City of
Walnut Creek
Walnut Creek, California
Basic Financial Statements
and Independent Auditors’ Report
For the biennial period ended June 30, 2006
Prepared by: Finance Division
City of Walnut Creek
Basic Financial Statements
For the biennial period ended June 30, 2006
Table of Contents
Page
FINANCIAL SECTION
Independent Auditors’ Report......................................................................................................................... ..... 1
Management Discussion and Analysis ................................................................................................................ 3
Basic Financial Statements:
Government- Wide Financial Statements:
Statement of Net Assets......................................................................................................................... ..... 21
Statement of Activities and Changes in Net Assets ................................................................................ 22
Major Governmental Fund Financial Statements:
Balance Sheet.......................................................................................................................... ...................... 26
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets ........................................................................... 27
Statement of Revenues, Expenditures and Changes in Fund Balances................................................ 28
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.......................................................................... 29
Major Proprietary Funds:
Statement of Net Assets......................................................................................................................... ..... 32
Statement of Revenues, Expenses and Changes in Fund Net Assets ................................................... 33
Statement of Cash Flows ............................................................................................................................. 34
Fiduciary Funds:
Statement of Fiduciary Net Assets............................................................................................................. 36
Notes to Basic Financial Statements ................................................................................................................. 37
Required Supplementary Information............................................................................................................. 67
SUPPLEMENTAL INFORMATION
Internal Service Funds:
Combining Statement of Net Assets.......................................................................................................... 74
Combining Statement of Revenues, Expenses and Changes in Net Assets......................................... 76
Combining Statement of Cash Flows ........................................................................................................ 78
Fiduciary Funds:
Statements of Changes in Net Assets and Liabilities – All Agency Funds .......................................... 82
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
3
As management of the City of Walnut Creek ( City), we offer readers of the City’s financial statements this
narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2006.
Please read this overview in conjunction with the accompanying financial statements.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements,
which are comprised of three components:
• Government- wide financial statements – These include the Statement of Net Assets and Statement
of Activities. These statements provide information about the activities of the City as a whole and
about the overall financial condition of the City in a manner similar to a private- sector business.
These statements are described in more detail in a subsequent section in this MDA.
• Fund financial statements – These statements provide additional information about the City’s
major funds, including how services were financed in the short term and fund balances available for
financing future projects. These statements are described in more detail in a subsequent section of
this MDA.
• Notes to the Financial Statements – The notes provide additional detail that is essential to a full
understanding of the information provided in the government- wide and fund financial statements.
In addition to the basic financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the City’s progress in funding its obligation to provide
pension benefits to its employees.
GOVERNMENT- WIDE FINANCIAL STATEMENTS AND FINANCIAL ANALYSIS
These statements include all assets and liabilities of the City using the accrual basis of accounting, which is
similar to the accounting used by most private sector companies. All current year’s revenues and expenses
are accounted for regardless of when the cash is paid or received.
These statements report the City’s net assets and changes in them. Net assets, the difference between assets
and liabilities, are one way to measure the City’s financial position. Over time, increases or decreases in net
assets are among indicators used to assess whether the financial condition of the City is improving or
deteriorating. However, it is also important to consider other non- financial factors, such as: changes in the
City’s property tax values; and sales tax outlets; and the condition of the City’s infrastructure ( i. e. parks and
streets), to accurately assess the overall health of the City.
The Government- Wide statements present information about the City’s activities. These include services
provided for police, fire, community development, streets and culture and leisure. These services are
funded from monies received from property, sales, and other taxes, direct charges for services provided,
grants, contributions from other agencies and impact fees collected from new development. The analysis on
the following page focuses on the net assets and changes in net assets of the City's Governmental Activities
( Tables 1, 2 and 3) and Business- Type Activities ( Tables 4 and 5) presented in the Government- wide
Statement of Net Assets and Statement of Activities.
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
4
Governmental Activities
The City's net assets from governmental activities, representing the difference between total assets and total
liabilities, were $ 338.2 million at June 30, 2006, an increase of $ 5.6 million ( 2%) from $ 332.6 million at June
30, 2004. This increase is the Change in Net Assets reflected in the Statement of Activities, as shown in Table
2 on page 6. Table 1 below summaries the City’s Net Assets.
A significant portion of the City’s net assets ($ 231.5 million or 69%) reflects its investment in capital assets
( e. g. land, infrastructure, buildings, equipment). The City uses these capital assets to provide services to
citizens; consequently, these assets are not available for future spending. The City’s total liabilities of $ 21.7
million represents obligations outstanding for current operations, capital projects, deposits held for
development projects and long term debt.
$ 7.8 million or 2% of the assets as of June 30, 2006 represent resources that are subject to external restrictions
on how they may be used by outside agencies and state regulations. Unrestricted net assets ($ 98.9 million
or 29%) may be used to meet the government’s ongoing obligations to citizens and creditors.
However, as discussed in the notes to the financial statements, much of the unrestricted net assets includes
the portion of the City’s General Fund and Internal Service Fund balances which have either been
designated for future vehicle and equipment replacement, a new library, major roadway reconstruction and
to cover economic uncertainties. This represents an increase of $ 9.4 million over the biennial period for the
Fiscal Year ended June 30, 2004.
Governmental Activities The charts on the following page summarize major expenditure program
categories, program revenues used to fund specific expenditure programs, and general City revenues
available for funding all City programs. For Fiscal Year 2004- 2006, total revenues from all sources relating
to governmental activities were $ 133.8 million and total expenditures for all City programs relating to
governmental activities were $ 130.9 million.
June 30, 2006 June 30, 2004
Cash and investments $ 98.8 $ 95.6
Other Assets 19.3 12.0
Capital assets 241.9 247.1
Total assets 360.0 354.7
Other Liabilities 21.7 22.1
Total liabilities 21.7 22.1
Net Assets
Invested in capital assets, net of debt 231.5 235.6
Restricted 7.8 7.5
Unrestricted 98.9 89.5
Total net assets $ 338.2 $ 332.6
Table 1
Governmental Net Assets ( In Millions)
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
5
Sources of Revenues - Governmental Activities
Vehicle License Fee
1.5%
Other Revenue
0.1%
Use of money and
property
4.7%
Inter- governmental
3%
Franchise
4.0%
Capital grants
0.8%
Operating
contributions and
grants
5.2%
Charges for service
28.7%
Property
23.2%
Sales and use
30.0%
Functional Expenses - Governmental Activities
Public Services
37.3%
Public protection
26.9%
Community
development
6.9%
Interest on long-term
debt
1.2%
Arts, recreation &
community service
7.0%
General
government
9.2%
Administrative
Services
7.1%
Housing
4.4%
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
6
Table 2
Change in Governmental Net Assets
( In Millions)
Fiscal Biennal Year Ended June 30th
Expenses 2006 2004
Public protection $ 35.2 $ 29.7
Public service 48.8 41.2
Community development 9.0 6.9
Housing 5.8 1.1
Arts, recreation & community service 9.2 8.7
Administrative service 9.3 8.5
General government 12.0 2.9
Interest on long- term debt 1.6 1.7
Total expenses 130.9 100.7
Revenues
Program revenues
Charges for service 38.4 32.4
Operating contributions and grants 6.9 7.6
Capital grants 1.1 4.1
Total program revenues 46.4 44.1
General revenues
Taxes:
Sales and use 40.1 37.8
Property 31.1 20.8
Franchise 5.3 6.1
Vehicle license fee 2.0 6.8
Other Taxes 4.0
Intergovernmental 2.5 0.9
Use of money and property 6.3 6.4
Other revenue 0.1 -
Transfers ( 3.8) ( 3.1)
Total general revenues 87.4 75.7
Total revenues 133.8 119.8
Change in net assets - Governmental Activities $ 2.9 $ 19.1
Table 2 shows that governmental expenses discussed above, which totaled $ 130.9 million, were offset in
part by program revenues for governmental activities of $ 46.3 million. These program revenues included
$ 38.4 million in charges for services, $ 6.9 million in operating grants and contributions, and $ 1.1 million in
capital grants and contributions. Charges for services include traffic safety fines, plan check fees, building
inspection fees, other charges related to new construction, and admission fees charged for cultural events.
Grants and contributions include amounts contributed by developers.
General revenues are not allocable to programs. General revenues are used to pay for the net cost of
governmental programs.
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
7
Table 3 presents the net expense of each of the City's largest programs. Net expense is defined as total
program cost less the revenues generated by those specific activities. In the City's case, the net expense of
the Administrative Services Department was minimal due to the recognition of revenues generated by
Business License and User fees in this program.
Business- type Activities
Business- type activities include the City’s Golf Course, Restaurant, and Partnership Enterprise Funds. The
net assets deficit of business- type activities was $. 4 million at June 30, 2006. Assets included a total of $ 3.2
million in cash and investments, $ 205,000 in receivables offset by $ 3.0 million in internal balances
( representing the net amount due from business- type activities to governmental activities) and $ 2.7 million
in capital assets. Liabilities include $ 1.4 million in advance deposits for recreation and arts classes and
Regional Arts performances that take place in the following biennial period, $ 1.3 million in long- term debt
and $ 706,000 in other liabilities.
2006 2004
Cash and Investments $ 3.2 $ 3.9
Other Assets ( 2.8) ( 3.0)
Capital assets 2.7 3.1
Total assets 3.1 4.0
Long- term debt outstanding 1.3 1.6
Other liabilities 2.2 2.7
Total liabilities 3.5 4.3
Net Assets
Invested in capital assets, net of debt 1.3 1.3
Restricted 0.1 0.2
Unrestricted ( 1.8) ( 1.8)
Total net assets $ ( 0.4) $ ( 0.3)
Table 4
Business- Type Net Assets
( In Millions)
2006 2004
Public protection $ ( 31.0) $ ( 25.6)
Public service ( 34.5) ( 23.0)
Community development ( 3.3) ( 2.8)
Housing 1.6 0.4
Arts, recreation & community service ( 4.9) ( 4.9)
Administrative service ( 1.0) -
General government ( 10.0) ( 2.1)
Interest on long- term debt ( 1.6) ( 1.7)
Totals $ ( 84.6) $ ( 59.7)
Table 3
Government Activities
Net ( Expense) Revenue From Services
( In Millions)
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
8
Operating revenues of Business- type Activities totaled $ 14.2 million in the 2006 biennial period while
expenses totaled $ 18.1 million. The Golf Course, the Restaurant and the Partnership all reported net
activity expenses. These net expenses were offset by general revenues and transfers from the General City
Operations Fund.
FUND FINANCIAL STATEMENTS
These statements provide more detailed information about the City’s major funds. A fund is a grouping of
related accounts that is used to maintain control over resources that have been segregated for specific
activities or objectives. The City, like other state and local governments, uses fund accounting to ensure
and demonstrate compliance with finance- related legal requirements. All of the funds of the City can be
divided into three categories: governmental funds, proprietary funds, and fiduciary funds.
Governmental funds Governmental funds are used to account for essentially the same functions reported
as governmental activities in the government- wide financial statements. However, unlike the government-wide
financial statements, governmental fund financial statements focus on near- term inflows and outflows
of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year.
Such information may be useful in evaluating a government’s near- term financing requirements.
Because the focus of governmental funds is narrower than that of the government- wide financial
statements, it is useful to compare the information presented for governmental funds 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 governmental fund statement of revenues, expenditures,
and changes in fund balances provide a reconciliation to facilitate this comparison between governmental
funds and governmental activities.
Information is presented separately in the governmental fund balance sheet and in the governmental fund
statement of revenues, expenditures, and changes in fund balances for the General City Operations and the
Public Ways and Facilities Capital Projects Funds. These funds qualify to be classified as major funds.
The City adopts a biennial appropriated budget for its General City Operations Fund. A budgetary
comparison statement has been provided for this fund to demonstrate compliance with this budget.
2004- 2006 2002- 2004
Net ( expenses) revenues from business- type activities
Golf course $ ( 0.5) $ ( 0.8)
Restaurant 0.2 -
Partnership ( 3.7) ( 4.0)
Totals $ ( 4.0) $ ( 4.8)
Table 5
Change in Business Type Net Assets
( In Millions)
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
9
Proprietary funds 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 golf course and related restaurant as well as its Partnership
Fund and are classified as major funds in the City’s Statement of Net Assets. Internal service funds are an
accounting device used to accumulate and allocate costs internally among the City’s various functions and
to build up reserves for future replacement of capital assets. The City uses internal service funds to account
for its fleet of vehicles, computer systems, other furniture and equipment, improvements to City buildings
and major roadway reconstruction. Because these services solely benefit the governmental function, they
have been included within governmental activities in the government- wide financial statements.
Proprietary fund financial statements provide the same type of information as the government- wide
financial statements, only in more detail. All eight internal service funds are combined into a single,
aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal
service funds is provided in the form of combining statements elsewhere in this report.
Fiduciary Funds The City is the agent for certain community groups and assessment districts, holding
amounts collected which await payment as directed. The City’s fiduciary activities are reported in the
separate Statement of Fiduciary Net Assets and the Agency Funds Statement of Assets and Liabilities.
These activities are excluded from the City’s other financial statements because the City cannot use these
assets to finance its own operations.
FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS
Summary Analysis of Governmental Funds
At June 30, 2006, the City’s governmental funds reported combined fund balances of $ 89.3 million, which is
an increase of $ 7.1 million or 9% compared with the last biennial period. This increase occurred in the
General City Operations Fund, which reported an increase in fund balance due to lower than expected
expenditures and higher than expected sales tax collections and an increase due to prior period adjustments
for supplies inventory, sales tax and dental claims liability, which were offset by a decrease of fund balance
in the Public Ways and Facilities Capital Project Fund. The following provides a more detailed analysis by
fund type.
Detailed Analysis by Fund of Major Governmental Funds
General City Operations Fund
The General City Operations Fund is the chief operating fund of the City. For the biennial period ending
June 30, 2006, total fund balance of this fund was $ 49.5 million, of which $ 21.5 has been designated for
construction of a new downtown library and $ 22.4 has been reserved or designated for claims,
encumbrances, advances to other funds and other City projects.
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
10
General City Operations Fund revenues increased $ 11 million or 11.1% in the 2006 biennial period due
primarily to an increase in property tax collections resulting from increased assessed valuations on
commercial and residential properties in the City and increased sales tax collections resulting from higher
sales at the City’s major retail outlets.
General City Operations expenditures increased $ 21.5 million or 28% over prior period due to additional
costs incurred for Public Protection, Public Service, Community Development, Arts, Recreation and
Community Services and Administration Services.
Public Ways and Facilities Capital Project Fund
The Public Ways and Facilities Fund accounts for all of the City’s capital projects and capital expenditures.
As of June 30, 2006, the Public Ways and Facilities Fund balance comprised of $ 33.6 million in unreserved,
undesignated balances and $ 6.2 million reserved or designated for encumbrances, debt service, low and
moderate- income housing and unrealized investment gains.
The Fund’s revenues increased $ 249,000 for the biennial period ending June 30, 2006 primarily due to
increased Redevelopment Agency tax increment collections resulting from the completion of new
developments such as Olympia Place, Century Theatre, and Plaza Escuela .
Fund expenditures decreased $ 4.1 million as capital outlay declined by $ 11.1 million while public service
and housing expenditures increased by $ 8.7 million and debt service expenditures decreased $ 901,000.
Several large projects such as the City Hall Expansion, Veterans Commemurative CH Plaza and the PD
Records Dispatch System were near completion in the prior fiscal period. As a result, much less
expenditures were incurred in the 2004- 2006 period.
Summary Analysis of Proprietary Funds
Net assets of the City’s Proprietary Funds declined by $ 84,000 to a deficit balance of $ $ 367,000 at the end of
the biennial period. Enterprise operating revenues were $ 14.2 million, up $ 3.4 million from the last biennial
period, while net non- operating revenues from interest and sale of property decreased $ 410,000 to $ 62,000.
Enterprise operating expenses were $ 18.1 million, up $ 2.8 million from the prior biennial period and net
transfers increased to $ 3.8 million, up from $ 3.1 million in the prior biennial period. Additional arts
education programs along with higher labor, maintenance and utility costs contributed to the increased
expenses.
Detailed Analysis by Fund of Major Proprietary Funds
Golf Course Fund
This Fund accounts for the operations of the City’s Boundary Oaks Golf Course. Net assets of the Fund
decreased $ 397,000 at the end of the 2004- 2006 biennial period to a total of $ 1.75 million, of which $ 712,000
was invested in capital assets and $ 168,000 was restricted for debt service. The remaining $ 871,000 of the
Fund’s Net Assets was unrestricted.
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
11
Restaurant Fund
This Fund accounts for lease revenues generated by Blake’s Restaurant, located at the Boundary Oaks Golf
Course. The Fund had a Net Asset deficit of $ 2.1 million at June 30, 2006, after earning $ 233,000 in the 2004-
2006 biennial period. Operating revenues consist of rent from the restaurant’s operator and increased by
$ 194,000 over the prior period. Expenses decreased by $ 23,000 from the prior period, primarily due to a
lower amount incurred for rent/ lease, professional and special services. The deficit in the fund is financed
by a long- term advance from the General City Operations Fund.
Partnership Fund
The Partnership Fund accounts for the operations of the City’s cultural programs, including Civic Arts
Education, Performing Arts, theatre production and the Bedford Art Gallery. As of June 30, 2006, the Fund’s
Net Assets totaled $ 29,000.
The Fund incurred an operating loss of $ 3.8 million in the current biennial period, down from an operating
loss of $ 3.9 million in the prior period. Operating revenues increased to $ 10.4 million while expenses
increased to $ 14.2 million in the current period. Operating revenues comprised of charges for admission to
events and programs, while expenses are primarily the costs of operating the facilities, as well as payments
for instructors and performers. Net transfers into the Fund increased to $ 3.8 million from the prior period’s
$ 3.1 million. These transfers represent funding provided by the General City Operations Fund as its part of
the City’s support with private enterprise to promote cultural programs.
Budgetary Highlights of the City’s Governmental Funds
Over the course of the year, the City Council revised the City budget with adjustments that fall into one of
the following three categories:
• Changes made to adjust appropriations among capital projects
• Changes made in the mid cycle report to adjust revenues and augment current year appropriations
• Other revenue and expenditure adjustments approved after the original budget was adopted.
After taking into account these adjustments, actual expenditures for the City’s General City Operations
Fund were $ 2.5 million lower than final budget amounts. The majority of the savings occurred in Public
Protection and Community Development due to lower than expected costs for services and personnel, and
delays in development occurring within the City ( some of which will be carried over to Fiscal Year 2006-
2008).
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
12
CAPITAL ASSETS
GASB 34 requires the City to record all of its capital assets including infrastructure. Infrastructure includes
roads, bridges, signals and similar assets used by the entire population.
In 2006, the City recorded the cost of all its infrastructure assets and computed the amount of accumulated
depreciation for these assets based on their original acquisition dates. At June 30, 2006 the cost of
infrastructure and other capital assets recorded on the City's financial statements was as shown in Table 6
below:
At June 30, 2006 the City had $ 241.9 million, net of depreciation, invested in a broad range of capital assets
used in governmental activities and $ 2.7 million, also net of depreciation, invested in Business- type assets,
as shown in Table 6 above. Further details on additions and deletions of capital assets may be found in
Note 5 to the financial statements.
The City depreciates all its capital assets over their estimated useful lives, as required by GASB 34. The
purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an
allocable portion of the cost of the asset is borne by all users. Additional information on depreciable lives
may be found in Note 5.
2006 2004
Governmental activities
Land $ 47.8 $ 45.1
Construction in progress 26.7 28.2
Building and improvements 79.2 75.7
Machinery Equipment and Software 5.5 3.6
Vehicles 6.9 6.1
Infrastructure 186.3 179.9
Less accumulated depreciation ( 110.5) ( 91.5)
Totals 241.9 247.1
Business activities
Land 1.3 1.3
Buildings 1.9 1.9
Improvements 2.2 2.2
Equipment & Software 0.3 0.2
Less accumulated depreciation ( 3.0) ( 2.5)
Totals $ 2.7 3.1
Table 6
Capital Assets at June 30, 2006
( In Millions)
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
13
DEBT ADMINISTRATION
At June 30, 2006 the City's debt comprised:
2006 2004
Governmental activities
Tax Allocation bonds $ 1 0.2 $ 11.5
Total governmental debt 10.2 11.5
Business- type activities
Lease Revenue Bonds 1 .4 1.81
Total business- type debt 1.4 1.81
Total debt $ 11.6 $ 13.3
Outstanding Debt at June 30th
( In Millions)
FINANCIAL HIGHLIGHTS
Financial highlights of the biennial period ended June 30, 2006 include the following:
Fund Level:
• Governmental funds balances totaled $ 89.3 million, while net asset deficit in proprietary funds were
$ 367,000 in the Enterprise funds and net asset balance of $ 12.4 million in the Internal Service Funds.
• Governmental fund revenues were $ 132.5 million, an increase of $ 11.2 million from 2004' s $ 121.3
million.
• Governmental fund expenditures increased to $ 126 million, up $ 17.5 million from the prior biennial
period.
• Proprietary fund operating revenues were $ 14.2 million in the Enterprise Funds and $ 1.3 million in
the Internal Service Funds.
• Proprietary fund operating expenses were $ 18.1 million in the Enterprise funds and $ 1.6 million in
the Internal Service Funds.
• Net non- operating revenues of proprietary funds were $ 62,000 in the Enterprise Funds and net non-operating
revenues were $ 12,000 in the Internal Service Funds.
General City Operations Fund:
• General City Operations Fund revenues were $ 109 million, an increase of $ 11 million over the prior
biennial period amounts.
• General City Operations Fund expenditures were $ 98.5 million, an increase of $ 21.5 million over the
prior biennial period amounts.
• Net transfers out of the General City Operations Fund were $ 5.6 million, a $ 12.8 million decrease
from the prior biennial period.
• General City Operations Fund balance of $ 49.5 million at June 30, 2006 compared favorably with the
prior biennial period's fund balance of $ 41.5 million.
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
14
Public Ways and Facilities:
• Public Ways and Facilities revenues were $ 23 million, an increase of $ 250,000 over the prior biennial
period amounts.
• Public Ways and Facilities expenditures were $ 27.4 million, and decrease of $ 4.1 million from the
prior biennial period amounts.
• Net transfers in to the Public Ways and Facilities Fund were $ 3.5 million, a $ 2 million decrease from
the prior biennial period.
• Public Ways and Facilities Fund balance of $ 39.8 million at June 30, 2006 represented a decrease of
$ 874,000 from the prior biennial period.
Government- wide:
• The City's total net assets were $ 337.9 million at June 30, 2006, of which $ 338.2 million were in
Governmental Activities and a $ 367,000 deficit were in Business- type Activities.
• Total City revenues were $ 151.8 million, of which $ 137.6 million were derived from Governmental
Activities and $ 14.2 million were derived from Business- type Activities.
• Total city expenses were $ 149 million, of which Governmental Activities incurred $ 130.9 million and
$ 18.2 million were incurred by Business- type Activities
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The City's population is expected to remain stable, and it has established itself as a major destination point
for cultural activities, retail shopping, and dining out, in addition to its more traditional role as a regional
office center. Given the state of the local economy, caution was exercised in developing the City’s budget
for the biennial fiscal period ending June 30, 2008. The City’s adopted budget for this period for its General
City Operations Fund totals $ 125 million, of which 33% is for Police Services, 21% is for Public Services, 21%
is for Arts, Recreation and Community Services and 25% is for Community Development and
Administration. The total amount budgeted in this fund represents a 13.7% increase over the Fiscal Year
2004- 2006 budget and is primarily due to increases in costs for personnel and other services, including those
relating to redevelopment occurring within the City.
Major Capital Projects funded for the biennial period ending June 30, 2008 include work on the following
projects:
• New Downtown Library
• Major Roadway Reconstruction
• Residential Slurry Seal and Overlay
• Heather Farm Garden Center
• City Hall Flood Proofing
• Parking Garage Elevator Electronic Upgrade
• Playground Replacement
• Rudgear Road Retaining Wall
CITY OF WALNUT CREEK, CALIFORNIA
Management’s Discussion and Analysis ( MDA)
For the biennial period ending June 30, 2006
15
Primary funding sources for these projects include one time grants, impact fees received from new
development and one time General Fund reserves set aside for these projects.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This Biennial Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a
general overview of the City's finances. Questions about this Report should be directed to the to the
following address: City of Walnut Creek, Finance Department, 1666 North Main Street, Walnut Creek,
California 94596. A copy of this financial report is also located at the City’s website at
http:// www. ci. walnut- creek. ca. us/
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BASIC FINANCIAL STATEMENTS
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GOVERNMENT- WIDE
FINANCIAL STATEMENTS
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City of Walnut Creek
Statement of Net Assets
June 30, 2006
Governmental Business- Type
Activities Activities Total
Current assets:
Cash and investments $ 97,726,708 $ 3 ,062,158 $ 1 00,788,866
Cash with fiscal agent 1 ,142,702 1 67,556 1,310,258
Receivables:
Accounts 2,146,783 1 93,022 2,339,805
Taxes 4,073,265 - 4,073,265
Due from other governments 992,243 - 992,243
Interest 9 67,908 1 2,103 980,011
Internal balances, current 1 02,846 ( 102,846) -
Total current assets 107,152,455 3,331,993 1 10,484,448
Noncurrent assets:
Notes and loans receivable 7,639,000 - 7 ,639,000
Inventory of materials and supplies 309,743 - 309,743
Internal balances, long- term 2 ,976,957 ( 2,976,957) -
Capital assets:
Nondepreciable 7 4,541,262 1,337,396 7 5,878,658
Depreciable 2 77,793,554 4,341,902 2 82,135,456
Accumulated depreciation ( 110,467,132) ( 2,986,453) ( 113,453,585)
Total capital assets 241,867,684 2,692,845 2 44,560,529
Total noncurrent assets 252,793,384 ( 284,112) 252,509,272
Total assets 3 59,945,839 3,047,881 3 62,993,720
Current liabilities:
Accounts payable and accrued liabilities 1,938,622 232,739 2,171,361
Accrued payroll 1,185,171 129,505 1,314,676
Refundable deposits 169,383 1,396,329 1 ,565,712
Deferred revenue 1,630,860 241,357 1,872,217
Interest payable 1 76,525 - 176,525
Long- term debt due in one year 8 55,594 9 0,000 945,594
Total current liabilities 5 ,956,155 2,089,930 8 ,046,085
Noncurrent liabilities:
Claims payable - due in more than one year 3 ,398,060 - 3 ,398,060
Compensated absences 2,999,660 - 2 ,999,660
Long- term debt due in more than one year 9 ,370,349 1,325,000 1 0,695,349
Total noncurrent liabilities 1 5,768,069 1,325,000 1 7,093,069
Total liabilities 21,724,224 3,414,930 2 5,139,154
Invested in capital assets, net of related debt 231,465,216 1,277,845 2 32,743,061
Restricted for:
Capital projects 81,607 - 8 1,607
Debt service 1,142,702 167,556 1,310,258
Community development 974,338 - 974,338
Special purposes 5,616,966 - 5 ,616,966
Total restricted net assets 7,815,613 167,556 7,983,169
Unrestricted net assets ( deficit) 98,940,786 ( 1,812,450) 9 7,128,336
Total net assets ( deficit) $ 3 38,221,615 $ ( 367,049) $ 337,854,566
ASSETS
LIABILITIES
NET ASSETS
See accompanying Notes to Basic Financial Statements.
21
City of Walnut Creek
Statement of Activities and Changes in Net Assets
For the biennial period ended June 30, 2006
Operating Capital
Charges for Grants and Grants and
Functions/ Programs Expenses Services Contributions Contributions Total
Primary government:
Governmental activities:
Public protection $ 35,195,773 $ 3,506,550 $ 461,321 $ 260,699 $ 4,228,570
Public service 48,831,781 10,016,155 4,340,661 - 14,356,816
Community development 9,010,079 4,936,270 - 789,890 5,726,160
Housing 5,756,918 6,341,829 1,003,457 - 7,345,286
Arts, recreation & community services 9,244,300 4,318,158 - - 4,318,158
Administrative services 9,346,121 7,308,137 1,054,295 - 8,362,432
General government 11,945,902 1,980,177 - - 1,980,177
Interest on long- term debt 1,564,009 - - - -
Total governmental activities 130,894,883 38,407,276 6,859,734 1,050,589 46,317,599
Business- type activities:
Golf course 3,771,468 3,304,346 - - 3,304,346
Restaurant 222,714 449,378 - - 449,378
Partnership 14,150,828 10,425,370 - - 10,425,370
Total business- type activities 18,145,010 14,179,094 - - 14,179,094
Total primary government $ 149,039,893 $ 52,586,370 $ 6,859,734 $ 1,050,589 $ 60,496,693
General revenues:
Taxes:
Sales and use
Property
Franchise
Vehicle license tax
Other taxes
Total taxes
Intergovernmental
Investment income
Other revenue
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning of period, as restated ( Note 13)
Net assets - end of period
See accompanying Notes to Basic Financial Statements.
Program Revenues
22
Governmental Business- Type
Activities Activities Total
$ ( 30,967,203) $ - $ ( 30,967,203)
( 34,474,965) - ( 34,474,965)
( 3,283,919) - ( 3,283,919)
1,588,368 - 1,588,368
( 4,926,142) - ( 4,926,142)
( 983,689) - ( 983,689)
( 9,965,725) - ( 9,965,725)
( 1,564,009) - ( 1,564,009)
( 84,577,284) - ( 84,577,284)
- ( 467,122) ( 467,122)
- 226,664 226,664
- ( 3,725,458) ( 3,725,458)
- ( 3,965,916) ( 3,965,916)
( 84,577,284) ( 3,965,916) ( 88,543,200)
40,098,916 - 40,098,916
31,102,682 - 31,102,682
5,266,682 - 5,266,682
1,956,193 - 1,956,193
3,966,624 3,966,624
82,391,097 - 82,391,097
2,519,827 - 2,519,827
6,255,498 77,503 6,333,001
73,558 115 73,673
( 3,803,954) 3,803,954 -
87,436,026 3,881,572 91,317,598
2,858,742 ( 84,344) 2,774,398
335,362,873 ( 282,705) 335,080,168
$ 338,221,615 $ ( 367,049) $ 337,854,566
$ - $ -
and Changes in Net Assets
Net ( Expense) Revenue
23
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24
The General City Operations Fund accounts for resources used to provide for general City operations
described in Note 1.
The Public Ways and Facilities Capital Projects Fund accounts for resources used for the acquisition
or construction of major facilities or projects and reflects expenditures for these facilities and projects.
GOVERNMENTAL
FUND FINANCIAL STATEMENTS
The funds described below were determined to be Major Funds by the City in fiscal 2006.
25
City of Walnut Creek
Balance Sheet
Major Governmental Funds
June 30, 2006
General Public Ways Total
City and Facilities Governmental
Operations Capital Projects Funds
ASSETS
Current:
Cash and investments $ 69,778,750 $ 27,947,958 $ 9 7,726,708
Cash with fiscal agent - 1,142,702 1 ,142,702
Accounts receivable 1,287,295 859,488 2,146,783
Taxes receivable 4,073,265 - 4 ,073,265
Due from other governments - 9 92,243 992,243
Interest receivable 5 79,611 388,297 967,908
Due from other funds 201,992 1 0,392,014 1 0,594,006
Notes and loans receivable 635,000 8,629,000 9,264,000
Inventory of materials and supplies 309,743 - 309,743
Advances to other funds 3,887,741 - 3,887,741
Total assets $ 80,753,397 $ 50,351,702 $ 131,105,099
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable and other accrued liabilities $ 1,250,366 $ 637,524 $ 1,887,890
Accrued payroll 1,138,355 4 6,816 1,185,171
Claims payable 3,398,060 - 3 ,398,060
Due to other funds 19,998,488 3 07,047 2 0,305,535
Refundable deposits 169,383 - 169,383
Deferred revenue 2,285,100 8,642,610 1 0,927,710
Compensated absences payable 2,999,660 - 2 ,999,660
Advances from other funds - 9 10,784 910,784
Total liabilities 31,239,412 10,544,781 41,784,193
Fund Balances:
Reserved:
Encumbrances 1,391,211 4,356,617 5,747,828
Debt service - 1,142,702 1 ,142,702
Advances to other funds 3,887,741 - 3 ,887,741
Employee housing 90,000 - 90,000
Low and moderate income housing - 5 81,099 581,099
Emergency 6,141,553 - 6 ,141,553
Total reserved 11,510,505 6,080,418 1 7,590,923
Unreserved:
Designated:
Workers compensation 1,679,543 - 1 ,679,543
Labor agreement 5 00,000 - 500,000
Legal claims 4,000,000 - 4 ,000,000
Dental claims 4 06,000 - 406,000
Unrealized investment gain - 1 23,485 123,485
Council discretionary 614,155 - 614,155
City Manager discretionary 7 5,000 - 7 5,000
Property expansion 3 ,062,278 - 3,062,278
Capital improvement program 1,405,022 - 1,405,022
Future contingencies 2 9,448 - 29,448
Downtown library 2 1,514,456 - 2 1,514,456
Total designated 33,285,902 1 23,485 3 3,409,387
Undesignated 4,717,578 3 3,603,018 3 8,320,596
Total unreserved 38,003,480 33,726,503 7 1,729,983
Total fund balances 49,513,985 39,806,921 8 9,320,906
Total liabilities and fund balances $ 80,753,397 $ 50,351,702 $ 1 31,105,099
See accompanying Notes to Basic Financial Statements.
26
Total Fund Balances - Total Governmental Funds $ 89,320,906
Capital assets used in governmental activities are not current financial resources and therefore are not
reported in the Governmental Funds Balance Sheet. Capital assets of governmental activities were
adjusted as follows:
Nondepreciable 74,541,262
Depreciable, net 164,735,104
Interest payable on long- term debt does not require current financial resources. Therefore, interest
payable is not reported as a liability in the Governmental Funds Balance Sheet. ( 176,525)
Revenues which are deferred on the Governmental Funds Balance Sheet because they are not
currently available are recognized as revenue in the Statement of Activities and accordingly increase
the net assets on the Statement of Net Assets. 9,296,850
Allowance for forgivable loans does not require current financial resources. Therefore, allowance for
forgivable loans is not recorded on the Governmental Funds Balance Sheet. ( 1,625,000)
Internal service funds are used to charge the costs of information technology and equipment
replacement to individual funds. The assets and liabilities of the internal service funds are included
in governmental activities in the Government- Wide Statement of Net Assets. 12,354,961
Long- term debts are not due and payable in the current period and therefore they are not reported in
the Governmental Funds Balance Sheet.
Long term debt, due in one year ( 855,594)
Long term debt, due in more than one year ( 9,370,349)
$ 338,221,615
See accompanying Notes to Basic Financial Statements.
Amounts reported for governmental activities in the Statement of Net Assets were different because:
Net Assets of Governmental Activities
City of Walnut Creek
Reconciliation of the Governmental Funds Balance Sheet
to the Government- Wide Statement of Net Assets
June 30, 2006
27
City of Walnut Creek
Statement of Revenues, Expenditures and Changes in Fund Balances
Major Governmental Funds
For the biennial period ended June 30, 2006
General Public Ways Total
City and Facilities Governmental
Operations Capital Projects Funds
REVENUES:
Taxes:
Sales and use $ 30,012,214 $ - $ 3 0,012,214
Sales Tax In- Lieu 10,086,702 - 1 0,086,702
Property 19,242,518 6 ,231,874 2 5,474,392
ERAF III ( 2,140,451) - ( 2,140,451)
VLF Swap 7,768,741 - 7 ,768,741
Business license 3,859,413 - 3 ,859,413
Franchise 5,266,682 - 5 ,266,682
Highway users - 2,453,929 2,453,929
Other 5,781,269 4 ,067,941 9,849,210
Intergovernmental 4,561,706 1 ,307,180 5,868,886
Use of money and property 7,124,815 2 ,067,942 9,192,757
Charges for services 8,444,459 3 ,604,455 1 2,048,914
Licenses, permits and fees 3,015,110 1 ,600,000 4,615,110
Fines, forfeitures and penalties 6,072,383 - 6,072,383
Other revenue 3 59,546 1,748,512 2 ,108,058
Total revenues 1 09,455,107 2 3,081,833 1 32,536,940
EXPENDITURES:
Current:
Public protection 3 4,802,951 1 3,891 3 4,816,842
Public service 24,691,360 10,287,353 3 4,978,713
Community development 9,017,711 - 9,017,711
Housing 1 35,000 5,621,918 5 ,756,918
Cultural Services 9,014,963 8 4,646 9,099,609
Administrative services 9,147,694 133,345 9,281,039
General government 1 1,736,254 2 00,833 1 1,937,087
Capital outlay:
Public ways and facilities - 8,276,395 8,276,395
Debt service:
Principal retirement - 1,240,000 1 ,240,000
Interest, fiscal charges and issuance costs - 1,590,459 1 ,590,459
Total expenditures 98,545,933 27,448,840 125,994,773
REVENUES OVER ( UNDER) EXPENDITURES 10,909,174 ( 4,367,007) 6 ,542,167
OTHER FINANCING SOURCES ( USES):
Transfers in 1,252,156 4,817,356 6 ,069,512
Transfers out ( 6,851,660) ( 1,323,878) ( 8,175,538)
Total other financing sources ( uses) ( 5,599,504) 3,493,478 ( 2,106,026)
Net change in fund balances 5,309,670 ( 873,529) 4,436,141
FUND BALANCES:
Beginning of the period, as restated ( Note 13) 4 4,204,315 40,680,450 84,884,765
End of the period $ 49,513,985 $ 39,806,921 $ 89,320,906
See accompanying Notes to Basic Financial Statements.
28
$ 4,436,141
Depreciation expense on capital assets is reported in the Government- Wide Statement of Activities
and Changes in Net Assets, but it does not require the use of current financial resources. Therefore,
depreciation is not reported as an expenditure in governmental funds.
( 14,834,746)
Governmental funds report acquisition of capital assets as expenditures in various functions and in
capital outlay. However, in the Government- Wide Statement of Activities and Changes in Net Assets,
the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is
the amount of capital assets additions recorded in the current period.
9,347,672
Losses on the disposal of capital assets is reported in the Government- Wide Statement of Activities
and Changes in Net Assets, but do not require the use of current financial resources. Therefore, it is
not reported as an expenditure in governmental funds. ( 21,924)
Revenues which are deferred on the Governmental Funds Balance Sheet because they are not
currently available are recognized as revenue in the Statement of Activities. This amount represent
revenues which were deferred on the governmental funds statements in prior years and recognized
this year, however those revenues which were recognized on the government- wide statements in
prior years and therefore should not be recognized as revenue in the current year.
4,230,749
Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces
long- term liabilities in the Government- Wide Statement of Net Assets.
Long- term debt repayments 1,240,000
Bond issuance premium is recognized as proceeds from sale of bonds in the governmental funds
financial statements, but is amortized over the life of the bonds on the government- wide statements
and reported as a reduction of interest expense. 11,188
Interest expense accrued on long- term debt is reported in the Government- Wide Statement of
Activities and Changes in Net Assets, but it does not require the use of current financial resources.
Therefore, interest expense is not reported as an expenditure in governmental funds. This amount
represents the difference between expenditures reported on the Government- wide statements and the
Governmental Funds statements.
15,262
Internal service funds are used to charge the costs of information technology and equipment
replacement, to individual funds. The net revenue of the internal service funds is reported with
governmental activities. ( 1,565,600)
$ 2,858,742
See accompanying Notes to Basic Financial Statements.
Net Change in Fund Balances - Total Governmental Funds
Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets
were different because:
Change in Net Assets of Governmental Activities
City of Walnut Creek
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 biennial period ended June 30, 2006
29
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30
Enterprise Funds:
The Golf Course Fund accounts for revenues and expenses of the Boundary Oaks Golf Course.
The Restaurant Fund accounts for revenues and expenses of the restaurant located at the Boundary
Oak Golf Course.
The Partnership Fund accounts for revenues and expenses of the Civic Arts Education program, the
Performing Arts program, specific theater productions, and the Bedford Art Gallery.
Internal Service Funds:
The Internal Service Funds account for activities that provide goods or services to other City funds,
departments, or agencies on a cost reimbursement basis. The combined total of all internal service
funds are shown on the Fund Financial Statements.
PROPRIETARY FUND
FINANCIAL STATEMENTS
Proprietary funds account for City operations financed and operated in a manner similar to private business
enterprise. The intent of the City is that the cost of providing goods and services be financed primarily
through user charges.
31
City of Walnut Creek
Statement of Net Assets
Major Proprietary Funds
June 30, 2006
Governmental
Activities
Golf Internal
Course Restaurant Partnership Total Service Funds
ASSETS
Current assets:
Cash and investments $ 899,811 $ 303,009 $ 1,859,338 $ 3,062,158 $ -
Cash with fiscal agent 167,556 - - 167,556 -
Total cash 1,067,367 303,009 1,859,338 3,229,714 -
Accounts receivable 43,793 57,500 91,729 193,022 -
Interest receivable 11,995 - 108 12,103 -
Due from other funds - - - - 10,061,941
Total current assets 1,123,155 360,509 1,951,175 3,434,839 10,061,941
Capital assets:
Nondepreciable 1,277,396 60,000 - 1,337,396 -
Depreciable 2,847,438 1,345,755 148,709 4,341,902 6,909,748
Accumulated depreciation ( 1,998,210) ( 905,468) ( 82,775) ( 2,986,453) ( 4,318,430)
Total capital assets 2,126,624 500,287 65,934 2,692,845 2,591,318
Total noncurrent assets 2,126,624 500,287 65,934 2,692,845 2,591,318
Total assets 3,249,779 860,796 2,017,109 6,127,684 12,653,259
LIABILITIES
Current liabilities:
Accounts payable and accrued liabilities 63,089 - 169,650 232,739 50,732
Accrued payroll 1,823 - 127,682 129,505 -
Due to other funds 19,906 - 82,940 102,846 247,566
Bonds payable - due in one year 90,000 - - 90,000 -
Total current liabilities 174,818 - 380,272 555,090 298,298
Noncurrent liabilities:
Deposits payable - - 1,396,329 1,396,329 -
Deferred revenue - 29,792 211,565 241,357 -
Advances from other funds - 2,976,957 - 2,976,957 -
Bonds payable - due in more than one year 1,325,000 - - 1,325,000 -
Total noncurrent liabilities 1,325,000 3,006,749 1,607,894 5,939,643 -
Total liabilities 1,499,818 3,006,749 1,988,166 6,494,733 298,298
NET ASSETS
Invested in capital assets, net of related debt 711,624 500,287 65,934 1,277,845 2,591,318
Restricted for:
Debt service 167,556 - - 167,556 -
Unrestricted net assets ( deficit) 870,781 ( 2,646,240) ( 36,991) ( 1,812,450) 9,763,643
Total net assets ( deficit) $ 1,749,961 $ ( 2,145,953) $ 28,943 $ ( 367,049) $ 12,354,961
See accompanying Notes to Basic Financial Statements.
Business- type Activities - Enterprise Funds
32
City of Walnut Creek
Statement of Revenues, Expenses and Changes in Fund Net Assets
Major Proprietary Funds
For the biennial period ended June 30, 2006
Governmental
Activities
Golf Internal
Course Restaurant Partnership Total Service Funds
OPERATING REVENUES:
Charges for services $ 3,304,346 $ 449,378 $ 10,425,370 $ 14,179,094 $ 1,339,007
Other revenue - 115 - 115 -
Total operating revenues 3,304,346 449,493 10,425,370 14,179,209 1,339,007
OPERATING EXPENSES:
Professional and special services 3,333,667 114,857 14,035,842 17,484,366 166,833
Repairs and maintenance 20,029 - 91,145 111,174 290,888
Depreciation and amortization 405,767 104,036 23,841 533,644 1,178,225
Total operating expenses 3,759,463 218,893 14,150,828 18,129,184 1,635,946
OPERATING ( LOSS) ( 455,117) 230,600 ( 3,725,458) ( 3,949,975) ( 296,939)
NONOPERATING REVENUES ( EXPENSES):
Interest income 69,910 6,470 1,123 77,503 -
Interest and related expenses ( 12,005) ( 3,821) - ( 15,826) -
Gain on sale of vehicles - - - - 11,611
Total nonoperating revenues ( expenses) 57,905 2,649 1,123 61,677 11,611
Net income ( loss) before contributions
and operating transfers ( 397,212) 233,249 ( 3,724,335) ( 3,888,298) ( 285,328)
Capital contributions - - - - 417,656
Transfers in - - 3,803,954 3,803,954 71,722
Transfers ( out) - - - - ( 1,769,650)
Change in net assets ( 397,212) 233,249 79,619 ( 84,344) ( 1,565,600)
NET ASSETS:
Beginning of the period 2,147,173 ( 2,379,202) ( 50,676) ( 282,705) 13,920,561
End of the period $ 1,749,961 $ ( 2,145,953) $ 28,943 $ ( 367,049) $ 12,354,961
See accompanying Notes to Basic Financial Statements.
Business- type Activities - Enterprise Funds
33
City of Walnut Creek
Statement of Cash Flows
Major Proprietary Funds
For the biennial period ended June 30, 2006
Governmental
Activities
Golf Internal
Course Restaurant Partnership Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from customers $ 3,295,036 $ 408,596 $ 10,358,444 $ 14,062,076 $ 1,339,007
Payments to suppliers ( 3,354,887) ( 115,991) ( 13,964,913) ( 17,435,791) ( 410,753)
Payments to employees ( 19,144) - ( 47,184) ( 66,328) -
Internal activity - receipts from ( payments to) other funds 19,906 - ( 117,060) ( 97,154) 1,831,983
Other receipts ( payments) - 29,907 ( 561,301) ( 531,394) -
Net cash provided ( used) by operating activities ( 59,089) 322,512 ( 4,332,014) ( 4,068,591) 2,760,237
CASH FLOWS FROM NONOPERATING ACTIVITIES:
Transfers in - - 3,803,954 3,803,954 71,722
Transfers out - - - - ( 1,769,650)
Net cash provided by operating activities - - 3,803,954 3,803,954 ( 1,697,928)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Capital contributions - - - - 417,656
Proceeds from disposal of capital assets - - - - 108,714
Acquisition of capital assets ( 67,736) - ( 42,030) ( 109,766) ( 1,588,679)
Interest paid on debt ( 12,005) ( 3,821) - ( 15,826) -
Principal paid on long- term debt ( 328,300) ( 66,700) - ( 395,000) -
Net cash ( used) by capital and
related financing activities ( 408,041) ( 70,521) ( 42,030) ( 520,592) ( 1,062,309)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment income received 62,146 6,470 1,032 69,648 -
Net cash provided by investing activities 62,146 6,470 1,032 69,648 -
Net increase ( decrease) in cash and cash equivalents ( 404,984) 258,461 ( 569,058) ( 715,581) -
CASH AND INVESTMENTS:
Beginning of the period 1,472,351 44,548 2,428,396 3,945,295 -
End of the period $ 1,067,367 $ 303,009 $ 1,859,338 $ 3,229,714 $ -
RECONCILIATION OF OPERATING INCOME
( LOSS) TO NET CASH PROVIDED ( USED)
OPERATING ACTIVITIES
Operating ( loss) $ ( 455,117) $ 230,600 $ ( 3,725,458) $ ( 3,949,975) $ ( 296,939)
Adjustments to reconcile operating ( loss) to net
cash provided ( used) by operating activities:
Depreciation 405,767 104,036 23,841 533,644 1,178,225
Changes in assets and liabilities:
Accounts receivable ( 9,310) ( 40,782) ( 66,926) ( 117,018) -
Due from other funds - - - - 1,584,417
Accounts payable and accrued liabilities ( 21,220) ( 1,134) 70,929 48,575 46,968
Salaries and wages payable 885 - 43,961 44,846 -
Due to other funds 19,906 - ( 117,060) ( 97,154) 247,566
Deposits payable - - ( 619,127) ( 619,127) -
Deferred revenue - 29,792 57,826 87,618 -
Net cash provided ( used) by operating activities $ ( 59,089) $ 322,512 $ ( 4,332,014) $ ( 4,068,591) $ 2,760,237
See accompanying Notes to Basic Financial Statements.
Business- type Activities - Enterprise Funds
34
FIDUCIARY FUND
FINANCIAL STATEMENTS
These funds account for assets held by the City as an agent for various community groups and functions. The
financial activities of these funds are excluded from the government- wide financial statements, but are
presented in the separate fiduciary fund financial statements.
35
City of Walnut Creek
Statement of Fiduciary Net Assets
Fiduciary Funds
June 30, 2006
Agency
Funds
ASSETS
Cash and investments $ 8,771,288
Accounts receivable 14,060
Interest receivable 89,344
Total assets $ 8,874,692
LIABILITIES
Accounts payable $ 139,851
Due to other governments 4,161,552
Due to bondholders 1,512,276
Deposits Payable 3,061,013
Total liabilities $ 8,874,692
See accompanying Notes to Basic Financial Statements.
36
37
NOTES TO BASIC
FINANCIAL STATEMENTS
City of Walnut Creek
Notes to Basic Financial Statements
For the biennial period ended June 30, 2006
38
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Walnut Creek, California have been prepared in conformity
with generally accepted accounting principles ( GAAP) as applied to governmental agencies. The
Governmental Accounting Standards Boards ( GASB) is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. The more significant of the City’s accounting
policies are described below.
A. Financial Reporting Entity
The City of Walnut Creek, California ( City) was incorporated in 1914. The City operates under an elected
Council and appointed City Manager form of government and provides the following services as
authorized by its charter: public safety, community development, arts, recreation and community services,
planning services, public works, general administrative services and capital improvements.
As required by GAAP, these basic financial statements present the City and its component units, entities for
which the City is considered to be financially accountable. Blended component units, although legally
separate entities, are in substance, part of the City’s operations and data from these units are combined with
data of the City. Each blended component unit has a June 30 year- end. The following entities are reported
component units:
Blended Component Units
Redevelopment Agency of the City of Walnut Creek ( Agency)
The Agency was created by the City of Walnut Creek City Council ( City Council) in October 1972. The
Agency has been included in the accompanying basic financial statements since the City Council acts as
the Agency’s governing board and exerts significant influence over its operations. The Agency’s
operations are governmental in nature and, as such, have been included as part of the General City
Operations and Public Ways and Facilities capital project funds.
The Walnut Creek Recreation Facilities, Inc. ( Development Authority)
The Development Authority was organized to finance the acquisition and improvement of the
Boundary Oak 18– hole golf course, pro shops, restaurant, lounge and meeting rooms located at 3800
Valley Vista Road in Walnut Creek. The development authority acquired the land and constructed
these facilities using proceeds from Lease Revenue Bonds issued for that purpose. The development
authority has leased the facilities to the City for a rental sufficient to meet the debt service on these
bonds. A portion of its financial activity has been recorded in the Golf Course Enterprise Fund and the
remaining activity has been recorded in the Restaurant Enterprise Fund.
Complete financial statements for each of the individual component units may be obtained from the City of
Walnut Creek, 1666 North Main Street, Walnut Creek, California 94596.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
39
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Biennial Reporting Period
The City adopts a two- year budget for estimated operating expenses and proposed financing sources. The
City uses the biennial basis to report its financial activity and results of operations in order to coincide with
the budget cycle. The City also issues interim summary financial reports for the first twelve month period
of each two year cycle.
C. Basis of Presentation, Measurement Focus and Basis of Accounting
The accounting policies of the City conform to generally accepted accounting principles. The accounts of
the City are organized on the basis of funds, each of which is considered a separate accounting entity. The
operations of each fund are accounted for by providing a separate set of self- balancing accounts that
comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Fund
accounting segregates funds according to their intended purpose and is used to aid management in
demonstrating compliance with finance- related legal and contractual provisions. The minimum number of
funds is maintained consistent with legal and managerial requirements.
Government- Wide Financial Statements
The City’s government- wide financial statements include a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of governmental activities and
business- type activities for the City, the primary government, accompanied by a total column. Fiduciary
activities of the City are not included in these statements.
These government- wide financial statements are presented on an “ economic resources” measurement focus and
the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as
well as infrastructure assets, and long- term liabilities, are included in the accompanying Statement of Net
Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting,
revenues are recognized in the period in which they are earned while expenses are recognized in the period in
which the liability is incurred.
Certain types of transactions are reported as program revenues for the City in three categories:
• Charges for services
• Operating grants and contributions
• Capital grants and contributions
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund
activities, payables and receivables. All internal balances in the Statement of Net Assets have been
eliminated except those representing balances between the governmental activities and the business- type
activities, which are presented as internal balances and eliminated in the total primary government column.
In the Statement of Activities, internal service fund transactions have been eliminated; however, those
transactions between governmental and business- type activities have not been eliminated. The following
interfund activities have been eliminated:
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
40
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
C. Basis of Presentation, Measurement Focus and Basis of Accounting, Continued
• Due to/ Due from other funds
• Advances to/ Advances from other funds
• Transfers in/ transfers out
The City applies all applicable GASB pronouncements ( including all NCGA Statements and Interpretations
currently in effect) as well as the following pronouncements issued on or before November 30, 1989, unless
those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards
Board ( FASB) Statements and Interpretations, Accounting Principles Board ( APB) Opinions, and Accounting
Research Bulletins ( ARB) of the committee on Accounting Procedure. The City applies all applicable FASB
Statements and Interpretations issued after November 30, 1989, except those that conflict with or contradict
GASB pronouncements.
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all funds. An accompanying schedule is presented to
reconcile and explain the differences in net assets as presented in these statements to the net assets
presented in the government- wide financial statements. The City has presented all major funds that met
those qualifications.
All governmental funds are accounted for on a spending or “ current financial resources” measurement focus
and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are
included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances
present increases ( revenues and other financing sources) and decreases ( expenditures and other financing
uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the
accounting period in which they become both measurable and available to finance expenditures of the
current period.
Revenues are recorded when received in cash, except that revenues subject to accrual ( generally 60 days
after year- end) are recognized when due. The primary revenue sources, which have been treated as
susceptible to accrual by the City, are property tax, sales tax, special assessments, intergovernmental
revenues, other taxes, interest revenue, rental revenue and certain charges for services. Expenditures are
recorded in the accounting period in which the related fund liability is incurred.
Deferred revenues arise when potential revenues do not meet both the “ measurable” and “ available”
criteria for recognition in the current period. Deferred revenues also arise when the government receives
resources before it has a legal claim to them, as when grant monies are received prior to incurring
qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the
government has a legal claim to the resources, the deferred revenue is removed from the balance sheet and
revenue is recognized.
The Reconciliation of the Fund Financial Statements to the Government- Wide Financial Statements is
provided to explain the differences created by the integrated approach of GASB Statement No. 34.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
41
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
C. Basis of Presentation, Measurement Focus and Basis of Accounting, Continued
Proprietary Fund Financial Statements
Proprietary fund financial statements include a Statement of Net Assets, a Statement of Revenues, Expenses
and Change in Net Assets, and a Statement of Cash Flows for all proprietary funds.
A column representing internal service funds is also presented in these statements. However, internal
service balances and activities have been combined with the governmental activities in the government-wide
financial statements.
Proprietary funds are accounted for using the “ economic resources” measurement focus and the accrual basis
of accounting. Accordingly, all assets and liabilities ( whether current or noncurrent) are included on the
Statement of Net Assets. The Statement of Revenues, Expenses and Change in Fund Net Assets presents
increases ( revenues) and decreases ( expenses) in total net assets. Under the accrual basis of accounting,
revenues are recognized in the period in which they are earned while expenses are recognized in the period
in which liability is incurred.
Operating revenues in the proprietary funds are those revenues that are generated from the primary
operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are
those expenses that are essential to the primary operations of the fund. All other expenses are reported as
nonoperating expenses.
Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Net Assets. The City’s fiduciary funds represent
agency funds. Agency funds are custodial in nature ( assets equal liabilities) and do not involve
measurement of results of operations. The agency funds are accounted for using the accrual basis of
accounting.
D. Use of Restricted and Unrestricted Net Assets
When an expense is incurred for purposes for which both restricted and unrestricted net assets are
available, the City’s policy is to apply restricted net assets first.
E. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. The City considers pooled cash and investment
amounts, with original maturities of three months or less, to be cash equivalents.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for
External Investment Pools, highly liquid market investments with maturities of one year or less at time of
purchase are stated at amortized cost. All other investments are stated at fair value.
Market value is used as fair value for those securities for which market quotations are readily available.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
42
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
E. Cash, Cash Equivalents and Investments, Continued
The City participates in an investment pool managed by the State of California titled Local Agency
Investment Fund ( LAIF) which has invested a portion of the pooled funds in Structured Notes and Asset-backed
Securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of
California collateralizing these investments. In addition, these Structured Notes and Asset- backed
Securities are subject to market risk as to change in interest rates.
In accordance with GASB Statement No. 40, Deposit and Investment Disclosures ( Amendment of GASB No. 3),
certain disclosure requirements, if applicable, for Deposits and Investment Risks are specified in the following
areas:
􀂃 Interest Rate Risk
􀂃 Credit Risk
o Overall
o Custodial Credit Risk
o Concentrations of Credit Risk
In addition, other disclosures are specified including use of certain methods to present deposits and
investments, highly sensitive investments, credit quality at year- end and other disclosures.
For purposes of reporting cash flows, the City considers each fund’s share in the cash and investments pool
to be cash and cash equivalents including cash with fiscal agents.
F. Restricted Assets
Fiscal agents acting on behalf of the City hold investment funds arising from the proceeds of long- term debt
issuances. The funds may be used for specific capital outlays or for the payment of certain bonds, certificate
of participation or tax allocation bonds and have been invested only as permitted by specific State statutes
or applicable City ordinance, resolution or bond indenture.
G. Compensated Absences
Government- Wide Financial Statements
For governmental and business- type activities, compensated absences are recorded as expenses and
liabilities as incurred.
Fund Financial Statements
For governmental funds, compensated absences are recorded as expenditures in the years they are incurred
as it is the City’s policy to liquidate any unpaid compensated absences at June 30 from currently available
financial resources. In proprietary funds, compensated absences are expensed to the various funds in the
period they are earned, and such fund’s share of the unpaid liability is recorded as a long- term liability of
the fund.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
43
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
H. Property Taxes
Property taxes are levied based on a fiscal year ( July 1 – June 30). Property taxes attach as an enforceable
lien on property as of January 1. Taxes are levied on July 1 and are payable in two installments on
December 10 and April 10. The County of Contra Costa bills and collects the property taxes and special
assessments for the City. Under the County’s Teeter Plan the County remits the entire amount levied and
handles all delinquencies, retaining the interest and penalties. The property taxes are remitted to the City in
installments during the year.
I. Long- Term Debt
Government- Wide Financial Statements
Long- term debt and other financial obligations are reported as liabilities in the appropriate funds.
Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the
bonds using the effective interest method. Bonds payable are reported net of the applicable premium or
discount. Issuance costs are reported as deferred charges. Interest on long- term debt is recognized as the
liability is incurred.
Fund Financial Statements
The governmental fund financial statements do not present long- term debt but are shown in the
Reconciliation of the Governmental Funds Balance Sheet to the Government- Wide Statement of Net Assets.
The proprietary fund financial statements present Long- term debt and other financed obligations as
liabilities in the appropriate funds.
For governmental fund types, bond premiums and discounts, as well as issuance costs, are recognized
during the current period. Bond proceeds are reported as other financing sources net of the applicable
premium or discount. Issuance costs, whether or not withheld from the actual net proceeds received, are
reported as debt service expenditures. Interest expenditures for governmental funds are recognized when
payment is done.
For proprietary fund types, bond premiums and discounts, as well as issuance costs, are deferred and
amortized over the life of the bonds using a straight- line method. Bonds payable are reported net of the
applicable bond premium or discount. Issuance costs are reported as deferred charges in the accompanying
financial statements. Interest on long- term debt is recognized as the liability is incurred.
J. Use of Estimates
The preparation of basic financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported amounts and disclosures.
Actual results could differ from these estimates and assumptions.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
44
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
K. Capital Assets
Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not
available. Donated fixed assets are valued at their estimated fair market value on the date donated. City
policy has set the capitalization threshold for reporting infrastructure capital assets at $ 25,000 and for all
other capital assets at $ 5,000 and with useful lives exceeding two years. Depreciation is recorded on a
straight- line basis over estimated useful lives of the assets as follows:
Buildings 10 - 50 years
Improvements other than buildings 10 - 30 years
Computer equipment 5 years
Machinery and equipment 10 years
Vehicles 7 years
Infrastructure 20- 100 years
In June 1999, the Governmental Accounting Standards Board ( GASB) issued Statement No. 34 which
requires the inclusion of infrastructure capital assets in local governments’ basic financial statements. In
accordance with GASB Statement No. 34, the City has included all infrastructures in the current basic
financial statements.
The City defines infrastructure as the basic physical assets that allow the City to function. The assets
include: roadways, storm drains, and traffic signals. Each major infrastructure network can be divided into
subsystems. For example the roadway network can be subdivided into pavement, curb, and gutters. The
storm drain network can be subdivided into structures and pipe. These subsystems were not delineated in
the basic financial statements. The appropriate operating department maintains information regarding the
subsystems.
Interest accrued during capital assets construction, if any, is capitalized for the business- type activities and
proprietary funds as part of the asset cost.
For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No.
34 for infrastructure reporting. The City commissioned an appraisal of City owned infrastructure and
property as of June 30, 2002. This appraisal determined the original cost, which is defined as the actual cost
to acquire new property in accordance with market prices at the time of first construction/ acquisition.
Original costs were developed in one of three ways: ( 1) historical records; ( 2) standard unit costs
appropriate for the construction/ acquisition date; or ( 3) present cost indexed by a reciprocal factor of the
price increase from the construction/ acquisition date to the current date. The accumulated depreciation,
defined as the total depreciation from the date of construction/ acquisition to the current date on a straight
line, unrecovered cost method was computed using industry accepted life expectancies for each infra-structure
subsystem. The book value was then computed by deducting the accumulated depreciation from
the original cost.
L. Public Facilities Financing
Interest costs incurred from the date of borrowing to the completion of the improvement project( s) are
capitalized, net of interest earnings, on all proprietary fund assets acquired with tax- exempt debt.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
45
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
M. Net Assets
Government- Wide Financial Statements
In the government- wide financial statements, net assets are presented as follows:
Invested in Capital Assets, Net of Related Debt – This amount consists of capital assets net of accumulated
depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or
improvement of the assets.
Restricted Net Assets – This amount is restricted by external creditors, grantors, contributors, or laws or
regulations of other governments.
Unrestricted Net Assets – This amount is all net assets that do not meet the definition of “ invested in
capital assets, net of related debt” or “ restricted net assets.”
Fund Financial Statements
Reservations of fund balances of governmental funds and retained earnings of proprietary funds are
created to either satisfy legal covenants, including State laws, that require a portion of the fund equity be
segregated or identify the portion of the fund equity not available for future expenditures.
N. Implementation of New GASB Pronouncements
In 2006, the City adopted a new accounting standard in order to conform to the following Governmental
Accounting Standards Board Statements:
􀂾 GASB Statement No. 40, Deposit and Investment Risk Disclosures – The Statement addresses selected
issues and amends GASB Statements No. 3, Deposits with Financial Institutions, Investments, ( including
Repurchase Agreements, and Reverse Repurchase Agreements. The Statement addresses common deposit and
investment risks related to credit risk, concentration of credit risk, interest rate risk, and foreign currency
risk. The Statement requires certain disclosures of investments that have fair values that are highly
sensitive to changes in interest rates.
􀂾 GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for
Insurance Recoveries – The Statement establishes accounting and financial reporting standards for
impairment of capital assets. A capital asset is considered impaired when its service utility has
declined significantly and unexpectedly. This Statement also clarifies and establishes accounting
requirements for insurance recoveries.
􀂾 GASB Statement No. 46, Net Assets Restricted by Enabling Legislation – The Statement addresses
selected issues and amends GASB Statement No. 34, Basic Financial Statements and Management's
Discussion and Analysis for State and Local Governments. The Statement enhances the usefulness and
comparability of net asset information and clarifies the meaning of legal enforceability. The
Statement also specifies accounting and financial reporting requirements for restricted net assets.
􀂾 GASB Statement No. 47, Accounting for Termination Benefits – The Statement provides accounting
guidance for state and local governmental employers regarding benefits ( such as early- retirement
incentives and severance benefits) provided to employees that are terminated. The Statement
requires recognition of the cost of involuntary termination benefits in the period in which a
government becomes obligated to provide benefits to terminated employees.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
46
2. CASH, CASH EQUIVALENTS AND INVESTMENTS
The City maintains a cash and investment pool, which includes cash balances and authorized investments of all
funds, which the City invests to enhance interest earnings. The pooled interest earned is allocated to the funds
quarterly, based on average daily cash and investment balances in these funds.
A. Cash Deposits
At June 30, 2006, the carrying amount of the City’s deposits was $ 438,420. Bank balances before reconciling
items were $ 1,471,873 at that date, the total amount of which was collateralized or insured with securities held
by the pledging financial institutions in the City’s name as discussed below.
The California Government Code requires California banks and savings and loan associations to secure the
City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner
shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor.
Thus, collateral for cash deposits is considered to be held in the City’s name.
According to California law, the market value of pledged securities with banking institutions must equal at
least 110% of the City’s cash deposits. California law also allows institutions to secure City deposits by
pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may
waive collateral requirements for cash deposits, which are fully insured up to $ 100,000 by the Federal Deposit
Insurance Corporation. The City, however, has not waived the collateralization requirements.
The City follows the practice of pooling cash and investments of all funds, except for funds required to be held
by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and
investments is allocated on a quarterly basis to the various funds based on average daily cash and investment
balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.
B. Investments
The City is authorized by State statutes and in accordance with the City’s Investment Policy ( Policy) to
invest in the following:
• U. S. Treasury Securities
• U. S. Government Federal Agencies
• Certificates of Deposit
• Bankers Acceptances
• Commercial Paper ( Corporations)
• Medium- Term Corporate Notes
• Repurchase Agreements collateralized by U. S. Securities or U. S. Government Federal Agencies
• California Local Agency Investment Fund ( LAIF)
• U. S. Government Mortgage Pass- Through Securities
• Collateralized Mortgage Obligations ( CMOs)
• Asset- Backed Securities ( ABS)
• Money Market Mutual Funds
• Passbook Savings and Demand Deposits Accounts
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
47
2. CASH, CASH EQUIVALENTS AND INVESTMENTS, Continued
B. Investments, Continued
The Policy, in addition to State statutes, establishes that funds on deposit in banks must be federally
insured or collateralized and investments shall ( 1) have maximum maturity not to exceed five years, ( 2) be
laddered and based on cash flow forecasts; and ( 3) be subject to limitations to a certain percent of the
portfolio for each of the authorized investments. The City’s investments comply with the established
policy.
In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for
External Pools, investments were stated at fair value using the aggregate method in all funds and
component units, resulting in the following investment income:
The calculation of realized gains and losses is independent of a calculation of the net change in the fair value of
investments. Realized gains and losses on investments that had been held in more than one fiscal year that
matured or were called/ sold in the current year were included as a change in the fair value of investments
reported in the prior year( s) and the current year.
The City’s portfolio value fluctuates in an inverse relationship to any change in interest rate. Accordingly, if
interest rates rise, the portfolio value will decline. If interest rates fall, the portfolio value will rise.
In accordance with GASB Statement No. 31, the portfolio, for year- end reporting purposes, is treated as if it
were all sold. Therefore, fund balance reflects the portfolio’s change in value. These portfolio value changes
are unrealized unless sold. The City’s policy is to buy and hold investments until their maturity dates.
The following is a summary of cash and investments at June 30, 2006:
Fiduciary Funds
Governmental Business Statement of
Activities Activities Total Net Assets Total
Cash and investments $ 9 7,726,708 $ 3 ,062,158 $ 1 00,788,866 $ 8 ,771,288 $ 1 09,560,154
Cash with fiscal agent $ 1 ,142,702 $ 1 67,556 $ 1 ,310,258 $ - $ 1 ,310,258
Government- Wide Statement of
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
48
2. CASH, CASH EQUIVALENTS AND INVESTMENTS, Continued
B. Investments, Continued
Deposits and investments were categorized as follows at June 30, 2006:
Credit
Quality Ratings Fair Value
City Treasury Deposits:
Deposits Not Rated $ 4 32,250
Petty cash Not Rated 6 ,170
Total City treasury deposits 4 38,420
City Treasury Investments:
Securities of U. S. Government Agencies
FHLB AAA 27,284,122
FNMA AAA 19,650,015
FHLMC AAA 12,726,005
Certificate of Deposits AA 10,000,000
Commercial paper AA 14,399,648
U. S. Treasury Notes Not Rated 4,922,050
U. S. Treasury Money Market Not Rated 4,177
Local Agency Investment Funds Not Rated 20,135,717
Total City treasury investments 109,121,734
Total cash and investments $ 109,560,154
Investments With Fiscal Agent:
Securities of U. S. Government Agencies
U. S. Treasury Notes Not Rated $ 1 ,310,258
Total Cash and Investments
With Fiscal Agent $ 1 ,310,258
D. Risk Disclosures
Interest Rate Risk. As a means of limiting its exposure to fair value losses arising from rising interest rates,
the City’s investment policy requires that the City’s investment portfolio mature in less than five years.
Specific maturities of investments depend on liquidity needs. As of June 30 2006, the City’s pooled cash and
investments had the following maturities.
Investment Type Fair Value 1 year or less 1- 2 years
Local Agency Investment Funds $ 2 0,135,717 $ 2 0,135,717 $ -
Securities of U. S. Government:
Negotiable Cert. of Deposit 1 0,000,000 1 0,000,000 -
Commercial Paper 1 4,399,648 1 4,399,648 -
Federal Home Loan Bank 2 7,284,122 2 6,297,242 9 86,880
Federal Home Loan Mortage Co. 1 2,726,005 1 0,789,705 1 ,936,300
Federal National Mortage Assn. 1 9,650,015 1 9,650,015 -
Private Ledger 4 ,177 4 ,177 -
US Treasury Bills 4 ,922,050 4 ,922,050 -
Total $ 1 09,121,734 $ 1 06,198,554 $ 2 ,923,180
Investment Maturities ( in years)
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
49
2. CASH, CASH EQUIVALENTS AND INVESTMENTS, Continued
D. Risk Disclosures, Continued
Custodial Credit Risk. For an investment, custodial credit risk is a risk that, in the event of the failure of the
counter party, the City will not be able to recover the value of its investment or collateral securities that are
in the possession of an outside party. All securities, with the exception of the money market funds and
LAIF, are held by a third- party custodian, Union Bank of California ( UBC). UBC is a registered member of
the Federal Reserve Bank. The City’s custodial agreement policy prohibits counterparties holding securities
not in the City’s name.
Credit Risk. This is risk that a security or a portfolio will lose some or all of its value due to a real or
perceived change in the ability of the issuer to repay its debt. The City’s investment policy is that no more
than $ 2 million can be invested in any one institution, other than the US Government, its agencies and
instrumentalities, and LAIF.
E. Investments in Local Agency Investment Funds
The City’s investments with the Local Agency Investment Fund ( LAIF), a State of California investment
pool, at June 30, 2006, included a portion of the pool funds invested in Structured Notes and Asset- Backed
Securities. These investments included the following:
Structured Notes - are debt securities ( other than asset- backed securities) whose cash flow
characteristics ( coupon rate, redemption amount, or stated maturity) depend upon one or more indices
and/ or that have embedded forwards or options.
Asset- Backed Securities - the bulk of which are mortgage- backed securities, entitle their purchasers to
receive a share of the cash flows from a pool of assets such as principal and interest repayments from a
pool of mortgages ( such as Collateralized Mortgage Obligations) or credit card receivables.
As of June 30, 2006, the City had $ 20,135,717 invested in LAIF, which had invested 2.567% of the pool
investment funds in Structured Notes and Asset- Backed Securities. The City valued its investments in
LAIF as of June 30, 2006, by multiplying its account balance with LAIF by a fair value factor determined by
LAIF. This fair value factor was determined by dividing all LAIF participants’ total aggregate fair value by
total aggregate amortized cost resulting in a factor of .998185821.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
50
3. NOTES AND LOANS RECEIVABLE
Summary of Notes and Loans Receivable
At June 30, 2006, the City’s notes and loans receivable and related deferred revenue totaled:
Loans and Notes
Home Rehabilitation Loans $ 5 79,695
First- Time Homebuyers 1 ,276,375
The Oaks Apartments 3 68,000
Sierra Drive Apartments 3 76,503
Trinity Avenue Apartments 1 ,260,503
Satellite Senior Homes 3 23,991
Ivy Hill Apartments 1 ,625,000
MP Tice Oak Associates 6 04,000
Resources for Community Development 2 ,214,933
Equity Loans to City Employees ( see note 12) 3 75,000
Equity Share Loan ( see note 12) 2 60,000
Total 9 ,264,000
Allowance for doubtful accounts ( 1,625,000)
Total net of allowance $ 7 ,639,000
The City and Redevelopment Agency engage in programs to encourage construction of improvement in
low- to- moderate income housing or other projects. Under these programs, grants or loans are provided
under favorable terms to homeowners or developers who agree to spend these funds in accordance with the
City’s and Agency’s terms. Since the City does not expect to collect these loans in the near term, they have
been offset by entries to deferred revenue in the fund financial statements.
Home Rehabilitation Loans
The City administers a housing rehabilitation loan program using Community Development Block Grant
funds, Redevelopment Agency Low and Moderate Income Housing funds and City funds. Under these
Programs, individuals with incomes below a certain level are eligible to receive low interest fifteen- year
loans, secured by deeds of trust, for construction work on their homes. The loan repayments may be
amortized over the life of the loans, deferred or a combination of both. At June 30, 2006 these loans totaled
$ 579,695 and the program included fifteen participants.
First- Time Homebuyer
The First- Time Homebuyer Program, using Community Development Block Grant funds, Redevelopment
Agency funds and City funds, was established during 1995 to provide financing for applicants with
moderate income or less who are able to qualify for a home purchase without down payment assistance. At
June 30, 2006, First- Time Homebuyer Loans in the amount of $ 1,276,375 had been extended and the
program included thirty five participants. These loans are secured by second deeds of trust, bear no interest
and are due and payable at the time the homes are sold, refinanced or transferred.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
51
3. NOTES AND LOANS RECEIVABLE, Continued
The Oaks Apartments
At June 30, 2006, the Agency held a note receivable from Ecumenical Association for Housing in the amount
of $ 368,000. The Note was entered into on July 14, 1995 to facilitate the building of a 36- unit apartment
complex to provide housing for individuals with incomes 60% or more below the Bay Area median income
level. Repayment of principal commenced on December 31, 2001, provided the project generates surplus
cash. The Note accrues interest at a rate of 5% beginning July 14, 2002. Any remaining unpaid principal and
interest is due in full August 1, 2022. The project did not generate surplus cash as of June 30, 2006.
Sierra Drive Apartments
At June 30, 2006, the City held a note receivable from Affordable Housing Association in the amount of
$ 327,000 and the Agency held a similar note in the amount of $ 49,503. The Notes were entered into on
December 8, 1995, to facilitate the renovation of a 28- unit apartment complex called Sierra Drive
Apartments. As a condition of the Notes, 14 units were encumbered with fifty- year covenants that require
the units to be rented to individuals with low and moderate incomes. Commencing December 8, 2001, the
Notes accrue interest at a rate of 3% until paid in full. Principal and interest payments are to be paid
annually, if the project generates surplus cash. Any remaining unpaid principal and interest is due in full
January 1, 2025. The project did not generate surplus cash as of June 30, 2006. At June 30, 2006 these loans
totaled $ 376,503.
Satellite Senior Homes
At June 30, 2006, the City held a note receivable from Satellite Housing Inc. in the amount of $ 323,991. The
Note was entered into on October 24, 2003, to facilitate the development of a 33- unit senior housing project
and permits the developer to draw up to $ 783,000 in City funds. As a condition of the Note, the units are to
be rented to seniors with very low incomes. Commencing upon the date of the first draw, the Notes accrue
interest at a rate of 3% until paid in full. Principal and interest payments are to be paid annually, if the
project generates surplus cash. Any remaining unpaid principal and interest is due in full January 31, 2008.
The project did not generate surplus cash as of June 30, 2006.
Casa Bonita Apartments
At June 30, 2006 the Agency held a note receivable from Trinity Avenue Apts., L. P. in the amount of
$ 1,262,080. The note was entered into on February 20, 2004 ( amended and restated on February 17, 2006) to
facilitate the building of a 17- unit rental apartment complex of which eight units are required by the City’s
Redevelopment Agency to be provided for income eligible households whose gross household income does
not exceed 60% of the area median income and of which the remaining nine units are required by the
County to be affordable to between 30% and 60% of the area median income. The note accrues interest at a
rate of 3% per annum from the date of advance( s) until paid in full. Principal and accrued interest are to be
paid annually commencing on May 1 following close of permanent financing of the Project Improvements
equal to Lenders’ share of residual receipts. Any remaining unpaid principal and interest are due in full 55
years from issuance of a certificate of occupancy which is expected to be issued in October 2006. At June 30,
2006 the total amount advanced to Trinity Avenue Apts., L. P. was $ 1,260,503.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
52
3. NOTES AND LOANS RECEIVABLE, Continued
Ivy Hill Apartments/ Regent on the Park Condominiums
In August 2000, a long- term loan in the amount of $ 1,625,000 was granted to Walnut Creek Housing
Partners, Alma Investors and New Cities Land Company ( the developer) to finance a portion of the cost of
developing the Ivy Hill Apartment Project, including land acquisition costs. The loan is due in fifty- five
years on February 1, 2055, it accrues interest at the rate of 5%. No principal or interest payments are due
until the maturity date. The loan, and all accrued interest, will be forgiven on the maturity date if the Ivy
Hill Apartment Project was operated in compliance with the regulatory agreement throughout the term of
the loan. An allowance for forgivable loans which equal the outstanding loan balance is therefore added on
the Statement of Net Assets to reflect the provisions of this loan. The loan is secured by a deed of trust
against the apartment site subordinate to the senior construction and permanent loans entered into by the
developer and the short- term loan, described below.
As a condition of the loans, 47 units were encumbered with fifty- five year covenants which require the units
to be rented to individuals with very low incomes, and shall be rented at a rate specified in the agreement.
MP Tice Oaks Associates
At June 30, 2006, the City held two notes receivable from MP Tice Oaks Associates in the total amount of
$ 604,000. These two Notes ($ 144,286 funded by Affordable Housing Fund and $ 459,714 funded by CDBG
Grant Program) were entered into on May 16, 2001 for a 91- unit multi- family housing project. The Notes
accrue simple interest at a rate of 3% and will be due in full in 55 years.
Villa Vasconcellos Apartments
At June 30, 2006 the City held a note receivable from Resources for Community Development in the amount
of $ 1,802,265 and the Agency held a similar note in the amount of $ 720,000. The City note consists of
$ 680,000 Community Block Grant Funds and $ 1,122,265 City inclusionary housing in- lieu fees. The notes
were originally entered into on October 7, 2004 to facilitate the building of a 72- unit rental apartment
complex to provide housing for very low- income households. The City note was amended and restated on
November 10, 2005 to include the additional funding provided by inclusionary housing in- lieu fees. Both
notes state that no interest is to be accrued on the unpaid principal balance, except in the event of a default,
in which case interest shall begin to accrue on the date of the default and continue until such time as the
Loan is repaid in full, or the default is cured, at the default rate of the lesser of ten percent ( 10%),
compounded annually or the highest rate permitted by law. Principal is due on May 1 following
completion of the construction equal to the City and Agency proportionate share of the Lenders’ share of
Residual receipts. Principal sum and all other sums shall be due and payable in full 55 years from
completion of the project as evidence by a certificate of occupancy or similar document which is expected to
be issued in the fall of 2007. At June 20, 2006, these loans totaled $ 2,214,933.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
53
4. INTERFUND TRANSACTIONS
Fund Financial Statements
Due To/ Due From
At June 30, 2006, the City had the following short- term receivables and payables:
General Public Ways
City and Facilities Internal
Operations Capital Projects Service Total
General City Operations $ - $ 1 0,019,487 $ 9,979,001 $ 19,998,488
Public Ways and Facilities 182,086 1 24,961 - 307,047
Internal Service - 2 47,566 - 247,566
Enterprise Funds:
Golf 19,906 - - 19,906
Partnership - - 82,940 82,940
Total $ 201,992 $ 1 0,392,014 $ 10,061,941 $ 20,655,947
Due to other funds
Due from other funds
The Public Ways Facilities Fund has loaned the Internal Service Fund $ 247,566, to assist in paying
expenditures for various capital improvement projects.
The General City Operations Fund has committed $ 9,979,001 to the City’s Internal Service Funds to assist in
paying for vehicle and equipment replacement.
The General City Operations Fund has committed $ 10,019,487 to the Public Ways and Facilities Fund to
assist in paying expenditures for various capital improvement projects.
The General City Operations Fund loaned the Public Ways and Facilities Fund $ 182,086 to assist in paying
expenditures for various capital improvement projects.
The Partnership Enterprise Fund has committed $ 82,940 to the City’s Internal Service Funds to assist in
paying expenditures for equipment replacement at the Regional Center of Arts.
Long- Term Advances
Long- term advances to be repaid out of future earnings or charges at June 30, 2006, consisted of:
General
City
Operations
Public Ways and Facilities $ 9 10,784
Enterprise Fund:
Restaurant 2 ,976,957
Total $ 3 ,887,741
Advances To
Advances From
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
54
4. INTERFUND TRANSACTIONS, Continued
Long- Term Advances to the City of Walnut Creek Redevelopment Agency
City of Walnut Creek has constructed certain improvements in the Agency’s Project Areas. The Agency has
agreed to reimburse the City for the cost of these improvements, with interest, solely out of incremental
property tax revenues remaining after Agency debt service payments. The interest rate on the cumulative
advances is 8.25% and is due when the principal amount of the advance is repaid or at such other times as
the Agency elects. Advances payable represent liabilities of the Broadway and the Mount Diablo projects
and amounted to $ 512,950 and $ 397,834 for a total of $ 910,784 as of June 30, 2006.
Long Term Advances Between the City’s Funds
The Restaurant Fund owed the General Fund $ 2,976,957 at June 30, 2006. No interest accrues on this
advance. The advance was made in 1992 and 1998 for renovations and improvements to the restaurant
facilities located at the Boundary Oaks Golf Course. The Restaurant Fund will make payments on the
advance from the General Fund from the cash flow of future restaurant operations.
Transfers
Transfers for the period ended June 30, 2006, were as follows:
Public Ways Internal
General City and Facilities Service
Operations Capital Projects Fund Total
General City Operations $ - $ 1,252,156 $ - $ 1,252,156
Public Ways and Facilities Capital Project 3,047,706 - 1,769,650 4,817,356
Enterprise Fund:
Partnership 3,803,954 - - 3,803,954
Internal Service Fund - 71,722 - 71,722
Total $ 6,851,660 $ 1,323,878 $ 1,769,650 $ 9,945,188
Transfers Out
Transfers In
The City Council authorized transfers from General City Operations to the Public Ways and Facilities
Capital Project Fund for various capital improvements approved in the 2004- 2006 adopted budget and
amendments. The amount authorized was $ 3,047,706.
The City Council authorized transfers from General City Operations to provide subsidies to the Partnership
Fund, a business type activity which accounts for the revenues and expenses of the Civic Arts Education
program, the Performing Arts program, the Bedford Art Gallery, and specific theater productions. The
amount authorized was $ 3,803,954.
The City Council authorized the annual transfer from the Public Ways and Facilities Capital Project Fund to
General City Operations for share of operating costs of various programs. The amount authorized was
$ 1,252,156.
The City Council authorized transfers from the Internal Service Fund to the Public Ways and Facilities
Capital Project Fund for various capital improvements approved in 2004- 2006 adopted budget and
amendments. The amount authorized was $ 1,769,650.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
55
5. CAPITAL ASSETS
Government- Wide Financial Statements
At June 30, 2006, the City’s capital assets consisted of the following:
Governmental Business- Type
Activities Activities Total
Non- depreciable assets:
Land $ 47,794,292 $ 1,337,396 $ 49,131,688
Construction in process 26,746,970 - 26,746,970
Total non- depreciable assets 74,541,262 1,337,396 75,878,658
Depreciable assets:
Buildings 79,234,963 1,863,275 81,098,238
Improvement other than buildings - 2,227,889 2,227,889
Machinery and equipment 5,511,744 250,738 5,762,482
Vehicles 6,853,345 - 6,853,345
Infrastructure 186,193,502 - 186,193,502
277,793,554 4,341,902 282,135,456
Less accumulated depreciation ( 110,467,132) ( 2,986,453) ( 113,453,585)
Total depreciable assets, net 167,326,422 1,355,448 168,681,870
Total capital assets $ 241,867,684 $ 2,692,845 $ 244,560,529
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
56
5. CAPITAL ASSETS, Continued
Government- Wide Financial Statements, Continued
The following is a summary of capital assets for governmental activities for the biennial period ended June
30, 2006:
Balance Balance
July 1, 2004 Additions Deletions Transfers June 30, 2006
Nondepreciable Assets:
Land $ 45,056,110 $ 2,807,305 $ - $ ( 69,123) $ 47,794,292
Construction in progress 28,166,162 5,469,090 - ( 6,888,282) 26,746,970
Total nondepreciable assets 73,222,272 8,276,395 - ( 6,957,405) 74,541,262
Depreciable Assets:
Buildings 75,721,992 5,145 - 3,507,826 79,234,963
Improvements other than buildings - - - - -
Machinery and equipment 3,593,627 283,770 ( 297,231) 1,931,578 5,511,744
Vehicles 6,097,425 1,532,276 ( 776,356) - 6,853,345
Infrastructure 179,918,982 838,765 - 5,435,755 186,193,502
Total depreciable assets 265,332,026 2,659,956 ( 1,073,587) 10,875,159 277,793,554
Accumulated Depreciation:
Buildings ( 17,008,722) ( 3,499,821) - - ( 20,508,543)
Improvements other than buildings - - - - -
Machinery and equipment ( 2,106,134) ( 914,654) 275,307 - ( 2,745,481)
Vehicles ( 3,819,458) ( 1,168,619) 679,253 - ( 4,308,824)
Infrastructure ( 68,556,653) ( 10,429,876) - ( 3,917,754) ( 82,904,283)
Total accumulated depreciation ( 91,490,968) ( 16,012,971) 954,560 ( 3,917,754) ( 110,467,132)
Depreciable assets, net 173,841,058 ( 13,353,015) ( 119,026) 6,957,405 167,326,422
Total governmental activities
capital assets, net $ 2 47,063,330 $ ( 5,076,620) $ ( 119,026) $ - $ 241,867,684
Governmental activities depreciation expense for capital assets for the biennial period ended June 30, 2006,
are as follows:
Public protection $ 8 61,621
Public service 1 4,770,114
Community development 37,637
Curtural Services 199,021
Administrative 1 23,567
General government 21,011
Total depreciation expense $ 16,012,971
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
57
5. CAPITAL ASSETS, Continued
Government- Wide Financial Statements, Continued
The following is a summary of capital assets for business- type activities:
Balance Balance
July 1, 2004 Additions Deletions June 30, 2006
Nondepreciable Assets:
Land $ 1,337,396 $ - $ - $ 1,337,396
Total nondepreciable assets 1,337,396 - - 1,337,396
Depreciable Assets:
Buildings 1,863,275 - - 1,863,275
Improvements 2,216,806 11,083 - 2,227,889
Equipment 152,056 98,682 - 250,738
Total depreciable assets 4,232,137 109,765 - 4,341,902
Accumulated Depreciation:
Buildings ( 1,171,024) ( 51,992) - ( 1,223,016)
Improvements ( 1,194,077) ( 442,832) - ( 1,636,909)
Equipment ( 87,708) ( 38,820) - ( 126,528)
Total accumulated depreciation ( 2,452,809) ( 533,644) - ( 2,986,453)
Depreciable assets, net 1,779,328 ( 423,880) - 1,355,449
Total business- type activities
capital assets, net $ 3,116,724 $ ( 423,880) $ - $ 2,692,845
Depreciation expense for business- type activities for the biennial period ended June 30, 2006, is as follows:
Golf Course $ 405,767
Restaurant 104,036
Partnership 23,841
Total $ 533,644
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
58
6. LONG- TERM DEBT
Summary of changes in long- term debt for the biennial period ended June 30, 2006, was as follows:
Balance Debt Debt Balance Due in Due in more
July 1, 2004 Issued Retired June 30, 2006 one year than one year
Governmental Activity Debt:
RDA 2000 Tax Allocation Bonds $ 2 ,600,000 $ - $ ( 175,000) $ 2 ,425,000 $ 9 5,000 $ 2 ,330,000
RDA 2003 Tax Allocation Bonds, Series A 6 ,475,000 - ( 755,000) 5 ,720,000 5 70,000 5 ,150,000
RDA 2003 Tax Allocation Bonds, Series B 2 ,335,000 - ( 310,000) 2 ,025,000 1 85,000 1 ,840,000
RDA 2003 Tax Allocation Bonds,
Series B, bond issuance premium 6 7,131 - ( 11,188) 5 5,943 5 ,594 5 0,349
Total governmental activity debt $ 1 1,477,131 $ - $ ( 1,251,188) $ 1 0,225,943 $ 8 55,594 $ 9 ,370,349
Business- Type Activity Debt:
1997 Lease Revenue Bonds $ 1 ,580,000 $ - $ ( 165,000) $ 1 ,415,000 $ 9 0,000 $ 1 ,325,000
Recreation Facilities Bonds 2 30,000 - ( 230,000) - - -
Total business- type activity debt $ 1 ,810,000 $ - $ ( 395,000) $ 1 ,415,000 $ 9 0,000 $ 1 ,325,000
Total long- term debt $ 1 3,287,131 $ - $ ( 1,646,188) $ 1 1,640,943 $ 9 45,594 $ 1 0,695,349
A. Governmental Activities
Tax Allocation Bonds Series 2000
Tax Allocation Bonds in the amount of $ 2,865,000 were issued on March 1, 2000. The Bonds were issued to
provide funds for redevelopment activities within the Merged Project Area and seismic retrofits and other
improvements to a City owned parking structure. The Bonds are due in annual principal installments of
$ 80,000 to $ 230,000 through 2022. Interest rates range from 5.00% to 6.2% and is payable semi- annually on
February 15 and August 15. Bonds maturing on or after August 15, 2009, are subject to optional redemption
at a premium of up to 1% plus accrued interest beginning August 15, 2008. Funding sources for the
repayment are tax revenue allocated to the Agency from the project area. The total amount outstanding as
of June 30, 2006, was $ 2,425,000.
The annual debt service requirements for the 2000 Tax Allocation Bonds outstanding at June 30, 2006 were
as follows:
Year Ending
June 30, Principal Interest Total
2007 $ 95,000 $ 137,351 $ 232,351
2008 100,000 132,426 232,426
2009 105,000 127,186 232,186
2010 110,000 121,580 231,580
2011 120,000 115,425 235,425
2012- 2016 705,000 466,980 1,171,980
2017- 2021 960,000 224,498 1,184,498
2022 230,000 7,130 237,130
Total $ 2,425,000 $ 1,332,576 $ 3,757,576
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
59
6. LONG- TERM DEBT, Continued
A. Governmental Activities, Continued
Tax Allocation Bonds Series 2003A
Tax Allocation Bonds in the amount of $ 6,475,000 were issued on November 1, 2003. The Bonds were
issued to refund and defease the 1993 Revenue Bonds, Series A, and to acquire property in the Merged
Project Area and relocate a Veterans Hall currently located on the property. The Bonds are due in annual
principal installments of $ 125,000 to $ 200,000 through 2019. Interest rates range from 3.00% to 4.7% and is
payable semi- annually on February 15 and August 15. Bonds maturing on or after August 15, 2010, are
subject to optional redemption at cost plus accrued interest beginning August 15, 2009. Funding sources for
the repayment are tax revenue allocated to the Agency from the project area. The total amount outstanding
as of June 30, 2006, was $ 5,720,000.
The annual debt service requirements for the 2003 Tax Allocation Bonds, Series A outstanding at
June 30, 2006 were as follows:
Year Ending
June 30, Principal Interest Total
2007 $ 570,000 $ 209,200 $ 779,200
2008 580,000 191,950 771,950
2009 600,000 172,750 772,750
2010 620,000 150,625 770,625
2011 645,000 126,100 771,100
2012- 2016 2,185,000 294,678 2,479,678
2017- 2019 520,000 29,388 549,388
Total $ 5,720,000 $ 1,174,691 $ 6,894,691
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
60
6. LONG- TERM DEBT, Continued
A. Governmental Activities, Continued
Tax Allocation Bonds Series 2003B
Tax Allocation Bonds in the amount of $ 2,335,000 were issued on November 1, 2003. The Bonds were
issued to refund and defease the 1993 Revenue Bonds, Series A, and to acquire property in the Merged
Project Area and re- locate a Veterans Hall currently located on the property. The Bonds were issued at a
premium of $ 72,725 which will be amortized over the life of the Bonds on the government- wide statements
using the straight line method. The Bonds are due in annual principal installments of $ 130,000 to $ 280,000
through 2015. Interest rates range from 4.00% to 6.0% and is payable semi- annually on February 15 and
August 15. Bonds maturing on or after August 15, 2010, are subject to optional redemption at cost plus
accrued interest beginning August 15, 2010. Funding sources for the repayment are tax revenue allocated to
the Agency from the project area. The total amount outstanding as of June 30, 2006, was $ 2,025,000.
The annual debt service requirements for the 2003 Tax Allocation Bonds, Series B outstanding at June 30,
2006 were as follows:
Year Ending
June 30, Principal Interest Total
2007 $ 185,000 $ 106,456 $ 291,456
2008 190,000 98,363 288,363
2009 200,000 88,969 288,969
2010 210,000 78,325 288,325
2011 220,000 66,494 286,494
2012- 2015 1,020,000 126,147 1,146,147
Total 2,025,000 $ 564,754 $ 2,589,754
Plus unamortized
bond issuance premium 55,943
Net $ 2,080,943
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
61
6. LONG- TERM DEBT, Continued
B. Business Type Activities
1997 Lease Revenue Bonds
On August 1, 1997, the Public Financing Authority of the City of Walnut Creek issued its 1997 lease revenue
bonds in the amount of $ 2,000,000. The bonds were issued to finance various renovations and
improvements to the Boundary Oak Municipal Golf Course. The bonds bear interest at rates from 3.85% to
5.375% and are due on August 15, 2017. The bonds are to be repaid from rental payments made by the City.
Principal payments are due annually on August 15. Interest payments are due semiannually on February
15 and August 15. The balance outstanding as of June 30, 2006 was $ 1,415,000.
The annual debt service requirements for the 1997 Lease Revenue Bonds outstanding at June 30, 2006, were
as follows:
Year Ending
June 30, Principal Interest Total
2007 $ 90,000 $ 71,581 $ 161,581
2008 95,000 67,531 162,531
2009 95,000 63,161 158,161
2010 100,000 58,649 158,649
2011 105,000 53,849 158,849
2012- 2016 630,000 182,334 812,334
2017- 2018 300,000 24,420 324,420
Total $ 1,415,000 $ 521,525 $ 1,936,525
Recreational Facilities Bonds
On July 1, 1967, the Walnut Creek Recreation Facilities, Inc. issued its 1967 Lease Revenue Bonds in the
amount of $ 2,750,000 to finance the acquisition and improvement of the Boundary Oak Municipal Golf
Course. The total outstanding balance of the bonds was paid off during the period ending on June 30, 2006.
C. Non- City Obligations
John Muir Medical Center
On January 15, 1994, the City acted as a financial intermediary in order to assist the John Muir Medical
Center in issuing $ 69,450,000 in variable rate demand bonds. The bonds are payable solely from revenues
collected by John Muir Medical Center. The City has not included these bonds in its financial statements,
since it is not legally or morally obligated for the repayment of the bonds.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
62
7. OTHER REQUIRED FUND DISCLOSURES
Deficit Fund Balance
At June 30, 2006, the following funds had a deficit fund equity:
Restaurant Enterprise Fund $ 2,145,953
The City is planning on removing the deficit fund balance from future operational revenue to be collected
by the Restaurant.
8. SELF- INSURANCE ACCRUED LIABILITIES
A. Municipal Pooling Authority
The City is a member of the Municipal Pooling Authority of Northern California ( MPANC). The Authority
provides coverage against the following types of loss risks under the terms of a joint- powers agreement
with the City and several other cities and governmental agencies as follows.
Type of Coverage ( Deductible)
Coverage
Limits
Liability ($ 100,000) $ 1 5,000,000
Auto - Physical damage ($ 3,000 for police vehicles, $ 2,000 for all others) 2 50,000
Workers' Compensation ($ 0) Statutory
All Risk Fire & Property ($ 5,000) 1 ,000,000,000
Boiler & Machinery ($ 5,000) 1 0,000,000
The Authority is governed by a board consisting of representatives from member municipalities. The Board
controls the operations of the Authority, including selection of management and approval of operating
budgets, independent of any influence by member municipalities beyond their representation on the Board.
The Authority provides for its members general liability risk of loss both through pooled coverage and
commercial insurance policies and for workers’ compensation risk of loss through a commercial insurance
policy for amounts above the self insured retention level.
The City’s deposits with the Authority are in accordance with formulas established by the Authority.
Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread
to member entities on a percentage basis after a retrospective rating.
Audited financial statements for the Authority are available from MPANC, 1911 San Miguel Drive, Suite
200, Walnut Creek, California 94596.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
63
8. SELF- INSURANCE ACCRUED LIABILITIES, Continued
B. Liability for Uninsured Claims
The City provides for the uninsured portion of claims and judgments in the General City Operations Fund.
Claims and Judgments, including a provision for claims incurred but not reported, are recorded when a loss
is deemed probable of assertion and the amount of the loss is reasonably determinable. The City’s liability
for uninsured claims at June 30, 2006, was estimated by management and based on MPANC’s claims
experience and was computed as follows:
General
Liability
Workers'
Compensation
Dental Claims
Liability Total
Balance as of July 1, 2004 $ 9 11,566 $ 1 ,407,884 $ 3 00,000 $ 2 ,619,450
Claims incurred 2 11,792 9 15,798 6 75,572 1 ,803,162
Changes in estimates ( 341,971) 1 70,023 1 06,000 ( 65,948)
Claims paid ( 51,941) ( 231,091) ( 675,572) ( 958,604)
Balance as of June 30, 2006 $ 7 29,446 $ 2 ,262,614 $ 4 06,000 $ 3 ,398,060
9. PENSION PLANS
A. California Public Employees’ Retirement Plan
Plan Description
The City contributes to the California Public Employee Retirement System ( PERS). The miscellaneous
employees of the City are part of an agent multiple- employer defined benefit pension plan. The safety
employees are part of a cost- sharing multiple– employer defined benefit plan. PERS provides retirement
and disability benefits, annual cost- of- living adjustments, and death benefits to plan members and
beneficiaries. PERS acts as a common investment and administrative agent for participating public entities
within the State of California. Benefit provisions and all other requirements are established by State statute
and City ordinance. Copies of PERS’ annual financial report may be obtained from their executive office at
400 P Street, Sacramento, CA 95814
Funding Policy
Active plan members are required by State statute to contribute 7% for miscellaneous and 9% for safety for
employees of their annual covered salary. The City employer makes the contributions required of City
employees on their behalf and for their account, which amounted to $ 2,177,352 for the year ended June 30,
2006. The City employer is required to contribute at an actuarial determined rate of 16.437% and 37.096% of
annual covered payroll for miscellaneous and safety employees, respectively. The contribution
requirements of plan members and the City are established and may be amended by PERS.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
64
9. PENSION PLANS, Continued
A. California Public Employees’ Retirement Plan, Continued
Annual Pension Cost
For 2005- 2006, the City’s annual pension cost of $ 6,457,468 for PERS was equal to the City’s required and
actual contributions. The required contribution was determined as part of the June 30, 2003, actuarial
valuation using the entry age normal actuarial cost method. The actuarial assumptions included ( a) 7.75%
investment rate of return ( net of administrative expenses), ( b) projected salary increases range from 3.25% to
14.45% for miscellaneous employees and 3.25% to 13.15% for safety employees depending on age, service,
and type of employment, and ( c) 2% per year cost- of- living adjustments. Both ( a) and ( b) included an
inflation component of 3%. The actuarial value of PERS assets was determined using techniques that
smooth the effects of short- term volatility in the market value of investments over a three year period.
PERS unfunded actuarial accrued liability ( or surplus) is being amortized as a level percentage of projected
payroll on a closed basis. The amortization period at June 30, 2003, was 22 years for miscellaneous
employees and 30 years for safety employees for prior and current service unfunded liability.
THREE- YEAR TREND INFORMATION FOR PERS
Annual Percentage of
Pension Cost APC Net Pension
Fiscal Year ( APC) Contributed Obligation
6/ 30/ 04 $ 2 ,273,254 100% $ -
6/ 30/ 05 5 ,003,709 100% -
6/ 30/ 06 6 ,457,468 100% -
10. DEFERRED COMPENSATION PLAN
City employees may defer a portion of their compensation under a City sponsored Deferred Compensation
Plan created in accordance with Internal Revenue Code Sections 401( a) and 457. Under this plan,
participants are not taxed on the deferred portion of their compensation until it is distributed to them;
distributions may be made only at termination, retirement, death or in an emergency as defined by the plan.
The laws governing deferred compensation plan assets require plan assets to be held by a trust for the
exclusive benefit of plan participants and beneficiaries. Since the assets held under these plans are not the
City’s property and are not subject to City control, they have been excluded from these financial statements.
11. CONTINGENCIES
The City is presently involved in certain matters of litigation that have arisen in the normal course of
conducting City business. City management believes, based upon consultation with the City Attorney, that
these cases, in the aggregate, are not expected to result in a material adverse financial impact on the City.
Additionally, City management believes that the City’s insurance programs are sufficient to cover any
potential losses should an unfavorable outcome materialize.
City of Walnut Creek
Notes to Basic Financial Statements, Continued
For the biennial period ended June 30, 2006
65
12. RELATED PARTIES LOANS
Equity Loans to City Employees
During the period ended June 30, 2006, the City entered into agreements with various City employees
under which the City contributed $ 135,000 towards the purchase of residences for the City employees. The
employment agreement further provides that the City receive an undivided ownership interest in such
residence as tenant- in- common. If the residence is sold, the City will receive from 5% to 19.00% of the net
sales proceeds ( specified in each agreement) after deducting the cost of sale, escrow fees and the market
value of capital improvements made by the owner. Total equity loans to City employees as of June 30, 2006
is $ 375,000.
Equity Share Loan
On March 15, 2003, the City entered into an agreement with the City Manager under which the City
contributed $ 260,000 towards the purchase of a residence for the City Manager. The employment
agreement further provides that the City receive an undivided ownership interest in such residence as
tenant- in- common. If the residence is sold, the City will receive 31.55% of the net sales proceeds after
deducting the cost of sale, escrow fees and the market value of capital improvements made by the owner.
13. PRIOR PERIOD ADJUSTMENT
For the biennial period ended June 30, 2006, the City made