COMPREHENSIVE ANNUAL FINANCIAL

REPORT

FISCAL YEAR ENDED

JUNE 30, 2004

PREPARED BY FINANCE DEPARTMENT

CITY OF BRENTWOOD

708 THIRD STREET

BRENTWOOD, CALIFORNIA 94513

City of Brentwood

City of Brentwood – 2003/ 04 CAFR

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City of Brentwood

COMPREHENSIVE ANNUAL FINANCIAL REPORT

City of Brentwood – 2003/ 04 CAFR i

For Fiscal Year Ended June 30, 2004

TABLE OF CONTENTS

INTRODUCTORY SECTION

Page

Table of Contents ............................................................................................................................... ......................................................................... i

Letter of Transmittal ............................................................................................................................... ................................................................. iv

Certificate of Achievement – GFOA ............................................................................................................................... ...................................... xiv

Certificate of Award – CSMFO ............................................................................................................................... ............................................... xv

List of Principal Officials ............................................................................................................................... ........................................................ xvi

City Organizational Chart ............................................................................................................................... ..................................................... xvii

City Community Services Location Map ............................................................................................................................... ............................. xviii

City of Brentwood Parks Map ............................................................................................................................... ................................................ xix

City of Brentwood Mission Statement ............................................................................................................................... .................................... xx

City of Brentwood Core Values ............................................................................................................................... .............................................. xxi

FINANCIAL SECTION

INDEPENDENT AUDITOR’S REPORT ............................................................................................................................... ................................ 1

MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................................................................... ............. 3

BASIC FINANCIAL STATEMENTS

Government- Wide Financial Statements

Statement of Net Assets ............................................................................................................................... .................................................. 17

Statement of Activities and Changes in Net Assets ............................................................................................................................... ...... 18

Fund Financial Statements

Governmental Fund Financial Statements

Balance Sheet – Governmental Funds ............................................................................................................................... ........................... 19

Reconciliation of the Governmental Funds Balance Sheet to the

Government- Wide Statement of Net Assets ............................................................................................................................... .................. 20

Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ............................................................. 21

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 ........................................................................... 22

City of Brentwood

COMPREHENSIVE ANNUAL FINANCIAL REPORT

City of Brentwood – 2003/ 04 CAFR ii

For Fiscal Year Ended June 30, 2004

TABLE OF CONTENTS ( CONTINUED)

Page

Proprietary Fund Financial Statements

Statement of Net Assets ............................................................................................................................... .................................................... 23

Statement of Revenues, Expenses and Changes in Fund Net Assets ................................................................................................................ 24

Statement of Cash Flows ............................................................................................................................... ................................................... 25

Fiduciary Fund Financial Statements

Statement of Fiduciary Net Assets ............................................................................................................................... .................................... 27

Notes to the Basic Financial Statements

Index of Notes to the Basic Financial Statements ............................................................................................................................... ............. 29

REQUIRED SUPPLEMENTARY INFORMATION

Note to the Required Supplementary Information ............................................................................................................................... ................... 73

Budgetary Comparison Schedule, General Fund ............................................................................................................................... ..................... 74

Budgetary Comparison Schedule, Thoroughfares ............................................................................................................................... ................... 75

Defined Benefit Pension Plan ............................................................................................................................... .................................................. 76

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

Non- Major Governmental Funds

Combining Balance Sheet ............................................................................................................................... ................................................. 77

Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......................................................................................... 81

Internal Service Funds

Combining Statement of Net Assets ............................................................................................................................... ................................. 85

Combining Statement of Activities and Changes in Net Assets ....................................................................................................................... 86

Combining Statement of Cash Flows ............................................................................................................................... ................................ 87

General Fund - Combining Financial Statements Governmental Activities by Fund Type

Balance Sheet – General Fund ............................................................................................................................... .......................................... 89

Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual - General Fund ................................................... 90

Special Revenue Funds

Combining Balance Sheet ............................................................................................................................... ................................................. 91

Combining Statement of Revenues, Expenditures and Changes in Fund Balances .......................................................................................... 93

Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual ........................................................ 95

City of Brentwood

COMPREHENSIVE ANNUAL FINANCIAL REPORT

City of Brentwood – 2003/ 04 CAFR iii

For Fiscal Year Ended June 30, 2004

TABLE OF CONTENTS ( CONTINUED)

Page

Debt Service Funds

Combining Balance Sheet ............................................................................................................................... ............................................... 103

Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................................................................................ 104

Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual ...................................................... 105

Capital Project Funds

Combining Balance Sheet ............................................................................................................................... ............................................... 109

Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........................................................................................ 111

Combining Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual ...................................................... 113

STATISTICAL SECTION ( Unaudited)

Reference Page

General Governmental Revenues by Source ............................................................................................................................... ......... Table 1....... S- 1

General Governmental Expenditures by Function ............................................................................................................................... . Table 2....... S- 2

General Governmental Tax Revenues by Source ............................................................................................................................... .. Table 3....... S- 3

General Property Tax Levies & Collections ............................................................................................................................... .......... Table 4....... S- 4

Assessed and Estimated Actual Value of Taxable Property .................................................................................................................. Table 5....... S- 5

Property Tax Rates – All Direct and Overlapping Governments ........................................................................................................... Table 6....... S- 6

Special Assessment Tax Revenue ............................................................................................................................... .......................... Table 7....... S- 7

Computation of Legal Debt Margin ............................................................................................................................... ....................... Table 8....... S- 8

Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita .................................................................... Table 9....... S- 9

Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures ...................... Table 10..... S- 10

Computation of Direct and Overlapping Debt ............................................................................................................................... ..... Table 11..... S- 11

Revenue Bond Coverage ............................................................................................................................... ...................................... Table 12..... S- 12

Demographic Statistics ............................................................................................................................... ........................................ Table 13..... S- 13

Property Value and Construction Activity ............................................................................................................................... ........... Table 14..... S- 14

Largest Property Taxpayers ............................................................................................................................... ................................. Table 15..... S- 15

Miscellaneous Statistical Information ............................................................................................................................... .................. Table 16..... S- 16

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR iv

October 15, 2004

The Honorable Mayor, Members of the City Council and Citizens of the City of Brentwood

City of Brentwood

Brentwood, California 94513

Dear Mayor Swisher, Members of the City Council and Citizens of the City of Brentwood:

State law requires all general- purpose local governments to publish a complete set of financial statements, presented in conformity with Generally

Accepted Accounting Principles ( GAAP), within six months of the close of each fiscal year. Therefore, we are pleased to submit the

Comprehensive Annual Financial Report ( CAFR) for the City of Brentwood, California for the fiscal year ended June 30, 2004. This is the fourth

year the City’s Finance Department has prepared this report and the third year using the reporting requirements as prescribed by the Governmental

Accounting Standards Board ( GASB) in Statement No. 34. Responsibility for both the accuracy of the data and the completeness and fairness of

the information, including all disclosures, rests with the City. To the best of the City staff’s knowledge and belief, the enclosed data is accurate in

all material respects and is reported in a manner designed to fairly present the financial position and results of the operations of the various entities

of the City of Brentwood. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been

included.

INTERNAL CONTROLS

Accounting for all of the City’s activities is centralized under the Finance Department. The department has been delegated the responsibility for

maintaining the integrity of the City’s recorded financial data. The Finance Department, in conjunction with the City’s management, is also

responsible for establishing and maintaining an internal control structure designed to ensure that the City’s assets are protected from loss, theft or

misuse. The internal control structure is designed to provide reasonable assurance that these objectives are met, while recognizing that this

assurance is not absolute. The concept of reasonable assurance recognizes that: 1) the cost of a control should not exceed the benefits likely to be

derived and 2) the valuation of costs and benefits requires estimates and judgments by management.

City Hall – 708 Third Street, Brentwood, California 94513 Phone: ( 925) 516- 5400 Fax: ( 925) 516- 5401

Public Works – 2201 Elkins Way, Brentwood, California 94513 Phone: ( 925) 516- 6000 Fax: ( 925) 516- 5497

Community Development – 104 Oak Street, Brentwood, California 94513 Phone: ( 925) 516- 5405 Fax: ( 925) 516- 5407

Engineering Department – 120 Oak Street, Brentwood, California 94513 Phone: ( 925) 516- 5420 Fax: ( 925) 516- 5421

Police Department – 100 Chestnut Street, Brentwood, California 94513 Phone: ( 925) 634- 6911 Fax: ( 925) 516- 5247

Parks and Recreation – 740 Third Street, Brentwood, California 94513 Phone: ( 925) 516- 5444 Fax: ( 925) 516- 5445

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR v

City administration believes the existing internal control systems are adequate to provide reasonable assurance that the City’s assets are

safeguarded against loss and that the financial records are reliable for preparing financial statements and maintaining accountability for assets.

This belief is supported by the City’s fifth consecutive “ Unqualified” Audit issued in 2004.

INDEPENDENT AUDIT

The City Council is responsible for: 1) assuring the City administration fulfills its responsibilities in the preparation of the financial statements and

2) engaging certified public accountants with whom the City Council reviews the scope of the audits and the accounting principles to be applied in

financial reporting.

The Government Code of the State of California requires general law cities, such as the City of Brentwood, to have its financial statements audited

by an independent certified public accountant. Accordingly, this year’s audit was completed by the accounting firm of Vavrinek, Trine, Day and

Co., LLP. The firm was engaged by the City Council to render an opinion on the City’s financial statements in accordance with auditing standards

generally accepted in the United States of America. To ensure complete independence, Vavrinek, Trine, Day and Co., LLP has full and free

access to meet with the City Council to discuss the results of their assessment of the adequacy of internal accounting controls and the quality of

financial reporting. The auditor’s report on the general purpose financial statements is the first item in the accompanying Financial Section.

In addition to meeting the requirements set forth in state statutes, the audit was also designed to meet the requirements of the Federal Single Audit

Act of 1984 and related Office of Management and Budget ( OMB) Circular A- 133. The standards governing Single Audit engagements require

the independent auditor to report not only on the fair presentation of the financial statements but also on the audited government’s internal controls

and compliance with legal requirements. This report is available in the City’s separately issued Single Audit Report.

COMPONENTS OF THE CAFR

Pursuant to GAAP requirements, the City has provided a narrative introduction, overview and analysis titled “ Management’s Discussion and

Analysis” ( MD& A). The MD& A, found in the Financial Section, provides financial highlights and interprets the financial reports by analyzing

trends and explaining changes, fluctuations and variances in the financial data. In addition, the MD& A is intended to disclose any known

significant events or decisions that affect the financial condition of the City. The Letter of Transmittal is designed to complement the MD& A and

should be read in conjunction with the MD& A. Components of the CAFR are:

1. INTRODUCTORY SECTION – This section is the Letter of Transmittal which focuses on the City and its financial condition. Included in the

Letter of Transmittal are a list of the City’s principal officials, an organization chart and additional City information.

2. FINANCIAL SECTION – The results of each fund’s performance for the year are presented in the Financial Section which begins with the

Auditor’s Report and the MD& A. These are followed by the Basic Financial Statements, the Fund Financial Statements, Notes to the

Basic Financial Statements, Required Supplementary Information and the Combining and Individual Fund Statements and Schedules.

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR vi

3. STATISTICAL SECTION – This section consists of selected financial and demographic information which is generally presented on a multi-year

basis.

PROFILE OF BRENTWOOD

The City of Brentwood was incorporated in 1948 as a general law city under the laws of the State of California. Brentwood is located halfway

between the cities of San Francisco and Sacramento at the eastern portion of Contra Costa County. The City is governed by a five member City

Council, under the Council– Manager form of government. As of June 30, 2004, the City had a population of approximately 40,000 and

encompassed approximately 14.829 square miles.

The City provides a full range of services including: Police, Public Works, Economic Development,

Planning, Building, Engineering and Inspection, Parks and Recreation, Housing and General

Administrative services. The City also operates public water and wastewater utilities, as well as

providing refuse collection and disposal, and a recycling program. All of these services are accounted

for in the City’s financial statements.

In addition, the City is financially accountable for two component units, the Brentwood Redevelopment

Agency and the Brentwood Joint Powers Financing Authority. Although legally separate entities, these

blended component units are, in substance, part of the government’s operations. Financial data for

these units is combined with the data of the primary government. Each of the blended components has

a June 30 year- end date for accounting purposes. See Note # 1– A, found on page 31, for a more detailed

discussion of these two component units.

The City’s annual budget serves as the foundation for planning and controlling the City’s finances. As

such, the City maintains extensive budgetary controls. The objective of these budgetary controls is to

ensure compliance with legal provisions embodied in the annual appropriated budget approved by the

City Council. The level of budgetary control is established at the fund level. Budgets are prepared and

expenditures recorded at the object of expenditure level. The accounting records are maintained using

either the accrual basis or modified accrual basis of accounting, as appropriate. The City also maintains

an encumbrance accounting system as one technique for accomplishing budgetary control.

The two- year budget process begins as a team effort in January of the first year, starting with an annual strategic planning meeting. Then the

individual departments use projected revenue assumptions to prioritize and recommend the next fiscal year’s objectives. The City Manager’s

Office and the Finance Department review all budget proposals and revenue assumptions, as well as all current financial obligations, before

preparing the document that is proposed to the City Council. The City Council reviews the proposed budget and the final adoption of the two- year

budget is scheduled for a City Council meeting in June. Before the beginning of the second year of the two- year budget cycle, the City Council

reviews the progress during the first year and approves appropriations for the second year.

Water Tower

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR vii

Activities of the General Fund, Special Revenue Funds, Debt Service Funds, Enterprises and Capital Project Funds are included in the annual

appropriated budget. Budget- to- actual comparisons are included in the Financial Section for the General Fund, certain Special Revenue Funds, the

Debt Service Funds and certain Capital Project Funds. The following funds are not legally required to adopt budgets as their appropriations are

established by the related bond documentation and/ or other legal agreements: Capital Improvement Financing Programs ( CIFPs), Capital

Improvement 2001, Street Improvement Projects, Capital Projects and Bypass Authority funds. See Note # 2– A, found on page 41, for additional

information.

BRENTWOOD TODAY

The City of Brentwood continues to thrive and all economic indicators point to the City’s continued growth and stability as shown by the

following statistics from fiscal year 2003/ 04:

• The City’s population increased by 11.08%

• Residential construction valuation increased by 9.87%

• The median price for new homes increased by 16%

• The median price for existing homes increased by 19.7%

• Commercial construction valuation increased by 146.47%

The Office / Research and Development / Flex- Tech Industrial sector increased significantly with the construction of four new projects totaling

135,000 square feet. The Sunset Industrial Complex, a 28- acre medium industrial project, was completed in fiscal year 2003/ 04. The complex,

which consists of 19 lots already sold to multiple end- users, will be open for business in fiscal year 2004/ 05.

Los Medanos College, which provides a full AA degree curriculum, is in its third year

of operation. Current enrollment stands at six hundred full- time equivalent students.

The City also has a 17,000 square foot Business and Technology Center adjacent to

the Los Medanos College campus. The Center, which is fully leased, provides an

affordable workplace for our resident entrepreneurs.

New commercial centers include: Lone Tree Plaza, a 475,000 square foot

commercial center, which is being constructed in two phases. Phase One was

completed at the end of fiscal year 2003/ 04 and Phase Two will be completed by the

end of fiscal year 2004/ 05. Lone Tree Center, a 180,000 square foot commercial

center and three neighborhood centers totaling 220,000 square feet are in various

stages of construction and will be completed by the first quarter of 2005. These new

commercial centers will increase both job opportunities and sales tax revenues.

City Park

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR viii

Brentwood continues to cultivate a vital, thriving and charming historical Downtown consisting of restaurants, unique retail businesses and

personal service businesses. These are businesses which typically anchor classic downtown settings and cannot be found in typical suburban

shopping centers. Downtown provides a pleasant backdrop to community events and street festivals and enjoys a 0% vacancy rate.

Professional services are also increasing the quality of life for Brentwood residents. Phase I of the

John Muir Medical Center, a fully entitled medical office project, consists of a three- story, 110,000

square foot medical facility and helicopter pad. The Center is expected to open in the second quarter

of 2005. Additional smaller office complexes are under construction at Garin Landing, Balfour

Offices, LaFuente Plaza, Sand Creek Business Center and Walnut Center.

FUTURE OUTLOOK

The City of Brentwood is dedicated to “... elevating confidence in government by creating a vision

and culture that furthers the goal of Brentwood representing the highest civic standard.” To achieve

this goal requires the City to manage its continuing growth with the need to: 1) provide infrastructure

and services in a timely fashion, 2) increase the quality of life for its citizens, 3) preserve the City’s

agricultural base and 4) maintain fiscal responsibility.

Managing Growth

The Regional Growth Management Plan ( RGMP) is the City’s main tool for managing growth. The intent of the RGMP is to maintain a consistent

sustainable rate of growth over the next 15 to 20 years and to better synchronize growth with public infrastructure and facilities. The 2001 General

Plan reduced the build out population to approximately 75,000. The 2004 revision to the RGMP enhances this system by introducing controls

missing in the first edition. Key elements of the 2004 RGMP revisions include:

• Establishment of an annual review of the numeric goals of the RGMP by the City Council

• Establishment of a five- member RGMP Evaluation Committee

• Removal of subjectivity from RGMP scoring system

• RGMP now controls the release of both Tentative Map allocations and building permits

• Elevates the quality of the City’s residential developments

Infrastructure

The City of Brentwood established a Development Fee Program in 1989. The program sets forth the relationship between contemplated future

development, facilities needed to serve future development and the estimated costs of those improvements based on the current General Plan and

Capital Improvement Program ( CIP). The purpose of the fees, referred to as AB 1600 fees, is to finance municipal public facilities to mitigate the

impacts caused by future development. These capital improvement facility fees are adopted pursuant to Government Code § 66000, et seq.

John Muir Medical Center

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR ix

The Development Fee Program implements policies of the City’s General

Plan including the policy that “… new development shall contribute its fair

share of the cost of on- site and off- site public infrastructure and services.

This shall include installation of public facilities, payment of impact fees

and participation in a Capital Improvement Financing Program ( CIFP).”

CIFPs provide a mechanism through which the City and the development

community cooperate to fund and construct major Master Planned and Sub-

Master Planned infrastructure ( roads, water and wastewater lines, regional

drainage facilities, etc.).

Bonds are sold using the participating Developer’s property as the

collateral. There is no risk involved for the City as a 3 to 1 value to lien

ratio is used to determine the amount of bonds to be sold. Additionally, the

City is able to obtain very low interest rates through its outstanding

financial reputation. As the properties develop, the bonds are repaid by the

new property owner over a 30- year period.

Services

The City of Brentwood utilizes several different types of revenue sources to pay for City services including Community Facility Districts ( CFDs),

Landscape and Lighting Districts ( LLDs) and User Fees.

CFDs – The State of California passed the Community Facilities Act in 1982 which allows cities to establish CFDs to finance one or more of the

following types of services: police protection services, fire protection and suppression services, recreation program services, library services,

maintenance services for elementary and secondary schools and structures, maintenance and operation of museums and cultural facilities,

maintenance of parks, parkways and open spaces, flood and storm protection services, services with respect to removal or remedial action for the

cleanup of any hazardous substance released or threatened to be released into the environment.

The City of Brentwood has established three CFDs which finance fire suppression and emergency medical services, police protection and public

safety services, open space services, flood and storm drainage services and joint use school site services.

LLDs – In 1972 the City Council approved the Landscaping and Lighting Act which authorizes the formation of assessment districts to ensure the

proper flow of funds for the ongoing operation, maintenance and servicing of specific improvements within the City of Brentwood. Specific

improvements include, but are not limited to: landscaping, street lighting, parks, open space facilities, trails and Contra Costa County Flood

Control channel landscaping. Currently there are 44 LLDs in the City of Brentwood.

$-

$ 10,000,000

$ 20,000,000

$ 30,000,000

$ 40,000,000

$ 50,000,000

$ 60,000,000

$ 70,000,000

$ 80,000,000

$ 90,000,000

1994/ 95

1995/ 96

1996/ 97

1997/ 98

1998/ 99

1999/ 00

2000/ 01

2001/ 02

2002/ 03

2003/ 04

Infrastructure Investment

1995 – 2004

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR x

User Fees – The City of Brentwood utilizes a User Fee Model to compute city- wide and departmental overhead factors, full hourly rate costs by

City Classification and/ or full costs associated with the provision of selected services. The City reviews and updates the fees on an annual basis

based on changes in the Consumer Price Index ( CPI). Examples of City fees covered in the Cost Allocation and Schedule of City fees include:

Building, Inspection, Planning, Engineering, Park and Recreation, Water Service, Wastewater Service and Solid Waste Service fees.

Quality of Life

In September 2003 the City Council passed a “ Percent- For- Art” public art program which applies to

both public projects and residential development. This program stipulates that any new public

project, valued over $ 100,000, contribute 1% of construction costs towards a public art project. The

following projects are already in the works:

• A Farmer Sculpture to honor the agricultural heritage of Brentwood

• An entry feature for the new Community Center at the Aquatics Complex

• An entry feature at the Brighton Station development

As a result of the joint- use agreements between the City of Brentwood, Brentwood Union School

District and Liberty Union School District, the City has either funded, or is in the process of

funding, two middle school community gymnasiums, two high school community gymnasiums, a

50- meter swimming pool, the Police Activities League and three Resource Officers. Total City

funding to date is $ 6,010,632.

The Affordable Housing Program, adopted September 9, 2003, provides the following benefits:

• Creates affordable housing by constructing 10% of all new dwelling units as affordable housing for very- low and low income households

• Provides affordable housing options for workforce while reducing congestion on regional roadways by eliminating commutes

• Units must remain affordable for 45 years for ownership units, 55 years for rentals

• Units must be integrated into each neighborhood and must be built with the same quality, fit and finish as market rate units

Alternatives to construction of affordable units include dedication of vacant land, conversion of market rate units to affordable units, dedication of

affordable units to the City and in- lieu fees ( fees sufficient to build the required units).

Agriculture

For decades Brentwood has been known for its bountiful cropland and “ U- pick” fruit stands. However, the rapid population growth in the late

‘ 90s resulted in the loss of farmland. In 2001, the City adopted the Agriculture Preservation Program in order to mitigate and offset the loss of

valuable farmland resources. In October 2002, the Brentwood Agricultural Land Trust ( BALT), a non- profit corporation, was formed to preserve

agricultural land, promote local agriculture and implement the City’s Agricultural Enterprise Program.

Shadow Lakes

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xi

Fiscal Responsibility

Long- Range Financial Planning – The City of Brentwood is currently working on a 10- year fiscal model which will be used to forecast and

analyze the General Fund’s revenues and expenditures. For revenues, the model was developed using approximately 98% of the General Fund’s

revenue sources including: property taxes, sales taxes, franchise fees, investment income and CFD revenue. For expenditures, the model used

department expenses and projections of retiree medical costs. This fiscal model will enable the City to forecast annual General Fund revenues,

expenditures and any net surplus or deficit for the next 10 years.

Cash Management – The City invests temporarily idle cash in accordance with California Government Code Section 53601 and a formal

investment policy approved by the City Council. This policy limits investments to certain types of instruments and requires that investments must

meet established criteria for safety, liquidity and yield.

In accordance with the policy, deposits are either collateralized or insured by federal depository insurance, with all collateral held either by the

City, its agent or a financial institution’s trust department in the City’s name. All investments held by the government during the year end at June

30, 2004, are classified in the category of lowest credit risk as defined by GASB.

This year the City implemented GASB Statement No. 40 which is designed to inform financial statement users about deposit and investment risks

which could affect a government’s ability to provide services and meet its obligations as they become due. For more information refer to Note # 3

found on pages 45 – 50.

Risk Management – The City has initiated a limited risk management program for workers’

compensation and general liability. As part of this comprehensive plan resources are being

accumulated in a fund balance reserve to meet potential losses. In addition, various risk control

techniques, including employee accident prevention training, have been implemented during the

year to minimize accident- related losses. For more information refer to Note # 9 found on pages

65 – 66.

MAJOR INITIATIVES

The capital budget for fiscal year 2004/ 05 includes 101 projects totaling approximately $ 82.9

million dollars. Major projects include:

• Vineyards at Marsh Creek – In July of 2004, the Contra Costa Local Agency Formation

Commission ( LAFCO) approved the City’s request to annex 593 acres south of the City

limits. This project includes a winery, a 2,500 seat amphitheater, executive home sites, a

recreation center, a Community College and the establishment of the John Marsh House

Park site.

Vineyards at Marsh Creek

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xii

• Community Facilities – There are currently four new community facilities either in the planning stage, the design stage or under

construction. These four projects are: a new Police Station, a new City Hall, a Recreation Center and Concession Stand to be located at

the Brentwood Family Aquatic Center and a Civic Center and Library to be located in the downtown area.

• Surface Water Treatment Facility – The City Council recently approved an agreement with the Contra Costa Water District ( CCWD)

which consists of 1) the City purchasing 3,200 acre- feet per year of existing treatment capacity at the Randall- Bold Water Treatment Plant

( RBWTP) and 2) constructing a scaled down water treatment facility adjacent to the RBWTP to treat water purchased under a 1999

agreement between Brentwood and the CCWD. This agreement allows the City to construct a smaller facility than originally anticipated,

at a net capital savings of $ 7 million, while ensuring the City has adequate, long- term supplies of treated water.

• Vasco Road Safety Improvements – In September of this year the City Council authorized the Mayor to sign a Joint Exercise of Powers

Agreement with Contra Costa County in an amount not to exceed $ 1.5 million. The agreement covers safety improvements for Vasco

Road, a county road, and improvements to roads within the boundaries of the City of Brentwood. Vasco Road is a major thoroughfare

which is used by Brentwood residents who work in the Tri- Valley and the Bay Area. Ensuring the safety of travelers on Vasco Road is

vital to the uninterrupted flow of commerce for both Brentwood and Contra Costa County. The Vasco Road improvement project, which

is not included in the current CIP budget, consists of re- striping and inserting median and shoulder rumble strips on Vasco Road from

Walnut Boulevard to the Alameda/ Contra Costa County line.

CERTIFICATE OF ACHIEVEMENT

The Government Finance Officers Association ( GFOA) and California Society of Municipal Finance Officers ( CSMFO) both offer a recognition

program for public entities to determine whether the City conforms to the highest level of governmental accounting and financial reporting

standards. Its attainment represents a significant accomplishment by a government and its management. Both GFOA and CSMFO awarded a

Certificate of Achievement for Excellence in Financial Reporting to the City of Brentwood for its Comprehensive Annual Financial Report for the

fiscal year ended June 30, 2003, the City’s third CAFR. We believe our 2003/ 04 CAFR continues to meet the Certificate of Achievement

Program’s requirements and therefore we are submitting this year’s CAFR to the GFOA to determine its eligibility for this year’s Certificate of

Achievement for Excellence in Financial Reporting.

ACKNOWLEDGEMENTS

We wish to thank the City Council for providing the clear policy direction and goals that have been used to prepare this CAFR. A great deal of

effort and attention to detail, representing many hours of work by staff members throughout the organization, is required to produce a report of this

quality. We would like to express our appreciation to all City of Brentwood staff members who have taken the time to participate in the

development of this year’s CAFR. Special recognition is given to the entire Finance Department staff and specifically Patti Bowden, Kerry Breen,

Denise Davies, Brian Kelleher, Gail Leech, Pat Meyer and Liz Ybarra. Appreciation is also expressed to the Mayor and the City Council for their

interest and support in planning and conducting the financial activities of the City in a responsible and responsive manner.

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xiii

The City of Brentwood has a bright future due to its committed elected leadership and the talents and ingenuity of its City employees. One of the

key components in securing this future is through a well- planned, long- term fiscal strategy based upon economic development that will generate

high paying, long- term employment opportunities, new and stable sales tax revenue sources and improved inter- governmental relations. City

Council and staff have taken steps to plan and implement this long- term strategy. Though the challenges are great, the City is firmly committed to

meeting each and every challenge that comes our way. This CAFR is the next step towards meeting those challenges. By continuing to follow the

financial policy set forth by the City Council, the City of Brentwood will deliver the highest level of service permitted by the available resources.

Respectfully submitted,

] É{ Ç fàxäxÇáÉÇ ctÅxÄt X{ ÄxÜ

John Stevenson Pamela Ehler

City Manager City Treasurer

Director of Finance and Information Systems

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xiv

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xv

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xvi

LIST OF PRINCIPAL OFFICIALS

CITY OFFICIALS

Brian Swisher........................................................................................................................ ................................................................................ Mayor

Annette Beckstrand..................................................................................................................... ................................................................. Vice- Mayor

Ana Gutierrez...................................................................................................................... ................................................................. Council Member

Bill Hill ............................................................................................................................... ................................................................. Council Member

Pete Petrovich ............................................................................................................................... ....................................................... Council Member

EXECUTIVE TEAM

John Stevenson...................................................................................................................... .................................................................... City Manager

Dennis Beougher....................................................................................................................... ................................................................ City Attorney

Craig Bronzan ............................................................................................................................... ................................. Director of Parks & Recreation

Karen Chew ............................................................................................................................... ................................................ Assistant City Manager

Mike Davies......................................................................................................................... ................................................................... Chief of Police

Karen Diaz ............................................................................................................................... ........... City Clerk / Director of Administrative Services

Pamela Ehler ............................................................................................................................... ............... Director of Finance & Information Systems

Bailey Grewal ............................................................................................................................... ........................................................... City Engineer

Mitch Oshinsky....................................................................................................................... ............................ Director of Community Development

Howard Sword ............................................................................................................................... ....................... Director of Economic Development

Paul Zolfarelli ............................................................................................................................... ........................................ Director of Public Works

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xvii

CITIZENS

CITY COUNCIL

City Manager

Boards &

Commissions

City Attorney

Engineering

Community

Development

Finance / IS

Parks and

Recreation

Public Police Works Administration

Economic

Development

City of Brentwood

Organizational Chart

Traffic Safety

B. A. C. U. P.

Volunteers

Chaplain

Police Explorers

Streets

Water

Wastewater

Solid Waste Purchasing

Grants

Administrative

Services

Information

Services

Business Services

Payroll

Finance

Operations

Development

Engineering

Traffic

Construction

Inspection

Capital

Improvement

Program

Utility Billing

Building

Planning

Landscape

Lighting &

Landscape

Districts

Park Planning

Village Drive

Resource Center

Recreation

Enterprise

Facilities

Management

City Wide Park

District

Human

Resources

City Clerk

Redevelopment

NPDES

Agriculture

Housing

Arts

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xviii

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xix

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xx

Mission Statement

Elevating Confidence in Government

Vision and Culture

We create and institutionalize a vision and culture that furthers the goal of

Brentwood representing the highest civic standard. We form the organization

around the values of integrity, passion, accountability, respect and quality to create

the “ Brentwood Way” of doing business.

The “ Brentwood Way”

• “ Good enough” is never good enough and we find a way to do it better.

• Striving to be the best. The best is never defined or constrained; it is never reached

and we advance the standard every day.

• Taking the best of both business and government for the benefit of the community.

Adopted by City Council 9/ 14/ 04

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xxi

We hold as our Core Values

Adopted by City Council 9/ 14/ 04

Quality

the highest degree of excellence

Accountability

answerable for our actions

Respect

to feel and show esteem and consideration

for others

Passion

boundless enthusiasm for what we do

Integrity

uncompromising adherence to moral

and ethical principles

City of Brentwood

Letter of Transmittal

City of Brentwood – 2003/ 04 CAFR xxii

This page intentionally left blank.

City of Brentwood - 2003/ 04 CAFR Page 1

INDEPENDENT AUDITORS' REPORT

To the Honorable Mayor and

Members of the City Council

City of Brentwood, California

We have audited the accompanying basic financial statements of the governmental activities, the business- type activities, each major fund, and the

aggregate remaining fund information of the City of Brentwood, California, ( City) as of and for the year ended June 30, 2004, which collectively

comprise the City’s basic financial statements as listed in the table of contents. These basic financial statements are the responsibility of the City's

management. Our responsibility is to express an opinion on these basic financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to

financial audits contained in Government Auditing Standards, issued by the Comptroller of the United States. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit

includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the

governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information of the City of Brentwood,

California, as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended

in conformity with accounting principles generally accepted in the United States of America.

City of Brentwood - 2003/ 04 CAFR Page 2

In accordance with Government Auditing Standards, we have also issued our report dated October 14, 2004 on our consideration of the City’s

internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements

and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and

the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral

part of an audit performed in accordance with Government Auditing Standards and should be considering in assessing the results of our audit.

The Required Supplementary Information, including Management’s Discussion and Analysis and budgetary comparison information, as listed in

the table of contents, is not a required part of the basic financial statements, but is supplementary information required by the Governmental

Accounting Standards Board. This Required Supplementary Information is the responsibility of the management of the City. We have applied

certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the

supplementary information. However, we did not audit the information and accordingly, we do not express an opinion.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The combining and individual

fund financial statements and schedules listed in the table of contents are presented for purpose of additional analysis and are not a required part of

the basic financial statements of the City. These financial statements and schedules are also the responsibility of the management of the City.

Such additional information has been subjected to the auditing procedures applied in our audit of the basic financial statements, and in our opinion,

is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.

The scope of our audit did not include the introductory section and statistical schedules listed in the table of contents and we do not express an

opinion on them.

Pleasanton, California

October 14, 2004

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 3

This discussion and analysis of the City of Brentwood’s financial performance provides an overview of the City’s financial activities for the fiscal

year ended June 30, 2004. Please read it in conjunction with the Letter of Transmittal, the Basic Financial Statements and the accompanying

Notes to the Basic Financial Statements.

FINANCIAL HIGHLIGHTS

􀂃 The assets of the City exceeded its liabilities at the close of the most recent fiscal year by $ 414.1 million. Of this amount, $ 21.7 million

may be used to meet the City’s ongoing obligations to citizens and creditors.

􀂃 The City’s total net assets increased $ 50.2 million due primarily to the completion of projects and the acquisition of assets.

􀂃 As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $ 68.4 million, a

decrease of $ 2.0 million in comparison to the prior year.

􀂃 The City’s total long- term debt increased by $ 12.3 million. The increase is primarily the result of an increase in the note payable to

CCWD.

􀂃 Internal Service ( Replacement) Funds have net assets of $ 13.3 million at year end, which is an increase of $ 2.6 million from the prior year.

􀂃 The City established a Housing Enterprise in fiscal year 2003/ 04, which includes an Affordable Housing Program.

􀂃 The Affordable Housing Program allows developers to pay an “ in- lieu” fee which generated $ 1.9 million in revenue.

􀂃 The Brentwood Agricultural Land Trust ( BALT) receives City funding through agricultural mitigation fees collected from developers.

During fiscal year 2003/ 04 developer fees accounted for $ 1.9 million of the $ 4.8 million in the Agricultural Land fund.

OVERVIEW OF THE FINANCIAL STATEMENTS

The financial statements presented herein include all of the activities of the City of Brentwood (“ the City”) and its component units using the

blended approach as prescribed by government accounting standards. The City’s basic financial statements are comprised of three components: 1)

Government- Wide Financial Statements, 2) Fund Financial Statements and 3) Notes to the Basic Financial Statements.

The Government- Wide Financial Statements present the financial picture of the City from the economic resources measurement focus using the

accrual basis of accounting. They present governmental activities and business- type activities separately. These statements include all assets of

the City, including infrastructure, as well as all liabilities, including long- term debt. Additionally, certain eliminations have occurred, as

prescribed by GASB 34, in regards to interfund activity, payables and receivables.

Governmental Activities – Most of the City’s basic services are reported in this category including the General Government, Public Safety,

Community Development, Engineering, Public Works, Parks and Community Services. Property and sales taxes, user fees, interest income,

franchise fees and state and federal grants finance these activities.

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 4

Business- Type Activities – The City charges a fee to customers to cover all or most of the costs of certain services it provides. The City’s

Wastewater, Solid Waste, Water, Parks and Recreation, City Rental and Housing activities are reported in this category.

The Statement of Net Assets and the Statement of Activities and Changes in Net Assets report information about the City as a whole. All of the

current year’s revenues and expenses are taken into account, regardless of when cash is received or paid. In addition, these two statements report

the City’s net assets and changes in them. Over time, increases or decreases in the City’s net assets are one indicator of whether its financial

health is improving or deteriorating. Other factors to consider are changes in the City’s property tax base and the condition of the City’s roads.

The Government- Wide Financial Statements can be found on pages 17 – 18 of this report.

The Fund Financial Statements provide detailed information about the most significant funds, not the City as a whole. Some funds are required

to be established by State law and by bond covenants. However, management establishes many other funds to help it control and manage money

for particular purposes or to show that it’s meeting legal responsibilities for using certain taxes, grants and other money.

The City’s Fund Financial Statements are divided into three categories – Governmental Funds, Proprietary Funds and Fiduciary Funds. The

Governmental Fund financials are prepared using the current financial resources measurement focus and modified accrual basis of accounting.

The Proprietary Fund financials are prepared using the economic resources measurement focus and the accrual basis of accounting. The Fiduciary

Funds are agency funds which only report a balance sheet and do not have a measurement focus. The Fund Financial Statements can be found on

pages 19 – 27 of this report.

Governmental Funds – Most of the City’s basic services are reported in Governmental Funds, which focus on how money flows into and out of

those funds and the balances left at year- end that are available for spending. The Governmental Fund statements provide a detailed, short- term

view of the City’s general government operations and the basic services it provides. Governmental Fund information helps determine whether

there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. The differences of results in the

Governmental Fund Financial Statements to those in the Government- Wide Financial Statements are explained in a reconciliation following each

Governmental Fund Financial Statement. The Governmental Fund Financial Statements can be found on pages 19 – 22 of this report.

Proprietary Funds – When the City charges customers for services it provides, whether to outside customers or other units of the City, these

monies are generally reported in Proprietary Funds. The City maintains two different types of Proprietary Funds – Enterprise Funds and Internal

Service Funds. Enterprise Funds are used to report the same functions presented as business- type activities in the Government- Wide Financial

Statements. Examples of Enterprise Funds include Water and Parks and Recreation. Internal Service Funds are used to report activities which

provide supplies and services for the City’s other programs and activities. Two examples are the City’s Information Systems Fund and the Fleet

Maintenance Fund. Internal Service Funds are reported with governmental activities in the Government- Wide Financial Statements, found on

pages 17 – 18 of this report.

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 5

Proprietary Funds provide a more detailed version of the information provided in the Government- Wide Financial Statements. Cash flows for the

Proprietary Funds and the Internal Service Funds are provided, as well as combining statements for the individual Internal Service Funds. The

Proprietary Fund Financial Statements can be found on pages 23 – 25 of this report.

Fiduciary Funds – The City is the trustee, or fiduciary, for certain amounts held on behalf of developers, property owners and others. The City’s

fiduciary activities are reported in separate Statement of Fiduciary Net Assets. We exclude these activities from the Government- Wide Financial

Statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these

funds are used for their intended purposes. The Fiduciary Fund Financial Statement can be found on page 27 of this report.

Notes to the Basic Financial Statements

The Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the

Government- Wide and Fund Financial Statements. The Notes to the Basic Financial Statements can be found on pages 29 – 72 of this report.

Required Supplementary Information

In addition to the basic financial statements and accompanying notes, this report also presents certain Required Supplementary Information

concerning 1) budgetary comparison schedules for the general fund and each major special revenue fund and 2) the City’s progress in funding its

obligation to provide pension benefits to its employees. Required Supplementary Information can be found on pages 73 – 76 of this report.

Combining and Individual Fund Statements and Schedules

Combining and Individual Fund Statements and Schedules for the following funds can be found on pages 77 – 113 of this report: Non- Major

Governmental Funds, Internal Service Funds, General Fund, Special Revenue Funds, Debt Service Funds and Capital Project Funds.

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 6

GOVERNMENT- WIDE FINANCIAL ANALYSIS

The net assets for the City as a whole increased 13.8% from $ 363.9 million at June 30, 2003 to $ 414.1 million at June 30, 2004. This increase of

$ 50.2 million comes from the change in net assets as recorded in the Statement of Activities and which flows through the Statement of Net Assets.

Invested in Capital Assets, Net of Related Debt increased $ 89.4 million due to the completion of projects. Restricted Net Assets decreased $ 17.3

million overall as a result of the reclassification of assets, for specific projects and programs, from restricted to unrestricted.

2004 2003 2004 2003 2004 2003

Current and Other Assets $ 9 3,174,803 $ 9 7,403,557 $ 4 8,726,605 $ 4 3,375,591 $ 1 41,901,408 $ 1 40,779,148

Capital Assets 2 34,572,483 1 84,849,115 1 60,796,611 1 48,205,105 3 95,369,094 3 33,054,220

Total Assets 3 27,747,286 2 82,252,672 2 09,523,216 1 91,580,696 5 37,270,502 4 73,833,368

Long- Term Liabilities Outstanding 3 8,486,487 3 9,191,552 6 4,218,155 5 1,242,460 1 02,704,642 9 0,434,012

Current Liabilities 1 6,948,087 1 7,668,025 3 ,475,438 1 ,825,524 2 0,423,525 1 9,493,549

Total Liabilities 5 5,434,574 5 6,859,577 6 7,693,593 5 3,067,984 1 23,128,167 1 09,927,561

Net Assets:

Invested in Capital Assets, Net of Related Debt 1 97,015,674 1 44,428,668 1 34,896,047 9 8,061,398 3 31,911,721 2 42,490,066

Restricted 4 8,177,025 4 3,163,510 1 2,359,754 3 4,664,252 6 0,536,779 7 7,827,762

Unrestricted 2 7,120,013 3 7,800,917 ( 5,426,178) 5 ,787,062 2 1,693,835 4 3,587,979

Total Net Assets $ 2 72,312,712 $ 2 25,393,095 $ 1 41,829,623 $ 1 38,512,712 $ 4 14,142,335 $ 3 63,905,807

Governmental Activities Business- Type Activities Totals

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 7

The City’s net assets from governmental activities increased 20.8% from $ 225.4 million to $ 272.3 million. This is primarily due to growth.

Program expenses by function, general revenues by major source, excess and/ or deficiency of revenues over expenses before contributions to fund

principal, special and extraordinary items and total assets are presented in the Statement of Activities and Changes in Net Assets.

2004 2003 2004 2003 2004 2003

Revenues:

Program Revenues:

Charges for Services $ 16,218,168 $ 13,862,506 $ 20,240,036 $ 15,719,566 $ 36,458,204 $ 29,582,072

Operating Grants and Revenues 165,107 226,570 - - 165,107 226,570

Capital Grants and Contributions 128,384 132,575 - - 128,384 132,575

General Revenues:

Taxes:

Property Taxes 7,990,595 6,933,900 868,369 680,375 8,858,964 7,614,275

Sales Tax and Gas Taxes 3,644,368 2,998,922 - - 3,644,368 2,998,922

Franchise Fees, Rentals 738,525 668,657 - 5 ,375 738,525 674,032

Public Service Taxes 743,890 589,266 - - 743,890 589,266

Measure C, TOT 457,883 448,498 - - 457,883 448,498

Motor Vehicle Taxes 1,508,664 1,702,280 - - 1,508,664 1,702,280

Investment Earnings 3,312,556 2,777,909 1,284,161 1,710,954 4,596,717 4,488,863

Impact Fees 28,218,482 21,965,625 20,104,810 20,286,877 48,323,292 42,252,502

Capital Contributions ( 931,403) 9,572,626 12,436,208 20,733,980 11,504,805 30,306,606

Capital Assets Contributed to/ from Other Funds 12,868,344 2,885,000 ( 12,868,344) ( 2,885,000) - -

Miscellaneous 12,817,467 6,470,739 150,000 - 12,967,467 6,470,739

Connection Fees Paid - - ( 11,305,768) - ( 11,305,768) -

Total Revenues 87,881,030 71,235,073 30,909,472 56,252,127 118,790,502 127,487,200

Expenses:

General Government 19,799,793 18,329,899 - - 19,799,793 18,329,899

Public Safety 9,970,436 6,750,947 - - 9,970,436 6,750,947

Community Development 4,804,009 2,886,102 - - 4,804,009 2,886,102

Engineering 2,469,775 1,618,876 - - 2,469,775 1,618,876

Public Works 3,491,159 2,942,088 - - 3,491,159 2,942,088

Parks 1,613,411 806,336 - - 1,613,411 806,336

Community Services 226,732 314,293 - - 226,732 314,293

Other 512,952 1,158,986 - - 512,952 1,158,986

Interest on Long- Term Debt 1,883,951 2,018,870 - - 1,883,951 2,018,870

Wastewater - - 8,461,336 3,405,073 8,461,336 3,405,073

Solid Waste - - 3,833,171 3,060,101 3,833,171 3,060,101

Water - - 7,395,878 6,779,073 7,395,878 6,779,073

Parks and Recreation - - 3,647,580 2,891,809 3,647,580 2,891,809

City Rentals - - 7 ,504 429,833 7 ,504 429,833

Housing - - 436,287 - 436,287 -

Total Expenses 44,772,218 36,826,397 23,781,756 16,565,889 68,553,974 53,392,286

Increase in Net Assets Before Transfers 43,108,812 34,408,676 7,127,716 39,686,238 50,236,528 74,094,914

Transfers 3,810,805 7,349,207 ( 3,810,805) ( 7,349,207) - -

Increase in Net Assets 46,919,617 41,757,883 3,316,911 32,337,031 50,236,528 74,094,914

Net Assets 7/ 1 225,393,095 183,635,212 138,512,712 106,175,681 363,905,807 289,810,893

Net Assets 6/ 30 $ 272,312,712 $ 225,393,095 $ 141,829,623 $ 138,512,712 $ 414,142,335 $ 363,905,807

Governmental Activities Business- Type Activities Total Primary Government

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 8

$-

$ 2,000,000

$ 4,000,000

$ 6,000,000

$ 8,000,000

$ 10,000,000

$ 12,000,000

$ 14,000,000

$ 16,000,000

$ 18,000,000

$ 20,000,000

General Government

Public Safety

Community Development

Engineering

Public Works

Parks

Community Services

Other

Interest on Long- term Debt

Program Revenues and Expenses

Expenses

Program

Revenues

Governmental Activities – The cost of all Governmental activities this year was $ 44.8 million. However, as shown in the Statement of

Activities, the amount that the taxpayers ultimately financed for these activities was only $ 28.3 million. A portion of the cost for these activities

was paid either by those who directly benefited from the programs ($ 16.2 million), by other governments and organizations that subsidized certain

programs with operating grants and contributions ($. 2 million), or capital grants and contributions ($. 1 million). Community Development and

Engineering show net revenues of $ 2.2 and $ 2.17 million respectively, which is the result of growth. Overall, the City’s governmental program

revenues were $ 16.5 million. The City paid for the remaining “ public benefit” portion of Governmental activities with $ 15.1 million in taxes,

some of which could only be used for certain programs, and with other revenues such as interest and general entitlements.

Total resources available during the year to finance governmental operations were $ 317.1 million consisting of net assets at July 1, 2003 of $ 225.4

million, program revenues of $ 16.5 million and general revenues and transfers of $ 75.2 million. Total Governmental activities during the year

were $ 44.8 million, thus net assets were increased by $ 46.9 million to $ 272.3 million.

Revenues by Source

Sales Tax & Gas

Taxes

4%

Property Taxes

9%

Charges for

Service

18%

Other Taxes

4%

Investment

Earnings

4%

Other

18%

Capital

Contributions

43%

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 9

Business- Type Activities – The City’s net assets from Business- Type activities increased 2.4% from $ 138.5 million to $ 141.8 million. Invested

in capital assets, net of related debt increased $ 36.8 million due primarily to the completion of projects. Overall, the unrestricted net assets

decreased by $ 11.2 million as a result of the reclassification of assets as reserved for specific projects and programs. The unrestricted net assets

within the Wastewater and Water enterprises have a deficit as a result of the notes and bonds payable used to finance the infrastructure needs of

the community.

The cost of all Business- Type activities this year was $ 23.8 million. As shown in the Statement of Activities and Changes in Net Assets, the

amounts paid by users of the systems were $ 20.2 million. Investment earnings were $ 1.3 million and impact fees and credits totaled $ 20.1 million.

Total resources available during the year to finance Business- Type activities were $ 165.6 million consisting of Net Assets at July 1, 2003 of

$ 138.5 million, program revenues of $ 20.2 million and general revenues and transfers of $ 6.9 million. Total Business- Type activities during the

year were $ 23.8 million, thus net assets were increased by $ 3.3 million to $ 141.8 million.

Revenues by Source

Capital

Contributions

47%

Charges for

Service

48%

Property

Taxes

2%

Investment

Earnings

3%

$-

$ 1,000,000

$ 2,000,000

$ 3,000,000

$ 4,000,000

$ 5,000,000

$ 6,000,000

$ 7,000,000

$ 8,000,000

$ 9,000,000

$ 10,000,000

Wastewater

Solid Waste

Water

Parks and Recreation

City Rentals

Housing

Program Revenues and Expenses

Expenses

Program

Revenues

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 10

FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS

At year- end the City’s General Fund had a fund balance of $ 22,830,391. This is an increase of $ 3,527,899 over last year, due primarily to

development growth.

The Special Revenue Funds decreased by $ 5,978,798 from the prior year due to the continued development of infrastructure. Thoroughfares

ended the year with a ($ 5,408,273) fund balance. This shortage will be addressed with proceeds from the CIFP 2004- 1 Infrastructure Revenue

Bonds.

The Capital Project Funds increased by $ 318,209 from the prior year, this is attributable to the building program the City has adopted.

Internal Service Funds show an increase in net assets of $ 2,609,111. The City has been able to continue to fully fund all the replacement funds.

GENERAL FUND BUDGETARY HIGHLIGHTS

Comparing the fiscal year 2003/ 04 original budget ( or adopted) General Fund expenditures of $ 26,910,077 to the final budget amount of

$ 28,507,103 shows a net increase of $ 1,597,026.

Supplemental General Fund budget changes include the following:

• $ 786,857 transferred to Street Projects

• $ 160,000 increase in Legal Services

• $ 650,169 in various budget adjustments approved by Council at the mid- year budget review

Beginning Balance + Supplemental Changes = Final Budget

$ 26,910,077 $ 1,597,026 $ 28,507,103

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 11

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets – The capital assets of the City are those assets which are used in the performance of the City’s functions. At June 30, 2004,

capital assets net of accumulated depreciation of the Governmental activities totaled $ 234,572,483. Capital assets net of accumulated depreciation

of the Business- Type activities totaled $ 150,236,614, excluding intangible assets. Depreciation on capital assets is recognized in the Government-

Wide financial statements. Refer to Note # 4, found on pages 51 – 52 of this report, for detailed information regarding capital assets. The City has

elected to use the depreciation method as allowed by GASB Statement No. 34 for infrastructure reporting.

Original Accumulated Book

Cost Depreciation Value

Capital Assets – Governmental:

Land $ 28,246,794 $ - $ 2 8,246,794

Land Improvements 749,552 235,554 5 13,998

Buildings 7 ,485,856 1,442,311 6 ,043,545

Infrastructure 159,758,962 29,653,174 1 30,105,788

Equipment 2,540,666 1,465,552 1 ,075,114

Vehicles 4,818,822 2,812,499 2 ,006,323

Work in Progress – CIP & Infrastructure 6 6,580,921 - 66,580,921

Total Capital Assets – Governmental $ 270,181,573 $ 3 5,609,090 $ 234,572,483

Capital Assets – Business- Type:

Land $ 414,352 $ - $ 414,352

Land Improvements 1,565,965 662,764 9 03,201

Buildings 1 3,533,484 2 ,104,470 11,429,014

Infrastructure 135,164,874 9 ,801,559 125,363,315

Equipment 1,451,455 793,770 6 57,685

Vehicles - - -

Work in Progress – CIP & Infrastructure 1 1,469,047 - 11,469,047

Total Capital Assets – Business- Type $ 163,599,177 $ 1 3,362,563 $ 150,236,614

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 12

Debt Administration – Debt, considered a liability of Governmental Activities, decreased in fiscal year 2003/ 04 by $ 705,065. Per capita debt

outstanding decreased from $ 1,077 to $ 1,038 per capita compared to the prior fiscal year. Detailed information regarding long- term debt activity

can be found in Note # 5 on pages 53 – 62 in this report.

Debt of the Business- Type activities increased by $ 12,975,695 in fiscal year 2003/ 04 primarily due to 1) the purchase of water treatment capacity

rights of up to 6 million gallons daily of water from CCWD and 2) the CCWD Water Connection Fee. The connection fee is based on the benefits

the City receives for each connection within the CCWD’s Los Vaqueros Service Area.

Balance Incurred or Satisfied or Balance

June 30, 2003 Issued Matured June 30, 2004

Governmental Activities

Certificates of Participation $ 3 05,000 $ - $ 3 05,000$ -

2002 General Obligation Payable 6 ,198,082 1 62,689 1 05,000 6 ,255,771

CIP 2001 Revenue Bonds 3 1,635,000 - 6 10,000 3 1,025,000

Capital Leases 3 72,478 - 9 6,440 2 76,038

Accumulated Compensated Absences 6 80,992 1 ,113,712 8 65,026 9 29,678

Total Governmental Activities $ 39,191,552 $ 1,276,401 $ 1,981,466 $ 38,486,487

Business- Type Activities

Capital Leases $ 1 51,055 $ - $ 4 7,392 $ 1 03,663

Notes Payable 8 69,532 - 2 15,831 6 53,701

Note Payable - State Water Resources 3 7,713,566 6 0,300 1 ,585,025 3 6,188,841

CCWD Water Entitlement 2 86,116 - 8 9,872 1 96,244

CCWD Treated Water Service - 1 0,000,000 5 ,000,000 5 ,000,000

CCWD Water Connection Fee - 1 1,020,768 - 1 1,020,768

Water and Wastewater Revenue Bonds 1 2,020,000 - 1 ,225,000 1 0,795,000

Accumulated Compensated Absences 2 02,191 2 82,141 2 24,394 2 59,938

Total Business- Type Activities $ 51,242,460 $ 21,363,209 $ 8,387,514 $ 64,218,155

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 13

ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES

The key assumptions in the General Fund revenue forecast for fiscal year 2004/ 05 were:

1. The Property Tax revenue estimate of $ 4,739,180 for fiscal year 2004/ 05 is 23% above the 2003/ 04 budgeted amount.

2. Sales Tax revenues are expected to increase by 20%. This increase is forecasted due to 1.1 million square feet of new commercial centers

and an anticipated rise in local economic activity.

3. The 17% increase in Franchise Fees is due to population growth and commercial development.

4. Investment income will increase an estimated $ 200,000 due to Brentwood’s exponential growth consisting of new home construction and

the addition of several large chain outlets.

5. Approximately 1,400 new housing units will be constructed.

6. Business License revenues are estimated to increase for fiscal year 2004/ 05 to $ 500,000, which is 40% above the 2003/ 04 budgeted

amount. This projected increase is due to new businesses that are expected to come to Brentwood and continued code enforcement. This

revenue is significant because it is not considered discretionary and therefore is not subject to being taken away by the State.

7. The passing of Proposition 57, the $ 15 billion bond measure intended to help solve the State budget crisis. One element of the bond

measure is what has been referred to as the “ triple flip”. The “ triple flip” suspends one- quarter of the Bradley- Burns sales tax, replaces the

lost revenues on a dollar- for- dollar basis with funds from the county- wide Educational Revenue Augmentation Fund ( ERAF) property tax

funds and increases the State’s sales and use tax by one- quarter percent. The proceeds from the increase in the State’s sales and use tax

are dedicated to the repayment of the bond measure. Starting in September 2004, monthly distributions of quarterly sales tax estimates

began at the reduced level. The City’s 2004/ 05 budget reflects these reductions in State sales tax distributions and revenue projections

will remain conservative in anticipation of further State cuts in funding for local governments.

New items specifically addressed in the 2004/ 05 budget were:

Public Safety – The City Council has put Public Safety as one of its priorities and is committed to make Brentwood one of the safest cities in

California. Safe streets and low crime rates attract growth in both residential and business development. Fiscal year 2004/ 05 includes the hiring

of seven sworn positions. This will bring staffing levels in the Police Department to 63. Additionally, $ 542,000 was budgeted for Fire

Department/ EMT service.

Recreational and Cultural – As the population of Brentwood continues to grow, the City is committed to expanding both the park and

recreational programs and facilities. Key budget items include:

• Funding for several joint use facilities with the Brentwood Union School District including a performing arts center and a

community gymnasium and exercise room.

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 14

• The new Public Art Program approved by the City Council in September 2003. Three projects are currently being funded by this

program which applies to both public projects and residential developments.

• An additional 80+ acres of parks scheduled for completion in fiscal year 2004/ 05.

Internal Services Replacement Programs – All Internal Service Funds have been funded 100% which ensures scheduled replacement needs can

be met. Included in the fiscal year 2004/ 05 budget are funds for a fuel station at the Corporation Yard.

Public Works – In order to serve the needs of our rapidly growing City more efficiently, funds are budgeted for improvements to the Transfer

Station. The current facility is 10 years old and to this point has kept pace with the increasing number of households without rate increases.

Retail Expansion – Sand Creek Crossing, a 260,000 square foot community center, is complete and offers the far- east county population shopping

opportunities that have not been present in the region. Lone Tree Plaza, a 454,000 square foot commercial center, Lone Tree Center, an 180,000

square foot commercial center and three neighborhood centers totaling 220,000 are scheduled for completion in fiscal year 2004/ 05. These

projects, totaling 1,114,000 square feet, will increase both job opportunities and sales tax revenues.

Economic Development/ Redevelopment – The budget focuses on the following items:

• Providing and funding public infrastructure and improvement within the Redevelopment Project Areas

• Development, management and implementation of the City’s Affordable Housing Program

• Adoption and implementation of the following specific plans: Downtown, Brentwood Boulevard Corridor and Empire Triangle

• Implementation of the Manufacturing Attraction Program

• Creation, preservation and improvement of housing opportunities within Redevelopment Project Areas

Facility Development – The current City Hall and Police facilities are overcrowded. The short- term City Hall solutions, the expansion and

renovation of the facility at 120 Oak Street to accommodate the Engineering department and the renovation of the existing City Hall to

accommodate the remaining City functions, were completed in fiscal year 2003/ 04. A new Police Station, located at the U. S. Print site, is

scheduled for completion in fiscal year 2004/ 05. A new City Hall, which will accommodate all appropriate City functions in an effective and

productive environment, is currently in the planning and design phases.

Emergency Preparedness Fund – Fiscal year 2004/ 05 represents the third year the City will have the Emergency Preparedness fund totaling

$ 5,383,271. Having this fund underscores City Council’s continued commitment to be prepared for a critical incident or catastrophic event in the

future.

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 15

REQUESTS FOR INFORMATION

This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the City’s

finances and to show the City’s accountability for the money it receives. If you have questions about this report, separate reports of the City’s

component units or need any additional financial information, contact the Finance Department, located at 708 Third Street, Brentwood, California

94513, either by phone ( 925) 516- 5415 or e- mail dept- finance@ ci. brentwood. ca. us.

City of Brentwood

Management’s Discussion and Analysis

City of Brentwood - 2003/ 04 CAFR Page 16

This page intentionally left blank.

Governmental Business- Type

Activities Activities

ASSETS

Current Assets:

Cash and Investments $ 6 9,725,527 $ 4 0,648,141 $ 1 10,373,668

Restricted Cash and Investments 2 2,416,731 9 18,893 2 3,335,624

Receivables, Net 3 ,206,757 2 ,322,525 5 ,529,282

Prepaids 6 96,058 1 2,254 7 08,312

Land Held for Resale 4 75,811 - 4 75,811

Notes Receivable - 3 59,822 3 59,822

Non- Current Assets:

Deferred Charges - 5 90,359 5 90,359

Long- Term Loans Receivable 5 0,000 4 78,530 5 28,530

Internal Balances ( 3,396,081) 3 ,396,081 -

Capital Assets, Net of Accumulated Depreciation & Amortization

Intangible Assets - 1 0,559,997 1 0,559,997

Land 2 8,246,794 4 14,352 2 8,661,146

Land Improvements 5 13,998 9 03,201 1 ,417,199

Buildings 6 ,043,545 1 1,429,014 1 7,472,559

Infrastructure 1 30,105,788 1 25,363,315 2 55,469,103

Machinery and Equipment 1 ,075,114 6 57,685 1 ,732,799

Vehicles 2 ,006,323 - 2 ,006,323

Work in Progress 6 6,580,921 1 1,469,047 7 8,049,968

Total Assets 3 27,747,286 2 09,523,216 5 37,270,502

LIABILITIES AND NET ASSETS

Current Liabilities:

Accounts Payable 7 ,702,814 2 ,563,012 1 0,265,826

Other Liabilities - 2 7,217 2 7,217

Deferred Revenue 7 2,427 7 00,157 7 72,584

Deposits Held 9 ,172,846 1 85,052 9 ,357,898

Long- Term Debt Due Within One Year 1 ,345,987 8 ,777,647 1 0,123,634

Non- Current Liabilities Due in More Than One Year:

Bonds Payable 3 6,540,771 1 0,525,000 4 7,065,771

Notes Payable - 4 4,746,988 4 4,746,988

Capital Leases Payable 1 75,561 5 3,251 2 28,812

Compensated Absences Payable 4 24,168 1 15,269 5 39,437

Total Liabilities 5 5,434,574 6 7,693,593 1 23,128,167

Net Assets:

Investment in Capital Assets, Net of Related Debt 1 97,015,674 1 34,896,047 3 31,911,721

Restricted for:

Debt Service 3 ,542,069 - 3 ,542,069

Specific Projects and Programs 4 4,634,956 1 2,359,754 5 6,994,710

Unrestricted 2 7,120,013 ( 5,426,178) 2 1,693,835

Total Net Assets $ 2 72,312,712 $ 1 41,829,623 $ 4 14,142,335

Total

PRIMARY GOVERNMENT

City of Brentwood

Statement of Net Assets

June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 17

Functions/ Programs Expenses Charges for Service

Operating Grants

and Contributions

Capital Grants and

Contributions Total

Governmental

Activities

Business- Type

Activities Total

Primary Government:

Government Activities

General Government $ 19,799,793 $ 4,120,088 $ - $ 1,987 $ 4,122,075 $ ( 15,677,718) $ - $ ( 15,677,718)

Public Safety 9,970,436 391,286 137,459 126,397 655,142 ( 9,315,294) - ( 9,315,294)

Community Development 4,804,009 7,048,216 - - 7,048,216 2,244,207 - 2,244,207

Engineering 2,469,775 4,642,625 - - 4,642,625 2,172,850 - 2,172,850

Public Works 3,491,159 15,953 - - 15,953 ( 3,475,206) - ( 3,475,206)

Parks 1,613,411 - 27,648 - 27,648 ( 1,585,763) - ( 1,585,763)

Community Services 226,732 - - - - ( 226,732) - ( 226,732)

Other 512,952 - - - - ( 512,952) - ( 512,952)

Interest on Long- Term Debt 1,883,951 - - - - ( 1,883,951) - ( 1,883,951)

Total Governmental Activities 44,772,218 16,218,168 165,107 128,384 16,511,659 ( 28,260,559) - ( 28,260,559)

Business- Type Activities

Wastewater 8,461,336 4,214,471 - - 4,214,471 - ( 4,246,865) ( 4,246,865)

Solid Waste 3,833,171 5,102,561 - - 5,102,561 - 1,269,390 1,269,390

Water 7,395,878 9,406,429 - - 9,406,429 - 2,010,551 2,010,551

Parks and Recreation 3,647,580 776,465 - - 776,465 - ( 2,871,115) ( 2,871,115)

City Rentals 436,287 740,110 - - 740,110 - 303,823 303,823

Housing 7 ,504 - - - - - ( 7,504) ( 7,504)

Total Business- Type Activities 23,781,756 20,240,036 - - 20,240,036 - ( 3,541,720) ( 3,541,720)

Total Primary Government $ 68,553,974 $ 36,458,204 $ 165,107 $ 128,384 $ 36,751,695 ( 28,260,559) ( 3,541,720) ( 31,802,279)

General Revenues:

Taxes:

Property Taxes 7,990,595 868,369 8,858,964

Sales Tax and Gas Taxes 3,644,368 - 3,644,368

Franchise Fees, Rentals 738,525 - 738,525

Public Service Taxes 743,890 - 743,890

Measure C, TOT 457,883 - 457,883

Motor Vehicle Taxes 1,508,664 - 1,508,664

Connection Fees Paid - ( 11,305,768) ( 11,305,768)

Investment Earnings 3,312,556 1,284,161 4,596,717

Contributions - Impact Fees and Credits 28,218,482 20,104,810 48,323,292

Capital Asset Contributions Received ( Made) ( 931,403) 12,436,208 11,504,805

Capital Assets Contributed To/ From Other Funds 12,868,344 ( 12,868,344) -

Miscellaneous 12,817,467 150,000 12,967,467

Transfers 3,810,805 ( 3,810,805) -

Total General Revenues and Transfers 75,180,176 6,858,631 82,038,807

Change in Net Assets 46,919,617 3,316,911 50,236,528

Net Assets - Beginning of Year 225,393,095 138,512,712 363,905,807

Net Assets - End of Year $ 272,312,712 $ 141,829,623 $ 414,142,335

Primary Government

Program Revenues Net ( Expenses) Revenues and Changes in Net Assets

City of Brentwood

Statement of Activities and Changes in Net Assets

For Year Ended June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 18

Other Total

General Capital Governmental Governmental

Fund Thoroughfares Projects Funds Funds

ASSETS

Current Assets:

Cash and Investments $ 31,484,903 $ - $ 5,833,788 $ 21,640,135 $ 58,958,826

Restricted Cash and Investments - - - 22,416,731 22,416,731

Receivables 910,945 1,214,449 1,673,861 163,988 3,963,243

Prepaids 678,885 - 3,678 10,748 693,311

Due from Other Funds - - 5,782,112 - 5,782,112

Land Held for Resale - - - 475,811 475,811

Non- Current Assets:

Long- Term Loans Receivable 50,000 - - - 50,000

Total Assets $ 33,124,733 $ 1,214,449 $ 13,293,439 $ 44,707,413 $ 92,340,034

LIABILITIES AND FUND BALANCES

Current Liabilities:

Accounts Payable and Accrued Liabilities $ 1,070,144 $ 786 $ 1,452,543 $ 5,059,632 $ 7,583,105

Due to Other Funds - 5,407,487 - 374,625 5,782,112

Deferred Revenue 72,352 1,214,449 - 111,441 1,398,242

Deposits Held 9,151,846 - - 21,000 9,172,846

Total Liabilities 10,294,342 6,622,722 1,452,543 5,566,698 23,936,305

Fund Balances:

Reserved for:

Prepaids 678,885 - 3,678 10,748 693,311

Land Held for Resale - - - 475,811 475,811

Debt Service - - - 3,542,069 3,542,069

Long- Term Receivables 50,000 - - - 50,000

Specific Projects and Programs - - 11,837,218 31,575,869 43,413,087

Unreserved, Reported in:

General Fund 22,101,506 - - - 22,101,506

Special Revenue - ( 5,408,273) - 3,536,218 ( 1,872,055)

Total Fund Balances 22,830,391 ( 5,408,273) 11,840,896 39,140,715 68,403,729

Total Liabilities and Fund Balances $ 3 3,124,733 $ 1 ,214,449 $ 1 3,293,439 $ 4 4,707,413 $ 9 2,340,034

City of Brentwood

Balance Sheet

June 30, 2004

Governmental Funds

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 19

Total Fund Balances - Total Governmental Funds $ 68,403,729

Amounts reported for Governmental Activities in the Statement of Net Assets are different because:

Capital assets used in governmental activities are not current financial resources and therefore are not reported in the

Governmental Funds Balance Sheet. 231,818,183

Internal Service Funds are used by management to charge costs of certain activities, such as data processing and

fleet management, 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. 13,327,313

The long- term assets are not available to pay for current period expenditures and therefore are deferred in the funds. 521,047

Long- term liabilities are not due and payable in the current period therefore they are not reported in the

Governmental Funds Balance Sheet. ( 41,757,560)

Net Assets of Government Activities $ 272,312,712

City of Brentwood

Reconciliation of the Governmental Funds Balance Sheet

to the Government- Wide Statement of Net Assets

June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 20

Other Total

General Capital Governmental Governmental

Fund Thoroughfares Projects Funds Funds

REVENUES

Taxes $ 7,954,481 $ - $ - $ 4,534,674 $ 12,489,155

Licenses 325,143 - - - 325,143

Permits and Fines 10,184,552 - - - 10,184,552

Uses of Money and Property 1,456,099 - - 1,565,994 3,022,093

Intergovernmental 1,664,063 - 2,173,800 501,624 4,339,487

Franchises 584,868 - - - 584,868

Charges for Other Services 570,455 - - - 570,455

Charges to Other Funds 5,073,565 - - - 5,073,565

Fees and Other Revenues 245,370 9,105,903 3,453,323 14,002,710 26,807,306

Total Revenues 28,058,596 9,105,903 5,627,123 20,605,002 63,396,624

EXPENDITURES

Current:

General Government 3,885,870 139,567 3,657,670 8,723,906 16,407,013

Public Safety 9,430,126 - - 1,351,380 10,781,506

Community Development 3,620,044 - - 1,454,895 5,074,939

Engineering 2,396,230 - - 260,263 2,656,493

Public Works 1,643,904 - - 177,914 1,821,818

Parks 1,573,009 - - 85,391 1,658,400

Community Services 178,562 - - 48,170 226,732

Other 507,369 - - 5,583 512,952

Capital Outlay 73,574 - 29,749,331 - 29,822,905

Debt Service:

Principal - - - 1,933,865 1,933,865

Interest and Fiscal Charges - - 11,489 1,703,869 1,715,358

Total Expenditures 23,308,688 139,567 33,418,490 15,745,236 72,611,981

REVENUES OVER ( UNDER) EXPENDITURES 4,749,908 8,966,336 ( 27,791,367) 4,859,766 ( 9,215,357)

OTHER FINANCING SOURCES ( USES)

Loan Proceeds - - - 4,245,101 4,245,101

Transfers In 846,044 - 26,540,872 4,150,684 31,537,600

Transfers Out ( 2,068,053) ( 12,235,756) ( 18,186) ( 14,282,978) ( 28,604,973)

Total Other Financing Sources ( Uses) ( 1,222,009) ( 12,235,756) 26,522,686 ( 5,887,193) 7,177,728

NET CHANGE IN FUND BALANCES 3,527,899 ( 3,269,420) ( 1,268,681) ( 1,027,427) ( 2,037,629)

Fund Balance, Beginning of Year 19,302,492 ( 2,138,853) 13,109,577 40,168,142 70,441,358

Fund Balance, End of Year $ 22,830,391 $ ( 5,408,273) $ 11,840,896 $ 39,140,715 $ 68,403,729

City of Brentwood

For Year Ended June 30, 2004

Statement of Revenues, Expenditures and Changes in Fund Balances

Governmental Funds

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 21

Net Changes in Fund Balances - Total Governmental Funds $ ( 2,037,629)

Amounts reported for governmental activities in the Statement of Activities are different because:

Governmental Funds report capital outlay as expenditures. 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. The amount shown

represents the capital assets recorded in the current period. 29,822,905

Depreciation expense on capital assets is reported in the Government- Wide Statement of Activities and Changes in Net Assets, but

they do not require the use of current financial resources. Therefore, depreciation expense is not reported as expenditures in

Governmental Funds. ( 2,461,952)

The net effect of various miscellaneous transactions involving Capital Assets ( e. g. sales, trade- ins and contributions) is to increase

net assets. 21,618,705

To record the net change in compensated absences in the Statement of Activities. ( 246,831)

Bond proceeds provide current financial resources to Governmental Funds, but issuing debt increases long- term liabilities in the

Government- Wide Statement of Net Assets. Repayment of bond principal is an expenditure in Governmental Funds, but the

repayment reduced long- term liabilities in the Government- Wide Statement of Net Assets.

This amount represents long- term debt repayments. 1,084,845

This amount represents accretion interest. ( 162,689)

Loan proceeds provide current financial resources to Governmental Funds, but debt increases long- term liability in the Government-

Wide Statement of Net Assets. ( 4,245,101)

This amount represents Interfund loan repayments. 849,020

Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 89,233

Internal Service Funds are used by management to charge the costs of certain activities, such as data processing and fleet

management, to individual funds. The net revenue of the Internal Service Funds is reported with Governmental Activities. 2,609,111

Changes in Net Assets of Government Activities $ 46,919,617

City of Brentwood

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 Year Ended June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 22

Governmental

Parks and Activities - Internal

Wastewater Solid Waste Water Recreation City Rentals Housing Totals Service Funds

ASSETS

Current Assets:

Cash and Investments $ 1 6,328,773 $ 9 81,035 $ 1 6,223,459 $ 6 ,576,738 $ - $ 5 38,136 $ 4 0,648,141 $ 1 0,766,701

Restricted Cash and Investments 1 83,022 - 7 35,871 - - - 9 18,893 -

Receivables 3 18,365 4 93,011 1 ,292,516 17,126 2 01,258 249 2 ,322,525 48,357

Prepaids 2,703 3,507 3,130 2,667 247 - 12,254 2,747

Notes Receivable 3 59,822 - - - - - 3 59,822 -

Non- Current Assets:

Deferred Charges 1 13,254 - 4 77,105 - - - 5 90,359 -

Due from Other Funds - - 3 1,753 - - - 31,753 -

Long- Term Loans Receivable - - 4 78,530 - - - 4 78,530 -

Internal Balances - - 3 ,396,081 - - - 3 ,396,081

Capital Assets:

Intangible Assets - - 1 0,597,532 - - - 1 0,597,532 -

Land 97,376 2 54,420 62,556 - - - 4 14,352 -

Buildings 1 ,032,498 14,000 7 ,825,845 4 ,661,141 - - 1 3,533,484 -

Infrastructure 6 9,373,356 6 96,851 4 8,036,936 1 7,057,731 - - 1 35,164,874 -

Machinery and Equipment 5 56,408 72,270 4 66,754 3 40,108 15,915 - 1 ,451,455 1 ,787,500

Vehicles - - - - - - - 4 ,818,822

Land Improvements 58,494 1 ,000,000 1 76,010 3 31,461 - - 1 ,565,965 -

Work in Progress 1 ,051,469 1 63,641 1 ,191,692 9 ,062,245 - - 1 1,469,047 -

Less Accumulated Depreciation and Amortization ( 3,854,470) ( 457,219) ( 7,883,768) ( 1,188,726) ( 15,915) - ( 13,400,098) ( 3,852,022)

Total Assets 8 5,621,070 3 ,221,516 8 3,112,002 3 6,860,491 2 01,505 5 38,385 2 09,554,969 1 3,572,105

LIABILITIES AND NET ASSETS

Current Liabilities:

Accounts Payable 1 66,605 1 86,334 8 06,254 1 ,384,342 1 5,599 3,878 2 ,563,012 1 19,709

Due to Other Funds - - - - 3 1,753 - 31,753 -

Other Liabilities - - - 2 7,217 - - 27,217 -

Deferred Revenue 2 94,199 - 3 60,403 18,831 2 6,724 - 7 00,157 75

Deposits Held - 7,822 1 10,000 9,818 5 7,412 - 1 85,052 -

Long- Term Debt Due Within One Year 1 ,700,966 3 08,260 6 ,726,818 39,283 2,320 - 8 ,777,647 35,285

Non- Current Liabilities Due in More Than One Year:

Bonds Payable 2 ,152,363 - 8 ,372,637 - - - 1 0,525,000 -

Notes Payable 3 4,575,111 4 27,725 9 ,744,152 - - - 4 4,746,988 -

Capital Leases Payable - 53,251 - - - - 53,251 35,500

Compensated Absences Payable 2 3,246 3 7,655 2 4,836 2 8,002 1 ,530 - 1 15,269 54,223

Total Liabilities 3 8,912,490 1 ,021,047 2 6,145,100 1 ,507,493 1 35,338 3,878 6 7,725,346 2 44,792

Net Assets:

Invested in Capital Assets, Net of Related Debt 5 1,208,899 1 ,101,199 5 2,321,989 3 0,263,960 - - 1 34,896,047 -

Restricted for:

Special Projects and Programs 1 ,711,666 6 42,084 4 ,859,400 4 ,554,685 5 7,412 5 34,507 1 2,359,754 -

Unrestricted ( 6,211,985) 4 57,186 ( 214,487) 5 34,353 8,755 - ( 5,426,178) 1 3,327,313

Total Net Assets $ 4 6,708,580 $ 2 ,200,469 $ 5 6,966,902 $ 3 5,352,998 $ 6 6,167 $ 5 34,507 $ 1 41,829,623 $ 1 3,327,313

City of Brentwood

Statement of Net Assets

Proprietary Funds

June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 23

Governmental

Parks and Activities - Internal

Wastewater Solid Waste Water Recreation City Rentals Housing Totals Service Funds

Operating Revenues:

Charges for Services $ 4,166,357 $ 4,928,871 $ 9,270,794 $ 619,417 $ 732,745 $ - $ 19,718,184 $ 4,184,457

Other Income 48,114 173,690 135,635 157,048 7,365 - 521,852 82,748

Total Operating Revenues 4,214,471 5,102,561 9,406,429 776,465 740,110 - 20,240,036 4,267,205

Operating Expenses:

Personnel Services 1,218,546 1,492,012 1,542,144 1,513,345 103,269 - 5,869,316 1,194,577

Repairs and Maintenance 4 5,209 1 90,095 5 76,979 1 85,634 1 01,367 - 1,099,284 9 7,902

Materials, Supplies and Services 2 ,092,673 2 ,824,265 4 ,088,072 1 ,545,245 2 47,764 7 ,504 10,805,523 8 74,975

Depreciation and Amortization 1,074,902 66,481 896,619 374,906 - - 2,412,908 734,289

Total Operating Expenses 4,431,330 4,572,853 7,103,814 3,619,130 452,400 7,504 20,187,031 2,901,743

Operating Income ( Loss) ( 216,859) 529,708 2,302,615 ( 2,842,665) 287,710 ( 7,504) 53,005 1,365,462

Non- Operating Revenues ( Expenses):

Interest Income 472,800 17,128 622,897 166,471 1,311 3,554 1,284,161 416,440

Property Tax - - - 868,369 - - 868,369 -

Interest Expense ( 804,307) ( 52,377) ( 566,592) - - - ( 1,423,276) ( 5,904)

Connection Fees Paid - - ( 11,305,768) - - - ( 11,305,768) -

Bond Premium - - ( 8,325) - - - ( 8,325) -

Loss on Sales of Capital Assets ( 13,594) - - - - - ( 13,594) ( 39,069)

Loss on Disposal of Capital Assets ( 3,567,956) - ( 288) ( 206,719) - - ( 3,774,963) ( 5,996)

Other Revenue - - - 150,000 - - 150,000 -

Total Non- Operating Revenues ( Expenses) ( 3,913,057) ( 35,249) ( 11,258,076) 978,121 1,311 3,554 ( 14,223,396) 365,471

Income ( Loss) before Contributions and Operating

Transfers

( 4,129,916) 494,459 ( 8,955,461) ( 1,864,544) 289,021 ( 3,950) ( 14,170,391) 1,730,933

Contributions - Impact Fees and Credits 4,733,527 - 7,384,499 9,073,760 - 538,457 21,730,243 -

Capital Asset Contributions 7,256,343 8,321 4,264,171 907,373 - - 12,436,208 -

Capital Assets Contributed to Governmental Funds ( 12,841,042) ( 20,190) - ( 7,112) - - ( 12,868,344) -

Transfers In 2,130,063 - 1,396,847 475,300 - - 4,002,210 1,079,823

Transfers Out ( 847,246) ( 249,477) ( 4,708,377) ( 1,677,779) ( 330,136) - ( 7,813,015) ( 201,645)

Change in Net Assets ( 3,698,271) 233,113 ( 618,321) 6,906,998 ( 41,115) 534,507 3,316,911 2,609,111

Net Assets, Beginning of Year 50,406,851 1,967,356 57,585,223 28,446,000 107,282 - 138,512,712 10,718,202

Net Assets, End of Year $ 46,708,580 $ 2,200,469 $ 56,966,902 $ 35,352,998 $ 66,167 $ 534,507 $ 141,829,623 $ 13,327,313

City of Brentwood

Statement of Revenues, Expenses and Changes in Fund Net Assets

Proprietary Funds

For Year Ended June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 24

Governmental

Parks and Activities - Internal

Wastewater Solid Waste Water Recreation City Rentals Housing Totals Service Funds

Cash Flows from Operating Activities

Cash Received from Customers/ Other Funds $ 4 ,194,604 $ 4 ,948,199 $ 9 ,259,390 $ 6 41,003 $ 6 87,627 $ ( 249) $ 1 9,730,574 $ 1 67,672

Cash Received from Interfund Services - - - - - - - 4 ,123,243

Cash Payments to Suppliers of Goods and Services ( 1,629,493) ( 2,132,961) ( 4,494,892) ( 385,848) ( 231,050) ( 3,626) ( 8,877,870) ( 689,470)

Cash Payments to Employees for Services ( 1,218,546) ( 1,492,012) ( 1,542,144) ( 1,513,345) ( 103,269) - ( 5,869,316) ( 1,194,577)

Cash Payments for Interfund Services ( 355,851) ( 792,059) ( 283,141) ( 178,269) ( 116,113) - ( 1,725,433) ( 196,690)

Other Recipients/ Payments ( 227,369) 5,033 ( 3,291,289) 1 65,743 5 9,733 - ( 3,288,149) ( 3,608)

Net Cash Provided By ( Used for) Operating Activities 7 63,345 5 36,200 ( 352,076) ( 1,270,716) 2 96,928 ( 3,875) ( 30,194) 2 ,206,570

Cash Flows from Non- Capital Financing Activities

Property Tax - - - 8 68,369 - - 8 68,369 -

Transfers Received 2 ,130,063 - 1 ,396,847 4 75,300 - - 4 ,002,210 1 ,079,823

Transfers Paid ( 847,246) ( 249,477) ( 4,708,377) ( 1,677,779) ( 330,136) - ( 7,813,015) ( 201,645)

Due to Other Funds - - - - 3 1,753 - 3 1,753 -

Due from Other Funds - - ( 31,753) - - - ( 31,753) -

Connection Fees Paid - - ( 11,305,768) - - - ( 11,305,768) -

Other Revenue - - - 1 50,000 - - 1 50,000 -

Net Cash Provided By ( Used for) Non- Capital Financing Activities 1 ,282,817 ( 249,477) ( 14,649,051) ( 184,110) ( 298,383) - ( 14,098,204) 8 78,178

Cash Flows from Capital and Related Financing Activities

Proceeds from Capital Debt 6 0,300 - 2 1,020,768 - - - 2 1,081,068 -

Contributions - Impact Fees and Credits 4 ,733,527 - 7 ,384,499 9 ,073,760 - 5 38,457 2 1,730,243 -

Interest Paid on Debt ( 804,307) ( 52,377) ( 566,592) - - - ( 1,423,276) ( 5,904)

Principal Paid on Debt ( 1,638,194) ( 263,223) ( 6,261,703) - - - ( 8,163,120) ( 31,595)

Bond Premium - - ( 8,325) - - - ( 8,325) -

Acquisition and Construction of Assets ( 2,729,520) ( 147,490) ( 8,561,194) ( 7,631,638) - - ( 19,069,842) ( 1,523,063)

Net Cash Provided By ( Used for) Capital and Related Financing Activities ( 378,194) ( 463,090) 1 3,007,453 1 ,442,122 - 5 38,457 1 4,146,748 ( 1,560,562)

Cash Flows from Investing Activities

Interest on Investments 4 72,800 1 7,128 6 22,897 1 66,471 1,311 3,554 1 ,284,161 4 16,440

Net Cash Provided By Investing Activities 4 72,800 1 7,128 6 22,897 1 66,471 1,311 3,554 1 ,284,161 4 16,440

Net Increase ( Decrease) in Cash and Cash Equivalents 2 ,140,768 ( 159,239) ( 1,370,777) 1 53,767 ( 144) 5 38,136 1 ,302,511 1 ,940,626

Cash and Cash Equivalents - Beginning of Year 1 4,188,005 1 ,140,274 1 7,594,236 6 ,422,971 144 - 3 9,345,630 8 ,826,075

Cash and Cash Equivalents - End of Year $ 1 6,328,773 $ 9 81,035 $ 1 6,223,459 $ 6 ,576,738 $ - $ 5 38,136 $ 4 0,648,141 $ 1 0,766,701

Reconciliation of Operating Income to Net Cash Provided By ( Used for)

Operating Activities

Operating Income ( Loss) $ ( 216,859) $ 5 29,708 $ 2 ,302,615 $ ( 2,842,665) $ 2 87,710 $ ( 7,504) $ 5 3,005 $ 1 ,365,462

Adjustments to Reconcile Operating Income to Net Cash Provided By ( Used for)

Operating Activities

Depreciation and Amortization 1,074,902 66,481 896,619 374,906 - - 2,412,908 7 34,289

Changes in Assets and Liabilities:

Receivables, Net ( 1,462) ( 139,732) ( 3,443,479) 3 0,562 7,210 - ( 3,546,901) 2 0,102

Inventories ( 552) ( 872) 640 ( 220) 40 - ( 964) -

Accounts Payable and Other Payables ( 95,893) 8 8,665 ( 120,904) 1 ,195,630 ( 28,864) 3,878 1,042,512 8 6,344

Accrued Expenses 3,209 ( 8,725) 4,683 ( 33,098) 9,095 ( 249) ( 25,085) 373

Deposits - 675 7,750 4,169 2 1,737 - 34,331 -

Net Cash Provided By ( Used for) Operating Activities $ 7 63,345 $ 5 36,200 $ ( 352,076) $ ( 1,270,716) $ 2 96,928 $ ( 3,875) $ ( 30,194) $ 2 ,206,570

Noncash Capital Activities:

Assets Contributed to/ from Other Funds 1 18,284 2 41,646 ( 1,532,743) 1 92,987 - - ( 979,826) ( 1,079,823)

City of Brentwood

Statement of Cash Flows

Proprietary Funds

For Year Ended June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 25

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City of Brentwood

City of Brentwood - 2003/ 04 CAFR Page 26

Agency Funds

ASSETS

Cash and Investments $ 7 ,827,899

Restricted Cash and Investments 5 ,945,858

Accrued Interest Receivable 23,318

Prepaid 951

Accounts Receivable 2 ,275

Total Assets $ 1 3,800,301

LIABILITIES

Accounts Payable $ 3 63,535

Due to Bondholders 13,436,766

Total Liabilities $ 1 3,800,301

City of Brentwood

Statement of Fiduciary Net Assets

Fiduciary Funds

June 30, 2004

City of Brentwood - 2003/ 04 CAFR See Accompanying Notes to the Basic Financial Statements Page 27

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City of Brentwood

City of Brentwood - 2003/ 04 CAFR Page 28

City of Brentwood

Notes to the Basic Financial Statements

City of Brentwood – 2003/ 04 CAFR Page 29

INDEX OF NOTES TO THE BASIC FINANCIAL STATEMENTS

Page

Note # 1 – Summary of Significant Accounting Policies ............................................................................................................................... ........... 31

A. Description of the Reporting Entity ............................................................................................................................... ............................... 31

B. Government- Wide and Fund Financial Statements ............................................................................................................................... ....... 32

C. Measurement Focus / Basis of Accounting ............................................................................................................................... .................... 32

D. Assets, Liabilities and Net Assets or Equity ............................................................................................................................... .................. 37

i. Use of Restricted / Unrestricted Net Assets ............................................................................................................................... ............ 37

ii. Cash and Investments ............................................................................................................................... .............................................. 38

iii. Cash and Cash Equivalents ............................................................................................................................... ..................................... 38

iv. Unbilled Services Receivable ............................................................................................................................... .................................. 38

v. Use of Estimates ............................................................................................................................... ...................................................... 38

vi. Inventories, Prepaid Items and Land Held for Resale ............................................................................................................................. 38

vii. Capital Assets ............................................................................................................................... .......................................................... 39

viii. Compensation Absences Payable ............................................................................................................................... ............................ 39

ix. Property Tax ............................................................................................................................... ............................................................ 40

x. Deferred Compensation Plan ............................................................................................................................... ................................... 40

xi. GASB 40 ............................................................................................................................... ................................................................. 40

Note # 2 – Stewardship, Compliance and Accountability ............................................................................................................................... .......... 41

A. Budgetary Information ............................................................................................................................... ................................................... 41

B. Interfund Receivables, Payables and Transfers ............................................................................................................................... ............. 42

C. Deficit Fund Equity ............................................................................................................................... ....................................................... 44

Note # 3 – Cash and Investments ............................................................................................................................... ................................................ 45

A. Pooled Cash and Non- Negotiable Certificates of Deposit ............................................................................................................................. 46

B. Investments ............................................................................................................................... .................................................................... 47

C. Investment in State Treasurer’s Pool ............................................................................................................................... ............................. 50

D. Cash and Investments with Fiscal Agent ............................................................................................................................... ....................... 50

E. Fair Value of Investments ............................................................................................................................... .............................................. 50

Note # 4 – Capital Assets ............................................................................................................................... ............................................................ 51

City of Brentwood

Notes to the Basic Financial Statements

City of Brentwood – 2003/ 04 CAFR Page 30

INDEX OF NOTES TO THE BASIC FINANCIAL STATEMENTS ( CONTINUED)

Page

Note # 5 – Long- Term Obligations ............................................................................................................................... ............................................. 53

A. Governmental Activities ............................................................................................................................... ................................................ 53

i. Bonds ............................................................................................................................... ....................................................................... 54

ii. Capital Leases ............................................................................................................................... .......................................................... 56

iii. Compensated Absences ............................................................................................................................... ........................................... 57

B. Business- Type Activities ............................................................................................................................... ............................................... 57

i. Capital Leases ............................................................................................................................... .......................................................... 58

ii. Notes Payable ............................................................................................................................... .......................................................... 58

iii. Bonds ............................................................................................................................... ....................................................................... 62

Note # 6 – Special Assessment Districts ( No City Liability) ............................................................................................................................... ...... 62

Note # 7 – Classification of Net Assets ............................................................................................................................... ...................................... 64

Note # 8 – Defined Benefit Pension Plan ............................................................................................................................... ................................... 64

A. Plan Description ............................................................................................................................... ............................................................ 64

B. Fund Policy ............................................................................................................................... .................................................................... 64

C. Annual Pension Cost ............................................................................................................................... ...................................................... 65

D. Three- Year Trend Information for the Plans ............................................................................................................................... ................. 65

Note # 9 – Risk Management ............................................................................................................................... ...................................................... 65

Note # 10 – Segment Information for Enterprise Funds ............................................................................................................................... ............. 67

Note # 11 – Post- Retirement Health Care Benefits ............................................................................................................................... .................... 69

Note # 12 – Brentwood Redevelopment Agency Tax Sharing Agreements ............................................................................................................... 69

Note # 13 – Contingent Liabilities ............................................................................................................................... .............................................. 70

A. Litigation ............................................................................................................................... ........................................................................ 70

B. Federal Grants ............................................................................................................................... ................................................................ 71

C. Developer Fee Credits ............................................................................................................................... .................................................... 71

D. Construction Commitments ............................................................................................................................... ........................................... 71

Note # 14 – Subsequent Events ............................................................................................................................... ................................................... 72

City of Brentwood

Notes to the Basic Financial Statements

City of Brentwood – 2003/ 04 CAFR Page 31

NOTE # 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. DESCRIPTION OF THE REPORTING ENTITY

The City of Brentwood is governed by a five member City Council under the Council- Manager form of government. The accompanying

financial statements present the City of Brentwood ( the primary government) and its component units, entities for which the government is

considered financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting

majority of that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial

burdens on the City. The City is also considered to be financially accountable for an organization if the organization is fiscally dependent ( i. e.

unable to adopt a budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other

organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion

would cause the City’s financial statements to be misleading or incomplete.

In addition to reporting directly for the City operations, two component units, the Brentwood Redevelopment Agency and Brentwood Joint

Powers Financing Authority, have been included in the primary reporting entity and are treated as blended component units.

• Brentwood Redevelopment Agency

The Brentwood Redevelopment Agency ( the “ Agency”) was established pursuant to the State of California Health and Safety Code,

Section 33000, entitled “ Community Redevelopment Law”. On August 20, 1981 the City Council became the governing board of the

Brentwood Redevelopment Agency. The Agency was formed for the purpose of preparing and carrying out plans for improvement,

rehabilitation and redevelopment of blighted areas within the territorial limits of the City of Brentwood. The funds of the Agency

have been included in the governmental activities in the financial statements. Separate financial statements for the Redevelopment

Agency ( RDA) may be obtained from the City of Brentwood Finance Department.

• Brentwood Joint Powers Financing Authority

The Brentwood Joint Powers Financing Authority ( the “ Authority”), formed on March 14, 1995, is a joint powers authority organized

under Section 6500 et seq. of the California Government Code between the City and the Agency for the purpose of acting as a vehicle

for various financing activities of the City and the Agency. The Board of Directors is the Brentwood City Council. The primary

purpose of the Authority is to render financial assistance to the City and the Agency by issuing debt and financing the construction of

public facilities. Separate financial statements are not required for the Authority, and therefore, are not issued.

City of Brentwood

Notes to the Basic Financial Statements

City of Brentwood – 2003/ 04 CAFR Page 32

NOTE # 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)

B. GOVERNMENT- WIDE AND FUND FINANCIAL STATEMENTS

The Government- Wide Financial Statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. The

Statement of Activities and Changes in Net Assets demonstrates the degree to which direct and indirect expenses, for a given function or

segment, are offset by program revenues. Direct expenses are clearly identifiable with a specific function or segment. Indirect expenses are

expenses which are allocated based on the City’s annual Cost Allocation Plan and Schedule of City Fees. Program revenues include 1)

charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or

segment, 2) operating grants and contributions, including special assessments and 3) capital grants and contributions. Taxes and other items

not properly included among program revenue are reported as general revenues.

Summaries of governmental activities, which are supported by taxes and inter- governmental revenues, are reported separately from business-type

activities, which rely to a significant extent on fees and charges. Fiduciary activities of the City are not included in these statements.

Separate financial statements are provided for Governmental Funds, Proprietary Funds and Fiduciary Funds even though the latter are

excluded from the Government- Wide Financial Statements. Major individual Governmental Funds and major individual Enterprise Funds are

reported as separate columns in the Fund Financial Statements.

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. These 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, the transactions between governmental and

business- type activities, which are presented as transfers, have not been eliminated from the Statement of Activities.

C. MEASUREMENT FOCUS / BASIS OF ACCOUNTING

The Government- Wide Financial Statements and the Proprietary Fund Financial Statements are reported using an economic resources focus

and the accrual basis of accounting. 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, regardless of the timing of the related cash flows.

The Governmental Fund Financial Statements are reported using 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. Under the

modified accrual basis of accounting, revenues are recognized in the accounting period in which they become measurable and available to

finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except for revenues subject to accrual

City of Brentwood

Notes to the Basic Financial Statements

City of Brentwood – 2003/ 04 CAFR Page 33

NOTE # 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( Continued)

( generally 60 days after year – end) which are recognized when due. Expenditures are recorded in the accounting period in which the related

fund liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences and claims and

judgments, are recorded only when payment is due.

Taxes, including property and sales taxes, and inter- governmental revenue associated with the current fiscal period are all considered to be

susceptible to accrual. Only the portion of the special assessments receivable due within the current fiscal period is considered to be

susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash

is received by the City.

For Proprietary Funds, all assets and liabilities, whether current or non- current, are included on the Statement of Net Assets. The Statement of

Revenues, Expenses and Changes 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 the 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 non- operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All

other expenses are reported as non- operating expenses. Proprietary Fund types include Enterprise Funds and Internal Service Funds.

Fiduciary Fund Financial Statements include a Statement of Net Assets. The City’s Fiduciary Funds represent agency funds, which are

custodial in nature ( assets equal liabilities). Agency funds do not involve measurement of r