASB Statement No. 68. Business -type activities reported pension liability in the amount of $1.8 million for fiscal year 2016-17. Net position decreased during the fiscal year primarily due to the recognition of the prior year’s $1.7 million pre-paid asset in the Lopez Fund. 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). Variance % Change CY to PY CY to PY Assets: Current and other assets $ 7,929,909 $ 9,032,484 $ 9,496,825 $ (1,102,575)-12.2% Capital assets, net 35,236,648 34,810,330 35,182,925 426,318 1.2% Total assets 43,166,557 43,842,814 44,679,750 (676,257)-1.5% Deferred Outflows of Resources: Deferred pension obligation 497,832 235,087 116,294 262,745 111.8% Total DOR 497,832 235,087 116,294 262,745 111.8% Liabilities: Long-term liabilities outstanding 1,989,886 1,545,567 1,509,557 444,319 28.7% Other liabilities 245,871 249,856 242,938 (3,985)-1.6% Total liabilities 2,235,757 1,795,423 1,752,495 440,334 24.5% Deferred Inflows of Resources: Deferred pension obligation 30,578 79,550 296,149 (48,972)-61.7% Total DIR 30,578 79,550 296,149 (48,972)-61.7% Net Position: Total net position $ 41,398,054 $ 42,202,928 $ 42,747,400 $ (804,874)-1.9% FYE 2017 FYE 2016 FYE 2015 City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 10 The City’s statement of activities of business -type activities at June 30, 2017, 2016, and 2015 are as follows: The business-type activities had operating income of $1.3 million in the 2016 -17 fiscal year, whereas $1.4 million in the 2015-16 fiscal year and $2.3 million in the 2014-15 fiscal year. Both operating revenues and expenses were higher than in the prior year when activity was significantly impacted by the severe drought . During the 2015-16 fiscal year, the City Council approved a Stage 1 Water Shortage Emergency which limited the amount of water a customer could use without inc urring financial penalties. During the 2016-17 fiscal year, the Water Emergency was rescinded. Revenues have rebounded as customers have increased water usage, although not to pre-drought levels. The operating expenses include payments to the County for the City’s share of costs at the Lopez water treatment facility, which were approximately $500,000 higher than the prior year. 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 increase in consumption of water has had a significant effect on the overall revenues. The City continues to closely monitor revenues and conservation efforts as these are now a continuous way of life in California. 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 Variance % Change CY to PY CY to PY Operating revenues $ 7,179,441 $ 6,687,885 $ 7,564,281 $ 491,556 7.3% Operating expenses 5,906,838 5,304,476 5,298,934 602,362 11.4% Operating income 1,272,603 1,383,409 2,265,347 (110,806)-8.0% Non-operating revenues 31,308 109,597 84,005 (78,289)-71.4% Transfers out (2,108,785)(2,037,478)(2,297,653)(71,307)3.5% Total non-operating revenues, contributions and transfers(2,077,477)(1,927,881)(2,213,648)(149,596)7.8% Change in net position $ (804,874) $ (544,472) $ 51,699 $ (260,402)-47.8% FYE 2017 FYE 2016 FYE 2015 City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 11 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 t he 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. I n 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 $17.5 million, an increase of approximately $544,000 in comparison with the prior fiscal year. Of the total fund balance, 36% of this total amount ($6.3 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. Fund Balances General Fund All Other Funds Total % of Total Nonspendable $ 1,071,000 $ - $ 1,071,000 6.1% Restricted - 7,600,388 7,600,388 43.4% Committed - - - 0% Assigned 1,986,271 546,365 2,532,636 14.4% Unassigned 6,327,625 - 6,327,625 36.1% Total $ 9,384,896 $ 8,146,753 $ 17,531,649 100.0% 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 $6.3 million, while total fund balance reached $9.4 million. As a measure of the General Fund’s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 39.3% 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 ty pe 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. City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 12 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 th at 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 expen ditures. Overall General Fund revenues have been improving 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 or below budgeted levels. The overall difference between the original General Fund budget and the final amended budget was an increase of approximately $737,000 in appropriations. This can mainly be attributed by the following: 1) the carryover of uncompleted capital projects from the prior fiscal year, 2) costs associated with an increase in the number and complexity of public records requests, and 3) negotiated salary and benefit increases for employees. In addition, during the fiscal year, the City Council increased the General Fund’s budget for Five Cities Fire Authority by approving the use of one -time funds to pay for the City’s share of a replacement fire engine, which cost $260,500, rather than financing the engine replacement over 10 years. 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, 2017, capital assets, net of related accumulated depreciation, of the governmental activities totaled $43.0 million and the capital assets, net of related accumulated depreciation, of the business-type activities totaled $35.2 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 87% of total net position. The capital assets are summarized by activity on the following page. City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 13 Description Original Cost Accumulated Depreciation Book Value Governmental Activities: Land $ 4,236,528 $ - $ 4,236,528 Infrastructure 6,379,188 - 6,379,188 Construction in Progress 3,453,399 - 3,453,399 Structures & Improvements 12,876,665 3,148,624 9,728,041 Machinery & Equipment 3,667,792 2,492,022 1,175,770 Infrastructure 40,601,770 22,578,593 18,023,177 Total $ 71,215,342 $ 28,219,239 $ 42,996,103 Description Original Cost Accumulated Depreciation Book Value Business-Type Activities: Land $ 56,730 $ - $ 56,730 Construction in Progress 473,634 - 473,634 Structures & Improvements 222,999 218,913 4,086 Machinery & Equipment 711,692 408,430 303,262 Infrastructure 57,940,813 23,541,875 34,398,936 Total $ 59,405,868 $ 24,169,220 $ 35,236,648 Major capital asset events during the fiscal year include the following:  Completion of water and sewer upgrades for approximately $1,000,000  Upgrades to the Council Chambers for $600,000  Purchase of the LePoint Street Parking lot for $1.4 million  Renovations at the Corporation Yard for approximately $500,000 New annual programs are recommended through the budget process. In the five-year Capital Improvement Program from fiscal years 2016-17 through 2020-21, the major capital projects include:  The purchase and construction of the Le Point Street Parking Lot expansion: Estimated total cost of project - $800,000.  Reinforcement of the Swinging Bridge – Total cost estimated to be $ 451,100.  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.  Pavement Management Program, the City’s annual improvements to streets and roads – $845,000.  Replacement of the large play structure at Strother Park - $60,000.  Continued improvements with the Water and Sewer systems based on their specific master plans. LONG-TERM DEBT At the end of the 2016-17 fiscal year, the City had a variety of outstanding long-term debt, totaling $18.8 million in governmental activities and $2.0 million in business-type activities. The City had total USDA loans payable outstanding of $1.1 million that was used City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 14 to acquire the property and office building for the location of City Hall offices. The City also has capital leases for police vehicles and certain information technology equipment, the outstanding amount of which is $414,978. Lastly, the City’s most significant outstanding long-term liability is the net pension liability. The net pension liability is the difference between the total pension liability (the present value of projected benefit payments to empl oyees based on their past service) and the assets (mostly investments reported at fair value) set aside to pay current employees, retirees, and beneficiaries. During the year, the City retired General Obligation debt of $955,000 which was used for expanding the current fire station in order to accommodate a full time fire staff. Voters approved the general obligation debt in November 2002, which was repaid through a tax assessment on property taxes. The City also made final payment on the capital lease for the sewer vactor truck during the fiscal year. Debt payments in the amount of $1,146,751 for governmental activities and $41,604 for business-type activities were made during the fiscal year. The City anticipates entering into vehicle leasing in the future, but no significant debt being added in the next few years. 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 2017 FYE 2016 One-Year Long-Term One-Year Long-Term One-Year Long-Term GO Bond $ 955,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Capital Lease 330,104 220,664 194,314 0 0 220,664 194,314 Loan Payable 1,179,566 36,939 1,106,950 0 0 36,939 1,106,950 Comp Absence 888,468 751,876 0 89,590 841,466 Net Pension 17,326,688 15,435,578 0 1,784,478 17,220,056 OPEB 766,167 1,007,329 0 115,818 1,123,147 Total $ 21,445,993 $ 257,603 $ 18,496,047 $ 0 $ 1,989,886 $ 257,603 $ 20,485,933 FINANCIAL ISSUES AND CONCERNS The budget for the 2017-18 fiscal year was approved by City Council on June 13, 2017. It 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. Staff identified several challenges facing the City in the near future including:  Rising pension costs  Securing a long-term, drought resistant water supply  The eventual closure of the Diablo Nuclear Power Plant  Overall economic development and revenue generation  Long-term infrastructure maintenance  Sustainability of ongoing operational needs The Long-Range Financial Plan assumes slowed growth beginning in the 2018-19 fiscal year and recessionary retraction beginning in the 2020-21 fiscal year that is 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 City of Arroyo Grande MANAGEMENT’S DISCUSSION AND ANALYSIS For the Fiscal Year Ended June 30, 2017 B - 15 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 C ity has the ability to restore services reduced over the past few years, staff is attempting to do so largely through contracts a nd other means that will provide the flexibility to expand and contract the organization in a timely manner when necessary due to econ omic 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. City of Arroyo Grande STATEMENT OF NET POSITION June 30, 2017 ASSETS Cash and investments $16,091,507 $6,405,503 $22,497,010 Receivables: Accounts 581,612 1,436,502 2,018,114 Taxes 1,281,489 1,281,489 Loan 1,503,194 1,503,194 Interest 24,880 10,481 35,361 Inventory 7,497 77,423 84,920 Prepaid items 1,063,503 1,063,503 Nondepreciable capital assets: Land 4,236,528 56,730 4,293,258 Infrastructure 6,379,188 6,379,188 Construction in progress 3,453,399 473,634 3,927,033 Depreciable capital assets: Structures and improvements 12,876,665 222,999 13,099,664 Equipment 3,667,792 711,692 4,379,484 Infrastructure 40,601,770 57,940,813 98,542,583 Accumulated depreciation (28,219,239) (24,169,220) (52,388,459) Total assets 63,549,785 43,166,557 106,716,342 DEFERRED OUTFLOWS OF RESOURCES Deferred pension 5,191,361 497,832 5,689,193 Total deferred outflows of resources 5,191,361 497,832 5,689,193 LIABILITIES Accounts payable 499,027 80,733 579,760 Accrued wages and benefits 228,029 228,029 Interest payable 13,926 13,926 Deposits payable 417,308 120,899 538,207 Unearned revenue 374,475 44,239 418,714 Noncurrent liabilities: Due within one year 257,603 257,603 Due in more than one year 18,496,047 1,989,886 20,485,933 Total liabilities 20,286,415 2,235,757 22,522,172 DEFERRED INFLOWS OF RESOURCES Deferred pension 1,318,073 30,578 1,348,651 Total deferred inflows of resources 1,318,073 30,578 1,348,651 (Continued) Governmental Activities Business-Type Activities Total B-16 City of Arroyo Grande STATEMENT OF NET POSITION June 30, 2017 NET POSITION Net investment in capital assets $41,437,236 $35,236,648 $76,673,884 Restricted for: Access programming 27,642 27,642 Community development 799,135 799,135 Capital projects 1,737,212 1,737,212 Debt service 34,584 34,584 Landscape maintenance 506,427 506,427 Park construction 1,544,119 1,544,119 Public improvements 2,093,937 2,093,937 Public safety 469,399 469,399 Streets and roads 1,004,848 1,004,848 Water production 1,895,411 1,895,411 Unrestricted (2,676,080) 4,424,194 1,748,114 Total net position $47,136,658 $41,398,054 $88,534,712 Total Governmental Activities Business-Type Activities B-17 City of Arroyo Grande STATEMENT OF ACTIVITIES For the Fiscal Year Ended June 30, 2017 Governmental Activities: General government $5,659,730 $52,734 $172,237 $- Community development 1,604,701 1,218,957 804,374 Public safety 5,075,763 227,920 65,995 129,324 Recreation services 705,766 746,467 Public works 1,777,425 420,095 Streets and roads 2,448,134 497,796 751,109 Interest on long-term debt 56,988 Total governmental activities 17,328,507 3,163,969 989,341 933,698 Business-type Activities: Water 1,677,487 6,202,191 Lopez 3,359,544 Sewer 869,807 977,250 Total business-type activities 5,906,838 7,179,441 Total government $23,235,345 $10,343,410 $989,341 $933,698 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 Net position at end of fiscal year Program Revenues Expenses Charges 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-18 $(5,434,759) $-$(5,434,759) 418,630 418,630 (4,652,524) (4,652,524) 40,701 40,701 (1,357,330) (1,357,330) (1,199,229) (1,199,229) (56,988) (56,988) (12,241,499) (12,241,499) 4,524,704 4,524,704 (3,359,544) (3,359,544) 107,443 107,443 1,272,603 1,272,603 (12,241,499) 1,272,603 (10,968,896) 6,494,953 6,494,953 5,835,213 5,835,213 1,160,087 1,160,087 610,820 610,820 93,544 93,544 547,492 31,308 578,800 36,779 36,779 2,108,785 (2,108,785) 16,887,673 (2,077,477) 14,810,196 4,646,174 (804,874) 3,841,300 42,490,484 42,202,928 84,693,412 $47,136,658 $41,398,054 $88,534,712 Net (Expense) Revenue and Changes in Net Position Total Governmental Activities Business-type Activities B-19 THIS PAGE IS INTENTIONALLY LEFT BLANK City of Arroyo Grande DESCRIPTION OF MAJOR GOVERNMENTAL FUNDS B-21 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 b e 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 provide d 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. City of Arroyo Grande GOVERNMENTAL FUNDS Balance Sheet June 30, 2017 ASSETS Cash and investments $7,633,922 $24,676 $2,012,160 $337,914 Accounts receivable 372,811 Taxes receivable 1,258,408 Loan receivable 714,154 Interest receivable 13,585 13 2,793 269 Inventory 7,497 Prepaid items 1,063,503 Total assets $10,349,726 $24,689 $2,014,953 $1,052,337 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $248,719 $24,684 $- $- Accrued wages and benefits 228,029 Deposits payable 417,308 Unearned revenue 70,774 Total liabilities 964,830 24,684 Deferred inflows of resources: Unavailable revenue 714,154 Total deferred inflows of resources 714,154 Fund Balances: Nonspendable: Inventory 7,497 Prepaid items 1,063,503 Restricted for: Access programming Community development Debt service Landscape maintenance Park construction Public improvements 2,014,953 Public safety Streets and roads 5 Water production Assigned for: Affordable housing 338,183 Capital projects 1,582,507 Post employment benefits 403,764 Tourism benefit Unassigned 6,327,625 Total fund balances 9,384,896 5 2,014,953 338,183 Total liabilities, deferred inflows of resources, and fund balances $10,349,726 $24,689 $2,014,953 $1,052,337 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-22 $10,095 $289,890 $5,782,850 $16,091,507 199,207 9,594 581,612 23,081 1,281,489 789,040 1,503,194 8,220 24,880 7,497 1,063,503 $799,135 $489,097 $5,823,745 $20,553,682 $-$205,728 $19,896 $499,027 228,029 417,308 263,475 40,226 374,475 - 469,203 60,122 1,518,839 789,040 1,503,194 789,040 1,503,194 7,497 1,063,503 27,642 27,642 10,095 10,095 48,510 48,510 506,427 506,427 1,544,119 1,544,119 78,984 2,093,937 469,399 469,399 1,004,843 1,004,848 1,895,411 1,895,411 338,183 19,894 4,051 1,606,452 403,764 184,237 184,237 6,327,625 10,095 19,894 5,763,623 17,531,649 $799,135 $489,097 $5,823,745 $20,553,682 TotalCDBG Fund Other Governmental Funds Capital Improvement Fund B-23 Cit of Arro,90 Grande RECONCILIATION OF THE GOVERNMENTAL FUNDS - BALANCE SHEET TO THE STATEMENT OF NET POSITION June 30, 2017 Total fund balances—governmental funds $ 17,531,649 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 Accumulated depreciation Net capital assets $ 71,215,342 (28,219,239) 42,996,103 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 $5,191,361 and deferred inflows of resources of $1,318,073 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 S 751,876 Capital lease payable 414,978 CA Energy loan payable 90,889 USDA loan payable 1,053,000 Net pension liability 15,435,578 Other postemployment benefits 1,007,329 Total long-term liabilities (13,926) 1,503,194 3,873,288 (18,753,650) Total net position, governmental activities S 47,136,658 The notes to the basic financial statements are an integral part of this statement. B-24 THIS PAGE IS INTENTIONALLY LEFT BLANK City of Amoy) Grande GOVERNMENTAL FUNDS Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2017 In-Lieu Special Gasoline Transportation Affordable Tax Fund Impact Fees Fund Housing Fund General Fund REVENUES Taxes and assessments 13,937,615 $ - $ $ - Licenses and permits 515,087 Fines and penalties 38,255 Use of money and property 355,404 24 10,195 173,111 Intergovernmental revenues 241,832 355,841 Charges for services 1,185,537 366,924 18,952 Other revenue 18,306 253 Total revenues 16,292,036 356,118 377,119 192,063 EXPENDITURES Current: General government 5,654,863 Community development 1,639,794 150,000 Public safety 5,613,103 Recreation services 1,002,881 Public works 1,783,472 Streets and road 723,563 Capital outlay 282,552 Debt service: Principal 116,104 48,647 Interest and fiscal agent fees 9,260 900 Total expenditures 16,102,029 773,110 150,000 Excess of revenue over/(under) expenditures 190,007 (416,992) 377,119 42,063 OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets 18,220 Proceeds from capital lease 282,552 Transfers in 2,234,873 509,097 1,335,025 Transfers out (930,953) (92,100) Total other financing sources/(uses) 1,604,692 416,997 1,335,025 Net change in fund balances 1,794,699 5 1,712,144 42,063 Fund balances (deficit) -July 1, 2016 7,590,197 302,809 296,120 Fund balances (deficit) -June 30, 2017 $ 9,384,896 $ 5 $ 2,014,953 $ 338,183 The notes to the basic financial statements are an integral part of this statement. B-26 Capital Other Improvement Governmental CDBG Fund Fund Funds Total 257,002 $ 14,194,617 515,087 38,255 25,417 564,151 143,402 660,972 520,992 1,923,039 1,039,214 2,610,627 18,559 143,402 660,972 1,842,625 19,864,335 180,533 5,835,396 54,456 1,844,250 59,083 5,672,186 22,897 1,025,778 80,246 1,863,718 1,081,607 1,805,170 2,178,009 2,460,561 982,000 1,146,751 65,792 75,952 3,282,513 1,422,110 21,729,762 143,402 (2,621,541) 420,515 (1,865,427) 18,220 282,552 456,158 435,152 4,970,305 (1,335,025) (503,442) (2,861,520) (878,867) (68,290) 2,409,557 143,402 (3,500,408) 352,225 544,130 (133,307) 3,520,302 5,411,398 16,987,519 10,095 19,894 $ 5,763,623 $ 17,531,649 Cit,9 of ArroDo 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, 2017 Total net change in fund balances — governmental funds $ 544,130 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 $2,460,561 is more than depreciation expense $(1,325,848) 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 sale of capital assets and the loss on disposal of capital assets is: 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, 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 by which proceeds from the issuance of debt of $282,552 is less than repayments of debt of $(1,146,751) 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, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. This year, the difference between accrual-basis pension costs and actual employer contributions was: 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: 1,134,713 (273,906) (13,821) (2,838) 18,964 864,199 29,512 2,666,160 (320,939) Change in net position —governmental activities S 4,646,174 The notes to the basic financial statements are an integral part of this statement. B-28 Cit of Arroo Grande DESCRIPTION OF MAJOR PROPRIETARY FUNDS 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. B-29 City of Arroyo Grande PROPRIETARY FUNDS Statement of Net Position June 30, 2017 Water Fund Lopez Fund Sewer Fund Totals ASSETS Current assets: Cash and investments $ 2,996,097 1,702,311 $ 1,707,095 $ 6,405,503 Receivables: Accounts, net 1,254,545 181,957 1,436,502 Interest 8,100 2,381 10,481 Inventory 72,470 4,953 77,423 Total current assets 4,331,212 1,702,311 1,896,386 7,929,909 Capital assets: Nondepreciable assets 359,711 170,653 530,364 Depreciable assets, net 11,139,800 23,566,484 34,706,284 Total capital assets, net 11,499,511 23,737,137 35,236,648 Total assets 15,830,723 1,702,311 25,633,523 43,166,557 DEFERRED OUTFLOWS OF RESOURCES Deferred pension 479,771 18,061 497,832 • Total deferred outflows of resources • 479,771 18,061 497,832 LIABILITIES Current liabilities: Accounts payable 78,264 2,469 80,733 Deposits payable 120,899 120,899 Unearned revenue 35,447 8,792 44,239 Total current liabilities 234,610 11,261 245,871 Noncurrent liabilities: Compensated absences 80,048 9,542 89,590 OPEB liability 115,818 115,818 Net pension liability 1,719,740 64,738 1,784,478 Total noncurrent liabilities 1,915,606 74,280 1,989,886 Total liabilities 2,150,216 85,541 2,235,757 DEFERRED INFLOWS OF RESOURCES Deferred pension 29,469 1,109 30,578 Total deferred inflows of resources 29,469 1,109 30,578 NET POSITION Net investment in capital assets 11,499,511 Restricted for: Capital projects 1,375,277 Unrestricted 1,256,021 23,737,137 35,236,648 1,702,311 361,935 1,737,212 1,465,862 4,424,194 Total net position $ 14,130,809 1,702,311 $ 25,564,934 $ 41,398,054 The notes to the basic financial statements are an integral part of this statement. B-30 City of ArroDo Grande PROPRIETARY FUNDS Statement of Revenues, Expenses, and Changes in Net Position For the Fiscal Year Ended June 30, 2017 Water Fund Lopez Fund Sewer Fund Totals OPERATING REVENUES Charges for services $ 6,029,405 $ $ 973,022 $ 7,002,427 Distribution charges 126,135 126,135 Meter installations 22,448 22,448 Other revenue 24,203 4,228 28,431 Total operating revenues 6,202,191 977,250 7,179,441 OPERATING EXPENSES Distribution 684,548 684,548 General 580,077 291,222 871,299 Lopez water contract 3,359,544 3,359,544 Production 157,635 157,635 Depreciation 255,227 578,585 833,812 Total operating expenses 1,677,487 3,359,544 869,807 5,906,838 Operating income (loss) 4,524;704 (3,359,544) 107,443 1,272,603 NON-OPERATING REVENUES Interest income 25,079 (1,063) 7,292 31,308 Total non-operating revenues 25,079 (1,063) 7,292 31,308 Income (loss) before transfers 4,549,783 (3,360,607) 114,735 1,303,911 Transfer in 3,359,544 3,359,544 Transfer out (5,145,125) (323,204) (5,468,329) Change in net position (595,342) (1,063) (208,469) (804,874) Net position -July 1, 2016 14,726,151 1,703,374 25,773,403 42,202,928 Net position - June 30, 2017 $ 14,130,809 $ 1,702,311 $ 25,564,934 $ 41,398,054 The notes to the basic financial statements are an integral part of this statement. B-31 City of Amoy) Grande PROPRIETARY FUNDS Statement of Cash Flows For the Fiscal Year Ended June 30, 2017 Water Fund Lopez Fund Sewer Fund Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 6,047,173 Payments to suppliers (941,294) Payments to employees (278,964) Other receipts 24,203 (1,657,615) 958,130 $ 7,005,303 (160,124) (2,759,033) (133,714) (412,678) 4,228 28,431 Net cash provided (used) by operating activities 4,851,118 (1,657,615) 668,520 3,862,023 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Lease payments made (21,410) (20,194) (41,604) Interest expense payments (396) (628) (1,024) Purchase of capital assets (1,081,991) (178,139) (1,260,130) Transfers from the capital improvement fund 24,696 24,696 49,392 Net cash used by capital and related financing activities (1,079,101) (174,265) (1,253,366) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers from/(to) other funds (5,169,821) Net cash provided (used) by noncapital financing activities (5,169,821) 3,359,544 (347,900) (2,158,177) (347,900) (2,158,177) 3,359,544 CASH FLOWS FROM INVESTING ACTIVITIES Interest income received 27,070 382 8,275 35,727 Net cash provided by investing activities 27,070 382 8,275 35,727 Net increase (decrease) in cash and cash equivalents (1,370,734) 1,702,311 154,630 486,207 Cash and cash equivalents -July 1, 2016 4,366,831 1,552,465 5,919,296 Cash and cash equivalents -June 30, 2017 $ 2,996,097 $ 1,702,311 $ 1,707,095 $ 6,405,503 RECONCILIATION TO THE STATEMENT OF NET POSITION Cash and investments $ 2,996,097 $ 1,702,311 $ 1,707,095 $ 6,405,503 (Continued) The notes to the basic financial statements are an integral part of this statement. B-32 Cít9 of Array) Grande PROPRIETARY FUNDS Statement of Cash Flows (Continued) For the Fiscal Year Ended June 30, 2017 Water Fund Lopez Fund Sewer Fund Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $ 4,524,704 $ (3,359,544) $ 107,443 $ 1,272,603 Adjustments to reconcile operating activities: Depreciation expense 255,227 Change in assets, deferred outflows of resources, liabilities and deferred inflows of resources: Receivables, net (129,019) Inventory 7,193 Prepaid items 21,806 Deferred outflows for pensions (251,240) Accounts and other payables 9,184 Deposits payable 2,050 Unearned revenue (3,846) Compensated absences (12,488) OPEB 36,041 Pension liability 439,368 Deferred inflows for pensions (47,862) 1,701,929 578,585 833,812 (23,684) (152,703) 270 7,463 5,868 1,729,603 (11,505) (262,745) (19,142) (9,958) 2,050 8,792 4,946 (5,002) (17,490) 36,041 28,005 467,373 (1,110) (48,972) Net cash provided (used) by operating activities $ 4,851,118 $ (1,657,615) $ 668,520 $ 3,862,023 The notes to the basic financial statements are an integral part of this statement. B-33 THIS PAGE IS INTENTIONALLY LEFT BLANK of Arroo Grande DESCRIPTION OF FIDUCIARY FUNDS Private-Purpose Trust Fund Successor Agency to the Former Arroyo Grande Redevelo_pment 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. B-35 Cit,9 of Arrop Granc:le STATEMENT OF FIDUCIARY NET POSITION June 30, 2017 Private-Purpose Trust Fund Successor Agency to the Former Redevelopment Agency Agency Funds Totals ASSETS Cash and investments $ 1,193,290 $ 120,928 1,314,218 Accounts receivable 66,262 66,262 Interest receivable 169 169 Prepaid items 52 52 Inventory - land held for resale 860,928 860,928 Note receivable 1,306,899 1,306,899 Total assets 3,361,117 $ 187,411 3,548,528 LIABILITIES Accounts payable $ 18,795 • 18,795 Interest payable 104,631 104,631 Unearned revenue 578,807 578,807 Due to other agencies 168,616 168,616 Loans payable 489,180 489,180 Bonds payable 5,450,000 5,450,000 Total liabilities 6,622,618 $ 187,411 6,810,029 NET POSITION Held in trust for: Successor agency to the former redevelopment agency (3,261,501) (3,261,501) Total net position (3,261,501) (3,261,501) The notes to the basic financial statements are an integral part of this statement. B-36 Cit9 of Arro,9 0 G rancle STATEMENT OF CHANGES IN FIDUCIARY NET POSITION Fiduciary Fund For the Fiscal Year Ended June 30, 2017 Private-Purpose Trust Fund Successor Agency to the Former Redevelopment Agency ADDITIONS Property taxes 673,294 Use of money and property 28,457 Total additions 701,751 DELETIONS Administration 69,000 Contract services 4,073 Interest and fiscal agent fees 318,947 Total deletions 392,020 Net change in net position 309,731 Net position -July 1, 2016 (3,571,232) Net position -June 30, 2017 (3,261,501) The notes to the basic financial statements are an integral part of this statement. B-37 Cit,9 of Arroo Gra ncle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 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 of the 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 Statements No. 39, 61, and 80. 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. • 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 expendituresin governmental funds. Proceeds of long-term debt and acquisitions under capital leases are reported as other financing sources. Non-exchange transactions, 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 the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. B-38 Cít,j ofArro90 Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued B. Basis of Accounting and Presentation — continued Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and charges for services. 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 one private-purpose trust fund, the Successor Agency to the Former Redevelopment Agency of Arroyo Grande. B-39 Cít :j of Arro,90 Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued 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. 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 development, 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 2103, 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. B-40 Cit ofArro,jo Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued D. Cash and Investments — continued 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. 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 the City's 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 asset. 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 revenues are 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. B-41 Cit9 of Amoy) Grancle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued 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. 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 classifications: 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. B-42 Cít of Arroo Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 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 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: Secured Unsecured January 1 July 1 August 1 August 31 Valuation/Lien Dates Levy Dates Due Dates Delinquency Dates January 1 July 1 November 1 (50%) February 1 (50%) December 10 (Nov) April 10 (Feb) B-43 Cít of Arror Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued L. Property Taxes — continued The City has 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 of 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. P. Future Accounting Pronouncements GASB Statements listed below will be implemented in future financial statements: Statement No. 75 "Accounting and Financial Reporting for The provisions of this statement are effective Postemployment Benefits Other Than Pensions" for fiscal years beginning after June 15, 2017. Statement No. 81 "Irrevocable Split-Interest Agreements" The provisions of this statement are effective for fiscal years beginning after December 15, 2017. Statement No. 82 " Pension Issues-an amendment of GASB The provisions of this statement are effective Statements No. 67, No. 68, and NO. 73" for fiscal years beginning after June 15, 2017. Statement No. 83 "Certain Asset Retirement Obligations" The provisions of this statement are effective for fiscal years beginning after June 15, 2018. Statement No. 84 "Fiduciary Activities" The provisions of this statement are effective for fiscal years beginning after December 15, 2018. Statement No. 85 "Omnibus" The provisions of this statement are effective for fiscal years beginning after June 15, 2017. Statement No. 86 "Certain Debt Extinguishment Issues" The provisions of this statement are effective for fiscal years beginning after June 15, 2017. Statement No. 87 "Leases" The provisions of this statement are effective for fiscal years beginning after December 15, 2019. B-44 Cit.9ofArro jo Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 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, 2017, is as follows: Cash in bank and on hand $ 4,144,743 Cash and investments held with fiscal agent 457,375 Investments 19,209,110 Total $ 23,811,228 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 Cash and investments, statement of fiduciary net position Total $ 22,497,010 1,314,218 $ 23,811,228 The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. The City has the following recurring fair value measurements as of June 30, 2017: Fair Value Measurements Using Investments by Fair Value U.S. Agency Securities Total $ 9,446,662 Quoted Prices in Active Markets for Identical Assets (Level 1) 9,446,662 $ Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Investments measured at Amortized Cost Local Agency Investment Fund 6,680,451 Certificates of Deposit 3,081,997 Money Market Funds 457,375 Total $ 19,666,485 $ 9,446,662 B-45 Cít of Arrcy) Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 3 — CASH AND INVESTMENTS — continued 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% 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 Maturity Portfolio in One Issuer N/A None None Authorized Investment Type Money Market Accounts 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: B-46 Cit,9 of Arroo Crancic NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 3 — CASH AND INVESTMENTS — continued Disclosures Relating to Interest Rate Risk - continued Remaining Maturity (in Months) Carrying 12 Months or More than 60 Investment Type Amount Less 13-24 Months 25-60 Months Months Local Agency Investment Fund $ 6,680,451 $ 6,680,451 $ - $ - $ - Certificates of Deposit 3,081,997 844,997 1,245,000 992,000 U.S. Agency Securities 9,446,662 4,995,610 1,994,526 2,456,526 Held by Fiscal Agent: Money Market Funds 457,375 457,375 Total $ 19,666,485 $ 12,978,433 $ 3,239,526 $ 3,448,526 $ 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 $ 6,680,451 NA $ - $ - $ - $ 6,680,451 Certificates of Deposit 3,081,997 N/A 3,081,997 U.S. Agency Securities 9,446,662 N/A 9,446,662 Held by Fiscal Agent: Money Market Funds 457,375 NA 457,375 Total S 19,666,485 S - S 9,446,662 S - $ 10,219,823 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). B-47 2,870,474 6,379,188 3,924,680 13,174,342 11,733,134 5,300,984 40,279,670 57,313,788 28,352,834 28,960,954 S 42,135,296 1,325,848 (1,325,848) S 1,134,713 1,733,349 1,733,349 1,459,443 273,906 273,906 $ 4,236,528 6,379,188 3,453,399 14,069,115 12,876,665 3,667,792 40,601,770 57,146,227 28,219,239 28,926,988 S 42,996,103 1,366,054 (2,931,842) (1,565,788) 1,143,531 100,157 322,100 1,565,788 1,565,788 Balance July 1, 2016 Additions Transfers and Other Re- Deletions classifications Balance June 30, 2017 2,460,561 2,460,561 Cit,9 ofArrojo Crancle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 3 — CASH AND INVESTMENTS — continued 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. NOTE 4 — CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2017, is as follows: Balance July 1, 2016 Additions Transfers and Other Re- Deletions classifications Balance June 30, 2017 Governmental Activities Nondepreciable capital assets Land Infrastructure Construction in progress Total nondepreciable capital assets Depreciable capital assets Structures and improvements Equipment Infrastructure Total depreciable capital assets Less accumulated depreciation Net depreciable capital assets Net capital assets Business-type Activities Nondepreciable capital assets Land Construction in progress Total nondepreciable capital assets Depreciable capital assets Structures and improvements Equipment Infrastructure Total depreciable capital assets Less accumulated depreciation Net depreciable capital assets Net capital assets 56,730 56,730 326,053 1,234,943 (1,087,362) 473,634 382,783 1,234,943 (1,087,362) 530,364 222,999 961,398 56,828,264 58,012,661 23,585,114 34,427,547 $ 34,810,330 25,187 25,187 833,812 (808,625) S 426,318 S 249,706 1,087,362 1,087,362 1,087,362 222,999 711,692 57,940,813 58,875,504 24,169,220 34,706,284 S 35,236,648 249,706 249,706 B-48 Cit,9 of Arroo Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 4 — CAPITAL ASSETS — continued Transfers and Other Reclassifications During the 2016-17 fiscal year, the City completed $4,019,204 in various capital projects. 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 $ 122,594 Community development 1,317 Public safety 335,909 Public works 99,751 Streets and roads 766,277 Total depreciation expense — governmental activities S 1,325,848 Business-type Activities: Water $ 255,227 Sewer 578,585 Total depreciation expense — business-type activities S 833,812 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, 2017, was $489,180. 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, 2017, was $224,974. B-49 Cit ofArrojo Gra ncle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 5 — LOANS RECEIVABLE (continued) Loans Receivable: In-Lieu Affordable Housing Fund 714,154 CDBG Fund 789,040 Total $ 1,503,194 NOTE 6 — INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS A. Interfund Transfers The transfers in and out between funds during the fiscal year ended June 30, 2017, were as follows: Transfer In Transfer Out General Fund $ 2,234,873 $ 930,953 Special Gasoline Tax Fund 509,097 92,100 Transportation Impact Fees Fund 1,335,025 Capital Improvement Fund 456,158 1,335,025 Nonma• jor Governmental Funds • 435,152 503,442 • Water Fund 5,145,125 Lopez Fund 3,359,544 Sewer Fund 323,204 Total $ 8,329,849 8,329,849 NOTE 7 — DEFERRED OUTFLOWS/INFLOWS OF RESOURCES At June 30, 2017, deferred inflows of resources, reported in the governmental fund financial statements, consisted of the following: Unavailable Loan Revenue: In-Lieu Affordable Housing Fund 714,154 CDBG Fund 789,040 Total $ 1,503,194 Information on deferred inflows and outflows of resources related to pension plans can be found in Note 11 — Defined Benefit 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, 2017, total $751,876 for governmental activities and $89,590 for business-type activities. B-50 City of Arro,r Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 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, 2017, is shown below: Date of Maturity Amount of Outstanding Redeemed Outstanding Issue Interest Rates Date Original Issue July 1, 2016 Current Year June 30, 2017 2003 2.00 — 4.45% 2024 $ 1,900,000 $ 955,000 $ 955,000 $ - The City Council approved the early payoff of the remaining balance on August 23, 2016 and the balance was paid in full on September 23, 2016. 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 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 nineteen (19) 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 De Lage Santander Ending June 30 Landen Bank Total 2018 $ 54,726 $ 177,952 $ 232,678 2019 54,725 74,847 129,572 2020 74,847 74,847 Total 109,451 327,646 437,097 Less: amount representing in interest 4,690 17,429 22,119 Present value of net minimum payments $ 104,761 $ 310,217 $ 414,978 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. B-51 Cit,y Arror Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 8 - LONG-TERM DEBT - continued D. California Energy Resources Conservation and Development Commission Loan Payable (continued) The outstanding loan payable debt of the City at June 30, 2017 is shown below: Date of Maturity Amount of Outstanding Redeemed Outstanding Issue Interest Rate Date Original Issue July 1, 2016 Current Year June 30, 2017 2011 3.00% 2026 $ 127,512 $ 99,566 $ 8,677 $ 90,889 The future minimum payment obligation for the loan payable is as follows: Fiscal Year Ending June 30 Principal Interest Total 2018 $ 8,939 $ 2,660 11,599 2019 9,209 2,390 11,599 2020 9,482 2,117 11,599 2021 9,775 1,825 • 11,600 2022 10,070 1,530 11,600 2023-2026 43,414 2,985 46,399 Total $ 90,889 $ 13,507 $ 104,396 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, 2017 is shown below: Date of Maturity Amount of Outstanding Redeemed Outstanding Issue Interest Rates Date Original Issue July 1, 2016 Current Year June 30, 2017 2011 3.75% 2041 $ 1,200,000 $ 1,080,000 $ 27,000 $ 1,053,000 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 2018 $ 28,000 $ 38,963 $ 66,963 2019 29,000 37,894 66,894 2020 30,000 36,788 66,788 2021 31,000 35,644 66,644 2022 32,000 34,462 66,462 2023-2027 180,000 152,962 332,962 2028-2032 217,000 115,856 332,856 2033-2037 260,000 71,250 331,250 2038-2041 246,000 18,900 264,900 Total $ 1,053,000 $ 542,719 $ 1,595,719 B-52 Cít of Arroo Grancle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 8 - LONG-TERM DEBT - continued 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 2016-17 was determined to be $563,000. The City is currently funding the liability on a pay-as-you-go basis and has set aside $403,764 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, 2017, is as follows: Balance July 1, 2016 Additions Deletions Balance June 30, 2017 Due Within One Year Governmental Activities Compensated absences General obligation bonds Capital leases payable CA Energy loan payable USDA loan payable Net pension liability OPEB Total $ 781,388 $ 623,831 955,000 288,500 282,552 99,566 1,080,000 16,009,583 1,390,460 686,390 452,997 $ 19,900,427 $ 2,749,840 $ 653,343 $ 751,876 $ 955,000 156,074 414,978 220,664 8,677 90,889 8,939 27,000 1,053,000 28,000 1,964,465 15,435,578 132,058 1,007,329 $ 3,896,617 $ 18,753,650 $ 257,603 Balance July 1, 2016 Additions Business-type Activities Compensated absences Capital leases payable Net pension liability OPEB Total $ 107,080 41,604 1,317,105 79,777 $ 1,545,566 44,656 694,481 38,003 $ 777,140 Deletions 62,146 41,604 227,108 1,962 $ 332,820 Balance Due Within June 30, 2017 One Year 89,590 $ 1,784,478 115,818 $ 1,989,886 NOTE 9 - WATER SUPPLY CONTRACT The City 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 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. B-53 Cít of Arror Grancle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 9 — WATER SUPPLY CONTRACT (continued) The future minimum contract payments for the debt service are shown below: Fiscal Year Contract Ending June 30 Payment 2018 $ 538,575 2019 537,018 2020 537,189 2021 539,090 2022 539,665 2023-2027 2,705,032 2028-2030 1,631,855 Total $ 7,028,424 NOTE 10 —JOINT POWERS AUTHORITY The City 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 contributed $2,241,766 to FCFA during the fiscal year ended June 30, 2017 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 PLANS A. General Information about the Pension Plans Plan Descriptions All qualified permanent and probationary employees are eligible to participate in the City's separate Safety (Police) and Miscellaneous Employee Pension Plans, cost-sharing multiple employer defined benefit plans administered by the California Public Employees' Retirement System (CalPERS). Benefit provisions under the Plans are established by State statue and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All member are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. B-54 Cít of Arro,r Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 11 — DEFINED BENEFIT PENSION PLAN continued A. General Information about the Pension Plans continued The defined benefit pension plan provisions and benefits at June 30, 2017 are summarized below: Miscellaneous Employee Plan Tier! Tier!! Tier111(PEPRA) On or after Prior to December December 20, On or after Hire date 20,2012 2012* Januaryl, 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 10.069% 8.377% 6.555% Required employer payment of unfunded . . . liability $761,369 $0 .$30 Safety Employee Plan Tierl Tier II Tier III (PEPRA) On or after Prior to December December 20, On or after Hire date 20, 2012 2012* 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 19.536% 16.656% 12.082% Required employer payment of unfunded liability $800,445 $0 $63 *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 Plans' 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 2016-17 fiscal year were $1,026,700 for the miscellaneous plan and $1,164,873 for the safety plan. At June 30, 2017, the City reported a liability of $11,174,679 for the miscellaneous plan and $6,045,377 for the safety plan for its • proportionate share of the net pension liability. The net pension liability was measured as ofJune 30, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as ofJune 30, 2015rolled forward to June 30, 2016 using standard update procedures. The City's proportion of the net pension liability was based on a projection of the City's long-term share of contributions to the pension plan relative to the projected contributions of all pension plan participants, actuarially determined. At June 30, 2017, the City's proportionate share of the net pension liability for each Plan as of June 30, 2015 and June 30, 2016 was as shown on the following page: B-55 Cit of Arror Grande NOTES TO THE BASIC FINANCIAL STATEMENTS • June 30, 2017 NOTE 11 — DEFINED BENEFIT PENSION PLAN — continued A. General Information about the Pension Plans — continued Miscellaneous Safety Proportion-June 30, 2015 0.31052% 0.19223% Proportion-June 30, 2016 0.32168% 0.11672% Adjustment due to differences in proportions 0.01116% -0.07551% B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions For the fiscal year ended June 30, 2017, the City recognized pension expense of $895,114 for the miscellaneous plan and ($509,666) 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, 2017, the City reported deferred outflows and inflows of resources related to pension from the following resources: Deferred Outflows Deferred Inflows of Resources of Resources Pension contributions subsequent to measurement date $ 2,191,573 Differences between expected and actual experience 41,513 Changes in assumptions 613,389 Net difference between projected and actual earnings on pension plan investment 3,106,621 Differences between City contributions and proportionate share of contributions 162,186 Adjustment due to differences in proportions 228,813 693,749 Total 5,689,193 1,348,651 The reported deferred outflows of resources related to pensions in the amount of $2,191,573 resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the pension liability in the 2017-18 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 2018 $ 100,802 2019 70,103 2020 1,171,509 2021 806,555 Total 2,148,969 B-56 Cít of Arroo Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 11 — DEFINED BENEFIT PENSION PLAN — continued B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions — continued Actuarial Assumptions — The total pension liability for both the miscellaneous and safety plans in the June 30, 2016 actuarial valuation was determined using the following actuarial assumptions: Miscellaneous Safety Valuation Date June 30, 2015 June 30,2015 Measurement Date June 30, 2016 June 30,2016 Acturial Cost Method Entry-Age Normal Cost Method Entry-Age Normal Cost Method Actuarial Assumptions: Discount Rate 7.65% 7.65% Inflation 2.75% 2.75% Payroll Growth 3% 3% Projected Salary Increase Varies by Entry Age and Service Varies by Entry Age and Service Investment Rate of Return 7.50% . 7.50% Mortality Derived using CalPERS' Membership Derived using Ca IPERS' Membership Data for all Funds (1) Data for all Funds (1) (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 7.65 %. To determine whether the municipal bond rate should be used in the calculation of a discount rate for public agency plans (including PERF C), CalPERS stress tested plans that would be most likely resulted in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing of the plans, the tests revealed the assets would not run out. Therefore, the current 7.65 % discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of7.65 % is applied to all plans in the Public Employees Retirement Fund, including PERF C. The stress test results are presented in a detailed report called "GASB Crossover Testing Report" that can be obtained at CalPERS' website under the GASB 68 section. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) 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 No. 67 and No. 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as they have changed their methodology. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best- estimate ranges of expected future real rates of return (expected returns, net pension plan investment expense and inflation) are developed for each major asset class. B-57 Cik9 of Amoy) Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 11 — DEFINED BENEFIT PENSION PLAN — continued B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions — continued In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 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 on the following page 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. New Strategic Real Return Real Return Asset Class Allocation Years 1-101 Years 11+2 Global Equity 51.0% 5.25% 5.71% Global Fixed Income 20.0% 0.99% 2.43% Inflation Sensitive 6.0% 0.45% 3.36% Private Equity 10.0% 6.83% 6.95% Real Estate 10.0% 4.50% 5.13% Infrastructure and Forestland 2.0% 4.50% 5.09% Liquidity 1.0% -0.55% -1.05% Total 100.0% 1 — An expected inflation of 2.5% used for this period 2 — An expected inflation of 3.0% used for this period 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 7.65 %, 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 1-percentage point lower (6.65 %) or 1- percentage point higher (8.65 %) than the current rate: Discount Rate -1% Current Discount Discount Rate +1% Plans' Net Pension Liability (6.65%) Rate (7.65%) (8.65%) Miscellaneous $ 15,891,222 $ 11,174,679 $ 7,276,689 Safety 8,803,539 6,045,377 3,781,209 Total $ 24,694,761 $ 17,220,056 $ 11,057,898 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, 2017, the City had no amount outstanding for contributions to the pension plan required for the 2016-17 fiscal year. B-58 Cít,9 of Array) Gra ncle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 12 - POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) A. Plan Description The City 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 $125 per month during calendar year 2016 and $128 per month during calendar year 2017 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. During fiscal year 2016-17, expenditures of $134,Ó20 were recognized for post-retirement health insurance contributions on a pay-as-you-go basis. As required by GASB Statement No. 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 Statement No. 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. The 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, 2017, the City has assigned $403,764 for post employment benefits in the General Fund's fund balance. C. Annual OPEB Cost For the fiscal year 2016-17, the City's OPEB cost (expense) of $563,000 was less than the annual required contributions (ARC) of $580,000 due to interest on OPEB obligations of $22,000 and the amortization adjustment to ARC of $(39,000). 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 2016-17, is shown below: Fiscal Year Annual % of Annual Ending June Annual Implied Rate OPEB Cost OPEB Cost Net OPEB 30 OPEB Cost Subsidy Contributed Contributed Obligation 2008 $ 219,706 $ - $ 64,532 29% $ 155,174 2009 219,706 109,503 50% 110,203 2010 219,706 128,616 59% 91,090 2011 196,673 128,474 65% 68,199 2012 195,647 140,389 72% 55,258 2013 194,815 146,666 75% 48,149 2014 229,780 148,701 65% 81,079 2015 228,334 149,758 66% 78,576 2016 226,933 148,494 65% 78,439 2017 563,000 72,000 134,020 37% 356,980 Total $ 2,494,300 $ 72,000 $ 1,299,153 55% $ 1,123,147 B-59 Ci't of Arro,9 o Grancle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 12 — POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) — continued C. Annual OPEB Cost (continued) The funded status of the plan as of June 30, 2017 (the last actuarial calculation), is as follows: Actuarial accrued liability (AAL) $ 5,590,000 Actuarial value plan assets Unfunded actuarial accrued liability (UAAL) S 5,590,000 Funded ratio (actuarial value of plan assets/AAL) 0% Covered payroll (active plan members) $ 5,345,000 UAAL as a percentage of covered payroll 105% 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 dthe 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. 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 June 30, 2017, used the Entry Age Normal cost method. The actuarial assumptions included a 2.85% investment rate of return (net of administrative expenses) and an annual healthcare cost trend rate of 7.5% for those not on Medicare and 6.5% for people on Medicare with the rate decreasing slightly in future years. These assumptions reflect an implicit 2.75% 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 June 30, 2017 was 20 years. NOTE 13 — LIABILITY, WORKERS' COMPENSATION, AND PURCHASED INSURANCE A. Description of Self-Insurance Pool Pursuant to Joint Powers Agreement The City is a member of the California Joint Powers Insurance Authority (Authority). The Authority is composed of 116 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the Authority 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 California 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-60 Cit of Arro,r Grancle NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 13 — LIABILITY, PROPERTY, AND WORKERS' COMPENSATION PROTECTION — continued 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 2016-17 the Authority's pooled retention is $2 million per occurrence, with reinsurance to $20 million, and excess insurance to $50 million. The Authority's reinsurance contracts are subject to the following additional pooled retentions: (a) $2.5 million annual aggregate deductible in the $3 million excess $2 million layer, and (b) $3 million annual aggregate deductible in the $5 million excess $10 million layer. There is a third annual aggregate deductible in the amount of $2.5 million in the $5 million excess $5 million layer, however it is fully covered under a separate policy and therefore not retained by the Authority. 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 (police and fire) 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 are distributed based on the outcome of cost allocation within the first and second loss layers. For 2016-17 the Authority's pooled retention is $2 million per occurrence, with reinsurance to statutory limits under California Workers' Compensation Law. Employer's Liability losses are pooled among 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 among members. C. Purchase Insurance Property Insurance— The City participates in the all-risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. The City is currently insured according to a schedule of covered property submitted by The City to the Authority. The City property currently has all-risk property insurance protection in the amount of $26,211,331. There is a $5,000 deductible per occurrence except for non-emergency vehicle insurance which has a $2,500 deductible. Premiums for the coverage are paid annually and are not subject to retrospective adjustments. B-61 Cit,9 of Arro90 Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 13 — LIABILITY, PROPERTY, AND WORKERS' COMPENSATION PROTECTION — continued 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 in 2016-17. 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, 2017 and the changes in those balances are shown below: Cash, investments and current assets 71,541 Estimated claims liability (105,789) Unpaid claims asset $ (34,248) Unpaid claims asset at July 1, 2016 49,488 Revenues 587 Claim payments and related expenditures (7,077) Change in fair market value (77) Change in estimated claims liability (77,169) Unpaid claims asset at June 30, 2017 $ (34,248) 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. B-62 Cít,9 of Amoy) Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 15 — SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY — continued 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. 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, 2017, consisted of the following: Total Cash and investments pooled with the City $ 735,915 Restricted cash and investments held with fiscal agent 457,375 Total $ 1,193,290 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. B-63 Cit,9 of Arro,r Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 NOTE 15 - SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY - continued 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. 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 Courtla.nd 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 began on March 1, 2015. Total amount outstanding, including accrued interest at June 30, 2017, was $941,399. 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, 2017, was $489,180. 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, 2017, the principal balance outstanding was $5,450,000. The future minimum payment obligation for the tax allocation bonds payable is as follows: Fiscal Year Ending June 30 Principal Interest Total 2018 $ 140,000 $ 310,180 $ 450,180 2019 150,000 302,489 452,489 2020 155,000 294,401 449,401 2021 165,000 285,505 450,505 2022 175,000 275,645 450,645 2023-2027 1,035,000 1,209,445 2,244,445 2028-2032 1,375,000 862,025 2,237,025 2033-2037 1,825,000 400,925 2,225,925 2038 430,000 12,470 442,470 Total 5,450,000 $ 3,953,085 $ 9,403,085 B-64 Cít of Arro.90 Grande NOTES TO THE BASIC FINANCIAL STATEMENTS June 30, 2017 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, 2017: Project Name Amount 5445 - Woman's Club Kitchen Remodal 22,500 5450 - Corporation Yard Upgrade, Phase 2 72,532 5456 - Woman's Club ADA Improvements 12,500 5547 — Heritage Square Park Restrooms 166,240 5606 - Halcyon Rd Complete Streets Plan 23,195 5608 - Bridge Street Bridge Rehabilitation 296,480 5638 - Pavement Management Program 44,945 5671 - East Branch Streetscape 30,012 5849 — Manhole Rehablitation 113,853 5944 - Water Well #11 488,398 Total $ 1,270,655 B-65 THIS PAGE IS INTENTIONALLY LEFT BLANK City of Arroyo Grande BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS General Fund For the Fiscal Year Ended June 30, 2017 REVENUES Taxes and assessments $13,693,500 $13,763,100 $13,937,615 $174,515 Licenses and permits 330,300 476,200 515,087 38,887 Fines and penalties 42,000 42,000 38,255 (3,745) Use of money and property 363,900 372,900 355,404 (17,496) Intergovernmental revenues 187,300 240,500 241,832 1,332 Charges for services 1,042,700 1,080,200 1,185,537 105,337 Other revenue 12,500 15,500 18,306 2,806 Total revenues 15,672,200 15,990,400 16,292,036 301,636 EXPENDITURES General government City council 113,700 120,015 99,363 20,652 City manager 440,400 443,700 435,330 8,370 City attorney 248,200 298,200 296,174 2,026 City clerk 409,700 414,700 393,518 21,182 Information technology 514,400 525,000 518,625 6,375 Finance and human resources 863,300 864,800 750,619 114,181 Non-departmental 2,907,400 3,221,900 3,161,234 60,666 Community development Planning 822,240 903,640 706,573 197,067 Engineering 476,400 648,000 620,932 27,068 Building and life safety 277,300 317,300 312,289 5,011 Public safety Administration 1,043,700 1,064,400 1,025,413 38,987 Patrol services 3,724,700 3,724,700 3,409,720 314,980 Support services 1,384,400 1,399,400 1,177,880 221,520 Emergency operations center 1,000 1,000 90 910 Recreation services Administration 385,950 405,950 395,601 10,349 Preschool program 82,800 82,800 78,626 4,174 Special recreation programs 149,500 149,500 147,660 1,840 Children in Motion 338,900 338,900 336,680 2,220 Five Cities Youth Basketball 52,750 52,750 44,314 8,436 Public works Administration 812,500 757,828 745,788 12,040 Park maintenance 465,700 496,100 494,247 1,853 Soto sports complex maintenance 207,600 207,600 190,969 16,631 Building maintenance 207,300 228,900 217,394 11,506 Automotive shop 138,200 138,200 135,074 3,126 Capital outlay 282,552 (282,552) Debt service 235,015 235,015 125,364 109,651 Total expenditures 16,303,055 17,040,298 16,102,029 938,269 Excess of revenue over (under) expenditures (630,855) (1,049,898) 190,007 1,239,905 Continued on following page Variance Over/(Under)Actual AmountsOriginalFinal Budget Amounts B-67 City of Arroyo Grande BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS General Fund For the Fiscal Year Ended June 30, 2017 Continued from previous page OTHER FINANCING SOURCES/(USES) Proceeds from sale of capital assets $5,000 $5,000 $18,220 $13,220 Capital lease 282,552 282,552 Transfer in 2,204,900 2,204,900 2,234,873 29,973 Transfer out (2,033,800) (3,826,275) (930,953) 2,895,322 Total other financing sources/ (uses)176,100 (1,616,375) 1,604,692 3,221,067 Net change in fund balance (454,755) (2,666,273) 1,794,699 4,460,972 Fund balance - July 1, 2016 7,590,197 7,590,197 7,590,197 Fund balance - June 30, 2017 $7,135,442 $4,923,924 $9,384,896 $4,460,972 Budget Amounts Actual Amounts Variance Over/(Under)Original Final B-68 City of Arroyo Grande BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS Special Gasoline Tax Fund For the Fiscal Year Ended June 30, 2017 REVENUES Use of money and property $-$-$24 $24 Intergovernmental revenues 364,100 364,100 355,841 (8,259) Other revenue 253 253 Total revenues 364,100 364,100 356,118 (7,982) EXPENDITURES Streets and roads 688,400 763,400 723,563 39,837 Debt service 49,600 49,600 49,547 53 Total expenditures 738,000 813,000 773,110 39,890 Excess of revenue under expenditures (373,900) (448,900) (416,992) 31,908 OTHER FINANCING SOURCES (USES) Transfer in 466,000 541,000 509,097 (31,903) Transfer out (92,100) (92,100) (92,100) Total other financing sources (uses)373,900 448,900 416,997 (31,903) Net change in fund balance 5 5 Fund balance - July 1, 2016 Fund balance - June 30, 2017 $- $-$5 $5 Budget Amounts Actual Amounts Variance Over/(Under)Original Final B-69 City of Arroyo Grande BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS Transportation Impact Fees Fund For the Fiscal Year Ended June 30, 2017 REVENUES Use of money and property $10,000 $10,000 $10,195 $195 Charges for services 150,500 150,500 366,924 216,424 Total revenues 160,500 160,500 377,119 216,619 EXPENDITURES Community development 2,705 2,705 Total expenditures 2,705 2,705 Excess of revenue over expenditures 160,500 157,795 377,119 219,324 OTHER FINANCING USES Transfer in 1,335,025 1,335,025 Transfer out (400,000) (1,834,671) 1,834,671 Total other financing uses (400,000) (1,834,671) 1,335,025 3,169,696 Net change in fund balance (239,500) (1,676,876) 1,712,144 3,389,020 Fund balance - July 1, 2016 302,809 302,809 302,809 Fund balance - June 30, 2017 $63,309 $(1,374,067) $2,014,953 $3,389,020 Budget Amounts Actual Amounts Variance Over/(Under)Original Final B-70 City of Arroyo Grande BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS In-Lieu Affordable Housing Fund For the Fiscal Year Ended June 30, 2017 REVENUES Use of money and property $100,400 $100,400 $173,111 $72,711 Charges for services 18,952 18,952 Total revenues 100,400 100,400 192,063 91,663 EXPENDITURES Community development 75,000 75,000 150,000 (75,000) Total expenditures 75,000 75,000 150,000 (75,000) Net change in fund balance 25,400 25,400 42,063 16,663 Fund balance - July 1, 2016 296,120 296,120 296,120 Fund balance - June 30, 2017 $321,520 $321,520 $338,183 $16,663 Budget Amounts Actual Amounts Variance Over/(Under)Original Final B-71 City of Arroyo Grande BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS CDBG Fund For the Fiscal Year Ended June 30, 2017 REVENUES Intergovernmental revenues $66,610 $66,610 $143,402 $76,792 Total revenues 66,610 66,610 143,402 76,792 EXPENDITURES Community development Total expenditures Excess of revenue over expenditures 66,610 66,610 143,402 76,792 OTHER FINANCING USES Transfer out (66,610) (66,610) 66,610 Total other financing uses (66,610) (66,610) 66,610 Net change in fund balance 143,402 143,402 Fund balance - July 1, 2016 (133,307) (133,307) (133,307) Fund balance - June 30, 2017 $(133,307) $(133,307) $10,095 $143,402 Budget Amounts Actual Amounts Variance Over/(Under)Original Final B-72 City of Arroyo Grande OTHER POSTEMPLOYMENT BENEFITS - SCHEDULE OF FUNDING PROGRESS For the Fiscal Year Ended June 30, 2017 0%5,407,283$ 51%07/01/13 $-2,731,368$ 2,731,368$ 07/01/10 2,053,287$ 2,053,287$ 0%41%5,055,775$ $- Actuarial Valuation Date 07/01/07 UAAL as a Percent- age of Covered Payroll ((b-a)/c) $-1,835,537$ Actuarial Accrued Liability (AAL) (b) 1,835,537$ Actuarial Valuation of Assets (a) 31% Covered Payroll ( c) 5,968,881$ Funded Ratio (a/b) 0% Unfunded AAL (UAAL)(b-a) 0%5,345,000$ 105%06/30/17 $-5,590,000$ 5,590,000$ B-73 City of Arroyo Grande NET PENSION LIABILITY - SCHEDULE OF PROPORTIONATE SHARE Last Ten Fiscal Years (1) As of June 30, 2017 The following table provides required supplementary information regarding the City's Pension Plans. 2015 2016 2017 Proportion of the net pension liability 0.23934%0.25243%0.19900% Proportionate share of the net pension liability 14,892,793$ 17,326,688$ 17,220,056$ Covered- employee payroll 5,222,082$ 5,594,685$ 5,164,535$ Proportionate share of the net pension liability as percentage of covered-employee payroll 285.19%309.70%333.43% Plan's total pension liability 30,829,966,631$ 31,771,217,402$ 33,358,627,624$ Plan's fiduciary net position 24,607,502,515$ 24,907,305,871$ 24,705,532,291$ Plan fiduciary net position as a percentage of the total pension liability 79.82%78.40%74.06% (1) The 2014-15 fiscal year was the first year of implementation, therefore only three years are shown. B-74 City of Arroyo Grande NET PENSION LIABILITY - SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years (1) As of June 30, 2017 The following table provides required supplementary information regarding the City's Pension Plan. 2015 2016 2017 Contractually required contribution (actuarially determined)1,590,307$ 2,071,858$ 2,191,573$ Contribution in relation to the actuarially determined contributions (1,590,307) (2,071,858) (2,191,573) Contribution deficiency (excess)-$ -$ -$ Covered- employee payroll 5,594,685$ 5,164,535$ 4,661,956$ Contributions as a percentage of covered-employee payroll 28.43%40.12%47.01% Notes to Schedule Valuation Date:6/30/2014 Methods and assumptions used to determine contribution rates: Actuarial cost method Entry Age Asset valuation method 5-year smoothed market Amortization method Level percentage of payroll, closed Discount rate 7.50% Price 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 Derived using CalPERs' Membership data for all funds. Post Retirement Benefit Contract COLA up to 2.75% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter. Valuation Date:6/30/2015 Discount rate 7.65% (1) The 2014-15 fiscal year was the first year of implementation, therefore only three years are shown. (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. B-75 THIS PAGE IS INTENTIONALLY LEFT BLANK Cít of Arroo Grande DESCRIPTION OF NONMAJOR GOVERNMENTAL 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 two 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. B-77 Cit,9 of Amoy) Gra ncle DESCRIPTION OF NONMAJOR GOVERNMENTAL 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. B-78 THIS PAGE IS INTENTIONALLY LEFT BLANK Cit9 of Arror Grande NONMAJOR GOVERNMENTAL FUNDS Combining Balance Sheet June 30, 2017 Special Revenue Funds Police Park Fire Protection Public Access Protection Park Improvement Impact Fees Television Impact Fees Development Impact Fees ASSETS Cash and investments Receivables: Accounts Taxes Interest Total assets LIABILITIES AND FUND BALANCES Liabilities: Accounts. payable Unearned revenue 40,226 Total liabilities 40,226 Fund Balances: Restricted for: Access programming 27,642 Debt service Landscape maintenance Park construction 1,256,332 287,787 Public improvements Public safety 229,814 36,761 Streets and roads Water production Assigned for: Capital projects Tourism benefit Total fund balances 229,814 27,642 36,761 1,256,332 287,787 Total liabilities and fund balances 229,814 $ 27,642 $ 36,761 $ 1,296,558 $ 287,787 $ 229,416 $ 17,831 36,711 $ 1,294,741 $ 287,389 9,594 398 217 50 1,817 398 $ 229,814 $ 27,642 $ 36,761 $ 1,296,558 $ 287,787 $ - $ - $ $ $ B-80 Special Revenue Funds Community Grace Lane Landscape Parkside Center Impact Assessment Assessment Assessment Traffic Fees District District District Traffic Signal Circulation Transportation $ 62,192 $ 68,118 $ 12,463 $ 431,750 $ 871,286 $ 132,146 $ 3,873 218 92 97 20 605 1,197 186 71 $ 62,284 $ 68,215 $ 12,483 $ 432,573 $ 872,483 $ 132,332 $ 3,944 - < 1,956 • 1,584 $ 3,304 $ 3,916 1,956 1,584 3,304 3,916 66,259 10,899 429,269 62,284 872,483 132,332 28 62,284 66,259 10,899 429,269 872,483 132,332 28 62,284 $ 68,215 $ 12,483 432,573 $ 872,483 $ 132,332 $ 3,944 B-81 Cit,9 of Arro90 Grande NONMAJOR GOVERNMENTAL FUNDS Combining Balance Sheet June 30, 2017 Special Revenue Funds Tourism In-Lieu Business In-Lieu Water Underground Improvement Neutralization Construction Drainage Fees Utility District ASSETS Cash and investments 220,010 $ 29 $ 16,671 $ 4,045 $ 165,133 Receivables: Accounts Taxes 22,633 Interest 251 6 221 Total assets 220,261 29 $ 16,671 $ 4,051 $ 187,987 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Unearned revenue Total liabilities Fund Balances: Restricted for: Access programming Debt service Landscape maintenance Park construction Public improvements Public safety Streets and roads 5,386 $ 3,750 5,386 3,750 29 16,671 Water production 214,875 Assigned for: Capital projects 4,051 Tourism benefit 184,237 Total fund balances 214,875 29 16,671 4,051 184,237 Total liabilities and fund balances 220,261 29 16,671 $ 4,051 $ 187,987 B-82 Special Revenue Funds Debt Service Total Nonmajor Water State COPS Total Special Fire Station GO City Hall USDA Total Debt Governmental Availability Grant Revenue Funds Bonds Debt Service Service Funds Funds $ 1,678,216 $ 202,550 $ 5,734,570 $ 48,280 $ 48,280 $ 5,782,850 9,594 9,594 22,851 230 230 23,081 2,320 274 8,220 8,220 $ 1,680,536 202,824 $ 5,775,235 $ 230 $ 48,280 $ 48,510 $ 5,823,745 19,896 $ 19,896 40,226 40,226 60,122 60,122 27,642 27,642 230 48,280 48,510 48,510 506,427 506,427 1,544,119 1,544,119 78,984 78,984 202,824 469,399 469,399 1,004,843 1,004,843 1,680,536 1,895,411 1,895,411 4,051 4,051 184,237 184,237 1,680,536 202,824 5,715,113 230 48,280 48,510 5,763,623 $ 1,680,536 $ 202,824 $ 5,775,235 $ 230 $ 48,280 $ 48,510 $ 5,823,745 B-83 Cit9 of Arro.90 Grande NONMAJOR GOVERNMENTAL FUNDS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2017 Special Revenue Funds Police Park Fire Protection Public Access Protection Park Improvement Impact Fees Television Impact Fees Development Impact Fees REVENUES Taxes and assessments $ $ $ $ Use of money and property 1,207 877 153 5,777 1,226 Intergovernmental revenues Charges for services Total revenues 121,797 25,633 10,280 263,101 148,754 123,004 26,510 10,433 268,878 149,980 EXPENDITURES Current: General government Community development Public safety Public works Debt service: Principal Interest and fiscal agent fees Total expenditures Excess of revenue over/ (under) expenditures 123,004 26,510 10,433 268,878 149,980 OTHER FINANCING SOURCES/(USES) Transfers in 1,400 156,681 Transfers out (76,849) (14,967) Total other financing sources/(uses) (76,849) 1,400 156,681 (14,967) Net change in fund balances 46,155 26,510 11,833 425,559 135,013 Fund balances (deficit) - July 1, 2016 183,659 1,132 24,928 830,773 152,774 Fund balances (deficit) -June 30, 2017 $ 229,814 $ 27,642 $ 36,761 $ 1,256,332 $ 287,787 B-84 Special Revenue Funds Community Grace Lane Landscape Parkside Center Impact Assessment Assessment Assessment Traffic Fees District District District Traffic Signal Circulation Transportation 10,606 $ 6,010 $ 42,770 $ 101 $ 352 288 61 1,822 3,631 636 200 391,668 8,686 130,872 9,038 10,894 6,071 44,592 134,503 737 391,868 14,617 5,447 5,513 27,108 5,447 5,513 27,108 14,617 9,038 5,447 558 17,484 134,503 737 377,251 54,956 (3,504) (2,400) (4,596) (1,723) (377,203) 54,956 (3,504) (2,400) (4,596) (1,723) (377,203) 63,994 1,943 (1,842) 12,888 132,780 737 48 (1,710) 64,316 12,741 416,381 739,703 131,595 (20) 62,284 $ 66,259 $ 10,899 $ 429,269 $ 872,483 $ 132,332 $ 28 B-85 5,004 (3,000) 2,004 37,022 147,215 16,462 16,462 16,462 209 29 17 4,034 Ot,9 of Arro,90 Grande NONMAJOR GOVERNMENTAL FUNDS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2017 Special Revenue Funds Tourism In-Lieu Business In-Lieu Water Underground Improvement Neutralization Construction Drainage Fees Utility District REVENUES Taxes and assessments $ $ - $ $ $ 193,226 Use of money and property 709 17 708 Intergovernmental revenues Charges for services 185,779 Total revenues 186,488 17 193,934 EXPENDITURES Current: General government 158,916 Community development 54,456 Public safety Public works Debt service: Principal Interest and fiscal agent fees Total expenditures 54,456 158,916 Excess of revenue over/ (under) expenditures 132,032 17 35,018 OTHER FINANCING SOURCES! USES) Transfers in 50,000 Transfers out Total other financing sources/(uses) 50,000 Net change in fund balances 182,032 Fund balances (deficit) -July 1, 2016 32,843 Fund balances (deficit) -June 30, 2017 $ 214,875 $ 29 $ 16,671 $ 4,051 $ 184,237 B-86 Special Revenue Funds Debt Service Total Nonmajor Water State COPS Total Special Fire Station GO City Hall USDA Total Debt Governmental Availability Grant Revenue Funds Bonds Debt Service Service Funds Funds $ $ $ 252,713 $ 4,289 $ - $ 4,289 $ 257,002 7,021 786 25,471 (54) (54) 25,417 129,324 520,992 520,992 144,312 1,039,214 1,039,214 151,333 130,110 1,838,390 4,289 (54) 4,235 1,842,625 173,533 7,000 7,000 180,533 54,456 54,456 59,083 59,083 59,083 42,178 80,246 80,246 955;000 27,000 982,000 98.2,000 25,798 39,994 65,792 65,792 42,178 59,083 367,318 987,798 66,994 1,054,792 1,422,110 109,155 71,027 1,471,072 (983,509) (67,048) (1,050,557) 420,515 284,503 76,849 73,800 150,649 435,152 (19,200) (503,442) (503,442) (19,200) (218,939) 76,849 73,800 150,649 (68,290) 109,155 51,827 1,252,133 (906,660) 6,752 (899,908) 352,225 1,571,381 150,997 4,462,980 906,890 41,528 948,418 5,411,398 $ 1,680,536 $ 202,824 $ 5,715,113 $ 230 $ 48,280 $ 48,510 $ 5,763,623 B-87 City of Arro90 Grande STATEMENT OF CHANGES IN ASSETS AND LIABILITIES Agency Funds For the Fiscal Year Ended June 30, 2017 Balance Balance June 30, 2016 Additions Deductions June 30, 2017 Sanitation Distribution Fund Cash and investments $ 150,016 2,238,380 $ 2,267,561 $ 120,835 Accounts receivable 46,151 1,949,224 1,929,113 66,262 Total assets $ 196,167 $ 4,187,604 $ 4,196,674 $ 187,097 Accounts payable $ 19,294 $ 96,780 $ 97,279 $ 18,795 Due to other agencies 176,873 4,090,824 4,099,395 168,302 Total liabilities $ 196,167 $ 4,187,604 $ 4,196,674 $ 187,097 Downtown Parking Fund Cash and investments $ 38,107 $ 130,007 $ 168,021 $ 93 Interest receivable 84 169 84 169 Prepaid items 52 52 Total assets 38,243 $ 130,176 $ 168,105 314 Accounts payable $ - $ 4,421 $ 4,421 $ - Due to other agencies 38,243 125,755 163,684 314 Total liabilities $ 38,243 $ 130,176 $ 168,105 $ 314 Total Agency Funds Cash and investments $ 188,123 $ 2,368,387 $ 2,435,582 $ 120,928 Accounts receivable 46,151 1,949,224 1,929,113 66,262 Interest receivable 84 169 84 169 Prepaid items 52 52 Total assets $ 234,410 $ 4,317,780 $ 4,364,779 $ 187,411 Accounts payable $ 19,294 $ 101,201 $ 101,700 $ 18,795 Due to other agencies 215,116 4,216,579 4,263,079 168,616 Total liabilities 234,410 •$ 4,317,780 $ 4,364,779 $ 187,411 B-88 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. THIS PAGE IS INTENTIONALLY LEFT BLANK City of Arroyo Grande NET POSITION BY COMPONENT Last Ten Fiscal Years Governmental Activities Net investment in capital assets $51,506,838 $52,059,524 $52,196,451 Restricted 916,560 969,659 937,284 Unrestricted 15,736,998 15,799,496 15,491,347 Total governmental activities net position 68,160,396 68,828,679 68,625,082 Business-Type Activities Net investment in capital assets 9,759,235 9,670,367 9,532,740 Restricted Unrestricted 6,961,084 7,569,157 7,518,372 Total business-type activities net position 16,720,319 17,239,524 17,051,112 Primary Government Net investment in capital assets 61,266,073 61,729,891 61,729,191 Restricted 916,560 969,659 937,284 Unrestricted 22,698,082 23,368,653 23,009,719 Total primary government net position $84,880,715 $86,068,203 $85,676,194 Source: City of Arroyo Grande Annual Financial Report Fiscal Year 2008 2009 2010 C-2 $54,012,699 $62,176,633 $62,107,039 $37,123,166 $39,466,986 $39,712,230 $41,437,236 8,179,991 7,221,859 7,374,485 7,580,876 8,516,033 5,531,798 8,375,502 7,584,426 6,370,870 2,520,322 2,977,346 (7,576,941) (2,753,544) (2,676,080) 69,777,116 75,769,362 72,001,846 47,681,388 40,406,078 42,490,484 47,136,658 10,057,743 9,816,684 10,268,542 35,230,778 35,100,758 34,768,726 35,236,648 1,196,593 1,158,896 1,737,212 1,737,212 6,686,297 6,057,411 6,628,074 7,727,871 6,487,746 5,696,990 4,424,194 16,744,040 15,874,095 16,896,616 44,155,242 42,747,400 42,202,928 41,398,054 64,070,442 71,993,317 72,375,581 72,353,944 74,567,744 74,295,504 76,673,884 8,179,991 7,221,859 7,374,485 8,777,469 9,674,929 7,269,010 10,112,714 14,270,723 12,428,281 9,148,396 10,705,217 (1,089,195) 3,128,898 1,748,114 $86,521,156 $91,643,457 $88,898,462 $91,836,630 $83,153,478 $84,693,412 $88,534,712 Fiscal Year 2014 201720112012201320152016 C-3 City of Arroyo Grande CHANGES IN NET POSITION Last Ten Fiscal Years Expenses Governmental activities: General government $4,240,653 $4,216,918 $4,543,500 Community development 861,279 680,610 983,321 Public safety 7,521,516 8,090,323 7,290,559 Recreation 941,366 955,677 850,711 Public works 974,892 988,341 828,852 Streets and roads 3,341,886 2,447,914 3,044,033 Sewer 759,438 738,149 858,806 Interest on long-term debt 457,271 460,671 462,435 Total governmental activities expenses 19,098,301 18,578,603 18,862,217 Business-type activities: Water 1,236,610 1,324,507 1,732,341 Lopez Sewer 2,363,814 2,834,416 2,772,836 Total business-type activities expenses 3,600,424 4,158,923 4,505,177 Total primary government expenses $22,698,725 $22,737,526 $23,367,394 Program Revenues Governmental activities: Charges for services: General government $614,920 $142,082 $139,111 Community development 288,672 218,197 292,480 Public safety 443,302 445,198 384,106 Recreation 627,707 695,501 675,828 Public works 28,815 31,824 75,165 Streets and roads 180,317 6,747 52,290 Sewer 760,618 767,717 788,165 Operating grants and contributions 2,297,131 1,740,668 2,169,381 Capital grants and contributions 664,433 577,876 888,102 Total governmental activities program revenues 5,905,915 4,625,810 5,464,628 Business-type activities: Charges for services: Water 2,336,545 2,284,127 2,508,136 Lopez Sewer 3,395,713 3,673,952 3,265,221 Operating grants and contributions Capital grants and contributions Total business-type activities program revenues 5,732,258 5,958,079 5,773,357 Total primary government program revenues $11,638,173 $10,583,889 $11,237,985 $ 2008 2009 2010 Fiscal Year C-4 $4,786,979 $4,475,869 $4,442,707 $4,206,267 $4,991,206 $5,440,588 $5,659,730 3,224,094 1,578,940 1,934,076 1,596,223 2,017,973 1,850,925 1,604,701 5,795,069 5,708,603 5,594,859 5,804,569 5,905,903 5,652,892 5,075,763 759,139 723,234 765,563 817,557 860,010 960,669 705,766 830,914 1,439,738 1,313,371 1,703,736 1,746,040 1,899,410 1,777,425 1,835,373 2,600,752 2,266,016 2,746,128 2,230,930 2,544,510 2,448,134 798,287 793,207 821,609 499,825 318,960 109,800 111,507 56,988 18,529,680 17,639,303 17,248,001 16,985,987 17,752,062 18,348,994 17,328,507 2,168,569 2,142,321 2,490,896 2,304,928 1,306,742 1,317,405 1,677,487 2,271,238 3,170,608 3,296,262 3,359,544 2,592,965 2,679,699 2,215,526 794,673 821,584 690,809 869,807 4,761,534 4,822,020 4,706,422 5,370,839 5,298,934 5,304,476 5,906,838 $23,291,214 $22,461,323 $21,954,423 $22,356,826 $23,050,996 $23,653,470 $23,235,345 $50,355 $38,563 $47,652 $48,931 $22,615 $12,666 $52,734 498,223 403,679 699,553 507,718 894,495 690,152 1,218,957 188,407 168,502 74,388 39,093 135,134 122,158 227,920 694,090 650,897 597,230 735,369 743,589 706,229 746,467 84,964 86,198 179,908 117,252 418,772 86,378 420,095 96,409 16,561 44,455 1,024 97,696 305,797 497,796 828,302 925,213 1,089,899 2,154,143 731,446 875,502 1,387,188 1,499,188 1,191,800 989,341 1,751,549 1,509,016 1,066,625 665,453 233,549 463,235 933,698 6,346,442 4,530,075 4,675,212 3,502,028 4,045,038 3,578,415 5,087,008 2,794,504 3,443,240 4,236,880 4,997,374 6,497,466 5,804,415 6,202,191 1,973,699 1,581 2,895,218 2,552,516 2,252,208 1,150,806 1,066,815 881,889 977,250 4,187 2,760 135,071 690,957 5,828,980 5,998,516 7,180,045 8,121,879 7,564,281 6,687,885 7,179,441 $12,175,422 $10,528,591 $11,855,257 $11,623,907 $11,609,319 $10,266,300 $12,266,449 2011 Fiscal Year 2014 20172012201320152016 C-5 City of Arroyo Grande CHANGES IN NET POSITION Last Ten Fiscal Years Net revenue (expense) Governmental activities $(13,192,386) $(13,952,793) $(13,397,589) Business-type activities 2,131,834 1,799,156 1,268,180 Total primary government net expense $(11,060,552) $(12,153,637) $(12,129,409) $ General Revenues and Other Changes in Net Position Governmental activities: Taxes: Property taxes $5,295,263 $5,586,348 $5,471,651 Sales and use taxes 5,280,813 4,658,777 4,252,903 Transient lodging taxes 437,164 389,067 348,014 Franchise taxes 621,987 639,776 604,325 Business license tax 80,990 79,111 80,283 Investment income 893,125 589,734 337,724 Other revenue 1,363,029 1,285,769 606,653 Transfers 1,341,156 1,392,494 1,492,439 Extraordinary gain Total governmental activities 15,313,527 14,621,076 13,193,992 Business-type activities: Investment income 199,398 112,543 35,847 Transfers (1,341,156) (1,392,494) (1,492,439) Total business-type activities revenues (1,141,758) (1,279,951) (1,456,592) Total primary government $14,171,769 $13,341,125 $11,737,400 Change in Net Position Governmental activities $2,121,141 $668,283 $(203,597) Business-type activities 990,076 519,205 (188,412) Total primary government $3,111,217 $1,187,488 $(392,009) Source: City of Arroyo Grande Annual Financial Report 2008 2009 2010 Fiscal Year C-6 $(12,183,238) $(13,109,228) $(12,572,789) $(13,483,959) $(13,707,024) $(14,770,579) $(12,241,499) 1,067,446 1,176,496 2,473,623 2,751,040 2,265,347 1,383,409 1,272,603 $(11,115,792) $(11,932,732) $(10,099,166) $(10,732,919) $(11,441,677) $(13,387,170) $(10,968,896) $5,379,176 $6,633,678 $6,232,026 $6,564,035 $6,832,769 $7,133,641 $6,494,953 4,781,774 4,127,541 4,269,905 4,583,049 4,634,828 5,213,844 5,835,213 390,472 630,379 746,333 840,602 1,124,486 1,159,458 1,160,087 539,673 570,172 575,495 595,161 612,261 613,715 610,820 79,663 84,925 85,078 85,625 90,108 86,947 93,544 389,292 333,962 330,551 375,843 426,084 486,526 547,492 479,514 773,180 565,018 626,840 949,606 123,376 36,779 1,888,403 2,070,466 1,468,937 (23,434,931) 2,297,653 2,037,478 2,108,785 2,641,541 13,927,967 17,865,844 14,273,343 (9,763,776) 16,967,795 16,854,985 16,887,673 30,483 24,025 17,835 33,627 84,005 109,597 31,308 (1,888,403) (2,070,466) (1,468,937) 23,434,931 (2,297,653) (2,037,478) (2,108,785) (1,857,920) (2,046,441) (1,451,102) 23,468,558 (2,213,648) (1,927,881) (2,077,477) $12,070,047 $15,819,403 $12,822,241 $13,704,782 $14,754,147 $14,927,104 $14,810,196 $1,744,729 $4,756,616 $1,700,554 $(23,247,735) $3,260,771 $2,084,406 $4,646,174 (790,474) (869,945) 1,022,521 26,219,598 51,699 (544,472) (804,874) $954,255 $3,886,671 $2,723,075 $2,971,863 $3,312,470 $1,539,934 $3,841,300 2011 Fiscal Year 2012 2013 2014 201720152016 C-7 City of Arroyo Grande FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years General Fund Reserved $794,186 $725,546 $679,140 Unreserved 2,272,789 2,726,035 4,321,286 Nonspendable Committed Assigned Unassigned Total general fund $3,066,975 $3,451,581 $5,000,426 All Other Governmental Funds Reserved $2,814,009 $2,919,758 $2,896,080 Unreserved, reported in: Special revenue funds 11,656,498 11,367,715 10,181,391 Debt service funds 528,838 530,905 (95,156) Nonspendable Restricted Committed Assigned Unassigned Total all other governmental funds $14,999,345 $14,818,378 $12,982,315 Source: City of Arroyo Grande Annual Financial Report The City of Arroyo Grande implemented GASB Statement No. 54 for the fiscal year ended June 30, 2011. Information prior to the implementation of GASB Statement No. 54 is not available. Fiscal Year 2008 2009 2010 C-8 $-$-$-$-$-$-$- 595,268 642,708 773,416 56,938 130,822 998,035 1,071,000 3,159,440 4,276,484 4,206,637 3,825,974 350,000 703,355 458,549 1,356,870 1,284,047 530,460 1,986,271 4,256,808 537,038 149,944 1,154,882 2,463,910 6,061,702 6,327,625 $5,202,076 $5,042,541 $5,658,393 $6,775,327 $7,704,753 $7,590,197 $9,384,896 $-$-$-$-$-$-$- 73,782 45,523 24,110 49,547 49,547 8,513,465 7,262,107 7,412,863 7,673,231 7,762,037 5,564,688 7,600,388 65,565 3,529,431 711,439 1,208,489 84,341 327,809 3,967,671 546,365 83,163 (13,405) (10,060) (18,547) (184,584) $12,199,841 $8,071,229 $8,635,402 $7,757,572 $8,120,846 $9,397,322 $8,146,753 Fiscal Year 2014 201720112012201320152016 C-9 City of Arroyo Grande CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years Revenues Taxes and assessments $13,266,750 $12,703,434 $12,156,062 Licenses and permits 197,526 175,202 207,801 Fines and penalties 116,999 104,320 77,145 Use of money and property 893,126 589,738 337,724 Intergovernmental revenues 2,230,140 1,175,605 2,053,958 Charges for services 2,320,190 1,987,517 2,105,522 Other revenue 853,555 633,781 227,969 Total revenues 19,878,286 17,369,597 17,166,181 Expenditures Current: General government 4,166,466 4,075,286 4,432,039 Community development 858,840 682,609 983,321 Public safety 7,194,758 7,035,372 6,965,253 Recreation 941,366 955,677 850,711 Parks and facilities 923,809 936,560 780,493 Streets and road 1,114,181 1,110,200 1,162,452 Sewer 248,806 224,587 267,933 Capital outlay 3,214,579 3,379,483 2,855,174 Debt service: Principal 84,024 194,775 199,775 Interest and fiscal agent fees 382,013 448,702 448,835 Total expenditures 19,128,842 19,043,251 18,945,986 Excess of revenue over (under) expenditures 749,444 (1,673,654) (1,779,805) Other Financing Sources (Uses) Cost of issuance Proceeds from issuance of debt 484,799 Proceeds from sale of capital assets Transfer in 4,752,885 5,116,137 5,825,184 Transfer out (3,355,125) (3,723,643) (4,332,745) Extraordinary loss Total other financing sources (uses)1,397,760 1,877,293 1,492,439 Net Change in Fund Balances $2,147,204 $203,639 $(287,366) Debt service as a percentage of non- capital expenditures 3.02%4.28%4.20% Source: City of Arroyo Grande Annual Financial Report 2008 2009 2010 Fiscal Year C-10 $12,745,313 $12,169,550 $11,965,499 $12,875,650 $13,352,062 $14,207,605 $14,194,617 194,743 206,319 259,153 262,929 340,265 269,932 515,087 66,724 71,605 52,299 45,012 43,764 46,534 38,255 389,292 333,962 312,551 364,460 424,326 590,820 564,151 2,755,945 2,372,614 1,258,892 2,052,641 1,732,737 1,655,035 1,923,039 2,095,895 1,925,491 2,733,085 1,449,387 1,870,662 1,606,914 2,610,627 138,094 604,371 151,312 111,723 368,312 88,385 18,559 18,386,006 17,683,912 16,732,791 17,161,802 18,132,128 18,465,225 19,864,335 4,920,805 4,358,806 4,664,317 4,469,132 4,786,049 5,256,955 5,835,396 1,592,094 1,567,283 1,241,020 1,595,790 1,684,674 1,849,608 1,844,250 5,248,185 5,337,305 5,136,154 5,329,649 5,356,518 5,879,489 5,672,186 759,139 720,797 758,822 808,823 866,808 960,669 1,025,778 778,575 1,350,922 1,288,515 1,558,905 1,663,621 1,804,644 1,863,718 1,090,471 1,877,833 1,544,570 1,947,648 1,474,872 1,760,289 1,805,170 273,818 273,296 257,073 7,667,405 4,594,942 2,115,032 2,484,378 4,333,128 1,546,294 2,460,561 1,135,709 367,342 242,294 358,308 329,291 395,065 1,146,751 491,151 289,407 111,670 111,623 104,060 132,374 75,952 23,957,352 20,737,933 17,359,467 18,664,256 20,599,021 19,585,387 21,729,762 (5,571,346) (3,054,021) (626,676) (1,502,454) (2,466,893) (1,120,162) (1,865,427) 2,253,119 69,077 275,595 448,512 209,613 282,552 849,000 62,169 35,343 838,806 34,991 18,220 6,239,127 6,691,654 4,532,700 5,254,550 7,523,254 8,777,226 4,970,305 (4,350,724) (4,621,188) (3,063,763) (2,957,819) (4,602,467) (6,739,748) (2,861,520) (3,333,432) 4,990,522 (1,193,889) 1,806,701 2,780,586 3,759,593 2,282,082 2,409,557 $(580,824) $(4,247,910) $1,180,025 $1,278,132 $1,292,700 $1,161,920 $544,130 11.09%4.24%2.38%2.99%2.74%3.01%6.78% 2011 Fiscal Year 20162014 2017201220132015 C-11 City of Arroyo Grande GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE Last Ten Fiscal Years 2008 5,201,904$ 5,280,813$ 437,164$ 80,990$ 621,987$ 93,359$ 11,716,217$ 2009 5,518,824 4,658,777 389,067 79,111 639,776 67,524 11,353,079 2010 5,408,201 4,252,903 348,014 80,283 604,325 63,450 10,757,176 2011 5,313,261 4,781,774 390,472 79,663 539,673 65,915 11,170,758 2012 6,563,217 4,127,541 630,379 84,925 570,172 70,461 12,046,695 2013 6,150,672 4,269,905 746,333 85,078 575,495 81,354 11,908,837 2014 6,564,035 4,583,049 840,602 85,625 595,161 105,396 12,773,868 2015 6,724,240 4,634,828 1,124,486 90,108 612,261 108,529 13,294,452 2016 7,005,656 5,213,844 1,159,458 86,947 613,715 127,985 14,207,605 2017 6,384,175 5,835,213 1,160,087 93,544 610,820 110,778 14,194,617 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 Year Property Taxes Sales & Use Tax Business Licenses Franchise Revenues C-12 City of Arroyo Grande ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years 2008 $2,196,091,386 $41,592,228 $2,237,683,614 $26,977,685 $2,210,705,929 100% 2009 2,291,770,614 45,964,735 2,337,735,349 27,218,700 2,310,516,649 100% 2010 2,245,531,517 44,455,451 2,289,986,968 27,131,700 2,262,855,268 100% 2011 2,242,734,120 41,864,014 2,284,598,134 26,925,209 2,257,672,925 100% 2012 2,195,793,943 41,107,547 2,236,901,490 26,926,650 2,209,974,840 100% 2013 2,204,645,960 42,637,641 2,247,283,601 26,788,183 2,220,495,418 100% 2014 2,300,046,365 45,362,799 2,345,409,164 26,614,912 2,318,794,252 100% 2015 2,468,055,741 50,263,602 2,518,319,343 26,368,700 2,491,950,643 100% 2016 2,581,058,076 45,395,240 2,626,453,316 26,777,282 2,599,676,034 100% 2017 2,707,862,720 45,142,453 2,753,005,173 26,612,159 2,726,393,014 100% Source: San Luis Obispo County Auditor-Controller For comparison purposes,gross assessed valuations include homeowners and other exemptions.Although these exemptions reduce property tax collections,the revenue loss is reimbursed by the State of California.As such,gross assessed valuation is the revenue base used in establishing property tax-related revenues. Assessed to Property ValueFiscal Year Secured Gross Assessed Value Unsecured Gross Assessed Value Total Gross Assessed Value Exemptions Net Taxable Value C-13 City of Arroyo Grande PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS Last Ten Fiscal Years 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 2016 1.00000 0.00374 0.06019 0.00982 0.00556 1.07931 2017 1.00000 0.00400 0.05919 0.00882 0.00000 1.07201 Source: HDL Coren & Cone, San Luis Obispo County Assessor Fiscal Year Valuations are established by the County Assessor of the County of San Luis Obispo,except for property owned by private utility companies,which is valued by the State of California.Under the provisions of Article XIIA of the State Constitution (Proposition 13 adopted by the voters on June 6,1978)properties are assessed at 100%of full value and subsequently increased at a maximum rate of 2%per year.The County collects property taxes and distributes the appropriate amount to each city.Each dollar of property tax is 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 Bonds Fire Bonds Total Tax Rate C-14 THIS PAGE IS INTENTIONALLY LEFT BLANK City of Arroyo Grande PRINCIPAL PROPERTY TAXPAYERS Current Fiscal Year and Nine Fiscal Years Ago Rank Sphear Investments LLC $49,586,541 1 1.82% Sunrise Terrace Associates 12,585,680 2 0.46% Grand and Elm Properties LP 12,571,949 3 0.46% Manfred G Freutel Trust 10,085,107 4 0.37% 1400 West Branch LLC 8,847,479 5 0.32% K Patrick Sandman LLC 7,809,240 6 0.29% EPT Arroyo Inc 7,493,445 7 0.27% Ray B. Bunnell Trust 7,296,367 8 0.27% Bolsa Chica Mobile Estates Inc 7,093,633 9 0.26% Deblauw Properties LLC 6,809,411 10 0.25% ESJ Centers LLC Ocean Oaks LLC Parkside Village LLC Orradre Ranch A California LP Totals $130,178,852 4.77% Source: HDL Coren & Cone 2016-17 Percentage of Total Taxable Assessed ValuationType of Business Assessed ValuationTaxpayer Commercial Residential Commerical Residential Commercial Commerical Recreational Commercial Commercial Commercial Residential Residential Commercial Residential C-16 Rank $--- 10,401,652 2 0.46% 8,910,903 3 0.40% 7,277,700 4 0.33% 6,502,732 6 0.29% 5,725,518 9 0.26% 6,101,977 7 0.27% 40,139,310 1 1.79% 6,582,400 5 0.30% 5,725,518 8 0.26% 5,724,203 10 0.26% $103,091,913 4.62% 2007-08 Percentage of Total Taxable Assessed ValuationAssessed Valuation C-17 City of Arroyo Grande SECURED PROPERTY TAX ROLL LEVIES AND COLLECTIONS Last Ten Fiscal Years Fiscal Year Total Secured Tax Levy Current Tax Collections Percent of Levy Collected Current Year Delinquencies Percent Delinquent 2008 3,696,974$ 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%** 2016 4,345,982 4,345,982 100%** 2017 4,578,200 4,578,200 100%** Source: San Luis Obispo County Auditor-Controller *The City has elected the Teeter Plan method of property tax collection,whereby the County remits 100%of taxes levied and pursues collection and retains any delinquent taxes and related penalties and interest. C-18 THIS PAGE IS INTENTIONALLY LEFT BLANK City of Arroyo Grande TAXABLE SALES BY CATEGORY Last Ten Calendar Years (in thousands of dollars) Food Stores $16,039 $18,165 $17,173 $15,773 Eating and Drinking Places 28,768 30,852 29,880 29,949 Building Materials 25,048 22,582 19,148 18,676 Auto Dealers and Supplies 36,175 27,909 22,528 24,753 Service Stations 44,032 48,613 34,574 36,817 Other Retail Stores 121,193 113,771 113,694 112,340 All Other Outlets 61,340 49,873 44,284 46,231 Total $332,595 $311,765 $281,281 $284,539 Source: State of California Board of Equalization and the Hdl Companies. 2010 Due to confidentiality issues,the names of the ten largest revenue payers are not available.The categories presented are intended to provide alternative information regarding the sources of the City's revenue. 2007 2008 2009 C-20 $15,564 $16,098 $17,705 $18,047 $15,955 $9,489 32,738 37,136 36,314 42,140 46,885 49,848 19,806 20,429 22,848 25,855 29,882 31,555 30,056 33,789 40,123 41,161 42,048 47,866 42,795 45,431 43,831 42,938 39,520 34,411 113,172 115,587 119,916 118,561 119,822 120,281 47,300 46,302 50,130 54,064 63,468 70,977 $301,431 $314,772 $330,867 $342,766 $357,580 $364,427 201620122013201420152011 C-21 City of Arroyo Grande RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Fiscal Year 2008 $1,625,000 $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 2016 955,000 288,500 1,179,566 2017 414,978 1,143,889 Source: City of Arroyo Grande Annual Financial Report General Obligation Bonds Tax Allocation Bonds Capital Leases Loan Payable Reimbursement Agreement Governmental Activities C-22 $111,582 $-$8,021,582 0.36%470.86 8,200,023 0.35%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 41,604 2,464,670 0.09%139.00 1,558,867 0.06%87.89 Outstanding Debt per CapitaSafe Water Loan Capital Leases Total Primary Government Percent of Estimated Actual Value of Taxable Property Business-Type Activities C-23 City of Arroyo Grande RATIOS OF GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years 2008 $1,625,000 $499,891 $1,125,109 $2,210,705,929 0.05%17,036 66.04 2009 1,550,000 568,811 981,189 2,310,516,649 0.04%17,080 57.45 2010 1,475,000 625,638 849,362 2,289,986,968 0.04%17,145 49.54 2011 1,395,000 677,881 717,119 2,284,598,134 0.03%17,365 41.30 2012 1,315,000 727,231 587,769 2,236,901,490 0.03%17,291 33.99 2013 1,230,000 818,400 411,600 2,247,283,601 0.02%17,395 23.66 2014 1,140,000 873,044 266,956 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 2016 955,000 906,890 48,110 2,626,453,316 0.00%17,731 2.71 2017 - 230 (230) 2,753,005,173 0.00%17,736 (0.01) 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 Value Population Net Bonded Debt Per Capita C-24 City of Arroyo Grande DIRECT AND OVERLAPPING DEBT June 30, 2017 $8,350,000 32.824%$2,740,804 San Luis Obispo County Community College District 67,095,000 5.702%3,825,757 Lucia Mar Unified School District 58,688,464 20.571%12,072,804 San Luis Obispo County Certificates of Participation 25,590,000 5.725%1,465,028 San Luis Obispo Pension Obligations 94,029,398 5.725%5,383,183 7,220,000 5.702%411,684 Lucia Mar Unified School District Certificates of Participation 7,410,000 20.571%1,524,311 Redevelopment Successor Agency 5,450,000 100.000%5,450,000 Combined Total Debt $273,832,862 $32,873,571 Ratio to Assessed Valuation: Direct Debt 0.00% Total Direct and Overlapping Tax and Assessment Debt 0.68% Combined Total Debt 1.19% Ratio to Redevelopment Successor Agency Incremental Valuation:2.88% Assessed Valuation Calculation: Net Taxable Value $2,753,005,173 Less: Redevelopment Agency Tax Increment (189,297,530) Total Assessed Valuation $2,563,707,643 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 City of Arroyo Grande LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years Debt Limit $76,003,136 $79,840,076 $79,151,950 $76,912,430 Total net debt applicable to limit Legal debt margin $76,003,136 $79,840,076 $79,151,950 $76,912,430 10%9%9%9% Source: San Luis Obispo County Fiscal Year Total net debt applicable to the limit as a percentage of debt limit 2008 2009 2010 2011 C-26 $81,390,806 $81,888,135 $85,681,844 $92,280,975 $100,526,999 $104,290,694 $81,390,806 $81,888,135 $85,681,844 $92,280,975 $100,526,999 $104,290,694 10%3%3%3%2%1% Legal Debt Margin Calculation for Fiscal Year 2017 Assessed value $2,753,005,173 Debt limit - 3.75% of total assessed value 103,237,694 Amount of debt applicable to limit 1,053,000 Legal debt margin $104,290,694 Section 43605 of California Government Code establishes a legal debt limit of 15% of gross assessed valuation for municipalities. However, this provision was enacted when assessed valuation was established based on 25% of market value. Effective with FY 1981-82, taxable property is assessed at 100% of market value. Although the debt limit provision has not been amended by the State since this change, the percentage has been proportionately modified to 3.75% for the purposes of this calculation for consistency with the original intent of the State’s limit. 2015 20172012201320142016 Fiscal Year C-27 City of Arroyo Grande DEMOGRAPHIC STATISTICS Last Ten Calendar Years Year Population 2008 17,036 577,858$ 34,012$ 5.9% 2009 17,080 561,131 32,796 9.2% 2010 17,145 547,714 31,946 10.4% 2011 17,365 554,159 32,049 9.5% 2012 17,291 590,856 33,967 6.2% 2013 17,395 555,104 32,024 5.3% 2014 17,334 580,593 33,570 4.9% 2015 17,295 567,314 31,996 4.0% 2016 17,731 580,593 33,570 4.9% 2017 17,736 601,429 33,910 3.7% Source: San Luis Obispo County Tax Assessor Rolls - California Department of Finance Personal Income (in thousands) Per Capita Personal Income Unemployment Rate C-28 City of Arroyo Grande FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General government 10.5 10.6 10.6 10.7 10.5 10.4 10.5 9.8 12.8 12.8 Community development 16.2 13.4 10.8 10.5 9.2 9.7 9.1 10.0 11.5 11.5 Police 43.2 38.0 38.5 38.5 39.6 38.4 37.5 32.8 34.7 34.7 Recreation 18.8 18.9 16.5 11.9 11.4 11.5 11.9 13.1 13.7 13.7 Public works 10.3 10.0 10.1 11.1 10.9 9.8 9.8 11.2 14.1 14.1 Streets and roads 5.8 6.1 6.0 6.4 6.1 5.6 5.2 4.8 4.8 4.8 Sewer 3.8 4.4 3.2 2.0 1.9 1.0 0.5 2.1 2.3 2.3 Water 7.3 7.4 6.5 6.6 6.6 6.1 6.8 5.1 6.3 6.3 Total 115.9 108.8 102.2 97.7 96.2 92.5 91.3 88.9 100.2 100.2 Source: City of Arroyo Grande payroll records Fiscal Year Function C-29 City of Arroyo Grande OPERATING INDICATORS BY FUNCTION Last Ten Fiscal Years 2008 2009 2010 2011 2012 General Government Number of business licenses 1,713 1,705 1,622 1,654 1,654 Number of minutes transcribed 24 35 30 44 30 Number of agenda items processed 302 275 297 295 246 Number of recruitments 51 31 19 18 10 Police Number of officers 27 27 26 26 26 Incidents recorded 12,518 14,150 17,072 16,145 17,250 Major crimes 498 395 478 444 313 Traffic collisions 325 450 429 432 410 Traffic enforcement activities 4,646 4,616 4,863 4,013 4,295 Arrests 609 364 631 605 574 Public Works Miles of streets maintained 70 70 70 70 70 Miles of sewer maintained 66 66 66 66 69 Number of vehicles maintained 70 90 89 90 86 Pieces of equipment maintained 385 389 385 389 350 Number of street trees maintained 1,141 1,200 1,200 1,200 1,200 Street service request 560 560 550 560 263 Water customer accounts 6,449 6,457 6,304 6,312 6,525 Acre feet of water consumed 3,343 3,177 2,918 2,746 2,868 Miles of water lines maintained 69 69 69 69 87 In-house capital projects constructed 3 3 3 2 3 Capital projects constructed 6 7 6 10 7 CIP studies initiated 2 2 4 3 CIP studies completed 1 1 1 2 1 Community Development Number of planning commission agendas 17 20 18 19 14 Number of planning commission staff reports 37 58 36 43 35 Number of ARC agendas 12 13 12 13 11 Plan and map checks completed 8 8 13 12 13 Building permits issued 530 540 530 421 376 Building inspections conducted 3,508 4,500 3,400 3,019 1,601 Recreation Services Registrations 11,000 11,650 11,500 11,650 11,750 Participants in City recreation sports 3,144 2,200 2,290 2,200 2,260 Number of programs/events/classes 114 91 72 91 108 Number of teams 306 281 255 281 336 Children in Motion enrollment 1,200 1,250 1,200 800 840 Source: City of Arroyo Grande budget records Fiscal Year C-30 2013 2014 2015 2016 2017 1,690 1,775 1,760 1,863 1,844 33 23 41 36 32 231 296 340 325 287 14 18 15 23 17 24 27 23 22 20 18,275 18,809 17,203 17,140 17,925 458 508 500 508 403 253 378 340 349 288 4,058 3,758 2,967 1,934 2,956 695 568 675 716 870 70 70 70 70 66 70 70 70 70 71 67 60 55 59 50 300 295 285 291 282 1,200 1,210 1,218 1,233 1,244 352 376 423 423 426 6,545 6,578 6,384 6,410 6,433 2,862 2,868 2,481 1,965 1,823 87 87 87 87 88 2 1 2 1 8 13 8 17 16 4 3 1 3 20 18 16 19 18 60 53 55 53 57 15 21 18 22 18 9 6 17 14 39 360 450 505 534 537 2,183 2,390 2,414 2,154 2,241 11,880 12,000 12,130 12,280 8,619 2,285 2,235 2,255 2,080 1,872 115 120 125 142 392 325 320 324 289 115 959 1,009 1,083 1,058 1,023 Fiscal Year C-31 City of Arroyo Grande CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Police Stations 1 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 19 19 19 19 19 19 19 19 19 19 Acreage of parks 151.6 151.6 151.6 151.6 151.6 151.6 151.6 151.6 151.6 151.6 Community centers 2 2 2 2 2 2 2 2 2 2 Water Water mains (miles)68 69 69 69 87 87 87 87 87 87 Water capacity**6.5 6.5 6.5 6.5 6.7 6.7 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 C-32