Fy2008_cafr

City of Santa Cruz, California

COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2008

Cover and Photo by Natalia Duarte

City of Santa Cruz State of California

Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2008

Prepared by Jack Dilles Cheryl Fyfe

Raymond Chin Tori Hannah Ralph Reader

Natalia Duarte Shelley Horrow Amy Schmidt

Ray Galindo Kathryn Mintz Kim Wigley

City of Santa Cruz Comprehensive Annual Financial Report For the year ended June 30, 2008 Table of Contents

INTRODUCTORY SECTION

Page

Transmittal Letter ......................................................................................................................................................i GFOA Certificate of Achievement for Excellence in Financial Reporting.........................................................ix Map of Santa Cruz.....................................................................................................................................................x Organization Chart ...................................................................................................................................................xi Directory of City Officials of the City of Santa Cruz............................................................................................xii FINANCIAL SECTION Independent Auditors’ Report...............................................................................................................................1 Management’s Discussion and Analysis .............................................................................................................3 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets...............................................................................................................................20 Statement of Activities and Changes in Net Assets ................................................................................22 Fund Financial Statements: Government Fund Financial Statements: Balance Sheet ..........................................................................................................................................28 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets.....................................................................29 Statement of Revenues, Expenditures and Changes in Fund Balances .........................................30 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 ...................................................................31 Proprietary Fund Financial Statements: Statement of Net Assets ........................................................................................................................34 Statement of Revenues, Expenses and Changes in Net Assets .......................................................38 Statement of Cash Flows.......................................................................................................................40 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets ......................................................................................................46 Statement of Changes in Fiduciary Net Assets..................................................................................47 Index to Notes to Basic Financial Statements .................................................................................................49 Notes to Basic Financial Statements .................................................................................................................51

City of Santa Cruz Comprehensive Annual Financial Report For the year ended June 30, 2008 Table of Contents, Continued

FINANCIAL SECTION, Continued

Page

Required Supplementary Information: Budgetary Information.......................................................................................................................................100 Budgetary Comparison Schedule – General Fund ..................................................................................104 Reconciliation of Net Changes in Fund Balances – Budgetary to GAAP Basis: General Fund ..........................................................................................................................................105 Budgetary Comparison Schedule – Redevelopment Agency ...............................................................106 Reconciliation of Net Changes in Fund Balances – Budgetary to GAAP Basis: Redevelopment Agency ........................................................................................................................107 Budgetary Comparison Schedule – Capital Improvement Fund ..........................................................108 Reconciliation of Net Changes in Fund Balances – Budgetary to GAAP Basis: Capital Improvement Fund..................................................................................................................109 Defined Benefit Pension Plan ............................................................................................................................111 Supplementary Information: Non-Major Governmental Funds: Combining Balance Sheet............................................................................................................................116 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ...........................118 Schedule of Budget and Actual Revenues – General Fund ....................................................................120 Schedule of Budget and Actual Expenditures and Other Financing Uses for Legally Adopted Appropriations by Department – General Fund ................................................122 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: Police Special Revenue Fund................................................................................................................124 State Highway Special Revenue Fund ................................................................................................125 Traffic Impact Fee Fund ........................................................................................................................126 Parks and Recreation Fund...................................................................................................................127 Housing and Community Development Fund..................................................................................128 Transportation Development Act........................................................................................................129 General Obligation Bond Debt Service ...............................................................................................130 Lease Revenue Bond Fund ...................................................................................................................131 Reconciliation of Net Changes in Fund Balances – Budgetary to GAAP Basis: Non-Major Governmental Funds ........................................................................................................132

City of Santa Cruz Comprehensive Annual Financial Report For the year ended June 30, 2008 Table of Contents, Continued

FINANCIAL SECTION, Continued

Page

Internal Service Funds: Combining Statement of Net Assets..........................................................................................................134 Combining Statement of Activities and Changes in Net Assets............................................................135 Combining Statement of Cash Flows ........................................................................................................136 Private-Purpose Trust Funds: Combining Statement of Fiduciary Net Assets ........................................................................................138 Combining Statement of Changes in Fiduciary .......................................................................................139 Agency Funds: Combining Statement of Fiduciary Net Assets ........................................................................................142 Combining Statement of Changes in Assets and Liabilities...................................................................143

STATISTICAL SECTION (Unaudited) Net Assets by Component........................................................................................................................................147 Changes in Net Assets ..............................................................................................................................................148 Fund Balances of Governmental Funds .................................................................................................................150 Changes in Fund Balances of Governmental Funds ............................................................................................152 General Governmental Tax Revenue by Source ...................................................................................................154 General Fund Revenue by Source ...........................................................................................................................156 Assessed Value of Taxable Property.......................................................................................................................157 Direct and Overlapping Property Tax Rates .........................................................................................................158 Principal Property Tax Owners ...............................................................................................................................159 Property Tax Levies and Collections ......................................................................................................................160 Ratios of Outstanding Debt by Type .....................................................................................................................162 Ratios of General Bonded Debt Outstanding ........................................................................................................164 Computation of Direct and Overlapping Debt .....................................................................................................165 Legal Debt Margin Information ..............................................................................................................................166 Pledged-Revenue Coverage.....................................................................................................................................168 Demographics and Economic Statistics..................................................................................................................170 Principal Employers..................................................................................................................................................171 Number of City Employees by Department..........................................................................................................172 Operating Indicators by Function ...........................................................................................................................173 Capital Asset Statistics by Function........................................................................................................................174

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The Honorable Mayor and City Council

The independent audit of the financial statements of the City of Santa Cruz was part of a broader, federally mandated "Single Audit" designed to meet the needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Santa Cruz’s separately issued Single Audit Report. GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Santa Cruz's MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Santa Cruz, incorporated in 1866, is located on the northern part of the Monterey Bay approximately 74 miles south of San Francisco and 30 miles from San Jose. The City of Santa Cruz was first founded in 1769 by the Spanish explorer Don Gaspar de Portola, who, along with Father Junipero Serra, began land based settlement in the area. Santa Cruz is the county seat for the County of Santa Cruz, and is a charter city which operates under the provisions of a voter-approved charter. The City has an area of 12 square miles and an estimated population of 58,125 as of January 2008. Santa Cruz is the home to the University of California, Santa Cruz (UCSC) which first opened in 1965 and has a current enrollment of over 15,000 students. UCSC has received worldwide recognition in the past few years for its high quality academic programs and sponsored research programs such as the California Institute for Quantitative Biomedical Research (QB3), the Center for Information Technology Research in the Interest of Society (CITRIS), and the Laboratory for Adaptive Optics. The major industries include tourism, manufacturing, and technology. Like other charter cities in California, the City of Santa Cruz has limited ability to set tax rates. The State Constitution (Prop 13) establishes a maximum rate for property tax and limits the growth of assessed value. Prop 13 sets the limit for increases of the property tax rate to 2% per year, but upon sale, full value becomes the assessed value. The property tax collected is allocated among the jurisdictions in the City's tax rate areas based on criteria established by the state legislature. The rates and tax base of two of the City’s other general revenues, sales and use tax and motor vehicle in lieu fees (VLF), are also controlled by the Legislature. Changes to existing local taxes and any new taxes require voter approval. Taxes used for general purposes are subject to approval by a simple majority of voters while taxes levied for specific purposes require a twothirds majority of voters. Assessments must be approved by a majority vote with voting rights apportioned based on the amount of the assessment. Property related fees require public majority protest procedures and property related fees for services other than water, sewer, and refuse must also be approved by a majority of property owners or 2/3 of the electorate. In addition, fees for facilities and services are subject to requirements that they not be set at levels that exceed the reasonable costs of providing services. As a result, fund balances generated by differences between fee revenue and related expense are retained and designated for services and facilities that benefit fee payers.

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The Honorable Mayor and City Council

The City of Santa Cruz has operated under the council-manager form of government since its incorporation in 1866. Policy-making and legislative authority are vested in a seven member governing council consisting of the Mayor and six Council Members. The City Council is responsible, among other things, for passing ordinances, adopting the budget, approving nominees to commissions, and hiring the City Manager, City Clerk and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the city and for appointing the heads of the various departments. The council is elected on a non-partisan basis. Council Members serve four-year staggered terms, with either three or four Council Members elected every two years. The Mayor is selected by a majority of the City Council and serves a one year term. Council Members are elected at large and all are subject to two term limits. The City of Santa Cruz provides a broad range of services including police and fire protection, construction and maintenance of streets, parks, flood control and other infrastructure, a wharf facility, recreational and cultural activities including a performing arts center and human services programs. It also operates municipal utilities for Water, Wastewater, Storm Water, and Refuse in addition to enterprise operations for parking facilities and a golf course. The water utility provides water service beyond the municipal boundaries and has a total service population of approximately 90,000. Certain infrastructure construction and community development activities are provided through a legally separate Redevelopment Agency. The Council sits as the Redevelopment Agency's board, and the Agency functions as a department of the City. Therefore, the City of Santa Cruz Redevelopment Agency has been included as an integral part of the City of Santa Cruz’s financial statements. Many major public services delivered within the City's boundaries, including education and public transportation, are provided by other agencies. The City of Santa Cruz is not financially accountable for the operations of the franchisees or these government agencies. As required by the City Charter, an annual budget is adopted by the City Council no later than the first regular meeting in July for the fiscal year beginning July first. As part of the budget process, all City departments submit budget requests for the next fiscal year. These requests are reviewed, and a final City Manager recommended budget showing estimated revenues and expenditures of the City is prepared. This proposed budget is transmitted to the City Council and made available to the public for review. Study sessions and a public hearing are conducted before final adoption of the budget by the City Council. The City Manager is authorized to approve appropriation transfers within any department; however, any new appropriation or appropriation transfer between departments requires approval by the City Council. Several supplemental appropriations were necessary during the year and are reflected in the budget amounts in the financial statements. Expenditures may not legally exceed appropriations at the department level. The Council reviews budget results at the mid-year review and at budget adoption. Redevelopment budgets are adopted annually along with an annual report. The ongoing review and long range planning focus for financial management provides numerous opportunities to identify and respond to changes in revenues and expenditures and in community priorities. Factors Affecting Financial Condition We believe that the information presented in the financial statements is best understood when it is considered from the broader perspective of the context within which the City of Santa Cruz operates.

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The Honorable Mayor and City Council

Economic Conditions and Outlook Tax revenues in the recent past have shown steady and positive growth Fiscal year 2008, however, signaled an end to this climb when the assessed value of real property showed only a modest increase rate of 6.4%, a decline of 2.9% in comparison to 9.3% from the previous fiscal year. At the time the FY 09 budget was adopted, the General Fund faced a $5 million budget deficit. Because of declining sales taxes and property taxes that resulted from the deterioration in the national economy, the deficit has grown and the City, as of January 2009, is facing a $7 million annual budgetary shortfall. The City has taken significant steps, including budgetary reductions, to address $4.6 million of the deficit and plans to take more steps to bring the budget into balance. In April of 2008, an appellate court ruling for Union City, California found that city’s 9-1-1 fee was a tax and not a fee, and therefore must be approved by voters. Although the City of Santa Cruz was not bound by the appellate court’s ruling, the City ceased collection of the fee, the Council made an official finding of fiscal emergency, and the Council called for a special election with mail-only ballots for the purpose of restoring this lost revenue. Measure T failed by a narrow margin in August of 2008. The fee generated a five-year average of $1.3 million in annual revenues. Measure E, the proposed Clean River, Beaches and Ocean special parcel tax. was placed on the November 4, 2008, ballot by City Council to generate funding for water quality programs to prevent pollution from reaching waterways, beaches and the Monterey Bay National Marine Sanctuary. This special tax required a majority 2/3 vote and is expected to generate $.6 million annually. Measure E passed by a 9.6% margin above the 2/3 threshold. Historical Trend Information Property Tax The historical trend for property tax has been positive, showing substantial growth. Property Tax revenues for governmental funds are up $1.7 million or 6.9% over the fiscal year 2007. It is expected that property tax revenues will increase by only 2.4% in FY 09, as market values have declined and associated property tax bills for certain properties have fallen. CITY OF SANTA CRUZ PROPERTY TAX In $ Millions

24.6

26.3

22.3

10.5

12.2

13.3

14.9

15.7

15.8

30 25

16.5

20 15 10 5 0

99

00

01

20

03

04

Fiscal Year

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05

06

07

08

The Honorable Mayor and City Council

Sales & Use Tax, Local Transactions and Use Tax and Supplemental Property Tax In-Lieu of Sales Tax Sales tax increased by $1.9 million or 14.9% in FY 08 as compared with FY 07. Although sales tax revenues have consistently trended up over the past 5 years, sales taxes are projected to drop by 7.5% in FY 09 as consumers spend less in the recessionary times.

CITY OF SANTA CRUZ SALES TAX In $ Millions 14.7

16

12.8 11.7

11.4 9.8

8.9

9.1

8.3

7.4

14 12

9.1

10 8 6 4 2 0 99

00

01

02

03

04

05

06

07

08

Fiscal Year

Transient Occupancy Tax Transient Occupancy Tax (TOT) declined after FY 01, initially due to September 11th and the resulting lack of tourists. Additionally, in FY 02, the University of California acquired a 10-year lease on a 170-bed major tourist hotel, the Holiday Inn, for use as a school dormitory. In FY 08 the former Holiday Inn still operates under the University’s plan. Another major shoreline tourist hotel, The Coast Hotel, started renovation plans in FY 07, and continued through FY 08. TOT revenues decreased by $0.1 million or 2.7% in FY 2008 and are expected to decline by a similar amount in FY 09. CITY OF SANTA CRUZ TRANSIENT OCCUPANCY TAX In $ Millions 3.9

3.5

3.1

3.2

2.9

3.0

3.4

3.0

3.7

3.8

4 3 2 1 0

99

00

01

02

03

04

Fiscal Year

v

05

06

07

08

The Honorable Mayor and City Council

Utility Users Tax The utility users’ tax is the third largest revenue source for the City, coming after property tax and sales tax. The utility users’ tax is comprised of a tax on eight utilities: electric, wired telecom, wireless telecom, natural gas, cable, water, wastewater, and refuse (the last three being municipal utilities). The rate for the tax is 7%, which has not been changed since October 1991. Clarifications of how the tax is applied were implemented in 1993 and 1994. Modest increases over the last three years can be attributed to a number of factors. There have been declines in electric and wired telecom while wireless telecom, gas, and cable have increased. The most significant factor for the rise in overall revenues points to the Water, Wastewater, and Refuse municipal utilities and the increase of tax revenues due to recent customer rate increases. Tax revenues are expected to increase by 9.2% in FY 09 in step with utility rate increases.

CITY OF SANTA CRUZ UTILITY USERS TAX In $ Millions 8.2 6.9

7.6

7.6

7.1

8.1

7.6

8.3

8.3

8.7

10 8 6 4 2 0

99

00

01

02

03

04

05

06

07

08

Fiscal Year

Risk management. The City of Santa Cruz uses a program of self-insurance for workers’ compensation and general liability claims, and employs a professional risk manager, supplemented by a professional claim administration firm, to minimize losses. The City is self-insured for workers' compensation up to $500,000 per occurrence. Santa Cruz participates in a multi-agency joint powers authority to provide excess insurance coverage for liability coverage. The joint powers authority and the City rely on estimates prepared by professional actuaries to set aside funds adequate to meet potential future losses. Excess coverage purchased through the joint powers authority covers claims in excess of $1,000,000 for general liability claims. As reflected in the financial statements, the Risk Management internal service fund had deficit net assets at June 30, 2008, of ($0.4 million), an improvement of $2.5 million associated with lower workers’ compensation claims history and increased workers’ compensation rates. Health care costs. The City contracts with CalPERS for employee health care coverage. program, employer premiums increased (per calendar year) as stated below: • • • •

FY 05: FY 06: FY 07: FY 08:

9.9% 8.9% 11.9% 6.8% vi

Under this

The Honorable Mayor and City Council

State budget. California faces continuing budget gaps with the Governor’s projection, for 2009 and 2010 combined, of a $41 billion state general fund budget deficit. This imbalance persists in spite of a number of noteworthy changes in state/local finance law. •

Proposition 57 or “Triple Flip”. In 2004, state voters approved a deficit-financing bond, pledging as repayment for the bond ¼ cent of the local Bradley-Burns sales tax. During the time this bond is outstanding, city and county revenue losses are replaced on a dollar-for-dollar basis with property taxes shifted from school districts. School losses, in turn, are offset by increased state aid. These revenue transfers commonly are referred to as the “triple flip”.

•

VLF-Property Tax Swap. In 1999, the state began reducing the vehicle license fee (VLF) rate charged to vehicle owners – and backfilling city and county revenue losses from this tax reduction with state subventions. The FY 2004-05 state budget packages permanently replaced the VLF backfill by shifting an equal amount of K-14 property taxes to cities and counties. Increased state aid offsets K14 school district revenue losses.

•

FY 2004-05 Property Tax Shift. The FY 2004-05 state budget packages included a $1.3 billion shift of property taxes from noneducational local agencies (cities, counties, special districts, and redevelopment agencies) to K-14 school districts. Unlike the two permanent property tax shifts enacted in the 1990’s, this tax shift sunset in FY 2006-07.

•

Proposition 1A. In 2004, state voters amended the State Constitution to prohibit the state from permanently reallocating the property tax, with certain exceptions, prohibit the State from reducing the Bradley Burns local sales tax rate or altering its method of allocation, and prohibit the State from further reducing the vehicle license fee without reimbursing local governments.

Cash management and policies The City’s investment policy states that not more than 25% of the portfolio shall be invested in any one entity or any one instrument to protect the City from concentration of credit risk, with the following exceptions: U.S. Treasury Obligations and the external investment pool, State of California – Local Agency Investment Fund (LAIF). In addition, purchases of mutual funds must not exceed 20% of the value of the portfolio. Purchases in a single mutual fund may not exceed 10% of the value of the portfolio. The City is in compliance with these provisions of the investment policy. As of June 30, 2008, the City had $73.5 million invested in LAIF accounts, $41.1 million in U.S. Agencies and U.S. Treasury Money Market Funds, and $0.9 million in other investments. Major Initiatives The City of Santa Cruz operates four municipal utilities, including water, wastewater, storm water, and refuse collection/landfill operations. The Water Department has not made any major capital improvements for the past 10 to 15 years while a new water supply project was being developed. Now, in order to address the pressing needs of an aging infrastructure and the need for a new water supply, the Water Department has embarked upon an ambitious program of capital improvements that will span the next five years and will cost approximately $50 million, to be financed partially through the issuance of new debt. Major distribution and supply projects are planned, including a desalination plant.

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The Honorable Mayor and City Council

The National Marine Sanctuary Program (NMSP), an agency of the National Oceanic and Atmospheric Administration (NOAA), and the City of Santa Cruz are partnering to design and construct the Monterey Bay National Marine Sanctuary Education Center. The Education Center in the City of Santa Cruz will function as the Monterey Bay National Marine Sanctuary’s premier visitor center. Design and site preparation is expected to begin fiscal year 2009. The City will continue to use Development Impact fees to enhance and upgrade park facilities. These fees will also be used for improvements to the greenbelt. During these tough economic times the Parks and Recreation Department will continue to seek grants and bond monies to renovate and upgrade outdated facilities. The development of Depot Park and the Multi Modal Station is an example of a successful partnership between numerous agencies. Awards The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Santa Cruz for its comprehensive annual financial report for the fiscal year ended June 30, 2007. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. Acknowledgements The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department. We would like to express our appreciation to all the members of the departments who assisted and contributed to the preparation of this report. We also want to thank the partners and staff of our auditors for their assistance and support. Credit must also be given to the Mayor, City Council Members, and City Manager for your unfailing leadership and support.

Respectfully submitted,

Jack Dilles Director of Finance

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ix

x

xi

Katherine Beiers Councilmember

City Manager Richard C. Wilson

City Attorney John Barisone

Water Bill Kocher

Economic Development and Redevelopment Bonnie Lipscomb

Public Works Mark Dettle

Police Howard Skerry

Information Technology Sharon Caiocca

Planning and Community Development Juliana Rebagliati

Fire Ron Oliver

Parks and Recreation Dannettee Shoemaker

Tony Madrigal Councilmember

Library City-County System Susan Elgin (Acting Director)

City Clerk Lorrie Brewer

Don Lane Councilmember

Human Resources Lisa Martinez Sullivan

Assistant City Manager Martin Bernal

Cynthia Mathews Mayor

Mike Rotkin Vice Mayor

Finance Jack Dilles

Ryan Coonerty Councilmember

Electorate

City of Santa Cruz Organization Chart

Joint Powers Agency Library Board

Lynn Robinson Councilmember

DIRECTORY OF CITY OFFICIALS CITY OF SANTA CRUZ Mayor Cynthia Mathews Vice Mayor Mike Rotkin

Councilmember Katherine Beiers

Councilmember Ryan Coonerty

Councilmember Don Lane

Councilmember Tony Madrigal

Councilmember Lynn Robinson

City Manager, Richard C. Wilson Assistant City Manager .....................................................................Martín Bernal Chief of Fire ......................................................................................Ron Oliver Chief of Police...................................................................................Howard Skerry City Attorney .....................................................................................John G. Barisone City Clerk ..........................................................................................Lorrie Brewer Director of Finance............................................................................Jack Dilles Director of Human Resources ...........................................................Lisa Sullivan Acting Director of Libraries ..............................................................Susan Elgin Director of Parks and Recreation ......................................................Dannettee E. Shoemaker Director of Planning and Community Development.........................Juliana Rebagliati Director of Public Works and City Engineer ....................................Mark Dettle Director of Redevelopment Agency..................................................Bonnie Lipscomb Director of Water Department...........................................................Bill Kocher

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INDEPENDENT AUDITORS’ REPORT To the Honorable Mayor and Members of the City Council of the City of Santa Cruz Santa Cruz, California We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of Santa Cruz, California (City), as of and for the year ended June 30, 2008, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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 basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Subsequent to the basic financial statement date of June 30, 2008 and the year then ended, the United States has entered into a Financial Credit Crisis. Although the United States Federal Government has taken actions which, at least in part, are intended to relieve and correct this Financial Credit Crisis, investments are subject to significant impairment and losses. To date, the City has not been informed and is not aware of any investment losses. Accordingly, such investment losses, if any, have not been reflected in the accompanying basic financial statements. 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 as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with generally accepted accounting principles in the United States. In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2008 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. 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 read in conjunction with this report in considering the results of our audit.

To the Honorable Mayor and Members of the City Council of the City of Santa Cruz Santa Cruz, California Page 2 As described in Note 1 to the basic financial statements, the City adopted Statement of Governmental Accounting Standards Board No. 48, Sales and Pledges of Receivables and Future Revenues and IntraEntity Transfers of Assets and Future Revenues, and No. 50, Pension Disclosures, an Amendment of GASB Statements No. 25 and No. 27. The accompanying Required Supplementary Information, such as Management’s Discussion and Analysis, budgetary comparison information and other 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. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the Required Supplementary Information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Supplementary Information is presented for purpose of additional analysis and is not a required part of the basic financial statements. The Supplementary Information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

Irvine, California January 23, 2009

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Management's Discussion and Analysis As management of the City of Santa Cruz we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City of Santa Cruz for the fiscal year ended June 30, 2008. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on page i of this report.

Financial Highlights – Primary Government (in millions) •

Government-Wide Highlights: Net Assets - The assets of the City of Santa Cruz exceeded its liabilities at the close of the fiscal year by $446.8. Of the total net assets, $118.5 or 26.5% was reported as unrestricted net assets and may be used to meet the government’s ongoing obligations to citizens and creditors. Restricted net assets of $6.5 may be used for the City’s ongoing obligations related to programs with external restrictions. The remaining $321.8 represents the City’s investment in capital assets, less any related outstanding debt used to acquire those assets. Changes in Net Assets - The City’s total net assets increased by $10.7 or 2.4% in fiscal year 2008. The increase in Net Assets represents the degree to which revenues exceed expenses. The increase in net assets for governmental activities of $24.2, or 11.7%, is comprised of an increase in capital assets in the amount of $27.1 and an increase in Tax revenues of $3.8, offset by an increase in Personnel Services expenditures in the amount of $6.6 and an increase in major maintenance in the amount of $3.4. The increase in capital assets in the amount of $27.1 includes FY 2008 additions in the amount of $6.9 and a prior period adjustment in the amount of $20.2. The prior period adjustment is the expending of $4.1 for prior years’ construction in progress and the transfer of $24.3 in net capital assets transferred from the Storm Water fund to the General fund. The prior period adjustment resulted from an analysis of the Storm Water enterprise fund’s capital assets which determined that $24.3 in net capital assets were incorrectly recorded in that fund, and should be transferred to the General fund. Business type activities had a decrease in net assets in the amount of $13.5 or 5.6% due to a prior period adjustment that transferred $24.3 in net capital assets from the Storm Water Enterprise Fund to the General fund. The reduction in net capital assets was offset by revenues exceeding expenditures in the amount of $10.8 resulting from utility rate increases, reduced expenses resulting from grant funding.

•

Fund Highlights: Governmental Funds – Governmental funds include general, special revenue, debt service, and capital projects funds. As of the close of fiscal year 2008, the City’s governmental funds, including the Redevelopment Agency Fund, reported a combined ending fund balance of $50.2, which is an increase of $1.0 or 2.0%from the fiscal year 2007. Approximately 60.4% of this amount, or $30.3, represents the unreserved fund balance available for appropriation. 73.6% of the unreserved fund balance, or $22.3, has been designated for various purposes. General Fund – Total fund balance of the General Fund on June 30, 2008 was $25.7, a decrease of $0.7 or 2.7% from the fiscal year 2007. Approximately 74.7% of this amount, or $19.2, was unreserved. Of the unreserved fund balance, $8.5, or approximately 44.3% is designated for various purposes. These include $5.7 for the city public trust, and varying amounts for other activities. The remaining unreserved balance of $10.7 or 55.7% of unreserved fund balance is undesignated. 3

Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. They are comprised of the statement of net assets and statement of activities and changes in net assets. The statement of net assets presents information on all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities and changes in net assets presents information showing how the City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., interest expense due but unpaid). Both of the above government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, public works, parks and recreation, library, transit, social services and community and economic development. The business-type activities of the City include the four municipal utilities: water, wastewater, storm water, and refuse and landfill operation; and also the self-supporting golf course and parking enterprises. Blended Component Units – Component units are legally separate entities that meet certain criteria and would be misleading if their data were not included in this report. This report includes two separate legal entities in this category—The City of Santa Cruz Redevelopment Agency and The Santa Cruz Public Improvement Financing Corporation. In this report all component units are blended with the primary government because the governing boards are substantively the same as the primary government, and the component units serve the primary government exclusively. The government-wide financial statements can be found on pages 20-23 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. The fund financial statements provide detail information about each of the City’s most significant funds, called major funds. The concept of major funds, and the determination of which are major funds, was established by GASB 34 and replaces the concept of combining like funds and presenting them in total. Instead, each major fund is presented individually, with all nonmajor funds summarized and presented in a single column. Individual fund data on the nonmajor funds is presented in the form of combining statements and schedules in the Supplemental Information section of this report on pages 116 through 119.

4

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City has nine governmental funds, of which two are considered major funds for presentation purposes. Each major fund is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the City’s two major funds – the General Fund and the Redevelopment Agency Fund. Data from the other seven governmental funds are combined into a single, aggregated presentation. The basic governmental fund financial statements can be found on pages 28 through 31 of this report. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements on pages 116 through 119 of this report. 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. The City uses enterprise funds to account for the four municipal utilities: water, wastewater, storm water, and refuse, recycling and landfill operation; and also the self-supporting golf and parking enterprises. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its equipment operations and maintenance, telecommunications, and risk management activities. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the governmental-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The fund financial statements for the proprietary funds provide separate information for the four municipal utilities: Water, Wastewater, Storm Water, and Refuse, recycling and landfill operations; and also the self- supporting golf course and parking enterprises. Conversely, the internal service funds are combined into a single aggregated column in the proprietary fund statements. Individual fund data for the internal service funds is provided in the form of combining statements on pages 134-136of this report. The basic proprietary fund financial statements can be found on pages 34-43 of this report. Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. Fiduciary funds represent agency funds and private-purpose trust funds. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations and use of the accrual basis of accounting. Agency funds include activities of the Library Joint Powers authority, Payroll Payables and Special Assessments. Trust funds are used to account for resources legally held in trust for special purposes, such as the McCaskill Trust for Local History, the McCaskill Trust for Visually Impaired and the Findkeldey Trust for Musical Literature.

5

Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 51-98 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City of Santa Cruz’s progress in funding its obligation to provide pension benefits to its employees, as well as providing a budgetary comparison schedule for the General Fund and the Redevelopment Agency Fund. Required supplementary information can be found on pages 100-111 of this report. Additional budgetary schedules for the General Fund and the combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds are presented immediately following the required supplementary information in the supplemental information section of this report. Combining and individual statements and schedules can be found on pages 120-132 of this report.

Government-Wide Financial Analysis (in $ millions) Net Assets. As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the City of Santa Cruz, combined net assets (governmental and business-type activities) totaled $446.8 at the close of the fiscal year ending June 30, 2008. This is an increase of $10.7 or 2.4% from the previous fiscal year. By far the largest portion of the City’s net assets $321.8 or 72.0% reflects its investment in capital assets (e.g., land, streets, bridges, water and sewer lines, buildings, machinery, and equipment), less any related, outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the City’s net assets $6.5 or 1.5% represents resources that are subject to external restrictions on how they may be used. The remaining 26.5% or $118.5 of the City’s net assets, are “unrestricted,” and may be used to meet the government’s ongoing obligations to citizens and creditors. City of Santa Cruz's Net Assets June 30, 2008

(amounts expressed in $ millions)

Current assets Noncurrent assets Capital assets

$

Governmental Activities 2008 2007 56.6 $ 57.9 10.5 8.6 184.7 157.8

$

Business-Type Activities 2008 2007 73.7 $ 69.6 17.8 18.1 236.6 257.9

$

Total 2008 130.3 $ 28.3 421.3

2007 127.5 26.7 415.7

251.8

224.3

328.1

345.6

579.9

569.9

Current liabilities Noncurrent liabilities

13.0 32.2

14.8 27.1

12.0 75.9

10.9 81.0

25.0 108.1

25.7 108.1

Total liabilities

45.2

41.9

87.9

91.9

133.1

133.8

159.9 6.5 40.2

144.2 13.6 24.6

161.9 78.3

172.3 81.4

321.8 6.5 118.5

316.5 13.6 106.0

Total assets

Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets

$

206.6

$

182.4

$

6

240.2

$

253.7

$

446.8

$

436.1

Changes in Net Assets. The City’s net assets increased by $10.7 or 2.4% from the prior fiscal year. The City’s expenses cover a range of services. Further analysis is provided within the governmental and business-type activity sections. City of Santa Cruz Changes in Net Assets Fiscal Year Ending June 30, 2008 (amounts expressed in millions) Governmental

Business-Type

Activities 2008

Total

Activities 2007

2008

2007

2008

2007

Revenues: Program revenues: Charges for services

$

29.6

$

25.0

$

62.5

$

56.9

$

92.1

$

81.9

Operating grants and contributions

4.7

5.4

0.1

-

4.8

5.4

Capital grants and contributions

5.4

5.7

2.3

1.7

7.7

7.4

39.7

36.1

64.9

58.6

104.6

94.7

Total program revenues General revenues: Property taxes

26.3

24.6

-

-

26.3

24.6

Sales and use taxes

14.7

12.8

-

-

14.7

12.8

Franchise taxes

2.9

2.6

-

-

2.9

2.6

Transient occupancy taxes

3.7

3.8

-

-

3.7

3.8

Utility users taxes

8.7

8.3

-

-

8.7

8.3

Admissions taxes

2.0

1.9

-

-

2.0

1.9

Other taxes Total taxes

1.9

2.4

-

-

1.9

2.4

60.2

56.4

-

-

60.2

56.4

Unrestricted grants and contributions

-

-

-

-

-

-

Unrestricted investment earnings

2.5

2.6

3.5

3.6

6.0

6.2

Gain (loss) on sale of assets

0.1

0.3

-

0.1

0.1

0.4

Miscellaneous

0.7

2.7

0.5

0.5

1.2

3.2

103.2

98.1

68.9

62.8

172.1

160.9

Total revenues Expenses: General government

14.2

12.5

-

-

14.2

12.5

Public safety

33.1

29.6

-

-

33.1

29.6 12.0

Parks and recreation

12.7

12.0

-

-

12.7

Library

10.2

9.6

-

-

10.2

9.6

Public works

13.7

11.5

-

-

13.7

11.5

Transit Community and economic development

0.7

0.7

-

-

0.7

0.7

11.0

10.6

-

-

11.0

10.6

Social services

2.0

1.8

-

-

2.0

1.8

Interest and charges on long term debt

1.6

1.3

-

-

1.6

1.3

Water

-

-

19.2

16.2

19.2

16.2

Wastewater

-

-

16.0

15.4

16.0

15.4

Refuse

-

-

15.0

13.0

15.0

13.0

Parking

-

-

3.3

2.6

3.3

2.6

Storm Water

-

-

1.4

1.9

1.4

1.9

Golf course Total expenses Change in net assets Net assets, beginning of year (as restated) Net assets - end of year

$

-

-

3.2

2.2

3.2

2.2

99.2

89.6

58.1

51.3

157.3

140.9

4.0

8.5

10.8

11.5

14.8

20.0

202.6

173.9

229.4

242.2

432.0

416.1

206.6

$

182.4

7

$

240.2

$

253.7

$

446.8

$

436.1

Governmental Activities. Governmental activities increased the City’s net assets by $4.0. A comparison of the cost of services by function for the City’s governmental activities is shown below, along with the revenues used to cover the net expenses of the governmental activities.

Governmental Activities (amounts expressed in $ millions) 2008 2007 Expenses net of program revenues: General government Public safety Parks and recreation Library Public works Transit Community and economic development Social services Interest and fiscal charges on long-term debt Total expenses net of program revenues governmental activities

$

(6.0) (28.9) (9.1) (0.6) (5.7) 2.2 (7.7) (2.0) (1.6)

$

(5.9) (25.3) (8.0) (0.8) (5.4) 3.2 (8.2) (1.8) (1.3)

(59.4)

(53.5)

26.3 14.7 2.9 3.7 8.7 2.0 1.9 60.2

24.6 12.8 2.6 3.8 8.3 1.9 2.4 56.4

2.5 0.7 63.4

2.6 0.3 2.7 62.0

General revenues and transfers: General revenues: Property taxes Sales and use taxes Franchise taxes Transient occupancy taxes Utility users taxes Admission taxes Other taxes Total taxes Unrestricted grants and contributions Unrestricted investment earnings Gain on sale of assets Miscellaneous Transfers Total general revenues and transfers Change in governmental activities net assets

$

8

4.0

$

8.5

Governmental Expenses. Total governmental activity expenses were $99.2 in fiscal year 2008. The largest expenses were incurred for public safety, public works, parks and recreation, and general government. These expenses do not include capital outlays, which are now reflected in the City’s capital assets.

EXPENSES FOR GOVERNMENTAL ACTIVITIES FY 2008 Interest on Debt 2%

General Government 14%

Community Development 11%

Public Works 14%

Library 10%

Public Safety 33%

Social Services 2% Parks & Recreation 13%

Transit 1%

Governmental Revenues. Per GASB 34, program revenues are derived directly from the program itself or from parties outside the reporting government’s taxpayers or citizenry. They reduce the net cost of the function to be financed from the government’s general revenues. Total program revenues from governmental activities were $39.7 in fiscal year 2008. Governmental program revenues derive primarily from charges for services, which include licenses and permits, planning fees, developer fees, recreation charges, traffic and other fines and forfeitures, charges to the Library Joint Powers Authority for personnel services provided, and several other revenues. Program revenues under the operating grants and contributions category include revenues restricted for specific purposes, such as gasoline tax and other federal, state and local grants. Program revenues in the capital grants and contributions category also include federal, state and local grants, but are restricted specifically to be used for capital projects or acquisitions. General revenues are all other revenues not categorized as program revenues, and include all taxes, unrestricted grants, contributions and investment earnings, material gains on sales of capital assets, and other miscellaneous revenues. Total general revenues from governmental activities were $63.5 in fiscal year 2008. Taxes of $60.2 comprised 94.8% of the City’s general revenues for fiscal year 2008. The largest single source of general revenues received during fiscal year 2008 was $26.3 of property taxes, or 41.4% of general revenues, followed by $14.7 of sales and use taxes, or 23.1% of general revenues.

9

REVENUES BY SOURCE GOVERNMENTAL ACTIVITIES FY 2008

Urestricted investment Utility users taxes Admission taxes 8% 2% earnings 2%

Capital Grants 5%

Transient occupancy taxes 4%

Charges for Services 28%

Sales and Use taxes 14%

Franchise taxes 3% Property taxes 26%

Other taxes 2%

Operating Grants 5%

Miscellaneous 1%

Business Type Activities. Net assets for business-type activities were $240.2, a decrease of $13.5 from the prior fiscal year mainly due to the reclassification of capital assets from the Storm Water fund to the General fund in the amount of $24.3 recorded as a prior period adjustment, offset by an change in net assets in the amount of $10.8. Total program revenues for business-type activities were $64.9. The largest program revenues were charges for services of $62.5. Other program revenues included capital grants and contributions of $2.3. Total expenses for the business-type activities were $58.1 during fiscal year 2008.

10

REVENUE AND EXPENSE BUSINESS ACTIVITIES FY 2008

30

25

REVENUE

in m illions$

20

EXPENSE 15

10

5

0 Water

Wastewater

Refuse

Parking

Storm Water Golf Coursse

REVENUES BY SOURCE BUSINESS ACTIVITIES FY 2008 Capital Grants 3%

General Revenue 6%

Charges for Services 91%

11

Financial Analysis of Individual Funds (in millions) As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds - The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $50.2 which is an increase of $1.0 or 2.0% over fiscal year 2008. Approximately $30.3 of the fund balance is unreserved fund balance, which is available for spending at the government’s discretion. Unreserved fund balance decreased by $3.3 or 9.8% over fiscal year 2008. It should, however, be noted that 73.6% of the unreserved fund balance, or $22.3, has been designated for various purposes, such as debt service, capital projects, public art, police programs and the City Public Trust, leaving $8.0 unreserved and undesignated. The remainder of fund balance, $19.9, is reserved to indicate that it is not available for spending because it has already been legally committed. General Fund – Total fund balance of the General Fund on June 30, 2008 was $25.7, a decrease of $0.7 from fiscal year 2007. Approximately 74.7% of this amount, or $19.2, was unreserved. Of the unreserved fund balance, $8.5, or 44.3% has been designated for specific uses. These include $5.5 for the City Public Trust and $1.9 for Accrued Compensated Absences, and varying amounts for other activities, such as unemployment insurance, housing, parks and recreation programs, and equipment and facilities maintenance. The remaining unreserved balance of $10.7, or 55.7% of unreserved fund balance, is undesignated and represents a decrease of $3.2 or 23.0% over fiscal year 2007. As a measure of the general fund’s liquidity, it may be useful to compare unreserved fund balance, the undesignated portion of the unreserved fund balance, and total fund balance to total fund expenditures. Unreserved fund balance ($19.2) represents 25.5% of total general fund expenditures ($75.3), including transfers out ($1.1). Unreserved and undesignated fund balance ($10.7) represents 14.2%, and total fund balance ($25.7) represents 34.1% of that same amount. The 14.2% percent of total expenditures that is represented by the undesignated, unreserved fund balance exceeds the City Council’s targeted minimum reserve level of 10% of the operating budget for the General Fund. Decrease in fund balance is a result of an increase in tax revenues of $3.0 and an increase in charges for services in the amount of $2.7, offset by an increase in Personnel Services expenditures in the amount of $6.6 with the remaining increase in expenditure of $0.2 distributed within Services, supplies, and other charges. Redevelopment Agency Fund – The City of Santa Cruz Redevelopment Agency is responsible for redevelopment of areas identified under the Community Redevelopment Law as being blighted. The Agency’s operations are funded primarily by the issuance of debt, which is expected to be repaid out of property tax increment revenue generated by increases in property assessed values in the redevelopment areas. At the end of fiscal year 2008, the total fund balance of the Redevelopment Agency Fund was $19.5, an increase of $3.6 from the prior year, or 22.6%. Of that amount, $8.6 is reserved to indicate that it is not available for spending because it has already been legally committed. The remainder of the unreserved fund balance of $10.9 is designated for either debt service or capital projects.

12

The Redevelopment Agency Fund had revenues of $14.0, including $12.0 of property tax increment revenue. Expenditures in this fund amounted to $10.4 which is a decrease of $0.2 over the prior fiscal year. Proprietary Funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. They include both enterprise funds and internal service funds. For the government-wide financial statements, the internal service funds are consolidated with governmental activities, and the enterprise funds comprise the business-type activities. As discussed in the business-type activities section previously, the Enterprise Funds’ net assets decreased by $13.5 as a result of a reclassification in capital assets in the amount of $24.3 from the Storm Water enterprise fund to the General Fund (recorded as a prior period adjustment), offset by a change in net assets of $10.8. Net assets in the internal service funds in the amount of $.5 represent an increase of $2.5 over the prior fiscal year. Increases in contributions to the Risk Management fund and decreases in the claims payable liability were the primary causes of this increase.

General Fund Budgetary Highlights The final amended general fund budget, including transfers out and advances, totaled $83.2, and included amendments to the original budget resulting in a $1.1 increase in operating expenditure appropriations and a $0.8 increase in transfers out. The principal amendments can be summarized as follows: Operating Appropriations Increases. • $0.6 in Future Planning for completion of the City’s General Plan. • $0.8 in Transfers to the General Capital Improvement fund for the Lead Remediation of the City’s small bore firearm shooting range. • $0.2 in Retirement contributions for the increased cost due to negotiated agreements with the City’s bargaining units. • $0.3 in Capital outlay for the purchase of vehicle equipment. Total operating appropriations increases - $1.4 Capital Assets and Debt Administration (in millions) Capital Assets. The City’s investment in capital assets for its governmental and business- type activities as of June 30, 2008, amounts to $421.3, net of accumulated depreciation of $285.3. This investment in capital assets includes land, land improvements, infrastructure, buildings, machinery and equipment, lease improvements, software, and construction in progress. Infrastructure assets are items that are normally immovable and of value only to the City such as roads, bridges, streets and sidewalks, drainage systems, lighting systems and similar items. The total additions to the City’s investment in capital assets for the current fiscal year, after restatements and deletions, were $37.7, net of accumulated depreciation. Major capital asset additions during the current fiscal included the following: • Bay Street Reservoir System Transmission Main $17.0 • Union and Locust Street Building $3.9 • Vehicles $2.8 • Infrastructure Improvements $1.8 • Bike Path Construction Improvements $1.4 • Sewer System Improvements $1.2 • Park Improvements $0.5 13

Additional information on the City’s capital assets can be found in Note 5 on pages 69-73 of this report.

Capital Assets (net of depreciation) (amounts expressed in $ millions) Governmental Activities

Business-Type Activities

June 30

June 30

2008 Land

$

2007

50.6

Construction in progress

$

2008

50.6

$

Total 2007

11.6

$

2008

11.6

$

2007

62.2

$

62.2

10.2

10.8

15.2

23.3

25.4

34.1

5.7

5.3

2.7

3.2

8.4

8.5

Infrastructure

84.9

61.8

94.8

103.7

179.7

165.5

Buildings

Land improvements

29.2

25.7

101.0

104.4

130.2

130.1

Machinery and equipment

3.7

3.1

11.3

11.5

15.0

14.6

Lease improvements

0.3

0.4

-

0.1

0.3

0.5

Software

0.1

0.1

-

0.1

0.1

0.2

Totals

$

184.7

$

157.8

$

236.6

$

257.9

$

421.3

$

415.7

Debt Administration (in millions) Long Term Debt - At the end of the current fiscal year, the City had $121.1 in long term debt outstanding compared to $121.3 last year, a $0.2 net decrease. Increases to claims and judgments payable, landfill closure costs, lease obligations, and tax allocation bonds were offset by decreases in a variety of other bonds, notes, loans, and leases payable. Excluding compensated absences and claims and judgments, the debt associated with governmental activities decreased by 18.6% from $25.8 to $21.0, and the Business-type activity debt was reduced by 7.3% from $80.6 to $74.7. The City currently has $7.0 in outstanding general obligation debt. This debt was approved by voters in November 1998 and authorized an ad valorem tax override for acquisition of open space property, improvements to fire stations, acquisition of a fire administrative headquarters building, and construction of a community park. This tax override is currently assessed at $9 per $100,000 of assessed value. The largest single debt obligation of the City is a note payable to the State of California for the construction of secondary treatment improvements at the City's wastewater treatment plant. As of June 30, 2008 the outstanding balance on this note was $31.9. The City has a corresponding note receivable from the County of Santa Cruz for $15.0. This note receivable relates to the County’s obligation related to the construction of the treatment plant improvements. The chart below illustrates the changes in bonds, notes, loans and leases payable for the year ending June 30, 2008.

Bonds, Notes, Loans and Leases Payable (amounts expressed in $ millions) Governmental Activities

Business-Type Activities

June 30

June 30

2008 Certificates of participation

$

2007 3.9

$

2008 4.1

$

Total 2007

17.4

$

2008

19.2

$

2007

21.3

$

23.3

Revenue bonds payable

6.9

-

22.0

22.6

28.9

22.6

General obligation bonds

7.0

7.1

-

-

7.0

7.1

Notes payable

1.5

2.9

32.8

35.3

34.3

38.2

Tax allocation bonds payable

4.9

5.0

-

-

4.9

5.0

Capital lease obligations

0.8

1.0

2.5

3.5

3.3

4.5

Other long-term liabilities

0.8

0.9

-

-

0.8

0.9

Totals

$

25.8

$

21.0

14

$

74.7

$

80.6

$

100.5

$

101.6

The City of Santa Cruz also has significant liabilities for claims and judgments, compensated absences (accrued vacation pay), and landfill closure and post closure costs. The amounts and changes of these liabilities are shown below.

(amounts expressed in $ millions) June 30, 2008 June 30 2008 Claims and judgements

$

10.4

2007 $

10.4

Increase

Percent

Due in less

Due in more

(Decrease)

Change

than one year

than one year

$

$

$

-

0.0%

2.9

7.5

Compensated absesnces

3.9

3.2

0.7

21.9%

2.6

1.3

Closure and post closure landfill costs

6.4

6.1

0.3

4.9%

-

6.4

1.0

26.8%

Totals

$

20.7

$

19.7

$

$

5.5

$

15.2

Additional information on the City of Santa Cruz’s long term debt can be found in Note 6 to the financial statements. Economic Climate The City of Santa Cruz, and Santa Cruz County for that matter, is closely tied to the regional economy of the nine-county San Francisco Bay Area and to Silicon Valley in particular. Fiscal Year 2008 showed signs of recovery at the national level, along with the Bay Area and Silicon Valley. Local private employers include a diverse array of manufacturing, business services, retail, hotel and food services, and biotechnology companies. In addition to the local private employers, the local economy also benefits from the University of California Santa Cruz. The University is a major employer, and has potential spin-off benefits from federal and state funded scientific research ventures including biomedical research, technology research, and adaptive optics. The state and the bay area experienced modest growth in jobs, personal income, and tourism in 2008. However, the bay area regional economic opportunities and challenges including continued job growth, housing prices, interest rates, state and national economic issues will, of course, moderate the rate of improvement.

Requests for Information This financial report is designed to provide a general overview of the City’s finances for all of its citizens, taxpayers, customers, investors and creditors. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City of Santa Cruz, Finance Department, 809 Center Street, Room 8, Santa Cruz, CA 95060.

15

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16

BASIC FINANCIAL STATEMENTS

17

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18

GOVERNMENT-WIDE FINANCIAL STATEMENTS

19

City of Santa Cruz Statement of Net Assets June 30, 2008

Primary Government Governmental

Business-Type

Activities

Activities

Total

ASSETS Current assets: Cash and cash equivalents

$

Restricted cash and cash equivalents Interest receivable

43,525,083

$

63,028,614

$

106,553,697

3,096,426

363,937

3,460,363

753,358

943,275

1,696,633

Taxes receivable

3,571,486

1,884

3,573,370

Accounts receivable - net

1,900,855

8,971,703

10,872,558

Due from other governments

1,670,924

370,239

2,041,163

Notes receivable - due within one year

205,519

-

205,519

Loans receivable - due within one year

37,500

-

37,500

Intergovernmental receivable - due within one year

-

-

-

49,317

-

49,317

152,449

-

152,449

1,666,449

30,000

1,696,449

56,629,366

73,709,652

130,339,018

808,407

2,137,469

2,945,876

Notes receivable - due in more than one year

6,137,762

401,058

6,538,820

Loans receivable - due in more than one year

1,389,879

-

1,389,879

-

15,134,017

15,134,017

1,973,992

2,223,989

Prepaid items Inventories Deposits Total current assets Noncurrent assets: Restricted investments

Intergovernmental receivable - due in more than one year Deferred charges

249,997

Long-term internal balances

1,864,818

(1,864,818)

-

50,609,567

11,590,526

62,200,093

7,976,050

3,713,741

11,689,791

Capital assets: Land Land improvements Infrastructure

201,318,617

167,272,762

368,591,379

Buildings

39,721,209

160,328,296

200,049,505

Machinery and equipment

11,516,693

24,563,974

36,080,667

Lease improvements

724,114

70,000

794,114

1,161,903

571,257

1,733,160

Construction in progress

10,186,790

15,229,557

25,416,347

Total capital assets

323,214,943

383,340,113

706,555,056

(138,529,010)

(146,766,006)

(285,295,016)

Total capital assets, net

184,685,933

236,574,107

421,260,040

Total noncurrent assets

195,136,796

254,355,825

449,492,621

Total assets

251,766,162

328,065,477

579,831,639

Software

Less accumulated depreciation

See accompanying Notes to Basic Financial Statements.

20

City of Santa Cruz Statement of Net Assets, Continued June 30, 2008

Primary Government Governmental

Business-Type

Activities

Activities

Total

LIABILITIES Current liabilities: Accounts payable and other current liabilities

$

Intergovernmental payable

5,356,002

$

4,535,774

$

9,891,776

2,200

-

2,200

Interest payable

209,669

1,267,098

1,476,767

Unearned revenue

377,547

55,237

432,784

Deposits payable

120,893

59,359

180,252

Claims and judgments payable - due within one year

2,943,930

-

2,943,930

Compensated absences payable - due within one year

1,947,831

639,571

2,587,402

Bonds, notes, loans and leases payable - due within one year

2,041,226

5,445,307

7,486,533

12,999,298

12,002,346

25,001,644

Total current liabilities Noncurrent liabilities: Claims and judgments payable - due in more than one year

7,498,625

-

7,498,625

Compensated absences payable - due in more than one year

973,914

319,787

1,293,701

23,679,758

69,217,295

92,897,053

-

6,363,712

6,363,712

Total noncurrent liabilities

32,152,297

75,900,794

108,053,091

Total liabilities

45,151,595

87,903,140

133,054,735

159,910,861

161,911,506

321,822,367

Capital projects

1,080,423

-

1,080,423

Debt service

4,818,569

-

4,818,569

Public safety

189,500

-

189,500

Parks and recreation

100,710

-

100,710

Bonds, notes, loans and leases payable - due in more than one year Landfill closure costs

NET ASSETS Invested in capital assets, net of related debt Restricted for:

Community and economic development Unrestricted Total net assets

307,734

-

307,734

40,206,770

78,250,831

118,457,601

$

206,614,567

$

240,162,337

$

446,776,904

Bal. Sheet Net Assets - IS Net Assets $

-

$

-

$

436,100,000

$

436

See accompanying Notes to Basic Financial Statements.

21

City of Santa Cruz Statement of Activities and Changes in Net Assets For the year ended June 30, 2008

Program Revenues

Functions/Programs

Charges for Services

Expenses

Operating

Capital

Grants and Contributions

Grants and Contributions

Total

Primary government: Governmental activities: General government

$

14,185,248

$

8,015,647

$

96,836

$

-

$

8,112,483

Public safety

33,112,568

3,761,166

401,895

55,627

4,218,688

Parks and recreation

12,687,303

3,419,078

107,393

36,084

3,562,555

Library

10,215,576

9,617,480

-

-

9,617,480

Public works

13,714,777

4,390,495

758,027

2,867,588

8,016,110

727,191

17,198

1,020,431

1,853,619

2,891,248

11,027,594

380,839

2,322,387

633,254

3,336,480

1,966,940

-

-

-

-

1,591,970

-

-

-

-

99,229,167

29,601,903

4,706,969

5,446,172

39,755,044

Water

19,169,949

25,205,503

-

1,306,392

26,511,895

Wastewater

16,030,806

15,289,391

-

(337,182)

14,952,209

Refuse

15,013,682

16,570,435

26,916

-

16,597,351

Parking

3,259,850

2,637,422

-

125,819

2,763,241

Storm water

1,450,158

876,944

-

1,247,691

2,124,635

Golf course

3,214,206

1,896,967

82,529

-

1,979,496

Transit Community and economic development Social services Interest and fiscal charges on long-term debt Total governmental activities Business-type activities:

Total business-type activities Total primary government

58,138,651 $

157,367,818

62,476,662 $

92,078,565

109,445 $

4,816,414

2,342,720 $

7,788,892

General Revenues: Taxes: Property taxes Sales and use taxes Franchise taxes Transient occupancy taxes Utility users taxes Admission taxes Other taxes Total taxes Unrestricted investment earnings Gain on sale of assets Miscellaneous Transfers Total general revenues and transfers Change in net assets Net assets - beginning of year (as restated) Net assets - end of year See accompanying Notes to Basic Financial Statements.

22

64,928,827 $

104,683,871

Net (Expense) Revenue and Changes in Net Assets Governmental Activities

Business-Type Activities

$

$

(6,072,765)

$

(6,072,765)

(28,893,880)

-

(28,893,880)

(9,124,748)

-

(9,124,748)

(598,096)

-

(598,096)

(5,698,667)

-

(5,698,667)

2,164,057

-

2,164,057

(7,691,114)

-

(7,691,114)

(1,966,940)

-

(1,966,940)

(1,591,970)

-

(1,591,970)

(59,474,123)

-

(59,474,123)

-

7,341,946

7,341,946

-

(1,078,597)

(1,078,597)

-

1,583,669

1,583,669

-

(496,609)

(496,609)

-

674,477

674,477

-

(1,234,710)

(1,234,710)

-

6,790,176

6,790,176

(59,474,123)

6,790,176

(52,683,947)

26,297,145

-

26,297,145

14,665,124

-

14,665,124

2,911,919

-

2,911,919

3,685,248

-

3,685,248

8,725,383

-

8,725,383

1,964,404

-

1,964,404

1,938,111

-

1,938,111

60,187,334

-

60,187,334

2,499,381

3,496,323

5,995,704

46,045

7,590

674,905 49,509

53,635

523,779 (49,509)

1,198,684 -

63,457,174

3,978,183

67,435,357

3,983,051

10,768,359

14,751,410

202,631,516 $

-

Total

206,614,567

229,393,978 $

240,162,337

432,025,494 $

446,776,904

23

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24

FUND FINANCIAL STATEMENTS

25

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26

Governmental Fund Financial Statements General Fund - The General Fund is used to account for sources and uses of financial resources traditionally associated with governments, and which are not required to be accounted for in another fund. Redevelopment Agency Fund - The Redevelopment Agency fund is used to account for all the activities of the City of Santa Cruz Redevelopment Agency. This includes the accumulation of resources for and the payment of interest and principal on debt issued to finance redevelopment activities, and general redevelopment operations. General Capital Improvement - This fund is used to account for capital improvements for which special projects funds have not been established. A portion of the City's transient occupancy tax receipts, combined with other funding sources, such as grants, provides funding for capital projects of general benefit, such as storm drain improvements, or improvements to public buildings. Non-Major Governmental Funds - Non-Major Governmental funds is the aggregate of all other governmental funds, and can be found in detail in the Supplementary Information section of this report.

27

City of Santa Cruz Balance Sheet Governmental Funds June 30, 2008

General Fund

Major Funds Redevelopment Agency

General Capital Improvement

Non-Major Governmental Funds

Total Governmental Funds

$

$

$

$

ASSETS Cash and cash equivalents Interest receivable Taxes receivable Accounts receivable - net Due from other governments Due from other funds Prepaid items Restricted assets: Cash and cash equivalents Investments

$

Total restricted assets Deposits Notes receivable - net Loans receivable - net Advances to other funds Inventory of land held for resale - net Total assets

18,276,227 187,288 2,589,512 1,070,659 175,873 2,734,686 49,317

11,220,274 136,117 397,073 -

793 (56,481) 554,338 72,700 180,414 -

5,794,228 412,192 30,563 701,172 1,314,637 -

35,291,522 679,116 3,571,486 1,844,531 1,670,924 2,734,686 49,317

-

3,086,110 61,514

2,435 282,330

7,881 464,563

3,096,426 808,407

-

3,147,624

284,765

472,444

3,904,833

70,063 215,252 3,946,405 -

5,351,636 438,000 -

-

776,393 1,427,379 -

70,063 6,343,281 1,427,379 4,384,405 -

$

29,315,282

$

20,690,724

$

1,036,529

$

10,929,008

$

61,971,543

$

3,296,419 77,567 38,994 112,353 131,000

$

226,559 21,065 7,009 946,569 -

$

858,469 2,630,040 99,261 78,018 -

$

537,321 98,973 2,200 875,644 239,292 1,531 1,495,000 -

$

4,918,768 2,729,013 2,200 974,276 377,547 120,893 2,519,587 131,000

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Due to other funds Intergovernmental payable Deferred revenue Unearned revenue Deposits payable Advances from other funds Claims and judgments payable Total liabilities Fund Balances: Reserved for: Encumbrances Noncurrent receivables and advances Prepaid items Debt service General plan update Hardship grants Low and moderate income housing Unreserved, designated, reported in: General fund Redevelopment Agency fund Special revenue funds Debt service funds Unreserved, undesignated, reported in: General fund Special revenue funds Capital projects funds Total fund balances Total liabilities and fund balances See accompanying Notes to Basic Financial Statements.

3,656,333

1,201,202

3,665,788

3,249,961

11,773,284

846,218 4,161,658 49,317 1,095,000 291,812 -

585,082 5,768,571 64,398 2,187,617

1,986,720 -

789,202 2,080,828 -

4,207,222 12,011,057 49,317 64,398 1,095,000 291,812 2,187,617

8,480,033 -

10,883,854 -

-

1,058,197 1,916,681

8,480,033 10,883,854 1,058,197 1,916,681

10,734,911 -

-

(4,615,979)

1,834,139 -

10,734,911 1,834,139 (4,615,979)

25,658,949 $

19,489,522

29,315,282

$

28

20,690,724

(2,629,259) $

1,036,529

7,679,047 $

10,929,008

50,198,259 $

61,971,543

City of Santa Cruz

Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets June 30, 2008

Total Fund Balances - All Governmental Funds

$

50,198,259

Amounts reported for Governmental Activities in the Statement of Net Assets were different because: Capital assets used in governmental activities are not current financial resources. Therefore, they were not reported in the governmental funds, with the exception of the internal service funds: Non-depreciable

GovernmentWide Statement of Net Assets

Internal Service Funds

$

$

Depreciable, net

60,796,357 123,889,576

$

Total capital assets

184,685,933

$

(1,014,002)

59,782,355

(188,842)

123,700,734

(1,202,844)

183,483,089

Interest payable on long-term debt does not require current financial resources. Therefore, interest payable is not reported as a liability in the governmental funds.

(209,669)

Internal Service Funds are used by management to charge the costs of certain activities, such as insurance and equipment management, to individual funds. The assets and liabilities of the Internal Service Funds are included in governmental activities in the Statement of Net Assets. Equipment Operations Fund

568,534

Telecommunications Fund

294,153

Risk Management Fund

(364,534)

Total internal service funds

498,153

Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the governmental funds. Noncurrent liabilities were not due and payable in the current period. Therefore, they were not reported in the governmental funds with the exception of the internal service funds: Compensated absences payable - due within one year

974,276 GovernmentWide Statement of Net Assets

Internal Service Funds

$

$

42,128

(1,905,703)

Compensated absences payable - due in more than one year

(973,914)

21,063

(952,851)

Bonds, notes, loans and leases payable - due within one year

(2,041,226)

-

(2,041,226)

(23,679,758)

-

(23,679,758)

63,191

(28,579,538)

Bonds, notes, loans and leases payable - due in more than one year Total long-term liabilities

$

(1,947,831)

(28,642,729)

$

Certain transactions related to debt issuance and refunding are reported as expenditures and other financing sources/uses in the governmental funds. For the Statement of Net Assets, the net amount of these transactions is capitalized as deferred charges, and will be amortized as an adjustment to interest expense over the remaining life of the debt. Net Assets of Governmental Activities

249,997 $

See accompanying Notes to Basic Financial Statements.

29

206,614,567

City of Santa Cruz Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the year ended June 30, 2008

Major Funds

Non-Major

Total

General

Redevelopment

General Capital

Governmental

Governmental

Fund

Agency

Improvement

Funds

Funds

REVENUES: Taxes

$

Licenses and permits Intergovernmental

45,809,387

$

11,956,560

$

1,455,615

$

965,772

935,191

-

-

427,481

$

60,187,334 1,362,672

854,975

-

1,686,829

5,249,753

7,791,557

Charges for services

22,559,336

-

-

224,934

22,784,270

Fines and forfeitures

2,123,686

-

-

110,000

2,233,686

Use of money and property

3,062,604

864,011

-

457,051

4,383,666

198,312

1,149,855

1,704,593

458,316

3,511,076

75,543,491

13,970,426

4,847,037

7,893,307

102,254,261

General government

13,982,305

-

231,329

-

14,213,634

Public safety

32,853,383

-

-

25,000

32,878,383

Parks and recreation

10,464,762

-

196,311

-

10,661,073

Library

10,298,783

-

-

-

10,298,783

4,642,061

-

4,423,732

1,032,249

10,098,042

-

-

-

727,191

727,191 11,007,630

Other revenues Total revenues EXPENDITURES:

Public works Transit Community and economic development

22,820

7,441,378

632,462

2,910,970

Social services

1,816,741

-

-

150,199

1,966,940

Capital outlay

1,024,209

717,564

8,037,127

3,018,516

12,797,416

146,019

1,722,534

115,000

193,004

2,176,557

Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES

45,174

546,024

305,371

570,134

1,466,703

75,296,257

10,427,500

13,941,332

8,627,263

108,292,352

247,234

3,542,926

(9,094,295)

46,045

-

-

-

46,045

-

-

-

6,881,849

6,881,849

74,240

-

7,772,237

293,664

8,140,141

(733,956)

(6,038,091)

OTHER FINANCING SOURCES (USES): Proceeds from asset disposition Proceeds from long-term debt issued Transfers in Transfers out Total other financing sources (uses) Net change in fund balances

(1,127,990)

-

(1,007,705)

-

(760,471)

(10,440)

(6,865,708)

(8,004,138)

7,761,797

309,805

7,063,897

3,542,926

(1,332,498)

(424,151)

1,025,806

15,946,596

(1,296,761)

FUND BALANCES: Beginning of year End of year

26,419,420 $

25,658,949

$

See accompanying Notes to Basic Financial Statements.

30

19,489,522

$

(2,629,259)

8,103,198 $

7,679,047

49,172,453 $

50,198,259

City of Santa Cruz Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Assets For the year ended June 30, 2008

Net Change in Fund Balances - All Governmental Funds

$

1,025,806

Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were different because:

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the Governmental funds (not including Internal service funds) for the current period. Capital assets Depreciation

$

12,864,636 (7,176,014) 5,688,622

Revenues considered "unavailable" at the end of the previous fiscal year were collected during the current year and are reported as revenues in the governmental funds. These revenues were previously included in the Statement of Activities.

147,806

Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.

(498,792)

Proceeds of long-term debt and payments to refunding bond escrow agents are reported as financing sources/uses in governmental funds. In the Statement of Net Assets, however, issuing or refinancing debt affects noncurrent liabilities.

(18,469)

Certain costs related to issuing new debt and refunding existing debt are reported as expenditures and financing uses in the governmental funds, but are capitalized in the Statement of Net Assets, and will be amortized over the remaining life of the debt.

(6,880,000)

Repayment of principal is an expenditure in governmental funds, but reduces noncurrent liabilities in the Statement of Net Assets.

2,176,557

Accrued but unpaid and accreted interest on long-term debt is reported in the Statement of Activities, but does not require the use of current financial resources. Therefore, it is not reported as an expenditure in the governmental funds.

(108,647)

Internal service funds are used by management to charge the costs of certain activities, such as insurance and equipment management, to individual funds. The net revenue of the internal service funds is reported with governmental activities. Change in Net Assets of Governmental Activities

2,450,168 $

See accompanying Notes to Basic Financial Statements.

31

3,983,051

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32

Proprietary Fund Financial Statements Water - Accounts for the activities of the City's water utility, which provides water delivery services to the residents of the City and some residents of the County. Wastewater - Accounts for the activities of the City's wastewater utility, which provides wastewater collection and treatment services to the residents of the City and some residents of the County. Refuse - Accounts for the activities of the City's refuse utility, which provides refuse pick-up services, recycling services, and a sanitary landfill for residents of the City. Parking - Accounts for the activities of the Downtown Parking District, which provides parking facilities in the downtown area. Storm Water - Accounts for storm water utility fees on properties within the City limits. These fees provide funding for flood control improvements associated with the U.S. Army Corps of Engineers San Lorenzo River Flood Control project, storm water pollution prevention programs, and measures to comply with the U.S. Environmental Protection Agency Non-Point Pollution Discharge Emissions Standards Program (NPDES). Golf Course - Accounts for the activities of the Delaveaga Golf Course, which provides recreational facilities to the public. Internal Service Funds - These funds are used to provide goods and services by one department or agency to other departments or agencies of the City on a cost reimbursement basis, and can be found in detail in the Supplementary Information section of this report.

33

City of Santa Cruz Statement of Net Assets Proprietary Funds June 30, 2008

Enterprise Funds

Water

Wastewater

Refuse

Parking

ASSETS Current assets: Cash and cash equivalents

$

34,106,738

Restricted cash and cash equivalents Interest receivable Accounts receivable - net Due from other governments

$

10,893,430

$

11,724,870

$

3,869,742

93,741

3,311

142,540

1,513

324,959

469,249

102,827

41,088

5,487,642

2,452,032

894,269

29,851

-

184,403

-

11,700

Inventories

-

-

-

-

Deposits

-

-

-

30,000

40,013,080

14,002,425

12,864,506

3,983,894

Total current assets Noncurrent assets: Restricted cash and cash equivalents

-

-

-

-

Restricted investments

-

371,016

931,645

495,522

Notes receivable - due in more than one year Intergovernmental receivable - due in more than one year Advances to other funds Deferred charges

401,058

-

-

-

-

15,008,579

-

-

5,164

78,018

-

-

416,888

245,643

257,364

192,419

3,654,410

1,371,330

98,575

4,638,102

Capital assets: Land Land improvements

71,900

910,270

-

280,701

71,455,148

52,596,348

19,346,219

1,125,817

Buildings

9,245,067

126,672,607

2,709,093

20,465,211

Machinery and equipment

6,122,085

4,257,303

13,116,298

404,806

-

70,000

-

-

Infrastructure

Lease improvements Software Construction in progress Less accumulated depreciation

265,431

196,557

99,336

9,933

12,465,580

193,141

109,351

35,947

(38,307,402)

(73,991,624)

(19,445,178)

(7,747,942)

Total capital assets (net of accumulated depreciation)

64,972,219

112,275,932

16,033,694

19,212,575

Total noncurrent assets

65,795,329

127,979,188

17,222,703

19,900,516

105,808,409

141,981,613

30,087,209

23,884,410

Total assets

See accompanying Notes to Basic Financial Statements.

34

Enterprise Funds

Governmental Activities Internal

Storm Water

$

Golf Course

2,401,647 806

$

Total

32,187 122,026

13,706

(8,554)

$

Service Funds

63,028,614

$

8,233,561

363,937

-

943,275

74,242 56,324

37,307

72,486

8,973,587

166,536

7,600

370,239

-

-

-

-

152,449

-

-

30,000

1,596,386

2,620,002

225,745

73,709,652

10,112,962

-

-

-

-

-

339,286

2,137,469

-

-

-

401,058

125,438

-

15,134,017

-

-

-

83,182

-

739,012

122,666

1,973,992

-

8,822

1,819,287

11,590,526

-

-

2,450,870

3,713,741

-

22,514,868

234,362

167,272,762

-

-

1,236,318

160,328,296

-

6,421

657,061

24,563,974

1,206,643

-

-

70,000

-

-

-

571,257

336,296

15,229,557

1,014,002

(5,498,802)

2,425,538

(1,775,058)

-

(146,766,006)

(1,354,097)

19,456,847

4,622,840

236,574,107

1,202,844

20,321,297

5,084,792

256,303,825

1,202,844

22,941,299

5,310,537

330,013,477

11,315,806

(Continued)

35

City of Santa Cruz Statement of Net Assets, Continued Proprietary Funds June 30, 2008

Enterprise Funds

Water

Wastewater

Refuse

Parking

LIABILITIES Current liabilities: Accounts payable and other current liabilities

$

2,156,746

Due to other funds Interest payable Unearned revenue Deposits payable

$

1,497,917

$

382,690

$

199,593

-

-

-

-

181,509

847,289

103,271

47,688

622

-

36,226

-

35,262

37

603

23,457

Claims and judgments payable

-

-

-

-

Compensated absences payable

290,513

142,101

167,072

17,143

due in less than one year

305,395

2,780,111

1,711,451

210,000

Total current liabilities

2,970,047

5,267,455

2,401,313

497,881 438,000

Bonds, notes, loans and leases payable

Noncurrent liabilities: Advances from other funds

-

-

-

Claims and judgments payable

-

-

-

-

Compensated absences payable

145,256

71,051

83,536

8,572

12,248,166

33,632,045

8,506,244

5,730,000

-

-

6,363,712

-

Bonds, notes, loans and leases payable due in more than one year Landfill closure costs Total noncurrent liabilities

12,393,422

33,703,096

14,953,492

6,176,572

Total liabilities

15,363,469

38,970,551

17,354,805

6,674,453

Invested in capital assets, net of related debt

52,418,659

75,863,776

5,815,999

13,272,575

Unrestricted

38,026,281

27,147,286

6,916,405

3,937,382

NET ASSETS

Total net assets

$

90,444,940

$

103,011,062

$

12,732,404

$

17,209,957

$

-

$

-

$

-

$

-

See accompanying Notes to Basic Financial Statements.

36

Enterprise Funds

Governmental Activities Internal

Storm Water

$

Golf Course

111,444

$

-

Total

187,384

$

Service Funds

4,535,774

$

437,234

-

-

5,673

56,331

31,010

1,267,098

-

-

18,389

55,237

-

-

-

59,359

-

-

-

-

2,812,930

1,277

21,465

639,571

42,128

175,000

263,350

5,445,307

-

344,052

521,598

12,002,346

3,297,965

-

1,510,000

1,948,000

-

-

-

-

7,498,625

639

10,733

319,787

21,063

5,595,000

3,505,840

69,217,295

-

-

-

6,363,712

-

5,595,639

5,026,573

77,848,794

7,519,688

5,939,691

5,548,171

89,851,140

10,817,653

853,650

161,911,506

1,202,844

13,686,847 3,314,761

(1,091,284)

78,250,831

(704,691)

$

17,001,608

$

(237,634)

$

240,162,337

$

498,153

$

-

$

-

$

-

$

(Concluded)

37

City of Santa Cruz Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds For the year ended June 30, 2008

Enterprise Funds

Water

Wastewater

Refuse

Parking

OPERATING REVENUES: Charges for services

$

25,205,503

$

15,289,391

$

16,570,435

$

2,637,422

Use of property

6,600

-

-

102,228

Other revenues

265,227

(13,456)

47,044

68,370

Total operating revenues

25,477,330

15,275,935

16,617,479

2,808,020

8,195,319

5,259,993

6,319,863

1,186,050

OPERATING EXPENSES: Personnel services Services, supplies, and other charges

8,419,538

5,161,635

6,262,254

1,243,460

Depreciation and amortization

1,980,208

4,512,812

1,875,054

526,760

Total operating expenses

18,595,065

14,934,440

14,457,171

2,956,270

Operating income (loss)

6,882,265

341,495

2,160,308

(148,250)

NONOPERATING REVENUES (EXPENSES): Intergovernmental

157,690

Investment earnings

1,758,018

Interest expense and fiscal charges Debt issuance costs Gain (loss) on sale of capital assets

(337,182)

26,916

125,819

785,825

537,609

199,309

(561,220)

(1,080,307)

(519,310)

(293,670)

(13,664)

(16,059)

(37,201)

(9,910)

9,125

3,735

(6,665)

-

Total nonoperating revenues (expenses)

1,349,949

(643,988)

1,349

Income (loss) before contributions and transfers

8,232,214

(302,493)

2,161,657

(126,702)

1,148,702

-

-

-

16,152

-

-

Capital contributions Transfers in Transfers out

(35,430)

21,548

-

(8,169)

(21,969)

(93)

(21,969)

(93)

Total contributions and transfers

1,129,424

(8,169)

Change in net assets

9,361,638

(310,662)

2,139,688

(126,795)

NET ASSETS: Beginning of year Prior period adjustment (Note 16) Beginning of year, as restated End of year

$

81,083,302

103,321,724

10,592,716

17,336,752

-

-

-

-

81,083,302

103,321,724

10,592,716

17,336,752

90,444,940

See accompanying Notes to Basic Financial Statements.

38

$

103,011,062

$

12,732,404

$

17,209,957

Enterprise funds

Governmental Activities Internal

Storm Water

$

Golf Course

876,944

$

1,896,967

$

Service Funds

62,476,662

$

8,934,301

-

1,150

109,978

59,974

-

156,594

523,779

7,943

876,944

2,054,711

63,110,419

9,002,218

127,828

995,549

22,084,602

1,451,714

322,889

1,810,476

23,220,252

5,361,227

732,932

197,718

9,825,484

96,385

1,183,649

3,003,743

55,130,338

6,909,326

(949,032)

7,980,081

2,092,892

(306,705)

1,247,691

82,529

1,303,463

-

128,275

(22,691)

3,386,345

447,782

(231,417)

(199,982)

(2,885,906)

(4,012)

(35,092)

(10,481)

(122,407)

-

-

1,395

7,590

-

1,109,457

(149,230)

1,689,085

443,770

802,752

(1,098,262)

9,669,166

2,536,662

-

-

1,148,702

-

-

-

16,152

-

-

(65,661)

-

-

1,099,193

802,752

(1,098,262)

10,768,359

2,450,168

253,686,501

(1,952,015)

40,491,379

860,628

(24,292,523)

-

16,198,856 $

Total

17,001,608

(237,634)

(86,494)

(24,292,523)

860,628 $

(86,494)

-

229,393,978 $

240,162,337

(1,952,015) $

498,153

39

(49,509)

City of Santa Cruz Combining Statement of Cash Flows Proprietary Funds For the year ended June 30, 2008

Enterprise Funds

Water

Wastewater

Refuse

Parking

CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers and users

$

Cash received from interfund services provided

23,465,754

$

14,554,744

$

17,215,514

$

2,647,211

-

-

-

-

Cash payments to suppliers for goods and services

(5,698,252)

(3,350,435)

(3,716,740)

(1,039,627)

Cash payments to employees for services

(8,043,476)

(5,179,827)

(6,230,291)

(1,173,437)

Cash payments for interfund services used

(1,817,242)

(1,155,312)

(2,429,673)

(84,238)

-

-

-

-

271,827

(13,456)

47,044

170,598

4,885,854

520,507

Cash payments to other governments Cash received from (payments to) others Net cash provided (used) by operating activities

8,178,611

4,855,714

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in

16,152

Transfers out Advances from other funds Advances to other funds Receipts from other governments Net cash provided (used) by noncapital financing activities

-

-

(35,430)

(8,169)

(21,969)

-

-

-

(93) 87,000

8,421

11,314

-

-

157,690

1,212,098

26,916

155,550

146,833

1,215,243

4,947

242,457

1,148,702

-

-

(284,994)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital contributions Purchase and construction of capital assets

(7,970,109)

(1,291,690)

(1,340,946)

Principal paid on capital debt

(278,194)

(2,683,434)

(2,318,487)

(195,090)

Interest paid on capital debt

(578,375)

(1,160,350)

(571,602)

(306,013)

(6,665)

-

(4,237,700)

(786,097)

Proceeds from sales of capital assets

9,125

3,735

Net cash provided (used) by capital and related financing activities

(7,668,851)

(5,131,739)

-

(371,016)

CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales and maturities of investments Interest receivables

148,442

(495,522)

59,716

24,866

5,447

1,096

1,758,018

785,825

537,609

199,309

Net cash provided (used) by investing activities

1,817,734

439,675

691,498

(295,117)

Net increase (decrease) in cash and cash equivalents

2,474,327

1,378,893

1,344,599

(318,250)

31,726,152

9,517,848

10,522,811

Investment income received

CASH AND CASH EQUIVALENTS: Beginning of year End of year

$

34,200,479 -

See accompanying Notes to Basic Financial Statements.

40

$

10,896,741 -

$

11,867,410 -

4,189,505 $

3,871,255 -

Enterprise Funds

Governmental Activities Internal

Storm Water

$

Golf Course

876,447

$

Total

1,910,867

$

Service Funds

60,670,537

$

11,464

-

-

-

(223,767)

(1,075,891)

(15,104,712)

(5,178,583)

(128,704)

(992,589)

(21,748,324)

(1,434,422)

(42,379)

(508,537)

(6,037,381)

(195,065)

-

(130,750)

(130,750)

-

-

(399,422)

76,591

-

481,597

(1,196,322)

17,725,961

2,137,695

-

-

16,152

-

-

(65,661)

-

1,510,000

8,934,301

(86,494)

1,597,000

-

-

-

19,735

-

1,409,925

82,529

3,044,708

-

1,409,925

1,592,529

4,611,934

(86,494)

2,100

-

-

1,148,702

(1,891,532)

-

(12,779,271)

(1,103,869)

(133,100)

(239,822)

(5,848,127)

-

(268,209)

(212,074)

(3,096,623)

-

1,395

-

7,590

(2,292,841)

(450,501)

(20,567,729)

-

(1,103,869)

(49,662)

(767,758)

15,979

5,393

112,497

128,275

(22,691)

3,386,345

443,770

144,254

(66,960)

2,731,084

435,932

(257,065)

(121,254)

4,501,250

1,383,264

275,467

58,891,301

6,850,297

2,659,518 $

-

2,402,453 -

$

154,213 -

$

63,392,551 -

(7,838)

$

8,233,561 (Continued)

41

City of Santa Cruz Combining Statement of Cash Flows, Continued Proprietary Funds For the year ended June 30, 2008

Enterprise Funds

Water

Wastewater

Refuse

Parking

RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income (loss)

$

6,882,265

$

341,495

$

2,160,308

$

(148,250)

Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Estimated closure/postclosure costs

1,980,208

4,512,812

1,875,054

526,760

-

-

308,476

-

(1,747,450)

Changes in assets and liabilities: Accounts receivable

(734,626)

656,866

5,175

76,285

50,857

82,642

-

Inventories

-

-

-

-

Deposits

-

-

-

-

Notes and loans receivable

-

-

-

119,595

Prepaid items

904,044

655,888

(192,635)

Due to other funds

Accounts payable and other current liabilities

-

-

-

-

Deferred revenue

-

-

(11,787)

-

Deposits payable

7,701

-

4,614

Claims and judgments payable

-

-

-

-

Compensated absences payable

75,558

29,309

6,930

12,613

1,296,346

4,514,219

2,725,546

668,757

Total adjustments Net cash provided (used) by operating activities

$

See accompanying Notes to Basic Financial Statements.

42

8,178,611

(21)

$

4,855,714

$

4,885,854

$

520,507

Enterprise Funds

Governmental Activities Internal

Storm Water

$

Golf Course

(306,705)

$

(949,032)

$

Service Funds

7,980,081

$

2,092,892

732,932

197,718

9,825,484

96,385

-

-

308,476

-

(497)

13,900

(1,806,632)

(48,510)

-

-

209,784

-

-

-

-

(18,808)

-

-

-

-

-

-

-

-

95,298

1,638,933

201,452

56,743 -

(557,166)

(557,166)

-

-

(11,787)

-

-

12,294

(203,927)

-

-

-

-

2,960

126,494

17,292

9,745,880

44,803

(876) 788,302 $

Total

481,597

(247,290) $

(1,196,322)

$

17,725,961

919 -

$

2,137,695

(Concluded)

43

This page intentionally left blank.

44

Fiduciary Fund Financial Statements Private - Purpose Trust Funds: Private-purpose trust funds are used to report the trust arrangements under which the principal and income benefit the Library Joint Powers Authority. Agency Funds: Agency funds are used to account for resources held by the City in a custodial capacity. These funds account for the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments.

45

City of Santa Cruz Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2008

PrivatePurpose

Agency

Trust Funds

Funds

ASSETS Cash and cash equivalents

$

Restricted cash and cash equivalents

540,755

$

-

1,895,765 64,634

Receivables: Interest receivable Taxes receivable Accounts receivable

4,930

12,728

-

569,410

-

507,692

Due from other governments

-

26,554

Prepaid items

-

-

Total assets

$

545,685

$

3,076,783

-

$

1,860,009

LIABILITIES Accounts payable and other current liabilities

$

Due to other governments

-

406,668

Deferred revenue

-

76,422

Deposits payable

-

449,709

Payable to bondholders

-

283,975

Total liabilities

-

NET ASSETS Held in trust for library programs

$

See accompanying Notes to Basic Financial Statements.

46

545,685

$

3,076,783

City of Santa Cruz Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the year ended June 30, 2008

PrivatePurpose Trust Funds ADDITIONS: Investment earnings

$

Total additions

25,893 25,893

DEDUCTIONS: Library programs

23,355

Total deductions

23,355

Change in net assets

2,538

NET ASSETS: Beginning of year

543,147

End of year

$

See accompanying Notes to Basic Financial Statements.

47

545,685

This page intentionally left blank.

48

City of Santa Cruz Index to Notes to the Basic Financial Statements For the year ended June 30, 2008

Page Note 1 - Summary of Significant Accounting Policies..................................................................................51 A. B. C. D. E. F. G. H. I. J. K. L. M. N. O. P. Q. R. S.

Reporting Entity..............................................................................................................................51 Basis of Accounting and Measurement Focus............................................................................51 Use of Restricted/Unrestricted Net Assets.................................................................................54 Cash, Cash Equivalents and Investments ...................................................................................54 Restricted Cash and Investments with Fiscal Agents................................................................54 Prepaid Items ..................................................................................................................................54 Inventories .......................................................................................................................................55 Interfund Transactions...................................................................................................................55 Capital Assets..................................................................................................................................55 Interest Payable...............................................................................................................................56 Deferred Revenue ...........................................................................................................................56 Compensated Absences .................................................................................................................57 Bond Premiums, Discounts, and Issuance Costs .......................................................................57 Long-Term Debt..............................................................................................................................57 Net Assets ........................................................................................................................................57 Fund Balances – Reservations and Designations .......................................................................58 Property Taxes ................................................................................................................................58 Use of Estimates..............................................................................................................................58 Implementation of New Governmental Accounting Standards Board Pronouncements ........................................................................................58

Note 2 - Cash Deposits and Investments .........................................................................................................59 A. Cash Deposits..................................................................................................................................60 B. Investments .....................................................................................................................................60 C. Risk Disclosures ..............................................................................................................................62 Note 3 – Receivables ............................................................................................................................................64 Note 4 – Interfund Balances and Transactions ...............................................................................................66 A. Government-Wide Financial Statements ....................................................................................66 B. Fund Financial Statements ............................................................................................................68 Note 5 – Capital Assets ........................................................................................................................................69 A. Government-Wide Financial Statements ....................................................................................69 B. Fund Financial Statements ............................................................................................................73

49

City of Santa Cruz Index to Notes to the Basic Financial Statements, Continued For the year ended June 30, 2008

Page Note 6 – Long-Term Debt....................................................................................................................................73 A. Governmental Activities Long-Term Debt .................................................................................76 B. Proprietary Fund Obligations .......................................................................................................81 Note 7 – Risk Management and Self Insurance..............................................................................................87 Note 8 – Landfill Closure and Postclosure Costs ...........................................................................................90 Note 9 – Retirement Plans...................................................................................................................................91 A. Pension Plan ....................................................................................................................................91 Note 10 – Post-Employment Retirement Benefits ..........................................................................................93 Note 11 – Commitments and Contingencies ...................................................................................................94 Note 12 – Operating Leases ................................................................................................................................95 Note 13 – Reserved and Designated Fund Balances ......................................................................................96 Note 14 – Deficit Net Assets ...............................................................................................................................97 Note 15 – Subsequent Events .............................................................................................................................97 Note 16 – Prior Period Adjustments..................................................................................................................98 A. Government-Wide Financial Statements ....................................................................................98 B. Fund Financial Statements ............................................................................................................98

50

City of Santa Cruz Notes to Basic Financial Statements For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Santa Cruz, California (City) have been prepared in conformity with Generally Accepted Accounting Principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below. A. Reporting Entity The City was incorporated as a town in 1866 under the laws of the State of California. It became a City in 1876. The City is a charter city administered under a council/manager form of government. The financial statements present the City and its component units (legally separate entities for which the City is considered to be financially accountable). Component units include those entities for which the City may have governing authority or is in a relationship of financial benefit or burden. Component units also include entities that are fiscally dependent upon the City. The financial activities of these entities are integrally related to those of the City and, therefore, blended with those of the City. Blending involves aggregating/merging component unit data and data from the City at the combined financial statement level. Based on the above criteria, the accompanying financial statements include the financial activities of the following entities as blended component units. Separate financial statements of these entities alone can be obtained from the Finance Department of the City. City of Santa Cruz Redevelopment Agency - The City of Santa Cruz Redevelopment Agency (Agency) was formed in 1956 to improve social, physical and economic conditions of the City by constructing a series of commercial, residential and public buildings in the downtown area. The City's Council members are the Agency's Directors and have full accountability for the Agency's fiscal matters. Santa Cruz Public Improvement Financing Corporation - The Santa Cruz Public Improvement Financing Corporation (Corporation) is a non-profit benefit corporation organized and operated under the laws of the State of California. The primary purpose of the Corporation is to serve as a financing vehicle for the City. The City Council has final responsibility for the operations of the Corporation. B. Basis of Accounting and Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The City’s Government-Wide Financial Statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. 51

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Government - Wide Financial Statements These basic financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories: Charges for services ¾ Operating grants and contributions ¾ Capital grants and contributions ¾

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 businesstype activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities and Changes in Net Assets, internal service fund transactions have been eliminated; however, those transactions between governmental and businesstype activities have not been eliminated. The following interfund activities have been eliminated: Due to/from other funds Advances to/from other funds ¾ Transfers in/out ¾ ¾

For its business-type activities, the City applies all applicable GASB pronouncements currently in effect, as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the Committee on Accounting Procedure that do not conflict with or contradict GASB pronouncements. Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the Government-Wide Financial Statements. The City has presented all major funds that met the applicable criteria. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. 52

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued Revenues are recorded when received in cash, except for that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property tax, sales tax, intergovernmental revenues and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Deferred revenues arise when potential revenues do not meet both the “measurable” and “available” criteria for recognition in the current period. Deferred revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when the government has a legal claim to the resources, the deferred revenue is removed from the Balance Sheet and revenue is recognized. The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a Statement of Net Assets, a Statement of Revenues, Expenses and Changes in Net Assets, and a Statement of Cash Flows for each major proprietary fund. A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. Internal Service Funds may be used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government. Examples are Equipment Operations, Stores Services, Telecommunications, and Risk Management Funds. Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Assets. The Statement of Revenues, Expenses and Changes in Net Assets increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts. 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 nonoperating expenses.

53

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Fiduciary Fund Financial Statements Fiduciary Fund Financial Statements include a Statement of Net Assets and a Statement of Changes in Fiduciary Net Assets. The City's fiduciary funds represent agency funds and private-purpose trust funds. Agency funds include asset held on behalf of the Library Joint Powers Authority, Payroll Payables, and Special Assessments. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds are accounted for using the accrual basis of accounting. The private-purpose trust funds are used to account for resources legally held in trust for special purposes, such as McCaskill Trust – Local History, McCaskill Trust – Visually Impaired, and The Finkeldey Trust – Musical Literature. C. Use of Restricted / Unrestricted Net Assets When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the City’s policy is to apply restricted net assets first. D. Cash, Cash Equivalents, and Investments Cash and cash equivalents are considered to be amounts in demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. For purposes of both the balance sheet and statements of cash flows, cash and cash equivalents includes not only currency on hand, but deposits in the City’s cash and investment pool. These deposits have the same characteristics for the participating funds as demand deposit accounts, in that the funds may deposit additional cash at any time and also effectively withdraw cash at any time without prior notice or penalty. Cash and cash equivalents also include restricted cash and money market funds held by fiscal agents. The City’s cash and investments are stated at fair value, which is based on a quoted market price. This includes all investments except the City’s investment in the California Local Agency Investment Fund (LAIF). LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. The City valued its investments in LAIF as of June 30, 2008, by multiplying its account balance with LAIF times a fair value factor determined by LAIF (.999950219). This fair value factor was determined by dividing the total aggregate fair value for all LAIF participants by the total aggregate amortized cost. E. Restricted Cash and Investments with Fiscal Agents Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and for acquisition and construction of capital projects. F. Prepaid Items Certain payments applicable to future accounting periods are recorded as prepaid items. Prepaid items do not reflect current appropriable resources and, thus, an equivalent portion of fund balance is reserved. 54

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued G. Inventories Inventories consist of material and supplies which are stated at cost using the first-in, first-out method. Inventories are recognized as expenditures when consumed rather than when purchased. H. Interfund Transactions Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the long-term portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the Government-Wide Financial Statements as “internal balances.” I. Capital Assets Capital assets are defined by the City as assets having an estimated useful life in excess of one year, and an initial, individual cost in excess of the capitalization thresholds described below: Infrastructure Buildings and lease improvements Land improvements Machinery and equipment Software (if qualified)

$

25,000 10,000 10,000 5,000 5,000

All capital assets are valued at historical cost or estimated historical cost if historical cost is not available. Donated capital assets are valued at their estimated fair market value on the date donated. Assets acquired under capital leases are capitalized in accordance with GAAP. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest accrued during capital assets construction, if any, is capitalized for the business-type activities and proprietary funds as part of the asset cost. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset’s useful life are not capitalized. Capital assets are reported in the applicable governmental or business-type activities in the Government-Wide Financial Statements. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Land improvements Buildings and lease improvements Water tanks and water mains Underground sewer lines Other infrastructure Machinery and equipment Software ( if qualified)

55

20 years 15-50 years 30-50 years 50 years 5-100 years 5-20 years 5 years

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued I. Capital Assets, Continued Assets are grouped by asset type into one of the following accounts: land; land improvements; infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), buildings (and improvements); machinery and equipment; lease improvements; software; and construction in progress. GASB issued Statement No. 34 which requires the inclusion of infrastructure capital assets in local governments’ Basic Financial Statements. In accordance with Statement No. 34, the City has included the value of all infrastructure in the fiscal year 2003 Basic Financial Statements. For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure reporting. Estimated historical costs were developed in one of three ways: 1) historical records; 2) standard unit costs appropriate for the construction/acquisition date; or 3) present cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the current date. The accumulated depreciation, defined as the total depreciation from the date of construction/acquisition to the current date on a straight line, unrecovered cost method was computed using industry-accepted life expectancies for each infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation from the estimated historical cost. J.

Interest Payable In the Government-Wide Financial Statements, interest payable on long-term debt is recognized as the liability is incurred for governmental fund types and proprietary fund types. In the Fund Financial Statements, propriety fund types recognize the interest payable when the liability is incurred.

K. Deferred Revenue In the Government-Wide Financial Statements, deferred revenue is recognized for transactions for which revenue has not yet been earned. Typical transactions recorded as deferred revenues in the Government-Wide Financial Statements are long-term assessments, long-term loans receivable, and prepaid charges for services. In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the revenue recognition criteria based on the modified accrual basis of accounting. The City records deferred revenue for transactions for which revenues have not been earned, or for which funds are not available to meet current financial obligations. Typical transactions for which deferred revenue is recorded are grants received but not yet earned or available, interest on interfund advances receivable, long-term assessments, and loans receivable.

56

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Compensated Absences The City has accumulated unpaid regular vacation leave (for all departments) which is accounted for in accordance with GAAP. The maximum accumulation of vacation leave is limited to the total number of hours accruable during two years. Employees are paid 100% of their accumulated vacation pay when they terminate their employment for any reason. Employees are allowed a partial payoff of accumulated sick leave up to a certain maximum amount. M. Bond Premiums, Discounts, and Issuance Costs For governmental type activities, bond premiums and discounts, as well as issuance costs, are recognized during the current period. Bond proceeds are reported as other financing sources net of the applicable premium or discount. Issuance costs, whether or not withheld from the actual net proceeds received, are reported as debt service expenditures. For business-type activities, bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using a straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs and costs in excess of net assets acquired are reported as other assets in the accompanying financial statements. N. Long-Term Debt Government-Wide Financial Statements - Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Fund Financial Statements - With the exception of compensated absences and advances from other funds, the governmental fund financial statements do not present long-term liabilities. However, the long term debt is shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets. O. Net Assets In the Government-Wide Financial Statements, net assets are classified in the following categories: Invested in Capital Assets, Net of Related Debt – This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets. Restricted Net Assets – This amount is restricted by external creditors, grantors, contributors, laws or regulations of other governments. Unrestricted Net Assets – This amount is all net assets that do not meet the definition of “invested in capital assets, net of related debt” or “restricted net assets.”

57

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued P. Fund Balances - Reservations and Designations In the Fund Financial Statements, governmental funds report reservations of fund balances for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balances represent tentative management plans that are subject to change. Q. Property Taxes Assessed property values are determined annually by the County Assessor as of March 1, and become a lien on real property at July 1. Taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County bills and collects property taxes and remits them to the City under the State-authorized method of apportioning taxes whereby all local agencies, including cities, receive from the county their respective shares of the amount of ad valorem taxes collected. Property tax revenues are recognized when levied, provided the measurement and availability criteria have been met. R. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In addition, estimates affect the reported amount of expenses. Actual results could differ from these estimates and assumptions. S. Implementation of New Governmental Accounting Standards Board (GASB) Pronouncements The City adopted new accounting standards in order to conform to the following GASB Statements: •

GASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of Assets and Future Revenues – this Statement establishes accounting and financial reporting standards for transactions in which a government receives, or is entitled to, resources in exchange for future cash flows generated by collecting specific receivables or specific future revenues.

•

GASB Statement No. 50, Pension Disclosures – An Amendment of GASB Statements No. 25 and 27 – this Statement more closely aligns the financial reporting requirements for pensions with those for other post-employment benefits (OPEB) and in doing so, enhances information disclosed in notes to financial statements or presented as RSI by pension plans and by employers that provide pension benefits.

58

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

2. CASH DEPOSITS AND INVESTMENTS The following is a summary of cash, cash equivalents, and investments, including restricted cash and investments with fiscal agents at June 30, 2008: Government-Wide Statement of Net Assets Governmental

Business-Type

Activities

Activities

Statement of Fiduciary

Total

Net Assets

Total

Unrestricted assets: Cash and cash equivalents

$

Total unrestricted assets

43,525,083

$

63,028,614

$

106,553,697

$

2,436,520

$

108,990,217

43,525,083

63,028,614

106,553,697

2,436,520

108,990,217

3,096,426

363,937

3,460,363

64,634

3,524,997

808,407

2,137,469

2,945,876

-

2,945,876

3,904,833

2,501,406

6,406,239

64,634

6,470,873

Restricted assets: Cash and cash equivalents Investments with fiscal agents Total restricted assets Grand Total

$

47,429,916

$

65,530,020

$

112,959,936

$

2,501,154

$

115,461,090

The City pools its available cash for investment purposes. Investment income from this pool is allocated to each fund based on its proportionate share of the pool. Cash and investments not pooled include bond proceeds held by fiscal agents and other amounts required to be segregated by bond indentures or other regulations. Investment income from cash and investments with fiscal agents is credited directly to the related fund. Cash, cash equivalents, and investments consisted of the following at June 30, 2008: Cash and cash equivalents: Pooled cash deposits Outstanding checks Other deposits and cash held by city Certificates of deposit Money market mutual funds available for debt service Federal securities State local agency investment fund

$

Total cash and cash equivalents

2,969,216 (3,290,818) 50,641 596,000 200,352 37,728,927 70,735,900 108,990,218

Restricted cash and cash equivalents: Pooled cash deposits Other cash deposits Money market mutual funds held by fiscal agents State local agency investment fund

512,876 81,257 179,121 2,751,742

Total restricted cash and cash equivalents

3,524,996

Restricted investments: Federal securities held by fiscal agents

2,945,876

Total restricted investments

2,945,876

Total cash, cash equivalents, and investments

$

59

115,461,090

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

2. CASH DEPOSITS AND INVESTMENTS, Continued A. Cash Deposits At June 30, 2008, the carrying amounts of the City’s cash deposits were $323,172, net of outstanding checks in the amount of $3,290,818. Bank balances before reconciling items were $3,200,428. The total bank balance was collateralized or insured with securities held by the pledging financial institutions in the City’s name as discussed below. The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive, which it has, collateral requirements for cash deposits, which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation. B. Investments The investments made by the City treasurer are limited to those allowable under State statutes as incorporated into the City’s Investment Policy, dated May 31, 2008, which is more conservative than that allowed by State statute. The scope of the investment policy includes all activities of the City and the following reporting entities: ¾ ¾ ¾

City of Santa Cruz City of Santa Cruz Redevelopment Agency Santa Cruz Public Improvement Financing Corporation

Under provisions of this policy, the City is authorized to invest in the following types of investments: ¾ ¾ ¾ ¾ ¾ ¾

Money market accounts deposited with a nationally or state-chartered bank. Bonds issued by the City. Purchases of this type shall not exceed five years to maturity. U.S. Treasury bills, notes, bonds, or certificates of indebtedness, or those securities backed by the full faith and credit of the U.S. Government with maturities not to exceed five years. Obligations, participations, or other instruments of, or issued by, a Federal agency or a United States government-sponsored enterprise with maturities not to exceed five years. Bankers’ acceptances with a term not to exceed 180 days’ maturity or 40% of the City’s portfolio. Nonnegotiable and nontransferable certificates of deposit issued by a nationally or statechartered bank, state or federal credit union, or by a state-licensed branch of a foreign bank. Purchases may not exceed 30% of the City’s portfolio with no more than 5% of the portfolio deposited with a single issuer. 60

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

2. CASH DEPOSITS AND INVESTMENTS, Continued B. Investments, Continued State of California Local Agency Investment Fund as long as the total amount of City and Agency combined funds invested does not exceed the limit set by LAIF. ¾ Shares of beneficial interest issued by diversified management companies investing in authorized securities and obligations (e.g., money market mutual funds). Purchases shall not exceed 20% of the City’s portfolio with no more than 10% of the portfolio in a single mutual fund. ¾ Repurchase agreements with primary dealers of the Federal Reserve with specific terms and conditions. The market value of securities that underlie a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities, and the value shall be adjusted no less than quarterly. Securities that can be pledged for collateral consist only of investments permitted within this policy with a maximum maturity of five years. Purchases shall not exceed 92 days to maturity and 20% of the portfolio. ¾

Bond proceeds held by fiscal agents to be used only for specific capital outlay, payments of certain longterm debt and maintaining required reserves are invested in accordance with the requirements and restrictions of the City’s investment policy and as permitted by specific State statutes, applicable City ordinance or resolution, and bond indenture requirements. The City is a participant in LAIF, which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City’s investments with LAIF at June 30, 2008, included a portion of the pool funds invested in Structured Notes and Asset-Backed Securities: Structured Notes: debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities: generally mortgage-backed securities that entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (for example, Collateralized Mortgage Obligations) or credit card receivables. As of June 30, 2008, the City had $73,487,642 invested in LAIF accounts, which had invested 14.725% of the pool investments in structured notes and asset-backed securities as compared to 3.466% in the previous year. The City’s share of structured notes and asset-backed securities due to its holdings in LAIF amounted to approximately 9.399% of investments at June 30, 2008.

61

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

2. CASH DEPOSITS AND INVESTMENTS, Continued C. Risk Disclosures Interest Rate Risk - In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the weighted average maturity of its investment portfolio to two and-one half (2 ½) years or less. The City is in compliance with this provision of the investment policy. At June 30, 2008, the City had the following investment maturities: Investment Type

Fair Value

U.S. Agencies U.S. Treasury Money Market Funds Certificates of Deposit Local Agency Investment Fund Total Fair Value of Investments Only*

$

$

40,674,803 379,474 596,000 73,487,642 115,137,919

Portfolio Weighted Average Maturity (Days) Portfolio Weighted Average Maturity (Years)

Maturity (Days) 209 1 814 212 214 0.58

*Does not include net amount of bank balances

Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations - Investments in callable bonds are investments that, although having clearly defined maturities, allow for the issuer to redeem or call such bonds earlier than their respective maturity dates. The investor must then replace the called bonds with investments that may have lower yield than the original bonds. As a result, the fair value of the callable bonds is highly sensitive to changes in interest rates. As of June 30, 2008, the City held $19,630,707 in callable securities, which amounted to approximately 17.05% of investments at June 30, 2008. The investment policy limits the purchase of callable U.S. Agency instruments to discreet calls and those that pay 100% of the principal at the redemption date. In addition, purchases of callable U.S. Agency instruments are not to exceed 30% of the value of the portfolio. The City is in compliance with these provisions of the investment policy. Credit Risk - State law limits investments in commercial paper and corporate bonds to the top two ratings issued by nationally recognized statistical rating organizations. The City’s investments are rated as follows: Moody's

Standard & Poor's

Aaa Aaa Aaa Aaa

AAA AAA AAA AAA

Not Rated Aaa Aaa

AAAm-G AAAm AAAm-G

Not Rated

Not Rated

U.S. Agencies Federal Farm Credit Bank Federal Home Loan Bank Federal Home Loan Mortgage Corporation Federal National Mortgage Association U.S. Treasury Money Market Mutual Funds BlackRock - Treasury Trust Fund BlackRock - T-Fund Goldman Sachs - Treasury Instruments Portfolio External Pool State of California - Local Agency Investment Fund

62

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

2. CASH DEPOSITS AND INVESTMENTS, Continued C. Risk Disclosures, Continued The City’s investment policy requires that the management company of mutual funds must have attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations. The investment in BlackRock Treasury Trust Money Market Mutual Fund is rated by only one nationally recognized statistical rating organization; however, it is approved by the National Association of Investors Corporation. Concentration of Credit Risk - The City’s investment policy states that not more than 25% of the portfolio shall be invested in any one entity or any one instrument to protect the City from concentration of credit risk, with the following exceptions: U.S. Treasury Obligations and the external investment pool (State of California – Local Agency Investment Fund). In addition, purchases of mutual funds must not exceed 20% of the value of the portfolio. Purchases in a single mutual fund may not exceed 10% of the value of the portfolio. The City is in compliance with these provisions of the investment policy. The following chart presents investments in any one issuer (other than U.S. Treasury securities and external investment pools) that represent 5% or more of total investments at June 30, 2008: Percentage of Amount Invested

Investment Type Federal Home Loan Bank

$

Federal Home Loan Mortgage Corporation Federal National Mortgage Association Total

$

16,127,339

Investments 14.01%

8,009,700

6.96%

13,504,314

11.73%

37,641,353

32.70%

The following chart presents the City’s investments in money market mutual funds by issuer at June 30, 2008: U.S. Treasury Money Market

Percentage of

Mutual Funds

Amount Invested

BlackRock - Treasury Trust Fund

$

Investments

31,503

0.03%

BlackRock - T-Fund

186,908

0.16%

Goldman Sachs - Treasury Instruments Portfolio

161,062

0.14%

379,473

0.33%

Total

$

Custodial Credit Risk – For deposits, custodial credit risk is the risk that, in the event of the failure of a deposit financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. For an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the provision for deposits stated in Note 2A. $2,968,530 of the City’s deposits with financial institutions in excess of federal depository insurance limits was held in uncollateralized accounts. Of the City’s total cash and investment balance at June 30, 2008, $3,325,349 was held by fiscal agents, not in the name of the City, and invested as follows: $2,945,876 in federal agency securities and $379,473 in money market mutual funds. 63

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

3. RECEIVABLES Government-Wide Statements The following is a summary of receivables net of allowances for uncollectible amounts at June 30, 2008: Government-Wide Statement of Net Assets

Interest receivable

Governmental

Business-Type

Activities

Activities

$

753,358

$

Statement of Fiduciary

Total

943,275

$

1,696,633

Net Assets $

Total

17,658

$

1,714,291

Taxes receivable

3,571,486

1,884

3,573,370

569,410

4,142,780

Accounts receivable, net

1,900,855

8,971,703

10,872,558

507,692

11,380,250

Due from other governments

1,670,924

370,239

2,041,163

26,554

2,067,717

Notes receivable

6,343,281

401,058

6,744,339

-

6,744,339

Loans receivable

1,427,379

-

1,427,379

-

1,427,379

-

15,134,017

15,134,017

-

15,134,017

Intergovernmental receivable Total

$

15,667,283

$

25,822,176

$

41,489,459

$

1,121,314

$

42,610,773

Fund Financial Statements At June 30, 2008, the Fund Financial Statements show the following notes, loans and intergovernmental receivables: Notes Receivable in the General Fund of $215,252 (net of an allowance for uncollectible amounts of $374,953) consist of a note from Neary Lagoon Partners in the amount of $78,800; a promissory note from Santa Cruz Shaffer Road Investors for housing developments in the amount of $31,183; a loan to the River Street Shelter for repairs in the amount of $9,300; a loan to First Night Santa Cruz for $20,000; Harvey West Assessment District notes in the amount of $99,085; employee computer loans in the amount of $5,683; various notes for housing improvement activities in the Housing In-Lieu program of $276,154; and $70,000 in loans to two borrowers participating in the Accessory Dwelling Unit Loan Program. Some notes are secured by a deed of trust. The employee computer loan program provides two-year loans to employees with a simple interest rate of 5%, payable through payroll deductions. The Redevelopment Agency Fund notes receivable balance of $5,351,636 (net of an allowance of $434,882) represents loans for low/moderate income housing projects. There are two types of loan repayment for these notes: due upon sale or transfer and lump sum payment at maturity. Interest rates range from 0% to 7%. The notes are all secured by a deed of trust. Notes receivable in the Parks and Recreation special revenue fund of $122,944 pertain to a promissory note for housing developments – development impact fees. There is no interest on this promissory note. Loan repayment is deferred to a future date when monthly repayment will begin. The note is secured by a personal guarantee from Santa Cruz Shaffer Road Investors, LP, a California limited partnership.

64

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

3. RECEIVABLES, Continued Notes receivable in the Housing and Community Development special revenue fund of $653,449 (net of an allowance of $1,394,298) represent disaster relief funds for buildings damaged in the 1989 earthquake, in addition to a $75,000 interest-free loan made to the Homeless Services Center for local shelter operations payable in early 2017. There are two types of loan repayment plans: monthly repayment and deferred to a future date when monthly repayment will begin. The interest rate on these notes is 3%. The notes are all secured by a deed of trust. Notes receivable in the enterprise funds are made up of two notes totaling $401,058. Both are due from Neary Lagoon Partners for water system connection fees pertaining to a low-moderate income housing project. These notes do not bear interest, and repayment is deferred until 2019. Loans Receivable in other governmental funds of $1,427,379 (net of an allowance of $7,404,967) consists of loans for rehabilitation of low/moderate income housing. The loans are made with Federal funds from the Department of Housing and Urban Development (HUD). The City administers these funds for HUD. There are four types of loan repayment schedules: monthly installments, due upon sale or transfer, deferred to a future date when monthly repayment will begin, and no repayment if the property remains in use for low/moderate income housing for a specified time period. Interest rates range from 0% to 7%. The loans are all secured by a deed of trust on the property being rehabilitated. Intergovernmental Receivables in the enterprise funds total $15,134,017 and are comprised of amounts due from local and state governmental agencies. $125,438 of the total relates to a levee construction and improvement project. The remaining $15,008,579 ($1,183,932 due within one year and $13,824,647 due in more than one year) is owed by the County of Santa Cruz for its share of a State Water Resources Board loan for wastewater treatment plant upgrades. Payments of interest and principal from the County of Santa Cruz are due in annual installments of $1,604,172, at an interest rate of 2.8%, with the final payment due August 1, 2018. Allowance for uncollectible notes and loans - When considerable uncertainty exists as to the collectibility of a note (as determined by management) due to the terms of the loan or other factors, it is offset by an allowance for uncollectibles.

65

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

4. INTERFUND BALANCES AND TRANSACTIONS A. Government-Wide Financial Statements Long-Term Internal Balances At June 30, 2008, the City had the following long-term internal balances: Internal Balances Payable Governmental Activities Internal Balances Receivable Business-Type Activities

$

1,864,818

This balance consists of the net amount of long-term advances between the Redevelopment Agency Fund and the Water, Wastewater and Parking enterprise funds. The advances are to fund various projects. Transfers The City had the following transfers for the year ending June 30, 2008: Transfers In Governmental Activities Transfers Out Business-Type Activities

$

49,509

Transfers are used to move revenues from the enterprise funds to the General Capital Improvements capital projects fund for financing a share of project expenses or debt service costs for projects from which those funds receive benefit. The City had the following due to/from other funds as of June 30, 2008:

Due to Other Funds

Due from Other Funds General Total

Fund General CIP

$

Non-Major Governmental Funds Internal Service Funds Total

$

66

2,630,040

$

2,630,040

98,973

98,973

5,673

5,673

2,734,686

$

2,734,686

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

4. INTERFUND BALANCES AND TRANSACTIONS, Continued A. Government-Wide Financial Statements, Continued The outstanding balances between funds result mainly from a timing difference between when interest revenues are earned and when they are received for amounts which are transferred from the earning fund to the General Fund, and short–term loans to cover negative cash. Long-Term Advances The City had the following long-term advances as of June 30, 2008:

Advances from Other Funds

Advances to Other Funds

Redevelopment Agency Fund

$

General CIP

Water

Wastewater

Agency

Enterprise

Enterprise

Fund

Fund

Fund

Fund

941,405

$

-

-

Non-Major Governmental Funds

1,495,000

Parking Enterprise Fund Golf Enterprise Fund Total

Redevelopment General

$

$

5,164

$

Total -

$

-

-

78,018

-

-

-

946,569 78,018 1,495,000

-

438,000

-

-

438,000

1,510,000

-

-

-

1,510,000

3,946,405

$

438,000

$

5,164

$

78,018

$

4,467,587

Long-term advances were made 1) from the General Fund, the Water Enterprise Fund, and the Wastewater Enterprise Fund to the Redevelopment Agency Fund to finance Redevelopment projects, 2) from the General Fund to the Housing and Community Development Special Revenue Fund as a deposit for matching grant funds, 3) from the Redevelopment Agency Fund to the Parking Enterprise Fund to finance two parking capital improvements projects.

67

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

4. INTERFUND BALANCES AND TRANSACTIONS, Continued B. Funds Financial Statements Transfers In / Out The City had the following transfers for the year ending June 30, 2008: Transfers In Non-Major

Transfers Out

General Fund

$

General

General

Governmental

Enterprise

Fund

Capital Imp.

Funds

Funds

-

$

960,000

$

167,990

$

Total -

$

1,127,990

General Capital Improvement

10,440

-

-

-

10,440

Non-Major Governmental Funds

27,306

6,721,078

117,324

-

6,865,708

Water

-

27,080

8,350

-

35,430

Wastewater

-

93

-

8,076

8,169

Refuse

-

13,893

-

8,076

21,969

Enterprise Funds:

Parking Internal Service Funds Total

$

-

93

-

-

93

36,494

50,000

-

-

86,494

74,240

$

7,772,237

$

293,664

$

16,152

$

8,156,293

Transfers are used to 1) move interest revenues from the earning fund to the General Fund, 2) move revenues from the General Fund and other funds to the General Capital Improvements Fund for financing various capital projects, and 3) to move unrestricted tax revenues from the General Capital Improvement / Capital Projects Fund to the General Fund as an operating subsidy.

68

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

5. CAPITAL ASSETS A. Government-Wide Financial Statements At June 30, 2008 the City’s capital assets consisted of the following: Governmental

Business-Type

Activities

Activities

Total

Capital Assets: Capital assets, not being depreciated: Land

$

Construction in progress Subtotal, capital assets, not being depreciated

50,609,567

$

11,590,526

$

62,200,093

10,186,790

15,229,557

25,416,347

60,796,357

26,820,083

87,616,440

7,976,050

3,713,741

11,689,791

Capital assets, being depreciated: Land improvements Infrastructure

201,318,617

167,272,762

368,591,379

Buildings

39,721,209

160,328,296

200,049,505

Machinery and equipment

11,516,693

24,563,974

36,080,667

724,114

70,000

794,114

Lease improvements Software

1,161,903

571,257

1,733,160

Subtotal, capital assets, being depreciated

262,418,586

356,520,030

618,938,616

Total capital assets

323,214,943

383,340,113

706,555,056

Less accumulated depreciation: Land improvements

(2,309,219)

Infrastructure Buildings Machinery and equipment Lease improvements Software Total accumulated depreciation $

Total capital assets, net

69

(1,023,426)

(3,332,645)

(116,371,143)

(72,542,834)

(188,913,977)

(10,512,046)

(59,349,831)

(69,861,877)

(7,850,269)

(13,319,349)

(21,169,618)

(439,925)

(17,033)

(456,958)

(1,046,408)

(513,533)

(1,559,941)

(138,529,010)

(146,766,006)

(285,295,016)

184,685,933

$

236,574,107

$

421,260,040

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

5. CAPITAL ASSETS, Continued A. Government-Wide Financial Statements, Continued The following is a summary of capital assets for governmental activities: Prior Period Balance July 1, 2007

Additions

Deletions

Adjustments

Balance

(Note 16)

June 30, 2008

Governmental Activities: Capital assets, not being depreciated: Land

$

Construction in progress Subtotal, capital assets, not being depreciated

50,609,567

$

-

$

-

$

-

$

50,609,567

10,758,619

12,495,965

(8,991,696)

(4,076,098)

10,186,790

61,368,186

12,495,965

(8,991,696)

(4,076,098)

60,796,357

Capital assets, being depreciated: Land improvements

7,024,152

709,621

-

242,277

7,976,050

168,644,770

4,003,497

-

28,670,350

201,318,617

Buildings

35,421,568

4,299,641

-

-

39,721,209

Machinery and equipment

10,602,374

1,396,319

-

11,516,693

724,114

-

-

-

724,114

1,102,389

59,514

-

-

1,161,903

Infrastructure

Lease improvements Software

(482,000)

Subtotal, capital assets, being depreciated

223,519,367

10,468,592

(482,000)

28,912,627

262,418,586

Total capital assets

284,887,553

22,964,557

(9,473,696)

24,836,529

323,214,943

Less accumulated depreciation: Land improvements Infrastructure

(1,740,472)

(540,481)

-

(28,266)

(2,309,219)

(4,591,838)

(116,371,143)

(106,789,432)

(4,989,873)

-

Buildings

(9,718,039)

(794,007)

-

-

(10,512,046)

Machinery and equipment

(7,539,275)

(788,637)

477,643

-

(7,850,269)

Lease improvements

(370,457)

(69,468)

-

-

(439,925)

Software

(956,476)

(89,932)

-

-

(1,046,408)

(127,114,151)

(7,272,398)

477,643

Total accumulated depreciation Total capital assets, net

$

157,773,402

$

15,692,159

70

$

(8,996,053)

(4,620,104) $

20,216,425

(138,529,010) $

184,685,933

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

5. CAPITAL ASSETS, Continued A. Government-Wide Financial Statements, Continued Depreciation expense of the governmental activities for the year ended June 30, 2008 was $7,272,398 and was distributed among City departments as follows. General government: City Council

$

6,781

City Clerk

13,618

Human Resources

23,758

Finance

129,974

Information Technology

18,512

Non-Departmental

170,710

General Government Departments

363,353

Internal service funds

96,384

Total general government

459,737

Public safety: Police

461,446

Fire

243,218

Total public safety

704,664

Parks and Recreation

2,232,930

Library

26,800

Public Works

3,757,506

Planning and Community Development

7,314

Redevelopment

83,447 $

Total depreciation expense

71

7,272,398

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

5. CAPITAL ASSETS, Continued A. Government-Wide Financial Statements, Continued The following is a summary of capital assets for business-type activities: Prior Period Balance July 1, 2007

Additions

Deletions

Adjustments

Balance

(Note 16)

June 30, 2008

Business-type Activities: Capital assets, not being depreciated: Land

$

Construction in process Subtotal, capital assets, not being depreciated

11,590,526

$

-

$

-

$

-

$

11,590,526

23,346,697

10,703,653

(18,820,793)

-

15,229,557

34,937,223

10,703,653

(18,820,793)

-

26,820,083

Capital assets, being depreciated: 3,956,018

-

Infrastructure

Land improvements

177,843,083

18,500,029

Buildings

160,220,644

107,652

23,223,969

2,459,414

Machinery and equipment Lease improvements

(400,000) (1,119,409)

(242,277)

3,713,741

(28,670,350)

167,272,762

-

160,328,296

-

24,563,974

70,000

-

-

-

70,000

555,257

16,000

-

-

571,257

Subtotal, capital assets, being depreciated

365,868,971

21,083,095

(1,519,409)

(28,912,627)

356,520,030

Total capital assets

400,806,194

31,786,748

(20,340,202)

(28,912,627)

383,340,113

Software

Less accumulated depreciation: (869,828)

(181,864)

-

28,266

(1,023,426)

Infrastructure

Land improvements

(74,094,311)

(3,440,361)

400,000

4,591,838

(72,542,834)

Buildings

(55,806,172)

(3,543,659)

-

-

(59,349,831)

Machinery and equipment

(11,663,756)

(2,588,317)

932,724

-

(13,319,349)

Lease improvements Software Total accumulated depreciation Total capital assets, net

(14,234)

(2,799)

-

-

(17,033)

(445,050)

(68,483)

-

-

(513,533)

(142,893,351)

(9,825,483)

1,332,724

4,620,104

(146,766,006)

$ 257,912,843

$

21,961,265

$ (19,007,478)

$

(24,292,523)

Business-type activities depreciation expense for the year ended June 30, 2008 is as follows: Water

$

1,980,208

Wastewater

4,512,812

Refuse

1,875,054

Parking

526,760

Storm Water

732,932

Golf Course

197,717

Total depreciation expense

72

$

9,825,483

$ 236,574,107

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

5. CAPITAL ASSETS, Continued B. Fund Financial Statements The Fund Financial Statements do not present general government capital assets. Consequently, capital assets are shown as a reconciling item in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets.

6. LONG-TERM DEBT A. Governmental Activities Long-Term Debt Classification

Compensated absences Claims and judgments

Balance

Accreted

July 1, 2007

Interest

$

2,419,032

$

10,442,555

Certificates of participation

4,096,138

General obligation bonds

7,055,865

Lease Revenue bonds

2,920,487

Tax allocation bonds payable

Amount

Due Within

Due in More

Retirements

June 30, 2008

One Year

Than One Year

2,811,812

$ (2,309,099)

$

2,869,053

(2,869,053)

Additions -

$

109,472

-

Notes payable

Amount Balance

-

$

1,947,831 2,943,930

$

973,914 7,498,625

-

(150,849)

3,945,289

153,713

3,791,576

-

(193,004)

6,972,333

199,781

6,772,552

6,880,000

-

2,921,745 10,442,555

-

6,880,000

125,000

6,755,000

(1,450,802)

-

1,469,685

1,176,724

292,961 4,750,000

5,005,000

-

-

(125,000)

4,880,000

130,000

Capital lease obligations

965,627

-

-

(146,019)

819,608

150,834

668,774

Other long-term liabilities

851,581

-

13,372

(110,884)

754,069

105,174

648,895

$ 12,574,237

$ (7,354,710)

$ 39,085,284

6,932,987

$ 32,152,297

Total

$ 33,756,285

$

109,472

$

Compensated Absences and Claims and Judgments As shown in the table above, the total amount outstanding at June 30, 2008 was $2,921,745 for compensated absences and $10,442,555 for claims and judgments. In prior years, compensated absences have been liquidated by the general fund. Claims and judgments are paid by the separate internal service funds for each liability. Certificates of Participation Certificates of Participation payable at June 30, 2008, are comprised of the following individual issues: Redevelopment Agency certificates of participation are part of the $2,080,000 Golf and Redevelopment Agency Certificates described under enterprise debt. The outstanding balance relating to the Agency at June 30, 2008 was $120,289. The Agency amount due within one year is $58,713 and amount due in more than one year is $61,576. For more information refer to the City of Santa Cruz Redevelopment Agency Basic Financial Statements.

73

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued City of Santa Cruz issued certificates in April 2001 in the amount of $4,415,000, to be used for the Civic Center Improvement Project. The certificates provide funds to finance the acquisition, construction, and improvement of the project. Although the City is obligated under the Lease Agreement to pay Lease Payments from any source of legally available funds, the Lease Agreement does not create a pledge, lien or encumbrance upon the revenues of the City. Annual payments are $75,000 - $270,000. The certificates bear interest at 4.6% - 5% and are payable semi-annually on April 1 and October 1 of each year, commencing October 1, 2001. Principal is payable annually on April 1 through the year 2031. The balance outstanding at June 30, 2008 was $3,825,000. The amount due within one year is $95,000 and amount due in more than one year is $3,730,000. The annual debt service requirements on the certificates of participation at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

153,713

$

191,844

Total $

345,557

2010

161,576

185,052

346,628

2011

105,000

177,835

282,835

2012

110,000

173,005

283,005

2013

115,000

167,945

282,945

2014-2018

655,000

755,640

1,410,640

2019-2023

825,000

582,600

1,407,600

2024-2028

1,050,000

355,000

1,405,000

2029-2033

770,000

78,250

Total

$

3,945,289

$

2,667,171

848,250 $

6,612,460

General Obligation & Lease Revenue Bonds In March 1999, the City issued $6,998,473 in general obligation bonds. The proceeds were used to upgrade fire stations, acquire open space property, and construct a community park and a fire administration facility. Annual payments ranging from $142,625 to $354,010 began September 1, 2000, and continue through September 1, 2029; interest ranges from 3.5% to 8.0%. The bonds are subject to early redemption at the option of the City beginning in 2008.

74

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued The bonds are secured by and will be paid with annual ad valorem tax levies on all property subject to taxation within the City. The fiscal year 2008 debt service consisted of $193,004 in principal and $233,546 in interest for a total debt service payment of $426,550. Fiscal year 2008 revenues pledged for the payment of the current year debt service was $544,794 resulting in a debt service to revenue source ratio of 77%. Remaining debt service payments for the life of the indenture are estimated to be $6,972,333 in principal and $6,098,156 in interest for a total debt service obligation of $13,070,489. The estimated total revenues pledged for the payment of the total debt service is estimated to be $21,246,966, resulting in a total debt service to revenue source ratio of 62%. Over the life of the obligation, the GO Obligation Bond Assessment taxes are expected to cover 100% of annual debt service payments. Any excess collections after the retirement of the bonds shall be transferred by the City to the General fund to be used in a manner consistent with requirements of applicable state and federal tax laws. The bonds were issued in two series. Series A consisted of $4,500,000 of general obligation bonds, and Series B consisted of $2,498,473 of general obligation bonds - capital appreciation bonds. During fiscal yearended June 30, 2008, principal payments in the amount of $193,004 were made on the bonds. The balance outstanding of Series A bonds at June 30, 2008 was $3,915,000. The carrying value of the Series B bonds was increased to $3,057,333 in order to reflect the accreted interest due at June 30, 2008. The total balance outstanding at June 30, 2008 was $6,972,333. In December, 2007, the City issued $6,880,000 in lease revenue bonds. The proceeds were to pay the costs of acquisition of land and improvements located in the City, to be used for public library and water department purposes; to fund interest on the bonds through September 1, 2008; to fund a reserve fund for the Bonds and to pay the costs of issuing the Bonds. Annual payments ranging from $162,113 to $467,250 began June 30, 2008, and continue through June 30, 2039. Interest is 4.53068%. The bonds are subject to early redemption at the option of the City beginning in 2008. The bonds are secured by and payable from a pledge of Revenues, consisting primarily of the Lease Payments and amounts on deposit from time to time in the funds and accounts established under the Indenture. Lease payments from the Water enterprise fund and the Library Joint Powers Authority to the City’s General fund will be adjusted annually to cover 100% of the City’s total annual obligation. During fiscal year-ended June 30, 2008, debt service was paid with capitalized interest. The FY 2008 debt service consisted of a total payment of $162,113 in interest only. FY 2008 revenues pledged for the payment of the current year debt service was $162,113 resulting in a current debt service to revenue source ratio of 100%. Remaining debt service payments for the life of the indenture are estimated to be $6,880,000 in principal payments and $5,711,672 in interest payments for a total debt service obligation of $12,591,672. The estimated total revenues pledged for the payment of the total debt service is estimated to be $12,591,669, resulting in a total debt service to revenue source ratio of 100%. During fiscal year-ended June 30, 2008, no principal payments were made on the bonds. The total balance outstanding at June 30, 2008 was $6,880,000.

75

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued The annual debt service requirements on the general obligation bonds at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

199,781

$

Total

237,617

$

437,398

2010

205,937

241,998

447,935

2011

208,582

244,570

453,152

2012

213,768

249,272

463,040

2013

218,437

254,150

472,587

2014-2018

1,169,246

1,334,367

2,503,613

2019-2023

1,337,583

1,435,072

2,772,655

2024-2028

1,558,934

1,491,316

3,050,250

2029-2033

697,955

609,795

1,307,750

Sub-total

5,810,223

6,098,156

11,908,379

Accreted Interest

1,162,110

-

1,162,110

Total

$

6,972,333

$

6,098,156

$

13,070,489

The annual debt service requirements on the lease revenue bonds at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

125,000

$

303,963

Total $

428,963

2010

130,000

298,963

428,963

2011

135,000

293,763

428,763

2012

140,000

288,363

428,363

2013

145,000

282,763

427,763

2014-2018

815,000

1,322,213

2,137,213

2019-2023

995,000

1,145,213

2,140,213

2024-2028

1,205,000

924,856

2,129,856

2029-2033

1,535,000

639,325

2,174,325

2034-2038

1,655,000

212,250

1,867,250

Total

$

6,880,000

76

$

5,711,672

$

12,591,672

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued Notes Payable In July 2001, the Redevelopment Agency received Housing Enabled by Local Partnerships (HELP) Loan funds from the State of California, to be used to finance the acquisition, development, demolition of existing structures, and the construction of a multifamily rental apartment complex in the Beach Target Area. The proceeds for the note are to be repaid by July 2011 with an interest rate of 3%. The balance outstanding at June 30, 2008, was $536,860. In March 2006, the Redevelopment Agency received loan funds from Salz Leathers, Inc., to be used to finance the acquisition of land. The proceeds of the note are to be repaid by March 2009, with an interest rate of 5%. The balance outstanding at June 30, 2008, was $872,825. In January 2007, the City received loan funds from Greg Fyvie, to be used for renovation of the Lawn Bowling Park. The proceeds of the note are to be repaid by January 2011, with no annual interest. The balance outstanding at June 30, 2008, was $60,000. Tax Allocation Bonds In October 2004, the Redevelopment Agency issued $5,245,000 in tax allocation bonds. On December 1, 2004, together with other funds, the proceeds were used to redeem all of the Agency’s outstanding 1996 Merged Earthquake Recovery and Reconstruction Project Area Tax Allocation Refunding Bonds, in the amount of $2,505,000, and to raise additional funds for programs, projects, and activities related to the Redevelopment project. Annual principal payments of $120,000 - $305,000 will be made through October, 2031; interest ranges from 2.50% to 4.625%. The principal, interest and premium (if any) on the bonds are payable solely from tax revenues and from amounts in certain accounts held by the trustee under and pursuant to the indenture. The FY 2008 debt service consisted of $125,000 in principal and $202,900 in interest for a total debt service payment of $327,900. FY 2008 revenues pledged for the payment of the current year debt service was $11,079,000 resulting in a debt service to revenue source ratio of 3%. Remaining debt service payments for the life of the indenture are estimated to be $ 4,880,000 in principal payments and $2,985,972 in interest payments for a total debt service obligation of $7,865,972. The estimated total revenues pledged for the payment of the total debt service is estimated to be $276,975,000 resulting in a total debt service to pledged revenue source ratio of 3%. The balance outstanding at June 30, 2008 was $4,880,000.

77

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued The annual debt service requirements on the tax allocation bonds at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

130,000

$

199,766

Total $

329,766

2010

130,000

196,516

326,516

2011

135,000

192,866

327,866

2012

140,000

188,566

328,566

2013

145,000

183,844

328,844

2014-2018

805,000

834,619

1,639,619

2019-2023

985,000

656,874

1,641,874

2024-2028

1,215,000

419,261

1,634,261

2029-2033 Total

1,195,000 $

113,660

4,880,000

$

2,985,972

1,308,660 $

7,865,972

Capital Lease Obligations In August 2001, the City acquired miscellaneous vehicles, equipment, and computer software under a capital lease agreement payable in semi-annual installments of $331,597 though August 2006, with an interest rate of 4.46%. This lease has been allocated to the General Fund, the Water, Wastewater, Refuse and Parking enterprise funds, and the Agency. The lease has been fully paid off as of June 30, 2007. In June 2002, the City acquired land under a capital lease agreement with Zion’s First National Bank in the amount of $765,000. The agreement is payable in semi-annual installments of $61,362 through 2021, with a 4.88% interest rate through January 2007, and a variable interest rate thereafter. From January 2007 through January 2021, the interest is to be recomputed, for each interest period, based on 90% of the current Index Rate. The balance outstanding at June 30, 2008 was $580,075. In July 2004, the City entered into a five-year capital lease agreement to obtain financing in the amount of $580,000 for the purchase of a seventy-five foot aerial fire truck to replace a 1979 Crown Telesquirt unit. The first interest payment of $9,657 was due in February, 2005, with annual installment payments of $125,781 beginning in August 2005 and ending in August 2009. Interest is at the rate of 3.33% and the payments will be made from the General Fund. The balance outstanding at June 30, 2008 was $239,533.

78

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued The annual debt service requirements on the capital leases at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

150,834

$

36,309

Total $

187,143

2010

156,369

30,775

187,144

2011

36,331

25,031

61,362

2012

38,104

23,258

61,362

2013

39,964

21,395

61,359

2014-2018

231,045

75,764

306,809

2019-2023 Total

166,962 $

16,605 $

819,609

229,137

183,567 $

1,048,746

Other Long-Term Liabilities The Redevelopment Agency is obligated under three separate Owner Participation Agreements (OPA) for various portions of the $1,250,000 Chestnut Street Special Assessment District Debt. Under the first OPA, the Redevelopment Agency owes $22,183 as of June 30, 2008. Under the second OPA, the Redevelopment Agency owes $186,102 as of June 30, 2008. Under the third OPA, the Redevelopment Agency assumes responsibility for an additional 48.68% of the Special Assessment Debt contingent upon the availability of tax increment. The Redevelopment Agency is currently liable under this OPA for $545,784 and interest, currently estimated at $58,416. The debt service is to be paid from tax increment revenues derived from the project. The total outstanding principal of Other Long-Term Liabilities as of June 30, 2008 was $754,069 and the outstanding interest was $45,407 for a total debt service of $799,476 payable in the next 8 years. The tax increment revenue for the obligation term is estimated to be $88,632,696 resulting in a debt service payment to revenue source ratio of 1%. The annual debt service requirements for other long-term liabilities outstanding at June 30, 2008, are as follows: For the Year Ending June 30,

Principal

Interest

Total

2009 2010 2011 2012 2013 2014-2018

$

105,174 111,859 118,852 129,272 73,386 215,526

$

20,714 14,705 8,381 1,607 -

$

125,888 126,564 127,233 130,879 73,386 215,526

Total

$

754,069

$

45,407

$

799,476

79

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued Conduit Debt - During the fiscal year 2003, the Agency issued variable rate demand multifamily housing revenue bonds to provide funding for loans made to Santa Cruz Shaffer Road Investors L.P., and 1010 Pacific Investors L.P. (both California limited partnerships). The revenue bonds were used to finance a portion of the costs of building a 206-unit multifamily residential development and for the rehabilitation and equipping of a 113-unit multifamily residential development within the City limits. The housing facilities are to be occupied by persons of low and very low income, to the extent required by federal tax law. The bonds were issued under a Trust Indenture, dated July 1, 2002 between the Agency, and Wells Fargo Bank, National Association, as trustee. For the Shaffer Road Apartments, the Agency issued 2002 Series A bonds and 2002 Series A-T in the amounts of $29,925,000 and $2,750,000, respectively. For the 1010 Pacific Avenue Apartments, 2002 Series B bonds in the amount of $21,650,000 were issued. The amount outstanding as of June 30, 2008 is $53,525,000. The bonds mature on August 15, 2035. The bonds and interest are limited obligations of the Agency, payable solely from the “trust estate,” which is specifically assigned and pledged to such purposes to the extent provided in the Official Statements. The trust estate includes the Agency’s interest in the loans made to the developer, including rights to receive payments on the loans, and rights to certain bond proceeds and related revenues. The Official Statements contain more information regarding the trust estate. During the fiscal year 2008, the Agency issued multifamily housing revenue bonds to provide funding for loans made to Tannery Artists Lofts Limited Partnership (a California Limited Partnership). The revenue bonds were used to finance the Borrower’s construction and development of a 100-unit multifamily housing rental facility to be located within the City limits. The housing facilities are to be occupied by persons of low and very low income, to the extent required by federal tax law. The bonds were issued under a Master Agency Agreement, dated August 1, 2007 between the Agency, and Washington Mutual Bank. For the Tannery Artists Lofts, the Agency issued 2007 Series A-1 bonds in the amount of $4,195,000. For the remaining portion of the loan relating to the 100-unit multifamily housing rental facility, the Agency issued 2007 Series A-2 bonds in the amount of $24,010,000. The amount outstanding as of June 30, 2008 is $28,205,000. The bonds mature on March 1, 2045 for Series A-1 and September 1, 2009 (subject to extension as forth in Series A-2 Note) respectively. The bonds and interest are limited obligations of the Agency, payable solely from the “trust estate,” which is specifically assigned and pledged to such purposes to the extent provided in the Official Statements. The trust estate includes the Agency’s interest in the loans made to the developer, including rights to receive payments on the loans, and rights to certain bond proceeds and related revenues. The Official Statements contain more information regarding the trust estate.

80

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations A summary of long-term debt transactions of the City for the enterprise funds for the year ended June 30, 2008, is as follows: Classification Balance July 1, 2007 Compensated absences Landfill closure costs

$

832,864

Additions $

6,055,236

Retirements

993,834

$

308,476

(867,340)

$

-

Amount

Amount

Balance

Due Within

Due in More

June 30, 2008

One Year

then One Year

959,358

$

639,571

6,363,712

-

$

319,787 6,363,712

Certificates of participation

19,183,862

-

(1,799,151)

17,384,711

1,306,288

16,078,423

Revenue bonds payable

22,600,000

-

(590,000)

22,010,000

615,000

21,395,000

Notes payable

35,337,269

-

(2,553,813)

32,783,456

2,624,582

30,158,874

3,514,755

-

(1,030,320)

2,484,435

899,437

1,584,998

1,302,310

$ (6,840,624)

6,084,878

$ 75,900,794

Lease obligations Total

$ 87,523,986

$

$

81,985,672

$

Compensated Absences As shown in the table above, the total amount outstanding at June 30, 2008 was $959,358 for compensated absences. Landfill Closure Costs As shown in the table above, the total amount outstanding at June 30, 2008 was $6,363,712 for landfill closure costs. Refer to Note 8 for landfill closure details. Certificates of Participation Certificates of Participation payable at June 30, 2008, are comprised of the following individual issues: Santa Cruz Golf and Redevelopment Agency Certificates issued in November, 1998, in the amount of $2,080,000, were used to refinance an issue used for improvements to the City's golf course and projects within the City's redevelopment plan areas. Annual payments of $125,000 to $215,000 will be made through May 2010; interest ranges from 3.5% to 4.25%. Although the City is obligated under the Lease Agreement to pay Lease Payments from any source of legally available funds, the Lease Agreement does not create a pledge, lien or encumbrance upon the revenues of the City. The balance outstanding relating to the Golf Course fund at June 30, 2008, was $299,711.

81

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations, Continued Santa Cruz Parking Certificates issued in November 1998 in the amount of $7,955,000, were used for the construction of a second parking structure in the downtown area. Although the City is obligated under the Lease Agreement to pay Lease Payments from any source of legally available funds, the Lease Agreement does not create a pledge, lien or encumbrance upon the revenues of the City. Annual payments are $155,000 - $445,000. The certificates bear interest at 3.5% to 4.9%. Interest is payable semi-annually on May 1 and November 1 and principal is payable annually on May 1 through the year 2028. The balance outstanding at June 30, 2008, was $5,940,000. Santa Cruz Refuse Certificates issued in October 1999 in the amount of $4,345,000, were issued to repay the Wastewater Enterprise Fund for earlier loans to construct a tunnel at the City’s landfill and a leachate line from the landfill to the City’s sewer treatment plant. Annual payments of $100,000 to $245,000 will be made through October 2024; interest ranges from 4.0% to 5.625%. The balance outstanding at June 30, 2008, was $3,460,000. Santa Cruz Refuse Certificates issued in March 2001, in the amount of $7,500,000, were used in the purchase of certain property and improvements, and to finance the acquisition, construction, and improvement of the project. The installment payments are payable solely from and secured by a first pledge of certain revenues of the City’s Refuse Enterprise Fund. Annual payments are $45,000 to $720,000. The certificates bear interest at 3.5% to 4.875%. Interest represented by the certificates will be payable semi-annually on April 1 and October 1 of each year. Principal is payable annually on October 1 through the year 2021. The certificates are subject to optional and mandatory prepayment. The balance outstanding at June 30, 2008, was $4,260,000. The Master Indenture for the 1999 and 2001 Refuse Certificates requires the City to pledge its annual Net Revenues (defined as operating income plus depreciation, interest income and non-operating income) in an amount equal to at least 125% of the annual debt service requirement each fiscal year, through final maturity of the Bonds on October 2024 or early retirement of the Bonds, whichever first occurs. Principal payments of $690,000 and interest payments of $201,795 were paid for the current year for a FY 2008 debt service total $891,795. Refuse revenues for FY 2008 were $16,617,479 resulting in a debt service to revenue source ratio of 5%. The total future debt service payments for this indenture are estimated to be $5,616,908, principal payments of $4,260,000 and future interest payments of $1,356,908. The estimated revenues pledged and collected by the Refuse fund for this obligation term will be approximately $233,800,000 resulting in a total debt service payment to revenue source ratio of 2%. Santa Cruz Refuse Certificates, issued in May 2004 in the amount of $1,590,000 were used to refinance the Santa Cruz Landfill Certificates issued in 1993. Annual payments of $495,000 to $545,000 will be made through 2008; interest ranges from 4.0 % to 5.375%. The City is obligated, subject to abatement, under the Agreement to pay the certificate payments from any source of legally available funds. There is a zero balance relating to the Refuse Fund at June 30, 2008.

82

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations, Continued Santa Cruz Golf Agency Certificates issued in May 2004 in the amount of $3,700,000 were used to finance the acquisition and construction of improvements to the DeLaveaga Golf Course. Annual payments of $ 90,000 to $ 260,000 will be made through 2029; interest ranges from 4.0% to 5.375%. The City is obligated, subject to abatement, under the Agreement to pay the certificate payments from any source of legally available funds. The City is currently liable and may become liable on other obligations payable from general revenues, some of which may have priority over the lease payments. The balance outstanding relating to the Golf Course Fund at June 30, 2008 was $3,425,000. The annual debt service requirements on the certificates of participation at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

1,306,288

$

830,538

Total $

2,136,826

2010

823,423

786,841

1,610,264

2011

670,000

751,332

1,421,332

2012

690,000

721,962

1,411,962

2013

725,000

690,782

1,415,782

2014-2018

4,185,000

2,902,197

7,087,197

2019-2023

5,000,000

1,739,790

6,739,790

2024-2028

3,725,000

601,920

4,326,920

2029-2033 Total

260,000 $

13,975

17,384,711

$

9,039,337

273,975 $

26,424,048

Annual principal and interest requirements for the certificates of participation are apportioned to the various funds based on the percentage share of certificate proceeds. Revenue Bonds Payable 2005 Wastewater Revenue Refunding Bonds, issued in November 2005 in the amount of $4,715,000 were used to refinance the Series B Sewer Revenue Bonds issued in February 1994. Annual payments of $200,000 to $350,000 will be made through November 2023; interest ranges from 3.0% to 4.50%. Annual debt service is payable solely from and secured by a lien on net revenues of the City’s sewer system. The balance outstanding at June 30, 2008, was $4,310,000.

83

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations, Continued The Master Indenture for the 2005 Wastewater Revenue Refunding Bonds requires the City to pledge its annual Net Revenues (defined as operating income plus depreciation, interest income and nonoperating income) in an amount equal to at least 125% of the annual debt service requirement each fiscal year, through final maturity of the Bonds on November 2023 or early retirement of the Bonds, whichever first occurs. Principal payments of $200,000 and interest payments of $171,311 were paid for the current year for a FY 2008 debt service total $371,311. Wastewater revenues for FY 2008 were $15,275,935 resulting in a debt service to revenue source ratio of 2%. The total future debt service payments for this indenture are estimated to be $5,880,023, principal payments of $4,310,000 and future interest payments of $1,570,023. The estimated revenues pledged and collected by the Wastewater fund for this obligation term will be approximately $245,000,000 resulting in a total debt service payment to revenue source ratio of 2%. 2005 Storm Water Revenue Refunding Bonds, issued in September 2005 in the amount of $6,100,000 were used to refinance the Santa Cruz Storm Water Certificates issued in October 1999. Annual payments of $160,000 to $385,000 will be made through October 2029; interest ranges from 3.0% to 4.375%. The bonds are special obligations of the City payable solely from the revenues received by the City from the ownership and operation of the Storm Water Enterprise. All revenues are irrevocably pledged to the payment of the bonds. The balance outstanding at June 30, 2008, was $5,770,000. The Master Indenture for the 2005 Storm Water Revenue Refunding Bonds requires the City to pledge its annual Net Revenues (defined as operating income plus depreciation, interest income and nonoperating income) in an amount equal to at least 125% of the annual debt service requirement each fiscal year, through final maturity of the Bonds on October 2029 or early retirement of the Bonds, whichever first occurs. Principal in the amount of $170,000 and interest in the amount of $228,723 for total of $398,723 in debt service payments were applied against this indenture for FY 2008. The current year Storm Water net revenues were $876,944 resulting in a debt service to revenue source ratio of 45%. The total future debt service payments for this indenture are estimated to be $5,770,000 in principal payments and $2,950,269 in future interest payments for the total debt service payments of $8,720,269. The estimated revenues pledged and collected by the Storm Water fund for this obligation term is estimated to be $18,375,000, resulting in a total debt service payment to revenue source ratio of 47%. 2006 Water Revenue Bonds issued in May 2006 in the amount of $12,450,000 were used to finance construction of a new transmission main connecting the Graham Hill Water Treatment Plant to the Bay Street Reservoir. Annual payments of $220,000 to $555,000 will be made through March 2036; interest ranges from 4.0% to 4.625%. The bonds are special obligations of the City payable from the Net Revenues received by the City from the ownership and operation of the City’s water system. The balance outstanding at June 30, 2008, was $11,930,000.

84

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations, Continued The Master Indenture for the 2006 Water Revenue Bonds requires the City to pledge its annual Net Revenues (defined as operating income plus depreciation, interest income and non-operating income) in an amount equal to at least 125% of the annual debt service requirement each fiscal year, through final maturity of the Bonds on March 2036 or early retirement of the Bonds, whichever first occurs. Principal payments of $220,000 and interest payments of $539,423 were paid for the current year for a FY 2008 debt service total $759,423. Water revenues for FY 2008 were $25,477,330 resulting in a debt service to revenue source ratio of 3%. The total future debt service payments for this indenture are estimated to be $21,297,733, principal payments of $11,930,000 and future interest payments of $9,367,733. The estimated revenues pledged and collected by the Water fund for this obligation term will be approximately $728,000,000, resulting in a total debt service payment to revenue source ratio of 2%. The annual debt service requirements on the revenue bonds at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

615,000

$

917,606

Total $

1,532,606

2010

635,000

895,831

1,530,831

2011

660,000

874,019

1,534,019

2012

680,000

851,150

1,531,150

2013

700,000

827,020

1,527,020

2014-2018

3,920,000

3,712,963

7,632,963

2019-2023

4,760,000

2,836,796

7,596,796

2024-2028

4,300,000

1,834,680

6,134,680

2029-2033

3,660,000

938,097

4,598,097

2034-2038

2,080,000

199,863

2,279,863

Total

$

22,010,000

$

13,888,025

$

35,898,025

Notes Payable State of California loans for the construction of a water main line north of the City. Proceeds for the note were received in September 1995, to be repaid in semi-annual installments of $46,679, including interest at 2.973%, through October 2015. This debt is recorded in the Water Enterprise Fund. The balance outstanding at June 30, 2008, was $623,560. State of California loans for the construction of secondary treatment improvements at the City's wastewater treatment plant. Loan proceeds were received as the City incurred project expenditures. Repayment began August 1999. Annual payments of $3,417,099, including interest at 2.8%, will be made through August 2018. This debt is recorded in the Wastewater Enterprise Fund. The balance outstanding at June 30, 2008, was $31,893,230.

85

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations, Continued State of California loans for the construction of certain solid waste facilities to assist them to achieve or improve compliance with State minimum standards. Proceeds were received in March 2001, and the loan is to be repaid in annual principal payments of in $33,333 through 2016. No interest is due on the principal balance of the loan outstanding. This debt is recorded in the Refuse Enterprise Fund. The balance outstanding at June 30, 2008, was $266,666. The annual debt service requirements on the notes at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

Interest

2,624,582

$

910,958

Total $

3,535,540

2010

2,697,248

838,295

3,535,543

2011

2,771,987

763,553

3,535,540

2012

2,848,804

686,736

3,535,540

2013

2,927,839

607,703

3,535,542

2014-2018

15,596,979

1,780,906

17,377,885

2019-2023

3,316,017

92,848

3,408,865

Total

$

$

32,783,456

5,680,999

$

38,464,455

Lease Obligations The City leases equipment in the Refuse, Water, Wastewater, Parking, and Golf Course funds under various capital lease agreements, payable in semi-annual and annual installments through August 2006 with interest rates ranging from 4.5% to 5.9%. In November 2002, the City entered into another equipment lease in the amount of $1,038,840, payable in 60 months. The payments are due in 10 consecutive semi-annual payments, and each payment includes 3.26% interest per year on the unpaid balances. In December 2003, the City entered into an equipment lease agreement in the amount of $656,182, payable in 60 months. The payments are due in ten consecutive semi-annual payments, and each payment includes 3.13% interest per year on the unpaid principal. The combined Refuse, Water, Wastewater, Parking, and Golf Course lease obligations were paid in full as of June 30, 2008. In January 2005, the City acquired four refuse trucks under a capital lease agreement payable in semiannual installments of $88,482 through February 2009, with an annual interest rate of 3.04%. This lease has been allocated to the Refuse Fund. The balance outstanding at June 30, 2008, was $173,010. In April 2005, the City acquired 25 receptacles, three recycling trucks and a truck retrofit under a capital lease agreement, payable in semi-annual installments of $85,636 through May 2010, with an annual interest rate of 3.70%. This lease has been allocated to the Refuse Fund. The balance outstanding at June 30, 2008, was $327,271. 86

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

6. LONG-TERM DEBT, Continued B. Proprietary Fund Obligations, Continued In December 2005, the City entered into a capital lease agreement for lease rental of two fairway mowers. The lease is payable in quarterly installments of $9,584 through December 2010 with an annual interest rate of 3.90%. The lease has been allocated to the Golf Course Fund. The balance outstanding at June 30, 2008 was $44,480. In June 2, 2006, the City acquired one front loader and five side-loaders under a capital lease agreement payable in semi-annual installments of $135,798 through June 2011 with an annual interest rate of 4.16%. This lease has been allocated to the Refuse Fund. The balance outstanding at June 30, 2008, was $758,614. In December 2006, the City acquired three trucks, one street sweeper and one sewer /storm drain vactor truck under a capital lease agreement payable in semi-annual installments of $118,213 through December 2011, with an annual interest rate of 3.88%. This lease has been allocated to the Refuse and Wastewater Funds. The balance outstanding at June 30, 2008 was $766,847. In May 2007, the City acquired one (1) Caterpillar D&T Waste Bulldozer under a capital lease agreement payable in semi-annual installments of $56,519 through May 2012, with an annual interest rate of 3.98%. This lease has been allocated to the Refuse Fund. The balance outstanding at June 30, 2008 was $414,213. The annual debt service requirements on the lease obligations at June 30, 2008, were as follows: For the Year Ending June 30, 2009

Principal $

2010

Interest

899,437

$

89,034

Total $

988,471

755,677

55,830

2011

603,604

27,045

630,649

2012

225,717

5,536

231,253

Total

$

2,484,435

$

177,445

811,507

$

2,661,880

7. RISK MANAGEMENT AND SELF-INSURANCE The City has an established a Risk Management Fund (an internal service fund) to account for a self-insurance program. For the period ending June 30, 2008, the City was self-insured for workers' compensation up to $500,000 per occurrence and for general liability up to $1,000,000 per occurrence. Claims in excess of these amounts are insured. The City is also completely self-insured for unemployment insurance, vision, and dental insurance claims, and this self-insurance program is accounted for in the General Fund. The City contracts with outside administrators to administer these programs. There were no significant reductions in insurance coverage. Settlements have not exceeded insurance coverage in any of the past three fiscal years.

87

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

7. RISK MANAGEMENT AND SELF-INSURANCE, Continued In January 1997, the City joined the Authority for California Cities Excess Liability (ACCEL). ACCEL is a joint powers authority organized under the provisions of Section 6500 et. seq. of the California Government code. ACCEL was founded in 1986 to provide medium-sized California cities self-funding for catastrophic losses. There are currently twelve members. ACCEL operates a liability risk pooling program which is subject to an annual independent financial audit and biennial actuarial study. ACCEL is governed by a twelve member Board of Directors. Each member agency appoints a representative to the Board of Directors. ACCEL is funded by its member participants and, at the discretion of its Board of Directors, may assess the members for additional premiums (in an unlimited amount) in the event ACCEL assets at any time are insufficient to discharge its liabilities. For the 2007-2008 fiscal year, ACCEL charged its members $0.52 cents per one-hundred dollars of payroll for the self-funded $4,000,000 excess of a $1,000,000 member self-insured retention. Members also purchased commercial excess insurance limits of $30,000,000 excess of $5,000,000. Ten cities purchased additional optional limits of $10,000,000 excess of $35,000,000. In addition, four cities purchased optional limits of $10,000,000 excess of $45,000,000. Members were also charged administrative costs in equal amounts. The City’s share of administrative costs was $27,360 during the 2007-2008 fiscal year. ACCEL’s day-to-day operations are administered by Alliant Insurance Services, Inc. (Alliant) contracted by ACCEL to provide accounting, risk consulting, insurance brokerage, and program administration services. Alliant’s responsibility also includes the administration of policies and procedures as set forth by the ACCEL Joint Powers Authority Agreement, By-laws, and by the Board of Directors. ACCEL provides coverage above each member’s self-insured retention (SIR), subject to aggregate limit. Historically, nine members have $500,000 SIRS and two members have $1,000,000 SIRS. ACCEL provided an optional coverage of $500,000 excess of $500,000 per occurrence through 1989-90; however, this coverage is no longer available. Prior to July 1, 1990, ACCEL pooled losses incurred by its members up to $10,000,000. Effective July 1, 1990, ACCEL created a reinsurance pool within the $9,000,000 excess of $1,000,000 layer by purchasing $5,000,000 excess of $5,000,000 coverage. On July 1, 1997, ACCEL further reduced its exposure and purchased coverage of $17,000,000 excess of $3,000,000 coverage. Due to favorable market conditions, ACCEL purchased coverage of $19,000,000 excess of $1,000,000 effective July 1, 1998. Six members with SIR of $500,000 purchased additional coverage of $500,000 excess of $500,000. As of July 1, 2000, nine members purchased insurance of $19,500,000 excess of $1,000,000. ACCEL was fully insured through June 30, 2003. As of July 1, 2003, the Authority purchased reinsurance covering $20,000,000 in excess of $2,000,000 and pooled losses in the layer $1,000,000 excess of $1,000,000. All members have SIR of $1,000,000. ACCEL members may participate in the purchase of other insurance, such as excess worker’s compensation and excess liability over $12,000,000 per occurrence where risk is not transferred to the pool. Effective September 1, 2003, ACCEL purchased excess insurance for all losses in excess of $2,000,000 per occurrence. ACCEL does not administer claims for these programs; therefore, no revenue or expense is reflected in ACCEL’s financial statements. 88

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

7. RISK MANAGEMENT AND SELF-INSURANCE, Continued ACCEL has a retrospective rating plan whereby all premiums collected, together with related investment income earned, in excess of pooled losses and loss expenses for each program year will be returned to members beginning five years after the end of the program year. Losses and loss expenses are allocated to each member based on a weighted actual loss formula. At the June 2007 Board of Directors meeting, a retrospectively rated refund was made available for distribution to the members for program years 2 through 16 in the amount of $10,386,869. Members may elect to have returned all or a portion of their refund and the funds will remain in the respective program year in the name of the member city. The City of Santa Cruz elected to have returned $500,000 of its $793,187 available retrospective rated refund, leaving $293,187 in the program. Summary audited financial information for ACCEL as of and for the year ended June 30, 2008, is as follows: Assets Cash and investments Other assets

$

29,509,489 450,557

Total assets

$

29,960,046

$

13,000,000 16,801,828 33,355

Liabilities and Net Assets Unpaid claims liability Retrospectively rated refunds liability Other liabilities Total liabilities Net assets

29,835,183 124,863

Total liabilities and net assets

$

29,960,046

$

10,976,850 1,982,961 328,591

Revenues Premiums earned Investment income Administrative fees Total revenues

13,288,402 Expenses

Loss provision and premiums paid General and administrative

12,859,811 400,266

Total expenses

13,260,077

Net income Net assets, beginning of year

28,325 96,538

Net assets, end of year

$

124,863

Complete financial statements for ACCEL can be obtained from Alliant Insurance Services, Inc., 600 Montgomery Street, 9th Floor, San Francisco, CA 94111.

89

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

7. RISK MANAGEMENT AND SELF-INSURANCE, Continued Risk Management Fund revenues are primarily premium charges received from other funds and are planned to match expenses of insurance premiums for coverage in excess of self-insured amounts, estimated payments resulting from self-insurance programs, and operating expenses. Department charges are based on historical experience. Claims known to be payable and the estimated liability for the balance, based on a case-by-case review of all claims is recorded as claims payable. An additional estimate of the amount to be paid for claims incurred, but not reported, is also recorded as claims payable. Changes in the Risk Management Fund's claims liability amount for the years ended June 30, 2006 through 2008 are as follows: CLAIMS PAYABLE

June 30, 2006

$

Beginning

Claims

Balance

Incurred

10,719,455

$

2,686,917

Ending Payments $

(2,399,082)

Balance $

11,007,290

June 30, 2007

11,007,290

2,988,351

(3,553,086)

10,442,555

June 30, 2008

10,442,555

2,869,053

(2,869,053)

10,442,555

The General Fund and Redevelopment Agency Fund typically have been used in prior years to liquidate the liability for claims and judgments. 8. LANDFILL CLOSURE AND POSTCLOSURE COSTS In accordance with requirements established by the California Integrated Waste Management Board, the City has recognized a portion of the landfill's closure and postclosure care (closure) costs. These cost estimates are based on the amount of landfill used to date. The total estimated costs are as follows: Total estimated closure costs Total estimated postclosure costs Total estimated closure and postclosure costs

$

4,643,503 9,008,799

$

13,652,302

The City has increased the landfill’s capacity through excavations, and plans to continue excavating in future years to increase capacity. This effort has also increased the estimates of the closure and postclosure costs. At June 30, 2008, the estimated landfill closure cost liabilities of $6,363,712 and estimated annual landfill closure cost of $308,473 were calculated as follows: Total estimated closure and postclosure costs

$

Percent of used capacity to total capacity

13,652,302 46.61% 6,363,338

Miscellaneous adjustments

374

Estimated total closure and postclosure costs liability

6,363,712

Previous closure costs accrued

6,055,236

2007-2008 expense for closure and postclosure costs

$ 90

308,476

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

8. LANDFILL CLOSURE AND POSTCLOSURE COSTS, Continued The landfill has an estimated remaining capacity of 5,597,296 cubic yards and has a current projected closure date of January, 2038. Based upon the requirements of the California Integrated Waste Management Board, the City set aside $166,000 to fund future closure and post-closure costs for the year ended June 30, 2005 and $166,558 for all subsequent years afterwards through and including fiscal year ending June 30, 2008. All cash is invested. The market value of the invested cash at June 30, 2008 was $3,543,067, and is available to provide for closure and postclosure costs. Total funds accumulated as of June 30, 2008, are comprised as follows: Closure

$

Postclosure

1,486,151 2,056,916

Total

$

3,543,067

The City has demonstrated acceptable financial assurance to the California Ingenerated Waste Management Board through an agreement pledging revenue for corrective actions costs on September 26, 2006. Sufficient funds to cover these potential costs are available in the Refuse Unrestricted Cash Account. The estimated closure and corrective action costs are current estimates based on data provided by an independent consultant and are subject to changes in inflation, technological advancements, or regulatory changes. 9. RETIREMENT PLANS A. Pension Plan Plan Description The City contributes to the California Public Employees' Retirement System (PERS); an agent multiple-employer defined benefit pension plan. The Police and Fire Safety plans are required to participate in a risk pool since there were less than 100 active members in at least one valuation since June 30, 2003. PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of PERS’ Annual Financial Report may be obtained from their Executive Office located at 400 P Street, Sacramento, CA 95814.

91

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

9. RETIREMENT PLANS, Continued A. Pension Plan, Continued Funding Policy City employees are required to contribute 9% for safety employees and 11.163% for all other employees of their annual covered salary. The City employer is required to contribute at an actuarially determined rate; the fiscal year 2008 rate is 9.079% for miscellaneous employees, 35.071 for police safety employees, and 39.718% for fire safety employees of annual covered payroll. During the first half of fiscal year 2008, miscellaneous employees continued a cost-sharing agreement whereby the employee was required to pay the employer share above 6.354%, a portion on a pre-tax basis and a portion on a post-tax basis. In November 2007 and January 2008, all contracts for miscellaneous employees were negotiated to reduce the employee contribution to 7%. The contribution requirements of City employees and the City employer are established and may be amended by PERS. Annual Pension Cost For fiscal year 2008, the City’s annual pension cost of $9,024,674 for PERS was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2005, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumption included (a) 7.75% investment rate of return (net of administrative expenses); (b) projected salary increases ranging from 3.25% to 14.45% depending on age, service, and type of employment, and (c) 2% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.0%. The actuarial value of PERS assets was determined using techniques that smooth the effects of volatility in the market value of investments over a fifteen-year period. PERS unfunded actuarial accrued liability (or surplus) is being amortized as a level percentage of projected payroll on a closed basis. The amortization period at June 30, 2005 was 15 years for Public Safety Police employees, 15 years for Public Safety Fire Employees, and 30 years for miscellaneous employees for prior and current service unfunded liability. Fiscal

Annual

Percentage

Net

Year

Pension

of APC

Pension

Ended

Cost (APC)

Contributed

Obligation

6,330,030

100%

June 30, 2007

June 30, 2006

$

6,462,742

100%

-

June 30, 2008

9,024,674

100%

-

92

$

-

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

9. RETIREMENT PLANS, Continued A. Pension Plan, Continued Funding Status as of the Most Recent Actuarial Date A schedule of funding progress for the most current available year follows, the remaining periods can be found in the RSI section. PUBLIC EMPLOYEE RETIREMENT SYSTEMS (PERS) SCHEDULE OF FUNDING PROGRESS Miscellaneous Employees

Actuarial Valuation Date June 30, 2007

Actuarial Value of Assets $

181,207,670

Unfunded (Overfunded) Actuarial Accrued Liability

Entry Age Actuarial Accrued Liability $

200,228,705

$

19,021,035

Funded Ratio 90.5%

Covered Payroll $

34,999,086

Unfunded (Overfunded) Actuarial Liability as Percentage of Covered Payroll 54.3%

Police Safety and Fire Safety Employees Since the City has less than 100 active members in Fire and Police plans in at least one valuation since June 30, 2004, the City is required to participate in a risk pool. An actuarial valuation was performed with other participants within the same risk pool. Therefore, standalone information of the schedule of the funding progress for the City is not available. 10. POST-EMPLOYMENT RETIREMENT BENEFITS Retiree Medical Plan The City contracts with CalPERS for retiree health care benefits. Covered employees who retire under the provisions of the City’s contract with CalPERS are eligible to continue CalPERS medical coverage. The City’s contribution rate for retiree enrollment is the minimum amount provided under Government Code Section 22892 of the Public Employees Medical and Hospital Care Act. The minimum rates for the following calendar years are listed below: • • • •

2007 - $80.80 2008 - $97.00 2009 – $101.00 2010 – CPI Adjustment

On June 30, 2008, 145 retired employees were eligible for the Retiree Medical Plan benefits. In fiscal year 2008, the City paid $158,872 towards the Retiree Medical Plan and recognized these expenditures as they were paid. 93

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

10. POST-EMPLOYMENT RETIREMENT BENEFITS, Continued Retiree Medical Incentive All part-time and full-time regular employees that meet specified Memorandum of Understanding (MOU) continuous service and minimum age requirements are also eligible to receive a retiree medical incentive. Miscellaneous employees must have at least 10 years of continued service with the City and be at least 55 years of age; and Public Safety employees must have a minimum of 5 years of continued service with the City and be at least 50 years of age. Retiree medical incentives will be provided until the retiree becomes eligible for Medicare or discontinues CalPERS medical coverage. On June 30, 2008, there were 65 participants in the retirement medical incentive program. In fiscal year 2008, the City paid $112,526 towards retiree medical incentives and recognized these expenditures as they were paid.

11. COMMITMENTS AND CONTINGENCIES The City participates in a number of Federally assisted grant programs, of which the principal grants are the Disaster Assistance Program, Community Development Block Grant (CDBG), Home Investments Partnership Program (HOME) grant program, various Department of Justice and Department of Transportation grant programs. These programs are subject to program compliance audits by the grantors or their representatives. The amount, if any, of expenditures which may be disallowed by the granting agencies upon audit cannot be determined at this time, although the City expects such amounts to be immaterial. The California Legislature granted tidal and submerged lands in trust to the City to be used for a number of statewide purposes in furtherance of navigation, commerce, and fisheries. In accordance with this legislation, revenues derived from the Wharf are required to be used for purposes permitted under the grant statute. There are a number of lawsuits presently against the City. While the ultimate outcome of these lawsuits is not determinable, in the opinion of the City Attorney and City management, recovery from the City, if any, would not have a material effect on the accompanying financial statements.

94

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

11. COMMITMENTS AND CONTINGENCIES, Continued The following is a list of commitments as of June 30, 2008: Major Commitments and Contracts: Water Supply Project

$

Bay Street Reservoir Reconstruction

2,640,868 1,844,600

Gun Range Remediation

667,887

Power Capacitor Bank Upgrades

666,733

Design and Construction Landfill Cell 3

571,723

Water Treatment Upgrades

539,862

AutoCar WXII 64 Truck

459,952

Water System Security

441,121

Mission Street Landscaping

282,379

GHWTP Photovoltaic System

239,786

Slide Repair at the GHWTP

224,556

MBNMS Visitors Center

215,144 $

Total Commitments and Contracts

8,794,611

12. OPERATING LEASES The City is obligated under various operating leases for the use of land, buildings, office space and equipment. Lease expenditures, primarily for governmental funds, for the year ended June 30, 2008 were $207,963. Future minimum lease payments required by lease agreements that have initial or remaining noncancelable lease terms in excess of one year as of June 30, 2008 are as follows:

2009 2010

$

154,179 32,283

Total future minimum lease payments

$

186,462

The City leases (as lessor) office facilities, buildings, and wharf facilities under operating leases to various entities and individuals. Total revenues from these leases for the year ending June 30, 2008 were $998,700. The total cost of leased assets as of June 30, 2008 was $28,073,064, and the accumulated depreciation of those assets that are depreciable amounted to $8,082,830. Future estimated revenues from these leases are as follows: Year Ending June 30,

Amount

2009 2010 2011 Future years

$

95

1,014,231 881,083 798,172 4,126,813

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

13. RESERVED AND DESIGNATED FUND BALANCES Fund balances at June 30, 2008, have been reserved and designated for the following purposes: Redevelopment

Capital

Special

Debt

General

Agency

Projects

Revenue

Service

Fund

Fund

Funds

Funds

Funds

Total

Reserved for: Encumbrances

$

Noncurrent receivables and advances Prepaid items Debt service General plan update Hardship grants Low and moderate income housing Total reserved

846,218

$

585,082

$

1,986,720

$

789,202

$

-

$

4,207,222

4,161,658

5,768,571

-

2,080,828

-

12,011,057

49,317

-

-

-

-

49,317

-

64,398

-

-

-

64,398

1,095,000

-

-

-

-

1,095,000

291,812

-

-

-

-

291,812

-

2,187,617

-

-

-

2,187,617

6,444,005

8,605,668

1,986,720

2,870,030

-

19,906,423

Designated for: Accrued compensated absences

1,905,703

-

-

-

-

1,905,703

Capital projects

-

8,823,786

-

-

-

8,823,786

City public trust

5,517,110

-

-

-

-

5,517,110

66,403

-

-

-

-

66,403

3,245

-

-

-

-

3,245 3,976,749

Code enforcement CPVAW

-

2,060,068

-

-

1,916,681

Equipment maintenance

Debt service

56,858

-

-

-

-

56,858

Green building education

459,653

-

-

-

-

459,653

Housing in-lieu program

241,732

-

-

-

-

241,732

Kiosk maintenance

72,512

-

-

-

-

72,512

Museum building

28,021

-

-

-

-

28,021

Parks and recreation programs

22,048

-

-

-

-

22,048

1,985

-

-

-

-

1,985

Planning/zoning programs Police programs

-

-

-

79,426

-

79,426

8,143

-

-

978,771

-

986,914

Unemployment insurance

70,018

-

-

-

-

70,018

Youth/teen programs

26,602

-

-

-

-

26,602

Total designated

8,480,033

10,883,854

-

1,058,197

1,916,681

22,338,765

Unreserved, Undesignated

10,734,911

-

1,834,139

-

7,953,071

Public works programs

Total fund balances

$

25,658,949

$

19,489,522

96

(4,615,979) $

(2,629,259)

$

5,762,366

$

1,916,681

$

50,198,259

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

14. DEFICIT NET ASSETS The City had a total deficit in net assets of ($3,231,427) as of June 30, 2008. This amount was comprised of the General Capital Improvement governmental fund deficit net assets of ($2,629,259), the Golf enterprise fund deficit net assets of ($237,634), and the Risk Management internal service fund deficit net assets of ($364,534). The Risk Management internal service fund deficit net assets is a combination of deficit net assets of ($2,047,889) in the Workers Compensation fund, offset by positive net assets of $1,683,355 in the Liability insurance fund. The General Capital Improvement funds’ deficit is a result of the accelerated completion of the City Arterial and Collector Street Overlay Project, and will be cleared with the planned issuance of debt in the next fiscal year. The Golf funds’ deficit net assets were due to a large project in the repair of damage to a small section of the greens. The deficit should be cleared with green fees collected in the next fiscal year. The Risk Management internal service funds’ deficit is due to estimated workers’ compensation claims liabilities in excess of cash and other assets available in the fund, positively offset by the Liability insurance net assets. It is anticipated that this deficit will be made up in future years by increased contributions from other City funds. The City has established an actuarially approved plan to fund the increased liability over a number of years. A detail listing of deficit net assets by fund is shown below: Net Assets Capital Improvement Fund

$ (2,629,259)

Golf fund

(237,634)

Risk Management Fund: Workers Compensation

$

Liability insurance

(2,047,889) 1,683,355

(364,534) $ (3,231,427)

Total deficit net assets

15. SUBSEQUENT EVENTS The City of Santa Cruz executed a loan agreement with the Library Joint Powers Authority in September of 2008 for $467,303 related to the costs of tenant improvements at the Union Locust building which the City advanced to the Authority. The loan will be repaid over ten years, with an annual interest rate of 5%. Annual debt service payment on this loan is $60,518.

97

City of Santa Cruz Notes to Basic Financial Statements, Continued For the year ended June 30, 2008

16. PRIOR PERIOD ADJUSTMENTS A. Government-Wide Financial Statements The City recorded the following prior-period adjustments in the Government-Wide Financial Statements. Adjustments to the Governmental Activities include a net increase of $24,078,512 in Capital assets – infrastructure and a net increase of $214,011 in Capital assets – land improvements, and a decrease in Capital Assets – construction in progress of $4,076,098 belonging to the General Fund and incorrectly recorded in the Storm Water Enterprise Fund during the GASB 34 conversion. Adjustments to the Business-Type Activities include the $24,078,512 reduction in Capital assets – infrastructure and a $214,011 reduction in capital Assets – land improvements in the Storm Water Enterprise Fund. Accordingly, the net assets as of July 1, 2007, have been restated as follows: Prior Period Adjustments

Net Assets, as Previously

Capital

Net Assets,

Reported

Assets

As Restated

Government-Wide Financial Statements Governmental Activities: Net assets

$

182,415,091

Total governmental activities

$

20,216,425

$

202,631,516

182,415,091

20,216,425

202,631,516

253,686,501

(24,292,523)

229,393,978

253,686,501

(24,292,523)

229,393,978

Business-Type Activities: Net assets Total business-type activities Total government-wide

$

436,101,592

$

(4,076,098)

$

432,025,494

B. Funds Financial Statements The City recorded the following prior-period adjustments in the fund financial statements: Adjustments to the Business-Type Activities include a $24,078,512 reduction in Capital assets–infrastructure and a $214,011 reduction in Capital Assets–land improvements in the Storm Water Enterprise Fund. These errors occurred during the GASB 34 conversion. Accordingly, the net assets as of July 1, 2007, have been restated as follows:

Major Enterprise Funds: Storm Water

$

Net Assets,

Prior Period Adjustments

Previously

Net Capital

Net Assets,

Reported

Assets

As Restated

40,491,379

$

98

(24,292,523)

$

16,198,856

REQUIRED SUPPLEMENTARY INFORMATION

99

City of Santa Cruz Required Supplementary Information For the year ended June 30, 2008

1. BUDGETARY INFORMATION An annual budget is adopted by the City Council no later than the first regular meeting in July for the fiscal year beginning July first. As part of the budget process, all City departments submit budget requests for the next fiscal year. These requests are reviewed, and a final City Manager recommended budget showing estimated revenues and expenditures of the City is prepared. This proposed budget is transmitted to the City Council and made available to the public for review. Study sessions and a public hearing are conducted before final adoption of the budget by the City Council. Transfers of appropriations within any department require the approval of the Director of Finance for transfers up to $50,000, and the City Manager approval for all transfers over $50,000. Any new appropriation or appropriation transfer between departments requires approval by the City Council. Several supplemental appropriations were necessary during the year and are reflected in the budget amounts in the financial statements. Expenditures may not legally exceed appropriations at the department level. Under the City Charter, all unexpended appropriations shall lapse at the end of the fiscal year unless they are lawfully committed, or are required by law to be continuously appropriated from year to year. Lawfully committed amounts include amounts legally encumbered at year end. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the governmental fund types. Encumbrances outstanding at year-end are reported as reservation of fund balances since they do not constitute expenditures or liabilities, and reappropriations in the subsequent year provide authority to complete these transactions as expenditures. In addition, project-length (or non-lapsing) budgets are adopted for capital improvement and other projects, and grant-funded projects or programs that may not be completed within the fiscal year during which the budget appropriation for the project or program originates. Under these circumstances, the appropriation continues until project or program completion, or unless the appropriation is subsequently amended or rescinded by the City Council. In the Budgetary Comparison Schedules, the “Original Budget” column includes the final adopted budget amounts, re-appropriations for prior year encumbrances, and continuing appropriations for project-length budgets automatically carried over from prior years. The City Charter requires the City Council, upon recommendation of the City Manager and after providing sufficient funds to meet debt service and operating needs, to annually set aside in the enterprise funds an amount to be used for the acquisition and betterment of plant facilities. Such amounts, if any, would be shown in the financial statements as cash and investments held for betterment of plant facilities. No such funds were set aside during the year ended June 30, 2008.

100

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008

1. BUDGETARY INFORMATION, Continued Budgets are adopted each year for all general, special revenue, debt service, and capital projects funds. These governmental fund budgets are prepared on a basis consistent with generally accepted accounting principles (GAAP), except in the following areas: ¾

Budgetary basis revenues include repayments of loan principal. Budgetary basis expenditures include loans made. On a GAAP basis both of these are considered as reclassifications of fund balance (between reserved and unreserved fund balance).

¾

GAAP basis revenues include the fair value adjustment to investment earnings. GAAP basis expenditures include compensated absences expense. Neither of these are included in the budgetary basis.

A reconciliation of differences between budgetary and GAAP revenues and expenditures follows the budget comparison schedules.

101

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102

BUDGETARY SCHEDULES

103

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008 Budgetary Comparison Schedule, General Fund Variance with Budgeted Amounts Original

Final

Actual Amounts

Positive

(Budgetary Basis)

(Negative)

Budget to GAAP Actual Amounts Differences

(GAAP Basis)

REVENUES: Taxes

$

46,473,504

$

46,473,504

$

45,809,387

$

(664,117)

$

-

$

45,809,387

Licenses and permits

726,000

726,000

935,191

209,191

-

935,191

Intergovernmental

980,000

1,094,113

854,975

(239,138)

-

854,975

External

8,443,264

9,127,264

9,834,933

707,669

-

9,834,933

Internal

4,132,294

3,779,037

3,789,924

10,887

-

3,789,924

Interagency

9,851,048

9,851,048

10,031,215

180,167

(1,096,736)

8,934,479

22,426,606

22,757,349

23,656,072

898,723

(1,096,736)

22,559,336

Fines and forfeitures

1,954,200

1,954,200

2,123,686

169,486

-

2,123,686

Use of money and property

2,729,625

2,729,625

2,987,166

257,541

75,438

3,062,604

69,082

182,948

198,312

15,364

-

198,312

75,359,017

75,917,739

76,564,789

647,050

(1,021,298)

75,543,491

General government

15,087,266

15,960,100

13,982,305

1,977,795

-

13,982,305

Public safety

33,451,796

33,225,430

32,853,383

372,047

-

32,853,383

Parks and recreation

10,689,712

10,745,668

10,464,762

280,906

-

10,464,762

Library

10,143,947

9,995,234

10,298,783

(303,549)

-

10,298,783

Public works

5,130,769

5,101,169

4,642,061

459,108

-

4,642,061

Community and economic development

1,258,065

1,579,640

1,119,556

460,084

(1,096,736)

22,820

Social services

1,787,703

1,834,309

1,816,741

17,568

-

1,816,741

2,130,215

2,365,963

1,024,209

1,341,754

-

1,024,209

781,010

781,010

146,019

634,991

-

146,019

95,199

95,199

45,174

50,025

-

45,174

80,555,682

81,683,722

76,392,993

5,290,729

(1,096,736)

75,296,257

(5,196,665)

(5,765,983)

171,796

5,937,779

75,438

247,234

46,045

-

46,045

(850,000)

-

-

Charges for services:

Subtotal charges for services

Other revenues Total revenues EXPENDITURES: Current:

Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from asset disposition Proceeds from long-term debt issued Loan principal receipts Transfers in

-

-

46,045

850,000

850,000

-

12,000

12,000

54,009

42,009

529,427

568,802

74,240

(679,390)

Transfers out

(1,548,875)

(1,127,990)

(118,073)

(953,696)

(4,484,628)

(5,884,056)

(781,900)

26,436,883

26,436,883

712,037

Total other financing sources (uses) Net change in fund balances

(54,009)

-

(494,562)

-

74,240

420,885

-

(1,127,990)

(54,009)

(1,007,705)

(835,623) 5,102,156

21,429

(760,471)

FUND BALANCE: Beginning of the year End of year

$

21,952,255

$

20,552,827

104

26,436,883 $

25,654,983

$

5,102,156

26,419,420

(17,463) $

3,966

$

25,658,949

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008

General Fund Reconciliation of Net Changes in Fund Balances - Budgetary to GAAP Basis: Net Change in Fund Balances - Budgetary Basis

$

(781,900)

The amount reported in the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances was different because: Interagency charges for personnel services provided to the redevelopment agency are a revenue and expenditure on a budgetary basis, but are eliminated in the Statement of Revenues, Expenditures, and Changes in Fund Balances on a GAAP basis.

(1,096,736)

Change in fund balances because the redevelopment agency is part of the reporting entity.

1,096,736

Unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis.

75,438

On a budgetary basis, loan principal receipts are recorded as revenue in the Statement of Revenues, Expenditures and Changes in Fund Balances, but on a GAAP basis, the receipts reduce receivables. Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances

(54,009) $

(760,471)

Reconciliation of Fund Balances - Budgetary to GAAP Basis: Fund Balances - Ending - Budgetary Basis

$

Interagency charges for personnel services provided to the redevelopment agency are a revenue and expenditure on a budgetary basis, but are eliminated in the Statement of Revenues, Expenditures, and Changes in Fund Balances on a GAAP basis.

(1,096,736)

Change in fund balances because the redevelopment agency is part of the reporting entity.

1,096,736

Unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis.

57,975

On a budgetary basis, loan principal receipts are recorded as revenue in the Statement of Revenues, Expenditures and Changes in Fund Balances, but on a GAAP basis, the receipts reduce receivables. Fund Balances - Ending - GAAP Basis

(54,009) $

105

25,654,983

25,658,949

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008

Budgetary Comparison Schedule, Redevelopment Agency Variance with Budgeted Amounts Original

Final

Actual Amounts

Positive

(Budgetary Basis)

(Negative)

Budget to GAAP Actual Amounts Differences

(GAAP Basis)

REVENUES: Tax increment

$

11,088,508

$

11,308,008

$

11,956,560

$

648,552

$

-

$

11,956,560

Use of money and property

408,259

436,259

803,486

367,227

60,525

864,011

Other revenues

294,580

369,580

1,149,855

780,275

-

1,149,855

11,791,347

12,113,847

13,909,901

1,796,054

60,525

13,970,426

Total revenues EXPENDITURES: Current: Community and economic development Capital outlay

9,864,825

11,664,323

7,551,378

4,112,945

(110,000)

4,384,760

5,616,760

717,564

4,899,196

-

717,564

6,010,909

6,568,997

6,568,864

133

(4,846,330)

1,722,534

594,778

565,203

546,024

19,179

-

546,024

20,855,272

24,415,283

15,383,830

9,031,453

(4,956,330)

10,427,500

5,016,855

3,542,926

$

Debt service:

7,441,378 -

Principal Interest and fiscal charges Total expenditures

REVENUES OVER (UNDER) EXPENDITURES

(9,063,925)

(12,301,436)

(1,473,929)

4,790,013

4,790,013

4,787,500

-

-

-

10,827,507

OTHER FINANCING SOURCES (USES): Loan proceeds Long term advance proceeds Loan principal receipts Transfer in Transfer out Total other financing sources (uses) Net change in fund balances

(2,513)

(4,787,500)

-

-

-

-

23,000

23,000

23,000

-

(23,000)

-

5,104,983

5,104,983

4,862,341

(242,642)

-

4,862,341

(5,104,983)

(5,104,983)

(4,862,341)

242,642

-

(4,862,341)

4,813,013

4,813,013

4,810,500

(4,810,500)

-

(4,250,912)

(7,488,423)

3,336,571

(9,063,925)

(4,221,204)

(5,630,172)

15,961,583

15,961,583

15,961,583

(2,513) 10,824,994

3,542,926

206,355 1,944,557

FUND BALANCE:

Beginning of the year End of year

$

11,710,671

$

8,473,160

106

$

19,298,154

$

10,824,994

15,946,596

14,987 $

221,342

$

19,489,522

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008

Redevelopment Agency Fund Reconciliation of Net Changes in Fund Balances - Budgetary to GAAP Basis: Net Change in Fund Balances - Budgetary Basis

$

3,336,571

The amount reported in the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances was different because: Unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis.

60,525

The Agency budgets for loan disbursements which will not be repaid within the current year. Although these amounts are recorded as long-term receivables on the Governmental Funds Balance Sheet, they are not available for appropriation.

110,000

On a budgetary basis, the Agency records loan principal receipts as revenue, but on a GAAP basis, they reduce receivables.

(23,000)

Proceeds of both short term loans and long term advances from the City are considered budgetary resources, but are not revenues on a GAAP basis.

(4,787,500)

The Agency budgets for both short term and long term loan and advance principal repayments to the City, but these payments are not considered expenditures on a GAAP basis.

4,846,330

Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances

$

3,542,926

$

19,298,154

Reconciliation of Fund Balances - Budgetary to GAAP Basis: Fund Balances - Ending - Budgetary Basis Cumulative unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis.

45,538

The Agency budgets for loan disbursements which will not be repaid within the current year. Although these amounts are recorded as long-term receivables on the Governmental Funds Balance Sheet, they are not available for appropriation.

110,000

On a budgetary basis, the Agency records loan principal receipts as revenue, but on a GAAP basis, they reduce receivables.

(23,000)

Proceeds of both short term loans and long term advances from the City are considered budgetary resources, but are not revenues on a GAAP basis.

(4,787,500)

The Agency budgets for both short term and long term loan and advance principal repayments to the City, but these payments are not considered expenditures on a GAAP basis.

4,846,330

Fund Balances - Ending - GAAP Basis

$

19,489,522

19,489,522 All funds are reserved or designated for debt service, capital projects, or low and moderate income housing.

107

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008 Budgetary Comparison Schedule, Capital Improvement Fund Variance with Budgeted Amounts Original

Final

Actual Amounts

Positive

(Budgetary Basis)

(Negative)

Budget to GAAP Actual Amounts Differences

(GAAP Basis)

REVENUES: Taxes

$

Intergovernmental

1,236,000

$

4,545,091

Use of money and property Other revenues Total revenues

1,236,000

$

5,427,489

1,455,615

$

1,686,829 (13,472)

219,615

$

-

(3,740,660)

-

$

1,455,615 1,686,829

110,870

110,870

(124,342)

13,472

-

3,351,539

3,377,886

1,704,593

(1,673,293)

-

1,704,593

9,243,500

10,152,245

4,833,565

(5,318,680)

13,472

4,847,037

EXPENDITURES: Current: General government

106,000

265,102

231,329

33,773

-

231,329

Parks and recreation

255,062

1,279,950

196,311

1,083,639

-

196,311

8,224,670

10,325,521

4,423,732

5,901,789

-

4,423,732

-

1,621,095

632,462

988,633

-

632,462

3,405,000

13,230,533

8,037,127

5,193,406

-

8,037,127

Principal

126,652

170,718

115,000

55,718

-

115,000

Interest and fiscal charges

196,876

321,876

305,371

16,505

-

305,371

12,314,260

27,214,795

13,941,332

13,273,463

-

13,941,332

(3,070,760)

(17,062,550)

(9,107,767)

7,954,783

13,472

(9,094,295)

11,500,000

11,500,000

-

Public works Community and economic development Capital outlay Debt service:

Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from long-term debt issued Capital contributions - other agencies

650,000

Transfers in

372,800

Transfers out

(105,950)

Total other financing sources (uses) Net change in fund balances

-

(11,500,000)

-

650,000

-

(650,000)

-

-

2,265,207

7,772,237

5,507,030

-

7,772,237

95,510

-

(10,440)

(105,950)

12,416,850

14,309,257

7,761,797

(6,547,460)

9,346,090

(2,753,293)

(1,345,970)

1,407,323

13,472

(1,297,876)

(1,297,876)

(1,297,876)

-

1,115

(10,440)

-

7,761,797 (1,332,498)

FUND BALANCES: Beginning of the year, as restated End of year

$

8,048,214

$

(4,051,169)

108

$

(2,643,846)

$

1,407,323

$

14,587

(1,296,761) $

(2,629,259)

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008

General Fund Reconciliation of Net Changes in Fund Balances - Budgetary to GAAP Basis: Net Change in Fund Balances - Budgetary Basis

$

Unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis. Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances

(1,345,970)

13,472 $

(1,332,498)

$

(2,643,846)

Reconciliation of Fund Balances - Budgetary to GAAP Basis: Fund Balances - Ending - Budgetary Basis Unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis. Fund Balances - Ending - GAAP Basis

109

14,587 $

(2,629,259)

$

(2,629,259)

This page intentionally left blank.

110

City of Santa Cruz Required Supplementary Information, Continued For the year ended June 30, 2008

PUBLIC EMPLOYEE RETIREMENT SYSTEM (PERS) SCHEDULE OF FUNDING PROGRESS Miscellaneous Employees Unfunded (Overfunded) Unfunded

Actuarial

Entry Age

(Overfunded)

Liability as

Actuarial

Actuarial

Actuarial

Actuarial

Valuation

Value of

Accrued

Accrued

Funded

Covered

Covered

Date

Assets

Liability

Liability

Ratio

Payroll

Payroll

June 30, 2005

$

150,956,645

$

170,732,487

$

Percentage of

19,775,842

88.4%

$

32,905,030

60.1%

June 30, 2006

164,898,761

183,410,717

18,511,956

89.9%

33,001,059

56.1%

June 30, 2007

181,207,670

200,228,705

19,021,035

90.5%

34,999,086

54.3%

Police Safety Employees Unfunded (Overfunded) Unfunded

Actuarial

Entry Age

(Overfunded)

Liability as

Actuarial

Actuarial

Actuarial

Actuarial

Valuation

Value of

Accrued

Accrued

Funded

Covered

Covered

Date

Assets

Liability

Liability

Ratio

Payroll

Payroll

June 30, 2005

$

5,295,150,375

$

6,367,049,264

$

Percentage of

1,071,898,889

83.2%

664,147,796

161.4%

June 30, 2006

6,102,615,567

7,278,049,834

1,175,434,267

83.9%

$

754,730,438

155.7%

June 30, 2007

6,826,599,459

7,986,055,176

1,159,455,717

85.5%

831,607,658

139.4%

CalPERS Risk Pool Information (see comment below):

Fire Safety Employees Unfunded (Overfunded) Unfunded

Actuarial

Entry Age

(Overfunded)

Liability as

Actuarial

Actuarial

Actuarial

Actuarial

Valuation

Value of

Accrued

Accrued

Funded

Covered

Covered

Date

Assets

Liability

Liability

Ratio

Payroll

Payroll

June 30, 2005

$

5,295,150,375

$

6,367,049,264

$

Percentage of

1,071,898,889

83.2%

664,147,796

161.4%

June 30, 2006

6,102,615,567

7,278,049,834

1,175,434,267

83.9%

$

754,730,438

155.7%

June 30, 2007

6,826,599,459

7,986,055,176

1,159,455,717

85.5%

831,607,658

139.4%

CalPERS Risk Pool Information (see comment below):

Since the City has less than 100 active members in Fire and Police plans in at least one valuation since June 30, 2003, the City is required to participate in a risk pool. An actuarial valuation was performed with other participants within the same risk pool. Therefore, standalone information of the schedule of the funding progress for the City was not available. 111

This page intentionally blank

112

SUPPLEMENTARY INFORMATION

113

This page intentionally left blank.

114

Non-Major Governmental Funds Special Revenue Funds: Police - Accounts for state and federal grants and other revenues restricted to be used for police programs. State Highway Funds - This fund is used to account for the City's apportionment of the State excise tax on gasoline and other related grants or receipts that are restricted for the planning, construction and maintenance of streets and roads. It is also used to account for a subvention of the State sales tax on gasoline (Traffic Congestion Relief Funds) that are restricted for street and highway maintenance, and rehabilitation and reconstruction of necessary associated facilities such as drainage and traffic control devices. Traffic Impact Fee Funds - This fund is used for capital improvements to mitigate traffic impacts generated by land development. The fee provides financial resources for improvements to transit stops, bike and pedestrian facilities, signal coordination, park and ride lots, and other alternative transportation sources impacted by development, and is levied on all Citywide projects requiring a building permit (residential remodels and limited expansions expected to generate less than five new trips per day are exempt). Parks and Recreation - Accounts for tax and fee revenues restricted for parks and recreation use. Housing and Community Development - Accounts for receipts and expenditures under the Housing and Community Development Act, which includes Community Development Block Grant funds and HOME program funds. It also is used to account for Red Cross housing reconstruction loan repayments and income and related expenditures for a City-owned rental property. Transportation Development Act Fund - This fund is used to account for receipts of State Transportation Development Act (TDA) funds restricted to be used for specialized or unmet transit needs. Acting as the public agency sponsor, the City contracts with non-profit agencies to meet these obligations. Debt Service Funds: General Obligation Bonds - This fund accounts for the debt service for a $7 million general obligation bond issue approved by voters in November 1998. Funds for payment of principal and interest on the bonds are generated by a property tax override assessment of $9.00 per $100,000 of assessed value. Lease Revenue Bonds - This fund accounts for the debt service for a $6.9 million revenue bond issued December 4, 2007. Funds for the payment of principal and interest on the bonds are generated by revenues received in the form of lease payments from the Water Enterprise Fund and the Library JPA for occupying the City's Locust/Union Building.

115

City of Santa Cruz Combining Balance Sheet Non-Major Governmental Funds June 30, 2008

Special Revenue Housing and Police

State

Traffic

Parks and

Community

Highway

Impact Fee

Recreation

Development

ASSETS Cash and cash equivalents

$

Interest receivable

423,189

$

662,109

$

970,981

$

1,682,304

$

704,613

3,141

6,258

7,790

14,945

317,416

-

-

-

-

-

2,737

253,969

444,466

-

-

-

730,460

-

-

584,177

Cash and cash equivalents

-

-

-

-

-

Investments

-

-

-

-

-

-

-

-

-

-

Notes receivable - net

-

-

-

122,944

653,449

Loans receivable - net

-

-

-

-

1,427,379

Taxes receivable Accounts receivable - net Due from other governments Restricted assets:

Total restricted assets

Total assets

$

429,067

$

1,652,796

$

1,423,237

$

1,820,193

$

3,687,034

$

-

$

357,785

$

-

$

129,581

$

49,955

LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and other current liabilities Due to other funds

275

-

-

6,075

Intergovernmental payable

-

-

-

-

2,200

Deferred revenue

-

-

444,466

122,944

308,234

239,292

-

-

-

-

Deposits payable

-

-

-

1,531

-

Advances from other funds

-

-

-

-

1,495,000

239,567

357,785

444,466

260,131

1,948,012

88,764

262,428

-

314,446

123,564

-

-

-

-

2,080,828

Unearned revenue

Total liabilities

92,623

Fund Balances: Reserved for: Encumbrances Non-current receivables Unreserved, designated for: Police programs

79,426

-

-

-

-

Public works programs

-

-

978,771

-

-

Debt service

-

-

-

-

-

Special revenue funds

21,310

1,032,583

-

1,245,616

(465,370)

Capital projects funds

-

-

-

-

-

189,500

1,295,011

978,771

1,560,062

1,739,022

Unreserved, undesignated, reported in:

Total fund balances Total liabilities and fund balances

$

429,067

$

116

1,652,796

$

1,423,237

$

1,820,193

$

3,687,034

Debt Service

Special Revenue Transportation

$

Lease

Total Other

Development

General

Revenue

Governmental

Act

Obligation Bond

Bond

Funds

-

$

1,100,741

$

250,291

$

5,794,228

-

9,024

53,618

-

30,563

-

412,192 30,563

-

-

-

701,172

-

-

-

1,314,637

-

-

472,444

472,444

-

-

-

-

-

-

472,444

472,444

-

-

-

776,393

-

-

-

1,427,379

$

-

$

1,140,328

$

776,353

$

10,929,008

$

-

$

-

$

-

$

537,321

-

-

-

-

-

-

98,973 2,200

-

-

-

875,644

-

-

-

239,292

-

-

-

1,531

-

-

-

1,495,000

-

-

-

3,249,961

-

-

-

789,202

-

-

-

2,080,828

-

-

-

79,426

-

-

-

978,771

-

1,140,328

776,353

1,916,681

-

-

-

1,834,139

-

-

-

-

-

1,140,328

776,353

7,679,047

-

$

-

$

1,140,328

$

776,353

$

10,929,008

117

City of Santa Cruz Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds For the year ended June 30, 2008

Special Revenue Housing and Police

State

Traffic

Parks and

Community

Highway

Impact Fee

Recreation

Development

REVENUES: Taxes

$

Licenses and permits

-

$

-

$

-

-

427,481

-

Intergovernmental

20,800

2,443,047

Charges for services

33,878

-

Fines and forfeitures

-

-

12,824 67,502

Use of money and property Other revenues Total revenues

$

347,482

$

-

-

-

-

-

2,058,715

-

191,056

-

-

110,000

-

51,363

37,557

77,919

105,003

30,836

427,480

-

-

2,952,727

465,037

726,457

2,163,718

EXPENDITURES: Current: Public safety

25,000

-

-

-

-

Public works

-

1,032,249

-

-

-

Transit

-

-

-

-

-

Community and economic development

-

-

-

224,022

2,686,948

Social services

-

-

-

-

150,199

-

2,097,432

-

195,646

725,438

Principal

-

-

-

-

-

Interest and fiscal charges

-

-

-

-

22,719

25,000

3,129,681

-

419,668

3,585,304

Capital outlay Debt service:

Total expenditures REVENUES OVER (UNDER) EXPENDITURES

42,502

(176,954)

465,037

306,789

(1,421,586)

-

-

-

-

-

OTHER FINANCING SOURCES (USES): Proceeds from long term debt issued Transfers in

-

-

(1,314)

-

(101,865)

(117,324)

(461,205)

(259,000)

Total other financing sources (uses)

(1,314)

23,809

(117,324)

(461,205)

(91,010)

Net change in fund balances

41,188

(153,145)

347,713

(154,416)

(1,512,596)

Transfers out

125,674

167,990

FUND BALANCES: Beginning of year End of year

148,312 $

189,500

1,448,156 $

118

1,295,011

631,058 $

978,771

1,714,478 $

1,560,062

3,251,618 $

1,739,022

Debt Service

Special Revenue Transportation

$

$

Lease

Total Other

Development

General

Revenue

Governmental

Act

Obligation Bond

Bond

Funds

-

$

618,290

$

-

$

965,772

-

-

-

427,481

727,191

-

-

5,249,753

-

-

-

224,934

-

-

-

110,000

-

39,642

132,743

457,051

-

-

-

458,316

727,191

657,932

132,743

7,893,307

-

-

-

25,000

-

-

-

1,032,249

727,191

-

-

727,191

-

-

-

2,910,970

-

-

-

150,199

-

-

-

3,018,516

-

193,004

-

193,004

-

234,176

313,239

570,134

727,191

427,180

313,239

8,627,263

-

230,752

(180,496)

-

-

(733,956)

6,881,849

6,881,849

-

-

-

-

-

(5,925,000)

-

-

956,849

309,805

-

230,752

776,353

(424,151)

-

909,576

-

-

$

1,140,328

$

776,353

293,664 (6,865,708)

8,103,198 $

7,679,047

119

City of Santa Cruz Schedule of Budget and Actual Revenues General Fund For the year ended June 30, 2008

Variance with Final Budget Budgeted Amounts Original

Final

Actual Amounts

Positive

(Budgetary Basis)

(Negative)

REVENUES: Taxes: Property Sales and use

$

13,906,000 14,962,000

$

13,906,000 14,962,000

$

13,722,295 14,665,125

$

(183,705) (296,875)

773,000

773,000

770,837

Franchise

2,720,000

2,720,000

2,911,919

Transient occupancy

2,148,000

2,148,000

2,229,633

81,633

230,000

230,000

265,594

35,594

Business license

Parking

(2,163) 191,919

Utility users

9,211,000

9,211,000

8,725,383

(485,617)

Admission

1,900,000

1,900,000

1,964,405

64,405

300,000

300,000

233,679

(66,321)

Property transfer Business improvement

205,000

205,000

202,015

(2,985)

Other taxes

118,504

118,504

118,502

(2)

46,473,504

46,473,504

45,809,387

(664,117)

676,000

676,000

884,677

208,677

50,000

50,000

50,514

514

726,000

726,000

935,191

209,191

Total taxes Licenses and permits: Construction permits Other licenses and permits Total licenses and permits Intergovernmental revenues:

75,000

155,978

62,292

(93,686)

State

905,000

938,135

779,683

(158,452)

Local

-

-

13,000

13,000

980,000

1,094,113

854,975

(239,138)

Federal

Total intergovernmental revenues Charges for services: General government:

-

-

330

330

623,000

623,000

683,001

60,001

1,717,972

2,081,972

2,696,497

614,525

8,000

8,000

7,801

1,260,250

1,260,250

1,469,749

Legislative Management and support Planning and zoning Other general government

(199)

Public safety: Police

209,499

Fire

619,477

619,477

521,848

(97,629)

Protective inspection

511,000

831,000

755,351

(75,649)

25,000

25,000

27,843

2,843

46,000

46,000

18,913

(27,087)

1,555,800

1,555,800

1,625,616

69,816

10,000

10,000

11,460

1,460

6,376,499

7,060,499

7,818,409

757,910

Other public safety Parks and recreation: Parks Recreation Other parks and recreation Subtotal of charges for services

120

City of Santa Cruz Schedule of Budget and Actual Revenues, Continued General Fund For the year ended June 30, 2008

Variance with Final Budget Budgeted Amounts Original

Final

Actual Amounts

Positive

(Budgetary Basis)

(Negative)

Charges for services, Continued: Subtotal from previous page

$

6,376,499

$

7,060,499

$

7,818,409

$

757,910

Public works: Engineering Transportation

66,400

66,400

77,388

1,984,500

1,984,500

1,923,179

10,988 (61,321)

Community and economic development: Other community and economic development Internal charges for services provided

15,865

15,865

15,957

92

4,132,294

3,779,037

3,789,924

10,887

Interagency personnel services charges: Library

8,600,483

8,600,483

8,934,479

333,996

Redevelopment Agency

1,250,565

1,250,565

1,096,736

(153,829)

Subtotal interagency charges

9,851,048

9,851,048

10,031,215

180,167

22,426,606

22,757,349

23,656,072

898,723

1,666,000

1,666,000

1,726,231

60,231

288,200

288,200

397,455

109,255

1,954,200

1,954,200

2,123,686

169,486

Investment income

739,325

739,325

956,881

217,556

Rents and royalties

1,990,300

1,990,300

2,030,285

39,985

2,729,625

2,729,625

2,987,166

257,541

Contributions and donations

28,072

141,938

132,138

(9,800)

Other miscellaneous revenues

41,010

41,010

66,174

25,164

69,082

182,948

198,312

15,364

75,359,017

75,917,739

76,564,789

647,050

Total charges for services Fines and forfeitures: Court and traffic fines Other fines and forfeitures Total fines and forfeitures Use of money and property:

Total use of money and property Other revenues:

Total other revenues Total revenues OTHER FINANCING SOURCES: Proceeds from asset dispositions Proceeds from long-term debt issued Repayment of loans and advances Transfers in Total other financing sources Total revenues and other financing sources

$

-

-

46,045

850,000

850,000

-

12,000

12,000

54,009

42,009

529,927

568,802

74,240

(494,562)

1,391,927

1,430,802

174,294

(1,256,508)

76,750,944

121

$

77,348,541

$

76,739,083

46,045 (850,000)

$

(609,458)

City of Santa Cruz Schedule of Budget and Actual Expenditures and Other Financing Uses For Legally Adopted Appropriations by Department - General Fund For the year ended June 30, 2008

Services, Supplies

City Council

$

Personnel

and Other

Debt

Capital

Actual Amounts

Services

Charges

Service

Outlay

(Budgetary Basis)

218,222

$

272,097

$

-

$

-

$

490,319

City Clerk

529,331

76,705

-

14,246

620,282

City Manager

729,548

515,921

-

-

1,245,469

City Attorney Human Resources Finance Information Technology

15,252

640,288

-

-

655,540

856,234

1,570,970

-

-

2,427,204

1,816,079

468,483

-

-

2,284,562

1,461,726

508,986

122,302

2,093,014

16,303,665

3,967,941

-

543,218

20,814,824

9,875,255

1,176,406

-

101,349

11,153,010

Parks and Recreation

7,124,945

3,325,768

-

27,381

10,478,094

Library

8,904,032

1,394,751

-

-

10,298,783

Public Works

3,907,790

1,575,887

-

215,713

5,699,390

Planning and Community Development

2,373,089

1,233,247

-

-

3,606,336

Redevelopment Administration

1,096,736

22,820

-

-

1,119,556

22,938

3,192,478

-

-

3,215,416

-

-

191,194

-

191,194

55,234,842

19,942,748

191,194

1,024,209

76,392,993

-

-

-

-

1,127,990

Police Fire

Non-Departmental Debt service Total expenditures Transfers out Total expenditures and other financing uses

$

55,234,842

$

19,942,748

Budget to GAAP Differences: See reconciliation in Required Supplementary Information Note 1.

122

$

191,194

$

1,024,209

$

77,520,983

Variance with Final Budget -

$

$

Final

Positive

Budget to GAAP

Actual Amounts

Budget

(Negative)

Differences

(GAAP Basis)

622,045

$

131,726

$

-

$

490,319

639,676

19,394

-

620,282

1,407,515

162,046

-

1,245,469

655,540

-

-

655,540

2,618,228

191,024

-

2,427,204

2,321,272

36,710

-

2,284,562

2,427,969

334,955

-

2,093,014

21,298,738

483,914

-

20,814,824

11,886,532

733,522

-

11,153,010

10,853,525

375,431

-

10,478,094

10,298,783

-

-

10,298,783

6,410,975

711,585

-

5,699,390

4,482,562

876,226

-

3,606,336

1,579,640

460,084

(1,096,736)

22,820

3,304,513

89,097

-

3,215,416

876,209

685,015

-

191,194

81,683,722

5,290,729

(1,096,736)

75,296,257

1,548,875

420,885

-

1,127,990

83,232,597

$

5,711,614

$

(1,096,736)

$

76,424,247

123

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Police Special Revenue Fund For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Intergovernmental

$

Charges for services

110,800

$

110,800

32,000

Fines and forfeitures Use of money and property Total revenues

$

32,000

20,800

$

33,878

-

$

-

20,800 33,878

-

-

-

-

-

7,570

7,570

11,405

1,419

12,824

150,370

150,370

66,083

1,419

67,502

146,395 -

56,395 90,000

25,000 -

-

25,000 -

146,395

146,395

25,000

-

25,000

3,975

3,975

41,083

1,419

42,502

(1,200)

(1,200)

(1,314)

-

(1,314)

(1,200)

(1,200)

(1,314)

-

(1,314)

2,775

2,775

39,769

148,635

148,635

148,635

EXPENDITURES: Current: Public safety: Police Capital outlay Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Total other financing sources (uses) Net change in fund balance

1,419

41,188

FUND BALANCE: Beginning of the year End of year

$

151,410

$

151,410

124

$

188,404

(323) $

1,096

148,312 $

189,500

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual State Highway Special Revenue Fund For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Intergovernmental

$

Charges for services

5,737,000

$

12,264,415

-

2,870,528

-

-

-

102,000

45,165

6,198

51,363

-

30,836

-

30,836

6,139,000

12,366,415

2,946,529

6,198

2,952,727

785,069 5,042,100

1,074,954 12,447,724

1,032,249 2,097,432

-

1,032,249 2,097,432

-

-

-

-

-

5,827,169

13,522,678

3,129,681

-

3,129,681

-

-

Use of money and property

102,000

Other revenues

300,000

Total revenues

$

2,870,528

$

EXPENDITURES: Current: Public works: Transportation Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES

311,831

(1,156,263)

(183,152)

6,198

(176,954)

500,000 500,000 -

300,000 500,000 641,325 -

125,674 (101,865)

-

125,674 (101,865)

Total other financing sources (uses)

1,000,000

1,441,325

23,809

-

23,809

Net change in fund balance

1,311,831

285,062

1,451,181

1,451,181

OTHER FINANCING SOURCES (USES): Proceeds from asset disposition Proceeds from long-term debt Transfers in Transfers out

(159,343)

6,198

(153,145)

FUND BALANCE: Beginning of the year End of year

$

2,763,012

$

1,736,243

125

1,451,181 $

1,291,838

(3,025) $

3,173

1,448,156 $

1,295,011

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Traffic Impact Fee Fund For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Intergovernmental

$

Charges for services

-

$

-

-

Use of money and property

$

-

-

$

-

-

-

$

-

27,600

27,600

33,845

3,712

37,557

365,000

365,000

427,480

-

427,480

392,600

392,600

461,325

3,712

465,037

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

392,600

392,600

461,325

3,712

465,037

(500,000)

(641,325)

(117,324)

-

(117,324)

Total other financing sources (uses)

(500,000)

(641,325)

(117,324)

-

(117,324)

Net change in fund balance

(107,400)

(248,725)

344,001

631,946

631,946

631,946

Other revenues Total revenues EXPENDITURES: Current: Public works: Transportation Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers out

3,712

347,713

FUND BALANCE: Beginning of the year End of year

$

524,546

$

383,221

126

$

975,947

(888) $

2,824

631,058 $

978,771

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Parks and Recreation Fund For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Taxes

$

Intergovernmental Use of money and property Other revenues Total revenues

907,000

$

523,000

-

595,000

$

347,482

$

-

110,000

-

$

347,482 110,000

72,700

72,700

70,240

7,679

77,919

392,000

45,586

191,056

-

191,056

1,371,700

1,236,286

718,778

7,679

726,457

265,000 1,034,000

729,233 1,289,075

419,668

-

419,668

1,034,000

1,289,075

419,668

-

419,668

7,679

306,789

EXPENDITURES: Current: Parks and Recreation Capital outlay Total expenditures REVENUES OVER (UNDER) EXPENDITURES

337,700

(52,789)

299,110

205,000 (28,307)

(690,900) (690,900)

(461,205)

-

(461,205)

OTHER FINANCING SOURCES (USES): Transfer in Transfers out Total other financing sources (uses)

176,693

(1,381,800)

(461,205)

-

(461,205)

Net change in fund balance

514,393

(1,434,589)

(162,095)

7,679

(154,416)

FUND BALANCE: Beginning of the year End of year

1,716,541 $

2,230,934

1,716,541 $

281,952

127

1,716,541 $

1,554,446

(2,063) $

5,616

1,714,478 $

1,560,062

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Housing and Community Development Fund For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Intergovernmental

$

Use of money and property Other revenues Total revenues

2,276,775

$

3,451,443

$

2,058,715

$

-

$

2,058,715

84,767

84,767

96,188

8,815

105,003

500,000

500,000

-

-

-

2,861,542

4,036,210

2,154,903

8,815

2,163,718

2,986,614

4,113,244

2,756,948

(70,000)

2,686,948

95,199 29,723

150,199 826,084

150,199 725,438

-

175,400 40,600

16,000

22,719

-

150,199 725,438 22,719

3,327,536

5,105,527

3,655,304

(70,000)

3,585,304

(465,994)

(1,069,317)

(1,500,401)

78,815

(1,421,586)

96,700 -

96,700 237,000 (259,000)

78,420 167,990 (259,000)

(78,420) -

167,990 (259,000)

96,700

74,700

(12,590)

(78,420)

(91,010)

(369,294)

(994,617)

EXPENDITURES: Current: Community and economic development: Housing and community development Social services: CDBG social services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from asset dispositions Loan principal receipts Proceeds from long-term debt Transfers in Transfers out Total other financing sources (uses) Net change in fund balance

(1,512,991)

395

(1,512,596)

FUND BALANCE: Beginning of the year End of year

3,255,673 $

2,886,379

3,255,673 $

2,261,056

128

3,255,673 $

1,742,682

(1,055) $

(660)

3,251,618 $

1,739,022

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Transportation Development Act For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Intergovernmental

$

Total revenues

699,452

$

699,452

$

727,191

$

-

$

727,191

699,452

699,452

727,191

-

727,191

699,452

699,452

727,191

-

727,191

699,452

699,452

727,191

-

727,191

-

-

-

-

-

-

-

-

-

-

EXPENDITURES: Current: Transit Total expenditures REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE: Beginning of the year End of year

$

-

$

-

129

$

-

$

-

$

-

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Obligation Bond For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Taxes

$

517,023

$

582,023

$

618,290

$

-

$

618,290

Use of money and property

12,010

12,010

35,979

3,663

39,642

Total revenues

529,033

594,033

654,269

3,663

657,932

193,004 234,346

193,004 234,346

193,004 234,176

-

193,004 234,176

427,350

427,350

427,180

-

427,180

101,683

166,683

227,089

3,663

230,752

910,323

910,323

910,323

EXPENDITURES: Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE: Beginning of the year End of year

$

1,012,006

$

1,077,006

130

$

1,137,412

(747) $

2,916

909,576 $

1,140,328

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Lease Revenue Bond Fund For the year ended June 30, 2008

Budgeted Amounts Original

Final

Actual Amounts

Budget to GAAP

Actual Amounts

(Budgetary Basis)

Differences

(GAAP Basis)

REVENUES: Use of money and property

-

-

125,181

7,562

132,743

Total revenues

-

-

125,181

7,562

132,743

-

-

313,239

-

313,239

-

-

313,239

-

313,239

-

-

(188,058)

7,562

(180,496)

-

6,881,849 -

6,881,849 (5,925,000)

-

6,881,849 (5,925,000)

Total other financing sources (uses)

-

6,881,849

956,849

-

956,849

Net change in fund balance

-

6,881,849

768,791

7,562

776,353

-

-

-

-

-

EXPENDITURES: Debt service: Principal Interest and fiscal charges Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Proceeds from long-term debt Transfers out

FUND BALANCE: Beginning of the year End of year

$

-

$

-

131

$

768,791

$

7,562

$

776,353

City of Santa Cruz Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Non-Major Governmental Funds For the year ended June 30, 2008

Other Governmental Funds Reconciliation of Net Changes in Fund Balances - Budgetary to GAAP Basis: Net Change in Fund Balances - Budgetary Basis

$

(454,779)

The amount reported in the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances was different because: Unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis.

39,048

The City budgets for loan disbursements which will not be repaid within the current year. Although these amounts are recorded as long-term receivables on the Governmental Funds Balance Sheet, they are not available for appropriation.

70,000

On a budgetary basis, the City records loan principal receipts as revenue, but on a GAAP basis, these receipts reduce receivables.

(78,420)

Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances

$

(424,151)

Reconciliation of Fund Balances - Budgetary to GAAP Basis: Fund Balances - Ending - Budgetary Basis

$

7,659,520

Cumulative unrealized gains and losses on investments, which are considered a component of investment income in the Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a budgetary basis.

27,947

The City budgets for loan disbursements which will not be repaid within the current year. Although these amounts are recorded as long-term receivables on the Governmental Funds Balance Sheet, they are not available for appropriation.

70,000

On a budgetary basis, the City records loan principal receipts as revenue, but on a GAAP basis, these receipts reduce receivables.

(78,420)

Fund Balances - Ending - GAAP Basis

$

7,679,047 -

132

INTERNAL SERVICE FUNDS Equipment Operations - This fund is used to account for the expenses related to city-wide fleet operations and maintenance activities, including vehicles, communications equipment, and other pooled equipment. Internal contributions to support this fund are based on cost recovery through charges to user departments and funds. These charges do not include the cost of equipment replacement. Telecommunications - This fund is used to account for the expenses related to the acquisition of communications equipment and ongoing maintenance of the telephone network including the main telephone switch, voice mail system, pagers, cell phones, and fax machines. Internal contributions to support this fund are based on cost recovery through user departments and funds. These charges do not include the cost of equipment replacement. Risk Management - Accounts for the expenses of the City's insurance program, including costs related to claims, administration, legal defense, and insurance premiums. Internal contributions to support this fund are based on cost recovery through charges to departments and funds. The following insurance activities are provided for in this fund: Workers' Compensation Insurance Liability Insurance

133

City of Santa Cruz Combining Statement of Net Assets All Internal Service Funds June 30, 2008

Equipment

Telecommun-

Risk

Operations

ications

Management

Total

ASSETS Current assets: Cash and cash equivalents

$

Interest receivable

510,650

$

5,927

Accounts receivable - net

Inventories Due from other funds

$

(315)

7,716,516

$

68,630

8,233,561 74,242

25,451

-

30,873

56,324

152,449

-

-

152,449

-

-

700,000

700,000

-

-

1,596,386

1,596,386

694,477

6,080

10,112,405

10,812,962

1,206,643

Deposits Total current assets

6,395

Noncurrent assets: Capital assets: Machinery and equipment

451,906

746,577

8,160

Software

-

336,296

-

336,296

Construction in progress

-

1,012,402

1,600

1,014,002

(322,032)

(1,023,905)

(8,160)

(1,354,097)

129,874

1,071,370

1,600

1,202,844

Total noncurrent assets

129,874

1,071,370

1,600

1,202,844

Total assets

824,351

1,077,450

10,114,005

12,015,806

199,462

70,788

166,984

437,234

5,927

699,746

-

705,673

Claims and judgments payable

-

-

2,812,930

2,812,930

Compensated absences payable

33,619

8,509

-

42,128

Total current liabilities

239,008

779,043

2,979,914

3,997,965

Less accumulated depreciation Total capital assets (net of accumulated depreciation)

LIABILITIES Current liabilities: Accounts payable and other current liabilities Due to other funds

Noncurrent liabilities: Claims and judgments payable

-

-

7,498,625

7,498,625

Compensated absences payable

16,809

4,254

-

21,063

Total noncurrent liabilities

16,809

4,254

7,498,625

7,519,688

255,817

783,297

10,478,539

11,517,653

Invested in capital assets, net of related debt

129,874

1,071,370

1,600

1,202,844

Unrestricted

438,660

Total liabilities NET ASSETS

Total net assets

$

568,534

134

(777,217) $

294,153

(366,134) $

(364,534)

(704,691) $

498,153

City of Santa Cruz Combining Statement of Revenues, Expenses and Changes in Net Assets All Internal Service Funds For the year ended June 30, 2008

Equipment

Telecommun-

Risk

Operations

ications

Management

Total

OPERATING REVENUES: Charges for services - internal

$

Charges for services - external Other revenues Total operating revenues

2,872,963

$

431,544

$

5,629,794

$

8,934,301

59,974

-

-

59,974

7,585

-

358

7,943

2,940,522

431,544

5,630,152

9,002,218

881,664

143,003

427,047

1,451,714

OPERATING EXPENSES: Personnel services

2,172,702

139,539

3,048,986

5,361,227

Depreciation and amortization

Services, supplies, and other charges

30,560

64,329

1,496

96,385

Total operating expenses

3,084,926

346,871

3,477,529

6,909,326

(144,404)

84,673

2,152,623

2,092,892

Investment earnings

37,938

2,234

407,610

447,782

Gain/(loss) on capital assets

(4,012)

-

-

33,926

2,234

407,610

443,770

(110,478)

86,907

2,560,233

2,536,662

(34,320)

(2,174)

(50,000)

(86,494)

(34,320)

(2,174)

(50,000)

(86,494)

(144,798)

84,733

2,510,233

2,450,168

713,332

209,420

(2,874,767)

(1,952,015)

Operating income (loss) NONOPERATING REVENUES (EXPENSES):

Total nonoperating revenues (expenses) Income (loss) before transfers Transfers out

Change in net assets

(4,012)

NET ASSETS: Beginning of year End of year

$

568,534

135

$

294,153

$

(364,534)

$

498,153

City of Santa Cruz Combining Statement of Cash Flows All Internal Service Funds For the year ended June 30, 2008 Equipment Operations

Telecommunications

Risk Management

Total

CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers and users Cash received from interfund services provided Cash payments to suppliers for goods and services Cash payments to employees for services Cash received from (payments to) others

$

Net cash provided (used) by operating activities

41,553 2,872,963 (2,115,287) (877,135) 9,288

$

(68,618)

784 431,544 (79,019) (130,240) 699,216

$

922,285

(30,873) 5,629,794 (2,984,277) (427,047) (903,569)

$

1,284,028

11,464 8,934,301 (5,178,583) (1,434,422) (195,065) 2,137,695

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Transfers in/out Net cash provided (used) by noncapital financing activities

(34,320)

(2,174)

(50,000)

(86,494)

(34,320)

(2,174)

(50,000)

(86,494)

(89,867) -

(1,012,402) -

(1,600) -

(1,103,869) -

(89,867)

(1,012,402)

(1,600)

(1,103,869)

(1,703) 33,926

2,234

(6,135) 407,610

(7,838) 443,770

32,223

2,234

401,475

435,932

(160,582)

(90,057)

1,633,903

1,383,264

671,232

96,452

6,082,613

6,850,297

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchase and construction of capital assets Principal paid on capital debt Interest paid on capital debt Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Interests receivable Investment income received Net cash provided (used) by investing activities Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS: Beginning of year End of year

$

510,650

$

6,395

$

7,716,516 -

$

8,233,561

$

(144,404)

$

84,673

$

2,152,623

$

2,092,892

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation and amortization Changes in current assets and liabilities: Accounts receivable Prepaid items Inventories Accounts payable and other current liabilities Due from other funds Due to other funds Deposits payable Claims and judgments payable Compensated absences payable Total adjustments Net cash provided (used) by operating activities

$

136

30,560

64,329

(18,421) (18,808) 76,223 1,703 4,529

784 60,520 699,216 12,763

(30,873) 64,709 (700,000) (203,927) -

96,385 (48,510) (18,808) 201,452 (700,000) 700,919 (203,927) 17,292

75,786

837,612

(868,595)

44,803

(68,618)

$

922,285

1,496

$

1,284,028

$

2,137,695

Private-Purpose Trust Funds McCaskill Trust - Local History - is restricted in purpose to promulgate local history. The principal and income benefit the Library Joint Powers Authority, McCaskill Trust - Visually Impaired - is restricted in purpose to providing library materials for the visually impaired. The principal and income benefit the Library Joint Powers Authority. The Finkeldey Trust - is restricted in purpose for the acquisition of musical literature. The principal and income benefit the Library Joint Powers Authority.

137

City of Santa Cruz Combining Statement of Fiduciary Net Assets Private-Purpose Trust Funds June 30, 2008

McCaskill

McCaskill

Total

Trust - Local

Trust - Visually

Finkeldey

Private-Purpose

History

Impaired

Trust

Trust Funds

ASSETS Cash and cash equivalents

266,427

$

263,608

$

10,720

$

540,755

Receivables: Interest receivable Total assets

2,444

2,389

97

4,930

268,871

265,997

10,817

545,685

NET ASSETS Held in trust for library programs

$

268,871

138

$

265,997

$

10,817

$

545,685

City of Santa Cruz Combining Statement of Changes in Fiduciary Net Assets Private-Purpose Trust Funds For the year ended June 30, 2008

McCaskill

McCaskill

Trust - Local

Trust - Visually

Finkeldey

Private-Purpose

Total

History

Impaired

Trust

Trust Funds

ADDITIONS: Investment earnings

$

Total additions

12,970

$

12,418

$

505

$

25,893

12,970

12,418

505

25,893

16,300

6,300

755

23,355

Total deductions

16,300

6,300

755

23,355

Change in net assets

(3,330)

6,118

(250)

2,538

DEDUCTIONS: Library programs

NET ASSETS: Beginning of year End of year

272,201 $

268,871

139

259,879 $

265,997

11,067 $

10,817

543,147 $

545,685

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140

Agency Funds Library Joint Powers Authority - Used to account for funds held by the City in an agency capacity for the Library Joint Powers Authority, which was established to finance the operations of the former City/County library system. Trust Deposit Holding - This fund is used to hold cash deposits received from outside parties on a temporary basis. Payroll Payables - Used to account for cash transferred from various funds to pay for payroll liabilities, which are paid out of this fund. Special Assessments - Accounts for assets held by the City in an agency capacity for special assessment districts. The City acts as agent for collection of principal and interest payments from the property owners and remits these monies to the bondholders. If funds are not available, the City is under no obligation to make bond payments from its own funds.

141

City of Santa Cruz Combining Statement of Fiduciary Net Assets Agency Funds June 30, 2008

Library

Trust

Total

Joint Powers

Deposit

Payroll

Special

Agency

Authority

Holding

Payables

Assessments

Funds

ASSETS Cash and cash equivalents

$

Restricted Cash and cash equivalents

160,228

$

482,691

-

-

$

1,044,828

$

208,018

-

64,634

$

1,895,765 64,634

Receivables: 10,167

988

-

1,573

12,728

Taxes receivable

Interest receivable

559,660

-

-

9,750

569,410

Accounts receivable

507,692

-

-

-

507,692

26,554

-

-

-

26,554

Due from other governments Total assets

$

1,264,301

$

483,679

$

1,044,828

$

$

780,697

$

34,484

$

1,044,828

$

283,975

$

3,076,783

-

$

1,860,009

LIABILITIES Accounts payable and other current liabilities Due to other governments

406,668

-

-

-

406,668

Deferred revenue

76,053

369

-

-

76,422

Deposits payable

883

448,826

-

-

449,709

-

-

-

283,975

283,975

Payable to bondholders Total liabilities

$

1,264,301

$

483,679

142

$

1,044,828

$

283,975

$

3,076,783

City of Santa Cruz Combining Statement of Changes in Assets and Liabilities Agency Funds For the year ended June 30, 2008

Balance July 1, 2007 Library Joint Powers Authority Assets: Cash and cash equivalents Receivables: Interest receivable Taxes receivable Accounts receivable Due from other governments Total assets Liabilities: Accounts payable and other current liabilities Due to other governments Deferred revenue Deposit payable Total liabilities Trust Deposit Holding Assets: Cash and cash equivalents Interest receivable Total assets Liabilities: Accounts payable and other current liabilities Deferred revenue Deposits payable Total liabilities Payroll Payables Assets: Cash and cash equivalents Total assets Liabilities: Accounts payable and other current liabilities Total liabilities Special Assessments Assets: Cash and cash equivalents Restricted cash and cash equivalents Receivables: Interest receivable Taxes receivable Accounts receivable Total assets Liabilities: Payable to bondholders Total liabilities

$

665,882

Additions

$

13,652 640,568 530,842 27,620

Balance June 30, 2008

Deletions

13,410,641

$

54,172 1,022,804 936,414 26,554

13,916,295

$

57,657 1,103,712 959,564 27,620

160,228 10,167 559,660 507,692 26,554

$

1,878,564

$

15,450,585

$

16,064,848

$

1,264,301

$

595,552 1,281,985 1,027

$

3,918,509 5,403 169,893 -

$

3,733,364 880,720 93,840 144

$

780,697 406,668 76,053 883

$

1,878,564

$

4,093,805

$

4,708,068

$

1,264,301

$

532,915 1,228

$

1,545,960 4,570

$

1,596,184 4,810

$

482,691 988

$

534,143

$

1,550,530

$

1,600,994

$

483,679

$

1,517 532,626

$

1,413,957 369 1,634,686

$

1,380,990 1,718,486

$

34,484 369 448,826

$

534,143

$

3,049,012

$

3,099,476

$

483,679

$

244,315

$

86,897,060

$

86,096,547

$

1,044,828

$

244,315

$

86,897,060

$

86,096,547

$

1,044,828

$

244,315

$

109,257,061

$

108,456,548

$

1,044,828

$

244,315

$

109,257,061

$

108,456,548

$

1,044,828

$

201,175 75,985

$

217,416 249

$

210,573 11,600

$

208,018 64,634

1,821 10,631 -

7,231 9,750 180,000

7,479 10,631 180,000

$

289,612

$

414,646

$

420,283

$

289,612

$

-

$

5,637

$

289,612

$

-

$

5,637

143

1,573 9,750 $

283,975 283,975

$

283,975

This page intentionally left blank.

144

STATISTICAL SECTION (Unaudited)

This part of the City of Santa Cruz's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city's overall financial health.

Contents

Page

Financial Trends

147 - 153

These tables contain trend information to help the reader understand how the city's financial performance and well-being have changed over time. Revenue Capacity

154 - 161

These tables contain information to help the reader assess the city's most significant local revenue source, the property tax. Debt Capacity

162 - 169

These tables present information to help the reader assess the affordability of the city's current levels of outstanding debt and the city's ability to issue additional debt in the future. Demographic and Economic Information

170 - 171

These tables offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place. Operating Information

172 - 174

These tables contain service and infrastructure data to help the reader understand how the information in the city's financial report relates to the services the city provides and the activities it performs.

Sources:

Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year.

145

This page is intentionally left blank.

146

City of Santa Cruz

TABLE 1

Net Assets By Component Last Six Fiscal Years

Fiscal Year Ended June 30 2003

2004

2005

2006

2007

2008

Governmental activities: Invested in capital assets, net of related debt

$

136,369,360

$

136,556,019

$

139,024,926

$

142,216,967

$

144,203,036

$

159,910,861

Restricted

10,441,164

11,411,611

10,105,142

12,132,237

13,648,674

6,496,936

Unrestricted

16,662,826

12,267,438

18,695,330

19,428,634

24,563,381

40,206,770

Total governmental activities net assets $

163,473,350

$

160,235,068

$

167,825,398

$

173,777,838

$

182,415,091

$

206,614,567

168,876,424

$

174,395,150

$

179,988,569

$

164,275,405

$

172,324,984

$

161,911,506

Business-type activities: Invested in capital assets, net of related debt

$

Restricted Unrestricted Total business-type activities net assets

-

-

704,469

-

-

-

62,492,429

58,267,139

57,125,277

78,560,182

81,361,517

78,250,831

$

231,368,853

$

232,662,289

$

237,818,315

$

242,835,587

$

253,686,501

$

240,162,337

$

305,245,784

$

310,951,169

$

319,013,495

$

306,492,372

$

316,528,020

$

321,822,367

Primary government: Invested in capital assets, net of related debt Restricted

10,441,164

11,411,611

10,809,611

12,132,237

13,648,674

6,496,936

Unrestricted

79,155,255

70,534,577

75,820,607

97,988,816

105,924,898

118,457,601

Total primary government net assets

$

394,842,203

$

392,897,357

$

405,643,713

$

416,613,425

The City of Santa Cruz implemented GASB 34 for the fiscal year ended June 30, 2003. Information prior to the implementation of GASB 34 is not available.

Source: City of Santa Cruz Finance Department

147

$

436,101,592

$

446,776,904

City of Santa Cruz

TABLE 2

Changes in Net Assets Last Six Fiscal Years

2003 Expenses Governmental activities: General government Public safety Parks and recreation Library Public works Transit Community and economic development Social services Interest and fiscal charges

$

10,382,020 23,770,732 12,312,469 8,441,896 9,790,984 569,247 8,265,841 1,976,456 979,508

Fiscal Year Ended June 30 2005 2006

2004

$

11,451,699 27,054,407 13,022,089 8,697,195 9,618,748 588,183 7,140,903 1,803,125 1,126,311

$

9,889,427 27,218,149 11,944,976 8,934,173 7,801,586 586,896 7,719,248 1,715,326 1,066,994

$

9,755,194 27,227,214 11,715,023 9,179,637 9,047,430 624,214 7,414,895 2,563,680 883,866

2007

$

12,494,563 29,646,507 12,002,102 9,644,172 11,509,715 646,548 10,616,686 1,758,216 1,304,447

2008

$

14,185,248 33,112,568 12,687,303 10,215,576 13,714,777 727,191 11,027,594 1,966,940 1,591,970

Total governmental activities expenses

76,489,153

80,502,660

76,876,775

78,411,153

89,622,956

99,229,167

Business-type activities: Water Wastewater Refuse Parking Storm Water Golf course

13,994,913 14,824,444 14,824,819 2,222,770 2,165,345 1,745,322

13,707,644 15,456,161 14,924,093 2,471,710 1,956,563 1,811,128

14,643,440 15,524,855 14,581,347 2,565,800 2,150,359 1,781,330

15,204,565 16,192,904 12,700,841 2,960,225 1,925,661 2,325,920

16,203,872 15,377,903 12,974,413 2,632,045 1,938,275 2,165,390

19,169,949 16,030,806 15,013,682 3,259,850 1,450,158 3,214,206

Total business-type activities expenses

49,777,613

50,327,299

51,247,131

51,310,116

51,291,898

58,138,651

$ 126,266,766

$ 130,829,959

$ 128,123,906

$ 129,721,269

$ 140,914,854

$ 157,367,818

$

$

$

$

$

$

Total primary government expenses Program Revenues Governmental activities: Charges for services: General government Public safety Parks and recreation Library Public works Transit Community and economic development Operating grants and contributions Capital grants and contributions

3,945,684 1,950,228 3,798,713 7,005,781 3,459,306 432,651 3,979,717 5,823,628

3,938,389 2,760,629 3,956,257 7,672,089 3,083,205 110,889 3,165,361 4,864,757

3,814,053 3,230,321 2,863,615 8,152,865 4,008,187 115,183 2,829,078 5,141,507

4,662,211 3,041,137 3,191,193 8,478,112 4,253,232 66,643 996,327 2,125,537 2,499,565

5,507,904 3,410,308 3,011,980 8,894,858 4,072,956 108,009 5,439,954 5,669,638

8,015,647 3,761,166 3,419,078 9,617,480 4,390,495 17,198 380,839 4,706,969 5,446,172

Total governmental activities program revenues

30,395,708

29,551,576

30,154,809

29,313,957

36,115,607

39,755,044

Business-type activities: Charges for services: Water Wastewater Refuse Parking Storm Water Golf course Operating grants and contributions Capital grants and contributions

14,278,839 11,461,188 13,341,636 2,209,631 892,378 1,867,914 85,446 2,312,416

15,687,800 11,664,391 14,583,240 2,478,911 862,150 1,933,684 138,515 3,391,001

17,283,215 11,911,915 14,562,560 2,635,129 872,569 992,439 369,968 6,439,375

19,480,617 13,079,711 13,525,848 2,654,549 869,490 1,608,752 15,704 2,480,435

22,442,267 13,978,613 15,108,051 2,697,863 875,730 1,770,614 40,470 1,662,249

25,205,503 15,289,391 16,570,435 2,637,422 876,944 1,896,967 109,445 2,342,720

Total business-type activities program revenues

46,449,448

50,739,692

55,067,170

53,715,106

58,575,857

64,928,827

Total primary government program revenues

76,845,156

80,291,268

85,221,979

83,029,063

94,691,464

104,683,871

(46,093,445) (3,328,165)

(50,951,084) 412,393

(46,721,966) 3,820,039

(49,097,196) 2,404,990

(53,507,349) 7,283,959

(59,474,123) 6,790,176

$ (49,421,610)

$ (50,538,691)

$ (42,901,927)

$ (46,692,206)

$ (46,223,390)

$ (52,683,947)

Net (expense)/revenue: Governmental activities Business-type activities Total primary government net (expense)/revenue

148

City of Santa Cruz

TABLE 2

Changes in Net Assets, Continued Last Six Fiscal Years

2003 General Revenues and Other Changes in Net Assets Governmental activities: Taxes Property taxes $ 15,078,406 Sales and use taxes 8,291,244 Franchise taxes 3,132,743 Transient occupancy taxes 2,932,256 Utility users taxes 7,592,049 Admission taxes 1,664,150 Other taxes 2,000,338 Unrestricted grants and contributions 4,526,808 Investment earnings 1,095,006 Gain (loss) on sale of assets (4,963) Extraordinary items 477,109 Miscellaneous 673,184 Transfers 57,444 Total governmental activities

$

47,515,774

Business-type activities: Unrestricted grants and contributions Investment earnings Gain (loss) on sale of assets Miscellaneous Transfers $

Change in Net Assets Governmental activities Business-type activities

$

Total primary government

$

50,485,980

$

16,476,980 11,383,231 3,478,971 3,067,869 8,080,171 1,629,164 2,107,273 4,562,277 846,634 60,093 577,892 78,584

$

52,349,139

250 717,261 (11,712) 108,532 (334,346)

2,970,206

Total primary government

15,792,225 9,084,026 3,329,454 3,016,463 7,638,926 1,724,330 2,480,973 2,565,897 437,672 716,218 679,168 334,346 47,799,698

2,421,200 60,717 545,733 (57,444)

Total business-type activities

Fiscal Year Ended June 30 2005 2006

2004

$

55,049,636

222 1,469,180 97,529 (78,584)

479,985

22,384,981 11,738,917 2,136,686 3,385,148 8,304,371 1,715,133 2,303,363 1,121,274 1,380,087 24,318 487,841 67,517

2007

$

61,987,602

2,079,379 91,920 508,500 (67,517)

1,488,347

24,593,312 12,770,015 2,607,388 3,750,509 8,288,655 1,909,012 2,466,711 2,628,122 322,288 2,648,223 3,367

2008

63,457,174

3,637,989 51,527 530,158 (3,367)

2,612,282

26,297,145 14,665,124 2,911,919 3,685,248 8,725,383 1,964,404 1,938,111 2,499,381 46,045 674,905 49,509

3,496,323 7,590 523,779 (49,509)

4,216,307

3,978,183

$

48,279,683

$

53,837,486

$

57,661,918

$

66,203,909

$

67,435,357

1,422,329 (357,959)

$

(3,151,386) 892,378

$

5,627,173 5,308,386

$

5,952,440 5,017,272

$

8,480,253 11,500,266

$

3,983,051 10,768,359

1,064,370

$

(2,259,008)

$

10,935,559

$

10,969,712

$

19,980,519

$

14,751,410

The City of Santa Cruz implemented GASB 34 for the fiscal year ended June 30, 2003. Information prior to the implementation of GASB 34 is not available.

Source: City of Santa Cruz Finance Department

149

City of Santa Cruz Fund Balances of Governmental Funds Last Ten Fiscal Years

Fiscal Year Ended June 30 1999

2000

2001

2002

General Fund Reserved

$

5,600,632

Unreserved, designated Unreserved, undesignated Total General Fund

$

6,215,738

$

4,906,611

$

4,008,809

-

-

5,194,894

6,392,382

11,351,018

12,011,261

9,170,827

6,974,625

$

16,951,650

$

18,226,999

$

19,272,332

$

17,375,816

$

10,138,359

$

11,383,565

$

13,204,616

$

14,174,955

All other governmental funds Reserved Unreserved, designated, reported in: Redevelopment Agency fund

1,236,971

1,210,456

1,351,077

-

-

-

-

1,502,558

890,922

1,092,974

2,591,507

-

-

-

(948,602)

Special revenue funds Debt service funds Capital projects funds

994,997

Unreserved, undesignated, reported in: -

-

-

Special revenue funds

Redevelopment Agency fund

1,418,246

(63,288)

861,078

660,747

Capital projects funds

2,158,532

671,223

1,558,754

Total all other governmental funds

$

16,454,666

Source: City of Santa Cruz Finance Department

150

1,508,205 $

14,929,860

$

17,180,968

$

19,032,358

TABLE 3

Fiscal Year Ended June 30 2003

$

2004

5,237,443

$

2005

4,388,586

$

2006

3,870,996

$

2007

4,327,113

$

2008

4,006,713

$

6,444,005

5,922,853

7,638,171

7,435,828

7,120,993

8,488,474

8,480,033

4,806,652

5,964,197

8,729,971

11,354,586

13,924,233

10,734,911

$

15,966,948

$

17,990,954

$

20,036,795

$

22,802,692

$

26,419,420

$

25,658,949

$

12,311,339

$

13,691,282

$

10,721,195

$

11,148,536

$

11,608,393

$

13,462,418

4,014,256

3,987,557

6,497,637

7,958,925

9,126,250

589,008

509,404

476,904

536,451

1,053,286

1,058,197

-

-

557,277

707,775

909,576

1,916,681

470,840

457,945

91,180

92,641

-

-

(55,035) 1,747,678 446,564 $

19,524,650

$

10,883,854

-

-

-

-

-

2,207,906

3,185,320

3,341,962

2,851,774

1,834,139

(1,444,460)

2,196,529

281,931

(2,796,246)

(4,615,979)

19,409,634

$

23,726,042

$

24,068,221

151

$

22,753,033

$

24,539,310

City of Santa Cruz

TABLE 4

Changes in Fund Balances of Governmental Funds Last Six Fiscal Years

Fiscal Year Ended June 30 2003

2004

2005

2006

2007

2008

Revenues Taxes

$

Licenses and permits

40,691,186

$

42,529,756

$

46,268,500

$

52,035,729

$

56,385,602

$

60,187,334

614,012

529,649

603,344

615,448

824,258

Intergovernmental

14,011,928

10,258,114

11,479,068

5,696,237

10,963,874

7,791,557

Charges for services

16,952,167

17,191,373

17,968,817

19,347,463

19,852,885

22,784,270

Fines and forfeitures

1,587,698

1,805,734

2,032,817

1,965,235

2,242,547

2,233,686

Use of money and property

2,859,096

2,345,707

2,821,174

3,234,159

4,375,345

4,383,666

449,907

592,012

686,853

1,049,925

2,464,263

3,511,076

77,165,994

75,252,345

81,860,573

83,944,196

97,108,774

102,254,261

Other revenues Total revenues

1,362,672

Expenditures General government Public safety

9,673,413

8,967,025

9,390,901

9,666,858

12,261,663

14,213,634

22,920,677

24,843,763

26,692,313

26,938,629

28,574,065

32,878,383

Parks and recreation

9,773,346

9,721,229

9,593,982

9,402,529

9,653,531

10,661,073

Library

8,412,201

8,528,577

8,980,823

9,250,499

9,693,097

10,298,783

Public works

5,592,617

4,539,192

4,248,358

4,158,916

4,940,051

10,098,042

569,247

588,183

586,896

624,214

646,548

727,191

7,954,378

6,332,156

6,640,932

8,436,468

10,028,992

11,007,630

Transit Community and economic development Social services

1,976,456

1,803,125

1,715,326

1,693,267

1,758,216

1,966,940

Capital outlay

11,340,680

9,553,173

7,846,456

11,921,789

14,867,937

12,797,416

1,116,090

1,718,937

2,231,549

1,149,776

2,203,868

2,176,557

839,345

851,721

966,238

921,517

1,078,832

1,466,703

-

-

276,569

-

-

-

80,168,450

77,447,081

79,170,343

84,164,462

95,706,800

108,292,352

(3,002,456)

(2,194,736)

2,690,230

Debt service: Principal Interest and fiscal charges Bond issuance costs Total expenditures Excess of revenues over (under) expenditures

(220,266)

1,401,974

(6,038,091)

Other financing sources (uses) Proceeds from asset dispositions Proceeds from long-term debt issued

777,750

756,823

139,104

25,256

348,541

46,045

-

-

5,825,000

3,200,000

-

6,881,849

Premiums on bonds sold

-

-

Payment to refunded bond escrow agent

-

-

1,565,684

3,244,346

(1,357,286)

Transfers in Transfers out Total other financing sources (uses) Net change in fund balances

986,148 $

(2,016,308)

$

-

-

-

-

-

-

1,928,681

861,257

1,260,514

8,140,141

(2,139,754)

(1,793,079)

(758,170)

1,861,415

3,552,019

(333,321)

23,994 (2,571,681)

$

6,242,249

3,328,343 $

3,108,077

$

(709,489)

(8,004,138)

899,566

7,063,897

2,301,540

$

1,025,806

Debt service as a percentage of noncapital expenditures

2.8%

3.8%

4.9%

2.9%

The City of Santa Cruz implemented GASB 34 for the fiscal year ended June 30, 2003. Prior to that implementation, expenditure amounts were categorized differently in the fund statements. Information is not available now to reclassify those prior years' expenditures into comparable categories for this table. Source: City of Santa Cruz Finance Department

152

4.1%

3.8%

This page is intentionally left blank.

153

City of Santa Cruz General Governmental Tax Revenues by Source1 Last Ten Fiscal Years

Fiscal Year Sales

Ended Property

June 30 1999 2000

$

and Use

10,484,409

$

Franchise

7,415,341

12,176,209

$

8,857,748

2,476,604 2,771,014

$

Transient

Utility

Occupancy

Users

3,174,694

$

3,541,396

6,912,440

Admission $

7,149,619

1,502,540 1,583,897

2001

13,342,450

9,790,693

2,851,830

3,900,905

8,246,829

1,611,318

2002

14,944,971

9,126,341

2,996,907

3,131,378

7,627,331

1,612,526

2003

15,629,920

8,291,244

3,132,743

2,932,256

7,592,049

1,664,150

2004

15,792,225

9,084,026

3,329,454

3,016,463

7,638,926

1,724,330

2005

16,501,921

11,383,231 5

2006

22,348,981

2007

24,593,312

12,770,015

2008

26,297,145

14,665,124

4

11,738,917 6

3,478,971

3,067,869

8,080,171

1,629,164

2,136,686

3,385,148

8,304,371

1,715,133

2,607,388

3,750,509

8,288,655

1,909,012

2,911,919

3,685,248

8,725,383

1,964,404

Notes: 1

This table includes all governmental fund types.

2

Beginning with fiscal year 2003, business improvement taxes include the Co-op Retail Management Business Real Property Improvement District.

3

Prior to fiscal year 2003, business license taxes were shown in Permits and Licenses.

4

A new quarter-cent sales tax override was implemented in fiscal year 2005. This temporary tax is scheduled to end on June 30, 2009.

5

Beginning in fiscal year 2006, property taxes include amounts for Property Taxes In Lieu of Vehicle License Fees.

6

A new permanent quarter-cent sales tax override was implemented in fiscal year 2007. In addition, the temporary quarter-cent sales tax override previously implemented in fiscal year 2005 was made permanent in fiscal year 2007.

Source: City of Santa Cruz Finance Department

154

TABLE 5

Parks and Parking $

192,352 158,229

$

Business

Property

Business

Recreation

Improvement2

Transfer

License3

Facilities

167,500 170,369

$

186,624

$

-

219,132

$

Total -

$

32,512,504

-

-

36,627,613 40,306,150

178,373

183,711

200,041

-

-

194,646

175,868

194,632

-

-

40,004,600

199,371

273,965

191,042

784,446

551,514

41,242,700

221,133

296,536

276,466

792,893

357,305

42,529,757

221,790

292,422

325,305

777,308

510,348

46,268,500

229,629

316,742

562,723

777,068

417,202

51,932,600

264,510

330,614

641,579

787,225

442,783

56,385,602

265,594

320,518

233,679

770,837

347,483

60,187,334

155

City of Santa Cruz

TABLE 6

General Fund Revenues by Source Last Ten Fiscal Years

Fiscal Year

Licenses

Ended June 30 1999

Taxes $

24,918,906

$

Charges

Fines

Use of Money

and

Inter-

for

and

and

Other

Permits

Governmental

Services

Forfeitures

Property

Revenues

1,397,862

$

4,170,892

$

6,729,820

$

1,397,833

$

3,794,000

$

213,496

Total $

42,622,809

2000

27,646,368

1,595,964

4,732,311

6,566,033

1,347,496

3,574,121

324,802

45,787,095

2001

30,258,503

1,342,471

5,281,661

7,009,901

1,286,990

4,152,368

327,692

49,659,586

2002

29,238,472

1,267,939

5,339,612

7,151,012

1,282,697

3,577,774

397,896

48,255,402

2003

30,027,154

614,012

4,788,035

16,693,936

1,555,481

2,252,373

308,104

56,239,095

2004

31,696,322

529,649

3,745,601

16,865,754

1,799,557

2,086,163

418,764

57,141,810

2005

34,384,206

603,344

5,465,642

17,799,213

2,022,779

2,333,922

276,565

62,885,671

2006

39,495,863

615,448

1,073,997

19,062,464

1,962,697

2,541,909

216,721

64,969,099

2007

42,837,408

824,258

1,563,745

19,786,417

2,218,082

3,061,718

187,732

70,479,360

2008

45,809,387

935,191

854,975

22,559,336

2,123,686

3,062,604

198,312

75,543,491

Notes: Beginning in fiscal year 2003, charges for personnel services provided to the Library Joint Powers Authority were included in General Fund charges for services, as well as charges for interfund personnel services provided. Also, prior to fiscal year 2003, business license taxes were shown in licenses and permits.

Source:

City of Santa Cruz Finance Department

156

City of Santa Cruz

TABLE 7

Assessed Value of Taxable Property Last Ten Fiscal Years

Fiscal Year Ended

Real Property

June 30

Residential

1999

$ 2,760,380,015

2000

2,980,522,986

Commercial $

449,610,460

Other $

510,282,517

Total

87,470,143

$ 3,297,460,618

92,665,671

3,583,471,174

$

Total

Total

Personal

Assessed

Direct Tax

Property

Value

Rate

186,050,833

$ 3,483,511,451

0.000%

198,830,667

3,782,301,841

0.009%

2001

3,193,569,036

537,141,067

113,773,535

3,844,483,638

207,913,809

4,052,397,447

0.009%

2002

3,494,071,877

611,373,783

111,624,535

4,217,070,195

237,668,331

4,454,738,526

0.009%

2003

3,657,553,824

663,946,747

122,103,592

4,443,604,163

237,898,436

4,681,502,599

0.009%

2004

3,882,699,208

700,948,081

123,781,647

4,707,428,936

225,168,674

4,932,597,610

0.009%

2005

4,150,085,545

755,991,976

126,848,221

5,032,925,742

217,439,195

5,250,364,937

0.009%

2006

4,563,844,105

788,484,799

110,751,935

5,463,080,839

216,627,737

5,679,708,576

0.009%

2007

5,032,785,543

841,223,841

112,527,378

5,986,536,762

219,805,452

6,206,342,214

0.009%

2008

5,334,777,709

911,303,678

159,469,219

6,405,550,606

222,004,469

6,627,555,075

0.009%

Notes: Total Direct Tax Rate is from Table 8. With the passage of a constitutional amendment (Proposition 13) and subsequently enacted State legislation, property is assessed according to a base year rather than on a percentage of market value. Accordingly, a reliable estimate of actual value of taxable property within the City is not possible.

Source: County of Santa Cruz Auditor-Controller's Office County of Santa Cruz Assessor's Office California Municipal Statistics, Inc.

157

City of Santa Cruz

TABLE 8 1

Direct and Overlapping Property Tax Rates Last Ten Fiscal Years

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

-

$ 0.009

$ 0.009

$ 0.009

$ 0.009

$ 0.009

$ 0.009

$ 0.009

$ 0.009

$ 0.009

-

0.009

0.009

0.009

0.009

0.009

0.009

0.009

0.009

0.009

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

1.000

Cabrillo College

0.014

0.007

0.012

0.021

0.019

0.019

0.038

0.037

0.024

0.030

Santa Cruz Schools

0.038

0.016

0.077

0.067

0.075

0.074

0.068

0.081

0.027

0.037

Bonny Doon Schools

0.056

0.019

0.021

0.035

0.036

0.034

0.033

0.029

0.023

0.025

Live Oak Schools

0.052

0.050

0.046

0.043

0.037

0.023

0.042

0.043

0.052

0.048

Scotts Valley Schools

0.087

0.077

0.073

0.052

0.084

0.055

0.054

0.050

0.044

0.043

1.247

1.169

1.229

1.218

1.251

1.205

1.235

1.240

1.170

1.182

$ 1.247

$ 1.178

$ 1.238

$ 1.227

$ 1.260

$ 1.214

$ 1.244

$ 1.249

$ 1.179

$ 1.191

Direct Rates: Debt service

$

Total Direct Rate Overlapping Rates2: County3 School Districts:

Total Overlapping Rate Total Direct and Overlapping Rate

Notes: 1

Rates are per $100.00 of assessed value.

2

Overlapping rates are those of entities that apply to property owners within the City of Santa Cruz. Not all overlapping rates apply to all property owners (e.g., the rates for school districts apply only to the proportion of the city's property owners whose property is located within the geographic boundaries of the school district).

3

The passage of a constitutional amendment (Proposition 13) in June 1978 limits the property tax rate to a base of $1.00 per $100.00. The $1.00 rate is levied by the County and apportioned to local agencies according to a formula prescribed by the California legislature.

Source:

County of Santa Cruz Auditor - Controller's Office

158

City of Santa Cruz

TABLE 9

Principal Property Tax Owners Current Year and Nine Years Ago

Fiscal Year Ended June 30 2008

1999 Percentage

Percentage

of Total Assessed Tax Owner Santa Cruz Seaside Company

Assessed

Rank

Valuation

Valuation

61,845,360

1

0.933% 0.613%

-

Valuation $

of Total

Assessed

$

Assessed

25,964,526

Rank

Valuation

2

0.747%

4

0.511%

Cypress Point RE Investors LLC

40,598,860

2

S C Beach Hotel Partners LLC

39,722,417

3

0.599%

17,747,772

Santa Cruz Shaffer Road Investors

32,444,052

4

0.490%

-

The Price Company/Costco Wholesale

25,478,285

5

0.384%

14,029,696

6

0.404%

Frederick Electronics Corporation

22,154,183

6

0.334%

12,436,290

8

0.358%

1010 Pacific Investors

22,099,898

7

0.333%

-

-

-

CRRI/Seagate Ocean Street LLC

21,716,567

8

0.328%

-

-

Cooper House LLC

20,258,564

9

0.306%

-

-

University Business Park LLC

20,197,439

10

0.305%

-

-

Silicon Systems Inc/Texas Instruments

-

-

133,167,473

1

3.832%

Thomas J. Lipton, Inc.

-

-

19,905,464

3

0.573%

Fremont Central Investment

-

-

15,300,000

5

0.440%

Outlook Apartments

-

-

13,423,995

7

0.386%

Pacific Square Ltd Partners

-

-

11,645,868

9

0.335%

Western Business Park/Redtree

-

-

10,701,137

10

0.308%

Totals

$

306,515,625

Total assessed value

$

6,627,555,075

4.625%

Source: HDL

159

$

274,322,221

$

3,475,407,552

7.893%

City of Santa Cruz

TABLE 10 1

Property Tax Levies and Collections Last Ten Fiscal Years

Outstanding Fiscal

Total

Year Ended

Total Tax 2

Current Tax 2

Percent

Delinquent

of Levy

Tax

Total

3

Delinquent

Collections

Outstanding

Tax

as Percent of

Delinquent

Collections

Current Levy

Taxes as Percent of

3

June 30

Levy

Collections

1999

$ 10,104,672

$ 10,104,672

100.0%

-

$ 10,104,672

100.0%

2000

11,732,295

11,732,295

100.0%

-

11,732,295

100.0%

-

-

2001

12,516,202

12,516,202

100.0%

-

12,516,202

100.0%

-

-

2002

14,190,378

14,190,378

100.0%

-

14,190,378

100.0%

-

-

2003

14,639,056

14,639,056

100.0%

-

14,639,056

100.0%

-

-

2004

15,335,693

15,335,693

100.0%

-

15,335,693

100.0%

-

-

2005

16,013,591

16,013,591

100.0%

-

16,013,591

100.0%

-

-

2006

18,191,952

18,191,952

100.0%

-

18,191,952

100.0%

-

-

2007

20,310,069

20,310,069

100.0%

-

20,310,069

100.0%

-

-

2008

21,573,114

21,573,114

100.0%

-

21,573,114

100.0%

-

-

Collected

Collections $

Taxes $

Notes: 1

This table includes levies and collections for the Redevelopment Agency.

2

Does not include amounts for Property Taxes in Lieu of Vehicle License Fees

3

Because it adopted a new method of distributing property taxes (commonly referred to as the "Teeter Plan"), the County is now responsible for all delinquent secured property taxes.

Source:

County of Santa Cruz Auditor-Controller's Office City of Santa Cruz Finance Department

160

Current Levy -

$

-

This page is intentionally left blank.

161

City of Santa Cruz Ratios of Outstanding Debt By Type Last Ten Fiscal Years

Fiscal Year Ended June 30 1999

2000

2001

2002

2003

Governmental Activities: General obligation bonds

$

Tax allocation bonds

6,998,473

$

7,176,298

$

7,299,481

$

7,286,115

$

7,260,759

3,540,000

3,385,000

3,225,000

3,055,000

2,880,000

Certificates of participation

555,921

518,392

4,890,431

4,769,607

4,642,350

Capital leases

Revenue bonds payable 854,158

1,583,610

1,649,722

3,355,410

2,450,555

Notes

-

-

-

1,500,000

1,500,000

Other

-

-

531,900

998,692

985,663

11,948,552

12,663,300

17,596,534

20,964,824

19,719,327

Wastewater revenue bonds

19,745,000

5,210,000

5,085,000

4,955,000

4,955,000

Storm water revenue bonds

-

-

-

-

-

Water revenue bonds

-

-

-

-

-

Golf course revenue bonds

155,000

80,000

-

-

-

Certificates of Participation

28,047,650

Total Governmental Activities Business-type Activities:

14,251,608

22,339,568

28,985,383

28,047,650

Leases

1,619,560

2,353,054

2,942,887

2,926,370

4,624,099

Notes

50,976,494

48,894,934

47,221,604

44,988,271

44,883,261

Total Business-type Activities

86,747,662

78,877,556

84,234,874

80,917,291

82,510,010

Total Primary Government

$

98,696,214

$

91,540,856

$

101,831,408

$

101,882,115

$

102,229,337

Personal income1

$

1,709,289,000

$

1,890,711,810

$

2,154,291,172

$

2,096,039,335

$

2,085,569,904

Debt as percentage of personal income Population2

5.77%

4.84%

54,575

56,046

4.73% 55,028

4.86%

4.90%

55,085

55,633

Debt per capita

1,808

1,633

1,851

1,850

1,838

Assessed value3

5,250,364,937

5,679,708,576

4,681,502,599

4,932,597,610

4,681,502,599

Debt as percentage of assessed value

1.88%

1.61%

2.18%

2.07%

Notes: 1

Personal income is calculated based on data from the US Department of Commerce, Bureau of Economic Analysis (refer to Table 16).

Source:

2

State Department of Finance

3

County of Santa Cruz Assessor's Office

City of Santa Cruz Finance Department

162

2.18%

TABLE 11

Fiscal Year Ended June 30 2004 $

2005

7,228,152

$

2,695,000

2006

7,183,381

$

5,245,000

2007

7,126,075

$

5,125,000

2008

7,055,866

6,972,334

5,005,000

4,880,000

-

6,880,000

4,096,139

3,945,290

4,513,661

4,377,108

4,239,123

1,765,216

1,766,635

1,247,913

965,627

819,608

1,624,706

1,334,942

4,205,026

2,920,485

1,469,685

920,263

1,029,804

944,836

851,581

754,069

18,746,998

20,936,870

22,887,973

20,894,698

25,720,985

4,820,000

4,680,000

4,715,000

4,510,000

4,310,000

-

-

6,100,000

5,940,000

5,770,000

-

-

12,450,000

12,150,000

11,930,000

-

-

-

-

29,831,339

28,662,892

20,915,877

19,183,861

3,939,187

3,108,344

3,145,352

3,514,756

2,484,435

42,593,574

40,240,469

37,822,337

35,337,269

32,783,456

81,184,100

76,691,705

85,148,566

80,635,886

74,662,602

17,384,710

$

99,931,098

$

97,628,575

$

108,036,539

$

101,530,584

$

100,383,587

$

2,109,542,853

$

2,247,596,565

$

2,365,518,375

$

2,638,747,497

$

2,785,524,375

4.74% 56,289

4.34% 56,451

4.57% 56,925

3.85% 57,553

3.60% 58,125

1,775

1,729

1,898

1,764

1,727

4,932,597,610

5,250,364,937

5,679,708,576

6,206,342,214

6,627,555,075

2.03%

1.86%

1.90%

1.64%

163

1.51%

City of Santa Cruz

TABLE 12

Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years

Fiscal

Less: Amount

Year

General

Available

Percentage

Debt

Ended

Obligation

in Debt

of Assessed

Per

Assessed

June 30

Bonds

Service Fund

Value

Capita

Value1

Population2

128

$ 3,483,511,451

54,575

1999

$

6,998,473

$

12

Total $

6,998,461

0.20%

$

2000

7,176,298

125,218

7,051,080

0.19%

126

3,782,301,841

56,046

2001

7,299,481

277,763

7,021,718

0.17%

128

4,052,397,447

55,028

2002

7,286,115

324,117

6,961,998

0.16%

126

4,454,738,526

55,085

2003

7,260,759

389,184

6,871,575

0.15%

124

4,681,502,599

55,633

2004

7,228,153

457,945

6,770,208

0.14%

120

4,932,597,610

56,289

2005

7,183,381

557,277

6,626,104

0.13%

117

5,250,364,937

56,451

2006

7,126,075

707,777

6,418,298

0.11%

113

5,679,708,576

56,925

2007

7,055,866

909,576

6,146,290

0.10%

107

6,206,342,214

57,553

2008

6,972,334

1,136,665

5,835,669

0.09%

100

6,627,555,075

58,125

Source:

1

County of Santa Cruz Assessor's Office

2

State Department of Finance

City of Santa Cruz Finance Department

164

City of Santa Cruz

TABLE 13

Computation of Direct and Overlapping Debt June 30, 2008

2007-2008 Assessed Valuation

$ 6,627,555,075

Redevelopment Incremental Valuation: Adjusted Assessed Valuation:

1,096,810,016 $ 5,530,745,059 Total

Percentage

Amount

Debt

Applicable

Applicable

Outstanding

to City (1)

to City

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Cabrillo Joint Community College District

$ 177,544,693

19.924%

90,158,463

54.892%

49,489,784

Santa Cruz Elementary School District

23,204,754

94.022%

21,817,574

Live Oak School District

19,954,975

3.256%

649,734

Scotts Valley Unified School District

19,675,000

0.026%

City of Santa Cruz

5,810,224

100.000%

5,810,224 (2)

City of Santa Cruz 1915 Act Bonds

1,295,000

100.000%

1,295,000

Santa Cruz High School District

Total Direct and Overlapping Tax and Assessment Debt

$ 337,643,109

$

35,374,005

5,116

$ 114,441,437

DIRECT AND OVERLAPPING GENERAL FUND DEBT: Santa Cruz County Certificates of Participation

69,471,974

20.205%

14,036,812

Santa Cruz County Office of Education Certificates of Participation

11,605,000

20.205%

2,344,790

Cabrillo Joint Community College District Certificates of Participation

2,640,000

19.924%

525,994

Scotts Valley Unified School District Certificates of Participation

4,145,000

0.026%

1,078

Santa Cruz City Schools Certificates of Participation

5,130,000

54.892%

2,815,960

Live Oak School District Certificates of Participation

3,835,000

3.256%

14,130,000

100.000%

837,819

100.000%

837,819

3,015,000

7.048%

212,497

City of Santa Cruz General Fund Obligations Santa Cruz Consolidated Emergency Communication Center Monterey Bay Unified Air Pollution Control District Authority

124,868 14,130,000 (3)

35,029,818 (4)

Total Direct and Overlapping General Fund Debt

$ 114,809,793

$

Combined Total Debt

$ 452,452,902

$ 149,471,255

Notes: (1) Percentage of overlapping agency's assessed valuation located within boundaries of the city. (2) Excludes interest accretion amounts. (3) Excludes issues self-supporting from enterprise revenues ($6,360,000). (4) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue, and tax allocation bonds and nonbonded capital lease obligations. Ratios to 2007-2008 Assessed Valuation: Direct Debt ($5,810,224)

0.09%

Total Direct and Overlapping Tax and Assessment Debt

1.73%

Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($20,778,043)

0.38%

Combined Total Debt

2.70% $0

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/08: Source: California Municipal Statistics, Inc.

165

City of Santa Cruz Legal Debt Margin Information Last Ten Fiscal Years

Fiscal Year Ended June 30 1999 Debt limit

$

Total net debt applicable to limit Legal debt margin

2000

522,526,718

$

567,345,276

6,998,461 $

515,528,257

2001 $

7,051,080 $

560,294,196

2002

607,859,617

$

7,021,718 $

600,837,899

2003

668,210,779

$

6,961,998 $

661,248,781

702,225,390 6,871,575

$

695,353,815

Total net debt applicable to the limit as a percentage of debt limit

1.34%

1.24%

166

1.16%

1.04%

0.98%

TABLE 14

Fiscal Year Ended June 30 2004 $

2005

739,889,642

$

6,770,208 $

733,119,434

2006

787,554,741

$

851,956,286

6,626,104 $

780,928,637

0.92%

2007 $

6,418,298 $

845,537,988

0.84%

0.75%

2008

930,951,332

$

6,146,290 $

924,805,042

994,133,261 11,951,626

$

0.66%

982,181,635

1.20%

Legal Debt Margin Calculation For Fiscal Year 2007-08: Total assessed value

$

Debt limit (15% of total assessed value)

6,627,555,075 994,133,261

Debt applicable to limit: General obligation bonds (reported at accreted value)

13,852,334

Less: Amount available in debt service fund for repayment of bonds

1,900,708.00

Total net debt applicable to limit

11,951,626

Legal debt margin

$

167

982,181,635

City of Santa Cruz Pledged-Revenue Coverage Last Ten Fiscal Years

Fiscal Year Ended June 30 1999

2000

2001

2002

2003

Wastewater Revenue Bonds: Wastewater charges and other

$

12,179,844

$

12,846,315

$

11,585,518

$

12,146,047

$

12,306,445

Less: operating expenses

7,379,231

7,856,133

7,275,278

8,929,861

9,415,409

Net available revenue

4,800,613

4,990,182

4,310,240

3,216,186

2,891,036

Debt service: 765,000

115,000

120,000

125,000

130,000

Interest

Principal

1,227,031

296,608

290,733

284,608

278,233

Total

1,992,031

411,608

410,733

409,608

408,233

2.41

12.12

10.49

7.85

7.08

Coverage Water Revenue Bonds: Water charges and other

$

14,425,845

$

-

$

-

$

-

$

-

Less: operating expenses

8,546,215

-

-

-

-

Net available revenue

5,879,630

-

-

-

-

Debt service: 380,000

-

-

-

-

Interest

Principal

9,925

-

-

-

-

Total

389,925

-

-

-

-

15.08

-

-

-

-

Coverage Storm Water Revenue Bonds: Storm Water charges and other

$

-

$

-

$

-

$

-

$

-

Less: operating expenses

-

-

-

-

-

Net available revenue

-

-

-

-

-

Debt service: Principal

-

-

-

-

-

Interest

-

-

-

-

-

Total Coverage

-

-

-

-

-

-

-

-

-

-

Certificates of Participation: Special assessments and other

$

-

$

-

$

11,510,578

$

12,080,193

$

12,422,235

Less: operating expenses

-

-

8,519,131

9,747,000

10,447,158

Net available revenue

-

-

2,991,447

2,333,193

1,975,077

Principal

-

-

110,000

100,000

145,000

Interest

-

-

223,868

537,580

529,300

Total

-

-

333,868

637,580

674,300

-

-

8.96

3.66

2.93

Debt service:

Coverage

Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest or depreciation.

Source:

City of Santa Cruz Finance Department

168

TABLE 15

Fiscal Year Ended June 30 2004 $

$

$

$

2005

12,230,219

$

2006

12,578,070

$

2007

12,394,292

$

2008

13,194,297

$

14,510,460

9,855,372

9,964,418

8,591,034

8,652,114

10,162,410

2,374,847

2,613,652

3,803,258

4,542,183

4,348,050

135,000

140,000

150,000

205,000

200,000

271,608

264,733

256,233

177,386

171,311

406,608

404,733

406,233

382,386

371,311

5.84

6.46

9.36

11.88

11.71

-

$

-

$

18,692,531

$

21,116,648

$

23,780,039

-

-

11,775,892

12,478,247

14,477,076

-

-

6,916,639

8,638,401

9,302,963

-

-

-

300,000

220,000

-

-

121,517

516,277

539,422

-

-

121,517

816,277

759,422

-

-

56.92

10.58

12.25

-

$

-

$

-

$

838,920

$

876,943

-

-

-

236,769

570,398

-

-

-

602,151

306,545

-

-

-

160,000

170,000

-

-

-

235,985

228,722

-

-

-

395,985

398,722

-

-

-

1.52

0.77

13,577,644

$

13,121,028

$

13,218,521

$

13,289,170

$

14,647,763

11,045,892

11,350,148

9,859,552

8,947,378

12,217,661

2,531,752

1,770,880

3,358,969

4,341,792

2,430,102

695,000

720,000

755,000

785,000

950,367

514,088

487,153

457,327

426,011

466,695

1,209,088

1,207,153

1,212,327

1,211,011

1,417,062

2.09

1.47

2.77

3.59

1.71

169

City of Santa Cruz

TABLE 16

Demographic and Economic Statistics Last Ten Fiscal Years

Fiscal Year Ended

Total

Per Capita

Per Capita

Unemployment

Personal

Personal

Taxable

Taxable

Rate2

Income

Income3

Sales4

Sales

June 30

Population1

1999

54,575

7.3%

2000

56,046

6.4%

1,890,712

33,735

725,287

12,941

2001

55,028

5.2%

2,154,291

39,149

828,500

15,056

2002

55,085

5.8%

2,096,039

38,051

809,628

14,698

2003

55,633

7.5%

2,085,570

37,488

761,208

13,683

2004

56,289

7.9%

2,109,543

37,477

761,986

13,537

2005

56,451

7.2%

2,247,597

39,815

795,060

14,084

2006

56,925

6.4%

2,365,518

41,555

813,834

14,297

2007

57,553

5.6%

2,638,747

45,849

828,447

14,395

2008

58,125

6.1%

2,785,524

47,923

852,292

14,663

$

1,709,289

$

Notes: Total Personal Income and Taxable Sales amounts are in thousands.

Source:

1

State Department of Finance

2

State Employment Development Department

3

U.S. Department of Commerce, Bureau of Economic Analysis

4

State Board of Equalization (based on most recent four quarters of data available)

170

31,320

$

634,138

$

11,620

City of Santa Cruz

TABLE 17

Principal Employers Current Year and Two Years Ago

Fiscal Year Ended June 30 2008

2006 Percentage

Number of Employees

Rank

Percentage

of Total

Number of

Employment

Employees

of Total Rank

Employment

Employer: University of California at Santa Cruz

4,680

1

4.840%

4,250

1

4.570%

County of Santa Cruz

2,705

2

2.797%

2,358

2

2.535%

City of Santa Cruz

1,140

3

1.179%

1,066

3

1.146%

Plantronics

494

4

0.511%

476

4

0.512%

Santa Cruz Beach-Boardwalk

347

5

0.359%

347

5

0.373%

Costco

256

6

0.265%

257

6

0.276%

Community Bridges

212

7

0.219%

212

7

0.228%

Crow's Nest

197

8

0.204%

195

8

0.210%

158

10

0.170%

174

9

0.187%

Lightsurf Technology Inc.

0.000% 180

Santa Cruz Biotechnology Incorporated

9

0.186%

Santa Cruz Sentinel 161

United Parcel Service Totals

10,372

Total employment1

96,700

10 10.559%

93,000

This table shows the data for the current fiscal year and two years ago because earlier years' data is not available.

Source:

1

9,493

U.S. Department of Labor - Bureau of Labor Statistics

City of Santa Cruz Business License database City of Santa Cruz Finance Department

171

10.208%

City of Santa Cruz

TABLE 18 1

Number of City Employees by Department Last Ten Fiscal Years

Fiscal Year Ended June 30 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Departments: City Clerk

7

7

7

7

7

7

7

7

7

6

City Manager

5

5

5

5

5

5

5

4

5

5

Human Resources

12

12

13

13

13

12

12

13

14

14

Finance

34

36

38

38

38

36

35

38

27

27

-

-

-

-

-

-

-

-

16

16

122

126

134

136

133

126

124

125

132

124

53

55

59

59

58

55

54

53

55

55

Parks and Recreation

114

118

126

127

125

118

116

111

105

100

Library

116

120

128

130

127

120

118

119

118

121

Public Works

212

219

235

239

232

219

216

216

232

229

28

30

31

32

31

30

29

27

28

27

Information Technology 2 Police Fire

Planning and Community Development

8

8

9

9

9

8

8

9

10

13

Water

85

89

94

96

94

89

87

88

91

94

Total

796

825

879

891

872

825

811

810

840

831

Redevelopment

Notes: 1

Personnel authorizations budgeted. Figures rounded to whole numbers.

2

Information Technology was part of the Finance Department previously, but it is now a separate department.

Source:

City of Santa Cruz Budget Document

172

City of Santa Cruz

TABLE 19

Operating Indicators By Function Last Five Fiscal Years

2004 Function: City Clerk Hours for creating the agenda for posting Advisory body hours Election hours Initiative/referendum petitions processing hours Human Resources Number of recruitments Number of applications Workers compensation claim payments Police Calls for service Cases Fire Emergency calls Inspections Parks and Recreation Number of classes Facility rentals: Parks (Picnic Areas) Louden Nelson Civic Auditorium Swimming pool Special events produced Library (all locations) Items checked out Queries handled Open hours/week Public Works Overlay (square footage) Seal coat (square footage) Sewer New connections Average daily flow (MGD) Annual total flow (MG) Water Active accounts Average daily consumption (MGD) Annual consumption (MG) Average monthly residential bill

$

Fiscal Year Ended June 30 2006

2005

2007

2008

305 ** 280

291 600 180

** 600 400

300 600 100

320 600 440

-

60

120

-

-

** ** 2,129,667

** ** 1,872,387

** ** 1,400,696

$

$

$

87 2,155 2,850,283

$

95 2,647 1,576,602

76,069 14,717

76,498 14,076

70,065 14,212

67,932 12,917

72,601 16,190

4,623 1,853

4,631 1,727

5,006 1,794

5,231 1,223

6,018 2,153

306

305

294

236

1,038

(1)

892 7,753 146 200 30

760 7,534 183 167 20

831 7,348 193 146 22

762 7,562 190 162 22

1,877 6,500 145 178 18

(2)

1,856,142 288,821 432

1,899,739 293,525 432

1,975,986 313,496 438

2,051,331 322,971 430

2,159,868 300,754 444

251,106 320,879

351,239 342,000

190,000 3,793,212

524,963 -

-

72 9.52 3,475

85 9.92 3,621

106 11.39 4,157

41 9.00 3,283

51 9.95 3,632

23,799

23,924

24,044

24,253

24,302

10 3,660 $25

10 3,448 $30

9 3,340 $34

9 3,369 $41

9 3,358 $46

This table shows data for the last five fiscal years. Prior years' data is not available. (1) Different count used for FY 2008 - includes multiples sessions of one course, e.g. if course entered several times in a season now counted as 4 rather than 1. (2) Now includes ball fields and indoor facilities in parks - New booking system count; all confirmed bookings, fewer multiple day rentals (3) New booking system count; all confirmed bookings, fewer multiple day rentals ** Unavailable Source: City of Santa Cruz Departments

173

(3)

City of Santa Cruz

TABLE 20

Capital Asset Statistics By Function Last Ten Fiscal Years

Fiscal Year Ended June 30 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Function: Public Safety Police: Stations Vehicular patrol units Fire stations

1

1

1

1

1

1

1

1

1

1

55

55

78

78

43

43

61

61

63

63

3

3

3

3

3

3

3

3

3

3

Public Parking 20

21

23

22

26

20

21

21

20

20

Spaces

1,369

4,939

5,094

5,235

5,397

5,124

5,149

5,149

5,132

5,154

Parking meters

1,953

1,945

1,741

1,764

1,695

1,714

1,764

1,764

1,888

1,890

29

29

29

30

30

30

30

30

30

30

1,450

1,450

1,457

1,970

1,970

1,970

1,970

1,970

1,970

1,970

11

11

11

17

17

17

17

17

17

17

Swimming pools

1

1

1

1

1

1

1

1

1

1

Tennis courts

7

7

7

7

7

7

8

8

6

6

Golf course

1

1

1

1

1

1

1

1

1

1

Central library

1

1

1

1

1

1

1

1

1

1

Branch libraries within city

2

2

2

2

2

2

2

2

2

2

Branch libraries in county

8

7

7

7

7

7

7

7

7

7

Bookmobile

-

-

1

1

1

1

1

1

1

1

145

136

136

136

136

136

136

136

136

136

9

13

13

13

13

13

13

13

13

13

2,335

2,335

2,800

2,825

2,825

2,893

2,893

2,893

2,893

2,993

200

208

62

148

148

151

151

151

151

155

35

35

8

50

50

50

50

50

50

49

300

300

300

300

300

300

290

291

291

293

1,890

1,890

1,904

1,913

1,997

2,019

2,089

2,060

2,060

2,038

Lots

Parks and Recreation Parks Parks acreage Playgrounds

Libraries

Streets Miles of paved streets Miles of alleys Street lights Sewer Miles of sanitary sewers Miles of storm drains Water Miles of water mains Fire hydrants

Source:

City of Santa Cruz Departments

174