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Home My WebLink About11/25/08 City of Hermosa Beach, California Comprehensive Annual Financial Report For the year ended June 30, 2008 City of Hermosa Beach Basic Financial Statements For the year ended June 30, 2008 Table of Contents i Page INTRODUCTORY SECTION (UNAUDITED) Table of Contents ...........................................................................................................................................................i Letter of Transmittal......................................................................................................................................................v Certificate of Achievement for Excellence in Financial Reporting – Governmental Finance Officers Association.......................................................................................................xi Organizational Chart.....................................................................................................................................................xii Principal Officials of the City of Hermosa Beach......................................................................................................xiii FINANCIAL SECTION Independent Auditors’ Report ..........................................................................................................................................1 Management’s Discussion and Analysis (Required Supplementary Information) (Unaudited).........................3 Basic Financial Statements: Government – Wide Financial Statements: Statement of Net Assets..........................................................................................................................................21 Statement of Activities and Changes in Net Assets ...........................................................................................22 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet.....................................................................................................................................................30 Reconciliation of the Governmental Funds Balance Sheet to the Government –Wide Statement of Net Assets.............................................................................31 Statement of Revenues, Expenditures and Changes in Fund Balances................................................................................................................32 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government – Wide Statement of Activities and Changes in Net Assets..............................................................................33 Proprietary Fund Financial Statements: Statement of Net Assets...................................................................................................................................38 Statement of Revenues, Expenses and Changes in Fund Net Assets........................................................39 Statement of Cash Flows.................................................................................................................................40 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets.................................................................................................................44 Statement of Changes in Fiduciary Net Assets............................................................................................45 Index to Notes to Basic Financial Statements..........................................................................................................47 Notes to Basic Financial Statements..........................................................................................................................49 Required Supplementary Information (Unaudited).....................................................................................................81 City of Hermosa Beach Basic Financial Statements For the year ended June 30, 2008 Table of Contents, Continued ii Page FINANCIAL SECTION, Continued Supplementary Information: Non-Major Governmental Funds: Combining Balance Sheet...................................................................................................................................94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances................................100 Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Non-Major Special Revenue Funds: Lighting and Landscape District.......................................................................................................105 State Gas Tax........................................................................................................................................106 AB 939 ...................................................................................................................................................107 Compensated Absences......................................................................................................................108 Prop A Open Space .............................................................................................................................109 Tyco.......................................................................................................................................................110 Tyco Tidelands.....................................................................................................................................111 Parks and Recreation Facilities..........................................................................................................112 4% Utility Users Tax............................................................................................................................113 Building Improvement .......................................................................................................................114 Bayview Drive Administrative Expense..........................................................................................115 Lower Pier Administrative Expense.................................................................................................116 Myrtle District Administrative Expense ..........................................................................................117 Loma District Administrative Expense............................................................................................118 Beach Drive Assessment District Administrative Expense...........................................................119 Community Development Block Grant............................................................................................120 Prop “A” Transit..................................................................................................................................121 Grants....................................................................................................................................................122 Air Quality Management District......................................................................................................123 Supplemental Law Enforcement Services (COPS)..........................................................................124 California Law Enforcement Program (CLEEP) .............................................................................125 Taskforce for Regional Auto Theft Prevention................................................................................126 Sewer.....................................................................................................................................................127 Asset Seizure and Forfeiture Fund....................................................................................................128 Fire Protection......................................................................................................................................129 Retirement Stabilization .....................................................................................................................130 Artesia Boulevard Relinquishment...................................................................................................131 Beach Drive 2 Underground District................................................................................................132 Myrtle Utility Underground Improvement.....................................................................................133 Bayview Drive Underground District..............................................................................................134 Beach Drive Underground District...................................................................................................135 Prospect Utility Underground District.............................................................................................136 City of Hermosa Beach Basic Financial Statements For the year ended June 30, 2008 Table of Contents, Continued iii Page FINANCIAL SECTION, Continued Supplementary Information, Continued: Internal Service Funds: Combining Statement of Net Assets...............................................................................................................138 Combining Statement of Revenues, Expenses and Changes in Net Assets..............................................139 Combining Statement of Cash Flows.............................................................................................................140 Fiduciary Fund Financial Statements: Combing Statement of Fiduciary Net Assets................................................................................................142 Combing Statement of Changes in Assets and Liabilities...........................................................................143 Capital Assets Used in the Operating Of Governmental Funds: Schedule by Source...........................................................................................................................................146 Schedule by Function and Activity.................................................................................................................147 Schedule of Changes in Capital Assets by Function and Activity.............................................................148 STATISTICAL SECTION (Unaudited) Net Assets By Component.............................................................................................................................................151 Changes in Net Assets....................................................................................................................................................152 Governmental Activities Tax Revenues By Source....................................................................................................154 Fund Balances of Governmental Funds.......................................................................................................................155 Changes in Fund Balances of Governmental Funds..................................................................................................156 Governmental Activities Tax Revenues By Source....................................................................................................157 Assessed Value and Estimated Actual Value of Taxable Property..........................................................................158 Direct and Overlapping Government..........................................................................................................................159 Principal Property Taxpayers........................................................................................................................................160 Property Tax Levies and Collections............................................................................................................................161 Construction Value and Property Value ....................................................................................................................162 Direct and Overlapping Debt........................................................................................................................................163 Legal Debt Margin Information....................................................................................................................................164 Demographic and Economic Statistics.........................................................................................................................166 Principal Employers.......................................................................................................................................................167 Full-Time Equivalent City Government Employees by Function............................................................................168 Operating Indicators by Function ................................................................................................................................169 Capital Asset Statistics by Function.............................................................................................................................170 iv This page intentionally left blank. vi Profile of the Government The City of Hermosa Beach is a beachfront, bedroom community with a stable population, located four miles south of Los Angeles International Airport. The City occupies 1.3 square miles and serves a population of 19,527, according to the State’s latest population estimate. However as a beach city, Hermosa experiences a high visitor population and the associated costs. Due to this high visitor population, the City operates in many ways like a larger city. During the 2007-08 fiscal year, beach attendance ranged from a low of 40,300 in February 2008 to a high of 690,085 in July 2007, according to the Los Angeles County Fire Department, Lifeguard Division. The City of Hermosa Beach, incorporated on January 14, 1907 as a general law city, operates under the Council-Manager form of government. Policy-making and legislative authority are vested in a governing council consisting of five members of the City Council elected on a non-partisan basis at large for a four- year term. Council members serve four-year, staggered terms, with an election every two years. One member is chosen by fellow members to serve as Mayor for a period of nine months; one is chosen to serve as Mayor Pro Tem. The Council is responsible for, among other things, establishing policy, passing ordinances, adopting an annual budget; appointing members to various City Commissions and Boards and hiring the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the government, and for appointing the heads of the various departments. Hermosa Beach offers a full range of municipal services, including police and fire protection, community development (planning and zoning), cultural, recreation and parks, maintenance and construction of public improvements, parking and animal control, and general administration. Financial information for the Downtown Business Area Enhancement District, the Lighting and Landscaping District, the Lower Pier Avenue Assessment District and the Myrtle Avenue, Loma Drive, Bayview Drive, and Beach Drive Utility Underground Districts are included in the City's financial statements as required by governmental accounting standards. The annual budget serves as the foundation for the City of Hermosa Beach’s financial planning and control. All departments of the City of Hermosa Beach are required to submit requests for appropriation to the City Manager according to a budget calendar. The City Manager uses these requests as the starting point for developing a proposed budget, which is presented to the City Council for review by May 15. The City Council is required to hold a public hearing on the budget, with adoption no later than June 30th. If the City Council fails to adopt a budget by that date, the budget submitted by the City Manager , as amended by the City Council, if applicable, is the appropriated budget except for capital improvement outlays. The appropriated budget is prepared by fund and department (e.g., Police Department). The City Manager may make transfers of appropriations between departments within each fund; transfers of appropriations between funds, however, require the approval of the City Council. A midyear budget review is conducted after the first six months of the fiscal year to ensure estimates are on target. Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund and major governmental funds with appropriated annual budgets, this comparison is presented as Required Supplementary Information on pages 83-86. For non- major governmental funds with appropriated annual budgets, this comparison is presented as Supplementary Information, after the Notes to the Financial Statements. 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 of Hermosa Beach operates. vii Local economy. As a beachfront community, with more bedrooms than businesses, Hermosa Beach had the eighth highest percentage change in secured and unsecured assessed valuation (11.9%) of the 88 cities in Los Angeles County for 2007-08. Since 2003, the assessed valuation (including exemptions) has risen steadily, averaging 10.9% per year for the past five years, making property tax the number one revenue source in the General Fund. Median home prices in Hermosa Beach as of June 2008 were $1,035,000, compared to $415,000 for Los Angeles County. The average median home price for Hermosa Beach for fiscal year 2007-08 was $1,166,708. As a beach city, the three highest occupations are management, sales, and administrative support, however residents enjoy access to a much more diverse employment base with the close proximity of all of the other cities in Los Angeles County. The unemployment rate in Hermosa Beach is 2.9%, compared with 7.1% for Los Angeles County, and 7.0% for California. Secured property taxes increased, 12% in 2007-08 and on the average, 11% over the past five years, corresponding with the increase in assessed valuation mentioned above (in spite of the shift of over $650,000 in 2004-05 and 2005-06 in property tax funds from local government to the State to balance their budget). The strength in this area helped offset the decline in the sales tax base that began in 2001-02 with the loss of several new auto dealerships: Audi/Porsche in 2002, Volkswagen in 2003 and BMW in 2004. The biggest impact was BMW new car sales, which was felt in full for the first time in 2005-06. BMW still maintains pre-owned sales on a portion of the previous site. Sales tax receipts over the past ten years were highest in 2000-01 at $2.7 million to a low in 2006-07. Receipts for 2007-08 are up 4% to $2.5 million. In the past ten year period, transient occupancy tax has increased from a low of $549,858 in 1998-99 to a high of $1.9 million in 2007-08, or an average increase of 17%. During that ten years, three new hotels were added; the Beach House (phases 1 and 2), the Holiday Inn Express, and the Hampton Inn. Growth for 2007-08 was 7%. Average occupancy for 2007-08 was 76.7% for Hermosa Beach compared to the South Bay rate of 77.2%. Utility user tax (UUT) was 2% less than 2006-07. The utility users tax is the second highest single source of income for the City. The City was successful in obtaining voter approval (72%) for adoption of a modern UUT ordinance in November 2007. The original ordinance was written in 1985. This new ordinance ensures that the City will continue to collect UUT revenue as technology changes occur and traditional phone service becomes a thing of the past. Since the new ordinance was not in effect from a practical standpoint until April 2008, the effects are not yet seen in the revenue. The decline in the tax is likely due to cell phone saturation. The City updated all user fees in 2005-06 and outsourced the billing and collection for ambulance transport services, both of which continue to have a positive impact on revenue. The City plans to update user fees at least every five years. National Economy. Subsequent to the reporting period of this report, financial markets are in crisis. From the earliest events in the spring of 2008 where the first sub prime mortgage lenders filed for bankruptcy to events at the beginning of the summer with the first bank failures occurring and then into the fall with Treasury Department seizing the Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) and later American International Group, Inc. (AIG), a large insurer. Credit markets were essentially frozen with the municipal bond market only showing signs of a thaw at the end of October. With few projections of improvement in the economy earlier than 2010-11, the City certainly must proceed cautiously, monitoring the economic effects as they develop. viii Fortunately, the City has no direct investment exposure with any of the failed companies or institutions. Exposure to any mortgage foreclosures or declines in property values are expected to be far less in the beach cities than in other locations. California Public Employees Retirement System (CalPERS). City retirement rates decreased by 2.53 points (2.53% of payroll) from 2006-07. CalPERS double digit earnings for 2003-04 through 2006-07, combined with the rate-smoothing policies implemented are having the desired effect on rates. Rates for 2008-09 increased slightly by .92 points with rates from CalPERS predicted to decrease by 3 points for 2009- 10. The investment return of -2.5% for 2007-08 is a signal of what we now know (as of this writing) to be a meltdown in the overall financial market. The City will need to begin planning for a potential increase in rates assuming conservatively that these losses may grow and continue for some time. The City created a Retirement Stabilization Fund in 2003-04 for this purpose so a determination can be made whether additional set-aside funds are necessary. The fund balance at 6/30/08 is $748,357. State Budget. Through passage of Proposition 1A in November 2004, a deal was struck whereby $1.3 billion in local government funds were shifted to the State in 2004-05 and 2005-06, with funds protected thereafter unless 2/3 of the legislature votes to “borrow” funds again. The State may only borrow local government funds twice in any 10 year period. Old loans must first be paid back before any new funds may be borrowed. In spite of this legislation, the State’s structural budget imbalance is still of great concern to local government, The State Budget did not affect general city revenue when their 2008-09 budget was “balanced” in September 2008, however after only two months (November 2008) the Governor has called a special session of the legislature to deal with a projected deficit of at least $10 billion for 2008-09. Long-term financial planning. The City Council’s adopted financial policies relating to long-term financial planning for specific funds, are as follows: Contingency Fund—Goal of fund balance equal to 15% of the General Fund appropriations for economic uncertainties, unforeseen emergencies. Insurance Fund—Goal of $3,000,000 in net assets for claims reserves and catastrophic losses. Equipment Replacement Fund—Goal of net assets equal to the accumulated amount calculated for all equipment, based on replacement cost and useful life of equipment. Compensated Absences Fund—Goal of fund balance equal to 25% funding for accrued liabilities for employee vacation, sick and compensatory time. The City also has a financial policy of transferring funds unspent in the General Fund at year-end to the Contingency Fund, Insurance Fund, Equipment Replacement Fund, and Capital Improvement Fund to build equity in those funds. For 2007-08, all unspent funds in the General Fund in the amount of $1,332,867 were transferred to the Insurance Fund. The City Council makes changes as necessary to the year end transfer, depending on the equity in the funds or based on other needs. The City’s long term financial planning focuses on the Capital Improvement Plan, which is produced as part of the annual budget. Since the City is built out, the plan primarily addresses maintenance, repair and upgrading of facilities and infrastructure, particularly streets and sewers. ix Primary projects coming up, (other than street and sewer improvements, which occur every year) are continuing upgrades to the Community Center and Emergency Operations Center, refurbishment of the Clark Field Community Building, rehabilitation of beach restrooms and a major renovation of the Public Works City Yard. The City will use federal Community Development Block Grant funds for these projects, in addition to City funds. Cash management policies and practices. Temporarily idle cash was invested during the year in obligations of the U.S. Treasury and the State Treasurer's investment pool. The average maturity was 8 months, with an average yield on investments of 4.79% Investment income includes changes in the fair value of investments. Changes in fair value during the current year, however, do not necessarily represent trends that will continue nor do such amounts necessarily become realized, since the City intends to hold the investments to maturity. Risk management. The City is self-insured up to $250,000 for liability claims. Excess coverage up to $20 million is obtained through the Independent Cities Risk Management Authority (ICRMA), a joint powers authority consisting of medium-sized California municipalities. The cost of the insurance depends on both the loss experience of member cities and the loss experience of Hermosa Beach. The City of Hermosa Beach purchases workers’ compensation coverage through a self-insured program available through ICRMA. The City maintains a $500,000 self-insured retention limit and participates in a self-insured risk sharing pool through the ICRMA and the California State Association of Counties (CSAC). Together, these two joint powers authorities provide a shared limit of coverage up to a maximum of $200 million. Claims defense and settlement are coordinated by third party administrators for both liability and worker's compensation, with oversight by the City’s Risk Manager/Human Resources Director. Additional information on the City of Hermosa Beach’s risk management activity can be found in Note 9 of the notes to the financial statements. Pension and other post employment benefits. The City of Hermosa Beach provides pension benefits to safety and non-safety employees through the California Public Employees Retirement System (CalPERS). CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. The City pays employee contributions as a negotiated benefit. City employer contributions are actuarially determined on an annual basis. The City of Hermosa Beach also provides post employment heath care benefits for certain retirees. As of the end of the current fiscal year, there were 25 retirees receiving these benefits. Generally Accepted Accounting Principles (GAAP) do not currently require governments to report a liability in the financial statements in connection with an employer's obligation to provide these benefits. However, Governmental Accounting Standards Board (GASB) Statements 43 and 45 will require different accounting and reporting for these types of “other post employment benefits” (OPEB). For our size City, the effective date will be fiscal year 2008-09. The City elected early implementation of GASB 45 and established a trust with an outside party to administer these funds in July 2007. The City is contributing the annual required contribution for all employees as determined by an actuarial study in the manner as is done for retirement contributions to CalPERS. Additional information on the City of Hermosa Beach’s pension arrangements and other post employment benefits can be found in Notes 10 and 12 in the Notes to the Financial Statements. x Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Hermosa Beach for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2007. This was the eighteenth consecutive year that the government has received this prestigious award. In order to be awarded a Certificate of Achievement, the government published a report that satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department, with particular appreciation to Valerie Mohler, the Accounting Supervisor. We would also like to express our appreciation to the City Manager and all of the departments, including the City Clerk and City Treasurer, and to our auditors, Caporicci & Larson, for their assistance and support in preparation of the report. Credit also must be given to the Mayor and the City Council for their continuing support for maintaining the highest standards of professionalism in the management of the City of Hermosa Beach’s finances. Respectfully submitted, Viki Copeland Finance Director xi xii xiii xiv This page intentionally left blank. 2 To the Honorable Mayor and City Council of the City of Hermosa Beach Hermosa Beach, California The accompanying Required Supplementary Information, such as Management’s Discussion and Analysis and budgetary comparison information, is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the Required Supplementary Information. However, we did not audit the information and express no opinion on the Required Supplementary Information. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Supplementary Information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Irvine, California November 17, 2008 3 Management's Discussion and Analysis As management of the City of Hermosa Beach, we offer readers of the City of Hermosa Beach’s financial statements this narrative overview and analysis of the financial activities of the City of Hermosa Beach for the fiscal year ended June 30, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages v - x of this report. Financial Highlights • The assets of the City of Hermosa Beach exceeded its liabilities at the close of the last fiscal year by $81,653,000 (net assets). Of this amount, $9,176,000 (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The government's total net assets decreased by ($1,446,000). The decrease is the result of increased revenues for property taxes and services charges which were offset by increased costs for salaries and benefits due to changes in employee memoranda of understanding, the filling of employee vacancies, and increased litigation costs for the MacPherson Oil Company lawsuit. • As of June 30, 2008, the City of Hermosa Beach’s governmental funds reported combined ending fund balances of $13,369,000, an increase of $318,000 in comparison with the prior year. Approximately 15% of this amount is reserved to indicate that it is not available because it has been 1) committed for purchase orders or contracts for the prior period and will be reappropriated, 2) committed for advances between funds for the purchase of property adjacent to City Hall, 3) committed for other specific projects or 4) represents an advance to other funds for utility undergrounding startup costs. Another 2% is designated for specific uses, with the remainder available for a variety of purposes. • As of June 30, 2008, the unreserved, undesignated fund balance for the General Fund was $0. Funds remaining unspent in the General Fund at year end are transferred equally to the Contingency Fund, Insurance Fund, Equipment Replacement Fund and the Capital Improvement Fund until financial goals are met. See “Financial Analysis of the Government’s Funds” for further discussion of these transfers for 2007-08. The balance in the Contingency Fund (or “rainy day fund”) is $4.4 million or 16.5% of General Fund appropriations and serves as the City’s cushion against economic uncertainties. The City’s financial policy is to retain a fund balance of 15% of General Fund appropriations, however because of litigation costs associated with the MacPherson Oil lawsuit, $500,000 will be transferred to the Insurance Fund to cover a portion of these costs, bringing the balance down to 14.8%. These balances will be addressed as part of the Midyear Budget Review process for 2008-09. The City’s financial goals and the progress toward those goals is always reviewed at midyear. • The City Of Hermosa Beach currently has no debt. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Hermosa Beach’s basic financial statements. The basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The report also contains other supplementary information in addition to the basic financial statements themselves. 4 Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Hermosa Beach’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the City of Hermosa Beach’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Hermosa Beach is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned, but unused, vacation leave). Both of the government-wide financial statements distinguish functions of the City of Hermosa Beach that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Hermosa Beach include legislative and legal, general government, public safety, public works, community development, and culture and recreation. The business-type activities of the City of Hermosa Beach are in the Downtown Enhancement Fund. The government-wide financial statements include not only the City of Hermosa Beach itself, but also the Lighting and Landscaping District, the Lower Pier Avenue Assessment District and the Myrtle Avenue, Loma Drive, Bayview Drive and Beach Drive Utility Underground Districts. Although these entities are legally separate, they function for all practical purposes as part of the City, and therefore have been included as an integral part of the primary government. The Government-Wide Financial Statements can be found on pages 21-23 of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Hermosa Beach, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. 5 The City of Hermosa Beach maintains thirty-seven individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the funds below, which are considered to be major funds: General Fund Proposition C Fund Contingency Fund Capital Improvement Fund Major funds are governmental or enterprise funds whose revenues, expenditures/expenses, assets or liabilities are at least 10% of corresponding totals for all governmental or enterprise funds and at least 5% of the corresponding total for all governmental and enterprise funds combined. Data from the other thirty-three governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Hermosa Beach adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 30-33 of this report. Proprietary funds. The City of Hermosa Beach maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Hermosa Beach uses an enterprise fund to account for its downtown enhancement operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City of Hermosa Beach’s various functions. The City of Hermosa Beach uses internal service funds to account for its fleet of vehicles, information systems and equipment and risk management/insurance. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Downtown Enhancement Fund which is considered to be a major fund of the City of Hermosa Beach. Internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 38-40 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City of Hermosa Beach’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. Funds of the Lower Pier Avenue, Myrtle Avenue, Loma Drive, Bayview Drive, and Beach Drive Undergrounding Districts are held as fiduciary funds. Other Post Employment Benefits (OPEB) funds that were held previously as fiduciary funds by the City, were placed in a trust fund administered by Public Agency Retirement Services in August 2007. The basic fiduciary fund financial statements can be found on pages 44-45 of this report. 6 Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 49-80 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Hermosa Beach’s major funds. Required supplementary information can be found on page 82 of this report. The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 94-136 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. As of June 30, 2008, assets exceeded liabilities by $81,653,000. By far the largest portion of the City of Hermosa Beach’s net assets, $67,305,000, (82%) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment). The City of Hermosa Beach uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. 2008 2007 2008 2007 2008 2007 Current and Other Assets $ 27,696 $ 26,058 $ (1,187) $ (1,228) $ 26,509 $ 24,830 Capital Assets 57,118 58,249 10,188 10,311 67,306 68,560 Total Assets 84,814 84,307 9,001 9,083 93,815 93,390 Long-term Liabilities Outstanding 4,337 3,436 - - 4,337 3,436 Other Liabilities 7,568 6,479 257 376 7,825 6,855 Total Liabilities 11,905 9,915 257 376 12,162 10,291 Net Assets: 72,909 74,392 8,744 8,707 81,653 83,099 Invested in Capital Assets 57,118 58,249 10,188 10,311 67,306 68,560 Restricted 5,171 3,813 - - 5,171 3,813 Unrestricted 10,620 12,330 (1,444) (1,604) 9,176 10,726 Total Net Assets $ 72,909 $ 74,392 $ 8,744 $ 8,707 $ 81,653 $ 83,099 Activities Activities Net Assets June 30, 2008 (dollars in thousands) Governmental Business-type Total A portion of the City of Hermosa Beach’s net assets (6%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets ($9,176,000) may be used to meet the government's ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Hermosa Beach is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental activities. The business-type activities show a deficit for unrestricted net assets due to the purchase of a 7 storage lot facility with internal loans from the Contingency Fund, the Insurance Fund and the Equipment Replacement Fund. These loans are being repaid from revenue received from the lease of the facility and unrestricted net assets when available. The government’s net assets decreased by ($1,446,000) during the current fiscal year. As mentioned earlier, this decrease is attributable to increased revenues for taxes that were offset by increased costs for salaries and benefits due to changes in employee memoranda of understanding, the filling of employee vacant positions, and increased litigation costs for the MacPherson Oil Company lawsuit. Both revenue and expense increases are discussed in more detail in the following report sections. Governmental activities. Governmental activities decreased the City of Hermosa Beach’s net assets by ($1,483,000). Key elements of this decrease are as follows: 2008 2007 2008 2007 2008 2007 Revenues: Program Revenues: Charges For Services $8,219 $7,536 $1,088 $1,144 $9,307 $8,680 Operating Grants and Contributions 731 756 - - 731 756 Capital Grants and Contributions 69 287 - - 69 287 General Revenues: - - - - Property Taxes 10,458 9,384 - - 10,458 9,384 Other Taxes 8,957 8,810 - - 8,957 8,810 Grants and Contributions Not Restricted to Specific Programs 1,472 1,274 - - 1,472 1,274 Other 1,354 1,267 86 134 1,440 1,401 Total Revenues 31,260 29,314 1,174 1,278 32,434 30,592 Expenses: Legislative and Legal 990 867 - - 990 867 General Government 2,544 2,523 - - 2,544 2,523 Public Safety 19,569 17,237 - - 19,569 17,237 Community Development 1,358 1,425 - - 1,358 1,425 Culture and Recreation 1,343 1,254 - - 1,343 1,254 Public Works 6,943 7,106 - - 6,943 7,106 Downtown Enhancement - - 1,133 1,096 1,133 1,096 Parking - - - - - - Total Expenses 32,747 30,412 1,133 1,096 33,880 31,508 Increase (Decrease) in Net Assets Before Transfers (1,487) (1,098) 41 182 (1,446) (916) Transfers 4 11 (4) (11) - - Increase (Decrease) in Net Assets (1,483) (1,087) 37 171 (1,446) (916) Net Assets - 7/1/07 74,392 75,479 8,707 8,536 83,099 84,015 Net Assets – 6/30/08 $72,909 $74,392 $8,744 $8,707 $81,653 $83,099 Changes in Net Assets June 30, 2008 (dollars in thousands) Governmental Activities Business-type Activities Total • Program revenues increased $683,000 because of an increased number of special events, increased participation in recreation programs and increased parking fines received as a result of a 23% increase in the number of citations issued over 2006-07. 8 • Property Taxes overall increased by $1,074,000 or approximately 11%. Assessed valuations increased 11.9% overall. • Other Taxes increased 2% as a result of increased revenue from the transient occupancy tax (tax on hotel stays), and a new fiber optic cable franchise that began operating in 2006-07. • Capital Grants and Contributions decreased due to reductions in County Measure B grant funds, a Federal Firefighters Assistance grant and other State grants for Police Ticket Writers which were completed 2006-07. • Grants and Contributions Not Restricted to Specific Programs increased for the following reasons: motor vehicle license fees decreased by ($23,000); a decrease of ($144,000) as no traffic congestion relief funding was received; Proposition A and C Transit Funds decreased by ($6,000); the amount of State reimbursed claims for mandated costs was ($36,000) less because 06-07 included claims that had previously been put on hold for several years. The City received a $400,000 allocation of Proposition 1B funding. Transit Development Act Revenue was $7,000 higher for 07-08. • Other revenue increased primarily due to the exchange of Community Development Block Grant funds for General Funds from the City of San Fernando, California, a large donation for Community Center Theatre Improvements and an increase in reimbursements for Fire Department Strike Teams dispatched to wild fires in 2007-08. - 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 20,000,000 Expenses and Program Revenues Governmental Activities Expenses Revenue 9 On the expense side, the Legislative and Legal function increased by approximately 14% because there were election costs in 2007-08 and City Councilmembers received an increase to their salary for the first time since 1986 . Employee salary and benefit increases of approximately 8%, which include both merit increases and changes to the Memoranda of Understanding (MOU) for all groups, affect all governmental functions. The General Government function increased due to increased legal costs for personnel issues. Increased legal costs for the ongoing MacPherson Oil Company litigation discussed in Note 12 of the Notes to the Basic Financial Statements, impacted all governmental functions since these costs were recorded in the Insurance Fund which is allocated across functions. The total amount for these legal costs for 2007-08 was $648,000. Business-type activities. Business-type activities increased the net assets by $37,000. The primary contributing factors to this increase were: • Charges for Services decreased 7% due to a decrease in parking lot revenue received in 2007-08. • Other revenue decreased due to the decrease in investment earnings over 2006-07 and decreased donations received for the City’s Centennial celebrations being held throughout the year. • The Downtown Enhancement operation shows increased expenses primarily due to an increase in the costs for the St. Patrick’s Day Parade event, a 4% increase to lot operator expenses for salary and benefit increases, and Centennial Celebrations held throughout the year. Revenue by Source - Governmental Activities Grants and Contributions Not Restricted to Specific Programs 5% Miscellaneous 2% Capital Grants and Contributions 0% Investment Earnings 3% Operating Grants and Contributions 2% Property Taxes 33% Sales Taxes 8% Utility User Taxes 9% Other Taxes 12% Charges for Services 26% 10 1,060,000 1,070,000 1,080,000 1,090,000 1,100,000 1,110,000 1,120,000 1,130,000 1,140,000 Expenses and Program Revenue Business-type Activities Expenses 1,133,746 Program Revenue 1,088,298 Downtown Enhancement Revenue by Source - Business-type Activities Charges for Services 93% Miscellaneous 5% Investment Earnings 2% Investment Earnings Charges for Services Miscellaneous 11 Financial Analysis of the Government’s Funds As noted earlier, the City of Hermosa Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City of Hermosa Beach’s governmental funds is to provide information on near-term inflows, outflows, and balances of spending resources. Such information is useful in assessing the City of Hermosa Beach’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Hermosa Beach’s governmental funds reported combined ending fund balances of $13,369,000, an increase of $318,000 (2%), in comparison with the prior year. Approximately 85% of this total amount $11,393,000 constitutes unreserved fund balance, which is available for spending at the government's discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to 1) liquidate contracts and purchase orders of the prior period ($1,208,000), 2) fund transportation development act projects ($14,000), 3) fund traffic congestion relief projects ($13,000) to account for advances to undergrounding district funds ($266,000), 4) to account for an advance to the Downtown Enhancement proprietary fund for the purchase of a storage lot facility ($365,000) , 5) to fund future parking facility projects ($10,000), and 6) for future Theatre Improvements donated by a local resident ($100,000) Four funds qualify as major funds under the GASB Statement No. 34, Basic Financial Statements – and Management Discussion and Analysis – for State and Local Governments, reporting criteria: the General Fund, Proposition C Fund, Contingency Fund and Capital Improvement Fund. The General Fund is the chief operating fund of the City of Hermosa Beach. At the end of the current fiscal year, the total fund balance was $499,000, with $132,000 reserved for re-appropriations, $100,000 reserved for Theatre Improvements, $10,000 reserved for future parking facility projects and $257,000 unreserved, but designated for certain purposes. The City’s financial policies require that unspent funds in the General Fund transfer to meet specific funding targets at year end. As those targets or goals are met, transfers may be redirected where funds are needed. For 2007-08, the City Council redirected that funds left unspent in the General Fund at year end transfer to the Insurance Fund to help cover MacPherson Oil lawsuit legal costs. The transfer to the Insurance Fund was $1,332,867. Key reasons funds were available at year end are as follows: • Property taxes, which now include vehicle license revenue since the measurement and growth of these fees is based on assessed valuation, increased by 11%. • Other tax revenue increased 2% primarily due to increases in transient occupancy tax, and a new fiber optic cable franchise that began in 2006-07. • Other revenue increased primarily due to a donation received for future theatre improvements, and an increase to Strike Team reimbursement for wild fires. • Expenditures were 3% less than budgeted, namely due to a number of newly vacant positions, vacant positions that remain unfilled and salary savings due to injured Public Safety employees. The Proposition C Fund qualifies as a major fund in 2007-08, primarily because funds are currently being accumulated in a capital reserve for the improvement of the City’s main arterial street, Pier Avenue. The street has experienced many failures and was identified by the pavement management report as a candidate for reconstruction. Design is scheduled to be completed in 2008-09 with construction beginning later that year. The Memorandum of Understanding for the capital reserve, approved by the Metropolitan Transit Authority, is due to expire in September 2010. 12 The Contingency Fund serves as the City’s “rainy day fund” or reserve for economic uncertainties. A goal amount of 15% of General Fund appropriations has been established. The unreserved, undesignated balance of $4.4 million represents 16.5% of appropriations. As previously mentioned, $500,000 of this balance will be transferred to the Insurance Fund to cover a portion of the legal costs associated with the MacPherson Oil lawsuit. Since the fund balance will be less than 15%, the shortage will be addressed during the Midyear Budget Review Process for 2008-09 as explained earlier. The Capital Improvement Fund provides funding for most of the City’s major multi-year projects. Financing sources for the fund are interfund transfers and interest earned on investments. Major changes to net assets are experienced when there are many ongoing project expenditures in any given year. Since capital projects are ongoing, the City policy is to provide funding whenever excess discretionary funds are available. Proprietary funds. The City of Hermosa Beach’s proprietary fund financial statements for the Downtown Enhancement Fund provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net assets of the Downtown Enhancement operation at the end of the year were ($1,444,000). The deficit is due to the purchase of a storage lot facility with partial funding from internal loans from the Contingency, Insurance and Equipment Replacement Funds. The loans were recorded as if they were being made to the Downtown Enhancement Fund. These loans are being repaid from revenue received from the lease of the facility and any unrestricted net assets that become available, which will ultimately eliminate the deficit. General Fund Budgetary Highlights Differences between the original budget and the final amended budget were 1% for estimated revenue and 1% for appropriations. Actual revenue was higher than the final budget by 3% due to the aforementioned revenue increases. Differences between original and final appropriations other than Transfers Out equaled $277,000 or about 1%. They are briefly summarized as follows: • $50,000 in increases in the Legislative/Legal category to provide funding for additional training, lobby benches for the Council Chambers, the Streetlight Banner Program, bank service charges, and increased legal costs. • $131,000 increase in the General Government function represents funding provided for an increase in personnel legal costs and recruiting services for Fire Chief. • $47,000 in Public Safety increases for items for the Emergency Operations Center (EOC) and an Emergency Services Coordinator that were reappropriated from 2006-07. • $28,000 in Community Resources increases for donations received for recreation programs. • $36,000 in increases for Public Works for Memorial Bench donations, and fence repair at Clark Field. Differences between the final appropriations and actual expenditures totaled $782,000. The largest variances can be summarized as follows: • Public Safety expenditures were less than budget by $190,160 primarily due to vacancies in the Assistant Fire Chief and paramedic positions for the year and salary savings due to employees out with injuries. Funds for Emergency Operating Center equipment that was not yet purchased will be used to purchase the equipment in 2008-09. 13 • Vacancies in the Senior Building Inspector, Senior Planner, and Planning Assistant positions were the main factors for Community Development expenditures being under budget by $323,985. • Expenditures in the Public Works category were less than budgeted by $175,009 due to continued use of a Maintenance I employee to fill a Maintenance II position, lower than anticipated street sweeping and utility costs and unspent emergency traffic signal and street repair funds. Transfers Out increased due to funds remaining in the General Fund at year end, which transfer to meet funding goals as explained on the previous page. Capital Asset and Debt Administration Capital assets. The City of Hermosa Beach’s investment in capital assets for its governmental and business type activities as of June 30, 2008, amounts to $67,306,000 (net of accumulated depreciation). This investment in capital assets includes land, buildings and structures, improvements, machinery and equipment, park facilities, roads, highways, and monuments. The total decrease in the City of Hermosa Beach’s investment in capital assets for the 2007-08 fiscal year was 2% (a 2% decrease for governmental activities and a 1% decrease for business-type activities). Major capital asset events during the fiscal year included the following: Governmental Activities • Construction in progress on a variety of street projects (widening and expansion of existing streets) and sewer projects was $246,000 at the end of the fiscal year. • Construction in progress on the Clark Building refurbishment was $44,000 at the end of the fiscal year. • Construction in progress on the City Yard Renovation was $244,000 at the end of the fiscal year. • Construction in progress on Beach Restroom Rehabilitation was $68,000 at the end of the fiscal year. Business type Activities • There were no significant changes to the capital assets in business type activities. 2008 2007 2008 2007 2008 Land $17,552 $17,552 $5,188 $5,188 $22,740 Buildings and Structures 3,062 3,326 4,927 5,072 7,989 Than Buildings 7,776 8,780 5 5 7,781 Equipment 1,275 1,329 8 9 1,283 Vehicles 1,367 1,517 - - 1,367 Infrastructure 24,520 24,550 60 - 24,580 Construction in Progress 1,566 1,195 - 37 1,566 Total $57,118 $58,249 $10,188 $10,311 $67,306 $68,560 1,338 1,517 24,550 1,232 2007 $22,740 8,398 8,785 Governmental Business-type Activities Activities Total City of Hermosa Beach’s Capital Assets (net of depreciation) (dollars in thousands) 14 Additional information on the City of Hermosa Beach’s capital assets can be found in note 6 on pages 66-68 of this report. Economic Factors and Next Year's Budgets and Rates • Housing sales and prices were still strong in Hermosa Beach for 2007-08, despite the sub-prime mortgage debacle. Foreclosures in the beach-adjacent areas such as Hermosa Beach are expected to be far less than in other areas. Assessed property values grew almost 12%, as did property tax revenue. The assessed valuation in Hermosa Beach has risen 10.9% on average for the last five years. We anticipated less growth for 2008-09 (7%), but not a decline. A recent economic forecast by Beacon Economics projected a 56% decline in home values nationally, a 36% decline in Los Angeles County, and almost no decline in the beach areas such as Hermosa Beach. • Sales tax revenue increased 4% from 2006-07 and is 7% lower than the highest year of 2000-01. The highest sales tax producing category, Eating and Drinking Places, rose 6% and represents 32% of the sales tax revenue. • City retirement rates decreased by 2.53 points (2.53% of payroll) from 2006-07. Rates for 2008-09 increased slightly by .92 points with rates from CalPERS predicted to decrease by 3 points for 2009- 10. The City set up its own Retirement Stabilization Fund to set aside funds for use in times of high retirement rates and has used these funds to offset the high rates. Improved investment earnings and rate smoothing policies adopted by CalPERS are finally making an impact. A snapshot of CalPERS investment earnings is as follows: 2001, –7.2%; 2002, –5.9%; 2003, 3.9%; 2004, 16.7%; 2005, 12.7%; 2006, 12.3%; 2007, 19.1%; and 2008, -2.5%. With the recent turmoil in the financial markets, and investment losses occurring at CalPERS, the City will have to determine the appropriate level of funding to maintain in our Stabilization Fund to ensure that funds are available to offset potential higher rates if investment losses continue. • The City elected in 2003-04 to begin making the annual required contribution for Other Post Employment Benefits (OPEB) after obtaining an actuarial study to value these employee benefits. Accounting for these benefits in much the same way as retirement benefits will be required beginning 7/1/2008 for our size government. In August 2007 the City placed accumulated funds in a trust with an outside party who will administer these funds. • The City was successful in obtaining voter approval of 72% for adoption of a modern utility user tax (UUT) ordinance in November 2007, with changes taking effect in April 2008. The original ordinance was written in 1985. This new ordinance ensures that the City will continue to collect UUT revenue as technology changes occur. Since UUT revenue is the second highest source of revenue for the City, this issue was of the utmost importance. • Significant expenditures from the Insurance Fund continue for the ongoing MacPherson Oil lawsuit. See the Notes to the Financial Statements for a complete history of this lawsuit. • The State of California’s fiscal outlook, is still a source of concern for local government. Proposition 1A (passed in November 2004), provided some protection in that funds may only be borrowed twice in a 10 year period and only if previous loans have been repaid. No funds were “borrowed” when the State’s budget was adopted late, in September, however the Governor has recently called the Legislature back for new budget balancing sessions since a shortfall of $10 million is now projected, only two months after the budget was adopted All of these factors were considered in preparing the City of Hermosa Beach’s budget for the 2008-2009 fiscal year. A discussion of the factors affecting the City’s financial condition may be found in the transmittal letter at the front of this report. 15 Since the City budget was adopted in June, financial market conditions have disintegrated, with the economy in or on the brink of a recession. The Federal Government bailed out Fannie Mae and Freddie Mac and seized control of the largest insurance company in the United States, American International Group, Inc. (AIG). Lehman Brothers, the 4thlargest investment bank in the U.S. filed for bankruptcy and Washington Mutual was seized by regulators and sold to J. P. Morgan Chase & Company. This was the biggest bank failure in history. With turmoil such as this occurring and markets not yet responding to the actions taken by the government, local governments will have to monitor effects on revenue, investments, and retirement funds carefully. Fortunately, Hermosa Beach has no debt and therefore has no adverse affects there. Requests for Information This financial report is designed to provide a general overview of the City of Hermosa Beach’s finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Finance Director, 1315 Valley Drive, Hermosa Beach, CA 90254. 16 This page intentionally left blank. BASIC FINANCIAL STATEMENTS 17 This page intentionally left blank. 18 GOVERNMENT-WIDE FINANCIAL STATEMENTS 19 This page intentionally left blank. 20 City of Hermosa Beach Statement of Net Assets June 30, 2008 Governmental Business-Type Activities Activities Total Current assets: Cash and investments 22,559,736$ 395,642$ 22,955,378$ Reimbursable grants receivable 46,127 46,127 Interest receivable on investments 158,912 5,957 164,869 Other accounts receivable 1,979,898 13,346 1,993,244 Property taxes receivable 1,079,855 1,079,855 Internal Balance 1,601,980 (1,601,980) - Deposits 140,000 140,000 Other assets 129,797 129,797 Total current assets 27,696,305 (1,187,035) 26,509,270 Noncurrent assets: Capital assets: Non-depreciable 19,117,991 5,188,092 24,306,083 Depreciable, net 37,999,541 4,999,486 42,999,027 Total capital assets 57,117,532 10,187,578 67,305,110 Total noncurrent assets 57,117,532 10,187,578 67,305,110 Total assets 84,813,837 9,000,543 93,814,380 Current liabilities: Workers' compensation claims payable - due within one year 711,902 711,902 General liability claims payable - due within one year 626,636 626,636 Compensated absences - due within one year 565,067 565,067 Accounts payable and accrued liabilities 1,533,785 213,582 1,747,367 Accrued wages and compensated absences 2,132,314 13,929 2,146,243 Refundable deposits 540,589 27,012 567,601 Unearned revenue 1,391,633 2,356 1,393,989 Other liabilities 66,148 66,148 Total current liabilities 7,568,074 256,879 7,824,953 Noncurrent liabilities: Workers' compensation claims payable 2,899,316 2,899,316 General liability claims payable 918,576 918,576 Compensated absences 518,891 518,891 Total noncurrent liabilities 4,336,783 - 4,336,783 Total liabilities 11,904,857 256,879 12,161,736 Invested in capital assets 57,117,532 10,187,578 67,305,110 Restricted for: Capital projects 299,641 299,641 Specific projects 4,872,001 4,872,001 Total restricted assets 5,171,642 - 5,171,642 Unrestricted 10,619,806 (1,443,914) 9,175,892 Total net assets 72,908,980$ 8,743,664$ 81,652,644$ See accompanying Notes to Basic Financial Statements. NET ASSETS Primary Government ASSETS LIABILITIES 21 City of Hermosa Beach Statement of Activities and Changes in Net Assets For the year ended June 30, 2008 Charges Operating Capital Total for Grants and Grants and Program Functions/Programs Expenses Services Contributions Contributions Revenues Primary government: Governmental activities: Legislative and legal 990,342$ General government 2,544,004 563,583$ 26,259$ 589,842$ Public safety 19,569,031 4,423,335 306,165 22,735$ 4,752,235 Community development 1,358,051 1,262,109 9,535 1,271,644 Culture and recreation 1,343,223 1,092,512 9,229 5,612 1,107,353 Public works 6,942,530 877,367 379,909 40,515 1,297,791 Total governmental activities 32,747,181 8,218,906 731,097 68,862 9,018,865 Business-type activities: Downtown Enhancement 1,133,746 1,088,298 1,088,298 Total business-type activities 1,133,746 1,088,298 - - 1,088,298 Total primary government 33,880,927$ 9,307,204$ 731,097$ 68,862$ 10,107,163$ General Revenues: Taxes: Property taxes Sale taxes Real Property Transfer Tax Franchise Fees Transient Occupancy Tax Business License Utility Users Tax ½ cent Sales Tax for Public Safety Total taxes Grants and contributions not restricted to specific programs Investment earnings Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets - beginning of year Net assets - end of year See accompanying Notes to Basic Financial Statements. Program Revenues 22 Governmental Business-type Activities Activities Total (990,342)$ (990,342)$ (1,954,162) (1,954,162) (14,816,796) (14,816,796) (86,407) (86,407) (235,870) (235,870) (5,644,739) (5,644,739) (23,728,316) -$ (23,728,316) (45,448) (45,448) - (45,448) (45,448) (23,728,316) (45,448) (23,773,764) 10,458,034 10,458,034 2,500,659 2,500,659 226,349 226,349 634,421 634,421 1,892,363 1,892,363 802,347 802,347 2,714,029 2,714,029 187,277 187,277 19,415,479 - 19,415,479 1,472,191 - 1,472,191 850,176 28,320 878,496 503,414 57,840 561,254 4,259 (4,259) - 22,245,519 81,901 22,327,420 (1,482,797) 36,453 (1,446,344) 74,391,777 8,707,211 83,098,988 72,908,980$ 8,743,664$ 81,652,644$ Net (Expense) Revenue and Changes in Net Assets 23 This page intentionally left blank. 24 FUND FINANCIAL STATEMENTS Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements 25 This page intentionally left blank. 26 GOVERNMENTAL FUND FINANCIAL STATEMENTS 27 This page intentionally left blank. 28 GOVERNMENTAL FUND FINANCIAL STATEMENTS Governmental Funds of the City are outlined below: The General Fund - This fund accounts for all revenues and expenditures used to finance the traditional services associated with a municipal government which are not accounted for in the other funds. In Hermosa Beach, these services include general government, safety, community development, culture and recreation and public works. Proposition "C" Transit Fund - The Proposition C Fund is a fund which was added during 1992 to account for funds allocated from the voter-approved 1/2 cent sales tax. Funds must be used for transit purposes. Contingency Special Revenue Fund - "Rainy day" funds set aside for unforeseen emergencies, unexpected economic events, etc. City Council adopted goal is 15% of appropriations. Capital Improvement Special Revenue Fund - Funds set aside for Capital Improvement Projects. Other Governmental Funds - Other Governmental Funds is the aggregate of all the non-major governmental funds. 29 City of Hermosa Beach Balance Sheet Governmental Funds June 30, 2008 Capital Proposition C Contingency Improvement Other Special Special Special Governmental General Revenue Revenue Revenue Funds Total ASSETS Cash and investments 2,301,753$ 2,146,436$ 3,904,443$ 1,942,494$ 4,710,714$ 15,005,840$ Reimbursable grants receivable 46,127 46,127 Interest receivable on investments 35,977 21,296 38,273 19,319 44,047 158,912 Other accounts receivable 1,347,380 632,068 1,979,448 Property taxes receivable 1,062,167 17,688 1,079,855 Other assets 111,885 5,616 117,501 Due from other funds 53,732 53,732 Advances to other funds 430,847 200,000 630,847 Total assets 4,859,162$ 2,167,732$ 4,373,563$ 2,161,813$ 5,509,992$ 19,072,262$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities 446,838$ 521,894$ 329,242$ 1,297,974$ Wages and compensated absences payable 2,011,126 1$ 5,471 71,360 2,087,958 Refundable deposits 540,589 540,589 Deferred revenue 1,295,720 95,913 1,391,633 Due to other funds 53,732 53,732 Advances from other funds 265,520 265,520 Other liabilities 66,148 66,148 Total liabilities 4,360,421 1 - 527,365 815,767 5,703,554 Fund Balances: Reserved for: Re-appropriations 131,550 150,000 471,142 455,235 1,207,927 Greenwald Theatre Improv Donation 100,000 100,000 Capital Outlay/Parking Facilities 9,592 9,592 Bike paths 14,752 14,752 Traffic congestion relief 12,682 12,682 Used oil grant - Advances to other funds 65,520 200,000 265,520 Storage lot purchase loan 365,327 365,327 Unreserved, designated for: Sales tax in-lieu 145,768 145,768 Affordable housing 111,831 111,831 Justice and treasury department 39,212 39,212 Unreserved, undesignated: Special revenue 2,017,731 3,942,716 963,306 4,172,344 11,096,097 Total fund balances 498,741 2,167,731 4,373,563 1,634,448 4,694,225 13,368,708 Total liabilities and fund balances 4,859,162$ 2,167,732$ 4,373,563$ 2,161,813$ 5,509,992$ 19,072,262$ See accompanying Notes to Basic Financial Statements. Major Funds 30 City of Hermosa Beach Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets June 30, 2008 Total Fund Balances - Total Governmental Funds 13,368,708$ Amounts reported for governmental activities in the Statement of Net Assets were reported differently because: Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. Governmental- Wide Statement of Net Assets Internal Service Funds Non-depreciable 19,117,991$ (348,235)$ 18,769,756 Depreciable, net 37,999,541 (2,099,187) 35,900,354 Total capital assets 57,117,532$ (2,447,422)$ 54,670,110 Internal Service Funds were used by management to charge the costs of certain activities, such as insurance and equipment replacement to individual funds. The assets and liabilities of the Internal Service Funds were included in governmental activities in the Government-Wide Statement of Net Assets. Insurance Fund 52,080 Equipment Replacement Fund 5,902,040 Total internal service funds 5,954,120 Compensated absences were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet.(1,083,958) Net Assets of Governmental Activities 72,908,980$ See accompanying Notes to Basic Financial Statements. 31 City of Hermosa Beach Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2008 Capital Proposition C Contingency Improvement Other Special Special Special Governmental General Revenue Revenue Revenue Funds Total REVENUES: Property taxes 10,458,034$ 449,085$ 10,907,119$ Other taxes 8,957,445 258,984$ 413,936 9,630,365 Licenses and permits 877,775 877,775 Fines and forfeitures 1,957,484 37,038 1,994,522 Use of money and property 379,528 300,000 679,528 Intergovernmental 217,886 1,059,194 1,277,080 Charges for services 4,081,035 90,130 4,171,165 Miscellaneous 302,421 100,000$ 334,691 737,112 Interest earned on investments 69,974 125,417 260,314$ 124,746 269,725 850,176 Total revenues 27,301,582 384,401 260,314 224,746 2,953,799 31,124,842 EXPENDITURES: Current: Legislative and legal 967,423 967,423 General government 2,233,417 199,809 2,433,226 Public safety 17,139,655 234,958 17,374,613 Community development 1,261,825 21,492 1,283,317 Culture and recreation 1,230,077 19,174 1,249,251 Public works 2,902,980 1,600 9,610 1,078,865 3,993,055 Capital outlay 28,768 3,200 852,569 787,904 1,672,441 Total expenditures 25,764,145 4,800 - 862,179 2,342,202 28,973,326 REVENUES OVER (UNDER) EXPENDITURES 1,537,437 379,601 260,314 (637,433) 611,597 2,151,516 OTHER FINANCING SOURCES (USES): Transfers in 781,918 175,000 798,440 1,755,358 Transfers out (2,131,307) (469,598) (56,305) (931,664) (3,588,874) Total other financing sources (uses)(1,349,389) - (469,598) 118,695 (133,224) (1,833,516) Net change in fund balances 188,048 379,601 (209,284) (518,738) 478,373 318,000 FUND BALANCES: Beginning of year 310,693 1,788,130 4,582,847 2,153,186 4,215,852 13,050,708 End of year 498,741$ 2,167,731$ 4,373,563$ 1,634,448$ 4,694,225$ 13,368,708$ See accompanying Notes to Basic Financial Statements. Major Funds 32 City of Hermosa Beach Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Assets For the year ended June 30, 2008 Net Change in Fund Balances - Total Governmental Funds 318,000$ Governmental Activities in the Statement of Activities were reported differently because: Governmental Funds report capital outlay as expenditures. However, in the Government-Wide Statement of Activities and Changes in Net Assets, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded in the current period. Total capital outlay expenditures reported in governmental funds 1,672,441 Less repair and maintenance expenditures reported in public works (276,221) Total 1,396,220 Depreciation expense on capital assets is reported in the Government-Wide Statement of Activities and Changes in Net Assets, but they do not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in governmental funds. Except for the Internal Service Funds amounts of $438,258 which are reported below. Total depreciation reported in Government-Wide Statement of Activities (2,987,661) Less depreciation reported in Internal Service Funds 438,258 Total (2,549,403) Long-term compensated absences were reported in the Government-Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources. Therefore, long-term compensated absences were not reported as expenditures in governmental funds.6,662 Internal Service Funds are used by management to charge the costs of certain activities, such as insurance and equipment replacement, to individual funds. The net revenue of the Internal Service Funds is reported with Governmental Activities.(654,276) Change in Net Assets of Governmental Activities (1,482,797)$ See accompanying Notes to Basic Financial Statements. 33 This page intentionally left blank. 34 PROPRIETARY FUND FINANCIAL STATEMENTS 35 This page intentionally left blank. 36 PROPRIETARY FUND FINANCIAL STATEMENTS Downtown Enhancement Fund - All parking lot revenues are deposited to the Downtown Enhancement Fund in order to promote business in general and improve the appearance of the downtown area. 37 City of Hermosa Beach Statement of Net Assets Proprietary Funds June 30, 2008 Major Governmental Enterprise Fund Activities Downtown Internal Enhancement Service Funds Current assets: Cash and investments 395,642$ 7,553,896$ Interest receivable on investments 5,957 Other accounts receivable 13,346 450 Advances to other funds 1,236,653 Deposits 140,000 Other assets 12,296 Total current assets 414,945 8,943,295 Noncurrent assets: Capital assets, net of accumulated depreciation 10,187,578 2,447,422 Total noncurrent assets 10,187,578 2,447,422 Total assets 10,602,523 11,390,717 Current liabilities: Current portion of long-term liabilities 1,338,538 Accounts payable 213,582 235,811 Accrued wages and compensated absences 13,929 44,356 Refundable deposit 27,012 Advances from other funds 1,601,980 Unearned revenue 2,356 Total current liabilities 1,858,859 1,618,705 Long-term liabilities: Workers' compensation claims payable 3,611,218 General liability claims payable 1,545,212 Less current portion above (1,338,538) Total long-term liabilities - 3,817,892 Total liabilities 1,858,859 5,436,597 Investment in capital assets 10,187,578 2,447,422 Reserved: Re-appropriations 38,284 251,116 Unrestricted (1,482,198) 3,255,582 Total net assets 8,743,664$ 5,954,120$ See accompanying Notes to Basic Financial Statements LIABILITIES ASSETS NET ASSETS 38 City of Hermosa Beach Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the year ended June 30, 2008 Major Governmental Enterprise Fund Activities Downtown Internal Enhancement Service Funds OPERATING REVENUES: Lease revenues 240,627$ Charges for services 847,671 3,247,125$ Miscellaneous revenue 57,840 135,283 Total operating revenues 1,146,138 3,382,408 OPERATING EXPENSES: Salaries and wages 65,116 384,145 Contractor services 809,059 1,445,407 Supplies 112,771 270,071 Claims expense 3,355,596 Depreciation 146,800 438,258 Total operating expenses 1,133,746 5,893,477 OPERATING INCOME (LOSS)12,392 (2,511,069) NONOPERATING REVENUES (EXPENSES): Interest earned on investments 28,320 Gain on disposal of capital assets 19,018 Total nonoperating revenues (expenses)28,320 19,018 INCOME (LOSS) BEFORE TRANSFERS 40,712 (2,492,051) Transfers in 1,837,775 Transfers out (4,259) Total transfers (4,259) 1,837,775 Change in net assets 36,453 (654,276) NET ASSETS: Beginning of the year 8,707,211 6,608,396 End of the year 8,743,664$ 5,954,120$ See accompanying Notes to Basic Financial Statements. 39 City of Hermosa Beach Statement of Cash Flows Proprietary Funds For the year ended June 30, 2008 Major Governmental Enterprise Fund Activities Downtown Internal Enhancement Service Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers 1,154,454$ 240,144$ Cash received for services from other funds 3,247,125 Cash payments to other funds for services (184,573) Cash payments to suppliers for goods and services (996,861) (1,804,269) Cash payments to employees for services (63,927) (384,669) Insurance premiums and settlements (2,097,331) Net cash provided by (used for) operating activities (90,907) (799,000) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in 1,837,775 Transfers out (4,259) Net cash provided by (used for) noncapital financing activities (4,259) 1,837,775 CASH FLOWS CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (23,013) (440,743) Net cash provided by (used for) capital and related financing activities (23,013) (440,743) CASH FLOWS FROM INVESTING ACTIVITIES: Interest receivable on investments 33,973 Net cash provided by (used for) investing activities 33,973 - Net increase (decrease) in cash and cash equivalents (84,206) 598,032 CASH AND CASH EQUIVALENTS: Beginning of year 479,848 6,955,864 End of year 395,642$ 7,553,896$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES: Operating income (loss)12,392$ (2,511,069)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 146,800 438,258 Changes in operating assets and liabilities: Other accounts receivable 5,573 3,645 Deposits (60,000) Other assets 48,789 38,167 Worker's compensation claims payable 822,787 General liability claims payable 435,478 Accounts payable (75,031) (88,791) Accrued wages and compensated absences 1,189 (524) Advances from (to) other fund (184,573) 123,049 Unearned revenue (46,046) Total adjustments (103,299) 1,712,069 Net cash provided by (used for) operating activities (90,907)$ (799,000)$ DISCLOSURE OF NON-CASH TRANSACTION: Gain on disposal of capital assets -$ 19,018$ See accompanying Notes to Basic Financial Statements. 40 FIDUCIARY FUND FINANCIAL STATEMENTS 41 This page intentionally left blank. 42 FIDUCIARY FUND FINANCIAL STATEMENTS Other Post Employment Benefits (OPEB) Trust Fund is used to administer an irrevocable trust fund for the payment of other post employment benefits for city employees. In fiscal year 2008, the City contributed $1,400,967 to PARS to administrate other post employment benefits, and OPEB fund will be closed this year. Agency Funds are used to account for assets held by the City in the capacity of agent for individuals. Agency Fund spending is controlled primarily through legal agreements and applicable State and Federal laws. 43 City of Hermosa Beach Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2008 Other Post Employment Benefits Agency Trust Fund Funds Cash and investments 316,141$ Interest receivable 3,134 Other accounts receivable 17,073 -$ 336,348$ Assessment: Installment account 320,313$ Reserve requirement 16,035 - 336,348$ Held in trust for OPEB -$ See accompanying Notes to Basic Financial Statements. NET ASSETS Total assets Total liabilities ASSETS LIABILITIES 44 City of Hermosa Beach Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the year ended June 30, 2008 Other Post Employment Benefits Trust Fund ADDITIONS: Contributions -$ Total additions - DEDUCTIONS: Contribution to Trust 1,400,967 Total deductions 1,400,967 Change in net assets (1,400,967) NET ASSETS: Beginning of year 1,400,967 End of year -$ See accompanying Notes to Basic Financial Statements. 45 This page intentionally left blank. 46 City of Hermosa Beach Index to Notes to Basic Financial Statements For the year ended June 30, 2008 47 Page Note 1 - Summary of Significant Accounting Policies...............................................................................49 A. Financial Reporting Entity..........................................................................................................49 B. Basis of Accounting and Measurement Focus.........................................................................50 C. Use of Restricted/Unrestricted Net Assets..............................................................................53 D. Cash and Investments.................................................................................................................53 E. Property Tax Receivable.............................................................................................................54 F. Interfund Transactions................................................................................................................54 G. Capital Assets...............................................................................................................................54 H. Claims Payable.............................................................................................................................54 I. Compensated Absences Payable...............................................................................................55 J. Unearned and Deferred Revenue..............................................................................................56 K. Long-Term Debt...........................................................................................................................56 L. Net Assets.....................................................................................................................................56 M. Fund Balances ..............................................................................................................................57 N. Use of Estimates...........................................................................................................................57 O. New Pronouncements.................................................................................................................57 Note 2 - Cash and Investments .......................................................................................................................58 Note 3 - Receivables..........................................................................................................................................61 Note 4 - Lease Revenues...................................................................................................................................63 Note 5 - Interfund Transactions......................................................................................................................64 Note 6 - Capital Assets......................................................................................................................................66 Note 7 - Long-Term Debt.................................................................................................................................69 Note 8 - Other Required Fund Disclosures..................................................................................................72 Note 9 - Risk Management ..............................................................................................................................72 Note 10 -Retirement Plans ...............................................................................................................................74 Note 11 - Commitments and Contingencies.................................................................................................78 Note 12 - Subsequent Events...........................................................................................................................78 48 This page intentionally left blank. City of Hermosa Beach Notes to Basic Financial Statements For the year ended June 30, 2008 49 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Hermosa Beach, California, (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Boards (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. Financial Reporting Entity The City of Hermosa Beach was incorporated on January 14, 1907, under the general laws of the State of California. The City operates under a Council-Manager form of government and provides the following services: public safety (police, crossing guards and fire), maintenance and construction of public improvements, cultural, recreation, community development (planning and zoning), and general administrative services. As required by GAAP, the basic financial statements present the City and its component units, entities for which the City is considered to be financially accountable. Blended component units, although legally separate entities, are in substance, part of the City’s operations and data from these units are combined with data of the City. Each blended component unit has a June 30 year-end. Discretely presented component units, on the other hand, are reported in a separate column in the combined basic financial statements to emphasize their legal separateness from the City. The City had no discretely presented component units. The following entities are reported as blended component units because the governing board is substantively the same as the primary government: Hermosa Beach Street Lighting and Landscaping District This fund is used to account for the Lighting and Landscaping Assessment District, which was created for street lighting/median maintenance purposes pursuant to Street and Highway Code 22500-22679. Lower Pier Avenue Assessment District Improvement Fund This fund is used to account for the funds of the assessment district, which was created in November 1997 pursuant to Street and Highway Code 10000 for improvements in the downtown Pier Plaza. Myrtle Underground Utility District Improvement Fund This fund is used to account for the funds of the utility underground assessment district, which was created in October 1999 pursuant to Street and Highway Code 10000. Bayview Drive Underground District Improvement Fund This fund is used to account for the funds of the utility underground assessment district, which was created in February 2005 pursuant to Street and Highway Code 10000. Beach Drive Assessment District Improvement Fund This fund is used to account for the funds of the utility underground assessment district, which was created in July 2004 pursuant to Street and Highway Code 10000. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 50 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus 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 in a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. City resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. Government - Wide Financial Statements These statements are presented as required by GASB Statement No. 34. The City Government-Wide Financial Statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. These statements present summaries of Governmental and Business-Type Activities for the City, the primary government, accompanied by a total column. Fiduciary activities of the City are not included in these statements. The basic financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The types of transactions reported as program revenues for the City are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Assets have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated because their expenses are reported a second time as expenditures/expenses in the funds that are billed for the goods or services they provide. However, transactions between governmental and business-type activities have not been eliminated. The following interfund activities, if applicable, have been eliminated: ¾ Due to/from other funds - short-term loans within the primary government ¾ Advances to/from other funds - long-term loans within the primary government ¾ Transfers in/out - flows of assets between funds without the requirement for repayment The City applies all applicable GASB pronouncements (including all NCGA Statements and Interpretations currently in effect) as well as the following pronouncements issued on or before November 30, 1989, to the business-type activities, unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the committee on Accounting Procedure. The City applies all applicable FASB Statements and Interpretations issued after November 30, 1989, except those that conflict with or contradict GASB pronouncements. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 51 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued These statements are presented as required by GASB Statement No. 34. Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the government-wide financial statements. Major funds are governmental or enterprise funds whose revenues, expenditures/expenses, assets or liabilities are at least 10% of corresponding totals for all governmental or enterprise funds and at least 5% of the corresponding total for all governmental and enterprise funds combined. The City reports the following major governmental funds: General Fund. This is the City’s principal operating fund. It accounts for all revenues and expenditures used to finance the traditional services associated with a municipal government except those required to be accounted for in another fund. Proposition C Transit Fund. This fund is used to account for funds allocated from the 1992 voter- approved ½ cent sales tax increase. Funds must be used for transit purposes. Contingency Fund. This fund accounts for “Rainy Day” funds set aside for unforeseen emergencies, unexpected economic events, etc. Capital Improvement Fund. This fund accounts for funds set aside for capital improvement projects. All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except those revenues subject to accrual (generally 60 days after year-end) which are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property tax, sales tax, intergovernmental revenues and other taxes. The exception to that rule is sales tax. Beginning in 2004-05, the State took sales tax revenue (Sales Tax In Lieu) from cities and counties, in order to use the source of funds as a guarantee for state issued debt to finance budget deficits. Sales tax is received on a monthly basis. Funds will be repaid according to the property tax schedule, with the bulk of payments occurring only twice a year. As such, the City has adopted an accrual policy of 7 to 12 months for recording this revenue. The revenue was earned by June 30, however the payment will not be received until January 2009. A designation in this amount has been set up to reflect that these funds are not available for appropriation. Business license fees are recorded as received. Expenditures are recorded in the accounting period in which the related fund liability is incurred. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 52 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued Unearned revenues arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures, or when lease payments, recreation class registrations or facility rentals are received in advance. In subsequent periods when the government has a legal claim to the resources, the unearned revenue is removed from the balance sheet and revenue is recognized. The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34 and is located after the governmental fund balance sheet in the fund financial statements. Proprietary Fund Financial Statements Two types of funds are classified as proprietary funds: enterprise funds and internal service funds. Proprietary Fund Financial Statements include a Statement of Net Assets, a Statement of Revenues, Expenses and Changes in Fund Net Assets, and a Statement of Cash Flows for each major proprietary fund. A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. The City reports the following major enterprise fund: Downtown Enhancement Fund. This fund accounts for unmetered parking lot and parking structure operations and expenses related to the promotion of business in general. The internal service funds are used to account for fleet services, information technology services and risk management services provided to other departments on a cost-reimbursement basis. Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or non-current) are included on the Statement of Net Assets. The Statement of Revenues, Expenses and Changes in Fund Net Assets presents increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts if applicable. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-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, if applicable. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 53 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Fiduciary Fund Financial Statements Fiduciary Fund Financial Statements include a Statement of Net Assets. The City’s Fiduciary funds represent Agency Funds, which are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Fiduciary fund types are accounted for according to the nature of the fund. Funds held as fiduciary funds represent assets resulting from assessments to the property owners in four utility undergrounding districts, two reserve funds for utility undergrounding districts and a downtown improvement district. The assets are used to repay bonds secured by the private property in the district. The temporary agency fund established in 2003-2004 to account for contributions and expenditures related to other post employment benefits for City employees was transferred to a trust administered by Public Agencies Retirement Services in August 2007. Further discussion of the trust can be found in Note 10. C. Use of Restricted/Unrestricted Net Assets When both restricted and unrestricted net assets are available for an expense item, the City’s policy is to apply restricted net assets first. D. Cash and Investments The City pools cash resources of its various funds to facilitate cash management. Cash in excess of current requirements is invested and reported as investments. It is the City’s intent to hold investments until maturity. However, the City may, in response to market conditions, sell investments prior to maturity in order to improve the quality, liquidity or yield of the portfolio. Interest earnings are apportioned among funds based on ending accounting period cash and investment balances. The City’s cash and investments are comprised of cash on hand, demand deposits, and highly liquid investments with original maturities of three months or less at the time of acquisition. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities for which market quotations are readily available. The City participates in the Local Agency Investment Fund (LAIF), an investment pool managed by the State of California. LAIF has invested a portion of the pool funds in Structured Notes and Asset-Backed Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as a result of changes in interest rates. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 54 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued D. Cash and Investments, Continued In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures (an amendment of GASB Statement No. 3), certain disclosure requirements, if applicable for deposit and investment risk are specified for the following areas: ¾ Interest Rate Risk ¾ Credit Risk Overall Custodial Credit Risk Concentrations of Credit Risk ¾ Foreign Currency Risk E. Property Tax Receivable Property taxes attach as an enforceable lien on property as of July 1 each year. Taxes are levied on January 1 and are payable in two installments: December 10 and April 10 of each year. The County of Los Angeles, California (County) bills and collects the property taxes and remits them to the City according to a payment schedule established by the County. City property tax revenues are recognized when received in cash except at year-end when they are accrued pursuant to the modified accrual basis of accounting. The City recognizes available taxes or those collected within 60 days as revenue at June 30. The County is permitted by State law to levy taxes at 1% of full market value (at time of purchase) and can increase the assessed valuation no more than 2% per year. The City receives a share of this basic levy, or .203 cents of each $1.00, proportionate to what it received during the years 1976 to 1978. F. Interfund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans).” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” G. Capital Assets Capital assets, which include land, buildings, improvements, equipment, furniture, and infrastructure assets (e.g., roads, sidewalks, and similar items), are reported in the applicable governmental or business- type activities in the Government-Wide Financial Statements. Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated capital assets are valued at their estimated fair market value on the date donated. City policy has set the capitalization threshold for reporting capital assets at $5,000 and infrastructure at $100,000. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows: Buildings 50 years Improvements other than buildings 20 years Machinery and equipment 3-20 years Infrastructure 15-50 years City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 55 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Capital Assets, Continued In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34 which requires the inclusion of infrastructure capital assets in local governments’ basic financial statements. In accordance with GASB Statement No. 34, the City has included all infrastructure as of June 30, 2006 into the 2005-2006 Basic Financial Statements. The City defines infrastructure as the basic physical assets that allow the City to function. The assets include streets, sewers and storm drains, parking meters and monuments. Each major infrastructure system can be divided into subsystems. For example the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights and landscaping. These subsystems were not delineated in the basic financial statements. The Finance Department, with the assistance of the appropriate operating department, maintains information regarding the subsystems. Interest accrued during capital assets construction, if any, is capitalized for the business-type and proprietary funds as part of the asset cost. For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure reporting. The City commissioned an appraisal of City owned infrastructure and property as of June 30, 2003. This appraisal determined the original cost, which is defined as the actual cost to acquire new property in accordance with market prices at the time of first construction/acquisition. Original costs were developed in one of three ways: (1) historical records; (2) standard unit costs appropriate for the construction/acquisition date; or (3) present cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the current date. The accumulated depreciation, defined as the total depreciation from the date of construction/acquisition to the current date on a straight line, unrecovered cost method was computed using industry-accepted life expectancies for each infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation from the original cost. H. Claims Payable The City records a liability to reflect an actuarial estimate of ultimate uninsured losses for both general liability claims (including property damage claims) and workers’ compensation claims. The estimated liability for workers’ compensation claims and general liability claims includes “incurred but not reported” (IBNR) claims. There is no fixed payment schedule to pay these liabilities. I. Compensated Absences Payable City employees have vested interest in varying levels of vacation, sick leave and compensatory time based on their length of employment. It is the policy of the City to pay all accumulated vacation pay and all or a portion of sick pay when an employee retires or terminates. The long-term amount is included as a liability in the governmental activities of the Government-Wide Financial Statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. All of the liability for compensated absences applicable to proprietary funds is reported in those funds. As mentioned under “Financial Policies,” the City’s goal is to accumulate funding in the Compensated Absences Fund for 25% of the accrued liability for compensated absences. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 56 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued J. Unearned and Deferred Revenue In the Government-Wide Financial Statements, unearned revenue is recognized for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues in the Government- Wide Financial Statements are cell phone site license lease payments received in advance, prepaid charges for services and facility rentals paid in advance. In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the revenue recognition criteria based on the modified accrual basis of accounting. The City records deferred revenue for transactions for which revenues have not been earned, or for which funds are not available to meet current financial obligations. Typical transactions for which deferred revenue is recorded are lease payments, quarterly encroachment fees and advance registration for recreation classes which were not yet earned or available. K. Long-Term Debt Government-Wide Financial Statements The City has no long-term debt. Other long-term obligations are reported on the Statement of Net Assets as liabilities in the appropriate activities. Fund Financial Statements Long-term debt is not presented in the fund financial statements, but long-term liabilities are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets located after the governmental funds balance sheet in the fund financial statements. L. Net Assets Government-Wide Financial Statements In the government-wide financial statements, net assets are reported in one of three categories: Invested in Capital Assets - This amount consists of capital assets net of accumulated depreciation. Restricted Net Assets - This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments. Unrestricted Net Assets - This amount represents remaining net assets that do not meet the definition of “invested in capital assets, net of related debt” or “restricted net assets.” City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 57 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued M. Fund Balances In 2001 - 2002, the City established financial goals for the following funds: Contingency Fund - Goal of fund balance equal to 15% of the General Fund operating budget appropriations for economic uncertainties, unforeseen emergencies. Insurance Fund - Goal of $3,000,000 in retained earnings for claims reserves and catastrophic losses. Equipment Replacement Fund - Goal of retained earnings equal to the accumulated amount calculated for all equipment, based on replacement cost and useful life of equipment. Compensated Absences Fund - Goal of fund balance equal to 50% funding for accrued liabilities for employee vacation, sick and compensatory time. In 2005-2006, the goal for this fund was changed to 25% funding for accrued liabilities for employee vacation, sick and compensatory time. Generally, any funds remaining unspent at year-end in the General Fund transfer equally to the Contingency Fund, Insurance Fund, Equipment Replacement Fund and the Capital Improvement Fund. As goals are met according to the above policy, transfers may be redirected to the Capital Improvement Fund (since there are never enough capital improvement funds) or other funds, as the need arises. In the fund financial statements, governmental funds report reservations of fund balances for amounts that are not available for appropriation or are legally restricted by outside parties to use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. N. Use of Estimates The preparation of the basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions. O. New Pronouncements In 2008, the City adopted new accounting standards in order to conform to the following Governmental Accounting Standards Board Statements: ¾ GASB Statement No. 45, Financial Reporting for Postemployment Benefit Plans (OPEB) other than Pension Plans – the Statement establishes uniform financial reporting standards for OPEB plans. The standards in this statement apply for OPEB Trust Funds included in the financial reports of Plan sponsors or employers, as well as for the stand-alone financial reports of OPEB plans or the public employee retirement systems, or other third parties, that administer time. ¾ GASB Statement No. 50, Pension Disclosures – An amendment of GASB Statements No. 25 and 27 - This Statement more closely aligns the financial reporting requirements for pensions with those for other postemployment benefits (OPEB) and, in doing so, enhances information disclosed in notes to financial statements or presented as required supplementary information (RSI). City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 58 2. CASH AND INVESTMENTS The City maintains a cash and investment pool which includes cash balances and authorized investments of all funds. This pooled cash is invested by the City Treasurer to enhance earnings. The pooled interest earned is allocated to the fund based on cash and investment balances in these funds at the end of each accounting period. The City had the following cash and investments at June 30, 2008: Funds Financial Fiduciary Funds Governmental Business-type Statement of activities activities Total Net Assets Total Cash and investments 22,559,736$ 395,642$ 22,955,378$ 316,141$ 23,271,519$ Government-Wide Statement of Net Assets The City’s Cash and Investments at June 30 in more detail: Fair value City Treasury: Cash deposits: Demand accounts 589,841$ Less items in transit (204,267) Total cash deposits 385,574 Investments: Local Agency Investment Fund 22,383,945 U.S. government notes 502,000 Total investments 22,885,945 Total cash and investments 23,271,519$ A. Cash Deposits The carrying amounts of the City’s cash deposits were $385,574 at June 30, 2008. Bank balances at June 30, 2008, were $589,841 which were fully insured or collateralized with securities held by the pledging financial institutions in the City’s name as discussed below. The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. The law states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City’s name. The market value of pledged securities must equal at least 110% of the City’s cash deposits. California law also allows institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. The City, however, has not waived the collateralization requirements. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 59 2. CASH AND INVESTMENTS, Continued A. Cash Deposits, Continued The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures, if applicable. Interest income from cash and investments with fiscal agents is credited directly to the related fund. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period- end cash and investment balances. Interest is not allocated to the Compensated Absences Fund, the Other Post Employment Benefit Fund, funds created to advance costs for utility undergrounding districts, reimbursable grant funds or internal service funds. B. Investments The City’s investment policy is more restrictive than the State’s, by design. Under the provisions of the City’s investment policy, and in accordance with California Government Code, the investments below are authorized. ¾ Securities of the U.S. Government, or its agencies ¾ Banker’s acceptances ¾ Time Certificates of Deposits ¾ Negotiable certificates of Deposit ¾ California Local Agency Investment Fund ¾ Corporate Medium-Term Notes In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, the City’s investments are carried at fair value instead of cost. Accordingly, the City adjusts the carrying value of its investments to reflect their fair value at each fiscal year-end with the effects of these adjustments included in income for that fiscal year. Changes in value for the fiscal year ended June 30, 2008, amounted to an unrealized increase of $13,190. The City’s investments with the Local Agency Investment Fund (LAIF), the State of California’s investment pool, at June 30, 2008, included a portion of the pooled funds invested in Structured Notes and Asset- Backed Securities. These investments included the following: Structured Notes, which are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities, the bulk of which are mortgage-backed securities, and which entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages, such as collateralized mortgage obligations (CMO’s), or credit card receivables. As of June 30, 2008, the City had $22,383,945 invested in LAIF. 14.72% of pool investment funds were invested in Structured Notes and Asset-Backed Securities. The City valued its investments in LAIF as of June 30, 2008 by multiplying its account balance with LAIF by a fair value factor determined by LAIF. This fair value factor was determined by dividing all LAIF participants’ total aggregate fair value by total aggregate amortized cost resulting in a factor of .999950219. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 60 2. CASH AND INVESTMENTS, Continued C. Risk Disclosures Interest Rate Risk - As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy limits investments to a maximum maturity of five years. At June 30, 2008, the City had the following investment maturities: Investment Type Fair value Less than 1 1 to 2 Federal Home Loan Mortgage Corporation 502,000$ 502,000$ Local Agency Investment Fund 22,383,945 22,383,945 Total 22,885,945$ 22,885,945$ -$ Investment maturities (in years) Custodial Risk – For deposits, custodial credit risk is the risk that, in the event of the failure of a deposit 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 City’s investment policy requires that all securities purchased from brokers/dealers shall be held in third party safekeeping. All Treasury bills and most other Treasury securities are “book entry” securities that are held at the Federal Reserve Union Bank of California. Collateral for time deposits in banks and savings an loans are held by the Federal Home Loan Bank or an approved agency of depository of the financial institution. The City’s investment policy does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the provision for deposits stated in Note 2A. $575,967 of the City’s deposits with financial institutions in excess of federal depository insurance limits was held in uncollateralized accounts. Credit Risk – The City’s investment policy recognizes the risk of potential loss of principal, interest or a combination of these amounts on investments. As such, the policy allows for investments only in instruments that are considered very safe. The City’s investments are rated by the nationally recognized statistical rating organizations as follows: Standard Moody's & Poor's U.S. Agencies Federal Home Loan Mortgage Corporation Aaa AAA External Pool State of California - Local Agency Investment Fund Not Rated Not Rated Concentration of credit risk – The City’s investment policy does not allow for an investment in any one institution that is in excess of 5% of the government’s total portfolio. The City is in compliance with the investment policy related to the concentration of credit risk. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 61 3. RECEIVABLES Government-Wide Financial Statements At June 30, 2008, the Government-Wide Financial Statements show the following miscellaneous receivables net of allowances for uncollectible amounts, if any: Fiduciary Funds Governmental Business-type Statement of activities activities Net Assets Total Accounts 1,979,898$ 13,346$ 17,073$ 2,010,317$ Taxes 1,079,855 1,079,855 Interest 158,912 5,957 3,134 168,003 Grants 46,127 46,127 Total 3,264,792$ 19,303$ 20,207$ 3,304,302$ Government-Wide Statement of Net Assets Fund Financial Statements At June 30, 2008, the Fund Financial Statements show the following receivables: A. Accounts Receivable Accounts receivable consisted of amounts accrued in the ordinary course of operations. The total amount of accounts receivable for each major and non-major fund in the aggregate as of June 30, 2008, were as follows: Governmental funds: General Fund 1,347,380$ Non-major funds 632,068 Internal Service funds 450 Total governmental funds 1,979,898 Enterprise fund: Downtown Enhancement Fund 13,346 Total Enterprise fund 13,346 Agency funds 17,073 Total 2,010,317$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 62 3. RECEIVABLES, Continued B. Taxes Receivable At June 30, 2008, the City had taxes receivable in the following major funds and non-major funds in the aggregate: Property taxes Governmental Funds: General Fund 1,062,167$ Non-major funds 17,688 Total 1,079,855$ C. Interest Receivable Interest receivable consists of interest from investments pooled by the City, which is distributed among the funds according to their cash balances at the end of the accounting period, and interest receivable on restricted investments held by the fiscal agents, which are recorded in the funds holding the investment. The interest receivable as of June 30, 2008, was as follows: City pooled investments Governmental funds: General Fund 35,977$ Proposition C Fund 21,296 Contingency Fund 38,273 Capital Improvement Fund 19,319 Non-major Funds 44,047 Total governmental funds 158,912 Enterprise fund: Downtown Enhancement Fund 5,957 Total Enterprise fund 5,957 Total 164,869 Agency funds 3,134 Total interest receivable 168,003$ D. Reimbursable Grants Receivable Grants receivable consists of a variety of reimbursable grants from other agencies. The total amount of reimbursable grants for each major and non-major funds in the aggregate as of June 30, 2008 were as follows: Governmental Funds: Non-major funds 46,127$ Total governmental funds 46,127$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 63 4. LEASE REVENUES In January 2000, the North Pier Parking Structure was completed. The parking structure contains 400 parking spaces and was funded in part by a downtown developer in exchange for the use of 100 spaces in the structure. The remainder of the funding was provided by the City’s Downtown Enhancement Fund and Prop A Open Space funding contributed by the Los Angeles County Department of Beaches and Harbors. In consideration of the County contribution, 50% of the annual net income derived from the parking structure must be shared with the County each year by September 1. The payment to the County for fiscal year 2007-2008 is $143,988. In February 2001, a 50 year lease for the retail space located in front of the North Pier Parking Structure was initiated. The City receives a monthly lease payment in the amount of $2,376. The lease includes a negotiated increase to the monthly lease payment to be calculated every 60 months based on the consumer price index. The next increase is due in January 2011. In February 2004, the City entered into a 5 year lease agreement with Sprint, a cellular telephone company, for placement of an antenna on the North Pier Parking Structure. The City receives a monthly lease payment in the amount of $2,376. In June 2005, the City purchased property adjacent to City Hall that is used as a self-storage facility. The existing lease for the storage facility was transferred to the City as a condition of the sale. The monthly lease payment increases in February of each year based on the consumer price index up to a maximum of 3% per year. The City receives a monthly lease payment in the amount of $15,647. The City leases a portion of the Hermosa Beach Community Center to nonprofit and cultural organizations. The leases are renegotiated annually. All of the above leases are accounted for as operating leases by the City. The future minimum rental revenues under these leases are as follows: Year ending June 30, 2009 169,608$ 2010 28,512 2011 28,512 2012 28,512 2013 28,512 2014-2018 142,560 2019-2023 142,560 2024-2028 142,560 2029-2033 142,560 2034-2038 142,560 2039-2043 142,560 2044-2048 142,560 2049-2051 71,280 Total 1,352,856$ Lease revenue for fiscal year 2008 was $305,575 with $76,339 reflected in the General Fund and $229,236 in the Downtown Enhancement Fund, an enterprise fund. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 64 5. INTERFUND TRANSACTIONS A. Government-Wide Financial Statements Transfers At June 30, 2008, the City had the following transfers: Transfers out Business-typeactivities Governmental activities 4,259$ Transfersin B. Fund Financial Statements Due To/From Other Funds The composition of due to/from other funds at June 30, 2008 is as follows: Due to other funds Non-major Governmental Funds Non-major Governmental Funds 53,732$ Due from other funds The balance of $53,732 in non-major governmental funds resulted from the time lag between the dates that reimbursable expenditures occur and payments are received from other agencies. All balances are scheduled to be collected in the subsequent year. Advances From/To Other Funds At June 30, 2008, the composition of advances to other funds is as follows: Downtown Non-major Enhancement Governmental Fund Funds Total Contingency Fund 365,327$ 65,520$ 430,847$ Capital Improvement Fund 200,000 200,000 Internal Service Funds 1,236,653 1,236,653 Total 1,601,980$ 265,520$ 1,867,500$ Advances to other fundsAdvances from other funds City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 65 5. INTERFUND TRANSACTIONS, Continued B. Fund Financial Statements, Continued The balances of $200,000 advanced from the Capital Improvement Fund and $65,520 advanced from the Contingency Fund to the non-major governmental funds resulted from long-term loans for the start up costs of two utility undergrounding districts. Since the advances are not scheduled to be collected in the subsequent year, the fund balance of the funds were reserved to reflect that the financial resources are not currently available. The balance of $1,601,980 from the Contingency Fund and Internal Service funds to the Downtown Enhancement Fund, represents the balance owed to these funds for the purchase of real property. The advances will be repaid from lease proceeds from a storage facility located on the property and unrestricted net assets available at year end. Transfers At June 30, 2008, the City had the following transfers: Capital Non-major Downtown Contingency Improvement Governmental Enhancement General Fund Fund Funds Fund Total General Fund 56,305$ 721,354$ 4,259$ 781,918$ Capital Improvement Fund 175,000 175,000 Non-major Governmental funds 798,440$ 798,440 Internal Service funds 1,332,867 469,598$ 35,310 1,837,775 Total 2,131,307$ 469,598$ 56,305$ 931,664$ 4,259$ 3,593,133$ Transfers inTransfers out In general, transfers are used to 1) transfer any unexpended balance in the General Fund according to the City’s financial policies, 2) use unrestricted revenues collected in one fund to finance various programs accounted for in other funds in accordance with budgetary authorizations, and 3) to reimburse the General Fund for administration services provided to other funds. In the year ended June 30, 2008, the following one-time transfers were made: ¾ Excess funds in the Contingency Fund in the amount of $469,598 were transferred to the Internal Service Insurance Fund to eliminate the deficit in that fund. ¾ The Special Revenue Compensated Absences Fund made a transfer in the amount of $35,310 to the Internal Service Insurance Fund to assist in eliminating the deficit in that fund. ¾ The 4% Utility Users Tax Railroad Right of Way Fund transferred $904 to the General Fund to close out the fund. ¾ The Non-major governmental Sewer Fund made a transfer in the amount of $15,600 to the General Fund to provide funding for services related to a new restaurant grease trap inspection program. ¾ The Capital Improvement Fund made a transfer of $56,305 to the General Fund for on-time capital purchases. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 66 6. CAPITAL ASSETS In accordance with GASB Statement No. 34, the City reports all capital assets, including infrastructure, in the Government-Wide Statement of Net Assets. The City elected to use the “Basic Approach” as defined by GASB Statement No. 34 for infrastructure reporting. The basic approach records accumulated depreciation and depreciation expense. A. Government-Wide Financial Statements At June 30, 2008, the City’s capital assets consisted of the following: Government Business-Type Activities Activities Total Non-Depreciable Assets: Land 17,552,077$ 5,188,092$ 22,740,169$ Construction in progress 1,565,914 - 1,565,914 Total non-depreciable assets 19,117,991 5,188,092 24,306,083 Depreciable Assets: Buildings and structures 4,776,417 5,879,099 10,655,516 Improvements other than buildings 13,232,411 5,610 13,238,021 Machinery and equipment 3,035,076 19,267 3,054,343 Vehicles 3,014,921 3,014,921 Infrastructure 41,334,028 59,650 41,393,678 Total depreciable assets 65,392,853 5,963,626 71,356,479 Less accumulated depreciation for: Buildings and structures (1,715,583) (951,827) (2,667,410) Improvements other than buildings (5,456,232) (842) (5,457,074) Machinery and equipment (1,759,819) (11,471) (1,771,290) Vehicles (1,648,027) - (1,648,027) Infrastructure (16,813,651) - (16,813,651) Total accumulated depreciation (27,393,312) (964,140) (28,357,452) Total depreciable assets, net 37,999,541 4,999,486 42,999,027 Total capital assets 57,117,532$ 10,187,578$ 67,305,110$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 67 6. CAPITAL ASSETS, Continued A. Government-Wide Financial Statements, Continued The following is a summary of capital assets for governmental activities for the year ended June 30, 2008: Balance Balance July 1, 2007 Additions Deletions June 30, 2008 Capital assets not being depreciated: Land 17,552,077$ 17,552,077$ Construction in progress 1,194,718 498,831$ (127,635)$ 1,565,914 Total capital assets not being depreciated 18,746,795 498,831 (127,635) 19,117,991 Capital assets being depreciated: Buildings and structures 4,776,417 4,776,417 Improvements other than buildings 13,232,411 13,232,411 Machinery and equipment 2,810,659 224,417 3,035,076 Vehicles 3,100,196 149,068 (234,343) 3,014,921 Infrastructure 40,212,301 1,265,762 (144,035) 41,334,028 Total capital assets being depreciated 64,131,984 1,639,247 (378,378) 65,392,853 Less accumulated depreciation for: Buildings and structures (1,450,361) (265,222) (1,715,583) Improvements other than buildings (4,452,381) (1,003,851) (5,456,232) Machinery and equipment (1,482,032) (277,787) (1,759,819) Vehicles (1,582,691) (289,252) 223,916 (1,648,027) Infrastructure (15,662,102) (1,151,549) (16,813,651) Total accumulated depreciation (24,629,567) (2,987,661) 223,916 (27,393,312) Total capital assets being depreciated, net 39,502,417 (1,348,414) (154,462) 37,999,541 Total governmental activities 58,249,212$ (849,583)$ (282,097)$ 57,117,532$ The City allocated the depreciation expenses to departments/functions of the government as follows: General government 60,080$ Public safety 298,294 Community development 7,511 Culture and recreation 40,681 Public works 991,288 Infrastructure 1,151,549 Capital assets held by the governments internal service funds are charged to the various functions based on their usage of the assets 438,258 Total depreciation expenses 2,987,661$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 68 6. CAPITAL ASSETS, Continued A. Government-Wide Financial Statements, Continued The following is a summary of capital assets for business-type activities: Balance Balance July 1, 2007 Additions Deletions June 30, 2008 Capital assets not being depreciated: Land 5,188,092$ 5,188,092$ Construction in progress 36,637 (36,637)$ - Total capital assets not being depreciated 5,224,729 -$ (36,637)$ 5,188,092 Capital assets being depreciated: Buildings and structures 5,879,099 - 5,879,099 Improvements other than buildings 5,610 5,610 Machinery and equipment 19,267 19,267 Infrastructure - 59,650 59,650 Total capital assets, being depreciated 5,903,976 59,650 - 5,963,626 Less accumulated depreciation for: Buildings and structures (806,623) (145,204) - (951,827) Improvements other than buildings (562) (280) (842) Machinery and equipment (10,155) (1,316) (11,471) Infrastructure - - Total accumulated depreciation (817,340) (146,800) - (964,140) Total capital assets being depreciated, net 5,086,636 (87,150) - 4,999,486 Total business-type activities 10,311,365$ (87,150)$ (36,637)$ 10,187,578$ Business-type activities depreciation expenses for capital assets for the year ended June 30, 2008 are as follows: Downtown Enhancement 146,800$ Total depreciation expense 146,800$ B. Fund Financial Statements The fund financial statements do not present general government capital assets. They are shown in the Reconciliation of the Governmental Funds Balances Sheet to the Government-Wide Statement of Net Assets located after the governmental fund balance sheet in the fund financial statements. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 69 7. LONG-TERM DEBT A. Long-Term Debt with City Commitment The following is a summary of compensated absences payable transactions for the year ended June 30, 2008: Balance Balance Due in Due in more July 1, 2007 Additions Retirements June 30, 2008 one year than one year Governmental activities: Compensated absences 1,090,620$ 1,173,028$ (1,179,690)$ 1,083,958$ 565,067$ 518,891$ Classification The long-term portion of compensated absences payable has been accrued for the Governmental Activities on the Government-Wide Financial Statement. Typically, the General Fund (major fund), the Lighting and Landscaping District Fund, AB939 Fund and the Sewer Fund (non-major funds) have been used to liquidate the liability for compensated absences. There is no fixed payment schedule to pay these liabilities. The total amount of compensated absences payable at June 30, 2008, was $1,083,958. B. Long-Term Debt without City Commitment At June 30, 2008, the following special assessment bonds are payable from the proceeds of the special assessment levied and collected on all real property within the special districts. The City is in no way obligated to repay the debt in the event of default and the debt is not recorded in the accompanying financial statements. 1998 Lower Pier Special Assessment Bonds In November 1997, limited obligation improvement bonds in the amount of $400,000 were issued for the Lower Pier Avenue Assessment District for street and sidewalk improvements in the downtown area. The City is in no way financially obligated for payments of the bonds, which are secured by private property in the district. The bonds will be repaid from assessments to the property owners as part of their annual property tax bill. The annual debt service requirements by year are as follows: Year ending Balance June 30, Principal Interest total 2009 20,000$ 16,575$ 36,575$ 2010 20,000 15,275 35,275 2011 20,000 13,975 33,975 2012 25,000 12,512 37,512 2013 25,000 10,888 35,888 2014-2018 155,000 26,813 181,813 Total 265,000$ 96,038$ 361,038$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 70 7. LONG-TERM DEBT, Continued B. Long-Term Debt without City Commitment, Continued 1999 Myrtle Utility Underground District Special Assessment Bonds In October 1999, limited obligation improvement bonds in the amount of $1,159,114 were issued for the Myrtle Avenue Utility Underground Assessment District for the undergrounding of utilities within the district. The City is in no way financially obligated for payment of the bonds, which are secured by private property in the district. The bonds will be repaid from assessments to the property owners as part of their annual property tax bill. The annual debt service requirements by year are as follows: Year ending Balance June 30, Principal Interest total 2009 45,000$ 40,878$ 85,878$ 2010 50,000 38,477 88,477 2011 50,000 35,902 85,902 2012 55,000 33,145 88,145 2013 55,000 30,202 85,202 2014-2018 345,000 97,454 442,454 2019-2020 160,000 9,200 169,200 Total 760,000$ 285,258$ 1,045,258$ 1999 Loma Utility Underground District Special Assessment Bonds In October 1999, limited obligation improvement bonds in the amount of $1,324,653 were issued for the Loma Drive Utility Underground Assessment District for the undergrounding of utilities within the district. The City is in no way financially obligated for payment of the bonds, which are secured by private property in the district. The bonds will be repaid from assessments to the property owners as part of their annual property tax bill. The annual debt service requirements by year are as follows: Year ending Balance June 30, Principal Interest total 2009 50,000$ 44,350$ 94,350$ 2010 55,000 41,697 96,697 2011 55,000 38,865 93,865 2012 55,000 35,978 90,978 2013 60,000 32,900 92,900 2014-2018 370,000 106,765 476,765 2019-2020 180,000 10,350 190,350 Total 825,000$ 310,905$ 1,135,905$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 71 7. LONG-TERM DEBT, Continued B. Long-Term Debt without City Commitment, Continued 2004 Beach Drive Utility Underground Assessment District Special Assessment Bonds In July 2004, limited obligation improvement bonds in the amount of $404,341 were issued for the Beach Drive Utility Underground Assessment District for the undergrounding of utilities within the district. The City is in no way financially obligated for payment of the bonds, which are secured by private property in the district. The bonds will be repaid from assessments to the property owners as part of their annual property tax bill. The annual debt service requirements by year are as follows: Year ending Balance June 30, Principal Interest total 2009 14,412$ 17,221$ 31,633$ 2010 15,104 16,513 31,617 2011 15,828 15,770 31,598 2012 16,588 14,992 31,580 2013 17,385 14,177 31,562 2014-2018 100,270 57,216 157,486 2019-2023 126,758 30,092 156,850 2024-2025 59,630 2,896 62,526 365,975$ 168,877$ 534,852$ 2005 Bayview Drive Utility Underground Assessment District Improvement Bonds In February 2005, limited obligation improvement bonds in the amount of $951,667 were issued for the Bayview Drive Utility Underground Assessment District for the undergrounding of utilities within the district. The City is in no way financially obligated for payment of the bonds, which are secured by private property in the district. The bonds will be repaid from assessments to the property owners as part of their annual property tax bill. The annual debt service requirements by year are as follows: Year ending Balance June 30, Principal Interest total 2009 33,841$ 31,074$ 64,915$ 2010 30,280 29,711 59,991 2011 31,779 28,392 60,171 2012 33,342 27,009 60,351 2013 34,972 25,557 60,529 2014-2018 186,831 104,382 291,213 2019-2023 229,308 60,991 290,299 2024-2026 167,714 10,925 178,639 Total 748,067$ 318,041$ 1,066,108$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 72 8. OTHER REQUIRED FUND DISCLOSURES A. Deficit Fund Balances At June 30, 2008, the following funds had a deficit fund balance: Beach Drive 2 Underground District (65,520)$ Prospect Utility Underground District (200,000)$ The deficits in the Beach Drive 2 Underground District and the Prospect Utility Underground District funds represent “start up” costs for the districts and will be eliminated once the districts have been formed and assessment collections are received. If the districts are not approved, the costs will be borne by the City and transferred to another fund. B. Deficit Unrestricted Net Assets At June 30, 2008, the following fund had deficit unrestricted net assets: Downtown Enhancement $(1,443,914) The deficit in this fund represents advances from the special revenue Contingency Fund, the internal service Insurance Fund and the internal service Equipment Replacement Fund for the purchase of property adjacent to City Hall that is used as a storage facility. The deficit will be eliminated with future revenues received from an operating lease on the facility. C. Fund Closures The Special Revenue 4% Utility Users Tax Railroad Right of Way Fund was combined with the General Fund since the funds were used for parks capital improvement projects. The remaining balance of $904 was interest earned by the fund through June 30, 2008. 9. RISK MANAGEMENT The City maintains an internal service fund to account for the City’s general liability and workers’ compensation claims, automobile, property, and unemployment insurance. The City is self-insured for each general liability claim up to $250,000. The City is insured above the self- insured retention for general liability insurance coverage, up to a maximum of $20,000,000 per occurrence, as a member of the Independent Cities Risk Management Authority (ICRMA). The City of Hermosa Beach purchases workers’ compensation coverage through a self-insured program available through ICRMA. The City maintains a $500,000 self-insured retention limit and participates in a self-insured risk sharing pool through the ICRMA and the California State Association of Counties (CSAC). Together, these two joint powers authorities provide a shared limit of coverage up to a maximum of $200 million. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 73 9. RISK MANAGEMENT, Continued ICRMA is a joint exercise of powers authority organized and operating pursuant to the California Government Code. ICRMA was formed in 1980 pursuant to joint exercise of power agreements for insurance and risk management purposes, which, as amended, enable ICRMA to provide programs of risk sharing, insurance and risk management services in connection with liability, property, and workers’ compensation claims. ICRMA’s annual budget is based on estimated actuarially determined member losses within the risk sharing layer, administrative expenses and excess insurance. The City’s premiums to ICRMA in the amount of $445,322 for the fiscal year 2007-2008 are in accordance with formulas established by ICRMA. The City is liable for possible additional assessments and withdrawal costs under terms of the membership agreement, however there has never been an additional assessment since the pool was formed. The City has entered into contracts with third party administrators who supervise and administer the City’s general liability and workers’ compensation insurance program. Claim loss estimates are determined by the third party administrator based on the nature of an individual claim. The loss estimates include amounts for future compensation, medical, legal and administrative fees. The City also includes estimated claims incurred but not reported (IBNR) provided by an actuary. Reimbursement requests are submitted to the City on a monthly basis as claims are paid. The workers’ compensation and general liability claims payable of $5,156,430 reported at June 30, 2008, are based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the Fund’s claims liability amounts were as follows: Beginning Claims and End Amounts of Year Changes in Claim of Year Due within Liability Estimates Payments Liability One Year Workers' Compensation 2004-2005 2,563,966$ 1,566,804$ (1,093,213)$ 3,037,557$ 690,000$ 2005-2006 3,037,557 676,379 (712,689) 3,001,247 746,000 2006-2007 3,001,247 902,765 (1,115,581) 2,788,431 538,526 2007-2008 2,788,431 2,014,658 (1,191,871) 3,611,218 711,902 General Liability 2004-2005 370,675 983,340 (736,082) 617,933 202,000 2005-2006 617,933 1,046,991 (810,322) 854,602 302,000 2006-2007 854,602 1,286,956 (1,031,824) 1,109,734 455,520 2007-2008 1,109,734 1,334,987 (899,509) 1,545,212 626,436 Detailed financial information may be obtained from the ICRMA Program Administrator located at 3780 Kilroy Airport Way, Suite 470, Long Beach, California 90806. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 74 10. RETIREMENT PLANS A. Public Employee Retirement System Plan Description The City contributes to the California Public Employees Retirement System (CalPERS), a cost-sharing multiple-employer defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of the CalPERS annual financial report may be obtained from their Executive Office located at 400 P Street, Sacramento, California 95814. Funding Policy City employees are required by State statute to contribute 7% for miscellaneous employees and 9% for safety employees of their annual covered salary. As a negotiated benefit, the City makes the contributions required of City employees on their behalf. Those contributions amounted to $912,648 for the year ended June 30, 2008. The City, as the employer, is required to contribute for fiscal year 2007-2008 at actuarially determined rates which are applied to annual covered payroll. The 2007-2008 rate is 14.835% for miscellaneous employees, 51.366% for police employees and 36.281% for fire employees. The contribution requirements of City employees and the City employer are established and may be amended by CalPERS. Annual Pension Cost For fiscal year 2007-2008, the City’s annual pension cost of $3,463,455 for CalPERS was equal to the City’s required and actual contributions, of which $849,334 is for the miscellaneous plan, $1,950,264 for the police plan and $663,857 for the fire plan. The required contribution was determined as part of the June 30, 2005, actuarial valuation using the entry age normal actuarial cost method. The following actuarial assumptions, while not required, are included to provide information deemed useful to the City Council: (a) 7.75% investment rate of return (net of administrative expenses); (b) projected salary increases ranging from 3.25% to 14.45% depending on age, service, and type of employment, and (c) 3.25% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3%. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a fifteen year period. PERS unfunded actuarial accrued liability (or surplus) is being amortized as a level percentage of projected payroll over a closed period equal to the average amortization period at the plan’s date of entry into the CalPERS Risk Pool. The amortization period at June 30, 2005 was 15 years for prior and current service unfunded liability. THREE-YEAR TREND INFORMATION FOR PERS Miscellaneous Plan Pension Cost APC Net Pension Fiscal Year (APC) Contributed Obligation 6/30/2006 686,428$ 100% -$ 6/30/2007 813,702 100% - 6/30/2008 849,334 100% - City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 75 10. RETIREMENT PLANS, Continued A. Public Employee Retirement System, Continued Annual Pension Cost, Continued Police Plan Annual Percentage of Pension Cost APC Net Pension Fiscal Year (APC) Contributed Obligation 6/30/2006 1,583,411$ 100% -$ 6/30/2007 1,847,429 100% - 6/30/2008 1,950,264 100% - Fire Plan Annual Percentage of Pension Cost APC Net Pension Fiscal Year (APC) Contributed Obligation 6/30/2006 708,865$ 100% -$ 6/30/2007 755,290 100% - 6/30/2008 663,857 100% - B. Other Post-Employment Benefits An actuary was hired to determine the Annual Required Contribution for benefits for police officers retiring after July 1, 2003. A temporary Agency Fund was established in 2003-2004 to account for contributions and expenditures related to these benefits. In June 2005, an actuary was hired to determine the Annual Required Contributions for all city employees retiring after June 30, 2005. In 2005-06, these benefits were added to the temporary agency fund previously mentioned. On June 12, 2008, the City Council adopted a resolution authorizing participation in a post retirement health care plan trust to be administered by Public Agency Retirement Services (PARS) and Union Bank of California (See Note 12 – Subsequent Events for details). In July 2007, the City signed an agreement with Public Agency Retirement Services to create and administer an irrevocable trust fund for the payment of other post employment benefits for city employees in compliance with Governmental Accounting Standards Board Statement 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. Funds in the amount of $1,400,967 that were previously set aside for this purpose in a temporary Agency Fund were forwarded to Union Bank pursuant to the agreement in August 2007 to establish the trust. Contributions were forwarded on a monthly basis. For fiscal year 2007-2008, twenty-five retirees received benefits at a total cost of $60, 682. Plan Description. The City of Hermosa Beach (City) participates in a post retirement health care plan trust (Plan) administered by Public Agency Retirement Services (PARS) and Union Bank of California. The Plan provides medical insurance benefits to eligible retirees. The City issues a publicly available financial report that includes financial statements and required supplementary information for the Plan. That report may be obtained by writing to City of Hermosa Beach, 1315 Valley Drive, Hermosa Beach, CA 90254. The Plan is comprised of several groups with those retirees providing service to the City prior to the year 2000 and several bargaining units, including General and Supervisory; Professional and Administrative Employees Association; Hermosa Beach Management Association; Police Management Association; Police Officers Association; and Firefighters Association. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 76 10. RETIREMENT PLANS, Continued B. Other Post-Employment Benefits, Continued The range of monthly benefits to be paid by the City ranges from $40 to $350 per month based on years of service from 10 years to 20 years provided to the City. The monthly benefits paid by the City are subject to change with increases provided based on age at retirement and years of service. Eligibility. All of the Plan’s employees became participants in accordance with negotiated Memorandum of Understanding (MOU) as negotiated by each group or bargaining unit. In order to receive benefits, eligible employees must meet the minimum requirements defined in their MOU. Participants of the Plan as of June 30, 2008 are as follows: Participants Total Active employees 132 Retirees 25 Total 157 Funding Policy. The contribution requirements for Plan members and the City are established by a Memorandum of Understanding as negotiated by each group or bargaining unit. The required contribution is based on projected pay-as-you-go financing requirements. For fiscal year 2008, the City contributed $1,876,647, which included the City’s initial contribution of $1,400,967 to the Plan. Plan members receiving benefits contributed $167,395 of the total premiums, as their required contributions. Annual OPEB Cost and Net OPEB Obligation. The City’s Annual Other Postemployment Benefit (OPEB) cost (expense) is calculated based on the Annual Required Contribution of the Employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excesses) over a period not to exceed thirty years. The City has elected to amortize its Unfunded Actuarial Accrued Liability (UAAL) during the current fiscal year. The following table shows the components of the City’s Annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB Obligation to the Plan: Total Annual required contribution 554,000$ Interest on net OPEB obligation - Adjustment to annual required contribution (79,000) Annual OPEB cost (expense) 475,000 Contribution Plan: Initial contribution 1,401,000 2008 contribution 475,000 Contributions made (1,876,000) Increase in net OPEB obligation (1,401,000) Net OPEB obliation - beginning of year 1,401,000 Net OPEB obliation - end of year -$ City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 77 10. RETIREMENT PLANS, Continued B. Other Post-Employment Benefits, Continued The City’s Annual OPEB cost, the percentage of Annual OPEB cost contributed to the Plan and the net OPEB obligation for 2008 and is as follows: Fiscal Annual % of Annual Net Year OPEB OPEB Cost OPEB Ended Cost Contributed Obligation 6/30/2008 475,000$ 100.00% -$ Funded Status and Funding Progress. As of June 30, 2005, the most recent actuarial valuation date, the Plan was not funded. In August 2007, the City made an initial contribution of $1,400,967. As of June 30, 2008, the Actuarial Accrued Liability for benefits was $4,241,000, and the actuarial value of assets was $1,763,000, resulting in an UAAL of $(2,478,000). The funded ration was 41.6 percent. The covered payroll (annual payroll of active employees covered by the Plan) was $8,459,000, and the ratio of UALL to the covered payroll was 29.3 percent. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare costs trend. Amounts determined regarding the funded status of the Plan and the Annual Required Contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as Required Supplementary Information following the notes to the basic financial statements, presents multi-year trend information about whether the actuarial value of Plan Assets is increasing or decreasing over time relative to the Actuarial Accrued Liabilities for benefits. Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and Plan members. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the June 30, 2005, actuarial valuation, the entry age actuarial cost method was used. The actuarial assumptions include a 4.5 percent investment rate of return (net of administrative expenses), which is based on the expected return on funds invested, and an annual healthcare cost trend rate of 10% initially reduced by decrements to an ultimate rate of 5 percent thereafter. The actuarial assumption for inflation was 3 percent, and the aggregate payroll increases was 3.25 percent used in the actuarial valuation. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 78 11. COMMITMENTS AND CONTINGENCIES A. Commitments The City had several outstanding or planned construction projects as of June 30, 2008. These projects are evidenced by contractual commitments with contractors and include: Commitment Project Spent to Date Remaining Infrastructure 245,630$ 889,528$ Clark Building Refurbishment 43,804 161,805 Community Center Improvements - Phase 4 (Restrooms)12,678 220,867 Community Center General Improvements 16,808 298,415 Hermosa Senior Activity Center 5,612 109,388 City Yard Renovation 244,394 991,330 Beach Restroom Rehabilitation 67,680 403,111 Total 636,606$ 3,074,444$ The infrastructure projects include both street and sewer projects that are funded by multiple funds including the Proposition C Fund, the Capital Improvement Fund and the Sewer Fund and a State Clean Beaches Initiative Grant recorded in the Grants Fund. The Clark Building Refurbishment Project is funded by the Parks/Rec Facility Tax Fund and the Capital Improvement Fund. The City Yard Renovation is funded by the Equipment Replacement Fund. The Beach Restroom Rehabilitation Project is funded by a grant recorded in the Proposition A Open Space Fund, the Tyco Fund and the Tyco Tidelands Fund. The Hermosa Senior Activity Center Project is funded by a grant recorded in the Proposition A Open Space Fund and the Parks/Rec Facility Tax Fund. The Community Center Improvements, Phase 4 (Restrooms) Project is funded by a grant recorded in the Community Development Block Grant Fund and the Parks/Rec Facility Tax Fund. The Community Center General Improvements Project is funded by the Parks/Rec Facility Tax Fund and the Capital Improvement fund. B. Contingencies The City is a defendant in a number of lawsuits, which have arisen in the normal course of business. While substantial damages are alleged in some of these actions, their outcome cannot be predicted with certainty. 12. SUBSEQUENT EVENTS MacPherson Oil Project The City entered into a lease with MacPherson Oil in 1992 to allow oil drilling from the City Yard site. During the time that ensued, MacPherson was taking the necessary steps to obtain all required environmental reviews and permits. In 1995 the voters enacted a new ordinance by way of an initiative, entitled Proposition E, to prohibit oil drilling in the City. The issue of whether Proposition E applied to MacPherson's project was the subject of a lawsuit initiated by Proposition E proponents. The City and City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 79 12. SUBSEQUENT EVENTS, Continued MacPherson argued that Proposition E did not preclude MacPherson from exercising its rights under the lease. The Court of Appeals, in a final opinion, ruled otherwise, and the oil project is now dead as a result of that decision. MacPherson has now sued the City, by way of a cross-complaint in the legal action referred to above, for damages due to the alleged breach of contract caused by Proposition E. Both parties filed motions for summary judgment in the trial court. In its motion, MacPherson contended, among other things, that enactment of Proposition E worked a breach of its lease with the City, entitling it to damages for lost profits. It claims damages in excess of $100 million. In its motion, the City contended that because the Court of Appeals has ruled Proposition E not to be an unconstitutional impairment of contract, it cannot work a breach. The City further contended that the passage of Proposition E made performance of the lease impossible. Finally, the City contended that if MacPherson is entitled to any damages, it is limited to restitution, and not lost profits. In December 2003, the trial court granted the City's motion in its entirety, holding that MacPherson is not entitled to proceed against the City for damages. MacPherson appealed this ruling to the Court of appeals, and in an unpublished decision issued in November 2005, the Court of Appeals reversed, rejecting many of the City's defenses and remanding the case back to the trial court for trial. The City's petition to the Supreme Court for review of this decision was denied. The case returned to the trial court in early 2006 and was assigned to a new judge, JoAnne O'Donnell, because MacPherson filed a timely objection to the previous Superior Court judge. The City engaged new trial counsel to defend it in the trial of this case, the Century City law firm of Bird Marella. MacPherson filed a motion to amend its cross-complaint to add causes of action for inverse condemnation and civil rights. Judge O'Donnell denied the motion, ruling that it was barred by laches due to the passage of time since the original cross-complaint was filed. The City filed a motion to bifurcate the trial, so that liability issues can be litigated first, and the damages phase litigated only if MacPherson prevails in the liability phase. Judge O’Donnell granted the motion over MacPherson’s strenuous objections. Thereafter, the parties actively engaged in pretrial discovery regarding liability, including production of documents, exchanges of interrogatories, and depositions of witnesses. Cross-motions for summary judgment on liability were filed and heard, and in early 2008 Judge O'Donnell denied the City's motion and granted Macpherson's motion, ruling that the City bore the risk of a breach by way of Proposition E and that the "compliance with all laws" clause in the lease does not provide the City with a defense. The City's petitions to the Court of Appeal and the California Supreme Court seeking review of that decision were both denied. On October 16, 2008, Judge O'Donnell scheduled a trial date for the damages phase of the trial for August 12, 2009. The City intends to bring yet another motion for summary adjudication on the issue of causation in order to limit the City's liability in damages; at some point in the proceeding, the City will also seek to limit MacPherson's relief to restitution on the theory that an assessment of lost profits is too speculative. The City continues to vigorously defend the case. The City has, unsuccessfully thus far, sought legislation in an effort to limit its damages liability, and has resurrected settlement negotiations. Both the cost of defense and a potential adverse judgment in this case could have a material effect on the financial picture of the City. City of Hermosa Beach Notes to Basic Financial Statements, Continued For the year ended June 30, 2008 80 12. SUBSEQUENT EVENTS, Continued Pension Obligation Bonds On June 10, 2008, the City Council authorized participation in the California Statewide Communities Development Authority (CSCDA) and issuance of Pension Obligation Bonds (“POBs”) by the City. The POBs will be issued through (CSCDA), a statewide financing authority jointly sponsored by the California State Association of Counties and the League of California Cities. The purpose of the borrowing is to refinance the City’s Unfunded Accrued Actuarial Liability (“UAAL”) owed to CalPERS. As of June 30, 2006, the City has a UAAL of $19,462,461. The UAAL is amortized by CalPERS at an interest rate of 7.75%. At the time the City approved the issuance, it was estimated that the City would be able to refinance the unfunded liability by issuing Pension Obligation Bonds at interest rates around 5.00% for a 9 year amortization period, which is the current amortization period with CalPERS. The primary benefit of issuing POBs would be a reduction in the City’s contribution rate for pension benefits, thereby reducing expenditures. The City’s scheduled 2008-09 payment for the UAAL is $1,668,207 (this amount is paid through our PERS rates as part of the employer contribution). The expected POB debt service payment in 2008-09 at the projected interest rate would be $1,509,601, with the difference being $158,606 in budgetary savings. Future POB payments would also be lower than the expected payments due to CalPERS. Issuing the POBs through the CSCDA financing authority is beneficial because the costs are lower than issuing alone, documentation is standardized and the overall process will take less staff time. The statewide program also offers the City structuring options so we can schedule the City’s repayment to meet our future budgetary constraints. Finally, through the statewide financing authority we expect to obtain the highest credit rating through municipal bond insurance which lowers the cost. Filing of a validation action in Superior Court is part of the process. The validation action is necessary to establish the City’s existing obligation and to allow for the issuance of bonds representing a refunding of the existing liability as an obligation statutorily required by law. The validation judgment was entered on September 9, 2008 with a 30-day appeal period which ended October 9, 2008. The law firm of Orrick, Herrington & Sutcliffe will serve as bond counsel; J.P. Morgan Securities, one of the Finance Teams for CSCDA will serve as financial advisor. Due to the recent turmoil in the financial markets, the bond rates have changed drastically from the point in time when the issuance was approved by the City Council. Markets will return to normal at some point, however, and the City will be prepared to move forward when the rates are favorable. 81 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) City of Hermosa Beach Required Supplementary Information (Unaudited) For the year ended June 30, 2008 82 BUDGETS AND BUDGETARY ACCOUNTING Budgets are annually adopted for all governmental and proprietary fund types on a basis consistent with generally accepted accounting principles. The City is required by its municipal code to adopt an annual budget on or before June 30 for the ensuing fiscal year. From the effective date of the budget, the amounts become the “annual appropriated budget.” The appropriated budget is prepared by fund, department and division. The City Council may amend the budget by motion during the fiscal year. Expenditures may not legally exceed appropriations at the fund level. The City Manager is authorized to transfer budgeted amounts between departments within the same fund, however, any transfers between funds or revisions that alter total appropriations of any fund require City Council approval. The legal level of control is therefore at the fund level. An example of this would be the Finance Department, which has two divisions, Finance Administration, funded by the General Fund and Finance Cashier, funded by the Parking Fund. The City Manager may approve a transfer from Finance Administration to another department within the General Fund, however, a transfer from Finance Administration to Finance Cashier would require City Council approval because the divisions are in two different funds. Supplemental appropriations, which increase appropriations, were made during the fiscal year, therefore, “final” budgeted revenue and appropriation amounts shown in the financial statements represent the original budget, modified for adjustments during the year. Appropriations lapse at the end of the fiscal year. Encumbrances - Under encumbrance accounting, purchase orders, contracts and other commitments for expenditures are recorded to reserve that portion of the applicable appropriation. Encumbrance accounting is employed as an extension of formal budgetary accounting. Unexpended appropriations lapse at year- end. Following are the budget comparison schedules for the General Fund and applicable major special revenue funds for which an annual operating budget was adopted. City of Hermosa Beach Required Supplementary Information (Unaudited), Continued For the year ended June 30, 2008 83 BUDGETS AND BUDGETARY ACCOUNTING, Continued Budgetary Comparison Schedule - General Fund Positive (Negative) Actual Variance with Original Final Amounts Final Budget Fund Balance, July 1, 2007 264,049$ 310,693$ 310,693$ -$ Resources (inflows): Property taxes 10,281,609 10,468,776 10,458,034 (10,742) Other taxes 8,891,038 8,851,073 8,957,445 106,372 Licenses and permits 721,997 741,081 877,775 136,694 Fines and forfeitures 1,723,627 1,786,719 1,957,484 170,765 Use of money and property 276,900 287,900 379,528 91,628 Intergovernmental 231,068 206,077 217,886 11,809 Charges for services 3,848,327 3,881,152 4,081,035 199,883 Miscellaneous 42,608 212,507 302,421 89,914 Interest earned on investments 164,579 76,689 69,974 (6,715) Transfers in 869,239 869,239 781,918 (87,321) Amount available for appropriation 27,315,041 27,691,906 28,394,193 702,287 Charges to appropriations (outflows): Legislative and legal 944,280 994,677 967,423 27,254 General government 2,197,177 2,328,157 2,233,417 94,740 Public safety 17,282,643 17,329,815 17,139,655 190,160 Community development 1,581,710 1,585,810 1,261,825 323,985 Culture and recreation 1,201,983 1,230,077 1,230,077 - Public works 3,041,617 3,077,989 2,902,980 175,009 Capital outlay 28,768 (28,768) Transfers out 798,440 2,131,308 2,131,307 1 Total charges to appropriations 27,047,850 28,677,833 27,895,452 782,381 Fund Balance, June 30, 2008 267,191$ (985,927)$ 498,741$ 1,484,668$ Budgeted Amounts City of Hermosa Beach Required Supplementary Information (Unaudited), Continued For the year ended June 30, 2008 84 BUDGETS AND BUDGETARY ACCOUNTING, Continued Budgetary Comparison Schedule – Proposition C Fund Positive (Negative) Actual Variance with Original Final Amounts Final Budget Fund Balance, July 1, 2007 99,228$ 1,788,130$ 1,788,130$ -$ Resources (inflows): Other Taxes 262,100 262,100 258,984 (3,116) Interest earned on investments 109,820 135,739 125,417 (10,322) Amount available for appropriation 471,148 2,185,969 2,172,531 (13,438) Charges to appropriations (outflows): Public Works 1,600 1,600 - Capital outlay 1,662,016 3,200 1,658,816 Total charges to appropriations - 1,662,016 4,800 1,658,816 Fund Balance, June 30, 2008 471,148$ 523,953$ 2,167,731$ 1,643,778$ Budgeted Amounts City of Hermosa Beach Required Supplementary Information (Unaudited), Continued For the year ended June 30, 2008 85 BUDGETS AND BUDGETARY ACCOUNTING, Continued Budgetary Comparison Schedule - Contingency Fund Positive (Negative) Actual Variance with Original Final Amounts Final Budget Fund Balance, July 1, 2007 4,384,403$ 4,582,847$ 4,582,847$ -$ Resources (inflows): Interest earned on investments 224,309 295,169 260,314 (34,855) Amount available for appropriation 4,608,712 4,878,016 4,843,161 (34,855) Charges to appropriations (outflows): Transfers out 469,598 469,598 - Total charges to appropriations - 469,598 469,598 - Fund Balance, June 30, 2008 4,608,712$ 4,408,418$ 4,373,563$ (34,855)$ Budgeted Amounts City of Hermosa Beach Required Supplementary Information (Unaudited), Continued For the year ended June 30, 2008 86 BUDGETS AND BUDGETARY ACCOUNTING, Continued Budgetary Comparison Schedule - Capital Improvement Fund Positive (Negative) Actual Variance with Original Final Amounts Final Budget Fund Balance, July 1, 2007 1,268,137$ 2,153,186$ 2,153,186$ -$ Resources (inflows): CDBG Funds Exchange 100,000 100,000 Interest earned on investments 263,324 142,526 124,746 (17,780) Transfers in 175,000 175,000 175,000 - Amount available for appropriation 1,706,461 2,470,712 2,552,932 82,220 Charges to appropriations (outflows): Capital outlay 1,420,918 2,200,746 862,179 (1,338,567) Transfers out 56,305 56,305 56,305 - Total charges to appropriations 1,477,223 2,257,051 918,484 (1,338,567) Fund Balance, June 30, 2008 229,238$ 213,661$ 1,634,448$ 1,420,787$ Budgeted Amounts City of Hermosa Beach Required Supplementary Information (Unaudited), Continued For the year ended June 30, 2008 87 Schedule of Funding Progress for the City’s OPEB Plan Unfunded Actuarial Actuarial Unfunded Liability as Actuarial Actuarial Accrued Actuarial Percentage of Valuation Asset Liability Accrued Funded Covered Covered Date Value Entry Age Liability Ratio Payroll Payroll 6/30/2008 1,763,000$ 4,241,000$ (2,478,000)$ 41.6% 8,459,000$ 29.3% 88 This page intentionally left blank. SUPPLEMENTARY INFORMATION 89 This page intentionally left blank. 90 NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds: Lighting and Landscaping District Fund - This fund is used to account for the Lighting Assessment District, which was created for street lighting/median maintenance purposes pursuant to Street and highway Code 22500-22679. State Gas Tax Fund - This fund is used to account for the City's share of state gasoline tax, which is restricted for use on public streets. Restricted Transportation Development Act funds from Los Angeles County Transportation Commission for the Strand Walkway Project and Bicycle Path Project are also accounted for in this fund. AB 939 Fund - This fund is used to account for the fees collected in connection with solid waste collection. The fees are used to implement a Source Reduction and Recycling Element and a Household Waste Element. Compensated Absences Fund - This fund is used to account for funds set aside to provide for liabilities associated with vacation time, sick time, etc. accumulated by employees. Prop A Open Space Fund - This fund is used to account for funds generated by passage of the L.A. County Safe Neighborhood Parks Bond Act by County voters for the purpose of improving parks and recreational facilities. Tyco Fund - This fund is used to account for funds received from an easement granted for construction of a transpacific, submarine fiber optic cable system originating in Japan with a landing in Hermosa Beach. The project will provide additional capacity. Tyco Tidelands Fund -This fund is used to account for the portion of the funds specific to the tidelands and submerged lands received from an easement granted for construction of a transpacific, submarine fiber optic cable system originating in Japan with a landing in Hermosa Beach that were set aside to build one new restroom and rehabilitate three existing restrooms at the beach. Parks/Recreation Facilities Tax Fund - This fund is used to account for revenue from subdivision fees and park or recreation facility tax fees on new dwellings. Generally, the funds are to be used for acquisition, improvements and expansion of park or recreational facilities. 4% Utility Users Tax Fund - This fund was used to account for funds remaining from a 4% utility users tax which was pledged for lease payments relating to certificates of participation (COPs) for the purchase of open space. The COPs were defeased in 1997. The remaining balance in the fund was closed out to the General Fund in 2007-08. Building Improvement Fund - This fund is intended to provide funds for ongoing building maintenance. Bayview Drive Administrative Expense Fund - This fund is used to account for all administrative expenditures required for the Bayview Utility Underground Special Assessment District. Lower Pier Administrative Expense Fund - This fund is used to account for all administrative expenditures required for the Lower Pier District. These funds are invested but interest is not allocated to this fund because it is not required by the bond documents. 91 NON-MAJOR GOVERNMENTAL FUNDS, Continued Special Revenue Funds, Continued: Myrtle District Administrative Expense Fund - This fund is used to account for all administrative expenditures required for the Myrtle Avenue Utility Underground Special Assessment District. Loma District Administrative Expense Fund - This fund is used to account for all administrative expenditures required for the Loma Drive Utility Underground Special Assessment District. Beach Drive Assessment District Administrative Expense Fund -This fund is used to account for all administrative expenditures required for the Loma Drive Utility Underground Special Assessment District. Community Development Block Grant Fund - This fund is used to account for funds received for participation in the federal block grant program. Projects must be approved by the County CDBG Commission. Proposition "A" Transit Fund - Transit revenue consists primarily of Proposition A fund (the 1/2 cent sales tax for Los Angeles County transportation purposes). The City currently operates a Dial-a-Ride program for seniors, a taxi voucher program, a commuter bus, special event and after school program shuttles and subsidizes bus passes for senior citizens and students. Grants Fund - This fund is used to account for State and Federal grants for specific projects. Air Quality Management District Fund - This fund is used to account for funds distributed by the South Coast Air Quality Management district. The revenues are restricted to programs which promote reduction in air pollution from motor vehicles. Supplemental Law Enforcement Services Fund (COPS)- This fund is used to account for funds received from the Citizen Option for Public Safety (COPS) program, established by the State Legislature in fiscal year 1996-1997. Funds must be used for front line municipal police services and must supplement and not supplant existing funding. California Law Enforcement Equipment Program Fund (CLEEP)- Funds received for the purchase of high technology law enforcement equipment. Taskforce for Regional Auto Theft Prevention (TRAP) Fund - Funds provided by a $1 fee on vehicle registration implemented by the Los Angeles County Board of Supervisor for a program to deter, investigate and prosecute vehicle theft in Los Angeles County. Sewer Fund - This fund is used to account for funds derived from a portion of the 6% utility user tax and miscellaneous services charges. Funds are spent on the Sewer/Storm Drain Department and capital sewer projects. Asset Seizure and Forfeiture Fund - This fund is used to account for property seized as a result of illegal activity and forfeited to the Police Department. Funds must be used for law enforcement purposes to supplement, not replace or decrease, existing appropriations. 92 NON-MAJOR GOVERNMENTAL FUNDS, Continued Special Revenue Funds, Continued: Fire Protection Fund - This fund is used to account for fire flow fees which are used to upgrade and enhance the fire flow capabilities of the fire protection system in the City and for upgrades to fire facilities. Retirement Stabilization Fund - This fund is used to account for funds set aside for use when retirement rates are unstable and have therefore increased beyond expectations. Artesia Boulevard Relinquishment Fund - This fund is used to track the costs related to the transfer ownership of Artesia Boulevard from the State to the City. During the fiscal year 2000-01, the State of California determined an estimated cost for the rehabilitation of the street which will be contributed to the City as a part of the transfer of ownership. Beach Drive 2 Underground District Fund -This fund is used to account for funds set aside for the creation of a new utility undergrounding district. The expenditures in this fund will be reimbursed to the City upon formation of the district. Myrtle Utility Underground Improvement Fund - This fund is used to account for expenditures relating to the cost for utility undergrounding in the special assessment district. It is also used to account for proceeds from bonds sold to finance the cost of the undergrounding. The bonds are secured by liens against real property within the district and will be repaid from assessments against the property. The City is not obligated in any way with respect to the bonds. Bayview Drive Underground District Improvement Fund - This fund is used to account for expenditures relating to the cost for utility undergrounding in the special assessment district. It is also used to account for proceeds from bonds sold to finance the cost of the undergrounding. The bonds are secured by liens against real property within the district and will be repaid from assessments against the property. The City is not obligated in any way with respect to the bonds. Beach Drive Underground District Improvement Fund - This fund is used to account for expenditures relating to the cost for utility undergrounding in the special assessment district. It is also used to account for proceeds from bonds sold to finance the cost of the undergrounding. The bonds are secured by liens against real property within the district and will be repaid from assessments against the property. The City is not obligated in any way with respect to the bonds. Prospect Utility Underground District Fund - This fund is used to account for funds set aside for the creation of a new utility undergrounding district. The expenditures in this fund will be reimbursed to the City upon formation of the district. 93 City of Hermosa Beach Combining Balance Sheet Non-Major Governmental Funds June 30, 2008 Lighting and Prop A Landscaping State Compensated Open District Gas Tax AB 939 Absences Space Tyco ASSETS Cash and investments 138,749$ 32,152$ 298,160$ 272,655$ 3$ 422,337$ Reimbursable grants receivable 5,612 Interest receivable on investments 1,374 129 2,974 4,353 Other accounts receivable 17,464 516,239 4,928 Property taxes receivable 17,688 Other assets Due from other funds Total assets 175,275$ 548,520$ 306,062$ 272,655$ 5,615$ 426,690$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 22,421$ 2,005$ 5,612 Accrued wages and compensated absences 16,386 8,032 Deferred revenue 17,688 78,225 Due to other funds Advances to other funds Total liabilities 56,495 - 10,037 -$ 5,612$ 78,225$ Fund Balances: Reserved: Re-appropriations 41,600 Bike paths 14,752 Traffic congestion relief 12,682 Unreserved, designated: Special revenue Justice and treasury department Unreserved, undesignated: Special revenue 118,780 521,086 254,425 272,655 3 348,465 Total fund balances 118,780 548,520 296,025 272,655 3 348,465 Total liabilities and fund balances 175,275$ 548,520$ 306,062$ 272,655$ 5,615$ 426,690$ Special Revenue Funds 94 Parks/ Bayview Dr Lower Pier Myrtle Dist Loma Dist Tyco Recreation 4% Utility Building Admin Admin Admin Admin Tidelands Facility Tax Users Tax Improvement Expense Expense Expense Expense 256,606$ 255,202$ 3,817$ 931$ 3,060$ 11,129$ 14,764$ 2,552 2,538 31 9 110 147 259,158$ 257,740$ -$ 3,848$ 940$ 3,060$ 11,239$ 14,911$ 13,931$ 16,964$ 414$ 337$ 491$ 689$ 5,305 13,931$ 22,269 - - 414 337 491 689 49,172 167,118 196,055 68,353 - 3,848 526 2,723 10,748 14,222 245,227 235,471 - 3,848 526 2,723 10,748 14,222 259,158$ 257,740$ -$ 3,848$ 940$ 3,060$ 11,239$ 14,911$ (Continued) Special Revenue Funds 95 City of Hermosa Beach Combining Balance Sheet, Continued Non-Major Governmental Funds, Continued June 30, 2008 Beach Drive Community Air Supplemental Assessment Development Quality Law Dist Admin Block Proposition "A" Management Enforcement Expense Grant Transit Grants District Services ASSETS Cash and investments 973$ 217$ 902,074$ 125,250$ 185,719$ Reimbursable grants receivable 40,515$ Interest receivable on investments 10 8,953 1,241 1,753 Other accounts receivable 1,114 4,265 6,078 Property taxes receivable Other assets 200 Due from other funds Total assets 983$ 1,331$ 915,492$ 40,515$ 132,569$ 187,472$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 339$ 1,324$ 45,586$ 7,036$ Accrued wages and compensated absences 528 (3) (6)$ 4,240$ Deferred revenue Due to other funds 24,235 Advances from other funds Total liabilities 339 1,324 46,114 31,268 (6) 4,240 Fund Balances: Reserved: Re-appropriations 8,534 26,739 Bike paths Traffic Congestion Relief Unreserved, designated: Special revenue Justice and treasury department Unreserved, undesignated: Special revenue 644 7 869,378 713 132,575 156,493 Total fund balances 644 7 869,378 9,247 132,575 183,232 Total liabilities and fund balances 983$ 1,331$ 915,492$ 40,515$ 132,569$ 187,472$ Special Revenue Funds 96 California Law Enforcement Taskforce for Artesia Equipment Regional Asset Blvd. Beach Drive 2 Program Auto Theft Seizure and Fire Retirement Relinquish- Underground (CLEEP) Prevention Sewer Forfeiture Protection Stabilization ment District 1,653$ 565,189$ 98,043$ 66,522$ 740,987$ 17,822$ 12 5,695 975 655 7,370 225 37,756$ 30,212 14,012 5,416 53,732 1,665$ 37,756$ 660,244$ 113,030$ 67,177$ 748,357$ 18,047$ -$ 207,638$ 2,454$ 2,001$ 8,259$ 28,593 26 29,497 65,520 - 37,756 236,231 -$ 2,480$ -$ 2,001 65,520 54,929 64,697 16,046 39,212 1,665 - 369,084 73,818 748,357 (65,520) 1,665 - 424,013 113,030 64,697 748,357 16,046 (65,520) 1,665$ 37,756$ 660,244$ 113,030$ 67,177$ 748,357$ 18,047$ -$ (Continued) Special Revenue Funds 97 City of Hermosa Beach Combining Balance Sheet, Continued Non-Major Governmental Funds, Continued June 30, 2008 Prospect Myrtle Utility Bayview Beach Drive Utility Total Other Underground Underground Underground Underground Governmental Improvement District District District Funds ASSETS Cash and investments 9,563$ 198,352$ 88,785$ 4,710,714$ Reimbursable grants receivable 46,127 Interest receivable on investments 96 1,965 880 44,047 Other accounts receivable 632,068 Property taxes receivable 17,688 Other assets 5,616 Due from other funds 53,732 Total assets 9,659$ 200,317$ 89,665$ -$ 5,509,992$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 329,242$ Accrued wages and compensated absences 71,360 Deferred revenue 95,913 Due to other funds 53,732 Advances from other funds 200,000 265,520 Total liabilities -$ -$ -$ 200,000 815,767 Fund Balances: Reserved: Re-appropriations 26,400 455,235 Bike paths 14,752 Strand walkways 12,682 Unreserved, designated: Special revenue Justice and treasury department 39,212 Unreserved, undesignated: Special revenue 9,659 173,917 89,665 (200,000) 4,172,344 Total fund balances 9,659 200,317 89,665 (200,000) 4,694,225 Total liabilities and fund balances 9,659$ 200,317$ 89,665$ -$ 5,509,992$ (Concluded) Special Revenue Funds 98 This page intentionally left blank. 99 City of Hermosa Beach Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the year ended June 30, 2008 Lighting and Prop A Landscaping State Compensated Open District Gas Tax AB 939 Absences Space Tyco REVENUES: Property taxes 449,085$ Other taxes Fines and forfeitures Use of money and property 300,000$ Intergovernmental 760,898$ 26,169$ Charges for services 58,458$ Miscellaneous 94 Interest earned on investments 5,524 255 19,419 17,708 Total revenues 454,703 761,153 77,877 -$ 26,169 317,708 EXPENDITURES: Current: General government 84,986 Public safety Community development Culture & recreation Public works 524,232 Capital outlay 19,518 5,612 251 Total expenditures 524,232 19,518 84,986 - 5,612 251 REVENUES OVER (UNDER) EXPENDITURES (69,529) 741,635 (7,109) - 20,557 317,457 OTHER FINANCING SOURCES (USES): Transfers in 98,440 Transfers out (10,835) (264,672) (35,310) (20,557) (175,000) Total other financing sources (uses)87,605 (264,672) - (35,310) (20,557) (175,000) NET CHANGE IN FUND BALANCES 18,076 476,963 (7,109) (35,310) - 142,457 FUND BALANCES: Beginning of year 100,704 71,557 303,134 307,965 3 206,008 End of year 118,780$ 548,520$ 296,025$ 272,655$ 3$ 348,465$ Special Revenue Funds 100 Parks/ Bayview Dr Lower Pier Myrtle Dist Loma Dist Tyco Recreation 4% Utility Building Admin Admin Admin Admin Tidelands Facility Tax Users Tax Improvement Expense Expense Expense Expense 3,500$ 190,536 4,620$ 3,324$ 9,391$ 10,379$ 17,801$ 9,934 1,713$ 189$ 83 706 926 17,801 203,970 1,713 189 4,703 3,324 10,097 11,305 1,565 1,325 5,415 5,879 3,786 57,229 56,010 37,544 56,010 98,559 - - 1,565 1,325 5,415 5,879 (38,209) 105,411 1,713 189 3,138 1,999 4,682 5,426 (904) (2,693) (1,132) (3,279) (3,748) - - (904) - (2,693) (1,132) (3,279) (3,748) (38,209) 105,411 809 189 445 867 1,403 1,678 283,436 130,060 (809) 3,659 81 1,856 9,345 12,544 245,227$ 235,471$ -$ 3,848$ 526$ 2,723$ 10,748$ 14,222$ (Continued) Special Revenue Funds 101 City of Hermosa Beach Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds, Continued For the year ended June 30, 2008 Beach Drive Community Air Assessment Development Quality Supplemental Dist Admin Block Proposition "A" Management Law Expense Grant Transit Grants District Enforcement REVENUES: Property taxes Other taxes 310,436$ 100,000$ Fines and forfeitures Use of money and property Intergovernmental 9,536$ 62,201$ 23,259$ Charges for services 5,919 Miscellaneous 2,958$ 9,287 Interest earned on investments 67 50,731 7,121 10,561 Total revenues 3,025 9,536 367,086 71,488 30,380 110,561 EXPENDITURES: Current: General government 1,434 98,980 225 Public safety 39,982 9,192 38,456 Community development 9,534 11,958 Culture & recreation 15,388 Public works 3,865 Capital outlay 57,428 50,444 Total expenditures 1,434 9,534 166,308 70,485 225 88,900 REVENUES OVER (UNDER) EXPENDITURES 1,591 2 200,778 1,003 30,155 21,661 OTHER FINANCING SOURCES (USES): Transfers in Transfers out (1,144) Total other financing sources (uses)(1,144) - - - - - NET CHANGE IN FUND BALANCES 447 2 200,778 1,003 30,155 21,661 FUND BALANCES: Beginning of year 197 5 668,600 8,244 102,420 161,571 End of year 644$ 7$ 869,378$ 9,247$ 132,575$ 183,232$ Special Revenue Funds 102 California Law Enforcement Taskforce for Artesia Equipment Regional Asset Blvd. Beach Drive 2 Program Auto Theft Seizure and Fire Retirement Relinquish- Underground (CLEEP) Prevention Sewer Forfeiture Protection Stabilization ment District 37,038$ 147,328$ 29,803$ 25,753 2,862 5,980 95,260$ 77$ 42,260 5,083 6,547 52,327$ 1,854$ 77 147,328 100,678 48,101 101,807 52,327 1,854 -$ 147,328 489,268 4,271 509,434 28,219 - 147,328 998,702 - 28,219 - 4,271 - 77 - (898,024) 48,101 73,588 52,327 (2,417) - 700,000 (15,600) (162,000) (234,790) - - 684,400 - (162,000) (234,790) - - 77 - (213,624) 48,101 (88,412) (182,463) (2,417) - 1,588 - 637,637 64,929 153,109 930,820 18,463 (65,520) 1,665$ -$ 424,013$ 113,030$ 64,697$ 748,357$ 16,046$ (65,520)$ (Continued) Special Revenue Funds 103 City of Hermosa Beach Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds, Continued For the year ended June 30, 2008 Prospect Myrtle Utility Bayview Beach Drive Utility Total Other Underground Underground Underground Underground Governmental Improvement District District District Funds REVENUES: Property taxes 449,085$ Other taxes 413,936 Fines and forfeitures 37,038 Use of money and property 300,000 Intergovernmental 1,059,194 Charges for services 90,130 Miscellaneous 334,691 Interest earned on investments 597$ 12,757$ 5,485$ 269,725 Total revenues 597 12,757 5,485 -$ 2,953,799 EXPENDITURES: Current: General government 199,809 Public safety 234,958 Community development 21,492 Culture & recreation 19,174 Public works 1,078,865 Capital outlay 23,444 787,904 Total expenditures - 23,444 - - 2,342,202 REVENUES OVER (UNDER) EXPENDITURES 597 (10,687) 5,485 - 611,597 OTHER FINANCING SOURCES (USES): Transfers in 798,440 Transfers out (931,664) Total other financing sources (uses)- - - - (133,224) NET CHANGE IN FUND BALANCES 597 (10,687) 5,485 - 478,373 FUND BALANCES: Beginning of year 9,062 211,004 84,180 (200,000) 4,215,852 End of year 9,659$ 200,317$ 89,665$ (200,000)$ 4,694,225$ (Concluded) Special Revenue Funds 104 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Lighting and Landscaping District For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 100,704$ 100,704$ -$ Resources (inflows): Property taxes 456,260 449,085 (7,175) Miscellaneous - 94 94 Interest earned on investments 4,310 5,524 1,214 Transfers in 98,440 98,440 - Amount available for appropriation 659,714 653,847 (5,867) Charges to appropriations (outflows): Public works 591,118 524,232 66,886 Transfers out 10,835 10,835 - Total charges to appropriations 601,953 535,067 66,886 Fund balance, June 30, 2008 57,761$ 118,780$ 61,019$ 105 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual State Gas Tax For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 71,557$ 71,557$ -$ Resources (inflows): Intergovernmental 388,586 760,898 372,312 Interest earned on investments 4,195 255 (3,940) Amount available for appropriation 464,338 832,710 368,372 Charges to appropriations (outflows): Public Works 14,375 - 14,375 Capital outlay 37,482 19,518 17,964 Transfers out 352,897 264,672 88,225 Total charges to appropriations 404,754 284,190 120,564 Fund balance, June 30, 2008 59,584$ 548,520$ 488,936$ 106 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual AB 939 For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 303,134$ 303,134$ -$ Resources (inflows): Charges for services 57,307 58,458 1,151 Interest earned on investments 22,463 19,419 (3,044) Amount available for appropriation 382,904 381,011 (1,893) Charges to appropriations (outflows): General government 99,264 84,986 14,278 Capital outlay 41,600 - 41,600 Total charges to appropriations 140,864 84,986 55,878 Fund balance, June 30, 2008 242,040$ 296,025$ 53,985$ 107 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Compensated Absences For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 307,965$ 307,965$ -$ Charges to appropriations (outflows): Transfers out 35,310 35,310 - Total charges to appropriations 35,310 35,310 - Fund balance, June 30, 2008 272,655$ 272,655$ -$ 108 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Prop A Open Space For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 3$ 3$ -$ Resources (inflows): Intergovernmental 370,557 26,169 (344,388) Amount available for appropriation 370,560 26,172 (344,388) Charges to appropriations (outflows): Capital outlay 350,000 5,612 344,388 Transfers out 20,557 20,557 - Total charges to appropriations 370,557 26,169 344,388 Fund balance, June 30, 2008 3$ 3$ -$ 109 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Tyco For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 206,008$ 206,008$ -$ Resources (inflows): Use of money and property 300,000 300,000 - Interest earned on investments 16,751 17,708 957 Amount available for appropriation 522,759 523,716 957 Charges to appropriations (outflows): Capital outlay 213,799 251 213,548 Transfers out 175,000 175,000 - Total charges to appropriations 388,799 175,251 213,548 Fund balance, June 30, 2008 133,960$ 348,465$ 214,505$ 110 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Tyco Tidelands For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 283,436$ 283,436$ -$ Resources (inflows): Interest earned on investment 20,947 17,801 (3,146) Amount available for appropriation 304,383 301,237 (3,146) Charges to appropriations (outflows): Capital outlay 301,950 56,010 245,940 Total charges to appropriations 301,950 56,010 245,940 Fund balance, June 30, 2008 2,433$ 245,227$ 242,794$ 111 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Parks/Recreation Facility Tax For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 130,060$ 130,060$ -$ Resources (inflows): Other taxes 3,500 3,500 - Miscellaneous 155,248 190,536 35,288 Interest earned on investments 9,909 9,934 25 Amount available for appropriation 298,717 334,030 35,313 Charges to appropriations (outflows): Culture and recreation 17,234 3,786 13,448 Public works 90,999 57,229 33,770 Capital outlay 190,484 37,544 152,940 Total charges to appropriations 298,717 98,559 200,158 Fund balance, June 30, 2008 -$ 235,471$ 235,471$ 112 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 4% Utility Users Tax For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 (809)$ (809)$ -$ Resources (inflows): Interest earned on investments 809 1,713 904 Amount available for appropriation - 904 904 Charges to appropriations (outflows): Transfers out - 904 (904) Total charges to appropriations - 904 (904) Fund balance, June 30, 2008 -$ -$ -$ 113 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Building Improvement For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 3,659$ 3,659$ -$ Resources (inflows): Interest earned on investments 214 189 (25) Amount available for appropriation 3,873 3,848 (25) Fund balance, June 30, 2008 3,873$ 3,848$ (25)$ 114 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Bayview Drive Administrative Expense For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 81$ 81$ -$ Resources (inflows): Miscellaneous 4,620 4,620 - Interest earned on investments 41 83 42 Amount available for appropriation 4,742 4,784 42 Charges to appropriations (outflows): General government 1,944 1,565 379 Transfers out 2,693 2,693 - Total charges to appropriations 4,637 4,258 379 Fund balance, June 30, 2008 105$ 526$ 421$ 115 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Lower Pier Administrative Expense For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 1,856$ 1,856$ -$ Resources (inflows): Miscellaneous 3,324 3,324 - Amount available for appropriation 5,180 5,180 - Charges to appropriations (outflows): General government 2,215 1,325 890 Transfers out 1,132 1,132 - Total charges to appropriations 3,347 2,457 890 Fund balance, June 30, 2008 1,833$ 2,723$ 890$ 116 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Myrtle District Administrative Expense For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 9,345$ 9,345$ -$ Resources (inflows): Miscellaneous 9,391 9,391 - Interest earned on investments 755 706 (49) Amount available for appropriation 19,491 19,442 (49) Charges to appropriations (outflows): General government 6,157 5,415 742 Transfers out 3,279 3,279 - Total charges to appropriations 9,436 8,694 742 Fund balance, June 30, 2008 10,055$ 10,748$ 693$ 117 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Loma District Administrative Expense For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 12,544$ 12,544$ -$ Resources (inflows): Miscellaneous 10,379 10,379 - Interest earned on investments 981 926 (55) Amount available for appropriation 23,904 23,849 (55) Charges to appropriations (outflows): General government 6,634 5,879 755 Transfers out 3,748 3,748 - Total charges to appropriations 10,382 9,627 755 Fund balance, June 30, 2008 13,522$ 14,222$ 700$ 118 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Beach Drive Assessment District Administrative Expense For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 197$ 197$ -$ Resources (inflows): Miscellaneous 2,958 2,958 - Interest earned on investments 31 67 36 Amount available for appropriation 3,186 3,222 36 Charges to appropriations (outflows): General government 1,896 1,434 462 Transfers out 1,144 1,144 - Total charges to appropriations 3,040 2,578 462 Fund balance, June 30, 2008 146$ 644$ 498$ 119 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Community Development Block Grant For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 5$ 5$ -$ Resources (inflows): Intergovernmental 193,709 9,536 (184,173) Amount available for appropriation 193,714 9,541 (184,173) Charges to appropriations (outflows): Community development 10,409 9,534 875 Capital outlay 183,300 - 183,300 Total charges to appropriations 193,709 9,534 184,175 Fund balance, June 30, 2008 5$ 7$ 2$ 120 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Proposition "A" Transit For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 668,600$ 668,600$ -$ Resources (inflows): Other taxes 315,511 310,436 (5,075) Charges for services 5,880 5,919 39 Interest earned on investments 53,584 50,731 (2,853) Amount available for appropriation 1,043,575 1,035,686 (7,889) Charges to appropriations (outflows): General government 99,154 98,980 174 Public safety 43,164 39,982 3,182 Community development 11,983 11,958 25 Culture and recreation 30,000 15,388 14,612 Total charges to appropriations 184,301 166,308 17,993 Fund balance, June 30, 2008 859,274$ 869,378$ 10,104$ 121 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Grants For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 8,244$ 8,244$ -$ Resources (inflows): Intergovernmental 1,378,739 62,201 (1,316,538) Miscellaneous 9,229 9,287 58 Amount available for appropriation 1,396,212 79,732 (1,316,480) Charges to appropriations (outflows): Public safety 9,229 9,192 37 Public works 13,039 3,865 9,174 Capital outlay 1,373,574 57,428 1,316,146 Total charges to appropriations 1,395,842 70,485 1,325,357 Fund balance, June 30, 2008 370$ 9,247$ 8,877$ 122 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Air Quality Management District For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 102,420$ 102,420$ -$ Resources (inflows): Intergovernmental 23,751 23,259 (492) Interest earned on investments 7,398 7,121 (277) Amount available for appropriation 133,569 132,800 (769) Charges to appropriations (outflows): General government 1,000 225 775 Total charges to appropriations 1,000 225 775 Fund balance, June 30, 2008 132,569$ 132,575$ 6$ 123 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Supplemental Law Enforcement Services For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 161,571$ 161,571$ -$ Resources (inflows): Other taxes 100,000 100,000 - Interest earned on investments 13,179 10,561 (2,618) Amount available for appropriation 274,750 272,132 (2,618) Charges to appropriations (outflows): Public safety 78,043 38,456 39,587 Capital outlay 86,616 50,444 36,172 Total charges to appropriations 164,659 88,900 75,759 Fund balance, June 30, 2008 110,091$ 183,232$ 73,141$ 124 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual California Law Enforcement Equipment Program For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 1,588$ 1,588$ -$ Resources (inflows): Interest earned on investments 97 77 (20) Amount available for appropriation 1,685 1,665 (20) Fund balance, June 30, 2008 1,685$ 1,665$ (20)$ 125 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Taskforce for Regional Auto Theft Prevention For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 -$ -$ -$ Resources (inflows): Intergovernmental 147,329$ 147,328$ (1) Amount available for appropriation 147,329 147,328 (1) Charges to appropriations (outflows): Public safety 147,329 147,328 1 Total charges to appropriations 147,329 147,328 1 Fund balance, June 30, 2008 -$ -$ -$ 126 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Sewer For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 637,637$ 637,637$ -$ Resources (inflows): Intergovernmental 30,164 29,803 (361) Charges for services 29,751 25,753 (3,998) Miscellaneous 4,000 2,862 (1,138) Interest earned on investments 50,710 42,260 (8,450) Transfers in 700,000 700,000 - Amount available for appropriation 1,452,262 1,438,315 (13,947) Charges to appropriations (outflows): Public works 653,205 489,268 163,937 Capital outlay 681,999 509,434 172,565 Transfers out 15,600 15,600 - Total charges to appropriations 1,350,804 1,014,302 336,502 Fund balance, June 30, 2008 101,458$ 424,013$ 322,555$ 127 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Asset Seizure and Forfeiture For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 64,929$ 64,929$ -$ Resources (inflows): Fines and forfeitures 13,000 37,038 24,038 Miscellaneous - 5,980 5,980 Interest earned on investments 5,055 5,083 28 Amount available for appropriation 82,984 113,030 30,046 Fund balance, June 30, 2008 82,984$ 113,030$ 30,046$ 128 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fire Protection For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 153,109$ 153,109$ -$ Resources (inflows): Miscellaneous 102,775 95,260 (7,515) Interest earned on investments 9,957 6,547 (3,410) Amount available for appropriation 265,841 254,916 (10,925) Charges to appropriations (outflows): Capital outlay 103,840 28,219 75,621 Transfers out 162,000 162,000 - Total charges to appropriations 265,840 190,219 75,621 Fund balance, June 30, 2008 1$ 64,697$ 64,696$ 129 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Retirement Stabilization For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 930,820$ 930,820$ -$ Resources (inflows): Interest earned on investments 65,390 52,327 (13,063) Amount available for appropriation 996,210 983,147 (13,063) Charges to appropriations (outflows): Transfers out 234,790 234,790 - Total charges to appropriations 234,790 234,790 - Fund balance, June 30, 2008 761,420$ 748,357$ (13,063)$ 130 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Artesia Boulevard Relinquishment For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 18,463$ 18,463$ -$ Resources (inflows): Interest earned on investments 3,591 1,854 (1,737) Amount available for appropriation 22,054 20,317 (1,737) Charges to appropriations (outflows): Public works 4,271 4,271 - Capital outlay 17,783 - 17,783 Total charges to appropriations 22,054 4,271 17,783 Fund balance, June 30, 2008 -$ 16,046$ 16,046$ 131 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Beach Drive 2 Underground District For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 (65,520)$ (65,520)$ -$ Amount available for appropriation (65,520) (65,520) - Fund balance, June 30, 2008 (65,520)$ (65,520)$ -$ 132 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Myrtle Utility Underground Improvement For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 9,062$ 9,062$ -$ Resources (inflows): Interest earned on investments 654 597 (57) Amount available for appropriation 9,716 9,659 (57) Fund balance, June 30, 2008 9,716$ 9,659$ (57)$ 133 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Bayview Drive Underground District For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 211,004$ 211,004$ -$ Resources (inflows): Interest earned on investments 15,069 12,757 (2,312) Amount available for appropriation 226,073 223,761 (2,312) Charges to appropriations (outflows): Capital outlay 180,531 23,444 157,087 Total charges to appropriations 180,531 23,444 157,087 Fund balance, June 30, 2008 45,542$ 200,317$ 154,775$ 134 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Beach Drive Underground District For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 84,180$ 84,180$ -$ Resources (inflows): Interest earned on investments 6,229 5,485 (744) Amount available for appropriation 90,409 89,665 (744) Fund balance, June 30, 2008 90,409$ 89,665$ (744)$ 135 City of Hermosa Beach Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Prospect Utility Underground District For the year ended June 30, 2008 Positive Budgeted (Negative) Amounts Actual Variance with Final Amounts Final Budget Fund balance, July 1, 2007 (200,000)$ (200,000)$ -$ Amount available for appropriation (200,000) (200,000) - Fund balance, June 30, 2008 (200,000)$ (200,000)$ -$ 136 INTERNAL SERVICE FUNDS Insurance Fund - This fund was created to account for costs associated with the City's insurances: liability, workers' compensation, unemployment, auto, property and officials' bonds. Equipment Replacement Fund - This fund was created to provide ongoing funds to replace assets at the end of the assets' useful life. 137 City of Hermosa Beach Combining Statement of Net Assets All Internal Service Funds June 30, 2008 Equipment Insurance Replacement Fund Fund Total ASSETS Current assets: Cash and investments 4,631,581$ 2,922,315$ 7,553,896$ Other accounts receivables 450 450 Deposits 140,000 140,000 Advances to other funds 618,326 618,327 1,236,653 Other assets 1,959 10,337 12,296 Total current assets 5,391,866 3,551,429 8,943,295 Capital assets, net of accumulated depreciation 2,447,422 2,447,422 Total assets 5,391,866 5,998,851 11,390,717 LIABILITIES Current liabilities: Current portion of long-term liabilities 1,338,538 1,338,538 Accounts payable 159,167 76,644 235,811 Accrued wages and compensated absences 24,189 20,167 44,356 Total current liabilities 1,521,894 96,811 1,618,705 Long-term liabilities: Workers' compensation claims payable 3,611,218 3,611,218 General liability claims payable 1,545,212 1,545,212 Less current portion above (1,338,538) (1,338,538) Total long-term liabilities 3,817,892 - 3,817,892 Total liabilities 5,339,786 96,811 5,436,597 NET ASSETS Invested in capital assets 2,447,422 2,447,422 Reserved: Re-appropriations 251,116 251,116 Unrestricted 52,080 3,203,502 3,255,582 Total net assets 52,080$ 5,902,040$ 5,954,120$ 138 City of Hermosa Beach Combining Statement of Revenues, Expenses, and Changes in Net Assets All Internal Service Funds For the year ended June 30, 2008 Equipment Insurance Replacement Fund Fund Total OPERATING REVENUES: Charges for services 1,904,711$ 1,342,414$ 3,247,125$ Miscellaneous 132,256 3,027 135,283 Total operating revenues 2,036,967 1,345,441 3,382,408 OPERATING EXPENSES: Salaries and wages 136,985 247,160 384,145 Contractor services 1,169,627 275,780 1,445,407 Supplies 255 269,816 270,071 Claims expense 3,355,596 3,355,596 Depreciation 438,258 438,258 Total operating expenses 4,662,463 1,231,014 5,893,477 OPERATING INCOME (LOSS)(2,625,496) 114,427 (2,511,069) NONOPERATING REVENUES (EXPENSES): Gain on disposal of capital assets 19,018 19,018 Total nonoperating revenues (expenses)- 19,018 19,018 INCOME (LOSS) BEFORE TRANSFERS (2,625,496) 133,445 (2,492,051) Transfers in 1,837,775 1,837,775 CHANGE IN NET ASSETS (787,721) 133,445 (654,276) NET ASSETS Beginning of the year 839,801 5,768,595 6,608,396 . End of the year 52,080$ 5,902,040$ 5,954,120$ 139 City of Hermosa Beach Combining Statement of Cash Flows All Internal Service Funds For the year ended June 30, 2008 Equipment Insurance Replacement Fund Fund Total CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers 133,157$ 106,987$ 240,144$ Cash received for services from other funds 1,904,711 1,342,414 3,247,125 Cash payments to suppliers of goods and services (1,290,783) (513,486) (1,804,269) Cash payments to employees for services (135,955) (248,714) (384,669) Insurance premiums and settlements (2,097,331) (2,097,331) Net cash provided by (used for) operating activities (1,486,201) 687,201 (799,000) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in 1,837,775 - 1,837,775 Net cash provided by (used for) noncapital financing activities 1,837,775 - 1,837,775 Acquisition of capital assets (440,743) (440,743) Net cash provided by (used for) capital and related financing activities - (440,743) (440,743) Net increase (decrease) in cash and cash equivalents 351,574 246,458 598,032 CASH AND CASH EQUIVALENTS: Beginning of year 4,280,007 2,675,857 6,955,864 End of year 4,631,581$ 2,922,315$ 7,553,896$ RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES: Operating income (loss) (2,625,496)$ 114,427$ (2,511,069)$ Adjustments to reconcile net operating income (loss) to net cash provided (used) by operating activities: Depreciation 438,258 438,258 Changes in current assets and liabilities: Other Accounts Receivables 509 3,136 3,645 Deposits (60,000) (60,000) Advances to other funds 61,525 61,524 123,049 Other assets (1,133) 39,300 38,167 Worker's compensation claims payable 822,787 822,787 General liability claims payable 435,478 435,478 Accounts payable (120,901) 32,110 (88,791) Accrued wages and compensated absences 1,030 (1,554) (524) Total adjustments 1,139,295 572,774 1,712,069 Net cash provided by (used for) operating activities (1,486,201)$ 687,201$ (799,000)$ DISCLOSURE OF NON-CASH TRANSACTION: Gain on disposal of capital assets -$ 19,018$ 19,018$ CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: 140 FIDUCIARY FUNDS The Agency Fund of the City was established to account for transactions related to payments for limited obligation bonds for the Lower Pier Avenue Assessment District, the Myrtle Avenue Utility Undergrounding Assessment District, and the Loma Drive Utility Undergrounding Assessment District. 141 City of Hermosa Beach Combining Statement of Fiduciary Net Assets All Agency Funds June 30, 2008 Beach Drive Bayview Lower Pier Assessment Beach Drive Bayview Drive District District Assessment Myrtle Avenue Loma Drive Drive Redemption Redemption Redemption Reserve Assessment Assessment Reserve Total ASSETS Cash and investments 51,983$ 38,652$ 25,661$ 3,708$ 92,352$ 91,615$ 12,170$ 316,141$ Interest receivable 514 383 254 37 917 909 120 3,134 Other accounts receivable 5,526 3,027 2,435 6,085 17,073 58,023$ 42,062$ 25,915$ 3,745$ 95,704$ 98,609$ 12,290$ 336,348$ LIABILITIES Assessment: Installment account 58,023$ 42,062$ 25,915$ 95,704$ 98,609$ 320,313$ Reserve requirement 3,745$ 12,290$ 16,035 58,023$ 42,062$ 25,915$ 3,745$ 95,704$ 98,609$ 12,290$ 336,348$ Total assets Total liabilities 142 City of Hermosa Beach Combining Statement of Changes in Assets and Liabilities All Agency Funds For the year ended June 30, 2008 Balance Balance July 1, 2007 Additions Deletions June 30, 2008 ASSETS Bayview Drive Redemption Fund: Cash and investments 67,781$ 184,479$ (200,277)$ 51,983$ Interest receivable 1,184 607 (1,277) 514 Other accounts receivable 2,189 5,525 (2,188) 5,526 Lower Pier District Redemption Fund: Cash and investments 39,175 45,884 (46,407) 38,652 Interest receivable 685 420 (722) 383 Other accounts receivable 1,533 3,027 (1,533) 3,027 Beach Drive Assessment District Redemption Fund: Cash and investments 22,905 38,344 (35,588) 25,661 Interest receivable 401 891 (1,038) 254 Other accounts receivable 1,547 - (1,547) - Beach Drive Assessment District Reserve Fund: Cash and investments 3,461 350 (103) 3,708 Interest receivable 61 41 (65) 37 Myrtle Avenue Assessment Fund: Cash and investments 83,367 113,918 (104,933) 92,352 Interest receivable 1,461 1,002 (1,546) 917 Other accounts receivable 5,631 2,436 (5,632) 2,435 Loma Drive Assessment Fund: Cash and investments 88,868 138,134 (135,387) 91,615 Interest receivable 1,555 1,014 (1,660) 909 Other accounts receivable 5,133 6,736 (5,784) 6,085 Bayview Drive Reserve Fund Cash and investments 11,357 1,165 (352) 12,170 Interest receivable 198 150 (228) 120 Total assets 338,492$ 544,123$ (546,267)$ 336,348$ LIABILITIES Bayview Drive Redemption Fund: Assessment installment account 71,154$ 190,611$ (203,742)$ 58,023$ Lower Pier District Redemption Fund: Assessment installment account 41,393 49,331 (48,662) 42,062 Beach Drive Assessment District Redemption Fund: Assessment installment account 24,853 39,235 (38,173) 25,915 Beach Drive Assessment District Reserve Fund: Reserve requirement 3,522 391 (168) 3,745 Myrtle Avenue Assessment Funds: Assessment installment account 90,459 117,356 (112,111) 95,704 Loma Drive Assessment Fund: Assessment installment account 95,556 145,884 (142,831) 98,609 Bayview Drive Reserve Fund Reserve requirement 11,555 1,315 (580) 12,290 Total liabilities 338,492$ 544,123$ (546,267)$ 336,348$ 143 This page intentionally left blank. 144 CAPITAL ASSETS USED IN THE OPERATING OF GOVERNMENTAL FUNDS 145 City of Hermosa Beach Capital Assets Used in the Operation of Governmental Funds Schedule By Source* For the year ended June 30, 2008 GOVERNMENTAL FUNDS CAPITAL ASSETS: Land 17,448,235$ Buildings and improvements 4,504,563 Improvements other than buildings 13,227,866 Machinery and equipment 1,865,577 Vehicles 25,996 Construction in progress 41,334,029 Infrastructure 1,321,521 Total governmental funds capital assets 79,727,787 Accumulated depreciation (25,057,677) Total governmental funds capital assets, net 54,670,110$ INVESTMENTS IN GOVERNMENTAL FUNDS CAPITAL ASSETS BY SOURCE: 62,880$ General fund revenues 32,383,483 46,946,706 334,718 Total governmental funds capital assets 79,727,787 Accumulated depreciation (25,057,677) Total governmental funds capital assets, net 54,670,110$ * This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. State grants Special revenue funds revenues Donated assets 146 City of Hermosa Beach Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity* For the year ended June 30, 2008 Buildings Improvements Machinery and Other than and Construction Land Structures Buildings Equipment Vehicles Infrastructure in Progress Total GOVERNMENTAL FUNDS CAPITAL ASSETS General government 307,349$ 2,006,824$ 97,728$ 307,431$ 2,719,332$ Public safety 534,812 751,295 1,228,938 25,996$ 2,541,041 Community development 99,858 12,755 112,613 Culture and recreation 650,000 1,017,601 203,154 118,848 1,989,603 Public works 16,490,886 945,326 12,075,831 197,605 41,334,029$ 1,321,521$ 72,365,198 17,448,235 4,504,563 13,227,866 1,865,577 25,996 41,334,029 1,321,521 79,727,787 Accumulated depreciation (1,704,709) (5,454,528) (1,069,632) (15,157) (16,813,651) (25,057,677) 17,448,235$ 2,799,854$ 7,773,338$ 795,945$ 10,839$ 24,520,378$ 1,321,521$ 54,670,110$ Total governmental funds capital assets Total governmental funds capital assets * This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 147 City of Hermosa Beach Capital Assets Used in the Operation of Governmental Funds Schedule of Changes in Capital Assets - By Function by Activity* For the year ended June 30, 2008 Capital Capital Assets Assets July 1, 2007 Additions Deletions June 30, 2008 Function and Activity: General government 2,719,332$ 2,719,332$ Public safety 2,430,916 110,125$ 2,541,041 Community development 112,613 112,613 Culture and recreation 1,989,604 1,989,604 Public works 71,079,102 1,557,766 (271,671)$ 72,365,197 Total governmental funds capital assets 78,331,567 1,667,891 (271,671) 79,727,787 Accumulated depreciation (22,508,274) (2,549,403) (25,057,677) Total governmental funds capital assets, net 55,823,293$ (881,512)$ (271,671)$ 54,670,110$ * This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service funds are excluded from the above amounts. 148 Contents Page Financial Trends 151 Revenue Capacity 154 Debt Capacity 163 Demographic and Economic Information 166 Operating Information 168 1 Ratios of Outstanding Debt by Type Ratios of General Bonded Debt Outstanding Pledged-Revenue Coverage Since the City of Hermosa Beach has no debt, the following schedules are not included in the Statistical Section: These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future.1 These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. This part of the City of Hermosa Beach's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the government' overall financial health. These schedules contain trend information to help the reader understand how the government's financial performance and well being have changed over time. These schedules contain information to help the reader assess the government's most significant local revenue source, the property tax. STATISTICAL SECTION 149 This page intentionally left blank. 150 City of Hermosa Beach Net Assets by Component Last Six Fiscal Years (accrual basis of accounting) 2003 2004 2005 2006 2007 2008 Governmental activities: Invested in capital assets, net of related debt 52,434,822$ 54,115,206$ 57,049,484$ 56,667,910$ 58,249,212$ 57,117,532$ Restricted 524,561 2,217,823 3,305,478 3,590,623 3,813,004 5,171,642 Unrestricted 15,165,745 15,218,039 14,932,486 15,221,233 12,424,195 10,619,806 Total governmental activities net assets 68,125,128$ 71,551,068$ 75,287,448$ 75,479,766$ 74,486,411$ 72,908,980$ Business-type activities: Invested in capital assets, net of related debt 6,796,868$ 6,880,925$ 8,081,080$ 8,297,790$ 10,311,365$ 10,187,758$ Restricted 864,024 - - - - - Unrestricted 780,346 827,781 502,758 237,824 (1,604,154) (1,443,914) Total business-type activities net assets 8,441,238$ 7,708,706$ 8,583,838$ 8,535,614$ 8,707,211$ 8,743,844$ Primary government: Invested in capital assets, net of related debt 59,231,690$ 60,996,131$ 65,130,564$ 64,965,700$ 68,560,577$ 67,305,110$ Restricted 1,388,585 2,217,823 3,305,478 3,590,623 3,813,004 5,171,642 Unrestricted 15,946,091 16,045,820 15,435,244 15,459,057 10,820,041 9,175,892 Total primary government net assets 76,566,366$ 79,259,774$ 83,871,286$ 84,015,380$ 83,193,622$ 81,652,644$ with the implementation of GASB 34. The City of Hermosa Beach has elected to show only six years of data for this schedule to coincide Fiscal Year 151 City of Hermosa Beach Changes in Net Assets Last Six Fiscal Years (accrual basis of accounting) 2003 2004 2005 2006 2007 2008 Expenses: Governmental activities: Legislative and legal 810,589$ 755,591$ 737,903$ 962,682$ 867,481$ 990,342$ General government 1,415,000 1,816,801 1,727,484 1,999,234 2,523,060 2,544,004 Public safety 10,415,111 11,219,997 12,855,036 15,167,715 17,237,156 19,569,031 Community development 968,000 1,115,600 1,355,888 1,349,891 1,424,766 1,358,051 Culture and recreation 1,045,567 965,440 996,021 1,149,070 1,253,882 1,343,223 Public works 4,136,564 4,592,460 6,687,811 7,980,811 7,106,083 6,942,530 Total governmental activities expenses 18,790,831 20,465,889 24,360,143 28,609,403 30,412,428 32,747,181 Business-type activities: Downtown Enhancement 909,137 939,576 166,732 1,130,499 1,096,039 1,133,746 Parking 1,525,371 1,632,093 1,701,775 - 2 - - Proposition "A" Transit 302,907 310,113 - 1 - - - Proposition "C" Transit 103,091 48,119 - 1 - - - Total business-type activities expenses 2,840,506 2,929,901 1,868,507 1,130,499 1,096,039 1,133,746 Total primary government expenses 21,631,337 23,395,790 26,228,650 29,739,902 31,508,467 33,880,927 Program revenues: Governmental activities: Charges for services: General government 89,037 84,745 88,375 458,900 497,423 563,583 Public safety 833,755 914,655 1,063,594 3,891,881 4,078,709 4,423,335 Community development 768,241 929,695 1,245,622 1,393,212 1,179,786 1,262,109 Culture and recreation 708,296 793,748 874,111 986,137 944,229 1,092,512 Public works 203,533 689,457 2,368,076 808,091 835,845 877,367 Operating grants and contributions 642,214 674,451 721,198 725,136 755,716 731,097 Capital grants and contributions 475,933 665,806 2,465,698 1,042,854 286,930 68,862 Total governmental activities program revenues: 3,721,009 4,752,557 8,826,674 9,306,211 8,578,638 9,018,865 Business-type activities: Charges for services: Downtown Enhancement 774,865 879,495 906,857 1,187,249 1,144,666 1,088,298 Parking 2,503,330 2,895,143 3,247,478 - 2 - - Proposition A Transit 14,381 14,384 - 1 - - - Proposition C Transit - - - 1 - - - Operating grants and contributions - - - - - - Capital grants and contributions - - - - - - Total business-type activities program revenues: 3,292,576 3,789,022 4,154,335 1,187,249 1,144,666 1,088,298 Total primary government program revenues: 7,013,585 8,541,579 12,981,009 10,493,460 9,723,304 10,107,163 Fiscal Year 152 City of Hermosa Beach Changes in Net Assets, Continued Last Six Fiscal Years (accrual basis of accounting) 2003 2004 2005 2006 2007 2008 Net revenues (expenses): Governmental activities (15,069,822) (15,713,332) (15,533,469) (19,303,192) (21,833,790) (23,728,316) Business-type activities 452,070 859,121 2,285,828 56,750 48,627 (45,448) Total net revenues (expenses) (14,617,752) (14,854,211) (13,247,641) (19,246,442) (21,785,163) (23,773,764) General revenues and other changes in net assets: Governmental activities: Taxes: Property taxes 5,282,147 5,885,480 6,221,535 8,361,888 9,383,544 10,458,034 Sales tax 2,508,346 2,596,135 2,584,015 2,511,004 2,395,390 2,500,659 Other taxes 5,166,212 5,559,070 5,897,908 6,186,641 6,414,534 6,456,786 Grants and contributions not restricted to specific programs 3,111,569 1,229,911 2,318,501 1,537,667 1,273,625 1,472,191 Investment income 439,050 177,757 467,923 753,746 1,097,128 850,176 Other general revenues 400,658 615,309 272,664 113 170,325 503,414 Transfers 990,593 2,356,585 1,507,304 144,451 11,255 4,259 Total governmental activities 17,898,575 18,420,247 19,269,850 19,495,510 20,745,801 22,245,519 Business-type activities: Investment income 96,117 73,519 96,365 33,154 48,113 28,320 Other general revenues 498,276 530,773 - 1 - - - Miscellaneous 10,812 12,966 243 6,323 86,112 57,840 Transfers (990,593) (2,356,585) (1,507,304) (144,451) (11,255) (4,259) Total business-type activities (385,388) (1,739,327) (1,410,696) (104,974) 122,970 81,901 Total primary government 17,513,187 16,680,920 17,859,154 19,390,536 20,868,771 22,327,420 Changes in net assets Governmental activities: 2,828,753 2,706,915 3,736,381 192,318 (1,087,989) (1,482,797) Business-type activities: 66,682 (880,206) 875,132 (48,224) 171,597 36,453 Total primary government 2,895,435$ 1,826,709$ 4,611,513$ 144,094$ (916,392)$ (1,446,344)$ The City of Hermosa Beach has elected to show only six years of data for this schedule to coincide with the implementation of GASB 34. 1 Transit operations were transferred to special revenue funds in fiscal year 2005. 2 The Parking Fund was combined with the General Fund in fiscal year 2006. Fiscal Year 153 City of Hermosa Beach Governmental Activities Tax Revenues By Source Last Six Years (accrual basis of accounting) 1/2 cent Fiscal Real sales tax year property extension Transient Utility ended Property Sales transfer Franchise for public occupancy user's Business June 30 tax tax tax fees safety tax tax license Total 2003 5,282,147$ 2,508,346$ 194,035$ 517,907$ 150,453$ 1,054,272$ 2,137,975$ 689,270$ 12,534,405$ 2004 5,885,480 2,596,135 243,390 514,403 162,902 1,291,689 2,652,821 693,865 14,040,685 2005 6,221,535 2,584,015 279,627 590,372 178,539 1,477,612 2,675,196 696,562 14,703,458 2006 8,361,888 2,511,004 305,018 597,754 188,644 1,628,394 2,726,085 740,746 17,059,533 2007 9,383,544 2,395,390 279,219 606,572 189,852 1,769,015 2,769,113 800,763 18,193,468 2008 10,458,034 2,500,659 226,349 634,421 187,277 1,892,363 2,714,029 802,347 19,415,479 The City of Hermosa Beach has elected to show only six years of data for this schedule to coincide with the implementation of GASB 34. 154 City of Hermosa Beach Fund Balances of Governmental Funds Last Six Fiscal Years (modified accrual basis of accounting) 2003 2004 2005 2006 2007 2008 General Fund: Reserved 231,701$ 230,527$ 103,014$ 158,854$ 142,604$ 241,142$ Unreserved 461,115 403,455 373,817 211,191 168,089 257,599 Total general fund 692,816 633,982 476,831 370,045 310,693 498,741 All other governmental funds: Reserved 909,806 1,459,679 4,107,762 3,845,091 3,875,682 1,734,658 Unreserved, reported in: Special revenue funds 11,053,526 12,038,695 10,516,612 10,900,400 8,864,333 11,135,309 Total all other governmental funds 11,963,332$ 13,498,374$ 14,624,374$ 14,745,491$ 12,740,015$ 12,869,967$ The City of Hermosa Beach has elected to show only six years of data for this schedule to coincide Fiscal Year with the implementation of GASB 34. 155 City of Hermosa Beach Changes in Fund Balances of Governmental Funds Last Six Fiscal Years (modified accrual basis of accounting) 2003 2004 2005 2006 2007 2008 Revenues: Property taxes 5,736,937$ 6,339,123$ 6,668,515$ 8,818,051$ 9,834,400$ 10,907,119$ Other taxes 7,323,267 8,262,205 9,085,304 9,404,925 9,488,447 9,630,365 Licenses and permits 571,682 664,169 701,468 868,085 772,832 877,775 Fines and forfeitures 278,334 371,802 459,106 1,627,274 1,615,777 1,994,522 Use of money and property 2,185,382 590,605 871,782 612,248 656,966 679,528 Intergovernmental 2,175,932 2,168,077 4,333,949 2,278,769 1,299,426 1,277,080 Charges for services 1,254,917 1,414,665 1,852,726 3,905,640 4,125,954 4,171,165 Miscellaneous 645,335 793,633 2,053,250 388,532 349,856 737,112 Interest earned on investments 450,116 177,757 467,925 753,746 1,097,128 850,176 Total revenues 20,621,902 20,782,036 26,494,025 28,657,270 29,240,786 31,124,842 Expenditures Current: Legislative and legal 832,157 752,541 727,026 963,031 858,017 967,423 General government 1,245,306 1,259,275 1,340,435 2,220,062 2,426,179 2,433,226 Public safety 10,040,618 10,555,169 12,139,133 14,444,334 16,236,080 17,374,613 Community development 951,856 1,089,056 1,325,219 1,346,996 1,417,596 1,283,317 Culture and recreation 966,621 932,447 940,158 1,124,347 1,205,653 1,249,251 Public works 3,082,096 3,189,361 3,374,363 3,785,554 3,895,291 3,993,055 Capital outlay 4,281,144 3,119,265 6,425,895 3,406,570 4,722,412 1,672,441 Debt service: n/a n/a n/a n/a n/a n/a Total expenditures 21,399,798 20,897,114 26,272,229 27,290,894 30,761,228 28,973,326 Excess (deficiency) of revenues over (under) expenditures (777,896) (115,078) 221,796 1,366,376 (1,520,442) 2,151,516 Other financing sources (uses) Transfers in 4,016,062 6,962,841 7,368,202 4,273,743 2,550,370 1,755,358 Transfers out (3,625,668) (5,371,555) (6,621,149) (5,625,788) (3,094,756) (3,588,874) Total other financing sources (uses) 390,394 1,591,286 747,053 (1,352,045) (544,386) (1,833,516) Net change in fund balances (387,502)$ 1,476,208$ 968,849$ 14,331$ (2,064,828)$ 318,000$ Debt service as a percentage of noncapital expenditures 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% The City of Hermosa Beach has elected to show only six years of data for this schedule, to coincide with the implementation of GASB 34. The City has no debt, therefore Debt Service as a percentage of noncapital expenditures is 0.0% for all years. Fiscal Year 156 City of Hermosa Beach General Government Tax Revenues By Source Last Six Fiscal Years (modified accrual basis of accounting) Fiscal Real year property Transient Utility ended Property Sales transfer Franchise occupancy user's June 30 tax tax tax fees tax tax Other Total 2003 5,736,937$ 2,508,346$ 194,035$ 517,907$ 1,054,272$ 2,137,975$ 910,732$ 13,060,204$ 2004 6,339,123 2,596,135 243,390 514,403 1,291,689 2,652,821 963,767 14,601,328 2005 6,668,515 2,584,015 279,627 590,372 1,477,612 2,675,196 1,478,482 15,753,819 2006 8,818,051 2,511,004 305,018 597,754 1,628,394 2,726,085 1,636,670 18,222,976 2007 9,834,400 2,395,390 279,219 606,572 1,769,015 2,769,113 1,669,138 19,322,847 2008 10,907,119 2,500,659 226,349 634,421 1,892,363 2,714,029 1,662,544 20,537,484 The City of Hermosa Beach has elected to show only six years of data for this schedule, to coincide with the implementation of GASB 34. The City has no debt, therefore Debt Service as a percentage 157 City of Hermosa Beach Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (In Thousands) Fiscal Total Estimated year Total taxable direct actual ended Residential Commercial Industrial Less assessed tax taxable Percentage June 30 property property property Other exemptions value rate value increase 1999 1,604,556$ 142,533$ 6,653$ 95,797$ (31,151)$ 1,818,388$ 1.00 1,849,539$ 2000 1,785,340 145,703 6,735 101,038 (29,734) 2,009,081 1.00 2,038,816 10.49% 2001 1,959,668 148,003 7,004 105,278 (30,692) 2,189,260 1.00 2,219,952 8.97% 2002 2,163,509 163,177 7,552 91,586 (26,278) 2,399,546 1.00 2,425,824 9.61% 2003 2,342,017 175,517 7,340 101,252 (29,039) 2,597,087 1.00 2,626,126 8.23% 2004 2,581,409 191,355 7,867 93,753 (27,925) 2,846,459 1.00 2,874,384 9.60% 2005 2,834,252 201,708 7,276 98,635 (31,158) 3,110,712 1.00 3,141,870 9.28% 2006 3,158,374 228,948 7,853 102,802 (29,415) 3,468,562 1.00 3,497,977 11.50% 2007 3,545,052 260,957 8,653 103,957 (23,719) 3,894,900 1.00 3,930,225 12.29% 2008 3,954,478 316,611 11,695 97,336 (21,763) 4,358,357 1.00 4,382,494 11.90% NOTE: Source: Los Angeles County Auditor-Controller Note: Assessed valuations available from the County of Los Angeles are based on 100% of full value per Section 135 of the California Revenue and Taxation Code. In 1978, the voters of the State of California passed Proposition 13 which limited taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum of 2%). With few exceptions, property is only reassessed as a result of new construction activity or at the time it is sold to a new owner. At that point, the property is reassessed based upon the added value of the construction or at the purchase price (market value) or economic value of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. 158 City of Hermosa Beach Direct and Overlapping Property Tax Rates Last Ten Fiscal Years (rate per $100 of assessed value) City direct rate Overlapping rates El Camino Flood Fiscal Basic Hermosa Beach Community Los Angeles Control Metropolitan Year rate School District College District County District Water District Total 1999 1.000000 0.001422 0.001765 0.008900 1.012087 2000 1.000000 0.001451 0.001953 0.008900 1.012304 2001 1.000000 0.001314 0.001552 0.008800 1.011666 2002 1.000000 0.001033 0.000881 0.006700 1.008614 2003 1.000000 0.001033 0.000881 0.006700 1.008614 2004 1.000000 0.019308 0.019025 0.000992 0.000462 0.006100 1.045887 2005 1.000000 0.016685 0.016558 0.000923 0.000245 0.005800 1.040211 2006 1.000000 0.014660 0.018380 0.000800 0.000050 0.005200 1.039090 2007 1.000000 0.020430 0.035700 0.000660 0.000050 0.004700 1.061540 2008 1.000000 0.017139 0.016467 - - 0.004500 1.038106 Source: Los Angeles County Auditor-Controller 159 City of Hermosa Beach Principal Property Tax Payers Current Year and Nine Years Ago Percent of Percent of total city total city Taxable taxable Taxable taxable assessed assessed assessed assessed value value value value Crico of Fountain Place Limited Partnership (1) 70,204,000$ 1.61% EQR Gallery Apartments Limited Partnership (1) 64,609,100 1.48% Regency Centers Limited Partnership (7) 13,749,002 0.32% 15,823,327$ 0.87% Barbara K. Robinson (3) 12,062,764 0.28% Beta Group (2) 11,872,994 0.27% 8,631,709 0.47% Robert J. & Ranae R. Desantis Trust (1) 11,471,876 0.26% Delphi Properties 1722 Strand LLC (4) 11,139,356 0.26% CAC Exchange I LLC (3) 10,361,694 0.24% Sepulveda Boulevard Properties LLC (2) 9,425,000 0.22% Rolling Investment Holdings (1) 8,688,400 0.20% Playa Pacifica Limited (2)10,697,400 0.59% International Church of the Foursquare (7)8,658,210 0.48% California Water Service Company (4)7,101,498 0.39% Cheng Yi and Ying Yin Chang (1)6,674,808 0.37% Roger E. Bacon (5)5,313,165 0.29% Century Valley Cable Corporation (2)4,776,089 0.26% Shook Development Corporation (2)4,388,407 0.24% Aviation Suites LLC (2)3,848,220 0.21% 88,771,086$ 5.14% 75,912,833$ 4.17% Source: HdL Coren & Cone, Los Angeles County Assessor Combined Tax Rolls Numbers in parentheses represent the number of parcels owned by the tax payer. Taxpayer 2008 1999 160 City of Hermosa Beach Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Taxes levied Collections in year ended for the Percent subsequent Percent June 30 fiscal year Amount of levy years Amount of levy 1999 3,623,653$ 3,442,675$ 95.01% 132,062$ 3,574,737$ 98.65% 2000 4,002,324 3,808,235 95.15% 119,930 3,928,165 98.15% 2001 4,370,463 4,239,808 97.01% 152,899 4,392,707 100.51% 2002 4,790,920 4,576,910 95.53% 112,090 4,689,000 97.87% 2003 5,193,796 5,017,148 96.60% 140,296 5,157,444 99.30% 2004 5,688,428 5,489,332 96.50% 115,084 5,604,416 98.52% 2005 6,215,435 5,708,000 91.84% 121,467 5,829,467 93.79% 2006 6,938,764 6,717,516 96.81% 142,471 6,859,987 98.86% 2007 8,256,383 7,778,209 94.21% 209,018 7,987,227 96.74% 2008 9,192,162 8,237,323 89.61% 8,237,323 89.61% Source: Los Angeles County Auditor-Controller fiscal year of levy Total collections to date Collected within the 161 City of Hermosa Beach Construction Value and Property Value Last Ten Fiscal Years Fiscal year ended Number of Number of Total assessed June 30 permits Valuation permits Valuation value 1999 594 37,648,012$ 55 6,857,053$ 1,849,539,164$ 2000 476 27,553,549 57 6,044,503 2,038,815,726 2001 540 32,136,129 56 7,402,324 2,219,952,219 2002 591 19,260,802 43 2,142,566 2,425,823,846 2003 630 23,174,222 65 2,499,590 2,626,125,947 2004 596 28,114,344 75 6,713,988 2,874,383,847 2005 610 33,433,982 74 4,388,664 3,141,870,060 2006 696 41,088,855 66 4,101,562 3,497,977,443 2007 526 26,041,241 52 4,595,140 3,894,900,286 2008 531 29,341,001 73 4,600,100 4,358,356,873 Source: City of Hermosa Beach Community Development Department Los Angeles County Auditor-Controller Residential Commercial 162 City of Hermosa Beach Direct and Overlapping Debt June 30, 2008 City assessed valuation 4,358,356,873$ Redevelopment agency incremental valuation - Total assessed valuation 4,358,356,873$ Estimated share of Percentage Outstanding overalpping applicable debt 6/30/08 debt Overlapping debt repaid with property taxes: West Basin Water District debt service 0.055% 150,054,336 825,052$ El Camino Community College District 2002 series 2003A 5.849% 9,625,000 563,013 El Camino Community College District 2005 refunding 5.849% 31,036,201 1,815,457 El Camino Community College District 2002 series 2006B 5.849% 145,400,000 8,505,148 Total overlapping debt repaid with property taxes 336,115,537$ 11,708,670 City direct debt Hermosa Beach City School District debt service 2002 100.000% 1,904,401 1,904,401 Hermosa Beach School District debt service 2005 100.000% 10,669,372 10,669,372 Total city direct debt 12,573,773 Total direct and overlapping debt 24,282,443$ Source: HdL Coren & Cone Los Angeles County Assessor's Office 163 City of Hermosa Beach Legal Debt Margin Information Last Ten Fiscal Years 1999 2000 2001 2002 2003 Assessed valuation 1,849,539,164$ 2,038,815,726$ 2,219,952,219$ 2,425,823,846$ 2,626,125,947$ Conversion percentage 25% 25% 25% 25% 25% Adjusted assessed valuation 462,384,791$ 509,703,932$ 554,988,055$ 606,455,962$ 656,531,487$ Debt limit percentage 15% 15% 15% 15% 15% Debt limit 69,357,719$ 76,455,590$ 83,248,208$ 90,968,394$ 98,479,723$ Total net debt applicable to limit -$ -$ -$ -$ -$ Legal debt margin 69,357,719$ 76,455,590$ 83,248,208$ 90,968,394$ 98,479,723$ Total debt applicable to the limit as a percentage of debt limit 0% 0% 0% 0% 0% valuation. This provision was enacted when assessed valuation was based on 25% of market value. Effective fiscal year 1981-82, each parcel was assessed based on 100% of market value as of the most recent change in ownership. The computations shown above convert the assessed valuation data for each fiscal year from the full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted. Source: City of Hermosa Beach Finance Department County of Los Angeles, Auditor-Controller Fiscal Year California Government Code section 43605 provides for a legal debt limit of 15% of gross assessed 164 2004 2005 2006 2007 2008 2,874,383,847$ 3,141,870,060$ 3,497,977,443$ 3,930,224,784$ 4,382,493,918$ 25% 25% 25% 25% 25% 718,595,962$ 785,467,515$ 874,494,361$ 982,556,196$ 1,095,623,480$ 15% 15% 15% 15% 15% 107,789,394$ 117,820,127$ 131,174,154$ 147,383,429$ 164,343,522$ -$ -$ -$ -$ -$ 107,789,394$ 117,820,127$ 131,174,154$ 147,383,429$ 164,343,522$ 0% 0% 0% 0% 0% Fiscal Year 165 City of Hermosa Beach Demographic and Economic Statistics Last Ten Calendar Years Personal income Per capita City per capita Unemployment School Calendar Population (in thousands) personal income personal income rate enrollment Year (1) (2) (2) (3) (4) (5) 1998 19,098 253,515,785$ 27,220$ 44,791$ 1.6% 1,346 1999 19,401 263,987,283 27,973 1.4% 1,384 2000 19,631 279,049,532 29,232 54,244 1.5% 1,420 2001 18,912 294,508,314 30,503 54,184 1.4% 1,430 2002 19,175 301,002,945 30,828 51,979 1.4% 1,471 2003 19,365 310,043,501 31,452 1.7% 1,489 2004 19,549 329,048,068 33,179 58,927 1.8% 1,498 2005 19,608 342,231,121 34,426 70,777 2.3% 1,475 2006 19,435 369,174,348 37,362 124,479 1.9% 1,462 2007 19,474 - - - 2.0% 1,449 2008 19,527 - - - 2.9% 1,518 Source: (1) State of California Department of Finance. (2) U.S. Department of Commerce, Bureau of Economic Analysis (data shown is for Los Angeles County). Not available for 2007 or 2008. (3) Personal Income figures for 1998, 2001, 2002, 2004, 2005 and 2006 are from the Internal Revenue Service individual income tax statistics by zip code and for 2000 from the U.S. Census Bureau, Census 2000. Internal Revenue Service figures are not an ongoing statistical project therefore all years are not available. Census information is available every 10 years. (4) State of California Employment Development Department. (5) State of California Department of Education. 166 City of Hermosa Beach Principal Employers Current Year and Nine Years Ago Percent of Percent of Number of total Number of total Employer employees employment employees employment 1 City of Hermosa Beach 184 4.63% 211 0.00% 24 Hour Fitness 158 3.98%- Von's Companies 142 3.58% 105 0.00% Shorewood Realtors, Incorporated 99 2.49% Hope Chapel 91 2.29% 130 0.00% Ralph's Grocery 77 1.94% 65 0.00% Hermosa Beach School District 67 1.69% 100 0.00% Patrick Molloy's 64 1.61% Comedy & Magic Club 54 1.36% Glen Ivy Hot Springs, Incorporated 52 1.31%- Vasek Polak, Incorporated 122 0.00% Hennesey's Tavern 100 0.00% Lucky's Grocery 65 0.00% Brewski's 50 0.00% Rocky Cola 47 0.00% Source: City of Hermosa Beach Finance Department 1Percent of total employment is not available for 1999. 2008 1999 167 City of Hermosa Beach Full-time and Part-time City Employees by Function Last Ten Fiscal Years Function 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General government 21 19 19 19 20 20 19 18 19 23 Public safety 117 105 105 109 114 106 115 112 103 96 Community development 11 9 10 9 11 11 11 11 10 8 Culture and recreation 38 38 42 26 29 32 37 40 36 33 Public works 24 22 22 22 23 21 23 22 21 24 Total 211 193 198 185 197 190 205 203 189 184 Source: City of Hermosa Beach Finance Department Full-time and part-time employees as of June 30 168 City of Hermosa Beach Operating Indicators by Function Last Ten Fiscal Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Public safety Police: Physical arrests 692 629 873 1,027 1,343 1,413 1,064 887 896 933 Traffic citations issued 3,133 3,209 2,870 3,086 3,631 3,372 2,101 1,518 1,681 2,490 Parking citations issued 57,981 45,810 43,139 45,339 46,342 49,379 54,010 47,770 48,329 59,656 Fire: Number of emergency calls 498 538 - 527 605 598 899 866 929 1,199 Inspections 680 486 - - 391 28 182 467 751 312 Community development: Building permits issued 648 530 594 636 691 676 696 762 597 637 Culture and recreation: Number of recreation classes 124 124 115 139 139 135 159 165 186 171 Total enrollment 4,807 5,131 4,039 5,112 4,778 4,616 5,969 5,228 5,128 4,272 Public works: Graffiti removal (hours) 382 289 422 285 410 456 217 414 474 461 Permits issued 504 538 1,335 528 567 529 706 875 821 1,071 Source: Various city departments. Note: Indicators are not available for Fire emergency calls in 2001 or Fire inspections in 2001 and 2002. Fire Inspection totals for 2003 through 2005 were only available for January through June. Fiscal Year 169 City of Hermosa Beach Capital Asset Statistics by Function Last Ten Fiscal Years 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Public safety Police: Police stations 1 1 1 1 1 1 1 1 1 1 Parking meters1 - - - 1,611 1,611 1,666 1,666 1,666 1,666 1,666 Fire: Fire stations 1 1 1 1 1 1 1 1 1 1 Culture and recreation Community centers 1 1 1 1 1 1 1 1 1 1 Community theatres 1 1 1 1 1 1 1 1 1 1 Public works: Beach (acres) 382 289 422 285 410 456 217 414 414 414 Greenbelt (acres) 19.5 19.5 19.5 19.5 19.5 19.5 19.5 19.5 19.5 19.5 Parks 20 20 20 20 20 20 20 20 20 20 Parks (acres) 21.7 21.7 21.7 21.7 21.7 21.7 21.7 21.7 21.7 21.7 Sanitary sewers (miles) 33 33 33 33 33 34 34 34 34 34 Streets (miles) 40 40 40 40 40 40 40 40 40 40 Streetlights 399 399 399 399 399 399 399 392 392 392 Storm drains (miles) 1 1 1 1 1 1 1 1 1 1 Traffic Signals 17 17 17 17 17 17 17 17 17 18 Source: City of Hermosa Beach Finance Department 1Number of parking meters is not available for fiscal years 1997-2001. Fiscal Year 170