HomeMy WebLinkAboutAgenda Report - January 3, 2007 K-01AWMA ffEM KIP I
AdMilli
AIIR CITY cam` Low
%W COUNCIL COMMUNICATION
TV
AGIENCA TF'LE: Regi arnf fdp the City's C ent
rehefoWe Annual financial Rep
(FiscaYew 2 -66) by Vlachs, ON & O'Connell, LLP
MEETII BATE: January 3, 2007
PREPA B BY: Financ (of Services Manager
RecoaftNOW ACTION: Receive and file the following reports and financial stahwnents
submitted by Macias, Gini & O'Connell, LLP and the Finance
Department for Fiscal -Year 2005-05:
The Combined Annual Financial & Single Audit Report
Management Report
Report on Applying Agreed-upon Procedures
BACKOR INFORMA'NON: The annual audit was conducted to assure the City Council and
other interested parties that the City's financial records and reports
are prepared in accordance with generally accepted accounting
principles (GAAP), that internal controls are adequate to safeguard the City against loss from
unauthorized use or dispositipn of assets and that the City has complied with all agreements and
covenatns to obtain grant funds and debt financing. Macias, Gini & O'Connell, LLP ("MGO") issued an
"unquaBied opinion." Scott Wunner, Director of MGO will be present to do the presentation and answer
questio0s during the Council neeting.
The reports will be provided to Federal and State oversight agencies, band trustees and insurance
compares for their review a6d evaluation. Copies of the reports are provided to the City Council and
also available to the public by contacting the Financial Services Division or the City's website at
www.lg i.Qoy and at the Lodt Public Library.
The audtors will report to the Council on Governmental Accounting Standards Board statement number
45.
Certlfi to of Achievement
The Ci received a Certifies of Achievement for Excellence in Reporting from the Government Finance
Officer* Association of United States and Canada (GFOA) for the 13t year and the California Society of
Municio.al Finance Officers (�SMFO) for the ninth year in a row. A copy of the GFOA certificate is
inciudeW in the 2005-06 Finsincial Reports.
FU NDOG: None
_�. 2a%c�Gt.r
Ruby. Paletsl Financial Services Amager
APPROVED:
King, City
CITY OF LODI
AUrreed-Upon Procedures Report l+ or
Gann Appropriations Limit
For the Fiscal Year Ended .lune )0.2006
MACIAS GINI & COMPANYLLP
CERTIFIED PUBLIC ACCOUNTANTS & MANAGEMENT CONSULTANTS
MACIAS C1NI & COMPANYLLP
3000 S Street, Ste. 300
Sacramento, Callfornla 95816
PHONE
916-928.2755 FAX
Cite Council
Lodi. California
INDEPENDENT ACCOUNTANTS REPORT
O"N7 APPLYING AGREED-UPON PROCEDURES
RELATED TO THE ARTICLE XIIIB
APPROPRIATIONS LIMIT CALCULATION
We have performed the procedures enumerated below to the accompanying Appropriations
Limit Worksheet of the City of Lodi. California (City) for the fiscal year ended ,lune 30, 2006.
These procedures. which were agreed to by the City Council of the City of Lodi. California, and
the Lea-ue of California Cities (as presented in the publication entitled Agreed --upon Procedures
Applied to the Apprvhr: ations Limitation Prescribed bz, Article XIII -B of the C'alifnrnia
Constitutions), were performed solely to assist the Cite in meeting the requirements of Section
1. of Article XIIIB of the California Constitution. The City management is responsible for the
Appropriations Limit Worksheet. This agreed-upon procedures engagement was conducted in
accordance with attestation standards established by the American Institute of Certified Public
Accountants. The sufficiencv of the procedures is solely the responsibility of those parties
specified in this report. Consequently. we make no representation regarding the sufficiency of
the procedui cs described heIWAI either for the purpose for which this report has been requested or
for any other purpose.
The procedures performed and our findings were as follows:
We obtained the City's reports setting forth the calculations necessary to establish the
City's appropriations limit and documentation utilized to calculate such limit for
fiscal year 2005-06.
Finding: No exceptions were noted as a result of our procedures.
?. We determined that the current appropriations limit and annual adjustment factors
used to calculate the appropriations limit for fiscal year 200-06 set forth in the
accompanying Appropriations Limit Worksheet and the aforementioned City reports.
were adopted by resolution of the Cite Council. We also determined that the
population and inflation options were selected by a recorded vote of the City Council.
Finding: No exceptions were noted as a result of our procedures.
www.maclasgini.com CERTIFIED PUBLIC ACCOUNTANTS d MANAGEMENT CONSULTANTS
�. For the accompanyin( Appropriations Limit Worksheet. we added the appropriations
limit. fiscal year 2004-05_ amount to the annual adjustment amount and agreed the
resulting amount to the appropriations limit. fiscal year 2005-06. as adopted. amount.
Finding: No exceptions were noted as a result of our procedures.
4. We a -reed the current near information presented in the accompanying
Appropriations Limit Worksheet to the appropriate aforementioned City reports.
Finding: No exceptions were noted as a result of our procedures.
5. We agreed the appropriations limit_ fiscal year 2004-05. amount presented in the
accompanying Appropriations Limit Worksheet to the prior year appropriations limit
adopted by the Cite Council.
Finding: No exceptions were noted as a result of our procedures,
We were not engaged to. and did not perform an examination. the objective of which would
be the expression of an opinion on the accompanying Appropriations Limit Worksheet.
Accordingly. we do not express such an opinion. Had we performed additional procedure&
other matters might have come to out' attention that would have been reported to you. No
procedures have been performed with respect to the determination of the appropriation limit
for the base year. as defined by Article XIII -B of the California Constitution.
This report is intended soler- for the information and use of the City Council and
management and is not intended to he and should not be used by anyone other than these
specified parties.
C"We44
U
Certified Public Accountants
Sacramento. California
.lune 23. 2006
2
CITY OF LODI
APPROPRIATIONS LIMIT WORKSHEET
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Amount
Appropriations limit. fiscal year 2004-05 $ 62,182,939
Adjustment factors:
Population increase. 2005-06 1.0096
Inflation increase. 200--06 1.0526
Total adjustment factor 6.2705%
Annual adjustment 1899.179
Appropriations limit. fiscal Near 2005-06. as adopted $ 66,082.118
CITY OF LODI, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Year Ended June 30, 2006
SUSAN HITCHCOCK, MAYOR
BOB JOHNSON, MAYOR PRO TEMP
JOHN BECKMAN, COUNCILMEMBER
LARRY HANSEN, COUNCILMEMBER
JOANNE MOUNCE, COUNCILMEMBER
BLAIR KING, CITY MANAGER
Prepared by the Finance Department
James Krueger, Deputy City Manager/Internal Services Director/Treasurer
Ruby Paiste, Financial Services Manager
Coriene Wadlow, Sr. Accountant
Odette Bondoc, Accountant 1I
INTRODUCTORY SECTION
CITY OF LODE
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2046
TABLE OF CONTENTS
INTRODUCTORY SECTION
15
Table of Contents
i
Letter of Transmittal
v
Certificate of Achievement for Excellence in Financial Reporting
xiii
Organization Chart of the City of Lodi
xv
Directory of Officials and Advisory Bodies
xvi
FINANCIAL SECTION
Independent Auditors' Report
23
MANAGEMENT DISCUSSION AND ANALYSIS
3
BASIC FINANCIAL STATEMENTS
Government -wide Financial Statements:
Statement of Net Assets
15
Statement of Activities
16
Fund Financial Statements:
17
Balance Sheet — Governmental Funds
20
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets
21
Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds
22
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances
of Governmental Funds to the Statement of Activities
23
Statement of Net Assets — Proprietary Funds
24
Statement of Revenues, Expenses and Changes in Net Assets — Proprietary Funds
26
Statement of Cash Flows — Proprietary Funds
26
Statement of Fiduciary Net Assets — Fiduciary Funds
27
Statement of Changes in Fiduciary Net Assets - Fiduciary Funds
28
Notes to Basic Financial Statements
29
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Funding Progress — Pension Plan 69
Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — General Fund 74
Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual -- Streets Fund 71
Notes to the Required Supplementary Information 72
CITY OF LODI
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2006
TABLE OF CONTENTS -continued
COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES
Combining Balance Sheet — Nonmajor Governmental Funds
75
Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds
76
Nonmajor Governmental Funds - Special Revenue Funds
77
Combining Balance Sheet —Nonmajor Governmental Funds — Special Revenue Funds
78
Combining Statement of Revenues,xpenditures and Changes in Fund Balances --Nonmajor Governmental Funds — Special Revenue Funds
79
Schedule of Revenues, Expenditureland Changes in Fund Balance — Budget and Actual — Nonmajor Governmental Funds --Special Revenue Funds
80
Nonmajor Governmental Funds - Capital Project Funds
85
Combining Balance Sheet —Nonmajor Governmental Funds — Capital Project Funds
86
Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds — Capital Project Funds
87
Combining Statement of Fiduciary Net Assets - Private -Purpose Trust Funds
89
Combining Statement of Changes in Fiduciary Net Assets - Fiduciary Funds
90
Statement of Changes in Assets and Liabilities - Agency Fund
91
STATISTICAL TABLES (UNAUDITED)
Government -wide information:
Net Assets by Component - Last Four Fiscal Years
93
Changes in Net Assets - Last Four Fiscal Years
94
Fund information:
Fund Balances, Governmental Funds - Last Ten Fiscal Years
96
Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years
97
Tax Revenues by Source, Governmental Funds - Last Ten Fiscal Years
99
Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years
100
Direct & Overlapping Property Tax Rates - Last Ten Fiscal Years
101
Principal Property Taxpayers -Current Year and Ten Years Ago
102
Property Tax Levies and Collections - Last ten Fiscal Years
103
Electric Sold by Type of Customer - June 30, 2006
104
Ratios of Outstanding Debt by Type - Last Ten Fiscal Years
105
Ratios of General Bonded Debt Outstanding- Last Ten Fiscal Years
106
Legal Debt Margin Information - Last Ten Fiscal Years
107
Pledged Revenue Coverage - Last Ten Fiscal Years
108
Demographic and Economic Statistics - Last Ten Fiscal Years
110
Principal Private Employers - June 30, 2006
111
CITY OF LODI
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2006
TABLE OF CONTENTS -continued
Full -Time Equivalent City Government Employees 112
Operating Indicators by Function/Program/Department - June 30, 2006 113
Capital Asset Statistics by Function/Program/Department - Last Two Fiscal years 116
SINGLE AUDIT
Schedule of Expenditures of Federal Awards 119
Notes to the Schedule of Expenditures of Federal Awards 121
Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Basic
Financial Statements Performed in Accordance with Government Auditing Standards 122
Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Program, Internal Control over
Compliance and Schedule of Expenditures of Federal Awards in Accordance with Circular A-133 124
Schedule of Findings and Questioned Costs 127
Schedule of Prior Findings and Questioned Costs 129
(This page intentionally left blank.)
CITY COUNCIL
SUSAN HITCHCOCK, Mayor
BOB JOHNSON , Mayor Pro
Tempore
COUNCILMEMBERS:
JOHN BECKMAN
LARRY HANSEN
JOANNE MOUNCE
December 1, 2006
Celir'tel�se711
CITY HALL, 221 WEST PINE STREET
P.O. BOX 3006
LODI, CALIFORNIA 95241-1910
(209) 333-6706
FAX (209) 333-6795
To the Honorable Mayor, Members of the City Council
and Manager of the City of Lodi:
BLA)R KING
City Manager
RANDIJOHL
City Clerk
STEVE SCHWABAUER
City Attorney
The Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2006, is hereby submitted. This report is provided to
present the financial position, results of operations and cash flows of the City's proprietary funds as of June 30, 2006, in conformity with generally
accepted accounting principles. The report conforms to the highest standards of financial reporting as established by the Governmental Accounting
Standards Board (GASB), for reporting by State and local governments. The responsibility for the accuracy, fairness and completeness of the
report rests with the City.
This report consists of management's representations concerning the finances of the City of Lodi. Consequently, management assumes full
responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these
representations, management of the City of Lodi has established a comprehensive internal control framework that is designed to protect the City's
assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with
GAAP. We believe that the information is accurate in all material respects and that it is presented in a manner designed to fairly present the
financial position of the City. In addition, we believe that all disclosures necessary to enable the reader to gain full understanding of the City's
financial activities have been included.
The CAFR is presented in four sections: introductory, a financial section, a statistical section and single audit section. The introductory section
includes the transmittal letter, the City's organization chart and a list of principal officials. The financial section includes the independent auditors'
report, management discussion and analysis, the basic financial statements, notes to the financial statements, required supplementary schedules,
and the combining and individual statements. The single audit section includes the schedule of expenditures of federal awards, notes to the
schedule, and reports on compliance and internal control based on the audit of the basic financial statements and on compliance and internal
control with requirements applicable to each major program in accordance with OMB Circuiar A-133. The statistical section includes selected
financial and demographic information presented on a multi-year basis.
This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A can be found immediately
following the independent auditors' report.
THE REPORTING ENTITY AND SERVICES PROVIDED
The funds included in the CAFR are those deemed dependent upon the City and controlled by the City Council and reflect the City's financial
reporting entity in accordance with GASB Statement 14.
The City of Lodi (City) was incorporated December 6, 1906, as a municipal corporation under the general laws of the State of California. The City
operates under a Council -Manager form of government. Under the Council -Manager form of government, policy making and legislative authority are
entrusted to the City Council. The City Council consists of five members elected at -large by its voters for four-year terms, with no term limits.
Elections are held in November ofven-numbered years. Each year the Mayor and Mayor Pro -Tempore are chosen by the members of the City
Council. The Mayor presides at Council meetings and acts as the ceremonial head of the City, the Mayor Pro Tempore serves as Mayor in his or
her absence. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for appointing department heads, and
overseeing the operations of the City. The City Manager, City Attorney and the City Clerk are appointed by the City Council.
The City provides a wide range of municipal services including public safety (police, fire and graffiti abatement), public utilities services (electric,
water and wastewater), transportation services (streets, flood control and transit) leisure, cultural and social services (parks and recreation, library
and community center), and general government services (management, human resources administration, financial administration, building
maintenance and equipment maintenance).
Several municipal services are provided through other government agencies, private companies or public utility companies, including:
Number of
Facilities
Elementary and Secondary Schools 18
Sanitation (solid waste) and Cable Television 2
Ambulance 1
Gas and Telephone 2
ECONOMIC CONDITION AND OUTLOOK
The City is located in the San Joaquin Valley between Stockton 10 miles to the south, and Sacramento 35 miles to the north, and adjacent to U.S.
Highway 99. The City population is 62,817 and is contained in an area of 12.81 square miles. The City has grown steadily since incorporation in
1906 and is projected to grow to 70,500 people by the year 2012. The City's growth is provided for in both the General Plan and the City's growth
control ordinance that allows an increase in population of 2% per year until the growth limits are reached.
Lodi is built on a strong and broad based agricultural industry with national and industrial markets for its commodities and products. Wines,
processed foods, nuts, fruit and milk are major commodities of the Lodi area and provide the basic material for food processing and packaging.
These commodities support the operations of General Mills, Guild Winery and Pacific Coast Producers to name just three companies in the
business of processing local agricultural commodities.
vt
In addition, Lodi has a wide range of small, financially sound businesses that add to the economic strength of the City. These companies range in
size from 10 to 150 employees and produce a wide variety of products, services and commodities.
Over the past several years, there has been an increase in industrial and residential development that has been unprecedented since the early
1980s. This new development combined with the growing strength of the winelgrape industry is a positive indicator for Lodi. The City's focus on
economic development has successfully encouraged numerous big industries to move to Lodi that collectively created hundreds of new jobs.
Economic Development
Lodi continues to be committed to promoting economic development (business retention and attraction) and expanding the tax base to fund city
services rather than increase taxes to pay for these services. The City developed long and short-term economic development goals in conjunction
with the Chamber of Commerce that resulted in the revitalization projects for the downtown and Cherokee Lane areas. In addition to revitalization
efforts, the City has adopted a number of incentives to retain and attract new businesses. These incentives included infrastructure improvements,
regulatory flexibility, tax credits and utility rate incentives.
MAJOR GOALS, OBJECTIVES AND PROJECTS
To assist the citizens of Lodi in understanding where the City intends to allocate available resources, the City Council, the City Manager and
Department Heads have established a hierarchy of major goals, objectives and major projects that support and re -enforce the City's mission
statement.
Four major City goals were established as policy direction and focal points for the efforts of City staff. These goals include:
Ensure a High Quality of Life and a Safe Environment for Citizens
Ensure Efficient and Productive City Organization
Ensure Public Trust, and
Ensure the Development of the Lodi Economy for a Fiscally Sound City Organization
City Council, the City Manager and Department Heads established nineteen major City objectives:
Maintain City's Sense of Community Provide Employee Training and Education
Provide for a Balanced Community Evaluate Telecommunications Opportunities
Enhance Access through Implementation of Information Systems Strategic Plan Provide Resources to Maintain City's Infrastructure
Promote Urban Forestry Promote Public Relations and Marketing Efforts
Attract, Retain and Invest in a Quality City Work Force Ensure Open and Accessible Public Meetings
Encourage Public Arts, Cultural and Recreational Opportunities Pursue Efforts to be Entrepreneurial
Provide Appropriate and Sufficient City Facilities Improve Customer Service
Develop Short and Long Range Operational Plans Continue to use Partnerships to Advance City's Objectives
Develop Effective Records Management Program Provide a Balanced Budget & Adhere to Adopted Policies
Promote Commercial/Industrial Base
Projects represent the foundation of the planning statements for the City of Lodi. These projects are designed to accomplish specific objectives and
become the focus for organization wide effort.
Vii
As discussed above, economic revitalization continued to be an active focal point of the City in 2005-06. The following major City projects were
planned in the 2003-05 two-year budget document: 1) remodel of the old Public Safety building and Civic Center Complex; 2) replacement of Animal
Shelter Facility; 3) construction of the DeSenedetti Park/G-Basin; 4) development and construction of an indoor sports and activity center, and 5)
construction of an aquatics complex.
During fiscal year 2005-06, some of these projects were in various phases of the capital improvement project process, and some General Fund
projects were put on hold until a revenue stream is identified.
The slow down in the capital development comes at a time when the cost of City services is increasing leaving less discretionary money. The
following projects have all been placed on hold awaiting additional funding sources:
Public Safety Building Remodel and Expansion
The Public Safety Building is over thirty years old and it has many mechanical and design deficiencies. Remodeling this building to provide
additional workspace, parking and related site improvements, a complete retrofit of the HVAC system, replacement of jail facility, full compliance
with the Americans with Disabilities Act requirements, more space for public safety officers and a Police and Civic center parking structure.
Animal Shelter Facility
The Lodi Animal shelter was built in the 1960's to service a community of approximately 26,000. As most shelters built at that time, its purpose was
to be a "dog pound", i.e. a place to impound stray and vicious dogs before euthanizing them. The current shelter cannot meet the newly mandated
State law or fulfill the expectations of a community eager to provide more humane animal care.
The estimated cost of the project is $4 million, which is $1.5 greater than the original estimate made in June 2001. This will be an 18,000 square
foot facility on a 3 -acre site. It will include kennels, isolation kennels, community classroom, a clinic, storage areas, exercise areas and areas set
aside for expansion of kennels. The project completed the design phase prior to being placed on hold pending identification of a revenue source.
DeBenedetti Park/G-Basin
This project consists of design and development of a youth sports complex (with lighted fields) and park within the "G -basin", which provides storm
water storage in the park. This project is one of the highest unranked projects identified by the Parks and Recreation Commission and the City
Council. The estimated cost of the project is $11.2 million, which is approximately $5 million greater than the estimate in June 2001. The project
has gone through the schematic design and construction design phases. The General Fund portion of the project has been put on hold; however,
the portions funded by other sources of revenue are expected to proceed.
Indoor Sports and Activity Center
This project consists of development and construction of a 40,000 square foot building to provide space for a gymnasium, exercise rooms, kitchen,
meeting rooms and offices for community use. The estimated cost is $10.9 million and is currently in the schematic design phase. The construction
design phase has been completed.
vul
Aquatics Complex
This project consists of design and construction of a recreation pool with water features, a 50 -meter competitive pool, snack bar, changing rooms,
showers, parking and picnic areas. The estimated cost of the project is $7 million, which is a $4 million, increase from the estimate made in June
2009. The project passed through the design phase prior to being placed on hold.
A Citizens Sales Tax Initiative was circulated in the Fail of 2004 and was in the ballot as Measure G in the November 2006 general election. If it
were approved, a % cent sales tax increase would have been used to fund the Indoor Sports and Activity Center and the Aquatics Complex,
however this measure did not pass.
FINANCIAL INFORMATION, MANAGEMENT AND CONTROL
A detailed understanding of the financial position and operating results of the City is provided in the following sections of this report. The following is
a brief description of the City's financial condition, management practices and control techniques.
Basis of Accounting
Basis of accounting refers to the policy as to when revenues, expenditures or expenses are recognized in the financial accounts and reported in the
financial statements. The City's accounting records for general government operations are maintained on a modified accrual basis. Revenues are
recorded when available and measurable. Expenditures are recorded when the services or goods are received and the liability incurred. For
proprietary fund types, the City uses the accrual basis of accounting. As such, the measurement focus is on net income in addition to financial
position and changes in financial position. Revenues are recognized when earned and expenses are recognized as the liability is incurred. We
believe that the City's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial
transactions.
Accounting System and Budgetary Control
In developing the City's accounting system, consideration is given to the adequacy of the internal controls. The objective of the City's internal
accounting controls is to provide reasonable, but not absolute, assurance that the assets are safeguarded against loss from unauthorized use or
disposition; and to ensure that transactions are properly recorded to permit the preparation of financial statements in accordance with generally
accepted accounting principles. The concept of reasonable assurance recognizes that the cost of control should not exceed the benefits likely to
be derived and that estimates and judgments are required to be made by management in evaluating these costs and benefits.
In addition, the City maintains budgetary controls. The objective of these controls is to ensure compliance with legal provisions embodied in the
annual appropriated budget approved by the City Council, The City Manager is responsible for the preparation of the budget and its implementation
after adoption. The City Council has the authority to amend the budget at any time during the year. The City Manager has the authority to make
adjustments to the budget as long as those changes will not have a significant policy impact nor affect budgeted year-end balances. During fiscal
year 2005-06, the City Council and City Manager made several supplemental budget appropriations, the majority of which relate to capital projects.
Fund Balance
It is the City's goal to target and maintain an unreserved, undesignated fund balance in the General Fund and working capital balances in the
Eiectric, Walter and Wastewater epterprise funds of at least 95% of operating expenditures. This goal allows for variations from year-to-year to
account for economic and fiscal flanges. The General Fund maintained an unreserved undesignated fund balance of $3,048,435 or 7.5% of
ix
operating expenditures at the end of fiscal year 2005-06. Fund balance is of concern to the City Council and was addressed during the fiscal year
by implementing budget cuts and raising various fees.
Cash Management
The City has written investment policies that address a wide range of investments. These policies describe the City's investment objectives,
investment authority, allowable investment vehicles, maturity terms and eligible financial institutions. They also describe the City's capital
preservation and cash management objectives_ As provided in the policy, investments are intended to be held until maturity and investment terms
are to be consistent with the City's cash flow needs. Investment reports are issued both monthly and quarterly to the City Manager and City Council
to provide detailed information regarding the City's investments and compliance with City policy and as required by state law. An important objective
of the City's investment policy is to thieve a reasonable rate of return on public funds while minimizing risks and preserving capital. In evaluating
the performance of the City's investment portfolio, investments are expected to yield a rate of return that regularly meets or exceeds an average rate
of return on a three-month U.S. Treasury Bill.
Appropriation Limitation
Article XIII B of the Constitution of the State of California (Proposition 4) provides for the limitation of expenditures by state and local governments.
Under the provisions of this article, City appropriations funded through tax sources may not exceed Fiscal Year 1979 appropriation levels except as
adjusted for increases in population and the growth in the California per capita income or non-residential assessed valuation due to new
construction within the city.
Excluded from the limitation are appropriations funded through charges for services, fines and forfeitures, grants, transfers of service responsibilities
between government agencies and indebtedness incurred prior to Fiscal Year 1979. Pursuant to subsequent legislation adopted after Article Xlfl B,
the City is required to annually establish and adopt its appropriations limit by resolution. For 2005-06, the City's appropriations subject to limit were
$31,625,055 and the appropriation limit was $66,082,116 a favorable variance of $34,457,063.
Dent Administration
At June 30, 2006, the City had outstanding Certificates of Participation of $143,492,775. These liabilities are discussed in Note 8 of the Basic
Financial Statements and summarized below.
The City issued a $5.0 million Certificates of Participation (1995) COP to fund its share of capital improvements in the downtown and Cherokee
Lane areas. These bonds were refunded by the issuance of the 2002 Certificates of Participation. The City also issued $1.97 million limited
obligation improvement bonds for the Central City Revitalization Assessment District on July 22, 1996. The improvement bonds of the assessment
district are not general obligations of the City.
The City also issued $10.12 million for the renovation of the Performing Arts Center on August 1, 1996; the 2002 Certificates of Participation also
refunded these bonds. The Electric Utility issued $43.96 million Certificates of Participation to finance the costs of certain improvements to the
distribution and transmission facilities of the City's electric system. These bonds were also refunded by the issuance of the 2002 Electric Systems
Revenue Certificates of Participation.
On 14ovember 2002, the Co issued the 2002 Revenue Certificates of Participation Series C for $21,225,000 and 2002 Series D for $22,740,000, to
buy out the energy purchase agreement entered into by the City in January 2002 with Calpine.
On October 21, 2003, the City of Lodi and the City of Fort Bragg issued Water and Wastewater revenue bonds (20036) through the California
Statewide Communities Development Authority ("the Authority") under its pooled financing program. Total bonds issued were $9,855,000 of which
$5,000,000 was for the upgrade of the City of Lodi's wastewater facilities.
The City issued $27,360,000 in Wastewater Certificates of Participation (2004A) to finance the costs of improvements to the wastewater collection,
treatment and disposal system.
The City's debt management policy includes a commitment to monitor all forms of debt annually during the preparation of the City's Financial Plan
and Budget to ensure compliance. Also, the City will generally conduct financing on a competitive basis, will seek an investment grade rating on any
direct debt and will obtain credit enhancements such as letters of credit or insurance when necessary for marketing purposes, availability and cost
effectiveness.
Interim Financial Reporting
Monthly financial reports are prepared to present the City's financial condition and results of operations. These executive reports are organized
using the "pyramid" approach. As such, the highest level of summary data is presented first, followed by progressively greater levels of detail. The
reports provide current period and year to date revenues, expenditures and encumbrances for all activities and funds, including year to date
estimates and variances.
Single Audit
The City is subject to financial and compliance reporting required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, which is a
requirement of all local and state governments receiving federal financial awards. As part of the Single Audit, tests are made to determine the
adequacy of internal controls, including that portion related to federal financial awards, as well as to determine that the City has complied with
certain applicable laws and regulations governing federal funds. The Single Audit report is published as part of the annual financial statements for
easy reference.
Competitive Bidding Policy
All required purchases for materials, equipment and services during 2005-06 were made pursuant to competitive bidding procedures as established
under the City's purchasing ordinance. Contracts for construction projects were awarded pursuant to competitive bidding procedures established by
the State of California for projects in excess of $5,000.
Risk Management
The City is self-insured for dental care, workers' compensation, general liability and unemployment insurance. General liability and workers'
compensation are administered by outside agencies. The City administers unemployment insurance. Self-insurance transactions are accounted for
under the City's Claims and Benefits Fund. At June 30, 2006, the Claims and Benefits Fund had a deficit of $3,054,636. The City is implementing a
phased deficit reduction plan recommended by an actuary to gradually eliminate the deficit in the Internal Service Fund.
INDEPENDENT AUDIT
The City Council requires an annual audit of the records and accounts of the City by an independent certified public accountant. To ensure internal
control periodically the City condus a request for proposal (RFP) process for auditing services. The accounting firm of Macias Gini & O'Connell
LLP was selected to perform this udit. The independent auditors' report precedes the basic financial statements and concludes that the City's
Xi
basic financial statements are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United
States of America.
CERTIFICATES OF ACHIEVEMENT
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in
Financial Reporting to the City for ils Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2005. The City did not
submit for the California Society If Municipal Finance Officers (CSMFO) award program last year. These Certificates of Achievement are
prestigious national and state awards recognizing conformance with the highest standards for preparation of state and local government financial
reports. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized CAFR,
whose contents conform to program standards. The CAFR must satisfy both generally accepted accounting principles and applicable legal
requirements.
A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement for the last thirteen
consecutive years. We believe our current report continues to conform to the Certificate of Achievement program requirements and we are
submitting it to GFOA this year.
ACKNOWLEDGMENTS
As always the professionalism, dedication and efficiency of the Finance Department Accounting staff made it possible for the timely preparation of
this report and are to be commended. I would also like to personally thank Ruby Paiste, Financial Services Manager, and Cory Wadlow, Senior
Accountant, Odette Bondoc, Accountant II and Tyson Mordhorst, Senior Programmer Analyst. Their work in preparing this year's CAFR is greatly
appreciated.
I would also like to thank you for your continued interest and support in planning and conducting the financial operations of the City in a responsible
and progressive manner.
Respectfully submitted,
i?-7-� 1 W �
es Krueger
Deputy City Manager/internal Services DirectoriTreasurer
XI;
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Lodi
California
For its Comp-clicnsive AnIMA
Financial Report
1'or the Fiscal Year Ended
June 30, 2005
A Certificate ol'Achievement for Bccllencc in financial X
]Zrpr>rling is prrsentcd by the Gswcrntnent finculce 011icers
Association ol'the United States and Canada to
1710vcrruIM11. units and public employee retirement
sysleazis whose comprehcnsive annual financial
reports (CAURs) achiQve the highest
standards in govcrtttrtent accounting
and linancial reporting,
Cf Ovfk,
-
�'vMt[0s{A1rs r
MO y
y t oX s President
Executive Director
(This page intentionally left blank.)
City of Lodi
Citizens
City Council
Library
Board f 1 ty y I' 9 �+! City III Boards and
Ci Attorne Ci Mana er I Ci Clerk f Commissions
Library
�IDeputy City
MgnagerArrtarnal
Services Director
CommunityI Parks and I Commm u nity I I Electric Utility I I Public Works I Fire I Police
Center Recreation Development
Financial Budget)
Services Revenue/
Division Treasury Div
xv
Human Information
Resources Systems
Division I I f +an
DIRECTORY OF OFFICIALS AND ADVISORY BODIES
CITY COUNCIL
Susan Hitchcock
Bob Johnson
John Beckman
Lary Hansen
Joanne Mounce
ADVISORY BODIES
Planning Commission
Library Board
Recreation Commission
Site Plan and Architectural Review Committee
Budget Committee
PRINCIPAL ADMINISTRATIVE OFFICERS
Blair King
Steve Schwabauer
Randi Johl
Nancy Martinez
James Krueger
Mike Pretz
Steve Baker
Richard Prima
George Morrow
Randy Hatch
Jerry Adams
Tony Goehring
xvi
Mayor
Mayor Pro Temp
Council Member
Council Member
Council Member
Eastside Improvement Committee
Lodi Arts Commission
Youth Commission
Lodi Senior Citizens' Commission
City Manager
City Attorney
City Clerk
Library Services Director
Dep.City Mgr/Internal Services Dir/Treasurer
Fire Chief
Interim Community Center Director
Public Works Director
Electric Utility Director
Community Development Director
Police Chief
Parks & Recreation Director
FINANCIAL SECTION
The Financial Section is comprised of the Independent Auditors' Report, Management Discussion and Analysis,
Basic Financial Statements, including the notes, required Supplementary information, and Supplementary
Information which includes Combining and Individual Fund Statements and Schedules.
The Honorable Members of City Council
City of Lodi, California
INDEPENDENT AUDITOR'S REPORT
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 Lodi, California (City), as of and for the year ended June 30, 2006, which collectively comprise the City's basic financial
statements as listed in the table of contents. These financial statements are the responsibility of the City's management. 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 of material misstatement. An audit includes consideration of internal control
over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities,
the business -type activities, each major fund, and the aggregate remaining, fund information of the City, as of June 30, 2006, and the respective changes in
financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United
States of America.
In accordance with Government Auditing Standards, we have also issued our report dated November 22, 2006 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. 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be considered in assessing the results of our audit.
The rnanagernent's discussion and analysis, the schedule of funding progress - pension plan. and schedules of revenues, expenditures and changes in fund
balance - budget and actual - for the General Fund and Streets Fund are not a required part of the basic financial statements but are supplementary information
required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of
inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the
information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the financial statements that eollectiaely comprise the City's basic financial statements. The
introductory section, combining and individual nonmajor fund statements and schedules. and the statistical section are presented for purposes of additional
analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund statements and schedules have been subjected
to the auditing procedures applied in the audit of the basic financial statements and. in our opinion, arc fairly stated, in all material respects in relation to the basic
financial statements taken as a whole. The introductory section and statistical section have not been sub _�ectcd to the auditing procedures applied in the audit of
the basic financial statements and, accordingly, we express no opinion on them.
Au;xt &J'w i D `Cou1Ae I UW
Certified Public Accountants
Sacramento, California
November 22, 2006
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section of the Comprehensive Annual Financial Report is presented as discussion and analysis of the financial performance of the City of
Lodi (the City) for the fiscal year ended June 30, 2006.
FINANCIAL HIGHLIGHTS
• The assets of the City of Lodi exceeded its liabilities at the close of the 2006 fiscal year by $207,603,383 (net assets). Of this amount,
$6,957,858 is a deficit in unrestricted net assets, needed to meet the City's ongoing obligations to citizens and creditors.
• The City's total net assets increased by $19,181,981 in fiscal year 2006.
• As of June 30, 2006, the City's governmental funds reported combined ending fund balances of $17,440,628, an increase of
$2,756,525 in comparison with the prior year. Of this amount, $14,982,440 is available for spending at the City's discretion
(unreserved fund balance)_
• At the close of the fiscal year, fund balance for the general fund was $4,368,941 or 10.7 % of total general fund expenditures of
$40,849,877.
• The City's total long-term debt decreased by $1,584,851(1.1 %) during the current fiscal year.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial
stah"rmft are comprised of three components: (1) Government -wide financial statements, (2) Fund financial statements, and (3) Notes to
the f=inancial Statements. This report also includes other supplementary information in addition to the basic financial statements.
Qqyga)Mj&Ae Finanpfal Statements
The government -wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to
a private -sector business.
The stabnwnt of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as
not its. Over time, increases or decreases in net assets may serve as a useful indicator of whether or not the financial position of the City
is improving or deteriorating.
The statement of activities presents information showing how the City's net assets changed during the rrmmt recent ffeeat year. AN ohw4W
in nt Viiare reV&W as soon as ft ~yMq ey" V" nm to to char4a oe " 4maq of rel" cash. flogs.
Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as
revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave.
J
Both of the government -wide Financial statements distinguish functions of the City that are principally supported by taxes and
intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs
through users fees and charges (business -type activities). The governmental activities of the City include general government, public
protection, public works, community development, library, and parks and recreation. The business -type activities of the City include electric
operations, wastewater system, water operations and public transit.
Fund Financial Statements
The fund financial statements are designed to report information about groupings of related accounts, which are used to maintain control over
resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund
accounting to ensure and demonstrate compliance with finance -related legal requirements. AN of the funds of the City can be divided into the
fbHowing three categories: Governmental funds, Proprietary funds, and Fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the
government -wide financial statements. Most of the City's basic services are reported in governmental funds. These statements, however,
focus on (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are
available for spending. Such information may be useful in determining financial resources available in the near future to finance City
programs.
Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the
information presented for governmental funds with similar information presented for governmental activities in the government -wide financial
statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the
governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a
reconciliation to facilitate this comparison between governmental funds and governmental activities.
The City maintains several individual governmental funds organized according to their type (special revenue, capital projects and debt
service). Information is presented separately in the governmental funds valance sheet and in the governmental funds statement of revenues,
expend4ures, and changes in fund balances for the general fund and the streets fund, which are considered to be major funds. Data from the
remaining governmental funds are combined into a single, aggregated presentiWon. Individual fund data for each of the non -major
governmental funds is provided in the form of combining statements elsewhere in this report.
The City adopts an annual budget for its general fund and special revenue funds. Budgetary comparison statements have been provided for
the general fund and the special revenue funds to demonstrate compliance with this budget.
Proprietary Funds. Proprietary funds are generally used to account for services for which the City charges customers -either outside
cmatomem, or internal units ordepartments of the City. Proprietary funds provide the same type of information as shown in the government -
wide financial statements, only in more detail. The City maintains the following two types of proprietary funds.,
•
Enterprise funds are used to report the same functions presented as business -type activities in the government -wide financtat
statements. The City uses enterprise funds to account for the operations of the Electric, Wastewater, Water, all of which are
considered to be major funds and the Transit system, which is considered to be a nonmajor proprietary fund.
4
• Internal Service fund is used to report activities that account for various employee benefits and self-insurance activities of the City.
Because these activities predominantly benefit governmental rather than business -type functions, they have been included within the
governmental activities ` n the government -wide financial statements.
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The activities of the
Downtown and Cherokee Lane` special assessments, the Industrial Way -Beckman special assessment and various landscape and lighting
districts are accounted for and reported under the fiduciary funds. The activities of the Private Sector trust and the Holz bequest are also
accounted for under the fiduciary funds. Since the resources of this fund are not available to support the City's own programs, it is not
reflected in the government -wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds.
Notes to the Financial Statements
The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the
government -wide and fund financial statements.
Required Supplementary Information
In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information
concerning the City's progress in funding its obligation to provide pension benefits to its employees, and a schedule comparing budget to
actual amounts in the General Fund and Streets Fund.
Combinina Statements
The combining statements in connection with non -major governmental funds and fiduciary funds are presented immediately following the
required supplementary information on pensions.
GOVERNMENT -WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. The City of Lodi assets exceeded
liabilities by $207,603,383 at the close of the current fiscal year.
The largest portion of the City's net assets reflects its investment in capital assets net of any associated depreciation (e.g., land, buildings and
improvements, machinery and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these
capital assets to provide services to citizens; consequently, these assets are not available for future spending, Although the City's investment
in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other
sources, since the capital assets themselves cannot be used to liquidate these liabilities.
Assets:
Current and other assets $
Capital assets
Total assets
Liabilities:
Long-term liabilities
outstanding
Other liabilities
Total liabilities
Net assets:
Invested in capital assets,
City of Lodi's Net Assets
Governmental
Activities
2006 2005
26,306,575
137,535,891
163,842,466
Business -type
Activities
2006 2005
23,020,354
85,587,439
83,430,392 $
133,148,186
136, 816,229
125,103,772
3,670,776
3,908,832
8,828,157
156,168,540
222,403,668
208,534,164
Total
2006 2005
111, 894, 014
106,450, 746
274,352,120
258,251,958
386,246,134
364,702,704
42,911,609
41,302,639
123,232,209
124,657,175
166,143,818
165,959,814
3,670,776
3,908,832
8,828,157
6,412,656
12,498,933
10,321,488
46,582,385
45,211,471
132,060,366
131,069,831
178,642,751
176,281,302
net of related debt 111,572,441 106,292,681 77,493,888 67,667,955 189,066,329 173,960,636
Restricted 14,525,637 13,465,723 10,969,285 2,350,888 25,494,922 15,816,611
Unrestricted (8,837,997) (8,801,335) 1,880,129 7,445,490 (6,957,868) (1,355,845)
Total net assets $ 117,260,081 110,957,069 90,343,302 77,464,333 $ 207,603,383 188,421,402
An additional portion of the City's net assets, $25,494,922 (12.28%) represents resources that are subject to external restrictions on how they
may be used. The remaining 4alance of unrestricted assets represents a deficit of $6,957,868. At the end of the current fiscal year, the City is
able to report positive balances in the two categories of net assets for the government as a whole:. Unrestricted net assets are negative for the
governmental activities. The deficit in unrestricted net assets in the governmental activities at the end of the year was $8,837,997 primarily
due to the accrual of compensated absences for $9,865,159 and the inclusion of the internal service fund in the governmental activities that
had negative net assets of $3,054,636.
Refer to pages 8-9 for analysis of the business -type activities and internal service fund negative unrestricted net assets.
31
Revenues
Program revenues:
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues:
Property taxes
Other taxes
Grants and contributions not restricted to
speck programs
Litigation - environmental lawsuits proceeds
Other
Total revenues
Expenses
General government
Public protection
Public works
Community development
Library
Parks and recreation
Interest on long-term debt
Electric
Wastewater
Water
Transit
Total expenses
Changes in net assets before special items and transfers
City of Lodi's Changes in Net Assets
Governmental
Business -type
Activities
Activities
Total
2006
2005
2006
2005
2006
2005
$ 4,717,215
5,604,193
76,768,433
70,046,786 $
81,485,648
75,650,981
2,586,677
2,194,994
3,376,995
2,730,943
5,963,672
4,925,937
14,630,848
17,558,575
11,145,804
3,401,579
25,776,652
20,960,154
8,030,641
7,124,388
8,030,641
7,124,388
10,063, 090
10, 252,443
10,063,090
10,252,443
14,214,678
13,192,542
14,214,678
13,192,542
6,700,399
9,149,692
6,700,399
9,149,692
1,340,239
758,278
4,063,465
4,312,412
5,403,704
5,070,690
55,583,388
56,685,413
102,055,096
89,641,414
157,638,484
146,326,827
9,746,613
9,957,816
9,746,613
9,957,816
22,104,641
22,252,819
22,104,641
22,252,819
13,228,998
12,376,743
13,228,998
12,376,743
2, 290,412
2,290,412
1,484, 793
1,484,470
1,484,793
1,484,470
4,113,772
4,565,240
4,113,772
4,565,240
1,233, 982
1,616,501
1,233,982
1,616,501
63,779,870
57,306,243
63,779,870
57,308,243
8,574,212
10,552,509
8,574,212
10,652,509
8,256,175
11,748,462
8,256,175
11,748,462
3,643,035
3,017 821
3,643,035
3,017,821
54,203,211
52,253,589
84.253,292
82,727,035
138,456,503
134,9+80,624
1,380,177
4,431,824
17,801,804
6,914,379
19,181,981
11,346,203
7
Special item — forgiveness of debt 15,276,708 15,276,708
Trartskm
Changes in net assets
Net assets at beghming of year
4,922,835
4,007,8`10
(4,922,835) _
{4,407,810)
6,303,012
8,439,634
12,878,969
18,183,277 19,181,981 26,622,911
110,957,069
102,517,435_
77,464,333
59,281,056 188,421,402 161,7981491
Net assets at end of year b �117,2�� 110,957,069 90,343,302 77,464,333 $ 207,2M383 188,421,402
ANALYSIS OF CHANGES IN NET ASSETS
Governm*ntal activities.
Governmental activities increased the City's net assets by $6,303,012 or 33% of the total increase in the City's net assets.
The key factors impacting the change in net assets are:
• Moderate revenue growth
• Slow down on new residential developments
• Increased assessed valuations due to growth in new homes and the strong resale market
• Significant restraint in spending.
Charges for services decreased by 16%, a net amount of $886, 978 from the prior fiscal year largely from development related fees essentially
due to slowing down of new residential developments.
• Construction permits decreased by $514,823 or 35%
• Planning and engineering inspection fees decreased by $263,513 or 30%
Operating grants and contributions increased by $391,683 or 18% mainly from funds received for State mandated costs totaling $510,868
compared to $2,980 from prior fiscal year. The State previously suspended reimbursements in prior years due to lack of funding.
Capital grants and contributions decreased by $2,927,727 or 17% from prior fiscal year. This was also substantially the effect of the slow
down in new developments, Development impact fees collected this year decreased by $5,394,142 or 81%. Street projects reimbursed by
Measure K also decreased by $570,587. These were offset by the increase of $2,071,861 in the contribution of capital assets from developers
and the receipt of Traffic Congestion Relief funds totaling $727, 886 from the State, which were also suspended in prior years due to lack of
funding.
The City's governmental activi s also realized the following revenue increases:
• Prow* i - 3W,2W — 18%
• Sales and use taxes - $628,787 — 7%
• Motor Vehicle license fees - $788,259 -22%
8
Other revenues also increased by $581,961 or 77% from miscetlaneous reimbursements and charges.
Expenses for governmental fur ors totaled $54,203,211, an increase of $1,949,622 frorn the prior fiscal year. This largely refkwU the net
increase in the actuarial estim tea for the reserves required for general liability and workers compensation included in general government
and the transfer of expenditures to community development.
Business -type activities.
Busirmn-type activities increased the City's net assets by $12,878,969 or 67% of the total increase in the City's net assets. The key elements
of this increase are:
• Contributions of capital assets from developers:
Electric Fund - $145,403
Wastewater Fund - $5,796,832
Water Fund - $4,857,467
• Proceeds from litigation settlements - $6,700,399
The City also implemented a market cost adjustment (MCA) for Electric Utility effective December 2, 2005, at an average of 17.67% to offset
the increase of purchased power expenses resulting in increased operating revenue of $5,204,454 or 10% from prior fiscal year. Wastewater
and water rates were also increased during the year resulting in increased operating revenues of $840,876 or 10% in Wastewater Utility; and
$629,647 or 8% in Water Utility,
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
OF Funds.
The focus of the City of Lodi's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable
resources. Such information is useful in assessing the City's financing requirements. In particular, unnerved fund balance may serve as a
useful measure of a government's net resources available for spending at the end of the fiscal year. Types of governmental funds reported
by the City hK4, a the General Fund, sperm revenue funds, debt service futwls and capital pros funds.
As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $17,440,628, an increase of
$2,766,525 in comparison to the prior year.
The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved fund balance of the general fund
was $3,048,435, while total fund balance was $4,368,941, an increase of $1,675,611 from prior year. As a measure of the gerwM frond's
lige y, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund
balance represents 7.01/6 of total general fund expenditures.
In the Streets Fund, total fund balance was $6,037,910. Decreases in charges for services were offset by the decrease in capital
expenditures resulting in an increase of $1,063,174 to fund balance compared to the prior year.
M
Governmental fund balances have increased for the last two years as a result of continued spending restraint and the receipt of unexpected
revenues from the State of California which includes reimbursements for mandated costs and receipts of more than expected vehicle license
flees.
Proprietary Funds
The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail.
Unrestricted net assets at the end of the year for the Electric Fund were ($1,899,386), Wastewater Fund $1,895,503, Water Fund $614,694
and Transit Fund $1,269,318.
The Internal Service Fund is reporting a deficit in unrestricted net assets as a result of the City not fully funding its self-insurance activities.
The City plans to implement the deficit reduction plan recommended by an actuary to gradually eliminate the deficit in the Internal Service
Fund.
Other factors concerning the finances of these funds are discussed in the City of Lodi's business -type activities.
General Fuad Budgetary Highlights
Significant differences between the original operating budget and the final amended operating budget in the General Fund were a net increase
in appropriation of$558,648. The increase in appropriations can be briefly summarized as follows:
• $279,301 increase in general government
$150,027 increase in public protection
• $116,642 increase in public works
$1,994 increase in library
• $10,684 increase in parks and recreation
Significant differences between the final budget and the actual revenues and expenditures can be briefly summarized as follows:
• Intergovernmental revenues - a favorable variance of $1,305,439 was largely due to the increase Vehicle License Fees received in
the amount of $788,259 and the reimbursement of state mandated costs not previously funded by the SW9 in the amount of
$508,168.
• Charges for services- Plan check fees and planning fees are now accounted for in the special revenue fund. These revenues were
previously accounted for in the General Fund.
• For expenditures, a f vorable variance between the final budget and actual expenditures of $1,703,151 was due to savings from
several vacancies and Ithe continued overall effort to reduce spending and costs.
10
Capital Assets and Debt Administration
Capital assets.
The City of Lodi's investment in apital assets for its governmental and business -type activities as of June 30, 2006, amounts to $274,352,120
(net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment,
vehicles, infrastructure and construction in progress. The total increase in the City of Lodi's investment in capital assets for the current fiscal
year was 6.23% (a 3.3% increase in governmental activities and 9.36% increase in business -type activities) as shown in the table below.
Changes in Capital Assets, Net of Depreciation
A significant increase in infrastructure compared to prior year was primarily due to additional streets built by residential development
completed in fiscal year 2005-06.
The increase in machinery and equipment and construction in progress in wastewater was due primarily to improvements to the White Slough
Water Pollution Control Facility.
Additional information on the City of Lodi's capital assets can be found in note 6 on pages 40-42 of this report.
Long-term debt.
At the end of the current fiscal year, the City of Lodi had total bonded debt outstanding of $143,492,775. Of this amount, $24,510,000 is the
outstanding balance of the bonds issued to fund the new public safety building, refinancing of the performing arts center and the downtown
and Cherokee Lane improvements. The total of $118,982,775 from the business -type activities consists of $40,097,313 for the Wastewater
Fund; and $78,885,462 for the Electric Fund.
11
Governmental Activities
Business -type
Activities
Total
2006
2005
2006
2005
2006
2005
Land
$ 24,016,374 $
23,798,811 $
5,247,806 $
5,247,806 $
29,264,180 $
29,046,617
Buildings and Improvements
39,284,078
40,323,027
26,390,168
27,253,059
65,674,246
67,576,086
Machinery and Equipment
1,080,497
1,257,058
83,489,707
69,865,611
84,570,204
71,122,669
Vehicles
1,741,279
2,251,552
1,988,516
2,430,020
3,729,795
4,681,572
Infrastructure
68,151,049
61,081,916
68,151,049
61,081,916
Work of Art
62,024
62,024
62,024
62,024
Construction in Progress
3,200,590
4,373,798
19,700,032
20,307,276
22,900,622
24,681,074
Total
$ 137,535,891 $
133,148,186 S
136,816,229 $
125,103,772 $ . 274,352,120 $
258,251,958
A significant increase in infrastructure compared to prior year was primarily due to additional streets built by residential development
completed in fiscal year 2005-06.
The increase in machinery and equipment and construction in progress in wastewater was due primarily to improvements to the White Slough
Water Pollution Control Facility.
Additional information on the City of Lodi's capital assets can be found in note 6 on pages 40-42 of this report.
Long-term debt.
At the end of the current fiscal year, the City of Lodi had total bonded debt outstanding of $143,492,775. Of this amount, $24,510,000 is the
outstanding balance of the bonds issued to fund the new public safety building, refinancing of the performing arts center and the downtown
and Cherokee Lane improvements. The total of $118,982,775 from the business -type activities consists of $40,097,313 for the Wastewater
Fund; and $78,885,462 for the Electric Fund.
11
City of Lodi's Outstanding Debt
Governmental Business -type
Activities activities Total
Certificates of Participation $ 24,510,000 118,982,775 143,492,775
The City of Lodi's total bonded debt decreased by $1,584,851 (1.1%) during the current fiscal year.
Bond Rating.
In response to a review of interim financial results, Fitch Rating services changed the rating on outstanding electric utility debt instruments
from BBB+ to BBB-. In light of more favorable financial results as reflected in the full year financial results as compared to the interim results,
City Management is hopeful that Fitch Ratings Services will reconsider its downgrade.
Additional information on the City of Lodi's long-term debt can be found in note 8 on pages 43-55 of this report.
Economic factors and next year's budget.
The City faced significant budget challenges in the last two fiscal years. As a result of downward economic trends and personnel expenditures,
which were increasing at a pace that outstripped the resources available to fund these expenditures, the City faced an operating deficit in the
General Fund for fiscal year 2004-05 and fiscal year 2005-06. Deficits for both years were eliminated and operating revenues exceeded
operating expenditures in both years as a result of reductions in budgeted expenditures of approximately $2.0 million in both fiscal years. The
budget for fiscal year 2006-07 incorporates sustaining these same levels of expenditure reductions in all departments except for the Police
and Fire Departments, which have filled positions that were left vacant in the prior two fiscal year budgets.
The budget for fiscal year 2006-07 incorporates sustaining these same levels of expenditure reductions in all departments except for the
Police and Fire Departments, which have filled positions that were left vacant in the prior two fiscal year budgets. The primary growth in
expenditures in the fiscal year 2006-07 budget results from filling these public safety positions. General tax revenues are estimated to increase
sufficiently to offset the impact on the budget of filling these positions.
The Electric Utility budget for 2005-06 was adopted with expenditures exceeding revenues by approximately $8.2 million. Most of this deficit
was alleviated through a combination of rate increases approved by resolution of the City Council in November 2005. In addition, vacancies
and reductions in operational e} penditures helped to reduce most of this deficit. However, the Electric Utility still incurred an operating loss in
fiscal year 2005-06. Burgeoning energy purchase costs caused the total budget to rise to $66.8 million in 2005-06. The Electric Utility budget
for fiscal year 2006-07 is balanced at $70.6 million, which is an increase of approximately 5.6% from fiscal year 2005-06. The rate increases
approved in November 2005, will result in more than $10 million in additional revenues in fiscal year 2006.07 and subsequent years. The rate
increases in conjunction with other cost cutting measures will be used to keep the cash balances at the same level in fiscal year 2006-07.
Economic -Development
There are two major developments in process in Lodi at the time of this report. The Reynolds Ranch development on the southern end of the
city will provide approximately 500 jobs to the community within the next two years. Blue Shield of California will be located in this
12
development and other busine ses will be located around the Blue shield facilities. The additional jobs and the expanded economic activity
from the commercial development in this project will provide needed additional property and sales tax revenues to the City's revenue base.
Additionally, the development plans include approximately 1,000 new residences to be built. This will add to significantly to the City's property
tax base.
On the west end of town the Southwest Gateway and West End development projects are in the planning stages of development. Frontier
Community Builders (FCB) is the developer in these projects and has been involved in building many new neighborhoods in the City of Lodi.
Both of these projects could add as many as 2,000 new residences to the city.
Both of these projects include development agreements that will provide for public facilities to be contributed as the development proceeds.
This as well as Impact Development Fees will allow for the provision of public facilities that would otherwise need to be funded with General
Fund revenue sources. Development agreements have not been used by the City to provide for public improvements in the past.
Housing market factors will affect the timing of when the residences will be built, but it is anticipated that both projects will proceed over the
course of the next 15-20 years.
REQUEST FOR INFORMATION
This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a general overview of the City's
finances and to demonstrate the City' accountability for the money it receives. If you have any questions about this report or need additional
information, contact the Financial Services Division of the City of Lodi at 300 W. Pine Street, Lodi, California, 95240.
11)
(This page intentionally left blank.)
BASIC FINANCIAL STATEMENTS
The Government -wide Financial Statements provide a broad overview of the City's financial position and operating results. Information is
grouped by governmental activities or business -type activities.
The Fund Financial Statements report information about the City's Governmental Funds, Proprietary Funds, and the Fiduciary Fund.
The notes have an integral role in disclosing information essential to the fair presentation of the Basic Financial Statements.
GOVERNMENT-WIDE FINANCIAL STATEMENTS
ASSETS
Cash and investments
Restricted assets
Accounts receivable,net
Property tax receivable
Interest receivable
Internal balances
Due from other governmental agencies
Loan receivable
Advance receivable
Inventory
Other assets
Deferred charges
Capital assets, net:
Nondepreciable
Depreciable, net
TOTAL ASSETS
LIABILITIES
Accounts payable and accrued liabilities
Accrued salaries and wages
Accrued interest
Uneamed revenue
Long-term liabilities:
Due within one year
Due in more than one year
TOTAL LIABILITIES
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Capital projects
Debt service
Other purposes
Unrestricted (deficit)
TOTAL_ NET ASSETS
The notes to the financial statements are an integral part of this statement
CITY OF LODI
STATEMENT OF NET ASSETS
June 30, 2006
Governmental
Business -type
Activities
Activities
Total
$ 16,978,883
10,646,448 $
27,625,331
1,697,469
34,001, 572
35,699, 041
3,372,945
7,623,045
10,995,990
1,629,396
1,629,396
63,938
70,288
134,226
(1,225,173)
1,225,173
2,541,936
17,902
2,559,838
1,084, 000
1,084,000
3,165,581
3,165,581
123,298
1,663,660
1,786,958
39,883
6,608
46,491
27,167,162
27,167,162
27,278,988
24,947,836
52,226,826
110,256,903
111,868,391
222,125,294
163,842, 466
222,403, 668
386,246,134
2,054,443
5,103, 780
7,158, 223
1,329,190
1,329,190
287,143
2,453,257
2,740,400
1,271,120
1,271,120
5,728,516
6,483, 318
12, 211,834
37,183, 093
116, 748, 891
153, 931,984
46,582,385
132,060,366
178,642,751
111, 572,441
77,493, 888
189,066, 329
12, 260, 708
12, 260, 708
1,697,469
2,280,112
3,977,581
567,460
8,689,173
9,256,633
(8,837,997)
1,880,129
(6,957,868)
$ 117,260,081
_
90,343,302 $
207,603,383
l�
Functions/Proorams
PRIMARY GOVERNMENT:
Governmental activities:
General government
Public protection
Public works
Community development
Library
Parks & recreation
Interest on long-term debt
Total governmental activities
Business -type activities:
Electric
Wastewater
Water
Transit
Total primary government
CITY OF LODI
STATEMENT OF ACTIVITIES
Year ended June 30, 2006
Net assets, end of year
The notes to the financial statements are an integral part of this statement
16
5 117,260,081 90,343,302 $ 207,603,383
Net (Expense) Revenue and
Program Revenues
Changes in Net Assets
Operating
Capital
Charges for Grants and
Grants and
Governmental
Business -type
ExRenses Services Contributions
Contributions
Activities
Activities
Total
$ 9,746,613
1,232,354 518,368
121,955
(7,873,936)
$
(7,873,936)
22,104,641
563,135 721,864
181,179
(20,638,463)
(20,638,463)
13,228,998
319,772 1,040,644
14,034,402
2,165,820
2,165,820
2,290,412
1,629,874 -
3,068
(657,470)
(657,470)
1,484,793
53,878 88.683
-
(1,342,232)
(1,342,232)
4,113,772
918,202 217,118
290,244
(2,688.208)
(2,688,208)
1,233,982
(1,233,982)
(1,233,982)
54,203,211
4,717,215 2.586,677
14,630.848
(32,268,471)
(32,268,471)
63,779,870
59,112,587
145,403
(4,521,880)
(4,521,880)
8,574,212
8,926,604 32,879
6,045,273
6,430,544
6,430,544
8,256,175
8,342,990 -
4,944,822
5,031,637
5,031,637
3,643,035
386,252 3,344,116
10,306
97,639
97,639
84,253,292
76,768,433 3,376,995
11,145,804
7,037,940
7,037,940
$ 138,456,503
81,485,648 5,963.672
25,776,652
(32,268,471)
7,037.940 $
(25,230,531)
General revenues:
Taxes:
Property taxes
8,030,641
8,030,641
Franchise taxes
8,721.495
8,721,495
Business license tax
973,430
-
973,430
Transient occupancy tax
368,165
368,165
#
Grants and contributions not restricted to specific programs
14,214,678
-
14,214,678
I
Investment earnings
327,716
2,007,462
2,335,178
Litigation - environmental lawsuits proceeds
6,700,399
6,700,399
Other
1,012,523
2,056,003
3,068,526
Transfers
4,922,835
4,922,835
Total general revenues and transfers
38,571,483
5,841,029
44,412,512
Change in net assets
6,303,012
12,878,969
19,181,981
Net assets, beginning of year
110,957,069
77,464,333
188,421,402
Net assets, end of year
The notes to the financial statements are an integral part of this statement
16
5 117,260,081 90,343,302 $ 207,603,383
FUND FINANCIAL STATEMENTS
FUND FINANCIAL STATEMENTS
Governmental Fund Types
Governmental funds consist of the General Fund, special revenue funds, debt service fund and capital projects
funds.
Major Governmental Funds include:
General Fund
This fund is maintained to account for all financial resources that are not restricted as to their use. This includes
property and sales taxes, business tax receipts, franchise taxes and various subventions such as Motor Vehicle In -
Lieu fees received from the State of California. With the exception of grant programs, General Fund resources
can be utilized for any legitimate governmental purpose.
Streets Fund
This fund was established to account for the following:
Gas Tax
To account for revenues and expenditures apportioned to the City under the Streets and Highway Code.
Portions of thetax rate levied by the State of California on all gasoline purchases are allocated to cities
throughout the,) State on a population basis. These funds are restricted for expenditure by the State of
California for street related purposes only.
Development Impact Mitigation Fees
To account for impact fees charged to provide for the building of various storm drains and street
improvements needed to serve new development. The fees are calculated on a per acre basis and are
collected at subdivision final map approval or with building permit stage effective November 4, 1991.
17
Measure K Sales Tax
To account for revenues and expenditures apportioned to the City for sales tax collections under Measure
K. Expenditures for administration, maintenance and construction must be for street -related projects.
Intermodal Surface Transportation Efficiency Act (ISTEA)
To account for revenues from the federal highway administration for programs including surface
transportation program (STP) for streets and roads, congestion mitigation and air quality program (CMAQ)
and hazard elimination safety (HES) for street lighting projects.
Proprietary Fund Types
Proprietary funds consist of the enterprise funds and the internal service funds.
Major Enterprise Funds include:
Electric Fund
The City established this fund in order to account for the provision of electric services to the residents of the
City. All activities necessary to provide such services are accounted for in this fund, including but not limited to,
source of supply, overhead, systems maintenance, customer service, engineering, administration, capital
improvements maintenance and debt service_
Sewer Fund
This fund was established by the City in order to account for the provision of waste water collection and
treatment services to the residents of the City. All activities necessary to provide such services are accounted
for in this fund, including, but not limited to, administration, operations, maintenance, improvements and debt
service.
Water Fund
This fund was established by the City in order to account for the provision of water to the residents of the City
as well as some customers in the County. All activities to provide such services are accounted for in this fund,
18
including, but not limited to administration, operations, distribution, maintenance, capital improvements and
debt service.
Nonmajor Enterprise Fund:
Transit Fund
This fund is used to account for the operations of the Dial -A -Ride and the Grapeline bus system.
Fiduciary Fund Type
Private -purpose Trust Funds
These funds are used to account for assets held by the Library Board as trustee of the Lodi Public Library and for
assets held by the City in accordance with the trust agreement on behalf of the Hutchins Street Square.
Agency Fund
This fund was established to account for special assessments collected on the property tax roll by the City on behalf
of the property owners within the Industrial Way Beckman Districts and the Downtown and Cherokee Lane Districts
and various landscape and lighting districts around the City.
ASSETS
Cash and investments
Restricted assets
Receivables:
Accounts, net
Property taxes
Interest
Due from other funds
Due from other governmental agencies
Loan receivable
Inventory
Advances to other funds
Other assets
Total assets
LIABILMES AND FUND BALANCES
Liabilities:
Accounts payable and other liabilities
Accrued salaries and wages
Due to other funds
Advances from other funds
Deterred revenue
Total liabilities
Fund belrrroes :
Reserved for library
Reserved for encumbrances
Reserved for inventory
Reserved for advances to other funds
Reserved
Unreserved reported in:
General Fund
Bpaw teverwe fur ds
Capital projects funds
Total fund balances
Total liabilities and fund balances
CITY OF LODI
BALANCE SHEET
GOVERNMENTAL FUNDS
June 30, 2006
Other
Total
General Streets Governmental
Governmental
Fund Fund Funds
Funds
$ 1,847,871 4,99,633 8,189,963 S
12,918,467
1,697,469
1,697,469
3,138,365
197,178
37,402
3,372,945
1,629,396
4
_ 4.368,941 6,037,910 7,033,777
1,629,396
7,227
21,725
23,243
52,195
$41,543
1,487,053
541,543
479,871
1,121,796
940,269
2,541,936
3,141,124
744,965
1,084,000
1,084,000
123,298
123,298
261,889
636,770
898,650
22,157
200,409
6,019
28,176
$ 7,510,065
6,782,875
10,595.135 $
24,886,075
$ 1,811,934
108,195
78,812 $
1,998,941
1,329,190
4
_ 4.368,941 6,037,910 7,033,777
1,329,190
$ 7,510,065 5.782,875 10,595,135 $
24,888,075
541,543
541,543
636,770
1,487,053
2,423,823
1,453,950
1,453,950
3,141,124
744,965
3,561,358
7,447,447
659,023
659,023
276,305
300,503
200,409
777,217
123,298
123,298
261,880
636,770
898,650
1,320,506
300,503
837,179
2,458,188
3,948,435
3,048,435
5,737,407 533,228
8,270,635
5 p 370
4
_ 4.368,941 6,037,910 7,033,777
17,440,628
$ 7,510,065 5.782,875 10,595,135 $
24,888,075
The notes to the financial statements are an integral part of this statement. 20
CITY OF LODI
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FIENDS
TO THE STATEMENT OF NET ASSETS
June 34, 2006
Amounts reported for governmental activities in the statement of net assets are
different because:
Fund balances - total governmental funds $ 17,440,628
Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the funds
Nondepreciable capital assets 27,278,988
Depreciable capital assets, net 110,256,903
Long-term liabilities are not due and payable in the current period
and therefore are not reported in the governmental funds as follows:
Compensated absences (9,865,159)
Long-term debt (25,963,450)
Interest on long-term debt is not accrued in the funds, but rather is
recognized as an expenditure when due (287,143)
Other long-term assets are not available to pay for current period expenditures and,
therefore, are deferred in the funds 1,453,950
`i
Internal service fund is used tby management to charge the costs of
general liability insurance, workers' compensation insurance, health benefits
insurance and other insurance to individual funds. The assets of the internal
service fund is included in governmental activities in the statement of net assets (3,054,636)
Net assets of governmental activities $ 117,260,081
The notes to the financial statements are an integral part of this statement. 21
CITY OF LODI
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
GOVERNMENTAL FUNDS
Year ended June 30, 2006
The notes to the financial statements are an integral part of this statement.
22
Other
Total
General
Streets
Governmental
Governmental
Fund
Fund
Funds
Funds
Revenues:
Taxes
$ 18,093,733
$
18,093,733
Licenses and permits
71,125
948,720
1,019,845
Intergovernmental revenues
15,620,997
8,328,848
1,541,185
25,499,030
Charges for services
1,823,583
827,693
1,196,808
3,848,084
Fines, forfeits and penalties
1,161,304
11,275
1,172,579
Investment and rental income
376,971
126,578
203,508
707,057
Miscellaneous revenue
319,815
260,145
73,223
653,183
Total revenues
37,467,528
9,543,264
3,974,719
50,985,511
Expenditures:
Current:
General government
8,344,970
8,344,970
Public protection
20,686,173
176,983
20,863,156
Public works
6,577,776
1,248,738
7,826,514
Community development
1,846,498
1,846,498
Library
1,468,178
1,468,178
Parks and recreation
3,434,361
6,109
3,440,470
Capital outlay
6,817,404
414,694
7,232,098
Debt service:
Interest and fiscal charges
56,026
1,181,856
1,237,882
Principal payments
282,393
609,662
892,055
Total expenditures
40,849,877
6,817,404
5,484,540
53,151,821
Excess (deficiency) of expenditures over (under) revenues
(3,382,349)
2,725,860
(1,509,821)
(2,166,310)
Other financing sources (uses):
Transfers in
6,892,824
2,248,909
9,141,733
Transfers out
(1,833,864)
1,662,686
(722,348)
(4,218,898)
Total other financing sources (uses)
T 5,058,960
(1,662,686)
1,526,561
4,922,835
Net change in fund balances
1,676,611
1,063,174
16,740
2,756,525
Fund balances, beginning of year
2,692,330
4,974,736
7,017,037
14,684,103
Fund balances, end of year
$ 4.368.941
6.037.910
7,033,777 $
17,440,628
The notes to the financial statements are an integral part of this statement.
22
CITY OF LODI
RECONCILIATION OF THE STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
TO THE STATEMENT OF ACTIVITIES
Year ended June 30, 2006
Amounts reported for governmental activities are different because.
Net change in fund balances - total governmental funds
Governmental funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense.
Capital outlays, capital contributions and depreciation expense are as follows:
Capitalized capital outlays
Capital contributions
Depreciation expense
Long-term debt proceeds, net of discounts, provide current financial resources to governmental funds,
but issuing debt proceeds increases long-term liabilities in the statement of net assets. Repayments
of the principal are expenditures in the governmental funds, but the repayments
reduce long-term liabilities in the statement of net assets.
Repayments of principal are as follows:
Capital leases
Certificates of participation principal
Loan principal
WaKnW service fund is used by management to charge the costs of certain activities, such as health benefits
and self-insurance, to individual funds. The net revenue (expenses) of internal service fund is reported with
governmental activities.
Deferred revenues recognized in the funds that were previously recognized in the statement of activities
Other expenses in the statement of activ'sties that do not use cufrent financial resources are not reported as
expenditures in the governmental funds.
Change in compensated ansences
Change in acmwd interest
Change in net assets of governmental activities
The notes to the financial statements are an integral part of this statement. 23
$ 2,756,525
7,232,098
4,617,877
(7,462,270)
282,393
520,000
89,662
(1,159,148)
(20,000)
(558,025)
3,900
$ 8, 303,012
ASSETS
Current assets:
Cash and Investments
Restricted cash and Investments
Restricted assets with fiscal agents
Receivables:
Accounts, net
Interest
Due from other governmental agencies
Advwm receivable
Inventory
Other assets
Total current assets
Noncurrent assets:
Advances to other funds
Deferred charges and other assets
Capital assets,net:
Nondepreciable
Depreciable, net
Total capital assets
Total noncurrent assets
TOTAL ASSETS
LIABILITIES
Current liabilities:
A r -aunts payable and other liabilities
Accrued interest
Unearned revenue
Self-insurance liability
Accrued compensated absences
Certificates of participation payable
Water note payable
TOM ccarerd Habdities
Noncurrent liabilities:
Seff-insurance liability
Accrued compensated absences
Certificates of participation payable
Wafer nate payable
Total noncurrent liabilities
TOTAL LIABILITIES
NET ASSETS (DEFICIT)
Invested in capital assets, net of related debt
Rest u*W:
Debt service
011ier Purposes
Unrestricted (deficit)
TOTAL NET ASSETS (DEFICIT)
CITY OF LODI
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
June 30, 2006
The notes to the financial statements are en integral pan of this statement 24
Governmental
Activities -
Business a Activities -Enterprise
Funds
Internal
Nonmejor Fund
Service
Etectric
Wastewater
Water
Transit
Total
Fund
$ 6,982,097
1,866,805
946,119
851,427 S
10,646,448 $
4,060,416
8.543,685
8,543,685
10,529.239
14,627,909
300.739
25,457,887
5,062,727
1,329,453
631,862
599,003
7,623,045
22,922
8.567
38.799
70,288
11,743
17,902
17,902
3,185,581
3,165,581
9,466,604
13,714
183,342
1,663,660
1.358
3,975
1.275
6,608
11,707
27,230,528
17,868,325
10,645.821
1,450,430
57,195,104
4,083,866
1,225,173
1,225,173
26,384,363
782.799
27,167,162
4,465.269
17,963,532
1,468,555
1.050,482
24,947,638
34,581,995
43.718.598
22,402,350
11.165,448
111,868,391
39,047,264
61,682,130
23,870,905
12,215,930
136,8161229
65,431,627
62,464,929
25,09,078
12,215,930
185,208,584
92.662.155
80,333,254
35.741.899
13.666,360
222,403,668
4,083,8613
2,960,468
478.733
1,486.443
I78,136
5.103,780
55,502
1,822,574
612,929
17,754
2,453,257
102.902
1.168,218
1,271,120
1,512.368
345,706
205,890
10,358
2,976
564,930
4,433,946
1,325,904
5,759,852
158.536
158,536
9,562,696
2.726.358
2.841,309
181,112
15,311.475
1.567,870
5,570,632
850,500
727,258
29.842
1,607,600
74,451,514
38.771,408
113,222,922
1,918,369
1,918,369
75,302,014
39.498.666
1,948,211
116,748,891
5,570,632
84,864,710
42,225.024
4,789,520
181,112
132,080,366
7,138,502
9,548,262
33,935,696
21.794,000
12,215,930
77,493,888
3,081
2,277,031
2,280,112
145,488
8,543,685
8,60,173
X1,899,386)
1,695,503
614.694
1,269,318
1,880,129
(3,054,636)
$ 7,797,445
38.108.230
30.952.379
13,485,248 $
90,343,302 $ (3.054.6
The notes to the financial statements are en integral pan of this statement 24
OPERATING REVENUES
Clwgas for st rm"
OPERATING EXPENSES
Personnel services
Supplies. nteierids and services
Ulitles
DepredOw and am rlizallan
Cft&m
TOTAL, OPERATING EXPENSES
OPERATING INCOME (LOSS)
NONOPERATING REVENUES (EXPENSES)
Investment income
Interest averse
Rent
Operating grants
1.4gadan-wrAwmentsl lawsuits proceeds
01w revernres
TOTAL NONOPERATING REVENUES (EXPENSES)
INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRA4FERS
Capita! cont♦Ibu6ans
Transfers in
Transfers out
Net capital contributions and transfers
Change in net assets
NET ASSETS (DEFICIT) - BEGINNiNG OF YEAR
NET ASSETS (DEFICIT) - END OF YEAR
CITY OF LO01
STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN NET ASSETS
PROPRIETARY FUNDS
Year ended June 30, 2006
The notes to the financial statements are an integral part of this report,
2i
Governmental
Business a Activities - Ente rise funds
AcdviBss-
Internal
Nnm—a i=rmd
Service
Electric
Wastewater
Water
Transit
Total
Fund
3 59.112,587
8,928.604
8.342,990
386,252 $
79,708,433 $
7,387 092
4,930,326
2.163,754
1,047,461
105,8%
8.247,397
3W W2
8.115,096
1,498,725
5,522,351
2,928,991
18,568,183
4,905,504
41,237,551
723.387
683,763
466,810
42,691,511
5,883,443
1,632.482
928,652
557,806
9,002,383
3,455 388
60,166,416
6,518.348
8,182.227
3,640,463
76.607,454
8,691154
(1,053,82
2408156
160,763
(3,254,211)
(1,739021)
(1,304,062)
_-
1,225.765
569,234
212,463
2.007,462
56,810
(3.613,454)
(2,055,864)
(73,948)
(2,572)
(5,745,838)
103,345
10,664
13,152
127,161
32,879
3,344,116
3,378,995
6,700,309
8,7001989
727116
232.909
398,202
570,515
1,928,842
88,104
(1,660,473)
_ tl,117,497)
7.247.780
3,925,211
8,395,021
144,914
(2.714.302)
1,290,759
7,408,547
671,000
6,656,000
(1,159,148)
145,403
6,045,273
4,944.822
10,306
11,145,604
5 a00
5,000
10,1]00
(2.908.246)
(1,062.53
(962.056)
(2,762,843)
4,987,740
3.987,766
10,306
8,222 969
(5,477,145)
6,278,499
11,396,309
881,306
12,878,989
(1,159,148)
13,274,590
31,829.731
19,556,070
12,803,942
77 333
1,8954E8
$ X7,797,445
3 .1.23030,952,379
13,485.248 S
90,343,302� $
L3�064.#W
The notes to the financial statements are an integral part of this report,
2i
Cash ftwsfrom operating adwitias.
Receipts from customers and users
Receipts from interfund services provided
Cash paid to suppliers for goods & services
Payments to employees
Payments for intsrfund services provided
Proceeds from litigation settlements
Net cash provided by (used in) operating activities
Cash flows from norlcepilal financing activities:
Receipt of loan to other funds
Operating grants
Repaid to other funds
Transfers in
Transfers out
Net cash provided by (used in) noncopital financing activities
Cash ilgrs from capital and related financing activities:
Acquisition and construction of capital assets
Fees received from developers
Principal payments on debt
Interest payments on debt
Net rash used in capital and related finanang activities
Cash ticws from investing activities:
ReM of City property
Proceeds from sales and matuntles of investments
Interest on investments
Net cash provided by investing aclivi5es
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and dash equivalents, end of year
Reconciliation to the statement of net assets.
Cash and investments
Resiidad cash and investments
Total cash and investments
Reconciliation of operating income (loss) to net cash provided by operating adivities.-
Operating Income (loss)
A4ustmords to reconcile operating income (loss) to
net cash provided by operating activities.
Depredation and amorlizadon
Proceeds from litigation settlements
Other revenues
Charge In assets and liabilities:
(Increase) decrease in accounts receivable
Increase in advance receivables
Decrease in due from other governmental agenues
Docn me (increase) in inventory
(Incase) decrease in other assets
Indease (deasase) in accounts payable and other liabilities
(Decrease) increase in compensated absences
Increase In unearned revenue
increase in self insuranca tiabiiny
Nal cash provided by (used in) operating act mUes
Noncash Invegtinc. Capital and Financing Activities
Capital contributions
interest reinvested
CITY OF 1-O01
STATEMENT OF CASH FLOWS
PROPRIETARY FUNDS
Year ended June 30, 200
The mtes to the 6runcial statements are an integral pan of this statement .5
Governmental
Busi_ress-type
Activities - Enterprise Funds
Activ€ties-
Noncrujor Fund
Imemal Service
Electric
Wastewater
Water
Transit
Total
Fund
S 57,343,099
8,920,460
8.628253
2,452,046 S
77,343,858 S
121,105
605,131
605,131
7,387,092
(46,984,513)
(2.226,325)
(6,575,664)
(2,926,819)
(58,713.321)
(6,448.614)
(5.567,430)
(2.124.335)
(1,057,876)
(104,650)
(8.454,291)
(330,282)
(2,01 t)
{678,442)
(656,616)
(52,175)
(1,369,444)
-
6700,399
6.700,400
5.794.276
3,891,358
7.038,296
11598)
16,112,332
729302
1,688,947
1,688,947
32,879
3.344,116
3,376,995
(1,688,947)
(1,688,947♦
5,000
5.000
10,000
—__ (2,908,246).
(1,062,533)
(962.056)
(4,932,535)_
(2,908,246)
664.293
(957.0
1,655.169
(1,545,840)
_
(1,311,048)
(2,458.319)
(948.412)
(189,643)
(4,907.622)
248.441
87,355
335.796
(1,275,000)
(153.220)
{1,428,220)
(2.049,468)
(2.091.925)
7_(.4,758)
_ (15,453)
(4,231,604)
(3,364.516)
55,576.6037
1.66 8,035)
(205,296)
110,231.650)
103,345
10.664
13,152
127,161
1,344,148
1,619,886
2.964,934
1215.832
579,804
186.844
1,982.480
69,695
2.559.980
2,303,035
197.508
13,152
5,073,675
69,695
2,085,494
1281,863
5,189.713
651,427
9.408,517
798,997
4,896,603 _
584,922
4.300.091
9.761.616
3.261,419
S 6,982.097 ==r..1.066,805
9489804
851,427 5��9.596,433
S
4.5360,416
5 6,982.097
1,866.805
946.119
851,427 S
10,646.448 S
4,060,416
8.543,685
_ _ _
8,543.665
S fi.982,097
1,866.605
9.489,804
851.427 $
19.190,133 $
4,060,415
S (1,053.829)
2.408,256
160,753
(3.254.211) $
(1.739,021) S
(1,304,062)
5,883,443
1,632,4822
928,652
557.606
9,002,363
6.700, 399
6.700,399
727,215
232,909
398.202
570,515
1,928,642
88,104
(680.758)
(251,000)
(113,257)
(202.956)
(1,247,971)
35,387
(1209,665)
(1,209,685)
(17,902)
l 686.235
1 680,333
401,005
(2,165)
(5,504)
393,336
(1,130)
1,170
318
358
(2.385)
1,965,118
(180,490)
(1,020,862)
17.807
781,573
(30.742)
(237,104)
39,419
(10.415)
1,206
(205,894)
28-679
28,679
1,943,000
S 5794.276
3.891 358
7.038.296
(fit1 59.8) 516,112,332
5
729,302
S 145.403
5.196-832
4 957 457
10.306 5
10.810.CO8 $
2a
26
The mtes to the 6runcial statements are an integral pan of this statement .5
CITY OF LODI
STATEMENT OF FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
June 30, 2006
ASSETS
Cash and Investments
Receivables:
Special assessments
Interest
Other assets
TOTAL ASSETS
LIABILITIES
Agency obligations
TOTAL LIABILITIES
NET ASSETS
The notes to the financial statements are an integral part of this statement. 27
Private -Purpose
Trust Funds Agency Fund
$ 759,390 $ 453,628
79,594
2,196
759,390 527,418
$ 759,390 $
527,418
527,418
CITY OF LODI
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
Year ended June 30, 2006
ADDITIONS
Investment and rental income
Total additions
DEDUCTIONS
Current
Library
Total deductions
CHANGE IN NET ASSETS
NET ASSETS, BEGINNING OF YEAR
NET ASSETS, END OF YEAR
The notes to the financial statements are an integral part of this statement. 28
Private -Purpose
Trust Funds
$ 77,925
77,925
12,862
12,862
65,063
694,327
$ 759,394
NOTES TO THE FINANCIAL STATEMENTS
CITY OF LODI
Notes to Basic Financial Statements
June 30, 2006
(7} SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) THE FINANCIAL REPORTING ENTITY
The City of Lodi (City) was incorporated on December 6, 1906, as a municipal corporation under the General Laws of the State of California.
The City operates under a Council -Manager form of government and provides the following services: general government, public works, public
protection (police and fire), public utilities, library, parks and recreation.
The accounting policies of the City conform to generally accepted accounting principles (GAAP) as applicable to governments in the United
States of America. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for governmental accounting
and financial reporting principles.
An elected five -member council governs the City of Lodi. As required by GAAP, these financial statements present the City and its component
units, entities for which the City is considered to be financially accountable. The component units, although legally separate entities, are, in
substance, part of the City's operations and therefore, their activities are blended with data of the City.
Blended Component units
The blended component units of the City are as follows_
The Lodi Public Improvement Corporation (LPIC) was formed on April 26, 1988, for the purpose of rendering financial assistance to the City in
the issuance of the 1988 Certificates of Participation (refunded by the issuance of the 1991 Certificates of Participation) to finance the expansion
of the City's White Slough Pollution Control Facility, the 1995 and 1996 Certificates of Participation to finance the Central City Revitalization
Projects and the Performing Arts/ Conference Center, (refunded by the issuance of the 2002 Certificates of Participation), the issuance of the
1999 Certificates of Participation to finance the Electric Systems improvements (refunded by the 2002 Certificates of Participation Series A) and
the issuance of the 2004 Wastewater System Revenue Certificates of Participation Series A to provide funds to finance the costs of certain
improvements to the wastewater collection, treatment and disposal system of the City.
The City Council constitutes the Board of Directors of LPIC. The funds of LPIC have been included in the Enterprise (Electric and Wastewater)
Funds and in the other governmental funds in the accompanying basic financial statements.
The Lodi Financing Corporation (LFC) was formed on October 12, 1999, for the purpose of assisting the City with the financing of the costs of its
environmental abatement program and enhancing the water supply of the City for the use, benefit and enjoyment of the citizens served by the
City. The City Council is the Board of Directors of LFC. The funds of LFC are included in the Water Fund in the accompanying basic financial
statements.
29
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(b) Government -wide and fund financial statements
The government -wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non -
fiduciary activities of the primary government and its component units. For the most part the effect of interfund activity has been removed from
these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately
from business -type activities that rely, to a significant extent, on fees and charges for support.
The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct
expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or
applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and
contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly
included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded
from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as
separate columns in the fund financial statements.
(c) Measurement focus, basis. of accounting, and financial statement presentation
The government -wide financial statements are reported using the economic resources measurement focus and accrual basis of accounting, as
are the proprietary fund and private -purpose trust fund financial statements. Revenues are recorded when earned and expenses are recorded
when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they
are levied. Grant and similar items are recognized as revenue as soon as all eligibility requirements have been met. Agency funds use the
accrual basis of accounting, but they do not have a measurement focus.
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of
accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they
are collectible within the current period or soon enough thereafter to pay liabilities of the current period. The City considers property tax revenues
to be available if they are collected within 60 days of the end of the current fiscal year. All other revenues are considered to be available if they
are generally collected within 120 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as
under accrual accounting. However, debt service expenditures, as well as expenditures related to vacation, sick leave, claims and judgments,
are recorded only when payment is due.
Property taxes, other local taxes, licenses, intergovernmental revenues, and interest associated with the current fiscal period are all considered
susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenues are considered to be
measurable and available when the City receives cash.
30
CITY OF LODI
Motes to Basic Financial Statements (continued)
June 30, 2006
The City reports the following major governmental funds.-
The
unds:
The General Fund is the City's primary operating fund. It accounts for all financial resources of the City except those required to be
accounted for in another fund.
The Street Fund accounts for Gas Tax revenues apportioned to the City under the Streets and Highway Code, impact fees charged to
provide for the building of various storm drains and street improvements needed to serve new developments, and to account for funds
apportioned to the City for sales tax collections under Measure K.
The City reports the following major proprietary (enterprise) funds:
The Electric Fund accounts for the provision of electric services to the residents of the City. All activities necessary to provide such
services are accounted for in this fund, including but not limited to, source of supply, overhead, systems maintenance, customer service,
engineering, administration, capital improvements, and maintenance and debt service.
The Wastewater Fund accounts for the provision of wastewater collection and treatment services to the residents of the City.
All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations,
maintenance, improvements and debt service.
The Water Fund accounts for the provision of water to the residents of the City as well as some customers in the County. All activities
to provide such services are accounted for in this fund, including, but not limited to administration, operations, distribution, maintenance,
capital improvements and debt service.
Additionally, the City reports the following fund types:
The Internal Service Fund accounts for the City's claims and benefits.
The fiduciary funds account for assets held in trust for other agencies.
Private -Purpose Trust Funds are used to account for trust agreements under which the principal and income benefit
individuals, private organizations or other governments. They were established to account for assets held and invested by the
Library Board as trustee; and to account for assets held by the City in accordance with a trust agreement on behalf of the
Hutchins Square. These funds can only be spent in accordance with the trust agreements.
Agency Fund accounts for assets held by the City as a trustee or as an agent for individuals, private organizations, related
organizations and/or other governmental units. This fund was established to account for special assessments collected on the
31
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
property tax roll by the City on behalf of the property owners within the Industrial WaylBeckman Districts, the
Downtown/Cherokee Lane Districts and various landscape and lighting districts around the City.
Private—sector standards of accounting and financial reporting issued prior to December 1, 1989, are followed in both the business -type activities
in the government -wide and the proprietary fund financial statements to the extent that those standards do not conflict with or contradict
guidance of the GASB. The City also has the option of the following subsequent private -sector guidance for their business -type activities and
enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private -sector guidance.
The effect of interfund activity has been eliminated from the government -wide financial statements. Exceptions to this rule are charges to other
City departments from the Electric, Wastewater, Water and Transit Funds. These charges have not been eliminated because elimination would
distort the direct costs and program revenues reported in the statement of activities.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result
from providing services in connection with the fund's principal ongoing operations. The principal operating revenues of the City's enterprise
funds and internal service fund are charges for customer services including: electric, wastewater, water and public transportation fees.
Operating expenses for enterprise funds and internal service fund include the cost of services, administrative expenses, and depreciation on
capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, and then unrestricted
resources as they are needed.
(d) Cash and Investments
1
The City maintains a cash and investment pool that is available for all funds of the City for the purpose of increasing interest earnings through
investment activities. Investments are generally stated at fair value with the exception of guaranteed investment contracts, which are stated at
cost. Income earned or losses arising from the investment of pooled cash are allocated to various funds based on month-end cash balances in
accordance with California Government Code Section 53647. Changes in fair value of investments are recognized as a component of interest
and investment income.
Proceeds from debt and other cash and investments held by fiscal agents by agreement are classified as restricted assets.
(e) Restricted Cash and Investments
The City established an escrow account (the "Central Plume Fund") into which certain settlement payments were deposited with the mutual
agreement between the City and the other parties that these funds will be used exclusively for environmental clean up, investigation or
remediation expenses incurred by the City in the Central Pfume Area and that it will not be used for the payment of legal or technical fees. These
funds are accounted for in the Water Fund.
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(f) Restricted Assets with Fiscal Agents
In the Enterprise (Electric) Fund, restricted assets represent the proceeds of the 1999 Certificates of Participation held by the trustee for the
planned improvements of the city electric systems. In the Capital Outlay Reserve Fund, the restricted assets represent the proceeds of the 2002
Improvement bonds reserved for debt service. In the Wastewater fund, the restricted assets represent the proceeds of the 20038 and the
2004A Certificates of Participation issued for improvements to the City's wastewater collection, treatment and disposal system. In the Water
Fund, the restricted assets represent funds held by the attorneys in connection with the PCEITCE litigation.
(g) Property Taxes
San Joaquin County is responsible for assessing, collecting and distributing property taxes in accordance with enabling legislation. Revenue
received is based on an allocation factor calculated by the County under the provisions of Proposition 13 plus a percentage of the increase in
market value in specific areas. The City's property tax is liened based on the assessed value listed as of the prior January 1st for all real and
personal property located in the City. Property sold after the assessment date (January 1st) is reassessed and the amount of property tax
assessed is prorated. The assessed value at January 1, 2004, upon which the 2005 #evy was based, was $4,473,902,000.
Secured property taxes are levied on October 1 and are due in two installments on November 1 and February 1. The tax becomes delinquent
after December 10 and April 10, respectively. Unsecured property tax is levied on July 1, due on July 31 and becomes delinquent after August
31.
Property taxes levied for the year ended June 30, 2006, are recorded as receivables, net of estimated uncollectible amounts. Property taxes
paid to the City by the County within 60 days of the fiscal year end are considered "available" and are, therefore, recognized as revenue.
In 1993, the City made an agreement with the San Joaquin County to participate in the Teeter Plan. The Teeter plan is an alternative method of
apportioning property tax money. The cities receive 95% of the property taxes in advance from the County and the 5% remaining after
reconciling the cities' balances at June 30. As part of the agreement, the County keeps the penalties and interest on the delinquent taxes.
(h) Due From/Due To Other Funds and Internal Balances
During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. In the fund
financial statements, these receivables and payables are classified as "due from other funds" or'due to other funds.' In the government -wide
financial statements, these receivables and payables are eliminated within the governmental activities and business -type activities columns.
Receivables and payables between the governmental activities and the business -type activities are classified as internal balances.
33
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(1) Transfers
In the fund financial statements, interfund transfers are recorded as transfers in (out) except for transactions that are described below:
Charges for services are recorded as revenues of the performing fund and expenditures of the requesting fund. Unbiiied costs are
recognized as an asset of the performing fund at the end of fiscal year.
Reimbursements for expenditures, initially made by one fund that is properly applicable to another fund, are recorded as expenditures in
the reimbursing fund and as other revenue in the fund that is reimbursed. Reimbursements are eliminated for purposes of government -
wide reporting.
0) Long-term obligations
In the government -wide financial statements and in the proprietary fund type financial statements, long-term debt and other long-term obligations
are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund statement of net assets. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Bonds payable are reported net of
the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related
debt. Gains or losses occurring from advance refunding are deferred and amortized into expense for both governmental and business -type
activities.
(k) Loan receivable
Loan receivable reported in the HOME Program & Community Development Block Grant Special Revenue Fund represent funds the City loaned
to a developer for a low-income housing project. The City will receive principal and interest from the original loan in thirty years and can use it for
allowable projects or to make new loans.
(1) Advance receivable
Advance receivable reported in the Enterprise Fund (Electric) represents the City's portion of the Northern California Power Agency's (NCPA)
General Operating reserve that is refundable upon demand by the City. (See Mote 13.)
(m) Inventory
General fund inventories are recorded at cost and are recognized as expenditures when consumed rather than when purchased. For the
proprietary fund types, inventories are recorded at cost using the weighted average cost method, which approximates market, and expense is
recognized when inventories are consumed in operations.
34
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(n) Deferred Charges
Deferred charges reported in the Electric Fund include costs incurred in connection with the issuance of the 2002 Certificates of Participation
Series A and B amortized over 30 years. It also includes the buyout cost of the Calpine energy purchase contract amortized over 9.5 years. The
deferred charges reported in the Wastewater Fund include costs incurred on the issuance of the 1991 Certificates of Participation amortized over
32.5 years and the costs incurred on the issuance of the 2003E and 2004A Certificates of Participation amortized over 20 years.
(o) Capitan Assets
Capital assets, which include land, buildings and improvements, machinery and equipment, vehicles, infrastructure (e.g., streets, streetlights,
traffic signals, sidewalks, and bridges), and electric lines, wastewater lines and storm drains are reported in the applicable governmental or
business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with individual
cost of $3,000 or more and have an estimated useful life in excess of two years. Such assets are recorded at historical cost. Donated capital
assets are recorded at estimated fair market value at the date of donation. Capital outlay is recorded as expenditures in the General and other
governmental funds and as assets in the government -wide financial statements to the extent the City's capitalization threshold is met.
The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset useful lives are not capitalized.
As required by the Governmental Accounting Standards Board Statement No. 34, beginning July 1, 2002, the City has capitalized infrastructure,
primarily its network of streets, as part of the capital assets shown in the governmental activities column on the government -wide statement of
net assets. This capitalization included infrastructure that could be identified and has been acquired since July 1, 1980.
Depreciation of capital assets is provided on the straight-line basis over the following estimated useful lives:
Years
Buildings and improvements 3-40
Machinery and equipment 2-40
Vehicles 5-15
Infrastructure 10-50
(p) Compensated Absences/Vacation and Sick Leave
Accumulated vacation and vested sick leave benefits are accrued when incurred in the government -wide financial statements and the proprietary
financial statements. A liability for these amounts is reported in the governmental funds only if they have matured.
35
z)
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(q) Self-insurance
The City is self-insured for general liability, workers' compensation, dental benefits, unemployment and long-term disability. Various City funds
are charged premiums for the City's self-insurance liability, which is accounted for as an internal service fund. The accrued liability for estimated
self-insured claims represents an estimate of the eventual loss on claims arising prior to year-end including claims incurred but not reported.
(r) Fund Equity
In the fund financial statements, governmental funds report reservations of fund balances for amounts that are not available for appropriation or
are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that
are subject to change,
(s) Statement of Cash Flows
A statement of cash flows is presented for proprietary fund types. For purposes of reporting cash flows, the City considers all highly liquid
investments with maturities of three months or less when purchased and investments maintained in the pool to be cash equivalents.
(t) Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain
reported amounts and disclosurels. Actual results could differ from those estimates.
1
Cash and investments
Cash and investments as of June 30, 2006 are classified in the accompanying financial statements as follows:
Statement of net assets:
Cash and investments
Restricted assets
Fiduciary funds cash and investments:
Private -purpose trust funds
Agency fund
Total cash and investments
36
27,625,331
35,699,041
759,390
453,628
$ 64,537,390
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Cash and investments as of .lune 30, 2006 consist of the following:
Cash on hand $ 2,073
Deposits with financial institutions 21,753,014
Investments 42,782,303
Total cash and investments $ 64,537,390
a) Authorized Investments
The City has adopted an investment policy pursuant to Government Code Section 53601 which authorizes the City to invest in obligations of the
U.S. Treasury, U.S Government agency securities and instruments, commercial paper rated A-1 by Standard & Poor's or P-1 by Moody's
Commercial Paper Record, bankers' acceptances, certificates of deposits, mutual funds, government investment contracts, medium term notes
as permitted by the Government Code, and the State of California Local Agency Investment Fund (LAI F). The City is not authorized to enter into
reverse repurchase agreements. The City selects its investments based on safety, liquidity and yield.
b) Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by the provisions of the debt agreements and to the extent that they are
permissible investments of funds of the City. The following table below identifies the permitted investment types authorized per the City's
investment policy. The table also identifies certain provisions that address interest rate risk, credit risk, and concentration of credit risk.
Commercial Paper 270 days
California State Local Agency Investment Fund (LAIF) Indefinite
Money Market Mutual Funds indefinite
Guaranteed investment contracts (GICs) 5 years
Medium term Notes 5 years
37
40%
Maximum
Maximum % of
Maximum Investment
Minimum Credit
Permitted Investments/Deposits
Maturity
Portfolio
in One issuer _
Quality
U.S. Treasury Obligations
5 years
100%
AAA
U.S. Agency Securities
5 years
100%
AAA
Banker's Acceptances
180 days
40%
25%
AAA
Certificates of Deposit
5 years
100%
33%
Negotiable Certificates of Deposit
5 years
30%
Commercial Paper 270 days
California State Local Agency Investment Fund (LAIF) Indefinite
Money Market Mutual Funds indefinite
Guaranteed investment contracts (GICs) 5 years
Medium term Notes 5 years
37
40%
AAA
100%
$40m per account unrated
20%
AAA
100%
AA -
30%
AAA
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
c) Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the
maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of the
fair values of the City's investments to market interest rate fluctuations is provided by the following table that shows the maturity date of each
investment:
Investment as of June 30, 2006
tAl F
Money Market Mutual Funds
Equities and options
Held by bond trustee:
Money Market Mutual Funds
Maturity
Less than One Year
$ 15,284, 809
521,817
120,321
12, 276, 738
Maturity
One to Five Years
Total
$ 15,284,809
521,817
120,321
12,276,738
Guaranteed investment contracts (GICs) 14,578,618 14,578,618
Total $ 28,203,685 14,578,618 $ 42,782,303
Investments in equities are shares of stocks received by the Library as an endowment from a private citizen.
d] Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by
the assignment of a rating by a nationally recognized statistical rating organization. The money market funds are registered under the Federal
Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and have a rating by S 8,P of "AAAm-
G n "AAA -m" or "AA -m" and rated by Moody's "Aaa," "Aa1" or "Aa2." The GICs and LAIF do not have a rating provided by a nationally
recognized statistical rating organization.
e) Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the
California Government Code. Investments in LAIF and money market mutual funds are not subject to the concentration of credit risk disclosure.
Of the remaining investments, only the GICs which are all issued by IXIS Funding Corporation. exceeded 5% of total City investments.
38
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
f) Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to
recover collateral securities that are in the possession of an outside party. The California Government Code and the City's investment policy do
not contain legal or policy requirements that would limit the exposure to custodial risk for deposits, other than the following provision for deposits.-
The
eposits:The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging
securities in an undivided collateral pool held by a depository regulated under state law. The market value of he pledged securities in the
collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to
secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured deposits. $22,035,503 of the City's
deposits with financial institutions, which exceeded federal depository insurance limits, was collateralized in this fashion.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a
government will not be able to recover the value of the investment or collateral securities that are in the possession of another party. The
California Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk
for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities.
Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government
investment pools such as LAIF.
g) Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment f=und (LAIF) that is regulated by the California Government Code under the
oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial
statements at amounts based upon the City's pro -rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the
amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are
recorded on an amortized basis.
The total amount invested by all public agencies in LAIF at June 30, 2006 was $16.4 billion. LAIF is part of the California Pooled Investment
Account (PMIA), which at June 30, 2006 had a balance of $63.3 billion. Of this amount, 2.567% was invested in derivative financial products.
PMIA is not SEC -registered, but is required to invest according to California State Code. The average maturity of PMIA investments was 152
days as of June 30, 2006.
The Local Investment Advisory Board has oversight responsibility for LAIF. The Board consists of five members as designated by state statute.
The value of the pool of shares in LAIF, which maybe withdrawn, is determined on an amortized cost basis, which is different than the fair value
of the pooled treasury's portion in the pool. Withdrawals from LAIF are done on a dollar for dollar basis.
�9
(3)
(4)
CITY OF LODI
Notes to Basic Financial Statements (continued)
,lune 30, 2006
In accordance with GASB 31, investments are marked to fair values annually and an adjustment is made to each fund accordingly. However,
actual daily activity is done on a dollar to dollar basis and only a withdrawal from the pool size that jeopardizes pool participants would cause the
withdrawal to be done at market value.
ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
Receivables of the General Fund, Electric, Wastewater and Water funds are reported net of uncollectible amounts. Total allowance provided for
uncollectible amounts related to receivables of the current period are as follows:
Uncollectibles related to late charges and services $
15,800
Uncollectibles related to electric sales and services
202,600
Uncollectibles related to wastewater services
36,100
Uncollectibles related to water sales and services
42,100
Total uncollectibles of the current fiscal year $
296,600
INTERFUND RECEIVABLESlPAYABLES
interfund receivables and payables at June 30, 2006 are as follows:
Due from Due to Amount
Other governmental Streets $ 541,543
$
541,543
"Due to" and "due from" balances are recorded primarily when funds overdraw their share of pooled cash or when there are short-term loans
between funds. The $541,543 represents cash deficit in other governmental funds.
Advances from
General
Other governmental
Water
Advances to
Other governmental
Streets
Other governmental
40
Amount
$ 261,880
636,770
1,225,173
$ 2,123,823
(5)
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
The $261,880 from the General Fund to the Other governmental is an advance used for the start up costs of a redevelopment agency. The
$636,770 advance from Other governmental was used for the Lower Sacramento Road expansion project. The $1,225,173 advanced from the
Water Fund was used for the construction of Fire Station #4.
TRANSFERS
Transfers for the year ended June 30, 2006, are summarized as follows:
Transfers in
Other
Transfers out:
General
Governmental Wastewater
Water Total
General $
1,833,864
$ 1,833,864
Streets
1,566,579
96,107
1,662,686
Other governmental
403,410
318,938
722,348
Electric
2,898,246
5,000
5,000 2,908,246
Wastewater
1,062,533
1,062,533
Water
962,056
962,056
Total $
6,892,824
2,248,909 5,000
5,000 $ 9,151,733
During the year, various interfund transfers were made to finance expenditures, subsidize operating losses and service debt.
The total transfers out of $1,566,579 from Streets to the General Fund include the transfer of $1,150,194 gas tax revenues to fund the Public
Works Street Maintenance Division, $361,636 for engineering cost of services and $54,749 in reimbursements from Measure K. The transfer out
of $96,107 from Streets to Other Governmental represents the annual transfer to the Debt Service Fund for the principal and interest payment of
the City's Measure K loan from San Joaquin Council of Governments for the construction costs incurred for the Highway 12/Kettleman
Lane/Highway 99 Interchange Improvements project.
Transfers out from Other Governmental to the General Fund of $403,410 include transfers of $115,130 from Fire Facilities Impact fees to cover
lease payment of the new fire truck; $50,000 to reimburse the General Fund for the costs associated with the administration of the IMF program;
139,074 for engineering costs of services; and $3,100 for the Arts in Public Places program.
The $1,833,864 transfers out from the General Fund to Other Governmental represent transfers of $1,631,053 to the Debt Service Fund for the
principal, interest and fiscal charges required to pay the 2002 Certificates of Participation; $175,000 to the Community Development Fund;
$21,702 to the Public Safety Special Revenue Funds as matching funds for the purchase of Self-contained Breathing Apparatus Equipment and
mobile compressor; and $6,109 to the Special Grants for the Tree Planting program
41
(6)
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
The $2,898,246 transfer out from the Electric Fund is for cost of services reimbursement to the General Fund, $1,062,533 from Wastewater
includes cost of services of $908,793, engineering cost of $30,740 and $123,000 for additional street sweeping reimbursement to the General
Fund. The $962,056 from Water includes $909,260 for cost of services and $52,796 for engineering costs. The transfer of $318,938 from Other
Governmental to Other Governmental represent transfers of $187,500 to Vehicle and Equipment Fund; $78,000 to the Community Development
Fund and $53,438 to the Debt Service Fund. Transfers out of $10,000 from the Electric Fund to Wastewater Fund and Water Fund are transfers
for public benefit programs.
CAPITAL ASSETS
Capital assets activity of the primary government for the year -ended June 30, 2006, was as follows:
Balance
Governmental activities
Capital assets, not being depreciated:
Land
Work of art
Construction in progress
Total capital assets, not being depreciated
Capital assets, being depred..ted:
mproveme
Buildings and ints
Machinery and equipment
Vehicles
Infrastructure
Total capital assets, being depreciated
Less accumulated depreciation for:
Buildings and improvements
Machinery and equipment
Vehicles
Infrastructure
Total accumulated depreciation
Total capital assets, being depreciated, net
Governmental activities capital assets, net
June 30, 2005 Increases Decreases
$ 23,798,811 217,563
62.024
Balance
June 30, 2006
$ 24,016,374
62,024
4,373,798 189,677 (1,362,885) 3,200,590
28,234,633 407,240 (1,362,885) 27,278,988
56,360,363 452,464
7,542,375 229,625
8,811,162
36,623
95,414,811
12,086,908
168128,711
12,805,620
16,037,336 1,491.413
6,285,317 406,186
6,559,610
546,896
34,332,895
5,017,775
63, 215,158
7,462,270
104.913, 553
5.343,350
$ 133,148,186
5.750, 590
42
56,812,827
7,772,000
8,847,785
107,501,719
180,934,331
17,528,749
6,691, 503
7,106,506
39,350,670
70,677,428
110,256,903
(1,362,885) 5 137,535,891
Business -type activities
Capital assets, not being depreciated:
Land
Construction in progress
Total capital assets, not being depreciated
Capital assets, being depreciated:
Buildings and improvements
Machinery and equipment
Vehicles
Total capital assets, being depreciated
Less accumulated depreciation for:
Buildings and improvements
Machinery and equipment
Vehicles
Total accumulated depreciation
Total capital assets, being depreciated, net
Business -type activities capital assets, net
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Balance
June 30, 2005
Increases
Decreases
Balance
June 30, 2006
$ 5,247,806
$ 5,247,806
20,307,276
3,945,362
(4,552,606) 19,700,032
25,555,082
3,945,362
(4,552,606) 24,947,838
34,461,202
34,461,202
99,879,557
16,298, 798
116,178,355
5,905,802
26,076
6,931,878
141,246,561
16,324,874
157,571,435
7,208,143
862,B91
8,071,034
30,013,946
2,674, 702
32,688,648
4,475,782
467,580
4,943,362
41,697,871
4,005,173
45,703,044
99, 548.690
12.319,701
111,868,391
125,103,772
16,265,063
(4,552,606)$ 136,816,229
43
CITY OF LOU
Notes to Basic Financial Statements (continued)
June 30, 2006
Depreciation expense was charged to function/programs of the primary government as follows:
Governmental activities:
General government
Public protection
Public works
Community development
Library
Parks and recreation
Business -type activities:
Electric
Wastewater
Water
Transit
(7) Operating Leases
Total depreciation expense - governmental activities
Total depreciation expense - business -type activities
$ 777,259
906,401
5,130,691
2Z328
4,767
620,824
$ 7,462,270
$ 943,353
1,575,362
928,652
557,806
$ 4,005,173
The City is obligated under various operating leases for the use of buildings and office space. Total costs for such leases were $152,382 for the
year ended June 30, 2006.
Future minimum lease payments required by lease agreements that have initial or remaining nonca ncellable lease terms of one year or more as
of June 30, 2006, are as follows:
Fiscal Years Ending
2007
Total minimum lease payments required
under operating leases
44
$ 91,400
$ 91,400
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(8j
Long -Term Obligations
The following is a summary of debt transactions of the City for the year ended June 30, 2006:
Amounts
Due within
Interest Rates June 30, 2005 Additions Reductions June 30, 2006 One Year
Governmental activities:
Compensated absences
2002 Certificates of Participation
Note payable
Loan payable
Capital leases
Self-insurance liability
Govemmental activity long-term liabilities
Business -type activities:
Compensated absences
California Safe Drinking Water Note Payable
Certificates of Participation:
1991 Certificates of Participation
Less deferred amounts:
For issuance discounts
Net
Amounts
Due Within
Interest Rates June 30, 2005 Additions Reductions June 30, 2006 One Year
$ 2,379,424 564,930 771,824 $ 2,172,530 $ 564,930
3.41% 2,230,125 153,220 2,076,905 158,536
4.5-6.6% 9,205,000
(311,227)
8,893,773
45
(195,000) 9,010,000 210,000
14,474 (296,753) (14,447§1
(160,526} 8,713,247 195,525
$ 9,307,134
3,078,297 (2,520,272) $
9,865,159 $
3,078,297
3.0-5.0%
25,030,000
(520,000)
24,510,000
535,000
5.0%
245,000
245,000
245,000
4.0%
368,175
(89,662)
278,513
91,232
5.3-5.39%
1,212,330
(282,393)
929,937
266,619
5,140,000
3,455,368 (1,512,368)
7,083,000
1,512,368
$ 41,302,639
6,533,665 (4,924,695) $
42,911,609 $
5,728,516
Amounts
Due Within
Interest Rates June 30, 2005 Additions Reductions June 30, 2006 One Year
$ 2,379,424 564,930 771,824 $ 2,172,530 $ 564,930
3.41% 2,230,125 153,220 2,076,905 158,536
4.5-6.6% 9,205,000
(311,227)
8,893,773
45
(195,000) 9,010,000 210,000
14,474 (296,753) (14,447§1
(160,526} 8,713,247 195,525
2002 Certificates of Participation A & B
Less deferred amounts:
From refunding
Net
2002 Certificates of Participation C & D
Add deferred amounts:
For issuance premium
Total
2003 Certificates of Participation B
Add deferred amounts:
For issuance premium
Total
2004 Certificates of Participation A
Add deferred amounts:
For issuance premium
Total
Total Certificates of Participation
Business -type activity long-term liabilities
Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above
totals for governmental activities. At year-end $7,083,000 of internal service funds self-insurance liability was included in the above amounts.
Also, for the governmental activities, compensated absences are generally liquidated by the general fund.
Long-term debt payable at June 30, 2006, comprised of the following individual issues:
California Safe Drinking Water Note Payable
The City entered into a contract on October 16, 1991, with the State of California Department of Water Resources to assist the City in financing
the construction of water wells enabling the City to meet safe drinking water standards established by the State. The original amount of the note
46
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Amounts
Due Within
Interest Rates
June 30, 2005
Additions Reductions
June 30, 2006
One Year
Variable
46,760,000
46,760,000
(7,167.231)
286,689
(6,880,542)
(286,6.88
39,592,769
286,689
39,879,458
(286,688)
1.54-5.25%
38,645,000
38,645,000
4,655,000
426,640
(65,636)
361,004
65,636
39,071,640
(65,636}
39,006,004
4,720,636
2.0-5.0%
4,815,000
(185,000)
4,630,000
190,000
j
74,861
(4,102)
70,759
4,102
4,889,861
(189,102)
4,700,759
194,102
2.0-5.5%
27,190,000
(895,000)
26,295,000
915,000
409,583
(21,277)
388,306
21,277
27,599,583
(916,277)
26,683,306
936,277
120,047,626
(1,064,851)
118,982,775
5,759,852
$ 124,657,175
564,930 (1,989,896)
$ 123,232,209
$ 6,483,318
Internal service funds predominantly serve the governmental funds. Accordingly, long-term liabilities for them are included as part of the above
totals for governmental activities. At year-end $7,083,000 of internal service funds self-insurance liability was included in the above amounts.
Also, for the governmental activities, compensated absences are generally liquidated by the general fund.
Long-term debt payable at June 30, 2006, comprised of the following individual issues:
California Safe Drinking Water Note Payable
The City entered into a contract on October 16, 1991, with the State of California Department of Water Resources to assist the City in financing
the construction of water wells enabling the City to meet safe drinking water standards established by the State. The original amount of the note
46
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
was $3,129,828 and is secured by the project and a pledge of user fees collected by the Water Enterprise Fund. Semiannual payments of
$114,006, are payable each October 1 and April 1 through 2016.
Annual debt service requirements to maturity of water note payable are as follows:
Fiscal
Year
Ending
June 30,
2007
2008
2009
2010
2011
2012-2016
2017
Total
Business -type
Activities
Principal
Interest
$ 158,536
$ 69,488
163,859
64,166
169,747
58,277
175,462
52,562
181,496
46,528
1,005,477
134,645
222,328
5,694
$ 2,076,905
$ 431,360
Note Payable
The City issued a $245,000 promissory note to James E. Dean and Carol Dean, as trustees of the James E. Dean Family Trust, for the purchase
of 307 W. Elm Street property, which is the site of the new Public Safety Building. Interest is payable quarterly and principal is due on April 1,
2007.
Annual debt service requirements to maturity of the note payable are as follows:
Fiscal
Year
Ending Governmental Activities
June 30, Principal Interest
2007 $ 245,000 $ 9,188
Total $ 245,000 $ 9,188
Loan Payable
The City entered into an agreement and issued a promissory note to San Joaquin County Council of Governments, a joint powers agency acting
as the San Joaquin County Transportation Authority, in the amount of $840,000 on February 5, 1999 for the purpose of funding the Kettleman
Lane/SR 99 Interchange project. The balance remaining as of June 30. 2006, is $278,513 interest and principal is due and payable annually
and matures on July 1, 2009.
47
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Annual debt service requirements to maturity of loan payable are as follows.-
Fiscal
ollows:
Fiscal
Year
Ending
June 30,
2007
2008
2009
Total
Certificates of Participation
Governmental Activities
Principal
$ 91,232
92,828
94,453
$ 278,_513
Interest
4,874
3,277
1,653
$ 9,804
$11,170,000 Certificates of Participation (1991 Wastewater Treatment Plant Expansion Refunding Project) were sold in December 1991 for the
repayment of the 1988 Wastewater Treatment Plant Expansion Project at a lower interest rate with approximately $1,400,000 of additional
proceeds. Principal is payable Innually on August 1 in amounts from $100,000 to $760,000 with final payment due August 1, 2026.
$5,000,000 California Statewide Communities Development Authority Water and Wastewater Revenue Bonds were issued on October 7, 2003.
The City of Lodi along with the City of Fort Bragg issued $9.855 million 2003 Series B revenue bonds through the California Statewide
Communities Development Authority (the "Authority") pooled financing program. The City of Lodi's portion is $5.0 million for the upgrade of its
wastewater facilities. Principal is payable annually on October 1 in amounts from $185,000 to $365,000 with final payment due October 1, 2023.
The Authority's Water and Wastewater Pooled Financing Program is available to California water and wastewater agencies to facilitate the
financing or refinancing of capital improvements. The program is available to California cities and special districts that operate water or
wastewater enterprises. The Authority is authorized pursuant to Chapter 5 of Division 7 of Title 1 of the California Government Code to issue
bonds to finance and refinance water and wastewater public capital improvements of local agencies located throughout California.
$27,360,000 Certificates of Participation (2004A COP) were issued on May 12, 2004 to provide funds to finance the costs of certain
improvements to the wastewater collection, treatment and disposal system of the City. Principal is payable annually on October 1 in amounts
from $170,000 to $2,070,000 with final payment due October 1, 2024.
$26,745,000 Certificates of Participation (2002 COP) were issued in January 2002 to provide funds to finance the costs of constructing,
furnishing and equipping a new police building and jail for the City; to finance portions of certain other projects and to refund the outstianding
1M and 1996 C 41ftates of Partipatton. The 1995 Certificates of Participation (1995 COP) were sold in October 1995 to finance the City
Downtown Revitalization and the Cherokee Lane Beautification projects. The 1996 Certificates of Participation (1996 COP) were sold in August
48
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
1996 to finance the construction of the Hutchins Street Square Conference and Performing Arts Center. Principal is payable annually on October
1 in amounts from $730,000 to $1,600,000 with final payment due October 1, 2031.
$46,760,000 2002 Variable Rate Demand Series A and $8,400,000 2002 Taxable Series B Electric System Revenue Certificates of Participation
were sold in January 2002. The proceeds of the 2002A Certificates of Participation were used to advance refund the 1999 Electric System
Certificates of Participation Series A and the 1999 Series B Capital Appreciation certificates. The 1999 Series A and Series B Revenue
Certificates of Participation were sold on August 18, 1999, to provide funds to finance the costs of certain improvements to the distribution and
transmission facilities of the City's Electric System. As of June 30, 2006, the outstanding balance of the advanced refunded certificates is
$43,957,682. The proceeds of the 2002B Certificates were deposited in the Rate Stabilization Fund and applied to certain power purchase costs
of the City_ Principal for Series A is payable annually beginning 2011 to 2032 in amounts ranging from $1,175,000 to $ 3,460,000. Series B was
fully paid as of June 30, 2005.
The interest rate on the 2002A Certificates is determined based on the "Weekly Rate Index" for weekly interest rate periods. "Weekly Rate
Index" is defined as The Bond Market Association Municipal Index as of the most recent date for which such index is published.
$21,225,000 Revenue Certificates of Participation 2002 Series C and $22,740,000 Revenue Certificates of Participation Series D were issued to
buy out the energy purchase agreement with Calpine.
In February 2001, the City entered into an energy purchase agreement (the Original Agreement) with Calpine Energy Services L.P. (Calpine) to
purchase 25 MW of energy at $651mwh for a ten-year period beginning January 1, 2002. Since the execution of the Original Agreement, actions
of the State in connection with the energy market conditions, including the initiation of conservation programs, and other factors, have resulted in
lower electric load requirements and reduced energy costs throughout the State. As a result, the City's need for the energy purchased under the
Original Agreement to serve its load has been reduced. The Original Agreement was amended on September 4, 2002, and was divided into
three parts. The City sold its interests in the energy purchased under the Original Agreement to Calpine and nets the payments due from the
City with respect to its purchase of such energy against the payments due from Calpine with respect to its purchase of the City's rights to such
energy. On November 21, 2002, the City issued $21,225,000 Revenue Certificates of Participation 2002 Series C and $22,740,000 Revenue
Certificates of Participation 2002 Taxable Series D to buy out the amended contract in the amount of $42,406,175.
The various indentures contain significant limitations and restrictions on annual debt service requirements, maintenance of and flow of moneys
through various restricted accounts and minimum revenue bond coverage. The City is in compliance with all such significant limitations and
restrictions.
49
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Interest Rate Swaps
1999 $42 Million Forward Basis Swap
Objective:
As a means to lower its borrowing costs, the City executed a forward floating -to -floating ("Basis") swap in connection with its existing
$42,000,000 Electric System Revenue Certificates of Participation, 1999 Series A and B. The intention of the swap was to provide protection
against rising short-term interest rates since the City's net payment increases as rates rise.
Terms:
Under the swap, the City pays Citigroup (previously Salomon) a variable payment computed as The Bond Market Association Municipal Swap
Index TM (BMA) and received a variable payment computed as 74.25% of the London Interbank Offered Rate (LIBOR). The swap has a notional
amount of $42 million and the associated fixed rate bonds had a $42 million principal amount at the time the swap was executed. The swap
began on July 15, 2003 and matpres on September 29, 2014. As of June 30, 2006, rates were as follows:
Terms Rates
Interest rate swap:
Variable payment to counterparty BMA 3.9700%
Variable payment from counterparty 74.25% of LIBOR (4.0300%)
Net interest rate swap payments (0.0600%)
Fair Value:
As of June 30, 2006, the swap had a fair value of $336,600. The fair value was estimated using the zero-coupon method. This method
calculates the future payments required by the swap, assuming that the current forward rates by the yield curve correctly anticipate future spot
rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon rate bonds due
on the date of each future net settlement on the swaps.
Credit Risk:
As of June 30, 2006, the City was exposed to credit risk because the swap had a positive fair market value. The counterparty was rated Aa1 by
Moody's Investors Service, AA- by Standard & Poor's, and AA+ by Fitch Ratings. To mitigate the potential for credit risk, the counterparty is
required to post collateral should the fair value exceed certain thresholds, In the event of a downgrade of the counterparty below AAA by
Standard & Poor's, the threshold amount is $10 million.
50
CITY OF LODI
Dotes to Basic Financial Statements (continued)
June 30, 2006
Basis Risk:
As noted above, the swap exposes the City to basis risk should the relationship between LIBOR and BMA converge. If a change occurs that
results in the rates' moving to convergence, the expected cost savings of the swap may not be realized.
Termination Risk:
The swap contract uses the international Swap Dealers Association Master Agreement, which includes standard termination events, such as
failure to pay and bankruptcy. The Schedule to the Master Agreement includes an "additional termination event." That is, the swap may be
terminated by the counterparty if the City's credit rating falls below BBB- as determined by Fitch or BBB- as determined by Standard & Poor's.
Also, if at the time of an early termination of the swap, if the swap has a negative fair value, the City would be liable to the counterparty for a
payment equal to the swap's fair value.
2002 $46.9 Million Step -Up Coupon Swap
Objective:
In connection with its issuance of $46,760,000 of Electric System Revenue Certificates of Participation 2002 Variable Rate Demand Series A, the
City entered into a swap transaction with Salomon Smith Barney on January 2002. The intention of the swap was to change the City's variable
interest rate on the bonds to a synthetic fixed rate that steps up over time. The swap was structured with step-up coupons in order to provide the
City with lower debt service in the earlier years of the transaction
Terns:
Under the swap, the City pays Citigroup (previously Salomon) a fixed rate with an initial coupon of 2.503%. Beginning July 1, 2005, the swap
coupon stepped up to 3.749% and then steps up to 4.945% on July 1, 2010 until maturity. In exchange, the City receives an initial variable rate
equal to 59.65% of the 1 -month London Interbank Offered Rate (LIBOR). Beginning January 1, 2004, the percent of LIBOR received by the City
stepped up to 60.56% and then steps up to 62.92% of LIBOR on January 1, 2006 until maturity. The 4.945% coupon in the final period reflects
the above -market fixed rate required to offset the first two periods' below-market fixed rates of 2.503% and 3.749% respectively. The effective
at -market fixed rate for the entire swap term equals 3.$5% or approximately 61.71% of LIBOR. The notional amount of the swap matches the
notional amount of the bonds outstanding in each year. The bonds' variable-rate coupons are assumed to be based on The Bond Market
Association Municipal Swap Index TM (BMA)
51
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
The bonds and related swap mature on July 1, 2032. As of June 30, 2006, rates were as follows:
Fair Value:
As of June 30, 2006, the swap had a fair value of ($4,621,519). The negative fair value of the swap is a result of the decline in interest rates
since the inception date of the swap. The fair value was estimated using the zero-coupon method. This method calculates the future payments
required by the swap, assuming that the current forward rates by the yield curve correctly anticipate future spot rates. These payments are then
discounted using the spot rate implied by the current yield curve for hypothetical zero-coupon rate bonds due on the date of each future net
settlement on the swap.
Credit Risk:
As of June 30, 2006, the City was not exposed to credit risk because the swap had a negative fair market value. However, should interest rates
change and the fair value of the swap becomes positive, the City would be exposed to credit risk in the amount of the swap's fair value. The
counterparty, was rated Aa1 by Moody's Investors Service, AA- by Standard & Poor's, and AA+ by Fitch Ratings. To mitigate the potential for
credit risk, the counterparty is required to post collateral should the fair value exceed certain thresholds. In the event of a downgrade of the
counterparty below AAA by Standard & Poor's, the threshold amount is $10 million.
Basis Risk:
As noted above, the swap exposes the City to basis risk should the relationship between LIBOR and BMA converge, changing the synthetic rate
on the bonds. if a change occurs that results in the rates' moving to convergence, the expected cost savings of the swap may not be realized.
Termination Risk:
The swap contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as
failure to pay and bankruptcy. The swap contract is insured by MBIA Insurance Corporation. The Schedule to the Master Agreement includes
an "additional termination event." That is, the swap may be terminated by the City if both the insurer and the City's credit rating are downgraded
below AA-,Aa3 and the City's credit rating falls below Baa3 as determined by Moody's Investor Service or BBB- as determined by Standard &
Poor's. If the swap is terminated, the bonds would no longer carry a synthetic fixed interest rate. Also, if at the time of an early termination of the
swap, if the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap's fair value.
52
Terms
Rates
Interest rate swap:
Fixed payment to counterparty
Fixed
3.7490%
Variable payment from counterparty
62.92% of LIBOR
(3.4130%)
_
Net interest rate swap payments
0.3360%
rate bond payments
BMA
3.9700%
_Variable
Synthetic interest rate on bonds
4.3060%
Fair Value:
As of June 30, 2006, the swap had a fair value of ($4,621,519). The negative fair value of the swap is a result of the decline in interest rates
since the inception date of the swap. The fair value was estimated using the zero-coupon method. This method calculates the future payments
required by the swap, assuming that the current forward rates by the yield curve correctly anticipate future spot rates. These payments are then
discounted using the spot rate implied by the current yield curve for hypothetical zero-coupon rate bonds due on the date of each future net
settlement on the swap.
Credit Risk:
As of June 30, 2006, the City was not exposed to credit risk because the swap had a negative fair market value. However, should interest rates
change and the fair value of the swap becomes positive, the City would be exposed to credit risk in the amount of the swap's fair value. The
counterparty, was rated Aa1 by Moody's Investors Service, AA- by Standard & Poor's, and AA+ by Fitch Ratings. To mitigate the potential for
credit risk, the counterparty is required to post collateral should the fair value exceed certain thresholds. In the event of a downgrade of the
counterparty below AAA by Standard & Poor's, the threshold amount is $10 million.
Basis Risk:
As noted above, the swap exposes the City to basis risk should the relationship between LIBOR and BMA converge, changing the synthetic rate
on the bonds. if a change occurs that results in the rates' moving to convergence, the expected cost savings of the swap may not be realized.
Termination Risk:
The swap contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as
failure to pay and bankruptcy. The swap contract is insured by MBIA Insurance Corporation. The Schedule to the Master Agreement includes
an "additional termination event." That is, the swap may be terminated by the City if both the insurer and the City's credit rating are downgraded
below AA-,Aa3 and the City's credit rating falls below Baa3 as determined by Moody's Investor Service or BBB- as determined by Standard &
Poor's. If the swap is terminated, the bonds would no longer carry a synthetic fixed interest rate. Also, if at the time of an early termination of the
swap, if the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap's fair value.
52
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30; 2006
2003 $42 Million Fixed -to -Floating Swap Termination
2003 $42 Million Fixed 4o -Floating Swap
Objective:
On April 16, 2003 the City executed two transactions with Citigroup, which comprised 1) the termination of an existing $42 million fixed -to -floating
swap maturing 2014 and 2) the execution of a new $42 million fixed -to -floating swap maturing 2009. The City initially entered into a swap in
September 1999 in order to covert its fixed-rate Bonds, into synthetic variable-rate debt. The fixed -receiver rate on the swap was 5.11%. Since
interest rates had declined substantially since the City entered into the swap, the City received a net payment from Citibank to terminate the
swap in the amount of $4,743,000. The City executed a new $42 million fixed -to -floating swap to manage interest rate volatility in its liability
portfolio.
Terms:
Under the swap, the City receives a fixed rate of 4.00% and pays The Bond Market Association Municipal Swap Index'"' (BMA) +100 bps. The
swap has a notional amount of $42 million and matures on January 15, 2009. As of June 30, 2006, rates were as follows:
Terms Rates
Interest rate swap:
Variable payment to counterparty BMA + 100 bps 4.9700%
Fixed payment from counterparty Fixed (4.0000%)
Net interest rate swap payments 0.9700%
Fair Value:
As of June 30, 2006, the swap had a fair value of ($810,907). The fair value was estimated using the zero-coupon method. This method
calculates the future payments required by the swap, assuming that the current forward rates by the yield curve correctly anticipate future spot
rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon rate bonds due
on the date of each future net settlement on the swaps.
Credit Risk:
As of June 30, 2006, the City was not exposed to credit risk because the swap had a negative fair market value. However, should interest rates
change and the fair value of the swap becomes positive, the City would be exposed to credit risk in the amount of the swap's fair value. The
counterparty was rated Aa1 by Moody's Investors Service, AA- by Standard & Poor's, and AA+ by Fitch Ratings. To mitigate the potential for
credit risk, the counterparty is required to post collateral should the fair value exceed certain thresholds. In the event of a downgrade of the
counterparty below AAA by Standard & Poor's, the threshold amount is $10 million.
53
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Basis Risk:
The swap does not expose the City to basis risk since the swap is not based on the LIBOR index. If a change occurs that results in BMA
increasing, the expected savings of the swap may not be realized.
Termination Risk:
The swap contract uses the International Swap Dealers Association Master Agreement, which includes standard termination events, such as
failure to pay and bankruptcy. The Schedule to the Master Agreement includes an "additional termination event." That is, the swap may be
terminated by the City if the counterparty's credit rating falls below BBB- as determined by Fitch or BBB- as determined by Standard & Poor's. If
the swap is terminated, the bonds would no longer carry a synthetic variable interest rate. Also, if at the time of an early termination of the swap,
if the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap's fair value.
Swap payments and associated debt.
Using rates as of June 30, 2006, debt service requirements of the variable-rate debt and net swap payments, assuming current interest rates
remain the same, for their term 7ere as follows. As rates vary, variable rate bond interest payments and net swap payments will vary.
2002 Electric Certificates of Participation Series A
Fiscal Year
Variable -Rate Bonds
Interest Rate
Ending June 30
Principal
Interest
Swaps, Net
Total
2007
$
1,856,372
40,854
$ 1,897,226
2008
1,856,372
115,344
1,971,716
2009
1,856,372
137,605
1,993,977
2010
1,856,372
109,620
1,965,992
2011
1,175, 000
1,856,372
418,943
3,450, 315
2012-2016
6,885,000
8,789,382
2, 894, 080
18, 568, 452
2017-2021
8,890,000
7,348,073
2,237,468
18,475,541
2022-2026
11,495,000
5,484,555
1,660,023
18,639,578
2027-2031
14,855,000
3,077,147
930,068
18,862,215
2032-2033
3,460,000
405,139
93,377
3,958,516
$ 46,760,000
34,386,156
8,637,382
$ 89,783,538
54
Capital Leases
The City has entered into lease agreements for financing the acquisition of two fire trucks and the improvements to the leased Finance Building.
These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future
minimum lease payments as of inception date. The assets acquired through capital leases are as follows:
Asset:
Vehicles
Leasehold improvements
Less accumulated depreciation
Total
55
Governmental
Activities
$2,307,123
124,478
(1,132,244)
$ 1,299,357
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Annual debt service requirements to
maturity for certificates
of participation are as follows:
Fiscal Year Ending
Governmental Activities
Business -type
Activities
June 30,
Principal
Interest _
Principal
Interest
2007 $
535,000 $
1,140,547 $
5,970,000
$ 5,549,258
2008
555,000
1,123,642
6,595,000
5,510,261
2009
565,000
1,104,874
4,320,000
5,293,868
2010
590,000
1,084,071
4,550,000
5,084,303
2011
610,000
1,060,956
5,975,000
5,203,078
2012-2016
3,435, 000
4,893,166
35,200,000
21,966, 838
2017-2021
4,275, 000
4,001,564
20,290,000
14,650,417
2022-2026
5,425,000
2,833,144
23,365,000
8,735,955
2027-2031
6,920,000
1,298,250
15,615,000
4,007,215
2032
1,600,000
40,000
3,460,000498,516
_
Total $
24,510,000 $
18,580,214 $
125,340,000
$ 76,499,708
Capital Leases
The City has entered into lease agreements for financing the acquisition of two fire trucks and the improvements to the leased Finance Building.
These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future
minimum lease payments as of inception date. The assets acquired through capital leases are as follows:
Asset:
Vehicles
Leasehold improvements
Less accumulated depreciation
Total
55
Governmental
Activities
$2,307,123
124,478
(1,132,244)
$ 1,299,357
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
The present values of future minimum capital lease payments as of June 30, 2006, are as follows:
Fiscal Years
Ending
2007
2008
2009
2010
2011
Total minimum lease payments
Lessaounts representing interest
Prese t value of minimum capital lease payments
Special Assessment District Debt
315,287
279,348
148,003
148,003
148, 003
1,038,644
108,707
$
929,937
The City issued limited obligation improvement bonds on July 22, 1996, for the "Lodi Central City Revitalization Assessment District." These
bonds have no governmental commitment and debt service is recorded in an Agency Fund. These bonds were issued under the Improvement
Act of 1915 and will mature in the year 2011. The City's liability in the event of delinquent assessment shall not exceed the balance of the
established Reserve Fund. The amount outstanding as of June 30, 2006, is $880,000.
Industrial Development Bonds
The City of Lodi has lent its name to the City of Lodi Industrial Development Authority for the purpose of issuing the following industrial
development bonds: Minton Corporation $5,000,000; Dart Corporation $8,000,000; Wallace Computer Services $3,000,000; and Luster -Cal
Nameplate Corporation $3,000,000. These bonds are special obligation bonds only, payable solely out of the bond revenues or other sources of
the above companies and are not a pledge of the general credit of the City. The City is not obligated for the redemption or administration of
these industrial development bonds.
Woodbridge Irrigation District Bonds
On October 8, 2003, the City lent its name to the Woodbridge Irrigation District (the "District") in the procurement of $11.745 million 2003
Revenue Certificates of Participation, to provide funds to finance the costs of construction of a new diversion dam on the Mokelumne River and
related facilities of the water district. A significant portion of the District's sources of payment for the 2003 Certificates are expected to be derived
56
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
from amounts to be received by the District from the City of Lodi pursuant to an Agreement for purchase of water from the Woodbridge Irrigation
District by the City of Lodi, dated May 13, 2003 (the "Lodi Water Sales Agreement"). Under the agreement, the City will purchase 6,000 acre feet
of water per annum from the District for 40 years.
(9) Nature and Purpose of Reported Fund Equity
The following is a summary of reserved, unreserved -designated and unreserved -undesignated fund balances at June 30, 2006:
Reserved for:
Library
Encumbrances
Advances to other funds
Inventory
Total Reserved
Unreserved -designated for:
Specific projects and programs
Total Designated
Unreserved - undesignated
Total Fund Balances
General
$ 659,023
276,305
261,880
123,298
1,320,506
Other
Streets Governmental
300,503
300,503
200,409
636,770
837,179
5,737,407 6,196,598
5,737,407 6,196,598
Total
$ 659,023
777,217
898,650
123,298
2,458,188
11, 934,005
11, 934,005
3,048,435 3,048,435
$ 4,368,941 6,037,910 7,033,777 $ 17,440,628
Reserved Fund Balance
Reserved represents that portion that is legally segregated for specific purposes and is not available for discretionary appropriation.
Unreserved -Designated Fund Balance
Designated represents that portion for which the City has made tentative plans.
Unreserved -Undesignated Fund Balance
Undesignated represents that portion which is available for budgeting in future periods.
57
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(10) Defined Benefit Pension Plan
(a) Plan Description
The City of Lodi contributes to the California Public Employees' Retirement System (PERS); an agent multiple -employer public employee defined
benefit pension plan. PERS provides retirement and disability benefits, annual cost -of -living adjustments, and death benefits to plan members
and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California.
Benefit provisions and all other requirements are established by state statute and city ordinance. Copies of PERS' annual financial report may
be obtained from their Executive Office- 400 P Street, Sacramento, CA 95814.
(b) Funding policy
Participants are required to contribute 7% (9% for safety employees) of their annual covered salary. The City makes the contributions required
of City employees on their behif and for their account. The City is required to contribute at an actuarially determined rate; the current rate is
11.55% for miscellaneous empl yees, 30.058% for fire and police employees, of annual covered payroll. The contribution requirements of plan
members and the City are established and may be amended by PERS.
(c) Annual Pension Cost
For fiscal 2006, the City's annual pension cost of $4,814,389 for PERS was equal to the City's required and actual contributions. The required
contribution was determined as part of the June 30, 2003, actuarial valuation using the entry age normal actuarial cost method. The actuarial
assumptions included (a) 7.75% investment rate of return (net of administrative expenses) (b) projected annual salary increases that vary by
age, length of service, and type of employment (c) 3.25% payroll growth, and (d) 3.00% inflation. The actuarial value of PERS assets was
determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three-year period
(smoothed market value). PERS unfunded actuarial liability is being amortized as a level percentage of projected payroll on a closed basis.
Amortization of the remaining period varies: (a) safety police plan over 15 years (b) safety fire plan over 15 years, and (e) miscellaneous plan
over 18 years as of the valuation date.
58
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
d) Trend Information
Three -Year Trend information (I Amounts in Thousands):
(11) Post -Retirement Health Care Benefits
Percentage
of APC
Contributed
100%
100%
100%
Net
Pension
Oblioation
$0
$0
$0
The City provides no past -employment benefits for its employees. However, employees hired prior to July 1, 1994, who retire after ten years of
service, may elect to convert accumulated sick leave time to establish an individual medical insurance account. Depending on the bargaining
unit of the employee, the value of the insurance account shall be determined by the following options:
a) Option I- "Bank"
The number of accumulated hours shall be reduced by 16-213% and the remaining balance converted into days. The days are then multiplied by
the current monthly premium being paid for the employee and, if applicable, his/her dependents. Fifty percent of that amount will be placed into
an account to be used by the City to pay medical insurance premiums for the employee and, if applicable, his/her dependents. For each year of
employment over ten years, 2.5% will be added to the 50% used in determining the account amount. Total premiums shall be paid from the
account until its depletion, at which time the benefit ceases.
b) Option ii — "Conversion"
The number of accumulated hours is multiplied by 50% and converted into days. The City pays one month's premium for employee and
dependents for each day. For each year of employment in excess of ten years, 2.5% is added to the 50%. The employee must pay any increase
in premiums.
c) Option III — "Cash -Out"
A retiring employee will be able to choose a cash pay-off of accumulated sick leave at the rate of 30% of base pay per hour.
d) Option IV — "Service Credit"
A reb€ing employee wig be able to convert unused sick leave to service credit for CALPFRS retirement purposes.
59
Annual
Fiscal Year
Pension
Ended
Cost APC
6130104
1,384
6130105
3,614
6130/06
4,814
(11) Post -Retirement Health Care Benefits
Percentage
of APC
Contributed
100%
100%
100%
Net
Pension
Oblioation
$0
$0
$0
The City provides no past -employment benefits for its employees. However, employees hired prior to July 1, 1994, who retire after ten years of
service, may elect to convert accumulated sick leave time to establish an individual medical insurance account. Depending on the bargaining
unit of the employee, the value of the insurance account shall be determined by the following options:
a) Option I- "Bank"
The number of accumulated hours shall be reduced by 16-213% and the remaining balance converted into days. The days are then multiplied by
the current monthly premium being paid for the employee and, if applicable, his/her dependents. Fifty percent of that amount will be placed into
an account to be used by the City to pay medical insurance premiums for the employee and, if applicable, his/her dependents. For each year of
employment over ten years, 2.5% will be added to the 50% used in determining the account amount. Total premiums shall be paid from the
account until its depletion, at which time the benefit ceases.
b) Option ii — "Conversion"
The number of accumulated hours is multiplied by 50% and converted into days. The City pays one month's premium for employee and
dependents for each day. For each year of employment in excess of ten years, 2.5% is added to the 50%. The employee must pay any increase
in premiums.
c) Option III — "Cash -Out"
A retiring employee will be able to choose a cash pay-off of accumulated sick leave at the rate of 30% of base pay per hour.
d) Option IV — "Service Credit"
A reb€ing employee wig be able to convert unused sick leave to service credit for CALPFRS retirement purposes.
59
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(12) Claims and Benefits
The City is exposed to various risks of toss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to
employees; and natural disasters. The City is self-insured as discussed in the following paragraphs for which liabilities are recorded in the
Internal Service Fund.
The City is self-insured for general liability up to the first $500,000 per occurrence with claims from $500,000 to $40,000,000 per occurrence and
in the aggregate insured through the California Joint Powers Risk Management Authority. The City never had any settlements that exceeded its
general liability insurance coverage. (See note 14)
The City is self-insured for workers' compensation up to the first $250,000 per claim. Any claims of $250,000 up to California statutory limits are
covered under a purchased p licy through the membership with the Local Agency Workers' Compensation Excess Joint Powers Authority.
Workers' compensation coveraPe increased from $100,000,000 in prior year to $150,000,000 in the current year. The City never had any
settlements that exceeded its workers' compensation insurance coverage. (See note 14).
The City is fully self-insured for dental and unemployment for its employees.
General liability and workers' compensation claims are administered by an outside agency and ail other claims are administered by the City. The
City has accrued a liability of $7,083,000 at June 30, 2006, for all self-insured claims in the Internal Service Fund that includes an amount for
incurred but not reported claims. The liability amount is based on the requirements of Governmental Accounting Standards Board Statement No.
10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable
that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. In the opinion of
the City, the amounts accrued are adequate to cover claims incurred but not reported in addition to known claims.
Changes in the self-insurance liability for fiscal years ended June 30, 2006 and 2005 are as follows:
Current -Year
Claims and Changes Claim
Beginning in Estimates Payments
FY 04-05 $ 5,508,000 1,224,805 (1,592,805)
FY 05-06 $ 5,140,000 3,455,368 (1,512,368)
60
Ending
$ 5,140,000
$ 7,083,000
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(93) Participation in Joint Ventures
Northern California Power Agency
The City, along with fourteen other public agencies, is a member of the Northern California Power Agency (NCPA) that was formed in 1968 as a
joint powers agency. Its membership consists of eleven cities with publicly owned electric utility distribution systems, one irrigation district, one
public utility district, one port authority and four other associate member entities. NCPA is generally empowered to purchase, generate, transmit,
distribute and sell electrical energy. Members participate in the projects of NCPA on an elective basis. A commission comprising of one
representative from each member organization governs NCPA. The commission is responsible for the general management of the affairs,
property and business of NCPA. Under the direction of the general manager, the staff of NCPA is responsible for providing various
administrative, operating and planning services for NCPA and its associated power corporations.
Project Financing and Construction
NCPA's project construction and development programs have been individually financed by project revenue bonds collateralized by NCPA's
assignment of all payments, revenues and proceeds associated with its interest in each project. Each Project Participant has agreed to Pay its
proportionate share of debt service and other costs of the related project, notwithstanding the suspension, interruption, interference, reduction or
curtailment of output from the project for any reason. Certain of the revenue bonds are additionally supported by municipal bond insurance credit
enhancements.
Increase in Non -defaulting Proiect Participant's Original Project Entitlement Percentage
Upon the failure of any Project Participant to make any payment, which failure constitutes a default under the Member Agreement for the
projects, and except as sales and transfers are made pursuant thereto, the Member Agreements provide that Project Entitlement for each non -
defaulting Project Participant shall be automatically increased for the remaining term of the Member Agreement; pro rata with those of the non -
defaulting Project Participant thereunder; provided, however, that the sum of such increase for any non -defaulting Project Participant shall not
exceed, without written consent of such non -defaulting Project Participant, an accumulated maximum of 25% of the non -defaulting Project
Participant's original Project Entitlement Percentage Share.
General Operating Reserve with NCPA
Members of NCPA established a general operating reserve in 1992 for the purposes of providing a vehicle to fund reasonably foreseeable
contingent liabilities. It was set up primarily to provide the following advantages: minimizes the number and dollar amount of reserve that might
otherwise be funded separately in connection with NCPA's individually financed operating plants, projects and programs; provides each member
with flexibility and unilateral control over the determination of what they will fund, how they will fund it and what expenditures from the reserve will
be made on their individual behalf. It provides funding for contingent liabilities that are not budgeted but that may require significant future
expenditures. The reserve is segregated by participant and is refundable on demand by the participant.
a
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
As of June 30, 2006, the City's balance in the NCPA General Operating Reserve, which has been credited with annual interest earnings and
settlements, is $3,165,581.
Proiect Participation
The NCPA members and their percentage share at June 30, 2005, which is the most recent available data, are as follows:
Hydro
Combustion
Multiple
Geothermal
Electric
Turbine
Capital
Transmission
Project
Project
Project #1
Facilities
Project
Alameda
16.8825
10.00
13.092
19.00
30,2208
Biggs
0.2270
.120
0,3835
Gridley
0.3360
.213
0,6055
Healdsburg
3.6740
1.66
3.500
6,5755
Lodi
10.2800
10.37
34.780
39.50
19,0191
Lompoc
3.6810
2.30
3.500
5.00
6.5889
Palo Alto
19.66
Plumas-Sierra Rural Electric Cooperative
0.7010
1.69
1.090
1,2658
Roseville
7.8830
15.26
13.251
36.50
13,6850
Santa Clara
44.3905
37.02
25.000
10,2377
Turlock Irrigation District
6.3305
1,3696
Ukiah
5.6145
2.04
5.454
10,0486
Bulk power purchased by the City through NCPA amounted to $41,169,608 during the year ended June 30, 2006 and is reflected in utilities
expense in the Electric Enterprise Fund.
DCPA Geothermal Proiect
A purchase power agreement with NCPA obligates the City for a 10.28% share of the operating costs and debt service of two of NCPA's 110 -
megawatt steam powered plants, Project Number 2 and Project Number 3. Outstanding long-term debt related to this project was approximately
$173 million at June 30, 2005.
62
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
In addition to federal geothermal leasehold, steam wells, gathering system and related facilities, the project consists of two electric generating
stations (Plant 1 and Plant 2). Each plant has two 55MW turbine generator units utilizing low temperature geothermal steam, associated
electrical, mechanical and control facilities; a heat dissipation system; a steam gathering system; a transmission tapline; and, other related
facilities. Geothermal steam for the project is derived from the geothermal property, which includes wellpads, access roads, steam wells and
reinjection wells.
Calaveras Hydroelectric Prosect
NCPA contracted to finance, manage, construct and operate Hydroelectric Project Number One for the licensed owner, Calaveras County Water
District. In exchange, NCPA has the right to the electric output of the project for 50 years from February 1982. NCPA has also the option to
purchase power from the project in excess of the District's requirements for the subsequent 50 years, subject to regulatory approval.
Under a power purchase agreement the City is obligated to pay 10.37% of the debt service and operating costs. At June 30, 2005,
approximately $496 million in long-term debt used to finance this project was outstanding.
NCPA Combustion Turbine_Proi ct
The project consists of five combustion turbine units, each nominally rated at 25 megawatts. Two such units are located in Roseville, two in
Alameda and one in Lodi. The project provides capacity during peak load periods and emergency capacity reserves. Excess capacity and
energy from the project are also sold to other entities from time to time. Under the NCPA power agreement, the City is obligated to pay 34.78%
of the debt service and operating costs. At June 30, 2005 approximately $22 million in tong -term debt was outstanding.
Transmission Project
The project was undertaken to meet certain obligations of NCPA under the NCPA/PG & E Interconnection Agreement. The project includes an
ownership interest in PG & E's 230kv Castle Rack to Lakeville Substation Transmission Line in Sonoma County, additional firm transmission
rights in that Transmission Line, and a central scheduling and dispatch facility in service at the NCPA headquarters in Roseville, California.
Under a power purchase agreement, the City is obligated to pay 19.02% of the debt service and operating costs. At June 30, 2005,
approximately $4.8 million in long-term debt was outstanding.
Capital Facilities Project
The Project consists of one 49.9 megawatt natural gas-fired steam injected combustion turbine generator unit located in Lodi, California.
Wastewater is reclaimed from the City of Lodi's White Slough water pollution control facility, processed to eliminate contaminants, and used in
the turbine to produce steam for power enhancement and emissions control.
63
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Under a power purchase agreement, the City is obligated to pay 39.5% of the debt service and operating costs. At June 30, 2005, approximately
$66.5 million in long-term debt was outstanding.
The following are the most recent available audited condensed financial statements of NCPA:
Combined Balance Sheet
June 30, 2005
Assets
Current assets $ 63,962,000
Restricted assets 197,387,000
Electric plant, net 440,334,000
Other assets and deferred charges 254,835,000
Total assets
$ 956,518,000
Combined Statement of Revenue and Expenses
Year ended June 30, 2005
Sales to participants for resale $ 248,887,000
Operating expenses (189,421,000)
Other revenues (expenses) (37,744,000)
Future recoverable costs (6,535,000)
Net revenues before refunds
Refunds to participants
Net revenues
Accumulated net revenues,
beginning of year
Accumulated net revenues,
end of year
15,187,000
(7,079,000L
8,108,000
10,800,000
$ 18,908,000
Liabilities and Capitalization
Current portion of long-term debt $ 56,505,000
Other current liabilities 50,571,000
Other liabilities and deferred credits 129,820,000
Long-term debt 700,714,000
Accumulated net revenues 18,908,000
Total liabilities and capitalization $ 956,518,000
Combined Statement of Cash Flow
Year ended June 30, 2005
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in capital and related
financing activities
Net cash provided by noncapital
and related financing activities
Increase in cash and cash equivalents
Cash and cash equivalents, beginning
of year
Cash and cash equivalents end of year
$ 99, 855, 000
12,834,000
(101,029,000)
3,765,000
15,425,000
101,152, 000
$ 116,577,000
At June 30, 2005, NCPA's total outstanding long-term debt was $757,219,000 at an average interest rate of 5%. The current portion of long-term
debt at June 30, 2005, was $56,505,000.
rfl
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Complete financial information for NCPA may be obtained at the following administration office:
Northern California Power Agency
180 Cirby Way
Roseville, CA 95678
Transmission Agency of Northern California
The Transmission Agency of Northern California (TANG) was organized under the California Government Code pursuant to a joint powers
agreement entered into by fifteen Northern California utilities including the City of Lodi. The purpose of TANC is to provide electric transmission
or other facilities for the use of its members through its authority to acquire, construct, finance, operate and maintain facilities for electric power
transmission. The joint powers agreement provides that the costs of TANC's activities can be financed or recovered through assessment of its
members or user charges through transmission contracts with its members. Each TANC member has agreed to pay a pro rata share of the
costs to operate TANC and has the right to participate in future project agreements. The joint power agreement remains in effect until debt
obligations and interest thereon have been paid, unless otherwise extended by the members.
Increase in Non -defaulting Proiect Participant's Oriqinal Proiect Entitlement Percentaae
Upon the failure of any Project Participant to make any payment, which failure constitutes a default under the Member Agreement for the
projects, and except as sales and transfers are made pursuant thereto, the Member Agreements provide that Project Entitlement for each non -
defaulting Project Participant shall be automatically increased for the remaining term of the Member Agreement; pro rata with those of the non -
defaulting Project Participant thereunder; provided, however, that the sum of such increase for any non -defaulting Project Participant shall not
exceed, without written consent of such non -defaulting Project Participant, an accumulated maximum of 25% of the non -defaulting Project
Participant's original Project Entitlement Percentage Share.
California-Oreaon Transmission Proiect
The project is a 339 -mile long, 500 -kilovolt alternating current transmission project between Southern Oregon and Central California. The project
is operated in coordination with the Pacific AC fntertie as a part of the Cafifornia-Oregon Intertie (COl) within the Western System Coordinating
Council (WSCC) region. The WSCC approved rating of the COI is 4,800 MW and the Pacific Direct Current fntertie (PDCI) is 3,100 MW for a
combined total of 7,900 MW of transfer capability. Depending on the time of year, operational transfer capability of the combined COI and PDCI
is between 6,900 MW and 7,900 MW.
TANC, California Department of Water Resources (CDWR), Western Area Power Authority (WAPA), and five other parties have agreed to an
Interim Participation Agreement (IPA) under which project participant is granted a percentage entitlement in project transfer capability and is
required to pay a percentage of the costs. Pursuant to the IPA and a subsequent agreement with WAPA, TANC is entitled to use approximately
1,242 MW, and is obligated to pay an average of approximately 73 percent of the operating costs associated with the project.
65
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
Under the TANC joint powers agreement, the City is obligated to pay 1.89% of its debt service and operating costs. At June 30, 2005,
approximately $386 million in long-term debt was outstanding of which $24 million is considered current.
Complete financial information for IANC may be obtained at the following administration office
Transmission Agency of Northern California
3100 Zinfandel Drive, Suite 600
Sacramento, CA 95670
(14) Membership in Insurance Pools
California Joint Powers Risk Management Authority
The City is a member, along wit twenty-five other public agencies, of California Joint Powers Risk Management Authority (CJPRMA) organized
under a Joint Powers Agreement pursuant to the California Government Code for the purpose of sharing the risk of catastrophic general liability,
automobile liability and public officials' errors and omissions losses because adequate insurance is not available in the commercial insurance
market. CJPRMA has a twenty-one member Board of Directors, including a director from the City of Lodi. The Board members elect officers of
CJPRMA every two years.
The ultimate cost of the program to the City depends on the catastrophic losses of all members, as well as the City's own loss experience and
will be determined retrospectively five years after the end of the current program year. The City periodically pays deposits to the CJPRMA.
These deposits are recorded as expenditures in the year paid, as they are a reasonable estimate of the actual cost of the program. During the
year ended June 30, 2006, deposits of $419,905 were paid to CJPRMA.
The participants at June 30, 2006, are as follows: City of Alameda, CCCMRMIA , Chico, Central San Joaquin Valley Risk Management
Authority, Fairfield, Fremont, Livermore, Lodi, Manteca, NCCSIF, Petaluma, Pomona, PERMA, Redding, Redwood Empire Municipal Insurance
Fund, Roseville, San Leandro, San Rafael, Santa Rosa, Santa Barbara Area Joint Powers insurance Authority, Small Cities Organized Risk
Effort, Stockton, Sunnyvale, Vacaville, Vallejo, and Yolo County Public Agencies Risk Management Insurance Authority.
Local Agency Workers` Compensation Excess Joint Powers Authority
The City, along with thirty-five other public agencies, is a member of the Local Agency Workers' Compensation Excess Joint Powers Authority
(LAWCX), which was formed July 1992, for the purpose of sharing the risk of workers' compensation losses. All members are self-insured, up to
$500,000 per occurrence. The City of Lodi's self-insured retention is $250,000. LAWCX members pool resources to pay claims up to
$2,000,000. LAWCX participates in the California Public Entity Insurance Authority to obtain coverage in excess of $2,000,000 up to
$100,000,000. The City paid $275,095 in deposits to LAWCX during the fiscal year ended June 30, 2006.
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
The participants at June 30, 2006, are as follows: Alameda, ABAG, BCJPIA, City of Benicia, CCCSIF, CCCTA, Central San Joaquin Valley Risk
Mgrnt Authority (CSJVRMA), City of Clovis, City of Coronado, East Bay Regional Park District, City of Encinitas, FASIS, City of Fremont, City of
Gilroy, City of Livermore, City of Lodi, City of Los Gatos, City of Merced, MBASIA, MCLAIA, City of Morgan Hill, City of Newark, PARSAC, City of
Placentia, PERMA, City of Roseville, City of San Leandro, City of Santa Maria, City of Santee, Small Cities Org. Risk Effort (SCORE), City of
South Lake Tahoe, City of Suisun City, City of Vacaville, City of Vallejo, Vector Control JPA and City of Vista.
California Transit Insurance Pool
The City, along with thirty-six other public agencies is a member of California Transit Insurance Pool (CaITIP), a joint powers insurance authority
which was formed for the purpose of sharing the risk of property damage, bodily injury, personal injury and public officials errors and omissions
losses for public transit systems.
Liability protection coverage is provided under two programs:
Program I applies to members who choose to utilize CaITIP's adjuster and /or those with a $0 deductible.
Program II applies to members with self-insured retentions who choose to provide their own adjusting services.
CaITIP purchases excess insurance over its $500,000 retention up to $20 million per occurrence. Each member is provided with $5 million in
excess of the pooled retention and has the option to choose one or both of two additional layers for the full $20 million.
CaITIP also provides physical damage coverage to its members. This coverage program is optional for all members and offers damage or loss
protection for transit, staff and maintenance vehicles to transit operators. CaITIP self -insures to $100,000, under which members have the
option of five levels of deductible ranging from $500 to $10,000 per vehicle. Claims are administered by the CaITIP's adjuster.
The City paid $110,873 in deposits to CaITIP during the fiscal year ended June 30, 2006. There have been no reductions in insurance coverage
from the prior year and there were no insurance settlements in excess of insurance coverage in any of the last three years
Self -
Insured Limit Physical
Program Retention (in millions) Damage
City of Lodi Transit System l Prefunded 5 X
67
CITY OF LODI
Notes to Basic Financial Statements (continued)
June 30, 2006
(15) Deficit in Fund Equity
Internal Service Fund - Claims and Benefits - A deficit in fund equity at June 30, 2006, in the amount of $3,054,636 in the Internal Service Fund
is due to the self-insurance liability to cover both incurred and incurred -but -not -reported (IBNR) claims. The City continues its effort to reach the
reserves recommended by an actuary and gradually eliminate the deficit in the Internal Service Fund.
(16) Commitments and Contingencies
Litigation and claims - The Cid is engaged in litigation over its groundwater contamination as a potential responsible party and in litigation with
its former outside counsel regarding malpractice and fee claims. The City estimates that it will need to raise $45 million to cover past costs, past
settlements and future obligations and have increased its water rates in an amount sufficient to cover these estimated expenses. Citizen efforts
to reduce these rates via initiative failed in November 2006 election by a vote of 64% to 36%. As such, the City Attorney does not anticipate a
material effect on the City's financial condition.
The City also faces a false imprisonment claim for a man who spent ten years in prison for a rape he was later found innocent of through DNA
testing. However, exposure for fees and judgment is capped at $500,000 (the amount of the City's self-insured retention). As such, the City
Attorney does not anticipate a material effect on the City's financial condition from this action.
All other actions against the City are under $75,000 or have no arguable cost and will therefore not have a material financial effect on the City.
Arbitrage Earnings Rebate Liability - Arbitrage earnings are defined as income earned on the unexpended tax-exempt certificate proceeds in
excess of that which would have been earned had the moneys been invested in securities with a yield of the effective rate of the certificates.
Currently, arbitrage earnings must be rebated to the United States Treasury every five years from the date of August 18, 1999, for the Electric
System Certificates of Participation. The there is no cumulative arbitrage liability as of June 30, 2006.
68
REQUIRED SUPPLEMENTARY INFORMATION
City of Lodi
R"UkW Sum Information
Schedule of Funding Progress - Pension Plan
.lune 30, 2006
(in thousands of dollars)
69
Unfunded
Entry Age
Unfunded
Actuarial
Actuarial
Actuarial
Liability as
Actuarial
Actuarial
Accrued
Accrued
Funded
Covered
Pereentege of
Valuation
Asset Value
Liability
Liability
Ratio
Payroll
Covered Payroll
Date
(A)
(B)
[(B) - (A)]
[(A) / (B)]
(C)
([(B) — (A)]!(C)}
6/30/03
$ 132,001
$ 149,935
$ 17,934
88%
$ 24,978
71.80%
6/30104
139,694
165,273
25,579
85%
25,640
99.76%
6130105
150,967
177,150
26,183
85%
27,215
96.21%
69
EXPENDITURES
My OF LODI
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL
13,110.196
GENERAL FUND
1205,535
310,702
City Council
123,675
Year snAeA June 30, 2001
92,756
30,919
Cay Manager
823.246
823,246
823,228
18
Variance with
391,439
Original
Final
Actual
Final 2L?M _
REVENUES
439,367
434,975
4,392
Human Resources
Tams
S 18,!371.730
18,114,730
18,093,733
5 (20,997)
Licensee and permits
68,510
68,510
71,125
2,615
Iniaryovanvusr" revenues
1399KO58
14,315,556
15,620,997
1,305,439
Charges for9WWces
2,473.035
2,120,755
1,823,583
(297,172)
FWm,faleNsand penalties
1,137,877
1,134,877
1,161,304
25,427
Lnveas»entand rental income
409,664
411,664
376,971
(34,693)
MLseAanears revenue
161,550
161,550
319,815
158,205
ToW revenues
36.608.424
36,327,644
37.467.528
1,139.864
EXPENDITURES
Cur ent
General government
13,110.196
12.996,237
1205,535
310,702
City Council
123,675
123,675
92,756
30,919
Cay Manager
823.246
823,246
823,228
18
alychok
391,439
391,439
349,599
41,840
CityA0artley
403,467
439,367
434,975
4,392
Human Resources
607,783
607,783
529,070
78,713
InfontatlmSystems
1.004,774
1,039,109
1016,103
23,006
ComrtaaNy Carnar
1.291.524
1,399,174
1,386,217
12,957
Finance
2,270,693
2.270.693
1,999,997
270,696
Non Departmental
1.776.965
1,870.381
1,713,025
165,356
TOW generai government
8.693.566
8.972,867
8.344,970
627,897
Public prptec5an:
Police
13,110.196
12.996,237
1205,535
310,702
Fire
7.873.052
8.137,038
8,000,636
136,400
Total public protection
20.963.248
21,133,275
20.666,173
447,102
Public Works
8.731.823
6.848.465
5.577,776
270.689
Library
1.541.953
1,543,947
1.458.178
75.769
Parks and recreation
3,705.371
3.716.055
3.434.361
281.694
Debt service:
Interest and fiscal clmarges
56.026
56,026
56.026
Principal payments
282,393
282,393
282,393
TOW 6mt service
_ 19
338,419
330.419
Total expenditures
41,994.380
42,553,028
40.849.877
1,703,151
DEFICIENCY OF REVENUES UNDER EXPENDITURES
(5.185.9561
(5,225.384)
(3.382,349)
2.843,035
OTHER FINANCING SOURCES {USES)
Trwubrsin
7,107,232
7,107,232
6.892.824
214,406
Transfers out
(1.587.184)
(1,687,184)
{1,.833,864}
(146,680)
TOW odor 5narx*V sources (uses)
_ 5,4E0 W
5,420,048
5,058,990
361,068
NET CHANGE IN FUND BALANCE
234.092
(805.336}
1.676,611
2,481,947
FUND BALANCE, beginning of year
1,918,665
2.692.330
2.692.330
FUND BALAWCE, end Of year
---TMW
-759.67'4,
.941
;4 7; W
Thnote to the required supplementary intonaton is an integral pan of INS schedule
70
CITY OF LODI
SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
STREETS FUND
Year ended June 30, 2006
REVENUES
Intergovernmental revenues
Charges for services
Investment and rental income
Miscellaneous revenue
Total Revenue
EXPENDITURES
Capital outlay
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 BALANCE
4,372,508 (2.513,180)
2,725,860 5,239,040
9,553 (9,553)
(1,617,491) (1,617,491) (1,562,686) (45,195)
(1,617,491) (1,607,938) (1,662,686) (54,748)
2,755,017 (4,121,118) 1,063,174 5,184,292
FUND BALANCE, BEGINNING OF YEAR 3,712,746 4,974,736 4,974,736
FUND BALANCE, END OF YEAR $ 6,467,763 853,618 6,037,910 5,184,292
The note to the required supplementary information is an integral part of this schedule.
trim
Variance with
Original
Final
Actual
Final Budget
g 7,132,000
7,132,000
8,328,848
1,195,848
940,000
940,000
827,693
(112,307)
15,000
15,000
126,578
111,578
260,145
260,145
8,087,000
8,087,000
9,543,264
1,456,264
3,714,492
10,600,180
6,817,404
3,782,776
3,714,492
10,600,180
6,817,404
3,782,776
4,372,508 (2.513,180)
2,725,860 5,239,040
9,553 (9,553)
(1,617,491) (1,617,491) (1,562,686) (45,195)
(1,617,491) (1,607,938) (1,662,686) (54,748)
2,755,017 (4,121,118) 1,063,174 5,184,292
FUND BALANCE, BEGINNING OF YEAR 3,712,746 4,974,736 4,974,736
FUND BALANCE, END OF YEAR $ 6,467,763 853,618 6,037,910 5,184,292
The note to the required supplementary information is an integral part of this schedule.
trim
CITY OF LODI
Notes to the Required Supplementary Information
June 30, 2006
Budgetary Data
The City adopts an annual budget for the general and special revenue funds. These budgets are prepared in accordance with generally
accepted accounting principles. As part of the City's internal controls, the City maintains budgetary controls. The objective of these
budgetary controls is to ensure compliance with the legal provisions embodied in the annual appropriated budget approved by the City
Council, The accompanying financial statements present budget and actual data only of funds for which an annual budget was adopted.
The budgets of capital projects are primarily "long-term" budgets that emphasize the major programs and capital project plans extending
over a number of years. Due to the long-term nature of these projects, "annual" budget and actual comparisons are not considered
meaningful. Formal budgetary integration is not employed for Debt Service Funds since effective budgetary control is alternatively
achieved through the bond indenture provisions. Accordingly, no budgetary information is included in the accompanying basic financial
statements for capital projects and debt service funds.
The City Council follows the following procedures in establishing the budgetary data reflected in the accompanying basic financial
statements:
Original Budget
On or prior to the first regular Council meeting in June of each year, the City Manager submits to the City Council a proposed
Financial Plan and Budget for the fiscal year commencing July 1. The budget includes proposed expenditures and the means of
financing them.
Budgeted revenues are adopted by the City Council at the time the budget is approved. Budgeted revenues are modified when
the tax base changes, when fees are modified or when new revenue sources are identified.
Public hearings are conducted during meetings of the City Council to obtain citizens' comments. Prior to July 1, the budget is
legally enacted through passage of a resolution.
Final Budget
The final budgetary data presented in the basic financial statements reflects the following changes to the original budget:
Budgeted expenditures represent original appropriations adjusted by budget transfers and appropriation amendments.
The legal level of budgetary control (that is, the level at which expenditures can not legally exceed the appropriated
f
72
amount) is at the department level. The operating budget is prepared and controlled at the department level (a -g., city
clerk, city manager, etc.) for the General Fund. Special revenue fund expenditures, including transfers out, are approved
by Council at the fund level.
• The City M eager may transfer appropriations from one activity to another within a department without approval from the
City Counci . All other appropriation adjustments during the year, whether transfers, increases or decreases, require City
Council ap roval.
73
(This page intentionally left blank.)
COMBINING AND INDIVIDUAL FUND STATEMENTS
AND SCHEDULES
NONMAJOR GOVERNMENTAL FUNDS
Nonmajor Governmental Funds include:
Special Revsnue Funds account for the proceeds of specific revenue sources that are restricted by law or administrative action to
expenditures for specified purposes, other than those for major capital projects;
Debt Service Fund account for the accumulation of resources for the repayment of principal and interest on general long-term debt;
Capital Project Funds account for the financial resources to be used for the acquisition or construction of major capital facilities, other than
those financed by proprietary funds.
CITY OF LODI
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS
June 30, 2006
Assets
Cash and investments
Restricted assets
Receivables:
Accounts, net
Interest
Due from other governmental agencies
Loan receivable
Other assets
Advances to other funds
Total assets
Liabilities and Fund Balances
Liabilities:
Accounts payable and other liabilities
Due to other funds
Advances from other funds
Deterred revenue
Total liabilities
Fund Balances :
Special Capital
Revenue Projects Total
$ 562,540 5,607,423 $ 6,169,963
1,697,469 1,697,469
34,863
2,539
37,402
2,205
21,038
23,243
570,319
369,950
940,269
1,084,000
369,950
1,084,000
930
5,089
6,019
636,770
636,770
$ 2,254,857
8,340,278 $
10,595,135
$ 61,854
16,958 $
78,812
541,543
541,543
1,487,053
1,487,053
1,084,000
369,950
1,453,950
1,687,397
1,873,961
3,561,358
Reserved for encumbrances 34,232 166,177 200,409
Reserved for advances to other funds 636,770 636,770
Unreserved -designated for specific projects and programs 533,228 5,663,370 6,196,398
Total fund balances 567,460 6,466,317 7,033,777
Total liabilities and fund balances
75
$ 2,254,857 8,340,278 $ 10,595,135
CITY OF LODI
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS
Year ended June 30, 2006
76
Special
Debt
Capital
Revenue
Service
Projects
Total
Revenues:
Licenses and permits
$ 948,720
$
948,720
Intergovernmental revenues
1,541,185
1,541,185
Charges for services
674,978
521,830
1,196,808
Fines, forfeits and penalties
11,275
11,275
investment and rental income
14,865
188,643
203,508
Miscellaneous revenue
34,144
39,079
73,223
Total revenues
3,225,167
749,552
3,974,719
Expenditures:
Current:
Public protection
176,983
176,983
Public works
1,248,738
1,248,738
Community development
1,846,498
1,846,498
Parks and recreation
6,109
6,109
Capital outlay
52,615
362,079
414,694
Debt service:
Interest and fiscal charges
1,170,936
10,920
1,181,856
Principal payments
609,662
609,662
Total expenditures
3,330,943
1,780,598
372,999
5,484,540
Excess (deficiency) of revenues over (under) expenditures
(105,776)
(1.780,598)
376,553
(1,509,821)
Other financing sources (uses):
Transfers in
280,811
1,780,598
187,500
2,248,909
Transfers out
(722,348)
(722,348)
Total other financing sources (uses)
280,811
1,780,598
(534,848)
1,526,561
Net change in fund balances
175,035
(158,295)
16,740
Fund balances, beginning of year
392,425
6,624,612
7,017,037
i
Fund balances, end of year
$ 567,460
6,466,317 $
7,033,777
76
NONMAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
CITY OF LODI
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
June 30, 2006
ASSETS
Cash and Investments
Receivables:
Accounts, net
Interest
Due from other governmental agencies
Other assets
Loan receivable
TOTAL ASSETS
LIABILITIES AND FUND BALANCES
LIABILITIES
Accounts payable and other liabilities
Due to other funds
Deferred revenue
TOTAL LIABILITIES
FUND BALANCES
Fund balances:
Reserved for encumbrances
Unreserved -designated for specific projects and programs
TOTAL FUND BALANCES
TOTAL LIABILITIES AND FUND BALANCES
HOME Program &
Community
Public Community Development
Safety Development Transportation Block Grants
$ 345,978 111,241 105,321 $
Total
562,540
8,218 26,645 34,863
1,350 448 407 2,205
28,776 541,543 570,319
930 930
1,084,000 1,084,000
$ 384,322 139,264 105,728 1,625,543 $ 2,254,857
$ 1,282 60,572
$ 61,854
541,543 541,543
1,084, 000 1,084,000
-- 1,625,543 _ 107,.47
31,382
2,850
34,232
383,040 47,310
102,878
533,228
383,040 78,692
105,728
567,460
$ 384,322 139,264
105,728
1,625,543 $ 22548 7
78
REVENUES
Licenses and permits
Intergovernmental revenues
Charges for services
Fines, forfeits and penalties
lavestment and rental income
Miscellaneous revenue
Total revenues
EXPENDITURES
Current
Pub4c protection
Public works
Community development
Parks and recreation
Capital outlay
Total expenditures
EXCESS (DEFICIENCY) OF REVENUES OVER
(UNDER) EXPENDITURES
OTHER FINANCING SOURCES
Transfers in
Total other financing sources
NET CHANGE IN FUND BALANCES
FUND BALANCES, beginning of year
FUND BALANCES, end of year
CITY OF LODI
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
Year ended June 30, 2006
HOME Program &
176,983
1,846,498
1,248,738
6,109
Community
Special Public
Community
52,615
Development
176,963
Grants Safety
Development
Transportation
Block Grants
Total
$
948,720
6,109
$
848,720
242,370
3,068
47,009
1,248,738
1,541,185
674,978
78,692
(3,181)
674,978
5,100
6,175
108,909
$
11,275
7,335
5,105
2,425
14,865
34,144
34,144
254,805
1.672,190
49,434
1,248,738
3,225,167
176,983
1,846,498
1,248,738
6,109
52,615
6,109
176,963
1,846,498
52,615 1,248,738
(6,109)
77,822
(174,308)
(3,181)
6,109
21,702
253,000
6,109
21,702
253,000
99,524
78,692
(3,181)
283,516
108,909
$
383,040
78,692
106,724D
79
176,983
1,248,738
1,846,498
6,109
52,615
3,330,943
(105,776)
280,811
280,811
175,035
392,425
$ 597,400
CITY OF LODI
SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
Year ended June 30, 2008
EXPENDITURES
Current
Parks and recreation
Total Expenditures
OTHER FINANCING SOURCES
Transfers in
Total other financing sources
NET CHANGE IN FUND BALANCE
FUND BALANCE, BEGINNING OF YEAR
FUND BALANCE, END OF YEAR
SPECIAL GRANTS
FINAL
BUDGET ACTUAL VARIANCE
$ 10,107 6,109 3,998
10,107 6,109 3,998
6,109 6,109
6,109 6,109
(3,998) 3,998
$ (3,998) 3,998
80
CITY OF LOD1
s711ED11LE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
Year ended June 30, 2006
REVENUES
Intergovernmental revenues
Fines, forfeits and penalties
Investment and rental income
Total Revenue
EXPENDITURES
Current
Public protection
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES OVER
(UNDER) EXPENDITURES
OTHER FINANCING SOURCES
Transfers in
Total other financing sources
NET CHANGE IN FUND BALANCE
FUND BALANCE, BEGINNING OF YEAR
FUND BALANCE, ENCS Of YEAR
81
PUBLIC SAFETY
FINAL.
BUDGET ACTUAL VARIANCE
$ 175,076 242,370 67,294
5,100 5,100
7,335 7,335
175,076 254,805 79,729
199,000 176,983 22,017
199,000 176,983 22,017
(23,924) 77,822 101,746
21,702 21,702
(2,222) 99,524 101,746
283,516 283,516
$ 781,294 383,040 101,746
CITY OF LODI
SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
Year ended June 30, 2006
REVENUES
Licenses and permits
Intergovernmental revenues
Charges for services
Fines, forfeits and penalties
Investment and rental income
Miscellaneous revenue
Total Revenue
EXPENDITURES
Current
Community development
Total Expenditures
DEFIC ENCY OF REVENUES UNDER
EXPENDITURES
OTHER FINANCING SOURCES
Transfers in
Total oti er financing sources
NET N FUNS? BALANCE
FUND "-AMCE, BE-Co"ING OF YEAR
FUND BALANCE, END OF YEAR
82
COMMUNITY DEVELOPMENT
FINAL
BUDGET ACTUAL VARIANCE
$ 994,680 948,720
(45,960)
3,068
3,068
465,280 674,978
209,698
6,175
6,175
5,105
5,105
34,144
34,144
1,459,960 1,672,190
212,230
1,971,180 1,846,498 124,682
1,971,180 1,846,498 124,682
(511,220) (174,308) 336,912
253,000 253,000
253,000 253,000
(258,220) 78,092 336,912
SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
Year ended June 30, 2006
83
TRANSPORTATION
FINAL
BUDGET
ACTUAL
VARIANCE
REVENUES
Intergovernmental revenues
$ 39,400
47,009
7,609
Investment and rental income
500
2,425
1,925
Total Revenue
39,900
49,434
9,534
EXPENDITURES
Capital outlay
62,866
52,615
10,251
Total Expenditures
62,866
52,615
10,251
DEFICIENCY OF REVENUES
UNDER EXPENDITURES
(22,966)
(3,181)
19,785
NET CHANGE IN FUND BALANCE
22,968
3,181
19,785
FUND BALANCE, BEGINNING OF YEAR
108,909
108,909
FUND BALANCE, END OF YEAR
$ 85,943
105,728
19,785
83
CITY OF LODI
SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL
NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS
Year ended June 30, 2006
REVENUES
Intergovernmental revenues
Total Revenue
EXPENDITURES
Current
Public works
Total Expenditures
NET CHANGE IN FUND BALANCE
FUND BALANCE, BEGINNING OF YEAR
FUND BALANCE, END OF YEAR
HOME PROGRAM and COMMUNITY DEVELOPMENT
BLOCK GRANTS
FINAL
BUDGET
ACTUAL
VARIANCE
$ 3,612,114
1,248,738
(2,363,376)
3,612,114
1,248,738
(2,363.376)
3,612,114
1,248,738
2,363,376
3,612,114
1,248,738
2,363,376
84
SPECIAL REVENUE FUNDS
Special Grants
This fund has been established to account for the receipt of smaller grants from Federal and State sources.
Public Safety
This fund was established to account for the revenues and expenditures related to the City's share of property forfeited by persons convicted of
possession and selling illegal drugs and the State of California auto theft prosecution moneys.
Community Development
This fund was established to account for development planning and project review services including land use entitlements, permit processing and
reviewlinspection of public improvements to ensure orderly physical growth and development of the City.
Transportation
This fund was established to account for the receipt of moneys from the State of California apportioned to the City for transportation purposes. The
State has designated 114% of the 6% sales tax levied statewide for local transportation purposes. Funding for this program was provided during
the 1971 legislative session with the enactment of the Transportation Development Act, which extended the 6% sales tax to include purchases of
gasoline. Revenues allocated to the City of Lodi under this program are divided into two categories: Article 8 funds, which are restricted for the
improvement and maintenance of street systems; and Article 4 funds, which are restricted for public transit systems.
HOME Program and Community Development Block Grants
This fund was established to account for the City's HOME Program that provides adequate and affordable housing for low and very low-income
residents, and Community Development Block Grants provided to the City principally for low and moderate income residents to develop a suitable
living environment and expand economic opportunities.
77
NONMAJOR GOVERNMENTAL FUNDS
CAPITAL PROJECT FUNDS
CAPITAL PROJECT FUNDS
Vehicle and Equipment
This fund was established to account for the financing and replacement of vehicles and equipment for all funds of the City with the exception of the
Enterprise Funds. Financing is primarily provided through operating transfers from other funds, interest earnings and sales of surplus
property.
Library
This fund is used to account for the acquisition, construction and installation of capital facilities for the Library.
Subdivision
This fund is used to account for construction and installation projects dealing with subdivision work for others.
Hutchins Street Square
When the old Lodi High School burned down, the City purchased the property and renamed it Hutchins Street Square. The Old Lodi High Site
Foundation was established and this organization organizes events to raise money for the capital restoration of Hutchins Street Square.
Capital Outlay Reserve
This fund was established to account for the entire City's construction projects and capital purchases in excess of $10,000 with the exception of
those funded through Enterprise Funds. Financing is provided primarily by operating transfers from other funds and from State and Federal grants.
Lodi Lake
This fund was established to account for moneys charged for activities held at Lodi Lake. The Council designated the moneys to be used for Lodi
Lake capital projects.
85
ASSETS
Cash and investments
Restricted assets
Receivables:
Acoounts, net
Interest
Due from other governmental agencies
Advances to other funds
Other assets
TOTAL ASSETS
LIABILITIES
Accounts payable and other liabilities
Advances from other funds
Unearned revenue
TOTAL LL41MITIES
CITY OF LOO]
COMBINING BALANCE SHEET
NONMAJOR GOVERNMENTAL FUNDS - CAPITAL PROJECT FUNDS
June 30, 2006
Capital
Vehicle and Hutchins Outlay Lodi
EquipMent Library Subdivision Street Square Reserve Lake Total
$ 290,725 12,526 300,339 2,181 4,964,434 37,118 $ 5,607,423
1,697,469 1,697,469
2,539 2,539
51 20,837 150 21,038
369,950 369,950
636,770 636,770
5,089_ 5,089
$ 290,725 12.677 $00,339 2,181 7,697,088 37,268 $ _ 8,340378
$ 14,673 2,285 $ 16,958
1,487,053 1,487,053
369,950 369,950
1,871,676 2,285 1,8I3g81
FUND BALANCES
Fund balances:
Raaenied for encuaftances 2,141 152,771 11,265 165,177
Reserved for advances to other funds 636,770 636,770
Unreswved-designated for specific projects and prams 288,584 12,677 300,339 2,181 5,035,871 23,718 5,663,370
TOTAL FUND BALANCES T 290,725 12,677 300,339 2.181 5,825,412 34,983 6,466,317
TOTAL LIABILITIES AND FUND BALANCES $ 290,725 12,677 300,339 2,181 7,697,088 37,268 $ 8,340,278
86
81
CITY OF LODI
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CNANGES IN FUND BALANCES
NONMAJOR GOVERNMENTAL FUNDS - CAPITAL PROJECT FUNDS
Year ended June 30.2M
Hutchins
Capital
Vehicle and
Street
Ouday
Lodi
Equipment Library Subdivision
_ Square
Reserve
Lake
Total
REVENUES
Charges for services
521,830
521 A30
Inveslment and rental Income
187,77D
873
158,643
Miscdlenaous revenue
14,579
20,000
4,500
39,079
Total revenues
14,579
729,600
5,373
749,552
EXPENDITURES
Capital outlay
63,670 2,653
1,396
278,875
15,485
362,079
Debt service:
Interest and fiscal charges
10,920
10,920
Total expenditures
63.670 2,653
1,396
289,795
15,485
372,999
EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES
(49.091) (2.653)
(1,396)
439,805
(10,112)
376,553
OTHER FINANCING SOURCES (USES)
Transfers in
187,500
187,500
Transfers out
(722,348)
(722,348)
Total other financing sources (uses)
187,500
(722,346)
(534,848)
NET CHANGE IN FUND BALANCES
138,409 (2,653)
(1,396)
(282,543)
(10,112)
(158,295)
FUND BALANCES ,13EGINNING OF YEAR
152.316 15,330 300,339
3,577
6,107,955
45,095
6,624,612
FUND BALANCES. END OF YEAR
$ 290,725 12,677 300,339
2.181
5,825,412
34„983 S
6.486,317
81
(This page intentionally left blank.)
FIDUCIARY FUNDS
Private -purpose Trust Funds
These funds are used to account for trust agreements under which the principal and income benefit individuals, private
organizations or other governments.
Agency Fund
This fund was established to account for special assessments collected on the property tax roll by the City on behalf of the
property owners within the Industrial Way Beeman Districts and the Downtown and Cherokee Lane Districts.
CITY OF LODI
COMBINING STATEMENT OF FIDUCIARY NET ASSETS
PRIVATE -PURPOSE TRUST FUNDS
June 30, 2006
89
Private -Purpose
Trust Funds
Hutchins Street
Library _
Square Bequest
Total
ASSETS
Cash and Investments
$ 758,056
1,334 $
759,390
TOTAL_ ASSETS
758,056
1,334
759,390
NET ASSETS
$ 758,056
1,334 $
759,390
89
CITY OF LODI
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FIDUCIARY FUNDS
Year ended June 30, 2006
ADDITIONS
Investment income and donations
Total additions
DEDUCTIONS
Current
Library
Total deductions
CHANGE IN NET ASSETS
NET ASSETS, BEGINNING OF YEAR
Private -Purpose Trust Funds
Hutchins Street
Library Square Bequest
$ 77,895
77,895
12,862
12,862
65,033
693,023
Total
30 $ 77,925
30 77,925
12,862
12,862
30 65,063
1,304 694,327
NET ASSETS, END OF YEAR $ 758,056 1,334 $ 759,390
90
CITY OF LODI!
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
AGENCY FUND
Year ended June 30, 2006
Special Assessments
Balance Balance
711105 Additions Deductions 6/30/06
ASSETS
Cash and investments $ 390,802 809,918 747,092 $ 453,628
Special assessment receivable 53,580 71,594 53,580 71,594
Interest receivable 2,923 2,196 2,923 2,196
Other assets 1,283 1,283
TOTAL ASSETS
LIABILITIES
Agency obligations
TOTAL LIABILITIES
$ 448,588 883,708 804,878 $ 527,418
$ 448,588 78,830
$ 527,4'18
$ 448,588 78,830 $ 527,418
91
(This page intentionally left blank.)
STATISTICAL TABLES
UNAUDITED
CITY OF LODE
NET ASSETS BY COMPONENT
LAST FOUR FISCAL YEARS
(Dollar amounts in thousands)
Governmental activities:
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total governmental activities net assets
Business -type activities:
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total business -type activities net assets
Primary government:
Invested in capital assets, net of related debt
Restrided
Unrestricted
Total primary government net assets
Fiscal Year
2006 2005 2004 2003
$ 111,572 $ 106,293 $ 100,749 $ 94,681
14,526 13,465 11,205 12,811
(8,838) (8,601) (9,437) (7,334)
$ 117,260 $ 110,957 $ 102,517 $ 1D0.158
$ 77,494 $
67,668 $
64,214 $
62,752
10,969
2,351
2,578
240
1,880
7,445
(7,511)
(10,270)
$ 90,343 $
77,464 $
59,281 3
52,722
$ 189,066 $ 173,961 $ 164,963 $ 157,433
25,495 15.816 13,783 13,051
(6,958) (1,356) (16,948) (17,604)
S 207,603 S 188.421 $ 161398 $ 152,880
Note: The City of Lodi implemented GASB 34 for the fiscal year ended June 30, 2003. Information prior to
the implementation of GAS13 34 is not aysgabib.
Source: City of Lodi Financial Services Division
93
MY OF LODI
CHANGES IN NET ASSETS
LAST FOUR FISCAL YIr4RS
(Dollar amounts in thousands)
Expenses
Governmental activities:
Germ -al government
Public protection
Public works
Community development
Library
Parks am neCnsetinn
Interest and fiscal charges
Total governmental activities expenses
Business -type activities:
Electric
wastewater
Water
Transit
Total business -type activities expenses
Total primary government expenses
Fiscal Year
2006 2005 2004 2003
S 9,746 $
9,458 $
13,167 $
12.238
22,105
22,253
19.162
16,632
13,229
12,377
11,866
10,946
2.290
3.018
-
-
1.485
1,484
1.409
1.454
4,114
4,565
4,095
3,9w
1,234
1.617
1,267
1,214
54103
52.254
50.968
46,473
63.780
57,308
55.943
51,388
8,574
10,653
6,297
6,141
8,256
11,748
7,489
12,879
3.643
3.018
3,064
5.389
84.253
82,727
72.793
75.797
$ 138.456
5 134,981
5 123,761
S 122,270
Program Revenues
Governmental activities:
Charges for services:
59,112
53.908
52.899
48.873
General government S
1,232 $
3,639 $
3,144 $
2.355
Public protection
563
623
525
541
Public works
320
461
430
335
Community development
1,630
-
-
-
Library
54
49
54
57
Parks and recreation
918
833
679
586
Operating grants and oonlnbulions
2.567
2,195
2.321
3,315
Capital grants and contributions
14.631
17,559
13.894
6,814
Total governmental activities program revenues
21.935
25,359
21.043
14,003
19usrness-tym adwitres:
Charges for services.
Electric
59,112
53.908
52.899
48.873
1 weler
8,927
8,086
6,560
6,760
Water
8,343
7.713
6,007
5,532
Transit
386
340
244
293
Operating grants and contributions
3.377
2.731
2,547
1,772
Capital grants and contributions
11.146
3,401
8.268
6,566
Total busirle$54ype activities program revenues
91,291
76,179
76.525
69,796
TOM primary government program revenues
$ 113,226
S 101.538
$ 97.568 S
83,799
Not(Expense)fRevenue
Governmental activities $ (32,268) S (26.895) $ (29,925) S (32,47D)
Business -type activities 7.038 (6,548) 3.732 (6.001)
Total primary government net expense $ (25.230) $ (33.443) $ (26.193) $ (38.471)
(Continued)
94
56
uolsln a eaoltifaS lerlueul-q lPol to Ali3 scuroS
'algeilene lou s� 4E 9SVE) to uolleluewa)dwl a4l
of loud uolleuwo;ul 'EpgZ'p£ aunt Papua feaA lexg eql Ml 4E eSVE) paluawatdwl !Pol to LL?o 841
LZ S 6WS $ EZ9'9Z S Z9L'6L S luawLUBA08 uewudlal01
L6£1 695'9 W,$' 6L8'ZL salliAgMgd"saL"ng
(OLL'O S 09E'Z S 664'9 S £6E'9 S swlw7asRMPUufs+l05
s)assV ION w 116ue40
864'8E s
ZEUS£ S
99069
s Zt4'44 s
luawwanoBllfewudlelol
86L'L
LZg'Z
L£L'4Z
t4B'S
ssimpe ad4l-sselrww moL
(tg6'Z)
(St6'Z)
(80o'4)
(EZ6'4)
SM)suefl
69Z
SZL
LLZ'St
9ZE
lqap to ssausnl6fo)-way IepWS
469,E
SEB'Z
ZE4'Z
9SOLZ
JoLoo
-
LLE
ME
-
slasse letldeo /4 ales uo mg
9ZL'Z
999
09L'6
00L'9
sllnamel ieluswuonnue-uoiW&.Vl
L54'9
zvtz
099'L
9002
sBulwes sfawtss+lul
96E'9 S
"VL $
4Zt'L
$ LE09 $
:Saltlupe adAl--ang
OOL'9E
SSZ�Z£
5E£ SE
LLS'8E
sallwpe leluauwa^od lelol
1.962
9WZ
8004
EZ6'4
sfa;suefl
LEL
069
869
Ztol
AKn0
69Z
SZL
091,
9ZE
s$ulweawawtss+wl
690'Z L
969'L L
£6l'£ L
9tZ'Y L
of pepulsai tau SUO]VK uluoo pue slueXJ
Oop
LLE
ME
99£
xelAmmdrwoluslsmL
ZZB
4L8
Z96
£L6
xel asuaoll sseulsng
4Z9'L
t8E'8
816'8
LZL'9
saxel aslepu A
96E'9 S
"VL $
4Zt'L
$ LE09 $
Afadwd
:ssxeL
3911 .rPR leluawwenog
:slassy ION ul 906ue43 jayto pue SonuaAald rem"E)
E00Z
4602
SOOZ
9002
f eaA
Mos! d
(spuesnoLn u! S unowe Je[loU)
suvr jL ivosm timi 15Vi
(ponupoo) S13SSV 13H NI 53SNYH3
laol =10 Alio
General Fund
Reserved
Unreserved
Total General Fund
All other governmental funds
Reserved
Unreserved, reported in:
Special revenue funds
Debt service funds
Capital projects funds
Total all other governmental funds
Source: City of Lodi Financial Services Division
CITY OF LODI
FUND BALANCES, GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(Dollar amounts In thousands)
Fiscal Year
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
$ 1,321 $ 1,185 $ 1,296 $ 927 $ 856 $ 532 $ 473 $ 149 $ 231 $ 233
3,048 1,507 157 640 2,208 3,414 3,315 2,582 2,030 2,277
$ 4,369 $ 2,692 $ 1,453 $ 1,567 S 3,064 $ 3,946 $ 3,788 $ 2,711 $ 2,261 $ 2,510
$ 1,138 $ 4,942 $ 3,778 S 6,405 $ 3,363 S 2,779 $ 555 $ 2,167 $ 943 $ 10,335
6,271 1,400 534 2,322 1,814 2,439 5,774 2,298 3,042 6,224
- _ - - - 228
5,663 5,650 5,720 7,655 17,905 1,695 3,511 2,230 1,859 1,827
$ 13,072 $ 11,992 $ 10,032 $ 16,382 $ 23,082 $ 6,913 $ 9,840 $ 6,695 $ 5,844 $ 18,614
$ 17,441 3 14,684 $ 11,485 S 17.949 $ 26,146 $ 10.859 $ 13,628 $ 9,406 $ 8,105 $ 21,124
99
Revenues:
Taxes
Licenses and permits
Intergovernmental revenues
Charges for services
Fines and forreitures
Investment and rental income
Misodianeous revenue
Total revenues
Expenditures:
Current:
General government
Public protection
Public works
Community development
Library
Parks and recreation
Capital outlay
Debt service:
Interest and fiscal charges
Principal payments
Total expenditures
Excess (deficiency) of revenues
Over (under) exQerMMUnIS
CITY OF LODI
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(Dollar amounts in thousands)
Fiscal Year
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
$ 18,094 $ 17,606 $ 16,908 $ 24,100 $ 23,043 $ 21,909 $ 19,801 $ 18,594 $ 17,790 $ 17,029
1,020
2,511
2,021
1,669
1,464
1,592
1,406
1,267
1,183
1,012
25,491
22,834
16,657
7,385
22,000
11,641
9,054
8,370
6,291
6,316
3,848
9,404
4,479
6,272
3,888
4,249
4,611
3,874
2,871
1,908
1,173
1,190
1,085
803
806
765
714
876
662
453
707
753
537
832
1,234
1,509
982
982
1,060
1,215
653
458
473
453
1,349
383
764
242
524
80
50,986
54,756
42,160
41,514
53,784
42,048
37,332
34,207
30,381
28,013
8,345
10,858
10,815
10,874
8,987
8,862
7,813
7,239
7,068
5,882
20,863
20,351
17,491
15,597
13,562
13,190
11,430
11,225
10,896
11,059
7,827
7,361
7,303
6,926
5,741
6,312
5,039
5,151
4,810
5,749
1,847
-
-
-
-
-
-
1,468
1,420
1,356
1.316
1,158
1,184
1,040
1,030
966
1,012
3,440
3,691
3,412
3,385
2,860
2,999
2,670
2,230
2,174
2,312
7,232
9,508
10,041
12,943
17,948
12.044
6,420
6,640
18,383
10,810
1,238 1,645 1,245 1,220 674 755 777 797 818 S64
892 855 759 730 555 530 505 485 470 275
53,152 55,689 52,422 52.991 51,490 45,876 35,694 34,797 45,585 37,763
(2,166) (933) (10,262) (11,477) 2,294 (3,828) 1,638 (590) (15,204) (9,750)
(Continued)
4
CITY OF LODI
CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS (Continued)
LAST TEN FISCAL, YEARS
(Dollar amounts in thousands)
Source: City of Lodi Finance Services Division
M
Fiscal Year
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Other financing sources (uses):
Transfers in
9,142
8,017
9,774
11,209
12,500
9,355
9,715
16,486
24,883
17,782
Transfers out
(4,219)
(4,009)
(6,859)
(8,228)
(13,052)
(10,090)
(7,130)
(14,410)
(23,392)
(16,166)
Capital lease proceeds
124
883
148
670
695
Proceeds from bond refunding
13,269
Payment to refunded bond escrow
(13,269)
Proceeds of certificates of participation
13,396
9,918
Proceeds from special assessment
2,421
Residual equity transfer
(187)
Total other financing sources (uses)
4,923
4,132
3,798
2.981
12,992
(65)
2,585
1,889
2,186
13,955
Net change in fund balances
2,757
3,199
(6,464)
(8,496)
15,286
(3,893)
4,223
1,299
(13,018)
4,205
Fund balances, beginning of year
14,684
11,485
17,949
26,445
10,859
13,628
9,405
8,106
21,124
16,919
Adjustment to fund balance as previously reported
300
1,124
Fund balances, end of year
$ 17,441
$ 14,684
$ 11,485 $
17,949 $
26,445
S 10,859 S
13,628 $
9,405 $
8,106 $
21,124
Debt service as a percentage of noncapital expenditures
4.9%
5.7%
5.0%
5.1%
3.8%
3.9%
4.6%,
4.8%
5.0%
3.6%
Source: City of Lodi Finance Services Division
M
City of Lodi
TAX REVENUES BY SOURCE, GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(Dollar amounts in thousands)
Fiscal Year
Totals $ 32,616 $ 31,469 $ 28,323 $ 27,631 $ 26,346 $ 24,762 $ 22,719 $ 20,722 $ 20,317 $ 19,201 70%
Note: General governmental tax revenues are included in taxes, licenses and permits, intergovernmental revenues and miscellaneous revenues.
Source: City of Lodi Financial Services Division
99
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
% Change
1997 to 2006
Property
$ 7,675
$ 6,771
$ 6,948
$ 6,191
$ 5,641
$ 5,322
$ 4,932
$ 4,517
$ 4,374
$ 4,225
82%
Sales & Use
9,812
9,183
8,533
8,709
8,300
8,028
7,095
6,523
6,205
5,950
100%
Transient Occupancy
368
352
317
400
439
390
318
305
278
249
48%
Franchise
890
821
800
730
931
820
675
618
586
524
70%
Documentary Transfer
355
353
240
207
172
158
116
119
77
66
438%
Motor Vehicle in Lieu
4,402
4,606
2,767
3,430
3,276
3,051
3,008
2,221
2,478
2,144
105%
Public Protection
310
304
264
247
231
242
196
180
180
154
101%
Business License
973
982
874
822
787
736
658
612
593
541
80%
In Lieu Franchise
7,831
8,097
7,580
6,895
6,569
6,015
5,721
5,627
5,546
5,348
46%
Totals $ 32,616 $ 31,469 $ 28,323 $ 27,631 $ 26,346 $ 24,762 $ 22,719 $ 20,722 $ 20,317 $ 19,201 70%
Note: General governmental tax revenues are included in taxes, licenses and permits, intergovernmental revenues and miscellaneous revenues.
Source: City of Lodi Financial Services Division
99
CITY OF LODI
ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
(Dollar amounts in thousands)
Land
1,226,293
1,107,776
1,027,462
960,166
Fiscal Year
832,788
787,249
756,166
728,900
709,296
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Secumd roil
$ 4,254,184
$ 3,877,398 $
3,619,116
$ 3,381,945
$ 3,096,937
$ 2,880,201
$ 2,707,343
$ 2,574,622
$ 2,515,478
$2,463,536
Utility roti
3,654
3,782
3,893
3,352
3,379
3,484
3,525
3,826
3,699
3,557
Unsecured roll
216,065
215,469
202,785
207,095
198,678
177,040
163,299
146,345
129,396
125,907
Gross assessed value
4,473,903
4,096,649
3,825,794
3,592,392
3,298,994
3,060,725
2,874,167
2,724,793
2,648,573
2,593,000
Less exemptions
220,590
217,077
212,102
200,957
190,252
185,473
183.294
179,835
176,500
172,945
Net assessed value
4,253,313
3,879,572
3,613,692
3,391,435
3,108,742
2,875,252
2,690,873
2,544,958
2,472,073
2,420,055
Land
1,226,293
1,107,776
1,027,462
960,166
889,262
832,788
787,249
756,166
728,900
709,296
Improvements
2,989,575
2,739,0361
2,549,860
2,366,887
2,164,121
1,982,668
1,847,800
1,748,387
1,705,635
1,673,877
Personal property
258,035
249,812
248,472
265,339
245,611
245,269
239,116
220,240
214,038
209,827
Gross assessed value
4,473,903
4,096,649
3,825,794
3,592,392
3,298,994
3,060,725
2,874,167
2,724,793
2,648,573
2,593,000
Less exemp8ons
220,590
217,077
212,102
200,957
190,252
185,473
183.294
179,835
176,500
172,945
Net assessed value
$ 4,253,313 $
3,879,572
$ 3,613,692
$ 3,391,435
$ 3,108,742
$ 2,875,252
5 2,690,873
$ 2,544,958
$ 2,472,073
$ 2,420,055
Source: San Joaquin County Auditor -Controllers Office
100
Source: San Joaquin County Auditor/Controllers Office
WE
CITY OF LODI
DIRECT AND OVERLAPPING
PROPERTY TAX RATES
LAST TEN FISCAL YEARS
(Rate per $100 of assessed value)
Basic
Fiscal
Countywide
Yew
Levy
School
All Other
Total
2006
1.0000
0.0570
0.0000
1.0570
2005
1.0000
0.0311
0.0000
1.0311
2004
1.0000
0.0475
0.0000
1.0475
2003
1.0000
0.0487
0.0000
1.0487
2002
1.0000
0.0002
0.0000
1.0002
2001
1.0000
0.0002
0.0000
1.0002
2000
1.0000
0.0002
0.0034
1.0036
1999
1.0000
0.0001
0.0034
1.0035
1998
1.0000
0.0019
0.0034
1.0053
1.997
1.0000
0.0022
0.0034
1.0056
Source: San Joaquin County Auditor/Controllers Office
WE
XVINI(•TAK614
PRINCIPAL PROPERTY TAX PAYERS
CURRENT YEAR AND TEN YEARS AGO
(Dollar amounts in thousands)
Fiscal Year
2006 1997
Taxpayer
Taxable
Assessed
Value
Rank
Percent of
Total City
Taxable
Assessed
Value (1)
Taxable
Assessed
Value
Rank
Percent of
Total City
Taxable
Assessed
Value
General Mills, Inc
S 152,102
1
3.768 %
$ 226,403
1
9.190 %
Pacific Coast Producers
43,068
2
1.067
45,346
2
1.841
Pacific Coast Producers Corp.
34,267
3
0.849
Cottage Bakery Inc.
25,341
4
0.628
Mstmont West
21,961
5
0.544
Parinehs Exchange 2004 LLC
19,539
6
0.484
Certainteed Corp.
18,842
7
0.467
Dart Container Corp.
17,625
8
0.437
12,405
5
0.504
Fountains At Lodi LLC
13,031
9
0.323
Panatloni, Carl D ETAL
12,984
10
0.322
Dayton Hudson Corp.
-
-
14,929
3
0.606
Daryl Geweke
12,865
4
0.522
Wells Fargo Bank
11,505
6
0.467
California Waste Removal System
10,766
7
0.437
Wallace Compo Service
-
9,669
8
0.392
Wilklon Land Col Partnership
9,422
9
0.382
Lodi Fab Industries, Inc.
-
-
8,867
10
0.360
Principal Secured Property Valuation
358,760
8.888
362,177
14.702
Other Seared Taxpayers
3,894,424
96.486
2,274,304
92.319
Exemptions relative to secured tax roll
216,944
5.375
172,945
7.020
Total Secured Property Valuation
$ 4,036,240
100.000 %
$ 2,463,536
100.906 %
Source: San Joaquin County Assessor's Office 102
CITY OF LODI
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
(Dour arum is in thousands)
1) Per agreement with San Joaquin County, the County provides the City of Lodi with 100% of the
amount owed to the City for secured properties, regardless of collection status. In exchange, the
County is ertWMd to 100% of revenues collected for interest and penalties. This agreement is
commonly referred to as the Teeter Plan.
Source: San Joaquin County Auditor/Controller's Office
103
Collected Within the
Total Collections
Fiscal Year of the Le
to Date
Taxes
Levied for
Percent
Percent
Fiscal
the Fiscal
of
of
Year
Year
Amount
Levy (1)
Amount
Levy
2006
$ 7,815
$ 7,815
100.0%
$ 7,815
100.0%
2005
7,057
7,057
100.0%
7,057
100,0%
2004
6,570
6,570
100.0%
6,570
100.0%
2003
5,832
5,832
100.0%
5,832
100.0%
2002
5,757
5,757
100.0%
5,757
100.0%
2001
5,182
5,182
100.0%
5,182
100.0%
2000
5,056
5,056
100.0%
5,056
100.0%
1999
4,653
4,653
100.0%
4,653
100.0%
1998
4,444
4,444
100.0%
4,444
100.0%
1997
3,827
3,827
100.0%
3,827
100.0%
1) Per agreement with San Joaquin County, the County provides the City of Lodi with 100% of the
amount owed to the City for secured properties, regardless of collection status. In exchange, the
County is ertWMd to 100% of revenues collected for interest and penalties. This agreement is
commonly referred to as the Teeter Plan.
Source: San Joaquin County Auditor/Controller's Office
103
CITY OF LODI
ELECTRIC SOLD BY TYPE OF CUSTOMER
FOR FISCAL YEAR ENDED JUNE 30, 2006
Type of Customer
City Accounts
Contract Large Industrial
Contract Medium Industrial
Contract Small Industrial
Domestic Residential
Domestic Mobile Home Park
Dusk to Dawn
Large Commercial
Large Industrial
Medium Industrial
Residental Low Income
Small Commerical
Small Industrial
Total
Billed Accounts
184
6
2
1
22,860
13
95
359
33
13
1,914
3,279
9
28,764
Note: The City of Lodi implemented GASB 44 for the fiscal year ended June 30, 2006.
Information prior to the implementation of GASB 44 is not available.
Source: City of Lodi Financial Services Division
`tot!
CITY OF LODI
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
(Dollar amounts in thousands, except per capita)
Governmental Activities Business -type Activities
Degtls regarding the City's outstanding debt can be found in the Note 8 on pages
45.57 of Ytase financial stalemants.
Source: Cdy of Lodi Financial Services Division
105
Cerellcates
Total
Certlflcros
Tool
Total
Fiscal
of
Loan
Notes
Govemawtal
of
Nobs
BM Messdype
Pdw-y
Per
Yew
Partldpatlon
Payable
Payable
Aetivibes
Participation
Payable
Aetividea
Goverm"t
PoPulMeon
capNa
2006
$ 24,510
$ 279
$ 245
5 25,034
S 125.340
S 2,077
$ 127,417
$ 152,451
63
$ 2,420
2005
25,030
368
245
25,643
126,615
2.230
128,845
154,488
62
2,492
2004
25,530
456
245
26,231
148,675
2,378
151,053
177,284
61
2,908
2003
26,015
543
245
26,803
117,515
2,521
120,036
146,839
61
2,407
2002
26,745
622
245
27,612
75,285
2,660
77,945
105,557
59
1,789
2001
12,980
-
-
12,980
59,931
2.794
62,725
75,705
59
1,283
2000
13,510
13,510
55,544
2,923
58,467
71,977
58
1,241
low
14,015
14,015
9,762
2,892
12,654
28,669
57
468
1998
14,500
14,500
9,872
3,013
12,885
27,385
56
489
1997
14,970
14,970
9,976
9,978
24,948
55
454
Degtls regarding the City's outstanding debt can be found in the Note 8 on pages
45.57 of Ytase financial stalemants.
Source: Cdy of Lodi Financial Services Division
105
CITY OF LODI
RATIOS OF GENERAL BONDED DEBT OUTSTANDING
LAST TEN FISCAL YEARS
(Dollar amounts in thousands, except per capita)
General bonded debt is debt payable with governmental fund resources and general
obligation bonds recorded in enterprise funds (of which, the City has none).
(1) Assessed value has been used because the actual value of taxable property is not
readity available in the State of California.
Source: City of Lodi Financial Services Division
106
Percent of
Certificates
Assessed
Fiscal
of
Value (1) of
Per
Year
Participation
Property
Capita
2006
$ 24,510
0.5
0k $ 390.18
2005
25,030
0.6
400.69
2004
25,530
0.7
420.12
2003
26,015
0.7
430.00
2002
26,745
0.8
450.02
2001
12,980
0.4
221.50
2000
13,510
0.5
233.33
1999
14,015
0.5
246.31
1998
14,500
0.5
260.32
1997
14,970
0.6
273.18
General bonded debt is debt payable with governmental fund resources and general
obligation bonds recorded in enterprise funds (of which, the City has none).
(1) Assessed value has been used because the actual value of taxable property is not
readity available in the State of California.
Source: City of Lodi Financial Services Division
106
CITY OF LODE
LEGAL DEBT MARGIN INFORMATION
LAST TEN FISCAL YEARS
(Dollar amounts in thousands)
FISCAL YEAR
2006 2005 2004 2003 2002
2001
2000
1999
1998
1997
Assessed valuation (1) $ 4,325,000 S 3,951,862 $ 3,686,227 $ 3,464,195 $ 3,177,319 5
2,942,348
$ 2,757,557
$ 2,611,744
$ 2,538,593
$ 2,485,366
Conversion percentage 25% 25% 25% 25% 25%
25%
25%
25%
25%
25%
Adjusted assessed valuation 1,081,250 987,966 921,557 866,049 794,330
735,587
689,389
652,936
634,648
621,342
Debt Umd pwcenlage 15% 15% 15% 15% 15%
15%
15%
15%
15%
15%
Debt Limit 162,188 148,195 138,234 129,907 119,149
110,338
103,408
97,940
95,197
93,201
Total net debt applicable to limit - - - - -
-
-
-
-
-
Legal debt margin $ 162,188 $ 148,195 $ 138,234 S 129,907 S 119.149 $
110.338
$ 103,408
$ 97,940
$ 95,197
$ 93,201
Total net debt applicable to the limit
as a,penatut of dW A droll 0% 0% 0% 0% 0%
0%
0%
0%
0%
0%
The Government Cade of the State of CaWomis provides for a legal debt limit of 15% of gross assessed valuation. However,
tW prtt Belot was arhar- WM saarare v0WwOn was traced upon 25% of market vAm. Eltective with the 1982 thhcal
yarn, each pard is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The
rbnpulatlon shown above rellect a convention of assessed valuation data for each fiscal year from the current full vatuation
p- opmlva to Its M% haat thel wits in~ al the 11me the legal debt margin was ena0ed by the Std of CaWomia for
lope gowomments located wlthihh the $W*W
(t) Raterr is C* azaass id hreittlratoo heitb a4wlotampWns of $14aAG3 daduclad tar 2006.
Source: San Joaquin County Auditor-Controllers Office
107
CITY OF LODI
PLEDGED -REVENUE COVERAGE
LAST TEN FISCAL YEARS
(Dollars amounts in thousands)
Less: Net
Fiscal Gross Operating Available Debt Service
Year Revenues (1) Expenses (2) Revenue Principal Interest Total Coverage
Electric Revenue Certificates of Participation
2005
5 60,339
$ 54,283
$ 6,056
$ 2,350
$ 2,049
54,399
1,38
2005
55,183
48,278
6,905
3,295
3,541
6,836
1.01
2004
55,074
46,858
8,216
4,750
3,203
7,953
1.03
2003
55,304
42,739
12,565
4,575
2,836
7,411
1.70
2002
49,089
63,545
(14,456)
1,100
1,359
2,459
(5.88)
2001
44,594
46,253
(1,659)
-
1,391
1,391
(1.19)
2000
41,219
40,016
1,203
1,330
1,330
0,90
1999
37.847
38,141
(294)
-
-
1998
36,281
34,561
1,720
1997
36,236
32,992
3,244
-
1
con5nued
IID
CITY OF LODE
PLEDGED -REVENUE COVERAGE (continued)
LAST YEN FISCAL YEARS
(Dollars amounts In thousands)
Wastewater Certificates of Participation
2006
9,496
4,886
4,610
1,275
2,077
3,352
1.38
2005
8,650
7,028
1,622
540
1,909
2,449
0.66
2004
6,635
4,385
2,250
175
715
890
2.53
2003
6,824
4,380
2,444
150
639
799
3.06
2002
4,193
4,808
(615)
150
649
799
(0.77)
2001
4,868
4,336
532
145
658
803
0.66
2000
4,000
3,147
853
140
667
8D7
1.06
1999
4,196
2,957
1,239
125
675
800
1.55
1998
4,034
2,914
1,120
120
682
802
1.40
1997
3,719
2,863
856
115
689
504
1.06
Includes all nongeneral obligation long term debt backed by pledged revenues.
Details regarding the Citys outstanding debt can be found in the Note 8 on pages 45-57 of Nese financial statements.
(1) Total aperating revenues including investment earnings.
(2) Total operating expenses exclusive 9 depreciation and amortization,
Source City of Lodi Financial Services Division
6
CITY OF LOD1
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN FISCAL YEARS
Population
San Joaquin
Population
Rank in Size
Fiscal Square City Percent
County
Percent
of California
Year Miles Population Change
Population
of County
Cities
2006
12.81
62,817
0.6%
668,265
9.4%
131
2005
12.81
62,467
2.8%
653,333
9.6%
131
2004
12.79
60,769
0.4%
630,600
9.6%
130
2003
12.69
60,500
1.8%
613,500
9.9%
179
2002
12.62
59,431
1.4%
596,000
10.0%
129
2001
12.60
58,600
1.2%
583,700
10.0%
126
2000
12.50
57,900
1.8%
566,600
10.2%
125
1999
12.32
56,900
2.2%
554,400
10.3%
124
1998
12.;
55,700
1.6%
545,200
10.2%
124
1997
12.3
54,800
0.6%
535,420
10.2%
123
Source: State of California, Department of Finance, Demographic Reseach Unit.
110
CITY OF LODI
PRINCIPAL PRIVATE EMPLOYERS
FOR FISCAL YEAR ENDED JUNE 30, 2006
Note: The City of Lodi implemented GASB 44 for the fiscal year ended June 30, 2006.
Information prior to the implementation of GASB 44 is not available.
2000 Census Labor Force figure
111
Labor Force
26,125
26,125
26,125
26,125
26,125
26,125
26,125
26,125
26,125
26,125
Percent
of Total City
Employer
Employees
Rank
Employment
Lodi Unified School District
2,400
1
9.19 %
Pacific Coast Producers
1,430
2
5.47
Lodi Memorial Hospital
900
3
3.44
Cottage Bakery
695
4
2.66
Blue Shield
550
5
2.11
City of Lodi
465
7
1.78
General Mills
425
6
1.63
Walmart
317
8
1.21
Farmers & Merchants Bank
314
9
1.20
Target
186
10
0.71
Total
7,682
29.40
Note: The City of Lodi implemented GASB 44 for the fiscal year ended June 30, 2006.
Information prior to the implementation of GASB 44 is not available.
2000 Census Labor Force figure
111
Labor Force
26,125
26,125
26,125
26,125
26,125
26,125
26,125
26,125
26,125
26,125
CITY OF LODI
FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES
BY DEPARTMENT FOR LAST TEN YEARS
2006 2005 2004 2003 2002 2001 2000 1999 1998 1997
Administration
33
37
36
37
34
34
32
30
26
24
Community Development
17
17
17
18
17
17
15
15
14
14
Electric
65
52
52
52
50
47
46
44
44
43
Finance
28
38
38
38
35
34
34
32
34
34
Fire
61
68
61
68
55
52
50
49
48
48
Library
14
15
15
15
14
14
14
14
14
14
Parks & Recreation
31
34
34
34
29
29
26
26
27
26
Police
117
117
116
117
115
114
113
113
112
112
Public Works
99
111
110
110
108
103
99
95
94
92
Total
465
�89
479
489
457
444
429
418
413
407
Source: City of Lodi Budget Document
112
CITY OF LODI
OPERATING INDICATORS BY FUNCTIONIPROGRAWDEPARTMENT
FOR FISCAL YEAR ENDED JUNE 30, 2006
General government
Building permits issued
2,699
Business tax certificates:
Retail sales and service
2,565
Manufacturers and processors
125
Professions
322
Miscellaneous contractors, peddlers, delivery vehicles, etc.
533
Utility billing/customer service:
Number of customers
25,655
Energy sales (KWH)
459,637,092
Peak demand (MW)
127
Public safety:
Police:
Major reported crimes
3,234
Total arrests
5,162
Dispatched calls for service
55,937
Fire:
Interior structure fire calls
66
Non-structural fire calls
158
Hazarvlous mal*rials calls
26
Emergency medical calls
2,912
Total emergency calls
4,447
Total number of units dispatched
6,055
Public works:
Miles of streets resurfaced
33
Fleet job orders completed
5,608
Traes,pla rated
300
113
CITY OF LODI
OPERATING INDICATORS BY FUNCTION/PROGRAWDEPARTMENT
FOR FISCAL YEAR ENDED JUNE 30, 2006
Water utility:
New connections
266
Water main breaks
8
Wastewater utility:
Average daily treatment (million gaiiday)
6.7MG
Library:
Registered borrowers
52,779
Circulation of library materials
281,216
Reference, research and informational questions answered
17,342
Annual atte dance at libraries
287,986
Number of p1-ograms offered
320
Annual attendance at programs
10,872
Public access computer usage
29,896
Community center:
Community center bookings
220
Instructional classes
509
Registered students
4,369
Yearly attendance
15,369
ME
CITY OF LODI
OPERATING INDICATORS BY FUNCTIOFIPROGRAMIDEPARTMENT
FOR FISCAL YEAR ENDED JUNE 30, 2006
Parks and recreation
After school program registration (number of participants/sites) 135,0001112
Adult sports
Program/Participation 36,000
Programs offered 11
Partnerships 5
Tournaments 20
YouthlTeen sports
Program attendance 200,000
Programs offered 20
Aquatics
Program attendance 59,000
Number of programs 6
Note: The City of Lodi implemented GASB 44 for the fiscal year ended June 30, 2006.
Information prior to the implementation of GASB 44 is not available.
Source: City of Lodi
115
CITY OF LORI
CAPITAL ASSET STATISTICS BY FUNCTIONfPROGRAWDEPARTMENT
LAST TWO FISCAL YEARS
Fiscal Year
2006 2005
General government:
Total square miles 12.81 12.81
Public safety:
Police:
Fire:
Facilities:
4
4
Stations
1
1
Animal control facility
1
1
Police training facility (pistol range)
1
1
Vehicles:
11
11
Marked patrol cars
28
28
Motorcycles and scooters
4
1
Animal control vehicles
3
3
Other automobiles
41
41
Facilities:
Fire stations
4
4
Vehicles:
Fire engines
5
5
Trucks/Trailers
7
7
Other automobiles
11
11
Public works:
Miles of streets
198
100
Miles of alley ways
16
14
Traffic signals
64
60
Street lights
7,203
6,995
116
CITY OF LODI
CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM/DEPARTMENT
LAST TWO FISCAL YEARS
117
Fiscal Year
2006
2005
Parks and recreation:
Parks and squares
23
23
Park acreage
275
275
Boating facilities - launch lanes
1
1
Senior center
1
1
Community Centers
1
1
Swimming pools
3
3
Baseball/softball diamonds
26
26
Tennis courts
11
11
Skateboard park
1
1
Playgrounds
22
22
Ballpark
26
26
Soccer Field
22
22
Football Field
3
3
Handball/Basketball/Volleyball Courts
8
8
Horseshoe Pits
10
10
Library:
Central library
1
1
Total items in collection
134,129
137,673
Integrated library system
1
1
Microform readers
1
1
Microform readers/printers
1
1
Self check out machines
1
1
Electric utility:
Overhead lines 12kv (miles)
129
129
Overhead lines 60kv (miles)
13
13
Underground lines (miles)
151
151
117
CITY OF LOD1
CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMIDEPARTMENT
LAST TWO FISCAL YEARS
Note: She City of Lodi implemented GAS5 44 for the fiscal year ended June 30, 2006. Information prior to 2005 are
not readily available.
Source: City of Lodi Departments
118
Fiscal Year
2006
2005
Water utility:
Water main lines
235
230
Water storage capacity (gallons)
1,100,000
1,100,000
Water wells
26
25
Water reservoirs
2
2
Wastewater utility_
Wastewater main lines (utiles)
183
182
Treatment capacity
8.5 MG
8.5 MG
Wastewater treatment plant
1
1
Stormwater utility:
Storl�lwater main drain lines (miles)
115
114
StorMwater pump stations
13
14
Central parking district:
Parking structure
1
1
Parking spaces
2,453
2,453
Parking lots
25
25
Note: She City of Lodi implemented GAS5 44 for the fiscal year ended June 30, 2006. Information prior to 2005 are
not readily available.
Source: City of Lodi Departments
118
SINGLE AUDIT REPORTS
CITY OF LODI
9C E [1•F gXMMqWW&A&QdF FEAMML A W Ails
FOR THE FISCAL, YEA0 EMWD JUNE 30, 2006
Federal Grantor
Pass-through Grantor or Direct CFDA
Program Title Number
U.S. Department of Housing and Urban Development
Passed through San Joaquin County Department of Planning and Building Inspection:
Community Development Block Grants/ Entitlement Grants:
2005-2006 Program Year
2004-2005 Program Year
2003-2004 Program Year
2002-2003 Program Year
2001-2002 Program Year
Total U,S. Department of Housing and Urban Development
U.S. Department of Justice
Direct:
Local Law Enforcement Block Grant Program
Local Law Enforcement Block Grant Program
Total Local Law Enforcement Block Grant Program
Total U.S. Department of Justice
U.S. Depmrhsent of Transportation
Passed through California Department of Transportation:
Highway Planning and Construction
Highway Planning and Construction
Total Highway Planning and Construction
Direct:
Federal Transit Formula Grants:
2005-2006 Program Year - Operating
2005-2006 Program Year - Capital
Total Federal Transit Formula Grants
Total U.S. Department of Transportation
Grant/Project
Number
Expenditures
14.218
NIA
S 65,916
14.218
NIA
189,724
14.218
NIA
80,381
14.218
NIA
14,858
14.218
NIA
237
'4.51.116
16.592 2003 -LB -BX -00301 11,900
16.592 2004 -LB -BX -0133 18,854
30.754
30,754
20.205 CML -5144(028) 69,444
20.205 CML -5154(021) 64,499
133.943
20.507 CA -90-Y413-00 1,502,852
20.507 CA -90-Y432-00 150,500
1,653,352
1,'9,25
(Continued)
See accompanying notes to the schedule of expenditures of Federal awards.
119
CITY OF LODI
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Federal Grantor
Pass-through Grantor or Direct CFDA Grant/Project
Program Title _ Number Number Expenditures
U.S. Department of Health and Human Services
Passed through San Joaquin County Department of Health Services Agency:
National Family Caregiver Support 93.052 A-05-441 7,500
Total U.S. Department of Health and Human Services 7,500
U.S. Department of Homeland Security
Direct:
Assistance to Firefighters Grant 97.044 EMW-2003-FG-13104 18,093
Total U.S. Department of Homeland Security 18,093
Total federal awards $ 2,194,758
See accompanying notes to the Schedule of expenditures of federal awards.
120
CITY OF LODI
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
NOTE 1 — GENERAL
The accompanying Schedule of Expenditures of Federal Awards (SEFA) for the fiscal year ended June 30, 2006, presents the activity of all
federal award programs of the City of Lodi, California (City). The City reporting entity is defined in Note 1 of the City's basic financial
statements. All federal awards received directly from federal agencies, as well as federal awards passed through other government agencies,
are included in the SEFA.
NOTE 2 — BASIS OF ACCOUNTING
The accompanying SEFA is preset ted using the modified accrual basis of accounting for grants accounted for in governmental fund types and
the full accrual basis of account i g for grants accounted for in proprietary fund types. as described in Note 1 of the City's basic financial
statements.
NOTE 3 — CATALOG OF FEDERAL DOMESTIC ASSISTANCE
The CFDA numbers included in the accompanying SEFA were determined based on the program name, review of grant contract information
and Office of Management and Budget's Catalog of Federal Domestic Assistance.
NOTE 4 - SUBRECIPIENTS
Of the federal expenditures presented in the schedule, the City provided federal awards to subrecipients as follows:
Federal Program
Federal
CFDA Number
Amount Provided
to Subrecipients
Community Development Block Grants/
Entitlement Grants 14.218 $ 118,447
Federal Transit Formula Grants 20.507 500,000
121
(This page intentionally left blank.)
MACIAS GINI & OtCONNELL LLP
CERTIFIED PUBLIC ACCOUNTANTS 8 MANAGEMENT CONSULTANTS
The Ilonorable Members of City L1116 I
City of Lodi, California
3000 S SawM Sum 300
Sacramemo, CA 95816
916.92BA600
2175 N. California Boulevard, Suite 645
Walnut Creek, CA 94596
9IS.274.0190
S 15 S. Fie w,= Street Suits 32S
Los Angeles. CA 90071
213.286.6400
402 West &madway, Suite 400
San Diems CA 92101
6 ! 4.573.1 1 12
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
AND OTIiER MAVFERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE «'ITH
GONUE N'�IENT AUDITING STAN1 AM)S
We have audited the financial stIatenlellt6 of Elle 4�0vernnlen(1l activities. the businCS�-t. j); activities, each major fund and the aggregate
remaining fund information of the City of Lodi. California tCit%'j. as of and for the fiscal year ended June 30. 2006, which collectively
comprise Elie City's basic financial statenlerlts and have issues] nur report thereon blCd November 22. 2006. We conducted our audit ill
accordance with auditim, standards generally accepted in the United States of ;lnlerica :nd ar_� standards applicable to financial audits contained
in Govei-irment Afldi ingr Slandarrls. issued by the Coltiptroller Gcn::ral of the L ,lit i Stat_.
1111e1.1ral Control Over Financial Reporangl
In planning and performing our �udit, we considered the City's internal control over tinancial reporting in order to determine our auditing
procedures for the put -pose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over
financial reporting. Our consideration of the internal control over tinancial rcportin_e ��ould iioi necessarily disclose all matters in the internal
control that nnibht be material Weaknesses. A nlatei-ial weakness i, a repurtabl: L( ldit1011 in ;.hick the design or operation of one or more of
the internal control compomms docs nut rcducc t6) ,t relau.41_. lo.. !e• ale ; , _ t'; , ::; t;,:_,n nts caused 11v error or fraud in amounts that
would be material in relation to nils financial zitenlellts hcine audit::d nidi• occ.ir ,.nd m)r within a timely period by employees in the
normal course of perforating their assigned functions. Wt: Mutes no Illattcrs in%o1%i ,_ ill: internal comrol over financial reporting and its
operation that we consider to be inaterial ,veakiicsscs,
However, we noted other matters involving the internal Control over financlal reporung tliai �\ L have reported to the management of the City to
a separate letter dated November 22, 2006.
www.mgocpa.com
An Independent Member of the SDO Seidman Affionce
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of
its compliance with certain provisions of taws, 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,
This report is intended solely for the information and use of the City Council, management. federal and state grantor agencies and pass-through
entities and is not intended to be and should not be used by anyone other than these specified parties.
au,as I r 0 t Couue j! LLP
Certified Public Accountants
Sacramento, California
November 22, 2006
123
MACIAS GINI & OICONNELL t_LP
CEFfnFIE4 PUBLIC ACCOUNTANTS A MANAGEMENT CONSULTANTS
The Honorable Members of City Council
City of Lodi, California
3000 S Street, Suite 300
Sacrentarto, CA 95816
916.928.4600
2175 H. Callfomia Bouievard. Suite 645
Walnut C►eek. U 94596
925.274.0190
51S S. Figueroa Street. Suite 325
Los Angeles. CA 90071
213.2".6400
402 West Broadway. Surae 400
San Diego. CA 92101
60.s73.t112
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIRE.AIEiNTS APPLICABLE TO EACH MAJOR
PROGRAM, INTERNAL CONTROL OVER COMPLIANCE AND SCMDULE OF EXPENDITURES OF FEDERAL
AWARDS IN ACCORDANCE WITH ONIB CIRCULAR A-133
Contplianc'e
We have audited the compliance of the City of Lodi, California (Cite)_ with the types of compliance requirements described in the U. S. Office
of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the
fiscal year ended June 30, 2006. The City's major federal progranis are identified in (lie suinniary of auditor's results section of the
accompanying schedule of findings and questioned costs. Compliance with the regtiMr ntients of lases. regulations. contracts and grants
applicable to each of its major federal programs is the responsibility of the City's inanagenieni. Our responsibility is to express an opinion on
the City's compliance based on our audit.
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 OMB
Circular A-133, Audits of Slates, Local Got-elrtrrtents, and Nora -profit Organizations. 'rhos? standards and OMB Circular A-133 require that
we plait and perform the audit to obtain reasonable assurance about whether noncompliance wish 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 Nvith those rcyuireriients and performmu-, such odiLr procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the
City's compliance with those re(juiremcl)ts.
with those requirements that is required to be reported in accordance with OMB Circular A-133 and that is described in the accompanying
schedule of prior year findings and questioned costs as item 05-03.
Internal Control Over Compliance
The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of
laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal
control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our
auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in
accordance with OMB Circular A-133.
We noted a certain matter involving the internal control over compliance and its operation that we consider to be a reportable condition.
Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal
control over compliance that, in our judgment, could adversely affect the City's ability to administer a major federal program in accordance
with the applicable requirements of laws, regulations, contracts. and grants. The reportable condition is described in the accompanying
schedule of prior year findings and questioned costs as item 05-03.
A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not
reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants caused by
error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period
by employees in the normal course of performing their assigned functions. Our consideration of the internal control over compliance would not
necessarily disclose all matters in the internal control that might be reportable conditions and. accordingly, would not necessarily disclose all
reportable conditions that are also considered to be material weaknesses. However, we consider the reportable condition described above not to
be material weakness.
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the governmental activities, the business -type activities, each major fund and the aggregate
retraining fund information of the City, as of and for the fiscal year ended .lune 30, 2006, and have issued our report thereon dated November
22, 2006. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the City's basic
financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis, as required
by OMB Circular A-133, and is not a required part of Lite basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion. is .fairly stated, in all material respects, in relation to the
basic financial statements taken as a whole.
125
In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to each of its major
rcdercll orn?rams for the year ended June 30. 2006. However, the results of our auditing procedures disclosed an instance of noncompliance
This report is intended solely for the information and use of the City Council, management, federal and state grantor agencies and pass-through
entities and is not intended to be and should not be used by anyone other than these specified parties.
ac J"as Q nr 'Cor t. Ke 11 w -P
Certified Public Accountants
Sacramento, California
November 22, 2006
126
Financial Statemerus:
Type of auditor's report issued:
CITY OF LODI
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Section I - Summary of Auditor's Results
Unqualified
Internal control over financial reporting:
• Material weaknesses identified? No
• Reportable conditions identified that are
not considered to be material weaknesses? None reported
Noncompliance material to financial
statements noted?
Federal Awards:
IM
Internal control over major programs:
• Material weaknesses identified? No
• Repot conditions kkwAified that are
not considered to be material weaknesses? Yes
Type of auditor's report issued on compliance
for major programs: Unqualified
Any audit findings disclosed that are required
to be etporfedin accordance wM section
5 a3 of Cid A-133? Yes
127
CITY OF LODI
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Identification of major programs:
Community Development Block Grants/Entitlement Grants CFDA #14.218
Federal Transit Formula Grant CFDA #20.507
Dollar threshold used to distinguish
between type A and type B programs:
Auditee qualified as low-risk auditee? No
Section II — Financial Statement Findings
None
Section III — Federal Award Findings and Questioned Costs
See Item 05-03 in the schedule of prior year findings and questioned costs.
128
CITY OF LODI
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Prior Year Finding No. 05-01
Community Development Block Grants/Entitlement Grants
CFDA No. 14.218
Department of Housing and Urban Development
David -Bacon Act
Criteria
Non-federal entities shall include in their construction contracts, subject to Davis -Bacon Act, a requirement that contractors or subcontractors
comply with the requirements of the Davis -Bacon Act and the DOL regulations (29 CFR part 5, "Labor Standards Provisions Applicable to
Contracts Governing Federally Financed and Assisted Construction"). This includes a requirement for contractors or subcontractors to submit
to the non-federal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance
(certified payrolls) (29 CFR sections 5.5 and 5.6).
Condition
The County of San Joaquin performs the function of ensuring that contractors submit weekly a copy of the payroll and a statement of
compliance related to construction activities funded by Community Development Block Grant funds for the City. Per our testing of weekly
payrolls submitted by one contractor to the County of San Joaquin, we noted that several weekly payrolls records were missing for the period
of November 2004 through mid-March 2005. This period corresponds with the contractor's progress payments #7 through #9, which were
approved for payment using Community Development Block Grant funds allocated to the City. It is evident that the County of San Joaquin is
not receiving a copy of the payroll and a statement of compliance for each week in which contract work is performed. As the County of San
Joaquin was missing payrolls and statements of compliance, we could not ascertain a complete population to verify that contractors and
subcontractors were submitting weekly required certified payrolls.
Questioned Costs
The amount paid on the contract in question during the year was $309,1$0.
129
CITY OF LODI
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Cause
The County of San Joaquin does not reconcile copies of payrolls and statements of compliance received to progress payments made to the
contractor on a timely basis. Per the County of San Joaquin, a final reconciliation of certified payrolls records with progress payments has not
been completed. This final reconciliation process is typically done when the City has submitted a "Notice of Completion," a copy of the
resolution from the City's City Council accepting the project as completed, and a request to release the contractor's retention payment, at which
time the project is closed -out and reported to the Department of Housing and Urban Development's Department of Labor on the County's
quarterly report.
Effect
The County of San Joaquin and the City could be subject to sanctions.
Recommendation
The County q of San Joaquin should), reconcile on a timely basis, at least quarterly to ensure they are receiving a copy of payrolls and statement of
compliance each week.
Prior Year Management's Response
County of San Joaquin indicated that the process of performing a final reconciliation when the City has submitted a Notice of Completion, a
copy of the resolution from the City's City Council accepting the project as completed, and a request to release the contractor's retention
payment, at which time the project is closed -out and reported to the Department of Housing and Urban Development's Department of Labor on
the County's quarterly report is sufficient.
130
CITY OF LODI
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Current Year Status
Per inquiry with the County of San Joaquin staff, the process of performing a final reconciliation when the City has submitted a Notice of
Completion, a copy of the resolution from the City's City Council accepting the project as completed, and a request to release the contractor's
retention payment, at which time the project is closed -out and reported to the Department of Housing and Urban Development's Department of
Labor on the County's quarterly report is sufficient. In addition to a final reconciliation upon completion of a project, certified payroll records
are examined upon receipt, so that any necessary corrective action may be initiated prior to compounding with subsequent payroll submittals.
The examination will ensure that the social security number and address for each employee on the project is reported on the initial payroll
where employees name appears; classification and wage rate compared with applicable wage determination; computations are correct;
deductions are permissible; and the statement of compliance is signed by the designated officer of the company. Should any violations of the
labor standards requirements be uncovered during the review process, the City of Lodi is notified. Also, when an approved progress payment
is received from the City of Lodi, County staff will verify that the County has received certified payrolls for the period covered by the progress
payment prior to payment. As such, and since no such findings were discovered this year. we consider the prior year finding to be addressed
and cleared.
Prior Year Finding No. 05-02
Community Development Block Grants/Entitlement Grants
CFDA No. 14.218
Department of Housing and Urban Development
Sub -recipient Monitoring
Criteria
A pass-through entity is responsible for award identification. At the time of the award, the pass-through entity should identify to the sub -
recipient the federal award information (e.g., Catalog of Federal Domestic Assistance (CFDA) title and number, award name, name of federal
agency) and applicable compliance requirements.
Condition
Per our review of the sub -recipient agreement between City and the Salvation Army, we noted that the City did not identify in that agreement
the federal award information.
131
CITY OF LODI
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Questioned Costs
The amount passed -through to the Salvation Army during the year was $355,360.
Cause
The City was unaware of these requirements.
Effect
The City could be subject to sanctions.
Recommendation
We recommend that the City ensure it includes in its award documentation to sub -recipients the federal award information (e.g., CFDA title
and number, award name, name of federal agency) and applicable compliance requirements.
Prior Year Management's Response
The Community Development Director for the City indicated that he consulted with the County of San Joaquin, who administers the
Community Development Block Program Consolidated Plan for participating jurisdictions, which includes the City, and she indicated she was
not familiar with the CFDA title and number of the program. Based on that information. the Community Development Director for the City
believed that the City agreement with the Salvation Army was in accordance with OMB Circular A-133.
Current Year Status
As of June 30, 2006 the City has yet to enter into a sub -recipient agreement with Salvation Army for which an allocation has been budgeted in
the County's Consolidated Plan. Therefore, there was no signed agreement to review. However, per review of the new sub -recipient
agreement form from the City's Community Improvement Manager, the above items were incorporated into the new sub -recipient agreement.
Therefore, we consider the prior year finding to be addressed and cleared.
132
CITY OF LODI
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Prior Year Finding No. 05-03
Community Development Block Grants/Entitlement Grants
CFDA No. 14.218
Department of Housing and Urban Development
Sub -recipient Monitoring
Criteria
Monitoring the sub -recipient's use of federal awards through site visits or other means is required to provide reasonable assurance that the sub -
recipient administers federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements and that
performance goals are achieved.
Condition
The City has a sub -recipient agreement dated November 1, 2004 with the Salvation Army that requires the Salvation Army to submit three
quarterly reports and one annual report. Per our testing, we noted that the Salvation Army has not submitted any of the required reports as
required by the sub -recipient agreement. Further inquiry established that the City Community Development Department does not have a
written sub -recipient monitoring procedures policy.
Questioned Costs
The amount passed -through to the Salvation Army during the year was $355,360.
Cause
The City Community Development Department does not have in place a sub -recipient monitoring policy that establishes written procedures for
effective monitoring of sub -recipients. In addition, per admission of the Community Development Director the City, the Community
Development Department does not have sufficient staff to document timely management decisions for audit and monitoring findings, maintain a
system to track and following-up on reported deficiencies related to programs funded by the recipient, or maintaining regular contacts with sub -
recipients and appropriate inquiries concerning the federal programs.
133
CITY OF LODI
SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS (Continued)
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Effect
The City could be subject to sanctions.
Recommendation
We recommend that the City put into place a comprehensive monitoring policy that establishes clear guidelines for communication of federal
award requirements to sub -recipients, responsibilities for monitoring sub -recipients, process and procedures for monitoring, methodology for
resolving findings of sub-recipien} noncompliance or weaknesses in internal control, and requirements for and processing of sub -recipient
audits, including appropriate adju Tient of pass-through entity's accounts. In addition. we recommend that the City obtain sufficient staffing
resources in order to enhance monitoring of sub -recipients. Additional funding for staff can be obtained by using Community Development
Block Funds for administration. Currently, the Community Development Department can use 20% of Community Development Block Grant
Funds for administration, however administration charges to these funds have been well below the allotted percentage.
Prior Year's Management's Response
The Community Development Director indicates that they will not receive any monitoring reports from the Salvation Army until after the City
delivers the funds and that any monitoring requirements can be handled in their day to day involvement with the Salvation Army.
Current Year Status
In the current year, there is a new project allocated to the Salvation Army, but the contract has yet to be executed. As such, the City has not
disbursed any funds to the Salvation Army this year. Therefore, for the current year there are no progress reports or an annual report for
testing. However, the City has not received the required progress reports or an annual report from the prior year's project with the Salvation
Army. Although City staff has compiled information from the Salvation Army for reporting purposes, we considered the prior year finding to
be a continuing finding for the current year.
134
(This page intentionally left blank.)
CITY OF LOTH, CALIFORNIA
Report to Management
For the Fiscal Year Ended June 30, 2006
CITY OF LODI, CALIFORNIA
Report to Management
For the Fiscal Year Ended June 30, 2006
Table of Contents
Page(s)
TrnsmittalLetter..........................................................................................................................................1
RewiredCommunications.........................................................................................................................2.4
Current Year Management Comment and Recommendation.......................................................................5
Stems of Prior Year Recommendations...................................................................................................6-18
Sebodule of Uncorrected Financial Statement Misstatements....................................................................19
City, Council
City of Lodi, California
We have audited the financial statements of the City of Lodi, California (City) for the year ended June
30, 2006, and have issued our report thereon dated November 22, 2006. Professional standards require
that we provide you with information related to our audit. That information is included in the Required
Communications section of this report.
Also, in planning and performing our audit of the financial statements of the City for the year ended June
30, 2006, we considered the City's internal controls in order to determine our auditing procedures for the
purpose of expressing an opinion on the financial statements, and not to provide assurance on internal
control over financial reporting.
During our audit for the fiscal year ended June 30, 2006, we became aware of a certain matter that
represents an opportunity for strengthening the City's internal control and operational efficiency. The
Current Year Management Comment and Recommendation section of this report summarizes our
comment and recommendation regarding the matter. We also followed up on those matters we became
aware of during the previous year's audit. Those matters are included in the Status of Prior Year
Recommendations section of this report. This report does not affect our report dated November 22,
2006, on the basic financial statements of the City.
This letter is intended solely for the information and use of City Council and management and is not
intended to be and should not be used by anyone other than these specified parties.
We would like to thank the City's management and staff for the courtesy and cooperation extended to us
during the course of our engagement. We have discussed our comments and suggestions with
management and would be pleased to discuss them further.
Certified Public Accountants
Sacramento, California
November 22, 2006
CITY OF LODI, CALIFORNIA
Report to Management
Required Communications
For the Fiscal Year Ended June 30, 2006
I. The Auditor's Responsibility Under U.S. Generally Accepted Auditing Standards and
OMS Circular A-133
As stated in our engagement letter dated July 16, 2003, our responsibility, as described by
professional standards, is to plan and perform our audit to obtain reasonable, but not absolute,
assurance about whether the basic financial statements are free of material misstatement and are
fairly presented in accordance with U.S. generally accepted accounting standards. Because an
audit is designed to provide reasonable, but not absolute assurance and because we did not
perform a detailed examination of all transactions, there is a risk that material misstatements may
exist and not detected by us.
In planning and performing our audit, we considered the City's internal control over financial
reporting in order to determine our auditing procedures for the purpose of expressing our
opinions on the basic financial statements and not to provide assurance on the internal control
over financial reporting. We also considered internal control over compliance with requirements
that could have a direct and material effect on a major federal program in order to determine our
auditing procedures for the purpose of expressing our opinion on compliance and to test and
report on internal control over compliance in accordance with OMB Circular A-133.
As part of obtaining reasonable assurance about whether the City's basic financial statements are
free of material misstatement, we performed tests of the City's compliance with certain
provisions of laws, regulations, contracts and grants, noncompliance with which could have a
direct and material effect on the determination of basic financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit.
Also, in accordance with OMB Circular A-133, we examined, on a test basis, evidence about the
City's compliance with the types of compliance requirements described in the U.S. Wice of
Management and Budget Circular A-133 Compliance Supplement applicable to each of its major
federal programs for the purpose of expressing an opinion on the City's compliance with those
requirements. While our audit provides a reasonable basis for our opinion, it does not provide a
legal determination on the City's compliance with those requirements.
II. Significant Accoanting Policies
Management has the responsibility for the selection and use of appropriate accounting policies.
In accordance with the terms of our engagement letter, we will advise management about the
appropriateness of accounting policies and their application. The significant accounting policies
used by the City 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 ended June
30, 2006. We noted no transactions entered into by the City during the year that were both
significant and unusual, and of which, under professional standards, we are required to inform
you, or transactions for which there is a lack of authoritative guidance or consensus.
2
CITY OF LODI, CALIFORNIA
Report to Management
Required Communications (Continued)
For the Fiscal Year Ended June 30, 2006
M. 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 estimates
affecting the financial statements were (1) depreciation, (2) allowance for doubtful accounts, (3)
compensated absences, and (4) self-insurance liability. We evaluated the key factors and
assumptions used to develop those estimates in determining that they are reasonable in relation to
the financial statements taken as a whole.
IV. Audit Adjustments
For the purposes of this report, professional standards define an audit adjustment as a proposed
correction of the financial statements that, in our judgment, may not have been detected except
through our auditing procedures. An audit adjustment may or may not indicate matters that
could have a significant effect on the City's financial reporting process (that is, cause future
financial statements to be materially misstated). In our judgment, none of the adjustments we
posed, whether recorded or unrecorded by the City, either individually or in aggregate, indicate
matters that could have a significant effect on the City's financial reporting process.
In addition, the attached schedule summarizes uncorrected misstatements of the financial
statements. Management has determined that their effects are immaterial, both individually and
in the aggregate, to the financial statements taken as a whole.
V. Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a
matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting
or auditing matter that could be significant to the basic financial statements or the auditor's
report. We are pleased to report that no such disagreements arose during the course of our audit.
VI. 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 consultation
involves applications of an accounting principle to the governmental unit'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.
CITY OF LODI, CALIFORNIA
Report to Management
Required Communications (Continued)
For the Fiscal Year Ended June 30, 2006
VII. Issmos Discussed Prior to Retention of Independent Auditors
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 City's auditors.
However, these discussions occurred in the normal course of our professional relationship and
our responses were not a condition to our retention.
VIM. Difficulties Encoentered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing our audit.
4
CITY OF LODI, CALIFORNIA
Report to Management
Current Year Management Comment and Recommendation
For the Fiscal Year Ended June 38, 2086
ADI1DMTRATION OF THE COMMUNM DEVELOPMENT BLOCK GRANT
Co ition
Through our single audit inquiries and observations, a lack of segregation of duties within the
Community Development Department involving the administration and disbursement of the Community
Development Block Grant (CDBG) program funds presents a weakness in controls. Currently, budgets,
compliance review requirements, and approval of grant expenditures are all performed by the Community
Improvement Manager. The preparation of and the review and approval of documents should be
segregated.
Rexmmen"ion
We recommend that the duties involving the preparation, processing, authorization, and reporting of
CDSG grant activities and related documents should be segregated to strengthen controls over the
administration of the CDBG program.
Management Respense
The reason for the condition is due to budget restraints and lack of staff. Management would like for a
segregation of the preparation of documents by staff and the review and approval performed by
management.
5
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended .lune 30, 2006
ENWERONMENTAL REWDIATION
CON,01tign
Thei Governmental Accounting Standards Board (GASB) issued a Preliminary Views (PV) document on
issues related to Accountiiag and Financial Reporting for Pollution Remediation Obligations on March
25, 2005. This document is proposing that once any one of five specified obligating events occurs,
governments would be required to estimate the components of expected pollution remediation outlays
and determine whether outlays for those components should be accrued as a liability or, if appropriate,
capitalized when goods and services are acquired.
Reggmwnd ion
Wi* the City's ongoing eavironmental contamination remediation issue, we recommend that the City be
aware of and review this possible new future GASB standard and ensure that the City be positioned to
implement this standard if and when it becomes effective.
200 Mrrnagament Responfe
The City is aware of this PV and plans to analyze its impact on the City's financial statements, so the
City's well-positioned if and when it becomes effective.
Cuent Year Status
The GASB issued Statement No. 49 — Accounting and Financial Reporting for Pollution Remediation
Oblations in November 2006. The requirements of this Statement are effective for financial statements
for periods beginning after December 15, 2007, with measurement of pollution remediation liabilities
required at the beginning of that period so that beginning net assets can be restated. However,
governments that have sufficient objective and verifiable information to apply the expected cash flow
technique to measurements in prior periods are required to apply the provisions retroactively for all such
prior periods presented. Therefore, the current year status is unchanged.
Cu ent Year ManagemepAResponse
The City is aware of this PV and should have plenty of time to implement this since it is not effective
until fiscal year 2008-09.
I41aORMATION TECHNOLOGY (IT)
Information Teeboology Administration — Policies and Procedures
Co it n
Administrative policies and procedures exist covering certain areas of IT, but lack sections dealing with
network security, password protection and configuration, and confidentiality of information.
Reg9mmeudQCion
The City should consider appending the current administrative policies and procedures to include
sections pertaining to computer network security, password protection and configuration, and
confidentiality of information.
6
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
20QI AJmgZMntAgVog1e
A now Electronic Media Use Policy has been drafted and is in the process of being approved. The new
policy is reported by Information Systems (IS) management to address the areas of computer network
security, passwords, and confidentiality of information.
CyMent Year Stats
Considered implemented.
Cment Year Hangeme es se
New password protection policy has been implemented in accordance with previous recommendation.
Inhwmatioa Tetlmok gy Administration — New -Hire Training
C011twon
New -hire training for the City is not properly documented to include an introduction of IT policies and
procedures. New -hire training is the first introduction an employee has to the City's operations and can
be an effective method of communicating all pertinent IT policies and procedures. An Information
Security Handbook has been completed and is currently under review by the City Manager's office. The
City's IS management reported that the handbook is designed to be distributed to all current and new
employees and contains information specific to this finding.
ReepmMend ion
The City should continue with efforts to review and implement the Information Security Handbook and
disseminate the information to all current and new employees. A statement of understanding should also
be signed by employees confirming receipt and acceptance of the policies.
20(U Mmazenwnt Respooee
Information Systems management agrees with the recommendation.
Cwent Year Stow
Considered implemented.
C ent Year Mawgeme $esponse
In rmation Security Han4book has been published.
Lo ica l Security -- Security Administration
CQ1MILition
The security administration function is not a documented role with defined responsibilities.
Rmmendation
The job description for the Information Systems Manager should be updated to include the security
administrator function with a defined role and responsibilities. In this way the expectations of the role
and the associated responsibilities are clearly defined for all personnel.
20L1514taVMment RgMoWe
City IS management report that a recommendation has been made to the City Manager, including new
language to be included in the IS Manager job description, in response to this recommendation.
7
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
CCWent Year_Stato
In pocess of being implemented.
Cmment Year eme Response
Appropriate language has been submitted to the Internal Services Director/Deputy City Manager and the
job description has been changed in accordance with the recommendation.
Loj$cal Security — Failed Logon Attempts
Co it' n
Three failed logon attempts will lock out the user from the network for five minutes. While the five
minute disabling period provides a level of control over unauthorized system access, it still leaves the
system vulnerable to repeated attempts over an extended period of time and could be enhanced.
Recy,mmendtion
Whie a measure of control exists to address repeated unauthorized access attempts, the City should
consider increasing the disabling period to 15-30 minutes to enhance security.
201V AJgMygMnt Response
Information Systems management agrees that a lockout period of more than five minutes can be done and
may be useful. Steps will be taken to implement this recommendation.
Cogent Year Staw
Considered implemented.
Cogent Year MgrWgemenesnonse
A five unsuccessful logon attempts the user is locked out for 30 minutes.
LaWa►l Security - Passwords
Co iti n
Passwords for the network are only required to be non -zero in length and six to 10 characters for the
AS400 and applications. There are no expiration periods for passwords on the network, AS400, or
app ications. Periodic charging of passwords provides an increased level of security on the network and
applications. There is no set number of changes required until a password can be reused.
Regamrendgion
Password security for the City's network and financial applications should be enhanced by:
o Establishing a minimal configuration standard for the network, AS400, and applications for a
password length of at least 6 characters containing both alphas and numerics.
o Instituting and enforcing an expiration period for passwords.
o Configuring the network, AS400, and application to allow only a minimal number (e.g. 5) of
password changes before a password can be reused.
204 AAMg&Wnt RespoZe
Information Systems management agrees in principle with the recommendation. There are several
reasons the IS Division has not implemented such requirements and restrictions. The Graphical User
Interface (GUI) version of the AS400 interface will not easily allow users to change their expired
passwords, and most of the IBM users rely on the GUI. The likely result would be some users being
locked out of the system for extended periods of time and a significant amount of time being spent re -
enabling user accounts.
8
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
Current Year N tuc
Considered implemented.
Cu ent_Year A&mggment Kesponse
Passwords now expire every 90 days and new ones must comply with password conventions addressing
lenph, reuse, and complexity.
L41&a1 Secionty — Automkbe Log Off
Co
There is no automated function to log a user off the network after a set period of inactivity. An open
network account with no activity creates the risk of unauthorized usage by someone other than the
account owner and should be curtailed whenever possible by automatically logging off an account after a
period of inactivity.
Rec n� nd ion
The City should consider enhancing their network security by implementing an auto logout period for
network connections. Alternatively, desktop screensavers with the password protection activated could
be forced down through the network domain. Instituting password protected screen savers should not
pose a risk of data loss.
209j Me gaze tr t ResPoW
Infoanation Systems manogement agrees in principle with the recommendation. The main reason this
procedure has not been iroplemented is that it must be done enterprise -wide. The Information Systems
Division will research the possibility of pushing screensaver password requirements to end users and
implement accordingly.
Current Year Stat:,�
Considered implemented.
Curwnt Year Moaeeme4 sponse
Pasovord-protected screensavers now launch on all city PCs after 15 minutes of inactivity.
Logical Security — Depardag Employees
Co . iti n
Thee is not an official policy and associated procedures outlining the timely notification of the network
and applications managers of a departing employee, contractor or temporary worker. Disabling or
removing the accounts of inactive users in a timely manner is essential to inhibit malicious activity on the
computer systems.
Priv" Year R�comrt�endatim
The City should develop an official policy and procedure to ensure that the network manager and the
financial application managers are notified in a timely manner whenever there is a departing employee,
contractor or temporary worker with an active user account to the computer systems.
2001 Mawge- RespQna
Infaftnation Systems management agrees with this recommendation. Such a policy would likely be
developed and advanced by someone not in the IS Division.
9
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
CMnt Year Status
Considered unchanged.
Gent Year RecopmendWion
Infgnation Systems management, working in conjunction with the City's human resources division,
should work to implement the policy and procedures first noted in our 2005 management letter. In
addition, the Information Systems division should conduct and audit of all user logons to the network and
the AS 400 applications to ensure that only current and valid personnel have access.
C ent Year MgNgementReVonse
Sane condition exists as for as we know.
Loocal Secarity — Access Rights
C0111LItion
Thwe is no policy and procedure to ensure that all system and application access rights are authorized
and up-to-date. All users must complete a written application, signed by their supervisor, the respective
department head and IS Manager, in order to be issued a user account for the AS400 or any systems
hosted by the IBM. The user accounts remain active until revoked. While this addresses the initial
issuance of user accounts and their associated authorization level, it does not address the control
objective of ensuring that all access rights are up-to-date. Personnel may move between positions
wherein the authorizations for those positions are not the same. Currently, reviews only check for
obsolete accounts and do not address existing accounts for appropriateness.
Recommendation
The IS Division should establish procedures to periodically review the lists of system and application
users to ensure that access rights are authorized and up-to-date. In addition, the process for approving
authorization to access the financial application should be reviewed to ensure that only authorized
persons are given the proper access to the system. This could include a review of persons by the Director
of Finance.
2005 hfinyW&nient ResnoNe
Information Systems management believes the current level of review is sufficient, given the number of
authorized signatures required to obtain a user account. Periodic reviews are made to ensure that no
obsolete accounts exist. Accounts will also be reviewed for appropriateness.
Caent Year Status
Through our observation, we could not verify that a) a policy and procedure had been implemented to
ensure that all system agd application access rights are authorized and are up-to-date; b) logs or
checklists documenting parodic reviews of user access rights to ensure proper authorization and that
these access rights are up-to-date. Therefore, we consider the condition unchanged.
CMnt Year 11&V ement.Resnonse
User lists are periodically teviewed by ISD to identify obsolete accounts and user appropriateness.
10
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
Accounting System Development and Maintenance
Coalition
WkNe most procedures for the accounting system development and maintenance are in place, they are not
formally documented. Irving the policies, procedures and standards formally documented should
address any ambiguity in implementation and reliance upon only a few key individuals.
Program changes are not always initiated, tested and approved by the functional users before being
applied to the production system.
The IS Division Programmer is not restricted from making changes in the production environment and is
also responsible for transporting changes and updates from the test environment to the production
system.
R Qg—mt nndt ion
Official policies, procedures and standards for the accounting system development and maintenance
should be documented and maintained. These policies, procedures and standards should ensure that:
o All new programs and changes are initiated and approved by the appropriate user management.
o The impact of new programs and updates are assessed in a test environment before
implementation in the production system.
o Programmers do not have update access to the production system, except for emergency fixes.
o Any emergency fix in the production system is properly logged.
o Program testing is reviewed and approved by someone other than the programmer.
o The process of moving programs into the production system is formal, well documented, and
performed by someone independent from programming.
20Q§ A&UMment Reso e
City IS management staff report that a new Documentation system (DOCS) has been implemented for
use by ISD staff members. The system is a repository for system assignments, location of source code
files, etc. Management report that current staffing does not allow for implementation of some of these
recommendations.
C ent Year SWtjM
Coaidition unchanged.
Cutrent Year Alo emer Response
System documentation is largely complete. Current staffing does not provide sufficient redundancy to
allow the type of system testing and implementation recommended.
Paekaged Accounting Software and Systems Software — Selection Method
congtion
There is not currently a documented system and application software selection method outlined for the
City,
11
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
Reg@mmendgpon
The City should document their system and application software selection processes and ensure that the
following areas are addressed:
o Business needs,
o Technical requirements,
a Analysis/comparison of several products
o Implementation issues, including conversion, and
a Costibenefit analysis
The City should pursue the needs assessment for the new financial and billing system as noted below, but
the procedures for system and application acquisition should be documented.
20M A&IMment Response
The Information Systems Manager has recommended to upper management that a qualified consultant be
hired to examine the city's business, technical and user needs as part of the process of selecting a
rep#acement for the city's current financial and billing systems software.
Cytrent Year Stags
In process of being implemented-
Czaent Year A&rWemejj.RgWonse
A stiff committee has beef impaneled to conduct in-house needs assessment related to ERP replacement.
In addition to conducting a needs assessment, the committee will provide recommendations related to
what the process and policy issues are in making the assessment of the needs for an ERP replacement.
This process will be documented by the Information Systems Division.
PadLMed Accounting Software and Systems Software — Test Environment
Co it' n
The IS Division has implemented a test environment for application software, but not for system
software. Update and patches are being applied directly to the production system.
Recommendation
Procedures to test updates to system software should be implemented, either on a separate machine or as
a partition with the current AS400, to ensure that updates and upgrades are not applied directly to the
production system without proper testing beforehand.
205 MagWment Response
The recommendation has merit, under ideal conditions. The IS Division will research the possibility of
partitioning the current system to allow for system software testing. Additionally, Information Systems
management feels that current testing practices do not present an unacceptable level of risk to the city or
the IBM computing environment.
Cr ena Fear Status
Condition unchanged. Standard IT management practice requires the testing of any updates before
application to the production environment.
12
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
CuMent. Year Man gemeg espouse
Because the cost for setting up a test environment might be considered prohibitive, the IS division is
developing alternative approaches to implementing software changes including in depth involvement and
testing by experts from the departments for which software changes are to be made.
Compmer Operations — Guidance and Continuity
Coaltition
CoMputer operations policies, procedures, and standards are not officially documented to provide official
guicance and continuity to computer operations.
&Wmrnendoion
The IS Division should develop and officially document computer operations policies, procedures, and
standards.
201V Hangggmfnt Resagnse
City IS management reported that the operations desk has thoroughly documented procedures related to
the processes and activities of that station. At the same time, the Information Systems Manager has begun
the .process of compiling an IS Division Policy and Procedures book that will address standards and
operating procedures.
Cy -Ment Leaf Status
Considered implemented.
Lm
ent Year Manpgemen4FResponse
Commuter operations polidies and procedures have
recommendation.
Cooputer Operations — Computer Room
been officially documented in accordance with the
CoNtition
The City has moved the computer room which now has a separate dedicated air conditioning system,
Uniaterrupted Power Supply (UPS) and generator. The room is secured with standard lock and key
controlled by the IS Division staff and facilities maintenance. An intrusion alarm system and
temperature and water alarms have been installed and are monitored by a local security company. The
room is equipped with a sprinkler system for fire suppression.
Recommend-4ion
The IS Division should consider replacing the water sprinkler system with a dry fire suppression system.
If local building ordinance requires the use of a water based system, the City should consider a dual
system with a pre -action type sprinkler.
209A Magemen-ttesoan,Le
It is agreed that a dry fire suppression system would be better than water sprinklers. However, cost may
be prohibitive.
Current Year Statin
Condition unchanged.
13
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
CgMeal Year MgNgemen,LResponse
Sante condition exists.
Computer Operations — Disaster Preparedness/Business Continuity Plans
Co it' n
The City currently has no disaster preparedness or business continuity plans in place.
&4.p—m ndation
The City should work to develop a comprehensive disaster preparedness and business continuity plan.
The plan, upon completion, should be thoroughly tested and provisions made for periodic reviews of the
plan.
2 spent Respa e
The City IS manager reported that the Division is in the process of developing a disaster recovery and
business continuity plan.
Cwrent YearStaLig
In process of being implemented, The City has developed a comprehensive disaster preparedness plan,
hovaever, we could not verify whether the plan has been thoroughly tested.
Cent Year .
eme .Res once
First draft completed.
Computer Operations — Service Level Agreements
Cog&dn
Service level agreements between the IS Division and the user departments are not in place. Help -desk
services are provided, but without documented policies and agreements, an acceptable level of service
canhot be properly defined.
Recommendation
Service level agreements between the user departments and the IS Division should be instituted to define
the level of service to be expected.
20QI A*xa--ePwntRgVouje
Inferrnstion Systems management agrees with this recommendation.
Cuent Year Statras
In process of being implonented. Management expects to implement the recommendation during the
fiscal year 2007-2008 budget process.
Cynent Year HgwgemegA&s�Qnse
Project is underway and service level agreements will be implemented as part of implementing an
Internal Services Fund for Information Services in fiscal year 2007-08.
14
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
Cowper Operations -- UnaetYorized Use of Software
condid0w
Thae are no procedures in place to ensure that there is no unauthorized use of software within the City.
RegwwndWon
The'1S Division should institute official procedures for the review of software installed on computers at
least yearly. The City should make efforts to protect itself from the liability of employees using
unauthorized software. An alternative to the physical review of installed software is to require
administrator privileges on network computers in order to install any software.
200,E M gW nt&esyon
The policing of installed so ftware on users' PCs is not done currently, nor is it considered practical at
this time.
Cur
,nt Year Sttrtus
W hide the above recommendation has not been fully implemented, we recognize that the City has taken
steps to protect itself from the liability of employees using unauthorized software on City computers. We
will consider the prior year letter of comment a continuing condition.
Curnt Year Mme► ement,�tesn�nse
New computers are now configured with modified rights that do not allow installation of software.
When old equipment is repaired or when service calls are made by Information Service's staff,
inspections are made to determine if there is any unauthorized software. For old computers this
procedure will be expanded to include random inspections by IS staff for unauthorized software use.
Comoputer Operations — Read -Write Access to the JDE Application
coqtltion
It was noted during our review that read-write access to the .IDE application is limited to select Finance
and rr Divisions personnel. Other City departments may have only read access to the application. As
such, any PO or obligating document must be done manually and then submitted to the Finance Division.
Having the individual departments conduct their purchasing outside of the financial application can
create situations where departments spend money for which they may not have the budget. City IS
management reported that an updated purchasing policy has been passed by the City Council and is
scheduled for implementation.
RegWmendq on
It is recommended that a review be conducted specific to the Purchasing/Accounts Payable function. The
City should continue with efforts to implement the new purchasing policy, ensuring that all department
POs are managed within the financial application and that budgeted funds are available.
200, Mgnagement &mons
Users are granted read-write privileges as warranted. Many departments are now inputting their own
requisition and purchasing data, and users are being granted access rights commensurate with their needs.
is
CITY OF LODI, CALIFORNIA
Report to Management
Stafes of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
CMent Year Status
Considered unchanged.
Czaent Year Mawgeme48espqnse
No change. Users are grated read-write privileges, as warranted and approved by management. All
departments have been trained on the use of JD Edwards purchasing. Not all departments have been
utilizing JD Edwards software for purchasing yet. This will be a requirement as part of the service level
agreements to be implemetlted in fiscal year 2006-07.
Outer Matters
During the time under audit, the City's IS Division was a sub -office to the City Manager's office and not
on par with other City departments, such as Finance and Human Resources. The concern this structure
created was that the IS Division was reporting to a functional user or did not have the organizational
status of their functional users. This structure had the potential to create conflicts of interest and project
planning concerns. However, since year-end, the City has undergone an organizational restructuring.
Now, Finance and Human Resources have become divisions, along with the IS Division, of the new
Internal Services Department, which report to the new Deputy City Manager. Now that the IS Division is
on par with the Finance and Human Resources divisions, it appears that this concern has been addressed.
In summary, our review of general computer controls of the financial application at the City found that
most of these conditions do not preclude the City from a basic level of assurance. Therefore, efforts
should be made to either implement the recommendations when staffing and/or funding is available or
took for other controls that can be instituted that will strengthen controls. However, the City should
address the physical protection of computer assets in the computer room before a basic level of assurance
is warranted.
CAPITAL ASSETS
Cotguion
Duritig our audit of the City's financial statements for the year ended June 30, 2004, we noted that the
acgmisition and construction of capital assets is maintained on a spreadsheet, outside of the City's
accounting system, which oaan lead to inaccurate recording and depreciation of capital assets.
Recangwndation
We recommend that the City place into operation the JDE fixed asset module that records the City's
capital assets and automatically calculates depreciation. The system would support the City's deprecation
method and automatically post accumulated depreciation expense to the General Ledger module for a
specified accounting period.
16
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
The system provides methods to track assets, their beginning cost, current value, and method of
depreciation. Some of the advantages include:
1. Flexible Asset Numbering System - an unlimited number of assets can be maintained. The
assets can be grouped by many types of categories for reporting purposes.
2. User Defined Asset Control - Accumulated depreciation, depreciation expense and asset
master accounts can be user specified for each asset.
3. Reports - variety of reports can be produced including a listing of all assets by type, category
and description, method of depreciation, and all other information maintained in the master
file. The module could be programmed to also print reports listing assets with original cost
and current book value plus calculated depreciation for a specified period.
To reduce operating overhead, the City should consider hiring temporary staff for data entry into the
capital assets module.
20W MOaggmenr Respoe
Wbon Finance migrated to the JDE General Accounting system in 1997, the implementation of all the
modules was prioritized. The Fixed Asset module at the time was at the lowest priority. The task of
converting the asset files in JDE requires set up and data entry that the current personnel can not
accommodate without overtime or part time help. In light of the current budget cut demands from
management, the implementation of the Fixed Asset module is recommended to be deferred at this time.
209 Status
Condition unchanged.
200 Marro wme Resao-Ve
This condition/recommendation will be addressed in the upcoming budget.
Cent Year Status
Condition unchanged.
Cu
ZentYe eme Res onse
Due to other priorities, this recommendation has not been implemented; lack of staffing is a big
hindrance to this implementation, but the City will start the process when vacancies in Accounting are
filled.
FTA INDM ECT COSTS
colitition
We noted, during our review of the fiscal year 2003/2004 Federal Transit Administration (FTA)
apportionment, that management had originally decided to use the apportionment to cover indirect costs.
Per our review of FTA guidelines, grantees who intend to seek FTA reimbursement for indirect costs
must prepare a cost allocation plan that has been approved by the FTA or another cognizant Federal
agency. Further inquiry determined that the cost allocation plan has not been approved in the prescribed
manner.
17
CITY OF LODI, CALIFORNIA
Report to Management
Status of Prior Year Recommendations (Continued)
For the Fiscal Year Ended June 30, 2006
Remmendartion
We recommend that the City perform a review of all grants and make the determination if indirect costs
can be applied against grant funds.
2021 1>pgingntlRespor�e
The Finance Department stud Transit will work together in the development of a comprehensive cost
allocation plan that will be submitted to FTA for approval. The City will also look into the other grants
to determine if indirect costs can be reimbursed once a cost allocation plan is established.
2u Stalus
Condition unchanged.
20(d A(mauMniRgZoWe
This condition/recommendation will be addressed in the upcoming budget.
Current Year Status
Condition unchanged.
Current Year ManagemerResnse
The City is looking into retaining a consultant to prepare a cost allocation plan.
18