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Agenda Report - December 16, 2009 J-01
AGENDA ITEMIft4w I im CITY OF LODI • ,. ' COUNCIL COMMUNICATION ,m AGENDA TITLE: Review of City's Annual Financial Report and Financial Statements (Fiscal Year 2008/09) as Submitted by Gini & O'Connell, LLP MEETING DATE: December 16,2009 PREPARED BY: Deputy City Manager RECOMMENDEDACTION: Review the following reports and financial statements submitted by Macias, Gini & O'Connell, LLP and the Internal Services department for Fiscal Year 2008/09: O The Combined Annual Financial and Single Audit Report • Management Report Report on Applying Agreed-upon Procedures BACKGROUND INFORMATION: 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 disposition of assets and that the City has complied with all agreements and covenants to obtain grant funds and debt financing. Macias, Gini & O'Connell, LLP (MGO) issued an "unqualified opinion." Richard Green, Partner and Scott Brunner, Director of MGO, will provide a presentation and answer questions during the meeting. The reports will be provided to federal and State oversight agencies, bond trustees and insurance companies for their review and evaluation. Copies of the reports are provided to the City Council and are also available to the public by contacting the Financial Services Division or through the City web site at www.lodi.gov and at the Lodi Public Library. Certificate of Achievement The City received a Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada (GFOA) for the le year and the California Society of Municipal Finance Officers (CSMFO) for the 10th year in a row. A copy of the GFOA certificate is included in the 2008/09 Financial Reports. FISCAL IMPACT: By law and good management practice, Lodi'sfinancial records are audited by independent auditors according to Generally Accepted Accounting Standards. Wei l-maintainedfinancial records are the cornerstone by which the City fulfills it fiduciary responsibilities to the public. Jordan Ayers Deputy City Manager Attachment APPROVED: f'_. BI 'r Kin ity Manager CITY OF LODI, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended June 30,2009 LARRY HANSEN, MAYOR PHIL KATZAKIAN, MAYOR PRO TEMP SUSAN HITCHCOCK, COUNCILMEMBER BOB JOHNSON, COUNCILMEMBER JOANNE MOUNCE, COUNCILMEMBER BLAIR KING, CITY MANAGER Prepared by the Financial Services Division Ruby Paiste, Financial Services Manager CorieneWadlow, Supervising Accountant Odette Bondoc, Accountant II INTRODUCTORY SECTION CITY OF LODI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30,2009 TABLE OF CONTENTS INTRODUCTORY SECTION Table of Contents Letter of Transmittal Certificate of Achievementfor Excellence in Financial Reporting Organization Chart of the City of Lodi Directory of Officials and Advisory Bodies FINANCIAL SECTION IndependentAuditor's Report MANAGEMENT'S DISCUSSIONAND ANALYSIS BASIC FINANCIAL STATEMENTS Government -wide Financial Statements: Statement of Net Assets Statement of Activities Fund Financial Statements: Balance Sheet — Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statementof Net Assets Statement of Revenues, Expendituresand Changes in Fund Balances— Governmental Funds Reconciliation of the Statement of Revenues, Expendituresand Changes in Fund Balances of Governmental Funds to the Statementof Activities Statementof Net Assets — Proprietary Funds Statement of Revenues, Expenses and Changes in Net Assets — Proprietary Funds Statementof Cash Flows— Proprietary Funds Statementof Fiduciary Net Assets — Fiduciary Funds Statementof Changes in Fiduciary Net Assets - Fiduciary Funds Notesto Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress— Pension Plan Schedule of Funding Progress— OPEB Plan Schedule of Revenues, Expendituresand Changes in Fund Balance — Budget and Actual — General Fund Notes to the Required Supplementary Information COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Combining Balance Sheet — Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances— Nonmajor Governmental Funds Nonmajor Governmental Funds - Special Revenue Funds Combining Balance Sheet —Nonmajor Governmental Funds — Special Revenue Funds i 3 15 16 17 19 20 21 22 23 24 25 26 27 29 73 74 75 76 78 79 80 82 CITY OF LODI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30,2009 TABLE OF CONTENTS- continued Combining Statement of Revenues, Expendituresand Changes in Fund Balances— Nonmajor Governmental Funds — Special Revenue Funds 83 Schedules of Revenues, Expendituresand Changes in Fund Balance — Budget and Actual — Nonmajor Governmental Funds — Special Revenue Funds 84 Nonmajor Governmental Funds - Capital Project Funds 92 Combining Balance Sheet — Nonmajor Governmental Funds — Capital Project Funds 93 Combining Statement of Revenues, Expendituresand Changes in Fund Balances— Nonmajor Governmental Funds— Capital Project Funds 94 Combining Statement of Net Assets - Internal Service Funds 96 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets — Internal Service Funds 97 Combining Statement of Cash Flows - Internal Service Funds 98 Combining Statement of Fiduciary Net Assets - Private-PurposeTrust Funds 100 Combining Statement of Changes in Fiduciary Net Assets - Fiduciary Funds 101 Statementof Changes in Assets and Liabilities - Agency Fund 102 STATISTICAL TABLES (UNAUDITED) Government -wide information: 104 Net Assets by Component - Last Seven Fiscal Years 105 Changes in Net Assets - Last Seven FiscalYears 106 Fund information: Fund Balances, Governmental Funds- Last Ten FiscalYears 108 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 109 Tax Revenues by Source, Governmental Funds - Last Ten FiscalYears 111 Assessed Value and Estimated Actual Value of Taxable Property- Last Ten FiscalYears 112 Direct and Overlapping Property Tax Rates- Last Ten FiscalYears 113 Principal Property Taxpayers -Current Year and Nine Years Ago 114 PropertyTax Levies and Collections- Last Ten FiscalYears 115 Electricity Sold by Type of Customer - Last Four Fiscal Years 116 Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 117 Ratios of General Bonded Debt Outstanding- Last Ten Fiscal Years 118 Legal Debt Margin Information- Last Ten FiscalYears 119 Direct and Overlapping Governmental Activities Debt 120 Pledged -Revenue Coverage- Last Ten FiscalYears 121 Demographicand Economic Statistics- Last Ten FiscalYears 123 Principal Private Employers - Current Year and Nine Years Ago 124 Full -Time Equivalent City Government Employees By Department- Last Ten Fiscal Years 125 Operating Indicators by Function/Program/Department - Last Four FiscalYears 126 Capital Asset Statistics by Function/Program/Department - Last Five FiscalYears 128 SINGLE AUDIT REPORTS Schedule of Expendituresof Federal Awards 132 Notes to the Schedule of Expenditures of Federal Awards 133 CITY OF LODI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDEDJUNE 30,2009 TABLE OF CONTENTS- continued IndependentAuditor's Reporton Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with GovernmentAuditing Standards 134 IndependentAuditor's Reporton Compliancewith RequirementsApplicableto Each Major Program and Internal Control over Compliance in Accordance with CircularA 133 136 Schedule of Findings and Questioned Costs 138 Schedule of PriorYear Findings and Questioned Costs 140 CONTINUING DISCLOSURES (UNAUDITED) Annual Reportfor Electric Utility 141 Annual Reportfor Wastewater Utility 147 Annual Reportfor the Lodi Public ImprovementCorporation 154 (This page intentionally left blank.) 1......; ..... ............ ....,. . CITY COUNCIL LARRY HANSEN, Mayor PHIL KATZAKIAN, Mayor Pro Tempore COUNCILMEMBERS: SUSAN HITCHCOCK BOB JOHNSON JOANNE MOUNCE November 16,2009 CITY OF LODI 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 the Manager of the City of Lodi: BLAIR KING City Manager RANDI JOHL City Clerk STEVE SCHWABAUER City Attorney The Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2009, is hereby submitted. This report is provided to present the financial position, changes in financial position, and where applicable, cash flows of the City of Lodi (City) as of and for the year ended June 30, 2009, 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. 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 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 five sections: introductory, financial, statistical, single audit and continuing disclosure 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 (MD&A), the basic financial statements, notes to the financial statements, required supplementary schedules, and the combining and individual statements. The statistical section includes selected financial and demographic information presented on a multi-year basis. 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 Circular A-133. The continuing disclosure section includes disclosures required by Security and Exchange Commission Rule 15c2 -12(b)(5) for any municipal bond issue closing after July 1, 1995. 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 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-yearterms, with no term limits. Electionsare held in November of even -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: Numberof Facilities Elementary and Secondary Schools 18 Sanitation (solid waste) and Cable Television 3 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 63,313 and is contained in an area of 13.92 square miles. The City has grown steadily since incorporation in 1906. 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. The City is built on a strong and broad based local economy. The City is known for its Zinfandel wine. It is an authentic dynamic wine region with 60 wineries within 10 miles of downtown. The employment base is diversified with food processing, packaging, plastic and service industries. In addition, the City 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. A 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 wine/grape industry is a positive indicatorfor the City. The City's focus on economic development has encouraged numerous big industriesto move to the City that collectively created hundreds of newjobs. Economic Development The City continues to be committed to promoting economic development (business retention and attraction) and expanding the tax base to fund City services rather than increasetaxes to pay for these services. The City has provided for additional retail sales and commercial activity with approval of new retail developments adjacent to Highway 99 and Harney Lane. The City is also committed to an EnterpriseZone with San Joaquin County. MAJOR GOALS, OBJECTIVESAND PROJECTS To assist the citizens of the City in understanding where the City intends to allocate available resources, the City Council, the City Manager and Department Heads established in 2004 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 PublicTrust, 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 TelecommunicationsOpportunities 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 Partnershipsto 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. These projects are designed to accomplish specific objectives and become the focus for organization wide effort. As discussed above, economic revitalization continued to be an active focal point of the City in 2008-09. The following projects are underway and will see significant progress or be completed in 2010. vii Water Treatment Plant The City currently relies on groundwater for its drinking water supply. To add additional capacity and allow recharge of the aquifer, the City expects to request bids for the Phase I construction of an 8 million gallon per day water treatment plant during FY 2009-10. Construction will follow with estimated completion in FY 2011-12. Lodi Avenue Reconstruction Lodi Avenue is a major thoroughfare running through the center of the City. The City will be using approximately $2.2 million in American Recovery and Reinvestment Act (ARRA) funds to reconstructand beautify a .06 mile portion of Lodi Avenue. Construction is expected to be completed in July 2010. Energy Efficiency projects The City was successful in obtaining $586,200 in Energy Efficiency and Conservation Block Grant Funds under the ARRA. The City will be using the funds for a variety of projects including updating the lighting in a stadium that was originally constructed using Work Project Act funding during the 1930's. Additional projects include updating servers to current energy efficient technologies, installing solar powered trash compactors in parks, updating HVAC controllers in selected buildings and providing a number of energy efficiency education opportunities along with energy efficient upgrades in local businesses. Tienda Drive Senior Housing and Roget Park The City is in the process of selling a parcel of land to a developer to build a senior housing project. The land is adjacent to land that had been given to the City to develop a park. Through the sale of the adjacent parcel to the developer, the City will be able to develop the park and have a showcase senior housing development. Construction is expected on both projects in FY 2010-11 with completion in FY 2012-13. Downtown Summit Downtown Lodi has been recognized by a respected planning organization as one of the best small -city downtowns in the Central Valley. Approximately twelve years ago, the downtown area underwent a major reconstruction. Recently, the City brought together the downtown property owners and business owners along with the City staff and other interested parties to discuss the future direction of the downtown district. Guest speakers with expertise in downtown development, business improvement districts and directional signage programs were brought in to speak to the group. The event was well received and plans are being developed to continue the momentum generated by the downtown summit. 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 viii 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 2008-09, the City Council and City Manager made several supplemental budget appropriations, the majority of which relate to operating budgets and 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 Water and Wastewater enterprise funds of at least 15% of operating expenditures. Based on a study completed in 2007, the target for the Electric enterprise fund working capital is $12.9 million. The goals allow for variations from year-to-year to account for economic and fiscal changes. The General Fund maintained an unreserved undesignated fund balance of $3,383,191 or 8.87%, of operating expenditures at the end of fiscal year 2008-09. 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 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 achieve 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 (Proposition4) provides for the limitation of expenditures by state and local governments. Underthe 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. ix 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. Pursuantto subsequent legislation adopted after Article XIII B, the City is required to annually establish and adopt its appropriations limit by resolution. For 2008-09, the City's appropriations subject to limit were $34,596,860 and the appropriation limitwas $76,227,535 leaving appropriations at $41,630,673 below the limit. Debt Administration At June 30, 2009, the City had outstanding Certificates of Participation of $163,678,072. These liabilities are discussed in Note 8 of the Basic Financial Statements and summarized below. The City issued $5.0 million of 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. In 1999, 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 refunded by the issuance of the 2002 Electric Systems Revenue Certificates of Participation. The 2002 bonds were also refunded during the fiscal year with the 2008 Electric Systems Revenue Certificates of Participation thereby eliminating a variable rate obligation. On November 2002, the City 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 and the City of Fort Bragg issued Water and Wastewater revenue bonds (20038) through the California Statewide Communities DevelopmentAuthority ("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's wastewater facilities. In 2004, 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. In 2007, the City issued $30,320,000 in Wastewater Certificates of Participation (2007A) to finance Phase III of the wastewater improvements and to refund the 1991 Certificates of Participation. On July 24, 2008, the City issued the 2008 Electric System Revenue Certificates of Participation to provide funds to currently refund the outstanding $46,760,000 principal amount of the Electric System Revenue Certificates of Participation 2002 Series A Variable Rates Certificates (the "Refunded 2002 Certificates"); and to pay certain costs relating to the termination of a swap agreement relating to the Refunded 2002 Certificates. 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 investmentgrade 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. The reports are available to all departments and to the public on the City's website. 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 2008-09 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 Californiafor 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 underthe Insurance Funds. At June 30,2009, the Insurance Funds had net assets of $427,789. 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 conducts a request for proposal (RFP) process for auditing services. The accounting firm of Macias Gini & O'Connell LLP was selected to perform this audit. The independent auditors' report precedes the basic financial statements and concludes that the City's 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 its ComprehensiveAnnual Financial Report (CAFR) for the fiscal year ended June 30, 2008. These Certificates of A 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 sixteen 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 Financial Services Division 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, Cory Wadlow, Supervising Accountant, Odette Bondoc, Accountant II and Tyson Mordhorst, Senior Programmer Analyst. Their work in preparing this year's CAFR is greatly appreciated. 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. Respecflully,,,cku bmitted, Jordan Ayers Deputy City Manager/internal Services Director xii Certificate of Achievement for Excellence in Financial Reporting Presented to City of Lodi California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30,2008 A Certificate of Achievement for Excellence in Financial Reporting is presented by the GovernmentFinance Officers Association of the United States and Canada to government u -its and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. S um%oarEs9� ... OPAMPresident 90.J .'S.�..ffi.L Opti Z481CA0 . *1�440P Executive Director City of Lodi Library Boards and Board City Attorney City Manager City Clerk Commissions Library Deputy City Managerlinternal Services Director CommunityParks and Community Electric Utility Public Works Fire Police Y Center Recreation Development Financial Budget/Human Services Revenue/ Resources Division Treasury Div. Division Xiv Information Systems Division DIRECTORY OF OFFICIALS AND ADVISORY BODIES CITY COUNCIL Lary Hansen Phil Katzakian Susan Hitchcock Bob Johnson Joanne Mounce ADVISORY BODIES Planning Commission Library Board Recreation Commission Site Plan and Architectural Review Committee Budget and Finance Committee PRINCIPAL ADMINISTRATIVE OFFICERS Blair King Jordan Ayers Steve Schwabauer Randi Johl Nancy Martinez Kevin Donnelly James Rodems Wally Sandelin Ken Weisel Rad Bartlam David Main xv Mayor Mayor Pro Temp Council Member Council Member Council Member Lodi Improvement Committee Lodi Arts Commission Youth Commission Lodi Senior Citizens' Commission City Manager Deputy City Manager City Attorney City Clerk Library Services Director Interim Fire Chief Community Center Director Public Works Director Interim Electric Utility Director Interim Community Development Director Police Chief (This page intentionally left blank.) 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. t�1 MACIAS GINI & OICONNELL L.L.P Certified Public Accountants & Management Consultants The Honorable Members of City Council City of Lodi, California INDEPENDENT AUDITOR'S REPORT S.a� RAMENTO 3000 S Street, Suite 300. Sacramento, CA 95816 916.928.4600 WALNUT CREEK OAKLAND LOSANGELES NEWPORT BEACH SAN DIEGO We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregateremaining fiend information of the City of Lodi, California (City), as of and for the year ended June 30, 2009, 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 statementsbased 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 GovernnzentAuditing 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 statementpresentation. 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, 2009, and the respective changes in financial position, and where applicable, cash flows, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 1, the City adopted the provisions of Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers of Post -employment Benefits Other than Pensions and Governmental Accounting Standards Board Statement No. 49, Accounting and Financial Reportingfor Pollution Remediation Obligationsduring the year ended June 30,2009. www.mp,0cpa.eom An Independent Member of the BDO Seidman Alliance In accordance with GovernmentAuditing Standards, we have also issued our report dated November 16, 2009 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 GovernmentAuditing Standards and should be considered in assessing the results of our audit. The management's discussion and analysis, the schedule of funding progress — pension plan, the schedule of funding progress — OPEB plan, and schedule of revenues, expenditures and changes in fund balance — budget and actual — for the General 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 collectively comprise the City's basic financial statements. The introductory section, combining and individual nonmajor fund statements and schedules, and the statistical and continuing disclosure sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, and is also not a required part of the basic financial statements of the City. The combining and individual nonmajor fund statements and schedules and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects in relation to the basic financial statements taken as a whole. The introductory, statistical and continuing disclosure sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Certified Public Accountants Sacramento, California November 16,2009 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 (City) for the fiscal year ended June 30, 2009. FINANCIAL HIGHLIGHTS • The assets of the City exceeded its liabilities at the close of the 2009 fiscal year by $185,151,549 (net assets). Of this amount, $38,910,042 is unrestricted net deficit, needed to meet the City's ongoing obligationsto citizens and creditors. • The City's total net assets decreased by $66,828,969 in fiscal year 2009. • As of June 30, 2009, the City's governmental funds reported combined ending fund balances of $17,010,318, a decrease of $3,167,285 in comparison with the prior year. Of this amount, $15,140,236 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 $3,766,188 (of which $3,383,191 is unreserved and undesignated) or 9.87 % of total general fund expenditures of $38,161,027. • The City's total long-term debt increased by $6,457,558 (2.6%) 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 statements are comprised of three components: (1) Government -wide financial statements, (2) Fund financial statements, and (3) Notes to the Financial Statements. This report also includes other supplementary information in addition to the basic financial statements. Government -wide Financial 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 statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether 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 most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. 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 operations, water operations and public transit operations. Fund Financial Statements The fund financial statements are designed to report information about groupings of related accounts, which are used to maintain control over resourcesthat have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into the following three categories: Governmental funds, Proprietary funds, and Fiduciaryfunds. 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 maybe 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 balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general fund, which is considered to be a major fund. Data from the remaining governmental funds are combined into a single, aggregated presentation. 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 compliancewith this budget. Proprietary Funds. Proprietary funds are generally used to account for services for which the City charges customers-eitheroutside customers, or internal units or departments 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 financial statements. The City uses enterprise funds to account for the operations of the Electric, Wastewater, Water, all of which are considered to be majorfunds and the Transit system, which is considered to be a nonmajor proprietary fund. 4 • Internal Service funds are used to report activities that account for various employee benefits and self-insurance activities and fleet activities of the City. Because these activities predominantly benefit governmental rather than business -type functions, they have been included within the governmental activities in the government -wide financial statements. Fiduciary funds. Fiduciaryfunds are used to accountfor 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 these funds 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. Reau!red 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 and OPEB benefits to its employees, and a schedule comparing budget to actual amounts in the General Fund. Combining 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 assets exceeded liabilities by $185,151,549t the close of the currentfiscal year. City of Lodi's Net Assets Governmental Business -type 41,631,099 214,205,305 Activities Activities Total Other liabilities 2009 2008 2009 2008 2009 2008 Assets: 15,238,506 Total liabilities 44,921,548 Current and other assets $ 31,574,708 34,037,758 95,268,567 100,662,535$ 126,843,275 134,700,293 Capital assets 138,412,794 132,039,677 186,710,027 179,681,047 325,122,821 311,720,724 Total assets 169,987,502 166,077,435 281,978,594 280,343,582 451,966,096 446,421,017 Liabilities: Long-term liabilities outstanding 37,182,469 41,631,099 214,205,305 137,570,894 251,387,774 179,201,993 Other liabilities 7,739,079 5,691,109 7,687,694 9,547,397 15,426,773 15,238,506 Total liabilities 44,921,548 47,322,208 221,892,999 147,118,291 266,814,547 194,440,499 Net assets: Invested in capital assets, net of related debt 115,035,793 107,873,736 95,533,308 98,108,325 210,569,101 205,982,061 Restricted 13,492,490 15,043,323 8,656,905 13,492,490 23,700,228 Unrestricted (deficit) (3,462,329) (4,161,832) (35,447,713) 26,460,061 (38,910,042) 22,298,229 Total net assets $ 125,065,954 118,755,227 60,085,595 133,225,291 $ 185,151,549 251,980,518 Assets. The City's total assets increased by $5,545,07@r 1.24%. The increase is primarily due to the following: Governmental activities. Total assets for the governmental activities increased by $3,910,067Capital assets used to support governmental activities increased by $6,373,117rpsulting from a $2,590,082ncrease in non -depreciable assets primarily construction in progress; and a $3,783,03rncreasein depreciable capital assets such as buildings and improvements, machineryand equipment, vehicles and infrastructure. 0 Business -type activities. Total assets for the business -type activities increased by $1,635,012 or 0.58%. The increase is mainly attributed to the increase in capital assets of $7,028,980, primarily from construction in progress, buildings and improvements and machinery and equipment. Liabilities. The City's total liabilities increased by $72,374,048 or 37.22%. The increase is primarily due to the following: Governmental activities. Total liabilities for the governmental activities decreased by $2,400,660. Historically, the City reported its retiree sick leave conversion medical benefits as part of the compensated absences. This year, the City implemented the Governmental Accounting Standards Board (GASB) Statement No. 45, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement generally requires governmentsto accountfor and report the annual cost of other postemployment benefits (OPEB) and the outstanding obligations related to OPEB in essentially the same manner as pensions. Annual OPEB cost for most governments will be based on actuarially determined amounts that, if paid on an ongoing basis, would generally provide sufficient resources to pay benefits as they become due. GASB allows governments to apply this statement prospectively, establish the OPEB liability at zero at the beginning of the initial year of implementation, and does not require governments to fund the OPEB plans. The City established its OPEB liability at zero this year and removed the previously accrued retiree sick leave conversion healthcare benefitsfor a total of $4,357,678 from the compensated absences liability. The outstanding obligation related to OPEB was $1,195,521 at June 30, 2009, and reported as part of the City's liabilities. Other insignificant activities accounted for the remaining decrease. Business -type activities. Total liabilities for the business -type activities increased by $74,774,708 or 50.83%. The increase is primarily attributable to the City's implementation of GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This statement addresses accounting and reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The Statement establishes once any five specified obligating events occurs, that a government is required to estimate the components of the expected pollution remediation outlays and determine whether the outlays for those components should be recorded as a liability or, if appropriate, capitalized when goods and services are acquired. The City has restated its beginning net assets by $70,505,924, to recognize the City's estimated pollution remediation obligation as of July 1, 2008. The outstanding pollution remediation obligation as of June 30, 2009, was $69,952,135. Net Assets. The City's overall financial position has declined during the fiscal year. The net assets have decreased by $66,828,969 or 26.52%. A decrease of $65,728,223 resulted from adjustments to the beginning assets due to the implementation of GASB Statement No. 45 and GASB Statement No. 49 as discussed earlier. The largest portion ($210,569,101) 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. An additional portion of the City's net assets, $13,492,490 (7.29%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted deficit amounts to $38,910,042. At the end of the currentfiscal year, the City is able to report positive balances in two categories of net assets for the government as a whole. Unrestricted net assets are negative for both the governmental and business -type activities. VA Refer to page 10 for analysis of the business -type activities unrestricted net assets. City of Lodi's Change in NetAssets g Governmental Business -type Activities Activities Total 2009 2008 20W 2008 2009 2008 Revenues Program revenues: Charges for services $ 4,784,593 5,125,103 95,314,241 90,003,049 $ 100,098,834 95,128,152 Operatinggrants and contributions 1,950,601 2,304,734 3,653,466 3,380,952 5,604,067 5,685,686 Capital grants and contributions 10,822,032 4,717,336 5,774,006 8,064,375 16,596,038 12,781,711 General revenues: Property taxes 13,563,551 13,838,387 13,563,551 13,838,387 Othertaxes 9,952,613 10,874,018 9,952,613 10,874,018 Grants and contributions not restricted to specific programs 8,248,606 9,593,031 8,248,606 9,593,031 Litigation -environmental lawsuits proceeds 2,010,085 8,891,315 2,010,085 8,891,315 Other 2,849,319 2,084,506 3,275,486 4,745,278 6,124,805 6,829,784 Total revenues 52,171,315 48,537,115 110,027,284 115,084,969 162,198,599 163,622,084 Expenses General government 9,450,858 8,306,827 9,450,858 8,306,827 Public protection 27,110,381 25,531,071 27,110,381 25,531,071 Public works 10,464,204 12,224,480 10,464,204 12,224,480 Community development 1,322,428 2,027,038 1,322,428 2,027,038 Library 1,495,407 1,695,638 1,495,407 1,695,638 Parks and recreation 4,609,091 4,414,367 4,609,091 4,414,367 Intereston long-term debt 1,133,880 1,165,982 1,133,880 1,165,982 Electric 73,357,886 65,201,065 73,357,886 65,201,065 Wastewater 10,939,721 12,227,529 10,939,721 12,227,529 Water 9,604,024 9,919,629 9,604,024 9,919,629 Transit 4,832,465 3,907,965 4,832,465 3,907,965 Total expenses 55,586,249 55,365,403 98,734,096 91,256,188 154,320,345 146,621,591 g Changes in net assets before special item and transfers Special item- swap termination Transfers Changes in net assets Net assets at beginning of year, as previously reported Change in accounting principles Net assets at beginning of year, as restated Net assets at end of year Analvsis of Changes in Net Assets (3,414,934) (6,828,288) 11,293,188 23,828,781 7,878,254 17,000,493 (8,979,000) (8,979,000) 1.,953.,049 (3y135f530) (3y053�795) 20�136�023 (1 .'1nn�7df,) 17,000,493 118,755,227 121,890,757 133,225,291 113,089,268 251,980,518 234,980,025 123,112,905 121,890,757 631,139,390 113,089,268 18fi.,252'qQ 234,980,025 $ 125.065.954 118.755.227 60.085.595 133.225.29 $ 1R5.151.5d9 251,980,518 Governmental activities. Net assets for the governmental activities increased by $1,953,049 in the current fiscal year. The key factors impacting the change in net assets are: • Negative revenue growth • Slowdown on new developments • Increase in personnel costs o Charges for services decreased by 7%, a net amount of $340,510 from the prior fiscal year largely from decreased revenue from engineering inspection fees ($213,098), in engineering fees ($249,085), and community development fees mainly building permits ($197,378). Other insignificant increases offset the difference. Operating grants and contributions decreased by $354,133 or 15 % largely from the shift of the After School program grant to the Lodi Unified School District. Capital grants and contributions increased by $6,104,696 or 129% from prior fiscal year. Increase in capital contributions ($7,400,558) was mainly attributable to the commercial developments at Reynolds Ranch, Sacramento Street reconstruction and the Lower Sacramento road widening project. • Property taxes — decreased by $274,836 or 2% compared to prior year. The dismal housing market and the continuing decline in market values falling below the assessed values caused homes to be reassessed and affected property tax revenues in the current year. Other taxes decreased by $921,405 or 8% - In prior years, both Sewer ($830,000) and Water ($418,700) Funds paid in -lieu taxes to the General Fund. Beginning the current year, both funds ceased paying in -lieu taxes and the cost of services were based on a cost study to adequately charge both funds for administrative costs. This decrease was offset by the increase in waste removal franchise fees ($263,266) and the increase in cable television franchise fees ($141,679). • Grants and contributions not restricted to specific programs decreased by $1,344,425 or 14%. Sales tax revenues declined by $1,271,428 and State motor vehicle license fees decreased by $72,997. Business close-outs and the continuing decline in both prices and consumer spending on most taxable goods largely contributed to the decrease in sales tax revenue. W • Other+revenues increased by $764,813 or 37% from prior fiscal year. This increase was primarilyfrom the one-time sale of land on 217 E. Lockeford ($339,852) and the receipt of donations used for the Library renovation and HVAC projects ($555,000). Expenses for governmental functions totaled $55,586,249 an increase of $220,846 from the prior fiscal year. Bus! ness-type activities. Business -type activities decreased the City's net assets by $3,053,795 in the current year. The key elements of this decrease are: • Capital Contributions: Net decrease of $2,290,369. Electric Fund - $249,504 — a decrease of $735,281 from prior year. Wastewater Fund - $2,083,307 — a decrease of $4,376,265 from prior year. Water Fund - $525,092 — an increase of $494,309. Transit Fund - $2,916,103 — an increase of $2,326,868. • Proceeds from litigation settlements - $2,010,085 - a decrease of $6,881,230 from prior year. • Swap termination payment of $8,979,000. The City's Energy Cost Adjustment (ECA) was established with the intent to automatically adjust the electric rates for monthly fluctuations in the City's purchased power expenses. Bulk power costs increased in the current year and byway of the ECA charge, operating revenue increased by $4,715,596 in the current year. Wastewater and water rates were also increased based on CPI change during the year resulting in increased operating revenues of $184,997 or 2% in Wastewater Utility; and $437,154 or 4% in Water Utility. Electricfund expenses increased by $8,156,821 primarily due to increased purchased power costs of $6,793,025, increase in interest expense of $759,608 and increase in personnel cost of $342,718. FINANCIAL ANALYSIS OF THE CITY'S FUNDS Governmental Funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Types of governmental funds reported by the City include the General Fund, special revenue funds, debt service fund and capital projectsfunds. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $17,010,318, a decrease of $3,167,285 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 $3,383,191 while total fund balance was $3,766,188, a decrease of $1,542,674 from prior year. As a measure of the general fund's liquidity, it 10 may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents 8.87% of total general fund expenditures. 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 Wastewater Fund were $6,990,227 and for the Transit Fund $1,826,897. The Electric Fund unrestricted deficit was $3,024,514, Water Fund unrestricted net deficit was $41,240,323 and the Internal Services Funds unrestricted net deficit was $642,463. Other factors concerning the finances of these funds are discussed in the City's business -type activities. GENERAL FUND BUDGETARY HIGHLIGHTS Significant differences between the original operating budget and the final amended operating budget in the General Fund were a net decrease in appropriations of $671,097. The decrease in appropriations can be briefly summarized as follows: • $195,949 decrease in general government • $286,080 decrease in public protection • $212,518 decrease in publicworks • $98,861 decrease in library • $122,311 increase in parks Significant differences between the final budget and the actual revenues and expenditures can be briefly summarized as follows: • Intergovernmental revenues — an unfavorable variance of $965,590 was attributable to an unexpected downturn comprised primarily of sales tax ($928,322) and the state motorvehicle in -lieu ($79,071) offset by various increases. • Charges for services — an unfavorable variance of $237,813 was largely from the decline in engineering inspection fees ($110,421), decrease in engineering fees ($339,198), and offset by increase in contract work for others ($125,697); strike team reimbursements ($139,287); and various decreases in other revenues. • Fines, forfeits and penalties — a favorable variance of $157,774 resulted from enhanced revenues through moving violations ($641994), late payments for utilities ($88,651), and utility connections ($15,788). • Miscellaneous revenues — a favorable variance of $353,104 is primarily attributable to the sale of land located at 217 E. Elm Street. • For expenditures, a favorable variance between the final budget and actual expenditures of $950,557 was due to savings from several vacancies and the continued overall effort to reduce spending and costs. 11 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital as sets The City's investment in capital assets for its governmental and business -type activities as of June 30, 2009, amounts to $325,122,821 (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's investment in capital assets for the current fiscal year was 4.30% (a 4.83% increase in governmental activities and 3.91% increase in business -type activities) as shown in the table below. Changes in Capital Assets, Net of Depreciation Governmental Activities Business -type Activities Total 2009 2008 2009 2008 2009 2008 Land $ 24,099,912 $ 24,016,374 $ 5,438,359$ 5,438,359 $ 29,538,271 $ 29,454,734 Buildingsand Improvements 35,651,579 36,522,080 26,271,445 24,691,134 61,923,024 61,213,214 Machinery and Equipment 1,613,652 1,383,916 99,010,483 96,652,254 100,624,135 98,036,174 Vehicles 1,238,294 1,369,953 2,683,977 2,694,895 3,922,271 4,064,844 Infrastructure 69,678,224 65,122,765 69,678,224 65,122,765 Work of Art 62,024 62,024 62,024 62,024 Construction in Progress 6,069,109 3,562,565 53,305,763 50,204,405 59,374,872 53,766,969 Total $ 138,412,794 $ 132,039,677 $ 186,710,027 $ 179,681,047 $ 325,122,821 $ 311,720,724 A significant increase in construction in progress compared to prior year was primarily due to the ongoing Phase III improvements to the White Slough Pollution Control Facility; the Lodi Lake boat house project; the finance relocation project; and the Lodi Public Library renovation and HVAC projects. The increase in building and improvements is due to the completion of the Municipal Service Center Transit Vehicle Maintenance Facility. Additional information on the City's capital assets can be found in Note 6 on pages 44-46 of this report. 12 Long-term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $163,678,072. Of this amount, $22,855,000 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 $140,823,072 from the business -type activities consists of $57,589,159 for the Wastewater Fund: and $83,233,913 for the Electric Fund. City of Lodi's Outstanding Debt Governmental Business -type Activities activities Total Certificates of Participation $ 22,855,000 140,823,072 163,678,072 The City's total bonded debt increased by $6,737,212 during the current fiscal year. Bond Rating In May of 2008, Standard & Poor's Rating Services upgraded the rating on outstanding electric utility debt instruments to A- with a stable outlook as a result of improved financial performance due to the implementation of various policies instituted by new management. Additional information on the City's long-term debt can be found in Note 8 on pages 47-54 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The collapse of the real estate market and the banking industry are the obvious consequences of the faltering economy along with the increase in unemployment rate across the country. Closures of automobile dealerships have also dramatically changed the sales tax base throughout the state. Sales tax, which once was the City's largest General Fund revenue source, is projected to drop to the second largest revenue source behind property taxes. Building and construction also slowed contributing to the decrease in development fee revenues. The State with its own budget crisis, has adopted a program that will borrow property tax revenue from local governments under the provisions of Proposition 1A thereby creating a receivable from the State. The City has sold its receivable to ajoint powers agency that will make the City revenue stream whole for FY 2009-10. Lodi continues to employ best management practices and be focused on creating a financially sustainable City with appropriate reserves and expenditure controls. To this end, the City was quick to take action to revise the FY 2008-09 budget when it became apparent the revenue estimates would be below budgeted levels. The City sought and received the assistance of labor groups to reduce payroll and benefits costs. The FY 2009-10 budget focused on the following issues and approach: manage declining General fund revenues while maintaining the broad range of services: reduce staff and/or personnel costs; streamline functions; avoid using one-time revenues or relying on future revenue that may not materialize; maintain balance among services; and complete the General Plan and address Wastewater Fund and Water Resource issues. For FY 2009-10, General Fund revenues have declined and the City has reduced expenditures accordingly to maintain a balanced budget. In terms of reducing costs, management and various employee organizations have agreed to a mix of reductions in work hours, benefits, and compensation to avoid large-scale layoffs. Staff levels for FY 2009-10 are proposed to be approximately the same as they were in FY 1999-2000. 13 Economic Development During this difficult economic time, the City has fared better than the surrounding area, as a whole. While not immune to the current foreclosure crisis, the City housing stock has seen fewer foreclosures and has maintained housing values better than the surrounding communities. The City's unemployment rate continues to track roughly 4 percent lower than that of San Joaquin County. The City's diversified economic base continues to help the City maintain its revenue base. Although agriculture is an important part of the City's past, present and future by providing residents with employment on farms and in processing plants, there are even morejobs in food and plastics manufacturing and in health-related businesses. Lodi Memorial Hospital, Blue Shield and Cottage Bakery have the highest year-round employment in the City, and large national and international manufacturers such as General Mills, CertainTeed and Thule find the City an attractive base for their West Coast operations. 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 310 W. Elm Street, Lodi, California, 95240. 14 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 Accounts receivable, net Property tax receivable Interest receivable Internal balances Due from other governmental agencies Restricted assets Loan receivable Advance receivable Inventory Other assets Deferred charges Capital assets, net: Nondepreciable Depreciable, net TOTALASSETS LIABILITIES Accounts payable and accrued liabilities Accrued salaries and wages Accrued interest Unearned revenue Net OPEB obligation 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 STATEMENTOFNETASSETS June 30,2009 Governmental Business -type Activities Activities Total $ 24,183,079 39,775,226 $ 63,958,305 3,115,943 8,262,600 11,378,543 1,603,438 1,603,438 86,010 130,886 216,896 (1,225,173) 1,225,173 861,191 1,573,601 2,434,792 1,687,747 21,516,023 23,203,770 1,084,000 1,084,000 5,904,783 5,904,783 147,024 1,682,052 1,829,076 31,449 5,784 37,233 15,192,439 15,192,439 30,231,045 58,744,122 88,975,167 108,181,749 127,965,905 236,147,654 169,987,502 281,978,594 451,966,096 2,543,464 3,184,688 5,728,152 1,764,230 1,764,230 273,747 2,886,738 3,160,485 1,962,117 1,616,268 3,578,385 1,195,521 1,195,521 4,606,352 4,530,676 9,137,028 32,576,117 209,674,629 242,250,746 44,921,548 221.892.999 266,814,547 115,035,793 95,533,308 210,569,101 11,578,237 11,578,237 1,687,747 1,687,747 226,506 226,506 (3,462,329) (35,447'713) (38,910,042) $ 125,065,954 60,085,595 $ 185,151,549 15 CITY OF LODI STATEMENT OF ACTIVITIES Year ended June 30,2009 Business-typeactivities Net (Expense) Revenueand Electric 73,357,886 73,999,938 249,504 Program Revenues 891,556 Changes in Net Assets Wastewater 10,939,721 9,276,217 55,576 2,083,307 Oaeratina Capital 475,379 Water 9,604,024 11,787,140 525,092 Chargesfor Giants and Grants and Governmental Business -type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total PRIMARY GOVERNMENT 6,007,617 6,007,617 Total primary government $ 154,320,345 100,098,834 5,604,067 16,596,038 (38,029,023) Governmental activities (32,021,406) General revenues: General government $ 9,450,858 1,630,875 27,769 9,526 (7,782,688) $ (7,782,688) Public protection 27,110,381 844,338 831,683 77,459 (25,356,901) (25,356,901) Publicworks 10,464,204 358,301 1,038,268 9,828,830 761,195 761,195 Community development 1,322,428 749,207 17,161 (556,060) (556,060) Library 1,495,407 44,167 52,881 (1,398,359) (1,398,359) Parks& recreation 4,609,091 1,157.705 889,056 (2,562,330) (2,562,330) Intereston long-term debt 1,133,880 Litigation -environmental lawsuits proceeds (1,133,880) (1,133,880) Total governmental activities 55,586,249 4,784,593 1,950,601 10,822,032 (38,029,023). (38,029,023) Business-typeactivities Electric 73,357,886 73,999,938 249,504 891,556 891,556 Wastewater 10,939,721 9,276,217 55,576 2,083,307 475,379 475,379 Water 9,604,024 11,787,140 525,092 2,708,208 2,708,208 Transit 4,832,465 250,946 3,597,890 2,916,103 1,932,474 1,932,474 98,734,096 95,314,241 3,653,466 5,774,006 6,007,617 6,007,617 Total primary government $ 154,320,345 100,098,834 5,604,067 16,596,038 (38,029,023) 6,007,617 $ (32,021,406) General revenues: Taxes: Property taxes 13,563,551 13,563,551 Franchisetaxes 8356 :756 8,356,756 Business license tax 1,190,370 1,190,370 Transient occupancy tax 405,487 405,487 Grants and contributions not restrictedto specific programs 8,248,606 8,248,606 Investmentearnings 467,048 1,384,935 1,851,983 Litigation -environmental lawsuits proceeds 2,010,085 2,010,085 Other 2,382,271 1,890,551 4,272,822 Special item- swap termination (8,979,000) (8,979,000) Transfers 5,367,983 (5,367,983) Total general revenues, special item and transfers 39,982,072 (9,061,412) 30,920,660 Change in net assets 1,953,049 (3,053,795) (1,100,746) Net assets, beginning of year, as previously reported 118,755,227 133,225,291 251,980,518 Change in accounting principles 4,357,678 (70,085,901) (65,728,223) Net assets, beginning of year, as restated 123,112,905 63,139,390 186,252,295 Net assets, end of year $ 125,065,954 60,085,595 $ 185,151,549 The notes to the financial statements are an integral part of this statement 16 FUND FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS Governmental Fund Types Governmental funds consist cf the General Fund, special revenue funds, debt service fund and capital projects funds. Major Governmental Fund: 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. 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 necessaryto 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. 17 Wastewater 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, 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 propertytax 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. 18 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 LIABILITIESAND FUND BALANCES Liabilities: Accounts payable and other liabilities Accrued salaries and wages Due to other funds Advances from other funds Deferred revenue Total liabilities Fund balances: Reserved Unreserved reported in: General Fund Special revenue funds Capital projectsfunds Total fund balances Total liabilities and fund balances CITY OF LODI BALANCE SHEET GOVERNMENTALFUNDS June 30,2009 General Fund Other Total Governmental Governmental Funds Funds $ 1,824,807 15,124,620 $ 16,949,427 1,764.230 1,687,747 1,687,747 2,656,710 458,594 3,115,304 1,603,438 1,603,438 14,801 46,707 61,508 1,126,826 492,672 1,619,498 3,766,188 861,191 861,191 $ 7,554,779 1,084,000 1,084,000 24,758 24,758 294,640 328,385 623,025 8.799 7.782 16,581 $ 7,554,779 20,091,698 $ 27,646,477 $ 2,024,361 333,755 $ 2,358,116 ' 1,764,230 1,764.230 1,619,498 1,619,498 1,848,198 1,848,198 3,046,117 3,046,117 3,788,591 6,847,568 10,636,159 382,997 1,487,085 1,870,082 3,383,191 3,383,191 6,539,775 6,539,775 5,217,270 5,217,270 3,766,188 13,244,130 17,010,318 $ 7,554,779 20,091,698 $ 27,646,477 The notes to the financial statements are an integral part of this statement. 19 CITY OF LODI RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS June 30,2009 Amounts reported for governmental activities in the statement of net assets are different because: Fund balances - total governmental funds Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds Nondepreciable capital assets Depreciable capital assets, net 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 Long-term debt Intereston long-term debt is not accrued in the funds, but rather is recognized as an expenditurewhen due Other long-termassets are not availableto payfor current period expenditures and, therefore, are deferred in the funds Internal service funds are used by management to charge the costs of general liability insurance, workers' compensation insurance, health benefits insurance, other insurance and the cost of operating and maintaining the City's fleet to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets Net assets of governmental activities The notes to the financial statements are an integral part of this statement. 20 $ 17,010,318 30,231,045 108,145,568 (7,147,947) (23,377,001) (273,747) 1,084,000 (606,282) $ 125,065,954 CITY OF LODI STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year ended June 30,2009 Other Total General Governmental Governmental Fund Funds Funds Revenues: Taxes $ 23,516,164 $ 23,516,164 Licenses and permits 61,783 369,648 431,431 Intergovernmental revenues 8,967,410 4,261,681 13,229,091 Charges for services 1,055,137 2,273,542 3,328,679 Fines, forfeits and penalties 1,415,174 900 1,416,074 Investmentand rental income 231,181 690,689 921,870 Miscellaneous revenue 446,404 1,315,209 1,761,613 Total revenues 35,693,253 8,911,669 44,604,922 Expenditures: Current: General government 6,922,096 1,509,163 8,431,259 Public protection 24,463,771 251,744 24,715,515 Publicworks 2,967,402 1,690,065 4,657,467 Community development 1,341,445 1,341,445 Library 1,499,720 1,499,720 Parks and recreation 2,160,035 1,615,726 3,775,761 Capital outlay 6,791,260 6,791,260 Debtservice: Interest and fiscal charges 18,516 1,120,307 1,138,823 Principal payments 129,487 659,453 788,940 Total expenditures 38,161,027 14,979,163 53,140,190 Deficiencyof revenues under expenditures (2,467,774) (6,067,494) (8,535,268) Other financing sources (uses): Transfers in 5,367,983 5,241,676 10,609,659 Transfers out (4,442,883) (798,7931 (5,241,676) Total other financing sources (uses) 925,100 4,442,883 5,367,983 Net change in fund balances (1,542,674) (1,624,611) (3,167,285) Fund balances, beginning of year 5,308,862 14,868,741 20,177,603 Fund balances, end of year $ 3,766,188 13,244,130 $ 17,010,318 The notes to the financial statements are an integral part of this statement. 21 CITY OF LODI RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year ended June 30,2009 Amounts reported for governmental activities are different because: Net change in fund balances- total govern mentalfunds 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 areas follows: Capitalized capital outlays Capital asset contributions Depreciation expense Book value on disposed capital assets Long-term debt proceeds, net of discounts, provide current financial resources to govern mentalfu nds, but issuing debt proceeds increases long-term liabilitiesin 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 principalare as follows: Capital leases Certificates of participation principal Loan principal Internal service funds are used by managementto charge the costs of certain activities, such as health benefits and self-insurance, costs of operation and maintenanceof the City's fleet, to individual funds. The net revenue (expenses) of the internal service funds are reportedwith governmental activities. Other expenses in the statementof activities that do not use current financial resourcesare not reported as expenditures in the governmental funds. Change in compensated absences Change in accrued interest Change in net assets of governmental activities The notes to the financial statements are an integral part of this statement. 22 $ (3,167,285) 6,791,260 7,400,558 (7,799,668) (17,586) 129,489 565,000 94,451 (1,910,155) (137,958) 4,943 $ 1,953,049 ASSETS Current assets Cash and investments Restrictedcash and investments Restrictedassets with fiscal agents Receivables Accounts, net Interest Due from otherfunds Due from other governmental agencies Advance receivable Inventory Other assets Total current assets Noncurrent assets Restrictedassets with fiscal agents Advancesto otherfunds Deferred charges Capital assets.net Nondepreciable Depreciable. net Total capital assets Total noncurrent assets TOTALASSETS LIABILITIES Current liabilities Accounts payableand other liabilities Accrued interest Due to otherfunds Unearnedrevenue Self-insurance liability Accrued compensated absences Certificates of participationpayable Water note payable Total current liabilities Noncurrent liabilities Self-insurance liability Accrued compensated absences Certificates of participation payable Water note payable Net OPE8 obligation Pollution remediationobligation Total noncurrent liabilities TOTAL LIABILITIES NETASSETS (DEFICIT) Invested in capital assets, netof relateddebt Unrestricted(deficit) TOTAL NETASSETS (DEFICIT) The notes to the financial statements are an integral pan of this statement 23 CITY OF LODI STATEMENTOF NETASSETS PROPRIETARY FUNDS June 30,2009 Governmental Activities- Business-typeActivities-Enterprise Funds Internal Nonmajor Fund Service Electric Wastewater Water Transit Total Funds $ 12,003,103 7,499,322 20,272,801 $ 39,775,226 $ 7,233,652 8,177,185 8.177.185 5,475,101 5,693,071 816 11,168,988 4,931,289 583.995 1,030,886 1,716,430 8,262,600 639 39,155 25,324 66,407 130.886 24,502 110,120 110,120 161.96 1,557,405 1,573,601 5,904,783 5,904,783 1,465,049 11,749 205,254 1,682,052 122.266 2t,57'6?4'a17-- 4,509 1,275 5,784 14.868 29,864,74zl— 13,834,166 2,169,850 2,169, 850 1,225,173 1,225,173 14,195,455 995,983 15,192,439 6,417,731 48,883,331 2,208,526 1,234,534 58,744,122 37,386,306 49,882,956 27,128,296 13,568,337 127,965,905 36.181 43,804,037 98,•7682— 2 2 14,802,871 186,710,027 36,181 ----36,Tgr 56,000,493 2 71 1152081714 87 910TT5766196 X0 2673 18,076,706 7,432,108 631,275 462,679 1,496,340 594.394 3,184,688 185.348 2,166,638 706.137 13,547 416 2,886,738 110,120 110,120 87.501 868.218 660,549 1,616,268 1,953,845 187,823 136,462 12,907 337,192 57,633 2,708,889 1,309,133 4,018,022 175,462 175,462 T 12,328,490 2,196,826 4,577,491 685.519 754.072 68,552 1,508,143 68,552 60,525,024 56,280,026 136,805,050 1,409,301 1,409,301 1,195,521 69 69 952135 81,210,5435 70$40098 71852135 5,841,564 66,905,168 X003 8,038,390 3,938,319 49,040,059 27,752,059 14,802,871 95,533,308 36.181 (41,240,323) 1,826,897 (35,447,713) (642.4631 $ 60,085,595 $ (606,2821 The notes to the financial statements are an integral pan of this statement 23 CITY OF LODI STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARYFUNDS Year ended June 30.2009 OPERATING REVENUES Charges for services OPERATING EXPENSES Personnelservices Supplies. materialsand services Utilities Depreciationand amortization Claims TOTAL OPERATING EXPENSES OPERATING INCOME(LOSS) NONOPERATING REVENUES (EXPENSES) Investmentincome Interestexpense Rent Operating grants Litigation-environmentalawsuits proceeds Otherrevenues TOTAL NONOPERATING REVENUES (EXPENSES) INCOME (LOSS) BEFORE SPECIAL ITEMS, CAPITAL CONTRIBUTIONSAND TRANSFERS Special item -swap termination Capital contributions Transfersout Net special item. capital contributions and transfers Change in net assets NETASSETS - BEG I N N I NG OF YEAR, as previously reported Change in accounting principles NETASSETS (DEFICIT)- BEGINNINGOF YEAR as restated NETASSETS (DEFICIT)- END OF YEAR Governmental Activities - Business -type Activities- Enterprise Funds Intemal Nonmajor Fund Service Electric Wastewater Water Transit Total Funds $ 73,999,938 9,276,217 11,787,140 250,946 $ 95,314,241S 8,988,662 5,965,737 2,984,049 1,471,463 258,565 10,679,804 EM7391%m 10,007,935 2,067,646 6,054,427 3,856,538 21,986,534 (1,451,478) 46,481,625 869.129 804,767 70.786 48,226,307 3,417 6.182.264 2,136,819 1,216,499 646.576 10,182,158 1,447 (3,053,795) (1,910,155) 10,460,580 1.01(), 085 52,414,674 2.010.085 3,746,893 68,637,561 8,057,643 9,547,156 4,832,465 91,074,825 11,127,110 5,362,377 1,218,574 2,239,984 (4,581,519) 4,239,416 2,138,448 373,036 428.586 570,662 12,649 1,384,935 165.835 (4,720,325) (2,882,078) (56.868) 5,774,006 (7,659,211 (1,451,478) (1_,060,122) 221,422 15.981 4.200 241,603 (535.030) 2,916,103 55,576 (9,748,451) 3,597,890 3,653,466 2,044,233 (3,053,795) (1,910,155) 10,460,580 1.01(), 085 52,414,674 2.010.085 133,225,291 1,274,830 822.338 396,731 334.969 94,910 1,648,948 62.458 (3,524,949) (1,779,763) 2,874,829 3,709,649 1,279,766 228.293 1,837,428 (561.189) 5114,813 (871.8701 5,519,182 (1,910,155) (8,979,000) 263,696 (70,482721) (68.552) (8,979,000) 249.504 2,083,307 525,092 2,916,103 5,774,006 (2,856,383) (1,451,478) (1_,060,122) (5367,983) (1,585,879) 631.829 (535.030) 2,916,103 (8572,977) (9,748,451) 70,640 4,579,783 2,044,233 (3,053,795) (1,910,155) 10,460,580 55,695,950 52,414,674 14,654,087 133,225,291 1,274,830 201,676 263,696 (70,482721) (68.552) 10,662,256 55,959,646 08,068,047) 14,585,535 3 913,805 56,030,286 (3,488,264) 16,629,768 The notesto the financial statements arc an integral partofthis report. 24 (70,085,901) 29,043 63,139.390 1,303,873 $ 60,085,595 $ (606,282) Cashflowsfrom operating activities Receiptsfrom customersand users Receiptsfrom interfund servicesprovided Cash paid to suppliersfor goods 8 services Payments to employees Paymentsfor interfund services provided Proceeds from litigation settlements Net cash provided by (used m) operatingacnwoes Cash flows from noncapitalfinancing activities Loanedfrom otherfunds Operalinggrants Transfersout Net cash provided by (used in) noncapitalfinancing activities Cash flows from capital and related financing activities Proceedsfrom Certificatesof Participation Refund ingof Certificatesof Participation Swap term i nation payment I ssua ncecosts -Certificates of Participation Acquisition and constructionof capitalassets Fees receivedfrom developers Capital grants received Principal payments on debt Interestpaymentson debt Net cash used i n capital and related financing activities Cashflows from investingactivities Rentof City properly Intereston investments Netcash providedbyinvestingacevaies Net increase (decrease)in cash and cash equivalents Cash and cash equivalents. beginningof year Cash and cash equivalents,end of year Reconciliationto the statementof net assets: Cash and investments Restricted cash and investments Restricted assetswith fiscal agents- current Total cash and cash equivalents Reconciliationof Operating income (loss) to net cash provided by (used in) operatingactivities Operatinglncome (loss) Adjustmentsto reconcileoperating income (loss) to net cash provided by (used in) operating activities: Depreciationand amortization Proceedsfrom litigation settlements Other revenues Change:., assets and liabilities Decrease in acwunts receivable Decrease in advance receivables Increasein due from otherfunds Increasein due from othergovernmentalagencies Increasein inventory Decrease(inerease)in other assets (Decrease) increasein accounts payable and other liabilities (Decrease) increasein compensated absences Increase(decrease)in unearned revenue Increasein self-insuranceliability Decreasein pollution remediationobligation Increasein OPEB obligation Net cash provided by (used in) operating activities Noncash Investina. Capital and Financino Activities Capital assetcontnbutlons CITY OF LODI STATEMENTOF CASH FLOWS PROPRIETARYFUNDS Yearended June 30, 2009 110.120 110.120 55576 2097.251 2,152,857 (2,856,383) (1,451,478) (1,060,122) (5,367,983) (2,856,383) (1,395,902) (1,060,122) 2,207,401 (3,105 61282.808 221.422 455.767 15.981 540.537 4.200 25.074 61,282,808 Governmental 420.434 Business-tvpeActivities - Enterprise Funds (46,760,000) Activities- 205.171 2,935,283 14,542.921 (7,683,847) 20,876,240 Nonmajor Fund (2,780,161) Internal Service Eiectdc Wastewater Water Transit Total Funds $ 75,561,260 9,766,496 14,763,586 345.856 $ 100.437.198 $ 64.278 322.520 581,924 385.700 322.520 8,988,662 (57.018.009) (3,347,088) (6,666,688) (3,627,780) (70,659,565) (8,034,540) (6,002.167) (2.989,408) (1,471,463) (246.943) (10,709,981) (1287.304) (2,755) (774.032) (775,620) (53.667) (1,606,074) (140.560) (7.630) 30 2.010.085 30 2,010,085 445 12,860,849 2,655,968 7,859,900 (3,582,_534) 19,794.,183 (268.904) 110.120 110.120 55576 2097.251 2,152,857 (2,856,383) (1,451,478) (1,060,122) (5,367,983) (2,856,383) (1,395,902) (1,060,122) 2,207,401 (3,105 61282.808 221.422 455.767 15.981 540.537 4.200 25.074 61,282,808 (46,760,000) 420.434 677.189 556.518 (46,760,000) (8,979.000) 205.171 2,935,283 14,542.921 (7,683,847) 20,876,240 (8,979,000) (2,780,161) 131.954 58,989,445 (63733) 7,297285 $ 17.478.204 (2,780,161) (660.300) (6.114,449) (782.382) (2,428,579) (9,985,710) 2.458 261.889 13.086 3.605.090 277.433 581,924 385.700 2,295,980 2,681,680 15.240.000) (1,270.0001 (169.746) (110120) (6,679,746) (4.355.422) (2,884,242) -(58,278) (9,462) (7,297,942) (7,489,617) (9,621.102) (997.320) (132,599) (18,240,638) 420.434 221.422 455.767 15.981 540.537 4.200 25.074 241.603 1,441,812 205,171 420.434 677.189 556.518 29.274 1,683,415 205.171 2,935,283 14,542.921 (7,683,847) 20,876,240 6,358,976 22.091.826 (1,478,458) 1,478,458 131.954 58,989,445 (63733) 7,297285 $ 17.478.204 13,192,393 28,450,802 3 59,121,399 $ 7,233,552 $ 12,003,103 7.499.322 20,272,801 $ 39,775,226 $ 7,233,552 8177,185 8,177,185 5,475,101 5,693,071 816 11,168,988 $ 17,478,204 28,450,802 59,121,399 7,233,552 $ 5,362,377 1218.574 2,239,984 (4,581,519) $ 4,239,416 $ (2,138,448) 6,182,264 2,136,819 1,216,499 646.576 10.182.158 1,447 2,010,085 2.010.085 822.338 396.731 334.969 94,910 1,648,948 62.458 479.550 73.973 3,051,567 3.605.090 4.328 581,924 581,924 (110120) (110.120) (9,462) (9,462) (126.796) (1,714) (12.050) (140.560) (7.630) 30 385 30 445 (2.508) (404.408) (1,182,631) (17,275) 245.877 (1,358,437) 55.898 (36.430) (5,359) 11,622 (30.167) 14.694 28.652 (300,000) (271.348) 545 336 (553,789) (553.789) 1,195,521 3 12,860,849 2,655,968 7,859,900 (3,582,W $ 19,794,183 $ (268.904) $ 247.046 1,435,718 512,006 250.438 $ 2,445,208 The notes to the financial statements arc an integral pan of this statement 25 CITY OF LODI STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS June 30,2009 ASSETS Cash and investments Receivables: Special assessments Interest TOTALASSETS LIABILITIES Agency obligations TOTAL LIABILITIES NET ASSETS The notes to the financial statements are an integral part of this statement. 26 Private -Purpose Trust Funds 248,308$ Agency Fund 617,876 78,336 2,083 248,308 698,295 $ 248,308$ 698,295 698,295 CITY OF LODI STATEMENTOF CHANGES IN FIDUCIARY NETASSETS FIDUCIARY FUNDS Year ended June 30,2009 ADDITIONS Investmentand rental income Total additions DEDUCTIONS Current Library Interest and fiscal charges Total deductions CHANGE IN NETASSETS NETASSETS, BEGINNINGOF YEAR NETASSETS, END OF YEAR The notes to the financial statements are an integral part of this statement. 27 Private -Purpose Trust Funds 37 37 419,287 186,691 605,978 (605,941) 854,249 248.308 (This page intentionally left blank.) NOTES TO THE FINANCIAL STATEMENTS CITY OF LODI Notes to Basic Financial Statements June 30,2009 4C I Do 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, community development, 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. Since then, several Certificates of Participation were issued to finance various major projects (See Note 8). 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. (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 29 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 measurementfocus. Governmental fund financial statements are reported using the current financial resources measurementfocus 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. The City reports the following major governmental fund: 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. 30 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 Funds accountfor the City's claims, benefits and fleet services. 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 accordancewith 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 property tax roll by the City on behalf of the property owners within the Industrial Way/Beckman 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-sectorguidance. 31 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 funds are charges for customer services including: electric, wastewater, water and public transportation fees. Operating expenses for enterprise funds and internal service funds 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 resourcesfirst, and then unrestricted resources as they are needed. (d) Adoption of New Accounting Standards The City adopted the provisions cf GASB Statement No. 45, Accounting and Financial Reporting by Employers Cf Post -employment Benefits Other than Pensions. This statement addresses how state and local governments should account for and report their costs and obligations related to postemployment healthcare and other nonpension benefits. These benefits are collectively referred to as other postemployment benefits (OPEB). The City provides healthcare benefits to eligible retirees who elect to convert their unused sick leave balance. The City pays one month's premium for employee and dependents for each day after conversion. The amount of premium paid is the same as the premium paid by the City at the time of retirement. Historically, the City followed guidance provided by GASB Statement No. 16, Accounting for CompensatedAbsences, to report its liabilities for sick leave benefits. The liabilities were generally calculated for employees eligible for the sick leave conversion who reached the age of 49 and 10 years of service credit. In June 2004, the GASB issued Statement No. 45. This statement generally requires that governments account for and report the annual cost of OPEB and the outstanding obligations related to OPEB in essentially the same manner as pensions. Annual OPEB cost for most governments will be based on actuarially determined amounts that, if paid on an ongoing basis, would generally provide sufficient resources to pay benefits as they come due. The GASB allows governments to apply this statement prospectively, establish the OPEB liability at zero at the beginning of the initial year of implementation, and does not require governments to fund the OPEB plans. The statement supersedes or amends previous authoritative guidance on accounting and financial reporting for an employer's OPEB expense and related information. 32 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 The City elected to implement GASB No. 45 prospectively beginning the current year and opted to establish its OPEB liability at zero at the beginning of the initial year of implementation; the City's net assets were restated to reflect this change in the accounting principle. As a result, $4,357,678 and $420,023 were added to the beginning net assets of the governmental activities and business -type activities, respectively, to recognize the reduction of the City's liabilities for sick leave benefits previously accrued under GASB Statement No. 16. The beginning net assets of individual enterprise fund and internal service funds were also restated to reflectthis change in accounting principle. The latest actuarial valuation determined that the City's annual OPEB cost was $1,785,173, the City's actual pay -as -you go cost was $589,652 and the net OPEB obligation as of June 30, 2009, was $1,195,521 (See Note 11). The City also adopted the provisions of GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This statement addresses accounting and reporting standards for pollution (including contamination) remediation obligations, which are obligations to address the current or potential detrimental effects of existing pollution by participating in pollution remediation activities such as site assessments and cleanups. The Statement establishes once any five specified obligating events occurs, that a government is required to estimate the components of the expected pollution remediation outlays and determine whether the outlays for those components should be recorded as a liability or, if appropriate, capitalized when goods and services are acquired. In accordance with GASB Statement No. 49, the City has restated its beginning net assets by $70,505,924, to recognize the City's estimated pollution remediation obligation as of July 1, 2008 (See Note 16). (e) Cash and Investments 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 investment income. Restricted assets represent the proceeds from debt and other cash and investments held by fiscal agents by agreement that meet the definition of cash and cash equivalents, with the exception of a $2,169,850 guaranteed investment contract held in the Wastewater Fund which is a long- term investment. 33 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (f) 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 Plume 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. (g) Restricted Assets with FiscalAgents In the Electric Enterprise Fund, restricted assets representthe proceeds of the 2008 Certificates of Participation reserved for debt service. 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 2003B, the 2004A and 2007A Certificates of Participation issued for improvements to the City's wastewater collection, treatment and disposal system. (h) 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 1 st for all real and personal property located in the City. Property sold after the assessment date (January 1 st) is reassessed and the amount of property tax assessed is prorated. The assessed value at January 1, 2007, upon which the 2008 levy was based, was $5,422,385,000. 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, 2009, 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 reconcilingthe cities' balances at June 30. As part of the agreement, the County keeps the penalties and interest on the delinquent taxes. 34 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (i) Due From/Due To Other Funds, Advances To/Advances From 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." Long-term interfund loans receivable are reported as "advances to other funds." The corresponding long-term interfund loans payable are reported as "advances from 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. 0) 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. Unbilled 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. (k) Long-term obligations In the government -wide financial statements and in the proprietaryfund 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 as an expense for both governmental and business -type activities. (1) Loan receivable Loan receivable reported in the HOME Program & Community Development Block Grants Special Revenue Fund represent funds the City loaned to a developer on November 15, 1995 for a low-income housing project. The City will receive principal and interest from the original loan in 2025 and can use it for allowable projects or to make new loans. 35 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (m) Advance receivable Advance receivable reported in the Electric Enterprise Fund represents the City's portion of the Northern California Power Agency's (NCPA) General Operating reservethat is refundable upon demand by the City (See Note 13). (n) 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 recognizedwhen inventories are consumed in operations. (o) Deferred Charges Deferred charges reported in the Electric Fund include costs incurred in connection with the issuance of the 2002 Certificates of Participation Series C & D amortized over 9.5 years and the 2008 Certificates of Participation Series A amortized over 24 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 2003B and 2004A Certificates of Participation amortized over 20 years and the 2007A Certificates of Participation amortized over 30 years. (p) Capital 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 and in the proprietary funds 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. 36 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 (q) Compensated Absences/Vacation and Sick Leave The City accrues for compensated absences, in the government -wide financial statements and the proprietary funds financial statements, to pay its employees for the unused vacation, compensatory time, and miscellaneous leave. The City is not obligated to pay for unused sick leave if employees terminate prior to retirement. (r) 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 in an internal service fund. The accrued liability for estimated self-insured claims represents an estimate of the eventual loss on claims arising priorto year-end including claims incurred but not reported. (s) 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 subjectto change. (t) 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 investmentswith maturities of three months or less when purchased and investments maintained in the pool to be cash equivalents. (u) 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 disclosures. Actual results could differ from those estimates. 37 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (2) CASH AND INVESTMENTS Cash and investments as of June 30, 2009 are classified in the accompanying financial statements as follows: Statement of net assets: Cash and investments $ 63,958,305 Restricted assets 23,203,770 Fiduciaryfunds cash and investments: Private -purpose trust funds 248,308 Agency fund 617,876 Total cash and investments $ 88,028,259 Cash and investments as of June 30, 2009 consist of the following: Cash on hand $ 2,371 Depositswith financial institutions 15,790,081 Investments 72,235,807 Total cash and investments $ 88,028,259 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 deposit, mutual funds that invest in eligible securities, government investment contracts, medium term notes as permitted by the Government Code, and the State of California Local Agency Investment Fund (LAIF). 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. 38 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Medium term Notes c) Interest Rate Risk 5 years 30% AAA 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: Investmentas of June 30,2009 LAI F Money Market Mutual Funds Equities and options Held by bond trustee: Money Market Mutual Funds Guaranteed investment contracts (GICs) Total Maturity Less than One Year $ 56,970,508 132,000 106,716 12,856,733 $ 70,065,957 Maturity One to Five Years Investments in equities are shares of stocks received by the Library as an endowment from a private citizen. 39 Total $ 56,970,508 132,000 106,716 12,856,733 2,169,850 2,169,850 2,169,850 $ 72,235,807 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 Certificatesof Deposit 5 years 100% 33% Negotiable Certificatesof Deposit 5 years 30% Commercial Paper 270 days 40% AAA California State LocalAgency Investment Fund (LAIF) Indefinite 100% $40m per account unrated Money Market Mutual Funds Indefinite 20% AAA Guaranteed investment contracts (GICs) 5 years 100% AA - Medium term Notes c) Interest Rate Risk 5 years 30% AAA 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: Investmentas of June 30,2009 LAI F Money Market Mutual Funds Equities and options Held by bond trustee: Money Market Mutual Funds Guaranteed investment contracts (GICs) Total Maturity Less than One Year $ 56,970,508 132,000 106,716 12,856,733 $ 70,065,957 Maturity One to Five Years Investments in equities are shares of stocks received by the Library as an endowment from a private citizen. 39 Total $ 56,970,508 132,000 106,716 12,856,733 2,169,850 2,169,850 2,169,850 $ 72,235,807 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 &P of"AAAm- G," "AAA -m" or "AA -m" and rated by Moody's "Aaa," "Aal" 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. 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 parry. The California Government Code and the City's investment policy do not contain legal or policy requirementsthat would limit the exposure to custodial risk for deposits, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured deposits. $15,879,893 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. 40 (3) CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 g) investment in State Investment Pool The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying 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 cost basis. The total amount invested by all public agencies in LAIF at June 30, 2009 was $25.2 billion. LAIF is part of the California Pooled Investment Account (PMIA), which at June 30, 2009 had a balance of $50.7 billion. Of this amount, 14.71% were invested in structured notes and asset- backed securities. PMIA is not SEC -registered, but is required to invest according to California State Code. The average maturity of PMIA investmentswas 235 days as of June 30,2009. 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 cf 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. In accordance with GASB Statement 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 thatjeopardizes pool participants would cause the withdrawal to be done at marketvalue. ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS Receivablesof the General Fund, Electric, Wastewater and Water funds are reported netof 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 Uncollectibles related to electric sales and services Uncollectibles related to wastewater services Uncollectibles related to water sales and services Total uncollectibles of the current fiscal year 41 18,700 220,400 57,400 70,900 $ 367,400 (4) CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 INTERFUND RECEIVABLES/PAYABLES Interfund receivablesand payables at June 30, 2009 areas follows: Due from Other governmental Other governmental Transit Due to General Other governmental Water Amount $ 1,126,826 492,672 110,120 $ 1,729,618 "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 $ 1,126,826 and $492,672 represent cash deficits in other governmental funds. The $110,120 represents the cash deficit in the Transit Fund. Advances from General Other governmental Water Advances to Other governmental Other governmental Other governmental Amount $ 294,640 328,385 1,225,173 $ 1,848,198 The $294,640 from the General Fund to the other governmental is an advance used for the start up costs of a redevelopment agency. The $328,385 advance from other governmental was used for the Lower Sacramento Road expansion project and other street projects. The $1,225,173 advanced from the Water Fund was used for the construction of Fire Station #4. 42 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (5) TRANSFERS Transfers for the year ended June 30, 2009, are summarized as follows: Transfers out: General Other governmental Electric Wastewater Water Transfers in Other General Governmental Total 4,442,883 $ 4,442,883 798,793 798,793 2,856,383 2,856,383 1,451,478 1,451,478 1,060,122 1,062,122 Total $ 5,367,983 5,241,676 $ 10,609,659 . During the year, various interfund transfers were made to finance expenditures, subsidize operating losses and service debt. Transfers out of $2,856,383 from the Electric Fund, $1,451,478 from Wastewater Fund, and $1,060,122 from Water Fund representthe cost of services reimbursementto the General Fund. The $4,442,883 transfers out from the General Fund to other governmental represent transfers of $1,010,219 to the Debt Service Fund for the principal, interest and fiscal charges required to pay the 2002 Certificates of Participation; $1,261,872 to the Community Center and $534,615 to the Recreation Fund; $685,000 to the Library Fund for the Library renovation and HVAC projects; $239,947 to Community Development; $576,223 to the Vehicle and Equipment Fund which include $511,223 for vehicle replacements and $65,000 for information systems replacements; and $135,007 to the Capital Outlay Reserve Fund for public safety software. The transfer out of $798,793 from other governmental to other governmental include $662,515 transferred from Community Center to Debt Service Fund for the principal, interest and fiscal charges required to pay the 2002 Certificates of Participation; $25,000 transferred from the Vehicle and Equipment Fund to the Capital Outlay Reserve Fund for the animal shelter improvements project; the annual transfer from the Streets Fund of $96,106 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; and transfer of $4,183 from the Community Development, $5,672 from Recreation Fund, and $5,317 from the Community Center to the Vehicle and Equipment Fund for fleet replacement. 43 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (6) CAPITAL ASSETS Capital assets activity of the primary government for the year -ended June 30, 2009, was as follows: Governmental activities Capital assets, not being depreciated: Land Work of art Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildingsand improvements 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 Balance Balance June 30,2008 Increases Decreases June 30,2009 $ 24,016,374 101,124 (17,586) $ 24,099,912 62,024 62,024 3,562,565 3,399,849 (893,305) 6,069,109 27,640,963 3,500,973 (910,891) 30,231,045 57,018,484 603,932 (124,477) 57,497,939 8,758,944 632,795 9,391,739 9,205,434 229,152 (190,639) 9,243,947 114,820,174 10,118,271 124,938,445 189,803,036 11,584,150 (315,116) 201,072,070 20,496,404 1,474,433 (124,477) 21,846,360 7,375,028 403,059 7,778,087 7,835,481 360,811 (190,639) 8,005,653 49,697,409 5,562,812 55,260,221 85,404,322 7,801,115 (315,116) 92,890,321 104,398,714 3,783,035 108,181,749 $ 132,039,677 7,284,008 (910,891) $ 138,412,794 44 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 Machineryand equipment Vehicles Total accumulated depreciation Total capital assets, being depreciated, net Business -type activities capital assets, net Balance Balance June 30.2008 Increases Decreases June 30.2009 $ 5,438,359 $ 5,438,359 50,204,405 9,510,485 (6,409,127) 53,305,763 55,642,764 9,510,485 (6,409,127) 58,744,122 34,483,556 2,503,880 36,987,436 136,904,385 6,380,110 143,284,495 8,104,473 445,570 (184,890) 8,365,153 179,492,414 9,329,560 (184,890) 188,637,084 9,792,422 923,569 10,715,991 40,252,131 4,021,881 44,274,012 5,409,578 456,488 (184,890) 5,681,176 55,454,131 5,401,938 (184,890) 60,671,179 124,038,283 3,927,622 127,965,905 $ 179,681,047 13,438,107 (6,409,127) $ 186,710,027 45 (7) CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Depreciation expense was charged to function/programs of the primary government as follows: Governmental activities: General government Public protection Publicworks Community development Library Parks and recreation Internal service funds Total depreciation expense - governmental activities Business -type activities: Electric Wastewater Water Transit Total depreciation expense - business -type activities OPERATING LEASES $ 607,463 884,450 5,681,752 651 2,696 622,656 1.447 $ 7,801,115 $ 1,453,569 2,085,294 1,216,499 646,576 $ 5,401,938 The City is obligated under various operating leases for the use of buildings and office space. Total costs for such leases were $135,365 for the year ended June 30,2009. Future minimum lease payments required by lease agreementsthat have initial or remaining noncancellable lease terms of one year or more as of June 30, 2009, are as follows: Fiscal Years Ending 2010 Total minimum lease payments required under operating leases 46 $ 25,000 $ 25,000 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (8) LONG-TERM OBLIGATIONS The following is a summary of debt transactions of the City for the year ended June 30, 2009: Governmental activities: Compensated absences, as restated 2002 Certificates of Participation Note payable Loan payable Capital leases Self-insurance liability Governmental activity long-term liabilities Business -type activities: Compensated absences, as restated Pollution remediation obligation, as restated California Safe Drinking Water Note Payable Certificates of Participation: 2008 Certificates of Participation Add deferred amounts: For issuance premium Less deferred amounts: From refunding Net 47 Amounts Due Within Interest Rates June 30,2008 Additions Reductions June 30,2009 One Year $ 7,121,480 1,927,080 (1,774,428) $ 7,274,132 $ 1,927,080 3.0-5.0% 23,420,000 (565,000) 22,855,000 590,000 5.0% 245,000 245,000 4.0% 94,451 (94,451) 5.3-5.39% 406,490 (129,489) 277,001 135,427 5,986,000 1,953,845 (1,408,509) 6,531,336 1,953,845 $ 37,273,421 3,880,925 (3,971,877) $ 37,182,469 $ 4,606,352 Amounts Due Within Interest Rates June 30,2008 Additions Reductions June 30,2009 One Year $ 1,875,502 337,192 (367,359) $ 1,845,335 $ 337,192 70,505,924 (553,789) 69,952,135 3.41% 1,754,509 (169,746) 1,584,763 175,462 3.8-5.05% 60,685,000 60,685,000 597,808 (24,911) 572.897 24,909 (7,239,734) 301,656 (6,938,078) (301,656) 54,043,074 276,745 54,319,819 (276,747) 47 2002 Certificates of ParticipationA & 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 ParticipationA Add deferred amounts: For issuance premium Total 2007 Certificates of ParticipationA Add deferred amounts: For issuance premium Less deferred amounts: From refunding Net Total Certificates of Participation Business -type activity long-term liabilities CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Amounts Due Within Interest Rates June 30,2008 Additions Reductions June 30,2009 One Year Vadable 46,760,000 (46,760,000) (6,307,166) 6,307,166 40,452,834 (40,452,834) 1.54-5.25% 33,990,000 (5,240,000) 28,750,000 2,920,000 229,732 (65,638) 164,094 65,636 34,219,732 (5,305,638) 28,914,094 2,985,636 2.0-5.0% 4,245,000 (200,000) 4,045,000 205,000 62,555 (4,102) 58,453 4,102 4,307,555 (204,102) 4,103,453 209,102 2.0-5.5% 24,445,000 (965,000) 23,480,000 1,010,000 345,752 (21,278) 324,474 21,277 24,790,752 (986,278) 23,804,474 1,031,277 4.0-5.0% 30,320,000 (105,000) 30,215,000 105,000 242,102 (8,254) 233.848 8,253 (812,115) 44,499 (767,616) (44,499) 29,749,987 (68,755) 29,681,232 68,754 133,520,860 54,043,074 (46,740,862) 140,823,072 4,018,022 $ 207,656,795 54,380,266 (47,831,756) $ 214,205,305 $ 4,530,676 48 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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, internal service funds self-insurance liability for $6,531,336 and $126,185 for compensated absences were included in the above amounts. Also, for the governmental activities, compensated absences are generally liquidated by the General Fund and the internal service funds. Long-term debt payable at June 30, 2009, 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 was $3,129,828 and is secured by the project and to be repaid with user fees collected by the Water Enterprise Fund. Semiannual payments of $114,012, are payable each October 1 and April 1 through 2017. Annual debt service requirementsto maturity of water note payable are as follows: Fiscal Year Ending Business -type Activities June 30, Principal Interest 2010 $ 175,462 $ 52,562 2011 181,496 46,528 2012 187,658 40,366 2013 194,263 33,762 2014 200,872 27,152 2015-2017 645,012 39,059 Total $ 1,584,763 $ 239,429 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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, 2012. Annual debt service requirementsto maturity of the note payable are as follows: Fiscal Year Ending June 30, 2010 2011 2012 Total Certificatesof Participation Governmental Activities Principal 245,000 $ 245,000 Interest $ 14,700 14,700 11,025 $ 40,425 $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 City has pledged future wastewater revenues, net of specified operating expenses, to repay $5.0 million in wastewater revenue bonds. The bonds are payable solely from wastewater customer net revenues. The total principal and interest remaining to be paid on the bonds is $5,669,411. Principal and interest paid for the current year and total net revenues were $426,022 and $4,843,408, respectively. 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 refinancewater and wastewater public capital improvementsof 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. The City has pledged future wastewater revenues, net of specified 50 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 operating expenses, to repay these bonds. The total principal and interest remaining to be paid on the bonds is $34,101,412. Principal and interest paid for the current year and total net revenueswere $2,134,856 and $4,843,408, respectively. $30,320,000 Certificates of Participation (2007A COP) were issued on November 16, 2007 to provide funds to finance the costs of certain improvements to the wastewater collection, treatment and disposal system of the City and to provide resources for the repayment of the 1991 Certificates of Participation (Wastewater Treatment Plant Expansion Refunding Project). Principal is payable annually on October 1 in amounts from $105,000 to $2,980,000 with final payment due October 1, 2037. The City has pledged future wastewater revenues, net of specified operating expenses, to repay these bonds. The total principal and interest remaining to be paid on the bonds is $62,010,788. Principal and interest paid for the current year and total net revenues were $1,591,200 and $4,843,408, respectively. $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 outstanding 1995 and 1996 Certificates of Participation. As of June 30, 2009, there are no outstanding balances of these refunded Certificates. 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 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 1,203 1. $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. The advanced refunded certificates were called in full on January 15, 2009. The proceeds of the 2002B Certificates were deposited in the Rate Stabilization Fund and applied to certain power purchase costs of the City. Series B was fully paid as of June 30, 2005. Series A was refunded in the currentfiscal year. $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 $65/mwh 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 51 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 energy. On November 21,2002, the City issued$21,225,000ZevenueCertificates of Participation 2002 Series C and $22,740,00Revenue 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. The City has pledged future electric revenues, net of specified operating expenses, to repay these bonds. The total principal and interest remaining to be paid on the bonds is $33,703,067 Principal and interest paid for the current year and total net revenues were $6, 889, 86and $1 6, 825, 594-pspectively. Current Refunding The City issued $60,685,000 Certificates of Participation (2008A COP) on July 24, 2008 to allow the City to prepay and cause the immediate defeasance of the outstanding $46,760,00(Certificates of Participation (Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates) and to pay $8, 979, 00(for the termination of a swap agreement related to the refunded 2002 certificates. The termination payment is presented as a special item on the government -wide statement of activities and the statement of revenues, expenses and changes in net assets of the proprietary funds. The City has pledged future electric revenues, net of specified operating expenses, to repay these bonds. The total principal and interest remaining to be paid on the bonds is $108, 647,050 Interest paid for the current year and total net revenueswere $3,070,462nd $16,825,594-pspectively. As a result, the refunded bonds are considered defeased and the liability has been removed from the Electric Enterprise Fund column of the statement of net assets. This current refunding was undertaken to convert the variable interest rate certificates of participationto fixed rate and to terminate the swap agreement related to the certificates of participation resulting in economic gain of $223,679;and an increase of $14,567,301 future debt payments. The reacquisition price exceeded the net carrying amount of the old debt by $7,239,734 This amount is being netted against the new debt and amortized over the life of the old debt which is the same as the refunding debt obligation. Principal is payable annually on July 1 in amounts ranging from $2,390, 001b $5,090,000eginning in 2016 with final paymentdue in 2032. 52 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Annual debt service requirementsto maturity for certificates of participation are as follows: Fiscal Year Ending June 30, 2010 $ 2011 2012 2013 2014 2015-2019 2020-2024 2025-2029 2030-2034 2035-2038 Governmental Activities Prin.ci.nal Interest 590.000 $ 1.084.071 610,000 11060,956 630,000 1,036,156 655,000 1,010,047 690,000 981,013 3,905,000 4,390,064 4,925,000 3,340,594 6,280,000 1,958,000 4,570,000 350,250 Total $ 22,855,000 $ 15,211,151 $ Capital Leases Business -type Activities Principal Interest 4,240,000 $ 7,014,776 4,450,000 6,836,735 4,700,000 6,640,535 6,075,000 6,344,375 6,325,000 6,031,538 29,500,000 25,870,787 27,485,000 19,838,995 31,620,000 12,498,487 23,670,000 4,941,250 9,110,000 939,250 147,175,000 $ 96,956,728 The City has entered into a lease agreementfor financing the acquisition of two fire trucks. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the presentvalue of its future minimum lease payments as of inception date. The assets acquired through this capital lease are as follows: Asset: Vehicles Less accumulated depreciation Total 53 Governmental Activities $ 883,037 (353,215) $ 529,822 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 The presentvalues of future minimum capital lease payments as of June 30, 2009, are as follows: Fiscal Years Ending 2010 $ 148,003 2011 148,003 Total minimum lease payments 296,006 Less amounts representing interest (19,005) Presentvalue of minimum capital lease payments $ 277,001 Special Assessment District Debt 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, 2009, is $465,000. 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 from amounts to be received by the Districtfrom 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"). Underthe agreement, the City will purchase 6,000 acre feet of water per annum from the Districtfor 40 years. 54 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (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, 2009: 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 Other General Governmental Total $ 11,903 $ 11,903 51,696 1,158,700 1,210,396 294,640 328,385 623,025 24,758 24,758 382,997 1,487,085 1,870,082 11,757,045 11,757,045 11,757,045 11,757,045 3,383,191 3,383,191 $ 3,766,188 13,244,130 $ 17,010,318 Reserved Fund Balance Reserved represents that portion that is legally segregated for specific purposes and is not availablefor discretionary appropriation. Unreserved -Designated Fund Balance Designated represents that portion for which the City has made tentative plans. Unreserved-UndesignatedFund Balance Undesignated representsthat portionwhich is available for budgeting in future periods. 55 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (10) DEFINED BENEFIT PENSION PLAN (a) Plan Description The City of Lodi contributesto 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 behalf and for their account. The City is required to contribute at an actuarially determined rate; the current rate is 12.058% for miscellaneous employees, 24.128% for fire and police employees, of annual covered payroll. The contribution requirementsof plan members and the City are established and may be amended by PERS. (c) Annual Pension Cost For fiscal 2009, the City's annual pension cost of $4,945,023 for PERS was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2006, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.75% investment rate of return (net of administrative expenses) (b) projected annual salary increases that vary by age, length of service, and type of employment (c) 3.25% payroll growth, and (d) 3.00% inflation. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a fifteen -year period (smoothed market value). PERS unfunded actuarial liability is being amortized as a level percentage of projected payroll on a closed basis. Amortization of the remaining period varies: (a) safety plan over 30 years and (b) miscellaneous plan over 22 years, as of June 30, 2008. 56 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (d) Trend information Three-YearTrend information ($ Amounts in Thousands): (e) Funded Status and Funding Progress As of June 30, 2007, the most recent actuarial valuation date, the plan was 87% funded. The actuarial accrued liability for benefits was $203 million, and the actuarial value of assets was $177 million, resulting in an unfunded actuarial accrued liability(UAAL) of $26 million. The covered payroll (annual payroll of active employees covered by the plan) was $27 million, and the ratio of the URAL to the covered payroll was 93.95%. The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. (11) POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (a) Plan Description The City participates in the PERS medical program. Employees who retire from the City and receive a PERS pension are eligible for postemployment medical benefits. The City contributes the minimum amount provided under Government Code Section 22825 of the Public Employees Medical and Hospital Care Act. In general, retirees must contribute any premium amounts in excess of the City contribution. However, as described below, a closed group of active employees and retirees receive additional postemployment benefits. Employees hired prior to the dates shown in the following table are allowed to convert their accumulated sick leave into postemployment medical benefits at retirement as long as they have ten or more years of service with the City. 57 Annual Percentage Net Fiscal Year Pension of APC Pension Ended Cost (APC) Contributed Obligation 6/30/07 $ 4,437 100% $0 6/30/08 4,963 100% $0 6/30/09 4,945 100% $0 (e) Funded Status and Funding Progress As of June 30, 2007, the most recent actuarial valuation date, the plan was 87% funded. The actuarial accrued liability for benefits was $203 million, and the actuarial value of assets was $177 million, resulting in an unfunded actuarial accrued liability(UAAL) of $26 million. The covered payroll (annual payroll of active employees covered by the plan) was $27 million, and the ratio of the URAL to the covered payroll was 93.95%. The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. (11) POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (a) Plan Description The City participates in the PERS medical program. Employees who retire from the City and receive a PERS pension are eligible for postemployment medical benefits. The City contributes the minimum amount provided under Government Code Section 22825 of the Public Employees Medical and Hospital Care Act. In general, retirees must contribute any premium amounts in excess of the City contribution. However, as described below, a closed group of active employees and retirees receive additional postemployment benefits. Employees hired prior to the dates shown in the following table are allowed to convert their accumulated sick leave into postemployment medical benefits at retirement as long as they have ten or more years of service with the City. 57 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Group Hired priorto: Executive Management July 1, 1994 Mid -Management July 1, 1994 Fire Mid -Management July 1, 1994 Police Mid -Management July 1, 1994 General Services July 1, 1995 IBEW July 1, 1995 Maintenance and Operators July 1, 1995 Dispatchers July 9, 1994 Police October 10, 1994 Fire December6,1995 The most widely elected options are the "Bank option and the "Conversion" option. Under the "Bank option, accumulated sick leave amounts are translated by specified formulas into a bank amount that is then used to pay postemployment healthcare premiums until the "Bank is exhausted. Under the "Conversion" option, the accumulated sick leave hours are converted by specified formulas into a period of time during which the retiree will receive postemployment benefits. The number of hours is multiplied by 50% and converted to days. The City pays one month's premium for employee and dependents for each day after conversion. For each year of employment in excess of ten years, 2.5% is added to the 50% before conversion. The amount of premium paid will be the same as the premium paid by the City at the time of retirement. In the event that the premium increases, the retiree pays the difference. The City also allows a surviving dependent of a retiree to enroll in the Sick Leave Conversion program to purchase medical insurance at the employee only premium for the same period as if the retiree had not died. Retirees are allowed to enroll in any of the available PERS medical plans. The PERS minimum amount will continue for the life of the retiree and surviving spouse. The "Conversion" benefit will continue until the end of a period that is based on accumulated sick leave at retirement. (b) Funding Policy Contribution requirements of the postemployment benefit are based on pay-as-you-go financing. For fiscal year 2008-09, the City contributed $589,652, or 33.03%, of the actuarially required contributions. 58 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (c) ,Annual OPEB Cost and Net OPEB Obligation The City's annual other postemployment benefits (OPEB) cost is calculated based on the annual required contribution (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation: Annual required contribution/annual OPEB cost (expense) $ 1,785,173 Contribution made (589,652) Increase in net OPEB obligation 1,195,521 Net OPEB obligation - beginning of year - Net OPEB obligation- end of year $ 1,195,521 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for FY 2008-09, the initial year implementing GASB Statement No. 45, is as follows: Fiscal year ended 06/30/2009 Annual OPEB Cost $ 1,785,173 59 Percentage of Annual OPEB Cost Contributed 33.03% Net OPEB Obligation $ 1,195,521 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (d) Funding Status and Funding Progress As of January 1, 2008, the most recent actuarial valuation date, the funded status of the Retiree Health Plan was as follows: Actuarial accrued liability(AAL) Actuarial value of plan assets Unfunded actuarial accrued liability (UAAL) Funded ratio (actuarial value of plan assets/AAL) Annual covered payroll (active plan members) UAAL as percentage of annual covered payroll (e) Actuarial Methods and Assumptions $ 23,323,165 0 $ 23,323,165 0.0% $ 9,846,065 237% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Projections of benefits for financial purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the plan members to that point. The actuarial methods and the assumptions used include techniques that are designed to reduce short -tem volatility in actuarial accrued liabilities and the actuarial value of assets, consistentwith the long-term perspectiveof the calculations. In the January 1, 2008 actuarial valuation, the entry age normal cost method was used. The actuarial assumptions included a 4% discount rate to calculate the present value of future benefit payments; an annual healthcare cost trend rate of 8.5% initially, reduced by .3 percent increments to an ultimate rate of 5.5% in the eleventh year and beyond; the PERS minimum benefit will increase 5% per year; a 3.25% annual rate of increase in payroll; assumed that 100% future eligible retirees will elect to maintain their enrollment in a PERS medical plan and qualify for the City's minimum contribution; 75% of future retirees will enroll a spouse; and also assumed that 100% of General Services, Maintenance and Operators and Dispatcherswill elect the conversion option and 50% of Executive Management, Mid Management and Policewill elect the option, The conversion option is not availableto IBEW and Fire retirees. The unfunded actuarial accrued liability is amortized as a level of percentage of expected payroll over thirty years. 60 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (12) CLAIMS AND BENEFITS The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City is self-insured as discussed in the following paragraphs for which liabilities are recorded in the Internal Service Fund -Insurance Funds. 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 ManagementAuthority. 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 policy through the membership with the Local Agency Workers' Compensation Excess Joint Powers Authority with coverage up to $300,000,000 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 unemploymentfor its employees. General liability and workers' compensation claims are administered by an outside agency and all other claims are administered by the City. The City has accrued a liability of $6,531,336 at June 30, 2009, for all self-insured claims in the Internal Service Fund -Insurance Funds 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, 2009 and 2008 are as follows: Current -Year Claims and Changes Claim Beginning in Estimates Pavments FY 07-08 $ 6,396,000 1,589,702 (1,999,702) FY 08-09 $ 5,986,000 1,953,845 (1,408,509) 61 Ending $ 5,986,000 $ 6,531,336 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 (13) PARTICIPATION IN JOINT VENTURES Northern California PowerAgency The City, along with fourteen other public agencies, is a member of the Northern California PowerAgency (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 NCPAs project construction and development programs have been individually financed by project revenue bonds collateralized by NCPAs 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-defaultins Proiect Participant's Orisinal Proiect 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 Entitlementfor 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 upprimarily to provide the following advantages: minimizes the number and dollar amount of reserve that might otherwise be funded separately in connection with NCPAs 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. 62 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 As of June 30,2009, the City's balance in the NCPA General Operating Reserve, which has been credited with annual interest earnings and settlements, is $5,904,783. Proiect Participation The NCPA members and their percentage share at June 30,2009,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% 30.359e/- 0.3590%Biggs Biggs 0.2270 .118 0.4082 Gridley 0.3360 .210 0.7103 Healdsburg 3.6740 1.66 3.500 6.6068 Lodi 10.2800 10.37 8.036 39.50 18.4861 Lompoc 3.6810 2.30 3.500 5.00 6.6194 Palo Alto 22.92 11.0736 Plumas-Sierra Rural Electric Coop .7010 1.69 1.090 1.4647 Roseville 7.8830 12.00 40.000 36.50 14.1756 Santa Clara 44.3905 37.02 25.000 Turlock Irrigation District 6.3305 Ukiah 5.6145 2.04 5.454 10.0963 Bulk power purchased by the City through NCPA amounted to $46,404,57(during the year ended June 30,2009 and is reflected in utilities expense in the Electric Enterprise Fund. NCPA 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 $77 million at June 30,2008. 63 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 Hvdroelectric Proiect 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 powerfrom the project in excess of the District's requirementsfor the subsequent 50 years, subjectto 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, 2008, approximately $478 million in long-term debt used to finance this projectwas outstanding. NCPA Combustion Turbine Proiect 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 8.036% of the debt service and operating costs. At June 30, 2008 approximately $12 million in long-term debt was outstanding. Transmission Proiect The projectwas undertaken to meet certain obligations of NCPA under the NCPA/PG & E InterconnectionAgreement. The project includes an ownership interest in PG & E's 230kv Castle Rock 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 18.4861% of the debt service and operating costs. At June 30, 2008, approximately $2.5 million in long-term debt was outstanding. Capital Facilities Proiect 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 enhancementand emissions control. 64 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Under a power purchase agreement, the City is obligated to pay 39.5% of the debt service and operating costs. At June 30, 2008, approximately $64 million in long-term debt was outstanding. The following are the most recent available audited condensed financial statements of NCPA: Combined Balance Sheet June 30,2008 (in thousands) Assets Current assets $ 81,632 Restricted assets 155,151 Electric plant, net 344,171 Other assets and deferred charges 282,141 Total assets $ 863,095 Combined Statement of Revenues and Expenses and Changes in net Assets Year ended June 30,2008 (in thousands) Sales for resale $ 311,374 Operating expenses Other revenues (expenses) Future recoverable costs Net revenues before refunds Refundsto participants Increase in net assets (292,639) (28,783) 24,911 14,863 (13,456) 1,407 Liabilities and Capitalization Current portion of long-term debt $ 38,205 Other current liabilities 76,377 Other liabilities and deferred credits 128,913 Long-term debt, net 593,696 Net assets 25,904 Total liabilities and net assets $ 863,095 Combined Statement of Cash Flow Year ended June 30,2008 (in thousands) Net cash provided by operating activities $ 50,555 Net cash provided by investing activities 24,563 Net cash used in capital and related financing activities (76,728) Net cash used in noncapital and related financing activities (6,868) Decrease in cash and cash equivalents (8,478) Net assets, beginning of year 24,497 Cash and cash equivalents, beginning of year Net assets, end of year $ 25,904 Cash and cash equivalents end of year 65 96,219 $ 87,741 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 At June 30, 2008, NCPA's total outstanding long-term debt was $631,901,000 at an average interest rate of 5%. The current portion of long-term debt at June 30, 2008, was $38,205,000. Complete financial informationfor NCPA may be obtained at the following administration office: Northern California PowerAgency 180 Cirby Way Roseville, CA 95678 Transmission Agency of Northern California The Transmission Agency of Northern California (TANC) 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 interestthereon have been paid, unlessotherwise extended by the members. Increase in Non -defaulting Proiect Participant's Oriainal Proiect Entitlement Percenta 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% cf the non -defaulting Project Participant's original Project Entitlement Percentage Share. California -Oregon 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 Intertie as a part of the California -Oregon Intertie (COI) within the Western System Coordinating Council (WSCC) region. The WSCC approved rating of the COI is 4,800 MW and the Pacific Direct Current Intertie (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. 66 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 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 percentageof the costs. Pursuantto the IPA and a subsequent agreementwith 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. Under the TANC joint powers agreement, the City is obligated to pay 1.89% of its debt service and operating costs. At June 30, 2008, approximately $348 million in long-term debt was outstanding of which $15 million is considered current. Complete financial information for TANC 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 CaliforniaJoint Powers Risk Management Authority The City is a member, along with 17 other individual cities and 4 joint powers authorities, 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 through an actuarial analysis of loss history during the ten-year period preceding the three years priorto 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, 2009, deposits of $84,877 were paid to CJPRMA for the liability program. The participants at June 30, 2009, are as follows: City of Alameda, Chico, Fairfield, Fremont, Livermore, Lodi, NCCSIF, Petaluma, Pomona, Redding, Redwood Empire Municipal Insurance Fund, Roseville, San Leandro, San Rafael, Santa Rosa, Small Cities Organized Risk Effort, Stockton, Sunnyvale, Vacaville, Vallejo, and Yolo County Public Agencies Risk Management InsuranceAuthority. 67 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Complete financial information for CJPRMA maybe obtained at the following administration office: California Joint Powers Risk Management Authority 2333 San Ramon Valley Boulevard Suite 250 San Ramon, CA 94583-4456 Local Agency Workers' Compensation Excess Joint Powers Authority The City, along with thirty-three other public agencies, is a member of the Local Agency Workers' Compensation Excess Joint Powers Authority (LAWCX), which was formed July 1992, for fhe purpose of sharing the risk of workers' compensation losses. LAWCX offers $150,000, 250,000, $350,000, $500,000 and $1 million self-insured retentions (SIR) or a member can attach directly to the purchased excess insurance. LAWCX covers the layer above the member SIR up to $5 million. The City of Lodi's self-insured retention is $250,000. LAWCX participates in the California State Association of Counties Excess Insurance Authority (CSAC-EIA) to obtain coverage up to statutory limits. The City paid $293,724 in deposits to LAWCX during the fiscal year ended June 30,2009. The participants at June 30, 2009, are as follows: Alameda, ABAG, BCJPIA, City of Benicia, CCCTA, Central San Joaquin Valley Risk Mgmt Authority (CSJVRMA), City of Clovis, City of Coronado, City of Encinitas, East Bay Regional Park District, FASTS, 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. Complete financial informationfor LAWCX maybe obtained at the following administration office: Local Agency Workers' Compensation Excess Joint Powers Authority 1750 Creekside Oaks Drive, Suite 200 Sacramento, California 95833 California Transit Insurance Pool The City, along with thirty-four other public agencies is a member of California Transit Insurance Pool (CaITIP), ajoint 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. 68 (15) CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Liability protection coverage is provided under two programs: Program I applies to members who choose to utilize CaITIP's claims administrator services. Program II applies to members with self-insured retentions who choose to provide their own claims administrator services. CaITIP purchases excess insurance over its $1,000,000 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 $107,195 in deposits to CaITIP during the fiscal year ended June 30, 2009. 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. City of Lodi Transit System Self - Insured Limit Physical Program Retention (in millions) Damage Prefunded 20 Yes Complete financial information for CalTip maybe obtained at the following administration office: California Transit Insurance Pool 1415 L Street, Suite 200 Sacramento, CA 95814 DEFICIT IN FUND EQUITY Nonmaior Governmental Fund — Community Development —A deficit in fund equity in the amount of $921,716 at June 30, 2009, is attributed to the unprecedented decrease in development due to the slowing economy, The City has raised the building fees effective July 1, 2009 and an increase in planning rates is scheduled for City Council action in November, 2009. Additionally, with the current fiscal year budget, the department has cut staff in order to balance revenues with expenditures. 69 (16) CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 Nonmaior Governmental Fund — Community Center — A deficit in fund equity in the amount of $232,211 at June 30, 2009, is attributed to the unexpected repairs and maintenance that were previously deferred; equipment purchases necessary to support operation; and the need to reallocate personnel costs that were not addressed during the budget process. Revenue enhancements and realignment of personnel costs will be pursued in the future to adequately fund the Community Center. Internal Service Funds - Benefits Fund — A deficit in fund equity in the amount of $1,078,724 at June 30, 2009, is attributed to the establishment of the net OPEB obligation beginning in the current year in accordance with the requirements of GASB Statement No. 45. Net OPEB obligation as of June 30, 2009, was $1,195,521. The City is still weighing its options whether to pre -fund the OPEB obligation or continue on a pay-as-you- go basis. Itwill be addressed during the budget process. Proprietary Funds — Water Fund - The deficit in fund equity in the Water Fund of $13,488,264 was the result of the accrual of pollution remediation obligation as required by the implementation of GASB Statement No. 49. The balance of the accrual as of June 30, 2009, was $69,952,135. In January 2006, the City increased water rates specifically to address groundwater contamination cleanup. This increase is generating approximately $3.0 million annually. Restatement& Net Assets —Pollution Remediation (GASB 49) Lodi relies on groundwater for its drinking water and in the late 1980's, PCE and TCE pollution was discovered in several municipal water supply wells. Investigationsconducted by the California Regional Water Quality Control Board in the early 1990's under the Well Investigation program revealed numerous areas where TCE was discharged, or where PCE from dry cleaning operations were discharged to the sewer system. In 1997, the Department of Toxic Substances Control and the City entered into a cooperative agreement whereby the City assumed a lead role in the cleanup and agreed to pursue legal action against potentially responsible parties (PRPs). The City has settled with all the involved parties during the fiscal year. The City received a draft cleanup and abatement order to investigate the discharges of waste, clean up the waste and abate the effects of the discharges of waste in conformance with the State Board's Resolution No. 92-49 Policies and Procedures for Investigation and Cleanup and Abatement of Discharges Under the Water Code Section 13304 and with the Regional Boards' Water Quality Control Plan for the Sacramento River and San Joaquin River. The City then engaged the services of Treadwell and Rollo to advise the City on courses of action in the preparation of feasibility studies, remedial design, and remedial action plan to comply with the technical and reporting requirements CF the State Board. Pursuant to the requirements of GASB Statement No. 49, which was implemented effective July 1, 2008, the City and its consultants have estimated its potential pollution remediation liability as of June 30, 2008. Total Project cost is based on conceptual -level design; RemedialAction Plan (RAP) and project Work Plans are yet to be written. The City's beginning net assets have been restated by $70,505,924 for the purpose of recognizing the estimated pollution remediation liability as of June 30, 2008. 70 CITY OF L.ODI Notes to Basic Financial Statements (Continued) June 30,2009 (17) COMMITMENTS AND CONTINGENCIES Litigation and claims — The City has fully resolved the litigation over its groundwater contamination as a potential responsible parry including litigation with its former outside counsel regarding malpractice and fee claims. Citizen efforts to reduce these rates via initiative failed in the 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 owns a 1,000 acre wastewater treatment facility known as "White Slough" approximately 5 miles west of the contiguous city limit. Neighboring farming and dairy operations are in litigation over elevated nitrate levels in the area. Efforts to join the City in the litigation have been so far unsuccessful but are expected to continue. It is too early at this stage to estimate liability or damages if the City is joined in the action. However, the City Attorney does not currently expect the matterto have a material effect on the City's financial condition. 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. Water Purchase Agreement with Woodbridge Irrigation District — The City obtains its municipal water supply from wells located within the City, extracting water from the underground aquifer, which is replenished in part by flows of the Mokelumne River. To avoid being wholly dependent upon wells and the possible impacts of eventual overdraft of the groundwater supply, the City made a commitment in 2003 to purchase surface water supply from Woodbridge Irrigation District for 40 years beginning in 2003. The agreement provides for the purchase of 6,000 acre feet per year and the City pays the District $1.2 million annually. Commencing on January 1 of the seventh year, the amount payable to the District shall be increased by two percent (2%) per year or by the change in the Consumer Price Index whichever is higher but shall not exceed five percent (5%). 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. There is no cumulative arbitrage liability as of June 30, 2009, for any of the City's outstanding Certificates of Participation. (18) FUTURE GASB PRONOUNCEMENTS The GASB has issued Statement No. 51, Accounting and Financial Reporting for Intangible Assets, which establishes accounting and financial reporting requirements for intangible assets including easements, water rights, timber rights, patents, trademarks, and computer software. The requirements of this statementwill be effective for the fiscal year ending June 30, 2010. In February of 2009, the GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, which enhances the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. The objective of this statement is to establish fund balance classifications that comprise 71 CITY OF LODI Notes to Basic Financial Statements (Continued) June 30,2009 a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. This statement is effective for the City's year ending June 30,2011. 72 REQUIRED SUPPLEMENTARY INFORMATION Actuarial Valuation Date 6/30/05 6/30/06 6/30/07 City cf Lodi Required Supplementary Information Schedule cf Funding Progress- Pension Plan June 30,2009 (in thousands of dollars) 73 Unfunded EntryAge Unfunded Actuarial Actuarial Actuarial Liabilityas Actuarial Accrued Accrued Funded Covered Percentage of Asset Value Liability Liability Ratio Payroll Covered Payroll (A) (B) [(B) - (A)l [(A) / (B)l (C) {[(B) — (A)l/(C)) $ 150,967 $ 177,150 $ 26,183 85% $ 26,992 97.00% 163,888 190,366 26,478 86% 26,836 98.67% 177,504 203,173 25,669 87% 27,322 93.95% 73 City of Lodi Required Supplementary Information Schedule of Funding Progress — OPEB Plan June 30,2009 (in thousands of dollars) As, required by GASB Statement No, 45, the City will report three years of data in the above table, as the information becomes available in subsequent years. 74 Actuarial Normal Annual UAALAs a Actuarial Value Accrued Unfunded Funded Covered Percentage of Valuation of Assets Liability Liability Ratio Payroll Covered Payroll Date (A) (B) [(B) - (A)] [(A) / (B)l (C) ([(B) — (A)l/(C)) 1/1/08 $ 0 $ 23,323 $ 23,323 0% $ 9,846 237% As, required by GASB Statement No, 45, the City will report three years of data in the above table, as the information becomes available in subsequent years. 74 Irk CITY OF LODI SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND Year ended June 30,2009 Variance with Original Final Actual Final Budget REVENUES Taxes $ 23,973,060 23,497,060 23,516,164 S 19.104 Licensesand permits 79,300 79,300 61,783 (17,517) Intergovemmentalevenues 10,937,000 9,933,000 8,967,410 (965.590) Chargesfor services 1,188,220 1,292,950 1,055,137 (237,813) Fines, forfeits and penalties 1,257,400 1,257,400 1,415,174 157,774 Investmentand rentalincome 270.500 270.500 231.181 (39,319) Miscellaneous revenue 953,300 93,300 446,404 353,104 Total revenues 38,658,780 35,423,510 35,693,253 (730,257) EXPENDITURES Current: General government: City Council 111,834 110,834 105.484 5,350 City Manager 1,138,130 1,085,631 1,060,920 24.711 City Clerk 469,098 458.238 419.908 38.330 CityAttomey 488,567 524.184 518,939 5,245 HumanResources 623,257 554,566 521.447 33.119 Information Systems 1,071,547 1,075,398 1,024,470 50.928 Financial Services 1,703,947 1,562,120 1,542,768 19,352 Budgetand Treasury 642,798 551.319 542,945 8,374 Non Departmental 1,100,106 1,231,045 1,185215 45,830 Total general government 7,349,284 7,153,335 6,922,096 231,239 Publicprotection: Police 15,804,665 15,481,474 15,399,921 81.553 Fire 9,140,875 9,177,986 9,063,850 114,136 Total public protection 24,945,540 24.659.460 24,463,771 195.689 PublicWorks 3,509,644 3,297,126 2,967,402 329.724 Library 1,640,020 1,541,159 1,499,720 41.439 Parks 2,200,680 2,322,991 2,160,035 162,956 Debtservice: Interestandfiiscalcharges 18.516 18.516 18.516 Principal payments 129,487 129.487 129,487 Total debt service 148,003 148,003 148.003 Total expenditures 39,793,171 39,122,074 38,161,027 961,047 DEFICIENCYOF REVENUES UNDER EXPENDITURES (1,134,391) (2,698,564) (2,467,774) 230,790 OTHER FINANCING SOURCES (USES) Transfersin 5.502.330 5,367,983 5.367.983 Transfersout (3,613,644) (4,442,883) (4,442,883) Total otherfinancing sources (uses) 1,888,686 925.100 925.100 NET CHANGE IN FUND BALANCE 754,295 (1,773,464) (1,542,674) 230,790 FUND BALANCE, beginningofyear 4,534,293 5,308,862 5,308,862 FUND BALANCE, end of year $ 5,288,588 3,535,398 3,766,1683 230.790 The noteto the required supplementaryinformationis an integralpart of this schedule Irk CITY OF LODI Notes to the Required Supplementary Information June 30,2009 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 compliancewith 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 priorto the first regular Council meeting in June of each year, the City Manager submits to the City Council a proposed Financial Plan and Budgetfor 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 W amount) is at the department level. The operating budget is prepared and controlled at the department level (e.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 Manager may transfer appropriations from one activity to anotherwithin a department without approval from the City Council. All other appropriation adjustments during the year, whether transfers, increases or decreases, require City Council approval. 77 (This page intentionally left blank.) , COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS Nonmajor Governmental Funds include: Special Revenue Funds accountfor the proceeds of specific revenue sources that are restricted bylaw 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 resourcesto be used for the acquisition or construction of major capital facilities, other than those financed by proprietaryfunds. CITY OF LODI COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS June 30,2009 Assets Cash and investments Restricted assets Receivables: Accounts, net Interest Due from other funds Due from other governmental agencies Loan receivable Other assets Advances to other funds Total assets Liabilitiesand Fund Balances Liabilities: Accounts payable and other liabilities Due to other funds Advances from other funds Deferred revenue Total liabilities Special Capital Revenue Proiects Total $ 10,022,991 5,101,629 $ 15,124,620 1,687,747 1,687,747 458,594 187,384 $ 458,594 36,027 10,680 46,707 469,200 23,472 492,672 480,627 380,564 861,191 1,084,000 1,730,669 1,084,000 2.747 5,035 7,782 5,806,843 328,385 328,385 $ 12,554,186 7,537,512 $ 20,091,698 $ 146,371 187,384 $ 333,755 1,596,026 23,472 1,619,498 328,385 1,519,813 1,848,198 3,046,117 328,385 3,046,117 5,116,899 1,730,669 6,847,568 Fund Balances: Reserved for encumbrances 897,512 261,188 1,158,700 Reserved fqr advances to other funds 328,385 328,385 Unreserved -designated for specific projects and programs 6,539,775 5,217,270 11,757,045 Total fund balances 7,437,287 5,806,843 13,244,130 Total liabilities and fund balances $ 12,554,186 7,537,512 $ 20,091,698 78 CITY OF LODI COMBINING STATEMENTOF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS Year ended June 30,2009 79 Special Debt Capital Revenue Service Projects Total Revenues: Licenses and permits $ 369,648 $ 369,648 Intergovernmental revenues 3,363,804 897,877 4,261, 681 Charges for services 2,196,904 76,638 2,273,542 Fines, forfeits and penalties 900 900 Investment and rental income 590,722 99,967 690,689 Miscellaneous revenue 671,518 643,691 1,315,209 Total revenues 7.193.496 1,718,173 8,911,669 Expenditures: Current: General government 1,509,163 1,509,163 Public protection 251,744 251,744 Pu bl icworks 1,690,065 1,690,065 Community development 1,341,445 1,341,445 Parks and recreation 1,615,726 1,615,726 Capital outlay 2,926,046 3,865,214 6,791,260 Debt service: Interest and fiscal charges 1,109, 387 10,920 1,120, 307 Principal payments 659,453 659,453 Total expenditures 9,334,189 1,768,840 3,876,134 14,979,163 Deficiencyof revenues under expenditures (2,140,693) (1,768,840) (2,157,961) (6,067,494) Other financing sources (uses): Transfers in 2,036,434 1,768,840 1,436,402 5,241,676 Transfersout (773,793) (25,000) (798,793) Total otherfinancing sources (uses) 1,262,641 1,768,840 1,411,402 4,442,883 Net change in fund balances (878,052) (746,559) (1,624,611) Fund balances, beginning of year 8,315,339 6,553,402 14,868,741 Fund balances, end of year $ 7,437,287 5,806,843 $ 13,244,130 79 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS SPECIAL REVENUE FUNDS Community Center This fund was established to accountfor the revenues and expenditures related to the activities of the Hutchins Street Square and Performing Arts Theater. Recreation This fund was established to accountfor the revenues and expenditures related to the wide -range of recreation activities and programs offered to the public. 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 monies. Community Development This fund was established to accountfor development planning and project review services including land use entitlements, permit processing and review/inspection of public improvementsto ensure orderly physical growth and developmentof the City. Streets Fund This fund was established to accountfor the following: Gas Tax To account for revenues and expenditures apportioned to the City under the Streets and Highway Code. Portions of the tax 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 November4, 1991. 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. 80 Intermodal Surface Transportation EfficiencyAct (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. 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 1/4% 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 maintenanceof street systems; and Article 4 funds, which are restricted for publictransit 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. 81 ASSETS Cash and Investments Receivables Accounts. net Interest Due from other funds Due from other governmental agencies Otherassets Loan receivable TOTALASSETS LIABILITIESAND FUND BALANCES LIABILITIES Accounts payableand other liabilities Due to other funds Advances from other funds Deferred revenue TOTAL LIABILITIES FUND BALANCES (DEFICIT) Reserved for encumbrances Unreserved-designatedfor specific projects and programs TOTAL FUND BALANCES (DEFICIT) TOTAL LIABILITIESAND FUND BALANCES CITY OF LODI COMBINING BALANCE SHEET NONMAJORGOVERNMENTAL FUNDS -SPECIAL REVENUE FUNDS June 30,2009 $ 29.699 10.845 8.860 9.904 87,063 $ 146,371 205,570 921,256 469,200 1,596,026 328.385 328,385 HOME Program & 1.084.000 3,046,117 235,269 10,845 8,860 931.160 2,377,565 1,553,200 5,116,899 (232,211) 54,410 153.277 (921,716) 8,310,298 Community $ 3.058 Community 162,137 9,444 Public Community Development Center Recreation Safety Development Streets Transportation Block Grants Total $ 53,531 111,680 9,829,788 27,992 $ 10,022,991 2,527 10,414 40.126 8,538 351,846 45.143 458,594 618 35,315 94 36,027 469,200 469,200 9,713 1,714 469,200 480,627 531 1,310 906 2.747 1,084,000 1,084,000 $ 1,553,200 $ 12,554,186 $ 29.699 10.845 8.860 9.904 87,063 $ 146,371 205,570 921,256 469,200 1,596,026 328.385 328,385 1,962,117 1.084.000 3,046,117 235,269 10,845 8,860 931.160 2,377,565 1,553,200 5,116,899 4,500 7,620 2,856 882,536 897.512 (236,711) 46,790 153,277 (924,572) 7,427,762 73,229 6,539,775 (232,211) 54,410 153.277 (921,716) 8,310,298 73,229 7,437,287 $ 3.058 65,255 162,137 9,444 10,687,863 73,229 1,553,2006 12,554,186 82 REVENUES Licensesand permits Intergovernmental revenues Charges for services Fines. forfeits and penalties Investmentand rental income Miscellaneous revenue Total revenues EXPENDITURES Current General government Public protection Publicworks Communitydevelopment Parks and recreation Capitaloutlay Total expenditures EXCESS (DEFICIENCY)OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES (DEFICIT), beginningof year FUND BALANCES (DEFICIT), end of year CITY OF LODI COMBINING STATEMENTOF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS- SPECIAL REVENUEFUNDS Year ended June 30,2009 HOME Program & Community Community Public Community Development Center Recreation Safety Development Streets Transportation Block Grants $ 369.648 260.283 17,161 2,923.324 45,143 117,893 442,171 1.034.807 379,559 340.367 900 240.306 106.171 3.450 239.831 435 215 182 119,724 550,962 682.912 1,141,193 264.815 886,092 4,054,484 964 46.107 117.893 Total $ 369.648 3,363,804 2,196,904 900 590,722 671,518 7,193,496 1,509,163 1,509,163 251,744 251.744 1,572,172 117.893 1,690,065 1,341,445 1,341,445 1,615,726 1,615,726 2,849,697 76,349 2,926,046 1,509,163 1,615,726 251,744 1,341,445 4,421,869 76,349 117.893 9,334,189 (826,251) (474,533) 13.071 (455,353) (367.385) (30.242) (2,140,693 1,261.872 534.615 239.947 (667.832) (5,672) (4,183) (96.106) 594,040 528,943 235,764 (96.3D6) (232,211) 54.410 13,071 (219.589) (463,491) (30,242) 140.206 (702,127) 8,773,789 103.471 $ (232,211) 54.410 153,277(921,716) 8,310,298 73,229 R3 2,036,434 (773,793) 1,262,641 (878,052) 8,315,339 $ 7.437.287 84 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETANDACTUAL NONMAJOR GOVERNMENTAL FUNDS- SPECIAL REVENUE FUNDS Year ended June 30,2009 COMMUNITY CENTER FINAL BUDGET ACTUAL VARIANCE REVENUES Charges for services $ 431,200 442,171 $ 10,971 Investmentand rental income 234,539 240,306 5,767 Miscellaneous revenue 435 435 Total Revenue 665,739 682,912 17,173 EXPENDITURES Current General government 1,509,163 1,509,163 DEFICIENCY OF REVENUES UNDER EXPENDITURES (843,424) (826,251) 17,173 OTHER FINANCING SOURCES (USES) Transfers in 1,261,872 1,261,872 Transfers out (667,832) (667,832) Total other financing sources (uses) 594,040 594,040 NET CHANGE IN FUND BALANCE (249,384) (232,211) 17,173 FUND BALANCE, BEGINNING OF YEAR FUND DEFICIT, END OF YEAR $ (249,384) (232,211) $ 17,173 84 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETAND ACTUAL NONMAJORGOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30,2009 85 RECREATION FINAL BUDGET ACTUAL VARIANCE REVENUES Charges for services $ 1,086,338 1,034,807 $ (51,531) Investment and rental income 60,000 106,171 46,171 Miscellaneous revenue 215 215 Total Revenue 1,146,338 1,141,193 (5,145) EXPENDITURES Current Parks and recreation 1,763,730 1,615,726 148,004 DEFICIENCY OF REVENUES UNDER EXPENDITURES (617,392) (474,533) 142,859 OTHER FINANCING SOURCES (USES) Transfers in 652,500 534,615 (117,885) Transfers out (5,672) (5,672) Total other financing sources (uses) 646,828 528,943 (117,885) NET CHANGE IN FUND BALANCE 29,436 54,410 24,974 FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR $ 29,436 54,410 $ 24,974 85 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETAND ACTUAL NONMAJORGOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30,2009 PUBLIC SAFETY FINAL BUDGET ACTUAL VARIANCE REVENUES Intergovernmental revenues Fines, forfeits and penalties Investmentand rental income Miscellaneous revenue Total Revenue EXPENDITURES Current Public protection NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNINGOF YEAR FUND BALANCE, END OF YEAR 86 $ 683,517 260,283 $ (423,234) 3,000 900 (2,100) 3,450 3,450 182 182 686,517 264,815 (421,702) 140,206 140,206 $ 190,131 153,277 $ (36,854) CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETANDACTUAL NONMAJOR GOVERNMENTAL FUNDS- SPECIAL REVENUE FUNDS Year ended June 30,2009 COMMUNITY DEVELOPMENT REVENUES Licenses and permits Intergovernmental revenues Charges for services Miscellaneous revenue Total Revenue EXPENDITURES Current Community development DEFICIENCY OF REVENUES UNDER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCE FUND DEFICIT, BEGINNINGOF YEAR FUND DEFICIT, END OF YEAR 87 FINAL BUDGET ACTUAL VARIANCE $ 899,999 369,648 $ (530,351) 17,161 17,161 380,001 379,559 (442) 150,000 119,724 (30,276) 1,430,000 886,092 (543,908) 1,628,438 1,341,445 286,993 (198,438) (455,353) (256,915) 239,947 239,947 (4,183) (4,183) 235,764 235,764 37,326 (219,589) (256,915) (702,127) (702,127) $ (664,801) (921,716) $ (256,915) CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETAND ACTUAL NON MAJOR GOVERNMENTAL FUNDS- SPECIAL REVENUE FUNDS Year ended June 30,2009 REVENUES I ntergovern mental revenues Charges for services Investmentand rental income Miscellaneous revenue Total Revenue EXPENDITURES Current Public works Capital outlay Total Expenditures DEFICIENCYOF REVENUES UNDER EXPENDITURES OTHER FINANCING USES Transfers out NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END CF YEAR 88 STREETS FINAL BUDGET ACTUAL VARIANCE $ 3,412,996 2,923,324$ (489,672) 1,268,138 340,367 (927,771) 121,400 239,831 118,431 550,962 550,962 4,802,534 4,054,484 (748,050) 1,611,563 1,572,172 39,391 7,147,213 2,849,697 4,297,516 8,758,776 4,421,869 4,336,907 (3,956,242) (367,385) 3,588,857 (96,106) (96,106) (4,052,348) (463,49 3,588,857 8,773,789 8,.773.789 $ 4,721,441 8,310,298$ 3,588,857 SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETAND ACTUAL NONMAJORGOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30,2009 REVENUES I ntergovern mental revenues Investmentand rental income Total Revenue EXPENDITURES Capital outlay NET CHANGE ]N FUND BALANCE FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR 89 TRANSPORTATION FINAL ` BUDGET ACTUAL VARIANCE $ 95,116 45,143 $ (49,973) 2,000 964 1,036 97,116 46,107 (51,009) 106,432 76,349 30.083 (9,316) (30,242) (20,926) 103,471 103,471 $ 94,155 73,229 $ (20,926) CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURESAND CHANGES IN FUND BALANCE BUDGETAND ACTUAL NONMAJORGOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30,2009 HOME PROGRAM and COMMUNITY DEVELOPMENT BLOCK GRANTS FINAL BUDGET REVENUES Intergovernmental revenues $ 461,105 EXPENDITURES Current Public Works $ 461.105 NET CHANGE IN FUND BALANCE FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR 90 ACTUAL II7,893 3 VARIANCE (343,212) 117.893 $ 343,212 (This page intentionally left blank.) NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECT FUNDS CAPITAL PROJECT FUNDS Vehicle and Equipment This fund was established to accountfor the financing and replacement of vehicles and equipmentfor all funds of the City with the exception of the Enterprise Funds. Financing is primarily provided through 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. 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 restorationof 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. 92 CITY OF LODI COMBINING BALANCESHEET NONMAJOR GOVERNMENTAL FUNDS -CAPITAL PROJECT FUNDS June 30,2009 ASSETS Cash and investments Restricted assets Receivables: Interest Duefrom otherfunds Due from other governmental agencies Advances to other funds Other assets TOTALASSETS LIABILITIES Accounts payable and other liabilities Due to other funds Advances from other funds TOTAL LIABILITIES FUND BALANCES Reserved for encumbrances Reserved for advances to other funds Unreserved-designatedfor specific projects and programs TOTAL FUND BALANCES TOTAL LIABILITIESAND FUND BALANCES Total $ 5,101,629 1,687,747 10,680 23.472 380,564 328,385 5,035 $ 7,537,512 $ 174 65,145 65,500 56,565 $ 187,384 23,472 23,472 1.519,813 1,519,813 174 65,145 1,585,313 80,037 1,730,669 4,168 246,463 10,557 Capital Vehicle and Hutchins Outlay Lodi Equipment Library Street Square Reserve Lake 5,806,843 $ 1,935,331 236,374 2,181 4,983,062 $ 1,935,331 231,339 2,181 2,932,778 1,687,747 10,680 23,472 380,564 328,385 5,035 $ 1,935,331 236,374 2,181 4,983,062 380.564 Total $ 5,101,629 1,687,747 10,680 23.472 380,564 328,385 5,035 $ 7,537,512 $ 174 65,145 65,500 56,565 $ 187,384 23,472 23,472 1.519,813 1,519,813 174 65,145 1,585,313 80,037 1,730,669 4,168 246,463 10,557 261,188 328,385 328,385 1,930,989 171,229 2,181 2,822,901 289,970 5,217,270 1,935,157 171,229 2,181 3,397,749 300,527 5,806,843 $ 1,935,331 236,374 2,181 4,983,062 380,564 $ 7,537,512 93 CITY OF LODI COMBINING STATEMENT OF REVENUES, EXPENDITURESAND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS- CAPITAL PROJECT FUNDS Year ended June 30,2009 REVENUES Intergovernmental revenues Charges for services Investmentand rental income Miscellaneous revenue Total revenues EXPENDITURES Capital outlay Debt service: Interestand fiscal charges Total expenditures EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) NET CHANGE IN FUND BALANCES FUND BALANCES, BEGINNING OF YEAR FUND BALANCES, END OF YEAR 94 Hutchins Capital Vehicle and Street Outlay Lodi Equipment Library Square Reserve Lake Total $ 59,090 838,787 $ 897,877 76,638 76,638 99,967 99,967 23.127 555,000 10,350 55,214 643,691 23,127 555,000 246,045 894,001 1,718,173 265,910 1,069,717 1,926,278 603,309 3,865,214 10,920 10,920 265,910 1,069,717 1,937,198 603,309 3,876.134 (242,783) (514,717) (1,691,153) 290,692 (2,157,961) 591,395 685,000 160,007 1,436,402 (25,000) (25,000) 566,395 685,000 160,007 1,411,402 323,612 170,283 (1,531,146) 290,692 (746,559) 1.611,545 946 2,181 4,928,895 9,835 6,553,402 $ 1,935,157 171,229 2,181 3,397,749 300,527 $ 5,806,843 94 (This page intentionally left blank.) INTERNAL SERVICE FUNDS Internal Service Funds are maintained to account for the internal transfer of services between operating units of the City and to achieve a level of operating efficiency that may not be available if the same activities were performed by multiple organizations. Fleet Services This fund is used to accountfor the operation, maintenanceand timely replacementof the City's fleet of vehicles which serve the transportation needs cf all city departments. Benefits These funds are used to accountfor the following employee benefits: Dental Employee assistance program Chiropractic Employee recognition program Life/accidental insurance Unemployment insurance Medical Flexible spending program Vision Long Term Disability Insurance These funds are used to account for the following insurances: General Liability Workers' Compensation . Other Insurance CITY OF LODI COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS June 30,2009 ASSETS Current assets: Cash and investments Receivables: Accounts, net Interest Inventory Other assets Noncurrent assets: Capital assets (net) Total current assets LIABILITIES Current liabilities: Accounts payable and other liabilities Self-insurance liability Accrued compensated absences Noncurrent liabilities: Self-insurance liability Accrued compensated absences Net OPEB obligation Total liabilities NET ASSETS (DEFICIT) Invested in capital assets, net cf related debt Unrestricted (deficit) Total net assets (deficit) Fleet Services Benefits Insurance Total $ 62,286 167,935 7,003,431 $ 7,233,652 639 639 100 1,070 23,332 24,502 122,266 122,266 14,868 14,868 36,181 36,181 220,833 184,512 7,026,763 7,432,108 49,995 67,715 57,633 68,552 1,195,521 176,180 1,263,236 67,638 185,348 1,953,845 1,953,845 57,633 4,577,491 4,577,491 68,552 1,195,521 6,598,974 8,038,390 36,181 36,181 8,472 (1,078,724) 427,789 (642,463) $ 44,653 (1,078,724) 427,789 $ (606,282) 96 CITY OF LODI COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NETASSETS INTERNAL SERVICE FUNDS Year ended June 30,2009 OPERATING REVENUES Charges for services OPERATING EXPENSES Personnel services Supplies, materials and services Utilities Depreciation and amortization Claims TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) NONOPERATING REVENUES Investment income Other revenues TOTAL NONOPERATING REVENUES Change in net assets NET ASSETS - BEGINNING OF YEAR, as previously reported Change in accounting principle NETASSETS - BEGINNING OF YEAR, as restated NETASSETS (DEFICIT) - END OF YEAR Fleet Services Benefits Insurance Total $ 1,240,197 6,442,018 1,306,447 $ 8,988,662 950,620 314,749 36,629 1,301,998 261,261 5,458,670 353,424 6,073,355 3,417 3,417 1,447 1,447 7,875 1,785,173 1,953,845 3,746,893 1,224,620 7.558.592 2,343,898 11,127,110 15.577 (1,116,574) (1,037,451) (2,138,448) 165,835 165,835 33 21,540 40,885 62,458 33 21.540 206,720 228,293 15.610 (1,095,034) (830,731) (1,910,155) 16.310 1,258,520 1,274,830 29,043 - 29,043 29,043 16,310 1,258,520 1,303,873 $ 44,653 (1,078,724) 427,789 $ (606,282) 97 CITY OF LODI COMBINING STATEMENT OF CASH FLOWS INTERNALSERVICE FUNDS Year ended June 30,2009 Cash flows from operating activities: Receipts from customers and users Receipts from interFund services provided Cash paid to suppliers for goods & services Payments to employees Net cash provided by (used for) operating activities Cash flows from investing activities: Intereston investments Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Reconciliation of operating income (loss) to net cash provided by (used for) operating activities: Fleet Services Benefits Insurance Total $ 33 18,393 45,852$ 64,278 1,240,197 6,442,018 1,306,447 8,988,662 (257,234) (6,019,628) (1,757,678) (8,034,540) (935,926) (314,749) (36,629) (1,287,304) 47,070 126,034 (442,008) (268,904) Other revenues 33 7,218 198,053 205,271 Change in assets and liabilities: 7,218 198,053 205,271 47,070 133,252 (243,955) (63,633) 15,216 34,683 7,247,386 7,297,285 $ 62,286 167.935 7,003,431$ 7,233,652 Operating Income (loss) $ 15,577 (1.1 16,574) (1,037,453$ (2,138,448) Adjustments to reconcile operating income (loss) to net cash provided (used for) by operating activities: Depreciation and amortization 1,447 1,447 Other revenues 33 21,540 40,885 62,458 Change in assets and liabilities: Decrease (increase) in accounts receivable (639) 4,967 4,328 Increase in inventory (7,630) (7,630) Increase in other assets (2,508) (2,508) Increase in accounts payable and other liabilities 22,949 28,694 4,255 55,898 Increase in compensated absences 14,694 14,694 Increase in net OPEB obligation 1,195,521 1,195,521 Increase in self-insurance liability 545,336 545,336 Net cash provided (used for) by operating activities $ 47,070 126.034 (442,008$ (268, 904) 98 (This page intentionally left blank.) FIDUCIARY FUNDS Private -purpose Trust Funds These funds are used to accountfor 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 Beckman Districts and the Downtown and Cherokee Lane Districts. ASSETS Cash and Investments TOTALASSETS NET ASSETS CITY OF LODI COMBINING STATEMENT OF FIDUCIARY NET ASSETS PRIVATE-PURPOSETRUST FUNDS June 30,2009 Private-Puroose Trust Funds Hutchins Street Library Square Bequest Total $ 246,825 1,483 $ 248,308 246,825 1,483 248,308 $ 246,825 1,483 $ 248,308 100 CITY OF LODI COMBINING STATEMENT OF CHANGES IN FIDUCIARY NETASSETS FIDUCIARY FUNDS Year ended June 30,2009 ADDITIONS Investment income and donations Total additions DEDUCTIONS Current Library Interestand fiscal charges Total deductions CHANGE IN NETASSETS NETASSETS, BEGINNING OF YEAR NETASSETS, END OF YEAR Private -Purpose Trust Funds Hutchins Street Library Square Bequest Total $ 37 $ 37 A7 37 419,287 419,287 186,691 186,691 605,978 605.978 (605,978) 37 (605,941) 852.803 1,446 854,249 $ 246,825 1,483$ 248,308 101 ASSETS Cash and investments Special assessment receivable Interest receivable TOTAL ASSETS LIABILITIES Agency obligations TOTAL LIABILITIES CITY OF LODI STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND Year ended June 30,2009 Special Assessments Balance Balance 711/08 Additions Deductions 6/30/09 $ 662,098 565,918 610,140 $ 617,876 78,823 78,336 78,823 78,336 4,642 2,083 4,642 2,083 $ 745,563 646,337 693,605 $ 698,295 $ 745,563 47,268 $ 698,295 $ 745,563 47,268 $ 698,295 102 (This page intentionally left blank.) STATISTICAL TABLES UNAUDITED STATISTICAL SECTION The Statistical Section provides detailed information as a framework for understanding the information in the financial statements, notes and required supplementary information. This section presents additional data and analysis that may provide the readerwith valuable insight regarding the demographics and the overall health of the City. Contents Financial Trends These schedules contain trend informationto help the reader understand howthe City's financial performance and well-being has changed over time. Revenue Capacity These schedules contain information to help the reader assess the factors affecting the City's most significant local revenue source, the property tax. Debt Capacity These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future. Demographicand Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons overtime and with other governments. Operating Information These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the city provides and the activities it performs. Sources Unless otherwise noted, the information in these schedules are derived from the comprehensive annual financial reports for the current year. The City implemented GASB Statement 34 for the fiscal year ended June 30,2003, schedules presenting government -wide information include information beginning that year. 104 Paaes 105-110 MiliiQifi[:1 117-122 123-125 126-130 CITY OF LODI NET ASSETS BY COMPONENT LAST SEVEN FISCAL YEARS (Dollaramounts in thousands) FiscalYear 2009 2008 2007 2006 2005 2004 2003 Governmental activities: Invested in capital assets, net of related debt Invested in capital assets, net of related debt $ 115,036 $ 107,874 $ 110,815 $ 111,572 $ 106,293 $ 100,749 $ 94,681 Restricted 13,492 15,043 15,044 14,526 13,465 11,205 12,811 Unrestricted (3,462) (4,162) (3,968) (8,838) (8,801) (9,437) (7,334) Total governmental activities net assets $ 125,066 $ 118,755 $ 121,891 $ 117,260 $ 110,957 $ 102,517 $ 100,158 Business-typeactivities: Invested in capital assets, net of related debt $ 95,533 $ 98,109 $ 97,961 $ 77,494 $ 67,668 $ 64,214 $ 62,752 Restricted 8,657 8,711 10,969 2,351 2,578 240 Unrestricted (35,448) 26,460 6,417 1,880 7,445 (7,511) (10,270) Total business -type activities net assets $ 60,085 $ 133,226 $ 113,089 $ 90,343 $ 77,464 $ 59,281 $ 52,722 Primary government: Invested in capital assets, net of related debt $ 210,569 $ 205,983 $ 208,776 $ 189,066 $ 173,961 $ 164,963 $ 157,433 Restricted 13,492 23,700 23,755 25,495 15,816 13,783 13,051 Unrestricted (38,910) 22,298 2,449 (6,958) (1,356) (16,948) (17,604) Total primary government net assets $ 185,151 $ 251,981 $ 234,980 $ 207,603 $ 188,421 $ 161,798 $ 152,880 Note: The City of Lodi implemented GASB 34 for the fiscal year ended June 30, 2003. Information prior to the implementation of GASB 34 is not available. Source: City of Lodi Financial Services Division 105 Expenses Governmental activities General government Public protection Publicworks Community development Library Parks and recreation Interest and fiscal charges Total governmental activitiesexpenses Business -type activities Electric Wastewater Water Transit Total business-typeactivitiesexpenses Total primary government expenses Program Revenues Governmental activities Charges for services General government Public protection Publicworks Community development Library Parks and recreation Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities Charges for services Electric Wastewater Water Transit Operating grants and contributions Capital grantsand contributions Total business -type activities program revenues Total primary government program revenues Net(Expense)/Revenue Governmental activities Business -type activities Total primary government net expense CITY OF LODI CHANGES IN NET ASSETS LAST SEVEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 9.451 $ 8.307 $ 7,853 $ 9,746 $ 9.958 $ 13,167 $ 12.238 27,110 25,531 23,328 22,105 22,253 19,162 16,632 10,464 12,224 10,599 13,229 12,377 11,868 10,946 1,323 2,027 2.130 2,290 3,018 3,064 5.389 1,495 1,696 1,630 1.485 1.484 1,409 1,454 4,609 4.414 4.172 4.114 4.565 4,095 3.989 1,134 1.166 1,201 1,234 1,617 1,267 1,214 55,586 55,365 50.913 54,203 52,254 50,968 46,473 73.358 65,201 67,534 63.780 57,308 55.943 51,388 10,940 12,227 9,271 8.574 10,653 6,297 6,141 9,604 9,920 9.875 8,256 11.748 7,489 12.879 4,832 3,908 3,577 3,643 3,018 3,064 5.389 98.734 91,256 90,257 84,253 82,727 72,793 75,797 $ 154,320 $146,621 $ 141,170 $ 138,456 $134,981 $123,761 $ 122.270 $ 1,631 $ 1,544 $ 1,280 $ 1,232 $ 3,639 $ 3,144 $ 2,355 844 837 582 563 623 525 541 358 755 295 320 461 430 335 749 1.085 1.174 1,630 44 53 53 54 49 50 57 1.158 851 1,007 918 833 679 586 1,951 2,305 2,589 2,587 2,195 2,321 3,315 10,822 4,717 6,975 14,631 17,559 13.894 6.814 17,557 12,147 13,955 21,935 25,359 21,043 14,003 74,000 69.284 65,809 59.112 53.908 52.899 48.873 9,276 9,091 8,524 8.927 8.086 6,560 6,760 11,787 11.350 10,040 8,343 7,713 6,007 5,532 251 278 401 386 340 244 293 3.653 3.381 2,621 3,377 2,731 2,547 1.772 5,774 8,064 19.984 11,146 3,401 8,268 6,566 104,741 101,448 107,379 91,291 76,179 76,525 69,796 $ 122,298 $113,595 $ 121,334 $ 113,226 $ 101,538 97.568 83.799 8 (A8.029) $ (43.218) $ (36.958) $ (32268) $ (26,895) $ (29,925) $ (32,470) 6,007 10,192 17,122 7.038 (6.548) 3,732 (6,001) $ (32,022) $ (33,026) $ (19.836) $ (25,230) $ (33,443) $ (26,193) $ (38.471) (Continued) 106 C1TY OF LODI CHANGES IN NET ASSETS (Continued) LAST SEVEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 General Revenues and Other Changes in Net Assets: Governmental activities Taxes Property Franchisetaxes Business license tax Transient occupancy tax Grantsand contributionsnot restrictedto Investmenteamings Other Transfers Total governmental activities Business-typeactivities: Investmenteamings Litigation -environmental lawsuits Other Special item -forgiveness of debt Special item -swap termination Transfers Total business -type activities Total primary government Change in Net Assets Governmental activities Business -type activities Total primary government $ 13,564 $ 13,838 $ 9,524 $ 8,031 $ 7,124 $ 7.188 $ 6.398 8.357 9,338 9,609 8.721 8.918 8,381 7,624 1,190 1,140 1,052 973 982 874 822 405 396 380 368 352 317 400 8.249 9,593 14,772 14,215 13,193 11,895 12.069 467 1,008 874 328 150 125 269 2.382 1.077 621 1,012 608 590 137 5,368 3,693 4,727 4,923 4,008 2,915 2,981 39.982 40,083 41.589 38,571 35,335 32.285 30,700 1.385 2,028 2.380 2.008 1,880 2.242 6,457 2,010 8,892 6.222 6,700 9,150 865 2,728 1.891 2,717 1.749 2.056 2,432 2,635 1,594 15,277 (6,979) (5,368) (3.693) (4.727) (4,923) (4,008) (2,915) (2,981) (9,061) 9,944 5,624 5.841 24,731 2.827 7.798 3 30,921 $ 50.027 $ 47,213 $ 44,412 $ 60,066 $ 35,112 $ 38.498 S 1.953 S (3.1351 S 4.631 $ 6.303 $ 8.440 $ 2,360 $ (1,770) 3.054 20136 22,746 12,879 18.183 6,559 1,797 $ (1,101) $ 17,001 $ 27,377 $ 19,182 $ 26,623 8.919 $ 27 The City of Lodi implemented GASB 34 for the fiscal year ended June 30, 2003 Information prior to the implementation of GASB 34 is not available Source: City of Lodi Financial Services Division 107 CITY OF LODI FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Dollar amounts in thousands) Source City of Lodi FinancialServicas Division $ 17.010 Q 20.178 $ 21.044 S 17.441 Q 14.684 Q 11.485 S 17.949 $ 26.445 $ 10.859 $ 13.628 108 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 General Fund Reserved $ 383 $ 1,150 $ 1,144 $ 1,321 $ 1,185 $ 1,296 $ 927 $ 856 $ 532 $ 473 Unreserved 3.383 4.159 5,175 3.048 1,507 157 640 2,507 3,414 3,315 Total General Fund $ 3.766 $ 5,309 $ 6,319 $ 4,369 $ 2,692 $ 1,453 $ 1,567 $ 3,363 $ 3,946 $ 3,788 All other governmental funds Reserved $ 1,487 $ 1,932 $ 1.874 $ 1,138 $ 4,942 $ 3,778 $ 6,405 $ 3,363 $ 2,779 $ 555 Unreserved, reported in: Special revenue funds 6,540 7.433 6,651 6.271 1,400 534 2,322 1,814 2,439 5,774 Capital projects funds 5.217 5.504 6,200 5,663 5,650 5,720 7,655 17,905 1,695 3,511 Total all other governmental funds $ 13.244 $ 14.869 $ 14.725 $ 13.072 $ 11,992 $ 10,032 $ 16,382 $ 23,082 $ 6,913 $ 9.840 Source City of Lodi FinancialServicas Division $ 17.010 Q 20.178 $ 21.044 S 17.441 Q 14.684 Q 11.485 S 17.949 $ 26.445 $ 10.859 $ 13.628 108 Revenues: Taxes Licenses and permits Intergovernmental revenues Charges for services Fines and forfeitures Investmentand rental income Miscellaneous 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) expenditures CITY OF LODI CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LASTTEN FISCALYEARS (Dollar amounts in thousands) Nscal Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 $ 23,516 $ 24,712 $ 20,594 $ 18,094 $ 17,606 $ 16,908 $ 24,100 $ 23,043 $ 21,909 $ 19,801 431 683 717 1,020 2,511 2,021 1,669 1,464 1,592 1,406 13,229 14,980 19,892 25,491 22,834 16,657 7,385 22,000 11,641 9,054 3,329 4,757 4,696 3,848 9,404 4,479 6.272 3.888 4,249 4.611 1,416 1,321 1,245 1,173 1,190 1,085 803 806 765 714 922 1,312 998 707 753 537 832 1,234 1,509 982 1,762 822 304 653 458 473 453 1,349 383 764 44,605 48.587 48,446 50,986 54,756 42,160 41,514 53,784 42.048 37,332 8,431 9,545 8.893 8,345 10,858 10,815 10,874 8,987 8,862 7,813 24,716 23,979 22,211 20,863 20,351 17,491 15,597 13,562 13,190 11,430 4,657 5,842 5,587 7,827 7,361 7,303 6,926 5,741 6,312 5,039 1,341 2,006 2,062 1,847 1,500 1,673 1,588 1,468 1,420 1,356 1,316 1,158 1,184 1,040 3,776 3,826 3.598 3,440 3,691 3,412 3,385 2,860 2,999 2,670 6.791 4,207 3,526 7,232 9,508 10,041 12,943 17,948 12,044 6,420 1,139 789 1,170 898 1,205 900 1.238 892 1,645 855 1,245 759 1,220 730 679 555 755 530 777 505 53,140 53,146 49,570 53,152 55,689 52,422 52,991 51,490 45,876 35,694 (8,535) (4,559) (1,124) (2,166) (933) (10,262) (11,477) 2,294 (3,828) 1,638 109 CITY OF LODI Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Adjustment to fund balance as previously reported Fund balances, end of year Debt service as a percentage of noncapital expenditures Source: City of Lodi Finance Services Division 5,367 3,693 4,727 4,923 4.132 3,798 2,981 12,992 (65) 2.585 (3,168) (866) 3,603 2,757 3,199 (6,464) (8,496) 15,286 (3,893) 4,223 20,178 21,044 17,441 14.684 11,485 17,949 26,445 10,859 13,628 9,405 300 1,124 5 17,010 $ 20,178 $ 21,044 $ 17,441 $ 14.684 $ 11,485 $ 17,949 $ 26,445 $ 10.859 $ 13.628 4 396 4.496 4.8% 4 9% 57% 5 096 5.1% 3.8% 3.996 4 696 110 CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS (Continued) LAST TEN FISCAL YEARS (Dollaramounts in thousands) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Other financing sources (uses): Transfersin 10,609 7.058 8,863 9,142 8.017 9,774 11,209 12,500 9,355 9,715 Transfersout (5,242) (3.365) (4,136) (4,219) (4,009) (6,859) (8.228) (13,052) (10,090) (7,130) Capital lease proceeds 124 883 148 670 Proceeds from bond refunding 13,269 Paymentto refunded bond escrow (13,269) Proceeds of certificatesof participation 13,396 Residual equity transfer Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Adjustment to fund balance as previously reported Fund balances, end of year Debt service as a percentage of noncapital expenditures Source: City of Lodi Finance Services Division 5,367 3,693 4,727 4,923 4.132 3,798 2,981 12,992 (65) 2.585 (3,168) (866) 3,603 2,757 3,199 (6,464) (8,496) 15,286 (3,893) 4,223 20,178 21,044 17,441 14.684 11,485 17,949 26,445 10,859 13,628 9,405 300 1,124 5 17,010 $ 20,178 $ 21,044 $ 17,441 $ 14.684 $ 11,485 $ 17,949 $ 26,445 $ 10.859 $ 13.628 4 396 4.496 4.8% 4 9% 57% 5 096 5.1% 3.8% 3.996 4 696 110 Property Sales & Use Transient Occupancy Franchise Documentary Transfer Motor Vehicle in Lieu Public Protection Business License In Lieu Franchise Totals City of Lodi TAX REVENUES BY SOURCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 % Change 2000 to 2009 $ 8,887 $ 9,210 $ 9,289 $ 7,676 $ 6,771 $ 6,948 $ 6,191 $ 5,641 $ 5,322 $ 4,932 80% 8,028 9,296 10,137 9,812 9,183 8,533 8,709 8,300 8,028 7,095 13% 405 396 380 368 352 317 400 439 390 318 27% 1,415 976 929 890 821 800 730 931 820 675 110% 114 125 235 355 353 240 207 172 158 116 -2% 4,784 4,797 4,635 4,402 4,606 2,767 3,430 3,276 3,051 3,008 59% 296 338 390 310 304 264 247 231 242 196 51% 1,038 1,140 1,082 973 982 874 822 787 736 658 58% 6,942 8,362 8,680 7,831 8,097 7,581 6,894 6,569 6,015 5,721 21% $ 31,909 $ 34,640 $ 35,757 $ 32,617 $ 31,469 $ 28,324 $ 27,630 $ 26,346 $ 24,762 $ 22,719 40% Note: General governmental tax revenues are included in taxes, licenses and permits, intergovernmental revenues and miscellaneous revenues. Source: City of Lodi Financial Services Division 111 CITY OF LODI Total Direct Tax Rate 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% (1) All exemptions (secured, utility, and unsecured rolls) are homeowners- $70,348and other- $194,806=$265,154 Note: In 1978. the voters of the State of Califomia passed Proposition 13 which limited propertytaxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor' (limited to a maximum increase of 2%). With few exceptions, property is only assessed at the time that It is sold to a new owner. At that point, the property being sold is reassessedat the purchase price. The assessed valuation data shown above represents the only data currently available with respect to the the actual market value of taxable property and is subject to the limitations described above. Source: San Joaquin County Auditor -Controllers Office 112 ASSESSED VALUE AND ESTIMATEDACTUAL VALUE OF TAXABLE PROPERTY LASTTEN FISCALYEARS (Dollaramounts inthousands) Fiscal Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Secured roll $ 5,156,706 $ 5,069,788 $ 4,799,141 $ 4,254,184 $ 3,877,398 $ 3,619,116 $ 3,381,945 $ 3,096,937 $ 2,880,201 $ 2,707,343 Utility roll 2,031 2,035 2,773 3,654 3,782 3,893 3,352 3,379 3,484 3,525 Unsecured roll 263,648 258,687 242,082 216,065 215,469 202,785 207,095 198,678 177,040 163,299 Gross assessed value 5,422,385 5,330,510 5,043,996 4,473,903 4,096,649 3,825,794 3,592,392 3,298,994 3,060,725 2,874,167 Less exemptions (1) 265,154 243,259 229,049 220,590 217,077 212,102 200,957 190,252 185,473 183,294 Net assessed value 5,157,231 5,087,251 4,814,947 4,253,313 3,879,572 3,613,692 3,391,435 3,108,742 2,875,252 2,690,873 Land 1,562,729 1,537,554 1,431,203 1,226,293 1,107,776 1,027,462 960,166 889,262 832,788 787,249 Improvements 3,577,741 3,503,186 3,327,453 2,989,575 2,739,061 2,549,860 2,366,887 2,164,121 1,982,668 1,847,800 Personal property 281,915 289,770 285,340 258,035 249,812 248,472 265,339 245,611 245,269 239,118 Gross assessed value 5,422,385 5,330,510 5,043,996 4,473,903 4,096,649 3,825,794 3,592,392 3,298,994 3,060,725 2,874,167 Less exemptions(1) 265,154 243,259 229,049 220,590 217,077 212,102 200,957 190,252 185,473 183,294 Net assessed value $ 5,157,231 $ 5,087,251 $ 4,814,947$ 4,253,313 $ 3,879,572 $ 3,613,692$ 3,391,435$ 3,108,742$ 2,875,252$ 2,690,873 Total Direct Tax Rate 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% (1) All exemptions (secured, utility, and unsecured rolls) are homeowners- $70,348and other- $194,806=$265,154 Note: In 1978. the voters of the State of Califomia passed Proposition 13 which limited propertytaxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor' (limited to a maximum increase of 2%). With few exceptions, property is only assessed at the time that It is sold to a new owner. At that point, the property being sold is reassessedat the purchase price. The assessed valuation data shown above represents the only data currently available with respect to the the actual market value of taxable property and is subject to the limitations described above. Source: San Joaquin County Auditor -Controllers Office 112 CITY OF LODI DIRECT AND OVERLAPPING PROPERTYTAX RATES LAST TEN FISCAL YEARS (Rate per $100 of assessed value) Source: San Joaquin County Tax C11scbor 113 Basic Fiscal Countywide Year Levy School All Other Total 2009 1.0000 0.0517 0.0000 1.0517 2008 1.0000 0.0478 0.0000 1.0478 2007 1.0000 0.0478 0.0000 1.0478 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 Source: San Joaquin County Tax C11scbor 113 CITY OF LODI PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO (Dollar amounts in thousands) Source: San Joaquin County Assessor's Office 114 Fiscal Year 2009 2000 Percent of Percent of Total City Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Lodi Memorial HospitalAssn $ 168,303 1 3.441 % General Mills 152,676 2 3.121 $ 175,049 1 6.935% Pacific Coast Producers 86,146 3 1.761 44,686 2 1.770 Calif Physicians Service Corp 42,615 4 0.871 Cottage Bakery Inc 24,653 5 0.504 Certainteed Corp 19,431 6 0.397 Archer Daniels Midland Co Corp 19,098 7 0.391 Dart Container Corp 18,814 8 0.385 12,885 6 0.510 Thule Hitch Systems 18,932 9 0.387 Lowe's 14,153 10 0.289 Dayton Hudson Corp 15,623 3 0.619 CaliforniaWaste Removal System 14,354 4 0.569 GFLIP Limited Partners 12,941 5 0.513 Wells Fargo Bank 11,775 7 0.467 First LodiAssociates 11,620 8 0.460 Wallace Computer Service 10,738 9 0.426 EdmundN. Richmond 10,455 10 0.414 Principal Secured Property Valuation 564,821 11.547 320,126 12.683 Other Secured Taxpayers 4,591,885 93.874 2,387,217 94.579 Exemptions relativeto secured tax roll 265,154 5.421 183,294 7.262 Total Secured Property Valuation $ 4,891,552 100.000% $2,524,049 100.000% Source: San Joaquin County Assessor's Office 114 CITY OF LODI PROPERTY TAX LEVIESAND COLLECTIONS LAST TEN FISCAL YEARS (Dollar amounts in thousands) 1) Per agreement with San Joaquin County, the County providesthe City of Lodi with 100% of the amount owed to the City for secured properties, regardlessof collection status. In exchange, the County is entitled to 100% of revenues collected for interest and penalties. This agreement is commonly referred to as the Teeter Plan. Source: San Joaquin CountyAuditor/Controller's Office 115 Collected Within the Total Collections Fiscal Year of the Levy to Date Taxes Levied for Percent Percent Fiscal the Fiscal of of Year Year Amount Levy(1) Amount Levy 2009 $ 7,966 $ 7,966 100.0% $ 7,966 100.0% 2008 8,167 8,167 100.0% 8,167 100.0% 2007 8,170 8,170 100.0% 8,170 100.0% 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% 1) Per agreement with San Joaquin County, the County providesthe City of Lodi with 100% of the amount owed to the City for secured properties, regardlessof collection status. In exchange, the County is entitled to 100% of revenues collected for interest and penalties. This agreement is commonly referred to as the Teeter Plan. Source: San Joaquin CountyAuditor/Controller's Office 115 CITY OF LODI ELECTRICITY SOLD BY TYPE OF CUSTOMER LAST FOUR FISCALYEARS Type of Customer Billed Accounts Billed Accounts Billed Accounts Billed Accounts 2009 2008 2007 2006 City Accounts 189 187 186 184 Contract Large Industrial 5 5 6 Contract Medium Industrial 1 1 2 Contract Small Industrial 1 0 1 Domestic Residential 22,506 22,510 22,938 22,860 DomesticMobile Home Park 13 13 13 13 Dusk to Dawn 92 92 95 95 Large Commercial 377 380 375 359 Large Industrial' 37 32 33 33 Medium Industrial 8 8 10 13 Residental Low Income 1,847 1,943 2,003 1,910 Small Commerical 3,249 3,199 3.241 3,279 t Small Industrial 10 9 9 9 Total 28,328 28,380 28,909 28,764 Informationpriorto the implementation of GASB 44 is not available. Source: City of Lodi Financial Services Division 116 i CITY OF LODI RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (Dollar amounts in thousands, except per capita) Governmental Activities Business-typeActivities Details regarding the City's outstanding debt can be found in the Note 8 of these financial statements. (1) See Demographicand Economic Statistics table for personal inwme and population. Source: City of Lodi Financial Services Division 117 Certificates Total Certificates Total Total Fiscal of Loan Notes Governmental of Notes Business -type Primary PercentofPersonal Per Year Participation Payable Payable Activities Participation Payable Activities Government income(1) Capita (1) 2009 $ 22,855 $ - $ 245 $ 23,100 $ 147,175 $ 1,585 $ 148,760 $ 171,860 n/a % 2,714 2008 23,420 94 245 23,759 139,760 1,755 141,515 165,274 n/a 2,608 2007 23,975 187 245 24,407 121,675 1,918 123,593 148,000 0.77 2,335 2006 24,510 279 245 25,034 125,340 2,077 127,417 152,451 084 2,427 2005 25,030 368 245 25,643. 126,615 2,230 128,845 154,488 0.90 2,473 2004 25,530 456 245 26,231 148,675 2.378 151,053 177.284 1.07 2,917 2003 26,015 543 245 26,803 117,515 2,521 120,036 146,839 0.94 2,427 2002 26,745 622 245 27,612 75,285 2,660 77,945 105,557 0.72 1,776 2001 12,980 12,980 59,931 2,794 62,725 75,705 0.53 1,292 2000 13,510 13,510 55,544 2.923 58,467 71,977 052 1,243 Details regarding the City's outstanding debt can be found in the Note 8 of these financial statements. (1) See Demographicand Economic Statistics table for personal inwme and population. Source: City of Lodi Financial Services Division 117 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 payablewith 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 readily available in the State of California. Source: City of Lodi Financial Services Division 118 Percent cf Certificates Assessed Fiscal of Value (1)f Per Year Participation Total Property Capita 2009 22,855 $ 22,855 0.4 % $ 360.98 2008 23,420 23,420 0.4 369.62 2007 23,975 23,975 0.5 378.18 2006 24,510 24,510 0.5 390.18 2005 25,030 25,030 0.6 400.69 2004 25,530 25,530 0.7 420.12 2003 26,015 26,015 0.7 430.00 2002 26,745 26,745 0.8 450.02 2001 12,980 12,980 0.4 221.50 2000 13,510 13,510 0.5 233.33 General bonded debt is debt payablewith 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 readily available in the State of California. Source: City of Lodi Financial Services Division 118 CITY OF LODI LEGAL DEBT MARGIN INFORMATION LAST TEN FISCALYEARS . (Dollar amounts in thousands) FISCAL YEAR 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Assessed valuation (1) $ 5,227,580 $ 5,159,269 $ 4,887,074 $ 4,325,000 $ 3,951,862 $ 3,686,227 $ 3,464,195 $ 3,177,319 $ 2,942,348 $ 2,757,557 Conversion percentage 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% Adjusted assessed valuation Debt limit percentage Debt Limit Total net debt applicable to limit Legal debt margin 1,306,895 15% 1,289,817 15% 1,221,769 15% 1,081,250 15% 987,966 15% 921,557 15% 866,049 15% 794,330 15% 735,587 15% 689,389 15% 196,034 193,473 183,265 162,188 148,195 138,234 129,907 119,149 110,338 103,408 $ 196,034 $ 193,473 $ 183,265 $ 162,188 $ 148,195 $ 138,234 $ 129,907 $ 119,149 $ 110,338 $ 103,408 01; 0% 01; 096 096 0% p% 0$ 01; 096 Total net debt applicable to the limit as a percent of debt limit The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1982fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computationshown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspectiveto the 25% level that was in effect at the time the legal debt marginwas enacted by the State of Califomia for localgovemements located within the state. (1) Reflects City assessed valuation with other exemptionsof $194,806 deducted for 2009 Source: San Joaquin CountyAuditor-Controllers Office 119 CITY OF LODI DIRECTAND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT June 30,2009 OVERLAPPING TAX AND ASSESSMENT DEBT: San Joaquin Community College District Lodi Unified School District City of Lodi 1915 Act Bonds TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DIRECTAND OVERLAPPING GENERAL FUND DEBT: San Joaquin County Certificates of Participation Lodi Unified School District Certificates of Participation City of Lodi Certificates of Participation TOTAL DIRECTAND OVERLAPPING GENERAL FUND DEBT COMBINED TOTAL DEBT(2) 2008-09Assessed Valuation 2008-09 Population DEBT RATIOS $ Total Debt 06/30/09 80,176,115 10,452,000 465,000 $ 207,495,000 49,000,000 22,855,000 $ 5,422,385,000 Percentage City's Share Applicable (1) of Debt 8.322 % $ 6,672,256 35.678 3,729,065 100.00 465,000 10,866,321 9.178 % 35.678 100.00 63,313 Per Capita Total Gross Debt $ 70,247,432 $ 1,110 19,043,891 17,482,220 22,855,000 59,38;111 $ 70,247,432 1..71M (1) Percent of overlapping agency's assessed valuation located within the boundaries of the City. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. SOURCE: California Municipal Statistics, San Francisco, CA San Joaquin County Auditors -Controller Office State of California, Departmentof Finance, Demographic Research Unit 120 CITY OF LODI PLEDGED-REVENUECOVERAGE LASTTEN FISCALYEARS (Dollars amounts in thousands) Less: Adjusted Adjusted Net Fiscal Annual Operating Available Debt Service Year Revenues (1) Expenses (2) Revenue Principal Interest Total Coverage Electric Revenue Certificates of Participation 2009 $ 75,195 $ 58,370 $ 16,825 $ 5,240 $ 4,720 $ 9,960 1.69 2008 74,923 54,437 20,486 2,305 3,961 6,266 3.27 2007 67,865 52,984 14,881 2,350 3,977 6,327 2.35 2006 61,066 51,131 9,935 - 3,613 3,613 2.75 2005 60,793 44,252 16,541 5,895 3,146 9,041 1.83 2004 56,347 45,045 11,302 2,150 3,261 5,411 2.09 2003 55,847 39,584 16,263 4,575 2,836 7,411 2.19 2002 49,858 61,039 (11,181) 1,100 1,646 2,746 (4.07) 2001 45,435 43,407 2,028 1,391 1,391 1.46 2000 41,541 37,385 4,156 1,330 1,330 3.12 continued 121 CITY OF LODI PLEDGED -REVENUE COVERAGE (continued) LAST TEN FISCAL YEARS (Dollars amounts in thousands) Less: Adjusted Adjusted Net Fiscal Annual Operating Available Debt Service Year Revenues f 11 Expenses (2) Revenue Principal Interest Total Coverage Wastewater Certificates of Participation 2009 $ 10,764 $ 5,921 4,843 $ 1,270 $ 2,882 4,152 1.17 2008 10,530 6,189 4,341 1,355 2,334 3,689 1.18 2007 9,881 5,287 4,594 1,315 2,017 3,332 1.38 2006 9,865 4,886 4,979 1,275 2,056 3,331 1.49 2005 9,232 4,781 4,451 540 2,210 2,750 1.62 2004 7,211 4,385 2,826 175 715 890 3.18 2003 7,428 4,380 3,048 160 639 799 3.81 2002 5,277 4,808 469 150 649 799 0.59 2001 5,175 4,336 839 145 658 803 1.04 2000 4,284 3,147 1,137 140 667 807 1.41 Includes all nongeneral obligation longterm debt backed by pledged revenues. Details regarding the City's outstanding debt can be found in the Note 8 of these financial statements. (1) Total operating revenues including investment earnings. (2) Total operating expenses exclusive of in -lieu fees paid to the General Fund and depreciation and amortization Source: City of Lodi Financial Services Division 122 CITY OF LODI DEMOGRAPHICAND ECONOMIC STATISTICS LAST TEN FISCALYEARS Personal income is the income received by all persons from all sources. Personal income is the some of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts. Per capita personal income is calculated as the personal income of residents of a given area divided by the resident population of the area. In computing per capita personal income, Bureau of Economic analysis uses the Census Bureau's annual midyear population estimates. Source: State of California, Departmentof Finance, Demographic Reseach Unit and Departmentof Labor. 123 Personal Per Population San Joaquin Population Rank in Size Income Capita Fiscal Square City Percent County Percent of California (millions of Personal Unemployment Year Miles Population Change Population of County Cities dollars) Income Rate 2009 13.92 63,313 -0.1% 689,480 9.2% 135 n/a n/a 12.2% 2008 13.92 63,362 -0.1% 685,600 9.2% 133 n/a n/a 7.1% 2007 13.17 63,395 0.9% 679,687 9.3% 129 $ 19,286 $ 28,743 6.1% 2006 12.81 62,817 0.6% 668,265 9.4% 131 18,125 27,272 5.5% 2005 12.81 62,467 2.8% 653,333 9.6% 131 17,257 26,239 5.9% 2004 12.79 60,769 0.4% 630,600 9.6% 130 16,573 25,527 6.5% 2003 12.69 60,500 1.8% 613,500 9.9% 179 15,543 24,620 6.9% 2002 12.62 59,431 1.4% 596,000 10.0% 129 14,747 24,150 6.6% 2001 12.60 58,600 1.2% 583,700 10.0% 126 14,281 24,086 6.4% 2000 12.50 57,900 1.8% 566,600 10.2% 125 13,757 24,209 6.5% Personal income is the income received by all persons from all sources. Personal income is the some of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts. Per capita personal income is calculated as the personal income of residents of a given area divided by the resident population of the area. In computing per capita personal income, Bureau of Economic analysis uses the Census Bureau's annual midyear population estimates. Source: State of California, Departmentof Finance, Demographic Reseach Unit and Departmentof Labor. 123 Note: The City of Lodi implemented GASB 44 for the fiscal year ended June 30,2006 124 CITY OF LODI PRINCIPAL PRIVATE EMPLOYERS CURRENT YEAR AND NINE YEARS AGO Current Nine Years Ago Percent Percent of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Lodi Unified School District 3,301 1 12.64 % 2,247 1 8.60 Lodi Memorial Hospital 1,360 2 5.21 650 2 2.49 Pacific Coast Producers 1,200 3 4.59 530 4 2.03 Blue Shield 850 4 3.25 Cottage Bakery 700 5 2.68 General Mills 478 6 1.83 575 3 2.20 City of Lodi 457 7 1.75 413 5 1.58 Farmers & Merchants Bank 336 8 1.29 183 10 0.70 Walmart 285 9 1.09 226 6 0.86 Target 165 10 0.63 200 7 0.77 Valley Industries 191 9 0.73 Lodi Fab Industries, Inc 200 8 0.77 Total 9,132 34.96 5,415 20.73 Note: The City of Lodi implemented GASB 44 for the fiscal year ended June 30,2006 124 2009 Department: Administration 32 Community Development 13 Electric 50 Financial Services 26 Fire 64 Library 14 Parks& Recreation 31 Police 125 Public Works 102 Total 457 Source: City of Lodi Budget Document 125 2000 32 15 46 34 50 14 26 113 99 CITY OF LODI FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY DEPARTMENT LAST TEN FISCAL YEARS 2008 2007 2006 2005 2004 2003 2002 2001 19 35 33 37 36 37 34 34 14 18 17 17 17 18 17 17 48 64 65 52 52 52 50 47 39 30 28 38 38 38 35 34 64 64 61 68 61 68 55 52 14 16 14 15 15 15 14 14 30 34 31 34 34 34 29 29 125 116 117 117 116 117 115 114 107 114 99 111 110 110 108 103 460 491 465 489 479 489 457 444 125 2000 32 15 46 34 50 14 26 113 99 CITY OF LODI OPERATING INDICATORS BY FUNCTION/PROGRAMIDEPARTMENT LAST FOUR FISCALYEARS General government: Building permits issued Businesstax certificates: Retail sales and service Manufacturers and processors Professions Miscellaneous contractors, peddlers, delivery vehicles, etc Utilitybilling/customer service: Numberof customers Energysales (KWH) Peak demand (MW) Public safety: Police: Major reported crimes Total arrests Dispatched calls for service Fire: Interiorstructurefire calls Non-structuralfire calls Hazardous materials calls Emergency medical calls Total emergency calls Total number of units dispatched Publicworks: Miles of streets resurfaced Fleetjob orders completed Trees planted Water utility: New connections Water main breaks Wastewater utility: Average daily treatment (million gal/day) Library: Registered borrowers Circulationof library materials Reference, research and informationalquestions answered Annual attendance at libraries Numberof programsoffered Annual attendance at programs Public access computer usage Community center: Community center bookings 126 Fiscal Year FiscalYear Fiscal Year Fiscal Year 2009 2008 2007 2006 1,754 1,851 2,317 2,699 2,496 2,442 2,632 2,565 82 78 78 125 380 398 404 322 1,411 1,063 1,127 533 25,555 25.555 25,712 25,655 452,075,554 450,407,709 458,740,745 459,637,092 134 134 144 127 2,454 2,993 3,096 3,234 4,646 5,590 5,463 5,162 56,391 55,911 53,686 55,937 69 88 79 66 123 160 163 158 70 35 27 26 3,364 3,420 3,213 2,912 5,392 5,346 5,000 4,447 7,038 7,841 7,005 6,055 6 5 4 33 3,921 3,520 6,938 5,608 96 130 95 17 35 110 266 4 4 10 8 6.5MG 6.5MG 6.9MG 6.7MG 53,530 48,969 44,558 52,779 219,711 280,466 273.270 281,216 15,379 19,257 18,854 17,342 n/a 296,793 288,070 287,986 316 348 339 320 8,765 11,242 10,700 10,872 38,388 38,999 35,260 29.896 475 494 302 220 CITY OF LODI OPERATING INDICATORS BY FUNCTION/PROGRAWDEPARTMENT (continued) LAST FOUR FISCAL YEARS Instructional classes Registered students Yearly attendance Parks and recreation: After school program registration (number of participants/sites) Adult sports Program/Participation Programs offered Partnerships Tournaments Youth/Teen sports Program attendance Programs offered Aquatics Program attendance Numberof programs Note The City of Lodi implemented GASB 44 for the fiscal year ended June 30,2006 Information pnorto the implementation of GASB 44 is not available Source CilyofLodi 127 FiscalYear 2009 FiscalYear 2008 FiscalYear 2007 FiscalYear 2006 507 530 478 509 3,316 5,550 3,548 4,369 14,050 14.410 14,429 15,369 1,92014 3,01414 145000112 135,000112 2,284 28,000 36,000 36,000 13 11 11 11 1 3 3 5 10 10 20 20 215,000 195,000 200,000 200,000 24 14 14 20 2,433 50,000 59,000 59,000 6 3 8 6 128 CITY OF LODI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM/DEPARTMENT LAST FIVE FISCAL YEARS Fiscal Year 2009 2008 2007 2006 2005 General government: Total square miles 13.92 13.92 13.17 12.81 12.81 Public safety: Police: Facilities: Stations 1 1 1 1 1 Animal control facility 1 1 1 1 1 Police training facility (pistol range) 1 1 1 1 1 Vehicles: Marked patrol cars 25 25 25 28 28 Motorcycles and scooters 5 5 5 4 1 Animal control vehicles 2 2 2 3 3 Other automobiles 38 40 41 41 41 Fire: Facilities: Fire stations 4 4 4 4 4 Vehicles: Fire engines 7 6 6 5 5 Trucks/Trailers 6 9 8 7 7 Other automobiles 12 7 10 11 11 Publicworks: Miles of streets 202 200 184 198 100 Miles cf alleyways 16 16 16 16 14 Traffic signals 62 64 66 64 60 Street lights 7,270 7,270 7,270 7,203 6,995 128 CITY OF LODI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM/DEPARTMENT (continued) LAST FIVE FISCAL YEARS Parks and recreation: Parks and squares Park acreage Boating facilities - launch lanes Senior center Community Centers Swimming pools Baseball/softball diamonds Tennis courts Skateboard park Playgrounds Ballpark Soccer Field Football Field Hand ball/Basketbal I/Volleyball Courts Horseshoe Pits Library: Central library Total items in collection Integrated library system Microform readers Microform readers/printers Self check out machines Electric utility: Overhead lines 12kv (miles) Overhead lines 60kv (miles) Underground lines (miles) 129 Fiscal Year 2009 2008 2007 2006 2005 26 23 23 23 23 371 275 275 275 275 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4 3 3 3 3 24 26 26 26 26 11 11 11 11 11 1 1 1 1 1 25 22 22 22 22 24 26 26 26 26 22 22 22 22 22 1 3 3 3 3 10 8 8 8 8 6 7 10 10 10 1 1 1 1 1 135,197 142,885 142,098 134,129 137,673 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 0 1 1 1 130 130 129 129 129 13 13 13 13 13 154 153 151 151 151 129 CITY OF LODI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAMMEPARTMENT (continued) LAST FIVE FISCAL YEARS Water utility: Water main lines Water storage capacity (gallons) Waterwells Water reservoirs Wastewater utility: Wastewater main lines (miles) Treatment capacity Wastewater treatment plant Stormwater utility: Stormwater main drain lines (miles) Stormwater pump stations Central parking district: Parking structure Parking spaces Parking lots Note. The City of Lodi implemented GASB 44 for the fiscal year ended June 30, 2006. Information prior to 2005 is not readily available. Source: City of Lodi Departments 130 Fiscal Year 2009 2008 2007 2006 2005 233 233 238 235 230 1,100, 000 1,100, 000 1,100, 000 1,100, 000 1,100,000 26 26 26 26 25 2 2 2 2 2 194 194 189 182 182 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG 1 1 1 1 1 161 119 161 115 114 14 14 14 13 14 1 1 1 1 1 2,453 2,453 2,453 2,453 2,453 25 25 25 25 25 Note. The City of Lodi implemented GASB 44 for the fiscal year ended June 30, 2006. Information prior to 2005 is not readily available. Source: City of Lodi Departments 130 (This page intentionally left blank.) SINGLE AUDIT REPORTS CITY OF LODI SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30,2009 Federal Grantor Pass-through Grantor or Direct CFDA Grant/Project Program Title Number Number Expenditures 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: 2003-2004 Program Year 14.218 B03 -UC -06-0009 $ 117,893 Total Community Development Block Grants/Entitlement Grants 117,893 U.S. Department of Justice Direct: Edward Byrne Memorial Justice Assistance Grant Program 16.738 2006 -DJ -BX -0951 13,160 Edward Byrne Memorial Justice Assistance Grant Program 16.738 2007 -DJ -BX -0138 4,648 Edward Byrne Memorial Justice Assistance Grant Program 16.738 2008-CK-WX-0248 93,530 Total Edward Byrne Memorial Justice Assistance Grant Program 111,338 U.S. Department of Transportation Direct: Federal Transit Formula Grants: 2005-2006 Program Year - Operating 20.507 CA -90-Y413-00 38,812 2007-2008 Program Year - Operating 20.507 CA -90-Y634-00 314,000 2008-2009 Program Year - Operating 20.507 CA -90-Y736-00 1,392,047 2003-2005 Program Years - Capital 20.507 CA -90-Y389-00 16,420 2006-2007 Program Year - Capital 20.507 CA -90-Y565-00 20,573 2007-2008 Program Year - Capital 20.507 CA -90-Y634-00 97,241 2008-2009 Program Year - Capital 20.507 CA -90-Y736-00 140,887 Total Federal Transit Formula Grants 2,019,980 U.S. Department of Homeland Security Passed through San Joaquin County: Assistance to Firefighters Grant 97.044 EMW-2004-FG-20336 12,750 Total Assistance to Firefighters Grant 12.750 Total Federal Awards $ 2,261,961 See accompanying notes to the schedule of expenditures of federal awards. 132 CITY OF LODI NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30,2009 NOTE1—GENERAL The accompanying Schedule of Expenditures of Federal Awards (SEFA) for the fiscal year ended June 30, 2009, 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 presented using the modified accrual basis of accounting for grants accounted for in governmental fund types and the full accrual basis of accounting 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 Amount Provided Federal Program CFDA Number to Subrecipients Federal Transit Formula Grants 20.507 $ 678,742 133 SAC(dAMEN 10 3000 S Street Suite 300 Sacramento,CA 95816 mo 916.928.4600 MAC IAs G I N I & OIC ©N N E LL LLP wstiNu r CREEIt Certified Public Accountants & Management Consultants OAKLAND LOS AN(5ELES NE WPORT BEACH SAN DIEGO The Honorable Members of City Council City of Lodi, California INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS We have audited the financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information of the City of Lodi, California (City), as of and for the fiscal year ended June 30, 2009, which collectively comprise the City's basic financial statements and have issued our report thereon dated November 16,2009. Our report contained an explanatoryparagraph discussing the City's implementation of the provisions of Governmental Accounting Standards Board Statement No. 45, Accounting and Financial Reporting by Employers of Post -employment Benefits Other than Pensions and Governmental Accounting Standards Board Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations during the year ended June 30, 2009. 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, issuedby the Coniptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or enlployees, in the normal course of performing their assigned fiinctions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatenlent of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. A inaterial weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. 134 www.a„,acpa.com An Independent Member of the BDO Seidman Alliance Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Complianceand 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 laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under GovernmentAuditing Standards. We noted certain matters that we reported to management of the City of Lodi, in a separate letter dated November 16,2009. 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. `i�� /fGG-GCS ./ C , r Certified Public Accountants Sacramento, California November 16,2009 135 MACIAS GINI & 01CONNELL t.LP Certified Public Accountants & Management Consultants The Honorable Menibers of City Council City of Lodi, California SACRA/AE O 3000 S Street, Suite 300 Sacramento, CA 95816 916.928.4600 WALNUT CREEK cfA�:LA;ac, -0-SA t;ELFS IVL Wi'C' RT 6LACN SAi1 b!FG0 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Coinpliance We have audited the compliance of the City of Lodi, California (City), with the types of compliance requirements described in the U. S. Office ofManagement and Budget (OMB) CircularA433 Compliance Supplement that are applicable to its major federal program for the fiscal year ended June 30,2009. The City's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the City's management. 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 GovernmentAudiiing Standards, issued by the Coniptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended June 30,2009. 136 www.nrgocpa.com An Independent Member of the 13130 Seidman Alliance 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, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. 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. Certified Public Accountants Sacramento, California November 16,2009 137 CITY OF LODI SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30,2009 138 Section I — Summary of Auditor's Results Financial Statements: Type of auditor's report issued: Unqualified Internal control over financial reporting: • Material weaknesses identified? No • Significant deficiencies identified that are not considered to be material weaknesses? None reported Noncompliance material to financial statements noted? No Federal Awards: Internal control over major programs: • Material weaknesses identified? No • Significant deficiencies identified that are not considered to be material weaknesses? None reported Type of auditor's report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A- 13 3? No 138 CITY OF LODI SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) FOR THE FISCAL YEAR ENDED JUNE 30,2009 Identification of major programs: Federal Transit Formula Grant CFDA #20.507 Dollar threshold used to distinguish between type A and type B programs: $300,000 Auditee qualified as low-risk auditee? Yes Section II — Financial Statement Findings None Section III — Federal Award Findings and Questioned Costs None 139 None CITY OF LODI SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30,2009 140 CONTINUING DISCLOSURES A0FAI CONTINUING DISCLOSURE REQUIREMENTS FOR THE CITY OF LODI AND THE LODI PUBLIC IMPROVEMENT CORPORATION Fiscal Year 2008-09 The City of Lodi has executed Continuing Disclosure Certificates associated with the various debt issues outstanding by the Electric Utility, Wastewater Utility and the Lodi Public Improvement Corporation. These Certificates were executed to satisfy provisions of Securities and Exchange Commission Rule 15c2 -12(b) (5). The material provided herein applies to the various debt issues as noted. Data for each utility is shown separately. This Bond Disclosure Section included within the City's Comprehensive Annual Financial Report (CAFR) provides the information required by the Continuing Disclosure Certificates. The CAFR, in turn, will be filed with the Municipal Securities Rulemaking Board. The CAFR may also be found on the City's website at www.lodi.gov. ANNUAL REPORT FOR ELECTRIC UTILITY The Lodi Electric Utility has Continuing Disclosure requirements associated with its 2008A Series A Certificates of Participation, 2002 Series C Certificates of Participation and 2002 Taxable Series D Certificates of Participation. The annual report includes, by reference, the audited financial statement of the City of Lodi (including the Electric Utility). The annual report also contains the following five (5) tables as required in the Certificates: 1. A table setting forth the City's power supply resourcesfor the most recently completed fiscal year. 2. A table showing the average number of customers, sales, revenues and demand for the past five fiscal years. 3. A table showing the outstanding debt of joint powers agencies in which Lodi participates and the City of Lodi share of that debt for the most recentfiscal year. 4. A table showing a summary of Operating Results for the past five fiscal years. 5. A table showing Lodi Electric Utility Department Rate Changes since November 1996 (applicable only to the 2002 Series C and D issues). Reporting of Significant Events The Certificates identify eleven (11) specific events that require special reporting. As of June 30, 2009, none of the specified events have occurred. Further, there is no knowledge on the part of the City Council, officers or employees of the City of any impending Significant Event that would require disclosure under the provisions of the certificates. 141 Table 1 A table setting forth the City's power supply resources. CITY OF LODI ELECTRIC UTILITY DEPARTMENT POWER SUPPLY RESOURCES 142 Capacity Available Actual Energy % of Total Source (MW)(2)(5) (MWh) Energy Purchased Powe : Western 6.3 11,751 2.27% NCPA Geothermal Project 11.1 96,991 18.75 Hydroelectric Project 25.2 42,094 8.14 Combustion Turbine Project No. 1 10.0 78 0.02 Capital Facilities, Unit One 19.7 18,039 3.49 Contracts, Exchanges and Bilaterals (4) 80.0 348,428 67.34 Total 152.3 517,381(5) 100.00% Total Capacity and Energy Sold at Wholesale N/A 48,289 City System Requirementfor Retail Load 152.3 469,092 (1) Columns may not add to totals due to rounding. (2) Non-coincidentcapacityavailable. (3) Entitlements, firm allocations and contract amounts. (4) Includes participation in NCPA/Seattle City Light exchange. See "OTHER NCPA PROJECTS—Power Purchase Contracts" in the forepart of this Official Statement. (5) Units at Backbone Output. (6) Includessupply from exchanges and line losses. 142 Table 2 A table showing the average number of customers, sales, revenues and demand for the past five fiscal years. CITY OF LODI ELECTRIC UTILITY DEPARTMENT CUSTOMERSALES, REVENUEAND DEMAND Fiscal Years Ended June 30, 2005 2006 2007 2008 2009 Number of Customers: Residential 22,554 22,870 22,928 22,523 22,465 Commercial 2,439 2,455 2,423 2,714 2,696 Industrial 32 32 33 32 37 Other 178 182 182 187 188 Total Customers 25,203 25,539 25,566 25,456 25,386 Kilowatt-Hour(kWh) Sales: Residential 153,080,272 159,540,557 159,247,195 153,563,188 153,487,430 Commercial 151,275,376 150,561,659 153,963,719 155,146,983 155,206,324 Industrial 142,395,954 141,462,582 133,816,956 129,429,938 131,059,764 Other 8,486,879 8,072,294 11,712,875 12,267,600 12,322,036 Total kWh sales 455,238,481 459,637,092 458,740,745 450,407,709 452,075,554 Revenues from Sale of Energy (2) Residential $ 21,367,522 $ 24,259,736 27,013,494 $ 27,127,049 $ 29,016,776 Commercial 19,721,979 21,365,903 23,241,809 25,173,286 26,883,557 Industrial 10,603,734 11,666,005 13,470,620 14,591,885 15,875,038 Other 2,214,897 1,820,944 2,071,324 2,132,120 2,224,567 Total Revenuesfrom Sale of Energy: $ 53,908,132 $ 59,112,588 $ 65,797,247 $ 69,024,340 $ 73,999,938 Peak Demand (kW) 117.5 124.3 140.4 132.4 117.4 (1) Columns may not add to totals due to rounding. Excludes revenuesfrom California Energy Commission Tax. Sources: City of Lodi, audited annual financial statements and Customer information System reports. 143 Table 3 A table showing the outstanding debt cf joint powers agencies in which Lodi participates. CITY OF LODI ELECTRIC UTILITY DEPARTMENT OUSTANDING DEBT OF JOINT POWERS AGENCIES (DollarAmounts in Millions) Lodi's Lodi's Share of Outstanding Debt Participation"' Outstanding Debt NCPA Geothermal Project $ 77.0 10.28% $ 7.9 Geysers Transmission Project 2.5 18.48 0.4 Calaveras Hydroelectric Project 478.0 10.37(2) 49.6 Combustion Turbine Project No. 1 12,0 8.03(3) 1.0 Capital Facilities Project Unit One 64.0 39.50 25.3 TANC Bonds 348.0 1.89 6.6 Commercial Paper Notes N/A TOTAL* $ 981.5 9.25% $ 90.8 * Columns may not add to totals due to independent rounding. (1) Participation obligation is subjectto increase upon default of another project participant. Such increase shall not exceed, without the written consentof a non -defaulting participant, an accumulated maximum of 25% of such non -defaulting participant's original participation. (2) Participant's project entitlement remains the same but share of debt has increased to 1.0.64% due to change in debt participation (3) Reflectsthe transfer of 34 MW of Lodi's interest in the NCPA Combustion Turbine Project No. 1 to the City of Roseville. Lodi remains contractually obligated underthe related third phase agreement for its 34.78% entitlement share through August 31,2010. Source: City of Lodi. 144 Table4 A table showing a summary of operating results for the past five fiscal years. CITY OF LODI ELECTRIC SYSTEM SUMMARY OF OPERATING RESULTS"' Ending Fiscal Year June 30 (Dollars in OOOs) . Actual 2005 (21 Actual 2006(2) Actual 2007 (21 Actual 2008 Actual 2009 Operating Revenues Rate Revenue $ 53,908 $ 59,113 $ 65,809 65,110 $ 65,229 ECA Revenue 4,174 8,771 . Other Revenue (3) 6,885 1,953 2,056 5,639 1,195 Total Operating Revenue 60,793 61,066 67,865 74,923 75,195 Operating Expenses Purchased Power 33,069 41,170 43,362 42,862 46,405 Non -Power Costs t4' 11,183 9,961 9,622 11, 575 11,965 Total Operating Expenses 44,252 51,131 52,984 54.437 58,370 Net Revenue Available for Debt Service 16,541 9,935 14,881 20,486 16,825 Parity Debt Service 2002 C & D, 2008 A Bonds 9,.041 3,613 6,327 6,266 9,960 Total Net Debt Service 9,041 3,613 6,327 6,266 9.960 Debt Service Coverage f.83 2.75 2.35 3.27 1.69 Remaining Revenue Available for Other Purposes 7,500 6,322 8,554 14,220 6,865 . Non -Operating Expenses In-LieuTransferto General Fund (6,349) (6,050) (6,779) (6,873) (6,942) Other Changes in Working Capital cep (484) (5,192) (1,562) Net Cash Flow Before Capital Expenditures 667 (4,920) 213 7,347 (77) Beginning Operating Reserve 5,790 7,342 3,632 5,470 14,513 Changes in GOR 885 1,210 1,625 1.696 (582) Net Deposit/Withdrawal from Reserves 667 (4,920) 213 7.347 .(77) Ending Operating Reserve $ 7,342 $ 3,632 $ 5,470 $ 14,513 $ 13,854 Source: City of Lodi (1) As defined in the Installment Purchase Contract, which may or may not be on the same basis as Generally Accepted Accounting Principles. (2) Certain amounts have been recast to reflect corrected coverage amounts. (3) Other revenues for FY 05 include a transfer of $4.5 million from a rate stabilization account and FY 08 include $3.25 million for the sale of the City's rights to the NCPA Combustion Turbine #1 to Roseville. (4) Non-powercosts include cost of services provided by other departments and does not include depreciation and amortization expense. (5) Consists of non-cash accounting entries. 145 Table 5 A table showing Lodi Electric Utility Department Rate Changes since November 1996. CITY OF LODI ELECTRIC UTILITY DEPARTMENT RATE CHANGES Effective Date Percent Change December2007 Established Solar Initiative Surcharge of $0.00125 per kilowatt-hour August 2007 Implemented monthly Energy Cost Adjustment December 2005 Average 17% increase across all rate classes December2002 4.5% average rate increase August 2001 Increased MCA for all but contract customers: 10% to 12% rate change June 2001 Implemented MCA for residential and small commercial: 8% to 10% rate change December 1998 5.00% rate decrease for small commercial/industrial customers May 1998 2.50% general rate increase to fund public benefit programs September 1997 4.5 to 5.5 cents per kilowatt-hour, non -demand, non -time -use, contract rate available for new large commercial/industrial loads December 1996 10% to 40% economic development discount on new small to medium commercial/industrial electric loads November 1996 Economic Stimulus Rate Credit increased to 1.262 cents per kilowatt-hourfrom 0.4 cents per kilowatt-hourfor largest primary service customers (estimated 19% reduction) Source: City of Lodi. 146 ANNUAL REPORT FOR WASTEWATER UTILITY The Lodi Wastewater Utility has Continuing Disclosure requirements associated with its 2007 SeriesA Certificates of Participation and 2004 SeriesA Certificates of Participation. The annual report includes, by reference, the audited financial statement of the City of Lodi (including the Wastewater Utility). The annual report also contains the following five (5) tables as required in the Certificates: 1. A table setting forth the City's number of connections by user type for the past five fiscal years. 2. A table showing the proportion of service charge revenue by class of user for the most recentfiscal year (applicable only to the 2004 SeriesA issue). 3. A table showing the largest users by service charge revenues for the most recent fiscal year. 4. A table showing a schedule of service charges. 5. A table showing a summary of historic operating results and debt service coverage for the pastfive fiscal years. Additionally, the Certificate for the 2007 SeriesA issue requires a description of any additional indebtedness incurred during the priorfiscal year which is payablefrom the system net revenues on a parity with the installment payments. Reporting of Significant Events The Certificates identify eleven (11) specific events that require special reporting. As of June 30, 2009, none of the specified events have occurred. Further, there is no knowledge on the part of the City Council, officers or employees of the City of any impending Significant Event that would require disclosure under the provisions cf the Certificates. 147 Table 7 A table setting forth the City's number of connections by usertype for the past five fiscal years. City of Lodi Wastewater System Number cf Connections by User Type as of June 30 and Percentage of Fiscal Year 2008-09 Service Charge Revenue by User Type Source: City of Lodi 148 % of FY 08/09 Service Charge User Type 2005 2006 2007 2008 2009 Revenue Residential 22,194 22,511 22,571 22,277 22,227 72.9% Commercial/Industrial 1,584 1,603 1,562 1,847 1,815 27.1% Total All Users 23,778 24,114 24,133 24,124 24,042 100.0% Source: City of Lodi 148 Table 2 A table showing the proportion of service charge revenue by class of user for the most recent fiscal year. City of Lodi Wastewater System Proportion of Service Charge Revenues by Class of User Fiscal Year 2008-09 Source: City of Lodi Percentage of Total Annual Service User Type Charge Revenue Single Family Residential 59.5% Multiple Family Residential 13.4% Commercial/industrial 27.1% Total 100.0% 149 Table 3 A table showing the largest users by service charge revenue for the most recent fiscal year. City of Lodi Wastewater System Largest Users by Service Charge Revenues Fiscal Year 2008-09 I lcar Type of Business Cottage Bakery Specialty bakery, frozen dough Lodi Unified School District K-12, adult education General Mills Cereals, bread mixes, snack foods City of Lodi Government Pacific Coast Producers Private label fruit canning Flame Mini Mart Gas station, liquorstore Lodi Memorial Hospital Health Care Miller Packing Company Hot dog producer Kaitz Property Management Residential Jay Carmac Residential 150 Service Charge Revenue 358,730 266,538 221,148 45,559 32,732 30,644 27,018 25,589 23,298 22,719 $ 1,053,975 Percentage of Total Annual Service Charae Revenue 3.87% 2.87 2.39 0.49 0.35 0.33 0.29 0.28 0.25 0.24 11.36% Table 4 A table showing the schedule of service charges. For Residential Users (per month): 1 Bedroom ........................,.... 2 Bedrooms ............................ 3 Bedrooms ............................ 4 Bedrooms ............................ 5 Bedrooms ............................ 6 Bedrooms ............................ 7 Bedrooms ............................ For Commercial/Industrial Users: Moderate Strength (annual pers Sewage Service Unit (SSU)...... High Strength: Flow (annual per MG) ............................................ BOD (annual per 1,000 lbs.) .................................... SS (annual per 1,000lbs.) ..................... ................ Grease Interceptor/Septic Holding Tank Waste within City Limits (per 1,000 gal.) .................................... Septic Holding Tank Waste Outside City Limits (per 1,000 gal.)........................................................... Disposalto Storm Drain System (per MG) ................. Disposal to Industrial System: Flow (per MG, annual basis) .................... BOD (per 1,OOOlbs., annual basis)............ Winery Waste (per 1,000 gallons) ............................ 151 City of Lodi Wastewater System Schedule of Wastewater Service Charges Service Service Service Charge Service Charge Charae Charge (effective July (effective July jeffective July jeffective July 1 2005 1.2006 1 2007 1.2008) $15.20 $15.49 $16.03 $16.65 20.26 20.65 21.37 22.19 25.34 25.81 26.71 27.74 30.41 30.98 32.06 33.29 35.48 36.14 37.40 33.84 40.54 41.30 42.74 44.38 45.60 46.46 48.08 49.93 $243.25 $247.80 $256.33 $266.28 1,170.45 2,092.01 2,164.00 2,247.10 572.79 345.24 357.12 370.83 468.23 215.86 223.29 231.86 179.30 182.80 189.09 196.35 380.64 388.06 401.41 416.82 180.33 192.00 198.61 206.24 1,309.48 2,218.78 22.82 20.34 185.10 191.47 198.82 151 Table 5 A table showing historic operating results and debt service coverage for the past five fiscal years. Operating Revenues Chargesfor Services Capacity/Connection Fees Non -Operating Revenues Interest Income Rent Other Total System Revenues Operating Expenses Personnel services Supplies, Materialsand services Utilities Total Operating Expenses System Net Revenues Parity Debt Service 1991 Installment Payments 2003 Installment Payments 2004 Installment Payments 2007 Installment Payments Total Parity Debt Service Debt Service Coverage Non -Operating Expenses Transfers (In)/Out Total Non -Operating Expenses NetCashflow Before Capital Expenditures Source: Financial Services Division City of Lodi Wastewater System Historical Operating Results and Debt Service Coverage Fiscal Years 2004-05 through 2008-09 2004-05 2005-06 2006-07 2007-08 2008-09 $6,645,391 $8,206,016 $8,523,530 1,440,337 720,588 563,759 569,234 922,153 182,345 103,345 176,202 400,377 265,788 259,618 9,232,209 9,864,971 9,881,503 2,336,247 2,163,754 2,289,035 1,809,913 1,998,725 2,314,233 635,100 723,387 683,669 4,781,260 4,885,866 5,286,937 4,450,949 4,979,105 4,594,566 749,790 799,516 800,755 382,223 378,523 379,748 1,618,356 2,152,825 2,151,194 2,750,369 3,330,864 3,331,697 1.62 1.49 1.38 665,691 1,057,533 1,315,191 665,691 1,057,533 1,315,191 $1,034,889 $590,708 $(52,322) 152 $9,091,220 836,862 165,931 435.935 10,529,948 2,996,028 2,394,804 798,652 6,189,484 $4,340,464 311,127 380,873 2,144,438 852.239 3,688,677 1.18 575,326 575,326 $76,461 $9,276,217 428,586 221,422 838.007 10,764,232 2,984,049 2,067,646 869,129 5,920,824 4,843,408 426,022 2,134,856 1,591,200 4,152,078 1.17 1,451,478 1,451,478 $(760,148) Additional Indebtedness The Wastewater Utility did not incur any additional indebtedness during the 2008-09 fiscal year which is payablefrom the system net revenues on a parity with the installment payments. 153 ANNUAL REPORT FOR THE LODI PUBLIC IMPROVEMENT CORPORATION The Lodi Public Improvement Corporation has Continuing Disclosure requirements associated with its 2002 Certificates of Participation. The annual report includes, by reference, the audited financial statement of the City of Lodi. The annual report also contains the following five (5) tables as required in the Certificates: 1. A table setting forth the approved budget and actual results for the most recent fiscal year. 2. A table showing the comparative statements of revenue, expenditures and changes in fund balance for the general fund for the past five fiscal years. 3. A table showing the assessed valuations for the last five fiscal years. 4. A table showing the secured property tax collections for the past ten fiscal years. 5. A table showing the ten largest locally secured taxpayers for the last fiscal year. Reporting of Significant Events The Certificates identify eleven (11) specific events that require special reporting. As of June 30, 2009, none of the specified events have occurred. Further, there is no knowledge on the part of the City Council, officers or employees of the City of any impending Significant Event that would require disclosure under the provisions of the Certificates. Table 7 A table setting forth the approved budget and actual results for the most recent fiscal year. Please refer to the Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual on page 75 of this Comprehensive Annual Financial Report. 154 Table 2 A table showing the comparative statements of revenue expenditures and changes in fund balance for the general fund for the past five fiscal years. Revenues: Taxes Licenses and permits Intergovernmental revenues Charges for services Fines, forfeits and penalties Investmentand rental income Miscellaneous revenue Total revenues Expenditures: Current: General government Public protection Publicworks Library Parks and recreation Capital outlay Debt service: Interest and fiscal charges Principal payments Total expenditures Deficiencyof revenues under expenditures Other financing sources (uses): Transfers in Transfers out Capital lease proceeds Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GENERALFUND LAST FIVE YEARS 2005 2006 2007 2008 2009 $ 16,698,748 2,511,180 14,419,838 2,646,094 1,186,280 338,920 174,375 37,975,435 18,093,733 71,125 15,620,997 1,823,583 1,161,304 376,971 319,815 37,467,528 20,594,293 83,964 16,091,446 1,854,575 1,241,051 380,375 210,495 40,456,199 24,712,405 80,925 10,642,600 2,510,207 1,317,407 662,164 630.413 40,556,121 $ 23,516,164 61,783 8,967,410 1,055,137 1,415,174 231,181 446,404 35,693,253 10,857,842 8,344,970 8,893,677 9,545,370 6,922,096 20,044,101 20,686,173 21,775,531 23,771,574 24,463,771 6,429,372 6,577,776 3,871,311 3,935,366 2,967,402 1,420,257 1,468,178 1,587,714 1,672,910 1,499,720 3,671,803 3,434,361 3,597,718 3,826,450 2,160,035 124,478 48,475 266,499 42,862,827 (4,887,392) 6,043,184 (40,928) 124,478 6,126,734 1,239,342 1,452,988 $ 2,692,330 155 56,026 282,393 40,849,877 (3,382,349) 6,892,824 (1,833,864) 5,058,960 1,676,611 2,692,330 4,368,941 41,464 273,823 40,041,238 414,961 4,937,314 (3,401,814) 1,535,500 1,950,461 4,368,941 6,319,402 29,724 18,516 249,624 129,487 43,031,018 38,161,027 (2,474,897) (2,467,774) 4,040,166 5,367,983 (2,575,809) (4,442,883) 1,464,357 925,100 (1,010,540) (1,542,674) 6,319,402 5,308,862 5,308,862 $ 3,766,188 Table 3 A table showing the assessed valuations for the last five fiscal years. Please refer to the table shown in the Statistical Section on page 112. Table 4 A table showing the secured property tax collections for the past ten fiscal years. Please refer to the table shown in the Statistical Section on page 115. Table 5 A table showing the ten largest locally secured taxpayers for the last fiscal year. Please refer to the table shown in the Statistical Section on page 114. 156 CITY OF LODI, CALIFORNIA Report to City Council For the Year Ended June 30,2009 CITY OF LODI, CALIFORNIA Report to City Council For the Year Ended June 30,2009 Table of Contents Page(s) TransmittalLetter.......................................................................................................................................... RequiredCommunications........................................................................................................................ .2-4 Current Year Management Comment and Recommendation.......................................................... .5-6 Status of Prior Year Recommendations................................................................................................... 7-15 MACIAS GINI & OICONNELLLLP Certified Public Accountants & Management Consultants City Council City of Lodi, California SACRAMENTO 3000 S Street, Suite 300 Sacramento, CA 95816 916.928.4600 WALNUT CREEK OAKLAND LOS ANGELES NEWPORT BEACH SAN MARCOS SAN DIEGO We have audited the financial statements of the City of Lodi, California (City) for the year ended June 30, 2009, and have issued our report thereon dated November 9, 2009. 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, 2009 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, 2009, 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 years' audits. Those matters are included in the Status of Prior Year Recommendations section of this report. This report does not affect our report dated November 9, 2009, 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 9,2009 www.mgocpa.com An Independent Member of the BDO Seidrnan Alliance CITY OF LODI, CALIFORNIA Report to Management Required Communications For the Year Ended June 30,2009 Significant Audit Findings Qualitative Aspects cf Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted, other than GASB Statement No. 45, Accounting and Financial Reporting by Employers of Post -employment Benefits Other than Pensions and GASB Statement No 49, Accounting and Financial Reporting for Pollution Remediation Obligations. The adoption of GASB 45 required the City to include a disclosure on its other post -employment benefits (commonly referred to as OPEBs) in its notes to the financial statements consistent with that disclosure already required for pensions. The adoption of GASB 45 also had two significant impacts on the City's financial statements. Historically, the City followed guidance provided by GASB Statement No. 16, Accountingfor CompensatedAbsences, to account for its liabilities for sick leave benefits. A significant portion of the sick leave benefits is now accounted for under GASB 45, which is different than that under GASB 16. GASB 45 does not require the immediate recording of the liability. As a result, the City's beginning net assets were increased by $4,777,701. GASB 45 requires a liability to be recorded only when the actual payment is less than the actuarially determined annual required contribution. For 2009, that required contribution was determined to be $1,785,173, however the City's actual pay-as-you-go cost was just $589,652. Therefore, the City has recorded a net OPEB obligation of $1,195,521 as of June 30, 2009. The adoption of GASB 49 required the City to record as a liability its estimated pollution remediation obligations. The City estimated those obligations to be $70,505,924 as of June 30,2008. As a result, the City's beginning net assets were decreased by this amount. The City estimated those obligations decreased to $69,952,135 as of June 30, 2009. As a result, the City's long-term liabilities now include this amount. The application of existing policies was not changed during the year ended June 30, 2009. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. 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: • The self-insurance liability is based on the development of amounts from various consultants' actuarial studies. • The net OPEB obligation is based on an actuarial analysis. The pollution remediation obligation is based upon estimated cash flows determined by an engineering consultant's remedial action plan. 2 CITY OF LODI, CALIFORNIA Report to Management Required Communications (Continued) For the Year Ended June 30,2009 • The actuarial pension data contained in Note 10 to the financial statements and required supplementary information (unaudited) is based on actuarial calculations performed in accordance with the parameters set forth in GASB Statement No. 50 and GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans. The actuarial data for other postemployment benefits contained in Note 11 to the financial statements and required supplementary information (unaudited) is based on actuarial calculations performed in accordance with GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing theAudit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and UncorrectedMisstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. The following material misstatement detected as a result of audit procedures was corrected by management: Special item — swap termination $8,979,000 Interest expense $ 374,125 Deferred charges 8,604,875 To expense the swap termination payment as a special item that was originally recorded as a deferred charge (asset) in the Electric Fund and was being amortized through interest expense. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of the audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated November 9,2009. 3 CITY OF LODI, CALIFORNIA Report to Management Required Communications (Continued) For the Year Ended June 30,2009 Management Consultations with OtherindependentAccountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the 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. OtherAudit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the 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. 4 CITY OF LODI, CALIFORNIA Report to Management Current Year Management Comment and Recommendation For the Year Ended June 30,2009 AMERICAN RECOVERY AND REINVESTMENT ACT (ARRA) The American Recovery and Reinvestment Act of 2009 (the Recovery Act) provides approximately $300 billion dollars in additional federal funds which will be passed down from federal agencies to state and local governments and institutions of higher education. These federal funds are intended to either supplement existing federal programs, create new programs, or to provide more broad fiscal relief. The Recovery Act mandates that there be an unprecedented amount of oversight and transparency over the spending of all funds associated with it. The Office of Management and Budget (OMB) set up a web site to be the central point for the transparency part of the mandate. Also, the OMB issued guidance to the federal agencies regarding how they should carry out programs and activities relating to the Recovery Act that promotes timeliness and accountability. The OMB guidance addresses many issues and responsibilities including the following: • Recipients are generally required to clearly distinguish Recovery Act funds from non -Recovery Act funds. • New programs or existing programs that have significant changes in compliance requirements will be identified with a new Catalog of Federal Domestic Assistance (CFDA) number. • Federal agencies designated Recovery Act programs as high-risk for single audit purposes. • There is extensive quarterly reporting to federal agencies required from recipients of Recovery Act funding, which will be due within 10 days of each calendar quarter -end. • Federal agencies are required to initiate additional oversight to address the unique implementation risks of the Recovery Act. The expectation in this area is that federal agencies will establish defined strategies to prevent or timely detect waste, fraud, or abuse. • Federal agencies will also use the single audit process as a means of promoting accountability for Recovery Act funds. • The Federal Audit Clearinghouse (FAC) is also required to make publicly available on the internet all single audit reports filed with the FAC for fiscal years ending September 30, 2009, and later. CITY OF LODI, CALIFORNIA Report to Management Current Year Management Comment and Recommendation (Continued) For the Year Ended June 30,2009 Based on the information above, it is clear the Recovery Act funds will have a significant impact on your single audit. While the Recovery Act may not have an immediate impact on your June 30, 2009 single audit, it is likely that it will have a significant impact over the following two fiscal years. Therefore, the City should begin planning and assessing risks associated with the receipt, spending and reporting of Recovery Act funds. Specifically, you should consider the following: • Whether control procedures in place over federal expenditures are appropriate, operating effectively, designed to detect and prevent unallowable expenditures, and designed to detect or prevent fraud and abuse. • Whether the existing staffing resources are adequate to address the increased reporting and monitoring requirements as a result of the Recovery Act. Also, the City should identify individual(s) who will monitor requirements and provide consistent guidance to the organization. • Whether additional controls and system requirements will be needed to ensure that Recovery Act funds can be separately identified and tracked. • Whether new controls will need to be established to meet the stringent reporting requirements to federal agencies. If Recovery Act funds will be passed down to subrecipients, that controls are in place to ensure appropriate subrecipient monitoring and also whether any new controls will need to be established related to new subrecipient reporting responsibilities. 21 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations For the Year Ended June 30,2009 The following is a summary of the status of prior years' recommendations. FROM YEAR ENDED JUNE 30.2008 - CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM (CaIPERS)ENROLLMENT Condition During our audit, we noted that one part-time employee exceeded 1,000 hours during fiscal year 2002. However, based on our review of the Personnel Action Form (PAR) in the part-time employee's personnel file and the Ca1PERS' online database, the part-time employee was enrolled in Ca1PERS nine months later. For employees enrolling in Ca1PERS, the requirement is that they be enrolled once they exceed 1,000 hours in a given fiscal year. However, it appears that the City has the option of not enrolling part-time employees. Recommendation It is recommended that Human Resources determine what happened in this instance and that the necessary changes in the payroll and timekeeping system, as well as review the manual payroll controls that compliment the enrollment notification process, are developed to ensure that the Ca1PERS enrollment process is done timely for eligible employees. Current Year Status We performed testing over the participant data file and noted no errors relating to the enrollment dates of the randomly selected participants. Therefore we consider this finding resolved. FROM YEAR ENDED JUNE 30.2007 - INTERNAL SERVICE FUNDS Condition Internal service funds are expressly designed to function as cost -reimbursement devices. That is, an internal service fund is simply a means of accumulating costs related to a given activity on an accrual basis so that the costs can subsequently be allocated to the benefiting funds in the form of fees and charges. During our audit of the City's financial statements for the period ending June 30, 2007, we noted that the internal service fund does not appear to be recovering the full cost of providing medical insurance benefits to other funds and/or user departments. We examined, on a test basis, monthly Ca1PERS invoice billings of health insurance premiums for active participants enrolled in the health care plans offered by Ca1PERS, the cost of which were expensed in the internal service fund, however, the revenue reported by the internal service funds were consistently less than the related costs of the medical benefits provided. Absent a reconciliation of the enrolled participants in the Ca1PERS health care plans and the City's internal payroll and Human Resources system, the costs related to the Ca1PERS invoice billings of health insurance premiums could be permanently stranded in the internal service fund, and therefore, the user departments not being charged their proportionate share of the costs. CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Recommendation We encourage management and/or authorized employees to perform a monthly reconciliation of the enrolled participants in the health care plans as reported by Ca1PERS in the monthly health insurance invoice roster detail with the City's internal payroll system and HR records to ensure accuracy and completeness of the roster. This strengthens control and ensures that the costs are properly and timely allocated according to the user department or fund and that City is only being charged for current employees at authorized rates. Current Year Status Condition unchanged. Recommendationremains. Current YearManakement Response Procedures have been developed and will be fully implemented in fiscal year 2009-10. FROM YEAR ENDED JUNE 30,2005 - ENVIRONMENTAL REMEDIATION Condition The Governmental Accounting Standards Board (GASB) issued Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, 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. Recommendation With the City's ongoing environmental contamination remediation issue, we recommend that the City be aware of and review this new future GASB standard and ensure that the City be positioned to implement this standard when it becomes effective. Current Year Status GASB Statement No. 49 —Accounting and Financial Reportingfor Pollution Remediation Obligations has been implemented for the fiscal year ending June 30, 2009. Therefore we consider this finding resolved. INFORMATION TECHNOLOGY (IT) Information Technology Administration — Policies and Procedures Condition 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. Recommendation 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. CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Current Year Status A new Electronic Media Acceptable Usage Policy has been adopted for use within the City. A review of the policy found that it does address computer network security, password protection and specific configuration standards, and confidentiality of information. Therefore we consider this finding resolved. Logical Security —Departing Employees Condition There 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. Recommendation 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. Current Year Status The City has adopted a policy 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. We noted that the Information Systems (IS) Division conducted an audit of all user accounts to ensure that only current and valid personnel have access. Therefore, we consider this finding resolved. Logical Security —Access Rights Condition There 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. Current Year Status User lists are periodically reviewed by the IS Division to identify obsolete accounts and user appropriateness. In addition, department heads are annually sent a list of users within their departments and their access rights. The Deputy City Manager is also sent a list for review. A policy has been adopted that formally incorporates procedures to be performed. Therefore, we consider this finding resolved. 6 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Accounting System Development and Maintenance Condition While most procedures for the accounting system development and maintenance are in place, they are not formally documented. Having 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. Recommendation 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. Current Year Status Condition unchanged. Prior recommendation remains. This is in process of being implemented. The IS Division has drafted a formal change control policy that incorporates procedures and standards as recommended, to ensure program changes applied to major systems follow an appropriate methodology and minimizes the risks associated with the continued operation without the proper change management oversight that include the inadvertent alteration or deletion of financial data or having the financial system unavailable for an extended period of time. Current YearManagement Response Management agrees. Formal polices covering this recommendation should be implemented during fiscal year 2009-10. Packaged Accounting Software and Systems Software — Selection Method Condition There is not currently a documented system and application software selection method outlined for the City. 10 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Recommendation 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, o Analysis/comparison of several products o Implementation issues, including conversion, and o Cost/benefit 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. Current Year Status Condition unchanged. Prior recommendation remains. This is in process of being implemented. Formal policies are in process of development. Current YearManagement Response Formal polices covering this recommendation should be implemented during fiscal year 2009-10. Packaged Accounting Software and Systems Software — Test Environment Condition 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. Current Year Status Condition unchanged. Prior recommendation remains. This is in process of being implemented. The IS Division has drafted a patch management policy documenting the process for applying patches and updates for operating systems and applications that follow the current change control draft policy and procedures. Current YearManagement Response Management agrees. Formal polices covering this recommendation should be implemented during fiscal year 2009-10. Computer Operations — Computer Room Condition The City has moved the computer room which now has a separate dedicated air conditioning system, Uninterrupted 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. 11 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Recommendation 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. Current Year Status Condition unchanged. The City remains at risk of loss of financial data and information technology assets due to water-based fire suppression system in the computer room. The City's actions to mitigate the risk were to implement a disaster preparedness/business continuityplan (see following comment). Current YearManagementResponse The City has determined that the risk to the IT equipment is acceptable given the cost of re -fitting the computer room. Computer Operations — Disaster Preparedness/Business Continuity Plans Condition The City currently has no disaster preparedness or business continuity plans in place. Recommendation 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. Current Year Status In the process of being implemented. Due to budgetary constraints, the City did not renew its contract with IBM Business Partner to provide disaster recovery services including recovery equipment hosting and priority equipment replacement. The City is now performing its own disaster recovery by doing two nightly backups on tapes and one weekly full backup. One copy of the nightly backup is stored in the IS Division and another copy in the Police Department building. Although best practices recommend that the backup tapes be stored at least 20 miles from the primary data center, the City has no plans to change the secondary storage site. This puts the City at increased risk of losing financial information as the backup tapes are subject to many of the same environmental risks as the primary data center, such as floods, large fires or earthquakes. Additionally, the City's disaster recovery plan has not been fully tested. Current YearManagement Response Management agrees. The City has received grant money to update certain hardware and software that will allow high level of system and data redundancy and to fully test the plan by December 31, 2010. Computer Operations — Service Level Agreements Condition 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 cannot be properly defined. 12 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Recommendation Service level agreements between the user departments and the IS Division should be instituted to define the level of service to be expected. Current Year Status In process of being implemented. Prior recommendation remains. Current YearManazem ent Response Service level agreements are being drafted and are expected to be completed during fiscal year 2009-10. Computer Operations — Unauthorized Use of Software Condition There are no procedures in place to ensure that there is no unauthorized use of software within the City. Recommendation The IS 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. Current Year Status In the process of being implemented. The City has elected the alternative by requiring administrator privileges on network computers in order to install any software. However, the number of users with local administrative rights has increased as a result of the Police Department installing a CAD RMS system in June 2009. The system requires users to have local administrative rights for it to operate properly. Approximately 100 computers in the Police Department have local administrative rights. The IS Division is in the process of developing a way to restrict the local administrative rights on these computers without affecting the system's functionality. Current YearManazement Response Management agrees. The IS Division is still in the process of restricting local administrative rights on the Police Department computers. As of November 1, 2009, all but five of the Police Department computers have had their local administrative rights restricted. It is expected that all computers will have their local administrativerights restricted by December 31,2009. Other Matters Since 2005, the City has been in various stages of addressing our prior recommendations. Efforts to implement several have been hampered by budgetary constraints and other higher priority undertalungs. Overall, of the 10 IT findings and recommendations from our 2005 review that remained last year, three have been implemented and seven are in the process of being implemented. Several of the recommendations in the process of implementation will be completed before the end of fiscal year 2009- 2010. 13 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 FROM YEAR ENDED JUNE 30,2004 - CAPITAL ASSETS Condition During our audit of the City's financial statements for the year ended June 30, 2004, we noted that the acquisition and construction of capital assets is maintained on a spreadsheet, outside of the City's accounting system, which can lead to inaccurate recording and depreciation of capital assets. Recommendation 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. 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 specifiedperiod. To reduce operating overhead, the City should consider hiring temporary staff for data entry into the capital assets module. Current YearStatus Condition unchanged. Prior recommendation remains. Current YearManagement Response Finance is currently in the initial stage of assessing the magnitude of this project and coordinating with Information Systems Division to evaluate and establish a project plan. As of fiscal year 2008-09 the City does not have the resources to do so. FEDERAL TRANSIT ADMINISTRATIONINDIRECT COSTS Condition 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. 14 CITY OF LODI, CALIFORNIA Report to Management Status of Prior Year Recommendations (Continued) For the Year Ended June 30,2009 Recommendation We recommend that the City perform a review of all grants and make the determination if indirect costs can be applied against grant funds. Current Year Status Condition unchanged. Prior recommendation remains. Current YearManaQement Response The City will be issuing a Request for Proposals in fiscal year 2009-10 to secure consultant services to develop an A-87 compliant cost allocation plan and indirect cost rate and secure cognizant agency approval. 15 CITY OF LODI Agreed -Upon Procedures Report for Gann Appropriations Limit For the Fiscal Year Ending June 30,2009 We have performed the procedures enumerated below to the accompanying Appropriations Limit Worksheet of the City of Lodi, California (City) for the fiscal year ending June 30, 2009. These procedures, which were agreed to by the City of Lodi, California and the League of California Cities (as presented in the publication entitled Agreed-upon Procedures Applied to the Appropriation Limitation Prescribed by Article XIII -B of the California Constitution), were performed solely to assist the City in meeting the requirements of Section 1.5 of Article XIII -B of the California Constitution. The City's 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 sufficiency of the procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and our findings were as follows: We obtained the completed worksheets setting forth the calculations necessary to establish the City's appropriations limit and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the City Council. Finding: No exceptions were noted as a result of our procedures. 2. For the accompanying Appropriations Limit Worksheet, we added last year's appropriations limit to the annual adjustment amount, and compared the resulting amount to this year's appropriations limit. Finding: No exceptions were noted as a result of our procedures. We compared the current year information presented in the accompanying Appropriations Limit Worksheet to the worksheets described in No. 1 above. Finding: No exceptions were noted as a result of our procedures. www.mgoepa.com An Independent Member of the BDO Seidrnan Alliance 4 . We agreed the prior year appropriations limit presented in the accompanying Appropriations Limit Worksheet to the prior year appropriations limit adopted by the City 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 procedures, other matters might have come to our 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 solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties. 2<<<ar" Gf✓, � o,lamIA�I VI/1 Certified Public Accountants Sacramento, California June 26,2009 CITY OF LODI APPROPRIATIONS LIMIT WORKSHEET FOR THE FISCAL YEAR ENDING JUNE 30,2009 Appropriation Limit, fiscal year ended June 30, 2008, as adopted $72,598,226 Adjustment factors: Population factor, for fiscal year ending June 30,2009, as adopted I.0068 Inflation factor, for fiscal year ending June 30, 2009, as adopted 1.0429 Annual percentage increase 4.9992% Annual adjustment 3,629,309 Appropriation limit, fiscal year ending June 30,2009, as adopted $76.227.535 2008/09 Comprehensive Annual Financial Report City Council December 16, 2009 Auditor's Opinion ❑ City engaged an independent auditor through a competitive process ❑ Macias, Gini, O'Connell, LLP has given the City aclean' opinion for the year ■ Reviewed financial records and found them to be in compliance will all rules and regulations in all material respects ■ Financial statements fairly present the balances and operations of the City z Status of City's Financial Position Highlights of Financial Records ❑ General Fund ■ Unreserved Fund Balance of $3,383,,191 ❑ About $450,000 less than projected for budget purposes ❑ 8.87% of General fund expenditures ❑ Minimum prudent reserve should be 15% of General Fund expenditures ■ $5.7 Million based upon 2008/09 Expenditures ■ $6.0 Million based upon 2009/10 Expenditures ❑ Average bi-weekly payroll is $1.27M ■ Current reserve covers less than 3 payrolls 3 Status of City's Financial Position Highlights of Financial Records ❑ General Fund (cont.) ■ Unreserved Fund Balance Projected 2005/06 1,506,926 2006/07 3,500,000 2007/08 4,534,293 2008/09 3,831,962 2009/10 3,831,962 Actual 3,048,435 4,175,522 4,159,007 3,383,191 n Status of City's Financial Position Highlights of Financial Records ❑ General Fund (cont.) ■ Budget to Actual Variances ❑ Sales taxes down over $900,000 ❑ Engineering fees down over $400,,000 ❑ Fines and penalties up about $160,000 ❑ One time property sale added about $330,000 ❑ Expenditure savings of about $950,,000 ■ Vacancies ■ Prudent management 5 Status of City's Financial Position Highlights of Financial Records ❑ New Accounting requirements ■ GASB 49 -Pollution Remediation ❑ Booked a liability of N$70 million ■ Results in negative unrestricted net assets in the Water Fund ■ GASB 45-OPEB ❑ Results in a $1.2 million unfunded liability in the Benefits Fund Ri Status of City's Financial Position Highlights of Financial Records ❑ Continuing Disclosures ■ Required by SEC regulations and bond documents ■ New section in the CAFR ■ Brings together all of the Continuing Disclosure reports for ease of filing with regulatory agencies Management Letter ❑ Review of City's Internal controls ■ No new findings this year ❑ 15 prior year findings ■ 5 have been closed ■ Expect 8 of the 10 remaining will be closed in 2009/10 ❑ Remaining 2 recommendations (computer room fire suppression and fixed asset module implementation) will not be implemented