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HomeMy WebLinkAboutFin Financial Reports FY2016-17____________________________________________________________________________________ FOR CITY CLERK ONLY File No.: 8-1 x 8-9 x 9-3-20 Council Meeting: 12/18/2017 Disposition: Accepted Reports Agenda Item No: 4.g Meeting Date: December 18, 2017 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: FINANCE Prepared by: Mark Moses Finance Director City Manager Approval: __________ TOPIC: YEAR-END FINANCIAL STATEMENTS AND RELATED AUDIT REPORTS SUBJECT: FISCAL YEAR 2016-2017 ANNUAL FINANCIAL REPORT; GANN APPROPRIATIONS LIMIT; MEMORANDUM ON INTERNAL CONTROL; CHILD DEVELOPMENT PROGRAM; AND SINGLE AUDIT FOR FEDERAL GRANTS RECOMMENDATIONS: ACCEPT THE FISCAL YEAR 2016-2017 ANNUAL FINANCIAL REPORT, THE GANN APPROPRIATIONS LIMIT REPORT, THE MEMORANDUM ON INTERNAL CONTROL, CHILD DEVELOPMENT PROGRAM REPORT, AND THE SINGLE AUDIT 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 2016-2017. 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, 2018. 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 Community Services departments worked with Maze and Associates to complete the annual audit of the City’s childcare program, as required by the State of California. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 Finally, the federal Single Audit Act requires that any local agency expending $500,000 or more in combined federal grant funds, either directly or indirectly in a fiscal year, is subject to a separate audit on those programs and a separate Single Audit Report is issued. This threshold was triggered in fiscal year 2016-2017. These reports were presented to the City Council Finance Committee on October 31, 2017 at which time it was agreed that staff would bring the reports forward to the full City Council. ANALYSIS: Overview The Fiscal Year 2016-2017 saw a leveling off in the economic recovery. Although property tax revenues remained strong, sales tax revenues and hotel tax revenues stalled for the first time since the recession. 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. Most of the unassigned general fund balance as of June 30, 2017 has been dedicated to one-time initiatives such as the continuation of two additional police officers through June 20, 2018, and the funding of the fixed-term director to manage homeless planning and outreach. Fiscal year 2016-2017 marks the third year of implementation of the pension accounting standard issued by the Governmental Accounting Standards Board (GASB) known as GASB 68. These requirements, which affect all public agencies with defined benefit pension programs, 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 more detailed definition of fair value and accepted valuation techniques. The net impact of implementing GASB 68 lowers the City’s net position as of June 30, 2017 by $110.5 million from a reporting perspective. The net pension liability as of this date was measured to be $167.1 million. The full funding of the City’s pension costs have been incorporated into the adopted fiscal year 2017-2018 budget; therefore, there is no negative impact on City operations or services resulting from the implementation of this new reporting standard. Fiscal year 2016-2017 marks the first year of implementation of the new Other Postemployment Benefits (OPEB) accounting standard issued by the Governmental Accounting Standards Board (GASB) known as GASB 75. The requirements, which will affect all public agencies with defined benefit programs other than pension (e.g., retiree medical, vision, etc.), are very similar to those of GASB 68. The City has elected to implement GASB 75 one year early, in order to improve transparency and to achieve reporting parity with GASB 68. The net impact of implementing GASB 75 lowers the City’s net position as of June 30, 2017 by $28.6 million from a financial/GASB reporting perspective. The net pension liability as of this date was measured to be $33.8 million. The full funding of the City’s OPEB costs have been incorporated into the adopted fiscal year 2017-2018 budget; therefore, there is no negative impact on City operations or services resulting from the implementation of this new reporting standard. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 Consistent with the policy adopted by the City Council upon the implementation of Measure E transactions and use tax (TUT) in April 2014, the City has set-aside the portion of the Measure E that exceeds the former Measure S TUT (i.e., one-quarter of one percent from the three-quarter of one percent tax) for public safety facilities construction and improvements. From the accumulated balance of $6,336,377 as of July 1, 2016, $1,572,491 was combined with the $3,844,963 in revenues received during the current year and $635,387 in County reimbursements for Fire Station 57 to fund $6,052,841 in project expenditures. As a result of this activity, $4,763,886 remained set aside for Measure E as of June 30, 2017. Approximately half of the expenditures during the fiscal year went to the Public Safety Center, with the other half split between Fire Stations 52 and 57. Total project-to-date spending is approximately $7.9 million. Fiscal Year 2016-17 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 $115.5 million, a decrease of $4.1 million from the prior year adjusted balance. This decrease is largely attributable to the spending down of accumulated funds that had been set aside for the public safety facilities construction and improvements. The Parking Fund, reported as a business-type activity, ended the fiscal year with a net position of $10.1 million, or $0.6 million more than that of the previous fiscal year. Cash contributes approximately 32% of this net position, with the remainder contributed by parking infrastructure. 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. Financial Results: General Fund Although the final operating results for the General Fund registered a strong $3.8 million, they fell short of the projections made at the time the budget was adopted for fiscal year 2016-2017 by approximately $1.2 million. This variance was driven by a leveling off of sales tax which recorded the lowest level since fiscal year 2013-2014. In addition, transient occupancy tax (hotel tax) dropped by 2.5% after recording several years of strong growth. Most of the positive General Fund operating results were used to fund capital transfers. Those capital transfers, coupled with use of funds accumulated for the public safety facilities projects drove the $2.0 million drop in fund balance. There were sufficient funds available to maintain the 10% Emergency and Cashflow Reserve. 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 2017-2018 Appropriations Limit calculation. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4 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. For this report, the City successfully completed its implementation of actions taken to address prior year internal control issues. No additional issues were raised during this audit. Child Development Program (Childcare) Audit The Childcare Program had positive operating results, with $4.1 million in total revenues and $3.9 million in expenditures for the fiscal year. The fund balance increased from $1.2 million to $1.4 million. Approximately half of the residual funds have been accumulated for capital improvements, most of which are planned for fiscal year 2017-2018. The audit resulted in no adverse findings. Single Audit The City incurred a total of $1,060,526 in federal expenditures during fiscal year 2016-2017 that fell under the parameters of this audit. The auditor identified the following major program to be audited: U.S Department of Transportation-Highway Planning and Construction – $564,538 supported street improvements, Southern Heights bridge replacement, transit center connector, and downtown transit/parking studies. As required under the Single Audit Act, a number of separate reports are contained within the document. Most of these reports comment on either compliance with Federal assistance regulations or recommendations regarding the City's accounting practices. With respect to compliance, the auditors found no material instances of noncompliance with laws, regulations, contracts or grants applicable to our programs. FISCAL IMPACT: No fiscal impact occurs by the City Council’s acceptance of these reports. The fiscal year 2016-2017 Comprehensive Annual Financial Report and related reports are presented as the actual results of the City and related entities’ financial activities for the year. RECOMMENDATION: Staff recommends that City Council accept the reports as presented. Attachments: http://docs.cityofsanrafael.org/Finance/reporting/FY16-17-CAFR.pdf http://docs.cityofsanrafael.org/Finance/reporting/FY16-17-GANN.pdf http://docs.cityofsanrafael.org/Finance/reporting/FY16-17-MOIC.pdf http://docs.cityofsanrafael.org/Finance/reporting/FY16-17-Childcare.pdf http://docs.cityofsanrafael.org/Finance/reporting/FY16-17-SingleAudit.pdf W:\Council Material\Staff Reports\2017\City\YE-Financial-Audit Reports FY16-17.doc SAN RAFAEL THE CITY WITH A MISSION COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDING JUNE 30, 2017 San CRg,fae{ Corporate Center COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2017 City of San Rafael, California 1400 Fifth Avenue San Rafael, California 94901 Prepared by the Finance Department of the City of San Rafael ; .~ , ;~. ~y CityJ{a{{ INTRODUCTORY SECTION CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2017 I INTRODUCTORY SECTION I TABLE OF CONTENTS Table of Contents Letter of TransmittaL .................................................................................................................................... v Mission Statement and Vision Statement. ................................................................................................. xii City Council and Staff .............................................................................................................................. xiii Location Map ........................................................................................................................................... xiv Organizational Chart ............................................................................................ ~ ..................................... xv Certificate of Achievement for Excellence in Financial Reporting ......................................................... xvi I FINANCIAL SECTION I Independent Auditor's Report .................................................................................................................. 1 Management's Discussion and Analysis ................................................................................................... 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position .............................................................................................................. 23 Statement of Activities .................................................................................................................. 24 Fund Financial Statements: Major Governmental Funds: Balance Sheet ............................................................................................................................ 28 Balance Sheet -Reconciliation of Governmental Fund Balances to Net Position of Governmental Activities .............................................................................. .3 0 Statement of Revenues, Expenditures, and Changes in Fund Balances .................................... 3 1 Reconciliation of the Net Change in Fund Balances -Total Governmental Funds with the Statement of Activities ................................................................................. .3 2 Proprietary Funds: Statement of Net Position .......................................................................................................... 35 Statement of Revenues, Expenses, and Changes in Fund Net Position ..................................... 36 Statement of Cash Flows ........................................................................................................... 37 CITY OF SAN RAFAEL, CALIFORNIA COlVlPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2017 Table of Contents I FINANCIAL SECTION (Continued) I Fiduciary Funds: Statement of Fiduciary Net Position ......................................................................................... .41 Statement of Changes in Fiduciary Net Position ...................................................................... .42 Notes to Basic Financial Statements ................................................................................................. .43 Required Supplementary Information: Schedule of the City's Proportionate Share of the Net Pension Liability ..................................... 99 Schedule of Contributions -Pension .......................................................................................... l 00 Schedule of Changes in Net OPEB Liability and Related Ratio ................................................ .103 Schedule of Contributions -OPEB ............................................................................................. 1 04 Schedules of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual - Budgetary Basis General Fund ............................................................................................................................ 1 06 Traffic and Housing Mitigation Special Revenue Fund .......................................................... l 07 Gas Tax Special Revenue Fund ............................................................................................... 108 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Budgetary Basis Essential Facilities Capital Projects Fund ................................................................................ ll0 Non-major Governmental Funds: Combining Balance Sheets .......................................................................................................... 114 Combining Statements of Revenues, Expenditures, and Changes in Fund Balance ................................................................................................................... 120 Budgeted Non-major Governmental Funds: Combining Schedules of Revenues, Expenditures, and Changes in Fund Balances -Budget and Actual.. ..................................................................... 126 11 CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2017 Table of Contents FINANCIAL SECTION (Continued) Internal Service Funds: Combining Statements of Net Position ....................................................................................... 136 Combining Statements of Revenues, Expenses and Changes in Fund Net Position ................... 138 Combining Statements of Cash Flows ........................................................................................ 140 Agency Funds: Combining Statements of Changes in Assets and Liabilities ...................................................... 144 I STATISTICAL SECTION I Financial Trends: Net Position by Component -Last Ten Fiscal Years ....................................................................... 148 Changes in Net Position Last Ten Fiscal Years ............................................................................. 150 Fund Balances of Governmental Funds -Last Ten Fiscal Years ..................................................... 154 Changes in Fund Balance of Governmental Funds -Last Ten Fiscal Years .................................... 156 Revenue Capacity: Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years ..................... 158 Property Tax Rates -All Overlapping Governments-Last Ten Fiscal Years .................................. 159 Principal Property Tax Payers -Current Year and Nine Years Ago ................................................ 160 Property Tax Levies and Collections -Last Ten Fiscal Years ......................................................... 161 Debt Capacity: Ratio of Outstanding Debt by Type -Last Ten Fiscal Years .......................................................... 162 Computation of Direct and Overlapping Debt .................................................................................. 163 Computation of Legal Bonded Debt Margin ..................................................................................... 164 Revenue Bond Coverage Parking Facility -Last Ten Fiscal Years ................................................. 165 iii CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2017 Table of Contents I STATISTICAL SECTION (Continued) Demographic and Economic Information: Demographic and Economic Statistics -Last Ten Fiscal Years ....................................................... 166 Principal Employers -Last Nine Calendar Years ............................................................................. 167 Operating Information: Full-Time Equivalent City Government Employees by Function -Last Ten Fiscal Years ................................................................................................................. 168 Operating Indicators by FunctionlProgram -Last Ten Fiscal Years ................................................ 170 Capital Asset Statistics by FunctionlProgram -Last Ten Fiscal Years ............................................ 172 iv October 12,2017 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, 2017, 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 as promulgated by the Governmental Accounting Standards Board and includes the report of the independent certified public accounting firm, Maze and Associates Accountancy Corporation, which has issued an unqualified, or "clean" opinion on the City's fmancial statements for the fiscal year ended June 30, 2017. 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 fmancial 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 fmancial 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 fmancial 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. CITY OF SAN RAFAEL I 1400 FIFTH AVENUE. SAN RAFAEL, CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Gary O. Phillips , Mayor' Maribeth Bushey, Vice Mayor· Kate Colin, Councilmember • John Gamblin, Councilmember • Andrew Cuyugan McCullough. Councilmember V REPORTING ENTITY -PROFILE 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, fmancial, 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 1,2017 was 61,187, an increase of 0.1 % from the January 1,2016 population of60,582 . Downtown San Rafael is the location of many community events, including the Thursday night Farmers Market Festivals six months out of the year, Second Friday Art Walks, the Twilight Criterium Bike Race, Mill Valley Film Festival, Winter WonderlandlParade of Lights, and now one of 14 state Cultural Arts Districts. 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 progranuning; 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, stonn drains and other infrastructure, recreation, childcare, permits, planning, code enforcement, and a library system serving two locations. 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 AUth0l1ty, originally established by the City and former Redevelopment CITY OF SAN RAFAEL i 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 : CITYOFSANRAFAEL.ORG Gary O. Phillips, Mayor • Maribeth Bushey, Vice Mayor· Kate Colin, Council member • John Gamblin, Council member • Andrew Cuyugan McCullough, Councilmember vi Agency for the purpose of fmancing redevelopment and other proj ects. 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 the CAFR. Fiscal year 2016-2017 marks the first year of implementation of Governmental Accounting Standards Board Statement No. 75 (GASB 75), Accounting and Financial Reportingfor Postemployment Benefits Other Than Pensions (OPEB). The purpose of this reporting requirement is to improve the decision-making usefulness of information in fmancial reports and enhance its value for assessing accountability and inter-period equity by requiring recognition of the entire net OPEB liability and a more comprehensive measure of OPEB expense, much as GASB 68 provided a similar approach for defined benefit pension obligations. The net OPEB liability of$33.8 million reported as of June 30, 2017, is based on the most recent actuarial valuation as of June 30,2015. The City's implementation of this new requirement is one year early, in order to increase transparency and achieve parity with the reporting methodology used for defmed benefit pensions. The City's net pension liability under GASB 68 reported as of June 30, 2017 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, 2016. The next annual report is anticipated to be completed within the upcoming 30 days. The City is aware of factors that may have an impact on the future measurement of the net pension liability. For example, the investment returns of 11.73% for the fiscal year ended June 30, 2017 well exceeded the target of 7.25%. In addition, the MCERA Board is scheduled to consider a reduction in the discount rate in the preparation of its next actuarial valuation, as of June 30, 2017. The City does not expect these factors to result in a net material difference in the measurement of its net pension obligation of$167.1 million reported in this year's financial reports. During fiscal year 2016-2017, 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 CITY OF SAN RAFAEL ! 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Gary O. Phillips, Mayor' Maribeth Bushey, Vice Mayor' Kate Colin, Councilmember • John Gamblin, Councilmember • Andrew Cuyugan McCullough, Councilmember vii 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 will include an upgraded dispatch and communications center, and a new classroom and training tower for emergency preparedness. Construction for both Fire Station 57, located at 3530 Civic Center Drive, and Fire Station 52, located at 210 3rd Street, began in June 2017 and are expected to be completed in the summer of 2018. The Public Safety Center demolition work is underway, and construction of the building will begin within the next few months. 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 71 % residential, 19% commercial, 4% institutional, 6% unsecured and others. The top 50 sales tax producers provide 72% of overall sales tax revenues. The California economy continues to recover from the recession. Although the 4.9% unemployment rate remains above the national average of 4.4%, it continues on a path towards convergence with the national average. Personal income has rebounded over the past few years, and the State continues to prosper from the flow of capital into the technology companies who are attracted to California. Over the past year, State revenues have lagged behind expectations. The recent surge in the stock market has breathed new life into the revenue forecast; however, capital gains are the State's most volatile and unpredictable revenue source. Notwithstanding the State's $10.1 billion in projected reserves, the Governor's revised budget for the upcoming year includes a $400 million deficit and major challenges persist. The "wall of debt", which when pension and retiree medical liabilities are considered, reaches into the hundreds of billions of dollars. Locally, the 3.0% Marin County unemployment rate is among the lowest in the State. According to the Marin Economic Forum, the County added 4,000 payroll jobs and gained approximately 250 payroll businesses in 2016. Real personal income is projected to grow at an average rate of2.5% over the next few years after inflation, and Marin County's taxable sales per capita are the third highest in the State. Marin County median home prices are over $1.3 million and continue to rise, while the recovery of commercial real estate has led to average rents increasing to $2.80 per square foot. CITY OF SAN RAFAEL i 1400 FIFTH AVENUE. SAN RAFAEL. CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Gary O. Phillips. Mayor' Maribeth Bushey. Vice Mayor· Kate Colin, Councllmember· John Gamblin, Councilmember • Andrew Cuyugan McCullough, Councilmember viii Demographic Data The following is a sample of demographic and economic attributes that make San Rafael an exceptional place to live and work. [2S] Economic development organizations in San Rafael include the San Rafael Chamber of Connnerce, Downtown Business Improvement District, and the Marin Economic Forum. [29 Marin County's top 10 employers include Kaiser PeImanente, Marin General Hospital, BioMarin Pharmaceutical, Autodesk, Dominican University of California, Bradley Real Estate, Novato Community Hospital, Wells Fargo, FICO, and W Bradley Electric. [2S] 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). [2S] The top three sales tax categories in 2016 for San Rafael were: 1. Autos and Transportation (33.1 %), 2. General Consumer Goods (20%), and 3. Building and Construction (18.8%). [2S] Several hotels and motels support tourism activity, led by a combined 235 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. Rents for one- bedroom apartments range from $2,300 to $2,700, while two bedroom apartments go for $3,000 to $3,600. The median home value in San Rafael is $955,000. Recent growth and economic vibrancy: • San Rafael ranked No.3 on Milken Institute Best-Perfonning 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. California secured six of the Top 25 spots among large metros, led by four metros in the San Francisco Bay Area. Additionally, two Bay Area metros were in the Top 10 of small metros. San Rafael ranks fourth in one-year high-tech GDP growth and concentration and has maintained the fastest five-year high-tech growth. Five-year high-tech GDP growth was 67 percent greater than the national average. Key strengths highlighted included our educated workforce and cluster of biotech employers. • San Rafael ranked No.3 on the SMU National Center for Arts Research Vibrancy Index the 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 flnns. Demand is gauged by the total CITY OF SAN RAFAEL ! 1400 FIFTH AVENUE , SAN RAFAEL, CALIFORNIA 94901 ; CITYOFSANRAFAEL .ORG Gary O. Phillips, Mayor' Maribeth Bushey, Vice Mayor' Kate Colin, Councllmember • John Gamblin, Councilmember • Andrew Cuyugan McCullough. Councilmember ix 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 served as the host city and basecamp for production of the Netflix Paramount Television Series 13 Reasons Why bringing in over $130,000 in transient occupancy tax dollars and pennitting fees. • San Rafael welcomed Sonoma Marin Area Rail Transit Service in August 2017 and San Rafael is the nl0st population destination on the connnuter rail service line. Construction of the Larkspur extension which will complete the southern end of the commuter rail line is set to commence in Fall 2017. • Vacancy rates are maintaining all-time lows for retail and office space and industrial space in San Rafael. Asking rents have increased throughout all market types. • Andy's Market relocated to the new Loch Lomond Marina Village Development. 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 accolU1ting data is collected so as to prepare reports in confonnance with generally accepted accounting principles. 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 offmancial 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. CITY OF SAN RAFAEL ! 1400 FIFTH AVENUE. SAN RAFAEL, CALIFORNIA 94901 ! CITYOFSANRAFAEL.ORG Gary O. Phill ips, Mayor· Marlbeth Bushey, Vice Mayor • Kate Colin, Councilmember· John Gamblin, Councilmember· Andrew Cuyugan McCullough, Councllmember x 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 Helena Mufioz, Karen Landesman and Whitney Fry, led by Accounting Manager Van Bach 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 detennine its eligibility. If accepted, this will mark the sixth consecutive year for which the City received the award. Lastly, we appreciate the ongoing leadership and support from the Mayor, City Councihnembers and the City Council Finance Committee. Their strong commitment to financial accountability and stewardship provide inspiration to the organization and motivate a high level of achievement. Respectfully submitted, Mark Moses Finance Director CITY OF SAN RAFAEL I 1400 FIFTH AVENUE, SAN RAFAEL, CALIFORNIA 94901 1 CITYOFSANRAFAEL.ORG Gary O. Phillips, Mayor' Maribeth Bushey, Vice Mayor· Kate Colin, Councllmember • John Gamblin, Councllmember • Andrew Cuyugan McCullough, Council member xi SAN RAFAEL THE CiTY WITH A MISSION 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 environnient 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 xii SAN RAFAEL THE CITY WITH A MISSION City Council aIld Staff City COlUlcil Gary O. Phillips, Mayor Maribeth Bushey, Vice Mayor Andrew McCullough, COlUlciJmember Kate Colin, COlUlcilmember John Gamblin, COlUlcilmember Elected Officials Rob Epstein, City Attorney Esther Beirne, City Clerk Executive Team Jim Schutz, City Manager Cristine Alilovich, Assistant City Manager Diana Bishop, Chief of Police Stacey Peterson, Human Resources Director Chris Gray, Fire Chief Sarah Houghton, Library Director Paul Jensen, Community Development Director Bill Guerin, Public Works Director Deborah Younkin, Interim Community Services Director Mark Moses, Finance Director Doris Toy, District Manager I Engineer-SRSD Xlll Greater San Francisco Bay-Area 4 · s LOCATION xiv ....-:::;;-=---'~A::~ SAN RAFAEL ~ THE CITY WITH A MISSION Organizational Chart Information Technology Parking Services I Finance I Assistant City Manager r---- f---- f-- f---- I~ Police I I Human Resources Volunteer & Sustainability I Fire Electorate City Attorney Mayor & City Council City Manager I I Community Community Services Development City Clerk Boards & Commissions I Public Works I I I Library I Economic Development ~ I .. 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 30,2016 Executi ve Director/CEO XVI .. L[ . roE =1 ... ............ .r.-... 1Wya{ qrouncf Coffee Shop 4th and (]3 Street 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, 2017, and the related notes to the financial statements, which collectively comprise the City's basic fmancial statements as listed in the Table of Contents. Management's Responsibility f~r 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 19%, 35%, and 15%, respective, of the assets, net position, and revenues of the entity-wide reporting entity. These component unit fmancial 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 fmancial 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 fmancial 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 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, 2017, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matters Management adopted the prOVIsIOns of the following Governmental Accounting Standards Board Statement during the year ended June 30, 2017 that had material effects on the financial statements, as discussed in Note 1 to the financial statements: • Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The emphasis of this matter does not constitute a modification to 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. 2 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 infonnation 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 infonnation 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 Infonnation is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 28, 2017 on our consideration of the City'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. 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 perfonned in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. /Wl(;\ ~ ~ i ~SSO~ Pleasant Hill, California September 28,2017 3 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 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, 2017. Please read it in conjunction with the basic financial statements and the accompanying notes to those basic financial statements. FINANCIAL HIGHLIGHTS Government-wide: In the fiscal year ended June 30, 2017, the City of San Rafael implemented Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reportingfor Postemployment Benefits Oher Than Pensions. The implementation of this pronouncement required a prior period adjustment and reduced the City's net position as of July 1, 2016, by $20.6 million, of which $20.3 million was for governmental activities and $0.3 million was for business-type activities. • Net Position -The assets of the City exceeded its liabilities as of June 30, 2017 by $125.6 million. • Activities -During the fiscal year the City's total revenues of $102.7 were greater than expenses of $98.0 million for governmental and business-type activities. • Changes in Net Position -The City's total net position increased by $4.7 million in fiscal year 2016-2017 as compared to the adjusted net position of the previous year. Net position of governmental activities increased by $4.1 million, while net position of the business-type activities increase by $556 thousand. Fund Level: • Governmental Funds -As of the close of fiscal year 2016-2017, the City's governmental funds reported combined ending fund balances of $46.1 million, a decrease of $4.1 million from fund balance of the prior year. Of this total amount, $0.5 million is nonspendable, $25.8 million is restricted, $3.5 million is committed, $15.0 million is assigned, and $1.3 million is unassigned. • Governmental fund revenues were $97.8 million, a decrease of $2.8 million from the previous fiscal year. The decrease is attributable to a number of one-time revenues that occurred during the previous year coupled with a slowdown in sales tax-related revenues and third party emergency transport services billings. Aside from these items, the City experienced modest to moderate growth in revenues. • Governmental fund expenditures increased by $4.2 million to $102.7 million, from $98.5 million in the prior year, due primarily to public safety infrastructure and other capital improvement program expenditures. • Enterprise fund operating revenue grew slightly by $57 thousand to $5.3 million. Enterprise operating expenditures totaled $3.8 million, a decrease of $0.8 million over the previous year. The expenditure decrease was attributable primarily to the pension-related accounting adjustments in the parking fund. 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 30,2017 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 23 through 25 of this report. 6 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 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 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 114 through 144 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 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 on the page immediately following each governmental fund financial statement. The City has twenty-nine 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-five governmental funds are combined into a single, aggregated presentation. The basic governmental fund financial statements can be found on pages 28 through 32 of this report. Individual fund data for each of these non- major governmental funds is provided in the form of combining statements on pages 114 through 133 of this report. Proprietary Funds The City maintains two different types of proprietary funds -enterprise funds and internal service funds. 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. 7 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 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. The basic proprietary fund financial statements can be found on pages 35 through 37 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 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 41 through 42 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 95 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 99 through 108 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 $115.5 million from Governmental Activities and $10.1 million from Business-type Activities, for a total of$125.6 million. This represents an increase of$4.7 million from the prior year net position. 8 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 The following is the condensed Statement of Net Position for the fiscal years ended June 30, 2017 and 2016: Summary of Net Position (in thousands) Governmental Activities Increase Business-Type Activities Increase 2017 2016 (Decrease) 20li 2016 (Decrease) Current and other assets $83,145 586,543 ($3,398) 53,267 $3,050 S217 Capital assets 199,506 194,086 5,420 16,444 16,699 (255) Total assets 282,651 280,629 2,022 19,711 19,749 (38) Deferred outflows (Notes 9 and 11) 76,869 57,287 19,582 2,394 1,939 455 Current and other liabilities 12,923 11,843 1,080 432 500 (68) Noncurrent liabilities 209,678 161,643 48,035 10,882 10,259 623 T otalliabilities 222,601 173,486 49,115 11,314 10,759 555 Deferred inflmvs (Notes 9 and 11) 21,403 32,710 (11,307) 693 1,107 (414) Net Position: Net investment in capital assets 199,203 193,707 5,496 10,969 10,958 11 Restricted 29,225 31,287 (2,062) 0 0 0 Umestricted (112,913) (93,274) (19,639) (872) (1,136) 264 Change due to implementation of (20,340) 20,340 (280) 280 GASB 75 (See Note 1 Q) Total net position $115,515 $111,380 $4,135 510,097 $9,542 $555 Current Governmental assets decreased by $3.4 million, primarily due to the use of funds set aside for public safety facility construction and improvements. The $5.4 million increase in Capital assets reflects this use of resources. Current and other liabilities increased by approximately $1.1 million, primarily due to an increase in accounts payable due to a higher level of construction activity. Noncurrent governmental liabilities increased by $48.0 million, mostly attributable to the increase in net pension and OPEB liabilities (Notes 9 and 11). Of this amount, $20.3 million is attributable to prior year OPEB liabilities. These liabilities are incorporated into the restated net position of the previous year. The net position in business-type activities reflects the fiscal activity of the Parking Services program and increased by $555 thousand from the previous year. The $623 thousand increase in noncurrent liabilities is driven by the increase in net pension and OPEB liabilities, although this is partially offset by the $280 thousand restatement of net position prompted by the first year implementation of GASB 75. Increases to deferred outflows and decreases to deferred inflows under the reporting requirements of GASB 68 and GASB 75 offset the liability increase, thus contributing to the positive impact on net position. 9 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 At June 30, 2017, the largest portion of net position in the amount of $210.2 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, $29.2 million, is subj ect to external restrictions, and their use is determined by those restrictions whether legal or by covenant. The remaining portion, unrestricted negative $113.8 million, represents the extent to which the net investment in capital assets and restricted net position exceed total assets. :Ket Position as of 6/3012017 Total = $ 125,612 (in thousands) Invested in Capital Assets (net) Restricted Unrestricted Total Net Position 10 $210,172 29,225 (113 ,785) $125,612 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 Statement of Activities -Governmental The following is the condensed Statement of Activities and Changes in Net Position for the fiscal years ended June 30, 2017 and 2016: Summary of Changes in Net Position [in thousands) Governmental Activities Increase 2017 2016 [Decrease] REVENUES Program revenues: Charges for servi ces $17282 $21,3"10 [$4,028] Operating grants and contributions 3,965 4,678 [713] Capi tal grants and contri buti ons 1,703 1,471 232 Total program revenues 22,950 27,459 [4,509] General revenues: Property taxes 23,343 19,999 3,344 Sales taxes 31,819 34,348 [2,529] Paramedic tax 5,486 4,226 1,260 Transient occupancy tax 2,985 3,063 [78] Franchi se tax 3,611 3,418 193 Business license tax 2,860 2,825 35 Other taxes 1,739 3,465 [1,726] Investment earni ngs 211 300 (89) Mi scell aneous 2,449 1,387 1,062 Total general revenues 74,503 73,031 1,472 TOTAL REVENUES 97,453 "100,490 [3,037) EXPENSES G ener al government "10,996 12,953 [1,957) Publ i c safety 44,367 55,400 [11,033) Public works and parks 19,846 22,929 [3,083) Communit)Xeconomic development 4243 4,307 (64) Cui tLlre and recreati on 14,131 15,027 (896) I nterest on long-term debt 271 277 (6) TOTAL EXPENSES 93,854 110,893 [17,039) EXCESS [DEFICIENCY) OF REVENUES oVER[UNDE~EXPENSES 3,599 [10,403) 14,002 Transfers in 536 449 87 Net Change in Net Position 4,135 [9,954) 14,089 Beginning Net Position 111,380 141,674 [30,294) Change due to implementation of G ASB 75 [See Note 10) [20,340) 20,340 Ending Net Position, June 30 $115,515 $111,380 $4,135 11 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 The City's governmental activities net position increased by $4.1 million during fiscal year 2016-2017. Charges for services were approximately $4.1 million lower than those of the previous year. Most of this decrease, $2.6 million, stems from a change in the reporting of reimbursements to the City from SRSD. (In the previous year, the reimbursements were reported as a charge for services. Going forward, these charges are eliminated because their source is a component unit of the City.) The City also experienced a decline in third-party billings for emergency medical transport services. Approximately half of the $3.3 million increase in property tax revenues results from a reporting change in which property transfer tax revenues are now being accounted for within the property tax category. In the prior year, it was reported under "Other taxes." The remainder of the growth reflects economic growth (approximately five percent) coupled with some one-time distributions from prior year activity. The year-over-year $2.5 million decrease in sales taxes is attributable to a leveling off in sales tax-related growth in the current year combined with a $1.2 million one-time sales tax revenue in the previous year. Other taxes dropped from $3.5 million to $1. 7 million in the current year because of the change in reporting of the property transfer tax, as described previously. Finally, Miscellaneous revenues increased by just under $1.1 million, with most of the increase attributable to County of Marin payments toward the Fire Station 57 construction, one of the active Essential Facilities Capital projects. The fiscal year 2016-2017 governmental expenses were $17.0 million less than those of the previous fiscal year. This decrease is driven by $26.7 million of pension expense adjustments recorded under GASB 68. The remaining year-over-year increase is attributable to other operating costs, which increased by approximately $9.7 million. The following graph shows governmental revenues by source: Revenues by Source Governmental Activities Total-$97AS3 (in thousands) 12 • Charges for se rvices • Operating grants and contri butions Capital grants and contri butions • Taxes Investment earnings • Miscellaneous $50 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 Expenses and Program Revenues Governmental Activities $45 -----------===------ $40 $35 $30 $25 $20 $15 $10 $5 $0 ~ ... ~q; ~o~ ",'li ()'l, ~(, o • program Revenues ~(,o~. Expenses Total expenses for governmental activities were $93.6 million (excluding interest on long-term debt of $271 thousand). Program revenues offset total expenditures as follows: • Those who directly benefited from programs contributed $17.3 million in charges for services. • A total of $5.7 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 $70.6 million. Functional expenses for the year ended June 30, 2017 were as follows: Expenses by Function (in thousands) Function Amount Percent of Total General government $10,996 11.6% Public safety 44,367 47.3% Public works and parks 19,846 21.0% Community development 4,243 4.5% Culture and recreation 14,131 15.1% Interest on debt 271 0.3% Total expenses $93,854 100% 13 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 Statement of Activities -Business-type Summary of Cbang,es in N,et Position For t he periods ended June 30, (in thousands) Revenues Program revenues: Charges for services Total program revenues General revenues: rvIiscenaneous Total general revenues TOTAL REVENUES Expenses General government TOTAL EXPENSES EXCESS (DEFICIENCY) OF REVEJ\TU'ES OVER (UNTIER) EXPENSES OTHER FINANCING SOIJRCES (USES) Transfers out Total Other Financing sources (uses) Net Change in Net Position Fund Balance, Begimung as of 7/1116 Change due to nnplementation of GASB 75 (See Note 1Q) Net Position, Endttlg as of 6/30/17 Busmess-Type Activities 2017 2016 $5,268 5,268 11 11 5,279 4,188 4,188 1,091 (536) 555 9,5 42 $10,097 $5,212 5,212 15 15 5227 4,763 4,763 464 (448) 16 9,806 (280) $9,542 Increase (Decrease) $56 56 (4) (4) 52 (575) (575 ) 627 (88) 539 (264) 280 $555 The net position for business-type activities was increased by $555 thousand in fiscal year 2016-2017 from the prior fiscal year. • Parking services is the City's only business-type activity with income derived from program revenues of $5.3 million. Program revenues include parking meter coin income of $1.9 million and parking garage hourly and monthly parking income of $1.3 million. Revenues also include parking and non-vehicle code fines totaling $2.1 million. Total expenses for parking services were $4.2 million and transfers out to general fund and non-major governmental fund for support totaled $536 thousand during the fiscal year 2016-2017. The year-over-year decrease in expenditures 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, 2017 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, 2017, the City reported a combined ending fund balance of $46.1 million of all its governmental funds (a decrease of 4.0 million from the prior year): $0.5 million is non-spendable, $25.8 million is restricted, $3.5 million is committed, $15.0 million is assigned and $1.3 million is unassigned. General Fund -The General Fund is the primary operatingfund of the City. General Fund -The fund balance of the General Fund as of June 30, 2017 was $16.7 million (a decrease of $2.0 million from the prior year balance): $0.5 million is non-spendable, $14.9 million is assigned, and $1.3 million is unassigned. The assigned portion of the balance includes $7.2 million for emergency and cash flow needs. General Fund Budgetary Highlights: The original adopted General Fund budget projected total revenue of $74.9 million and transfers-in of $1.2 million for total resources of $76.1 million. This budget appropriated expenditures of $69.9 million and transfers-out of $6.0 million for total appropriations of $75.9 million. Transfers-out were later increased to $7.2 million in order to accommodate the funding of the San Rafael Essential Facilities project from Measure E Transactions and Use Tax (TUT), based on actual project expenditures. Actual revenues, at $73.4 million, were lower than the original budgeted revenues by $1.5 million. This negative performance was primarily due to a decline in sales tax revenues. Actual expenditures of $69.5 million were less than the original budgeted expenditures by $0.4 million, primarily due to staffing vacancies. Fiscal year 2016-2017 General Fund revenues and transfers of $74.8 million exceeded expenditures and operating transfers out of $71.3 million by $3.5 million. Capital transfers to the Essential Facilities Capital Projects fund reduced the net results by $5.4 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 30,2017 Summary of General Fund Budget and Actual For the fiscal year ended June 30,2017 (in thousands) Adopted Budget Revised Budget Revenues $74,942 $74,117 Transfers in 1,213 1,382 Total resources 76,155 75 ,499 Expenditures 69,901 $70,526 Transfers out (operating) 1,936 1,796 Total uses 71,837 72,322 Net Operating Results $4,318 $3,177 Transfers out (capital) 4,040 5,417 Net Results after capital transfers $278 ($2,240) Actual $73,366 1,382 74,748 69,520 1,796 71,316 $3,432 5,417 ($1,985) 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 $10.4 million to $9.l million. Revenues totaled $0.2 million, while $1.8 million was charged against this fund to support the maintenance of the City-wide traffic model, including the Tamalpais Avenue queue cutter and Freitas- Las Gallinas Intersection Improvement. The balance in the fund is being held in anticipation of maj or 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 proj ects. Gas tax revenues exceeded expenditures and net transfers by $70 thousand in fiscal year 2016-2017 leaving the ending fund balance effectively unchanged at $6.7 million. Expenditures during fiscal year 2016-2017 totaled $4.6 million. In addition to routine street-related maintenance, expenditures include $703 thousand for Downtown Rail Readiness, $1.6 million for miscellaneous street resurfacing, $580 thousand for Grand Avenue Pathway Connector, $232 thousand for Brookdale Avenue Retaining Wall Repair and $146 thousand for Emergency Slide Repair and Road Repair. The largest sources of revenues were $1.1 million in development impact fees, $1.2 million from State gasoline taxes, $635 thousand in local Measure A and $492 thousand in Measure B 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, Fire Station 52 and the Public Safety Center. Expenditures during fiscal year 2016-2017 totaled $6.1 million, of which $5.4 million was transferred from the General Fund from an allocation of Measure E Transaction and Use Tax, and the remainder from reimbursements from the County of Marin for its share of Fire Station 57 costs. Non-major Governmental Funds -The City's non-major funds are presented in the basic financial statements in the aggregate. At June 30, 2017, non-major funds had a total fund balance of$13.6 million, a $0.8 million decrease from the previous year. While the Childcare and Grants funds reported increases of $216 thousand and $139 thousand, respectively; the Stormwater Fund spent down $772 thousand as it completed major work on the Rossi Pump Station, and the State Lands Fund (reported under Development Services) expended a net $318 thousand in support of a right-of-way purchase. 16 CITY OF SAN RAE1IEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 Of the ending total non-major fund balances of $13.6 million: $10.0 million (74%) is legally restricted for specific purposes by external funding source providers, $3.5 million (25%) is committed for special purposes by the City Council, 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 36, the City's proprietary fund net position was increased by $764 thousand during the fiscal year. The Parking Services Fund is the City's sole business-type (Enterprise) activity. The proprietary fund operating revenue was increased by $57 thousand in fiscal year 2016-2017 to $5.269 million. The Enterprise fund operating expenses were $3.8 million in fiscal year 2016-2017, a decrease of $0.8 million over the prior fiscal year. The City's Internal Service Funds are also reported in this Proprietary Fund classification. In fiscal year 2016-2017, the Internal Services Funds were comprised of: Building Maintenance, Vehicle Replacement, Equipment Replacement, Employee Benefits, Liability Insurance, Workers' Compensation, Dental Insurance, Employee Retirement, OPEBlRetiree Medical, Radio Replacement, Telephone Replacement and Sewer Maintenance. The net position of the Internal Service Funds increased by $2.2 million, $1.9 million of which was in the building maintenance fund reflecting the growth in depreciable City infrastructure-related assets. 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, 2017 amounts to $216.0 million, net of accumulated depreciation of $167.9 million. This investnlent 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 $12.0 million, offset by accumulated depreciation of $6.9 million. Additions to capital assets during fiscal year 2016-201 7 included: • Building and structures • Terra Linda Recreation Center Pool House ~ Infrastructure: $9.8 million • Downtown Rail Readiness -$3.8 million • Tamalpais Avenue Queue Cutter Improvement -$1.9 million • Rossi Pump -$1.7 million • H Street Drainage Improvement -$2.4 million 17 ~lll' OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 The City's Capital Assets for the fiscal years ending June 30, 2017 and 2016 were as follows: Governmental Activities Land Construction in progress Land improvements Buildings and structures Machinery and equipment Infrastructure Less accumulated depreciation Subtotal Governmental Activities Business-type Actil>ities Land Buildings and structures Machinery and equipment Less accumulated depreciation Subtotal Business-type Activities Total Capital Assets Summary of Capital Assets (in thousands) 2017 $83,662 11.847 9,020 42.896 18,841 197.025 (163,785) 199.506 8,621 10,714 1,212 (4.103) 16,444 $215.950 2016 $83,261 11.520 9~020 41.667 18.477 187,2.13 (157.072) 194.c~86 8,621 10.114 1,267 (3,902) 16)00 $210,786 Additional infonnation on the City's capital assets can be found in Note 5 on pages 63 through 64 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 fonner 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 infonnation on the debt obligations of the City and Note 15 for additional information on the Successor Agency.) The City's long-tenn obligations for the fiscal years ending June 30, 2017 and 2016 were as follows: Summary ofL-ang-Term Debt (in thousands) Governmental Activity Debt: 2010 Ta..xable Pension Obligation Bonds PG & E City Hall HV AC Retrofit Note Payable PG & E Street Light Retrofit Note Payable Subtotal Governmental Activity Debt Business-type Debt: PG & E Parking Lot Lighting Retrofit Note Payable 2012 Authority Lease Revenue refunding Bon~ as adjusted Subtotal Busmess-type Debt Tot.al Long-Term Obligations 18 2017 $4,390 213 91 4,694 41 5,434 5,475 $10)69 2016 $4,490 246 133 4,869 48 5,693 5,741 $10,610 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 ECONOMIC CLIMATE AND NEXT YEAR'S BUDGET Seven years after the official end of the Great Recession, the City's revenues have firmly established themselves above the former peak set at the end of the last decade, although sales tax revenues have experienced a leveling off. As the City looks ahead to fiscal year 2017-2018, management is encouraged by indicators that the local economy will remain vibrant. However, relatively strong growth in the regional economy continues to be tempered by uncertainty at the state, national and international levels. The nation continues to bounce back slowly, fueled by a resurgent housing market and consistent job growth. While elements of the national economy are on the mend, there are many longer-term issues the nation must address, including funding changes to the national healthcare system, long-term underemployment and unemployment, and resolving underfunded federal entitlements and state and local pensions. The California economy continues to rebound from the recession. Although the 4.9% unemployment rate remains above the national average of 4.4%, it continues to fall and remains on a convergent track with the national average. Personal income has rebounded over the past few years, and the State continues to prosper from the flow of capital into the technology companies who are attracted to California. Although the State has been able to slowly build back its reserves and post budget surpluses, there are concerns that budget shortfalls could return within the next few years. In addition, the "wall of debt" which, when pension and retiree medical liabilities are considered, reaches into the hundreds of billions of dollars and managing the impact of the severe drought most of the 58 counties are likely to burden the State for several years. Locally, the 3.0% Marin County unemployment rate is the second lowest in the State. According to the Marin Economic Forum, the County added 4,000 payroll jobs and gained approximately 250 payroll businesses in 2016. Real personal income is projected to grow at an average rate of just over 2.5% over the next year, and Marin County's taxable sales per capita are the third highest in the State. Marin County median home prices now exceed $1.3 million and continue to rise, while the recovery of commercial real estate has led to stable rents increasing to an average of $2.80 per square foot. The City's general fund is fueled by the momentum of five consecutive years of strong operating results. Service levels have increased moderately over the past few years, with additional resources being allocated to homeless issues, massage ordinance enforcement, open space management and deferred maintenance. At the same time, the City is fully funding its actuarially-determined, required contributions for both pension and retiree medical (OPEB) obligations. The City enters fiscal year 2017-2018 with approximately $4.8 million accumulated from a dedicated portion of its Measure E Transaction Use Tax (TUT) for public safety facilities construction and improvements. One-third of this twenty-year San Rafael three-quarter percent TUT, which became effective April 1, 2014, has been set aside by City Council direction for this purpose. 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 and make come strategic investments for the City's future, there will still be critical, unfunded capital and maintenance needs. The trends for sales tax and transactions and use tax (Measure E), which combined represent the City's largest tax revenue generators, suggested continued, but moderate growth. For fiscal year 2017-2018, these taxes are proj ected to increase by approximately three percent. The City's second largest tax generator is property tax. The City is expecting the fiscal year 2016-2017 tax roll to increase by approximately five percent over the previous year. Other tax and non-tax revenues are expected to grow moderately, in the range of two to four percent. 19 CITY OF SAN RAFAEL Management's Discussion and Analysis Fiscal Year Ended June 30, 2017 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 three-year contract terminating on October 31, 2019, the City's labor units are all operating under two-year contracts that expire on June 30, 2018. Negotiated compensation increases in effect through June 30,2018 range between 3.0% and 4.0% for the fiscal year. 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 fmancial management. Because the City's bonds are highly sought by investors and are fairly 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. The City anticipates spending down most of its funds accumulated for the San Rafael Essential Facilities capital improvements project. This project, which includes a new public safety administrative building and major safety and operational improvements to fire stations, is being funded from a dedicated portion of the Measure E TUT. Other General Fund balances are expected to remain stable for the year. 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. 20 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. 21 CITY OF SAN RAP AEL STATEMENT OF NET POSITION JlJNE 30, 2017 Component Unit San Rafael Sanitation Activities Activities Total District ASSETS Cash and investments available for operations (Note 2) $64,866,135 $3,217,411 $68,083,546 $24,536,913 Restricted cash and investments (Note 2) 702,161 702,161 Receivables: Accounts 2,333,440 50,543 2,383,983 48,157 Taxes 7,481,603 7,481,603 Grants 123,581 6,507 130,088 Interest 169,010 169,010 Loans (Note 4) 654,612 654,612 Long-term receivable from the Successor Agency (Note 15D) 761,773 761,773 Long-term receivable from San Rafael Sanitation District (Note 4G) 4,527,836 4,527,836 Internal balances (Note 3B) 162,051 (162,051) Prepaid expenses and others 1,362,605 154,835 1,517,440 54,842 Capital assets (Note 5): Nondepreciable 95,509,234 8,620,853 104,130,087 387,361 Depreciable, net 103,996,931 111,819,685 48,004,957 Total Assets 282,650,972 19,710,852 302,361,824 73,032,230 DEFERRED OUTFLOWS Deferred outflows related to pension (Note 9) 72,653,722 2,353,734 75,007,456 Deferred outflows related to OPEB (Note 11) 4,214,824 40,176 4,255,000 Total Deferred Outflows 76,868,546 2,393,910 79,262,456 LIABILITIES Accounts payable 8,416,779 90,048 8,506,827 620,794 Deposits payable 101,146 101,146 Interest payable 46,547 46,547 Developer deposits payable 547,699 547,699 Unearned revenue 367,589 367,589 Claims payable (Note 13): Due in one year 2,653,288 2,653,288 Due in more than one year 6,094,050 6,094,050 Compensated absences (Note 1K): Due in one year 556,116 17,703 573,819 Due in more than one year 3,892,816 123,922 4,016,738 Long-term debt (Note 6): Due in one year 280,172 276,816 556,988 Due in more than one year 4,413,151 5,198,149 9,611,300 Long-term payable to the City of San Rafael (Note 4G) 4,527,836 Net OPEB liability (Note 11) 33,466,002 318,998 33,785,000 Net pension liability (Note 9) 5,242,181 Total Liabilities 11,314,364 233,915,841 5,148,630 DEFERRED INFLOWS Deferred inflows related to pension (Note 9) 21,402,737 693,376 22,096,113 Total Deferred Inflows 21,402,737 693,376 22,096,113 NET POSITION (Note 8): Net investment in capital assets 199,202,842 10,968,642 210,171,484 48,392,318 Restricted for: Special revenue projects: Housing and street improvements 16,575,903 16,575,903 Stormwater 189,087 189,087 Emergency medical services 1,744,530 1,744,530 Other 6,564,442 6,564,442 Capital projects 3,984,436 3,984,436 Debt service 167,245 167,245 Total Restricted Net Position 29,225,643 29,225,643 Umestricted 012,913,181) (871,620) 0 13 ,784,801 2 19,491,282 Total Net Position $10,097,022 See accompanying notes to financial statements 23 FunctionslPrograms Primary Government Governmental Activities: General government Public safety Public works and parks Community development Culture and recreation CITY OF SAN RAFAEL STA TEMENT OF ACTIVITIES FOR THE YEAR ENDED JU]'ffi 30, 2017 Expenses Charges for Services $421,393 4,264,939 1,804,698 3,850,107 6,941,013 Program Revenues Operating Grants and Contributions $168,782 996,507 2,452,581 347,481 Interest on long-term debt and fiscal charges $10,996,269 44,366,734 19,845,719 4,242,743 14,131,000 271,263 Total Governmental Activities Business-type Activities Parking services Total Business-type Activities Total Primary Government Component Unit San Rafael Sanitation District 93,853,728 4,188,152 4,188,152 $98,041,880 $11,255,194 General revenues: Taxes: Property Sales: Sales and Use 17,282,150 5,268,991 5,268,991 $22,551,141 $16,014,016 Measure E half-cents sales tax Measure E quarter-cents sales tax Measure S Paramedic Transient occupancy Franchise Business license Other Investment earnings Miscellaneous Transfers (Note 3A) Total general revenues and transfers Change in Net Position 3,965,351 $3,965,351 $ 36,945 Net Position, beginning of year, as adjusted (Note 1Q) Net Position, end of year See accompanying notes to financial statements 24 $ Capital Grants and Contributions $1,702,993 1,702,993 $1,702,993 79,245 Net (Expenses) Revenues and Changes in Net Position Component Primary Government Unit San Rafael Governmental Business-type Sanitation Activities Activities Total District ($10,406,094) ($10,406,094 ) (39,105,288) (39,105,288) (13,885,447) (13,885,447) (392,636) (392,636) (6,842,506) (6,842,506) (271,263) (271,263) (70,903,234) (70,903,234) $1,080,839 1,080,839 1,080,839 1,080,839 (70,903,234 ) 1,080,839 (69,822,395) $4,875,012 23,343,140 23,343,140 1,528,047 20,255,493 20,255,493 7,689,925 7,689,925 3,844,963 3,844,963 28,878 28,878 5,485,637 5,485,637 2,984,758 2,984,758 3,610,824 3,610,824 2,774,803 2,774,803 1,824,830 1,824,830 210,628 10,810 221,438 97,090 2,448,604 2,448,604 536,000 (536,000) 75,038,483 (525,190) 74,513,293 1,625,137 4,135,249 555,649 4,690,898 6,500,149 111,380,055 9,541,373 120,921,428 61,383,451 $115,515,304 $10,097,022 $125,612,326 $67,883,600 25 FUND FINANCIAL STATEMENTS Major funds are defmed 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 2016-2017: 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. 27 ASSETS Cash and investments available for operations (Note 2) Restricted cash and investments (Note 2) Receivables: Accounts Taxes Grants Interest Loans (Note 4) Long-term receivable from the Successor Agency (Note 15D) Prepaids Total Assets LIABILITIES Accounts payable Deposits payable Developer deposits payable Unearned revenue Compensated absences Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable revenue -SB90 reimbursement receivable Unavailable revenue -long-term receivable from Successor Agency Total Deferred Inflows of Resources Fund Balances (Note 8): Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources and Fund Balances CITY OF SAN RAP AEL GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2017 Special Revenue Funds Traffic and Housing General Mitigation Gas Tax $13,434,043 $9,227,743 $7,009,256 1,257,061 46,441 7,109,197 109,688 167,018 230,973 193,573 761,773 277,473 $23,237,538 $9,421,316 $7,165,385 $4,144,408 $270,227 $441,689 79,411 15,659 387,085 64,189 4,675,093 285,886 441,689 1,096,240 761,773 1,858,013 508,446 9,135,430 6,723,696 14,900,945 1,295,041 16,704,432 9,135,430 6,723,696 $23,237,538 $9,421,316 $7,165,385 See accompanying notes to basic financial statements 28 Essential Facilities Capital Projects Fund $1,950,002 183,106 $2,133,108 $2,133,108 2,133,108 $2,133,108 Other Governmental Funds $12,734,480 702,161 846,832 262,718 123,581 1,992 230,066 $812,035 6,076 160,614 367,589 9,953,279 3,491,708 115,103 13,560,090 Total Governmental Funds $44,355,524 702,161 2,333,440 7,481,603 123,581 169,010 654,612 761,773 $56,863,751 $7,801,467 101,146 547,699 367,589 64,189 1,096,240 761,773 1,858,013 508,446 25,812,405 3,491,708 15,016,048 1,295,041 29 CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET -RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2017 Total fund balances reported on the governmental funds balance sheet 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. Internal service funds are used by management to the cost of management of building, workers' compensation, employee insurance, and post-retirement healthcare benefits to individual funds. The assets and liabilities are included in Governmental Activities in the Statement of Net Position. Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. Compensated absences Unavailable revenue Long-term receivables from San Rafael Sanitation District Deferred outflow related to pension Net pension liability Deferred inflow related to pension Deferred outflow related to OPEB Net OPEB liability . Net position of governmental activities See accompanying notes to financial statements 30 $46,123,648 190,678,334 21,218,401 (4,693,323) (4,384,743) 1,858,013 4,527,836 72,653,722 (161,812,669) (21,402,737) 4,214,824 CITY OF SAN RAFAEL GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2017 Traffic and Essential Other Housing Facilities Capital Governmental General Fund Funds REVENUES Taxes and special assessments $64,242,440 $6,924,451 Licenses and pennits 2,559,841 Fines and forfeitures 400,283 Use of money and properties 229,791 $31,267 $24,527 63,764 Intergovernmental 2,767,092 3,728,982 1,567,082 Charges for services 2,459,680 204,210 1,149,022 9,612,249 Other revenue $635,387 437,695 Total Revenues 73,365,784 635,387 18,605,241 EXPENDITURES Current: General government 10,190,580 22,450 344,386 Public safety 40,844,246 8,173,907 Public works and parks 11,201,655 1,745,154 2,643,991 1,162,161 Community development 3,759,564 Culture and recreation 3,077,435 9,569,293 Capital outlay 1,641,317 459,609 Capital improvement I special projects 305,704 6,052,841 1,044,704 Debt service: Principal 175,172 Interest and fiscal charges Total Expenditures 4,591,012 6,052,841 20,754,060 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES ( 1,532,127) 373,833 (5,417,454) OTHER FINANCING SOURCES (USES) Transfers in (Note 3A) 1,382,303 228,400 325,000 5,417,454 1,933,850 Transfers out (Note 3A) (628,400) Total Other Financing Sources (Uses) 228,400 (303,400) 5,417,454 Net Change in Fund Balances (1,985,371) (1,303,727) 70,433 (827,788) FUND BALANCES, BEGINNING OF YEAR 10,439,157 6,653,263 FUND BALANCES, END OF YEAR $9,l35,430 $6,723,696 See accompanying notes to financial statements 31 Total Governmental Funds $71,166,891 2,559,841 400,283 349,349 8,063,156 l3,425,161 1,842,053 97,806,734 10,557,416 49,018,153 16,752,961 3,759,564 12,646,728 2,100,926 7,403,249 175,172 9,287,007 (4,046,453) 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 30,2017 NET CHANGE TI\T FUND BALANCES -TOTAL GOVERNMENTAL FUNDS Amounts reported for Governmental Activities in the Statement of Activities are different because ofthe 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 therefore added back to fund balance Non-capitalized capital outlay expenditures were reclassified to various governmental activities Loss on disposal of capital assets is deducted from fund balance Transfer of capital assets to Internal Service Funds is deducted from fund balance Depreciation expense is deducted from fund balance Long-Term Debt Proceeds and Payments Repayments on long-term debt principal are expenditures in the governmental funds, but in the Statement of Net Position the repayments reduce long-term liabilities. Accrual of Non-Current Items The amount below included in the Statement of Activities does not require the use of current financial resources and therefore is not reported as revenue or expenditures in governmental funds (net change): Compensated absences Unavailable revenue Long-term receivable from San Rafael Sanitary District 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. 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. 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. Change in Net Position of Governmental Activities See accompanying notes to financial statements 32 ($4,046,453) 9,504,175 2,003,366 (207,188) (1,228,402) (6,222,352) 175,172 (126,623) (516,972) (331,171) 2,524,957 190,187 2,416,553 $4,135,249 PROPRIETARY FUND FINANCIAL STATEMENTS Proprietary funds account for City operations fmanced 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 maj or fund. P~GSERVICESFUND 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. 33 CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2017 ASSETS Current Assets: Cash and investments available for operations (Note 2) Receivable: Accounts Grants Prepaids Total Current Assets Noncurrent Assets: Capital assets (Note 5): Nondepreciable Depreciable, net Total Noncurrent Assets Total Assets DEFERRED OUTFLOWS Deferred outflows related to pension (Note 9) Deferred outflows related to OPEB (Note II) Total Deferred Outflows LIABILITIES Current Liabilities: Accounts payable Interest payable Compensated absences, due in one year (Note 1 K) Claims payable, due in one year (Note 13) Long-term debt, due in one year (Note 6) Total Current Liabilities Noncurrent Liabilities: Compensated absences (Note lK) Claims payable (Note 13) Long-term debt (Note 6) Net OPEB liability (Note 11) Net Pension Liability (Note 9) Total Noncurrent Liabilities Total Liabilities DEFERRED INFLOWS Deferred inflows related to pension (Note 9) Total Deferred Inflows NET POSITION (Note 8): Net investment in capital assets Unrestricted Total Net Position 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. Net position business-type activities See accompanying notes to financial statements 35 Business-type Activities Parking $3,217,411 50,543 6,507 8,620,853 2,353,734 90,048 46,547 17,703 276,816 431,114 123,922 5,198,149 318,998 5,242,181 10,883,250 11,314,364 693,376 693,376 10,968,642 (709,569) 10,259,073 (162,051) $10,097,022 Governmental Activities Internal Service Funds $20,510,611 530,301 8,297,530 8,827,831 30,419,000 615,312 2,653,288 6,094,050 8,827,831 CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 OPERATING REVENUES Charges for current services Other operating revenues Total Operating Revenues OPERATING EXPENSES Personnel Insurance premiums and claims Maintenance and repairs Depreciation (Note 5) General and administrative Total Operating Expenses Operating Income NONOPERATING REVEN1JES (EXPENSES) Investment income Interest expense Miscellaneous income Loss on sale of capital assets Total Nonoperating Revenues (Expenses) Income Before Transfers CAPITAL CONTRIBUTIONS TRANSFERS IN (Note 3A) TRANSFERS OUT (Note 3A) Change in Net Position NET POSITION, BEGINNING OF YEAR, AS ADJUSTED (Note 1Q) NET POSITION, END OF YEAR * Reconciliation of the Change in Net Position with the Statement of Activities Change in Net Position 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. Change in Net Position of Business-type Activities See accompanying notes to flllancia1 statements 36 Business-type Activities - Enterprise Funds Parking Services $3,103,420 2,165,571 5,268,991 2,097,898 71,875 255,508 1,362,350 3,787,631 1,481,360 10,810 (192,038) (181,228) 1,300,132 (536,000) 764,132 9,494,941 $10,259,073 $764,132 (208,483) $555,649 Governmental Activities Internal Service Funds $15,206,988 962,296 16,169,284 2,775,670 6,614,379 288,700 1,067,900 4,289,993 15,036,642 1,132,642 68,951 94,264 (19,944) 143,271 1,275,913 1,228,402 80,275 (376,520) 2,208,070 18,848,280 $21,056,350 CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds Cash payments to suppliers for goods and services Cash payments to employees for salaries and benefits Other operating revenues Cash Flows from Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts Interfund payments Cash Flows from Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on revenue bonds and note payable Interest expenses and fiscal charges Acquisition of capital assets Proceeds from sale of property Cash Flows from Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Cash Flows from Investing Activities NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR Reconciliation of operating income to net cash provided by operating activities: Operating income Adjustments to reconcile operating income to cash flows from operating activities: Depreciation Net change in assets and liabilities: Accounts receivable Loans receivable Prepaids and deposits Increase (decrease) in due to OPEB system Accounts payable Compensated absence obligations (Decrease) in due to retirement system Claims payable Net Cash Provided by Operating Activities NON-CASH TRANSACTIONS: Amortization of bond discount Contributions of capital assets Business-type Activities Funds Parking Services $3,103,420 (1,665,543) (2,346,766) (536,000) (266,817) (193,263) (460,080) 10,810 10,810 375,719 2,841,692 $3,217,411 $1,481,360 255,508 104,307 (154,835) (1,813) (76,483) (1,100) (245,955) $1,360,989 See accompanying notes to basic financial statements 37 Governmental Activities Internal Service Funds $15,307,819 (13,509,146) (164,292) 962,010 2,596,391 80,275 (376,520) (296,245) (1,222,005) 94,264 1,241,356 $1,132,642 1,067,900 89,607 10,938 2,478 134,054 FIDUCIARY FUND FINANCIAL STATEMENTS Fiduciary funds are used to account for assets held by the City as an 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 ASSETS CITY OF SAN RAFAEL FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2017 Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund Cash and investments (Note 2) Restricted cash and investments (Note 2) Receivable: $87,344 Ta,xes LIABILITIES Accounts payable Interest payable Total Assets Other long-term obligations (Note 15D) $3,447,857 $1,697 46,747 761,773 Agency Funds $289,768 951 $290,719 $26,614 Due to bondholders 264,105 Long-term debt 15C): Due within one year Due more than one year Total Liabilities NET POSITION Held in trust for private purpose 3,080,000 See accompanying notes to financial statements 41 $290,719 CITY OF SAN RAFAEL STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30,2017 ADDITIONS P",n"''''r1n.l taxes Total Additions DEDUCTIONS General government Interest expense Total Deductions SPECIAL ITEM OPEB liability adjustment (Note 15D) Total Special Item in Net Position NET POSITION HELD IN TRUST FUND FOR OTHER PURPOSES tle~;mnllng of year End Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund $4,137,246 4,137,246 261,850 886,612 1,148,462 278,888 278,888 3,267,672 (19,562,702) ($16,295,030) See accompanying notes to financial statements 42 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of the Financial Reporting Entity As required by generally accepted accounting principles, the fmancial statements present the City of San Rafael (the City) as the Primary Government, with its component units for which the City is considered fmancially 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 refmancing 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 (CMF A) 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 are reported in the Parking Services Enterprise Funds. 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 4G, a receivable from the District has been established. 43 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I 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, intergoven1Illental 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, 2017 I 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 maj or 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, 2017 I 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-reirrlbursement 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, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to liabilities, the statement of financial position or balance sheet will sometimes repoti 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 defelTed inflow of resources, is reported in the governmental funds balance sheet. The governmental funds repoti 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 as well as any appropriations for capital projects. 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. L Cash Equivalents F or 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. 47 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) J. Capital Assets 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. Capital assets, excluding infrastructure, are recorded if acquisition or construction costs exceed $25,000. The similar threshold for infrastructure is $25,000. 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 Machinery and equipment Infrastructure District 20 -50 years 4 -20 years 15 -50 years 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 Sewer collection facilities General plant & administrative facilities 48 50-80 years 5-50 years 3-15 years CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K 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 fmancial 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: Cbvemmenta1 Business-Type Activities Activities Total Beginning Balance $4,258,120 $142,725 $4,400,845 Additions 4,436,330 113,870 4,550,200 Payments (4,245,518) (114,970) (4,360,488) Ending Balance $4,448,932 $141,625 $4,590,557 Current Portion $556,116 $17,703 $573,819 49 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L. Property Tax Levy, Collection and Maximum Rates State of California Constitution Article XllI 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 1000/0 of market value as defined by Article XllI A and may be adjusted by no more than 20/0 per year unless the property is sold, transferred, or substantially in1proved. 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: Valuationllien dates Levy dates Due dates (delinquent as of) Secured January 1 July 1 50% on November 1 (December 10) 50% on February 1 (April 10) Unsecured January 1 July 1 July 1 (August 31) The term "unsecured" refers to taxes on personal property other than land and buildings. These taxes are secured by liens on the property being taxed. 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: District 55% remitted on December 15 40% remitted on April 15 5% remitted on June 15 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. M. 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. 50 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. N. 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. o. Use of Estimates The preparation of fmancial 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 fmancial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates. P. Implementation of Accounting Standards Significant Accounting Standards Adopted in the Current Year GASB Statement No. 75 -In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions. The objective of this Statement is to improve accounting and fmancial reporting by state and local governments for postemployment benefits other than pensions (OPEB). The Statement replaces the requirements of Statements No. 45 Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple- Employer Plans, for OPEB. The Statement is effective for periods beginning after June 15, 2017; however, the City has elected to implement effective July 1,2016. Q. Prior Period Adjustments The early implementation of GASB Statement No. 75 required the City to make prior period adjustments. As a result, the beginning net positions of the Governmental Activities and Business- Type Activities were reduced by $20,340,365 and $280,365, respectively. The beginning net position of the Parking Services Fund was also reduced by $280,365 and the OPEBlRetiree Medical Fund increased by $9,101,000 as part of this implementation. See Note 11 for additional information. 51 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. I 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 forn1. 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. 52 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 2 -CASH AND INVESTMENTS (Continued) B. Classification Cash and investments as of June 30,2017, 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 Restricted cash and investments Total Primary Government Cash and Investments San Rafael Sanitation District (Component Unit) Cash and investments available for 0 perations Total San Rafael Sanitation District Cash and Investments Statement of Fiduciary Net Position (separate statement): Successor Agency to the Redevelopment Agency: Cash and investments available for operations Restricted cash and investments Cash and Investments Pt. San Pedro RoadAssessment District Agency Fund Total Fiduciary Cash and Investments Total Cash and Investments $68,083,546 68,785,707 24,536,913 87,344 ° 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. 53 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I 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 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 Investment in of Authorized Investment T~e Maturi!2' Quality Portfolio One Issuer U.S. Government Obligation 5 years N/A No limit No limit U.S. Agency Securities and Instruments 5 years AAA No limit No limit Repurchase Agreements 1 year A-I No limit No limit Prime Commercial Paper 270 days A-I 25% 10% of total outstanding commercial paper Bankers' Acceptances 180 days A-I 40% $2,000,000 Medium-Term Corporate Notes 5 years A 30% 5% of portfolio Negotiable Certificates of Deposit 5 years A-I 30% 5% of portfolio N on-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 Mutual Funds N/A AAA 10% N/A Limited Obligation Improvement Bonds related to 30 years N/A N/A N/A Special Assessment Districts and Special Tax Districts 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. 54 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I 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 Maximum Percentage of Authorized Investment T~Ee Maturity Minimum Credit Quality Portfolio U.S. Treasury Obligations 5 years to no N/A No Limit maximum U.S. Agency Securities 3 - 5 years N/A No Limit U.S. Agency Instruments 5 years AAA No Limit Repurchase Agreements . 1 year A-I 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 No Limit Guaranteed Investment Contracts (fully N/A Highest No Limit collateralize d) Municipal Obligations N/A Two Highest 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 5 Years N/A No Limit Local Agency Investment Fund N/A N/A N/A (A) Guaranteed Investment Contracts must be fully collateralized with U.S. Treasury Obligations or U.S. Agency Obligations. E. GASB 72 Fair Value Hierarchy The City categorizes its fair value measurements within the fair value hierarchy established by Generally Accepted Accounting Principles (GAAP). 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. 55 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 2 -CASH AND INVESTMENTS (Continued) The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30,2017: City: Money Market Mutual Funds U.S. Treasury Notes U.S. Agency Securities and Instruments Medium-Term Corporate Notes Investment in Pt. San Pedro Bonds Total Investments Local Agency Investment Fund County Investment Pool Cash in banks and on hand Total City and Investments Fiduciary: Total Investments Cash in banks and on hand Total Fiduciary Cash and Investments Total City and Fiduciary Cash and Investments San Rafael Sanitary District: County Investment Pool Total District's Cash and Investments Total Cash and Investments (a) Levell $4,389,785 $4,389,785 ° (b) Level 2 $70,094 14,565,516 4,054,295 $18,689,905 (c) Level 3 Total $70,094 4,389,785 14,565,516 4,054,295 $1,520,800 (d) __ -,1,,--,52_0.]...,8_00_ $1,520,800 24,600,490 34,171,960 77,038 9,936,219 68,785,707 ° 377,112 377,112 69,162,819 24,536,913 24,536,913 $93,699,732 Source: The above GASB 72 classifications into the different Input Levels are provided by the US Bank Institutional Trust & Custody. (a) Levell 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, unobservable inputs shall reflect the assumptions that market participants would use in pricing the asset including assumptions about risk. (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. 56 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I 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: City: Money Market Mutual Funds Local Agency Investment Fund County Investment Pool U.S. Treasury Notes U.S. Agency Securities and Instruments Medium-Term Corporate Notes Investment in Pt. San Pedro Bonds Total Investments Cash in banks and on hand Total City and Investments Fiduciary: Total Investments Cash in banks and on hand Total Fiduciary Cash and Investments Total City and Fiduciary Cash and Investments San Rafael Sanitary District: County Investment Pool Total District's Cash and Investments Total Cash and Investrrents 57 12 Months or Less $70,094 34,171,960 77,038 2,495,880 5,998,990 1,502,835 More than $1,893,905 8,566,526 2,551,460 1,520,800 $14,532,691 $70,094 34,171,960 77,038 4,389,785 14,565,516 4,054,295 58,849,488 68,785,707 o 24,536,913 24,536,913 $93,699,732 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I 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, 2017, these investments matured in an average of 194 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 42 days at June 30, 2017. 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 "AAAN1." 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. 58 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I 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, 2017, 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: Type ofInvestment City (except Fiduciary Funds): Money Market Mutual Funds County Investment Pool U.S. Treasury Notes U.S. Agency Securities and Instruments Medium-Term Corporate Notes Total rated investments Not rated: Local Agency Investment Fund Investment in PI. San Pedro Bonds Cash in banks and on hand Total City Cash and Investments Fiduciary: Money Market Mutual Funds Total rated investments Not rated: Local Agency Investment Fund Cash in banks and on hand Total Fiduciary Cash and Investments Total City and Fiduciary Cash and Investments Component Unit San Rafael Sanitary District: Investment in County Pool (Rated AANVl) Total District's Cash and Investments Total Cash and Investments H. Concentration Risk A A+ AA-AA $495,895 $2,061,665 $500,340 $498,205 $2,061,665 $500,340 $498,205 AA+ $4,389,785 14,565,516 498,190 $19,453,491 MalAM $70,094 77,038 $0 $0 AANV1 AIIPI Total $70,094 77,038 4,389,785 14,565,516 4,054,295 $0 23,156,728 34,171,960 1,520,800 9,936,219 68,785,707 377,112 377,112 69,162,819 Included in the table at Note G above are the following significant investments in anyone issuer other than U. S. Treasury securities, mutual funds, and external investment pools. Reporting Unit Entity-wide Issuer Federal Home Loan Bank Federal Farm Credit Bank 59 Investment TyPe Federal Agencies Obligation Federal Agencies Obligation Amount $5,748,348 3,726,430 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I 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, 2017, were as follows: From Fund To Fund Amount General Fund Non-Major Governmental Funds $1,796,089 General Fund Essential Facilities Capital Projects Fund 5,417,454 Gas Tax Fund General Fund 400,000 Traffic and Housing Mitigation Fund 228,400 Parking Services Enterprise Fund General Fund 436,000 Non-Major Governmental Funds 100,000 Internal Service Fund General Fund 376,520 Non-Major Governmental Funds General Fund 169,783 Non-M£tior Governmental Funds 37,761 Building Maintenance Internal Service Fund 80,275 Gas Tax Fund 325,000 $9,367,282 (A) Transfer to the non-Major Governmental Funds were for administrative costs, grant matching, recreation and other program support. (A) (B) (C) (D) (C) (A) (C) (E) (F) (F) (G) (B) Transfer to the Essential Facilities Capital Projects Fund were for the Fire Station 52 and 57, and Public Safety Center projects. (C) Transfers to the General Fund were for street maintenance support, administrative costs and pension obligation bond debt service principal and interest payment. (D) Transfer to Traffic Mitigation for Freitas-Las Gallinas Intersection Improvement. (E) Transfer residual funds in programs now reported in General Fund. (F) Transfer Measure A Open Space to Victor Jones Park Improvements and Albert Park Improvements. (G) Transfer from State Land Fund to Gas Tax Fund for right of way purchase. 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. 60 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I NOTE 4 -LOANS RECEIVABLE A. Summary of Loans Receivable The City has identified the portion of fund balance represented by these loans as nonspendable or restricted as discussed in Note 8. At June 30, 2017, these loans totaled: B. Employee Loans Employee Loans Centertown Associates One "H" Street Associates Fire Chief Loan Marin Housing Authority Total $6,350 230,066 48,573 224,623 145,000 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. loans are interest-free, have maximum terms of one year, and are repaid through automatic payroll deductions. As of June 30, 2017, the balance of the employee loans receivable was $6,350. 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, 2017, the balance of the loan including principal and accrued interest was $230,066. 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, 2017, the balance of this loan was $48,573. 61 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 4 -LOANS RECEIVABLE (Continued) 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, 2017, the balance of the loan was $224,623. F. Marin Housing Authority Loans On April 19, 2016, the City made a loan to the Marin Housing Authority for a low and moderate income unit, in the amount of $145,000. As with other loans made under this program, this loan is due upon the sale of the unit. As of June 30,2017, the balance of this loan was $145,000. G. 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, 2017 is $4,527,836, and is composed of the following: Long-tenn receivable from San Rafael Sanitation District: Defined benefit pension liability allocation (GASB 68) Other post-employment benefit liability allocation (GASB 75) Totallong-tennreceivable from San Rafael Sanitation District 62 $3,623,716 904,120 $4,527,836 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 5 -CAPITAL ASSETS Changes in capital assets during the fiscal year consisted of: Governmental Activities Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Land improvements Buildings and structures Machinery and equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Land improvements Buildings and structures Machinery and equipment Infrastructure Total accumulated depreciation Total net capital assets being depreciated Total governmental activity capital assets Business-type Activities Capital assets not being depreciated: Land Total capital assets not being depreciated Capital assets being depreciated: Buildings and structures Machinery and equipment Total capital assets being depreciated Less accumulated depreciation for: Buildings and structures Machinery and equipment Total accumulated depreciation Total net capital assets being depreciated Total business-type activity capital assets Balance June 30,2016 $83,261,168 9,020,097 41,667,102 18,476,428 187,212,938 256,376,565 (5,800,084 ) (17,086,815) (12,126,787) (122,058,098) {157,071z784~ 99,304,781 $194,085,670 Balance June 30, 2016 $8,62°2 853 8,620,853 10,713,814 1,266,865 11,980,679 (2,894,596) (1,007,821 1 (3,902,4172 $16,699,115 63 $401,191 961,998 961,998 (270,055) (1,203,468) (1,142,308) (4,674,418) {7,290,249} {6,328,251 ~ $5.647,627 Additions ($205,363) (50,1452 (255,508 2 (255,508~ {$255,5082 Retirements {$20721892 (207,189) (597,431) 577,488 (19,943) ($227.132) Retirements ($54,795) (54,795 2 54,795 54,795 Balance Transfers June 30,2017 $83,662,359 ($11,040,3442 11,846,875 (11,040,344 ) 95,509,234 9,020,097 1,228,402 42,895,504 18,840,995 9,811,942 197,024,880 11,040,344 267,781,476 (6,070,139) ( 18,290,283) (12,691,607) (126,732,516} Balance Transfers 10,713,814 (3,099,959) (1,003,171 2 (4,103 213 °1 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 5 -CAPITAL ASSETS (Continued) I San Rafael Sanitation District Capital assets not being depreciated: Land and easements Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Subsurface lines Sewage collection facilities General plant and administration Total capital assets being depreciated Less accumulated depreciation for: Subsurface lines Sewage collection facilities General plant and administration Total accumulated depreciation Total net capital assets being depreciated Total District's capital assets Balance June 30,2016 $115,329 3,204,067 3,319,396 28,364,238 39,499,143 1,649,897 69,513,278 (10,812,495) (17,631,349) (963,773) (29,407,617) 40,105,661 $43,425,057 Additions Retirements $6,393,082 6,393,082 70,932 49,533 3,213 123,678 (485,276) (931,117) (133,105) (1,549,498) (1,425,820) $4,967,262 Transfers & Adjustments ($9,325,117) (9,325,117) 6,745,103 2,580,013 9,325,116 9,325,116 ($1) Balance June 30, 2017 $115,329 272,032 387,361 35,180,273 42,128,689 1,653,110 78,962,072 (11,297,771) (18,562,466) (1,096,878) (30,957,115) 48,004,957 $48,392,318 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. 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 Public safety Public works and parks Community develop ment/redevelop ment Culture and recreation Total Governmental Activities Business-type Activities Parking services Total Business-type Activities 64 $141,713 857,493 5,480,853 53,342 756,848 $7,290,249 $255,508 $255,508 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 INOTE6-LONGTERMDEBT I A. The City generally incurs long-tenn debt to [mance projects or purchase assets which will have useful lives equal to or greater than the related debt. A summary of govenunental and business-type activities transactions for the fiscal year ended June 30, 2017, are as follows: Authorized Balance Balance Current and Issued June 30, 2016 Additions Retirements June 30, 2017 Portion Governmental Activities: 2010 Taxable Pension Obligation Bonds 6.00%-6.25%, due 7/112025 $4,490,000 $4,490,000 $100,000 $4,390,000 $205,000 Total Pension Obligation Bonds 4,490,000 100,000 4,390,000 205,000 PG & E City Hall HV AC Retrofit Note Payable 0.00%, due 11130/2023 334,585 245,838 33,280 212,558 $33,280 PG & E Street Light Retrofit Note Payable 0.00%, due 8/31/2019 233,896 132,657 41,892 90,765 41,892 Total Governmental Long-term Debt $4,868,495 $4,693,323 $280,172 Business-type Activities PG & E Parking Lot Lighting Retrofit Note Payable 0.00%, due 1113012023 $66,380 $48,204 $6,816 $41,388 $6,816 2012 Authority Lease Revenue Refimding Bonds 2.00-4.00%, due 4/112033 6,750,000 5,705,000 260,001 5,444,999 270,000 Less: unamortized bond discount ~12,147~ !725~ P 1,4222 Total Enterprise Fund Debt $5,741,057 $276,816 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. B. Pacific Gas and Electric Note Payable 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 (HV AC) 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 HV AC 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. 65 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 6 -LONG-TERM DEBT (Continued) I c. 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 4.000/0. 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 subj ect 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 an10unt of the Bonds subject to redemption, plus accrued interest to the date fixed for redemption, without premium. D. Future Debt Service Future debt service requirements, including interest, at June 30, 2017, are as follows: For the Year Ended June 30 2018 2019 2020 2021 2022 2023 -2027 2028 -2032 2033 Totals Reconciliation of Long-term debt: Less: unamortized discount Governmental Activities Princip al Interest $280,172 $264,362 495,172 245,612 485,261 219,662 508,280 538,280 2,386,158 $4,693,323 66 192,062 162,031 303,443 $1,387,172 Business-type Activities Princip al Interest $276,816 $186,188 281,816 178,088 291,816 169,838 296,816 161,288 306,816 152,588 1,652,307 617,982 1,945,000 314,412 435,000 17,400 5,486,387 $1,797,784 (11,422) $5,474,965 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 7 -DEBT WITHOUT CITY COMMITMENT I 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: San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds-2000A California Statewide Communities Development Authority Revenue Bonds-2002 San Rafael Redevelopment Agency Variable Rate Demand Multifamily Housing Revenue Bonds-200 lA San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds-200! San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds-200? Series A Multifamily Housing Revenue Bonds-2007 Series B Pt. San Pedro Road Median Landscaping Assessment District Limited Obligation Bonds-20l2 NOTE 8 -NET POSITION AND FUND BALANCE A. Net Position Project Description 162-175 Belvedere Apartments S1. Marks School 55 Fairfax Apartments San Rafael Commons Apartments Martinelli House Project Martinelli House Pt. San Pedro Road Median Landscaping Original Amount $3,590,529 5,605,000 3,000,000 6,100,000 6,000,000 1,000,000 1,750,000 Outstanding June 30, 2017 $1,084,330 3,695,000 2,200,000 4,880,000 1,944,047 205,575 1,520,800 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, 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, 2017 I NOTE 8 -NET POSITION AND FUND BALANCE (Continued) I 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 Pennanent 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 Councilor 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 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, 2017 I NOTE 8 -NET POSITION AND FUND BALANCE (Continued) I Detailed classifications of the City's fund balances, as of June 30, 2017, are below: SEecial Revenue Funds Traffic and Essential Facilities Other Housing Capital Projects Governmental General Fund Mitigation Gas Tax Fund Funds Fund balances: Nonspendable: Loans receivable $230,973 Prepaids 277,473 Total Nonspendable 508,446 Restricted for: Assessment District capital projects $300,780 Baypoint Lagoons Assessment District 238,326 Bedroom tax capital projects 76,845 Childcare 1,370,144 Development services 683,286 Emergency medical services 1,744,530 1997 financing authority revenue bonds debt service 147,797 Gas tax $6,723,696 Grants 753,121 Household hazmat facility 313,365 Library 632,065 Library assessment 667,572 Loch Lomond Assessment District 660,266 Low and Moderate Income Housing 910,350 Mariposa Assessment District debt service 16,573 Measure A Open Space 369,235 Parkland dedication 449,188 Peacock Gap Assessment District debt service 2,875 Public safety 158,500 Pt. San Pedro -Maintenance Portion 151,283 Recreation revolving 118,091 Storm water 189,087 Traffic and housing mitigation $9,135,430 Total Restricted 9,135,430 6,723,696 9,953,279 69 Total $230,973 277,473 508,446 300,780 238,326 76,845 1,370,144 683,286 1,744,530 147,797 6,723,696 753,121 313,365 632,065 667,572 660,266 910,350 16,573 369,235 449,188 2,875 158,500 151,283 118,091 189,087 9,135,430 25,812,405 (Continued) CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 8 -NET POSITION AND FUND BALANCE (Continued) I SEecial Revenue Funds Traffic and Essential Facilities Other Housing Capital Projects Governmental General Fund Mitigation Gas Tax Fund Funds Total Committed to: Capital improvement capital projects $3,463,772 $3,463,772 Park capital projects 27,936 27,936 Total Committed 3,491,708 3,491,708 Assigned to: Contractual commitments $50,581 50,581 MOU -One time payment 500,000 500,000 Emergency and cash flow 7,200,000 7,200,000 Infrastructure reserve 600,000 600,000 General plan / long range planning 1,786,478 1,786,478 Measure E -Public Safety Facility 4,763,886 4,763,886 Open space capital projects 115,103 115,103 Total Assigned 14,900,945 115,103 15,016,048 Unassigned to: General Fund 1,295,041 1,295,041 1,295,041 1,295,041 Total Fund Balances $16,704,432 $9,135,430 $6,723,696 $13,560,090 $46,123,648 I 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 defmed 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 fmancial 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. 70 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) I 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 frrst 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. 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. 71 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) I 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, 2017 were as follows: Employer Contribution Rate Basis City of San Rafael Mise Tier I 50.40% Highest year City of San Rafael Mise Tier 2 46.81% Average three highest years City of San Rafael Fire Tier I 75.67% 0.00%-19.79% 3.0%@55 Highest year City of San Rafael Fire Tier 2 72.59% IlJ4% 17.69% 3.0%@55 Average three highest years City of San Rafael Safety Police Tier 74.79% 00.00% -19.79% 3.0%@55 Highest year City of San Rafael Safety Police Tier: 75.53% 11.34';10 -17.69% 3.0%@55 A verage three highest years PEPRA Mise 42.11% 9.18%-10.18% 2.0%@62 AVerage three highest years PEPRA Safety 64.88% 14.53% 2.1%@ 57 Average three highest years These rates were determined by MCERA, based on the actuarial valuation dated June 30,2015. The actual rate of return on investments during that year was 4.990/0 on a market value basis net of investment expenses, as compared to the 7.25% assumption. The City uses the actuarially determined percentages of payroll to calculate and pay contributions to MCERA. Contributions to the plan from the City were $20,003,002 for the year ended June 30, 2017, based on a total payroll of $41 ,553,242, of which $32,885,135 represented the basis for the plan contributions. Of the total payroll subject to plan contributions, $1,305,530 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 am0l1ized over a closed 17-year period (15 years remaining as of June 30, 2015), except for the additional UAL attributable to the outstanding unfunded actual'ialloss from 2009, which is being am0l1ized over a separate closed period (currently 23 years). Effective with the June 30, 2014 valuation, any new sources of UAL due to actuarial gains and losses or method changes are am0l1ized over a closed 24-year period (23 years remaining as of June 30, 2015, with a 5-year ramp up peripd 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 amoliization 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. 72 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) I D. Pension Liability and Pension Expense The City's net pension liability (NPL) has been determined for the fmancial reporting period ended June 30, 2017 based on the following methodology: The City's NPL as of June 30,2015 was updated to the measurement date of June 30, 2016, using the actual City's plan assets as of June 30,2016 and estimating the change in the City's liabilities between July 1,2015 and June 30, 2016. 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 $167,054,850, or 34.9538% of the total MCERA NPL of $477,930,440 (reference MCERA's GASB 67/68 report as of June 30, 2016). This compares to the previous year's NPL of $142,323,127, or 36.7394% of the total MCERA NPL of $387,385,550 (reference MCERA's GASB 67/68 report as of June 30, 2015). In addition to the reporting of the NPL as of June 30, 201 7, the City reported deferred inflows of $22,096,113 and deferred outflows of $55,004,455 as of the measurement date June 30, 2016. The City reported post-measurement date outflows of $20,003,001 from actual fiscal year 2016- 2017 pension contributions. Deferred inflows include deferred investment gains and adjustments to assumptions based on actual positive results. Deferred inflows have a positive impact on net assets (offsetting the NPL) and will be recognized in future reporting periods. Deferred outflows include deferred investment losses, adjustments to assumptions based on actual negative results, and contributions made after the measurement date. Deferred outflows 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 is $114,143,507. After allocations to the San Rafael Sanitation District, the net impact on the City's Statement of Net Position is $110,519,791. 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. MCERA reported the Plan's pension expense to be $85,290,611, of which $30,799,273, or 34.9538%, is the City's annual pension expense for the reporting year. 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 $20,003,001. 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 below the assumed rate were responsible for the increase in net pension liability and had a corresponding impact on pension expense. 73 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) I The table below provides a summary of the key results during the reporting period: Summary of Results Measurement Date Description 6/30/2016 Net Pension Liability $167,054,850 Deferred Inflows 22,096,113 Deferred Outflows (55,004455) Impact on Net Position before Deferred Outflows from Contributions 134,146,508 Additional Deferred Outflows -Contributions Subsequent to Measurement Date (20,003 001 \ Impact on Statement of Net Position before Allocations 114,143507 Allocation ofNPL to SRSD 5,320,236 Allocation of Deferred Inflows (measurement date) to SRSD 703,700 Allocation of Deferred Outflows (measurement date) to SRSD (1 751 740'1 Impact on Net Position before Allocation of Deferred Outflows from Contributions to SRSD 4,272,196 Allocation of Additional Deferred Outflows (Contributions) to SRSD (648480) Long-Term Receivable from SRSD, due to pension obligations (see Note 4H) 3623716 Impact on Statement of Net Position, net of receivable from SRSD 110,519,791 Pension Expense ($ Amount) 30,799,273 Projection of Total Pension Liability and Net Pension Liability Measurement Date 6/30/2015 $142,323,127 33,817,086 (39,886216) 136,253,997 (19,339,577)_ 116,914,420 4,695,240 1,115,626 (1315846) 4,495,020 (638013) 3857007 113 057,413 19107,673 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, 2016. The beginning of year measurement ofTPL is based on the actuarial valuation as of June 30, 2015. The TPL at the end of the measurement year, June 30, 2016, is also measured as of the valuation date of June 30, 2015, and projected to June 30, 2016. 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, 2015. The FNP at the end of the measurement year, June 30, 2016, is also measured as of the valuation date of June 30, 2015, and projected to June 30,2016. 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. 74 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) I Actuarial assumptions: The total pension liability as of June 30, 2016 was determined by an actuarial valuation as of June 30, 2015, 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 Discount Rate Price Inflation Salary Increases Administrative Expenses Post-Retirement COLA Mortality Rates for Healthy Members and Inactives 7.25 percent per year, net of investment expenses 7.25 percent per year 2.75% per year 3% per year plus merit component based on employee classification and years of service. Administrative expenses in the actuarial valuation are assumed to be $4.635 million for FY 2015-16, 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 2015-16 amounts. 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. Rates of mortality for active members are specified by 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. These assUlllptions constitute a slight change from those used in prior actuarial valuations: The investment rate of return assumption of7.25% coupled with an inflation assumption of3.00%. 75 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I 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 defmes 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, 2016: Asset Class Domestic Equity International Equity Fixed Income Real Estate Real Assets Private Equity Total Target Allocation 32% 22% 23% 8% 7% Long-Term Expected Real Rate of Return 5.10% 5.30% 0.75% 3.75% 3.55% 5.90% Long-Term Expected Rate of Return (with the effect ofintlation) 7.35% 7.55% 3.00% 6.00% 5.80% 8.15% 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 7.25%. 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 (23 years remaining as of the June 30, 2015 actuarial valuation) and an amount necessary to amortize the remaining Unfunded Actuarial Liability as a level percentage of payroll over a closed period (15 years remaining as of the June 30, 2015 actuarial valuation). A change in the discount rate would affect the measurement of the TPL. A lower discount rate reslJlts 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 very 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 71%. A one percent increase in the discount rate decreases the TPL by approximately 11 % and decreases the NPL by approximately 59%. 76 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) The table below shows the sensitivity of the NFL to a one percent decrease and a one percent increase in the discount rate: Sensithity of Net Pension Liability to Changes in Discount Rate Description Total Pension Liability Fiduciary Net Position Net Pension Liability Fiduciary Net Position as a Percentage of the Total Pension Liability 1% Decrease $1,019,941,989 71.9% Discount Rate 7.25% $900,629,287 733,574,437 $167,054,850 81.5% 1% Increase 8.25% $802,536,748 733,574,437 $68,962,311 91.4% 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 defmed benefit retirement pian, and the scheduled recognition of these deferred amounts: Description Differences between expected and actual experience Changes in assumptions Change in proportion Changes in proportion and difference between City contributions and proportionate share of contributions Actual FY 16-17 contributions (post measurement date) Net difference between projected and actual earnings on pension plan investments Deferred Inflows and Outflows Before Allocations Allocation to SRSD Allocation of Deferred Inflows (measurement date) Allocation of Deferred Outflows (measurement date) Net Deferred Inflows and Outflows 77 Deferred Deferred Outflows of Inflows of $5,483,071 $25,298,450 14,629,279 4,966,639 11,646,403 20,003,001 $22,096,113 $703,700 $1,751,740 648,480 $19,695,893 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 9 -PENSION PLANS (Continued) The $20,003,001 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, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year ended June 30 2018 2019 2020 2021 Thereafter Amortization Amount $9,222,804 8,905,878 7,294,038 7,485,622 NOTE 10 -PUBLIC AGENCY RETIREMENT SYSTEM (DEFINED CONTRIBUTION RETIREMENT PLANS) The City contributes to the Public Agency Retirement System (PARS), which administers a defmed contribution retirement plan. A defmed 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. No forfeitures were noted during the current period. During the year, the City and employees each contributed $98,186. The total covered payroll of employees participating in the plan for the year ended June 30, 2017, was $2,618,290. The total payroll for the year was $41,553,242. 78 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I NOTE II-POST-EMPLOYMENT HEALTH CARE BENEFITS At June 30, 2017, net OPEB liability and related deferred outflows of resources and deferred inflows of resources are as follows: Governmental Business-Type Activities Activities Total Deferred outflows of resources: Net difference between projected and actual earnings on plan investments $772,668 $7,332 $780,000 Employer contributions made subsequent to the measurement date 3,442,156 32,844 3,475,000 Total deferred outflows of resources $4,214,824 $40,176 $4,255,000 Net OPEB liabilities: $33,466,002 $318,998 $33,785,000 Total net OPEB liabilities $33,466,002 $318,998 $33,785,000 Plan Description The City provides certain health care benefits for retired employees and their spouses under a cost sharing defmed 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. At June 30,2017, 684 retirees and surviving spouses received post-employment health care benefits. The provisions and benefits of the City's Other Post Employment Benefit Plan, in effect at June 30, 2017, are summarized as follows: Elected Officials, Mid-Management, & I Unrepresented Management All other Bargaining Units Eligibility Retire directly from the City: -Age 50 (age 55 ifhired 2: 7/1/11) with 10 years services (Including reciprocity) OR -30 years service (Miscellaneous), 20 years service (Safety) OR -Age 70 -Disability Retirement Benefit Hired < 111109 Full premium/cap I Hired < 1/1110 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 I None Hired> 4/1/07 None Other No DentaL Vision, or Life Benefrrs 79 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 11-POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) Membership in the plan consisted of the following at June 30,2017, the date of the latest actuarial valuation: Active plan members Inactive employees or beneficiaries currently receiving benefit payments Inactive employees entitled to but not yet receiving benefit payments Total Funding Policy and Actuarial Assumptions 336 ° 348 684 During the fiscal year ended June 30, 2017, the City elected to early implement GASB 75, ''Accounting and Financial Reporting For Postemployment Benefits Other Than Pensions". This Statement replaces the requirements of Statement No. 45 and establishes new accounting and fmancial reporting requirements for OPEB plans. As a result, the funding policy and actuarial assumptions presented include elements of both the historical approach and the revised approach under GASB 75. Under GASB 45, the City's funding policy requires a minimum annual contribution equivalent to the annual required contribution (ARC). Under GASB 75, this changes to an actuarial determined contribution which is made up of additional components including deferred outflows of resources and deferred inflows of resources. The ARC was determined as part of a June 30, 2015 actuarial valuation using the entry age normal actuarial cost method. This is a projected benefit cost method, which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The actuarial assumptions included (a) 4.5% investment rate of return and (b) 2.75% of general inflation increase, and (c) a healthcare trend of declining annual increases ranging from 6.7% in 2015 to 4.5% for the years starting 2021. 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. Projections of benefits for fmancial reporting purposes are based on the substantive plan (the plan as understood by the City and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the City and plan members at that point. The actuarial methods and assumptions used include techniques that smooth the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Actuarial calculations reflect a long-term perspective and actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to revision at least biennially as results are compared to past expectations and new estimates are made about the future. The City's OPEB unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll using a 19- year fixed (closed) period for June 30,2016 in its June 30, 2015 actuarial valuation. 80 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 11-POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2014 through June 30, 2015. 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: Target Asset Class Allocation Public Equity 57% Fixed Income 27% TIPS 5% Commodities 3% REITs 8% Total 100% Assumed Long-Term Rate of Intlation Assumed Long-Term Investment Expenses Expected Long-Term Net Rate of Return Discount Rate Long-Term Expected Real Rate of Return 5.96% 2.65% 2.50% 5.20% 8.13% 2.75% nla 7.28% 7.25% Long-Term Expected Rate of Return (with the effect of inflation} 8.71% 5.40% 5.25% 7.95% 10.88% The Expected Long-Term Rate of Return is provided by CalPERS' Strategic Asset Allocation Overview in August 2011 -Strategy 1. Discount Rate The discount rate used to measure the total OPEB liability was 7.25 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. 81 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I NOTE 11-POST-EMPLOYMENTHEALTH CARE BENEFITS (Continued) Change in Net OPEB Liability TotalOPEB Liability Plan Fiduciary Net Position NetOPEB Liability/(As set) Balance at June 30,2015 (Valuation Date) Changes Recognized for the Measurement Period: Service Cost Interest on the total OPEB liability Changes in benefrt terms Difference between expected and actual experience Changes of assumptions ContrIbutions from the employer Net investment income Administrative expenses Benefrt payments and refunds Net Changes during July 1,2015 to June 30,2016 Balance at June 30, 2016 (Measurement Date) $48,226,000 766,000 3,447,000 $15,608,000 766,000 3,447,000 (2,896,000) (157,000) 7,000 The benefit payments and refunds includes implied subsidy benefit payments in the amount of $702,000. 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 I-percentage-point lower (6.25 percent) or I-percentage-point higher (8.25 percent) than the current discount rate: Plan's Net OPEB Liability/(Asset) Discount Rate ~1 % (6.25%) $39,500,000 Current Discount Rate (7.250/0) $33,785,000 Discount Rate +1 %) (8.25%) Sensitivity of the net OPEB liability to changes in the health care cost trend rates Plan's Net OPEB Liability/(Asset) Discount Rate ~1 % $30,786,000 Healthcare Cost Trend Rates $33,785,000 Discount Rate +1 % Detailed infonnation about the OPEB plan's fiduciary net position is available in the separately issued plan financial report. 82 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 11-POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources related to OPEB Components ofOPEB Expense for fiscal year 2016-2017 were as follows: Service Cost Interest on Total OPEB Liability Projected earning on investments Employee contributions Administrative expense Change in benefits Recognition of deferred outflows/inflows: Experience Assumptions Asset Returns OPEB Expense $766,000 3,447,000 (1,132,000) 7,000 $3,283,000 Components of deferred outflows of resources and deferred inflows of resources related to OPEB at June 30, 2017 were as follows: Net difference between projected and actual earnings on OPEB plan investments Employer contributions made subsequent to the measurement date Total Deferred Outflows Deferred Inflows of Resources of Resources $780,000 3,475,000 $4,255,000 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. The expected average remaining service life for the 2015-16 measurement period is 4.0 years. $3,475,000 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, 2018. 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 Ended June 30 2018 2019 2020 2021 Thereafter Deferred Outflows Deferred Inflows of Resources of Resources 83 $195,000 195,000 195,000 195,000 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 11 -POST -El\1PLOYMENT HEALTH CARE BENEFITS (Continued) The table below provides a summary of the key results during this reporting period. Summary of Results Measurement Date Description June 30, 2016 NetOPEB Liability $33,785,000 Deferred Inflows - Deferred Outflows (780,000) Impact on Net Position before deferred contributions 33,005,000 Additional Deferred Outflows -Contributions subsequent to measurement date (3,475,000) Impact on Statement of Net Position before Allocations 29,530,000 Allocation ofNOL to SRSD 1,034,395 Allocation of Deferred Inflows (measurement date) to SRSD - Allocation of Deferred Outflows (measurement date) to SRSD (23,881) Impact on Net Position before deferred contributions to SRSD 1,010,514 Allocation of Additional Deferred Outflows (contributions) to SRSD (106,394) Long-Term Receivable from SRSD, due to OPEB obligations (see Note 4H) 904,120 Impact on Statement of Net Positions, net of receivable from SRSD 28,625,880 OPEB Expense ($ Amount) 3,283,000 Covered Payroll ($ Amount) 31,106,000 Measurement Date June 30,2015 $32,618,000 - - 32,618,000 - 32,618,000 1,002,000 - - 1,002,000 - 1,002,000 31,616,000 2,148,000 32,906,000 Actuarial data is comprised from a variety of complex inputs. It is therefore subject to change between measurement dates. As a result, the Net OPEB Liability used to calculate the SRSD allocation percentage in fiscal year ended June 30, 2016 ($32,727,000) varies slightly from the figure reported in the actuarial report dated June 30, 2017 ($32,618,000) by $109,000. I 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. 84 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 12 -JOINTLY GOVERNED ORGANIZATIONS (Continued) 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 consortiallevel 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 16.44% or $221,318 for the year ended June 30, 2017. 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 MSLAJP A. MGSA services now include street light maintenance, abandoned vehicle abatement, taxicab regulation and administrative responsibility for MarinMap. The City's contribution to MGSA was $3,134 for the year ended June 30, 2017. Financial statements of the MGSA can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. 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, fmance, implement, manage, own, and operate a County-wide public safety and emergency radio system. The Governing Board consists of one representative from each member. On February 1, 1999, the Authority issued the 1999 Revenue Bonds in the amount of $26,940,000 with interest rates ranging from 4.75% to 5.01%, maturing on August 15, 2016, to finance the acquisition and installation of the system. 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 operation 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 $314,161 of the Authority's operation and debt service for the fiscal year ended June 30, 2017. 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. 85 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 12 -JOINTLY GOVERNED ORGANIZATIONS (Continued) 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 menlber 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 $32,134 for the year ended June 30, 2017. Financial statements of the Agency can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. 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 fmance, 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 $17,849 for the year ended June 30, 2017. 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 (12.5%) clean water grants and from local shares (12.0/0 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. 86 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 12 -JOINTLY GOVERNED ORGANIZATIONS (Continued) I The financial statements of the Agency are available at the CMSA office. Condensed financial information for the Agency is presented below for June 30, 2016 and 2015, the most recent information available. Total assets Deferred outflows of resources Total liabilities Deferred inlows of resources Net position Total revenues Total expenses Total contributions and adjustments Prior period adjustment -GASB 68 Change in net position I NOTE 13 -RISK MANAGEMENT A. City 2016 $106,391,299 2,092,186 (60,370,523) (2,487,504) $45,625,458 $16,952,527 (16,834,929) 162,705 $280,303 2015 $109,050,874 936,613 (62,387,928) (2,254,404) $45,345,155 $17,873,113 (16,220,247) 415,845 (7,278,030) (5,209,319) The City is exposed to various exposures 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 Fundto account for and fmance 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 $119,773,465. 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. During the fiscal year ended June 30, 2017, the City contributed $278,096 for coverage during the current year and received a refund of $49,910 of prior year excess contributions. Five years after settlement of all claims for a program year, CJPRMA retroactively adjusts 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. 87 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I NOTE 13 -RISK MANAGEMENT (Continued) I 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. 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 ** 2017 Balance, beginning of year $2,543,655 $6,044,911 $8,588,566 Current year claims and changes in estimates 696,685 1,181,591 1,878,276 Claims paid (658,811) (1,060,693) (1,719,504) Balance, end of year $2,581,529 $6,165,809 $8,747,338 Due in one year $1,226,194 $1,427,094 $2,653,288 Due in more than one year 1,355,335 4,738,715 6,094,050 Total claim liabilities $2,581,529 $6,165,809 $8,747,338 * Liability based on an actuarial valuation as of December 31,2015, extrapolated to June 30, 2016 * * Liability based on an actuarial valuation as of February 29,2016, extrapolated to June 30, 2016 The claims settlements have not exceeded insurance coverage for the past three years. B. District 2016 $7,319,418 3,111,209 (1,842,061) $8,588,566 $2,129,125 6,459,441 $8,588,566 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. 88 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 13 -RISK MANAGEMENT (Continued) I 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. The following summarizes active insurance policies as of June 30, 2017 together with coverage limits for each insured event: Insurance Program Limits Coverage Description CSRMA -Allied Wodd Ins. $3,000,000 GenlMgt liability -aggregate CSRMA -Allied Wodd Ins. $1,000,000 GenlMgt liability -occurrence CSRMA -Allied Wodd Ins. $1,000,000 Auto liability - accident CSRMA -Allied Wodd Ins. $4,000,000 Excess liability CSRMA -Public Entity Property Insurance Program (P .E.P .I.P.) $12,157,866 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 fmancial statements of CSRMA are available at their office: 100 Pine Street, 11th Floor, San Francisco, CA 94111. Condensed fmancial information for CSRMA is presented below for the years ended June 30, 2016 and 2015 (latest information available). 2016 2015 Assets $28,336,567 $27,418,098 Liabilities (16,735,609) (16,714,638) Net assets $11,600,958 $10,703,460 Revenues $11,843,583 $10,895,632 Expenses (10,946,085) (11,157,866) Increase (decrease) in net assets $897,498 ($262,234) 89 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30,2017 I NOTE 14 -COl\1MITMENTS AND CONTINGENCIES A. City Litigation The City is subj ect to litigation arising in the normal course of business. In the opinion of the City Attorney there is no pending litigation which is likely to have a material adverse effect on the fmancial position of the City as of June 30, 2017. Major Contracts In April 2017, the City entered into a construction contract for $19,940,000 for the major construction and renovation of two fire stations. The contract amount was reduced shortly thereafter to its current sum of $19,098,834. The funding for this project comes from a combination of funds set aside in the General Fund and future General Fund revenues attributable to the Measure E Transactions and Use Tax. It is highly likely that some form of debt financing will be required during fiscal year 2017-2018 to meet the cashflow requirements of this project. B. District As of June 30, 2017, SRSD had several contracts for sewer improvement projects with remaining obligations of approximately $1,300,000, with the majority expected to be completed within the 2017118 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 AB 1484 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 AB 1484 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). 90 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 NOTE 15 -SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCy) ACTIVITIES (Continued) 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. 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 tum will use the amounts deposited into their respective funds for making payments on the 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. 91 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 NOTE 15 -SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCy) ACTIVITIES (Continued) 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. 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 anyone 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 Proj ect 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, 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 anyone 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. 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 $18.9 million in remaining debt service on the Bonds, which is scheduled to occur in 2023. For fiscal year June 30, 2017, tax increment revenues amounted to $4.2 million which was used to make the debt service payments of $3.6 million. 92 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 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, 2017: San Rafael Redevelopment Agency 1999 Tax Allocation Bonds Capital Appreciation Bonds Authorized and Issued 5.58%-5.6%, due 12/112022 $2,389,004 2002 Tax Allocation Refunding Bonds 2.00%-5.25%, due 12/1/2021 25,020,000 2009 Tax Allocation Refunding Bonds 3.00%-5.00%, due 12/112022 14,660,000 Add: deferred bond premium costs Total Successor Agency Long-tenn Debt Debt Service Requirements Balance $6,074,097 $344,411 6,060,000 8,905,000 Annual debt service requirements are shown below: For the Year Ended June 30 2018 2019 2020 2021 2022 2023 Totals Reconciliation of long-term debt: Less unaccreted discount Add deferred bond premium costs 93 $1,830,000 1,100,000 Balance June 30,2017 $6,418,508 4,230,000 7,805,000 479,162 $18,932,670 Current Portion $1,920,000 1,160,000 $3,080,000 Governmental Activities Principal Interest $3,080,000 $484,026 3,229,081 370,676 3,309,082 297,019 3,389,231 214,175 3,404,749 120,819 3,586,374 $19,998,517 ($1,545,009) 479,162 $18,932,670 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 NOTE 15 -SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCy) ACTIVITIES (Continued) 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. On February 26, 2013, the Oversight Board approved the inclusion of $502,000, representing the unfunded OPEB (retiree medical) liability attributable to former Redevelopment Agency employees; the repayment is being made in nine equal, annual installments. On March 27,2017, the California State Department of Finance notified the Successor Agency of its determination that Other Post Employment Benefit Obligations (OPEB) would not be allowed. The last approved payment of $55,778, which was received in June 2017, brought the remaining balance to $298,888. This amount was removed from the schedule of obligations of the Successor Agency as of June 30,2017. The following table summarizes the activity for the fiscal year ended June 30, 2017: Approved Balance Amount June 30, 2016 Unfunded Pension Liability $1,904,431 $952,216 Unfunded OPEB Obligation 502,000 354,666 Total Long-Term Obligations $1,306,882 Annual repayment requirements are shown below: E. Commitment and Contingencies For the Year Ended June 30 2018 2019 2020 2021 Totals State Approval of Enforceable Obligation Additions Principal $190,443 190,443 190,443 190,444 $761,773 Retirements $190,443 55,778 $246,221 Debt Cancelled $298,888 $298,888 Balance June 30, 2017 $761,773 $761,773 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, 2017, the Successor Agency had prepared ten 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. 94 CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2017 I NOTE 16-SUBSEQUENTEVENT Energy Efficiency Loan and Master Service Agreement On September 5, 2017, the City Council authorized a loan agreement with the California Energy Commission for various energy efficient system upgrades to City facilities and street lights. At the same time, the City Council approved a master services agreement with Pacific Gas and Electric Company to perform these system upgrades in a total amount not to exceed $1,178,813. The loan terms provide for annual interest of 1 % on the outstanding balance. Disbursement of the loan is expected in July 2019, with semi-annual repayment beginning in December 2020 and terminating in December 2027. The planned source of repayment will be energy cost savings that result from the improvements. 95 REQUIRED SUPPLEMENTARY INFORMATION CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 Schedule of the City's Proportionate Share oftbe Net Pension liability Last 10 years'" 6/30/2015 6/30/2016 City's proportionate share Proportionate share of total pension liability Proportionate share of fiduciary net position Proportionate share of the net pension liability Plan fiduciruy net position as a percentage ofthe total pension liability Covered payroll Net pension liability as a percentage of covered payroll 30.0453% $677,753,565 89.04% $31,429,178 236.26% '" -The fiscal year ended June 30,2015 was the first year of implementation, therefore only three years are shown 99 36.7394% $907,195,058 764,871,931 $142,323,127 84.31% $31,106,414 457.54% 6/30/2017 34.9538% $900,629,287 81.45% $32,126,272 519.99% CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 Schedule of Contributions Defined Benefit Pension Last 10 years (subject to available information: first year ofimplementation was Fiscal Year ended June 30, 2015) Contractually required contribution Contributions in Relation to the Contractually required contribution Contribution Deficiencyl (Excess) Covered payroll Contnbutions as a percentage of covered payroll Notes to Schedule Valuation Date 1 Timing $ $ 2015 17,802,358 17,802,358 31,106,414 57.23% 6/30/2013 (for contributions made in FY2014-2015) Key Methods and Assumptions Used to Detennine Contribution Rates (for FY2014-15): Actuarial cost method Amortization method Remaining Amortization period Asset valuation method Inflation Salary increases Investment Rate ofRetum Retirement Age Healthy Mortality Disabled Mortality Entry Age Normal Cost Method Level percentage of payroll with separate period for Extraordinary Actuarial Loss from2009 Unfunded liability -17 years / Extraordinary Actuarial Loss -25 years 5-year smoothed market, 8oolo /12oolo corridor around market 3.25% 3.25% plus merit component based on employee classification and years of service 7.5oolo Classic Tiers: Safety -50, Miscellaneous -55; PEPRA Tiers: Safety -57, Miscellaneous -62 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 Sex distinct RP-2000 Combined Mortality projected to 2010 using Scale AA with ages set forward three years for all members 100 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 Schedule of Contributions Defined Benefit Pension Last 10 years (subject to available infonnation: first year of impleme ntation was Fiscal Year ended June 30,2015) (Continued) Contractually required contribution Contributions in Relation to the Contractually required contribution Contribution Deficiency 1 (Exces s) Covered payroll Contributions as a percentage of covered payroll Notes to Schedule Valuation Date 1 Timing $ $ $ 2016 19,339,577 19,339,577 32,126,272 60.20% 6/30/2014 (for contributions made in FY2015-2016) Key Methods and Assumptions Used to Detennine Contribution Rates (for FY2015·16): Actuarial cost method Amortization method Remaining Amortization period Asset valuation method Inflation Salary increases Investment Rate ofRetum Retirement Age Healthy Mortality Disabled Mortality Entry Age Normal Cost Method Level percentage of payroll with separate period for Extraordinary Actuarial Loss from 2009 Unfunded liability -16 years 1 Extraordinary Actuarial Loss -24 years 5-year smoothed market, 80% 1120% corridor around market 3.25% 3.25% plus merit component based on employee classification and years ofservice 7.25% Classic Tiers: Safety -50, Miscellaneous -55; PEPRA Tiers: Safety -57, Miscellaneous -62 CalPERS 2014 Pre-Retirement Non-Industrial Death rates (plus Duty-Related Death rates for Safety Members), with the 20-year static projection used by CaIPERS replaced by generational improvements from a base year of 2009 using Scale MP-2014 CalPERS 2014 Disability Mortality rates (Non-Industrial rates for Miscellaneous members and Industrial Disability rates for Safety members), adjusted by 90010 for Males and Females (Miscellaneous and Safety) with the 20-year static projection used by CaIPERS replaced by generational improvements from a base year of 2009 using Scale MP-2014 101 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 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) Contractually required contribution Contributions in Relation to the Contractually required contribution Contribution Deficiencyl (Excess) Covered payroll Contributions as a percentage of covered payroll Notes to Schedule Valuation Date 1 Timing $ $ $ 2017 20,003,001 20,003,001 32,885,135 60.83% 6/30/2015 (for contributions made in FY2016-2017) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2016-17): Actuarial cost method Amortization method Remaining Amortization period Asset valuation method Inflation Salary increases Investment Rate of Return Retirement Age Healthy Mortality Disabled Mortality Entry Age Normal Cost 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 of6/30114), and additional layers for unexpected changes in UAL after 6/30113 (24 years for gains and losses with a 5~year phase-inlout and 22 years for assumption changes with a 3-year phase-inlout). 19 years remaining as of June 30,2016 Market Value 2.75% per year 3.00% plus merit component based on employee classification and years of service 7.25% Classic Tiers: Safety -50, Miscellaneous -55; PEPRA Tiers: Safety -57, Miscellaneous -62 Sex distinct RP-2000 combined mortality prqiected to 2010 using Scale AA with ages set back one year for male members/two years for female members Sex distinct RP-2000 combined mortality prqiected to 2010 using Scale AA with ages set forward three years for all members 102 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) Measurement period TotalOPEB liability Service cost Interest Differences between expected and actual experience Assumption changes Benefit payments, including refimds of employee contnbutions Net change in total OPEB liability TotalOPEB liability -beginning TotalOPEB liability -ending (a) OPEB fiduciary net position Contnbutions -employer Net investment income Benefit payments, including refimds of employee contnbutions Administrative expense Net change in plan fiduciary net position Plan fiduciary net position -beginning Plan fiduciary net position -ending (b) Plan net OPEB liability -ending (a) -(b) Plan fiduciary net position as a percentage of the total OPEB liability Covered-employee payroll Plan net OPEB liability as a percentage ofcovered-employee payroll $ $ Historical information is required only for the measurement periods for which GASB 75 is applicable. 103 2015-16 766,000 3,447,000 (2,896,000) 1,317,000 2,896,000 157,000 (2,896,000) 150,000 CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2017 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) Actuarially determined contribution Contributions in relation to the actuarially determined contribution Contribution deficiency (excess) Covered-employee payroll Contributions as a percentage of covered-employee payroll $ $ $ 2016-17 3,450,000 {3,475,000} {25,000} 32,885,000 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 Actuarial Cost Method Amortization Method Remaining Amortization Asset Valuation Method Discount Rate Contribution Policy General Inflation Mortality, Retirement, Disability, Termination Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Medical Trend Healthcare participation for future retirees Cap Increases June 30, 2015 Entry Age Normal, Level Percentage of Payroll Level dollar amount, over approximate lO-year period 19 years remaining as ofJune 30, 2016 Investment gains and losses spread over 5-year rolling period 7.25% City contributes full ADC 2.75% per annum Same as June 30, 2015 actuarial valuation Mortality projected fully generational with Scale MP-14, modified to converge to ultimate improvement rates in 2022 Same as discount rate -expected City contributions projected to keep sufficient plan assets to pay all benefits from trust Aggregate - 3 % Merit -6/30/14 MCERA assumptions Non-Medicare -6.5% for 2017, decreasing 0.5% per year to an ultin rate of 4.50% for 2021 and Medicare -6.7% for 2017, decreasing to ultimate rate of 4.5% for 2021 and later years Capped benefit: 100% currently covered, 80% currently waived PEMHCA minimum -60% None 104 GENERAL FUND AND MAJOR SPECIAL REVENUE FUND BUDGET-TO-ACTUAL STATEMENTS GASB Statement No. 34 dictates that budget-to-actual infonnation in the basic [mancial 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. 105 CITY OF SAN RAFAEL GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES B1JDGET AND ACTUAL REVENUES Taxes and special assessments Licenses and permits Fines and forfeitures Use of money and properties Intergovernmental Charges for services Other revenue Total Revenues EXPENDITURES Current: General government Public safety Public works and parks Community development Culture and recreation Capital outlay Debt service: Principal Interest and fiscal charges Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, El\ID OF YEAR FOR THE YEAR ENDED JUNE 30,2017 Budgeted Amounts Actual Original Final Amounts $65,690,000 $64,563,000 $64,242,440 2,361,000 2,511,000 2,559,841 483,000 448,000 400,283 288,000 288,000 229,791 3,104,005 3,042,000 2,767,092 2,550,000 2,869,000 2,459,680 466,000 396,000 706,657 74,942,005 74,117,000 73,365,784 9,512,718 10,941,401 10,190,580 41,610,680 40,958,109 40,844,246 11,144,863 10,943,588 11,201,655 4,013,962 4,154,885 3,759,564 3,076,042 3,076,042 3,077,435 90,690 175,172 175,172 175,172 276,513 276,513 271,263 69,900,640 70,525,710 69,519,915 5,041,365 3,591,290 3,845,869 1,212,520 1,382,303 1,382,303 (5,976,091 ) (7,213,543 2 (7,213,543 2 (4,763,571 2 (5,831,240 2 (5,831,240 2 $277,794 {$2,239,950 2 (1,985,371) 18,689,803 $16,704,432 106 Variance with Final Budget Positive O~egative) ($320,560) 48,841 (47,717) (58,209) (274,908) (409,320) 310,657 (751,216) 750,821 113,863 (258,067) 395,321 (1,393) 5,250 1,005,795 254,579 $254,579 CITY OF SAN RAFAEL TRAFFIC AND HOUSING MITIGATION SPECIAL REVENUE FlJND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 REVENUES Use of money and properties Charges for services Total Revenues EXPENDITURES Current: General government Capital improvement/special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers In Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR Budgeted Amounts Original Final $36,400 $36,400 600,000 715,000 636,400 751,400 80,000 80,000 4,570,733 80,000 4,650,733 556,400 (3,899,333) 228,400 228,400 $556,400 ($3,670,933) 107 Actual Amounts $31,267 204,210 235,477 22,450 1,745,154 1,767,604 (1,532,127) 228,400 228,400 (1,303,727) 10,439,157 $9,135,430 Variance with Final Budget Positive (Negative) ($5,133) (510,790) (515,923) 57,550 2,825,579 2,883,129 2,367,206 $2,367,206 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, 2017 REVENUES Use of money and properties Intergovernmental Charges for services Other revenue Total Revenues EXPENDITURES Current: General government Public works and parks Capital outlay Capital improvement/special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR Budgeted Amounts Original Final $23,000 $23,000 1,903,385 4,028,385 1,043,600 1,043,600 5,094,985 43,676 43,676 3,109,442 3,781,238 5,508,565 309,102 481,702 3,462,220 9,815,181 (492,235) (4,720,196) 325,000 (400,000) (628,400) (303,400) ($5,023,596) 108 Actual Amounts $24,527 3,728,982 1,149,022 62,314 4,964,845 2,643,991 1,641,317 373,833 325,000 (628,400) (303,400) 70,433 6,653,263 $6,723,696 Variance with Final Budget Positive $1,527 (299,403) 105,422 (130,140) 43,676 1,137,247 3,867,248 175,998 5,224,169 5,094,029 $5,094,029 SUPPLEMENTARY INFORMATION 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, 2017 REVENUES Other revenue Total Revenues EXPENDITURES Capital improvement/special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Total Other Financing Sources (Uses) Net Change in Fund Balances FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR Budgeted Amounts Final $4,040,000 $6,052,841 4,040,000 6,052,841 (4,040,000) (6,052,841) 4,040,000 4,040,000 5,417,454 ($635,387) 110 Actual Amounts (5,417,454) 5,417,454 5,417,454 Variance with Final Budget Positive (Negative) $635,387 635,387 635,387 $635,387 NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Recreation Revolving Fund -Established to administer the Community Services Department's program and facility rental charge and a.ccounts 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 adj acent 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 ten sites throughout the City. Loch Lomond Assessment District Fund -Established to provide maintenance for stormwater and geotechnical mitigation facilities. A Mello Roos District was formed to fund this maintenance. 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. Pt. San Pedro Maintenance Portion Special Revenue Fund -Established to account for ongoing maintenance needs within the Pt. San Pedro assessment district. 111 NON· MAJOR GOVERNMENTAL FUNDS (Continued) 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. 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 ValleylLucas 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. 112 ASSETS Cash and investments Restricted cash and investments Receivables: Accounts Taxes Grants Interest Loans Prepaids Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Deposits payable Developer deposits payable Deferred revenue Total Liabilities Fund Balances: Restricted Committed Assigned Total Fund Balances CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30,2017 SPECIAL REVENUE FUNDS Baypoint Lagoons Household Recreation Assessment Hazmat Revolving District Facility Childcare $556,856 $238,169 $294,058 $1,374,316 169,289 296,864 157 40,594 472 3,670 $726,617 $238,326 $590,922 $1,418,580 $240,937 $118,443 $48,436 159,114 367,589 608,526 277,557 48,436 118,091 $238,326 313,365 1,370,144 118,091 238,326 313,365 1,370,144 Total Liabilities and Fund Balances $726,617 $238,326 $590,922 $1,418,580 114 Loch Lomond Assessment District $701,449 97 $701,546 $41,280 41,280 660,266 660,266 $701,546 Library Library Assessment $641,059 $687,806 432 $641,491 $687,806 $9,426 $20,234 9,426 20,234 632,065 667,572 632,065 667,572 $641,491 $687,806 SPECIAL REVENUE FUNDS Public Safety $138,261 21,000 $159,261 $761 761 $158,500 158,500 $159,261 Stormwater $212,794 17,829 $230,623 $41,536 41,536 189,087 189,087 $230,623 115 Development Services $703,392 $703,392 $12,530 6,076 1,500 20,106 683,286 683,286 $703,392 Parkland Grants Dedication $702,855 $457,538 53,152 $756,007 $457,538 $2,886 $8,350 2,886 8,350 753,121 449,188 753,121 449,188 $756,007 $457,538 (Continued) ASSETS Cash and investments Restricted cash and investments Receivables: Accounts Taxes Grants Interest Loans Prep aids Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Deposits payable Developer deposits payable Deferred revenue Total Liabilities Fund Balances: Restricted Committed Assigned Total Fund Balances Total Liabilities and Fund Balances CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2017 SPECIAL REVENUE FUNDS Emergency Pt. San Pedro Medical Business Maintenance Services Improvement Portion $1,494,455 $22,958 $153,108 359,679 25,903 459 $1,880,037 $22,958 $153,567 $135,507 $22,958 $2,284 135,507 22,958 2,284 1,744,530 151,283 1,744,530 151,283 $1,880,037 $22,958 $153,567 116 Low and Moderate Income Measure A Housing Open Space $679,950 $199,727 218,273 334 230,066 $910,350 $418,000 $48,765 48,765 910,350 369,235 910,350 369,235 $910,350 $418,000 DEBT SERVICE FUNDS 1997 Peacock Gap Mariposa Financing Assessment Assessment Authority District District Revenue Bonds $2,875 $16,573 $147,797 $2,875 $16,573 $147,797 $2,875 $16,573 $147,797 2,875 16,573 147,797 $2,875 $16,573 $147,797 Capital Improvement $2,864,858 625,123 29,835 1,658 $3,521,474 $57,702 57,702 3,463,772 3,463,772 $3,521,474 117 CAP IT AL PROJECTS FUNDS Park Bedroom Assessment Capital Tax Districts Projects $76,845 $223,742 $27,936 77,038 $76,845 $300,780 $27,936 $76,845 $300,780 $27,936 76,845 300,780 27,936 $76,845 $300,780 $27,936 (Continued) ASSETS Cash and investments Restricted cash and investments Receivables: Accounts Taxes Grants Interest Loans Prepaids Total Assets LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Deposits payable Developer deposits payable Deferred revenue Total Liabilities Fund Balances: Restricted Committed Assigned Total Fund Balances CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30,2017 CAPITAL PROJECTS FUNDS Total Non-Major Open Governmental $115,103 $115,103 115,103 Funds $12,734,480 702,161 846,832 262,718 123,581 1,992 230,066 4,574 $14,906,404 $812,035 6,076 160,614 367,589 1,346,314 9,953,279 3,491,708 1 13,560,090 Total Liabilities and Fund Balances $115,103 $14,906,404 118 CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2017 SPECIAL REVENUE FUNDS Baypoint Lagoons Household Recreation Assessment Hazmat Revolving District Facility Childcare REVENUES Taxes and special assessments $25,368 Use of money and properties $1,477 760 $180 $4,177 Intergovernmental 10,097 329,232 Charges for services 3,129,356 156,434 3,724,353 Other revenue 16,149 1,125 11,939 Total Revenues 3,157,079 26,128 157,739 4,069,701 EXPENDITURES Current: General government Public safety 93,013 Public works and parks 5,722 Culture and recreation 4,798,373 3,853,401 Capital outlay Capital improvement/special projects 16,994 Total Expenditures 4,815,367 5,722 93,013 3,853,401 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,658,288) 20,406 64,726 216,300 OTHER FINANCING SOURCES (USES) Transfers in 1,750,000 Transfers out Total Other Financing Sources (Uses) 1,750,000 Net Change in Fund Balances 91,712 20,406 64,726 216,300 Fund Balance, Beginning 26,379 217,920 248,639 1,153,844 Fund Balance, Ending $118,091 $238,326 $313,365 $1,370,144 120 Loch Lomond Assessment District $15,606 2,334 17,940 48,618 48,618 (30,678) (30,678) 690,944 $660,266 SPECIAL REVENUE FUNDS Library Public Development Parkland Library Assessment Safety Stormwater Services Grants Dedication $868,481 $2,135 2,302 $130 $548 $33,615 $1,592 $1,620 1,000 89,053 1,002,826 7,067 1,860 903,910 39,360 3,020 74,762 20,228 23,106 1,500 13,222 870,783 165,805 924,686 33,615 1,027,524 42,480 5,997 26,606 182,778 276,387 582,235 782,590 30,072 10,049 907,470 6,996 4,936 908,171 92,704 17,045 907,470 281,323 1,696,758 26,606 765,013 122,776 (3,823) (36,687) (115,518) (772,072) 7,009 262,511 (80,296) 100,000 46,089 37,761 (325,000) (169,783) 100,000 (325,000) (123,694) 37,761 (3,823) (36,687) (15,518) (772,072) (317,991) 138,817 (42,535) 635,888 704,259 174,018 961,159 1,001,277 614,304 491,723 $632,065 $667,572 $158,500 $189,087 $683,286 $753,121 $449,188 (Continued) 121 CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2017 SPECIAL REVENUE FUNDS Low and Emergency Pt. San Pedro -Moderate Medical Business Maintenance Income Improvement Portion REVENUES Taxes and special assessments $5,485,637 $74,084 Use of money and properties 7,729 508 $2,445 Intergovernmental 121,517 Charges for services 1,506,437 Other revenue 220,984 59,375 Total Revenues 74,592 EXPENDITURES Current: General government 47,978 81,027 Public safety 7,114,323 Public works and parks 89,980 Culture and recreation Capital outlay Capital improvement/special projects Total Expenditures 7,162,301 89,980 81,027 EXCESS (DEFICIENCy) OF REVENUES OVER (UNDER) EXPENDITURES 180,003 (15,388) (19,207) OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances 180,003 (15,388) (19,207) Fund Balance, Beginning 1,564,527 166,671 929,557 Fund Balance, Ending $1,744,530 $151,283 $910,350 122 Measure A Open Space $437,170 973 438,143 107,949 205,179 125,015 6,979 362,256 DEBT SERVICE FUl'IDS CAPITAL PROJECTS FUl'IDS 1997 Peacock Gap Mariposa Financing Park Assessment Assessment Authority Capital Bedroom Assessment Capital District District Revenue Bonds Improvement Tax Districts Projects $18,105 $493 $363 $13,357 143,472 $5,507 493 156,829 18,105 363 5,507 459,609 10,440 459,609 10,440 493 (302,780) 18,105 363 (4,933) 493 (302,780) 18,105 363 ( 4,933) $2,875 $16,573 147,304 3,766,552 58,740 300,417 32,869 $2,875 $16,573 $147,797 $3,463,772 $76,845 $300,780 $27,936 (Continued) 123 CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE REVENUES Taxes and special assessments Use of money and properties Intergovernmental Charges for services Other revenue Total Revenues EXPENDITURES Current: General government Public safety Public works and parks Culture and recreation Capital outlay Capital improvement/special projects Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balance, Beginning Fund Balance, Ending NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2017 CAPITAL PROJECTS FUNDS Total Non-Major Open Governmental Space Funds $383 383 4,463 4,463 (4,080) (4,080) 119,183 $115,103 124 $6,924,451 63,764 1,567,082 9,612,249 437,695 18,605,241 344,386 8,173,907 1,162,161 9,569,293 459,609 1,044,704 20,754,060 (2,148,819) 1,933,850 (612,819) 1,321,031 (827,788) 14,387,878 $13,560,090 CITY OF SAN RAFAEL BlJDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2017 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 $26,309 $1,477 ($24,832) 700 760 60 Intergovernmental 10,000 10,097 97 Charges for services 2,962,330 3,129,356 167,026 Other revenue 2,750 16,149 13,399 Total Revenues 3,001,389 3,157,079 155,690 26,200 26,128 (72 2 EXPENDITURES Current: General government Public safety Public works and parks 6,000 5,722 278 Culture and recreation 4,809,085 4,798,373 10,712 Capital outlay Capital improvement/special projects 10,000 16,994 (6,994) Total Expenditures 4,819,085 4,815,367 3,718 6,000 5,722 278 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,817,696) (1,658,288) 159,408 20,200 20,406 206 OTHER FINANCING SOURCES (USES) Transfers in 1,750,000 1,750,000 Transfers out Total Other Financing Sources (Uses) 1,750,000 1,750,000 FUND BALANCES, BEGINNING OF YEAR AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES ($67,696) 91,712 $159,408 $20,200 20,406 $206 FUND BALANCES, BEGINNING OF YEAR 26,379 217,920 FUND BALANCES, END OF YEAR $118,091 $238,326 126 SPECIAL REVENUE FUNDS Household Hazmat Facility Childcare Loch Lomond Assessment District Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual Actual (Negative) Actual (Negative) $15,610 $15,606 ($4) $550 $180 ($370) $2,000 $4,177 $2,177 2,000 2,334 334 / 312,200 329,232 17,032 156,515 156,434 (81) 3,775,000 3,724,353 (50,647) 1,125 1,125 11,939 11,939 157,065 157,739 674 4,089,200 4,069,701 (19,499) 330 169,361 93,013 76,348 50,054 48,618 1,436 4,099,128 3,853,401 245,727 169,361 4,099,128 3,853,401 50,054 48,618 (12,296) 64,726 77,022 (9,928) __ 2_1--,6';....30_0 ___ ---''---_ (32,444) (30,678) ($12,296) 64,726 $77,022 ($9,928) 216,300 ($32,444) (30,678) 248,639 1,153,844 690,944 $313,365 $1,370,144 $660,266 (Continued) 127 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, 2017 SPECIAL REVENUE FUNDS Library Library Assessment Variance Variance Final Positive Final Positive Actual (Negative) Actual (Negative) REVENUES Taxes and special assessments $875,000 $868,481 ($6,519) Use of money and properties $600 $2,135 $1,535 1,800 2,302 502 Intergovernmental 1,000 1,000 Charges for services 6,000 7,067 1,067 Other revenue 1,000 3,020 Total Revenues 7,600 13,222 5,622 876,800 870,783 (6,017) EXPENDITURES Current: General government Public safety Public works and parks Culture and recreation 10,000 10,049 (49) 995,819 907,470 88,349 Capital outlay Capital improvement/special projects 15,000 8,004 Total Expenditures 25,000 995,819 907,470 88,349 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (17,400) (3,823) 13,577 (119,019) (36,687) 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 ($17,400) (3,823) $13,577 ($119,019) (36,687) FUND BALANCES, BEGINNING OF YEAR 635,888 704,259 FUND BALANCES, END OF YEAR $667,572 128 Final Budget $240 70,000 1,500 75,000 146,740 276,322 5,000 281,322 (134,582) 100,000 100,000 ($34,582) Public Safety Variance Positive Actual (Negative) $130 ($110) 89,053 19,053 1,860 360 74,762 (238) 165,805 19,065 276,387 (65) 4,936 64 281,323 (1) (115,518) 19,064 100,000 100,000 (15,518) $19,064 174,018 $158,500 SPECIAL REVENUE FUNDS Final Budget $5,000 772,800 5,000 782,800 10,412 734,711 1,525,867 2,270,990 (1,488,190) ($1,488,190) Stormwater Variance Positive Actual (Negative) $548 ($4,452) 903,910 131,110 20,228 15,228 924,686 141,886 5,997 4,415 782,590 (47,879) 908,171 617,696 1,696,758 574,232 (772,072) 716,118 (772,072) $716,118 961,159 $189,087 129 Development Services Final Budget $33,000 33,000 117,000 340,000 457,000 (424,000) (325,000) (325,000) ($749,000) Variance Positive Actual (Negative) $33,615 $615 33,615 615 26,606 90,394 340,000 26,606 430,394 7,009 431,009 (325,000) (325,000) (317,991) $431,009 1,001,277 $683,286 (Continued) 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, 2017 SPECIAL REVENUE Grants Parkland Dedication Variance Variance Final Positive Final Positive Bud~et Actual (Negative) Actual (Negative} REVENUES Taxes and special assessments Use of money and properties $2,800 $1,592 ($1,208) $4,000 $1,620 ($2,380) Intergovernmental 369,250 1,002,826 633,576 Charges for services 39,360 39,360 Other revenue 23,106 23,106 1,500 1,500 Total Revenues 372,050 1,027,524 655,474 42,480 38,480 EXPENDITURES Current: General government 235,961 182,778 53,183 Public safety 563,091 582,235 (19,144) Public works and parks 37,301 30,072 7,229 Culture and recreation Capital outlay 330,000 92,704 237,296 Capital improvement/special projects Total Expenditures 799,052 765,013 34,039 367,301 122,776 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (427,002) 689,5l3 (363,301) (80,296) OTHER FINANCING SOURCES (USES) Transfers in 46,089 46,089 37,761 37,761 Transfers out (169,783 l (169,783) Total Other Financing Sources (Uses) (123,694! (123,694) 37,761 37,761 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES ($550,696) l38,817 $689,513 ($325,540) (42,535) FUND BALANCES, BEGINNING OF YEAR 614,304 FUND BALANCES, END OF YEAR $449,188 130 Emergency Medical Services Final Budget $5,216,424 2,000 125,000 2,598,000 247,819 8,189,243 83,288 7,178,379 7,261,667 927,576 $927,576 Actual $5,485,637 7,729 121,517 1,506,437 220,984 7,342,304 47,978 7,114,323 7,162,301 180,003 1,564,527 $1,744,530 Variance Positive (Negative) $269,213 5,729 (3,483) (1,091,563) 35,310 64,056 99,366 SPECIAL REVENUE FUNDS Business Improvement Variance Final Positive Actual 131 Pt. San Pedro-Maintenance Portion Final $80,000 500 80,500 90,250 90,250 (9,750) ($9,750) Actual $74,084 508 74,592 89,980 89,980 (15,388) Variance Positive (Negative) ($5,916) 8 270 (5,638) (15,388) =:::::::::::=== 166,671 $151,283 (Continued) 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, 2017 SPECIAL REVENUE FUNDS Low and Moderate Income Housing Measure A Open Space Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $430,300 $437,170 $6,870 Use of money and properties $8,300 $2,445 ($5,855) 600 973 373 Intergovernmental Charges for services Other revenue 70,000 59,375 (10,625) Total Revenues 78,300 61,820 (16,480) 430,900 438,143 7,243 EXPENDITURES Current: General government 210,000 81,027 128,973 Public safety 199,123 107,949 91,174 Public works and parks 155,000 205,179 (50,179) Culture and recreation 460,000 460,000 Capital outlay Capital improvement/special projects Total Expenditures 210,000 81,027 128,973 814,123 313,128 500,995 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (131,700) (19,207) 112,493 (383,223) 125,015 508,238 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (118,036) (118,036) Total Other Financing Sources (Uses) (118,036) (118,036) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES AND USES OVER (UNDER) EXPENDITURES ($131,700) (19,207) $112,493 ($501,259) 6,979 $508,238 FUND BALANCES, BEGINNING OF YEAR 929,557 362,256 FOND BALANCES, END OF YEAR $910,350 $369,235 132 DEBT SERVICE FUNDS Mariposa Assessment District 1997 Financing Authority Revenue Bonds Final Budget Actual $16,573 Variance Positive (Negative) Final Budget $430 430 430 $430 $493 493 493 147,304 $147,797 133 Variance Positive (Negative) $63 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. OPEBlRetiree 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 provid.ing services to the San Rafael Sanitation District and the charges for those services. 135 ASSETS Current Assets: Cash and investments Accounts receivable Loans receivable Prepaids Capital assets: Nondepreciable assets Depreciable assets, net Total Assets LIABILITIES Current Liabilities: Accounts payable Claims payable -due in one year Non-current Liabilities: CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF NET POSITION JUNE 30, 2017 Building Vehicle Equipment Maintenance Replacement Replacement $1,617,858 $1,673,326 $2,845,878 1,080,558 530,301 2,615,538 5,044,661 637,331 4,763,697 7,798,545 3,483,209 129,423 208,333 196,005 Claims payable -due in more than one year Total Liabilities 129,423 208,333 196,005 NET POSITION: Net investment in capital assets 3,145,839 5,044,661 637,331 Unrestricted 1,488,435 2,545,551 2,649,873 Total Net Position $4,634,274 $7,590,212 $3,287,204 136 Employee Liability Benefits Insurance $810,716 $2,967,749 810,716 2,967,749 501 1,226,194 1,355,335 501 2,581,529 810,215 386,220 $810,215 $386,220 Workers' Compensation $6,663,771 6,663,771 304 1,427,094 4,738,715 6,166,113 497,658 $497,658 Dental Insurance $152,927 3,624 3,624 149,303 $149,303 Employee Retirement $2,281,906 2,281,906 2,281,906 $2,281,906 OPEBI Retiree Medical $711,122 711,122 16,487 694,635 $694,635 137 Radio Telephone Sewer Replacement Maintenance $358,889 $398,256 $28,213 358,889 28,213 32,422 28,213 32,422 358,889 365,834 $358,889 $365,834 Total $20,510,611 1,080,558 530,301 8,297,530 30,419,000 615,312 2,653,288 6,094,050 9,362,650 8,827,831 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2017 Building Vehicle Equipment Employee Maintenance Replacement Benefits OPERATING REVENUES Charges for current services $800,000 $1,213,282 $1,910,808 $551,519 Other operating revenues 286 606 Total Operating Revenues 1,911,094 552,125 OPERATING EXPENSES Personnel 161,876 2,416 Insurance premiums and claims Maintenance and repairs 201,103 87,597 General and administrative 18,243 1,952,354 796,874 Depreciation expense 106,224 Total Operating Expenses 1,010,352 2,220,454 799,290 Operating Income (Loss) 551,733 202,930 (309,360) NONOPERATING REVENUES (EXPENSES) Investment income 5,317 5,099 9,304 8,635 Miscellaneous Income 94,264 Loss on sale of capital assets (19,944) Total Nonoperating Revenues (Expenses) 5,317 79,419 Net income (loss) before transfers 557,050 282,349 (300,056) CAPITAL CONTRIBUTIONS 1,228,402 TRANSFERS IN 80,275 TRANSFERS OUT Change in Net Position 1,865,727 282,349 (300,056) (238,530) NET POSITION, BEGINNING OF YEAR, AS ADmSTED 2,768,547 7,307,863 1,048,745 NET POSITION, END OF YEAR $4,634,274 $7,590,212 $3,287,204 138 Liability Insurance $1,552,880 49,910 1,602,790 1,063,453 184,656 1,248,109 8,962 8,962 363,643 22,577 $386,220 OPEBI Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $1,974,595 $399,028 $200,000 $2,775,000 $648,660 $571,223 $2,609,993 $15,206,988 7,910 892,199 1,385 962,296 1,974,595 406,938 200,000 3,667,199 648,660 571,223 2,611,378 16,169,284 2,611,378 2,775,670 1,487,865 388,506 3,674,555 6,614,379 288,700 116,474 3,342 673,499 544,551 4,289,993 1,067,900 1,604,339 388,506 3,342 3,674,555 673,499 544,551 2,611,378 15,036,642 370,256 18,432 196,658 (7,356) (24,839) 26,672 1,132,642 21,819 663 7,392 522 1,238 68,951 94,264 (19,944) 21,819 663 7,392 522 1,238 143,271 392,075 19,095 204,050 (7,356) (24,317) 27,910 1,275,913 1,228,402 80,275 (376,520) (376,520) 392,075 19,095 (172,470) (7,356) (24,317) 27,910 2,208,070 105,583 130,208 2,454,376 701,991 383,206 337,924 18,848,280 $497,658 $149,303 $2,281,906 $694,635 $358,889 $365,834 $21,056,350 139 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $800,000 $1,224,360 $1,911,094 $551,519 $1,552,880 Cash payments to suppliers for goods and services (126,737) (85,119) (1,898,044) (836,813) (1,211,360) Cash payments to employees for salaries and benefits (161,876) (2,416) Other operating revenues 10,000 606 Cash Flows from Operating Activities 683,263 1,139,241 (148,826) (287,104) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts 80,275 Interfund payments Cash Flows from Noncapital Financing Activities 80,275 'CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (468,338) (753,667) Proceeds from sale of property 94,264 Cash Flows from Investing Activities (468,338) (659,403) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 5,317 5,099 9,304 Cash Flows from Investing Activities 5,317 5,099 9,304 8,962 Net increase (decrease) in cash and cash equivalents 300,517 484,937 (139,522) (278,469) 400,392 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,317,341 1,188,389 2,985,400 2,567,357 CASH AND CASH EQUIVALENTS, END OF YEAR $1,617,858 $1,673,326 $2,845,878 $2,967,749 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $551,733 $202,930 ($309,360) ($247,165) $354,681 Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 38,921 922,755 106,224 Net change in assets and liabilities: Accounts receivable 140 Loans receivable 10,938 Prep aids and deposits 2,478 Accounts payable 92,609 54,310 (39,939) (1,125) Claims payable 37,874 Net Cash Provided by (Used in) Operating Activities $683,263 $1,139,241 ($287,104) $391,430 NON-CASH TRANSACTIONS: Contributions of capital assets $1,228,402 140 Workers' $1,974,595 (1,490,587) 484,008 21,819 21,819 505,827 6,157,944 $6,663,771 $370,256 (7,146) 120,898 $484,008 Dental Insurance $399,028 (388,587) 7,910 18,351 663 663 19,014 133,913 $152,927 $18,432 (81) $18,351 OPEB/ Employee Employee Radio Telephone Sewer Retirement Retirement Replacement Maintenance $200,000 $2,850,980 $648,660 $571,223 $2,623,480 (3,342) (3,661,843) (673,499) (533,604) (2,599,611) 1,385 196,658 81,336 25,254 (376,520) (376,520) ___________________ _ (172,470) $196,658 81,336 629,786 $711,122 ($7,356) 75,980 12,712 $81,336 141 522 522 (24,317) 383,206 $358,889 ($24,839) ($24,839) 1,238 1,238 38,857 359,399 $398,256 $26,672 10,947 25,254 $13,487 11,767 Total $15,307,819 (13,509,146) (164,292) 962,010 2,596,391 80,275 (376,520) (296,245) (1,222,005) 94,264 68,951 1,241,356 19,269,255 $20,510,611 $1,132,642 1,067,900 89,607 10,938 2,478 134,054 158,772 $2,596,391 $1,228,402 AGENCY FUNDS Agency Funds account of 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. 143 CITY OF SAN RAFAEL AGENCY FUNDS COMBINING STATEMENTS OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2017 Balance Balance June 30,2016 Additions Deductions June 30, 2017 Pt. San Pedro Road Assessment District Assets Restricted cash and investments $291,111 $206,708 $208,051 $289,768 Taxes receivable 1,134 1,134 Total Assets $292,245 $209,185 Liabilities Interest payable $27,697 $26,614 $27,697 $26,614 Due to bondholders 264,548 181,488 Total Liabilities $292,245 $209,185 Balance Balance June 30,2016 Additions Deductions Total Agency Fund Assets Restricted cash and investments $291,111 $206,708 $208,051 $289,768 Taxes receivable 1,134 951 1,134 951 Total Assets $292,245 $207,659 $209,185 Liabilities Interest payable $27,697 $26,614 $27,697 $26,614 Due to bondholders 264,548 181,045 181,488 264,105 Total Liabilities $292,245 $207,659 $209,185 $290,719 144 ~c :Nears (Beach (Par/( 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 fmancial 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 FunctionlProgram 3. Capital Asset Statistics by FunctionlProgram Sources Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. 147 <on "0 = tIS <on = 0 ..= ~ $270,000 $220,000 $170,000 $120,000 $70,000 $20,000 ($30,000) ($80,000) ($130,000) CITY OF SAN RAFAEL NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 IJNet of Related Debt • Restricted • Unrestricted 2008 2009 2010 Governmental activities Net investment in capital assets $176,724,820 $178,744, 119 $173,536,144 Restricted 26,848,900 25,721,231 26,150,254 Unrestricted 4,273,937 (700,985) (4,63L276) Total governmental activities net position $207,847,657 $203,764,365 $195,055,122 Business-type activities Net investment in capital assets $10,130,329 $11,243,637 $10,950,825 U nrestri cted 2,471,117 1,936,958 2,017,354 Total business-type activities net position $12,601,446 $13,180,595 $12,968,179 Primary government Net investments in capital assets $186,855,149 $189,987,756 $184,486,969 Restricted 26,848,900 25,721,231 26,150,254 U nrestri cted 6,745,054 1,235,973 (2,613,922) Total primary government net position $220,449,103 $216,944,960 $208,023,301 2011 $174,281,922 21,322,937 (8,170,324) $187,434,535 $10,793,592 1,948,447 $12,742,039 $185,075,514 21,322,937 (6,221,877) $200,176,574 (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. 148 2012 $192,361,245 24,693,205 10,652,263 $227,706,713 $10,650,558 2,495,889 $203,011,803 24,693,205 13,148,152 160 2013 $193,222,791 35,780,412 11,151,318 $240,154,521 $10,670,190 2,501,498 $13,171,688 $203,892,981 35,780,412 13,652,816 $253,326,209 2014 $190,286,275 37,339,141 (196,824) $227,428,592 $10,786,591 2,049,957 $12,836,548 $201,072,866 37,339,141 1,853,133 $240,265,140 2015 $190,621,085 33,389,224 $10,744,952 (938,519) $201,366,037 33,389,224 (83,275,053) $151,480,208 149 2016 $193,707,175 31,286,725 (93,273,480) $10,958,058 (1,136,050) $204,665,233 31,286,725 2017 $199,202,842 29,225,643 (112,913,181) $115,515,304 $10,968,642 (871,620) $10,097,022 $210,171,484 29,225,643 (113,784,801) Expenses Governmental Activities: General government Public safety Public works and parks Community development Culture and recreation Interest on long-term debt and fiscal charges Total Governmental Activities Expenses Business-Type Activities: Parking services Total Business-Type Activities Expenses Total Primary Government Expenses Component Unit: San Rafael Sanitation District Program Revenues Governmental Activities: Charges for services: General government Public safety Public works and parks Community development Culture and recreation Operating grants and contributions Capital grants and contributions Total Government Activities Program Revenues Business-Type Activities: Charges for services: Parking services Total Business-Type Activities Program Revenues Total Primary Government Program Revenues Component Unit: San Rafael Sanitation District Charges for service Operating grants and contributions Capital grants and contributions Total Component Unit Program Revenues Net (Expense)/Revenue Governmental Activities Business-Type Activities Total Primary Government Net Expense Component Unit Activities CITY OF SAN RAFAEL CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) 2008 2009 $8,621,079 $8,075,344 40,845,347 42,708,538 22,105,367 23,036,676 5,811,866 5,759,171 10,300,230 11,505,896 1,989,620 1,907,229 89,673,509 92,992,854 3,282,235 3,563,235 3,282,235 3,563,235 $92,955,744 $96,556,089 $8,090,636 $9,143,977 $1,494,784 $1,738,685 5,562,072 5,906,445 4,983,288 4,753,817 3,247,024 2,915,872 4,870,884 5,253,683 3,463,616 3,544,248 3,239,509 7,311,173 26,861,177 31,423,923 4,161,936 4,454,490 4,161,936 4,454,490 $31,023,113 $35,878,413 $9,366,305 $10,567,647 $9,366,305 $10,567,647 ($62,812,332) ($61,568,931 ) 879,701 891,255 ($61,932,631~ ($60,677 ,67 6~ $1,275,669 $1,423,670 150 2010 2011 $8,396,759 $8,269,846 42,752,033 44,735,486 17,401,923 17,408,038 6,738,873 7,804,650 11,139,225 11,487,999 2,200,024 1,621,605 88,628,837 91,327,624 4,016,198 3,785,751 4,016,198 3,785,751 $92,645,035 $95,113,375 $9,087,354 $9,677,630 $1,665,460 $1,636,542 6,308,912 6,167,925 3,916,874 4,141,103 2,830,179 2,676,663 5,280,458 5,362,497 3,721,055 3,651,902 2,116,906 1,857,670 25,839,844 25,494,302 4,244,404 4,011,333 4,244,404 4,011,333 $30,084,248 $29,505,635 $11,559,549 $12,223,779 $11,559,549 $12,223,779 ($62,788,993) ($65,833,322) 228,206 225,582 ($62,560, 7 87~ ($65,607,7402 $2,472,195 $2,546,149 2012 2013 2014 2015 2016 2017 $10,171,332 $10,202,530 $9,085,672 $9,099,858 $12,952,983 $10,996,269 39,876,910 41,966,065 43,800,158 39,968,631 55,399,798 44,366,734 17,423,033 17,695,164 22,125,336 16,893,164 22,929,289 19,845,719 4,587,557 3,403,158 3,451,244 3,128,373 4,307,269 4,242,743 11,020,663 11,330,058 11,846,818 11,198,151 15,026,680 14,131,000 1,224,991 283,805 327,350 284,288 277,263 271,263 84,304,486 84,880,780 90,636,578 80,572,465 110,893,282 93,853,728 3,446,482 3,545,387 4,125,476 4,249,597 4,762,851 4,188,152 3,446,482 3,545,387 4,125,476 4,249,597 4,762,851 4,188,152 $87,750,968 $88,426,167 $94,762,054 $84,822,062 $115,656,133 $98,041,880 $10,185,779 $10,169,082 $11,378,055 $11,375,239 $11,654,767 $11,255,194 $1,986,791 $2,655,749 $2,838,940 $1,379,523 $526,495 $421,393 7,122,396 6,478,321 6,014,034 4,966,251 4,939,658 4,264,939 5,214,267 7,837,472 6,101,460 3,078,267 5,157,289 1,804,698 3,255,367 3,984,204 3,279,251 3,796,684 4,004,178 3,850,107 5,873,147 6,075,129 6,417,003 6,537,646 6,683,059 6,941,013 3,158,281 4,085,073 4,698,142 4,185,450 4,678,338 3,965,351 2,705,696 5,876,993 762,719 1,308,027 1,470,953 1,702,993 29,315,945 36,992,941 30,111,549 25,251,848 27,459,970 22,950,494 3,901,175 3,990,706 4,485,394 5,173,557 5,212,181 5,268,991 3,901,175 3,990,706 4,485,394 5,173,557 5,212,181 5,268,991 $33,217,120 $40,983,647 $34,596,943 $30,425,405 $32,672,151 $28,219,485 $12,368,889 $12,413,123 $13,732,496 $14,629,758 $15,414,530 $16,014,016 36,945 79,245 $12,368,889 $12,413,123 $13,732,496 $14,629,758 $15,414,530 $16,130,206 ($54,988,541 ) ($47,887,839) ($60,525,029) ($55,320,617) ($83,433,312) ($70,903,234) 454,693 445,319 359,918 923,960 449,330 1,080,839 ($54,533,848) ($47,442,5202 {$60,165,1112 ($54,396,6572 ($82,983,9822 ($69,822,395) $2,183,110 $2,244,041 $2,354,441 $3,254,519 $3,862,215 $4,875,012 151 CITY OF SAN RAFAEL CHANGES IN NET POSITION (continued) Last Ten Fiscal Years (Accrual Basis of Accounting) Fiscal Year Ended June 30, 2008 2009 2010 General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property Sales Special assessments Paramedic Motor vehicles Transient occupancy Franchise Business license Other Investment earnings Gain (Loss) on disposal of assets Miscellaneous Special item -Court fmes repayment Transfers Total Government Activities Business-Type Activities: Investment earnings Aid from other government agencies Transfers Total Business-Type Activities Total Primary Government Component Unit: San Rafael Sanitation District Property Taxes Investment earnings Miscellaneous Aid from other governmental agencies Total Component Unit Special Item Governmental Activities Component Unit Activities Change in Net Position Governmental Activities Business-Type Activities Total Primary Government Change in Net Position Component Unit Activities $22,195,606 25,764,457 3,503,555 257,320 9,242,241 1,583,056 296,454 344,080 63,186,769 121,486 (344,080) (222,594) $62,964,175 $803,071 341,032 3,546 577,860 $1,725,509 $374,437 657,107 $1,031,544 $3,001,178 152 $21,978,859 21,970,262 3,210,317 197,989 1,678,912 2,941,149 2,405,934 1,561,835 717,968 461,224 361,190 57,485,639 49,084 (361,190) (312,106) $57,173,533 $855,511 206,752 3,540 381,144 $1,446,947 ($4,083,292) 579,149 ($3,504,143) $2,870,617 $21,684,131 19,055,124 3,489,494 171,518 1,558,243 2,868,332 2,317,664 1,411,583 302,180 221,791 541,390 458,300 54,079,750 17,678 (458,300} {440,622} $53,639,128 $823,187 93,274 415,391 $1,331,852 ($8,709,243) (212,416} ($8,921,659} $3,804,047 2011 $21,632,733 21,623,445 3,661,064 297,425 1,644,262 2,990,539 2,296,460 1,930,531 176,502 1,496,174 463,600 58,212,735 11,878 (463,600} (451,722} $57,761,013 $1,214,519 59,265 6,499 $1,280,283 ($7,620,587) (226, 140} ($7,846,727} $3,826,432 2012 2013 2014 2015 2016 2017 $20,107,637 $17,317,772 $18,439,619 $19,039,443 $19,998,567 $23,343,140 22,355,749 24,262,282 27,758,971 32,269,915 34,348,089 31,819,259 3,807,545 3,804,985 3,816,070 3,820,240 4,226,020 5,485,637 1,866,575 2,185,287 2,332,277 2,661,878 3,063,263 2,984,758 3,076,094 3,331,160 3,260,958 3,272,390 3,418,277 3,610,824 2,332,146 2,507,785 2,588,728 2,670,071 2,824,664 2,774,803 3,574,918 2,929,915 3,452,171 3,295,751 3,465,193 1,824,830 205,413 991,762 184,171 216,066 300,091 210,628 542,816 2,580,882 1,140,743 2,254,901 1,387,315 2,448,604 57,960 423,817 449,917 432,630 448,478 536,000 57,926,853 60,335,647 63,423,625 69,933,285 73,479,957 75,038,483 7,675 3,739 4,375 7,008 14,723 10,810 (57,960) (423,817) {449,917) (432,630) (448,4782 (536,00°2 (50,285) (420,078 2 (445,542) (425,622) (433,755) (525,190) $57,876,568 $59,915,569 $62,978,083 $69,507,663 $73,046,202 $74,513,293 $1,192,566 $1,177,469 $1,345,018 $1,319,852 $1,367,172 $1,528,047 38,191 25,591 151,729 171,804 46,225 97,090 9,613 56,589 22,125 35,090 $1,240,370 $1,259,649 $1,518,872 $1,526,746 $1,413,397 $1,625,137 $4,462,815 ($4,462,815 2 $2,938,312 $12,447,808 $2,898,596 $19,075,483 ($9,953,355) $4,135,249 404,408 25,241 (85,624) 498,338 15,575 555,649 $3,342,720 $12,473,049 $2,812,972 $19,573,821 ($9,937,780) $4,690,898 $3,423,480 $3,503,690 $3,873,313 $318,450 $5,275,612 $6,500,149 153 CITY SAN RAFAEL FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years $55,000 $45,000 $35,000 $25,000 $15,000 $5,000 (Modified Accrual Basis of Accounting) ($5,000) JL:::===================================="=7 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General Fund Pre-GASB 54 Presentation: Reserved Unreserved GASB 54 Presentation: Nonspendable Restricted Committed Assigned Unassigned Total General Fund All Other Governmental Funds Pre-GASB 54 Presentation: Reserved Unreserved, reported in: Special Revenue Funds Capital Project Funds Debt Service Funds Expendable Trust Fund GASB 54 Presentation: Nonspendable Restricted Committed Assigned Total all other governmental funds CJ Total Fund Balance 2008 $2,196,153 4,022,612 $6,218,765 $17,599,142 7,413,808 35,430 3,315,764 $28,364,144 2009 $2,225,775 1,670,455 $3,896,230 $16,680,568 8,641,239 (1,030,293) 3,360,540 $27,652,054 (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis. 2010 $1,763,622 5,038,173 $6,801,795 $15,352,723 8,778,027 4,527,627 $28,658,377 (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. 154 2011 $589,833 200,238 555,561 5,439,879 $6,785,511 $377,180 19,289,367 3,864,322 4,124,029 $27,654,898 2012 2013 2014 2015 2016 2017 (a) ------ $527,509 $527,235 $503,338 $399,299 $476,316 $508,446 76,188 651,121 800,876 1,516,644 2,476,676 6,866,149 12,374,002 16,440,910 14,900,945 1,588,500 1,772,577 1,295,041 $2,771,462 $3,804,787 $7,369,487 $14,361,801 $18,689,803 $16,704,432 $788,031 $51,521 $8,719 $2,359 $9,449 16,856,959 20,769,546 30,185,064 31,742,184 27,552,245 25,812,405 5,135,257 8,447,495 2,185,825 931,871 3,799,421 3,491,708 5,283,559 6,511,850 4,959,533 712,810 119,183 115,103 $28,063,806 $35,780,412 $37,339,141 $33,389,224 $31,480,298 $29,419,216 155 CITY OF SAN RAFAEL CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year Ended June 30, 2008 2009 2010 2011 Revenues Taxes and special assessments $56,129,195 $51,019,143 $47,678,541 $51,448,130 Licenses and permits 1,489,748 1,472,913 1,518,819 1,416,772 Fines and forfeitures 797,081 660,338 787,411 862,820 Use of money and properties 1,584,508 847,120 433,874 380,720 Intergovernmental 12,081,968 17,518,670 13,001,703 11,864,127 Charges for services 15,607,460 16,384,265 15,787,325 15,888,750 Other revenue 815,704 759,320 716,760 1,026,845 Total Revenues 88,505,664 88,661,769 79,924,433 82,888,164 Expenditures Current: General government 8,288,170 8,059,526 7,997,067 6,863,142 Public safety 40,299,862 41,209,972 39,574,091 40,967,352 Public works and parks 13,641,665 12,926,646 10,731,669 10,666,176 Community development 5,786,661 5,572,079 4,398,594 4,527,351 Culture and recreation 9,820,365 10,233,361 9,605,684 10,067,822 Capital outlay 6,243,517 5,048,044 1,890,559 1,745,483 Capital improvement / special projects 5,124,091 6,606,857 3,436,608 6,240,861 Debt service: Capitalized lease obligation Principal 2,504,370 2,714,358 2,804,258 2,530,338 Interest and fiscal charges 1,776,354 1,683,240 1,979,372 1,448,910 Total Expenditures 93,485,055 94,054,083 82,417,902 85,057,435 Excess (deficiency) of revenues over (under) expenditures (4,979,391) (5,392,314) (2,493,469) (2,169,271) Other Financing Sources (Uses) Issuance of debt 14,660,000 Payment to refunded bonds (14,315,000) Bond premiums 1,038,185 Capital lease for equipment acquisition Proceeds from PG&E loans Proceeds from sale of capital asset 221,791 Transfers in 6,353,216 8,972,495 7,494,560 5,806,834 Transfers (out) (6,329,136) (6,614,806) (6,411,150) (4,657,326) Total other fmancing sources (uses) 24,080 2,357,689 2,688,386 1,149,508 Extraordinary Item Transfer to Successor Agency Net Change in fund balances ($4,955,311) ($3,034,625) $194,917 ($1,019,763) Debt service as a percentage of noncapital expenditures 5.2% 5.3% 6.2% 5.2% 156 2012 $51,395,116 1,648,890 801,758 315,561 10,537,396 19,649,433 870,957 85,219,111 8,783,873 39,311,551 11,518,822 3,755,504 10,345,673 1,312,383 3,604,171 2,518,320 735,221 81,885,518 3,333,593 4,539,646 (4,864,293) (324,647) $3,008,946 4.2% 2013 $51,549,306 1,929,387 734,005 325,043 11,869,889 23,575,374 4,092,411 94,075,415 10,529,480 41,377,062 12,002,448 2,961,275 10,591,057 4,009,454 5,284,720 283,805 87,039,301 7,036,114 8,425,474 (6,711,657) 1,713,817 (2,352,584) $6,397,347 0.4% 2014 $56,686,142 1,934,755 669,553 363,089 11,953,308 19,949,333 2,045,407 93,601,587 8,678,833 41,900,762 13,697,957 3,296,375 11,106,367 2,154,900 7,168,776 208,642 327,350 88,539,962 5,061,625 568,481 3,655,302 (3,053,865) 1,169,918 $6,231,543 0.7% 157 2015 $61,804,228 2,456,820 556,076 444,757 13,233,503 15,346,794 1,777,003 95,619,181 10,203,687 43,954,515 12,758,643 3,416,859 11,616,777 4,498,924 2,186,986 75,172 284,288 88,995,851 6,623,330 4,348,149 (3,051,499) 1,296,650 $7,919,980 0.4% 2016 $65,866,218 2,588,411 435,829 460,206 13,685,003 14,366,744 3,208,749 100,611,160 11,349,079 47,071,166 14,390,699 3,670,108 12,048,104 4,813,757 4,826,576 75,172 277,263 98,521,924 2,089,236 7,533,364 (6,582,555) 950,809 $3,040,045 0.4% 2017 $71,166,891 2,559,841 400,283 349,349 8,063,156 13,425,161 1,842,053 97,806,734 10,557,416 49,018,153 16,752,961 3,759,564 12,646,728 2,100,926 7,403,249 175,172 271,263 102,685,432 (4,878,698) 9,287,007 (8,454,762) 832,245 ($4,046,453) 0.5% $14,000 $12,000 $10,000 <n $8,000 c S ~ $6,000 $4,000 $2,000 $0 Fiscal Residential Year ProEe~ 2008 $ 7,024,610,641 2009 7,357,121,277 2010 7,335,863,721 2011 7,215,965,203 2012 7,317,280,602 2013 7,265,617,525 2014 7,558,708,224 2015 7,991,224,952 2016 8,511,358,216 2017 9,025,896,811 !!I I!I 2008 2009 I!I 2010 CITY OF SAN RAFAEL ASSESSED AND ESTIMATED ACTUAL V ALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS • • • I!I I!I I!I I!I 2011 2012 2013 2014 _Unsecured P,·operty _Secured Property Real ProEer~ Total Real Commercial Industrial Secured ProEer~ ProEe~ Other ProEe!:!r 1,824,656,505 214,341,528 105,409,028 9,169,017,702 1,941,927,620 234,669,841 129,177,656 9,662,896,394 2,052,276,292 244,857,019 130,177,994 9,763,175,026 2,056,985,417 247,409,955 124,426,487 9,644,787,062 2,036,262,351 247,485,238 118,579,648 9,719,607,839 1,987,170,644 245,917,096 115,453,836 9,614,159,101 2,009,718,415 245,674,195 130,594,237 9,944,695,071 2,120,065,908 249,864,918 115,675,852 10,476,831,630 2,221,843,976 263,830,302 108,982,883 11,106,015,377 2,390,814,514 267,468,956 135,689,202 11,819,869,483 I!I I!I I!I 2015 2016 2017 Total Unsecured Total Estimated Direct ProEer~ Assessed {a} Full Market {a} Tax Rate {b} $ 362,727,209 $ 9,531,744,911 $ 9,531,744,911 0.17718% 374,976,613 10,037,873,007 10,037,873,007 0.17951% 401,201,906 10,164,376,932 10,164,376,932 0.19215% 383,414,952 10,028,202,014 10,028,202,014 0.17851% 384,950,872 10,104,558,711 10,104,558,711 0.17827% 384,534,108 9,998,693,209 9,998,693,209 0.17456% 402,261,887 10,346,956,958 10,346,956,958 0.11985% 417,217,272 10,894,048,902 10,894,048,902 0.11657% 400,942,059 11,506,957,436 11,506,957,436 0.11672% 423,545,667 12,243,415,150 12,243,415,150 0.11693% (a) The State Constitution requires property to be assessed at one htmdred 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. (b) California cities do not set their own direct tax rate. The state constitution establishes the rate at I % and allocates a portion of that amount, by an annual calculation, to all the taxing entities within a tax rate area. Data Source: Marin County Assessor 2007/08 -2016/17 Combined Tax Rolls 158 CITY OF SAN RAFAEL PROPERTY TAX RATES ALL OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Fiscal School Misc. Special Year City County (1) Districts Districts Total 2008 0.154 0.295 0.7225 0.0461 1.2172 2009 0.154 0.295 0.7192 0.0461 1.2139 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 0.7988 0.0553 1.3028 Notes: (l) 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 2007/08 -2016/17 Tax Rate Tables 159 Tax~a;yer CITY OF SAN RAFAEL PRINCIPAL PROPERTY TAXPAYERS CURRENT FY 2016/17 AND FY 2007/08 FY 2016-2017 Percentage of Total City Taxable Taxable Assessed Assessed Value Value California Corporate Center ACQ LLC $ 235,592,917 1.92% MGP Xl Northgate LLC 141,854,871 1.16% Professional Financial Investors Inc 52,469,836 0.43% South Valley Apartments LLC 51,976,039 0.42% Kaiser 47,890,626 0.39% BRE Piper MF 33 North CA LLC 45,652,854 0.37% Regency Center II Assoc 45,430,182 0.37% $ Northbay Properties II 44,976,649 0.37% Bay Apartment Communities Inc 42,857,370 0.35% Barbara Fasken 1995 Trust ETAL 42,474,774 0.35% Northgate Mall Associates Hines San Rafael LLC San Rafael Associates NF Marin Sanitary Service 4040 Civic Center LLC Rafael Town Center Investors LLC Bit Holdings Forty-Five Inc Subtotal $ 751,176,118 6.14% $ Total Net Assessed Valuation: Fiscal Year 2016-2017 $ 12,243,415,150 Fiscal Year 2007-2008 $ 9,531,744,911 160 FY 2007-2008 Percentage of Total City Taxable Taxable Assessed Assessed Value Value 40,116,943 0.42% 33,229,690 0.35% 33,826,191 0.35% 119,980,919 1.26% 78,065,660 0.82% 63,225,500 0.66% 39,405,212 0.41% 36,206,743 0.38% 32,696,979 0.34% 31,243,240 0.33% 507,997,077 5.33% $28 CITY OF SAN RAFAEL PROPERTY TAX LEVIES AND COLLECTIONS (1) LAST TEN FISCAL YEARS ---. $2~ $22 .. -- ~~ --~ ~ ..... ------~ ..-~ ~ $19 = :5 ~ $16 $12 -+-Allocations $9 ~ Apportionments $6 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fiscal Year Rate Levies Allocations Collections A1212ortionments Delinguencies 2008 1.00 (2) $ 22,195,606 (2) $ 22,195,606 (2) 2009 1.00 (2) 21,978,859 (2) 21,978,859 (2) 2010 1.00 (2) 21,702,536 (2) 21,702,536 (2) 2011 1.00 (2) 21,632,731 (2) 21,632,731 (2) 2012 1.00 (2) 20,704,368 (2) 20,704,368 (2) 2013 l.00 (2) 20,883,041 (2) 20,883,041 (2) 2014 1.00 (2) 22,001,357 (2) 22,001,357 (2) 2015 1.00 (2) 22,376,457 (2) 22,376,457 (2) 2016 1.00 (2) 23,636,093 (2) 23,636,093 (2) 2017 1.00 (2) 25,173,651 (2) 25,173,651 (2) 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 govenunental entities. 161 f---- r---- 2017 Delinquent taxes as a Percent of Allocations 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% $45 CITY OF SAN RAFAEL RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS $40 +--=~-----------------------------------------1 DTotalGovemmental $35 $30 '" $25 = .S ::: $20 ~ $15 $10 $5 $- 2008 2009 2010 2011 2012 2013 Governmental Activities RDA Tax Financing Court Fine Fiscal Allocation Authority Note Promissory Year Bonds Revenue Bonds Payable Note 2008 $ 37,537,161 $ 780,000 $ 169,000 $ 816,119 2009 35,793,692 455,000 169,000 594,100 2010 35,355,988 169,000 363,328 2011 33,298,499 169,000 124,222 2012 169,000 2013 169,000 2014 528,839 2015 453,667 2016 378,495 2017 303,323 Business-Type Activities Parking Total Fiscal Services Note Primary Year Bonds Payable Total Government 2008 $ 7,140,000 $ 7,140,000 $ 46,843,435 2009 6,975,000 6,975,000 44,185,608 2010 6,805,000 6,805,000 42,828,646 2011 6,630,000 6,630,000 44,780,819 2012 6,445,000 6,445,000 11,104,000 2013 6,445,000 6,445,000 11,104,000 2014 6,186,403 $ 61,836 6,248,239 11,267,078 2015 5,942,128 55,020 5,997,148 10,940,815 2016 5,692,853 48,204 5,741,057 10,609,552 2017 5,433,577 41,388 5,474,965 10,168,288 Notes: Debt amounts exclude any premiums, discounts, or other amortization amounts. ---------1 II Total Business 2014 Capitalized Lease Obligations $ 401,155 198,816 135,330 69,098 Percentage of Personal Income (a) 1.73% 1.67% 1.85% 1.87% 0.46% 0.44% 0.43% 0.41% 0.38% nla 2015 Pension Obligation 2016 Bonds Total $ 4,490,000 4,490,000 4,490,000 4,490,000 4,490,000 4,490,000 4,390,000 $ 39,703,435 37,210,608 36,023,646 38,150,819 4,659,000 4,659,000 5,018,839 4,943,667 4,868,495 4,693,323 Per Capita (a) 804.39 757.08 728.11 770.28 190.45 190.85 192.38 184.77 175.13 167.13 In August 2012, the series 2003 parking services bonds were refunded with series 2012 refunding bonds. Data Sources: City of San Rafael State of Cali fomi a, 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. 162 2017 CITY OF SAN RAFAEL COMPUTATION OF DIRECT AND OVERLAPPING DEBT June 30,2017 2016-17 Assessed Valuation: OVERLAPPING TAX AND ASSESSJVIENT DEBT: Marin Community College District San Rafael High School District Tamalpais Union High School District Dixie School District Ross School District Ross Valley School District San Rafael School District Marin Healthcare District Marin Emergency Radio Authority Parcel Tax Obligations TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DIRECT AND OVERLAPPING GENERAL FUND DEBT: $ $ 12,243,415,150 Total Debt 6/30/2017 % Applicable (1) 313,510,000 17.315% 71,215,315 78.283% 117,095,000 0.081% 18,065,810 65.888% 18,894,143 1.554% 44,891,171 0.013% 69,670,289 83.694% 157,385,000 20.831% 33,000,000 17.289% City's Share of Debt 6/30/2017 $ 54,284,257 55,749,485 94,847 11,903,201 293,615 5,836 58,309,852 32,784,869 5,705,370 $ 219,131,331 Marin County Certificates of Participation $ 90,392,081 95,475,000 111,628 17.289% $ 15,627,887 16,506,673 19,299 20,014 Marin County Pension Obligation Bonds Marin County Transit District General Fund Obligations Marin Municipal Water District General Fund Obligations Marin Community District Certification of Participation San Rafael School District Certificates of Participation City of San Rafael General Fund Obligations City of San Rafael Pension Obligations TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT 90,816 2,420,834 3,405,000 7,377,975 4,390,000 Less: City of San Rafael lease revenue bonds supported by parking revenues TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT OVERLAPPING TAX INCREMENT DEBT (Successor Agency) $ TOTAL GROSS DIRECT DEBT TOTAL NET DIRECT DEBT TOTAL OVERLAPPING DEBT GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT 14,424,004 17.289% 17.289% 22.038% 17.315% 83.694% 100.000% 100.000% 100.000% (1) Percentage of overlapping assessed valuation located within boundaries of the city. $ $ 419,167 2,849,781 7,377,975 (2) 4,390,000 47,210,796 5,474,966 41,735,830 14,424,004 11,767,975 6,293,009 268,998,157 280,766,132 275,291,166 (3) (2) Include city's share of Marin Emergency Radio Authority refunding revenue bonds and $344,711 PG&E notes. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Ratios to 2016-17 Assessed Valuation: Total Overlapping Tax and Assessment Debt Total Gross Direct Debt ($11,767,975) Total Net Direct Debt ($6,293,009) Gross Combined Total Debt Net Combined Total Debt Total Overlapping Tax Increment Debt Data Source: MuniServices 163 1.79% 0.10% 0.05% 2.29% 2.25% 0.53% Fiscal Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 CITY OF SAN RAFAEL COMPUTATION OF LEGAL BONDED DEBT MARGIN June 30, 2017 ASSESSED VALUATION: $ 12,243,415,150 BONDED DEBT LIMIT (3.75% OF ASSESSED VALUE) (a) 459,128,068.13 LESS AMOUNT OF DEBT SUBJECT TO LIMIT: 4,693,323.00 LEGAL BONDED DEBT MARGIN $ 454,434,745 Total net debt Total Net Debt Legal applicable to the limit Debt Applicable to Debt as a percentage Limit of debt $ 357,440,434 $ 39,703,435 $ 317,736,999 12.50% 376,420,238 37,210,608 339,209,630 10.97% 381,164,135 36,023,646 345,140,489 10.44% 376,057,576 38,150,819 337,906,757 11.29% 378,920,952 4,659,000 374,261,952 1.24% 374,950,995 4,659,000 370,291,995 1.26% 388,010,886 5,018,839 382,992,047 1.31% 408,526,834 4,943,667 403,583,167 1.22% 431,510,904 4,868,495 426,642,409 1.14% 459,128,068 4,693,323 454,434,745 1.03% NOTE: (a) 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 Source: City of San Rafael's Finance Department 164 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2008 2009 2010 Fiscal Gross Operating Year Revenue (1) Expenses (2) 2008 $ 4,089,112 $ 2,692,086 2009 4,425,813 2,980,083 2010 4,262,082 3,343,680 2011 4,023,211 3,101,411 2012 3,908,664 2,870,718 2013 3,994,446 3,121,964 2014 4,489,769 3,716,552 2015 5,180,554 4,031,161 2016 5,226,904 3,739,321 2017 5,279,801 2,425,281 2011 CITY OF SAN RAFAEL REVENUE BOND COVERAGE PARKING FACILITY LAST TEN FISCAL YEARS 2012 2013 2014 --+-Coverage 2015 Debt Service Reguirements Net Revenue Available for Debt Service Principal Interest $ 1,397,026 $ 160,000 $ 335,216 $ 1,445,730 165,000 330,379 918,402 170,000 325,285 921,800 175,000 319,391 1,037,946 185,000 312,291 872,481 310,000 240,012 773,217 245,000 210,063 1,149,393 245,000 205,163 1,487,583 250,000 199,613 2,854,520 260,000 192,038 2016 2017 Total Coverage 495,216 2.82 495,379 2.92 495,285 1.85 494,391 1.86 497,291 2.09 550,012 1.59 455,063 1.70 450,163 2.55 449,613 3 .31 452,038 6.31 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 oflower 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 Revel/ue and Expenditure Status Reports 165 23 .50% 23 .00% 22.50% 22.00% CITY OF SAN RAFAEL DEMOGRAPIDC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS It ~ __ ."r r-4 - $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 I' ...... I ............ _-, • City Population as a % of County Population 2007200820092010201120122013 2014 2015 2016 2017 $500,000 $0 • Personal Income (2) (in thousands) $50 If) "0 I: ra $45 If) :::J 0 ..I: $40 I- $35 $30 ~'\ ry<;::5 ~'b ry<;::5 ~~ ry<;::5 ~<;:') ry<;:') ~'\-ry<;:') ~ry ~ ~'? ry<;:') ~ ry<;:') ~'; ry<;:') ~i'o ry<;:') -+---Per Capita Personal Income (2) • Unemployment Rate (%) Personal Per Capita Average Marin Fiscal City Income (2) Personal Unemployment County Year Population (1) (in thousands) Income (2) Rate (3) Population 2008 $ 58,235 $ 2,703,213 $ 46,557 5.60% $ 257,406 2009 58,363 2,642,978 45,288 9.30% 258,618 2010 58,822 2,317,704 39,402 9.80% 260,651 2011 58,136 2,389,222 40,978 8.80% 254,692 2012 58,305 2,438,291 41,908 5.50% 254,790 2013 58,182 2,538,895 43,351 4.70% 254,007 2014 58,566 2,621,228 44,531 4.50% 255,846 2015 59,214 2,699,436 44,558 3.70% 258,972 2016 60,582 2,817,497 46,308 3.40% 262,274 2017 60,842 nla nla nla 263,604 Source: (I) State of California, Department of Finance -Demographic Research Unit. The data represents the City's population as of Jan uary I, 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. 20 I 0 and later-Income -US Census Bureau, most recent American Community Survey (3) Unemployment Data: California Employment Development Department 166 City Population % of County 22.62% 22.57% 22.57% 22.83% 22.88% 22.91% 22.89% 22.87% 23.10% 23.08% CITY OF SAN RAFAEL PRINCIPAL EMPLOYERS FISCAL YEAR 2016-2017 LAST NINE CALENDAR YEARS 2017" 2016-2015-201-1-2013" 2012" 2011' 2010" 2009- EmJlloyer (Al # (Al # {Al # (Al # (Al # (Al # (Al # (Al # {Al Autodesk, Inc. 719 228% 748 2.28% 763 2.33% 1,095 3.52% 1,000 3.27% 878 3.25% 928 3.44% 1,028 3.83% 1,200 4.32% Kaiser Permanente 2061 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% 2,267 8.15% San Rafael ElementarylHigh Schools Dist(! 700 2.22% 650 1.98% 650 1.99% 600 1.93% 600 1.96% 600 2.22% 600 2.22% 600 2.23% 575 2.07% Cily of San Rafael 454 1.44% 577 1.76% 581 1.78% 666 2.14% 643 2.10% 521 1.93% 592 2.19% 630 2.34% 633 2.28% MHN 350 1.14% 350 1.30% 350 1.30% 350 1.30% Dominican University of California 456 1.44% 485 1.48% 422 1.29% 354 1.14% 347 1.13% 346 1.28% 336 1.24% 370 1.38% 508 1.83% Bradley Real Estate 280 0.89% 435 1.33% 418 1.28% 385 1.24% 369 1.21% 376 1.39% 350 1.30% Macy's 380 1.16% 380 1.22% 380 1.24% 380 1.41% 450 1.67% 445 1.66% Wells Fargo Baok 310 0.98% 326 0.99% 306 0.94% 308 0.99% 334 1.09% FICO 300 0.91% Fair Issac Corp 300 0.92% 300 0.96% 350 1.26% Community Action Marin 255 0.81% 220 0.67% 225 0.69% 300 0.96% 300 0.98% Safeway 841 3.11% 452 1.67% 452 1.68% Comcast 620 2.30% 619 2.29% 619 2.30% Guide Dogs for the Blind 203 0.64% 225 0.69% 287 1.07% Bernard Osher Marin lCC 200 0.61% Buckelew Programs 240 0.76% 186 0.57% Ghilotti Bros. 175 0.55% 150 0.46% 240 0.86% Golden Gate Bridge Highwav & Transp. DisL 828 2.98% YMCA 348 1.25% San Rafael City High School District 250 0.90% Urban Painting, Inc. 150 0.46% Totals 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% 7,199 25.90% # Number of FIE employees in Marin locations (Al Percentage of total employment Note: From the EDD website, it shows that the Total 2017 Employment in the City of San Rufael was 31,600 of which it is used as the denominator lor the 2017 percentages are calculated. , The number ortotnl employment lor the Cityis available for the lust nine fiscal years only. Data Sources: State ofCaUfomlu, Emplo)went Development Department, Labor Market InformnHon Dh15lon & North Bay Business Journal (Annual Book ofUsts) 167 Function CITY OF SAN RAFAEL FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS ~r-------------------------r 450.00 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 o General Government o Public Works and Parks Culture and Recreation 2008 2009 2010 o Public Safety III Community Development 2011 2012 2013 2014 400.00 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 2015 General Government 59.88 58.88 56.88 54.35 55.23 53.23 55.11 58.11 2016 60.61 Public Safety 186.00 183.00 165.00 166.00 162.00 163.00 168.00 171.75 175.75 Public Works and Parks 78.80 78.80 60.80 62.80 62.00 60.00 6l.00 62.00 62.00 Community Development 34.50 34.50 26.75 26.75 18.25 18.25 17.80 17.80 19.80 Culture and Recreation 85.90 85.90 83.49 89.82 8l.56 80.76 83.66 84.23 84.25 Total 445.08 441.08 392.92 399.72 379.04 375.24 385.57 393.89 402.41 Data Source: City of San Rafael's Finance Department 168 2017 62.11 176.55 63.00 20.00 84.35 406.01 CITY OF SAN RAFAEL OPERATING INDICATORS BY FUNCTIONIPROGRAM LAST TEN FISCAL YEARS 2008 FunctionlProgram Public safety: Fire: Inspection permit issued 217 196 Police: Police calls for service 43,488 42,227 Law violations: Part I crimes 2,314 2,352 Physical arrests (adult and juvenile) 4,182 4,487 Traffic violations 9,241 5,777 Parking violations 42,481 44,913 Public works Street resurfacing (miles) (Eng Div) 4.95 2.77 Potholes repaired (square miles) N/A N/A Asphalt used for street repairs (tons) N/A N/A Culture and recreation: Recreation class participants 8,000 8,000 Items in collection (thousands) Library: Items in collection (thousands) N/A 124.40 Total items borrowed (thousands) N/A N/A Note: NIA denotes information not available. 170 2010 2011 307 294 42,227 39,512 2,352 2,180 4,487 3,102 5,777 8,190 42,806 34,590 2.77 7.40 N/A N/A N/A 10,809 9,524 9,000 151.88 158.30 371.12 435.66 2012 2013 2014 2015 2016 2017 282 307 261 282 198 233 39,537 42,707 51,261 55,805 57,026 53,567 2,101 2,523 2,289 2,533 2,523 2,392 2,981 2,951 3,227 3,450 3,453 2,526 4,048 3,448 4,498 4,168 3,252 3,341 32,492 30,881 38,814 36,398 34,803 36,169 N/A 2.70 9.00 6.40 6.76 2.32 N/A N/A N/A N/A N/A N/A 178.9 7,500 10,700 11,000 7,195 5,800 12,075 7,082 9,857 10,023 12,725 13,493 159.18 125.92 168.62 127.76 227.89 117,354 366.46 392.23 478.96 443.64 469.79 327,297 171 CITY OF SAN RAFAEL CAPITAL ASSET STATISTICS BY FUNCTIONIPROGRAM LAST TEN FISCAL YEARS 2008 2009 2010 FunctionlProgram Public safety: Fire stations 6 6 6 Police stations Police Fleet Public works Miles of streets 173 173 173 Street lights 4,435 4,435 4,435 Parking District lights Traffic Signals 89 89 89 Culture and recreation: Community services: City parks 20 20 20 City parks acreage 42 42 42 Playgrounds 14 14 14 City trails 20 20 20 Community gardens 1 1 1 Community centers 4 4 4 Senior centers 0 0 0 Sports centers 0 0 0 Performing arts centers 0 0 0 Swimming pools 1 1 Tennis courts 10 10 10 Basketball Courts 5 5 5 Baseball/softball diamonds 5 5 5 Soccer/football fields 2 2 2 Library: City Libraries 2 2 Wastewater: Miles of sanitary sewers 179 179 179 Data Source: City of San Rafael's Finance Department 172 6 173 4,435 89 20 42 14 20 4 0 0 0 10 5 5 2 2 179 2012 6 173 4,435 89 20 42 14 20 1 4 0 0 0 1 10 5 5 2 2 179 2013 6 173 4,435 89 20 42 14 20 1 4 0 0 0 10 5 5 2 2 179 2014 6 173 4,435 89 20 42 14 20 1 4 0 0 0 10 5 5 2 2 145 2015 6 1 173 4,435 89 20 42 14 20 1 4 0 0 0 1 10 5 5 2 2 145 2016 6 1 173 4,435 89 20 42 14 20 4 0 0 0 1 10 5 5 2 2 145 173 2017 6 173 4,435 89 20 42 14 20 1 4 0 0 0 1 10 5 5 2 2 145 M INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED UPON PROCEDURES FOR COMPLIANCE WITH THE PROPOSITION 111 2017-2018 APPROPRIATIONS LIMIT INCREMENT Honorable Mayor and Members of the City Council City of San Rafael, California MAZE &ASSOCIATES 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, 2017. 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 XnIB Appropriations Limitation Uniform Guidelines, were performed solely to assist you in meeting the requirements of Section 1.5 of Article Xlrrn 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 report 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 2017-2018 Appropriations Limit of $128,732,737 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 2017-2018 Appropriations Limit by mUltiplying the 2016-2017 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 Factor 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 reported 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. Pleasant Hill, California September 28, 2017 Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hi ll, CA 94523 T 925.930.0902 F 925 .930.0135 E maze@mazeassociates.com w mazeassociates.com CITY OF SAN RAFAEL MEMORANDUM ON JNTERNAL CONTROL AND REQUIRED COMMUNICATIONS FOR THE YEAR ENDED JUNE 30, 2017 This Page Left Intentionally Blank CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL AND REQUIRED COMMUNICATIONS For The Year Ended June 30, 2017 Table of Contents Memorandum on Internal Control ................................................................................................... 1 Schedule of Other Matters ....................................................................................................... 3 Status of Prior Year Significant Deficiencies ......................................................................... 5 Required Communications ................................................................................................................ 7 Significant Audit Findings ............................................................................................................ 7 Accounting Policies ................................................................................................................ 7 Unusual Transactions, Controversial or Emerging Areas .................................................... 8 Accounting Estimates ............................................................................................................. 8 Disclosures ............................................................................................................................... 9 Difficulties Encountered in Performing the Audit.. .............................................................. 9 Corrected and Uncorrected Misstatements ............................................................................ 9 Disagreements with Management .......................................................................................... 9 Management Representations .................................................................................................. 9 Management Consultations with Other Independent Accountants ...................................... 9 Other Audit Findings or Issues .............................................................................................. 10 Other Information Accompanying the Financial Statements ..................................................... 10 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, 2017, and have issued our report thereon dated September 28, 2017. 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. t){l a~~ j ~o~ Pleasant Hill, California September 28, 2017 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 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 two years. We have cited them here to keep you abreast of developments: Effective in fiscal year 2017-18: GASB 81 -Irrevocable Split-Interest Agreements This Statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this Statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This Statement requires that a government recognize revenue when the resources become applicable to the reporting period. GASB 85-Omnibus 2017 The objective of this Statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEBD. GASB 86-Certain Debt Extinguishment Issues The primary objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources-resources other than the proceeds of refunding debt-are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. Effective in fiscal year 2018-19: GASB 83 -Certain Asset Retirement Obligations This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. 3 This Page Left Intentionally Blank 2016 -01: CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL STATUS OF PRIOR YEAR SIGNIFICANT DEFICIENCIES Internal Controls over Revenue at Community Center Current Year Status: Recommendation implemented. 2016 -02: Timely Preparation and Review of Bank Reconciliations Current Year Status: Recommendation implemented. 2015 -1: Accuracy of Special Assessment Tax Rolls Current Year Status: Recommendation implemented. 2015 --2: Internal Control over Employee Benefits and Claims Activities Current Year Status: Recommendation implemented. 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, 2017. We did not audit the financial statements of the San Rafael Sanitation District, as of and for the year ended June 30, 2017, which represent 19%, 35%, and 15% 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 Government 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 follows: The following Governmental Accounting Standards Board (GASB) pronouncements became effective, but did not have a material effect on the financial statements: GASB 73- GASB 74- GASB 77- GASB 80- GASB 82- Accountancy Corporation 3478 Buskirk Avenue , Suite 2 15 Pleasant Hill , CA 94523 Accounting and Financial Reporting (or Pensions and Related Assets That A re Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 Financial Reporting for Post-employment Benefit Plans Other Than Pension Plans Tax Abatement Disclosures Blending Requirements for Certain Component Units-an amendment of GASB Statement No. 14 Pension Issues-an amendment of GASB Statements No. 67 , No. 68, and No. 73 7 T 925 .930.0902 F 925 .930.0135 E maze@ mazeassociat es .com w mazeassociates.com ~' I - The following GASB pronouncement becomes effective in fiscal year 2018. However, the City elected to adopt the provisions of this statement in fiscal year 2017. As disclosed in Note 1 to the financial statements, this statement required a prior period adjustment for the cumulative effect on the financial statements. GASB Statement No. 75 -Accounting and Financial Reporting (or Postemployment Benefits Other Than Pensions The objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (OPEB). The Statement replaces the requirements of Statements No. 45 Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. 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. 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 was (were): • Estimated Net Pension Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management's estimate of the net pension liabilities and deferred outflows/inflows of resources are disclosed in Note 9 to the financial statements and are based on actuarial studies detennined bya 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: Management's estimate of the net OPEB liability is disclosed in Note 11 to the financial statements and is based on actuarial study determined by a consultant, which is 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. 8 • Estimated Fair Value of Investments: As of June 30, 2017, cash and investments were measured by fair value. Fair value is essentially market pricing in effect as of June 30, 2017. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2017. 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/certain 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. 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 m a management representation Jetter dated September 28, 2017. 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. 9 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 normal 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 information. 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. We were not engaged to report on the Introductory and Statistical Sections which accompany the fmancial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic fmancial statements, and accordingly, we do not express an opinion or provide any assurance on it. ****** This information 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. Very truly yours, tWl",~e ~ ~~~ Pleasant Hill, California September 28, 2017 10 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2017 This Page Left Intentionally Blank CITY OF SAN RAFAEL CBILDDEVELOPMENTPROGRAM FOR THE YEAR ENDED JUNE 30, 2017 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 Awards ..... '" ....................................................................................................... , .............. 1 0 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: CSPP6261 -California State Preschool Programs ............................................................................ 15 Audited Reserve Account Activity Report ....................................................................................... 17 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 ........................................................................ 19 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 as of and for the year ended June 30, 2017 , 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. Accountancy Corporation 3478 Buski rk Aven ue , Suite 215 Pleasant Hill , CA 94523 T 925 .930 .0902 F 925.930.0135 E maze@mazeassociates.com 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, 2017, and changes in financial position for the year then ended in conformity 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 Infonnation 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 September 28, 2017 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. IYVl Ct 1, e-i" f)OO~ Pleasant Hill, California September 28, 2017 2 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BALANCE SHEET JUNE 30,2017 ASSETS Cash (Note 3) Grants receivable (Note 4) Prepaid expense Total Assets LIABILITIES AND FUND BALANCE Accounts payable Total Liabilities Fund balance, unassigned (Note 5) Total Liabilities and Fund Balance See accompanying notes to financial statements 3 $1,374,316 40,594 3,670 $1,418,580 $48,436 48,436 1,370,144 $1,418,580 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2017 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 CHANGE IN FUND BALANCE FUND BALANCE, Beginning of year End of year See accompanying notes to financial statements 4 $196,122 16,467 95,163 21,500 4,177 3,724,333 11,939 4,069,701 1,940,680 46,237 1,313,842 297 1,553 145,220 34,865 2,862 18,130 286,893 29,888 32,234 700 3,853,401 216,300 1,153,844 $1,370,144 I NOTE 1-ORGANIZATION CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2017 The City of San Rafael operates the Child Development Program encompassing nine 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. I NOTE 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 measureable 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, 2017 INOTE 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) m 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 MarketlMutual 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 defmed as Levell, Level 2, or Level 3 input. 6 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30,2017 I NOTE 4 -GRANTS RECEIVABLE The Program has the following grants receivable at June 30, 2017: Agency Grant Marin County First 5 Grant Total I NOTE 5 -FUND BALANCES Amount $40,594 $40,594 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 ofthe 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 Councilor its designee and may be changed at the discretion of the City Councilor 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 30,2017 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 30,2017, 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 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Pass-Through Grantor Award Program CFDA# # Amount Federal Awards US Department of Housing and Urban Development, Pass-through the County of Marin Community Development Block Grant 14.218 HUD-04527-01-15 $16,477 Total Federal Awards $16,477 State Awards State of California Department of Education Child Development Division State Preschool Program FY2017 CSPP-6261 $196,122 Total State A wards $196,122 County Award County of Marin First Five -Preschool CSRl-21-009-1O $95,163 Local Awards Marin Child Care Council N/A $16,000 Marin County Office of Education N/A 5,500 Total Local Awards $21,500 Total State, Federal Awards, and Local $329,262 10 Revenue Expenditures $16,477 $16,477 $16,477 $16,477 $196,122 $244,294 $196,122 $244,294 $95,163 $95,163 $16,000 $16,000 5,500 5,500 $21,500 $21,500 $329,262 $377,434 CITY OF SAN RAP AEL CHILD DEVELOPMENT PROGRAM COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30,2017 State Preschool Program Total CDE Non-CDE (CSPP 6261) CD Contracts Programs REVENUES State grants: Current year grants $196,122 $196,122 CDBG preschool grant $16,467 First Five school readiness grants 95,163 Local grants 21,500 Interest 4,177 Parent fees -noncertified children 3,724,333 Other 11,939 Total Revenues 196,122 196,122 3,873,579 EXPENDITURES Certified salaries 69,905 69,905 1,870,775 Classified salaries 46,237 46,237 Employee benefits 96,443 96,443 1,217,399 Training and instruction 297 Office supplies 1,553 Books and supplies 14,849 14,849 130,371 Utilities and housekeeping services 34,865 Travel and conference 2,862 Rentals 18,130 Services and other operating expenditures 16,860 16,860 270,033 Equipment 29,888 Insurance 32,234 Renovation and repair 700 Total Expenditures 244,294 244,294 3,609,107 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (48,172) (48,172) 264,472 TRANSFERS Transfers in from other programs 100,000 100,000 Transfers out to other programs (100,000) CHANGE IN FUND BALANCE $51,828 $51,828 $164,472 11 Total $196,122 16,467 95,163 21,500 4,177 3,724,333 11,939 4,069,701 1,940,680 46,237 1,313,842 297 1,553 145,220 34,865 2,862 18,130 286,893 29,888 32,234 700 3,853,401 216,300 100,000 (100,000) $216,300 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EXPENDITURES BY STATE CATEGORIES FOR THE YEAR ENDED JUNE 30, 2017 CSPP-6261 State Preschool Program Totals EXPENDITURES: /1000 Certified personnel salaries $69,905 1100 Teachers' salaries 69,905 1200 Administration 1300 Supervisors' salaries 1600 Infant educators /2001 Classified personnel salaries $46,237 2100 Instructional aides' salaries 46,237 2300 Clerical and other office salaries 2400 Maintenance and operations salaries 2500 Food services salaries 2600 Transportation salaries /3000 Employee benefits $96,443 3200 Payroll taxes (Medicare) 1,727 3300 Other benefits 66,736 3400 Health and welfare 26,177 3600 Workers' compensation insurance 1,803 /4000 Books and supplies $14,849 4200 Other books 4300 Instructional materials and supplies 14,849 4500 Other supplies 4600 Food supplies /5000 Services and other operating expenditures $16,860 5100 Lecturer 5200 Travel and conferences 5300 Memberships and dues 5400 Insurance 1,575 5500 Utilities and housekeeping services 1,268 5600 Rentals, leases and repairs 3,011 5700 Audit expense 5800 Other direct services & admin. 11,006 /6000 Capital Outlay 6100 Sites and improvements of sites 6200 Buildings and improvements of buildings 6400 Equipment (prograrri-related) 6500 Equipment replacement (program related) I Depreciation Costs ca italized as Fixed Assets ONREIMBURSABLE EXPENDITURES $244,294 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, regulations, and contract provisions. 12 $69,905 / 69,905 $46,237 / 46,237 $96,443 / 1,727 66,736 26,177 1,803 $14,849 I 14,849 $16,860 I 1,575 1,268 3,011 11,006 I $244,294 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF REIMBURSABLE ADMINISTRATIVE COSTS FOR THE YEAR ENDED JUNE 30, 2017 Administrative Costs (Audit Fees) Total Administrative Costs 13 CSPP-6261 State Preschool Program $7,210 $7,210 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EQUIPMENT EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2017 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 RENO V A TION AND REP AIR EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2017 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 AUDITED ATTENDANCE AND FISCAL REPORT for California State Preschool Programs Agency Name: City of San Rafael Child Development Program Vendor No. 21-2193 June 30,2017 Contract No. CSPP 6261 Iindependent Auditor's Name: Maze & Associates r.nIIIMN.A COLUMN B COLUMN C r.nI IIMIII D COLUMN E SECTION I -CERTIFIED CHILDREN DAYS OF ~~J~NRnl ~~~~ ENROLLMENT FISCAL PER AUDIT CUMULATIVE FISCAL ADJUSTMENT FORM CDFS 8501 ADJUSTMENTS YEAR PER AUDIT FACTOR Three and Four Year Olds Full-time-plus --1.1800 - Full-time --1.0000 - Three-quarters-time -0.7500 - UI,e','o"-u,,,e 8,398 8,398 0.6196 5,203.401 Exceptional Needs FuJl-ti m .... nlo ,~ --1.4160 - Full-time --1.2000 - Three-quarters-time --0.9000 - One-half-time --0.6196 - Limited and f\,,)r-~nylish )roficit:l,f 1=, oIU;m"_nlo,~ --1.2980 - FUll-time --1.1000 - Th, ee-'-!uo"e, "-,;,,,e --0.8250 - One-half-time --0.6196 At Risk of Abuse or Neglect """IU;, III~ --1.2980 - Full-time --1.1000 - Three-n' --0.8250 - un""""I,-,;,,,e 0.6196 Severely Disabled Full-tin,,,-pluQ --1.7700 - Full-\Lme_ --1.5000 - Thre",-n, 'i' --1.1250 0.6196 iTOTAL DAYS OF ENROLLMENT 8,398 8,398 &; ?m .d./")1 iDAYS OF OPERATION 175 175 'DAYS OF ATTENn.t.N~E 8,3~8 8~39~ 0 NO NONCERTIFIED CHILDREN -Check this box, omit page 2, and continue to Section III if no non certified CUll '" ,e, "" -If """"QQO' y, attach additional sheets to explain adjustment!>. AUD 8501, Page 1 of 4 (FY 2016-17) California Department of Education 15 AUDITED ATTENDANCE AND FISCAL REPORT for California State Preschool Programs Agency Name: Ci!l of San Rafael Child Develoement Program Vendor No. 21-2193 Fiscal Year End: June 30,2017 Contract No. CSPP 6261 COLUMN A COLUMN B COLUMN C CUMULATNE FISCAL AUDIT YEAR PER FORM ADJUSTMENT CUMULATNE FISCAL YEAR PER CDFS 8501 INCREASE DR AUDIT SECTION III -REVENUE (DECREASE) RESTRICTED INCOME Child Nutrition Programs $0 County Maintenance of Effort (EC ~ 8279) a Uncashed Checks to Providers a Other (Specify): 0 OtheUSjJecify): a Subtotal $0 $0 $0 Transfer from Reserve -General 0 Transfer from Reserve -Professional Development a Subtotal $0 $0 $0 Family Fees for Certified Children 0 Interest Earned on Apportionments 0 UNRESTRICTED INCOME Family Fees for Noncertified Children 0 Head Start Pro~ram (EC ~ 8235(b)) a Other (Specify): 0 Other (Specify): 0 TOTAL REVENUE $0 $0 $0 SECTION IV -REIMBURSABLE EXPENSES Direct Payments to Providers_(FCCH Only) $0 1 000 Certificated Salaries 69,905 69,905 2000 Classified Salaries 46,237 46,237 3000 Employee Benefits 96,443 96,443 4000 Books and Supplies 14,849 14,849 5000 Services and Other Operating Expenses 16,860 16,860 6100/6200 Other Approved Capital Outlay 0 6400 New EquijJment (program-related) 0 6500 Replacement Equipment (program-related) 0 Depreciation or Use Allowance 0 Start-Up Expenses (service level exemption) 0 Bud~et Impasse Credit 0 Indirect Costs Rate: 0.00% (Rate is Self-Calculating) 0 TOTAL EXPENSES CLAIMED FOR REIMBURSEMENT $244,294 $0 $244,294 TOTAL ADMINISTRATIVE COSTS lin,'"d.din""onIV.b~.) $7,210 $7,210 FOR CDE-A&I USE ONLY: Independent Auditor's Assurances on Agency's compliance with Contract Funding Terms and Conditions and Program Requirements of the California Department of Education, Earty Education and Support Division: Eligibility, enrollment, and attendance records are being maintained as required (check YES or NO): COMMENTS -If necessary. attach additional sheets to explain adjustments: 1-'1 Adjustments identified in Column B are adjustments made to report audit fees as administrative costs. o NO -Explain any discrepancies. Reimbursable expenses claimed above are eligible for reimbursement, reasonable, necessary. and adequately supported (check YES or NO): 1-'1 YES I I NO -Explain any discrepancies. 1-'1 NO SUPPLEMENTAL REVENUES OR EXPENSES -Check this box and omit paoe 4 if thene are no supplemental revenues AUD 8501, Page 3 of 4 (FY 2016·17) California Department of Education 16 AUDITED RESERVE ACCOUNT ACTIVITY REPORT Agency Name: City of San Rafael Child Development Program Fiscal Year End: June 30,2017 Vendor No. 21-2193 Independent Auditor's Name: Maze & Associates RESERVE ACCOUNT TYPE (Check One): COLUMNA COLUMN B COLUMN C 0 Center Based AUDIT PER AGENCY ADJUSTMENT PER AUDIT 0 Resource and Referral INCREASE OR 0 Altemative Payment (DECREASE) LAST YEAR: 1. Beginning Balance (must equal ending balance from Last Year's AUD 9530-A) $0 2. Plus Transfers from Contracts to Reserve Account (based on last year's post-audit CDFS 9530, Section IV): Contract No. CSPP 5253 $0 Contract No. 0 Contract No. 0 Contract No. 0 Contract No. 0 Contract No. 0 Total Transferred from Contracts to Reserve Account $0 $0 $0 3. Less Excess Reserve to be Billed (enter as a positive amount any excess amount calculated by CDFS on last year's post-audit CDFS 9530) $0 4. Ending Balance on Last Year's Post-Audit CDFS 9530 $0 $0 $0 THIS YEAR: 5. Plus Interest Earned This Year on Reserve Funds (column A must agree with this year's CDFS 9530-A, Section II) $0 6. Less Transfers to Contracts from Reserve Account (column A amounts must agree with this year's CDFS 9530-A, Section III; and column C amounts must be reported on this year's AUD forms for respective contracts): CSPP -General Contract No. CSPP 6261 $0 Contract No. 0 CSPP -Professional Development Contract No. $0 Contract No. 0 Subtotal $0 $0 $0 Other Contracts Contract No. $0 Contract No. 0 Contract No. 0 Contract No. 0 Contract No. 0 Subtotal $0 $0 $0 Total Transferred to Contracts from Reserve Account $0 $0 $0 7. Ending Balance or June 30, 2017 (column A must agree with this year's CDFS 9530·A, Section IV) $0 $0 $0 COMMENTS· If necessary, attach additional sheets to explain adjustments: AUD 9530·A, Page 1 of 1 (FY 2016-17) 17 California Department of Education This Page Left Intentionally Blank MAZE & ASSOCIATES 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 A UDITING 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), as of and for the year ended June 30,2017, and the related notes to the financial statements, and have issued our report thereon dated September 28, 2017. 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 detennine 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 Otlter 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, Su ite 215 Pl easant Hill , CA 94523 19 T 925.930.0902 F 925.930.0135 E maze@mazeassoc iates.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. 'ht~{>1~~ Pleasant Hill, California September 28, 2017 20 CITY OF SAN RAFAEL SINGLE AUDIT REPORT FOR THE YEAR ENDED JUNE 30, 2017 This Page Left Intentionally Blank CITY OF SAN RAFAEL SINGLE AUDIT REPORT For The Year Ended June 30, 2017 TABLE OF CONTENTS Schedule of Findings and Questioned Costs .............................................................................. 1 Section I -Summary of Auditor's Results ........................................................................... 1 Section II -Financial Statement Findings ........................................................................... 2 Section III -Federal Award Findings and Questioned Costs ............................................. 2 Schedule of Expenditures of Federal Awards ............................................................................ 3 Notes to Schedule of Expenditures of Federal Awards ............................................................. 5 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 ...................... 7 Independent Auditor's Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance ........... 9 This Page Left Intentionally Blank CITY OF SAN RAFAEL SCHEDULE OF FINDINGS AND QUESTIONED COSTS For The Year Ended June 30, 2017 SECTION I-SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued on whether the financial statements were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: • Material weakness( es) identified? Yes • Significant deficiency(ies) identified? Yes Noncompliance material to financial statements noted? Yes Federal Awards Type of auditor's report issued on compliance for major programs: Unmodified Internal control over major programs: • Material weakness( es) identified? Yes • Significant deficiency(ies) identified? Yes Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.5 l 6(a)? Yes Identification of major programs: CFDA#(s) Name of Federal Program or Cluster 20.205 Highway Planning and Construction x x x x x x Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? x Yes No None Reported No No None Reported No No SECTION II -FJNANCIAL STATEMENT FINDJNGS Our audit did not disclose any significant deficiencies, or material weaknesses or instances of noncompliance material to the basic fmancial statements. We have also issued a separate Memorandum on Internal Control dated September 28, 2017 which is an integral part of our audits and should be read in conjunction with this report. SECTION ill -FEDERAL AWARD FJNDJNGS AND QUESTIONED COSTS Our audit did not disclose any fmdings or questioned costs required to be reported in accordance with Uniform Guidance. 2 CITY OF SAN RAFAEL SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS For the Fiscal Year Ended June 30, 2017 Federal Grantor/ Pass-Through Grantor/Program or Cluster Title U.S. Department of Housing and Urban Development Pass-Through County of Marin, California Community Development Block Grants/ Entitlement Grants Childcare ADA I DOJ Compliance Curb Ramps Total U.S. Department of Housing and Urban Development U.S. Department of Health and Human Services Pass-Through the California Health and Human Services Agency Medical Assistance Program Department of Health Care Services -Ground Emergency Medical Transportation Pass-Through County of Marin, California Special Programs for the Aging Title III, Part B -Grants for Supportive Services and Senior Centers Total U.S. Department of Health and Human Services U.S. Department of Transportation, Pass-Through Programs Pass-Through State of California Department of Transportation Highway Planning and Construction Downtown Rail Readiness Project Southern Heights Bridge Replacement Del Presidio Blvd. -Pt. San Pedro Resurfacing SR Downtown Integrated Transit Center Study SR Downtown Parking and Wayfinding Study Subtotal for Highway Planning and Construction State and Community Highway Safety 2nd Street at Grand Ave Intersection Modification Pass-Through California Office of Traffic Safety State and Community Highway Safety Selective Traffic Enforcement Program FY2016 Selective Traffic Enforcement Program FY2017 Subtotal for State and Community Highway Safety Pass-Through California Office of Traffic Safety Minimum Penalties for Repeat Offenders for Driving While Intoxicated Avoid Grant FY 15-16 Total U.S. Department of Transportation 3 Federal CFDA Number 14.218 14.218 93.778 93.044 20.205 20.205 20.205 20.205 20.205 20.600 20.600 20.600 20.608 Pass-Th rough Identifying Number HUD-04527-01-15 HUD-4536-01-16 SFY 2013-14 10-204 CML-5043(036) BRL0-5043(038) STPL-5043 (035) RSTPL-6406(014) RSTPL-6406(014) HISPL 5043 (037) PT1673 PT17115 AL1628 Federal Expenditures $ 16,447 190,373 206,820 55,306 9,994 65,300 308,014 182,302 20,897 41,771 11,554 564,538 3,845 67,408 48,365 119,618 58,030 742, 186 (Continued) CITY OF SAN RAFAEL SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS For the Fiscal Year Ended June 30, 2017 Federal Grantor/ Pass-Through Grantor/Program or Cluster Title U.S. Department of Justice, Direct Program Bulletproof Vest Partnership Program PD Vest Grant 2017 Total U.S. Department of Justice U.S. Department of Homeland Security, Pass-Through Programs Pass-Through County of Marin, California Homeland Security Grant Program Marin County CERT FY 2015 Total U.S. Department of Homeland Security Total Federal Expenditures Federal CFDA Number 16.607 97.067 Pass-Through Identifying Number SHSGP-2015 See Accompanying Notes to Schedule of Expenditures of Federal Awards 4 Federal Expenditures 18,570 18,570 27,650 27,650 $ 1,060,526 CITY OF SAN RAFAEL NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS For The Year Ended JUNE 30, 2017 NOTE 1 -REPORTING ENTITY The Schedule of Expenditure of Federal Awards (the Schedule) includes expenditures of federal awards for the City of San Rafael, California, and its component units as disclosed in the notes to the Basic Financial Statements, except for federal awards of the San Rafael Sanitation District (District). Federal awards expended by this entity, if any, are excluded from the schedule and are subject to a separate Single Audit performed by other auditors. NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements, regardless of the measurement focus applied. All governmental funds and agency funds are accounted for using the modified accrual basis of accounting. All proprietary funds are accounted for using the accrual basis of accounting. Expenditures of Federal Awards reported on the Schedule are recognized when incurred. NOTE 3 -INDIRECT COST ELECTION The City has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. 5 This Page Left Intentionally Blank 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 financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units , each major fund, and the aggregated remaining fund information of the City as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated September 28 , 2017 . Our report includes a reference to other auditors who audited the financial statements of the San Rafael Sanitation District, as described in our report on the City's financial statements . This report does not include the results of the other auditors' testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Our report included an emphasis of a matter paragraph disclosing the implementation of new accounting principles . Internal Control Over Financial Reporting In planning and performing our audit of the financial statements , we considered City'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 City's internal control. Accordingly, we do not express an opinion on the effectiveness of 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. 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. Accou nta ncy Corporation 34 78 Buskirk Aven ue, Suite 2 15 Pl easant Hill , CA 94523 7 T 925 .930 .0902 F 925 .930.0 135 E m aze@mazeassoc iates .com w rnazeassociates.corn Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 'W\.(}.l,Cl.-i ~Mo~ Pleasant Hill, California September 28, 2017 8 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Members of the City Council City of San Rafael, California Report on Compliance for Each Major Federal Program We have audited City of San Rafael's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended June 30, 2017. The City's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with the requirements of federal statutes, regulations, and terms and conditions of federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the City's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 US. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program . However, our audit does not provide a legal determination of the City's compliance. Opinion on Each Major Federal Program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year e nded Jun e 30, 2017 . Accountancy Corporation 3478 Buskirk Avenue , Suite 2 15 Pleasant Hill, CA 94523 9 T 925 .930 .0902 F 925 .930 .0135 E maze@ mazeassociat es.com w mazeassociates.com Report on Internal Control Over Compliance Management is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Unifonn Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2017. We have issued our report thereon dated September 28, 2017 which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the fmancial statements. The information has been subjected to the auditing procedures applied in the audit of the fmancial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. ty{lCl.1e. 'l 1\M'~ Pleasant Hill, California September 28, 2017 10 STAFF REPORT APPROVAL ROUTING SLIP Staff Report Author: Mark Moses Date of Meeting: 12/18/2017 Department: Finance Department Topic: FY17 Year End Financial Audit Subject: FY17 Year End Financial Audit Type: (check all that apply) ☐ Consent Calendar ☐ Public Hearing ☒ Discussion Item ☐ Resolution ☐ Ordinance ☐ Professional Services Agreement ☐ Informational Report *If PSA, City Attorney approval is required prior to start of staff report approval process Was agenda item publicly noticed? ☐ Yes ☐No Date noticed: ☐Mailed ☐Site posted ☐Marin IJ Due Date Responsibility Description Completed Date Initial / Comment DEPARTMENT REVIEW FRIDAY noon 12/1 Director Director approves staff report is ready for ACM, City Attorney & Finance review. 12/1/2017 ☒ MM CONTENT REVIEW MONDAY morning 12/4 Assistant City Manager City Attorney Finance ACM, City Attorney & Finance will review items, make edits using track changes and ask questions using comments. Items will be returned to the author by end of day Wednesday. Click here to enter a date. 12/5/2017 Click here to enter a date. ☒ ☒ LG ☒ DEPARTMENT REVISIONS FRIDAY noon 12/8 Author Author revises the report based on comments receives and produces a final version (all track changes and comments removed) by Friday at noon. Click here to enter a date. ☒ ACM, CITY ATTORNEY, FINANCE FINAL APPROVAL MONDAY morning 12/11 Assistant City Manager City Attorney Finance ACM, City Attorney & Finance will check to see their comments were adequately addressed and sign-off for the City Manager to conduct the final review. Click here to enter a date. Click here to enter a date. 12/11/2017 ☒ ☒ ☒ MM TUES noon 12/12 City Manager Final review and approval 12/13/2017 ☒ JS