City of Petaluma
Petaluma, California
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Prepared By:
The City of Petaluma Finance Department
Joseph D. Netter, Interim Finance Director
Cinde Rubaloff, Accounting Manager
City of Petaluma
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Table of Contents
i
Page
INTRODUCTORY SECTION
Table of Contents ............................................................................................................................... ................... i
Letter of Transmittal ............................................................................................................................... .............. v
GFOA Certificate of Achievement for Excellence in Financial Reporting...................................................... xv
CSMFO Certificate of Award for Outstanding Financial Reporting............................................................... xvi
Organization Chart ............................................................................................................................... ................ xvii
Principal Officials of the City of Petaluma, California...................................................................................... xviii
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, 2004
Table of Contents, Continued
ii
Page
FINANCIAL SECTION, Continued
Basic Financial Statements, Continued:
Required Supplementary Information:
Budgetary Information ............................................................................................................................. 90
Budgetary Comparison Schedule – General Fund......................................................................... 91
Budgetary Comparison Schedule – Home/ Begin Special Revenue Fund.................................. 92
Budgetary Comparison Schedule – Redevelopment Low- Mod Income
Special Revenue Fund.................................................................................................................. 93
Defined Benefit Pension Plan .................................................................................................................. 95
Supplementary Information:
Non- Major Governmental Funds:
Combining Balance Sheet......................................................................................................................... 102
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):
Redevelopment PCD Debt Service Fund – 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
Community, Library, and Public Facilities Impact Fee Special Revenue Fund......................... 113
Flood Mitigation Impact Fees Special Revenue Fund ................................................................... 114
Housing In- Lieu Special Revenue Fund.......................................................................................... 115
Park Development, Parkland Acquisition, Aquatic Facilities Impact Fees
Special Revenue Fund.................................................................................................................. 116
Traffic Mitigation Impact Fee Special Revenue Fund.................................................................... 117
Gas Tax Special Revenue Fund......................................................................................................... 118
Supplemental Law Enforcement Special Revenue Fund .............................................................. 119
Landscape Assessment District Special Revenue Fund ................................................................ 120
Police Special Revenue Fund............................................................................................................. 121
Street Special Revenue Fund............................................................................................................. 122
Transient Occupancy Tax Special Revenue Fund .......................................................................... 123
City of Petaluma
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Table of Contents, Continued
iii
Page
FINANCIAL SECTION, Continued
Supplementary Information, Continued
City Debt Service Fund ...................................................................................................................... 124
Redevelopment CBD Debt Service Fund......................................................................................... 125
Governmental Capital Project Fund................................................................................................. 126
Prince Park Trust Special Revenue Fund ........................................................................................ 127
Wickersham Park Trust Permanent Fund....................................................................................... 128
Internal Service Funds:
Combining Statement of Net Assets....................................................................................................... 130
Combining Statement of Activities and Changes in Net Assets......................................................... 132
Combining Statement of Cash Flows ..................................................................................................... 134
Fiduciary Funds:
Combining Balance Sheet......................................................................................................................... 138
Combining Statement of Revenues, Expenditures and Changes in Fund Balances -
Expendable Trust Funds.................................................................................................................... 139
Statement of Changes in Assets and Liabilities – Agency Funds....................................................... 140
STATISTICAL SECTION ( Unaudited)
Government- wide Expenditures by Function ......................................................................................... 141
General Government Expenditures by Function .................................................................................... 142
Government- wide Revenue by Source ..................................................................................................... 143
General Government Revenue by Source ................................................................................................ 144
Property Tax Levies and Collections......................................................................................................... 145
Assessed Value of Taxable Property ......................................................................................................... 146
Property Tax Rates – Direct and Overlapping Governments................................................................ 147
Special Assessment Billings and Collections ........................................................................................... 148
Computation of Legal Debt Margin .......................................................................................................... 149
Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capita................ 150
City of Petaluma
Comprehensive Annual Financial Report
For the year ended June 30, 2004
Table of Contents, Continued
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Page
STATISTICAL SECTION ( Unaudited), Continued
Ratio of Annual Debt Service Expenditures for General Bonded Debt to
Total General Government Expenditures.......................................................................................... 151
Direct and Overlapping Bonded Debt Statement ................................................................................... 152
Schedule of Revenue Bond Coverage for Proprietary Funds................................................................ 153
Demographic Statistics..................................................................................................................... .......... 154
Construction, Property Value and Bank Deposits .................................................................................. 155
Assessed Valuation of Principal Property Taxpayers............................................................................. 156
Miscellaneous Statistics..................................................................................................................... ......... 157
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January 21, 2004
To the Honorable Mayor, Members of the City Council and Citizens of the City of Petaluma:
We are pleased to submit to you the Comprehensive Annual Financial Report ( CAFR) of
the City of Petaluma for the fiscal year ended June 30, 2004. This report is published in
accordance with local ordinance and state law requirements that financial statements be
presented in conformity with generally accepted accounting principles ( GAAP) and audited
in accordance with generally accepted auditing standards by a firm of licensed certified
public accountants. Pursuant to that requirement, we hereby submit the comprehensive
annual financial report ( CAFR) of the City of Petaluma, California for the fiscal year ended
June 30, 2004.
For the fiscal year ended June 30, 2004, the City of Petaluma continues to comply with the
pronouncements of the Governmental Accounting Standards Board ( GASB), including
GASB Statement No. 34. Statement 34 established a new financial reporting model for
state and local governments incorporating government- wide financial statements, in
addition to the customary fund statement presentation. Reconciliations of the fund financial
statements to the Statement of Net Assets and Statement of Activities are provided in the
financial section of this report.
This is the second fiscal year the new reporting model has been presented which provides
financial report users a narrative introduction, overview, and analysis, to accompany the
basic financial statements in the form of Management’s Discussion and Analysis ( MD& A).
This letter of transmittal is designed to complement the MD& A, and should be read in
conjunction with it. The City of Petaluma’s MD& A can be found in the financial section
immediately following the reports of the independent auditors.
This report consists of management’s representations concerning the finances of the City
of Petaluma. Consequently, management assumes full responsibility for the completeness
and reliability of all of the information presented in this report. To provide a reasonable
basis for making these representations, management of the City of Petaluma has
established a comprehensive internal control framework that is designed both to protect the
government’s assets from loss, theft, or misuse and to compile sufficient reliable
information for the preparation of the City of Petaluma’s financial statements. Because the
cost of internal controls should not outweigh their benefits, the City of Petaluma’s
comprehensive framework of internal controls has been designed to provide reasonable
rather than absolute assurance that the financial statements will be free from material
misstatement. As management, we assert that, to the best of our knowledge and belief,
this financial report is complete and reliable in all material respects.
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The City of Petaluma’s financial statements have been audited by Caporicci & Larsen,
Certified Public Accountants, an international public accounting firm fully licensed and
qualified to perform audits of the State and local governments within the State of California.
The goal of the independent audit was to provide reasonable assurance that the financial
statements of the City of Petaluma, for the fiscal year ended June 30, 2004, are free of
material misstatement. The independent audit involved examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements; assessing the
accounting principles used and significant estimates made by management; and evaluating
the overall financial statement presentation.
The independent auditor concluded that there was a reasonable basis for rendering an
unqualified opinion that the City of Petaluma’s financial statements for the fiscal year ended
June 30, 2004, are fairly presented in conformity with accounting principles generally
accepted in the United States of America. The independent auditor’s report is presented as
the first component of the financial section of this report.
The independent audit of the financial statements of the City of Petaluma was part of a
broader, federally mandated “ Single Audit” designed to meet the special needs of Federal
grantor agencies. The standards governing Single Audit engagements require the
independent auditor to report not only on the fair presentation of the financial statements,
but also on the audited government’s internal controls and compliance with legal
requirements, with special emphasis on internal controls and legal requirements involving
the administration of Federal awards. These reports are available in the City’s separately
issued Single Audit Report.
GAAP requires that management provide a narrative introduction, overview and analysis to
accompany the basic financial statements in the form of Management’s Discussion and
Analysis ( MD& A). This letter of transmittal is designed to complement MD& A and should
be read in conjunction with it. The City’s MD& A can be found immediately following the
report of the independent auditors in the financial section of the CAFR.
CITY OF PETALUMA PROFILE
The City of Petaluma, founded in 1852 and charted in 1858, is located in southern Sonoma
County, California, approximately 40 miles north of downtown San Francisco. Petaluma
consists of 13.8 square miles and includes residential communities, commercial retail areas
and several industrial/ office complexes that are home to the Telecom industry. It is also
home to 43 parks, 2 community centers, 3 recreational facilities and 40 ball fields.
The City operates under the Council- Manager form of government. Policymaking and
legislative authority are vested in the City Council, which consists of an elected Mayor and
six members Council. The governing council is responsible for the City’s ordinances,
operating resolutions, adoption of the annual budget, appointing commissions and
committees and hiring the City Manager, the City Clerk and the City Attorney. The City
Manager is responsible for implementing the policies, ordinances and directives of the City
Council, for overseeing the day- to- day operations of the City and for appointing the
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Directors of the City departments. The Finance Director also serves as the Treasurer for
the City. The Council is elected on a nonpartisan basis. The Mayor and Council members
are elected to four- year staggered terms.
The City provides a full range of services including public safety, building safety regulation
and inspection; community planning; infrastructure and public facility capital improvement
construction; street and park maintenance; street lighting; recreational activities and cultural
programs. The City also provides water and sewer services to its citizens. The full- time
fire department also provides emergency medical services through an ambulance service
that users are billed for. Educational services are provided by three school districts and a
branch of the Santa Rosa Junior College is located in the City. The County provides library
services while the City provides the building.
FACTORS AFFECTING FINANCIAL CONDITION
The information presented in the financial statements is best understood when considered
from the broader perspective of the specific environment within which the City of Petaluma
operates.
LOCAL ECONOMY. The micro economy of Petaluma is dependent on the macro economies
of both the State of California and the Nation. Additionally, while much of the state is
enjoying a rebound from the most recent recession, the San Francisco Bay Area is lagging
behind, due to its heavy dependency on the “ high technology” market. Even though there
are recent signs of recovery, the initial investment of capital buildings and infrastructure
during the “ boom” years will not reach efficiency for many years at the current slow growth
pace.
Sonoma County has experienced recessionary conditions for several years. Employment
has taken a turn downward during that time with major lay- offs in the high- tech
manufacturing industries. Wineries and vineyards also contributed to the weakness due to
expanded global supply and downward pressure on prices. The City was significantly
affected by the downturn in the “ high- tech” environment. Sonoma County and Petaluma
are home to numerous “ telecom” industries, which were hit hard by the downturn in the
economy. Local economic relief is becoming evident in the vineyards, with price stability
that was preceded by several years of decline. Some stability is reflected in the tourism
industry. The summer of 2004 provided some improvement in travel, as short- distance
travel from nearby major metropolitan areas picked up.
For 2005, better news is ahead. Sonoma County business confidence continues to rise for
the sixth consecutive quarter, hitting 6.19 on a 10- point scale ( with 10 = excellent).
Executives are predicting a further improvement to 6.48 by summer of 2005.
The strength of up- start telecom firms is reliant on business investment. Investment is
improving nationwide, but little of it is being directed toward the telecom industry. Thus the
turnaround in the telecom industry will lag other tech centers that focus more on consumer
products and computing components.
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Low interest rates have generated sufficient demand to offset any downward pressure in
sales prices, due to weak income growth. However, prices are expected to remain flat
during the next eighteen months, as the interest rates rise from historic lows.
Signs are emerging in the County that would warrant a cautious optimism for slow
economic recovery. According to recent reports, Sonoma County is expected to
experience:
• Improved employment outlook for the next six months. The majority of executives
surveyed ( 57%) in the Sonoma County’s Economic Development Board Winter 2004
Confidence Report believe the unemployment rate will decline and more executives
plan to increase employment ( 28%) vs. decrease ( 16%).
• Sonoma County’s unemployment rate has stayed below the California average
because of a nonexpanding labor force. During the 4th quarter of 2004, the jobless
rate has been falling, albeit slowly. Sonoma County’s unemployment rate for
December 2004 was 3.6% compared the state of California average of 6.2%.
Petaluma’s unemployment rate at the same period was 2.9%.
• Profit outlooks have improved, with 50% of respondents in the survey expecting
higher profits for the next quarter.
• Industry Confidence in Sonoma County from Fall 2003 to Winter 2003 was as
follows: ( Index change by Industry)
o Agriculture + 1.2
o Technology + 1.7
o Professional/ Financial + 0.3
o Retail/ Distribution + 0.3
o Manufacturing + 3.4
o Real Estate 0.0
o Other + 0.75
• Recoveries are noted in health services, hospitality, real estate and construction
industries. Health care is on the rise due to the aging population and increased
availability of medical facilities in the County.
• The hospitality industry has been depressed since the tragic 9- 11 incident but
continues to build confidence with greater consumer discretionary income being
spent on travel plans.
Petaluma is attacking the downturn in the telecom industry by vigorously pursuing retail
growth. Based on a “ sales tax leakage” study, over $ 2 million in sales tax revenue is lost
annually by residents of the City shopping elsewhere. The City is aggressive in economic
development activity. Recently a major department store development ( Kohl’s) was
completed on the north side of the city. With this anchor store, it is projected several other
regional and national retail stores will locate in the surrounding development. Additionally,
expansion to the Factory Outlet Mall is under discussion along with possible expansion of
the Petaluma Auto mall with additional auto dealerships. Finally, the City approved a $ 75
million development agreement to build a 12- screen theatre downtown, as well as develop
additional retail and residential space in the area. This project is currently under
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construction and is scheduled to open in spring of 2005. Additional retail/ residential
developments are planned for the south side of the City along with a major development
under consideration at the Kenilworth Jr. High School site.
While the City remains heavily reliant on sales tax revenues from the sale of new and used
vehicles ( 34% of total sales tax), a renewed emphasis on diversification of this resource is
taking place. With the increase in the tourism industry, the City should realize additional
transient occupancy taxes that will provide funds for the General Fund. Finally, while
housing prices are stabilizing in the County, Petaluma’s housing values continue to rise,
due to the high demand and low supply, which exists in the City.
While the City’s micro economy is improving, the possibility of losing a major source of
General Fund revenue remains. Proposition 1A was approved by the voters in November
2004 which protects local government revenues unless extreme emergencies exist.
However, included in the legislation was the State Vehicle License Fee ( VLF) Swap, which
reduced VLF fees and is replaced with additional property tax. The net result is expected
to be a 33% reduction in net revenues to the City. Since vehicle license tax represents 9.7
percent of the General Fund budget, this loss will be significant. In addition, the state
instituted the “ triple flip” formula, which takes City sales tax and replaces with property tax.
Unfortunately, property tax is generally paid twice per year where sales taxes are paid
monthly. This will impact cash flow issues and loss of interest income. Because of these
revenues challenges and unknowns, management is considering a bridge loan program to
finance VLF losses until repaid by the state in 2006.
MAJOR INITIATIVES FOR THE YEAR
The City has completed several projects in fiscal year 2004, and has several major projects
scheduled to start in fiscal year 2005. Additionally, the City has approved the Central
Petaluma Specific Plan, which provides the blueprint for the revitalization of the downtown
area. In fiscal year 2004, the City completed the following projects:
• The Computer Aided Dispatch/ Records Management project ( CAD/ RMS) was
implemented in the Police Department. This project links all law enforcement
agencies in Sonoma County with each other and provides for the rapid sharing of
information.
• The complete financial systems were converted to Pentamation municipal
accounting systems which included general ledger, payroll, revenue management,
business license, animal license, accounts payable and project management. Utility
Billing will be implemented in FY 04- 05.
• Petaluma River Access Plan was designed and construction started on Water Street
on the underground utilities and infrastructure. In addition, expanded pedestrian
paths are being added to access the turning basin at Washington Street.
• Keller Street Garage completion with a new security guard program and higher level
of maintenance with participation of the Downtown merchants.
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• Completion of the Petaluma Central Business District Streetscape master plan
including Washington Street to “ B” Street and from Petaluma Boulevard to Howard
Street. The construction project was awarded for $ 2.2 million dollars and is
currently underway.
• Completed the recycled water pipeline from the City’s treatment plant to Rooster
Run Golf Course. This provides treated wastewater for irrigation of the City’s golf
course.
• Unreinforced Masonry Program was initiated that reimbursed property owners in the
downtown area to upgrade their buildings to new earthquake standards.
Approximately $ 100,000 was reimbursed in FY 03- 04.
• The Theatre District project was approved that included an Owner Participation
Agreement ( OPA) and Development Agreement ( DA). This project is currently
under construction which includes a 12 screen movie theatre, a 530- space parking
structure, a mixed- use retail/ residential Theatre Square, an office building on the
Petaluma River and a mixed use residential project on 1st street.
• Petaluma Railroad Depot – lease executed with Northwest Pacific Railroad,
Northcoast Rail Authority and other agencies for a long- term lease ( 25 years) of the
8200 square foot building. The City currently renovated the exterior and Interior of
the facility. The facility will be used for City and other agency events/ offices.
• Water Street Improvements – Final undergrounding utility and landscape design
was completed and the project was awarded. Construction is currently underway
which will include replacement of the storm drain, sewer lines, water lines, electrical
utilities, and lighting conduits.
• Caulfield Extension – An application was submitted to the California Public Utilities
Commission ( CPUC) to trade the rail crossing at Hopper for a new rail crossing at
Caulfield. This trade would make Lakeville Street safer and allow for the southern
crossing of the Petaluma River as provided in the Central Petaluma Specific Plan.
• Wayfinding Signage – A task force was created to develop and recommend a
signage program that would assist tourist and residents to find major interest spots
in the downtown and other areas of the city. The recommendation has been
completed and the project will be bid in the summer of 2005.
• Petaluma River Flood Management Project continues to be a priority. In FY 03- 04
the City was successful in receiving an additional Federal appropriation of $ 7.3
million dollars.
• The Petaluma Community Development Commission ( PCDC) and the City of
Petaluma issued $ 23.63 million dollars of Tax Allocation Bonds ( TAB’s) for
redevelopment projects in the downtown and surrounding areas.
• The City completed an Economic Sustainable Retail Strategy and Leakage Study.
The study provided focus and recommendation to the City of Petaluma on strategies
for economic development taking into consideration a regional approach.
• Brownfields Grant - The City was successful in receiving a $ 200,000 Brownfield
grant to assist in identifying toxic petrochemical sites throughout the City.
• The 2003- 04 Housing Element Progress Report was completed and submitted to
HCD.
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• Downtown River Apartments is currently under construction with occupancy
scheduled for March 2005.
• The major arterials of Petaluma’s streets and roads systems are being
reconstructed or resurfaced. This is a high priority for the City Council with over $ 10
million dollars expended in FY 03- 04 alone. This program will continue in FY 04- 05.
Capital projects planned for fiscal year 2005 include:
DESIGN AND DEVELOPMENT OF THE KENILWORTH J. H. SITE
• Work with the Petaluma Schools and potential developers to redevelop the site for
retail and commercial. Relocate swim center and Skate Park to allow for access.
STREET RECONSTRUCTION
• Continue reconstruction of the major streets in the City to increase the overall quality
of City streets and reduce maintenance costs.
RAILROAD DEPOT RENOVATION
• Continue the renovations of the existing historic railroad depot and railroad offices
will revitalize a major section of the City’s downtown. The renovation will provide
offices and community meeting rooms while revitalizing a prominent gateway to the
City’s downtown.
RIVER ACCESS PROJECT
• Complete the construction of the Petaluma River Access Enhancement plan will
provide pedestrian and bike paths along the Petaluma River in the downtown area.
This pathway will eventually extend north from downtown to connect to the existing
pathways in other parts of the City.
DOWNTOWN IMPROVEMENTS
• Complete the downtown improvement project that will result in improved streets,
street lighting and pedestrian appurtenants in the central core of downtown.
WATER TREATMENT PLANT
• Complete design of the new wastewater treatment plant in FY 2005. Acquisition of
the site is expected in FY 2004- 05 while the project is still on track for completion in
FY 2007.
BOND FINANCING PROJECTS
• Consider the Redevelopment Agency issuing additional new debt to continue the
redevelopment of the downtown core of the city.
• Consider a new assessment district in the downtown to augment with private dollars
the improvements in the downtown area.
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COMMUNITY FACILITIES PROJECTS
• Library Renovations
• Relocation of Fire Station # 1
• Fire Station # 2 and # 3 remodeling
PUBLIC TRANSPORTATION PROJECTS
• D Street Bridge improvements
• Washington Street Bike trails
• Cross- town connector design and engineering
• Citywide Bridge rehabilitation project
• East Washington Street rehabilitation
PARKS AND RECREATION PROJECTS
• Finish design and construction of Gatti Park
• Petaluma Senior Center Project
• Shollenberger Park Improvements
• Boys and Girls Club Pool Project
• Relocate the Swim Center and Skate Park
OTHER ACTIVITIES
• The new 20 year General Plan will be completed to replace the existing plan. This
has been a four- year process that will provide the blueprint for the development of
the City for the future.
• The City will update the existing vehicle and equipment replacement plan to better
identify equipment requirements and identify methods to finance the required
acquisitions.
FINANCIAL INFORMATION
ANNUAL BUDGET. The City of Petaluma operates on a fiscal year basis, beginning July 1st
and ending June 30th. The budget is prepared under the supervision of the City Manager
and transmitted to the City Council for deliberation and adoption in June, prior to the
beginning of the fiscal year.
In accordance with the City’s Charter, the budget is required to be submitted to the City
Council by the first Monday in May. Budget hearings are held in May and June. The
budget is approved by resolution, and the appropriations are set by ordinance. Upon
adoption by the City Council, the City maintains budgetary controls to ensure compliance
with legal provisions embodied in the annual budget. Budget- to- actual comparisons are
provided in this report for each individual governmental fund for which an appropriated
annual budget has been adopted. The City’s budgetary procedures are further discussed
in the Notes to the Basic Financial Statements, which are located in the financial section of
this report.
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CASH MANAGEMENT, POLICIES AND PRACTICES. The City adopts an annual Investment Policy
intended to provide specific criteria for the prudent investment of City funds. This Policy is
in conformance with all Federal, State and local laws governing the investment of City
monies. Cash temporarily idle during the year was invested in various securities, as
permitted in the City’s Investment Policy and state laws governing the deposit of public
funds. The City’s 2004 Investment Policy was adopted by the City Council in January
2004.
The City ended the year with cash and investments of $ 94.5 million of which $ 53.7 million
is directly managed by the City Treasurer. Fiscal agents at the direction of the City
Treasurer manage Bond proceeds of $ 40.8 million. Total accrued earnings were
$ 1,416,346. The estimated average interest rate as of June 30, 2004 was 1.70%
compared to 1.29% for U. S. Treasury 91 day yields, and 0.84% at June 30, 2003.
DEBT ADMINISTRATION. As of June 30, 2004, the City of Petaluma and its component units
have a number of debt issues outstanding. In fiscal year 2004 the City issued additional
debt as follows: $ 23.63 Million dollars for the Petaluma Community Development
Commission in the form of Tax Allocation Bonds ( Series 2003A). In addition, a Certificate
of Participation ( COP) refunding issue was completed in the amount of $ 6.295 Million,
which refunded an earlier issue plus supported additional fund for an airport expansion
project. The City has no outstanding tax- supported general obligation debt. The total
outstanding debt is shown in detail in the Notes to the Basic Financial Statements
presented within the financial section of this report.
RISK MANAGEMENT. The City uses a combination of insured and self- insured programs to
finance its property and casualty risk. The City is self- insured for workers’ compensation
( up to $ 275,000), automotive ( up to $ 25,000), and general liability risks ( up to $ 500,000).
Resources accumulate in the City’s Risk Management Fund and the Workers’
Compensation Fund to meet potential losses. Excess liability and workers’ compensation
coverage is provided through a risk- sharing pool, the California Joint Powers Risk
Management Authority ( CJPRMA). Additional risk management information is presented in
the Notes to the Basic Financial Statements.
OTHER. Additional information concerning the finances of the City is contained in the Notes
to the Basic Financial Statements. The City has refrained from duplicating information
contained in the Management Discussion and Analysis ( MD& A) or in the notes.
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AWARDS AND ACKNOWLEDGEMENTS
AWARDS. The Government Finance Officers Association ( GFOA) awarded the Certificate of
Achievement for Excellence in Financial Reporting to the City for the June 30, 2003 CAFR.
This was the ninth year in a row that the City received an award from the GFOA. In 2002
the City did receive the California Society of Municipal Finance Officers ( CSMFO) award –
Certificate of Achievement for Excellence in Financial Reporting for fiscal year ended June
30, 2002. Management decided not to submit for the California award, as timing did not
permit because of a computer conversion priority project.
For the GFOA Certificate of Achievement, a government must publish an easily readable
and efficiently organized comprehensive annual financial report. This report must satisfy
both generally accepted accounting principles and applicable legal requirements. A
Certificate of Achievement is valid for a period of one year. We believe that our current
CAFR, which implements GASB Statement No. 34, continues to meet the Certificate of
Achievement Program’s requirements and we are submitting it to the GFOA to determine
its’ eligibility for a certificate.
ACKNOWLEDGEMENTS. This report could not have been prepared without the effort of Cinde
Rubaloff, Accounting Manager who spent untold hours preparing the financial statements,
notes, statistical information and other details to comply with all the necessary
requirements and pronouncements. I would like to express my appreciation to all members
of the department that assisted and contributed to the preparation of this report, particularly
the team of Chris Jones and Cindy Juandy. I would also like to thank the Mayor, City
Council and the City Manager for their confidence and support for maintaining the highest
standards of professionalism in the management of the City of Petaluma’s finances.
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CITY OF PETALUMA OFFICIALS
DAVID GLASS
Mayor
MIKE O’BRIEN KEITH CANAVERO MICHAEL HARRIS
Vice- Mayor Councilmember Councilmember
MICHAEL HEALY BRYANT MOYNIHAN PAMELA TORLIATT
Councilmember Councilmember Councilmember
CITY MANAGER
Michael A. Bierman
INTERIM FINANCE DIRECTOR/ TREASURER
Joseph D. Netter
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CITY OF PETALUMA, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS
June 30, 2004
As management of the City of Petaluma, California ( City), we offer readers of the City’s financial statements
this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30,
2004. We encourage readers to consider the information presented here in conjunction with additional
information that we have furnished in our letter of transmittal and the City’s basic financial statements, which
follow this section.
The Comprehensive Annual Financial Report ( CAFR) is presented in four sections:
• An Introductory Section which includes the Transmittal Letter and general information;
• The Financial Section which includes:
o Auditor’s Report,
o Management’s Discussion and Analysis
o Basic Financial Statements
o Required Supplementary Information; and
o Combined Financial Statements and Schedules
• Statistical information; and
• Compliance Information
FINANCIAL HIGHLIGHTS
• The net assets of the City exceeded its liabilities at June 30, 2004 by $ 219.883 million ( net assets).
Of this amount, $ 22.6 million ( unrestricted net worth) may be used to meet the government’s
ongoing obligations to citizens and creditors, but is subject to designation for specific City programs.
• The City’s total net assets increased by $ 15.43 million to $ 219.883 million during the fiscal year
ended June 30, 2004. Net assets for fiscal year 2003 were restated. This was an increase of 7.8
percent. Of this total, $ 139.24 million were Governmental net assets and $ 80.645 million were
Business- type net assets.
• Revenues for the City’s Governmental Activities increased to $ 57.47 million or 9.7 percent over prior
fiscal year. Expenditures increased to $ 51.57 million or 15.4 percent over prior fiscal year.
• Revenues for the City’s Business- type Activities increased to $ 30.31 million or 21.8 percent over
prior fiscal year, while expenses increased to $ 20.78 million or 6.2 percent over prior fiscal year ( as
restated).
• The City’s General Fund reported a deficit of ($ 0.175 million) for the year ending June 30, 2004,
decreasing the general fund balance to $ 6.143 million representing a decrease of 2.78 percent over
the prior fiscal year.
• At the end of the current fiscal year, the unreserved fund balance for the General Fund was $. 758
million or 2.37 percent of total General Fund Expenditures.
• The resources available for appropriation were $ 0.559 million less than budgeted for the General
Fund ( 1.4 percent). The expenditures for the fund were $ 1.2 million less than budgeted ( 3.6
percent).
4
OVERVIEW OF THE BASIC FINANCIAL STATEMENTS
The financial section of this report consists of five parts – the Independent Auditor’s Report, management’s
discussion and analysis ( this portion), the basic financial statements, required supplementary information,
and other supplemental information.
This discussion and analysis section is intended to serve as an introduction to the City’s basic financial
statements. The City’s basic financial statements consist of three components: 1) government- wide
financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This
report also contains other supplementary information in addition to the basic financial statements
themselves.
GOVERNMENT- WIDE FINANCIAL STATEMENTS
The government- wide financial statements are designed to provide readers with a broad overview of the
City’s finances, in a manner similar to a private- sector business. It provides both long- term and short- term
information about the City’s overall financial status.
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 in the net assets may serve as a useful
indicator of whether the financial position of the City is improving or deteriorating.
The statement of activities presents information showing how the government’s net assets changed during
the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving
rise to the change occurs, regardless of the timing of related cash flows. Thus, 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).
These two statements report the City’s net assets and changes in them. These statements divide the City
into two kinds of activities:
• Governmental activities – Most of the City’s basic services are reported here, including the police,
fire, public works and parks departments, and general administration. Property taxes, sales taxes,
franchise fees and intergovernmental revenues finance a significant portion of the cost of these
activities.
• Business- type activities – The City charges a fee to customers to help it cover all or most of the cost
of certain services it provides. The City’s water and waste water ( sewer) systems, the airport, and
ambulance services are the major activities.
The government- wide financial statements include the City itself ( known as the primary government) but
also two legally separate entities, the City of Petaluma Public Financing Corporation, and the Petaluma
Public Financing Authority. The City is financially accountable for these entities and financial information for
these blended component units is reported within the financial information presented for the primary
government itself. Financial information for another blended component unit, the City of Petaluma
Community Development Commission ( PCDC), is also included with the activities of the primary
government.
FUND FINANCIAL STATEMENTS
The Fund Financial Statements focus on individual parts of the City government and provide detailed
information about each of the City’s most significant funds, called Major Funds. The concept of Major
Funds, and the determination of which are Major Funds, was established by GASB 34 and replaces the
concept of combining like funds and presenting them in total. Instead, each Major Fund is presented
individually, with all Non- major Funds combined in a single column on each fund statement. Subordinate
schedules present the detail of these Non- major Funds. Major Funds present the major activities of the City
for the year. The General Fund is always a Major Fund, but other funds may change from year to year as a
result of changes in the pattern of City activities.
5
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, use 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. Most of the City’s basic services are reported in governmental funds, which focus
on how resources flows into and out of those funds and the balances left at year- end that are available for
spending. These funds are reported using an accounting method called modified accrual accounting, which
measures cash and all other financial assets that can be readily converted to cash. The governmental fund
statements provide a detailed short- term view of the City’s general government operations and the basic
services it provides. Governmental fund information helps you determine whether there are more or fewer
financial resources that can be spent in the near future to finance the City’s programs.
Because the focus of governmental funds is narrower than that of the government- wide financial
statements, it is useful to compare the information presented for governmental funds with similar information
presented for governmental activities. In the government- wide financial statements. By doing so, readers
may better understand the long- term impact of the government’s near- term financing decisions. Both the
governmental fund Balance Sheet and the governmental fund Statement of Revenues, Expenditures, and
Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental
funds and governmental activities.
The City maintains various individual governmental funds. Information is presented separately in the
Governmental Funds Balance Sheet, and in the Governmental Funds Statement of Revenues,
Expenditures, and Changes in Fund Balances for the General Fund, Low & Moderate Income Housing
Fund, Housing In- Lieu Fund, Traffic Mitigation Impact Fee Fund, Petaluma Community Development
Commission ( PCDC) – Central Business District ( CBD) Capital Project Fund, and the PCDC – Petaluma
Community Development ( PCD) Capital Project Fund, all of which are considered to be major funds. Data
from other governmental funds are combined into a single, aggregated presentation. Individual fund data
for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere
in this report.
The City adopts an annual appropriated budget for its major funds. The basic financial statements include
budgetary comparison statements for the General Fund and those funds referred to in the previous
paragraph to demonstrate compliance with the annual budget. Budgetary comparison statements have
been provided for all of the funds in the combining section of this report.
PROPRIETARY FUNDS. Offer short and long- term financial information about the activities the City operates
like businesses. The City maintains two types of proprietary funds. Enterprise funds are used to report the
same functions presented as business- type activities in the government- wide financial statements. The City
uses enterprise funds to account for its water, wastewater, airport, ambulance, transportation and marina
activities. Internal service funds are used to accumulate and allocate costs internally among the City’s
various functions including public liability, workers’ compensation, vehicle and equipment replacement,
information technology, employee benefits and general services.
Proprietary funds provide the same type of information as the government- wide financial statements, only in
more detail. The proprietary fund financial statements provide separate information for the Water,
Wastewater, Airport, and Marina, which are considered to be major funds of the City. Data from other
enterprise funds is combined into a single aggregated presentation. The internal service funds, none of
which can be considered Major Funds because their revenues are derived from other City Funds are
presented in a single aggregated column in the proprietary fund financial statements. Individual fund data
for the Non- major enterprise and internal service funds are provided in the Supplemental section of this
document.
6
FIDUCIARY FUNDS. Fiduciary funds provide information about the financial relationships and accounts for
resources in which the City acts solely as a trustee or agent for the benefit of others, to whom the resources
belong. Fiduciary funds are not reflected in the government- wide financial statement because the
resources of those funds are not available to support the City’s own programs. The basic fiduciary fund
financial statements can be found immediately following the basic proprietary fund financial statements.
NOTES TO THE BASIC FINANCIAL STATEMENTS
The notes to the basic financial statements provide additional information that is essential to a full
understanding of the data provided in the government- wide and fund financial statements. The notes to the
basic financial statements can be found immediately following the basic fiduciary fund financial statements.
SUPPLEMENTAL INFORMATION
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information that follows the notes to the basic financial statements.
The combining statements referred to earlier in connection with nonmajor governmental funds, enterprise
funds and internal service funds are presented for all nonmajor Special Revenue Funds, nonmajor Capital
Projects Funds, all nonmajor Debt Service Funds, all nonmajor Enterprise Funds and all Internal Service
Funds. These combining and individual fund statements and schedules can be found immediately following
the required supplementary information.
This report also contains statistical information that may be useful to readers of this report. This information
can be found in the last section of this report.
GOVERNMENT- WIDE FINANCIAL ANALYSIS
The government- wide financial statements provide long- term and short- term information about the City’s
overall financial condition. This analysis addresses the financial statements of the City as a whole.
In accordance with GASB Statement No. 34, the city is not required to restate financial information from
prior periods for the purpose of providing comparative information for this analysis. In future years, when
prior year information is available, a comparative analysis of government- wide information will be presented.
The largest portion of the City’s net assets ( 50.0 percent) reflects its investment in capital assets ( e. g., land,
building, improvements other than buildings, equipment, infrastructure, and construction in progress); less
any related debt used to acquire those assets that are still outstanding. The City used these capital assets
to provide services to citizens; consequently, these assets are not available for future spending. Although
the City’s investment in 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, since the capital assets themselves cannot
be used to liquidate these liabilities.
Net assets ( as restated) of the City increased 7.5 percent to $ 219.88 million, of which $ 109.8 million is
invested in capital assets such as equipment, buildings and infrastructure. Of the remaining total, $ 87.4
million is restricted to specifically stipulated spending agreements originated by law, contract or other
agreements with external parties. The remaining is unrestricted and/ or unreserved. It is this part of the net
assets that can be used to finance day- to- day operations without constraints established by debt covenants,
enabling legislation, or other legal requirements.
7
G o v e rn m e n ta l
A c ti v i ti e s
B u sin e ss- ty p e
A c tiv i tie s
T o ta l P r im a ry
G o v e rn m e n t
A sse ts:
C a p ita l a s s e t s $ 9 6 ,1 7 4 $ 9 1 , 3 3 3 $ 1 8 7 , 5 0 7
C u rre n t a n d o th e r a s s e t s 1 0 1 ,7 5 8 21, 6 7 8 123 ,4 3 6
T o t a l a s s e t s 1 9 7 , 9 3 2 113 ,0 1 1 310 ,9 4 3
L i a b i l i ti e s:
L o n g - t e rm lia b ilit ie s 5 1 , 8 4 5 2 7 , 8 9 8 7 9 , 7 4 3
O t h e r L ia b ilit ie s 6 , 8 5 0 4,4 6 6 11, 3 1 6
T o t a l lia b ilit ie s 5 8 , 6 9 5 32, 3 6 4 91, 0 5 9
N e t A sse ts:
In ve s t e d in c a p it a l a s s e t s , n e t o f
re la t e d d e b t 4 7 , 0 6 6 6 2 , 7 6 9 1 0 9 , 8 3 5
R e s t ric te d 7 7 ,1 6 4 1 0 , 2 8 3 8 7 , 4 4 7
U n re s t ric t e d 1 5 , 0 0 8 7,5 9 3 22, 6 0 1
T o t a l n e t a s s e t s $ 1 3 9 , 2 3 8 $ 80, 6 4 5 $ 219 ,8 8 3
( i n th o u sa n d s)
S u m m a r y o f N e t A s se ts
A s o f J u n e 3 0 , 2 0 0 4
The net assets of governmental activities increased by 6.0 percent ($ 139.24 million from $ 131.30 million in
FY 2003, as restated). The net assets of our business- type activities increased by 10.2 percent ($ 80.65
million from to $ 73.14 million, as restated) in 2004. The major portion of the increase ($ 6.9 million) was the
results of the Wastewater Utility Fund. This increase cannot be used to make up for the operations
associated with our governmental activities. The City restricts the use of these net assets to finance the
continuing operations of the wastewater operations.
8
The summary of changes in net assets is presented below. It provides summary information that provides
how the net assets increased and/ or decreased for the citywide operations, with a breakdown between
governmental activities and business- type activities.
G o v e rn m e n ta l
A c ti v i ti e s
B u s i n e s s - ty p e
A c ti v i ti e s
T o ta l P r i m a r y
G o v e rn m e n t
T o ta l P r i m a r y
G o v e r n m e n t
J u n e 3 0 , 2 0 0 3
P e rc e n ta g e
C h a n g e
R e v e n u e s:
P ro g ra m R e ve n u e s
C h a rg e s fo r s e rvic e $ 7 ,9 1 5 $ 2 6 , 5 5 6 $ 3 4 , 4 7 1 $ 2 8 , 4 5 9 2 1 . 1 3 %
O p e ra t in g g ra n t s a n d c o n t rib u t io n s 7 ,6 5 8 4 , 4 4 6 1 2 , 1 0 4 4 , 3 8 4 1 7 6 . 0 9 %
C a p ita l g ra n t s a n d c o n t r ib u t io n s 4 6 9 - 469 6,6 8 4 - 9 2 .9 8%
T o ta l p ro g ra m re ve n u e 1 6 ,0 4 2 31, 0 0 2 47, 0 4 4 39,5 2 7 19. 0 2 %
G e n e ra l R e ve n u e s :
Ta x e s :
P ro p e rt y 5 ,3 0 6 - 5 , 3 0 6 5 , 1 8 2 2 . 3 9 %
R e d e ve lo p m e n t In c re m e n t 1 1 ,9 0 9 - 1 1 , 9 0 9 1 1 , 0 8 8 7 . 4 0 %
S a le s 1 0 , 0 3 0 - 1 0 , 0 3 0 1 0 , 2 6 5 - 2 . 2 9 %
O t h e r 6 ,1 4 7 - 6 , 1 4 7 9 , 7 1 1 - 3 6 . 7 0 %
T ra n s ie n t o c c u p a n c y - - -
F ra n c h is e 1 ,8 1 4 - 1 , 8 1 4
P ro p e rt y t ra n s fe r 1 ,4 0 7 - 1 , 4 0 7
B u s in e s s lic e n s e - - -
M o to r ve h ic le in - lie u 2 ,5 5 8 - 2 , 5 5 8
O t h e r 4 7 - 4 7
In ve s tm e n t in c o m e 1 ,2 7 3 2 4 7 1 , 5 2 0 1 , 5 1 1 0 . 6 0 %
In te rg o ve rn m e n ta l - - -
T ra n s fe rs 9 4 1 ( 94 1 ) -
T o t a l G e n e ra l R e ve n u e s 4 1 , 4 3 2 ( 69 4 ) 40, 7 3 8 37,7 5 7 7.8 9%
T o t a l R e ve n u e s 5 7 , 4 7 4 30, 3 0 8 87, 7 8 2 77,2 8 4 13. 5 8 %
E x p e n se s:
G o ve rn m e n t a l A c t ivit ie s
G e n e ra l g o ve rn m e n t 3 ,5 9 2 - 3 , 5 9 2 9 , 6 9 3 - 6 2 . 9 4 %
C o m m u n it y d e ve lo p m e n t 1 5 ,5 6 8 - 1 5 , 5 6 8 6 , 5 9 3 1 3 6 . 1 3 %
P o lic e 1 2 , 3 6 9 - 1 2 , 3 6 9 1 2 , 0 3 0 2 . 8 2 %
F ire 5 ,7 3 8 - 5 , 7 3 8 6 , 5 2 9 - 1 2 . 1 2 %
P a rk s a n d re c re a t io n 4 ,4 4 6 - 4 , 4 4 6 4 , 2 0 6 5 . 7 1 %
P u b lic w o rk s 4 , 9 8 7 - 4 , 9 8 7 4 , 2 4 1 1 7 . 5 9 %
In te re s t o n lo n g - t e rm d e b t 2 ,8 3 7 - 2 , 8 3 7 1 , 3 9 0 1 0 4 . 1 0 %
B u s in e s s - t y p e A c t ivit ie s
A irp o rt - 1 , 6 2 4 1 , 6 2 4 1 , 1 5 6 4 0 . 4 8 %
A m b u la n c e - 1 , 9 6 5 1 , 9 6 5 1 , 1 8 5 6 5 . 8 2 %
M a rin a - 5 4 3 5 4 3 5 9 4 - 8 . 5 9 %
P u b lic T ra n s p o rta t io n - 1 , 3 4 0 1 , 3 4 0 1 , 1 3 8 1 7 . 7 5 %
W a s te W a te r - 7 , 5 2 5 7 , 5 2 5 7 , 0 5 7 6 . 6 3 %
W a t e r U t ilit y - 9,8 1 4 9,8 1 4 8,4 4 4 16. 2 2 %
T o t a l E x p e n s e s 4 9 , 5 3 7 2 2 , 8 1 1 7 2 , 3 4 8 6 4 ,2 5 6 12. 5 9 %
E x c e s s o f R e ve n u e s o ve r E x p e n s e s 7 ,9 3 7 7,4 9 7 15, 4 3 4 13,0 2 8 18. 4 7 %
In c re a s e in N e t A s s e t s
N e t A s s e t s 6 / 3 0 / 2 0 0 3 1 3 1 ,3 0 1 7 3 , 1 4 8 2 0 4 , 4 4 9
N e t A s s e t s 6 / 3 0 / 2 0 0 4 1 3 9 ,2 3 8 80, 6 4 5 219 ,8 8 3
C h a n g e in N e t A s s e t s $ 7 ,9 3 7 $ 7,4 9 7 $ 15, 4 3 4
( I n th o u sa n d s)
S u m m a ry o f C h a n g e s in N e t A sse ts
F o r th e Y e a r E n d e d J u n e 3 0 , 2 0 0 4
The City’s total Primary Government Revenues increased by 13.58 percent to $ 87.78 million over prior
fiscal year 2003. The primary reasons for the increase were in the areas of charges for services ( 21.12%),
operating grants/ contributions ( 176.1%), property taxes ( 2.4%), and redevelopment increment ( 7.4%). The
total Primary Government Expenses increased by 12.6 percent to $ 72.3 million. The primary reason for
this increase was due to increased costs in Community Development ( 136%), Police ( 2.8%), Parks and
Recreation ( 5.7%), Public Works ( 17.5%), Interest on Long Term Debt ( 104.1%).
For the Business- type activities, the major increases over prior fiscal year 2003 were as follows: Airport
( 40%), Ambulance ( 65.8%), Public Transportation ( 17.7%), Wastewater ( 6.6%) and Water Utility ( 16.2%).
Following is a brief review of various factors that impacted city revenues and expenditures for the fiscal year
ending on June 30, 2004:
• The largest general revenue ( governmental activities), sales tax, accounted for 24.2 percent of total
general revenues in the General Fund.
• Redevelopment Increment increased by 7.4% over prior year which accounted for 28.7 percent of
total Governmental Activity Revenues.
9
• Program revenues for capital grants and contributions decreased in the governmental activities due
to the absence of the non- recurring grant of $ 3 million from the Army Corps of Engineers, for
reimbursement of expenses associated with the flood control project. This money was received in
FY 2003.
• Overall expenditures ( governmental activities) increased by $ 4.8 million in fiscal year 2004. This
was primarily due to an increase in the enterprise fund operations and the increase in Community
Development Department. For the General Government, the City reclassified the redevelopment
operations to the Community Development Department resulting in a decrease in General
Government and an increase in Community Development.
• Interest expense on long term debt increased by $ 1.4 million due to the addition of new Petaluma
Community Development project debt.
• Unallocated capital outlay increase of $ 1.12 million was for major street reconstruction.
FINANCIAL ANALYSIS OF THE GOVERNMENTAL FUNDS
The City uses fund accounting to segregate accounts for specific activities or objectives, including
demonstrating finance- related legal compliance.
GOVERNMENTAL FUNDS. The focus of the City’s governmental funds is to provide information on near- term
inflows, outflows and balances of spendable resources that are available to provide services and capital
project construction. In particular, unreserved fund balance may serve as a useful measure of a
government’s net spendable resources.
As of the end of the current fiscal year, the City’s governmental funds reported total combined ending fund
balances of $ 79.03 million, an increase of $ 12.3 million in comparison with the prior year. Approximately
13.5 percent of this total amount constitutes unreserved/ undesignated fund balance, which is available for
spending at the government’s discretion. The remainder of the fund balance, $ 68.3 million is
reserved/ designated to indicate that it is not available for new spending, because it has already been
committed for various purposes as shown below.
G o v e rn m e n ta l F u n d s
F o r th e Y e a r E n d e d J u n e 3 0 , 2 0 0 4
( In T h o u sa n d s)
R e se rv e d fo r :
E n c um b ra n c e s $ 1 1 , 1 4 9
N o t e s re c e iva b le s 2 2 , 5 2 4
L a n d h e ld fo r re s a le 4 0 2
L o n g - t e rm a d va n c e s 1 0 , 6 8 8
D e b t s e rvic e 2 3 , 1 7 3
In ve n t o r ie s 1 3
D e p o s it s a n d p re p a id s 3 9 5
T o t a l R e s e rve d 6 8 , 3 4 4
D e sig n a te d fo r S p e c i fic P r o je c ts -
U n re se rv e d F u n d B a la n c e s 1 0 , 6 8 5
T o ta l F u n d B a la n c e s $ 7 9 , 0 2 9
10
The following table presents the amount of revenues from various sources as well as increases or
decreases from the prior year.
F Y 2 0 0 3 F Y 2 0 0 4 In c re a s e / ( D e c re a s e )
R e ve n u e b y S o u rc e A m o u n t % o f T o ta l A m o u n t % o f T o ta l A m o u n t P e rc e n t a g e
T a x e s $ 3 0 .8 1 5 6 .3 % $ 3 2 .0 6 5 3 .5% $ 1 .2 5 4 . 1 %
L ic e n s e , P e rm it s & F e e s 3 .7 8 6 . 9 % 7 . 0 7 1 1 . 8 % 3 . 2 9 8 7 . 0 %
F iin e s , F o rfe itu re s & P e n a lt ie s 0 .5 8 1 . 1 % 0 . 5 3 0 . 9 % ( 0 . 0 5 ) - 8 . 6 %
U s e o f M o n e y & P ro p e rt y 2 .5 6 4 . 7 % 1 . 4 3 2 . 4 % ( 1 . 1 3 ) - 4 4 . 1 %
In te rg o ve rn m e n ta l 1 1 .4 5 2 0 . 9 % 1 0 . 9 5 1 8 . 3 % ( 0 . 5 0 ) - 4 . 4 %
C h a rg e s fo r C u rre n t S e rvic e s 5 .2 2 9 . 5 % 6 . 0 5 1 0 . 1 % 0 . 8 3 1 5 . 9 %
O t h e r 0 .3 2 0 .6 % 1 .8 0 3 .0% 1 .4 8 4 6 2 .5 %
T o ta ls $ 5 4 .7 2 1 0 0 .0 % $ 5 9 .8 9 1 0 0 .0% $ 5 .1 7 9 .4 %
R e v e n u e s C la ssi fie d b y S o u rc e
G o v e rn m e n ta l F u n d s
( i n m i l l i o n s o f d o l l a r s)
R e v e n u e s b y S o u r c e
G o v e r n m e n ta l F u n d s
L ic e n s e ,
P e rm its &
F e e s
1 1 .8 %
F iin e s ,
F o r f e itu r e s &
Pe n a ltie s
0 .9 %
U s e o f
M o n e y &
Pr o p e r ty
2 .4 %
In te r g o v e r n -
m e n ta l
1 8 .3 %
C h a r g e s f o r
C u r r e n t
S e r v ic e s
1 0 .1 % O th e r
3 .0 %
T a x e s
5 3 .5 %
The following provides an explanation of revenues by source that changed significantly from prior years.
• Taxes increased by $ 1.25 million from $ 30.81 million to $ 32.06 million during the year ( 4.0%
increase). This increase is primarily due to property tax increase, 3.4%; redevelopment tax
increment increase, 7.4%; and low to moderate income housing revenue increase, 7.5%.
• Use of money and property ( interest income) declined by 44% mainly due to reporting rules under
GASB 31 whereby unrealized losses on investments are recognized in FY 2004.
• Intergovernmental revenue decreased due to the following:
o $ 0.8 million decrease in State motor vehicle fees due to the State exactions
o County grants increased by $ 89,000
o Public Safety Augmentation Fund increase by $ 40,000
11
The following table presents expenditures by function compared to prior year amounts.
F Y 2 0 0 3 F Y 2 0 0 4 In c re a s e / ( D e c re a s e )
E x p e n d itu re s b y F u n c t io n A m o u n t % o f T o ta l A m o u n t % o f T o ta l A m o u n t P e rc e n ta g e
C u rre n t :
G e n e ra l G o ve rnm e n t $ 9 .3 5 1 7 . 5 % $ 4 . 8 0 6 .8 % $ ( 4 . 5 5 ) - 4 8 . 7 %
C o m m u n it y D e ve lo p m e n t 7 .0 5 1 3 . 2 % 1 5 . 0 3 2 1 .3 % 7 .9 8 1 1 3 .2%
P o lic e 1 1 . 8 5 2 2 .2 % 1 2 .2 3 1 7 .4 % 0 .3 8 3 . 2 %
F ire 5 .6 9 1 0 . 7 % 6 . 1 6 8 .7 % 0 .4 7 8 . 3 %
P a rk s & R e c re a t io n 3 .7 8 7 . 1 % 4 . 1 5 5 .9 % 0 .3 7 9 . 8 %
P u b lic W o rk s 3 . 7 9 7 . 1 % 4 . 4 1 6 .3 % 0 .6 2 1 6 . 4 %
C a p it a l O u t la y 8 . 2 6 1 5 . 5 % 1 5 . 6 8 2 2 .3 % 7 .4 2 8 9 . 8 %
D e b t S e rvic e :
P rin c ip a l 1 .6 6 3 . 1 % 4 . 3 1 6 .1 % 2 .6 5 1 5 9 .6%
In t e re s t 1 . 8 6 3 . 5 % 3 . 7 0 5 .3 % 1 .8 4 9 8 .9%
T o t a ls $ 5 3 . 2 9 1 0 0 .0 % $ 7 0 .4 7 1 0 0 .0 % $ 1 7 .1 8 3 2 .2%
E x p e n d i tu r e s C l a s s i fi e d b y S o u r c e
G o v e rn m e n ta l F u n d s
( in m i l l io n s o f d o l la rs)
E x p e n d itu re s B y F u n c tio n
G o v e rn m e n ta l F u n d s
P a r k s &
R e c r e a tio n
5 .9 %
Pu b lic W o r k s
6 .3 %
C a p ita l O u tla y
2 2 .3 %
D e b t S e r v ic e
In te r e s t
5 .3 %
D e b t S e r v ic e
P r in c ip a l
6 .1 %
F ir e
8 .7 %
Po lic e
1 7 .4 %
G e n e r a l
G o v e r n m e n t
6 .8 %
C o m m u n ity
D e v e lo p m e n t
2 1 .3 %
The following provides an explanation of the expenditures by function that changed significantly over the
prior year.
• General Government – decrease by $ 4.55 million
o Petaluma Community Development Commission program expenses were classified as
Community Development rather than as General Government as in the prior fiscal year -
decrease $ 4.9 million
o General Fund operating departments increased to $ 4.7 million, 9.8 percent, over FY 2003
o Non- major governmental funds increased to $ 0.102 million, 55.2 percent over FY 2003
• Community Development – increased by $ 7.9 million
o In FY 2004, Petaluma Community Development Commission program expenses were
classified in Community Development – increase $ 4.9 million
o Low to Moderate Income Housing programs decreased by $ 1.2 million
o Home/ Begin Federal Home program increased by $ 4.1 million
o Direct Community Development expenses increased by $ 0.1 million
• Police – increased by $ 0.38 million due to salary and retirement cost increases.
• Fire – increased by $ 0.47 million due to staffing and retirement increases
• Parks & Recreation – increased by $ 0.38 million due to cost increases at the Community Center
aquatics programs, youth programs, senior programs and other.
12
• Public Works – increased by $ 0.62 million due to an increase in engineering services, increased
maintenance costs on buildings and equipment, and increased personnel costs.
• Capital Outlay – increased by $ 7.42 million mainly due to the major streets and roads reconstruction
projects completed in FY 2004.
• Debt Service ( Principal and Interest) – increased by $ 1.81 million to account for greater debt service
payments on existing and new debt initiated in FY 2004.
GENERAL FUND FINANCIAL HIGHLIGHTS
The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the
unreserved fund balance of the General Fund was $. 76 million while the total fund balance was $ 6.14
million. As a measure of the General Fund’s liquidity, it may be useful to compare the unreserved fund
balance to total fund expenditures. Unreserved fund- balance represents 2.5 percent of the total General
Fund expenditures. When the $ 3.7 million that is reserved for long term advances is added to this figure,
the percentage increases to 14.3 percent of the total General Fund expenditures. Overall General Fund
reserved fund balance increased by 4.6 percent ($ 5.375 million from $ 3.675 million during FY 2004). The
General Fund unreserved fund balance decreased by 69 percent ($. 768 million from $ 2.528 million).
Overall, the General Fund fund balance decreased by 3.26 percent ending the year with $ 6.143 million.
For the fiscal year ended June 30, 2004, the cash and investments balance in the General Fund was
$ 1.058 million, a decrease of $ 2.43 million from the prior fiscal year. Overall assets decreased to $ 8.292
million from $ 8.431 million in fiscal year 2003.
G e n e ra l F u n d
S ta te m e n t o f R e v e n u e s, E x p e n d itu re s a n d C h a n g e s in F u n d B a la n c e
F o r th e Y e a r E n d e d J u n e 3 0 , 2 0 0 4 C o m p a re d to Y e a r E n d e d J u n e 3 0 , 2 0 0 3
( In T h o u sa n d s)
In c re a s e / ( D e c re a s e )
R e v e n u e s: F Y 2 0 0 3 % o f T o ta l F Y 2 0 0 4 % o f T o ta l A m o u n t P e rc e n t a g e
Ta x e s :
S a le s $ 1 0 ,2 6 5 3 0 .9% $ 1 0 ,0 3 0 3 0 . 6 % $ ( 2 3 5 ) - 2 . 3 %
P ro p e rt y 5 ,1 3 4 1 5 . 4 % 5 , 3 0 6 1 6 . 2 % 1 7 2 3 . 4 %
O t h e r T a x e s 3 ,3 1 3 10.0% 3 ,6 9 1 11.3 % 3 7 8 11.4%
T o ta l T a x e s 1 8 ,7 1 2 1 9 , 0 2 7 3 1 5 1 . 7 %
C h a rg e s fo r S e rvic e s 4 ,8 9 7 1 4 . 7 % 5 , 7 0 9 1 7 . 4 % 8 1 2 1 6 . 6 %
In t e rg o ve rn m e n t a l 4 , 3 0 0 1 2 . 9 % 3 , 3 8 3 1 0 . 3 % ( 9 1 7 ) - 2 1 . 3 %
In ve s tm e n t R e ve n u e 4 9 4 1 . 5 % ( 3 8 ) - 0 . 1 % ( 5 3 2 ) - 1 0 7 . 7 %
T ra n s fe rs F ro m 2 ,2 5 4 6 . 8 % 1 , 2 7 7 3 . 9 % ( 9 7 7 ) - 4 3 . 3 %
O th e r 2 ,5 7 6 7.8% 3 ,3 9 4 10.4 % 8 1 8 31.8%
T o ta l R e ve n u e 3 3 ,2 3 3 1 0 0 . 0 % 3 2 , 7 5 2 1 0 0 . 0 % ( 4 8 1 ) - 1 . 4 %
E x p e n d i tu re s:
G e n e ra l G o ve rn m e n t 4 ,3 0 4 1 3 . 1 % 4 , 7 2 5 1 4 . 3 % 4 2 1 9 . 8 %
P u b lic S a fe t y 1 7 , 5 4 1 5 3 . 2 % 1 8 , 0 0 3 5 4 . 7 % 4 6 2 2 . 6 %
P u b lic W o rk s 3 , 3 7 9 1 0 . 3 % 3 , 0 5 9 9 . 3 % ( 3 2 0 ) - 9 . 5 %
C o m m u n it y D e ve lo p m e n t 2 ,0 3 8 6 . 2 % 2 , 2 1 8 6 . 7 % 1 8 0 8 . 8 %
P a rk s a n d R e c re a t io n 3 , 4 7 0 1 0 . 5 % 3 , 7 5 0 1 1 . 4 % 2 8 0 8 . 1 %
T ra n s fe rs T o 1 ,5 8 3 4 . 8 % 1 , 0 1 7 3 . 1 % ( 5 6 6 ) - 3 5 . 8 %
C a p ita l O u t la y 6 3 0 1.9% 1 5 6 0.5 % ( 4 7 4 ) - 7 5 .2%
T o ta l E x p e n d itu re s 3 2 ,9 4 5 1 0 0 . 0 % 3 2 , 9 2 8 1 0 0 . 0 % ( 1 7 ) - 0 . 1 %
E x c e s s ( D e fic ie n c y ) o f R e ve n u e s
O ve r ( U n d e r) E x p e n d it u re s 2 8 8 ( 1 7 6 )
N e t In c re a se in F u n d B a la n c e $ 2 8 8 $ ( 1 7 6 )
13
Overall, the general fund revenues ( including transfers in) decreased slightly to $ 32.75 million from $ 33.23
million, which represents a 1.4 percent decrease. Individual components of these changes are summarized
as follows:
• Property taxes increased to $ 5.306 million ( 3.4 percent) reflecting the continued strong real estate
market in the City. This was also evident in the increase of property transfer taxes to $ 1.407 million,
which represented a 32.5 percent increase over the prior year.
• Sales taxes decreased to $ 10.03 million, (- 2.3 percent) reflecting a slight decrease in retail sales,
especially in auto sales.
• Licenses and permits increased to $ 2.52 million, ( 36.3 percent) reflecting the increase in service
charges that were implemented in fiscal year 2003 and carried throughout fiscal year 2004.
• Intergovernmental revenues decreased to $ 3.83 million, (- 21.3 percent). The decline was the result
of the decrease in the vehicle in- lieu payments that the State suspended in late fiscal 2003.
• Charges for services also increased to $ 5.71 million ( 16.6 percent) due to the increase in service
charges that were implemented in fiscal 2003 and carried forward throughout fiscal year 2004.
• In the other taxes section, Business License taxes decreased $. 065 million (- 9.2%); while Franchise
Fees for Refuse and PG& E decreased $ 0.85 million (-. 82%).
Changes in general fund expenditure, by function, occurred, as follows during the year ended June 30,
2004.
• General government expenditures increased by $ 421,000 ( 9.8 percent) to $ 4.725 million. The main
increase was capital costs for the new computer system “ Pentamation” in the Finance Department
increase of $ 490,000 over prior fiscal year. In addition, the City Clerk Department increased by
$ 48,000 for election costs increase over prior fiscal year.
• Community development expenditures increased by $ 180,000 ( 8.8 percent) to $ 2.2 million due to
increased staffing levels and cost of living increases.
• Public safety expenditures increased by $ 462,000 ( 2.6 percent) to $ 18.0 million due to the full
implementation of the enhanced retirement system, which increased retirement costs by 10.3
percent.
• Parks and recreation expenditures increased by $ 280,000 ( 8.1 percent) to $ 3.750 million due to
increased staffing levels and cost of living increases.
• Public works expenditures decreased by $ 320,000, ( 9.5 percent), to $ 3.1 million as a result of
vacancies in that department and a decrease in department capital expenditures.
G e n e ra l F u n d R e v e n u e s
S a le s T a x
3 0 .6 %
P ro p e rty T a x
1 6 .2 %
O th e r T a xe s
1 1 .3 %
C h a rg e s fo r
S e rvic e s
1 7 .4 %
O th e r
1 0 .4 %
T ra n s fe rs
F ro m
3 .9 %
In ve s tm e n t
R e ve n u e
0 .0 %
In te rg o ve rn -
m e n ta l
1 0 .3 %
14
G e n e ra l F u n d E x p e n d itu re s
Pa r k s a n d
R e c r e a tio n
1 1 .4 %
T r a n s f e r s T o
3 .1 %
C a p ita l O u tla y
0 .5 %
C o m m u n ity
D e v e lo p m e n t
6 .7 %
Pu b lic W o r k s
9 .3 %
Pu b lic S a f e ty
5 4 .7 %
G e n e r a l
G o v e r n m e n t
1 4 .3 %
GENERAL FUND BUDGETARY HIGHLIGHTS
The table below displays the General Fund’s original budget, final budget and actual results for fiscal year
2004 revenue, expenditures and transfers. While revenues were slightly below projections, expenditures
came in well under budget. See the Economic Factors and Future Budget Outlook section for a discussion
on projections for fiscal year 2005.
Differences between the original and final revenue budget did not change. There were various uncertainties
in FY 04 including the unknowns about the State and its decision on reduction of the State Motor Vehicle
fees. Management decided to let the original budget stand for its General Fund.
Differences between the original and final expenditures budget amounted to a decrease of $ 140,150. This
was represented by an increase of $ 200,000 in the Community Development Department for additional
staffing and a decrease of $ 340,150 in Transfers Out to other funds. Transfers out were reduced at mid
year to eliminate a reserve account considered for establishment for retirement benefits.
Favorable
( Unfavorable)
Original Final Actual with Final
Budget Budget Amount Budget
Revenues $ 3 3.312 $ 3 3.312 $ 3 2.752 $ ( 0.560)
Expenditures $ 3 3.066 $ 3 3.266 $ 3 1.756 $ 1 .510
Other Financing Uses
Transfers Out $ - $ 0 .593 $ 1 .017 $ ( 0.424)
Capital Outlay $ 0.283 $ 0.283 $ 0.156 $ 0 .127
Net Change in Fund Balance $ ( 0.037) $ ( 0.830) $ ( 0.177) $ 0 .653
( in millions)
General Fund 2003- 04 Budgetary Comparison
General Fund actual revenues did not meet final budget projections by $. 56 million in fiscal year 2004.
• Tax revenues exceeded budget by $ 0.43 million. The major overages included property tax $ 0.16
million, sales taxes $ 0.60 million and real property transfer tax $ 0.24 million. There were decreases
in business license tax and other categories.
15
• Licenses, permits and fees were over final budget projections by $ 0.73 million. The major factors in
this category were: building permit fees up $ 0.50 million, plan checking fees were up $ 0.38 million,
while fire inspection fees were down by $ 0.03 million.
• Use of money and property was down over final budget projections by $ 0.49 million. Actual
investment income in the General Fund reported a negative of $ 0.038 million. These negative
differences over projections are a result of GASB 31 reporting rules whereby unrealized losses on
investments are booked at fiscal year end, even though the investments have not been actually sold.
• Intergovernmental revenues were under final budget projections by $ 0.49 million. The major reason
was the loss of State motor vehicle fee revenues in the amount of $ 0.56 million over final budget
projections. There were slight variances in other intergovernmental categories.
• Charges for services were down $ 1.0 million over final budget projections. The major reason for this
decline over projections was due to the over estimate of capital projects administrative overhead
charges applied to General Fund revenues. The City has a policy of charging 5% administrative
overhead charge on major capital projects to offset City administration on these capital projects.
Major project costs were down over final budget estimates resulting in this General Fund revenue
variance.
Expenditures were less than projected by $ 1.51 million. Of the $ 1.51 million, $ 1.4 million in appropriations
were carried over to fiscal year 2004, leaving a net variance of $. 11 million in expenditures ( after carry
overs). The majority of the difference included personnel costs, contractual services and contingencies.
FINANCIAL ANALYSIS OF THE OTHER MAJOR GOVERNMENTAL FUNDS
The other major funds within the governmental fund category were as follows:
• Low/ Moderate Income Housing Fund ( Special Revenue)
• Home/ Begin Fund ( Special Revenue)
• PCDC – Central Business District Project Fund ( Capital Project)
• PCDC – Petaluma Community District Project Fund ( Capital Project)
• PCDC – Petaluma Community District Debt Service Fund
The Low/ Moderate Income Housing Fund utilizes the 20 percent set aside from redevelopment property tax
increment to fund affordable housing in the City. The reserved fund balance increased by $ 1.88 million to
$ 10.28 million during FY 2004. This represented an increase of 18.7 percent. All of these funds are
reserved for future low- income housing projects. Several new projects were added in FY 2004 or are
currently under construction.
The Home/ Begin Special Revenue Fund accounts for federal grants/ loans received under the Housing and
Community Development Act of 1974. The money is used for specific programs, which provide housing for
residents with low and moderate income levels. The reserve fund balance increased by $ 97,554 to
$ 516,689. This represents a 23.3 percent increase. Notes receivable due the City over the life of the
Federal loan amounts to $ 6.5 million.
The PCDC – Central Business District Project Fund is the activity fund for this project area. This
redevelopment project area is located in the downtown area of the City and will be the major focus of
redevelopment activities in the next few years. The project area receives funding from property tax
increments. Tax increments represent property tax receipts that exceed what were received in the base
year or when the project area was formed. The total fund balance is “ negative” due to loans from the other
project area to fund projects. At year- end, the total fund deficit was $ 8,947,654. This was considerably
higher than at the end of fiscal 2003 when the fund deficit was $ 2,540,528. The reserved fund balance
increased from $ 529,900 to $ 6,430,414 in fiscal 2004. This reservation was entirely for outstanding
encumbrances, which were higher due to increased capital project activity in this fund.
The PCDC – Community Development Project Fund represents approximately one- third of the entire area
of the City. This project area was very active in the 1990’ s with the development of the auto mall. This mall
now accounts for over 30% of all sales tax that is generated in the City. Other major developments in this
16
project area were the Marina Business Center, the Redwood Business Center and the Sheraton Hotel. The
total fund balance is $ 15,166,090 of which $ 10,208,107 is reserved and the remainder $ 4,957,983 is
designated for specific projects. The overall fund balance decreased by $ 5,698,752 in fiscal 2004 when
compared to fiscal 2003. The reserved fund balance increased to $ 10.2 million from $ 2.8 million, 1 264
percent increase. Of this amount, $ 6.8 million is reserved for long term advances on a major downtown
redevelopment project. The unreserved fund balance decreased to $ 4.95 million from $ 16.4 million, a 69.7
percent decline over FY 2003. This decrease is accounted for by completed projects in the redevelopment
area boundaries.
FINANCIAL ANALYSIS OF THE MAJOR ENTERPRISE FUNDS
The Airport Fund’s operating activities amounted to a loss of $ 0.58 million in fiscal year 2004. This
represents an additional loss of $ 0.41 million compared with FY 2003. The net operating loss is due to
interest costs associated with debt service payments on a refunding and expanded bond issue.
Depreciation and amortization accounts for $ 0.47 million in the Statement of Revenues, Expenses and
Changes in Fund Net Assets.
The Ambulance Fund accounts for activities related to providing ambulance services. The net loss for this
operation in FY 2004 was $ 0.17 million as compared to a loss of $ 0.14 million for FY 2003. This represents
an additional decline of 21.4 percent over FY 2003.
The Marina Fund’s net loss was $ 0.05 million in fiscal 2004, compared to a loss of $ 0.37 million in fiscal
2003. This fund continues to operate in a negative position due to the existing debt service load that it
carries. Although the City is not making debt service payments we continue to recognize the interest
portion of the debt. The interest and any penalties are capitalized and added to the principal amount. It is
anticipated that this debt will be addressed in fiscal 2005.
The Waste Water Fund’s net income was $ 6.97 million in fiscal 2004, compared to $ 3.57 million in FY 2003.
This represented an increase of $ 3.4 million, or 95 percent. Operating expenses decreased by 5.4 percent
to $ 7.34 million over FY 2003. This was the result of operating and cost of service decreasing by $ 0.55
million.
The Water Utility Fund’s operating activities amounted to a gain of $ 0.69 million in fiscal 2004, compared to
a loss of $ 0.59 million in fiscal 2003. This represented an increase of 216 percent. Operating revenues
increased by 14.4 percent to $ 10.4 million. This was result of water rate increases that were implemented
in July 2003. Operating expenses increased by 6.9 percent to $ 9.74 million largely due to increased staffing
levels and increased cost of contract water supply.
The Public Transportation Fund accounts for the operation of the City transit services. The operation had a
net gain of $ 0.10 million for FY 2004. This was an increase of 234 percent, or $ 0.70 million compared to FY
2003. Operating revenues ( fare box) declined to $ 0.159 million from $ 0.170 million, a decrease of 6.5
percent. However, Intergovernmental revenues increased to $ 1.28 million from $ 1.08 million compared to
the prior fiscal year 2003. This represents an 18.5 percent increase over FY 2003. Total operating
expenses increased to $ 1.34 million from $ 1.23 million, an increase of 8.9 percent. Most of the increase
was due to personnel and fuel cost increases.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
The City’s investment in capital assets for its governmental and business- type activities as of June 30, 2004
was $ 187.5 million ( net of accumulated depreciation). This investment in capital assets includes:
infrastructure, land, buildings, improvements other than buildings, construction in progress, vehicles and
equipment. The total increase in the City’s investment in capital assets for the current period ( FY 04) was
$ 101.2 million. This represents a 117 percent increase over FY 2003.
Major capital asset events during the current fiscal year 2004 include the following:
17
• Major historic downtown infrastructure improvements.
• Historic downtown Theatre District addition.
• Historic Railroad Depot improvements.
• New water recycling facility constructed.
• Major streets and roads improvement program.
For governmental- wide financial statement presentation, all depreciable capital assets are depreciated from
the acquisition date over their useful lives. Governmental fund financial statements record capital assets
purchases as expenditures.
Capital assets for the governmental and business- type activities are presented in the following table to
illustrate changes from prior fiscal year 2003.
In c re a s e
( D e c re a s e )
2 0 0 3 2 0 0 4 2 0 0 3 2 0 0 4 2 0 0 3 2 0 0 4 % C h a n g e
L a n d $ 2 4 . 3 $ 2 4 . 3 $ 6 . 0 $ 1 0 . 0 $ 3 0 . 3 $ 3 4 . 3 1 3 . 2 %
C o n s t ru c t io n in P ro g re s s 5 .7 1 3 . 5 1 0 . 3 1 8 . 1 1 6 . 0 3 1 . 6 9 7 . 5 %
B u ild in g s a n d im p ro ve m e n t s 1 0 .6 1 0 . 7 1 1 . 2 1 0 . 7 2 1 . 8 2 1 . 4 - 1 . 8 %
E q u ip m e n t 2 .9 3 . 4 1 . 7 2 . 1 4 . 6 5 . 5 1 9 . 6 %
In fra s t ru c tu re 4 1 . 9 44. 3 51. 6 50.4 93.5 94. 7 1.3 %
T o t a ls $ 8 5 . 4 $ 96. 2 $ 80. 8 $ 91.3 $ 16 6 . 2 $ 187. 5 12.8 %
A c t ivit ie s A c t ivit ie s T o t a ls
C a p i ta l A s s e ts
( N e t o f D e p r e c i a ti o n , i n M i l l i o n s)
G o ve rn m e n t a l B u s in e s s - t y p e
Among the significant additions to the capital assets included in fiscal year 2004 were:
• Land
o The City purchased 261 acres for the Petaluma River Marsh project – sewer plant land $ 4.0
million
• Construction in Progress
o $ 7.8 million increase in General Government which included the following projects:
􀂃 Downtown Improvements
􀂃 Theatre District infrastructure
􀂃 Railroad Depot improvements
􀂃 Washington/ McDowell intersection improvements
o $ 7.8 million increase in Business- Type activities which included the following projects:
􀂃 construction of new water recycling facility
􀂃 construction of recycled water pipeline
• Building and Improvements
o Net building and improvements decreased by 1.8% or $ 0.4 million. This is a result of
depreciation exceeding additions
• Equipment
o Net equipment additions increased by 19.6% or $ 0.9 million. This increase was due to
Pentamation accounting software, $ 0.51 million, purchase of six transit buses, $ 0.51 million,
and police patrol vehicles, $ 0.55 million, less retirements and depreciation of $ 0.66 million.
• Infrastructure
o Infrastructure improvements gross amount increased by $ 5.0 million. This was mainly due to
street and road reconstruction. The new ( net) additions were $ 1.2 million with increased
depreciation on our street systems of $ 3.8 million.
The City’s fiscal year 2005 capital project budget includes additions of $ 64.4 million. Of this amount, $ 10
million is projected for the new wastewater treatment plant and $ 7.2 million is for water utility capital
projects. Additional information about the City’s capital assets can be found in Note 6 in the Notes to the
Basic Financial Statements.
18
Debt Administration
Debt considered a liability of governmental activities increased by $ 19.3 million in FY 2004.
• A new 2003A Tax Allocation Bond was issued for the Redevelopment Agency in the amount of
$ 23.6 million.
• The 1993 Certificates of Participation with a balance of $ 3.77 million were defeased.
• Compensated absences decreased by $ 0.6 million
Below is a chart for governmental activities debt.
In c re a s e
B a la n c e B a la n c e ( D e c re a s e )
J u ly 1 , 2 0 0 3 J u n e 3 0 , 2 0 0 4 F ro m F Y 2 0 0 3
2 0 0 4 A T a x A llo c a t io n B o n d s $ 1 7 ,5 1 5 ,0 0 0 $ 1 7 , 3 9 0 , 0 0 0 $ ( 1 2 5 , 0 0 0 )
2 0 0 0 B T a x A llo c a t io n B o n d s 8 8 0 , 0 0 0 7 8 5 , 0 0 0 ( 9 5 , 0 0 0 )
2 0 0 1 A T a x A llo c a t io n B o n d s 3 , 5 0 5 , 0 0 0 3 , 2 4 5 , 0 0 0 ( 2 6 0 , 0 0 0 )
2 0 0 3 A T a x A llo c a t io n B o n d s - 2 3 , 6 3 0 , 0 0 0 2 3 , 6 3 0 , 0 0 0
U n a m o rt iz e d B o n d s Is s u a n c e D is c o u n t
fo r 2 0 0 3 A Ta x A llo c a t io n B o n d s - ( 1 3 , 7 4 3 ) ( 1 3 , 7 4 3 )
A s s e s s m e n t D is t ric t 1 9 TA B 7 1 9 ,9 2 1 7 1 0 , 0 0 0 ( 9 , 9 2 1 )
1 9 9 3 C e rt ific a t e s o f P a rt ic ip a t io n 3 , 7 7 2 , 0 0 0 - ( 3 , 7 7 2 , 0 0 0 )
C o m p e n s a t e d A b s e n c e s 3 , 4 2 1 , 1 7 5 2 , 8 2 5 , 4 6 7 ( 5 9 5 , 7 0 8 )
A c c ru e d C la im s 5 ,0 2 4 ,5 9 9 5,5 5 9 ,0 0 0 534 ,4 0 1
T o t a l $ 3 4 , 8 3 7 , 6 9 5 $ 54 , 1 3 0 , 7 2 4 $ 19, 2 9 3 , 0 2 9
G o v e rn m e n ta l A c tiv i tie s L o n g - T e rm D e b t
F o r th e Y e a r E n d e d J u n e 3 0 , 2 0 0 4 C o m p a re d to J u n e 3 0 , 2 0 0 3
Debt considered a liability of business- type activities decreased by $ 3.4 million in FY 2004.
• The 1993 Certificates of Participation with balances of $ 2.48 million were defeased with the
issuance of the new 2003 COP.
• The new 2003 Certificate of Participation was issued in the amount of $ 6.295 million. Of this
amount, $ 3.25 million is earmarked for Petaluma Municipal Airport improvements.
• The 2000 Wastewater Revenue Bonds were reduced by $ 0.31 million.
Below is a chart for business- type activities debt:
In c re a s e
B a la n c e B a la n c e ( D e c re a s e )
J u ly 1 , 2 0 0 3 J u n e 3 0 , 2 0 0 4 F ro m F Y 2 0 0 3
1 9 9 3 C e rt ific a t e s o f P a rt ic ip a t io n $ 2 ,4 8 3 ,0 0 0 $ - $ ( 2 , 4 8 3 , 0 0 0 )
2 0 0 3 C e rt ific a t e s o f P a rt ic ip a t io n - 6 , 2 9 5 , 0 0 0 6 , 2 9 5 , 0 0 0
U n a m o rt iz e d B o n d s Is s u a n c e P re m iu m - 8 0 , 2 3 7 8 0 , 2 3 7
fo r 2 0 0 3 C e rt ific a t e s o f P a r t ic ip a t io n
2 0 0 0 W a s te w a t e r R e ve n u e B o n d s 8 ,0 3 0 ,0 0 0 7 , 7 2 0 , 0 0 0 ( 3 1 0 , 0 0 0 )
U n a m o rit iz e d B o n d s Is s u a n c e D is c o u n t ( 7 4 ,8 6 6 ) ( 7 0 , 4 1 8 ) 4 , 4 4 8
fo r 2 0 0 0 W a s te w a t e r R e ve n u e B o n d s
2 0 0 1 B W a e r R e ve n u e B o n d s 9 ,6 5 5 ,0 0 0 9 , 4 4 0 , 0 0 0 ( 2 1 5 , 0 0 0 )
U n a m o rit iz e d B o n d s Is s u a n c e D is c o u n t ( 1 7 ,4 8 7 ) ( 1 6 , 6 1 3 ) 8 7 4
fo r 2 0 0 1 B W a te r R e ve n u e B o n d s
C a lifo rn ia D e p t o f B o a t in g & W a t e rw a y s 4 , 2 4 7 , 1 3 8 4 , 4 5 5 , 4 9 1 2 0 8 , 3 5 3
C a lifo rn ia D e p t o f T ra n s p o rt a t io n 7 3 5 , 0 2 6 6 5 9 , 1 4 8 ( 7 5 , 8 7 8 )
C o m p e n s a te d A b s e n c e s 5 6 4 ,1 7 1 414 ,8 9 6 ( 14 9 , 2 7 5 )
T o t a l $ 2 5 ,6 2 1 ,9 8 2 $ 28,9 7 7 ,7 4 1 $ 3,3 5 5 ,7 5 9
B u sin e ss- T y p e A c tiv i tie s L o n g - T e rm D e b t
F o r th e Y e a r E n d e d J u n e 3 0 , 2 0 0 4 C o m p a re d to J u n e 3 0 , 2 0 0 3
19
Additional information about the City’s long term obligations for both Governmental Activities and Business-
Type Activities can be found in Note 7 in the Notes to the Basic Financial Statements.
As stated in the Statistical Section of the CAFR, the combined direct debt ratio to assessed valuation is zero
percent for the General Fund compared to the allowable, legal debt margin of 15 percent. The legal debt
margin for the City is $ 815.4 million. In 2003, Moody’s insured rating for the City was Aaa.
ECONOMIC FACTORS AND FUTURE BUDGET OUTLOOK
The City of Petaluma’s economy is clearly linked to national, state and regional economies. Sonoma
County has experienced recessionary conditions for several years. Employment has taken a turn
downward during that time with major lay- offs in the high- tech manufacturing industries. Wineries and
vineyards also contributed to the weakness due to expanded global supply and downward pressure on
prices.
For 2004, better news is ahead. Sonoma County business confidence continues to rise for the fifth
consecutive quarter, hitting 6.7 on a 10 point scale ( with 10 = excellent). Overall, Sonoma County
businesses report that the current economic conditions in Sonoma County are strong. The future of
Sonoma County businesses looks promising. It is estimated that business confidence will increase by 3%
to 6.9 by winter of 2005.
The economy is continuing to improve with estimates of increased salary and wages as well as an increase
in business profits. Interest rates will continue to rise in 2004 with a constant to slight increase in the stock
market. It is also believed that the national unemployment rate will decline. The housing market remains
strong with increased appreciation along with healthy household balance sheets indicated by low and stable
rate of personal bankruptcy filings.
Despite recent concerns, rising gas prices have not affected most businesses in Sonoma County. 98% of
local executives reported no loss in business due to rising gas prices. In general, Sonoma County
businesses appear resilient to the economic effects of higher gas prices. It is also important to note that
property values in Sonoma County remain strong. Sonoma County is an extremely desirable place to live
with little housing stock currently on the market.
Recoveries are noted in health services, hospitality, real estate and construction industries. Health care is
on the rise due to the aging population and increased availability of medical facilities in the County. The
hospitality industry has been depressed since the tragic 9- 11 incident but continues to build confidence with
greater consumer discretionary income being spent on travel plans. Real estate and construction industries
have shown reasonable gains due to the lower mortgage interest rates and increased housing starts in the
County.
Employment growth has seen a major upturn in the past twelve months. It is estimated that an additional
1.3 million jobs will be created in the next seven months nationally. Sonoma County will see a modest job
growth with increases across a broad spectrum of industries starting with manufacturing, professional
business services, construction, health care, hospitality and food services. Even the technology and wine
making industries are seeing stronger demands on 2004 and 2005.
Retail sales in Petaluma decreased in FY 2004 over FY 2003 results. Total estimated sales tax received in
FY 2004 was $ 10.03 million or 9.7% lower then FY 2003. This was due to lower sales in the transportation
section or auto sales category. Other areas of revenue increases included property taxes ( 3.4%), charges
for current services ( 16.6%), license and permits ( 36.3%) and intergovernmental declined by 21.3% due to
the reduction in the State motor vehicle fees.
The uncertainties in this forecast are the ever increasing State budget deficit. The financial impacts on the
City of Petaluma resulted in reduction of the State motor vehicle in- lieu fees of over $ 700,000, in addition to
over $ 1 million reduction of tax increment revenues into the City’s redevelopment agency. The inability of
the State to deal with its ongoing policy of providing service levels that do not have sufficient resources to
pay for them will only cause continual problems on State and local levels in California.
20
The State budget deficit, which is estimated to be over $ 20 billion, was partially “ balanced” through issuance
of deficit bonds. In addition, the State instituted the “ triple flip” formula – trading certain sales tax, property
tax and other revenues to support the deficit bonds.
In November, 2004, Proposition 1A was passed which protects local government revenues from State
exactions when there is an extreme emergency. However, part of the negotiations in supporting Proposition
1A was the State motor vehicle fee swap. This formula replaces State motor vehicle fees with property tax
revenues. Also, as part of the financial assistance to the State, the backfill ( loss of MLV) fees for last year
were retained by the State with a promise to be repaid in August of 2006. For the City of Petaluma, this
receivable amount is $ 951,083.
The City is currently considering a bond issue to sell its receivable at a 90% discount to receive the funds
eighteen months early. For the State, Governor Schwarzenegger has proposed major cost reductions and
some revenue enhancements. However, city governments are currently not impacted by the Governor’s
proposals. State budget deliberations are continuing in the State legislature.
In January, Petaluma is focusing on economic development with major improvements in its downtown area.
Currently, a $ 100 million Theatre District project will be completed this summer that will increase business
activity, tourism and spending that will result in increased sales tax dollars. The other major focus is on
regional shopping center activity. Several sites are proceeding through the planning process that will boost
Petaluma’s inventory of shopping outlets. In addition, expansion of Petaluma’s auto mall is under
consideration by joining with several adjacent sites and adding new auto dealerships.
For the City’s enterprise operations, annual reviews are held to consider appropriate rate increases to give
greater assurance of maintaining healthy enterprise operations. Overall, the economic future of Petaluma is
bright.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
The CAFR is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the
City’s finances. Questions about this report should be directed to the Finance Department, at 11 English
Street, Petaluma, California 94952. This report will also be provided on the City’s website at:
www. ci. petaluma. ca. us under the Finance Department’s page. Questions concerning any of the information
contained in the CAFR should be addressed to the Finance Director, City of Petaluma, 11 English Street,
Petaluma, CA 94952 or at finance@ ci. petaluma. ca. us.
BASIC FINANCIAL STATEMENTS
21
22
GOVERNMENT- WIDE FINANCIAL STATEMENTS
23
24
City of Petaluma
Statement of Net Assets
June 30, 2004
Governmental Business- Type
Activities Activities Total
ASSETS
Current assets:
Cash and investments $ 3 9,035,609 $ 9 ,353,127 $ 4 8,388,736
Restricted cash and investments 2 9,917,264 1 0,282,773 4 0,200,037
Receivables:
Accounts receivable, net 5 52,252 3 ,019,015 3 ,571,267
Interest receivable 1 ,772,128 9 8,432 1 ,870,560
Intergovernmental 3 ,818,066 2 90,568 4 ,108,634
Short- term internal balances 1 ,084,724 ( 1,084,724) -
Internal services balances ( 60,439) 6 0,439 -
Inventories 2 3,469 2 21,229 2 44,698
Deposits and prepaid items 1 ,084,662 4 ,451 1 ,089,113
Total current assets 7 7,227,735 2 2,245,310 9 9,473,045
Noncurrent assets:
Long- term internal balances 1 ,274,685 ( 1,274,685) -
Non- current receivables 2 0,574 - 2 0,574
Notes receivable 2 2,523,843 - 2 2,523,843
Land held for resale 4 02,053 - 4 02,053
Deferred charges 3 09,257 7 07,048 1 ,016,305
Capital assets:
Non- depreciable 3 7,775,986 2 8,128,052 6 5,904,038
Depreciable, net 5 8,398,302 6 3,204,503 1 21,602,805
Total capital assets 9 6,174,288 9 1,332,555 1 87,506,843
Total noncurrent assets 1 20,704,700 9 0,764,918 2 11,469,618
Total assets 1 97,932,435 1 13,010,228 3 10,942,663
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 2 ,675,771 2 ,558,280 5 ,234,051
Wages payable 9 70,595 9 6,053 1 ,066,648
Interest payable 3 93,692 5 03,069 8 96,761
Unearned revenue 7 ,788 - 7 ,788
Refundable deposits 5 16,147 2 29,774 7 45,921
Claims payable - due within one year 1 ,375,000 - 1 ,375,000
Compensated absences - due within one year 3 48,056 4 4,422 3 92,478
Long- term debt - due within one year 5 62,526 1 ,034,547 1 ,597,073
Total current liabilities 6 ,849,575 4 ,466,145 1 1,315,720
Noncurrent liabilities:
Claims payable - due in more than one year 4 ,184,000 - 4 ,184,000
Compensated absences - due in more than one year 2 ,477,411 3 70,474 2 ,847,885
Long- term debt - due in more than one year 4 5,183,731 2 7,528,298 7 2,712,029
Total noncurrent liabilities 5 1,845,142 2 7,898,772 7 9,743,914
Total liabilities 5 8,694,717 3 2,364,917 9 1,059,634
NET ASSETS
Invested in capital assets, net of related debt 4 7,065,517 6 2,769,710 1 09,835,227
Restricted for:
Special projects 3 3,072,502 - 3 3,072,502
Debt service 2 3,088,068 1 0,282,748 3 3,370,816
Capital projects 2 1,003,950 - 2 1,003,950
Total restricted 7 7,164,520 1 0,282,748 8 7,447,268
Unrestricted 1 5,007,681 7 ,592,853 2 2,600,534
$ 1 39,237,718 $ 8 0,645,311 $ 2 19,883,029
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, 2004
Indirect Operating Capital
Expense Charges for Grants and Grants and
Functions/ Programs Expenses Allocation Services Contributions Contributions
Primary government:
Governmental activities:
General government $ 6,016,478 $ ( 2,424,700) $ 1,330,855 $ 94,398 $ -
Community development 15,567,621 - 3,343,931 5,220,195 -
Police 12,368,011 1,216 619,937 1,153,776 -
Fire 5,734,813 3,037 525,101 - -
Parks and recreation 4,071,402 374,720 1,166,680 - -
Public works 4,976,881 9,911 929,151 1,189,418 469,012
Interest on long- term debt 2,836,883 - - -
Total governmental activities 51,572,088 ( 2,035,816) 7,915,655 7,657,787 469,012
Business- type activities:
Airport 1,552,780 71,436 984,202 48,052 -
Ambulance 1,439,576 525,000 1,763,361 - -
Marina 528,973 13,968 228,078 - -
Public transportation 1,239,931 100,150 158,719 1,275,584 -
Waste water utility 6,769,148 755,900 13,444,505 3,122,611 -
Water utility 9,244,794 569,362 9,976,729 - -
Total business- type activities 20,775,202 2,035,816 26,555,594 4,446,247 -
Total primary government $ 72,347,290 $ - $ 34,471,249 $ 12,104,034 $ 469,012
General Revenues and Transfers:
Taxes:
Property taxes
Redevelopment tax increment
Sales taxes
Franchise tax
Property transfer tax
Other taxes
Total taxes
Motor vehicle in- lieu
Unrestricted investment earnings
Miscellaneous revenue
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning of year, as restated
Net assets - end of year
See accompanying Notes to Basic Financial Statements.
Program Revenues
26
Governmental Business- Type
Total Activities Activities Total
$ 1,425,253 $ ( 2,166,525) $ - $ ( 2,166,525)
8,564,126 ( 7,003,495) - ( 7,003,495)
1,773,713 ( 10,595,514) - ( 10,595,514)
525,101 ( 5,212,749) - ( 5,212,749)
1,166,680 ( 3,279,442) - ( 3,279,442)
2,587,581 ( 2,399,211) - ( 2,399,211)
- ( 2,836,883) - ( 2,836,883)
16,042,454 ( 33,493,818) - ( 33,493,818)
1,032,254 - ( 591,962) ( 591,962)
1,763,361 - ( 201,215) ( 201,215)
228,078 - ( 314,863) ( 314,863)
1,434,303 - 94,222 94,222
16,567,116 - 9,042,068 9,042,068
9,976,729 - 162,573 162,573
31,001,841 - 8,190,823 8,190,823
$ 47,044,295 ( 33,493,818) 8,190,823 ( 25,302,995)
5,306,079 - 5,306,079
11,908,633 - 11,908,633
10,030,124 - 10,030,124
1,813,523 - 1,813,523
1,407,014 - 1,407,014
6,146,504 - 6,146,504
36,611,877 - 36,611,877
2,557,723 - 2,557,723
1,273,166 246,515 1,519,681
46,875 - 46,875
940,835 ( 940,835) -
41,430,476 ( 694,320) 40,736,156
7,936,658 7,496,503 15,433,161
131,301,060 73,148,808 204,449,868
$ 139,237,718 $ 80,645,311 $ 219,883,029
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- Low/ Mod Income Housing Special Revenue Fund - This fund accounts for the redevelopment
agency’s 20% set- aside, as required by law, of tax increment. The activity of this funds consists of supporting
development of affordable housing in the community.
Redevelopment- PCD Debt Service Fund - This fund accounts for the accumulation of resources, and the
payment of principal and interest of the Redevelopment Agency's PCD project area's long- term debt. The
debt of PCD consists of the 2000A, 2001A and the 2003A Tax Allocation Bonds, and the Auto Plaza DDA- AD
19.
Redevelopment- CBD Capital Project Fund - This funds accounts for the administration and capital projects
undertaken in the Central Business District project area of the 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.
Other Governmental Funds is the aggregate of all the non- major governmental funds.
31
City of Petaluma
Balance Sheet
Governmental Funds
June 30, 2004
Redevelopment Low/ Redevelopment
General Home/ Begin Mod Income Housing PCD
Fund Special Revenue Special Revenue Debt Service
ASSETS
Cash and investments $ 1,048,273 $ 502,544 $ 1,864,164 $ 22,880,821
Restricted cash and investments - - - 115,965
Receivables:
Accounts receivable, net 383,541 - - -
Interest receivable 7 2,336 499,330 788,256 -
Intergovernmental receivable 2 ,795,550 9,553 20,341 -
Due from other funds 3,784,724 - - -
Inventories 13,440 - - -
Deposits and prepaid items 124,240 - - -
Advances to other funds - - - -
Non- current receivables 2 0,574 - - -
Notes receivable 4 9,375 6,015,742 10,029,629 -
Land held for resale - - - -
Total assets 8,292,053 7,027,169 12,702,390 2 2,996,786
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities 597,493 1,905 12,112 30
Wages payable 9 12,823 - 1,757 -
Deferred revenue 175,841 6,508,575 7 71,126 -
Refundable deposits 463,224 - - -
Due to other funds - - - -
Advances from other funds - - - -
Total liabilities 2,149,381 6 ,510,480 784,995 30
Fund Balances:
Reserved for:
Encumbrances 1,413,097 - 252,290 -
Notes receivable 4 9,378 6,015,742 10,029,629 -
Land held for resale - - - -
Long- term advances and due to other funds 3,784,724 - - -
Debt service - - - 22,996,756
Inventories 13,440 - - -
Deposits and prepaids 124,240 - - -
Total reserved 5,384,879 6 ,015,742 10,281,919 22,996,756
Unreserved, reported in:
General fund 7 57,793 - - -
Special revenue funds - ( 5,499,053) 1,635,476 -
Debt service funds - - - -
Capital project funds - - - -
Permanent funds - - - -
Total unreserved, undesignated 757,793 ( 5,499,053) 1,635,476 -
Total fund balances 6,142,672 5 16,689 11,917,395 22,996,756
Total liabilities and fund balances $ 8,292,053 $ 7 ,027,169 $ 12,702,390 $ 22,996,786
See accompanying Notes to Basic Financial Statements.
Major Funds
32
Redevelopment Redevelopment Non- Major Total
CBD PCD Governmental Governmental
Capital Project Capital Project Funds Funds
$ 5 3,058 $ ( 22,501,916) $ 26,726,577 $ 30,573,521
29,702,164 99,135 29,917,264
- - 168,711 5 52,252
1,175 151,039 197,823 1 ,709,959
8,535 72,168 911,919 3,818,066
- - 125,000 3,909,724
- - - 1 3,440
- - 270,640 3 94,880
- 6,778,685 - 6,778,685
- - - 2 0,574
- 1,096,706 5 ,332,391 22,523,843
- 402,053 - 402,053
6 2,768 15,700,899 33,832,196 100,614,261
796,913 96,486 1,056,474 2,561,413
9,509 11,724 6,226 942,039
- 376,599 1 ,403,474 9 ,235,615
- 50,000 2,923 516,147
2,700,000 - 125,000 2 ,825,000
5,504,000 - - 5,504,000
9,010,422 534,809 2,594,097 2 1,584,214
6,430,414 1 ,930,663 1,123,222 11,149,686
- 1,096,706 5 ,332,391 22,523,846
- 402,053 - 402,053
- 6,778,685 125,000 10,688,409
- - 175,747 23,172,503
- - - 1 3,440
- - 270,640 3 94,880
6,430,414 10,208,107 7,027,000 68,344,817
- - - 757,793
- - 18,187,147 14,323,570
- - - -
( 15,378,068) 4,957,983 4 ,993,631 ( 5,426,454)
- - 1,030,321 1 ,030,321
( 15,378,068) 4,957,983 24,211,099 10,685,230
( 8,947,654) 15,166,090 31,238,099 79,030,047
$ 6 2,768 $ 15,700,899 $ 33,832,196 $ 100,614,261
Major Funds
33
34
City of Petaluma
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets
June 30, 2004
Total Fund Balances - Total Governmental Funds $ 79,030,047
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 3 7,775,986
Depreciable, net 5 7,811,000
Total capital assets 95,586,986
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. 9,227,827
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. 3,934,316
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. 309,257
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. ( 393,692)
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 within one year ( 331,909)
Compensated absences - due in more than one year ( 2,378,857)
Long- term liabilities - due within one year ( 562,526)
Long- term liabilities - due in more than one year ( 45,183,731)
Total long- term liabilities ( 48,457,023)
Net Assets of Governmental Activities $ 1 39,237,718
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, 2004
Redevelopment Low/ Redevelopment
General Home/ Begin Mod Income Housing PCD
Fund Special Revenue Special Revenue Debt Service
REVENUES:
Taxes $ 19,027,341 $ - $ 2,276,239 $ -
Licenses, permits and fees 2,515,482 - - -
Fines, forfeitures and penalties 464,499 - - -
Use of money and property ( 38,135) 65,598 48,470 167,564
Intergovernmental 3 ,383,091 4,133,658 6 0,803 -
Charges for current services 5,708,610 - 18,165 -
Other 4 14,253 - 12,200 -
Total revenues 31,475,141 4,199,256 2 ,415,877 167,564
EXPENDITURES:
Current:
General government 4 ,725,455 - - -
Community development 2,218,047 4,101,702 5 34,835 -
Police 11,862,431 - - -
Fire 6 ,141,216 - - -
Parks and recreation 3,749,843 - - -
Public works 3 ,058,814 - - -
Capital outlay 1 55,521 - - -
Debt service:
Principal - - - 449,000
Interest - - - 3,422,755
Total expenditures 31,911,327 4,101,702 5 34,835 3,871,755
REVENUES OVER ( UNDER) EXPENDITURES ( 436,186) 9 7,554 1,881,042 ( 3,704,191)
OTHER FINANCING SOURCES ( USES):
Proceeds from sale of bonds - - - 2 3,615,783
Transfers in 1,277,350 - - 3,031,500
Transfers out ( 1,016,581) - - -
Total other financing sources ( uses) 260,769 - - 26,647,283
Net change in fund balances ( 175,417) 97,554 1,881,042 22,943,092
FUND BALANCES:
Beginning of year, as restated 6 ,318,089 4 19,135 10,036,353 53,664
$ 6,142,672 $ 516,689 $ 11,917,395 $ 2 2,996,756
See accompanying Notes to Basic Financial Statements.
End of year
Major Funds
36
Redevelopment Redevelopment Non- Major Total
CBD PCD Governmental Governmental
Capital Project Capital Project Funds Funds
$ 573,869 $ 9,058,525 $ 1 ,124,888 $ 32,060,862
- - 4,558,748 7,074,230
- - 67,260 531,759
1,213 222,188 959,840 1 ,426,738
- 284,848 3 ,093,277 10,955,677
19,484 - 306,512 6,052,771
2,433 1,581 1,369,766 1 ,800,233
596,999 9,567,142 11,480,291 59,902,270
- - 69,105 4,794,560
- 5,025,135 3 ,159,008 15,038,727
- - 363,031 12,225,462
- - 22,556 6,163,772
- - 400,006 4 ,149,849
- - 1,355,464 4 ,414,278
7,145,125 357,259 8,017,521 15,675,426
- - 3,867,000 4 ,316,000
- - 278,185 3 ,700,940
7,145,125 5,382,394 17,531,876 70,479,014
( 6,548,126) 4,184,748 ( 6,051,585) ( 10,576,744)
- - - 23,615,783
15,013,300 1,642,000 26,267,712 47,231,862
( 14,872,300) ( 11,525,500) ( 20,541,481) ( 47,955,862)
141,000 ( 9,883,500) 5,726,231 22,891,783
( 6,407,126) ( 5,698,752) ( 325,354) 12,315,039
( 2,540,528) 20,864,842 31,563,453 66,715,008
$ ( 8,947,654) $ 15,166,090 $ 31,238,099 $ 79,030,047
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, 2004
Net Change in Fund Balances - Total Governmental Funds $ 12,315,039
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. 15,675,426
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. ( 2,565,891)
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. ( 1,210,562)
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 289,301
Internal service funds are used by management to charge the costs of certain activities to individual funds. The net
expense of certain activities of the internal service funds is reported with governmental activities. 2,342,594
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. 555,274
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.
Current year amortization of bond issuance costs ( 10,664)
Amount recognized as expenditure on the Governmental Funds Financial Statements 319,921
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 ( 474)
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. 651,748
Bond proceeds provided current financial resources to Governmental Funds, but issuing debt increased long- term
liabilities in the Government- Wide Statement of Net Assets. 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.
Bond proceeds ( 23,615,783)
Long- term debt repayments 4,316,000
Change in Net Assets of Governmental Activities $ 9,061,929
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
transportation services for the City.
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 provide goods and services by one department or agency to
other departments or agencies of the City on a cost reimbursement basis.
39
City of Petaluma
Statement of Net Assets
Proprietary Funds
June 30, 2004
Public
Airport Ambulance Marina Transportation
Fund Fund Fund Fund
ASSETS
Current assets:
Cash and investments $ - $ 4 22,492 $ 2 24,294 $ -
Restricted cash and investment 3 ,892,178 - - -
Receivables:
Accounts receivable, net 4 9,989 3 27,630 2 2,574 -
Interest receivable - 3 ,836 1 ,664 -
Intergovernmental receivable 2 ,291 - - 2 88,277
Inventories 4 5,254 - 1 ,848 1 9,168
Deposits and prepaids - 5 75 - -
Total current assets 3 ,989,712 7 54,533 2 50,380 3 07,445
Non- current assets:
Deferred charges 3 00,609 - - -
Capital assets:
Nondepreciable 4 ,584,280 - - 1 ,411,292
Depreciable 9 ,666,889 5 59,189 4 ,804,813 1 ,512,136
Less accumulated depreciation ( 6,751,241) ( 306,756) ( 1,892,146) ( 840,374)
Total capital assets 7 ,499,928 2 52,433 2 ,912,667 2 ,083,054
Total non- current assets 7 ,800,537 2 52,433 2 ,912,667 2 ,083,054
Total assets 1 1,790,249 1 ,006,966 3 ,163,047 2 ,390,499
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 3 0,291 1 8,334 6 ,913 1 14,411
Wages payable 6 49 1 8,106 4 1 4 ,204
Interest payable 1 67,098 - 1 98,132 -
Refundable deposits 1 01,165 - 3 1,645 -
Due to other funds 7 0,477 - - 1 ,014,247
Advances from other funds - - 1 ,274,685
Claims payable - due within one year - - - -
Compensated absences - due within one year - - - -
Long- term debt - due within one year 8 4,894 - 4 09,975
Total current liabilities 4 54,574 3 6,440 1 ,921,391 1 ,132,862
Non- current liabilities: ( 3,826,981)
Claims payable - due in more than one year - - - -
Compensated absences - due in more than one year - 7 7,934 - 3 7,118
Long- term debt - due in more than one year 6 ,949,491 - 4 ,045,516 -
Total non- current liabilities 6 ,949,491 7 7,934 4 ,045,516 3 7,118
Total liabilities 7 ,404,065 1 14,374 5 ,966,907 1 ,169,980
NET ASSETS
Invested in capital assets, net of related debt 4 65,543 2 52,433 ( 1,542,824) 2 ,083,054
Restricted for debt service 3 ,892,178 - - -
Unrestricted 2 8,463 6 40,159 ( 1,261,036) ( 862,535)
Total net assets $ 4 ,386,184 $ 8 92,592 $ ( 2,803,860) $ 1 ,220,519
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
$ 4 ,808,045 $ 3 ,151,951 $ 8 ,606,782 $ 9 ,208,433
2 5 6 ,390,570 1 0,282,773 -
1 ,616,556 1 ,002,266 3 ,019,015 -
4 2,137 4 5,083 9 2,720 6 7,881
- - 2 90,568 -
- 1 54,959 2 21,229 1 0,029
- 3 ,876 4 ,451 6 89,782
6 ,466,763 1 0,748,705 2 2,517,538 9 ,976,125
1 23,635 2 82,804 7 07,048 -
1 9,656,289 2 ,476,191 2 8,128,052 -
5 6,171,614 4 8,750,684 1 21,465,325 1 ,514,918
( 26,325,882) ( 22,602,756) ( 58,719,155) ( 469,283)
4 9,502,021 2 8,624,119 9 0,874,222 1 ,045,635
4 9,625,656 2 8,906,923 9 1,581,270 1 ,045,635
5 6,092,419 3 9,655,628 1 14,098,808 1 1,021,760
1 ,531,606 8 17,200 2 ,518,755 1 53,883
1 8,433 5 4,620 9 6,053 2 8,556
6 4,880 7 2,959 5 03,069 -
2 2,314 7 4,650 2 29,774 -
- - 1 ,084,724 -
- - 1 ,274,685 -
- - - 1 ,375,000
1 7,667 2 6,755 4 4,422 1 6,147
3 20,552 2 19,126 1 ,034,547 -
1 ,975,452 1 ,265,310 6 ,786,029 1 ,573,586
- - - 4 ,184,000
8 6,854 1 68,568 3 70,474 9 8,554
7 ,329,030 9 ,204,261 2 7,528,298 -
7 ,415,884 9 ,372,829 2 7,898,772 4 ,282,554
9 ,391,336 1 0,638,139 3 4,684,801 5 ,856,140
4 1,852,439 1 9,200,732 6 2,311,377 1 ,045,635
- 6 ,390,570 1 0,282,748 -
4 ,848,644 3 ,426,187 6 ,819,882 4 ,119,985
$ 4 6,701,083 $ 2 9,017,489 $ 7 9,414,007 $ 5 ,165,620
6 0,439
1 ,170,865
$ 8 0,645,311
Major Funds
41
City of Petaluma
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
For the year ended June 30, 2004
Public
Airport Ambulance Marina Transportation
Fund Fund Fund Fund
OPERATING REVENUES:
Charges for sales $ 433,877 $ - $ 9,931 $ -
Charges for services 550,325 1,763,361 218,147 158,719
Connection fees - - - -
Total operating revenues 9 84,202 1,763,361 228,078 158,719
OPERATING EXPENSES:
Cost of sales 317,992 - 5,637 -
Cost of services 100,271 1,251,110 38,973 1,140,867
Claims - - - -
General and administrative 410,250 647,787 153,185 161,754
Depreciation and amortization 525,232 52,058 140,287 33,505
Total operating expenses 1,353,745 1 ,950,955 338,082 1,336,126
Operating income ( loss) ( 369,543) ( 187,594) ( 110,004) ( 1,177,407)
NONOPERATING REVENUES ( EXPENSES):
Intergovernmental 4 8,052 - - 1,275,584
Investment earnings and rent 3 4,171 18,516 7,755 2,479
Interest expense ( 295,439) - ( 221,331) -
Total nonoperating revenues ( expenses) ( 213,216) 18,516 ( 213,576) 1,278,063
Income ( loss) before operating transfers ( 582,759) ( 169,078) ( 323,580) 100,656
OPERATING TRANSFERS
Transfers in - - 273,000 -
Transfers out - - - -
Total transfers - - 273,000 -
Change in net assets ( 582,759) ( 169,078) ( 50,580) 100,656
NET ASSETS:
Beginning of year 4 ,968,943 1 ,061,670 ( 2,753,280) 1,119,863
Prior period adjustment - - - -
Beginning of year as restated 4 ,968,943 1 ,061,670 ( 2,753,280) 1,119,863
End of year $ 4,386,184 $ 8 92,592 $ ( 2,803,860) $ 1,220,519
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
$ - $ 9,395,635 $ 9 ,839,443 $ -
12,037,906 224,567 14,953,025 5,122,366
1,406,599 776,515 2,183,114 -
13,444,505 1 0,396,717 26,975,582 5,122,366
- 4,677,916 5 ,001,545 -
3,355,419 2 ,061,725 7,948,365 2 ,371,537
- - - 1,788,132
2,631,237 1 ,792,600 5,796,813 1 93,065
1,349,801 1 ,211,611 3,312,494 1 50,103
7,336,457 9 ,743,852 22,059,217 4,502,837
6,108,048 652,865 4,916,365 6 19,529
3,122,611 - 4,446,247 -
114,167 62,516 239,604 1 18,114
( 242,392) ( 465,600) ( 1,224,762) -
2,994,386 ( 403,084) 3,461,089 1 18,114
9,102,434 249,781 8,377,454 7 37,643
7,509,000 9 ,267,000 17,049,000 2,150,000
( 9,645,000) ( 8,830,000) ( 18,475,000) -