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HomeMy WebLinkAboutFin Year-End Financial Statements and Related Audit Reports____________________________________________________________________________________ FOR CITY CLERK ONLY Council Meeting: 11/18/2019 Disposition: Accepted reports Agenda Item No: 7.c Meeting Date: November 18, 2019 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Nadine Atieh Hade, Finance Director City Manager Approval: ______________ TOPIC: YEAR-END FINANCIAL STATEMENTS AND RELATED AUDIT REPORTS SUBJECT: FISCAL YEAR 2018-2019 ANNUAL FINANCIAL REPORT; GANN APPROPRIATIONS LIMIT; MEMORANDUM ON INTERNAL CONTROL; AND THE CHILD DEVELOPMENT PROGRAM (CHILDCARE) FINANCIAL REPORT RECOMMENDATION: Accept the Fiscal Year 2018-2019 Annual Financial Report, the Gann Appropriations Limit Report, the Memorandum on Internal Control, and the Child Development Program Financial Report BACKGROUND: As required by local code, State law, bond covenants, and best practices, the City of San Rafael completes an annual audit of its financial activities. The auditing firm of Maze and Associates, Accountancy Corporation conducted the audit for fiscal year 2018-2019. Their work was completed in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and the provisions of Office of Management and Budget Circular A-133, Audits of State and Local Government and Non-Profit Organizations. The requirements of Section 1.5 of Article XIIIB of the California Constitution are met with an agreed- upon procedure report applied to the Gann Appropriation Limit calculated for the year ending June 30, 2020. A Memorandum on Internal Control is also prepared by the auditors to address the City’s controls over its financial activities. These reports are also attached to this staff report. Also, as part of the fiscal year-end closing activities, the Finance and Library & Recreation departments worked with Maze and Associates to complete the annual audit of the City’s childcare program, as required by the State of California. These final reports were presented to the City Council Finance Committee on November 12, 2019 at which time it was agreed that staff would bring the reports forward to the full City Council. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 ANALYSIS: Overview The Fiscal Year 2018-2019 ended in a better financial position than originally budgeted mainly due to an increase in sales tax. The year-over-year $1.5 million increase in sales taxes was attributed to a large order of buses purchased by the Golden Gate Bridge Highway and Transportation District and unexpected one-time merchant gains primarily attributable to building and construction which is not expected to be ongoing. Furthermore, the State implemented a new sales tax remittance system in the last fiscal year and as a result of system errors, sales tax remittance was delayed for months which caused the current fiscal year to include sales tax revenue that should have been for the prior year had it been remitted timely. Property tax revenues remained strong, with growth in line with the prior year. The City’s General Fund Emergency Reserves continue to meet the target level of ten percent of operating expenses established by City Council Policy. Although the City’s year ending fund balances are strong, critical unmet needs have accumulated as a result of the past, multi-year deferral of various capital improvements, maintenance and technology support projects and initiatives. Fiscal year 2018-2019 marks the fifth year of implementation of the pension accounting standard issued by the Governmental Accounting Standards Board (GASB) known as GASB 68, and the third year of implementation of the new Other Postemployment Benefits (OPEB) accounting standard issued by the Governmental Accounting Standards Board (GASB) known as GASB 75. These requirements, which affect all public agencies with defined benefit retiree plans, are designed to enhance the comparability of financial statements by requiring the measurement of pension-related assets and liabilities at fair value, using a consistent and detailed definition of fair value and accepted valuation techniques. The net impact of reporting under GASB 68 lowers the City’s net position as of June 30, 2019 by $112 million from a reporting perspective. The net pension liability as of this date was measured to be $110.6 million. The net impact of reporting under GASB 75 lowers the City’s net position as of June 30, 2018 by $28.9 million. The net OPEB liability as of this date was measured to be $33 million. The full annual funding of the City’s Retiree and OPEB costs have been incorporated into the adopted fiscal year 2019 2020 budget; therefore, there is no negative impact on City operations or services resulting from the reporting of financial information under these reporting standards. The City made major progress on the Measure E – Public Safety Facility initiative, completing Fire Station 52 during the fiscal year with Fire Station 57’s completion soon to follow. Construction expenses for the year totaled $23.9 million, of which 58% were in support of the Public Safety Center and the remainder split evenly between stations 52 and 57. Total project-to-date spending is approximately $48.4 million. Fiscal Year 2018-19 Annual Financial Report – Citywide Financial Results The actual results of the City’s financial activities are presented in the attached Comprehensive Annual Financial Report. The report includes Government-wide financial statements with governmental activities and business-type activities presented separately. Net position is one indicator of the City’s financial position. At the end of the fiscal year, net position of the City governmental activities was $136.9 million, an increase of $16.8 million from the prior year adjusted balance. This increase is largely attributable to the large activity of capital projects being performed during the year. The Parking Fund, reported as a business-type activity, ended the fiscal year with a net position of $9.8 million, or $0.2 million less than that of the previous fiscal year. The fund’s cash balance makes up 33% of total net position. Additional explanatory information is provided in the Management’s Discussion and Analysis (MD&A) section beginning on page five of the attached CAFR. The MD&A provides key highlights and a summary view of financial activities for the year. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 Financial Results: General Fund General fund operating revenues exceeded expenditures by $2.2 million. Measure E revenues of $4.1 million dedicated to public safety facilities construction and infrastructure were transferred out of the General Fund in support of the projects whereas $2.2 million was transferred from bond proceeds in the Essential Facilities Capital Projects Fund to cover interest payments. The fund balance of the General Fund as of June 30, 2019 was $12.5 million (an increase of $310 thousand from the prior year balance): $37 thousand is non-spendable, $11.4 million is assigned and $1.1 million is unassigned. The assigned portion of the balance includes $7.9 million for emergency and cash flow needs. Gann Appropriations Limit The Agreed-Upon Procedures report for the Gann Appropriations Limit required three procedures to be performed including testing the accuracy of the calculations and comparison of information presented. No exceptions were noted in these procedures for compliance with the Proposition 111 fiscal year 2019- 2020 Appropriations Limit calculation. Memorandum on Internal Control The auditors are required to communicate to the City Council matters that come to their attention relating to the audit in a report entitled Memorandum on Internal Control and Required Communications. No additional issues were raised during this audit. Childcare Financial Report The Childcare Program had positive operating results, with $3.6 million in total revenues and $3.5 million in expenditures for the fiscal year. The fund balance increased from $1.6 million to $1.7 million of which funds have been accumulated for capital improvements which are scheduled to occur in fiscal year 19- 20. The audit resulted in no adverse findings. FISCAL IMPACT: No fiscal impact occurs by the City Council’s acceptance of these reports. The fiscal year 2018-2019 Comprehensive Annual Financial Report and related reports are presented as the actual results of the City and related entities’ financial activities for the year. OPTIONS: The City Council has the following options to consider on this matter: 1. Accept the report; 2. Accept report with modifications. 3. Direct staff to return with more information. 4. Take no action. RECOMMENDED ACTION: Staff recommends that City Council accept the reports as presented. The reports will remain as “draft” until City Council has accepted the reports. ATTACHMENTS: 1. FY 2018-19 Draft Comprehensive Annual Financial Report 2. FY 2018-19 Draft Gann Appropriations Limit 3. FY 2018-19 Draft Memorandum of Internal Controls and Required Communications 4. FY 2018-19 Draft Child Development Program Financial Report COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDING JUNE 30, 2019 Loch Lomond Marina, San Rafael, California SAN RAFAEL THE CITY WITH A MISSION                   COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2019 City of San Rafael, California 1400 Fifth Avenue San Rafael, California 94901 Prepared by the Finance Department of the City of San Rafael                   Porchfest, Gerstle Park INTRODUCTORY SECTION                   CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2019 Table of Contents i INTRODUCTORY SECTION TABLE OF CONTENTS Letter of Transmittal .................................................................................................................................... v Mission Statement and Vision Statement ................................................................................................... xi City Council and Staff ............................................................................................................................... xii Location Map ............................................................................................................................................ xiii Organizational Chart ................................................................................................................................. xiv Certificate of Achievement for Excellence in Financial Reporting ........................................................... xv FINANCIAL SECTION Independent Auditor's Report .................................................................................................................. 1 Management’s Discussion and Analysis .................................................................................................. 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ............................................................................................................. 25 Statement of Activities .................................................................................................................. 26 Fund Financial Statements: Major Governmental Funds: Balance Sheet ............................................................................................................................ 30 Balance Sheet - Reconciliation of Governmental Fund Balances to Net Position of Governmental Activities .............................................................................. 32 Statement of Revenues, Expenditures, and Changes in Fund Balances .................................... 33 Reconciliation of the Net Change in Fund Balances - Total Governmental Funds with the Statement of Activities ................................................................................. 34 Proprietary Funds: Statement of Net Position .......................................................................................................... 36 Statement of Revenues, Expenses, and Changes in Fund Net Position .................................... 37 Statement of Cash Flows ........................................................................................................... 38 CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2019 Table of Contents ii FINANCIAL SECTION (Continued) Fiduciary Funds: Statement of Fiduciary Net Position ......................................................................................... 40 Statement of Changes in Fiduciary Net Position ....................................................................... 41 Notes to Basic Financial Statements .................................................................................................. 43 Required Supplementary Information: Schedule of the City’s Proportionate Share of the Net Pension Liability ..................................... 94 Schedule of Contributions – Defined Benefit Pension ................................................................. 95 Schedule of Changes in Net OPEB Liability and Related Ratios ............................................... 100 Schedule of Contributions – OPEB ............................................................................................ 101 Schedules of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual - Budgetary Basis General Fund ........................................................................................................................... 104 Traffic and Housing Mitigation Special Revenue Fund .......................................................... 105 Gas Tax Special Revenue Fund ............................................................................................... 106 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Budgetary Basis Essential Facilities Capital Projects Fund ................................................................................ 108 Non-major Governmental Funds: Combining Balance Sheets ......................................................................................................... 112 Combining Statements of Revenues, Expenditures, and Changes in Fund Balance ................................................................................................................... 118 Budgeted Non-major Governmental Funds: Combining Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ...................................................................... 124 CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2019 Table of Contents iii FINANCIAL SECTION (Continued) Internal Service Funds: Combining Statements of Net Position ....................................................................................... 134 Combining Statements of Revenues, Expenses and Changes in Fund Net Position ................... 136 Combining Statements of Cash Flows ........................................................................................ 138 Agency Funds: Combining Statements of Changes in Assets and Liabilities ...................................................... 142 STATISTICAL SECTION Financial Trends: Net Position by Component – Last Ten Fiscal Years ....................................................................... 146 Changes in Net Position – Last Ten Fiscal Years ............................................................................. 148 Fund Balances of Governmental Funds – Last Ten Fiscal Years ..................................................... 152 Changes in Fund Balance of Governmental Funds – Last Ten Fiscal Years .................................... 154 Revenue Capacity: Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ...................... 156 Property Tax Rates - All Overlapping Governments– Last Ten Fiscal Years .................................. 157 Principal Property Tax Payers – Current Year and Nine Years Ago ................................................ 158 Property Tax Levies and Collections – Last Ten Fiscal Years ......................................................... 159 Debt Capacity: Ratio of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................... 160 Computation of Direct and Overlapping Debt .................................................................................. 161 Computation of Legal Bonded Debt Margin .................................................................................... 162 Revenue Bond Coverage Parking Facility – Last Ten Fiscal Years ................................................. 163 CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2019 Table of Contents iv STATISTICAL SECTION (Continued) Demographic and Economic Information: Demographic and Economic Statistics – Last Ten Fiscal Years ...................................................... 164 Principal Employers – Last Ten Calendar Years .............................................................................. 165 Operating Information: Full-Time Equivalent City Government Employees by Function – Last Ten Fiscal Years ................................................................................................................. 166 Operating Indicators by Function/Program – Last Ten Fiscal Years ................................................ 168 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years ............................................ 170 Gary O. Phillips, Mayor • Andrew Cuyugan McCullough, Vice Mayor • Maribeth Bushey, Councilmember • Kate Colin, Councilmember • John Gamblin, Councilmember November 8, 2019 Honorable Mayor, Members of the City Council and Residents of San Rafael: The Comprehensive Annual Financial Report (“CAFR”) of the City of San Rafael (“City”) for the year ended June 30, 2019, is hereby submitted as required by local ordinances, state statutes and bond covenants. This financial report has been prepared in conformance with Generally Accepted Accounting Principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB) and includes the report of the independent certified public accounting firm, Maze and Associates Accountancy Corporation, which has issued an unmodified, or “clean” opinion on the City’s financial statements for the fiscal year ended June 30, 2019. The independent audit of the financial statements is part of a broader, federally mandated examination known as a “Single Audit”, which is designed to meet the needs of federal grantor agencies. The standards governing Single Audits require the independent auditor to report on the audited agency’s internal controls and compliance with legal requirements, with special emphasis on such controls and requirements involving the administration of federal funding. These reports will be available in the City’s separately issued Single Audit Report. City Management is responsible for both the data accuracy, and the completeness and fairness of the presentation of this report. To the best of our knowledge and belief, the data presented is accurate in all material respects and is reported in a manner that presents fairly the financial position and results of operations of the various funds and component units of the City. Further, the CAFR is prepared in accordance with procedures and policies set by the Government Finance Officers Association. The analysis of the financial condition and the result of operations can be found in the financial section of the Management’s Discussion and Analysis document. The CAFR is organized into three sections: 1.Introductory section, which is unaudited, includes this letter of transmittal, an organizational chart and a list of the City’s elected and appointed officials. 2.Financial section, includes the general-purpose financial statements, related footnote disclosures, and the combining and individual fund and account group financial statements and schedules, as well as the independent auditors' report. 3.Statistical section, which is unaudited, includes selected financial and demographic information, presented on a multi-year basis. Generally, ten-year data is presented for expenditures, revenues, assessed valuation for local properties and construction activity. v CITY OF SAN RAFAEL I 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG vi REPORTING ENTITY -PRO FI.LE OF THE GOVERNMENT The City of San Rafael is located 17 miles north of San Francisco in Marin County. Protected by its Mediterranean like setting along the shores of the San Francisco Bay, the City enjoys a mild climate year-round. As the County seat, San Rafael is considered the commercial, financial, cultural and civic hub of Marin County. Abundant recreational facilities are available in and around the City. The City's park and recreational resources include 19 city parks, 393 acres of developed parkland, city and county open space, and China Camp State Park. San Rafael is close to other attractions, including the Golden Gate Bridge, Muir Woods, Point Reyes National Seashore, Mount Tamalpais, multiple state parks, San Francisco, Oakland and the Sonoma and Napa wine country. In 1874, the City of San Rafael became the first incorporated city in the county, later becoming a charter city in 1913 by vote of City residents. The City Council comprises five members; four are elected at-large to four-year terms while the mayor is elected separately to a four-year term. The City's land area is 22 square miles, including seventeen square miles of land and 5 of water and tidelands. San Rafael's population on January 1, 2019 was 61,343 and is projected to grow at an average rate of 0.3% per year. Downtown San Rafael is the location of many community events, including the Thursday night Summer Market Festivals three months out of the year, Second Friday Art Walks, the Twilight Criterium Bike Race, Mill Valley Film Festival, Winter Wonderland/Parade of Lights, and is one of only 14 Cultural Arts Districts in the State of California. San Rafael is also the heart of the County's cultural activities with venues such as the Marin Center, which presents numerous ballets, concerts, speaking engagements as well as the award- winning Marin County Fair; the Falkirk Cultural Center, providing art exhibits and children's programming; the Christopher B. Smith Film Center, and a host of other diverse dining and entertainment venues. The City is also home to the distinguished Dominican University of California. The City of San Rafael provides a full range of municipal services required by statute or charter, namely: police and fire protection, construction and maintenance of streets, parks, storm drains and other infrastructure, recreation, childcare, permits, planning, code enforcement, and a library system serving two locations along with a temporary pop-up at the Northgate Mall. The City performed certain infrastructure construction and economic development activities through a separate Redevelopment Agency until its dissolution on February 1, 2012. The City of San Rafael accepted the role of Successor Agency to the Redevelopment Agency per Council action on January 3, 2012, and now conducts its economic development activities with funding from its General Fund. The City and California Municipal Finance Authority compose the San Rafael Joint Powers Financing Authority, originally established by the City and former Redevelopment CITY OF SAN RAFAEL I 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 · CITYOFSANRAFAEL.ORG Gary 0 . Phillips, Mayor• Andrew Cuyugan McCullough , Vice Mayor• Maribeth Bushey, Councilmember • Kate Colin , Councilmember • John Gamblin, Councllmember vii Agency for the purpose of financing redevelopment and other projects. The San Rafael Sanitation District is a discretely presented component unit of the City of San Rafael and is presented independent of City financial information. For a further explanation of these entities, refer to Note 1 -Summary of Significant Accounting Policies in the Financial Section of the CAFR. The City participates in various organizations through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these agencies exercise full powers and authorities within the scope of the related Joint Powers Agreement including the preparation of annual budgets, accountability for all funds, and the power to make and execute contracts. Obligations and liabilities of the separate entities are not those of the City. For a further explanation of these separate entities, refer to Note 12 -Jointly Governed Organizations in theCAFR. The City's net pension liability under GASB 68 reported as of June 30, 2019 is based on the latest available GASB 67 /68 report prepared by the Marin County Employees Retirement Association (MCERA), which was prepared as of June 30, 2018. The next annual report is anticipated to be completed within the upcoming 30 days. The City does not expect the report to have a material impact in the measurement of its net pension obligation of$110.6 million reported in this year's financial reports. During fiscal year 2018-2019, the City made significant progress towards improving our essential facilities. Building from over a decade of community efforts to address San Rafael's aging essential public safety facilities, the Essential Facilities project includes a total of seven projects recommended for either replacement or renovation, including a new public safety center across the street from City Hall. These new buildings will be seismically-safe and provide modem facilities for our firefighters, police officers, paramedics and dispatchers. They include an upgraded dispatch and communications center, and a new classroom and training tower for emergency preparedness. The remodel for Fire Station 54 and Fire Station 55 commenced in mid-2019 and is scheduled for completion during the fiscal year 2020-2021. Construction of Fire Station 57 located at 3530 Civic Center Drive is expected to be completed before the end of 2019. Fire Station 52 located at 210 3rd Street was successfully completed in April 2019. ECONOMIC FACTORS The City has a diversified economic base, which includes an assortment of high-tech, financial, service-based, entertainment and industrial businesses. Downtown San Rafael provides a mix of restaurants, retail shops and financial institutions. The City's varied economic base is reflected in its property tax base, which is 74% residential, 19% commercial, 2% industrial, and 5% unsecured and others. The top 25 sales tax producers provide 52% of overall sales tax revenues. CITY OF SAN RAFAEL j 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 CITYOFSANRAFAEL.ORG Gary 0 . Phillips , Mayor• Andrew Cuyugan McCullough, Vice Mayor• Maribeth Bushey , Councilmember • Kate Colin , Councilmember • John Gamblin, Councilmember viii The California economy is one of the largest in the world when measured by annual gross domestic product, the growth of which exceeds that of the entire United States. Unemployment has reached a r~cord low of 4.0% in September and the current period of employment expansion has reached 115 months, surpassing the longest previous expansion of the 1960's. Locally, Marin County's economic indicators remain positive with an unemployment rate that is among the lowest in the State at 2.4% and per capita income is about twice the national average at $68,879. The housing market also remains in strong standing with the median sales price for a single-family home increasing 15% in 2018. Demographic Data The following is a sample of demographic and economic attributes that make San Rafael an exceptional place to live and work. ~ Economic development organizations in San Rafael include the San Rafael Chamber of Commerce, Downtown Business Improvement District, and the Marin Economic Forum. ~ Marin County's top 10 employers ·include Kaiser Permanente, Marin Health Medical Center, Dominican University of California, Marin Community Clinics, Novato Community Hospital, Hospice by the Bay, W Bradley Electric, Wells Fargo, Community Action Marin, and BioMarin. ~ Major shopping areas, as measured in available retail square footage, include the Downtown corridor (938,000 aggregate), Northgate Mall (725,000), Montecito Center (130,000) and Northgate One (113,900): ~ The top three sales tax categories in 2018 for San Rafael were: 1. Autos and Transportation (25.1 %), 2. Building and Construction (16.9%), and 3. General Consumer Goods (13.9%). ~ Several hotels and motels support tourism activity, led by a combined 471 rooms in the Embassy Suites and Four Points Sheraton. Citywide, the total number of hotel rooms is 787. ~ Establishing and maintaining affordable residential housing for sale and lease continues to be a challenge both in San Rafael and throughout Marin County. The median rent for an apartment in San Rafael is $2,605. The median home value in San Rafael is $1,051,500. CITY OF SAN RAFAEL I 1400 FIFTH AVE NU C, SAN fiMAcL, LALl~Uf/NIA 94!,/Ul I LI rYuFSANRAFAEL.ORG Gary 0 . Phillips, Mayor• Andrew Cuyugan McCullough , Vice Mayor• Maribeth Bushey, Councilmember • Kate Colin, Councilmember • John Gamblin . Councilmember ix Recent growth and economic vibrancy: • San Rafael ranked No. 6 on the 2018 Milken Institute Best-Performing Small Cities Index. This index provides an objective benchmark for examining the underlying factors and identifying unique characteristics of economic growth in metropolitan areas. The index uses metrics such as job creation, wage gains, and technology developments to evaluate the relative growth of metropolitan areas. • San Rafael ranked No. 3 on the SMU National Center for Arts Research Vibrancy Index. This overall index is composed of three dimensions: supply, demand, and government support. Supply is assessed by the total number of arts providers in the community, including the number of arts and culture organizations and employees, independent artists, and entertainment firms. Demand is gauged by the total nonprofit arts dollars in the community, including program revenue, contributed revenue, total expenses, and total compensation. Lastly, the level of government support is based on state and federal arts dollars and grants. • San Rafael was named one of the most unique art towns in the United States in an article published by The Storage Space citing Art Works Downtown, the Marin Society of Artists, Youth in Arts, and the California Film Institute as highlights. • The Grand A venue Pedestrian bridge was completed connecting downtown with east San Rafael communities and providing improved accessibility for bicyclists and pedestrians. • As part of San Rafael's Essential Facility projects, the city completed construction of Fire Station 52 located at 210 3rd Street replacing the original station built in 1958. • San Rafael implemented a pilot program to regulate cannabis business activity, including zoning changes and licensing in an effort to enhance revenues for regulatory efforts and other city services. FINANCIAL INFORMATION The City's management is responsible for establishing and maintaining internal controls to ensure that the City's assets are adequately protected from loss, theft or misuse. In addition, management controls ensure that proper accounting data is collected so as to prepare reports in conformance with generally accepted accounting principles. CITY OF SAN RAFAEL I 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 CITYOFSANRAFAEL.ORG Gary 0 . Phillips, Mayor• Andrew Cuyugan McCullough, Vice Mayor• Maribeth Bushey , Councilmember • Kate Colin , Councllmember • John Gamblin , Councllmember x Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived. All internal control evaluations occur within the above framework. It is management's belief that the City's internal accounting controls adequately safeguard assets and provide reasonable assurance that financial transactions are properly recorded. The City develops a budget based upon City Council priorities and department objectives. The Finance Department maintains a traditional line item budget by major function. Budget control is accomplished at the functional or division level within each fund. This budget creates a comprehensive management and fiscal system aimed at achieving the objectives of each operating level consistent with those that have been set for the community by the City Council. Each department director is responsible for accomplishing goals within his or her functional area and monitoring the use of her or his budget allocations consistent with policies set by the City Council and monitored by the City Manager. ACKNOWLEDGMENTS The preparation of this City-wide document would not have been possible without the assistance of each of the City's departments. In addition, Finance support staff Sara Smith, Shawn Plate, Whitney Fry, Andrew Thompson and Flora Xu, led by Accounting Manager Van Bach and Finance Director Nadine Atieh Hade were key to the timely issuance of this report. We believe this document meets the Government Finance Officers Association's (GFOA) Certificate of Achievement for Excellence in Financial Reporting requirements and will be submitting it to the GFOA to determine its eligibility. If accepted; this will mark the eighth consecutive year for which the City received the award. Lastly, we appreciate the ongoing leadership and support from the Mayor, City Councilmembers and the City Council Finance Committee made up of Mayor Phillips and Councilmember John Gamblin. Their strong commitment to financial accountability and stewardship provide inspiration to the organization and motivate a high level of achievement. Respectfully submitted, J~~ City Manager ~~~]~ Nadine Atieh Hade Finance Director CITY OF SAN RAFAEL I 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 CITYOFSANRAFAEL ORG Gary 0 . Phillips, Mayor• Andrew Cuyugan McCullough , Vice Mayor• Maribeth Bushey, Councilmember • Kate Colin , Councilmember • John Gamblin , Councilmember MISSION STATEMENT The Mission of the City of San Rafael is to enhance the quality of life and to provide for a safe, healthy, prosperous and livable environment in partnership with the community. VISION STATEMENT Our vision for San Rafael is to be a vibrant economic and cultural center reflective of our diversity, with unique and distinct neighborhoods in a beautiful natural environment, sustained by active and informed residents and a responsible innovative local government. January 1996 xi SAN RAFAEL THE CITY WITH A MISSION City Council and Staff As of November 8, 2019 City Council Gary O. Phillips, Mayor Andrew McCullough, Vice Mayor Kate Colin, Councilmember Maribeth Bushey, Councilmember John Gamblin, Councilmember Elected Officials Rob Epstein, City Attorney Lindsay Lara, City Clerk Executive Team Jim Schutz, City Manager Cristine Alilovich, Assistant City Manager Diana Bishop, Chief of Police Chris Gray, Fire Chief Bill Guerin, Public Works Director Paul Jensen, Community Development Director Susan Andrade-Wax, Library & Recreation Director Nadine Atieh Hade, Finance Director Rebecca Woodbury, Director of Digital Service & Open Government Shibani Nag, Human Resources Director Andrew Hening, Homeless Initiatives Director xii SAN RAFAEL THE CITY WITH A MISSION xiii J\J Petaluma O Greater San Francisco Bay Area @!!!s !!liiiiiiii'!!5iiiiio!!!!!!!!!'!!!'!'!!!!!!5siiiiiiiiiiiiiiiiiiiiiiiiiiiiil!'!10!!!!!!!~1s Mies LOCATION MAP 0 • Vacavllle __.. 0 Concord Hayward 0 • \ 0 San.lose 0 r ~i Clara ; ORGANIZATIONAL CHART Electorate City ClerkCity Attorney Mayor & City Council Boards & Commissions Assistant City Manager Finance Volunteer and Sustainability Programs Human Resources Parking Services Police Department Fire Department Library and Recreation Public WorksEconomic Development City Manager Digital Service and Open Government Community Development Homeless Initiativesxiv~SAN RAFAEL ~ THE CITY WITH A M ISSION xv Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of San Rafael California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018 Executive Director/CEO Station 52 FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor and Members of the City Council City of San Rafael, California Report on Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of San Rafael (City), California, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the Table of Contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the component unit financial statements of the San Rafael Sanitation District, which represents 24%, 36%, and 14%, respective, of the assets, net position, and revenues of the primary government. Those financial statements were audited by other auditors, whose report thereon has been furnished to us and our opinion, insofar as it relates to the amounts included for the San Rafael Sanitation District, is based solely on the report of these auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 Accountancy Corporation 3478 B uski rk Ave nu e, Suite 215 Pleasant Hill, CA 94523 M MAZE & ASSOCIATES T 925.930.0902 F 925.930.0135 E maze@mazeassociates.com w mazeassociates.com Opinions In our opinions, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, the aggregate remaining fund information and the discretely presented component unit of the City as of June 30, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of matter Management adopted the provisions of the following Governmental Accounting Standards Board Statement, which became effective during the year ended June 30, 2019: Governmental Accounting Standards Board Statement 88 – Certain Disclosures Related to Debt including Direct Borrowings and Direct placements. See Note 6 to the financial statements for relevant disclosures. The emphasis of these matters does not constitute a modification of our opinion. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis and required supplementary information, as listed in the Table of Contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Introductory Section, Supplementary Information, and Statistical Section as listed in the Table of Contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The Supplementary Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 This analysis of the City of San Rafael’s (City) financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2019. Please read it in conjunction with the basic financial statements and the accompanying notes to those basic financial statements. FINANCIAL HIGHLIGHTS Government-wide: Net Position – The assets and deferred outflows of the City exceeded its liabilities and deferred inflows as of June 30, 2019 by $146.8 million. Activities – During the fiscal year the City’s total revenues of $123.2 were greater than expenses of $106.6 million for governmental and business-type activities. Changes in Net Position – The City’s total net position increased by $16.5 million in fiscal year 2018-2019 as compared to the net position of the previous year. Net position of governmental activities increased by $16.7 million, while net position of the business-type activities decreased by $200 thousand. Fund Level: Governmental Funds – As of the close of fiscal year 2018-2019, the City’s governmental funds reported combined ending fund balances of $67.8 million, a decrease of $20.0 million primarily due expenditure of bond proceeds from the fund balance of the prior year. Of this total amount, $65 thousand is nonspendable, $53.3 million is restricted, $1.9 million is committed, $11.5 million is assigned, and $1.1 million is unassigned. Governmental fund revenues totaled $117.6 million, an increase of $10.2 million from the those of the previous fiscal year. Approximately $8 million was attributable to the Gas Tax Fund in the form of grant and federal reimbursements for expenses incurred on capital projects. The remainder was due to positive trends in property tax and sales tax performance, and reimbursements from the County of Marin for major improvements to Fire Station 57. Aside from these items, the City experienced modest to moderate growth in revenues. Governmental fund expenditures increased by $18.5 million to $138.9 million, from $120.4 million in the prior year, due primarily to public safety infrastructure and other capital improvement program expenditures. Enterprise fund operating revenue increased $158 thousand to a total of $5.4 million. Enterprise operating expenditures totaled $4.9 million, an increase of $0.3 million over the previous year. OVERVIEW OF FINANCIAL STATEMENTS The Comprehensive Annual Financial Report is composed of the following: 1.Introductory section, which includes the Transmittal Letter and general information 2.Management’s Discussion and Analysis (this part) 3.Basic Financial Statements, which include the Government-wide and the Fund financial statements along with the Notes to these financial statements 4.Combining statements for Non-Major Governmental Funds, Internal Services Funds, and Fiduciary Funds 5.Statistical Information 5 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which have three components: 1) Government-wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Basic Financial Statements. The basic financial statements include the City (primary government) and all legally separate entities (component units) for which the government is financially accountable. This report also contains other supplementary information in addition to the basic financial statements for further information and analysis. Government-wide Financial Statements The government-wide financial statements present the financial picture of the City and provide readers with a broad view of the City’s finances. These statements present governmental activities and business-type activities separately and include all assets of the City (including infrastructure) as well as all liabilities (including long-term debt). Additionally, certain interfund receivables, payables, and other interfund activity have been eliminated as prescribed by Governmental Accounting Standards Board (GASB) Statement No. 34. The Statement of Net Position and the Statement of Activities and Changes in Net Position report information about the City as a whole. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account, regardless of when cash is received or paid. The Statement of Net Position presents information on all of the City’s assets and liabilities, with the difference between the two reported as net position. Over time, increases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities and Changes in Net Position presents information showing how the City’s net position changed during the year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of timing of related cash flows. In the Statement of Net Position and the Statement of Activities and Changes in Net Position, City activities are separated as follows: Governmental Activities – Most of the City’s basic services are reported in this category, including Public Safety, Public Works and Parks, Community Development, Cultural and Recreation, and Government Administration (finance, human resources, legal, City Clerk and City Manager operations). Property tax, sales and use taxes, user fees, interest income, franchise fees, hotel taxes, business licenses, and property transfer taxes, plus state and federal grants finance these activities. Business-type Activities – The City charges fees to customers to cover the full costs of certain services it provides. The City’s Parking Services program is the City’s sole business-type activity. Discretely Presented Component Units – The government–wide financial statements include not only the City itself (the primary government), but also the San Rafael Sanitation District, a legally separate entity for which the City is financially accountable. Financial information for the San Rafael Sanitation District is reported separately from the financial information presented for the primary government. The government-wide financial statements can be found on pages 25 through 27 of this report. 6 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Fund Financial Statements and Major Component Unit 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, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City are divided into three categories: governmental funds, proprietary funds, and fiduciary funds. The fund financial statements provide detailed information about each of the City’s most significant funds called major funds. The concept of major funds and the determination of the major funds were established in the Governmental Accounting Standards Board Statement No. 34. Each major fund is presented individually with all non-major funds summarized and presented in a single column. Further detail on the non-major funds is presented on pages 112 through 142 of this report. 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 financial capacity. 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 government 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. These reconciliations are presented on the page immediately following each governmental fund financial statement. The City has thirty-one governmental funds, of which four are considered major funds for presentation purposes. Each major fund is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances. The City’s four major funds are: the General Fund, Traffic and Housing Mitigation, Gas Tax and Essential Facilities Capital Projects. Data from the other twenty-seven governmental funds are combined into a single, aggregated presentation. The basic governmental fund financial statements can be found on pages 30 through 34 of this report. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements on pages 112 through 132 of this report. Proprietary Funds – The City maintains two different types of proprietary funds - enterprise funds and internal service funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses an enterprise fund to account for its Parking Services program and reports it as a major fund. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its building maintenance; vehicle, equipment and computer replacement; workers’ compensation; general liability; self-insured dental program; other employee and retiree benefits programs. 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. Like the government-wide financial statements, proprietary fund financial statements use the accrual basis of accounting. There is no reconciliation needed between the government-wide financial statements for business- type activities and the proprietary fund financial statements. 7 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 The basic proprietary fund financial statements can be found on pages 36 through 38 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 statements because the resources of those funds are not available to support the City’s own programs. The City acts as an agent on behalf of others, holding amounts collected, and disbursing them as directed or required. The City’s fiduciary activities are reported in the separate Statements of Fiduciary Net Position and the Agency Funds Statement of Changes in Assets and Liabilities. The City’s fiduciary funds include a private purpose trust fund to account for activities of the City of San Rafael Successor Agency and an agency fund that accounts for resources held by the City in a custodial capacity for the Pt. San Pedro Road Assessment District. Information for the fiduciary funds can be found on pages 40 through 41 of this report. 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 43 through 93 of this report. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. One section includes budgetary comparison statements for the major funds (general, gas tax, traffic and housing mitigation, and essential facilities capital projects). The other section is a schedule of funding progress for the Marin County Employees’ Retirement System. All budgeted positions that are filled by either full-time or permanent part-time employees (working seventy-five percent of full-time equivalent) are eligible to participate in this system. Required supplementary information can be found on pages 94 through 106 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position Net position is one measurement of the City’s financial position. During this fiscal year, the net position of the City was $136.9 million from Governmental Activities and $9.9 million from Business-type Activities, for a total of $146.8 million. This represents an increase of $16.5 million from the prior year net position. 8 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 The following is the condensed Statement of Net Position for the fiscal years ended June 30, 2019 and 2018: Increase Increase 2019 2018 (Decrease) 2019 2018 (Decrease) Current and other assets $102,788 $126,251 ($23,463) $3,283 $3,199 $84 Capital assets 254,163 221,978 32,185 15,941 16,151 (210) Total assets 356,951 348,229 8,722 19,224 19,350 (126) Deferred outflows (Notes 9 and 11)38,415 44,932 (6,517) 1,178 1,364 (186) Current and other liabilities 14,479 19,363 (4,884) 477 439 38 Noncurrent liabilities 208,131 219,709 (11,578) 8,953 9,151 (198) Total liabilities 222,610 239,072 (16,462) 9,430 9,590 (160) Deferred inflows (Notes 9 and 11)35,838 33,947 1,891 1,130 1,060 70 Net Position: Net investment in capital assets 231,844 217,170 14,674 11,023 10,952 71 Restricted 23,289 25,550 (2,261) 0 0 0 Unrestricted (118,215) (122,577) 4,362 (1,179) (887) (292) Total net position $136,918 $120,143 $16,775 $9,844 $10,065 ($221) Governmental Activities Business-Type Activities Summary of Net Position (in thousands) Current Governmental assets decreased by $23.5 million, primarily due to the expenditure of bond proceeds for public safety facility construction and improvements. The $32.2 million increase in Capital assets reflects project- to-date activity for this activity in combination with major traffic infrastructure improvements. The decrease of $6.5 million is primarily a result of recognition of prior year deferred outflows related to the City’s change in proportion of its net pension liability in relation to the other members within the larger MCERA pool. Current and other liabilities decreased by approximately $4.9 million, primarily due to a decrease in accounts payable as a result of a higher level of construction activity in the prior year. Noncurrent governmental liabilities decreased by $11.6 million, a result of the net decrease in net pension liability when compared to the prior year (Note 9). Deferred inflows experienced a modest increase as amortization of prior balances was offset by a large investment gain with the MCERA trust that will be recognized in future years. In order to decrease the volatility of the measurement of net pension liability gains and losses in excess of those projected are capitalized and amortized over a five-year period. The net position in business-type activities reflects the fiscal activity of the Parking Services program and decreased by $221 thousand from the previous year. Capital assets decreased by $210 thousand due to current year depreciation. The decrease in deferred outflows was due to the proportion change of net pension liability mentioned above. The $198 thousand decrease in noncurrent liabilities is driven by the decrease in net pension liabilities. 9 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 At June 30, 2019, the largest portion of net position in the amount of $242.9 million consisted of the City’s investment in capital assets net of related debt. This component represents the total amount of funds required to acquire capital assets less any related debt used for such acquisition that is still outstanding. The City uses these assets to provide services to residents. The capital assets of the City are not sources of income for repayment of debt as most assets are not revenue generating and generally are not liquidated to repay debt. Therefore, debt service payments are funded from other sources available to the City. A portion of the City's net position, $23.3 million, is subject to external restrictions, and their use is determined by those restrictions whether legal or by covenant. The remaining portion, unrestricted negative $119.4 million, represents the extent to which the net investment in capital assets and restricted net position exceed total assets. Invested in Capital Assets (net)$242,867 Restricted 23,289 Unrestricted (119,395) Total Net Position $146,761 Net Position as of 6/30/2019 Total = $ 146,761 (in thousands) 10 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Statement of Activities - Governmental The following is the condensed Statement of Activities and Changes in Net Position for the fiscal years ended June 30, 2019 and 2018: Increase 2019 2018 (Decrease) REVENUES Program revenues: Charges for services $19,904 $19,142 $762 Operating grants and contributions 4,585 5,143 (558) Capital grants and contributions 8,042 975 7,067 Total program revenues 32,531 25,260 7,271 General revenues: Property taxes 25,903 24,627 1,276 Sales taxes 35,627 34,120 1,507 Paramedic tax 4,936 4,923 13 Transient occupancy tax 3,203 3,115 88 Franchise tax 3,627 3,727 (100) Business license tax 2,788 2,790 (2) Other taxes 1,783 2,246 (463) Investment earnings 1,450 557 893 Miscellaneous 5,905 5,992 (87) Total general revenues 85,222 82,097 3,125 TOTAL REVENUES 117,753 107,357 10,396 EXPENS ES General government 11,968 9,836 2,132 Public safety 49,899 53,231 (3,332) Public works and parks 19,271 22,085 (2,814) Community/economic development 5,782 4,040 1,742 Culture and recreation 12,819 13,286 (467) Interest on long-term debt 1,848 884 964 TOTAL EXPENSES 101,587 103,362 (1,775) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENSES 16,166 3,995 12,171 Transfers in 609 633 (24) Total Other Financing Sources (Uses) 609 633 (24) Net Change in Net Position 16,775 4,628 12,147 Beginning Net Position 120,143 115,515 4,628 Ending Net Position, June 30 $136,918 $120,143 $16,775 Governmental Activities Summary of Changes in Net Position (in thousands) 11 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 The City’s governmental activities net position increased by $16.8 million during fiscal year 2018-2019. Year-over- year increases revenues of $10.4 million and the decrease in expenses of $1.8 million contributed to a net change in position of $12.2 million. Revenue increases were concentrated in the areas of capital grants, property taxes and sales taxes, while decreases in program expenses were concentrated in public safety and public works. Reductions in expenses for public safety and public works are the result of fluctuations in internal service activity between fiscal years as well as required pension and OPEB related adjustments. Due to the nature of allocations of expenses in the government-wide statements, fluctuation analysis on program expenses is better performed on the fund level financial statements. Growth in property taxes stemmed from the 2% proposition 13 inflation adjustment as well a restoration of $31 million of previously reduced values to residential properties. These are homes that are below the trended Proposition 13 values that received reductions between 2008 and 2012. In addition, the sale and improvement of large commercial properties in 2017 were reflected on the tax roll for the fiscal year ended June 30, 2019. The year-over-year $1.5 million increase in sales taxes was attributed to a large order of buses purchased by GGBHTD and unexpected merchant gains primarily attributable to building and construction which is not expected to be ongoing. Furthermore, the State implemented a new sales tax remittance system in the last fiscal year and as a result of system errors, sales tax remittance was delayed for months which caused the current fiscal year to include sales tax revenue that would have been for the prior year had it been remitted timely. The decrease in fiscal year 2018-2019 governmental expenses was due, in part to pension and OPEB expense adjustments recorded under GASB 68 and 75, respectively, as well as reduced internal service fund expenditure allocations resulting primarily from Workers’ Compensation premiums and claims during the year. The following graph shows governmental revenues by source: 12 Revenues by Source Governmental Activities Capital gr.ants and contributions, 6.83% Operating grants and contributions, 3.89% Miscellaneous, 5.01% Investment earnings, 1.24% Charges for services, 16.90% CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Total expenses for governmental activities were $99.7 million (excluding interest on long-term debt of $1.8 million). Program revenues offset total expenditures as follows:  Those who directly benefited from programs contributed $19.9 million in charges for services.  A total of $12.6 million in operating and capital projects were funded by outside agencies through operating, capital grants, and contributions. As a result, total expenses that were funded by tax revenues, investment income, other general revenues and fund balance were $67.2 million. Functional expenses for the year ended June 30, 2019 were as follows: Function Amount Percent of Total General government $11,918 11.7% Public safety 49,154 48.4% Public works and parks 20,032 19.7% Community development 5,825 5.7% Culture and recreation 12,810 12.6% Interest on debt 1,848 1.8% Total expenses $101,587 100% Expenses by Function (in thousands) 13 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $- Publ i,c Safety Expenses and Program !Revenues Governmenta I Activities (in thousands) Public Worts and Parks Culture and Recreation Genera l Government Community Development ■ Program Revenues ■ Expenses CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Statement of Activities – Business-type Increase 2019 2018 (Decrease) Revenues Program revenues: Charges for services $5,362 $5,204 $158 Total program revenues 5,362 5,204 158 General revenues: Investment Income 64 24 40 Total general revenues 64 24 40 TOTAL REVENUES 5,426 5,228 198 Expenses General government 5,039 4,628 411 TOTAL EXPENSES 5,039 4,628 411 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENSES 387 600 (213) OTHER FINANCING SOURCES (USES) Transfers out (608) (633) 25 Total Other Financing sources (uses) Net Change in Net Position (221) (33) (188) Net Position, Beginning 10,064 10,097 (33) Net Position, Ending $9,843 $10,064 ($221) Summary of Changes in Net Position For the periods ended June 30, 2019 and 2018 (in thousands) Business-Type Activities The net position for business-type activities decreased from the prior year by $221 thousand.  Parking services is the City’s only business-type activity with income derived from program revenues of $5.4 million. Program revenues include parking meter coin income of $2.0 million and parking garage hourly and monthly parking income of $1.2 million. Revenues also include parking and non-vehicle code fines totaling $2.2 million. Total expenses for parking services were $5.0 million and transfers out to general fund and non-major governmental fund for support totaled $608 thousand during the fiscal year 2018-2019. The year-over-year increase in expenses was driven by routine pension-related accounting adjustments in the parking fund. 14 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 FINANCIAL ANALYSIS OF INDIVIDUAL FUNDS Governmental Funds Fund Balance Classifications In February 2009, the Governmental Accounting Standards Board issued Statement No. 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions. The objective of GASB 54 was to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be applied. Under GASB 54, fund balances are classified in five categories: nonspendable, restricted, committed, assigned, and unassigned based on hierarchy of constraint. Further details on fund balance classifications can be found in Note 8B. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financial capacity. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of June 30, 2019, the City reported a combined ending fund balance of $67.8 million of all its governmental funds (a decrease of $20.0 million from the prior year): $65 thousand is non-spendable, $53.3 million is restricted, $1.9 million is committed, $11.5 million is assigned, and $1.1 million is unassigned. General Fund – The General Fund is the primary operating fund of the City. General Fund – The fund balance of the General Fund as of June 30, 2019 was $12.5 million (an increase of $310 thousand from the prior year balance): $37 thousand is non-spendable, $11.4 million is assigned and $1.1 million is unassigned. The assigned portion of the balance includes $7.9 million for emergency and cash flow needs. General Fund Budgetary Highlights: The original adopted General Fund budget projected total revenue of $78.9 million and transfers-in of $1.7 million for total resources of $80.6 million. This budget appropriated expenditures of $75.6 million and transfers-out of $5.9 million for total appropriations of $81.5 million. Expenditures were later increased to $78.5 million to accommodate interest incurred on 2018’s bond proceeds and accordingly, transfers in were similarly increased to account for the transfer of funds from the Essential Facilities Capital Projects Fund to cover the interest charges. Transfers-out were increased by $404 thousand based on estimated Measure E sales tax increases transferred to the Essential Facilities Fund and grant matching allocated to other funds. Actual revenues, at $80.3 million, were higher than the original budgeted revenues by $1.4 million. This positive performance was primarily due to stronger-than-anticipated property tax and sales tax revenues. Actual expenditures of $78.0 million were greater than the original budgeted expenditures by $2.5 million, primarily due to interest on the 2018 bond issuance previously unbudgeted. Fiscal year 2018-2019 General Fund revenues and transfers of 84.6 million exceeded expenditures, operating and capital transfers out of $84.3 million by $0.3 million. Net operating results were sufficient to ensure that the General Fund Emergency and Cash Flow Reserve maintained its target level of 10 percent of actual expenditures. 15 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Adopted Budget Revised Budget Actual Revenues $78,896 $79,016 $80,335 Transfers in 1,687 4,321 4,321 Total resources 80,583 83,337 84,656 Expenditures 75,574 $78,547 78,068 Operating transfers out 1,850 2,085 2,085 Capital Transfers out 4,025 4,194 4,194 Total uses 81,449 84,826 84,347 Net Results ($866) (1,489) $309 Summary of General Fund Budget and Actual For the fiscal year ended June 30, 2019 (in thousands) Traffic and Housing Mitigation Fund – The City uses this fund to collect developer contributions to be used for major street improvement and housing infrastructure projects. During the year, the fund balance decreased from $6.3 million to $5.2 million. Revenues totaled $2.5 million, while $3.6 million was charged against this fund to support the maintenance of the City-wide traffic model. Rail crossing improvements at Anderson Drive accounted for charges of $3.4 million and a project to install new queue cutter signals on 2nd and 3rd streets next to the rail crossing accounted for $117 thousand. The balance in the fund is being held in anticipation of major street projects identified in the General Plan 2020 and other qualifying expenditures. Gas Tax Fund – The City uses this fund to manage its allocation of State gasoline taxes and local funding for street maintenance projects. Gas tax revenues were exceeded by expenditures and net transfers by $1.3 million in fiscal year 2018-2019 resulting in a drop in fund balance from $6.0 million to $4.7 million. The activities for the year were all planned and approved project work. Expenditures during fiscal year 2018-2019 totaled $12.6 million. In addition to routine street-related maintenance of $1.3 million, major expenditures included $5.2 million for Francisco Boulevard West multi-use pathway, $2.2 million for modifications to 2nd Street at Grand Avenue, $1.2 million for emergency slide repair at 70 Irwin, $382 thousand for improvements on G Street, $360 thousand to implement an Automated Traffic Signal Performance Measures system, $333 thousand for emergency slide repair at 80 Upper Toyon, $228 thousand for emergency slide repair at 21 San Pablo, and $200 thousand for sidewalk improvements to Francisco Boulevard. The largest sources of revenues were $4.1 million in grant reimbursements for costs associated with the Francisco Boulevard West multi-use pathway, $2.1 million in grant reimbursements for the Grand Avenue Connector Project, $1.3 million from State gasoline taxes, $1.2 million in development impact fees, $1.1 million in State RMRA (Road Maintenance and Rehabilitation Account) funding, and $647 thousand in local Measure A funding. Essential Facilities Capital Projects Fund – The City uses this fund to account for major capital improvements to public safety facilities. The currently active construction projects are Fire Station 57 and the Public Safety Center. Expenditures during fiscal year 2018-2019 totaled $23.9 million, of which $4.1 million was transferred from the General Fund from an allocation of Measure E Transaction and Use Tax, $3.3 million from reimbursements from the County of Marin for its share of Fire Station 57 costs, and $1.1 million was allocated from paramedic tax funds. 16 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Non-major Governmental Funds – The City’s non-major funds are presented in the basic financial statements in the aggregate. At June 30, 2019, non-major funds had a total fund balance of $13.0 million, a $1.2 million decrease over that of the previous year. The largest fund balance decrease, $456 thousand, was recorded in the Emergency Medical Services Fund as result of planned capital transfers to support the delivery of medical transport services. The Measue A Open Space fund decreased by $404 thousand as the fund balance was used for planned CIP projects including the Bret Harte restroom installation. The Parkland Dedication fund decreased by $345 thousand as result of capital outlay for renovation and expansion of Albert Park. Of the ending total non-major fund balances of $13.0 million: $10.9 million (84%) is legally restricted for specific purposes by external funding source providers, $1.9 million (15%) is committed for special purposes by the City Council, $27 (less than 1%) thousand is nonspendable, and $ 0.1 million (1%) is assigned. Additional information about these aggregated non-major funds is presented in the combining statements which immediately follow the required supplementary information. Proprietary Funds The City’s proprietary funds are presented in the basic financial statements in a manner similar to that found in the government-wide financial statements, but in more detail. As noted in the Summary of Changes in Net Position – Business-type Activities at page 26, the City’s Enterprise fund net position decreased by $221 thousand during the fiscal year. The Parking Services Fund is the City’s sole business-type (Enterprise) activity. The proprietary fund operating revenue increased by $158 thousand in fiscal year 2018-2019 to $5.4 million. The Enterprise fund operating expenses were $4.9 million in fiscal year 2018-2019, an increase of $0.4 million over the prior fiscal year. The change in operating expenses was primarily driven by the recognition of pension and OPEB expenses under Governmental Accounting Standards Board Statement Nos. 68 and 75. The City’s Internal Service Funds are also reported in this Proprietary Fund classification. In fiscal year 2018-2019, the Internal Services Funds were comprised of: Building Maintenance, Vehicle Replacement, Equipment Replacement, Employee Benefits, Liability Insurance, Workers’ Compensation, Dental Insurance, Employee Retirement, OPEB/Retiree Medical, Radio Replacement, Telephone Replacement and Sewer Maintenance. The net position of the Internal Service Funds increased by $775 thousand. Net investment in capital assets decreased by $400 thousand, while unrestricted fund balance increased by $1.1 million. The decrease in capital assets resulted primarily from depreciation of existing capital assets. The increase in unrestricted fund balance reflected the deferral of vehicle purchases in the Vehicle Replacement Fund and increased allocation to the Workers Compensation Fund. The other Internal Service Funds reported small-to-moderate changes to their respective net positions. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2019 amounts to $270.1 million, net of accumulated depreciation of $182.5 million. This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure and construction in progress. Infrastructure assets are items that are normally immovable and of value only to the City such as roads, bridges, streets and sidewalks, drainage systems, lighting systems, and similar items. The net addition to the City’s investment in capital assets for the current fiscal year was $32.3 million, offset by accumulated depreciation of $8 million. 17 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 Additions to capital assets during fiscal year 2018-2019 included:  Land Improvements: $0.7 million  Albert Park Improvements - $742k  Building and structure projects: $0.7 million  Victor Jones Park Improvements - $688k  Infrastructure: $4.2 million  Freitas-Las Gallinas Intersection Improvement - $3.5 million  Emergency Slide-80 Upper Toyon - $349k  G-Street Improvements Phase 2 - $383k The City’s Capital Assets for the fiscal years ending June 30, 2019 and 2018 were as follows: 2019 2018 Governmental Activities Land $83,662 $83,662 Construction in progress 69,822 35,720 Land improvements 9,763 9,020 Buildings and structures 44,247 43,559 Machinery and equipment 20,948 20,971 Infrastructure 203,818 199,560 Less accumulated depreciation (178,097) (170,514) Subtotal Governmental Activities 254,163 221,978 Business-type Activities Land 8,621 8,621 Buildings and structures 10,714 10,714 Machinery and equipment 1,042 1,128 Less accumulated depreciation (4,436)(4,313) Subtotal Business-type Activities 15,941 16,150 Total Capital Assets $270,104 $238,128 Summary of Capital Assets (in thousands) Additional information on the City’s capital assets can be found in Note 5 on pages 61 through 63 of this report. Debt Administration The City’s debt obligations were stable year-over year and reflect payments of principal made during the year. The debt of the former Redevelopment Agency is reported under the Successor Agency, which is presented as Private- Purpose Trust Fund on the Statement of Fiduciary Net Position. (See Note 6 of the financial statements for additional information on the debt obligations of the City and Note 15 for additional information on the Successor Agency.) The City’s long-term obligations for the fiscal years ending June 30, 2019 and 2018 were as follows: 18 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 2019 2018 Governmental Activity Debt: 2018 Authority Lease Revenue Bond $53,104 $53,612 2010 Taxable Pension Obligation Bonds 3,765 4,185 PG & E City Hall HVAC Retrofit Note Payable 146 179 PG & E Street Light Retrofit Note Payable 7 49 PG & E Efficiency Note Payable 1,081 1,081 Subtotal Governmental Activity Debt 58,103 59,106 Business-type Debt: PG & E Parking Lot Lighting Retrofit Note Payable 28 35 2012 Authority Lease Revenue refunding Bonds, as adjusted 4,890 5,164 Subtotal Business-type Debt 4,918 5,199 Total Long-Term Obligations $63,021 $64,305 Summary of Long-Term Debt (in thousands) 19 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 ECONOMIC CLIMATE AND NEXT YEAR’S BUDGET Ten years removed from the Great Recession, the US Economy continues to grow, officially reaching the longest economic expansion in US history. The labor market has created over 2 million jobs per year since 2010. However, growth is beginning to slow. According to the September Federal Open Market Committee meeting US GDP Growth is forecasted to decline to 2.1% in 2019 versus 3% in 2018. GDP Growth is then expected to decrease to 2% in 2020 and 1.8% in 2021 with unemployment and inflation expected to follow similar patterns. California is on strong economic footing to begin the fiscal year with a GDP that would rank as the fifth largest nation in the world. The state’s fiscal 2019 budget assumes slowed growth in line with national trends and seeks to exercise fiscal prudence although GDP growth of 5.6% in 2018 outpaces the nation as a whole (2.9%) and unemployment has recently reached a record low of 4%. This is taking place within a climate of uncertainty, though, as the cost of living continues to rise and income inequality persists. Locally, Marin County’s unemployment rate is among the lowest in the State at 1.9% and total employment figures are forecasted to grow at an average rate of 0.9% through 2022. The new fiscal year begins with property tax revenues projected to increase, however a gradual decline is projected over the next three years. In San Rafael, property taxes are continuing to grow while sales taxes, having achieved a 4.3% gain over the previous year are projected to start leveling off. The trend of consumer spending continues to shift to online retailers and away from brick-and-mortar locations and the city is continuing to analyze results of the Wayfair decision, however, its actual impact is currently unclear. The City’s general fund has been fueled by the momentum of seven consecutive years of solid operating results. Service levels have increased moderately over the past few years and at the same time, the City is fully funding its actuarially-determined, required contributions for both pension and retiree medical (OPEB) obligations. Reductions in staffing and service levels, coupled with deferred maintenance of City facilities as method of coping with past economic downturns means that, although the City is able to maintain and, in some cases, improve on its level of services, there are still critical unfunded capital and maintenance needs. Sales tax and transactions and use tax (Measure E) combined, represent the City’s largest tax revenue generators. The City’s second largest tax generator is property tax. The City is expecting the fiscal year 2019-2020 tax roll to increase by approximately four percent over the previous year. Other tax and non-tax revenues are expected to grow moderately, in the range of two to four percent. The City’s largest expenditure relates to personnel costs. Salaries and benefits are tied to the labor agreements with each bargaining group. With the exception of SEIU-Childcare, which has a two-year contract expiring on October 31, 2021, the City’s labor units are all operating under two-year contracts that expire on June 30, 2020. In the bond markets, the San Rafael name is recognized as a high credit municipal entity given both the City’s financial strength and solid financial management. Because the City’s bonds are highly sought by investors and are competitive in the marketplace, the City can borrow funds at reasonably attractive rates. The City maintains an AA issuer credit rating with Standard & Poor’s Ratings Services. 20 CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2019 REQUEST FOR INFORMATION This financial report is designed to provide our residents, businesses, customers, and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for providing high quality services within the limits of our fiscal resources. If you have questions about this report or need additional financial information, contact the City of San Rafael – Finance Department at 1400 Fifth Avenue, Room 204, San Rafael, California 94901. 21 CITY OF SAN RAFAEL STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES The Statement of Net Position and the Statement of Activities summarize the entire City’s financial activities and financial position. They are also referred to as Government-wide financial statements. The Statement of Net Position reports the difference between the City’s total assets and the City’s total liabilities, including all the City’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the City’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of all of the City’s Governmental Activities in a single column, and the financial position of all the City’s Business-type Activities in a single column; these columns are followed by a total column which presents the financial position of the entire City. The City’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City’s Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City’s Business-type Activities include all its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City’s net position. It is also prepared on the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures. The Statement of Activities presents the City’s expenses first, listed by program, and follows these with the expenses of its business-type activities. Program revenues - that is, revenues which are generated directly by these programs - are then deducted from program expenses to arrive at the net expense of each governmental and Business-type program. The City’s general revenues are then listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position. Both these Statements include the financial activities of the City and the San Rafael Joint Powers Financing Authority which are legally separate but are considered to be component units of the City because they are controlled by the City, which is financially accountable for their activities. The balances and the activities of the San Rafael Sanitation District, a discretely presented component unit, are included in these statements in a separate column. 23 CITY OF SAN RAFAEL STATEMENT OF NET POSITION JUNE 30, 2019 Component Unit Primary Government San Rafael Governmental Business-type Sanitation Activities Activities Total District ASSETS Cash and investments available for operations (Note 2)$46,061,683 $3,233,626 $49,295,309 $34,255,365 Restricted cash and investments (Note 2)33,285,009 33,285,009 Receivables: Accounts 3,061,308 31,401 3,092,709 1,638,629 Taxes 7,493,119 7,493,119 Grants 6,639,211 6,639,211 Interest 168,845 168,845 Loans (Note 4)400,201 400,201 Long-term receivable from the Successor Agency (Note 15D)380,887 380,887 Long-term receivable from San Rafael Sanitation District (Note 4F)4,613,963 4,613,963 Internal balances (Note 3B)(15,357) 15,357 Prepaid expenses and others 698,871 3,400 702,271 58,166 Capital assets (Note 5): Nondepreciable 153,484,773 8,620,853 162,105,626 1,649,704 Depreciable, net 100,678,702 7,320,355 107,999,057 50,643,188 Total Assets 356,951,215 19,224,992 376,176,207 88,245,052 DEFERRED OUTFLOWS Deferred outflows related to pension (Note 9)31,683,580 1,019,387 32,702,967 Deferred outflows related to OPEB (Note 11) 6,731,530 158,470 6,890,000 Total Deferred Outflows 38,415,110 1,177,857 39,592,967 LIABILITIES Accounts payable 10,058,042 125,790 10,183,832 1,066,236 Deposits payable 194,417 194,417 Interest payable 42,460 42,460 Developer deposits payable 581,717 581,717 Unearned revenue 265,425 265,425 Claims payable (Note 13): Due in one year 2,353,275 2,353,275 Due in more than one year 7,368,273 7,368,273 Compensated absences (Note 1L): Due in one year 541,020 17,308 558,328 Due in more than one year 3,783,824 121,153 3,904,977 Long-term debt (Note 6): Due in one year 485,261 291,816 777,077 Due in more than one year 57,617,671 4,625,966 62,243,637 Long-term payable to the City of San Rafael, due in more than one year (Note 4F)4,613,963 Net OPEB liability, due in more than one year (Note 11)32,240,023 758,977 32,999,000 Net pension liability, due in more than one year (Note 9)107,121,341 3,446,517 110,567,858 Total Liabilities 222,610,289 9,429,987 232,040,276 5,680,199 DEFERRED INFLOWS Deferred inflows related to pension (Note 9)33,116,207 1,065,479 34,181,686 Deferred inflows related to OPEB (Note 11)2,721,922 64,078 2,786,000 Total Deferred Inflows 35,838,129 1,129,557 36,967,686 NET POSITION (Note 8): Net investment in capital assets 231,844,210 11,023,426 242,867,636 52,292,892 Restricted for: Special revenue projects: Housing and street improvements 10,821,214 10,821,214 Stormwater 402,544 402,544 Emergency medical services 813,346 813,346 Other 8,302,170 8,302,170 Capital projects 2,778,457 2,778,457 Debt service 171,143 171,143 Total Restricted Net Position 23,288,874 23,288,874 Unrestricted (118,215,177) (1,180,121) (119,395,298) 30,271,961 Total Net Position $136,917,907 $9,843,305 $146,761,212 $82,564,853 See accompanying notes to financial statements 25 Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities: General government $11,967,641 $377,606 $134,515 Public safety 49,899,296 5,304,832 1,041,606 Public works and parks 19,270,613 4,158,338 3,248,299 $8,042,524 Community development 5,781,826 4,312,259 Culture and recreation 12,819,429 5,750,846 160,435 Interest on long-term debt and fiscal charges 1,848,263 Total Governmental Activities 101,587,068 19,903,881 4,584,855 8,042,524 Business-type Activities Parking services 5,038,553 5,362,016 Total Business-type Activities 5,038,553 5,362,016 Total Primary Government $106,625,621 $25,265,897 $4,584,855 $8,042,524 Component Unit San Rafael Sanitation District $12,601,257 $16,964,083 $5,907 $1,433,871 General revenues: Taxes: Property Sales: Sales and Use Measure E half-cent sales Measure E quarter-cent sales Measure S Paramedic Transient occupancy Franchise Business license Other Investment earnings Miscellaneous Transfers (Note 3A) Total general revenues and transfers Change in Net Position Net Position, beginning of year Net Position, end of year See accompanying notes to financial statements Program Revenues CITY OF SAN RAFAEL STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019 26 Component Unit San Rafael Governmental Business-type Sanitation Activities Activities Total District ($11,455,520)($11,455,520) (43,552,858)(43,552,858) (3,821,452)(3,821,452) (1,469,567)(1,469,567) (6,908,148)(6,908,148) (1,848,263)(1,848,263) (69,055,808)(69,055,808) $323,463 323,463 323,463 323,463 (69,055,808)323,463 (68,732,345) $5,802,604 25,903,240 25,903,240 1,727,221 22,840,700 22,840,700 8,516,937 8,516,937 4,258,469 4,258,469 10,540 10,540 4,934,584 4,934,584 3,203,499 3,203,499 3,627,254 3,627,254 2,788,496 2,788,496 1,783,170 1,783,170 1,450,434 63,870 1,514,304 519,793 5,904,968 5,904,968 7,768 608,698 (608,698) 85,830,989 (544,828) 85,286,161 2,254,782 16,775,181 (221,365) 16,553,816 8,057,386 120,142,726 10,064,670 130,207,396 74,507,467 $136,917,907 $9,843,305 $146,761,212 $82,564,853 Primary Government Net (Expenses) Revenues and Changes in Net Position 27 FUND FINANCIAL STATEMENTS Major funds are defined generally as having significant activities or balances in the current year. Only individual major funds are presented in the Fund Financial Statements, while non-major funds are combined in a single column. Individual non-major funds may be found in the Supplemental Section. The funds described below were determined to be major funds by the City in fiscal year 2018-2019: GENERAL FUND Established to account for all financial resources necessary to carry out basic governmental activities of the City which are not accounted for in another fund. The General Fund supports essential City services such as police and fire protection, building and street maintenance, libraries, recreation, parks and open space maintenance. TRAFFIC AND HOUSING MITIGATION SPECIAL REVENUE FUND Established to maintain long-term developer contributions for major housing and street improvement projects. GAS TAX SPECIAL REVENUE FUND Established to receive and expend the City’s allocation of the State gasoline taxes. ESSENTIAL FACILITIES CAPITAL PROJECTS FUND Established to account for major capital improvements to public safety facilities. 29 CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2019 Traffic and Housing General Mitigation Gas Tax ASSETS Cash and investments available for operations (Note 2)$9,241,545 $5,212,430 Restricted cash and investments (Note 2)561,507 Receivables: Accounts 1,315,478 $565,826 Taxes 7,081,049 97,483 Grants 5,545,237 Interest 163,128 Loans (Note 4)100,472 42,859 Long-term receivable from the Successor Agency (Note 15D)380,887 Due from other funds 587,351 Prepaids 37,271 Total Assets $19,468,688 $5,255,289 $6,208,546 LIABILITIES Accounts payable $5,030,877 $57,913 $1,119,473 Deposits payable 10,015 Developer deposits payable 420,706 Due to other funds 360,962 Unearned revenue Total Liabilities 5,461,598 57,913 1,480,435 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - SB90 reimbursement receivable 1,093,632 Unavailable revenue - long-term receivable from Successor Agency 380,887 Total Deferred Inflows of Resources 1,474,519 Fund Balances (Note 8): Nonspendable 37,271 Restricted 5,197,376 4,728,111 Committed Assigned 11,391,084 Unassigned 1,104,216 Total Fund Balances 12,532,571 5,197,376 4,728,111 Total Liabilities, Deferred Inflows of Resources and Fund Balances $19,468,688 $5,255,289 $6,208,546 See accompanying notes to basic financial statements Special Revenue Funds 30 Essential Other Total Facilities Capital Governmental Governmental Projects Fund Funds Funds $1,561,838 $12,144,661 $28,160,474 32,018,667 704,835 33,285,009 52,882 1,054,402 2,988,588 314,587 7,493,119 813,066 211,752 6,570,055 5,717 168,845 256,870 400,201 380,887 587,351 27,627 64,898 $34,446,453 $14,720,451 $80,099,427 $2,055,954 $891,669 $9,155,886 184,402 194,417 161,011 581,717 226,389 587,351 265,425 265,425 2,055,954 1,728,896 10,784,796 1,093,632 380,887 1,474,519 27,627 64,898 32,390,499 10,944,518 53,260,504 1,901,271 1,901,271 118,139 11,509,223 1,104,216 32,390,499 12,991,555 67,840,112 $34,446,453 $14,720,451 $80,099,427 31 CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET - RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2019 Total fund balances reported on the governmental funds balance sheet $67,840,112 Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds because of the following: Capital assets used in Governmental Activities are not financial resources and, therefore, are not reported in the Governmental Funds. 240,776,112 Internal service funds are used by management to charge the cost of management of 21,425,360 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. (58,102,932) Compensated absences (4,324,844) Unavailable revenue 1,474,519 Long-term receivables from San Rafael Sanitation District 4,613,963 Deferred outflow related to pension 31,683,580 Net pension liability (107,121,341) Deferred inflow related to pension (33,116,207) Deferred outflow related to OPEB 6,731,530 Deferred inflow related to OPEB (2,721,922) Net OPEB liability (32,240,023) Net Position of governmental activities $136,917,907 building, workers' compensation, employee benefits, insurance, and post-retirement healthcare benefits to individual funds. The assets and liabilities are included in Governmental Activities in the Statement of Net Position. See accompanying notes to financial statements 32 CITY OF SAN RAFAEL GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2019 Traffic and Essential Other Total Housing Facilities Capital Governmental Governmental General Mitigation Gas Tax Projects Fund Funds Funds REVENUES Taxes and special assessments $70,282,284 $6,818,901 $77,101,185 Licenses and permits 2,661,500 2,661,500 Fines and forfeitures 337,680 337,680 Use of money and properties 250,570 $111,363 $33,778 $871,481 315,868 1,583,060 Intergovernmental 3,290,086 10,567,243 1,744,935 15,602,264 Charges for services 2,671,395 2,356,530 1,206,142 8,932,809 15,166,876 Other revenue 841,538 374,639 3,251,151 690,714 5,158,042 Total Revenues 80,335,053 2,467,893 12,181,802 4,122,632 18,503,227 117,610,607 EXPENDITURES Current: General government 12,297,845 18,800 236,854 12,553,499 Public safety 43,107,841 8,571,035 51,678,876 Public works and parks 11,742,280 59,945 2,337,369 1,478,028 15,617,622 Community development 4,988,260 4,988,260 Culture and recreation 3,080,364 9,387,644 12,468,008 Capital outlay 117,253 10,308,603 23,908,035 4,367,156 38,701,047 Debt service: Principal 495,172 495,172 Interest and fiscal charges 2,356,207 2,356,207 Total Expenditures 78,067,969 195,998 12,645,972 23,908,035 24,040,717 138,858,691 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 2,267,084 2,271,895 (464,170) (19,785,403) (5,537,490) (21,248,084) OTHER FINANCING SOURCES (USES) Transfers in (Note 3A)4,321,361 5,201,300 5,959,636 15,482,297 Transfers out (Note 3A)(6,278,828) (3,380,892) (800,000) (2,234,450) (1,585,864) (14,280,034) Total Other Financing Sources (Uses) (1,957,467) (3,380,892) (800,000) 2,966,850 4,373,772 1,202,263 Net Change in Fund Balances 309,617 (1,108,997) (1,264,170) (16,818,553) (1,163,718) (20,045,821) FUND BALANCES, BEGINNING OF YEAR 12,222,954 6,306,373 5,992,281 49,209,052 14,155,273 87,885,933 FUND BALANCES, END OF YEAR $12,532,571 $5,197,376 $4,728,111 $32,390,499 $12,991,555 $67,840,112 See accompanying notes to financial statements Special Revenue Funds 33 CITY OF SAN RAFAEL Reconciliation of the NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS with the STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2019 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($20,045,821) Amounts reported for Governmental Activities in the Statement of Activities are different because of the following: Capital Assets Transactions Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Capital outlay and improvement expenditures are added back to fund balance 39,452,886 Non-capitalized capital outlay expenditures were reclassified to various governmental activities (871,389) Loss on disposal of capital assets is deducted from fund balance (320,406) Depreciation expense is deducted from fund balance (5,692,089) Long-Term Debt Proceeds and Payments Governmental funds record proceeds and payments as other financing sources and expenditures. However, in the Statement of Net Position, those costs are reversed as increases and decreases in long-term liabilities. 495,172 Amortized bond premium expense is added back to fund balance 507,944 Accrual of Non-Current Items The amount below included in the Statement of Activities does not require the use of current financial Compensated absences 270,811 Unavailable revenue (192,877) Long-term receivable from San Rafael Sanitary District (7,474) Net Pension Liability Transactions Governmental funds record pension expense as it is paid. However, in the Statement of Activities those costs are reversed as deferred outflows/(inflows) and an increase/(decrease) in net pension liability.1,604,235 Net OPEB Liability Transactions Governmental funds record OPEB expense as it is paid. However, in the Statement of Activities those costs are reversed as deferred outflows/(inflows) and an increase/(decrease) in net OPEB liability.856,577 Allocation of Internal Service Fund Activities Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service fund is reported with governmental activities.717,612 Change in Net Position of Governmental Activities $16,775,181 See accompanying notes to financial statements Repayments on long-term debt principal resources and therefore is not reported as revenue or expenditures in governmental funds (net change): 34 PROPRIETARY FUND FINANCIAL STATEMENTS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges, whether external or internal. The City reports its only enterprise fund, as a major fund. PARKING SERVICES FUND Established to maintain parking garages, lots and spaces in the Downtown Parking District, and to pay for parking enforcement and meter collection. INTERNAL SERVICE FUNDS Established to account for department services and financing performed for other departments within the same governmental jurisdiction. Funding comes from charges assessed to the departments benefiting from the service. 35 CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2019 Business-type Activities - Governmental Enterprise Funds Activities Parking Internal Services Service Funds ASSETS Current Assets: Cash and investments available for operations (Note 2) $3,233,626 $17,901,209 Receivable: Accounts 31,401 72,720 Grants 69,156 Prepaids 3,400 633,973 Total Current Assets 3,268,427 18,677,058 Noncurrent Assets: Capital assets (Note 5): Nondepreciable 8,620,853 3,126,385 Depreciable, net 7,320,355 10,260,978 Total Noncurrent Assets 15,941,208 13,387,363 Total Assets 19,209,635 32,064,421 DEFERRED OUTFLOWS Deferred outflows related to pension (Note 9) 1,019,387 Deferred outflows related to OPEB (Note 11) 158,470 Total Deferred Outflows 1,177,857 LIABILITIES Current Liabilities: Accounts payable 125,790 902,156 Interest payable 42,460 Compensated absences, due in one year (Note 1L) 17,308 Claims payable, due in one year (Note 13) 2,353,275 Long-term debt, due in one year (Note 6) 291,816 Total Current Liabilities 477,374 3,255,431 Noncurrent Liabilities: Compensated absences (Note 1L) 121,153 Claims payable (Note 13)7,368,273 Long-term debt (Note 6) 4,625,966 Net OPEB liability (Note 11) 758,977 Net pension liability (Note 9) 3,446,517 Total Noncurrent Liabilities 8,952,613 7,368,273 Total Liabilities 9,429,987 10,623,704 DEFERRED INFLOWS Deferred inflows related to pension (Note 9) 1,065,479 Deferred inflows related to OPEB (Note 11) 64,078 Total Deferred Inflows 1,129,557 NET POSITION (Note 8): Net investment in capital assets 11,023,426 13,387,363 Unrestricted (1,195,478) 8,053,354 Total Net Position 9,827,948 $21,440,717 Some amounts reported for business-type activities in the Statement of Net Position are different because certain internal service fund assets and liabilities are included with business-type activities.15,357 Net position business-type activities $9,843,305 See accompanying notes to financial statements 36 CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2019 Business-type Activities - Governmental Enterprise Funds Activities Parking Internal Services Service Funds OPERATING REVENUES Charges for current services $3,139,137 $18,005,346 Other operating revenues 2,222,879 902,230 Intergovernmental 200,000 Total Operating Revenues 5,362,016 19,107,576 OPERATING EXPENSES Personnel 2,818,271 4,470,306 Insurance premiums and claims 7,360,418 Maintenance and repairs 268,469 1,158,504 Depreciation (Note 5)236,085 1,302,692 General and administrative 1,597,129 3,778,755 Total Operating Expenses 4,919,954 18,070,675 Operating Income 442,062 1,036,901 NONOPERATING REVENUES (EXPENSES) Investment income 63,870 324,562 Interest expense (176,025) Miscellaneous income 11,259 Loss on sale of capital assets (4,119) Total Nonoperating Revenues (Expenses)(112,155)331,702 Income Before Transfers 329,907 1,368,603 TRANSFERS IN (Note 3A)170,798 TRANSFERS OUT (Note 3A)(608,698)(764,363) Change in Net Position (278,791)775,038 NET POSITION, BEGINNING OF YEAR 10,106,739 20,665,679 NET POSITION, END OF YEAR $9,827,948 $21,440,717 * Reconciliation of the Change in Net Position with the Statement of Activities Change in Net Position ($278,791) Some amounts reported for business-type activities in the Statement of Activities are different because the portion of the net income of certain internal service funds is reported with the business-type activities which those funds serviced.57,426 Change in Net Position of Business-type Activities ($221,365) See accompanying notes to financial statements 37 CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2019 Business-type Activities - Governmental Enterprise Funds Activities Parking Internal Services Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $3,139,137 $18,082,439 Cash payments to suppliers for goods and services (1,838,721) (15,437,289) Cash payments to employees for salaries and benefits (2,468,975) (1,995,915) Other operating revenues 2,232,825 902,230 Cash Flows from Operating Activities 1,064,266 1,551,465 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts 170,798 Interfund payments (608,698)(764,363) Cash Flows from Noncapital Financing Activities (608,698)(593,565) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on revenue bonds and note payable (281,816) Interest expenses and fiscal charges (177,362) Acquisition of capital assets (26,902)(830,680) Proceeds from sale of property 11,259 Cash Flows from Capital and Related Financing Activities (486,080)(819,421) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 63,870 324,562 Cash Flows from Investing Activities 63,870 324,562 NET DECREASE IN CASH AND CASH EQUIVALENTS 33,358 463,041 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,200,268 17,438,168 CASH AND CASH EQUIVALENTS, END OF YEAR $3,233,626 $17,901,209 Reconciliation of operating income to net cash provided by operating activities: Operating income $442,062 $1,036,901 Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 236,085 1,302,692 Net change in assets and liabilities: Accounts receivable 9,946 (141,876) Prepaids (3,400)(633,973) Loans receivable 18,969 Increase in due to OPEB system 389,577 Accounts payable 30,277 (209,121) Compensated absence obligations 2,997 (Decrease) in due to retirement system (43,278) Claims payable 177,873 Net Cash Provided by Operating Activities $1,064,266 $1,551,465 NON-CASH TRANSACTIONS: Amortization of bond discount $725 See accompanying notes to basic financial statements 38 FIDUCIARY FUND FINANCIAL STATEMENTS Fiduciary funds are used to account for assets held by the City as an agent or custodian for other entities. The financial activities of such funds are excluded from the Government-wide financial statements and presented in fund statements that consist of a Statement of Net Position. SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY – PRIVATE PURPOSE TRUST FUND Established to account for the activities of the Successor Agency to the San Rafael Redevelopment Agency. PT. SAN PEDRO ROAD ASSESSMENT DISTRICT AGENCY FUND Established to accumulate funds for payment of principal and interest for Pt. San Pedro Road Median Landscaping Assessment District bonds. 39 Successor Agency to the Pt. San Pedro Redevelopment Road Assessment Agency District Private-Purpose Agency Trust Fund Fund ASSETS Cash and investments (Note 2)($167,622) Restricted cash and investments (Note 2)86 $282,954 Receivable: Taxes 3,555,006 725 Total Assets 3,387,470 $283,679 LIABILITIES Accounts payable 1,751 Interest payable 27,861 $24,276 Other long-term obligations (Note 15D) 380,887 Due to bondholders 259,403 Long-term debt (Note 15C): Due within one year 3,215,000 Due more than one year 9,996,290 Total Liabilities 13,621,789 $283,679 NET POSITION (DEFICIT) Held in trust for private purpose ($10,234,319) See accompanying notes to financial statements CITY OF SAN RAFAEL FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2019 40 CITY OF SAN RAFAEL STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2019 Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund ADDITIONS Property taxes $3,837,808 Use of money and property 456 Bond premium 79,861 Other revenue 904 Total Additions 3,919,029 DEDUCTIONS General government 168,342 Interest expense 683,363 Total Deductions 851,705 Change in Net Position 3,067,324 NET POSITION HELD IN TRUST FUND FOR OTHER PURPOSES Beginning of year (13,301,643) End of year ($10,234,319) See accompanying notes to financial statements 41 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A.Description of the Financial Reporting Entity As required by generally accepted accounting principles, the financial statements present the City of San Rafael (the City) as the Primary Government, with its component units for which the City is considered financially accountable. The component units discussed below are included in the City's reporting entity because of the significance of their operational and financial relationships with the City. B.Description of Blended Component Units The accompanying basic financial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City’s blended component units, entities for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is in substance, part of the City’s operations and so data from this entity is combined with the City. The City’s blended component units are described below. San Rafael Joint Powers Financing Authority – The San Rafael Joint Powers Financing Authority (Authority) was formed by the City of San Rafael and the former San Rafael Redevelopment Agency (Agency) pursuant to Articles 1 and 2 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California for the purpose of assisting in the financing and refinancing of certain assessment district and redevelopment-related activities in the City. On March 18, 2013, the Agency was replaced by the California Municipal Finance Authority (CMFA) in order that the life of the Authority would extend beyond that of the Agency. The Authority is administered by a governing board whose members are the City Council of the City of San Rafael. Activities of the Authority related to the 2012 Authority Lease Revenue Refunding Bonds are reported in the Parking Services Enterprise Funds. Activities of the Authority related to the 2018 Authority Lease Revenue Bonds are reported in the City’s General Fund and the Essential Facilities Capital Projects Fund. Separate financial statements are not prepared for the Authority. C.Description of Discretely Presented Component Unit San Rafael Sanitation District – The San Rafael Sanitation District (District) was formed in 1947 under Section 4700 of the California Health and Safety Code to provide wastewater transmission over the southern two-thirds of the City and adjacent unincorporated areas. The District is governed by a three-member Board of Directors who are appointed to four-year terms. The City Council of the City appoints two out of the three board members and has the ability to remove the two board members at will. The City contracts with the District to maintain the collection systems in the City and surrounding unincorporated areas. These employees are paid through the City’s payroll department and participate in the City’s cost-sharing multiple-employer defined benefit pension plan administered by the Marin County Employees’ Retirement Association. The employees also participate in the City’s healthcare benefits plan which includes a provision for postemployment benefits. These costs are the obligation of the District and not the City. As discussed in Note 4F, a receivable from the District has been established. 43 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The District’s activities are reported as a discretely presented component unit in a separate column in the basic financial statements which includes the District’s assets, liabilities, revenues, expenses, results of operations and cash flows. The District’s fiscal year ends on June 30 and its separately issued component unit financial statements can be obtained at the San Rafael Sanitation District, 111 Morphew Street, San Rafael, California 94901. D.Basis of Presentation Government-wide Statements – The Statement of Net Position and the Statement of Activities display information about the primary government (the City) and its component units. These statements include the financial activities of the overall City government, except for fiduciary activities. Interfund transfers and amounts owed between funds within the primary government have been eliminated from the statements. Amounts representing interfund services and uses remain in the statements. These statements distinguish between the governmental and business- type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements – The fund financial statements provide information about the City’s funds, including fiduciary funds and blended component units. Separate statements for each fund category – governmental, proprietary, and fiduciary – are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non-major funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. E. Major Funds and Other Reported Funds Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds. 44 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City reported the following major governmental funds in the accompanying financial statements: General Fund – Established to account for all financial resources necessary to carry out basic governmental activities of the City which are not accounted for in another fund. Traffic and Housing Mitigation Special Revenue Fund – Established to maintain long-term developer contributions for major housing and street improvement projects. Gas Tax Special Revenue Fund – Established to receive and expend the City’s allocation of the State gasoline taxes. Essential Facilities Capital Projects Fund – Established to account for major capital improvements to public safety facilities. The City reported its only enterprise fund as a major fund in the accompanying financial statements. The enterprise fund is: Parking Services Fund – Established to maintain parking garages, lots and spaces in the Downtown Parking District, and to pay for parking enforcement, meter collection, and downtown enforcement services. The City also reports the following fund types: Internal Service Funds – These funds account for: building maintenance; vehicle, equipment computer, radio, and telephone replacement; employee benefits; liability insurance; workers’ compensation; dental insurance; employee retirement; and retiree medical (OPEB); and sewer maintenance. Fiduciary Fund – These funds include: Successor Agency to the Redevelopment Agency Private- Purpose Trust Fund – which accounts for the accumulation of resources held by the Successor Agency to the Redevelopment Agency to be used for payments at appropriate amounts and times in the future; Pt. San Pedro Road Assessment District Agency Fund – which accumulates funds for the payment of principal and interest for Pt. San Pedro Road Median Landscaping District bonds. The financial activities of these funds are excluded from the government-wide financial statements, but are presented in the separate Fiduciary Fund financial statements. F. Basis of Accounting The government-wide, proprietary, fiduciary and discretely presented component unit financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. 45 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end with the exception of sales and use tax revenues which are reported as available if collected within ninety days of year- end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital leases are reported as other financing sources. Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues, interest revenue, charges for services, fines and forfeitures. Other receipts and taxes are recognized as revenue when the cash is received. Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenue. Thus, both restricted and unrestricted net position may be made available to finance program expenditures. The City’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. The City considers restricted shared state revenues such as gasoline taxes and public safety sales taxes, restricted locally imposed transportation sales taxes, fines, forfeitures, licenses, permits, charges for services, and program grants as program revenues. Certain indirect costs are included in program expenses reported for individual functions and activities. G. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. 46 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to liabilities, the statement of financial position or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Unavailable revenue, a type of deferred inflow of resources, is reported in the governmental funds balance sheet. The governmental funds report unavailable revenues from three sources: taxes receivable, interest on interfund advances and loans receivable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. H. Budgets, Budgetary Accounting, and Encumbrances The City adopts an annual budget which is effective July 1 for the ensuing fiscal year. The budget reflects estimated revenues and expenditures, except for the capital projects funds and the Peacock Gap Assessment District Debt Service Fund. Appropriations and spending authorizations for projects in the capital projects funds and some special revenue funds are approved by the City Council on a multi-year basis. From the effective date of the budget, which is adopted at the department level, the amounts stated therein as proposed expenditures become appropriations to the various City departments. The City Council may amend the budget by resolution during the fiscal year in order to respond to emerging needs, changes in resources, or shifting priorities. Expenditures may not exceed appropriations at the fund level, which is the legal level of control. The City Manager is authorized to transfer budgeted amounts between accounts, departments or funds; the Council must approve any increase in the City’s operating expenditures, appropriations for capital projects, and transfers between major funds and reportable fund groups. Budgets are adopted on a basis consistent with Generally Accepted Accounting Principles for the General Fund and Special Revenue Funds. Encumbrance accounting, under which purchase orders for expenditures are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the budgetary process. All unencumbered appropriations lapse at year end. I. Cash Equivalents For purposes of the statement of cash flows, the City considers all highly liquid investments (including all restricted assets) with maturity of three months or less when purchased to be cash equivalents. The City maintains a cash and investment pool that is available for use by all funds. As the proprietary funds' share of this pool is readily available when needed, such share is also considered to be cash equivalent. Deposit assets in the proprietary funds are related to insurance and benefits and are not considered cash equivalents for purposes of the statement of cash flows. J. Prepaids Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. 47 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K.Capital Assets City Contributed capital assets are valued at their estimated fair market value on the date contributed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are recorded at acquisition value. All other capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. The City has included the value of all infrastructure capital assets into its Basic Financial Statements using the Basic Approach for infrastructure reporting. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. City policy has set the capitalization thresholds for reporting capital assets at the following: General capital assets ranging from $5,000 to $50,000 Infrastructure capital assets ranging from $25,000 to $250,000 Depreciation is provided using the straight-line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. The City has assigned the useful lives listed below to capital assets: Buildings, improvements, and structures 20 – 50 years Machinery and equipment 4 – 20 years Infrastructure 15 – 50 years District Collection systems and facilities purchased or constructed are stated at cost. Assets contributed have been recorded at the fair market value at the date received. Interest is capitalized for assets constructed when applicable. The costs of normal repairs and maintenance that do not add to the value of an asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets, as applicable. Applicable capital assets must be capitalized for amounts $1,000 or above and may be capitalized for amounts from $500 to $1,000 if determined to be sensitive. Depreciation is provided by the straight-line method over the estimated useful lives of capital assets as follows: Subsurface lines 50 – 80 years Sewer collection facilities 5 – 50 years General plant & administrative facilities 3 – 15 years 48 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L. Compensated Absences Compensated absences are accrued as earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. Unused sick leave may be compensable up to 600 hours, depending upon the provisions of the MOUs, which vary by bargaining unit. The long-term portion of the liability for compensated absences for governmental fund type operations is recorded as compensated absences in the government-wide financial statements. Compensated absences are liquidated by the fund that has recorded the liability. Proprietary fund liabilities are recorded within their respective funds. The long-term portion of governmental activities compensated absences is liquidated primarily by the General Fund. The changes of the compensated absences were as follows: Governmental Business-Type Activities Activities Total Beginning Balance $4,595,655 $135,464 $4,731,119 Additions 3,008,839 108,471 3,117,310 Payments (3,279,650) (105,474) (3,385,124) Ending Balance $4,324,844 $138,461 $4,463,305 Current Portion $541,020 $17,308 $558,328 M.Property Tax Levy, Collection and Maximum Rates City State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts. Marin County assesses properties, bills for and collects property taxes on the schedule that follows: Secured Unsecured Valuation/lien dates January 1 January 1 Levy dates July 1 July 1 Due dates (delinquent as of) 50% on November 1 (December 10) July 1 (August 31) 50% on February 1 (April 10) 49 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) For assessment and collection purposes, property is classified as either “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and real property having a tax lien that is sufficient, in the opinion of the Country Assessor, to secure payment of the taxes. Unsecured property comprises all taxable property not attached to land, such as personal property or business property. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer. Property taxes are levied and recorded as revenue when received in the fiscal year of levy because of the adoption of the “alternate method of property tax distribution,” known as the Teeter Plan, by the City and the County of Marin. The Teeter Plan authorized the auditor-controller of the County of Marin to allocate 100% of the secured property taxes billed, but not yet paid. The County of Marin remits tax monies to the City in three installments, as follows: 55% remitted on December 15 40% remitted on April 15 5% remitted on June 15 District The County of Marin levies taxes and places liens on real property as of January 1 on behalf of the District. Unsecured property taxes are levied throughout the year. N. Sewer Charges Sewer charges are billed and collected on behalf of the District by the County of Marin as a special assessment on annual property tax billings. Property taxes are levied on January 1 and are due in two equal installments on November 1 and February 1. In accordance with the Teeter Plan, the County remits to the District all charges which are assessed and the county retains responsibility for collecting past due amounts. The Teeter Plan provides that the County advance the District its share of the annual gross levy of secured property taxes and special assessments. In consideration, the District gives the County of Marin its rights to penalties and interest on delinquent secured property tax receivables and actual proceeds collected. O. Connection Fees Connection fees represent a one-time contribution of resources to the District imposed on contractors and developers for the purpose of financing capital improvements. Connection fees are recognized after non-operating revenues (expenses) in the statement of revenues, expenses and changes in net position. The District utilizes connection fees received on a first-in-first-out basis to finance current year capital projects. Accordingly, if there is a balance of connection fees available at year-end, it is classified as restricted net position. 50 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) P. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates. Q. New Funds In fiscal year 2018-2019, the City established a Special Revenue Fund, Measure G - Cannabis, for the purpose of reporting tax revenue and expenditures related to Cannabis activities authorized by Measure G. R. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. NOTE 2 - CASH AND INVESTMENTS A. Policies The City maintains an investment policy that emphasizes safety, liquidity and reasonable market yield. This policy is reviewed and approved by the City Council annually. The City invests in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to increase security, the City employs the trust department of a bank as the custodian of certain City managed investments, regardless of their form. 51 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a market value of 150% of the deposit, as collateral for these deposits. Under California Law this collateral is held in a separate investment pool by another institution in the City’s name and places the City ahead of general creditors of the institution. The City’s investments are carried at fair value, as required by generally accepted accounting principles. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. B. Classification Cash and investments as of June 30, 2019, are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of City debt instruments or agency agreements. Statement of Net Position: City of San Rafael: Cash and investments available for operations $49,295,309 Restricted cash and investments 33,285,009 Total Primary Government Cash and Investments 82,580,318 San Rafael Sanitation District (Component Unit) Cash and investments available for operations 34,255,365 Total San Rafael Sanitation District Cash and Investments 34,255,365 Statement of Fiduciary Net Position (separate statement): Successor Agency to the Redevelopment Agency: Cash available for operations (167,622) Restricted cash 86 Total Successor Agency Cash (167,536) Pt. San Pedro Road Assessment District Agency Fund: Restricted cash 282,954 Total Fiduciary Cash 115,418 Total Cash and Investments $116,951,101 The City does not normally allocate investments by fund. Each proprietary fund’s portion of Cash and Investments Available for Operations is in substance a demand deposit available to finance operations, and is considered a cash equivalent in preparing the statement of cash flows. 52 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) C.Investments Authorized by the California Government Code and the City’s Investment Policy The City’s investment policy and the California Government Code allow the City to invest in the following securities provided the credit ratings of the issuers are acceptable to the City and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code, or the City’s Investment Policy where it is more restrictive: Minimum Maximum Maximum Maximum Credit Percentage of Investment in Authorized Investment Type Maturity Quality (A) Portfolio (A) One Issuer U.S. Government Obligation 5 years N/A No limit No limit U.S. Agency Securities and Instruments 5 years N/A No limit No limit Repurchase Agreements 1 year A-1 No limit No limit Prime Commercial Paper 270 days A-1 25% 10% of total outstanding commercial paper Bankers’ Acceptances 180 days A-1 40% $2,000,000 Medium-Term Corporate Notes 5 years A 30%5% of portfolio Negotiable Certificates of Deposit 5 years A-1 30%5% of portfolio Non-negotiable Certificates of Deposit 5 years N/A 30%5% of portfolio Local Agency Investment Fund N/A N/A N/A N/A Money Market Funds N/A AAA 10%N/A Limited Obligation Improvement Bonds Related to Special Assessment Districts and Special Tax Districts 30 years N/A N/A N/A (A) At time of purchase The San Rafael Sanitation District maintains all of its cash in the County of Marin pooled investment fund for the purpose of increasing interest earnings through pooled investment activities. The County Pool includes both voluntary and involuntary participation from external entities. The District is a voluntary participant. The State of California statutes require certain special districts and other governmental entities to maintain their cash surplus with the County Treasurer. The District has approved by resolution, the investment policy of the County of Marin which complies with the California Government Code. 53 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) D. Investments Authorized by Debt Agreements The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if there are insufficient resources to meet debt repayment obligations. The California Government Code requires these funds to be invested in accordance with City ordinance bond indentures or State statute. The table below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements: Maximum Maturity U.S. Treasury Obligations 5 years to no maximum N/A No Limit U.S. Agency Securities 3 - 5 years N/A No Limit U.S. Agency Instruments 5 years N/A No Limit Repurchase Agreements 1 year A-1 No Limit Bankers’ Acceptances 360 days Highest Category Rating No Limit Money Market Funds N/A Highest Category Rating No Limit Prime Commercial Paper 270 days Highest Category Rating No Limit N/A Highest Category Rating No Limit Municipal Obligations N/A Two Highest Category Ratings No Limit Medium-Term Corporate Notes 5 Years A No Limit Non-Negotiable Certificates of Deposit 180 Days N/A No Limit Negotiable Certificates of Deposit 5 Years N/A No Limit Local Agency Investment Fund N/A N/A No Limit California Asset Management Program N/A N/A No Limit Deposit Accounts N/A A No Limit Money Market Mutual Funds N/A AAAm No Limit State or Local Bonds N/A A No Limit Defeasance Securities N/A N/A No Limit (A) At time of purchase. (B)Guaranteed Investment Contracts must be fully collateralized with U.S. Treasury Obligations or U.S. Agency Obligations. Maximum Percentage of Portfolio Guaranteed Investment Contracts (fully collateralized) (B) Authorized Investment Type Minimum Credit Quality (A) 54 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) E. GASB 72 Fair Value Hierarchy The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30, 2019: (a)(b)(c) Level 1 Level 2 Level 3 Total City: Money Market Funds $639,024 $639,024 U.S. Treasury Notes $3,988,410 3,988,410 U.S. Agency Securities and Instruments 14,234,083 14,234,083 Medium-Term Corporate Notes 4,064,372 4,064,372 Investment in Pt. San Pedro Bonds $1,387,200 (d)1,387,200 $3,988,410 $18,937,479 $1,387,200 24,313,089 Investments Exempt from Fair Value Hierarchy: California Asset Management Program 32,018,667 Local Agency Investment Fund 17,778,472 County Investment Pool 79,149 Total Investments 74,189,377 Cash in banks and on hand 8,390,941 Total City and Investments 82,580,318 Fiduciary: Cash in banks and on hand 115,418 Total Fiduciary Cash 115,418 Total City and Fiduciary Cash 82,695,736 San Rafael Sanitary District: County Investment Pool 34,255,365 34,255,365 Total Cash and Investments $116,951,101 Source: The above GASB 72 classifications into the different Input Levels are provided by the US Bank Institutional Trust & Custody. (a)Level 1 inputs are quoted prices in active market for identical assets. These are quoted prices in active markets for identical assets at the measurement date. An active market for the asset is a market in which transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. (b)Level 2 inputs are significant other observable inputs. These inputs include: a) Quoted prices for similar assets in active markets; b) Quoted prices for identical or similar assets in markets that are not active; and c) Inputs other than quoted prices that are observable for an asset. (c)Level 3 inputs are significant unobservable inputs. These inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date. (d)This pertains to the City-owned bonds of its investments in Pt. San Pedro that has no trading market and is thus listed under Level 3. This bond is valued using discounted cash flow techniques. Total District's Cash and Investments 55 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) F. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City also manages its interest rate risk by holding most investments to maturity, thus reversing unrealized market gains and losses. Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity or earliest call date: 12 Months More than Type of Investment or Less 12 Months Total City: Money Market Funds $639,024 $639,024 California Asset Management Program 32,018,667 32,018,667 Local Agency Investment Fund 17,778,472 17,778,472 County Investment Pool 79,149 79,149 U.S. Treasury Notes 2,991,730 $996,680 3,988,410 U.S. Agency Securities and Instruments 9,079,202 5,154,881 14,234,083 Medium-Term Corporate Notes 2,048,602 2,015,770 4,064,372 Investment in Pt. San Pedro Bonds 1,387,200 1,387,200 Total Investments $64,634,846 $9,554,531 74,189,377 Cash in banks and on hand 8,390,941 Total City Cash and Investments 82,580,318 Fiduciary: Cash in banks and on hand 115,418 Total Fiduciary Cash 115,418 Total City and Fiduciary Cash 82,695,736 San Rafael Sanitary District: County Investment Pool 34,255,365 Total District's Cash and Investments 34,255,365 Total Cash and Investments $116,951,101 56 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2019, these investments matured in an average of 173 days. Money Market Mutual Funds are available for withdrawal on demand. The investment portfolio of the Money Market Mutual Fund had an average maturity of 26 to 28 days at June 30, 2019. The City invests the proceeds of the 2018 Authority Lease Revenue Bonds with the California Asset Management Program (CAMP). CAMP is a California Joint Powers Authority established in 1989 to provide California public agencies with professional investment services. The CAMP Pool is a permitted investment for all local agencies under California Government Code Section 53601(p). CAMP is directed by a Board of Trustees, which is made up of experienced local government finance directors and treasurers. CAMP investments are limited to investments permitted by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. The City reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share in accordance with GASB 79 requirements. At June 30, 2019, the fair value was approximate to the City’s cost. At June 30, these investments have an average maturity of 54 days. The City, as a CAMP shareholder, may withdraw all or any portion of the funds in its CAMP account at any time by redeeming shares. The CAMP Declaration of Trust permits the CAMP trustee to suspend the right of withdrawal from CAMP or to postpone the date of payment of redemption proceeds if the New York Stock Exchange is closed other than for customary weekend and holiday closings, if trading on the New York Stock Exchange is restricted, or if, in the opinion of the CAMP trustees, an emergency exists such that disposal of the CAMP pool securities or determination of its net asset value is not reasonably practicable. If the right of withdrawal is suspended, the City may either withdraw its request for that withdrawal or receive payment based on the net asset value of the CAMP pool next determined after termination of the suspension of the right of withdrawal. The County’s investment pool is not registered with the Securities and Exchange Commission as an investment company. The pool has a credit rating of “AAA/V1.” Investments made by the Treasurer are regulated by the California Government Code and by the County’s investment policy. The objectives of the policy are in order of priority, safety, liquidity, yield, and public trust. The County has established a treasury oversight committee to monitor and review the management of public funds maintained in the investment pool in accordance with Article 6 Section 27131 of the California Government Code. The oversight committee and the Board of Supervisors review and approve the investment policy annually. The County Treasurer prepares and submits a comprehensive investment report to the members of the oversight committee and the investment pool participants every month. The report covers the types of investments in the pool, maturity dates, par value, actual costs and fair value. 57 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 2 - CASH AND INVESTMENTS (Continued) G. Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2019, for each of the Primary Government’s investment types as provided by Standard and Poor’s or Moody’s investment rating systems, except as noted: Percentage Amount of Investments Invested Investments NRSRO Rating City (except Fiduciary Funds): Money Market Funds $639,024 < 1% Aaa/AAA California Asset Management Program 32,018,667 43%AAAm County Investment Pool 79,149 < 1% Aaa/AAA U.S. Treasury Notes 3,988,410 6%AA+ U.S. Agency Securities and Instruments 14,234,083 19%AA+ Medium-Term Corporate Notes 4,064,372 6% A, A+, AA-, AA Local Agency Investment Fund 17,778,472 24% Not Rated Investment in Pt. San Pedro Bonds 1,387,200 2% Not Rated Total City Investments 74,189,377 Component Unit: Investment in County Pool 34,255,365 AAA/V1 Total Investments $108,444,742 H. Concentration Risk Included in the table at Note G above are the following significant investments in any one issuer other than U. S. Treasury securities, mutual funds, and external investment pools. Reporting Unit Issuer Investment Type Amount Entity-wide Federal Home Loan Bank Federal Agencies Obligation $5,402,739 Entity-wide Federal Farm Credit Bank Federal Agencies Obligation 3,494,515 Entity-wide Federal Home Loan Mortgage Corporation Federal Agencies Obligation 3,142,597 58 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 3 - INTER-FUND TRANSACTIONS A. Transfers Resources may be transferred from one City fund to another. Transfers routinely fund capital projects or capital outlays, lease or debt service payments, and operating expenses. Transfers between funds during the fiscal year ended June 30, 2019, were as follows: From Fund To Fund Amount General Fund Essential Facilities Capital Projects Fund $4,145,000 (A) Non-Major Governmental Funds 2,133,828 (B) Traffic and Housing Mitigation Special Revenue Fund Non-Major Governmental Funds 3,380,892 (C) Gas Tax Special Revenue Fund General Fund 800,000 (D) Essential Facilities Capital Projects Fund General Fund 2,234,450 (E) Parking Services Enterprise Fund General Fund 508,698 (E) Non-Major Governmental Funds 100,000 (B) Internal Service Funds General Fund 678,213 (E) Non-Major Governmental Funds 86,150 (B) Non-Major Governmental Funds General Fund 100,000 (D) Essential Facilities Capital Projects Fund 1,056,300 (A) Building Maintenance Internal Service Fund 170,798 (F) Non-Major Governmental Funds 258,766 (B) $15,653,095 and other program support. (A) Transfers to the Essential Facilities Capital Projects Fund were for Public Safety Center Projects. (B) Transfers to the Non-Major Governmental Funds were for administrative costs, grant matching, recreation, (C) Transfers to the Capital Improvement Fund were for program support. (F) Transfers to the Building Maintenance Internal Service Fund were for program support. (D) Transfers to the General Fund were for street maintenance support and administrative costs. (E) Transfers to the General Fund from Essential Facilities Capital Projects, Parking Services and Internal Services Funds were for debt service payments. B. Internal Balances GASB 34 requires internal balances to be presented in the Government-wide financial statements only. They represent the net interfund receivables and payables remaining after the elimination of all such balances within governmental and business-type activities. 59 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 4 - LOANS RECEIVABLE A. Summary of Loans Receivable The City has identified the portion of fund balance represented by these loans as restricted or assigned as discussed in Note 8. At June 30, 2019, these loans totaled: Employee Loans $3,936 Centertown Associates 256,870 One "H" Street Associates 42,859 Fire Chief Loan 96,536 Total $400,201 B. Employee Loans The City administers a computer loan program that supports the use of technology by employees. Employees are permitted to borrow up to $1,500 for the purchase of computer hardware and software. The loans are interest-free, have maximum terms of one year, and are repaid through automatic payroll deductions. As of June 30, 2019, the balance of the employee loans receivable was $3,936. C. Centertown Associates Loan On August 20, 1990, the former Redevelopment Agency loaned Centertown Associates, Ltd, $303,000 at 3% interest due semiannually. The loan was made for the construction of a 60-unit affordable Centertown apartment complex and is fully secured by a deed of trust. The final payment is due on July 31, 2065. With the dissolution of the Redevelopment Agency effective February 1, 2012, the assets of the Agency’s Low and Moderate Income Housing fund, including the Centertown Associates loan, were assumed by the City’s Low and Moderate Income Housing Special Revenue Fund. As of June 30, 2019, the balance of the loan including principal and accrued interest was $256,870. D. One “H” Street Associates Loan On January 18, 1994, the City loaned One “H” Street Associates $100,000 at zero percent interest with annual payments of $2,857 and with a final payment due January 18, 2034. As of June 30, 2019, the balance of this loan was $42,859. E. Fire Chief Loan On September 17, 2007, the City Council approved a Home Loan Agreement to provide the Fire Chief with housing assistance. Under the Agreement, which was executed on October 3, 2007, the City loaned the Fire Chief $600,000 to assist in the purchase of his primary residence. The loan is secured by a recorded deed of trust. The initial interest rate to be charged was 5.25% through August 31, 2008. On September 1, 2008, and on each September 1 following, until the loan is paid off, the interest rate of the loan will be adjusted based upon the then reported quarter- to-date Local Agency Investment Fund rate on the City’s investment portfolio. As of June 30, 2019, the balance of the loan was $96,536. 60 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 4 - LOANS RECEIVABLE (Continued) F. Other Receivables The City provides staffing to San Rafael Sanitation District (District) under a contractual arrangement originated in 1987 that requires the District to pay all related employee costs incurred by the City on its behalf. Accordingly, the cost of providing pension and post- employment health benefits incurred by the City for the District staff but not yet funded are reflected by the District as an obligation, and by the City as a noncurrent receivable. The obligation as of June 30, 2019 is $4,613,963, and is composed of the following: Long-term receivable from San Rafael Sanitation District: Defined benefit pension liability allocation (GASB 68)$3,520,186 Other post-employment benefit liability allocation (GASB 75)1,093,777 Total long-term receivable from San Rafael Sanitation District $4,613,963 NOTE 5 - CAPITAL ASSETS Changes in capital assets during the fiscal year consisted of: Balance Additions/Balance June 30, 2018 Adjustments Retirements Transfers June 30, 2019 Governmental Activities Capital assets not being depreciated: Land $83,662,359 $83,662,359 Construction in progress 35,720,118 $40,021,643 ($229,724) ($5,689,623) 69,822,414 Total capital assets not being depreciated 119,382,477 40,021,643 (229,724) (5,689,623) 153,484,773 Capital assets being depreciated: Land improvements 9,020,097 742,470 9,762,567 Buildings and structures 43,558,694 688,428 44,247,122 Machinery and equipment 20,971,296 261,923 (284,724)20,948,495 Infrastructure 199,559,595 4,258,725 203,818,320 Total capital assets being depreciated 273,109,682 261,923 (284,724) 5,689,623 278,776,504 Less accumulated depreciation for: Land improvements (6,340,195) (267,555)(6,607,750) Buildings and structures (19,553,095) (1,294,498)(20,847,593) Machinery and equipment (12,952,045) (1,256,765) 194,042 (14,014,768) Infrastructure (131,668,796) (4,958,895)(136,627,691) Total accumulated depreciation (170,514,131) (7,777,713) 194,042 (178,097,802) Total net capital assets being depreciat ed 102,595,551 (7,515,790) (90,682) 5,689,623 100,678,702 Total governmental activity capital assets $221,978,028 $32,505,853 ($320,406)$254,163,475 61 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 5 - CAPITAL ASSETS (Continued) Balance Balance June 30, 2018 Additions Retirements June 30, 2019 Business-type Activities Capital assets not being depreciated: Land $8,620,853 $8,620,853 Total capital assets not being depreciated 8,620,853 8,620,853 Capital assets being depreciated: Buildings and structures 10,713,814 10,713,814 Machinery and equipment 1,128,311 $26,902 ($112,516) 1,042,697 Total capital assets being depreciated 11,842,125 26,902 (112,516) 11,756,511 Less accumulated depreciation for: Buildings and structures (3,305,322) (205,362)(3,510,684) Machinery and equipment (1,007,265) (30,723) 112,516 (925,472) Total accumulated depreciation (4,312,587) (236,085) 112,516 (4,436,156) Total net capital assets being depreciated 7,529,538 (209,183)7,320,355 Total business-type activity capital assets $16,150,391 ($209,183)$15,941,208 Balance T ransfers &Balance June 30, 2018 Additions Retirements Adjustments June 30, 2019 San Rafael Sanitation District Capital assets not being depreciated: Land and easements $115,329 $115,329 Construction in progress 775,804 $4,596,989 ($3,838,418) 1,534,375 Total capital assets not being depreciated 891,133 4,596,989 (3,838,418) 1,649,704 Capital assets being depreciated: Subsurface lines 36,555,141 823,808 1,371,263 38,750,212 Sewage collection facilities 42,205,803 27,611 2,467,155 44,700,569 General plant and administration 1,676,278 100,623 ($27,108)1,749,793 Total capital assets being depreciated 80,437,222 952,042 (27,108) 3,838,418 85,200,574 Less accumulated depreciation for: Subsurface lines (11,863,418) (579,346)(12,442,764) Sewage collection facilities (19,691,736) (1,171,540)(20,863,276) General plant and administration (1,140,144) (138,310) 27,108 (1,251,346) Total accumulated depreciation (32,695,298) (1,889,196) 27,108 (34,557,386) Total net capital assets being depreciated 47,741,924 (937,154)3,838,418 50,643,188 Total District's capital assets $48,633,057 $3,659,835 $52,292,892 Capital Asset Contributions - Some capital assets may have been acquired using Federal and State grant funds, or were contributed by developers or other governments. These contributions are accounted for as revenues at the time the capital assets are contributed. 62 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 5 - CAPITAL ASSETS (Continued) Depreciation Allocation - Depreciation expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or program are as follows: Governmental Activities General government $144,138 Public safety 893,499 Public works and parks 5,851,551 Community development 46,532 Culture and recreation 841,993 Total Governmental Activities $7,777,713 Business-type Activities Parking services $236,085 Total Business-type Activities $236,085 NOTE 6 - LONG TERM DEBT The City generally incurs long-term debt to finance projects or purchase assets which will have useful lives equal to or greater than the related debt. A summary of governmental and business-type activities transactions for the fiscal year ended June 30, 2019, are as follows: Authorized Balance Balance Current and Issued June 30, 2018 Retirements June 30, 2019 Portion Governmental Activities Bonds: 2018 Authority Lease Revenue Bonds 4.00%-5.00%, due 6/1/2034 $45,485,000 $45,485,000 $45,485,000 Add: unamortized bond premium 8,127,097 $507,944 7,619,153 2010 Taxable Pension Obligation Bonds 6.00%-6.25%, due 7/1/2025 4,490,000 4,185,000 420,000 3,765,000 $445,000 Total Governmental Activities Bonds 57,797,097 927,944 56,869,153 445,000 Governmental Activities - Direct Borrowings: PG & E City Hall HVAC Retrofit Note Payable 0.00%, due 11/30/2023 334,585 179,278 33,280 145,998 33,280 PG & E Street Light Retrofit Note Payable 0.00%, due 8/31/2019 233,896 48,873 41,892 6,981 6,981 PG & E CEC Efficiency Note Payable 1.00%, due 12/22/2027 1,178,813 1,080,800 1,080,800 Total Governmental Activities - Direct Borrowings 1,308,951 75,172 1,233,779 40,261 Total Governmental Activities Debt $59,106,048 $1,003,116 $58,102,932 $485,261 Business-type Activities Direct Borrowing: PG & E Parking Lot Lighting Retrofit Note Payable 0.00%, due 11/30/2023 $66,380 $34,571 $6,816 $27,755 $6,816 2012 Authority Lease Revenue Refunding Bonds 2.00-4.00%, due 4/1/2033 6,750,000 5,174,999 275,000 4,899,999 285,000 Less: unamortized bond discount (10,697) (725)(9,972) Total Business-type Activities Bonds 5,164,302 274,275 4,890,027 285,000 Total Business-type Activities $5,198,873 $281,091 $4,917,782 $291,816 63 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 6 - LONG-TERM DEBT (Continued) A. 2018 Authority Lease Revenue Bonds On March 5, 2018, the Authority issued 2018 Authority Lease Revenue Bonds in the amount of $45,485,000 bearing interest at rates from 4.00% to 5.00%. The proceeds of the bonds were provided for replacement of two fire stations and construction of a public safety center. Interest on the Bonds is payable semiannually on June 1 and December 1. Principal payable on the Bonds will be paid on June 1 starting on June 1, 2021. The Bonds maturing on or prior to June 1, 2028, are not subject to optional redemption prior to their maturity. The Bonds maturing on or after June 1, 2029, are subject to optional redemption as a whole or in part on any date after June 1, 2028, at the option of the Authority, at a redemption price equal to the principal amount of the Bonds subject to redemption, plus accrued interest to the date fixed for redemption, without premium. The Bonds are payable from any source of available funds of the City. The bond covenants contain events of default that require the revenue of the City to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. B. 2010 Taxable Pension Obligation Bonds On July 1, 2010, the City issued 2010 Taxable Pension Obligation Bonds in the amount of $4,490,000 bearing interest at rates from 6.00% to 6.25%. Principal payments are due annually on July 1 and interest is payable semiannually on January 1 and July 1. The Bonds were issued to prefund a portion of the obligations of the City to the Marin County Employees’ Retirement Association. Payment of the principal and interest on the Bonds is not limited to any special source of funds and is payable from any legally available moneys of the City. The City is not empowered or obligated to levy or pledge taxes to make payments on the Bonds. The bond covenants contain events of default that require the revenue of the City to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. C.Pacific Gas and Electric Note Payable PG&E Lighting Retrofit On September 30, 2013, the City executed a note payable agreement with Pacific Gas and Electric (PG&E) in the amount of $634,861, bearing no interest. The debt was assumed as a means to finance energy-efficient retrofit projects which include updating existing heating, ventilation and air conditioning (HVAC) unit in City Hall and converting the street and parking lot light to light emitting diode (LED). $334,585 of the loan is for the HVAC projects and $300,276 of the loan is for the LED projects. Repayment of the loan commenced in December 2013, and is due monthly until paid in full in 2023. 64 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 6 - LONG-TERM DEBT (Continued) PG&E CEC Efficiency On September 5, 2017, City Council approved the execution of a note payable agreement with Pacific Gas and Electric (PG&E) in the amount of $1,178,813, bearing interest at 1%. The debt was assumed as a means to finance the execution of various energy efficiency system upgrades to City facilities and street lights. The upgrades will include interior and exteriors lighting upgrades and energy management control systems. As of June 30, 2019, the loan obligation was $1,080,000, the project is ongoing and additional note proceeds are expected in fiscal year 2019- 2020. Payments will commence in December 2020, and are due semi-annually until paid in full in 2027. D. 2012 Authority Lease Revenue Refunding Bonds On August 7, 2012, the Authority issued 2012 Authority Lease Revenue Refunding Bonds in the amount of $6,750,000 bearing interest at rates from 2.00% to 4.00%. The proceeds of the Series 2012 Bonds were used to repay the Authority’s 2003 Authority Lease Revenue Bonds that financed the construction of the 3rd and C Street parking structure and achieved lower interest rates and lower annual debt service payments. The refunding resulted in a net present value savings to the City in debt service of $670,496. In addition, the requisition price exceeded the net carrying amount of the old debt by $295,278. The Series 2012 Bonds are payable from lease payments made by the City to the Authority for leasing the City facilities. The rights to these lease payments have been irrevocably transferred by the Authority to the Trustee. Activities related to the Series 2012 Bonds are reported in the Parking Services Enterprise Fund. Principal payments are due annually on April 1 and interest is payable semiannually on October 1 and April 1. The Bonds maturing on or prior to April 1, 2022, are not subject to optional redemption prior to their maturity. The Bonds maturing on or after April 1, 2023, are subject to optional redemption as a whole or in part on any date after April 1, 2022, at the option of the Authority, at a redemption price equal to the principal amount of the Bonds subject to redemption, plus accrued interest to the date fixed for redemption, without premium. The Bonds are payable from any source of available funds of the City. The bond covenants contain events of default that require the revenue of the City to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. 65 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 6 - LONG-TERM DEBT (Continued) E. Future Debt Service Future debt service requirements, including interest, at June 30, 2019, are as follows: For the Year Governmental Activities - Bonds Governmental Activities - Direct Borrowings Ended June 30 Principal Interest Principal Interest 2020 $445,000 $2,420,832 $40,261 $33,280 2021 2,385,000 2,393,232 87,320 54,626 2022 2,575,000 2,286,801 87,320 53,545 2023 2,775,000 2,171,501 87,320 52,464 2024 3,000,000 2,045,528 66,918 30,981 2025 - 2029 16,830,000 7,848,506 270,200 74,306 2030 - 2034 21,240,000 3,211,250 270,200 47,285 2035 - 2039 270,200 20,265 2040 54,040 810 Totals 49,250,000 $22,377,650 1,233,779 $367,562 Reconciliation of Long-term debt: Add: unamortized premium 7,619,153 $56,869,153 $1,233,779 Business-type Activities For the Year Business-type Activities - Bonds Direct Borrowings Ended June 30 Principal Interest Principal 2020 $285,000 $169,838 $6,816 2021 290,000 161,288 6,816 2022 300,000 152,588 6,816 2023 310,000 143,588 6,816 2024 320,000 134,288 491 2025 - 2029 1,750,000 507,518 2030 - 2034 1,644,999 164,400 Totals 4,899,999 $1,433,508 27,755 Reconciliation of Long-term debt: Less: unamortized discount (9,972) $4,890,027 $27,755 66 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 7 - DEBT WITHOUT CITY COMMITMENT The City has sponsored the issuance of the following debt, for which the City is not liable for repayment but acts as an agent for the property owners and bondholders: Project Original Outstanding Description Amount June 30, 2019 San Rafael Redevelopment Agency 162-175 Belvedere Multifamily Housing Revenue Bonds-2000A Apartments $3,590,529 $997,394 California Statewide Communities Development Authority Revenue Bonds-2002 St. Marks School 5,605,000 3,205,000 San Rafael Redevelopment Agency Variable Rate Demand Multifamily 55 Fairfax Housing Revenue Bonds-2001A Apartments 3,000,000 1,900,000 San Rafael Redevelopment Agency San Rafael Commons Multifamily Housing Revenue Bonds-2001 Apartments 6,100,000 4,585,000 San Rafael Redevelopment Agency Martinelli House Multifamily Housing Revenue Bonds-2007 Series A Project 6,000,000 1,845,971 Multifamily Housing Revenue Bonds-2007 Series B Martinelli House 1,000,000 175,174 Pt. San Pedro Road Median Landscaping Pt. San Pedro Road Assessment District Limited Obligation Bonds-2012 Median Landscaping 1,750,000 1,387,200 Total $27,045,529 $14,095,739 NOTE 8 - NET POSITION AND FUND BALANCE A. Net Position Net Position is the excess of all the City’s assets and deferred outflow over all its liabilities, and deferred inflows regardless of fund. Net Position is divided into three captions. These captions apply only to Net Position, which is determined only at the Government-wide level and business type activity and are described below: Net Investment in Capital Assets describes the portion of Net Position which is represented by the current net book value of the City’s capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Position which is restricted to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. Unrestricted describes the portion of Net Position which is not restricted to use. 67 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 8 - NET POSITION AND FUND BALANCE (Continued) B. Fund Balance In the fund financial statements, fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash and receivables, less its liabilities. The City’s fund balances are classified in accordance with Governmental Accounting Standards Board Statement Number 54 (GASB 54), Fund Balance Reporting and Governmental Fund Type Definitions, which requires the City to classify its fund balances based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the City prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the following hierarchy is ranked according to the degree of spending constraint: Nonspendable represents balances set aside that do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for redevelopment are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts are required to be presented as a component of the applicable category. Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources. Committed fund balances have constraints imposed by resolution of the City Council which may be altered only by resolution of the City Council. Nonspendable amounts subject to council commitments are included along with spendable resources. Assigned fund balances are amounts constrained by the City’s intent that they be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the City Manager as designated by the City Council and may be changed at the discretion of the City Council or City Manager. This authorization is given through Resolution No. 13173 which adopts the City’s Fund Balance Policy. This category includes nonspendables, when it is the City’s intent to use proceeds or collections for a specific purpose; and residual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed. Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual General Fund balance and residual fund deficits, if any, of other governmental funds. 68 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 8 - NET POSITION AND FUND BALANCE (Continued) Detailed classifications of the City’s fund balances, as of June 30, 2019, are below: Capital Project Funds General Fund Traffic and Housing Mitigation Gas Tax Essential Facilities Capital Projects Fund Other Governmental Funds Total Fund balances: Nonspendable: Prepaids $37,271 $27,627 $64,898 Total Nonspendable 37,271 27,627 64,898 Restricted for: Assessment District capital projects 302,890 302,890 Baypoint Lagoons Assessment District 252,414 252,414 Bedroom tax capital projects 84,325 84,325 Childcare 1,746,845 1,746,845 Development services 631,375 631,375 Emergency medical services 785,719 785,719 1997 financing authority revenue bonds debt service 151,695 151,695 Gas tax $4,728,111 4,728,111 Grants 796,024 796,024 Household hazmat facility 366,418 366,418 Library 2,449,535 2,449,535 Library assessment 556,470 556,470 Loch Lomond Assessment District 674,208 674,208 Loch Lomond Assessment District #2 282,718 282,718 Low and Moderate Income Housing 895,727 895,727 Mariposa Assessment District debt service 16,573 16,573 Measure E - Public Safety Facility $32,390,499 32,390,499 Measure G - Cannabis 75,973 75,973 Parkland dedication 257,542 257,542 Peacock Gap Assessment District debt service 2,875 2,875 Public safety 89,647 89,647 Pt. San Pedro- Maintenance Portion 120,673 120,673 Recreation revolving 2,328 2,328 Storm water 402,544 402,544 Traffic and housing mitigation $5,197,376 5,197,376 Total Restricted 5,197,376 4,728,111 32,390,499 10,944,518 53,260,504 Committed to: Capital improvement capital projects 1,890,447 1,890,447 Park capital projects 10,824 10,824 Total Committed 1,901,271 1,901,271 Assigned to: Contractual commitments 230,646 230,646 MOU - One-time payments 797,625 797,625 Measure E - Public Safety Facility 143,702 143,702 Emergency and cash flow 7,900,000 7,900,000 Infrastructure Reserve 600,000 600,000 General plan / long range planning 1,719,111 1,719,111 Open space capital projects 118,139 118,139 Total Assigned 11,391,084 118,139 11,509,223 Unassigned 1,104,216 1,104,216 Total Fund Balances $12,532,571 $5,197,376 $4,728,111 $32,390,499 $12,991,555 $67,840,112 Special Revenue Funds 69 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS A. Plan Description The City’s defined benefit retirement plan is administered by the Marin County Employees’ Retirement Association (MCERA), a retirement system established in July 1950 and governed by the California Constitution; the County Employees Retirement Law of 1937 (CERL or 1937 Act, California government Code Section 31450 et seq.); the Public Employees’ Pension Reform Act of 2013 (PEPRA, Government Code Section 7522); the provisions of California Government Code Section 7500 et seq; and the bylaws, procedures, and policies adopted by MCERA’s Board of Retirement. The Marin County Board of Supervisors may also adopt resolutions, as permitted by the CERL and PEPRA, which may affect the benefits of MCERA members. MCERA operates as a cost-sharing multiple employer defined benefit plan for the City and eight other participating employers: County of Marin, Local Agency Formation Commission (LAFCO), Marin City Community Services District, Marin County Superior Court, Marin/Sonoma Mosquito and Vector Control District, Novato Fire Protection District, Southern Marin Fire Protection District, and Tamalpais Community Services District. Separate actuarial valuations are performed for these other agencies and districts, and the responsibility for funding their plans rest with those entities. Post-retirement benefits are administered by MCERA to qualified retirees. Copies of MCERA’s annual financial reports, which include required supplementary information (RSI) for each plan may be obtained from their office at One McInnis Parkway, Suite 100, San Rafael, CA 94903 or online at www.mcera.org. B. Benefit Provisions Service Retirement: MCERA’s service retirement benefits are based on the years of credited service, final average compensation, and age at retirement, according to the applicable statutory formula. Members who qualify for service retirement are entitled to receive monthly retirement benefits for life. General members hired prior to January 1, 2013 are eligible to retire once they attain the age of 50 (except Misc Tier 2, whereby the minimum age is 55) and have acquired 10 or more years of retirement service credit. A member with 30 years of service is eligible to retire regardless of age. A member who is age 70 or older is eligible to retire regardless of service credit. General members who are first hired on or after January 1, 2013 are eligible to retire once they have attained the age of 52, and have acquired 5 years of retirement service credit, or age 70, regardless of service. Safety members hired prior to January 1, 2013 are eligible to retire once they attain the age of 50 and have acquired 10 or more years of retirement service credit. A member with 20 years of service is eligible to retire regardless of age. A member who is age 70 or older is eligible to retire regardless of service. Safety members who are first hired on or after January 1, 2013 are eligible to retire once they have attained the age of 50, and have acquired 5 years of retirement service credit, or age 70, regardless of service. 70 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) Disability Retirement: A member with five years of service, regardless of age, who becomes permanently incapacitated for the performance of duty is eligible to apply for a non-service connected disability retirement. Any member who becomes permanently incapacitated for the performance of duty as a result of injury or disease arising out of and in the course of employment is eligible to apply for a service-connected disability retirement, regardless of service length or age. Death Benefits: MCERA provides specified death benefits to beneficiaries and members’ survivors. The death benefits provided depend on whether the member is active or retired. The basic active member death benefit consists of a members’ retirement contributions plus interest plus one month’s pay for each full year of service (up to a maximum of six month’s pay). Retiring members may choose from five retirement benefit payment options. Most retirees elect to receive the unmodified allowance which provides the maximum benefit to the retiree and continuance of 60% of the retiree’s allowance to the surviving spouse or registered domestic partner after the retiree’s death. Other death benefits may be available based on the years of service, marital status, and whether the member has minor children. Cost of Living Adjustment: Retirement allowances are indexed for inflation. Most retirees receive automatic basic cost of living adjustments (COLA’s) based upon the Urban Consumer Price Index (UCPI) for the San Francisco Bay Area. These adjustments go into effect on April 1 of each year. Annual COLA increases are statutorily capped at 2%, 3%, or 4% depending upon the member’s retirement tier. When the UCPI exceeds the maximum statutory COLA for the member’s tier, the difference is accumulated for use in future years when the UCPI is less than the maximum statutory COLA. The accumulated percentage carryover is known as the COLA Bank. C. Funding Policy The funding policy of MCERA provides for actuarially determined periodic contributions by the City at rates such that sufficient assets will be available to pay plan benefits when due. The employer rates for normal cost are determined using the Entry Age Normal Actuarial Cost Method, which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The City contribution rates for the year ended June 30, 2019 were as follows: Employer Employee Contribution Rate Contribution Rate Benefit Basis City of San Rafael Misc Tier 1 53.34%0.00% - 16.13% 2.7% @ 55 Highest year City of San Rafael Misc Tier 2 52.40%7.34% - 11.76% 2.0% @ 55 Average three highest years City of San Rafael Fire Tier 1 74.94%0.00% - 19.59% 3.0% @ 55 Highest year City of San Rafael Fire Tier 2 72.55% 11.40% - 17.36% 3.0% @ 55 Average three highest years City of San Rafael Safety Police Tier 1 74.30%0.00% - 19.59% 3.0% @ 55 Highest year City of San Rafael Safety Police Tier 2 73.49% 11.40% - 17.36% 3.0% @ 55 Average three highest years PEPRA Misc 45.39%9.30% 2.0% @ 62 Average three highest years PEPRA Safety 63.06%13.98% 2.7% @ 57 Average three highest years These rates were determined by MCERA, based on the actuarial valuation dated June 30, 2017. The actual rate of return on investments during that year was 11.92% on a market value basis net of investment expenses, as compared to the prior year’s 7.25% assumption. 71 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) The City uses the actuarially determined percentages of payroll to calculate and pay contributions to MCERA. Contributions to the plan from the City were $20,352,203 for the year ended June 30, 2019, based on a total payroll of $44,634,340, of which $33,106,430 represented the basis for the plan contributions. Of the total payroll subject to plan contributions, $1,431,100 is attributable to the San Rafael Sanitation District (SRSD), a component unit of the City. Effective with the June 30, 2013 valuation, the Unfunded Actuarial Liability (UAL) as of June 30, 2013 is being amortized over a closed 17-year period (13 years remaining as of June 30, 2017), except for the additional UAL attributable to the outstanding unfunded actuarial loss from 2009, which is being amortized over a separate closed period (currently 21 years). Effective with the June 30, 2014 valuation, any new sources of UAL due to actuarial gains and losses or method changes are amortized over a closed 24-year period, with a 5-year ramp up period at the beginning of the period, a 4-year ramp down at the end of the period, and 15 years of level payments as a percentage of payroll between the ramping periods. This new amortization method for gains and losses is similar to a 20-year amortization period with level payments as a percentage of payroll, in conjunction with a traditional 5-year asset smoothing. Assumption changes are amortized over a closed 22-year period, with a 3-year ramp up period, 2- year ramp down period, and 17 years of level payments as a percentage of payroll. D. Pension Liability and Pension Expense The City’s net pension liability (NPL) has been determined for the financial reporting period ended June 30, 2019 based on the following methodology: The City’s NPL as of June 30, 2017 was updated to the measurement date of June 30, 2018 using the actual City’s plan assets as of June 30, 2018 and estimating the change in the City’s liabilities between July 1, 2017 and June 30, 2018. This estimate is based on a projection of the City’s long-term contributions to the pension plan relative to the projected contributions of all participating employers. The resulting NPL for the City under this calculation is $110,567,858, or 34.4752% of the total MCERA NPL of $330,297,827 (reference MCERA’s GASB 67/68 report as of June 30, 2018). This compares to the previous year’s NPL of $120,649,687, or 32.718% of the total MCERA NPL of $368,756,305 (reference MCERA’s GASB 67/68 report as of June 30, 2017). In addition to the reporting of the NPL as of June 30, 2019, the City reported deferred inflows of $34,181,686 and deferred outflows of $12,350,764 as of the measurement date June 30, 2018. The City reported post-measurement date outflows of $20,352,203 from actual fiscal year 2018- 2019 pension contributions. Deferred outflows include deferred investment gains and adjustments to assumptions based on actual positive results. Deferred outflows have a positive impact on net assets (offsetting the NPL) and will be recognized in future reporting periods. Deferred inflows include deferred investment losses, adjustments to assumptions based on actual negative results, and contributions made after the measurement date. Deferred inflows have a negative impact on net assets (similar to the NPL) and will be recognized in future reporting periods. The net impact of these pension liability related entries on the City’s Statement of Net Position before allocations to the San Rafael Sanitation District was $112,046,577. After allocations to the San Rafael Sanitation District, the net impact on the City’s Statement of Net Position was $108,526,391. 72 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) Under GASB 68, the City’s pension expense is based on the Plan’s pension expense, adjusted for the City’s actual contributions and net pension liability. Three components are used to calculate pension expense: (1) changes in the net pension liability; (2) changes in benefit terms (if any): and (3) changes in actuarial assumptions and experience. Pension expense is calculated using a different methodology than that used to derive the actuarially determined annual contribution to the Plan. Actual pension contributions during the reporting year were $20,352,203. Because pension expense is affected by annual changes in the net pension liability, volatility is to be expected. For the current measurement period, investment returns above the assumed rate were responsible for the decrease in net pension liability and had a corresponding impact on pension expense. The table below provides a summary of the key results during the reporting period: Measurement Date Measurement Date Description 6/30/2018 6/30/2017 Net Pension Liability $110,567,858 $120,649,687 Deferred Inflows 34,181,686 31,607,575 Deferred Outflows (12,350,764) (18,395,737) Impact on Net Position before Deferred Outflows from Contributions 132,398,780 133,861,525 Additional Deferred Outflows - Contributions Subsequent to Measurement Date (20,352,203) (20,167,435) Impact on Statement of Net Position before Allocations 112,046,577 113,694,090 Allocation of NPL to SRSD 3,487,083 3,740,703 A llocation of Deferred Inflows (measurement date) to SRSD 1,078,020 979,982 A llocation of Deferred Outflows (measurement date) to SRSD (389,518) (570,354) Impact on Net Position before Allocation of Deferred Outflows from Contributions to SRSD 4,175,585 4,150,331 A llocation of Additional Deferred Outflows (Contributions) to SRSD (655,399) (657,863) Long-Term Receivable from SRSD, due to pension obligations (see Note 4F)3,520,186 3,492,468 Impact on Statement of Net Position, net of receivable from SRSD $108,526,391 $110,201,622 Pension Expense $18,704,394 $21,503,841 Summary of Results Projection of Total Pension Liability and Net Pension Liability Total Pension Liability (TPL) is the actuarial present value of projected benefit payments attributed to past periods of employee service. For the purposes of Governmental Accounting Standards Board Statement No. 68 (GASB 68), MCERA and the City have adopted a measurement date of June 30, 2018. The beginning of year measurement of TPL is based on the actuarial valuation as of June 30, 2017. The TPL at the end of the measurement year, June 30, 2018, is also measured as of the valuation date of June 30, 2017 and projected to June 30, 2018. The Plan Fiduciary Net Position (FNP) is the fair or market value of assets. The FNP at the beginning of the year is based on the actuarial valuation as of June 30, 2017. The FNP at the end of the measurement year, June 30, 2018, is also measured as of the valuation date of June 30, 2017 and projected to June 30, 2018. 73 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) The Net Pension Liability (NPL) is the City liability for benefits provided through its defined benefit plan administered by MCERA. It is calculated by reducing the TPL by the FNP. The long- term portion of the governmental activities’ NPL is liquidated primarily by the General Fund. Actuarial assumptions: The total pension liability as of June 30, 2018 (measurement date) was determined by an actuarial valuation as of June 30, 2017, using the following actuarial assumptions applied to all prior periods included in the measurement. The key assumptions in the valuation were: Actuarial assumptions: Expected Return on Assets 7.00 percent per year, net of investment expenses Discount Rate 7.00 percent per year Price Inflation 2.75% per year Salary Increases 3% per year plus merit component based on employee classification and years of service. Administrative Expenses Administrative expenses in the actuarial valuation are assumed to be $4.917 million for FY 2017-18, to be split between employees and employers based on their share of the overall contributions. Administrative expenses shown in this report are based on the actual FY 2017-18 amounts. Post-Retirement COLA Post-retirement COLAs are assumed at a rate of 2.7% for members with a 4% COLA cap, 2.6% for members with a 3% COLA cap, and 1.9% for members with a 2% COLA cap. Mortality Rates for Rates of mortality for active members are specified by CalPERS 2017 Healthy Members Pre-Retirement Non-Industrial Death Rates (plus Duty-Related Death and Inactives rates for Safety members), with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Mortality Rates for Rates of mortality among disabled members are given by CalPERS 2017 Retired Disabled Disability Mortality rates (Non-Industrial rates for Miscellaneous members Members and Industrial Disability rates for Safety members), adjusted by 90% for Males (Miscellaneous and Safety) and 90% for Miscellaneous Females, with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. 74 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) Asset Allocation Policy and Expected Long-term Rate of Return by Asset Class The Board of Retirement has adopted an Investment Policy Statement (IPS), which provides the framework for the management of MCERA’s investments. The IPS establishes MCERA’s investment objectives and defines the principal duties of the Retirement Board, the custodian bank, and the investment managers. The asset allocation plan is an integral part of the IPS and is designed to provide an optimum and diversified mix of asset classes with return expectations to satisfy expected liabilities while minimizing risk exposure. MCERA currently employs external investment managers to manage its assets subject to the provisions of the policy. Plan assets are managed on a total return basis with a long term objective of achieving and maintaining a fully funded status for the benefits provided through the Plan. The following was the Retirement Board’s adopted asset allocation policy as of June 30, 2018: Long-Term Expected Rate Target Long-Term Expected of Return Asset Class Allocation Real Rate of Return (with the effect of inflation) Domestic Equity 32% 4.60% 7.35% International Equity 22% 4.75% 7.50% Fixed Income 23% 0.75% 3.50% Public Real Assets 7% 3.25% 6.00% Real Estate 8% 3.50% 6.25% Private Equity 8% 5.10% 7.85% Total 100% The Long-Term returns are calculated using a 10-year geometric return derived from arithmetic returns and the associated risk (standard deviation). Determination of Discount Rate The discount rate used to measure the Total Pension Liability was 7.00%. Related to the discount rate is the funding assumption that employees will continue to contribute to the plan at the required rates and employers will continue the historical and legally required practice of contributing to the plan based on an actuarially determined contribution, reflecting a payment equal to annual normal cost, a portion of the expected administrative expenses, an amortization payment for the extraordinary losses from 2009 amortized over a closed period (21 years remaining as of the June 30, 2017 actuarial valuation), and an amount necessary to amortize the remaining Unfunded Actuarial Liability as a level percentage of payroll over a closed period (13 years remaining as of the June 30, 2017 actuarial valuation). A change in the discount rate would affect the measurement of the TPL. A lower discount rate results in a higher TPL and higher discount rates results in a lower TPL. Because the discount rate does not affect the measurement of assets, the percentage change in the NPL can be significant for a relatively small change in the discount rate. A one percent decrease in the discount rate increases the TPL by approximately 13% and increases the NPL by approximately 113%. A one percent increase in the discount rate decreases the TPL by approximately 11% and decreases the NPL by approximately 93%. 75 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) The table below shows the sensitivity of the NPL to a one percent decrease and a one percent increase in the discount rate: 1%Discount 1% Decrease Rate Increase Description 6.00%7.00%8.00% Total Pension Liability $1,072,547,443 $947,923,920 $845,324,560 Fiduciary Net Position 837,356,062 837,356,062 837,356,062 Net Pension Liability $235,191,381 $110,567,858 $7,968,498 78.1%88.3%99.1%Fiduciary Net Position as a Percentage of the Total Pension Liability Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Pension Resources The impact of experience gains or losses and assumption changes on the Total Pension Liability (TPL) are recognized in the proportionate share of the pension expense over the average expected remaining service life of all active and inactive members of the plan. As of the measurement date, this recognition period was 4 years. The following tables show the current balance and sources of deferred outflows and inflows related to the City’s defined benefit retirement plan, and the scheduled recognition of these deferred amounts: Deferred Deferred Outflows of Inflows of Description Resources Resources Differences between expected and actual experience $1,026,038 Changes in assumptions $10,243,832 Change in proportion 2,106,932 5,882,404 Difference between City contributions and proportionate share of contributions 9,065,783 Actual FY 18-19 contributions (post measurement date)20,352,203 Net difference between projected and actual earnings on pension plan investments 18,207,461 Deferred Inflows and Outflows Before Allocations $32,702,967 $34,181,686 Allocation of Deferred Inflows and Outflows to SRSD As of measurement date $389,518 $1,078,020 Post-measurement date 655,399 Net Deferred Inflows and Outflows $31,658,050 $33,103,666 76 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 9 - PENSION PLANS (Continued) The $20,352,203 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Amortization Year ended June 30 Amount 2020 ($4,765,259) 2021 (4,671,470) 2022 (8,312,697) 2023 (4,081,496) Total ($21,830,922) NOTE 10 - PUBLIC AGENCY RETIREMENT SYSTEM (DEFINED CONTRIBUTION RETIREMENT PLANS) The City contributes to the Public Agency Retirement System (PARS), which administers a defined contribution retirement plan. A defined contribution retirement plan provides retirement benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s accounts are determined instead of specifying the amount of benefits the individual is to receive. The benefits a participant will receive depend on the amount contributed to the participant’s account, and the returns earned on investments on those contributions. The Plan’s trust administrator is Phase II, P.O. Box 12919, Newport Beach, California 92658. As established by the plan, all eligible part-time and temporary employees of the City become participants in the plan from the date that they are hired. An eligible employee is any employee who, at any time during which the employer maintains this plan, is not accruing a benefit under the Marin County Employees’ Retirement Fund. As determined by the plan, each employee must contribute 3.75% of gross earnings to the plan. The City contributes an additional 3.75% of the employee’s gross earnings. Contributions made by an employee and the employer vest immediately. During the year, the City and employees each contributed $132,472. The total covered payroll of employees participating in the plan for the year ended June 30, 2019, was $3,700,356. The total payroll for the year was $44,634,340. 77 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS Plan Description The City provides certain health care benefits for retired employees and their spouses under an Agent Multiple-Employer Defined Benefit Plan. The benefit provisions were established under the authority of the 1937 Act, Section 31450, et. seq. of the Government Code. Employees who meet the vesting criteria become eligible for these benefits if they receive a retirement benefit from the Marin County Employees’ Retirement Association within 120 days of retirement from City employment. The provisions and benefits of the City’s Other Post Employment Benefit Plan, in effect at June 30, 2019, are summarized as follows: Elected Officials, Mid-Management, & Unrepresented Management All other Bargaining Units Eligibility -Age 50 (age 55 if hired > 7/1/11) with 10 years services (Including reciprocity) OR - -Age 70 - Disability Retirement Benefit Hired < 1/1/09 Full premium/cap Hired < 1/1/10 Up to cap Hired ≥ 1/1/09 PEMHCA Min Hired ≥ 1/1/10 PEMHCA Min Surviving Spouse Benefit Continuation to surviving spouse Medicare Part B Hired < 4/1/07 Full reimbursement None Hired ≥ 4/1/07 None Other No Dental, Vision, or Life Benefits Retire directly from the City: 30 years service (Miscellaneous), 20 years service (Safety) OR Membership in the plan consisted of the following at June 30, 2019, the measurement date: Active plan members 366 Inactive employees or beneficiaries currently receiving benefit payments 349 Inactive employees entitled to but not yet receiving benefit payments 70 Total 785 Funding Policy and Actuarial Assumptions The City’s net OPEB liability was measured using a Total OPEB Liability and Fiduciary Net Position measured as of June 30, 2018, using an actuarial valuation as of June 30, 2017. The following actuarial assumptions were used in the valuation: (a) 6.75% investment rate of return and (b) 2.75% of general inflation increase, and (c) a healthcare trend of declining annual increases ranging from 7.5% in 2019 to 4.0% for the years starting 2076. In addition, the fixed dollar benefit amounts are assumed to be held flat in the future and the premium related benefits are assumed to increase with the healthcare trend rate. 78 I I I CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2016 through June 30, 2017. The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Long-Term Rate of Return Target Expected (with the effect Asset Class Allocation Real Rate of Return of inflation) Public Equity 57% 4.82% 7.57% Fixed Income 27% 1.47% 4.22% TIPS 5% 1.29% 4.04% Commodities 3% 0.84% 3.59% REITs 8% 3.76% 6.51% Total 100% Assumed Long-Term Rate of Inflation 2.75% Assumed Long-Term Investment Expenses n/a Expected Long-Term Net Rate of Return 6.75% Discount Rate 6.75% The Expected Long-Term Rate of Return is provided by CalPERS’ Strategic Asset Allocation Overview in August 2014 – Strategy 1. Discount Rate The discount rate used to measure the total OPEB liability was 6.75 percent. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be sufficient to make projected benefit payments and the plan assets are expected to be invested using the strategy to achieve the expected return. 79 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) Change in Net OPEB Liability Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability/(Asset) (a) (b) (c) = (a) - (b) Balance at June 30, 2017 $51,581,000 $17,884,000 $33,697,000 Changes Recognized for the Measurement Period: Service Cost 822,000 822,000 Interest on the total OPEB liability 3,435,000 3,435,000 Changes in benefit terms Difference between expected and actual experience - Changes of assumptions - Contributions from the employer 3,573,000 (3,573,000) Net investment income 1,425,000 (1,425,000) Administrative expenses (43,000) 43,000 Benefit payments and refunds (3,028,000) (3,028,000) Net Changes during July 1, 2017 to June 30, 2018 1,229,000 1,927,000 (698,000) Balance at June 30, 2018 (Measurement Date)$52,810,000 $19,811,000 $32,999,000 Increase (Decrease) The benefit payments and refunds includes implied subsidy benefit payments in the amount of $771,000. Sensitivity of the net OPEB liability to changes in the discount rate The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75 percent) or 1-percentage-point higher (7.75 percent) than the current discount rate: Discount Rate -1% Current Discount Discount Rate +1% (5.75%) Rate (6.75%) (7.75%) $39,267,000 $32,999,000 $27,753,000 Plan's Net OPEB Liability/(Asset) Sensitivity of the net OPEB liability to changes in the health care cost trend rates Healthcare Cost Discount Rate -1% Trend Rates Discount Rate +1% $29,161,000 $32,999,000 $37,724,000 Plan's Net OPEB Liability/(Asset) 80 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) Detailed information about the OPEB plan’s fiduciary net position is available in the separately issued plan financial report. That report may be obtained from the California Public Employees’ Retirement System, CERBT, P.O. Box 942703, Sacramento, CA, 94229. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources related to OPEB Components of OPEB Expense for fiscal year 2018-2019 were as follows: Service Cost $822,000 Interest on Total OPEB Liability 3,435,000 Projected earning on investments (1,206,000) Employee contributions Administrative expense 43,000 Change in benefits Recognition of deferred outflows/inflows: Experience (708,000) Assumptions 833,000 Asset Returns 48,000 OPEB Expense $3,267,000 Components of deferred outflows of resources and deferred inflows of resources related to OPEB at June 30, 2019 were as follows: Governmental Business-Type Activities Activities Total Deferred outflows of resources: Changes of assumptions $3,092,205 $72,795 $3,165,000 Employer contributions made subsequent to the measurement date 3,639,325 85,675 3,725,000 Total deferred outflows of resources $6,731,530 $158,470 $6,890,000 Deferred inflows of resources: Differences between expected and actual experience $2,629,107 $61,893 $2,691,000 Net difference between projected and actual earnings on plan investments 92,815 2,185 95,000 Total deferred inflows of resources $2,721,922 $64,078 $2,786,000 The difference between projected OPEB plan investment earnings and actual earnings is amortized over a five-year period. The remaining gains and losses are amortized over the expected average remaining service life. 81 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) $3,725,000 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ended June 30, 2020. Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as future OPEB expense as follows: Measurement Period Amortized Ended June 30 Amount 2020 $173,000 2021 173,000 2022 (23,000) 2023 56,000 $379,000 The table below provides a summary of the key results during this reporting period. Measurement Date Measurement Date Description June 30, 2018 June 30, 2017 Net OPEB Liability $32,999,000 $33,696,000 Deferred Inflows 2,786,000 3,399,000 Deferred Outflows (3,165,000)(4,170,000) Impact on Net Position before deferred contributions 32,620,000 32,925,000 Additional Deferred Outflows - Contributions subsequent to measurement date (3,725,000)(3,563,000) Impact on Statement of Net Position before Allocations 28,895,000 29,362,000 Allocation of NOL to SRSD 1,249,127 1,295,611 Allocation of Deferred Inflows (measurement date) to SRSD 105,460 130,692 Allocation of Deferred Outflows (measurement date) to SRSD (119,806)(160,337) Impact on Net Position before deferred contributions to SRSD 1,234,781 1,265,966 Allocation of Additional Deferred Outflows (contributions) to SRSD (141,004)(136,997) Long-Term Receivable from SRSD, due to OPEB obligations (see Note 4F)1,093,777 1,128,969 Impact on Statement of Net Positions, net of receivable from SRSD $27,801,223 $28,233,031 OPEB Expense $3,267,000 $3,395,000 Covered Employee Payroll $36,350,000 $32,885,000 Summary of Results 82 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS The City participates in the jointly governed organizations discussed below through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these entities exercise full powers and authorities within the scope of the related Joint Powers Agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Each joint organization is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint organization, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on that board. Obligations and liabilities of this joint organization are not the City’s responsibility and the City does not have an equity interest in the assets of each joint organization except upon dissolution of the joint organization. A.The Marin County Integrated On-Line Library System (System) The MARINet Library Consortium was formed to provide for the procurement, ownership, operation, maintenance, and governance of shared library services among the libraries, public and academic, in Marin County. Current services shared and paid for on a consortial level through annual membership dues include an integrated library system including patron database, cataloging system, and online catalog of materials; delivery of items between libraries in Marin, a statewide library delivery service called Link+, numerous online resources, and more. The Governing Board of the System consists of the library director or designated alternate of each participant in the System. In accordance with the cost sharing formula developed by the library directors of the participants, the City’s share of annual operating costs is 16% or $258,164 for the year ended June 30, 2019. Financial statements of the System can be obtained from the County Librarian, Marin County Free Library, Marin County Civic Center, 3501 Civic Center Drive, San Rafael, California 94903. B. The Marin General Services Authority (MGSA) The MGSA was formed by the County of Marin and twelve local agencies to acquire street light facilities, operate the facilities during an eminent domain action against PG&E, and coordinate the subsequent transfer of the facilities to the individual local agencies. Each of the local agency’s share of contributions was based on the number of street lights to be acquired in the local agency’s individual jurisdiction in relation to the total number of street lights to be acquired by the Marin Streetlight Acquisition Joint Powers Authority. MGSA services now include street light maintenance, abandoned vehicle abatement, taxicab regulation and administrative responsibility for MarinMap. The City’s contribution to MGSA was $650,570 for the year ended June 30, 2019. Financial statements of the MGSA can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. 83 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS (Continued) C. The Marin Emergency Radio Authority (MERA) MERA was formed on February 28, 1998, by the County of Marin and 25 local agencies within the County to plan, finance, implement, manage, own, and operate a County-wide public safety and emergency radio system. The Governing Board consists of one representative from each member. In February 2010, MERA refinanced its 1999 Revenue Bonds; the 1999 bonds were originally issued in the amount of $26,940,000 to finance the acquisition of the system. The 2010 refunding bonds were issued at a premium of $934,832 above their par value of $18,575,000. These bonds mature annually through 2021 and bear interest from 2% to 4%. Similar to the original bonds, the refunding bonds are special obligations of MERA and are secured by the Members’ service payments. One February 1, 2007, MERA borrowed $2,250,000 from Citizens Business Bank. The note is being amortized over 14 ½ years at an annual interest rate of 4.43%. Loan Payments are funded by member operating payments. The costs of maintenance, operation, and debt service are divided on a pro rata share based on an agreed-upon formula established by a majority of the Governing Board. The members entered into a Project Operating Agreement on February 1, 1999. Under the Operating Agreement, members are obligated to contribute service payments to cover the Authority’s operations and debt service. The City’s portion of the obligation is 16.913%. The first operating service payment was in July 1999. The first debt service payment was in August 2002. The City contributed $680,205 of the Authority’s operation and debt service for the fiscal year ended June 30, 2019. The City has established a reserve in its internal service funds to pay future service payments. Financial statements of the MERA can be obtained at 95 Rowland Way, Novato, California 94945. D. The Countywide Planning Agency The Agency was established on October 16, 1990, by the County of Marin and the cities of Belvedere, Corte Madera, Fairfax, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon to implement countywide performance standards for traffic, housing, water and sewer facilities, and environmental protection to ensure that residential and commercial growth does not exceed local water, sewer and transportation capacities. The Governing Board of the Countrywide Planning Agency consists of one member of the County Board of Supervisors and one member of the City Council of each participating city. Financial statements of the Agency can be obtained at 3501 Civic Center Drive, San Rafael, California 94903. E. The Marin Telecommunications Agency The Agency was established to regulate the rates for cable television service and equipment and to advise the participants of their license authority. The Governing Board of the Marin Telecommunications Agency consists of one member from each of the eleven participating agencies. The City’s contribution to the Agency was $72,914 for the year ended June 30, 2019. Financial statements of the Agency can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. 84 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS (Continued) F.The Marin County Hazardous and Solid Waste Joint Powers Authority The Authority was established by the County, local cities, and waste franchising districts to finance, prepare and implement source reduction and recycling elements on a county-wide integrated waste management plan as required by State Assembly Bill 939. The City’s contribution to the Authority was $17,850 for the year ended June 30, 2019. Financial statements of the Authority can be obtained at 3501 Civic Center Drive, San Rafael, California 94903. G. Central Marin Sanitation Agency (CMSA) In October 1979, the District entered into a joint powers agreement with three neighboring sanitation agencies in central Marin County forming the Central Marin Sanitation Agency (CMSA). CMSA serves as a regional wastewater treatment plant for its four member agencies and San Quentin Prison (SQ) and is governed by a six-member Board of Commissioners, two appointed by the Board of Directors of the San Rafael Sanitation District (SRSD), two appointed by the Board of Directors of the San Rafael Sanitation District No. 1 (SD 1), one appointed by the governing board of Sanitary District No. 2 (SD 2), and one appointed by the City Council of the City of Larkspur (Larkspur). Total project costs for the joint venture were funded from federal (75%) and state (13%) clean water grants and from local shares (12% total) allocated among the member agencies and SQ based upon the weighted average of the strength and volume of sewage flows per member at inception of the project. Final individual local shares of total project costs were approximately $7.6 million for SRSD, $6.3 million for SD 1, $1.6 million for SD 2, $1 million for Larkspur, and $1.4 million for SQ. CMSA derives its annual funding for its operations and capital programs almost exclusively from service charges to member agencies. The joint powers agreement does not provide an explicit measurable right as required to establish an equity interest for any of the joint venture participants, and in addition to, stipulates that all excess capital funds, if any, and all excess administration, operations and maintenance funds from whatever source, if any, are the property of CMSA. The financial statements of the Agency are available at the CMSA office. Condensed financial information for the Agency is presented below for June 30, 2018 and 2017, the most recent information available. 2018 2017 Total assets $99,091,285 $99,239,615 Deferred outflows of resources 7,332,920 5,961,780 Total liabilities (62,147,599) (61,321,187) Deferred inflows of resources (2,056,973) (1,260,848) Net position $42,219,633 $42,619,360 Total revenues $17,353,966 $17,235,271 Total expenses (16,351,993) (16,793,252) Total contributions and adjustments (1,025,880) (1,283,532) Prior period adjustment (375,820) (2,164,585) Change in net position ($399,727) ($3,006,098) 85 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 13 - RISK MANAGEMENT A. City The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City established the Risk Management Internal Service Fund to account for and finance its uninsured risks of loss. The City manages risk by participating in a public entity risk pool (described below), purchasing insurance and by retaining certain risks. Risk Coverage Liability Coverage The City is a member of the California Joint Powers Risk Management Authority (CJPRMA) which covers general liability claims up to $40,000,000. The purpose of CJPRMA is to spread the adverse effects of general liability losses among the member agencies. The City also purchases commercial insurance for property damage claims with an insured amount of $114,220,740. The City is self-insured up to $500,000 for each general liability claim and $25,000 for each property damage claim. Once the self-insured retention is met CJPRMA becomes responsible for payment of all liability claims up to the limit. The City contributed a total of $334,004 in liability coverage premiums during the fiscal year ended June 30, 2019. Five years after settlement of all claims for a program year, CJPRMA will retroactively adjust premium deposits for any excess or deficiency in deposits related to paid claims and reserves. Financial statements for the risk pools may be obtained from CJPRMA at 3201 Doolan Road, Suite 285, Livermore, California 94551. Workers’ Compensation Coverage The City purchases insurance for workers’ compensation through Safety National Casualty Corporation Excess Workers’ Compensation and Employers Liability Insurance with coverage up to statutory limits. The City is self-insured up to $1,000,000 for each worker’s compensation claim. Insurance Internal Service Funds and Financial Reporting The City records estimated liabilities for claims filed up to the amounts for which it retains risk in the General Liability and Workers Compensation Internal Service Funds. Charges to the General Fund and other funds are based on relative general liability and workers compensation risk associated with the activities of each fund. Charges are recorded in the funds as expenditures or expenses and as revenues in the respective internal service funds. The Governmental Accounting Standards Board (GASB) requires municipalities to record their liability for uninsured claims and to reflect the current portion of this liability as an expenditure in their financial statements. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims. 86 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 13 - RISK MANAGEMENT (Continued) The City’s liability for uninsured general liability claims and workers’ compensation claims, including claims incurred but not reported, are reported in the Statements of Net Position. General Workers' Totals, as of June 30 Liability * Compensation ** 2019 2018 Balance, beginning of year $3,557,907 $5,985,768 $9,543,675 $8,747,338 Current year claims and changes in estimates 984,984 1,022,113 2,007,097 2,601,883 Claims paid (926,826) (902,398) (1,829,224) (1,805,546) Balance, end of year $3,616,065 $6,105,483 $9,721,548 $9,543,675 Due in one year $1,100,676 $1,252,599 $2,353,275 $2,696,736 Due in more than one year 2,515,389 4,852,884 7,368,273 6,846,939 Total claim liabilities $3,616,065 $6,105,483 $9,721,548 $9,543,675 * Liability based on an actuarial valuation as of March 31, 2018, extrapolated to June 30, 2019 ** Liability based on an actuarial valuation as of December 31, 2017, extrapolated to June 30, 2019 The claims settlements have not exceeded insurance coverage for the past three years. B.District The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees and natural disaster. The District participates in a joint powers agreement with other entities forming the California Sanitation Risk Management Authority (CSRMA), a public entity risk pool operating as a common risk management and insurance program for 60 member entities. CSRMA is governed by a Board of Directors composed of one representative from each member agency and meets three times per year in conjunction with conferences of the California Association of Sanitation Agencies. The Board controls the operations of CSRMA, including selection of management and approval of operating budgets, independent of any influence by member entities. The District pays annual premiums to CSRMA for its primary insurance and property insurance programs. Primary and property insurance programs are fully insured wherein CSRMA purchases insurance as a group thereby reducing its costs. CSMRA provides both fully insured and pooled insurance programs for its participating member entities. Because all employees of the District are contracted employees from the City of San Rafael, workers’ compensation insurance is not carried by the District but is provided through the City. The District’s primary and property insurance programs transfer risk to commercial insurance policies for claims above deductibles, while the District retains risk for claims to the extent of deductibles. Settled claims for CSRMA have not exceeded coverage in any of the past three fiscal years. 87 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 13 - RISK MANAGEMENT (Continued) The following summarizes active insurance policies as of June 30, 2019 together with coverage limits for each insured event: Insurance Program Limits Coverage Description CSRMA - Allied World Ins. $3,000,000 Gen/Mgt liability - aggregate CSRMA - Allied World Ins. $1,000,000 Gen/Mgt liability - occurrence CSRMA - Allied World Ins. $1,000,000 Auto liability - accident CSRMA - Allied World Ins. $4,000,000 Excess liability CSRMA - Public Entity Property Insurance Program (P.E.P.I.P.)$12,174,235 Special form property CSRMA - Illinois Union Ins. $25,000,000 Pollution liability - tier 1 CSRMA - Illinois Union Ins. $2,000,000 Pollution liability - tier 2 CSRMA - Lloyds of London $2,000,000 Cyber liability - third party CSRMA - Lloyds of London $2,000,000 Cyber liability - third party CSRMA - Travelers Ins. $25,000 Identity theft The financial statements of CSRMA are available at their office: 100 Pine Street, 11th Floor, San Francisco, CA 94111. Condensed financial information for CSRMA is presented below for the years ended June 30, 2018 and 2017 (latest information available). 2018 2017 Assets $25,703,119 $28,419,707 Liabilities (17,997,369) (17,241,037) Net assets $7,705,750 $11,178,670 Revenues $10,453,268 $11,166,523 Expenses (13,926,188) (11,588,811) Increase (decrease) in net assets (3,472,920) ($422,288) NOTE 14 - COMMITMENTS AND CONTINGENCIES A.City Litigation The City is a defendant in several lawsuits arising from its normal operations. City management is of the opinion that the potential claims against the City not covered by insurance resulting from such litigation would not materially affect the basic financial statements of the City. Major Contracts In December 2017, the City entered into a contract for the construction of a public safety administrative center and fire station in the amount of $36,727,000. The primary source of funding for these projects comes from a portion of General Fund revenues attributable to the Measure E Transactions and Use Tax. Lease Revenue Bonds were issued in March 2018 to ensure sufficient funds on hand. As of June 30, 2019, remaining obligations on the contract total approximately $21,343,000. All remaining obligations are expected to be satisfied during the fiscal year ending June 30, 2020. 88 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 14 - COMMITMENTS AND CONTINGENCIES (Continued) B.District As of June 30, 2019, SRSD had several contracts for sewer improvement projects with remaining obligations of approximately $1,471,000, the majority of which are expected to be completed within the 2019-2020 fiscal year. NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES A. Redevelopment Dissolution In an effort to mitigate its budget deficit, the State of California adopted ABx1 26 on June 28, 2011, amended by AB1484 on June 27, 2012, which suspended all new redevelopment activities except for limited specified activities as of that date and dissolved redevelopment agencies on January 31, 2012. The suspension provisions prohibited all redevelopment agencies from a wide range of activities, including incurring new indebtedness or obligations, entering into or modifying agreements or contracts, acquiring or disposing of real property, taking actions to adopt or amend redevelopment plans and other similar actions, except actions required by law or to carry out existing enforceable obligations, as defined in ABx1 26. In addition, ABx1 26 and AB1484 directed the State Controller to review the activities of all redevelopment agencies and successor agencies to determine whether an asset transfer between an agency and any public agency occurred on or after January 1, 2011. If an asset transfer did occur and the public agency that received the asset is not contractually committed to a third party for the expenditure or encumbrance of the asset, the legislation requires the State Controller to order the asset returned to the redevelopment agency. This review was performed in May 2013, and a report issued on July 29, 2013 (see section B of this footnote). The City elected to become the Successor Agency to the Redevelopment Agency, and on February 1, 2012, the Redevelopment Agency’s remaining net assets were distributed to the Successor Agency. ABx1 26 requires the establishment of an Oversight Board to oversee the activities of the Successor Agency and one was established on April 2, 2012. The activities of the Successor Agency are subject to review and approval of the Oversight Board, which is comprised of seven members. The activities of the Successor Agency are reported in the Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund as the activities are under the control of the Oversight Board. The City provides administrative services to the Successor Agency to wind down the affairs of the former Redevelopment Agency. Pursuant to the dissolution of the City of San Rafael Redevelopment Agency, certain assets of the Redevelopment Agency were distributed to the Housing Successor and all remaining Redevelopment Agency assets and liabilities were distributed to the Successor Agency. 89 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) The City elected to become the Housing Successor and on February 1, 2012. Assets and Liabilities relating to the Housing Successor are reported in the City’s Low and Moderate Income Housing Special Revenue Fund. B. Redevelopment Property Tax Trust Fund (RPTTF) The Successor Agency’s primary source of revenue comes from the RPTTF allocation distributed by the County. Property tax revenues for each Project Area are deposited into the RPTTF, which redistributes each Project Area’s tax increment under specified formulas. The County Auditor administers the RPTTF and disburses twice annually from this fund pass-through payments to affected taxing entities, an amount equal to the total of obligation payments that are required to be paid from tax increment as denoted on the Recognized Obligation Payment Schedule (“ROPS”). The disbursements are established in the treasury of the Successor Agencies, and various allowed administrative fees and allowances. Any remaining balance is then distributed by the County Auditor back to affected taxing entities under a prescribed method that accounts for pass-through payments. The County Auditor is also responsible for the distributing other monies received from the Successor Agency (from sale of assets, etc.) to the affected taxing entities. Successor agencies in turn will use the amounts deposited into their respective funds to make payments for principal and interest on loans and monies advanced to or indebtedness incurred by the dissolved redevelopment agencies. C. Long-Term Debt 1999 Tax Allocation Bonds and Capital Appreciation Bonds On June 16, 1999, the former Agency issued Tax Allocation Bonds in the amount of $23,504,004. The bonds were issued as Current Interest Bonds in the aggregate principal amount of $21,115,000 and as Capital Appreciation Bonds in the original amount of $2,389,004. The proceeds of the bonds were used to finance certain redevelopment activities of benefit to the former Agency’s Central San Rafael Redevelopment Project Area. In December 2009 of the former Agency exercised the redemption option of the Current Interest Bonds. The outstanding balance of the Bonds was refunded, on a current basis, through the issuance of the 2009 Tax Allocation Refunding Bonds as discussed below. The Capital Appreciation Bonds mature annually after December 1 from 2018 to 2022, in amounts ranging from $1,440,000 to $2,070,000 and bear interest at rates from 5.58% to 5.60%. Interest on the Capital Appreciation Bonds will compound on each interest premium date and will be payable solely at maturity. The bonds are secured, on parity with the 1992 and 1995 bonds (refunded in 2002), by a pledge and a lien on tax revenues and amounts on deposit in certain funds and accounts held by the fiscal agent. 90 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) 2002 Tax Allocation Refunding Bonds On October 9, 2002, the former Agency issued Tax Allocation Refunding Bonds in the amount of $25,020,000. The proceeds of the bonds were used to refund the 1992 Tax Allocation Refunding Bonds and the 1995 Tax Allocation Bonds. The Bonds mature annually each December 1 from 2002 to 2022, in amounts ranging from $540,000 to $1,920,000 and bear interest at rates ranging from 2.00% to 5.25%. Interest is payable semiannually on June 1 and December 1. The Bonds maturing on or after December 1, 2013, are subject to optional redemption prior to maturity, in whole or in part, and by lot within any one maturity, prior to their respective maturity dates, on any date on or after December 1, 2012, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from tax revenues to be derived from the redevelopment activities of the former Agency related to the Central San Rafael Redevelopment Project Area. 2009 Tax Allocation Refunding Bonds On December 14, 2009, the former Agency issued 2009 Tax Allocation Refunding Bonds in the amount of $14,660,000 bearing interest at rates from 3.00% to 5.00%. The proceeds of the Series 2009 Bonds were used to refund the former Agency’s 1999 Tax Allocation Current Interest Bonds and to advance funds to the City to finance street and parking improvements for the benefit of the Agency’s Central San Rafael Redevelopment Project. Principal payments are due annually on December 30 and interest payable semiannually on June 30 and December 30. The Series 2009 Bonds maturing on or before December 1, 2019, are not subject to optional redemption prior to their respective stated maturities. The Series 2009 Bonds maturing on or after December 1, 2020, are subject to optional redemption as a whole or in part either on a pro rata basis among maturities or in inverse order of maturity, and by lot within any one maturity, prior to their respective maturity dates, at the option of the Agency, on any date on or after December 1, 2019, at a price equal to the principal amount of such Series 2009 Bonds called for redemption, together with interest accrued on the date fixed for redemption, without premium. Use of Tax Increment The former Agency pledged all future tax increment revenues for the repayment of the 1999 Capital Appreciation Bonds, and the 2002 and 2009 Tax Allocation Refunding Bonds. The pledge of all future tax increment revenues ends upon repayment of $16.1 million in remaining debt service on the Bonds, which is scheduled to occur in 2023. For fiscal year June 30, 2019, tax increment revenues amounted to $3.8 million which was used to make the debt service payments of $3.6 million. The bond covenants contain events of default that require the revenue of the Agency to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the Agency to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the Agency; or if any court or competent jurisdiction shall assume custody or control of the Agency. The Agency’s bonds also contain a subjective acceleration clause that allows the trustees or holders, who hold the majority of the aggregate principal amount of the notes, to accelerate payment of the entire principal amount outstanding and interest accrued to become immediately due if they determine that a material adverse change occurs. 91 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) The following table summarizes the activity for the fiscal year ended June 30, 2019: Authorized Balance Balance Current and Issued June 30, 2018 Additions Retirements June 30, 2019 Portion San Rafael Redevelopment Agency 1999 Tax Allocation Bonds Capital Appreciation Bonds 5.58%-5.6%, due 12/1/2022 $2,389,004 $6,782,447 $344,403 $1,440,000 $5,686,850 $1,440,000 2002 Tax Allocation Refunding Bonds 2.00%-5.25%, due 12/1/2021 25,020,000 2,310,000 540,000 1,770,000 565,000 2009 Tax Allocation Refunding Bonds 3.00%-5.00%, due 12/1/2022 14,660,000 6,645,000 1,210,000 5,435,000 1,210,000 Add: deferred bond premium costs 399,301 79,861 319,440 Total Successor Agency Long-term Debt $16,136,748 $344,403 $3,269,861 $13,211,290 $3,215,000 Debt Service Requirements Annual debt service requirements are shown below: For the Year Governmental Activities Ended June 30 Principal Interest 2020 $3,309,082 $297,019 2021 3,389,231 214,175 2022 3,404,749 120,819 2023 3,586,374 36,500 Totals 13,689,436 $668,513 Reconciliation of long-term debt: Less: unaccreted discount (797,586) Less: deferred bond premium costs 319,440 $13,211,290 D. Other Long-Term Obligations During the fiscal year ending June 30, 2013, the San Rafael Successor Agency Oversight Board approved two personnel-related obligations of the former Redevelopment Agency. On August 30, 2012, the Oversight Board approved the inclusion of $1,904,431, representing the unfunded pension liability attributable to former Redevelopment Agency employees; the repayment is being made in ten equal, annual installments. The following table summarizes the activity for the fiscal year ended June 30, 2019: Approved Balance Balance Amount June 30, 2018 Retirements June 30, 2019 Unfunded Pension Liability $1,904,431 $571,330 $190,443 $380,887 Total Long-Term Obligations $571,330 $190,443 $380,887 92 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2019 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) Annual repayment requirements are shown below: For the Year Ended June 30 Principal 2020 $190,443 2021 190,444 Totals $380,887 E. Commitment and Contingencies State Approval of Enforceable Obligation The Successor Agency prepares a Recognized Obligation Payment Schedule (ROPS) semi- annually that contains all proposed expenditures for the subsequent six-month period. The ROPS is subject to the review and approval of the Oversight Board as well as the State Department of Finance. As of June 30, 2019, the Successor Agency had prepared twelve ROPS, all of which have been approved by the Oversight Board and the California Department of Finance. The Department of Finance has stated that all items on a future ROPS are subject to a subsequent review. The amount, if any, of current obligations that may be denied by the Department of Finance cannot be determined at this time. The City expects such amounts, if any, to be immaterial. 93 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Measurement date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 City's proportionate share 30.0453% 36.7394% 34.9538% 32.7180% 33.4752% Proportionate share of total pension liability $677,753,565 $907,195,058 $900,629,287 $878,483,703 $947,923,920 Proportionate share of fiduciary net position 603,499,779 764,871,931 733,574,437 757,834,016 837,356,062 Proportionate share of the net pension liability $74,253,786 $142,323,127 $167,054,850 $120,649,687 $110,567,858 Plan fiduciary net position as a percentage of the total pension liability 89.04% 84.31% 84.31% 86.27% 88.34% Covered payroll (report date)$31,073,560 $32,126,272 $32,885,135 $36,349,651 $33,106,430 Net pension liability as a percentage of covered payroll 236.26% 443.01% 508.00% 331.91% 333.98% * - The fiscal year ended June 30, 2015 was the first year of implementation, therefore only five years are shown Last 10 years* Schedule of the City's Proportionate Share of the Net Pension Liability Cost-Sharing Multiple Employer Plan 94 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Schedule of Contributions Defined Benefit Pension Cost-Sharing Multiple Employer Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) Fiscal year ended, June 30 2015 Contractually required contribution 17,802,358$ Contributions in Relation to the Contractually required contribution 17,802,358 Contribution Deficiency/ (Excess)-$ Covered payroll 31,073,560$ Contributions as a percentage of covered payroll 57.29% Notes to Schedule Valuation Date / Timing 6/30/2013 (for contributions made in FY2014-2015) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2014-15): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Actuarial Loss from 2009 Remaining Amortization period Unfunded liability - 17 years / Extraordinary Actuarial Loss - 25 years Asset valuation method 5-year smoothed market, 80% /120% corridor around market Inflation 3.25% Salary increases 3.25% plus merit component based on employee classification and years of service Investment Rate of Return 7.50% Retirement Age Healthy Mortality Sex distinct RP-2000 Combined Mortality projected to 2010 using Scale AA with ages set back one year for male members / two years for female members Disabled Mortality Sex distinct RP-2000 Combined Mortality projected to 2010 using Scale AA with ages set forward three years for all members Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 95 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Fiscal year ended, June 30 2016 Contractually required contribution 19,339,577$ Contributions in Relation to the Contractually required contribution 19,339,577 Contribution Deficiency/ (Excess)-$ Covered payroll 32,126,272$ Contributions as a percentage of covered payroll 60.20% Notes to Schedule Valuation Date / Timing 6/30/2014 (for contributions made in FY2015-2016) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2015-16): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Actuarial Loss from 2009 Remaining Amortization period Unfunded liability - 16 years / Extraordinary Actuarial Loss - 24 years Asset valuation method 5-year smoothed market, 80% /120% corridor around market Inflation 3.25% Salary increases 3.25% plus merit component based on employee classification and years of service Investment Rate of Return 7.25% Retirement Age Healthy Mortality CalPERS 2014 Pre-Retirement Non-Industrial Death rates (plus Duty-Related Death rates for Safety Members), with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2009 using Scale MP-2014 Disabled Mortality CalPERS 2014 Disability Mortality rates (Non-Industrial rates for Miscellaneous members and Industrial Disability rates for Safety members), adjusted by 90% for Males and Females (Miscellaneous and Safety) with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2009 using Scale MP-2014 Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 Defined Benefit Pension Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) (Continued) Cost-Sharing Multiple Employer Schedule of Contributions 96 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Fiscal year ended, June 30 2017 Contractually required contribution 20,003,001$ Contributions in Relation to the Contractually required contribution 20,003,001 Contribution Deficiency/ (Excess) -$ Covered payroll 32,885,135$ Contributions as a percentage of covered payroll 60.83% Notes to Schedule Valuation Date / Timing 6/30/2015 (for contributions made in FY2016-2017) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2016-17): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (24 years remaining as of 6/30/14), the remaining UAL as of June 30, 2013 (16 years as of 6/30/14), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 19 years remaining as of June 30, 2016 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.25% Retirement Age Healthy Mortality Sex distinct RP-2000 combined mortality projected to 2010 using Scale AA with ages set back one year for male members/two years for female members Disabled Mortality Sex distinct RP-2000 combined mortality projected to 2010 using Scale AA with ages set forward three years for all members Schedule of Contributions Defined Benefit Pension Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 (Continued) Cost-Sharing Multiple Employer 97 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Fiscal year ended, June 30 2018 Contractually required contribution 20,167,435$ Contributions in Relation to the Contractually required contribution 20,167,435 Contribution Deficiency/ (Excess) -$ Covered payroll 36,349,651$ Contributions as a percentage of covered payroll 55.48% Notes to Schedule Valuation Date / Timing 6/30/2016 (for contributions made in FY2017-2018) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2017-18): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (22 years remaining as of 6/30/16), the remaining UAL as of June 30, 2013 (14 years as of 6/30/16), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 18 years remaining as of June 30, 2017 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.25% Retirement Age Healthy Mortality Sex distinct CalPERS 2014 Pre-Retirement Non-Industrial Death rates (plus Duty-Related death rates for Safety members) Disabled Mortality Sex distinct RP-2000 combined mortality projected to 2010 using Scale AA with ages set forward three years for all members Schedule of Contributions Defined Benefit Pension Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) (Continued) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 Cost-Sharing Multiple Employer 98 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Fiscal year ended, June 30 2019 Contractually required contribution $20,352,203 Contributions in Relation to the Contractually required contribution 20,352,203 Contribution Deficiency/ (Excess)$0 Covered payroll $33,106,430 Contributions as a percentage of covered payroll 61.48% Notes to Schedule Valuation Date / Timing 6/30/2017 (for contributions made in FY2018-2019) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2018-19): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (21 years remaining as of 6/30/17), the remaining UAL as of June 30, 2013 (13 years as of 6/30/17), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 17 years remaining as of June 30, 2018 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.00% Retirement Age Healthy Mortality Rates of mortality for active members are specified by CalPERS 2017 Pre-Retirement Non-Industrial Death Rates (plus Duty-Related Death rates for Safety members), with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Disabled Mortality Rates of mortality among disabled members are given by CalPERS 2017 Disability Mortality rates (Non-Industrial rates for Miscellaneous members and Industrial Disability rates for Safety members), adjusted by 90% for Males (Miscellaneous and Safety) and 90% for Miscellaneous Females, with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Schedule of Contributions Defined Benefit Pension Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) (Continued) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 Cost-Sharing Multiple Employer 99 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 Measurement period 2015-16 2016-17 2017-18 Total OPEB liability Service cost $766,000 $789,000 $822,000 Interest 3,447,000 3,540,000 3,435,000 Differences between expected and actual experience (4,107,000) Assumption changes 4,831,000 Benefit payments, including refunds of employee contributions (2,896,000) (3,015,000) (3,028,000) Net change in total OPEB liability 1,317,000 2,038,000 1,229,000 Total OPEB liability - beginning 48,226,000 49,543,000 51,581,000 Total OPEB liability - ending (a)$49,543,000 $51,581,000 $52,810,000 OPEB fiduciary net position Contributions - employer $2,896,000 $3,475,000 $3,573,000 Net investment income 157,000 1,675,000 1,425,000 Benefit payments, including refunds of employee contributions (2,896,000) (3,015,000) (3,028,000) Administrative expense (7,000) (8,000) (44,000) Net change in plan fiduciary net position 150,000 2,127,000 1,926,000 Plan fiduciary net position - beginning 15,608,000 15,758,000 17,885,000 Plan fiduciary net position - ending (b)$15,758,000 $17,885,000 $19,811,000 Plan net OPEB liability - ending (a) - (b)$33,785,000 $33,696,000 $32,999,000 Plan fiduciary net position as a percentage of the total OPEB liability 31.81%34.67%37.51% Covered employee payroll $32,885,000 $36,350,000 $40,496,000 Plan net OPEB liability as a percentage of covered employee payroll 102.74%92.70%81.49% Historical information is required only for the measurement periods for which GASB 75 is applicable. Other Post-Employment Benefits (OPEB) SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS Last Ten Fiscal Years Agent Multiple Employer Plan 100 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 SCHEDULE OF CONTRIBUTIONS Agent Multiple Employer Plan Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) Fiscal year 2016-17 Actuarially determined contribution $3,450,000 Contributions in relation to the actuarially determined contribution (3,475,000) Contribution deficiency (excess)($25,000) Covered employee payroll $32,885,000 Contributions as a percentage of covered employee payroll 10.49% GASB 75 requires this information for plans funding with OPEB trusts be reported in the employer's Required Supplementary Information for 10 years or as many years as are available upon implementation. The June 30, 2017 actuarial valuation provided the Actuarially Determined Contributions for fiscal years ending 06/30/17. Notes to Schedule: Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Valuation Date June 30, 2015 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount, over approximate 10-year period Remaining Amortization 19 years remaining as of June 30, 2016 Asset Valuation Method Investment gains and losses spread over 5-year rolling period Discount Rate 7.25% Contribution Policy City contributes full ADC General Inflation 2.75% per annum Mortality, Retirement, Disability, Termination Same as June 30, 2015 actuarial valuation Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Aggregate - 3% Merit - 6/30/14 MCERA assumptions Medical Trend Non-Medicare - 6.5% for 2017, decreasing 0.5% per year to an ultima rate of 4.50% for 2021 and Medicare - 6.7% for 2017, decreasing to a ultimate rate of 4.5% for 2021 and later years Healthcare participation for future retirees Capped benefit: 100% currently covered, 80% currently waived PEMHCA minimum - 60% Cap Increases None Mortality projected fully generational with Scale MP-14, modified Same as discount rate - expected City contributions projected to 101 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2019 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) Fiscal year 2017-18 2018-19 Actuarially determined contribution $3,530,000 $3,612,000 Contributions in relation to the actuarially determined contribution (3,563,000) (3,725,000) Contribution deficiency (excess)($33,000) ($113,000) Covered employee payroll $36,350,000 $40,496,000 Contributions as a percentage of covered employee payroll 9.71% 9.20% GASB 75 requires this information for plans funding with OPEB trusts be reported in the employer's Required Supplementary Information for 10 years or as many years as are available upon implementation. The June 30, 2017 actuarial valuation provided the Actuarially Determined Contributions for fiscal years ending 6/30/18 and 6/30/19. Notes to Schedule: Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Valuation Date June 30, 2017 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount, over approximate 10-year period Remaining Amortization 18 years remaining as of June 30, 2017 Asset Valuation Method Investment gains and losses spread over 5-year rolling period Discount Rate 6.75% at June 30, 2017; 7.25% at June 30, 2016 Contribution Policy City contributes full ADC General Inflation 2.75% per annum Mortality, Retirement, Disability, Termination Same as June 30, 2017 actuarial valuation Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Aggregate - 3% Merit - 6/30/17 MCERA assumptions Medical Trend Non-Medicare - 7.5% for 2019, decreasing to 4.00% for 2076 and later years and Medicare - 6.5% for 2019, decreasing to 4.00% for 2076 and later years Healthcare participation for future retirees Capped benefit: 100% currently covered, 80% currently waived PEMHCA minimum - 60% Cap Increases None Agent Multiple Employer Plan Post-retirement mortality: projected fully generational with Scale Pre-retirement mortality: projected 15-year static with 90% of Scale MP-2016 Same as discount rate - expected City contributions projected to keep sufficient plan assets to pay all benefits from trust 102 GENERAL FUND AND MAJOR SPECIAL REVENUE FUND BUDGET-TO-ACTUAL STATEMENTS GASB Statement No. 34 dictates that budget-to-actual information in the basic financial statements should be limited to the General Fund and major Special Revenue Funds. This section is provided for the presentation of Budget-to-Actual Statements for the General Fund, Traffic and Housing Mitigation, and the Gas Tax Special Revenue Funds. Budgets are adopted on a basis consistent with Generally Accepted Accounting Principles for the General Fund and Special Revenue Funds. 103 CITY OF SAN RAFAEL GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2019 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes and special assessments $69,138,000 $69,258,000 $70,282,284 $1,024,284 Licenses and permits 2,937,000 2,937,001 2,661,500 (275,501) Fines and forfeitures 375,000 375,000 337,680 (37,320) Use of money and properties 246,200 246,200 250,570 4,370 Intergovernmental 3,229,000 3,229,000 3,290,086 61,086 Charges for services 2,465,552 2,465,552 2,671,395 205,843 Other revenue 505,000 505,000 841,538 336,538 Total Revenues 78,895,752 79,015,753 80,335,053 1,319,300 EXPENDITURES Current: General government 11,306,237 11,471,373 12,297,845 (826,472) Public safety 43,650,861 43,614,581 43,107,841 506,740 Public works and parks 11,751,430 11,793,325 11,742,280 51,045 Community development 4,692,833 5,262,497 4,988,260 274,237 Culture and recreation 3,327,557 3,327,557 3,080,364 247,193 Capital outlay 90,690 90,690 90,690 Debt service: Principal 495,172 493,280 495,172 (1,892) Interest and fiscal charges 258,963 2,493,413 2,356,207 137,206 Total Expenditures 75,573,743 78,546,716 78,067,969 478,747 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 3,322,009 469,037 2,267,084 1,798,047 OTHER FINANCING SOURCES (USES) Transfers in 1,686,911 4,321,361 4,321,361 Transfers out (5,875,000) (6,278,828) (6,278,828) Total Other Financing Sources (Uses) (4,188,089) (1,957,467) (1,957,467) Net Change in Fund Balances ($866,080) ($1,488,430) 309,617 $1,798,047 FUND BALANCES, BEGINNING OF YEAR 12,222,954 FUND BALANCES, END OF YEAR $12,532,571 104 CITY OF SAN RAFAEL TRAFFIC AND HOUSING MITIGATION SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2019 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and properties $49,200 $49,200 $111,363 $62,163 Charges for services 300,000 300,000 2,356,530 2,056,530 Total Revenues 349,200 349,200 2,467,893 2,118,693 EXPENDITURES Current: General government 25,000 25,000 18,800 6,200 Public works and parks 212,424 242,036 59,945 182,091 Capital outlay 67,282 620,386 117,253 503,133 Total Expenditures 304,706 887,422 195,998 691,424 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 44,494 (538,222) 2,271,895 2,810,117 OTHER FINANCING SOURCES (USES) Transfers Out (3,380,892) (3,380,892) Total Other Financing Sources (Uses)44,494 (3,380,892) (3,380,892) Net Change in Fund Balances $88,988 ($3,919,114) (1,108,997) $2,810,117 6,306,373 FUND BALANCES, END OF YEAR $5,197,376 FUND BALANCES, BEGINNING OF YEAR 105 CITY OF SAN RAFAEL GAS TAX SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2019 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and properties $48,000 $48,000 $33,778 ($14,222) Intergovernmental 3,293,999 7,743,999 10,567,243 2,823,244 Charges for services 1,043,600 1,043,600 1,206,142 162,542 Other revenue 374,639 374,639 Total Revenues 4,385,599 8,835,599 12,181,802 3,346,203 EXPENDITURES Current: General government Public works and parks 5,431,189 3,759,551 2,337,369 1,422,182 Capital outlay 70,108 17,740,581 10,308,603 7,431,978 Total Expenditures 5,501,297 21,500,132 12,645,972 8,854,160 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,115,698) (12,664,533) (464,170) 12,200,363 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (400,000) (800,000) (800,000) Total Other Financing Sources (Uses) (400,000) (800,000) (800,000) Net Change in Fund Balances ($1,515,698) ($13,464,533) (1,264,170) $12,200,363 FUND BALANCES, BEGINNING OF YEAR 5,992,281 FUND BALANCES, END OF YEAR $4,728,111 106 SUPPLEMENTARY INFORMATION 107 CITY OF SAN RAFAEL ESSENTIAL FACILITIES CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2019 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $871,481 $871,481 Other revenue $31,000,000 $31,000,000 3,251,151 (27,748,849) Total Revenues 31,000,000 31,000,000 4,122,632 (26,877,368) EXPENDITURES Capital outlay 35,025,000 $35,823,871 23,908,035 11,915,836 Total Expenditures 35,025,000 35,823,871 23,908,035 11,915,836 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (4,025,000) (4,823,871) (19,785,403) (14,961,532) OTHER FINANCING SOURCES (USES) Transfers in 4,025,000 4,145,000 5,201,300 1,056,300 Transfers out (2,234,450) (2,234,450) Total Other Financing Sources (Uses) 4,025,000 1,910,550 2,966,850 1,056,300 Net Change in Fund Balances $0 ($2,913,321) (16,818,553) ($13,905,232) FUND BALANCES, BEGINNING OF YEAR 49,209,052 FUND BALANCES, END OF YEAR $32,390,499 108 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Recreation Revolving Fund – Established to administer the Community Services Department’s program and facility rental charge and accounts for the Recreation Memorial Fund. Baypoint Lagoons Assessment District Fund – The Baypoint Lagoons Lighting and Landscape District was formed to protect and enhance wildlife habitat and water quality in Baypoint (Spinnaker) Lagoon and the adjacent diked salt marsh. Household Hazmat Facility Fund - Established to account for State mandated hazardous materials information, collection, and reporting. Expenditures include inspection of businesses for compliance with regulations. This fund also serves as the depository for countywide Household Hazardous Waste Program. Childcare Fund – Established to administer and account for childcare programs at eight sites throughout the City. Loch Lomond #10 Community Facilities District Fund – Established to provide maintenance for stormwater and geotechnical mitigation facilities. A Mello Roos District was formed to fund this maintenance. Loch Lomond Marina #2 Community Facilities District Fund – Established to report tax assessments and maintenance expenditures of the District. Library Fund – Established to account for restricted library activities that are intended to be self- funding. Library Assessment Fund – Established to account for a special parcel tax dedicated to public library services and facilities, equipment, and technology improvements. Public Safety Fund – Established for special police services, which are intended to be self-funding. Stormwater Fund – Established to provide for self-funding storm drain maintenance program plus separate programs through the County and Bay Area to educate residents about urban runoff pollution. Development Services Fund – Established to account for development activities that are supported by external sources of funds. This fund does not account for the operating costs of building, planning, and engineering, which are located in the General Fund. Grants Fund – Established to account for grants for the Library, Childcare, Police and Falkirk Cultural Center. Parkland Dedication Fund – Established to account for long-term developer deposits used to enhance and maintain the park structure within City limits. Emergency Medical Services Fund – Established to account for the Emergency Medical Services and Transportation program that provides services to all segments of the community. Business Improvement Fund – Established to account for activities held in Downtown San Rafael. 109 NON-MAJOR GOVERNMENTAL FUNDS (Continued) Pt. San Pedro Maintenance Portion Special Revenue Fund – Established to account for ongoing maintenance needs within the Pt. San Pedro assessment district. Low and Moderate Income Housing Special Revenue Fund – Established to account for the activities related to the assets assumed by the City as Housing Successor to the San Rafael Redevelopment Agency for the housing activities of the former Redevelopment Agency. Measure A Open Space Special Revenue Fund – Established to account for the use of proceeds distributed by the County of Marin from Measure A, as well as other supplementary matching or City-funding for the operation or maintenance of open space, park or recreation lands. Measure G - Cannabis Special Revenue Fund – Established for the purpose of reporting tax revenue and expenditures related to Cannabis activities authorized by Measure G. DEBT SERVICE FUNDS Peacock Gap Assessment District Fund – Established to accumulate funds for the payment of principal and interest for the 1993 Bonds which matured in 2005. The proceeds were used to refund the 1984 Bonds, which provided for the construction of public improvements in the project area. Financing is to be provided by property tax increments generated within the specific geographic region described by the bond assessment district. Mariposa Assessment District Fund - Established to accumulate funds for the payment of principal and interest for the 1993 Bond, which matured in 2008. The proceeds were used to finance the grading and paving of Mariposa Road. 1997 Financing Authority Revenue Bonds Fund – Established to accumulate funds for the payment of principal and interest for the 1997 Revenue Bonds which matured in 2011. The proceeds were used to purchase the previously issued special assessment bonds. Financing is to be provided by property tax increments generated within the specific geographic region described by the bond assessment district. CAPITAL PROJECTS FUNDS Capital Improvement Fund – Established for the costs associated with major capital improvement projects not tied to specific funds elsewhere. Improvements could include medians, parkways, sidewalks, and other public assets. Bedroom Tax Fund – Established to collect funds from multiple-unit housing used to pay for maintaining and developing parks within local neighborhoods. Assessment Districts Fund – Established to account for ongoing construction and improvement needs within the following assessment districts: Peacock Gap, Kerner Boulevard, Sun Valley/Lucas Valley Open Space, East San Rafael Drainage Assessment District 1. Park Capital Projects Fund – Established to account for capital improvements for all City owned parks, whether paid for by City funds, grants, donations, or partnership with the community. Open Space Fund – Established for the acquisition of open space. 110 CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2019 SPECIAL REVENUE FUNDS Baypoint Loch Lomond Lagoons Household #10 Recreation Assessment Hazmat Community Revolving District Facility Childcare Facilities Dist. ASSETS Cash and investments $482,314 $252,288 $93,046 $1,753,287 $676,085 Restricted cash and investments Receivables: Accounts 43,471 717,656 Taxes 126 Grants 23,407 Interest Loans Prepaids Total Assets $525,785 $252,414 $810,702 $1,776,694 $676,085 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $258,032 $287,458 $29,849 $1,877 Deposits payable Developer deposits payable 156,826 Due to other funds Deferred revenue 265,425 Total Liabilities 523,457 444,284 29,849 1,877 Fund Balances: Nonspendable Restricted 2,328 $252,414 366,418 1,746,845 674,208 Committed Assigned Total Fund Balances 2,328 252,414 366,418 1,746,845 674,208 Total Liabilities and Fund Balances $525,785 $252,414 $810,702 $1,776,694 $676,085 112 SPECIAL REVENUE FUNDS Loch Lomond Marina #2 Community Library Public Development Facilities Dist. Library Assessment Safety Stormwater Services Grants $282,320 $2,451,306 $586,458 $72,647 $448,831 $828,923 $771,556 17,000 398 5,235 6,395 50,958 $282,718 $2,451,306 $591,693 $89,647 $455,226 $828,923 $822,514 $1,771 $35,223 $52,682 $17,743 $17,708 175,620 8,782 4,185 1,771 35,223 52,682 197,548 26,490 $282,718 2,449,535 556,470 $89,647 402,544 631,375 796,024 282,718 2,449,535 556,470 89,647 402,544 631,375 796,024 $282,718 $2,451,306 $591,693 $89,647 $455,226 $828,923 $822,514 (Continued) 113 CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2019 SPECIAL REVENUE FUNDS Low and Emergency Pt. San Pedro Moderate Parkland Medical Business Maintenance Income Dedication Services Improvement Portion Housing ASSETS Cash and investments $288,531 $522,718 $21,569 $126,760 $637,900 Restricted cash and investments Receivables: Accounts 276,275 Taxes 23,186 483 Grants Interest 957 Loans 256,870 Prepaids 27,627 Total Assets $288,531 $849,806 $21,569 $127,243 $895,727 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $30,989 $36,460 $21,569 $6,570 Deposits payable Developer deposits payable Due to other funds Deferred revenue Total Liabilities 30,989 36,460 21,569 6,570 Fund Balances: Nonspendable 27,627 Restricted 257,542 785,719 120,673 $895,727 Committed Assigned Total Fund Balances 257,542 813,346 120,673 895,727 Total Liabilities and Fund Balances $288,531 $849,806 $21,569 $127,243 $895,727 114 DEBT SERVICE FUNDS CAPITAL PROJECTS FUNDS 1997 Peacock Gap Mariposa Financing Measure A Measure G - Assessment Assessment Authority Capital Bedroom Open Space Cannabis District District Revenue Bonds Improvement Tax $29,367 $2,875 $16,573 $151,695 $1,210,133 $84,325 625,686 $232,158 46,606 137,387 4,760 $232,158 $75,973 $2,875 $16,573 $151,695 $1,977,966 $84,325 $5,769 $87,519 226,389 232,158 87,519 $75,973 $2,875 $16,573 $151,695 $84,325 1,890,447 75,973 2,875 16,573 151,695 1,890,447 84,325 $232,158 $75,973 $2,875 $16,573 $151,695 $1,977,966 $84,325 (Continued) SPECIAL REVENUE FUNDS 115 Total Park Non-Major Assessment Capital Open Governmental Districts Projects Space Funds ASSETS Cash and investments $224,191 $10,824 $118,139 $12,144,661 Restricted cash and investments 79,149 704,835 Receivables: Accounts 1,054,402 Taxes 314,587 Grants 211,752 Interest 5,717 Loans 256,870 Prepaids 27,627 Total Assets $303,340 $10,824 $118,139 $14,720,451 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $450 $891,669 Deposits payable 184,402 Developer deposits payable 161,011 Due to other funds 226,389 Deferred revenue 265,425 Total Liabilities 450 1,728,896 Fund Balances: Nonspendable 27,627 Restricted 302,890 10,944,518 Committed $10,824 1,901,271 Assigned $118,139 118,139 Total Fund Balances 302,890 10,824 118,139 12,991,555 Total Liabilities and Fund Balances $303,340 $10,824 $118,139 $14,720,451 CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2019 CAPITAL PROJECTS FUNDS 116 Baypoint Loch Lomond Lagoons Household #10 Recreation Assessment Hazmat Community Revolving District Facility Childcare Facilities Dist. REVENUES Taxes and special assessments $25,368 Use of money and properties $32,351 5,056 $607 $32,608 $12,547 Intergovernmental 27,200 390,329 Charges for services 2,271,345 167,285 3,181,669 Other revenue 48,257 13,577 Total Revenues 2,379,153 30,424 167,892 3,618,183 12,547 EXPENDITURES Current: General government Public safety 143,827 Public works and parks 38,027 1,876 Culture and recreation 4,724,942 3,493,153 Community development Capital outlay Total Expenditures 4,724,942 38,027 143,827 3,493,153 1,876 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,345,789) (7,603) 24,065 125,030 10,671 OTHER FINANCING SOURCES (USES) Transfers in 2,071,674 50,000 Transfers out Total Other Financing Sources (Uses) 2,071,674 50,000 Net Change in Fund Balances (274,115) (7,603) 24,065 175,030 10,671 Fund Balance, Beginning 276,443 260,017 342,353 1,571,815 663,537 Fund Balance, Ending $2,328 $252,414 $366,418 $1,746,845 $674,208 SPECIAL REVENUE FUNDS CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2019 118 Loch Lomond Marina #2 Community Library Public Development Facilities Dist. Library Assessment Safety Stormwater Services Grants $79,737 $1,041,371 5,000 $44,820 11,060 $88 $9,608 $49,999 $13,370 8,379 71,068 664,436 7,354 720 833,777 80,914 62,040 29,534 84,737 141,467 1,052,431 133,916 872,919 49,999 677,806 118 104,263 7,585 259,148 552,534 1,059,398 15,608 1,144,665 7,585 15,608 1,144,665 259,148 1,059,398 118 656,797 77,152 125,859 (92,234) (125,232) (186,479) 49,881 21,009 100,000 48,964 (100,000) (36,810) 100,000 (100,000) 12,154 77,152 125,859 (92,234) (25,232) (186,479) (50,119) 33,163 205,566 2,323,676 648,704 114,879 589,023 681,494 762,861 $282,718 $2,449,535 $556,470 $89,647 $402,544 $631,375 $796,024 (Continued) SPECIAL REVENUE FUNDS 119 CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2019 Low and Emergency Pt. San Pedro - Moderate Parkland Medical Business Maintenance Income Dedication Services Improvement Portion Housing REVENUES Taxes and special assessments $4,934,584 $124,284 Use of money and properties $5,227 31,405 1,504 $22,271 Intergovernmental 140,706 Charges for services 2,470,659 Other revenue 5,135 398,202 48,995 Total Revenues 10,362 7,975,556 125,788 71,266 EXPENDITURES Current: General government 82,473 Public safety 7,375,342 Public works and parks 109,853 Culture and recreation 9,276 Community development Capital outlay 654,091 Total Expenditures 663,367 7,375,342 109,853 82,473 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (653,005) 600,214 15,935 (11,207) OTHER FINANCING SOURCES (USES) Transfers in 308,106 Transfers out (1,056,300) Total Other Financing Sources (Uses) 308,106 (1,056,300) Net Change in Fund Balances (344,899) (456,086) 15,935 (11,207) Fund Balance, Beginning 602,441 1,269,432 104,738 906,934 Fund Balance, Ending $257,542 $813,346 $120,673 $895,727 SPECIAL REVENUE FUNDS 120 1997 Peacock Gap Mariposa Financing Measure A Measure G - Assessment Assessment Authority Capital Bedroom Open Space Cannabis District District Revenue Bonds Improvement Tax $482,356 $125,973 $5,228 367 $2,821 $28,541 442,817 482,723 125,973 2,821 471,358 5,228 50,000 232,599 261,436 7,438 3,710,022 494,035 50,000 3,710,022 7,438 (11,312) 75,973 2,821 (3,238,664) (2,210) 3,380,892 (392,754) (392,754)3,380,892 (404,066) 75,973 2,821 142,228 (2,210) 404,066 $2,875 $16,573 148,874 1,748,219 86,535 $75,973 $2,875 $16,573 $151,695 $1,890,447 $84,325 (Continued) SPECIAL REVENUE FUNDS CAPITAL PROJECTS FUNDSDEBT SERVICE FUNDS 121 Total Park Non-Major Assessment Capital Open Governmental Districts Projects Space Funds REVENUES Taxes and special assessments $6,818,901 Use of money and properties $4,421 $2,197 315,868 Intergovernmental 1,744,935 Charges for services 8,932,809 Other revenue $4,060 690,714 Total Revenues 4,421 4,060 2,197 18,503,227 EXPENDITURES Current: General government 236,854 Public safety 8,571,035 Public works and parks 1,478,028 Culture and recreation 9,387,644 Community development Capital outlay 3,043 4,367,156 Total Expenditures 3,043 24,040,717 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,378 4,060 2,197 (5,537,490) OTHER FINANCING SOURCES (USES) Transfers in 5,959,636 Transfers out (1,585,864) Total Other Financing Sources (Uses)4,373,772 Net Change in Fund Balances 1,378 4,060 2,197 (1,163,718) Fund Balance, Beginning 301,512 6,764 115,942 14,155,273 Fund Balance, Ending $302,890 $10,824 $118,139 $12,991,555 FOR THE YEAR ENDED JUNE 30, 2019 CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECTS FUND 122 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2019 SPECIAL REVENUE FUNDS Recreation Revolving Baypoint Lagoons Assessment District Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $25,500 $25,368 ($132) Use of money and properties $28,409 $32,351 $3,942 1,300 5,056 3,756 Intergovernmental 15,000 27,200 12,200 Charges for services 3,084,700 2,271,345 (813,355) Other revenue 2,750 48,257 45,507 Total Revenues 3,130,859 2,379,153 (751,706) 26,800 30,424 3,624 EXPENDITURES Current: General government Public safety Public works and parks 40,386 38,027 2,359 Culture and recreation 5,152,419 4,724,942 427,477 Community development Capital outlay Total Expenditures 5,152,419 4,724,942 427,477 40,386 38,027 2,359 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,021,560) (2,345,789) (324,229) (13,586) (7,603) 5,983 OTHER FINANCING SOURCES (USES) Transfers in 2,071,674 2,071,674 Transfers out Total Other Financing Sources (Uses) 2,071,674 2,071,674 FUND BALANCES, BEGINNING OF YEAR AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES $50,114 (274,115) ($324,229) ($13,586) (7,603) $5,983 FUND BALANCES, BEGINNING OF YEAR 276,443 260,017 FUND BALANCES, END OF YEAR $2,328 $252,414 124 Loch Lomond #10 Household Hazmat Facility Childcare Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $1,100 $607 ($493) $8,000 $32,608 $24,608 $3,500 $12,547 $9,047 336,908 390,329 53,421 156,515 167,285 10,770 3,765,000 3,181,669 (583,331) 13,577 13,577 157,615 167,892 10,277 4,109,908 3,618,183 (491,725) 3,500 12,547 9,047 175,271 143,827 31,444 25,054 1,876 23,178 4,080,509 3,493,153 587,356 175,271 143,827 31,444 4,080,509 3,493,153 587,356 25,054 1,876 23,178 (17,656) 24,065 41,721 29,399 125,030 95,631 (21,554) 10,671 32,225 50,000 50,000 50,000 50,000 ($17,656) 24,065 $41,721 $79,399 175,030 $95,631 ($21,554) 10,671 $32,225 342,353 1,571,815 663,537 $366,418 $1,746,845 $674,208 (Continued) Community Facilities District SPECIAL REVENUE FUNDS 125 Library Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $204,500 $79,737 ($124,763) Use of money and properties 400 5,000 4,600 $12,900 $44,820 $31,920 Intergovernmental 1,000 8,379 7,379 Charges for services 7,500 7,354 (146) Other revenue 7,000 80,914 73,914 Total Revenues 204,900 84,737 (120,163) 28,400 141,467 113,067 EXPENDITURES Current: General government Public safety Public works and parks 25,000 7,585 17,415 Culture and recreation 55,000 15,608 39,392 Community development Capital outlay Total Expenditures 25,000 7,585 17,415 55,000 15,608 39,392 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 179,900 77,152 (102,748) (26,600) 125,859 152,459 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES $179,900 77,152 ($102,748) ($26,600) 125,859 $152,459 FUND BALANCES, BEGINNING OF YEAR 205,566 2,323,676 FUND BALANCES, END OF YEAR $282,718 $2,449,535 Community Facilities District SPECIAL REVENUE FUNDS Loch Lomond Marina #2 FOR THE YEAR ENDED JUNE 30, 2019 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL 126 SPECIAL REVENUE FUNDS Library Assessment Public Safety Stormwater Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $1,054,595 $1,041,371 ($13,224) 3,300 11,060 7,760 $210 $88 ($122) $1,200 $9,608 $8,408 90,000 71,068 (18,932) 7,500 720 (6,780) 782,800 833,777 50,977 75,000 62,040 (12,960) 5,000 29,534 24,534 1,057,895 1,052,431 (5,464) 172,710 133,916 (38,794) 789,000 872,919 83,919 276,155 259,148 17,007 1,287,941 1,059,398 228,543 1,243,207 1,144,665 98,542 64,130 64,130 1,243,207 1,144,665 98,542 276,155 259,148 17,007 1,352,071 1,059,398 292,673 (185,312) (92,234) 93,078 (103,445) (125,232) (21,787) (563,071) (186,479) 376,592 100,000 100,000 100,000 100,000 ($185,312) (92,234) $93,078 ($3,445) (25,232) ($21,787) ($563,071) (186,479) $376,592 648,704 114,879 589,023 $556,470 $89,647 $402,544 (Continued) 127 Grants Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments Use of money and properties $39,000 $49,999 $10,999 $2,600 $13,370 $10,770 Intergovernmental 929,750 664,436 (265,314) Charges for services Other revenue Total Revenues 39,000 49,999 10,999 932,350 677,806 (254,544) EXPENDITURES Current: General government 117,000 118 116,882 231,105 104,263 126,842 Public safety 996,417 552,534 443,883 Public works and parks Culture and recreation Community development Capital outlay Total Expenditures 117,000 118 116,882 1,227,522 656,797 570,725 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (78,000) 49,881 127,881 (295,172) 21,009 316,181 OTHER FINANCING SOURCES (USES) Transfers in 48,964 48,964 Transfers out (100,000) (100,000)(36,810) (36,810) Total Other Financing Sources (Uses) (100,000) (100,000)12,154 12,154 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES ($178,000) (50,119) $127,881 ($283,018) 33,163 $316,181 FUND BALANCES, BEGINNING OF YEAR 681,494 762,861 FUND BALANCES, END OF YEAR $631,375 $796,024 Development Services FOR THE YEAR ENDED JUNE 30, 2019 SPECIAL REVENUE FUNDS BUDGET AND ACTUAL CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 128 Parkland Dedication Emergency Medical Services Business Improvement Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $4,744,398 $4,934,584 $190,186 $3,000 $5,227 $2,227 12,500 31,405 18,905 130,000 140,706 10,706 2,550,000 2,470,659 (79,341) 5,135 5,135 265,738 398,202 132,464 3,000 10,362 7,362 7,702,636 7,975,556 272,920 7,578,000 7,375,342 202,658 200,000 200,000 37,301 9,276 28,025 711,781 654,091 57,690 949,082 663,367 285,715 7,578,000 7,375,342 202,658 (946,082) (653,005) 293,077 124,636 600,214 475,578 308,106 308,106 (1,056,300) (1,056,300) 308,106 308,106 (1,056,300) (1,056,300) ($637,976) (344,899) $293,077 $124,636 (456,086) ($580,722) 602,441 1,269,432 $257,542 $813,346 (Continued) SPECIAL REVENUE FUNDS 129 Low and Moderate Income Housing Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $77,000 $124,284 $47,284 Use of money and properties 640 1,504 864 $2,200 $22,271 $20,071 Intergovernmental Charges for services Other revenue 70,000 48,995 (21,005) Total Revenues 77,640 125,788 48,148 72,200 71,266 (934) EXPENDITURES Current: General government 200,000 82,473 117,527 Public safety Public works and parks 134,345 109,853 24,492 Culture and recreation Community development Capital outlay Total Expenditures 134,345 109,853 24,492 200,000 82,473 117,527 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (56,705) 15,935 72,640 (127,800) (11,207) 116,593 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES ($56,705) 15,935 $72,640 ($127,800) (11,207) $116,593 FUND BALANCES, BEGINNING OF YEAR 104,738 906,934 FUND BALANCES, END OF YEAR $120,673 $895,727 Pt. San Pedro-Maintenance Portion SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2019 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL 130 DEBT SERVICE FUNDS Measure A Open Space Measure G - Cannabis Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $476,662 $482,356 $5,694 $126,000 $125,973 ($27) 1,900 367 (1,533) 478,562 482,723 4,161 126,000 125,973 (27) 50,000 50,000 198,064 232,599 (34,535) 155,000 261,436 (106,436) 410,335 410,335 763,399 494,035 269,364 50,000 50,000 (284,837) (11,312) 273,525 76,000 75,973 (27) (392,754) (392,754) (392,754) (392,754) ($677,591) (404,066) $273,525 $76,000 75,973 ($27) 404,066 $16,573 $75,973 $16,573 (Continued) Mariposa Assessment District SPECIAL REVENUE FUNDS 131 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2019 1997 Financing Authority Revenue Bonds Variance Final Positive Budget Actual (Negative) REVENUES Taxes and special assessments Use of money and properties $780 $2,821 $2,041 Intergovernmental Charges for services Other revenue Total Revenues 780 2,821 2,041 EXPENDITURES Current: General government Public safety Public works and parks Culture and recreation Community development Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 780 2,821 2,041 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES $780 2,821 $2,041 148,874 FUND BALANCES, END OF YEAR $151,695 DEBT SERVICE FUNDS 132 INTERNAL SERVICE FUNDS Internal service funds account for department services and financing performed for other departments within the same governmental jurisdiction. Funding comes from charges assessed to the departments benefiting from the service. Building Maintenance Fund - Established to account for construction projects and cyclical large dollar maintenance tasks (roof, painting) completed on City owned buildings. Vehicle Replacement Fund – Established to provide for the replacement of vehicles. Equipment Replacement Fund – Established to provide for the replacement of computers and equipment. Employee Benefits Fund - This fund is utilized for the payment of retiree benefits, unemployment insurance, accumulated leave requirements and other negotiated benefits not tied to a specific department. Liability Insurance Fund - Established to maintain sufficient reserves for outstanding claims. All costs associated with liability premiums are paid from this fund. Workers’ Compensation Fund - Established to maintain sufficient reserves for injury claims. All costs associated with workers compensation, including safety training, wellness programs, claim expenses and insurance premiums are paid from this fund. Dental Insurance Fund - Set up to maintain sufficient reserves for dental claims. All costs associated with dental claims and administrations are paid from this fund. Employee Retirement Fund – Established to maintain sufficient reserves to fund debt service payments on the 2010 Taxable Pension Obligation Bonds and other pension related obligations. OPEB/Retiree Medical Fund – Established to account for activities related to the funding, administration and procurement of retiree medical benefits. Radio Replacement Fund - Established to meet radio system operating costs, capital acquisition and replacement, and operating lease obligations for the Public Works, Fire, Community Development and Police Departments. The Marin Emergency Radio Authority (MERA) is a countywide JPA that has taken the roll in procurement and installation of a new digital radio system. This fund supports San Rafael's portion of the MERA efforts and related contractual obligations. Telephone Replacement Fund – Established to provide ongoing support services for telephone equipment and usage throughout the organization. Sewer Maintenance Fund – Established to record both the cost of providing services to the San Rafael Sanitation District and the charges for those services. 133 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF NET POSITION JUNE 30, 2019 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance ASSETS Current Assets: Cash and investments $97,070 $1,162,146 $2,874,104 $599,034 $3,623,799 Accounts receivable Grants receivable 69,156 Prepaids 633,973 Capital assets: Nondepreciable assets 3,126,385 Depreciable assets, net 3,733,205 6,101,220 426,553 Total Assets 7,025,816 7,897,339 3,300,657 599,034 3,623,799 LIABILITIES Current Liabilities: Accounts payable 150,698 131,878 266,018 9,734 7,377 Claims payable - due in one year 1,100,676 Non-current Liabilities: Claims payable - due in more than one year 2,515,389 Total Liabilities 150,698 131,878 266,018 9,734 3,623,442 NET POSITION: Net investment in capital assets 6,859,590 6,101,220 426,553 Unrestricted 15,528 1,664,241 2,608,086 589,300 357 Total Net Position $6,875,118 $7,765,461 $3,034,639 $589,300 $357 134 OPEB/ Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $6,762,682 $100,548 $1,638,768 $457,028 $98,659 $224,110 $263,261 $17,901,209 72,720 72,720 69,156 633,973 3,126,385 10,260,978 6,762,682 100,548 1,638,768 529,748 98,659 224,110 263,261 32,064,421 16,842 3,634 21,951 30,763 263,261 902,156 1,252,599 2,353,275 4,852,884 7,368,273 6,122,325 3,634 21,951 30,763 263,261 10,623,704 13,387,363 640,357 96,914 1,638,768 507,797 98,659 193,347 8,053,354 $640,357 $96,914 $1,638,768 $507,797 $98,659 $193,347 $21,440,717 135 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance OPERATING REVENUES Charges for current services $1,500,000 $1,100,000 $3,146,433 $891,777 $1,564,879 Intergovernmental 200,000 Other operating revenues 8,035 179 Total Operating Revenues 1,708,035 1,100,000 3,146,433 891,777 1,565,058 OPERATING EXPENSES Personnel 737,055 798,239 219,930 Insurance premiums and claims 1,426,988 Maintenance and repairs 1,120,435 38,069 General and administrative 9,617 2,349,637 144,580 150 Depreciation expense 133,500 1,064,637 104,555 Total Operating Expenses 1,263,552 1,102,706 3,191,247 942,819 1,647,068 Operating Income (Loss) 444,483 (2,706) (44,814) (51,042) (82,010) NONOPERATING REVENUES (EXPENSES) Investment income 20,770 37,471 38,973 66,286 Miscellaneous Income 11,259 Loss on sale of capital assets (4,119) Total Nonoperating Revenues (Expenses) 27,910 37,471 38,973 66,286 Net income (loss) before transfers 444,483 25,204 (7,343) (12,069) (15,724) TRANSFERS IN 170,798 TRANSFERS OUT (86,150) Change in Net Position 529,131 25,204 (7,343) (12,069) (15,724) NET POSITION, BEGINNING OF YEAR 6,345,987 7,740,257 3,041,982 601,369 16,081 NET POSITION, END OF YEAR $6,875,118 $7,765,461 $3,034,639 $589,300 $357 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2019 136 OPEB/ Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $2,194,521 $372,442 $350,000 $3,099,837 $648,660 $561,276 $2,575,521 $18,005,346 200,000 38,132 3,041 852,810 33 902,230 2,232,653 375,483 350,000 3,952,647 648,660 561,309 2,575,521 19,107,576 98,610 142,081 2,474,391 4,470,306 1,573,307 425,320 3,934,803 7,360,418 1,158,504 66,118 3,727 680,205 423,591 101,130 3,778,755 1,302,692 1,738,035 425,320 3,727 3,934,803 680,205 565,672 2,575,521 18,070,675 494,618 (49,837) 346,273 17,844 (31,545) (4,363) 1,036,901 126,725 3,871 26,129 4,337 324,562 11,259 (4,119) 126,725 3,871 26,129 4,337 331,702 621,343 (45,966) 372,402 17,844 (31,545) (26) 1,368,603 170,798 (678,213) (764,363) 621,343 (45,966) (305,811) 17,844 (31,545) (26) 775,038 19,014 142,880 1,944,579 489,953 130,204 193,373 20,665,679 $640,357 $96,914 $1,638,768 $507,797 $98,659 $193,347 $21,440,717 137 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2019 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $1,630,844 $1,118,969 $3,146,433 $891,777 $1,564,879 Cash payments to suppliers for goods and services (1,247,520) (672,042) (2,486,841) (183,660) (1,368,853) Cash payments to employees for salaries and benefits (737,055) (798,239) (219,930) Other operating revenues 8,035 179 Cash Flows from Operating Activities 391,359 446,927 (77,463) (90,122) (23,725) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts 170,798 Interfund payments (86,150) Cash Flows from Noncapital Financing Activities 84,648 'CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (661,334) (169,346) Proceeds from sale of property 11,259 Cash Flows from Investing Activities (661,334) (158,087) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 20,770 37,471 38,973 66,286 Cash Flows from Investing Activities 20,770 37,471 38,973 66,286 Net increase (decrease) in cash and cash equivalents (185,327) 309,610 (39,992) (51,149) 42,561 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 282,397 852,536 2,914,096 650,183 3,581,238 CASH AND CASH EQUIVALENTS, END OF YEAR $97,070 $1,162,146 $2,874,104 $599,034 $3,623,799 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $444,483 ($2,706) ($44,814) ($51,042) ($82,010) Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 133,500 1,064,637 104,555 Net change in assets and liabilities: Accounts receivable (69,156) Prepaid (633,973) Loans receivable 18,969 Accounts payable (117,468) (137,204) (39,080) 127 Claims payable 58,158 Net Cash Provided by (Used in) Operating Activities $391,359 $446,927 ($77,463) ($90,122) ($23,725) 138 OPEB/ Workers' Dental Employee Employee Radio Telephone Sewer Compensation Insurance Retirement Retirement Replacement Replacement Maintenance Total $2,194,521 $372,442 $350,000 $3,027,117 $648,660 $561,276 $2,575,521 $18,082,439 (1,503,153) (425,370) (3,727) (3,913,779) (680,205) (414,308) (2,537,831) (15,437,289) (98,610) (142,081) (1,995,915) 38,132 3,041 852,810 33 902,230 630,890 (49,887) 346,273 (33,852) (31,545) 4,920 37,690 1,551,465 170,798 (678,213) (764,363) (678,213) (593,565) (830,680) 11,259 (819,421) 126,725 3,871 26,129 4,337 324,562 126,725 3,871 26,129 4,337 324,562 757,615 (46,016) (305,811) (33,852) (31,545) 9,257 37,690 463,041 6,005,067 146,564 1,944,579 490,880 130,204 214,853 225,571 17,438,168 $6,762,682 $100,548 $1,638,768 $457,028 $98,659 $224,110 $263,261 $17,901,209 $494,618 ($49,837) $346,273 $17,844 ($31,545) ($4,363) $1,036,901 1,302,692 (72,720) (141,876) (633,973) 18,969 16,557 (50) 21,024 9,283 $37,690 (209,121) 119,715 177,873 $630,890 ($49,887) $346,273 ($33,852) ($31,545) $4,920 $37,690 $1,551,465 139 AGENCY FUND Agency Funds account for assets held by the City as agent for individuals, governmental entities, and non-public organizations. Pt. San Pedro Road Assessment District Fund - Established to accumulate funds for payment of principal and interest for Pt. San Pedro Road Median Landscaping Assessment District bonds. 141 CITY OF SAN RAFAEL AGENCY FUNDS COMBINING STATEMENTS OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2019 Balance Balance June 30, 2018 Additions Deductions June 30, 2019 Pt. San Pedro Road Assessment District Assets Restricted cash and investments $286,396 $26,457 $29,899 $282,954 Taxes receivable 983 725 983 725 Total Assets $287,379 $27,182 $30,882 $283,679 Liabilities Interest payable $25,474 $24,276 $25,474 $24,276 Due to bondholders 261,905 2,906 5,408 259,403 Total Liabilities $287,379 $27,182 $30,882 $283,679 Balance Balance June 30, 2018 Additions Deductions June 30, 2019 Total Agency Fund Assets Restricted cash and investments $286,396 $26,457 $29,899 $282,954 Taxes receivable 983 725 983 725 Total Assets $287,379 $27,182 $30,882 $283,679 Liabilities Interest payable $25,474 $24,276 $25,474 $24,276 Due to bondholders 261,905 2,906 5,408 259,403 Total Liabilities $287,379 $27,182 $30,882 $283,679 142 Boyd Park STATISTICAL SECTION STATISTICAL SECTION This part of the City’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 City’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit. Financial Trends These schedules contain trend information to help the reader understand how the City’s financial performance and well- being have changed over time: 1.Net Position by Component 2.Changes in Net Position 3.Fund Balances of Governmental Funds 4.Changes in Fund Balance of Governmental Funds Revenue Capacity These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax: 1.Assessed and Estimated Actual Value of Taxable Property 2.Property Tax Rates, All Overlapping Governments 3.Principal Property Taxpayers 4.Property Tax Levies and Collections Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future: 1.Ratio of Outstanding Debt by Type 2.Computation of Direct and Overlapping Debt 3.Computation of Legal Bonded Debt Margin 4.Revenue Bond Coverage Parking Facility Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place: 1.Demographic and Economic Statistics 2.Principal Employers Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs: 1.Full-Time Equivalent City Government Employees by Function 2.Operating Indicators by Function/Program 3.Capital Asset Statistics by Function/Program Sources Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. 145 2010 2011 2012 2013 Governmental activities Net investment in capital assets $173,536,144 $174,281,922 $192,361,245 $193,222,791 Restricted 26,150,254 21,322,937 24,693,205 35,780,412 Unrestricted (4,631,276) (8,170,324) 10,652,263 11,151,318 Total governmental activities net position $195,055,122 $187,434,535 $227,706,713 $240,154,521 Business-type activities Net investment in capital assets $10,950,825 $10,793,592 $10,650,558 $10,670,190 Unrestricted 2,017,354 1,948,447 2,495,889 2,501,498 Total business-type activities net position $12,968,179 $12,742,039 $13,146,447 $13,171,688 Primary government Net investments in capital assets $184,486,969 $185,075,514 $203,011,803 $203,892,981 Restricted 26,150,254 21,322,937 24,693,205 35,780,412 Unrestricted (2,613,922) (6,221,877) 13,148,152 13,652,816 Total primary government net position $208,023,301 $200,176,574 $240,853,160 $253,326,209 (a) The City adjusted certain beginning balances during fiscal years 2013-2014, 2014-2015 and 2016-2017. Financial data shown for proceeding years were not adjusted for the presentation. CITY OF SAN RAFAEL NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) ($130,000) ($80,000) ($30,000) $20,000 $70,000 $120,000 $170,000 $220,000 $270,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Thousands Net of Related Debt Restricted Unrestricted 146 □ • • 2014 2015 2016 2017 2018 2019 $190,286,275 $190,621,085 $193,707,175 $199,202,842 $217,170,376 $231,844,210 37,339,141 33,389,224 31,286,725 29,225,643 25,549,583 23,288,874 (196,824) (82,336,534) (93,273,480) (112,913,181) (122,577,233) (118,215,177) $227,428,592 $141,673,775 $131,720,420 $115,515,304 $120,142,726 $136,917,907 $10,786,591 $10,744,952 $10,958,058 $10,968,642 $10,951,518 $11,023,426 2,049,957 (938,519) (1,136,050) (871,620) (886,848) (1,180,121) $12,836,548 $9,806,433 $9,822,008 $10,097,022 $10,064,670 $9,843,305 $201,072,866 $201,366,037 $204,665,233 $210,171,484 $228,121,894 $242,867,636 37,339,141 33,389,224 31,286,725 29,225,643 25,549,583 23,288,874 1,853,133 (83,275,053) (94,409,530) (113,784,801) (123,464,081) (119,395,298) $240,265,140 $151,480,208 $141,542,428 $125,612,326 $130,207,396 $146,761,212 147 CITY OF SAN RAFAEL CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year Ended June 30, 2010 2011 2012 2013 Expenses Governmental Activities: General government $8,396,759 $8,269,846 $10,171,332 $10,202,530 Public safety 42,752,033 44,735,486 39,876,910 41,966,065 Public works and parks 17,401,923 17,408,038 17,423,033 17,695,164 Community development 6,738,873 7,804,650 4,587,557 3,403,158 Culture and recreation 11,139,225 11,487,999 11,020,663 11,330,058 Interest on long-term debt and fiscal charges 2,200,024 1,621,605 1,224,991 283,805 Total Governmental Activities Expenses 88,628,837 91,327,624 84,304,486 84,880,780 Business-Type Activities: Parking services 4,016,198 3,785,751 3,446,482 3,545,387 Total Business-Type Activities Expenses 4,016,198 3,785,751 3,446,482 3,545,387 Total Primary Government Expenses $92,645,035 $95,113,375 $87,750,968 $88,426,167 Component Unit: San Rafael Sanitation District $9,087,354 $9,677,630 $10,185,779 $10,169,082 Program Revenues Governmental Activities: Charges for services: General government $1,665,460 $1,636,542 $1,986,791 $2,655,749 Public safety 6,308,912 6,167,925 7,122,396 6,478,321 Public works and parks 3,916,874 4,141,103 5,214,267 7,837,472 Community development 2,830,179 2,676,663 3,255,367 3,984,204 Culture and recreation 5,280,458 5,362,497 5,873,147 6,075,129 Operating grants and contributions 3,721,055 3,651,902 3,158,281 4,085,073 Capital grants and contributions 2,116,906 1,857,670 2,705,696 5,876,993 Total Government Activities Program Revenues 25,839,844 25,494,302 29,315,945 36,992,941 Business-Type Activities: Charges for services: Parking services 4,244,404 4,011,333 3,901,175 3,990,706 Total Business-Type Activities Program Revenues 4,244,404 4,011,333 3,901,175 3,990,706 Total Primary Government Program Revenues $30,084,248 $29,505,635 $33,217,120 $40,983,647 Component Unit: San Rafael Sanitation District Charges for service $11,559,549 $12,223,779 $12,368,889 $12,413,123 Operating grants and contributions Capital grants and contributions Total Component Unit Program Revenues $11,559,549 $12,223,779 $12,368,889 $12,413,123 Net (Expense)/Revenue Governmental Activities ($62,788,993) ($65,833,322) ($54,988,541) ($47,887,839) Business-Type Activities 228,206 225,582 454,693 445,319 Total Primary Government Net Expense ($62,560,787) ($65,607,740) ($54,533,848) ($47,442,520) Component Unit Activities $2,472,195 $2,546,149 $2,183,110 $2,244,041 148 2014 2015 2016 2017 2018 2019 $9,085,672 $9,099,858 $12,952,983 $10,996,269 $9,835,941 $11,967,641 43,800,158 39,968,631 55,399,798 44,366,734 53,231,197 49,899,296 22,125,336 16,893,164 22,929,289 19,845,719 22,084,433 19,270,613 3,451,244 3,128,373 4,307,269 4,242,743 4,040,195 5,781,826 11,846,818 11,198,151 15,026,680 14,131,000 13,285,563 12,819,429 327,350 284,288 277,263 271,263 884,336 1,848,263 90,636,578 80,572,465 110,893,282 93,853,728 103,361,665 101,587,068 4,125,476 4,249,597 4,762,851 4,188,152 4,627,716 5,038,553 4,125,476 4,249,597 4,762,851 4,188,152 4,627,716 5,038,553 $94,762,054 $84,822,062 $115,656,133 $98,041,880 $107,989,381 $106,625,621 $11,378,055 $11,375,239 $11,654,767 $11,255,194 $12,235,868 $12,601,257 $2,838,940 $1,379,523 $526,495 $421,393 $517,542 $377,606 6,014,034 4,966,251 4,939,658 4,264,939 5,628,478 5,304,832 6,101,460 3,078,267 5,157,289 1,804,698 2,362,375 4,158,338 3,279,251 3,796,684 4,004,178 3,850,107 3,814,892 4,312,259 6,417,003 6,537,646 6,683,059 6,941,013 6,819,303 5,750,846 4,698,142 4,185,450 4,678,338 3,965,351 5,142,670 4,584,855 762,719 1,308,027 1,470,953 1,702,993 974,603 8,042,524 30,111,549 25,251,848 27,459,970 22,950,494 25,259,863 32,531,260 4,485,394 5,173,557 5,212,181 5,268,991 5,203,585 5,362,016 4,485,394 5,173,557 5,212,181 5,268,991 5,203,585 5,362,016 $34,596,943 $30,425,405 $32,672,151 $28,219,485 $30,463,448 $37,893,276 $13,732,496 $14,629,758 $15,414,530 $16,014,016 $16,829,908 $16,964,083 36,945 58,440 5,907 79,245 105,734 1,433,871 $13,732,496 $14,629,758 $15,414,530 $16,130,206 $16,994,082 $18,403,861 ($60,525,029) ($55,320,617) ($83,433,312) ($70,903,234) ($78,101,802) ($69,055,808) 359,918 923,960 449,330 1,080,839 575,869 323,463 ($60,165,111) ($54,396,657) ($82,983,982) ($69,822,395) ($77,525,933) ($68,732,345) $2,354,441 $3,254,519 $3,862,215 $4,875,012 $4,758,214 $5,802,604 149 CITY OF SAN RAFAEL CHANGES IN NET POSITION (continued) Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year Ended June 30, 2010 2011 2012 2013 General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property $21,684,131 $21,632,733 $20,107,637 $17,317,772 Sales 19,055,124 21,623,445 22,355,749 24,262,282 Special assessments Paramedic 3,489,494 3,661,064 3,807,545 3,804,985 Motor vehicles 171,518 297,425 Transient occupancy 1,558,243 1,644,262 1,866,575 2,185,287 Franchise 2,868,332 2,990,539 3,076,094 3,331,160 Business license 2,317,664 2,296,460 2,332,146 2,507,785 Other 1,411,583 1,930,531 3,574,918 2,929,915 Investment earnings 302,180 176,502 205,413 991,762 Gain (Loss) on disposal of assets 221,791 Miscellaneous 541,390 1,496,174 542,816 2,580,882 Special item - Court fines repayment Transfers 458,300 463,600 57,960 423,817 Total Government Activities 54,079,750 58,212,735 57,926,853 60,335,647 Business-Type Activities: Investment earnings 17,678 11,878 7,675 3,739 Aid from other government agencies Transfers (458,300) (463,600) (57,960)(423,817) Total Business-Type Activities (440,622) (451,722) (50,285)(420,078) Total Primary Government $53,639,128 $57,761,013 $57,876,568 $59,915,569 Component Unit: San Rafael Sanitation District Property Taxes $823,187 $1,214,519 $1,192,566 $1,177,469 Investment earnings 93,274 59,265 38,191 25,591 Miscellaneous Aid from other governmental agencies 415,391 6,499 9,613 56,589 Total Component Unit $1,331,852 $1,280,283 $1,240,370 $1,259,649 Special Item Governmental Activities Component Unit Activities Change in Net Position Governmental Activities ($8,709,243) ($7,620,587) $2,938,312 $12,447,808 Business-Type Activities (212,416) (226,140) 404,408 25,241 Total Primary Government ($8,921,659) ($7,846,727) $3,342,720 $12,473,049 Change in Net Position Component Unit Activities $3,804,047 $3,826,432 $3,423,480 $3,503,690 150 2014 2015 2016 2017 2018 2019 $18,439,619 $19,039,443 $19,998,567 $23,343,140 $24,627,373 $25,903,240 27,758,971 32,269,915 34,348,089 31,819,259 34,119,502 35,626,646 3,816,070 3,820,240 4,226,020 5,485,637 4,923,148 4,934,584 2,332,277 2,661,878 3,063,263 2,984,758 3,115,151 3,203,499 3,260,958 3,272,390 3,418,277 3,610,824 3,726,841 3,627,254 2,588,728 2,670,071 2,824,664 2,774,803 2,790,212 2,788,496 3,452,171 3,295,751 3,465,193 1,824,830 2,245,882 1,783,170 184,171 216,066 300,091 210,628 556,745 1,450,434 1,140,743 2,254,901 1,387,315 2,448,604 5,991,713 5,904,968 449,917 432,630 448,478 536,000 632,657 608,698 63,423,625 69,933,285 73,479,957 75,038,483 82,729,224 85,830,989 4,375 7,008 14,723 10,810 24,436 63,870 (449,917)(432,630)(448,478)(536,000)(632,657)(608,698) (445,542)(425,622)(433,755)(525,190)(608,221)(544,828) $62,978,083 $69,507,663 $73,046,202 $74,513,293 $82,121,003 $85,286,161 $1,345,018 $1,319,852 $1,367,172 $1,528,047 $1,620,584 $1,727,221 151,729 171,804 46,225 97,090 234,379 519,793 10,690 7,768 22,125 35,090 $1,518,872 $1,526,746 $1,413,397 $1,625,137 $1,865,653 $2,254,782 $4,462,815 ($4,462,815) $2,898,596 $19,075,483 ($9,953,355) $4,135,249 $4,627,422 $16,775,181 (85,624)498,338 15,575 555,649 (32,352)(221,365) $2,812,972 $19,573,821 ($9,937,780) $4,690,898 $4,595,070 $16,553,816 $3,873,313 $318,450 $5,275,612 $6,500,149 $6,623,867 $8,057,386 151 CITY SAN RAFAEL FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2010 2011 2012 2013 General Fund Pre-GASB 54 Presentation: Reserved $1,763,622 Unreserved 5,038,173 GASB 54 Presentation: Nonspendable $589,833 $527,509 $527,235 Restricted 200,238 76,188 Committed 555,561 651,121 800,876 Assigned 5,439,879 1,516,644 2,476,676 Unassigned Total General Fund $6,801,795 $6,785,511 $2,771,462 $3,804,787 All Other Governmental Funds Pre-GASB 54 Presentation: Reserved $15,352,723 Unreserved, reported in: Special Revenue Funds 8,778,027 Capital Project Funds 4,527,627 Debt Service Funds Expendable Trust Fund GASB 54 Presentation: Nonspendable $377,180 $788,031 $51,521 Restricted 19,289,367 16,856,959 20,769,546 Committed 3,864,322 5,135,257 8,447,495 Assigned 4,124,029 5,283,559 6,511,850 Total all other governmental funds $28,658,377 $27,654,898 $28,063,806 $35,780,412 (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis. (b) The City adjusted certain beginning balances during fiscal years 2013-2014, 2014-2015 and 2015-2016. Financial data shown for preceding years were not adjusted for the presentation. ($5,000) $15,000 $35,000 $55,000 $75,000 $95,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Thousands Total Fund Balance 152 □ 2014 2015 2016 2017 2018 2019 (a) $503,338 $399,299 $476,316 $508,446 $1,008,234 $37,271 6,866,149 12,374,002 16,440,910 14,900,945 11,214,720 11,560,392 1,588,500 1,772,577 1,295,041 934,908 $7,369,487 $14,361,801 $18,689,803 $16,704,432 $12,222,954 $12,532,571 $8,719 $2,359 $9,449 $302,366 $27,627 30,185,064 31,742,184 27,552,245 $25,812,405 $73,489,688 53,260,504 2,185,825 931,871 3,799,421 3,491,708 1,754,983 1,901,271 4,959,533 712,810 119,183 115,103 115,942 118,139 $37,339,141 $33,389,224 $31,480,298 $29,419,216 $75,662,979 $55,307,541 153 CITY OF SAN RAFAEL CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2010 2011 2012 2013 Revenues Taxes and special assessments $47,678,541 $51,448,130 $51,395,116 $51,549,306 Licenses and permits 1,518,819 1,416,772 1,648,890 1,929,387 Fines and forfeitures 787,411 862,820 801,758 734,005 Use of money and properties 433,874 380,720 315,561 325,043 Intergovernmental 13,001,703 11,864,127 10,537,396 11,869,889 Charges for services 15,787,325 15,888,750 19,649,433 23,575,374 Other revenue 716,760 1,026,845 870,957 4,092,411 Total Revenues 79,924,433 82,888,164 85,219,111 94,075,415 Expenditures Current: General government 7,997,067 6,863,142 8,783,873 10,529,480 Public safety 39,574,091 40,967,352 39,311,551 41,377,062 Public works and parks 10,731,669 10,666,176 11,518,822 12,002,448 Community development 4,398,594 4,527,351 3,755,504 2,961,275 Culture and recreation 9,605,684 10,067,822 10,345,673 10,591,057 Capital outlay 1,890,559 1,745,483 1,312,383 4,009,454 Capital improvement/special projects 3,436,608 6,240,861 3,604,171 5,284,720 Debt service: Principal 2,804,258 2,530,338 2,518,320 Interest and fiscal charges 1,979,372 1,448,910 735,221 283,805 Total Expenditures 82,417,902 85,057,435 81,885,518 87,039,301 Excess (deficiency) of revenues over (under) expenditures (2,493,469)(2,169,271)3,333,593 7,036,114 Other Financing Sources (Uses) Issuance of debt 14,660,000 Payment to refunded bonds (14,315,000) Bond premiums 1,038,185 Proceeds from PG&E loans Proceeds from sale of capital asset 221,791 Transfers in 7,494,560 5,806,834 4,539,646 8,425,474 Transfers (out)(6,411,150)(4,657,326)(4,864,293)(6,711,657) Total other financing sources (uses)2,688,386 1,149,508 (324,647)1,713,817 Extraordinary Item Transfer to Successor Agency (2,352,584) Net Change in fund balances $194,917 ($1,019,763)$3,008,946 $6,397,347 Debt service as a percentage of noncapital expenditures 6.2%5.2%4.2%0.4% Fiscal Year Ended June 30, 154 2014 2015 2016 2017 2018 2019 $56,686,142 $61,804,228 $65,866,218 $71,166,891 $74,893,789 $77,101,185 1,934,755 2,456,820 2,588,411 2,559,841 2,718,166 2,661,500 669,553 556,076 435,829 400,283 384,268 337,680 363,089 444,757 460,206 349,349 654,531 1,583,060 11,953,308 13,233,503 13,685,003 8,063,156 8,878,974 15,602,264 19,949,333 15,346,794 14,366,744 13,425,161 14,660,094 15,166,876 2,045,407 1,777,003 3,208,749 1,842,053 5,219,414 5,158,042 93,601,587 95,619,181 100,611,160 97,806,734 107,409,236 117,610,607 8,678,833 10,203,687 11,349,079 10,557,416 10,010,100 12,553,499 41,900,762 43,954,515 47,071,166 49,018,153 51,805,708 51,678,876 13,697,957 12,758,643 14,390,699 16,752,961 17,647,312 15,617,622 3,296,375 3,416,859 3,670,108 3,759,564 4,051,224 4,988,260 11,106,367 11,616,777 12,048,104 12,646,728 12,823,771 12,468,008 2,154,900 4,498,924 4,813,757 2,100,926 22,815,967 38,701,047 7,168,776 2,186,986 4,826,576 7,403,249 208,642 75,172 75,172 175,172 280,172 495,172 327,350 284,288 277,263 271,263 1,005,636 2,356,207 88,539,962 88,995,851 98,521,924 102,685,432 120,439,890 138,858,691 5,061,625 6,623,330 2,089,236 (4,878,698)(13,030,654)(21,248,084) 46,565,800 568,481 3,655,302 4,348,149 7,533,364 9,287,007 68,351,964 15,482,297 (3,053,865)(3,051,499)(6,582,555)(8,454,762)(68,373,222)(14,280,034) 1,169,918 1,296,650 950,809 832,245 46,544,542 1,202,263 $6,231,543 $7,919,980 $3,040,045 ($4,046,453)$33,513,888 ($20,045,821) 0.7%0.4%0.4%0.5%1.3%2.8% 155 CITY OF SAN RAFAEL ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Real Property Total Real Total Fiscal Residential Commercial Industrial Secured Unsecured Total Estimated Direct Year Property Property Property Other Property Property Assessed (a) Full Market (a) Tax Rate (b) 2010 7,335,863,721$ 2,052,276,292$ 244,857,019$ 130,177,994$ 9,763,175,026$ 401,201,906$ 10,164,376,932$ 10,164,376,932$ 0.19215% 2011 7,215,965,203 2,056,985,417 247,409,955 124,426,487 9,644,787,062 383,414,952 10,028,202,014 10,028,202,014 0.17851% 2012 7,317,280,602 2,036,262,351 247,485,238 118,579,648 9,719,607,839 384,950,872 10,104,558,711 10,104,558,711 0.17827% 2013 7,265,617,525 1,987,170,644 245,917,096 115,453,836 9,614,159,101 384,534,108 9,998,693,209 9,998,693,209 0.17456% 2014 7,558,708,224 2,009,718,415 245,674,195 130,594,237 9,944,695,071 402,261,887 10,346,956,958 10,346,956,958 0.11985% 2015 7,991,224,952 2,120,065,908 249,864,918 115,675,852 10,476,831,630 417,217,272 10,894,048,902 10,894,048,902 0.11657% 2016 8,511,358,216 2,221,843,976 263,830,302 108,982,883 11,106,015,377 400,942,059 11,506,957,436 11,506,957,436 0.11672% 2017 9,025,896,811 2,390,814,514 267,468,956 135,689,202 11,819,869,483 423,545,667 12,243,415,150 12,243,415,150 0.11693% 2018 9,522,645,933 2,532,439,852 276,751,912 128,305,868 12,460,143,565 417,902,554 12,878,046,119 12,878,046,119 0.11709% 2019 10,042,494,232 2,681,917,170 285,601,803 107,472,477 13,117,485,682 409,129,431 13,526,615,113 13,526,615,113 0.11742% (a) (b) Data Source: Marin County Assessor 2009/10 - 2018/19 Combined Tax Rolls The State Constitution requires property to be assessed at one hundred percent of the most recent purchase price, plus an increment of no more than two percent annually, plus any local over-rides. These values are considered to be full market values. California cities do not set their own direct tax rate. The state constitution establishes the rate at 1% and allocates a portion of that amount, by an annual calculation, to all the taxing entities within a tax rate area. $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Millions Unsecured Property Secured Property 156 1 -- Fiscal School Misc. Special Year City County (1)Districts Districts Total 2010 0.154 0.295 0.7402 0.0461 1.2349 2011 0.154 0.295 0.7542 0.0461 1.2489 2012 0.154 0.295 0.7831 0.0461 1.2779 2013 0.154 0.295 0.7743 0.0461 1.2691 2014 0.154 0.295 0.7890 0.0461 1.2838 2015 0.154 0.295 0.7651 0.0461 1.2599 2016 0.154 0.295 0.7846 0.0695 1.3028 2017 0.154 0.295 0.8251 0.0553 1.3291 2018 0.154 0.295 0.8127 0.0661 1.3275 2019 0.154 0.295 0.8495 0.0650 1.3635 Notes: (1) Like other cities, San Rafael includes several property tax rate areas with different rates. A mean average is indicated. Data Source: Marin County Assessors Office 2008/09 - 2017/18 Tax Rate Tables CITY OF SAN RAFAEL PROPERTY TAX RATES ALL OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS 157 CITY OF SAN RAFAEL PRINCIPAL PROPERTY TAX PAYERS CURRENT FY 2018/19 AND FY 2009/2010 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Value Value Value California Corporate Center ACQ LLC 273,522,259$ 2.02% MGP XI Northgate LLC 214,970,194 1.59% Professional Financial Investors Inc 112,170,328 0.83% BRE Properties Inc 63,635,520 0.47% South Valley Apartments LLC 54,071,293 0.40% Regency Center II Associates LP 47,653,153 0.35% 41,716,937$ 0.41% Northbay Properties II 46,914,742 0.35% Bay Apartment Communities Inc 44,412,310 0.33% 35,182,329 0.35% Barbara Fasken 1995 Trust ETAL 44,190,490 0.33% Coastal City Partners LLC 42,603,280 0.31% Northgate Mall Associates 112,797,140 1.11% SR Corporation Center Phase 1 72,881,400 0.72% SR Corporation Center Phase 2 40,204,768 0.40% Corac LLC 82,587,760 0.81% Sutter Health 44,602,859 0.44% Marin Sanitary Service 39,236,037 0.39% 4040 Civic Center LLC 36,503,908 0.36% Robert Dickson Trust 44,076,750 0.43% Subtotal 944,143,569$ 6.98% 549,789,888$ 5.41% Total Net Assessed Valuation: Fiscal Year 2018-2019 13,526,615,113$ Fiscal Year 2009-2010 10,164,376,932$ FY 2018-2019 FY 2009-2010 158 Delinquent taxes Fiscal as a Percent of Year Rate Levies Allocations Collections Apportionments Delinquencies Allocations 2010 1.00 (2)21,702,536$ (2)21,702,536$ (2)0.0% 2011 1.00 (2)21,632,731 (2)21,632,731 (2)0.0% 2012 1.00 (2)20,704,368 (2)20,704,368 (2)0.0% 2013 1.00 (2)20,883,041 (2)20,883,041 (2)0.0% 2014 1.00 (2)22,001,357 (2)22,001,357 (2)0.0% 2015 1.00 (2)22,376,457 (2)22,376,457 (2)0.0% 2016 1.00 (2)23,636,093 (2)23,636,093 (2)0.0% 2017 1.00 (2)25,173,651 (2)25,173,651 (2)0.0% 2018 1.00 (2)26,088,961 (2)26,088,961 (2)0.0% 2019 1.00 (2)27,718,712 (2)27,718,712 (2)0.0% Notes: (1) Includes deductions for County property tax administration. (2) Information not applicable. All general purpose property taxes are levied by the county and allocated to other governmental entities. CITY OF SAN RAFAEL PROPERTY TAX LEVIES AND COLLECTIONS (1) LAST TEN FISCAL YEARS $6 $9 $12 $16 $19 $22 $25 $28 $31 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019MillionsAllocations Apportionments 159 -------,, ~ ---,, ---.,., -- -+-- ~ - CITY OF SAN RAFAEL RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS RDA Tax Financing Court Fine Capitalized Pension Lease Fiscal Allocation Authority Note Promissory Lease Obligation Revenue Year Bonds Revenue Bonds Payable Note Obligations Bonds Bonds Total 2010 35,355,988$ -$ 169,000$ 363,328$ 135,330$ 36,023,646$ 2011 33,298,499 - 169,000 124,222 69,098 4,490,000$ 38,150,819 2012 - - 169,000 - - 4,490,000 4,659,000 2013 - - 169,000 - - 4,490,000 4,659,000 2014 - - 528,839 - - 4,490,000 5,018,839 2015 - - 453,667 - - 4,490,000 4,943,667 2016 - - 378,495 - - 4,490,000 4,868,495 2017 - - 303,323 - - 4,390,000 4,693,323 2018 - - 1,308,951 - - 4,185,000 45,485,000$ 50,978,951 2019 1,233,779 3,765,000 45,485,000 50,483,779 Parking Total Percentage Fiscal Services Note Primary of Personal Per Year Bonds Payable Total Government Income (a)Capita (a) 2010 6,805,000$ 6,805,000$ 42,828,646$ 1.85% 728.11 2011 6,630,000 6,630,000 44,780,819 1.87% 770.28 2012 6,445,000 6,445,000 11,104,000 0.46% 190.45 2013 6,445,000 6,445,000 11,104,000 0.44% 190.85 2014 6,186,403 61,836$6,248,239 11,267,078 0.43%192.38 2015 5,942,128 55,020 5,997,148 10,940,815 0.41%184.77 2016 5,692,853 48,204 5,741,057 10,609,552 0.38%175.13 2017 5,433,577 41,388 5,474,965 10,168,288 0.35%167.13 2018 5,164,303 34,572 5,198,875 56,177,826 n/a 926.25 2019 4,890,027 27,755 4,917,782 55,401,561 Notes : Debt amounts exclude any premiums, discounts, or other amortization amounts. In August 2012, the series 2003 parking services bonds were refunded with series 2012 refunding bonds. Data Sources:City of San Rafael State of California, Department of Finance (population) U.S. Department of commerce, Bureau of the Census (income) (a) See Schedule of Demographic and Economic Statistics for personal income and population data. Governmental Activities Business-Type Activities $- $10 $20 $30 $40 $50 $60 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019MillionsTotal Governmental Total Business 160 Cl • CITY OF SAN RAFAEL COMPUTATION OF DIRECT AND OVERLAPPING DEBT June 30, 2019 2018-19 Assessed Valuation:13,526,615,113$ Total Debt City's Share of OVERLAPPING TAX AND ASSESSMENT DEBT:6/30/2019 % Applicable (1) Debt 6/30/2019 Marin Community College District 462,100,000$ 17.274% 79,823,154$ San Rafael High School District 116,868,938 78.409% 91,635,766 Tamalpais Union High School District 101,995,000 0.077%78,536 Dixie School District 30,910,810 66.296% 20,492,631 Ross School District 17,934,441 1.491% 267,403 Ross Valley School District 42,363,340 0.012%5,084 San Rafael School District 141,275,126 83.707% 118,257,170 Marin Healthcare District 372,690,000 20.778% 77,437,528 Marin Emergency Radio Authority Parcel Tax Obligations 33,000,000 17.249% 5,692,170 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 393,689,442$ DIRECT AND OVERLAPPING GENERAL FUND DEBT: Marin County Certificates of Participation 85,234,007$ 17.249% 14,702,014$ Marin County Pension Obligation Bonds 84,770,000 17.249% 14,621,977 Marin County Transit District General Fund Obligations 69,502 17.249%11,988 Marin Municipal Water District General Fund Obligations 56,544 21.984%12,431 Marin Community College District Certification of Participation 13,360,834 17.274% 2,307,950 San Rafael School District Certificates of Participation 3,140,000 83.707% 2,628,400 City of San Rafael General Fund Obligations 52,614,778 100.000% 52,614,778 (2) City of San Rafael Pension Obligations 3,765,000 100.000% 3,765,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT 90,664,538 Less: City of San Rafael lease revenue bonds supported by parking revenues 4,900,000 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT 85,764,538$ OVERLAPPING TAX INCREMENT DEBT (Successor Agency 9,099,465$ 100.000% 9,099,465$ TOTAL GROSS DIRECT DEBT 56,379,778 TOTAL NET DIRECT DEBT 51,479,778 TOTAL OVERLAPPING DEBT 437,073,669 GROSS COMBINED TOTAL DEBT 493,453,445 (3) NET COMBINED TOTAL DEBT 488,553,445 (1)The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable (2) Include share of Marin Emergency Radio Authority refunding revenue bonds and $1,233,779 PG&E notes. Ratios to 2018-19 Assessed Valuation: Total Overlapping Tax and Assessment Debt 2.91% Total Gross Direct Debt ($56,379,778)0.42% Total Net Direct Debt ($51,479,778)0.38% Gross Combined Total Debt 3.65% Net Combined Total Debt 3.61% Ratios to Redevelopment Incremental Valuation ($,2964,827,159 Total Overlapping Tax Increment Debt 0.31% Data Source: MuniServices (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. 161 ASSESSED VALUATION:13,526,615,113$ BONDED DEBT LIMIT (3.75% OF ASSESSED VALUE) (a) 507,248,067$ LESS AMOUNT OF DEBT SUBJECT TO LIMIT: 50,978,951.00 LEGAL BONDED DEBT MARGIN 456,269,116$ Total net debt Total Net Debt Legal applicable to the limit Fiscal Debt Applicable to Debt as a percentage Year Limit Limit Margin of debt limit 2010 381,164,135$ 36,023,646$ 345,140,489$ 10.44% 2011 376,057,576 38,150,819 337,906,757 11.29% 2012 378,920,952 4,659,000 374,261,952 1.24% 2013 374,950,995 4,659,000 370,291,995 1.26% 2014 388,010,886 5,018,839 382,992,047 1.31% 2015 408,526,834 4,943,667 403,583,167 1.22% 2016 431,510,904 4,868,495 426,642,409 1.14% 2017 459,128,068 4,693,323 454,434,745 1.03% 2018 482,926,729 50,978,951 431,947,778 11.80% 2019 507,248,067 50,483,779 456,764,288 11.05% NOTE: (a) Source: City of San Rafael's Finance Department CITY OF SAN RAFAEL COMPUTATION OF LEGAL BONDED DEBT MARGIN June 30, 2019 California Government Code, Section 43605 sets the debt limit at 15%. The Code section was enacted prior to the change in basing assessed value to full market value when it was previously 25% of market value. Thus, the limit shown as 3.75% is one-fourth 162 CITY OF SAN RAFAEL REVENUE BOND COVERAGE PARKING FACILITY LAST TEN FISCAL YEARS Debt Service Requirements Net Revenue Fiscal Gross Operating Available for Year Revenue (1) Expenses (2) Debt Service Principal Interest Total Coverage 2010 4,262,082$ 3,343,680$ 918,402$ 170,000$ 325,285$ 495,285$ 1.85 2011 4,023,211 3,101,411 921,800 175,000 319,391 494,391 1.86 2012 3,908,664 2,870,718 1,037,946 185,000 312,291 497,291 2.09 2013 3,994,446 3,121,964 872,481 310,000 240,012 550,012 1.59 2014 4,489,769 3,716,552 773,217 245,000 210,063 455,063 1.70 2015 5,180,554 4,031,161 1,149,393 245,000 205,163 450,163 2.55 2016 5,226,904 3,739,321 1,487,583 250,000 199,613 449,613 3.31 2017 5,279,801 2,425,281 2,854,520 260,000 192,038 452,038 6.31 2018 5,219,721 4,320,695 899,026 270,000 184,163 454,163 1.98 2019 5,425,883 4,283,754 1,142,130 275,000 176,025 451,025 2.53 Notes: On March 26, 2003, the City Financing Authority issued lease revenue bonds for the design and construction of a new parking facility. On August 12,2012 , the City Financing Authority refunded the series 2003 lease revenue bonds with series 2012 lease revenue refunding bonds to take advantage of lower interest rates. (1) Includes all Parking Facility Operating Revenues and Non-operating Interest Revenue (2) Includes all Parking Facility Operating Expenses less Depreciation and Interest Data Source: San Rafael Finance Department Revenue and Expenditure Status Reports 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Coverage 163 1 - CITY OF SAN RAFAEL DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Personal Per Capita Average Marin City Fiscal City Income (2)Personal Unemployment County Population Year Population (1)(in thousands)Income (2) Rate (3)Population % of County 2010 58,822$ 2,317,704$ 39,402$ 9.80% 260,651$ 22.57% 2011 58,136 2,389,222 40,978 8.80% 254,692 22.83% 2012 58,305 2,438,291 41,908 5.50% 254,790 22.88% 2013 58,182 2,538,895 43,351 4.70% 254,007 22.91% 2014 58,566 2,621,228 44,531 4.50% 255,846 22.89% 2015 59,214 2,699,436 44,558 3.70% 258,972 22.87% 2016 60,582 2,817,497 46,308 3.40% 262,274 23.10% 2017 60,842 2,943,227 48,374 3.30% 263,604 23.08% 2018 60,651 3,152,985 52,509 2.30% 263,886 22.98% 2019 60,046 n/a n/a n/a 262,879 22.84% Source: (1) State of California, Department of Finance - Demographic Research Unit. The data represents the City's population as of January 1, of each year. (2) 2007-2009 Income Data--Demographic Estimates are based on the last available census. Projections are developed by incorporating all of the prior census data released to date. 2010 and later- Income - US Census Bureau, most recent American Community Survey (3)Unemployment Data: California Employment Development Department 0.00% 2.50% 5.00% 7.50% 10.00% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Unemployment Rate (%) 22.00% 22.50% 23.00% 23.50% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 City Population as a % of County Population $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Personal Income (2) (in thousands) $30 $35 $40 $45 $50 $55 ThousandsPer Capita Personal Income (2) 164 r ■ ■ ---+---■ Employer # (A) # (A) # (A) # (A) # (A) # (A) # (A) # (A) # (A) # (A) Kaiser Permanente 2,014 6.22% 2,092 6.62% 2,061 6.52% 662 2.02%1,575 4.82% 1,637 5.26% 1,756 5.74% 1,803 6.68% 1,330 4.93% 1,311 4.88% BioMarin Pharmaceutical Inc.950 2.93% San Rafael Elementary/High Schools Dist(700 2.16% 700 2.22% 700 2.22% 650 1.98% 650 1.99% 600 1.93% 600 1.96% 600 2.22% 600 2.22% 600 2.23% City of San Rafael 410 1.27% 410 1.30% 454 1.44% 577 1.76% 581 1.78% 666 2.14% 643 2.10% 521 1.93% 592 2.19% 630 2.34% Dominican University of California 421 1.30% 319 1.01%456 1.44% 485 1.48% 422 1.29% 354 1.14% 347 1.13% 346 1.28% 336 1.24% 370 1.38% Guide Dogs for the Blind 227 0.70% 200 0.63% 203 0.64% 225 0.69% - - - - - - - - - - 287 1.07% Buckelew Programs 103 0.32% 106 0.34% 240 0.76% 186 0.57% - - - - - - - - - - - - Lifehouse 100 0.31%0.00%0.00% - - - - - `` - - - - - - - - EO Poducts 150 0.46%0.00%0.00% - - - - - - - - - - - - - - Toyota Marin 141 0.44%0.00%0.00% - - - - - - - - - - - - - - Totals 5,216 16.10% 4,708 14.90% 5,853 18.52% 5,314 16.20% 5,620 17.19% 6,025 19.37% 6,079 19.87% 6,715 24.87% 6,007 22.25% 6,092 22.67% #Number of FTE employees in Marin locations (A)Percentage of total employment Note: From the EDD website, it shows that the Total 2019 Employment in the City of San Rafael was 32,400 of which it is used as the denominator for the 2019 percentages are calculated. Data Sources: State of California, Employment Development Department, Labor Market Information Division & North Bay Business Journal (Annual Book of Lists) 2014 2013 2012 2011 2010 CITY OF SAN RAFAEL PRINCIPAL EMPLOYERS FISCAL YEAR 2018-2019 LAST TEN CALENDAR YEARS 20152016201920172018 165 CITY OF SAN RAFAEL FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Function General Government 56.88 54.35 55.23 53.23 55.11 58.11 60.61 62.11 60.11 63.11 Public Safety 165.00 166.00 162.00 163.00 168.00 171.75 175.75 176.55 175.35 175.65 Public Works and Parks 60.80 62.80 62.00 60.00 61.00 62.00 62.00 63.00 66.67 66.00 Community Development 26.75 26.75 18.25 18.25 17.80 17.80 19.80 20.00 21.00 22.00 Culture and Recreation 83.49 89.82 81.56 80.76 83.66 84.23 84.25 84.35 87.35 85.82 Total 392.92 399.72 379.04 375.24 385.57 393.89 402.41 406.01 410.48 412.58 Data Source: City of San Rafael's Finance Department 0.00 50.00 100.00 150.00 200.00 250.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019FTE'sGeneral Government Public Safety Public Works and Parks Community Development Culture and Recreation 166 ■ ■ ■ ■ ■ CITY OF SAN RAFAEL OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2010 2011 2012 2013 Function/Program Public safety: Fire: Inspection permit issued 307 294 282 307 Police: Police calls for service 42,227 39,512 39,537 42,707 Law violations: Part I crimes 2,352 2,180 2,101 2,523 Physical arrests (adult and juvenile)4,487 3,102 2,981 2,951 Traffic violations 5,777 8,190 4,048 3,448 Parking violations 42,806 34,590 32,492 30,881 Public works Street resurfacing (miles) (Eng Div)2.77 7.40 N/A 2.70 Potholes repaired (square miles)N/A N/A N/A N/A Asphalt used for street repairs (tons)N/A 10,809 178.9 7,500 Culture and recreation: Recreation class participants 9,524 9,000 12,075 7,082 Recreation Facility Rentals Childcare School-Age program participants Library: Items in collection (thousands)151.88 158.30 159.18 125.92 Total items borrowed (thousands)371.12 435.66 366.46 392.23 Note: N/A denotes information not available. 168 2014 2015 2016 2017 2018 2019 261 282 198 233 186 123 51,261 55,805 57,026 53,567 51,013 47,919 2,289 2,533 2,523 2,392 2,326 1,893 3,227 3,450 3,453 2,526 2,019 1,923 4,498 4,168 3,252 3,341 2,758 2,944 38,814 36,398 34,803 36,169 36,208 40,407 9.00 6.40 6.76 2.32 2.50 4.30 N/A N/A N/A N/A N/A N/A 10,700 11,000 7,195 5,800 4,730 7,200 9,857 10,023 12,725 13,493 12,842 N/A 5,146 7,592 168.62 127.76 227.89 117,354 115,812 123,432 478.96 443.64 469.79 327,297 324,452 356,301 169 CITY OF SAN RAFAEL CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2010 2011 2012 2013 Function/Program Public safety: Fire stations 6666 Police stations 1111 Police Fleet Public works Miles of streets 173 173 173 173 Street lights 4,435 4,435 4,435 4,435 Parking District lights Traffic Signals 89 89 89 89 Culture and recreation: Community services: City parks 20 20 20 20 City parks acreage 42424242 Playgrounds 14 14 14 14 City trails 20 20 20 20 Community gardens 1111 Community centers 4444 Senior centers 0000 Sports centers 0000 Performing arts centers 0000 Swimming pools 1111 Tennis courts 10 10 10 10 Basketball Courts 5555 Baseball/softball diamonds 5555 Soccer/football fields 2222 Library: City Libraries 2222 Wastewater: Miles of sanitary sewers 179 179 179 179 Data Source: City of San Rafael's Finance Department 170 2014 2015 2016 2017 2018 2019 666666 111111 173 173 173 173 173 173 4,435 4,435 4,435 4,435 4,435 4,435 89 89 89 89 89 89 20 20 20 20 20 20 42 42 42 42 42 42 14 14 14 14 14 14 20 20 20 20 20 20 111111 444444 000000 000000 000000 111111 10 10 10 10 10 10 555555 555555 222222 222222 145 145 145 145 145 145 171 INDEPENDENT ACCOUNTANT'S REPORT ON APPL YING AGREED UPON PROCEDURES FOR COMPLIANCE WITH THE PROPOSITION 111 2019-2020 APPROPRIATIONS LIMIT INCREMENT Honorable Mayor and Members of the City Council City of San Rafael, California We have performed the procedures below, which were agreed to by the City of San Rafael, on the Appropriations Limit Worksheet (Worksheet) for the year ended June 30, 2019. The City's management is responsible for the Worksheet. These procedures, which were suggested by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were performed solely to assist you in meeting the requirements of Section 1.5 ·of Article XIIIB of the California Constitution. The sufficiency of these procedures is solely the responsibility of the City. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this repmi has been requested or for any other purpose. The procedures and associated findings were as follows: A. We obtained the Worksheet and determined that the 2019-2020 Appropriations Limit of $138,889,447 and annual adjustment factors were adopted by Resolution of the City Council. We also determined that the population and inflation options were selected by a recorded vote of the City Council. B. We recomputed the 2019-2020 Appropriations Limit by multiplying the 2018-2019 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option. C. For the Worksheet, we agreed the Per Capita Income Factor, City Population Factor and County Population F~ctor to California State Department of Finance Worksheets. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been repmied to you. This report is intended solely for the information and use of management and the City Council and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record. · 1\1¥\&~e. 1 X/1,(Jo~ Pleasant Hill, California November 8, 2019 Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill, CA 94523 T 925.930.0902 F 925 .930.0135 E maze@mazeassociates.com w mazeassociates.com CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL AND REQUIRED COMMUNICATIONS FOR THE YEAR ENDED JUNE 30, 2019 This Page Left Intentionally Blank CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL AND REQUIRED COMMUNICATIONS For The Year Ended June 30, 2019 Table of Contents Page Memorandum on Internal Control .................................................................................................. I Schedule of Other Matters ..................................................................................................... .3 Required Communications ............................................................................................................... 7 Significant Audit Findings ... _ ......................................................................................................... 7 Accounting Policies ................................................................................................................ 7 Unusual Transactions, Controversial or Emerging Areas .................................................... 7 Accounting Estimates ............................................................................................................. 8 Disclosures .............................................................................................................................. 8 Difficulties Encountered in Performing the Audit.. .............................................................. 8 Corrected and Uncorrected Misstatements ............................................................................ 8 Disagreements with Management.. ........................................................................................ 9 Management Representations ................................................................................................. 9 Management Consultations with Other Independent Accountants ...................................... 9 Other Audit Findings or Issues ............................................................................................... 9 Other Information Accompanying the Financial Statements ....................................................... 9 This Page Left Intentionally Blank M MAZE & ASSOCIATES MEMORANDUM ON INTERNAL CONTROL To the City Council of the City of San Rafael, California We have audited the basic financial statements of the City of San Rafael for the year ended June 30, 2019 and have issued our report thereon dated November 7, 2019. Our opinions on the basic financial statements and this report, insofar as they relate to San Rafael Sanitation District (District), are based solely on the report of other auditors. In planning and performing our audit of the basic financial statements of the City of San Rafael, in accordance with auditing standards generally accepted in the United States of America, we considered the City's internal control over financial reporting (internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a .combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City's financial statements will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency. This communication is intended solely for the information and use of management, City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards, and is not intended to be and should not be used by anyone other than these specified parties. ttYl "'~ -( ~/)d"~ Pleasant Hill, California November 8, 2019 Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill, CA 94523 T 925.930.0902 F 925.930.0135 e maze @mazeassociates.com w mazeassoclates,com This Page Left Intentionally Blank CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking effect in the next few years. We have cited them here to keep you abreast of developments: EFFECTIVE FISCAL YEAR 2019/20: GASB 84-Fiduciary Activities The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. This Statement describes four fiduciary funds that should be reported, ifapplicable: (1) pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust funds, and ( 4) custodial funds. Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. GASB 90 -Maioritv Equity Interests-an amendment of GASB Statements No. 14 and No. 61) The primary objectives of this Statement are to improve the consistency and comparability of reporting a govermnent's majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government's holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. For all other holdings of a majority equity interest in a legally separate organization, a government should report the legally separate organization as a component unit, and the government or fund that holds the equity interest should report an asset related to the majority equity interest using the equity method. This Statement establishes that ownership of a majority equity interest in a legally separate organization results in the government being financially accountable for the legally separate organization and, therefore, the government should report that organization as a component unit. This Statement also requires that a component unit in which a government has a 100 percent equity interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value at the date the government acquired a 100 percent equity interest in the component unit. Transactions presented in flows statements of the component unit in that circumstance should include only transactions that occurred subsequent to the acquisition. 3 CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS EFFECTIVE FISCAL YEAR 2020/21: GASB87-Leases The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. GASB 89 -Accounting for Interest Cost Incurred before the End of a Construction Period The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5-22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. EFFECTIVE FISCAL YEAR 2021/22: GASB 91 -Conduit Debt Obligations The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. 4 CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS This Statement also addresses arrangements-often characterized as leases-that are associated with conduit debt obligations. This Statement requires issuers to disclose general information about their conduit debt obligations, organized by type of commitment, including the aggregate outstanding principal amount of the issuers' conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities related to supporting the debt service of conduit debt obligations also should disclose information about the amount recognized and how the liabilities changed during the reporting period. 5 This Page Left Intentionally Blank M MAZE &ASSOCIATES REQUIRED COMMUNICATIONS To the City Council of the City of San Rafael, California We have audited the basic financial statements of the City of San Rafael for the year ended June 30, 2019. We did not audit the financial statements of the San Rafael Sanitation District, as of and for the year ended June 30, 2019, which represent 24%, 36%, and 14% of the assets , net position and revenues , respectively, of the entity-wide reporting entity. These component unit financial statements were audited by another auditor, whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for this entity, is based solely on the report of the other auditor. Professional standards require that we communicate to you the following information related to our audit under generally accepted auditing standards and Gov ernm ent Auditing Standards and the Uniform Guidance. Significant Audit Findings Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City of San Rafael are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year, except as indicated below. The following Governmental Accounting Standards Board (GASB) pronouncement became effective, but did not have a material effect on the financial statements. GASB 83 Certain Asset Retirement Obligations The following GASB pronouncement became effective, but did not have a material effect on the financial statements. See Notes 6 and 15C in the financial statements for additional disclosure. GASB 88 Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements Unusual Transactions, Controversial or Emerging Areas We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill , CA 94523 7 T 925.930.0902 F 925,930.0135 E maze @mazeassociates .com w mazeassoclates.corn Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the City's financial statements were: • Estimated Net Pension Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management's estimate of the net pension liabilities and related deferred outflows/inflows ofresources are disclosed in Note 9 to the financial statements and are based on actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. • Estimated Net OPEB Liability and Pension-Related Deferred Outflows and Inflows of Resources: Management's estimate of the net OPEB liability and related deferred outflows/inflows of resources are disclosed in Note 11 to the financial statements and is based on actuarial studies determined by a consultant, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. • Management's estimate of the depreciation: is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note 1 to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. • Estimated Fair Value of Investments: As of June 30, 2019, cash and investments were measured by fair value. Fair value is essentially market pricing in effect as of June 30, 2019. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2019. Disclosures The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements taken as a whole. 8 Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in a management representation letter dated November 8, 2019. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the City's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the nonnal course of our professional relationship and our responses were not a condition to our-retention. · Other Information Accompanying the Financial Statements We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary infonnation. We were engaged to report on the supplementary information which accompany the financial statements, but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing · the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. 9 We were not engaged to report on the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. ****** This infonnation is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties. lyf\6'~~ 4~1cx)o~ Pleasant Hill, California November 8, 2019 10 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2019 This Page Left Intentionally Blank CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM FOR THE YEAR ENDED JUNE 30, 2019 Table of Contents INTRODUCTORY SECTION: Table of Contents ........................................................................................................................................... .i FINANCIAL SECTION: Independent Auditor's Report ................................................................................................................... 1 Basic Financial Statements Balance Sheet .......................................................................................................................................... 3 Statement of Revenue, Expenditures and Changes in Fund Balance ........................................................................................................................................ 4 Notes to Basic Financial Statements ...................................................................................................... 5 Supplementary Information Schedule of A wards .............................................................................................................................. 10 Combining Statement of Revenues, Expenditures and Changes in Fund Balance ................................................................................................................................ 11 Schedule of Expenditures by State Categories .................................................................................... 12 Schedule of Reimbursable Administrative Costs ................................................................................ 13 Schedule of Equipment Expenditures Utilizing Contract Funds ...................................................... 14 Schedule of Renovation and Repair Expenditures Utilizing Contract Funds ..................................... 14 Audited Attendance and Fiscal Reports/ Audited Fiscal Reports: CSPP8280 -California State Preschool Programs ............................................................................ 15 Audited Reserve Account Activity Report ....................................................................................... 20 Compliance Report · Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ........................................................................ 25 This Page Left Intentionally Blank INDEPENDENT AUDITOR'S REPORT To the Honorable Members of the City Council City of San Rafael, California Report on the Financial Statements We have audited the accompanying financial statements of the City of San Rafael Child Development Program (Program) of the City of San Rafael , California, as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the Program's basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements , whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Program's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Program's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Ac coun t an cy C or pora t ion 3 478 Bu sk ir k Avenue, Suit e 2 15 Pl easa nt Hill , CA 94523 T 925 .930 .0902 F 925.930.0 135 E maze@mazeassociates.co m w mazeassociates .com Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Program as of June 30, 2019, and changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Program's basic financial statements as a whole. The Supplementary Information as listed · in the Table of Contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The Supplementary Information as listed in the Table of Contents is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and in conformity with the CDE Audit Guide, issued by the California Department of Education, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2019 on our consideration of the Program's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Program's internal control over financial reporting and compliance. ~~i?\00~ Pleasant Hill, California November 8, 2019 2 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BALANCE SHEET JUNE 30, 2019 ASSETS Cash (Note 3) Grants receivable (Note 4) Total Assets LIABILITIES AND FUND BALANCE Accounts payable Total Liabilities Fund balance, restricted (Note 5) Total Liabilities and Fund Balance See accompanying notes to financial statements 3 $1,753,287 23,407 $1,776,694 $29,849 29,849 1,746,845 $1,776,694 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2019 REVENUES State grants: Current year grants CDBG preschool grant First five school readiness grants Local grant Interest Parent fees Other Total Revenues EXPENDITURES Certified salaries Classified Salaries Employee benefits Training and instruction Office supplies Books and supplies Utilities and housekeeping services Travel and conference Rentals Services and other operating expenditures Equipment Insurance Renovation and repair Total Expenditures OTHER FINANCING SOURCES (USES) Transfers in from the City Total Transfers CHANGE IN FUND BALANCE FUND BALANCE, Beginning of year End of year See accompanying notes to financial statements 4 $232,864 36,447 99,978 21,040 32,608 3,181,669 13,577 3,618,183 1,722,132 76,030 1,155,391 3,667 3,615 139,707 24,592 14,641 40,438 231,557 38,284 31,570 11,529 3,493,153 50,000 50,000 175,030 1,571,815 $1,746,845 INOTE 1-ORGANIZATION CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2019 The City of San Rafael operates the Child Development Program encompassing eight childcare centers within the City of San Rafael. One of these centers provides day care services to subsidized families under the Child Development Program funded by the California Department of Education, which includes the Preschool program. The City is financially accountable for the activities of the Program. The Program has no employees and substantially all staff services which it requires are performed by the City's personnel. Costs incurred by the City to provide such services including compensation, retirement, and other benefit costs are reimbursed by the Program. These basic financial statements present only the activities of the Program and are not intended to present the financial position of the City of San Rafael, California, or the results of its operations. The financial statements of the Program are included as a Special Revenue Fund in the City's financial statements. jNOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting The accounting and reporting treatment applied to a fund is determined by its measurement focus. Governmental funds are accounted for on a spending or "current financial resources" measurement focus. Accordingly, only current assets and current liabilities generally are included on the balance sheets. Operating statements of governmental funds present increases (revenues and other financial sources) and decreases (expenditures and other financial uses) in net current assets. The Program's financial activities are accounted for using the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. · Expenditures are recorded when the related fund liability is incurred. Revenues considered susceptible to accrual include charges for services, federal and state grants, and interest. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable. B. Fund Balance Fund Balance is the excess of all the Program's assets over all its liabilities. 5 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2019 !NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. · Level 2 inputs are inputs -other than quoted prices included within level 1 -that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. I NOTE 3 -CASH AND INVESTMENTS The Program's cash is included in a City-wide cash and investment pool, the details of which are presented in the City's basic financial statements. The Program pools cash from all sources with the City of San Rafael so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time. The City's investment policy and the California Government Code permit investments in Securities of the U.S. Government or its agencies, Certificates of Deposit, Negotiable Certificates of Deposit, Banker's Acceptances, Commercial Paper, the State of California Local Authority Investment Fund (LAIF Pool), Repurchase Agreements, Medium-Term Corporate Notes, Limited Obligation Improvement Bonds related to special assessment districts and special tax districts, and Money Market/Mutual Funds. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The City of San Rafael pooled investments is an uncategorized input not defined as Level 1, Level 2, or Level 3 inp11t. 6 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2019 I NOTE 4 -GRANTS RECEIVABLE The Program has the following grants receivable at June 30, 2019: Agency Grant Marin County First 5 Grant Total I NOTE 5 -FUND BALANCES Amount $23,407 $23,407 Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund's cash and receivables, less its liabilities. The City's fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the City prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the following hierarchy is ranked according to the degree of spending constraint. Nonspendable represents balances set aside to indicate items do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for redevelopment are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts are required to be presented as a component of the applicable category. Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources. Committed fund balances have constraints imposed by formal action of the City Council which may be altered only by formal action of the City Council. Nonspendable amounts subject to council commitments are included along with spendable resources. Assigned fund balances are amounts constrained by the City's intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the City Council or its designee and may be changed at the discretion of the City Council or its designee. This category includes nonspendables, when it is the City's intent to use proceeds or collections for a specific purpose, and residual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed. Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual general fund balance and residual fund deficits, if any, of other governmental funds. 7 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2019 I NOTE 6 -CONTINGENCIES AND COMMITMENTS The Program participates in Federal, State and County grant programs that are fully or partially funded by grants received from other governmental units. Expenditures financed by grants are subject to audit by the appropriate grantor government. If expenditures are disallowed due to noncompliance with grantor program regulations, the City may be required to reimburse the grantor government. As of June 30, 2019, some amounts of grant expenditures have not been audited, but the City believes that disallowed expenditures, if any, based on subsequent audits will not have a material effect on any individual governmental funds or the overall financial condition of the City. 8 SUPPLEMENTARY INFORMATION Program Federal Awards CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF AWARDS FOR THE YEAR ENDED JUNE 30, 2019 Pass-Through Identifying CFDA# Number US Department of Housing and Urban Development, Pass-through the County of Marin Community Development Block Grant 14.218 40CDBG19CD4527 Total Federal Awards State Awards State of California Department of Education Child Development Division State Preschool Program FY2018 CSPP-8280 Total State Awards County Award County of Marin First Five -Preschool CSRI-21-009-10 Local A wards Marin Child Care Council NIA Total Local Awards Total State, Federal Awards, and Local Award Amount Revenue Expenditures $36,447 $36,447 $36,447 $36,447 $36,447 $36,447 $232,864 $232,864 $286,118 $232,864 $232,864 $286,118 $99,978 $99,978 $99,978 $21,040 $21,040 $21,040 $21,040 $21,040 $21,040 $390,329 $390,329 $443,583 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2019 State Preschool Program Total CDE Non-CDE (CSPP 8280) CD Contracts Programs REVENUES State grants: Current year grants $232,864 $232,864 CDBG preschool grant $36,447 First Five school readiness grants 99,978 Local grants 21,040 Interest 32,608 Parent fees -noncertified children 3,181,669 Other 13,577 Total Revenues 232,864 232,864 3,385,319 EXPENDITURES Certified salaries 60,656 60,656 1,661,476 Classified salaries 76,030 76,030 Employee benefits 115,741 115,741 1,039,650 Training and instruction 3,667 Office supplies 3,615 Books and supplies 11,377 11,377 128,330 Utilities and housekeeping services 24,592 Travel and conference 14,641 Rentals 40,438 Services and other operating expenditures 22,314 22,314 209,243 Equipment 38,284 Insurance 31,570 Renovation and repair 11,529 Total Expenditures 286,118 286, 118 3,207,035 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (53,254) (53,254) 178,284 OTHER FINANCING SOURCE (USES) Transfers in from City 50,000 50,000 Total Transfers 50,000 50,000 CHANGE IN FUND BALANCE ($3,254) ($3,254) $178,284 11 Total $232,864 36,447 99,978 21,040 32,608 3,181,669 13,577 3,618,183 1,722,132 76,030 1,155,391 3,667 3,615 139,707 24,592 14,641 40,438 231,557 38,284 31,570 11,529 3,493,153 125,030 50,000 50,000 $175,030 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EXPENDITURES BY STATE CATEGORIES FOR THE YEAR ENDED JUNE 30, 2019 EXPENDITURES: 11000 1100 1200 1300 1600 12001 2100 2300 2400 2500 2600 13000 3200 3300 3400 3600 14000 4200 4300 4500 4600 l5ooo 5100 5200 5300 5400 5500 5600 5700 5800 16000 6100 6200 6400 Certified personnel salaries Teachers' salaries Administration Supervisors' salaries Infant educators Classified personnel salaries Instructional aides' salaries Clerical and other office salaries Maintenance and operations salaries Food services salaries Transportation salaries Employee benefits Payroll taxes (Medicare) Other benefits Health and welfare Workers' compensation insurance Books and supplies Other books Instructional materials and supplies Other supplies Food supplies Services and other operating expenditures Lecturer Travel and conferences Memberships and dues Insurance Utilities and housekeeping services Rentals, leases and repairs Audit expense Other direct services & admin. Capital Outlay Sites and improvements of sites Buildings and improvements of buildings Equipment (program-related) 6500 Equipment replacement (program related) I Depreciation Costs capitalized as Fixed Assets TOT AL OF REIMBURSABLE AND NONREIMBURSABLE EXPENDITURES CSPP-8280 State Preschool Program $60,656 60,656 $76,030 76,030 $115,741 1,864 77,742 34,618 1,517 $11,377 11,377 $22,314 3,066 2,462 3,005 13,781 $286,118 We have examined the claims filed for reimbursement and the original records supporting the transactions recorded under the contracts listed above to an extent considered necessary to assure ourselves that the amounts claimed by the contractor were eligible for reimbursement, reasonable, necessary, and adequately supported, according to governing laws, regtJlations, and contract provisions. 12 Totals $60,656 I 60,656 $76,o3o 1 76,030 $115,741 1,864 77,742 34,618 1,517 $11,377 1 11,377 $22,314 I 3,066 2,462 3,005 13,781 I $286,118 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF REIMBURSABLE ADMINISTRATIVE COSTS FOR THE YEAR ENDED JUNE 30, 2019 Administrative Costs (Audit Fees) Total Administrative Costs 13 CSPP-8280 State Preschool Program $5,408 $5,408 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EQUIPMENT EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2019 Expenditures Under $7,500 Unit Cost .Expenditures Over $7,500 Unit Cost with CDD Approval Expenditures Over $7,500 Unit Cost Without CDD Approval Cost Item Cost Item Cost Item None None None SCHEDULE OF RENOVATION AND REPAIR EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2018 Expenditures Under $10,000 Unit Cost Cost Item None Expenditures Over $10,000 Unit Cost with CDD Approval Cost Item None 14 Expenditures Over $10,000 Unit Cost Without CDD Approval Cost Item None CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 1 of 9 (06/19) Fiscal Year Ending Contract Number Vendor Code [June 30, 2019 jcsPP I [8280 [2193 Full Name of Contractor jcity of San Rafael J ........ VI Section 1 -Days of Enrollment Certified Children Three Years and Older Full-time-plus Three Years and Older Full-time Three Years and Older Three-quarters-time Three Years and Older One-half-time Exceptional Needs Full-time-plus Exceptional Needs Full-time Exceptional Needs Three-quarters-time Exceptional Needs One-half-time Limited and Non-English Proficient Full-time-plus Limited and Non-English Proficient Full-time Limited and Non-English Proficient Three-quarters-time Limited and Non-English Proficient One-half-time Column A Column B Column C Cumulative Audit Cumulative CDNFS 8501 Adjustments Per Audit 7,886 7,886 PageD Column D Column E Adjustment Adjusted Days Factor Per Audit 1.1800 0 1.0000 0 0.7500 0 0.6193 4,883.7998 1.6166 0 1.3700 0 1.0275 0 0.6193 0 1.2980 0 1.1000 0 0.8250 0 0.6193 0 CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 2 of 9 (06/19) Fiscal Year Ending Contract Number Vendor Code [June 30, 2019 lcsPP I 18280 I [2193 Full Name of Contractor !city of San Rafael I ~ 0\ Column A Column B Column C Column D Column E Section 1 -Days of Enrollment Certified Children Cumulative Audit Cumulative Adjustment Adjusted Days CDNFS 8501 Adjustments Per Audit Factor Per Audit At Risk of Abuse or Neglect Full-time-plus 1.2980 0 At Risk of Abuse or Neglect Full-time 1 .. 1000 0 At Risk of Abuse or Neglect Three-quarters-time 0.8250 0 At Risk of Abuse or Neglect One-half-time 0.6193 0 Severely Disabled Full-time-plus 2.0237 0 \ Severely Disabled Full-time / 1.7150 0 Severely Disabled Three-quarters-time 1.2863 0 Severely Disabled One-half-time 0.6193 0 TOTAL DAYS OF ENROLLMENT 7,886 7,886 N/A 4,883.7998 DAYS OF OPERATION 175 175 N/A N/A DAYS OF ATTENDANCE 7,886 7,886 N/A N/A D NO NON-CERTIFIED CHILDREN Check this box (omit pages 3-5) and continue to Revenue Section on page 6. Page~ CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 3 of 9 (06/19) Fiscal Year Ending Contract Number Vendor Code [June 30, 2019 jcsPP I 18280 I !2193 Full Name of Contractor IL-c_it_y_o_f_S_a_n_R_a_fa_e_l ________________________________ -------J Section 2 -Days of Enrollment Non-Certified Column A Column B Column C Column D Column E Cumulative Audit Cumulative Adjustment Adjusted Days Children CDNFS 8501 Adjustments Per Audit Factor Per Audit Toddlers (18 up to 36 months) Full-time-plus 1.8880 0 Toddlers (18 up to 36 months) Full-time 1.6000 0 Toddlers (18 up to 36 months) Three-quarters-time 1.2000 0 f--' ---l ; Toddlers (18 up to 36 months) One-half-time 0.6193 0 Three Years and Older Full-time-plus 1.1800 0 Three Years and Older Full-time 1.0000 0 Three Years and Older Three-quarters-time 0.7500 0 Three Years and Older One-half-time 0.6193 0 Exceptional Needs Full-time-plus 1.6166 0 Exceptional Needs Full-time 1.3700 0 Exceptional Needs Three-quarters-time 1.0275 0 Exceptional Needs One-half-time 0.6193 0 PageLJ CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 4 of 9 (06/19) Fiscal Year Ending Contract Number Vendor Code [June 30, 2019 lcsPP 118280 I [2193 Full Name of Contractor jcity of San Rafael j ........ 00 Section 2 -Days of Enrollment Non-Certified Children Limited and Non-English Proficient Full-time-plus Limited and Non-English Proficient Full-time Limited and Non-English Proficient Three-quarters-time Limited and Non-English Proficient One-half-time At Risk of Abuse or Neglect Full-time-plus At Risk of Abuse or Neglect Full-time At Risk of Abuse or Neglect Three-quarters-time At Risk of Abuse or Neglect One-half-time Column A Column B Cumulative Audit CDNFS 8501 Adjustments PageD Column C Column D Column E Cumulative Adjustment Adjusted Days Per Audit Factor Per Audit 1.2980 0 1.1000 0 0.8250 0 0.6193 0 1.2980 0 1.1000 0 0.8250 0 0.6193 0 CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 5 of 9 (06/19) Fiscal Year Ending Contract Number Vendor Code !June 30, 2019 lcsPP l 18280 I [2193 Full Name of Contractor jcity of San Rafael j Section 2 -Days of Enrollment Non-Certified Column A Column B Column C Column D Column E Cumulative Audit Cumulative Adjustment Adjusted Days Children CDNFS 8501 Adjustments Per Audit Factor Per Audit Severely Disabled Full-time-plus 2.0237 0 Severely Disabled Full-time 1.7150 0 ,-....... '-0 Severely Disabled Three-quarters-time 1.2863 0 Severely Disabled One-half-time 0.6193 0 TOTAL NON-CERTIFIED DAYS OF ENROLLMENT N/A 0 PageD t0 0 CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 6 of 9 (06/19) Fiscal Year Ending jJune 30, 2019 Contract Number lcspp I [a280 Vendor Code 12193 I Full Name of Contractor jcity of San Rafael J Column A Column B Column C Section 3 -Revenue Cumulative Audit Cumulative CDNFS 8501 Adjustments Per Audit Restricted Income -Child Nutrition Programs Restricted Income -County Maintenance _of Effort (EC Section 8279) Restricted Income -Other: Restricted Income -Subtotal Transfer from Reserve -General Transfer from Reserve -Professional Development Transfer from Reserve Total Family Fees for Certified Children Interest Earned on Child Development Apportionment Payments Unrestricted Income: Fees for Non-Certified Children Unrestricted Income: Head Start Unrestricted Income -Other: Total Revenue Page□ CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 7 of 9 (06/19) Full Name of Contractor [city of San Rafael Section 4 -Reimbursable Expenses Direct Payments to Providers (FCCH only) 1000 Certificated Salaries 2000 Classified Salaries 3000 Employee Benefits 4000 Books and Supplies 5000 Services and Other Operating Expenses t0 6100/6200 Other Approved Capital Outlay ........ 6400 New Equipment (program-related) 6500 Equipment Replacement (program-related) Depreciation or Use Allowance Start-up Expenses (service level exemption) Budget Impasse Credit Indirect Costs (Include in Administrative Cost) Non-Reimbursable (State Use Only) Total Reimbursable Expenses Total Administrative Cost (included in section 4 above) Approved Indirect Cost Rate: Column A Cumulative CDNFS 8501 60,656 76,030 115,741 11,377 22,314 286,118 Fiscal Year Ending !June 30, 2019 Contract Number jcsPP I [8280 Vendor Code !2193 j Column B Column C Audit Cumulative Adjustments Per Audit 60,656 76,030 115,741 11,377 22,314 286,118 5,408 5,408 Comments: !Adjustments identified in Column B are adjustments made to report audit fees as administrative costs. ~ NO SUPPLEMENTAL REVENUE Check this box and omit Page 8. PageD CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS A U D 8501 Page 8 of 9 (06/19) Full Name of Contractor Section 5 -Supplemental Revenue Enhancement Funding Other: Other: Total Supplemental Revenue N N Section 6 -Supplemental Expenses 1000 Certificated Salaries 2000 Classified Salaries 3000 Employee Benefits 4000 Books and Supplies 5000 Services and Other Operating Expenses 6000 Equipment/Capital Outlay Depreciation or Use Allowance Indirect Costs Non-reimbursable Expenses 6100-6500 Non-reimbursable Capital Outlay Total Supplemental Expenses Page □ Column A Cumulative CDNFS 8501 Column A Cumulative CDNFS 8501 Fiscal Year Ending IJune 30, 2019 Contract Number lcspp I lr-82_8_0_--,l Vendor Code 12193 I Column B Column C Audit Cumulative Adjustments Per Audit Column B Column C Audit Cumulative Adjustments Per Audit CALIFORNIA DEPARTMENT OF EDUCATION AUDITED ATTENDANCE AND FISCAL REPORT FOR CALIFORNIA STATE PRESCHOOL PROGRAMS Fiscal Year Ending !June 30, 2019 A U D 8501 Page 9 of 9 (06/19) Contract Number lcspp I 18280 j Full Name of ContractorjCity of San Rafael j Vendor Code 12193 j t0 w Column A Section 7 -Summary Cumulative CDNFS 8501 Total Certified Days of Enrollment 7,886 Days of Operation 175 Days of Attendance 7,886 Total Non-Certified Days of Enrollment Restricted Program Income Transfer from Reserve Family Fees for Certified Children Interest Earned on Apportionment Payments Direct Payments to Providers Start-up Expenses (service level exemption) Total Reimbursable Expenses 286,118 Total Administrative Cost Column B Column C Audit Cumulative Adjustments Per Audit 7,886 175 7,886 286,118 5,408 5,408 Total Certified Adjusted Days of Enrollment Total Non-Certified Adjusted Days of Enrollment 4,883.7998 0 Independent Auditor's Assurances on Agency's Compliance with the Contract Funding Terms and Conditions and Program Requirements of the California Department of Education, Early Learning and Care Division: Eligibility, enrollment and attendance records are being maintained as required (check YES or NO): Reimbursable expenses claimed on page 7 are eligible for reimbursement, reasonable, necessary, and adequately supported (check YES or NO): Include any comments in the Comments box on page 7. If necessary, attach additional sheets to explain adjustments. Page □ ~Yes □No ~ Yes □No CALIFORNIA DEPARTMENT OF EDUCATION AUDITED RESERVE ACCOUNT ACTIVITY REPORT A U D 9530-A Page 1 of 1 (06/19) Fiscal Year End !June 30, 2019 Reserve Account Type !center-Based Vendor Code 1~2_1_93 ____ ~-~ Full Name of Contractor !city of San Rafael Child Development Program Prior Year -Reserve Account Activity Per 2017-18 AUD 9530-A 1. Beginning Balance (2017-18 Ending Balance) 0 2. Plus Transfers to Reserve Account: Per CDNFS 9530 Contract No. 7280 0 Contract No. Contract No. Contract No. Contract No. Contract No. Total Transferred from PY Contracts to Reserve 0 3. Less Excess Reserve to be Billed 4. Ending Balance on PY Post-Audit CDNFS 9530 0 Current Year -Reserve Account Activity Column A Column B Column C CDNFS 9530-A Audit Adjustments Per Audit 5. Plus Interest Earned This Year on Reserve 0 0 C -_-, 6. Less Transfers to Contracts from Reserve: :} ,,- CSPP General-Contract No. 8280 0 0 CSPP General-Contract No. CSPP Professional Development-Contract No. CSPP Professional Development-Contract No. Subtotal CSPP Transfers 0 0 Other Contract No. Other Contract No. Other Contract No. Other Contract No. Other Contract No. Subtotal Other Contract Transfers Total Transferred to Contracts from Reserve Account 0 0 7. Ending Balance on June 30, 2019 0 0 COMMENTS -If necessarv attach additional sheets to exolain adiustments. INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Members of the City Council City of San Rafael, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the City of San Rafael Child Development Program (Program), California, as of and for the year ended June 3 0, 2019, and the related notes to the financial statements, and have issued our report thereon dated November 8, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Program's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Program's internal control. Accordingly, we do not express an opinion on the effectiveness of Program's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Program's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Program's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill, CA 94523 25 T 925.930.0902 F 925,930.0135 E maze@mazeassociates .com w mazeassociates.com Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Program's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Program's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 1Vta)e-~~o~ Pleasant Hill, California November 8, 2019 26