City of Petaluma
Petaluma, California
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Prepared By:
The City of Petaluma Finance Department
Steven Carmichael, Administrative Services Director
Cinde Rubaloff, Accounting Manager
City of Petaluma
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents
Page
INTRODUCTORY SECTION
Letter of Transmittal ............................................................................................................................... .............. i
GFOA Certificate of Achievement for Excellence in Financial Reporting...................................................... ix
Organization Chart ............................................................................................................................... ................ x
Principal Officials of the City of Petaluma, California...................................................................................... xi
FINANCIAL SECTION
Independent Auditors’ Report......................................................................................................................... .. 1
Management’s Discussion and Analysis .......................................................................................................... 3
Basic Financial Statements:
Government- Wide Financial Statements:
Statement of Net Assets......................................................................................................................... .. 25
Statement of Activities and Changes in Net Assets ............................................................................. 26
Fund Financial Statements:
Government Fund Financial Statements:
Balance Sheet ............................................................................................................................... ....... 32
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets.................................................................. 35
Statement of Revenues, Expenditures and Changes in Fund Balances ...................................... 36
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Government- Wide
Statement of Activities and Changes in Net Assets ................................................................ 38
Proprietary Fund Financial Statements:
Statement of Net Assets ..................................................................................................................... 40
Statement of Revenues, Expenses and Changes in Fund Net Assets.......................................... 42
Statement of Cash Flows.................................................................................................................... 44
Fiduciary Fund Financial Statements:
Statement of Fiduciary Net Assets ................................................................................................... 48
Statement of Changes in Fiduciary Net Assets............................................................................... 49
Notes to Basic Financial Statements .............................................................................................................. 51
City of Petaluma
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents, Continued
Page
FINANCIAL SECTION, Continued
Required Supplementary Information:
Budgetary Information.................................................................................................................... ............... 94
Budgetary Comparison Schedule – General Fund...................................................................................... 95
Budgetary Comparison Schedule – Home/ Begin Special Revenue Fund............................................... 96
Budgetary Comparison Schedule – Redevelopment Special Revenue Fund .......................................... 97
Budgetary Comparison Schedule – Impact Fee Special Revenue Fund................................................... 98
Defined Benefit Pension Plan......................................................................................................................... 99
Supplementary Information:
Non- Major Governmental Funds:
Combining Balance Sheet......................................................................................................................... 104
Combined Statement of Revenues, Expenditures and Changes in Fund Balances ......................... 106
Schedule of Revenues, Expenditures and Changes in Fund Balances –
Budget and Actual ( Budgetary Basis):
City Capital Project Funds – Major Fund ........................................................................................ 109
Redevelopment CBD Capital Project Fund – Major Fund ............................................................ 110
Redevelopment PCD Capital Project Fund – Major Fund ............................................................ 111
Community Development Block Grant Special Revenue Fund................................................... 112
Grants and Donations Special Revenue Fund ................................................................................ 113
Gas Tax Special Revenue Fund......................................................................................................... 114
Public Safety Special Revenue Fund ................................................................................................ 115
Landscape Assessment District Special Revenue Fund ................................................................ 116
Street Special Revenue Fund............................................................................................................. 117
Transient Occupancy Tax Special Revenue Fund .......................................................................... 118
Prince Park Trust Special Revenue Fund ........................................................................................ 119
Redevelopment CBD/ PCD Debt Service Fund.............................................................................. 120
Wickersham Park Trust Permanent Fund....................................................................................... 121
Internal Service Funds:
Combining Statement of Net Assets....................................................................................................... 124
Combining Statement of Activities and Changes in Net Assets......................................................... 126
Combining Statement of Cash Flows ..................................................................................................... 128
City of Petaluma
Comprehensive Annual Financial Report
For the year ended June 30, 2006
Table of Contents, Continued
Page
FINANCIAL SECTION, Continued
Supplementary Information, Continued:
Fiduciary Funds:
Combining Balance Sheet......................................................................................................................... 132
Combining Statement of Revenues, Expenditures and Changes in Fund Balances -
Fiduciary Funds – Private Purpose Trust Funds............................................................................ 133
Statement of Changes in Assets and Liabilities – Agency Funds....................................................... 134
STATISTICAL SECTION ( Unaudited)
Net Assets by Component...................................................................................................................... .............. 136
Changes in Net Assets ............................................................................................................................... ........... 137
Fund Balances of Governmental Funds .............................................................................................................. 139
Changes in Fund Balances of Governmental Funds ......................................................................................... 140
Governmental Activities Tax Revenues by Source............................................................................................ 141
Assessed Value and Estimated Actual Value of Taxable Property ................................................................. 142
Direct and Overlapping Property Tax Rates ...................................................................................................... 143
Principal Property Taxpayers ............................................................................................................................... 144
Property Tax Levies and Collections ................................................................................................................... 145
Ratios of Outstanding Debt by Type ................................................................................................................... 146
Ratios of General Bonded Debt Outstanding..................................................................................................... 147
Direct and Overlapping Governmental Activities Debt ................................................................................... 148
Legal Debt Margin Information ........................................................................................................................... 149
Pledged – Revenue Coverage ............................................................................................................................... 150
Demographic and Economic Statistics ................................................................................................................ 151
Principal Employers...................................................................................................................... ........................ 152
Full- Time Equivalent City Government Employees by Function ................................................................... 153
Operating Indicators by Function ........................................................................................................................ 154
Capital Asset Statistics by Function..................................................................................................................... 155
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vii
viii
ix
CITY OF PETALUMA OFFICIALS
DAVID GLASS
Mayor
KEITH CANEVARO MICHAEL HARRIS MICHAEL HEALY
Vice- Mayor Councilmember Councilmember
KAREN NAU MIKE O’BRIEN PAMELA TORLIATT
Councilmember Councilmember Councilmember
CITY MANAGER
Michael A. Bierman
ADMINISTRATIVE SERVICES DIRECTOR/ TREASURER
Steven Carmichael
x
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3
CITY OF PETALUMA
MANAGEMENT’S DISCUSSION AND ANALYSIS
As management of the City of Petaluma ( City), we offer readers of the City’s financial statements this
narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2006.
We encourage readers to consider the information presented here in conjunction with additional
information that we have furnished in our letter of transmittal, which can be found on page i- vi of this
report.
Financial Highlights
Government Wide Financial Statements
• The assets of the City of Petaluma exceeded its liability at the close of the fiscal year by $ 260.3
million ( Net Assets). Of this amount, $ 186.4 million was invested in capital assets, net of related
debt. The balance was restricted for capital projects, $ 12.6 million, debt service, non- expendable
trusts and special projects, $ 35.1 million, and unrestricted, $ 26.2 million. This included all City
funds and Redevelopment Agency funds.
• The City’s total net assets increased by $ 15.7 million, comprised of a $ 14.2 million, increase in
governmental net assets and $ 1.5 million increase in business- type activities net assets over prior
year amounts.
Fund Financial Statements
• At the close of the fiscal year, the City’s governmental funds, including the General Fund, special
revenue funds, debt service funds, capital projects funds, and redevelopment agency funds,
reported combined ending fund balances of $ 55.4 million, a decrease of $ 3.3 million from the prior
year. The 2006 fund balance was comprised of $ 69.1 million reserved balances, and $ 4.7 million
designated balances, producing an unreserved fund balance of ($ 18.4) million.
• At the end of the fiscal year, the total General Fund fund balance was $ 8.6 million, equal to the prior
year. Of this amount, $ 8.1 million was reserved, including $ 5.1 million reserved for contingencies,
approximately 12% of annual expenditures. The unreserved portion was $ 220,848, approximately
.5% of General Fund expenditures.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction of the City of Petaluma’s Basic Financial
Statements. The City of Petaluma’s Basic Financial Statements are comprised of three components: 1)
Government- Wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Financial
Statements. This report also contains other supplementary information in addition to the Basic Financial
Statements themselves.
Government- Wide Financial Statements – The Government- Wide Financial Statements consist of a
Statement of Net Assets and a Statement of Activities and Changes in Net Assets, which are designed to
provide readers with a broad overview of the City’s finances, in a manner similar to a private- sector
business.
The Statement of Net Assets presents information on all of the City’s assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may serve
as a useful indicator of changes in the City’s financial position.
4
Overview of the Financial Statements, Continued
The Statement of Activities and Changes in Net Assets presents the change in the government’s net assets
during the current fiscal year. All changes in net assets are reported when the underlying event, giving rise
to the change, occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are
reported in this statement for some items that will only result in cash flows in future fiscal periods ( e. g.,
uncollected taxes and earned but unused vacation leave).
Both of the Government- Wide Financial Statements distinguish the two functions of the City. The first is
activities which are principally supported by taxes and intergovernmental revenues ( governmental
activities). The second is activities 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, community development, police, fire, parks and recreation, and public works. The
business- type activities of the City include: airport, ambulance, marina, and transit operations, and waste
water and water utilities.
The Government- Wide Financial Statements include not only the City itself but also the Redevelopment
Agency component unit. Financial information for this component unit is blended with the financial
statements of the City, the primary government. The Redevelopment Agency, although legally separate,
functions, for all practical purposes, as a department of the City, and therefore, has been included as an
integral part of the primary government.
The Government- Wide Financial Statements can be found on pages 23- 27 of this report.
Fund Financial Statements – A fund is a grouping of related accounts that is 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 three categories: governmental funds,
proprietary funds, and fiduciary funds.
Governmental Funds – Governmental funds account for basically the same functions as reported as
government activities in the Government- Wide Financial Statements. However, unlike the Government-
Wide Financial Statements, Governmental Fund Financial Statements focus on near- term inflows and
outflows of spendable resources, as well as on balances of spendable resources available at the end of the
fiscal year. Such information may be useful in evaluating a government’s near- term financing
requirements.
Because the focus of governmental funds is narrower than that of the Government- Wide Financial
Statements, it is useful to compare the information presented for governmental funds in the Governmental
Fund Financial Statements with similar information presented for governmental activities in the
Government- Wide Financial Statements. By doing so, readers may better understand the long- term impact
of the government’s near- term financing decisions. Both the Governmental Fund Balance Sheet and the
Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balances provide a
reconciliation to facilitate this comparison between governmental funds and governmental activities.
The Governmental funds information is presented in the Governmental Fund Financial Statements for the
City’s major funds:
• General Fund,
• Home/ Begin Special Revenue Fund,
• Redevelopment Agency Special Revenue Fund,
• Impact Fee Special Revenue Fund,
• City Capital Project Fund,
• Redevelopment Agency Central Business District Project Area Cap Project Fund, Redevelopment
Agency Petaluma Community Development Project Area Cap Project Fund
5
Overview of the Financial Statements, Continued
Data from the ten non- major governmental funds are combined into a single, aggregated presentation.
Individual fund data for each of the non- major governmental funds is provided in the form of combining
statements elsewhere in this report.
The basic Governmental Fund Financial Statements are on pages 31- 38 of this report.
Proprietary Funds – The City maintains two types of proprietary funds. Enterprise funds are used to report
the functions presented as business- type activities in the Governmental- Wide Financial Statements.
Enterprise funds account for airport, ambulance, marina and transit operations, and waste water and water
utilities.
Internal service funds, the second type of proprietary fund, are used to account for the accumulation of
resources, and the allocation of costs, which are required to provide internal services to various City
departments and functions. Employee benefits, general services, information technology, risk management,
vehicle/ equipment replacement and worker’s compensation comprise the City’s internal service funds.
Because these services predominantly benefit governmental, rather than business- type functions, all but the
business activity portion of the vehicle/ equipment replacement fund have been included within the
governmental activities in the Government- Wide Financial Statements. The business activity portion of the
vehicle/ equipment replacement fund has been combined with the business type activities in the
Government- Wide Financial Statements.
The Proprietary Fund Financial Statements provide fund information for the airport, ambulance, marina
and transit operations, and waste water and water utilities funds. The internal service funds are combined
into a single, aggregated presentation in the Proprietary Fund Financial Statements. Individual fund data
for the internal service funds is provided in the form of combining statements elsewhere in this report.
The Proprietary Fund Financial Statements are on pages 39- 45 of this report.
Notes to the Basic Financial Statements – The notes provide additional information that is essential to a full
understanding of the data provided in the Government- Wide and Fund Financial Statements. The Notes to
the Basic Financial Statements begin on page 51 through page 92 of this report.
Other Information – In addition to the Basic Financial Statements and accompanying notes, this report also
presents certain required supplementary information. The first type of information presented is the
budgetary information. The budgetary comparison statements have been provided for the governmental
funds to demonstrate compliance with the legal provisions of the 2006 appropriation ordinance. The
second type of information included relates to the City’s progress in funding its obligation to provide
pension benefits to its employees. The Required Supplementary Information begins on page 93 of this
report.
6
Government- Wide Financial Statement Analysis
Statement of Net Assets – As noted earlier, net assets are an indicator of a government’s financial position.
In the case of the City, the Net Assets ( the amount by which total assets exceeded total liabilities) equaled
$ 260.3 million at the close of the fiscal year.
The largest portion of the City’s net assets ( 71%) reflect its investment in capital assets ( e. g., infrastructure,
land, buildings, machinery, and equipment), less any related, outstanding debt used to acquire those assets.
The City uses these capital assets to provide services to citizens; consequently, these assets are not available
for future spending. Although the City’s investment in its capital assets is reported net of related debt, it
should be noted that the resources needed to repay this debt must be provided from other sources i. e.
future revenues, since the capital assets themselves cannot be used to liquidate these liabilities. An
additional portion of the City’s net assets ( 19%) represents resources that are subject to external restrictions.
The remaining balance ( 10%), the unrestricted net assets, may be used to meet the government’s ongoing
obligations to citizens and creditors, subject to restrictions of various funding sources, as applicable.
As stated earlier, net assets increased by $ 15.7 million during the fiscal year. This increase is due in part to
the $ 3.6 million net increase in unrestricted assets. The balance of the increase is the net result of fiscal year
activity and cannot be attributed to any specific items.
Governmental Activities – Governmental activities contributed $ 17.3 million to the City’s net assets, an
increase of $ 14.2 million over the prior year.
Governmental Activities
Governmental
Activities
Governmental
Activities
Governmental
Activities
2006 2005 Change
Assets:
Current and other assets $ 8 3,932 $ 8 4,584 $ ( 652)
Capital Assets, net of depreciation 1 48,689 1 35,104 1 3,585
Total assets 2 32,621 2 19,688 1 2,933
Liabilities:
Long- term liabilities 5 0,874 5 1,958 ( 1,084)
Other Liabilities 8 ,553 8 ,713 ( 160)
Total liabilities 5 9,427 6 0,671 ( 1,244)
Net Assets:
Invested in capital assets, net of
related debt 1 03,564 8 9,920 1 3,644
Restricted 4 6,501 5 7,223 ( 10,722)
Unrestricted 2 3,129 1 1,873 1 1,256
Total net assets $ 1 73,194 $ 1 59,016 $ 1 4,178
Summary of Net Assets
As of June 30, 2006 and 2005
( in thousands)
7
Government- Wide Financial Statement Analysis, continued
Charges for services include:
• Charges for administration,
• Charges for community development planning, permits, inspection and other services, developer
Impact fees,
• Specific police, fire and public works services for which a fee is charged,
• Recreation charges and rents of park property,
• Fines and penalties,
• Various fees and license charges,
• Parking permits,
• Sales.
Operating and capital grants and contributions include amounts received form federal, state and county
governments, as well as private grantors, developer and other donors. Franchise taxes include amounts
collected from the providers of the City’s cable, garbage and utilities services. Other taxes include transient
occupancy tax, business license tax, development impact fees and other miscellaneous taxes.
General government function includes legislative and administrative branches of the City: City Council,
City Clerk, City Manager, City Attorney, Administrative Services Department, and Animal Services.
Community development function provides for building engineering, inspection, permit, planning, as well
as GIS and housing services.
Parks and recreation includes operation of City parks, community centers, recreation classes and services,
swimming pools, museum, and landscape assessment districts.
Public works function covers costs for street maintenance, street lights, traffic signals, street signs, building
and equipment maintenance, and the Turning Basin operation.
Governmental Activities Changes:
• Decrease in capital grants and contributions are due to decrease in donations and developer
contributions related to capital projects during 2006.
• General property taxes and Redevelopment Agency tax increment increased due to increasing
property values in the community.
• Property transfer tax and motor vehicle in- lieu tax are reported as Intergovernmental, unrestricted
taxes in 2006, and are consistent with 2005.
• Other taxes increased due to an increase in impact fee collections over the prior year.
• General government expenses increased due to increase in Police function, which resulted from
increased staffing.
• General government expenses also increased as a result of the growth of Public Works costs related
to increased street maintenance, reconstruction activity.
• General government expenses also increased due to Parks and Recreation increased maintenance
costs resulting from the addition of new City parks.
8
Government- Wide Financial Statement Analysis, continued
The charts that follow show the program revenues, general revenues, and expenses by function for all
Governmental activities, including the Redevelopment Agency.
2006 2005 Percentage
Change
Revenues:
Program Revenues
Charges for service $ 8,669 $ 9,474 - 8.5%
Operating grants and contributions 3,393 2,415 40.5%
Capital grants and contributions 3,817 11,244 - 66.1%
Total program revenue 15,879 23,133 - 31.4%
General Revenues:
Taxes:
Property Tax 6,030 5,202 15.9%
Redevelopment Tax Increment 14,181 13,359 6.2%
Sales Tax 10,726 10,314 4.0%
Franchise Tax 2,419 1,840 31.5%
Intergovernmental/ Unrestricted 5,999 6,028 - 0.5%
Other Taxes 5,962 3,461 72.3%
Total Taxes 45,317 40,204 12.7%
Unrestricted Investment Earnings 2,555 1,817 40.6%
Miscellaneous Revenue 683 1,061 - 35.6%
Total Revenue 64,434 66,215 - 2.7%
Expenses:
General government 767 ( 117) - 755.6%
Community development 14,526 15,463 - 6.1%
Police 14,701 12,732 15.5%
Fire 7,597 7,086 7.2%
Parks and recreation 4,970 4,542 9.4%
Public works 7,424 6,284 18.1%
Interest on long- term debt 1,953 1,157 68.8%
Total Expenses 51,938 47,147 10.2%
Revenues Over ( Under) Expenses 12,496 19,068 - 34.5%
Internal Capital Contributions - ( 1,556)
Transfers 1,681 2,267 - 25.8%
Change in Net Assets 14,177 19,779 - 28.3%
Net assets- beginning of year 159,017 139,238 14.2%
Net assets- end of year $ 173,194 $ 159,017 8.9%
Governmental Activities
Summary of Statement of Activities and Changes in Net Assets
Governmental Activities
For the Years Ended June 30, 2006 and 2005
( In thousands)
9
Government- Wide Financial Statement Analysis, continued
Business- Type Activities – Business- type activities net assets contributed $ 87.1 million to the City’s net
assets, an increase of $ 1.5 million over the prior year. All business- type activities are fully supported by
fees. Their expenses include indirect costs and in- lieu fees of $ 3.6 million charged by the General Fund and
the internal service funds for support and general City services.
2006 2005 Change
Assets:
Current and other assets $ 1 4,575 $ 1 9,290 $ ( 4,715)
Capital Assets, net of depreciation 1 32,250 9 9,326 3 2,924
Total assets 1 46,825 1 18,616 2 8,209
Liabilities:
Long- term liabilities 4 8,703 2 8,890 1 9,813
Other Liabilities 1 0,976 4 ,118 6 ,858
Total liabilities 5 9,679 3 3,008 2 6,671
Net Assets:
Invested in capital assets, net of
related debt 8 2,862 6 9,769 1 3,093
Restricted 1 ,225 5 ,126 ( 3,901)
Unrestricted 3 ,058 1 0,713 ( 7,655)
Total net assets $ 8 7,145 $ 8 5,608 $ 1 ,537
Business- type Activities
Summary of Statement of Net Assets
As of June 30, 2006 and 2005
( in thousands)
Business- type Activities
Charges for services include:
• Charges for waste water and water,
• Connection fees,
• Airport and marina charges for sales,
• Airport and marina leases rents and transient parking,
• Charges for ambulances services,
• Charges for transit services
Operating and capital grants and contributions include amounts received from federal, state and county
governments, as well as private grantors, developers and other donors.
10
Government- Wide Financial Statement Analysis, continued
Business- type Activities Changes:
• Business- type activity capital grants and contributions decreased from 2005, because in 2005 grants
were received related to waste water capital projects ( incorrectly classified as operating grants in
2005). Capital grants and contributions increased in 2006 due to grant funding received for the
airport capital projects.
• Business- type activity expenses have increased due to increase in waste water utility fund’s
contractor costs and repairs related to the sewer treatment plant.
The charts that follow show the program revenues, general revenues, and expenses by function for all
business- type activities:
Business- type
Activities
2006
Business- type
Activities
2005
Percentage
Change
Revenues:
Program Revenues
Charges for service $ 27,676 $ 25,633 8.0%
Operating grants and contributions 1,184 3,138 - 62.3%
Capital grants and contributions 990 - 0.0%
Total program revenue 29,850 28,771 3.8%
General Revenues: 0.0%
Unrestricted Investment Earnings 440 430 2.3%
Total Revenue 30,290 29,201 3.7%
Expenses:
Business- type Activities
Airport 1,259 1,151 9.4%
Ambulance 2,512 2,175 15.5%
Marina 941 637 47.7%
Public Transportation 1,638 1,431 14.5%
Waste Water 10,674 8,594 24.2%
Water Utility 10,048 9,539 5.3%
Total Expenses 27,072 23,527 15.1%
Revenues Over ( Under) Expenses 3,218 5,674 - 43.3%
Internal Capital Contributions - 1,556 0.0%
Transfers ( 1,681) ( 2,267) - 25.8%
Change in Net Assets 1,537 4,963 - 69.0%
Net assets- beginning of year 85,608 80,645 6.2%
Net assets- end of year $ 87,145 $ 85,608 1.8%
Summary of Statement of Activities and Changes in Net Assets
Business- type Activities
For the Years Ended June 30, 2006 and 2005
( In thousands)
11
Government- Wide Financial Statement Analysis, continued
Total Primary Government
Total Activities Total Activities Total Activities
2006 2005 Change
Assets:
Current and other assets $ 98,507 $ 103,874 $ ( 5,367)
Capital Assets, net of depreciation 280,939 234,430 46,509
Total assets 379,446 338,304 41,142
Liabilities:
Long- term liabilities 99,577 80,848 18,729
Other Liabilities 19,529 12,831 6,698
Total liabilities 119,106 93,679 25,427
Net Assets:
Invested in capital assets, net of
related debt 186,426 159,689 26,737
Restricted 47,726 62,349 ( 14,623)
Unrestricted 26,187 22,586 3,601
Total net assets $ 260,339 $ 244,624 $ 15,715
Summary Statement of Net Assets
As of June 30, 2006 and 2005
( in thousands)
Fund Financial Statements Analysis
Governmental Major Funds
General Fund
This fund provides for the basic services which are expected of a local government, including general
government, police, fire, recreation, community development and public works. Support for these services
is provided by charges for services, fees, taxes, intergovernmental revenues, donations and grants.
HOME/ Begin Special Revenue Fund
The federal HOME program was created in 1990 and has provided over $ 6.3 million to the City of Petaluma
to fund affordable housing on a project- specific basis. The HOME program is administered through the
California State Department of Housing and Community Development.
Impact Fee Special Revenue Funds
These funds are used to account for the impact fees, in the following categories, which are imposed on
development in the City:
• Community Facilities
• Library Facility
• Public Facilities
• Fire Suppression
• Storm Drainage
• Housing in- Lieu
• Commercial Linkage
• Parkland Acquisition/ Development
• Aquatic Facility
• Police Facility
• Traffic Mitigation
12
Fund Financial Statements Analysis, continued
These fees are used for the specific purposes for which they are collected. The majority are used for capital
improvement projects, which are required as a result of the impact of development on the City.
City Capital Project Funds
The City Capital Project Funds account for the capital improvement activities and projects ( CIP) which are
financed with governmental resources. They include:
• General Government CIP
• Community Development CIP
• Police CIP
• Fire CIP
• Parks and Recreation CIP
• Public Works CIP
Redevelopment Special Revenue Funds, and Capital Project Funds
The City’s Redevelopment Agency ( RDA), Petaluma Community Development Commission ( PCDC), was
activated on December 1, 1975 and adopted the Redevelopment Plan for the Central Business District
Project Area ( CBD) on September 27, 1976. In 1988, the PCDC adopted the Petaluma Community
Development Project Area ( PCD). In adopting the redevelopment project areas, the PCDC exercises all
redevelopment powers authorized under the constitution and the Health & Safety Code of the State of
California. In August 2006, the CBD and PCD were merged fiscally. This will allow for projects to be done
in the CBD where tax increment is less than needed to complete additional projects. The seven members of
the PCDC Board of Directors are the members of the Petaluma City Council. The City Manager acts as the
Commission’s Executive Director.
This Commission includes three major funds:
• Redevelopment Special Revenue ( Grants, Donations, Low and Moderate Income Housing),
• Redevelopment PCDC Capital Projects.
• Redevelopment CBD Capital Projects
Increase/( Decrease)
Revenue by Source Amount % of Total Amount % of Total Amount Percentage
Taxes $ 3 7.10 55.4% $ 3 4.12 48.9% $ 2.98 8.7%
License, permits & fees 7 .28 10.9% 4 .70 6.7% 2.58 54.9%
Fines, forfeitures & penalties 0 .64 1.0% 0 .46 0.7% 0.18 39.1%
Use of money & property 2 .71 4.0% 2 .41 3.5% 0.30 12.4%
Intergovernmental 8 .44 12.6% 8 .67 12.4% ( 0.23) - 2.7%
Charges for current services 7 .26 10.8% 7 .00 10.0% 0.26 3.7%
Other 3 .55 5.3% 1 2.47 17.9% ( 8.92) - 71.5%
Totals $ 6 6.98 100.0% $ 6 9.83 100.0% $ ( 2.85) - 4.1%
FY 2006 FY 2005
Revenues Classified by Source
Governmental Funds
For the Years ending June 30, 2006 and 2005
( in millions of dollars)
13
Fund Financial Statements Analysis, continued
Revenues by Source
Governmental Funds
License,
permits &
fees
10.9%
Fines,
forfeitures &
penalties
1.0%
Use of
money &
property
4.0%
Intergovern-mental
12.6%
Charges for
current
services
10.8%
Other
5.3%
Taxes
55.4%
FY 2006 FY 2005 Increase/( Decrease)
Expenditures by Function Amount % of Total Amount % of Total Amount Percentage
Current:
General Government 4 .53 6% 3 .88 4% 0 .65 17%
Community Development 1 3.25 18% 1 3.55 15% ( 0.30) - 2%
Police 1 5.15 21% 1 2.71 14% 2 .44 19%
Fire 7 .83 11% 7 .12 8% 0 .71 10%
Parks & Recreation 4 .81 7% 4 .26 5% 0 .55 13%
Public Works 6 .21 9% 4 .99 5% 1 .22 24%
Capital Outlay 1 7.28 24% 4 1.92 46% ( 24.64) - 59%
Debt Service:
Principal 0 .67 1% 0 .56 1% 0 .11 20%
Interest 1 .87 3% 2 .69 3% ( 0.82) - 30%
Cost of issuance 0 .56 1% - 0% 0 .56 0%
Totals 7 2.16 100% 9 1.68 100% ( 19.51) - 27%
Expenditures Classified by Function
Governmental Funds
For the Years ending June 30, 2006 and 2005
( in millions of dollars)
14
Fund Financial Statements Analysis, continued
Expenditures By Function
Governmental Funds
Community
Development
18.4%
General
Government
6.3%
Police
21.0%
Fire
10.9%
Debt Service
Principal
0.9%
Debt Service
Interest
3.4%
Capital Outlay
23.9%
Public Works
8.6%
Parks &
Recreation
6.7%
Proprietary Major Funds
Airport Fund
This fund accounts for the daily operation and maintenance of the Petaluma Airport, including capital
improvement projects.
Ambulance Fund
This fund accounts for the activities related to providing ambulance services for the City.
Marina Fund
The Marina Fund accounts for the daily operation and maintenance of the Petaluma Marina, including
capital improvement projects.
Public Transportation Fund
Transit services, which are provided by the City, are accounted for in this fund, including capital projects.
Waste Water Utility Fund
This fund is part of the Department of Water Resources and Conservation, which provides comprehensive
and integrated management of Petaluma’s water resources, including collection and treatment of waste
water. Capital projects are included in this fund.
Water Utility Fund
This fund is part of the Department of Water Resources and Conservation, which provides comprehensive
and integrated management of Petaluma’s water resources, including reliable delivery of high quality
water. Capital projects are included in this fund.
15
Fund Financial Statements Analysis, continued
FY 2006 FY 2005 Increase/( Decrease)
Revenue by Source Amount % of Total Amount % of Total Amount Percentage
Charges for sales $ 9.93 26.2% $ 9.45 25.9% $ 0.48 5.1%
Charges for services 22.64 59.8% 21.17 58.0% 1.47 7.0%
Connection Fees 3.66 9.7% 1.19 3.3% 2.47 207.6%
Intergovernmental 0.05 0.1% 3.14 8.6% ( 3.09) - 98.4%
Investment earnings and rent 0.59 1.5% 0.59 1.6% ( 0.00) - 0.5%
Gain ( loss) on disposal of assets ( 0.01) 0.0% ( 0.56) - 1.5% 0.54 0.0%
Contribution to/ from City/ Capital 0.99 2.6% 1.53 4.2% ( 0.54) 0.0%
Totals $ 37.84 100.0% $ 36.51 100.0% $ 1.33 3.7%
Revenues Classified by Source
Proprietary Funds
For the Years ending June 30, 2006 and 2005
( in millions of dollars)
Revenue By Source -
Proprietary Funds
Investment
earnings and
rent
1.5%
Intergovern-mental
.1%
Charges for
services
59.8%
Contribution
to/ from
City/ capital
2.6%
Gain ( loss) on
disposal of
assets
0%
Connection
fees
9.7%
Charges for
sales
26.2%
FY 2006 FY 2005 Increase/( Decrease)
Amount % of Total Amount % of Total Amount Percentage
Cost of services $ 17.63 54% $ 16.10 57% $ 1.53 9%
Claims 0.96 3% 1.47 5% ( 0.51) - 35%
General and administrative 9.89 30% 6.77 24% 3.12 46%
Depreciation and amortization 3.65 11% 3.53 12% 0.13 4%
Interest expense $ 0.56 2% $ 0.49 2% $ 0.08 16%
Totals $ 32.69 100% $ 28.35 100% $ 4.34 13%
Expenditures Classified by Function
Proprietary Funds
For the Years ending June 30, 2006 and 2005
( in millions of dollars)
16
Fund Financial Statements Analysis, continued
Expenditures Classified by Function -
Proprietary Funds
Claims
2.9%
Depreciation
and
amortization
11.2%
Interest
expense
1.7%
Cost of
services
53.9%
General and
administrative
30.3%
Financial Analysis of the Government’s Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance- related
legal requirements.
Governmental Funds – The focus of the City of Petaluma’s Governmental Funds is to provide information
on near- term inflows, outflows, and balances of spendable resources. Such information is useful in
assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful
measure of a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City of Petaluma Governmental Funds reported combined
ending fund balances of $ 55.4 million, a decrease of $ 3.3 million from the prior year. $ 69.1 million is total
reserved. Encumbrances are ($ 3.0 million), notes receivable ($ 26.4 million) long term advances and due
from other funds ($ 33.4 million), contingencies ($ 5.2 million) and miscellaneous ($ 1.2 million). An addition
$ 4.5 million is designated for special projects. This produces a negative unreserved fund balance of $ 18.4
million.
The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved
fund balance of the General Fund was $ 220.848, while total fund balance was $ 8.6 million. As a measure of
the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund
balance to total fund expenditures. Unreserved fund balance represents .5% of total General Fund
expenditures, while total fund balance represents 21% of that same amount.
The General Fund balance decreased by $ 93,330 during the current fiscal year.
The Redevelopment Agency had a total fund balance of $ 15.4 million:
• Special Revenue Funds $ 15.4 million
• CBD Capital Project Fund ($ 31.70) million
• PCD Capital Project Fund $ 33.0 million
• CBD/ PCD Debt Service Funds $. 7 million
17
Financial Analysis of the Government’s Funds, continued
Most of the fund balance is reserved for notes receivable, long- term advances and due from other funds,
and capital projects. The net decrease in fund balance during the current year in the RDA was $ 5.1 million,
primarily due to the planned use of funds for the capital projects.
Governmental Funds
2006 2005 Change
Assets:
Current assets $ 72,679 $ 48,497 $ 24,182
Non- current assets 31,310 61,573 ( 30,263)
Total assets 103,989 110,070 ( 6,081)
Liabilities:
Current liabilities 4,594 9,336 ( 4,742)
Non- current liablities 43,972 42,053 1,919
Total liabilities 48,566 51,389 ( 2,823)
Fund Balance:
Reserved 69,102 61,771 7,331
Unreserved, designated 4,712 4,047 665
Unreserved, undesignated ( 18,391) ( 7,137) ( 11,254)
Total fund balance 55,423 58,681 ( 3,258)
Total liabilities and fund balances $ 103,989 $ 110,070 $ ( 6,081)
Summary of Balance Sheet
As of June 30, 2006 and 2005
( in thousands)
Governmental Funds
18
Financial Analysis of the Proprietary Funds
Proprietary Funds – Enterprise Funds activity was comparable to the prior year. Total increase in net assets
was $ 1.1 million, substantially all of which was generated by the waste water utility fund. Internal Service
Funds activity was comparable to the prior year. Total increase in net asset was $ 2.97 million, substantially
all of which was generated in the Worker’s Compensation Fund, for the purpose of reducing the negative
net asset balance carried forward from prior years.
Proprietary Funds
2006 2005 Change
Assets:
Current assets $ 2 6,306 $ 2 9,023 $ ( 2,717)
Non- current assets 1 36,065 1 01,961 3 4,104
Total assets 1 62,371 1 30,984 3 1,387
Liabilities:
Current liabilities 1 2,903 5 ,474 7 ,429
Non- current liablities 5 4,117 3 4,263 1 9,854
Total liabilities 6 7,020 3 9,737 2 7,283
Net Assets:
Invested in capital assets, net 8 5,227 7 1,631 1 3,596
of related debt
Restricted for debt service 1 ,225 5 ,126 ( 3,901)
Unrestricted 8 ,899 1 4,490 ( 5,591)
Total net assets $ 9 5,351 $ 9 1,247 $ 4 ,104
Summary of Statement of Net Assets
As of June 30, 2006 and 2005
( in thousands)
Proprietary Funds
General Fund Budgetary Highlights
The General Fund total revenues were above the adopted budget estimates by $ 4.2 million, due to:
unbudgeted developer contributions of $ 1.3 million, tax revenues in excess of budgeted amounts including,
$ 0.6 million property tax, $ 0.4 million franchise tax, $ 0.. 5 million property transfer tax, and
intergovernmental revenue in excess of budgeted amounts of $ 1.4 million motor vehicle in- lieu.
The General Fund expenditures were over the budget by $. 8 million. The majority of this variance was
caused by the accounting for donated real property and infrastructure at the end of the year. Note 12
contains detailed information on the amounts and the explanations for all governmental departments and
funds which exceeded appropriation at the end of 2006.
Amendments to the General Fund appropriations for 2006 totaled $ 4.6 million.
19
Capital Asset and Debt Administration
Capital Assets – The City of Petaluma’s investment in capital assets for its Governmental and Business-
Type Activities as of June 30, 2006, amounts to $ 281 million ( net of accumulated depreciation). This
investment in capital assets includes land, construction in progress, buildings and improvements, vehicles
and equipment, and infrastructure. Detailed information about the City’s capital assets is contained in Note
6. The total increase in the City’s investment in capital assets, net of depreciation, for the current fiscal year
was $ 46.5 million or a 20% increase ( this represents an increase of 10% in Governmental Activities and a
33% increase for Business- type Activities).
Capital asset balances as of June 30, 2005 and 2006 were:
Increase Increase
( Decrease) ( Decrease)
2006 2005 % Change 2006 2005 % Change
Land $ 34.6 $ 33.4 4% $ 10.7 $ 10.6 1%
Const in Proc 41.4 39.6 4% 48.6 21.7 124%
Bldg and Improv 11.7 12.0 - 2% 15.6 10.8 45%
Vehicle and Equip 4.4 4.3 1% 2.0 1.8 9%
Infrastructure 56.6 45.8 24% 55.3 54.4 2%
Totals $ 148.7 $ 135.1 10% $ 132.3 $ 99.3 33%
Capital Assets
( net of depreciation, in millions)
as of June 30, 2006 and 2005
Governmental Business- type
Activities Activities
Long Term Debt – At the end of the current fiscal year, the City had total long term debt of $ 94.5 million, of
which $ 44.6 was bonded debt of the Redevelopment Agency ( secured by future tax increment revenue),
$ 42.7 million bonded debt of the enterprise funds ($ 6.3 certificate of participation and $ 36.4 secured by
water and waste water revenue.) and the balance of $ 7.2 million other loans.
• The Redevelopment debt increased with the issuance of the 2005A TAB, which refunded a portion
of the 2000A TAB.
• The Waste Water Fund’s debt increased from new revolving lines of credit with BNP Paribas and
Zion 1st National Bank, interim financing for the waste water treatment plant capital project.
• Marina loan to California Dept of Boatings and Waterways increased by $. 2 million, as unpaid
interest and penalties were added to the principal due.
The City maintained its A rating from Standard & Poor’s Corporation and A1 rating from Moody’s for
general obligation debt. The Moody’s rating for the Redevelopment Agency is A1 ( uninsured).
State statutes limit the amount of general obligation debt a governmental entity may issue up to 15% of its
total assessed valuation. The current debt limitation for the City is $ 1,103 million and at June 30, 2006, the
City had no general obligation debt outstanding. Additional information on the City of Petaluma’s long
term debt can be found in Note 7 of this report.
20
Capital Asset and Debt Administration, continued
Balance Balance Increase
June 30, 2006 June 30, 2005 ( Decrease)
California Airport Loan $ 1,835 $ 1 ,978 $ ( 143)
2003 Certificates of Participation 6 ,130 6 ,295 ( 165)
Unamortized Bonds Issuance Premium 7 4 7 7 ( 3)
for 2003 Certificates of Participation - - -
2000 Wastewater Revenue Bonds 7 ,055 7 ,395 ( 340)
Unamoritized Bonds Issuance Discount
for 2000 Wastewater Revenue Bonds ( 61) ( 66) 5
BNP Paribas Revolving Line of Credit 1 0,250 - 1 0,250
Zion 1st National Bank Revolving Line of Credit 1 0,247 - 1 0,247
2001B Water Revenue Bonds 8 ,990 9 ,220 ( 230)
Unamoritized Bonds Issuance Discount ( 15) ( 16) 1
for 2001B Water Revenue Bonds - - -
California Dept of Boating & Waterways 4 ,883 4 ,674 2 09
Total $ 4 9,388 $ 2 9,557 $ 1 9,831
( in millions)
Business- Type Activities Long- Term Debt
As of June 30, 2006 and 2005
Economic Factors and Next Year’s Budget
The economy at both the national and State level continue to grow at a sluggish rate. The local economy is
further impacted by the slow rebound in the Petaluma high tech industry. We are also challenged by the
rising retirement cost of the Public Employees Retirement System ( PERS).
The City has a diverse economic base that includes residential, retail, and commercial assets. While the
sales and hotel taxes have decreased, the property and property transfer taxes increased, mitigating the
impact of the economic slowdown.
We have adopted a balanced budget for FY 2006- 07, taking all the known factors into account.
Requests for Information
This financial report is designed to provide a general overview of the City of Petaluma’s finances for all
those with an interest in the government’s finances. Questions concerning any of the information provided
in this report or requests for additional financial information should be addressed to the Administrative
Services Director, 11 English Street, Petaluma, CA 94952.
BASIC FINANCIAL STATEMENTS
21
22
GOVERNMENT- WIDE FINANCIAL STATEMENTS
23
24
City of Petaluma
Statement of Net Assets
June 30, 2006
Governmental Business- Type
Activities Activities Total
ASSETS
Current assets:
Cash and investments $ 4 6,181,485 $ 1 0,525,280 $ 5 6,706,765
Restricted cash and investments 1 51,121 1 ,225,327 1 ,376,448
Receivables:
Accounts receivable, net 1 ,248,708 2 ,795,925 4 ,044,633
Interest receivable 3 57,841 - 3 57,841
Intergovernmental 3 ,255,140 9 4,180 3 ,349,320
Short- term internal balances 5 16,125 ( 516,125) -
Internal services balances ( 532,168) 5 32,168 -
Inventories 2 2,332 2 89,818 3 12,150
Deposits and prepaid items 1 38,502 5 0,661 1 89,163
Total current assets 5 1,339,086 1 4,997,234 6 6,336,320
Noncurrent assets:
Long- term internal balances 1 ,274,686 ( 1,274,686) -
Non- current assets 5 98,120 1 0,393 6 08,513
Non- current receivables 3 ,198,646 - 3 ,198,646
Notes receivable 2 6,436,402 - 2 6,436,402
Land held for resale 4 02,053 - 4 02,053
Deferred charges 6 83,130 8 41,278 1 ,524,408
Capital assets:
Non- depreciable 7 5,976,741 5 9,363,874 1 35,340,615
Depreciable, net 7 2,712,772 7 2,886,544 1 45,599,316
Total capital assets 1 48,689,513 1 32,250,418 2 80,939,931
Total noncurrent assets 1 81,282,550 1 31,827,403 3 13,109,953
Total assets 2 32,621,636 1 46,824,637 3 79,446,273
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 3 ,606,506 8 ,801,845 1 2,408,351
Wages payable 8 94,311 1 35,091 1 ,029,402
Interest payable 3 66,141 6 15,616 9 81,757
Unearned revenue 7 12,292 7 ,319 7 19,611
Refundable deposits 3 03,343 2 24,319 5 27,662
Claims payable - due within one year 1 ,182,257 - 1 ,182,257
Compensated absences - due within one year 3 94,140 6 2,573 4 56,713
Long- term debt - due within one year 1 ,094,448 1 ,127,341 2 ,221,789
Total current liabilities 8 ,553,438 1 0,974,104 1 9,527,542
Noncurrent liabilities:
Noncurrent deposits - 2 5,010 2 5,010
Claims payable - due in more than one year 4 ,057,152 - 4 ,057,152
Compensated absences - due in more than one year 2 ,785,391 4 19,279 3 ,204,670
Long- term debt - due in more than one year 4 4,031,368 4 8,260,770 9 2,292,138
Total noncurrent liabilities 5 0,873,911 4 8,705,059 9 9,578,970
Total liabilities 5 9,427,349 5 9,679,163 1 19,106,512
NET ASSETS
Invested in capital assets, net of related debt 1 03,563,697 8 2,862,307 1 86,426,004
Restricted for:
Special projects 3 3,162,999 - 3 3,162,999
Debt service 6 86,807 1 ,225,327 1 ,912,134
Permanent fund: Non- expandable trust 1 6,000 - 1 6,000
Capital projects 1 2,635,285 - 1 2,635,285
Total restricted 4 6,501,091 1 ,225,327 4 7,726,418
Unrestricted 2 3,129,499 3 ,057,840 2 6,187,339
$ 1 73,194,287 $ 8 7,145,474 $ 2 60,339,761
See accompanying Notes to Basic Financial Statements.
Primary Government
Total net assets
25
City of Petaluma
Statement of Activities and Changes in Net Assets
For the year ended June 30, 2006
Indirect Operating Capital
Expense Charges for Grants and Grants and
Functions/ Programs Expenses Allocation Services Contributions Contributions
Primary government:
Governmental activities:
General government $ 4,531,428 $ ( 3,764,339) $ 2,009,426 $ 885 $ -
Community development 13,936,356 590,093 3,547,011 1,049,349 1,792,920
Police 14,699,977 1,158 823,226 820,644 29,418
Fire 7,591,287 5,220 548,681 - 24,440
Parks and recreation 4,536,718 433,295 1,481,006 5,200 650,620
Public works 7,302,992 121,394 259,982 1,516,760 1,319,204
Interest on long- term debt 2,143,505 ( 190,342) - - -
Total governmental activities 54,742,263 ( 2,803,521) 8,669,332 3,392,838 3,816,602
Business- type activities:
Airport 1,191,259 67,605 1,272,124 - 797,813
Ambulance 1,994,992 516,731 1,982,093 - -
Marina 862,185 78,977 205,910 - -
Public transportation 1,506,871 130,856 170,296 1,183,859 67,191
Waste water utility 9,632,917 1,041,357 13,621,443 - 125,055
Water utility 9,080,205 967,995 10,424,392 - -
Total business- type activities 24,268,429 2,803,521 27,676,258 1,183,859 990,059
Total primary government $ 79,010,692 $ - $ 36,345,590 $ 4,576,697 $ 4,806,661
General Revenues and Transfers:
Taxes:
Property taxes
Redevelopment tax increment
Sales taxes
Franchise tax
Intergovernmental, unrestricted
Other taxes
Total taxes
Unrestricted investment earnings
Miscellaneous revenue
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning of year
Net assets - end of year
See accompanying Notes to Basic Financial Statements.
Program Revenues
26
Governmental Business- Type
Total Activities Activities Total
$ 2,010,311 $ 1,243,222 $ - $ 1,243,222
6,389,280 ( 8,137,169) - ( 8,137,169)
1,673,288 ( 13,027,847) - ( 13,027,847)
573,121 ( 7,023,386) - ( 7,023,386)
2,136,826 ( 2,833,187) - ( 2,833,187)
3,095,946 ( 4,328,440) - ( 4,328,440)
- ( 1,953,163) - ( 1,953,163)
15,878,772 ( 36,059,970) - ( 36,059,970)
2,069,937 - 811,073 811,073
1,982,093 - ( 529,630) ( 529,630)
205,910 - ( 735,252) ( 735,252)
1,421,346 - ( 216,381) ( 216,381)
13,746,498 - 3,072,224 3,072,224
10,424,392 - 376,192 376,192
29,850,176 - 2,778,226 2,778,226
$ 45,728,948 ( 36,059,970) 2,778,226 ( 33,281,744)
6,030,427 - 6,030,427
14,180,658 - 14,180,658
10,726,182 - 10,726,182
2,418,832 - 2,418,832
5,999,846 - 5,999,846
5,962,328 - 5,962,328
45,318,273 - 45,318,273
2,555,420 439,614 2,995,034
683,389 - 683,389
1,680,549 ( 1,680,549) -
50,237,631 ( 1,240,935) 48,996,696
14,177,661 1,537,291 15,714,952
159,016,626 85,608,183 244,624,809
$ 173,194,287 $ 87,145,474 $ 260,339,761
and Changes in Net Assets
Net ( Expense) Revenue
27
28
FUND FINANCIAL STATEMENTS
29
30
Governmental Fund Financial Statements
General Fund - The General Fund is used to account for resources traditionally associated with government,
which are not required legally, or by sound financial management, to be accounted for in another fund.
Home/ Begin Special Revenue Fund - The Home/ Begin Special Revenue Fund is used to account for federal
grants received under the Housing and Community Development Act of 1974. The money is used for specific
programs, which provide housing to people with low and moderate income.
Redevelopment Special Revenue Fund - This fund accounts for the redevelopment agency’s 20% set- aside, as
required by law, of tax increment for Low and Moderate Income Housing. The activity of this funds consists
of supporting development of affordable housing in the community. Also included in this fund are
redevelopment agency donations and grant revenues.
Impact Fees Fund - This fund is used to account for fees received from local development projects, which are
used for the construction of major public improvements, assistance to low income people in the community,
acquisition, development, enhancement of neighborhood and community parks.
City Capital Project funds - These funds account for the collection of resources and the related expenditure
on acquisition and construction of major capital improvement projects in the City, other than those accounted
for in proprietary funds.
Redevelopment- CBD Capital Project Fund - This funds accounts for the administration and capital projects
undertaken in the Central Business District project area of the Redevelopment Agency.
Redevelopment- PCD Capital Project Fund - This funds accounts for the administration and capital
improvement projects undertaken in the Petaluma Community Development project area of the
Redevelopment Agency.
31
City of Petaluma
Balance Sheet
Governmental Funds
June 30, 2006
Impact
General Home/ Begin Redevelopment Fees
Fund Special Revenue Special Revenue Special Revenue
ASSETS
Cash and investments $ 6,318,285 $ 5 89,655 $ 3,324,566 $ 8 ,335,566
Restricted cash and investments - - - -
Receivables:
Accounts receivable, net 484,613 - 461,707 5,424
Interest receivable 3 57,841 - - -
Intergovernmental receivable 2 ,295,044 - 110,680 3,526
Due from other funds 2,241,444 - - 41,000
Inventories 12,934 - - -
Deposits and prepaid items 61,054 - - -
Advances to other funds - - - -
Non- current receivables 2 4,814 918,101 1,411,530 570,560
Notes receivable 4 9,375 6,248,290 12,238,980 5,102,821
Land held for resale - - - -
Total assets 11,845,404 7,756,046 17,547,463 1 4,058,897
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities 1,506,964 - 259,727 154,408
Wages payable 8 04,851 - 5,751 -
Deferred revenue 712,426 7,172,511 1,899,042 397,421
Refundable deposits 228,343 - - -
Due to other funds 22,500 - - 107,800
Total liabilities 3 ,275,084 7 ,172,511 2,164,520 659,629
Fund Balances:
Reserved for:
Encumbrances 632,000 - 1,009,000 -
Notes receivable 4 9,375 6,248,290 12,238,890 5,102,821
Land held for resale - - - -
Long- term advances and due from other funds 2,241,444 - - 41,000
Inventories 12,934 - - -
Contingencies 5,150,000 - - -
Deposits and prepaids 61,054 - - -
Total reserved 8,146,807 6 ,248,290 13,247,890 5,143,821
Unreserved, designated for:
General fund 2 02,665 - - -
Special revenue funds - 214,565 - 3,980,600
Unreserved, reported in:
General fund 2 20,848 - - -
Special revenue funds - ( 5,879,320) 2,135,053 4 ,274,847
Capital project funds - - - -
Permanent funds - - - -
Total unreserved, undesignated 220,848 ( 5,879,320) 2,135,053 4 ,274,847
Total fund balances 8,570,320 5 83,535 15,382,943 1 3,399,268
Total liabilities and fund balances $ 11,845,404 $ 7,756,046 $ 17,547,463 $ 14,058,897
See accompanying Notes to Basic Financial Statements.
Major Funds
32
Redevelopment Redevelopment Non- Major Total
City CBD PCD Governmental Governmental
Capital Project Capital Project Capital Project Funds Funds
$ 11,905,232 $ 1,434 $ 1 ,396 $ 4,570,231 $ 35,046,365
- - - 151,121 151,121
7,480 - 3 ,632 205,811 1,168,667
- - - - 357,841
3 0,301 96,016 218,294 5 01,279 3,255,140
- - 30,341,999 - 32,624,443 2 2,500
- - - - 1 2,934
- - - - 6 1,054
- - 1,274,686 - 1,274,686
4 1,610 - 172,550 5 9,481 3,198,646
- 60,956 1,871,780 8 64,200 26,436,402
- - 402,053 - 402,053
11,984,623 158,406 34,286,390 6,352,123 103,989,352
121,820 580,137 487,854 3 22,795 3,433,705
6,274 17,629 3 ,295 18,359 856,159
3 0,301 - 463,029 1,172,451 11,847,181
- - 75,000 - 303,343
180,943 31,310,700 232,000 2 71,700 32,125,643 5 21,300
339,338 31,908,466 1,261,178 1,785,305 48,566,031
- - 621,200 7 10,000 2,972,200
- 60,956 1,871,780 8 64,200 26,436,312
- - 402,053 - 402,053
- - 31,097,999 - 33,380,443
- - - - 12,934
- - - - 5,150,000
- - - 686,807 747,861
- 60,956 3 3,993,032 2,261,007 69,101,803
- - - - 202,665
- - - 315,348 4,510,513
- - - - 220,848
- - - 1,964,868 2 ,495,448
11,645,285 ( 31,811,016) ( 967,820) - ( 21,133,551)
- - - 25,595 25,595
11,645,285 ( 31,811,016) ( 967,820) 1,990,463 ( 18,391,660)
11,645,285 ( 31,750,060) 33,025,212 4,566,818 55,423,321
$ 11,984,623 $ 158,406 $ 34,286,390 $ 6,352,123 $ 1 03,989,352
Major Funds
33
34
City of Petaluma
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets
June 30, 2006
Total Fund Balances - Total Governmental Funds $ 55,423,321
Capital assets used in governmental activities were not current financial resources. Therefore, they were
not reported in the Governmental Funds Balance Sheet. Except for the internal service funds reported
below, the capital assets were adjusted as follows:
Non- depreciable 7 5,976,741
Depreciable, net 7 0,347,463
Total capital assets 146,324,204
Revenues which are deferred on the Governmental Funds Balance Sheet because they are not currently
available are reported as revenue in the Statement of Activities and Changes in Net Assets and accordingly
increase the net assets on the Statement of Net Assets. 11,134,889
Internal Service Funds were used by management to charge the costs of certain activities, such as
insurance and fleet management, to individual funds. The assets and liabilities of the Internal Service
Funds were included in governmental activities in the Government- Wide Statement of Net Assets. 8,206,349
Bond issuance costs are an expenditure in the governmental funds but are capitalized and amortized over
the life of the bonds in the Government- Wide Financial Statements. 683,130
Interest payable on long- term debt did not require current financial resources. Therefore, interest payable
was not reported as a liability on the Governmental Funds Balance Sheet. ( 366,141)
Long- term liabilities were not due and payable in the current period. Therefore, they were not reported in
the Governmental Funds Balance Sheet.
Compensated absences - due in within one year ( 382,053)
Compensated absences - due in more than one year ( 2,703,596)
Long- term liabilities - due within one year ( 1,094,448)
Long- term liabilities - due in more than one year ( 44,031,368)
Total long- term liabilities ( 48,211,465)
Net Assets of Governmental Activities $ 1 73,194,287
See accompanying Notes to Basic Financial Statements.
Amounts reported for Governmental Activities in the Statement of Net Assets were different because:
35
City of Petaluma
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the year ended June 30, 2006
Impact
General Home/ Begin Redevelopment Fees
Fund Special Revenue Special Revenue Special Revenue
REVENUES:
Taxes $ 21,526,372 $ - $ 2,741,130 $ -
Licenses, permits and fees 3,108,562 - - 3,881,090
Fines, forfeitures and penalties 5 00,722 - - -
Use of money and property 1,256,908 4 5,837 31,549 691,594
Intergovernmental 4 ,679,068 6 ,985 104,995 64,833
Charges for current services 6,961,780 - 1 0,923 -
Other 1 ,914,327 - 324,132 11
Total revenues 39,947,739 5 2,822 3,212,729 4 ,637,528
EXPENDITURES:
Current:
General government 4 ,534,477 - - -
Community development 2,534,720 1 ,045 886,139 1,557,573
Police 14,863,668 - - 98
Fire 7 ,822,325 - - 86
Parks and recreation 4,497,685 - - 5,113
Public works 5,210,438 - - 10,164
Capital outlay 1 ,695,248 - - 387,162
Debt service:
Principal - - - -
Interest 1 ,916 - - -
Cost of issuance - - - -
Total expenditures 41,160,477 1 ,045 8 86,139 1,960,196
REVENUES OVER ( UNDER) EXPENDITURES ( 1,212,738) 51,777 2,326,590 2 ,677,332
OTHER FINANCING SOURCES ( USES):
Debt issuance - - - -
Premium paid - - - -
Payment to escrow agent - - - -
Proceeds from sale of asset 60,908 - - -
Transfers in 1,378,000 - - 699,000
Transfers out ( 319,500) - ( 442,829) ( 2,123,914)
Total other financing sources ( uses) 1,119,408 - ( 442,829) ( 1,424,914)
Net change in fund balances ( 93,330) 51,777 1,883,761 1 ,252,418
FUND BALANCES:
Beginning of year 8 ,663,650 5 31,758 13,499,182 12,146,850
$ 8,570,320 $ 5 83,535 $ 15,382,943 $ 13,399,268
See accompanying Notes to Basic Financial Statements.
End of year
Major Funds
36
Redevelopment Redevelopment Non- Major Total
City CBD PCD Governmental Governmental
Capital Project Capital Project Capital Project Funds Funds
$ - $ 1,018,606 $ 10,420,921 $ 1,666,889 $ 37,373,918
- 787 - 1 4,212 7,004,651
- - - 139,807 640,529
4,001 44,086 373,444 2 62,088 2,709,507
1,828 - - 3,579,712 8 ,437,421
- - - 288,936 7,261,639
- 720 5 ,988 1,304,614 3 ,549,792
5,829 1,064,199 10,800,353 7,256,258 66,977,457
- - - - 4,534,477
- 540,665 5 ,865,822 1 ,868,437 13,254,401
- - - 285,154 15,148,920
- - - 3,215 7,825,626
- - - 306,477 4,809,275
- - - 986,920 6,207,522
3,569,042 9 ,139,824 2,432,804 5 6,810 17,280,890
- - - 672,000 672,000
1 1,041 8 7,804 1 7,077 1,752,999 1 ,870,837
- - - 559,891 559,891
3,580,083 9 ,768,293 8,315,703 6,491,903 72,163,839
( 3,574,254) ( 8,704,094) 2,484,650 7 64,355 ( 5,186,382)
- - - 18,355,000 18,355,000
- - - 161,953 161,953
- - - ( 17,948,420) ( 17,948,420)
- - - - 6 0,908
9,149,519 1 ,980,733 1,231,697 4 ,992,332 19,431,281 779,669
- ( 140,500) ( 4,628,000) ( 10,477,607) ( 18,132,350) ( 2,078,600)
9,149,519 1 ,840,233 ( 3,396,303) ( 4,916,742) 1,928,372
5,575,265 ( 6,863,861) ( 911,653) ( 4,152,387) ( 3,258,010)
6,070,020 ( 24,886,199) 33,936,865 8,719,205 58,681,331
$ 11,645,285 $ ( 31,750,060) $ 33,025,212 $ 4,566,818 $ 55,423,321
Major Funds
37
City of Petaluma
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes
in Fund Balances to the Government- Wide Statement of Activities and Changes in Net Assets
For the year ended June 30, 2006
Net Change in Fund Balances - Total Governmental Funds $ ( 3,258,010)
Governmental Funds reported capital outlay as expenditures. However, in the Government- Wide Statement of
Activities and Changes in Net Assets, the cost of those assets was allocated over their estimated useful lives as
depreciation expense. This was the amount of capital assets recorded in the current period.
Capital assets additions 16,260,483
Depreciation expense on capital assets was reported in the Government- Wide Statement of Activities and Changes in
Net Assets, but they did not require the use of current financial resources. Therefore, depreciation expense was not
reported as expenditures in Governmental Funds. ( 3,105,779)
Loss on the disposal of capital assets is reported in the Government- Wide Statement of Activities and Changes in Net
Assets, but they do not require the use of current financial resources. Therefore, it is not reported as revenues in
Governmental Funds.
Proceeds from sale of capital assets ( 60,908)
Loss on disposal of capital assets ( 11,099)
Revenue which are deferred on the Governmental Funds Balance Sheet because they are not currently available are
reported as revenue in the Statement of Activities and Changes in Net Assets and accordingly increase the net assets on
the Statement of Net Assets 1,077,622
Internal service funds are used by management to charge the costs of certain activities to individual funds. The net
expense of certain activities of certain internal service funds is reported with governmental activities. 2,567,213
Interest expense on long- term debt was reported in the Government- Wide Statement of Activities and Changes in Net
Assets, but they did not require the use of current financial resources. Therefore, interest expense was not reported as
expenditures in Governmental Funds. The amount represents the change in accrued interest from prior year. 21,881
Bonds issuance cost are expenditures on the Governmental Funds Financial Statements. However, in the Government-
Wide Statement of Activities and Changes in Net Assets, the bond issuance cost are capitalized and amortized over the
life of the bonds.
Bond issuance costs 559,891
Current year amortization of bond issuance costs ( 104,207)
Bond discount is recognized as expenditure on the Governmental Funds Financial Statements. However, in the
Government- Wide Statement of Activities and Changes in Net Assets, the bond discount is capitalized and amortized
over the life of the bonds. This amount represent the current year amortization ( 45,552)
Compensated Absences were reported on the Government- Wide Statement of Activities and Changes in Net Assets, but
they did not require the use of current financial resources. Therefore, compensated absences were not reported as
expenditures in the Governmental Funds. 172,659
Bond proceeds provided current financial resources to Governmental Funds, but issuing debt increased long- term
liabilities in the Government- Wide Statement of Net Assets.
Proceeds from debt ( 18,355,000)
Financial Statements, these costs are capitalized and reported as part of long- term debt and amortized over the life of the
debt. ( 161,953)
Repayment of bond principal was an expenditure in Governmental Funds, but the repayment reduced long- term
liabilities in the Government- Wide Statement of Net Assets.
Long- term debt repayments from escrow fund 17,948,420
Long- term debt repayments 672,000
Change in Net Assets of Governmental Activities $ 14,177,661
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Activities were different because:
38
Proprietary Fund Financial Statements
Airport Fund - This fund accounts for the daily operation and maintenance of the Petaluma Airport,
including capital improvements.
Ambulance Fund - The fund is used to account for the activities related to providing ambulance services to
the citizens of the community.
Marina Fund - This fund accounts for the daily operation and maintenance of the Petaluma Marina,
structural and equipment improvements, and planning and implementing promotional campaigns.
Public Transportation Fund - The fund is used to account for the operation of City's transit services.
Waste Water Utility Fund - This fund is part of the Department of Water Resources and Conservation, which
provides comprehensive and integrated management of Petaluma’s water resources, including collection and
treatment of wastewater.
Water Utility Fund - This fund is part of the Department of Water Resources and Conservation, which
provides comprehensive and integrated management of Petaluma’s water resources, including reliable
delivery of high quality water.
Internal Service Funds - These funds are used to account for goods and services provided by the internal
service departments to other City departments, on a cost reimbursement basis.
39
City of Petaluma
Statement of Net Assets
Proprietary Funds
June 30, 2006
Public
Airport Ambulance Marina Transportation
Fund Fund Fund Fund
ASSETS
Current assets:
Cash and investments $ 258,341 $ 519 $ 338 $ 359,295
Restricted cash and investment 490,685 - - -
Receivables:
Accounts receivable, net 87,136 315,332 1 7,247 -
Intergovernmental receivable 2,768 - - 84,093
Due from other funds - - - -
Inventories 31,079 - 621 23,698
Deposits and prepaids - - 7 ,573 10,080
Total current assets 870,009 315,851 2 5,779 477,166
Non- current assets:
Non- current assets 10,393 - - -
Deferred Debt Charges 413,291 - - -
Capital assets: - -
Nondepreciable 1 0,375,320 - - 965,052
Depreciable 9 ,685,335 510,134 4,823,560 1 ,644,414
Less accumulated depreciation ( 7,431,495) ( 340,097) ( 2,171,393) ( 680,165)
Total capital assets 12,629,160 170,037 2,652,167 1 ,929,301
Total non- current assets 13,052,844 170,037 2,652,167 1 ,929,301
Total assets 1 3,922,853 485,888 2,677,946 2 ,406,467
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 1 24,325 27,465 1 ,395 227,901
Wages payable 2 ,976 16,808 326 5 ,521
Interest payable 1 33,283 - 199,136 -
Due to other funds - 407,400 113,900 -
Refundable deposits 131,806 - 1 5,250 -
Deferred Revenue - - - -
Claims payable - due within one year - - - -
Compensated absences - due within one year 8 19 4,885 - -
Long- term debt - due within one year 3 11,326 - 231,337 -
Total current liabilities 7 04,535 456,558 561,344 2 33,422
Non- current liabilities:
Non- current deposits 10,393 - 1 4,617 -
Claims payable- due in more than one year - - - -
Compensated absences - due in more than one year 3,783 77,813 - 35,123
Advances from other funds - due in more than one year - - 1,274,686 -
Long- term debt - due in more than one year 7,727,912 - 4,651,882 -
Total non- current liabilities 7 ,742,088 77,813 5,941,185 35,123
Total liabilities 8,446,623 534,371 6,502,529 2 68,545
NET ASSETS
Invested in capital assets, net of related debt 4,589,922 170,037 ( 2,231,052) 1,929,301
Restricted for debt service 490,685 - - -
Unrestricted 395,623 ( 218,520) ( 1,593,531) 208,621
Total net assets $ 5,476,230 $ ( 48,483) $ ( 3,824,583) $ 2,137,922
Some amounts reported for business- type activities in the statement of net assets are different
because certain internal service fund assets and liabilities are included with business- type activities.
Equipment replacement ( BA) fund is completely allocated to the business type activities
Net assets of business- type activities
See accompanying Notes to Basic Financial Statements.
Major Funds
40
Governmental
Activities
Waste Water Water Utility Internal
Utility Fund Fund Total Service Funds
$ 7,346,728 $ 2,062,284 $ 10,027,505 $ 11,632,895
253 734,389 1 ,225,327 -
1,608,364 767,846 2 ,795,925 8 0,041
7,319 - 9 4,180 -
- - - 22,500
- 234,420 2 89,818 9 ,398
4,628 5 ,773 28,054 100,055
8,967,292 3 ,804,712 14,460,809 1 1,844,889
- - 1 0,393 598,120
197,304 230,683 841,278 -
46,371,338 1,652,164 59,363,874 -
59,396,962 56,572,365 132,632,770 4 ,037,992
( 25,517,658) ( 24,357,235) ( 60,498,043) ( 920,866)
80,250,642 33,867,294 131,498,601 3 ,117,126
80,447,946 34,097,977 132,350,272 3 ,715,246
89,415,238 37,902,689 146,811,081 1 5,560,135
7,768,892 642,071 8 ,792,049 1 82,597
4 6,737 62,723 135,091 3 8,152
213,051 70,146 615,616 -
- - 521,300 -
- 77,263 224,319 -
7,319 - 7 ,319 -
- - - 1,182,257
2 2,895 33,974 6 2,573 12,087
350,552 234,126 1,127,341 -
8,409,446 1 ,120,303 11,485,608 1,415,093
- - 2 5,010 -
- - - 4,057,152
9 4,833 207,727 419,279 8 1,795
- - 1,274,686 -
27,139,967 8,741,009 48,260,770 -
27,234,800 8,948,736 49,979,745 4 ,138,947
35,644,246 10,069,039 61,465,353 5 ,554,040
52,760,123 24,892,159 82,110,490 3 ,117,126
253 734,389 1 ,225,327 -
1,010,616 2 ,207,102 2 ,009,911 6 ,888,969
$ 53,770,992 $ 27,833,650 85,345,728 $ 1 0,006,095
532,168
1,267,578
$ 87,145,474
Major Funds
41
City of Petaluma
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
For the year ended June 30, 2006
Public
Airport Ambulance Marina Transportation
Fund Fund Fund Fund
OPERATING REVENUES:
Charges for sales $ 623,069 $ 181 $ 1 3,382 $ -
Charges for services 594,138 1,981,912 192,528 170,296
Connection fees - - - -
Intergovernmental operating 5 4,917 - - 1,183,859
Total operating revenues 1,272,124 1 ,982,093 205,910 1,354,155
OPERATING EXPENSES:
Cost of services 619,479 1,576,387 418,677 1,244,672
Claims - - - -
General and administrative 92,999 882,450 145,963 279,447
Depreciation and amortization 330,579 45,355 131,935 112,202
Total operating expenses 1,043,057 2 ,504,192 696,575 1,636,321
Operating income ( loss) 2 29,067 ( 522,099) ( 490,665) ( 282,166)
NONOPERATING REVENUES ( EXPENSES):
Investment earnings and rent 167,333 ( 4,833) 6,679 41,476
Interest expense ( 215,807) ( 7,531) ( 244,587) ( 1,406)
Gain or ( loss) on disposal of assets - - - -
Total nonoperating revenues ( expenses) ( 48,474) ( 12,364) ( 237,908) 4 0,070
Capital contribution 7 97,813 - - 67,191
Income ( loss) before operating transfers 9 78,406 ( 534,463) ( 728,573) ( 174,905)
OPERATING TRANSFERS:
Transfers in 4,869 - 43,000 201,800
Transfers out - - - -
Total transfers 4,869 - 43,000 201,800
Change in net assets 9 83,275 ( 534,463) ( 685,573) 26,895
NET ASSETS:
Beginning of year 4 ,492,955 4 85,980 ( 3,139,010) 2,111,027
End of year $ 5,476,230 $ ( 48,483) $ ( 3,824,583) $ 2,137,922
Some amounts reported for business- type activities in the statement of activities are different because
the net revenue ( expense) of certain internal service funds is reported with business- type activities.
Equipment replacement ( BA) fund is completely allocated to the business type activities
Change in net assets of business- type activities
See accompanying Notes to Basic Financial Statements.
Major Funds
42
Governmental
Activities
Waste Water Water Utility Internal
Utility Fund Fund Total Service Funds
$ 357 $ 9,277,022 $ 9,914,011 $ 1 7,782
12,208,044 84,051 15,230,969 7,408,195
1,413,042 1 ,063,319 2,476,361 -
- - 1,238,776 -
13,621,443 1 0,424,392 28,860,117 7,425,977
4,968,070 7 ,055,739 15,883,024 1,748,079
- - - 957,635
4,427,224 1 ,797,984 7,626,067 2 ,014,127
1,393,049 1 ,236,675 3,249,795 4 02,672
10,788,343 1 0,090,398 26,758,886 5,122,513
2,833,100 333,994 2,101,231 2,303,464
6 5,766 152,233 428,654 1 56,074
( 24,227) ( 68,317) ( 561,875) -
4,516 - 4 ,516 ( 18,688)
4 6,055 83,916 ( 128,705) 137,386
125,055 - 990,059 -
3,004,210 417,910 2,962,585 2,440,850
- - 249,669 5 30,000
( 630,000) ( 1,448,600) ( 2,078,600) -
( 630,000) ( 1,448,600) ( 1,828,931) 530,000
2,374,210 ( 1,030,690) 1,133,654 2,970,850
51,396,782 2 8,864,340 7,035,245
$ 53,770,992 $ 2 7,833,650 $ 10,006,095
319,348
8 4,289
$ 1,537,291
Major Funds
43
City of Petaluma
Combining Statement of Cash Flows
Proprietary Funds
For the year ended June 30, 2006
Public
Airport Ambulance Marina Transportation
Fund Fund Fund Fund
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 1,201,694 $ 2,027,832 $ 220,327 $ 120,851
Cash payments to suppliers for goods and services ( 811,572) ( 1,562,226) ( 436,846) ( 1,097,281)
Cash payments to employees for services ( 62,073) ( 894,209) ( 146,014) ( 281,391)
Claims paid - - - -
Intergovernmental operating 54,917 - - 1,183,859
Net cash provided ( used) by operating activities 382,966 ( 428,603) ( 362,533) ( 73,962)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Due to other funds - 407,400 113,900 -
Transfers in 4,869 - 43,000 201,800
Transfers out - - - -
Net cash provided ( used) by noncapital financing activities 4,869 407,400 156,900 201,800
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Cash receipts from grants 804,166 - - 34,723
Acquisition of capital assets ( 5,158,059) ( 15,019) - ( 31,096)
Proceeds of long term debt - - 209,097 -
Payments of long term debt ( 310,253) - - -
Interest paid ( 351,412) ( 7,531) ( 254,637) ( 1,406)
Net cash provided ( used) by capital and
related financing activities ( 5,015,558) ( 22,550) ( 45,540) 2,221
CASH FLOWS FROM INVESTING ACTIVITIES:
Interest received from investments and rent 167,333 ( 4,833) 6,679 41,476
Net cash provided ( used) by investing activities 167,333 ( 4,833) 6,679 41,476
Net increase ( decrease) in cash and cash equivalents ( 4,460,390) ( 48,586) ( 244,494) 171,535
CASH AND CASH EQUIVALENTS:
Beginning of year 5,209,416 49,105 244,832 187,760
End of year $ 749,026 $ 519 $ 338 $ 359,295
Operating income ( loss) $ 229,067 $ ( 522,099) $ ( 490,665) $ ( 282,166)
Adjustments to reconcile operating income ( loss) to net
cash provided ( used) by operating activities:
Depreciation and amortization 330,579 45,355 131,935 112,202
Changes in:
Accounts receivable ( 15,513) 45,547 ( 2,856) -
Inventories 6,850 - 1,490 152
Deposits and prepaids 2,647 192 81 555
Noncurrent assets ( 10,393) - - -
Accounts payable and accrued liabilities ( 201,590) 14,161 ( 19,659) 147,239
Wage payable 1,424 ( 8,184) ( 51) 650
Refundable deposits 27,651 - 2,575 -
Deferred revenue - - - ( 50,000)
Noncurrent deposits 10,393 - 14,617 -
Claims payable - - - -
Accrued compensated absences 1,851 ( 3,575) - ( 2,594)
Total adjustments 153,899 93,496 128,132 208,204
Net cash provided ( used) by operating activities $ 382,966 $ ( 428,603) $ ( 362,533) $ ( 73,962)
See accompanying Notes to Basic Financial Statements.
Major Funds
44
Governmental
Activities
Waste Water Water Utility Internal
Utility Fund Fund Total Service Funds
$ 13,981,019 $ 10,741,990 $ 28,293,713 $ 7,489,745
1,743,922 ( 7,067,339) ( 9,231,342) ( 2,558,742)
( 4,426,083) ( 1,776,138) ( 7,585,908) ( 2,049,841)
- - - ( 13,591)
- - 1,238,776 -
11,298,858 1,898,513 12,715,239 2,867,571
- - 521,300 90,000
- - 249,669 530,000
( 630,000) ( 1,448,600) ( 2,078,600) -
( 630,000) ( 1,448,600) ( 1,307,631) 620,000
217,736 - 1,056,625 -
( 29,012,439) ( 1,651,770) ( 35,868,383) ( 1,281,298)
20,497,041 - 20,706,138 -
( 335,552) ( 229,913) ( 875,718) -
126,314 ( 69,755) ( 558,427) -
( 8,506,900) ( 1,951,438) ( 15,539,765) ( 1,281,298)
65,766 152,233 428,654 156,074
65,766 152,233 428,654 156,074
2,227,724 ( 1,349,292) ( 3,703,503) 2,362,347
5,119,257 4,145,965 14,956,335 9,270,548
$ 7,346,981 $ 2,796,673 $ 11,252,832 $ 11,632,895
$ 2,833,100 $ 333,994 $ 2,101,231 $ 2,303,464
1,393,049 1,236,675 3,249,795 402,672
209,736 309,885 546,799 ( 80,041)
- ( 22,992) ( 14,500) ( 1,593)
142,521 ( 5,650) 140,346 741,929
- - ( 10,393) ( 598,120)
6,711,992 11,392 6,663,535 148,565
7,238 12,631 13,708 2,597
- 13,363 43,589 -
7,319 - ( 42,681) -
- - 25,010 -
- - - ( 13,591)
( 6,097) 9,215 ( 1,200) ( 38,311)
8,465,758 1,564,519 10,614,008 564,107
$ 11,298,858 $ 1,898,513 $ 12,715,239 $ 2,867,571
Major Funds
45
46
Private Purpose Trust Funds:
These funds account for assets legally held in trust for specific purpose.
Agency Funds:
These funds are custodial in nature ( assets equal liabilities) and do not involve measurement of results
of operations. They are used to account for assets held in an agency capacity for others and therefore
cannot be used to support the City's programs.
Fiduciary Fund Financial Statements
47
City of Petaluma
Statement of Fiduciary Net Assets
Fiduciary Funds
For the year ended June 30, 2006
Private Purpose
Trusts Agency
Funds Funds
ASSETS
Cash and investments $ 170,397 $ 4,374,202
Intergovernmental receivable - 57,225
Total assets 170,397 $ 4,431,427
LIABILITIES
Accrued liabilities 72 $ 4,431,427
Total liabilities 72 $ 4,431,427
NET ASSETS
Held in trust $ 170,325
See accompanying Notes to Basic Financial Statements.
48
City of Petaluma
Statement of Changes in Fiduciary Net Assets
Fiduciary Funds
For the year ended June 30, 2006
Private-
Purpose
Trusts
ADDITIONS:
Investment income $ 4,496
Total additions 4,496
DEDUCTIONS:
Program costs
Administrative costs 2,445
Total deductions 2,445
CHANGES IN NET ASSETS 2,051
NET ASSETS:
Beginning of year 168,274
End of year $ 170,325
See accompanying Notes to Basic Financial Statements.
49
50
City of Petaluma
Notes to Basic Financial Statements
For the year ended June 30, 2006
51
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Petaluma, California ( City) have been prepared in conformity
with generally accepted accounting principles ( GAAP) as applied to governmental agencies. The
Governmental Accounting Standards Board ( GASB) is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. The more significant of the City’s accounting
policies are described below.
A. Reporting Entity
The City was incorporated as a general law City by the state legislature on April 12, 1858. The City
currently operates under a Council- Manager form of government established under a charter election in
1947. The City provides the following services as authorized by its charter: police and fire protection,
ambulance service, transit service, parks and recreation, public works, community development, and
general administrative services. In addition, the City owns and operates a water and sewer system, a
municipal airport, and a marina.
As required by GAAP, these basic 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 data from these units are combined with
data of the City. Discretely presented component units, on the other hand, are reported in a separate
column in the combined basic financial statements to emphasize their legal separateness from the City.
Each blended component unit has a June 30 year- end. The City had no discretely presented component
units. The following entities are reported as blended component units:
Petaluma Community Development Commission
The Petaluma Community Development Commission ( PCDC) was established by the City Council under
the State of California Health and Safety Code, Section 34100, et seq. on September 27, 1976, to perform
redevelopment activities for the City. Although PCDC is a separate legal entity from the City, it is reported
as if it were part of the primary government because the City Council is the governing board, and it is
financially accountable to the City. Separate basic financial statements are issued by PCDC, to comply with
the redevelopment agency guidelines as established by the State of California. A copy may be obtained
upon request from the City of Petaluma. PCDC is comprised of two project areas, Central Business District
( CBD) and Petaluma Community Development project area ( PCD).
City of Petaluma Public Financing Corporation
The City of Petaluma Public Financing Corporation ( PPFC) was established in November of 1990 and is a
not- for- profit benefit corporation, created under the laws of the State of California. Although PPFC is a
separate legal entity from the City, it is reported as if it were part of the primary government, because its
sole purpose is to be a financing entity for the City. PPFC does not issue separate basic financial statements.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
52
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
A. Reporting Entity, Continued
Petaluma Public Financing Authority
The Petaluma Public Financing Authority ( PPFA) was established in May of 1996 as a joint powers
authority between the City and PCDC. Its purpose was to issue revenue bonds, which provided funds for a
consolidated special assessment bond refunding. Although PPFA is a separate legal entity from the City, it
is reported as if it were part of the primary government, because its sole purpose is to be a financing entity
for the City. PPFA does not issue separate basic financial statements.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for with a separate set of self- balancing
accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as
appropriate. Governmental resources are allocated to and accounted for in individual funds based upon
the purposes for which they are to be spent and the means by which spending activities are controlled.
Government - Wide Financial Statements
The City’s Government- Wide Financial Statements include a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of governmental and business-type
activities for the City accompanied by a total column. Fiduciary activities of the City are not included
in these statements.
The Government- Wide Financial Statements are presented on an “ economic resources” measurement focus
and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital
assets, as well as infrastructure assets, and long- term liabilities, are included in the accompanying
Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis
of accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which the liability is incurred.
Certain types of transactions are reported as program revenues for the City in three categories:
􀂾 Charges for services
􀂾 Operating grants and contributions
􀂾 Capital grants and contributions
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund
activities, payables and receivables including the corresponding deferred revenues. All internal balances
in the Statement of Net Assets have been eliminated except those representing balances between the
governmental activities and the business- type activities, which are presented as internal balances and
eliminated in the total primary government column. In the Statement of Activities and Changes in Net
Assets, internal service fund transactions have been eliminated; however, those transactions between
governmental and business- type activities have not been eliminated.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
53
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Government - Wide Financial Statements, Continued
The City applies all applicable GASB pronouncements ( including all NCGA Statements and Interpretations
currently in effect) as well as the following pronouncements issued on or before November 30, 1989 to the
business type activities, unless those pronouncements conflict with or contradict GASB pronouncements:
Financial Accounting Standards Board ( FASB) Statements and Interpretations, Accounting Principles Board
( APB) Opinions and Accounting Research Bulletins ( ARB) of the committee on Accounting Procedure. The
City applies all applicable FASB Statement and Interpretations issued after November 30, 1989 except those
that conflict with or contradict GASB pronouncements.
Governmental Fund Financial Statements
Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all major governmental funds and non- major funds
aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets as
presented in these statements to the net assets presented in the Government- Wide Financial Statements.
The City has presented all major funds that met the qualifications for major fund reporting.
All governmental funds are accounted for on a spending or " current financial resources" measurement focus
and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are
included on the Balance Sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances
presents increases ( revenues and other financing sources) and decreases ( expenditures and other financing
uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the
accounting period in which they become both measurable and available to finance expenditures of the
current period. Accordingly, revenues are recorded when received in cash, except for that revenues subject
to accrual ( generally 60 days after year- end) are recognized when due. The primary revenue sources, which
have been treated as susceptible to accrual by the City, are property tax, tax payer- assessed tax revenues
( sales tax, transient occupancy taxes, franchise taxes, etc.), certain grant revenues and earnings on
investments. Revenues from taxes are recognized not exceeding 60 days. Expenditures are recorded in the
accounting period in which the related fund liability is incurred.
Deferred revenues arise when potential revenues do not meet both the “ measurable” and “ available”
criteria for recognition in the current period. Deferred revenues also arise when the government receives
resources before it has a legal claim to them, as when grant monies are received prior to incurring
qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when the
government has a legal claim to the resources, the deferred revenue is removed from the balance sheet and
revenue is recognized.
The Reconciliation of the Fund Financial Statements to the Government- Wide Financial Statements is
provided to explain the differences created by the integrated approach of GASB Statement No. 34.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
54
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
Proprietary Fund Financial Statements
Proprietary Fund Financial Statements include a Statement of Net Assets, a Statement of Revenues,
Expenses and Changes in Fund Net Assets, and a Statement of Cash Flows for each major proprietary fund.
A separate column representing internal service funds is also presented in these statements. However,
internal service balances and activities have been combined with the governmental activities in the
Government- Wide Financial Statements.
Proprietary funds are accounted for using the " economic resources" measurement focus and the accrual basis
of accounting. Accordingly, all assets and liabilities ( whether current or noncurrent) are included on the
Statement of Net Assets. The Statement of Revenues, Expenses and Changes in Fund Net Assets present
increases ( revenues) and decreases ( expenses) in total net assets. Under the accrual basis of accounting,
revenues are recognized in the period in which they are earned while expenses are recognized in the period
in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions
have been made for uncollectible amounts. In accordance with GASB Statement No. 20, Accounting and
Financial Reporting for Proprietary Funds and Other Government Entities that Use Proprietary Fund Accounting,
the City applies all GASB pronouncements currently in effect as well as Financial Accounting Standard
Board Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research
Bulletins of the Committee on Accounting Procedure issued on or before November 30, 1989.
Operating revenues in the proprietary funds are those revenues that are generated from the primary
operations of the fund. All other revenues are reported as non- operating revenues and. Operating
expenses are those expenses that are essential to the primary operations of the fund. All other expenses are
reported as non- operating expenses.
Fiduciary Fund Financial Statements
Fiduciary Fund Financial Statements include a Statement of Net Assets and a Statement of Changes in
Fiduciary Net Assets. The City's fiduciary funds represent Agency Funds and Private- Purpose Trust Funds.
Agency funds are custodial in nature ( assets equal liabilities) and do not involve measurement of results of
operations. The agency funds are accounted for using the accrual basis of accounting. The Private- Purpose
Trust Funds are used to account for resources legally held in trust for special purposes. These funds are
accounted for using the accrual basis of accounting.
C. Use of Restricted/ Unrestricted Net Assets
When an expense is incurred for purposes for which both restricted and unrestricted net assets are
available, the City’s policy is to apply restricted net assets first.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
55
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
D. Cash, Cash Equivalents and Investments
The City pools cash resources of its various funds to facilitate cash management. Cash in excess of current
requirements is invested and reported as investments. It is the City’s intent to hold investments until
maturity. However, the City may, in response to market conditions, sell investments prior to maturity in
order to improve the quality, liquidity, or yield of the portfolio. Interest earnings are apportioned among
funds based on ending accounting period cash and investment balances.
The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and highly liquid
investments with original maturity of three months or less from the date of acquisition. Cash and cash
equivalents are combined with investments and displayed as Cash and Investments.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures ( Amendment of GASB No. 3),
certain disclosure requirements for Deposits and Investment Risks were made in the following areas:
􀂃 Interest Rate Risk
􀂃 Credit Risk
􀂉 Overall
􀂉 Custodial Credit Risk
􀂉 Concentrations of Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and
investments, highly sensitive investments, credit quality at year- end and other disclosures.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for
External Investment Pools, highly liquid market investments with maturities of one year or less at time of
purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used
as fair value for those securities for which market quotations are readily available.
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund ( LAIF), which has invested a portion of the pool funds in Structured Notes and Asset-backed
Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of
California collateralizing these investments. In addition, these Structured Notes and Asset- backed
Securities are subject to market risk as to change in interest rates.
E. Inventories
Inventories in General Fund are recorded at cost, and inventories in Proprietary Funds are recorded at the
lower of cost of market. All inventories use the first- in, first- out method and the items are recorded as
expenditures/ expenses when consumed. The General Fund inventory, which consists primarily of supplies
and parts, is offset by a reserved fund balance to indicate that this asset is not available for appropriation.
The Proprietary Fund inventory consists primarily of supplies, meters, and vehicle parts held for further
consumption.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
56
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
F. Receivables
In the government- wide statements, receivables consist of all revenues earned at year- end, but not yet
received. Allowance for uncollectible accounts receivable are based upon historical trends and the periodic
aging of accounts receivable. At June 30, 2006, allowance for doubtful accounts ( which is netted with
accounts receivables in the financial statement presentation) was as follows for the various funds:
Airport Fund $ 5,000
Ambulance Fund 270,000
Marina Fund 2,000
Waste Water Utility Fund 20,000
Water Utility Fund 16,000
G. Interfund Transactions
Advances to and advances from other funds/ City/ Redevelopment Agency represent interfund loans in the
fund financial statements. Advances between funds are offset by a fund balance reservation in the
applicable governmental funds to indicate that they are not expendable available financial resources.
All other outstanding balance between funds are reported as due to and due from other funds. These are
generally repaid within the following fiscal year.
Any residual balances outstanding between the governmental activities and business- type activities are
reported in the Government- Wide Financial Statements as “ internal balances.”
H. Capital Assets and Depreciation
Capital assets, which include land, buildings, improvements, equipment and infrastructure assets ( e. g.
roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business- type
activities in the Governmental- Wide Financial Statement. Capital assets are recorded at historical cost or
estimated historical cost if actual cost is not available. Donated assets are valued at their estimated fair
value on the date donated. The City’s policy is to capitalize all property, plant, and equipment with a unit
cost of $ 5,000 or more, and a useful life of one year or more.
Capital assets in government fund operations are recorded as expenditures in the fund financial statements.
They are capitalized for the government- wide financial statements. Infrastructure assets are also reported as
capital assets in the government- wide financial statements.
Capital assets used in proprietary fund types are capitalized in the fund in which they are utilized. Interest
during construction is capitalized in the proprietary funds.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
57
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
H. Capital Assets, Continued
Depreciation is charged as an expense of operations for all activities on the government- wide financial
statements, and as expense of operations in the proprietary funds on the fund financial statements.
Depreciation is based on the estimated useful lives of the assets using the straight- line method. The revised
estimated useful lives are as follows:
Vehicles and equipment 3- 15 years
Building and improvements 10- 50 years
Infrastructure 20- 50 years
The Governmental Accounting Standards Board ( GASB) issued Statement No. 34 which requires the
inclusion of infrastructure capital assets in local governments’ basic financial statements. In accordance with
Statement No. 34, the City has included the value of all infrastructure in the current Basic Financial
Statements.
The City defines infrastructure as the basic physical assets that allow the City to function. The assets
include:
􀂾 Sidewalks and bridges
􀂾 Street system
􀂾 Sewer system
􀂾 Pipes
Each major infrastructure system can be divided into subsystems. For example the street system can be
subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices ( signs,
signals and pavement markings), landscaping and land. These subsystems were not delineated in the Basic
Financial Statements. The appropriate operating department maintains information regarding the
subsystems.
For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No.
34 for infrastructure reporting. Estimated historical costs were developed in one of the following methods:
1) Use of historical records where available.
2) Standard unit costs appropriate for the construction/ acquisition date of asset.
3) Present replacement cost indexed by a reciprocal factor of the price increase from the
construction/ acquisition date to the current date.
The accumulated depreciation, defined as the total depreciation from the date of construction/ acquisition
to the current date, was computed on a straight line basis, using industry accepted life expectancies for each
infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation
from the estimated historical cost.
Interest accrued during capital assets construction, if any, is capitalized for the government and business-type
activities in the Government- Wide Financial Statements and proprietary funds in the fund financial
statements as part of the asset cost.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
58
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
I. Interest Payable
In the Government- Wide Financial Statements, interest payable for long- term debt is recognized as the liability
is incurred in the appropriate activity.
In the Fund Financial Statements, propriety fund types recognize the interest payable when the liability is
incurred.
Interest costs incurred on borrowed funds during the period of construction of capital assets for Enterprise
Fund are capitalized, when material, as a component of the cost of acquiring such assets. Interest in the amount
of $ 153,762 Airport Fund, $ 878,231 Waste Water Fund, $ 382,369 in Water Fund was capitalized during the year
ended June 30, 2006.
J. Deferred Revenue
In the Government- Wide Financial Statements, deferred revenue is recognized for transactions for which
revenue has not yet been earned.
In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the
revenue recognition criteria based on the modified accrual basis of accounting. The City records deferred
revenue for transactions for which revenues have not been earned, or for which funds are not available to
meet current financial obligations. Typical transactions for which deferred revenue is recorded are; interest
earned but not received on notes receivable, intergovernmental revenue earned but not received within
availability period, and revenue received, but not earned at year- end.
K. Compensated Absences
The City has compensated absences of regular vacation and sick leave which are accounted for in accordance
with generally accepted accounting principles ( GAAP). Employees may accumulate earned vacation time.
Management employees are limited to the amount, which may be earned, in a three year period. All other
employees are limited to the amount, which may be earned, in a two year period.
Employees may accumulate unused sick leave without limits. The unused sick leave vests after five years of
service for firefighters, and after ten years of service for all other employees. Vested sick leave is payable
upon death or retirement for all employees at 50% of the vested amount, up to a limit of 1,000 hours for fire
battalion chiefs, 720 hours for firefighters, 600 hours for police mid- management employees, and 480 hours
for all other employees. All employees may elect, in lieu of a cash payment, to have all vested sick leave
applied to their years of service under the retirement plan.
Public safety employees are also eligible for vested sick leave to be paid upon a disability retirement at 50%
of the vested amount, up to a limit of 1,000 hours for firefighters, and 600 hours for all police officers.
A liability is calculated for all of the cost of compensated absences based on benefits earned by employees
in the current period, for which there is a probability of payment at termination. The salary and related
payroll costs are those in effect as of June, 30, 2006.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
59
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
K. Compensated Absences, Continued
For governmental funds, compensated absences are recorded as current and non- current liabilities only on
the government- wide financial statements. For proprietary funds, current and non- current liabilities for
compensated absences are recorded as expenses in both the government- wide financial statement and the
fund financial statement.
L. Long- Term Debt
Government- Wide Financial Statements
Long- term debt and other long- term obligations are reported as liabilities in the appropriate activities.
Bond premiums and discounts and issuance costs are deferred and amortized over the life of the bonds using
the straight- line method. Bonds payable are reported net of premium or discount. Issuance costs are reported as
deferred charges.
Fund Financial Statements
Long- term debt is not reported in the governmental Fund Financial Statements but is shown in the
Reconciliation of the Governmental Funds Balance Sheet to the Government- Wide Statement of the Net Assets.
In the Fund Financial Statements, governmental funds recognized bond premiums and discounts and issuance
costs during the current period. The current year amount of debt issued is reported as other financing sources.
Premiums on debt issuance are reported as other financing sources while discounts on debt issuance are
reported as other financing uses. All debt issuance costs are reported as debt service expenditure.
M. Net Assets and Fund Equity
In the Government- Wide Financial Statements, net assets are classified in the following categories:
Invested in Capital Assets, net of Related Debt – This amount consists of capital assets net of
accumulated depreciation and reduced by outstanding debt that attributed to the acquisition,
construction, or improvement of the assets.
Restricted – This amount is restricted by external creditors, grantors, contributors, laws or regulations
of other governments.
Unrestricted – This amount is all net assets that do not meet the definition of “ invested in capital assets,
net of related debt” or “ restricted net assets.”
In the Fund Financial Statement, reservation and designations of fund balances of governmental funds and
restricted net assets of proprietary funds are created to either satisfy legal covenants, or to identify the
portion of the fund equity not available for current expenditures.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
60
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
N. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition,
estimates affect the reported amount of expenses. Actual results could differ from these estimates and
assumptions.
O. Revenues
Property Taxes
Article XIII of the California Constitution ( more commonly known as Proposition 13) limits ad valorem
taxes on real property to one percent of value plus taxes necessary to pay indebtedness approved by voters
prior to July 1, 1978. The Article also established the 1975/ 76 assessed valuation as the basis and limits
annual increases to the cost of living, not to exceed two percent, for each year thereafter. Property may also
be reassessed to full market value after a sale, transfer of ownership, or completion of new construction.
The State is prohibited under the Article from imposing new ad valorem, sales, or transactions taxes on real
property. Local government may impose special taxes ( except on real property) with the approval of two-thirds
of the qualified voters.
Property taxes attached as a lien on the property as of January 1. Secured property taxes are levied on July 1
and are due in two installments by December 10 and April 10. The County of Sonoma bills and collects
property taxes on behalf of the City using an alternative method of distribution known as the “ Teeter Plan.”
The State Revenue and Taxation Code allows counties to distribute secured real property and supplemental
property taxes on an accrual basis resulting in full payment to the City each fiscal year. Any subsequent
delinquent payments and related penalties and interest will revert to Sonoma County. The City reports
property tax revenue net of collection fees.
Sales Tax Revenue
The City accrues the State’s July and August sales tax payments for the previous fiscal year. These
payments consist of actual receipts for the period of May 15 through July 14 and are measurable and
available for the fiscal year in which that they are accrued. The City reports sales tax revenue net of
collection fees.
Program Revenue
In general, program revenues are derived from the activities of a particular function. Program revenues
include charges for services, permits and fees, and restricted operating and capital grants.
Operating and Non- Operating Revenues of Proprietary Funds
Operating revenues of proprietary funds result from providing goods and services. They also include all
revenue not related to capital ( and relating financing) non- capital financing, or investing activities.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
61
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
P. New Pronouncements
In 2006, the City adopted a new accounting standard in order to conform to the following Governmental
Accounting Standards Board Statements:
􀂾 GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries – The Statement establishes accounting and financial reporting standards for
impairment of capital assets. A capital asset is considered impaired when its service utility has
declined significantly and unexpectedly. This Statement also clarifies and establishes accounting
requirements for insurance recoveries.
􀂾 Statement No. 44, Economic Condition Reporting: The Statistical Section ( Amendment of NCGA Statement
1) – The Statement establishes the objectives of the statistical section and the five categories of
information it contains; financial trends information, revenue capacity information, debt capacity
information, demographic and economic information, and operating information.
􀂾 GASB Statement No. 46, Net Assets Restricted by Enabling Legislation – The Statement addresses
selected issues and amends GASB Statement No. 34, Basic Financial Statements and Management's
Discussion and Analysis for State and Local Governments. The Statement enhances the usefulness and
comparability of net asset information and clarifies the meaning of legal enforceability. The
Statement also specifies accounting and financial reporting requirements for restricted net assets.
􀂾 GASB Statement No. 47, Accounting for Termination Benefits – The Statement provides accounting
guidance for state and local governmental employers regarding benefits ( such as early- retirement
incentives and severance benefits) provided to employees that are terminated. The Statement
requires recognition of the cost of involuntary termination benefits in the period in which a
government becomes obligated to provide benefits to terminated employees.
2. CASH AND INVESTMENTS
The City maintains a cash and investment pool, which includes cash balances and authorized investments for
all funds.
A. Cash Deposits
The carrying amount of the City’s cash deposits were $ 33,215 at June 30, 2006. Bank balances before
reconciling items were $ 969,900. The total bank balance was collateralized or insured with securities held
by the pledging financial institutions in the City’s name as discussed below.
The California Government Code requires California banks and savings and loan associations to secure the
City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner
shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor.
Thus, collateral for cash deposits is considered to be held in the City's name.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
62
2. CASH AND INVESTMENTS, Continued
A. Cash Deposits, Continued
The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also
allows institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150%
of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are fully
insured up to $ 100,000 by the Federal Deposit Insurance Corporation. The City, however, has not waived the
collateralization requirements.
The City follows the practice of pooling cash and investments of all funds, except for funds required to be held
by fiscal agents under the provisions of bond indentures and asset seizure funds segregated in the police trust
account. Interest income from cash and investments with fiscal agents is credited directly to the related fund.
B. Investments
Under provisions of the California Government Code, authorized investments for the City include
securities of the State or local agencies of the State, securities of the U. S. Treasury and other Federal
agencies, certificates of deposit, bankers’ acceptances, repurchase agreements, commercial paper, money
market, mutual funds, guaranteed investment contracts, California Asset Management Program ( CAMP)
and State of California Local Agency Investment Funds ( LAIF).
Local Agency Investment Fund - The City’s investments with Local Agency Investment Funds ( LAIF) at June
30, 2006, included a portion of the pool funds invested in Structured Notes and Asset- Backed Securities.
These investments included the following:
Structured Notes are debt securities ( other than asset- backed securities) whose cash- flow characteristics
( coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/ or that
have embedded forwards or options.
Asset- Backed Securities the bulk of which are mortgage- backed securities, entitle their purchasers to receive a
share of the cash flows from a pool of assets, such as principal and interest repayments from a pool of
mortgages ( such as CMO’s) or credit card receivables.
As of June 30, 2006, the City had $ 6,458,180 invested in LAIF, which had invested 2.567% of the pooled
investment funds in Structured Notes and Asset- Backed Securities. The City valued its investments in LAIF
as of June 30, 2006, by multiplying its account balance with LAIF times a fair value factor determined by
LAIF. This fair value factor was determined by dividing all LAIF participants’ total aggregate fair value by
total aggregate amortized cost resulting in a factor of 0.998185821.
Investment in Assessment District Bond - The City purchased an improvement bond for the Assessment
District 2000- 01 in September 2001. This bond was issued to finance a portion of the work of the
Washington/ McDowell capital improvement project. The bond will be repaid by the property owners
through September 2021. Interest is earned at a rate of 6% per annum. The assessment will be collected by
the Sonoma County Assessor’s Office. At June 30, 2006, the City had $ 892,818 invested in the bond.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
63
2. CASH AND INVESTMENTS, Continued
B. Investments, Continued
California Asset Management Program - CAMP is a separate public agency established under the provisions of
the California Joint Exercise of Powers Act. This program provides California public agencies with
investment management services, and accounting and arbitrage rebate calculation services of tax- exempt
financings.
C. Cash and Investment with Fiscal Agents
The Cash and Investments with Fiscal Agents in the amount of $ 1,376,448 include certain amounts which
are held by fiscal agents to be used only for specific capital outlay, payments of certain long- term debt and
maintaining required reserves. These funds have been invested only as permitted by specific State statutes
governing their investment or applicable City ordinance, resolution, or bond indenture.
D. Summary of Cash and Investments
The following is a summary of cash and investments at June 30, 2006:
Governmental Business- Type Fiduciary
Activities Activities Funds Total
Cash and investments $ 4 6,431,486 $ 1 0,275,280 $ 4 ,544,599 $ 6 1,251,365
Restricted cash and investments $ 1 51,121 $ 1 ,225,327 $ - $ 1 ,376,448
Total cash and investments $ 6 2,627,813
Government- Wide Statement of Net Assets
Cash and investments held in the City Treasury grouped by maturity date at June 30, 2006, are shown
below:
Cash and Investment Type Fair Value 1 year or less 1- 2 years 2- 3 years 3- 4 years 4- 5 years Over 5 years
Cash deposits $ 3 3,215 $ 3 3,215 $ - $ - $ - $ - $ -
Securities of U. S. Government Agencies
FNMA 7 ,029,660 1 ,510,644 2 ,008,547 3 ,510,469 - - -
FFCB 1 ,463,438 - - 1 ,463,438 - - -
FHLB 9 ,378,247 5 ,105,359 4 ,272,888 - - - -
FHLMC 6 ,262,295 - 4 ,265,451 1 ,996,844 - - -
Corporate Note 4 81,934 - 4 81,934 - - - -
US Treasury Notes 6 ,912,881 1 ,031,348 3 ,162,550 2 ,718,983 - - -
Total Securities of U. S.
Government Agencies 3 1,528,455 7 ,647,351 1 4,191,370 9 ,689,734 - - -
Local Agency Invesments Funds 6 ,458,180 - - - - - -
California Asset Management Program 2 1,788,488 - - - - - -
Investments in Authority Refunding
Revenue Bond 5 50,209 5 50,209 - - - - -
Investments in Assessment Dist. Bond 8 9 2 , 8 1 8 8 7,579 8 7,579 8 7,579 8 7,579 8 7,579 454,924
Total $ 6 1,251,365 $ 8 ,318,354 $ 1 4,278,949 $ 9 ,777,313 $ 8 7,579 $ 8 7,579 $ 4 54,924
Investment Maturities ( in years)
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
64
2. CASH AND INVESTMENTS, Continued
E. Risk Disclosures
Interest Rate Risk: Interest rate risk is the market value fluctuation due to overall changes in the interest rates.
It is mitigated by limiting the average maturity of the City’s portfolio not to exceed five years.
As a means of maintaining liquidity and minimizing interest rate risk, the City’s investment policy limits are as
follows:
Maturity % of Portfolio
Up to one year 25% ( Minimum)
one year to five years 75% ( Maximum)
Credit Risk: Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real
or perceived change in the ability of the issuer to repay its debt. According to the City’s investment policy,
no more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US
Government, its agencies and instrumentalities, and LAIF. If a security is downgraded by either Moody’s
or S& P to a level below the minimum quality required by the City, it shall be the City’s policy to sell that
security as soon as practicable.
At June 30, 2006, the City had the following deposits and investments:
Moody's S& P
Investments:
Securities of U. S. Government Agencies:
FNMA Aaa AAA
FFCB Aaa AAA
FHLB Aaa AAA
FHLMC Aaa AAA
Corporate Notes Aaa AAA
US Treasury Notes Aaa AAA
Local Agency Investment Funds
California Asset Management Program
Investments in Authority Refunding Revenue Bond
Investments in Assessment Dist. Bond
Not Rated
Credit Quality Ratings
Not Rated
Not Rated
Not Rated
Custodial Credit Risk: For an investment, custodial credit risk is the risk that, in the event of the failure of the
counterparty, the City will not be able to recover the value of its investments or collateral securities that are in
the possession of an outside party. None of the City’s investments were subject to custodial credit risk.
F. Fair Value of Investments
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for
External Investment Pools, investments were stated at fair value using the aggregate method as follows. The
total fair value adjustment resulted in a loss of $ 434,875.
City of Petaluma
Notes to Basic Financial Statements, Continued
For the year ended June 30, 2006
65
3. NOTES RECEIVABLE
As of June 30, 2006, the City had the following notes receivables:
Balance Balance
July 1, 2005 Additions Deletions June 30, 2006
Housing Loans to
Not- For- Profit Agencies $ 19,357,243 $ 583,063 $ ( 29,383) $ 19,910,923
First- Time Home Buyers Loans 4,482,824 935,000 ( 764,125) 4,653,699
Eligible Construction Cost Loan
and Tax increment Loan 1,472,838 398,942 - 1,871,780
Total $ 25,312,905 $ 1,917,005 $ ( 793,508) $ 26,436,402
An adjustment was made to record interest accruals that were not previously accounted for.
As of June 30, 2006, the City had the following loans receivable:
Description Balance at June 30, 2006
Housing Loans to Nonprofit Agencies:
Buckelew Project $ 4 44,151
Capri Creek Assoc LLC 9 7,500
Casa Grande 1 ,240,918
Caulfield Land St. Housing Assoc 1 82,999
Downtown River Assoc LP 7 ,062,836
Eden Housing Inc - Washington Creek 3 20,000
Old Elm Partners 2 ,504,336
575 Vallejo St. Assoc. 8 51,184
579 Vallejo St. Assoc. 9 90,000
Edith St. Apt. Inc 1 ,217,884
Lieb Sr. Apt. Inc. 1 ,593,886
Madrone Village Assoc 2 89,947
Parklane Apt. Corp 1 72,500
Roundwalk Village Partners 1 ,863,800
Salishan Apt. Inc 3 88,380
Wood Sorrel 6 29,646
Lind Storefront Program 6 0,956
Total Housing Loans to Nonprofit Agencies 1 9,910,923
First Time Home Buyers Loans 4 ,653,699
Eligible Construction Cost Loan and Tax Increment Loan:
Sheraton Marina Hotel OPA 7 50,000
Sher