CITY OF OAKLAND
CALIFORNIA
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE 30, 2006
PREPARED BY THE FINANCE AND MANAGEMENT AGENCY
WILLIAM E. NOLAND, DIRECTOR
LARAE BROWN, CONTROLLER
PRINTED ON RECYCLED PAPER
COMPREHENSIVE ANNUAL FINANCIAL
REPORT
FISCAL YEAR ENDED JUNE 30, 2006
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 .............................. 41
( 4) Interfund Receivables, Payables and Transfers................................................... 58
( 5) Memorandums of Understanding ........................................................................ 60
( 6) Notes and Loans Receivable................................................................................ 61
( 7) Capital Assets ...................................................................................................... 62
( 8) Property Held for Resale ..................................................................................... 68
( 9) Accounts Payable and Accrued Liabilities Payable ............................................ 69
( 10) Deferred Revenue................................................................................................ 70
( 11) Tax and Revenue Anticipation Notes Payable .................................................... 71
( 12) Long- Term Obligations ....................................................................................... 72
( 13) General Fund Unreserved Fund Balance............................................................. 84
( 14) Self- Insurance...................................................................................................... 84
( 15) Joint Venture........................................................................................................ 87
( 16) Pension Plans....................................................................................................... 91
( 17) Postemployment Benefits Other Than Pension Benefits..................................... 95
( 18) Commitments and Contingent Liabilities............................................................ 95
( 19) Deficit Fund Balances/ Net Assets ....................................................................... 98
( 20) Subsequent Events............................................................................................... 99
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
Schedule Page
STATISTICAL SECTION
Net Assets by Component ......................................................................................... 1 126
Changes in Net Assets ............................................................................................... 2 127
Program Revenues by Function/ Program.................................................................. 3 128
Fund Balances, Governmental Funds........................................................................ 4 129
Changes in Fund Balances, Governmental Funds..................................................... 5 130
Tax Revenues by Source, Governmental Funds........................................................ 6 131
Assessed Value and Estimated Actual Value of Taxable Property ........................... 7 132
Direct and Overlapping Property Tax Rates.............................................................. 8 133
Principal Property Tax Payers……………………………………………………… 9 134
Property Tax Levies and Collections......................................................................... 10 135
Taxable Sales by Category ........................................................................................ 11 136
Direct and Overlapping Sales Tax Rates................................................................... 12 137
Ratios of Outstanding Debt by Type ......................................................................... 13 138
Ratios of General Bonded Debt Outstanding ............................................................ 14 139
Direct and Overlapping Governmental Activities Debt ............................................ 15 140
Legal Debt Margin Information ................................................................................ 16 141
Pledge- Revenue Coverage, Port of Oakland ............................................................. 17 142
Demographic and Economic Statistics ...................................................................... 18 143
Principal Employers .................................................................................................. 19 144
Full- Time- Equivalent City Government Employees by Function/ Program.............. 20 145
Operating Indicators by Function/ Program ............................................................... 21 146
Capital Asset Statistics by Function/ Program ........................................................... 22 147
General Information ................................................................................................................. 148
FINANCE AND MANAGEMENT AGENCY
ACCOUNTING DIVISION
150FRANK OGAWA PLAZA, SUITE 6353
OAKLAND, CALIFORNIA 94612
( 510) 238- 3264
December 1, 2006
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, 2006, 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
established by the Governmental Accounting 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.
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 financial 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
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 financial statements have been audited by a group of independent auditing firms 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,
2006, 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, 2006. The Independent Auditors Report is presented
as the first component of the Financial Section of this 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. This Basic Financial Statements
presents information on the activities of the City and its component units.
GASB 34, Basic Financial'Statements - and Management Discussion and Analysis - for State
and Local Governments, retains many of the most popular features of the traditional reporting for
state and local governments. It also incorporates these important new features:
. 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
government- wide financial statements to emphasize that they are legally separate from the City
operations.
11
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 operated by 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
administrative site for the County of Alameda, the regional seat for the federal government, the
district location of primary state offices, and the transportation hub of commerce for the. Bay
Area.
In November 1998, the citi~ ens of Oakland passed Measure X changing the form of government
from Council- 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.
The Mayor and City Council is 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 from six
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
removing the City Administrator; and ( 7) to change the title of the City Administrator to " City
Administrator".
ll1
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 30, 2005, the City Council, during its mid- cycle review, approved the City's
revised budget for fiscal year 2005- 06.
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 departmental level within funds. The City Administrator is authorized to
administer the budget and may transfer monies ITomone activity, program or project to another
within the same agency and fund. Supplemental appropriations or transfers of appropriations
between funds or agencies must be approved by 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 ofthe 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:
. ".. .. 9thBest office market in the country in 2006." ( Marcus & Millichap))
".. .. 8thBest Place for Business in the U. S." ( Forbes 2002 Annual Survey);
" ih Most Creative City in America" ( Carnegie Mellon);
".. .. 6thBest City to live in the U. S." ( Money, Dec. 2002);
".. .. leader among America's top ten technology cities." ( Newsweek, April 30, 2001); and
.
.
.
.
IV
. ".. .. uniquely positioned as an excellent point for international business." ( Mickey
Kantor, former U. S. Secretary of Commerce)
These statements are 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
innovationfor improvedbusinessproductsandservices. .
Oakland occupies 56 square miles of land with nineteen miles of coastline to the west and
magnificent rolling hills to the east. It is the eighth largest city in California with a population of
412,318. Its economy ranks in the top 20 economies in the 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);
. Ranked 8th in the nation in percentage of women- owned businesses;
. Anchored by corporate giants such as Clorox, Kaiser Permanente, Dreyer's, APL, etc.;
. Port of Oakland handles 62% of all export cargo on the West Coast of the U. S.; and
. Ranked 8thmost educated workforce in the United States.
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. The Port of Oakland is
the fourth busiest container port in the United States and handles 99% of all containerized cargo
that passes through the Golden Gate plus 62% of all export cargo on the West Coast of the
United States. In 2005, the Oakland International Airport handled more than 14.5 million
passengers and has more than 200 daily flights to serve 13 domestic and international carriers to
42 non- stop destinations. Part of this tremendous growth is driven by China's booming
manufacturing trade and other economies in the Far East.
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
growth. The study targeted inner cities with population of 50,000 residents or more. It found
that only ten added jobs at a higher rate than surrounding metropolitan areas: Oakland; San Jose;
Long Beach; Anaheim; Portland, Oregon; Seattle; Jersey City, N. J.; Tulsa Okla; St. Petersburg,
Fla; and Winston- Salem, N. C.
Long- term Financial Planning
Mayor's lOK Project: Mayor Jerry Brown launched a major new initiative when he took office
in 1999, the 10K Downtown Housing Initiative, with its goal of attracting 10,000 new residents
v
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.
As of January 2006, the Mayor's 10K Initiative has been realized. A total of 82 projects with a
total of 7,369 units were either completed, under construction, or in planning. The projects are
broken down by status as follows: 17 completed with 1,663 units; 15 under construction with
2,144 units; 20 with planning approval for 2,196 units; and 10 in the planning process with 1,366
units. Once the remaining projects are completed, Oakland will exceed its goal by 2,000
residents for a total of 12,000 new downtown dwellers. 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.
. Economic Indicators and Next Fiscal Year's Budget and Tax Rates
The City of Oakland's primary economic indicators are highlighted on pages 15 and 16 in the
Management Discussion and Analysis ( MD& A) section of this report.
Cash Management Policies and Practices
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 InvestmentPolicy in compliancewith 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 9isbursements of the City, and to reduce overall portfolio
needs while maintaining market- average rates of return. Investments 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 U. S. 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.
Risk Management
To finance its risks of general liability and workers' compensation, the City maintains a program
of self- insurance, supplemented with 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.
Vi
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.
Awards
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, 2005. 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 CAFR must 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 () fAchievement for 16 of the last 17 years. The City's Fiscal Year 2005- 06
CAFR will be submitted to GFOA for consideration for the Certificate of Achievement for
Excellence in Financial Reporting.
Acknowledgements
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.
submitted,
William E~ oland, Director
Finance and Management Agency
Vll
Certificate of
Ac11ievement
for F/ xcellence
in Financial
Reporting
Presented to
City of Oakland
California
For its Comprehensive Annual
Financial Report
for the Fiscal Year Ended
June 30, 2005
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 aunual fmancial
reports ( CAFRs) achieve the highest
standards in government accounting
and fmancial reporting. ~ President
~/~
Executive Director
~
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
ix
x
DIRECTORY OF CITY OFFICIALS
MAYOR/ COUNCIL FORM OF GOVERNMENT
June 30, 2006
MAYOR
Jerry Brown
MEMBERS OF THE CITY COUNCIL
Ignacio De La Fuente, President ( District 5)
Jean Quan, Vice- Mayor ( District 4)
At Large – Henry Chang, Jr. District 1 – Jane Brunner District 2 – Patricia Kernighan
District 3 – Nancy Nadel 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
Lori Fogarty 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
Osborn Solitei Theresa Woo
Financial Analyst Accountant III
Accounting Team ( GL, ORA & GRANTS)
Myrna Bangloy Edward Chun Norma Torres
Bruce Levitch Felipe Kiocho Sandra Tong
Frank Catalya Lani Pallotta David Warner
Connie L. Chu Erico 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
1
Honorable Mayor and Members
of the City Council
City of Oakland, California
Independent Auditor’s Report
We have audited the accompanying financial 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, 2006, which collectively comprise
the City’s basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the City’s management. Our responsibility is to express opinions on these financial statements
based on our audit. We did not audit the financial statements of the Oakland Base Reuse Authority ( OBRA), the
Oakland Municipal Employees’ Retirement System ( OMERS) and the Oakland Police and Fire Retirement System
( PFRS), which collectively represent the following percentages of assets, net assets and revenues/ additions as of and
for the year ended June 30, 2006:
Revenues/
Opinion Unit Assets Net Assets Additions
Discretely presented component units ( OBRA) 3.9% 9.9% 2.7%
Aggregate remaining fund information ( OMERS and PFRS) 71.6% 73.0% 21.2%
Those financial statements were audited by other auditors whose reports thereon has been furnished to us, and our
opinion, insofar as it relates to the amounts included for those entities, is based on the reports 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 financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s
internal control over financial reporting. Accordingly, we do not express such an opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors
provide a reasonable basis for our opinions.
In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present
fairly, in all material respects, the respective financial 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, 2006, and the respective changes in financial 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.
2
In accordance with Government Auditing Standards, we have also issued our report dated December 6, 2006, on our
consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain
provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the results of that
testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report
is an integral part of an audit performed in accordance with Government Auditing Standards and should be
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 financial statements but are
supplementary information required by accounting principles generally accepted in the United States of America.
We have applied certain limited procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the required supplementary information. However, we 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 financial statements that collectively comprise
the City’s basic financial statements. The introductory section, combining and individual fund financial 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 financial statements and schedules have been
subjected to the auditing procedures applied by us and the other auditors in the audit of the basic financial statements
and, in our opinion, based on our audit and the reports of other auditors, are fairly stated in all material respects in
relation to the basic financial 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 financial statements
and, accordingly, we express no opinion on them.
Certified Public Accountants
Walnut Creek, California
December 6, 2006
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, 2006. 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 $ 690.5 million as of June
30, 2006, compared to $ 657.6 million at June 30, 2005. This represents a net
growth of $ 32.9 million or 5% compared to the previous year. Assets increased
by 3% or $ 68.0 million primarily as the result of the combined increase of $ 107.5
million in pooled and restricted cash and investments attributable to unspent bond
proceeds and improved cash collections. Conversely, liabilities grew by 2% or
$ 35.1 million compared to the prior fiscal year primarily as a result of new debts
associated with the above unspent bond proceeds.
• The City’s cumulative fund balances grew by 6.1% ($ 54.7 million) to $ 955.3
million compared to $ 900.6 million for the prior fiscal year. This growth is
primarily attributed to: ( 1) the combined increase of $ 107.5 million or 13% in
pooled and restricted cash and investments primarily attributable to unspent bond
proceeds; ( 2) the 15.6% improvement in property taxes as a result of double digit
increases in property valuation; and ( 3) offset by a modest 5.7% increase in
overall governmental expenditures for is operations.
• As of June 30, 2006, the City had total long- term obligations outstanding of $ 1.9
billion compared to a similar amount outstanding for the prior fiscal year for a
minimal increase of only 1%. Of this amount, $ 358.0 million is general obligation
bonds backed by the full faith and credit of the City. The remaining $ 1.5 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, 2006
was $ 59.4 million compared to $ 46.3 million for the previous year, an increase of
$ 13.1 million or 28%. The unreserved/ undesignated fund balance met the
requirements of the City Council’s 7.5% reserve policy based on the total General
Fund expenditures for fiscal year 2006.
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, 2006 by $ 690.5 million compared
to $ 657.6 million as of June 30, 2005, an increase of $ 32.9 million. The largest portion
of the City’s net assets ( 62%) reflects its investment in capital assets of $ 430.2 million,
an increase of $ 12.2 million ( 3%) net of related debt, compared to the previous fiscal
year. The increase is attributed to new additions net of the annual deductions for asset
retirements and for depreciation expense. Of the remaining balance, ( 39%) reflects
$ 267.8 million in resources that are subject to external restrictions on how they may be
used. The net deficit of ($ 7.5) million is primarily attributed to ongoing projects related
governmental activities.
7
City of Oakland’s Net Assets
June 30, 2006
( In Thousands)
Governmental
Activities
Business- Type
Activities Totals
2006
2005
2006
2005
2006
2005
Assets:
Current and other assets $ 1,723,502 $ 1,651,554 $ 54,508 $ 61,075 $ 1,778,010 $ 1,712,629
Capital assets 835,991 839,375 127,221 121,240 963,212 960,615
TOTAL ASSETS 2,559,493 2,490,929 181,729 182,315 2,741,, 222 2,673,244
Long- term liabilities
outstanding
1,815,189
1,794,616
68,475
70,814
1,883,664
1,865,430
Other liabilities 165,070 149,248 1,986 991 167,056 150,239
TOTAL LIABILITIES 1,980,259 1,943,864 70,461 71,805 2,050,720 2.015,669
Net assets:
Invested in capital assets,
net of related debt
319,932
310,633
110,279
107,396
430,211 418,029
Restricted net assets:
Debt service 27,470 28,375 - - 27,470 28,375
Pension obligations 153,735 175,247 - - 153,735 175,247
Urban redevelopment
and housing
82,940
84,752
-
-
82,940 84,752
Other purposes 3,679 4,041 - - 3,679 4,041
Unrestricted ( 8,522) ( 55,983) 989 3,114 ( 7,533) ( 52,869)
TOTAL NET ASSETS $ 579,234 $ 547,065 $ 111,268 $ 110,510 $ 690,502 $ 657,575
Governmental activities. The City’s change in net assets of $ 32.9 million for the year
ended June 30, 2006 compared to $ 101.8 million for the previous fiscal year represents a
net decrease of $ 60.0 million. The key elements of this decrease are listed below.
8
Changes in Net Assets
June 30, 2006
( In Thousands)
The City’s change in net assets was $ 32.9 million for the year ended June 30, 2006
compared to $ 104.9 million as of June 30, 2005. The decrease of $ 71.9 million ( 69%) is
attributed to the increase in expenses of 7% or $ 56.8 million and the decline in revenues
of 2% or $ 15.1 million attributed primarily to the decline in fair value for he City’s
pension annuity. Significant elements that make up this decrease are itemized below.
Governmental
Activities
Business- Type
Activities Totals
2006
2005
2006
2005
2006 2005
Revenues:
Program revenues:
Charges for services $ 70,711 $ 111,467 24,875 $ 24,496 95,586 $ 135,963
Operating grants and
contributions 77,154 74,694 - - 77,154 74,694
General revenues:
Property taxes 268,693 234,127 - - 268,693 234,127
State taxes 67,304 68,451 - - 67,304 68,451
Local taxes 261,815 251,301 - - 261,815 251,301
Interest and
investment income 30,406
46,063 1,996
707 32,402 46,770
Other 78,053 84,850 62 - 78,115 84,850
TOTAL REVENUES 854,136 870,953 26,933 25,203 881,069 896,156
Expenses:
General government 71,471 65,865 - - 71,471 65,865
Public safety 335,171 319,908 - - 335,171 319,908
Life enrichment 101,902 96,649 - - 101,902 96,649
Community &
economic development 140,351
117,689
-
-
140,351 117,689
Public works 100,448 107,457 - - 100,448 107,457
Interest on long- term
debt 73,224
62,238
-
-
73,224 62,238
Sewer - - 24,841 21,337 24,841 21,337
Parks and recreation - - 734 160 734 160
TOTAL EXPENSES 822,567 769,806 25,575 21,497 848,142 791,303
Change in net assets
before transfers 31,569
101,147 1,358
3,706 32,927 104,853
Transfers 600 621 ( 600) ( 621) - -
Change in net assets 32,169 101,768 758 3,085 32,927 104,853
Net assets at beginning of
year 547,065
445,297 110,510
107,425 657,575 552,722
NET ASSETS AT END
OF YEAR $ 579,234
$ 547,065 111,268
$ 110,510 690,502 $ 657,575
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
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
30.6%
Operating Grants and
Contributions
9.0%
Investment and interest
income
3.6%
Other Revenues
9.1%
Property taxes
31.4%
State taxes
7.9%
Charge for Services
8.3%
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
2.4%
Charge for services
97.6%
Charge for services
Other
10
1 1
• While the increases in property and local taxes of 15% and 4% respectively were
driven by enhancement in assessed property valuation within the boundaries of
the City of Oakland during fiscal year 2005- 06, charges for services and other
income declined by ( 30%) and ( 8%) respectively.
• The decrease in interest and investment income of $ 14.4 million or 31% is
primarily attributable to the decline in fair value for the City’s pension annuity.
• The increase of $ 15.3 million of spending in public safety when compared to the
previous year is due primarily to overtime costs resulting from the continuing
problem of shortage in sworn staff, and the added costs to recruit new officers and
conduct police academies to train and certify new recruits.
• The increases in community & economic development and life enrichment
expenses of $ 23.0 million and $ 5.3 million respectively are attributed to
completed projects and costs related to continuing projects from previous years.
• Interest on long- term debt increased by 18% or $ 11.0 million due to defeasance
and refunding of certain debts by the City.
Business- type activities. Business- type activities ended the fiscal year with a positive
change in its net assets of $ 0.8 million compared to $ 3.1 million for the previous fiscal
year. The decline of $ 2.3 million in net assets is attributable to a 7% or $ 1.7 million
increase in revenues offset by a 19% or $ 4.1 million increase in sewer project related
expenditures.
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.
The Oakland Redevelopment Agency had a fund balance of $ 321.7 million as of June 30,
2006 that represents an increase of 20% over the prior fiscal year. The net increase of
$ 53.6 million was primarily related to the improvement in property tax revenues in the
project areas and the remaining bond proceeds for the Low and Moderate Housing
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 $ 110.3
million as of June 30, 2006, compared to $ 107.4 million for the previous fiscal year. The
1 2
2.7% or $ 2.9 million increase is related to partial proceeds spent from a new debt issued
to finance sewer projects. During the fiscal year, the City capitalized $ 6.0 million in
sewer system completed projects, net of depreciation.
General Fund Budgetary Highlights
Differences between the original and the final amended expenditure budgets totaling
$ 21.2 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 $ 19.8 million for the year ended June 30, 2006, compared
to $ 1.2 million in savings for the previous fiscal year. The net budget savings is
attributed to ( 1) the significant turnover in full time sworn officers through attrition, ( 2)
the absorption of a certain portion of sworn officers salaries and benefits by Measure Y
funds to satisfy that Measure’s mandates while recruitment for additional authorized full
time peace officers is in progress, and ( 3) the completion of carryforward projects during
the fiscal year.
Actual revenues compared to the final amended general fund revenue budget exceeded
projections by $ 16.3 million, compared to a favorable variance of $ 40.0 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.
Capital Assets
The City’s capital assets, net of depreciation, totaled $ 963.2 million as of June 30, 2006
compared to $ 960.6 million as of June 30, 2005, an increase of .25%. Governmental
activities additions of $ 64.7 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 $ 3.4 million in
capital assets for governmental activities. Business activities, primarily the sewer fund,
increased its capital assets by $ 6.0 million, net of retirements and depreciation. See Note
( 7) for more details in capital assets.
1 3
Construction Commitments
The City has active construction projects as of June 30, 2006. The projects include street
construction, park construction, building improvements and sewer and storm drain
improvements ( in thousands).
Spent to Date
Remaining
Commitment
Infrastructure – streets $ 102,904 $ 49,433
Infrastructure – parks 21,367 33,151
Facility improvements 31,601 72,359
Sewers and storm drains 17,487 54,372
Technology enhancements 17,234 6,756
Miscellaneous 15,014 11,513
TOTAL $ 205,607 $ 227,584
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 $ 918.5 million. The total amount of debt
applicable to the debt limit was $ 358.1 million. The resulting legal debt margin was
$ 560.4 million.
The City of Oakland’s underlying ratings for its general obligation bonds as of June 30,
2006, were as follows:
Standard and Poor’s Corporation A+
Moody’s Investors Services, Inc. A1
Fitch, JBCA, Inc. A+
As of June 30, 2006, the City had total long- term obligations outstanding of $ 1.88 billion
compared to $ 1.86 billion outstanding for the prior fiscal year, an increase of .5%. Of this
amount, $ 358.1 million is general obligation bonds backed by the full faith and credit of
the City. The remaining $ 1.53 billion is comprised of various long- term debt instruments
listed below including accruals of year- end estimates for other long- term liabilities.
1 4
Outstanding Debt
June 30, 2006
( In Thousands)
The City’s overall total long- term obligations increased by $ 18.2 million compared to
fiscal year 2005. The net increase is primarily attributable to ( 1) the issuance of General
Obligations Bonds, Measure G, Series 2006 ( the “ 2006 GO Bonds”), ( 2) the Agency
issuance of the Subordinated Housing Set Aside Revenue Refunding Bonds, Series
2006A ( the “ Series 2006A Bonds”), and ( 3) the Agency’s issuance of the federally
taxable Subordinated Housing Set Aside Revenue Bonds, Series 2006A- T (“ Series
2006A- T Bonds”). 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 2006.
Summary of New Debt:
General Obligation Bonds, Measure G, Series 2006, ( the “ 2006 GO Bonds”):
On June 29, 2006, the City issued $ 21,000,000 of General Obligation Bonds ( Series
2006, Measure G) ( the “ 2006 GO Bonds”). The 2006 GO Bonds were issued by the City
to acquire, improve, construct and finance existing and additional facilities for the
Oakland Museum of California and the Oakland Zoo. This issuance constitutes the
second and final series of bonds to be issued from the total authorized amount of
$ 59,000,000 of bonds duly approved by at least two- thirds of the voters voting on
Measure G at the City election held on March 5, 2002. The 2006 GO Bonds are tax-
Governmental
Activities
Business- Type
Activities Totals
2006
2005
2006
2005
2006 2005
General obligation bonds $ 358,124 $ 349,486 $ - $ - $ 358,124 $ 349,486
Tax allocation bonds 319,115 270,085 - - 319,115 270,085
Certificates of
participation 49,154 50,195 - - 49,154 50,195
Lease revenue bonds 346,110 366,245 - - 346,110 366,245
Pension obligation bonds 341,475 366,405 - - 341,475 366,405
Special assessment debt
with government
commitments
7,085
7,370 - -
7,085
7,370
Accreted interest on
appreciation bonds
85,884
70,811 - -
85,884
70,811
Sewer- bonds & notes
payable
-
-
65,765
67,985
65,765
67,985
Less: deferred amounts
Bond issuance
premiums 22,734
24,186 2,710 2,829 25,444 27,015
Bond refunding loss ( 22,216) ( 22,793) - - ( 22,216) ( 22,793)
Total Bonds Payable 1,507,465 1,481,990 68,475 70,814 $ 1,575,940 1,552,804
Notes payable 38,158 45,209 - - 38,158 45,209
Other long- term liabilities 269,566 267,417 - - 269,566 267,417
TOTAL
OUTSTANDING DEBT $ 1,815,189
$ 1,794,616
$ 68,475
$ 70,814
$ 1,883,664 $ 1,865,430
1 5
exempt with interest rates ranging from 4.500% to 5.000% and a final maturity of
January 15, 2036.
Subordinated Housing Set Aside Revenue Refunding Bonds, Series 2006A
Subordinated Housing Set Aside Revenue Bonds, Series 2006A- T ( Federally Taxable):
On April 4, 2006, the Redevelopment Agency of the City of Oakland (“ Agency”) issued
$ 2,195,000 of Subordinated Housing Set Aside Revenue Refunding Bonds, Series 2006A
(“ Series 2006A Bonds”) and $ 82,645,000 of Subordinated Housing Set Aside Revenue
Refunding Bonds, Series 2006A- T (“ Series 2006A- T Bonds”). All of the Series 2006A
Bonds and a portion of the 2006A- T Bonds were issued for the purpose of providing
funds to establish an irrevocable escrow to refund and defease certain of the Agency’s
Subordinated Housing Set Aside Revenue Bonds, Series 2000T. The remaining portion
of the Series 2006A- T Bonds were issued to finance or refinance various redevelopment
activities, including the development of low and moderate income housing within the
Agency’s project areas. The Series 2006A Bonds are tax- exempt with a final maturity of
September 1, 2018; the interest rate of these bonds is 5.000%. The Series 2006A- T
Bonds are federally taxable with a final maturity of September 1, 2036; the interest rates
of these bonds range from 5.030% to 5.927%.
The refunding portion of this financing resulted in a gross cash flow savings of
approximately $ 10.7 million. The net economic gain on the refunding portion of this
financing is $ 1,437,419.
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 7.5% in July 2006 compared to
an average unemployment rate of 7.9% for 2005.
• 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.
• Average forecast residential rental and vacancy rates for 2006 were $ 1,236 per month
and 6.0% respectively compared to $ 1,206 and 6.5% for 2005.
1 6
• 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 $ 105.8 billion for 2003, ranks in
the top 20 metropolitan economies in the United States and the 51st largest economy
in the world.
• Estimated population for January 1, 2005 is 412,318 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 13.15 to 15.85 cents per kilowatt hour
while industrial rates are from 8.87 to 12.82 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.
1 7
THIS PAGE LEFT INTENTIONALLY BLANK
Governmental Business- Type Oakland Base
Total Reuse Authority
ASSETS
Cash and investments $ 368,492 $ 4,673 $ 373,165 $ 102,462 $ 6,317
Receivables ( net of allowance for uncollectibles of
$ 7,705 for City and $ 2,160 for component units):
Accrued interest 1,887 - 1,887 989 -
Property taxes 20,513 - 20,513 - -
Accounts receivable 51,037 2,962 53,999 33,241 -
Grants receivable 14,628 - 14,628 - 1,931
Due from component units 20,978 - 20,978 - -
Internal balances 4,660 ( 4,660) - - -
Due from other governments 4,892 - 4,892 - -
Due from pension trust fund 3,658 - 3,658 - -
Notes and loans receivable ( net of allowance for - -
uncollectibles of $ 43,597 for the City) 204,270 - 204,270 - -
Restricted assets:
Cash and investments 566,037 50,846 616,883 260,647 4,095
Receivables - - - 8,603 345
Inventories 850 - 850 - -
Capital assets: -
Land and other assets not being depreciated 94,685 8,783 103,468 752,705 -
Facilities, infrastructures, and equipment,
net of depreciation 741,306 118,438 859,744 1,318,440 -
Property held for resale 53,266 - 53,266 91,283
Unamortized bond issuance costs 23,849 687 24,536 - -
Net pension asset 384,425 - 384,425 - -
Other 60 - 60 102,767 -
TOTAL ASSETS 2,559,493 181,729 2,741,222 2,579,854 103,971
LIABILITIES
Accounts payable and other current liabilities 131,338 1,945 133,283 42,760 428
Accrued interest payable 9,758 - 9,758 30,908 -
Due to other governments 278 - 278 - -
Due to primary government - - - 16,739 4,239
Unearned revenue 7,876 41 7,917 66,790 -
Matured bonds and interest payable 520 - 520 - -
Other 15,300 - 15,300 43,844 458
Noncurrent liabilities:
Due within one year 151,328 2,407 153,735 26,451 4,381
Due in more than one year 1,663,861 66,068 1,729,929 1,524,780 3,115
TOTAL LIABILITIES 1 ,980,259 70,461 2 ,050,720 1,752,272 1 2,621
NET ASSETS ( deficit)
Invested in capital assets, net of related debt 319,932 110,279 430,211 663,939 -
Restricted net assets:
Debt service 27,470 - 27,470 114,377 -
Pension 153,735 - 153,735 - -
Urban redevelopment and housing 82,940 - 82,940 - 85,033
Other purposes 3,679 - 3,679 - -
Unrestricted net assets ( deficit) ( 8,522) 989 ( 7,533) 49,266 6,317
TOTAL NET ASSETS $ 5 79,234 $ 111,268 $ 6 90,502 $ 827,582 $ 9 1,350
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, 2006
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 $ 7 1,471 $ 16,266 $ 832$ - ( 54,373) $ - ( 54,373)
Public safety 3 35,171 42,492 7,313 - ( 285,366) - ( 285,366)
Life enrichment 1 01,902 79 26,564 - ( 75,259) - ( 75,259)
Community and economic development 1 40,351 7,947 20,459 - ( 111,945) - ( 111,945)
Public works 1 00,448 3,927 21,986 - ( 74,535) - ( 74,535)
Interest on long- term debt 7 3,224 - - - ( 73,224) - ( 73,224)
TOTAL GOVERNMENTAL ACTIVITIES 8 22,567 70,711 77,154 - ( 674,702) - ( 674,702)
Business- type activities:
Sewer 2 4,841 24,678 - - - ( 163) ( 163)
Park and recreation 734 197 - - - ( 537) ( 537)
TOTAL BUSINESS- TYPE ACTIVITIES 2 5,575 24,875 - - - ( 700) ( 700)
TOTAL PRIMARY GOVERNMENT $ 8 48,142 $ 95,586 $ 77,154$ - $ ( 674,702) ( 700) $ ( 675,402)
Component units:
Port of Oakland $ 2 81,513 $ 267,461 $ - $ 29,658 $ 15,606
Oakland Base Reuse Authority $ 8 ,037 $ 7,087 $ 2,004 $ - $ 1,054
General revenues:
Property taxes 2 68,693 - 268,693 - -
State taxes 6 7,304 - 67,304 - -
Local taxes 2 61,815 - 261,815 - -
Interest and investment income 3 0,406 1,996 32,402 11,146 381
Other 7 8,053 62 78,115 37,714 63
Transfers 600 ( 600) - - -
TOTAL GENERAL REVENUES AND TRANSFERS 7 06,871 1,458 708,329 48,860 444
Changes in net assets 3 2,169 758 32,927 64,466 1,498
NET ASSETS - BEGINNING 5 47,065 110,510 657,575 763,116 89,852
NET ASSETS - ENDING $ 5 79,234 $ 111,268 $ 690,502 $ 827,582 $ 91,350
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, 2006
Reuse Authority
Port Oakland Base
of Oakland
19
General
ASSETS
Cash and investments $ 128,760 $ - $ 149,610 $ 18,202 $ 6 8,179 $ 364,751
Receivables ( net of allowance
for uncollectibles of $ 5,431):
Accrued interest 1,194 42 36 133 482 1,887
Property taxes 7,982 830 8,143 - 3 ,558 20,513
Accounts receivable 45,096 1,397 1,259 - 3 ,141 50,893
Grants receivable - 14,120 - - 508 14,628
Due from component unit 18,438 - - - 2 ,540 20,978
Due from other funds 60,190 547 33,178 - 2 ,102 96,017
Due from other governments - - 4,892 - - 4,892
Notes and loans receivable ( net
of allowance for uncollectibles of $ 43,597) 40,835 83,986 62,334 - 1 7,115 204,270
Restricted cash and investments 153,735 3,679 128,012 111,094 1 59,048 555,568
Property held for resale - - 53,266 - - 53,266
Other 36 24 - - - 60
TOTAL ASSETS $ 456,266 $ 1 04,625 $ 4 40,730 $ 1 29,429 $ 2 56,673 $ 1 ,387,723
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable and accrued liabilities $ 101,796 $ 4,784 $ 16,480 $ 3,857 $ 2 ,918 $ 129,835
Due to other funds 27,348 9,674 2,121 - 1 3,947 53,090
Due to other governments 65 - 213 - - 278
Deferred revenue 29,813 87,897 96,862 - 1 9,179 233,751
Matured bonds and interest payable - - - 520 - 520
Other 10,725 - 3,311 612 285 14,933
TOTAL LIABILITIES 169,747 1 02,355 1 18,987 4 ,989 3 6,329 4 32,407
Fund balances ( deficit)
Reserved:
Encumbrances 6,708 14,525 - 5,669 6 ,397 33,299
Long- term receivables 6,000 - - - - 6,000
Debt service 2,443 - - - 1 49,388 151,831
Property held for resale - - 53,266 - - 53,266
Capital projects - - 267,229 - - 267,229
Pension obligations 119,000 - - - - 119,000
Unreserved/( deficit) reported in:
General fund 152,368 - - - - 152,368
Special revenue funds - ( 12,255) - - 5 4,357 42,102
Capital project funds - - 1,248 118,771 1 0,202 130,221
TOTAL FUND BALANCES 286,519 2 ,270 3 21,743 1 24,440 2 20,344 9 55,316
TOTAL LIABILITIES AND FUND BALANCES $ 456,266 $ 1 04,625 $ 4 40,730 $ 1 29,429 $ 2 56,673 $ 1 ,387,723
The notes to the basic financial statements are an integral part of this statement.
( In Thousands)
CITY OF OAKLAND
Balance Sheet
Governmental funds
June 30, 2006
Federal/ State
Grant Fund
Redevelopment Capital Governmental
Improvement
Total
Governmental
Funds
Oakland
Agency
Other
Funds
Municipal
20
Fund balance - total governmental funds $ 9 55,316
8 11,264
23,849
3 84,425
( 9,758)
2 25,875
( 1,797,414)
( 14,323)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 579,234
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 governmental 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 Funds Balance Sheet to the
Statement of Net Assets for Governmental Activities
City of Oakland
June 30, 2006
( In Thousands)
21
General
REVENUES
Taxes:
Property $ 1 51,754 $ - $ 89,337 $ - $ 27,270 $ 268,361
State:
Sales and use 44,875 - - - 11,969 56,844
Motor vehicle in- lieu 2,984 - - - - 2,984
Gas - - - - 7,476 7,476
Local:
Business license 43,790 - - - - 43,790
Utility consumption 48,770 - - - - 48,770
Real estate transfer 79,483 - - - - 79,483
Transient occupancy 11,690 - - - - 11,690
Parking 8,469 - - - 6,727 15,196
Voter approved special tax - 11,095 - - 20,633 31,728
Franchise 12,152 - - - - 12,152
Licenses and permits 18,975 - - - 31 19,006
Fines and penalties 23,888 118 - - 1,461 25,467
Interest and investment income 3,808 3,538 7,320 4,274 11,781 30,721
Charges for services 66,849 177 - - 3,685 70,711
Federal and state grants and subventions 3,587 65,233 - 139 4,819 73,778
Other 17,075 4,196 6,663 2 19,622 47,558
TOTAL REVENUES 538,149 84,357 103,320 4,415 115,474 845,715
EXPENDITURES
Current:
Elected and Appointed Officials:
Mayor 1,654 3 - 300 190 2,147
Council 2,604 - - 447 1,244 4,295
City Manager 9,930 691 - 816 2,152 13,589
City Attorney 9,459 382 - - 3,021 12,862
City Auditor 1,157 - - - 4 1,161
City Clerk 1,547 - - - 70 1,617
Agencies/ Departments:
Personnel Resource Management 4,436 - - - 77 4,513
Information Technology 8,891 6 - 330 - 9,227
Financial Services 22,780 171 - 5 1,225 24,181
Police Services 179,201 3,915 - 6 4,846 187,968
Fire Services 101,247 1,141 - 828 7,946 111,162
Life Enrichment:
Parks and Recreation 14,136 72 - 20 3,068 17,296
Library 11,120 11,477 - 14 331 22,942
Museum - - - - 267 267
Aging & Health and Human Services 5,926 28,058 - 19 12,578 46,581
Cultural Arts and Museum 6,748 - - 84 - 6,832
Community and Economic Development 20,592 23,729 75,456 2,466 13,318 135,561
Public Works 32,621 2,381 - 8,842 35,972 79,816
Other 16,992 - 3,689 - 2,367 23,048
Capital outlay 573 6,295 - 12,918 5,228 25,014
Debt service:
Principal repayment - 500 10,325 605 61,153 72,583
Bond issuance costs - - 2,111 385 - 2,496
Interest charges - 806 16,259 78 51,884 69,027
TOTAL EXPENDITURES 451,614 79,627 107,840 28,163 206,941 874,185
EXCESS ( DEFICIENCY) OF REVENUES
OVER ( UNDER) EXPENDITURES 86,535 4,730 ( 4,520) ( 23,748) ( 91,467) ( 28,470)
OTHER FINANCING SOURCES ( USES)
Proceeds from bonds issuance - - 84,840 21,000 - 105,840
Premiums on issuance of bonds - - 124 204 - 328
Payment to refunding bond escrow agent - - ( 27,853) - - ( 27,853)
Property sale proceeds 3,040 - 1,033 - 189 4,262
Transfers in 2,608 - - 241 98,794 101,643
Transfers out ( 97,501) - - ( 3,300) ( 242) ( 101,043)
TOTAL OTHER FINANCING SOURCES ( USES) ( 91,853) - 58,144 18,145 98,741 83,177
NET CHANGE IN FUND BALANCES ( 5,318) 4,730 53,624 ( 5,603) 7,274 54,707
Fund balances ( deficit) - beginning 291,837 ( 2,460) 268,119 130,043 213,070 900,609
FUND BALANCES - ENDING $ 2 86,519 $ 2,270 $ 321,743 $ 124,440 $ 220,344 $ 955,316
The notes to the basic financial statements are an integral part of this statement.
Agency
Governmental
Year Ended June 30, 2006
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 $ 5 4,707
( 1,321)
1 9,353
( 5,105)
( 7,778)
9 46
Principal payments 7 2,583
Payments to escrow agent for refunded debt 2 7,853
Issuance of bonds and notes ( 105,840)
Premium on bond proceeds ( 328)
Amortization of bond premiums 1 ,780
Amortization of refunding loss ( 2,945)
Additional accrued and accreted interest calculated on bonds and notes payable ( 17,964)
Reductions on other long- term liability for mandated Alameda County environmental clean- up health costs 3 ,180
The net loss of activities of internal service funds is reported with governmental activities ( 6,952)
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 32,169
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
For the Year Ended June 30, 2006
( In Thousands)
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.
Some expenses such as claims, vacations and sick leave reported in the statement of activities do
not require the use of current financial resources and therefore are not reported as an expenditure
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 transactions, 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.
Amounts reported for governmental activities in the statement of
activities are different because:
Revenues in the statement of activities that do not provide current financial resources are not
reported as revenues in the funds. Also, loans made to developers and others are treated as urban
redevelopment and housing expenditures at the time the loans are made and are reported as
revenues when the loans are collected in the funds. This represents the change in the deferred
amounts during the current period.
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 expenditures in the
governmental funds.
23
Internal
Sewer Service
Service Total Funds
ASSETS
Current Assets:
Cash and investments $ - $ 4 ,673 $ 4,673 $ 3,741
Accounts receivables ( net of uncollectibles of $ 1,926 and $ 348)
for the enterprise funds and internal service funds, respectively) 2 ,930 32 2 ,962 144
Inventories - - - 850
Restricted cash and investments 5 0,846 - 5 0,846 10,469
Total current assets 5 3,776 4,705 5 8,481 15,204
Noncurrent Assets:
Capital assets:
Land and other assets not being depreciated 8 ,565 218 8 ,783 310
Facilities and equipment, net of depreciation 1 16,724 1,714 118,438 24,417
Total capital assets 1 25,289 1,932 127,221 24,727
Unamortized bond issuance costs 687 - 6 87 -
Total noncurrent assets 1 25,976 1,932 127,908 24,727
TOTAL ASSETS 1 79,752 6,637 186,389 39,931
LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 1 ,945 - 1 ,945 1,503
Due to other funds 4 ,660 - 4 ,660 34,609
Deferred revenue 41 - 4 1 -
Other payables - - - 367
Bonds, notes payables 2,407 - 2 ,407 4,890
Total current liabilities 9,053 - 9 ,053 41,369
Noncurrent Liabilities:
Bonds, notes and other payables 66,068 - 66,068 12,885
Total noncurrent liabilities 6 6,068 - 6 6,068 12,885
TOTAL LIABILITIES 75,121 - 75,121 54,254
NET ASSETS
Invested in capital assets, net of related debt 1 08,347 1,932 110,279 6,952
Unrestricted ( deficit) ( 3,716) 4,705 9 89 ( 21,275)
TOTAL NET ASSETS ( DEFICIT) $ 1 04,631 $ 6 ,637 $ 111,268 $ ( 14,323)
The notes to the basic financial statements are an integral part of this statement.
CITY OF OAKLAND
Statement of Fund Net Assets
Proprietary Funds
June 30, 2006
( In Thousands)
Business- type Activities - Enterprise Funds
Nonmajor Fund
Parks and
Recreation
Activities
Governmental
24
Internal
Sewer Service
Service Total Funds
OPERATING REVENUES
Rental $ - $ 197 $ 197 $ -
Sewer services 24,678 - 24,678 -
Charges for services - - - 34,964
Other - - - 6,464
TOTAL OPERATING REVENUES 24,678 197 24,875 41,428
OPERATING EXPENSES
Personnel 12,941 - 12,941 15,903
Supplies 440 - 440 6,107
Depreciation and amortization 3,614 152 3,766 4,353
Contractual services and supplies 1,401 64 1,465 7,462
Repairs and maintenance 57 - 57 1,957
General and adminsitrative 2,061 2 2,063 3,710
Rental 1,252 11 1,263 1,578
Other - 505 505 6,349
TOTAL OPERATING EXPENSES 21,766 734 22,500 47,419
OPERATING INCOME ( LOSS) 2,912 ( 537) 2,375 ( 5,991)
NONOPERATING REVENUES ( EXPENSES)
Interest and investment income 1,834 162 1,996 ( 315)
Interest expense ( 3,075) - ( 3,075) ( 1,108)
Other, net 62 - 62 462
TOTAL NONOPERATING REVENUES ( EXPENSES) ( 1,179) 162 ( 1,017) ( 961)
INCOME ( LOSS) BEFORE TRANSFERS 1,733 ( 375) 1,358 ( 6,952)
Transfers out ( 600) - ( 600) -
Change in net assets 1,133 ( 375) 758 ( 6,952)
Net Assets - Beginning 103,498 7,012 110,510 ( 7,371)
NET ASSETS - ENDING $ 104,631 $ 6,637 $ 111,268 $ ( 14,323)
The notes to the basic financial statements are an integral part of this statement.
Recreation
Parks and
Nonmajor Fund
Governmental
Business- type Activities Enterprise Funds Activities
( In Thousands)
CITY OF OAKLAND
Statement of Revenues, Expenses and Changes in Fund Net Assets
Proprietary Funds
Year Ended June 30, 2006
25
Internal
Sewer Service
Service Total Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers, including other funds and cash deposits $ 24,959 $ - $ 24,959 $ 3 4,913
Cash received from tenants for rents - 197 197 -
Cash from other sources - - - 6 ,464
Cash paid to employees for services ( 12,941) - ( 12,941) ( 15,903)
Cash paid to suppliers for goods & services ( 4,216) ( 582) ( 4,798) ( 26,252)
NET CASH PROVIDED BY ( USED IN) OPERATING ACTIVITIES 7,802 ( 385) 7,417 ( 778)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Payment of interfund loans ( 91) - ( 91) 4 ,473
Federal and state grants 62 - 62 -
Transfers out ( 600) - ( 600) -
NET CASH PROVIDED BY ( USED IN) NONCAPITAL FINANCING ACTIVITIES ( 629) - ( 629) 4 ,473
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Acquisition of capital assets ( 9,746) ( 1) ( 9,747) ( 2,290)
Proceeds from sales of property 5
Long- term debt:
Costs of issuance 29 - 29 -
Repayment of long- term debt ( 2,339) - ( 2,339) ( 5,615)
Interest paid on long- term debt ( 3,075) - ( 3,075) ( 830)
NET CASH PROVIDED BY ( USED IN) CAPITAL AND RELATED
FINANCING ACTIVITIES ( 15,131) ( 1) ( 15,132) ( 8,730)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest income received 1,834 1 62 1,996 ( 593)
Rental income - - - 457
NET CASH PROVIDED BY ( USED IN) INVESTING ACTIVITIES 1,834 1 62 1,996 ( 136)
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 6,124) ( 224) ( 6,348) ( 5,171)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 56,970 4,897 61,867 1 9,381
CASH AND CASH EQUIVALENTS - END OF YEAR $ 50,846 $ 4,673 $ 55,519 $ 1 4,210
RECONCILIATION OF OPERATING INCOME ( LOSS) TO NET CASH
PROVIDED BY ( USED IN) OPERATING ACTIVITIES
Operating income ( loss) $ 2,912 $ ( 537) $ 2,375 $ ( 5,991)
ADJUSTMENTS TO RECONCILE OPERATING INCOME ( LOSS) TO
NET CASH PROVIDED BY ( USED IN) OPERATING ACTIVITIES
Depreciation and amortization 3,614 152 3,766 4 ,353
Changes in assets and liabilities:
Receivables 281 - 281 ( 63)
Inventories - - - 12
Accounts payable and accrued liabilities 962 - 962 9 11
Deferred revenue 33 - 33 -
NET CASH PROVIDED BY ( USED IN) OPERATING ACTIVITIES $ 7,802 $ ( 385) $ 7,417 $ ( 778)
RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE
STATEMENT OF NET ASSETS
Cash and investments - 4,673 4,673 3,741
Restricted cash and investments 50,846 - 50,846 10,469
TOTAL $ 50,846 $ 4,673 $ 55,519 $ 14,210
The notes to the basic financial statements are an integral part of this statement.
Recreation
Parks and
Nonmajor Fund
( In Thousands)
Business- type Activities - Enterprise Funds Activities
Governmental
CITY OF OAKLAND
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2006
26
Private
Pension Purpose
Trust Trust
Funds Fund
ASSETS
Cash and investments $ 3,844 $ 5 ,701
Receivables:
Accrued interest and dividends 2,601 2 1
Investments and contributions 79,461 -
Restricted:
Cash and investments 634,763 -
Securities lending collateral 57,659 -
TOTAL ASSETS 778,328 5 ,722
LIABILITIES
Accounts payable and accrued liabilities 126,018 3 6
Due to other funds 3,658 -
Securities lending collateral 57,659 -
Other - 7
TOTAL LIABILITIES 187,335 4 3
NET ASSETS
Net assets held in trust $ 590,993 $ 5 ,679
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, 2006
27
Private
Pension Purpose
Trust Trust
Funds Fund
ADDITIONS:
Contributions:
Member contributions $ 25 $ -
City contributions - 120
Total contributions 25 120
Trust receipts - 807
Investment income:
Net appreciation in fair value of investments 25,644 -
Interest 13,888 131
Dividends 4,898 -
Securities lending 2,020 -
TOTAL INVESTMENT INCOME 46,450 131
Less investment expenses:
Investment expenses ( 2,008) -
Borrowers rebates and other agent fees on securities lending transactions ( 1,911) -
Total investment expenses ( 3,919) -
NET INVESTMENT INCOME 42,531 131
TOTAL ADDITIONS 42,556 1,058
DEDUCTIONS:
Benefits to members and beneficiaries:
Retirement 43,878 -
Disability 26,249 -
Death 2,191 -
TOTAL BENEFITS TO MEMBERS AND BENEFICIARIES 72,318 -
Administrative expenses 1,080 5
Change in payable to City 1,587 -
Police services - 150
TOTAL DEDUCTIONS 74,985 155
Change in net assets ( 32,429) 903
NET ASSETS - BEGINNING 623,422 4,776
NET ASSETS - ENDING $ 590,993 $ 5,679
The notes to the basic financial statements are an integral part of this statement.
CITY OF OAKLAND
( In Thousands)
Year Ended June 30, 2006
Fiduciary Funds
Statement of Changes in Fiduciary Net Assets
28
CITY OF OAKLAND
Notes to Basic Financial Statements
Year Ended June 30, 2006
29
THIS PAGE LEFT INTENTIONALLY BLANK
CITY OF OAKLAND
Notes to Basic Financial Statements
Year Ended June 30, 2006
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, 2006
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 and the Port of Oakland Marine Terminal Facilities.
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, 2006
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
if they are collected within 60 days of the end of the current fiscal period. All other revenues
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
33
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, 2006.
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.
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.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
34
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 Agency 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 business- type activities in the government- wide and the
proprietary fund financial statements to the extent that those standards do not conflict with or
contradict guidance of the 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
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
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
35
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.
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.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
36
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.
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.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
37
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
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.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
38
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). 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
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.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
39
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 $ 94,174,096
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
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.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
40
Effects of New Pronouncements
In April 2004, GASB issued Statement No. 43, Financial Reporting for Postemployment
Benefit Plans Other Than Pension Plans. This statement establishes uniform financial reporting
standards for other postemployment benefits ( OPEB) plans. The approach followed in this
statement generally is consistent with the approach adopted for defined benefit pension plans
with modifications to reflect differences between pension plans and OPEB plans. The
statement applies for OPEB trust funds included in the financial reports of plan sponsors or
employers, as well as for the stand- alone financial reports of OPEB plans or the public
employee retirement systems, or other third parties, that administer them. This statement also
provides requirements for reporting of OPEB funds by administrators of multiple- employer
OPEB plans, when the fund used to accumulate assets and pay benefits or premiums when due
is not a trust fund. This statement is effective for the City’s fiscal year ending June 30, 2007.
In June 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by
Employers for Postemployment Benefits Other Than Pensions, which addresses how state and
local governments should account for and report their costs and obligations related to
postemployment healthcare and other nonpension benefits. Collectively, these benefits are
commonly referred to as other postemployment benefits, or OPEB. The statement generally
requires that employers account for and report the annual cost of OPEB and the outstanding
obligations and commitments related to OPEB in essentially the same manner as they currently
do for pensions. Annual OPEB cost for most employers will be based on actuarially determined
benefits as they come due. This statement’s provisions may be applied prospectively and do not
require governments to fund their OPEB plans. An employer may establish its OPEB liability
at zero as of the beginning of the initial year of implementation; however, the unfunded
actuarial liability is required to be amortized over future periods. This statement also
establishes disclosure requirements for information about the plans in which an employer
participates, the funding policy followed, the actuarial valuation process and assumptions, and,
for certain employers, the extent to which the plan has been funded over time. This statement is
effective for the City’s fiscal year ending June 30, 2008.
In September 2006, the GASB issued Statement No. 48, Sales and Pledges of Receivables and
Future Revenues and Intra- Entity Transfers of Assets and Future Revenues. This Statement
establishes accounting and financial reporting standards for transactions in which a government
receives, or is entitled to, resources in exchange for future cash flows generated by collecting
specific receivables or specific future revenues. It also contains provisions that apply to certain
situations in which a government does not receive resources but, nevertheless, pledges or
commits future cash flows generated by collecting specific future revenues. In addition, this
Statement establishes accounting and financial reporting standards that apply to all intra- entity
transfers of assets and future revenues. The requirements of this Statement are effective for
financial statement periods beginning after December 15, 2006.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
41
In November 2006, the GASB issued Statement No. 49, Accounting and Financial Reporting
for Pollution Remediation Obligations. This Statement addresses accounting and financial
reporting standards for pollution ( including contamination) remediation obligations, which are
obligations to address current or potential detrimental effects of existing pollution by
participating in pollution remediation activities such as site assessments and cleanups. The
requirements of this Statement are effective for financial statements periods beginning after
December 15, 2007.
Use of Estimates
The preparation of financial statements in conformity with U. S. generally accepted accounting
principles requires management to make estimates and assumptions that affect certain reported
amounts and disclosures. Actual results could differ from those estimates.
( 3) CASH AND INVESTMENTS AND RESTRICTED CASH AND
INVESTMENTS
Primary Government
The City maintains a cash and investment pool consisting of City funds and cash held for
OMERS, PFRS, Port, and OBRA. The City’s funds are invested according to the investment
policy adopted by the City Council. The objectives of the policy are legality, safety, liquidity,
diversity, and yield. The policy addresses soundness of financial institutions in which the City
can deposit funds, types of investment instruments permitted by the California Government
Code, duration of the investments, and the percentage of the portfolio that may be invested in:
• United States Treasury securities ( subject to restrictions by the Nuclear Free Ordinance);
• federal agency issues;
• bankers’ acceptances;
• commercial paper;
• medium term corporate notes and deposit notes;
• negotiable certificates of deposit;
• certificates of deposit;
• State of California Local Agency Investment Fund;
• money market mutual funds;
• local city/ agency bonds;
• State of California bonds;
• secured obligations and agreements;
• repurchase agreements; and
• reverse repurchase agreements.
CITY OF OAKLAND
Notes to Basic Financial Statements, ( continued)
Year Ended June 30, 2006
42
The City’s investment policy stipulates that the collateral to back up repurchase agreements be
priced at market value and be held in safekeeping by the City’s primary custodian.
Additionally, the City Council has adopted certain requirements prohibiting investments in
nuclear weapons makers, and restricting investments in U. S. Treasury bills and notes due to
their use in funding nuclear weapons research and production.
Other deposits and investments are invested pursuant to the governing bond covenants,
deferred compensation plans, or retirement systems’ investment policies. Under the investment
policies, the investment counsel is given the full authority to accomplish the objectives of the
bond covenants or retirement systems subject to the discretionary limits set forth in the
policies.
The retirement systems’ investment policies authorize investment in the domestic stocks and
bonds, U. S. equities, internation