CITY OF OAKLAND
CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2005
PREPARED BY THE FINANCE AND MANAGEMENT AGENCY
WILLIAM E. NOLAND, DIRECTOR
LARAE BROWN, CONTROLLER
COMPREHENSIVE ANNUAL FINANCIAL
REPORT
FISCAL YEAR ENDED JUNE 30, 2005
TABLE OF CONTENTS
Page
INTRODUCTORY SECTION
Letter of Transmittal................................................................................................................. i
GFOA Certificate of Achievement........................................................................................... viii
Organizational Chart................................................................................................................. ix
List of Elected and Appointed Officials ................................................................................... x
Project Team........................................................................................................................... . xi
FINANCIAL SECTION
Independent Auditor’s Report ............................................................................................ 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:
Balance Sheet – Governmental Funds.................................................................... 20
Reconciliation of Governmental Funds Balance Sheet to the
Statement of Net Assets for Governmental Activities...................................... 21
Statement of Revenues, Expenditures and Changes in Fund Balances –
Governmental Funds…..…………………………...........................………… 22
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances of Governmental Funds to the Statement of Activities of
Governmental Activities................................................................................... 23
Statement of Net Assets – Proprietary Funds......................................................... 24
Statement of Revenues, Expenses and Changes in Fund
Net Assets – Proprietary Funds ........................................................................ 25
Statement of Cash Flows – Proprietary Funds ....................................................... 26
Statement of Fiduciary Net Assets – Fiduciary Funds ........................................... 27
Statement of Changes in Fiduciary Net Assets – Fiduciary Funds ........................ 28
Page
Notes to Basic Financial Statements:
( 1) Organization and Definition of Reporting Entity................................................ 30
( 2) Summary of Significant Accounting Policies ..................................................... 32
( 3) Cash and Investments and Restricted Cash and Investments .............................. 42
( 4) Interfund Receivables, Payables and Transfers................................................... 57
( 5) Memorandums of Understanding ........................................................................ 59
( 6) Notes and Loans Receivable................................................................................ 60
( 7) Capital Assets ...................................................................................................... 61
( 8) Property Held for Resale ..................................................................................... 67
( 9) Accounts Payable and Accrued Liabilities Payable ............................................ 68
( 10) Deferred Revenue................................................................................................ 69
( 11) Tax and Revenue Anticipation Notes Payable .................................................... 70
( 12) Long- Term Obligations ....................................................................................... 71
( 13) General Fund Unreserved Fund Balance............................................................. 86
( 14) Self- Insurance...................................................................................................... 87
( 15) Joint Venture........................................................................................................ 90
( 16) Pension Plans....................................................................................................... 93
( 17) Postemployment Benefits Other Than Pension Benefits..................................... 97
( 18) Commitments and Contingent Liabilities............................................................ 97
( 19) Deficit Fund Balances/ Net Assets ....................................................................... 100
( 20) Subsequent Events............................................................................................... 101
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Funding Progress –
PERS Actuarial Valuation ............................................................................................ 102
Budgetary Data................................................................................................................... 103
Budgetary Comparison Schedule – General Fund ............................................................. 105
Reconciliation of Operations on Modified Accrual Basis to Budgetary Basis .................. 106
Page
COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES:
Combining Balance Sheet – Nonmajor Governmental Funds............................................. 108
Combining Statement of Revenues, Expenditures and Changes in Fund Balances –
Nonmajor Governmental Funds ................................................................................... 109
Combining Balance Sheet – Nonmajor Governmental Funds – Special Revenue Funds .. 110
Combining Statement of Revenues, Expenditures and Changes in Fund Balances –
Nonmajor Governmental Funds – Special Revenue Funds.......................................... 111
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and
Actual – Special Revenue Funds .................................................................................. 112
Combining Balance Sheet – Nonmajor Governmental Funds – Debt Service Funds ......... 114
Combining Statement of Revenues, Expenditures and Changes in Fund Balances –
Nonmajor Governmental Funds – Debt Service Funds................................................ 115
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and
Actual – Debt Service Funds........................................................................................ 116
Combining Balance Sheet – Nonmajor Governmental Funds – Capital Projects .............. 118
Combining Statement of Revenues, Expenditures and Changes in Fund Balances –
Nonmajor Governmental Funds – Capital Projects...................................................... 119
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and
Actual – Capital Projects .............................................................................................. 120
Combining Statement of Net Assets – Internal Service Funds .......................................... 121
Combining Statement of Revenues, Expenses and Changes in Fund Net Assets –
Internal Service Funds .................................................................................................. 122
Combining Statement of Cash Flows – Internal Service Funds......................................... 123
Combining Statement of Fiduciary Net Assets – Pension Trust Funds ............................. 124
Combining Statement of Changes in Fiduciary Net Assets – Pension Trust Funds........... 125
Table Page
STATISTICAL SECTION
Governmental Revenues by Source........................................................................... 1 126
Governmental Expenditures ...................................................................................... 2 127
Property Tax Levies and Collections......................................................................... 3 129
Assessed Value of Property....................................................................................... 4 130
Property Tax Rates .................................................................................................... 5 131
Principal Property Taxpayers .................................................................................... 6 132
Special Assessment Billings and Collections............................................................ 7 133
Computation of Legal Debt Margin .......................................................................... 8 134
Percentage of Net General Obligation Bonded Debt to Assessed
Value and Net Bonded Debt Per Capita .............................................................. 9 135
Percentage of Annual Debt Service Expenditures to Total
General Governmental Expenditures................................................................... 10 136
Direct and Overlapping Bonded Debt ....................................................................... 11 137
Revenue Bond Coverage:
Port of Oakland.................................................................................................... 12 138
OMERS Revenue Bond....................................................................................... 12 138
Economic Indices ...................................................................................................... 13 139
Demographic Statistics.............................................................................................. 14 140
Miscellaneous Statistics............................................................................................. 15 141
General Information ................................................................................................................. 143
FINANCEAND MANAGEMENT AGENCY
ACCOUNTING DIVISION
150 FRANK H. OGAWA PLAZA, SUITE 6353
OAKLAND, CALIFORNIA 94612
( 510) 238- 3264
December 16, 2005
Citizens of the City of Oakland
The Honorable Mayor and
Members of the City Council
I am pleased to present the Comprehensive Annual Financial Report ( CAFR) of the City of
Oakland, California ( City). The Finance and Management Agency has prepared this report to
present the financial position and the changes in financial position for the fiscal year ended June
30, 2005, and the cash flows of its proprietary fund types for the year then ended. The basic
financial statements and supporting schedules have been prepared in compliance with Section
809 of the City Charter, with California Government Code Sections 25250 and 25253, and in
accordance with generally accepted accounting principles ( GAAP) for local governments as
establishedby the GovernmentalAccounting Standards Board ( GASB).
Our Comprehensive Annual Financial Report is presented in three sections:
The Introductory Section includes the transmittal letter, information about the
organizational structure of the City, the profile of the government, information useful in
assessing the financial condition of the City, and the Government Finance Officers
Association's ( GFOA) Certificate of Achievement.
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The Financial Section is prepared in accordance with the GASB 34 requirements by
including the Management's Discussion and Analysis ( MD& A), the Basic Financial
Statements including notes and the Required Supplementary Information. The Basic
Financial Statements include the government- wide financial statements that present an
overview of the City's entire financial operations and the fund financial statements that
present the financial information of each of the City's major funds, as well as non- major
governmental, and fiduciary funds. Also included in this section is the Independent Auditors'
Report on the basic [ mancial statements.
The Statistical Section includes ten years of unaudited summary financial data, debt
computations, and a variety of demographic, economic and social information that may be of
interest to potential investors in the City's bonds and to other inquiring readers.
This report consists of management's representations concerning the finances of the City.
Consequently, management assumes full responsibility for the completeness and reliability of all
of the information presented in this report. To provide a reasonable basis for making these
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representations, management of the City has established a comprehensive internal control
framework that is designed both to protect the government's assets from loss, theft, or misuse, to
compile sufficient reliable information for the preparation of the City's financial statements in
conformity with GAAP, and to comply with laws and regulations. Because the cost of internal
controls should not outweigh their benefits, the City's comprehensive framework of internal
controls has been designed to provide reasonable rather than absolute assurance that the financial
statements will be free from material misstatement. As management, we assert that, to the best of
our knowledge and belief, this financial report is complete and reliable in all material respects.
The City's fmancial statements have been audited by a group of independent auditing furns that
are licensed certified public accountants. The objective of the independent audit was to provide
reasonable assurance that the financial statements of the City for the fiscal year ended June 30,
2005, are free of material misstatement. The independent auditor concluded, based upon the
audit, that there was reasonable basis for rendering an unqualified opinion on the City's financial
statements for the fiscal year ended June 30, 2005. The Independent Auditors Report is presented
as the first componen, tof the Financial Section ofthis report.
GASB Statement No. 34 ( GASB 34) requires that management provide a narrative introduction,
overview, and analysis to accompany the basic financial statements in the form of Management's
Discussion and Analysis ( MD& A). This letter of transmittal is designed to complement the
MD& A and should be read in conjunction with it. The City's MD& A can be found immediately
following the report of the independent auditors.
The Reporting Entity and Its Services
The City has defined its reporting entity in accordance with generally accepted accounting
principles that provide guidance for determining which governmental activities, organizations,
and functions should be included in the reporting entity. These Basic Financial Statements
present information on the activities of the City and its component units.
GASB 34, Basic Financial Statements - and Management Discussion and Analysis - for State
andLocalGovernments, retainsmanyof themostpopularfeaturesof the traditionalreportingfor
stateandlocalgovernments. It alsoincorporatestheseimportantnewfeatures:
. Government- wide financial reporting;
. Management's Discussion and Analysis ( MD& A);
. Separate presentation of major funds; and
. Expanded budgetary reporting.
Moreover, GASB 34 requires that states and local governments annually disclose the full net
value of all capital. assets, including infrastructure assets, in order to comply with generally
accepted accounting principles.
GAAP require that the component units be separated into blended or discretely presented units
for reporting purposes. Although legally separate entities, blended component units are, in
substance, part of the City's operations. Therefore, they are reported as part of the Primary
Government. The discretely presented component units are reported in separate columns in the
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government- wide financial statements to emphasize that they are legally separate ITomthe City
operations.
Accordingly, we have included the operations of the Oakland Municipal Employees' Retirement
System ( OMERS), the Police and Fire Retirement System ( PFRS), and the Oakland
Redevelopment Agency ( Agency) as blended component units. The operations of the Port of
Oakland ( including the Oakland International Airport) and the Oakland Base Reuse Authority
( OBRA) are presented discretely. The Oakland- Alameda County Coliseum Authority ( Authority)
is a Joint Venture owned and operatedby the City and the County of Alameda.
The Oakland Housing Authority, the Oakland Unified School District, and the Peralta
Community College District were not included because they have limited relationships with the
City and, therefore, did not meet the criteria for inclusion in the reporting entity. The City is also
represented in six regional agencies that are excluded from the City's reporting entity. These
agencies are the San Francisco Bay Area Rapid Transit District ( BART), Alameda- Contra Costa
Transit District ( AC Transit), Bay Area Air Quality Management District, Association of Bay
Area Governments ( ABAG), East Bay Regional Park District, and the East Bay Municipal
Utility District.
Profile of the Government
The City of Oakland was chartered as a city in 1854. It is situated on the eastern side of the
Oakland/ San Francisco Bay in the County of Alameda. Its western border offers nineteen miles
of coastline, while the rolling hills to the east present views of the Bay and the Pacific Ocean. In
between are traditional, well- kept neighborhoods, a progressive downtown that is experiencing a
tremendous surge in growth, and superior cultural and recreational amenities. It is the
. administrativesite for the Countyof Alameda, the regionalseat for the federalgovernment, the
district location of primary state offices, and the transportation hub of commerce for the Bay
Area.
In November 1998, the citizens of Oakland passed Measure X changing the form of government
ITomCouncil- City Administrator to Mayor- Council through a charter amendment. Legislative
authority is vested in the City Council and executive authority is vested in the Mayor. The City
Administrator, appointed by and under the direction of the Mayor, has administrative authority to
manage the day- to- day administrative and fiscal operations of the City. The City Auditor and the
City Attorney are both elected officials and serve four- year terms.
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The Mayor and City Council are the governing body of the City and comprises eight elected
officials. One Council member is elected " at large", while the other seven Council members
represent specific districts. The Mayor and City Council are elected to serve four- year terms.
On March 2,2004, the citizens of Oakland passed Measure P: ( 1) to repeal the sunset provision
of Measure X passed in November 1998to retain the Mayor- Council form of government; ( 2) to
change the term limit for Mayor from two terms to two consecutive terms; ( 3) to reduce the
number of votes needed for the City Council to pass an ordinance on reconsideration ITomsix
votes to five votes; ( 4) to eliminate the prohibition on paying the Mayor more than the City
Administrator; ( 5) to remove the rule that the Mayor vacates his or her office by missing ten
consecutive City Council meetings; ( 6) to require the Mayor to advise the City Council before
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removing the City Administrator; and ( 7) to change the title of the City Manager to " City
Administrator".
The City provides a full range of services contemplated by statute or charter, including those
functions delegated to cities under state law. These services include public safety ( police and
fire), sanitation and environmental health enforcement, recreational and cultural activities, public
improvements, planning, zoning, and general administrative services.
The City's budget is a detailed operating plan that identifies estimated costs in relation to
estimated revenues. The budget includes: ( 1) the programs, projects, services, and activities to be
carried out during the fiscal year; ( 2) the estimated revenue available to finance the operating
plan; and ( 3) the estimated spending requirements for the operating plan. The budget represents a
process wherein policy decisions by the Mayor and the City Council are adopted, implemented
and controlled. The notes to the required supplementary information summarizes the budgetary
roles of various City officials and the timetable for their budgetary actions according to the City
Charter. On June 29, 2004, the City Council, during its mid- cycle review, approved the City's
revised budget for fiscal year 2004- 05.
The City Charter prohibits expending monies for which there is no legal appropriation.
Therefore, the City is required to adopt budgets for all City funds. The level of budgetary control
( that is, the level at which expenditures cannot legally exceed the appropriated amount) is
established at the fund level, although for management purposes, the line item budget is
controlled at the departmentallevel within funds. The City Administratoris authorizedto .
administer the budget and may transfer monies from one activity, program or project to another
within the same agency and fund. Supplemental appropriations or transfers of appropriations
between funds or agencies must be approvedby the City Council.
The City also maintains an encumbrance accounting system to provide budgetary controls for
governmental funds. Encumbrances which would result in an overrun of an account balance are
suspended in the system until additional funding is made available via budget change requests or
withdrawn due to lack of funding. Encumbrances outstanding at June 30 and carried forward are
reported as reservations of the appropriate governmental fund's fund balance since they do not
constitute expenditures or liabilities. Encumbrances that do not lapse but are brought forward to
the new fiscal year are incorporated as part of the budget adopted by City Council for that year.
Factors Affecting Financial Condition
The information presented in the financial statements is perhaps best understood when it is
considered from the broader perspective of the specific environment within which the City
operates. .
Local Economy. The City of Oakland has transformed itself into one of the most desirable
communities to live and to do business in the country. Testimony to this transformation is well
publicized in various magazines and comments by public officials. For example, the City is:
. " . . . .4thBest commercial real estate market in the country" ( Moody's Investors 2003)
" 8thBest Place for Business in the u. S." ( Forbes 2002 Annual Survey);
". ... ih Most Creative City in America" ( Carnegie Mellon);
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. ".. .. 6thBest City to live in the u. S." ( Money, Dec. 2002);
" leader among America's top ten technology cities." ( Newsweek, April 30, 2001); and
" .. .. uniquely positioned as an excellent point for international business." ( Mickey
Kantor, former u. S. Secretary of Commerce)
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These statements are a testimony to the City's vibrancy, its business- friendly public policies, its
well educated ( ranked 8thas most educated in the nation) and skilled labor force, its incentive-driven
environment within which to do business, and a City administration under Mayor Jerry
Brown's leadership that enthusiastically supports and embraces sustainable economic
development. Moreover, transportation systems such as four freeways ( 1- 880, 1- 580, Hwy. 13,
and Hwy. 24), railroad, trucking, shipping ( 4thlargest port in the nation), air transportation, and
public transit converge in the. City of Oakland to make it the hub of interstate and international
commerce on the West Coast. Its strategic location and proximity to Silicon Valley and to highly
acclaimed institutions of higher learning provide excellent synergy for collaborative research and
innovation for improved business products and services.
Oakland occupies 56 square miles of land with nineteen miles of coastline to the west and
magnificent rolling hills to t~ e east. It is the eight~ lar~ est city i? California with a population of
412,300. Its economy ranks IIIthe top 20 economIes IIIthe UnIted States and the 84t largest in
the world. Some of the diverse attributes which helped Oakland survive the dot. com bust are:
. Featured as among 10 top technology cities in the future ( Newsweek, April 2001)
. Oakland ranked nation's # 1 office market through 2005 ( Landauer OM Index);
. Commercial building permits issued in 2003 valued at $ 278.9 million, 25.5% increase;
. Ranked 3rdin the nation in percentage of women- owned businesses;
Two primary engines that drive the economies of the City in particular and Northern California
in general are the Port of Oakland and the Oakland International Airport. Both entities celebrated
their 7Sthanniversaries in 2002 with pride and enthusiasm in meeting the challenges of the new
century. Both are investing billions of dollars in major expal1sionprograms in anticipation of the
new challenges. Finally, both entities have significant impacts on the City's and the region's
economies. For example, in 2003, the Port of Oakland moved $ 1.2 billion in agricultural goods.
The Port is the primary seaport for more than 70% of California wine, dried fruits, and other
edible exports.
In a recent article by the San Francisco Chronicle headlined, " It's full steam ahead at the Port of
Oakland," it declared a booming business at the Port benefiting businesses and jobs in 2003.
Those benefiting are dockworkers, truckers, rail companies, the California Central Valley
farmers, and shipping companies. Ranked the 4thbusiest port in the nation, the Port of Oakland
handled 99% of Northern California's ocean container cargo with a remarkable growth of 13.8%
in containers handled compared to 2002. Part of this tremendous growth is driven by China's
booming manufacturing trade and other economies in the Far East.
Downtown Oakland remains the largest center for office development in the East Bay with 15.3
million square feet of office space and 70,000 daytime workers. The Shorenstein Company
recently completed a 20- story, 450,000 square foot office tower in the City Center that is.
occupied by various businesses. Ask Jeeves company moved its operations from Emeryville to
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Oakland. It signed a lease to occupy 55,803 square feet and will occupy the fourth and fifth
floors along with the plaza level in the new tower.
In a recent article by the Oakland Tribune, a study conducted by a Harvard business professor for
the Initiative for a Competitive Inner City concluded that while many of America's inner cities
continue to hemorrhage jobs, the City of Oakland gained jobs, fueled by immigrant population
growt, h. The study targeted inner cities with population of 50,000 residents or more. It found
that only ten addedjobs at a higher rate than surrounding metropolitan areas: Oakland; San Jose;
Long Beach; Anaheim; Portland, Oregon; Seattle; Jersey City, N. J.; Tulsa Okla; S1. Petersburg,
Fla; and Winston- Salem, N. C.
Long- term Financial Planning
Mayor's lOK Project: A major initiative launched by Mayor Jerry Brown when he took office
in 1999, the 10K Downtown Housing Initiative, is realizing its goal of attracting 10,000 new
residents to downtown Oakland by encouraging the development of 6,000 market- rate housing
units. A near perfect climate, California's best mass transit system, a central Bay Area location
and a growing downtown workforce all contribute to make downtown Oakland a great place to
live.
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As of October 1, 2005, the 10K Downtown Housing Initiative has exceeded the goal with 61
residential projects, 7,053 units, housing for about 12,000 new residents, completed or in
process. Seventeen projects ( 1,663 units) have been completed, fourteen projects ( 1,479 units)
are in construction, twenty projects ( 2,570 units) have received planning approvals, and ten
projects ( 1,341 units) are in the planning process. The Initiative has literally altered Oakland's
skyline with the construction of the Essex on Lake Merritt, the first high- rise residential
construction in downtown Oakland in 20 years.
Cash Management Policies and Practices
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To maximize interest income and maintain liquidity, the City pools operating cash of both the
City and Port and invests these monies in securities of various maturities. These monies and
operating funds of the Redevelopment Agency and the Oakland Base Reuse Authority are
invested pursuant to the City's Investment Policy in compliance with Section 53601 of the
California Government Code, the Nuclear Free Zone and Linked Banking Ordinances, and the
Tobacco Divestiture Resolution. The objectives of the' Investment Policy are to preserve capital,
provide adequate liquidity to meet cash disbursements of the City, and to reduce overall portfolio
needs while maintaining market- average rates of return. mvestrnents are secured by collateral as
required under law, with maturity dates staggered to ensure that cash is available when needed.
The City Council receives quarterly reports on the performance of the City's pooled investment
program.
The permitted investments include US. Treasury notes ( with certain restrictions), federal agency.
issues, bankers' acceptances, commercial paper, corporate stocks and bonds with ratings of Al or
PI by either Standard and Poor's or Fitch's, negotiable certificates of deposit, Local Agency
Investment Fund, and repurchase agreements.
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Risk Management
To finance its risks of general liability and workers' compensation, the City maintains a program
of self- insurance, supplementedwith commercial insurance of limited coverage, that is sufficient
to protect resources at the lowest reasonable cost. The City does maintain commercial fire
insurance policies on all of its buildings. Additionally, the City insures for the perils of
earthquake and flood on the Henry J. Kaiser Convention Center and the George F. ScotIan
Memorial Convention Center.
The City Attorney represents the City in all of its legal matters, including claims investigation,
civil litigation, and disposition of claims and lawsuits.
Insurance to protect and indemnify the City against the risks of general liability and property
damage is required in virtually all of its public works, contractor- supplied, and professional
services contracts.
A wards
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The Government Finance Officers Association of the United States and Canada ( GFOA)
awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of
Oakland for its Comprehensive Annual Financial Report ( CAFR) for the fiscal year ended June
30, 2004. The Certificate of Achievement is a prestigious national award recognizing
conformance with the highest standards for preparation of state and local government fInancial
reports. In order to be awarded a Certificate of Achievement, a governmental unit must publish
an easily readable and efficiently organized CAFR whose contents conform to program
standards. Such CAFRmust satisfy both generally accepted accounting principles and applicable
legal requirements.
The Certificate of Achievement is valid for a period of one year only. The City of Oakland has
received a Certificate of Achievement for 15 ofthe last 16 years. The City's Fiscal Year 2004- 05
CAFR will be submitted to GFOA for consideration for the Certificate of Achievement for
Excellence in Financial Reporting.
Acknowledgements
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I would like to express my appreciation to the entire staff of the Finance and Management
Agency, most particularly the Accounting Division, and other agency and departmental staff, for
their professionalism, dedication, and efficiency in the preparation of this report. I also thank
Macias, Gini & Company LLP for their assistance and guidance. Finally, I would like to thank
the Mayor, members of the City Council, and the City Administrator for their interest and
continuing support in planning and conducting the City's financial operations in a responsible
and progressive manner.
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Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Oakland,
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2004
A Certificate of Achievement for Excellence in Financial
Reporting is presented by the Government Finance Officers
Association of the United States and Canada to
government units and public employee retirement
systems whose comprehensive annual financial
reports ( CAFRs) achieve the highest
standards in government accounting
and fmancial reporting.
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President
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Executive Director
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City of Oakland Organization Chart
City Attorney
Fire Services Human Services
Library Services Parks &
Recreation
Public Works
Assistant City
Administrator
City Clerk
Community &
Economic Development
Police Services
Finance and
Management
Cultural Arts
& Marketing
City Administrator
Mayor City Council City Auditor
Electorate
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DIRECTORY OF CITY OFFICIALS
MAYOR/ COUNCIL FORM OF GOVERNMENT
June 30, 2005
MAYOR
Jerry Brown
MEMBERS OF THE CITY COUNCIL
Ignacio De La Fuente, President ( District 5)
Jane Brunner, Vice- Mayor ( District 1)
At Large – Henry Chang, Jr. District 2 – Patricia Kernighan District 3 – Nancy Nadel
District 4 – Jean Quan District 6 – Desley Brooks District 7 – Larry Reid
COUNCIL APPOINTED OFFICERS
Deborah A. Edgerly, City Administrator
LaTonda Simmons, City Clerk
ELECTED OFFICERS
John Russo, City Attorney
Roland Smith, City Auditor
AGENCY & DEPARTMENT DIRECTORS
Raul Godinez Audree Jones- Taylor
Public Works Parks & Recreation
Carmen Martinez Daniel Farrell
Library Services Fire Services
William E. Noland Wayne Tucker
Finance & Management Police Services
Vacant Andrea Youngdahl
Cultural Arts & Marketing Human Services
Dan Vanderpriem/ Claudia Cappio
Community & Economic Development
xi
CITY OF OAKLAND
COMPREHENSIVE ANNUAL FINANCIAL REPORT
PROJECT TEAM
William E. Noland LaRae Brown
Director Controller
Finance and Management Agency
AUDIT/ FINANCIAL STATEMENT COORDINATOR
Ace A. Tago, Assistant Controller
FINANCIAL STATEMENT PREPARATION
CAFR Section Leaders
Bruce Levitch Osborn Solitei Theresa Woo
Accountant III Financial Analyst Accountant III
Accounting Team ( GL, ORA & GRANTS)
Myrna Bangloy Mercy David Sandra Tong
Bernadette Bangloy Carol Hoomanawanui Norma Torres
Frank Catalya Felipe Kiocho Marilyn Tran
Connie L. Chu Lani Pallotta David Warner
Edward Chun Eric Parras Andy Yang
ADMINISTRATIVE SUPPORT
Novette G. Flores, Administrative Assistant
SPECIAL ASSISTANCE
Donna Treglown Kathleen Larson Katano Kasaine
David Jones Janet An Sharon Holman
SPECIAL ASSISTANCE - DEPARTMENTS & OFFICES
City Administrator’s Office City Attorney’s Office FMA- Treasury Division
Community & Economic Development Agency
Risk Management
MACIAS GINI &. COMPANYLLP
Mt. Diablo Plaza
2175 N. California Boulevard, Ste. 64S
Walnut Creek, California 94596
925.274.0190 PHONE
925.274.3819 FAX
Honorable Mayor and Members
of the City Council
City of Oakland, California
Independent Auditor's Report
We have audited the accompanying[ mancial statements of the governmental activities, the business- type activities,
the aggregate discretely presented component units, each major fund, and the aggregate remaining fund
information of the City of Oakland, California ( City), as of and for the year ended June 30, 2005, which
collectively comprise the City's basic [ mancial statements as listed in the table of contents. These [ mandai
statements are the responsibility of the City's management. Our responsibility is to express opinions on these
[ mancial statements based on our audit. We did not audit the [ mandaI statements of the Oakland Base Reuse
Authority ( OBRA), which represent 4%, 11%, and 3%, respectively, of the assets, net assets and revenues of the
aggregate discretely presented component units. Those [ manciaI statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for OBRA,
is based on the report of the other auditors.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to [ mandaI audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the [ mancial statements are free of material misstatement. An audit includes
consideration of internal control over [ mandaI reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
City's internal control over [ mancial reporting. Accordingly, we do not express such an opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures hi. the [ mancial statements.
An audit also includes assessing the accounting principles used and the significant estimates made by management,
as well as evaluating the overall [ mandaI statement presentation. We believe that our audit and the report of
other auditors provide a reasonable basis for our opinions.
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In our opinion, based on our audit and the report of other auditors, the [ mandaI statements referred to above
present fairly, in all material respects, the respective [ mandaI position of the governmental activities, the
business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate
remaining fund information of the City as of June 30, 2005, and the respective changes in [ mancial position and
cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note 2 to the [ mancial statements, the City adopted the provisions of Governmental Accounting
Standards Board ( GASB) Statement No. 40, Deposit and Investment Risk Disclosures - an amendment of GASB
Statement No. 3.
CERTIFIED PUBLIC ACCOUNTANTS" MANAGEMENT CONSULTANTS
In accordance with Government Auditing Standards, we have also issued our report dated December 9,. 2005, on
our consideration of the City's internal control over [ mancial reporting and on our tests of its compliance with
certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that
report is to describe the scope. of our testing of internal control over [ mancial reporting and compliance and the
results of that testing, and not to provide an opinion on the internal control over [ mancial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing
Standards and sho~ ddbe considered in assessing the results of our audit.
The management's discussion and analysis, the schedules of funding progress and the budgetary comparison
information listed in the table of contents are not a required part of the basic [ mancial statements but are
supplementary information required by accounting principles generally accepted in the United States of America.
We have applied certain limited procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information. However, we and the other
auditors did not audit the information and express no opinion on it.
Our audit was conducted for the purpose of forming opinions on the [ mancial statements that collectively comprise
the City's basic [ mancial statements. The introductory section, combining and individual fund [ mancial
statements and schedules, and statistical section are presented for purposes of additional analysis and are not a
required part of the basic financial statements. The combining and individual fund [ mancial statements and
schedules have been subjected to the auditing procedures applied by us in the audit of the basic [ mandaI
statements and, in our opinion, are fairly stated in all material respects in relation to the basic [ mancial statements
taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures
applied by us and the other auditors in the audit of the basic [ mancial statements and, accordingly, we and the
other auditors express no opinion on them.
~~ » ) j~, C\- c~~~ ~ L.\'
Certified Public Accountants ~
Walnut Creek, California
December 9, 2005
. I
1
3
MANAGEMENT’S DISCUSSION AND ANALYSIS
This section of the City of Oakland’s ( the City) Comprehensive Annual Financial Report
presents a narrative overview and analysis of the financial activities of the City for the
fiscal year ended June 30, 2005. We encourage readers to consider the information
presented here in conjunction with the additional information contained in the City’s
financial statements and related notes and our letter of transmittal that precedes this
section.
FINANCIAL HIGHLIGHTS
· The City’s total assets exceeded its total liabilities by $ 657.6 million as of June
30, 2005, compared to $ 552.7 million at June 30, 2004. This represents an
increase of 19% ($ 104.9 million) compared to the previous year. The largest
portion of the City’s net assets ( 64%) reflects its $ 418.0 million of investments in
capital assets for governmental and business type activities, net of related debt.
Of the remaining balance, ( 44%) reflects $ 292.4 million in funding for debt
service, capital projects and other continuing development projects for the City,
and a deficit in unrestricted assets of ($ 52.9) million or (- 8%).
· The City’s cumulative fund balances grew by 31% ($ 213.3 million) to $ 900.6
million compared to $ 687.3 million for the prior fiscal year. This growth is
primarily attributed to: ( 1) the combined increase of $ 183.3 million or 28% in
pooled and restricted cash and investments as a result of unspent Lease Revenue
Bonds, Series 2005 proceeds issued on June 21, 2005; ( 2) the improved revenue
collections as a result of double digit increases in property taxes; and ( 3) the 3%
reduction in overall governmental liabilities excluding long- term debts.
· As of June 30, 2005, the City had total long- term obligations outstanding of $ 1.87
billion compared to $ 1.68 billion outstanding for the prior fiscal year, an increase
of 11%. Of this amount, $ 227.0 million is general obligation bonds backed by the
full faith and credit of the City. The remaining $ 1.64 billion is comprised of
various long- term debt instruments including accruals of year- end estimates for
other long- term liabilities.
· The City’s General Fund unreserved/ undesignated fund balance at June 30, 2005
was $ 46.3 million compared to $ 39.8 million for the previous year, an increase of
$ 6.5 million or 16%, attributed primarily to conservative revenue forecasting for
real estate transfer taxes. The unreserved/ undesignated fund balance exceeded the
City Council’s 7.5% reserve policy by 43%.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to introduce the City’s basic financial
statements. The City’s basic financial statements consist of three components: ( 1)
4
government- wide financial statements, ( 2) fund financial statements, and ( 3) notes to the
basic financial statements. This report also includes required and other supplementary
information in addition to the basic financial statements themselves.
Government- wide Financial Statements
The government- wide financial statements are designed to provide readers with a broad
overview of the City’s finances, in a manner similar to the financial statements for a
private- sector business.
The statement of net assets presents information on all of the City’s assets and liabilities,
with the difference between the two reported as net assets. Over time, increases or
decreases in net assets may serve as a useful indicator of whether or not the financial
position of the City is improving or deteriorating.
The statement of activities presents information showing how the City’s net assets
changed during the most recent fiscal year. All changes in net assets are reported as soon
as the underlying event giving rise to the change occurs, regardless of the timing of the
related cash flows. Thus, revenues and expenses are reported in this statement for some
items that will only result in cash flows in future fiscal periods, such as revenues
pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and
sick leave.
Both of the government- wide financial statements distinguish functions of the City that
are principally supported by taxes and intergovernmental revenues ( governmental
activities) from other functions that are intended to recover all or a significant portion of
their costs through user fees and charges ( business- type activities). The governmental
activities of the City include general government, public safety, life enrichment,
community and economic development, and public works. The business- type activities of
the City include the sewer service system and the parks and recreation.
Fund Financial Statements
The fund financial statements are designed to report information about groupings of
related accounts that are used to maintain control over resources that have been
segregated for specific activities or objectives. The City, like other state and local
governments, uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements. All of the funds of the City can be divided into the following
three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds. Governmental funds are used to account for essentially the same
functions reported as governmental activities in the government- wide financial
statements. Most of the City’s basic services are reported in governmental funds.
However, unlike the government- wide financial statements, governmental fund financial
statements focus on the near- term inflows and outflows of spendable resources, as well as
5
on the balances of spendable resources available at the end of the fiscal year. Such
information may be useful in evaluating the City’s near- term financing requirements.
Because the focus of governmental funds is narrower than that of the government- wide
financial statements, it is useful to compare the information presented for governmental
funds with similar information presented for governmental activities in the government-wide
financial statements. By doing so, readers may better understand the long- term
impact of the City’s near- term financing decisions. Both the governmental fund balance
sheet and the governmental fund statement of revenues, expenditures, and changes in
fund balances provide a reconciliation to facilitate this comparison between governmental
funds and governmental activities.
The City maintains several individual governmental funds organized according to their
type ( special revenue, capital projects, debt service, and general fund). Information is
presented separately in the governmental fund balance sheet and in the governmental
fund statement of revenues, expenditures, and changes in fund balances for the general
fund, federal and state grant special revenue fund, Oakland Redevelopment Agency
( Agency) as a blended component unit of the City, and municipal capital improvement
fund, all of which are considered to be major funds. Data from the remaining funds are
combined in a single, aggregated presentation. Individual fund data for each of the non-major
governmental funds is provided in the form of combining statements elsewhere in
this report.
The City adopts an annual appropriated budget for its general fund. A budgetary
comparison schedule has been provided for the general fund in the required
supplementary information to demonstrate compliance with this budget.
Proprietary funds. Proprietary funds are generally used to account for services for which
the City charges customers, either outside customers or internal units or departments of
the City. Proprietary funds provide the same type of information shown in the
government- wide statements only in more detail. The City maintains the following two
types of proprietary funds:
Enterprise funds are used to report the same functions presented as business- type
activities in the government- wide financial statements. The City uses enterprise
funds to account for the operations of the Sewer Service System and the Parks and
Recreation operations. The Sewer Service Fund is considered to be a major fund
of the City.
Internal service funds are used to report activities that provide services and
supplies for certain City programs and activities. The City uses internal service
funds to account for its fleet of vehicles, radio and communication equipment,
facilities management, printing and reproduction, and central stores. Because
these services predominantly benefit governmental rather than business- type
functions, they have been included within governmental activities in the
government- wide financial statements. The internal service funds are combined
6
into a single, aggregated presentation in the proprietary fund financial statements.
Individual fund data for the internal service funds is provided in the form of
combining statements elsewhere in this report.
Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of
employees and parties outside the City. The Oakland Municipal Employees Retirement
System ( OMERS) Fund, the Police and Fire Retirement System ( PFRS) Fund are
reported as pension trust funds. The Private Purpose Trust Fund along with the pension
trust funds are reported as trust funds since their resources are not available to support the
City’s own programs. For this reason, they are not reflected in the government- wide
financial statements. The accounting used for fiduciary funds is much like that used for
proprietary funds.
Notes to the Basic Financial Statements
The notes to the basic financial statements provide additional information that is essential
to a full understanding of the data provided in the government- wide and fund financial
statements.
Other Information
In addition to the basic financial statements and accompanying notes, this report presents
certain required supplementary information, other than this discussion and analysis,
concerning the City’s progress in funding its obligation to provide pension benefits to its
employees and budget- to- actual information for the City’s general fund. This required
supplementary information is presented immediately following the notes to the basic
financial statements.
The combining statements referred to earlier in connection with non- major governmental
funds, internal service funds, and fiduciary funds are immediately following the required
supplementary information along with budgetary comparison schedules.
Government- wide Financial Analysis
Net assets may serve over time as a useful indicator of the City’s financial position. The
City’s total assets exceeded its liabilities as of June 30, 2005 by $ 657.6 million compared
to $ 552.7 million as of June 30, 2004, an increase of $ 104.9 million. The largest portion
of the City’s net assets ( 64%) reflects its $ 418.0 million of investments in capital assets
for governmental and business type activities net of related debt. Of the remaining
balance, ( 44%) reflects $ 292.4 million in funding for debt service, capital projects and
other continuing development projects for the City, and a deficit in unrestricted assets of
($ 52.9) million or (- 8%).
7
City of Oakland’s Net Assets
June 30, 2005
( In Thousands)
Governmental Bu siness- type 2005 2004
Activities Activities Total Total
Assets:
Current and other assets $ 1,651,554 $ 6 1,07 5 $ 1,712,629 $ 1,443,658
Capital assets 839,375 121,240 960,615 946,004
TOTAL ASSETS 2,490,929 182,315 2,673,244 2,389,662
Liabilities:
Long- term liabilities outstanding 1,794,616 70,814 1,865,430 1,677,195
Other liabilities 149,248 991 150,239 159,745
TOTAL LIABILITIES 1,943,864 71,805 2,015,669 1,836,940
Net assets:
Invested in capital assets, net
of related debt 310,633 107,396 418,029 502,955
Restricted net assets:
Debt service 28,375 - 28,375 70,562
Pension obligations 175,247 - 175,247 31,048
Urban redevelopment and
housing 84,752 - 84,752 189,555
Other purposes 4,041 - 4,041 24,861
Unrestricted ( 55,983) 3,114 ( 52,869) ( 266,259)
TOTAL NET ASSETS $ 547,065 $ 110,510 $ 657,575 $ 552,722
The City’s investment in capital assets of $ 418.0 million, decreased by $ 84.9 million
compared to the previous fiscal year, is attributed to the increase in long- term debt related
to capital assets. Other factors that contributed to the reduction in investment in capital
assets include annual deduction for depreciation expense and asset retirements, net of
new additions. The City’s restricted net assets totaling $ 292.4 million represents
resources that are subject to external restrictions on how they may be used. The
unrestricted deficit of ($ 52.9) million is primarily caused by the Agency, which issues
bonds and other indebtedness to fund urban development and housing projects that are
not capitalized as assets.
Governmental activities. The City’s change in net assets of $ 104.9 million for the year
ended June 30, 2005 represents an increase of $ 72.0 million compared to $ 32.9 million
for the prior fiscal year. The key elements of this increase are listed below.
8
Changes in Net Assets
June 30, 2005
( In Thousands)
Governmental Business- type 2005* 2004 *
Activities Activities Total Total
Revenues:
Program revenues:
Charges for services $ 111,467 $ 24,496 $ 135,963 $ 87,480
Operating grants and
contributions 74,694 - 74,694 78,965
Capital grants and contributions - - - 10,366
General revenues:
Property taxes 234,127 - 234,127 200,731
State taxes 68,451 - 68,451 72,906
Local taxes 251,301 - 251,301 197,873
Interest and investment
income 46,063 707 46,770 5,660
Other 84,850 - 84,850 117,238
TOTAL REVENUES 870,953 25,203 896,156 771,219
Expenses:
General government 65,865 - 65,865 67,069
Public safety 319,908 - 319,908 297,869
Life enrichment 96,649 - 96,649 102,314
Community & economic
development 117,689 - 117,689 121,160
Public works 107,457 - 107,457 70,369
Interest on long- term debt 62,238 - 62,238 58,020
Sewer - 21,337 21,337 20,597
Parks and recreation - 160 160 159
TOTAL EXPENSES 769,806 21,497 791,303 737,557
Change in net assets before
transfers 101,147 3,706 104,853 32,862
Transfers 621 ( 621) - -
Change in net assets 101,768 3,085 104,853 32,862
Net assets at beginning of year 445,297 107,425 552,722 519,860
NET ASSETS AT END OF YEAR $ 547,065 $ 110,510 $ 657,575 $ 552,722
* Certain amounts have been reclassified to conform with current year presentation.
The City’s net assets increased by $ 104.9 million for the year ended June 30, 2005
compared to $ 32.9 million as of June 30, 2004. The increase of $ 72.0 million is the
result of a 16% improvement in revenue collections compared to the previous year
matched against an increase of 7% in expenditures. Significant components that make up
this increase are itemized below.
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
General
government
Public safety Life
enrichment
Community
and Economic
Development
Public Works Interest on
long- term debt
Program Expenses
Program Revenue
Expenses and Program Revenues
Governmental Activities
Revenues by Sources
Governmental Activities
Local taxes
28.8%
Operating Grants and
Contributions
8.6%
Investment and interest
income
5.3%
Other Revenues
9.7%
Property taxes
26.9%
State taxes
7.9%
Charge for Services
12.8%
9
-
5,000
10,000
15,000
20,000
25,000
Parks and recreation Sewer
Expenses and Program Revenues
Business- type Activities
Program Expenses
Program Revenue
Revenues by Source
Business- type Activities
Other
2.5%
Charge for services
97.5%
Charge for services
Other
10
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· The increases in State and local property taxes were driven by a 42%
enhancement in assessed property valuation within the boundaries of the City of
Oakland during fiscal year 2004- 05 as reported by the County of Alameda.
· The increase in interest and investment income of $ 41.1 million is primarily
attributable to the presentation of negative interest for pension annuity last year
and increased earnings from the City’s pooled and restricted cash and investments
as a result of carrying higher balances compared to the previous year.
· The decrease of $ 32.4 million in other revenues when compared to the previous
year is attributed primarily to last year’s revision of the City’s allowance for
doubtful accounts, as the City re- evaluated the collectibility of its long- term notes
receivables.
· The increase of $ 22.0 million of spending in public safety when compared to the
previous year is due primarily to overtime costs and national disaster responses
for which the City had not been reimbursed by the Federal agencies.
· The $ 5.7 million reduction in life enrichment expenditures reflects the transfer of
all parks and recreation maintenance personnel to public works for management,
resource allocation, and maximum flexibility in scheduling maintenance.
· The increase of $ 37.1 million in public works expenditures reflect the addition of
all maintenance personnel transferred from parks and recreation to public works
and the completion of various current and continuing projects assigned.
Business- type activities. Business- type activities increased the change in its net assets by
$ 3.1 million for the year ended June 30, 2005. A key element of the increase for
Business- type activities is attributed primarily to an 11% annual rate increase and the
volume of billings for sewer services as a result of the surge in downtown housing
development under the Mayor’s 10 K Program. The 10K Program’s goal is to develop
housing to attract 10,000 new residents to downtown Oakland.
Financial Analysis of the Government’s Funds
Governmental funds. The focus of City’s governmental funds is to provide information
on near- term inflows, outflows, and balances of spendable resources. Such information is
useful in assessing the City’s financing requirements. In particular, unreserved fund
balance may serve as a useful measure of a government’s net resources available for
spending at the end of the fiscal year.
As of June 30, 2005, the City’s governmental funds reported combined ending fund
balances of $ 900.6 million compared to $ 687.3 for the previous fiscal year, as restated.
The majority of the $ 210.1 million increase ( 31%) is attributed to ( 1), the combined
increase of $ 183.3 million or 28% in pooled and restricted cash and investments as a
result of unspent Lease Revenue Bonds, Series 2005 proceeds issued on June 21, 2005,
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( 2) the improved revenue collections as a result of double digit increases in property tax
valuation, and ( 3) the 3% reduction in overall governmental liabilities excluding long-term
debts.
At June 30, 2005, the Federal/ State Grant Fund ended with a negative fund balance of
$ 2.5 million compared to a negative fund balance of $ 23.1 million for the previous fiscal
year. The significant reduction in negative fund balance is due to systematic collection
efforts to reimburse City advances to pay for grant activities.
The Oakland Redevelopment Agency had a fund balance of $ 268.1 million as of June 30,
2005 that represents an increase of 28% over the prior fiscal year. The net increase of
$ 58.5 million was primarily related to the improvement in property tax revenues in the
project areas and the remaining bond proceeds for the Central District Project Area to be
completed by fiscal year 2007.
Proprietary funds. The City’s proprietary funds provide the same type of information
found in the government- wide financial statements under the business- type column but in
more detail.
The portion of net assets invested in capital assets, net of related debt amounted to $ 107.4
million as of June 30, 2005, compared to $ 113.6 for the previous fiscal year. The 5%
decrease is related to partial proceeds spent from a new debt issued to finance sewer
projects. During the fiscal year, the City capitalized $ 3.1 million in sewer system
completed projects, net of depreciation.
General Fund Budgetary Highlights
Differences between the original and the final amended expenditure budgets totaling
$ 16.7 million were due primarily to the determination of actual project carryforwards for
continuing appropriations for various multi- year projects, capital improvement projects,
and other projects authorized by City Council. The original approved expenditure budget
contained only estimates of project carryforwards.
Total general fund actual expenditures compared to the final amended expenditure budget
showed net budget savings of $ 1.2 million for the year ended June 30, 2005, compared to
$ 3.6 million in savings for the previous fiscal year. The net savings is attributed to the
significant turnover in full time employees due to retirement and City efforts to reduce
personnel costs in line with its revenue forecast.
Actual revenues compared to the final amended general fund revenue budget exceeded
projections by $ 40.0 million, compared to an unfavorable variance of $ 3.6 million for the
previous fiscal year. The increase is primarily attributed to improved property taxes
driven by a 42% improvement in assessed property valuation as reported by the County
of Alameda.
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Capital Assets
The City’s capital assets, net of depreciation, totaled $ 960.6 million as of June 30, 2005
compared to $ 946.0 million as of June 30, 2004, an increase of 2.0%. Governmental
activities additions of $ 13.3 million in capital assets included land acquisition and
capitalization of infrastructure, facilities improvements, and furniture and equipment
which met the City’s threshold for capitalization. These additions were offset by
retirements and depreciation, the net effect of which was a reduction of $ 3.9 million in
capital assets for governmental activities. Business activities, primarily the sewer fund,
increased its capital assets by $ 1.4 million net of retirements and depreciation. See Note
( 7) for more details in capital assets.
Construction Commitments
The City has active construction projects as of June 30, 2005. The projects include street
construction, park construction, building improvements and sewer and storm drain
improvements ( in thousands).
Remaining
Spent to date Commitment
Infrastructure – streets $ 92 ,621 $ 50 ,031
Infrastructure – parks 14,057 39,863
Facility improvements 22,878 34,065
Sewer and storm drains 10,414 49,315
Technology enhancements 13,800 5,587
Miscellaneous 14,058 8,676
T ota ls $ 167,828 $ 187,537
Debt Administration
At the end of the current fiscal year, the City’s debt limit ( 3.75% of property valuation,
net of exemptions subject to taxation) was $ 903.4 million. The total amount of debt
applicable to the debt limit was $ 227.0 million. The resulting legal debt margin was
$ 676.1 million.
The City of Oakland’s underlying ratings for its general obligation bonds as of June 30,
2004, were as follows:
Standard and Poor’s Corporation A+
Moody’s Investors Services, Inc. A1
Fitch, JBCA, Inc. A+
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As of June 30, 2005, the City had total long- term obligations outstanding of $ 1.87 billion
compared to $ 1.68 billion outstanding for the prior fiscal year, an increase of 11%. Of
this amount, $ 227.0 million is general obligation bonds backed by the full faith and credit
of the City. The remaining $ 1.64 billion is comprised of various long- term debt
instruments listed below including accruals of year- end estimates for other long- term
liabilities.
Outstanding Debt
June 30, 2005
( In Thousands)
Governmental Activities Business- type Activities Total
2005 2004 2005 2004 2005 2004
General obligation bonds $ 227,010 $ 232,045 $ $ — $ 227,010 $ 232,045
Tax allocation bonds 270,085 235,555 — 270,085 235,555
Certificates of participation 50,195 54,780 — 50,195 54,780
Lease revenue bonds 488,721 386,200 — 488,721 386,200
Pension obligation bonds 366,405 388,824 — 366,405 388,824
Special assessment debt
with government
commitment 7,370 7,940 — 7,370 7,940
Accreted interest on
appreciation bonds 70,811 52,863 70,811 52,863
Sewer- bonds and notes payable — — 67,985 6,362 67,985 6,362
Less: Deferred amounts
Bond issuance premiums 24,186 11,830 2,829 — 27,015 11,830
Bond refunding loss ( 22,793) ( 20,333) — ( 22,793) ( 20,333)
Total bonds payable 1,481,990 1,349,704 70,814 6,362 1,552,804 1,356,066
Notes payable 45,209 46,153 45,209 46,153
Other long- term obligations 267,417 274,976 — 267,417 274,976
TOTAL OUTSTANDING
DEBT $ 1,794,616 $ 1,670,833 $ 70,814 $ 6,362 $ 1,865,430 $ 1,677,195
The City’s overall total long- term obligations increased by $ 182.7 million compared to
fiscal year 2004. The net increase is primarily attributable to ( 1) the issuance of
Refunding Revenue Bonds, 2005 Series A- 1, A- 2 and B (“ Series 2005 A & B Bonds”),
( 2) the issuance of Sewer Revenue Bonds, Series 2004 A ( the “ 2004 Series A Bonds”),
and ( 3) the Agency’s issuance of Tax Allocation Bonds, Series 2005 for redevelopment
within the Central District project area. The notes payable and other long- term
obligations increased basically because of the additional amounts provided for
compensated absences, workers’ compensation, and estimated claims payable for fiscal
year 2005.
Summary of New Debt:
Refunding Revenue Bonds, 2005 Series A- 1, A- 2 and B (“ Series 2005 A & B Bonds”):
On June 21, 2005, the Joint Powers Financing Authority issued its $ 144,950,000
Refunding Revenue Bonds, Series A- 1, A- 2, and B. A portion of the proceeds were to be
used to refund and defease all of the Authority’s outstanding lease Revenue Bonds, 1998
15
Series A. However, the Interest Rate Swap Agreement associated with the 1998 Series A
Bonds still remains in effect and set to terminate on July 31, 2021.
Sewer Revenue Bonds, 2004 Series A: On December 14, 2004, the City issued
$ 62,330,000 of Sewer Revenue Bonds, Series 2004 A ( the “ 2004 Series A Bonds”). The
2004 A Project involves the rehabilitation and, where necessary, replacement of sections
of the existing sewer system, including the sewer pipelines and connections to private
sewer lines. The project is designed to reduce infiltration and inflow, increase the
capacity of designated sewer pipes throughout the system, and eliminate sewer overflows
of untreated water into the San Francisco Bay. The 2004 Series A Bonds have interest
rates ranging from 3.00% to 5.25% and mature in 2029.
Solar Panel Tax- Exempt Lease Transaction: On November 14, 2004, the City of
Oakland ( the “ Lessee”) for $ 4,138,858 to finance the design and construction of solar
photovoltaic generation systems as described in the Design/ Build Agreement for the
Solar Power and Energy Efficiency Project, between the Lessee and the PowerLight
Corporation ( the “ Contractor”). This financing was a capital lease at an interest rate of
4.25%.
Enterasys Equipment Lease: On February 15, 2005, the electorate authorized the
execution of a seven- year contract for the lease of network equipment and services with
Enterasys, Inc., for an amount not to exceed $ 215,000 annually or $ 1,500,000 over the
term of the contract. The purpose of the lease financing was to finance the installation
and maintenance of equipment necessary to update the City’s network telephone
infrastructure. This financing was a capital lease and part of the lease was taxable at an
interest rate of 5.522% and the tax- exempt portion was 3.54%. On March 30, 2005, the
City entered into a lease financing with Enterasys, Inc., in the amount of $ 1,139,884.
Shoretel Equipment Lease: On February 15, 2005, the electorate authorized the
successful completion of the City’s Voice over IP pilot project and the execution of a
seven- year contract for the lease of telephone equipment and services with ShoreTel
Communications, Inc., for an amount not to exceed $ 275,000 annually or $ 1,650,000
over the term of the contract. The purpose of the lease financing was to finance the
purchase and installation of equipment necessary to update the City’s network telephone
infrastructure. The financing was a capital lease and part of the lease was taxable at an
interest rate of $ 5.522% and the tax- exempt portion was 3.54%. On March 30, 2005, the
City entered into a lease financing with ShoreTel Communications, Inc., in the amount of
$ 1,397,326.
Central District Redevelopment Project, Subordinated Tax Allocation Bonds, Series
2005: On February 8, 2005, the Agency issued the Series 2005 Bonds for $ 44,360,000 to
finance various redevelopment activities within the Central District Project Area
including the following: property acquisition to facilitate residential and commercial
development downtown; environmental remediation; parking garage expansion;
renovation and maintenance of public facilities such as the Fox Theater; and public
infrastructure such as streetscape and traffic improvements. Proceeds of the Series 2005
16
Bonds will also be used to fund façade improvements, tenant improvements, and support
for all Agency- sponsored public capital projects for fiscal years 2005 through 2007.
Current Year Refunding: On June 16, 2005, the Oakland Joint Powers Financing
Authority ( JPFA) issued its $ 122,170,000 Revenue Bonds, Series 2005 ( City of Oakland
General Obligation Bond Program) Bonds. The bonds have interest rates ranging from
3.00% to 5.00% and mature in 2025. The Bonds were issued to ( 1) purchase City of
Oakland General Obligation Refunding Bonds, Series 2005 ( the “ Oakland GO Bonds”) in
the aggregate principal amount of $ 122,476,041, which were issued simultaneously with
the issuance of Bonds to defease all of the City’s outstanding Refunded GO Bonds, ( 2)
finance certain public capital improvements to be acquired under/ or constructed by the
Authority, ( 3) pay the premium for a financial guaranty insurance policy, and ( 4) pay
certain costs of issuance associated with the Bonds.
Refunding Revenue Bonds, 2005 Series: On June 21, 2005, the City, through the JPFA,
issued 2005 Refunding Revenue Bonds, 2005 Series ( 2005 Bonds) in the amount of
$ 144,950,000, comprised of $ 63,500,000 tax- exempt 2005 Series A- 1 Bonds,
$ 63,475,000 tax- exempt 2005 Series A- 2 Bonds, and $ 17,975,000 taxable Series B
bonds. The 2005 Bonds were issued as auction rate securities. The purpose of the bonds
was to ( 1) refund and defease all of the Oakland Joint Powers Finance Authority’s
( JPFA) outstanding Lease Revenue Bonds, 1998 Series A, which were issued to refund
Special Refunding Revenue Bonds ( Pension Financing) 1988 Series A issued by the City,
and ( 2) fund a portion of the City’s obligation to make payments to its Police and Fire
Retirement system.
Additional information on the City’s long- term debt obligations can be found in Note 12
to the financial statements.
Economic Factors and Next Year’s Budgets and Tax Rates
The economic indicators highlighted below, among others and including labor union
contracts, were factored into the City’s budget formulation process as they relate to
revenue forecasting, program planning, and resource allocation for fiscal year 2005- 06.
· The City of Oakland’s unemployment rate dropped to 7.8% in October 2005
compared to an average unemployment rate of 9.1% for 2004.
· The annual rate of the Bay Area’s consumer price index decreased slightly to 2.04%
in October 2005 ( 2.09% in September 2005), while the U. S. City average decreased
from 3.52% to 3.19%.
· Oakland’s vacancy rate for class A and B office space has dropped to 7.5% for the
2005 third quarter compared to 10.2% for the 2004 third quarter. By comparison, the
2005 third quarter Class A vacancy rates for the City of San Francisco and the Silicon
Valley were 13.1% and 13.9%, respectively.
17
· For the 2005 third quarter, the average office space rental rate per square foot for
the City ranged from $ 1.66 to $ 1.89 compared to $ 2.40 for San Francisco and
$ 2.09 for the Silicon Valley.
· Oakland’s gross metropolitan product, estimated at $ 99.6 billion for 2001, ranks
in the top 20 metropolitan economies in the United States and the 84th largest
economy in the world.
· Estimated population for 2005 is 415,700 with a total number of households of
150,790 and an average household size of 2.60 persons with a mean household
income of $ 59,500.
· Electric utility rates for commercial range from 13.67 to 17.67 cents per kilowatt
hour while industrial rates are from 9.21 to 13.47 cents per kilowatt hour.
· Increases in expenditures due to new union contracts, CalPers pension rates, and
healthcare costs have been factored into the City’s Fiscal Year 2005- 06 budget
without raising or imposing new taxes.
Requests for Information
This financial report is designed to provide a general overview of the City of Oakland’s
finances for all those with an interest in the City’s fiscal and economic affairs. Requests
for additional financial information should be addressed to the Finance and Management
Agency, Accounting Division, City of Oakland, 150 Frank H. Ogawa Plaza, Suite 6353;
Oakland, California 94612- 2093.
Governmental Business- Type Oakland Base
Total Reuse Authority
ASSETS
Cash and investments $ 288,237 $ 4,897 $ 293,134 $ 95,581 $ 6,060
Receivables ( net of allowance
for uncollectibles of $ 9,560):
Accrued interest 1,340 - 1,340 970 -
Property taxes 10,871 - 10,871 - -
Accounts receivable 69,816 3,243 73,059 34,425 714
Grants receivable 24,623 - 24,623 - 168
Due from component unit 21,763 - 21,763 - -
Internal balances 4,751 ( 4,751) - - -
Due from other governments 4,898 - 4,898 - -
Due from pension trust fund 2,070 - 2,070 - -
Notes and loans receivable ( net of - -
allowance for uncollectibles of $ 6,490) 184,438 - 184,438 - -
Restricted assets:
Cash and investments 562,935 56,970 619,905 373,478 8,932
Receivables - - - 5,915 -
Inventories 1,057 - 1,057 - -
Capital assets:
Land and other assets not being depreciated 100,702 5,002 105,704 695,254 -
Facilities, infractructure, and equipment,
net of depreciation 738,673 116,238 854,911 1,230,615 490
Property held for resale 57,738 - 57,738 - 89,408
Unamortized bond issuance costs 22,903 716 23,619 - -
Net pension asset 392,203 - 392,203 - -
Other 1,911 - 1,911 106,831 -
TOTAL ASSETS 2,490,929 182,315 2,673,244 2,543,069 105,772
LIABILITIES
Accounts payable and other current liabilities 122,727 983 123,710 46,208 1,010
Accrued interest payable 9,160 - 9,160 33,430 -
Due to other governments 235 - 235 - 3,676
Due to primary government - - - 18,828 2,935
Unearned revenue 8,404 8 8,412 69,897 90
Matured bonds and interest payable 520 - 520 - -
Other 8,202 - 8,202 45,535 714
Noncurrent liabilities:
Due within one year 148,849 2,338 151,187 20,660 -
Due in more than one year 1,645,767 68,476 1,714,243 1,545,395 7,495
TOTAL LIABILITIES 1 ,943,864 71,805 2 ,015,669 1,779,953 1 5,920
NET ASSETS ( deficit)
Invested in capital assets, net of related debt 310,633 107,396 418,029 592,698 490
Restricted net assets:
Debt service 28,375 - 28,375 136,004 -
Pension obligations 175,247 - 175,247 - -
Urban redevelopment and housing 84,752 - 84,752 - 83,302
Other purposes 4,041 - 4,041 - -
Unrestricted net assets ( deficit) ( 55,983) 3,114 ( 52,869) 34,414 6,060
TOTAL NET ASSETS $ 5 47,065 $ 110,510 $ 6 57,575 $ 763,116 $ 8 9,852
The notes to the basic financial statements are an integral part of this statement
Activities Activities Port of Oakland
Statement of Net Assets
City of Oakland
Primary Government Component Units
( In Thousands)
June 30, 2005
18
Operating Capital
Charges for Grants and Grants and Governmental Business- type
Functions/ Programs Expenses Services Contributions Contributions Activities Activities Total
Primary government:
Governmental activities:
General government $ 6 5,865 $ 25,641 $ -$ - $ ( 40,224) $ - $ ( 40,224)
Public safety 3 19,908 66,983 - - ( 252,925) - ( 252,925)
Life enrichment 9 6,649 125 - - ( 96,524) - ( 96,524)
Community and economic development 1 17,689 12,528 74,694 - ( 30,467) - ( 30,467)
Public works 1 07,457 6,190 - - ( 101,267) - ( 101,267)
Interest on long- term debt 6 2,238 - - - ( 62,238) - ( 62,238)
TOTAL GOVERNMENTAL ACTIVITIES 7 69,806 111,467 74,694 - ( 583,645) - ( 583,645)
Business- type activities:
Sewer 2 1,337 24,252 - - - 2,915 2,915
Park and recreation 160 244 - - - 84 84
TOTAL BUSINESS- TYPE ACTIVITIES 2 1,497 24,496 - - - 2,999 2,999
TOTAL PRIMARY GOVERNMENT $ 7 91,303 $ 135,963 $ 74,694$ - ( 583,645) 2,999 ( 580,646)
Component units:
Port of Oakland $ 2 66,060 $ 251,010 $ 5,375 $ 51,365 $ 41,690
Oakland Base Reuse Authority $ 7 ,881 $ 7,957 $ 1,062 $ - $ 1,138
General revenues:
Property taxes 2 34,127 - 234,127 - -
State taxes 6 8,451 - 68,451 - -
Local taxes 2 51,301 - 251,301 - -
Interest and investment income 4 6,063 707 46,770 8,935 249
Other 8 4,850 - 84,850 3,678 203
Transfers 621 ( 621) - - -
TOTAL GENERAL REVENUES AND TRANSFERS 6 85,413 86 685,499 12,613 452
Changes in net assets 1 01,768 3,085 104,853 54,303 1,590
NET ASSETS - BEGINNING 4 45,297 107,425 552,722 708,813 88,262
NET ASSETS - ENDING $ 5 47,065 $ 110,510 $ 657,575 $ 763,116 $ 89,852
The notes to the basic financial statements are an integral part of this statement
City of Oakland
Changes in Net Assets
Primary Government
Net ( Expense) Revenue and
Component Units
Program Revenue
( In Thousands)
Statement of Activities
For the Year Ended June 30, 2005
Reuse Authority
Port Oakland Base
of Oakland
19
General
ASSETS
Cash and investments $ 79,445 $ - $ 129,143 $ 20,274 $ 55,975 $ 284,837
Receivables ( net of allowance
for uncollectibles of $ 8,047):
Accrued interest 418 - 411 138 373 1,340
Property taxes 5,484 734 1,187 21 3,445 10,871
Accounts receivable 65,855 158 373 1 3,034 69,421
Grants receivable - 23,928 - - 695 24,623
Due from component unit 20,367 - - - 1,396 21,763
Due from other funds 68,721 2,842 31,125 - 3,440 106,128
Due from other governments - - 4,898 - - 4,898
Notes and loans receivable ( net
of allowance for uncollectibles of $ 6,490) 38,619 78,788 51,351 - 15,680 184,438
Restricted cash and investments 175,198 4,090 89,801 112,073 165,792 546,954
Property held for resale - - 57,738 - - 57,738
Other 1,887 24 - - - 1,911
TOTAL ASSETS $ 455,994 $ 110,564 $ 366,027 $ 132,507 $ 249,830 $ 1,314,922
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable and accrued liabilities $ 102,181 $ 5,108 $ 9,456 $ 1,311 $ 3,509 $ 121,565
Due to other funds 25,110 23,435 6,669 - 13,957 69,171
Due to other governments 21 - 213 - 1 235
Deferred revenue 29,882 84,481 81,190 21 19,046 214,620
Matured bonds and interest payable - - - 520 - 520
Other 6,963 - 380 612 247 8,202
TOTAL LIABILITIES 164,157 113,024 97,908 2,464 36,760 414,313
Fund balances ( deficit)
Reserved:
Encumbrances 4,115 15,265 - 434 4,837 24,651
Long- term receivables 6,000 - - - 2,659 8,659
Debt service 3,379 - - - 155,769 159,148
Property held for resale - - 57,738 - - 57,738
Capital projects - - 208,829 - 208,829
Pension obligations 138,000 - - - - 138,000
Unreserved/( deficit) reported in:
General fund 140,343 - - - - 140,343
Special revenue funds - ( 17,725) - - 37,510 19,785
Capital project funds - - 1,552 129,609 12,295 143,456
TOTAL FUND BALANCES ( DEFICIT) 291,837 ( 2,460) 268,119 130,043 213,070 900,609
TOTAL LIABILITIES AND FUND BALANCES ( DEFICIT) $ 455,994 $ 110,564 $ 366,027 $ 132,507 $ 249,830 $ 1,314,922
The notes to the basic financial statements are an integral part of this statement.
Total
Governmental
Funds
Oakland
Agency
Other
Funds
Municipal
Federal/ State
Grant Fund
Redevelopment Capital Governmental
Improvement
( In Thousands)
CITY OF OAKLAND
Balance Sheet
Governmental funds
June 30, 2005
20
Fund balance - total governmental funds $ 9 00,609
8 12,585
Accounts recivable from OMER's 3 06
2 2,903
3 92,203
( 9,160)
2 06,216
( 1,771,226)
( 7,371)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 547,065
The note to the basic financial statements are an integral part of this statement.
Amounts reported for governmental activities in the
statement of net assets are different because:
Capital assets used in governmental activities are not financial resource and
therefore, are not reported in the funds.
Bond issuance costs are expended in the governmental funds when paid and
are capitalized and amortized over the life of the corresponding bonds for the
purposes of the government activities on the statement of net assets.
Because the focus of governmental funds is on short- term financing, some
assets will not be available to pay for current period expenditures. Those assets
are offset by deferred revenue in the governmental funds.
Long- term liabilities, including bonds payable, are not due and payable in the
current period and, therefore, are not reported in the governmental funds.
Internal service funds are used by the City to charge the costs of providing
supplies and services, fleet and facilities management, and use of radio and
communication equipment to individual funds. Assets and liabilities of internal
service funds are included in governmental activities in the statement of net
assets.
Net pension assets are recognized in the statement of net assets as an asset,
however it is not considered a financial resource and, therefore, is not reported
on the balance sheet of governmental funds.
Interest on long- term debt is not accrued in the funds, but rather is recognized
as an expenditure when due.
Reconciliation of the Government Fund Balance Sheet to the
Statement of Net Assets for Governmental Activities
City of Oakland
June 30, 2005
( In Thousands)
21
General
REVENUES
Taxes:
Property $ 143,436 $ - $ 69,797 $ - $ 18,828 $ 232,061
State:
Sales and use 41,651 800 - - 8,697 51,148
Motor vehicle in- lieu 9,656 - - - - 9,656
Gas - - - - 7,647 7,647
Local:
Business license 43,902 - - - - 43,902
Utility consumption 49,781 - - - - 49,781
Real estate transfer 77,722 - - - - 77,722
Transient occupancy 10,926 - - - - 10,926
Parking 7,029 - - - 4,551 11,580
Voter approved special tax - 10,712 - - 19,443 30,155
Franchise 11,128 - - - - 11,128
Licenses and permits 15,652 - - - 24 15,676
Fines and penalties 24,632 341 - - 1,352 26,325
Interest and investment income 20,845 3,450 4,580 3,880 5,740 38,495
Charges for services 66,375 73 5,173 38 1,474 73,133
Federal and state grants and subventions 591 84,620 - - 11,798 97,009
Other 21,896 7,056 4,208 191 20,360 53,711
TOTAL REVENUES 545,222 107,052 83,758 4,109 99,914 840,055
EXPENDITURES
Current:
Elected and Appointed Officials:
Mayor 1,552 - - - 179 1,731
Council 2,279 - - 28 1,789 4,096
City Manager 9,276 198 - 1,990 2,179 13,643
City Attorney 8,055 307 - 8 2,659 11,029
City Auditor 1,106 - - - - 1,106
City Clerk 1,644 - - 21 61 1,726
Agencies/ Departments:
Personnel Resource Management 3,726 - - - - 3,726
Information Technology 7,853 3 - 518 35 8,409
Financial Services 17,942 259 - 3,215 781 22,197
Police Services 171,639 6,342 - - 832 178,813
Fire Services 90,442 1,276 - 145 6,166 98,029
Life Enrichment:
Administration 7 - - - - 7
Parks and Recreation 13,097 86 - 4 3,553 16,740
Library 10,478 9,359 - - 710 20,547
Museum 7,089 - - 45 249 7,383
Aging & Health and Human Services 6,910 25,654 - - 3,045 35,609
Community and Economic Development 18,902 21,149 47,034 414 13,532 101,031
Public Works 28,909 5,845 - 8,682 29,902 73,338
Other 29,260 366 - - 8,701 38,327
Capital outlay 1,184 13,478 - 12,760 8,797 36,219
Debt service:
Principal repayment 670 1,407 9,830 41 58,848 70,796
Payment to refunding bond escrow agent - - - - 17,710 17,710
Bond issuance costs - - 1,241 89 3,148 4,478
Interest charges 123 705 14,886 12 44,930 60,656
TOTAL EXPENDITURES 432,143 86,434 72,991 27,972 207,806 827,346
EXCESS ( DEFICIENCY) OF REVENUES
OVER ( UNDER) EXPENDITURES 113,079 20,618 10,767 ( 23,863) ( 107,892) 12,709
OTHER FINANCING SOURCES ( USES)
Proceeds from bonds issuance - - 44,360 7,894 381,702 433,956
Premiums on issuance of bonds - - 3,387 656 9,492 13,535
Payment to refunding bond escrow agent - - - - ( 247,860) ( 247,860)
Property sale proceeds 349 45 - - - 394
Transfers in 27,506 - - - 82,405 109,911
Transfers out ( 82,405) - - ( 6,300) ( 20,606) ( 109,311)
TOTAL OTHER FINANCING SOURCES ( USES) ( 54,550) 45 47,747 2,250 205,133 200,625
NET CHANGE IN FUND BALANCES 58,529 20,663 58,514 ( 21,613) 97,241 213,334
Fund balances ( deficit) - beginning 233,308 ( 23,123) 209,605 151,656 115,829 687,275
FUND BALANCES ( DEFICIT) - ENDING $ 291,837 $ ( 2,460) $ 268,119 $ 130,043 $ 213,070 $ 900,609
The notes to the basic financial statements are an integral part of this statement.
Agency
Governmental
Year Ended June 30, 2005
Governmental Funds
Oakland
Redevelopment
Municipal
Capital
Improvement
Statement of Revenues, Expenditures and Changes in Fund Balances
CITY OF OAKLAND
Grant Fund Funds Funds
( In Thousands)
Other Total
Federal/ State Governmental
22
Net change in fund balance - total governmental funds $ 2 13,334
1 2,996
( 9,263)
1 3,058
1 0,833
4 ,478
Principal payments 7 0,796
Payments to escrow agent for refunded debt 2 65,570
Issuance of bonds and notes ( 433,956)
Premium on bond proceeds ( 13,535)
Amortization of bond premiums 1 ,179
Amortization of cost of issuances ( 785)
Amortization of refunding loss ( 2,672)
Additional accrued and accreted interest calculated on bonds and notes payable ( 17,145)
Other long- term liability for mandated Alameda County environmental clean- up health costs ( 5,499)
The net loss of activities of internal service funds is reported with governmental activities. ( 7,621)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 1 01,768
The note to the basic financial statements are an integral part of this statement.
City of Oakland
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds
to the Statement of Activities of Governmental Activities
Revenues in the statement of activities that do not provide current financial
resources are not reported as revenues in the funds. This represents the change
in the deferred amounts during the current period.
June 30, 2005
( In Thousands)
Amounts reported for governmental activities in the
statement of activities are different because:
Government funds report capital outlays as expenditures. However, in the
statement of activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense. This is the amount by which
capital outlay exceeds depreciation in the current period.
Changes to the net pension assets, as reported in the statement of activities, do
not require the use of current financial resources and therefore are not reported
as an expenditure's in the governmental funds.
The issuance of long- term debt provides current financial resources to
governmental funds, while the repayment of the principal of long- term debt
and the advance refunding of debt consume the current financing sources of
the governmental funds. These transaction, however have no effect on net
assets. This is the amount by which principal retirement and payment to
escrow agent exceeded bond proceeds in the current period.
Bond issuance costs are expended in the governmental funds when paid, and
are deferred and amortized over the life of the corresponding life of the bonds
for purposes of the statement of net assets. This is the amount by which current
year bond issuance costs exceeded amortization expense in the current period.
Certain long- term accrued obligations, such as claims, vacations, and sick
leave, are reported in the fund statements only when they mature, rather than
when the obligation is incurred. The increase made to net change in fund
balance is caused by the payments made during the year that exceeded the
liabilities incurred and changes in estimates.
23
Internal
Sewer Service
Service Total Funds
ASSETS
Current Assets:
Cash and investments $ - $ 4,897 $ 4 ,897 $ 3,400
Accounts receivables ( net of uncollectibles of $ 997 and $ 516
for the enterprise funds and internal service funds, respectively) 3,211 32 3 ,243 89
Inventories - - - 1,057
Restricted cash and investments 56,970 - 5 6,970 15,981
Total current assets 60,181 4,929 6 5,110 20,527
Noncurrent Assets:
Capital assets:
Land and other assets not being depreciated 4,784 218 5 ,002 310
Facilities and equipment, net of depreciation 114,373 1,865 1 16,238 26,480
Total capital assets 119,157 2,083 1 21,240 26,790
Unamortized bond issuance costs 716 - 7 16 -
Total noncurrent assets 119,873 2,083 1 21,956 26,790
TOTAL ASSETS 180,054 7,012 1 87,066 47,317
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 983 - 9 83 1,162
Due to other funds 4,751 - 4 ,751 30,136
Deferred revenue 8 - 8 -
Bonds, notes and other payables 2,338 - 2 ,338 5,616
Total current liabilities 8,080 - 8 ,080 36,914
Noncurrent Liabilities:
Bonds, notes and other payables 68,476 - 6 8,476 17,774
Total noncurrent liabilities 68,476 - 6 8,476 17,774
TOTAL LIABILITIES 76,556 - 7 6,556 54,688
NET ASSETS
Invested in capital assets, net of related debt 105,313 2,083 1 07,396 3,400
Unrestricted ( deficit) ( 1,815) 4,929 3 ,114 ( 10,771)
TOTAL NET ASSETS ( DEFICIT) $ 103,498 $ 7,012 $ 1 10,510 $ ( 7,371)
The notes to the basic financial statements are an integral part of this statement.
Parks and
Recreation
Activities
Governmental
( In Thousands)
Business- type Activities - Enterprise Funds
Nonmajor Fund
CITY OF OAKLAND
Statement of Fund Net Assets
Proprietary Funds
June 30, 2005
24
Internal
Sewer Service
Service Total Funds
OPERATING REVENUES
Rental $ - $ 237 $ 237 $ -
Sewer services 23,292 - 23,292 -
Charges for services - - - 32,373
Other 960 7 967 788
TOTAL OPERATING REVENUES 24,252 244 24,496 33,161
OPERATING EXPENSES
Personnel 10,648 3 10,651 14,313
Supplies 337 - 337 5,479
Depreciation and amortization 3,531 152 3,683 4,856
Contractual services and supplies 1,364 - 1,364 1,331
Repairs and maintenance 38 - 38 1,679
General and adminsitrative 2,916 - 2,916 3,572
Rental 726 5 731 1,508
Other - - - 6,811
TOTAL OPERATING EXPENSES 19,560 160 19,720 39,549
OPERATING INCOME ( LOSS) 4,692 84 4,776 ( 6,388)
NONOPERATING REVENUES ( EXPENSES)
Interest and investment income 592 115 707 111
Interest expense ( 1,777) - ( 1,777) ( 1,447)
Other, net - - - 82
TOTAL NONOPERATING REVENUES ( EXPENSES) ( 1,185) 115 ( 1,070) ( 1,254)
INCOME ( LOSS) BEFORE TRANSFERS 3,507 199 3,706 ( 7,642)
Transfers in - - - 284
Transfers out ( 621) - ( 621) ( 263)
TOTAL TRANSFERS ( 621) - ( 621) 21
Change in net assets 2,886 199 3,085 ( 7,621)
Net Assets - Beginning 100,612 6,813 107,425 250
NET ASSETS - ENDING $ 103,498 $ 7,012 $ 110,510 $ ( 7,371)
The notes to the basic financial statements are an integral part of this statement.
( In Thousands)
CITY OF OAKLAND
Statement of Revenues, Expenses and Changes in Fund Net Assets
Proprietary Funds
Year Ended June 30, 2005
Recreation
Parks and
Nonmajor Fund
Governmental
Business- type Activities Enterprise Funds Activities
25
Internal
Sewer Service
Service Total Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers, including other funds and cash deposits $ 23,041 $ ( 3) $ 23,038 $ 3 2,782
Cash received from tenants for rents - 237 237 7 87
Cash from other sources 960 7 967 -
Cash paid to employees for services ( 10,648) ( 3) ( 10,651) ( 14,313)
Cash paid to suppliers for goods & services ( 5,800) ( 26) ( 5,826) ( 20,870)
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,553 2 12 7,765 ( 1,614)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Payment of interfund loans ( 7,927) - ( 7,927) 8 ,172
Transfers in - - - 2 84
Transfers out ( 621) - ( 621) ( 263)
NET CASH PROVIDED BY ( USED IN) NONCAPITAL FINANCING ACTIVITIES ( 8,548) - ( 8,548) 8,193
CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES
Acquisition of capital assets ( 4,951) - ( 4,951) ( 5,203)
Long- term debt:
Bond proceeds 65,217 - 65,217 6 ,676
Costs of issuance ( 730) ( 730) -
Repayment of long- term debt ( 707) - ( 707) ( 5,598)
Interest paid on long- term debt ( 1,456) - ( 1,456) ( 1,280)
NET CASH PROVIDED BY ( USED IN) CAPITAL FINANCING ACTIVITIES 57,373 - 57,373 ( 5,405)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 592 1 15 707 ( 56)
Other investing activities - - - 83
NET CASH PROVIDED BY ( USED IN) INVESTING ACTIVITIES 592 115 707 27
NET INCREASE IN CASH AND CASH EQUIVALENTS 56,970 3 27 57,297 1 ,201
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR - 4,570 4,570 1 8,180
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 56,970 $ 4,897 $ 61,867 $ 1 9,381
RECONCILIATION OF OPERATING INCOME ( LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Operating income ( loss) $ 4,692 $ 84 $ 4,776 $ ( 6,388)
ADJUSTMENTS TO RECONCILE OPERATING INCOME ( LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization 3,531 152 3,683 4 ,856
Changes in assets and liabilities:
Receivables ( 179) ( 3) ( 182) 31
Inventories - - - 1 48
Accounts payable and accrued liabilities ( 419) ( 21) ( 440) ( 261)
Deferred revenue ( 72) - ( 72) -
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 7,553 $ 212 $ 7,765 $ ( 1,614)
RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE
STATEMENT OF NET ASSETS
Cash and investments - 4,897 4 ,897 3,400
Restricted cash and investments 56,970 - 56,970 15,981
TOTAL $ 56,970 $ 4,897 $ 61,867 $ 19,381
The notes to the basic financial statements are an integral part of this statement.
CITY OF OAKLAND
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2005
Recreation
Parks and
Nonmajor Fund
( In Thousands)
Business- type Activities - Enterprise Funds Activities
Governmental
26
Private
Pension Purpose
Trust Trust
Funds Fund
ASSETS
Cash and investments $ 35,097 $ 4,981
Receivables:
Accrued interest and dividends 2,240 17
Investments and contributions 74,737 -
Restricted:
Cash and investments 650,169 -
Securities lending collateral 50,594 -
TOTAL ASSETS 812,837 4,998
LIABILITIES
Accounts payable and accrued liabilities 136,751 215
Due to other funds 2,070 -
Securities lending collateral 50,594 -
Other - 7
TOTAL LIABILITIES 189,415 222
NET ASSETS
Net assets held in trust $ 623,422 $ 4,776
The notes to the basic financial statements are an integral part of this statement.
( In Thousands)
CITY OF OAKLAND
Statement of Fiduciary Net Assets
Fiduciary Funds
June 30, 2005
27
Private
Pension Purpose
Trust Trust
Funds Fund
ADDITIONS:
Contributions:
Member contributions $ 24 $ -
City contributions 17,710 34
Total contributions 17,734 34
Trust receipts - 1,045
Investment income:
Net appreciation in fair value of investments 35,276 -
Interest 11,731 94
Dividends 3,089 -
Securities lending 911 -
TOTAL INVESTMENT INCOME 51,007 94
Less investment expenses:
Investment expenses ( 1,495) -
Borrowers rebates and other agent fees on securities lending transactions ( 793) -
Total investment expenses ( 2,288) -
NET INVESTMENT INCOME 48,719 94
Other income 38 -
TOTAL ADDITIONS 66,491 1,173
DEDUCTIONS:
Benefits to members and beneficiaries:
Retirement 43,791 -
Disability 25,982 -
Death 2,236 -
TOTAL BENEFITS TO MEMBERS AND BENEFICIARIES 72,009 -
Administrative expenses 936 3
Change in payable to City ( 306) -
Police services - 1,278
TOTAL DEDUCTIONS 72,639 1,281
Change in net assets ( 6,148) ( 108)
NET ASSETS - BEGINNING 629,570 4,884
NET ASSETS - ENDING $ 623,422 $ 4,776
The notes to the basic financial statements are an integral part of this statement.
CITY OF OAKLAND
( In Thousands)
Year Ended June 30, 2005
Fiduciary Funds
Statement of Changes in Fiduciary Net Assets
28
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
29
THIS PAGE LEFT INTENTIONALLY BLANK
CITY OF OAKLAND
Notes to Basic Financial Statements
Year Ended June 30, 2005
30
( 1) ORGANIZATION AND DEFINITION OF REPORTING ENTITY
The City of Oakland, California, ( the City or Primary Government) was incorporated on May
25, 1854, by the State of California and is organized and exists under and pursuant to the
provisions of State law. The Mayor/ Council form of government was established in November
1998 through Charter amendment. The legislative authority is vested in the City Council and
the executive authority is vested in the Mayor with administrative authority resting with the
City Administrator.
The accompanying financial statements present the City and its component units, entities for
which the City is considered to be financially accountable. Blended component units, although
legally separate entities, are, in substance, part of the City’s operations and are combined with
the data of the Primary Government within the governmental activities column in the
government- wide financial statements and governmental funds in the fund financial statements.
The Port of Oakland ( Port) and the Oakland Base Reuse Authority ( OBRA) are the City’s
discretely presented component units and are reported in separate columns in the government-wide
financial statements to emphasize that they possess characteristics that they are legally
separate from the City. Although the Port and OBRA have a significant relationship with the
City, the entities are fiscally independent and do not provide services solely to the City and,
therefore, are presented discretely.
Blended Component Units
The Redevelopment Agency of the City of Oakland ( Agency) was activated on October 11,
1956, for the purpose of redeveloping certain areas of the City designated as project areas. Its
principal activities are acquiring real property for the purpose of removing or preventing blight,
constructing improvements thereon, and rehabilitating and restoring existing properties. The
Oakland City Council serves as the Board of the Agency. The Agency’s funds are reported as a
major governmental fund.
The Civic Improvement Corporation ( Corporation) was created to provide a lease financing
arrangement for the City. The Corporation’s activities are reported in other governmental
funds.
The Oakland Joint Powers Financing Authority ( JPFA) was formed to assist in the financing of
public capital improvements. JPFA is a joint exercise agency organized under the laws of the
State of California and is composed of the City and the Agency. JPFA transactions are reported
in other governmental funds. Related debt is included in the long- term obligations of the City
in the governmental activities column of the government- wide statement of net assets.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
31
Discretely Presented Component Units
The Port is a legally separate component unit established in 1927 by the City. Operations
include the Oakland International Airport; the Port of Oakland Marine Terminal Facilities; and
commercial real estate which includes Oakland Portside Associates ( OPA), a California limited
partnership, and the Port of Oakland Public Benefit Corporation ( Port- PBC), a nonprofit
benefit corporation. OPA and Port- PBC were dissolved effective June 30, 2004, and all assets
were transferred to the Port. All interfund transactions have been eliminated. The Port is
governed by a seven- member Board of Port Commissioners ( the Board) that is appointed by
the City Council, upon nomination by the Mayor. The Board appoints an Executive Director to
administer operations. The Port prepares and controls its own budget, administers and controls
its fiscal activities, and is responsible for all Port construction and operations. The Port is
required by City charter to deposit its operating revenues in the City Treasury. The City is
responsible for investing and managing such funds. The Port is presented in a separate column
in the government- wide financial statements.
The OBRA was established in 1995 as a Joint Powers Authority ( JPA) by the City; the Agency;
and the County of Alameda ( County). OBRA was established to assure the effective transition
of military facilities in Oakland that have been or may be selected for closure. OBRA currently
is assuming the effective transition of the Oakland Army Base ( OAB) to the Agency and the
Port. Effective July 1, 2003, OBRA’s governing body amended the JPA agreement, which
among other things, changed the composition of the governing body, reducing it to a five-member
board consisting of the Mayor of Oakland and four other members of the Oakland City
Council ( which does not represent the majority of the City Council and therefore the Board is
not substantively the same as the City Council).
The votes of a majority of OBRA’s governing body are required to take action on most matters.
The revised Joint Powers Assessment requires OBRA to deposit its revenues in the City
Treasury. The City is responsible for investing and managing such funds. OBRA is presented
in a separate column in the government- wide financial statements.
Complete financial statements of the individual component units may be obtained from:
Finance and Management Agency, Accounting Division
City of Oakland
150 Frank H. Ogawa Plaza, Suite 6353
Oakland, CA 94612- 2093
In accordance with Governmental Accounting Standards Board Statement No. 39, Determining
Whether Certain Organizations Are Component Units, the City evaluated potential component
units and determined that none of the remaining potential component units were individually
significant to the City’s reporting entity.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
32
( 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Government- wide and Fund Financial Statements
The government- wide financial statements ( the statement of net assets and the statement of
activities) report information on all of the non- fiduciary activities of the City and its component
units. The effect of inter- fund activity has been removed from these statements except for
interfund services provided among funds. Governmental activities, which are normally
supported by taxes and intergovernmental revenues, are reported separately from business- type
activities, which rely to a significant extent on fees and charges for support. Likewise, the
Primary Government is reported separately from its discretely presented component units,
legally separate entities for which the Primary Government is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a given
function or segment are offset by program revenues. Direct expenses are those that are clearly
identifiable with a specific function or segment. Program revenues include ( 1) charges to
customers or applicants who purchase, use or directly benefit from goods, services, or
privileges provided by a given function or segment; and ( 2) grants and contributions that are
restricted to meeting the operational or capital requirements of a particular function or segment.
Taxes and other items not properly included among program revenues are reported as general
revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and
fiduciary funds, even though the latter is excluded from the government- wide financial
statements. Major individual governmental funds and a major individual enterprise fund are
reported as separate columns in the fund financial statements.
Measurement Focus, Basis of Accounting, and Financial Statement
Presentation
The government- wide financial statements are reported using the economic resources
measurement focus and the accrual basis of accounting, as are the proprietary fund and
fiduciary fund financial statements. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, regardless of the timing of related cash flows. Property
taxes are recognized as revenues in the year for which they are levied. Grants and similar items
are recognized as revenues as soon as all eligibility requirements have been met.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as
soon as they are both measurable and available. Revenues are considered to be available when
they are collected within the current period or soon enough thereafter to pay liabilities of the
current period. The City considers property tax revenues to be available for the year levied and
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
33
if they are collected within 60 days of the end of the current fiscal period. All other revenues
are considered to be available if they are collected within 120 days of the end of the current
fiscal period. Expenditures are recorded when a liability is incurred, as under accrual
accounting. However, debt service expenditures, as well as expenditures related to
compensated absences and claims and judgments, are recorded only when payment is due.
Property taxes, state and local taxes, grants, licenses, and interest associated with the current
fiscal period are all considered to be susceptible to accrual and so have been recognized as
revenues of the current fiscal period. Special assessments are recorded as revenues and
receivables to the extent installments are considered current. The estimated installments
receivable not considered available, as defined above, are recorded as receivables and offset by
deferred revenue.
The County of Alameda is responsible for assessing, collecting and distributing property taxes
in accordance with enabling state law, and for remitting such amounts to the City. Property
taxes are assessed and levied as of July 1 on all taxable property located in the City, and result
in a lien on real property. Property taxes are then due in two equal installments; the first on
November 1 and the second on February 1 of the following calendar year, and are delinquent
after December 10 and April 10, respectively. General property taxes are limited to a flat 1%
rate applied to the 1975- 76 full value of the property, or 1% of the sales price of the property or
of the construction value added after the 1975- 76 valuation. Assessed values on properties
( exclusive of increases related to sales and construction) can rise a maximum of 2% per year.
Taxes were levied at the maximum 1% rate during the year ended June 30, 2005.
The City reports the following major governmental funds:
The General Fund is the City’s primary operating fund. It accounts for all financial
activities and resources of the general government except those required to be
accounted for in another fund. These activities are funded principally by property taxes,
sales and use taxes, business, utility and real estate transfer taxes, interest and
investment income, and charges for services.
The Federal/ State Grant Fund accounts for various Federal and State grants used or
expended for a specific purpose, activity or program.
The Oakland Redevelopment Agency Fund accounts for federal grants, land sales,
rents and other revenues relating to redevelopment projects. Expenditures are
comprised of land acquisitions and improvements and all other costs inherent in
redevelopment activities.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
34
The Municipal Capital Improvement Fund accounts primarily for monies pertaining
to the Museum and the Scotland Convention Center financings. This fund may be used
for the lease, acquisition, construction or other improvements of public facilities.
The City reports the following major enterprise fund:
The Sewer Service Fund accounts for the sewer service charges received by the City
based on the use of water by East Bay Municipal Utility District customers residing in
the City. The proceeds from the sewer charges are used for the construction and
maintenance of sanitary sewers and storm drains and the administrative costs of the
program.
Additionally, the City reports the following fund types:
The Internal Service Funds account for the purchase of automotive and rolling
equipment; radio and other communication equipment; the repair and maintenance of
City facilities; acquisition, maintenance and provision of reproduction equipment and
services; and acquisition of inventory provided to various City departments on a cost
reimbursement basis.
The Pension Trust Funds account for closed benefit plans that cover uniformed
employees hired prior to July 1976 and non- uniformed employees hired prior to
September 1970.
The Private Purpose Trust Fund accounts for the operations of the Youth Opportunity
Program and certain gifts that are not related to ORA projects or parks, recreation and
cultural activities.
Private- sector standards of accounting and financial reporting issued prior to December 1,
1989, are followed in both the government- wide and the proprietary fund financial statements
to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. The City also has the option of following
subsequent private- sector guidance for their business- type activities and enterprise funds,
subject to this same limitation. The City has elected not to follow subsequent private- sector
guidance.
Charges between the City, the Port, and the OBRA are not eliminated because the elimination
of these charges would distort the direct costs and revenues reported.
Proprietary funds distinguish operating revenues and expenses from nonoperating items.
Operating revenues and expenses generally result from providing services in connection with
the fund’s principal ongoing operations. The principal operating revenues of the City’s
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
35
enterprise and internal service funds are charges for customer services including: sewers, golf
courses, vehicle acquisition and maintenance, radio and telecommunication support charges,
and reproduction services. Operating expenses for enterprise funds and internal service funds
include the cost of services, administrative expenses, and depreciation on capital assets. All
other revenues and expenses not meeting this definition are reported as nonoperating revenues
and expenses.
When both restricted and unrestricted resources are available for use, it is the City’s policy to
use restricted resources first, then unrestricted resources as they are needed.
Cash and Investments
The City follows the practice of pooling cash of all operating funds for investment, except for
the Oakland Redevelopment Agency Fund, and funds held by outside custodians. Investments
are generally carried at fair value. Money market investments ( such as short- term, highly liquid
debt instruments including commercial paper, banker’s acceptances, U. S. Treasury and agency
obligations) and participating interest- earning investment contracts ( such as negotiable
certificates of deposit, repurchase agreements and guaranteed or bank investment contracts)
that have a remaining maturity at the time of purchase of one year or less, are carried at
amortized cost. Changes in fair value of investments are recognized as a component of interest
and investment income.
Proceeds from debt and other cash and investments held by fiscal agents by agreement are
classified as restricted assets.
Income earned or losses arising from the investment of pooled cash are allocated on a monthly
basis to the participating funds and component units based on their proportionate share of the
average daily cash balance.
For purposes of the statement of cash flows, the City considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. The proprietary
fund types’ investments in the City’s cash and investment pool are, in substance, demand
deposits and are therefore considered to be cash equivalents.
Adoption of GASB Statement No. 40
The City has adopted Governmental Accounting Standards Board ( GASB) Statement No. 40,
Deposit and Investment Risk Disclosures 􀂱 an amendment of GASB Statement No. 3, effective
July 1, 2004. GASB 40 is designed to inform financial statement users about deposit and
investment risks that could affect a government’s ability to provide services and meet its
obligations as they become due. There are risks inherent in all deposits and investments, and
GASB believes that the disclosures required by this Statement provide users of governmental
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
36
financial statements with information to assess common risks inherent in deposit and
investment transactions. Deposit and investment resources often represent significant assets of
the governmental, proprietary and fiduciary funds. These resources are necessary for the
delivery of governmental services and programs, or to carry out fiduciary responsibilities.
Some key changes with GASB 40 include disclosure of:
· Common deposit and investment risks related to credit risk;
· Concentration of credit risk;
· Interest rate risk;
· Investments that have fair values that are highly sensitive to changes in interest rates; and
· Deposit and investment policies related to those risks.
Due From/ Due To Other Funds and Internal Balances
During the course of operations, numerous transactions occur between individual funds for
goods provided or services rendered. In the fund financial statements, these receivables and
payables are classified as “ due from other funds” or “ due to other funds.” In the government-wide
financial statements, these receivables and payables are eliminated within the
governmental activities and business- type activities columns. Net receivables and payables
between the governmental activities and business- type activities are classified as internal
balances.
Interest Rate Swap Agreements
The City enters into interest rate swap agreements to modify interest rates on outstanding debt.
Other than the net interest expense resulting from these agreements, no amounts are recorded in
the financial statements. Refer to Note 12 for additional information.
Inter- fund Transfers
In the fund financial statements, inter- fund transfers are recorded as transfers in/ out except for
certain types of transactions that are described below:
Charges for services are recorded as revenues of the performing fund and expenditures
of the requesting fund. Unbilled costs are recognized as an asset of the performing fund
and a liability of the requesting fund at the end of the fiscal year.
Reimbursements for expenditures, initially made by one fund that are properly
applicable to another fund, are recorded as expenditures in the reimbursing fund and as
reduction of expenditures in the fund that is reimbursed. Reimbursements are
eliminated for purposes of government- wide reporting.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
37
Bond Issuance Costs and Discounts/ Premiums
In the government- wide financial statements and in the proprietary fund financial statements,
long- term debt and other long- term obligations are reported as liabilities in the applicable
governmental activities, business- type activities, or proprietary fund statement of net assets.
Bond premiums and discounts, as well as 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. Bond issuance costs are reported as deferred charges and
amortized over the term of the related debt.
In the fund financial statements, governmental funds recognize bond premiums and discounts
as other financing sources and uses, respectively, and bond issuance costs as debt service
expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received
are reported as debt service expenditures.
Inventories
Inventories, consisting of materials and supplies held for consumption, are stated at cost. Cost
is calculated using the average cost method. Inventory items are considered expensed when
consumed rather than when purchased.
Capital Assets
Capital assets, which include land, museum collections, construction in progress, facilities and
improvements, furniture, machinery and equipment, infrastructure ( e. g., streets, streetlights,
traffic signals, and parks), sewers and storm drains, and capital assets acquired prior to 1980,
are reported in the applicable governmental or business- type activities columns in the
government- wide financial statements. Capital assets are defined by the City as assets with an
initial, individual cost of $ 5,000 or more and an estimated useful life in excess of one year.
Such assets are recorded at historical cost or estimated historical cost if purchased or
constructed. Donated capital assets are recorded at estimated fair market value at the date of
donation. Capital outlay is recorded as expenditures in the general, federal/ state grant, the
Agency, municipal capital improvements, and other governmental funds and as assets in the
government- wide and proprietary financial statements to the extent the City’s capitalization
threshold is met.
The cost of normal maintenance and repairs that do not add to the value of the asset or
materially extend its useful life are not capitalized.
The City has a collection of artwork presented for public exhibition and education that is being
preserved for future generations. These items are protected, kept unencumbered, cared for and
preserved by the City. The proceeds from the sale of any pieces of the collection are used to
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
38
purchase other acquisitions for the collection. However, future acquisitions purchased with
authorized budgeted City funds during a fiscal year will be reported as non- depreciable assets
in the City’s financial statements.
Depreciation of capital assets is provided on the straight- line basis over the following estimated
useful lives:
Facilities and improvements 15- 40 years
Furniture, machinery and equipment 3- 20 years
Infrastructure 7- 50 years
Property Held for Resale
Property held for resale is recorded as an asset at the lower of cost or estimated net realizable
value. In its fund statements, the Agency charges as expenditures, the cost of developing and
administering its capital development projects related to costs over and above the cost of the
initial acquisition.
Net Pension Asset
In February 1997, the City issued pension obligation bonds to reduce the actuarial accrued
liability of the Police and Fire Retirement System ( PFRS). And in June 2005, the City
contributed $ 17.7 million to PFRS to be used to fund a portion of the City’s obligation under its
Charter to the Retirement System. The net pension asset represents a prepaid asset amortized
over the same period used by the actuary at the time of the bond issuance, as it allows for the
matching of the asset with the related pension obligation bond liability. See Note 16 for the
accounting treatment of the net pension asset.
Compensated Absences
It is the City’s policy to permit employees to accumulate earned but unused vested vacation,
sick leave and other compensatory time. All earned compensatory time is accrued when
incurred in the government- wide financial statements and the proprietary fund financial
statements. A liability for these amounts is reported in the governmental funds only if they are
due and payable.
Retirement Plans
City employees participate in one of three defined benefit retirement plans: Oakland Police and
Fire Retirement System ( PFRS), Oakland Municipal Employees’ Retirement System
( OMERS), and California Public Employees’ Retirement System ( PERS), collectively the
Plans. Employer contributions and member contributions made by the employer to the Plans
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
39
are recognized when due and the employer has made a formal commitment to provide the
contributions. Benefits and refunds are recognized when due and payable in accordance with
the provisions of the Plans. Refer to Note 16 for additional information.
Refunding of Debt
Gains or losses occurring from advance refundings are deferred and amortized into expense for
both business- type activities and proprietary funds. For governmental activities reported in the
government- wide financial statements, they are deferred and amortized into expense if they
occurred subsequent to June 30, 2001.
Fund Balances
Reservations of fund balances of the governmental funds indicate those portions of fund equity
that are not available for appropriation for expenditure or which have been legally restricted to
a specific use. Following is a brief description of the nature of certain reserves.
1. Reserve for Encumbrances – Encumbrances outstanding at fiscal year end are
reported as reservations of fund balances and the related appropriation is automatically
carried forward into the next fiscal year. Encumbrances do not constitute expenditures
or liabilities because the commitments will be honored during the subsequent fiscal
year.
2. Reserve for Long- Term Receivables – This fund balance is reserved for long- term
receivables that do not represent expendable available financial resources
3. Reserve for Debt Service – This fund balance is reserved for the payment of debt
service requirements in subsequent years.
4. Reserve for Property Held for Resale – This fund balance is reserved for the cost of
developing and administering residential and commercial properties intended for resale.
5. Reserve for Capital Projects – This fund balance is reserved for ongoing projects in
specific areas excluding the General Fund. This reservation includes $ 38,122,381
reserved for low and moderate housing projects.
6. Reserve for Pension Obligations – This fund balance is reserved for the City’s
obligations under its pension plans.
Designations of portions of the General Fund unreserved fund balance have been made to
indicate those portions of the fund balances which the City has tentative plans to utilize in a
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2005
40
future period. These amounts may or may not result in actual expenditures. See Note 13 for
specific designations.
Restricted Net Assets
Restricted net assets are those assets, net of their related liabilities, that have constraints placed
on their use by laws, regulations, creditors, grantors, contributors, or by enabling legislation.
Accordingly, restricted assets may include principal and interest amounts accumulated to pay
debt service, unspent grant revenues, certain fees and charges, and restricted tax revenues.
Effects of New Pronouncements
In November 2003, GASB issued Statement No. 42, Accounting and Financial Reporting for
Impairment of Capital Assets and for Insurance Recoveries. This statement establishes
accounting and financial reporting standards for impairment of capital assets. A capital asset is
im