The URL can be used to link to this page

Home My WebLink AboutAgenda Report - February 17, 2016 I-01TM CITY OF LODI COUNCIL COMMUNICATION AGENDA ITEM z- AGENDA TITLE: Receive and File City's Annual Financial Report (Fiscal Year 2014/15) by Macias, Gini & O'Connell, LLP MEETING DATE: February 17, 2016 PREPARED BY: Deputy City Manager RECOMMENDED ACTION: Receive and file the following reports and financial statements submitted by Macias, Gini & O'Connell, LLP and the Internal Services department for Fiscal Year 2014/15: • 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." Scott Brunner, Director of MGO, will be present to 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. 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 22nd year and the California Society of Municipal Finance Officers (CSMFO) for the 16th year in a row. A copy of the GFOA certificate is included in the 2014/15 Financial Reports. FISCAL IMPACT: By law and good management practice, the City's financial records are audited by independent auditors according to Generally Accepted Auditing Standards. Well maintained financial records are the cornerstone by which the City fulfills its fiduciary responsibilities to the public. icActske-g6„ Jordan Ayers Deputy City Manager APPROVED: Stephen Sc iiWabau r, City Manager CITY OF LODI, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended June 30, 2015 BOB JOHNSON, MAYOR MARK CHANDLER, MAYOR PRO TEM DOUG KUEHNE, COUNCILMEMBER JOANNE MOUNCE, COUNCILMEMBER ALAN NAKANISHI, COUNCILMEMBER STEVE SCHWABAUER, CITY MANAGER Prepared by the Financial Services Division Ruby Paiste, Financial Services Manager Derrick Cotten, Supervising Accountant CITY OF LODI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS INTRODUCTORY SECTION Table of Contents Letter of Transmittal v Certificate of Achievement for Excellence in Financial Reporting xiii Organization Chart of the City of Lodi xiv Directory of Officials and Advisory Bodies xv FINANCIAL SECTION Independent Auditor's Report 1 MANAGEMENTS DISCUSSION AND ANALYSIS 3 BASIC FINANCIAL STATEMENTS Government -wide Financial Statements: Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements: 19 Balance Sheet — Governmental Funds 21 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 22 Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds 23 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 24 Statement of Net Position — Proprietary Funds 25 Statement of Revenues, Expenses and Changes in Net Position — Proprietary Funds 26 Statement of Cash Flows — Proprietary Funds 27 Statement of Fiduciary Net Position — Fiduciary Funds 29 Statement of Changes in Fiduciary Net Position - Fiduciary Funds 30 Notes to Basic Financial Statements 32 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Changes in Net Pension Liability and Related Ratios - Miscellaneous Plan 82 Schedule of Changes in Net Pension Liability and Related Ratios - Safety Plan 83 Schedule of Contributions 84 Schedule of Funding Progress — OPEB Plan 85 Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — General Fund 86 Note to the Required Supplementary Information 87 COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Combining Balance Sheet — Nonmajor Governmental Funds 90 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds 91 Nonmajor Governmental Funds - Special Revenue Funds 92 Combining Balance Sheet —Nonmajor Governmental Funds — Special Revenue Funds 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds — Special Revenue Funds 95 Schedules of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual — Nonmajor Governmental Funds — Special Revenue Funds 96 Nonmajor Governmental Funds - Capital Project Funds 102 Combining Balance Sheet — Nonmajor Governmental Funds — Capital Project Funds 103 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds — Capital Project Funds 104 Internal Service Funds 106 Combining Statement of Net Position - Internal Service Funds 107 Combining Statement of Revenues, Expenses and Changes in Fund Net Position — Internal Service Funds 108 Combining Statement of Cash Flows - Internal Service Funds 109 Combining Statement of Fiduciary Net Position - Private -Purpose Trust Funds 110 Combining Statement of Changes in Fiduciary Net Position - Private -Purpose Trust Funds 111 Statement of Changes in Assets and Liabilities - Agency Fund 112 STATISTICAL SECTION (UNAUDITED) Government -wide information: Net Position by Component - Last Ten Fiscal Years Changes in Net Position - Last Ten Fiscal Years Fund information: Fund Balances, Governmental Funds - Last Ten Fiscal Years Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years Tax Revenues by Source, Governmental Funds - Last Ten Fiscal Years Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years Principal Property Taxpayers -Current Year and Nine Years Ago Property Tax Levies and Collections - Last Ten Fiscal Years Electricity Sold by Type of Customer - Last Ten Fiscal Years Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding- Last Ten Fiscal Years Legal Debt Margin Information - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt Pledged -Revenue Coverage - Last Ten Fiscal Years Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Year and Nine Years Ago Full -Time Equivalent City Government Employees By Department - Last Ten Fiscal Years Operating Indicators by Function/Program/Department - Last Ten Fiscal Years Capital Asset Statistics by Function/Program/Department - Last Ten Fiscal Years 114 115 116 118 119 121 122 123 124 125 126 127 128 129 130 131 134 135 136 137 139 SINGLE AUDIT REPORTS Schedule of Expenditures of Federal Awards 142 CITY OF LODI COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2015 TABLE OF CONTENTS - continued Notes to the Schedule of Expenditures of Federal Awards 144 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 145 Independent Auditor's Report on Compliance for the Major Federal Program and on Internal Control over Compliance Required by OMB Circular A-133 147 Schedule of Findings and Questioned Costs 149 Schedule of Prior Year Findings and Questioned Costs 151 CONTINUING DISCLOSURES (UNAUDITED) Annual Report for Electric Utility Annual Report for Wastewater Utility Annual Report for the Lodi Public Improvement Corporation and the Lodi Public Financing Authority Annual Report for Water Utility 154 161 168 171 (This page intentionally left blank.) CITY COUNCIL BOB JOHNSON, Mayor MARK CHANDLER, Mayor Pro Tempore COUNCILMEMBERS: DOUG KUEHNE JOANNE MOUNCE ALAN NAKANISHI February 3, 2016 STEVE SCHWABAUER CITY OF LODI City Manager 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 City Manager of the City of Lodi: JENNIFER FERRAIOLO City Clerk JANICE MAGDICH City Attorney The Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 2015, 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, 2015, in conformity with accounting principles generally accepted in the United States of America (GAAP). 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 and changes in financial position of the City. In addition, we believe that all disclosures necessary to enable the reader to gain a full understanding of the City's financial activities have been included. This letter of transmittal is designed to complement the Management's Discussion and Analysis (MD&A) and should be read in conjunction with it. The MD&A can be found immediately following the independent auditor's 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 No.14, as amended by GASB Statement No. 61. 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-year terms, with no term limits. Elections are held v 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, community development, human resources administration, financial administration, building maintenance and equipment maintenance). Several municipal services are provided through other government agencies, private companies or public utility companies, including: Number of Facilities Elementary and Secondary Schools 18 Sanitation (solid waste) and Cable Television 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 63,719 and is contained in an area of 13.98 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 over 80 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. 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 indicator for the City. The City's focus on economic development has encouraged numerous big industries to move to the City that collectively created hundreds of new jobs. vi 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 increase taxes 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 in the southeast corner of the City, and with a large retail development in the southwest corner of the City. The City is also committed to an Enterprise Zone with San Joaquin County. MAJOR GOALS, OBJECTIVES AND 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 aspirational goals, objectives and major projects that support and re -enforce the City's mission statement. Council then set project specific goals at a series of workshops in 2015. 1). Aspirational Goals Four major City goals were established as policy direction and focal points for the efforts of City staff. These goals include: Ensure a High Quality of Life and a Safe Environment for Citizens Ensure Efficient and Productive City Organization Ensure Public Trust, and Ensure the Development of the Lodi Economy for a Fiscally Sound City Organization City Council, the City Manager and Department Heads established nineteen major City objectives: Maintain City's Sense of Community Provide for a Balanced Community Enhance Access through Implementation of Information Systems Strategic Plan Promote Urban Forestry Attract, Retain and Invest in a Quality City Work Force Encourage Public Arts, Cultural and Recreational Opportunities Provide Appropriate and Sufficient City Facilities Develop Short and Long Range Operational Plans Develop Effective Records Management Program Promote Commercial/Industrial Base 2). Project Specific Goals Provide Employee Training and Education Evaluate Telecommunications Opportunities Provide Resources to Maintain City's Infrastructure Promote Public Relations and Marketing Efforts Ensure Open and Accessible Public Meetings Pursue Efforts to be Entrepreneurial Improve Customer Service Continue to use Partnerships to Advance City's Objectives Provide a Balanced Budget and Adhere to Adopted Policies 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. Council set the following priorities and categories in 2015: Economic development for "shovel ready" land Economic development and incentive program to focus on underutilized parcels Public Safety, Gang Reduction Intervention Program, training and increase in staffing vii Fiscal sustainability, asset preservation, CALPERS and Other Post -Employment Benefits East side rehabilitation, incentive programs and infrastructure Additional priorities that did not fit into the above categories include 1) addressing homelessness issues, 2) providing downtown Wi-Fi and music and 3) beautification of highway overpasses. As discussed above, economic revitalization continued to be an active focal point of the City in 2014-15. The following projects are underway and will see significant progress or be completed in 2014 or 2015. Fire Station #2 The City awarded a $4.2 million construction contract in August 2014 for building a replacement for the existing Fire Station #2. Construction is substantially complete and the new building will be occupied in January 2016. Lodi Shopping Center The Lodi Shopping Center development in the southwestern corner of the City has cleared all legal hurdles and is currently under construction. Anchored by a WalMart supercenter, the site will encompass 12 building pads and approximately 340,000 square feet of retail space. Construction began on the main building and a number of smaller pads in 2015. Reynolds Ranch Reynolds Ranch is a planned development on the south eastern edge of the city that will eventually incorporate residential and commercial development. Development continues with additional retail space completed in 2014 and 2015. Construction continues on a number of pads and tenants should be in place in 2016. Build -out of the commercial space will occur over the next 10 years. Residential Development The City has five residential development projects that have been approved and total about 1,100 dwelling units. Dwelling units are fairly evenly divided among low, medium and high density units. Sales in one of the five projects are ongoing in 2015. Construction is expected in two of the remaining four projects in the coming year. Water Meters and Water Infrastructure Under state law, all residential housing must be billed for water usage on a metered basis by 2025. The City has embarked on a program to install meters on approximately 14,000 parcels over an eight year period. A portion of this project will also include moving mains and service connections from alleys and rear yards to streets and front yards. Additionally, the City will be appropriately sizing water mains as part of this project. Construction began during FY 2009-10 and will continue through FY 2017-18. To date, approximately 10,900 meters have been installed. Estimated cost for the complete program is $42.5 million. FINANCIAL INFORMATION, MANAGEMENT AND CONTROL A detailed understanding of the financial position and change in financial position 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. viii 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 operating income in addition to financial position and changes in financial position. Revenues are recognized when earned and expenses are recognized as the liability is incurred. We believe that the City's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. Accounting System and Budgetary Control In developing the City's accounting system, consideration is given to the adequacy of the internal controls. The objective of the City's internal accounting controls is to provide reasonable, but not absolute, assurance that the assets are safeguarded against loss from unauthorized use or disposition; and to ensure that transactions are properly recorded to permit the preparation of financial statements in accordance with GAAP. The concept of reasonable assurance recognizes that the cost of the controls 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 fund balances. During fiscal year 2014-15, the City Council and City Manager made several supplemental appropriations for operating budgets and capital projects. Fund Balance It is the City's goal to target and maintain an unassigned fund balance in the General Fund of at least 16% of revenues and working capital balances in the Water and Wastewater enterprise funds, and at least 25% of operating expenses. Based on a reserve policy adopted in March 2014, the target for the Electric enterprise fund working capital is $23.7 million for fiscal year 2014-15. The goals allow for variations from year-to-year to account for economic and fiscal changes. The General Fund maintained an unassigned fund balance of $12,107,040 or 28.65%, of revenues at the end of fiscal year 2014-15. 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 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. ix Appropriation Limitation Article XIII B of the Constitution of the State of California (Proposition 4) provides for the limitation of expenditures by state and local governments. Under the provisions of this article, City appropriations funded through tax sources may not exceed Fiscal Year 1979 appropriation levels except as adjusted for increases in population and the growth in the California per capita income or non-residential assessed valuation due to new construction within the City. Excluded from the limitation are appropriations funded through charges for services, fines and forfeitures, grants, transfers of service responsibilities between government agencies and indebtedness incurred prior to Fiscal Year 1979. Pursuant to subsequent legislation adopted after Article XIII B, the City is required to annually establish and adopt its appropriations limit by resolution. For 2014-15, the City's appropriations subject to limit were $34,129,895 and the appropriation limit was $86,477,897, leaving appropriations at $52,348,002 below the limit. Debt Administration At June 30, 2015, the City had outstanding Certificates of Participation and Revenue Bonds of $169,717,617. These liabilities are discussed in Note 8 of the Basic Financial Statements and summarized below. 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 refunded with the 2008 Electric Systems Revenue Certificates of Participation thereby eliminating a variable rate obligation. 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. These bonds were partially refunded with the 2012 Refunding Wastewater Revenue Bonds, Series A. 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 $60,685,000 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. On October 1, 2010, the City issued $9,015,000 Water Revenue Certificates of Participation, 2010 Series A and $29,650,000 Water Revenue Bonds, 2010 Series B (Federally taxable - Build America Bonds) to finance the construction of the Surface Water Treatment Facility which is designed to pump water from the Mokelumne River, treat and deliver it to the City's water distribution system. On September 1, 2012, the City issued $19,080,000 Refunding Lease Revenue Bonds (2012 LRB) to prepay and cause the immediate defeasance of the outstanding $21,025,000 Certificates of Participation (2002 COP). The 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. x The City also issued the $17,105,000 2012 Refunding Wastewater Revenue Bonds (2012 Bonds) in September 2012 to advance refund the $17,115,000 principal amount of the 2004 Wastewater Revenue Certificates of Participation (2004 COP). The 2004 COP were issued to provide funds to finance the costs of certain improvements to the wastewater collection, treatment and disposal system of the City. The City's debt management policy includes a commitment to monitor all forms of debt annually during the preparation of the City's Financial Plan and Budget to ensure compliance. Also, the City will generally conduct financing on a competitive basis, will seek an investment grade rating on any direct debt and will obtain credit enhancements such as letters of credit or insurance when necessary for marketing purposes, availability and cost effectiveness. Interim Financial Reporting Monthly financial reports are prepared to present the City's financial condition and changes in financial position. 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. 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 and expending in excess of $500,000 of federal financial awards annually. 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 2014-15 were made pursuant to competitive bidding procedures as established under the City's purchasing ordinance. Contracts for construction projects were awarded pursuant to competitive bidding procedures established by the State of California for projects in excess of $5,000. Risk Management The City is self-insured for dental care, workers' compensation, general liability and unemployment insurance. General liability and workers' compensation are administered by outside agencies. The City administers unemployment insurance. Self-insurance transactions are accounted for under the Insurance Funds. At June 30, 2015, the Insurance Fund had a net position of $4,053,434. 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 proper 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 auditor's 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 GAAP. xi 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 Comprehensive Annual Financial Report (CAFR) for the year ended June 30, 2014. These Certificates of Achievement are prestigious national and state awards recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized CAFR, whose contents conform to program standards. The CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement for the last twenty-two 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, Derrick Cotten, Supervising Accountant, Tyson Mordhorst, Senior Programmer Analyst and Nancy Spinelli, Finance Technician. Their work in preparing this year's CAFR is greatly appreciated. I would also like to thank you for your continued interest and support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Jordan Ayers Deputy City Manager/Internal Services Director xii Government Finance Officers Association 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 ■■ ■ City of Lodi Citizens City Council Library Board Library City Attorney City Manager City Clerk Boards and Commissions Deputy City Manager/Internal Services Director Parks, Rec. & Cultural Services Community Development Electric Utility Public Works Fire Police Budget/ Treasury Division Financial Services Division Human Resources Division Information Systems Division FY 2014-2015 DIRECTORY OF OFFICIALS AND ADVISORY BODIES CITY COUNCIL Bob Johnson Mark Chandler Doug Kuehne JoAnne Mounce Alan Nakanishi ADVISORY BODIES Planning Commission Library Board Recreation Commission Site Plan and Architectural Review Committee PRINCIPAL ADMINISTRATIVE OFFICERS Steve Schwabauer Jordan Ayers Janice Magdich Jennifer Ferraiolo Dean Gualco Larry Rooney Jeff Hood Wally Sandelin Elizabeth Kirkley Steve Schwabauer Tod Patterson xv Mayor Mayor Pro Tempore 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 Fire Chief Parks, Recreation & Cultural Services Director Public Works Director Electric Utility Director Community Development Director Interim Police Chief 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. Certified Public Accountants Independent Auditor's Report The Honorable Members of City Council City of Lodi, California Report on the Financial Statements Sacramento Walnut Creek Oakland San Francisco Los Angeles Century City We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining Newport Beach fund information of the City of Lodi, California (City), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which San Diego collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, 2015, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1 to the basic financial statements, effective July 1, 2014, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions — an amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date — an amendment of GASB Statement No. 68. Our opinions are not modified with respect to this matter. Macias Gini & O'Connell LLP 3000 5 Street, Suite 300 Sacramento, CA 95816 1 www.mgocpa.com Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the schedules of changes in net pension liability and related ratios, the schedule of pension contributions, the schedule of funding progress for the OPEB plan, and the schedule of revenues, expenditures and change in fund balance — budget and actual — for the General Fund as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying introductory section, combining and individual fund statements and schedules, statistical section, schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, and the continuing disclosures section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund statements and schedules and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory, statistical, and continuing disclosures sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 3, 2016 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. LacsOcenitel Sacramento, California February 3, 2016 2 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 year ended June 30, 2015. FINANCIAL HIGHLIGHTS • The assets and the deferred outflows of resources of the City exceeded its liabilities and the deferred inflows of resources at the close of the fiscal year by $171,425,284 (net position). Of this amount, $73,254,063 is unrestricted deficit. • The City's total net position decreased by $12,863,903 in fiscal year 2015. • As of June 30, 2015, the City's governmental funds reported combined ending fund balances of $24,436,361, an increase of $3,293,392 in comparison with the prior year. Of this amount, $12,107,040 is available for spending at the City's discretion (unassigned fund balance). • At the close of the fiscal year, fund balance for the general fund was $12,478,553, of which $12,107,040 is unassigned or 28.65% of total general fund revenues of $42,254,075. • The City's total long-term liabilities decreased by $9,528,619 (4.45%) 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 Basic 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 position presents information on all of the City's assets, deferred outflows of resources, and liabilities, with the difference reported as net position. Over time, increases or decreases in net position 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 position changed during the most recent fiscal year. All changes in net position 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. 3 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, 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 resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into the following three categories: Governmental funds, Proprietary funds, and Fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. Most of the City's basic services are reported in governmental funds. These statements, however, focus on (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are available for spending. Such information may be useful in determining financial resources available in the near future to finance City programs. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains several individual governmental funds organized according to their type (special revenue, capital projects and debt service). Information is presented separately in the governmental funds 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 and schedules have been provided for the general fund and the special revenue funds to demonstrate compliance with this budget. Proprietary Funds. Proprietary funds are generally used to account for services for which the City charges customers, either outside 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 major funds and the Transit system, which is considered to be a non -major proprietary fund. 4 • Internal Service funds are used to report activities that account for various employee benefits, self-insurance, 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. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. The activities of 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 -Purpose Trust and the Hutchins Street Square 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, they are 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 Basic Financial Statements The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report presents certain required supplementary information concerning changes in net pension liability and related ratios for the City's Miscellaneous and Safety pension plans, the City's progress in funding its obligation to provide other postemployment benefits (OPEB) to its employees, and schedules 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. 5 GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government's financial position. The City's assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $171,425,284 at the close of the current fiscal year. Assets: Current and other assets Capital assets Total assets Deferred outflows of resources Liabilities: Net OPEB obligation Net pension liability Long-term liabilities Other liabilities Total liabilities City of Lodi's Net Position Governmental Business -type Activities Activities 2015 $ 44,957,568 125,703,452 170,661,020 Total 2014 2015 2014 2015 2014 39,219,664 82,429,647 86,449,184 $ 127,387,215 125,668,848 125,248,452 238,569,011 234,608,951 364,272,463 359,857,403 164,468,116 320,998,658 6,317,566 462,397 5,343,727 74,791,178 34,313,177 6,505,235 4,767,274 35,661,889 4,679,095 120,953,317 45,108,258 Deferred inflows of resources 12,226,800 Net position: Net investment in capital assets Restricted Unrestricted Total net position 105,943,664 12,001,224 (74,146,419) $ 43,798,469 105,461,769 11,808,701 2,551,785 119,822,255 321,058,135 491,659,678 8,240,201 7,371,560 16,870,603 170,074,211 10,723,874 178,254,118 10,781,887 197, 668, 688 189, 036, 005 485,526,251 14,557,767 7,833,957 5,343,727 91,661,781 204,387,388 17,229,109 4,767,274 213,916,007 15,460,982 318,622,005 234,144,263 3,943,356 16,170,156 119,924,203 6,810,256 892,356 116,156,098 6,702,976 16,534,616 225,867,867 18,811,480 (73,254,063) 221,617,867 18,511,677 19,086,401 127,626,815 139,393,690 $ 171,425,284 259,215,945 Assets. The City's total assets increased by $6,133,427. The increase is primarily due to the following: Governmental activities. Total assets for the governmental activities had an increase of $6,192,904 or 3.77% resulting largely from an increase in cash and investments due to increases in property tax revenue, $495,193; sales tax, $513,673; State mandated reimbursements from claims 6 submitted in prior years including interest, $958,106; and transfers from the Electric, Wastewater, Water Enterprise Funds and the Internal Service Fund for various capital projects, $3,600,000. Other insignificant activities make up the difference. Business -type activities. Total assets for the business -type activities had a decrease of $59,477. Current and other assets decreased by $4,019,537 primarily due to decreases in cash and investments and restricted assets as a result of payments for debt service and an increase in contributions to the Capital Outlay Fund for various projects, $3,550,000; offset by the increase in Greenhouse gas allowance compared to prior year of $1,869,672 and the increase in charges for services revenue due to increased rates in Wastewater Fund of $409,030 and in the Electric Fund by $544,512, due to the overall increase in usage by customers. Capital assets increased by $3,960,060 primarily from the purchase of thirteen buses in the Transit Fund, $2,585,873, increase in construction in progress, $10,449,092; offset by depreciation of buildings and improvements, machinery and equipment, and vehicles. Other insignificant activities contributed to the difference. Deferred outflows of resources. The increase in deferred outflows of resources of $ 6,723,810 is primarily due to the recording of the current pension contributions made after the measurement date of June 30, 2014 of the CaIPERS valuation report. Liabilities. The City's total liabilities increased by $84,477,742 or 36.08%. The increase is primarily due to the following: Governmental activities. Total liabilities for the governmental activities had a significant increase of $75,845,059 or 168.14%, primarily from pension related liability. Business -type activities. Total liabilities for the business -type activities increased by $8,632,683 or 4.57%. The increase is primarily attributable to the pension related liability. Other insignificant activities offset the difference. Deferred inflows of resources. The increase in deferred inflows of resources of $16,170,156 represents the plan earnings of both Miscellaneous and Safety Plans in excess of projected in the CaIPERS actuarial report. Net position. The City's overall financial position has increased during the fiscal year. The net position has increased by $12,863,903, excluding the restatement of $100,654,564, or 4.96%. The largest portion ($225,867,867) of the City's net position 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 position, $18,811,480 (10.97%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position amounts to a deficit of $73,254,063. At the end of the current fiscal year, the City is able to report positive balances in two categories of net position for the City as a whole. Unrestricted net position is negative for the governmental -type activities. 7 City of Lodi's Change in Net Position Governmental Business -type Activities Activities Total 2015 2014 2015 2014 2015 2014 Revenues Program revenues: Charges for services $ 6,193,492 5,692,708 92,904,205 91,956,874 $ 99,097,697 97,649,582 Operating grants and contributions 3,369,054 2,685,911 5,185,575 4,431,258 8,554,629 7,117,169 Capital grants and contributions 3,130,921 5,359,070 5,283,584 2,846,263 8,414,505 8,205,333 General revenues: Property taxes 13,502,085 12,758,079 13,502,085 12,758,079 Other taxes 11,128,660 10,960,317 11,128,660 10,960,317 Grants and contributions not restricted to specific programs 10,650,893 10,138,096 10,650,893 10,138,096 Rent 1,941,477 1,905,709 4,200 4,200 1,945,677 1,909,909 Other 750,606 730,690 3,376,133 3,126,882 4,126,739 3,857,572 Total revenues 50,667,188 50,230,580 106,753,697 102,365,477 157,420,885 152,596,057 Expenses General government 9,108,789 9,580,379 9,108,789 9,580,379 Public protection 27,426,291 27,883,875 27,426,291 27,883,875 Public works 10,281,419 10,644,153 10, 281,419 10, 644,153 Community development 1,164,964 1,174,428 1,164,964 1,174,428 Library 1,324,130 1,282,257 1,324,130 1,282,257 Parks and recreation 3,115,763 3,163,506 3,115,763 3,163,506 Interest on long-term debt 817,918 824,517 817,918 824,517 Electric 64,366,530 61,974,538 64,366,530 61,974,538 Wastewater 12,911,955 12,526,711 12,911,955 12,526,711 Water 9,905,544 11,013,911 9,905,544 11,013,911 Transit 4,133,679 3,833,786 4,133,679 3,833,786 Total expenses 53,239,274 54,553,115 91,317,708 89,348,946 144,556,982 143,902,061 Changes in net position before transfers (2,572,086) (4,322,535) 15,435,989 13,016,531 12,863,903 8,693,996 Transfers 7,513,614 4,792,000 (7,513,614) (4,792,000) Changes in net position 4,941,528 469,465 7,922,375 8,224,531 12,863,903 8,693,996 Net position at beginning of year, as previously reported 119,822,255 120,585,956 139,393,690 134,435,142 259,215,945 255,021,098 Adjustment related to pensions (80,965,314) (19,689,250) (100,654,564) Adjustment for OPEB and deferred costs (1,233,166) (3,265,983) (4,499,149) Net position at beginning of year, as restated 38,856,941 119,352,790 119,704,440 131,169,159 158,561,381 250,521,949 Net position at end of year $ 43,798,469 119,822,255 127,626,815 139,393,690 $ 171,425,284 259,215,945 Analysis of Changes in Net Position Governmental activities Net position for the governmental activities increased by $4,941,528 in the current fiscal year, which is an increase of $4,472,063 from last year's increase of $469,465. The key factors impacting this increase are: 8 Revenues increased $436,608 from the prior fiscal year. Key elements of this increase are: • Charges for services increased by 8.8%, a net amount of $500,784 from the prior fiscal year, mainly from the increase revenue from engineering inspection fees and engineering fees of $415,705. • Operating grants and contributions increased by $683,143 or 25.43% compared to the prior year from the increase in the State mandated reimbursements of $958,106 offset by the decrease in Police Hiring grant of $194,984 and decrease of CaIGRIP funding of $177,776. • Capital grants and contributions decreased by $2,228,149 or 41.58% from the prior fiscal year. The decrease in capital contributions was mainly attributable to federal funds used for the Harney Lane Grade Separation project and the Sacramento Street Pedestrian Beautification project totaling $1,761,762, decrease gas tax allocation of $167,740 and decrease in CDBG allocation of $307,992. • Property taxes increased by $744,006 or 5.83% compared to prior year. The economy continues to show evidence of positive movement particularly in the housing market. Rising home prices coupled with record lows in mortgage rates are helping the process to generate sales, resulting in an increase in property tax revenues in the current year. • Grants and contributions not restricted to specific programs increased by $512,797 or 5.06% basically from sales tax revenues which increased by $513,673. The overall increase in sales tax is attributed to a general increase in consumer spending and steady increase in auto sales spurred by low interest rates, easy credit and manufacturer's incentives. Expenses for governmental functions totaled $53,239,274, a decrease of $1,313,841 from the prior fiscal year. The key elements of this decrease are: • General government — the decrease in general government of $471,590 is primarily due to decrease in salaries and benefits due to vacancies and the effect of the Council approved one-time payment given to employees and the increase in the cap for medical premiums in the prior year. Other insignificant increases offset the difference. • Public protection — a decrease of $457,584 in public protection is primarily due to vacancies and the one-time payment given to employees and the increase in the cap for medical premiums in the prior year. Other insignificant increases offset the difference. • Public works — the decrease of $362,734 is primarily due to vacancies and the one-time payment given to employees and the increase for medical premiums in the prior year. Other insignificant increases offset the difference. Transfers increased by $2,771,614, primarily due to contributions from the enterprise funds for various capital projects. Business -type activities Business -type activities increased the City's net position by $7,922,375 in the current year, which is a decrease of $302,156 from last year's increase of $8,224,531. The key elements of this decrease are: • Transfers to the governmental activities for various capital projects increased by $2,771,614 in comparison to the prior year. • Charges for services in the Electric fund increased by $544,512 primarily from sales due to growth and increased usage by commercial customers. • Increase in the Greenhouse gas allowance (GHG) of $1,869,672 in the Electric fund related to Assembly Bill 32: Global Warming Act, which set the 2020 greenhouse gas emissions reduction into law and also adopted a regulation that established a system of market-based declining annual aggregate emission limits for sources or categories of sources that emit greenhouse gases. In 2011, the California Air Resources Board (ARB) adopted the cap -and -trade regulation. This program covers major sources of GHG emissions in the State such as refineries, power plants, industrial facilities, and transportation fuels. The cap -and -trade program includes an enforceable emissions cap that will decline over time. The State distributes allowances which are tradable permits, equal to emissions allowed under the cap. 9 • Capital contributions increased by $2,437,321, primarily from federal funds received for the purchase of buses for the Transit Fund. • Increase in depreciation expense of $1,146,358 as the result of adding $5,416,421 in capital assets. • Bulk power cost increased by $1,209,397 compared to the prior year is primarily attributed to increasing transmission access charges per MWH charged by NCPA. 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, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. Types of governmental funds reported by the City include the General Fund, special revenue funds, debt service fund and capital projects funds. At the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $24,436,361. This represents an increase of $3,293,392, an increase of $2,162,924 in comparison to the prior year increase of $1,130,468 resulting from the increase in total revenues and increase in transfers in, offset by the increase in capital outlay. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $12,107,040 while total fund balance was $12,478,553. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance and total fund balance represent 33.56% and 34.59% of total General Fund expenditures, respectively. The fund balance of the General Fund increased by $3,004,793 during the current fiscal year, an increase of $1,496,245 from last year's increase of $1,508,548. Key factors in this growth are as follows: • Total revenues increased by $2,653,051, primarily from the increase in sales tax of $513,673; increase in property tax of $495,193, increase in property tax in -lieu of $244,564, increase in State mandated reimbursements of $958,106; increase in engineering and inspection fees, $415,705; and, increase in transient occupancy tax of $72,636. Other insignificant increases and decreases offset the difference. • Total expenditures increased by $297,571, primarily from increase in public works for professional services related to construction testing and inspection services for various city projects. Salaries and wages also decreased by $747,481 and offset by the increase of overtime by $ 446,372 due to vacancies. Other insignificant increases and decreases offset the difference. 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 position at the end of the year for the Wastewater Fund was $5,698,680, Water Fund was $2,087,340 and for the Transit Fund, $3,489,661. The Electric Fund unrestricted net position was ($10,383,325) and the Internal Services Funds unrestricted net position was ($615,623). 10 Other factors concerning the finances of these funds are discussed in the City's business -type activities. GENERAL FUND BUDGETARY HIGHLIGHTS Differences between the original budget and the final budget in the General Fund were a net increase in appropriations of $99,422. The increase in appropriations can be briefly summarized as follows: • $61,923 increase in general government • $301,499 decrease in public protection • $128,511 increase in public works • $11,643 increase in library Significant differences between the final budget and the actual revenues and expenditures can be briefly summarized as follows: • Taxes — a favorable variance of $467,835 was due to positive variances in property tax ($57,041), real property transfer tax ($29,493), transient occupancy tax ($116,419), in -lieu of vehicle license fees ($122,721), cable TV franchise fees ($59,537), electric, gas and industrial waste franchise ($106,235), card room tax ($23,217), offset by a negative variance in business license tax ($46,828). • Intergovernmental revenues — a favorable variance of $1,359,792 was mainly due to a positive variance in sales tax ($366,733), State mandated reimbursements ($962,932), and in Prop. 172 ($31,865). • For expenditures, a favorable variance between the final budget and actual expenditures of $948,082 was due to savings from vacancies and the continued overall effort to reduce spending and costs. 11 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital assets The City's investment in capital assets for its governmental and business -type activities as of June 30, 2015, amounts to $364,272,463 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment, vehicles, infrastructure, works of art, and construction in progress. The total increase in the City's investment in capital assets for the current fiscal year was $4,415,060, a 1.23% increase (a 0.36% increase in governmental activities and 1.69% increase in business -type activities) as shown in the table below. Land Construction in Progress Buildings and Improvements Machinery and Equipment Vehicles Infrastructure Work of Art Total Changes in Capital Assets, Net of Depreciation Governmental Activities Business -type Activities 2015 2014 2015 2014 $ 24,947,834 12,124,679 36,344,383 549,226 1,758,667 49,673,756 304,907 $ 125,703,452 $ 24,933,134 $ 5,535,718 $ 4,407,042 14,478,947 38, 288, 041 29, 340, 217 726,413 184,431,755 1,318,240 4,782,374 55,270,675 304,907 $ 125,248,452 $ 238,569,011 $ Total 2015 5,535,718 $ 30,483,552 $ 4,029,855 26,603,626 31,130,846 65,684,600 191,198,079 184,980,981 2,714,453 6,541,041 49,673,756 304,907 2014 30,468,852 8,436,897 69,418,887 191,924,492 4,032,693 55,270,675 304,907 234,608,951 $ 364,272,463 $ 359,857,403 An increase in construction in progress compared to prior year was primarily from the ongoing improvements for Fire Station # 2 and Fire Station #3, City Hall Annex improvements, the Harney Lane Grade separation project, White Slough Plant improvements, and the Water Meter Programs - Phases #4 and #5. The increase in vehicles resulted from the purchase of thirteen buses. Additional information on the City's capital assets can be found in Note 6 on pages 49-51 of this report. 12 Long-term debt At the end of the current fiscal year, the City had total bonded debt outstanding of $169,717,613. Of this amount, $19,950,250 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 $149,767,363 from the business -type activities consists of $35,907,504 for the Water Fund; $47,556,412 for the Wastewater Fund; and $66,303,447 for the Electric Fund. City of Lodi's Outstanding Debt Governmental Business -type Activities Activities Certificates of Participation and Revenue Bonds $ 19,950,250 The City's total bonded debt decreased by $7,583,005 during the current fiscal year. Total 149, 767, 367 169, 717, 617 Bond Rating In December 2015, Moody's Rating Services maintained its A2 rating with a stable outlook on outstanding electric utility debt instruments given management's focus on improving financial performance and no plans to issue additional debt in the near future. In September 2015, Standard & Poor's Rating Services raised its long-term rating to A+ from A on the outstanding public improvement bonds with a stable outlook. Additional information on the City's long-term debt can be found in Note 8 on pages 52-58 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET The City continues to see a number of positive economic indicators and is slowly returning to revenue levels seen before the Great Recession. General Fund revenues including transfers from other funds are projected to increase for the first time to exceed the historic high of $45.5 million in 2007/08 to a conservatively projected $46,708,260 in 2015/16, representing a 7.2 percent growth in revenues. This past year has seen the continued growth for Costco and Home Depot stores. Moreover, plans are now on file for construction of several businesses and additional retailers are moving forward with plans to complete other sections of the development at Reynolds Ranch. Additionally, the Lodi Shopping Center is moving forward and is under construction. The General Fund continues to be of the greatest focus. It funds all of the core municipal services including police, fire, administration, economic development, transfers to the parks and library funds and other essential public services. The General Fund houses the large majority of City employees. The City has reduced its workforce by 17% over the past ten years, from 470 full-time budgeted employees in 2004/05 to 391 full-time budgeted employees in 2015/16. The City will add a net of 8 positions this year to address capital maintenance needs, succession planning and operational efficiencies in various departments. 13 The City will continue its capital efforts in the coming year. Significant projects expected to be undertaken during the year include various electrical system maintenance projects, water meter and water system maintenance projects, PCE/TCE remediation projects, various wastewater system maintenance projects, street maintenance and replacing boating facilities at Lodi Lake Park under a State Division of Boating and Waterways Local Assistance grant. The City began a phased financial systems implementation and activated the financials, human resources and payroll during the fiscal year 2014/15. Utility billing, business license and animal license and fleet maintenance management modules will be brought live during the budget year. Additionally, the City is expecting to complete construction of Fire Station #2 and refurbish the City Hall Annex to house Parks Administration, Fire Administration and the City's computer systems. Balancing the 2015/16 budget involves balancing several critical issues: employee costs and retirement contributions; capital programs; and cost increases beyond the City's control that were either imposed by external entities or negotiated by the City with its bargaining groups. Employee costs and retirement contributions — Prior to the economic downturn, Lodi and its employees aggressively moved to manage employment costs. Positions not deemed vital to City operations were held vacant, and other departmental expenses were closely monitored. Importantly, as the economy plummeted, in March 2009, City employees made a number of temporary salary and benefit concessions to reduce salary costs, including salary reductions, furloughs, and waiving of the City's deferred compensation match. These concessions alone were valued at over $2.3 million for FY 2009-10, $2.7 million for FY 2010-11, and $3.0 million for FY 2011-12. Consequently, the City largely avoided employee layoffs and drastic service cuts so common in other cities. In 2013, the majority of employees agreed to a historic restructuring of their salary and benefits, permanently reducing employee expenses. Employees agreed to paying their full seven or nine percent retirement contribution and capping the City's medical costs. The effect of these agreements was to reduce employment costs seven to nine percent below the 2007/08 levels. For 2014/15, the City negotiated an additional one-year agreement with all of its bargaining units (except IBEW). For the first time since 2007/08, the City returned a portion of the concessions agreed to by employees, issuing a one-time payment of $2,300 per employee to all employees, and increasing the medical cap to January 2014 rates. In addition, the City increased safety uniform allowances by 1 percent on a one-year non- PERSable basis. The one-time dollars were paid for from amounts over the City's General Fund reserve targets at the close of the 2012/13 budget year. The ongoing health costs were funded through the budget. Looking forward to 2015/16 and beyond, the City has reached an agreement with The agreements reached generally call for 3 percent raises in year one and 2 percent raises in years two and three. Capital programs — The City continues to utilize one-time funds for capital maintenance, rather than ongoing operations. In prior years, the City assessed its physical plant and is using one-time funds generated by the Lodi Energy Center, to address deferred maintenance projects on its buildings. Scheduled to be completed this year are Fire Station #2, City Hall Annex remodel, financial system implementation and various roof, parking lot and facility maintenance projects totaling about $1.6 million. The 2015/16 budget also includes $767,000 in unallocated one-time revenues that could be put toward additional capital projects. Imposed costs — While revenues have increased by over $3.1 million, the cost of retirement and insurance continue to rise. In the last few years, CaIPERS has revised a number of its actuarial assumptions and policies. Rates for Miscellaneous plan employees rose 1.9 percent while Safety plan rates increased 2.9 percent. Total additional cost to the City is about $600,000. In December of 2014, CaIPERS released its long awaited five-year rate projections resulting from its major policy shift regarding the time frame within which it recovers market losses. In years past, CaIPERS recovered these losses over a 30 -year rolling period. In 2013, CaIPERS reduced 14 that time frame. The increase is phased in on a bell curve over five years, levels out for 20 years and decreasing for the last five. The bell curve structure means Lodi will see its greatest impact in the 2019/20 budget year. Projected contribution rates ranges from 19.994% to 27.7% for the Miscellaneous group, and 40.87% to 54.59% for the Safety group, in the next five years. A second cost increase that is a cause of concern is rapidly increasing health care costs. While the City has negotiated a medical insurance cap with its bargaining units, costs are expected to increase and impact the net pay of the workforce. Staff is evaluating the impact of the Affordable Care Act and believes that prudent management of part-time hours will allow the City to avoid an economic impact. A third cost increase that is a cause of concern is worker's compensation. The City is self-funded for worker's compensation costs. There has been a moderation in the cost and severity of claims and the City has funded its actuarial liability at slightly more than the 90% percent confidence level. Staff continues to manage the program and provide education to employees to minimize injuries and work time losses. Economic Development During the Great Recession, the City has fared better than the surrounding area, as a whole. While not immune to the 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 1 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, even more jobs can be found in food and plastics manufacturing and in health-related businesses. Lodi Health Hospital, Blue Shield and ConAgra have the highest year-round employment in the City, and large national and international manufacturers such as CertainTeed find the City an attractive base for their West Coast operations. The City was disappointed with the announcement that the General Mills plant would be closing by the end of 2016. City staff, is in discussions with General Mills staff regarding the marketing and re -use of the site as General Mills closes the plant. While a major employer, staff is optimistic that a suitable replacement will be found timely and not significantly impact City 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. 15 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 Funds. The notes have an integral role in disclosing information essential to the fair presentation of the Basic Financial Statements. GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF LODI STATEMENT OF NET POSITION June 30, 2015 Governmental Business -type Activities Activities Total ASSETS Cash and investments $ 41,348,139 27,531,358 $ 68,879,497 Accounts receivable, net 4,606,072 8,815,777 13,421,849 Property tax receivable 7,752 7,752 Interest receivable 25,857 24,685 50,542 Internal balances (1,550,454) 1,550,454 Due from other governmental agencies 348,979 2,287,366 2,636,345 Restricted assets 31,717,302 31,717,302 Loans receivable 88,698 88,698 Advance receivable 6,956,797 6,956,797 Inventory 171,223 3,119,361 3,290,584 Other assets 337,849 337,849 Capital assets, net: Nondepreciable 37,377,420 20,014,665 57,392,085 Depreciable, net 88,326,032 218,554,346 306,880,378 TOTAL ASSETS 170,661,020 320,998,658 491,659,678 DEFERRED OUTFLOWS OF RESOURCES Unamortized losses on defeasance 435,462 6,874,417 7,309,879 Related to pensions 5,882,104 1,365,784 7,247,888 TOTAL DEFERRED OUTFLOWS OF RESOURCES 6,317,566 8,240,201 14,557,767 LIABILITIES Accounts payable and accrued liabilities 5,549,654 7,619,627 13,169,281 Accrued salaries and wages 542,673 542,673 Accrued interest 211,203 2,328,909 2,540,112 Unearned revenue 201,705 775,338 977,043 Net OPEB obligation 5,343,727 5,343,727 Net pension liability 74,791,178 16,870,603 91,661,781 Long-term liabilities: Due within one year 2,439,237 8,346,744 10,785,981 Due in more than one year 31,873,940 161,727,467 193,601,407 TOTAL LIABILITIES 120,953,317 197,668,688 318,622,005 DEFERRED INFLOWS OF RESOURCES Related to pensions 12,226,800 3,943,356 16,170,156 NET POSITION Net investment in capital assets 105,943,664 119,924,203 225,867,867 Restricted for: Road -related projects 3,207,124 3,207,124 Capital projects 6,841,989 6,841,989 Debt service 6,810,256 6,810,256 Public safety 249,258 249,258 Community development 1,474,880 1,474,880 Parks, recreation and community services 227,973 227,973 Unrestricted (74,146,419) 892,356 (73,254,063) TOTAL NET POSITION $ 43,798,469 127,626,815 $ 171,425,284 The notes to the financial statements are an integral part of this statement. 17 CITY OF LODI STATEMENT OF ACTIVITIES Year ended June 30, 2015 Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business -type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total PRIMARY GOVERNMENT: Govemmental activities: General government $ 9,108,789 1,971,045 1,012,932 (6,124,812) $ (6,124,812) Public protection 27,426,291 608,602 1,222,232 41,451 (25,554,006) (25,554,006) Public works 10,281,419 832,391 1,114,220 2,863,540 (5,471,268) (5,471,268) Community development 1,164,964 1,377,715 212,751 212,751 Library 1,324,130 43,456 19,670 (1,261,004) (1,261,004) Parks and recreation 3,115,763 1,360,283 225,930 (1,529,550) (1,529,550) Interest on long-term debt 817,918 (817,918) (817,918) Total governmental activities 53,239,274 6,193,492 3,369,054 3,130,921 (40,545,807) (40,545,807) Business -type activities: Electric 64,366,530 65,237,320 2,557,326 417,669 3,845,785 3,845,785 Wastewater 12,911,955 14,714,123 372,044 2,174,212 2,174,212 Water 9,905,544 12,722,619 613,715 493,748 3,924,538 3,924,538 Transit 4,133,679 230,143 2,014,534 4,000,123 2,111,121 2,111,121 Total business -type activities 91,317,708 92,904,205 5,185,575 5,283,584 12,055,656 12,055,656 Total primary govemment $ 144,556,982 99,097,697 8,554,629 8,414,505 (40,545,807) 12,055,656 (28,490,151) General revenues: Taxes: Property taxes 13,502,085 13,502,085 Franchise taxes 8,975,852 8,975,852 Business license tax 1,486,389 1,486,389 Transient occupancy tax 666,419 666,419 Grants and contributions not restricted to specific programs 10,650,893 10,650,893 Investment eamings 145,159 631546 776,705 Rent 1,941,477 4,200 1,945,677 Other 605,447 2,744,587 3,350,034 Transfers 7,513,614 (7,513,614) Total general revenues and transfers 45,487,335 (4,133,281) 41,354,054 Changes in net position 4,941,528 7,922,375 12,863,903 Net position, beginning of year, as previously reported Change in accounting principles Net position, beginning of year, as restated 119,822,255 139,393,690 259,215,945 (80,965,314) (19,689,250) (100,654,564) 38,856,941 119,704,440 158,561,381 Net position, end of year $ 43,798,469 127,626,815 $ 171,425,284 The notes to the financial statements are an integral part of this statement. FUND FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS Governmental Fund Types Governmental funds consist of the General Fund, special revenue funds, debt service fund and capital projects funds. Major Governmental 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 necessary to provide such services are accounted for in this fund, including but not limited to, source of supply, overhead, systems maintenance, customer service, engineering, administration, capital improvements maintenance and debt service. 19 Sewer Fund This fund was established by the City in order to account for the provision of waste water collection and treatment services to the residents of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, improvements and debt service. Water Fund This fund was established by the City in order to account for the provision of water to the residents of the City as well as some customers in the County. All activities to provide such services are accounted for in this fund, 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 Types Private -purpose Trust Funds These funds are used to account for assets held by the Library Board as trustee of the Lodi Public Library and for assets held by the City in accordance with the trust agreement on behalf of the Hutchins Street Square. Agency Fund This fund was established to account for special assessments collected on the property tax roll by the City on behalf of the property owners within the Industrial Way Beckman Districts and the Downtown and Cherokee Lane Districts and various landscape and lighting districts around the City. 20 CITY OF LODI BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2015 Other Total General Governmental Governmental Fund Funds Funds ASSETS Cash and investments $ 12,542,808 Receivables: Accounts, net 3,890,758 Property taxes 7,752 Interest 9,340 Due from other funds Due from other governmental agencies Inventory Total assets $ 16,450,658 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 3,373,901 Accrued salaries and wages 542,673 Due to other funds Advances from other funds Unearned revenue 55,531 Total liabilities 3,972,105 Deferred inflows of resources: Unavailable revenue Fund balances: Nonspendable Inventory Restricted Road -related projects Capital projects Public safety Community development Parks, recreation and community services Committed Video- related capital projects 345,294 Assigned Encumbrances - supplies, materials and services 26,219 Unassigned 12,107,040 Total fund balances 12,478,553 Total liabilities, deferred inflows of resources, and fund balances $ 16,450,658 The notes to the financial statements are an integral part of this statement. 21 14,664,209 $ 715,314 7,595 93,114 348,979 1,291 27,207,017 4,606,072 7,752 16,935 93,114 348,979 1,291 15,830,502 $ 32,281,160 2,038,245 $ 93,114 1,550,454 146,174 5,412,146 542,673 93,114 1,550,454 201,705 3,827,987 7,800,092 44,707 44,707 1,291 3,207,124 6,797,282 249,258 1,474,880 227,973 1,291 3,207,124 6,797,282 249,258 1,474,880 227,973 345,294 26,219 12,107,040 11,957,808 24,436,361 15,830,502 $ 32,281,160 CITY OF LODI RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION June 30, 2015 Fund balances - total governmental funds $ 24,436,361 Amounts reported for governmental activities in the statement of net position are different because: 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 Deferred outflows of resources related to pensions are not reported in governmental funds. Deferred inflows of resources related to pensions are not reported in governmental funds. 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 Issuance premium (to be amortized as interest expense) Unamortized losses on defeasance (to be amortized as interest expense) Accrued interest Net pension liability Other long-term assets are not available to pay for 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, employee benefits 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 position 37,377,420 88,298,534 5,807,745 (12,010,250) (5,732,206) (19,325,000) (870,250) 435,462 (211,203) (73,864,726) 44,707 (588,125) Net position of governmental activities $ 43,798,469 The notes to the financial statements are an integral part of this statement. 22 CITY OF LODI STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year ended June 30, 2015 Other Total General Governmental Governmental Fund Funds Funds Revenues: Taxes $ 24,630,745 $ 24,630,745 Licenses and permits 87,908 879,225 967,133 Intergovernmental revenues 12,642,107 4,914,450 17,556,557 Charges for services 1,482,448 2,345,002 3,827,450 Fines, forfeits and penalties 1,573,071 1,573,071 Investment and rental income 1,546,845 481,971 2,028,816 Miscellaneous revenue 290,951 529,286 820,237 Total revenues 42,254,075 9,149,934 51,404,009 Expenditures: Current: General government Public protection Public works Community development Library Parks and recreation Capital outlay Debt service: Interest and fiscal charges Total expenditures 6,490,907 26,388,172 1,882,250 1,311,367 36,072,696 Excess (deficiency) of revenues over (under) expenditures 6,181,379 2,660,048 257,888 2,625,771 1,226,307 2,145,084 9,841,625 844,812 9,150,955 26,646,060 4,508,021 1,226,307 1,311,367 2,145,084 9,841,625 844,812 19,601,535 55,674,231 (10,451,601) (4,270,222) Other financing sources (uses): Transfers in 3,952,000 11,647,376 Transfers out (7,128,586) (907,176) Total other financing sources (uses) (3,176,586) 10,740,200 Changes in fund balances 3,004,793 288,599 15,599,376 (8,035,762) 7,563,614 3,293,392 Fund balances, beginning of year 9,473,760 11,669,209 21,142,969 Fund balances, end of year $ 12,478,553 11,957,808 $ 24,436,361 The notes to the financial statements are an integral part of this statement. 23 CITY OF LODI RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year ended June 30, 2015 Net change in fund balances - total governmental funds Amounts reported for governmental activities are different because: 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 and depreciation expense are as follows: Capitalized capital outlays Depreciation expense Internal service funds are used by management to charge the costs of general liability insurance, workers' compensation insurance, health benefits insurance, other insurance, employee benefits and the cost of operating and maintaining the City's fleet to individual funds. The net revenue of the internal service funds are reported with governmental activities. $ 3,293,392 8,996,052 (8,539,608) 784,312 Other expenses in the statement of activities that do not use current financial resources are not reported as expenditures in the governmental funds. Change in compensated absences 563,640 Amortization of loss on defeasance (26,935) Amortization of bond premium 53,830 Change in net pension liability and related amounts (183,155) Change in net position of governmental activities $ 4,941,528 The notes to the financial statements are an integral part of this statement. 24 CITY OF LODI STATEMENT OF NET POSITION PROPRIETARY FUNDS June 30, 2015 Business -type Activities -Enterprise Funds Electric Nonmajor Fund Wastewater Water Transit Total Governmental Activities - Internal Service Funds ASSETS Current assets: Cash and investments $ 6,383,017 13,853,935 6,755,522 538,884 $ 27,531,358 $ 14,141,122 Restricted cash and investments 14,832,904 14,832,904 Restricted assets with fiscal agents 12,230,110 108,982 2,375,456 14,714,548 Receivables: Accounts, net 4,884,633 1,010,587 844,542 2,076,015 8,815,777 Interest 3,959 8,816 11,567 343 24,685 8,922 Due from other governmental agencies 362,028 1,925,338 2,287,366 Advance receivable 6,956,797 6,956,797 Loans receivable 88,698 88,698 Inventory 2,755,191 92,370 271,800 3,119,361 169,932 Other assets 337,849 337,849 Total current assets 33,302,405 15,074,690 25,791,668 4,540,580 78,709,343 14,319,976 Noncurrent assets: Restricted assets with fiscal agents 2,169,850 2,169,850 Advances to other funds 376,429 1,750,403 2,126,832 Capital assets, net: Nondepreciable 763,785 8,772,041 8,920,552 1,558,287 20,014,665 Depreciable, net 39,367,685 81,525,988 81,629,524 16,031,149 218,554,346 27,498 Total capital assets 40,131,470 90,298,029 90,550,076 17,589,436 238,569,011 27,498 Total noncurrent assets 40,131,470 92,844,308 92,300,479 17,589,436 242,865,693 27,498 TOTAL ASSETS 73,433,875 107,918,998 118,092,147 22,130,016 321,575,036 14,347,474 DEFERRED OUTFLOWS OF RESOURCES Unamortized losses on defeasance 5,128,145 1,746,272 6,874,417 Related to pensions 784,603 498,007 46,096 37,078 1,365,784 74,359 TOTAL DEFERRED OUTFLOWS OF RESOURCES 5,912,748 2,244,279 46,096 37,078 8,240,201 74,359 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 3,309,528 1,037,742 2,899,265 373,092 7,619,627 137,508 Accrued interest 1,615,256 538,769 174,884 2,328,909 Unearned revenue 660,104 115,234 775,338 Self-insurance liability 634,932 Accrued compensated absences 286,385 185,493 33,237 22,454 527,569 31,195 Certificates of participation and revenue bonds payable 5,219,909 1,709,566 889,700 7,819,175 Total current liabilities 10,431,078 3,471,570 4,657,190 510,780 19,070,618 803,635 Noncurrent liabilities: Advances from other funds 576,378 576,378 Self-insurance liability 7,670,955 Accrued compensated absences 542,777 588,524 55,868 1,187,169 48,639 Certificates of participation and revenue bonds payable 61,083,539 45,846,848 35,017,805 141,948,192 Net pension liability 9,512,447 6,314,886 620,694 422,576 16,870,603 926,452 Net OPEB obligation 5,343,727 Pollution remediation obligation 18,592,106 18,592,106 Total noncurrent liabilities 71,715,141 52,750,258 54,230,605 478,444 179,174,448 13,989,773 TOTAL LIABILITIES 82,146,219 56,221,828 58,887,795 989,224 198,245,066 14,793,408 DEFERRED INFLOWS OF RESOURCES Related to pensions 2,223,452 1,476,050 145,081 98,773 3,943,356 216,550 NET POSITION Net investment in capital assets (1,449,979) 46,766,719 57,018,027 17,589,436 119,924,203 27,498 Restricted: Debt service 6,810,256 6,810,256 Unrestricted (10,383,325) 5,698,680 2,087,340 3,489,661 892,356 (615,623) TOTAL NET POSITION $ (5,023,048) 52,465,399 59,105,367 21,079,097 $ 127,626,815 $ (588,125) The notes to the financial statements are an integral part of this statement. 25 OPERATING REVENUES Charges for services CITY OF LODI STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS Year ended June 30, 2015 Business -type Activities - Enterprise Funds Nonmajor Fund Electric Wastewater Water Transit $ 65,237,320 14,714,123 12,722,619 230,143 $ Total Govemmental Activities - Internal Service Funds 92,904,205 $ 12,010,929 OPERATING EXPENSES Personnel services 6,194,068 3,116,493 2,316,305 312,406 11,939,272 1,039,685 Supplies, materials and services 12,282,288 2,541,904 2,139,013 2,600,659 19,563,864 7,906,220 Utilities 38,568,622 676,838 579,774 74,844 39,900,078 17,843 Depreciation 2,658,929 4,217,932 2,752,367 1,145,770 10,774,998 1,444 Claims 2,352,814 TOTAL OPERATING EXPENSES 59,703,907 10,553,167 7,787,459 4,133,679 82,178,212 11,318,006 OPERATING INCOME (LOSS) 5,533,413 4,160,956 4,935,160 (3,903,536) 10,725,993 692,923 NONOPERATING REVENUES (EXPENSES) Investment income 135,397 356,590 130,616 8,943 631,546 58,750 Interest expense (3,532,168) (2,358,788) (2,118,085) (8,009,041) Operating grants 234,550 613,715 2,014,534 2,862,799 Greenhouse gas allowance 2,322,776 2,322,776 Loss on disposal of capital assets (1,130,455) (1,130,455) Other revenues 1,360,933 590,013 483,708 314,133 2,748,787 82,639 TOTAL NONOPERATING REVENUES (EXPENSES) (608,967) (1,412,185) (890,046) 2,337,610 (573,588) 141,389 INCOME (LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 4,924,446 2,748,771 4,045,114 (1,565,926) 10,152,405 834,312 Capital contributions 417,669 372,044 493,748 4,000,123 5,283,584 Transfers out (3,823,858) (1,894,378) (1,795,378) (7,513,614) (50,000) Net capital contributions and transfers (3,406,189) (1,522,334) (1,301,630) 4,000,123 (2,230,030) (50,000) Changes in net position 1,518,257 1,226,437 2,743,484 2,434,197 7,922,375 784,312 NET ASSETS - BEGINNING OF YEAR, as previously reported 4,560,430 58,608,905 57,086,278 19,138,077 139,393,690 (291,199) Change in accounting principles (11,101,735) (7,369,943) (724,395) (493,177) (19,689,250) (1,081,238) NET POSITION - BEGINNING OF YEAR, restated NET POSITION - END OF YEAR The notes to the financial statements are an integral part of this statement. (6,541,305) 51,238,962 56,361,883 18,644,900 119,704,440 (1,372,437) $ (5,023,048) 52,465,399 59,105,367 21,079,097 $ 127,626,815 $ (588,125) 26 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 Payments for interfund services provided Net cash provided by (used in) operating activities Cash flows from noncapital financing activities: Operating grants Loaned to other funds Loaned from other funds Repaid from other funds Received -greenhouse gas allowance Transfers out Net cash provided by (used) in noncapital financing activities Cash flows from capital and related financing activities: Fees received for water meter installations Acquisition and construction of capital assets Fees received from developers Capital grants received Principal payments on debt Interest payments on debt Net cash used in capital and related financing activities Cash flows from investing activities: Interest on investments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year The notes to the financial statements are an integral part of this statement. CITY OF LODI STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year ended June 30, 2015 Business -type Activities - Enterprise Funds Electric Wastewater $ 67,309,118 257,410 (50,941,764) (6,398,576) (3,799) 10,222,389 234,550 576,378 2,322,776 (3,823,858) (690,154) (867,535) 163,985 (4,960,000) (3,358,233) (9,021,783) 108,068 618,520 17,994,607 $ 18,613,127 15,307,357 (1,785,280) (3,273,694) (602,252) 9,646,131 128,571 (1,894,378) (1,765,807) (4,945,098) 183,994 (1,500,000) (2,171,525) (8,432,629) 176,903 (375,402) 14,338,319 13,962,917 (continued) 27 Water 12,403,707 (2,525,891) (2,309,985) (555,248) 7,012,583 613,715 (576,378) (1,795,378) (1,758,041) 56,050 (5,617,689) 20,301 (850,000) (2,119,856) (8,511,194) 104,238 (3,152,414) 27,116,296 23,963,882 Nonmajor Fund Transit 544,276 $ (2,441,667) (327,968) (60,469) (2,285,828) 1,195,418 1,195,418 (3,576,060) 3,455,944 (120,116) 9,051 (1,201,475) 1,740,359 538,884 $ Total 95,564,458 $ 257,410 (57,694,602) (12,310,223) (1,221,768) 24,595,275 2,043,683 (576,378) 576,378 128,571 2,322,776 (7,513,614) (3,018,584) 56,050 (15,006,382) 368,280 3,455,944 (7,310,000) (7,649,614) (26,085,722) 398,260 (4,110,771) 61,189,581 57,078,810 $ Governmental Activities - Internal Service Funds 82,739 12,010,929 (10,463,138) (1,067,650) 562,880 (50,000) (50,000) 53,319 566,199 13,574,923 14,141,122 CITY OF LODI STATEMENT OF CASH FLOWS - continued PROPRIETARY FUNDS Year ended June 30, 2015 Business -type Activities - Enterprise Funds Nonmajor Fund Electric Wastewater Water Transit Total Governmental Activities - Internal Service Funds Reconciliation to the statement of net position: Cash and investments $ 6,383,017 13,853,935 6,755,522 538,884 $ 27,531,358 $ 14,141,122 Restricted cash and investments 14,832,904 14,832,904 Restricted assets with fiscal agents - current 12,230,110 108,982 2,375,456 14,714,548 Total cash and cash equivalents $ 18,613,127 13,962,917 23,963,882 538,884 $ 57,078,810 $ 14,141,122 Reconciliation of operating income (loss) to net cash provided by (used in) operating activities: Operating Income (loss) $ 5,533,413 4,160,956 4,935,160 (3,903,536) $ 10,725,993 $ 692,923 Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation 2,658,929 4,217,932 2,752,367 1,145,770 10,774,998 1,444 Other revenues 1,360,933 590,013 483,708 314,133 2,748,787 82,639 Change in assets and liabilities: Increase in loans receivable (54,631) (54,631) Decrease (increase) in accounts receivable 1,712,963 (4,361) 50,165 1,758,767 Increase in advance receivables (744,688) (744,688) Decrease (increase) in due from other governmental agencies 7,150 (306,858) (299,708) Decrease (increase) in inventory 267,074 (68,270) 92,259 291,063 (31,146) Decrease (increase) in other assets 432 (337,813) (337,381) 100 Increase (decrease) in accounts payable and accrued liabilities (307,096) 899,480 66,245 173,367 831,996 (15,696) Increase (decrease) in compensated absences (54,069) (80,187) 11,036 (6,656) (129,876) (15,370) Decrease in net pension liability and related amounts (150,439) (77,014) (4,716) (8,906) (241,075) (12,595) Decrease in unearned revenue (208,114) (208,114) Decrease in self-insurance liability (715,872) Decrease in pollution remediation obligation (520,856) (520,856) Increase in net OPEB obligation 576,453 Net cash provided by (used in) operating activities $ 10,222,389 9,646,131 7,012,583 (2,285,828) $ 24,595,275 $ 562,880 Noncash Investing, Capital and Financing Activities Capital asset contributions Book value of disposed capital assets Amortization of issuance premium 253,684 188,050 417,397 1,130,455 24,908 174,567 19,700 The notes to the financial statements are an integral part of this statement. 28 859,131 1,130,455 219,175 ASSETS Cash and investments Receivables: Interest TOTAL ASSETS CITY OF LODI STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS June 30, 2015 $ Private -Purpose Trust Funds Agency Fund 238,905 $ 428,973 277 238,905 429,250 LIABILITIES Agency obligations 429,250 NET POSITION - EXPENDABLE The notes to the financial statements are an integral part of this statement. 29 $ 238,905 $ CITY OF LODI STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS Year ended June 30, 2015 ADDITIONS Investment and rental income DEDUCTIONS Current Library Private -Purpose Trust Funds $ 6 33,812 CHANGE IN NET POSITION (33,806) NET POSITION, BEGINNING OF YEAR 272,711 NET POSITION, END OF YEAR $ 238,905 The notes to the financial statements are an integral part of this statement. 30 NOTES TO BASIC FINANCIAL STATEMENTS CITY OF LODI Notes to Basic Financial Statements June 30, 2015 (1) 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. The Lodi Public Financing Authority (LPFA) was created by a Joint Exercise of Powers Agreement between the City and the Industrial Development Authority (IDA) on July 21, 2010, for the purpose of assisting the City in the financings of public capital improvements. The 2010 Water Revenue Certificates of Participation Series A and B were issued in October 2010 to provide funds for a new water treatment facility. On September 1, 2012, the $19,080,000 Refunding Lease Revenue Bonds (2012 LRB) was issued to prepay and cause the immediate defeasance of the outstanding $21,025,000 Certificates of Participation (2002 COP). The 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 32 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 and to refund the outstanding 1995 and 1996 Certificates of Participation. The $17,105,000 2012 Refunding Wastewater Revenue Bonds (2012 Bonds) was also issued in September 2012 to advance refund the $17,115,000 principal amount of the 2004 Wastewater Revenue Certificates of Participation (2004 COP). The 2004 COP were issued to provide funds to finance the costs of certain improvements to the wastewater collection, treatment and disposal system of the City. The City Council constitutes the Board of Directors of LPFA. The funds of LPFA have been included in the Enterprise (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 position and the statement of activities) report information on all of the non - fiduciary activities of the primary government and its component units. For the most part the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities that rely, to a significant extent, on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government -wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. (c) Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and accrual basis of accounting, as are the proprietary fund and private -purpose trust fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grant and similar items are recognized as revenue as soon as all eligibility requirements have been met. Agency funds use the accrual basis of accounting, but they do not have a measurement focus. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they 33 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 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. 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 San Joaquin County (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 account for the City's claims, benefits and fleet services. The Fiduciary Funds account for assets held in trust for other agencies. 34 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Private -Purpose Trust Funds are used to account for trust agreements under which the principal and income benefit individuals, private organizations or other governments. They were established to account for assets held and invested by the Library Board as trustee; and to account for assets held by the City in accordance with a trust agreement on behalf of the Hutchins Square. These funds can only be spent in accordance with the trust agreements. Agency Funds account 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. 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. (d) 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. (e) Restricted Cash and Investments The City accounts for certain settlement payments for environmental remediation as restricted with the understanding that these funds will be used exclusively for environmental clean up, investigation or remediation expenses incurred by the City in the specified areas and that they will not be used for the payment of legal or technical fees. These funds are accounted for in the Water Fund. 35 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (f) Restricted Assets with Fiscal Agents 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. In the Electric Fund, restricted assets represent the proceeds of the 2002D and the 2008 Certificates of Participation restricted for debt service. In the Wastewater Fund, the restricted assets represent the proceeds of the 2004A and the 2007A Certificates of Participation issued for improvements to the City's wastewater collection, treatment and disposal system. In the Water Fund, restricted assets represent the proceeds of the 2010A and 2010B Revenue Bonds issued for the purpose of providing funds to pay the cost of a new Water Treatment Facility. (g) Property Taxes 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 lien is based on the assessed value listed as of the prior January 1st for all real and personal property located in the City. Property sold after the assessment date (January 1st) is reassessed and the amount of property tax assessed is prorated. The assessed value at January 1, 2015, upon which the 2014-15 levy was based, was $5,418,050,000. 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, 2015, 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 governmental funds. 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 City receives 95% of the property taxes in advance from the County and the 5% remaining after reconciling the City's balance at June 30. As part of the agreement, the County keeps the penalties and interest on the delinquent taxes. (h) Due From/Due To Other Funds, 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 36 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 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. (i) 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/expenses of the requesting fund. Unbilled costs are recognized as an asset of the performing fund at the end of fiscal year. Reimbursements for expenditures/expenses, initially made by one fund that is properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund that is reimbursed. Reimbursements are eliminated for purposes of government -wide reporting. (j) Long-term Obligations In the government -wide financial statements and in the proprietary fund 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 position. Bond premiums are deferred and amortized over the life of the bonds. Bonds payable are reported net of the applicable bond premium. Losses occurring from advance refunding are reported as deferred outflows of resources and amortized as an expense for both governmental and business -type activities. (k) Loans Receivable Loans receivable reported in the HOME Program and Community Development Block Grants Special Revenue Fund represent funds loaned to first-time homebuyers. Loans receivable in the Electric Enterprise Fund represent loans to eligible industrial and commercial customers participating in the Lodi Energy Efficiency Financing Pilot Project. In December 2009, the City entered into a contractual relationship with the California Department of Housing and Community Development (HCD) to administer a First-time Homebuyers Program. The loan program is intended to provide deferred down -payment assistance to first-time homebuyers who are at or below 80% of the median income, for the purchase of homes within Lodi. The loan bears 2% interest and is due and payable 30 years from close of escrow, upon transfer of the property or when the home is no longer owner -occupied, whichever comes first. 37 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 In October 2010, the City established a loan fund in its public benefits program from which G2 electric utility rate commercial and industrial customers may borrow money to implement energy conservation projects in their facilities. The loan is at zero interest rate payable in two years capped at $50,000 per customer. As of June 30, 2015, a total of twenty-one loans to industrial and commercial customers have been approved. (I) 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 Reserve that is refundable upon demand by the City (See Note 12). (m) Inventory Other governmental funds inventories are recorded at cost and are recognized as expenditures when consumed rather than when purchased. For the proprietary fund types, inventories are recorded at cost using the weighted average cost method, which approximates market, and expense is recognized when inventories are consumed in operations. (n) Deferred Outflows and Inflows of Resources Unamortized Losses on Defeasance Deferred outflows of resources reported in the Electric Enterprise Fund and business -type activities include refunding loss incurred in connection with the issuance of the 2008 Certificates of Participation Series A amortized over 24 years. The deferred outflows of resources reported in the Wastewater Enterprise Fund and business -type activities include refunding loss incurred on the issuance of the 2007A Certificates of Participation amortized over 20 years and the 2012 Refunding Revenue Bonds amortized over 11 years. Deferred outflows of resources reported in the governmental activities represent refunding loss incurred with the issuance of the 2012 Refunding Lease Revenue Bonds. Related to Pensions Pension contributions made in the current year are reported as deferred outflows of resources per GASB Statement No. 71 as the CaIPERS' valuation measurement date is June 30, 2014. Those contributions will be expensed in fiscal year 2015-16. Plan earnings in excess of earnings projected in the CaIPERS actuarial report are reported as deferred inflows of resources. Unavailable Revenue The unavailable revenue in the other governmental funds is related to the HCD's First-time Homebuyers Program. 38 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (o) 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 position. This capitalization included infrastructure that could be identified and has been acquired since July 1, 1980. Depreciation of capital assets is provided on the straight-line basis over the following estimated useful lives: Years Buildings and improvements 3 - 40 Machinery and equipment 2 - 40 Vehicles 5 - 15 Infrastructure 10 - 50 (p) Compensated Absences/Vacation and Sick Leave 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. 39 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (q) Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Miscellaneous and Safety Plans (Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by the CaIPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. GASB Statement No. 68 requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used: Valuation Date: Measurement Date: Measurement Period: (r) Self -Insurance June 30, 2013 June 30, 2014 July 1, 2013 to June 30, 2014 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 prior to year-end including claims incurred but not reported. (s) Net Position In the government -wide and proprietary funds financial statements, net position is reported in one of three categories: Net Investment in Capital Assets — This category consists of capital assets net of accumulated depreciation and reduced by deferred outflows of resources and outstanding debt that is attributed to the acquisition, construction, or improvement of the assets. Restricted Net Position — Assets restricted by external creditors, grantors, contributors, or laws or regulations of other governments reduced by liabilities related to those assets. Unrestricted Net Position — This category consists of all net position that does not meet the definition of net investment in capital assets or restricted net position. 40 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (t) Fund Balance Fund balances presented in the governmental fund financial statements represent the difference between assets, liabilities and deferred inflows of resources. GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes the criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental funds. GASB Statement No. 54 requires that the fund balances be classified in categories based upon the type of restrictions imposed on the use of funds. The City evaluated each of its funds at June 30, 2015 and classified fund balances into the following five categories: Nonspendable — Amounts that cannot be spent because they are (1) not in spendable form, such as prepaid items, inventories and long-term receivables for which the payment of proceeds are not restricted or committed with respect to the nature of the specific expenditures of that fund or (2) legally or contractually required to remain intact. Restricted — Amounts that are restricted by external parties such as creditors or imposed by grants, laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The City has legislative restrictions on amounts collected and reported in the City's various governmental funds. Committed — Amounts that can only be used for specific purposes pursuant to constraints imposed by a formal action by the City's "highest level of decision-making authority", which the City considers to be an ordinance passed by the Lodi City Council. Assigned — Amounts that have been allocated by action of the Lodi City Council in which the City's intent is to use the funds for a specific purpose. Once assigned, funds may only be released by resolution of the City Council. Unassigned — Amounts that constitute the residual balances that have no restrictions placed upon them and are reported in the General Fund. For other governmental funds, as restrictions exceed available resources only deficit amounts are reported in the unassigned category. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, and then unrestricted resources as they are needed. The City does not have a policy on the order of spending unrestricted amounts when an expenditure is incurred for which amounts in any of the unrestricted fund balance classifications could be used. Therefore, by default under GASB Statement No. 54, the City uses committed resources first, then assigned resources and unassigned resources last as they are needed. It is the City's policy to maintain an unassigned fund balance in the General Fund of at least 16% of revenues and working capital balances in the Water and Wastewater enterprise funds of at least 25% of operating expenses and the target for the Electric Enterprise Fund working capital is 41 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 $23.7 million. The policy allows for variations from year-to-year to account for economic and fiscal changes. The City Council also adopted a policy to establish the following reserves: Catastrophic reserve - To maintain the ability of the City to meet operational costs during times of declared emergency or major catastrophe, the City shall designate General Fund balance of a minimum of 8% of annual General Fund revenues. This reserve may only be drawn upon pursuant to an emergency as declared under the Municipal Code. Economic reserve - To maintain the City's economic viability and to meet seasonal cashflow shortfalls, the City shall designate General Fund economic reserve balance of a minimum of 8% of annual General Fund revenues. Funding the economic reserve will begin in the fiscal year following full funding of the catastrophic reserve. Funding may only be disbursed upon a resolution of the City Council. Once fully funded, if these reserves fall below 5% of annual revenues, the City Manager shall prepare a plan within three months of approval of the City's Financial Statements. This plan will restore the 5% within 12 months and the 8% within 24 months. (u) Statement of Cash Flows A statement of cash flows is presented for proprietary fund types. For purposes of reporting cash flows, the City considers all highly liquid investments with maturities of three months or less when purchased and investments maintained in the pool to be cash equivalents. (v) 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. (w) Implementation of New Governmental Accounting Standards During the year ended June 30, 2015, the City implemented GASB Statement No. 68 — Accounting and Financial Reporting for Pensions — An Amendment of GASB Statement No. 27 and GASB Statement No. 71 — Pension Transition for Contributions Made Subsequent to the Measurement Date — an amendment of GASB Statement No. 68 (collectively, the Statements). The primary objective of the Statements is to improve accounting and financial reporting by state and local governments for pensions by establishing standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses. It requires employers to report a net pension liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of benefits. The Statements identify the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. 42 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 The net pension liability offset by the related deferred outflows of resources as of June 30, 2014 reduced the City's beginning net position of its governmental activities, business -type activities, Electric Fund, Wastewater Fund, Water Fund, Transit Fund, and internal service funds by $80,965,314, $19,689,250, $11,101,735, $7,369,943, $724,395, $493,177, and $1,081,238, respectively. (x) Future Implementation of New Governmental Accounting Standards The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB Statements: In February 2015, GASB issued Statement No. 72, Fair Value Measurement and Application. This statement addresses accounting and financial reporting issues related to fair value measurements. The requirements of this statement are effective for the City's year ending June 30, 2016. In June 2015, GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68. This statement establishes requirements for those pensions and pension plans that are not administrated through a trust meeting specified criteria and thus are not covered by Statement Nos. 67 and 68. The requirements of this statement are effective for the City's year ending June 30, 2016. In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This statement addresses reporting by governments that provide other postemployment benefits (OPEB) to their employees and for governments that finance OPEB for employees of other governments. The requirements of this statement are effective for the City's year ending June 30, 2018. In June 2015, GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This statement reduces the hierarchy of generally accepted accounting principles to two categories of authoritative GAAP and addresses the use of authoritative and nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specific with a source of authoritative GAAP. The requirements of this statement are effective for the City's year ending June 30, 2016. In August 2015, GASB issued Statement No. 77, Tax Abatement Disclosures. This statement requires governments that enter into tax abatement agreements to disclose certain information about the agreements. The requirements of this statement are effective for the City's year ending June 30, 2017. In December 2015, the GASB issued Statement No. 79, Certain External Investment Pools and Pool Participants. This statement establishes criteria for an external investment pool to qualify for making the election to measure all investments at amortized cost for financial reporting purposes. Pool participants should also measure their investments at amortized cost if the external pool meets these criteria. If an external investment pool does not meet the criteria, then the pool should apply the provisions in paragraph 16 of Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Pool participants should measure their investments in that pool at external investment pools that measure all of their investments at amortized cost and for governments that participate in those pools. The 43 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 requirements of this statement are effective for the City's year ending June 30, 2017. (2) CASH AND INVESTMENTS Cash and investments as of June 30, 2015 are classified in the accompanying financial statements as follows: Government -wide statement of net position: Cash and investments $ 68,879,497 Restricted assets 31,717,302 Fiduciary funds cash and investments: Private -purpose trust funds 238,905 Agency fund 428,973 Total cash and investments $ 101,264,677 Cash and investments as of June 30, 2015 consist of the following: Cash on hand $ 3,071 Deposits with financial institutions 8,583,383 Investments 92,678,223 Total cash and investments (a) Authorized Investments $ 101,264,677 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, bankers' acceptances, certificates of deposit, negotiable certificates of deposit, commercial paper, State of California Local Agency Investment Fund (LAIF), Investment Trust of California (CALTRUST),Certificate of Deposit Account Registry Service (CDARS), mutual funds that invest in eligible securities, supranationals and medium term notes as permitted by the Government Code. The City is not authorized to enter into reverse repurchase agreements. The City selects its investments based on safety, liquidity and yield. 44 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 The following table identifies the permitted investment types authorized per the City's investment policy. The table also identifies certain provisions that address interest rate risk and concentration of credit risk. Maximum Maximum % of Maximum Investment Permitted Investments/Deposits Maturity Portfolio in One issuer U.S. Treasury Obligations 5 years 100% U.S. Agency Securities 5 years 100% Banker's Acceptances 180 days 40% Certificates of Deposit 5 years 100% Negotiable Certificates of Deposit 5 years 30% Commercial Paper 270 days 40% California State Local Agency Investment Fund (LAIF) Indefinite 100% Passbook Deposits Indefinite 100% Money Market Mutual Funds Indefinite 20% Guaranteed Investment Contracts (GICs) 5 years 100% Medium term Notes 5 years 30% Investment Trust of California (CALTRUST) Indefinite 100% Certificate of Deposit Account Registry Service (CDARS) 5 years 30% Supranational Obligations 5 years 30% (b) Investments Authorized by Debt Agreements 25% $50m per account Investments of debt proceeds held by bond trustee are governed by the provisions of the debt agreements as to the extent that they are permissible investments of funds of the City. (c) Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity its fair value is 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: 45 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Investment as of June 30, 2015 Maturity Maturity Less than One Year One to Five Years Total LAIF $ 31,944,790 $ 31,944,790 CALTRUST 43,615,455 43,615,455 Money Market Mutual Funds 123,254 123,254 Held by bond trustee: Negotiable Certificates of Deposit 1,010,755 3,539,300 4,550,055 U.S. Agency Securities 631,224 631,224 LAIF 1,737,159 1,737,159 Money Market Mutual Funds 7,796,111 7,796,111 Guaranteed investment contracts (GICs) 2,169,850 2,169,850 Total investments subject to interest rate risk $ 42,612,069 49,955,829 92,567,898 Equities and options 110,325 Total investments $ 92,678,223 Investments in equities are shares of stock received by the Library as an endowment from a private citizen. (d) Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The money market mutual 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 "AAA -m." The GICs and LAIF do not have a rating provided by a nationally recognized statistical rating organization. The CALTRUST Short term fund is rated "AA/S1+" by S&P while the CALTRUST Medium term fund is rated "A or better." The negotiable certificates of deposit are all rated AAA. In accordance with the City's investment policy in selecting authorized investments, consideration must be given to credit ratings and collateralization of applicable instruments, however, the City does not have a minimum credit rating limitations policy. 46 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (e) Concentration of Credit Risk The investment policy of the City contains certain limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in LAIF, CALTRUST, and money market mutual funds are not subject to the concentration of credit risk disclosure. There are no investments with any one issuer greater than 5% of total investments. (f) Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial risk for deposits, other than the following provision for deposits: The 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. $9,652,164 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 Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools such as LAIF. (g) Investments in Investment Pools 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, 2015 was $21.5 billion. LAIF is part of the California Pooled Investment Account (PMIA), which at June 30, 2015 had a balance of $69.6 billion. Of this amount, 2.08% was invested in medium-term and short-term 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 investments was 239 days as of June 30, 2015. 47 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 The Local Investment Advisory Board has oversight responsibility for LAIF. The Board consists of five members as designated by state statute. The value of the pool of shares in LAIF, which may be withdrawn, is determined on an amortized cost basis, which is different than the fair value of the City's portion of the pool. Withdrawals from LAIF are done on a dollar for dollar basis. In accordance with GASB Statement 31, investments are marked to fair value annually and an adjustment is made to each fund accordingly. However, actual daily activity is done on a dollar to dollar basis and only a withdrawal from the pool size that jeopardizes pool participants would cause the withdrawal to be done at market value. The City is also a participant in the Investment Trust of California Joint Powers Authority Pool (CALTRUST). At June 30, 2015, the City's investment in CALTRUST is $43.6 million. CALTRUST is an innovative partnership between the CSAC Finance Corporation and the League of California Cities to provide a convenient method for local agencies to pool their assets for investment. The weighted average to maturity of CALTRUST investments was as follows: CALTRUST Short Term, 16 months and CALTRUST Medium, 24 months. The Board of Trustees, which is made up of experienced local treasurers and Investment Officers has oversight responsibility for CALTRUST. The value of the pool shares in CALTRUST, which may be withdrawn, is determined on a fair value basis, which may be different than the amortized cost of the City's portion of the pool. The total amount invested in CALTRUST by California public agencies, as of June 30, 2015 was divided among the following asset classes: CALTRUST Short term was $989 million and CALTRUST Medium Term was $790 million. ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS Receivables of the General Fund, Electric, Wastewater and Water funds are reported net of uncollectible amounts. Total allowance provided for uncollectible amounts related to receivables of the current period are as follows: Uncollectibles related to late charges and services $ 4,090 Uncollectibles related to electric sales and services 178,970 Uncollectibles related to wastewater services 47,980 Uncollectibles related to water sales and services 75,800 Total uncollectibles of the current fiscal year $ 306,840 48 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (4) INTERFUND RECEIVABLES/PAYABLES Interfund receivables and payables at June 30, 2015 are as follows: Due from Due to Amount Other governmental Other governmental $ 93,114 "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 $93,114 represents cash deficits in other governmental funds. Advances from Advances to Amount Wastewater Other governmental Water Electric Water Other governmental 376,429 576,378 1,174, 025 $ 2,126,832 The $376,429 advance from the Wastewater Fund was used for the Impact Mitigation Fees update, $55,000; and $321,429 was used for the Grape Bowl Improvements - Phase 3. The advances from the Water Fund were used for the City Hall Annex Phase 2, $576,378; and for the construction of Fire Station #4, $1,174,025. (5) TRANSFERS Transfers for the year ended June 30, 2015, are summarized as follows: Transfers in Other Transfers out: General Governmental Total General $ 7,128,586 $ 7,128,586 Other governmental 907,176 907,176 Electric 2,104,000 1,719,858 3,823,858 Wastewater 1,068,000 826,378 1,894,378 Water 780,000 1,015,378 1,795,378 Internal service 50,000 50,000 Total $ 3,952,000 11,647,376 $ 15,599,376 49 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 During the year, various interfund transfers were made to finance expenditures, subsidize operating losses and service debt. Transfers out of $2,104,000 from the Electric Fund, $1,068,000 from the Wastewater Fund, and $780,000 from the Water Fund represent the cost of services reimbursement to the General Fund. The transfer of $7,128,586 from the General Fund to other governmental represents transfer of $509,403 to the Debt Service Fund for the interest required to pay the 2012 Refunding Lease Revenue Bonds; $3,583,243 to Parks, Recreation and Community Services for operating costs; $126,160 to Community Development for operating costs; $806,780 to the Vehicle and Equipment Fund for vehicle replacements and computer replacements; and $1,511,200 to the Capital Outlay Reserve Fund for various capital projects; and $591,800 to the Streets Fund for various streets projects. The transfer out of $907,176 from other governmental to other governmental includes $335,410 transferred from Parks, Recreation and Community Services to the Debt Service Fund for the interest required to pay the 2012 Refunding Lease Revenue Bonds, transfer of $150,500 from Parks, Recreation and Community Services to Parks Capital Fund for park -related capital projects, transfer of $189,000 from Streets and $125,300 transfer from Vehicle and Equipment Fund to Capital Outlay Reserve for various capital projects, and transfer of $2,510 from the Community Development, $31,866 from Public Safety and $72,590 from the Parks, Recreation and Community Services to the Vehicle and Equipment Fund for fleet replacement. The transfer out from the Electric Fund of $1,719,858, transfer out from Wastewater Fund for $826,378, Water Fund for $1,015,378, and $50,000 from the Insurance Fund, to other governmental represent transfers to the Capital Outlay Reserve Fund for various capital projects. 50 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (6) CAPITAL ASSETS Capital assets activity of the primary government for the year -ended June 30, 2015, was as follows: Balance Balance Governmental activities June 30, 2014 Increases Decreases June 30, 2015 Capital assets, not being depreciated: Land $ 24,933,134 14,700 $ 24,947,834 Work of Art 304,907 304,907 Construction in progress 4,407,042 7,955,423 (237,786) 12,124,679 Total capital assets, not being depreciated 29,645,083 7,970,123 (237,786) 37,377,420 Capital assets, being depreciated: Buildings and improvements 68,538,889 68,538,889 Machinery and equipment 11,335,038 329,853 (58,053) 11,606,838 Vehicles 10,346,394 696,076 11,042,470 Infrastructure 140,164,672 237,786 140,402,458 Total capital assets, being depreciated 230,384,993 1,263,715 (58,053) 231,590,655 Less accumulated depreciation for: Buildings and improvements 30,250,848 1,943,658 32,194,506 Machinery and equipment 10,608,625 507,040 (58,053) 11,057,612 Vehicles 9,028,154 255,649 9,283,803 Infrastructure 84,893,997 5,834,705 90,728,702 Total accumulated depreciation 134,781,624 8,541,052 (58,053) 143,264,623 Total capital assets, being depreciated, net 95,603,369 (7,277,337) 88,326,032 Governmental activities capital assets, net $ 125,248,452 692,786 (237,786) $ 125,703,452 51 Business -type activities Capital assets, not being depreciated: CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Balance Balance June 30, 2014 Increases Decreases June 30, 2015 Land $ 5,535,718 Construction in progress 4,029,855 Total capital assets, not being depreciated 9,565,573 10,449,092 $ 5,535,718 14,478,947 10,449,092 20,014,665 Capital assets, being depreciated: Buildings and improvements 47,395,387 47,395,387 Machinery and equipment 265,429,564 2,353,163 (1,972,823) 265,809,904 Vehicles 9,773,724 3,063,258 (1,600,595) 11,236,387 Total capital assets, being depreciated 322,598,675 5,416,421 (3,573,418) 324,441,678 Less accumulated depreciation for: Buildings and improvements 16,264,541 1,790,629 18,055,170 Machinery and equipment 74,231,485 7,989,032 (842,368) 81,378,149 Vehicles 7,059,271 995,337 (1,600,595) 6,454,013 Total accumulated depreciation Total capital assets, being depreciated, net Business -type activities capital assets, net 97,555,297 10,774,998 225,043,378 (5,358,577) $ 234,608,951 52 (2,442,963) 105,887,332 (1,130,455) 218,554,346 5,090,515 (1,130,455) $ 238,569,011 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Depreciation expense was charged to function/programs of the primary government as follows: Governmental activities: General government $ 524,974 Public protection 898,317 Public works 5,942,856 Community development 4,515 Library 72,651 Parks and recreation 1,096,295 Internal service funds 1,444 Total depreciation expense - governmental activities $ 8,541,052 Business -type activities: Electric $ 2,658,929 Wastewater 4,217,932 Water 2,752,367 Transit 1,145,770 Total depreciation expense - business -type activities $ 10,774,998 (7) OPERATING LEASES The City is obligated under an operating lease for the use of facilities. Total costs for such lease was $21,000 for the year ended June 30, 2015. Future minimum lease payments required by this lease agreement that has a remaining noncancellable lease term of one year or more as of June 30, 2015, are as follows: Years Ending 2016 $ 21,000 Total minimum lease payments required under operating leases $ 21,000 53 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (8) LONG-TERM LIABILITIES The following is a summary of long-term liability transactions of the City for the year ended June 30, 2015: Governmental activities: Compensated absences 2012 Lease Revenue Bonds Issuance premium Total Note payable Self-insurance liability Governmental activities long-term liabilities Amounts Due Within Interest Rates June 30, 2014 Additions Reductions June 30, 2015 One Year 2.0-5.0% $ 6,391,050 19,080,000 924,080 1,490,475 (2,069,485) $ (53,830) 20,004,080 (53,830) 5,812,040 $ 1,490,475 19, 080, 000 870,250 260,000 53,830 19,950,250 313,830 6.0% 245,000 245,000 $ 9,021,759 35,661,889 54 634,932 (1,350,804) 2,125,407 (3,474,119) $ 8,305,887 634,932 34,313,177 $ 2,439,237 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Interest Rates Amounts Due Within June 30, 2014 Additions Reductions June 30, 2015 One Year Business -type activities: Compensated absences $ 1,844,614 527,570 (657,446) 1,714,738 $ 527,569 Pollution remediation obligation 19,112,962 (520,856) 18,592,106 Certificates of Participation and Revenue Bonds: 2010 Water Revenue Bonds A & B 2.50-6.637% 36,265,000 (850,000) 35,415,000 870,000 Issuance premium 512,205 (19,700) 492,505 19,700 Total 36,777,205 (869,700) 35,907,505 889,700 2008 Certificates of Participation A Issuance premium Total 3.8-5.05% 60,685,000 448,356 (24,908) 61,133,356 (24,908) 60,685,000 423,448 24,909 61,108,448 24,909 2002 Certificates of Participation D 1.54-5.25% 10,155,000 (4,960,000) 5,195,000 5,195,000 2004 Certificates of Participation A 2.0-5.5% 2,070,000 2,070,000 2007 Certificates of Participation A 4.0-5.0% 29,605,000 (145,000) 29,460,000 155,000 Issuance premium 192,582 (8,254) 184,328 8,253 Total 29,797,582 (153,254) 29,644,328 163,253 2012 Wastewater Revenue Bonds A Issuance premium Total Total Certificates of Participation and Revenue Bonds Business -type activities long-term liabilities 2.0-5.0% 15,825,000 1,538,399 (1,355,000) (166,313) 17,363,399 (1,521,313) 157,296, 542 (7,529,175) $ 178,254,118 527,570 14,470,000 1,372,086 1,380,000 166,313 15,842,086 1,546,313 149,767,367 7,819,175 (8,707,477) $ 170,074,211 $ 8,346,744 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 $8,305,887 was included in the above amounts. Also, for the governmental activities, compensated absences are generally liquidated by the General Fund and the internal service funds. 55 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Long-term debt payable at June 30, 2015, comprised of the following individual issues: 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 Public Safety Building. Interest is payable quarterly and principal is due on April 1, 2017. Annual debt service requirements to maturity of the note payable are as follows: Year Ending Governmental Activities June 30, Principal Interest 2016 $ $ 14,700 2017 245,000 11,025 Total $ 245,000 $ 25,725 Certificates of Participation and Revenue Bonds $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 operating expenses, to repay these certificates. The total principal and interest remaining to be paid on the certificates is $2,954,925. Interest paid for the current year and total net revenues were $98,325 and $9,509,480, 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 ranging 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 certificates. The total principal and interest remaining to be paid on the certificates is $52,429,588. Principal and interest paid for the current year and total net revenues were $1,602,850 and $9,509,480, respectively. 56 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 $22,740,000 Revenue Certificates of Participation Series D (2002 COP) 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 energy. Principal is payable annually on July 1 in amounts ranging from $110,000 to $5,195,000 with final payment due July 1, 2015. The City has pledged future electric revenues, net of specified operating expenses, to repay these certificates. The total principal and interest remaining to be paid on the certificates is $5,331,368. Principal and interest paid for the current year and total net revenues were $5,360,458 and $15,016,570. 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 $46,760,000 Certificates of Participation (Electric System Revenue Certificates of Participation 2002 Series A Variable Rate Certificates) and to pay $8,979,000 for the termination of a swap agreement related to the refunded 2002 certificates. Principal is payable annually on July 1 in amounts ranging from $2,390,000 to $5,090,000 beginning in 2016 with final payment due in 2032. The City has pledged future electric revenues, net of specified operating expenses, to repay these certificates. The total principal and interest remaining to be paid on the certificates is $90,900,400. Interest paid for the current year and total net revenues were $2,957,775 and $15,016,570, respectively. On October 1, 2010, the City issued $9,015,000 Water Revenue Bonds, 2010 Series A and $29,650,000 Water Revenue Bonds, 2010 Series B (Federally taxable - Build America Bonds) (2010 Bonds) to finance the construction of the Surface Water Treatment Facility which is designed to pump water from the Mokelumne River, treat and deliver it to the City's water distribution system. Principal is payable annually on June 1 in amounts ranging from $775,000 to $2,210,000 with final payment due June 1, 2040. The City has pledged future water revenues, net of operation and maintenance costs, to repay these certificates. The total principal and interest remaining to be paid on the certificates is $69,267,196. Principal and interest paid for the current year and total net revenues were $2,356,141 and $7,554,798, respectively. The City issued $19,080,000 Refunding Lease Revenue Bonds (2012 LRB) on September 1, 2012 to allow the City to prepay and cause the immediate defeasance of the outstanding $21,025,000 Certificates of Participation (2002 COP). The 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, 2015, 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 Square Conference and Performing Arts Center. The total principal and interest remaining to be 57 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 paid on the 2012 LRB is $27,455,956. Principal is payable annually on October 1 in amounts ranging from $260,000 to $1,605,000 beginning in 2016 with final payment due in 2031. Interest paid for the current year was $844,812. The City issued $17,105,000 2012 Refunding Wastewater Revenue Bonds (2012 Bonds) to advance refund the $17,115,000 principal amount of the 2004 Wastewater Revenue Certificates of Participation. The City pledged future wastewater revenues, net of specified operating expenses, to repay these certificates. The total principal and interest remaining to be paid on the 2012 Bonds is $17,513,950. Principal is payable annually on October 1 in amounts ranging from $1,280,000 to $1,885,000 beginning in 2013 with final payment due in 2023. Principal and interest paid for the current year and total net revenues were $1,970,350 and $9,509,480 respectively. At June 30, 2015, the remaining balance of the refunded debt is $0. 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. Annual debt service requirements to maturity for certificates of participation and bonds are as follows: Year Ending Governmental Activities Business -type Activities June 30, Principal Interest Principal Interest 2016 $ 260,000 $ 840,913 $ 7,600,000 $ 7,324,025 2017 830,000 824,563 4,880,000 6,969,356 2018 860,000 794,912 5,110,000 6,767,006 2019 900,000 755,212 5,310,000 6,540,606 2020 930,000 721,087 5,535,000 6,304,106 2021-2025 5,345,000 2,903,717 32,040,000 27,359,983 2026-2030 6,810,000 1,404,480 37,270,000 18,407,003 2031-2035 3,145,000 131,072 32,370,000 8,810,488 2036-2040 17,180,000 2,619,854 Total $ 19,080,000 $ 8,375,956 $ 147,295,000 $ 91,102,427 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 58 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 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 District from the City of Lodi pursuant to an Agreement for the purchase of water from the District by the City of Lodi, dated May 13, 2003 (the "Lodi Water Sales Agreement"). Under the agreement, the City will purchase 6,000 acre feet of water per annum from the District for 40 years. (9) PENSION PLAN Plan Descriptions All qualified permanent and probationary employees are eligible to participate in the City's separate Miscellaneous and Safety Plans (Plans), agent multiple -employer defined benefit pension plans administered by the California Public Employees' Retirement System (CaIPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. CaIPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CaIPERS website. Benefits Provided CaIPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non -duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. 59 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 The Plans' provisions and benefits in effect at June 30, 2015, are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Miscellaneous Plan Prior to On or after January 1, 2013 January 1, 2013 2% @ 55 2% @ 62 5 years of service 5 years service monthly for life monthly for life 50-55 52-67 2%-2.418% 1% to 2.5% 6.75% 19.994% 7% 19.994% Safety Plan Prior to December 22, 2012 to December 22, 2012 December 31, 2012 3% @ 50 3% @ 55 5 years of service 5 years of service monthly for life monthly for life 50 50-55 2.4% to 3% 60 3% 9% 9% 40.87% 40.87% On or after January 1, 2013 2.7% @ 57 5 years of service monthly for life 50-57 2% to 2.7% 11.25% 40.87% CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Employees Covered At June 30, 2013, the most recent actuarial valuation available, the following employees were covered by the benefits of the City's Plans: Miscellaneous Plan Safety Plan Inactive employees or beneficiaries currently receiving benefits 355 158 Inactive employees entitled to but not yet receiving benefits 134 16 Active employees 256 118 Total 745 292 Contributions For the year ended June 30, 2015, the City's actuarially determined contributions were as follows: Miscellaneous Plan Safety Plan Inactive employees or beneficiaries currently receiving benefits 355 158 Inactive employees entitled to but not yet receiving benefits 134 16 Active employees 256 118 Total 745 292 Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CaIPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Net Pension Liability The City's net pension liability for each Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2014, using an annual actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. 61 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Actuarial Assumptions The total pension liabilities in the June 30, 2013 actuarial valuations were determined using the following actuarial assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Discount Rate Inflation Investment Rate of Return Mortality Miscellaneous Plan June 30, 2013 June 30, 2014 Safety Plan June 30, 2013 June 30, 2014 Entry -Age Normal Cost Method 7.5% 7.5% 2.75% 2.75% 7.5%(1) 7.5%(1) Based on rates of CaIPERS Experience Study (1) Net of pension plan investment expenses, including inflation The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2013 valuation were based on the results of a January 2014 actuarial experience study for the period 1997 to 2011. Further details of the Experience Study can found on the CaIPERS website. Discount Rate The discount rate used to measure the total pension liability was 7.50% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CaIPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.50 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.50 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CaIPERS website. According to GASB Statement No. 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. This difference was deemed immaterial by the City. 62 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 CaIPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CaIPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CaIPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short- term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long- term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. Asset Class New Strategic Allocation Real Return Years 1-10(1) Real Return Years 11+ (2) Global Equity 47.0% 5.25% 5.71% Global Fixed Income 19.0 0.99 2.43 Inflation Sensitive 6.0 0.45 3.36 Private Equity 12.0 6.83 6.95 Real Estate 11.0 4.50 5.13 Infrastructure and Forestland 3.0 4.50 5.09 Liquidity 2.0 (0.55) (1.05) An expected inflation of 2.5 percent used for this period. An expected inflation of 3.0 percent used for this period. 63 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Changes in the Net Pension Liability The changes in the Net Pension Liability for each Plan follows: Miscellaneous Plan: Balance at June 30, 2013 (1) Changes in the year: Service cost Interest on the total pension liability Contribution - employer Contribution - employee Net investment income (2) Benefit payments, including refunds of employee contributions Net changes during measurement period Balance at June 30, 2014 Safety Plan: Balance at June 30, 2013 (1) Changes in the year: Service cost Interest on the total pension liability Contribution - employer Contribution - employee Net investment income (2) Benefit payments, including refunds of employee contributions Net changes during measurement period Balance at June 30, 2014 Increase (Decrease) Total Pension Liability $ 158,694,446 2,478,901 11,705,179 (7,729,680) 6,454,400 $ 165,148,846 Plan Fiduciary Net Position $ 111,971,008 2,694,850 1,237,916 19,249,151 (7,729,680) 15,452,237 Net Pension Liability $ 46,723,438 2,478,901 11, 705,179 (2,694,850) (1,237,916) (19,249,151) (8,997,837) $ 127,423,245 $ 37,725,601 Increase (Decrease) Total Pension Liability $ 154,077,401 3,048,048 11,390,793 Plan Fiduciary Net Net Pension Position Liability $ 93,345,381 $ 60,732,020 4,106,044 1,058,376 16,070,261 3,048,048 11,390,793 (4,106,044) (1,058,376) (16,070,261) (7,448,361) (7,448,361) 6,990,480 13,786,320 (6,795,840) $ 161,067,881 $ 107,131,701 $ 53,936,180 (1) The fiduciary net position includes receivables for employee service buybacks, deficiency reserves, fiduciary self insurance and OPEB expense. (2) Net of administrative expenses. 64 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City for each Plan, calculated using the discount rate for each Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 -percentage point lower or 1 -percentage point higher than the current rate: 1% Decrease Net Pension Liability Current Discount Rate Net Pension Liability 1% Increase Net Pension Liability Miscellaneous Plan Safety Plan 6.50% $58,879,248 7.50% $37,725,601 8.50% $20,138,259 6.50% $75,439,730 7.50% $53,936,180 8.50% $36,195,422 Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in the separately issued CaIPERS financial reports Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2015, the City recognized pension expense of $2,515,043 and $4,662,330 for the Miscellaneous and Safety Plans, respectively. At June 30, 2015, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Miscellaneous Plan Safety Plan Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Pension contributions subsequent to measurement date $ 3,252,760 $ $ 3,995,128 $ Net differences between projected and actual earnings on plan investmetns 8,818,030 7,352,126 Total $ 3,252,760 $ 8,818,030 $ 3,995,128 $ 7,352,126 65 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 The $3,252,760 and $3,995,128 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2016. Other amounts reported as deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year Ending Miscellaneous Safety June 30 Plan Plan 2016 $ 2,204,507 $ 1,838,032 2017 2,204,507 1,838,032 2018 2,204,507 1,838,032 2019 2,204,509 1,838,030 Total $ 8,818,030 $ 7,352,126 (10) POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (a) Plan Description The City sponsors a single -employer defined -benefit postemployment healthcare plan (Retiree Health Plan) to provide medical insurance benefits to eligible retired employees and their spouses. The Plan does not issue a publicly available financial report. Medical coverage is provided through CaIPERS healthcare program. Employees who retire from the City and receive a CaIPERS 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. Group Hired prior to: Executive Management July 1, 1994 Mid -Management July 1, 1994 Fire Mid -Management December 6, 1995 Police Mid -Management July 1, 1994 General Services July 1, 1995 IBEW July 1, 1995 66 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Maintenance and Operators July 1, 1995 Dispatchers July 9, 1994 Police October 10, 1994 Fire December 6, 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 was still alive. Retirees are allowed to enroll in any of the available CaIPERS medical plans. The CaIPERS 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 Retiree Health Plan are based on pay-as-you-go financing. For fiscal year 2014-15, the City contributed $699,748, or 54.83%, of the actuarially required contributions. (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 No. 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. 67 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 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 Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Contributions made Increase in net OPEB obligation Net OPEB obligation - beginning of year Net OPEB obligation - end of year $ 1,315,853 190,691 (230,343) 1,276,201 (699,748) 576,453 4,767,274 $ 5,343,727 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation, are as follows: Percentage of Net Year Annual Annual OPEB OPEB ended OPEB Cost Cost Contributed Obligation 06/30/2013 $ 1,283,605 51.08% $ 4,249,526 06/30/2014 1,223,236 57.67% 4,767,274 06/30/2015 1,276,201 54.83% 5,343,727 68 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (d) Funding Status and Funding Progress As of January 1, 2014, 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) $ 16,879,493 $ 16,879,493 Funded ratio (actuarial value of plan assets/AAL) 0% Annual covered payroll (active plan members) $ 5,697,043 UAAL as percentage of annual covered payroll 296% The schedule of funding progress, presented as RSI following the notes to the basic financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability of benefits. (e) Actuarial Methods and Assumptions 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. 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 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-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2014 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; a 2.75% inflation rate; an annual healthcare cost trend rate of 7.5% for calendar year 2015, increasing to 8.5% for calendar year 2015, then gradually decreasing to 4.5% for calendar year 2021 and beyond; the CaIPERS minimum benefit will increase 4% per year; a 3.00% annual rate of increase in payroll; assumed that 100% of future eligible retirees will elect to maintain their enrollment in a CaIPERS 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 Dispatchers will elect the conversion option and 50% of Executive Management, Mid Management and Police will elect the option. The conversion option is not available to IBEW and Fire retirees. The unfunded 69 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 actuarial accrued liability is amortized as a level percentage of expected payroll over a closed thirty year period. As of June 30, 2015, the remaining amortization period is 24 years. (11) 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 Fund. The City is self-insured for general liability up to the first $500,000 per occurrence with claims from $500,000 to $40,000,000 per occurrence and in the aggregate insured through the California Joint Powers Risk Management Authority. The City has not had any settlements that exceeded its general liability insurance coverage (See Note 13). 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 has not had any settlements that exceeded its workers' compensation insurance coverage (See Note 13). The City is fully self-insured for dental and unemployment for its employees. General liability and workers' compensation claims are administered by an outside agency and all other claims are administered by the City. The City has accrued a liability of $8,305,887 at June 30, 2015, 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 GASB Statement No. 62, 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 the years ended June 30, 2015 and 2014 are as follows: Current -Year Claims and Changes Claim Beginning in Estimates Payments Ending FY 13-14 $ 9,117,062 $ 1,050,613 $ (1,145,916) $ 9,021,759 FY 14-15 9,021,759 634,932 (1,350,804) 8,305,887 70 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (12) PARTICIPATION IN JOINT VENTURES Northern California Power Agency The City, along with thirteen other public agencies, is a member of the Northern California Power Agency (NCPA) that was formed in 1968 as a joint powers agency. Its membership consists of eleven cities with publicly owned electric utility distribution systems, one irrigation district, one public utility district, one port authority and three other associate member entities. NCPA is generally empowered to purchase, generate, transmit, distribute and sell electrical energy. Members participate in the projects of NCPA on an elective basis. A commission comprising of one representative from each member organization governs NCPA. The commission is responsible for the general management of the affairs, property and business of NCPA. Under the direction of the general manager, the staff of NCPA is responsible for providing various administrative, operating and planning services for NCPA and its associated power corporations. Project Financing and Construction NCPA's project construction and development programs have been individually financed by project revenue bonds collateralized by NCPA's assignment of all payments, revenues and proceeds associated with its interest in each project. Each Project Participant has agreed to pay its proportionate share of debt service and other costs of the related project, notwithstanding the suspension, interruption, interference, reduction or curtailment of output from the project for any reason. Certain of the revenue bonds are additionally supported by municipal bond insurance credit enhancements. Increase in Non-defaultinq Project Participant's Original Project Entitlement Percentage Upon the failure of any Project Participant to make any payment, which failure constitutes a default under the Member Agreement for the projects, and except as sales and transfers are made pursuant thereto, the Member Agreements provide that Project Entitlement for each non - defaulting Project Participant shall be automatically increased for the remaining term of the Member Agreement; pro rata with those of the non - defaulting Project Participant thereunder; provided, however, that the sum of such increase for any non -defaulting Project Participant shall not exceed, without written consent of such non -defaulting Project Participant, an accumulated maximum of 25% of the non -defaulting Project Participant's original Project Entitlement Percentage Share. General Operating Reserve with NCPA Members of NCPA established a general operating reserve in 1992 for the purposes of providing a vehicle to fund reasonably foreseeable contingent liabilities. It was set up primarily to provide the following advantages: minimizes the number and dollar amount of reserve that might otherwise be funded separately in connection with NCPA's individually financed operating plants, projects and programs; provides each member with flexibility and unilateral control over the determination of what they will fund, how they will fund it and what expenditures from the reserve will be made on their individual behalf. It provides funding for contingent liabilities that are not budgeted but that may require significant future expenditures. The reserve is segregated by participant and is refundable on demand by the participant. 71 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 As of June 30, 2015, the City's balance in the NCPA General Operating Reserve, which has been credited with annual interest earnings and settlements, is $6,956,797. Project Participation The NCPA members and their percentage share at June 30, 2015, which is the most recent available data, are as follows: NCPA MEMBERS Hydro Combustion Multiple Lodi Geothermal Electric Turbine Capital Transmission Energy Project Project Project #1 Facilities Project Center Alameda 16.8825% 10.00% 21.820% 19.00% 30.7802% Bay Area Rapid Transit 6.6000% Biggs 0.2270 0.197 0.3446 0.2679 Gridley 0.3360 0.350 0.6248 1.9643 Healdsburg 3.6740 1.66 5.833 6.6947 1.6428 Lodi 10.2800 10.37 13.393 39.50 20.6077 9.5000 Lompoc 3.6810 2.30 5.833 5.00 6.7101 2.0357 Palo Alto 22.92 Plumas-Sierra Rural Electric Coop 0.7010 1.69 1.817 1.3112 0.7857 Roseville 7.8830 12.00 36.50 13.0846 Santa Clara 44.3905 37.02 41.667 25.7500 Ukiah 5.6145 2.04 9.090 10.2315 1.7857 OTHER PARTICIPANTS Azusa 2.7857 California Department of Water Resources 33.5000 Modesto Irrigation District 10.7143 Power & Water Resources Pooling Agency 2.6679 Turlock Irrigation District 6.3305 9.6106 72 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Bulk power purchased by the City through NCPA amounted to $38,512,404 during the year ended June 30, 2015 and is reflected in utilities expense in the Electric Enterprise Fund. NCPA Geothermal Project 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 (MW) steam powered plants, Project Number 2 and Project Number 3. Outstanding long-term debt related to this project was approximately $38 million at June 30, 2015. In addition to federal geothermal leasehold, steam wells, gathering system and related facilities, the project consists of two electric generating stations (Plant 1 and Plant 2). Each plant has two 55MW turbine generator units utilizing low temperature geothermal steam; associated electrical, mechanical and control facilities; a heat dissipation system; a steam gathering system; a transmission tapline; and, other related facilities. Geothermal steam for the project is derived from the geothermal property, which includes wellpads, access roads, steam wells and reinjection wells. Calaveras Hydroelectric Project NCPA contracted to finance, manage, construct and operate Hydroelectric Project Number One for the licensed owner, Calaveras County Water District. In exchange, NCPA has the right to the electric output of the project for 50 years from February 1982. NCPA has also the option to purchase power from the project in excess of the District's requirements for the subsequent 50 years, subject to regulatory approval. Under a power purchase agreement the City is obligated to pay 10.37% of the debt service and operating costs. At June 30, 2015, approximately $383 million in long-term debt used to finance this project was outstanding. NCPA Combustion Turbine Project #1 The project consists of five combustion turbine units; each nominally rated at 25 MW. 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 13.393% of the debt service and operating costs. At June 30, 2015, there was no outstanding long-term debt related to this project. Capital Facilities Project The Project consists of one 49.9 MW natural gas-fired steam injected combustion turbine generator unit located in Lodi, California. Wastewater is reclaimed from the City of Lodi's White Slough water pollution control facility, processed to eliminate contaminants, and used in the turbine to produce steam for power enhancement and emissions control. 73 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Under a power purchase agreement, the City is obligated to pay 39.5% of the debt service and operating costs. At June 30, 2015, approximately $45 million in long-term debt was outstanding. Transmission Project The project was undertaken to meet certain obligations of NCPA under the NCPA/PG & E Interconnection Agreement. The project includes an ownership interest in PG & E's 230kv Castle 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 20.6077% of the debt service and operating costs. At June 30, 2015, there was no outstanding long-term debt related to this project. Lodi Energy Center The Lodi Energy Center project is a 280 MW base load, combined cycle, natural gas-fired, combustion turbine generating station (one gas turbine and one steam turbine) built in Lodi on city property. Under a power purchase agreement, the City is obligated to pay 17.03% of the debt service and 9.5% of operating costs. At June 30, 2015, approximately $370 million in long-term debt was outstanding. The following are the most recent available audited condensed financial statements of NCPA: Condensed Statement of Net Position June 30, 2015 (in thousands) Liabilities, Deferred Inflows of Resources and Net Assets and Deferred Outflows of Resources Position Current assets Restricted assets Electric plant, net Other assets Total assets Deferred outflows of resources Total assets and deferred outflows of resources 81,501 Long-term debt, net $ 816,936 204,769 Current liabilities 93,224 618,708 Non-current liabilities 199,980 249,659 Deferred inflows of resources 81,930 1,154,637 Net position 29,991 Total liabilities, deferred inflows of resources 67,424 and net position $ 1,222,061 $ 1,222,061 74 Sales for resale CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Condensed Statement of Revenues, Expenses and Changes in Net Position Year ended June 30, 2015 (in thousands) $ 423,887 Operating expenses Other expenses Future recoverable costs Net revenues before refunds Refunds to participants Decrease in net position Net position, beginning of year Net position, end of year $ (378,672) (38,260) (2,292) 4,663 (6,905) (2,242) 32,233 Combined Statement of Cash Flow Year ended June 30, 2015 (in thousands) Net cash from operating activities $ Net from investing activities Net cash from capital and related financing activities Net cash from noncapital and related financing activities 61,496 (11,747) (74,875) (1,846) Decrease in cash and cash equivalents (26,972) Cash and cash equivalents, beginning of year 130,151 29,991 Cash and cash equivalents end of year $ 103,179 At June 30, 2015, NCPA's total net outstanding long-term debt was $835,340,000 at an average interest rate of 5%. The current portion of long- term debt at June 30, 2015, was $35,615,000. Complete financial information for NCPA may be obtained at the following administration office: Northern California Power Agency 180 Cirby Way Roseville, CA 95678 Transmission Agency of Northern California The Transmission Agency of Northern California (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 TANG 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 75 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 costs to operate TANC and has the right to participate in future project agreements. The joint powers agreement remains in effect until debt obligations and interest thereon have been paid, unless otherwise extended by the members. Increase in Non -defaulting Project Participant's Original Project Entitlement Percentage Upon the failure of any Project Participant to make any payment, which failure constitutes a default under the Member Agreement for the projects, and except as sales and transfers are made pursuant thereto, the Member Agreements provide that Project Entitlement for each non - defaulting Project Participant shall be automatically increased for the remaining term of the Member Agreement; pro rata with those of the non - defaulting Project Participant thereunder; provided, however, that the sum of such increase for any non -defaulting Project Participant shall not exceed, without written consent of such non -defaulting Project Participant, an accumulated maximum of 25% of the non -defaulting Project Participant's original Project Entitlement Percentage Share. California -Oregon Transmission Project The project is a 340 -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 Electricity Coordinating Council (WECC) region. The WECC approved rating of the COI is 4,800 MW. TANC, Western Area Power Authority (WAPA), and five other parties have agreed to an Interim Participation Agreement (IPA) under which each project participant is granted a percentage entitlement in project transfer capability and is required to pay a percentage of the costs. Pursuant to the IPA and a subsequent agreement with WAPA, and the purchase of entitlement, rights and title, and interest in the City of Vernon's share of the project transmission assets, TANC is entitled to use approximately 1,362 MW, and is obligated to pay an average of approximately 80 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, 2015, approximately $284 million in long-term debt was outstanding of which $32 million is considered current. Effective July 1, 2015, the City terminated its interest in the California -Oregon Transmission Project to other TANC members. As a result, the City will not incur any costs after this date related to this Project. 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 76 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 (13) MEMBERSHIP IN INSURANCE POOLS California Joint Powers Risk Management Authority The City is a member, along with 16 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. 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 prior to the end of the current program year. The City periodically pays deposits to the CJPRMA. These deposits are recorded as expenses in the year paid, as they are a reasonable estimate of the actual cost of the program. During the year ended June 30, 2015, premiums of $93,834 were paid to CJPRMA for the liability program. The participants at June 30, 2015, are as follows: Alameda, Chico, Fairfield, Fremont, Livermore, Lodi, Northern California Cities Self Insurance Fund, Petaluma, Redding, Redwood Empire Municipal Insurance Fund, Richmond, Roseville, San Leandro, San Rafael, Santa Rosa, Small Cities Organized Risk Effort, Stockton, Sunnyvale, Vacaville, Vallejo, and Yolo County Public Agencies Risk Management Insurance Authority. Complete financial information for CJPRMA may be obtained at the following administration office: California Joint Powers Risk Management Authority 3252 Constitution Dr. Livermore, CA 94551 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 the 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 $353,997 in premiums to LAWCX during the year ended June 30, 2015. The participants at June 30, 2015, are as follows: City of Alameda, Association of Bay Area Governments Shared Risk Pool (ABAG SHARP), Bay Cities Joint Powers Insurance Authority (BCJPIA), City of Benicia, Central Contra Costa County Transit Agency (CCCTA), California Housing 77 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Workers' Compensation Authority (CHWCA), Central San Joaquin Valley Risk Management Authority (CSJVRMA), City of Clovis, City of Coronado, City of Encinitas, Fire Agencies Self Insurance System (FASIS), City of Gilroy, City of Livermore, City of Lodi, Town of Los Gatos, City of Merced, Monterey County Local Agencies Insurance Authority (MCLAIA), City of Morgan Hill, City of Newark, City of Placentia, City of Pleasanton, Public Agency Risk Sharing Authority of California (PARSAC), City of Roseville, Public Entity Risk Management Authority (PERMA), City of San Leandro, City of Santa Maria, City of Santee, Small Cities Organized Risk Effort (SCORE), City of South Lake Tahoe, City of Suisun City, City of Vacaville, City of Vallejo, Vector Control Joint Powers Agency (VCJPA) and City of Vista. Complete financial information for LAWCX may be 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-three other public agencies is a member of the California Transit Insurance Pool (CaITIP), a joint powers insurance authority which was formed for the purpose of sharing the risk of property damage, bodily injury, personal injury and public officials errors and omissions losses for public transit systems. Liability protection coverage is provided under two programs: Program I applies to members who choose to utilize CaITIP's 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 $4 million in excess of the pooled retention for a total of $5 million in coverage 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 up 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 $77,447 in premiums to CaITIP during the year ended June 30, 2015. 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. 78 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 City of Lodi Transit System Self - Insured Limit Physical Program Retention (in millions) Damage Prefunded 20 Yes Complete financial information for CalTip may be obtained at the following administration office: California Transit Insurance Pool 1750 Creekside Oaks Drive, Suite 200 Sacramento, California 95833 (14) DEFICIT IN FUND EQUITY Internal Service Funds — Fleet Services Fund— A deficit in fund equity in the amount of $928,620 at June 30, 2015, is attributed to the net pension obligation set up in accordance with the requirements of GASB Statement No. 68. Net pension obligation as of June 30, 2015, was $926,452. Internal Service Funds - Benefits Fund — A deficit in fund equity in the amount of $3,712,939 at June 30, 2015, is attributed to the net OPEB obligation set up in accordance with the requirements of GASB Statement No. 45. Net OPEB obligation as of June 30, 2015, was $5,343,727. The City will continue to address annual funding to eliminate the deficit during the budget process. Electric Enterprise Fund — A deficit in fund equity in the amount of $5,023,048 at June 30, 2015, is attributed to the net pension obligation set up in accordance with the requirements of GASB No. 68. Net pension obligation as of June 30, 2015, was $9,512,447. (15) POLLUTION REMEDIATION OBLIGATION The City 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. Investigations conducted by the California Regional Water Quality Control Board (RWQCB) in the early 1990's under the Well Investigation program revealed numerous areas where TCE was discharged, or where PCE from dry cleaning operations was discharged to the sewer system. In 1997, the Department of Toxic Substances Control (DTSC) 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's estimate of the pollution remediation obligation was $70 million. The City has settled with all the involved parties. 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 Water Resources Control Board's (SWRCB) Resolution No. 92-49 Policies and Procedures 79 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 for Investigation and Cleanup and Abatement of Discharges Under the Water Code Section 13304 and with the RWQCB's 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 of the SWRCB. The City's estimated total pollution remediation obligation as of June 30, 2015, is $18,592,106. This amount is an estimate and subject to changes resulting from price increases or reductions, technology, or changes in applicable laws or regulations. (16) COMMITMENTS AND CONTINGENCIES Litigation and claims — The City has fully resolved all the litigation arising out of its groundwater contamination. Settlement and rate revenues have amassed a $16 million dollar reserve which is expected to cover all costs through the next 10 years. Costs thereafter can be effectively managed with new rate revenues. 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 matter to 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. Effective January 1, 2010, 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, 2015, for any of the City's outstanding Certificates of Participation and Revenue Bonds. 80 CITY OF LODI Notes to Basic Financial Statements (continued) June 30, 2015 Construction and Other Significant Commitments — Commitments are existing arrangements to enter into future transactions or events, such construction contracts for ongoing projects and long-term contractual obligations with suppliers for future purchases at specified prices and sometimes specified quantities. Significant commitments as of June 30, 2015 are as follows: General Fund $ 26,219 Other governmental funds 3,527,744 Total $ 3,553,963 (17) SUBSEQUENT EVENTS In August 2015, the City obtained a loan in the amount of $1.5 million to finance the Electric Enterprise Fund's LED Street Light Retrofit project. Annual principal and interest payment is approximately $235,000 with final payment due December 1, 2022. The City has pledged future revenues from Greenhouse Gas Free Allowance proceeds, to repay the loan. In September 2015, the City obtained a loan in the amount of $468,000 to finance the purchase of a fire engine. Annual principal and interest payment is $99,172 with final payment due on December 1, 2020. The annual payments will be paid from Fire department appropriations. 81 REQUIRED SUPPLEMENTARY INFORMATION CITY OF LODI REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS MISCELLANEOUS PLAN Measurement Period 2013-14 (1) Total Pension Liability Service Cost $ 2,478,901 Interest 11,705,179 Benefit Payments, Including Refunds of Employee Contributions (7,729,680) Net Change in Total Pension Liability 6,454,400 Total Pension Liability - Beginning 158,694,446 Total Pension Liability - Ending (a) 165,148,846 Plan Fiduciary Net Position Contributions - Employer 2,694,850 Contributions - Employee 1,237,916 Net Investment Income (2) 19,249,151 Benefit Payments, Including Refunds of Employee Contributions (7,729,680) Other Changes in Fiduciary Net Position Net Change in Fiduciary Net Position 15,452,237 Plan Fiduciary Net Position - Beginning 111,971,008 Plan Fiduciary Net Position - Ending (b) 127,423,245 Plan Net Pension Liability/(Asset) - Ending (a) - (b) $ 37,725,601 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 77.16% Covered -Employee Payroll $ 16,669,363 Plan Net Pension Liability/(Asset) as a Percentage of Covered -Employee Payroll 226.32% (1) Historical information is required only for measurement periods for which GASB 68 is applicable. (2) Net of administrative expenses. Notes to Schedule: Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2013. This applies for voluntary benefit changes as well as any offers to Two Years Additional Service Credits (a.k.a. Golden Handshakes). Changes of Assumptions: There were no changes in assumptions. 82 CITY OF LODI REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS SAFETY PLAN Measurement Period 2013-14 (1) Total Pension Liability Service Cost $ 3,048,048 Interest 11,390,793 Benefit Payments, Including Refunds of Employee Contributions (7,448,361) Net Change in Total Pension Liability 6,990,480 Total Pension Liability - Beginning 154,077,401 Total Pension Liability- Ending (a) 161,067,881 Plan Fiduciary Net Position Contributions - Employer 4,106,044 Contributions - Employee 1,058,376 Net Investment Income (2) 16,070,261 Benefit Payments, Including Refunds of Employee Contributions (7,448,361) Other Changes in Fiduciary Net Position Net Change in Fiduciary Net Position 13,786,320 Plan Fiduciary Net Position - Beginning 93,345,381 Plan Fiduciary Net Position - Ending (b) 107,131,701 Plan Net Pension Liability/(Asset) - Ending (a) - (b) $ 53,936,180 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 66.51% Covered -Employee Payroll $ 11,194,123 Plan Net Pension Liability/(Asset) as a Percentage of Covered -Employee Payroll 481.83% (1) Historical information is required only for measurement periods for which GASB 68 is applicable. (2) Net of administrative expenses. Notes to Schedule: Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2013. This applies for voluntary benefit changes as well as any offers to Two Years Additional Service Credits (a.k.a. Golden Handshakes). Changes of Assumptions: There were no changes in assumptions. 83 CITY OF LODI REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS 2013-14 2014-15 Miscellaneous Plan: Actuarially Determined Contributions $ 2,694,850 $ 3,252,760 Contributions in Relation to the Actuarially Determined Contributions (2,694,850) (3,252,760) Contribution Deficiency Covered -Employee Payroll $ 16,669,363 $ 15,904,486 Contributions as a Percentage of Covered -Employee Payroll 16.17% 20.45% Safety Plan: Actuarially Determined Contributions $ 4,106,044 $ 3,995,128 Contributions in Relation to the Actuarially Determined Contributions (4,106,044) (3,995,128) Contribution Deficiency $ $ Covered -Employee Payroll Contributions as a Percentage of Covered -Employee Payroll Notes to Schedule: $ 11,194,123 36.68% $ 11,569,013 34.53% The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2013- 14 were from the June 30, 2011 public agency valuations. Actuarial Cost Method Amortization Method/Period Entry Age Normal For details, see June 30, 2011 Funding Valuation Report. Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2011 Funding Valuation Report. Inflation 2.75% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative Expenses; includes Inflation. Retirement Age The probabilities of Retirement are based on the 2010 CaIPERS Experience Study for the period from 1997 to 2007. Mortality The probabilities of mortality are based on the 2010 CaIPERS Experience Study for the period from 1997 to 2007. Pre -retirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries. 84 City of Lodi Required Supplementary Information Schedule of Funding Progress — OPEB Plan June 30, 2015 (in thousands of dollars) Entry Age Actuarial Normal Annual UAAL As 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)] (C) {[(B) — (A)]/(C)} 1/1/10 $ 0 $ 17,710 $ 17,710 0% $ 9,410 188% 1/1/12 0 17,011 17,011 0% 7,305 233% 1/1/14 0 16,879 16,879 0% 5,697 296% 85 CITY OF LODI SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND Year ended June 30, 2015 Budget Original Variance with Final Actual Final Budget REVENUES Taxes $ 23,912,910 24,162,910 24,630,745 $ 467,835 Licenses and permits 80,800 80,800 87,908 7,108 Intergovernmental revenues 11,214,240 11,282,315 12,642,107 1,359,792 Charges for services 1,217,410 1,317,410 1,482,448 165,038 Fines, forfeits and penalties 1,478,400 1,478,400 1,573,071 94,671 Investment and rental income 1,533,100 1,533,100 1,546,845 13,745 Miscellaneous revenue 220,800 220,800 290,951 70,151 Total revenues 39,657,660 40,075,735 42,254,075 2,178,340 EXPENDITURES Current: General government: City Manager 902,700 914,008 883,079 30,929 City Clerk and Council 626,320 615,520 522,168 93,352 City Attorney 490,810 497,325 396,514 100,811 Human Resources 419,590 456,700 437,832 18,868 Information Systems 1,017,670 968,940 884,000 84,940 Financial Services 1,647,090 1,664,670 1,613,592 51,078 Budget and Treasury 283,360 283,500 271,153 12,347 Non Departmental 1,456,090 1,504,890 1,482,569 22,321 Total general government 6,843,630 6,905,553 6,490,907 414,646 Public protection: Police 17,130,800 16, 638, 578 16,477,012 161,566 Fire 9,867,280 10,058,003 9,911,160 146,843 Total public protection 26,998,080 26,696,581 26,388,172 308,409 Public Works 1,936,540 2,065,051 1,882,250 182,801 Library Total expenditures EXCESS OF REVENUES OVER EXPENDITURES 1,341,950 1,353,593 1,311,367 42,226 37,120,200 37,020,778 36,072,696 948,082 2,537,460 3,054,957 6,181,379 3,126,422 OTHER FINANCING SOURCES (USES) Transfers in 3,940,357 3,952,000 3,952,000 Transfers out (6,314,877) (7,131,623) (7,128,586) 3,037 Total other financing sources (uses) (2,374,520) (3,179,623) (3,176,586) 3,037 CHANGES IN FUND BALANCE 162,940 (124,666) 3,004,793 3,129,459 FUND BALANCE , beginning of year 7,641,322 7,641,322 9,473,760 1,832,438 FUND BALANCE, end of year $ 7,804,262 7,516,656 12,478,553 $ 4,961,897 The note to the required supplementary information is an integral part of this schedule. 86 CITY OF LODI Note to the Required Supplementary Information June 30, 2015 Budgetary Data The City adopts an annual budget for the general and special revenue funds. These budgets are prepared in accordance with generally accepted accounting principles. As part of the City's internal controls, the City maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with the legal provisions embodied in the annual appropriated budget approved by the City Council. The accompanying financial statements present budget and actual data only of funds for which an annual budget was adopted. The budgets for capital projects are primarily "long-term" budgets that emphasize the major programs and capital project plans extending over a number of years. Due to the long-term nature of these projects, "annual" budget and actual comparisons are not considered meaningful. Formal budgetary integration is not employed for debt service funds since effective budgetary control is alternatively achieved through the bond indenture provisions. Accordingly, no budgetary information is included in the accompanying basic financial statements for capital projects and debt service funds. The City Council follows the following procedures in establishing the budgetary data reflected in the accompanying basic financial statements: Original Budget On or prior to the first regular Council meeting in June of each year, the City Manager submits to the City Council a proposed Financial Plan and Budget for the fiscal year commencing July 1. The budget includes proposed expenditures and the means of financing them. Budgeted revenues are adopted by the City Council at the time the budget is approved. Budgeted revenues are modified when the tax base changes, when fees are modified or when new revenue sources are identified. Public hearings are conducted during meetings of the City Council to obtain citizens' comments. Prior to July 1, the budget is legally enacted through passage of a resolution. Final Budget The final budgetary data presented in the basic financial statements reflects the following changes to the original budget: • Budgeted expenditures represent original appropriations adjusted by budget transfers and appropriation amendments. The legal level of budgetary control (that is, the level at which expenditures can not legally exceed the appropriated 87 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 another within a department without approval from the City Council. All other appropriation adjustments during the year, whether transfers, increases or decreases, require City Council approval. COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES NONMAJOR GOVERNMENTAL FUNDS Nonmajor Governmental Funds include: Special Revenue Funds account for the proceeds of specific revenue sources that are restricted by law or administrative action to expenditures for specified purposes, other than those for major capital projects; Debt Service Fund account for the accumulation of resources for the repayment of principal and interest on general long-term debt; Capital Project Funds account for the financial resources to be used for the acquisition or construction of major capital facilities, other than those financed by proprietary funds. CITY OF LODI COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS June 30, 2015 Special Capital Revenue Projects ASSETS Total Cash and investments $ 4,590,818 10,073,391 $ 14,664,209 Receivables: Accounts, net 660,894 54,420 715,314 Interest 2,510 5,085 7,595 Due from other funds 93,114 93,114 Due from other governmental agencies 348,979 348,979 Inventory 1,291 1,291 Total assets $ 5,697,606 10,132,896 $ 15,830,502 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 253,085 Due to other funds 93,114 Advances from other funds Unearned revenue 146,174 Total liabilities 492,373 Deferred Inflows of Resources: Unavailable revenue 1,785,160 $ 1,550,454 2,038,245 93,114 1,550,454 146,174 3,335,614 3,827,987 44,707 44,707 Fund Balances: Nonspendable: Inventory 1,291 1,291 Restricted for: Road -related projects 3,207,124 3,207,124 Capital projects 6,797,282 6,797,282 Public safety 249,258 249,258 Community development 1,474,880 1,474,880 Parks, recreation and community services 227,973 227,973 Total fund balances 5,160,526 6,797,282 11,957,808 Total liabilities, deferred inflows of resources, and fund balances 90 $ 5,697,606 10,132,896 $ 15,830,502 CITY OF LODI COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS Year ended June 30, 2015 Special Debt Capital Revenue Service Projects Revenues: Licenses and permits $ 879,225 Intergovernmental revenues 4,914,450 Charges for services 2,282,934 Investment and rental income 446,806 Miscellaneous revenue 301,617 Total revenues 8,825,032 Expenditures: Current: General government Public protection Public works Community development Parks and recreation Capital outlay Debt service: Interest and fiscal charges Total expenditures Deficiency of revenues under expenditures Other financing sources (uses): Transfers in Transfers out Total other financing sources (uses) 2,660,048 257,888 2,625,771 1,226,307 2,145,084 3,540,613 62,068 35,165 227,669 Total 879,225 4,914,450 2,345,002 481,971 529,286 324,902 9,149,934 6,301,012 2,660,048 257,888 2,625,771 1,226,307 2,145,084 9,841,625 844,812 844,812 12,455,711 844,812 (3,630,679) (844,812) 4,301,203 (781,876) 844,812 3,519,327 844,812 6,301,012 19,601,535 (5,976,110) (10,451,601) 6,501,361 (125,300) 11,647,376 (907,176) 6,376,061 10,740,200 Changes in fund balances (111,352) 399,951 288,599 Fund balances, beginning of year 5,271,878 6,397,331 11,669,209 Fund balances, end of year $ 5,160,526 6,797,282 $ 11,957,808 91 NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS SPECIAL REVENUE FUNDS Parks, Recreation and Community Services This fund was established to account for the revenues and expenditures related to the activities of the Hutchins Street Square and Performing Arts Theater and the wide -range of parks and 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 along with State and Federal grants related to public safety operations. Community Development This fund was established to account for development planning and project review services including land use entitlements, permit processing and review/inspection of public improvements to ensure orderly physical growth and development of the City. Streets Fund This fund was established to account for the following: Gas Tax To account for revenues and expenditures apportioned to the City under the Streets and Highway Code. Portions of 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 November 4, 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. 92 Intermodal Surface Transportation Efficiency Act (ISTEA) To account for revenues from the federal highway administration for programs including surface transportation program (STP) for streets and roads, congestion mitigation and air quality program (CMAQ) and hazard elimination safety (HES) for street lighting projects. 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 maintenance of street systems; and Article 4 funds, which are restricted for public transit systems. HOME Program and Community Development Block Grants This fund was established to account for the City's HOME Program that provides adequate and affordable housing for low and very low-income residents, and Community Development Block Grants provided to the City principally for low and moderate income residents to develop a suitable living environment and expand economic opportunities. 93 CITY OF LODI COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS June 30, 2015 Parks, HOME Program and Recreation and Community Community Public Community Development Services Safety Development Streets Transportation Block Grants Total ASSETS Cash and Investments $ 230,683 280,994 1,501,484 2,577,657 $ 4,590,818 Receivables: Accounts, net 47,023 1,927 3,247 564,586 44,111 660,894 Interest 144 230 950 1,166 20 2,510 Due from other funds 93,114 93,114 Due from other governmental agencies 81,538 47,067 220,374 348,979 Inventory 1,291 1,291 TOTAL ASSETS $ 279,141 364,689 1,505,681 3,283,590 44,111 220,394 $ 5,697,606 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable and other liabilities $ 49,877 259 30,801 91,278 19 80,851 $ 253,085 Due to other funds 29,519 63,595 93,114 Unearned revenue 115,172 31,002 146,174 TOTAL LIABILITIES 49,877 115,431 30,801 91,278 29,538 175,448 492,373 DEFERRED INFLOWS OF RESOURCES Unavailable revenue 44,707 44,707 FUND BALANCES Nonspendable Inventory 1,291 1,291 Restricted for: Road -related projects 3,192,312 14,573 239 3,207,124 Public safety 249,258 249,258 Community development 1,474,880 1,474,880 Parks, recreation and community services 227,973 227,973 TOTAL FUND BALANCES 229,264 249,258 1,474,880 3,192,312 14,573 239 5,160,526 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 279,141 364,689 1,505,681 3,283,590 44,111 220,394 $ 5,697,606 94 REVENUES Licenses and permits Intergovernmental revenues Charges for services Investment and rental income Miscellaneous revenue Total revenues CITY OF LODI COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 Parks, Recreation and Community Public Community Services Safety Development Streets HOME Program and Community Development Transportation Block Grants Total $ 879,225 $ 879,225 263,620 4,121,950 43,991 484,889 4,914,450 1,662,690 498,490 121,754 2,282,934 431,250 1,590 6,825 7,141 446,806 10,498 2,589 84,954 203,576 301,617 2,104,438 267,799 1,469,494 4,454,421 43,991 484,889 8,825,032 EXPENDITURES Current General government 2,660,048 Public protection 257,888 Public works 2,141,013 Community development 1,226,307 Parks and recreation 2,145,084 Capital outlay 3,511,195 Total expenditures 4,805,132 257,888 1,226,307 5,652,208 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,700,694) 9,911 243,187 (1,197,787) 29,418 29,418 14,573 484,758 2,660,048 257,888 2,625,771 1,226,307 2,145,084 3,540,613 484,758 12,455,711 131 (3,630,679) OTHER FINANCING SOURCES (USES) Transfers in 3,583,243 126,160 591,800 4,301,203 Transfers out (558,500) (31,866) (2,510) (189,000) (781,876) Total other financing sources (uses) 3,024,743 (31,866) 123,650 402,800 3,519,327 CHANGES IN FUND BALANCES 324,049 (21,955) 366,837 (794,987) 14,573 131 (111,352) FUND BALANCES (DEFICIT), beginning of year (94,785) 271,213 1,108,043 3,987,299 108 5,271,878 FUND BALANCES , end of year $ 229,264 249,258 1,474,880 3,192,312 14,573 239 $ 5,160,526 95 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 PARKS, RECREATION AND COMMUNITY SERVICES FINAL BUDGET ACTUAL VARIANCE REVENUES Charges for services $ 1,860,360 1,662,690 $ (197,670) Investment and rental income 430,000 431,250 1,250 Miscellaneous revenue 47,500 10,498 (37,002) Total Revenue 2,337,860 2,104,438 (233,422) EXPENDITURES Current General government Parks and recreation Total Expenditures 3,046,630 2,213,710 5,260,340 2,660,048 386,582 2,145,084 68,626 4,805,132 455,208 DEFICIENCY OF REVENUES UNDER EXPENDITURES (2,922,480) (2,700,694) 221,786 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) 3,583,243 3,583,243 (558,500) (558,500) 3,024,743 3,024,743 CHANGES IN FUND BALANCE 102,263 324,049 221,786 FUND DEFICIT, BEGINNING OF YEAR (94,785) (94,785) FUND BALANCE, END OF YEAR $ 7,478 229,264 $ 221,786 96 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 PUBLIC SAFETY FINAL BUDGET ACTUAL VARIANCE REVENUES Intergovernmental revenues $ 695,966 263,620 $ (432,346) Investment and rental income 770 1,590 820 Miscellaneous revenue 2,589 2,589 Total Revenue 696,736 267,799 (428,937) EXPENDITURES Current Public protection EXCESS OF REVENUES OVER EXPENDITURES OTHER FINANCING USES Transfers out CHANGES IN FUND BALANCE FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR 97 691,434 5,302 257,888 433,546 9,911 4,609 (31,866) (31,866) (26,564) (21,955) 271,213 271,213 $ 244,649 249,258 $ 4,609 4,609 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 COMMUNITY DEVELOPMENT FINAL BUDGET ACTUAL VARIANCE REVENUES Licenses and permits $ 628,040 879,225 $ 251,185 Charges for services 359,000 498,490 139,490 Investment and rental income 3,400 6,825 3,425 Miscellaneous revenue 120,460 84,954 (35,506) Total Revenue 1,110,900 1,469,494 358,594 EXPENDITURES Current Community development EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) CHANGES IN FUND BALANCE FUND BALANCE, BEGINNING OF YEAR 1,262,090 (151,190) 1,226,307 35,783 243,187 394,377 126,160 126,160 (2,510) (2,510) 123,650 123,650 (27,540) 366,837 394,377 1,108, 043 1,108, 043 FUND BALANCE, END OF YEAR $ 1,080,503 1,474,880 $ 394,377 98 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 STREETS FINAL Variance with BUDGET Actual Final Budget REVENUES Intergovernmental revenues $ 4,509,993 4,121,950 $ (388,043) Charges for services 289,490 121,754 (167,736) Investment and rental income 14,140 7,141 (6,999) Miscellaneous revenue 30,000 203,576 173,576 Total Revenue 4,843,623 4,454,421 (389,202) EXPENDITURES Current Public works Capital outlay Total Expenditures DEFICIENCY OF REVENUES UNDER EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) 2,128,207 4,113,825 6,242,032 (1,398,409) 2,141,013 (12,806) 3,511,195 602,630 5,652,208 589,824 (1,197,787) 200,622 591,800 591,800 (189,000) (189,000) 402,800 402,800 CHANGES IN FUND BALANCE (995,609) (794,987) FUND BALANCE, BEGINNING OF YEAR 3,987,299 3,987,299 200,622 FUND BALANCE, END OF YEAR $ 2,991,690 3,192,312 $ 200,622 99 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 TRANSPORTATION FINAL BUDGET ACTUAL VARIANCE REVENUES Intergovernmental revenues $ 43,991 43,991 $ EXPENDITURES Capital outlay 43,991 29,418 14,573 CHANGES IN FUND BALANCE 14,573 14,573 FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR $ 14,573 $ 14,573 100 CITY OF LODI SCHEDULE OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL NONMAJOR GOVERNMENTAL FUNDS - SPECIAL REVENUE FUNDS Year ended June 30, 2015 REVENUES Intergovernmental revenues EXPENDITURES Current Public works CHANGES IN FUND BALANCE HOME PROGRAM and COMMUNITY DEVELOPMENT BLOCK GRANTS FINAL BUDGET ACTUAL VARIANCE $ 916,415 484,889 $ (431,526) 916,415 484,758 431,657 131 131 FUND BALANCE, BEGINNING OF YEAR 108 FUND BALANCE, END OF YEAR $ 239 $ 131 101 NONMAJOR GOVERNMENTAL FUNDS CAPITAL PROJECT FUNDS CAPITAL PROJECT FUNDS Vehicle and Equipment This fund was established to account for the financing and replacement of vehicles and equipment for all funds of the City with the exception of the Enterprise Funds. Financing is primarily provided through 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 which organizes events to raise money for the capital restoration of Hutchins Street Square. Capital Outlay Reserve This fund was established to account for the entire City's construction projects and capital purchases in excess of $10,000 with the exception of those funded through Enterprise Funds. Financing is provided primarily through transfers from other funds and from State and Federal grants. Parks Capital This fund was established to account for the acquisition, construction and installation of capital facilities for the various city parks. 102 CITY OF LODI COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS - CAPITAL PROJECT FUNDS June 30, 2015 Capital Vehicle and Hutchins Outlay Parks Equipment Street Square Reserve Capital Total ASSETS Cash and investments $ 2,033,605 3,276 6,803,352 1,233,158 $ 10,073,391 Receivables: Accounts, net 1,803 52,617 54,420 Interest 4,305 780 5,085 TOTAL ASSETS $ 2,035,408 3,276 6,860,274 1,233,938 $ 10,132,896 LIABILITIES Accounts payable and other liabilities $ 101,918 1,669,842 13,400 $ 1,785,160 Advances from other funds 1,229,025 321,429 1,550,454 TOTAL LIABILITIES 101,918 2,898,867 334,829 3,335,614 FUND BALANCES Restricted for: Capital projects TOTAL LIABILITIES AND FUND BALANCES 1,933,490 3,276 3,961,407 $ 2,035,408 3,276 103 899,109 6,797,282 6,860,274 1,233,938 $ 10,132,896 REVENUES Charges for services Investment and rental income Miscellaneous revenue Total revenues EXPENDITURES Capital outlay CITY OF LODI COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS - CAPITAL PROJECT FUNDS Year ended June 30, 2015 $ Vehicle and Equipment Library Hutchins Capital Street Outlay Parks Square Reserve Capital 58,068 4,000 $ 5 29,936 5,224 30,383 1,090 196,196 30,383 1,095 88,004 205,420 699,410 28,890 5,489,371 83,341 EXCESS (DEFICIENCY) OF REVENUE OVER (UNDER) EXPENDITURES (669,027) (28,890) 1,095 (5,401,367) 122,079 Total 62,068 35,165 227,669 324,902 6,301,012 (5,976,110) OTHER FINANCING SOURCES (USES) Transfers in 913,747 5,425,514 162,100 6,501,361 Transfers out (125,300) (125,300) Total other financing sources (uses) 788,447 5,425,514 162,100 6,376,061 CHANGES IN FUND BALANCES 119,420 (28,890) 1,095 24,147 284,179 399,951 FUND BALANCES , BEGINNING OF YEAR 1,814,070 28,890 2,181 3,937,260 614,930 6,397,331 FUND BALANCES, END OF YEAR $ 1,933,490 3,276 3,961,407 899,109 $ 6,797,282 104 (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 account for the operation, maintenance and timely replacement of the City's fleet of vehicles which serve the transportation needs of all city departments. Benefits This fund is used to account for 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 This fund is used to account for the following insurances: General Liability Workers' Compensation Other Insurance 106 CITY OF LODI COMBINING STATEMENT OF FUND NET POSITION INTERNAL SERVICE FUNDS June 30, 2015 Fleet Services Benefits Insurance Total ASSETS Current assets: Cash and investments $ 76,483 1,681,977 12,382,662 $ 14,141,122 Receivables: Interest 49 1,064 7,809 8,922 Inventory 169,932 169,932 Noncurrent assets: Capital assets (net) 27,498 27,498 Total assets 273,962 1,683,041 12,390,471 14,347,474 DEFERRED OUTFLOWS OF RESOURCES Related to pensions 74,359 74,359 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 54,105 52,253 31,150 137,508 Self-insurance liability 634,932 634,932 Accrued compensated absences 31,195 31,195 Noncurrent liabilities: Net pension liability 926,452 926,452 Self-insurance liability 7,670,955 7,670,955 Accrued compensated absences 48,639 48,639 Net OPEB obligation 5,343,727 5,343,727 Total liabilities 1,060,391 5,395,980 8,337,037 14,793,408 DEFERRED INFLOWS OF RESOURCES Related to pensions NET POSITION Net investment in capital assets Unrestricted (deficit) Total net position 216,550 216,550 27,498 (956,118) (3,712,939) 4,053,434 27,498 (615,623) $ (928,620) (3,712,939) 4,053,434 $ (588,125) 107 CITY OF LODI COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION INTERNAL SERVICE FUNDS Year ended June 30, 2015 Fleet Services Benefits Insurance Total OPERATING REVENUES Charges for services $ 1,636,786 7,763,238 2,610,905 $ 12,010,929 OPERATING EXPENSES Personnel services 672,956 Supplies, materials and services 855,697 Utilities 17,194 Depreciation 1,444 Claims 17,280 TOTAL OPERATING EXPENSES OPERATING INCOME (LOSS) 229,630 6,013,643 1,700,602 1,564,571 7,943,875 72,215 (180,637) NONOPERATING REVENUES Investment income 196 Other revenues 2,294 TOTAL NONOPERATING REVENUES 2,490 137,099 1,039,685 1,036,880 7,906,220 649 17,843 1,444 634,932 2,352,814 1,809,560 11,318,006 801,345 692,923 6,568 51,986 58,750 29,397 50,948 82,639 35,965 102,934 141,389 LOSS (INCOME) BEFORE TRANSFERS 74,705 (144,672) 904,279 834,312 Transfers out (50,000) (50,000) Changes in net position 74,705 (144,672) 854,279 784,312 NET ASSETS - BEGINNING OF YEAR, as previously reported 77,913 (3,568,267) 3,199,155 (291,199) Change in accounting principles (1,081,238) (1,081,238) NET POSITION - BEGINNING OF YEAR, as restated (1,003,325) (3,568,267) 3,199,155 (1,372,437) NET POSITION - END OF YEAR $ (928,620) (3,712,939) 4,053,434 $ (588,125) 108 CITY OF LODI COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS Year ended June 30, 2015 Cash flows from operating activities: Receipts from customers and users Receipts from interfund services provided Cash paid to suppliers for goods and services Payments to employees Net cash provided by operating activities Cash flows from noncapital financing activities: Transfers out Cash flows from investing activities: Interest on investments Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Reconciliation of operating income (loss) to net cash provided by operating activities: Operating Income (loss) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation Other revenues Change in assets and liabilities: Increase in inventory Decrease in other assets Increase (decrease) in accounts payable and accrued liabilities Decrease in compensated absences Decrease in self-insurance liability Increase in net OPEB obligation Decrease in net pension liability and related amounts Net cash provided by operating activities 109 Fleet Services $ 2,394 1,636,786 (934,295) (700,921) $ 3,964 147 4,111 72,372 76,483 72,215 1,444 2,294 (31,146) 100 (12,978) (15,370) (12,595) Benefits 29,397 7,763,238 (7,136,209) (229,630) 426,796 5,828 432,624 1,249,353 1,681,977 (180,637) 29,397 1,583 576,453 Insurance Total 50,948 $ 82,739 2,610,905 12,010,929 (2,392,634) (10,463,138) (137,099) (1,067,650) 132,120 562,880 (50,000) (50,000) 47,344 53,319 129,464 566,199 12,253,198 13,574,923 12,382,662 $ 14,141,122 801,345 $ 692,923 1,444 50,948 82,639 (31,146) 100 (4,301) (15,696) (15, 370) (715, 872) 576,453 (12,595) (715, 872) 3,964 426,796 132,120 $ 562,880 FIDUCIARY FUNDS Private -purpose Trust Funds These funds are used to account for trust agreements under which the principal and income benefit individuals, private organizations or other governments. Agency Fund This fund was established to account for special assessments collected on the property tax roll by the City on behalf of the property owners within the Industrial Way Beckman Districts and the Downtown and Cherokee Lane Districts. ASSETS Cash and Investments CITY OF LODI COMBINING STATEMENT OF FIDUCIARY NET POSITION PRIVATE -PURPOSE TRUST FUNDS June 30, 2015 Library Hutchins Street Square Bequest Total $ 237,383 1,522 $ 238,905 NET POSITION -EXPENDABLE $ 237,383 1,522 $ 238,905 110 CITY OF LODI COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION PRIVATE -PURPOSE TRUST FUNDS Year ended June 30, 2015 Library Hutchins Street Square Bequest Total ADDITIONS Investment income and donations $ 6 $ 6 DEDUCTIONS Current Library 33,812 33,812 CHANGES IN NET POSITION (33,812) NET POSITION, BEGINNING OF YEAR 271,195 NET POSITION, END OF YEAR $ 237,383 111 6 (33,806) 1,516 272,711 1,522 $ 238,905 CITY OF LODI STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND Year ended June 30, 2015 Special Assessments Balance Balance July 1, 2014 Additions Deductions June 30, 2015 ASSETS Cash and investments $ 425,592 Interest receivable 113 TOTAL ASSETS $ 425,705 LIABILITIES Agency obligations $ 425,705 112 35,437 277 35,714 3,545 32,056 $ 113 428,973 277 32,169 $ 429,250 $ 429,250 (This page intentionally left blank.) STATISTICAL SECTION 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 reader with valuable insight regarding the demographics and the overall health of the City. Contents Pages Financial Trends These schedules contain trend information to help the reader understand how the 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. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time 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 report for the current year. 114 115-120 121-126 127-133 134-136 137-141 CITY OF LODI NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Governmental activities: Net investment in capital assets $ 105,944 $ 105,462 $ 106,828 $ 107,587 $ 114,165 $ 113,308 $ 115,036 $ 107,874 $ 110,815 $ 111,572 Restricted 12,001 11,809 12,601 16,176 14,894 13,233 13,492 15,043 15,044 14,526 Unrestricted (74,146) 2,551 1,157 (3,606) (5,148) (6,110) (3,462) (4,162) (3,968) (8,838) Total governmental activities net position $ 43,799 $ 119,822 $ 120,586 $ 120,157 $ 123,911 $ 120,431 $ 125,066 $ 118,755 $ 121,891 $ 117,260 Business -type activities: Net investment in capital assets $ 119,924 $ 116,156 $ 113,008 $ 109,582 $ 104,858 $ 100,233 $ 95,533 $ 98,109 $ 97,961 $ 77,494 Restricted 6,810 6,703 6,600 6,533 5,303 8,657 8,711 10,969 Unrestricted 892 16,535 14,827 (34,563) (34,129) (28,591) (35,448) 26,460 6,417 1,880 Total business -type activities net position $ 127,626 $ 139,394 $ 134,435 $ 81,552 $ 76,032 $ 71,642 $ 60,085 $ 133,226 $ 113,089 $ 90,343 Primary government: Net investment in capital assets $ 225,868 $ 221,618 $ 219,836 $ 217,169 $ 219,023 $ 213,541 $ 210,569 $ 205,983 $ 208,776 $ 189,066 Restricted 18,811 18,512 19,201 22,709 20,197 13,233 13,492 23,700 23,755 25,495 Unrestricted (73,254) 19,086 15,984 (38,169) (39,277) (34,701) (38,910) 22,298 2,449 (6,958) Total primary government net position $ 171,425 $ 259,216 $ 255,021 $ 201,709 $ 199,943 $ 192,073 $ 185,151 $ 251,981 $ 234,980 $ 207,603 Source: City of Lodi Financial Services Division 115 CITY OF LODI CHANGES IN NET POSITION LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Expenses Governmental activities: General government $ 9,109 $ 9,580 $ 8,943 $ 9,381 $ 8,262 $ 8,749 $ 9,451 $ 8,307 $ 7,853 $ 9,746 Public protection 27,426 27,884 25,930 25,432 25,113 27,186 27,110 25,531 23,328 22,105 Public works 10,281 10,644 10,546 10,248 9,305 10,462 10,464 12,224 10,599 13,229 Community development 1,165 1,174 1,050 1,003 973 1,114 1,323 2,027 2,130 2,290 Library 1,324 1,282 1,342 1,381 1,355 1,440 1,495 1,696 1,630 1,485 Parks and recreation 3,116 3,164 2,933 2,913 5,778 5,077 4,609 4,414 4,172 4,114 Interest and fiscal charges 818 825 416 1,033 1,075 1,105 1,134 1,166 1,201 1,234 Total governmental activities expenses 53,239 54,553 51,160 51,391 51,861 55,133 55,586 55,365 50,913 54,203 Business -type activities: Electric 64,367 61,974 61,106 62,599 63,399 64,364 73,358 65,201 67,534 63,780 Wastewater 12,912 12,527 13,423 17,441 11,687 11,289 10,940 12,227 9,271 8,574 Water 9,905 11,014 (34,877) 7,953 8,188 6,148 9,604 9,920 9,875 8,256 Transit 4,134 3,834 4,141 4,256 4,132 4,785 4,832 3,908 3,577 3,643 Total business -type activities expenses 91,318 89,349 43,793 92,249 87,406 86,586 98,734 91,256 90,257 84,253 Total primary government expenses $ 144,557 $ 143,902 $ 94,953 $ 143,640 $ 139,267 $ 141,719 $ 154,320 $ 146,621 $ 141,170 $ 138,456 Program Revenues Governmental activities: Charges for services: General government $ 1,971 $ 1,955 $ 2,337 $ 1,718 $ 1,793 $ 2,184 $ 1,631 $ 1,544 $ 1,280 $ 1,232 Public protection 609 582 538 500 643 714 844 837 582 563 Public works 832 415 224 166 356 326 358 755 295 320 Community development 1,378 1,219 1,458 993 1,601 786 749 1,085 1,174 1,630 Library 43 43 44 43 47 48 44 53 53 54 Parks and recreation 1,360 1,479 1,404 1,241 1,245 1,269 1,158 851 1,007 918 Operating grants and contributions 3,369 2,686 2,341 2,300 2,236 1,927 1,951 2,305 2,589 2,587 Capital grants and contributions 3,131 5,359 4,216 5,025 6,737 5,122 10,822 4,717 6,975 14,631 Total governmental activities program revenues 12,693 13,738 12,562 11,986 14,658 12,376 17,557 12,147 13,955 21,935 Business -type activities: Charges for services: Electric 65,237 64,693 63,230 64,251 62,167 69,664 74,000 69,284 65,809 59,112 Wastewater 14,714 14,305 13,747 13,280 13,090 11,513 9,276 9,091 8,524 8,927 Water 12,723 12,756 12,441 12,083 11,940 11,716 11,787 11,350 10,040 8,343 Transit 230 203 185 186 195 217 251 278 401 386 Operating grants and contributions 5,186 4,431 5,178 4,214 3,983 3,449 3,653 3,381 2,621 3,377 Capital grants and contributions 5,284 2,846 4,715 3,206 5,150 1,408 5,774 8,064 19,984 11,146 Total business -type activities program revenues 103,374 99,234 99,496 97,220 96,525 97,967 104,741 101,448 107,379 91,291 Total primary government program revenues $ 116,067 $ 112,972 $ 112,058 $ 109,206 $ 111,183 $ 110,343 $ 122,298 $ 113,595 $ 121,334 $ 113,226 Net (Expense)/Revenue Governmental activities Business -type activities $ (40,546) $ (40,815) $ (38,598) $ (39,405) $ (37,203) $ (42,757) $ (38,029) $ (43,218) $ (36,958) $ (32,268) 12,056 9,885 55,703 4,971 9,119 11,381 6,007 10,192 17,122 7,038 Total primary government net expense $ (28,490) $ (30,930) $ 17,105 $ (34,434) $ (28,084) $ (31,376) $ (32,022) $ (33,026) $ (19,836) $ (25,230) (Continued) 116 CITY OF LODI CHANGES IN NET POSITION (Continued) LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 General Revenues and Other Changes in Net Position: Governmental activities: Taxes: Property $ 13,502 $ 12,758 $ 12,218 $ 12,103 $ 12,698 $ 12,836 $ 13,564 $ 13,838 $ 9,524 $ 8,031 Franchise taxes 8,976 8,838 8,735 8,712 8,692 8,658 8,357 9,338 9,609 8,721 Business license tax 1,486 1,528 1,524 1,628 1,246 1,242 1,190 1,140 1,082 973 Transient occupancy tax 666 594 546 486 426 382 405 396 380 368 Grants and contributions not restricted to specific programs 10,651 10,138 9,382 9,277 8,954 7,064 8,249 9,593 14,772 14,215 Investment earnings 145 203 44 132 133 155 467 1,008 874 328 Rent 1,942 1,906 1,370 Other 605 528 610 2,052 1,556 1,917 2,382 1,077 621 1,012 Special item -gain on sale of parkland 321 Transfers 7,514 4,792 5,682 1,261 6,657 5,868 5,368 3,693 4,727 4,923 Total governmental activities 45,487 41,285 40,111 35,651 40,683 38,122 39,982 40,083 41,589 38,571 Business -type activities: Investment earnings 632 757 497 566 575 731 1,385 2,028 2,380 2,008 Litigation- environmental lawsuits proceeds 1,107 300 2,010 8,892 6,222 6,700 Rent 4 4 Other 2,745 2,370 1,258 1,244 1,353 923 1,891 2,717 1,749 2,056 Special item -swap termination (8,979) Transfers (7,514) (4,792) (5,682) (1,261) (6,657) (5,868) (5,368) (3,693) (4,727) (4,923) Total business -type activities (4,133) (1,661) (2,820) 549 (4,729) (3,914) (9,061) 9,944 5,624 5,841 Total primary government $ 41,354 $ 39,624 $ 37,291 $ 36,200 $ 35,954 $ 34,208 $ 30,921 $ 50,027 $ 47,213 $ 44,412 Change in Net Position Governmental activities Business -type activities Total primary government Source: City of Lodi Financial Services Division $ 4,941 $ 470 $ 1,513 $ (3,754) $ 3,480 $ (4,635) $ 1,953 $ (3,135) $ 4,631 $ 6,303 7,923 8,224 52,883 5,520 4,390 7,467 (3,054) 20,136 22,746 12,879 $ 12,864 $ 8,694 $ 54,396 $ 1,766 $ 7,870 $ 2,832 $ (1,101) $ 17,001 $ 27,377 $ 19,182 117 CITY OF LODI FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 General Fund Reserved $ $ $ $ $ $ 389 $ 383 $ 1,150 $ 1,144 $ 1,321 Unreserved 3,896 3,383 4,159 5,175 3,048 Nonspendable 10 9 6 357 Committed 345 301 277 Assigned 26 29 65 50 136 Unassigned 12,107 9,134 7,614 6,233 5,654 Total General Fund $ 12,478 $ 9,474 $ 7,965 $ 6,289 $ 6,147 $ 4,285 $ 3,766 $ 5,309 $ 6,319 $ 4,369 All other governmental funds Reserved $ $ $ $ $ $ 7,801 $ 1,487 $ 1,932 $ 1,874 $ 1,138 Unreserved, reported in: Special revenue funds 963 6,540 7,433 6,651 6,271 Capital projects funds 3,649 5,217 5,504 6,200 5,663 Nonspendable 1 4 3 1 Restricted 11,957 11,764 12,556 15,017 13,786 Unassigned (99) (512) (863) (846) Total all other governmental funds $ 11,958 $ 11,669 $ 12,047 $ 14,155 $ 12,940 $ 12,413 $ 13,244 $ 14,869 $ 14,725 $ 13,072 $ 24,436 $ 21,143 $ 20,012 $ 20,444 $ 19,087 $ 16,698 $ 17,010 $ 20,178 $ 21,044 $ 17,441 Implemented GASB 54 during the 2011 fiscal year changing the presentation of fund balance. Source: City of Lodi Financial Services Division 118 CITY OF LODI CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Revenues: Taxes $ 24,631 $ 23,719 $ 23,022 $ 22,928 $ 23,061 $ 23,118 $ 23,516 $ 24,712 $ 20,594 $ 18,094 Licenses and permits 967 852 921 686 954 520 431 683 717 1,020 Intergovernmental revenues 17,557 17,392 14,625 15,289 16,865 12,579 13,229 14,980 19,892 25,491 Charges for services 3,827 3,558 3,880 3,427 3,946 4,116 3,329 4,757 4,696 3,848 Fines and forfeitures 1,573 1,557 1,632 1,357 1,407 1,444 1,416 1,321 1,245 1,173 Investment and rental income 2,029 2,025 1,389 1,264 817 923 922 1,312 998 707 Contributions and donations 282 1,003 689 Miscellaneous revenue 538 1,078 813 799 1,093 1,762 822 304 653 Total revenues 51,404 50,106 46,547 45,764 48,538 43,793 44,605 48,587 48,446 50,986 Expenditures: Current: General government 9,151 9,019 8,522 8,820 7,667 7,666 8,431 9,545 8,893 8,345 Public protection 26,646 27,093 26,282 25,249 24,489 24,466 24,716 23,979 22,211 20,863 Public works 4,508 4,393 4,532 4,174 3,715 4,383 4,657 5,842 5,587 7,827 Community development 1,226 1,192 1,111 1,037 969 1,013 1,341 2,006 2,062 1,847 Library 1,311 1,268 1,411 1,381 1,357 1,322 1,500 1,673 1,588 1,468 Parks and recreation 2,145 2,299 2,370 2,254 4,127 4,180 3,776 3,826 3,598 3,440 Capital outlay 9,842 7,652 6,271 2,961 9,377 5,108 6,791 4,207 3,526 7,232 Debt service: Interest and fiscal charges 845 851 483 1,039 1,081 1,110 1,139 1,170 1,205 1,238 Principal payments 245 630 752 725 789 898 900 892 Advance refunding escrow 1,689 Total expenditures 55,674 53,767 52,916 47,545 53,534 49,973 53,140 53,146 49,570 53,152 Excess (deficiency) of revenues over(under)expenditures (4,270) (3,661) (6,369) (1,781) (4,996) (6,180) (8,535) (4,559) (1,124) (2,166) (Continued) 119 CITY OF LODI CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS (continued) LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Other financing sources (uses): Transfers in 15,599 11,596 12,546 14,486 11,881 11,173 10,609 7,058 8,863 9,142 Transfers out (8,036) (6,804) (6,864) (11,348) (5,224) (5,305) (5,242) (3,365) (4,136) (4,219) Proceeds from sale of land 98 Refunding bonds issued 20,103 Payment to refunded bond escrow agent (19,848) Total other financing sources (uses) 7,563 4,792 5,937 3,138 6,755 5,868 5,367 3,693 4,727 4,923 Special item- sale of parkland 630 Net change in fund balances 3,293 1,131 (432) 1,357 2,389 (312) (3,168) (866) 3,603 2,757 Fund balances, beginning of year 21,143 20,012 20,444 19,087 16,698 17,010 20,178 21,044 17,441 14,684 Fund balances, end of year $ 24,436 $ 21,143 $ 20,012 $ 20,444 $ 19,087 $ 16,698 $ 17,010 $ 20,178 $ 21,044 $ 17,441 Debt service as a percentage of noncapital expenditures Source: City of Lodi Finance Services Division 1.9% 1.9% 5.5% 3.9% 120 4.3% 4.3% 4.3% 4.4% 4.8% 4.9% City of Lodi TAX REVENUES BY SOURCE, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year % Change 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2006 to 2015 Property $ 8,810 $ 8,314 $ 7,955 $ 7,861 $ 8,285 $ 8,342 $ 8,887 $ 9,210 $ 9,289 $ 7,676 15% Sales and Use 10,625 10,111 9,350 9,246 8,663 6,873 8,028 9,296 10,137 9,812 8% Transient Occupancy 666 594 545 486 426 382 405 396 380 368 81% Franchise 1,942 1,862 1,758 1,734 1,715 1,681 1,415 976 929 890 118% Documentary Transfer 159 155 120 91 95 117 114 125 235 355 -55% Motor Vehicle in Lieu 4,533 4,289 4,143 4,151 4,317 4,377 4,784 4,797 4,635 4,402 3% Public Protection 362 341 325 295 250 267 296 338 390 310 17% Business License 1,133 1,220 1,187 1,182 958 962 1,038 1,140 1,082 973 16% In Lieu Franchise 7,033 6,977 6,977 6,977 6,977 6,977 6,942 8,362 8,680 7,831 -10% Totals $ 35,263 $ 33,863 $ 32,360 $ 32,023 $ 31,686 $ 29,978 $ 31,909 $ 34,640 $ 35,757 $ 32,617 8% Note: General governmental tax revenues are included in taxes, licenses and permits, intergovernmental revenues and miscellaneous revenues. Source: City of Lodi Financial Services Division 121 CITY OF LODI ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS (Dollar amounts in thousands) Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Secured roll $ 5,156,704 $ 4,895,091 $ 4,737,807 $ 4,738,823 $ 4,907,588 $ 4,986,693 $ 5,156,706 $ 5,069,788 $ 4,799,141 $ 4,254,184 Utility roll 3,490 3,490 2,382 2,382 2,423 2,423 2,031 2,035 2,773 3,654 Unsecured roll 257,856 230,827 233,398 226,651 270,600 270,315 263,648 258,687 242,082 216,065 Gross assessed value 5,418,050 5,129,408 4,973,587 4,967,856 5,180,611 5,259,431 5,422,385 5,330,510 5,043,996 4,473,903 Less exemptions (1) 326,833 324,439 327,783 314,448 321,138 332,701 265,154 243,259 229,049 220,590 Net assessed value 5,091,217 4,804,969 4,645,804 4,653,408 4,859,473 4,926,730 5,157,231 5,087,251 4,814,947 4,253,313 Land 1,469, 347 1,364,401 1,227, 969 1,264, 884 1,322, 830 1,345,815 1,562,729 1,537,554 1,431,203 1,226,293 Improvements 3,610,391 3,443,266 3,445,328 3,401,792 3,534,778 3,600,824 3,577,741 3,503,186 3,327,453 2,989,575 Personal property 338,312 321,741 300,290 301,180 323,003 312,792 281,915 289,770 285,340 258,035 Gross assessed value 5,418,050 5,129,408 4,973,587 4,967,856 5,180,611 5,259,431 5,422,385 5,330,510 5,043,996 4,473,903 Less exemptions (1) 326,833 324,439 327,783 314,448 321,138 332,701 265,154 243,259 229,049 220,590 Net assessed value $ 5,091,217 $ 4,804,969 $ 4,645,804 $ 4,653,408 $ 4,859,473 $ 4,926,730 $ 5,157,231 $ 5,087,251 $ 4,814,947 $ 4,253,313 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 - $61,499 and other - $265,384 =$326,833 Note: In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum 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 reassessed at 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 -Controller's Office 122 CITY OF LODI DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (Rate per $100 of assessed value) Basic Fiscal Countywide Year Levy School All Other Total 2015 1.0000 0.0658 0.0000 1.0658 2014 1.0000 0.0574 0.0000 1.0574 2013 1.0000 0.0646 0.0000 1.0646 2012 1.0000 0.0658 0.0000 1.0658 2011 1.0000 0.0626 0.0000 1.0626 2010 1.0000 0.0575 0.0000 1.0575 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 Source: San Joaquin County Tax Collector 123 CITY OF LODI PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO (Dollar amounts in thousands) Fiscal Year 2015 2006 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 Hospital Assn $ 149,117 1 3.083 % $ % Pacific Coast Producers 104,939 2 2.170 43,068 2 1.068 General Mills 86,831 3 1.795 152,102 1 3.771 California Physicians Service Corp 57,476 4 1.188 Cottage Bakery Inc 41,022 5 0.848 25,341 4 0.628 Westcore Vine LP 26,417 6 0.546 Costco 19,793 7 0.409 Archer Daniels Midland Co Corp 18,405 8 0.381 Dart Container Corp 16,638 9 0.344 17,625 8 0.437 North American Specialty Products LLC 15,723 10 0.325 Pacific Coast Producers Corp. 34,267 3 0.850 Kristmont West 21,961 5 0.544 Parinehs Exchange 2004 LLC 19,539 6 0.484 Certainteed Corp 18,842 7 0.467 Fountains At Lodi LLC 13,031 9 0.323 Panattoni, Carl D ETAL 12,984 10 0.322 Principal Secured Property Valuation 536,361 11.089 358,760 8.894 Other Secured Taxpayers 4,620,343 95.520 3,895,424 96.575 Exemptions relative to secured tax roll 319,672 6.609 220,590 5.469 Total Secured Property Valuation $ 4,837,032 100.000 % $ 4,033,594 100.000 % Source: San Joaquin County Assessor's Office 124 CITY OF LODI PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (Dollar amounts in thousands) Taxes Collected Within the Total Collections Fiscal Year of the Levy to Date Levied for Percent Percent Fiscal the Fiscal of of Year Year Amount Levy (1) Amount Levy 2015 $ 8,742 $ 8,742 100.0% $ 8,742 100.0% 2014 8,353 8,353 100.0% 8,353 100.0% 2013 7,865 7,865 100.0% 7,865 100.0% 2012 7,754 7,754 100.0% 7,754 100.0% 2011 8,143 8,143 100.0% 8,143 100.0% 2010 8,291 8,291 100.0% 8,291 100.0% 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% 1) Per agreement with San Joaquin County, the County provides the City of Lodi with 100% of the amount owed to the City for secured properties, regardless of collection status. In exchange, the County is entitled to 100% of revenues collected for interest and penalties. This agreement is commonly referred to as the Teeter Plan. Source: San Joaquin County Auditor/Controller's Office CITY OF LODI ELECTRICITY SOLD BY TYPE OF CUSTOMER LAST TEN FISCAL YEARS Type of Customer Billed Accounts 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 City Accounts 212 207 204 195 197 189 189 187 186 184 Contract Large Industrial 5 5 6 Contract Medium Industrial 1 1 2 Contract Small Industrial 1 0 1 Domestic Residential 22,393 22,623 22,541 22,361 22,360 22,525 22,506 22,510 22,938 22,860 Domestic Mobile Home Park 13 13 13 13 13 13 13 13 13 13 Dusk to Dawn 88 89 88 92 89 89 92 92 95 95 Large Commercial 337 339 344 336 350 357 377 380 375 359 Large Industrial 41 39 40 38 40 39 37 32 33 33 Medium Industrial 12 11 11 9 9 9 8 8 10 13 Residental Low Income 2,798 2,788 2,582 2,531 2,258 2,193 1,847 1,943 2,003 1,910 Small Commerical 3,332 3,367 3,358 3,340 3,324 3,280 3,249 3,199 3,241 3,279 Small Industrial 7 8 9 11 11 10 10 9 9 9 Total 29,233 29,484 29,190 28,926 28,651 28,704 28,328 28,380 28,909 28,764 Source: City of Lodi Financial Services Division 126 CITY OF LODI RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS (Dollar amounts in thousands, except per capita) Governmental Activities Business -type Activities Total Certificates of Total Total Fiscal Lease Revenue Loan Notes Governmental Participation and Notes Business -type Primary Percent of Personal Per Year Bonds Payable Payable Activities Revenue Bonds Payable Activities Government Income (1) Capita (1) 2015 $ 19,950 $ 245 $ 20,195 $ 149,767 $ $ 149,767 $ 169,962 7.67 % $ 2,667 2014 20,004 245 20,249 157,297 157,297 177,546 9.10 2,821 2013 20,058 245 20,303 167,743 167,743 188,046 9.74 2,993 2012 21,025 245 21,270 173,241 173,241 194,511 10.34 3,096 2011 21,655 245 21,900 178,827 178,827 200,727 10.67 3,213 2010 22,265 245 22,510 144,165 1,409 145,574 168,084 8.49 2,645 2009 22,855 245 23,100 148,529 1,585 150,114 173,214 8.81 2,736 2008 23,420 94 245 23,759 140,640 1,755 142,395 166,154 8.99 2,622 2007 23,975 187 245 24,407 122,128 1,918 124,046 148,453 8.15 2,342 2006 24,510 279 245 25,034 125,863 2,077 127,940 152,974 8.93 2,435 Details regarding the City's outstanding debt can be found in Note 8 of these financial statements. (1) See uemograpnic ana tconomlc statistics table tor personal income ana population. Source: City of Lodi Financial Services Division 127 CITY OF LODI RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS (Dollar amounts in thousands, except per capita) Percent of Less Amounts Assessed Fiscal Lease Revenue Available for Value (1) of Per Year Bonds Debt Service Net Property Capita 2015 $ 19,950 $ 19,950 0.4 % $ 313.09 2014 20,004 20,004 0.4 314.28 2013 20,058 10 20,048 0.4 318.58 2012 21,025 1,692 19,333 0.4 307.73 2011 21,655 1,692 19,963 0.4 319.55 2010 22,265 1,692 20,573 0.4 323.73 2009 22,855 1,692 21,163 0.4 334.26 2008 23,420 1,692 21,728 0.4 342.92 2007 23,975 1,692 22,283 0.4 351.49 2006 24,510 1,692 22,818 0.5 363.25 General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (of which, the City has none). (1) Assessed value has been used because the actual value of taxable property is not readily available in the State of California. Source: City of Lodi Financial Services Division 128 CITY OF LODI LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (Dollar amounts in thousands) FISCAL YEAR 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Assessed valuation (1) $ 5,152,666 $ 4,867,731 $ 4,709,916 $ 4,718,766 $ 4,926,130 $ 4,995,362 $ 5,227,580 $ 5,159,269 $ 4,887,074 $ 4,325,000 Conversion percentage 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% Adjusted assessed valuation 1,288,167 1,216,933 1,177,479 1,179,692 1,231,533 1,248,841 1,306,895 1,289,817 1,221,769 1,081,250 Debt limit percentage 15% 15% 15% 15% 15% 15% 15% 15% 15% 15% Debt Limit 193,225 182,540 176,622 176,954 184,730 187,326 196,034 193,473 183,265 162,188 Total net debt applicable to limit 19,950 20,004 20,048 19,333 19,963 20,573 21,163 21,728 22,283 22,818 Legal debt margin $ 173,275 $ 162,536 $ 156,574 $ 157,621 $ 164,767 $ 166,753 $ 174,871 $ 171,745 $ 160,982 $ 139.370 Total net debt applicable to the limit as a percent of debt limit 10.3% 11.0% 11.4% 10.9% 10.8% 11.0% 10.8% 11.2% 12.2% 14.1% 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 1982 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computation shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time the legal debt margin was enacted by the State of California for local governments located within the state. (1) Reflects City assessed valuation with other exemptions of $265,384 deducted for 2015. Source: San Joaquin County Auditor -Controller's Office 129 CITY OF LODI DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT June 30, 2015 OVERLAPPING DEBT: San Joaquin Community College District Lodi Unified School District San Joaquin County Certificates of Participation Lodi Unified School District Certificates of Participation SUBTOTAL OVERLAPPING DEBT DIRECT DEBT: City of Lodi Lease Revenue Bonds City of Lodi - Note payable SUBTOTAL DIRECT DEBT TOTAL DIRECT AND OVERLAPPING DEBT(2) Total Debt $ 153,118,000 89,335,000 152,425,000 36,665,000 19,950,250 245,000 2014-15 Gross Assessed Valuation $ 5,418,050,000 2014-15 Population 63,719 DEBT RATIOS Total Gross Debt $ 95,622,160 $ Percentage City's Share Applicable (1) of Debt 8.865 % $ 37.209 9.821 37.209 100.00 100.00 13,573,911 33,240,660 14,969,659 13,642,680 75,426,910 19,950,250 245,000 20,195,250 $ 95,622,160 Per Capita Value 1,501 1.76% (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, Department of Finance, Demographic Research Unit 130 CITY OF LODI PLEDGED -REVENUE COVERAGE LAST TEN FISCAL YEARS (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 2015 $ 67,132 $ 52,116 $ 15,016 $ 4,960 $ 3,358 $ 8,318 1.81 2014 67,144 50,349 16,795 4,750 3,606 8,356 2.01 2013 63,974 51,209 12,765 4,575 3,839 8,414 1.52 2012 65,220 50,164 15,056 3,270 4,021 7,291 2.07 2011 63,307 48,397 14,910 3,080 4,152 7,232 2.06 2010 70,288 49,949 20,339 2,920 4,274 7,194 2.83 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 Source: City of Lodi Financial Services Division 131 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 (1) Expenses (2) Revenue Principal Interest Total Coverage Wastewater Certificates of Participation and Revenue Bonds 2015 $ 15,845 $ 6,335 $ 9,510 $ 1,500 $ 2,172 $ 3,672 2.59 2014 15,186 6,003 9,183 4,610 2,294 6,904 1.33 2013 14,305 5,674 8,631 1,500 2,560 4,060 2.13 2012 13,787 6,659 7,128 1,430 2,688 4,118 1.73 2011 16,508 5,972 10,536 1,370 2,748 4,118 2.56 2010 12,284 6,180 6,104 1,320 2,832 4,152 1.47 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 Source: City of Lodi Financial Services Division 132 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 (1) Expenses (2) Revenue Principal Interest (3) Total Coverage Water Revenue Bonds 2015 $ 13,370 $ 5,815 $ 7,555 $ 850 $ 1,506 $ 2,356 3.21 2014 14,166 6,835 7,331 825 1,530 2,355 3.11 2013 13,367 6,899 6,468 800 1,535 2,335 2.77 2012 13,275 5,392 7,883 775 1,530 2,305 3.42 2011 14,051 5,662 8,389 1,409 874 2,283 3.67 Includes all nongeneral obligation long-term debt backed by pledged revenues. Details regarding the City's outstanding debt can be found in Note 8 of these financial statements. (1) Total operating revenues including investment earnings, operating grants, capital contributions and other revenue. (2) Total operating expenses including cost of services paid to the General Fund and excluding in -lieu fees, depreciation and amortization. (3) Net of Build America Bonds interest subsidy. Source: City of Lodi Financial Services Division 133 CITY OF LODI DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Population Fiscal Square City Percent Year Miles Population Change 2015 13.98 63,719 0.4% 2014 13.98 63,651 0.2% 2013 13.92 62,930 0.2% 2012 13.92 62,825 0.8% 2011 13.92 62,473 0.6% 2010 13.92 63,549 0.6% 2009 13.92 63,313 -0.1% 2008 13.92 63,362 -0.1% 2007 13.17 63,395 0.9% 2006 12.81 62,817 0.6% San Joaquin County Population 719,511 710,731 698,414 695,750 690,899 694,293 689,480 685,600 679,687 668,265 Population Percent of County 8.9% 9.0% 9.0% 9.0% 9.0% 9.2% 9.2% 9.2% 9.3% 9.4% Rank in Size of California Cities 138 135 137 136 135 136 135 133 129 131 Personal Per Income Capita (millions of Personal dollars) Income $ 2,215 34,755 2,102 33,024 1,952 31,013 1,931 30,732 1,882 30,132 1,980 31,166 1,967 31,071 1,849 29,178 1,822 28,743 1,713 27,272 Personal income is the income received by all persons from all sources. Personal income is the sum of net earnings by place of residence, rental income of persons, personal dividend income, personal interest income, and personal current transfer receipts. Unemployment Rate 7.8% 8.8% 9.0% 11.3% 13.4% 13.3% 12.2% 7.1% 6.1% 5.5% 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, Department of Finance, Demographic Reseach Unit and Department of Labor. 134 CITY OF LODI PRINCIPAL 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 3,090 1 11.83 % 2,400 1 9.19 Lodi Memorial Hospital 1,386 2 5.31 900 2 3.44 Pacific Coast Producers 2,800 3 10.72 500 4 1.91 Blue Shield 780 4 2.99 550 3 2.11 ConAgra 485 5 1.86 General Mills 280 6 1.07 425 6 1.63 City of Lodi 391 7 1.50 429 5 1.64 Walmart 190 8 0.73 317 7 1.21 Farmers & Merchants Bank 192 9 0.73 314 8 1.20 Target 177 10 0.68 186 10 0.71 Valley Industries 295 9 1.13 Total 9,771 37.41 6,316 24.18 135 CITY OF LODI FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY DEPARTMENT LAST TEN FISCAL YEARS Fiscal Year 2015 2014 2013 2012 2011* 2010 2009 2008 2007 2006 Department: Administration 10 10 10 12 13 31 32 19 35 33 Community Development 11 9 9 9 13 13 13 14 18 17 Electric 48 43 40 40 41 51 50 48 64 65 Financial Services 24 26 39 30 28 Fire 53 53 53 54 64 64 64 64 64 61 Internal Services 31 31 31 29 35 Library 10 10 11 12 14 14 14 14 16 14 Parks and Recreation 31 31 30 34 31 Parks, Recreation and Cultural Services 26 27 27 29 37 Police 102 104 104 103 125 125 125 125 116 117 Public Works 100 95 92 93 98 102 102 107 114 99 Total 391 382 377 381 440 455 457 460 491 465 Community Center, Human Resources and Information Systems were previously included in Administration. Budget, Financial Services, Human Resources and Information Services are now Internal Services. Community Center, Parks & Recreation are now Parks, Recreation and Cultural Services. Source: City of Lodi Budget Document 136 CITY OF LODI OPERATING INDICATORS BY FUNCTION/PROGRAM/DEPARTMENT LAST TEN FISCAL YEARS Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 General government: Building permits issued 2,404 1,791 1,578 1,461 2,022 1,709 1,754 1,851 2,317 2,699 Business tax certificates: Retail sales and service 2,281 2,633 2,526 2,485 2,530 2,406 2,496 2,442 2,632 2,565 Manufacturers and processors 23 80 78 77 76 80 82 78 78 125 Professions 323 362 362 364 371 373 380 398 404 322 Miscellaneous contractors, peddlers, delivery vehicles, etc. 1,256 1,595 1,456 1,362 1,357 1,312 1,411 1,063 1,127 533 Utility billing/customer service: Number of customers 25,912 25,733 23,927 23,761 23,575 25,573 25,555 25,555 25,712 25,655 Energy sales (KWH) 438,780,911 437,294,133 435,822,465 435,655,731 421,130,329 434,200,987 452,075,554 450,407,709 458,740,745 459,637,092 Peak demand (MW) 134 126 122 116 116 120 134 134 144 127 Public safety: Police: Major reported crimes 2,268 2,519 2,643 3,573 2,885 2,377 2,454 2,993 3,096 3,234 Total arrests 3,690 3,656 3,825 4,350 4,410 4,238 4,646 5,590 5,463 5,162 Dispatched calls for service 35,992 35,281 50,124 46,756 52,061 51,870 56,391 55,911 53,686 55,937 Fire: Interior structure fire calls 32 33 67 57 56 47 69 88 79 66 Non-structural fire calls 143 1,923 209 163 121 123 123 160 163 158 Hazardous materials calls 65 53 58 41 69 70 70 35 27 26 Emergency medical calls 3,418 3,848 3,882 3,820 3,752 3,494 3,364 3,420 3,213 2,912 Total emergency calls 3,666 4,144 5,823 5,620 5,753 5,385 5,392 5,346 5,000 4,447 Total number of units dispatched 5,727 7,845 7,954 7,855 7,835 7,390 7,038 7,841 7,005 6,055 Public works: Miles of streets resurfaced 6 6 6 6 6 3 6 5 4 33 Fleet job orders completed 2,500 2,004 1,803 1,953 2,810 3,303 3,921 3,520 6,938 5,608 Trees planted 135 131 131 96 130 95 - Water utility: New connections 8 8 8 7 8 17 17 35 110 266 Water main breaks 16 14 14 10 8 6 4 4 10 8 Wastewater utility: Average daily treatment (million gal/day) 4.6MG 5.0MG 5.10MG 6.5MG 6.5MG 6.5MG 6.5MG 6.5MG 6.9MG 6.7MG Library: Registered borrowers 58,824 55,835 51,594 47,147 43,927 39,199 53,530 48,969 44,558 52,779 Circulation of library materials 197,673 225,476 215,293 217,742 248,250 251,967 219,711 280,466 273,270 281,216 Reference, research and informational questions answered 13,189 16,750 16,270 14,463 16,234 16,501 15,379 19,257 18,854 17,342 Annual attendance at libraries 209,929 224,762 222,148 210,279 207,123 n/a 296,793 288,070 287,986 Number of programs offered 432 284 407 432 388 344 316 348 339 320 Annual attendance at programs 12,888 10,824 14,443 12,993 13,133 10,676 8,765 11,242 10,700 10,872 Public access computer usage 41,180 47,126 45,871 47,428 58,990 52,124 38,388 38,999 35,260 29,896 (Continued) 137 CITY OF LODI OPERATING INDICATORS BY FUNCTION/PROGRAM/DEPARTMENT - (continued) LAST TEN FISCAL YEARS Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Community center: Community center bookings 794 769 718 698 926 789 475 494 302 220 Instructional classes 500 553 580 307 536 583 507 530 478 509 Registered students 2,586 3,269 2,819 3,713 3,438 3,525 3,316 5,550 3,548 4,369 Yearly attendance 13,925 13,925 13,925 13,925 14,217 13,355 14,050 14,410 14,429 15,369 Parks and recreation: After school program registration (number of participants/sites) 315140/19 254,096/20 1,715/20 3,232120 1,920/4 1,920/4 1,920/4 3,014/4 145,000/12 135,000/12 Adult sports Program/Participation 15,285 2,082 2,246 2,420 2,528 2,528 2,284 28,000 36,000 36,000 Programs offered 18 17 16 15 16 16 13 11 11 11 Partnerships 2 2 2 3 5 51 3 3 5 Tournaments 10 5 6 12 7 7 10 10 20 20 Youth/Teen sports Program attendance 3,621 3,672 3,643 3,889 4,251 4,251 215,000 195,000 200,000 200,000 Programs offered 18 18 19 24 16 16 24 14 14 20 Aquatics Program attendance 28,009 27,731 23,414 34,366 32,566 32,566 2,433 50,000 59,000 59,000 Number of programs 15 13 13 25 13 13 6 3 8 6 Source: City of Lodi 138 CITY OF LODI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM/DEPARTMENT LAST TEN FISCAL YEARS General government: Total square miles Public safety: Police: Fire: Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 13.92 13.92 13.92 13.92 13.92 13.92 13.92 13.92 13.17 12.81 Facilities: Stations 1 1 1 1 1 1 1 1 1 1 Animal control facility 1 1 1 1 1 1 1 1 1 1 Police training facility (pistol range) 1 1 1 1 1 1 1 1 1 1 Vehicles: Marked patrol cars 23 23 23 23 23 23 25 25 25 28 Motorcycles and scooters 7 5 5 5 5 5 5 5 5 4 Animal control vehicles 2 2 2 2 2 2 2 2 2 3 Other automobiles 37 37 37 37 37 37 38 40 41 41 Facilities: Fire stations 4 4 4 4 4 4 4 4 4 4 Vehicles: Fire engines 6 6 6 6 7 7 7 6 6 5 Trucks/Trailers 6 6 6 5 5 6 6 9 8 7 Other automobiles 11 11 11 9 8 10 12 7 10 11 Public works: Miles of streets 202 202 202 202 202 202 202 200 184 198 Miles of alley ways 16 16 16 16 16 16 16 16 16 16 Traffic signals 67 67 67 67 67 62 62 64 66 64 Street lights 7,270 7,270 7,270 7,270 7,270 7,270 7,270 7,270 7,270 7,203 (Continued) 139 CITY OF LODI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM/DEPARTMENT - (continued) LAST TEN FISCAL YEARS Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Parks and recreation: Parks and squares 26 26 26 26 26 26 26 23 23 23 Park acreage 361 361 361 373 373 373 371 275 275 275 Boating facilities - launch lanes 1 1 1 1 1 1 1 1 1 1 Senior center 1 1 1 1 1 1 1 1 1 1 Community Centers 1 1 1 1 1 1 1 1 1 1 Swimming pools 4 4 4 4 4 4 4 3 3 3 Baseball/softball diamonds 20 20 20 24 24 24 24 26 26 26 Tennis courts 11 11 11 11 11 11 11 11 11 11 Skateboard park 1 1 1 1 1 1 1 1 1 1 Playgrounds 20 20 20 22 25 25 25 22 22 22 Ballpark 24 24 24 24 24 24 24 26 26 26 Soccer Field 22 22 22 22 22 22 22 22 22 22 Football Field 1 1 1 1 1 1 1 3 3 3 Handball/Basketball/Volleyball Courts/Bocce Courts 12 12 12 10 10 10 10 8 8 8 Horseshoe Pits 8 8 8 8 6 6 6 7 10 10 Library: Central library 1 1 1 1 1 1 1 1 1 1 Total items in collection 119,554 148,287 149,243 135,113 134,804 130,530 135,197 142,885 142,098 134,129 Integrated library system 1 1 1 1 1 1 1 1 1 1 Microfilm readers 1 1 1 1 1 1 1 1 1 1 Microfilm readers/printers 1 1 1 1 1 1 1 1 1 1 Self check out machines 2 2 2 2 2 2 2 0 1 1 Electric utility: Overhead lines 12kv (miles) 117 117 133 133 133 130 130 130 129 129 Overhead lines 60kv (miles) 14 14 14 14 13 13 13 13 13 13 Underground lines (miles) 118 115 159 159 157 155 154 153 151 151 (Continued) 140 CITY OF LODI CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM/DEPARTMENT - (continued) LAST TEN FISCAL YEARS Fiscal Year 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Water utility: Water main lines 236 236 236 236 236 237 233 233 238 235 Water storage capacity (gallons) 4,100,000 4,100,000 4,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 1,100,000 Water wells 28 28 28 27 27 26 26 26 26 26 Water reservoirs 3 3 3 2 2 2 2 2 2 2 Wastewater utility: Wastewater main lines (miles) 196 196 196 196 196 191 194 194 189 182 Treatment capacity 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG 8.5 MG Wastewater treatment plant 1 1 1 1 1 1 1 1 1 1 Stormwater utility: Stormwater main drain lines (miles) 124 124 124 124 124 124 161 119 161 115 Stormwater pump stations 14 14 14 14 14 14 14 14 14 13 Central parking district: Parking structure 1 1 1 1 1 1 1 1 1 1 Parking spaces 2,450 2,450 2,453 2,453 2,453 2,453 2,453 2,453 2,453 2,453 Parking lots 25 25 25 25 25 25 25 25 25 25 Source: City of Lodi Departments 141 SINGLE AUDIT REPORTS CITY OF LODI SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015 Federal Grantor Pass-through Grantor or Direct CFDA Grant/Project Federal Federal Program Title Number Number Expenditures U.S. Department of Housing and Urban Development Direct: Community Development Block Grants/Entitlement Grants 14.218 B -13 -MC -06-0038 $ 263,095 Community Development Block Grants/Entitlement Grants 14.218 B -14 -MC -06-0038 221,663 Total Community Development Block Grants/Entitlement Grants 484,758 U.S. Department of Justice Direct: Edward Byrne Memorial Justice Assistance Grant Program 16.738 2013 -DJ -BX -0877 9,846 U.S. Department of Transportation Direct: Federal Transit - Formula Grants 20.507 CA -95-X169 130,542 Federal Transit - Formula Grants 20.507 CA -95-X207 1,442,302 Federal Transit - Formula Grants 20.507 CA -90-Z171 332,800 Federal Transit - Formula Grants 20.507 CA -90-Z281 678,769 Federal Transit - Formula Grants 20.507 CA -90-Z293 913,769 Total Federal Transit - Formula Grants 3,498,182 See accompanying notes to the schedule of expenditures of federal awards. 142 CITY OF LODI SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED JUNE 30, 2015 Federal Grantor Pass-through Grantor or Direct CFDA Grant/Project Federal Federal Program Title Number Number Expenditures U.S. Department of Transportation (Continued) Passed through California Department of Transportation: Highway Planning and Construction 20.205 STPL-5154(040) $ 230,890 Highway Planning and Construction 20.205 RPSTPLE-5154(044) 43,358 Total Highway Planning and Construction 274,248 Passed through California Office of Traffic Safety State and Community Highway Safety Passed through University of California, Berkeley: State and Community Highway Safety Total State and Community Highway Safety Passed through California Office of Traffic Safety Minimum Penalties for Repeat Offenders for Driving While Intoxicated Passed through City of Stockton: Minimum Penalties for Repeat Offenders for Driving While Intoxicated 20.600 PT 1462 20.600 SC14230 20.608 PT1557 20.608 AL 1160 26,531 14,602 41,133 112,533 16,473 Total Minimum Penalties for Repeat Offenders for Driving While Intoxicated 129,006 Total U.S. Department of Transportation 3,942,569 Total Expenditures of Federal Awards $ 4,437,173 See accompanying notes to the schedule of expenditures of federal awards. 143 CITY OF LODI NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2015 NOTE 1— GENERAL The accompanying Schedule of Expenditures of Federal Awards (SEFA) for the year ended June 30, 2015, 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 (CFDA) 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 SEFA, the City provided federal awards to subrecipients as follows: Federal Program Title Community Development Block Grants/ Entitlement Grants Federal CFDA Number 144 Amount Provided to Subrecipients 14.218 $192,737 Certified Public Accountants Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards The Honorable Members of City Council City of Lodi, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Lodi, California (City), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the City's basic financial statements, and have issued our report thereon dated February 3, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. We did identify a certain deficiency in internal control, described in the accompanying Schedule of Findings and Questioned Costs as item 2015-001 that we consider to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Macias Gini & O'Connell LLP 3000 5 Street, Suite 300 Sacramento, CA 95816 145 Sacramento Walnut Creek Oakland San Francisco Los Angeles Century City Newport Beach San Diego www.mgocpa.com City's Response to Finding The City's response to the finding identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The City's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of the Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Oconiteii Sacramento, California February 3, 2016 146 Certified Public Accountants Independent Auditor's Report on Compliance for the Major Federal Program and on Internal Control Over Compliance Required by OMB Circular A-133 The Honorable Members of City Council City of Lodi, California Report on Compliance for the Major Federal Program We have audited the City of Lodi's (City) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on the City's major federal program for the year ended June 30, 2015. 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. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for the City's major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 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 on compliance for the major federal program. However, our audit does not provide a legal determination of the City's compliance. Opinion on Major Federal Program In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2015. Macias Gini & O'Connell LLP 3000 5 Street, Suite 300 Sacramento, CA 95816 147 Sacramento Walnut Creek Oakland San Francisco Los Angeles Century City Newport Beach San Diego www.mgocpa.com Report on Internal Control over Compliance Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City's internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Sacramento, California February 3, 2016 Oconket 148 CITY OF LODI SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2015 Section 1— Summary of Auditor's Results Financial Statements: Type of auditor's report issued: Internal control over financial reporting: Unmodified • Material weaknesses identified? No • Significant deficiencies identified that are not considered to be material weaknesses? Yes Noncompliance material to financial statements noted? No Federal Awards: Internal control over major federal 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 federal programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133? Identification of major federal programs: Federal Program Title Federal Transit — Formula Grants No CFDA No. 20.507 Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? Yes 149 CITY OF LODI SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) FOR THE YEAR ENDED JUNE 30, 2015 Section II — Financial Statement Findings Reference Number: 2015-001 Criteria: Under generally accepted accounting principles, 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 benefitting funds in the form of fees and charges. Condition: The City is not charging City funds their share of the City's Other Postemployment Benefits (OPEB) costs accumulating in its Benefits Internal Service Fund. Context: The Benefits Internal Service Fund's deficit net position balances were $1,078,724, $1,930,874, $2,934,664, $3,621,665, $3,203,516, $3,568,267, and $3,712,939 as of June 30, 2009, 2010, 2011, 2012, 2013, 2014, and 2015, respectively. Effect: This condition resulted in an increase of $144,672 in the deficit net position of the Benefits Internal Service Fund during the year ended June 30, 2015. Cause: The City is only charging City funds their share of the City's OPEB costs that it has chosen to pay under a pay-as-you-go basis. Recommendation: Under generally accepted accounting principles, the City should either charge City funds their share of the OPEB costs incurred in its Benefits Internal Service Fund as opposed to limiting the charges to those costs actually paid, or report the OPEB liability in other City funds like is done for the net pension liability. Management Response and Corrective Action: The City's practice of reflecting the total liability and expense of the OPEB program in the Benefits Internal Service Fund enhances transparency in reporting by showing the impact of this reporting requirement in one location. The deficit net position will continue until the City fully funds the actuarially calculated liability and expense that it is required to record. Staff will bring forward the deficit amount each budget cycle for City Council consideration. Section III — Federal Award Findings and Questioned Costs None 150 Financial Statement Findings Reference Number: CITY OF LODI SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTONED COSTS FOR THE YEAR ENDED JUNE 30, 2015 2014-001 Criteria: Under generally accepted accounting principles, 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 benefitting funds in the form of fees and charges. Condition: The City is not charging City funds their share of the City's Other Postemployment Benefits (OPEB) costs accumulating in its Benefits Internal Service Fund. Context: The Benefits Internal Service Fund's deficit net position balances were $1,078,724, $1,930,874, $2,934,664, $3,621,665, $3,203,516, and $3,568,267 as of June 30, 2009, 2010, 2011, 2012, 2013, and 2014, respectively. Effect: This condition resulted in an increase of $364,751 in the deficit net position of the Benefits Internal Service Fund during the year ended June 30, 2014. Cause: The City is only charging City funds their share of the City's OPEB costs that it has chosen to pay under a pay-as-you-go basis. Recommendation: Under generally accepted accounting principles, the City needs to charge City funds their share of the OPEB costs incurred in its Benefits Internal Service Fund as opposed to limiting the charges to those costs actually paid. Management Response and Corrective Action: The City's practice of reflecting the total liability and expense of the OPEB program in the Benefits Internal Service Fund enhances transparency in reporting by showing the impact of this reporting requirement in one location. The deficit net position will continue until the City fully funds the actuarially calculated liability and expense that it is required to record. Staff will bring forward the deficit amount each budget cycle for City Council consideration. Status: During the year ended June 30, 2015, the Benefits Internal Service Fund's deficit net position increased by $144,672, therefore this recommendation continues as finding 2015-001. 151 CITY OF LODI SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTONED COSTS (Continued) FOR THE YEAR ENDED JUNE 30, 2015 Reference Number: 2014-002 Criteria: Under generally accepted accounting principles, costs directly related to the acquisition or construction of capital assets, should be capitalized and not expensed. The City defines capital assets as assets with an initial individual cost of more than $3,000 and an estimated useful life in excess of two years. Condition: Transactions relating to the City's water meter capital asset project were expensed. Cause: The condition is a result of the timing of the City's year-end close process. The City runs a capital report identifying the City's capital asset activity and reconciles the activity to general ledger activity to ensure all costs were captured. However, costs relating to a capital project were accrued and reported in the general ledger subsequent to the previously mentioned reconciliation, thus project costs were improperly reported as an expense and not capitalized. Effect: As a result of this condition, a significant audit adjustment for the Water Fund debiting "capital assets" on the Statement of Net Position and crediting "services and supplies" expense on the Statement of Revenues, Expenses and Changes in Net Position for $1,499,302 was recorded. Recommendation: The City should improve its year-end procedures for identifying capital projects to ensure proper financial reporting. Management Response and Corrective Action: The City is currently transitioning to a new financial system which includes capital assets and project management modules. These two modules will not only streamline the year-end capitalization process, it will also ensure proper financial reporting of the City's capital assets. Status: No transactions that should have been capitalized were determined to have been expensed during the year, therefore we consider this recommendation implemented. 152 CONTINUING DISCLOSURES UNAUDITED CONTINUING DISCLOSURE REQUIREMENTS FOR THE CITY OF LODI, THE LODI PUBLIC IMPROVEMENT CORPORATION AND THE LODI PUBLIC FINANCING AUTHORITY Fiscal Year 2012-13 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 2008 Series A 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 resources for 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 recent fiscal 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, 2015, 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. 154 Table 1 A table setting forth the City's power supply resources. CITY OF LODI ELECTRIC UTILITY DEPARTMENT POWER SUPPLY RESOURCES Source Capacity Available (MW)(1)(4) Actual Energy % of Total (MWh) Energy Purchased Power(2): Western 8.00 9,824 2.15% NCPA Geothermal Project 12.91 87,319 19.09 Hydroelectric Project 26.20 17,217 3.76 Combustion Turbine Project No. 1 9.98 439 0.10 Capital Facilities, Unit One 19.71 1,442 0.32 Lodi Energy Center 28.75 158,527 34.65 Contracts and Exchanges(3) 45.00 182,686 39.93 Total 150.55 457,454(4) 100.00% Total Capacity and Energy Sold at Wholesale N/A 3,326 City System Requirement for Retail Load 134.01 454,128 (1) Source: NCPA. Non -coincident capacity. (2) Entitlements, firm allocations and contract amounts. (3) Includes participation in NCPA/Seattle City Light exchange. (4) Includes supply from exchanges and line losses. Table 2 A table showing the average number of customers, sales, revenues and demand for the past five fiscal years. Number of Customers: Residential Commercial Industrial Other Total Customers Kilowatt -Hour (kWh) Sales: Residential Commercial Industrial Other Total kWh sales Revenues from Sale of Energy: Residential Commercial Industrial Other Total Revenues from Sale of Energy: Peak Demand (MW) Excludes revenues from California Energy Commission Tax. Sources: City of Lodi, audited annual financial statements and Customer Information System reports. CITY OF LODI ELECTRIC UTILITY DEPARTMENT CUSTOMER SALES, REVENUE AND DEMAND Fiscal Years Ended June 30, 2011 22,251 2,865 39 229 25,384 144,256,683 137,584,723 128,072,575 11,216,348 421,130,329 $ 24,513,202 $ 21,870,624 13,914,539 1,868,985 $ 62,167,350 $ 123.9 2012 22,244 2,834 37 235 25,350 149,814,375 138,735,487 135,620,441 11,485,428 435,655,731 25,606,368 $ 21,814,073 14,876,828 1,954,099 64,251,368 $ 116.0 156 2013 22,369 2,902 39 246 25,556 151,814,834 140,733,500 131,473,405 11,800,726 435,822,465 25,377,978 $ 21,816,149 14,173,951 1,861,567 63,229,645 $ 123.3 2014 22,547 2,898 38 250 25,733 148,762,783 146,176,148 130,333,102 12,022,160 437,294,193 25,270,075 $ 23,127,603 14,381,296 1,913,833 64,692,808 $ 128.7 2015 22,355 3,264 40 253 25,912 148,950,428 149,380,413 128,814,673 11,635,397 438,780,911 25,165,194 23,780,354 14,418,921 1,871,470 65,235,939 134.0 Table 3 A table showing the outstanding debt of joint powers agencies in which Lodi participates. CITY OF LODI ELECTRIC UTILITY DEPARTMENT OUTSTANDING DEBT OF JOINT POWERS AGENCIES (Dollar Amounts in Millions) Lodi's Share of Outstanding Lodi's Outstanding Debt(') Participation(2) Debt NCPA Geothermal Project Three $ 38.0 10.28% $ 3.9 Hydroelectric Project 383.0 10.37 39.7 Capital Facilities Project Unit One 44.6 39.50 17.6 Lodi Energy Center Project 241.0 17.03 41.0 TANC COTP 284.0 1.92(3) 5.5 TOTAL* $ 990.6 10.87% $ 107.7 " Columns may not add to totals due to independent rounding. (1) Source: NCPA Financial Statements. (2) Participation obligation is subject to increase upon default of another project participant. Such increase shall not exceed, without the written Consent of a non -defaulting participant, an accumulated maximum of 25% of such non -defaulting participant's original participation. (3) Lodi's actual payment obligation differs slightly from this percentage due to varying shares of certain series of TANC bonds relating to each TANC member -participant's taxable portion and each TANG member -participant's participation or non -participation in acquisition of assets from Vernon. Effective July 1, 2014, Lodi has entered into a layoff of its COTP interest which will effectively reduce Lodi's share of outstanding debt to $0. Lodi remains contractually obligated for its share. Source: Northern California Power Agency. 157 Table 4 A table showing a summary of operating results for the past five fiscal years. CITY OF LODI ELECTRIC SYSTEM SUMMARY OF OPERATING RESULTS (1) Ending Fiscal Year June 30 (Dollars in 000s) Actual 2011 Actual 2012 Actual 2013 Actual 2014 Actual 2015 Operating Revenues Rate Revenue $ 59,676 $ 61,658 $ 61,888 $ 61,837 $ 63,370 ECA Revenue 2,491 2,593 1,341 2,856 1,867 Other Revenue 1,140 969 745 2,451 1,895 Total Operating Revenue 63,307 65,220 63,974 67,144 67,132 Operating Expenses Purchased Power 35,282 39,416 39,191 37,303 38,512 Non -Power Costs (2) 13,115 10,748 12,018 13,046 13,604 Total Operating Expenses 48,397 50,164 51,209 50,349 52,116 Net Revenue Available for Debt Service 14,910 15,056 12,765 16,795 15,016 Parity Debt Service 2002 C & D, 2008 A Bonds 7,232 7,291 8,414 8,356 8,318 Total Net Debt Service 7,232 7,291 8,414 8,356 8,318 Debt Service Coverage 2.06 2.07 1.52 2.01 1.81 Remaining Revenue Available for Other Purposes 7,678 7,765 4,351 8,439 6,698 Non -Operating Revenue/Expenses Greenhouse gas allowance 2,018 453 2,323 In -Lieu Transfer to General Fund (6,977) (6,977) (6,977) (6,977) (7,033) Net Cash Flow Before Capital Expenditures 701 788 (608) 1,915 1,988 Beginning Operating Reserve 25,899 28,455 30,384 31,082 33,850 Changes in GOR 1,854 1,141 1,306 942 745 Net Deposit/Withdrawal from Reserves 701 788 (608) 1,915 1,988 Ending Operating Reserve $ 28,454 $ 30,384 $ 31,082 $ 33,939 $ 36,583 Source: City of Lodi (1) As defined in the Installment Purchase Contract, this may or may not be on the same basis as Generally Accepted Accounting Principles. (2) Non -power costs include cost of services provided by other departments and does not include depreciation and amortization expense. 158 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 September 2015 Extended Economic Development Rates January 2015 Average 5% increase across all rate classes July 2013 Established Electric Vehicle and Industrial Equipment Charging Rates April 2009 Established Economic Development Rates updated July 2013 December 2007 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 December 2002 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 159 November 1996 Economic Stimulus Rate Credit increased to 1.262 cents per kilowatt-hour from 0.4 cents per kilowatt-hour for largest primary service customers (estimated 19% reduction) Source: City of Lodi. ANNUAL REPORT FOR WASTEWATER UTILITY The Lodi Wastewater Utility has Continuing Disclosure requirements associated with its 2004 Series A Certificates of Participation, 2007 Series A Certificates of Participation and the 2012 Refunding Wastewater Revenue Bonds. 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 recent fiscal year (applicable only to the 2004 Series A 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 past five fiscal years. Additionally, the Certificate for the 2007 Series A issue requires a description of any additional indebtedness incurred during the prior fiscal year which is payable from 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, 2015, 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. 161 Table 1 A table setting forth the City's number of connections by user type for the past five fiscal years. User Type Residential Commercial/Industrial Total All Users Source: City of Lodi City of Lodi Wastewater System Number of Connections by User Type as of June 30 and Percentage of Fiscal Year 2014-15 Service Charge Revenue by User Type % of FY 14/15 Service Charge 2011 2012 2013 2014 2015 Revenue 21,956 21,864 21,959 22,076 21,920 77% 1,785 1,819 1,851 1,851 1,876 23% 23,741 23,683 23,810 23,927 23,796 100% 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 2014-15 Percentage of Total Annual Service User Type Charge Revenue Single Family Residential 60% Multiple Family Residential 17% Commercial/Industrial 23% Total 100% Source: City of Lodi Table 3 A table showing the largest users by service charge revenue for the most recent fiscal year. User ConAgra Foods General Mills Lodi Unified School District Miller Packing Company Blue shield of California Archer Daniels Midland Pacific Coast Producers Covenant Care Vienna Convalescent Hospital Del Castillo Foods Total top ten users Total System City of Lodi Wastewater System Largest Users by Service Charge Revenues Fiscal Year 2014-15 Type of Business Specialty bakery, frozen dough $ Cereals, bread mixes, snack foods K-12, adult education Hot dog producer Health Insurance Agricultural processor Private label fruit canning Rehabilitation/Nursing Center Rehabilitation/Nursing Center Tortilla producer 164 Service Charge Revenue 474,855 332,022 95,931 39,311 39,119 35,804 32,856 21,397 21,140 20,580 1,113,015 Percentage of Total Annual Service Charge Revenue 3.23% 2.26 .65 .27 .27 .24 .22 .14 .14 .14 7.56% 14,714,123 100.00% Table 4 A table showing the schedule of service charges. City of Lodi Wastewater System Schedule of Wastewater Service Charges Service Service Service Charge Service Charge Charge Charge (effective July (effective July (effective July (effective July 1, 2011) 1, 2012 1, 2013) 1, 2014) For Residential Users (per month): 1 Bedroom $24.47 $25.20 $25.83 $26.48 2 Bedrooms 32.62 33.60 34.44 35.30 3 Bedrooms 40.78 42.00 43.05 44.13 4 Bedrooms 48.93 50.40 51.66 52.95 5 Bedrooms 57.09 58.80 60.27 61.78 6 Bedrooms 65.24 67.20 68.88 70.60 7 Bedrooms 73.40 75.60 77.49 79.43 For Commercial/Industrial Users: Moderate Strength (annual per Sewage Service Unit (SSU) $391.44 $403.20 $413.28 $423.61 High Strength: Flow (annual per MG) 3,303.25 3,402.35 3,487.41 3,574.60 BOD (annual per 1,000 lbs.) 545.12 561.47 575.51 589.90 SS (annual per 1,000 lbs.) 340.84 351.07 359.85 368.85 Grease Interceptor/Septic Holding Tank Waste within City Limits (per 1,000 gal.) 288.63 297.29 304.72 312.34 Septic Holding Tank Waste Outside City Limits (per 1,000 gal.) 612.73 631.11 646.89 663.06 Disposal to Storm Drain System (per MG) 303.18 312.28 320.09 328.09 Disposal to Industrial System: Flow (per MG, annual basis) 2,609.28 2,687.56 BOD (per 1,000 lbs., annual basis) 23.92 24.64 Winery Waste (per 1,000 gallons) 292.27 301.01 301.04 165 Table 5 A table showing historic operating results and debt service coverage for the past five fiscal years. City of Lodi Wastewater System Historical Operating Results and Debt Service Coverage Fiscal Years 2010-11 through 2014-15 2010-11 2011-12 2012-13 2013-14 2014-15 Operating Revenues Charges for Services $13,089,679 $13,280,216 $13,747,216 $14,305,093 $14,714,123 Non -Operating Revenues Interest Income 220,600 216,108 301,347 427,308 356,590 Rent Other 3,198,194 290,819 256,868 453,798 774,007 Total System Revenues 16,508,473 13,787,143 14,305,431 15,186,199 15,844,720 Operating Expenses Personnel services 3,257,618 3,130,012 3.089,930 3,215,190 3,116,493 Supplies, Materials and services 1,955,464 2,818,041 1,900,710 2,145,745 2,541,909 Utilities 758,934 710,622 683,508 642,508 676,838 Total Operating Expenses 5,972,016 6,658,675 5,674,148 6,003,443 6,335,240 System Net Revenues 10,536,457 7,128,468 8,631,283 9,182,756 9,509,480 Parity Debt Service 2003 Installment Payments 381,393 379,170 381,122 3,280,111 2004 Installment Payments 2,147,600 2,139,350 1,705,213 98,321 98,325 2007 Installment Payments 1,588,750 1,599,050 1,598,950 1,603,550 1,602,850 2012 Installment Payments 374,519 1,921,700 1,970,350 Total Parity Debt Service 4,117,743 4,117,570 4,059,804 6,903,682 3,671,525 Debt Service Coverage 2.56 1.73 2.13 1.33 2.59 Non -Operating Expenses Transfers (In)/Out 1,451,480 (778,092) 1,451,480 1,318,000 1,068,000 Total Non -Operating Expenses 1,451,480 (778,092) 1,451,480 1,318,000 1,068,000 Net Cashflow Before Capital Expenditures $4,967,234 $3,788,990 $3,119,999 $961,072 $4,769,955 Source: Financial Services Division 166 Additional Indebtedness The Wastewater Utility did not incur any additional indebtedness during the 2014-15 fiscal year which is payable from the system net revenues on a parity with the installment payments. 167 ANNUAL REPORT FOR THE LODI PUBLIC IMPROVEMENT CORPORATION AND THE LODI PUBLIC FINANCING AUTHORITY The Lodi Public Improvement Corporation and the Lodi Public Financing Authority have Continuing Disclosure requirements associated with its 2012 Refunding Lease Revenue Bonds. 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. 6. A table showing the Employee -paid and City -paid employee portion of the retirement plan. Reporting of Significant Events The Certificates identify eleven (11) specific events that require special reporting. As of June 30, 2015, 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 1 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 86 of this Comprehensive Annual Financial Report. 168 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. STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GENERAL FUND LAST FIVE YEARS 2011 2012 2013 2014 2015 Revenues: Taxes $ 23,061,164 22,928,438 23,022,370 23,718,396 24,630,745 Licenses and permits 83,395 79,745 62,582 83,420 87,908 Intergovernmental revenues 10,032,523 10,449,364 10,531,871 11,319,708 12,642,107 Charges for services 1,035,220 682,156 1,105,178 1,025,851 1,482,448 Fines, forfeits and penalties 1,404,307 1,355,101 1,628,870 1,552,531 1,573,071 Investment and rental income 455,923 807,270 979,100 1,548,787 1,546,845 Miscellaneous revenue 480,028 286,125 393,299 352,331 290,951 Total revenues 36,552,560 36,588,199 37,723,270 39,601,024 42,254,075 Expenditures: Current: General government 6,478,159 6,007,327 5,943,192 6,482,226 6,490,907 Public protection 24,091,472 24,923,155 25,920,654 26,470,110 26,388,172 Public works 1,421,238 1,112,569 1,555,833 1,554,939 1,882,250 Library 1,357,473 1,380,972 1,410,657 1,267,850 1,311,367 Parks and recreation 2,191,102 Debt service: Interest and fiscal charges 6,427 Principal payments 141,576 Total expenditures 35,687,447 33,424,023 34,830,336 35,775,125 36,072,696 Excess of revenues over expenditures 865,113 3,164,176 2,892,934 3,825,899 6,181,379 Other financing sources (uses): Transfers in 5,379,186 5,370,230 5,367,990 3,952,000 3,952,000 Transfers out (4,383,110) (8,391,858) (6,584,665) (6,269,351) (7,128,586) Total other financing sources (uses) 996,076 (3,021,628) (1,216,675) (2,317,351) (3,176,586) Net change in fund balances 1,861,189 142,548 1,676,259 1,508,548 3,004,793 Fund balances, beginning of year 4,285,216 6,146,405 6,288,953 7,965,212 9,473,760 Fund balances, end of year $ 6,146,405 6,288,953 7,965,212 9,473,760 12,478,553 169 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 115. 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 118. 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 117. Table 6 A table showing the Employee -paid and City -paid employee portion of the retirement plan. Pension Contributions As of Fiscal Year Ended June 30, 2015 Bargaining Units Employee Paid* Council appointees 7.0% Executive management 7.0 Confidential mid -management 7.0 Confidential 7.0 Fire mid -management 9.0 Fire 9.0 Mid -management 7.0 General services 7.0 Maintenance and operators 7.0 IBEW 7.0 Police mid -management 9.0 Police 9.0 Dispatchers 7.0 *PEPRA Miscellaneous Employees *PEPRA Safety Employees City Paid Total Employee Share oda 7.0% 7.0 7.0 7.0 9.0 9.0 7.0 7.0 7.0 7.0 9.0 9.0 7.0 6.75 6.75 11.25 11.25 170 ANNUAL REPORT FOR WATER UTILITY The Lodi Water Utility has Continuing Disclosure requirements associated with its 2010 Series A and B Certificates of Participation. The annual report includes, by reference, the audited financial statement of the City of Lodi (including the Water Utility). The annual report also contains the following four (4) tables as required in the Certificates: 1. A table setting forth the City's number of accounts and revenues by user type for the past five fiscal years. 2. A table showing the largest users by service charge revenues for the most recent fiscal year. 3. A table showing a schedule of selected rates effective January 1, 2015. 4. A table showing a summary of historic operating results and debt service coverage for the past five fiscal years. Additionally, the Certificate for the 2010 Series A issue requires a description of any additional indebtedness incurred during the prior fiscal year which is payable from 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, 2015, 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. 171 Table 1 A table showing number of accounts and revenues by user type. CITY OF LODI WATER SYSTEM Number of Accounts and Revenues by User Type Commercial/Industrial/ Municipal Residential Year Ending Number of December 31 Accounts Revenue Number of Accounts Revenue 2007 1,445 $ 2,043,731 21,533 $ 8,715,928 2008 1,470 2,184,496 21,449 9,429,594 2009 1,382 2,188,486 21,577 9,600,129 2010 1,383 2,097,001 21,622 9,604,412 2011 1,396 2,169,967 21,593 9,706,537 2012 1,432 2,329,957 23,399 8,411,315 2013 1,415 2,436,777 21,717 10,353,374 2014 1,435 2,534,741 21,722 10,359,235 Source: City of Lodi Table 2 A table showing the largest users by service charge revenue for the most recent fiscal year. User Lodi Unified School District City of Lodi Pacific Coast Producers General Mills ConAgra Foods Lodi Memorial Hospital Lodi Grape Festival Temple Baptist Church Wine & Roses Blue Shield of California Subtotal Top Ten Users TOTAL SYSTEM City of Lodi Water System Largest Users by Service Charge Revenues Fiscal Year 2014-15 Type of Business K-12, adult education Government Private label fruit canning Cereals, bread mixes, snack foods Specialty bakery, frozen dough Health care Festival Grounds Church Hotel and restaurant Health insurance 173 Service Charge Revenue 303,546 280,366 142,558 81,600 64,539 54,230 20,728 17,848 13,623 12,815 $ 991,853 Percentage of Total Annual Service Charge Revenue 2.39% 2.20 1.12 0.64 0.51 0.43 0.16 0.14 0.11 0.10 7.80% 12,722,619 100.00% Table 3 A table showing selected rates effective January 1, 2015. CITY OF LODI WATER SYSTEM Selected Rates Effective January 1, 2015 Percent Increase Current Flat Rates ($/month) Single Family Residential Unit ($/month) 1 Bedroom 2 Bedroom 3 Bedroom Metered Water Rates Service Charge ($/month) Single Family Residential Up to 3/4" Meter Multi -Family and Non -Residential 1" Meter 1 1/2" Meter 2" Meter Water Usage rates ($/CCF) Single Family Residential Tier 1 - 0 to 10 CCF/month Tier 2 - 11 to 50 CCF/month Tier 3 - Over 50CCF/month Multi -Family and Non -Residential All Water Usage Source: City of Lodi. 174 $31.26 $37.55 $45.00 $22.58 $35.91 $63.66 $93.26 $0.96 $1.32 $1.68 1.08 Table 4 A table showing historic operating results and debt service coverage for the past five fiscal years. CITY OF LODI WATER SYSTEM Historical Operating results and Debt Service Coverage Fiscal Years 2010-11 through 2014-15 Gross Revenues Water Sales (1) Investment Earnings Water Impact Mitigation Fees Meter Retrofit Installation Charges Other Revenues (2) Total Gross Revenues Operating and Maintenance Expenses Personnel Services (3) Supplies, Materials and Services (3) New Treatment Plant Operations (net) Utilities Administrative Overhead Total 0 & M Expenses Net Revenue Available for Debt Service Debt Service 1991 California DWR SRF loan (4) 2010 Bonds (5) Total Net Debt Service Debt Service Coverage (6) Debt Service Coverage Debt Service Coverage (excluding impact mitigation fees) Net Remaining Revenues Available for Capital Capital Improvement Projects Meter Retrofit Program (7) 2010-11 11,940,022 83,374 14,803 1,653,399 359,979 14,051,577 1,359,227 2,590,222 652,296 1,060,122 5,661,865 8,389,712 1,433,395 849,968 2,283,363 2011-12 2012-13 12,083,226 12,441,039 119,526 67,892 111,429 2,529 675,815 585,965 285,093 269,335 13, 275, 089 13, 366, 850 1,856,131 2,272,568 1,781,622 2,882,547 693,657 683,635 1,060,120 1,060,120 5,391,530 6,898,870 7,883,559 6,467,980 2,304,811 2,335,360 2,304,811 2,335,360 3.67 3.42 2.77 3.67 6,106,349 919,555 175 3.37 5,578,748 2.77 4,132,620 6,325,558 6,536,687 2013-14 2014-15 12,756,076 118,799 60,000 405,677 825,314 12,722,619 87,211 20,299 56,052 483,710 14,165,866 13,369,891 2,392,611 3,014,227 648,233 780,000 2,316,305 2,139,014 579,774 780,000 6,835,071 5,815,093 7,330,795 7,554,798 2,355,230 2,356,141 2,355,230 2,356,141 3.11 3.21 3.09 4,975,565 3.20 5,198,657 6,891,350 4,841,932 Other Water System Improvements (8) Total Capital Improvement Projects Net Change in Reserve Water Enterprise Fund (9) Beginning Cash Balance Ending Cash Balance 3,666,202 4,585,757 540,832 1,144,363 6,866,390 7,681,050 380,675 267,902 7,272,025 5,109,834 1,520,592 (1,287,639) (3,548,520) (2,296,460) 88,823 14,120,605 12,807,412 12,465,350 9,044,659 7,027,567 12,807,412 12,465,350 9,044,659 7,027,567 6,755,522 (1) Water sales reflect Council -adopted rate increases effective January 1, 2015. (2) Includes rent, sales of City property, discounts, water reimbursements, and damage to property, water tap fees, DBCP reimbursements, and other miscellaneous revenues. DBCP reimbursements are expected to decline beginning in Fiscal Year 2012-13 as new plant becomes operational and groundwater draws diminish. PCE/TCE litigation revenues are excluded from Fiscal year 2005-06 through 2009- 10. Fiscal year 2009-10 reflects one-time adjustments from prior years. (3) PCE/TCE litigation expenses are excluded from Fiscal Year 2006-07 through Fiscal year 2010-11. (4) Debt service on 1991 Loan was paid off in full on October 1, 2010. (5) Reflects total debt service for the 2010 Water Revenue Bonds net of the 35% interest rate subsidy for the Series 2010B bonds. (6) Coverage calculated based on Net Revenues divided by net Debt Service and Net Revenues less mitigation fees divided by Net Debt Service. (7) Annual capital costs of transition to water meters. Program expected to be completed in Fiscal Year 2017-18. (8) Excludes costs of the Project to be funded from proceeds of the Series 2010 Bonds. (9) Water Enterprise Fund balance includes both operating and capital reserves and is presented on a cash basis. Cash position is expected to increase substantially upon completion of the water meter installation program. Source: City of Lodi 176 4' 1 I • ' ) 0i) (; CITY OF LODI, CALIFORNIA Report to City Council For the Year Ended June 30, 2015 Certified Public Accountants CITY OF LODI, CALIFORNIA Report to City Council For the Year Ended June 30, 2015 Table of Contents Page(s) Transmittal Letter 1 Required Communications 2-4 Status of Prior Year Recommendations 5-6 Certified Public Accountants City Council City of Lodi, California Sacramento Walnut Creek Oakland Los Angeles Century City Newport Beach San Diego We have audited the financial statements of the governmental activities, the business -types activities, each major fund, and the aggregate remaining fund information of the City of Lodi, California (City), as of and for the year ended June 30, 2015, and have issued our report thereon dated February 3, 2016. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards, and OMB Circular A-133, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our Audit Service Plan presented to you on September 29, 2015. Professional standards also require that we communicate to you the information related to our audit that is included in the Required Communications section of this report. In planning and performing our audit of the financial statements of the City as of and for the year ended June 30, 2015, in accordance with auditing standards generally accepted in the United States of America, we considered the City's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control Accordingly, we do not express an opinion on the effectiveness of the City's internal control. During our audit for the year ended June 30, 2015, we followed up on our recommendations to address conditions we identified during previous years' audits. The status of those recommendations is included in the Status of Prior Year Recommendations section of this report. This report does not affect our report dated February 3, 2016, on the basic financial statements of the City. We also noted certain matters that we reported to management of the City of Lodi in a separate letter dated February 3, 2016. 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. AcAts O'Connell /AP r Sacramento, California February 3, 2016 Macias Gini & O'Connell LLP 3000 S Street, Suite 300 Sacramento, CA 95816 1 www.mgocpa.com CITY OF LODI, CALIFORNIA Report to City Council Required Communications For the Year Ended June 30, 2015 Significant Audit Findings Qualitative Aspects of 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. As described in Note (1)(w) to the financial statements, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions — An amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date — an amendment of GASB Statement No. 68. These statements address the accounting and financial reporting requirements for the City's pension benefits. As of July 1, 2014, the City restated the beginning net position to record the beginning deferred outflows of resources related to pension contributions and net pension liability as follows: Governmental Activities Net position - beginning, as previously reported $ 119,822,255 Change in accounting principles (80,965,314) Net Position - beginning, as restated $ 38,856,941 Net postion - beginning, as previously reported Change in accounting principles (11,101,735) (7,369,943) Net Position - beginning, as restated Electric Fund Business -Type Activities $ 139,393,690 (19,689,250) $ 119,704,440 Total $ 259,215,945 (100,654,564) $ 158,561,381 Wastewater Fund Water Fund Transit Fund Internal Service Funds $ 4,560,430 $ 58,608,905 $ 57,086,278 $ (724,395) 19,138,077 $ (291,199) (493,177) (1,081,238) $ (6,541,305) $ 51,238,962 $ 56,361,883 $ 18,644,900 $ (1,372,437) We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates 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 City's financial statements were: • The self-insurance liability is based on the development of amounts from various consultants' actuarial studies. • The pollution remediation obligation is based upon estimated cash flows determined by an engineering consultant's remedial action plan. • The actuarial pension data contained in Note (9) to the financial statements and required supplementary information (unaudited) is based on actuarial valuations performed in accordance with the parameters set forth in GASB Statement No. 68, Accounting and Financial Reporting for Pensions. 2 CITY OF LODI, CALIFORNIA Report to City Council Required Communications (Continued) For the Year Ended June 30, 2015 • The actuarial data for other postemployment benefits contained in Note (10) 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 each opinion unit's financial statements. The financial statements disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit's financial statements. 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 February 3, 2016. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the 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. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the 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. 3 CITY OF LODI, CALIFORNIA Report to City Council Required Communications (Continued) For the Year Ended June 30, 2015 Other Matters We applied certain limited procedures to management's discussion and analysis, the schedules of changes in net pension liability and related ratios, the schedule of pension contributions, the schedule of funding progress for the OPEB plan, and the schedule of revenues, expenditures and change in fund balance — budget and actual — for the General Fund, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining and individual fund statements and schedules and the schedule of expenditures of federal awards, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the introductory, statistical, and continuing disclosures sections, which accompany the financial statements but are not RSI. We did not audit or perform other procedures on this other information, and we do not express an opinion or provide any assurance on them. 4 CITY OF LODI, CALIFORNIA Report to City Council Status of Prior Year Recommendations For the Year Ended June 30, 2015 The following is a summary of the status of prior years' recommendations. FROM YEAR ENDED JUNE 30, 2005 INFORMATION TECHNOLOGY (IT) 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 The City performs disaster recovery by utilizing Dell Appsure for local backups. The City just started utilizing AWS (Amazon Web Services) for off site hosting of backups off the Appsure. The City developed a disaster preparedness plan in 2007, which defines the recovery process. But there is no evidence that the plan has been fully tested. Since 2007, much has changed with the City's information systems environment and, therefore the current plan is in need of an update. Therefore, our recommendation remains in the process of implementation. Current Year Management Response The City is working towards a new network architecture that will minimize the risk of network failure. Using distributed technology within the data center as well as distributed services on the City wide area network (WAN). Completion of the new architecture will occur by 2017. 5 CITY OF LODI, CALIFORNIA Report to City Council Status of Prior Year Recommendations (Continued) For the Year Ended June 30, 2015 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 specified period. To reduce operating overhead, the City should consider hiring temporary staff for data entry into the capital assets module. Current Year Status The City has implemented a new financial system, which included a capital asset module. This module records the City's capital assets and automatically calculates depreciation. As such, the recommendation is considered implemented. 6 CITY OF LODI Independent Accountant's Report on Applying Agreed -Upon Procedures Related to the Article XIII -B Appropriations Limit Calculation For the Fiscal Year Ended June 30, 2015 Certified Public Accountants Certified Public Accountants Independent Accountant's Report on Applying Agreed -Upon Procedures Related to the Article XIII -B Appropriations Limit Calculation City Council Lodi, California Sacramento Walnut Creek Oakland Los Angeles Century City Newport Beach San Diego We have performed the procedures enumerated below to the accompanying Appropriations Limit Worksheet of the City of Lodi, California (City) for the fiscal year ended June 30, 2015. These procedures, which were agreed to by City management and the California Committee on Municipal Accounting (as presented in its publication entitled Agreed -Upon Procedures Applied to the Appropriations Limitations 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 these 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: 1. 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 this procedure. 2. For the accompanying Appropriations Limit Worksheet, we added the appropriations limit for the fiscal year ended June 30, 2014 to the annual adjustment amount, and compared the resulting amount to the appropriations limit for the fiscal year ended June 30, 2015. Finding: No exceptions were noted as a result of this procedure. 3. We compared the current year information presented in the accompanying Appropriations Limit Worksheet to the worksheets described in procedure No. 1 above. Finding: No exceptions were noted as a result of this procedure. Macias Gini & O'Connell LLP 3000 S Street, Suite 300 Sacramento, CA 95816 1 www.mgocpa.com 4. We agreed the appropriations limit for the fiscal year ended June 30, 2014 presented in the accompanying Appropriations Limit Worksheet to the appropriations limit for the fiscal year ended June 30, 2014 adopted by the City Council. Finding: No exceptions were noted as a result of this procedure. We were not engaged to and did not conduct an audit, 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. AciaLs giv. OcaNteit i/F4 Sacramento, California February 9, 2016 2 CITY OF LODI APPROPRIATIONS LIMIT WORKSHEET FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Appropriation Limit for the fiscal year ended June 30, 2014, as adopted $86,108,936 Adjustment factors: Population factor, fiscal year ended June 30, 2015, as adopted Inflation factor, fiscal year ended June 30, 2015, as adopted Adjustment factor for the fiscal year ended June 30, 2015 Annual adjustment Appropriation Limit for the fiscal year ended June 30, 2015, as adopted 3 1.0066 0.9977 1.00428 368,961 $86,477,897 2014/15 Comprehensive Annual Financial Report City Council February 17, 2016 Auditor's Opinion ❑ City engaged an independent auditor through a competitive process ❑ Macias, Gini, O'Connell, LLP has given the City a clean' 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 Audit Process ❑ No findings regarding management's estimates ❑ No significant difficulties with staff ❑ No material misstatements ❑ No disagreements with staff Status of City's Financial Position Highlights of Financial Records ❑ General Fund ■ Unassigned Fund Balance of $12,107,040 ❑ Includes $264,822 for Library ❑ Net General Fund Reserve of $11,842,218 ❑ About $1.4 million higher than projected for budget purposes Status of City's Financial Position Highlights of Financial Records ❑ General Fund (cont.) ■ Reserve represents 25.6% of General Fund revenues for 2014/15 ❑ Fully funds Catastrophic Reserve ■ 8% - $3,696,486 ❑ Fully funds Economic Reserve ■ 8% - $3,696,486 ❑ Designated for settled labor agreements - $3,829,237 ❑ Undesignated - $620,009 Status of City's Financial Position Highlights of Financial Records ❑ General Fund (cont.) ■ Budget to Actual Variances ❑ Revenues $2.1 million higher than budget ■ Sales taxes up about $367,000 ■ Property taxes up about $57,000 ■ State mandated reimbursements up about $963,000 ■ Franchise fees up about $166,000 ■ In -lieu -VLF $123,000 ■ Transient Occupancy Tax up about $116,000 ■ Charges for services up about $165,000 ■ Fines and forfeitures $95,000 6 Status of City's Financial Position Highlights of Financial Records ❑ General Fund (cont.) ■ Budget to Actual Variances (cont.) ❑ Expenditures about $948k under budget ■ Salary and Benefits savings of about $807,000 ■ Service and Supply savings of about $141,000 Impact of GASB 68 ❑ GASB 68 required that we bring the pension liability to the face of the financial statements ■ Net Pension Liability -$91,661,781 ❑ Governmental -$74,791,178 ❑ Enterprise -$16,870,603 ■ Deferred Outflows/Inflows-$8,922,268 ❑ Governmental -$6,344,696 ❑ Enterprise -$2,577,572 ■ Also added footnote disclosure Single Audit ❑ No questioned costs ❑ No material weaknesses in internal controls ❑ Significant deficiency identified ■ Benefits Fund deficit related to OPEB Management Letter ❑ Review of City's Internal controls ■ No new findings ❑ Prior year findings ■ 1 remains open ❑ IT disaster preparedness plan needs to be updated and fully tested ■ New network architecture will include updated disaster preparedness plan ■ Closed item- Fixed Asset module implementation 10 Questions?