CC 2019-12-10_08b Acceptance of Comprehensive Annual Financial ReportMEMORANDUM
TO: CITY COUNCIL
FROM: NICOLE VALENTINE, ACCOUNTING MANAGER
SUBJECT: CONSIDERATION OF ACCEPTANCE OF THE COMPREHENSIVE
ANNUAL FINANCIAL REPORT
DATE: DECEMBER 10, 2019
SUMMARY OF ACTION:
Receive and file the Comprehensive Annual Financial Report (CAFR) for the fiscal year
ended June 30, 2018.
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
Preparation of the City’s financial reports requires approximately 200 hours per year of
personnel resources and auditing services cost approximately $22,000 annually.
RECOMMENDATION:
It is recommended the City Council receive and file the Comprehensive Annual Financial
Report (CAFR) for the fiscal year ended June 30, 2018.
BACKGROUND:
On April 22, 2014, the City Council awarded an agreement for consultant services to
Moss, Levy & Hartzheim, LLP to audit the City’s financial records for the fiscal years
ended June 30, 2014 through June 30, 2018. Audit services are retained for two reasons:
first, to have an independent review of internal control; and secondly, to ensure that the
resulting financial reports fairly represent the financial position of the City. Typically, the
audited financial statements would be presented to the City Council by December 31,
however due to other workload priorities and department vacancies the preparation of the
CAFR was delayed this year.
ANALYSIS OF ISSUES:
Generally accepted accounting principles (GAAP) provide the criteria for judging whether
a financial report is fairly presented. In defining the minimum standard of acceptable basic
financial reporting for state and local governments, GAAP mandate a complete set of
basic financial statements, including accompanying note disclosures, as well as the
presentation of certain required supplementary information. GAAP encourages
government agencies to present this information within the Comprehensive Annual
Financial Report (CAFR).
Item 8.b. - Page 1
CITY COUNCIL
CONSIDERATION OF ACCEPTANCE OF THE COMPREHENSIVE ANNUAL
FINANCIAL
DECEMBER 10, 2019
PAGE 2
The CAFR is a more detailed financial report beyond just the basic financial statements.
It is made up of three basic sections:
• The introductory section: provides general information of the City which includes
the letter of transmittal, list of principal officials, and organizational chart.
• The financial section: provides the overall financial information of the City which
includes the report of the independent auditor, management’s discussion and
analysis (a narrative of the City finances), the basic financial statements, required
supplementary information and other supplementary schedules and statements.
• The statistical section: provides a broad range of operational, economic, and
historical data that provides a context for assessing the City’s economic condition.
This section provides information about the City’s general financial trends, revenue
capacity, debt capacity, economic and demographic trends, and operating
information.
The auditors conducted testing of internal controls in June and July 2018. The procedures
for receiving and disbursing cash, the accounting methodology used to record
transactions, the separation of duties to avert collusion, and asset securities were
reviewed. As a result of this testing, there were no internal control issues/events noted.
In November 2018, an audit was conducted on net position of the City at June 30, 2018.
Documentation in support of the assets, liabilities, and fund balance of all the funds in the
City were examined and verified. This process assures an impartial review and
substantiation of the City’s net position. The result of this review is the City’s CAFR.
The City’s CAFR is in compliance with newly effective Government Accounting Standards
Board (GASB) pronouncements, as detailed in the Notes to the Financial Statements.
As presented in the CAFR, the City’s combined net position at June 30, 2018 decreased
by 5.5% from $88.5 million to $83.7 million. This overall decrease is due to a decrease in
governmental activities and a slight decrease in business-type activities. The decrease in
governmental activities is largely due to changes in the net pension liability and other
post-employment benefits (OPEB) liability.
Item 8.b. - Page 2
CITY COUNCIL
CONSIDERATION OF ACCEPTANCE OF THE COMPREHENSIVE ANNUAL
FINANCIAL
DECEMBER 10, 2019
PAGE 3
Net position of all funds reflects all the assets and liabilities of the City. It includes the
City’s investment in capital assets such as parks, bridges and roads as well as the
liabilities or obligations to pay vendors, employees and debt service payments. The net
position is the mathematical difference between assets and liabilities, but it doesn’t
necessarily reflect the economic health of an organization. In the City’s case, about 90%
of the total net position reflects capital assets. While these assets are important, they
can’t be used to fund the day-to-day operations of the City and, therefore, may not be the
most useful measure of the City’s liquidity. It may be more useful to compare unassigned
fund balance to get a sense of the City’s ability to pay for ongoing operations. In the
General Fund, this amount represents 46.9% of total expenditures, which exceeds the
City’s reserve goal of 20%.
For financial reporting purposes, the additional ½ percent local sales tax revenue
approved by voters in 2006 is combined with the General Fund. The combined funds, as
shown in the table on the following page, reports revenues and other financing sources
of $18.3 million and expenditures and other financing uses of $17.4 million. As a result,
there was an increase to the fund balance of $932,000 during the 2017-18 fiscal year.
The General Fund’s total fund balance is $8.3 million or approximately 48% of
expenditures (including transfers out). However, some fund balances are considered
nonspendable because it is held as inventory ($9,800) or reflects prepaid items ($30,579).
Additionally, $3,193,183 is designated for completing capital projects or meeting other
commitments in the future, including post-employment benefits. This leaves an
unassigned General Fund balance of $7.0 million that is available for appropriation for
City programs and projects, which equates to approximately 44% of expenditures.
Item 8.b. - Page 3
100
90
80
70
60
50
40
30
20
10
2009 2010 2011
Net Position by Component
(In Millions)
2012 2013 2014 2015 2016
■ Net investment in capital assets ■ Restricted ■ Unrestricted
2017 2018
CITY COUNCIL
CONSIDERATION OF ACCEPTANCE OF THE COMPREHENSIVE ANNUAL
FINANCIAL
DECEMBER 10, 2019
PAGE 4
Auditors may issue three different types of opinions at the conclusion of an audit; an
unmodified, modified, or adverse opinion. An unmodified opinion assures the reader that
the information presented in the CAFR fairly represents the financial position of the City.
A modified opinion states that the information is fairly presented except for a particular
issue. An adverse opinion indicates that the agency has major accounting and/or internal
control issues and no reliance may be placed on the financial statements. The
Administrative Services Department staff is proud to report that for the fiscal year ended
June 30, 2018, the City of Arroyo Grande received an unmodified opinion.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Receive and file the Comprehensive Annual Financial Report; or
2. Provide other direction to staff.
ADVANTAGES:
By receiving and filing the Comprehensive Annual Financial Report, the City will be
accepting the auditors’ unqualified opinion. As mentioned above, an unqualified opinion
assures the reader that the information presented in the CAFR fairly represents the
financial position of the City.
DISADVANTAGES:
There are no disadvantages in relation to the recommended action.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
General Fund
Local Sales
Tax Fund Total
Beginning Fund Balance 7/1/17 7,802,389$ 1,582,507$ 9,384,896$
Revenues 15,069,392 2,267,845 17,337,237
Expenditures (15,558,616) (1,846,116) (17,404,732)
Other Financing Sources/(Uses)999,730 - 999,730
Net Change in Fund Balance 510,506$ 421,729$ 932,235$
Fund Balance:
Nonspendable 40,379$ -$ 40,379$
Assigned for capital projects - 2,654,595 2,654,595
Assigned for post employment benefits 538,588 - 538,588
Unassigned 7,733,928 (650,359) 7,083,569
Ending Fund Balance, 6/30/18 8,312,895$ 2,004,236$ 10,317,131$
Item 8.b. - Page 4
I
I I
CITY COUNCIL
CONSIDERATION OF ACCEPTANCE OF THE COMPREHENSIVE ANNUAL
FINANCIAL
DECEMBER 10, 2019
PAGE 5
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
ATTACHMENTS:
1) Comprehensive Annual Financial Report and Independent Auditors’ Report on
Internal Control over Financial Reporting and on Compliance and Other Matters
Based on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards (on file in the Administrative Services and
Legislative and Information Services Departments for public review, as well as on
the City’s website at www.arroyogrande.org)
Item 8.b. - Page 5
Comprehensive AnnuAl FinAnCiAl
report
For the FisCAl YeAr ending June 30, 2018
CitY oF ArroYo grAnde,
CAliForniA
prepAred bY the depArtment oF AdministrAtive serviCes
ATTACHMENT 1
Item 8.b. - Page 6
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City of Arroyo Grande
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Table of Contents
For the Fiscal Year Ended June 30, 2018
i
INTRODUCTORY SECTION
Letter of Transmittal ................................................................................................................................................................ A-1
Directory of Officials ................................................................................................................................................................ A-5
Organization of City Government ............................................................................................................................................ A-6
FINANCIAL SECTION
Independent Auditors’ Report .................................................................................................................................................. B-1
Management’s Discussion and Analysis (unaudited) ............................................................................................................... B-3
Basic Financial Statements
Government-wide Financial Statements:
Statement of Net Position ............................................................................................................................................ B-16
Statement of Activities .................................................................................................................................................. B-18
Fund Financial Statements:
Description of Major Governmental Funds .................................................................................................................. B-21
Balance Sheet – Governmental Funds .......................................................................................................................... B-22
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ................................. B-24
Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds .................................. B-26
Reconciliation of the Statement of Revenues, Expenditures, and Changes in
Fund Balances of Governmental Funds to the Statement of Activities ..................................................................... B-28
Description of Major Proprietary Funds ....................................................................................................................... B-29
Statement of Net Position – Proprietary Funds ............................................................................................................ B-30
Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds ................................................ B-31
Statement of Cash Flows – Proprietary Funds .............................................................................................................. B-32
Description of Fiduciary Funds ...................................................................................................................................... B-35
Statement of Fiduciary Net Position ............................................................................................................................. B-36
Statement of Changes in Fiduciary Net Position ........................................................................................................... B-37
Notes to Basic Financial Statements ................................................................................................................................ B-38
Required Supplementary Information (unaudited)
Budgetary Information – Major Governmental Funds:
General Fund ................................................................................................................................................................. B-67
Special Gasoline Tax Fund ............................................................................................................................................. B-69
Transportation Impact Fees Fund ................................................................................................................................. B-70
In-Lieu Affordable Housing Fund .................................................................................................................................. B-71
Community Development Block Grant (CDBG) Fund .................................................................................................... B-72
Schedule of Changes in the OPEB Liability and Related Ratios ....................................................................................... B-73
Net Pension Liability – Schedule of Proportionate Share ................................................................................................ B-74
Net Pension Liability – Schedule of Contributions ........................................................................................................... B-75
Supplemental Information
Description of Nonmajor Governmental Funds ............................................................................................................... B-77
Nonmajor Governmental Funds:
Combining Balance Sheet ............................................................................................................................................. B-80
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ..................................................... B-84
Agency Funds:
Statement of Changes in Assets and Liabilities ............................................................................................................. B-88
Item 8.b. - Page 7
City of Arroyo Grande
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Table of Contents
For the Fiscal Year Ended June 30, 2018
ii
STATISTICAL SECTION (unaudited)
Net Position by Component – Last Ten Fiscal Years ................................................................................................................. C-2
Changes in Net Position – Last Ten Fiscal Years........................................................................................................................ C-4
Fund Balances of Governmental Funds – Last Ten Fiscal Years ................................................................................................ C-8
Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years ........................................................................... C-10
General Governmental Tax Revenues by Source – Last Ten Fiscal Years ............................................................................... C-12
Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ............................................................... C-13
Property Tax Rates – Direct and Overlapping Governments – Last Ten Fiscal Years ............................................................. C-14
Principal Property Taxpayers – Current Fiscal Year and Nine Fiscal Years Ago ...................................................................... C-16
Secured Property Tax Roll Levies and Collections – Last Ten Fiscal Years .............................................................................. C-18
Taxable Sales by Category – Last Ten Calendar Years ............................................................................................................ C-20
Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ................................................................................................... C-22
Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years ..................................................................................... C-24
Direct and Overlapping Debt .................................................................................................................................................. C-25
Legal Debt Margin Information – Last Ten Fiscal Years .......................................................................................................... C-26
Demographic Statistics – Last Ten Calendar Years ................................................................................................................. C-28
Full-Time Equivalent City Government Employees by Function ............................................................................................. C-29
Operating Indicators by Function – Last Ten Fiscal Years ....................................................................................................... C-30
Capital Asset Statistics by Function – Last Ten Fiscal Years .................................................................................................... C-32
Item 8.b. - Page 8
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
December 10, 2019
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, 2018.
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, 2018 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, 2018 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
Item 8.b. - Page 9
CITY OF
<»
ALIF ANIA w f ' ~ ,
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 17,880.
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 2018-19 Budget will impact the community.
Item 8.b. - Page 10
A- 3
Street Projects – The Brisco Road-Halcyon Road/Route 101 Interchange project is in the Project Approval and
Environmental Determination phase and a preferred alternative is scheduled to be selected. In addition, several pavement
rehabilitation projects are scheduled to improve the City’s streets.
Bridge Projects – The Bridge Street bridge rehabilitation, Traffic Way bridge improvement project, 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 corporation yard storm water compliance plan implementation and drainage solutions in the
Sierra Drive/Hillcrest Drive neighborhood which includes improvements to eliminate storm water flow across Oak Park
Boulevard and reduce the potential of storm water leaving Sierra Drive and entering adjacent properties.
Water & Sewer Projects – Various waterline upgrades, the construction of the Lift Station No. 1 force main replacement
and a comprehensive structural analysis of the steel pipe bridges crossing the Arroyo Grande Creek at Coach Road and
Garden Street 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 1.36% 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-seven (47) retired employees receiving these benefits, which are financed on a pay-
as-you-go-basis.
Item 8.b. - Page 11
Item 8.b. - Page 12
Additional information on the City's pension arrangements and postemployment benefits can be found in NOTE 8-LONG-
TERM DEBT, NOTE 11 -DEFINED BENEFIT PENSION PLANS and NOTE 12 -POSTEMPLOYMENT BENEFITS OTHER THAN
PENSIONS (OPEB) in the notes to the basic financial statements.
Acknowledgements
The preparation of this report would not have been possible without the efficient and dedicated services of the entire
staff of the administrative services department. We would like to express our appreciat ion to all members of the
department who assisted and contributed to the preparation of this report. Credit also must be given to the Mayor and
City Council for their diligent support for maintaining the highest standards of professionalism in the management of the
City of Arroyo Grande's finances.
Respectfully submitted,
Accounting Manager
APPROVED FOR SUBMITTAL TO CITY COUNCIL :
A-4
City of Arroyo Grande
DIRECTORY OF OFFICIALS
A- 5
ELECTED OFFICIALS
Mayor ................................................................................................................................................... Jim Hill
Mayor Pro Tem ............................................................................................................................... Caren Ray
Council Member .................................................................................................................... Kristen Barneich
Council Member ............................................................................................................................. Tim Brown
Council Member ................................................................................................................... Barbara Harmon
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.................................................................................................................................... Beau Pryor
Director of Public Works ............................................................................................................. Bill Robeson
Director of Recreation Services .......................................................................................... Sheridan Bohlken
Item 8.b. - Page 13
City of Arroyo Grande
ORGANIZATION OF CITY GOVERNMENT
A- 6
Citizens of
Arroyo Grande
City Council
Boards &
Commissions City Manager
Administrative
Services
Finance
Human
Resource
Community
Development
Building & Life
Safety
Engineering
Planning
Legislative &
Information
Services
City Clerk
Information
Techology
Police
Patrol Services
Support
Services
Public Works
Capital
Projects
Maintenance
Services
Utility
Recreation
Services
Chidren in
Motion
Preschool
Special Events
Sports
Leagues
City Attorney
Item 8.b. - Page 14
Moss, Levy & Hartzheim LLP
Certified Public Accountants
2400 Professional Parkway, Suite 205 Santa Maria, CA 93455 Tel 805.925.2579 Fax 805.925.2147 mlhcpas.com
BEVERLY HILLS ∙ CULVER CITY ∙ SANTA MARIA
INDEPENDENT AUDITORS’ REPORT
City Council of the City of Arroyo Grande
Arroyo Grande, California
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major
fund, and the aggregate remaining fund information of City of Arroyo Grande (City), as of and for the fiscal year ended June 30,
2018, 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, 2018, 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
B-1
Item 8.b. - Page 15
Emphasis of Matter
Changes in Accounting Principles
As discussed in note 1 to the basic financial statements effective July 1, 2017, the City of Arroyo Grande adopted Governmental
Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than
Pensions. Our opinion is not modified with respect to this matter.
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-67 through B-72, the schedule of changes in the OPEB
liability and related ratios on page B-73, the schedule of proportionate share of net pension liability on page B-74, and the schedule
of pension contributions on page B-75 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 November 20, 2019, on our consideration
of the City of Arroyo Grande’s internal control over financial reporting and on our tests of its compliance with certain provisions of
laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our
testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on
internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Santa Maria, California
November 20, 2019
B-2
Item 8.b. - Page 16
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 3
The management’s discussion and analysis of the City of Arroyo Grande provides an overall review of the City’s financial activities for
the fiscal year ended June 30, 2018. The intent of this discussion and analysis is to look at the City’s financial performance as a whole.
Readers should review the discussion and analysis in conjunction with the basic financial statements, as well as the notes to the basic
financial statements to enhance their understanding of the City’s financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal year ended June 30, 2018, are as follows:
The City has finished the fiscal year with General Fund expenditures exceeding revenues by approximately $67,000,
however, after transfers and other financing sources, the General Fund’s fund balance of $10.3 million reflects an
increase of approximately $932,000. This fund balance amount has exceeded the City’s reserve policy goal of 20% of
appropriated General Fund expenditures. Of the $10.3 million in fund balance, approximately $7.1 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. 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 conversion of an existing irrigation well to domestic use by providing appropriate treatment facilities. The
project will provide an additional 40 to 50 acre-feet per year of water supply to the City. The project included
the construction of offsite filter back-flush pipeline, site grading, masonry retaining wall/building, treatment
plant equipment, pump and equipment, water line tie-in and testing of the well.
o Santos Field Barrier Removal project provides ADA accessible access from the Soto Sports Complex parking lot
to the Santos Field Bleachers. Partnership with a local Eagle Scout to complete the installation of a play structure
at Heritage Square Park.
o Heritage Square Park Restroom project consisted of the installation of a prefabricated restroom building at the
Heritage Square Park and associated site improvements.
o Manhole Rehabilitation of repairing and coating thirteen manholes.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of a series of financial statements, schedules and notes to those statements. These statements are
organized so the reader can understand the City as a financial whole, an entire operating entity. These statements then proceed to
provide an increasingly detailed look at specific financial activities. This annual report consists of three basic sections – introductory
section, financial section (which consists of this discussion and analysis), and a statistical section.
The basic financial statements include two kinds of statements that present different views of the City:
The first two statements are government-wide financial statements that provide both long-term and short-term
information about the City’s overall financial status.
The remaining statements are fund financial statements that focus on individual parts of the government, reporting the
City’s operations in more detail than the government-wide financial statements.
The financial statements also include notes that explain some of the information in the financial statements and provide more detailed
data.
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).
Item 8.b. - Page 17
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 4
The statement of net position includes all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of
resources. The statement of activities also reports the City’s net position but more specifically how it has changed (revenues and
expenses). Net position is the difference between all of the City’s assets added to deferred outflows of resources and liabilities added
to the deferred inflows of resources. Net position is one of the ways to measure the City’s financial health or position.
Over time, increases or decreases in the City’s net position is an indicator of whether its financial health is improving or deteriorating,
respectively. To assess the overall health of the City, you also need to consider additional non-financial factors such as changes in the
City’s tax base, facility condition, required educational programs, and other factors.
The City’s combined net position for the past 10 fiscal years is presented in the graph below:
Net position decreased during the 2017-18 fiscal year from $88.5 million to $83.7 million, or by 5.5%. This overall decrease is due to
a decrease in governmental activities and a slight decrease in business-type activities. The decrease in governmental activities is
largely due to changes in the net pension liability and other post-employment benefits (OPEB) liability.
The government-wide financial statements of the City are divided into two categories:
Governmental activities: Most of the City’s basic services are included here, such as the general government, community
development, police, public works, and recreation services. Property and sales taxes, user fees, interest income,
franchise fees, and state and federal grants finance these types of activities.
Business-type activities: The City charges a fee to customers to cover all or most of the cost of certain services it provides.
The City’s water, Lopez treatment, and sewer systems are reported in this category.
-
10
20
30
40
50
60
70
80
90
100
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Net Position by Component
(In Millions)
Net investment in capital assets Restricted Unrestricted
Item 8.b. - Page 18
• • •
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 5
GOVERNMENTAL ACTIVITIES
The City’s net position of governmental activities at June 30, 2018, 2017, and 2016 are as follows:
The Governmental Accounting Standards Board Statement No. 68 established guidelines regarding how the City reports pension
liability. Pension liability has always existed; however, it has not been required to be reported in the financial statements until the
2014-15 fiscal year. At June 30, 2018, the City reported net pension liability of $19.4 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 information on the long term
pension obligations can be found in the Notes to the Financial Statements and the Required Supplementary 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 2017-18 fiscal year, the City utilized approximately $1.1 million of this funding to improve and maintain
streets and sidewalks, $400,000 to support public safety efforts, $200,000 for infrastructure upgrades and improvements, and
$100,000 for storm water and drainage projects. The Local Sales Tax Measure provides approximately $2.3 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 $ 21,426,864 $ 20,553,682 $ 19,888,925 $ 873,182 4%
Capital assets, net 43,421,093 42,996,103 42,135,296 424,990 1%
Total assets 64,847,957 63,549,785 62,024,221 1,298,172 2%
Deferred Outflows of Resources:0
Deferred pension and OPEB 6,916,288 5,191,361 3,278,204 1,724,927 33%
Total DOR 6,916,288 5,191,361 3,278,204 1,724,927 33%
Liabilities:0
Long-term liabilities outstanding 26,452,962 18,753,650 19,900,427 7,699,312 41%
Other liabilities 1,495,243 1,532,765 1,414,443 (37,522)-2%
Total liabilities 27,948,205 20,286,415 21,314,870 7,661,790 38%
Deferred Inflows of Resources:0
Deferred pension and OPEB 1,252,990 1,318,073 1,497,071 (65,083)-5%
Total DIR 1,252,990 1,318,073 1,497,071 (65,083)-5%
Net Position:0
Net investment in capital assets 41,836,070 41,437,236 39,712,230 398,834 1%
Restricted 8,217,418 8,375,502 5,531,798 (158,084)-2%
Unrestricted (7,490,438) (2,676,080) (2,753,544) (4,814,358) -180%
Total net position $ 42,563,050 $ 47,136,658 $ 42,490,484 $ (4,573,608) -10%
FYE 2017 FYE 2016FYE 2018
Item 8.b. - Page 19
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 6
The City’s statement of activities of governmental activities at June 30, 2018, 2017, and 2016 are as follows:
During the 2017-18 fiscal year, the City’s total revenue decreased by 1% to $19.7 million and expenses increased by 25% to $21.6
million.
The City’s significant source of revenue is derived by property and sales taxes. These taxes have had increases in the past several fiscal
years. During the 2017-18 fiscal year, these taxes generated $13.0 million, or 82% of total revenue. This was an increase of about
$683,000 when compared to the 2017-18 fiscal year and an increase of about $665,000 when compared to the 2015-16 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 $ 2,142,437 $ 3,163,969 $ 1,923,380 $ (1,021,532) -32.3%
Grants and contributions 1,888,900 1,923,039 1,655,035 (34,139) -1.8%
General revenues:
Property taxes 6,838,615 6,494,953 7,133,641 343,662 5.3%
Other taxes 8,025,623 7,699,664 7,073,964 325,959 4.2%
Other revenues 772,144 584,271 609,902 187,873 32.2%
Total revenues 19,667,719 19,865,896 18,395,922 (198,177) -1.0%
Expenses:
General government 6,323,149 5,659,730 5,397,817 663,419 11.7%
Community development 2,339,874 1,604,701 1,850,925 735,173 45.8%
Public safety 7,205,048 5,075,763 5,572,516 2,129,285 42.0%
Recreation 1,108,612 705,766 960,669 402,846 57.1%
Public works 2,063,905 1,777,425 1,892,337 286,480 16.1%
Streets and roads 2,516,344 2,448,134 2,544,510 68,210 2.8%
Interest on long-term debt 53,546 56,988 130,220 (3,442) -6.0%
Total expenses 21,610,478 17,328,507 18,348,994 4,281,971 24.7%
Income (deficiency) before transfers -1,942,759 2,537,389 46,928 (4,480,148) -176.6%
Transfers from (to) business-type activity 1,968,873 2,108,785 2,037,478 (139,912) -6.6%
Change in net position 26,114 4,646,174 2,084,406 (4,620,060) -99.4%
Ending net position $ 42,563,050 $ 47,136,658 $ 42,490,484 $ (4,573,608) -9.7%
FYE 2017 FYE 2016FYE 2018
Item 8.b. - Page 20
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 7
Property tax revenues have steadily increased for the past five fiscal years and are projected to continue a modest but steady increase
for the upcoming years. 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; however 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 previous fiscal years.
The City charged $2.1 million for services to users and developers in the 2017-18 fiscal year and makes up approximately 16% of total
revenue for the City. This represents a decrease of approximately $1.1 million from the prior fiscal year. The Community Development
Department which includes the Planning, Engineering and Building divisions reported revenues of $900,000 in the 2017-18 fiscal year
however revenue was $1.2 million in the 2016-17 fiscal year. In addition, the 2017-18 fiscal year included a decrease of $330,000 in
public works related services which includes one-time charges of $300,000 collected in fiscal year 2016-17.
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 in the near future. In addition to the increase in revenues, the City has incurred
additional costs as explained below.
The cost of all governmental activities in the 2017-18 fiscal year was $21.6 million, an increase of 25% in comparison to last fiscal year.
The City is a service oriented organization therefore, 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. 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, general government (which includes the City Clerk, Information Technology, City Council, City
Manager, Finance and Human Resources divisions), represents the City’s highest percent of expenses incurred at 32%, followed by
public safety at 31%, community development (which includes Planning, Engineering and Building) at 11% and public works (which
consists of maintenance of parks and facilities not including utilities) at 9%. These functions were subsidized by taxes, investment
income, miscellaneous income, and transfers from the business-type activities.
Item 8.b. - Page 21
15
10
5
Net Position by Component
(In Millions)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
■ Property Taxes ■ Sales & Use Tax
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 8
The City continues to invest heavily in public safety; those activities cost the City approximately $7.2 million in the 2017-18 fiscal year.
The City currently contributes approximately $2.2 million towards the operations of the Five Cities Fire Authority. The City has invested
in must needed fire-related infrastructure including fire engines. The Fire Authority has an aging fleet system and in response, during
the 2015-16 and 2016-17 fiscal years, the Five Cities Fire Authority board of directors entered into two lease purchase arrangement
for the replacement of two fire engines.
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 2017-18 fiscal year, the City spent
approximately $2.5 million in street and road costs. This program is funded from the State’s gasoline taxes which contributed
approximately $555,000, which includes approximately $100,000 in SB1 Road Maintenance Rehabilitation funds and is also funded
from the additional one half cent sales tax the voters approved in 2006. During the 2017-18 fiscal year, the additional sales tax
contributed over $1.1 million towards street and road-related projects. The City continues to budget and contribute towards 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, 2018, 2017, and 2016 are as follows:
Item 8.b. - Page 22
25
20
15
10
5
Expenses by Function
Last 10 Fiscal Years
(In Millions)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
■ 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, 2018
B - 9
As shown above, the City’s net position decreased by 0.6%, from $41.4 million to $41.1 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 $2.1 million for fiscal year 2017-18.
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 $ 8,443,551 $ 7,929,909 $ 9,032,484 $ 513,642 6.5%
Capital assets, net 35,156,981 35,236,648 34,810,330 (79,667) -0.2%
Total assets 43,600,532 43,166,557 43,842,814 433,975 1.0%
Deferred Outflows of Resources:
Deferred pension and OPEB 571,886 497,832 235,087 74,054 14.9%
Total DOR 571,886 497,832 235,087 74,054 14.9%
Liabilities:
Long-term liabilities outstanding 2,696,309 1,989,886 1,545,567 706,423 35.5%
Other liabilities 261,443 245,871 249,856 15,572 6.3%
Total liabilities 2,957,752 2,235,757 1,795,423 721,995 32.3%
Deferred Inflows of Resources:
Deferred pension and OPEB 77,020 30,578 79,550 46,442 151.9%
Total DIR 77,020 30,578 79,550 46,442 151.9%
Net Position:
Total net position $ 41,137,646 $ 41,398,054 $ 42,202,928 $ (260,408) -0.6%
FYE 2017 FYE 2016FYE 2018
Item 8.b. - Page 23
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 10
The City’s statement of activities of business-type activities at June 30, 2018, 2017, and 2016 are as follows:
The business-type activities had operating income of $1.9 million in the 2017-18 fiscal year, whereas $1.3 million in the 2016-17 fiscal
year and $1.4 million in the 2015-16 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 incurring 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.
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 change 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
Variance % Change
CY to PY CY to PY
Operating revenues $ 8,058,122 $ 7,179,441 $ 6,687,885 $ 878,681 12.2%
Operating expenses 6,110,825 5,906,838 5,304,476 203,987 3.5%
Operating income 1,947,297 1,272,603 1,383,409 674,694 53.0%
Non-operating revenues 58,064 31,308 109,597 26,756 85.5%
Transfers out (1,968,873) (2,108,785) (2,037,478) 139,912 -6.6%
Total non-operating revenues, contributions and transfers (1,910,809) (2,077,477) (1,927,881) 166,668 -8.0%
Change in net position $ 36,488 $ (804,874) $ (544,472) $ 841,362 -104.5%
FYE 2017 FYE 2016FYE 2018
Item 8.b. - Page 24
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 11
the City’s general governmental operations and the basic services it provides. Governmental fund information helps
determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s
programs. Because this information does not encompass the additional long-term focus of the government-wide
statements, additional information is provided in the financial statements that reconciles and explains the relationship
(or differences) between them.
Proprietary funds: When the City charges customers for the services it provides, these services are generally reported in
proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of
Net Position and the Statement of Revenues, Expenses, and Changes in Net Position. In fact, the City’s proprietary funds
are the same as the business-type activities reported in the government-wide statements but provide more detail and
additional information, such as cash flows. The proprietary fund financial statements provide separate information for
the Water, Lopez, and Sewer funds.
Fiduciary funds: The City is the trustee, or fiduciary, for the Downtown Parking Association, Sanitation District, and the
Successor Agency of the Former Redevelopment Agency. The City is responsible for ensuring that the assets reported in
these funds are used for their intended purposes.
Governmental Funds – The focus of the City of Arroyo Grande’s governmental funds is to provide information on near-term inflows,
outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular,
unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal
year. At fiscal year-end, the City’s governmental funds reported a combined fund balance of $18.7 million, an increase of
approximately $1.18 million in comparison with the prior fiscal year. Of the total fund balance, 43% of this total amount ($8.2 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 below. For further information on the
definition of the fund balance classification, see Note 1, Subsection K – Fund Balances and Net Position.
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 $8.2 million, while total fund balance reached $10.3 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 46.9% of total general fund
expenditures. This exceeds the City Council’s reserve goal of 20%.
Proprietary Funds – The City of Arroyo Grande’s proprietary funds provide the same type of information found in the Government-
wide Financial Statements under business-type activities, but includes a statement of cash flows. Factors concerning the finances of
these two funds have already been addressed in the discussion of the City of Arroyo Grande’s business-type activities.
Total % of Total
Nonspendable $ 40,379 $ - $ 40,379 0.2%
Restricted - 7,437,987 7,437,987 39.8%
Committed - - - 0.0%
Assigned 3,193,183 956,670 4,149,853 22.2%
Unassigned 7,083,569 - 7,083,569 37.9%
Total $ 10,317,131 $ 8,394,657 $ 18,711,788 100.0%
Fund Balances General Fund
All Other
Funds
Item 8.b. - Page 25
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
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 that alter
fund balance. Semi-annual reports are used to keep the City Council informed of key budget issues, forecasts, and required changes.
The budget amendments reported in the financial reports fall into three categories:
The carryover of appropriations for contracts, equipment, and/or projects approved in the previous fiscal year(s), but
not completed as of fiscal year-end.
Increases or decreases in estimated revenues to reflect actual receipts of major revenues.
Additional appropriations for unforeseen, but necessary expenses or expenditures.
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
$918,000 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.
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, 2018, capital assets, net of related accumulated depreciation, of the governmental activities
totaled $43.4 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 capital assets are summarized by activity on the following page.
Item 8.b. - Page 26
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 13
Major capital asset events during the fiscal year include the following:
New Heritage Square Park Restrooms $205,000
Purchase of MDC/In Car Video System for the Police Department Vehicles $280,000
Renovations at the Corporation Yard for approximately $200,000
Strother Park Rain Garden and Play Structure $100,000
New annual programs are recommended through the budget process. In the five-year Capital Improvement Program from fiscal years
2017-18 through 2021-22, the major capital projects include:
Reinforcement of the Swinging Bridge – Total cost estimated to be $ 518,000.
Both the Bridge Street Bridge and Traffic Way Bridge Improvements: Total cost of both projects is estimated to be $12.6
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 – $1.1 million.
Sierra Drive – Hillcrest Road Drainage Improvement project – Total cost estimated to be $135,000.
Continued improvements with the Water and Sewer systems based on their specific master plans.
Description Original Cost
Accumulated
Depreciation Book Value
Governmental Activities:
Land 4,236,528$ -$ 4,236,528$
Infrastructure 6,379,188 - 6,379,188
Construction in Progress 3,652,161 3,652,161
Structures & Improvements 13,407,938 3,433,630 9,974,308
Machinery & Equipment 4,258,597 2,423,036 1,835,561
Infrastructure 40,670,520 23,327,173 17,343,347
Total 72,604,932$ 29,183,839$ 43,421,093$
Description Original Cost
Accumulated
Depreciation Book Value
Business-Type Activities:
Land 56,730$ -$ 56,730$
Construction in Progress 736,394 736,394
Structures & Improvements 222,999 219,080 3,919
Machinery & Equipment 817,990 421,959 396,031
Infrastructure 58,304,450 24,340,543 33,963,907
Total 60,138,563$ 24,981,582$ 35,156,982$
Item 8.b. - Page 27
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City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 14
LONG-TERM DEBT
At the end of the 2017-18 fiscal year, the City had a variety of outstanding long-term debt, totaling $26.5 million in governmental
activities and $2.7 million in business-type activities. The City had total USDA loans payable outstanding of $1.0 million that was used
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 $478,073. 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 employees based on their past service) and the assets (mostly investments
reported at fair value) set aside to pay current employees, retirees, and beneficiaries.
The City entered into a 4-year lease for police vehicles during the fiscal year. Debt payments in the amount of $239,010 for
governmental activities and $39,699 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:
FINANCIAL ISSUES AND CONCERNS
The budget for the 2018-20 fiscal year was approved by City Council on June 12, 2018. 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
Debt Description FYE 2017 One-Year Long-Term One-Year Long-Term One-Year Long-Term
GO Bond $ - $ - $ - $ - $ - $ - $ -
Capital Lease 414,978 200,801 277,272 39,699 103,890 240,500 381,162
Loan Payable 1,143,889 38,209 1,068,741 - - 38,209 1,068,741
Comp Absence 841,466 - 685,851 - 98,532 - 784,383
Net Pension 17,220,056 - 19,402,521 - 2,084,901 - 21,487,422
OPEB 1,123,147 - 4,832,922 - 369,287 - 5,202,209
Total $ 20,743,536 $ 239,010 $ 26,267,307 $ 39,699 $ 2,656,610 $ 278,709 $ 28,923,917
Business-Type FYE 2018Governmental
Item 8.b. - Page 28
City of Arroyo Grande
MANAGEMENT’S DISCUSSION AND ANALYSIS
For the Fiscal Year Ended June 30, 2018
B - 15
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
important to utilize long-range financial planning to provide for consistent service level delivery. It is proposed to annually increase
reserves through accumulation of unexpended funds at the end of each fiscal year. In addition, as revenues increase and the City has
the ability to restore services reduced over the past few years, staff is attempting to do so largely through contracts and other means
that will provide the flexibility to expand and contract the organization in a timely manner when necessary due to economic trends.
The objective is to be prepared for the next economic downturn so adjustments can be made that will maintain stable services and
minimize the needs for layoffs or negotiated employee concessions.
CONTACTING THE CITY’S ADMINISTRATIVE SERVICES DEPARTMENT
This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the
City’s finances and to demonstrate the City’s accountability for the money it receives. If you have any questions about this report or
need additional financial information, contact the Administrative Services Department at 300 East Branch Street in Arroyo Grande,
California or by phone at (805) 473-5400.
Item 8.b. - Page 29
City of Arroyo Grande
STATEMENT OF NET POSITION
June 30, 2018
ASSETS
Cash and investments $17,895,271 $6,924,476 $24,819,747
Receivables:
Accounts 850,713 1,429,089 2,279,802
Taxes 1,374,581 1,374,581
Loan 1,229,442 1,229,442
Interest 36,478 15,972 52,450
Inventory 9,800 74,014 83,814
Prepaid items 30,579 30,579
Nondepreciable capital assets:
Land 4,236,528 56,730 4,293,258
Infrastructure 6,379,188 6,379,188
Construction in progress 3,652,161 736,394 4,388,555
Depreciable capital assets:
Structures and improvements 13,407,938 222,999 13,630,937
Equipment 4,258,597 817,990 5,076,587
Infrastructure 40,670,520 58,304,450 98,974,970
Accumulated depreciation (29,183,839) (24,981,582) (54,165,421)
Total assets 64,847,957 43,600,532 108,448,489
DEFERRED OUTFLOWS OF RESOURCES
Deferred pension 6,725,969 557,344 7,283,313
Deferred OPEB 190,319 14,542 204,861
Total deferred outflows of resources 6,916,288 571,886 7,488,174
LIABILITIES
Accounts payable 546,040 81,919 627,959
Accrued wages and benefits 214,027 214,027
Interest payable 9,609 9,609
Deposits payable 386,559 129,109 515,668
Unearned revenue 339,008 50,415 389,423
Noncurrent liabilities:
Due within one year 239,010 39,699 278,709
Due in more than one year 26,213,952 2,656,610 28,870,562
Total liabilities 27,948,205 2,957,752 30,905,957
DEFERRED INFLOWS OF RESOURCES
Deferred pension 753,828 38,879 792,707
Deferred OPEB 499,162 38,141 537,303
Total deferred inflows of resources 1,252,990 77,020 1,330,010
(Continued)
Governmental
Activities
Business-Type
Activities Total
The notes to the basic financial statements are an integral part of this statement.
B-16
Item 8.b. - Page 30
City of Arroyo Grande
STATEMENT OF NET POSITION
June 30, 2018
NET POSITION
Net investment in capital assets $41,836,070 $35,013,392 $76,849,462
Restricted for:
Access programming 47,219 47,219
Community development 796,128 796,128
Capital projects 1,737,212 1,737,212
Debt service 46,105 46,105
Landscape maintenance 514,388 514,388
Park construction 1,240,233 1,240,233
Public improvements 2,160,316 2,160,316
Public safety 410,534 410,534
Streets and roads 1,284,279 1,284,279
Water production 1,718,216 1,718,216
Unrestricted (7,490,438) 4,387,042 (3,103,396)
Total net position $42,563,050 $41,137,646 $83,700,696
Total
Governmental
Activities
Business-Type
Activities
B-17
Item 8.b. - Page 31
City of Arroyo Grande
STATEMENT OF ACTIVITIES
For the Fiscal Year Ended June 30, 2018
Governmental Activities:
General government $6,323,149 $37,178 $333,155 $-
Community development 2,339,874 926,624 410,929
Public safety 7,205,048 152,481 121,048 188,163
Recreation services 1,108,612 843,584
Public works 2,063,905 2,112
Streets and roads 2,516,344 180,458 835,605
Interest on long-term debt 53,546
Total governmental activities 21,610,478 2,142,437 1,289,808 599,092
Business-type Activities:
Water 1,737,552 7,033,290
Lopez 3,419,571 81
Sewer 953,702 1,024,751
Total business-type activities 6,110,825 8,058,122
Total government $27,721,303 $10,200,559 $1,289,808 $599,092
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
Restatement
Net position at beginning of fiscal year - restated
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
Item 8.b. - Page 32
$(5,952,816) $-$(5,952,816)
(1,002,321) (1,002,321)
(6,743,356) (6,743,356)
(265,028) (265,028)
(2,061,793) (2,061,793)
(1,500,281) (1,500,281)
(53,546) (53,546)
(17,579,141) (17,579,141)
5,295,738 5,295,738
(3,419,490) (3,419,490)
71,049 71,049
1,947,297 1,947,297
(17,579,141) 1,947,297 (15,631,844)
6,838,615 6,838,615
6,174,833 6,174,833
1,153,959 1,153,959
609,182 609,182
87,649 87,649
553,645 42,793 596,438
218,499 15,271 233,770
1,968,873 (1,968,873)
17,605,255 (1,910,809) 15,694,446
26,114 36,488 62,602
47,136,658 41,398,054 88,534,712
(4,599,722) (296,896) (4,896,618)
42,536,936 41,101,158 83,638,094
$42,563,050 $41,137,646 $83,700,696
Net (Expense) Revenue and Changes
in Net Position
Total
Governmental
Activities
Business-type
Activities
B-19
Item 8.b. - Page 33
Item 8.b. - Page 34
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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 be
accounted for in another fund.
Special Gasoline Tax Fund
This fund accounts for receipts and expenditures of money apportioned by the State under Streets and Highway
Code sections 2105, 2106, 2107, 2107.5, and new State Bill 1 additional gasoline tax. The use of gas tax revenues
can only be used to construct and maintain streets, roads and highways.
Transportation Impact Fees Fund
This fund accounts for developer impact fees (AB1600 fees) paid to protect the public health, safety, and welfare
by maintaining the existing level of public services for existing and future residents within the City of Arroyo
Grande.
In-Lieu Affordable Housing Fund
This fund accounts for monies paid by developers in meeting the City's mandatory affordable housing
requirements.
CDBG Fund
This fund accounts for revenues and expenditures related to Community Development Block Grant (CDBG) Funds.
The program is a flexible program that provides the City with resources to address a wide range of unique
community development needs.
Capital Improvement Fund
This fund accounts for capital projects constructed within the City. Funding sources are provided from other City
funds through capital transfers; grant revenues from the federal and state governments; and other miscellaneous
sources. These funding sources are used to improve the City parks, drainage systems, streets, sewer pipelines, and
water systems.
Other Governmental Funds
This is the aggregate of all the Nonmajor governmental funds.
Item 8.b. - Page 35
City of Arroyo Grande
GOVERNMENTAL FUNDS
Balance Sheet
June 30, 2018
ASSETS
Cash and investments $9,296,826 $169,408 $2,107,920 $600,466
Accounts receivable 584,633 7,661
Taxes receivable 1,313,114 37,591
Loan receivable 440,402
Interest receivable 19,151 65 4,273 631
Inventory 9,800
Prepaid items 30,579
Due from other funds 54,943
Total assets $11,309,046 $214,725 $2,112,193 $1,041,499
LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES
Liabilities:
Accounts payable $310,529 $22,765 $715 $-
Accrued wages and benefits 214,027
Deposits payable 386,559
Unearned revenue 80,800
Due to other funds
Total liabilities 991,915 22,765 715
Deferred inflows of resources:
Unavailable revenue 440,402
Total deferred inflows of resources 440,402
Fund Balances:
Nonspendable:
Inventory 9,800
Prepaid items 30,579
Restricted for:
Access programming
Community development
Debt service
Landscape maintenance
Park construction
Public improvements 2,111,478
Public safety
Streets and roads 191,960
Water production
Assigned for:
Affordable housing 601,097
Capital projects 2,654,595
Post employment benefits 538,588
Tourism benefit
Unassigned 7,083,569
Total fund balances 10,317,131 191,960 2,111,478 601,097
Total liabilities, deferred inflows of
resources, and fund balances $11,309,046 $214,725 $2,112,193 $1,041,499
General Fund
Transportation
Impact Fees Fund
In-Lieu
Affordable
Housing Fund
Special Gasoline
Tax Fund
B-22
Item 8.b. - Page 36
$- $282,502 $5,438,149 $17,895,271
62,031 147,641 48,747 850,713
23,876 1,374,581
789,040 1,229,442
12,358 36,478
9,800
30,579
54,943
$851,071 $430,143 $5,523,130 $21,481,807
$-$192,267 $19,764 $546,040
214,027
386,559
217,982 40,226 339,008
54,943 54,943
54,943 410,249 59,990 1,540,577
789,040 1,229,442
789,040 1,229,442
9,800
30,579
47,219 47,219
7,088 7,088
55,714 55,714
514,388 514,388
1,240,233 1,240,233
48,838 2,160,316
410,534 410,534
1,092,319 1,284,279
1,718,216 1,718,216
601,097
19,894 19,222 2,693,711
538,588
316,457 316,457
7,083,569
7,088 19,894 5,463,140 18,711,788
$851,071 $430,143 $5,523,130 $21,481,807
TotalCDBG Fund
Other
Governmental
Funds
Capital
Improvement
Fund
The notes to the basic financial statements are an integral part of this statement.
B-23
Item 8.b. - Page 37
City of Arroyo Grande
RECONCILIATION OF THE GOVERNMENTAL FUNDS - BALANCE SHEET TO THE STATEMENT OF NET POSITION
June 30, 2018
The notes to the basic financial statements are an integral part of this statement.
B-24
Total fund balances – governmental funds
In governmental funds, only current assets are reported. In the statement of net position, all assets
are reported, including capital assets and accumulated depreciation.
Capital assets at historical cost $ 72,604,932
Accumulated depreciation (29,183,839)
Net capital assets
In governmental funds, interest on long-term debt is not recognized until the period in which it
matures and is paid. In the government-wide statement of activities, it is recognized in the period
that it is incurred.
In governmental funds, certain receivables are deferred because they do not meet current financial
obligations. However, in government-wide statement of activities, they are recognized in the
period that they are 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 $6,725,969 and deferred inflows of resources of $753,828 is:
In governmental funds, OPEB 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 OPEB are recorded. The difference between deferred outflows of
resources of $190,319 and deferred inflows of resources of $499,162 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 $ 685,851
Capital lease payable 478,073
CA Energy loan payable 81,950
USDA loan payable 1,025,000
Net pension liability 19,349,166
OPEB liability 4,832,922
Total long-term liabilities
Total net position, governmental activities
$ 18,711,788
43,421,093
(9,609)
1,229,442
5,972,141
(308,843)
(26,452,962)
$ 42,563,050
Item 8.b. - Page 38
Item 8.b. - Page 39
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City of Arroyo Grande
GOVERNMENTAL FUNDS
Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Fiscal Year Ended June 30, 2018
REVENUES
Taxes and assessments $14,612,859 $-$-$-
Licenses and permits 420,387
Fines and penalties 51,402
Use of money and property 493,626 198 13,231 284,144
Intergovernmental revenues 457,935 554,909
Charges for services 1,204,429 133,226 -
Other revenue 96,599 8,085
Total revenues 17,337,237 563,192 146,457 284,144
EXPENDITURES
Current:
General government 5,834,310
Community development 2,074,084 21,230
Public safety 6,205,132
Recreation services 990,608
Public works 1,773,300
Streets and road 695,617 715
Capital outlay 260,965 77,069
Debt service:
Principal 249,647 18,424
Interest and fiscal agent fees 16,686 2,215
Total expenditures 17,404,732 793,325 715 21,230
Excess of revenue over/(under)
expenditures (67,495) (230,133) 145,742 262,914
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 50,570
Proceeds from capital lease 167,695 154,532
Transfers in 2,276,615 359,124
Transfers out (1,495,150) (91,568) (49,217)
Total other financing sources/(uses)999,730 422,088 (49,217)
Net change in fund balances 932,235 191,955 96,525 262,914
Fund balances (deficit) - July 1, 2017 9,384,896 5 2,014,953 338,183
Fund balances (deficit) - June 30, 2018 $10,317,131 $191,960 $2,111,478 $601,097
General Fund
Transportation
Impact Fees Fund
In-Lieu
Affordable
Housing Fund
Special Gasoline
Tax Fund
B-26
Item 8.b. - Page 40
$-$-$251,379 $14,864,238
420,387
51,402
36,198 827,397
120,275 290,654 465,127 1,888,900
332,993 1,670,648
63,245 167,929
120,275 353,899 1,085,697 19,890,901
62,600 85,218 5,982,128
73,889 2,169,203
74,851 6,279,983
24,381 200 1,015,189
43,547 1,816,847
1,010,881 1,707,213
1,389,901 1,727,935
28,000 296,071
38,962 57,863
2,487,763 344,667 21,052,432
120,275 (2,133,864) 741,030 (1,161,531)
50,570
322,227
2,133,864 78,804 4,848,407
(123,282) (1,120,317) (2,879,534)
(123,282) 2,133,864 (1,041,513) 2,341,670
(3,007) (300,483) 1,180,139
10,095 19,894 5,763,623 17,531,649
$7,088 $19,894 $5,463,140 $18,711,788
Other
Governmental
Funds TotalCDBG Fund
Capital
Improvement
Fund
The notes to the basic financial statements are an integral part of this statement.
B-27
Item 8.b. - Page 41
City of Arroyo Grande
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF
GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
For the Fiscal Year Ended June 30, 2018
The notes to the basic financial statements are an integral part of this statement.
B-28
Total net change in fund balances – governmental funds
In governmental funds, capital outlays are reported as expenditures. However, in the statement of
activities, the cost of those assets is allocated over their estimated useful lives as depreciation
expense. This is the amount by which additions to capital assets of $1,727,935 is more than
depreciation expense $(1,257,029) 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, 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 $322,227 is more than repayments
of debt of $(296,071) 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:
Change in net position – governmental activities
$ 1,180,139
470,906
(45,916)
(273,752)
4,317
(26,156)
66,025
(1,208,922)
(140,527)
$ 26,114
Item 8.b. - Page 42
City of Arroyo Grande
DESCRIPTION OF MAJOR PROPRIETARY FUNDS
B-29
Water Fund
This fund is used to account for the activities associated with the transmission and distribution of potable water by
the City to its users. This fund also accounts for the accumulation of water facility revenues to be used in capital
improvement projects in the City.
Lopez Fund
This fund is responsible for the purchase of water from Lopez Dam. The City has a 50.55% share of the water and
expense generated by Zone 3 – County of San Luis Obispo’s Flood Control and Water Conservation District.
Sewer Fund
This fund is used to account for maintenance of sewer lines connecting City residents to the South San Luis Obispo
County Sanitation District sewer plant. This fund also accounts for the accumulation of sewer facility revenues to
be used in capital improvement projects in the City.
Item 8.b. - Page 43
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Net Position
June 30, 2018
ASSETS
Current assets:
Cash and investments $3,308,142 $1,703,956 $1,912,378 $6,924,476
Receivables:
Accounts, net 1,250,637 178,452 1,429,089
Interest 12,085 3,887 15,972
Inventory 69,282 4,732 74,014
Total current assets 4,640,146 1,703,956 2,099,449 8,443,551
Capital assets:
Nondepreciable assets 751,073 42,051 793,124
Depreciable assets, net 11,044,721 23,319,136 34,363,857
Total capital assets, net 11,795,794 23,361,187 35,156,981
Total assets 16,435,940 1,703,956 25,460,636 43,600,532
DEFERRED OUTFLOWS OF RESOURCES
Deferred pension 526,352 30,992 557,344
Deferred OPEB 14,542 14,542
Total deferred outflows of resources 540,894 30,992 571,886
LIABILITIES
Current liabilities:
Accounts payable 41,926 39,993 81,919
Deposits payable 129,109 129,109
Unearned revenue 41,623 8,792 50,415
Debt due within one year 24,576 15,123 39,699
Total current liabilities 237,234 63,908 301,142
Noncurrent liabilities:
Compensated absences 87,919 10,613 98,532
Leases payable 64,312 39,578 103,890
OPEB liability 369,287 369,287
Net pension liability 1,968,966 115,935 2,084,901
Total noncurrent liabilities 2,490,484 166,126 2,656,610
Total liabilities 2,727,718 230,034 2,957,752
DEFERRED INFLOWS OF RESOURCES
Deferred pension 36,717 2,162 38,879
Deferred OPEB 38,141 38,141
Total deferred inflows of resources 74,858 2,162 77,020
NET POSITION
Net investment in capital assets 11,706,906 23,306,486 35,013,392
Restricted for:
Capital projects 1,375,277 361,935 1,737,212
Unrestricted 1,092,075 1,703,956 1,591,011 4,387,042
Total net position $14,174,258 $1,703,956 $25,259,432 $41,137,646
TotalsLopez FundWater Fund Sewer Fund
The notes to the basic financial statements are an integral part of this statement.
B-30
Item 8.b. - Page 44
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Revenues, Expenses, and Changes in Net Position
For the Fiscal Year Ended June 30, 2018
OPERATING REVENUES
Charges for services $6,936,153 $81 $1,021,987 $7,958,221
Distribution charges 29,584 29,584
Meter installations 6,521 6,521
Other revenue 61,032 2,764 63,796
Total operating revenues 7,033,290 81 1,024,751 8,058,122
OPERATING EXPENSES
Distribution 683,190 683,190
General 601,512 370,440 971,952
Lopez water contract 3,419,571 3,419,571
Production 171,775 171,775
Depreciation 279,626 582,370 861,996
Total operating expenses 1,736,103 3,419,571 952,810 6,108,484
Operating income (loss)5,297,187 (3,419,490) 71,941 1,949,638
NON-OPERATING REVENUES/(EXPENSES)
Gain on sale of capital assets 12,486 2,785 15,271
Interest income 29,494 1,564 11,735 42,793
Interest expense (1,449) (892) (2,341)
Total non-operating revenues 40,531 1,564 13,628 55,723
Income (loss) before transfers 5,337,718 (3,417,926) 85,569 2,005,361
Transfer in 232,499 3,419,571 3,652,070
Transfer out (5,230,982) (389,961) (5,620,943)
Change in net position 339,235 1,645 (304,392) 36,488
Net position - July 1, 2017 14,130,809 1,702,311 25,564,934 41,398,054
Restatement (295,786) (1,110) (296,896)
Net position - July 1, 2017, restated 13,835,023 1,702,311 25,563,824 41,101,158
Net position - June 30, 2018 $14,174,258 $1,703,956 $25,259,432 $41,137,646
Water Fund Lopez Fund TotalsSewer Fund
The notes to the basic financial statements are an integral part of this statement.
B-31
Item 8.b. - Page 45
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Cash Flows
For the Fiscal Year Ended June 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $6,990,552 $81 $1,025,492 $8,016,125
Payments to suppliers (992,952) (3,419,571) (82,065) (4,494,588)
Payments to employees (297,629) (211,350) (508,979)
Other receipts 61,032 2,764 63,796
Net cash provided (used) by operating
activities 5,761,003 (3,419,490) 734,841 3,076,354
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Lease principal payments made (12,050) (7,415) (19,465)
Interest expense payments (1,449) (892) (2,341)
Purchase of capital assets (575,909) (206,538) (782,447)
Proceeds from sale of capital assets 12,486 2,903 15,389
Capital lease proceeds 100,938 62,116 163,054
Net cash used by capital and
related financing activities (475,984) (149,826) (625,810)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers from/(to) other funds (4,998,483) 3,419,571 (389,961) (1,968,873)
Net cash provided (used) by noncapital
financing activities (4,998,483) 3,419,571 (389,961) (1,968,873)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 25,509 1,564 10,229 37,302
Net cash provided by investing
activities 25,509 1,564 10,229 37,302
Net increase in cash and cash
equivalents 312,045 1,645 205,283 518,973
Cash and cash equivalents - July 1, 2017 2,996,097 $1,702,311 $1,707,095 $6,405,503
Cash and cash equivalents - June 30, 2018 $3,308,142 $1,703,956 $1,912,378 $6,924,476
RECONCILIATION TO THE STATEMENT OF NET POSITION
Cash and investments $3,308,142 $1,703,956 $1,912,378 $6,924,476
(Continued)
Water Fund Lopez Fund TotalsSewer Fund
The notes to the basic financial statements are an integral part of this statement.
B-32
Item 8.b. - Page 46
City of Arroyo Grande
PROPRIETARY FUNDS
Statement of Cash Flows (Continued)
For the Fiscal Year Ended June 30, 2018
Reconciliation of operating income (loss) to net
cash provided (used) by operating
activities:
Operating income (loss)$5,297,187 $(3,419,490) $71,941 $1,949,638
Adjustments to reconcile operating
activities:
Depreciation expense 279,626 582,370 861,996
Change in assets, deferred outflows of resources,
liabilities and deferred inflows of resources:
Receivables, net 3,908 3,505 7,413
Inventory 3,188 221 3,409
Deferred outflows for pensions (43,038) (12,798) (55,836)
Deferred outflows for OPEB 367 367
Accounts and other payables (36,338) 37,524 1,186
Deposits payable 8,210 8,210
Unearned revenue 6,176 6,176
Compensated absences 7,871 1,071 8,942
OPEB liability (27,770) (27,770)
Pension liability 216,970 49,982 266,952
Deferred inflows for pensions 6,505 1,025 7,530
Deferred inflows for OPEB 38,141 38,141
Net cash provided (used) by
operating activities $5,761,003 $(3,419,490) $734,841 $3,076,354
Water Fund Lopez Fund TotalsSewer Fund
The notes to the basic financial statements are an integral part of this statement.
B-33
Item 8.b. - Page 47
Item 8.b. - Page 48
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City of Arroyo Grande
DESCRIPTION OF FIDUCIARY FUNDS
B-35
Private-Purpose Trust Fund
Successor Agency to the Former Arroyo Grande Redevelopment Agency
This private-purpose trust fund was created to hold the assets of the former redevelopment agency of the City of
Arroyo Grande until they are distributed to other units of state and local government after the payment of
enforceable obligations have been made.
Agency Funds
Sanitation District Fund
This agency fund accounts for the receipt and remittance of wastewater processing fees on behalf of the South San
Luis Obispo County Sanitation District. The City bills the wastewater processing fee through the utility bills,
collecting the fee from the City's utility customers.
Downtown Parking Fund
This agency fund collects assessments from Arroyo Grande Village merchants for the maintenance of the Village
parking lots for the Downtown Village Merchants Association.
Item 8.b. - Page 49
City of Arroyo Grande
STATEMENT OF FIDUCIARY NET POSITION
June 30, 2018
ASSETS
Cash and investments $603,001 $131,344 $734,345
Accounts receivable 82,805 82,805
Interest receivable 17 17
Inventory - land held for resale 860,928 860,928
Note receivable 1,334,758 1,334,758
Total assets 2,798,687 $214,166 3,012,853
LIABILITIES
Accounts payable 157 $18,747 18,904
Unearned revenue 780,841 780,841
Due to other agencies 195,419 195,419
Loans payable 207,319 207,319
Bonds payable 5,084,131 5,084,131
Total liabilities 6,072,448 $214,166 6,286,614
NET POSITION
Held in trust for:
Successor agency to the former
redevelopment agency (3,273,761) (3,273,761)
Total net position $(3,273,761) $(3,273,761)
Private-Purpose
Trust Fund
Agency Funds Totals
Successor Agency to
the Former
Redevelopment
Agency
The notes to the basic financial statements are an integral part of this statement.
B-36
Item 8.b. - Page 50
City of Arroyo Grande
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
Fiduciary Fund
For the Fiscal Year Ended June 30, 2018
ADDITIONS
Property taxes $467,224
Use of money and property 32,222
Total additions 499,446
DELETIONS
Administration 69,000
Contract services 5,136
Costs of issuance for bond refunding 230,021
Interest and fiscal agent fees 207,549
Total deletions 511,706
Net change in net position (12,260)
Net position - July 1, 2017 (3,261,501)
Net position - June 30, 2018 $(3,273,761)
Successor Agency to
the Former
Redevelopment
Agency
Private-Purpose
Trust Fund
The notes to the basic financial statements are an integral part of this statement.
B-37
Item 8.b. - Page 51
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-38
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 expenditures in 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.
Item 8.b. - Page 52
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-39
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.
Item 8.b. - Page 53
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-40
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.
Item 8.b. - Page 54
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-41
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 assets. The
amount charged to depreciation expense each fiscal year represents that fiscal year’s pro rata share of the cost of capital assets.
GASB Statement No. 34 requires that all capital assets with limited useful lives be depreciated over their estimated useful lives.
Depreciation is provided using the straight line method which means the cost of the asset is divided by its expected useful life in
years and the result is charged to expense each fiscal year until the asset is fully depreciated. The City has assigned the useful
lives listed below to capital assets:
Machinery and equipment 5 – 15 years
Structures and improvements 10 – 50 years
Infrastructure 25 – 50 years
F. Interfund Transactions
Interfund transactions are reported as loans, services provided, reimbursements, or transfers. Loans are reported as interfund
receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at
market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs
a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions
are treated as transfers. Transfers among governmental funds are netted as part of the reconciliation to the government-wide
financial statements.
G. Unearned Revenue
Unearned 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.
Item 8.b. - Page 55
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-42
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 Liabilities
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.
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.
Item 8.b. - Page 56
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-43
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
K. Fund Balances and Net Position – continued
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 below:
Secured Unsecured
Valuation/Lien Dates January 1 January 1
Levy Dates July 1 July 1
Due Dates November 1 (50%) August 1
February 1 (50%)
Delinquency Dates December 10 (Nov) August 31
April 10 (Feb)
The City 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.
Item 8.b. - Page 57
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-44
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued
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.
N. New Accounting Pronouncements
For the fiscal year ended June 30, 2018, the City implemented Governmental Accounting Standards Board (GASB) Statement No.
75, “Accounting and Financial Reporting for Postemployment Benefits Other than Pensions.” This Statement is effective for
periods beginning after June 15, 2017. The objective of this Statement is to improve accounting and financial reporting by state
and local governments for postemployment benefits other than pensions. Implementation of the GASB Statement No. 75 and the
impact on the City’s financial statements are explained in Note 12 – Postemployment Health Care Benefits (OPEB) and Note 17 –
Restatements.
P. Future Accounting Pronouncements
GASB Statements listed below will be implemented in future financial statements:
Statement No. 84 "Fiduciary Activities” The provisions of this statement are effective
for fiscal years beginning after December 15, 2018.
Statement No. 87 "Leases” The provisions of this statement are effective
for fiscal years beginning after December 15, 2019.
Statement No. 89 “Accounting for Interest Cost Incurred
before the end of a Construction period"
The provisions of this statement are effective
for fiscal years beginning after December 15, 2019.
Statement No. 90 "Majority Equity Interests-an Amendment of
GASB Statements 14 and 61.”
The provisions of this statement are effective for
fiscal years beginning after June 15, 2018.
Statement No. 91 "Conduit Debit Obligations” The provisions of this statement are effective
for fiscal years beginning after December 15, 2020.
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.
Item 8.b. - Page 58
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-45
NOTE 3 – CASH AND INVESTMENTS
The composition of cash and investments as of June 30, 2018, is as follows:
Cash in bank and on hand $ 10,289,120
Cash and investments held with fiscal agent 4,326
Cash in escrow 77,463
Investments 15,183,183
Total $ 25,544,092
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 $ 24,809,747
Cash and investments, statement of fiduciary net position 734,345
Total $ 25,544,092
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, 2018:
Fair Value Measurements Using
Total
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Investments by Fair Value
U.S. Agency Securities $ 6,873,923 $ 6,873,923 $ - $ -
Investments measured at Amortized Cost
Local Agency Investment Fund 4,735,011
Certificates of Deposit 3,574,249
Money Market Funds 4,326
Total $ 15,187,509
Investments Authorized by the California Government Code and the City’s Investment Policy
The table on the following page 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.
Item 8.b. - Page 59
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-46
NOTE 3 – CASH AND INVESTMENTS – continued
Investments Authorized by the California Government Code and the City’s Investment Policy (continued)
Maximum Maximum
Maximum Percentage of Investment
Authorized Investment Type Maturity Portfolio in One Issuer
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
Authorized Investment Type Maturity Portfolio in One Issuer
Money Market Accounts N/A None None
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the
longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways
that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments
and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as
necessary to provide the cash flows and liquidity needed for operations. Information about the sensitivity of the fair values of the
City’s investments to market interest rate fluctuations is provided on the following page that shows the distribution of the City’s
investments by maturity:
Remaining Maturity (in Months)
Carrying
Amount
12 Months or
Less
13-24 Months
25-60 Months
More than 60
Months Investment Type
Local Agency Investment Fund $ 4,735,011 $ 4,735,011 $ - $ - $ -
Certificates of Deposit 3,574,249 1,347,249 1,731,000 496,000
U.S. Agency Securities 6,873,923 1,988,758 2,445,402 2,439,763
Held by Fiscal Agent:
Money Market Funds 4,326 4,326
Total $ 15,187,509 $ 8,075,344 $ 4,176,402 $ 2,935,763 $ -
Item 8.b. - Page 60
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-47
NOTE 3 – CASH AND INVESTMENTS – continued
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is
measured by the assignment of rating by a nationally recognized statistical rating organization. Presented below is the minimum
rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the
actual rating as of fiscal year end for each investment type:
Minimum Exempt Rating as of Fiscal Year End
Carrying Legal From
Investment Type Amount Rating Disclosure AAA AA Not Rated
Local Agency Investment Fund $ 4,735,011 N/A $ - $ - $ - $ 4,735,011
Certificates of Deposit 3,574,249 N/A 3,574,249
U.S. Agency Securities 6,873,923 N/A 6,873,923
Held by Fiscal Agent:
Money Market Funds 4,326 N/A 4,326
Total $ 15,187,509 $ - $ 6,873,923 $ - $ 8,313,586
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated
by the California Government Code.
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not
be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The
California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure
to custodial credit risk for deposits, other than the following provision for deposits: The California Government Code requires that a
financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool
held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities
in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial
institutions to secure the City’s deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public
deposits. None of the City’s deposits with financial institutions in excess of the Federal Depository Insurance Corporation’s limits were
held in uncollateralized accounts.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a
transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of
another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that
would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies
only to direct investments in marketable securities. Custodial credit risk does not apply to a local government’s indirect investment
in securities through the use of mutual funds or governmental investment pools (such as LAIF).
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code
under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the
accompanying basic financial statements at the amounts based upon the City’s pro-rata share of the fair value provided by LAIF for
the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost basis.
Item 8.b. - Page 61
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-48
NOTE 4 – CAPITAL ASSETS
Capital asset activity for the fiscal year ended June 30, 2018, is as follows:
Transfers and
Balance Other Re- Balance
July 1, 2017 Additions Deletions classifications June 30, 2018
Governmental Activities
Nondepreciable capital assets
Land $ 4,236,528 $ - $ - $ - $ 4,236,528
Infrastructure 6,379,188 6,379,188
Construction in progress 3,453,399 1,389,901 (45,916) (1,145,223) 3,652,161
Total nondepreciable capital
assets 14,069,115 1,389,901 (45,916) (1,145,223) 14,267,877
Depreciable capital assets
Structures and improvements 12,876,665 14,628 516,645 13,407,938
Equipment 3,667,792 323,406 (292,429) 559,828 4,258,597
Infrastructure 40,601,770 68,750 40,670,520
Total depreciable capital assets 57,146,227 338,034 (292,429) 1,145,223 58,337,055
Less accumulated depreciation 28,219,239 1,257,029 (292,429) 29,183,839
Net depreciable capital assets 28,926,988 (918,995) 1,145,223 29,153,216
Net capital assets $ 42,996,103 $ 470,906 $ (45,916) $ - $ 43,421,093
Transfers and
Balance Other Re- Balance
July 1, 2017 Additions Deletions classifications June 30, 2018
Business-type Activities
Nondepreciable capital assets
Land $ 56,730 $ - $ - $ - $ 56,730
Construction in progress 473,634 507,049 (118) (244,171) 736,394
Total nondepreciable capital
assets 530,364 507,049 (244,171) 793,124
Depreciable capital assets
Structures and improvements 222,999 222,999
Equipment 711,692 155,932 49,634 817,990
Infrastructure 57,940,813 119,466 244,171 58,304,450
Total depreciable capital assets 58,875,504 275,398 49,634 244,171 59,345,439
Less accumulated depreciation 24,169,220 861,996 49,634 24,981,582
Net depreciable capital assets 34,706,284 (586,598) 244,171 34,363,857
Net capital assets $ 35,236,648 $ (79,549) $ (118) $ - $ 35,156,981
Transfers and Other Reclassifications
During the 2017-18 fiscal year, the City completed $1,389,394 in various capital projects.
Item 8.b. - Page 62
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-49
NOTE 4 – CAPITAL ASSETS – continued
Depreciation Allocation
Depreciation expense was charged to functions and programs based on their usage of related assets. The amounts allocated to each
function or program is presented below:
Governmental Activities:
General government $ 141,303
Community development 1,317
Public safety 247,877
Public works 106,148
Streets and roads 760,384
Total depreciation expense – governmental activities $ 1,257,029
Business-type Activities:
Water $ 279,626
Sewer 582,370
Total depreciation expense – business-type activities $ 861,996
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, 2018, was $207,319.
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 $233,083.
Loans Receivable:
In-Lieu Affordable Housing Fund $ 440,402
CDBG Fund 789,040
Total $ 1,229,442
Item 8.b. - Page 63
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-50
NOTE 6 – INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS
A. Interfund Transfers
The transfers in and out between funds during the fiscal year ended June 30, 2018, were as follows:
Transfer In Transfer Out
General Fund $ 2,276,615 $ 1,495,150
Special Gasoline Tax Fund 359,124 91,568
Transportation Impact Fees Fund 49,217
Capital Improvement Fund 2,133,864
CDBG Fund 123,282
Nonmajor Governmental Funds 78,804 1,120,317
Water Fund 232,499 5,230,982
Lopez Fund 3,419,571
Sewer Fund 389,961
Total $ 8,500,477 $ 8,500,477
B. Interfund Receivable and Payable
The amounts borrowed between funds during the fiscal year ended June 30, 2018, were as follows:
Due from Due to
General Fund $ 54,943 $ -
CDBG Fund 54,943
Total $ 54,943 $ 54,943
NOTE 7 – DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
At June 30, 2018, deferred inflows of resources, reported in the governmental fund financial statements, consisted of the following:
Unavailable Loan Revenue:
In-Lieu Affordable Housing Fund $ 440,402
CDBG Fund 789,040
Total $ 1,229,442
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, 2018, total $685,851 for governmental activities and $98,532 for business-type activities.
B. 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 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.
Item 8.b. - Page 64
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-51
NOTE 8 – LONG-TERM DEBT – continued
B. Capital Leases Payable (continued)
The future minimum payment obligation for the capital leases payable are shown below:
Fiscal Year
Ending June 30
De Lage
Landen
California
First National
Bank
Community
Bank of Santa
Maria
Total
2019 $ 54,725 $ 74,847 $ 130,827 $ 260,399
2020 74,846 130,155 205,001
2021 129,467 129,467
2022 64,469 64,469
Total 54,725 149,693 454,918 659,336
Less: amount
representing in interest
1,578 8,526 27,570
37,674
Present value of net
minimum payments
$ 53,147 $ 141,167 $ 427,348
$ 621,662
C. California Energy Resources Conservation and Development Commission Loan Payable
On July 7, 2010, the City entered into a loan agreement with the California Energy Resources Conservation and Development
Commission (CA Energy). The purpose of the loan was to partially fund the city-wide energy savings project. The project consisted
of heating, ventilation, and air conditioning retrofits including equipment, building controls, lighting equipment and lighting
controls, installation of vending machine misers, installation of LCD computer monitors, installation of computer controls, and
installation of LED streetlights. Installation occurred at all City owned buildings including city council chambers, city hall, fire
department, community center, corporate yard, Soto Field complex, and recreation services building.
The outstanding loan payable debt of the City at June 30, 2018 is shown below:
Date of
Issue Interest Rate
Maturity
Date
Amount of
Original Issue
Outstanding
July 1, 2017
Redeemed
Current Year
Outstanding
June 30, 2018
2011 3.00% 2026 $ 127,512 $ 90,889 $ 8,939 $ 81,950
The future minimum payment obligation for the loan payable is as follows:
Fiscal Year
Ending June 30
Principal
Interest
Total
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 10,374 1,225 11,599
2024-2026 33,040 1,759 34,799
Total $ 81,950 $ 10,846 $ 92,796
Item 8.b. - Page 65
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-52
NOTE 8 – LONG-TERM DEBT – continued
D. 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
Issue Interest Rates
Maturity
Date
Amount of
Original Issue
Outstanding
July 1, 2017
Redeemed
Current Year
Outstanding
June 30, 2018
2011 3.75% 2041 $ 1,200,000 $ 1,053,000 $ 28,000 $ 1,025,000
The future minimum payment obligation for the USDA loan payable is as follows:
Fiscal Year
Ending June 30
Principal
Interest
Total
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 33,000 33,244 66,244
2024-2028 187,000 146,081 333,081
2029-2033 225,000 107,569 332,569
2034-2038 270,000 61,312 331,312
2039-2041 188,000 10,763 198,763
Total $ 1,025,000 $ 503,757 $ 1,528,757
E. Net Pension Liability
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 of Arroyo Grande’s California Public Employee’s Retirement
System (CalPERS) plans (Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the
same basis as they are reported by CalPERS. 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. See Note 11 for
further detail.
F. OPEB Liability
For purposes of measuring the net OPEB liability and deferred outflows/inflows of resources related to OPEB, and OPEB expense,
information about the fiduciary net position of the City’s plan (OPEB Plan) and additions to/deductions from the Plan’s fiduciary
net position have been determined on the same basis. For this purpose, benefit payments are recognized when due and payable
in accordance with the benefit terms. Investments are reported at fair value. See Note 12 for further detail.
G. Changes in Long-Term Liabilities
Long-term liability activity for the fiscal year ended June 30, 2018, is as follows:
Balance
July 1, 2017
Additions
Deletions
Restatement
Balance
June 30, 2018
Due Within
One Year
Governmental Activities
Compensated absences $ 751,876 $ 552,257 $ 618,282 $ - $ 685,851 $ -
Capital leases payable 414,978 322,227 259,132 478,073 200,801
CA Energy loan payable 90,889 8,939 81,950 9,209
USDA loan payable 1,053,000 28,000 1,025,000 29,000
Net pension liability 15,435,578 3,656,873 1,958,614 2,215,329 19,349,166
OPEB liability 1,007,329 419,976 783,403 4,189,020 4,832,922
Total $ 18,753,650 $ 4,951,333 $ 3,656,370 $ 6,404,349 $ 26,452,962 $ 239,010
Item 8.b. - Page 66
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-53
NOTE 8 – LONG-TERM DEBT – continued
G. Changes in Long-Term Liabilities - continued
Balance
July 1, 2017
Additions
Deletions
Restatement
Balance
June 30, 2018
Due Within
One Year
Business-type Activities
Compensated absences $ 89,590 $ 58,820 $ 49,878 $ - $ 98,532 $ -
Capital leases payable 163,054 19,465 143,589 39,699
Net pension liability 1,784,478 650,852 383,900 33,471 2,084,901
OPEB liability 115,818 32,097 59,867 281,239 369,287
Total $ 1,989,886 $ 904,823 $ 513,110 $ 314,710 $ 2,696,309 $ 39,699
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.
The future minimum contract payments for the debt service are shown below:
Fiscal Year
Ending June 30
Contract
Payment
2019 $ 472,396
2020 471,019
2021 470,974
2022 472,112
2023 472,491
2024-2028 2,356,755
2029-2030 1,412,177
Total $ 6,127,924
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 $2,223,604 to FCFA during the fiscal year ended June 30, 2018 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.
Item 8.b. - Page 67
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-54
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.
The defined benefit pension plan provisions and benefits at June 30, 2018 are summarized below:
Miscellaneous Employee Plan
Tier I Tier II Tier III (PEPRA)
Hire date
Prior to December
20, 2012
On or after
December 20,
2012*
On or after
January 1, 2013
Benefit formula 2.5% @ 55 2.0% @ 55 2.0% @ 62
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 62
Required employee contribution rates 8.000% 7.000% 6.250%
Required employer contribution rates 10.110% 8.418% 6.533%
Required employer payment of unfunded
liability
$851,937
$0
$62
Safety Employee Plan
Tier I Tier II Tier III (PEPRA)
Hire date
Prior to December
20, 2012
On or after
December 20,
2012*
On or after
January 1, 2013
Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 years of service 5 years of service 5 years of service
Benefit payments Monthly for life Monthly for life Monthly for life
Retirement age 50 55 57
Required employee contribution rates 9.000% 9.000% 11.500%
Required employer contribution rates 19.723% 16.842% 11.990%
Required employer payment of unfunded
liability
$884,034
$0
$91
*After January 1, 2013, second tier will only apply to employees transferring from another CalPERS agency
Item 8.b. - Page 68
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-55
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
A. General Information about the Pension Plans – continued
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 2017-18 fiscal year were $1,123,561 for the miscellaneous plan and $1,218,956 for the safety plan.
At June 30, 2018, the City reported a liability of $12,721,850 for the miscellaneous plan and $8,712,217 for the safety plan for its
proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2017 and the total pension
liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2016 rolled forward to
June 30, 2017 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, 2018, the City’s proportionate share of the net pension liability for each Plan as
of June 30, 2016 and June 30, 2017 was as shown on the following page:
Miscellaneous Safety
Proportion-June 30, 2016 0.32168% 0.11672%
Proportion-June 30, 2017 0.32272% 0.14581%
Adjustment due to differences in proportions 0.00104% 0.02909%
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions
For the fiscal year ended June 30, 2018, the City recognized pension expense of $2,241,725 for the miscellaneous plan and
$1,528,360 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, 2018, the City reported deferred outflows and inflows of resources related to pension from the following resources:
Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contributions subsequent to measurement date $ 2,342,517 $ -
Differences between expected and actual experience 110,982
Changes in assumptions 2,925,318 223,664
Net difference between projected and actual earnings on
pension plan investment
651,168
Differences between City contributions and proportionate
share of contributions
823,390
Adjustment due to differences in proportions 540,920 458,061
Total $ 7,283,313 $ 792,707
Item 8.b. - Page 69
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-56
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions – continued
The reported deferred outflows of resources related to pensions in the amount of $2,342,517 resulting from City contributions
subsequent to the measurement date will be recognized as a reduction of the pension liability in the 2018-19 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
2019 $ 1,291,238
2020 1,947,418
2021 1,293,642
2022 (384,209)
Total $ 4,148,089
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:
Change in Assumptions – In December 2016, as part of the Asset Liability Management (ALM) review cycle, the CalPERS Board
approved to lower the financial reporting discount rate for PERF C from 7.65% to 7.15%.
Discount Rate – The discount rate used to measure the total pension liability was 7.15 %. 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 7.15 % discount rate is
appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate
of 7.15 % 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.
Miscellaneous Safety
Valuation Date June 30, 2016 June 30, 2016
Measurement Date June 30, 2017 June 30, 2017
Actuarial Cost Method Entry-Age Normal Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:
Discount Rate 7.15%7.15%
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 7.00%7.00%
Mortality Derived using CalPERS' Membership Derived using CalPERS' Membership
Data for all Funds (1)Data for all Funds (1)
Post Retirement Benefit Increase Contract COLA up to 2.75% until Contract COLA up to 2.75% until
Purchasing Power Protection Allowance Purchasing Power Protection Allowance
Floor on Purchasing Power applies;Floor on Purchasing Power applies;
2.75% therafter 2.75% therafter
(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 2017 experience study report.
Item 8.b. - Page 70
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-57
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions – continued
CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that
is scheduled to be completed in February 2022. 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 2021-22 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.
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.
Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following table represents the City’s proportionate
share of the net pension liability calculated using the discount rate of 7.15 %, 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 (6.15 %) or 1- percentage
point higher (8.15 %) than the current rate:
Asset Class
New Strategic
Allocation
Real Return
Years 1-10(a)
Real Return
Years 11+(b)
Global Equity 47.0%4.90%5.38%
Global Fixed Income 19.0%0.80%2.27%
Inflation Sensitive 6.0%0.60%1.39%
Private Equity 12.0%6.60%6.63%
Real Estate 11.0%2.80%5.21%
Infrastructure and Forestland 3.0%3.90%5.36%
Liquidity 2.0%-0.40%-0.90%
Total 100.0%
(a) An expected inflation of 2.5% was used for this period.
(b) An expected inflation of 3.0% was used for this period.
Item 8.b. - Page 71
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-58
NOTE 11 – DEFINED BENEFIT PENSION PLAN – continued
B. Pension Liabilities, Deferred Outflows and Inflows, and Pension Expense Related to Pensions – continued
Plans’ Net Pension Liability
Discount Rate -1%
(6.15%)
Current Discount
Rate (7.15%)
Discount Rate +1%
(8.15%)
Miscellaneous $ 18,135,082 $ 12,721,850 $ 8,238,513
Safety 12,951,034 8,712,217 5,247,195
Total $ 31,086,116 $ 21,434,067 $ 13,485,708
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, 2018, the City had no amount outstanding for contributions to the pension plan required for the 2017-18 fiscal year.
NOTE 12 – POSTEMPLOYMENT HEALTH CARE BENEFITS (OPEB)
A. Plan Description
The City provides postemployment health care benefits through the CalPERS cost-sharing multiple employer health care program
(PEMHCA) to eligible employees. The City pays the greater of $133 per month or the PEMHCA minimum of $133 for fiscal year
2017-2018. To be eligible for postretirement health benefits, employees must complete at least 5 years of continuous service and
be a minimum of 55 years of age. 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.
As of June 30, 2018, the City has not funded an OPEB trust.
B. Employees Covered
As of June 30, 2017, actuarial valuation, the following current and former employees were covered by the benefit terms under
the City’s Plan:
C. Contributions
The City currently finances benefits on a pay-as-you-go basis primarily from the City’s General Fund, Streets Fund and Water Fund.
D. Total OPEB Liability
The City's OPEB Liability was measured as of June 30, 2017 and the total OPEB liability used to calculate the OPEB Liability was
determined by an actuarial valuation as of June 30, 2017.
Actuarial assumptions. The total OPEB liability was determined using the following actuarial assumptions, applied to all periods
included in the measurement, unless otherwise specified:
Active plan members 70
Inactive plan members or beneficiaries currently receiving benefits 47
Inactive plan members entitled to but not yet receiving benefit payments 35
Total 152
Salary increases 2.00%
Discount rate 3.58%
Healthcare cost trend rate 7.50% decreasing to 4.00% for 2076 and later
Item 8.b. - Page 72
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-59
NOTE 12 – POSTEMPLOYMENT HEALTH CARE BENEFITS (OPEB) – continued
D. Total OPEB Liability - continued
Pre-retirement mortality rates were based on the CalPERS 1997-2015 Experience Study, as appropriate, without projection. Post-
retirement mortality rates were based on the mortality projected fully generational with Scale MP-2017. Actuarial assumptions
used in the June 30, 2017 valuation were based on a review of plan experience during the period July 1, 2015 to June 30, 2017.
Discount rate. GASB 75 requires a discount rate that reflects the following:
a) The long-term expected rate of return on OPEB plan investments — to the extent that the OPEB plan's fiduciary net
position (if any) is projected to be sufficient to make projected benefit payments and assets are expected to be
invested using a strategy to achieve that return;
b) A yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or
higher — to the extent that the conditions in (a) are not met.
To determine a resulting single (blended) rate, the amount of the plan's projected fiduciary net position (if any) and the amount
of projected benefit payments is compared in each period of projected benefit payments. The discount rate used to measure the
City's total OPEB liability is based on these requirements and the following information:
E. Changes in the OPEB Liability
Sensitivity of the OPEB liability to changes in the discount rate. The following presents the OPEB liability, as well as what the OPEB
liability would be if it were calculated using a discount rate that is 1-percentage point lower (2.75 percent) or 1-percentage-point
higher (4.75 percent) than the current discount rate:
Long-Term
Expected Return Municipal Bond
of Plan Investments 20 Year High Grade
Reporting Date Measurement Date (if any) Rate Index Discount Rate
June 30, 2018 June 30, 2017 N/A 3.75%3.58%
Liability
Balance at June 30, 2017
(Valuation Date June 30, 2017)5,593,406$
Changes recognized for the measurement period:
Service cost 287,461
Interest 164,612
Changes of assumptions (633,250)
Contributions - employer -
Net investment income -
Benefit payments (210,020)
Administrative expense -
Net Changes (391,197)
Balance at June 30, 2018
(Measurement Date June 30, 2017)5,202,209$
1% Decrease Discount Rate 1% Increase
2.58%3.58%4.58%
OPEB Liability 2,099,497$ 5,202,209$ 4,492,784$
Item 8.b. - Page 73
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-60
NOTE 12 – POSTEMPLOYMENT HEALTH CARE BENEFITS (OPEB) – continued
E. Changes in the OPEB Liability - continued
Sensitivity of the OPEB liability to changes in the healthcare cost trend rates. The following presents the OPEB liability, as well as
what the OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower (6.5
percent decreasing to 3.0%)) or 1-percentage-point higher (8.5 percent decreasing to 5.0%) than the current healthcare cost trend
rates:
F. OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2018, the City recognized OPEB expense of $356,126. As of the fiscal year ended June 30, 2018,
the City reported deferred outflows and deferred inflows of resources related to OPEB from the following sources:
Amounts reported as deferred outflows and deferred inflows of resources will be recognized in OPEB expense as follows:
NOTE 13 – LIABILITY, WORKERS’ COMPENSATION, AND PURCHASED INSURANCE
A. Description of Self-Insurance Pool Pursuant to Joint Powers Agreement
The City is a member of the California Joint Powers Insurance Authority (Authority). The Authority is composed of 116 California
public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The
purpose of the Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance
or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The California JPIA began
covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of
Directors. The Board operates through a nine-member Executive Committee.
1% Decrease Trend Rate 1% Increase
6.5% decreasing
to 3.0%
7.5% decreasing
to 4.0%
8.5% decreasing
to 5.0%
OPEB Liability 4,550,062$ 5,202,209$ 6,098,989$
Deferred Outflows Deferred Inflows
of Resources of Resources
Contributions subsequent to measurement date 204,861$ -$
Changes in assumptions 537,303
204,861$ 537,303$
Amount
2019 (95,947)$
2020 (95,947)
2021 (95,947)
2022 (95,947)
2023 (95,947)
2024 (57,568)
(537,303)$
Fiscal year ending June 30,
Item 8.b. - Page 74
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-61
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.
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 $40 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 2017-18 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
$26,393,790. There is a $10,000 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.
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 2017-18.
Item 8.b. - Page 75
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-62
NOTE 13 – LIABILITY, PROPERTY, AND WORKERS’ COMPENSATION PROTECTION – continued
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, 2018 and the changes in those balances are shown below:
Cash, investments and current assets $ 67,998
Estimated claims liability (107,048)
Unpaid claims asset $ (39,050)
Unpaid claims asset at July 1, 2017 $ (34,247)
Revenues 1,019
Claim payments and related expenditures (4,495)
Change in fair market value (67)
Change in estimated claims liability (1,260)
Unpaid claims asset at June 30, 2018 $ (39,050)
NOTE 14 – REVENUE LIMITATIONS IMPOSED BY CALIFORNIA PROPOSITION 218
Proposition 218, which was approved by the voters in November 1996, will regulate the City’s ability to impose, increase, and extend
taxes, assessments, and fees. Any new, increased, or extended taxes, assessments, and fees subject to the provisions of Proposition
218, require voters’ approval before they can be implemented. Additionally, Proposition 218 provides that these taxes, assessments,
and fees are subject to the voters’ initiative process and may be rescinded in the future years by the voters.
NOTE 15 – SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY
On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (the Bill) that provides for the dissolution of all
redevelopment agencies in the State of California. This action impacted the reporting entity of the City that previously had reported
a redevelopment agency (RDA) within the reporting entity of the City as a blended component unit.
The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government will agree to
serve as the “successor agency” to hold the assets until they are distributed to other units of State and local government. On January
10, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill
as part of the City Resolution No. 4420.
After the enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into
new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only
be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that
were subject to legally enforceable contractual commitments).
Item 8.b. - Page 76
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-63
NOTE 15 – SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY – continued
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, 2018, consisted of the following:
Total
Cash and investments pooled with the City $ 598,674
Restricted cash and investments held with fiscal agent 4,327
Total $ 603,001
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.
Item 8.b. - Page 77
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-64
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
Courtland Avenue in the amount of $930,000 utilizing low and moderate set-aside funds. The term of the loan agreement is 55
years with interest accruing on the outstanding principal balance at the rate of 3% per annum. Repayment of the loan began on
March 1, 2015. Total amount outstanding, including accrued interest at June 30, 2018, was $969,258.
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, 2018, was $207,319.
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 were fully defeased by the Taxable Tax Allocation
Refunding Bonds, Series 2018 of $5,305,000 on June 27, 2018 that will mature on September 1, 2037. As a result of the refunding,
the City had a total savings of $841,389 for an economic gain of $415,389. The defeased amount was put into escrow and will
pay off the 2007 Bonds with a payment of $305,000 plus 5.304% interest on September 1, 2019 and $5,005,000 plus 5.800%
interest on September 1, 2037. As of June 30, 2018, the principal balance of the 2018 bonds outstanding was $5,305,000. As a
result of the refunding there was an original issue discount, loss on refunding, and prepaid bond insurance created that is
amortized over the life of the refunded bonds. As of June 30, 2018, these amounts net to $220,869 which reduces the total
amount of bonds payable.
Item 8.b. - Page 78
City of Arroyo Grande
NOTES TO THE BASIC FINANCIAL STATEMENTS
June 30, 2018
B-65
NOTE 15 – SUCCESSOR AGENCY TRUST FOR ASSETS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY – continued
F. Tax Allocation Bonds Payable (Continued)
The future minimum payment obligation for the tax allocation bonds payable is as follows:
Fiscal Year
Ending June 30
Principal
Interest
Total
2019 $ 265,000 $ 135,322 $ 400,322
2020 190,000 195,009 385,009
2021 195,000 189,238 384,238
2022 200,000 182,943 382,943
2023 210,000 176,116 386,116
2024-2028 1,145,000 763,161 1,908,116
2029-2033 1,390,000 516,781 1,906,781
2034-2038 1,710,000 191,522 1,901,522
Total $ 5,305,000 $ 2,350,092 $ 7,655,092
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, 2018:
Project Name Amount
5456 – Woman’s Club Barrier Removal $ 16,578
5445 – Woman’s Club Kitchen Renovation 78,546
5423 – Recreation Center Safety Improvements 13,121
5459 – Strother Park Restroom Roof 48,074
5608 - Bridge Street Bridge Rehabilitation 266,653
5944 - Water Well #11 801,755
Total $ 1,224,727
NOTE 17 – RESTATEMENTS
The City had two restatements for the fiscal year ended June 30, 2018. The implementation of GASB 75 as noted in Note 8-F resulted
in a restatement of ($3,993,909) in the Statement of Activities in the Governmental Activities and a restatement of ($266,330) in the
Business-type Activities Water Fund. Another restatement was needed to correct the reporting of the pension liability and deferred
inflows and outflows which resulted in a restatement of ($605,813) in the Governmental Activities and ($30,566) in the Business-type
Activities with ($29,456) in the Water Fund and ($1,110) in the Sewer Fund.
Item 8.b. - Page 79
Item 8.b. - Page 80
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City of Arroyo Grande
BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS
General Fund
For the Fiscal Year Ended June 30, 2018
REVENUES
Taxes and assessments $14,454,400 $14,461,100 $14,612,859 $151,759
Licenses and permits 403,000 449,500 420,387 (29,113)
Fines and penalties 43,000 45,000 51,402 6,402
Use of money and property 377,700 378,700 493,626 114,926
Intergovernmental revenues 127,900 132,000 457,935 325,935
Charges for services 1,151,100 1,212,400 1,204,429 (7,971)
Other revenue 15,500 31,100 96,599 65,499
Total revenues 16,572,600 16,709,800 17,337,237 627,437
EXPENDITURES
General government
City council 96,900 110,015 81,237 28,778
City manager 510,200 601,751 526,545 75,206
City attorney 283,200 305,225 273,017 32,208
City clerk 413,300 413,300 406,923 6,377
Information technology 570,100 577,900 490,462 87,438
Finance and human resources 858,600 915,200 805,585 109,615
Non-departmental 3,356,700 3,427,100 3,250,541 176,559
Community development
Planning 809,700 1,061,859 874,754 187,105
Engineering 654,400 696,566 752,060 (55,494)
Building and life safety 321,700 386,700 447,270 (60,570)
Public safety
Administration 1,082,600 1,124,500 1,132,899 (8,399)
Patrol services 3,987,800 4,000,800 3,780,284 220,516
Support services 1,456,100 1,485,800 1,291,949 193,851
Emergency operations center 600 600 600
Recreation services
Administration 429,900 395,900 312,004 83,896
Preschool program 87,200 96,600 95,721 879
Special recreation programs 149,500 149,500 145,751 3,749
Children in Motion 367,300 425,800 437,132 (11,332)
Public works
Administration 856,100 824,106 793,802 30,304
Park maintenance 482,300 475,200 417,904 57,296
Soto sports complex maintenance 214,525 214,500 207,450 7,050
Building maintenance 217,300 262,300 210,005 52,295
Automotive shop 144,400 144,400 144,139 261
Capital outlay 260,965 (260,965)
Debt service 226,175 197,400 266,333 (68,933)
Total expenditures 17,576,600 18,293,022 17,404,732 888,290
Excess of revenue over (under)
expenditures (1,004,000) (1,583,222) (67,495) 1,515,727
Continued on following page
Variance
Over/(Under)Actual AmountsOriginalFinal
Budget Amounts
B-67
Item 8.b. - Page 81
City of Arroyo Grande
BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS
General Fund
For the Fiscal Year Ended June 30, 2018
Continued from previous page
OTHER FINANCING SOURCES/(USES)
Proceeds from sale of capital assets $5,000 $205,000 $50,570 $(154,430)
Proceeds from capital lease 167,695 167,695
Transfer in 2,244,400 2,268,500 2,276,615 8,115
Transfer out (1,998,200) (3,373,095) (1,495,150) 1,877,945
Total other financing sources/
(uses)251,200 (899,595) 999,730 1,899,325
Net change in fund balance (752,800) (2,482,817) 932,235 3,415,052
Fund balance - July 1, 2017 9,384,896 9,384,896 9,384,896
Fund balance - June 30, 2018 $8,632,096 $6,902,079 $10,317,131 $3,415,052
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B-68
Item 8.b. - Page 82
City of Arroyo Grande
BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS
Special Gasoline Tax Fund
For the Fiscal Year Ended June 30, 2018
REVENUES
Use of money and property $-$-$198 $198
Intergovernmental revenues 500,300 500,300 554,909 54,609
Other revenue 8,085 8,085
Total revenues 500,300 500,300 563,192 62,892
EXPENDITURES
Streets and roads 717,700 717,700 695,617 22,083
Capital outlay 77,069 (77,069)
Debt service 49,600 40,600 20,639 19,961
Total expenditures 767,300 758,300 793,325 (35,025)
Excess of revenue under
expenditures (267,000) (258,000) (230,133) 27,867
OTHER FINANCING SOURCES (USES)
Proceeds from capital lease 154,532 154,532
Transfer in 359,100 359,100 359,124 24
Transfer out (92,100) (90,500) (91,568) (1,068)
Total other financing sources
(uses)267,000 268,600 422,088 153,488
Net change in fund balance 10,600 191,955 181,355
Fund balance - July 1, 2017 5 5 5
Fund balance - June 30, 2018 $5 $10,605 $191,960 $181,355
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B-69
Item 8.b. - Page 83
City of Arroyo Grande
BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS
Transportation Impact Fees Fund
For the Fiscal Year Ended June 30, 2018
REVENUES
Use of money and property $10,000 $10,000 $13,231 $3,231
Charges for services 75,000 75,000 133,226 58,226
Total revenues 85,000 85,000 146,457 61,457
EXPENDITURES
Streets and road 2,705 715 1,990
Total expenditures 2,705 715 1,990
Excess of revenue over
expenditures 85,000 82,295 145,742 63,447
OTHER FINANCING USES
Transfer out (1,737,025) (49,217) 1,687,808
Total other financing uses (1,737,025) (49,217) 1,687,808
Net change in fund balance 85,000 (1,654,730) 96,525 1,751,255
Fund balance - July 1, 2017 2,014,953 2,014,953 2,014,953
Fund balance - June 30, 2018 $2,099,953 $360,223 $2,111,478 $1,751,255
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B-70
Item 8.b. - Page 84
City of Arroyo Grande
BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS
In-Lieu Affordable Housing Fund
For the Fiscal Year Ended June 30, 2018
REVENUES
Use of money and property $100,400 $100,400 $284,144 $183,744
Charges for services 18,000 18,000 - (18,000)
Total revenues 118,400 118,400 284,144 165,744
EXPENDITURES
Community development 75,000 145,000 21,230 123,770
Total expenditures 75,000 145,000 21,230 123,770
Net change in fund balance 43,400 (26,600) 262,914 289,514
Fund balance - July 1, 2017 338,183 338,183 338,183
Fund balance - June 30, 2018 $381,583 $311,583 $601,097 $289,514
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B-71
Item 8.b. - Page 85
City of Arroyo Grande
BUDGETARY INFORMATION - MAJOR GOVERNMENTAL FUNDS
CDBG Fund
For the Fiscal Year Ended June 30, 2018
REVENUES
Intergovernmental revenues $63,900 $65,672 $120,275 $54,603
Total revenues 63,900 65,672 120,275 54,603
EXPENDITURES
Community development 5,100 3,641 3,641
Total expenditures 5,100 3,641 3,641
Excess of revenue over
expenditures 58,800 62,031 120,275 58,244
OTHER FINANCING USES
Transfer out (58,800) (62,031) (123,282) (61,251)
Total other financing uses (58,800) (62,031) (123,282) (61,251)
Net change in fund balance (3,007) (3,007)
Fund balance - July 1, 2017 10,095 10,095 10,095
Fund balance - June 30, 2018 $10,095 $10,095 $7,088 $(3,007)
Budget Amounts
Actual Amounts
Variance
Over/(Under)Original Final
B-72
Item 8.b. - Page 86
City of Arroyo Grande
SCHEDULE OF CHANGES IN THE OPEB LIABILITY AND RELATED RATIOS
Last 10 Years*
As of June 30, 2018
2018
Total OPEB Liability
Service cost 287,461$
Interest on the total OPEB liability 164,612
Difference between expected and actual experience
Changes in assumptions (633,250)
Changes in benefit terms
Benefit payments (210,020)
Net change in total OPEB Liability (391,197)
Total OPEB liability- beginning 5,593,406
Total OPEB liability- ending (a)5,202,209$
Covered payroll 6,130,128$
Total OPEB liability as a percentage
of covered payroll 84.86%
*- Fiscal year 2018 was the 1st year of implementation, therefore only one year is shown.
Measurement Period
B-73
Item 8.b. - Page 87
City of Arroyo Grande
NET PENSION LIABILITY - SCHEDULE OF PROPORTIONATE SHARE
Last Ten Fiscal Years (1)
As of June 30, 2018
The following table provides required supplementary information regarding the City's Pension Plans.
2015 2016 2017 2018
Proportion of the net pension liability 0.23934%0.25243%0.22499%0.21613%
Proportionate share of the net pension liability 14,892,793$ 17,326,688$ 19,468,856$ 21,434,067$
Covered payroll 5,222,082$ 5,594,685$ 5,912,090$ 6,070,014$
Proportionate share of the net pension liability as
percentage of covered payroll 285.19%309.70%329.31%353.11%
Plan's total pension liability 30,829,966,631$ 31,771,217,402$ 33,358,627,624$ 37,161,348,332$
Plan's fiduciary net position 24,607,502,515$ 24,907,305,871$ 24,705,532,291$ 27,244,095,376$
Plan fiduciary net position as a percentage of the
total pension liability 79.82%78.40%74.06%73.31%
Notes to Schedule:
Changes in assumptions
In 2017, as part of the Asset Liability Management review cycle, the discount rate was changed from 7.65% to 7.15%.
In 2016, the discount rate was changed from 7.5% (net of administrative expense) to 7.65% to correct for an adjustment to
exclude administrative expense.
In 2015, amounts reported as changes in assumptions resulted primarily from adjustments to expected retirement ages
of general employees.
(1) The 2014-15 fiscal year was the first year of implementation, therefore only four years are shown.
B-74
Item 8.b. - Page 88
City of Arroyo Grande
NET PENSION LIABILITY - SCHEDULE OF CONTRIBUTIONS
Last Ten Fiscal Years (1)
As of June 30, 2018
The following table provides required supplementary information regarding the City's Pension Plan.
2015 2016 2017 2018
Contractually required contribution (actuarially determined)1,590,307$ 2,071,858$ 2,191,573$ 2,342,517$
Contribution in relation to the actuarially determined
contributions (1,590,307) (2,071,858) (2,191,573) (2,342,517)
Contribution deficiency (excess)-$ -$ -$ -$
Covered payroll 5,594,685$ 5,912,090$ 6,070,014$ 5,866,531$
Contributions as a percentage of covered payroll 28.43%40.12%36.10%39.93%
Notes to Schedule
Valuation Date:6/30/2013
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 7.65%
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 four 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
Item 8.b. - Page 89
Item 8.b. - Page 90
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City of Arroyo Grande
DESCRIPTION OF NONMAJOR GOVERNMENTAL
B-77
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.
Item 8.b. - Page 91
City of Arroyo Grande
DESCRIPTION OF NONMAJOR GOVERNMENTAL
B-78
Special Revenue Funds – continued
Transportation Fund
This fund accounts for revenues from the Local Transportation Fund (LTF) and the South County Transit (SCT).
Expenditures are restricted to public transportation.
In-Lieu Water Neutralization Fund
The City requires development projects that increase total water consumption in the City to “neutralize” that
demand by reducing water consumption in existing development by an equivalent amount. This fund accounts for
these funds collected by developers and is used towards the City’s water conservation efforts.
Construction Fund
This fund accounts for the accumulation of tax revenues levied on construction of residential dwelling units,
mobile home lots, and commercial buildings. Expenditures are restricted to public improvements, including but
not limited to, facilities, fire stations, fire-fighting equipment, parks, street improvements, and equipment.
Drainage Fees Fund
This fund accounts for development drainage fees restricted to improving drainage within the City.
In-Lieu Underground Utility Fund
This fund accounts for monies paid by developers in meeting the City's underground utility requirements.
Tourism Business Improvement District Fund
The purpose of the Tourism Business Improvement District (TBID) is to provide projects, programs and activities
that benefit lodging businesses located and operating within the City of Arroyo Grande. A two percent (2%)
assessment is levied on all lodging businesses of the rent charged by the operator per occupied room per night for
all transient occupancies. Revenue collected is used to promote the lodging industry within the City.
Water Availability Fund
Pursuant to the provisions of Section 38743 of the Government Code, water availability charges is a “special
charge” which is levied to each parcel of property not served with city water. These charges are restricted for the
sole purpose of expanding water supply such as desalination plant, recycled water, scalping plant, etc.
State COPS Grant Fund
This fund accounts for the receipt and use of monies from the State of California restricted to the purchase of
police equipment and technology for crime prevention.
Debt Service Funds
Fire Station GO Bond Fund
This fund is used to account for the accumulation of resources and payment of long-term debt principal and
interest for general obligation bonds issued by the City to finance the expansion of the City Fire Station.
City Hall USDA Debt Service Fund
This fund is used to account for the accumulated resources and payment of long-term debt principal and interest
for USDA loan payable issued by the City to finance for the relocation of City Hall.
Item 8.b. - Page 92
Item 8.b. - Page 93
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City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Balance Sheet
June 30, 2018
ASSETS
Cash and investments $183,701 $47,126 $44,113 $1,053,374 $223,959
Receivables:
Accounts
Taxes
Interest 360 93 87 2,682 631
Total assets $184,061 $47,219 $44,200 $1,056,056 $224,590
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $149 $-$111 $-$187
Unearned revenue 40,226
Total liabilities 149 111 40,226 187
Fund Balances:
Restricted for:
Access programming 47,219
Debt service
Landscape maintenance
Park construction 1,015,830 224,403
Public improvements
Public safety 183,912 44,089
Streets and roads
Water production
Assigned for:
Capital projects
Tourism benefit
Total fund balances 183,912 47,219 44,089 1,015,830 224,403
Total liabilities and
fund balances $184,061 $47,219 $44,200 $1,056,056 $224,590
Park
Improvement
Impact Fees
Park
Development
Special Revenue Funds
Fire Protection
Impact Fees
Police
Protection
Impact Fees
Public Access
Television
B-80
Item 8.b. - Page 94
$42,909 $59,103 $8,233 $449,583 $923,574 $132,886 $41,029
51 960
127 125 16 892 1,830 264 174
$43,036 $59,228 $8,300 $451,435 $925,404 $133,150 $41,203
$13 $647 $1,995 $1,933 $96 $-$7,342
13 647 1,995 1,933 96 7,342
58,581 6,305 449,502
43,023
925,308 133,150 33,861
43,023 58,581 6,305 449,502 925,308 133,150 33,861
$43,036 $59,228 $8,300 $451,435 $925,404 $133,150 $41,203
Community
Center Impact
Fees
Special Revenue Funds
Parkside
Assessment
District
Landscape
Assessment
District
Grace Lane
Assessment
District
Traffic
Circulation TransportationTraffic Signal
B-81
Item 8.b. - Page 95
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Balance Sheet
June 30, 2018
ASSETS
Cash and investments $233,967 $29 $5,786 $19,184 $293,148
Receivables:
Accounts
Taxes 22,831
Interest 463 38 550
Total assets $234,430 $29 $5,786 $19,222 $316,529
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $7,219 $-$-$-$72
Unearned revenue
Total liabilities 7,219 72
Fund Balances:
Restricted for:
Access programming
Debt service
Landscape maintenance
Park construction
Public improvements 29 5,786
Public safety
Streets and roads
Water production 227,211
Assigned for:
Capital projects 19,222
Tourism benefit 316,457
Total fund balances 227,211 29 5,786 19,222 316,457
Total liabilities and
fund balances $234,430 $29 $5,786 $19,222 $316,529
Drainage Fees
In-Lieu
Underground
Utility
Tourism
Business
Improvement
District
In-Lieu Water
Neutralization Construction
Special Revenue Funds
B-82
Item 8.b. - Page 96
$1,487,599 $133,166 $5,382,469 $562 $55,118 $55,680 $5,438,149
48,747 48,747 48,747
23,842 34 34 23,876
3,406 620 12,358 12,358
$1,491,005 $182,533 $5,467,416 $596 $55,118 $55,714 $5,523,130
$-$-$19,764 $-$-$-$19,764
40,226 40,226
59,990 59,990
47,219 47,219
596 55,118 55,714 55,714
514,388 514,388
1,240,233 1,240,233
48,838 48,838
182,533 410,534 410,534
1,092,319 1,092,319
1,491,005 1,718,216 1,718,216
19,222 19,222
316,457 316,457
1,491,005 182,533 5,407,426 596 55,118 55,714 5,463,140
$1,491,005 $182,533 $5,467,416 $596 $55,118 $55,714 $5,523,130
Debt Service
Total Special
Revenue Funds
Water
Availability
State COPS
Grant
Special Revenue Funds
Fire Station GO
Bonds
Total Debt
Service Funds
City Hall USDA
Debt Service
Total Nonmajor
Governmental
Funds
B-83
Item 8.b. - Page 97
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Fiscal Year Ended June 30, 2018
REVENUES
Taxes and assessments $-$-$-$-$-
Use of money and property 1,036 70 270 8,193 1,909
Intergovernmental revenues
Charges for services 27,801 19,507 7,170 56,071 31,837
Total revenues 28,837 19,577 7,440 64,264 33,746
EXPENDITURES
Current:
General government
Community development
Public safety 74,739 112
Recreation services 187
Public works
Debt service:
Principal
Interest and fiscal agent fees
Total expenditures 74,739 112 187
Excess of revenue over/
(under) expenditures (45,902) 19,577 7,328 64,264 33,559
OTHER FINANCING SOURCES/(USES)
Transfers in
Transfers out (304,766) (96,943)
Total other financing
sources/(uses)(304,766) (96,943)
Net change in fund balances (45,902) 19,577 7,328 (240,502) (63,384)
Fund balances (deficit) - July 1, 2017 229,814 27,642 36,761 1,256,332 287,787
Fund balances (deficit) - June 30, 2018 $183,912 $47,219 $44,089 $1,015,830 $224,403
Special Revenue Funds
Park
Development
Police
Protection
Impact Fees
Public Access
Television
Park
Improvement
Impact Fees
Fire Protection
Impact Fees
B-84
Item 8.b. - Page 98
$-$9,332 $5,680 $43,966 $-$- $-
383 385 46 2,735 5,689 818 339
276,964
1,859 47,232
2,242 9,717 5,726 46,701 52,921 818 277,303
13,754
13
14,027 8,052 21,372 96
13 14,027 8,052 21,372 96 13,754
2,229 (4,310) (2,326) 25,329 52,825 818 263,549
(21,490) (3,368) (2,268) (5,096) (229,716)
(21,490) (3,368) (2,268) (5,096) (229,716)
(19,261) (7,678) (4,594) 20,233 52,825 818 33,833
62,284 66,259 10,899 429,269 872,483 132,332 28
$43,023 $58,581 $6,305 $449,502 $925,308 $133,150 $33,861
Landscape
Assessment
District
Parkside
Assessment
District
Grace Lane
Assessment
District
Community
Center Impact
Fees
Special Revenue Funds
Transportation
Traffic
CirculationTraffic Signal
B-85
Item 8.b. - Page 99
City of Arroyo Grande
NONMAJOR GOVERNMENTAL FUNDS
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
For the Fiscal Year Ended June 30, 2018
REVENUES
Taxes and assessments $-$-$-$-$192,036
Use of money and property 1,554 90 91 329
Intergovernmental revenues
Charges for services 84,671 15,080 9,315
Total revenues 86,225 90 15,171 201,680
EXPENDITURES
Current:
General government 71,464
Community development 73,889
Public safety
Recreation services
Public works
Debt service:
Principal
Interest and fiscal agent fees
Total expenditures 73,889 71,464
Excess of revenue over/
(under) expenditures 12,336 90 15,171 130,216
OTHER FINANCING SOURCES/(USES)
Transfers in 5,004
Transfers out (10,975) (3,000)
Total other financing
sources/(uses)(10,975) 2,004
Net change in fund balances 12,336 (10,885) 15,171 132,220
Fund balances (deficit) - July 1, 2017 214,875 29 16,671 4,051 184,237
Fund balances (deficit) - June 30, 2018 $227,211 $29 $5,786 $19,222 $316,457
Drainage Fees
Special Revenue Funds
In-Lieu
Underground
Utility
Tourism
Business
Improvement
District
In-Lieu Water
Neutralization Construction
B-86
Item 8.b. - Page 100
$-$-$251,014 $365 $-$365 $251,379
10,518 1,742 36,197 1 1 36,198
188,163 465,127 465,127
32,450 332,993 332,993
42,968 189,905 1,085,331 366 366 1,085,697
85,218 85,218
73,889 73,889
74,851 74,851
200 200
43,547 43,547
28,000 28,000 28,000
38,962 38,962 38,962
277,705 66,962 66,962 344,667
42,968 189,905 807,626 366 (66,962) (66,596) 741,030
5,004 73,800 73,800 78,804
(232,499) (210,196) (1,120,317) (1,120,317)
(232,499) (210,196) (1,115,313) 73,800 73,800 (1,041,513)
(189,531) (20,291) (307,687) 366 6,838 7,204 (300,483)
1,680,536 202,824 5,715,113 230 48,280 48,510 5,763,623
$1,491,005 $182,533 $5,407,426 $596 $55,118 $55,714 $5,463,140
-
Debt Service
Total Nonmajor
Governmental
Funds
Total Debt
Service Funds
State COPS
Grant
Total Special
Revenue Funds
Water
Availability
City Hall USDA
Debt Service
Fire Station GO
Bonds
Special Revenue Funds
B-87
Item 8.b. - Page 101
City of Arroyo Grande
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the Fiscal Year Ended June 30, 2018
Sanitation Distribution Fund
Cash and investments $113,127 $2,328,040 $2,319,600 $121,567
Accounts receivable 54,946 2,194,108 2,177,665 71,389
Total assets $168,073 $4,522,148 $4,497,265 $192,956
Due to other agencies 168,073 4,522,148 4,497,265 192,956
Total liabilities $168,073 $4,522,148 $4,497,265 $192,956
Downtown Parking Fund
Cash and investments $93 $22,868 $20,875 $2,086
Interest receivable 169 17 169 17
Prepaid items 52 52
Total assets $314 $22,885 $21,096 $2,103
Accounts payable $-$4,611 $4,611 $-
Due to other agencies 314 18,274 16,485 2,103
Total liabilities $314 $22,885 $21,096 $2,103
San Luis Obispo County TMD Assessment Fund
Cash and investments $7,708 $96,250 $96,267 $7,691
Accounts receivable 11,316 11,416 11,316 11,416
Total assets $19,024 $107,666 $107,583 $19,107
Accounts payable $18,795 $96,218 $96,266 $18,747
Due to other agencies 229 11,448 11,317 360
Total liabilities $19,024 $107,666 $107,583 $19,107
Total Agency Funds
Cash and investments $120,928 $2,447,158 $2,436,742 $131,344
Accounts receivable 66,262 2,205,524 2,188,981 82,805
Interest receivable 169 17 169 17
Prepaid items 52 52
Total assets $187,411 $4,652,699 $4,625,944 $214,166
Accounts payable $18,795 $100,829 $100,877 $18,747
Due to other agencies 168,616 4,551,870 4,525,067 195,419
Total liabilities $187,411 $4,652,699 $4,625,944 $214,166
Balance Balance
June 30, 2018AdditionsDeductionsJune 30, 2017
B-88
Item 8.b. - Page 102
Item 8.b. - Page 103
-?¼t... CITY OF
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 $52,059,524 $52,196,451 $54,012,699
Restricted 969,659 937,284 8,179,991
Unrestricted 15,799,496 15,491,347 7,584,426
Total governmental activities
net position 68,828,679 68,625,082 69,777,116
Business-Type Activities
Net investment in capital assets 9,670,367 9,532,740 10,057,743
Restricted
Unrestricted 7,569,157 7,518,372 6,686,297
Total business-type activities
net position 17,239,524 17,051,112 16,744,040
Primary Government
Net investment in capital assets 61,729,891 61,729,191 64,070,442
Restricted 969,659 937,284 8,179,991
Unrestricted 23,368,653 23,009,719 14,270,723
Total primary government net
position $86,068,203 $85,676,194 $86,521,156
Source: City of Arroyo Grande Annual Financial Report
Fiscal Year
2009 2010 2011
C-2
Item 8.b. - Page 104
$62,176,633 $62,107,039 $37,123,166 $39,466,986 $39,712,230 $41,437,236 $41,836,070
7,221,859 7,374,485 7,580,876 8,516,033 5,531,798 8,375,502 8,217,418
6,370,870 2,520,322 2,977,346 (7,576,941) (2,753,544) (2,676,080) (7,490,438)
75,769,362 72,001,846 47,681,388 40,406,078 42,490,484 47,136,658 42,563,050
9,816,684 10,268,542 35,230,778 35,100,758 34,768,726 35,236,648 35,013,392
1,196,593 1,158,896 1,737,212 1,737,212 1,737,212
6,057,411 6,628,074 7,727,871 6,487,746 5,696,990 4,424,194 4,387,042
15,874,095 16,896,616 44,155,242 42,747,400 42,202,928 41,398,054 41,137,646
71,993,317 72,375,581 72,353,944 74,567,744 74,295,504 76,673,884 76,849,462
7,221,859 7,374,485 8,777,469 9,674,929 7,269,010 10,112,714 9,954,630
12,428,281 9,148,396 10,705,217 (1,089,195) 3,128,898 1,748,114 (3,103,396)
$91,643,457 $88,898,462 $91,836,630 $83,153,478 $84,693,412 $88,534,712 $83,700,696
Fiscal Year
2015 201820122013201420162017
C-3
Item 8.b. - Page 105
City of Arroyo Grande
CHANGES IN NET POSITION
Last Ten Fiscal Years
Expenses
Governmental activities:
General government $4,216,918 $4,543,500 $4,786,979
Community development 680,610 983,321 3,224,094
Public safety 8,090,323 7,290,559 5,795,069
Recreation 955,677 850,711 759,139
Public works 988,341 828,852 830,914
Streets and roads 2,447,914 3,044,033 1,835,373
Sewer 738,149 858,806 798,287
Interest on long-term debt 460,671 462,435 499,825
Total governmental activities
expenses 18,578,603 18,862,217 18,529,680
Business-type activities:
Water 1,324,507 1,732,341 2,168,569
Lopez
Sewer 2,834,416 2,772,836 2,592,965
Total business-type activities
expenses 4,158,923 4,505,177 4,761,534
Total primary government
expenses $22,737,526 $23,367,394 $23,291,214
Program Revenues
Governmental activities:
Charges for services:
General government $142,082 $139,111 $50,355
Community development 218,197 292,480 498,223
Public safety 445,198 384,106 188,407
Recreation 695,501 675,828 694,090
Public works 31,824 75,165 84,964
Streets and roads 6,747 52,290 96,409
Sewer 767,717 788,165 828,302
Operating grants and contributions 1,740,668 2,169,381 2,154,143
Capital grants and contributions 577,876 888,102 1,751,549
Total governmental activities
program revenues 4,625,810 5,464,628 6,346,442
Business-type activities:
Charges for services:
Water 2,284,127 2,508,136 2,794,504
Lopez
Sewer 3,673,952 3,265,221 2,895,218
Operating grants and contributions 4,187
Capital grants and contributions 135,071
Total business-type activities
program revenues 5,958,079 5,773,357 5,828,980
Total primary government program
revenues $10,583,889 $11,237,985 $12,175,422
2009 2010 2011
Fiscal Year
C-4
Item 8.b. - Page 106
$4,475,869 $4,442,707 $4,206,267 $4,991,206 $5,440,588 $5,659,730 $6,323,149
1,578,940 1,934,076 1,596,223 2,017,973 1,850,925 1,604,701 2,339,874
5,708,603 5,594,859 5,804,569 5,905,903 5,652,892 5,075,763 7,205,048
723,234 765,563 817,557 860,010 960,669 705,766 1,108,612
1,439,738 1,313,371 1,703,736 1,746,040 1,899,410 1,777,425 2,063,905
2,600,752 2,266,016 2,746,128 2,230,930 2,544,510 2,448,134 2,516,344
793,207 821,609
318,960 109,800 111,507 56,988 53,546
17,639,303 17,248,001 16,985,987 17,752,062 18,348,994 17,328,507 21,610,478
2,142,321 2,490,896 2,304,928 1,306,742 1,317,405 1,677,487 1,737,552
2,271,238 3,170,608 3,296,262 3,359,544 3,419,571
2,679,699 2,215,526 794,673 821,584 690,809 869,807 953,702
4,822,020 4,706,422 5,370,839 5,298,934 5,304,476 5,906,838 6,110,825
$22,461,323 $21,954,423 $22,356,826 $23,050,996 $23,653,470 $23,235,345 $27,721,303
$38,563 $47,652 $48,931 $22,615 $12,666 $52,734 $37,178
403,679 699,553 507,718 894,495 690,152 1,218,957 926,624
168,502 74,388 39,093 135,134 122,158 227,920 152,481
650,897 597,230 735,369 743,589 706,229 746,467 843,584
86,198 179,908 117,252 418,772 86,378 420,095 2,112
16,561 44,455 1,024 97,696 305,797 497,796 180,458
925,213 1,089,899
731,446 875,502 1,387,188 1,499,188 1,191,800 989,341 1,289,808
1,509,016 1,066,625 665,453 233,549 463,235 933,698 599,092
4,530,075 4,675,212 3,502,028 4,045,038 3,578,415 5,087,008 4,031,337
3,443,240 4,236,880 4,997,374 6,497,466 5,804,415 6,202,191 7,033,290
1,973,699 1,581 81
2,552,516 2,252,208 1,150,806 1,066,815 881,889 977,250 1,024,751
2,760
690,957
5,998,516 7,180,045 8,121,879 7,564,281 6,687,885 7,179,441 8,058,122
$10,528,591 $11,855,257 $11,623,907 $11,609,319 $10,266,300 $12,266,449 $12,089,459
2012
Fiscal Year
2015 20182013201420162017
C-5
Item 8.b. - Page 107
City of Arroyo Grande
CHANGES IN NET POSITION
Last Ten Fiscal Years
Net revenue (expense)
Governmental activities $(13,397,589) $(12,183,238) $(12,183,238)
Business-type activities 1,268,180 1,067,446 1,067,446
Total primary government net
expense $(12,129,409) $(11,115,792) $(11,115,792)
General Revenues and Other Changes in Net Position
Governmental activities:
Taxes:
Property taxes $5,586,348 $5,471,651 $5,379,176
Sales and use taxes 4,658,777 4,252,903 4,781,774
Transient lodging taxes 389,067 348,014 390,472
Franchise taxes 639,776 604,325 539,673
Business license tax 79,111 80,283 79,663
Investment income 589,734 337,724 389,292
Other revenue 1,285,769 606,653 479,514
Transfers 1,392,494 1,492,439 1,888,403
Extraordinary gain
Total governmental activities 14,621,076 13,193,992 13,927,967
Business-type activities:
Investment income 112,543 35,847 30,483
Other revenue
Transfers (1,392,494) (1,492,439) (1,888,403)
Total business-type activities
revenues (1,279,951) (1,456,592) (1,857,920)
Total primary government $13,341,125 $11,737,400 $12,070,047
Change in Net Position
Governmental activities $1,223,487 $1,010,754 $1,744,729
Business-type activities (11,771) (389,146) (790,474)
Total primary government $1,211,716 $621,608 $954,255
Source: City of Arroyo Grande Annual Financial Report
2009 2010 2011
Fiscal Year
C-6
Item 8.b. - Page 108
$(12,572,789) $(13,483,959) $(13,707,024) $(14,770,579) $(14,770,579) $(12,241,499) $(17,579,141)
2,473,623 2,751,040 2,265,347 1,383,409 1,383,409 1,272,603 1,947,297
$(10,099,166) $(10,732,919) $(11,441,677) $(13,387,170) $(13,387,170) $(10,968,896) $(15,631,844)
$6,633,678 $6,232,026 $6,564,035 $6,832,769 $7,133,641 $6,494,953 $6,838,615
4,127,541 4,269,905 4,583,049 4,634,828 5,213,844 5,835,213 6,174,833
630,379 746,333 840,602 1,124,486 1,159,458 1,160,087 1,153,959
570,172 575,495 595,161 612,261 613,715 610,820 609,182
84,925 85,078 85,625 90,108 86,947 93,544 87,649
333,962 330,551 375,843 426,084 486,526 547,492 553,645
773,180 565,018 626,840 949,606 123,376 36,779 218,499
2,070,466 1,468,937 (23,434,931) 2,297,653 2,037,478 2,108,785 1,968,873
2,641,541
17,865,844 14,273,343 (9,763,776) 16,967,795 16,854,985 16,887,673 17,605,255
24,025 17,835 33,627 84,005 109,597 31,308 42,793
15,271
(2,070,466) (1,468,937) 23,434,931 (2,297,653) (2,037,478) (2,108,785) (1,968,873)
(2,046,441) (1,451,102) 23,468,558 (2,213,648) (1,927,881) (2,077,477) (1,910,809)
$15,819,403 $12,822,241 $13,704,782 $14,754,147 $14,927,104 $14,810,196 $15,694,446
$5,293,055 $789,384 $(23,470,800) $2,197,216 $2,084,406 $4,646,174 $26,114
427,182 1,299,938 25,733,905 (830,239) (544,472) (804,874) 36,488
$5,720,237 $2,089,322 $2,263,105 $1,366,977 $1,539,934 $3,841,300 $62,602
2012
Fiscal Year
2013 2014 2015 201820162017
C-7
Item 8.b. - Page 109
City of Arroyo Grande
FUND BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
General Fund
Reserved $725,546 $679,140 $-
Unreserved 2,726,035 4,321,286
Nonspendable 595,268
Committed
Assigned 350,000
Unassigned 4,256,808
Total general fund $3,451,581 $5,000,426 $5,202,076
All Other Governmental Funds
Reserved $2,919,758 $2,896,080 $-
Unreserved, reported in:
Special revenue funds 11,367,715 10,181,391
Debt service funds 530,905 (95,156)
Nonspendable 73,782
Restricted 8,513,465
Committed
Assigned 3,529,431
Unassigned 83,163
Total all other governmental funds $14,818,378 $12,982,315 $12,199,841
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
2009 2010 2011
C-8
Item 8.b. - Page 110
$-$-$-$-$-$-$-
642,708 773,416 56,938 130,822 998,035 1,071,000 40,379
3,159,440 4,276,484 4,206,637 3,825,974
703,355 458,549 1,356,870 1,284,047 530,460 1,986,271 3,193,183
537,038 149,944 1,154,882 2,463,910 6,061,702 6,327,625 7,083,569
$5,042,541 $5,658,393 $6,775,327 $7,704,753 $7,590,197 $9,384,896 $10,317,131
$-$-$-$-$-$-$-
45,523 24,110 49,547 49,547
7,262,107 7,412,863 7,673,231 7,762,037 5,564,688 7,600,388 7,437,987
65,565
711,439 1,208,489 84,341 327,809 3,967,671 546,365 956,670
(13,405) (10,060) (18,547) (184,584)
$8,071,229 $8,635,402 $7,757,572 $8,120,846 $9,397,322 $8,146,753 $8,394,657
Fiscal Year
2015 201820122013201420162017
C-9
Item 8.b. - Page 111
City of Arroyo Grande
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
Revenues
Taxes and assessments $12,703,434 $12,156,062 $12,745,313
Licenses and permits 175,202 207,801 194,743
Fines and penalties 104,320 77,145 66,724
Use of money and property 589,738 337,724 389,292
Intergovernmental revenues 1,175,605 2,053,958 2,755,945
Charges for services 1,987,517 2,105,522 2,095,895
Other revenue 633,781 227,969 138,094
Total revenues 17,369,597 17,166,181 18,386,006
Expenditures
Current:
General government 4,075,286 4,432,039 4,920,805
Community development 682,609 983,321 1,592,094
Public safety 7,035,372 6,965,253 5,248,185
Recreation 955,677 850,711 759,139
Parks and facilities 936,560 780,493 778,575
Streets and road 1,110,200 1,162,452 1,090,471
Sewer 224,587 267,933 273,818
Capital outlay 3,379,483 2,855,174 7,667,405
Debt service:
Principal 194,775 199,775 1,135,709
Interest and fiscal agent fees 448,702 448,835 491,151
Total expenditures 19,043,251 18,945,986 23,957,352
Excess of revenue over (under)
expenditures (1,673,654) (1,779,805) (5,571,346)
Other Financing Sources (Uses)
Cost of issuance
Proceeds from issuance of debt 484,799 2,253,119
Proceeds from sale of capital assets 849,000
Transfer in 5,116,137 5,825,184 6,239,127
Transfer out (3,723,643) (4,332,745) (4,350,724)
Extraordinary loss
Total other financing sources
(uses)1,877,293 1,492,439 4,990,522
Net Change in Fund Balances $203,639 $(287,366) $(580,824)
Debt service as a percentage of non-
capital expenditures 4.28%4.20%11.09%
Source: City of Arroyo Grande Annual Financial Report
2009 2010 2011
Fiscal Year
C-10
Item 8.b. - Page 112
$12,169,550 $11,965,499 $12,875,650 $13,352,062 $14,207,605 $14,194,617 $14,864,238
206,319 259,153 262,929 340,265 269,932 515,087 420,387
71,605 52,299 45,012 43,764 46,534 38,255 51,402
333,962 312,551 364,460 424,326 590,820 564,151 827,397
2,372,614 1,258,892 2,052,641 1,732,737 1,655,035 1,923,039 1,888,900
1,925,491 2,733,085 1,449,387 1,870,662 1,606,914 2,610,627 1,670,648
604,371 151,312 111,723 368,312 88,385 18,559 167,929
17,683,912 16,732,791 17,161,802 18,132,128 18,465,225 19,864,335 19,890,901
4,358,806 4,664,317 4,469,132 4,786,049 5,256,955 5,835,396 5,982,128
1,567,283 1,241,020 1,595,790 1,684,674 1,849,608 1,844,250 2,169,203
5,337,305 5,136,154 5,329,649 5,356,518 5,879,489 5,672,186 6,279,983
720,797 758,822 808,823 866,808 960,669 1,025,778 1,015,189
1,350,922 1,288,515 1,558,905 1,663,621 1,804,644 1,863,718 1,816,847
1,877,833 1,544,570 1,947,648 1,474,872 1,760,289 1,805,170 1,707,213
273,296 257,073
4,594,942 2,115,032 2,484,378 4,333,128 1,546,294 2,460,561 1,727,935
367,342 242,294 358,308 329,291 395,065 1,146,751 296,071
289,407 111,670 111,623 104,060 132,374 75,952 57,863
20,737,933 17,359,467 18,664,256 20,599,021 19,585,387 21,729,762 21,052,432
(3,054,021) (626,676) (1,502,454) (2,466,893) (1,120,162) (1,865,427) (1,161,531)
69,077 275,595 448,512 209,613 282,552 322,227
62,169 35,343 838,806 34,991 18,220 50,570
6,691,654 4,532,700 5,254,550 7,523,254 8,777,226 4,970,305 4,848,407
(4,621,188) (3,063,763) (2,957,819) (4,602,467) (6,739,748) (2,861,520) (2,879,534)
(3,333,432)
(1,193,889) 1,806,701 2,780,586 3,759,593 2,282,082 2,409,557 2,341,670
$(4,247,910) $1,180,025 $1,278,132 $1,292,700 $1,161,920 $544,130 $1,180,139
4.24%2.38%2.99%2.74%3.01%6.78%1.87%
2012
Fiscal Year
20172015 2018201320142016
C-11
Item 8.b. - Page 113
City of Arroyo Grande
GENERAL GOVERNMENTAL TAX REVENUES BY SOURCE
Last Ten Fiscal Years
2009 5,518,824$ 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
2018 6,687,106 6,174,833 1,153,959 87,649 609,182 151,509 14,864,238
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
Item 8.b. - Page 114
City of Arroyo Grande
ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
Last Ten Fiscal Years
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 2,707,856,604 45,043,543 2,752,900,147 26,612,159 2,726,287,988 100%
2018 2,841,199,531 45,708,217 2,886,907,748 26,406,810 2,860,500,938 100%
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
Item 8.b. - Page 115
City of Arroyo Grande
PROPERTY TAX RATES - DIRECT AND OVERLAPPING GOVERNMENTS
Last Ten Fiscal Years
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
2018 1.00000 0.00400 0.10119 0.00732 0.00000 1.11251
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
Item 8.b. - Page 116
Item 8.b. - Page 117
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City of Arroyo Grande
PRINCIPAL PROPERTY TAXPAYERS
Current Fiscal Year and Nine Fiscal Years Ago
Rank
Sphear Investments LLC $50,586,422 1 1.77%
Grand and Elm Properties LP 14,416,110 2 0.50%
Sunrise Terrace Associates 12,836,848 3 0.45%
Manfred G Freutel Trust 10,286,807 4 0.36%
1400 West Branch LLC 9,020,427 5 0.32%
Bolsa Chica Mobile Estates Inc 8,310,322 6 0.29%
EPT Arroyo Inc 7,643,312 7 0.27%
K Patrick Sandman LLC 7,471,528 8 0.26%
Ray B. Bunnell Trust 7,432,693 9 0.26%
Deblauw Properties LLC 7,142,992 10 0.25%
ESJ Centers LLC
Orradre Ranch A California LP
NKT Commercial LLC
Ocean Oaks LLC
Clifford Branch Trust
Totals $135,147,461 4.72%
Source: HDL Coren & Cone
2017-18
Percentage of
Total Taxable
Assessed
ValuationType of Business Assessed ValuationTaxpayer
Commercial
Commercial
Residential
Residential
Residential
Commercial
Recreational
Commercial
Commercial
Commercial
Residential
Residential
Commercial
Commercial
Vacant Land
C-16
Item 8.b. - Page 118
Rank
$---
10,865,216 2 0.46%
9,089,118 3 0.39%
6,319,800 6 0.27%
7,423,254 4 0.32%
6,623,185 5 0.28%
40,942,094 1 1.75%
5,838,686 7 0.25%
5,665,000 8 0.24%
5,398,074 9 0.23%
4,930,271 10 0.21%
$103,094,698 4.41%
2008-09
Percentage of
Total Taxable
Assessed
ValuationAssessed Valuation
C-17
Item 8.b. - Page 119
City of Arroyo Grande
SECURED PROPERTY TAX ROLL LEVIES AND COLLECTIONS
Last Ten Fiscal Years
Fiscal Year
Total Secured Tax
Levy
Current Tax
Collections
Percent of Levy
Collected
Current Year
Delinquencies
Percent
Delinquent
2009 3,855,626$ 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%**
2018 4,819,065 4,819,065 100%**
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
Item 8.b. - Page 120
Item 8.b. - Page 121
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City of Arroyo Grande
TAXABLE SALES BY CATEGORY
Last Ten Calendar Years
(in thousands of dollars)
Food Stores $18,165 $17,173 $15,773 $15,564
Eating and Drinking Places 30,852 29,880 29,949 32,738
Building Materials 22,582 19,148 18,676 19,806
Auto Dealers and Supplies 27,909 22,528 24,753 30,056
Service Stations 48,613 34,574 36,817 42,795
Other Retail Stores 113,771 113,694 112,340 113,172
All Other Outlets 49,873 44,284 46,231 47,300
Total $311,765 $281,281 $284,539 $301,431
Source: State of California Board of Equalization and the Hdl Companies.
2011
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.
2008 2009 2010
C-20
Item 8.b. - Page 122
$16,098 $17,705 $18,047 $15,955 $9,489 $12,659
37,136 36,314 42,140 46,885 49,848 52,748
20,429 22,848 25,855 29,882 31,555 34,972
33,789 40,123 41,161 42,048 47,866 55,963
45,431 43,831 42,938 39,520 34,411 38,604
115,587 119,916 118,561 119,822 120,281 119,427
46,302 50,130 54,064 63,468 70,977 77,015
$314,772 $330,867 $342,766 $357,580 $364,427 $391,388
201720132014201520162012
C-21
Item 8.b. - Page 123
City of Arroyo Grande
RATIOS OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Fiscal Year
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
2018 478,073 1,106,950
Source: City of Arroyo Grande Annual Financial Report
General
Obligation Bonds
Tax Allocation
Bonds Capital Leases Loan Payable
Reimbursement
Agreement
Governmental Activities
C-22
Item 8.b. - Page 124
$- $- $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
143,589 1,728,612 0.06%96.68
Outstanding
Debt per CapitaSafe Water Loan Capital Leases
Total Primary
Government
Percent of
Estimated
Actual Value of
Taxable
Property
Business-Type Activities
C-23
Item 8.b. - Page 125
City of Arroyo Grande
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
Last Ten Fiscal Years
2009 $1,550,000 $568,811 $981,189 $2,337,735,349 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)
2018 - 596 (596) 2,886,907,748 0.00%17,880 (0.03)
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
Item 8.b. - Page 126
City of Arroyo Grande
DIRECT AND OVERLAPPING DEBT
June 30, 2018
$7,925,000 32.666%$2,588,781
San Luis Obispo County Community College District 132,425,000 5.668%7,505,849
Lucia Mar Unified School District 55,861,576 20.518%11,461,678
San Luis Obispo County Certificates of Participation 24,120,000 5.691%1,372,669
San Luis Obispo Pension Obligations 86,764,398 5.691%4,937,762
Lucia Mar Unified School District Certificates of Participation 20,643,590 20.518%4,235,652
Redevelopment Successor Agency 5,303,000 100.000%5,303,000
Combined Total Debt $333,042,564 $37,405,391
Ratio to Assessed Valuation:
Direct Debt 0.00%
Total Direct and Overlapping Tax and Assessment Debt 0.75%
Combined Total Debt 1.30%
Ratio to Redevelopment Successor Agency Incremental Valuation:2.59%
Assessed Valuation Calculation:
Net Taxable Value $2,886,907,748
Less: Redevelopment Agency Tax Increment (204,861,378)
Total Assessed Valuation $2,682,046,370
Source: California Municipal Statistics
Net Debt Outstanding
Percentage
Applicable to the
City
Amount Applicable to
the CityJurisdiction
San Luis Obispo County Flood Control and Water Conservation
District, Zone No. 3
C-25
Item 8.b. - Page 127
City of Arroyo Grande
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
Debt Limit $79,840,076 $79,151,950 $76,912,430 $81,390,806
Total net debt applicable to limit
Legal debt margin $79,840,076 $79,151,950 $76,912,430 $81,390,806
9%9%9%10%
Source: San Luis Obispo County
Fiscal Year
Total net debt applicable to the limit as a
percentage of debt limit
2009 2010 2011 2012
C-26
Item 8.b. - Page 128
$81,888,135 $85,681,844 $92,280,975 $100,526,999 $104,290,694 $109,284,041
$81,888,135 $85,681,844 $92,280,975 $100,526,999 $104,290,694 $109,284,041
3%3%3%2%1%1%
Legal Debt Margin Calculation for Fiscal Year 2017
Assessed value $2,886,907,748
Debt limit - 3.75% of total assessed value 108,259,041
Amount of debt applicable to limit 1,025,000
Legal debt margin $109,284,041
Section 43605 of California Government Code establishes a legal debt limit of 15% of gross assessed valuation for municipalities. However,
this provision was enacted when assessed valuation was established based on 25% of market value. Effective with FY 1981-82, taxable
property is assessed at 100% of market value. Although the debt limit provision has not been amended by the State since this change, the
percentage has been proportionately modified to 3.75% for the purposes of this calculation for consistency with the original intent of the
State’s limit.
2016 20182013201420152017
Fiscal Year
C-27
Item 8.b. - Page 129
City of Arroyo Grande
DEMOGRAPHIC STATISTICS
Last Ten Calendar Years
Year Population
2009 17,080 561,131$ 32,853$ 9.2%
2010 17,145 547,714 31,946 10.4%
2011 17,365 554,159 31,912 9.5%
2012 17,291 590,856 34,171 6.2%
2013 17,395 555,104 31,912 5.3%
2014 17,334 580,593 33,494 4.9%
2015 17,295 567,314 32,802 4.0%
2016 17,731 580,593 32,745 4.9%
2017 17,736 601,429 33,910 3.7%
2018 17,880 629,380 35,200 3.0%
Source: California Department of Finance & US Census Bureau
Personal Income
(in thousands)
Per Capita
Personal Income
Unemployment
Rate
C-28
Item 8.b. - Page 130
City of Arroyo Grande
FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION
Last Ten Fiscal Years
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
General government 10.6 10.6 10.7 10.5 10.4 10.5 9.8 12.8 12.8 12.8
Community development 13.4 10.8 10.5 9.2 9.7 9.1 10.0 11.5 11.5 11.7
Police 38.0 38.5 38.5 39.6 38.4 37.5 32.8 34.7 34.7 33.6
Recreation 18.9 16.5 11.9 11.4 11.5 11.9 13.1 13.7 13.7 14.4
Public works 10.0 10.1 11.1 10.9 9.8 9.8 11.2 14.1 14.1 13.7
Streets and roads 6.1 6.0 6.4 6.1 5.6 5.2 4.8 4.8 4.8 3.9
Sewer 4.4 3.2 2.0 1.9 1.0 0.5 2.1 2.3 2.3 2.7
Water 7.4 6.5 6.6 6.6 6.1 6.8 5.1 6.3 6.3 6.7
Total 108.8 102.2 97.7 96.2 92.5 91.3 88.9 100.2 100.2 99.5
Source: City of Arroyo Grande payroll records
Fiscal Year
Function
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Item 8.b. - Page 131
City of Arroyo Grande
OPERATING INDICATORS BY FUNCTION
Last Ten Fiscal Years
2009 2010 2011 2012 2013
General Government
Number of business licenses 1,705 1,622 1,654 1,654 1,690
Number of minutes transcribed 35 30 44 30 33
Number of agenda items processed 275 297 295 246 231
Number of recruitments 31 19 18 10 14
Police
Number of officers 27 26 26 26 24
Incidents recorded 14,150 17,072 16,145 17,250 18,275
Major crimes 395 478 444 313 458
Traffic collisions 450 429 432 410 253
Traffic enforcement activities 4,616 4,863 4,013 4,295 4,058
Arrests 364 631 605 574 695
Public Works
Miles of streets maintained 70 70 70 70 70
Miles of sewer maintained 66 66 66 69 70
Number of vehicles maintained 90 89 90 86 67
Pieces of equipment maintained 389 385 389 350 300
Number of street trees maintained 1,200 1,200 1,200 1,200 1,200
Street service request 560 550 560 263 352
Water customer accounts 6,457 6,304 6,312 6,525 6,545
Acre feet of water consumed 3,177 2,918 2,746 2,868 2,862
Miles of water lines maintained 69 69 69 87 87
In-house capital projects constructed 3 3 2 3
Capital projects constructed 7 6 10 7 8
CIP studies initiated 2 4 3 4
CIP studies completed 1 1 2 1
Community Development
Number of planning commission agendas 20 18 19 14 20
Number of planning commission staff reports 58 36 43 35 60
Number of ARC agendas 13 12 13 11 15
Plan and map checks completed 8 13 12 13 9
Building permits issued 540 530 421 376 360
Building inspections conducted 4,500 3,400 3,019 1,601 2,183
Recreation Services
Registrations 11,650 11,500 11,650 11,750 11,880
Participants in City recreation sports 2,200 2,290 2,200 2,260 2,285
Number of programs/events/classes 91 72 91 108 115
Number of teams 281 255 281 336 325
Children in Motion enrollment 1,250 1,200 800 840 959
Source: City of Arroyo Grande budget records
Fiscal Year
C-30
Item 8.b. - Page 132
2014 2015 2016 2017 2018
1,775 1,760 1,863 1,844 1,844
23 41 36 32 30
296 340 325 287 280
18 15 23 17 35
27 23 22 20 23
18,809 17,203 17,140 17,925 17,242
508 500 508 403 435
378 340 349 288 331
3,758 2,967 1,934 2,956 2,144
568 675 716 870 738
70 70 70 66 66
70 70 70 71 75
60 55 59 50 70
295 285 291 282 285
1,210 1,218 1,233 1,244 1,244
376 423 423 426 426
6,578 6,384 6,410 6,433 6,502
2,868 2,481 1,965 1,823 2,213
87 87 87 88 87
2 1 2 1 2
13 8 17 16 8
3 1 3
3 2
18 16 19 18 18
53 55 53 57 64
21 18 22 18 15
6 17 14 39 31
450 505 534 537 430
2,390 2,414 2,154 2,241 2,911
12,000 12,130 12,280 8,619 9,095
2,235 2,255 2,080 1,872 1,423
120 125 142 392 234
320 324 289 115 113
1,009 1,083 1,058 1,023 1,109
Fiscal Year
C-31
Item 8.b. - Page 133
City of Arroyo Grande
CAPITAL ASSET STATISTICS BY FUNCTION
Last Ten Fiscal Years
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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)69 69 69 87 87 87 87 87 87 87
Water capacity**6.5 6.5 6.5 6.7 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
Item 8.b. - Page 134