Comprehensive
Annual Financial Report
For the
Year Ended June 30, 2004
Hotel Healdsburg
Clock Tower
City of Healdsburg
California
Serifem Building, 2003
CITY OF HEALDSBURG
HEALDSBURG, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
WITH REPORT ON AUDIT BY
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
JUNE 30, 2004
Prepared by the Finance Department
CITY OF HEALDSBURG
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
June 30, 2004
Page
Number
INTRODUCTORY SECTION:
Transmittal Letter i
GFOA Certificate of Achievement iv
Organization Chart v
List of Elected and Appointed Officials vi
FINANCIAL SECTION:
Independent Auditors’ Report 1
Management’s Discussion and Analysis 3
Basic Financial Statements:
Government- wide Financial Statements:
Statement of Net Assets 15
Statement of Activities 16
Fund Financial Statements:
Governmental Funds:
Balance Sheet 18
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets 21
Statement of Revenues, Expenditures and Changes in Fund Balances 22
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances of Governmental Funds to the
Statement of Activities 25
Proprietary Funds:
Statement of Net Assets 26
Statement of Revenues, Expenses and Changes in Fund Net Assets 28
Statement of Cash Flows 30
Fiduciary Funds:
Statement of Fiduciary Net Assets 32
Statement of Changes in Fiduciary Net Assets 33
Notes to Basic Financial Statements 34
CITY OF HEALDSBURG
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
( CONTINUED)
June 30, 2004
Page
Number
REQUIRED SUPPLEMENTARY INFORMATION:
Budgetary Comparison Schedule:
General Fund 75
Note to Required Supplementary Information 76
SUPPLEMENTARY INFORMATION:
Other Governmental Funds: 77
Combining Balance Sheet 78
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 79
Other Special Revenue Funds: 81
Combining Balance Sheet 82
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances 86
Schedules of Revenues, Expenditures and Changes in Fund
Balance - Budget and Actual:
Gas Tax Special Revenue Fund 90
Park Fees Special Revenue Fund 91
TDA Special Revenue Fund 92
Community Redevelopment Agency UDAG Loan Special Revenue Fund 93
Area A Lighting and Landscaping District Special Revenue Fund 94
Benjamin Way Maintenance District Special Revenue Fund 95
Public Safety Special Revenue Fund 96
Other and Major Debt Service Funds: 97
Schedules of Revenues, Expenditures and Changes in Fund
Balance - Budget and Actual:
General Debt Service Fund 98
Community Redevelopment Agency Debt Service Fund 99
Special Assessment Debt Service Fund 100
Other Enterprise Funds: 101
Combining Statement of Net Assets 102
Combining Statement of Revenues, Expenses and
Changes in Net Assets 104
Combining Statement of Cash Flows 106
CITY OF HEALDSBURG
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
( CONTINUED)
June 30, 2004
Page
Number
SUPPLEMENTARY INFORMATION ( CONTINUED):
Internal Service Funds: 109
Combining Statement of Net Assets 110
Combining Statement of Revenue, Expenses and
Changes in Net Assets 112
Combining Statement of Cash Flows 114
Fiduciary Funds: 117
Combining Statement of Fiduciary Net Assets 118
Combining Statement of Changes in Fiduciary Net Assets 120
STATISTICAL SECTION: S- 1
Government- wide Expenses by Program - Last Two Fiscal Years S- 2
Government- wide Revenues by Source - Last Two Fiscal Years S- 5
Governmental Revenues by Source - Last Ten Fiscal Years S- 6
Governmental Expenditures by Function - Last Ten Fiscal Years S- 6
Property Tax Levies and Collections - Last Ten Fiscal Years S- 8
Assessed Valuation of Taxable Property - Last Ten Fiscal Years S- 9
Property Tax Rates - All Overlapping Governments - Last Ten Fiscal Years S- 10
Ratio of General Bonded Debt to Assessed Valuation
And Per Capita - Last Ten Fiscal Years S- 12
Special Assessment Billings and Collections - Last Ten Fiscal Years S- 13
Computation of Legal Debt Margin S- 14
Computation of Direct and Overlapping Debt S- 15
Ratio of Annual Debt Service Expenditures for General Bonded
Debt to Total General Expenditures - Last Ten Fiscal Years S- 16
Demographic Statistics - Last Ten Fiscal Years S- 17
Schedule of Revenue Bond Coverage - Last Ten Fiscal Years S- 18
Construction, Bank Deposits and Property Value - Last Ten Fiscal Years S- 20
Sotoyome Redevelopment Project Area - Largest Secured Property
Tax Payers S- 22
Principal Property Taxpayers S- 23
Schedule of Insurance and Surety Bonds S- 24
Miscellaneous Statistical Information S- 25
CITY OF HEALDSBURG
COMPREHENSIVE ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
( CONTINUED)
June 30, 2004
Page
Number
STATISTICAL SECTION ( CONTINUED):
Other:
Schedule of Ten Major Businesses S- 26
Schedule of Schools Average Daily Attendance - Last Ten Fiscal Years S- 27
Schedule of Net Income ( Loss) - Water Fund S- 28
Schedule of Cash Flows - Water Fund S- 30
Schedule of Water Sold and Revenue per Hundred Cubic Feet S- 32
Schedule of Net Income ( Loss) - Sewer Fund S- 34
Schedule of Cash Flows - Sewer Fund S- 36
Schedule of Net Income ( Loss) - Electric Fund S- 38
Schedule of Cash Flows - Electric Fund S- 40
Schedule of Electric Utility Customers, Sales and Revenue -
Last Ten Fiscal Years S- 42
Schedule of Electricity Sold and Revenue per Megawatt Hours -
Last Ten Fiscal Years S- 44
Schedule of Electricity Purchased - Last Ten Fiscal Years S- 46
Schedule of Proportional Share - NCPA Debt Service S- 49
Sotoyome Redevelopment Project Area - Taxable Value and
Tax Increments S- 50
Sotoyome Redevelopment Project Area - Tax Increment/ Tax Reserves S- 52
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2004
As management of the City of Healdsburg ( City), we offer readers of the City’s financial statements
this narrative overview and analysis of the financial activities of the City for the fiscal year ended
June 30, 2004. We encourage readers to consider the information presented here in conjunction with
additional information that we have furnished in our letter of transmittal, which can be found in the
Introductory Section of this report.
FINANCIAL HIGHLIGHTS
• City assets exceeded its liabilities by $ 126.1 million ( net assets) at June 30, 2004. Of this
amount, $ 37.4 million ( unrestricted net assets) may be used to meet the government’s ongoing
obligations to citizens and creditors.
• City total net assets increased by $ 8.5 million during the fiscal year, compared to an increase of
$ 6.1 million in the prior year. The increase was primarily due to a decrease in community
development expenses compared to the prior year.
• At the close of fiscal year 2003- 04, City governmental funds reported combined ending fund
balance of $ 45.6 million, a decrease of $ 2.9 million.
• At the end of fiscal year 2003- 04, unreserved fund balance for the General Fund was $ 4.0
million, or 75 percent of total General Fund expenditures.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are 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 contains other supplementary information in addition to the basic
financial statements themselves.
Government- wide financial statements
The government- wide financial statements are designed to provide readers with a broad overview of
the City’s finances, in a manner similar to a private- sector business.
The statement of net assets presents information on all of the City’s assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
OVERVIEW OF THE FINANCIAL STATEMENTS ( CONTINUED)
Government- wide financial statements ( Continued)
The statement of activities presents information showing how the City’s net assets changed during the
most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving
rise to the change occurs, regardless of the timing of related cash flows. Thus, all of the current year’s
revenues and expenses are taken into account regardless of when cash is received or paid ( e. g.,
uncollected taxes or earned but unused vacation leave).
Government- wide financial statements distinguish City governmental activities that are principally
supported by taxes and intergovernmental revenues from other business- type activities that are
intended to recover all or a significant portion of their costs through user fees and charges.
Governmental activities of the City and the Healdsburg Community Redevelopment Agency, a
blended component unit, include general government, public safety, culture and recreation and
community development. Business type activities of the city include water utility, sewer utility, electric
utility, streets and other programs.
The government- wide financial statements can be found on pages 15 - 17 of this report.
Fund financial statements
Fund financial statements are designed to report information about groupings of related accounts 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. City funds can be divided into three categories:
governmental funds, proprietary funds and fiduciary funds.
Governmental funds are used to account for essentially the same functions reported as governmental
activities in the government- wide financial statements. However, unlike the government- wide
financial statements, governmental fund financial statements focus on near- term inflows and outflows
of spendable resources, as well as on balances of spendable resources available at the end of the fiscal
year. Such information may be useful in evaluating a government’s near- term financing requirements.
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 fund balance sheet and the governmental fund statement of
revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this
comparison between governmental funds and governmental activities.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
OVERVIEW OF THE FINANCIAL STATEMENTS ( CONTINUED)
Fund financial statements ( Continued)
Governmental funds ( Continued) The City maintains several individual governmental funds
organized by their type ( special revenue, debt service, capital projects and permanent funds).
Information is presented separately in the governmental fund balance sheet and in the governmental
fund statement of revenues, expenditures, and changes in fund balances for the General, Community
Redevelopment Agency Debt Service, Special Assessment Debt Service, Community
Redevelopment Commercial/ Industrial Capital Projects, Community Redevelopment Low/ Moderate
Income Capital Projects and General Capital Projects which are considered to be major funds. Data
from the remaining governmental funds are combined into a single, aggregated presentation.
Individual fund data for each of the other governmental funds is provided in the form of combining
statements beginning on page 77 of this report.
The City adopts an annual appropriated budget for its General Fund, certain special revenue funds and
debt service funds. Budgetary comparison statements have been provided to demonstrate compliance
with this budget. These statements are on pages 75 and 90 - 100 of this report.
The basic governmental fund financial statements can be found on pages 18 - 25 of this report.
Proprietary funds are generally used to account for services for which the City charges outside
customers, or internal departments of the City. Proprietary funds provide the same type of information
as shown in the government- wide 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 an enterprise fund to account for the
operations of water, sewer, electric, streets and other programs.
• Internal service funds are used to report activities that provide internal services for the City.
The City uses internal service funds to account for its insurance and benefits, vehicle service and
replacement, information systems and equipment and government buildings. Because internal
service funds predominantly benefit governmental rather than business- type functions, they have
been included within governmental activities in the government- wide financial statements. The
internal service funds are combined into a single, aggregated presentation in the proprietary fund
financial statements. Individual fund data for the internal service funds is provided in the form of
combining statements beginning on page 109 of this report.
The basic proprietary fund financial statements can be found on pages 26 - 31 of this report.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
OVERVIEW OF THE FINANCIAL STATEMENTS ( CONTINUED)
Fund financial statements ( Continued)
Fiduciary funds are used to account for resources held for the benefit of parties outside the
government. Fiduciary funds are not reflected in the government- wide financial statement because the
resources of those funds are not available to support the City’s own programs.
The basic fiduciary fund financial statements can be found on page 32 of this report.
Notes to the basic financial statements
The notes provide additional information that is essential to a full understanding of the data provided in
the government- wide and fund financial statements. The notes to the basic financial statements can be
found on pages 34 - 73 of this report.
Other information
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information that includes a Budgetary Comparison Schedule for the General
Fund. Required supplementary information can be found on pages 75 and 76 of this report.
Combining statements for other governmental funds, internal service funds, and budgetary comparison
schedules for certain individual funds are presented immediately following the required supplementary
information. Combining financial statements and schedules can be found on pages 77 - 122 of this
report.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
GOVERNMENT- WIDE FINANCIAL ANALYSIS
Statement of Net Assets
As noted earlier, net assets may serve over time as a useful indicator of a government’s financial
position. At June 30, city assets exceeded liabilities by $ 126.1 million in 2004 and by $ 117.6 million
in 2003, as summarized below:
Condensed Statements of Net Assets
( In millions of dollars)
Governmental Activities Business- type Activities Total
2004 2003 2004 2003 2004 2003
Assets:
Current and other assets $ 54.9 $ 59.6 $ 35.2 $ 34.8 $ 90.1 $ 94.4
Capital assets ( net of
accumulated depreciation 34.1 28.1 76.7 73.7 110.8 101.8
Total Assets 89.0 87.7 111.9 108.5 200.9 196.2
Liabilities:
Current and other liabilities 4.8 6.5 1.6 1.9 6.4 8.4
Noncurrent liabilities 50.4 51.7 18.0 18.5 68.4 70.2
Total Liabilities 55.2 58.2 19.6 20.4 74.8 78.6
Net Assets:
Invested in capital assets,
net of related debt 12.5 9.5 58.7 60.8 71.2 70.3
Restricted 11.5 16.3 6.0 6.3 17.5 22.6
Unrestricted 9.8 3.7 27.6 21.0 37.4 24.7
Total Net Assets $ 33.8 $ 29.5 $ 92.3 $ 88.1 $ 126.1 $ 117.6
A more detailed Statement of Net Assets is shown on page 15.
The largest portion ( 56.4 percent) of the City’s net assets reflects its investment of $ 71.2 million in
capital assets ( land, buildings and improvements, equipment, infrastructure, and construction in
progress, net of accumulated depreciation); less any related outstanding debt used to acquire those
assets. 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, resources needed to repay this debt must be provided from other sources, since the capital
assets themselves cannot be used to liquidate these liabilities.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
GOVERNMENT- WIDE FINANCIAL ANALYSIS ( CONTINUED)
Statement of Net Assets ( Continued)
Another portion of the City’s net assets ($ 17.5 million or 13.9 percent) represents resources that are
subject to external restrictions on how they may be used. The remaining balance of unrestricted net
assets, $ 37.4 million ( 29.7 percent) may be used to meet the government’s ongoing obligations to
citizens, creditors, and to meet City imposed designations ( e. g., reserves, pending litigations,
contingencies, capital projects).
At the end of the current fiscal year, the City is able to report positive balances in all three categories
of net assets, both for the government as a whole, as well as for its separate governmental activities and
business- type activities. The same situation held true for the prior fiscal year.
Statement of Activities
The statement of activities shows how the government’s net assets changed during fiscal year 2003- 04
as compared to 2002- 03.
The City’s net assets increased overall by $ 8.5 million during the current fiscal year.
Governmental activities increased the City’s net assets by $ 4.6 million before transfers for the current
year. Compared to 2002- 03, the City recognized a $ 1.9 million increase in revenues, the majority of
which is capital grants and contributions, and a decrease of $ 1.6 million in expenses. Public safety is
the largest expense function ( 43.1 percent), followed by community development ( 24.5 percent),
interest on long- term debt ( 21.8 percent), general government ( 10.2 percent), culture and recreation (. 2
percent) and unallocated depreciation (. 2 percent). General revenues such as property and sales tax are
not shown by program, but are effectively used to support program activities citywide.
Business- type activities increased the City’s net assets by $ 3.9 million before transfers for the current
year. Compared to 2002- 03, business- type activities generated $ 1.3 million less in revenue, primarily
due to a decrease in capital grants and contributions, and recognized $ 0.2 million less in expenses. As
shown on page 16, the Electric Fund had total expenses of $ 8.4 million. The Electric utility fees
provide the largest share of revenues of the business- type activity revenues ( 47 percent).
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
GOVERNMENT- WIDE FINANCIAL ANALYSIS ( CONTINUED)
Statement of Activities ( Continued)
Condensed Statements of Activities
( In millions of dollars)
Governmental Activities Business- type Activities Total
2004 2003 2004 2003 2004 2003
Revenues:
Program revenues:
Charges for services $ 0.9 $ 0.9 $ 19.0 $ 18.6 $ 19.9 $ 19.5
Operating grants and
contributions 1.6 1.5 0.9 0.8 2.5 2.3
Capital grants and
contributions 1.6 0.1 0.5 2.3 2.1 2.4
General revenues 12.1 11.8 0.5 0.5 12.6 12.3
Total Revenues 16.2 14.3 20.9 22.2 37.1 36.5
Expenses:
General government 1.2 0.9 0.0 0.0 1.2 0.9
Public safety 5.0 5.0 0.0 0.0 5.0 5.0
Community development 2.9 5.5 0.0 0.0 2.9 5.5
Interest on long- term debt 2.5 1.8 0.0 0.0 2.5 1.8
Water 0.0 0.0 3.2 3.0 3.2 3.0
Sewer 0.0 0.0 2.7 2.5 2.7 2.5
Electric 0.0 0.0 8.0 8.6 8.0 8.6
Streets 0.0 0.0 1.2 1.2 1.2 1.2
Other programs 0.0 0.0 1.9 1.9 1.9 1.9
Total Expenses 11.6 13.2 17.0 17.2 28.6 30.4
Change in Net
Assets before
Transfers 4.6 1.1 3.9 5.0 8.5 6.1
Transfers ( 0.3) ( 24.5) 0.3 24.5 0.0 0.0
Change in Net
Assets 4.3 ( 23.4) 4.2 29.5 8.5 6.1
Net Assets Beginning
of Year 29.5 52.9 88.1 58.6 117.6 111.5
Net Assets End of Year $ 33.8 $ 29.5 $ 92.3 $ 88.1 $ 126.1 $ 117.6
A more detailed Statement of Activities is shown on pages 16 - 17.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
FINANCIAL ANALYSIS OF CITY FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with
finance- related legal requirements.
Governmental funds
The focus of the City’s governmental funds is to provide information on near- term inflows, outflows
and balances of spendable resources. Such information is useful in assessing the City’s financing
requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s
net resources available for spending at the end of the fiscal year. Refer to pages 18 - 25 for more detail
of governmental funds.
As of June 30, 2004, the City’s governmental funds reported combined ending fund balances of $ 45.6
million, a decrease of $ 2.9 million in comparison with the prior year. Of the $ 45.6 million, $ 10.4
million, or 23 percent, constitutes unreserved fund balance. The remainder of fund balance is reserved
to indicate that it is not available for new spending because it has already been committed to pay for
debt service ($ 4.4 million), redevelopment projects from bond funding ($ 29.3 million) and for a
variety of other purposes.
The general fund is the chief operating fund of the City. At the end of the current fiscal year, the
general fund reported a fund balance of $ 4.0 million, compared with $ 3.8 million last year, an increase
of $ 0.2 million. The increase was the result of an increase in revenues and a decrease in transfers out.
The City has two debt service funds that are used to report the accumulation of resources for and the
payment of principal and interest of long- term debt. At June 30, 2004, the City’s Community
Redevelopment Debt Service fund reported a fund balance of $ 2.9 million, and the Special Assessment
Debt Service fund reported a fund balance of $ 614 thousand, an increase of $ 21 thousand from prior
year.
The City’s capital projects funds are used to account for capital outlay associated with the Community
Redevelopment Commercial/ Industrial improvements, Community Redevelopment Low/ Moderate
Income Housing projects, and General projects not supported by enterprise funds. The Community
Redevelopment Commercial/ Industrial Capital Projects fund balance was $ 18.8 million at the end of
the current year, a decrease of $ 5.4 million from prior year. This decrease is due to the purchase of
land and the funding of projects, including the construction of a local medical clinic.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
FINANCIAL ANALYSIS OF CITY FUNDS ( CONTINUED)
Proprietary funds
The City’s proprietary funds provide the same type of information found in the government- wide
financial statements, but in more detail.
The City’s major enterprise funds include Water, Sewer, Electric and Streets funds. The major
changes in enterprise net assets are a $ 1.1 million increase to $ 14.5 million in the Water Fund, a $ 1.6
million increase to $ 27.4 million in the Sewer Fund and a $ 1.0 million increase to $ 20.4 million
increase in the Electric Fund. These increases are generally due to revenues exceeding expenditures
and transfers out.
The City also maintains internal service funds to account for Insurance and Benefits, Vehicle
Maintenance, Information Services and Building Maintenance. The Internal Service Funds had a
decrease in net assets of $ 0.6 million during the fiscal year ending with a balance of $ 4.9 million. The
majority of the deceases are due to expenses exceeding revenues by 0.4 million in the Insurance and
Benefits Fund.
GENERAL FUND BUDGETARY HIGHLIGHTS
At June 30, 2004, unreserved general fund balance was $ 4.0 million. Note that unreserved fund
balance includes amounts designated by the City in accordance with the City’s reserve policy.
Unreserved fund balance, which includes designated funds, represents 75 percent of total General Fund
expenditures.
For the City’s General Fund, actual revenues for the year were $ 5.5 million, $ 0.7 million more than the
final budgeted revenues. The majority of the variance was in intergovernmental revenues, which
includes the motor vehicle license fee subvention. The City budgeted $ 0.4 million but reported actual
revenue of $ 0.9 million. The other significant variance was in charges for services where the budgeted
amount was $ 0.2 million, but the City recognized revenue of $ 0.3 million. Total expenditures
exceeded the City’s budgeted amount by $ 0.1 million.
Overall, the City ended the year with a positive budget variance of $ 0.7 million, having budgeted a
$ 0.4 million decrease to fund balance, but ending the year with a net increase of $ 0.2 million.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital assets:
The City’s investment in capital assets for its governmental and business- type activities as of
June 30, 2004 amounts to $ 110.8 million ( net of accumulated depreciation). This investment in capital
assets includes land, buildings & improvements, equipment, infrastructure, and construction in
progress. The total increase in capital assets for fiscal year 2003- 04 was $ 9.1 million or 8 percent.
Major capital asset events during the current fiscal year included the following:
• Purchased land for commercial/ industrial redevelopment projects, including a new medical center
and downtown parking facilities.
• Completion of the medical center building.
• Completed ongoing streets and utility systems improvements.
Capital assets are summarized below:
Capital Assets ( Net of Accumulated Depreciation)
( In millions of dollars)
Governmental Activities Business- type Activities Total
2004 2003 2004 2003 2004 2003
Land and land rights $ 12.4 $ 8.4 $ 3.8 $ 3.8 $ 16.2 $ 12.2
Right of way 6.7 6.7 0.0 0.0 6.7 6.7
Construction in progress 0.6 3.9 9.6 11.0 10.2 14.9
Buildings 11.2 5.7 3.2 3.4 14.4 9.1
Streets 0.0 0.0 17.2 16.4 17.2 16.4
Utility systems 0.0 0.0 37.1 33.2 37.1 33.2
Drainage 0.0 0.0 3.9 4.2 3.9 4.2
Machinery and equipment 2.3 2.4 1.1 0.9 3.4 3.3
Operations 0.0 0.0 0.8 0.8 0.8 0.8
Infrastructure 0.9 0.9 0.0 0.0 0.9 0.9
Total Capital Assets, Net $ 34.1 $ 28.0 $ 76.7 $ 73.7 $ 110.8 $ 101.7
Additional information on the City’s capital assets can be found in Note 4 in the notes to the basic
financial statements.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
CAPITAL ASSET AND DEBT ADMINISTRATION ( CONTINUED)
Long- term debt:
At the end of fiscal year 2003- 04, the City had total bonded debt outstanding of $ 67.5 million.
Outstanding debt is summarized as follows:
Outstanding Debt – General Obligation and Revenue Bonds
( In millions of dollars)
Governmental Activities Business- type Activities Total
2004 2003 2004 2003 2004 2003
General obligation bonds $ 5.6 $ 5.7 $ 0.0 $ 0.0 $ 5.6 $ 5.7
Tax allocation bonds 41.6 42.4 0.0 0.0 41.6 42.4
Special assessments 2.1 2.2 0.0 0.0 2.1 2.2
Certificates of participation 0.0 0.0 18.2 18.7 18.2 18.7
Total $ 49.3 $ 50.3 $ 18.2 $ 18.7 $ 67.5 $ 69.0
The City’s total bonds outstanding at the end of the year were $ 67.5 million, a decrease of $ 1.5 million
from the prior year. This change was the net result of advance refunding the 1993 General Obligation
Bonds in the amount of $ 3.6 million and principle payments of $ 1.5 million.
Additional information on the City’s long- term debt can be found in Note 5 in the notes to the basic
financial statements.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
In preparing the budget for 2004- 05, management looked at the following economic factors:
• The State of California has not resolved the budget crisis and is still faced with a $ 17 billion
shortfall that may take several years to resolve. The City revenues that continue to be at risk
include motor vehicle license fees, property taxes, supplemental law enforcement funds and
redevelopment tax increments.
• The slowing of sales tax revenue growth due to a weaker economy is expected to continue over
the next several years. Sales tax revenue represents 43% of the General Fund revenue, the
largest single source.
See independent auditors’ report.
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CITY OF HEALSDBURG
MANAGEMENT’S DISCUSSION AND ANALYSIS
( CONTINUED)
June 30, 2004
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES ( CONTINUED)
Economic Factors ( Continued):
• The City’s costs for the contribution to the Public Employee Retirement System ( PERS), the
retirement plan for City employees, are increasing significantly due to lower than projected
earnings by the State managed retirement system. The higher pension costs will be a problem
over the next several years.
Compared to prior year’s budget, the City’s General Fund expenditures are projected to decrease by
3% as the City continues to cut costs wherever possible. Staff salaries and benefits increased due to
the annual CPI increase of 3.9%, a 10% increase in health care premiums, and workers’ compensation
and retirement contribution rates.
The City continues to grow with new hotels, and other commercial development, construction of street
improvements, park construction, and various other projects. The 2004- 05 budget is a reflection of the
City’s commitment to the residents of Healdsburg. The City’s conservative approach has provided for
a consistent high level of services that have continued through the use of one- time revenue sources.
The City has made a commitment to allocate resources for public safety, cultural/ social programs, and
infrastructure improvements. A copy of the City’s 2004- 05 budget can be obtained by contacting the
City’s Finance Department.
This financial report is designed to provide our citizens, taxpayers, customers, and investors and
creditors with a general overview of the City’s finances and to show the City’s accountability for the
money it receives.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of City finances for all those with an
interest in the government’s finances. If you have questions about this report or need additional
financial information, contact the City’s Finance Department at City of Healdsburg offices at
401 Grove Street, Healdsburg, California or by calling ( 707) 431- 3310.
Governmental Business- type
Activities Activities Total
ASSETS:
Cash and investments ( Note 2) $ 14,876,208 $ 24,121,116 $ 38,997,324
Receivables:
Interest 141,924 - 141,924
Accounts 683,190 2,554,244 3,237,434
Taxes 848,718 - 848,718
Loans 1,840,225 - 1,840,225
Special assessments 2,065,000 - 2,065,000
Notes 35,668 - 35,668
Due from other governments 339,269 - 339,269
Internal balances 400,641 ( 400,641) -
Inventory 38,676 1,293,472 1,332,148
Prepaid items - 740,576 740,576
Deferred charges 485,057 868,692 1,353,749
Restricted assets:
Cash and investments ( Note 2) 33,148,108 6,025,750 39,173,858
Capital assets ( Note 4):
Land 12,439,005 3,830,804 16,269,809
Right of way 6,681,379 - 6,681,379
Infrastructure, net 925,373 - 925,373
Depreciable buildings, net 11,189,010 3,191,180 14,380,190
Depreciable streets, net - 17,240,331 17,240,331
Depreciable utility systems, net - 37,133,595 37,133,595
Depreciable drainage, net - 3,926,653 3,926,653
Depreciable machinery and equipment, net 2,320,983 1,119,226 3,440,209
Depreciable operations, net - 766,445 766,445
Construction in progress 583,693 9,506,507 10,090,200
TOTAL ASSETS 89,042,127 111,917,950 200,960,077
LIABILITIES:
Accounts payable and accrued liabilities 1,759,426 1,033,690 2,793,116
Deposits payable 109,743 556,952 666,695
Deferred revenue 2,904,175 - 2,904,175
Claims payable 39,479 - 39,479
Noncurrent liabilities ( Note 5):
Due within one year 2,720,388 470,000 3,190,388
Due in more than one year 47,739,846 17,568,091 65,307,937
TOTAL LIABILITIES 55,273,057 19,628,733 74,901,790
NET ASSETS:
Invested in capital assets, net of related debt 12,454,251 58,676,652 71,130,903
Restricted for:
Debt service 4,413,894 - 4,413,894
Capital projects - 6,025,750 6,025,750
Community development 6,813,923 - 6,813,923
Public safety 17,615 - 17,615
Culture and recreation 256,893 - 256,893
Unrestricted 9,812,494 27,586,815 37,399,309
TOTAL NET ASSETS $ 33,769,070 $ 92,289,217 $ 126,058,287
See independent auditors' report and notes to basic financial statements.
CITY OF HEALDSBURG
STATEMENT OF NET ASSETS
June 30, 2004
- 15 -
Charges Operating Capital
for Grants and Grants and
Expenses Services Contributions Contributions
PRIMARY GOVERNMENT:
Governmental activities:
General government $ 1,191,134 $ 538,563 $ 115,326 $ -
Public safety 5,022,074 387,386 256,261 -
Culture and recreation 24,809 2,633 1,788 75,377
Community development 2,851,824 440 1,201,701 1,516,430
Unallocated infrastructure
depreciation 22,852 - - -
Interest on long- term debt 2,534,572 - - -
Total governmental activities 11,647,265 929,022 1,575,076 1,591,807
Business- type activities:
Water 3,250,531 4,410,089 - -
Sewer 2,673,855 4,211,621 - 2,525
Electric 7,953,778 8,443,881 - 491,116
Street 1,249,962 835,553 - -
Other programs 1,907,323 1,123,047 931,839 4,986
Total business- type activities 17,035,449 19,024,191 931,839 498,627
TOTAL PRIMARY GOVERNMENT $ 28,682,714 $ 19,953,213 $ 2,506,915 $ 2,090,434
General revenues:
Taxes:
Property taxes, levied for general purposes
Franchise taxes
Sales tax
Motor vehicle in- lieu
Other revenues
Investment earnings
Transfers
Total general revenues and transfers
Change in net assets
Net assets - Beginning of year
Net assets - End of year
See independent auditors' report and notes to basic financial statements.
- 16 -
Functions/ programs
Program Revenues
CITY OF HEALDSBURG
STATEMENT OF ACTIVITIES
For the year ended June 30, 2004
Governmental Business- type
Activities Activities Total
$ ( 537,245) $ - $ ( 537,245)
( 4,378,427) - ( 4,378,427)
54,989 - 54,989
( 133,253) - ( 133,253)
( 22,852) - ( 22,852)
( 2,534,572) - ( 2,534,572)
( 7,551,360) - ( 7,551,360)
- 1,159,558 1,159,558
- 1,540,291 1,540,291
- 981,219 981,219
- ( 414,409) ( 414,409)
- 152,549 152,549
- 3,419,208 3,419,208
( 7,551,360) 3,419,208 ( 4,132,152)
7,388,206 - 7,388,206
286,149 - 286,149
2,817,986 - 2,817,986
719,701 - 719,701
239 - 239
890,269 483,654 1,373,923
( 317,767) 317,767 -
11,784,783 801,421 12,586,204
4,233,423 4,220,629 8,454,052
29,535,647 88,068,588 117,604,235
$ 33,769,070 $ 92,289,217 $ 126,058,287
- 17 -
Changes in Net Assets
Primary Government
Net ( Expense) Revenue and
Community Special
General Redevelopment Assessment
Cash and investments $ 3,139,061 $ - $ 13,611
Receivables: - - -
Accounts 32,369 - -
Taxes 721,735 - -
Loans - - -
Interest 17,035 - 68
Special assessments - - 2,065,000
Due from other governments 252,634 - -
Due from other funds 125,231 - -
Inventory 3,533 - -
Restricted cash and investments - 3,110,047 600,315
TOTAL ASSETS $ 4,291,598 $ 3,110,047 $ 2,678,994
LIABILITIES:
Accounts payable $ 15,248 $ 3,710 $ -
Deposits 109,490 - -
Due to other funds - 243,077 -
Deferred revenue 195,382 - 2,065,000
TOTAL LIABILITIES 320,120 246,787 2,065,000
FUND EQUITY:
Reserved:
Noncurrent notes receivable - - -
Inventory 3,533 - -
Low and moderate income housing - - -
Debt service - 2,863,260 613,994
Community and economic development - - -
Multi- year programs - - -
Unreserved, Reported In:
General fund 3,967,945 - -
Special revenue fund - - -
Capital projects fund - - -
Permanent fund - - -
TOTAL FUND EQUITY 3,971,478 2,863,260 613,994
TOTAL LIABILITIES AND FUND EQUITY $ 4,291,598 $ 3,110,047 $ 2,678,994
See independent auditors' report and notes to basic financial statements
Debt Service Funds
CITY OF HEALDSBURG
BALANCE SHEET
GOVERNMENTAL FUNDS
June 30, 2004
- 18 -
LIABILITIES AND FUND EQUITY
ASSETS
Community Community
Redevelopment Redevelopment Other Total
Commercial/ Low/ Moderate Governmental Governmental
Industrial Income General Funds Funds
$ 3 ,730 $ 1,166,728 $ 2,680,622 $ 2,969,553 $ 9 ,973,305
- -
4 39,522 - 71,020 103,546 6 46,457
5 9,828 14,957 - 52,198 8 48,718
- - - 1,840,225 1 ,840,225
6 3,874 30,374 6,816 23,757 1 41,924
- - - - 2 ,065,000
- - - 86,635 3 39,269
2 43,077 - - 1,700,000 2 ,068,308
- - - - 3 ,533
2 0,150,330 9,287,416 - - 3 3,148,108
$ 2 0,960,361 $ 10,499,475 $ 2,758,458 $ 6,775,914 $ 5 1,074,847
$ 2 7,049 $ 8,325 $ 8,027 $ 29,507 $ 9 1,866
2 53 - - - 1 09,743
1 ,700,000 - - 198,231 2 ,141,308
3 88,467 - - 450,708 3 ,099,557
2 ,115,769 8,325 8,027 678,446 5 ,442,474
- - - 1,465,225 1 ,465,225
- - - - 3 ,533
- 10,491,150 - - 1 0,491,150
- - - 936,640 4 ,413,894
1 6,637,521 - - - 1 6,637,521
2 ,207,071 - - - 2 ,207,071
- - - - 3 ,967,945
- - - 3,589,521 3 ,589,521
- - 2,750,431 17,649 2 ,768,080
- - - 88,433 8 8,433
1 8,844,592 10,491,150 2,750,431 6,097,468 4 5,632,373
$ 2 0,960,361 $ 10,499,475 $ 2,758,458 $ 6,775,914 $ 5 1,074,847
Capital Projects Funds
- 19 -
( This page left blank intentionally)
- 20 -
Fund balances - total governmental funds $ 45,632,373
Amounts reported for governmental activities in the statement of net assets are different because:
Capital assets used in governmental activities are not current financial resources
and therefore are not reported in the governmental funds balance sheet. 32,071,351
Long- term assets are not available to pay for current period expenditures and,
therefore, are deferred in the funds. 195,382
Internal service funds are used by management to charge the costs of
self- insurance and capital replacements to individual funds. The assets
and liabilities of the internal service funds are included in governmental
activities in the statement of net assets. 4,923,691
Internal balances included in internal service funds which are receivable from the
enterprise funds. 473,641
Long- term liabilities are not due and payable in the current period and, accordingly,
are not reported s fund liabilities. All liabilities, both current and long- term are
reported in the Statement of Net Assets:
General obligation bonds $ ( 5,635,000)
Tax allocation bonds payable ( 41,640,000)
Special assessment bonds payable ( 2,065,000)
Bond discount 2 85,154
Deferred charges for issuance costs 4 85,057
Total long- term liabilities ( 48,569,789)
Interest on long- term debt is not accrued in governmental funds, but rather is
recognized as an expenditure when due. ( 957,579)
Net assets of governmental activities $ 33,769,070
See independent auditors' report and notes to basic financial statements.
- 21 -
CITY OF HEALDSBURG
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS
June 30, 2004
Community Special
General Redevelopment Assessment
REVENUES:
Property taxes $ 662,888 $ - $ -
Special assessments - - 342,135
Sales and other taxes 3,414,603 - -
Charges for services 311,082 - -
Intergovernmental revenue 904,009 - -
Development fees and permits - - -
Investment income 53,762 4,493 4,738
Miscellaneous fees and charges 162,641 - -
Other revenues 13,272 - -
TOTAL REVENUES 5,522,257 4,493 346,873
EXPENDITURES:
Current:
General government 687,077 - -
Public safety 4,595,044 - -
Culture and recreation - - -
Community development - - -
Capital outlay - - -
Debt Service:
Principal retirement - 780,000 165,000
Interest and fees - 1,870,085 160,726
Bond issue costs - - -
Advance to refund bond escrow agent - - -
TOTAL EXPENDITURES 5,282,121 2,650,085 325,726
EXCESS OF REVENUES OVER
( UNDER) EXPENDITURES 240,136 ( 2,645,592) 21,147
OTHER FINANCING SOURCES ( USES):
Transfers in - 2,651,878 -
Transfers out ( 15,000) - -
General obligation bonds issued - - -
Payment to refund bond escrow agent - - -
Bond discount - - -
TOTAL OTHER
FINANCING SOURCES ( USES) ( 15,000) 2,651,878 -
NET CHANGE IN FUND BALANCES 225,136 6,286 21,147
FUND BALANCES - BEGINNING OF YEAR 3,746,342 2,856,974 592,847
FUND BALANCES - END OF YEAR $ 3,971,478 $ 2,863,260 $ 613,994
See independent auditors' report and notes to basic financial statements.
- 22 -
CITY OF HEALDSBURG
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
For the year ended June 30, 2004
GOVERNMENTAL FUNDS
Debt Service Funds
Community Community
Redevelopment Redevelopment Other Total
Commercial/ Low/ Moderate Governmental Governmental
Industrial Income General Funds Funds
$ 4,866,356 $ 1,216,988 $ - $ 641,974 $ 7,388,206
- - - - 342,135
- - - - 3,414,603
- - - - 311,082
- - - 850,566 1,754,575
- - - 85,949 85,949
286,562 147,350 22,178 121,858 640,941
192,216 - - - 354,857
1,509,930 - - 158,739 1,681,941
6,855,064 1,364,338 22,178 1,859,086 15,974,289
2,938 4,731 2,299 236,546 933,591
- - - 6,546 4,601,590
- - - 24,809 24,809
4,609,087 333,607 - 96,102 5,038,796
- - 4,347,572 - 4,347,572
- - - 120,000 1,065,000
44,018 - - 134,070 2,208,899
- - - 93,863 93,863
- - - 208,029 208,029
4,656,043 338,338 4,349,871 919,965 18,522,149
2,199,021 1,026,000 ( 4,327,693) 939,121 ( 2,547,860)
162,793 60,000 7,457,528 1,249,535 11,581,734
( 7,760,372) ( 1,623,299) ( 720,932) ( 1,847,716) ( 11,967,319)
- - - 3,620,000 3,620,000
- - - ( 3,470,000) ( 3,470,000)
- ( 58,153) ( 58,153)
( 7,597,579) ( 1,563,299) 6,736,596 ( 506,334) ( 293,738)
( 5,398,558) ( 537,299) 2,408,903 432,787 ( 2,841,598)
24,243,150 11,028,449 341,528 5,664,681 48,473,971
$ 18,844,592 $ 10,491,150 $ 2,750,431 $ 6,097,468 $ 45,632,373
- 23 -
Capital Projects Funds
( This page left blank intentionally)
- 24 -
Net change in fund balances - total governmental funds $ ( 2,841,598)
Amounts reported for governmental activities in the statement of 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
as depreciation expense. This is the amount by which capitalizable capital outlays
($ 6,635,915) exceeded depreciation ($ 414,468 ) in the current period. 6,221,447
Some revenues reported in the Statement of Activities are not considered to be
available to finance current expenditures and therefore are not reported as
revenues in the governmental funds. 195,382
The issuance of long- term debt provides current financial resources to
governmental funds, while the repayment of the principal of long- term debt
consumes the current financial resources of governmental funds. Neither
transaction, however, has any effect on net assets. Also, governmental funds
report the effect of issuance costs, premiums, discounts, and similar items
when debt is first issued, whereas these amounts are deferred and amortized
in the statement of activities. These amounts are the net effect of these
differences in the treatment of long- term debt:
Debt issued or incurred:
Issuance of general obligation bonds $ ( 3,620,000)
Payment to refund bond escrow agent 3,470,000
Advance to refund bond escrow agent 115,000
Bond issuance costs 93,863
Bond discount 58,153
Principal payments 1,065,000
1,182,016
Some expenses reported in the statement of activities do not require the use of
current financial resources and therefore are not reported as expenditures in
the governmental funds:
Accrued interest ( 197,764)
Amortization of issuance costs ( 21,886)
Amortization of bond discount ( 12,994)
( 232,644)
Internal service funds are used by management to charge the costs of self- insurance
and capital replacements to individual funds. A portion of the net loss of the
internal service funds is reported with governmental activities. ( 291,180)
Change in net assets of governmental activities $ 4,233,423
See independent auditors' report and notes to basic financial statements.
- 25 -
CITY OF HEALDSBURG
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS
For the year ended June 30, 2004
TO THE STATEMENT OF ACTIVITIES
Water Sewer Electric
Fund Fund Fund
CURRENT ASSETS:
Cash and investments $ 4,179,337 $ 6,705,922 $ 8,220,676
Accounts receivable 721,995 563,095 1,138,076
Notes receivable - - -
Due from other funds - - 87,008
Inventory 77,388 1,624 1,199,138
Prepaid items - - 740,576
TOTAL CURRENT ASSETS 4,978,720 7,270,641 11,385,474
NONCURRENT ASSETS:
Deferred issuance cost 739,055 129,637 -
Restricted cash and investments 5,364,760 660,990 -
Capital assets:
Land 285,780 682,880 48,360
Building 1,449,918 206,166 447,835
Streets - - -
Utility systems 17,572,124 17,272,023 13,319,086
Drainage - 8,666,790 -
Machinery and equipment 478,235 475,149 329,487
Operations - - -
Construction in progress 3,305,538 2,340,185 1,166,972
Less accumulated depreciation ( 4,491,937) ( 6,871,942) ( 5,893,713)
TOTAL NONCURRENT ASSETS 24,703,473 23,561,878 9,418,027
TOTAL ASSETS 29,682,193 30,832,519 20,803,501
LIABILITIES:
CURRENT LIABILITIES:
Accounts payable and accrued liabilities 382,584 126,660 213,164
Deposits from others 5,151 - 161,815
Due to other funds - - -
Claims payable - - -
Compensated absences - - -
Certificates of participation 405,000 65,000 -
TOTAL CURRENT LIABILITIES 792,735 191,660 374,979
NONCURRENT LIABILITIES:
Certificates of participation 14,341,254 3,226,837 -
TOTAL LIABILITIES 15,133,989 3,418,497 374,979
NET ASSETS:
Invested in capital assets, net of related debt 3,853,404 19,479,414 9,418,027
Restricted for capital projects 5,364,760 660,990 -
Unrestricted 5,330,040 7,273,618 11,010,495
TOTAL NET ASSETS $ 14,548,204 $ 27,414,022 $ 20,428,522
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds
Net assets of business- type activities
See independent auditors' report and notes to basic financial statements.
CITY OF HEALDSBURG
STATEMENT OF NET ASSETS
PROPRIETARY FUNDS
June 30, 2004
LIABILITIES
- 26 -
ASSETS
Business- type Activities - Enterprise Funds
Governmental
Activities -
Other Total Internal
Streets Enterprise Enterprise Service
Fund Funds Funds Funds
$ 2,864,283 $ 2,150,898 $ 24,121,116 $ 4,902,903
15,259 115,819 2,554,244 36,733
- - - 35,668
- 67,080 154,088 -
- 15,322 1,293,472 35,143
- - 740,576 -
2,879,542 2,349,119 28,863,496 5,010,447
- - 868,692 -
- - 6,025,750 -
- 2,813,784 3,830,804 -
- 3,814,903 5,918,822 -
22,408,425 20,000 22,428,425 -
- - 48,163,233 -
- - 8,666,790 -
10,739 600,975 1,894,585 4,862,159
- 1,195,526 1,195,526 -
2,182,268 511,544 9,506,507 -
( 5,189,705) ( 2,442,654) ( 24,889,951) ( 2,794,067)
19,411,727 6,514,078 83,609,183 2,068,092
22,291,269 8,863,197 112,472,679 7,078,539
140,541 170,741 1,033,690 709,981
72,467 317,519 556,952 -
- 81,088 81,088 -
- - - 39,479
- - - 1,405,388
- - 470,000 -
213,008 569,348 2,141,730 2,154,848
- - 17,568,091 -
213,008 569,348 19,709,821 2,154,848
19,411,727 6,514,078 58,676,650 2,068,092
- - 6,025,750 -
2,666,534 1,779,771 28,060,458 2,855,599
$ 22,078,261 $ 8,293,849 92,762,858 $ 4,923,691
( 473,641)
$ 92,289,217
Business- type Activities -
Enterprise Funds ( Continued)
- 27 -
Water Sewer Electric
Fund Fund Fund
OPERATING REVENUES:
Charges for services $ 3,844,742 $ 3,517,024 $ 8,366,511
Development fees 554,190 628,082 47,926
Rental income - - -
Miscellaneous 11,157 66,515 29,444
TOTAL OPERATING REVENUES 4,410,089 4,211,621 8,443,881
OPERATING EXPENSES:
Purchased power - - 4,910,373
Operations 1,282,118 926,611 1,351,066
Administrative 815,028 983,338 1,197,543
Insurance premiums - - -
Depreciation 367,010 496,859 353,922
TOTAL OPERATING EXPENSES 2,464,156 2,406,808 7,812,904
OPERATING INCOME ( LOSS) 1,945,933 1,804,813 630,977
NONOPERATING REVENUES ( EXPENSES):
Taxes - - -
Intergovernmental grants - - -
Investment earnings 105,182 111,008 141,732
Loss on disposal of assets ( 5,471) - ( 8,545)
Interest expense ( 680,810) ( 181,481) -
TOTAL NONOPERATING REVENUES ( EXPENSES) ( 581,099) ( 70,473) 133,187
INCOME ( LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 1,364,834 1,734,340 764,164
CAPITAL CONTRIBUTIONS AND TRANSFERS:
Capital contributions - 2,525 491,116
Transfers in - - 1,714
Transfers out ( 257,436) ( 147,402) ( 267,178)
TOTAL CAPITAL CONTRIBUTIONS AND TRANSFERS ( 257,436) ( 144,877) 225,652
CHANGE IN NET ASSETS 1,107,398 1,589,463 989,816
TOTAL NET ASSETS - BEGINNING OF YEAR 13,440,806 25,824,559 19,438,706
TOTAL NET ASSETS - END OF YEAR $ 14,548,204 $ 27,414,022 $ 20,428,522
Adjustment to reflect the consolidation of internal
service fund activities related to enterprise funds:
Change in net assets of business- type activities - prior years
Change in net assets of business- type activities - current year
Net assets of business- type activities
See independent auditors' report and notes to basic financial statements.
- 28 -
CITY OF HEALDSBURG
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
PROPRIETARY FUNDS
For the year ended June 30, 2004
Business- type Activities - Enterprise Funds
Governmental
Activities-
Other Total Internal
Streets Enterprise Enterprise Service
Fund Funds Funds Funds
$ - $ 201,533 $ 15,929,810 $ 5,556,354
108,216 447,970 1,786,384 4,631
- 311,797 311,797 -
727,337 161,747 996,200 139,088
835,553 1,123,047 19,024,191 5,700,073
- - 4,910,373 -
631,244 1,322,433 5,513,472 1,611,496
138,778 414,602 3,549,289 82,743
- - - 4,253,217
432,603 157,091 1,807,485 468,920
1,202,625 1,894,126 15,780,619 6,416,376
( 367,072) ( 771,079) 3,243,572 ( 716,303)
- 931,839 931,839 -
- 4,986 4,986 -
47,164 33,789 438,875 73,561
- - ( 14,016) -
- - ( 862,291) -
47,164 970,614 499,393 73,561
( 319,908) 199,535 3,742,965 ( 642,742)
- - 493,641 -
1,198,064 434,557 1,634,335 124,709
( 604,632) ( 111,811) ( 1,388,459) ( 35,000)
593,432 322,746 739,517 89,709
273,524 522,281 4,482,482 ( 553,033)
21,804,737 7,771,568 88,280,376 5,476,724
$ 22,078,261 $ 8,293,849 92,762,858 $ 4,923,691
( 211,788)
( 261,853)
$ 92,289,217
Enterprise Funds ( Continued)
- 29 -
Business- type Activities -
Water Sewer Electric
Fund Fund Fund
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers $ 4,302,355 $ 4,111,711 $ 8,590,763
Payments to suppliers ( 924,597) ( 1,484,820) ( 6,502,178)
Payments to employees ( 1,078,809) ( 859,003) ( 1,391,763)
NET CASH PROVIDED ( USED) BY OPERATING ACTIVITIES 2,298,949 1,767,888 696,822
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Taxes - - -
Intergovernmental grants - - -
Cash received from other funds - - 1,714
Cash paid to other funds ( 257,436) ( 147,402) ( 267,178)
NET CASH PROVIDED ( USED) BY
NONCAPITAL FINANCING ACTIVITIES ( 257,436) ( 147,402) ( 265,464)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Acquisition of capital assets - capital replacement ( 1,518,478) ( 1,575,152) ( 475,379)
Capital contributions - 2,525 491,116
Retirement of debt ( 395,000) ( 65,000) -
Interest paid ( 680,810) ( 181,481) -
NET CASH PROVIDED ( USED) BY CAPITAL
AND RELATED FINANCING ACTIVITIES ( 2,594,288) ( 1,819,108) 15,737
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income 104,482 112,934 130,505
Loans collected ( granted) 14,617 18,110 20,681
NET CASH PROVIDED ( USED) INVESTING ACTIVITIES 119,099 131,044 151,186
NET INCREASE ( DECREASE) IN
CASH AND CASH EQUIVALENTS ( 433,676) ( 67,578) 598,281
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 9,977,773 7,434,490 7,622,395
CASH AND CASH EQUIVALENTS - END OF YEAR $ 9,544,097 $ 7,366,912 $ 8,220,676
RECONCILIATION OF OPERATING INCOME ( LOSS) TO
NET CASH PROVIDED ( USED) BY OPERATING ACTIVITIES:
Operating income ( loss) $ 1,945,933 $ 1,804,813 $ 630,977
Depreciation 367,010 496,859 353,922
Change in assets and liabilities:
( Increase) decrease in accounts receivable ( 107,734) ( 99,910) 146,882
( Increase) decrease in inventory ( 2,467) ( 831) 67,153
( Increase) decrease in prepaid items 1,058 394 ( 232,914)
Increase ( decrease) in accounts payable 95,243 ( 433,437) ( 45,072)
Increase ( decrease) in deposits ( 94) - ( 224,126)
Increase ( decrease) in other accrued liabilities - - -
NET CASH PROVIDED ( USED) BY
OPERATING ACTIVITIES $ 2,298,949 $ 1,767,888 $ 696,822
See independent auditors' report and notes to basic financial statements.
Business- type Activities - Enterprise Funds
- 30 -
CITY OF HEALDSBURG
STATEMENT OF CASH FLOWS
For the year ended June 30, 2004
PROPRIETARY FUNDS
Governmental
Activities-
Other Total Internal
Streets Enterprise Enterprise Service
Fund Funds Funds Funds
$ 824,376 $ 1,023,200 $ 18,852,405 $ 5,690,542
( 257,675) ( 920,710) ( 10,089,980) ( 5,673,761)
( 502,671) ( 541,772) ( 4,374,018) ( 228,489)
64,030 ( 439,282) 4,388,407 ( 211,708)
- 931,839 931,839 -
- 4,986 4,986 -
1,198,064 434,557 1,634,335 124,709
( 604,632) ( 207,208) ( 1,483,856) ( 35,000)
593,432 1,164,174 1,087,304 89,709
( 921,704) ( 328,162) ( 4,818,875) ( 296,497)
- - 493,641 -
- - ( 460,000) -
- - ( 862,291) -
( 921,704) ( 328,162) ( 5,647,525) ( 296,497)
47,700 32,748 428,369 58,256
- 78,874 132,282 ( 3,140)
47,700 111,622 560,651 55,116
( 216,542) 508,352 388,837 ( 363,380)
3,080,825 1,642,546 29,758,029 5,266,283
$ 2,864,283 $ 2,150,898 $ 30,146,866 $ 4,902,903
$ ( 367,072) $ ( 771,079) $ 3,243,572 $ ( 716,303)
432,603 157,091 1,807,485 468,920
( 11,176) ( 99,848) ( 171,786) ( 9,410)
- 3,896 67,751 18,756
- 30 ( 231,432) -
38,373 117,532 ( 227,361) -
( 28,698) 153,096 ( 99,822)
- - - 26,329
$ 64,030 $ ( 439,282) $ 4,388,407 $ ( 211,708)
Business- type Activities -
Enterprise Funds ( Continued)
- 31 -
Private Purpose
Trust Funds
ASSETS:
Cash and investments $ 842,593
Interest receivable 4,294
TOTAL ASSETS 846,887
LIABILITIES:
Accounts payable 242
Deposits 2,206
TOTAL LIABILITIES 2,448
NET ASSETS:
Held in trust for other purposes $ 844,439
See independent auditors' report and notes to basic financial statements.
- 32 -
CITY OF HEALDSBURG
STATEMENT OF FIDUCIARY NET ASSETS
June 30, 2004
FIDUCIARY FUNDS
Private Purpose
Trust Funds
ADDITIONS:
Contributions $ 23,167
Investment income 13,971
Fees and charges 31,418
Transfers in 50,000
TOTAL ADDITIONS 118,556
DEDUCTIONS:
Community development 108,910
CHANGE IN NET ASSETS 9,646
NET ASSETS - BEGINNING OF YEAR 834,793
NET ASSETS - END OF YEAR $ 844,439
See independent auditors' report and notes to basic financial statements.
- 33 -
CITY OF HEALDSBURG
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
June 30, 2004
FIDUCIARY FUNDS
See independent auditors’ report.
- 34-
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
June 30, 2004
1. SIGNIFICANT ACCOUNTING POLICIES:
Description of the Reporting Entity - The basic financial statements of the City of Healdsburg
( City) include the financial activities of the City and its component units: the Healdsburg
Community Redevelopment Agency ( CRA), Healdsburg Financing Authority ( HFA) and the
Healdsburg Public Improvement Corporation ( HPIC).
The criteria used in determining the scope of the reporting entity are based on the provisions of
Governmental Accounting Standards Board Statement ( GASB) 14. The City of Healdsburg is the
primary government unit. Component units are those entities which are financially accountable to
the primary government, either because the City appoints a voting majority of the component units’
Board, or because the component unit will provide a financial benefit or impose a financial burden
on the City.
The component units have been accounted for as " blended" component units of the City. Despite
being legally separate, these entities are so intertwined with the City that they are, in substance,
part of the City's operations. Accordingly, the balances and transactions of these component units
are reported within the funds of the City. Balances for the CRA are reported as separate funds in
the Special Revenue, Debt Service, Capital Projects and Fiduciary Funds. HPIC transactions are
included in the Water and Electric Enterprise Funds. HFA transactions are recorded in the
Community Redevelopment Agency Debt Service Fund. The following criteria were used in
determining that the component units were blended:
The members of the City Council or other members appointed by the City Council act as
governing bodies of the CRA, HPIC and HFA. In addition, the CRA, HPIC and HFA provide
services, which benefit the City.
The City and the CRA are financially interdependent, and the governing bodies of the city and
CRA are the same.
The CRA and HFA are financially interdependent. The CRA makes annual payments to HFA,
which are used for debt service on bonds issued by HFA.
The City and HPIC are financially interdependent. The City makes annual lease payments to
HPIC, which are used for debt service on the certificates issued by HPIC.
Separate financial statements for the CRA and HPIC are available at the City's Administrative
Offices.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 35 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Description of Joint Powers Authorities Participation - The City participates in one joint power
activity and a pooled arrangement through formally organized and separate entities. The financial
activities of the Northern California Power Agency and the Redwood Empire Municipal Insurance
Fund are not included in the accompanying basic financial statements as they are administered by
boards separate from and independent of the City. ( See Notes 9 and 10)
Government- Wide and Fund Financial Statements - The government- wide financial statements
( i. e., the statement of net assets and the statement of changes in net assets) report information about
the reporting government as a whole, except for its fiduciary activities. Governmental activities,
which normally are supported by taxes and intergovernmental revenues, are reported separately
from business- type activities, which rely to a significant extent on fees and charges for support.
Likewise, the primary government ( including its blended component units) is reported separately
from discretely presented component units for which the primary government is financially
accountable. The City has no discretely presented component units. For the most part, the effect
of interfund activity has been removed from these statements.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment 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 or segment. Taxes and other items not
properly included among program revenues are reported instead as general revenues.
The underlying accounting system of the City is organized and operated on the basis of separate
funds, each of which is considered to be a separate accounting entity. The operations of each fund
are accounted for with a separate set of self- balancing accounts that comprise its assets, liabilities,
fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are
allocated to and accounted for in individual funds based upon the purposes for which they are to be
spent and the means by which spending activities are controlled.
Separate financial statements for the government’s governmental, proprietary, and fiduciary funds
are presented after the government- wide financial statements. These statements display
information about major funds individually and other funds in the aggregate for governmental and
proprietary funds. Fiduciary statements, even though excluded from the government- wide
financial statements include financial information that primarily represent assets held by the City in
a custodial capacity for other individuals or organizations.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 36 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Measurement Focus, Basis of Accounting, and Financial Statement Presentation - The
government- wide financial statements are reported using the economic resources measurement
focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial
statements. Under the economic resources measurement focus, all assets and liabilities ( whether
current or noncurrent) associated with their activity are included on their balance sheets. Operating
statements present increases ( revenues) and decreases ( expenses) in total net assets. Under the
accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a
liability is incurred, regardless of the timing of related cash flows. Proprietary funds distinguish
operating revenues and expenses from nonoperating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a
proprietary fund’s principal ongoing operations. Nonexchange transactions, in which the City
gives ( or receives) value without directly receiving ( or giving) equal value in exchange include
property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property
taxes is recognized in the fiscal year which the taxes are levied. Revenue from grants,
entitlements, and donations is recognized in the fiscal year in which all the eligibility requirements
have been satisfied. Operating expenses for proprietary funds include the cost of sales and
services, administrative expenses, and depreciation on capital assets. All revenues and expenses
not meeting this definition are reported as nonoperating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the government’s policy
to use restricted resources first, then unrestricted resources, as they are needed.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Under the current financial
resources measurement focus, only current assets and current liabilities are generally included on
their balance sheets. The reported fund balance ( net current assets) is considered to be a measure
of “ available spendable resources”. Governmental fund operating statements present increases
( revenues and other financing sources) and decreases ( expenditures and other financing uses) in net
current assets. Accordingly, they are said to present a summary of sources and uses of “ available
spendable resources” during a period. Noncurrent portions of long- term receivables due to
governmental funds are reported on their balance sheets in spite of their spending measurement
focus. However, special reporting treatments are used to indicate that they should not be
considered “ available spendable resources” since they do not represent net current assets.
Recognition of governmental fund type revenue represented by noncurrent receivables is deferred
until they become current receivables. Noncurrent portions of other long- term receivables are
offset by fund balance reserve accounts.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 37 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Measurement Focus, Basis of Accounting, and Financial Statement Presentation ( Continued)
Under the modified accrual basis of accounting, revenues are considered to be available when they
are collectible within the current period or soon enough thereafter to pay liabilities of the current
period. For this purpose, the government considers revenues to be available if they are collected
within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a
liability is incurred, except for principal and interest on long- term liabilities, claims payable, and
compensated absences which are recognized as expenditures to the extent they have matured.
General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of
general long- term liabilities are reported as other financing sources.
Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are
all considered to be susceptible to accrual and so have been recognized as revenues of the current
fiscal period. Only the portion of special assessments receivable due within the current fiscal
period is considered to be susceptible to accrual as revenue of the current period. All other revenue
items are considered to be measurable and available only when cash is received by the government.
All government- wide, business- type activities and proprietary funds of the City follow FASB
Statements and Interpretations issued on or before November 30, 1989, Accounting Principles
Board Opinions and Accounting Research Bulletins, unless those pronouncements conflict with
GASB pronouncements.
Fund Classifications - The funds designated as major funds are determined by a mathematical
calculation consistent with GASB Statement No. 34.
Major Governmental Funds
The General Fund is the primary operating fund of the City. It is used to account for all
revenues and expenditures that are not required to be accounted for in another fund.
The Community Redevelopment Debt Service Fund accounts for the resources accumulated
and payments made for principal and interest on long- term obligations of the Community
Redevelopment Agency.
The Special Assessment Debt Service Fund accounts for the resources accumulated and
payments made for principle and interest of the City’s special assessment districts.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 38 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Major Governmental Funds ( Continued)
The Community Redevelopment Commercial/ Industrial Capital Projects Fund accounts for
revenues received from tax increments redevelopment projects.
The Community Redevelopment Low/ Moderate Income Capital Projects Fund accounts for
revenues received from tax increments for low to moderate income housing projects.
The General Capital Projects Fund accounts for non- enterprise projects acquired by the City.
Major Enterprise Funds
The Water Fund accounts for the activities of water utility to the residents of the city.
The Sewer Fund accounts for the activities of sewer utility to the residents of the city.
The Electric Fund accounts for the activities of the government’s electric distribution
operations.
The Streets Fund accounts for the activities of the government’s street maintenance operations.
The City’s fund structure also includes the following fund types:
Governmental Fund Types
The Special Revenue Funds are used to account for revenues derived from specific revenue
sources. These funds are required by statute or ordinance to finance particular functions or
activities of government.
The Debt Service Funds are used to account for accumulation of resources for the payment of
long- term debt principal and interest.
The Capital Projects Funds are used to account for resources used for the acquisition of capital
facilities by a government, except for those capital facilities financed by Enterprise Funds.
The Permanent Fund type is used to report resources that are legally restricted to the extent that
only earnings, and not principal, are used for the benefit of the City.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 39 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Proprietary Fund Type
The Enterprise Funds are used to account for operations that are financed and operated in a
manner similar to private business enterprises- where the intent of the governing body is that
the costs ( expenses including depreciation) of providing goods or services to the general public
on a continuing basis be financed or recovered primarily through user charges.
The Internal Service Funds are used to account for the financing of special activities that
provide services within the City. These activities include insurance and benefits, vehicle
maintenance, information services and building maintenance.
Fiduciary Fund Type
Private Purpose Trust Funds are used to report trust arrangements under which principal and
income benefits to support private organizations or other governments.
Encumbrance Accounting is employed as an extension of the budgetary process. This method
records purchase orders, contracts and other commitments for the expenditure of funds in order to
reserve that portion of the applicable appropriation. The City Council honors encumbrances
outstanding at year- end.
Capital Assets ( including infrastructure) are recorded at cost where historical records are available
and at an estimated original cost where no historical records exist. Contributed capital assets are
valued at their estimated fair market value at the date of contribution. Generally, capital asset
purchases in excess of $ 5,000 are capitalized if they have an expected useful life of 3 years or
more.
Capital assets include additions to public domain ( infrastructure) which includes certain
improvements including pavement, curb and gutter, sidewalks, traffic control devices, bridges and
right- of- way corridors within the City. The City has valued and recorded all infrastructure asset
data as of June 30, 2004.
Capital assets used in operations are depreciated over their estimated useful lives using the
straight- line method in the Government- wide Financial Statements and in the Fund Financial
Statements of the Proprietary Funds. Depreciation is charged as an expense against operations and
accumulated depreciation is reported on the respective balance sheet.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 40 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Capital Assets ( Continued)
The lives used for depreciation purposes of each capital asset class are:
Buildings 10 to 30 years
Improvements other than buildings 10 years
Water distribution lines 10 to 50 years
Vehicles 3 to 15 years
Machinery and equipment 10 years
Office furniture, computers and equipment 3 to 10 years
Leased property 5 to 10 years
Infrastructure 50 years
Inventory is valued at cost using the first- in, first- out ( FIFO) method. Inventory of the General
Fund consists of expendable supplies held for consumption. The cost is recorded as an expenditure
in the General Fund at the time individual inventory items are consumed rather than when
purchased. Inventory of the Enterprise Funds consist principally of materials and supplies for
utility operations.
Cash and Investments are pooled by the City for investment purposes. Investments are stated at fair
value. Fair value is the value at which a financial instrument could be exchanged in a current
transaction between willing parties, other than in a forced or liquidation sale.
Vested Vacation and Sick Leave obligations are fully funded and recorded in the Insurance and
Benefit Internal Service Fund as accrued compensated absences.
Property Tax Levy, Collection and Maximum Rates - The State of California ( State) Constitution
Article XIII A provides that the combined maximum property tax rate on any given property may
not exceed one percent of its assessed value unless an additional amount for general obligation debt
has been approved by voters. Assessed value is calculated at 100 percent of market value as
defined by Article XIII A and may be adjusted by no more than two percent per year unless the
property is sold or transferred. The State Legislature has determined the method of distribution of
receipts from a one percent tax levy among the counties, cities, school districts and other districts.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 41 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Property Tax Levy, Collection and Maximum Rates ( Continued)
Sonoma County assesses properties, bills for and collects secured and unsecured property taxes as
follows:
Secured Unsecured
Lien dates January 1 January 1
Levy dates July 1 July 1
Due dates 50% on November 1 July 1
50% on February 1
Delinquent as of December 10 ( for November) August 31
April 10 ( for February)
The term " unsecured" refers to taxes on personal property. These taxes are secured by liens on the
property being taxed.
The City accrues only those taxes, which are levied for the tax year and received within sixty days
after year- end.
Statement of Cash Flows - For the purpose of the statements of cash flows, cash and cash
equivalents include highly liquid investments with original maturities of three months or less,
including investments in the California Local Agency Investment Fund, Sonoma County
Investment Fund, Banker’s Acceptances and Commercial Paper.
Claims Payable - The City reports its risk activities in the Insurance and Benefit Service Fund.
When it is probable that a claim liability has been incurred at year- end, and the amount of the loss
can be reasonably estimated, the City records the estimated loss, net of any insurance coverage
under its self- insurance program. Estimated claims losses, if any, include an accrual for IBNR
(" incurred but not reported") claims. Small dollar claims are recorded as expenditures when paid.
Deferred Revenue - The deferred revenue reported on the Governmental Funds Balance Sheet
represents $ 195,382 in funds not available to pay for current expenditures and $ 2,904,175 in
receivables for which the revenue has not been earned.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 42 -
1. SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED):
Use of Estimates - The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenditures during the reporting period. Specifically, the City has made certain estimates and
assumptions relating to the collectibility of its receivables ( including accounts receivable, and notes
receivable, the valuation of property held for resale, valuation of capital assets and depreciation
expense, and the ultimate outcome of claims payable. Actual results could differ from those
estimates and assumptions.
2. CASH AND INVESTMENTS:
Cash and Investments
Cash and investments at June 30, 2004 are classified in the accompanying financial statements as
follows:
Government- Fiduciary
Wide Fund
Statement of Statement of
Net Assets Net Assets Total
Unrestricted assets:
Cash and investments $ 38,997,324 $ 842,593 $ 39,839,917
Restricted assets:
Cash and investments 39,173,858 - 39,173,858
Total Cash and Investments $ 78,171,182 $ 842,593 $ 79,013,775
Cash and investments at June 30, 2004 consisted of the following:
Cash on hand $ 1,350
Deposits with financial institutions 737,061
Investments 78,275,364
Total Cash and Investments $ 79,013,775
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 43 -
2. CASH AND INVESTMENTS ( CONTINUED):
Investment Authorized by the California Government Code and the City’s Investment Policy
The table below identifies the investment types that are authorized for the City by the California
Government Code ( or the City’s investment policy, where more restrictive). The table also
identifies certain provisions of the California Government Code ( or the City’s investment policy,
where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.
This table does not address investments of debt proceeds held by bond trustee that are governed by
the provisions of debt agreements of the City, rather than the general provisions of the California
Government Code or the City’s investment policy.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity of * Portfolio in One Issuer
U. S. Treasury Obligations 5 years No Limit No Limit
U. S. Government Sponsored Entities 5 years No Limit No Limit
Banker’s Acceptances 180 days 40% 10%
Commercial Paper 180 days 25% 10%
Negotiable Certificates of Deposit 5 years 30% 10%
Repurchase Agreements 1 day 2.5% 10%
Medium- Term Notes 5 years 30% 10%
County Pooled Investment Funds N/ A 10% 10%
Local Agency Investment Fund ( LAIF) N/ A 10% 10%
* - Excluding amounts held by bond trustee that are not subject to California Government Code
restrictions.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 44 -
2. CASH AND INVESTMENTS ( CONTINUED):
Investments Authorized by Debt Agreements
Investment of debt proceeds held by bond trustee are governed by provisions of the debt
agreements, rather than the general provisions of the California Government Code or the City’s
investment policy. The table below identifies the investment types that are authorized for
investments held by bond trustee. The table also identifies certain provisions of these debt
agreements that address interest rate risk, credit risk, and concentration of credit risk.
Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity Allowed in One Issuer
U. S. Treasury Obligations None No Limit No Limit
U. S. Government Sponsored Entities None No Limit No Limit
Banker’s Acceptances 30 days No Limit No Limit
Commercial Paper 270 days No Limit No Limit
Money Market Mutual Funds N/ A No Limit No Limit
Investment Contracts 30 years No Limit No Limit
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 45 -
2. CASH AND INVESTMENTS ( CONTINUED):
Disclosures Relating to Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of
its fair value to changes in market interest rates. One of the ways that the City manages its
exposure to interest rate risk is by purchasing a combination of shorter term and longer term
investments and by timing cash flows from maturities so that a portion of the portfolio is maturing
or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity
needed for operations.
Information about the sensitivity of the fair values of the City’s investments ( including investments
held by bond trustee) to market interest rate fluctuations is provided by the following table that
shows the distribution of the City’s investments by maturity:
Remaining Maturity ( in Months)
12 Months 13 - 24 25 - 60
Investment Type or Less Months Months Total
Local Agency Investment Fund $ 3,036,322 $ - $ - $ 3,036,322
Sonoma County Investment Pool 239,457 - - 239,457
Commercial Paper 2,891,589 - - 2,891,589
Banker’s Acceptance 3,992,014 - - 3,992,014
Federal Farm Credit Bank 3,970,737 1,985,347 4,000,000 9,956,084
Federal Farm Loan Bank 12,912,240 8,486,484 15,986,003 37,384,727
U. S. Treasury Obligations 995,147 - - 995,147
Money Market Mutual Funds 19,780,024 - - 19,780,024
$ 47,817,530 $ 10,471,831 $ 19,986,003 $ 78,275,364
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 46 -
2. CASH AND INVESTMENTS ( CONTINUED):
Disclosures Relating to 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. Presented below is the minimum rating required by ( where
applicable) the California Government Code, the City’s investment policy, or debt agreements, and
the actual rating as of year end for each investment type:
Total Minimum
as of Legal
Investment Type June 30, 2004 Rating AAA A- 1+ P- 1 Unrated
Local Agency
Investment Fund $ 3,036,322 N/ A $ - $ - $ - $ 3,036,322
Sonoma County
Investment Pool 239,457 N/ A - - - 239,457
Commercial Paper 2,891,589 A- 1+ - 2,891,589 - -
Banker’s Acceptance 3,992,014 P- 1 - - 3,992,014 -
Federal Farm Credit Bank 9,956,084 AAA 9,956,084 - - -
Federal Farm Loan Bank 37,384,727 AAA 37,384,727 - - -
U. S. Treasury Obligations 995,147 AAA 995,147 - - -
Money Market
Mutual Funds 19,780,024 N/ A - - - 19,780,024
Total $ 78,275,364 $ 48,335,958 $ 2,891,589 $ 3,992,014 $ 23,055,803
N/ A - Not Applicable
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 47 -
2. CASH AND INVESTMENTS ( CONTINUED):
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any
one issuer beyond that stipulated by the California Government Code. Investments in any one
issuer that represent 5% or more of total City’s investments are as follows:
Reported
Issuer Investment Type Amount
Bank of America Banker’s Acceptance $ 3,992,014
Federal Agency Securities Federal Farm Credit Bank 9,956,084
Federal Agency Securities Federal Farm Loan Bank 37,384,727
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 its deposits or will not be able to recover
collateral securities that are in the possession of an outside party. 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 its 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 deposits or investments, 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 ( unless so waived by the governmental unit). 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 public
deposits. At June 30, 2004, the City deposits ( bank balances) were insured by the Federal
Depository Insurance up to $ 100,000 and the remaining balance of the deposits of $ 1,000,717 were
collateralized under California Law. The difference between the bank balances and deposits
represent deposits in transit and outstanding checks.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 48 -
2. CASH AND INVESTMENTS ( CONTINUED):
Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund ( LAIF) that is regulated
by California Government Code Section 16429 under the oversight of the Treasurer of the State of
California. The 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.
Investment in County Investment Pool
The City is a voluntary participant in the Sonoma County Investment Fund ( County Pool) that is
regulated by California Government Code Section 16429 under the oversight of the Treasurer of
the County of Sonoma. 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 the County for the entire County portfolio ( in relation to the amortized cost of that
portfolio). The balance available for withdrawal is based on the accounting records maintained by
the County, which are recorded on an amortized cost basis.
3. INTERFUND RECEIVABLES/ PAYABLES AND TRANSFERS:
Due to and from other funds at June 30, 2004 are as follows:
Receivable Fund Payable Fund Amount
General Other Governmental Funds $ 125,231
Community Redevelopment Community Redevelopment
Commercial Industrial Debt Service 243,077
Other Governmental Funds Community Redevelopment
Commercial Industrial 1,700,000
Electric Enterprise Other Governmental Funds 73,000
Other Enterprise Funds 14,008
Other Enterprise Funds Other Enterprise Funds 67,080
$ 2,222,396
The amounts loaned between the funds represent temporary amounts advanced to pay for operating
expenses.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 49 -
3. INTERFUND RECEIVABLES/ PAYABLES AND TRANSFERS ( CONTINUED):
The compositions of the City’s interfund transfer balances as of June 30, 2004 are as follows:
Transfers In Transfers Out Amount
Community Redevelopment Community Redevelopment
Debt Service Commercial Industrial $ 1,902,878
Community Redevelopment
Low/ Moderate Income 749,000
Community Redevelopment Community Redevelopment
Commercial Industrial Commercial Industrial 55,930
Water Enterprise 9,955
Streets Enterprise 96,908
Community Redevelopment
Low/ Moderate Income General Capital Projects 60,000
General Capital Projects Community Redevelopment
Commercial Industrial 5,771,850
Community Redevelopment
Low/ Moderate Income 874,299
Other Governmental Funds 305,789
Water Enterprise 223,333
Sewer Enterprise 123,333
Electric Enterprise 123,924
Internal Service Funds 35,000
Other Governmental Funds Streets Enterprise 507,724
Other Enterprise Funds 111,811
General Capital Projects 630,000
Electric Enterprise General Capital Projects 1,714
Streets Enterprise Community Redevelopment
Commercial Industrial 21,114
Other Governmental Funds 1,057,370
Electric Enterprise 119,580
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 50 -
3. INTERFUND RECEIVABLES/ PAYABLES AND TRANSFERS ( CONTINUED):
The compositions of the City’s interfund transfer balances ( Continued):
Transfers In Transfers Out Amount
Other Enterprise Funds Other Governmental Funds $ 434,557
Internal Service General 15,000
Community Redevelopment
Commercial Industrial 8,600
General Capital Projects 29,218
Water Enterprise 24,148
Sewer Enterprise 24,069
Electric Enterprise 23,674
Fiduciary Other Governmental Funds 50,000
$ 13,390,778
The Community Redevelopment Debt Service Fund received funds to pay for debt service.
The General Capital Projects Fund received funds to pay for capital improvements.
The Other Governmental Funds received funds to pay for operating expenditures.
The Streets Enterprise Fund received funds to pay for street related improvements.
All other transfers between funds were used for payment of operating expenditures or expenses.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 51 -
4. CAPITAL ASSETS:
A summary of changes in the Governmental Activities capital assets at June 30, 2004 is as follows:
Governmental Activities:
Balance at Balance at
June 30, 2003 Additions Deletions June 30, 2004
Capital assets, not being depreciated:
Land $ 8,442,782 $ 3,996,223 $ - $ 12,439,005
Right of way 6,681,379 - - 6,681,379
Construction in progress 3,854,387 1,949,686 ( 5,220,380) 583,693
Total capital assets,
not being depreciated 18,978,548 5,945,909 ( 5,220,380) 19,704,077
Capital assets, being depreciated:
Buildings 8,120,527 5,841,251 - 13,961,778
Machinery and equipment 5,138,323 388,723 ( 214,646) 5,312,400
Infrastructure 1,143,453 - - 1,143,453
Total capital assets
being depreciated 14,402,303 6,229,974 ( 214,646) 20,417,631
Less accumulated depreciation for:
Buildings ( 2,408,252) ( 364,516) - ( 2,772,768)
Machinery and equipment ( 2,686,969) ( 496,007) 191,559 ( 2,991,417)
Infrastructure ( 195,211) ( 22,869) - ( 218,080)
Total accumulated depreciation ( 5,290,432) ( 883,392) 191,559 ( 5,982,265)
Total capital assets
being depreciated, net 9,111,871 5,346,582 ( 23,087) 14,435,366
Governmental activities
capital assets, net $ 28,090,419 $ 11,292,491 $ ( 5,243,467) $ 34,139,443
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 52 -
4. CAPITAL ASSETS ( CONTINUED):
A summary of changes in the Business- type Activities capital assets at June 30, 2004 is as follows:
Business- type Activities:
Balance at Balance at
June 30, 2003 Additions Deletions June 30, 2004
Capital assets, not being depreciated:
Land and land rights $ 3,830,804 $ - $ - $ 3,830,804
Construction in progress 11,025,350 4,692,964 ( 6,211,807) 9,506,507
Total capital assets,
not being depreciated 14,856,154 4,692,964 ( 6,211,807) 13,337,311
Capital assets, being depreciated:
Buildings 5,918,822 - - 5,918,822
Streets 21,144,674 1,283,751 - 22,428,425
Utility systems 43,392,267 4,770,966 - 48,163,233
Drainage 8,664,262 2,528 - 8,666,790
Machinery and equipment 1,572,397 322,188 - 1,894,585
Operations 1,195,526 - - 1,195,526
Total capital assets
being depreciated 81,887,948 6,379,433 - 88,267,381
Less accumulated depreciation for:
Buildings ( 2,568,248) ( 159,394) - ( 2,727,642)
Streets ( 4,756,565) ( 431,529) - ( 5,188,094)
Utility systems ( 10,211,708) ( 817,930) - ( 11,029,638)
Drainage ( 4,473,535) ( 266,602) - ( 4,740,137)
Machinery and equipment ( 650,422) ( 124,937) - ( 775,359)
Operations ( 409,191) ( 19,890) - ( 429,081)
Total accumulated depreciation ( 23,069,669) ( 1,820,282) - ( 24,889,951)
Total capital assets
being depreciated, net 58,818,279 4,559,151 - 63,377,430
Business- type activities
capital assets, net $ 73,674,433 $ 9,252,115 $ ( 6,211,807) $ 76,714,741
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 53 -
4. CAPITAL ASSETS ( CONTINUED):
Depreciation expense was charged to functions/ programs of the primary government as follows:
Governmental Activities:
General government $ 108,717
Public safety 181,528
Community development 101,375
Unallocated infrastructure depreciation 22,852
Capital assets held by the government’s internal
service funds are charged to the various functions
based on their usage of the assets 468,920
Total depreciation expense - governmental activities $ 883,392
Business- type Activities:
Water $ 367,010
Sewer 496,859
Electric 353,922
Street 432,603
Other 157,091
Total depreciation expense - business- type activities $ 1,807,485
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 54 -
5. LONG- TERM LIABILITIES:
The following is a summary of the Governmental Activities long- term liability transactions for the
year ended June 30, 2004:
Governmental Activities:
Balance at Balance at Due Within
July 1, 2003 Additions Reductions June 30, 2004 One Year
General Obligation Bonds ( GO):
1998 Refunding $ 2,135,000 $ - $ ( 120,000) $ 2,015,000 $ 125,000
1993 Refunding 3,585,000 - ( 3,585,000) - -
2003 Refunding - 3,620,000 - 3,620,000 165,000
Total GO Bonds 5,720,000 3,620,000 ( 3,705,000) 5,635,000 290,000
Tax Allocation Bonds ( TAB):
1995 Series 3,490,000 - ( 70,000) 3,420,000 75,000
2002 Series A 14,030,000 - ( 270,000) 13,760,000 270,000
2002 Series C 5,530,000 - ( 105,000) 5,425,000 105,000
2003 Series A 13,000,000 - ( 210,000) 12,790,000 270,000
2003 Series B 6,370,000 - ( 125,000) 6,245,000 125,000
Total TAB Bonds 42,420,000 - ( 780,000) 41,640,000 845,000
Special Assessments:
Foss Creek 310,000 - ( 55,000) 255,000 70,000
Area A 1,920,000 - ( 110,000) 1,810,000 110,000
Total Special
Assessments 2,230,000 - ( 165,000) 2,065,000 180,000
Compensated absences 1,520,012 - ( 114,624) 1,405,388 1,405,388
Bond discount ( 239,995) ( 58,153) 12,994 ( 285,154) -
Total governmental
activities long- term
liabilities $ 51,650,017 $ 3,561,847 $ ( 4,751,630) $ 50,460,234 $ 2,720,388
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 55 -
5. LONG- TERM LIABILITIES ( CONTINUED):
The following is a summary of the Business- type Activities long- term liability transactions for the
year ended June 30, 2004:
Business- type Activities:
Balance at Balance at Due Within
July 1, 2003 Additions Reductions June 30, 2004 One Year
Certificates of Participation
( COP):
1996 Sewer improvements $ 855,000 $ - $ ( 20,000) $ 835,000 $ 20,000
2000 B - CSCDA Water 3,030,000 - ( 55,000) 2,975,000 55,000
2000 B - CSCDA Sewer 2,525,000 - ( 45,000) 2,480,000 45,000
2001 A - CSCDA Water 6,745,000 - ( 230,000) 6,515,000 235,000
2002 C - CSCDA Water/
Wastewater 5,510,000 - ( 110,000) 5,400,000 115,000
Total COP Bonds 18,665,000 - ( 460,000) 18,205,000 470,000
Bond discount ( 173,628) - 6,719 ( 166,909) -
Total business- type
activities long- term
liabilities $ 18,491,372 $ - $ ( 453,281) $ 18,038,091 $ 470,000
Governmental Activities:
a. 1998 General Obligation Refunding Bonds:
In March 1998, the City issued $ 2,675,000 in General Obligation Refunding Bonds to advance
refund $ 2,410,000 of outstanding 1990 Series B General Obligation Bonds. The net proceeds
were deposited in an irrevocable trust with an escrow agent to provide for all future debt
service payments on the 1990 Series B bonds. As a result, the 1990 Series B bonds are
considered to be defeased, and the liability for those bonds has been removed from the
long- term liabilities. Interest on bonds varies from 3.80% to 5.05% with semi- annual debt
service payments on August 1 and February 1 of each year with principal maturing
August 1, 1998 through August 1, 2015. Debt service payments are made from property tax
levy authorized by the voters. The 1990 B General Obligation were redeemed on
August 1, 2000.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 56 -
5. LONG- TERM LIABILITIES ( CONTINUED):
Governmental Activities ( Continued):
b. 1993 General Obligation Refunding Bonds:
In December 1993, the City issued $ 4,175,000 in General Obligation Refunding Bonds to
advance refund the 1990 Series A General Obligation Bonds. The proceeds from the refunding
issue were placed in an irrevocable trust with an escrow agent to provide the remaining debt
service payments on the refunded debt. Accordingly, the trust account assets and the liability
for the defeased bonds are not included in the City’s financial statements. Interest on the bonds
varies between 4.3% to 5.375% with semi- annual debt service payments on February 1 and
August 1 of each year with principal maturing August 1, 1994 through August 1, 2015. Debt
service payments are made from property taxes levy authorized by the voters. The 1990
Series A General Obligation bonds were redeemed on August 1, 2000. The 1993 General
Obligation Refunding Bonds were refunded in July 2003.
c. 2003 General Obligation Refunding Bonds:
In July 2003, the City issued $ 3,620,000 in General Obligation Refunding Bonds to advance
refund $ 3,585,000 of outstanding 1998 General Obligation Bonds. The net proceeds were
deposited in an irrevocable trust with an escrow agent to provide for all future debt service
payments on the 1998 General Obligation Bonds. As a result, the 1998 General Obligation
Bonds are considered to be defeased, and the liability for those bonds has been removed from
the long- term liabilities. Interest on bonds varies from 2.5% to 3.6% with semi- annual debt
service payments on August 1 and February 1 of each year with principal maturing
August 1, 2004 through August 1, 2015. Debt service payments are made from property tax
levy authorized by the voters. The 1998 General Obligation Bonds were redeemed on
August 1, 2003. The advance refunding resulted in a cash flow decrease of $ 1,092,000 ( debt
service payments between the old and new debt) and an economic gain of $ 913,000 ( difference
between the present value of the old and new debt).
Future debt service requirements on these bonds are as follows:
Year Ending
June 30, Principal Interest Total
2005 $ 290,000 $ 198,376 $ 488,376
2006 310,000 188,712 498,712
2007 325,000 178,403 503,403
2008 350,000 167,435 517,435
2009 385,000 154,914 539,914
2010- 2014 2,460,000 539,739 2,999,739
2015- 2016 1,515,000 63,130 1,578,130
$ 5,635,000 $ 1,490,709 $ 7,125,709
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 57 -
5. LONG- TERM LIABILITIES ( CONTINUED):
Governmental Activities ( Continued):
d. Tax Allocation Bonds:
1995 Series - In December 1995, the Agency issued $ 3,900,000 1995 Tax Allocation Bonds.
The Bonds were issued to finance improvements in the Sotoyome Project Area. Interest on the
bonds varies from 4.20% to 7.50% with semi- annual debt service payments on June 1, and
December 1 of each year with principal maturing annually December 1, 1996 through
December 2025. Debt Service payments will be made from tax increment revenue received by
the Agency.
2002 Series A - In March 2002, the Healdsburg Financing Authority issued $ 14,290,000 in Tax
Allocation Bonds on behalf of the Agency. The bonds were issued to finance improvements in
the Sotoyome Project Area and to advance refund the 1993 Series A Certificates of
Participation. Interest on the bonds varies from 1.7% to 5.125 % with semi- annual debt service
payments on February 1 and August 1 of each year with principal maturing annually
August 1, 2002 through August 2031. Debt service payments will be made from tax increment
revenue received by the Agency.
The amount of defeased 1993 Series A Certificates of Participation outstanding at
June 30, 2004 was $ 2,295,000.
2002 Series C - In March 2002, the Healdsburg Financing Authority issued on behalf of the
Agency $ 5,630,000 in Tax Allocation Bonds. The Bonds were issued to finance low and
moderate income housing land acquisition and improvements in the Sotoyome Project Area.
Interest on the bonds varies from 1.7% to 5.125% with semi- annual debt service payments on
February 1, and August 1 of each year with principal maturing annually August 1, 2002
through August 2031. Debt Service payments will be made from tax increment revenue
received by the Agency.
2003 Series A - In April 2003, the Agency issued $ 13,000,000 Series A 2003 Tax Allocation
Bonds. The Bonds were issued to finance certain redevelopment activities within or to the
benefit of the Agency’s Sotoyome Project Area, fund a reserve account and pay for costs of
issuance of the Bonds. Interest on the bonds varies from 1.46% to 4.45% with semi- annual
debt service payments on February 1 and August 1 of each year with principal maturing
annually August 1, 2003 through 2031. Debt service payments will be made from tax
increment revenue received by the Agency.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 58 -
5. LONG- TERM LIABILITIES ( CONTINUED):
Governmental Activities ( Continued):
d. Tax Allocation Bonds ( Continued):
2003 Series B - In April 2003, the Agency issued $ 6,370,000 Series B 2003 Tax Allocation
Bonds. The Bonds were issued to finance certain redevelopment activities within or to the
benefit of the Agency’s Sotoyome Project Area, fund a reserve account and pay for costs of
issuance of the Bonds. Interest on the bonds varies from 1.46% to 4.45% with semi- annual
debt service payments on February 1 and August 1 of each year with principal maturing
annually August 1, 2003 through 2031. Debt service payments will be made from tax
increment revenue received by the Agency and allocated to the Low/ Moderate Income Housing
Fund.
Future debt service requirements on these bonds are as follows:
Year Ending
June 30, Principal Interest Total
2005 $ 845,000 $ 2,110,387 $ 2,955,387
2006 865,000 2,089,688 2,954,688
2007 880,000 2,064,427 2,944,427
2008 905,000 2,034,941 2,939,941
2009 930,000 2,001,287 2,931,287
2010- 2014 5,195,000 9,364,444 14,559,444
2015- 2019 6,425,000 7,943,078 14,368,078
2020- 2024 8,120,000 6,006,983 14,126,983
2025- 2029 10,160,000 3,504,128 13,664,128
2030- 2032 7,315,000 626,679 7,941,679
$ 41,640,000 $ 37,746,042 $ 79,386,042
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 59 -
5. LONG- TERM LIABILITIES ( CONTINUED):
Governmental Activities ( Continued):
e. Special Assessment Debt with Government Commitment:
Proceeds from the assessment bonds issued for each district were used to construct
improvements that benefited the property owners in that district. Debt service payments are
made from special assessment taxes collected from property owners by the County of Sonoma.
The City has recorded the bonds as a liability because they may make temporary advance
payment of debt service if sufficient funds have not been collected. Also, the assessments
receivable have been recorded in a Debt Service Fund offset by an equal amount of deferred
revenues in accordance with the provisions of GASB Statement 6.
Future debt service requirements on these bonds are as follows:
Year Ending
June 30, Principal Interest Total
2005 $ 180,000 $ 140,715 $ 320,715
2006 210,000 126,806 336,806
2007 215,000 111,071 326,071
2008 140,000 97,995 237,995
2009 150,000 87,773 237,773
2010- 2014 915,000 259,969 1,174,969
2015 255,000 13,923 268,923
$ 2,065,000 $ 838,252 $ 2,903,252
Business- type Activities:
f. 1996 Sewer Improvement Certificates:
The Certificates were authorized and issued by the Healdsburg Public Improvement
Corporation in the amount of $ 950,000 to provide funds for capital improvements to the City’s
sewer system. The interest on the Certificates varies from 4.50% to 8.50% with semi- annual
debt service payments payable on June 1 and December 1 commencing June 1, 1997. Principal
on the certificates is payable annually from December 1, 1997 through December 1, 2026.
Revenues from the operation of the sewer utility will be used to make the debt service
payments.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 60 -
5. LONG- TERM LIABILITIES ( CONTINUED):
Business- type Activities ( Continued):
g. 2000 B Water and Sewer CSCDA Certificates:
The bonds were authorized and issued on July 25, 2000 by the California Statewide
Communities Development Authority in the amount of $ 3,130,000 for water and $ 2,605,000
for sewer totaling $ 5,735,000 to provide funds for capital improvements.
The interest on the bond varies from 4.10% to 5.15% with semi- annual debt service payments
payable on April 1 and October 1 commencing October 1, 2000 through October 1, 2030.
Revenues from the operation of the water and sewer utilities will be used to make debt service
payments.
h. 2001 A Water CSCDA Certificates:
The bonds were authorized and issued by the California Statewide Communities Development
Authority in the amount of $ 7,170,000 of refunding revenue bonds on March 1, 2001. The
interest on the bonds varies from 2.9% to 4.5% with semi- annual debt service payments
payable on April 1 and October 1 of each year commencing October 1, 2001. Principal on the
bonds is payable annually from October 1, 2001 through October 1, 2026. Revenues from the
operation of the water utility will be used to make the debt service payments. The proceeds of
$ 6,886,409 ( after the bond discount and payment of underwriter fees, insurance and other
issuance costs of $ 283,590) plus the debt service reserves of the refunded issues was used to
purchase State and Local Government Securities ( SLGS). These securities were deposited in
an irrevocable trust with an escrow agent to provide for all future debt service payments for the
following Certificates of Participation - 1992 Water, 1993 REFA Series C, 1995 Water and
1996 Water. All of these above- mentioned certificates are considered defeased and the liability
for these have been removed from long- term debt. As of June 30, 2004, $ 6,585,000 remained
outstanding on these refunded issues.
i. 2003 C Water/ Wastewater CSCDA Certificates:
The Bonds were authorized and issued by the California Statewide Communities Development
Authority on behalf of the City in the amount of $ 5,510,000 in October 2002. The proceeds are
to be used for water improvement projects. The interest on the bonds varies from 2.0% to 3.6%
with semi- annual debt service payments payable on April 1 and October 1 commencing
April 1, 2003. Principal on bonds is payable annually from October 1, 2003 through
October 1, 2032. Revenues from the operation of the water utility will be used to make the
debt service payments.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 61 -
5. LONG- TERM LIABILITIES ( CONTINUED):
Business- type Activities ( Continued):
j. Annual Debt Service Requirements:
Annual debt service requirements to maturity for proprietary long- term liabilities, including
interest of $ 13,344,051 are as follows:
Year Ending Certificates of Participation
June 30, Principal Interest Total
2005 $ 470,000 $ 833,603 $ 1,303,603
2006 480,000 818,341 1,298,341
2007 505,000 802,170 1,307,170
2008 505,000 785,104 1,290,104
2009 540,000 766,760 1,306,760
2010- 2014 2,905,000 3,505,959 6,410,959
2015- 2019 3,245,000 2,845,621 6,090,621
2020- 2024 4,145,000 1,932,785 6,077,785
2025- 2029 3,500,000 899,546 4,399,546
2030- 2033 1,910,000 154,162 2,064,162
$ 18,205,000 $ 13,344,051 $ 31,549,051
6. CONDUIT DEBT:
Total bonds outstanding related to special facility revenue bonds is $ 5,775,000 at June 30, 2004.
These bonds were issued to provide hospital facilities. The City is not liable for repayment of the
special facility revenue bonds, and accordingly, they are not reflected in the accompanying basic
financial statements.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 62 -
7. EMPLOYEES' RETIREMENT PLAN:
Plan Description
The City of Healdsburg contributes to the California Public Employees' Retirement System
( PERS), an agent multiple- employer public employee defined benefit pension plan. PERS provides
retirement and disability benefits, annual cost- of- living adjustments, and death benefits to plan
members and beneficiaries. PERS acts as a common investment and administrative agent for
participating public entities within the State of California. Benefit provisions and all other
requirements are established by state statute and City Ordinance. Copies of PERS’ annual financial
report may be obtained from their executive office: 400 P Street, Sacramento, CA 95814.
Funding Policy
The City is required to contribute at an actuarially determined rate; the current rate is 7.2% for
miscellaneous employees and 7.525% for the period July 2003 to December 2003 and 20.51% for
the period January 2004 to June 2004 for safety employees of annual covered payroll. The
contribution requirements of plan members and the City are established and may be amended by
PERS. The City, due to a collective bargaining agreement, also has a legal obligation to
contribute 7% ( 9% for safety employees) of each participant’s annual covered salary.
Annual Pension Cost
For 2004, the City’s annual pension cost of $ 693,895 for PERS was equal to the City’s required
and actual contributions. The required contribution was determined as part of the June 30, 2002,
actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions
included ( a) 8.25% investment rate of return ( net of administrative expenses), ( b) projected annual
salary increases that vary by duration of service, and ( c) 3.50% per year cost- of- living adjustments,
( d) 3.75% payroll growth, and ( e) individual salary growth using a merit scale varying by duration
of employment coupled with an assumed annual inflation component of 3.50% and an annual
production growth of 0.25%. Both ( a) and ( b) included an inflation component of 3.75%. The
actuarial value of PERS assets was determined using techniques that smooth the effects of short-term
volatility in the market value of investments over a four- year period ( smoothed market value).
PERS unfunded actuarial accrued liability is being amortized as a level percentage of projected
payroll on a closed basis. The remaining amortization period at June 30, 2003 was 22 years.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 63 -
7. EMPLOYEES' RETIREMENT PLAN ( CONTINUED):
Three- Year Trend Information for the Miscellaneous and Safety Plans
Fiscal Annual Pension Percentage Net Pension
Year Cost ( APC) APC Contributed Obligation
6/ 30/ 02 $ 538,167 100% $ -
6/ 30/ 03 677,861 100% -
6/ 30/ 04 693,895 100% -
Schedule of Funding Progress for PERS
Actuarial
Accrued ( Overfunded) UAAL as
Actuarial Actuarial Liability Unfunded a % of
Valuation Value of ( AAL) Entry AAL Funded Covered Covered
Date Assets Age ( UAAL) Ratio Payroll Payroll
( A) ( B) ( B- A) ( A/ B) ( C) [( B- A)/ C]
6/ 30/ 01:
Misc. $ 20,217,598 $ 19,017,940 $ ( 1,199,658) 106.3 % $ 4,833,438 ( 24.819) %
Safety 12,206,895 10,994,782 ( 1,212,113) 111.0 % 1,792,279 ( 67.629) %
Total $ 32,424,493 $ 30,012,722 $ ( 2,411,771) 108.0 % $ 6,625,717 ( 36.400) %
6/ 30/ 02:
Misc. $ 19,491,095 $ 21,188,667 $ 1,697,572 92.0 % $ 5,483,146 30.960 %
Safety 11,674,901 14,001,327 2,326,426 83.4 % 1,833,680 126.872 %
Total $ 31,165,996 $ 35,189,994 $ 4,023,998 88.6 % $ 7,316,826 54.997 %
6/ 30/ 03:
Misc. $ 20,063,233 $ 25,214,165 $ 5,150,932 79.6 % $ 5,735,518 89.808 %
Safety 11,891,319 15,026,183 3,134,864 79.1 % 2,008,844 156.053 %
Total $ 31,954,552 $ 40,240,348 $ 8,285,796 79.4 % $ 7,744,362 106.991 %
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 64 -
8. RESERVES AND DESIGNATIONS OF FUND EQUITY:
The City may set up " reserves" of fund equity to segregate fund balances which are not
appropriable for expenditure in future periods, or which are legally set aside for a specific future
use. Fund " designations" may also be established to indicate tentative plans for financial resources
utilization in a future period. Each of the City's reserves and designations are described below:
a. Reserves for non- current notes receivable represents amounts which are not available for
current expenditures.
b. Reserve for inventory and prepaid items represents amounts, which are not available to meet
current expenditures.
c. Reserve for low and moderate income housing represents amounts setaside in the Community
Redevelopment Low/ Moderate Income Capital Projects Fund.
d. Reserves for debt service represent amounts accumulated in accordance with bond indenture or
similar covenant.
e. Reserve for Community and Economic Development has been established to reflect bond
proceeds restricted for Capital Improvements.
f. Reserve for multi- year programs reserves are amounts set aside for long- term capital projects.
9. NORTHERN CALIFORNIA POWER AGENCY:
The City is a member of Northern California Power Agency ( NCPA), which operates under a joint
powers agreement among fourteen public agencies consisting of eleven cities with publicly owned
electric distribution systems, one irrigation district, one public utility district, one port authority and
four associate member entities. The purpose of NCPA is to use the combined strength of its
members to purchase, generate, sell, and interchange electric energy and capacity through the
acquisition and use of electrical generation and transmission facilities. Each NCPA member has
agreed to fund a pro rata share of certain assessments by NCPA and enter into power supply
contracts with NCPA to purchase power in support of bearing the costs of NCPA operations,
energy and facilities. While governed by its members, none of NCPA's obligations are those of its
members unless expressly assumed by them. Amounts paid by the City to NCPA during the year
ended June 30, 2004, of $ 4,057,538 included $ 4,010,809 for purchased power and $ 46,729 in
advances and assessments and are reported as an expense of the Electric Fund.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 65 -
9. NORTHERN CALIFORNIA POWER AGENCY ( CONTINUED):
The City’s interest in NCPA projects and reserves, as computed by NCPA, was $ 2.4 million at
June 30, 2004. This amount represents the City’s portion of funds which resulted from the
reconciliations of several prior years’ budgets for programs. It is recognized that all the funds
credited to the City are linked to the collection of revenue from the City’s ratepayers, or to the
settlement of disputes relating to electric power supply and that the money was collected from the
City’s ratepayers to pay power bills. Additionally, the NCPA Commission identified and approved
the funding of specific reserves for working capital, accumulated employee’s post- retirement
medical benefits, and billed property taxes for the geothermal project. The Commission also
identified a number of contingent liabilities that may or may not be realized, the cost of which in
most cases is difficult to estimate at this time. One such contingent liability is the steam field
depletion which will require funding to cover debt service and operational costs in excess of the
expected value of the electric power. The General Operating Reserve is intended to minimize the
number and amount of individual reserves needed for each project, protect NCPA’s financial
condition and maintain its credit worthiness. These funds are available on demand but the City has
left them with NCPA as a reserve against these contingencies identified by NCPA.
Members of NCPA may participate in an individual project of NCPA without obligation for any
other project. Member assessments collected for one project may not be used to finance other
projects of NCPA without the member’s permission.
The City additionally purchased energy directly from the Western Area Power Administration
totaling $ 782,767 and paid assessments totaling $ 69,868.
NCPA Geothermal Project
A purchase power agreement with NCPA obligates the City for a 3.31% share of the operating
costs and debt service of two of NCPA's 110- megawatt steam powered generating plants, Project
Number 2 and Project Number 3. Total outstanding debt of the NCPA Geothermal Project at
June 30, 2004 is $ 217,340 thousand.
NCPA’s Geothermal project has experienced a greater than originally anticipated decline in steam
production from geothermal wells on its leasehold property. Results of the continuing well analysis
program indicate that the potential productive capacity of the geothermal steam reservoir is less
than originally estimated. Therefore, NCPA has modified the operations of the Geothermal Project
to reduce the average annual output from past levels. As a result, the per unit cost of energy
generated by the projects will be higher than anticipated.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 66 -
9. NORTHERN CALIFORNIA POWER AGENCY ( CONTINUED):
NCPA Geothermal Project ( Continued)
NCPA will continue to monitor the wells while pursuing alternatives for improving and extending
reservoir performance, including supplemental water reinjection, plant equipment modifications,
and changes in operating methodology. NCPA, along with other steam field operators, has
observed a substantial increase in steam production in the vicinity of reinjection wells and is
attempting to increase water reinjection at strategic locations. NCPA, other steam developers, and
the Lake County Sanitation District constructed a wastewater pipeline project that greatly increased
the amount of water available for reinjection.
Calaveras Hydroelectric Project
In July 1981, NCPA agreed with the Calaveras County Water District to purchase the output of the
North Fork Stanislaus River Hydroelectric Development Project and to finance its construction.
Debt service payments began in February 1990 when the operating portions were declared
substantially complete. Under a power purchase agreement with NCPA, the City is obligated to pay
1.66% of the debt service and operating costs. At June 30, 2004 approximately $ 501,130 thousand
in long- term debt used to finance this project was outstanding. NCPA has initiated a series of
restructurings and early calls which will reduce annual debt service and comparative cost of energy
from this resource. The City chose to lower debt service payment obligations by making a
$ 1,603,580 debt reduction payment in early 2002.
NCPA Combustion Turbine Project
In October 1984, NCPA financed a five- unit, 125- megawatt combustion turbine project. The
project, built in three member cities, began full commercial operation in June 1986, providing
reserve and peaking power. Under the NCPA power purchase agreement, the City is obligated to
pay 3.5% of the debt service and operating costs. The Combustion Turbine Project was completed
in June 1990. Project participation costs are substantially less than the cost of power which would
otherwise be purchased. At June 30, 2004 approximately $ 24,815 thousand in long- term debt
related to this project was outstanding.
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 67 -
9. NORTHERN CALIFORNIA POWER AGENCY ( CONTINUED):
Geothermal Public Power Line
NCPA has entered into interest rate swaps and related agreements related to its hydro electric
project. Additional information regarding NCPA debt is disclosed in NCPA’s financial statements.
In 1983, NCPA, Sacramento Municipal Utility District, Santa Clara, and the Modesto Irrigation
District ( joint owners) initiated studies for a Geothermal Public Power Line. The transmission line
will carry power generated at several existing and planned geothermal plants in the Geysers area to
a location where the joint owners can receive it for transmission to their load centers. NCPA has an
18.5% share of the project. The City has a 6.61% participation in NCPA's share. In 1989, the
construction of the proposed Geothermal Public Power Line was discontinued. In December 1998,
NCPA issued $ 10 million in revenue bonds to defease the remaining variable rate refunding bonds
used to finance this project. At June 30, 2004, approximately $ 5,455 thousand in long- term debt
related to this project was outstanding.
NCPA Condensed Financial Information
The information below summarizes NCPA's audited financial statements as of and for the year
ended June 30, 2004 ( in thousands):
Total assets $ 996,278
Total liabilities ( excluding long- term debt) 228,526
Long- term debt 756,958
Accumulated net revenues 10,800
Revenues 218,277
Expenses ( including refunds) 225,975
Decrease in accumulated net revenues 7,698
Maturities ( Principal) of NCPA's long- term debt as of June 30, 2004 are as follows ( in thousands)
( audited):
2005 $ 54,555
2006 56,505
2007 36,095
2008 37,060
2009 38,205
2010 and after 593,520
Less: unamortized net discount and premium ( 4,427)
Current portion ( 54,555)
Total $ 756,958
CITY OF HEALDSBURG
NOTES TO BASIC FINANCIAL STATEMENTS
( CONTINUED)
June 30, 2004
See independent auditors’ report.
- 68 -
9. NORTHERN CALIFORNIA POWER AGENCY ( CONTINUED):
NCPA Condensed Financial Information ( Continued)
The City does not include its net investment in NCPA in the proprietary fund financial statements
because it is a separate legal entity and the JPA’s obligations and liabilities are not those of the
City.
NCPA Financial Information
NCPA’S financial statements can be obtained from NCPA, 180 Cirby Way, Roseville, CA 95678.
10. POOLED ARRANGEMENT:
In addition to NCPA, the City participates in a pooled insurance arrangement. A description of this
agency follows:
Redwood Empire Municipal Insurance Fund ( REMIF) is a governmental self- insurance
cooperative organized under a joint powers agreement by certain California cities to provide
liability coverage to its members as allowed under the California Government Code. REMIF is a
“ risk sharing pool”, which pools risks and funds and which shares in the cost of losses. REMIF
provides and administers liability coverage programs for seven member and nine associate member
cities. Members and associate members have the option, with approval by the Board of Directors,
of participating in any or all of seven programs which provide workers’ compensation, general
liability, property, health, dental, vision, and auto physical damage coverage.
The Redwood Empire Municipal Insurance Fund is in turn a member of the California Joint
Powers Insurance Authority, a super self- i