The URL can be used to link to this page

Home My WebLink About13-ATTACHMENT AATTACHMENT A COMPREHENSIVE ANNUAL FINANCIAL REPORT TUSTIN HISTORY BUILDING OUR FUTURE HONORING OUR PAST F -d COMPREFIENSIVE ANNUAL FINANCIAL REPORT FOR TIS YEAR ENDED JUNE 30TH, 2013 CITY OF TUSTIN, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT WITH REPORT ON AUDIT BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE YEAR ENDED JUNE 30, 2013 Prepared By: Finance Department CITY OF TUSTIN TABLE OF CONTENTS For the year ended June 30, 2013 INTRODUCTORY SECTION: Page Number Elected and Administrative Officials i Letter of Transmittal iii Organization Chart vii GFOA Certificate of Achievement for Excellence in Financial Reporting viii FINANCIAL SECTION: Independent Auditors' Report 1 Management's Discussion and Analysis (Required Supplementary Information - Unaudited) 5 Basic Financial Statements: Government -wide Financial Statements: Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements: Governmental Funds: Balance Sheet 20 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 21 Statement of Revenues, Expenditures and Changes in Fund Balances 22 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 23 Proprietary Fund: Statement of Net Position 24 Statement of Revenues, Expenses and Changes in Net Position 25 Statement of Cash Flows 26 Fiduciary Funds: Statement of Fiduciary Net Position 28 Statement of Changes in Fiduciary Net Position 29 Notes to Basic Financial Statements 31 CITY OF TUSTIN TABLE OF CONTENTS (CONTINUED) For the year ended June 30, 2013 Page Number REQUIRED SUPPLEMENTARY INFORMATION: 77 Schedules of Funding Progress PERS Miscellaneous Employees 79 Other Post -Employment Benefit Plan 79 Budgetary Comparison Schedule: General Fund 80 Note to Required Supplementary Information 81 SUPPLEMENTARY INFORMATION: 83 Other Governmental Funds: 85 Combining Balance Sheet 86 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 88 Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: Gas Tax Special Revenue Fund 90 Measure M Special Revenue Fund 91 Park Acquisition and Development Special Revenue Fund 92 Asset Forfeiture Special Revenue Fund 93 Air Quality Special Revenue Fund 94 Supplemental Law Enforcement Special Revenue Fund 95 Housing Authority Special Revenue Fund 96 Agency Funds: 97 Combining Statement of Assets and Liabilities 98 Combining Statement of Changes in Assets and Liabilities 99 STATISTICAL SECTION (UNAUDITED): 101 Description of Statistical Section Contents 103 Financial Trends Net Position by Component - Last Nine Fiscal Years 104 Changes in Net Position - Expenses and Program Revenues - Last Nine Fiscal Years 106 Changes in Net Position - General Revenues - Last Nine Fiscal Years 108 Fund Balances of Governmental Funds - Last Nine Fiscal Years 110 Changes in Fund Balances of Governmental Funds - Last Nine Fiscal Years 112 CITY OF TUSTIN TABLE OF CONTENTS (CONTINUED) For the year ended June 30, 2013 Page Number STATISTICAL SECTION (UNAUDITED) (CONTINUED): Revenue Capacity: Assessed Value and Estimated Actual Values of Taxable Property - Last Ten Fiscal Years 114 Direct and Overlapping Property Tax Rates - Last Nine Fiscal Years 116 Principal Property Taxpayers - Current Year and Nine Years Ago 118 Property Tax Levies and Collections - Last Nine Fiscal Years 119 Debt Capacity Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 120 Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years 122 Overlapping Debt Schedule 123 Legal Debt Margin Information - Last Ten Fiscal Years 124 Pledged -Revenue Coverage - Last Ten Fiscal Years 126 Demographic and Economic Information: Demographic and Economic Statistics - Last Ten Calendar Years 128 Principal Employers - Current Year and Seven Years Ago 129 Operating Information Full -Time City Employees by Function - Last Ten Fiscal Years 130 Capital Asset Statistics by Function - Last Ten Fiscal Years 131 Water District Schedules for Revenue Capacity: Water Consumption by Customer Type - Last Ten Fiscal Years 132 Water Rates - Last Ten Fiscal Years 134 Water Customers - Current Year and Seven Years Ago 135 CITY OF TUSTIN Elected and Administrative Officials MAYOR Al Murray CITY COUNCIL Charles E. "Chuck" Puckett, Mayor Pro Tem John Nielsen Rebecca "Beckie" Gomez Dr. Allan Bernstein AUDIT COMMISSION R. Lawrence Friend, Chair Craig Shimomura, Chair Pro Tem Robert Ammann Richard G. Hilde Gregory C. Moore CITY MANAGER/CITY CLERK David E. Kendig City Attorney Elizabeth A. Binsack Director, Community Development Pamela Arends-King Director, Finance/ City Treasurer Jeffrey C. Parker -i- Chuck Robinson Deputy City Manager/ Director of Human Resources Scott M. Jordan Chief of Police David Wilson Director, Parks and Recreation Services Douglas S. Stack Director, Public Works/ City Engineer The page left blank intentionally Finance Department December 20, 2013 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL CITIZENS OF THE CITY OF TUSTIN City of Tustin Tustin, California 92780 TLISTIN HISTORY BUILDING OUR FUTURE HONORING OUR PAST The Comprehensive Annual Financial Report (CAFR) of the City of Tustin for the fiscal year ended June 30, 2013, is hereby submitted. These statements have been prepared in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by an independent public accounting firm of licensed certified public accountants. The report consists of management's representations concerning the finances of the City of Tustin. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with management. To provide a reasonable basis for making these representations, management has established an internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City's framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and component units of the City of Tustin. All disclosures necessary to enable the reader to gain an understanding of the City's financial activities have been included. The City of Tustin's financial statements for the year ended June 30, 2013, have been audited by White Nelson Diehl Evans LLP, an independent public accounting firm of licensed certified public accountants. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Tustin's financial statements for the fiscal year ended June 30, 2013, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Tustin's MD&A can be found immediately following the report of the independent auditors. 300 Centennial Way, Tustin, CA 92780 • P: (714) 573-3060 • F: 1,7141 832-0825 0 www.tustinca.org PROFILE OF THE CITY OF TUSTIN The City of Tustin is located in the central part of Orange County, about forty miles southeast of Los Angeles and eighty miles north of San Diego, at the intersection of the 5 and 55 Freeways. Tustin covers over eleven square miles and adjoins the cities of Orange, Santa Ana and Irvine. The State of California Department of Finance has estimated the City's January 1, 2013 population at 77,983, a two percent increase from 2012. While the City is surrounded by much of the County's main industrial employment, it is essentially a residential community. The City was incorporated under the General Laws of the State of California in 1927 as the "City of Tustin". Government was by a five member elected City Council. The Council/Administrator form of city government was adopted in 1965 and was modified to the Council/Manager form in 1981. Council members serve staggered, four-year terms, with a two consecutive term limit. The Mayor is selected by the City Council from among its membership and serves a one-year term. The City Manager is appointed by the City Council to carry out the policies and direction of the City Council, oversee the day-to-day operations of the City and appoint department heads. Tustin is a full service City. The services provided by the City include police, street and park maintenance, water, recreation, traffic/transportation, public improvements, planning, zoning, and general administrative services. The City contracts with the Orange County Fire Authority for fire suppression services. Also included in the City's overall operations are the Tustin Public Financing Authority and the City of Tustin Housing Authority (Housing Authority). The activities of both entities are included in these financial statements. Additional information for the Tustin Public Financing Authority and the Tustin Housing Authority is available in Note 1 of the Notes to Basic Financial Statements. The key element of the City's financial management process is the development and approval of the annual budget. The City Council conducts various open budget workshops as necessary and adopts the budget at a noticed public meeting. The budget is prepared pursuant to generally accepted accounting principles (GAAP) and is balanced by fund. The level of appropriations is controlled by the City Council for each fund. The City Manager is authorized to transfer appropriations within the fund between the various programs and/or departments. Budgetary control is maintained by a real-time financial reporting system. Budget to actual comparisons are provided through display or reports and through budget controls set within the purchasing and accounts payable modules for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund this comparison is presented on page 80 as part of the required supplementary information and for nonmajor governmental funds this comparison is presented on pages 90 — 96 as part of the other supplementary information for the governmental funds. Successor Agency expenses are restricted by the State of California Department of Finance (DOF) to enforceable obligations. The enforceable obligations are approved every six months by the DOF through the submission of a Recognized Obligation Payment Schedule. The Successor Agency is presented as a Private Purpose Trust Fund on pages 28 - 29. - 1V - ECONOMIC OUTLOOK The State of California continues to slowly recover from the economic downturn. The statewide unemployment rate has dropped from 9.8% in November 2012 to 8.7% for November 2013, which is 1.7% higher than the United States unemployment rate of 7.0% for November 2013. The Orange County unemployment rate has decreased 1.2% from November 2012 to 5.8% for November 2013. The City's sales tax revenue continues to be the largest revenue source for the General Fund. It is 46% of total General Fund revenues. Annual sales tax revenue increased from $19.9 million in fiscal year 2011-2012 to $21.6 million in fiscal year 2012-2013, an 8% increase. The increase is primarily due to the increase in automobile sales from prior fiscal year. Sales tax revenue for fiscal year 2013-2014 is expected to increase $600 thousand from prior year. Property tax revenue is the second largest General Fund revenue source (17% of total revenues). Orange County property values and property sales continue to increase, therefore, property tax revenue increased from $7.8 million in fiscal year 2011-2012 to $8.2 million in fiscal year 2012-2013, a 5.2% increase. The City's property tax revenue is expected to increase $400 thousand in fiscal year 2013-2014. Development at the Marine Corp Air Station Base also referred to as the Tustin Legacy (Legacy) continues to move forward. The City continues negotiations with Standard Pacific for the development of a residential neighborhood; and with other developers and commercial companies for commercial, retail and residential development. The Irvine Company purchased property within the Legacy for $45.6 million to construct 533 rental apartment units of which 37 are for moderate income tenants. Of the $45.6 million collected from the Irvine Company, $15.3 million is designated to fund construction of the Legacy backbone infrastructure. The City also entered into an agreement with Anton Legacy Tustin L.P. for the sale of land for one dollar and $4.3 million to fund construction of the Legacy backbone infrastructure to construct 225 rental apartments of which 88 are very low- income units, 73 are low-income units and 64 are moderate -income units. During fiscal year 2012-2013 construction on the Tustin Ranch Road extension project continued and was completed late fall 2013. The construction of the fire station within the Legacy was started and expected to be completed spring 2014. The City sold property held for resale for $8.7 million in August 2012 for the development of two hotels and a retail establishment along the 55 Freeway and Edinger Avenue. The hotels and retail establishment opened June 2013. Due to the opening of the two new hotels the City's hotel bed tax revenue will increase from $137 thousand for fiscal year 2012-2013 to $730 thousand for fiscal year 2013-2014. The City Council continues to take a proactive approach for maintaining the City's healthy financial position by monitoring revenues and expenses. General Fund Revenues for fiscal year 2013-14 are estimated to be $1.7 million less than fiscal year 2012-13, primarily due to the State Department of Finance disallowing transfers from the Successor Agency to the Tustin Community Redevelopment Agency to the General Fund for reimbursement of third party contracts. Expenditures are $1.2 million more than budgeted in fiscal year 2012-13 primarily due to the filling of vacant police department positions. The City expects a $539 thousand deficit for fiscal year 2013-14; therefore City Council has chosen to use excess reserves to balance the General Fund budget for fiscal year 2013-2014. City Council will be reviewing the City's financial condition during the mid -year budget review in February 2014. MEM ACCOMPLISHMENTS AND FUTURE PROJECTS Major capital improvement projects completed included the Tustin Sports Park Baseball Diamond; the Columbus Tustin Park playground renovation; the City Hall CAT 6 cabling project; and the Newport Ave/SR 55 North bound ramp reconfiguration. The City continues to work on the Tustin Ranch irrigation; Valencia North Loop/Armstrong project; and the Rawlings water reservoir rehabilitation. The City's capital projects for fiscal year 2013-2014 are budgeted at $90 million. Funding sources for the capital projects include revenues from gas tax, Community Development Block Grant, water revenues, Community Facility bond proceeds, Measure M2, Park Development Funds, and Water Revenue Bond proceeds. Major projects include the Clifton C. Miller Community Center kitchen remodel; Frontier Park Water Element (Spray Ground); a Bocce Ball Court at Pepper Tree park; replacement of the City Hall generator; the rehabilitation of the Rawlings water reservoir; McFadden Avenue rehabilitation between Mantle Land and Pasadena Avenue; the Irvine Boulevard rehabilitation between Prospect Avenue and Holt Avenue; and the Newport Avenue bicycle trail reconstruction project between Main Street and Irvine Boulevard. Major Legacy projects include Valencia Avenue extension from Kensington Park Drive to Tustin Ranch Road; the Park Avenue extension from Legacy Road to the Jamboree Road ramp; Red Hill Avenue median improvements between Barranca Parkway and north of Valencia Avenue; the Barranca Parkway Improvement from west of Tustin Ranch Road to east of Aston Street; and the Bell Avenue extension from Red Hill Avenue to Armstrong Avenue. 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 Tustin for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2012. This was the twenty- sixth consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS I wish to express my appreciation to the entire Finance Department staff for their contribution to the department during the year. Their efforts are reflected in this report and in other documents resulting from the annual audit process. Special thanks are due to Jennifer Leisz, Finance Manager, Nipa Shah, Part-time Accounting Supervisor, Sean Tran, Administrative Services Manager, Alberto Preciado, Accountant, the finance staff, and consultant Melissa Shirah, C.P.A. Their significance in preparing the final financial documents is reflected in the quality of this report. The Mayor and members of the City Council are to be commended for their interest and support in conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Pamela Arends-King Finance Director/City Treasurer -vi - CITIZENS OF TUSTIN POLICE PUBLIC WORKS COMMUNITY DEVELOPMENT CITY PARKS & RECREATION CITY ATTORNEY DEPUTY CITY MANAGER FINANCE HUMAN RESOURCES LOCAL GOVERNMENT -Vll- FY 2012-13 SUCCESSOR AGENCY TO THE TUSTIN REDEVELOPMENT AGENCY COORDINATION AND COOPERATION PRIVATE UTILITIES Cable T.V. Electricity Natural Gas Telephone CONTRACT SERVICES Fire Refuse Animal Control SPECIAL DISTRICTS Library Lighting Sewers Flood Control Re - Assessment District 95-1 CFD's MAYOR CITY CLERK CITY COUNCIL CITY TREASURER POLICE PUBLIC WORKS COMMUNITY DEVELOPMENT CITY PARKS & RECREATION CITY ATTORNEY DEPUTY CITY MANAGER FINANCE HUMAN RESOURCES LOCAL GOVERNMENT -Vll- FY 2012-13 SUCCESSOR AGENCY TO THE TUSTIN REDEVELOPMENT AGENCY COORDINATION AND COOPERATION PRIVATE UTILITIES Cable T.V. Electricity Natural Gas Telephone CONTRACT SERVICES Fire Refuse Animal Control SPECIAL DISTRICTS Library Lighting Sewers Flood Control Re - Assessment District 95-1 CFD's 0 Govemment Finance Officers Association City of Tustin California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2012 Executive Director/CEO INDEPENDENT AUDITORS' REPORT Honorable City Council of the City of Tustin Tustin, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activity, each major fund, and the aggregate remaining fund information of the City of Tustin (the City), as of and for the year ended June 30, 2013, and the related notes to the basic financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these basic financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the basic financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. -1- 2875 M ichelle D rive, Sjite 300, I rvi ne, CA 92606 • Tel: 714.978.1300 • Fac: 714.978.7893 Officmlamte:1 in Ora g�aid San DiepCcurtie; Opinion In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activity, each major fund, and the aggregate remaining fund information of the City of Tustin, as of June 30, 2013, and the changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matters As discussed in Note Id to the basic financial statements, the City incorporated deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure of net position due to the adoption of Governmental Accounting Standards Board's Statement No. 63, "Financial Reporting of Deferred Ou�flows of Resources, Deferred Inflows of Resources, and Net Position". The adoption of this standard also provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. Our opinion is not modified with respect to this matter. As discussed in Notes Id and 18 to the basic financial statements, the City has changed its method for accounting and reporting certain items previously reported as assets or liabilities during fiscal year 2012-2013 due to the early adoption of Governmental Accounting Standards Board's Statement No. 65, `Items Previously Reported as Assets and Liabilities". The adoption of this standard required retrospective application resulting in $434,527 and $1,255,379 reductions of previously reported net position of the business -type activity and the Successor Agency to the Tustin Community Redevelopment Agency Private -Purpose Trust Fund, respectively. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, schedules of funding progress and the budgetary comparison schedule, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the management's discussion and analysis, and schedules of funding progress in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during the audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance on them. The budgetary comparison schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements of the City or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the budgetary comparison schedule is fairly stated in all material respects in relation to the basic financial statements taken as a whole. -2- Other Matters (Continued) Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The introductory section, combining and individual nonmajor fund financial statements (supplementary information), and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information, as listed in the table of contents, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining schedules are fairly stated in all material respects in relation to the basic financial statements 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 do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2013, 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 grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Irvine, California December 18, 2013 -3- The page left blank intentionally City of Tustin Management's Discussion and Analysis (Unaudited) June 30, 2013 As management of the City of Tustin, California (City), we offer readers of the City of Tustin's financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2013. 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 in the introductory section of this report, and with the City's financial statements. Financial Highlights • The assets and deferred out flows of resources of the City exceeded its liabilities at June 30, 2013, by $695 million (net position). Net position consists of $456 million net investment in capital assets, $54.4 million in restricted net position and $184.6 million in unrestricted net position. • The government's total net position increased by $59.3 million during the fiscal year ended June 30, 2013. The primary reason for the increase is due to the gain on sale of assets of $43.3 million. The assets sold were land held for resale in the former Marine Corp Air Station referred to as the Legacy and land held for resale along the 55 freeway and Edinger Avenue. • As of June 30, 2013, the City's governmental funds reported combined ending fund balances of $245.0 million, an increase of $40.1 million in comparison with the prior year. The significant increase in ending fund balances is due to the gain on the sale of land held for resale. Approximately $130.3 million (53.2%) is nonspendable and $53.5 million is restricted. • The net increase in the City's total long-term liabilities was $2.6 million. The $2.6 million net increase is primarily due to the $2.0 million liability to fund an annuity the City purchased to fund an early retirement incentive program. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements consist of three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the basic financial statements. This report also contains required supplementary and other supplementary information in addition to the basic financial statements themselves. See independent auditors' report. -5- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 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. The statement of net position presents information on all of the City's assets and liabilities and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Government -wide financial statements distinguish City governmental activities that are principally supported by taxes and intergovernmental revenues from other business -type activities that are intended to recover all or a significant portion of their costs through user fees and charges. Governmental activities of the City, and the Tustin Public Financing Authority, a blended component unit, include general government, public safety, community services and public works. Business -type activity of the City is the Water Utility. The government -wide financial statements can be found immediately following this discussion and analysis. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. However, unlike the government -wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. See independent auditors' report. CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Fund financial statements (Continued) The City maintains various individual governmental funds organized by their type (special revenue, debt service and capital projects funds). Information is presented separately in the Governmental Funds Balance Sheet and in the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances. The General Fund, the CFD Construction Capital Projects Fund, and the Other Capital Projects Fund are considered to be major funds. Data from other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General Fund and the special revenue funds to demonstrate compliance with the annual budget law. Budgetary comparison schedules have been provided to demonstrate compliance with this budget requirement elsewhere in this report. The governmental funds financial statements can be found immediately following the government - wide financial statements. Proprietary funds. The City of Tustin maintains one type of proprietary (Enterprise) fund. This enterprise fund is used to report the same functions presented as business -type activities in the government -wide financial statements. The City uses an enterprise fund to account for its Water Utility. The proprietary fund financial statements can be found immediately following the governmental funds financial statements. 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 statement, because the resources of those funds are not available to support the City's own programs. The City utilizes a one private -purpose trust fund to account for the assets, liabilities and activities of the Successor Agency. The Successor Agency was created on February 1, 2012 with the dissolution of the Tustin Community Redevelopment Agency. The second fiduciary fund is an agency fund which is used to account for the assets of Community Facility Districts 04-1, 06-1 and 07-1. The fiduciary funds financial statements can be found immediately following the proprietary fund financial statements. Notes to the basic financial statements The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government -wide and fund financial statements. The notes to the basic financial statements can be found immediately following the fiduciary funds financial statements. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information which includes a Budgetary Comparison Schedule for the General Fund and schedules of funding progress for the City's defined benefit pension plan and other postemployment healthcare benefits plan. Required supplementary information can be found immediately following the notes to the basic financial statements. See independent auditors' report. 7- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Other information (Continued) The combining statements referred to earlier in connection with nonmajor governmental funds are presented for all nonmaj or Special Revenue Funds, nonmaj or Capital Proj ects Funds, and all nonmaj or Debt Service Funds. These combining and individual fund statements and schedules can be found immediately following the required supplementary information. Government -wide Financial Analysis The government -wide financial statements provide long-term and short-term information about the City's overall financial condition. This analysis addresses the financial statements of the City as a whole. The largest portion of the City's net position (65.6 percent) reflects its investment in capital assets (e.g., land, buildings, and improvements other than buildings, equipment, infrastructure, and construction in progress), less any related outstanding debt that was 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. City of Tustin Summary of Net Position As of June 30, 2013 (in millions of dollars) Total Net Position 1007.9 1663.7 $27.8 $31.3 $635.7 1095.0 9.3% See independent auditors' report. -8- Governmental Business -Type Total Activities Activities Total % Change 2012 2013 2012 2013 2012 2013 2012-2013 Assets: Current and other assets $243.6 $284.0 $25.4 $19.1 $269.0 $303.1 Capital assets 412.7 431.8 37.2 45.8 449.9 477.6 Total Assets 656.3 715.8 62.6 64.9 718.9 780.7 8.6% Deferred Outflows of Resources - - 0.6 0.5 0.6 0.5 (16.7%) Liabilities: Current liabilities 38.2 38.5 4.3 3.8 42.5 42.3 Non -Current liabilities 10.2 13.6 31.1 30.3 41.3 43.9 Total Liabilities 48.4 52.1 35.4 34.1 83.8 86.2 2.9% Net Position: Net investment in capital assets 412.7 431.8 25.5 24.2 438.2 456.0 Restricted 47.7 54.4 - - 47.7 54.4 Unrestricted 147.5 177.5 2.3 7.1 149.8 184.6 23.2% Total Net Position 1007.9 1663.7 $27.8 $31.3 $635.7 1095.0 9.3% See independent auditors' report. -8- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Government -wide Financial Analysis (Continued) Governmental activities. Net position of the City's governmental activities increased 9.2% to $663.7 million, of which $431.8 million is invested in capital assets such as equipment, buildings and infrastructure. Of the remaining total, $54.4 million is restricted to specifically stipulated spending agreements originated by law, contract or other agreements with external parties. The remaining $177.5 million is subject to designation for specific purposes as approved by the City Council, and may be used to meet the City's ongoing obligations. City of Tustin Summary of Changes in Net Position For the Year Ended June 30, 2013 (in millions of dollars) Governmental Business -Type Total Activities Activities Total % Change 2012 2013 2012 2013 2012 2013 2012-2013 Revenues: 12.3 18.7 - - Program revenues: 18.7 Public safety 28.8 Charges for services $4.3 $3.9 $15.1 $16.8 $19.4 $20.7 Operating grants & contributions 3.6 4.5 - - 3.6 4.5 Capital grants and contributions 20.9 21.0 - - 20.9 21.0 General revenues: 3.2 - - 7.1 Taxes 25.2 16.7 - - 25.2 16.7 Sales taxes shared state revenues 19.9 21.6 - - 19.9 21.6 Motor vehicle taxes 5.8 6.0 - - 5.8 6.0 Earnings on investments 0.9 0.2 0.2 - 1.1 0.2 Miscellaneous 14.4 7.2 - 0.3 14.4 7.5 Gain on sale of assets - 43.3 - - - 43.3 Total Revenues 95.0 124.4 15.3 17.1 110.3 141.5 28.4% Expenses: General government 12.3 18.7 - - 12.3 18.7 Public safety 28.8 30.7 - - 28.8 30.7 Public works 20.8 15.1 - - 20.8 15.1 Community services 7.1 3.2 - - 7.1 3.2 Interest on long-term debt 3.0 0.9 - - 3.0 0.9 Water - - 13.4 13.6 13.4 13.6 Total Expenses 72.0 68.6 13.4 13.6 85.4 82.2 (3.6%) Extraordinary Item: Loss on transfer to successor agency2( 7.3) _ _ = 2( 7.3) - 100.0% Change in net position (4.3) 55.8 1.9 3.5 (2.4) 59.3 Net Position - Beginning, restated 612.2 607.9 25.9 27.8 638.1 635.7 Net Position - Ending $607.9 $663.7 $27.8 $31.3 $635.7 $695.0 9.3% See independent auditors' report. CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Government -wide Financial Analysis (Continued) In governmental activities, the increase in net position of $55.8 million is primarily due to the gain on sale of assets of $43.3 million. The city sold 21 acres of land held for resale in the Legacy area (former Marine Corp Air Station), to the Irvine Company (TIC) for the construction of 533 rental apartments. TIC paid the City $45.6 million for the property. Of this amount, $15.3 million is designated to fund the construction of the Legacy's backbone infrastructure. Within the Legacy area the City also sold 12.7 acres of land to Anton Legacy Tustin L.P. for one dollar and $4.3 million to fund construction of the backbone infrastructure, to build 225 rental apartments for low to moderate income tenants. 8.3 acres of land held for resale was sold to Tustin Gateway FIS, LLC along the 55 freeway and Edinger Avenue, for the construction of two hotels and retail establishments. The total consideration for the property was $8.7 million and the value of the property was $11.6 million, therefore the sale of the property resulted in a net loss of $2.9 million. Overall, governmental revenues increased by $29.4 million from prior year. Charges for services decreased $0.4 million from prior year primarily due to the decrease in workers compensation contributions from other funds and departments because it was determined the workers compensation reserves were adequate to pay claims in fiscal year ending June 30, 2013. Operating grants and contributions increased $0.9 million due to a transfer of funds from the Successor Agency for third party costs incurred relating to the Newport Boulevard extension project. Taxes decreased $8.5 million from prior year because the City is no longer receiving property tax increment for the Tustin Community Redevelopment Agency (TCRA). In fiscal year 2012, the City only received seven months of property tax increment for TCRA which dissolved February 1, 2012. The City's property tax revenue increased from fiscal year ending June 30, 2012, $0.7 million due to the increase in property values and sale of property. Due to the dissolution of the TCRA the City received its share of the allocated tax increment collected net of obligations of $1.8 million. Sales tax revenue increased $1.7 million due to consumers continuing demand for new automobiles. Investment earnings decreased $0.7 million primarily due to lower rates of return and a large gain with the maturing of a corporate bond of $0.3 million in fiscal year ending June 30, 2012. Prior year's average weighted rate of return was 0.36% compared to 0.33% in the fiscal year ending June 30, 2013. Miscellaneous revenue for governmental activities decreased $7.2 million. The primary reason for the decrease is due to an $8.6 million transfer in fiscal year ending June 30, 2012 from the Successor Agency to the Tustin Community Redevelopment Agency (Successor Agency) for the reimbursement of costs incurred by the General Fund related to the extension of Newport Boulevard. The obligation to the General Fund is approximately $35 million. For fiscal year ending June 30, 2013, that transfer was only $1.9 million based upon the tax increment received and what was available after priority obligations were met such as payment of bond debt. Governmental expenses decreased $3.4 million from prior year. Of this amount, general government expenses increased $6.4 million from prior year due to: • A legal settlement payment of $2.1 million to Key Bank. After the dissolution of the Tustin Legacy Community Partnership (TLCP), who were the master developers for the Legacy area, a lien of $53 million, held by Key Bank on the property that TLCP held but reverted back to the City after the dissolution, was successfully negotiated down to $2.1 million. See independent auditors' report. -10- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Government -wide Financial Analysis (Continued) • An annual payment of $1.3 million for an annuity. Due to the potential budget deficit for fiscal year ending June 30, 2013, an early retirement incentive was offered to qualifying employees effective October 31, 2012 by purchasing an annuity. 35 employees took advantage of the early retirement incentive. The $1.3 million represents two annual payments of the total cost of the annuity of $3.4 million. • Leave buy out of $0.8 million which was paid to the 35 employees that took advantage of the early retirement incentive. The $1.9 million increase in Public Safety expenses is primarily due to the increase in filling vacant positions, increased retirement costs, and salary merit increases. The $5.7 million decrease in expenses for Public Works is primarily due to the decrease in capital spending and from the decrease in personnel costs due to the large number of Public Works employees who took advantage of the early retirement incentive the City offered. Community services expenses decreased $3.9 million and interest on long-term debt decreased $2.1 million due to the dissolution of the TCRA. Fiscal year ending June 30, 2012 had seven months of TCRA expenses. Business -Type activities net position increased $3.5 million due to the implementation of increase in water rates over a five year period starting June 2010. The rates are adequate to cover the annual operating costs and build reserves. Water operation costs increased $0.2 million primarily due to the increase in production costs. Financial Analysis of the Government's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information may be useful in assessing the City's financing requirements. As of the end of the current fiscal year, the City's governmental funds reported total combined ending fund balances of $245.0 million, an increase of $40.1 million in comparison with the prior year due to the gain on sale of land held for resale. Approximately $130.3 million (53.2%) of this total amount constitutes nonspendable fund balance. Of the nonspendable amount $129.2 million is land held for resale. The remainder of the fund balance consists of $53.5 million in restricted funds, $16.9 million assigned to capital projects, and $44.3 million in unassigned funds. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $44.3 million, while total fund balance was $193.0 million. As a measure of the General Fund's liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 80% of the total General Fund expenditures. See independent auditors' report. -11- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Financial Analysis of the Government's Funds (Continued) City of Tustin Summary of Changes in Fund Balances - General Fund For the Year Ended June 30, 2013 (in millions of dollars) Expenditures General government 11.6 16.3 Total 28.6 27.8 Public works %Change 6.0 2012 2013 2012-2013 Revenues: 1.8 1.1 Interest and fiscal charges Taxes 39.5 44.3 52.7 Charges for services 2.7 2.4 Intergovernmental 10.3 5.6 Other Financing Sources (Uses): Fines and forfeitures 0.9 0.7 0.2 Licenses and permits 0.4 0.6 43.3 Other 3_6 3_0 Extraordinary Item: Total Revenues 57.4 56.6 (1.4%) Expenditures General government 11.6 16.3 Public safety 28.6 27.8 Public works 6.9 6.0 Community services 2.9 2.7 Capital outlay 1.8 1.1 Interest and fiscal charges 0_9 0_9 Total Expenses 52.7 54.8 4.0% Excess of Revenues Over (Under) Expenditures 4.7 1.8 Other Financing Sources (Uses): Net transfers 0.2 (0.8) Sale of property _ 43.3 Total Other Financing Sources (Uses) 0_2 42.5 Extraordinary Item: Loss on transfer to successor agency 7.9 Net Change in Fund Balance 3.0 44.3 1,576.67% See independent auditors' report. -12- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Financial Analysis of the Government's Funds (Continued) Transactions impacting revenues in the General Fund were as follows: • Sales tax revenues were $21.6 million reflecting a $1.7 million increase from prior year due to the increase in automobile sales. Charges for services decreased $0.3 million from prior year primarily due to the decrease in workers compensation contributions from other funds and departments as the workers compensation reserves are adequate to cover claims. Intergovernmental revenue decreased $4.7 million from prior year due to the decrease in the amount the Successor Agency reimbursed the General Fund for an outstanding obligation for third party costs incurred for the extension of Newport Boulevard project. The Successor Agency reimbursed the General Fund $8.7 million for the fiscal year ending June 30, 2012 and the payment for the fiscal year ending June 30, 2013 decreased $4.9 million to $3.8 because this was the tax increment available after other priority obligations were paid such as bond debt. Fine and forfeitures decreased $0.2 million from prior year primarily due to the decline in vehicle code fines and parking citations because of the lack of Police Department staff as the department lost key individuals due to the early retirement incentives. License and Permits increased $0.2 million due to the increase in building permits from prior year. Other Revenue decreased $0.6 million from prior year due to the decrease in equipment replacement contributions from other funds and departments as it was determined the reserves in that fund were adequate for the fiscal year ending June 30, 2013. Changes in General Fund expenditures from previous fiscal year, by function, occurred as follows during the year ended June 30, 2013: • General Government expenditures increased $4.7 million primarily due to the legal settlement with Key Bank of $2.1 million for the resolution of a $53 million lien on property within the Legacy area that reverted back to the City when its business relationship with the former master developer, Tustin Legacy Community Partnership, dissolved; the payment of $1.3 million for the annual annuity the City purchased for $3.4 million for the early retirement incentive due to the structural deficit the City was experiencing going into fiscal year ending June 30, 2013; and decrease of $1.6 million of reimbursement from the former TCRA for overhead in fiscal year June 30, 2012. The reimbursement for overhead is netted against the total General Government expenditures. • Public safety expenditures decreased $0.8 million due to the decrease in personnel costs as a result of the early retirement incentive program effective October 31, 2012. • The $0.9 million decrease in expenditures for Public Works is due the reduction in personnel costs because of the early retirement incentive. • Community services expenditures decreased $0.2 million because of the decrease in personnel costs due to the early retirement incentive. • Capital Outlay decreased $0.7 million due to budget cuts to help eliminate a structural deficit for the fiscal year ending June 30, 2013. • Net transfers decreased $1.0 million primarily due to the transfer of cash from the General Fund to the Community Facility Districts to eliminate deficit cash balances. The cash was refunded to the General Fund when the Community Facility Districts were reimbursed for expenditures from the bond proceeds held with the fiscal agent. See independent auditors' report. - 13 - CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Financial Analysis of the Government's Funds (continued) • The $7.9 million extraordinary loss in fiscal year ending June, 30, 2012 was due to the dissolution of TCRA. The California Department of Finance deemed short-term borrowing of $4.7 million from the General Fund to TCRA unenforceable and disallowed the affordable housing reimbursement payments of $3.2 from TCRA to the General Fund from 6/30/11 to 1/1/12. The CFD Construction Capital Projects Fund expenditures decreased $1.7 million from prior fiscal year due to the decrease in funding from the CFD Construction Capital Projects Fund for the back- bone infrastructure within the former Marine Corps Air Station Base area. The Other Capital Projects Fund revenues increased $14.1 million from prior year primarily due to the receipt of the following funds for the Tustin Ranch Road extension project, $4.0 from the Orange County Transportation Authority; $4.5 million from Santa Ana TSIA; $4.5 million from the City of Irvine; and $2.4 million from the Irvine Ranch Water District. Expenditures increased $6.2 million due to the construction of the Tustin Ranch Road extension project. General Fund Budgetary Highlights Differences between the General Fund actual revenues and transfers and amended budgeted revenues and transfers were $49.9 million primarily due to the sale of land held for resale. Actual General Fund expenditures were less than the amended budgeted amount of $78 million by $23.1 million due to the budgeting of capital outlay for public right away for $17.8 million that was not completed for the Legacy area. Financial Analysis of the Proprietary Funds The City has one proprietary fund which is the Water Enterprise Fund. Net position of the Water Enterprise increased $3.5 million during fiscal year 2013, from $27.8 million as of June 30, 2012, to $31.3 million as of June 30, 2013. Operating revenues for the Water Fund exceeded operating expenses by $3.9 million, leading to the increase in net position. Significant activity during the year included an $8.6 million increase in capital assets, mostly due to construction in progress for replacing Rawlings Reservoir. Additional information on the proprietary fund's capital assets can be found in the Notes to the Basic Financial Statements section of this report (beginning on page 51). Capital Asset and Debt Administration Capital Assets The City's investment in capital assets for its governmental and business -type activities as of June 30, 2013 amounts to $477.6 million, net of accumulated depreciation. This investment in capital assets includes land, buildings and system improvements, machinery and equipment, park facilities, roads, highways, and bridges. See independent auditors' report. -14- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Capital Asset and Debt Administration (Continued) Capital Assets (Continued) Land Right of way Construction in progress Buildings and improvements Machinery and equipment Infrastructure Property, plant and equipment Total Capital Assets, Net City of Tustin Summary of Changes in Capital Assets For the Year Ended June 30, 2013 (in millions of dollars) Governmental Business -Type Activities Activities Total Activities Activities Total 3.0 4.4 % Change 2012 2013 2012 2013 2012 2013 2012-2013 $44.1 $44.1 $1.2 $1.2 $45.3 $45.3 42.9 44.3 - - 42.9 44.3 54.6 80.7 5.8 15.6 60.4 96.3 65.9 64.7 5.3 5.1 71.2 69.8 3.0 2.7 - - 3.0 2.7 202.2 195.3 - - 202.2 195.3 - 24.9 23.9 24.9 23.9 $412.7 $431.8 $37.2 $45.8 $449.9 $477.6 6.2% The major activity affecting capital assets this year was continued construction in progress for the Tustin Ranch Road extension and the Rawlings Reservoir replacement. Additional information on the City's capital assets can be found in the notes to the basic financial statements section of this report (beginning on page 50). Long-term Debt At the end of the current fiscal year, the City had total outstanding long-term liabilities of $43.9 million. Of this amount, $30.1 million are secured solely by specified revenue sources such as property tax increment and water service charges. Bonds payable Claims and judgments Postemployment benefits obligation Termination benefits Compensated absences City of Tustin Summary of Changes in Long -Term Liabilities For the Year Ended June 30, 2013 (in millions of dollars) Governmental Business -Type Activities Activities 2012 2013 2012 2013 $- $- $30.9 $30.1 3.0 4.4 - - 3.6 4.3 - - - 2.0 - - 3.6 2_9 0_2 0_2 Total Total % Change 2012 2013 2012-2013 $30.9 $30.1 3.0 4.4 3.6 4.3 - 2.0 3_8 3_1 Total Outstanding Debt $10.2 $13.6 $31.1 $30.3 $41.3 $43.9 See independent auditors' report. -15- 6.3% CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2013 Capital Asset and Debt Administration (Continued) Long-term Debt (Continued) The City's long-term debt increased $2.6 million from prior year as a result of the following transactions: • Workers' compensation claims rose $1.4 million due to $1.2 million in new claims incurred plus increases of $0.8 million to claims that existed at June 30, 2012. • The City purchased an annuity through Pacific Life Insurance Company to fund an early retirement incentive program (termination benefits). As of June 30, 2013, the outstanding liability to fund the plan is $2.0 million. Additional information on the City's long-term debt can be found in the notes to the basic financial statements section of this report starting on page 52. Next Year's Budget and Rates The City Council adopted the fiscal year 2013-2014 Budget with total appropriations of $130.6 million. The General Fund fiscal year 2013-2014 estimated revenues are $47.7 million and budgeted appropriations are $48.0 million resulting in an estimated operating deficit of $0.3 million. The appropriations are $1.2 million more than prior year's appropriation. The City Council approved the use of $0.3 million of General Fund undesignated fund balance to balance the fiscal year 2013-2014 budget. There were no tax rates or fee increases as part of the preparation and adoption of the fiscal year 2013-14 budget. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, City of Tustin, 300 Centennial Way, Tustin, California, 92780. See independent auditors' report. -16- CITY OF TUSTIN STATEMENT OF NET POSITION June 30, 2013 See independent auditors' report and notes to basic financial statements. -17- Governmental Business -type Activities Activity Total ASSETS: Cash and investments $ 126,606,999 $ 15,223,708 $ 141,830,707 Receivables: Accounts 4,904,612 2,949,330 7,853,942 Interest 109,881 6,595 116,476 Loans 1,062,005 - 1,062,005 Notes 976,042 976,042 Allowance for uncollectibles (1,688,046) (1,688,046) Internal balances 893,430 (893,430) - Prepaid expenses and deposits 209,808 225 210,033 Land held for resale 129,172,578 - 129,172,578 Restricted assets: Cash and investments with fiscal agents 21,823,475 1,782,687 23,606,162 Capital assets: Not being depreciated 169,094,816 16,791,729 185,886,545 Being depreciated, net 262,666,472 28,990,354 291,656,826 TOTALASSETS 715,832,072 64,851,198 780,683,270 DEFERRED OUTFLOWS OF RESOURCES: Deferred charge on refunding - 527,089 527,089 LIABILITIES: Accounts payable and accrued liabilities 8,954,888 3,181,103 12,135,991 Due to Successor Agency to the Tustin Community Redevelopment Agency 22,816,940 - 22,816,940 Interest payable - 333,500 333,500 Deposits payable 6,771,297 346,441 7,117,738 Noncurrent liabilities: Due within one year 7,077,564 858,433 7,935,997 Due in more than one year 6,549,822 29,392,294 35,942,116 TOTAL LIABILITIES 52,170,511 34,111,771 86,282,282 NET POSITION: Net investment in capital assets 431,761,288 24,171,745 455,933,033 Restricted for: Community services 2,548,962 - 2,548,962 Public safety 441,223 441,223 Public works 51,377,200 - 51,377,200 Unrestricted 177,532,888 7,094,771 184,627,659 TOTAL NET POSITION $ 663,661,561 $ 31,266,516 $ 694,928,077 See independent auditors' report and notes to basic financial statements. -17- CITY OF TUSTIN STATEMENT OF ACTIVITIES For the year ended June 30, 2013 Functions/programs Expenses Governmental activities: General government $ 18,705,913 Public safety 30,702,298 Public works 15,087,234 Community services 3,201,865 Interest on long-term liabilities 967,115 Total governmental activities 68,664,425 Business -type activity: Water 13,574,149 Total $ 82,238,574 Program Revenues Charges Operating Capital for Grants and Grants and Services Contributions Contributions $ 763,101 $ 106,833 $ - 917,947 319,140 - 1,248,595 3,689,274 20,946,880 926,432 397,911 51,431 3,856,075 4,513,158 20,998,311 16,688,773 - - $ 20,544,848 $ 4,513,158 $ 20,998,311 General revenues: Taxes: Property Franchise Transient occupancy Business license Sales taxes shared state revenues Motor vehicle taxes shared state revenues Earnings on investments Miscellaneous Gain on sale of assets Total general revenues Change in net position NET POSITION AT BEGINNING OF YEAR, AS RESTATED NET POSITION AT END OF YEAR See independent auditors' report and notes to basic financial statements. -18- Net (Expense) Revenue and Changes in Net Position - Governmental Business -type 1,655,388 Activities Activity Total $ (17,835,979) $ - $ (17,835,979) (29,465,211) - (29,465,211) 10,797,515 - 10,797,515 (1,826,091) - (1,826,091) (967,115) - (967,115) (39,296,881) - (39,296,881) - 3,114,624 3,114,624 (39,296,881) 3,114,624 (36,182,257) 14,526,101 - 14,526,101 1,655,388 - 1,655,388 137,064 - 137,064 377,498 - 377,498 21,575,405 - 21,575,405 5,951,653 - 5,951,653 243,921 39,700 283,621 7,231,648 271,858 7,503,506 43,335,089 - 43,335,089 95,033,767 311,558 95,345,325 55,736,886 3,426,182 59,163,068 607,924,675 27,840,334 635,765,009 $ 663,661,561 $ 31,266,516 $ 694,928,077 -19- CITY OF TUSTIN BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2013 See independent auditors' report and notes to basic financial statements. -20- CFD Other Construction Capital Other Total Capital Projects Projects Governmental Governmental General Fund Fund Funds Funds ASSETS Cash and investments $ 92,957,695 $ - $ 10,669,915 $ 22,979,389 $ 126,606,999 Cash and investments with fiscal agents - 21,823,475 - - 21,823,475 Receivables: Accounts 3,720,414 - 740,501 443,697 4,904,612 Interest 38,396 4,622 66,863 109,881 Loans - - 1,062,005 1,062,005 Notes 976,042 976,042 Allowance for uncollectibles - (1,688,046) (1,688,046) Advances to other funds - 893,430 - 893,430 Prepaid expenses and deposits 178,308 - 31,500 209,808 Land held for resale 128,809,901 - - 362,677 129,172,578 TOTALASSETS $ 225,704,714 $ 21,823,475 $ 12,308,468 $ 24,234,127 $ 284,070,784 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES: Accounts payable and accrued liabilities $ 3,946,731 $ 1,530,209 $ 1,872,736 $ 1,605,212 $ 8,954,888 Due to Successor Agency to the Tustin Community Redevelopment Agency 22,816,940 - - - 22,816,940 Deposits payable 5,939,446 - 821,915 9,936 6,771,297 TOTAL LIABILITIES 32,703,117 1,530,209 2,694,651 1,615,148 38,543,125 DEFERRED INFLOWS OF RESOURCES: Unavailable revenue 29,479 - - 472,108 501,587 FUND BALANCES: Nonspendable 128,988,209 - 893,430 394,177 130,275,816 Restricted 19,615,343 20,293,266 - 13,592,491 53,501,100 Assigned - - 8,720,387 8,160,203 16,880,590 Unassigned 44,368,566 - - - 44,368,566 TOTAL FUND BALANCES 192,972,118 20,293,266 9,613,817 22,146,871 245,026,072 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 225,704,714 $ 21,823,475 $ 12,308,468 $ 24,234,127 $ 284,070,784 See independent auditors' report and notes to basic financial statements. -20- CITY OF TUSTIN RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION June 30, 2013 Fund balances - total governmental funds $ 245,026,072 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets net of depreciation have not been included as financial resources in governmental funds. 431,761,288 Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities both current and long-term, are reported in the Statement of Net Position. Balances at June 30, 2013 are: Claims and judgments payable $ (4,461,082) Compensated absences payable (2,907,202) Post employment benefits obligation (4,277,824) Termination benefits payable (1,981,278) Total long-term liabilities (13,627,386) Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the governmental funds balance sheet. 501,587 Net position of governmental activities $ 663,661,561 See independent auditors' report and notes to basic financial statements. -21- CITY OF TUSTIN STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the year ended June 30, 2013 REVENUES: Taxes Licenses and permits Fines and forfeitures Investment income Intergovernmental revenue Charges for services Rental income Other revenue TOTAL REVENUES EXPENDITURES: Current: General government Public safety Public works Community services Capital outlay Debt service: Interest and fiscal charges TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Sale of property TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING OF YEAR FUND BALANCES - END OF YEAR General $ 44,279,024 $ 577,044 678,428 49,633 5,592,814 2,380,410 421,563 CFD Other Construction Capital Capital Projects Projects Fund Fund 56,581,278 Other Governmental Funds Total Governmental Funds $ $ $ 44,279,024 16,279,344 $ $ $ 44,279,024 17,357,805 27,847,607 - 577,044 96,432 27,944,039 5,980,807 678,428 2,572 79,656 42,029 173,890 - 8,578,035 7,380,193 21,551,042 240,802 - 63,868 2,685,080 - - 128,440 550,003 384 7,089,589 81,478 9,773,813 243,758 15,747,280 7,696,008 80,268,324 16,279,344 80,511 997,950 17,357,805 27,847,607 - 96,432 27,944,039 5,980,807 - 5,980,807 2,720,492 - - 32,031 2,752,523 1,055,368 11,042,876 10,597,776 5,791,211 28,487,231 954,358 - 5,392 7,365 967,115 54,837,976 11,123,387 10,603,168 6,924,989 83,489,520 1,743,302 (10,879,629) 5,144,112 771,019 (3,221,196) 414,141 5,708,313 - - 6,122,454 (1,208,313) - (4,500,000) (414,141) (6,122,454) 43,340,797 - 43,340,797 42,546,625 5,708,313 (4,500,000) (414,141) 43,340,797 44,289,927 (5,171,316) 644,112 356,878 40,119,601 148,682,191 25,464,582 8,969,705 21,789,993 204,906,471 $ 192,972,118 $ 20,293,266 $ 9,613,817 $ 22,146,871 $ 245,026,072 See independent auditors' report and notes to basic financial statements. -22- CITY OF TUSTIN RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the year ended June 30, 2013 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the Statement of Activities are 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 as depreciation expense. This is the amount by which capital expenditures and contributions exceeded depreciation and disposition of capital assets in the current period: Capital expenditures Capital contributions Disposition of capital assets Depreciation expenses The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long term -debt and changes in other long-term liabilities affects the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term liabilities: Postemployment benefits obligation Termination benefits payable Claims and judgments payable Compensated absences payable Some revenues reported in the Statement of Activities are not considered to be available to finance current expenditures and therefore are not reported as unavailable revenues in the governmental funds Net change in unavailable revenue Change in net position of governmental activities See independent auditors' report and notes to basic financial statements. -23 - S 27,603,911 800,121 (5,709) (9,320,495) S (662,240) (1,981,278) (1,450,429) 635.628 S 40,119,601 19,077,828 (3,458,319) (2,224) S 55,736,886 CITY OF TUSTIN STATEMENT OF NET POSITION PROPRIETARY FUND June 30, 2013 NONCURRENT ASSETS: Capital assets: Not being depreciated 16,791,729 Being depreciated, net 28,990,354 TOTAL NONCURRENT ASSETS 45,782,083 TOTAL ASSETS 65,744,628 DEFERRED OUTFLOWS OF RESOURCES: Deferred charge on refunding 527,089 LIABILITIES: Business -type CURRENT LIABILITIES: Activity Accounts payable and accrued liabilities Water Advance from other fund Enterprise ASSETS: Fund CURRENT ASSETS: 148,433 Cash and investments $ 15,223,708 Accounts receivable 2,949,330 Interest receivable 6,595 Prepaid expenses 225 Restricted cash and investments with fiscal agents 1,782,687 TOTAL CURRENT ASSETS 19,962,545 NONCURRENT ASSETS: Capital assets: Not being depreciated 16,791,729 Being depreciated, net 28,990,354 TOTAL NONCURRENT ASSETS 45,782,083 TOTAL ASSETS 65,744,628 DEFERRED OUTFLOWS OF RESOURCES: Deferred charge on refunding 527,089 LIABILITIES: CURRENT LIABILITIES: Accounts payable and accrued liabilities 3,181,103 Advance from other fund 893,430 Deposits payable 346,441 Compensated absences payable 148,433 Interest payable 333,500 Bonds payable 710,000 TOTAL CURRENT LIABILITIES 5,612,907 LONG-TERM LIABILITIES: Compensated absences 16,493 Termination benefits payable 44,362 Bonds payable 29,331,439 TOTAL LONG-TERM LIABILITIES 29,392,294 TOTAL LIABILITIES 35,005,201 NET POSITION: Net investment in capital assets 24,171,745 Unrestricted 7,094,771 TOTAL NET POSITION $ 31,266,516 See independent auditors' report and notes to basic financial statements. -24- CITY OF TUSTIN STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUND For the year ended June 30, 2013 OPERATING REVENUES: Charges for services OPERATING EXPENSES: Personnel services Purchased water Maintenance and operation Depreciation and amortization TOTAL OPERATING EXPENSES OPERATING INCOME NONOPERATING REVENUES (EXPENSES): Investment income Other income Interest expense TOTAL NONOPERATING REVENUES (EXPENSES) CHANGE IN NET POSITION NET POSITION AT BEGINNING OF YEAR, AS RESTATED NET POSITION AT END OF YEAR See independent auditors' report and notes to basic financial statements. -25- Business -type Activity Water Enterprise Fund $ 16,688,773 2,470,318 6,096,911 2,892,491 1,296,119 12,755,839 3,932,934 39,700 271,858 (818,310) (506,752) 3,426,182 27,840,334 $ 31,266,516 CITY OF TUSTIN STATEMENT OF CASH FLOWS PROPRIETARY FUND For the year ended June 30, 2013 NET CASH PROVIDED BY OPERATING ACTIVITIES 4,800,039 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (9,315,484) Cash paid to other funds for capital assets (424,185) Principal paid on bonds (710,000) Interest paid (1,352,499) NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (11,802,168) CASH FLOWS FROM INVESTING ACTIVITIES: Investment income 46,185 NET DECREASE IN CASH AND CASH EQUIVALENTS (6,955,944) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 23,962,339 CASH AND CASH EQUIVALENTS - END OF YEAR $ 17,006,395 See independent auditors' report and notes to basic financial statements. (Continued) -26- Business -type Activity Water Enterprise Fund CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers $ 16,817,815 Payments to suppliers (8,334,300) Cash paid to other funds for services (1,200,000) Payments to employees (2,483,476) NET CASH PROVIDED BY OPERATING ACTIVITIES 4,800,039 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (9,315,484) Cash paid to other funds for capital assets (424,185) Principal paid on bonds (710,000) Interest paid (1,352,499) NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (11,802,168) CASH FLOWS FROM INVESTING ACTIVITIES: Investment income 46,185 NET DECREASE IN CASH AND CASH EQUIVALENTS (6,955,944) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 23,962,339 CASH AND CASH EQUIVALENTS - END OF YEAR $ 17,006,395 See independent auditors' report and notes to basic financial statements. (Continued) -26- CITY OF TUSTIN STATEMENT OF CASH FLOWS PROPRIETARY FUND (CONTINUED) For the year ended June 30, 2013 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating income Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization Other nonoperating income Change in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in prepaid expenses Increase (decrease) in accounts payable and accrued liabilities Increase (decrease) in deposits payable Increase (decrease) in compensated absences Increase (decrease) in termination benefits payable NET CASH PROVIDED BY OPERATING ACTIVITIES See independent auditors' report and notes to basic financial statements. -27- Business -type Activity Water Enterprise Fnnrl $ 3,932,934 1,296,119 271,858 (157,061) 4,345 (555,096) 14,245 (51,667) 44,362 $ 4,800,039 CITY OF TUSTIN STATEMENT OF FIDUCIARY NET POSITION June 30, 2013 ASSETS: Cash and investments Cash and investments with fiscal agents Receivables: Taxes Interest Due from City of Tustin Prepaid items and deposits Land held for resale Capital assets, net TOTAL ASSETS LIABILITIES: Accounts payable Interest payable Deposits payable Residual payable to County Auditor -Controller Due to bondholders Long-term liabilities: Due within one year Due in more than one year TOTAL LIABILITIES NET POSITION: Held in trust See independent auditors' report and notes to basic financial statements. -28- Successor Agency to the Tustin Community Redevelopment Agency Private Purpose Agency Trust Fund Funds $ 39,118,023 $ 180,533 6,389,967 11,430,460 - 108,370 17,010 - 22,816,940 - 3,640 - 1,345,000 - 233,000 - 69,923,580 $ 11,719,363 516,997 $ - 1,052,417 - 1,000 - 21,877,282 - - 11,719,363 2,945,000 - 68,509,015 - 94,901,711 $ 11,719,363 $ (24,978,131) CITY OF TUSTIN STATEMENT OF CHANGES IN FIDUCIARY NET POSITION For the year ended June 30, 2013 ADDITIONS: Tax revenue Rental income Investment income Other revenue TOTAL ADDITIONS DEDUCTIONS: Community services Interest Capital contributions to the City of Tustin Depreciation and amortization Residual payment to County Auditor -Controller TOTAL DEDUCTIONS CHANGE IN NET POSITION NET POSITION - BEGINNING OF YEAR, AS RESTATED NET POSITION - END OF YEAR See independent auditors' report and notes to basic financial statements. -29- Successor Agency to the Tustin Community Redevelopment Agency Private Purpose Trust Fund $ 8,948,037 15,000 1,041,073 192,411 10,196,521 6,226,679 3,410,338 800,121 33,424 42,612,097 53,082,659 (42,886,138) 17,908,007 $ (24,978,131) The page left blank intentionally -30- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. The Financial Reporting Entity: The City of Tustin (City) was incorporated in 1927 as a "General Law" City governed by an elected five -member city council. As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Tustin (the primary government) and its component units. The component units discussed below are included in the City's reporting entity because of the significance of their operational or financial relationship with the City. These entities are legally separate from each other. However, the City of Tustin's elected officials have a continuing full or partial accountability for fiscal matters of the other entities. The financial reporting entity consists of: (1) the City, (2) organizations for which the City is financially accountable, and (3) organizations for which the nature and significance of their relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete. An organization is fiscally dependent on the primary government if it is unable to adopt its budget, levy taxes, or set rates or charges, or issue bonded debt without approval by the primary government. In a blended presentation, a component unit's balances and transactions are reported in a manner similar to the balances and transactions of the City. Component units are presented on a blended basis when the component unit's governing body is substantially the same as the City's or the component unit provides services almost entirely to the City. Blended Component Units The Tustin Public Financing Authority is a joint powers authority organized pursuant to the State of California Government Code, Section 6500. The Authority exists under a Joint Exercise of Power Agreement dated May 1, 1995. The members of the City Council constitute the members of the Board of Directors of the Authority. The Authority is authorized to borrow money for the purpose of financing the acquisition of bonds, notes, and other obligations of, or for the purpose of making loans to the City and/or to refinance outstanding obligations of the City or Assessment Districts of the City. The City of Tustin Housing Authority (the Housing Authority) was established by the City Council in 2011, and is responsible for the administration of providing affordable housing in the City. The Housing Authority is governed by a five -member Board of Directors which consists of members of the City Council. The Housing Authority's financial transactions are reported in the Special Revenue Funds. Since the City Council serves as the governing board for these component units, all of the City's component units are considered to be blended component units. Blended component units, although legally separate entities, are in substance, part of the City's operations and so data from these units are reported with the interfund data of the primary government. These component units do not issue separate component unit financial statements. See independent auditors' report. -31 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): b. Government -wide and Fund Financial Statements: The government -wide financial statements (i.e., the statement of net position and the statement of changes in net position) report information about the reporting government as a whole, except for its fiduciary activities. All fiduciary activities are reported only in the fund financial statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government (including its blended component units) is reported separately from discretely presented component units for which the primary government is financially accountable. The City has no discretely presented component units. For the most part, the effect of interfund activity has been removed from these statements. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, 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. Separate financial statements for the City's governmental, proprietary, and fiduciary funds are presented after the government -wide financial statements. These statements display information about major funds individually and other governmental funds in the aggregate for governmental funds. Fiduciary fund statements, even though excluded from the government -wide financial statements, include financial information for private purpose trust funds and agency funds. See independent auditors' report. -32- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): c. Measurement Focus, Basis of Accounting and Financial Statement Presentation: The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund (fiduciary funds do not have a measurement focus) financial statements. Under the economic resources measurement focus, all assets, deferred outflows of resources, liabilities, and deferred inflows of resources (whether current or noncurrent) associated with their activity are included on their balance sheets/statements of net position. Operating statements present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Proprietary funds result from providing services and producing and delivering goods. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange include taxes, grants, entitlements, and donations. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all the eligibility requirements have been satisfied. Property taxes are recognized as revenue in the year for which they are levied. Operating revenues are those that result from providing services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the current financial resources measurement focus, only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources". Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Noncurrent portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. However, special reporting treatments are used to indicate that they should not be considered "available spendable resources" since they do not represent net current assets. Recognition of governmental fund type revenue represented by noncurrent receivables is deferred until they become current receivables. See independent auditors' report. -33 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): Under the modified accrual basis of accounting, revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, except for principal and interest on long-term liabilities, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of long-term liabilities are reported as other financing sources. Property taxes, franchise taxes, licenses, intergovernmental revenue and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The City's fiduciary funds consist of a private purpose trust fund, which is reported using the economic resources measurement focus, and the agency funds which have no measurement focus, but utilize the accrual basis for reporting its assets and liabilities. All governmental activities, business -type activities and proprietary funds of the City follow Governmental Accounting Standards Board (GASB) pronouncements. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Classifications The funds designated as major funds are determined by a mathematical calculation. The City reports the following major governmental funds: The General Fund is the primary operating fund of the City and is used to account for all revenues and expenditures that are not required to be accounted for in another fund. The CFD Construction Capital Projects Fund is used to account for construction and improvements to the Tustin Legacy area. The Other Capital Projects Fund is used to account for capital projects which are not funded by a specific source. See independent auditors' report. -34- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): Fund Classifications (Continued) The City reports the following major proprietary fund: The Water Enterprise Fund is used to account for the City's water service operations to residents and businesses. The City's fund structure also includes the following fund types: Governmental Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted by law or administrative action for a specified purpose. Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities. Fiduciary Funds Private Purpose Trust Fund is used to account for the activities of the Successor Agency to the Tustin Community Redevelopment Agency. Agency Funds are used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations and other governments. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The agency funds are used to account for taxes received for special assessments debt for which the City is not obligated. See independent auditors' report. -35 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): d. New Accounting Pronouncements: Implemented In fiscal year 2012-2013, the City implemented GASB Statement No. 63, "Financial Reporting of Deferred Ou�flows of Resources, Deferred Inflows of Resources, and Net Position". This statement incorporates deferred outflows of resources and deferred inflows of resources, as defined by GASB Concepts Statement No. 4, "Elements of Financial Statements" into the definitions of the required components of the residual measure of net position, formerly net assets. This statement also provides a new statement of net position format to report all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. In fiscal year 2012-2013, the City early implemented GASB Statement No. 65, "Items Previously Reported as Assets and Liabilities". This statement established accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities. Due to the early implementation of this statement, unamortized prior year bond issue costs, which should be recognized as an expense in the period incurred, were eliminated. Accounting changes adopted to conform to the provisions of this statement have been applied retroactively. The result of the implementation of this standard decreased the net position at July 1, 2012 of the business -type activity and Successor Agency to the Tustin Community Redevelopment Agency Private -Purpose Trust Fund by $434,527 and $1,255,379, respectively. Pending Accounting Standards GASB has issued the following statements which may impact the City's financial reporting requirements in the future: • GASB 66 - "Technical Corrections, an amendment of GASB Statement No. 10 and Statement No. 62 ", effective for periods beginning after December 15, 2012. • GASB 67 - "Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25 ", effective for the fiscal years beginning after June 15, 2013. • GASB 68 - "Accounting and Financial Reporting for Pensions, an amendment of GASB Statement No. 27", effective for the fiscal years beginning after June 15, 2014. • GASB 69 - "Government Combinations and Disposals of Government Operations", effective for periods beginning after December 15, 2013. • GASB 70 - "Accounting and Financial Reporting for Nonexchange Financial Guarantees " effective for the periods beginning after June 15, 2013. See independent auditors' report. -36- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity: Cash, Cash Equivalents and Investments Investments are stated at fair value (the value at which a financial instrument would be exchanged in a current transaction between willing parties other than a forced or liquidation sale), except for certain investments which have a remaining life of less than one year when purchased and investment contracts, which are stated at amortized cost. The City's proprietary fund participates in the pooling of City-wide cash and investments. Amounts held in the City pool are available to the fund on demand and are considered to be cash and cash equivalents for statement of cash flow purposes. Investments not held in the City pool that are short-term investments with original maturities of three months or less from the date of acquisition are considered cash and cash equivalents. Capital Assets Capital assets (including infrastructure) are recorded at cost where historical records are available and at an estimated original cost where no historical records exist. Contributed capital assets are valued at their estimated fair value at the date of contribution. Capital asset purchases (other than infrastructure) in excess of $10,000 are capitalized if they have an expected useful life of five years or more. Infrastructure assets with a cost exceeding $150,000 are capitalized. Capital assets include additions to public domain (infrastructure), certain improvements including pavement, curb and gutter, sidewalks, traffic control devices, streetlights, sewers, storm drains, bridges, and right-of-way corridors within the City. Capital assets used in operations are depreciated over their estimated useful lives using the straight-line method in the government -wide financial statements and in the fund financial statements of the enterprise fund. Depreciation is charged as an expense against operations and accumulated depreciation is reported on the respective statement of net position. The lives used for depreciation purposes of each capital asset class are: Buildings Improvements other than buildings Property and plant Machinery and equipment Infrastructure See independent auditors' report. -37- 5 - 40 years 5 - 40 years 5 - 40 years 4 - 10 years 25 - 75 years CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued): Deferred Outflows/Inflows of Resources: In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred ou�flows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has one item that qualifies for reporting in this category. It is the deferred charge on refunding, net of accumulated amortization reported in the government -wide statement of net position and the proprietary fund financial statements. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. The City has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenues, is reported only in the governmental fund balance sheet. The governmental funds report unavailable revenues from one source: grants. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Land Held for Resale Land held for resale is carried at the lower of cost or estimated realizable value determined only upon the execution of a disposition and development agreement. Property Taxes Under California law, property taxes are assessed and collected by the counties up to 1% of assessed value, plus other increases approved by the voters. The property taxes go into a pool, and are then allocated to the cities based on complex formulas. The City of Tustin accrues as revenues only those taxes which are received within 60 days after year end in the fund financial statements. See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued): Property Tax Calendar Property taxes are assessed and collected each fiscal year according to the following property tax calendar: Lien date January 1 st Levy period July 1st to June 30th Levy date On or before 4th Monday in September Due date November Is'- 1st installment February 1st - 2" d installment Collection date December 10th - 1st installment April 10th - 2" d installment Interest and penalties are assessed after the collection date. Compensated Absences All vested vacation and compensatory leave time is recognized as an expense and as a liability in the proprietary type fund at the time the liability vests. Governmental fund types recognize the vested vacation and compensatory time as an expenditure in the current year to the extent it is paid during the year or is due and payable at year-end. Any additional accrued vacation and compensatory time relating to governmental funds and amounts relating to the proprietary fund type are included as long-term liabilities within the statement of net position. f Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the statement of net position date, and reported amounts of revenues and expenses during the reporting period. Estimates are used to determine depreciation expense, the allowance for doubtful accounts and certain liabilities. Actual results may differ from those estimates. See independent auditors' report. -39- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): g. Subsequent Events: In preparing these financial statements, the City has evaluated events and transactions for potential recognition or disclosure through December 18, 2013, the date the financial statements were available to be issued. 2. CASH AND INVESTMENTS: Cash and Investments Cash and investments as of June 30, 2013 are classified in the accompanying financial statements as follows: Statement of Net Position: Cash and investments $ 141,830,707 Cash and investments with fiscal agents 23,606,162 Fiduciary Funds: Cash and investments 39,298,556 Cash and investments with fiscal agents 17,820,427 Total Cash and Investments 222.555.852 Cash and investments as of June 30, 2013 consist of the following: Cash on hand $ 9,100 Deposits with financial institutions 7,786,041 Investments 214,760,711 Total Cash and Investments 222,555.852 See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 2. CASH AND INVESTMENTS (CONTINUED): Investments Authorized by the California Government Code and the City's Investment Policy The table below identifies the investment types that are authorized for the City. The table also identifies certain provisions of the City's investment policy that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by fiscal agents that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy. Maximum Maximum Investment Types Percentage Investment Authorized by the City's Policy Maturity of Portfolio in One Issuer Municipal Bonds 5 years 10% 5% U.S. Treasury Obligations 5 years None None U.S. Government Sponsored Agency Securities Banker's Acceptances Commercial Paper Negotiable Certificates of Deposit Repurchase Agreements Medium -Term Notes Money Market Mutual Funds Local Agency Investment Fund (LAIF) Orange County Investment Pool N/A - Not Applicable See independent auditors' report. -41- 5 years 50% None 180 days 25% 30% 90 days 25% 10% 5 years None None 1 year None None 5 years 10% None N/A 20% None N/A None None N/A None None CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 2. CASH AND INVESTMENTS (CONTINUED): Investments Authorized by Debt Agreements Investment of debt proceeds held by bond trustees is governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by bond trustees. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk. Authorized Investment Types U.S. Treasury Obligations U.S. Government Sponsored Agency Securities Banker's Acceptances Commercial Paper Money Market Mutual Funds Investment Contracts Certificates of Deposit Corporate Notes Repurchase Agreements N/A - Not Applicable Disclosures Relating to Interest Rate Risk Maximum Maturity None Maximum Maximum Percentage Investment of Portfolio in One Issuer None None None None None 270 days None None 180 days None None N/A None None 30 years None None None None None None None None None None None Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. See independent auditors' report. -42- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 2. CASH AND INVESTMENTS (CONTINUED): Disclosures Relating to Interest Rate Risk (Continued) Information about the sensitivity of the fair values of the City's investments (including investments held by bond trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments by maturity: Remaining Maturity (in Months) 12 Months 13-24 25-60 Over 60 Investment Type or Less Months Months Months Total United States Treasury Obligations $ 3,004,335 $ 14,984,180 $ 4,880,080 $ - $ 22,868,595 United States Government Sponsored Agency Securities: Federal National Mortgage Association (FNMA) - - 4,963,025 - 4,963,025 Federal Home Loan Bank (FHLB) 10,005,950 - - - 10,005,950 Local Agency Investment Pool (LAIF): City 48,609,984 - - - 48,609,984 Successor Agency 36,896,415 - - - 36,896,415 Orange County Investment Pool 370,133 - - - 370,133 Money Market Mutual Funds 36,781,632 - - - 36,781,632 Negotiable Certificates of Deposit 1,483,622 2,714,327 - - 4,197,949 Medium-term Notes 2,627,202 5,012,455 - - 7,639,657 Municipal Bonds - 1,000,780 - - 1,000,780 Held by Fiscal Agents: Money Market Mutual Funds 41,426,591 - - - 41,426,591 181205.864 23.711.742 9.843.105 - $214,760,711 See independent auditors' report. -43 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 2. CASH AND INVESTMENTS (CONTINUED): Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City's investment policy, or debt agreements, and the Standard and Poor's actual rating as of year end for each investment type. N/A - Not Applicable See independent auditors' report. Total Minimum Exempt as of Legal from Not Investment Type June 30, 2013 Rating Disclosure AAA AA+ Al AA- Rated U.S. Treasury Obligations $ 22,868,595 N/A $22,868,595 $ $ - $ $ $ U.S. Government Sponsored Agency Securities: FNMA 4,963,025 N/A 4,963,025 FHLB 10,005,950 N/A 10,005,950 - Local Agency Investment Pool: City 48,609,984 N/A - 48,609,984 Successor Agency 36,896,415 N/A 36,896,415 Orange County Investment Pool 370,133 N/A 370,133 Money Market Mutual Funds 36,781,632 A 36,781,632 - Negotiable Certificates of Deposit 4,197,949 N/A - 4,197,949 Medium-term Notes 7,639,657 AA 5,012,455 2,627,202 - Municipal Bonds 1,000,780 A - 1,000,780 - Held by Fiscal Agents: Money Market Mutual Funds 41,426,591 A - 41,426,591 - Total $ 214.760.711 $22.868.595 $78208223 $14968.975 $ 6.013235 $ 2.627202 $91074.481 N/A - Not Applicable See independent auditors' report. 2 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 CASH AND INVESTMENTS (CONTINUED): Concentration of Credit Risk The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. The City does not have investments in any one issuer (other than U. S. Treasury securities, money market mutual funds, and external investment pools) that represent 5% or more of total City investments. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, an investor 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. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, an investor will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The California Government Code requires that a financial institution secures deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. As of June 30, 2013, none of the City's deposits with financial institutions in excess of federal depository insurance limits were held in uncollateralized accounts. As of June 30, 2013, the City's investments in the following investment types were held by the same broker-dealer (counterparty) that was used by the City to buy the securities: Carrying Investment Type Value U.S. Treasury Obligations U.S. Government Sponsored Agency Securities Medium-term Notes Municipal Bonds Negotiable Certificates of Deposit See independent auditors' report. -45- $ 22,868,595 14,968,975 7,639,657 1,000,780 4,197, 949 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 2. CASH AND INVESTMENTS (CONTINUED): Investment in State Investment Pool The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The fair value of the City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro -rata share of the fair value provided by LAW for the entire LAW portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Investment in County Investment Pool The Orange County Investment Pool Fund (OCIP) is a pooled investment fund program governed by the Orange County Board of Supervisors, and is administered by the Orange County Treasurer and Tax Collector. Investments in OCIP are highly liquid as deposits and withdrawal can be made at any time without penalty. The City's fair value of its share in the pool is the same value of the pool shares, which amounted to $370,133. Information on OCIP's use of derivative securities in its investment portfolio and OCIP's and the City's exposure to credit, market, or legal risk is not available. 3. LOANS RECEIVABLE: Multi -Family Development Loan: A Bridge Loan was provided to a Senior Apartment Developer to assist in the development of 53 affordable rental units. The total outstanding balance as of June 30, 2013 was $350,000. Home Improvement Loans: Home improvement loans were provided to low and moderate income households (rental and ownership). These deferred loans are due upon sale, refinance, or when the rental units are no longer available as affordable units. Term is 30 years. The total outstanding balance as of June 30, 2013, was $56,768. An allowance of $56,768 has been recorded to reflect the amount of the loans not expected to be collectible. Homebuyer Program Loans: Down payment assistance was provided to qualified first time homebuyers. The loans provided in the Ambrose Lane Development are due beginning in 2016, or when the homeowner sells or refinances. The loans provided in the Tustin Grove Development are due when the homeowner sells or refinances. If the homeowner does not sell or refinance before July 2015, the loan is forgiven. The total outstanding balance as of June 30, 2013, was $655,237. An allowance of $655,237 has been recorded to reflect the amount of loans not expected to be collectible. See independent auditors' report. 11 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS: Advances To and Advances From The composition of interfund advances as of June 30, 2013 is as follows: Due To Due From Amount Water Enterprise Fund Other Capital Projects Fund $ 893,430 On April 6, 2010, the City entered into a promissory note with the Tustin Water Enterprise Fund in the amount of $2,123,437 to provide the cash necessary to meet a bond covenant. The Water Enterprise Fund promised to pay the City on June 1, 2015, the principal amount of $2,123,437 with interest accrued thereon from April 6, 2010 to the maturity date at the rate of 3.5% per annum, compounded semiannually on June 1 and December 1 in each year, commencing June 1, 2010. The remaining amount receivable from the Water Enterprise Fund as of June 30, 2013 payable to the Other Capital Projects Fund is $893,430. Interfund Transfers The composition of interfund transfers for the year ended June 30, 2013 is as follows: Transfers In Transfers Out General Fund Other Governmental Funds CFD Construction Capital Projects Fund General Fund Other Capital Projects Fund Amount $ 414,141 1,208,313 4,500,000 6,122,454 The transfers during the fiscal year ended June 30, 2013 were for the following purposes: A transfer from other governmental funds totaling $414,141 was made to reimburse the General Fund per the adopted budget for fiscal year 2012-13. The General Fund transferred $1,208,313 to the CFD Construction Capital Projects Fund to eliminate negative cash until reimbursement is received from the fiscal agent. The Other Capital Projects Fund transferred $4,500,000 to the CFD Construction Capital Projects Fund to transfer funds to fund improvements in accordance with the joint exercise of powers agreement with the City of Santa Ana. See independent auditors' report. -47- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 5. LAND TRANSFER FROM THE UNITED STATES GOVERNMENT: On May 13, 2002, the City entered into an agreement with the United States of America (the Government) wherein the Government agreed to convey to the City a portion of the former Marine Corps Air Station Tustin (MCAS Tustin). The transfer is pursuant to the authority provided by Section 2905(b)4 of the Defense Base Closure and Realignment Act of 1990, as amended, and the implementing regulations of the Department of Defense to convey surplus property at a closing installation to the local redevelopment authority at no cost for economic development purposes. The real properties, consisting of approximately 1,153 acres of land located within the bounds of the former MCAS Tustin, were conveyed to the City in multiple parcels, by separate conveyances. Parcel Group I, (consisting of approximately 977 acres), was conveyed to the City on May 14, 2002. A portion of Parcel Group I (consisting of approximately 23 acres) was conveyed to the City during fiscal year 2003 and the remainder was conveyed to the City in fiscal year 2004. Conveyance of Parcel Group II (consisting of a total of 49 acres) was conveyed in September 2006 and May and July 2003. Conveyance of Parcel Group III (consisting of approximately 18 acres) and Parcel Group IV (consisting of approximately 119 acres) were conveyed in September 2006 and April 2008, respectively. As part of the agreement, the City also received certain personal property and utilities on the base. The land was recorded at their estimated fair value at the date of conveyance. Subsequent to the conveyance of properties from the Government, the Agreement required the City to convey approximately 22 acres to Santa Ana Unified School District (SAUSD), 15 acres to Rancho Santiago Community College District (RSCCD) and 65 acres to South Orange County Community College District (SOCCCD) subject to certain conditions as detailed in the agreement with the Government and the terms and conditions of the settlement and release agreements between the City and SAUSD and the City and the RSCCD. The SAUSD declined the conveyance of the land from the City and instead of receiving the land, the SAUSD was paid $60,000,000 under an agreement dated December 20, 2002. The City conveyed the RSCCD parcel during fiscal year 2003. Conveyance of the SOCCCD parcel happened in fiscal year 2004. The value of the remaining parcels that have been conveyed to the City as of June 30, 2013 is $97,890,526 and is included in the total of the land held for resale reported in the General Fund. The value was based on an assumption that most of the land will be sold in a bulk sale to a single developer and the remaining property not sold will be park space or conveyed to other governmental agencies. See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 5. LAND TRANSFER FROM THE UNITED STATES GOVERNMENT (CONTINUED): On May 21, 2013, the City Council approved a General Plan Amendment, MCAS Tustin Specific Plan Amendment, Development Agreement, and Agreement for Exchange of Real Property with the SOCCCD. The Exchange Agreement delineates the terms and processes associated with the exchange of the ultimate ownership of approximately 89 acres of land within Planning Area 1 of Tustin Legacy. The City of Irvine has identified concerns about that project's traffic impacts in Irvine, and about the traffic analysis of projects in the MCAS Tustin Specific Plan area generally. In July 2013, the City entered into a settlement agreement with the City of Irvine which allows the City to proceed with the Exchange Agreement. The transfer of the parcels is expected to occur during the fiscal year ended June 30, 2014. 6. DUE TO SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY: On December 31, 2008, the City entered into a promissory note with the former Redevelopment Agency in the amount of $18,881,750. The City promised to pay the former Redevelopment Agency on December 1, 2013, the principal amount of $18,881,750 with interest accrued thereon from December 30, 2008 to the maturity date at the rate of 4.25% per annum, compounded semiannually on June 1 and December 1 in each year, commencing June 1, 2009. Effective February 1, 2012, the former Redevelopment Agency was dissolved and the promissory note was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. The total amount payable to the Successor Agency to the Tustin Community Redevelopment Agency as of June 30, 2013 was $22,816,940. See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 7. CAPITALASSETS: A summary of changes in the Governmental Activities capital assets for the year ended June 30, 2013 is as follows: Capital assets, being depreciated Buildings Balance at - - 66,004,966 Balance at 14,953,890 July 1, 2012 Additions Deletions June 30, 2013 Capital assets, not being depreciated: Infrastructure 285,375,112 285,375,112 Land $ 44,140,596 $ - $ - $ 44,140,596 Right of way 42,940,176 1,326,325 - 44,266,501 Construction in progress 54,567,354 28,133,881 (2,013,516) 80,687,719 Total capital assets, not being depreciated, net 271,035,334 being depreciated 141,648,126 29,460,206 (2,013,516) 169,094,816 Capital assets, being depreciated Buildings 66,004,966 - - 66,004,966 Improvements other than buildings 14,953,890 622,099 - 15,575,989 Machinery and equipment 14,419,701 335,243 (412,775) 14,342,169 Infrastructure 285,375,112 285,375,112 Total capital assets, (83,266,038) (6,786,874) being depreciated 380,753,669 957,342 (412,775) 381,298,236 Less accumulated depreciation for Buildings (11,335,770) (1,315,655) - (12,651,425) Improvements other than buildings (3,721,316) (557,751) - (4,279,067) Machinery and equipment (11,395,211) (660,215) 407,066 (11,648,360) Infrastructure (83,266,038) (6,786,874) - (90,052,912) Total accumulated depreciation (109,718,335) (9,320,495) 407,066 (118,631,764) Total capital assets, being depreciated, net 271,035,334 (8,363,153) (5,709) 262,666,472 Governmental activities capital assets, net 412,683,460 21,097,053 (2,019 225) 431,761288 See independent auditors' report. -50- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 7. CAPITAL ASSETS (CONTINUED): Depreciation expense was charged to functions/programs of the governmental activities as follows: General government $ 123,246 Public safety 204,389 Public works 8,536,575 Community services 456,285 9,320 495 A summary of changes in the Business -type Activities capital assets for the year ended June 30, 2013 is as follows: Capital assets, not being depreciated Land Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings and improvements Property, plant and equipment Total capital assets, being depreciated Balance at Balance at July 1, 2012 Additions Deletions June 30, 2013 $ 1,177,216 $ - $ 5,819,016 9,795,497 _ 6,996,232 9,568,372 42,839,888 52,408,260 9.795.497 Less accumulated depreciation for: Buildings and improvements (4,219,142) (268,746) Property, plant and equipment (17,956,705) (973,313) Total accumulated depreciation (22,175,847) (1,242,059) Total capital assets, being depreciated, net Total business -type activity capital assets, net 30,232,413 (1,242,059) $ 1,177,216 15,614,513 - 16,791,729 - 9,568,372 42,839,888 52,408,260 (4,487,888) (18,930,018) (23,417,906) 28,990,354 37228,645 8,553,438 45,782,083 During the fiscal year ended June 30, 2013, the City capitalized interest of $480,012. See independent auditors' report. -51- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 8. LONG-TERM LIABILITIES: A summary of long-term liability activity for the year ended June 30, 2013 is as follows: Business -type activities: 2011 Water Revenue bonds Bond premium 2012 Refunding Water Revenue bonds Bond premium Termination benefits Compensated absences 'total business -type activities long-term liabilities $ 20,760,000 $ $ - $ 20,760,000 $ - 294,509 (10,199) 284,310 - 8,910,000 (710,000) 8,200,000 710,000 878,885 (81,756) 797,129 - - 44,362 - 44,362 - 216,593 154,203 (205,870) 164,926 148,433 $ 31,059,987 $ 198,565 $ x.007,825) $ 30,250,727 $ 858,433 See independent auditors' report. -52- Balance at Balance at Due Within July 1, 2012 Additions Deletions June 30, 2013 One Year Governmental activities: Claims and judgments (Note 11) $ 3,010,653 $ 3,290,272 $ (1,839,843) $ 4,461,082 $ 4,461,082 Postemployment benefits obligation (Note 10) 3,615,584 1,034,400 (372,160) 4,277,824 - 'termination benefits - 1,981,278 - 1,981,278 - Compensated absences 3,542,830 2,271,287 (2,906,915) 2,907,202 2,616,482 Total governmental activities long-term liabilities $ 10,169,067 J-8_ 577,237 $ X118,918) $ 13,627,386 $ 7,077,564 Business -type activities: 2011 Water Revenue bonds Bond premium 2012 Refunding Water Revenue bonds Bond premium Termination benefits Compensated absences 'total business -type activities long-term liabilities $ 20,760,000 $ $ - $ 20,760,000 $ - 294,509 (10,199) 284,310 - 8,910,000 (710,000) 8,200,000 710,000 878,885 (81,756) 797,129 - - 44,362 - 44,362 - 216,593 154,203 (205,870) 164,926 148,433 $ 31,059,987 $ 198,565 $ x.007,825) $ 30,250,727 $ 858,433 See independent auditors' report. -52- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 8. LONG-TERM LIABILITIES (CONTINUED): Termination Benefits Payable In June 2012, the City Council approved the offering of an early retirement incentive program administered by Public Agency Retirement Services (PARS) to directly reduce General Fund expenditures while also making is easier to restructure staffing levels and operations in a more economical and efficient manner. The City offered early retirement incentives to all regular employees meeting the following criteria: a) Employed by the City in a full-time or part-time benefited position as of June 5, 2012; and b) 50 years of age with 5 years of City service and 5 years of Ca1PERS service as of October 31, 2012; and c) Resign from City employment effective no later than October 31, 2012; and d) Retire under Ca1PERS effective no later than November 1, 2012. The incentive provided a benefit of 7% of the employee's base salary. Employees chose one of 14 options on how they would receive the benefit. 35 City employees accepted the City's offer. The City purchased an annuity through Pacific Life Insurance Company to fund the plan with 5 annual payments of $675,213. As of June 30, 2013, the outstanding liability due to fund the plan is $2,025,640, ($1,981,278 reported in the governmental activities and $44,362 in the business -type activities) with annual payment dates of October 10, 2014 through 2016. Business -type Activities 2011 Water Revenue Bonds On May 25, 2011, the Public Financing Authority issued $20,760,000, 2011 Water Revenue Bonds. The Bonds were issued to finance certain water system improvements. The Bonds are payable in annual installments ranging from $735,000 to $1,690,000 until maturity on April 1, 2041. Interest is payable semiannually on April 1 and October 1, with rates ranging from 5.0% to 5.25% per annum. The City has pledged net revenues received from the operation of Water Enterprise to repay the outstanding debt service. The net revenues are the amount of the gross revenues received less the amount of maintenance and operation costs, which include management, personnel, services, equipment, repair and other necessary costs of maintaining and operating the Water Enterprise. The City has covenanted to fix, prescribe, revise and collect rates, fees and charges for the services and facility furnished by the Water Enterprise during each fiscal year which are sufficient to yield net revenues, at least equal to 120% of the annual debt service on the bonds. At June 30, 2013, total interest and principal remaining on the bonds is $42,520,938. During the fiscal year, the total interest expense incurred was $1,047,625 and net revenues were $5,226,475. See independent auditors' report. -53 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 8. LONG-TERM LIABILITIES (CONTINUED): Business -type Activities (Continued) 2011 Water Revenue Bonds — (Continued) The annual debt service requirements to amortize the bonds are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 2039-2041 Add: Premium Totals Principal 4,055,000 5,200,000 6,660,000 4,845,000 20,760,000 284,310 Interest $ 1,047,625 1,047,625 1,047,625 1,047,625 1,047,625 5,23 8,125 4,852,125 3,697,813 2,242,750 492,000 21,760,938 Total $ 1,047,625 1,047,625 1,047,625 1,047,625 1,047,625 5,23 8,125 8,907,125 8,897,813 8,902,750 5,337,000 42,520,938 284,310 21,044,310 21760.938 42.805.248 2012 Refunding Water Revenue Bonds On March 27, 2012, the City issued $8,910,000, 2012 Refunding Water Revenue Bonds. The Bonds were issued to provide funds to defease the 2003 Refunding Water Revenue Bonds and prepay certain outstanding notes payable incurred to finance improvements to the Water Enterprise. The Bonds are payable in annual installments ranging from $710,000 to $960,000 until maturity on April 1, 2023. Interest is payable semiannually on April 1 and October 1, with rates ranging from 2.0% to 4.0% per annum. The defeasance resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $594,664. The difference reported in the accompanying statements as a deferred outflow of resources, is being charged to interest expense through 2023. The remaining balance at June 30, 2013 is $527,089. See independent auditors' report. -54- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 8. LONG-TERM LIABILITIES (CONTINUED): Business -type Activities (Continued) 2012 Refunding Water Revenue Bonds — (Continued) The City has pledged net revenues received from the operation of Water Enterprise to repay the outstanding debt service. The net revenues are the amount of the gross revenues received less the amount of maintenance and operation costs, which include management, personnel, services, equipment, repair and other necessary costs of maintaining and operating the Water Enterprise. The City has covenanted to fix, prescribe, revise and collect rates, fees and charges for the services and facility furnished by the Water Enterprise during each fiscal year which are sufficient to yield net revenues, at least equal to 120% of the annual debt service on the bonds. At June 30, 2013, total interest and principal remaining on the bonds is $9,962,500. During the fiscal year, the total interest expense incurred was $285,546, principal payments were $710,000, and net revenues were $5,226,475. 2012 Refunding Water Revenue Bonds The annual debt service requirements to amortize the bonds are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 Add: premium Totals See independent auditors' report. Principal $ 710,000 725,000 745,000 770,000 795,000 4,455,000 8,200,000 797,129 Interest $ 286,375 272,175 250,425 228,075 197,275 528,175 1,762,500 Total $ 996,375 997,175 995,425 998,075 992,275 4,983,175 9,962,500 797,129 8,997,129 1762.500 10,759.629 -55 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 9. PENSION PLAN: Plan Description The City contributes to the California Public Employees' Retirement System (PERS), an agent -multiple employer public employee defined pension benefit plan for miscellaneous employees and a cost-sharing multiple -employer public employee defined benefit pension plan for public safety employees. 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 website: www.calpers.ca.gov. Funding Policy Participants are required to contribute a percentage of their annual covered salary. For members employed with the City by December 31, 2011, the City contributes a portion of the required member contributions. The City is required to contribute the remaining amount necessary to fund the benefits for its members, using the actuarial methods recommended by the PERS actuaries and actuarial consultants and adopted by the Board of Administration. The following chart summarizes the employee and employer required contributions as of June 30, 2013: Plan / Group Hire date into a Ca1PERS- Employee Employer Employer covered position with City of Contribution Paid Rate Tustin Member Contribution Safety — TPMA Hired into the City of Tustin's 4.50% 4.50% 32.901% & TPOA Safety plan on or before 12.31.11 3% g 50 Hired into the City of Tustin's 9% 0% 19.204% Safety plan from 01.01.12 — 12.31.12, or on/after 01.01.13 if defined as a "classic member" under the PEPRA 2% g 50 Hired on/after 01.01.13 if 9% 0% 14% defined as a "new member" under the PEPRA 2.7% g 57 See independent auditors' report. -56- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 9. PENSION PLAN (CONTINUED): Funding Policy (Continued) Safety — Hired into the City of Tustin's 4% 5% 32.901% Executive & Safety plan on or before Management 12.31.11 3% g 50 Hired into the City of Tustin's 9% 0% 19.204% Safety plan from 01.01.12 — 12.31.12, or on/after 01.01.13 if defined as a "classic member" under the PEPRA (2% g 50) Hired on/after 01.01.13 if 11.50% 0% 11.50% defined as a "new member" under the PEPRA (2.7% @ 57) Miscellaneous — Hired into the City of Tustin's 3.50% 3.50% 10.282% TMEA, TPSSA, Miscellaneous plan on or Confidential, & before 12.31.11 2% g 55 Supervisory Hired into the City of Tustin's 7% 0% 10.282% Miscellaneous plan from 01.01.12 — 12.31.12, or on/after 01.01.13 if defined as a "classic member" under the PEPRA 2% g 60 Hired on/after 01.01.13 if 7% 0% 10.282% defined as a "new member" under the PEPRA 2% g 62 Miscellaneous — Hired into the City of Tustin's 4% 3% 10.282% Executive & Miscellaneous plan on or Management before 12.31.11 2% g 55 Hired into the City of Tustin's 7% 0% 10.282% Miscellaneous plan from 01.01.12 — 12.31.12, or on/after 01.01.13 if defined as a "classic member" under the PEPRA 2% g 60 Hired on/after 01.01.13 if 6.25% 0% 10.282% defined as a "new member" under the PEPRA 2% g 62 See independent auditors' report. -57- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 9. PENSION PLAN (CONTINUED): Funding Policy (Continued) Miscellaneous — Part -Time Non- Benefitted Hired into the City of Tustin's Miscellaneous plan on or before 12.31.11 2% g 55 5.50% 1.50% 10.282% Hired into the City of Tustin's 7% 0% 10.282% Miscellaneous plan from 01.01. 12 — 12.31.12, or on/after 01.01.13 if defined as a "classic member" under the PEPRA 2% g 60 Hired on/after 01.01.13 if 7% 0% 10.282% defined as a "new member" under the PEPRA 2% g 62 The funded status of the plan based on the June 30, 2012 actuarial valuation is as follows: Actuarial Accrued Liability $79,578,148 Actuarial Value of Assets $ 72,395,531 $ Unfunded Liability (Excess Assets) 7,182,617 Funded Ratio 90.97 % Annual Covered Payroll $ 13,524,065 Unfunded Liability % of Covered Pavroll 53.11 % The schedule of funding progress presented as Required Supplementary Information following the Notes to Basic Financial Statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 9. PENSION PLAN (CONTINUED): Annual Pension Cost For 2013, the City's annual pension cost of $2,155,633 for the Miscellaneous Plan and $3,766,627 for the Safety Plan (on an actuarially determined basis) was equal to the City's required and actual contributions. The required contribution for the Miscellaneous Plan for the year ended June 30, 2013 was determined as part of the June 30, 2010 actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions for the Miscellaneous Plan included (a) 7.75% investment rate of return (net of administrative expenses), (b) projected annual salary increases of 3.55% to 14.45% depending on age, service and type of employment, and (c) 3.25% 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 short-term volatility in the market value of investments over a four-year period (smoothed market value). PERS unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period as of the actuarial valuation date was 20 years for the Miscellaneous Plan. Three -Year Trend Information for PERS - Miscellaneous Plan Fiscal Annual Pension Percentage Net Pension Year Cost (APCI APC Contributed Obligation 6/30/11 $ 2,205,531 100% $ - 6/30/12 2,349,007 100% - 6/30/13 2,155,633 100% - Three -Year Trend Information for PERS - Safety Plan Fiscal Annual Pension Year Cost (APP 6/30/11 $ 3,396,182 6/30/12 3,785,849 6/30/13 3,766,627 See independent auditors' report. -59- Percentage APC Contributed 100% 100% 100% Net Pension Obligation CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 10. POST -EMPLOYMENT HEALTH CARE BENEFITS: Plan Description The City provides other postemployment benefits (OPEB) to retired employees in the form of a contribution towards their medical premiums under the PERS health plan, a single -employer deferred benefit plan which provides medical insurance benefits to eligible retirees in accordance with various labor agreements. Survivor benefits are not provided. The City's OPEB plan does not issue a separate stand-alone report. Eligibility Employees hired prior to July 1, 2011 are eligible for retiree health benefits if they retire from the City on or after age 50 (unless disabled), with five years of service and are eligible for a PERS pension and are enrolled in a PERS retiree health plan. Employees hired after June 30, 2011 are eligible for retiree health benefits if they retire from the City on or after age 50 (unless disabled), with ten years of service and are eligible for a PERS pension and are enrolled in a PERS retiree health plan. The benefits are available only to employees who retire from the City. Membership of the plan consisted of the following at June 30, 2013: Police Police General Management ConfidentialSupport Total Retirees Receiving Benefits 36 35 28 1 6 106 Eligible Active Employees 88 81 34 4 44 251 The above table does not reflect current retirees not enrolled in the PERS health plan who may be eligible to enroll in the plan at a later date. Funding Policy The City's current contribution is based on pay-as-you-go. As of July 1, 2011, the City's monthly contribution rate was $250 for the Confidential, General, and Police Support groups; $350 for the Police and Management group. For the year ended June 30, 2013, the City paid $372,160 in contributions for postemployment health care benefits. Current active employees are not required to contribute any portion towards these benefits. See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 10. POST -EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED): Funding Policy (Continued) Annual OPEB Cost and Net OPEB Obligation. The City's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) not to exceed thirty years. The City's ARC for the year ended June 30, 2013 was $1,195,094. The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City's net OPEB obligation: ARC (OPEB cost) Interest on net OPEB obligation Adjustment to ARC Annual OPEB cost Contributions made Increase (decrease)in net OPEB obligation Net OPEB obligation, beginning Net OPEB obligation, ending Police General Management $ 415,103 $ 388,322 $ 207,551 Police Confidential Support Total $ 16,738 $ 167,380 $ 1,195,094 43,588 43,263 28,188 14,242 16,891 146,172 (91,508) (90,823) (59,175) (29,899) (35,461) (306,866) 367,183 340,762 176,564 1,081 148,810 1,034,400 (140,982) (89,762) (121,904) (2,232) (17,280) (372,160) 226,201 251,000 54,660 (1,151) 131,530 662,240 1,078,175 1,070,103 697,221 352,276 417,809 3,615,584 1.304.376 1.321.103751.881 13-5112515-49339 4.277.824 See independent auditors' report. -61- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 10. POST -EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED): Funding Policy (Continued) The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2013 and the two preceding years were as follows: Fiscal Annual Percentage of Net Year OPEB Annual OPEB OPEB Ended Cost Cost Contributed Obligation 6/30/11 $ 887,145 19.96% $ 3,171,070 6/30/12 747,031 40.50% 3,615,584 6/30/13 1,034,400 35.98% 4,277,824 Funding Status and Progress As of June 30, 2011, the most recent valuation date, the actuarial accrued liability for benefits was $9.8 million, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $9.8 million and a funded ratio (actuarial value of assets as a percentage of the actuarial accrued liability) of 0%. The covered payroll (annual payroll of active employees) was $21.52 million and the ratio of the UAAL to the covered payroll was 45.6%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for the benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial assets, consistent with the long-term perspective of the calculations. See independent auditors' report. -62- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 10. POST -EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED): Actuarial Methods and Assumptions (Continued) The required contribution for the fiscal year 2013 was determined as part of the June 30, 2011 actuarial valuation. The actuarial cost method used for determining the benefit obligations is the entry age normal cost method. The actuarial assumptions included a 4.25% investment rate of return (which is based on assumed long-term investment return on plan assets and on the City's assets, as appropriate), annual inflation rate of 3%, annual payroll increase of 3.25% and an annual healthcare cost trend rate with increases that vary by year. The UAAL is being amortized as a level percentage of projected payroll over a closed period of 30 years. 11. SELF-INSURANCE PROGRAM/RISK POOL: The City uses a combination of insured and self-insured programs to finance its property and casualty risk. The City is self-insured for worker's compensation, automotive, and general liability risks. Excess liability coverage for the City's self-insurance retention of $250,000 per occurrence is provided through a risk sharing pool, the California Insurance Pool Authority (CIPA). The CIPA provides excess liability coverage above $2,000,000 per occurrence and $40,000,000 annual aggregate. The City's self-insurance retention limit is $400,000 per occurrence for worker's compensation claims. Worker's compensation claims which exceed the self-insurance retention are insured by CIPA up to the California statutory limit for worker's compensation. Property and employment practices liability risk are financed through insurance contracts and have various limits and deductibles. The City is a member of CIPA in order to jointly purchase insurance coverage and to share costs for professional risk management, claim administration, and group purchasing of insurance products with ten other Orange County cities. Members may be assessed the difference between the funds available and the $40,000,000 annual aggregate in proportion to their annual premium. CIPA uses independent actuaries and underwriters to determine premiums and help set insurance limits and deductible levels. The pool is managed by all independent general manager and contracted legal advisers. Two internal subcommittees are made up of City members to provide direction on underwriting and claims activities. The Governing Board of CIPA is comprised of one member from each participating City and is responsible for the selection of the independent general manager, legal counsel, and electing subcommittee members. The financial statements of the CIPA are available at the administrative office located at 240 Newport Center Drive, Suite 210, Newport Beach, California. See independent auditors' report. -63 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 11. SELF-INSURANCE PROGRAM/RISK POOL (CONTINUED): The government retains a risk of loss, due to the fact that actual losses may exceed estimated claims or coverage amounts. Settled claims have not exceeded any of the City's coverage amounts in any of the last three fiscal years, and there were no reductions in the City's coverage during the year ended June 30, 2013. At June 30, 2013, estimated claims payable of $4,461,082, which includes a provision for incurred but not reported claims and loss adjustment expenses, are reported as a long-term liability. Changes in the balances of claims liabilities for the years ended June 30, 2012 and 2013, including a provision for incurred but not reported claims and loss adjustment expenses, were as follows: June 30, 2012 2013 Beginning Balance $ 3,286,318 3,010,653 Additions $ 1,832,406 3,290,272 12. SPECIAL ASSESSMENT DISTRICTS' BONDS: Deletions $ 2,108,071 1,839,843 Ending Balance $ 3,010,653 4,461,082 Special assessment districts exist in various parts of the City to provide improvements to properties located in those districts. Properties are assessed for the cost of improvements; these assessments are payable over the term of the debt issued to finance the improvements and must be sufficient to repay this debt. The bonds listed below were issued pursuant to the Refunding Act of 1984 for the 1915 Improvement Act Bonds and the Improvement Bond Act of 1915 and are the liabilities of the property owners and are secured by liens against the assessed property. The City Treasurer acts as an agent for collection of principal and interest payments by the property owners and remittance of such monies to bondholders. Neither the faith and credit nor the general taxing power of the City have been pledged to the payment of the bonds. Therefore, none of the following special assessment bonds have been included in the accompanying financial statements. District Bonds Community Facilities District 04-1, 2013 Community Facilities District 06-1, 2007 Community Facilities District 06-1, 2010 Community Facilities District 07-1, 2007 See independent auditors' report. -64- Amount of Issue $ 9,350,000 53,570,000 1,675,000 13,680,000 Outstanding June 30, 2013 $ 9,350,000 52,580,000 1,645,000 13,550,000 78275,000 77,125,000 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 12. SPECIAL ASSESSMENT DISTRICTS' BONDS (CONTINUED): In September 2007, the City issued $53,570,000 of Special Tax Bonds, Series 2007A, to facilitate the new infrastructure construction on the former MCAS being converted into various public, housing, commercial and educational uses. The proceeds of the bonds will be used to pay the cost and expense of acquisition and construction of certain public facilities necessary for the development of the Tustin Legacy District, fund the reserve account, pay capitalized interest on bonds through September 1, 2008, and pay costs of issuing the Series 2007A Bonds. Serial current interest bonds will mature from September 1, 2009 to September 1, 2025. Term current interest bonds will mature on September 1, 2036, with mandatory sinking payments from September 1, 2026 through September 1, 2036. Interest maturity rates of the current interest bonds range from 4% at September 1, 2009 to 5.375% at September 1, 2025 and current term interest bonds are 6% on their respective maturity dates. At June 30, 2013, the amount of the Special Tax Bonds, Series 2007A was $52,580,000. In September 2007, the City issued $13,680,000 of Special Tax Bonds, Series 2007, to facilitate the new infrastructure construction on the former MCAB being converted into various public, housing, commercial and educational uses. The proceeds of the bonds will be used to pay the cost and expense of acquisition and construction of certain public facilities necessary for the development of the Tustin Legacy District, fund the reserve account, and pay costs of issuing the Series 2007 Bonds. Serial current interest bonds will mature from September 1, 2009 to September 1, 2025. Term current interest bonds will mature on September 1, 2037, with mandatory sinking payments from September 1, 2026 through September 1, 2037. Interest maturity rates of the current interest bonds range from 4% at September 1, 2009 to 5.65% at September 1, 2025 and current term interest bonds are 6% through their respective maturity dates. At June 30, 2013, the amount of the Special Tax Bonds, Series 2007 was $13,550,000. In October 2010, the City issued $1,675,000 of Special Tax Bonds, Series 2010 to, to facilitate the new infrastructure construction on the former MCAB being converted into various public, housing, commercial and educational uses. The proceeds of the bonds will be used to pay the cost and expense of acquisition and construction of certain public facilities necessary for the development of the Tustin Legacy District, fund the reserve account, and pay costs of issuing the Series 2010 Bonds. Serial current interest bonds will mature from September 1, 2011 to September 1, 2035. Term current interest bonds will mature on September 1, 2039, with mandatory sinking payments from September 1, 2036 through September 1, 2039. Interest maturity rates of the current interest bonds range from 1.5% at September 1, 2011 to 5.625% at September 1, 2035 and current term interest bonds are 5.75% through their respective maturity dates. At June 30, 2013, the amount of the Special Tax Bonds, Series 2010 was $1,645,000. See independent auditors' report. -65 - CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 12. SPECIAL ASSESSMENT DISTRICTS'BONDS (CONTINUED): In May 2013, the City issued $9,350,000 of Special Tax Refunding Bonds, Series 2013 to, to refund in full and defease the City of Tustin Community Facilities District No. 04-1 Special Tax Bonds, Series 2004. The 2004 series were originally issued to facilitate the new infrastructure construction on the former MCAS being converted into various public, housing, commercial and educational uses. The proceeds of the bonds will be used to pay the cost and expense of acquisition and construction of certain public facilities necessary for the development of the Tustin Legacy District, fund the reserve account, pay capitalized interest on bonds through September 1, 2032, and pay costs of issuing the Series 2013 Bonds. Serial current interest bonds will mature from September 1, 2032 to September 1, 2032. Term current interest bonds will mature on September 1, 2014, with mandatory sinking payments from September 1, 2030 through September 1, 2032. Interest maturity rates of the current interest bonds range from 2.00% at September 1, 2014 to 5.00% at September 1, 2028 - and current term interest bonds are 5.375% and 5.50% on their respective maturity dates. At June 30, 2013, the amount of the Special Tax Refunding Bonds, Series 2013 was $9,350,000. Neither the general taxing power of the City nor the faith or credit of the PFA or the City have been pledged to the payment of the bonds. Therefore, the bonds have not been included in the accompanying financial statements. 13. COMMITMENTS AND CONTINGENCIES: There are certain legal actions pending against the City which have arisen in the normal course of operations. In the opinion of management and the City Attorney, the ultimate resolution of such actions is not expected to have a significant impact, if any, on the financial statements or operations of the City. In July 2004, the City entered into a disposition and development agreement ("DDA") with Vestar Development Company ("Developer") where the City agreed to sell and/or lease or sublease and developer agreed to purchase and/or lease or sublease the Tustin Legacy Property. Pursuant to the DDA, the City and Developer entered into an infrastructure construction and payment agreement ("Agreement") dated June 8, 2005. The Agreement calls for the Developer to pay the Project Fair Share Contribution (as defined in the DDA) with respect to the Tustin Legacy Backbone Infrastructure program. Pursuant to the original and subsequent agreements, the Developer is entitled to reimbursement of its infrastructure costs that exceed the Project Fair Share Obligation upon full acceptance of individual Developer Backbone Infrastructure Segments. As of June 30, 2013, the total infrastructure cost incurred by the Developer that is subject to reimbursement was $45,164,084 and the total reimbursement made by the City was $30,241,666. Estimated future reimbursements to be made by the City (as the infrastructure segments are completed and accepted by the City and only if there are excess land sale proceeds from parcels identified in the agreement) are $21,873,901. See independent auditors' report. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 14. GOVERNMENTAL FUND BALANCE CLASSIFICATIONS: The fund balances reported on the fund statements consist of the following categories: Nonspendable - This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted - This classification includes amounts that can be spent only for specific purposes stipulated by constitution, external resource providers or through enabling legislation. Committed - This classification includes amounts that can be used only for the specific purposes determined by a formal action of the City's highest level of decision-making authority. The City Council is the highest level of decision-making authority for the City that can, by adoption of an ordinance prior to the end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is taken (the adoption of another ordinance) to remove or revise the limitation. Assigned - This classification includes amounts that are intended to be used for specific purposes as indicated by City Council or by persons to whom City Council has delegated the authority to assign amounts for specific purposes. City Council has not delegated such authority. In governmental funds, other than the general fund, assigned fund balance represents the remaining amount that is not restricted or committed. Unassigned - The classifications include the residual balance for the City's general fund and includes all spendable amounts not contained in other classifications. In other funds, the unassigned classification is used only to report a deficit balance resulting from overspending for specific purposes for which amounts had been restricted, committed or assigned. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balances are available, the City's policy is to apply restricted fund balance first. When an expenditure is incurred for purposes for which committed, assigned or unassigned fund balances are available, the City's policy is to apply committed fund balance first, then assigned fund balance, and finally unassigned fund balance. See independent auditors' report. -67- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 14. GOVERNMENTAL FUND BALANCE CLASSIFICATIONS (CONTINUED): 15. JOINT POWERS AUTHORITY: Orange County Fire Authority In January 1995, the City of Tustin entered into a joint powers agreement with the Cities of Buena Park, Cypress, Dana Point, Irvine, Laguna Hills, Laguna Niguel, Lake Forest, La Palma, Los Alamitos, Mission Viejo, Placentia, San Clemente, San Juan Capistrano, Seal Beach, Stanton, Villa Park, and Yorba Linda and the County of Orange (County) to create the Orange County Fire Authority. The purpose of the Authority is to provide for mutual fire protection, prevention, and suppression services and related and incidental services including, but not limited to, emergency medical and transport services, as well as providing facilities and personnel for such services. The effective date of formation was March 1, 1995. The Authority's governing board consists of one representative from each City and two from the County. The operations of the Authority are funded with structural fire fees collected by the County through the property tax roll for the unincorporated area and on behalf of all member cities except for the Cities of Stanton, Tustin, San Clemente, Buena Park, Placentia, and Seal Beach. The County pays all structural fees it collects to the Authority. The Cities of Stanton, Tustin, San Clemente, Buena Park, Placentia, and Seal Beach are considered "cash contract cities" and, accordingly, make cash contributions based on the Authority's annual budget. The financial statements of the Orange County Fire Authority are available at 1 Fire Authority Road, Irvine, California. See independent auditors' report. am CFD Construction Other Capital Capital Other Total General Projects Projects Governmental Governmental Fund Fund Fund Funds Funds Nonspendable: Prepaid items $ 178,308 $ - - $ 31,500 $ 209,808 Advance to other funds - - 893,430 - 893,430 Land held for resale 128,809,901 - - 362,677 129,172,578 Restricted for: Capital projects 19,615,343 20,293,266 - 11,405,090 51,313,699 Public safety - - - 441,223 441,223 Community services - - - 1,746,178 1,746,178 Assigned to: Capital projects - - 8,720,387 8,160,203 16,880,590 Unassigned 44,368,566 - - - 44,368,566 Total fund balances $ 192.972.118 $ 20293.266 $ 9.613.817 $ 22.146.871 $ 245.026.072 15. JOINT POWERS AUTHORITY: Orange County Fire Authority In January 1995, the City of Tustin entered into a joint powers agreement with the Cities of Buena Park, Cypress, Dana Point, Irvine, Laguna Hills, Laguna Niguel, Lake Forest, La Palma, Los Alamitos, Mission Viejo, Placentia, San Clemente, San Juan Capistrano, Seal Beach, Stanton, Villa Park, and Yorba Linda and the County of Orange (County) to create the Orange County Fire Authority. The purpose of the Authority is to provide for mutual fire protection, prevention, and suppression services and related and incidental services including, but not limited to, emergency medical and transport services, as well as providing facilities and personnel for such services. The effective date of formation was March 1, 1995. The Authority's governing board consists of one representative from each City and two from the County. The operations of the Authority are funded with structural fire fees collected by the County through the property tax roll for the unincorporated area and on behalf of all member cities except for the Cities of Stanton, Tustin, San Clemente, Buena Park, Placentia, and Seal Beach. The County pays all structural fees it collects to the Authority. The Cities of Stanton, Tustin, San Clemente, Buena Park, Placentia, and Seal Beach are considered "cash contract cities" and, accordingly, make cash contributions based on the Authority's annual budget. The financial statements of the Orange County Fire Authority are available at 1 Fire Authority Road, Irvine, California. See independent auditors' report. am CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 16. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT AGENCIES: On June 29, 2011, Assembly Bills Ix 26 (the "Dissolution Act") and Ix 27 were enacted as part of the fiscal year 2011-12 state budget package. On June 27, 2012, as part of the fiscal year 2012-13 state budget package, the Legislature passed and the Governor signed AB 1484, which made technical and substantive amendments to the Dissolution Act based on experience to -date at the state and local level in implementing the Dissolution Act. Under the Dissolution Act, each California redevelopment agency (each a "Dissolved RDA") was dissolved as of February 1, 2012, and the sponsoring community that formed the Dissolved RDA, together with the other designated entities, have initiated the process under the Dissolution Act to unwind the affairs of the Dissolved RDA. A Successor Agency was created for each Dissolved RDA which is the sponsoring community of the Dissolved RDA unless it elected not to serve as the Successor Agency. On September 20, 2011, the City elected to serve as the Successor Agency to the Tustin Community Redevelopment Agency. The Dissolution Act also created oversight boards which monitor the activities of the successor agencies. The roles of the successor agencies and oversight boards is to administer the wind down of each Dissolved RDA which includes making payments due on enforceable obligations, disposing of the assets (other than housing assets) and remitting the unencumbered balances of the Dissolved RDAs to the County Auditor -Controller for distribution to the affected taxing entities. The Dissolution Act allowed the sponsoring community that formed the Dissolved RDA to elect to assume the housing functions and take over the certain housing assets of the Dissolved RDA. If the sponsoring community does not elect to become the Successor Housing Agency and assume the Dissolved RDA's housing functions, such housing functions and all related housing assets will be transferred to the local housing authority in the jurisdiction. AB 1484 modified and provided some clarifications on the treatment of housing assets under the Dissolution Act. The Tustin Housing Authority elected on January 17, 2012 to serve as the Housing Successor Agency. After the date of dissolution, the housing assets, obligations, and activities of the Dissolved RDA have been transferred and are reported in the Housing Authority Special Revenue Fund in the financial statements of the City. All other assets, obligations, and activities of the Dissolved RDA have been transferred and are reported in a fiduciary fund (private -purpose trust fund) in the financial statements of the City. The Dissolution Act and AB 1484 also establish roles for the County Auditor -Controller (the "CAC), the California Department of Finance (the "DOF") and the California State Controller's office in the dissolution process and the satisfaction of enforceable obligations of the Dissolved RDAs. See independent auditors' report. am CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 16. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT AGENCIES (CONTINUED): The County Auditor -Controller is charged with establishing a Redevelopment Property Tax Trust Fund (the "RPTTF") for each Successor Agency and depositing into the RPTTF for each six-month period the amount of property taxes that would have been redevelopment property tax increment had the Dissolved RDA not been dissolved. The deposit in the RPTTF fund is to be used to pay to the Successor Agency the amounts due on the Successor Agency's enforceable obligations for the upcoming six-month period. The Successor Agency is required to prepare a recognized obligation payment schedule (the "ROPS") approved by the oversight board setting forth the amounts due for each enforceable obligation during each six month period. The ROPS is submitted to the DOF for approval. The County Auditor -Controller will make payments to the Successor Agency from the RPTTF fund based on the ROPS amount approved by the DOF. The ROPS is prepared in advance for the enforceable obligations due over the next six months. The process of making RPTTF deposits to be used to pay enforceable obligations of the Dissolved RDA will continue until all enforceable obligations have been paid in full and all non -housing assets of the Dissolved RDA have been liquidated. As part of the dissolution process AB 1484 required the Successor Agency to have due diligence reviews of both the low and moderate income housing funds and all other funds to be completed by October 15, 2012 and January 15, 2013 to compute the funds (cash) which were not needed by the Successor Agency to be retained to pay for existing enforceable obligations. These funds were to be remitted to the CAC after the DOF completed its review of the due diligence reviews. The Successor Agency remitted $14,317,623 to the CAC on December 18, 2012 for the low and moderate income housing funds due diligence review. The amount due to the CAC for the Other Funds due diligence review is $28,295,637, of which $6,418,355 was remitted by the Successor Agency on May 10, 2013. The balance of $21,877,282 is due five days after receipt of payment of the advance from the City of Tustin. The advance is due December 1, 2013. The State Controller of the State of California has been directed to review the propriety of any transfers of assets between Dissolved RDA and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency. See independent auditors' report. -70- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 16. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT AGENCIES (CONTINUED): Management believes, in consultation with legal counsel, that the obligations of the Dissolved RDA due to the City are valid enforceable obligations payable by the Successor Agency under the requirements of the Dissolution Act and AB 1484. The City's position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City. 17. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES: The assets and liabilities of the former redevelopment agency were transferred to the Successor Agency to the Tustin Community Redevelopment Agency on February 1, 2012 as a result of the dissolution of the former redevelopment agency. The City is acting in a fiduciary capacity for the assets and liabilities. Disclosures related to these transactions are as follows: Due from the City of Tustin On December 31, 2008, the City entered into a promissory note with the former Redevelopment Agency in the amount of $18,881,750. The City promised to pay the former Redevelopment Agency on December 1, 2013, the principal amount of $18,881,750 with interest accrued thereon from December 30, 2008 to the maturity date at the rate of 4.25% per annum, compounded semiannually on June 1 and December 1 in each year, commencing June 1, 2009. Effective February 1, 2012, the former Redevelopment Agency was dissolved and the promissory note was transferred to the Successor Agency. The total amount receivable from the General Fund as of June 30, 2013 was $22,816,940. Capital Assets Capital assets, not being depreciated Land Capital assets, being depreciated: Buildings Less accumulated depreciation Total capital assets, being depreciated, net Successor Agency capital assets, net See independent auditors' report. Balance at Balance at July 1, 2012 Additions Deletions June 30, 2013 $ 119.000 $ - $ - $ 119,000 190,000 - - 190,000 (72.200) (3.800) - (76.000) 117.800 (3.800) - 114,000 S 236,800(3.800) - S 233,000 -71- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 17. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES (CONTINUED): Long -Term Liabilities A summary of long-term liability activity for the year ended June 30, 2013 is as follows: Tax allocation bonds Unamortized premium Unamortized discount Total bonds payable Tax Allocation Bonds Payable Balance at July 1, 2012 Additions $ 75,010,000 $ 95,964 (843,041) 29,624 174 ,262.923 $ 29.624 1998 Town Center Tax Allocation Bonds Balance at Due Within June 30, One Deletions 2013 Year $ (2,835,000) $ 72,175,000 $ 2,945,000 (3,532) 92,432 - (813,417) - $ (2 838,532) $ 71,454,015 12 ,945,000 On July 1, 1998, the Tustin Community Redevelopment Agency issued $20,805,000 Tax Allocation Refunding Bonds to refund the Agency's Town Center Area Redevelopment Project Tax Allocation Refunding Bonds, Series 1987, in aggregate principal amount of $5,145,000 and the Agency's Town Center Area Redevelopment Project Subordinate Tax Allocation Bonds, Series 1991 in aggregate principal amount of $12,880,000. As of June 30, 2006, the 1987 and 1991 bonds have been fully redeemed. Serial bonds are payable in annual installments ranging from $775,000 to $1,315,000 commencing on December 1, 1998. Interest is payable semiannually on June 1 and December 1, with rates ranging from 3.5% to 5.0% per annum. The bonds maturing on or after December 1, 2009, are subject to redemption prior to maturity as a whole or in part, at the option of the Agency, on any date on or after December 1, 2008 at prices ranging from 100% to 101% of principal. At June 30, 2013, the 1998 Bonds outstanding balance was $5,945,000. The annual debt service requirements to amortize the tax allocation bonds are as follows: Year Ending June 30. 2014 2015 2016 2017 Totals See independent auditors' report. Principal $ 1,380,000 1,445,000 1,525,000 1,595,000 5,945,000 -72- Interest $ 258,073 188,138 113,888 37,881 $ 597,980 Total $ 1,638,073 1,633,138 1,638,888 1,632,881 6.542.980 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 17. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES (CONTINUED): Long -Term Liabilities (Continued) Tax Allocation Bonds Payable (Continued) 2010 Housing Tax Allocation Bonds On March 1, 2010, the Tustin Community Redevelopment Agency issued $26,170,000 Tax Allocation Housing Bonds, Series 2010 to refinance low and moderate income housing activities throughout the geographic boundaries of the City and, in particular, to repay a reimbursement obligation from the Agency to the City, relating to the City's write down of land for use for affordable housing purposes. Serial bonds are payable in annual installments ranging from $550,000 to $1,300,000 commencing on September 1, 2010. Interest is payable semiannually on March 1 and September 1, with rates ranging from 2% to 5% per annum. At June 30, 2013, the 2010 Housing Bonds outstanding balance was $23,505,000. The annual debt service requirements to amortize the tax allocation bonds are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 2039-2040 Totals See independent auditors' report. Principal $ 735,000 760,000 785,000 815,000 850,000 4,785,000 5,925,000 3,325,000 3,740,000 1.785.000 23,505,000 -73- Interest $ 1,078,431 1,054,106 1,025,106 993,106 959,806 4,247,772 3,061,450 1,850,181 979,125 94.894 15.343.977 Total $ 1,813,431 1,814,106 1,810,106 1,808,106 1,809,806 9,032,772 8,986,450 5,175,181 4,719,125 1,879,894 3 8.848.977 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 17. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES (CONTINUED): Long -Term Liabilities (Continued) Tax Allocation Bonds Payable (Continued) 2010 MCAS Tax Allocation Bonds On October 27, 2010, the Tustin Community Redevelopment Agency issued $44,170,000 Tax Allocation Bonds, Series 2010 for the purpose of financing redevelopment activities within or for the benefit of the Agency's MCAS -Tustin Redevelopment Project Area. The bonds are payable in annual installments ranging from $640,000 to $12,230,000 commencing on September 1, 2011. Interest is payable semiannually on March 1 and September 1, with rates ranging from 2.0% to 5.0% per annum. The bonds maturing on or after September 1, 2019, are subject to optional redemption prior to maturity, as a whole or in part, from any available source of funds, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. At June 30, 2013, the 2010 MCAS Bonds outstanding balance was $42,725,000. The annual debt service requirements to amortize the tax allocation bonds are as follows: Year Ending June 30, 2014 2015 2016 2017 2018 2019-2023 2024-2028 2029-2033 2034-2038 2039-2041 Totals See independent auditors' report. Principal $ 830,000 855,000 880,000 905,000 935,000 5,260,000 6,520,000 8,280,000 10,570,000 7,690,000 42.725.000 -74- Interest $ 1,982,375 1,957,100 1,931,075 1,904,300 1,872,025 8,755,806 7,449,756 5,640,000 3,295,500 589,250 35.377.187 Total $ 2,812,375 2,812,100 2,811,075 2,809,300 2,807,025 14,015,806 13,969,756 13,920,000 13,865,500 8,279,250 78.102.187 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 18. RESTATEMENT OF NET POSITION: Net position for the government -wide financial statements as of July 1, 2012 was restated as follows: Business -type Activity Net position as previously reported as of June 30, 2012 $ 28,274,861 Reduction in net position to remove unamortized bond issuance costs for the implementation of GASB Statement 65 (434,527) Net position as restated July 1, 2012 27,840.334 Net position for the proprietary fund financial statements as of July 1, 2012 was restated as follows: Water Enterprise Fund Net position as previously reported as of June 30, 2012 $ 28,274,861 Reduction in net position to remove unamortized bond issuance costs for the implementation of GASB Statement 65 (434,527) Net position as restated July 1, 2012 27.840.334 Net position for the fiduciary fund financial statements as of July 1, 2012 was restated as follows: Net position as previously reported as of June 30, 2012 Reduction in net position to remove unamortized bond issuance costs for the implementation of GASB Statement 65 Net position as restated July 1, 2012 See independent auditors' report. -75- Private -Purpose Trust Fund $ 19,163,386 (1,255,379) 17.908.007 The page left blank intentionally -76- REQUIRED SUPPLEMENTARY INFORMATION -77- The page left blank intentionally CITY OF TUSTIN SCHEDULES OF FUNDING PROGRESS For the year ended June 30, 2013 SCHEDULE OF FUNDING PROGRESS FOR PERS MISCELLANEOUS EMPLOYEES SCHEDULE OF FUNDING PROGRESS FOR OTHER POST -EMPLOYMENT BENEFIT PLAN Actuarial Actuarial Value Accrued Unfunded UAAL as a Actuarial of Assets Liability AAL Funded Covered % of Valuation (AVA) (AAL) (UAAL) Ratio Payroll Payroll Date (a) (b) (b) - (a) (a)/(b) (c) [(b)-(a)]/(c) 06/30/10 $ 63,773,252 $ 69,334,930 $ 5,561,678 91.98% $ 13,660,580 40.71% 06/30/11 68,289,474 75,399,067 7,109,593 90.57% 13,462,500 52.81% 06/30/12 72,395,531 79,578,148 7,182,617 90.97% 13,524,065 53.11% SCHEDULE OF FUNDING PROGRESS FOR OTHER POST -EMPLOYMENT BENEFIT PLAN See independent auditors' report. -79- Actuarial Actuarial Value Accrued Unfunded UAAL as a Actuarial of Assets Liability AAL Funded Covered % of Valuation (AVA) (AAL) (UAAL) Ratio Payroll Payroll Date (a) (b) (b) - (a) (a)/(b) (c) [(b)-(a)]/(c) 06/01/07 $ - $ 7,109,000 $ 7,109,000 0.00% $ 21,800,000 32.61% 06/30/09 - 8,584,000 8,584,000 0.00% 23,100,000 37.16% 06/30/11 - 9,801,000 9,801,000 0.00% 21,515,000 45.55% See independent auditors' report. -79- CITY OF TUSTIN BUDGETARY COMPARISON SCHEDULE GENERAL FUND REVENUES: Taxes Licenses and permits Fines and forfeitures Investment income Intergovernmental Charges for services Rental income Otherrevenue TOTAL REVENUES EXPENDITURES: Current: General government Public safety Public works Community services Capital outlay Debt service: Interest and fiscal charges TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out Sale of property TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING OF YEAR FUND BALANCE - END OF YEAR For the year ended June 30, 2013 21,157,033 21,157,033 16,279,344 Variance with 29,451,000 29,451,000 27,847,607 Final Budget Budgeted Amounts 5,980,807 Positive Original Final Actual (Negative) $ 40,079,000 $ 40,079,000 $ 44,279,024 $ 4,200,024 509,900 509,900 577,044 67,144 809,000 809,000 678,428 (130,572) 45,000 45,000 49,633 4,633 3,242,684 3,242,684 5,592,814 2,350,130 2,094,300 2,094,300 2,380,410 286,110 267,800 267,800 421,563 153,763 2,204,700 2,204,700 2,602,362 397,662 49,252,384 49,252,384 56,581,278 7,328,894 21,157,033 21,157,033 16,279,344 4,877,689 29,451,000 29,451,000 27,847,607 1,603,393 6,566,600 6,566,600 5,980,807 585,793 2,941,400 2,941,400 2,720,492 220,908 17,826,524 17,826,524 1,055,368 16,771,156 16,300 16,300 954,358 (938,058) 77,958,857 77,958,857 54,837,976 23,120,881 (28,706,473) (28,706,473) 1,743,302 30,449,775 - - 414,141 414,141 - - (1,208,313) (1,208,313) 5,000 5,000 43,340,797 43,335,797 5,000 5,000 42,546,625 42,541,625 (28,701,473) (28,701,473) 44,289,927 72,991,400 148,682,191 148,682,191 148,682,191 - $ 119,980,718 $ 119,980,718 $ 192,972,118 $ 72,991,400 See independent auditors' report and note to required supplementary information. -80- CITY OF TUSTIN NOTE TO REQUIRED SUPPLEMENTARY INFORMATION June 30, 2013 1. BUDGETS AND BUDGETARY ACCOUNTING: The City follows these procedures in establishing the budgets. (1) The annual budget is adopted by the City Council after the holding of a hearing and provides for the general operation of the City. The operating budget includes proposed expenditures and the means of financing them. (2) The City Council approves total budgeted appropriations and any amendments to appropriations throughout the year. This "appropriated budget" covers City expenditures in all governmental funds, except for capital improvement projects carried forward from prior years. The City Manager is authorized to transfer budgeted amounts between departments. Actual expenditures may not exceed budgeted appropriations at the fund level. Budget figures used in the accompanying required supplementary information are the original and final adjusted amounts. (3) Formal budgetary integration is employed as a management control device during the year. Commitments for materials and services, such as purchase orders and contracts, are recorded as encumbrances to assist in controlling expenditures. Capital projects appropriations are an automatic supplemental appropriation for the next year. All others lapse unless they are encumbered at year-end or re -appropriated through the formal budget process. There were no outstanding encumbrances at year-end. (4) Annual budgets are adopted for the General and Special Revenue Funds on a basis substantially consistent with accounting principles generally accepted in the United States of America. Accordingly, actual revenues and expenditures can be compared with related budgeted amounts without any significant reconciling items. No budgetary comparisons are presented for the City's Proprietary Funds as the City is not legally required to adopt budgets for these fund types. Budgetary comparisons of Capital Projects Funds are primarily "long-term" budgets, which emphasize capital outlay plans extending over one year. Because of the long-term nature of these budgets, "annual" budget comparisons are not considered meaningful and accordingly, no budgetary information is provided. See independent auditors' report. The page left blank intentionally SUPPLEMENTARY INFORMATION The page left blank intentionally CITY OF TUSTIN OTHER GOVERNMENTAL FUNDS June 30, 2013 SPECIAL REVENUE FUNDS The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted by law or administrative action for a specific purpose. Gas Tax - This fund accounts for revenues and expenditures apportioned under the Street and Highways Code of the State of California. Expenditures may be made for any street -related purpose allowable under the Code. Measure M - This fund is used to account for monies received from the County for street projects. Park Acquisition and Development - This fund is used to account for fees received from developers to develop the City's park system. Asset Forfeiture - This fund is used to account for monies received from the Federal government that are used for special law enforcement purchases. Air Quality - This fund is used to account for funds received from South Coast Air Quality Management District to be used for reducing pollution. Supplemental Law Enforcement - This law was established under Government Code Section 30061 enacted by A133229, Chapter 134, of the 1996 Statutes and is an appropriation from the State Budget for the "Citizen Option for Public Safety Program". This fund can only be used for police front line municipal activities that provide police services to the City in prevention of drug abuse, crime prevention, and community awareness programs. Housing Authority - This fund is used to account for revenues and associated expenditures to be used for increasing or improving low and moderate income housing. CAPITAL PROJECTS FUND The Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities. Construction 95-1 - This fund accounts for infrastructure improvements to the Tustin 95-1 Area. CITY OF TUSTIN COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS June 30, 2013 See independent auditors' report. -86- Special Revenue Funds Park Acquisition and Asset Gas Tax Measure M Development Forfeiture ASSETS Cash and investments $ 4,783,271 $ 3,555,526 $ 8,314,924 $ 436,886 Receivables: Accounts 149,341 294,356 - - Interest 2,072 1,541 3,602 189 Loans - - - - Notes - - - - Allowance for uncollectibles - - - - Prepaid expenses and deposits - - - - Land held for resale - - - - TOTAL ASSETS $ 4,934,684 $ 3,851,423 $ 8,318,526 $ 437,075 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES: Accounts payable and accrued liabilities $ 236,632 $ 1,152,723 $ 158,323 $ 24,290 Deposits payable - - - - TOTAL LIABILITIES 236,632 1,152,723 158,323 24,290 DEFERRED INFLOWS OF RESOURCES: Unavailable revenue - 63,501 - - FUND BALANCES: Nonspendable - - - - Restricted 4,698,052 2,635,199 - 412,785 Assigned - - 8,160,203 - TOTAL FUND BALANCES 4,698,052 2,635,199 8,160,203 412,785 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 4,934,684 $ 3,851,423 $ 8,318,526 $ 437,075 See independent auditors' report. -86- $ 2,385 $ Special Revenue Funds (Continued) $ 3,375 Capital $ 11,586 $ 1,605,212 - - 9,936 Projects Total 9,936 Supplemental 15,898 13,311 Fund Other Air Law Housing Construction Governmental Quality Enforcement Authority Total 95-1 Funds $ 164,642 $ 44,317 $ 1,758,726 $ 19,058,292 $ 3,921,097 $ 22,979,389 - - - 443,697 - 443,697 71 19 59,369 66,863 - 66,863 - - 1,062,005 1,062,005 - 1,062,005 - - 976,042 976,042 - 976,042 - - (1,688,046) (1,688,046) - (1,688,046) - - 31,500 31,500 - 31,500 - - 362,677 362,677 - 362,677 $ 164,713 $ 44,336 $ 2,562,273 $ 20,313,030 $ 3,921,097 $ 24,234,127 $ 2,385 $ 15,898 $ 3,375 $ 1,593,626 $ 11,586 $ 1,605,212 - - 9,936 9,936 - 9,936 2,385 15,898 13,311 1,603,562 11,586 1,615,148 - - 408,607 472,108 - 472,108 - - 394,177 394,177 - 394,177 162,328 28,438 1,746,178 9,682,980 3,909,511 13,592,491 - - - 8,160,203 - 8,160,203 162,328 28,438 2,140,355 18,237,360 3,909,511 22,146,871 $ 164,713 $ 44,336 $ 2,562,273 $ 20,313,030 $ 3,921,097 $ 24,234,127 -87- CITY OF TUSTIN COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - OTHER GOVERNMENTAL FUNDS For the year ended June 30, 2013 REVENUES: Investment income Intergovernmental revenue Charges for services Rental income Otherrevenue TOTAL REVENUES EXPENDITURES: Current: General government Public safety Community services Capital outlay Debt service: Interest and fiscal charges TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING USES: Transfers out NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING OF YEAR FUND BALANCES - END OF YEAR See independent auditors' report. Special Revenue Funds 866,041 - Park 145,039 4,798,177 574,205 - Acquisition 1,692 3,405 - $ 2,635,199 and Asset Gas Tax Measure M Development Forfeiture $ 9,123 $ 11,575 $ 17,707 $ 773 1,734,562 4,464,757 - 178,153 - - 17,037 - - - 128,440 - - - 10,000 - 1,743,685 4,476,332 173,184 178,926 866,041 - 22,603 109,306 145,039 4,798,177 574,205 - 1,744 1,692 3,405 - $ 2,635,199 1,012,824 4,799,869 600,213 109,306 730,861 (323,537) (427,029) 69,620 - (222,483) 730,861 (546,020) (427,029) 69,620 3,967,191 3,181,219 8,587,232 343,165 $ 4,698,052 $ 2,635,199 $ 8,160,203 $ 412,785 -88- - Special Revenue Funds (Continued) - Capital - 997,950 - 96,432 - Projects Total 96,432 Supplemental - 32,031 Fund Other Air Law Housing - Construction Governmental Quality Enforcement Authority Total 95-1 Funds $ 414 $ 59 $ 2,378 $ 42,029 $ - $ 42,029 - 102,721 900,000 7,380,193 - 7,380,193 46,831 - - 63,868 - 63,868 - - - 128,440 - 128,440 - - 26,883 36,883 44,595 81,478 47,245 102,780 929,261 7,651,413 44,595 7,696,008 - - - 997,950 - 997,950 - 96,432 - 96,432 - 96,432 - - 32,031 32,031 - 32,031 68,550 15,098 - 5,601,069 190,142 5,791,211 - - 524 7,365 - 7,365 68,550 111,530 32,555 6,734,847 190,142 6,924,989 (21,305) (8,750) 896,706 916,566 (145,547) 771,019 - - - (222,483) (191,658) (414,141) (21,305) (8,750) 896,706 694,083 (337,205) 356,878 183,633 37,188 1,243,649 17,543,277 4,246,716 21,789,993 $ 162,328 $ 28,438 $ 2,140,355 $ 18,237,360 $ 3,909,511 $ 22,146,871 -89- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GAS TAX SPECIAL REVENUE FUND For the year ended June 30, 2013 See independent auditors' report. -90- Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Investment income $ 10,000 $ 10,000 $ 9,123 $ (877) Intergovernmental revenue 1,971,600 1,971,600 1,734,562 (237,038) TOTAL REVENUES 1,981,600 1,981,600 1,743,685 (237,915) EXPENDITURES: Current: General government 933,700 933,700 866,041 67,659 Capital outlay 1,012,000 1,012,000 145,039 866,961 Debt service: Interest and fiscal charges - - 1,744 (1,744) TOTAL EXPENDITURES 1,945,700 1,945,700 1,012,824 932,876 EXCESS OF REVENUES OVER EXPENDITURES 35,900 35,900 730,861 694,961 FUND BALANCE - BEGINNING OF YEAR 3,967,191 3,967,191 3,967,191 - FUND BALANCE - END OF YEAR $ 4,003,091 $ 4,003,091 $ 4,698,052 $ 694,961 See independent auditors' report. -90- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL MEASURE M SPECIAL REVENUE FUND For the year ended June 30, 2013 See independent auditors' report. -91- Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Investment income $ 5,000 $ 5,000 $ 11,575 $ 6,575 Intergovernmental revenue 5,769,300 5,769,300 4,464,757 (1,304,543) TOTAL REVENUES 5,774,300 5,774,300 4,476,332 (1,297,968) EXPENDITURES: Capital outlay 6,716,891 6,716,891 4,798,177 1,918,714 Debt service: Interest and fiscal charges - - 1,692 (1,692) TOTAL EXPENDITURES 6,716,891 6,716,891 4,799,869 1,917,022 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (942,591) (942,591) (323,537) 619,054 OTHER FINANCING USES: Transfers out - - (222,483) (222,483) NET CHANGE IN FUND BALANCE (942,591) (942,591) (546,020) 396,571 FUND BALANCE - BEGINNING OF YEAR 3,181,219 3,181,219 3,181,219 - FUND BALANCE - END OF YEAR $ 2,238,628 $ 2,238,628 $ 2,635,199 $ 396,571 See independent auditors' report. -91- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL PARK ACQUISITION AND DEVELOPMENT SPECIAL REVENUE FUND For the year ended June 30, 2013 See independent auditors' report. -92- Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Investment income $ 60,000 $ 60,000 $ 17,707 $ (42,293) Charges for services 11,500 11,500 17,037 5,537 Rental income 96,300 96,300 128,440 32,140 Other revenue - - 10,000 10,000 TOTAL REVENUES 167,800 167,800 173,184 5,384 EXPENDITURES: Current: General government - - 22,603 (22,603) Capital outlay 660,927 660,927 574,205 86,722 Debt Service: Interest and fiscal charges - - 3,405 (3,405) TOTAL EXPENDITURES 660,927 660,927 600,213 60,714 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (493,127) (493,127) (427,029) 66,098 FUND BALANCE - BEGINNING OF YEAR 8,587,232 8,587,232 8,587,232 - FUND BALANCE - END OF YEAR $ 8,094,105 $ 8,094,105 $ 8,160,203 $ 66,098 See independent auditors' report. -92- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ASSET FORFEITURE SPECIAL REVENUE FUND REVENUES: Investment income Intergovernmental revenue TOTAL REVENUES EXPENDITURES: Current: General government EXCESS OF REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE - BEGINNING OF YEAR FUND BALANCE - END OF YEAR See independent auditors' report. For the year ended June 30, 2013 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 500 $ 500 $ 773 $ 273 80,000 80,000 178,153 98,153 80,500 80,500 178,926 98,426 187,000 187,000 109,306 77,694 (106,500) (106,500) 69,620 176,120 343,165 343,165 343,165 - $ 236,665 $ 236,665 $ 412,785 $ 176,120 -93 - CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL AIR QUALITY SPECIAL REVENUE FUND REVENUES: Investment income Charges for services TOTAL REVENUES EXPENDITURES: Capital outlay EXCESS OF REVENUES OVER (UNDER) EXPENDITURES ijo6jn]j:�_jw_r[$j=p xe:mm�[#=M1J:r_�:4 FUND BALANCE - END OF YEAR See independent auditors' report. For the year ended June 30, 2013 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 100 $ 100 $ 414 $ 314 57,500 57,500 46,831 (10,669) 57,600 57,600 47,245 (10,355) 77,000 77,000 68,550 8,450 (19,400) (19,400) (21,305) (1,905) 183,633 183,633 183,633 - $ 164,233 $ 164,233 $ 162,328 $ (1,905) -94- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL SUPPLEMENTAL LAW ENFORCEMENT SPECIAL REVENUE FUND For the year ended June 30, 2013 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Investment income $ - $ - $ 59 $ 59 Intergovernmental revenue 100,000 100,000 102,721 2,721 TOTAL REVENUES 100,000 100,000 102,780 2,780 EXPENDITURES: Current: Public safety 97,900 97,900 96,432 1,468 Capital outlay 25,000 25,000 15,098 9,902 TOTAL EXPENDITURES 122,900 122,900 111,530 11,370 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (22,900) (22,900) (8,750) 14,150 FUND BALANCE - BEGINNING OF YEAR 37,188 37,188 37,188 - FUND BALANCE - END OF YEAR $ 14,288 $ 14,288 $ 28,438 $ 14,150 See independent auditors' report. -95- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL HOUSING AUTHORITY SPECIAL REVENUE FUND For the year ended June 30, 2013 See independent auditors' report. -96- Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Investment income $ - $ - $ 2,378 $ 2,378 Intergovernmental revenue 900,000 900,000 900,000 - Otherrevenue - - 26,883 26,883 TOTAL REVENUES 900,000 900,000 929,261 29,261 EXPENDITURES: Community services 55,500 55,500 32,031 23,469 Debt Service: Interest and fiscal charges - - 524 (524) TOTAL EXPENDITURES 55,500 55,500 32,555 22,945 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 844,500 844,500 896,706 52,730 FUND BALANCE - BEGINNING OF YEAR 1,243,649 1,243,649 1,243,649 - FUND BALANCE - END OF YEAR $ 2,088,149 $ 2,088,149 $ 2,140,355 $ 52,730 See independent auditors' report. -96- CITY OF TUSTIN AGENCY FUNDS June 30, 2013 Agency Funds are used to account for assets held by the City in a trustee capacity or as an agent for individual, private organizations and other governments. Community Facilities District 04-01 - This fund records the deposit of monies held to pay the debt service requirements of the community facilities district. Community Facilities District 06-01 - This fund records the deposit of monies held to pay the debt service requirements of the community facilities district. Community Facilities District 07-01 - This fund records the deposit of monies held to pay the debt service requirements of the community facilities district. -97- CITY OF TUSTIN COMBINING STATEMENT OF ASSETS AND LIABILITIES ALL AGENCY FUNDS June 30, 2013 See independent auditors' report. -98- Community Community Community Facilities Facilities Facilities District District District 04-01 06-01 07-01 Total ASSETS Cash and investments $ - $ 156,532 $ 24,001 $ 180,533 Cash and investments with fiscal agents 537,450 9,024,663 1,868,347 11,430,460 Taxes receivable 29,485 78,885 - 108,370 TOTAL ASSETS $ 566,935 $ 9,260,080 $ 1,892,348 $ 11,719,363 LIABILITIES Due to bondholders $ 566,935 $ 9,260,080 $ 1,892,348 $ 11,719,363 TOTAL LIABILITIES $ 566,935 $ 9,260,080 $ 1,892,348 $ 11,719,363 See independent auditors' report. -98- CITY OF TUSTIN COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS For the year ended June 30, 2013 COMMUNITY FACILITIES DISTRICT 06-01 ASSETS: Cash and investments Cash and investments with fiscal agents Taxes receivable TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES See independent auditors' report. $ - $ 5,503,224 $ 5,346,692 $ 156,532 9,360,498 3,520,350 3,856,185 9,024,663 51,140 130,025 102,280 78,885 $ 9,411,638 $ 9,153,599 $ 9,305,157 $ 9,260,080 $ - $ 3,519,817 $ 3,519,817 $ - 9,411,638 5,561,873 5,713,431 9,260,080 $ 9,411,638 $ 9,081,690 $ 9,233,248 $ 9,260,080 -99- (Continued) Balance Balance July 1, 2012 Additions Deletions June 30, 2013 COMMUNITY FACILITIES DISTRICT 04-01 ASSETS: Cash and investments with fiscal agents $ 3,081,296 $ 10,052,320 $ 12,596,166 $ 537,450 Taxes receivable 18,224 47,710 36,449 29,485 TOTAL ASSETS $ 3,099,520 $ 10,100,030 $ 12,632,615 $ 566,935 LIABILITIES: Due to bondholders $ 3,099,520 $ 12,613,740 $ 15,146,325 $ 566,935 TOTAL LIABILITIES $ 3,099,520 $ 12,613,740 $ 15,146,325 $ 566,935 COMMUNITY FACILITIES DISTRICT 06-01 ASSETS: Cash and investments Cash and investments with fiscal agents Taxes receivable TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES See independent auditors' report. $ - $ 5,503,224 $ 5,346,692 $ 156,532 9,360,498 3,520,350 3,856,185 9,024,663 51,140 130,025 102,280 78,885 $ 9,411,638 $ 9,153,599 $ 9,305,157 $ 9,260,080 $ - $ 3,519,817 $ 3,519,817 $ - 9,411,638 5,561,873 5,713,431 9,260,080 $ 9,411,638 $ 9,081,690 $ 9,233,248 $ 9,260,080 -99- (Continued) CITY OF TUSTIN COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS (CONTINUED) For the year ended June 30, 2013 See independent auditors' report. -100- Balance Balance July 1, 2012 Additions Deletions June 30, 2013 COMMUNITY FACILITIES DISTRICT 07-01 ASSETS: Cash and investments $ - $ 1,113,942 $ 1,089,941 $ 24,001 Cash and investments with fiscal agents 2,205,821 515,551 853,025 1,868,347 TOTAL ASSETS $ 2,205,821 $ 1,629,493 $ 1,942,966 $ 1,892,348 LIABILITIES: Accounts payable $ - $ 516,398 $ 516,398 $ - Due to bondholders 2,205,821 1,122,708 1,436,181 1,892,348 TOTAL LIABILITIES $ 2,205,821 $ 1,639,106 $ 1,952,579 $ 1,892,348 TOTAL ALL AGENCY FUNDS ASSETS: Cash and investments $ - $ 6,617,166 $ 6,436,633 $ 180,533 Cash and investments with fiscal agents 14,647,615 14,088,221 17,305,376 11,430,460 Taxes receivable 69,364 177,735 138,729 108,370 TOTAL ASSETS $ 14,716,979 $ 20,883,122 $ 23,880,738 $ 11,719,363 LIABILITIES: Accounts payable $ - $ 4,036,215 $ 4,036,215 $ - Due to bondholders 14,716,979 19,298,321 22,295,937 11,719,363 TOTAL LIABILITIES $ 14,716,979 $ 23,334,536 $ 26,332,152 $ 11,719,363 See independent auditors' report. -100- STATISTICAL SECTION -101- The page left blank intentionally -102- DESCRIPTION OF STATISTICAL SECTION CONTENTS June 30, 2013 This part of the City of Tustin'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: Pages Financial Trends - These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time. 104 Revenue Capacity - These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. 114 Debt Capacity - These schedules 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. 120 Demographic and Economic Information - These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place. 128 Operating Information - These schedules 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. 130 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. The City implemented GASB Statement 34 in 2005; schedules presenting government -wide information include information beginning in that year. -103- Governmental activities: Net investment in capital assets Restricted Unrestricted Total governmental activities net position Business -type activities: Net investment in capital assets Restricted Unrestricted Total business -type activities net position Primary government: Net investment in capital assets Restricted Unrestricted Total primary government net position CITY OF TUSTIN NET POSITION BY COMPONENT Last Nine Fiscal Years (accrual bases of accounting) Fiscal Year 2005 2006 2007 2008 $ 238,482,797 $ 261,132,785 $ 285,331,502 $ 343,062,465 53,511,631 55,021,376 94,111,615 161,669,815 8,287,989 14,993,866 (19,936,964) (14,320,020) $ 300,282,417 $ 331,148,027 $ 359,506,153 $ 490,412,260 $ 22,198,864 $ 20,494,561 $ 22,150,723 $ 22,267,386 207,310,935 206,342,244 199,289,608 172,421,511 $ 229,509,799 $ 226,836,805 $ 221,440,331 $ 194,688,897 $ 260,681,661 $ 281,627,346 $ 307,482,225 $ 365,329,851 53,511,631 55,021,376 94,111,615 161,669,815 215,598,924 221,336,110 179,352,644 158,101,491 $ 529,792,216 $ 557,984,832 $ 580,946,484 $ 685,101,157 GASB 34 was implemented for the fiscal year ended June 30, 2005. Information prior to implementation of GASB 34 is not available. -104- Fiscal Year 2009 2010 2011 2012 2013 $ 357,299,104 $ 360,282,692 $ 378,911,546 $ 412,683,460 $ 431,761,288 145,602,640 135,670,302 116,718,495 47,727,966 54,367,385 104,037,153 114,737,049 116,545,351 147,513,249 177,532,888 $ 606,938,897 $ 610,690,043 $ 612,175,392 $ 607,924,675 $ 663,661,561 $ 24,964,824 $ 24,541,113 $ 20,872,492 $ 25,479,160 $ 24,171,745 1,191,694 - - - - 1,981,499 1,851,666 5,541,672 2,795,701 7,094,771 $ 28,138,017 $ 26,392,779 $ 26,414,164 $ 28,274,861 $ 31,266,516 $ 382,263,928 $ 384,823,805 $ 399,784,038 $ 438,162,620 $ 455,933,033 146,794,334 135,670,302 116,718,495 47,727,966 54,367,385 106,018,652 116,588,715 122,087,023 150,308,950 184,627,659 $ 635,076,914 $ 637,082,822 $ 638,589,556 $ 636,199,536 $ 694,928,077 -105- CITY OF TUSTIN CHANGES IN NET POSITION EXPENSES AND PROGRAM REVENUES Expenses: Governmental activities: General government Public safety Public works Community services Interest on long-term debt Total governmental activities expenses Last Nine Fiscal Years (accrual basis of accounting) Fiscal Year 2005 2006 2007 2008 $ 9,151,650 $ 10,269,053 $ 7,926,778 $ 8,668,759 21,748,046 23,255,837 25,269,653 27,875,230 14,169,030 14,354,535 19,091,399 30,814,898 3,255,036 3,425,790 3,444,799 3,442,833 874,939 1,003,920 1,618,814 4,715,026 49,198,701 52,309,135 57,351,443 75,516,746 Business -type activities: Water 9,324,853 9,365,401 11,879,958 11,870,706 Tustin Legacy 1,788,633 1,355,822 1,518,560 1,279,802 Total business -type activities expenses 11,113,486 10,721,223 13,398,518 13,150,508 Program revenues: Governmental activities: Charges for services: General government Public safety Public works Community services Operating grants and contributions Capital grants and contributions Total governmental activities program revenues Business -type activities: Charges for services: Water Tustin Legacy Capital grants and contributions Total business -type activities program revenues Net revenues (expenses): Governmental activities Business -type activities Total net revenues (expenses) 1,928,287 2,388,279 2,540,796 2,716,432 1,180,959 1,364,877 1,476,811 2,749,660 1,631,277 3,230,212 2,987,687 1,688,753 941,297 876,199 916,075 929,548 2,377,440 3,655,881 3,677,905 3,831,037 4,484,592 19,470,274 9,652,907 79,210,370 12,543,852 30,985,722 21,252,181 91,125,800 8,478,119 8,858,151 10,418,522 10,923,061 1,328,686 3,660,334 409,693 34,370 805,777 - - 28,299,036 10,612,582 12,518,485 10,828,215 39,256,467 $ (36,654,849) $ (21,323,413) $ (36,099,262) $ 15,609,054 (500,904) 1,797,262 (2,570,303) 26,105,959 $ (37,155,753) $ (19,526,151) $ (38,669,565) $ 41,715,013 GASB 34 was implemented for the fiscal year ended June 30, 2005. Information prior to implementation of GASB 34 is not available. -106- Fiscal Year 2009 2010 2011 2012 2013 $ 8,499,303 $ 7,802,579 $ 7,854,361 $ 12,266,470 $ 18,705,913 29,126,019 27,277,141 28,622,807 28,800,773 30,702,298 22,102,002 20,816,686 19,809,907 20,765,854 15,087,234 5,112,770 12,742,391 13,150,089 7,078,104 3,201,865 3,566,782 4,087,839 4,814,598 3,057,645 967,115 68,406,876 72,726,636 74,251,762 71,968,846 68,664,425 30,222,148 16,982,781 13,621,100 28,791,083 29,367,544 12,569,331 11,938,146 12,578,667 13,467,541 13,574,149 1,259,093 - - - - 13,828,424 11,938,146 12,578,667 13,467,541 13,574,149 1,694,464 1,404,925 1,109,150 1,390,073 763,101 2,136,772 1,168,348 1,196,830 1,133,096 917,947 2,374,308 3,761,321 3,508,904 800,328 1,248,595 897,386 957,545 969,006 974,747 926,432 4,253,442 3,403,411 3,441,281 3,590,210 4,513,158 18,865,776 6,287,231 3,395,929 20,902,629 20,998,311 30,222,148 16,982,781 13,621,100 28,791,083 29,367,544 11,281,679 10,594,471 12,422,746 15,112,161 16,688,773 22,587 - - - - 11,304,266 10,594,471 12,422,746 15,112,161 16,688,773 $ (38,184,728) $ (55,743,855) $ (60,630,662) $ (43,177,763) $ (39,296,881) (2,524,158) (1,343,675) (155,921) 1,644,620 3,114,624 $ (40,708,886) $ (57,087,530) $ (60,786,583) $ (41,533,143) $ (36,182,257) -107- General revenues and other changes in net position: Governmental activities: Taxes: Property taxes Transient occupancy taxes Business license taxes Othertaxes Sales tax Motor vehicle in lieu, unrestricted Investment income Other general revenues Gain (loss) on disposal of capital assets Transfers Extraordinary item Total governmental activities Business -type activities CITY OF TUSTIN CHANGES IN NET POSITION GENERAL REVENUES Last Nine Fiscal Years (accrual basis of accounting) Fiscal Year 2005 2006 2007 2008 $ 19,338,392 $ 21,242,797 $ 28,617,969 $ 31,070,501 139,879 155,199 161,105 163,831 N/A N/A N/A N/A 1,320,209 1,409,696 1,534,720 1,665,601 18,351,207 18,912,722 19,317,135 20,428,465 455,244 433,795 443,222 321,918 - 3,202,914 4,842,033 7,417,199 10,846,132 1,323,230 1,598,099 1,523,530 (216,936) (422,555) - (1,366,208) 1,233,209 5,931,225 7,943,105 53,668,609 51,467,336 52,189,023 64,457,388 114,893,446 Investment income - 1,411,899 1,567,316 815,560 Gain (loss) on disposal of capital assets 8,358,415 - 3,519,618 (681) Miscellaneous 509,956 49,070 - 23,337 Transfers (1,233,209) (5,931,225) (7,943,105) (53,668,609) Total business -type activities 7,635,162 (4,470,256) (2,856,171) (52,830,393) Total primary government $ 59,102,498 $ 47,718,767 $ 61,601,217 $ 62,063,053 Changes in net position: Governmental activities $ 14,812,487 $ 30,865,610 $ 28,358,126 $ 130,502,500 Business -type activities 7,134,258 (2,672,994) (5,426,474) (26,724,434) Total primary government $ 21,946,745 $ 28,192,616 $ 22,931,652 $ 103,778,066 GASB 34 was implemented for the fiscal year ended June 30, 2005. Information prior to implementation of GASB 34 is not available. -108- Fiscal Year 2009 2010 2011 2012 2013 $ 34,022,959 $ 28,347,659 $ 30,205,879 $ 23,270,718 $ 14,526,101 154,379 141,335 142,915 137,131 137,064 356,565 337,867 358,526 44,800 377,498 1,689,573 1,720,505 1,648,319 1,621,521 1,655,388 19,858,142 15,917,332 18,597,453 19,931,865 21,575,405 252,666 6,122,789 6,189,249 5,833,094 5,951,653 4,863,469 4,086,852 2,358,847 958,169 243,921 2,314,540 1,520,662 1,700,323 14,444,183 7,231,648 - - - - 43,335,089 103,805,196 - - - - - - - (27,314,435) - 167,317,489 58,195,001 61,201,511 38,927,046 95,033,767 164,764 86,654 158,242 156,855 39,700 82,810 25,340 19,064 59,222 271,858 (103,805,196) - - - - (103,557,622) 111,994 177,306 216,077 311,558 $ 63,759,867 $ 58,306,995 $ 61,378,817 $ 39,143,123 $ 95,345,325 $ 129,132,761 $ 2,451,146 $ 570,849 $ (4,250,717) $ 55,736,886 (106,081,780) (1,231,681) 21,385 1,860,697 3,426,182 $ 23,050,981 $ 1,219,465 $ 592,234 $ (2,390,020) $ 59,163,068 -109- CITY OF TUSTIN FUND BALANCES OF GOVERNMENTAL FUNDS Last Nine Fiscal Years (modified accrual basis of accounting) Fund Balance prior to GASB 54 The City of Tustin has elected to show only nine years of data for this schedule. - 110 - Fiscal Year 2005 2006 2007 2008 General fund: Reserved $ 276,989 $ 118,510 $ 248,372 $ 116,342 Unreserved 19,931,022 24,124,968 20,454,356 24,471,029 Total general fund $ 20,208,011 $ 24,243,478 $ 20,702,728 $ 24,587,371 All other governmental funds: Reserved $ 32,804,461 $ 34,612,789 $ 68,724,358 $ 76,696,588 Unreserved, reported in: Special revenue funds 7,592,615 8,550,855 10,639,839 64,896,223 Debt service funds 1,936,057 2,510,686 - - Capital projects funds 17,029,831 11,145,244 12,388,651 17,558,428 Total all other governmental funds $ 59,362,964 $ 56,819,574 $ 91,752,848 $ 159,151,239 Fund Balance subsequent to GASB 54 General fund: Nonspendable $ - $ - $ - $ - Restricted - - - - Committed - - - - Assigned - - - - Unassigned - - - - Total general fund $ - $ - $ - $ - All other governmental funds: Nonspendable $ - $ - $ - $ - Restricted - - - - Committed - - - - Assigned - - - - Unassigned - - - - Total all other governmental funds $ - $ - $ - $ - The City of Tustin has elected to show only nine years of data for this schedule. - 110 - Fiscal Year 2009 2010 2011 2012 2013 $ 120,632,293 $ 144,139,167 $ - $ - $ - 1,971,846 5,870,992 - - - $ 122,604,139 $ 150,010,159 $ - $ - $ - $ 49,777,973 $ 66,609,267 $ - $ - $ - 16,437,130 14,277,683 - - - - (6,774,245) - - - 90,474,987 75,663,086 - - - $ 156,690,090 $ 149,775,791 $ - $ - $ - $ - $ 144,139,167 $ 144,186,955 $ 144,604,847 $ 128,988,209 - - - - 19,615,343 - 47,608 - - - - 5,823,384 - - - - - 7,443,165 4,077,344 44,368,566 $ - $ 150,010,159 $ 151,630,120 $ 148,682,191 $ 192,972,118 $ - $ 34,800,738 $ 22,352,713 $ 1,710,292 $ 1,287,607 - 111,455,097 130,673,281 38,274,666 33,885,757 - 344,708 - - - - 11,670,324 18,603,317 16,239,322 16,880,590 - (8,495,076) (10,989,463) - - $ - $ 149,775,791 $ 160,639,848 $ 56,224,280 $ 52,053,954 CITY OF TUSTIN CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Nine Fiscal Years (modified accrual basis of accounting) Other financing sources (uses) Proceeds from debt issuance - Fiscal Year 25,000,000 - Transfers in 2005 2006 2007 2008 Revenues: (3,970,443) (5,270,356) (10,795,694) (7,803,274) Taxes $ 39,290,491 $ 40,542,668 $ 48,306,569 $ 51,775,505 Licenses and permits 1,008,965 2,153,355 2,095,154 2,710,309 Fines and forfeitures 895,816 784,966 783,390 818,868 Investment income 1,662,329 2,849,921 4,228,582 7,529,488 Intergovernmental revenues 7,613,141 15,338,254 20,136,822 27,394,402 Charges for services 1,530,537 2,107,336 2,043,251 1,583,324 Rental income 208,222 304,733 349,450 786,438 Developer contributions - - - - Other revenues 12,827,879 8,260,032 3,160,370 59,309,772 Total revenues 65,037,380 72,341,265 81,103,588 151,908,106 Expenditures: Current: General government 8,429,464 10,134,368 7,806,916 8,295,887 Public safety 21,075,766 22,697,122 24,450,803 26,561,960 Public works 7,475,332 7,691,894 9,651,745 10,136,680 Community services 2,834,472 3,026,890 3,023,648 2,886,132 Capital outlay 13,509,215 27,057,889 28,503,673 15,080,865 Debt service: Principal retirement 1,220,000 1,275,000 1,330,000 1,055,000 Interest and fiscal charges 884,533 1,023,622 1,620,897 4,718,806 Bond issue costs - - - - Total expenditures 55,428,782 72,906,785 76,387,682 68,735,330 Excess (deficiency) of revenues over (under) expenditures 9,608,598 (565,520) 4,715,906 83,172,776 Other financing sources (uses) Proceeds from debt issuance - - 25,000,000 - Transfers in 5,203,652 7,190,511 10,795,694 7,803,274 Transfers out (3,970,443) (5,270,356) (10,795,694) (7,803,274) Contribution to developer - - - (11,934,400) Sale of property 65,431 137,442 1,676,618 44,658 Total other financing sources (uses) 1,298,640 2,057,597 26,676,618 (11,889,742) Extraordinary loss - - - - Net change in fund balances $ 10,907,238 $ 1,492,077 $ 31,392,524 $ 71,283,034 Debt service as a percentage of noncapital expenditures 5.29% 5.28% 6.57% 12.06% The City of Tustin has elected to show only nine years of data for this schedule. - 112 - Fiscal Year 2009 2010 2011 2012 2013 $ 56,198,002 $ 52,579,529 $ 57,324,011 $ 50,907,306 $ 44,279,024 1,692,955 3,538,198 716,144 443,928 577,044 832,188 890,770 893,642 875,068 678,428 4,429,915 3,198,484 1,632,215 472,725 173,890 14,626,663 5,378,430 5,372,905 6,413,137 21,551,042 4,497,309 2,708,705 5,020,485 2,813,752 2,685,080 771,807 869,645 358,030 480,255 550,003 - 4,051,180 1,593,475 - - 1,188,200 1,028,432 2,425,052 14,075,025 9,773,813 84,237,039 74,243,373 75,335,959 76,481,196 80,268,324 6,728,236 7,197,709 7,505,928 11,656,331 17,357,805 27,759,939 26,359,435 27,508,514 28,714,347 27,944,039 11,311,291 10,133,685 9,110,621 6,954,384 5,980,807 5,005,986 12,251,479 12,740,969 6,506,381 2,752,523 24,772,717 13,125,983 9,979,670 25,816,530 28,487,231 11,143,000 7,913,000 10,659,000 2,590,000 - 3,570,834 4,603,661 4,131,435 3,264,323 967,115 - - 429,731 - - 90,292,003 81,584,952 82,065,868 85,502,296 83,489,520 (6,054,964) (7,341,579) (6,729,909) (9,021,100) (3,221,196) - 26,274,205 43,281,289 - - 142,866,218 37,207,661 2,645,014 3,020,291 6,122,454 (41,295,836) (37,207,661) (2,645,014) (3,020,291) (6,122,454) 40,201 7,421 18,138 43,745 43,340,797 101,610,583 26,281,626 43,299,427 43,745 43,340,797 - - - (98,386,142) - $ 95,555,619 $ 18,940,047 $ 36,569,518 $ (107,363,497) $ 40,119,601 28.96% 22.37% 26.76% 10.88% 1.76% - 113 - CITY OF TUSTIN ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY Last Ten Fiscal Years Notes: Exemptions are netted directly against individual categories In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. (A) Effective February 1, 2012, the Redevelopment Agency was dissolved. See Notes 16 and 17 for more information. - 114 - City Fiscal Year Taxable Ended Assessed June 30 Secured Unsecured Value 2004 $ 4,969,203 $ 314,645 $ 5,283,848 2005 5,306,887 308,339 5,615,226 2006 5,753,518 285,670 6,039,188 2007 6,397,216 301,747 6,698,963 2008 7,109,465 359,631 7,469,096 2009 7,505,735 435,026 7,940,761 2010 7,381,782 371,722 7,753,504 2011 7,274,075 371,027 7,645,102 2012 7,360,593 344,424 7,705,017 2013 7,486,098 341,604 7,827,702 Notes: Exemptions are netted directly against individual categories In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. (A) Effective February 1, 2012, the Redevelopment Agency was dissolved. See Notes 16 and 17 for more information. - 114 - Redevelopment Agency (A) -115 - Total Direct Tax Rate 0.190% 0.220% 0.226% 0.261% 0.279% 0.326% 0.308% 0.310% 0.303% 0.302% Taxable Assessed Secured Unsecured Value (A) $ 659,266 $ 61,810 $ 721,076 927,400 68,767 996,167 1,039,506 71,738 1,111,244 1,496,217 84,203 1,580,420 2,425,555 165,392 2,590,947 1,946,378 71,422 2,017,800 1,667,398 80,166 1,747,564 1,696,957 77,235 1,774,192 1,590,722 83,160 1,673,882 1,596,843 77,628 1,674,471 -115 - Total Direct Tax Rate 0.190% 0.220% 0.226% 0.261% 0.279% 0.326% 0.308% 0.310% 0.303% 0.302% CITY OF TUSTIN DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Nine Fiscal Years (rate per $100 of taxable value) Direct Rate: City of Tustin Tustin Unified School District South Orange County Community College District County of Orange Orange County Flood Control District Orange County Library District Orange County Department of Education Various Special Districts Total Direct Rate Overlapping Rates: Tustin Unified School District Bonds Metropliton Water District Bonds Rancho Santiago Community College District Bonds Irvine Ranch Water District Bonds Santa Ana Unified School District Bonds Total Overlapping Rates Total Direct and Overlapping Rates Fiscal Year 2005 2006 2007 2008 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 0.4397 0.4397 0.4397 0.4397 0.0886 0.0886 0.0886 0.0886 0.0617 0.0617 0.0617 0.0617 0.0198 0.0198 0.0198 0.0198 0.0167 0.0167 0.0167 0.0167 0.0161 0.0161 0.0161 0.0161 0.2302 0.2302 0.2302 0.2302 1.0000 1.0000 1.0000 1.0000 0.0554 0.0311 0.0023 0.0317 0.0058 0.0052 0.0047 0.0045 0.0273 0.0169 0.0191 0.0237 0.0001 0.0477 0.2138 0.2143 0.0496 0.0435 0.0392 0.0359 0.1382 0.1444 0.2791 0.3101 $ 1.1382 $ 1.1444 $ 1.2791 $ 1.3101 The City of Tustin has elected to show only nine years of data for this schedule. Source: Hdl, Coren & Cone - 116 - Fiscal Year 2009 2010 2011 2012 2013 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 0.4397 0.4397 0.4397 0.4397 0.4397 0.0886 0.0886 0.0886 0.0886 0.0886 0.0617 0.0617 0.0617 0.0617 0.0617 0.0198 0.0198 0.0198 0.0198 0.0198 0.0167 0.0167 0.0167 0.0167 0.0167 0.0161 0.0161 0.0161 0.0161 0.0161 0.2302 0.2302 0.2302 0.2302 0.2302 1.0000 1.0000 1.0000 1.0000 1.0000 0.0310 0.0380 0.0596 0.0559 0.0672 0.0043 0.0043 0.0037 0.0037 0.0035 0.0225 0.0274 0.0314 0.0315 0.0324 0.2143 0.2242 0.2242 0.2155 0.2155 0.0321 0.0739 0.0717 0.0715 0.0775 0.3042 0.3678 0.3906 0.3781 0.3961 $ 1.3042 $ 1.3678 $ 1.3906 $ 1.3781 $ 1.3961 -117- CITY OF TUSTIN PRINCIPAL PROPERTY TAX PAYERS Current Year and Nine Years Ago The amounts shown above include the Combined Tax Rolls and the SBE Non -Unitary Tax Roll Sources: Orange County Assessor's Office HdL, Coren & Cone - 118 - 2013 2004 Percent of Percent of Total City Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Value Value Value Irvine Company LLC $ 271,717,606 2.86% $ 272,408,550 4.62% Vestar Kimco Tustin LP 158,439,243 1.67% Avalon II California Value I 95,784,066 1.01% PK II Larwin Square SC LP 49,776,225 0.52% Ricoh Development of California Inc 47,679,705 0.50% 24,000,000 0.41% Costco Wholesale Corporation 46,801,088 0.49% Borchard Redhill SKB-Tustin LLC 46,563,000 0.49% 31,479,889 0.53% Rancho Alisal LLC 36,610,468 0.39% CPII Park Place LLC 34,761,082 0.37% Tustin Heights SC LP 33,737,223 0.36% Pan Pacific Retail Prop 43,772,016 0.74% AIMCO Brookside Tustin 37,599,477 0.64% Steelcase Inc 37,492,385 0.64% Sanyo Foods Corporation 32,654,926 0.55% Catellus Finance 29,052,688 0.49% Pairgain Technologies Inc 24,081,904 0.41% Cadigan Communities LP 23,562,976 0.40% $ 821,869,706 8.66% $ 556,104,811 9.43% The amounts shown above include the Combined Tax Rolls and the SBE Non -Unitary Tax Roll Sources: Orange County Assessor's Office HdL, Coren & Cone - 118 - CITY OF TUSTIN PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Total Collections to Date Percent Collected within the of Levy Fiscal Taxes Levied Fiscal Year of Levy Collections in Year Ended for the 29,417,184 Percent Subsequent June 30 Fiscal Year Amount of Levy Years 2004 $ 12,011,332 $ 11,507,171 95.80% $ 27,851 2005 19,706,674 19,338,392 98.13% 42,299 2006 21,602,011 21,242,797 98.34% 309,074 2007 30,701,393 28,617,969 93.21% 799,215 2008 33,554,781 31,070,501 92.60% 695,793 2009 38,515,110 34,022,959 88.34% 1,417,067 2010 31,739,378 28,347,659 89.31% 917,222 2011 30,713,746 29,541,000 96.18% 610,052 2012 30,163,205 20,433,400 67.74% 147,389 2013 9,492,638 9,257,817 97.53% 121,715 Total Collections to Date Notes: The amounts presented include City property taxes and former Redevelopment Agency tax increment. This schedule also include amounts collected by the City and former Redevelopment Agency that were passed -through to other agencies. Effective February 1, 2012, the Redevelopment Agency was dissolved. See Notes 16 and 17 for more information Source: County of Orange Auditor Controller's Office - 119- Percent Amount of Levy $ 11,535,022 96.03% 19,380,691 98.35% 21,551,871 99.77% 29,417,184 95.82% 31,766,294 94.67% 35,440,026 92.02% 29,264,881 92.20% 30,151,052 98.17% 20,580,789 68.23% 9,379,532 98.81% Notes: The amounts presented include City property taxes and former Redevelopment Agency tax increment. This schedule also include amounts collected by the City and former Redevelopment Agency that were passed -through to other agencies. Effective February 1, 2012, the Redevelopment Agency was dissolved. See Notes 16 and 17 for more information Source: County of Orange Auditor Controller's Office - 119- CITY OF TUSTIN RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Fiscal Governmental Activities Year General Tax Tax Tax Lease Total Ended Obligation Allocation Allocation Allocation Revenue Notes Notes Governmental June 30 Bonds Bonds (1) Bonds (7) Bonds (8) Bonds (2) Payable (3) Payable (4) Activities 2004 $ $ 15,910,000 $ $ $ 945,000 $ $ $ 16,855,000 2005 14,990,000 645,000 15,635,000 2006 14,030,000 330,000 14,360,000 2007 13,020,000 - 25,000,000 38,020,000 2008 11,975,000 25,000,000 36,975,000 2009 10,870,000 14,962,000 19,284,170 45,116,170 2010 9,720,000 26,170,000 8,199,000 20,112,456 64,201,456 2011 8,515,000 24,915,000 44,170,000 - 20,976,317 98,576,317 2012 - - - 21,877,282 21,877,282 2013 22,816,940 22,816,940 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Per Capita Personal Income is not available for the City of Tustin alone so the Percentage of Personal Per Capita Income has been left off this schedule. (1) On July 1, 1998 the City issued $20.8 million of Tax Allocation Refunding Bonds to retire Series 1987 Refunding Bonds. On February 1, 2012, the remaining liability of $7,260,000 was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. (2) In June of 1996 the City issued $2.7 million of Lease Revenue Bonds as a member of the Countywide Joint Powers Authority. The final maturity was August, 2006. (3) In April of 2007 the Tustin Redevelopment Agency executed a note payable in the amount of $25 million to acquire property to carry out the program objectives of the Agency. (4) In December of 2008 the City executed a note payable to the Tustin Redevelopment Agency in the amount of $18,881,750 to increase its deposit of probable compensation per court order pending litigation. The balance also includes accrued interest in the amount of $1,162,188. As of February 1, 2012, this note is payable to the Successor Agency to the Tustin Community Redevelopment Agency. (5) In September of 2003 the City issued $14.355 million of Refunding Water Revenue Bonds to defease the outstanding Certificates of Participation and the Orange County Water District Notes. These bonds were defeased in March 2012. (6) In 1998 the City executed a note payable in the amount of $6.8 million with the Orange County Water District. -120- (7) In March 2010 the Tustin Redevelopment Agency issued $26,170,000 Tax Allocation Housing Bonds, Series 2010 to refinance low and moderate income housing activities throughout the geographic boundaries in the City. On February 1, 2012, the remaining liability of $24,220,000 was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. (8) In November 2010 the Tustin Redevelopment Agency issued $44,170,000 MCAS Tax Allocation Bonds, Series 2010 to finance capital improvements in the MCAS project area. On February 1, 2012, the remaining liability of $43,530,000 was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. (9) In May 2011 the City issued $20,760,000 Water Revenue Bonds, 2011 Series A to finance water capital improvement proj ects. (10) In March 2012 the City issued $8.91 million of Refunding Water Revenue Bonds to defease the outstanding 2003 Water Revenue Bonds. -121 - Business -type Activities Water Water Water Certificates Total Total Debt Revenue Revenue Revenue of Notes Business -type Primary per Bonds (5) Bonds (9) Bonds (10) Participation Payable (6) Activities Government Capita $ - $ $ $ 7,575,000 $ 3,991,272 $ 11,566,272 $ 28,421,272 $ 407 13,668,367 - - 13,668,367 29,303,367 417 13,461,607 13,461,607 27,821,607 394 13,331,607 13,331,607 51,351,607 719 13,080,000 13,080,000 50,055,000 696 12,560,000 12,560,000 57,676,170 783 11,875,000 11,875,000 76,076,456 1,018 11,165,000 20,760,000 31,925,000 130,501,317 1,722 - 20,760,000 8,910,000 29,670,000 51,547,282 673 - 20,760,000 8,200,000 28,960,000 51,776,940 664 (7) In March 2010 the Tustin Redevelopment Agency issued $26,170,000 Tax Allocation Housing Bonds, Series 2010 to refinance low and moderate income housing activities throughout the geographic boundaries in the City. On February 1, 2012, the remaining liability of $24,220,000 was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. (8) In November 2010 the Tustin Redevelopment Agency issued $44,170,000 MCAS Tax Allocation Bonds, Series 2010 to finance capital improvements in the MCAS project area. On February 1, 2012, the remaining liability of $43,530,000 was transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. (9) In May 2011 the City issued $20,760,000 Water Revenue Bonds, 2011 Series A to finance water capital improvement proj ects. (10) In March 2012 the City issued $8.91 million of Refunding Water Revenue Bonds to defease the outstanding 2003 Water Revenue Bonds. -121 - CITY OF TUSTIN RATIO OF GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds. The City currently does not have general bonded debt in either fund. * - Assessed value has been used because the actual value of taxable property is not readily available in the State of California. Effective February 1, 2012, the redevelopment agency was dissolved. The outstanding balance of tax allocation bonds were transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. - 122- Outstanding General Bonded Debt Fiscal Year General Tax Percent of Ended Obligation Allocation Assessed Per June 30 Bonds Bonds Total Value * Capita 2004 $ - $ 15,910,000 $ 15,910,000 0.26% $ 228 2005 - 14,990,000 14,990,000 0.23% 213 2006 - 14,030,000 14,030,000 0.20% 199 2007 - 13,020,000 13,020,000 0.16% 182 2008 - 11,975,000 11,975,000 0.12% 166 2009 - 10,870,000 10,870,000 0.11% 148 2010 - 35,890,000 35,890,000 0.38% 480 2011 - 77,600,000 77,600,000 0.82% 1,024 2012 - - - - - 2013 - - - - - General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds. The City currently does not have general bonded debt in either fund. * - Assessed value has been used because the actual value of taxable property is not readily available in the State of California. Effective February 1, 2012, the redevelopment agency was dissolved. The outstanding balance of tax allocation bonds were transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. - 122- CITY OF TUSTIN OVERLAPPING DEBT SCHEDULE June 30, 2013 2012-13 Assessed Valuation Redevelopment Incremental Valuation Adjusted Assessed Value OVERLAPPING TAX AND ASSESSMENT DEBT: Metropolitan Water District Rancho Santiago Community College District Santa Ana Unified School District Irvine Unified School District Community Facilities District No. 86-1 Tustin Unified School District School Facilities Improvement District No. 2002-1 Tustin Unified School District School Facilities Improvement District No. 2008-1 Tustin Unified School District School Facilities Improvement District No. 2012-1 Tustin Unified School District Community Facilities District No. 88-1 Tustin Unified School District Community Facilities District No. 06-1 City of Tustin Community Facilities Districts Irvine Ranch Water District Improvement Districts TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT DIRECT AND OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations Orange County Pension Obligations Orange County Board of Education Certificates of Participation Municipal Water District of Orange County Water Facilities Corporation Orange Unified School District Certificates of Participation Orange Unified School District Benefit Obligations Santa Ana Unified School District Certificates of Participation City of Tustin TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT: Less: MWDOC Water Facilities Corporation (100% self supporting) TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT: OVERLAPPING TAX INCREMENT DEBT (Successor Agencies) GROSS COMBINED TOTAL DEBT NET COMBINED TOTAL DEBT $ 9,502,172,504 Total Overlapping Tax and Assessment Debt (2,064,358,979) Total Direct Debt 0.00% $ 7,437,813,525 4.20% Net Combined Total Debt 5.36% City's Share of Total Debt (1) Debt at 6/30/13 %Applicable 6/30/13 $ 165,085,000 0.452% $ 746,184 293,246,944 0.015 43,987 296,779,272 0.001 2,968 98,685,000 0.250 246,713 55,441,785 45.968 25,485,480 72,725,000 43.871 31,905,185 35,000,000 44.797 15,678,950 47,955,000 100.000 47,955,000 13,545,000 100.000 13,545,000 77,570,000 100.000 77,570,000 334,278,080 0.496-82.193 101,840,903 $ 315,020,370 190,546,000 2.221% 4,232,027 306,287,244 2.221 6,802,640 15,770,000 2.221 350,252 10,035,000 2.664 267,332 35,573,644 0.030 10,672 88,265,000 0.030 26,480 78,885,880 0.001 789 - 100.000 - $11,690,192 267,332 $11,422,860 $ 105,635,000 0.002-100.00% $ 72,175,669 $ 398,886,231 (2) $ 398,618,899 (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. Effective February 1, 2012, the former Redevelopment Agency was dissolved. See Notes 16 and 17 for more information. Ratios to 2012-13 Assessed Valuations: Total Overlapping Tax and Assessment Debt 3.32% Total Direct Debt 0.00% Gross Combined Total Debt 4.20% Net Combined Total Debt 5.36% Ratios to Redevelopment Incremental Valuations ($2.064.358.979): Total Overlapping Tax Increment Debt 3.50% Source: California Municipal Statistics, Inc. -123- Assessed valuation Conversion percentage Adjusted assessed valuation Debt limit percentage Debt limit Total net debt applicable to limitation Legal debt margin Total debt applicable to the limit as a percentage of debt limit CITY OF TUSTIN LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years 2004 $ 5,283,848,000 25% 1,320,962,000 15% 198,144,300 Fiscal Year 2005 $ 5,615,226,000 25% 1,403,806,500 15% 210,570,975 2006 $ 6,039,188,000 25% 1,509,797,000 15% 226,469,550 2007 $ 6,698,963,000 25% 1,674,740,750 15% 251,211,113 $ 198,144,300 $ 210,570,975 $ 226,469,550 $ 251,211,113 0.0% 0.0% 0.0% 0.0% The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state. Sources: County Tax Assessor's Office City Finance Department -124- Fiscal Year 2008 2009 2010 2011 2012 2013 $ 7,469,096,000 $ 7,940,761,000 $ 7,753,504,000 $ 7,645,102,000 $ 7,705,016,000 $ 7,827,702,000 25% 25% 25% 25% 25% 25% 1,867,274,000 1,985,190,250 1,938,376,000 1,911,275,500 1,926,254,000 1,956,925,500 15% 15% 15% 15% 15% 15% 280,091,100 297,778,538 290,756,400 286,691,325 288,938,100 293,538,825 $ 280,091,100 $ 297,778,538 $ 290,756,400 $ 286,691,325 $ 288,938,100 $ 293,538,825 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -125- Fiscal Year Ended June 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 CITY OF TUSTIN PLEDGED -REVENUE COVERAGE Last Ten Fiscal Years Refunding Water Revenue Bonds Debt Service Less Net Water Operating Available Revenue Expenses Revenue 4.44 230,000 $ 9,189,579 $ 6,032,117 $ 3,157,462 8,905,221 7,297,101 1,608,120 9,348,715 7,417,023 1,931,692 10,844,515 9,986,251 858,264 11,240,752 10,053,706 1,187,046 11,510,315 10,573,932 936,383 12,829,902 9,928,608 2,901,294 12,422,746 10,566,435 1,856,311 15,112,161 10,683,621 4,428,540 16,688,773 11,462,258 5,226,515 Refunding Water Revenue Bonds Debt Service Principal Interest Coverage $ 400,000 $ 311,002 4.44 230,000 583,920 1.98 130,000 575,410 2.74 180,000 570,470 1.14 335,000 563,450 1.32 520,000 550,385 0.87 685,000 530,105 2.39 710,000 502,705 1.53 740,000 1,432,659 2.04 710,000 957,111 3.14 Notes: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. Operating expenses do not include interest or depreciation expenses. Water revenues in 2010 include proceeds from an advance from the City's general fund. Effective February 1, 2012, the redevelopment agency was dissolved. The outstanding balance of tax allocation bonds were transferred to the Successor Agency to the Tustin Community Redevelopment Agency. See Notes 16 and 17 for more information. - 126- Tax Allocation Bonds (A) Tax Debt Service Allocation Principal Interest Coverage $ 2,362,640 $ 890,000 $ 765,205 1.43 2,401,247 920,000 727,640 1.46 2,952,481 960,000 687,680 1.79 3,956,734 1,000,000 642,040 2.41 3,381,188 1,055,000 594,358 2.05 4,460,947 1,105,000 547,365 2.70 3,831,975 1,150,000 497,180 2.33 17,928,849 2,460,000 2,204,419 3.84 -127- CITY OF TUSTIN DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years Source: HdL Coren & Cone, LLC -128- Personal Per Capita County of Orange Calendar City of Tustin Income Personal Unemployment Year Population (In Thousands) Income Rate 2004 69,753 $ 1,832,204 $ 26,267 4.70% 2005 70,291 1,953,946 27,798 4.20% 2006 70,524 2,064,542 29,274 3.70% 2007 71,383 2,246,281 31,468 3.30% 2008 71,931 2,368,395 32,926 3.80% 2009 73,670 2,450,480 33,263 5.20% 2010 74,736 2,407,036 32,207 8.90% 2011 75,733 2,363,057 31,186 9.40% 2012 76,597 2,429,318 31,716 8.60% 2013 77,983 2,451,708 31,439 5.60% Source: HdL Coren & Cone, LLC -128- CITY OF TUSTIN PRINCIPAL EMPLOYERS Current Year and Seven Years Ago (1) Information is not available for fiscal year 2003-2004. Sources: Orange County Investment Board, City of Tustin -129- 2013 2006(l) Percent of Percent of Number of Total Number of Total Employer Employees Employment Employees Employment Tustin Unified School District 1,100 2.63% Rockwell Collins Inc 600 1.44% Ricoh Electronics Inc 500 1.20% 1,038 2.77% Costco 450 1.08% Safmarine 400 0.96% GE Power Electronics (formerly Cherokee International) 330 0.79% 330 0.84% City Of Tustin 300 0.72% Tustin Hospital Medical Center 300 0.72% 200 0.51% Toshiba America Medical Systs 300 0.72% 300 0.76% Micro Vention Inc. 300 0.72% Balboa Water Group 253 0.61% Kleen Impressions 250 0.60% Warner Systems 250 0.60% Alliance One 215 0.51% Home Depot 203 0.49% Health South Tustin Rehab Hosp 200 0.48% Logomark Inc 200 0.48% Straub Distributing Co 200 0.48% SMC Corp 200 0.48% KTBN Channel 40 Trinity Broadcasting 200 0.48% 180 0.46% Texas Instruments 560 1.42% MacPherson Enterprises 540 1.37% Revere Transducers 200 0.51% Fireman's Fund Insurance 190 0.48% Safeguard Business Systems 175 0.45% (1) Information is not available for fiscal year 2003-2004. Sources: Orange County Investment Board, City of Tustin -129- Function General Government Community Development Public Works Police Parks and Recreation Redevelopment Agency Water Total CITY OF TUSTIN FULL-TIME CITY EMPLOYEES BY FUNCTION Last Ten Fiscal Years Fiscal Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 32 31 31 31 31 27 27 25 29 26 21 22 24 28 29 28 24 17 17 15 47 48 48 50 51 50 53 52 51 40 141 141 141 145 144 147 147 140 139 131 20 18 17 17 15 16 15 14 15 13 5 2 3 5 5 6 6 6 5 3 22 22 22 20 20 23 22 23 25 17 288 284 286 296 295 297 294 277 281 245 The City contracts with the OC Fire Authority for fire services. Source: City of Tustin Finance Department -130- CITY OF TUSTIN CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years Fiscal Year Function 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Public Safety Police Stations 1 1 1 1 1 1 1 1 1 1 Fire Stations (1) 2 2 2 2 2 2 2 2 2 2 Public Works Street (miles) 101.8 101.8 101.8 101.8 106.3 127.2 127.2 127.2 127.2 127.2 Street Lights 2,855 2,855 2,855 2,855 3,285 3,544 3,544 3,544 3,544 3,544 Traffic Signals 97 97 97 97 113 113 116 117 118 118 Storm Drain (miles) 23.7 23.7 23.7 23.7 49.1 49.2 49.2 49.2 49.2 49.2 Street Trees 16,667 16,744 16,638 16,638 15,821 15,853 15,853 15,837 15,786 16,097 Parks and Recreation Parks 12 12 12 12 12 12 13 13 13 13 Parks (acres) 81.5 81.5 81.5 81.5 81.5 81.5 98.5 98.5 98.5 98.5 Community Centers 1 1 1 1 1 1 1 1 1 1 Senior Centers 1 1 1 1 1 1 1 1 1 1 Water Metered Services 13,500 13,500 13,900 14,080 14,117 14,118 14,118 14,139 14,139 14,172 Average daily consumption 12,500 12,500 12,514 17,205 14,970 14,460 14,460 12,899 13,491 13,601 Reservoirs 6 6 6 6 6 6 6 6 6 6 Wells 12 12 12 12 12 13 13 13 13 13 Water Main (miles) 173 173 173 173 173 173 173 173 173 173 Fire Hydrants 2,200 2,200 2,200 2,200 2,200 2,201 2,201 2,201 2,201 2,201 (1) The City contracts with the OC Fire Authority for fire services, and they have full use of City owned stations. Source: City of Tustin Finance Department -131- CITY OF TUSTIN WATER CONSUMPTION BY CUSTOMER TYPE Last Ten Fiscal Years Measured in hundred cubic feet. Source: City of Tustin Finance Department -132- Fiscal Year Type of Customer 2004 2005 2006 2007 Residential 2,522,125 2,539,105 2,847,140 3,319,069 Apartment/Multiple Units 1,042,914 1,101,639 1,218,770 1,312,731 Commercial 288,347 285,628 331,990 360,170 Fire Services 598 1,100 306 11,453 Irrigation 129,127 132,442 137,651 171,200 Government 180,387 170,830 179,426 265,158 Restaurants 59,591 61,706 71,356 67,378 Hospitals 18,333 13,732 14,690 14,243 Non -Profit 35,386 37,906 43,427 48,320 Industrial 57,214 60,262 77,425 71,065 Hotel/Motels 9,806 8,502 10,878 13,367 All Others 96,678 112,043 103,570 100,604 4,440,506 4,524,895 5,036,629 5,754,758 Measured in hundred cubic feet. Source: City of Tustin Finance Department -132- Fiscal Year 2008 2009 2010 3,202,982 3,012,575 2,749,415 1,264,584 1,226,181 1,142,749 326,987 305,601 287,951 478 184 217 174,858 171,382 145,287 260,688 264,425 238,914 61,029 54,916 52,761 14,376 11,222 9,636 48,922 45,387 43,985 69,920 67,985 56,360 12,803 12,890 13,562 115,246 105,221 171,781 5,552,873 5,277,969 4,912,618 2011 2012 2013 2,592,741 2,733,482 2,815,322 1,133,899 1,172,823 1,158,480 296,001 305,638 308,376 275 1,242 818 134,408 149,957 151,965 212,561 236,658 268,581 48,873 53,183 53,461 11,587 12,204 12,442 41,291 44,488 44,476 51,760 58,298 57,462 8,332 8,514 10,417 176,248 147,552 82,716 4,707,976 4,924,039 4,964,516 - 133 - CITY OF TUSTIN WATER RATES Last Ten Fiscal Years Notes: HCF = Hundred Cubic Feet (1 HCF = 748 gallons) A seven (7) tiered rate structure was implement on July 1, 2010. Additionally, a new fixed charge (Capital Fee) was implemented with the new rate structure, which has been included in the Bi -Monthly Fixed Charge. The rate shown is for a standard residential customer. The bi-monthly fixed rate shown is based on the standard residential customer meter (5/8"). The City uses the American Water Works Association equivalent meter capacity ratios from the AWWA Manual M6 to calculate fixed charges for meters ranging from 1 to 6 inches. Source: City of Tustin Finance Department -134- Consumption Charges Bi -Monthly Up to From From All Fiscal Fixed 12 13 to 40 41 to 60 Over 60 Year Charge HCF HCF HCF HCF 2004 $ 16.00 $ 0.35 $ 1.12 $ 1.20 $ 1.32 2005 16.00 0.35 1.12 1.20 1.32 2006 18.16 0.40 1.27 1.36 1.50 2007 20.24 0.44 1.42 1.52 1.67 2008 22.26 0.49 1.56 1.67 1.84 2009 22.26 0.49 1.56 1.67 1.84 2010 22.26 0.49 1.56 1.67 1.84 Consumption Charges Bi -Monthly Up to From From From From From All Fiscal Fixed 10 11 to 20 21 to 30 31 to 40 41 to 50 51 to 60 Over 60 Year Charge HCF HCF HCF HCF HCF HCF HCF 2011 $ 34.49 $ 0.58 $ 1.02 $ 1.33 $ 1.65 $ 1.97 $ 2.29 $ 2.62 2012 36.94 0.70 1.22 1.60 1.99 2.37 2.76 3.17 2013 40.63 0.73 1.29 1.69 2.10 2.56 2.97 3.40 Notes: HCF = Hundred Cubic Feet (1 HCF = 748 gallons) A seven (7) tiered rate structure was implement on July 1, 2010. Additionally, a new fixed charge (Capital Fee) was implemented with the new rate structure, which has been included in the Bi -Monthly Fixed Charge. The rate shown is for a standard residential customer. The bi-monthly fixed rate shown is based on the standard residential customer meter (5/8"). The City uses the American Water Works Association equivalent meter capacity ratios from the AWWA Manual M6 to calculate fixed charges for meters ranging from 1 to 6 inches. Source: City of Tustin Finance Department -134- Water Customer TUSTIN UNIFIED SCHOOL DIST CITY OF TUSTIN CALTRANS - DISTRICT 12 AT& T SERVICES, INC. RICOH ELECTRONICS INC HSA LP SCHROEDER PROP MGMT TUSTIN ACRES COMM ASSOC TUSTIN PLAZA CENTER, LP TUSTIN PLACE H.O.A. SKB-TUSTIN LLC TRINITY UNITED PRESBYTERIAN VALENCIA GARDENS OWNER LLC RED HILL ASSOCIATION GRE TUSTIN FINANCIAL TUSTIN CARE CENTER CMC ASSOCIATION MGMT KEY INN COMPANY OF MARY TUSTIN HOSPITAL MEDICAL CENTER SIERRA CORP MGT AVALON 2 CALIF 1 LP 15701 TV WAY PARTNERSHIP SYCAMORE GARDENS ASSOC WESTCHESTER PARK L.P BRIARWOOD INVESTMENT CO LT TUSTIN VILLAGE COMMUNITY ASSOC BASCOM EAST TUSTIN AVE APT LLC PACIFIC BELL V KAY - NNC VALENCIA GARDENS A GREENWOOD AND MCKENZIE ALDERS APARTMENT COMPANY PACIFIC POINT APTS ARNEL MANAGEMENT REGENCY WEST SYCAMORE CREEK APARTMENTS CITY OF TUSTIN WATER CUSTOMERS Current Year and Seven Years Ago 2013 Percent of Water Total Water Charges Revenues 2006(l) Percent of Water Total Water Charges Revenues $ 658,670 3.95% $ 204,869 3.50% 150,073 0.90% 52,710 0.90% 129,767 0.78% 73,129 0.44% 72,988 0.44% 37,964 0.23% 53,459 0.91% 37,473 0.22% 19,940 0.34% 35,290 0.21% 22,501 0.38% 32,934 0.20% 32,028 0.19% 29,315 0.18% 27,114 0.16% 26,899 0.16% 26,727 0.16% 26,478 0.16% 25,206 0.15% 25,006 0.15% 23,149 0.40% 24,533 0.15% 24,488 0.15% 24,222 0.15% 24,180 0.14% 24,149 0.14% 23,703 0.14% 23,548 0.14% 23,297 0.14% 19,784 0.34% 21,833 0.13% 25,311 0.43% 18,901 0.11% 18,364 0.31% 65,410 1.12% 50,417 0.86% 27,033 0.46% 23,490 0.40% 20,903 0.36% 20,513 0.35% 18,655 0.32% 18,599 0.32% 17,878 0.31% Total Water Sales $ 1,679,915 10.07% $ 702,985 12.01% (1) Information is not available for fiscal year 2003-2004. Source: City of Tustin Finance Department -135-