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Home My WebLink About08-ATTACHMENT 1 (CAFR FOR THE YEAR ENDED JUNE 30, 2016)i I T ! — _t F' TUSTIN LEGACY' Okix �,py .r s5'fR•:� ': � G iw -- v IP.11�11�,ljlP� Columbus FLIGHT i , .A Tu�DI� TU 5 T I R L E G A C Y .:.� t io}tit Gam, 41 a; CITY OF TUSTIN, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT WITH REPORT ON AUDIT BYINDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE YEAR ENDED JUNE 30, 2016 Prepared By: Finance Department CITY OF TUSTIN TABLE OF CONTENTS For the year ended June 30, 2016 INTRODUCTORY SECTION: Page NrnmhPr Elected and Administrative Officials i Letter of Transmittal iii Organization Chart ix GFOA Certificate of Achievement for Excellence in Financial Reporting x 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, 2016 Page NrnmhPr REQUIRED SUPPLEMENTARY INFORMATION: 91 Safety Plan: Schedule of Proportionate Share of the Net Pension Liability 93 Schedule of Contributions 94 Miscellaneous Plan: Schedule of Changes in the Net Pension Liability and Related Ratios 95 Schedule of Contributions 96 Other Post -Employment Benefit Plan: Schedule of Funding Progress 97 Budgetary Comparison Schedule: General Fund 98 Note to Required Supplementary Information 99 SUPPLEMENTARY INFORMATION: 101 Other Governmental Funds: 103 Combining Balance Sheet 104 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 106 Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: Gas Tax Special Revenue Fund 108 Measure M Special Revenue Fund 109 Park Acquisition and Development Special Revenue Fund 110 Asset Forfeiture Special Revenue Fund 111 Air Quality Special Revenue Fund 112 Supplemental Law Enforcement Special Revenue Fund 113 Housing Authority Special Revenue Fund 114 Special Tax B Special Revenue Fund 115 Agency Funds: 117 Combining Statement of Assets and Liabilities 118 Combining Statement of Changes in Assets and Liabilities 119 CITY OF TUSTIN TABLE OF CONTENTS (CONTINUED) For the year ended June 30, 2016 Page NrnmhPr STATISTICAL SECTION (UNAUDITED): 121 Description of Statistical Section Contents 123 Financial Trends: Net Position by Component - Last Ten Fiscal Years 124 Changes in Net Position - Expenses and Program Revenues - Last Ten Fiscal Years 126 Changes in Net Position - General Revenues - Last Ten Fiscal Years 128 Fund Balances of Governmental Funds - Last Ten Fiscal Years 130 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 132 Revenue Capacity: Assessed Value and Estimated Actual Values of Taxable Property - Last Ten Fiscal Years 134 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years 136 Principal Property Taxpayers - Current Year and Ten Years Ago 138 Property Tax Levies and Collections - Last Ten Fiscal Years 139 Debt Capacity: Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 140 Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years 142 Overlapping Debt Schedule 143 Legal Debt Margin Information - Last Ten Fiscal Years 144 Pledged -Revenue Coverage - Last Ten Fiscal Years 146 Demographic and Economic Information: Demographic and Economic Statistics - Last Ten Calendar Years 148 Principal Employers - Current Year and Nine Years Ago 149 Operating Information: Full -Time City Employees by Function - Last Ten Fiscal Years 150 Capital Asset Statistics by Function - Last Ten Fiscal Years 151 Water District Schedules for Revenue Capacity: Water Consumption by Customer Type - Last Ten Fiscal Years 152 Water Rates - Last Ten Fiscal Years 154 Water Customers - Current Year and Nine Years Ago 155 CITY OF TUSTIN Elected and Administrative Officials MAYOR John Nielsen CITY COUNCIL Dr. Allan Bernstein, Mayor Pro Tem Rebecca Gomez Al Murray Charles E. Puckett AUDIT COMMISSION Craig Shimomura, Chair R. Lawrence Friend, Chair Pro Tem Robert Ammann Daniel Erickson Thomas Stroud CITY MANAGER/CITY TREASURER David E. Kendig City Attorney Elizabeth A. Binsack Director, Community Development John Buchanon Director, Economic Development Jennifer Leisz Acting Director, Finance Jeffrey C. Parker - 1 - Erica N. Rabe City Clerk Charles Celano Chief of Police Derick Yasuda Director of Human Resources David Wilson Director, Parks and Recreation Services Douglas S. Stack Director, Public Works City Engineer The page left blank intentionally Finance Department December 19. 2016 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL CITIZENS OF THE CITY OF TUSTIN City of Tustin Tustin, California 92780 FUSTIN HISTORY BUILDING OUR FUTURE HONORING OUR PAST I z The Comprehensive Annual Financial Report (CAFR) of the City of Tustin for the fiscal year ended June 30, 2016, 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, 2016, ha,e 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, 2016, 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. 300 Centennial Way Tustin CA 92780 0 P 714) 573-3060 • F: (714) 832-0825 0 www tustinca org 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. 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, 2016 population at 82,717, a 2.2% increase from 2015. Among cities with a population above 30,000, growth was distributed throughout California, with cities in Orange County included in the top ten. While Tustin 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 98 as part of the required supplementary information, and for nonmajor governmental funds this comparison is presented on pages 108-115 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 annually 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. ECONOMIC OUTLOOK The State of California maintains a stable economy since the economic downturn. The statewide unemployment rate has dropped from 5.8% in October 2015 to 5.5% for October 2016, which is 0.6% higher than the United States unemployment rate of 4.9% for October 2016. The Orange County unemployment rate has decreased 0.9% from October 2015 to 4.2% for October 2016. The City's sales tax revenue continues to be the largest revenue source for the General Fund. It is 44% of total General Fund revenues. Annual sales tax revenue increased from fiscal year 2014- 2015 to fiscal year 2015-2016 to $24.5 million. Sales tax revenue for fiscal year 2016-2017 is expected to decrease slightly, about $0.4 million from prior year, primarily due to conservative estimates considering the volatility of this revenue source. Property tax revenue is the second largest General Fund revenue source (16% of total revenues). Orange County property values and property sales have increased; therefore, property tax revenue is estimated to increase $0.2 million from prior year to $9.2 million for fiscal year 2016-2017. Development at the Marine Corp Air Station Base also referred to as the Legacy continues to move forward. Community Facilities District 14-01 was formed to raise two special taxes in relation to this development for public services provided such as public safety, parks and street maintenance and to pay debt service for bonds which were issued in November 2015. With the development, funds will be committed to help fund the construction of backbone infrastructure. Staff is monitoring the costs of providing public services and maintaining streets, sidewalks and parks which are funded by the service tax provided by the various Community Facilities Districts. 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 2016-17 are estimated to be $2.0 million less than fiscal year 2015-16, primarily due to the decrease in sales tax for the final triple flip payment which was received in fiscal year 2015-16 and conservative estimates for sales tax revenue. Expenditures are $2.3 million more than budgeted in fiscal year 2015-16 primarily due to the increased salary and benefit costs, operational costs, and capital expenditures. The City expects a $2.4 million deficit for fiscal year 2016-17 to be funded with planned use of excess reserves, bringing the projected General Fund reserve -v- percentage to 39.5%, which is well above the 20<< City policy. City Council will be reviewing the City', financial condition during the mid -year budget review in February 2017. ACCOMPLISHMENTS AND FUTURE PROJECTS During fiscal year 2016 the City refunded the bond issues for Community Facilities Districts No. 06-1 and 07-1, taking advantage of the lower interest rate environment, decreasing total debt service requirements by $17.9 million over the life of the bonds. In September 2016, the Tustin Public Financing Authority issued Water Refunding Bonds to refund the 2011 Water Revenue Bonds, resulting in additional cost savings. Also in September 2016 the Successor Agency to the Tustin Redevelopment Agency issued Tax Allocation Refunding Bonds to refund the 2010 Housing Tax Allocation Bonds and the 2010 MCAS Tax Allocation Bonds, again taking advantage of the lower interest rates, resulting in cost savings. Major capital improvement projects completed include the following: • Improvements for Frontier Park Playground, Centennial Park and Laurel Glen Park • Frontier Park Water Play Recirculation • Biofiltration retrofit at various locations • Warner Extension from Redhill to Armstrong • Barranca Parkway Improvements • IRWD Sewer Relocation at Tustin Ranch Road and Barranca In addition, Legacy Road and Victory Park were completed in fiscal year 2016 with funding from developer contributions. The City's capital projects for fiscal year 2016-2017 are budgeted at $122 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, former Redevelopment Agency bond proceeds and Water Revenue Bond proceeds Major capital projects for fiscal year 2016-2017 include: • Annual Roadway and Public Infrastructure Maintenance Program (MOE) • Victory Road Extension: Red Hill Avenue to Armstrong Avenue • Detention Basin landscaping and Water Quality Installation at the corner of Red Hill Avenue and Barranca Parkway • Peters Canyon Channel Improvements • Moffett Drive Extension from Park Avenue to east of Peters Canyon Channel • Park Avenue Extension from Victory Road to Moffett Drive • Tustin Linear Park between Barranca Parkway and Armstrong Avenue • Drill and Install Wellhead - Edinger Well M AWARDS The Government Finance Officers Association of the United States and Canada i 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, 2015. This was the twenty-ninth 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 Sean Tran, Administrative Services Manager, Alberto Preciado, Senior Accountant, Sharon Ting, Accountant, Glenda Babbitt, Management Analyst, Elizabeth Andrew C.P.A., 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, ennifer Leisz Acting Finance Director The page left blank intentionally - viii - CITIZENS OF TUSTIN POLICE PUBLIC WORKS COMMUNITY DEVELOPMENT CITY PARKS & RECREATION CITY ATTORNEY DEPUTY CITY MANAGER FINANCE HUMAN RESOURCES -1X- LOCAL GOVERNMENT FY 2015-16 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 -1X- LOCAL GOVERNMENT FY 2015-16 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 �J Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Tustin California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 Executive Director/CEO -x- 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, 2016, 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 opinions 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 opinions. -1- 2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893 Offices located in Orange and San Diego Counties Opinions 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, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the safety plan schedule of proportionate share of the net pension liability and the schedule of contributions, the miscellaneous plan schedule of changes in the net pension liability and related ratios and the schedule of contributions, the other post -employment benefit plan schedule of funding progress, and the budgetary comparison schedule for the general fund, identified as Required Supplementary Information (RSI) in the accompanying 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 RSI 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 RSI because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 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 supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole. -2- Other Matters (Continued) Other Information (Continued) 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 19, 2016, 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. /4� e� &/-, Irvine, California December 19, 2016 -3- The page left blank intentionally CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 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, 2016. 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 outflows of resources of the City exceeded its liabilities and deferred inflows of resources at June 30, 2016, by $723.4 million (net position). Net position consists of $508.7 million invested in capital assets, $95.2 million in restricted net position and $119.5 million in unrestricted net position. The government's total net position increased by $17 million during the fiscal year ended June 30, 2016. The primary reasons for the increase are due to the receipt of $26.4 million from the issuance of bonds for CFD 14-1 within the former Marine Corps Air Station known as the Legacy. This increase was partially offset by increased spending for construction costs for development at the Legacy. As of June 30, 2016, the City's governmental funds reported combined ending fund balances of $268.2 million, a decrease of $16.6 million in comparison with the prior year. The decrease in ending fund balances is primarily due to the reclassification of $34 million of land held for resale to land reported as capital assets which is not reflected in the governmental funds statements. This decrease was partially offset by the bond proceeds received for development at the Legacy mentioned above. Approximately $88.6 million of the fund balance is nonspendable; $73.1 million is restricted; and $26.9 million is assigned. 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. 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 cashflows. 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. -5- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 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 ou flows 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 fisnds and governmental activities. 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, MCAS 2010 Capital Project Fund, and the CFD Construction Capital Project 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 a bi-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 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, 07-1, 13-1, and 2014-1. 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. mom CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 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 outlining the pension liabilities, contributions and funding status 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. The combining statements referred to earlier in connection with nonmajor governmental funds are presented for all nonmajor Special Revenue Funds and nonmajor Capital Projects 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 (70 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. Assets: Current and other assets Capital assets Total Assets Deferred Outflows of Resources Liabilities: Current liabilities Non -Current liabilities Total Liabilities Deferred Inflows of Resources Net Position: Net investment in capital assets Restricted Unrestricted Total Net Position -7- City of Tustin Summary of Net Position As of June 30, 2016 (in millions of dollars) Governmental Business -Type Total Activities Activities Total % Chanze 2015 2016 2015 2016 2015 2016 2015-2016 $298.1 $282.9 $38.3 $37.2 $336.4 $320.1 456.6 483.3 45.7 48.8 502.3 532.1 754.7 766.2 84.0 $86.0 838.7 $852.2 1.6% 8_6 4_7 0_6 0_6 9_2 5_3 12.4 13.5 3.2 4.6 15.6 18.1 69.7 67.6 44.6 44.1 114.3 111.7 82.1 81.1 47.8 48.7 129.9 129.8 (0.2%) 10.9 4_1 0_7 0_2 11.6 4_3 456.6 483.2 24.3 25.5 480.9 508.7 72.9 95.2 - - 72.9 95.2 140.8 107.3 11.8 12.2 152.6 119.5 670.3 $685.7 $36.1 S37.7 $706.4 723.4 2.4% -7- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Government -wide Financial Analysis (Continued) Governmental activities. Net position of the City's governmental activities increased 2.3% to $685.7 million, of which $483.2 million is invested in capital assets such as equipment, buildings and infrastructure. Of the remaining total, $95.2 million is restricted to specifically stipulated spending agreements originated by law, contract or other agreements with external parties. The remaining $107.3 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, 2016 (in fnillions of dollars) Governmental Business -Type Total Activities Activities Total % Change 2015 2016 2015 2016 2015 2016 2015-2016 Revenues: 17.1 20.0 - - 17.1 20.0 Program revenues: 29.9 27.8 - - 29.9 27.8 Charges for services $3.8 $7.8 $19.4 $16.5 $23.2 $24.3 Operating grants & contributions 3.5 2.7 - - 3.5 2.7 Capital grants and contributions 20.2 48.7 - - 20.2 48.7 General revenues: 85.1 103.0 16.0 15.6 101.1 118.6 17.3% Taxes 17.9 20.2 - - 17.9 20.2 Sales taxes shared state revenues 22.3 24.5 - - 22.3 24.5 Motor vehicle taxes 6.4 6.8 - - 6.4 6.8 Earnings on investments 1.1 2.4 0.2 0.5 1.3 2.9 Miscellaneous 7.8 2.7 0.5 0.1 8.3 2.8 Gain on sale of assets 48.1 - - - 48.1 - Contribution from Successor Agency 32.1 - - - 32.1 - Total Revenues 163.2 115.8 20.1 17.1 183.3 132.9 (27.5%) Expenses: General government 17.1 20.0 - - 17.1 20.0 Public safety 29.9 27.8 - - 29.9 27.8 Public works 34.4 47.3 - - 34.4 47.3 Community services 3.7 7.9 - - 3.7 7.9 Water - - 16.0 15.6 16.0 15.6 Total Expenses 85.1 103.0 16.0 15.6 101.1 118.6 17.3% Change in net position, before extraordinary item 78.1 12.8 4.1 1.5 82.2 14.3 Extraordinary Items: Contribution of capital assets from Successor Agency - 1_6 - _ - 1_6 Repayment of funds from Successor Agency to City of Tustin's Housing Authority - 1.0 - - - 1.0 Change in net position 78.1 15.4 4.1 1.5 82.2 17.0 Net Position - Beginning 637.6 670.3 34.4 36.1 672.0 706.4 Restatement for Prior Period Adjustment4( 5.41 - (.4) -Net Position - Ending S670.3 S685.7 $36.1 S37.7 $706.4 $723.4 2.4% LIV CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Government -wide Financial Analysis (Continued) In governmental activities, the increase in net position of $15.4 million is primarily due to the following reasons: • Deferred inflows related to pension plans decreased $6.8 million mostly due to the decline in the net differences between projected and actual earnings on plan investments. Total governmental assets increased $11.5 million, mostly due to the receipt of $26.4 million from the issuance of bonds for CFD 14-1 within the former Marine Corps Air Station known as the Legacy. This increase was partially offset by increased spending for construction costs for development at the Legacy. In addition, the City received $1.6 million in contributed capital assets from the Successor Agency to the Tustin Community Redevelopment Agency and $1.0 million for repayment of funds from the Successor Agency to the City of Tustin's Housing Authority. Overall, governmental revenues decreased $47.4 million from prior year. The primary reasons for the decrease were significant revenues recognized in fiscal year 2015 from the sale of Land Held for Resale to Standard Pacific for the development of 375 residential homes ($48.1 million) and the transfer of unspent bond proceeds from the Successor Agency to the Tustin Community Redevelopment Agency to the City ($32.1 million). Capital grants and contributions increased $28.5 million from fiscal year 2015 primarily due to the receipt of $26.4 million from the issuance of bonds for CFD 14-1 within the former Marine Corps Air Station known as the Legacy. Also contributing to the increase in capital grants and contributions was an adjustment of $1.8 million to recognize deposits for TSIP Area A -B as revenue. Charges for services increased $4 million during fiscal year 2016 primarily due to increases in Public Works and General Government classifications. Public Works increases were due to increased building activity resulting in higher plan check fees and building permits, and park in lieu fees which generated about $0.8 million in revenue. General Government increases were due to higher rental income and reimbursement of cost of issuance for the CFD 2014-1 bonds for City staff and administration. Taxes increased $2.3 million from prior year primarily due to: • Hotel Bed Tax increased $0.5 million due to the increase in the Hotel Bed Tax rate. The citizens of Tustin voted in November 2014 to increase the Hotel Bed Tax from 6% to 10%. The new rate became effective January 1, 2015, resulting in a full year at the new higher rate in 2016. Property tax revenue increased $1.9 million mostly due to the receipt of tax revenue for the newly formed CFD 2014-1 at Tustin Legacy. Special tax A, which must be used for facilities and improvements at Tustin Legacy, totaled about $1.4 million and special tax B for services at Tustin Legacy totaled about $0.5 million. Sales taxes increased $2.3 million due to a large county pool reallocation made by the State board of Equalization for prior year out-of-state use tax purchases and increases in auto -transportation sales. Earnings on investments increased $1.3 million from fiscal year 2015 due to higher average cash balances over the past year, along with the slight increase in the average weighted portfolio yield and careful monitoring of the City's cash flow needs and diversification of investments. The average cash balance for fiscal year 2015-16 was $191 million with an average weighted portfolio yield of 0.96% and average weighted days to maturity of 673 days. The average cash balance for fiscal year 2014-15 was $188.7 million with an average weighted portfolio yield of 0.82% and average weighted days to maturity of 707 days. The decrease in the weighted average maturity was primarily caused by a significant number of called investments with longer maturity dates due to continued low interest rates. The increase in investment earnings was also impacted by a favorable market adjustment of $0.7 million recorded at June 30, 2016. CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Government -wide Financial Analysis (Continued) Miscellaneous revenue decreased $5.1 million, mostly due to higher revenues for fiscal year 2015, including the reimbursement of $1.2 million for street maintenance to meet the city's Maintenance of Effort requirement to receive Measure M sales tax revenue from the Orange County Transportation Authority; the receipt of $0.7 million for the reimbursement of state mandated costs from the past few years; the sale of 5.7 acres of land held for resale for $0.5 million to the South Orange County Community College; and other one-time revenues. Governmental expenses increased $17.9 million from prior year primarily due to the increase in Public Works spending on capital projects. In analyzing the final construction costs upon completion, approximately $18.9 million was expensed in the government -wide statements due to construction completed for assets not owned by the City including OFCD channel improvements, wet and dry utilities, City of Santa Ana improvements, Irvine Ranch Water District improvements, and City of Irvine infrastructure. These expenses, previously included in construction in progress in the statement of financial position are causing an increase in the public works and community services expense categories in the government wide activities. Community Services expenses increased S4.2 million from prior year due to a $4.0 million advance to Tustin Unified School District (TUSD) for the planning and design of the 6-12 School Project per the School Facilities Implementation, Funding, and Mitigation Agreement. Per the terms of the agreement, the City plans to fund an additional $40 million over the next 12 months. General Government expenses increased $2.9 million from fiscal year 2015 primarily due to charges for $1.9 million in required maintenance of effort (MOE) and capital expenses in the Other Capital Projects Fund per the adopted budget. About $1 million of the increase is due to a change in classification of CalPERS payments for the unfunded liability portion of the employer expense, caused by changes in the way that these costs are billed by CalPERS. Prior to fiscal year 2016, these costs were factored into the percentage paid by employers and charged to the respective department budgets, but beginning in 2016, the flat amount reducing the existing liability is not allocated by employee. Public Safety expenses decreased $2.1 million from prior year primarily due to the payoff in fiscal year 2015 of the Public Safety Side Fund pension liability of $4.3 million. Extraordinary Items due to the contribution of capital assets from the SATCRDA of $1.6 million and repayment of funds from the Successor Agency to the City of Tustin's Housing Authority also lead to the increase in net position. The capital assets contributed included the following properties located in Tustin: 0 450 El Camino Real — Old Town Respite Park 0 445 C Street — Stevens Square Parking Structure 0 1021 Edinger Avenue and 15012 Newport Avenue — future Newport Avenue Extension Business -Type activities net position increased $1.5 million from prior year. Charges for services decreased $2.9 million from fiscal year 2015 due to the decline in water consumption caused by drought restrictions and voluntary water saving over the past year. Water operation costs decreased $0.4 million primarily because less water was purchased from the East Orange County Water District due to water conservation. 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. -10- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Financial Analysis of the Government's Funds (Continued) As of the end of the current fiscal year, the City's governmental funds reported total combined ending fund balances of $268.2 million, a decrease of $16.6 million in comparison with the prior year. The decrease is primarily due to the reclassification of Land Held for Resale totaling $34.0 million for 310 acres of land at the Legacy development to be given to another governmental agency and to be used for parks and roads. In addition the Valencia Parcels (about 5 acres) were reclassified due to a change in the intended use of the property. These parcels will be retained by the City and will be used to create the new Veterans Sports Park. These transactions resulted in a reduction in the fund balance for the governmental funds and an increase in land in the government -wide statement of net position. Approximately $88.6 million (33.2%) of the City's governmental fund balance constitutes nonspendable fund balance. Of the nonspendable amount, $88.0 million is Land Held for Resale. The remainder of the fund balance consists of $73.1 million in restricted funds, $26.9 million assigned to capital projects, and $79.7 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 $79.7 million, while total fund balance was $186.9 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 117% of the total General Fund expenditures. City of Tustin Summary of Changes in Fund Balances - General Fund For the Year Ended June 30, 2016 (in millions of dollars) Expenditures: General government 16.6 19.1 Total 33.0 27.8 Public works % Change 6.5 2015 2016 2015-2016 Revenues: 5.8 3.4 Debt service Taxes $43.7 $48.0 69.6 Charges for services 1.8 2.3 Intergovernmental 2.6 3.2 Other Financing Sources (Uses): Fines and forfeitures 0.8 1.0 2.1 Licenses and permits 0.9 1.3 La4.0 Other 22.4 4.3 Gain on sale of land held for resale 48.1 - Total Revenues 120.3 60.1 (50.0%) Expenditures: General government 16.6 19.1 Public safety 33.0 27.8 Public works 6.3 6.5 Community services 2.9 7.0 Capital Outlay 5.8 3.4 Debt service 5.0 4.1 Total Expenses 69.6 67.9 (2.4%) Excess of Revenues Over (Under) Expenditures 50.7 (7.8) Other Financing Sources (Uses): Net transfers 2.1 5.3 Special Item 21.4 La4.0 Net Change in Fund Balance 74.2 36.5 (149.2°/x) -11- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Financial Analysis of the Government's Funds (Continued) Transactions impacting revenues in the General Fund were as follows: • Property tax revenue totaled about $16 million reflecting an increase of approximately $1 million from prior year due to the increase in property values. • Sales tax revenue increased about $2.3 million due to a large county pool reallocation made by the State board of Equalization for prior year out-of-state use tax purchases and increases in auto -transportation sales. • Intergovernmental revenue increased $0.6 million from fiscal year 2015 primarily due to an adjustment to recognize deposits for TSIP Area A-13 as revenue. • License and Permits increased $0.4 million due to the increase in building permits from prior year. Overall building activity was higher in fiscal year 2016. • Other Revenue decreased $18.1 million from prior year primarily due to significant increases that occurred in fiscal year 2015. In 2015, the City received $16.9 million from Standard Pacific for construction of backbone infrastructure in the Legacy. Reimbursement for cost recovery increased in fiscal year 2015 as well, by $1.2 million for street maintenance to meet the City's Maintenance of Effort requirement to receive Measure M sales tax revenue from the Orange County Transportation Authority. • As stated previously the Gain on Sale of Land Held for Resale decreased $48.1 million from prior fiscal year due to the sale of Land Held for Resale in the Legacy to Standard Pacific for the development of 375 residential homes. Changes in General Fund expenditures from previous fiscal year, by function, occurred as follows during the year ended June 30, 2016: • General Government expenditures increased $2.5 million from prior year. About $1 million of the increase is due to a change in classification of Ca1PERS payments for the unfunded liability portion of the employer expense, caused by changes in the way that these costs are billed by CalPERS. Prior to fiscal year 2016, these costs were factored into the percentage paid by employers, but beginning in 2016, the flat amount reducing the existing liability is not allocated by employee. Also contributing to the increase in general government expenses was increased spending for improvements and professional and consulting related to the Legacy development and increased landscape and maintenance costs due to the impact of five years of drought and removal of median vegetation. • Public safety expenditures decreased $5.2 million from prior year primarily due to the payment in fiscal year 2015 of the Public Safety Side Fund pension liability of $4.3 million and a. $0.5 million increase in claims paid. • Community Services expenditures increased $4.1 million due to a $4.0 million advance to Tustin Unified School District (TUSD) for the planning and design of the 6-12 School Project per the School Facilities Implementation, Funding, and Mitigation Agreement. Per the terms of the agreement, the City plans to fund an additional $40 million over the next 12 months. • Capital Outlay decreased $2.4 million primarily due to the decrease in construction projects funded by the General Fund. During fiscal year 2016, the primary activity was planning and design for future construction projects with more funding provided with bond proceeds from the Community Facilities Districts. • Debt Service decreased $0.9 million due to a decline in the annual payment to the Successor Agency from the initial payment of $5 million in 2015 to the payment amount of $4.1 million in 2016. The final payment amount of $4.1 million due to the Successor Agency was paid in August 2016. • Net Transfers increased $3.2 million from prior year due to the transfer from the CFD Construction Capital Projects Fund totaling $1.6 million to repay amounts transferred to cover negative cash in prior years (See Note 4). -12- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Financial Analysis of the Government's Funds (Continued) Changes in Special Item presented in the Summary of Changes in Fund Balances — General Fund are the result of the following transactions: The Special Item of $21.4 million in fiscal year 2015 is due to a decision from the DOF to allow the City to pay a Due to the Successor Agency promissory note with the former Redevelopment Agency over a five-year period; therefore, it was reclassified to long-term debt (See Note 9). As mentioned previously, the Special Item in fiscal year 2016 totaling negative $34 million is the reclassification of Land Held for Resale for 310 acres of land at the Legacy development to be given to another governmental agency and to be used for parks and roads. In addition the Valencia Parcels (about 5 acres) were reclassified due to a change in the intended use of the property. These parcels will be retained by the City and will be used to create the new Veterans Sports Park. These transactions resulted in a reduction in the fund balance for the governmental funds and an increase in land in the government -wide statement of net position. The MCAS 2010 Capital Project Fund's decrease in excess of revenues over expenditures of $41.9 million is primarily due to the DOF allowing the use of unspent bond proceeds that were outstanding when the former Tustin Community Redevelopment Agency was dissolved February 1, 2012. The $32.1 million contribution from the Successor Agency received in fiscal year 2015 will be used for backbone infrastructure within the Legacy area per the bond covenants. Capital outlay increased $9.4 million during 2016, contributing to the decrease in excess of revenues over expenditures. The CFD Construction Capital Project Fund's increase in excess of revenues over expenditures of $39 million is primarily due to the issuance of bonds for CFD 2014-1 totaling $26.4 million received in fiscal year 2016 restricted for use in the Legacy area according to bond covenants. Also contributing to the excess of revenues over expenditures was a $7.1 million reduction in expenditures during 2016 due to reduced construction activity and an increase in intergovernmental revenue of $5.8 million due to the refunding of bonds for CFD 06-1 and CFD 07-1. General Fund Budgetary Highlights Differences between the General Fund actual revenues and amended budgeted revenues were $6.8 million primarily due to budgeted developer contributions that were not received. Contributions in conjunction with the sale of land to Regency Center totaling $10.3 million were received in August 2016. The amended budgeted expenditures were $90.6 million, an increase in appropriations of $9.8 million from the original budgeted expenditures of $80.8 million. The increase in appropriations was due to on-going development at the Tustin Legacy. $4 million was appropriated to facilitate the opening of the Heritage Elementary School and $0.4 million was for the design efforts for Moffett Drive and Kensignton Park Drive streets which border the school site. An appropriation of $0.9 million was for the Orange County Animal Shelter building project, $0.5 million for preparation of the mixed use concept and business plan with Oliver McMillan, and consulting services for the Red Hill Corridor with Kimley Horn. In Addition, after the mid -year budget review, there was a $1.8 million appropriation for salary and benefit increases in accordance with negotiated Memorandums of Understanding. Actual General Fund expenditures were less than the amended budgeted amount of $90.6 million by $22.7 million due to the decrease in capital project spending and use of professional and consulting services. Actual transfers in exceeded budgeted transfers in by $2 million, largely due to $3.4 million for Special Tax B which was not included in the budget for fiscal year 2016. In addition, there was $1.5 million transferred from the CFD Construction Capital Projects Fund to repay amounts transferred to cover negative cash in prior years. -13- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Financial Analysis of the Proprietary Funds The City has one proprietary fund which is the Water Enterprise Fund. Total revenues for the Water Fund exceeded total expenses by $1.6 million, resulting in an increase in net position during fiscal year 2016, from $36.1 million as of June 30, 2015, to $37.7 million as of June 30, 2016. Operating revenues decreased significantly from $19.4 million in fiscal year 2015 to $16.5 million in 2016, due to reduced water consumption resulting from water conservation efforts. Related operating costs decreased $0.5 million from prior fiscal year, due to less water purchased from outside sources. 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, 2016 amounts to $532 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. City of Tustin Summary of Changes in Capital Assets For the Year Ended June 30, 2016 (in millions of dollars) The major activity affecting capital assets this year was the reclassification of $34 million of land from land held for resale discussed previously. Approximately 310 acres of land at the Legacy development was reclassified to be given to another governmental agency and to be used for parks and roads. In addition the Valencia Parcels (about 5 acres) were reclassified due to a change in the intended use of the property. These parcels will be retained by the City and will be used to create the new Veterans Sports Park. There was a decrease in construction in progress due to the completion of improvements for Frontier Park Playground, Centennial Park and Laurel Glen Park, Frontier Park Water Play Recirculation, biofiltration retrofit at various locations, Warner Extension from Redhill to Armstrong, Barranca Parkway Improvements, IRWD Sewer Relocation at Tustin Ranch Road and Barranca. In addition, Legacy Road and Victory Park were completed in fiscal year 2016 with funding from developer contributions. In analyzing the final construction costs upon completion, approximately $18.9 million was expensed in the government -wide statements due to construction completed for assets not owned by the City including OFCD channel improvements, wet and dry utilities, City of Santa Ana improvements, Irvine Ranch Water District improvements, and City of Irvine infrastructure. These expenses are causing an increase in the public works and community services categories in the government wide activities. Infrastructure increased $9.8 million mostly due to completion of the Warner Avenue Extension. 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 54). 14- Governmental Business -Type Total Activities Activities Total % Change 2015 2016 2015 2016 2015 2016 2015-2016 Land $44.1 $86.2 $1.2 $1.2 $45.3 $87.4 Right of way 43.8 43.8 - - 43.8 43.8 Construction in progress 57.8 28.5 3.6 8.1 61.4 36.6 Buildings and improvements 76.4 78.8 4.5 4.3 80.9 83.1 Machinery and equipment 3.2 4.7 - - 3.2 4.7 Infrastructure 231.4 241.2 - - 231.4 241.2 Property, plant and equipment - - 36.4 35.2 36.4 35.2 Total Capital Assets, Net $456.7 $483.2 $45.7 $48.8 $502.4 $532.0 5.9% The major activity affecting capital assets this year was the reclassification of $34 million of land from land held for resale discussed previously. Approximately 310 acres of land at the Legacy development was reclassified to be given to another governmental agency and to be used for parks and roads. In addition the Valencia Parcels (about 5 acres) were reclassified due to a change in the intended use of the property. These parcels will be retained by the City and will be used to create the new Veterans Sports Park. There was a decrease in construction in progress due to the completion of improvements for Frontier Park Playground, Centennial Park and Laurel Glen Park, Frontier Park Water Play Recirculation, biofiltration retrofit at various locations, Warner Extension from Redhill to Armstrong, Barranca Parkway Improvements, IRWD Sewer Relocation at Tustin Ranch Road and Barranca. In addition, Legacy Road and Victory Park were completed in fiscal year 2016 with funding from developer contributions. In analyzing the final construction costs upon completion, approximately $18.9 million was expensed in the government -wide statements due to construction completed for assets not owned by the City including OFCD channel improvements, wet and dry utilities, City of Santa Ana improvements, Irvine Ranch Water District improvements, and City of Irvine infrastructure. These expenses are causing an increase in the public works and community services categories in the government wide activities. Infrastructure increased $9.8 million mostly due to completion of the Warner Avenue Extension. 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 54). 14- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 Long-term Debt At the end of the current fiscal year, the City had total outstanding long-term liabilities of $111.6 million. Of this amount, $41.6 million are secured solely by specified revenue sources such as property tax increment and water service charges. City of Tustin Summary of Changes in Long -Term Liabilities For the Year Ended June 30, 2016 (in millions of dollars) Bonds payable Due to Successor Agency to the Tustin Community Redevelopment Agency Claims and judgments Postemployment benefits obligation Termination benefits Compensated absences Pension liabilities Total Outstanding Debt Governmental Business -Type Total Activities Activities Total % Change 2015 2016 2015 2016 2015 2016 2015-2016 $- $- $42.6 $41.6 $42.6 $41.6 16.4 12.3 - - 16.4 12.3 5.1 4.8 - - 5.1 4.8 5.7 7.2 - - 5.7 7.2 1.3 0.6 - - 1.3 0.6 3.0 3.1 0.2 0.2 3.2 3.3 38.2 39.5 1_8 2_3 40.0 41.8 69.7 S67.5 S44.6 S44.1 S114.3 S111.6 2.4% Overall, long-term debt decreased $2.7 million from the prior year balances mostly due to the payment of $4.1 million reducing the Due to Successor Agency to the Tustin Community Redevelopment Agency. This decrease was offset by an increase of $1.8 million in pension liabilities, comprised of reductions for the Safety (police) Plans totaling $1.5 million and an increase of $3.3 million for the Miscellaneous (all other) Plans. The decrease in the Safety Plans was mostly due to the payoff in fiscal year 2015 of the plan's side fund, which impacted the actuarial valuation of the remaining balances. The increase in the Miscellaneous Plans was mostly due to the interest on the total pension liability which accrues at the rate determined by Ca1PERS of 7.65%. 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 56. Next Year's Budget and Rates The City Council adopted the fiscal year 2016-2017 Budget with total appropriations of $219.6 million which includes $10.9 million of capital outlay for the Water Enterprise Fund. The General Fund fiscal year 2016-2017 estimated revenues are $55.6 million and budgeted appropriations are $58 million resulting in an estimated operating deficit of $2.4 million. The operating deficit will be covered by planned use of excess General Fund reserves. The appropriations are $3.7 million higher than prior year's appropriation. The primary reason for the increase in appropriations is due to increased salary and benefit costs, operational costs, and capital expenditures. An increase of about $2 million is associated with the various Memorandum of Understanding (MOU) agreements as well as various personnel changes outlined in the adopted budget. An increase of $1.9 million is associated with various capital projects funded from the General Fund which include council chamber improvements, citywide pedestrian improvements and various building improvements. All other appropriations are consistent with fiscal year 2015. There were no fee increases as part of the preparation and adoption of the fiscal year 2016-17 budget. 15- CITY OF TUSTIN Management's Discussion and Analysis (Unaudited) June 30, 2016 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. -16- CITY OF TUSTIN STATEMENT OF NET POSITION June 30, 2016 ASSETS: Cash and investments Receivables: Accounts Interest Loans Allowance for uncollectibles Prepaid items and deposits Land held for resale Restricted assets: Cash and investments Capital assets: Not being depreciated Being depreciated, net TOTAL ASSETS DEFERRED OUTFLOWS OF RESOURCES: Deferred charge on refunding Deferred amounts on pension plans TOTAL DEFERRED OUTFLOWS OF RESOURCES LIABILITIES: Accounts payable and accrued liabilities Interest payable Deposits payable Noncurrent liabilities: Due within one year Due in more than one year TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES: Deferred amounts on pension plans NET POSITION: Net investment in capital assets Restricted for: Community services Public safety Public works Unrestricted TOTAL NET POSITION See accompanying notes to basic financial statements. -17- Governmental Business -type Activities Activity Total $ 134,387,214 $ 16,207,860 $ 150,595,074 9,656,992 2,920,396 12,577,388 310,168 46,052 356,220 899,029 - 899,029 (562,687) - (562,687) 578,393 26,035 604,428 88,484,827 - 88,484,827 49,228,190 17,878,663 67,106,853 158,525,364 9,237,662 167,763,026 324,703,771 39,610,461 364,314,232 766,211,261 85,927,129 852,138,390 - 364,908 364,908 4,671,159 277,520 4,948,679 41671,159 642,428 5,313,587 7,220,215 3,486,580 10,706,795 - 481,980 481,980 6,333,893 562,770 6,896,663 12,372,470 1,010,640 13,383,110 55,177,464 43,124,345 98,301,809 81,104,042 48,666,315 129,770,357 4,083,439 232,034 4,315,473 483,229,135 25,443,651 508,672,786 2,974,062 - 2,974,062 169,036 - 169,036 92,097,927 - 92,097,927 107,224,779 12,227,557 119,452,336 $ 685,694,939 $ 37,671,208 $ 723,366,147 CITY OF TUSTIN STATEMENT OF ACTIVITIES For the year ended June 30, 2016 Functions/programs Expenses Governmental activities: General government $ 20,023,280 Public safety 27,779,830 Public works 47,326,664 Community services 7,869,124 Total governmental activities Business -type activity: Water Total Program Revenues Charges Operating Capital for Grants and Grants and Services Contributions Contributions $ 2,072,540 $ 22,487 $ - 1,195,350 245,079 - 3,538,906 1,751,492 48,248,575 953,149 703,920 463,008 102,998,898 7,759,945 2,722,978 48,711,583 15,586,463 16,511,795 - - $ 118,585,361 $ 24,271,740 $ 2,722,978 $ 48,711,583 See accompanying notes to basic financial statements. General revenues: Taxes: Property Franchise Transient occupancy Business license Sales taxes shared state revenues Motor vehicle taxes shared state revenues Earnings on investments Miscellaneous Total general revenues Change in net position, before extraordinary items Extraordinary Items: Contribution of capital assets from Successor Agency Repayment of fiinds from Successor Agency to City of Tustin's Housing Authority Change in net position NET POSITION AT BEGINNING OF YEAR NET POSITION AT END OF YEAR -18- Net (Expense) Revenue and Changes in Net Position Governmental Business -type Activities Activity Total $ (17,928,253) $ - $ (17,928,253) (26,339,401) - (26,339,401) 6,212,309 - 6,212,309 (5,749,047) - (5,749,047) (43,804,392) - (43,804,392) - 925,332 925,332 (43,804,392) 925,332 (42,879,060) 16,451,763 - 16,451,763 1,839,963 - 1,839,963 1,554,754 - 1,554,754 406,891 - 406,891 24,513,610 - 24,513,610 6,778,329 - 6,778,329 2,430,087 480,050 2,910,137 2,671,845 149,374 2,821,219 56,647,242 629,424 57,276,666 12,842,850 1,554,756 14,397,606 1,570,400 - 1,570,400 976,042 - 976,042 15,389,292 1,554,756 16,944,048 670,305,647 36,116,452 706,422,099 $ 685,694,939 $ 37,671,208 $ 723,366,147 -19- CITY OF TUSTIN BALANCESHEET GOVERNMENTAL FUNDS June 30, 2016 See accompanying notes to basic financial statements. -20- Capital Projects Funds Other Total MCAS CFD Governmental Governmental General 2010 Construction Funds Funds ASSETS Cash and investments $ 81,708,848 $ 22,617,699 $ 24,814 $ 30,035,853 $ 134,387,214 Restricted cash and investments 18,633,011 - 30,595,179 - 49,228,190 Receivables: Accounts 8,176,000 - - 1,480,992 9,656,992 Interest 158,627 34,321 - 117,220 310,168 Loans 515,233 - - 383,796 899,029 Allowance for uncollectibles (528,891) - - (33,796) (562,687) Prepaid items and deposits 576,471 - - 1,922 578,393 Land held for resale 88,002,743 - - 482,084 88,484,827 TOTAL ASSETS $ 197,242,042 $ 22,652,020 $ 30,619,993 $ 32,468,071 $ 282,982,126 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES: Accounts payable and accrued liabilities $ 4,500,945 $ 1,720,922 $ 156,112 $ 842,236 $ 7,220,215 Deposits payable 5,523,648 - - 810,245 6,333,893 TOTAL LIABILITIES 10,024,593 1,720,922 156,112 1,652,481 13,554,108 DEFERRED INFLOWS OF RESOURCES: Unavailable revenue 313,713 - - 898,488 1,212,201 FUND BALANCES: Nonspendable 88,579,214 - - 1,922 88,581,136 Restricted 18,657,461 - 30,463,881 23,974,462 73,095,804 Assigned - 20,931,098 - 5,940,718 26,871,816 Unassigned 79,667,061 - - - 79,667,061 TOTAL FUND BALANCES 186,903,736 20,931,098 30,463,881 29,917,102 268,215,817 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 197,242,042 $ 22,652,020 $ 30,619,993 $ 32,468,071 $ 282,982,126 See accompanying notes to basic financial statements. -20- CITY OF TUSTIN RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION June 30, 2016 Fund balances - total governmental funds 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. Long-term liabilities applicable to the City's governmental activities are not due anc 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, 2016 are: Claims and judgments payable $ (4,785,201) Compensated absences payable (3,139,635) Due to Successor Agency (12,303,512) Post employment benefits obligation (7,162,634) Termination benefits payable (660,426) Total long-term liabilities Pension related debt applicable to the City's governmental activites are not due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to pensions are only reported in the Statement of Net Position as the changes in these amounts effects only the government -wide statements for governmental activities; Deferred outflows of resources 4,671,159 Deferred inflows of resources (4,083,439) Pension liability (39,498,526) 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. Net position of governmental activities See accompanying notes to basic financial statements. -21- $ 268,215,817 483,229,135 (28,051,408) (38,910,806) 1,212,201 $ 685,694,939 CITY OF TUSTIN STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the year ended June 30, 2016 REVENUES: Taxes Licenses and permits Fines and forfeitures Investment income Intergovernmental revenue Charges for services Rental income Other revenue Contribution from property owners - special assessments TOTAL REVENUES EXPENDITURES: Current: General government Public safety Public works Community services Capital outlay Debt service: Principal retirement TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out TOTAL OTHER FINANCING SOURCES (USES) NET CHANGE IN FUND BALANCES, BEFORE SPECIAL AND EXTRAORDINARY ITEM SPECIAL ITEM EXTRAORDINARY ITEM NET CHANGE IN FUND BALANCES FUND BALANCES - BEGINNING OF YEAR FUND BALANCES - END OF YEAR 19,082,646 - - 27,791,298 - - 6,489,414 692,966 - 7,016,001 - - 3,418,762 10,175,955 1,536,523 4,101,171 - - 67, 899,292 10,868,921 1,536,523 (7,814,737) (10,478,561) 30,668,931 1,289,808 Capital Projects Funds Other Total - MCAS CFD Governmental Governmental General 2010 Construction Funds Funds $ 48,039,509 $ - $ - $ - $ 48,039,509 1,334,311 - - - 1,334,311 982,123 - - - 982,123 1,641,999 390,360 27,884 361,829 2,422,072 3,159,110 - 5,820,080 9,345,203 18,324,393 2,335,827 - - 21,441 2,357,268 1,090,681 - - 218,171 1,308,852 1,500,995 - - 3,213,106 4,714,101 - - 26,357,490 - 26,357,490 60,084,555 390,360 32,205,454 13,159,750 105,840,119 19,082,646 - - 27,791,298 - - 6,489,414 692,966 - 7,016,001 - - 3,418,762 10,175,955 1,536,523 4,101,171 - - 67, 899,292 10,868,921 1,536,523 (7,814,737) (10,478,561) 30,668,931 1,289,808 20,372,454 105,884 27,897,182 - 7,182,380 292,497 7,308,498 7,367,381 22,498,621 - 4,101,171 9,055,570 89,360,306 4,104,180 16,479,813 5,405,924 - 48,064 - 5,453,988 (48,064) - (1,572,719) (3,833,205) (5,453,988) 5,357,860 - (1,524,655) (3,833,205) - (2,456,877) (10,478,561) 29,144,276 270,975 16,479,813 (34,026,499) - - - (34,026,499) - - - 976,042 976,042 (36,483,376) (10,478,561) 29,144,276 1,247,017 (16,570,644) $ 186,903,736 $ 20,931,098 $ 30,463,881 $ 29,917,102 $ 268,215,817 See accompanying 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, 2016 Net change in fund balances - total governmental funds $ (16,570,644) 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 outlay $ 11,661,381 Contribution of capital assets to other entities (18,887,000) Contribution of capital assets from a developer 9,610,141 Contribution of capital assets from the Successor Agency 1,570,400 Reclassification of assets from land held for resale 34,026,499 Disposition of capital assets (174,837) Depreciation expense (11,226,534) 26,580,050 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: Principal payment $ 4,101,171 Postemployment benefits obligation (1,468,416) Claims and judgments payable 363,554 Compensated absences payable (114,617) Termination benefits payable 660,426 3,542,118 Pension expense reported in the governmental funds includes the annual required contributions. In the Statement of Activities, pension expense includes the change in the net pension liability, and related change in pension amounts for deferred outflows of resources and deferred inflows of resources 1,446,280 Some revenues reported in the Statement of Activities are not considered to be available to finance current expenditures and therefore are reported as available revenues in the governmental funds: Net change in unavailable revenue 391,488 Change in net position of governmental activities $ 15,389,292 See accompanying notes to basic financial statements. -23- CITY OF TUSTIN STATEMENT OF NET POSITION PROPRIETARY FUND June 30, 2016 ASSETS: CURRENT ASSETS: Cash and investments Accounts receivable Interest receivable Prepaid items Restricted cash and investments TOTAL CURRENT ASSETS NONCURRENT ASSETS: Capital assets: Not being depreciated Being depreciated, net TOTAL NONCURRENT ASSETS TOTAL ASSETS DEFERRED OUTFLOWS OF RESOURCES: Deferred charge on refunding Deferred amounts on pension plans TOTAL DEFERRED OUTFLOWS OF RESOURCES LIABILITIES: CURRENT LIABILITIES: Accounts payable and accrued liabilities Deposits payable Compensated absences payable Termination benefits payable Interest payable Bonds payable TOTAL CURRENT LIABILITIES LONG-TERM LIABILITIES: Compensated absences payable Bonds payable Net pension liability TOTAL LONG-TERM LIABILITIES TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES: Deferred amounts on pension plans NET POSITION: Net investment in capital assets Unrestricted TOTAL NET POSITION See accompanying notes to basic financial statements. -24- Business -type Activity Water Enterprise Fund $ 16,207,860 2,920,396 46,052 26,035 17,878,663 37,079,006 9,237,662 39,610,461 48,848,123 85,927,129 364,908 277,520 642,428 3,486,580 562,770 180,853 14,787 481,980 815,000 5,541,970 20,094 40,833,043 2,271,208 43,124,345 48,666,315 232,034 25,443,651 12,227,557 $ 37,671,208 CITY OF TUSTIN STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUND For the year ended June 30, 2016 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 and other fiscal charges Loss on sale of assets TOTAL NONOPERATING REVENUES (EXPENSES) CHANGE IN NET POSITION NET POSITION AT BEGINNING OF YEAR NET POSITION AT END OF YEAR See accompanying notes to basic financial statements. -25- Business -type Activity Water Enterprise Fund $ 16,511,795 2,849,928 5,488,071 3,675,377 1,759,296 13,772,672 2,739,123 480,050 149,374 (1,806,578) (7,213) (1,184,367) 1,554,756 36,116,452 $ 37,671,208 CITY OF TUSTIN STATEMENT OF CASH FLOWS PROPRIETARY FUND For the year ended June 30, 2016 NET CASH PROVIDED BY OPERATING ACTIVITIES 5,727,832 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (4,686,122) Principal paid on bonds (790,000) Interest paid (2,070,165) NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (7,546,287) CASH FLOWS FROM INVESTING ACTIVITIES: Investment income 352,405 Change in the fair value of investments 112,262 NET CASH PROVIDED BY INVESTING ACTIVITIES 464,667 NET DECREASE IN CASH AND CASH EQUIVALENTS (1,353,788) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 35,440,311 CASH AND CASH EQUIVALENTS - END OF YEAR $ 34,086,523 CASH AND CASH EQUIVALENTS: Cash and investments - current assets $ 16,207,860 Cash and investments - restricted assets 17,878,663 TOTAL CASH AND CASH EQUIVALENTS $ 34,086,523 See accompanying notes to basic financial statements. (Continued) -26- Business -type Activity Water Enterprise Fund CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers $ 16,611,810 Payments to suppliers (6,714,784) Payments to other funds for services (1,200,000) Payments to employees (2,969,194) NET CASH PROVIDED BY OPERATING ACTIVITIES 5,727,832 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets (4,686,122) Principal paid on bonds (790,000) Interest paid (2,070,165) NET CASH USED BY CAPITAL AND RELATED FINANCING ACTIVITIES (7,546,287) CASH FLOWS FROM INVESTING ACTIVITIES: Investment income 352,405 Change in the fair value of investments 112,262 NET CASH PROVIDED BY INVESTING ACTIVITIES 464,667 NET DECREASE IN CASH AND CASH EQUIVALENTS (1,353,788) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 35,440,311 CASH AND CASH EQUIVALENTS - END OF YEAR $ 34,086,523 CASH AND CASH EQUIVALENTS: Cash and investments - current assets $ 16,207,860 Cash and investments - restricted assets 17,878,663 TOTAL CASH AND CASH EQUIVALENTS $ 34,086,523 See accompanying notes to basic financial statements. (Continued) -26- CITY OF TUSTIN STATEMENT OF CASH FLOWS PROPRIETARY FUND (CONTINUED) For the year ended June 30, 2016 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 items (Increase) decrease in deferred ouflows of resources Increase (decrease) in accounts payable and accrued liabilities Increase (decrease) in deposits payable Increase (decrease) in compensated absences Increase (decrease) in termination benefits payable Increase (decrease) in net pension liability Increase (decrease) in deferred inflows of resources NET CASH PROVIDED BY OPERATING ACTIVITIES See accompanying notes to basic financial statements. -27- Business -type Activity Water Enterprise Fund $ 2,739,123 1,759,296 149,374 (129,273) (25,925) (82,119) 1,282,775 79,915 4,719 (14,787) 438,294 (473,560) $ 5,727,832 CITY OF TUSTIN STATEMENT OF FIDUCIARY NET POSITION ASSETS: Cash and investments Restricted cash and investments Receivables: Taxes Due from City of Tustin Prepaid items and deposits TOTAL ASSETS LIABILITIES: Accounts payable Interest payable Deposits payable Due to bondholders Long-term liabilities: Due within one year Due in more than one year TOTAL LIABILITIES NET POSITION: Held in trust See accompanying notes to basic financial statements. June 30, 2016 -28- Successor Agency to the Tustin Community Redevelopment Agency Private Purpose Agency Trust Fund Funds $ 3,162,611 $ 62,102 4,658,297 12, 899,136 - 78,835 12,303,512 - 5,562 - 20,129,982 $ 13,040,073 10,540 $ 981 975,760 - 1,000 - - 13,039,092 5,821,171 - 67,224,632 - 74,033,103 $ 13,040,073 $ (53,903,121 CITY OF TUSTIN STATEMENT OF CHANGES IN FIDUCIARY NET POSITION For the year ended June 30, 2016 ADDITIONS: Tax revenue Rental income Contribution from the City of Tustin Investment income TOTAL ADDITIONS DEDUCTIONS: Administrative expenses Community services Interest TOTAL DEDUCTIONS CHANGE IN NET POSITION BEFORE EXTRAORDINARY ITEMS EXTRAORDINARY ITEMS: Contribution of capital assets to the City of Tustin Repayment of funds to the City of Tustin's Housing Authority CHANGE IN NET POSITION NET POSITION - BEGINNING OF YEAR NET POSITION - END OF YEAR See accompanying notes to basic financial statements. -29- Successor Agency to the Tustin Community Redevelopment Agency Private Purpose Trust Fund $ 4,994,874 8,750 125,821 17,534 5,146, 979 44,895 141,013 3,051,599 3.237.507 1,909,472 (1,570,400) (976,042) (636,970) (53,266,151) $ (53,903,121) The page left blank intentionally -30- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2016 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 Authorit(the 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, which designates management and has full accountability for the Housing Authority's financial affairs. The Housing Authority's financial transactions are reported in the Special Revenue Funds. -31- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): a. The Financial Reporting Entity (Continued): Since the City Council serves as the governing board for these component units and management of the City has operational responsibility 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 within the funds of the primary government. These component units do not issue separate component unit financial statements. b. Government -wide and Fund Financial Statements: The government -wide financial statements (i.e., the statement of net position and the statement of activities) 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. Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables and receivables. All internal balances in the statement of net position have been eliminated except those representing balances between the governmental activities and the business -type activity, which are presented as internal balances and eliminated in the total primary government column. In the statement of activities, inter -fund services have been eliminated; however, those transactions between governmental and business -type activity have not been eliminated. 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. -32- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): b. Government -wide and Fund Financial Statements (Continued): 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. 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 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. -33- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): 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. 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. -34- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): c. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued): 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 MCAS 2010 Capital Projects Fund is used to account for capital project costs at the Marine Corps Air Station. The CFD Construction Capital Projects Fund is used to account for construction and improvements to the Tustin Legacy area. 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. -35- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): d. New Accounting Pronouncements: Current Year Standards In fiscal year 2015-2016, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 72, "Fair Value Measurement and Application". GASB Statement No. 72 requires the City to use valuation techniques which are appropriate under the circumstances and are either a market approach, a cost approach or income approach. GASB Statement No. 72 establishes a hierarchy of inputs used to measure fair value consisting of three levels. Level I inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs, and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. GASB Statement No. 72 also contains note disclosure requirements regarding the hierarchy of valuation inputs and valuation techniques that were used for the fair value measurements. There was no material impact on the City's financial statements as a result of the implementation of GASB Statement No. 72. GASB Statement No. 73 - "Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 ", was required to be implemented in the current fiscal year, except for those provisions that address employer and governmental nonemployer contributing entities for pensions that are not within the scope of GASB Statement No. 68, and is effective for periods beginning after June 15, 2016, and did not impact the City. GASB Statement No. 76 - "The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments ", was required to be implemented in the current fiscal year and did not impact the City. GASB Statement No. 79 - "Certain External Investment Pools and Pool Participants", was required to be implemented in the current fiscal year, except for certain provisions on portfolio quality, custodial credit risk, and shadow pricing, which are effective for periods beginning after December 15, 2015, and did not impact the City. GASB Statement No. 82, "Pension Issues an Amendment of GASB Statement No. 67, No. 68 and No. 73 ", changed the measurement of covered payroll reported in required supplementary information and has been early implemented. -36- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): d. New Accounting Pronouncements (Continued): Pending Accounting Standards GASB has issued the following statements, which may impact the City's financial reporting requirements in the future: GASB 73 - `Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 ", contains provisions that address employer and governmental nonemployer contributing entities for pensions that are not within the scope of GASB 68, effective for periods beginning after June 15, 2016. • GASB 74 - `Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans ", effective for periods beginning after June 15, 2016. • GASB 75 - `Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions ", effective for periods beginning after June 15, 2017. • GASB 77 - "Tax Abatement Disclosure", effective for periods beginning after December 15, 2015. • GASB 78 - `Pensions Provided through Certain Multiple -Employer Defined Benefit Pension Plans ", effective for periods beginning after December 15, 2015. • GASB 79 - "Certain External Investment Pools and Pool Participants ", contains certain provisions on portfolio quality, custodial credit risk, and shadow pricing, effective for periods beginning after December 15, 2015. • GASB 80 - "Blending Requirements for Certain Component Units", effective for periods beginning after June 15, 2016. • GASB 81 - "Irrevocable Split -Interest Agreements", effective for periods beginning after December 15, 2016. • GASB 82 - "Pension Issues", effective for periods beginning after June 15, 2016, except for certain provisions on selection of assumptions, which are effective in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. -37- 1 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 5 - 40 years Improvements other than buildings 5 - 40 years Property and plant 5 - 40 years Machinery and equipment 4 - 10 years Infrastructure 25 - 75 years CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 and the governmental funds balance sheet 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 future periods and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The City has the following items that qualify for reporting in this category: • 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. • Deferred outflow related to pensions. This amount is equal to employer contributions made after the measurement date of the net pension liability. • Deferred outflows related to pensions for the changes in proportion and differences between employer contributions and the proportionate share of contributions. These amounts are amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions through the plans, which is 3.8 years. -39- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 (Continued) In addition to liabilities, the statement of net position and the governmental funds balance sheet 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 future periods and will not be recognized as an inflow of resources (revenue) until that time. The City has the following items that qualify for reporting in this category: • Deferred inflows from unavailable revenue, which arises only under a modified accrual basis of accounting, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from grants. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. • Deferred inflow related to pensions for differences between expected and actual experience. This amount is amortized over a closed period equal to the average of the expected remaining service lives of all employees that are provided with pensions through the plans, which is 2.7 to 3.8 years. • Deferred inflows from pensions resulting from changes in assumptions. These amounts are amortized over a closed period equal to the average expected remaining service lives of all employees that are provided with pensions through the plans, which is 2.7 to 3.8 years. • Deferred inflows related to pensions resulting from the difference in projected and actual earnings on investments of the pension plans fiduciary net position. These amounts are amortized over five years. -40- 1 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued): 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 accrues as revenues only those taxes which are received within 60 days after year end in the fund financial statements. Property Tax Calendar Property taxes are assessed and collected each fiscal year according to the following property tax calendar: Lien date January 1St Levy period July 1St to June 30th Levy date On or before 4th Monday in September Due date November Is'- Is'installment February Is' - 2nd installment Collection date December 10th - 1st installment April 10"' - 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. -41- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): e. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position or Equity (Continued): Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City's California Public Employees' Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. f. Use of Estimates: The preparation of financial statements in accordance 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. 2. CASH AND INVESTMENTS: Cash and Investments Cash and investments as of June 30, 2016, are classified in the accompanying financial statements as follows: Statement of Net Position: Cash and investments $ 150,595,074 Restricted cash and investments 67,106,853 Fiduciary Funds: Cash and investments 3,224,713 Restricted cash and investments 17,557,433 Total Cash and Investments 238.484.073 -42- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 2. CASH AND INVESTMENTS (CONTINUED): Cash and Investments (Continued) Cash and investments as of June 30, 2016, consist of the following: Cash on hand $ 9,100 Deposits with financial institutions 7,124,276 Investments 231,350,697 Total Cash and Investments 238.484.073 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. Investment Types Authorized by the City's Policy Negotiable certificates of deposit Prime quality commercial paper Government sponsored pools (LAIF, mutual funds) Commercial bank time drafts (Bankers acceptances) Medium-term notes Municipal and state securities Federal agency bonds or notes United States (U.S). Treasury securities Money market funds Repurchase agreements N/A - Not Applicable * Average weighted maturity shall not exceed ninety (90) days if commercial paper exceeds fifteen (15) percent of total portfolio assets. -43- Maximum Maximum Percentage Investment Maturity of Portfolio in One Issuer None 30% None 270 days * 25% None N/A None None 180 days 25% 30% 5 years 15% None None 15% 5% 5 years 75% None 5 years None None N/A None None 1 year None None * Average weighted maturity shall not exceed ninety (90) days if commercial paper exceeds fifteen (15) percent of total portfolio assets. -43- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 Percentage of Portfolio None Maximum Investment in One Issuer 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. -44- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 12 Months 13-24 25-60 Over 60 Investment Type or Less Months Months Months Total U.S. Treasury Notes $ 12,010,416 $ 15,547,500 $ 7,046,760 $ - $ 34,604,676 U.S. Government Sponsored Agency Securities: Federal National Mortgage Association (FNMA) Federal Home Loan Bank (FHLB) Federal Home Loan Mortgage Corporation (FHLMC) Federal Farm Credit Bank (FFCB) Local Agency Investment Pool (LAIF) Orange County Investment Pool Negotiable Certificates of Deposit Medium-term Notes Municipal Bonds Held by Fiscal Agents: Money Market Mutual Funds - 2,012,730 8,020,413 - 10,033,143 9,019,849 3,001,222 5,533,189 - 17,554,260 4,007,930 1,000,174 3,552,006 - 8,560,110 2,000,166 4,020,675 4,006,268 - 10,027,109 48,834,412 - - - 48,834,412 10,482,773 - - - 10,482,773 1,737,774 2,989,513 8,627,495 - 13,354,782 10,050,920 4,145,274 8,673,355 - 22,869,549 - 2,010,320 3,082,810 - 5,093,130 49,936,753 - - - 49,936,753 X148 080,993 34,727,408 48.542.296 - $231,350,697 -45- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 The ratings for the "Other" category above are as follows: Medium-term Notes: AA- Total Minimum Exempt A 2,136,269 A+ 2,564,288 as of Legal from Not Investment Type June 30, 2016 Ratine Disclosure AAA AA+ AA Other Rated U.S. TreaSUry Notes $ 34,604,676 N/A $ 34,604,676 $ $ - $ $ $ U.S. Government Sponsored Agency Securities: FNMA 10,033,143 N/A - 10,033,143 FHLB 17,554,260 N/A 17,554,260 FHLMC 8,560,110 N/A 8,560,110 FFCB 10,027,109 N/A 10,027,109 - Local Agency Investment Pool 48,834,412 N/A - 48,834,412 Orange County Investment Pool 10,482,773 N/A 10,482,773 Negotiable Certificates ofDeposit 13,354,782 N/A 13,354,782 Medium- term Notes 22,869,549 A 4,080,153 7,032,413 9,745,323 2,011,660 Municipal Bonds 5,093,130 A - - 4,059,200 1,033,930 Held by Fiscal Agents: Money Market Mutual Funds 49.936.753 A 49.936.753 - - Total 231350697 P34,604,676 554,016,906 446174,E S7-0-32-413 513,804,E 75J17S57 N/A - Not Applicable The ratings for the "Other" category above are as follows: Medium-term Notes: AA- $ 4,040,826 A- 1,003,940 A 2,136,269 A+ 2,564,288 9,745,323 Municipal Bonds: AA- S 4,059,200 -46- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 2. 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. Investments in any one issuer that represent 5% or more of total City's investments are as follows: Reported Issuer Investment Type Amount Federal Home Loan Bank United States Government Sponsored Agency Securities $ 17,554,260 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. -47- 2 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 CASH AND INVESTMENTS (CONTINUED): Custodial Credit Risk (Continued) As of June 30, 2016, 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, 2016, 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: 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 LAIF 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 $10,482,773. 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. Carrying Investment Type Value U.S. Treasury Notes $ 34,604,676 U.S. Government Sponsored Agency Securities 46,174,622 Medium-term Notes 22,869,549 Municipal Bonds 5,093,130 Negotiable Certificates of Deposit 13,354,782 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 LAIF 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 $10,482,773. 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. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 2. CASH AND INVESTMENTS (CONTINUED): Fair Value Measurements The City categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the relative inputs used to measure the fair value of the investments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets in active markets that the City has the ability to access. Level 2: Inputs to the valuation methodology include: • Quoted prices for similar assets in active markets; • Quoted prices for identical or similar assets in inactive markets; • Inputs other than quoted prices that are observable for the asset; • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs reflect the City's own assumptions about the inputs market participants would use in pricing the asset (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the City's own data. The asset's level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The determination of what constitutes observable requires judgment by the City's management. City management considers observable data to be that market data which is readily available, regularly distributed or updated, reliable, and verifiable, not proprietary, and provided by multiple independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the relative observability of the inputs to its fair value measurement and does not necessarily correspond to City management's perceived risk of that investment. The methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. -49- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 2. CASH AND INVESTMENTS (CONTINUED): Fair Value Measurements (Continued) When available, quoted prices are used to determine fair value. When quoted prices in active markets are available, investments are classified within Level 1 of the fair value hierarchy. When quoted prices in active markets are not available, fair values are based on evaluated prices received by City's custodian. The following is a description of the recurring valuation methods and assumptions used by the City to estimate the fair value of its investments. For a large portion of the City's portfolio, the City's custodian applies their leveling methodology across all securities in a specific sector (i.e. U.S. Government Sponsored Agency Securities). Inputs to their pricing models are based on observable market inputs in active markets. The City has no investments categorized in Level 3. When valuing Level 3 securities, the inputs or methodology are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. Quoted Prices Level 1 U.S. Treasury Notes U.S. Government Sponsored Agency Securities: FNMA FHLB FHLMC FFCB Negotiable Certificates of Deposit Medium-term Notes Municipal Bonds Total Leveled Investments Local Agency Investment Pool* Orange County Investment Pool* Held by Fiscal Agents: Money Market Mutual Funds* Total Investment Portfolio * Not subject to fair value measurements. -50- Observable Inputs Level 2 $ 34,604,676 10,033,143 17,554,260 8,560,110 10,027,109 13,354,782 22,869,549 5.093.130 122.096.759 Unobservable Inputs Level 3 Total $ 34,604,676 10,033,143 17,554,260 8,560,110 10,027,109 13,354,782 22,869,549 5.093,130 122,096,759 48,834,412 10,482,773 49,936,753 S 231,350,697 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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, 2016, 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, 2016, was $33,796. An allowance of $33,796 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 were due beginning in 2016, or when the homeowner sells or refinances. The loans provided in the Tustin Grove Development were due when the homeowner sells or refinances. If the homeowner did not sell or refinance before July 2015, the loan was forgiven. In fiscal year 2015-16, the loans were forgiven. However, there was no impact in the financial statements because an allowance for the full amount was recorded in the prior year. Orange County Rescue Mission: On February 10, 2015, the City entered into an agreement with the Orange County Rescue Mission (OCRM), whereby the City agreed to convey two residential buildings to the OCRM to be used for housing for homeless veterans. In exchange, the OCRM executed a promissory note to the City in the amount of $533,000. The note is payable after 30 years with 3% interest. For every year that the OCRM uses the property for homeless veterans housing, the promissory note and any accrued interest will be forgiven by 1/30"'. Should the OCRM successfully utilize the properties for homeless veterans housing for all 30 years in which the note is in effect, as stipulated in the deed of trust, it will owe no money to the City. The total outstanding balance at June 30, 2016, including accrued interest of $13,658 was $528,891. An allowance of $528,891 has been recorded to reflect the amount of the note not expected to be collectible. 4. INTERFUND TRANSFERS: The composition of interfund transfers for the year ended June 30, 2016, is as follows: Transfers In Transfers Out Amount General Fund CFD Construction Capital Projects Fund $ 1,572,719 Other Governmental Funds 3,833,205 CFD Construction Capital Projects Fund General Fund 48,064 5,453.988 -51- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 4. INTERFUND TRANSFERS (CONTINUED): The transfers during the fiscal year ended June 30, 2016, were for the following purposes: A transfer from the CFD Construction Capital Projects Fund totaling $1,572,719 to the General Fund was made to repay amounts transferred to cover negative cash in prior years. A transfer from other governmental funds totaling $3,427,578 to the General Fund to pay for public safety services provided for the Special Tax B area. A transfer from other governmental funds totaling $310,200 was made to the General Fund per the adopted budget for fiscal year 2015-16. A transfer from other governmental funds totaling $95,427 to the General Fund to pay for services provided for Measure M. The General Fund transferred $48,064 to the CFD Construction Capital Projects Fund to eliminate negative cash until reimbursement is received from the fiscal agent. 5. LAND HELD FOR RESALE: Land held for resale as of June 30, 2016, consisted of the following: Pacific Park $ 30,787,557 South A Street property 131,818 Tustin Legacy 57,083,368 27 Look Out 127,157 14542 Newport Avenue #3 354,927 Total Land Held for Resale S 88.484.827 6. 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. -52- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 6. LAND TRANSFER FROM THE UNITED STATES GOVERNMENT: (CONTINUED): 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 parcels were recorded at their estimated fair values at the dates 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. 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 I 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 allowed the City to proceed with the Exchange Agreement. The transfer of the parcels occurred August 2014 and was considered an even exchange. The City also entered into a separate agreement with the SOCCCD in July 2014 to acquire the Valencia Parcels, approximately 5 acres of land, for $1,083,220 less a demolition credit of $500,000. In August 2014, the City sold 74 acres of the land to a developer for $56,000,000 resulting in a gain on land held for resale of $48,136,121. In February 2015, the City entered into an Exchange Agreement with the United States of America Department of Army. The Exchange Agreement delineates the terms associated with the exchange of the ultimate ownership of approximately 15 acres of usable land and improvements. The transfer of the property occurred in April 2015 and was determined to be of equivalent value. -53- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 6. LAND TRANSFER FROM THE UNITED STATES GOVERNMENT: (CONTINUED): In fiscal year 2015-16, the City reclassified 310 acres of the land held for resale related to the land transfer from the United States Government to land to be used for government purposes. The reclassification was for land to be given to another governmental agency and to be used for parks and roads. In addition, the Valencia Parcels (about 5 acres) were reclassified due to a change in the intended use of the property. These parcels were retained by the City and will be used to create the new veteran's sports park. As a result, land held for resale was reduced by $34,026,499 in the General Fund and is reported as land in the government -wide statement of net position. The recorded value of the remaining parcels as of June 30, 2016, was $57,083,368. 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. 7. CAPITALASSETS: A summary of changes in the Governmental Activities capital assets for the year ended June 30, 2016, is as follows: Capital assets, not being depreciated: Land Right of way Construction in progress Total capital assets, not being depreciated Capital assets, being depreciated: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total capital assets, being depreciated Less accumulated depreciation for: Buildings Improvements other than buildings Machinery and equipment Infrastructure Total accumulated depreciation Total capital assets, being depreciated, net Total governmental activities capital assets, net Balance at July 1, 2015 Additions Deletions Transfers Balance at June 30, 2016 S 44,140,596 S 40,637,298 S - S 1,464,000 S 86,241,894 43,758,156 - - - 43,758,156 57,814,454 16,213,971 (45,503,111) - 28,525,314 145,713,206 56,851,269 (45,503,111) 1,464,000 158,525,364 71,350,715 2,170,531 - 190,000 73,711,246 26,134,906 2,474,698 - - 28,609,604 15,381,429 2,528,331 (224,099) - 17,685,661 335,749,305 17,889,303 (388,858) - 353,249,750 448,616,355 25,062,863 (612,957) 190,000 473,256,261 (15,442,817) (1,470,051) - (83,600) (16,996,468) (5,598,386) (943,464) - - (6,541,850) (12,217,058) (987,350) 211,457 - (12,992,951) (104,422,215) (7,825,669) 226,663 - (112,021,221) (137,680,476) (11,226,534) 438,120 (83,600) (148,552,490) 310,935,879 13,836,329 (174,837) 106,400 324,703,771 S 456,649,085 S 70.687,598 $ (45 677,948) S 1.570,400483,229,135 * - Transfer of capital assets from the Successor Agency to the Tustin Community Redevelopment Agency to the City (see Note 22). -54- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 7. CAPITALASSETS (CONTINUED): Depreciation expense was charged to functions/programs of the governmental activities as follows: General government $ 224,380 Public safety 347,619 Public works 10,122,172 Community services 532,363 11,226,534 A summary of changes in the Business -type Activity capital assets for the year ended June 30, 2016, 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 Less accumulated depreciation for: Buildings and improvements Property, plant and equipment Total accumulated depreciation Total capital assets, being depreciated, net Total business -type activity capital assets, net Balance at Balance at July 1, 2015 Additions Deletions June 30, 2016 $ 1,177,216 $ - $ - $ 1,177,216 3,551,265 4,716,968 (207,787) 8,060,446 4,728,481 4,716,968 (207,787) 9,237,662 9,500,377 - - 9,500,377 57,760,809 338,816 (14,071) 58,085,554 67.261.186 338.816 (14.071) 67.585.931 (4,959,934) (238,848) - (5,198,782) (21,317,158) (1,466,388) 6,858 (22,776,688) (26,277,092) (1,705,236) 6,858 (27,975,470) 40,984,094 (1,366,420) (7,213) 39,610,461 $ 45,712,575 $ 3,350,548 S (215,000) $ 48,848,123 During the fiscal year ended June 30, 2016, the City capitalized interest of $161,874. -55- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 8. LONG-TERM LIABILITIES: A summary of long-term liability activity for the year ended June 30, 2016, is as follows: Governmental activities: Due to Successor Agency to the Tustin Community Redevelopment Agency (Note 9) $ Pension liability (Note 10c) Postemployment benefits Balance at Balance at Due Within July 1, 2015 Additions Deletions June 30, 2016 One Year 16,404,683 $ - $ (4,101,171) $ 12,303,512 $ 4,101,171 38,089,096 1,409,430 - 39,498,526 - obligation (Note 11) 5,694,218 2,084,000 (615,584) 7,162,634 - Claims and judgments (Note 13) 5,148,755 2,389,008 (2,752,562) 4,785,201 4,785,201 Termination benefits 1,320,852 - (660,426) 660,426 660,426 Compensated absences 3,025,019 2,670,160 (2,555,544) 3,139,635 2,825,672 Total governmental Revenue bonds 6,765,000 - (745,000) 6,020,000 770,000 activities long-term 633,615 - (81,757) 551,858 - 2013 Water liabilities $ 69,682,623 $ 8.552,598 $ (10,685,287) $ 67,549,934 $ 12,372,470 Business -type activity: 2011 Water Revenue bonds $ 20,760,000 $ - $ - $ 20,760,000 $ - Bond premium 263,911 - (10,200) 253,711 - 2012 Refunding Water Revenue bonds 6,765,000 - (745,000) 6,020,000 770,000 Bond premium 633,615 - (81,757) 551,858 - 2013 Water Revenue bonds 14,000,000 - (45,000) 13,955,000 45,000 Bond premium 111,418 - (3,944) 107,474 - Pension liability (Note 10c) 1,832,914 438,294 - 2,271,208 - Termination benefits 29,574 - (14,787) 14,787 14,787 Compensated absences 196,228 212,518 (207,799) 200,947 180,853 Total business -type activity long-term liabilities $ 44.592,660 $ 650,812 $ X1108,487) $ 44,134,985 $ 1,010,640 -56- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 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 malting 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) Resigned from City employment effective no later than October 31, 2012; and d) Retired 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. Thirty-five 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, 2016, the outstanding liability due to fund the plan is $675,213, ($660,426 reported in the governmental activities and $14,787 in the business -type activity). The final payment was made in September 2016. Business -type Activity 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 the 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, 2016, total interest and principal remaining on the bonds was $39,378,063. During the fiscal year, the total interest expense incurred is $1,047,625 and net revenues were $4,498,419. -57- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 8. LONG-TERM LIABILITIES (CONTINUED): Business -type Activity (Continued) 2011 Water Revenue Bonds (Continued) The annual debt service requirements to amortize the bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2041 Add: Premium Totals Principal 2,315,000 4,700,000 6,040,000 7,705,000 20,760,000 253,711 Interest $ 1,047,625 1,047,625 1,047,625 1,047,625 1,047,625 5,126,125 4,199,313 2,861,750 1,192,750 18,618,063 Total $ 1,047,625 1,047,625 1,047,625 1,047,625 1,047,625 7,441,125 8,899,313 8,901,750 8,897,750 39,378,063 253,711 21,013.711 S 18.618.063 $ 39.631.774 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, 2016, is $364,908. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 8. LONG-TERM LIABILITIES (CONTINUED): Business -type Activity (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, 2016, total interest and principal remaining on the bonds is $6,973,525. During the fiscal year, the total interest expense incurred was $250,425, principal payments were $745,000, and net revenues were $4,498,419. The annual debt service requirements to amortize the bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2023 Add: Premium Principal $ 770,000 795,000 830,000 860,000 885,000 1,880,000 6,020,000 551.858 Interest $ 228,075 197,275 165,475 138,500 110,600 113,600 953,525 Total $ 998,075 992,275 995,475 998,500 995,600 1,993,600 6,973,525 551.858 Totals S 6.571.858 S 953,525 S7.525.383 -59- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 8. LONG-TERM LIABILITIES (CONTINUED): Business -type Activity (Continued) 2013 Water Revenue Bonds On April 1, 2014, the City issued $14,045,000, 2013 Water Revenue Bonds. The Bonds were issued to finance certain water system improvements. The Bonds are payable in annual installments ranging from $45,000 to $2,615,000 until maturity on April 1, 2043. Interest is payable semiannually on April 1 and October 1, with rates ranging from 2.0% to 5.00% 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, 2016, total interest and principal remaining on the bonds is $27,684,230. During the fiscal year, the total interest expense incurred was $653,120 and net revenues were $4,498,419. The annual debt service requirements to amortize the bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032 - 2036 2037-2041 2042-2043 Add: Premium Principal $ 45,000 50,000 50,000 50,000 55,000 1,110,000 1,980,000 2,430,000 3,080,000 5,105,000 13,955,000 107.474 Interest $ 652,220 651,320 650,320 648,320 646,320 3,160,880 2,829,375 2,376,081 1,732,650 381,744 13,729,230 Total $ 697,220 701,320 700,320 698,320 701,320 4,270,880 4,809,375 4,806,081 4,812,650 5,486,744 27,684,230 107.474 Totals $ 14,062,474 $ 13,729,230 $ 27,791,704 -60- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 9. 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 City has negotiated with the State Department of Finance (DOF) to allow for the Local Agency Investment Fund (LAIF) interest rate to be used as the effective interest and to pay the debt off over four to five years. The DOF agreed to allow the LAIF interest rate at the time the City entered into the promissory note with the former Redevelopment Agency which was 2.54% and also agreed to five installment payments with the first payment due within seven days of the City accepting DOF's offer. With the effective flat interest rate of 2.54% compounded annually the total amount payable to the Successor Agency to the Tustin Community Redevelopment Agency was $21,404,683. The City signed the settlement agreement on December 9, 2014, and the first installment payment totaling $5,000,000 was made within the required time period. The remaining balance is payable in four annual installments of $4,101,171 beginning on or before December 31, 2015, and again on or before December 31 of each of the following three years (2016, 2017 and 2018). The outstanding balance as of June 30, 2016, is $12,303,512. Subsequent to year-end, the City amended the settlement agreement (see Note 23). 10. PENSION PLANS: a. General Information about the Pension Plans: Plan Descriptions All qualified permanent and probationary employees are eligible to participate in the City's separate Safety (police) and Miscellaneous (all other) Plans. The Miscellaneous Plan is an agent multiple -employer defined benefit pension plan, and the Safety Plan is a cost-sharing multiple employer defined benefit pension plan. Both of these Plans are administered by the California Public Employees' Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CAPERS website. -61- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): a. General Information about the Pension Plans (Continued): Benefits Provided CalPERS provides service retirement and disability retirement benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees or their beneficiaries. Benefits are based on three factors: service credit (up to one year of service per fiscal year), benefit factor (based on plan and age at retirement), and final compensation (highest pensionable compensation for a consecutive 12 or 36 month period, depending on plan). Members with five years of total service are eligible to retire at age 50 to 62 with statutorily reduced benefits. Members of all but one plan available to employees are eligible to retire upon reaching age 50 and attaining 5 years of service credit. PEPRA Miscellaneous members (membership date on or after January 1, 2013) are eligible to retire upon reaching age 52 and attaining 5 years of service. All members are eligible for non -duty disability retirement benefits after 5 years of service. Safety members are eligible for industrial disability retirement benefits, regardless of age or years of service, if they are determined to be industrially disabled within the meaning of the retirement law. The survivors of members are eligible for the Basic Death Benefit, the 1957 Survivor Benefit, and/or the 1959 Survivor Benefit. The survivors of Safety members who die prior to retirement are also eligible for the Pre -Retirement Option 2W Death Benefit and, if the member is actively employed and dies in the course of duty, the Special Death Benefit. Each plan provides retirees with a cost -of -living adjustment of up to 2% per year. The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Prior to January 1, 2012 2%@55 5 years of service monthly for life 50+ 2% 10% 10.338% -62- Miscellaneous January 1, 2012 to On or After December 31, 2012 January 1, 2013 2%@60 2%@62 5 years of service 5 years of service monthly for life monthly for life 50+ 52+ 2% 2% 10% 6.25% 10.338% 13.338% CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): a. General Information about the Pension Plans (Continued): Benefits Provided (Continued) The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates Employees Covered Safety Prior to January 1, 2012 to On or After January 1, 2012 December 31, 2012 January 1, 2013 3%@50 2%@50 2.7%@57 5 years of service 5 years of service 5 years of service monthly for life monthly for life monthly for life 50+ 50+ 50+ 3% 2% 2.7% 12% 12% 11.5% 24.849% 10.813% 11.153% At June 30, 2016, the following employees were covered by the benefit terms for the Miscellaneous Plan: Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled to but not yet receiving benefits Active employees Total Contributions Miscellaneous 225 296 180 701 Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July I following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. -63- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): b. Net Pension Liability: The City's net pension liability for each Plan is measured as the total pension liability, less the pension plan's fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2015, using an annual actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Actuarial Assumptions The total pension liabilities in the June 30, 2014 actuarial valuations were determined using the following actuarial assumptions: Valuation Date Measurement Date Actuarial Cost Method Actuarial Assumptions: Miscellaneous June 30, 2014 June 30, 2015 Entry -Age Normal Cost Method Safety June 30, 2014 June 30, 2015 Entry -Age Normal Cost Method Discount Rate 7.65% 7.65% Inflation 2.75% 2.75% Payroll Growth 3.00% 3.00% Projected Salary Increase (1) (1) Investment Rate of Return 7.5%(2) 7.5%(2) Mortality (3) (3) (1) Depending on age, service and type of employment. (2) Net of pension plan investment expenses, including inflation. (3) The probabilities of mortality are derived using CaIPERS' membership data for all funds. The mortality table used was developed based on CaIPERS' specific data.. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. for more details on this table, please refer to the 2014 experience study report. All other actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at the CaIPERS website under Forms and Publications. -64- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): b. Net Pension Liability (Continued): Change of Assumptions GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense. Discount Rate The discount rate used to measure the total pension liability was 7.65% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing of the Plans, the tests revealed the assets would not run out. Therefore, the current 7.65% discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long term expected discount rate of 7.65% is applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report called "GASB Crossover Testing Report" that can be obtained from the Ca1PERS website under the GASB 68 section. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best -estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, Ca1PERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. -65- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): b. Net Pension Liability (Continued): Discount Rate (Continued) The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the Ca1PERS Board effective on July 1, 2014. Asset Class Global Equity Global Fixed Income Inflation Sensitive Private Equity Real Estate Infrastructure and Forestland Liquidity Total New Strategic Allocation 51.00% 19.00% 6.00% 10.00% 10.00% 2.00% 2.00% 100.00% (a) An expected inflation of 2.5% used for this period (b) An expected inflation of 3.0% used for this period -66- Real Return Years 1 -10 (a) 5.25% 0.99% 0.45% 6.83% 4.50% 4.50% -0.55% Real Return Years 11+ (b) 5.71% 2.43% 3.36% 6.95% 5.13% 5.09% -1.05% CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): c. Changes in the Net Pension Liability: The changes in the net pension liability for the Miscellaneous Plan, using the measurement date of June 30, 2015, are as follows: Changes in the Year: Service cost Increase (Decrease) - Total Plan Net Pension Pension Fiduciary Liability Liability Net Position (Asset) Balance at June 30, 2014 $ 93,683,688 $ 79,584,353 $ 14,099,335 Changes in the Year: Service cost 1,779,008 - 1,779,008 Interest on the total pension liability 6,982,672 - 6,982,672 Differences between actual and expected experience 452,122 - 452,122 Changes in assumptions (1,770,351) - (1,770,351) Changes in benefit terms - - - Plan to plan resource movement - (114) 114 Contribution - employer - 1,503,081 (1,503,081) Contribution - employee - 905,331 (905,331) Net investment income - 1,753,374 (1,753,374) Administrative expenses - (89,714) 89,714 Benefit payments, including refunds of employee contributions (3,956,389) (3,956,389) - Net Changes 3,487,062 115,569 3,371,493 Balance at June 30, 2015 (Measurement Date) $ 97,170,750 $ 79,699,922 $ 17,470,828 -67- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): c. Changes in the Net Pension Liability (Continued): As of June 30, 2016, the City reported net pension liabilities for its proportionate shares of the net pension liability for the Safety Plan as follows: Safety Proportionate Share of Net Pension Liability $ 24,298,906 The City's net pension liability for each Plan is measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2015, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. The City's proportionate share of the net pension liability was based on a projection of the City's long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City's proportionate share of the net pension liability for each Plan as of June 30, 2014 and 2015 was as follows: Safety Proportion - June 30, 2014 0.68843% Proportion - June 30, 2015 0.58972% Change - Increase (Decrease) -0.09871% CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): c. Changes in the Net Pension Liability (Continued): Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City for each Plan, calculated using the discount rate for each Plan, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 -percentage point lower or 1 -percentage point higher than the current rate: Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. -69- Miscellaneous Safety 1% Decrease 6.65% 6.65% Net Pension Liability $ 31,013,880 $ 40,457,639 Current Discount Rate 7.65% 7.65% Net Pension Liability $ 17,470,828 $ 24,298,906 1% Increase 8.65% 8.65% Net Pension Liability $ 6,350,370 $ 11,049,042 Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports. -69- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 10. PENSION PLANS (CONTINUED): d. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions: For the year ended June 30, 2016, the City recognized pension expense of $2,994,628. At June 30, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: $4,558,292 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year Ending June 30, 2017 2018 2019 2020 2021 Thereafter e. Payable to the Pension Plans: Amount $ (2,142,835) (2,017,145) (1,631,038) 1,865,932 At June 30, 2016, the City had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2016. -70- Deferred Deferred Outflows Inflows of Resources of Resources Pension contributions subsequent to measurement date $ 4,558,292 $ - Differences between actual and expected experience - (70,329) Change in assumptions - (2,747,431) Change in employer's proportion and differences between the employer's contributions and the employer's proportionate share of contributions 390,387 Net differences between projected and actual earnings on plan investments - (1,497,713) Total(4,315,473) $4,558,292 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Year Ending June 30, 2017 2018 2019 2020 2021 Thereafter e. Payable to the Pension Plans: Amount $ (2,142,835) (2,017,145) (1,631,038) 1,865,932 At June 30, 2016, the City had no outstanding amount of contributions to the pension plans required for the year ended June 30, 2016. -70- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 11. POST -EMPLOYMENT HEALTH CARE BENEFITS: Plan Description The City provides other post -employment benefits (OPEB) to retired employees in the form of a contribution towards their medical premiums under the PERS health plan, a single -employer defined 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, 2016: Police Police General Management Confidential Support Total Retirees Receiving Benefits 41 30 24 1 6 102 Eligible Active Employees 90 87 43 7 43 270 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 contributions are made on a pay-as-you-go basis. As of July 1, 2015, 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, 2016, the City paid $615,584 in contributions for postemployment health care benefits. Current active employees are not required to contribute any portion towards these benefits. 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. -71- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 11. POST -EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED): Funding Policy (Continued) The City's ARC for the year ended June 30, 2016 was $2,404,000. 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 Interest on net OPEB obligation Adjustment to ARC Annual OPEB cost Contributions made Increase in net OPEB obligation Net OPEB obligation, beginning Net OPEB obligation, ending Police Police General Management Confidential Support Total $ 846,570 $ 756,097 $ 432,978 $ 51,699 $ 316,656 $ 2,404,000 76,065 67,935 38,903 4,645 28,452 216,000 (188,753) (168,581) (96,537) (11,527) (70,602) (536,000) 733,882 655,451 375,344 44,817 274,506 2,084,000 (255,128) (130,365) (198,124) (4,509) (27,458) (615,584) 478,754 525,086 177,220 40,308 247,048 1,468,416 1,788,142 1,845,615 883,248 365,484 811,729 5,694,218 S 2,266,896 S 2,370,701 $ 1,060,468 S 405,792 S 1,058,777 S 7,162,634 The City's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 and the two preceding years were as follows: Fiscal Annual Year OPEB Ended Cost 6/30/14 $ 1,107,635 6/30/15 1,142,391 6/30/16 2,084,000 -72- Percentage of Annual OPEB Cost Contributed 37.50% 36.62% 29.54% Net OPEB Obligation $ 4,970,150 5,694,218 7,162,634 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 11. POST -EMPLOYMENT HEALTH CARE BENEFITS (CONTINUED): Funding Status and Progress As of June 30, 2015, the most recent valuation date, the actuarial accrued liability for benefits was $19.79 million, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $19.79 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 $22.23 million and the ratio of the UAAL to the covered payroll was 89.0%. 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. The required contribution for the fiscal year 2016 was determined as part of the June 30, 2015 actuarial valuation. The actuarial cost method used for determining the benefit obligations is the entry age normal cost method. The actuarial assumptions included a 4.00% 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 at 7.5% in 2016 decreasing by .5% to 5.0% in 2021. The UAAL is being amortized as a level percentage of projected payroll over a closed period of 15 years. -73- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 12. IRS SECTION 457 DEFERRED COMPENSATION PLAN: In accordance with federal law, all part-time employees must be enrolled in Social Security or another "qualified" retirement plan. Since the City does not participate in Social Security, part-time employees are enrolled in the City's IRS Section 457 deferred compensation plan. Nationwide Retirement Solutions, Inc. acts as the third party administrative services provider for the defined contribution plan. Employees are required to contribute 5.5% of salary to the deferred compensation plan every pay period. The City contributes an additional 2% of salary, for a total contribution of 7.5%. Council established the plan by resolution in fiscal year 2011-2012, and has the authority to amend contribution requirements. Contributions to the participants account must equal at least 7.5% of the participant's compensation, or such other minimum amount as required for the plan to be considered a retirement system under applicable government code and legal requirements. Total contributions to the plan during fiscal year 2016 were $67,252. 13. 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 an 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. -74- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 13. 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, 2016. At June 30, 2016, estimated claims payable of $4,785,201, 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, 2015 and 2016, including a provision for incurred but not reported claims and loss adjustment expenses, were as follows: une 30 2015 2016 Beginning Ending Balance Additions Deletions Balance $ 4,278,500 $ 3,874,920 $ 5,148,755 2,389,008 14. SPECIAL ASSESSMENT DISTRICTS' BONDS: $ 3,004,665 $ 5,148,755 2,752,562 4,785,201 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, 2015A Community Facilities District 06-1, 2015B Community Facilities District 07-1, 2015A Community Facilities District 07-1, 2015B Community Facilities District 2014-01, 2015A -75- Amount Outstanding of Issue June 30, 2016 $ 9,350,000 $ 8,795,000 49,740,000 49,740,000 2,735,000 2,735,000 13,155,000 13,155,000 1,500,000 1,500,000 27,665,000 27,665,000 104.145.000 103.590.000 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 14. 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, 2016, the outstanding amount of the Special Tax Refunding Bonds, Series 2013 was $8,795,000. 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 were 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 and pay costs of issuing the bonds. The outstanding bonds in the amount of $52,925,000 of the 2007A Bonds were refunded in advance from bond proceeds of the $49,740,000 Community Facilities District No. 06-1 Special Tax Refunding Bonds, Series 2015A. 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 MCAS being converted into various public, housing, commercial and educational uses. The proceeds of the bonds were 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. The outstanding bonds in the amount of $1,645,000 of the 2010 Bonds were refunded in advance from bond proceeds of the $49,740,000 Community Facilities District No. 06-1 Special Tax Refunding Bonds, Series 2015A. -76- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 14. SPECIAL ASSESSMENT DISTRICTS' BONDS (CONTINUED): In September 2007, the City issued $13,680,000 of Special Tax Bonds, Series 2007, 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 were 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. The outstanding bonds in the amount of $13,250,000 Special Tax Bonds, Series 2007 were refunded in advance from bond proceeds of the $13,155,000 Community Facilities District No. 07-1 Special Tax Refunding Bonds, Series 2015A. In November 2015, the City issued $27,665,000 Community Facilities District No. 2014-01 Special Tax Bonds, Series 2015A (CFD 2014-01 2015A Special Tax Bonds). The CFD 2014-01 2015A Special Tax Bonds were issued to finance certain infrastructure improvements and school facilities, fund a reserve account, and pay for costs of issuance and administrative costs. Serial current interest bonds will mature from September 1, 2016 to September 1, 2035 with interest rates ranging from 2.0% to 5.0%. Term current interest bonds will mature on September 1, 2040 and September 1, 2045, with mandatory sinking payments from September 1, 2036 through September 1, 2045 with interest rates of 5.0%. In December 2015, the City issued $13,155,000 Community Facilities District No. 07-1 Special Tax Refunding Bonds, Series 2015A (CFD 07-1 2015A Refunding Bonds). The CFD 07-1 2015A Refunding Bonds were issued to refund in full and defease the CFD 07-1 Series 2007 Bonds. Serial bonds will mature from September 1, 2021 to September 1, 2025 with interest rates ranging from 2.5% to 3.125%. Term current interest bonds will mature on September 1, 2030 and September 1, 2037, with mandatory sinking payments from September 1, 2030 through September 1, 2037 with interest rates of 5.00%. The City's refunding of the CFD 07-1 Series 2007 Bonds resulted in a decrease of its total debt service payments by $2,152,849 and an economic gain (difference between the present values of the old and new debt) of $1,423,246. In December 2015, the City issued $1,500,000 Community Facilities District No. 07-1 Special Tax Bonds, Series 2015B (CFD 07-1 Special Tax 2015B Bonds). The CFD 07-1 Special Tax 2015B Bonds were issued to finance public improvements, fund a reserve account and pay for costs of issuance. Serial bonds will mature from September 1, 2016 to September 1, 2020 with interest rates ranging from 2.00% to 2.25%. -77- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 14. SPECIAL ASSESSMENT DISTRICTS' BONDS (CONTINUED): In November 2015, the City issued $49,740,000 Community Facilities District No. 06-1 Special Tax Refunding Bonds, Series 2015A (CFD 06-01 2015A Refunding Bonds). The CFD 06-01 2015A Refunding Bonds were issued to refund in full and defease the CFD No 06-1 Series 2007A Bonds and Special Tax Bonds 2010. Serial current bonds will mature from September 1, 2016 to September 1, 2035 with interest rates ranging from 2.0% to 5.0%. Term current interest bonds will mature on September 1, 2037 with an interest rate of 5.00%, September 1, 2037 with an interest rate of 3.75% and September 1, 2039 with an interest rate of 4.0% with mandatory sinking fund payments due September 1, 2036 through September 1, 2039. The City's refunding of the CFD No. 06-1 Series 2007A Bonds and Special Tax Bonds 2010 resulted in a decrease of its total debt service payments by $15,726,836 and an economic gain (difference between the present values of the old and new debt) of $7,020,039. In November 2015, the City issued $2,735,000 Community Facilities District No. 06-1 Special Tax Bonds, Series 2015B (CFD 06-1 Special Tax 2015B Bonds). The CFD 06-1 Special Tax 2015B Bonds were issued to finance public improvements, fund a reserve account and pay for costs of issuance. Serial current bonds will mature from September 1, 2016 to September 1, 2033 with interest rates ranging from 2.0% to 3.75%. Term current interest bonds will mature on September 1, 2035 with an interest rate of 3.75%, and September 1, 2037 with an interest rate of 3.75% with mandatory sinking fund payments due September 1, 2035 through September 1, 2037. 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. 15. 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. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 16. 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. Assi named - 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. Unassigned - This classification includes the residual balance for the City's general fund including all spendable amounts not contained in other classifications. Negative fund balance in governmental funds, after determining the fund balance classifications described above, is also reported as unassigned fund balance. 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. -79- CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 16. GOVERNMENTAL FUND BALANCE CLASSIFICATIONS (CONTINUED): Nonspendable: Prepaid items Land held for resale Restricted for: Capital projects ( I ) Public safety program Housing projects Assigned to: Capital projects (2) Unassigned Capital Projects Funds Other Total General MCAS CFD Governmental Governmental Fund 2010 Construction Funds Funds $ 576,471 $ - $ - $ 1,922 $ 578,393 88,002,743 - - - 88,002,743 18,657,461 - - 20,931,098 79,667,061 30,463,881 21,418,151 169,036 2,387,275 70,539,493 169,036 2,387,275 5,940,718 26,871,816 79,667,061 Total fund balances186.903.736 20.931.098 $ 30,463,881 29.917.102 S 268.215.817 (1) The General Fund balance restricted for capital projects ($18,657,461) is comprised of funds legally restricted for backbone infrastructure at the Tustin Legacy development. The CFD Construction Capital Project fund balance restricted for capital projects ($30,463,881) is comprised of bond proceeds restricted for uses specified in the bond indenture. A majority of the fund balance restricted for capital projects in the other governmental funds ($21,418,151) includes State gas taxes restricted for allowable street -related purposes and developer fees to improve City parks. (2) The MCAS 2010 Capital Projects fund balance assigned to capital projects ($20,931,098) is for financing development activities within or for the benefit of the MCAS -Tustin redevelopment project area as indicated by the 2010 MCAS Bond indenture. The other governmental funds balance assigned to capital projects ($5,940,718) is to be used for specific projects indicated in the adopted budget. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 17. OTHER REQUIRED INDIVIDUAL FUND DISCLOSURES: Excess of Expenditures over Appropriations: Other Governmental Funds: Asset Forfeiture Special Revenue Fund Supplemental Law Enforcement Special Revenue Fund 18. JOINT POWERS AUTHORITY: Orange County Fire Authority Variance with Budget. Actual Final Bud eget $ 317,246 $ 361,943 $ (44,697) 106,500 107,674 (1,174) 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. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 19. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT AGENCIES: On June 29, 2011, Assembly Bills lx 26 (the Dissolution Act) and lx 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. In September 2015, the Legislature passed and the Governor signed SB 107, which made additional changes to the Dissolution Act. Under the Dissolution Act, each California redevelopment agency (each 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 are 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 did not elect to become the Successor Housing Agency and assume the Dissolved RDA's housing functions, such housing functions and all related housing assets were 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. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 19. RECENT CHANGES IN LEGISLATION AFFECTING CALIFORNIA REDEVELOPMENT AGENCIES (CONTINUED): The Dissolution Act and AB 1484 also established 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. The County Auditor -Controller was charged with establishing a Redevelopment Property Tax Trust Fund (the RPTTF) for each Successor Agency and depositing into the RPTTF 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. 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. 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. The State Controller of the State of California was directed to review the propriety of any transfers of assets between the Dissolved RDA and other public bodies that occurred after January 1, 2011. If the public body that received such transfers was not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller was required to order the available assets to be transferred to the public body designated as the successor agency. The State Controller completed its review on July 31, 2014, and did not identify any unallowable transfers of assets that occurred during the audit between the former RDA, the City and or other public agencies. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 20. 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 to the Tustin Community Redevelopment Agency. The City has negotiated with the State Department of Finance (DOF) to allow for the Local Agency Investment Fund (LAIF) interest rate as the effective interest and to pay the debt off over four to five years. The DOF agreed to allow the LAIF interest rate at the time the City entered into the promissory note with the former Redevelopment Agency which was 2.54% and also agreed to five installment payments with the first payment due within seven days of the City accepting DOF's offer. With the effective flat interest rate of 2.54% compounded annually the total amount payable to the Successor Agency to the Tustin Community Redevelopment Agency was $21,404,683. The City signed the settlement agreement on December 9, 2014, and the first installment payment totaling $5,000,000 was made within the required time period. The remaining balance is payable in four annual installments of $4,101,171 beginning on or before December 31, 2015, and again on or before December 31 of each of the following three years (2016, 2017 and 2018). The outstanding balance as of June 30, 2016 is $12,303,512. Subsequent to year-end, the City amended the settlement agreement (see Note 23). .I' CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 20. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES (CONTINUED): 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 Long -Term Liabilities Transfers Balance at to Balance at July 1, 2015 Additions Cites June 30, 2016 $ 1,464,000 $ - $(1,464,000) $ - 190,000 (83,600) 106,400 - (190,000) 83,600 (106,400) $ 1,570,400 $ -J(1,570,400) $ - A summary of long-term liabilities activity for the year ended June 30, 2016, is as follows: i Balance at Balance at Due Within July 1, 2015 Additions Deletions June 30, 2016 One Year Tax allocation bonds $ 66,170,000 $ $ (4,785,000) $ 61,385,000 $ 1,720,000 Unamortized premium 85,368 (3,532) 81,836 - Unamortized discount (754,169) 29,624 (724,545) - Note payable to County Auditor Controller 16,40403 (4,101,171) 12,303,512 4,101,171 Total long-term liabilities $ 81.905 882 $ $ 0860,079) S 73.045.803 5.821.171 i CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 20. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES (CONTINUED): Long -Term Liabilities (Continued) Tax Allocation Bonds Payable 1998 Town Center Tax Allocation Bonds 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. In fiscal year 2015-16, the 1998 Bonds remaining outstanding balance of $3,120,000 was paid in full. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 20. 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, 2016, the 2010 Housing Bonds outstanding balance was $21,225,000. The annual debt service requirements to amortize the tax allocation bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2040 Totals Principal $ 815,000 850,000 880,000 920,000 955,000 5,415,000 4,620,000 3,375,000 3,395,000 Interest $ 993,106 959,806 925,206 889,206 851,706 3,595,753 2,251,125 1,352,531 367,895 Total $ 1,808,106 1,809,806 1,805,206 1,809,206 1,806,706 9,010,753 6,871,125 4,727,531 3,762,895 21,225,000 S 12,186,334 S 33.411.334 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 20. 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, 2016, the 2010 MCAS Bonds outstanding balance was $40,160,000. The annual debt service requirements to amortize the tax allocation bonds are as follows: Year Ending June 30, 2017 2018 2019 2020 2021 2022-2026 2027-2031 2032-2036 2037-2041 Totals Principal $ 905,000 935,000 970,000 1,010,000 1,050,000 5,955,000 7,520,000 9,585,000 12,230,000 Interest $ 1,904,300 1,872,025 1,833,925 1,794,325 1,753,125 8,035,881 6,422,431 4,302,625 1,588,000 Total $ 2,809,300 2,807,025 2,803,925 2,804,325 2,803,125 13,990,881 13,942,431 13,887,625 13,818,000 40.160.000 29.506.637 69.666.637 CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 20. SUCCESSOR AGENCY TO THE TUSTIN COMMUNITY REDEVELOPMENT AGENCY DISCLOSURES (CONTINUED): Long -Term Liabilities (Continued) Note Payable to County Auditor Controller As part of the dissolution process AB1484 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 County Auditor -Controller (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 City negotiated with the State Department of Finance (DOF) to allow for the Local Agency Investment Fund (LAIF) interest rate as the effective interest and to pay the debt off over four to five years. The DOF agreed to allow the LAIF interest rate of 2.54% which was in effect at the time the City entered into the promissory note with the former Redevelopment Agency and has agreed to installment payments over four years after the first payment due within seven days of the City accepting DOF's offer. With the effective flat interest rate of 2.54% compounded annually the total amount receivable from the City and payable to CAC as of June 30, 2014 was $21,404,683. The City signed the settlement agreement on December 9, 2014, and the first installment payment totaling $5,000,000 was made within the required time period. The remaining balance is payable in four annual installments of $4,101,171 beginning on or before December 31, 2015, and again on or before December 31 of each of the following three years (2016, 2017 and 2018). The outstanding balance as of June 30, 2016 is $12,303,512. Subsequent to year-end, the City amended the settlement agreement (see Note 23). 21. SCHOOL FACILITIES IMPLEMENTATION COMMITMENT: In August 2015, the City entered into a school facilities implementation, funding and migration agreement, and related site conveyance agreement with the Tustin Unified School District (TUSD) as well as a joint community facilities agreement with TUSD and Standard Pacific that provides a framework for development of grades 6-12 schools on the 40 -acre designated site, along with the opening of Heritage Elementary School as a magnet elementary site in the fall of 2016. The estimated cost to complete the project is $75,117,850. In order to facilitate the implementation plan, the City will advance funds to the project development with three different approaches. First the City advanced $4 million in October 2015. Second, the City will deposit an additional $15 million in the project development account which occurred on August 1, 2016. Third, the City will have the option to advance additional funds for the entire project or just certain projects. The City also issued 2014-1 Community Facilities District Special Tax Bonds, Series 2015A, totaling $27,665,000. Of the $27,665,000, $7,858,391 are available to be spent on school facilities. CITY OF TUSTIN NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2016 22. EXTRAORDINARY AND SPECIAL ITEMS: Extraordinary Items The Successor Agency to the Tustin Redevelopment Agency Private -Purpose Trust Fund transferred $1,570,400 of assets to the City upon final completion of the property management plan and acceptance by the California Department of Finance required under the redevelopment agency dissolution process. The Successor Agency to the Tustin Redevelopment Agency Private -Purpose Trust Fund also transferred $976,042 of Redevelopment Property Tax Trust Fund funds received through the California Department of Finance approval of the recognized obligation payment schedule to the Housing Authority Special Revenue Fund for repayment of Town Center Housing set-aside funds diverted to support non -housing redevelopment activities in Town Center. These amounts are reported as an extraordinary loss in the statement of changes in fiduciary net position of the Successor Agency to the Tustin Redevelopment Agency Private -Purpose Trust Fund. The $1,570,400 is reported as an extraordinary gain in the City's statement of activities and the $976,042 is reported as an extraordinary gain in the City's statement of activities and the statement of revenues, expenditures, and changes in fund balances in governmental funds. Special Item The City reclassified $34,026,499 previously reported as land held for resale in the general fund to land to be used for general government purposes for roads and parks, and land to be contributed to another governmental agency. This amount is reported as a special item by reducing the general fund balance. 23. SUBSEQUENT EVENTS: The City entered into an amended agreement with the California State Department of Finance to receive a credit of $5,000,000 to decrease the amount due from the Successor Agency under the promissory note described in Note 20. In the amended agreement the amount due is reduced to $7,303,512 with $4,101,171 due December 31, 2016 and $3,202,341 due December 31, 2017. The $4,101,171 payment was paid early by the City on August 17, 2016, bringing the remaining balance due down to $3,202,341. In September 2016, the Successor Agency to the Tustin Community Redevelopment Agency issued $55,940,000 Tax Allocation Refunding Bonds, Series 2016, to refund in advance the 2010 Housing Tax Allocation Bonds of which $21,225,000 remained outstanding and the 2010 MCAS Tax Allocation Bonds of which $40,160,000 remained outstanding. In September 2016, the Tustin Public Financing Authority issued $21,515,000 2016 Water Refunding Revenue Bonds to refund in advance the 2011 Water Revenue Bonds of which $20,760,000 remained outstanding. In preparing these financial statements, the City has potential recognition or disclosure through December were available to be issued. evaluated other events and transactions for 19, 2016, the date the financial statements REQUIRED SUPPLEMENTARY INFORMATION -91- The page left blank intentionally -92- CITY OF TUSTIN SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY SAFETY PLAN Last Ten Fiscal Years* Fiscal year ended June 30, 2016 June 30, 2015 Measurement period June 30, 2015 June 30, 2014 Plan's proportion of the net pension liability 0.35401% 0.41499% Plan's proportionate share of the net pension liability $ 24,298,906 $ 25,822,675 Plan's covered - employee payroll $ 9,495,434 $ 9,640,345 Plan's proportionate share of the net pension liability as a percentage of covered - employee payroll 255.90% 267.86% Plan's proportionate share of the fiduciary net position as a percentage of the Plan's total pension liability 78.40% 79.82% Plan's proportionate share of aggregate employer contributions $ 3,182,851 $ 2,544,912 Notes to Schedule: Benefit Changes: There were no changes in benefits. Changes in Assumptions: GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan administrative expense. * - Fiscal year 2015 was the 1 st year of implementation, therefore only two years are shown. Additional years' information will be displayed as it becomes available. -93- CITY OF TUSTIN SCHEDULE OF CONTRIBUTIONS SAFETY PLAN Last Ten Fiscal Years* Fiscal year ended Contractually required contribution (actuarially determined) Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered - employee payroll Contributions as a percentage of covered - employee payroll Notes to Schedule: Valuation Date 6/30/2013 June 30, 2016 June 30, 2015 $ 2,708,192 $ 3,045,919 (2,708,192) (7,049,591) $ - $ (4,003,672) $ 10,013,668 $ 9,495,434 27.04% 74.24% Methods and Assumptions Used to Determine Contribution Rates: Single and agent employers Entry age** Amortization method Level percentage of payroll, closed** Asset valuation method Market Value*** Inflation 2.75%** Salary increases Depending on age, service and type of employment** Investment rate of return 7.50%, net of pension plan investment expense, including inflation** Retirement age 50 years** Mortality Morality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-going mortality improvement using Scale BB published by the Society of Actuaries until June 30, 2010. There is no margin for future mortality improvement beyond the valuation date.** * - Fiscal year 2015 was the 1 st year of implementation, therefore only two years are shown. Additional years' information will be displayed as it becomes available. ** -The valuation for June 30, 2012 (applicable to fiscal year ended June 30, 2015) included the same actuarial assumptions *** - The valuation for June 30, 2012 (applicable to fiscal year ended June 30, 2015) valued assets using a 15 Year Smoothed Market method. -94- CITY OF TUSTIN SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS MISCELLANEOUS PLAN Last Ten Fiscal Years* Fiscal year ended June 30, 2016 June 30, 2015 Measurement period June 30, 2015 June 30, 2014 Total Pension Liability: 905,331 Service cost $ 1,779,008 $ 1,747,494 Interest on total pension liability 6,982,672 6,613,765 Differences between expected and actual experience 452,122 - Changes in assumptions (1,770,351) - Changes in benefit terms - - Benefit payments, including refunds of employee contributions (3,956,389) (3,974,724) Net Change in Total Pension Liability 3,487,062 4,386,535 Total Pension Liability - Beginning of Year 93,683,688 89,297,153 Total Pension Liability - End of Year (a) $ 97,170,750 $ 93,683,688 Plan Fiduciary Net Position: Contributions - employer $ 1,503,081 $ 1,379,562 Contributions - employee 905,331 962,617 Net investment income 1,753,374 11,900,167 Benefit payments (3,956,389) (3,974,724) Plan to plan resource movement (114) - Administrative expense (89,714) - Net Change in Plan Fiduciary Net Position 115,569 10,267,622 Plan Fiduciary Net Position - Beginning of Year 79,584,353 69,316,731 Plan Fiduciary Net Position - End of Year (b) $ 79,699,922 $ 79,584,353 Net Pension Liability - Ending (a) -(b) $ 17,470,828 $ 14,099,335 Plan fiduciary net position as a percentage of the total pension liability 82.02% 84.95% Covered - employee payroll $ 12,847,036 $ 12,270,014 Net pension liability as percentage of covered- employee payroll 135.99% 114.91% Notes to Schedule: Benefit Changes: There were no changes in benefits. Changes in Assumptions: There were no changes in assumptions. * - Fiscal year 2015 was the 1 st year of implementation, therefore only two years are shown. Additional years' information will be displayed as it becomes available. -95- CITY OF TUSTIN SCHEDULE OF CONTRIBUTIONS MISCELLANEOUS PLAN Last Ten Fiscal Years* Fiscal year ended Actuarially determined contribution Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered - employee payroll Contributions as a percentage of covered - employee payroll Notes to Schedule June 30, 2016 June 30, 2015 $ 1,850,100 $ 1,503,081 (1,850,100) (1,503,081) $ 13,828,003 $ 12,847,036 13.38% 11.70% Valuation Date 6/30/2013 Methods and Assumptions Used to Determine Contribution Rates: Single and agent employers Entry age** Amortization method Level percentage of payroll, closed** Asset valuation method Market Value*** Inflation 2.75%** Salary increases Depending on age, service and type of employment** Investment rate of return 7.50%, net of pension plan investment expense, including inflation** Retirement age 2.0% at 55 retirement age from 55-67, 2% at 62 retirement age 52-67** Mortality Morality assumptions are based on mortality rates resulting from the 2010 CalPERS Experience Study adopted by the CalPERS Board, first used in the June 30, 2009 valuation. For purposes of the post-retirement mortality rates, those revised rates include 5 years of projected on-going mortality improvement using Scale AA published by the Society of Actuaries until June 30, 2010. There is no margin for future mortality improvement beyond the valuation date.** * - Fiscal year 2015 was the 1 st year of implementation, therefore only two years are shown. Additional years' information will be displayed as it becomes available. ** -The valuation for June 30, 2012 (applicable to fiscal year ended June 30, 2015) included the same actuarial assumptions *** - The valuation for June 30, 2012 (applicable to fiscal year ended June 30, 2015) valued assets using a 15 Year Smoothed Market method. -96- CITY OF TUSTIN SCHEDULE OF FUNDING PROGRESS OTHER POST -EMPLOYMENT BENEFIT PLAN For the year ended June 30, 2016 -97- Actuarial Actuarial Value Accrued Unfunded UAAL as a Actuarial of Assets Liability AAL Funded Covered % of Valuation (AVA) (AAL) (URAL) Ratio Payroll Payroll Date (a) (b) (b) - (a) (a)/(b) (c) [(b)-(a)]/(c) 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% 06/30/13 - 12,047,000 12,047,000 0.00% 20,346,000 59.21% 06/30/15 - 19,794,000 19,794,000 0.00% 22,227,000 89.05% -97- CITY OF TUSTIN BUDGETARY COMPARISON SCHEDULE GENERAL FUND REVENUES: Taxes Licenses and permits Fines and forfeitures Investment income Intergovernmental Charges for services Rental income Other revenue Developer contribution TOTAL REVENUES EXPENDITURES: Current: General government Public safety Public works Community services Capital outlay Debt service: Principal retirement TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES): Transfers in Transfers out TOTAL OTHER FINANCING SOURCES (USES) SPECIAL ITEM NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING OF YEAR FUND BALANCE - END OF YEAR For the year ended June 30, 2016 Budgeted Amounts Original Final Variance with Final Budget Positive Actual (Negative) $ 46,509,900 $ 46,509,900 $ 48,039,509 $ 1,529,609 1,074,500 1,074,500 1,334,311 259,811 726,000 726,000 982,123 256,123 185,000 185,000 1,641,999 1,456,999 2,735,800 2,735,800 3,159,110 423,310 2,969,100 2,969,100 2,335,827 (633,273) 1,072,900 1,072,900 1,090,681 17,781 1,287,100 1,307,100 1,500,995 193,895 10,305,600 10,305,600 - (10,305,600) 66,865,900 66,885,900 60,084,555 (6,801,345) 19,603,100 24,055,312 19,082,646 4,972,666 30,137,100 30,137,100 27,791,298 2,345,802 6,831,200 7,539,793 6,489,414 1,050,379 3,429,100 7,429,100 7,016,001 413,099 15,754,400 16,415,604 3,418,762 12,996,842 5,000,000 5,000,000 4,101,171 898,829 80,754,900 90,576,909 67,899,292 22,677,617 (13,889,000) (23,691,009) (7,814,737) 15,876,272 3,423,300 3,423,300 5,405,924 1,982,624 (2,389,100) (2,389,100) (48,064) 2,341,036 1,034,200 1,034,200 5,357,860 4,323,660 - - (34,026,499) (34,026,499) (12,854,800) (22,656,809) II2 1Q'7 111 (36,483,376) 112 2Q7 1 17 (13,826,567) $ 210,532,312 $ 200,730,303 $ 186,903,736 $ (13,826,567) See accompanying note to required supplementary information. -98- CITY OF TUSTIN NOTE TO REQUIRED SUPPLEMENTARY INFORMATION June 30, 2016 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. The page left blank intentionally -100- SUPPLEMENTARY INFORMATION - 101 - The page left blank intentionally -102- CITY OF TUSTIN OTHER GOVERNMENTAL FUNDS June 30, 2016 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 and maintenance 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. Special Tax B - This fund is used to account for Special Tax B perpetual tax levied on taxable property in the Tustin Legacy to pay for authorized services and administrative expenses. CAPITAL PROJECTS FUNDS The Capital Projects Funds are 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. Other Capital Projects - This fund is used to account for capital projects which are not funded by a specific source. - 103- CITY OF TUSTIN COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS June 30, 2016 -104- Special Revenue Funds Park Acquisition and Asset Gas Tax Measure M Development Forfeiture ASSETS Cash and investments $ 5,376,459 $ 4,205,827 $ 8,516,552 $ 54,392 Receivables: Accounts 129,424 741,522 949 - Interest 8,159 6,382 12,923 82 Loans - - - - Allowance for uncollectibles - - - - Prepaid items and deposits - - - - Land held for resale - - - - TOTAL ASSETS $ 5,514,042 $ 4,953,731 $ 8,530,424 $ 54,474 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES: Accounts payable and accrued liabilities $ 266,022 $ 185,189 $ 42,630 $ 10 Deposits payable - - - - TOTAL LIABILITIES 266,022 185,189 42,630 10 DEFERRED INFLOWS OF RESOURCES: Unavailable revenue - 467,787 - - FUND BALANCES: Nonspendable - - - - Restricted 5,248,020 4,300,755 8,487,794 54,464 Assigned - - - - TOTAL FUND BALANCES 5,248,020 4,300,755 8,487,794 54,464 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 5,514,042 $ 4,953,731 $ 8,530,424 $ 54,474 -104- $ 17 $ 4,820 $ 16,789 $ - - 9,936 17 4,820 26,725 - - 430,701 - $ - $ 326,759 $ 842,236 - - 800,309 810,245 - - 1,127,068 1,652,481 - - - 898,488 - - 1,922 - - - 1,922 297,537 107,808 2,387,275 6,764 3,084,045 - 23,974,462 - - - - - 5,940,718 5,940,718 297,537 107,808 2,389,197 6,764 3,084,045 5,940,718 29,917,102 $ 297,554 $ 112,628 $ 2,846,623 $ 6,764 $ 3,084,045 $ 7,067,786 $ 32,468,071 - 105- Special Revenue Funds (Continued) Capital Projects Funds Total Supplemental Other Other Air Law Housing Construction Capital Governmental Quality Enforcement Authority Special Tax B 95-1 Projects Funds $ 269,909 $ 111,889 $ 1,930,467 $ - $ 3,084,045 $ 6,486,313 $ 30,035,853 27,235 569 - 6,764 - 574,529 1,480,992 410 170 82,150 - - 6,944 117,220 - - 383,796 - - - 383,796 - - (33,796) - - - (33,796) - - 1,922 - - - 1,922 - - 482,084 - - - 482,084 $ 297,554 $ 112,628 $ 2,846,623 $ 6,764 $ 3,084,045 $ 7,067,786 $ 32,468,071 $ 17 $ 4,820 $ 16,789 $ - - 9,936 17 4,820 26,725 - - 430,701 - $ - $ 326,759 $ 842,236 - - 800,309 810,245 - - 1,127,068 1,652,481 - - - 898,488 - - 1,922 - - - 1,922 297,537 107,808 2,387,275 6,764 3,084,045 - 23,974,462 - - - - - 5,940,718 5,940,718 297,537 107,808 2,389,197 6,764 3,084,045 5,940,718 29,917,102 $ 297,554 $ 112,628 $ 2,846,623 $ 6,764 $ 3,084,045 $ 7,067,786 $ 32,468,071 - 105- CITY OF TUSTIN COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - OTHER GOVERNMENTAL FUNDS For the year ended June 30, 2016 -106- Special Revenue Funds Park Acquisition and Asset Gas Tax Measure M Development Forfeiture REVENUES: Investment income $ 78,529 $ 61,620 $ 118,319 $ 2,784 Intergovernmental revenue 1,660,492 2,898,230 1,075,598 31,501 Charges for services - - 21,441 - Rental income - - 218,171 - Other revenue - 2,960 - - TOTAL REVENUES 1,739,021 2,962,810 1,433,529 34,285 EXPENDITURES: Current: General government 869,888 2,953 51,088 361,943 Public safety - - - - Community services - - - - Capital outlay 776,002 2,581,523 731,695 - TOTAL EXPENDITURES 1,645,890 2,584,476 782,783 361,943 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 93,131 378,334 650,746 (327,658) OTHER FINANCING USES: Transfers out - (95,427) - - TOTAL OTHER FINANCING USES - (95,427) - - NET CHANGE 1N FUND BALANCES, BEFORE EXTRAORDINARY ITEM 93,131 282,907 650,746 (327,658) EXTRAORDINARY ITEM - - - - NET CHANGE 1N FUND BALANCES 93,131 282,907 650,746 (327,658) FUND BALANCES - BEGINNING OF YEAR 5,154,889 4,017,848 7,837,048 382,122 FUND BALANCES - END OF YEAR $ 5,248,020 $ 4,300,755 $ 8,487,794 $ 54,464 -106- 153 Special Revenue Funds (Continued) Capital Projects Funds - - 3,783 1,289,808 - 105,884 Total - Supplemental - 105,884 Other Other Air Law Housing Construction Capital Governmental Quality Enforcement Authority Special Tax B 95-1 Projects Funds $ 3,336 $ 1,402 $ 17,862 $ - $ - $ 77,977 $ 361,829 101,285 143,755 - 3,434,342 - - 9,345,203 - - - - - - 21,441 - - - - - - 218,171 - - 6,126 - 1,997 3,202,023 3,213,106 104,621 145,157 23,988 3,434,342 1,997 3,280,000 13,159,750 153 - - - - 3,783 1,289,808 - 105,884 - - - - 105,884 - - 292,497 - - - 292,497 - 1,790 - - - 3,276,371 7,367,381 153 107,674 292,497 - - 3,280,154 9,055,570 104,468 37,483 (268,509) 3,434,342 1,997 (154) 4,104,180 - - - (3,427,578) (310,200) - (3,833,205) - - - (3,427,578) (310,200) - (3,833,205) 104,468 37,483 (268,509) 6,764 (308,203) (154) 270,975 - - 976,042 - - - 976,042 104,468 37,483 707,533 6,764 (308,203) (154) 1,247,017 193,069 70,325 1,681,664 - 3,392,248 5,940,872 28,670,085 $ 297,537 $ 107,808 $ 2,389,197 $ 6,764 $ 3,084,045 $ 5,940,718 $ 29,917,102 -107- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL GAS TAX SPECIAL REVENUE FUND REVENUES: Investment income Intergovernmental revenue TOTAL REVENUES EXPENDITURES: Current: General government Capital outlay TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE - BEGINNING OF YEAR FUND BALANCE - END OF YEAR For the year ended June 30, 2016 1,125,300 1,125,300 869,888 255,412 1,047,400 1,047,400 776,002 271,398 2,172,700 2,172,700 1,645,890 526,810 (514,900) (514,900) 93,131 608,031 5,154,889 5,154,889 5,154,889 - $ 4,639,989 $ 4,639,989 $ 5,248,020 $ 608,031 -108- Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ - $ - $ 78,529 $ 78,529 1,657,800 1,657,800 1,660,492 2,692 1,657,800 1,657,800 1,739,021 81,221 1,125,300 1,125,300 869,888 255,412 1,047,400 1,047,400 776,002 271,398 2,172,700 2,172,700 1,645,890 526,810 (514,900) (514,900) 93,131 608,031 5,154,889 5,154,889 5,154,889 - $ 4,639,989 $ 4,639,989 $ 5,248,020 $ 608,031 -108- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL MEASURE M SPECIAL REVENUE FUND REVENUES: Investment income Intergovernmental revenue Other revenue TOTAL REVENUES EXPENDITURES: Current: General government Capital outlay TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING USES: Transfers out NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING OF YEAR FUND BALANCE - END OF YEAR For the year ended June 30, 2016 - - 2,953 (2,953) 3,759,800 3,759,800 2,581,523 1,178,277 3,759,800 3,759,800 2,584,476 1,175,324 (2,000) (2,000) 378,334 380,334 (39,000) (39,000) (95,427) (56,427) (41,000) (41,000) 282,907 323,907 4,017,848 4,017,848 4,017,848 - $ 3,976,848 $ 3,976,848 $ 4,300,755 $ 323,907 -109- Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 2,000 $ 2,000 $ 61,620 $ 59,620 3,755,800 3,755,800 2,898,230 (857,570) - - 2,960 2,960 3,757,800 3,757,800 2,962,810 (794,990) - - 2,953 (2,953) 3,759,800 3,759,800 2,581,523 1,178,277 3,759,800 3,759,800 2,584,476 1,175,324 (2,000) (2,000) 378,334 380,334 (39,000) (39,000) (95,427) (56,427) (41,000) (41,000) 282,907 323,907 4,017,848 4,017,848 4,017,848 - $ 3,976,848 $ 3,976,848 $ 4,300,755 $ 323,907 -109- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL PARK ACQUISITION AND DEVELOPMENT SPECIAL REVENUE FUND For the year ended June 30, 2016 - 110 - Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) REVENUES: Investment income $ 55,000 $ 55,000 $ 118,319 $ 63,319 Intergovernmental revenue - - 1,075,598 1,075,598 Charges for services 15,000 15,000 21,441 6,441 Rental income 128,000 128,000 218,171 90,171 TOTAL REVENUES 198,000 198,000 1,433,529 1,235,529 EXPENDITURES: Current: General government - - 51,088 (51,088) Capital outlay 6,736,700 6,736,700 731,695 6,005,005 TOTAL EXPENDITURES 6,736,700 6,736,700 782,783 5,953,917 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (6,538,700) (6,538,700) 650,746 7,189,446 FUND BALANCE - BEGINNING OF YEAR 7,837,048 7,837,048 7,837,048 - FUND BALANCE - END OF YEAR $ 1,298,348 $ 1,298,348 $ 8,487,794 $ 7,189,446 - 110 - CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N 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 For the year ended June 30, 2016 275,000 317,246 361,943 (44,697) (174,000) (216,246) (327,658) (111,412) 382,122 382,122 382,122 - $ 208,122 $ 165,876 $ 54,464 $ (111,412) Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 1,000 $ 1,000 $ 2,784 $ 1,784 100,000 100,000 31,501 (68,499) 101,000 101,000 34,285 (66,715) 275,000 317,246 361,943 (44,697) (174,000) (216,246) (327,658) (111,412) 382,122 382,122 382,122 - $ 208,122 $ 165,876 $ 54,464 $ (111,412) CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL AIR QUALITY SPECIAL REVENUE FUND REVENUES: Investment income Intergovernmental revenue TOTAL REVENUES EXPENDITURES: Current: General government Capital outlay TOTAL EXPENDITURES EXCESS OF REVENUES OVER (UNDER) EXPENDITURES FUND BALANCE - BEGINNING OF YEAR FUND BALANCE - END OF YEAR For the year ended June 30, 2016 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ 100 $ 100 $ 3,336 $ 3,236 82,000 82,000 101,285 19,285 82,100 82,100 104,621 22,521 - - 153 (153) 98,000 98,000 - 98,000 98,000 98,000 153 97,847 (15,900) (15,900) 104,468 120,368 193,069 193,069 193,069 - $ 177,169 $ 177,169 $ 297,537 $ 120,368 - 112 - CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL SUPPLEMENTAL LAW ENFORCEMENT SPECIAL REVENUE FUND REVENUES: Investment income Intergovernmental revenue TOTAL REVENUES EXPENDITURES: Current: Public safety Capital outlay For the year ended June 30, 2016 100,100 106,500 105,884 616 1,790 (1,790) TOTAL EXPENDITURES 100,100 Variance with 107,674 (1,174) EXCESS OF REVENUES OVER Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ - $ - $ 1,402 $ 1,402 173,500 173,500 143,755 (29,745) 173,500 173,500 145,157 (28,343) 100,100 106,500 105,884 616 1,790 (1,790) TOTAL EXPENDITURES 100,100 106,500 107,674 (1,174) EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 73,400 67,000 37,483 (29,517) FUND BALANCE - BEGINNING OF YEAR 70,325 70,325 70,325 - FUND BALANCE - END OF YEAR $ 143,725 $ 137,325 $ 107,808 $ (29,517) -113- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL HOUSING AUTHORITY SPECIAL REVENUE FUND REVENUES: Investment income Other revenue TOTAL REVENUES EXPENDITURES: Current: Community services EXCESS OF REVENUES OVER (UNDER) EXPENDITURES EXTRAORDINARY ITEM For the year ended June 30, 2016 Variance with Final Budget Budgeted Amounts Positive Original Final Actual (Negative) $ - $ - $ 17,862 $ 17,862 5,600 5,600 6,126 526 5,600 5,600 23,988 18,388 335,700 335,700 292,497 43,203 (330,100) (330,100) (268,509) 61,591 976,042 (976,042) NET CHANGE IN FUND BALANCE (330,100) (330,100) 707,533 (914,451) FUND BALANCE - BEGINNING OF YEAR 1,681,664 1,681,664 1,681,664 - FUND BALANCE - END OF YEAR $ 1,351,564 $ 1,351,564 $ 2,389,197 $ (914,451) -114- CITY OF TUSTIN SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES 1N FUND BALANCE - BUDGET AND ACTUAL SPECIAL TAX B SPECIAL REVENUE FUND For the year ended June 30, 2016 Budgeted Amounts Original Final REVENUES: Intergovernmental revenue OTHER FINANCING USES: Transfers out NET CHANGE IN FUND BALANCE FUND BALANCE - BEGINNING OF YEAR Actual $ 3,434,342 Variance with Final Budget Positive (Negative) $ 3,434,342 - (3,427,578) (3,427,578) - 6,764 6,764 FUND BALANCE - END OF YEAR $ - $ - $ 6,764 $ 6,764 - 115 - The page left blank intentionally - 116 - CITY OF TUSTIN AGENCY FUNDS June 30, 2016 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. Community Facilities District 13-01 - This fund records the deposit of monies held to pay the debt service requirements of the community facilities district. Community Facilities District 2014-1 - This fund records the deposit of monies held to pay the debt service requirements of the community facilities district. - 117- CITY OF TUSTIN COMBINING STATEMENT OF ASSETS AND LIABILITIES ALL AGENCY FUNDS June 30, 2016 - 118 - Community Community Community Community Community Facilities Facilities Facilities Facilities Facilities District District District District District 04-01 06-01 07-01 13-01 2014-1 Total ASSETS Cash and investments $ 14,133 $ 7,902 $ 9,870 $ - $ 30,197 $ 62,102 Restricted cash and investments 1,062,260 6,712,608 1,835,892 - 3,288,376 12,899,136 Taxes receivable 7,064 49,379 - - 22,392 78,835 TOTAL ASSETS $ 1,083,457 $ 6,769,889 $ 1,845,762 $ - $ 3,340,965 $13,040,073 LIABILITIES Accounts payable $ - $ - $ - $ 981 $ - $ 981 Due to bondholders 1,083,457 6,769,889 1,845,762 (981) 3,340,965 13,039,092 TOTAL LIABILITIES $ 1,083,457 $ 6,769,889 $ 1,845,762 $ - $ 3,340,965 $13,040,073 - 118 - CITY OF TUSTIN COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS For the year ended June 30, 2016 COMMUNITY FACILITIES DISTRICT 04-01 ASSETS: Cash and investments Restricted cash and investments Taxes receivable TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES COMMUNITY FACILITIES DISTRICT 06-01 ASSETS: Cash and investments Restricted cash and investments Taxes receivable TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES COMMUNITY FACILITIES DISTRICT 07-01 ASSETS: Cash and investments Restricted cash and investments TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES $ 1,933,317 $ 17,883,846 $ 17,971,401 $ 1,845,762 - 119 - (Continued) Balance Balance July 1, 2015 Additions Deletions June 30, 2016 $ 18,529 $ 1,307,784 $ 1,312,180 $ 14,133 1,075,291 673,061 686,092 1,062,260 14,372 7,064 14,372 7,064 $ 1,108,192 $ 1,987,909 $ 2,012,644 $ 1,083,457 $ - $ 673,059 $ 673,059 $ - 1,108,192 1,299,983 1,324,718 1,083,457 $ 1,108,192 $ 1,973,042 $ 1,997,777 $ 1,083,457 $ 99,759 $ 5,651,435 $ 5,743,292 $ 7,902 9,246,015 5,190,023 7,723,430 6,712,608 57,846 49,379 57,846 49,379 $ 9,403,620 $ 10,890,837 $ 13,524,568 $ 6,769,889 $ - $ 3,682,508 $ 3,682,508 $ - 9,403,620 64,792,474 67,426,205 6,769,889 $ 9,403,620 $ 68,474,982 $ 71,108,713 $ 6,769,889 $ - $ 2,013,084 $ 2,003,214 $ 9,870 1,933,317 914,963 1,012,388 1,835,892 $ 1,933,317 $ 2,928,047 $ 3,015,602 $ 1,845,762 $ - $ 915,500 $ 915,500 $ - $ 1,933,317 $ 17,883,846 $ 17,971,401 $ 1,845,762 - 119 - (Continued) CITY OF TUSTIN COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS (CONTINUED) For the year ended June 30, 2016 Balance July 1, 2015 Additions Deletions COMMUNITY FACILITIES DISTRICT 13-01 ASSETS: Balance Cash and investments $ 980 $ 217,122 $ 218,102 $ - TOTAL ASSETS $ 980 $ 217,122 $ 218,102 $ - LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES COMMUNITY FACILITIES DISTRICT 2014-01 ASSETS: Cash and investments Restricted cash and investments Taxes receivable TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES TOTAL ALL AGENCY FUNDS ASSETS: Cash and investments Restricted cash and investments Taxes receivable TOTAL ASSETS LIABILITIES: Accounts payable Due to bondholders TOTAL LIABILITIES $ 980 $ 3,921 $ 3,920 $ 981 - 217,122 218,103 (981) $ 980 $ 221,043 $ 222,023 $ - $ - $ 1,608,646 $ 1,578,449 $ 30,197 - 3,906,014 617,638 3,288,376 - 22,392 - 22,392 $ - $ 5,537,052 $ 2,196,087 $ 3,340,965 $ - $ 1,349,419 $ 1,349,419 $ - - 4,177,357 836,392 3,340,965 $ - $ 5,526,776 $ 2,185,811 $ 3,340,965 $ 119,268 $ 10,798,071 $ 10,855,237 $ 62,102 12,254,623 10,684,061 10,039,548 12,899,136 72,218 78,835 72,218 78,835 $ 12,446,109 $ 21,560,967 $ 20,967,003 $ 13,040,073 $ 980 $ 6,624,407 $ 6,624,406 $ 981 12,445,129 87,455,282 86,861,319 13,039,092 $ 12,446,109 $ 94,079,689 $ 93,485,725 $ 13,040,073 -120- STATISTICAL SECTION - 121 - The page left blank intentionally -122- DESCRIPTION OF STATISTICAL SECTION CONTENTS June 30, 2016 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: Peres 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. 124 Revenue Capacity - These schedules contain information to help the reader assess the City's most significant local revenue source, the property tax. 134 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. 140 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. 148 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. 150 Sources: Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. - 123- CITY OF TUSTIN NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Business -type activities Net investment in capital assets $ 22,150,723 $ 22,267,386 $ 24,964,824 $ 24,541,113 Restricted - - 1,191,694 - Unrestricted 199,289,608 172,421,511 1,981,499 1,851,666 Total business -type activities net position $ 221,440,331 $ 194,688,897 $ 28,138,017 $ 26,392,779 Primary government: Net investment in capital assets $ 307,482,225 Fiscal Year $ 382,263,928 $ 384,823,805 2007 2008 2009 2010 Governmental activities: Unrestricted 179,352,644 158,101,491 106,018,652 Net investment in capital assets $ 285,331,502 $ 343,062,465 $ 357,299,104 $ 360,282,692 Restricted 94,111,615 161,669, 815 145,602,640 135,670,302 Unrestricted (19,936,964) (14,320,020) 104,037,153 114,737,049 Total governmental activities net position $ 359,506,153 $ 490,412,260 $ 606,938,897 $ 610,690,043 Business -type activities Net investment in capital assets $ 22,150,723 $ 22,267,386 $ 24,964,824 $ 24,541,113 Restricted - - 1,191,694 - Unrestricted 199,289,608 172,421,511 1,981,499 1,851,666 Total business -type activities net position $ 221,440,331 $ 194,688,897 $ 28,138,017 $ 26,392,779 Primary government: Net investment in capital assets $ 307,482,225 $ 365,329,851 $ 382,263,928 $ 384,823,805 Restricted 94,111,615 161,669, 815 146,794,334 13 5,670, 302 Unrestricted 179,352,644 158,101,491 106,018,652 116,588,715 Total primary government net position $ 580,946,484 $ 685,101,157 $ 635,076,914 $ 637,082,822 -124- Fiscal Year 2011 2012 2013 2014 2015 2016 $ 378,911,546 $ 412,683,460 $ 431,761,288 $ 461,673,323 $ 456,649,085 $ 483,229,135 116,718,495 47,727,966 54,367,385 36,693,458 72,929,522 95,241,025 116,545,351 147,513,249 177,532,888 93,877,440 140,727,040 107,224,779 $ 612,175,392 $ 607,924,675 $ 663,661,561 $ 592,244,221 $ 670,305,647 $ 685,694,939 $ 20,872,492 $ 25,479,160 $ 24,171,745 $ 23,657,878 $ 24,270,718 $ 25,443,651 5,541,672 2,795,701 7,094,771 8,326,340 11,845,734 12,227,557 $ 26,414,164 $ 28,274,861 $ 31,266,516 $ 31,984,218 $ 36,116,452 $ 37,671,208 $ 399,784,038 $ 438,162,620 $ 455,933,033 $ 485,331,201 $ 480,919,803 $ 508,672,786 116,718,495 47,727,966 54,367,385 36,693,458 72,929,522 95,241,025 122,087,023 150,308,950 184,627,659 102,203,780 152,572,774 119,452,336 $ 638,589,556 $ 636,199,536 $ 694,928,077 $ 624,228,439 $ 706,422,099 $ 723,366,147 -125- 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 Business -type activities: Water Tustin Legacy Total business -type activities expenses 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) Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 $ 7,926,778 $ 8,668,759 25,269,653 27,875,230 19,091,399 30,814,898 3,444,799 3,442,833 1,618,814 4,715,026 57,351,443 75,516,746 11,879,958 11,870,706 1,518,560 1,279,802 13,398,518 13,150,508 $ 8,499,303 $ 7,802,579 29,126,019 27,277,141 22,102,002 20,816,686 5,112,770 12, 742, 391 3,566,782 4,087,839 68,406,876 72,726,636 12,569,331 11,938,146 1,259,093 - 13,828,424 11,938,146 2,540,796 2,716,432 1,694,464 1,404,925 1,476,811 2,749,660 2,136,772 1,168,348 2,987,687 1,688,753 2,374,308 3,761,321 916,075 929,548 897,386 957,545 3,677,905 3,831,037 4,253,442 3,403,411 9,652,907 79,210,370 18,865,776 6,287,231 21,252,181 91,125,800 30,222,148 16,982,781 10,418,522 10,923,061 11,281,679 10,594,471 409,693 34,370 22,587 - - 28,299,036 - - 10,828,215 39,256,467 11,304,266 10,594,471 $ (36,099,262) $ 15,609,054 $ (38,184,728) $ (55,743,855) (2,570,303) 26,105,959 (2,524,158) (1,343,675) $ (38,669,565) $ 41,715,013 $ (40,708,886) $ (57,087,530) -126- Fiscal Year 2011 2012 2013 2014 2015 2016 $ 7,854,361 $ 12,266,470 $ 18,705,913 $ 14,825,780 $ 17,121,057 $ 20,023,280 28,622,807 28,800,773 30,702,298 28,440,799 29,886,284 27,779,830 19,809,907 20,765,854 15,087,234 49,538,371 34,435,214 47,326,664 13,150,089 7,078,104 3,201,865 3,498,460 3,699,059 7,869,124 4,814,598 3,057,645 967,115 - - - 74,251,762 71,968,846 68,664,425 96,303,410 85,141,614 102,998,898 13,621,100 28,791,083 29,367,544 19,394,706 27,570,891 59,194,506 12,578,667 13,467,541 13,574,149 16,100,137 15,982,078 15,586,463 12,578,667 13,467,541 13,574,149 16,100,137 15,982,078 15,586,463 1,109,150 1,390,073 763,101 249,237 252,074 2,072,540 1,196,830 1,133,096 917,947 920,112 1,071,099 1,195,350 3,508,904 800,328 1,248,595 1,710,813 1,564,314 3,538,906 969,006 974,747 926,432 967,134 892,102 953,149 3,441,281 3,590,210 4,513,158 3,325,304 3,546,823 2,722,978 3,395,929 20,902,629 20,998,311 12,222,106 20,244,479 48,711,583 13,621,100 28,791,083 29,367,544 19,394,706 27,570,891 59,194,506 12,422,746 15,112,161 16,688,773 18,682,821 19,375,359 16,511,795 12,422,746 15,112,161 16,688,773 18,682,821 19,375,359 16,511,795 $ (60,630,662) $ (43,177,763) $ (39,296,881) $ (76,908,704) $ (57,570,723) $ (43,804,392) (155,921) 1,644,620 3,114,624 2,582,684 3,393,281 925,332 $ (60,786,583) $ (41,533,143) $ (36,182,257) $ (74,326,020) $ (54,177,442) $ (42,879,060) -127- General revenues and other changes in net position: Governmental activities: Taxes: Property taxes Transient occupancy taxes Business license taxes Other taxes Sales tax Motor vehicle in lieu, unrestricted Investment income Other general revenues Gain (loss) on disposal of capital assets Gain on sale of land held for resale Transfers Contribution from successor agency Extraordinary item Total governmental activities Business -type activities: CITY OF TUSTIN CHANGES IN NET POSITION GENERAL REVENUES Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2007 2008 2009 2010 $ 28,617,969 $ 31,070,501 $ 34,022,959 $ 28,347,659 161,105 163,831 154,379 141,335 N/A N/A 356,565 337,867 1,534,720 1,665,601 1,689,573 1,720,505 19,317,135 20,428,465 19,858,142 15,917,332 443,222 321,918 252,666 6,122,789 4,842,033 7,417,199 4,863,469 4,086,852 1,598,099 1,523,530 2,314,540 1,520,662 - (1,366,208) - - 7,943,105 53,668,609 103,805,196 - 64,457,388 114,893,446 167,317,489 58,195,001 Investment income 1,567,316 815,560 164,764 86,654 Gain (loss) on disposal of capital assets 3,519,618 (681) - - Miscellaneous - 23,337 82,810 25,340 Transfers (7,943,105) (53,668,609) (103,805,196) - Total business -type activities (2,856,171) (52,830,393) (103,557,622) 111,994 Total primary government $ 61,601,217 $ 62,063,053 $ 63,759,867 $ 58,306,995 Changes in net position: Governmental activities $ 28,358,126 $ 130,502,500 $ 129,132,761 $ 2,451,146 Business -type activities (5,426,474) (26,724,434) (106,081,780) (1,231,681) Total primary government $ 22,931,652 $ 103,778,066 $ 23,050,981 $ 1,219,465 - 128- Fiscal Year 2011 2012 2013 2014 2015 2016 $ 30,205,879 $ 23,270,718 $ 14,526,101 $ 13,661,771 $ 14,552,535 $ 16,451,763 142,915 137,131 137,064 616,897 1,090,675 1,554,754 358,526 44,800 377,498 393,241 419,148 406,891 1,648,319 1,621,521 1,655,388 1,663,215 1,763,878 1,839,963 18,597,453 19,931,865 21,575,405 22,288,032 22,269,896 24,513,610 6,189,249 5,833,094 5,951,653 6,150,893 6,380,698 6,778,329 2,358,847 958,169 243,921 628,180 1,052,276 2,430,087 1,700,323 14,444,183 7,231,648 4,040,996 7,829,149 2,671,845 - - 43,335,089 - 48,136,121 - - - - - 32,137,773 - - (27,314,435) - 1,412,257 - 2,546,442 61,201,511 38,927,046 95,033,767 50,855,482 135,632,149 59,193,684 158,242 156,855 39,700 144,381 249,863 480,050 19,064 59,222 271,858 408,749 489,090 149,374 177,306 216,077 311,558 553,130 738,953 629,424 $ 61,378,817 $ 39,143,123 $ 95,345,325 $ 51,408,612 $ 136,371,102 $ 59,823,108 $ 570,849 $ (4,250,717) $ 55,736,886 $ (26,053,222) $ 78,061,426 $ 15,389,292 21,385 1,860,697 3,426,182 3,135,814 4,132,234 1,554,756 $ 592,234 $ (2,390,020) $ 59,163,068 $ (22,917,408) $ 82,193,660 $ 16,944,048 -129- CITY OF TUSTIN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Fund Balance prior to GASB 54 All other governmental fiends: Reserved $ Fiscal Year $ 76,696,588 2007 2008 2009 2010 General fund: Unreserved, reported in: Reserved $ 248,372 $ 116,342 $ 120,632,293 $ 144,139,167 Unreserved 20,454,356 24,471,029 1,971,846 5,870,992 Total general fund $ 20,702,728 $ 24,587,371 $ 122,604,139 $ 150,010,159 All other governmental fiends: Reserved $ 68,724,358 $ 76,696,588 $ 49,777,973 $ 66,609,267 Unreserved, reported in: Special revenue funds 10,639,839 64,896,223 16,437,130 14,277,683 Debt service funds - - - (6,774,245) Capital projects funds 12,388,651 17,558,428 90,474,987 75,663,086 Total all other governmental funds $ 91,752,848 $ 159,151,239 $ 156,690,090 $ 149,775,791 Fund Balance subsequent to GASB 54 General fund: Nonspendable $ - $ - $ - $ 144,139,167 Restricted - - - - Committed - - - 47,608 Assigned - - - 5,823,384 Unassigned - - - - Total general fund $ - $ - $ - $ 150,010,159 All other governmental funds: Nonspendable $ - $ - $ - $ 34,800,738 Restricted - - - 111,455,097 Committed - - - 344,708 Assigned - - - 11,670,324 Unassigned - - - (8,495,076) Total all other governmental funds $ - $ - $ - $ 149,775,791 - 130- Fiscal Year 2011 2012 2013 2014 2015 2016 $ 144,186,955 $ 144,604,847 $ 128,988,209 $ 129,049,954 $ 122,458,642 $ 88,579,214 - - 19,615,343 1,352,309 16,650,332 18,657,461 7,443,165 4,077,344 44,368,566 18,781,826 84,278,138 79,667,061 $ 151,630,120 $ 148,682,191 $ 192,972,118 $ 149,184,089 $ 223,387,112 $ 186,903,736 $ 22,352,713 $ 1,710,292 $ 1,287,607 $ - $ - $ 1,922 130,673,281 38,274,666 33,885,757 29,820,853 24,048,818 54,438,343 18,603,317 16,239,322 16,880,590 5,493,536 37,350,531 26,871,816 (10,989,463) - - - - - $ 160,639,848 $ 56,224,280 $ 52,053,954 $ 35,314,389 $ 61,399,349 $ 81,312,081 - 131 - CITY OF TUSTIN CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (modified accrual basis of accounting) Other financing sources (uses) Proceeds from debt issuance 25,000,000 Fiscal Year - 26,274,205 2007 2008 2009 2010 Revenues: Transfers out (10,795,694) (7,803,274) (41,295,836) Taxes $ 48,306,569 $ 51,775,505 $ 56,198,002 $ 52,579,529 Licenses and permits 2,095,154 2,710,309 1,692,955 3,538,198 Fines and forfeitures 783,390 818,868 832,188 890,770 Investment income 4,228,582 7,529,488 4,429,915 3,198,484 Intergovernmental revenues 20,136,822 27,394,402 14,626,663 5,378,430 Charges for services 2,043,251 1,583,324 4,497,309 2,708,705 Rental income 349,450 786,438 771,807 869,645 Developer contributions - - - 4,051,180 Gain on sale of land held for resale - - - - Contribution from Successor Agency - - - - Other revenues 3,160,370 59,309,772 1,188,200 1,028,432 Total revenues 81,103,588 151,908,106 84,237,039 74,243,373 Expenditures: Current: General government 7,806,916 8,295,887 6,728,236 7,197,709 Public safety 24,450,803 26,561,960 27,759,939 26,359,435 Public works 9,651,745 10,136,680 11,311,291 10,133,685 Community services 3,023,648 2,886,132 5,005,986 12,251,479 Capital outlay 28,503,673 15,080,865 24,772,717 13,125,983 Debt service: Principal retirement 1,330,000 1,055,000 11,143,000 7,913,000 Interest and fiscal charges 1,620,897 4,718,806 3,570,834 4,603,661 Bond issue costs - - - - Total expenditures 76,387,682 68,735,330 90,292,003 81,584,952 Excess (deficiency) of revenues over (under) expenditures 4,715,906 83,172,776 (6,054,964) (7,341,579) Other financing sources (uses) Proceeds from debt issuance 25,000,000 - - 26,274,205 Transfers in 10,795,694 7,803,274 142,866,218 37,207,661 Transfers out (10,795,694) (7,803,274) (41,295,836) (37,207,661) Contribution to developer - (11,934,400) - - Sale of property 1,676,618 44,658 40,201 7,421 Total other financing sources (uses) 26,676,618 (11,889,742) 101,610,583 26,281,626 Extraordinary gain (loss) - - - - Special item - - - - Net change in fund balances $ 31,392,524 $ 71,283,034 $ 95,555,619 $ 18,940,047 Debt service as a percentage of noncapital expenditures 6.57% 12.06% 28.96% 22.37% -132- Fiscal Year 2011 2012 2013 2014 2015 2016 $ 57,324,011 $ 50,907,306 $ 44,279,024 $ 45,096,520 $ 43,696,204 $ 48,039,509 716,144 443,928 577,044 1,284,232 885,043 1,334,311 893,642 875,068 678,428 631,340 752,597 982,123 1,632,215 472,725 173,890 621,786 1,041,661 2,422,072 5,372,905 6,413,137 21,551,042 7,453,722 15,032,387 18,324,393 5,020,485 2,813,752 2,685,080 1,787,268 1,870,401 2,357,268 358,030 480,255 550,003 751,724 1,113,340 1,308,852 1,593,475 - - - 16,934,704 26,357,490 - - 43,340,797 - 48,136,121 - - - - - 32,137,773 - 2,425,052 14,075,025 9,773,813 6,110,735 6,302,392 4,714,101 75,335,959 76,481,196 123,609,121 63,737,327 167,902,623 105,840,119 7,505,928 11,656,331 17,357,805 14,205,424 17,568,297 20,372,454 27,508,514 28,714,347 27,944,039 28,170,314 33,062,929 27,897,182 9,110,621 6,954,384 5,980,807 5,797,705 6,417,257 7,182,380 12,740,969 6,506,381 2,752,523 3,081,299 3,170,747 7,308,498 9,979,670 25,816,530 28,487,231 74,422,436 23,800,093 22,498,621 10,659,000 2,590,000 - - 5,000,000 4,101,171 4,131,435 3,264,323 967,115 - - - 429,731 - - - - - 82,065,868 85,502,296 83,489,520 125,677,178 89,019,323 89,360,306 (6,729,909) (9,021,100) 40,119,601 (61,939,851) 78,883,300 16,479,813 43,281,289 - - - - 2,645,014 3,020,291 6,122,454 2,084,612 5,266,102 5,453,988 (2,645,014) (3,020,291) (6,122,454) (2,084,612) (5,266,102) (5,453,988) 18,138 43,745 - - - - 43,299,427 43,745 - - - - - (98,386,142) - 1,412,257 - 976,042 - - - - 21,404,683 (34,026,499) $ 36,569,518 $(107,363,497) $ 40,119,601 $ (60,527,594) $ 100,287,983 $ (16,570,644) 26.76% 10.88% 1.76% 0.00% 6.42% 5.57% -133- Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CITY OF TUSTIN ASSESSED VALUE AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY (1N THOUSANDS) Last Ten Fiscal Years Cit 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 18 and 19 for more information. (B) This rate represents the weighted average of all individual direct rates applied by the City of Tustin. - 134- Taxable Assessed Secured Unsecured Value $ 6,397,216 $ 301,747 $ 6,698,963 7,708,506 435,160 8,143,666 7,019,706 341,056 7,360,762 6,874,131 323,694 7,197,825 6,791,003 318,875 7,109,878 6,865,333 294,518 7,159,851 6,975,148 295,303 7,270,451 7,151,192 267,629 7,418,821 7,503,074 287,558 7,790,632 7,924,736 293,492 8,218,228 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 18 and 19 for more information. (B) This rate represents the weighted average of all individual direct rates applied by the City of Tustin. - 134- Redevelopment Agency (A) - 135- Total Direct Tax Rate (B) 0.261% 0.279% 0.326% 0.308% 0.310% 0.303% 0.302% 0.116% 0.116% 0.116% Taxable Assessed Secured Unsecured Value (A) $ 1,496,217 $ 84,203 $ 1,580,420 1,826,514 89,863 1,916,377 2,432,407 165,392 2,597,799 2,175,049 128,194 2,303,243 2,180,029 129,387 2,309,416 2,085,982 133,065 2,219,047 2,107,792 123,929 2,231,721 2,192,026 121,534 2,313,560 2,362,339 139,834 2,502,173 2,643,865 141,934 2,785,799 - 135- Total Direct Tax Rate (B) 0.261% 0.279% 0.326% 0.308% 0.310% 0.303% 0.302% 0.116% 0.116% 0.116% CITY OF TUSTIN DIRECT AND OVERLAPPING PROPERTY TAX RATES Last Ten Fiscal Years (rate per $100 of taxable value) Source: Hdl, Coren & Cone -136- Fiscal Year 2007 2008 2009 2010 Direct Rate: City of Tustin $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 Tustin Unified School District 0.4397 0.4397 0.4397 0.4397 South Orange County Community College District 0.0886 0.0886 0.0886 0.0886 County of Orange 0.0617 0.0617 0.0617 0.0617 Orange County Flood Control District 0.0198 0.0198 0.0198 0.0198 Orange County Library District 0.0167 0.0167 0.0167 0.0167 Orange County Department of Education 0.0161 0.0161 0.0161 0.0161 Various Special Districts 0.2302 0.2302 0.2302 0.2302 Total Direct Rate 1.0000 1.0000 1.0000 1.0000 Overlapping Rates: Tustin Unified School District Bonds 0.0023 0.0317 0.0310 0.0380 Metropolitan Water District Bonds 0.0047 0.0045 0.0043 0.0043 Rancho Santiago Community College District Bonds 0.0191 0.0237 0.0225 0.0274 Irvine Ranch Water District Bonds 0.2138 0.2143 0.2143 0.2242 Santa Ana Unified School District Bonds 0.0392 0.0359 0.0321 0.0739 Total Overlapping Rates 0.2791 0.3101 0.3042 0.3678 Total Direct and Overlapping Rates $ 1.2791 $ 1.3101 $ 1.3042 $ 1.3678 Source: Hdl, Coren & Cone -136- Fiscal Yeah 2011 2012 2013 2014 2015 2016 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 $ 0.1272 0.4397 0.4397 0.4397 0.4397 0.4397 0.4397 0.0886 0.0886 0.0886 0.0886 0.0886 0.0886 0.0617 0.0617 0.0617 0.0617 0.0617 0.0617 0.0198 0.0198 0.0198 0.0198 0.0198 0.0198 0.0167 0.0167 0.0167 0.0167 0.0167 0.0167 0.0161 0.0161 0.0161 0.0161 0.0161 0.0161 0.2302 0.2302 0.2302 0.2302 0.2302 0.2302 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 0.0596 0.0559 0.0672 0.0891 0.0696 0.0775 0.0037 0.0037 0.0035 0.0035 0.0035 0.0035 0.0314 0.0315 0.0324 0.0333 0.0508 0.0504 0.2242 0.2155 0.2155 0.2155 0.0960 0.0960 0.0717 0.0715 0.0775 0.0736 0.0687 0.0660 0.3906 0.3781 0.3961 0.4150 0.2886 0.2934 $ 1.3906 $ 1.3781 $ 1.3961 $ 1.4150 $ 1.2886 $ 1.2934 - 137- CITY OF TUSTIN PRINCIPAL PROPERTY TAX PAYERS Current Year and Ten Years Ago 2016 2006 Percent of Total City Taxable A CRPRRPf1 Percent of Total City Taxable Taxable Assessed Assessed Value Value 2.12% Taxable 0.79% Assessed Taxpayer Value Irvine Company LLC $ 233,313,029 Vestar Kiinco Tustin LP 168,166,642 Avalon II California Value I LP 103,839,054 Legacy Villas LLC 100,997,664 Irvine Apartment Communities LP 51,860,610 Borchard Redhill SKB-Tustin LLC 50,867,718 Cadigan Communities LP 50,320,770 PK 11 Larwin Square SC LP 49,508,974 Costco Wholesale Corporation 48,093,830 Ricoh Development of California Inc 48,064,313 Percent of Total City Taxable A CRPRRPf1 Percent of Total City Taxable Taxable Assessed Assessed Value Value 2.12% $ 64,428,837 0.79% 1.53% 80,172,000 0.98% 0.95% 70,241,253 0.86% 0.92% 58,392,867 0.72% 0.47% 220,714,583 2.70% 0.46% 63,731,170 0.78% 0.46% $ 889,746,713 10.90% 0.45% 0.44% 0.44% MW Housing Partners III LP 133,302,391 1.63% William Lyon Homes Inc 90,577,571 1.11% Bascom East Tustin Avenue Apartment LLC 70,241,253 0.86% Ora Residential Investment LLC 58,392,867 0.72% Oppenheim lmmobilen-Kapi Talanlagegesel 54,550,000 0.67% WL Homes 53,636,041 0.66% $ 905,032,604 8.24% $ 889,746,713 10.90% The amounts shown above include the Combined Tax Rolls and the SBE Non -Unitary Tax Roll. Sources: Hdl, Coren & Cone -138- CITY OF TUSTIN PROPERTY TAX LEVIES AND COLLECTIONS Last Ten Fiscal Years Notes: The amounts presented include City property taxes and former Redevelopment Agency tax increment. This schedule also includes amounts collected by the City and former Redevelopment Agency that were passed -through to other agencies. Effective February 1, 2012, the former Redevelopment Agency was dissolved. See Notes 18 and 19 for more information Source: County of Orange Auditor Controller's Office -139- Collected within the Fiscal Taxes Levied Fiscal Year of Levy Collections in Total Collections to Date Year Ended for the Percent Subsequent Percent June 30 Fiscal Year Amount of Levy Years Amount of Levy 2007 $ 30,701,393 $ 28,617,969 93.21% $ 799,215 $ 29,417,184 95.82% 2008 33,554,781 31,070,501 92.60% 695,793 31,766,294 94.67% 2009 38,515,110 34,022,959 88.34% 1,417,067 35,440,026 92.02% 2010 31,739,378 28,347,659 89.31% 917,222 29,264,881 92.20% 2011 30,713,746 29,541,000 96.18% 610,052 30,151,052 98.17% 2012 30,163,205 20,433,400 67.74% 147,389 20,580,789 68.23% 2013 9,492,638 9,257,817 97.53% 121,715 9,379,532 98.81% 2014 9,862,476 9,655,778 97.90% 121,400 9,777,178 99.14% 2015 9,287,149 9,007,785 96.99% 163,497 9,171,282 98.75% 2016 10,847,984 10,541,516 97.17% 233,935 10,775,451 99.33% Notes: The amounts presented include City property taxes and former Redevelopment Agency tax increment. This schedule also includes amounts collected by the City and former Redevelopment Agency that were passed -through to other agencies. Effective February 1, 2012, the former Redevelopment Agency was dissolved. See Notes 18 and 19 for more information Source: County of Orange Auditor Controller's Office -139- CITY OF TUSTIN RATIOS OF OUTSTANDING DEBT BY TYPE Last Ten Fiscal Years Fiscal Governmental Activities Year Tax Tax Tax Total Ended Allocation Allocation Allocation Notes Notes Governmental June 30 Bonds (1) Bonds (5) Bonds (6) Payable (2) Payable (3) Activities 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 2014 21,404,683 21,404,683 2015 16,404,683 16,404,683 2016 12,303,512 12,303,512 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (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 18 and 19 for more information. (2) 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. (3) 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. As of February 1, 2012, this note is payable to the Successor Agency to the Tustin Community Redevelopment Agency. See Note 19 for more information. (4) 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. -140- (5) 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 18 and 19 for more information. (6) 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 18 and 19 for more information. (7) In May 2011 the City issued $20,760,000 Water Revenue Bonds, 2011 Series A to finance water capital improvement projects. (8) In March 2012 the City issued $8.91 million of Refunding Water Revenue Bonds to defease the outstanding 2003 Water Revenue Bonds. (9) In October 2013 the City issued $14,045,000 Water Revenue Bonds to finance water capital improvement projects Business -type Activity Water Water Water Water Total Total Debt Revenue Revenue Revenue Revenue Business -type Primary Percentage of Per Bonds (4) Bonds (7) Bonds (8) Bonds (9) Activity Government Personal Income Capita $ 13,331,607 $ $ $ $ 13,331,607 $ 51,351,607 2.29% 719 13,080,000 13,080,000 50,055,000 2.11% 696 12,560,000 12,560,000 57,676,170 2.35% 783 11,875,000 11,875,000 76,076,456 3.16% 1,018 11,165,000 20,760,000 31,925,000 130,501,317 5.52% 1,722 - 20,760,000 8,910,000 29,670,000 51,547,282 2.12% 673 21,044,310 8,997,129 30,041,439 52,858,379 2.16% 678 21,034,111 8,205,372 14,160,362 43,399,845 64,804,528 2.73% 827 21,023,911 7,398,615 14,111,418 42,533,944 58,938,627 2.44% 752 21,013,711 6,571,858 14,062,474 41,648,043 53,951,555 2.21% 652 (5) 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 18 and 19 for more information. (6) 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 18 and 19 for more information. (7) In May 2011 the City issued $20,760,000 Water Revenue Bonds, 2011 Series A to finance water capital improvement projects. (8) In March 2012 the City issued $8.91 million of Refunding Water Revenue Bonds to defease the outstanding 2003 Water Revenue Bonds. (9) In October 2013 the City issued $14,045,000 Water Revenue Bonds to finance water capital improvement projects Fiscal Year Ended June 30 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 CITY OF TUSTIN RATIO OF GENERAL BONDED DEBT OUTSTANDING Last Ten Fiscal Years Outstanding General Bonded Debt General Tax Obligation Allocation Bonds Bonds Total $ 13,020,000 11,975,000 10,870,000 35,890,000 77,600,000 $ 13,020,000 11,975,000 10,870,000 35,890,000 77,600,000 Percent of Assessed 0.16% 0.12% 0.11% 0.38% 0.82% Per Capita $ 182 166 148 480 1,024 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 18 and 19 for more information. -142- CITY OF TUSTIN OVERLAPPING DEBT SCHEDULE June 30, 2016 2015-16 Assessed Valuation $11,004,027,235 Redevelopment Incremental Valuatior (2,617,671,840) Adjusted Assessed Value $ 8,386,355,395 City's Share of Total Debt (1) Debt at OVERLAPPING TAX AND ASSESSMENT DEBT: 6/30/16 % Applicable 6/30/16 Metropolitan Water District $ 92,865,000 0.449% $ 416,964 Rancho Santiago Community College District 268,052,899 0.114 305,580 Rancho Santiago Community College District School Facilities Improvement Dst No. 1 64,240,000 0.192 123,341 Santa Ana Unified School District 274,001,882 0.236 646,644 Tustin Unified School District School Facilities Improvement District No. 2002-1 48,068,292 45.202 21,727,829 Tustin Unified School District School Facilities Improvement District No. 2008-1 90,085,000 43.334 39,037,434 Tustin Unified School District School Facilities Improvement District No. 2012-1 29,830,000 44.069 13,145,783 Tustin Unified School District Community Facilities District No. 88-1 34,700,000 100.000 34,700,000 Tustin Unified School District Community Facilities District No. 06-1 13,395,000 100.000 13,395,000 City of Tustin Community Facilities Districts 103,590,000 100.000 103,590,000 Irvine Unified School District Community Facilities District No. 86-1 65,900,000 0.208 137,072 Irvine Ranch Water District Improvement Districts 447,910,610 5.308-84.102 53,834,861 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 281,060,508 DIRECT AND OVERLAPPING GENERAL FUND DEBT: Orange County General Fund Obligations 124,614,000 2.205% 2,747,739 Orange County Pension Obligations 353,417,858 2.205 7,792,864 Orange County Board of Education Certificates of Participatior 14,840,000 2.205 327,222 Municipal Water District of Orange County Water Facilities Corporatior 2,770,000 2.630 72,851 Orange Unified School District Certificates of Participation 27,837,063 0.030 8,351 Orange Unified School District Benefit Obligations 82,965,000 0.030 24,890 Santa Ana Unified School District Certificates of Participation 70,982,229 0.236 167,518 City of Tustin - 100.000 - TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT: 11,141,435 Less: MWDOC Water Facilities Corporation (100% self supporting) 72,851 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT: 11,068,584 OVERLAPPING TAX INCREMENT DEBT (Successor Agencies) $ 154,825,000 0.001-100.00% $ 62,981,169 GROSS COMBINED TOTAL DEBT $ 355,183,112 (2) NET COMBINED TOTAL DEBT $ 355,110,261 (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages wet 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 leas obligations. Effective February 1, 2012, the former Redevelopment Agency was dissolved. See Notes 18 and 19 for more information Ratios to 2015-16 Assessed Valuations: Total Overlapping Tax and Assessment Debi 2.55% Total Direct Debt 0.00% Gross Combined Total Debt 3.23% Net Combined Total Debt 3.23% Ratios to Redevelopment Incremental Valuations ($2,617,671,840) Total Overlapping Tax Increment Debi 2.41% Source: California Municipal Statistics, Inc. -143- 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 Fiscal Year 2007 2008 2009 2010 $ 6,698,963,000 $ 8,143,666,000 $ 7,360,762,000 $ 7,197,825,000 25% 25% 25% 25% 1,674,740,750 2,035,916,500 1,840,190,500 1,799,456,250 15% 15% 15% 15% 251,211,113 305,387,475 276,028,575 269,918,438 $ 251,211,113 $ 305,387,475 $ 276,028,575 $ 269,918,438 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 on 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 from the current full valuation perspective to the 25% level 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 -144- Fiscal Year 2011 2012 2013 2014 2015 2016 $ 7,109,878,000 $ 7,159,851,000 $ 7,270,451,000 $ 7,418,821,000 $ 7,790,632,000 $ 8,218,228,000 25% 25% 25% 25% 25% 25% 1,777,469,500 1,789,962,750 1,817,612,750 1,854,705,250 1,947,658,000 2,054,557,000 15% 15% 15% 15% 15% 15% 266,620,425 268,494,413 272,641,913 278,205,788 292,148,700 308,183,550 $ 266,620,425 $ 268,494,413 $ 272,641,913 $ 278,205,788 $ 292,148,700 $ 308,183,550 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -145- CITY OF TUSTIN PLEDGED-REVEN UE COVERAGE Last Ten Fiscal Years Fiscal Year Less Net Water Revenue Bonds Ended Water Operating Available Debt Service June 30 Revenue Expenses Revenue Principal Interest Coverage 2007 $ 10,844,515 $ 9,986,251 $ 858,264 $ 180,000 $ 570,470 1.14 2008 11,240,752 10,053,706 1,187,046 335,000 563,450 1.32 2009 11,510,315 10,573,932 936,383 520,000 550,385 0.87 2010 12,829,902 9,928,608 2,901,294 685,000 530,105 2.39 2011 12,422,746 10,566,435 1,856,311 710,000 502,705 1.53 2012 15,112,161 10,683,621 4,428,540 740,000 1,432,659 2.04 2013 16,688,773 11,462,258 5,226,515 710,000 957,111 3.14 2014 18,955,616 13,198,598 5,757,018 710,000 1,622,859 2.47 2015 19,375,359 12,511,648 6,863,711 770,000 1,973,820 2.50 2016 16,511,795 12,013,376 4,498,419 790,000 1,951,170 1.64 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 and amortization expenses. Water revenues in 2010 include proceeds from an advance from the City's general fund. -146- Tax Allocation $ 3,956,734 3,381,188 4,460,947 3,831,975 17,928,849 Tax Allocation Bonds Debt Service Principal $ 1,000,000 1,055,000 1,105,000 1,150,000 2,460,000 Interest 642,040 594,358 547,365 497,180 2,204,419 - 147- Coverage 2.41 2.05 2.70 2.33 3.84 CITY OF TUSTIN DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Calendar Years Source: HdL Coren & Cone, LLC -148- Personal Per Capita County of Orange Calendar City of Tustin Income Personal Unemployment Year Population (In Thousands) Income Rate 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% 2014 78,360 2,375,640 30,317 4.90% 2015 78,347 2,411,442 30,779 5.10% 2016 82,717 2,441,169 29,512 4.20% Source: HdL Coren & Cone, LLC -148- CITY OF TUSTIN PRINCIPAL EMPLOYERS Current Year and Ten Years Ago 2016 2006 Sources: Orange County Workforce Investment Board City of Tustin US Census Bureau -149- Percent of Percent of Number of Total Number of Total Employer Employees Employment Employees Employment Tustin Unified School District 2,248 5.13% Kaiser Foundation Hospitals 593 1.35% Youngs Market Company LLC 548 1.25% 1,038 2.77% City of Tustin 392 0.89% Costco Wholesale Corporation 350 0.80% Logomark Inc 315 0.72% Toshiba America Medical Systs 300 0.68% 300 0.76% Ricoh Electronics Inc 256 0.58% Vita Best Nutrition Inc 250 0.57% Balboa Water Group 250 0.57% Tustin Hospital Medical Center 200 0.51% KTBN Channel 40 Trinity Broadcasting 180 0.46% Texas Instruments 560 1.42% MacPherson Enterprises 540 1.37% GE Power Electronics (formerly Cherokee 330 0.84% Revere Transducers 200 0.51% Fireman's Fund Insurance 190 0.48% Safeguard Business Systems 175 0.45% Sources: Orange County Workforce Investment Board City of Tustin US Census Bureau -149- 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 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 31 31 27 27 25 29 26 35 33 38 28 29 28 24 17 t7 15 15 16 19 50 51 50 53 52 51 40 47 48 45 145 144 147 147 140 139 131 140 141 141 17 15 16 15 14 15 13 13 14 14 5 5 6 6 6 5 3 - - - 20 20 23 22 23 25 17 17 18 19 296 295 297 294 277 281 245 267 270 276 The City contracts with the OC Fire Authority for fire services. Source: City of Tustin Human Resource Department -150- Function CITY OF TUSTIN CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years Fiscal Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 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) 101.8 106.3 127.2 127.2 127.2 127.2 127.2 129.1 129.1 130.1 Street Lights 2,855 3,285 3,544 3,544 3,544 3,544 3,544 3,640 3,640 3,680 Traffic Signals 97 113 113 116 117 118 118 121 121 125 Storm Drain (miles) 23.7 49.1 49.2 49.2 49.2 49.2 49.2 51.2 51.4 51.8 Street Trees 16,638 15,821 15,853 15,853 15,837 15,786 16,097 16,073 15,815 15,706 Parks and Recreation Parks 12 12 12 13 13 13 13 13 13 14 Parks (acres) 81.5 81.5 81.5 98.5 98.5 98.5 98.5 98.5 98.5 116.0 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 14,080 14,117 14,118 14,118 14,139 14,139 14,172 14,181 14,148 14,099 Average daily consumption 17,205 14,970 14,460 14,460 12,899 13,491 13,601 13,975 13,975 9,975 Reservoirs 6 6 6 6 6 6 6 6 6 6 Wells 12 12 13 13 13 13 13 13 13 13 Water Main (miles) 173 173 173 173 173 173 173 173 173 173 Fire Hydrants 2,200 2,200 2,201 2,201 2,201 2,201 2,201 1,914 1,945 1,945 (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 - 151 - CITY OF TUSTIN WATER CONSUMPTION BY CUSTOMER TYPE of Customer Residential Apartment/Multiple Units Commercial Fire Services Irrigation Government Restaurants Hospitals Non -Profit Industrial Hotel/Motels All Others Measured in hundred cubic feet. Source: City of Tustin Finance Department Last Ten Fiscal Years Fiscal Year 2007 2008 2009 2010 3,319,069 3,202,982 1,312,731 1,264,584 360,170 326,987 11,453 478 171,200 174,858 265,158 260,688 67,378 61,029 14,243 14,376 48,320 48,922 71,065 69,920 13,367 12,803 100,604 115,246 5,754,758 5,552,873 -152- 3,012,575 2,749,415 1,226,181 1,142, 749 305,601 287,951 184 217 171,382 145,287 264,425 238,914 54,916 52,761 11,222 9,636 45,387 43,985 67,985 56,360 12,890 13,562 105,221 171,781 5,277,969 4,912,618 Fiscal Year 2011 2012 2013 2014 2015 2016 2,592,741 2,733,482 2,815,322 2,905,069 2,603,538 1,934,761 1,133,899 1,172,823 1,158,480 1,163,159 1,139,321 1,003,808 296,001 305,638 308,376 321,125 310,585 259,459 275 1,242 818 577 837 646 134,408 149,957 151,965 167,346 155,766 96,082 212,561 236,658 268,581 276,292 229,262 134,446 48,873 53,183 53,461 52,520 51,658 45,069 11,587 12,204 12,442 7,634 10,018 11,166 41,291 44,488 44,476 45,920 41,601 22,989 51,760 58,298 57,462 60,438 59,292 40,407 8,332 8,514 10,417 12,866 21,379 23,387 176,248 147,552 82,716 87,785 71,324 68,830 4,707,976 4,924,039 4,964,516 5,100,731 4,694,581 3,641,050 -153- CITY OF TUSTIN WATER RATES Last Ten Fiscal Years - 154- 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 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 61 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 2014 43.59 0.79 1.38 1.81 2.25 2.79 3.24 3.70 2015(l) 46.85 0.84 1.48 1.94 2.41 3.05 3.53 4.05 2016 46.85 0.84 1.48 1.94 2.41 3.05 3.53 4.05 Emergency Drought Stage 2 - Consumption Charges Bi -Monthly Up to From From From From From All Fiscal Fixed 8 9 to 16 17 to 24 25 to 32 33 to 40 41 to 48 Over 49 Year Charge HCF HCF HCF HCF HCF HCF HCF 2015(l) $ 46.85 $ 0.84 $ 1.48 $ 1.94 $ 2.41 $ 3.05 $ 3.53 $ 4.05 2016 46.85 0.84 1.48 1.94 2.41 3.05 3.53 4.05 Notes: HCF - Hundred Cubic Feet (1 HCF - 748 gallons) (l) A revised seven (7) tiered rate structure was approved on August 5, 2014 to address a stage 2 emergency drought water demand reduction mandate. A seven (7) tiered rate structure was implemented 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 - 154- Water Customer Tustin Unified School District Tustin Plaza Center, LP City of Tustin AT& T Services, Inc. Schroeder Property Management Ricoh Electronics, Inc. Key Inn CalTrans - District 12 15701 TV Way Partnership Tustin Acres Community Association CA 4-14 FUND, LLC 71286 JMJ LLC Briarwood Investment Co. Ltd. HSA LP Westchester Park L.P. Sierra Corporate Management Tustin Village Community Association Bascon East Tustin Ave Apt. LLC Pacific Bell V KAY - NNC Valencia Gardens Greenwood and McKenzie CMC Association Mgmt. Alders Apartment Company Pacific Point Apartments Arnel Management Regency West Sycamore Creek Apartments Total Water Sales Source: City of Tustin Finance Department CITY OF TUSTIN WATER CUSTOMERS Current Year and Ten Years Ago 2016 2006 Percent of Percent of Water Total Water Water Total Water Charges Revenues Charges Revenues $ 411,765 2.49% $ 204,869 3.50% 61,664 0.37% 61,017 0.37% 52,710 0.90% 53,426 0.32% 47,045 0.28% 19,940 0.34% 43,094 0.26% 37,958 0.23% 37,945 0.23% 36,960 0.22% 35,803 0.22% 22,501 0.38% 35,599 0.22% 34,829 0.21% 31,307 0.19% 25,311 0.43% 30,527 0.18% 53,459 0.91% 29,971 0.18% 19,784 0.34% 29,933 0.18% 29,265 0.18% 18,364 0.31% 65,410 1.12% 50,417 0.86% 27,033 0.46% 23,490 0.40% 23,149 0.40% 20,903 0.36% 20,513 0.35% 18,655 0.32% 18,599 0.32% 17,878 0.31% $ 1,048,108 6.33% $ 702,985 12.01% -155- The page left blank intentionally -156-