CITY OF MARTINEZ, CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2006
Prepared by
ADMINISTRATIVE SERVICES DEPARTMENT
CITY OF MARTINEZ
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
Page
INTRODUCTORY SECTION:
Table of Contents....................................................................................................................... ............................... i
Letter of Transmittal.................................................................................................................... ............................ v
Key Personnel...................................................................................................................... .................................. xii
Organization Chart ............................................................................................................................... ................ xiii
Location Map............................................................................................................................ ............................ xiv
CSMFO Award.......................................................................................................................... ............................ xv
GFOA Award ............................................................................................................................... ........................ xvi
FINANCIAL SECTION:
Independent Auditor’s Report on Basic Financial Statements ............................................................................ 1
Management’s Discussion and Analysis................................................................................................................ 3
Basic Financial Statements:
Government- wide Financial Statements:
Statement of Net Assets ........................................................................................................................ 18
Statement of Activities..................................................................................................................... .... 19
Fund Financial Statements:
Governmental Funds:
Balance Sheet.......................................................................................................................... .......... 22
Reconciliation of the Governmental Funds – Fund Balances
with the Governmental Activities Statement of Net Assets.......................................................... 23
Statement of Revenues, Expenditures, and Changes in Fund Balances........................................... 24
Reconciliation of the Net Change in Fund Balances - Total Governmental
Funds with the Change in Governmental Net Assets .................................................................. 25
Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual:
General Fund ............................................................................................................................... 26
CITY OF MARTINEZ
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
Page
FINANCIAL SECTION ( Continued):
Basic Financial Statements ( Continued)
Proprietary Funds:
Statement of Net Assets......................................................................................................................... 28
Statement of Revenue, Expenses and Changes in Fund Net Assets..................................................... 29
Statement of Cash Flows ....................................................................................................................... 30
Fiduciary Funds:
Statement of Fiduciary Net Assets........................................................................................................ 32
Statement of Changes in Fiduciary Net Assets..................................................................................... 33
Notes to Financial Statements..................................................................................................................... 35
Supplemental Information:
Non- major Governmental Funds:
Combining Balance Sheets ................................................................................................................... 60
Combining Statements of Revenues, Expenditures, and Changes
in Fund Balances .............................................................................................................................. 62
Combining Schedule of Revenues, Expenditures, and Changes
in Fund Balances - Budget and Actual............................................................................................ 64
Internal Service Funds:
Combining Statement of Net Assets ..................................................................................................... 68
Combining Statements of Revenues, Expenses and Changes in Net Assets ....................................... 69
Combining Statements of Cash Flows.................................................................................................. 70
Fiduciary Funds:
Combining Balance Sheets ................................................................................................................... 72
Statement of Changes in Assets and Liabilities – All Agency Funds .................................................. 73
CITY OF MARTINEZ
Comprehensive Annual Financial Report
For the Year Ended June 30, 2006
Page
STATISTICAL SECTION:
Net Assets by Component...................................................................................................................... 77
Changes in Net Assets ............................................................................................................................ 78
Fund Balances of Governmental Funds.................................................................................................. 80
Changes in Fund Balance of Governmental Funds ................................................................................ 82
Assessed and Estimated Actual Value of Taxable Property ................................................................. 84
Property Tax Rates.......................................................................................................................... ....... 85
Principal Property Tax Payers ............................................................................................................... 86`
Property Tax Levies and Collections...................................................................................................... 87
Ratio of Outstanding Debt by Type........................................................................................................ 88
Computation of Direct and Overlapping Debt ....................................................................................... 89
Computation of Legal Bonded Debt Margin.......................................................................................... 90
Revenue Bond Fund Coverage Water Fund Certificates of Participations............................................ 91
Demographic and Economic Statistics ................................................................................................... 92
Principal Employers...................................................................................................................... ......... 93
Full- Time Equivalent City Government Employees by Function ......................................................... 94
Operating Indicators by Function/ Program............................................................................................ 96
Capital Asset Statistics by Function/ Program........................................................................................ 98
The City operates under the Council- Manager form of government. The City Manager is responsible for
the efficient implementation of Council policy and the effective administration of all City government
affairs. The City is organized into four departments reporting directly to the City Manager. They are
Administrative Services, Community Development, Building, and Police.
Governmental Structure, Local Economic Condition and Outlook
The City provides a full range of services including police protection, community development,
recreation activities, parks and street maintenance, water utilities and general administration.
The City’s General Fund supports most of these services. It is the primary reporting entity for general
government operations of the City of Martinez. It accounts for all financial resources not required by law
or administrative action to be accounted for in another fund. The General Fund is the City’s largest
operating fund.
General Fund revenues, including transfers in, totaled $ 20,090,867 in fiscal year 2005- 06, an increase of
21.6% from the prior fiscal year, with taxes representing approximately 75% of the total General Fund
revenues, or $ 14,994,265. One- time revenues, including a major litigation settlement in the City's favor,
accounted for $ 1,441,816, or 40.4% of the increase. Franchise Fees increased $ 348,516, in large part due
to an expanded cable television franchise fee calculation, updated for the first time since 1982. Property
taxes increased $ 444,963 over the prior year, and the after effects of the State's VLF tax shift program
resulted in additional property tax swap and sales tax in- lieu funding. Other revenue sources that
comprised the remaining 25% of General Fund revenues included licenses, permits and fees,
intergovernmental, charges for services, fines and forfeits, use of money and property, and miscellaneous.
After a year of improved economic growth, the State relied less on local revenues to fill gaps in its
operating budget. City revenues in fiscal year 2005- 06 exceeded projections by $ 719,225. The General
Fund ended fiscal year 2005- 06 with an unreserved and undesignated fund balance of $ 6.3 million.
The City’s enterprise operations consist of the Parking Services, Water System, and Marina Services
funds. Revenue to the Parking Services Fund is generated from meter collections and citations, and
expenditures represent enforcement and meter maintenance activities. The City’s only parking district is
the main downtown area. The Martinez Water System provides a reliable supply of high quality potable
water in sufficient quantity to meet the needs of Martinez residents and businesses. The safety of the
water and the health of the community are ensured through the use of advanced technology, proper water
treatment, water quality analysis, treatment plant maintenance, backflow prevention, and the maintenance
of the water distribution system. The water system operates much in the same way as a private business.
Revenues generated by the Martinez Water System are deposited into the Water System Fund. A private
contractor operates the full- service Martinez Marina, with oversight by City staff and the Marina
Commission. The City is moving forward to establish a long- term lease arrangement to provide for the
Marina’s financial stability and ensure that the facility is available for the enjoyment of Marina users.
The Governor's budget revealed that revenues at the State level were up significantly from the 2005- 06
budget estimates and that revenues are expected to further increase in fiscal 2006- 07. The increases were
largely related to stronger than expected revenues from volatile sources, such as corporate profits and
investment earnings. As a result of the greater than anticipated revenues, the State has restored some
funds to local governments. The Governor proposed reinstating Prop 42 funding for local street and road
improvements, which the legislature approved in the 2006- 07 Budget. The City's allocation is estimated
to be approximately $ 150,000 annually and will be applied to various paving projects throughout the City.
Additionally, a $ 19B bond measure for transportation infrastructure projects was placed on the November
2006 ballot ( and subsequently passed), of which $ 2B is to be utilized for improvements to local roads.
The measure will allocate the funding proportionately by population with a minimum $ 400,000 to each
jurisdiction to address their most critical transportation needs. The State Budget also includes payment of
the first two years of the scheduled 15 year repayment of pre- fiscal year 2005- 06 mandates owed to local
governments. Although the City made its final ERAF III payment of $ 399,000 to the State in 2005- 06,
the State has already indicated that it is facing budget deficits in fiscal year 2007- 08.
Unemployment rates in the East Bay have stabilized and no longer outpace the State and national
averages as they did a year ago. As of May 2006, the national and State unemployment rates were 4.4%
and 4.6%, respectively, with the rate in the East Bay at 4.1%, and Contra Costa County lower still at only
3.9%. These figures on the surface are somewhat misleading, however, because according to the May
2006 Economic Development Alliance for Business Newsletter, the primary reason the East Bay's
unemployment rates have dropped in the past year has been a decrease in the labor force of 42,300 since
October 2005. The Bay Area housing market experienced its 14th consecutive month of year- over- year
declines in number of homes sold. In Contra Costa County, 20.5% fewer homes were sold, yet the
median price rose 8.3% to $ 584,000. Mortgage rates continue to rise and the average monthly payment is
almost $ 3,100 per month in the Bay Area. The cost of housing is the single most important factor driving
the cost of living, and continued slowdown in the housing market would likely lead to tepid overall
growth in the next few years.
The national economy grew at an annual rate of 2.9% in the second quarter, compared with 5.6% in the
previous quarter, according to the preliminary estimates released by the U. S. Bureau of Economic
Analysis. The Bloomberg. com U. S. Economic Preview ( September 17, 2006) predicts that the housing
industry slowdown will result in the Federal Reserve maintaining interest rates. At their August 2006
meeting, the central bank ended a string of 17 consecutive interest rate increases dating back to June
2004. Economists believe the rate increases have resulted in higher mortgage rates, which in turn have
contributed to declines in home sales and construction. On the inflation front, the Labor Department's
showed a deceleration in inflation with prices rising in August 2006 at half the pace of July. The Federal
Reserve will try to engineer a soft landing in which economic expansion slows down enough to avoid
inflation.
The economic challenges facing the City remain the same as in recent years, with the goal of developing
and diversifying its economy in ways that embrace its heritage. Revitalization of the downtown area and
Marina areas are crucial elements of the City’s long- term economic strategy. Exploring new and
innovative ways to market the City throughout the region may ultimately result in improved revenue for
local businesses. The City is intent upon accomplishing these and other strategic goals. Martinez’
economic outlook remains one of optimism for a prosperous future.
Major Initiatives and Objectives
AMGEN Tour of California and Local Cycling Events. The City was proud to host the 2nd Stage of the
inaugural Amgen Tour of California bike race, a world- class professional cycling event featuring 126 of
the world's top cyclists. The event marked a tremendous community effort as over 160 local volunteers
turned out to prepare the race course, serve as course marshals, and ensure the safety of riders and
spectators alike. The City was showcased nationally on ESPN2’ s nightly coverage of the AMGEN Tour,
including a 30- second “ commercial” about Martinez that highlighted the City’s rich history, strong sports
legacy, and natural beauty. The City also hosted “ Martinez Celebrates Cycling” in advance of Stage Two
of the AMGEN Tour of California. Over 200 local cyclists participated in the two racing events, which
included the 30- mile Alhambra Valley Bike Tour and the Bay Front Classic Criterium held on a closed-circuit
track around downtown streets. The " Live Healthy" Fair featuring the products and services of 18
vendors was extremely popular. Both events demonstrated the City could successfully host a major
sporting event and accommodate thousands of spectators and tourists. The City hopes to participate in the
Amgen Tour as part of its rotation of destinations and is planning to make " Martinez Celebrates Cycling"
an annual local event.
Continued Enhancements to Public Safety. Public safety remains the City's number one priority. New
public safety programs were implemented, including a $ 250K grant- based initiative in conjunction with
Mothers against Drunk Driving ( MADD) that resulted in 71 more DUI arrests in the City than the year
before. The Martinez Police Department also continued its efforts to further reduce speeding and enforce
seat belts throughout the City. For the year, there were 165 fewer traffic accidents and 57 fewer injuries.
Infrastructure Improvements. Several major capital improvement projects were either completed or
initiated during the year. The new boat launch ramp, sheet pile wall and Ferry Plaza improvement projects
at the Marina, which cost over $ 1.6 million to complete, were unveiled in October 2005, which coincided
with the change to the Marina's new private operator, Almar/ Pacific Marine. Landscape work on the Joe
DiMaggio Drive Beautification Project across the railroad tracks from the old train depot was also
finished in 2005, as was the Bay Trail segment between Berrellesa and Ferry streets which included a
pedestrian bridge over Alhambra Creek. The City paved portions of Alhambra Avenue south of Highway
4 and plans to use local funds to pave parts of Morello Avenue, Center Avenue, Muir Road, and Reliez
Valley Road in 2006. Other projects currently under design and slated to begin in 2006 include the
Alhambra Avenue Improvement Project to construct signals, sidewalks and sound walls between
Highway 4 and Forest Hills; the Harbor View Reservoir Replacement Project to address issues with the
existing aged infrastructure; and significant upgrades to the Kiwanis Building on Allen Street.
Downtown Revitalization. Martinez adopted the new Downtown Specific Plan in July 2006 after several
years of City Council, Planning Commission and citizen review. The Plan will serve as the blueprint for
growth in the downtown area, while preserving the small town character of downtown Martinez. Two
large areas were rezoned from service commercial and light industrial to higher density residential and
mixed use to encourage more downtown residents.
Improved Code Enforcement Efforts. The City continued to enhance its Code Enforcement program.
An Administrative Citation Ordinance was adopted in June 2005, which provides an additional remedy to
enforce Municipal Code violations and collect fines for non- compliance.
Environmental Protections. The City also adopted an ordinance on September 21, 2005 ( effective
January 1, 2006), which established new regulations for the installation of wood burning appliances.
Burning wood is a significant source of fine particulate pollution and is more toxic than cigarette smoke.
The ordinance prohibits installation or remodel of new wood burning devices unless it is an EPA- certified
wood stove or a pellet stove.
Culture and Recreational Programs. Cultural and recreational programs were once again a big part of
the City’s efforts in 2005- 06. The City coordinated with the Chamber of Commerce to host a " Martinez
Restaurant Tour" on October 8, 2005. More than 200 people signed up for the successful walking tour,
with tastes of Martinez favorites at each stop. The City plans to sponsor this event annually. The
Recreation Division coordinated a Northern California United States Tennis Association award- winning
tennis program at Brown Street, and also expanded the special populations program to include Thursday
arts and crafts classes at RES for Success ( Residential and Educational Services). Renovations to 636
Ward Street, the City- leased location for the Willows Cabaret Theatre, are projected to be completed in
time for a December 2006 opening night.
Technological Enhancements and Community Interaction. The City recently rolled out two programs
designed to improve community access and operational efficiency. The first is a web- based video
streaming presentation that enables citizens with Internet access to view the Council meetings and other
streaming video content through the City's website from the comfort of their homes. The second is
CityAssist, a “ Citizen Relationship Management System” that enables citizens to log on to the City's
website to place requests for service or file complaints. The program directs these requests or complaints
to the correct staff for resolution, and constituents are able to track and review the progress of their
requests at any time.
Financial Information
Accounting System and Budgeting Controls. In developing and evaluating the City's accounting system,
consideration is given to the accuracy of internal accounting control. Internal accounting controls are
designed to provide reasonable assurance regarding the safeguarding of assets against loss from
unauthorized use or disposition, the accuracy and reliability of accounting data and the adherence to
prescribed managerial policy. The concept of reasonable assurance recognizes that the cost of control
should not exceed benefits likely to be derived and the evaluation of costs and benefits requires estimates
and judgments by management.
The City’s accounting and budgeting records for the basic financial statements in this report conform to
generally accepted accounting principles according to standards established by the Governmental
Accounting Standards Board.
The City maintains extensive budgetary controls. The City’s Annual Budget provides the overall control
of its revenues and expenditures. The City’s accounting system produces monthly reports on
expenditures and encumbrance activity that assist Department Heads in managing their activities and
programs. These reports are also reviewed by the Administrative Services Director and by the Finance
Manager to assure budgetary compliance.
As a recipient of federal, state, and county financial assistance, the City is responsible for ensuring that an
adequate control structure is in place to comply with applicable laws and regulations related to those
programs. This internal control structure is subject to periodic evaluation by management and the finance
staff of the City.
Debt Administration. The City generally incurs long- term debt to finance projects or purchase assets that
will have useful lives equal to or greater than the related debt.
The General Long- term Obligations Account Group provides accounting control over the principal of the
City’s general long- term debt. This debt will be repaid only out of governmental funds, but is not
accounted for in these funds because this debt does not require an appropriation or expenditure in this
accounting period. The City’s long- term obligations are reported in the Statement of Net Assets.
Proprietary Fund ( Enterprise and Internal Service) long- term debt is maintained in the proprietary fund
that will repay the debt because the City accounts for these funds on a full- accrual basis in a manner
similar to that of commercial operations.
Bond premiums, discounts, and issuance costs are recognized during the period of issuance for
governmental fund types. Bond proceeds are reported as another financing source net of the applicable
premium or discount. Issuance costs, even if withheld from the actual net proceeds received, are reported
as debt service expenditures. For proprietary fund types, the bond premiums, discounts, and issuance
costs are deferred and amortized over the life of the bonds using the effective interest method. Bonds
payable are reported net of the applicable bond premium or discount. Issuance costs are reported as
deferred charges. The City’s primary General Long- term Obligations consist of Certificates of
Participation from 1992, which was refunded in March of 2003. This debt is explained in detail in Note 7
to the Financial Statements.
Cash Management Policies and Practices. The City’s investment policy is to minimize credit and market
risks while maintaining an optimal yield on its portfolio. Bank deposits are either insured by the Federal
Government or collateralized. All collateral on deposits were held either by the City or its agent in the
City’s name. Idle cash is primarily invested in the State of California Local Agency Investment Fund
( LAIF). The City earned interest income of $ 925,660 on its investments.
Risk Management. The City is a member of the Municipal Pooling Authority ( MPA) a Joint Powers
agency that covers general liability losses up to $ 20 million. The City has a deductible of up to $ 5,000
per claim.
The City’s Safety Program, Property Insurance, and Workers’ Compensation reporting are all coordinated
through the MPA.
Please refer to the Management Discussion and Analysis ( MD& A) and the notes to the financial
statements for additional information. The City has refrained from duplicating information.
Other Information
Independent Audit. State statutes require an annual audit by independent certified public accountants.
The City selected the accounting firm of Maze and Associates for these services. The auditor’s opinion
letter has been made a part of this report.
Awards. The California Society of Municipal Officers ( CSMFO) awarded a Certificate of Achievement
for Excellence in Financial Reporting to the City for its Comprehensive Annual Financial Report ( CAFR)
for the fiscal year ended June 30, 2005. This was the fourth consecutive year the City has received this
prestigious award. In addition, the Government Finance Officer’s Association of the United States and
Canada ( GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City
of Martinez for its comprehensive annual financial report for the fiscal year ended June 30, 2005. This
was the fifth consecutive award the City has received from GFOA. In order to be awarded a Certificate of
Achievement, a City must publish an easily readable and efficiently organized comprehensive annual
financial report. This report satisfied both generally accepted accounting principles and applicable legal
requirements.
A Certificate of Achievement is valid for a period of one year only. We believe that our current
comprehensive annual financial report continues to meet the Certificate of Achievement Program
requirements. The CSMFO Board of Directors determined this year to return to the original intent of its
awards program, which allows submissions from agencies who are participating in the CAFR review
program for the first time or from agencies that choose not to participate in the GFOA program. The City
intends to submit its CAFR to GFOA for award consideration, and as such is not eligible to be considered
for the CSMFO award.
Acknowledgements
The preparation of this Comprehensive Annual Financial Report is the result of the hard work and
dedicated efforts of the staff in the Administrative Services Department. Special thanks to the Finance
Division, in particular, Cathy Heater, Finance Manager, and Kristine Sosa, Accountant, and to Michael
Chandler, Management Analyst, for their efforts in preparing this report. I would also like to thank the
City Council and the City Manager for their support in planning and directing the financial operations of
the City.
Respectfully submitted,
Lianne Marshall
Administrative Services Director
City of Martinez Key Personnel
June 30, 2006
City Council
Rob Schroder, Mayor
Lara DeLaney, Vice Mayor
Bill Wainwright, Councilmember
Janet Kennedy, Councilmember
Mark Ross, Councilmember
Council Appointees
June Catalano, City Manager
Elected Officials
Gary Hernandez, City Clerk
Carolyn Robinson, City Treasurer
City Staff
Lianne Marshall, Administrative Services Director
Richard Pearson, Community Development Director
David Scola, Building Director
Dave Cutaia, Chief of Police
CITY OF MARTINEZ
Citizens of Martinez
City Clerk ( elected)
Administration
Personnel
Finance
Information Systems
Admin Services Dept
Building Permits/ Inspections
Code Enforcement
Construction Management
Solid Waste
Building Dept Economic Development
Administration
Planning
Public Works
Water System
Parking Services
CIP
Engineering
Marina
Senior Center
Recreation and Community Services
Community Development Dept
Administrative Services
Investigative Services
Support Services
Traffic Enforcement
Field Services
Emergency Services
Police Dept
City Manager
City Council ( elected) City Treasurer ( elected)
AREA MAP
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City of Martinez
1
MANAGEMENT’S DISCUSSION AND ANALYSIS
Governmental Accounting Standards Board Statement 34, “ Basic Financial Statements--- and
Management’s Discussion & Analysis--- for Local Governments” ( GASB 34) requires the City to
provide this overview of its financial activities for the fiscal year, and should be read in
conjunction with the accompanying Transmittal Letter and Basic Financial Statements.
FISCAL 2006 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:
City- wide Activities:
· The City’s total net assets were $ 82,179,010 at June 30, 2006, up $ 5,290,012 from the prior
year. Of this total, $ 42,834,687 were Governmental assets and $ 39,344,323 were Business-type
assets.
· Total City revenues were $ 34,972,992 in Fiscal 2006. General Revenues and Transfers,
which result from both Governmental and Business- type Activities, totaled $ 18,007,484.
Program Revenues from the Governmental Activities were $ 6,887,342, and Program
Revenues from the Business- type Activities were $ 10,078,166.
· Total City expenses were $ 29,682,980 in Fiscal 2006. Program Expenses from the
Governmental Activities were $ 19,455,047, and Program Expenses from the Business- type
Activities were $ 10,227,933.
General Fund Activities:
· General Fund revenues of $ 19,955,417 in Fiscal 2006 represented an increase of $ 3,430,478
from the prior year. General Fund expenditures of $ 16,628,998 in Fiscal 2006 represented an
increase of $ 996,865 over the prior year expenditures.
· General Fund balance of $ 12,847,069 at June 30, 2006 was $ 3,099,734 higher than Fiscal
2005’ s fund balance of $ 9,747,335.
OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT
This Comprehensive Annual Financial Report is in six parts:
1) Introductory section, which includes the Transmittal Letter and general information,
2) Management’s Discussion and Analysis ( this part),
3) The Basic Financial Statements, which include the City- wide and the Fund financial
statements, along with the Notes to these financial statements,
4) Required Supplemental Information,
5) Combining Statements for Non- major Governmental Funds and Fiduciary Funds,
6) Statistical information.
3
The Basic Financial Statements
The Basic Financial Statements comprise the City- wide Financial Statements and the Fund
Financial Statements; these two sets of financial statements provide two different views of the
City’s financial activities and financial position both long- term and short- term. The Fiduciary
Funds are excluded from the Basic Financial Statements because the City cannot use these assets
to finance its own operations.
The City- wide Financial Statements provide a longer- term view of the City’s activities as a
whole, and comprise the Statement of Net Assets and the Statement of Activities. The Statement
of Net Assets provides information about the financial position of the City in its entirety,
including all its capital assets and long- term liabilities on the full accrual basis, similar to that
used by corporations. The Statement of Activities provides information about all the City’s
revenues and all its expenses, also on the full accrual basis, with the emphasis on measuring net
revenues or expenses of each of the City’s programs. The Statement of Activities explains in
detail the Change in Net Assets for the year.
The City- wide Financial Statements group all the City’s activities into Governmental Activities
and Business- type Activities, as explained below. All the amounts in the Statement of Net
Assets and the Statement of Activities are separated into Governmental Activities and Business-type
Activities in order to provide a summary of these two activities of the City as a whole.
The Fund Financial Statements report the City’s operations in more detail than the City- wide
statements and focus primarily on the short- term activities of the City’s General Fund and other
Major Funds. The Fund Financial Statements measure only current revenues and expenditures,
current assets, liabilities and fund balances; they exclude capital assets, long- term debt and other
long- term obligation amounts.
Major Funds account for the major financial activities of the City and are presented individually,
while the activities of Non- major Funds are presented in summary, with subordinate schedules
presenting the detail for each of these other funds. Major Funds are explained below.
The City acts solely as a depository agent for various community groups and functions, as well
as an Assessment District. The fiduciary statements provide information about the cash balances
and activities of these functions. These statements are separate from, and their balances are
excluded from, the City’s financial statements.
The City- wide Financial Statements
The Statement of Net Assets and the Statement of Activities present information about the
following:
· Governmental Activities— All of the City’s basic services are considered to be governmental
activities, including general government; community development; public safety; public
works; recreation, parks, and community services; public improvements; building inspection
and code enforcement; planning and zoning; and general administration services. These
services are supported by general City revenues such as taxes, and by specific program
revenues such as mitigation/ impact fees.
· Business- type Activities— The City’s three enterprise activities, Parking Services, Water
System, and Marina Services are reported here. Unlike governmental services, these services
are supported through charges paid by users based on the amount of the service they use.
Citywide Financial Statements are prepared on the accrual basis, which means they measure the
flow of all economic resources of the City as a whole.
4
Fund Financial Statements
The Fund Financial Statements provide detailed information about each of the City’s most
significant funds, called Major Funds. The concept of Major Funds, and the determination of
which are Major Funds, was established by GASB Statement 34 and replaces the concept of
combining like funds and presenting them in total. Instead, each Major Fund is presented
individually, with all Non- major Funds summarized and presented only in a single column.
Subordinate schedules present the detail of these Non- major Funds. Major Funds present the
major activities of the City for the year, and may change from year to year as a result of changes
in the pattern of the City’s activities.
Fund Financial Statements include governmental, enterprise and internal service funds as
discussed in the following:
Governmental Fund Financial Statements are prepared on the modified accrual basis, which
means they measure only current financial resources and uses. Capital assets and other long-lived
assets, along with long- term liabilities, are not presented in the Governmental Fund
Financial Statements.
Enterprise and Internal Service Fund financial statements are prepared on the full accrual basis,
as in the past, and include all their assets and liabilities, current and long- term.
Since the City’s Internal Service Funds are proprietary funds used by the City to account for the
financing of goods and services provided by one department or agency to other departments or
agencies of the City on a cost- reimbursement basis, their activities are reported only in total at
the Fund level. Internal Service Funds may not be Major Funds because their revenues are
derived from other City funds. These revenues are eliminated in the City- wide Financial
Statements and any related profits or losses are returned to the activities that created them, along
with any residual net assets of the Internal Service Funds.
Comparisons of Budget and Actual financial information are presented only for the General
Fund and other Major Funds that are Special Revenue Funds.
Fiduciary Statements
The City is the agent for one assessment district, the Alhambra Creek Special Assessment
District, and is responsible for holding amounts collected from property owners that await
transfer to the District’s bond trustees. The City is also an agent for certain community
organizations, for which it collects and disburses cash and maintains separate cash accounts. The
City’s fiduciary activities are reported in the separate Statements of Fiduciary Net Assets and the
Agency Funds Statement of Changes in Assets and Liabilities. As previously mentioned, these
activities are excluded from the City’s other financial statements because the City cannot use
these assets to finance its own operations.
5
FINANCIAL ACTIVITIES OF THE CITY AS A WHOLE
This analysis focuses on the net assets and changes in net assets of the City’s Governmental
Activities ( Tables 1, 2 and 3) and Business- type Activities ( Tables 4 and 5) presented in the
City- wide Statement of Net Assets and Statement of Activities that follow.
Governmental Activities
Table 1
Governmental Net Assets at June 30, 2006
The City’s net assets from governmental activities increased $ 5,212,377 in Fiscal 2006 from
$ 37,622,310 in Fiscal 2005. This increase is the Change in Net Assets reflected in the Statement
of Activities, as shown in Table 2, and is explained below:
· Cash and investments increased by $ 4,259,836 from Fiscal 2005 primarily due to a
settlement from Texaco of $ 1,260,023; an insurance rebate of $ 181,793; two years of
Measure C allocations amounting to $ 922,241; and an increase in tax revenues along with
a reduction to expenditures.
· Other non- capital assets increased $ 459,438, primarily due to an increase in
intergovernmental receivables.
· Capital assets increased $ 871,731, net of depreciation charges, due to work performed on
capital projects in process and infrastructure.
· Long- term debt declined $ 200,000 as no new debt was issued in Fiscal 2006 and
principal payments were made to reduce existing debt.
Governmental Activities
2006 2005
Cash and investments $ 20,090,863 $ 15,831,027
Other assets 3,316,882 2,857,444
Capital assets 25,877,792 25,006,061
Total Assets 49,285,537 43,694,532
Long- term debt outstanding 1,805,000 2,005,000
Other Liabilities 4,645,850 4,067,222
Total Liabilities 6,450,850 6,072,222
Net assets:
Invested in capital assets, net of debt 24,072,792 23,001,061
Restricted 1,805,299 1,968,361
Unrestricted 16,956,596 12,652,888
Total Net Assets $ 42,834,687 $ 37,622,310
6
· Net assets invested in capital assets ( net of related debt) increased $ 1,071,731 to
$ 24,072,792 as discussed above.
· Restricted net assets are composed of $ 836,675 in Capital Projects, $ 508,007 in Special
Revenue Projects, and $ 460,617 in Debt Service.
· Unrestricted net assets are normally the part of net assets that can be used to finance day-to-
day operations without constraints established by debt covenants or other legal
requirements. Unrestricted net assets were $ 16,956,596 at June 30, 2006.
Fiscal Year 2006 Government Activities ( see Table 2)
As the Sources of Revenue Chart shows, $ 6,048,835 ( or 25%) of the City’s Fiscal 2006
Governmental Activities revenue came from property taxes; $ 5,749,263 ( or 23%) came from
other taxes; and $ 3,196,164 ( or 13%) came from sales tax. The remaining $ 9,673,162 ( or 39%)
came primarily from operating contributions and grants, and charges for services.
The Functional Expenses Chart includes only current year expenses, which are discussed in
detail below. The largest expenses were in Police, which accounted for $ 8,637,872, or 45% of
the City's Fiscal 2006 Governmental Activities expenses, followed by Community Development
with $ 7,281,906 ( or 37%). The remaining $ 3,535,269 ( or 18%) was spread fairly evenly among
General Government, Building, Administrative Services and Nondepartmental, with interest on
long term debt amounting to less than 1%.
Expenses do not include capital outlays, which are now added to the City’s capital assets. In
Fiscal 2006, the City’s capital assets increased $ 871,731 as shown in detail in Table 7.
Functional Expense
General
Government
6%
Nondepartmental
Services
4%
Administrative
Services
4%
Building
4%
Community
Development Dept
38%
Interest on Long
Term Debt
0%
Police
44%
Sources of Revenue
Capital Grants and
Contributions
6%
Investment Earnings
2%
Other Taxes
23%
Sales Taxes
13% Property Taxes
25%
Operating Grants &
Contributions
12%
Charges for Services
10%
Transfers
1%
Miscellaneous
7%
Intergovernmental
1%
7
The Statement of Activities presents program revenues and expenses and general revenues in
detail. All of these are elements in the Changes in Governmental Net Assets are summarized
below.
Table 2
Changes in Governmental Net Assets
Table 2 shows that governmental expenses were $ 19,455,047 in Fiscal 2006, down $ 1,175,456
from the prior year, as increased expenses in General Government, Nondepartmental Services,
Administrative Services and Building were partially offset by reduced Community Development,
Police and interest expenses.
Total government activities revenues of $ 24,667,424 were up by $ 5,289,180 in Fiscal 2006, with
an increase in general revenues of $ 3,243,808 and an increase of $ 2,045,372 in program
revenues.
Governmental Activities
2006 2005
Expenses
General government $ 1,220,112 $ 1,064,838
Nondepartmental services 722,957 602,262
Administrative services 704,534 611,904
Building 831,843 821,956
Community development 7,281,906 8,871,098
Police 8,637,872 8,597,502
Interest on LTD 55,823 60,943
Total expenses 19,455,047 20,630,503
Revenues
Program revenues:
Charges for services 2,423,231 2,146,907
Operating contributions & grants 3,004,055 1,896,096
Capital grants 1,460,056 798,967
Total program revenues 6,887,342 4,841,970
General revenues:
Property tax 6,048,835 5,603,872
Sales tax 3,196,164 3,012,701
Other taxes 5,749,263 4,605,311
Intergovernmental 344,160 881,895
Investment earnings 533,475 267,746
Miscellaneous 1,744,370 282,749
Transfers 163,815 ( 118,000)
Total general revenues 17,780,082 14,536,274
Total revenues 24,667,424 19,378,244
Change in net assets $ 5,212,377 ($ 1,252,259)
8
Table 3
Governmental Activities
Governmental Activities
Table 3 presents the net cost of each of the City’s programs. Net expense is defined as total
program cost less the revenues generated by those specific activities. In the City’s case, the net
expenses, ( expenses less program revenues) of Community Development and Building varied
significantly from the total expenses in Table 2. Overall, program revenues reduced program
expenses by an average of 35% of total expenses. The City’s program revenues include
developer fees, plan check fees, building inspection, traffic fines, recreation fees, police fees,
grants, assessment revenues, and other charges for services.
Community Development experienced the largest variance in net expenses between Fiscal 2006
and 2005 with a decrease of $ 3,451,234. The difference was due to an increase in grant funding
and Measure C funding, coupled with a decrease in capital expenditures. General Government
and Nondepartmental Services had the largest increases in expenses over revenue due to
increased costs and no additional program revenues.
Table 4
Business- type Net Assets at June 30, 2006
2006 2005
Governmental Activities:
Police ( 7,635,209) ( 7,480,527)
Community development ( 2,363,525) ( 5,814,759)
General government ( 1,058,779) ( 929,537)
Administrative services ( 704,534) ( 611,904)
Nondepartmental services ( 722,957) ( 602,262)
Building ( 26,878) ( 288,601)
Interest on long term debt ( 55,823) ( 60,943)
Total Governmental Activities ( 12,567,705) ( 15,788,533)
Net ( Expense) Revenue
From Services
Business- type Activities
2006 2005
Cash and investments $ 9,961,499 $ 8,772,508
Other assets $ 2,105,130 $ 2,626,334
Capital assets 43,184,401 44,093,611
Total Assets 55,251,030 55,492,453
Long- term debt outstanding 14,490,680 14,950,680
Other Liabilities 1,416,027 1,275,085
Total Liabilities 15,906,707 16,225,765
Net assets:
Invested in capital assets, net of debt 30,405,353 30,894,163
Restricted 465,980 492,014
Unrestricted 8,472,990 7,880,511
Total Net Assets $ 39,344,323 $ 39,266,688
9
Business- type activities net assets totaled $ 39,344,323 at June 30, 2006, an increase of $ 77,635
from the prior year.
Table 5
Changes in Business- type Net Assets
Table 5 shows that the Business- type activities expenses were $ 10,227,933 in Fiscal 2006, with
most of the $ 795,734 decrease in the Water System.
Total Business- type activities revenues of $ 10,305,568 were down by $ 1,161,464 in Fiscal 2006,
with decreases of $ 1,006,750 in program revenues and $ 154,714 in general revenues. Most of
the program revenue decrease was due to less grant funding received in Fiscal 2006. Most of the
decrease in general revenues was due to reduced transfers over the prior year.
Table 6
Business- type Activities
2006 2005
Business- type Activities:
Water System ($ 22,193) ($ 777,906)
Marina Services ( 47,466) 1,098,521
Parking Services ( 80,108) ( 259,366)
Total Business- type Activities ($ 149,767) $ 61,249
Net ( Expense) Revenue
From Services
Business- type Activities
2006 2005
Expenses
Water System $ 9,419,852 $ 10,019,095
Marina Services 381,516 472,205
Parking Services 426,565 532,367
Total expenses 10,227,933 11,023,667
Revenues
Program revenues:
Charges for services 9,963,323 9,680,270
Operating contributions & grants 0 0
Capital grants 114,843 1,404,646
Total program revenues 10,078,166 11,084,916
General revenues:
Taxes 48,292 56,769
Investment earnings 317,631 184,977
Rents and leases 25,294 22,370
Miscellaneous 0 0
Transfers ( 163,815) 118,000
Total general revenues 227,402 382,116
Total revenues 10,305,568 11,467,032
Change in net assets $ 77,635 $ 443,365
10
THE CITY’S FUND FINANCIAL STATEMENTS
Governmental Funds
At June 30, 2006, the City’s governmental funds reported a combined fund balance of
$ 17,727,179, an increase of $ 4,048,721, or 30%, compared with the prior year. The General
Fund increased by $ 3,099,734, Capital Improvements increased by $ 1,106,148, and Non- major
Funds decreased by $ 157,161.
Governmental Fund revenues increased $ 4,996,630 to a total of $ 24,435,653. Non- major Fund
revenues increased by $ 935,486, Capital Improvements increased by $ 630,666, and General
Fund revenues increased by $ 3,430,478. Governmental Fund expenditures increased by
$ 719,520 to a total of $ 20,550,747. General Fund expenses increased by $ 996,865, Capital
Improvements decreased by $ 145,734, and Non- major Fund expenditures decreased by
$ 131,611. Other financing sources decreased by $ 281,815.
ANALYSES OF MAJOR GOVERNMENTAL FUNDS
General Fund
General Fund revenues, including transfers, increased overall by $ 3,565,928 to a total of
$ 20,090,867 in Fiscal 2006 due primarily to increases in Taxes of $ 1,772,381. These increases
were partially offset by a decline in Intergovernmental revenue of $ 564,420. Other revenue
increases were in Licenses, Permits and Fees, which were up by $ 129,704 due to the rise in
construction. Fines and Forfeitures were down slightly by $ 18,249 over Fiscal 2005, due
primarily to a decrease in parking citations. Use of Money and Property increased $ 228,129,
with $ 91,364 in interest earned over the prior year. Actual revenues exceeded budgeted amounts
by $ 719,225, or 3.6%, with taxes comprising $ 335,547 of the increase.
General Fund expenditures increased overall from Fiscal 2005, but were less than originally
budgeted. Expenditures, including transfers out, increased $ 980,470 in Fiscal 2006 to a total of
$ 16,991,133. Transfers out of the General Fund decreased $ 16,395 in Fiscal 2006 to $ 362,135.
The largest transfers resulted from the City Council’s decisions to use $ 250,000 for paving
projects and $ 46,000 for open space slide repairs.
Although the final expenditures for the General Fund at year- end were $ 543,162, or 3.2% below
budget, the fiscal year ended with encumbrances of $ 190,540. Budget amendments and
supplemental appropriations of $ 768,765 were made during the year to increase appropriations
for unanticipated expenditures after adoption of the original budget to a total of $ 17,172,160.
At June 30, 2006, the General Fund balance was comprised of $ 793,427 in reserved balances and
$ 12,053,642 in unreserved balances, of which $ 5,700,541 was designated by Council for certain
purposes as referred to in Note 10C of the financial statements. Only the unreserved portion
represents available liquid resources, since the reserved portion is represented by non- cash assets
or by open purchase orders.
11
Capital Improvement Fund
The Capital Improvement Fund accounts for major City capital improvement projects. The Fund
is budgeted on a project length basis and therefore is not comparable on an annual basis.
Revenue received in 2006 included funding for projects from the Department of Transportation,
CDBG and Contra Costa County in the amount of $ 1,460,056. Another $ 1,793,825 in funding
came from transfers in from the General Fund; Gas Tax revenue; NPDES grants; and Measure C
funds. The Fund also received $ 265,111 in mitigation fees and interest and other revenue. Total
revenue received, including transfers in, was $ 3,518,992 an increase of $ 1,782,278 over the prior
year. Expenditures, including transfers out, for Fiscal 2006 were down $ 462,301 from 2005. In
2006, work was done on several capital projects, including the Kiwanis building upgrade and
various paving and landscape projects.
Other Governmental Funds
These funds are not presented separately in the Basic Financial Statements, but are individually
presented as Supplemental Information.
Internal Service Funds
Internal Service Funds are proprietary funds used by the City to account for the financing of
goods or services provided by one department or agency to other departments or agencies of the
City on a cost- reimbursement basis. The City’s Internal Service Funds are the Equipment
Replacement Fund and the Management Information System ( MIS) Fund.
· Equipment Replacement Fund— Costs for the Equipment Replacement Fund are considered
to be “ direct costs” that are readily identifiable with a specific service. The Equipment
Replacement Fund charges departments' equipment and vehicle rates based on value and
overall maintenance costs.
· Management Information System ( MIS) Fund— Costs for the MIS Fund are considered to be
“ indirect costs” that are not easily associated with a specific service. These costs are
distributed by both number of workstations and overall use of technology.
Enterprise Funds
Enterprise Funds are used to account for operations ( a) that are financed and operated in a
manner similar to private business enterprises, where the intent of the City is that the costs and
expenses, including depreciation, of providing goods or services to the general public on a
continuing basis are financed or recovered primarily through user charges; or ( b) which the City
has decided that periodic determination of revenue earned, expenses incurred, and/ or net income
is appropriate for capital maintenance, public policy, management control, accountability, or
other purposes. The City’s Enterprise Funds include Parking Services, Water System, and
Marina Services and are described as follows:
· Parking Services— Parking Services Fund revenue is generated from parking meters.
Operating revenues increased $ 73,456 this year to a total of $ 346,457 due to the installation
of new meters in the prior year. Operating expenses decreased by $ 48,525 to $ 433,153. Net
assets of $ 1,122,424 decreased by $ 35,238. The Parking Services Fund’s fiscal year end
12
unrestricted Net Assets was $ 426,012. Future revenue is expected to continue to grow due to
the installation of the new parking meters.
· Water System— The Water System Fund is financed and operated in a manner similar to that
of a private business. Net assets of the Water System Fund increased $ 93,287 in the current
year, compared to a $ 619,430 decline in Fiscal 2005. Overall revenue increased by
$ 181,764, while expenses decreased by $ 616,566 due to a prior year non- capitalized expense
of $ 336,000 for main line repairs. Additionally, there was a $ 12,180 decrease in non-operating
expenses and a $ 109,022 increase in operating revenues due to higher investment
earnings. At June 30, 2006, the Fund’s Net Assets were $ 40,454,328, with $ 29,708,941
invested in capital assets and $ 465,980 restricted for debt service. Only $ 10,372,694 of the
Fund’s Net Assets was unrestricted at June 30, 2006 with $ 4,083,133 set aside for capital
projects. Due to the age of the Water System, significant investments will be required in
future years to enhance security and update water lines and equipment.
· Marina Services— Marina Fund revenues include lease payments, charges for services,
property taxes, and State grants for capital improvement projects. The Marina Fund incurred
an operating loss of $ 68,589 in the current year, mostly due to the amortization of dredging
the Marina; however, the loss was less than the $ 191,364 deficit from the prior year.
Operating revenues increased $ 53,127 due to a new management agreement for the operation
of the Marina which resulted in increased fees, while operating expenses decreased by
$ 69,648 due to a reduction in repairs to the Marina over the prior year. The Fund’s Net
Assets decreased by $ 36,511.
CAPITAL ASSETS
GASB 34 requires the City to record all of its capital assets including infrastructure, which was
not recorded in prior years. Infrastructure includes roads, bridges, signals and similar assets used
by the entire population.
In accordance with GASB 34, in Fiscal 2003, the City recorded the cost of all its infrastructure
assets and computed the amount of accumulated depreciation for these assets based on their
original acquisition dates.
At the end of Fiscal 2006, Governmental Activities and Business- type Activities had invested in
a broad range of capital assets, net of depreciation, in the amounts of $ 25,877,792 and
$ 43,184,401, respectively, as shown in Table 7:
13
Table 7
Capital Assets at Year- end
The City depreciates all its capital assets over their estimated useful lives, as required by GASB
34. The purpose of depreciation is to spread the cost of a capital asset over the years of its life so
that an allocable portion of the cost of the asset is borne by all users. Additional information on
capital assets and depreciation may be found in Note 6.
DEBT ADMINISTRATION
Each of the City’s debt issues is discussed in detail in Note 7 to the financial statements.
Debt Service Funds are used to account for the accumulation of resources for and the payment of
general long- term debt principal, interest and related costs ( other than those paid for by the
Enterprise Funds). In March 2003, the City issued Certificates of Participation ( COPs) in the
amount of $ 2,200,000 to refund and retire the outstanding 1992 proceeds that were used to
finance the rehabilitation and expansion of the Martinez City Hall.
The Water Fund has two outstanding debt issues. In 1999 and 2003, the City issued Certificates
of Participation ( COPs) in the amounts of $ 5,480,000 and $ 4,710,000, respectively. COP
proceeds were used to finance improvements to the Water Plant.
The following table represents the City’s debt as of June 30, 2006:
June 30, 2006 June 30, 2005
Governmental Activities
Land $ 4,978,951 $ 4,978,951
Construction in progress 1,519,168 578,022
Building and improvements 5,096,093 4,706,879
Equipment 4,211,299 4,178,518
Infrastructure 36,308,236 35,638,966
Less accumulated depreciation ( 26,235,955) ( 25,075,275)
Totals $ 25,877,792 $ 25,006,061
Business- Type Activities
Land $ 1,665,154 $ 1,665,154
Construction in progress 872,989 1,553,568
Building and improvements 18,350,055 16,621,758
Equipment 1,816,199 1,816,199
Infrastructure 87,274,707 87,196,002
Less accumulated depreciation ( 66,794,703) ( 64,759,070)
Totals $ 43,184,401 $ 44,093,611
14
Table 8
Outstanding Debt
SPECIAL ASSESSMENT DISTRICT DEBT
A special assessment district in the City has also issued debt to finance infrastructure and
facilities construction for that district. No special assessment debt was issued in Fiscal 2006.
At June 30, 2006, a total of $ 1,005,000 in special assessment district debt was outstanding,
issued by one special assessment district. This debt is secured only by special assessments on
the real property in the district issuing the debt, and is not the City’s responsibility, although the
City does act as these Districts’ agent in the collection and remittance of assessments.
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The economy of the City and its major initiatives for the coming year are discussed in detail in
the accompanying Transmittal Letter.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers,
investors, and creditors with a general overview of the City’s finances. Questions about this
Report should be directed to the Administrative Services Department, at 525 Henrietta Street,
Martinez, CA 94553.
June 30, 2006 June 30, 2005
Governmental Activity Debt
General Long- Term Debt
2003 Certificates of Participation $ 1,805,000 $ 2,005,000
Total governmental activity debt $ 1,805,000 $ 2,005,000
Business- Type Activity Debt
Water Fund Long- Term Debt
1999 Water System Improvements $ 5,480,000 $ 5,630,000
2003 Refinancing Project 4,710,000 5,010,000
Total principal $ 10,190,000 $ 10,640,000
Marina Long- term Debt, including accrued interest
1960 State of California $ 2,483,527 $ 2,483,527
1973 State of California 301,523 311,523
1978 State of California 157,623 157,623
1982 State of California 370,071 370,071
1985 State of California 987,936 987,936
Total Marina Fund debt $ 4,300,680 $ 4,310,680
Total business- type activity debt $ 14,490,680 $ 14,950,680
15
CITY OF MARTINEZ
STATEMENT OF NET ASSETS
AND STATEMENT OF ACTIVITIES
The Statement of Net Assets and the Statement of Activities summarize the entire City’s financial activities
and financial position. They are prepared on the same basis as is used by most businesses, which means they
include all the City’s assets and all its liabilities, as well as all its revenues and expenses. This is known as
the full accrual basis— the effect of all the City’s transactions is taken into account, regardless of whether or
when cash changes hands, but all material internal transactions between City funds have been eliminated.
The Statement of Net Assets reports the difference between the City’s total assets and the City’s total
liabilities, including all the City’s capital assets and all its long- term debt. The Statement of Net Assets
focuses the reader on the composition of the City’s net assets, by subtracting total liabilities from total assets.
The Statement of Net Assets summarizes the financial position of all the City’s Governmental Activities in a
single column, and the financial position of all the City’s Business- Type Activities in a single column; these
columns are followed by a Total column that presents the financial position of the entire City.
The City’s Governmental Activities include the activities of its General Fund, along with all its Special
Revenue, Capital Projects and Debt Service Funds. Since the City’s Internal Service Funds service these
Funds primarily, their activities are consolidated with Governmental Activities, after eliminating inter- fund
transactions and balances. The City’s Business- type Activities include all its Enterprise Fund activities.
The Statement of Activities reports increases and decreases in the City’s net assets. It is also prepared on the
full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of when
cash changes hands. This differs from the “ modified accrual” basis used in the Fund financial statements,
which reflect only current assets, current liabilities, available revenues and measurable expenditures.
The format of the Statement of Activities presents the City’s expenses first, listed by program, and follows
these with the expenses of its business- type activities. Program revenues— that is, revenues which are
generated directly by these programs— are then deducted from program expenses to arrive at the net expense
of each governmental and business- type program. The City’s general revenues are then listed in the
Governmental Activities or Business- type Activities column, as appropriate, and the Change in Net Assets is
computed and reconciled with the Statement of Net Assets.
Both these Statements include the financial activities of the City and the Martinez Public Improvement
Corporation. The Corporation is legally separate but is a component unit of the City because it is controlled
by the City, which is financially accountable for the activities of the Corporation.
17
CITY OF MARTINEZ
STATEMENT OF NET ASSETS
JUNE 30, 2006
Governmental Business- Type
Activities Activities Total
ASSETS
Cash and investments ( Note 3):
Available for operations $ 19,712,482 $ 9,495,519 $ 29,208,001
With fiscal agents 378,381 465,980 844,361
Receivables ( net of allowance for uncollectible):
Accounts and other 355,540 1,362,100 1,717,640
Intergovernmental 1,865,555 50,000 1,915,555
Interest 280,668 280,668
Loans receivable ( Note 5) 262,010 22,920 284,930
Internal balances ( Note 4) 535,363 ( 535,363)
Prepaids and inventory ( Note 1 H) 17,746 17,746
Bond issuance costs, net of amortization ( Note 7) 1,205,473 1,205,473
Capital assets ( Note 6):
Land and construction in progress 6,498,119 2,538,143 9,036,262
Depreciable assets, net 19,379,673 40,646,258 60,025,931
Total Assets 49,285,537 55,251,030 104,536,567
LIABILITIES
Accounts payable 1,052,889 618,461 1,671,350
Accrued wages and benefits 702,453 120,119 822,572
Deposits 1,112,593 85,172 1,197,765
Unearned revenue 198,510 384,727 583,237
Claims payable due within one year ( Note 14) 80,000 80,000
Accrued interest 48,440 48,440
Accrued compensated absences ( Note 1 G):
Due within one year 149,500 30,500 180,000
Due in more than one year 1,349,905 128,608 1,478,513
Long- term debt ( Notes 7 and 8):
Due within one year 200,000 455,000 655,000
Due in more than one year 1,605,000 14,035,680 15,640,680
Total Liabilities 6,450,850 15,906,707 22,357,557
NET ASSETS ( Note 10)
Invested in capital assets, net of related debt 24,072,792 30,405,353 54,478,145
Restricted for:
Capital projects 836,675 836,675
Debt service 460,617 465,980 926,597
Special revenue projects 508,007 508,007
Total Restricted Net Assets 1,805,299 465,980 2,271,279
Unrestricted 16,956,596 8,472,990 25,429,586
Total Net Assets $ 42,834,687 $ 39,344,323 $ 82,179,010
See accompanying notes to financial statements
18
CITY OF MARTINEZ
STATEMENT OF ACTIVITIES
JUNE 30, 2006
Net ( Expense) Revenue and
Program Revenues Changes in Net Assets
Operating Capital
Charges for Grants and Grants and Governmental Business- type
Functions/ Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
General government $ 1,220,112 $ 112,254 $ 49,079 ($ 1,058,779) ($ 1,058,779)
Nondepartmental services 722,957 ( 722,957) ( 722,957)
Administrative services 704,534 ( 704,534) ( 704,534)
Building 831,843 804,965 ( 26,878) ( 26,878)
Community development 7,281,906 1,166,315 2,292,010 $ 1,460,056 ( 2,363,525) ( 2,363,525)
Police 8,637,872 339,697 662,966 ( 7,635,209) ( 7,635,209)
Interest on long- term debt 55,823 ( 55,823) ( 55,823)
Total Governmental Activities 19,455,047 2,423,231 3,004,055 1,460,056 ( 12,567,705) ( 12,567,705)
Business- type Activities:
Water system 9,419,852 9,397,659 ($ 22,193) ( 22,193)
Marina services 381,516 219,207 114,843 ( 47,466) ( 47,466)
Parking services 426,565 346,457 ( 80,108) ( 80,108)
Total Business- type Activities 10,227,933 9,963,323 114,843 ( 149,767) ( 149,767)
Total $ 29,682,980 $ 12,386,554 $ 3,004,055 $ 1,574,899 ( 12,567,705) ( 149,767) ( 12,717,472)
General revenues:
Property taxes 6,048,835 6,048,835
Sales taxes 3,196,164 3,196,164
Other taxes 5,749,263 48,292 5,797,555
Intergovernmental 344,160 344,160
Investment earnings 533,475 317,631 851,106
Rents and leases 25,294 25,294
Miscellaneous 1,744,370 1,744,370
Transfers ( Note 4) 163,815 ( 163,815)
Total general revenues and transfers 17,780,082 227,402 18,007,484
Change in Net Assets 5,212,377 77,635 5,290,012
Net Assets- Beginning 37,622,310 39,266,688 76,888,998
Net Assets- Ending $ 42,834,687 $ 39,344,323 $ 82,179,010
See accompanying notes to financial statements
19
FUND FINANCIAL STATEMENTS
GASB 34 revises the format of the Fund Financial Statements so that only individual major funds are
presented, while non- major funds are combined in a single column. Major funds are defined generally as
having significant activities or balances in the current year.
MAJOR GOVERNMENTAL FUNDS
The funds described below are determined to be major funds by the City in Fiscal 2006. Individual non-major
funds may be found in the Supplemental Section.
GENERAL FUND
The General Fund is used for all the general revenues of the City not specifically levied or collected for other
City funds and the related expenditures. The General Fund accounts for all financial resources of the City
which are not accounted for in another fund.
CAPITAL IMPROVEMENTS
To account for the expenditures spent and revenue received for various capital projects within the City.
21
CITY OF MARTINEZ
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2006
Other Total
Capital Governmental Governmental
General Improvements Funds Funds
ASSETS
Cash and investments ( Note 3):
Available for operations $ 13,301,455 $ 2,792,467 $ 1,324,475 $ 17,418,397
With fiscal agents 378,381 378,381
Receivables:
Accounts 355,540 355,540
Intergovernmental 725,830 892,569 247,156 1,865,555
Other
Interest 280,668 280,668
Loans receivable ( Note 5) 262,010 262,010
Prepaids and inventory 17,746 17,746
Due from other funds ( Note 4) 77,504 77,504
Advances to other funds ( Note 4) 550,707 550,707
Total Assets $ 15,309,450 $ 3,947,046 $ 1,950,012 $ 21,206,508
LIABILITIES
Accounts payable $ 394,493 $ 532,721 $ 55,722 $ 982,936
Accrued wages and benefits 680,688 7,584 688,272
Claims payable ( Note 14) 80,000 80,000
Deposits 1,108,690 3,903 1,112,593
Due to other funds ( Note 4) 77,504 77,504
Deferred revenue ( Note 5) 198,510 262,010 77,504 538,024
Total Liabilities 2,462,381 794,731 222,217 3,479,329
FUND BALANCES
Fund balance ( Note 10)
Reserved for:
Debt service 460,617 460,617
Prepaids and inventory 17,746 17,746
Special events 30,301 30,301
Police grants 329 131,829 132,158
Advances to other funds 550,707 550,707
Grants 3,804 3,804
Encumbrances 190,540 61,675 32,660 284,875
Unreserved, Reported in:
General Fund 12,053,642 12,053,642
Special Revenue Funds 957,109 957,109
Capital Projects Funds 3,090,640 145,580 3,236,220
Total Fund Balances 12,847,069 3,152,315 1,727,795 17,727,179
Total Liabilities and Fund Balances $ 15,309,450 $ 3,947,046 $ 1,950,012 $ 21,206,508
See accompanying notes to financial statements
22
CITY OF MARTINEZ
Reconciliation of the
GOVERNMENTAL FUNDS -- FUND BALANCES
with the
GOVERNMENTAL ACTIVITIES STATEMENT OF NET ASSETS
JUNE 30, 2006
Total fund balances reported on the governmental funds balance sheet $ 17,727,179
Amounts reported for Governmental Activities in the Statement of Net Assets
are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and
therefore are not reported in the Governmental Funds. 24,870,842
ALLOCATION OF INTERNAL SERVICE FUND NET ASSETS
Internal Service Funds are not governmental funds. However, they are used by management to
charge the costs of certain activities, such as insurance and central services and maintenance
to individual governmental funds. The net current assets of the Internal Service Funds are therefore
included in Governmental Activities in the following line items in the Statement of Net Assets.
Cash and investments 2,294,085
Interest and other
Internal balances ( 15,344)
Capital assets 1,006,950
Accounts payable ( 69,953)
Accrued liabilities ( 14,181)
Accrued compensated absences ( 16,386)
Deferred revenue
ACCRUAL OF NON- CURRENT REVENUES AND EXPENSES
Revenues which are deferred on the Fund Balance Sheets because they are not available currently
are taken into revenue in the Statement of Activities. 339,514
LONG- TERM ASSETS AND LIABILITIES
The assets and liabilities below are not due and payable in the current period and therefore are not
reported in the Funds:
Long- term debt ( 1,805,000)
Non- current portion of compensated absences ( 1,483,019)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 42,834,687
See accompanying notes to financial statements
23
CITY OF MARTINEZ
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2006
Other Total
Capital Governmental Governmental
General Improvements Funds Funds
REVENUES
Taxes $ 14,994,265 $ 14,994,265
Special assessments $ 648,225 648,225
Licenses, permits, and fees 609,979 $ 219,459 829,438
Intergovernmental 851,560 1,460,056 1,982,079 4,293,695
Charges for services 1,009,212 1,009,212
Fines and forfeits 276,466 8,020 284,486
Use of money and property 491,293 44,552 49,301 585,146
Miscellaneous 1,722,642 1,100 67,444 1,791,186
Total Revenues 19,955,417 1,725,167 2,755,069 24,435,653
EXPENDITURES
Current:
General government 1,253,927 1,253,927
Nondepartmental services 722,957 722,957
Administrative services 691,218 691,218
Building 826,781 826,781
Community development 4,594,548 632,344 1,045,017 6,271,909
Police 8,324,721 208,065 8,532,786
Debt service ( Note 7):
Principal 200,000 200,000
Interest and fiscal charges 55,823 55,823
Capital outlay 214,846 1,780,500 1,995,346
Total Expenditures 16,628,998 2,412,844 1,508,905 20,550,747
EXCESS ( DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,326,419 ( 687,677) 1,246,164 3,884,906
OTHER FINANCING SOURCES ( USES)
Transfers in ( Note 4) 135,450 1,793,825 5,500 1,934,775
Transfers ( out) ( Note 4) ( 362,135) ( 1,408,825) ( 1,770,960)
Total Other Financing Sources ( Uses) ( 226,685) 1,793,825 ( 1,403,325) 163,815
NET CHANGE IN FUND BALANCES 3,099,734 1,106,148 ( 157,161) 4,048,721
BEGINNING FUND BALANCES 9,747,335 2,046,167 1,884,956 13,678,458
ENDING FUND BALANCES $ 12,847,069 $ 3,152,315 $ 1,727,795 $ 17,727,179
See accompanying notes to financial statements
24
CITY OF MARTINEZ
Reconciliation of the
NET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the Change in
GOVERNMENTAL NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balances, which measures only changes in current assets and current
liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the
Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $ 4,048,721
Amounts reported for governmental activities in the Statement of Activities
are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However,
in the Statement of Activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense.
The capital outlay expenditures are therefore added back to fund balances 1,995,346
Net retirement of capital assets are deducted from fund balances ( 4,643)
Depreciation expense is deducted from the fund balances
( Depreciation expense is net of internal service fund depreciation
of $ 303,806 which has already been allocated to serviced funds) ( 1,012,759)
LONG- TERM DEBT PROCEEDS AND PAYMENTS
Bond proceeds provide current financial resources to governmental funds, but
issuing debt increases long- term liabilities in the Statement of Net Assets.
Repayment of bond principal is an expenditure in the governmental funds, but
in the Statement of Net Assets the repayment reduces long- term liabilities.
Repayment of debt principal is added back to fund balances 200,000
ACCRUAL OF NON- CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or ( require) the use of
current financial resources and therefore are not reported as revenue or expenditures in
governmental funds ( net change):
Deferred revenue ( 5,901)
Compensated absences ( 136,493)
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities,
such as equipment acquisition, and maintenance to individual funds.
The portion of the net revenue ( expense) of these Internal Service Funds arising out
of their transactions with governmental funds is reported with governmental activities,
because they service those activities.
Change in Net Assets - All Internal Service Funds 128,106
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 5,212,377
See accompanying notes to financial statements
25
CITY OF MARTINEZ
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED JUNE 30, 2006
Variance with
Budgeted Amounts Final Budget
Positive
Original Final Actual Amounts ( Negative)
REVENUES:
Taxes 13,743,107 $ 14,658,718 $ 14,994,265 $ 335,547
Licenses, permits, and fees 443,700 470,200 609,979 139,779
Intergovernmental 706,113 797,767 851,560 53,793
Charges for services 672,689 803,199 1,009,212 206,013
Fines and forfeits 344,000 349,000 276,466 ( 72,534)
Use of money and property 288,900 307,896 491,293 183,397
Miscellaneous 285,749 1,849,412 1,722,642 ( 126,770)
Total Revenues 16,484,258 19,236,192 19,955,417 719,225
EXPENDITURES:
Current:
General government 1,238,168 1,340,572 1,253,927 86,645
Nondepartmental services 983,254 866,315 722,957 143,358
Administrative services 729,044 744,708 691,218 53,490
Building 869,539 919,689 826,781 92,908
Community development 4,207,815 4,636,923 4,594,548 42,375
Police 8,375,575 8,449,107 8,324,721 124,386
Capital Outlay 214,846 214,846
Total Expenditures 16,403,395 17,172,160 16,628,998 543,162
EXCESS OF REVENUES
OVER EXPENDITURES 80,863 2,064,032 3,326,419 1,262,387
OTHER FINANCING SOURCES ( USES)
Transfers in 135,450 135,450
Transfers ( out) ( 125,635) ( 362,135) ( 362,135)
Total other financing sources ( uses) ( 125,635) ( 226,685) ( 226,685)
EXCESS ( DEFICIENCY) OF REVENUES AND OTHER
SOURCES OVER EXPENDITURES AND OTHER USES ( 44,772) 1,837,347 3,099,734 1,262,387
BEGINNING FUND BALANCES 9,747,335 9,747,335 9,747,335
ENDING FUND BALANCES $ 9,702,563 $ 11,584,682 $ 12,847,069 $ 1,262,387
See accompanying notes to financial statements
26
MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private business
enterprise. The intent of the City is that the cost of providing goods and services be financed primarily
through user charges.
The concept of major funds established by GASB Statement 34 extends to Proprietary Funds. The City has
identified all of its Proprietary Funds as major funds in Fiscal 2006.
GASB 34 does not provide for the disclosure of budget vs. actual comparisons regarding proprietary funds
that are major funds.
WATER SYSTEM FUND
To account for the funds received from customers receiving water service provided by the City and the
related expenditures for administration, system improvements, maintenance and repairs, and debt service for
bond issues related to the provision of water to the customers.
MARINA SERVICES FUND
To account for the activities related to the operations at the municipal marina.
PARKING SERVICES FUND
To account for the activities related to the various parking lots in the downtown area, including parking
meters and shuttle services.
27
CITY OF MARTINEZ
PROPRIETARY FUNDS
STATEMENT OF NET ASSETS
JUNE 30, 2006
Business- type Activities - Enterprise Funds Governmental
Activities-
Parking Internal Service
Water System Marina Services Services Totals Funds
ASSETS
Current Assets:
Cash and investments ( Note 3):
Available for operations $ 8,760,152 $ 302,019 $ 433,348 $ 9,495,519 $ 2,294,085
With fiscal agent 465,980 465,980
Receivables:
Accounts and other 1,346,020 16,080 1,362,100
Intergovernmental 50,000 50,000
Total Current Assets 10,572,152 368,099 433,348 11,373,599 2,294,085
Capital Assets ( Note 6):
Land 630,912 800,165 234,077 1,665,154
Buildings 15,335,900 282,821 15,618,721
Improvements 13,929 2,472,283 245,122 2,731,334
Equipment 1,301,625 514,574 1,816,199 3,040,609
Infrastructure 87,274,707 87,274,707
Less: Accumulated depreciation ( 65,531,121) ( 966,221) ( 297,361) ( 66,794,703) ( 2,042,584)
39,025,952 2,589,048 696,412 42,311,412 998,025
Construction in progress ( Note 6) 872,989 872,989 8,925
Net Capital Assets 39,898,941 2,589,048 696,412 43,184,401 1,006,950
Other Non- Current Assets:
Loan receivable ( Note 5) 22,920 22,920
Bond issuance costs, net 1,205,473 1,205,473
Total Non- Current Assets 41,127,334 2,589,048 696,412 44,412,794 1,006,950
Total Assets 51,699,486 2,957,147 1,129,760 55,786,393 3,301,035
LIABILITIES
Current liabilities:
Accounts payable 606,170 8,296 3,995 618,461 69,953
Accrued liabilities 117,544 2,575 120,119 14,181
Deferred revenue 384,727 384,727
Deposits 31,375 53,797 85,172
Accrued interest 48,440 48,440
Current portion of compensated absences ( Note 1G) 30,500 30,500
Current portion of long- term debt ( Note 7) 455,000 455,000
Total Current Liabilities 1,289,029 446,820 6,570 1,742,419 84,134
Noncurrent Liabilities:
Accrued compensated absences ( Note 1G) 127,842 766 128,608 16,386
Advance from other funds ( Note 4) 550,707 550,707
Long term debt ( Note 7) 9,735,000 9,735,000
Loans payable ( Note 8) 4,300,680 4,300,680
Total Liabilities 11,151,871 5,298,207 7,336 16,457,414 100,520
Invested in capital assets,
net of related debt 29,708,941 696,412 30,405,353 1,006,950
Restricted for debt service 465,980 465,980
Unrestricted 10,372,694 ( 2,341,060) 426,012 8,457,646 2,193,565
Total Net Assets ( Deficit) $ 40,547,615 ($ 2,341,060) $ 1,122,424 39,328,979 $ 3,200,515
Some amounts reported for business- type activities in the Statement of Net Assets are different
because certain internal service fund assets and liabilities are included with business- type activities. 15,344
Net assets business- type activities $ 39,344,323
See accompanying notes to financial statements
NET ASSETS ( Note 10)
28
CITY OF MARTINEZ
PROPRIETARY FUNDS
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN FUND NET ASSETS
FOR THE YEAR ENDED JUNE 30, 2006
Business- type Activities - Enterprise Funds Governmental
Activities-
Parking Internal Service
Water System Marina Services Services Totals Funds
OPERATING REVENUES
Water sales $ 8,937,741 $ 8,937,741
Rents and leases $ 156,307 156,307
Charges for services 458,205 $ 346,457 804,662 $ 1,302,965
Other fees 1,713 62,900 64,613 48,500
Refunds and rebates 6,300
Rents and leases 25,294 25,294
Total Operating Revenues 9,422,953 219,207 346,457 9,988,617 1,357,765
OPERATING EXPENSES
Filtration plant 4,292,291 4,292,291
Maintenance, repairs, and distribution 1,351,812 29,343 14,326 1,395,481 943,613
Administration 1,516,738 68,936 347,191 1,932,865
Depreciation and amortization 1,863,664 189,517 71,636 2,124,817 303,806
Total Operating Expenses 9,024,505 287,796 433,153 9,745,454 1,247,419
Operating Income ( Loss) 398,448 ( 68,589) ( 86,696) 243,163 110,346
NONOPERATING REVENUES ( EXPENSES)
Interest income 303,510 14,121 317,631 75,201
Interest ( expense) ( 444,856) ( 93,720) ( 538,576)
Loss on disposal of equipment ( 1,344)
Taxes 10,955 37,337 48,292
Total Nonoperating Revenues ( Expenses) ( 141,346) ( 82,765) 51,458 ( 172,653) 73,857
Income ( Loss) Before Transfers 257,102 ( 151,354) ( 35,238) 70,510 184,203
Transfers in ( Note 4) 20,635 20,635
Transfers ( out) ( Note 4) ( 184,450) ( 184,450)
Net transfers ( 163,815) ( 163,815)
Contributions- Intergovernmental 114,843 114,843
Change in net assets 93,287 ( 36,511) ( 35,238) 21,538 184,203
BEGINNING NET ASSETS ( DEFICIT) 40,454,328 ( 2,304,549) 1,157,662 3,016,312
ENDING NET ASSETS ( DEFICIT) $ 40,547,615 ($ 2,341,060) $ 1,122,424 $ 3,200,515
Some amounts reported for business- type activities in the Statement of Activities are different because the
portion of the net income of certain internal service funds is reported with the business- type activities 56,097
which those funds service
Change in net assets of business- type activities $ 77,635
See accompanying notes to financial statements
29
CITY OF MARTINEZ
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2006
Business- type Activities- Enterprise Funds
Governmental
Activities-
Parking Internal Service
Water System Marina Services Services Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 9,453,112 $ 195,061 $ 346,457 $ 9,994,630 $ 1,323,879
Payments to suppliers ( 5,454,880) ( 146,396) ( 315,004) ( 5,916,280) ( 1,202,600)
Payments to employees ( 1,507,320) ( 46,443) ( 1,553,763) 313,814
Rent and lease payments received 25,294 25,294
Cash Flows from Operating Activities 2,516,206 48,665 ( 14,990) 2,549,881 435,093
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Taxes received 10,955 37,337 48,292
Interfund receipt ( 163,815) ( 723,533) ( 887,348)
Cash Flows from Noncapital Financing Activities ( 163,815) ( 712,578) 37,337 ( 839,056)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Advances from other funds 341,456 341,456
Received from other governments 945,365 945,365
Acquisition of capital assets ( 996,490) ( 219,117) ( 1,215,607) ( 197,593)
Proceeds from sale of equipment ( 1,344)
Principal payments on capital debt ( 450,000) ( 450,000)
Interest paid ( 356,959) ( 103,720) ( 460,679)
Cash Flows from Capital and Related Financing Activities ( 1,803,449) 963,984 ( 839,465) ( 198,937)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest 303,510 14,121 317,631 75,201
Cash Flows from Investing Activities 303,510 14,121 317,631 75,201
Net Cash Flows 852,452 300,071 36,468 1,188,991 311,357
Cash and investments at beginning of period 8,373,680 1,948 396,880 8,772,508 1,982,728
Cash and investments at end of period $ 9,226,132 $ 302,019 $ 433,348 $ 9,961,499 $ 2,294,085
Reconciliation of Operating Income ( Loss) to Cash Flows
from Operating Activities:
Operating income ( loss) $ 398,448 ($ 68,589) ($ 86,696) $ 243,163 $ 110,346
Adjustments to reconcile operating income to cash flows
from operating activities:
Depreciation and amortization 1,863,664 189,517 71,636 2,124,817 303,806
Change in assets and liabilities:
Accounts receivable 55,453 ( 15,782) 39,671 14,614
Accounts payable and other liabilities 207,124 ( 60,490) ( 696) 145,938 46,767
Deposits ( 1,198) 12,373 11,175
Accrued vacation and other fringe benefits ( 7,285) 766 ( 6,519) 3,701
Accrued wages and benefits 4,359
Deferred revenue ( 8,364) ( 8,364) ( 48,500)
Cash Flows from Operating Activities $ 2,516,206 $ 48,665 ($ 14,990) $ 2,549,881 $ 435,093
See accompanying notes to financial statements
30
FIDUCIARY FUNDS
FIDUCIARY FUNDS
Fiduciary funds are used to account for assets held by the City as an agent or in trust for individuals, private
organizations, and other governments. The financial activities of these funds are excluded from the Entity-wide
financial statements, but are presented in separate Fiduciary Fund financial statements.
31
CITY OF MARTINEZ
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET ASSETS
JUNE 30, 2006
Agency Trust
Funds Fund
ASSETS
Restricted cash and investments ( Note 3) $ 371,407 $ 115,071
Total Assets $ 371,407 $ 115,071
LIABILITIES
Accounts payable $ 2,736 $ 194
Due to bondholders 197,398
Due to members 171,273
Total Liabilities $ 371,407 194
NET ASSETS
Reserved for private purpose activities 114,877
Total Net Assets $ 114,877
See accompanying notes to financial statements
32
CITY OF MARTINEZ
FIDUCIARY FUNDS
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Trust
Funds
ADDITIONS
Donations $ 3,152
Interest 3,273
Total Additions 6,425
DEDUCTIONS
Supplies 2,271
Total Deductions 2,271
CHANGE IN NET ASSETS 4,154
NET ASSETS, BEGINNING OF YEAR 110,723
NET ASSETS, END OF YEAR $ 114,877
See accompanying notes to financial statements
33
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Martinez was incorporated in 1876 and operates under an elected Mayor/ Council form of
government. The City’s major operations include public safety, water system, marina, parking,
community development, building, recreation and parks, and general administrative services.
A. Reporting Entity
The financial statements of the City of Martinez include the financial activities of the City as well as
the Martinez Public Improvement Corporation which is controlled by and dependent on the City.
While the Corporation is a separate legal entity, the City Council serves in a separate session as its
governing body and the financial activities of the Corporation are integral to those of the City.
Corporation financial activities have been aggregated and merged ( termed “ blended”) with those of
the City in the accompanying financial statements.
The Martinez Public Improvement Corporation is a nonprofit public benefit corporation
organized and existing under the Nonprofit Public Benefit Corporation Law of the State of
California. The purposes for which the Corporation was formed include, among others, ( i) rendering
financial assistance to the City by financing, refinancing, acquiring, constructing, improving, leasing
and selling of buildings, building improvements, equipment, electrical, water, sewer, road and other
public improvements, lands and any other real or personal property for the benefits of the City and
surrounding areas; ( ii) acquiring by lease, purchase or otherwise, real or personal property or any
interest therein; and ( iii) constructing, reconstructing, modifying, adding to, improving or otherwise
acquiring or equipping buildings, structures or improvements and ( by sale, lease, sublease, leaseback,
gift or otherwise) making any part or all of any such real or personal property available to or for the
benefit of the residents of the City. The Corporation is reported as part of the City’s operations
because of its purpose to provide financing for the City.
The Pleasant Hill/ Martinez Joint Facilities Agency is established for the purpose of providing
cost- effective services for employees participating in the Miscellaneous CALPERS retirement plan.
The Agency is controlled by the City and has the same governing body as the City, which also
performs all accounting and administrative functions for the Agency.
Separate financial statements for the Martinez Public Improvement Corporation and the Pleasant
Hill/ Martinez Joint Facilities Agency are not issued.
B. Basis of Presentation
The City’s Basic Financial Statements are prepared in conformity with accounting principles
generally accepted in the United States of America. The Government Accounting Standards Board is
the acknowledged standard setting body for establishing accounting and financial reporting standards
followed by governmental entities in the U. S. A.
These Standards require that the financial statements described below be presented.
35
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
Government- wide Statements: The Statement of Net Assets and the Statement of Activities display
information about the primary government ( the City) and its component units. These statements
include the financial activities of the overall City government, except for fiduciary activities.
Eliminations have been made to minimize the double counting of internal activities. These statements
distinguish between the governmental and business- type activities of the City. Governmental
activities generally are financed through taxes, intergovernmental revenues, and other nonexchange
transactions. Business- type activities are financed in whole or in part by fees charged to external
parties.
The Statement of Activities presents a comparison between direct expenses and program revenues
for each segment of the business- type activities of the City and for each function of the City’s
governmental activities. Direct expenses are those that are specifically associated with a program or
function and, therefore, are clearly identifiable to a particular function. Program revenues include ( a)
charges paid by the recipients of goods or services offered by the programs, ( b) grants and
contributions that are restricted to meeting the operational needs of a particular program and ( c) fees,
grants and contributions that are restricted to financing the acquisition or construction of capital
assets. Revenues that are not classified as program revenues, including all taxes, are presented as
general revenues.
Fund Financial Statements: The fund financial statements provide information about the City's
funds, including fiduciary funds and blended component units. Separate statements for each fund
category— governmental, proprietary, and fiduciary— are presented. The emphasis of fund financial
statements is on major individual governmental and enterprise funds, each of which is displayed in a
separate column. All remaining governmental and enterprise funds are aggregated and reported as
nonmajor funds.
Proprietary fund operating revenues, such as charges for services, result from exchange transactions
associated with the principal activity of the fund. Exchange transactions are those in which each
party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and
investment earnings, result from nonexchange transactions or ancillary activities.
C. Major Funds
Major funds are defined as funds that have either assets, liabilities, revenues or
expenditures/ expenses equal to ten percent of their fund- type total and five percent of the grand total.
Major governmental and business- type funds are identified and presented separately in the fund
financial statements. All other funds, called non- major funds, are combined and reported in a single
column, regardless of their fund- type. The General Fund is always a major fund. The City may also
select other funds it believes should be presented as major funds.
The City reported the following major governmental funds in the accompanying financial statements:
General Fund - The General Fund is used for all the general revenues of the City not specifically
levied or collected for other City funds and the related expenditures. The General Fund accounts for
all financial resources of the City which are not accounted for in another fund.
36
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
Capital Improvements Fund- To account for the funds spent and revenue received for various
capital projects within the City.
The City reported all its enterprise funds as major funds in the accompanying financial statements:
Water System Fund- To account for the funds received from customers receiving water service
provided by the City and the related expenditures for administration, system improvements,
maintenance and repairs, and debt service for bond issues related to the provision of water to the
customers.
Marina Services Fund- To account for the activities related to the operations at the municipal
marina.
Parking Services Fund- To account for the activities related to the various parking lots in the
downtown area, including parking meters and shuttle services.
The City also reports the following fund types:
Internal Service Funds. The funds account for equipment replacement and management
information systems; all of which are provided to other departments on a cost- reimbursement basis.
Fiduciary Funds. Trust Funds and Agency Funds are used to account for assets held by the City as
an agent for the Alhambra Creek Assessment District, the Senior Center Club, and several private-purpose
trusts. The financial activities of these funds are excluded from the Government- wide
financial statement, but are presented in separate Fiduciary Fund financial statements.
D. Basis of Accounting
The government- wide, proprietary, and fiduciary fund financial statements are reported using the
economic resources measurement focus and the full accrual basis of accounting. Revenues are
recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of
when the related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Under this method, revenues are recognized when measurable
and available. The City considers all revenues reported in the governmental funds to be available if
the revenues are collected within sixty days after year- end. Expenditures are recorded when the
related fund liability is incurred, except for principal and interest on general long- term debt, claims
and judgments, and compensated absences, which are recognized as expenditures to the extent they
have matured.
Governmental capital asset acquisitions are reported as expenditures in governmental funds.
Proceeds of governmental long- term debt and acquisitions under capital leases are reported as other
financing sources.
37
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
Those revenues susceptible to accrual are property, sales and franchise taxes, certain other
intergovernmental revenues, special assessments and interest revenue. Fines, permits, licenses and
charges for services are not susceptible to accrual because they are not measurable until received in
cash.
Non- exchange transactions, in which the City gives or receives value without directly receiving or
giving equal value in exchange, include taxes, grants, entitlements, and donations. On the accrual
basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed.
Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all
eligibility requirements have been satisfied.
The City may fund programs with a combination of cost- reimbursement grants, categorical block
grants, and general revenues. Thus, both restricted and unrestricted net assets may be available to
finance program expenditures. The City’s policy is to first apply restricted grant resources to such
programs, followed by general revenues if necessary.
Certain indirect costs are included in program expenses reported for individual functions and
activities.
The City follows those Financial Accounting Standards Board Statements issued before November
30, 1989 unless they conflict with Governmental Accounting Standards Board Statements.
E. Revenue Recognition for Water System Enterprise Fund
Revenues are recognized based on cycle billings rendered to customers. Revenues for services
provided but not billed at the end of the year are accrued.
F. Property Taxes and Special Assessment Revenue
Revenue is recognized in the fiscal year for which the tax and assessment is levied. The County of
Contra Costa levies, bills and collects property taxes for the City; the County remits the entire
amount levied and handles all delinquencies, retaining interest and penalties. Secured and unsecured
property taxes are levied on January 1 of the preceding fiscal year.
Secured property tax is due in two installments, on November 1 and February 1, and becomes a lien
on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured
property tax is due on July 1 and becomes delinquent on August 31.
The term “ unsecured” refers to taxes on personal property other than real estate, land and buildings.
These taxes are secured by liens on the personal property being taxed. Property tax revenues are
recognized by the City in the fiscal year they are assessed provided they become available as defined
above.
38
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
G. Compensated Absences
Compensated absences comprise unused vacation leave, vested sick pay and other employee benefits
which are accrued as earned. The City’s liability for compensated absences is recorded in various
Governmental funds or Proprietary funds as appropriate. The liability for compensated absences is
determined annually. For all governmental funds, amounts expected to be permanently liquidated
are recorded as fund liabilities; the remaining portion is recorded in the Statement of Net Assets.
The changes of the compensated absences were as follows:
Governmental
Activities
Business- Type
Activities Total
Beginning Balance $ 1,376,244 $ 165,627 $ 1,541,871
Additions 1,404,709 134,755 1,539,464
Payments ( 1,281,548) ( 142,040) ( 1,423,588)
Ending Balance $ 1,499,405 $ 158,342 $ 1,657,747
Current Portion $ 149,500 $ 30,500 $ 180,000
Compensated absences are liquidated by the fund that has recorded the liability. The long- term
portion of governmental activities compensated absences is liquidated primarily by the General
Fund.
H. Inventories
Inventories are valued at cost ( on the first- in, first- out basis). Inventories of the General Fund consist
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. Reported General Fund inventories are
equally offset by a fund balance reserve which indicates that they do not constitute available
spendable resources even though they are a component of net current assets.
I. Postemployment Health Care Benefits
The City provides health care benefits for retired employees and spouses based on negotiated
employee bargaining unit contracts. Substantially all of the City’s employees may become eligible
for those benefits if they reach the normal retirement age and have a minimum ten years of service
while working for the City. The premium reimbursement benefits are as follows: 0- 10 years of
service = 0%; 11- 15 years of service = 25%; 16- 20 years of service = 50%; 21- 25 years of service =
75%; 26 years or more of service = 100%. Currently, 35 retirees meet the eligibility requirements
and receive reimbursements.
Additionally, the City provides the option of postretirement health benefits to sworn Police Personnel
through the Public Employees’ Retirement System in lieu of the reimbursement plan, in accordance
with the MOU for that represented group. The City covers 100% of the cost. Currently, 29 retirees
meet the eligibility requirements and are either receiving reimbursements or health benefits paid
directly by the City to PERS.
39
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)
The cost of retiree health care benefits is recognized as an expenditure when health care premiums
are paid. For the year ending June 30, 2006, those costs totaled $ 459,436.
NOTE 2 - BUDGETS AND BUDGETARY ACCOUNTING
The City adopts a biennial budget for the General Fund and all Special Revenue Funds, except for
the Traffic Congestion Relief Special Revenue Fund on or before June 30 of even- numbered years
for each of the ensuing two fiscal years. The operating budget takes the form of a two- year budget,
which is adopted in its entirety by the City Council by resolution. This budget is adopted on a basis
consistent with generally accepted accounting principles ( GAAP). All annual appropriations lapse at
fiscal year- end. Capital Projects Funds are budgeted on a project length basis.
On or before the last day in March of each year, all departments of the City submit requests for
appropriations to the City’s Manager so that a budget may be prepared on or by May 1, for even
numbered years. The proposed budget is presented to the City’s Council for review. The Council
holds public hearings and a final budget must be prepared and adopted no later than June 30.
The appropriated budget is prepared by fund, function and department. The City’s department heads
may make transfers of appropriations within a department. The City Manager is authorized to revise
the budget so long as the total revisions in any single budget year do not exceed 5% of the budget,
and provided that sufficient revenues are available to offset such revisions. Council approval is
required for additional appropriation from fund balances or new revenue sources. The legal level of
budgetary control at the departmental level.
The budget is revised in February to take into consideration information available during the fiscal
year. Budget amounts presented in the accompanying financial statements reflect original
appropriations modified by supplemental amendments discussed above which were not material.
NOTE 3 - CASH AND INVESTMENTS
The City pools cash from all sources and all funds, except Cash and Investments held by Trustees, so
that it can be invested at the maximum yield consistent with safety and liquidity, while individual
funds can make expenditures at any time.
A. Policies
California Law requires banks and savings and loan institutions to pledge government securities with
a market value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a
market value of 150% of the deposit, as collateral for these deposits. Under California Law this
collateral is held in a separate investment pool by another institution in the City’s name and places
the City ahead of general creditors of the institution.
The City invests in individual investments and in investment pools. Individual investments are
evidenced by specific identifiable securities instruments, or by an electronic entry registering the
owner in the records of the institution issuing the security, called the book entry system. In order to
increase security, the City employs the Trust Department of a bank as the custodian of certain City
managed investments, regardless of their form.
40
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
The City’s investments are carried at fair value, as required by generally accepted accounting
principles. The City adjusts the carrying value of its investments to reflect their fair value at each
fiscal year end, and it includes the effects of these adjustments in income for that fiscal year.
B. Classification
Cash and investments are classified in the financial statements as shown below, based on whether or
not their use is restricted under the terms of City debt instruments or Agency agreements.
Cash and investments available for operations $ 29,208,001
Restricted investments 844,361
Total Primary Government cash and investments 30,052,362
Cash and investments
in Fiduciary Funds ( separate statement) 486,478
Total cash and investments $ 30,538,840
Cash and Investments Available for Operations is used in preparing proprietary fund statements of
cash flows because these assets are highly liquid and are expended to liquidate liabilities arising
during the year.
C. Investments Authorized by the California Government Code and the City’s Investment Policy
The City’s Investment Policy and the California Government Code allow the City to invest in the
following, provided the credit ratings of the issuers are acceptable to the City; and approved
percentages and maturities are not exceeded.
Minimum Maximum
Maximum Credit Percentage
Authorized Investment Type Maturity Quality Allowed
Shares of Beneficial Interest N/ A Top rating
category
20%
California Local Agency Upon Demand N/ A No limit
Investment Fund ( LAIF Pool)
U. S. Treasury Obligations 5 Years N/ A No limit
U. S. Agency Securities and 5 Years N/ A No limit
U. S. Government Sponsored Enterprise Obligations
41
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
D. Investments Authorized by Debt Agreements
The City must maintain required amounts of cash and investments with trustees or fiscal agents
under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged
reserves to be used if the City fails to meet its obligations under these debt issues. The California
Government Code requires these funds to be invested in accordance with City resolutions, bond
indentures or State statutes. The table below identifies the investment types that are authorized for
investments held by fiscal agents. The table also identifies certain provisions of these debt
agreements:
Minimum
Maximum Credit
Authorized Investment Type Maturity Quality
Repurchase Agreements 6 months Top Four Rating Category
U. S. Treasury Obligations N/ A N/ A
U. S. Agency Securities and U. S. Government N/ A N/ A
Sponsored Enterprise
State Obligations N/ A A
Commercial Paper 270 days Top Rating Category
Negotiable Certificates of Deposit 365 days Top Rating Category
Time Certificates of Deposit 365 days Top Rating Category
Guaranteed Investment Contract N/ A Not lower than the bond
rating of certain bonds of the
City of Martinez
Shares of Beneficial Interest N/ A Top Rating Category
Money Market Funds N/ A Aaam or AAAm- G
Bankers Acceptances 365 days Top Rating Category
California Local Agency Upon Demand N/ A
Investment Fund ( LAIF Pool)
California Asset Management Program ( CAMP) Upon Demand N/ A
E. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of
an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its
fair value to changes in market interest rates. The City generally manages its interest rate risk by
holding investments to maturity.
42
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
Information about the sensitivity of the fair values of the City’s investments ( including investments
held by bond trustees) to market interest rate fluctuations is provided by the following table that
shows the distribution of the City’s investments by maturity or earliest call date:
12 Months 13 to 24
Investment Type or less Months Total
U. S. Agencies Securities and U. S. Government Sponsored Enterprise
Non- callable $ 4,789,866 $ 3,249,469 $ 8,039,335
Callable 2,216,551 2,216,551
California Local Agency Investment Fund 19,341,802 19,341,802
Money Market Funds 323,395 323,395
Total Investments $ 26,671,614 $ 3,249,469 29,921,083
Cash in banks and on hand 617,757
Total Cash and Investments $ 30,538,840
The City is a participant in the Local Agency Investment Fund ( LAIF) that is regulated by California
Government Code Section 16429 under the oversight of the Treasurer of the State of California. The
City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as
the value of the pool share. The balance is available for withdrawal on demand, and is based on the
accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in
LAIF’s investment portfolio are collateralized mortgage obligations, mortgage- backed securities,
other asset- backed securities, loans to certain state funds, and floating rate securities issued by federal
agencies, government- sponsored enterprises, United States Treasury Notes and Bills, and
corporations. At June 30, 2006, these investments have an average maturity of 152 days.
F. Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the
investment. This is measured by the assignment of a rating by a nationally recognized statistical
rating organization. Presented below is the actual rating as of June 30, 2006 for each investment type
as provided by Standard and Poor’s.
Investment Type AAA A- 1+ Total
U. S. Agencies Securities
and U. S. Government Sponsored Enterprise:
Non- callable $ 4,721,474 $ 3,317,861 $ 8,039,335
Callable 2,216,551 2,216,551
Money Market Funds 323,395 323,395
Totals $ 7,261,420 $ 3,317,861 10,579,281
Not rated:
California Local Agency Investment Fund 19,341,802
Cash in banks and on hand 617,757
Total Cash and Investments $ 30,538,840
43
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 3 - CASH AND INVESTMENTS ( Continued)
G. Concentration of Credit Risk
Significant investments in the securities of any individual issuers, other than U. S. Treasury securities,
mutual funds, are set forth below:
Reporting Reported
Unit Issuer Amount
Entity- wide Federal National Mortgage Association $ 3,793,616
Federal Home Loan Bank 2,585,665
Federal Home Loan Mortgage Corporation 3,876,784
Major Funds General Fund
Federal National Mortgage Association 3,793,616
Federal Home Loan Bank 2,566,703
Federal Home Loan Mortgage Corporation 3,249,649
Non - Major Funds Federal Home Loan Mortgage Corporation 188,612
NOTE 4 – INTERFUND TRANSACTIONS
A. Transfers Between Funds
With Council approval, resources may be transferred from one City fund to another. The purpose of
the majority of transfers, is to reimburse a fund which has made an expenditure on behalf of another
fund. Less often, a transfer may be made to open or close a fund.
Fund Receiving Transfers Fund Making Transfers
Amount
Transferred
General Fund Water System Fund $ 135,450 A
Capital Improvements Fund General Fund 336,000 B
Water System Fund 49,000 B
Non- Major Governmental Funds 1,408,825 A, B
Non- Major Governmental Funds General Fund 5,500 A
Water System Fund General Fund 20,635 A
Total Interfund Transfers $ 1,955,410
A: To fund operations
B: To fund capital projects
B. Current Interfund Balances
Current interfund balances arise in the normal course of business and are expected to be repaid
shortly after the end of the fiscal year. At June 30, 2006, the Alhambra Creek Improvements Capital
Projects Fund owed the General Fund $ 77,504.
C. Long- Term Interfund Advances
In fiscal year 2004- 2005 the General Fund made an advance to the Marina Systems Enterprise Fund
in the amount of $ 225,000, to be repaid monthly until 2018. Annual interest at 4.96% is accrued on
the unpaid balance. As of June 30, 2006, the balance was $ 198,083.
44
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 4 – INTERFUND TRANSACTIONS ( Continued)
In fiscal year 2005- 2006 the General Fund made two additional advances to the Marina Systems
Enterprise Fund in the amount of $ 82,000 and $ 275,000. The $ 82,000 advance is to be repaid at the
same repayment terms as the original $ 225,000 advance discussed above. As of June 30, 2006 its
balance was $ 77,624. The second advance for $ 275,000 is to be repaid over the next 45 years.
Annual interest at 4.53% is accrued on the unpaid balance. As of June 30, 2006 its balance was
$ 275,000.
D. Internal Balances
Internal balances are presented in the Entity- wide financial statements only. They represent the net
interfund receivables and payables remaining after the elimination of all such balances within
governmental and business- type activities.
NOTE 5 – LOAN RECEIVABLE AND DEFERRED REVENUE
The City made a loan to Riverhouse Associates, which was used to rehabilitate the Riverhouse Hotel,
an affordable housing project. The loan is secured by a deed of trust, bears no interest, and is due
August 14, 2021. At June 30, 2006 the loan balance was $ 284,930.
NOTE 6 - CAPITAL ASSETS
All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not
available. Contributed capital assets are valued at their estimated fair market value on the date
contributed.
Capital assets with limited useful lives are depreciated over their estimated useful lives. The purpose
of depreciation is to spread the cost of capital assets equitably among all users over the life of these
assets. The amount charged to depreciation expense each year represents that year’s pro rata share of
the cost of capital assets. Depreciation is provided using the straight- line method which means the
cost of the asset is divided by its expected useful life in years and the result is charged to expense
each year until the asset is fully depreciated. The City has assigned the useful lives listed below to
capital assets:
Buildings 30 years
Improvements 18- 67 years
Equipment 7 years
Infrastructure 40 years
Major outlays for capital assets and improvements are capitalized as projects are constructed.
Interest incurred during the construction phase is reflected in the capitalized value of the asset
constructed, net of interest earned on the invested proceeds over the same period.
45
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 6 - CAPITAL ASSETS ( Continued)
A. Capital Asset Additions and Retirements
Capital asset activities for the year ended June 30, 2006 comprise:
June 30, 2005 Additions Retirements Transfers June 30, 2006
Governmental activities
Capital assets not being depreciated:
Land $ 4,978,951 $ 4,978,951
Construction in progress 578,022 $ 1,128,034 ($ 4,641) ($ 182,247) 1,519,168
Total capital assets not being depreciated 5,556,973 1,128,034 ( 4,641) ( 182,247) 6,498,119
Capital assets being depreciated:
Buildings 4,706,879 376,034 13,180 5,096,093
Equipment 4,178,518 215,519 ( 182,738) 4,211,299
Infrastructure 35,638,966 500,203 169,067 36,308,236
Total capital assets being depreciated 44,524,363 1,091,756 ( 182,738) 182,247 45,615,628
Less accumulated depreciation:
Buildings ( 2,394,751) ( 85,721) ( 2,480,472)
Equipment ( 2,075,934) ( 376,147) 155,885 ( 2,296,196)
Infrastructure ( 20,604,590) ( 854,697) ( 21,459,287)
Total accumulated depreciation ( 25,075,275) ( 1,316,565) 155,885 ( 26,235,955)
Net capital assets being depreciated 19,449,088 ( 224,809) ( 26,853) 182,247 19,379,673
Governmental activities capital assets, net $ 25,006,061 $ 903,225 ($ 31,494) $ 25,877,792
Business- type activities
Capital assets, not being depreciated:
Land $ 1,665,154 $ 1,665,154
Construction in progress 1,553,568 $ 814,672 ($ 1,495,251) 872,989
Total capital assets not being depreciated 3,218,722 814,672 ( 1,495,251) 2,538,143
Capital assets being depreciated:
Buildings 15,588,829 29,892 15,618,721
Improvements 1,032,929 203,154 1,495,251 2,731,334
Equipment 1,816,199 1,816,199
Infrastructure 87,196,002 78,705 87,274,707
Net capital assets being depreciated 105,633,959 311,751 1,495,251 107,440,961
Less accumulated depreciation for:
Buildings ( 6,009,551) ( 399,397) ( 6,408,948)
Improvements ( 774,057) ( 187,752) ( 961,809)
Equipment ( 1,016,955) ( 98,484) ( 1,115,439)
Infrastructure ( 56,958,507) ( 1,350,000) ( 58,308,507)
Total accumulated depreciation ( 64,759,070) ( 2,035,633) ( 66,794,703)
Net capital assets being depreciated 40,874,889 ( 1,723,882) 1,495,251 40,646,258
Business- type activities capital assets, net $ 44,093,611 ($ 909,210) $ 43,184,401
46
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 6 - CAPITAL ASSETS ( Continued)
B. Capital Asset Contributions
Some capital assets may be acquired using federal and State grant funds, or they may be contributed
by developers or other governments. GASB Statement 34 requires that these contributions be
accounted for as revenues at the time the capital assets are contributed.
C. Depreciation Allocation
Depreciation expense is charged to functions and programs based on their usage of the related assets.
The amounts allocated to each function or program are as follows:
Governmental Activities
Community Development $ 950,901
Police 60,107
General Government 1,751
Capital assets held by the City's Internal Service Funds 303,806
Total Governmental Activities $ 1,316,565
Water System $ 1,774,480
Marina System 189,517
Parking Services 71,636
Total Business- Type Activities $ 2,035,633
Business- Type Activities
NOTE 7 – LONG- TERM DEBT
The City generally incurs long- term debt to finance projects or purchase assets which will have
useful lives equal to or greater than the related debt.
Proprietary Fund ( Enterprise and Internal Service) long- term debt is accounted for in the proprietary
funds which will repay the debt because these funds are accounted for on the full- accrual basis in a
similar manner to commercial operations.
For governmental fund types, bond premiums and discounts, as well as issuance costs, are
recognized during the period of issuance. For proprietary fund types, bond premiums and discounts,
as well as issuance costs, are deferred and amortized over the life of the bonds using the straight- line
method. Bonds payable are reported net of the applicable bond premium or discount.
47
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 7 – LONG TERM DEBT ( Continued)
The City’s debt issues and transactions are summarized below and discussed in detail thereafter.
A. Current Year Transactions and Balances
Original Issue Balance at Balance at Current
Amount June 30, 2005 Retirements June 30, 2006 Portion
Governmental Activity Debt
General Long- Term Debt
2003 Certificates of Participation
Refinancing Project, 2- 4%, due 12/ 01/ 13 $ 2,200,000 $ 2,005,000 $ 200,000 $ 1,805,000 $ 200,000
Total governmental activity debt $ 2,200,000 $ 2,005,000 $ 200,000 $ 1,805,000 $ 200,000
Business- Type Activity Debt
Enterprise Long- Term Debt
Certificates of Participation:
1999 Water System Improvements, 4.2-
5.375%, due 12/ 1/ 26 $ 6,040,000 $ 5,630,000 $ 150,000 $ 5,480,000 $ 155,000
2003 Refinancing Project,
2- 4%, due 12/ 01/ 18 5,595,000 5,010,000 300,000 4,710,000 300,000
Total business- type activity debt $ 11,635,000 $ 10,640,000 $ 450,000 $ 10,190,000 $ 455,000
B. 1999 Certificates of Participation
On August 1, 1999, the City issued Certificates of Participation ( COPs) in the amount of $ 6,040,000
to fund and retire the construction of various improvements to the City’s existing municipal water
system. Semi- annual interest payments are due on June 1 and December 1 of each year, and annual
principal payments are due on December 1. Interest and principal payments are payable from net
revenues derived from the operation of the water system.
C. 2003 Certificates of Participation
On March 11, 2003, the City issued Certificates of Participation ( COPs) in the amount of $ 7,795,000
to refund and retire the outstanding 1992 City Hall Refurbishment Certificates of Participation and
the 1993 Water System Improvements Certificates of Participation. Interest payments on the 2003
COPs are due semi annually on June 1 and December 1, and annual principal payments are due on
December 1. Interest and principal payments are payable from lease revenues on City Hall and net
revenues derived from the operation of the water system.
48
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 7 – LONG TERM DEBT ( Continued)
D. Debt Service Requirements
Annual debt service requirements are shown below:
Governmental Activities Business- type Activities
For the Year
Ending June 30 Principal Interest Principal Interest
2007 $ 200,000 $ 51,306 $ 455,000 $ 436,661
2008 205,000 47,256 470,000 423,808
2009 215,000 42,519 485,000 410,263
2010 220,000 36,532 500,000 394,517
2011 230,000 29,638 520,000 376,326
2012- 2016 735,000 40,084 2,910,000 1,553,904
2017- 2021 2,655,000 881,646
2022- 2026 1,780,000 360,935
2027- 2031 415,000 11,163
Total $ 1,805,000 $ 247,335 $ 10,190,000 $ 4,849,223
E. Authorized but Unissued Debt
The City has previously issued Water Revenue Bonds authorized by the electorate at a bond election
held on June 7, 1966. Series A, B, and C Bonds in the amount of $ 3,250,000 were previously issued
and have been fully retired. $ 1,400,000 remains authorized but unissued.
The City has a conditional commitment to borrow an additional $ 2.93 million from the State to
finance certain Marina improvements. As of June 30, 2006, the City is still in negotiations with the
State for the terms of the loan.
NOTE 8 – LOANS PAYABLE TO STATE OF CALIFORNIA
At June 30, 2006, the Marina Fund owed $ 4,300,680 in loans to the State, $ 10,000 less than the June
30, 2005 balance due to the principal repayment made by the City in fiscal year 2006. The City also
made an interest payment of $ 78,594 in fiscal 2006 to cover current year interest accrued on the
unpaid loan balances.
In January of 1960, the City entered into an agreement with the State of California, whereby a loan of
$ 1,300,000 was granted to the City for the construction of a Marina. At June 30, 2006, the amount
payable to the State including interest amounted to $ 2,483,527.
The agreement was modified in 1964 with the following conditions:
Net income from the operations of the Marina is distributable as follows:
· Pro rata reimbursement to contributors of initial development costs as described in the
agreement.
49
CITY OF MARTINEZ
Notes to Financial Statements
NOTE 8 – LOANS PAYABLE TO STATE OF CALIFORNIA ( Continued)
· 80% of the annual net income to the State, until the sum of $ 1,300,000 is paid; the
remaining 20% to be paid to the City.
· After the principal portion of the loan is repaid to the State, 80% of the annual net income
shall be paid to the City; the remaining 20% shall be paid to the State until the State has
been paid 3% interest per annum on the unpaid principal of the loan for each year starting
with January 1, 1961. The agreement will terminate upon completion of the foregoing
payments.
On December 20, 1973, the City entered into another agreement with the State of California,
whereby a loan of $ 450,000 was granted to the City to complete the Martinez Small Craft Harbor
( MSCH). At June 30, 2006, the amount payable to the State was $ 301,523 including accrued
interest. The terms are as follows:
· The loan is payable from the gross revenues from operations of the facilities located or
erected within the MSCH Project, prior to any other expenditures from such revenues.
Payments of principal and interest at 4.5% shall be payable in equal annual installments on August 1
of each year with a final payment due on August 1, 2004. During fiscal year 2005 the State amended
the agreement and extended the final payment date as the City and State are still in negotiations to
amend the loan agreement.
· Any retained earnings arising from the operation of the MSCH Project after deductions for
repayments of the State lo