ML062620418

Annual Corporate Financial Reports

ML062620418
Person / Time
Site:	San Onofre
Issue date:	09/13/2006
From:	Scherer A Southern California Edison Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
Download: ML062620418 (229)

Text

SOUTHERN CALIFORNIA A. Edward Scherer Manager of EDISON' Nuclear Regulatory Affairs An EDISON INTERNATIONALI Company September 13, 2006 U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, D. C. 20555

Subject:

Docket Nos. 50-361 and 50-362 Annual Corporate Financial Reports San Onofre Nuclear Generating Station Units 2 and 3

Dear Sir or Madam:

In accordance with the requirements of 10 CFR Part 50, Section 50.71(b) enclosed are copies of the annual financial reports for the licensees of the San Onofre Nuclear Generating Station, Units 2 and 3, who do not submit a Form 10-Q with the Securities and Exchange Commission or a Form I with the Federal Energy Regulatory Commission, the City of Riverside, California (for the fiscal year ending June 30, 2005);

and the City of Anaheim, California (for the fiscal year ending June 30, 2005). Each report includes the appropriate certified financial statement required by Section 50.71(b).

Ifyou have any questions or need additional information regarding this matter, please feel free to contact me.

Sincerely, Enclosures cc: B. S. Mallett, Regional Administrator, NRC Region IV N. Kalyanam, NRC Project Manager, San Onofre Units 2, and 3 C. C. Osterholtz, NRC Senior Resident Inspector, San Onofre Units 2 and 3 f4o P.O. Box 128 San Clemente, CA 92672 949-368-7501 Fax 949-368-7575

CITY OF RIVERSIDE, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2005 Prepared by the Finance Department Paul C. Sundeen, Chief Financial Officer 3900 Main Street, Riverside, California 92522 (951) 826-5660 This report was printed on recycled stock

I-11 C-od *.N=mwmmwm I-

- I

CITY OF RIVERSIDE COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30,2005 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of T ransm ittal .............................................................................................................................. v GFOA Certificate of Achievement ............................................................................................................. x Legislative and City Officials .................................................................................................................. xi O rgan ization C hart ............................................................................................................................... xi FINANCIAL SECTION Independent Auditor's Report .................................................................................................................. 1 Management's Discussion and Analysis .................................................................................................... 3 Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Assets .............................................................................................................. 19 Statement of Activities .............................................................................................................. 20 Fund Financial Statements:

Balance Sheet - Governmental Funds ................................................................................................ 21 Reconciliation of the Balance Sheet of Governmental Funds to Statement of Net Assets .................................... 22 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds ............................. 23 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ........................................................................................... 24 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund ............. 25 Statement of Net Assets - Proprietary Funds ....................................................................................... 26 Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds .................................... 28 Statement of Cash Flows - Proprietary Funds ..................................................................................... 29 Statement of Fiduciary Net Assets - Fiduciary Fund - Agency Fund ........................................................... 31 Notes to Financial Statements ........................................................................................................... 32 Combining and Individual Fund Statements and Schedules:

Combining Balance Sheet - Nonmajor Governmental Funds ................................................................... 57 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds .............................................................................................................................. 60 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Nonmajor Governmental Funds ............................................................................................................. 63 Combining Statement of Net Assets -Nonmajor Enterprise Funds ............................................................ 67 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Nonmajor Enterprise Funds ........... 69

CITY OF RIVERSIDE COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30,2005 TABLE OF CONTENTS Page FINANCIAL SECTION (CONTINUED)

Combining Statement of Cash Flows - Nonmajor Enterprise Funds ........................................................... 70 Combining Statement of Net Assets - Internal Service Funds .................................................................. 73 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Internal Service Funds ................ 74 Combining Statement of Cash Flows - Internal Service Funds .................................................................. 75 Combining Statement of Changes in Assets and Liabilities - Fiduciary Fund ................................................ 77 Capital Assets Used in the Operation of Governmental Funds:

Schedule by Source .............................................................................................................. 79 Schedule by Function and Activity ............................................................................................ 80 Schedule of Changes by Function and Activity .............................................................................. 81 STATISTICAL SECTION Table 1 General Governmental Expenditures by Function - Last Ten Fiscal Years ................................................... 83 2 General Governmental Revenues by Source - Last Ten Fiscal Years .......................................................... 84 3 General Governmental Tax Revenues by Source - Last Ten Fiscal Years ..................................................... 85 4 Property Tax Levies and Collections - Last Ten Fiscal Years ................................................................... 86 5 Assessed and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years ......................................... 87 6 Property Tax Rates - Direct and Overlapping Governments - Last Ten Fiscal Years ........................................ 88 7 Computation of Direct and Overlapping General Obligation Debt ............................................................ 89 8 Computation of Legal Debt Margin for City General Obligation Bonds ....................................................... 90 9 Ratio of Net General Obligation Bonded Debt to Assessed Value and Bonded Debt per Capita - Last Ten Fiscal Y ears ................................................................................................................................. 91 10 Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to Total General Governmental Expenditures - Last Ten Fiscal Years .......................................................................................... 92 11 Revenue Bond Coverage - Last Ten Fiscal Years ................................................................................. 93 12 Special Assessment Collections - Last Ten Fiscal Years ......................................................................... 94 13 Principal Taxpayers ................................................................................................................... 95 14 Miscellaneous Statistical Data ....................................................................................................... 96 15 Demographic Statistics - Last Ten Fiscal Years .................................................................................... 98 16 Construction, Bank Deposits, and Property Value - Last Ten Fiscal Years ................................................... 99

CITY O

September 30, 2005 To the Honorable Mayor, Members of the City Council and Citizens of the City of Riverside:

It is our pleasure to submit the Comprehensive Annual Financial Report (CAFR) of the City of Riverside (the City) for the fiscal year ended June 30, 2005.

This report consists of management's representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed both to protect the City's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City's financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, internal controls have 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, this financial report is complete and reliable in all material respects.

The City's financial statements have been audited by McGladrey & Pullen, LLP, a firm of certified public accountants. The independent auditor concluded, based on the audit, that there was a reasonable basis for rendering an unqualified opinion on the City's financial statements for the fiscal year ended June 30, 2005. The independent auditor's report is presented as the first component of the financial section of this CAFR.

The independent audit of the financial statements of the City was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on internal controls and compliance with legal requirements, with emphasis on those involving the administration of federal awards. These reports are available in the City's separately issued Single Audit Report.

V

Management has provided an overall analysis of the financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City's MD&A can be found immediately following the report of the independent auditors.

Profile of the City of Riverside The City of Riverside, incorporated on October 11, 1883, is located in the western portion of Riverside County about 60 miles east of Los Angeles. The City currently occupies a land area of 85.6 square miles.

The City operates under the council-manager form of government, with a seven-member council elected by ward for four-year overlapping terms. The mayor is elected at large for a four-year term and is the presiding officer of the Council, but does not have a vote except in the case of a tie. The City Council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the City Manager, City Attorney and City Clerk. The City Manager is responsible for carrying out the policies and ordinances of the Council, for overseeing the day-to-day operations of the City, and for appointing the heads of various departments. The Council is elected on a non-partisan basis.

The City provides a full range of services which include general government, public safety (police, fire, disaster preparedness and building inspection), construction and maintenance of highways and streets, economic development, culture and recreation, electric, water, airport, refuse, sewer, and senior citizen/handicap transportation. In addition to general City activities, the Council is financially accountable for the Riverside Redevelopment Agency, Riverside Public Financing Authority and the Riverside Municipal Improvements Corporation; therefore, these entities are included as an integral part of the City's financial statements. Additional information on these legally separate entities can be found in Note 1.A in the notes to the financial statements.

The annual budget serves as the foundation for the City's financial planning and control. The City Manager presents the proposed budget to the City Council for review at least thirty-five calendar days prior to the beginning of each fiscal year. The Council is required to hold public hearings on the proposed budget and to adopt a final budget no later than June 30, which is the close of the City's fiscal year. The appropriated budget is prepared by fund and department. Department heads may make transfers of appropriations within a department. Transfers of appropriations between departments, however, require the approval of the Council.

Budget-to-actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on page 25 as part of the basic financial statements for the governmental funds. For governmental funds other than the general fund, with appropriated annual budgets, this comparison is presented in the governmental fund subsection of this report, which begins on page 63.

vi

Local economy. The City is located in the Inland Empire, which consists of Riverside and San Bernardino Counties. The population of the Inland Empire at 3.66 million people is larger than 21 states. The City leads the Inland Empire in most measures of economic power, including population, income, employment, bank deposits, assessed valuations, office space and college enrollment. The population of the City is 285,537, which places the City as the seventh largest in Southern California behind the City of Bakersfield.

The Inland Empire has a very strong economic environment, as does the City. This area is expected to add about 30,000 jobs during calendar year 2005. The City owned electric utility gives it a competitive advantage at this time when energy costs and reliability are issues. Riverside's challenges include a lack of available space for manufacturing and industrial development within its current boundaries.

America's Most Livable Communities Award was conferred upon the City of Riverside in 2004. This award is conferred once each decade to those communities whose innovations have brought vitality and growth to their regions, a marked improvement in the quality of life, and are taking major strides to prepare for the new global economy.

Grubb and Ellis, a national real estate broker, ranked the Riverside metro area as one of the top five in all four national markets (retail, office, industrial and apartment) in their 2003 Global Forecast: U.S. Market Strength Forecast 2002-2007.

Priorities for the future: A Citywide Strategic Planning document has been developed through a series of meetings, workshops, and surveys with the community, elected officials, and City employees. The plan, as updated, sets forth four goals as follows:

• Economic Development

" Growth and Annexation

• Transportation

• Liveable Communities and Neighborhoods Long-term financial planning. Annually, the City updates a six (6) year capital improvement program; planned capital expenditures during fiscal years 2004/2005 through 2009/2010 (except for the Park and Recreation Department which only plans projects as funds become available) total $402 million, a 6% decrease over the prior 6 year plan. Electric, Water and Sewer fund projects make up 63%

of the $402 million, while transportation-related projects (traffic signal and streets) comprise 19 percent. Major inputs to the CIP include a new power generation plant (the second for the City), the major and minor street rehabilitation and construction program, recurring and system improvements to the electric program, water and main replacements, sewer plant primary system upgrade, and Agricultural Park cleanup.

Vii

Cash management policies and practices. Cash temporarily idle during the year was invested principally in federal agency securities and the State of California Local Agency Investment Fund. The maturities of the investments do not exceed five (5) years, with the average maturity not exceeding three (3) years. All securities are held in third party safekeeping by Union Bank of California as agent for the City. The money market sweep account is held by Bank of America. All transactions originated and authorized by the City are transacted on a delivery versus payment (DVP) basis in order to perfect delivery. The average yield on the investments was 2.77% for the fiscal year.

Risk management. Risk exposures to the assets of the City are managed through a combination of self-insured retention and insurance coverage. The City believes they have current assets adequate to cover the actuarially determined liability for general liability and workers' compensation claims, including estimated claims incurred but not reported. The City maintains excess liability insurance to provide coverage beyond a self-insured retention of $3,000,000 per occurrence for general liability and $4,000,000 for workers' compensation.

Pension benefits. The City provides pension benefits for all employees through a statewide plan managed by the California Public Employees Retirement System (CalPERS). The City has no obligation in connection with employee benefits offered through this plan beyond its annual contractual payment to CalPERS. Additional information on the plan can be found in Note 13 in the notes to the financial statements.

Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Riverside for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2004. This was the eighteenth consecutive year that the City has received this prestigious award. The City received this award for publishing an easily readable and efficiently organized CAFR that satisfied both GAAP and applicable legal requirements.

This award is valid for a period of one year only. We believe that our current CAFR continues to meet the Program's requirements and we are submitting it to the GFOA again this year.

The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department, particularly the leadership of Brent Mason, Assistant Finance Director and Laura Nomura, Controller. We would like to express our appreciation to all members of the Department who assisted and contributed to its preparation. Credit also must be given to the Mayor and the City Council for their unfailing support for maintaining the highest standards of professionalism in the management of the City's finances.

viii

Respectfully submitted, Paul C. Sundeen City Manager Assistant City Manager/CFO/Treasurer ix

Certificate of Achievement for Excellence in Financial The Government Finance Officers Association of the United States Reporting and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Riverside for our Presented to Comprehensive Annual Financial Report for the fiscal year ended City of Riverside, June 30, 2004.

California For its Comprehensive Annual In order to be awarded a Certificate of Achievement, a governmental Financial Report unit must publish an easily readable and efficiently organized for the Fiscal Year Ended Comprehensive Annual Financial Report, whose contents conform to June 30, 2004 program standards. Such reports must satisfy both generally A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers accepted accounting principles and applicable legal requirements.

Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting A Certificate of Achievement is valid for a period of one year only.

and financial reporting.

We believe our current report continues to conform to Certificate of Achievement Program requirements, and we are submitting it to 7 Pre siden GFOA to determine its eligibility for another certificate.

President a'-

Executive Director x

ORGANIZATION CHART LEGISLATIVE OFFICIALS Ronald 0. Loverldge ............................................. Mayor Doa Betro ................................ Councilmember-Ward i Ameal Moore ............................ Councilmember- Ward 2 Art Gage ................................... Councilmember - Ward 3 city Council&Mo mew Frank Schiavone ........... Councilmember - Ward 4 Ed Adkison ............................... Councilmember - Ward 5 Nancy Hart ............................... Councilmember- Ward 6 I City Clerk I- Steve Adams ............................. Councilmember - Ward 7 CITY OFFICIALS Bradley J. Hudson ................................... City Manager*

Michael Beck ............................... Assistant City Manager Tom DeSantis .............................. Assistant City Manager Paul C. Sundeen ................... Assistant City Manager/CFO Colleen J. Nicol .............................................. City Clerk*

Gregory P. Priamos .................................... City Attorney*

Tom Boyd ................................................. City Engineer Russ Leach .............................................. Chief of Police Steve Reneker ........................... Chief Information Officer Scott Barber ................. Community Development Director Belinda Graham ............................. Development Director Tedd Laycock .................................................. Fire Chief Kris Martinez ................. Interim General Services Director Rhonda Strout ............ Interim Human Resources Director Judith Auth ............................................. Library Director Vince Moses .......................................... Museum Director Ralph Nuflez ......................... Park and Recreation Director Note: All department heads officially report to the City Manager David Wright ................................ Public Utilities Director Siobhan Foster ................... Interim Public Works Director

• Appointed by City Council xi

II II -

-0

McGladrey& Pullen Certified PRubi Accountants Independent Auditor's Report The Honorable Mayor and Members of the City Council City of Riverside Riverside, California We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Riverside, California, (the City) as of and for the year ended June 30, 2005, which collectively comprise the City's basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the City's management. Our responsibility is to express opinions on these 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

Inour opinion, the financial statements referred to above present fairly, inall material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Riverside, California, as of June 30, 2005, and the respective changes infinancial position and cash flows, where applicable, thereof and the respective budgetary comparison for the general fund for the year then ended, in conformity with accounting principles generally accepted inthe United States of America.

Inaccordance with GovernmentAuditing Standards,we have also issued our report dated September 30, 2005 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed inaccordance with Government Auditing Standardsand should be considered inassessing the results of our audit.

The Management's Discussion and Analysis, as listed inthe table of contents, is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted inthe United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

McGladrey &Pulen, LLP Isa member firm ofRSM Intemadonal, an affilation of separate and Independent legal entities.

1

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual nonmajor fund financial statements and other schedules, listed inthe table of contents as supplementary information, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied inthe audit of the basic financial statements and, in our opinion, is fairly stated in all material respects inrelation to the basic financial statements taken as a whole.

The accompanying introductory and statistical sections, as listed in the table of contents, are presented for the purpose of additional analysis and are not a required part of the basic financial statements. This information has not been subjected to the auditing procedures applied Inthe audit of the basic financial statements and, accordingly, we express no opinion on it.

Riverside, California September 30, 2005 2

Management's Discussion and Analysis As management of the City of Riverside (the City), we offer this narrative overview and analysis of financial activities for the fiscal year ended June 30, 2005. We encourage readers to consider the information presented here in conjunction with additional information furnished in our letter of transmittal, which can be found on page v. of this report. All amounts, unless otherwise indicated, are expressed in thousands of dollars.

Overview of the Financial Statements This discussion and analysis are intended to serve as an introduction to the City's basic financial statements, compromised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains certain supplementary information.

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 assets presents information on all of the City's assets and liabilities, with the excess of assets over liabilities reported as net assets. Over time, increases or decreases in the net assets 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 City's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

The government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business type activities). The governmental activities of the City include general government, public safety, highways and streets, and culture and recreation. The business type activities of the City include Electric, Water, Sewer, Refuse, Public Parking, Airport and Transportation services.

3

The government-wide financial statements include the City and it's component units. The City's component units are the Riverside Redevelopment Agency, Riverside Public Financing Authority, and the Riverside Municipal Improvements Corporation. Although legally separate, these entities function for all practical purposes as departments of the City and therefore have been blended as part of the primary government.

Both the Governmental Activities and the Business Type Activities are presented on the accrual basis of accounting, a basis of accounting that differs from the modified accrual basis of accounting used in presenting governmental fund financial statements. Note 1.C. of the Notes to the Basic Financial Statements fully describe these bases of accounting. Proprietary funds, discussed below, also follow the accrual basis of accounting.

The government-wide financial statements can be found on pages 19-20 of this report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories:

governmental, proprietary, and fiduciary.

Governmentalfunds. Governmental funds are used to account for the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendableresources as well as on balances of spendable resources available at the end of the fiscal year.

It is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. Reconciliations to facilitate this comparison are provided for both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances. The major reconciling items relate to capital assets and debt. In the Governmental Funds, acquisitions of capital assets are treated as "expenditures" because upon purchase of a capital asset, cash used for the acquisition is no longer available for other purposes. The issuance of debt provides cash, which is now available for specified purposes. Accordingly, at the end of the fiscal year, the unreserved fund balances of the Governmental Funds reflect spendable resources available for appropriation by the City Council.

Spendable balances are not presented on the face of the government-wide financial statements.

The City maintains seventeen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund and the Redevelopment Agency Debt Service Fund, both of which are major funds. Data from the other fifteen governmental funds are 4

combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and can be found on pages 57-66 in this report.

The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided to demonstrate compliance with this budget.

The basic financial statements can be found on pages 19-55 of this report.

Proprietary funds. The City maintains two different types of proprietary funds, enterprise and internal service funds. Enterprise funds are used to report the same functions presented as business type activities in the government-wide financial statements. The City uses enterprise funds to account for Electric, Water, Sewer, Refuse, Parking, Airport and Transportation services. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City uses internal service funds to account for self-insured insurance programs, central stores and its fleet of vehicles. Because these services predominantly benefit governmental rather than business type functions, they have been included within governmental activities in the governuent-wide financial statements. Internal service funds are presented as proprietary funds because both enterprise and internal service funds follow the accrual basis of accounting.

Proprietary funds provide the same type of information as the government-wide financial statements (business type activities), only in more detail. The proprietary fund financial statements provide separate information for the Electric, Water and Sewer operations, all of which are considered to be major funds of the City. The four remaining proprietary funds noted above are combined into a single, aggregated presentation. All internal service funds are also combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the non-major proprietary funds and the internal service funds is provided in the form of combiningstatements and can be found on pages 67-71 in this report.

The basic proprietary fund financial statements can be found on pages 26-30 of this report.

Agency funds. Agency funds are used to account for situations where the City's role is purely custodial. Agency 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. All assets reported in Agency funds are offset by a liability; the accrual basis of accounting is used to recognize receivables and payables.

The Agency fund financial statement can be found on page 31 of this report.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements begin on page 32 of this report.

5

Government-wide Financial Analysis The following table presents a summarization of the City's assets, liabilities and net assets for its governmental and business type activities. As noted earlier, a government's net asset position may serve over time as a useful indicator of its fimancial position.

Governmental Business type Activities Activities Total 2005 2004 2005 2004 2005 2004 Current and other assets $571,535 $483,015 $ 396,346 $453,186 $ 967,881 $ 936,201 Capital assets, net 543,970 507.243 809,277 693,448 1,353.247 1.200.691 Total assets 1,115,505 990,258 1,205.623 1.146.634 2,321.128 2.136.892 Current liabilities 72,940 60,284 87,797 85,075 160,737 145,359 Long-term liabilities 418,673 349.417 431,447 453,514 850,120 802,931 Total liabilities 491,613 409,701 5 538.589 1,010,857 948,290 Net assets:

Invested in capital assets, net of related debt 515,354 484,784 402,377 341,041 917,731 825,825 Restricted 154,957 137,126 54,540 49,242 209,497 186,368 Unrestricted (46.419) 41353* 229,462 217.762 183.043 176,409 Total net assets S623.822 $580.557 S6§.32 60.02 $1,188.602 The City's assets exceeded liabilities by $1,310,271 at June 30, 2005, an increase of $121,669 from June 30, 2004.

By far the largest portion of the City's net assets (70 percent) reflects its investment in capital assets (i.e., land, buildings, machinery, equipment and infrastructure), net of any related debt that is still outstanding used to acquire those assets and net of unspent bond proceeds and cash held in bond reserve accounts. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.

An additional portion of the City's net assets (16 percent) represents resources that are subject to external restrictions on how they may be used. The remaining unrestricted net assets (14 percent) may be used to meet the government's ongoing obligations to citizens and creditors. Of this amount, $229,462 is held by the business type activities; the governmental activities reflect a negative $46,419.

The Riverside Redevelopment Agency (the Agency), a blended component unit of the City, represents $116,932 of negative 6

unrestricted net assets for 2005 and was a negative $108,865 in the prior year. The remaining governmental activities of the City have positive unrestricted net assets of $70,513 in 2005 and $67,512 in 2004, mostly attributable to the City's General Fund.

The Agency exists to finance improvements that serve to remediate blight within the City. Often these activities do not result in a residual asset, but rather underwrite the cost of a development activity deemed beneficial in meeting the Agency's objectives. The resulting statement of net assets reflects the debt obligation to be repaid through future tax revenues, without an offsetting asset.

While this is the routine functioning of such an entity, when blended with the City, its negative unrestricted net assets causes the governmental activities to report a negative position.

The government's total net assets increased by $121,669 during the current fiscal year, which reflects the growth in both the governmental ($43,335) and business type ($78,334) activities. This is primarily due to continued investment by the City in its infrastructure, which is largely funded by grants and dedicated revenue sources. Lastly, business type unrestricted assets grew based on municipal service charges for service exceeding the current years operating expenditures.

The following condensed summary of activities of the City's governmental and business type operations for the period ended June 30, 2005 shows total net assets increasing by $121,669. The prior fiscal year is also presented for comparative purposes. Also included in the following analysis are revenue and expense graphs to aid the reader in their understanding of the results of the current year's activities.

7

Governmental Business Type Activities Activities Total 2005 2004 2005 2004 2005 2004 Revenues:

Program Revenues:

Charges for services $ 63,087 $ 57,001 $327,032 $304,911 $ 390,119 $ 361,912 Operating Grants and Contributions 16,140 12,935 2,261 1,723 18,401 14,658 Capital Grants and Contributions 5,292 1,136 32,317 26,390 37,609 27,526 General Revenues:

Sales taxes 53,348 46,624 - 53,348 46,624 Property taxes 61,553 39,211 - 61,553 39,211 Other taxes and fees 32,237 41,364 - 32,237 41,364 Grants and contributions not restricted to specific programs 15,220 18,710 - 15,220 18,710 Other 13,571 6,760 14,910 9,569 28,481 16,329 Total revenues 260,448 223,741 376,520 342,593 636.968 566,334 Expenses:

General government 69,520 63,000 - 69,520 63,000 Public safety 105,131 102,500 105,131 102,500 Highways and streets 17,983 22,017 17,983 22,017 Culture and recreation 23,512 22,988 23,512 22,988 Interest on long-term debt 15,885 10,996 - 15,885 10,996 Electric - 200,030 196,727 200,030 196,727 Water - 36,709 33,921 36,709 33,921 Sewer - 26,108 23,273 26,108 23,273 Refuse - 12,841 11,510 12,841 11,510 Airport - 1,185 1,088 1,185 1,088 Transportation - 2,557 2,286 2,557 2,286 Public Parking - - 824 1.389 824 1,389 Total expenses 232,031 221,501 280,254 270,194 512.285 491,695 Increase in net assets before Special item and Transfers 28,417 2,240 96,266 72,399 124,683 74,639 Special item - canal abandonment - (3,014) - (3,014)

Transfers 14,918 10.302 (14.918) (10.302_ -

Increase in net assets 43,335 12,542 78,334 62,097 121,669 74,639 Net assets - beginning 580.557 568.015 608.045 545.948 1.188.602 1.113.963 Net assets - ending 62390 $686.379 6i0 8

Governmental activities. Governmental activities increased the City's net assets by $43,335, accounting for 36 percent of the total growth in net assets. The net assets in the prior fiscal year increased by $12,542. Key elements of this year's activity in relation to the prior year are as follows:

• Charges for services increased by approximately $6,000 primarily as a result of increased revenues from building and related fees from new development within the City.

" Operating and capital grants and contributions increased approximately $7,400 in 2005 primarily due to increased grant funding for capital projects, public safety items, and housing projects.

" Sales and property taxes increased approximately $29,000 in 2005, principally because of the strong local economy and the expansion of redevelopment project areas and activities, plus the reclassification of vehicle licenses fees, as described below.

• Other taxes and fees decreased about $9,000 because the majority of vehicle license fee revenue is now received in the form of property taxes.

" Other revenues increased approximately $6,800 mainly due to an increase in investment income resulting from an unrealized market value adjustment required for financial statement reporting purposes.

" While significant variances between years exist for the various expense functions, the total net increase was approximately $11 million. The more significant items are: (1) increased salaries and benefits, coupled with costs associated with substantial technological improvements and increased training for police officers; (2) increased interest expense arising from the issuance of

$75,400 of new debt (net of debt refinancing and bond premiums) during 2005; and (3) increased costs associated with capital projects and development activities. These increases are partially offset by a decrease in depreciation expense in the current year in the highways and streets category due to an adjustment in fiscal year 2004 associated with a new accounting pronouncement.

" Transfers to governmental funds increased $4,616 primarily due to increased operating revenue realized by the Electric and Water funds (transfers are a percentage of gross revenues, as defined).

9

Expenses and Programs Revenues - Governmental Activities - Fiscal Year Comparison 2005 vs. 2004

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0 General Public safety Highways and Culture and Interest on government streets recreation long-term debt 10

Revenues by Source - Governmental Activities - Fiscal Year Comparison 2005 2004 Operating grants and Capital grants and contributions contributions Capital grants and Operating giants and contributions 6% 2% contribuio6%

n 1%

Property taxes Charges for services K 16%

Property taxes 24%

24% Charges for services 26%

estaxes 21%

Grants and Grants and contributions not contributions not restricted to specific programs restricted to specific 8%

programs 6% Miscellaneous Franchise taxes Investment incomeI I 2S Ivsm3% mcm Miscellaneousj -Utility Franchis users taxes Francies 2% Utility users taxes 10%/0

-J I%income lntewo*a

%Investment

% _Other Intergovernmental, Prue rs 2%

1% unresricted 1%

unrestricted 6%

1%

11

Business type activities. Business type activities increased the City's net assets by $78,334, accounting for 65 percent of the total growth in net assets. The change in net assets of business type activities increased from the prior fiscal period by $16,237. Key elements of this year's increase in relation to the prior year are as follows:

" In 2005, charges for services increased $22,121 to $327,032 from $304,911 in 2004 primarily due to an increase in the volume of electric and water sales, in conjunction with a 2.2% electric rate increase and an 8.5% water rate increase.

• Capital grants and contributions increased $5,927 in the current year to $32,317 from $26,390 in the prior year. The increase is mainly due to contributions in aid related to a CALTRANS project.

" Other general revenues increased due to an increase in investment income due to an unrealized market value adjustment required for financial statement reporting purposes and the sale of surplus land.

" Although operating revenues in the Water fund increased, capital grants and contributions decreased, leading to an overall decrease in program revenues in this fund.

" The total net increase in expenses in Business type activities was approximately $10 million. Significant items include: increases in personnel and public benefits expenses in the Electric fund; increased maintenance and repair of the City's water mains, and; increased personnel and operational costs associated with the Sewer and Refuse funds.

Expenses and Program Revenues - Business Type Activities - Fiscal Year Comparison 2005 vs. 2004

$275,000 S16,000

$15,000 S250,000-0'05 Expenses S14,000 S225,000 - '04 Expenes $13,000 AO0 Expenses r m v sS12,000 M'04 Expenses

$200,000 S ,.P Program revenues $11,000 '06 Program revenues S175,000- 12'04 Program revenus $101,000 I 1'04 Program revenues

$150,000 - S9,000

$125,000- $7,000'

$100,00 $60000

$7$5,000 iii: i, ', $4,000 *;

$3,000

$50,000

$25,00 $2,00 0*

$1,9000$

Soltri 1ater A cwer -i4r Retua rasotdo a Electric Water Sewer 12 Refuse Airport Treasportation P~arig

Revenues by Source - Business Type Activities - Fiscal Year Comparison 2005 2004 Operating grants and contributions 1% Operatinggrants and contributions 1%

Capital grants and contributions 90/0 Capital grants and contributions Charges for service 8%

Charges for services 87% 890/0 Investmnt income 1%

kInvestment Miscell ousIncome 1%

-Misc~ellaneous IV1%

13

Financial Analysis of the City's Funds Governmentalfunds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

The following table sunmarizes the balance sheet of the City's General Fund, Redevelopment Debt Service Fund, and Total Governmental Funds. As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements.

Redevelopment Total Governmental General Fund Debt Service Funds 2005 2004 2005 2004 2005 2004 Total assets S!26.757 S117,833 Total liabilities S 55.849 S 58,151 S27,61 $28.139 Fund balances Reserved 44,487 17,268 13,499 11,517 92,164 52,445 Unreserved 117,259 223,487 227,160 Total 153,753 134.527 13,499 11,517 315,651 i42.A08 279,605 Total liabilities and fund balances S209,602 S19Z67 ~122" a L3ULM3 As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $315,651, an increase of $36,046 in comparison with the prior year. About 29% of this amount ($92,164) is reserved to indicate funds are not available for new spending because it has already been committed for a variety of restricted purposes. The remainder of the fund balance is unreserved, meaning it is available for spending at the City's discretion. Of that amount, $184,348 has been designated for specific capital projects and economic contingencies, leaving $39,139 without a commitment; at June 30, 2004 the comparable amount was $40,728. The decrease in uncommitted, unreserved fund balance is due principally to an increase in the amount designated for specific capital projects.

The General Fund is the principal operating fund of the City. At the end of the current fiscal year, the unreserved fund balance was

$109,266, of which $92,993 was designated for future operations, economic contingencies and liability insurance, leaving $16,273 unreserved and undesignated; at June 30, 2004 the comparable number was $15,693. The General Fund realized higher than 14

anticipated taxes and permit fees due to continued significant development within the City, which resulted in the General Fund not having an operating deficit, exclusive of capital expenditures, as originally anticipated. The total fund balance reached $153,753, an increase of $19,226 over the prior year.

The Redevelopment debt service fund has a total fund balance of $13,499, all of which is reserved for the payment of debt service. A net increase in the fund balance occurred during the current year ($1,982) mainly due to the issuance of new bonds.

Proprietaryfunds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Unrestricted net assets of the Electric, Water and Sewer operations at the end of the year amounted to $118,880, $15,870, and

$69,795, respectively. The total growth in net assets for these funds was $57,454, $5,141 and $3,478, respectively, demonstrating the adequacy of the current rate structure for these funds.

General Fund Budgetary Highlights Final budgeted revenues increased from the amount originally budgeted to the final as a result of grant related programs.

Total budgeted expenditures increased from $238,648 to $270,370 or $31,722. The increases can be generally summarized as follows:

o The General Services department added appropriations of $4,900 for construction of the Magnolia Street Police Precinct and other City-wide capital improvement projects.

o The Police department added appropriations of $13,000 primarily for grant funded operational charges as well as negotiated salary and benefit increases.

o The Fire department added appropriations of $5,400 primarily for grant funded operational charges as well as negotiated salary and benefit increases.

u The Park and Recreation department added appropriations of $3,900 primarily for grant funded improvement projects.

o Other miscellaneous appropriations were added in other departments throughout the year of approximately $4,500.

15

Actual amounts differed from those budgeted as follows:

o Actual total revenues were more than the amount budgeted principally as a result of greater than anticipated development activity and sales and property taxes associated therewith.

u Budgeted expenditures exceeded actual amounts by $78,000. As in prior years, the principal reason is associated with capital projects not completed at year-end. Such projects and related amounts are continued to the next fiscal year.

u Other financing sources (uses) exceeded the final amount budgeted by $54,232. The major event causing this variance is the issuance of $60 million of pension obligation bonds to fund the unfunded actuarial accrued liability (UAAL) associated with the City's miscellaneous employees.

o The net effect of all of the above was a favorable variance from the amounts budgeted of 107,219.

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, 2005 amounted to $1,353,247 (net of accumulated depreciation). This investment includes land, buildings and improvements, machinery and equipment, park facilities, roads, highways, and bridges. The total increase in the City's net investment in capital assets for the current fiscal year was $152,556 ($36,727 for governmental activities including internal service funds and $115,829 for business type activities).

Major capital improvements during the current fiscal year included: new infrastructure, consisting primarily of street improvements

($27,462); Riverside Canal ($8,415); replacement of the water transmission main at the 60/215 interchange ($4,160); Sewer department upgrades ($12,456), Electric Utility upgrades ($32,464); and Water Utility system upgrades ($20,446).

Construction in progress totaled $172,136 at June 30, 2005. Some of the major projects in process are the Riverside Energy Resource Center, the downtown power upgrade project, the water system expansion, an upgrade to the electric distribution system, the Magnolia Street Police Precinct, the Janet Goeske Center and the Airport Fire Station. Depreciation expense during the fiscal year was $18,039 for governmental activities and $27,420 for business type activities.

16

City of Riverside's Capital Assets (net of depreciation)

Governmental Business Type Activities Activities Total 2005 2004 2005 2004 2005 2004 Land $124,475 $116,925 $ 31,262 $ 32,725 $ 155,737 $ 149,650 Buildings 42,933 52,826 140,513 135,062 183,446 187,888 Improvements other than Buildings 20,303 20,675 492,804 449,683 513,107 470,358 Machinery and equipment 12,176 12,883 11,833 9,074 24,009 21,957 Inftastructure 304,812 286,789 - 304,812 286,789 Construction in progress 39,271 17,145 1309286 66904136 84,049 Total S54U97 S507,241 $12144a SI1200.691 Additional information on the City's capital assets can be found in note 5 on page 40 of this report.

Long-term debt. At the end of the current fiscal year, the City had total debt outstanding of $850,120, which includes bonded debt of

$789,501.

City of Riverside's Long-Term Debt Governmental Business Type Activities Activities Total 2005 2004 2005 2004 2005 2004 Lease/Revenue Bonds $144,024 $131,590 $419,581 $440,970 $563,605 $572,560 General Obligation Bonds 20,280 20,285 S- 20,280 20,285 Pension Obligation Bonds 148,280 89,540 S- 148,280 89,540 Certificates of Participation 57,336 58,706 S- 57,336 58,706 Notes Payable 10,645 11,057 10,459 11,066 21,104 22,123 Capital Leases 7,431 8,938 392 439 7,823 9,377 Compensated Absences 30,677 29,301 - 30,677 29,301 Water Acquisition Rights 5L039 1O15 1.039

$3492417 $431,447 $85S4 g0,120 Total 17

The City's total debt increased by $47,189 (6 percent) during the current fiscal year due to the issuance of $60,000 in Pension Obligation bonds and $25,693 in Redevelopment Agency debt; these were offset by scheduled debt service payments.

The City's Electric and Water Utilities maintain an "A+" and "AA-", respectively, from Standard & Poors and Fitch for their revenue bonds. The City's general obligation bond ratings are "AA-" and "AA".

State statutes limit the amount of general obligation debt a governmental entity may issue to 15 percent of its total assessed valuation.

The legal debt margin for the City is $1,880,200, after deducting the general obligation debt of $220,710.

Additional information on the City's long-term debt can be found in note 7 beginning on page 41 of this report.

Economic Factors and Next Year's Budget and Rates El The assessment roll for the City increased 9.8% between fiscal year 2004 and fiscal year 2005.

O Property taxes increased between fiscal year 2004 and 2005 by 58.4% primarily as a result of the State's swapping of Property Tax revenue for Vehicle License fees as well as new development and the expansion of redevelopment activity.

O Employment in Riverside County is 3.4% over the prior year and unemployment is down to 5.9% as compared to 6.2% for 2004.

E The required contribution rates as a percentage of payroll for the City's retirement program, including the employee portion which is paid by the City, will be changing effective July 1, 2006 as follows:

" Miscellaneous Plan - 22.80% to 22.89%

" Safety Plan - 27.41% to 30.54%

At the time of budget preparation for fiscal year 2006, the economic outlook for the City was considered to be very good. The General Fund Budget for fiscal year 2006 of $192 million contemplates the use of approximately $7 million of the beginning fund balance.

Request 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 City's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City Manager's Office, Finance Division, 3900 Main Street City of Riverside, CA 92522.

18

City of Riverside Statement of Net Assets June 30, 2005 (amounts expressed In thousands)

Governmental Business-type Assets Activiies Activities Total Cash and investments $ 218,094 $ 170.199 388,293 Receivables, net 55,546 47,699 103,245 Inventory 4,743 4,743 Nuclear material Inventory 1,311 1,311 Prepaid items 4,535 6,631 11,166 Deferred charges 126,310 58,538 184,846 Internal balances 18,752 (18,752)

Land and improvements held for resale 6,386 6,386 Restricted assets:

Cash and cash equivalents 61,455 61,455 Cash and investments at fiscal agent 110,019 68.661 178.680 Other 606 606 Capital leases receivable 27,150 27,150 Land and other capital assets not being depreciated 163,746 164,127 327,873 Capital assets (net of accumulated depreciation) 380,224 645,150 1,025,374 Total assets 1,115,505 1,205,623 2,321,128 Liabilities Accounts payable and other current liabilities 21,165 31,406 52,571 Accrued interest payable 4,059 4,059 Unearned revenue 1,540 502 2,042 Deposits 28,627 3,964 32,591 Current liabilities payable from restricted assets 4,172 4,172 Claims and judgments payable 17,549 17,549 Decommissioning liability 44,030 44,030 Landfill capping 3,723 3,723 Noncurrent liabilities:

Due within one year 20,844 23,037 43,881 Due Inmore than one year 397.829 408,410 806,239 Total liabilities 491,613 519,244 1,010,857 Net Assets Invested in capital assets, net of related debt 515,354 402,377 917,731 Restricted for Capital projects 118,309 118,309 Debt service 8,442 46,459 54,901 Other purposes 28,206 3,217 31,423 Programs 4,864 4,864 Unrestricted (46,419) 229,462 183,043 Total net assets $ 623,892 $ 686,379 $ 1,310,271 19 The notes to the financial statements are an integral part of this statement.

City of Riverside Statement of Activities For the fiscal year ended June 30,2005 (amounts expressed In thousands)

Not (Expense) Revenue and Program Revenues Changes In Net Assets Indirect Operating Capital Expenses Charges for Grants and Grants and Governmental Business type FunctionslPrograms Expenses Allocation Services Contributions Contributions Activities Activities Total Governmental activities:

General government $ 58,460 $ 11,060 $ 25,995 $ 9.923 $ 1,946 $ (31,656) $ (31,656)

Public safety 110,969 (5,838) 6.982 4,577 472 (93,100) (93,100)

Highways and streets 20,364 (2,381) 23,108 229 1,224 6,578 6,578 Culture and recreation 26,353 (2,841) 7,002 1,411 1,650 (13,449) (13,449)

Interest on long-term debt 15,885 (15,885) (15,885)

Total governmental activities 232,031 63,087 16,140 5,292 (147,512) (147,512)

Business type activities:

Electric 200,030 252,322 16,716 $ 69,008 69,008 Water 36,709 34,002 11,826 9,119 9,119 Sewer 26,108 21,967 3.515 (626) (626)

Refuse 12,841 14,492 179 1,830 1,830 Airport 1,185 1,088 182 37 122 122 Transportation 2,557 200 2,079 44 (234) (234)

Public parking 824 2.961 2,137 2,137 Total business type activities 280,254 327,032 2,261 32,317 81.356 81,356 Total $ 512,285 S 390,119 $ '18,401 $ 37,609 (147,512) 81,356 (66,156)

General revenues:

Taxes:

Sales 53,348 53,348 Property 61,553 61,553 Utility users 22,133 22,133 Franchise 4,481 4,481 Other 3,828 3,828 Intergovernmental, unrestricted 1,795 1,795 Grants and contributions not restricted to specific programs 15,220 15,220 Investment income 7,815 7,548 15,363 Miscellaneous 5,756 7,362 13,118 Subtotal 175,929 14,910 190,839 Special item - canal abandonment (3,014) (3,014)

Transfers, net 14,918 (14,918)

Total general revenues, special items, and transfers 190,847 (3,022) 187,825 Change in net assets 43,335 78,334 121,669 Net assets - beginning 580,557 608,045 1,188,602 Net assets - ending $ 623.892 $ 686,379 $ 1,310,271 The notes to the financial statements are an integral part of this statement 20

City of Riverside Balance Sheet Governmental Funds June 30, 2008 (amounts expressed In thousands)

Raedevelopsknt Other Total General Debt Governmental Governmental Assets Fund Service Funds Funds Cash and Investments S 78,366 $ 5,982 $ 113,610 197,958 Cash and Investments at fiscal agent 63.165 7,430 39,424 110,019 Receivables (net of allowance for uncollectbles):

Interest 922 59 1,096 2,077 Property taxes 8,438 382 8,798 Sales tax 9,103 9,103 Utiliy bled 552 552 Accounts 3,110 261 173 3,544 Intergovernmental 5.066 8,937 14.003 Notes 70 17,124 17,194 Capital lease receivable 27,150 27,150 Prepal Items 176 4,352 4,528 Due from other funds 6,921 6.921 Advances to other funds 33,715 228 232 34,175 Land & improvements held for resale 6,386 6,386 Total assets 209,602 $ 41,110 $ 191.696 $ 442,408 Uabilities and fund balances UaIties:

Accounts payable $ 4,234 $ 432 $ 6,144 $ 10,810 Accrued payrol 7,908 7,908 RetWng payable 382 1,484 1.866 Intergovemmental 138 138 Unearned revenue 12,427 27,179 18,622 58,228 Deposits 28.564 44 28.608 Due to other funds 50 2,001 2,051 Advances from other funds 2,146 15,002 17,148 Total liabilities 55,849 27,611 43.297 126,757 Fund balances:

Reserved 44,487 13,499 34,178 92,164 Unreserved, designated for economic contingencies 27,000 27,000 Unreserved, designated for liability Insurance 6,400 6,400 Unreserved, designated for future operations:

General fund 59.593 59,593 Special revenue funds 19,544 19.544 Capital project funds 71,684 71,684 Permanent fund 127 127 Unreserved, undesignated:

General fund 16.273 16,273 5,447 5.447 Special revenue funds Capital project funds 17,419 17,419 Total fund balances 153,753 13,499 148,399 315.651 Total lablities and fund balances $ 209.602 $, 41,110 $ 191,696 $ 442.408 The notes to the financial statements are an Integral part of this statement.

21

CITY OF RIVERSIDE RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS June 30, 2005 (amounts expressed In thousands)

Total fund balances - governmental funds $315,651 Amounts reported for governmental activities In the Statement of Net Assets are different because:

Capital assets net of accumulated depreciation used in governmental activities that are not current financial resources and, therefore, are not reported in the funds. 540,383 Issuance costs from issuing debt are expenditures at the fund level but are deferred and subject to capitalization and amortization in the Statement of Net Assets. 4,105 Special item, pension contribution, is a use of current financial resources and an expenditure at the fund level, is deferred and recognized as a deferred charge on the Statement of Net Assets. 120,548 Revenues that do not meet the "availability" criteria for revenue recognition and therefore, are deferred in the funds. 56,688 Long-term liabilities, as listed below, are not due and payable in the current period and therefore are not reported in the funds.

Bonds Payable $ (307,999)

Accrued Interest Payable (4,059)

Certificates of Participation Payable (57,336)

Notes Payable (10,645)

Capital Leases Payable (7,431)

Bond Premiums (4,585)

Compensated Absences (30,052)

(422,107)

Internal service funds are used by management to charge the costs of insurance, centralized purchasing and fleet management to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the Statement of Net Assets. 8,624 Net assets of governmental activities $623,892 The notes to the financial statements are an integral part of this statement 22

City of Riverside Statement of Revenues, Expenditures, and Changes In Fund B Governmental Funds For the fiscal year ended June 30, 2005 (amounts expressed In thousands)

Redevelopment Other Total Debt Governmental Governmental General Fund Service Funds Funds Revenues Taxes $ 116,018 $ 16,994 $ 9,044 $ 142,056 Licenses end permits 7,374 7,015 14,389 Intergovernmental 15,366 200 27,002 42,568 Charges for services 11,291 - 8 11,299 Fines and forfeitures 1,783 223 2,006 Special assessments 4,118 2,154 6,272 Rental and Investment Income 4,251 2,486 4,178 10,915 Miscellaneous 4,749 591 4,656 9,996 Total revenues 164,950 20,271 54,280 239,501 Expenditures Current:

General government 21,351 261 7,188 28,800 Public safety 119,036 119,036 Highways and streets 13,446 13,446 Culture and recreation 26,198 7,982 34,180 Capital outlay 48,366 48,366 Debt service:

Principal 3,522 13,674 570 17,766 Interest 8,337 6,377 311 15,025 Bond Issuance costs 487 1,051 1,538 Total expenditures 192,377 21,363 64,417 278,157 Deficiency of revenues under expenditures (27,427) (1,092) (10,137) (38,656)

Other financing sources (uses):

Transfers in 22,846 8,575 18,523 49,944 Transfers out (8,076) (17,068) (9,882) (35,026)

Proceeds from Issuance of long term obligations 60,000 11,454 14,124 85,578 Premiums on bonds issued 113 113 Sale of capital assets 92 6,138 6,230 Total other financing sources before special item 74,862 3,074 28,903 106,839 Special Item - pension contribution (28,213) (3,928) (32,141)

Net change in fund balances 19,222 1,982 14,838 36,042 Fund balances - beginning 134,527 11,517 133,561 279,605 Fund balances - ending $ 153,749 $ 13,499 $ 148,399 $ 315,647 The notes to the financial statements are an integral part of this statement.

23

CITY OF RIVERSIDE 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, 2005 (amounts expressed In thousands)

Net change in fund balances-total governmental funds $36,042 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 and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period, as listed below.

Capital Outlay 53,797 Depreciation Expense (17,273) 36,524 Revenues In the statement of activities that do not meet the *avallability" criteria for revenue recognition and therefore are not reported as revenue in the funds. 4,085 Special Item, Pension Contribution that is deferred and amortized in the statement of activities. 32,141 The issuance of long-term debt (e.g., bonds, leases, notes) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. The net effect of these differences in the treatment of long-term debt and related items Is listed below:

Principal repayments 17,634 Deferred Charges 1,251 Compensated Absences (1,211)

Interest (910)

Proceeds from LTD (85,693)

Other 182 (68,747)

Internal service funds are used by management to charge the costs of insurance, centralized purchasing and fleet management to individual funds. The net revenue of certain activities of internal service funds is reported with governmental activities. 3,290 Change in net assets of governmental activities $ 43,335 The notes to the financial statements are an integral part of this statement 24

City of Riverside Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund For the year ended June 30. 2005 (amounts expressed in thousands)

Actual Variance with Budgeted Amounts Actual Variance with Budgeted Amounts Original Final Amounts Final Budget Original Final Amounts Final Budget Revenues Public safety:

5,424 Police 74,685 87,816 75,974 11,842 Taxes $ 110,594 $ 110,594 $ 116,018 $

639 Fire 61,381 86,839 34,688 32,151 Ucenses and permits 6,735 6,735 7,374 (6,736) Animal regulation 2,870 2.870 2,119 751 Intergovernmental 15,943 22,102 15,366 3,100 Building and zoning inspection 2,061 2,524 2,433 91 Charges for services 8,129 8,191 11,291 (282) Street lighting 3,859 3,859 3.822 37 Fines and forfeitures 2,045 2,045 1,783 Total public safety 144,856 163,908 119,036 44,872 Special assessments 3,755 3,755 4,118 363 Rental and investment Income 3,015 3,057 4,251 1,194 (515) Highways and streets 13,442 15,247 13,446 1.801 Miscellaneous 2,155 5,264 4,749 Culture end recreation 32,248 36,116 26,198 9,918 Total revenues 152,371 161,743 164,950 3,207 Expenditures Debt service:

Principal 750 1,538 3,522 (1,984)

General government interest 2,416 2,528 8,337 (5,809)

Mayor 536 653 498 155 97 46 Bond issuance costs 487 (487)

Council 78 143 12,346 Total debt service 3,166 4,066 (8,280)

Manager 769 1,031 767 264 Attorney 179 391 98 293 284 195 89 Total expenditures 238,648 270.370 192,377 77,993 Clerk 208 Planning 5,058 5,663 4,990 673 3.928 4,292 3,587 705 Deficiency of revenue under expenditures (88,277) (108,627) (27,427) 81.200 Human Resources General Services 26,007 30,907 13,561 17.346 Finance 6,633 6,106 3,103 3.003 Other financing sources (uses) 11,114 2,372 Transfers in 23,522 26,325 22,540 (3,48U)

Information System 13,580 13,486 Transfers out (3,450) (5,798) (8.076) (2.278)

Non-departmental 14.946 15,083 10,728 4,335 Proceeds from issuance of long-term debt 0 0 60,000 60.000 78.019 48,738 29,281 Sale of capital assets 100 100 92 (8)

Subtotal 71,922 (26,986) (26,986) (27,387) 401 Total other financing sources Allocated expenditures before special item 20,172 20,630 74,862 54,232 44,936 51,033 21,351 29.882 Total general government (28,213) (28,213) continued Special item - pension contribution 0 0 Net change in fund balances (66,105) (87,997) 19,222 107.219 The notes to the financial statements are an integral part of this statement, Fund balance, beginning 134,527 134,527 134,527 0 68,422 $ 46,530 $ 153,749 $ 107,219 Fund balance, ending mm;m===

25

City of Riverside Statement of Net Assets Proprietary Funds June 30, 2005 (amounts expressed in thousands)

Business-type Activities - Enterprise Funds Governmental Other Total Activities-Enterprise Enterprise Internal Assets Electric Water Sewer Funds Funds Service Funds Current assets:

Cash and Investments $ 88,292 $ 15,911 $ 58,794 $ 7,202 $ 170,199 $ 20,136 Receivables (net of allowances for uncollectibles)

Interest 941 217 720 98 1,976 213 Utility billed 11,332 1,591 568 428 13,919 Utility unbilled 10,813 2,152 782 596 14,343 Accounts 8,637 1,713 690 271 11,311 6 Intergovernmental 3,133 396 491 2,130 6,150 56 Nuclear materials inventory 1,311 1,311 Inventory 4,743 Prepaid items 6,628 I 6,631 7 Due from other funds 50 50 Restricted assets:

Cash and cash equivalents 50,003 4,339 3,896 3,217 61,455 Cash and investments at fiscal agent 64.474 4,187 68,661 Public benefit programs receivable 595 595 Conservation & reclamation programs receivable 11 11 Total current assets 246,209 30,518 65,942 13,943 356,612 25,161 Non-current assets:

Advances to other funds 3 48 10,728 10,779 2,506 Deferred charges 40,015 7,135 3,922 7,464 58,536 1,657 Capital assets:

Land 6,848 12,552 2,698 9,164 31,262 Buildings 12,243 14,787 173,947 4,509 205,486 1,488 Accumulated depreciation-buildings (3,051) (2,280) (57,173) (2,469) (64,973) (32)

Improvements other than buildings 473,765 293,244 37,471 7,178 811,658 Accumulated depreciation-improvements other than buildings (215,853) (92,356) (7,628) (3,017) (318,854)

Machinery and equipment 14,609 8,672 6,126 10,676 40,083 9,335 Accumulated depreciation-machinery and equipment (11,423) (5.576) (4,269) (6,982) (28,250) (7,204)

Construction in progress 98,385 12,656 257 21,567 132,865 Total non-current assets 415,541 248,882 166.079 48,090 878,592 7,750 Total assets 661,750 279,400 232,021 62,033 1,235,204 32,911 continued 26

City of Riverside Statement of Net Assets Proprietary Funds June 30,2005 (amounts expressed In thousands)

Business-type Activities - Enterprise Funds Governmental Other Total Activities-Enterprise Enterprise Internal Electric Water Sewer Funds Funds Service Funds Liabilities Current liabilities:

16,260 1,383 1,238 1,740 20,621 397 Accounts payable 4,708 2,027 1,158 905 8,798 624 Accrued payroll Retainage payable 1,273 645 26 1,944 47 Intergovernmental 43 43 17,549 Claims and judgments 87 196 219 502 Unearned revenue 2,599 1.365 3,964 19 Deposits 941 941 3,979 Due to other funds 42 17 59 Capital leases-current Water stock acquisitions-current 150 150 Current liabilities payable from restricted assets:

15,015 4,075 3,120 22,210 Revenue bonds Accrued interest 2,678 610 775 4,063 108 1 618 727 Other payables 42,684 10,343 7,173 3,822 64,022 22,615 Total current liabilities Non-current liabilities:

Revenue bonds 306,144 62,819 28,408 397,371 9,841 9,841 Notes payable 116 217 333 Capital leases 13,690 5,890 3.768 5,292 28,640 1,672 Advances from other funds 44,030 44,030 Decommissioning liability 865 865 Water stock acquisitions 3,723 3,723 Landfill capping 363,864 69,574 42,133 9,232 484,803 1.672 Total non-current liabilities 406,548 79,917 49,306 13,054 548,825 24,287 Total liabilities Net Assets 97,207 175,041 109,284 20,845 402,377 3,587 Invested in capital assets, net of related debt 34,383 8,440 3,636 46,459 Restricted for debt service 3,217 3,217 Restricted for other purposes 4,732 132 4,864 Restricted for programs 118,880 15,870 69,795 24,917 229,462 5,037 Unrestricted

$ 255,202 $ 199,483 $ 182,715 $ 48,979 $ 686,379 $ 8,624 Total net assets The notes to the financial statements are an Integral part of this statement.

27

City of Riverside Statement of Revenues, Expenses, and Changes In Fund Net Assets Proprietary Funds For the fiscal year ended June 30, 2006 (amounts expressed In thousands)

Business-type Activities - Enterprise Funds Governmental Other Total Activities.

Enterprise Enterprise Internal Electric Water Sewer Funds Funds Service Funds Operating revenues:

Charges for services $ 252,322 $ 34,002 $ 21,967 $ 18,741 $ 327,032 $ 17,373 Operating expenses:

Personal services 13,274 7,543 7,169 4,815 32,801 2,966 Contractual services 2,849 2,105 837 3,663 9,454 62 Maintenance and operation 145.820 7,948 6,451 4,807 165,026 1,324 General 10,165 7,937 3,435 1,509 23,046 1,606 Materials and supplies 454 422 1,394 815 3,085 129 Insurance 834 628 378 436 2,276 7,738 Depreciation and amortization 15,116 6,314 4,715 1,275 27,420 767 Total operating expenses 188,512 32,897 24,379 17,320 263,108 14,592 Operating income (loss) 63,810 1,105 (2,412) 1,421 63,924 2,781 Nonoperating revenues (expenses):

Operating grants 2,261 2,261 Interest income 5,183 582 1.496 287 7,548 688 Other 1,255 1,171 1,809 1,998 6,233 (279)

Gain (loss) on retirement of capital assets 217 620 627 (335) 1,129 89 Capital improvement fees 3,494 3,494 Interest expense and fiscal charges (11,518) (3,812) (1,729) (87) (17,146) (15)

Total nonoperating revenues (expenses) (4,863) (1,439) 5,697 4,124 3,519 483 Income (loss) before capital contributions, transfers and special item 58,947 (334) 3,285 5,545 67,443 3,264 Capital contributions 16,716 11,826 21 260 28,823 26 Transfers in 363 150 172 6,456 7.141 Transfers out (18.572) (3,487) (22,059)

Total before special item 57,454 8,155 3,478 12,261 81,348 3,290 Special Item . canal abandonment (3,014) - (3,014) _

Change in net assets 57,454 5,141 3,478 12,261 78,334 3,290 Total net assets - beginning 197,748 194,342 179,237 36,718 608,045 5,334

$ 255,202 $ 199,483_ $ 182,715 $ 48,979 $ 686,379 $ 8,624 Total net assets - ending The notes to the financial statements are an integral part of this statement.

28

City of Riverside Propdetary Funds Statement of Cash Flows For the fiscal year ended June 30, 2005 (amounts expressed In thousands)

Business-type Activities. Enterprise Funds Governmental Other Total Activities-Enterprise Enterprise Internal Electric Water Sewer Funds Funds Service Funds Cash flows from operating activities:

Cash received from customers and users 245,314 $ 38,702 $ 22,529 $ 18.764 $ 323,309 $ 17,768 Cash paid to employees for services (13,415) (7,679) (7,390) (4,871) (33,355) (3,149)

Cash paid to other suppliers of goods or services (150,200) (20,287) (12,404) (12.057) (194,948) (12,465)

Other receipts (payments) 1,255 1,171 2,071 (4,283) 214 (280)

Canal abandonment (1.147) (1,147)

Net cash provided (used) by operating activities 82.954 81760 4.806 (2.447) 94,073 1.874 Cash flows from noncapital financing activities:

Transfers in 363 150 172 8,458 7,141 Transfers out (18,572) (3,487) (22,059)

Operating grants 1,966 1,965 Advances from interfund receivables 8,749 8,749 Payments on interfund receivables 24 1,000 1,024 560 Advances to other funds (2.997) (839) (3,836)

Net cash provided (used) by noncapital financing activities (18,209) (3,313) (2,825) 17,331 (7.016) 560 Cash flows from capital and related financing activities:

Purchase of capital assets (95,562) (17,242) (12,691) (13,690) (139,185) (930)

Purchase of nuclearfuel (984) - (984)

Proceeds from the sale of capital assets 274 999 1,014 5 2,292 76 Principal paid on long-term obligations (14,555) (4,069) (3,619) (4) (22,247)

Interest paid on long-term obligations (11,259) (2,548) (1,817) (65) (15,689)

Capital Improvement fees 3,494 3,494 Capital contributions 12,864 9,721 44 22,629 Net cash used for capital and related financing activities (109,222) (13,139) (13,619) (13,710) (149,690) (854)

Cash flows from Investing activities:

Purchase of Investments (2,803) (3) (2,808)

Income from investments 4,939 543 1,480 274 7,216 653 Net cash provided by investing activities 2,136 540 1.460 274 4,410 653 Net Increase (decrease) in cash and cash equivalents (42,341) (7,152) (10,178) 1,448 (58,223) 2233 Cash and cash equivalents, beginning (including $110,029 for Electric,

$10,100 for Water, $3,809 for Sewer and $3,333 for other enterprise funds In restricted accounts) 180,636 27,402 72,888 8,971 289,877 17,903 Cash and cash equivalents, ending (including $50,003 for Electric,

$4,339 for Water, $3,896 for Sewer and $3,217 for other enterprise funds in restricted accounts) $ 138,295 $ 20,250 $ 62,690 $ 10,419 $ 231,654 $ 20,136

= ý X s continued 29

City of Riverside Proprietary Funds Statement of Cash Flows For the fiscal year ended June 30, 2005 (amounts expressed In thousands)

Business-type Activities - Enterprise Funds Governmental Other Total Activities.

Enterprise Enterprise Internal Electric Water Sewer Funds Funds Service Funds Reconciliation of operating income (loss) to net cash provided (used) by operating activities:

Operating Income (loss) 63,810 $ 1,105 $ (2,412) $ 1,421 $ 63.924 $ 2,781 Other receipts (payments) 1,255 1,171 1,809 1,998 6,233 (280)

Canal abandonment (1,147) (1,147)

Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization 15,116 6,314 4,7115 1,275 27,420 767 Amortization of nuclear fuel 4,331 4,331 (Increase) decrease in utility billed receivables (651) 105 i3 23 (470)

Decrease (increase) in utility unbilled receivables (855) (283) 5 (24) (1,157)

(Increase) decrease in accounts receivable 267 440 73W8 29 1,474 (6)

(Increase) decrease In Intergovernmental receivables (1,832) 1,467 (23 30) (1.661) (2,256) 391 Decrease in notes receivable 3337 337 (increase) decrease in prepaid items (2,044) 11 (1) (2,034)

Decrease in nuclear materials inventory (82) (82)

(Increase) in inventory (1,849) 688 (992) 72 (656) (888) (283)

Increase (decrease) in accounts payable (Decrease) In accrued payroll (142) (136) (22 21) (56) (555) (15)

Increase (decrease) in retainage payable 1,088 (77) 4 1,015 Decrease in intergovernmental receivables 27 27 (683) (178) 75) (18) (954) (34)

(Decrease) in unearned revenue (7j Increase (decrease) in deposits (212) 971 759 Increase (decrease) in due to other funds (4,378) (4,378) 137 Increase In claims and judgments 265 Increase in decommissioning liabilitity 2,873 2,873 Decrease in landfill capping (399) (399)

Net cash provided (used) by operating activities 82,954 $ 8,760 $ 4,8056 $ (2,447) $ 94,073 $ ,1,874 Noncash financing and Investing activities:

Capital contributions $ 3,852 $ 2.105 $ 21 $ 216 $ 6,194 $ 26

$ 13,690 $ 5.890 $ 3,768 $ 2,532 $ 25,880 $ 1,672 Advance from other funds - pension obligation bonds

$ $ (1.867) $ $ $ (1,867) $

Canal abandonment The notes to the financial statements are an integral part of this statement 30

City of Riverside Statement of Fiduciary Net Assets Fiduciary Fund June 30, 2006 (amounts expressed In thousands)

Agency Funds Assets:

Cash and investments $ 2,991 Cash and investments at fiscal agent 13,996 Interest receivable 48 Property tax receivables 166 Total assets $ 17,201 Liabilities:

Accounts payable $ 1 Due to other funds 6 Held for bond holders 17,194 Total liabilities $ 17,201 The notes to the financial statements are an integral part of this statement 31

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

1. Summary of Significant Accounting Policies generate a financial statement) may be obtained from the City's Finance Department, 3900 Main Street, Riverside, California, 92522.

The City of Riverside (City) was incorporated on October 11, 1883 as a Charter City and operates under a Council-Manager form of Government. B. Government-wide and Fund Financial Statements The more significant accounting policies reflected in the financial statements are summarized as follows: The govemment-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary A. Reporting Entity activities of the City and its component units. Interfund activity has been removed from these statements except for utility charges, as this would These financial statements present the City and its component units, entities distort the presentation of function costs and program revenues.

for which the City is financially accountable. Blended component units are Governmental activities, which normally are supported by taxes and legally separate entities, but in substance are part of the City's operations intergovemmental revenues, are reported separately from business type and their data is combined with that of the City's. The City has no component activities, which rely to a significant extent on fees and charges for support.

units that meet the criteria for discrete presentation. All of the City's component units have a June 30 year end. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues.

Blended Component Units Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or Riverside Redevelopment Agency (Redevelopment Agency) was established applicants who purchase, use, or directly benefit from goods, services, or in 1971 by the City. The Redevelopment Agency's primary purpose is to privileges provided by a given function or segment and 2) grants and eliminate blighted areas in the City by encouraging commercial development. contributions that are restricted to meeting the operational or capital City Council members serve as the Redevelopment Agency's directors and requirements of a particular function or segment. Taxes and other items not have full accountability for fiscal matters. properly included among program revenues are reported instead as general revenues. Indirect expenses are allocated to the various functions based on Riverside Public Financing Authority (Public Financing Authority) was a proportionate utilization of the services rendered. Such allocations consist organized in December 1987 by the City and the Redevelopment Agency. of charges for accounting, human resources, information technology and The purpose of the Public Financing Authority is to provide financing for other similar support services.

public capital improvements to the City or the Redevelopment Agency. City Council members serve as the Public Financing Authority's directors and Separate financial statements are provided for governmental funds, have full accountability for fiscal matters. proprietary funds, and fiduciary funds, even though the latter are excluded from the govemment-wide financial statements. Major individual Riverside Municipal Improvements Corporation (Municipal Improvements governmental funds and major individual enterprise funds are reported as Corporation) was created in 1978 and operates under provisions of the separate columns in the fund financial statements.

Nonprofit Public Benefit Corporation Law of the State of California. The Municipal Improvements Corporation's primary purpose is to provide C. Measurement Focus, Basis of Accounting, and Financial financing assistance by obtaining land, property and equipment on behalf of Statement Presentation the City. Three members of the City Council serve as the Municipal Improvements Corporation's directors and have full accountability for fiscal The govemment-wide financial statements are reported using the economic matters. resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are Complete financial statements for each of the individual component units recorded when earned and expenses are recorded when a liability is except the Riverside Municipal Improvement Corporation (which does not incurred, regardless of the timing of related cash flows. Property taxes are 32

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands) recognized as revenues in the year for which they are levied on the property. The General fund is the governments primary operating fund. It accounts Grants and similar items are recognized as revenue as soon as all eligibility for all financial resources of the general government, except those requirements have been met. An allowance for doubtful accounts is required to be accounted for in another fund.

maintained for the utility and other miscellaneous receivables. Agency funds report only assets and liabilities, therefore have no measurement focus. The Redevelopment Agency's debt service fund accounts for the resources accumulated and payments made for principal and interest on Governmental fund financial statements are reported using the current long-term obligation debt of the Redevelopment Agency.

financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable The government reports the following major proprietary funds:

and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities The Electric fund accounts for the activities of the City's electric of the current period. For this purpose, the government considers revenues distribution operations.

to be available if they are collected within 60 days of the end of the current fiscal period, except for sales tax revenue which is seven (7) months, as The Water fund accounts for the activities of the City's water distribution described below. Expenditures generally are recorded when a liability is operations.

incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and The Sewer fund accounts for the activities of the City's sewer systems.

judgments, are recorded only when payment is due.

Additionally, the government reports the following fund types:

Effective with the current fiscal year, the State temporarily began to exchange 25% of sales taxes for an equal amount of property taxes to Internal service funds account for the central stores, central garage, and securitize a short-term State bond issue. The State bond issue will remain the three self-insured risks of workers compensation, unemployment and outstanding for an uncertain number of years, but is currently estimated not public liability on a cost reimbursement basis.

to exceed eight (8) years. These in-lieu sales taxes will be paid to the City by the State on a different calendar than sales taxes, which are paid monthly, The agency fund is used to account for special assessments that service three months in arrears. The vast majority of the in-lieu amount will be paid no-commitment debt during the applicable fiscal year; however, the final payment of the in-lieu sales taxes will not be paid until the January following the end of the The permanent fund is a fiduciary fund that is used to report resources applicable fiscal year. The City has budgeted this final payment in the that are legally restricted to the extent that only earnings, and not current fiscal year and will continue this practice during this temporary period, principal, may be used for purposes that support the City's Library effectively extending the availability period to seven (7) months for the in-lieu programs.

sales taxes and thus provide consistency in the reporting of sales tax revenue. Pronouncements regarding accounting and financial reporting issued by the Financial Accounting Standards Board prior to December 1, 1989 generally Property taxes, special assessments, sales taxes, franchise taxes, licenses, are followed in both the government-wide and proprietary fund financial charges for services, amounts due from other governments and interest statements to the extent that those standards do not conflict with or associated with the current fiscal period are all considered to be susceptible contradict guidance of the Governmental Accounting Standards Board.

to accrual. Other revenue items such as fines and permits are considered to Governments also have the option of following subsequent private-sector be measurable and available only when the govemment receives cash, and guidance for their business-type activities and enterprise funds, subject to are therefore not susceptible to accrual. this same limitation. The City has elected not to follow subsequent private-The government reports the following major governmental funds: sector guidance.

33

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Significant interfund activity has been eliminated from the government-wide E. Restricted Cash and Investments financial statements with the exception of charges between the City's electric, water, sewer and refuse functions and various other functions of the Certain proceeds of Enterprise fund revenue bonds, as well as certain City. Elimination of these charges would distort the direct costs and program resources set aside for their repayment, are classified as restricted assets on revenues reported for the various functions concerned. the statement of net assets because their use is limited by applicable bond covenants. Additionally, unspent proceeds received from the City's landfill Amounts reported as program revenues include 1) charges to customers for capping surcharge are also recorded as restricted assets.

goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. F. Land and Improvements Held for Resale Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Land and improvements held for resale are generally acquired under Developer Disposition Agreements in the normal course of Redevelopment Proprietary funds distinguish operating revenues and expenses from non- Agency activity. The Developer Disposition Agreements provide for transfer operating items. Operating revenues and expenses generally result from of property to developers after certain redevelopment obligations have been providing services and producing and delivering goods in connection with a fulfilled. This property is carried at cost until an event occurs to indicate a proprietary fund's principal ongoing operations. The sewer fund also lower net realizable value.

recognizes as operating revenue the portion of connection fees intended to recover the cost of connecting new customers to the system. Operating G. Inventory expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital Supplies are valued at cost using the average-cost method. Costs are assets. All revenues and expenses not meeting this definition are reported charged to user departments when consumed rather than when purchased.

as non-operating revenues and expenses.

H. Prepaid Items D. Cash and Investments Payments to vendors for services benefiting future periods are recorded as The City values its cash and investments in accordance with the provisions prepaid items and expenditures are recognized when items are consumed.

of Government Accounting Standards Board (GASB) Statement No. 31, "Accounting and Financial Reporting for Certain Investments and External I. Capital Assets and Nuclear Fuel Investment Pools (GASB 31)," which requires governmental entities, including governmental external investment pools, to report certain Capital Assets investments at fair value in the statement of net assets/balance sheet and recognize the corresponding change in the fair value of investments in the Capital assets, which include property, plant, equipment, and infrastructure year in which the change occurred. Fair value is determined using published assets ( e.g., roads, bridges, sidewalks, right of way, and similar items), are market prices. reported in the applicable governmental or business-type activities columns In the government-wide financial statements. The government defines capital Cash accounts of all funds are pooled for investment purposes to enhance assets as assets with an initial, individual cost of more than five thousand safety and liquidity while maximizing interest earnings. Investments are dollars and an estimated useful life in excess of one year. Such assets are stated at fair value. All highly liquid investments (including restricted assets) recorded at historical cost or estimated historical cost if purchased or with a maturity of 90 days or less when purchased are considered cash constructed. Costs include: labor, materials; interest during construction; equivalents. Cash and investments held on behalf of proprietary funds by allocated indirect charges such as engineering, construction and the City Treasurer are considered highly liquid and are classified as cash transportation equipment, retirement plan contributions and other fringe equivalents for the purpose of presentation in the Statement of Cash Flows.

34

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed In thousands) benefits. Donated capital assets are recorded at estimated fair market value activities, or proprietary fund type statement of net assets. Bond premiums at the date of donation. and discounts, as well as issuance costs, are classified as deferred charges and amortized over the life of the bonds using the effective interest method.

The costs of normal maintenance and repairs that do not add to the value of Bonds payable are reported net of the applicable bond premium or discount.

the asset or materially extend asset lives are not capitalized. Capital assets other than land are depreciated using the straight-line method. In the fund financial statements, government fund types recognize bond issuance costs as expenditures during the current period. The face amount Nuclear Fuel of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on The Electric Utility amortizes the cost of nuclear fuel to expense using the "as debt issuance are reported as other financing uses.

burned" method. In accordance with the Nuclear Waste Disposal Act of 1982, the Electric Utility is charged one dollar per megawatt-hour of energy Decommissioninq generated by the City's share of San Onofre Nuclear Generating Station's Units 2 and 3 to provide for estimated future storage and disposal of spent Federal regulations require the Electric Utility to provide for the future fuel. The Electric Utility pays this fee to its operating agent, Southern decommissioning of its ownership share of the nuclear units at San Onofre.

California Edison Company, on a quarterly basis. The Electric Utility established a trust account to accumulate resources for the decommissioning of the nuclear power plant and restoration of the J. Compensated Absences beachfront at San Onofre. Each year the Electric Utility recognizes an expense in the amount of the contribution to the trust account. The funding City employees receive 10 to 25 vacation days a year based upon length of will occur over the useful life of the generating plant.

service. A maximum of two years' vacation accrual may be accumulated and unused vacation is paid in cash upon separation. Amounts held in the trust account are classified as restricted assets in the accompanying balance sheet. To date, the Electric Utility has set aside City employees generally receive one day of sick leave for each month of $44,030 in cash and investments with the trustee as Riverside's estimated employment with unlimited accumulation. Upon retirement or death, certain share of the decommissioning cost of San Onofre. Based on a cost estimate employees or their estates receive a percentage of unused sick leave paid in completed by Southern California Edison and approved by the California a lump sum based on longevity. The General, Library, Redevelopment Public Utilities Commission, the Electric Utility plans to set aside Agency Capital Projects and the Housing and Community Development approximately $1,600 per year to fund this obligation. Decommissioning is Special Revenue funds have been used to liquidate such balances. expected to commence around the year 2014.

The liability associated with these benefits is reported in the government- L. Claims and Judgments Payable wide statements. Vacation and sick leave of proprietary funds is recorded as an expense and as a liability of those funds as the benefits accrue to Claims and judgments payable are recognized when it is probable that a employees. liability has been incurred and the amount of loss can be reasonably estimated. Such claims, including an estimate for claims incurred but not K. Long-Term Obligations reported at year end, are recorded as liabilities in the appropriate internal service fund.

Long-Term Debt M. Fund Equity In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are In the fund financial statements, reserves represent those portions of fund reported as liabilities in the applicable governmental activities, business-type equity not available for appropriation or legally segregated for a specific 35

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousandsl future use. Designated fund balances represent amounts identified by criteria for recognition in the current period. Unearned revenues also arise management or the governing board for the future use of financial resources. when the government receives resources before it has a legal claim to them, as when grant monies are received prior to meeting all eligibility N. Net Assets requirements. In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, revenue Net assets represent the difference between assets and liabilities. Net is recognized. The majority of the City's governmental fund unearned assets invested in capital assets, net of related debt, consists of capital revenue for June 30, 2005 relates to unearned revenue on a capital lease.

assets, net of accumulated depreciation, reduced by the outstanding See Note 4.

balances of any borrowings used for the acquisition, construction or improvement of those assets. Net assets invested in capital assets, net of Q. Property Tax Calendar related debt excludes unspent debt proceeds. Net assets are reported as restricted when there are limitations imposed on their use either through Under California law, general property taxes are assessed for up to 1% of the legislation adopted by the City or through external restrictions imposed by property's assessed value. General property taxes are collected by the creditors, grantors or laws or regulations of other governments. Restricted counties along with other special district taxes and assessments and voter resources are used first to fund appropriations. approved debt. General property tax revenues are collected and pooled by the county throughout the fiscal year and then allocated and paid to the

0. Interfund Transactions county, cities and school districts based on complex formulas prescribed by State statutes.

Interfund transactions are accounted for as revenues and expenditures or expenses. Transactions, which constitute reimbursements, are eliminated in Property taxes are calculated on assessed values as of January 1 for the the reimbursed fund and accounted for as expenditures or expenses in the ensuing fiscal year. On July 1 of the fiscal year the levy is placed and a lien fund to which the transaction is applicable. is attached to the property. Property taxes are due in two installments. The first installment is due November 1 and is delinquent on December 10. The During the year, transactions occur between individual funds for goods second installment is due February 1 and is delinquent on April 10. Property provided or services rendered. Related receivables and payables are taxes receivable represent current and prior years' uncollected tax levies, classified as "due from/to other funds" on the accompanying fund level adjusted for uncollectable amounts.

statements. The noncurrent portion of long-term interfund loans receivable are reported as interfund receivables/payables and, for governmental fund R. Use of Estimates types, are equally offset by a fund balance reserve to indicate that the receivable does not constitute available expendable financial resources. The preparation of financial statements in conformity with accounting Interfund payables also include accrued interest, which has been offset by principles generally accepted in the United States of America requires deferred revenue. management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and Any residual balances outstanding between the governmental activities and liabilities at the date of the financial statements, and the reported amounts of business-type activities are reported in the government-wide financial revenue and expenditures. Specifically, the City has made certain estimates statements as "internal balances". and assumptions relating to the collectability of its receivables, the valuation of property held for resale, the useful lives of capital assets and the ultimate P. Unearned Revenues outcome of claims and judgments. Actual results may differ from those estimates and assumptions.

Governmental and proprietary funds report unearned revenue on the statement of net assets. Unearned revenues arise in governmental funds when potential revenue does not meet both the "measurable" and "available" 36

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

S. Implementation of new accounting principles following fiscal year. These estimates are compiled into a proposed operating budget that includes a summary of proposed expenditures and The City adopted Governmental Accounting Standards Board (GASB) financial resources and historical data for the preceding fiscal year. The Statement No. 46, Net Assets Restricted by Legislation- an amendment of operating budget is presented by the City Manager to the City Council for GASB Statement No. 34. GASB 34 requires that limitations on the use of net review. Public hearings are conducted to obtain citizen comments. The City assets imposed by enabling legislation be reported as restricted net assets. Council generally adopts the budget during one of its June meetings.

GASB 46 clarifies that a legally enforceable enabling legislation restriction is The City Manager is legally authorized to transfer budgeted amounts one that a party external to a government - such as citizens, public interest between divisions and accounts within the same department. Transfer of groups, or the judiciary - can compel a government to honor. Statement 46 appropriations between departments or funds and increased appropriations further requires that legal enforceability of an enabling legislation restriction must be authorized by the City Council. Expenditures may not legally exceed be reevaluated ifany of the resources raised by the enabling legislation are budgeted appropriations at the departmental level within a fund.

used for a purposes not specified by the enabling legislation or ifa government has other cause for reconsideration. This statement requires 3. Cash and Investments governments to disclose the portion of total net assets that is restricted by enabling legislation. Accordingly, net assets restricted by legislation have Cash and investments at fiscal year end consist of the following:

been reported to conform to the provisions of GASB Statement No. 46.

Currently, the City has no such restrictions. Investments $413,194 Cash and investments at fiscal agent 225,685 GASB has issued several pronouncements prior to June 30, 2005 (for years 638,879 ending after June 30, 2005) that have effective dates that may impact future Cash on hand and in transit 6.536 financial presentations. Management has not currently determined what, if MAMIE41 any, impact implementation of the following statements may have on the financial statement of the City of Riverside. The amounts are reflected in the government-wide statement of net assets:

, GASB Statement Number 42, "Accounting and Financial Reporting Cash and investments $388,293 for Impairment of Capital Assets and Insurance Recoveries. Restricted cash and cash equivalents 61,455

" GASB Statement Number 44, *Economic Condition Reporting: The Restricted cash and investments at fiscal agent 178,680 Total per statement of net assets 628,428 Statistical Section" which amends portions of previous guidance Fiduciary fund and investments 16,987 related to the preparation of a statistical section when presented as a required part of a comprehensive annual financial report (CAFR).

2. Legal Compliance - Budgets The City follows the practice of pooling cash and investments of all funds except for funds required to be held by outside fiscal agents under the Budgets are adopted on a basis consistent with accounting principles provisions of bond indentures, which are administered by outside agencies.

generally accepted in the United States of America. Annual appropriated budgets are adopted for all departments within the general, special revenue Interest income earned on pooled cash and investments is allocated monthly and capital project funds. Formal budgets are not employed for debt service to funds based on the beginning and month-end balances. Interest income funds because debt indenture provisions specify payments. The permanent from cash and investments held at fiscal agents is credited directly to the fund is not budgeted. related account Bank deposits are covered by federal depository insurance for the first $100 or by collateral held in the pledging bank's trust department During the period December through February of each fiscal year, in the name of the City.

department heads prepare estimates of required appropriations for the 37

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts exoressed in thousands)

Authorized Investments Investments in money market funds rated in the single highest classification Under provisions of the City's investment policy, and in accordance with Municipal obligations rated Aaa/AAA or general obligations of states with California Government Code Section 53601, the City Treasurer may invest or ratings of at least A2/A or higher by both Moody's and S&P deposit in the following types of investments: Investment Agreements No maximum percentage of the related debt issue or maximum investment in Max Max %of Maturity Portfolio one issuer is specified.

Securities of the U.S. Gov't.

and its sponsored agencies 5 Years 100% Disclosures Relating to Interest Rate Risk Repurchase Agreements 1Year 100%

Reverse Repurchase Agreements 90 Days 20% Interest rate risk is the risk that changes In market interest rates will Negotiable Certificates of Deposit 5 Years 30% adversely affect the fair value of an investment Generally, the longer the Bankers Acceptances 180 Days 40% maturity of an investment, the greater the sensitivity of its fair value to Commercial Paper of *prime' quality 270 Days 25% changes in market interest rates. The City's investment policy requires that the Interest rate risk exposure be managed by purchasing a combination of Local Agency Investment Fund (State Pool) N/A 100% shorter term and longer term investments and by timing cash flows from Mutual Funds N/A 20% maturities so that a portion of the portfolio is maturing or coming close to Medium-Term Corporate Notes 5 Years 30% maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Investments in Medium Term Corporate Notes may be invested in securities rated A or better by Moody's or Standard and Poor's rating services and no Information about the sensitivity of the fair values of the City's investments more than 15% of the market value of the portfolio may be invested in one (including investments held by fiscal agent) to market interest rate corporation. fluctuations is provided by the following table that shows the distribution of the City's investments by maturity:

The City's investment policy provides two exceptions to the above; one is for investments authorized by debt agreements (described below) and the other Remaining Maturity (in Months) for funds reserved in the San Onofre Nuclear Generating Station 12 Months 13 to 24 25 to 60 More than Investment TI=e or Less Months Months 60 Months Decommissioning Account for which the five-year maturity limitation may be extended to the term of the operating license. Money Market Funds $66,831 $66.831 $ - $ -

Federal Agency Securities 250.161 9.968 173.197 66,996 Investments Authorized by Debt Agreements Corp Medium Term Notes 69,969 24.551 35,436 9.982 Municipal Securities 1,190 1,190 State Investment Pool 25,043 25,043 Provisions of debt agreements, rather than the general provisions of the Held by Fiscal Agent California Government Code or the City's investment policy, govern Money Market Funds 9,473 9,473 Investment Contracts 100,230 403 30,424 40.308 29,095 investments of debt proceeds held by bond fiscal agents. Permitted State Investment Pool 42,732 42,732 investments are specified in related trust agreements and include the Certificates of Deposit 5,528 5,328 200 following: Fed Agency Securities 67.722 21.597 26,968 19,157 Total 285ZS Securities of the U.S. Government and its sponsored agencies Bankers' Acceptances rated in the single highest classification The City assumes that callable investments will not be called.

Commercial Paper rated in the single highest classification 38

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Disclosures Relating to Credit Risk its investment or collateral securities that are in the possession of another party. The City's investment policy requires that a third party bank trust Generally, credit risk is the risk that an issuer of an investment will not fulfill department hold all securities owned by the City. All trades are settled on a its obligation to the holder of the investment. This is measured by the delivery vs. payment basis through the City's safekeeping agent. The City assignment of a rating by a nationally recognized statistical rating has no deposits with financial institutions; bank balances are swept daily into organization. Presented below is the actual rating as of year-end for each a money market account.

investment type:

Investment in State Investment Pool Rating as of Year End The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Govemment Code Section 16429 under M 6a.a A United the oversight of the Treasurer of the State of California. The fair value of the Money Market Funds $ 66,831 $ - $ - 1 $66,831 City's investment in this pool Is reported in the accompanying financial Federal Agency Securities 250,161 250,161 statements at amounts based upon the City's pro-rata share of the fair value Corp Medium Term Notes 40,460 17,984 11,545 69,969 provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost Municipal Securities 1,190 1,190 of that portfolio). The balance available for withdrawal is based on the State Investment Pool 25,043 25,043 Held by Fiscal Agent accounting records maintained by LAIF, which are recorded on an amortized Money Market Funds 9,473 9,473 cost basis.

Investment Contracts 100,230 99,362 8W8 State Investment Pool 42,732 42,732 4. Capital Lease Receivable Certificates of Deposit 5,528 5,528 Fed Agency Securities67-722 67,722 Total 21138 The Redevelopment Agency has a direct financing lease arrangement with the State of California (the State) for a twelve-story office building. The lease Concentration on Credit Risk term Is for thirty years and the State takes ownership of the facility at the conclusion of that term. The lease calls for semi-annual payments not less The investment policy of the City contains no limitations on the amount that than the debt service owed by the Redevelopment Agency on the lease can be invested in any one issuer beyond that stated above. Investments in revenue bonds issued for the purchase and renovation of the building. The any one issuer that represent 5% or more of total City investments are as future minimum lease payments to be received are as follows:

follows:

2006 $2,249 Investment Toye Reported Amount 2007 2,273 FHLB Federal Agency Securities $183,654 2008 2,298 FHLMC Federal Agency Securities 39,060 FNMA Federal Agency Securities 57,785 2009 2,324 2010 2,355 Thereafter 38,990 Custodial Credit Risk Total Due 50,489 Custodial credit risk for deposits is the risk that, in the event of the failure of a Less: amount applicable to interest (23.339) depository financial institution, a government will not be able to recover its Total capital lease receivable W2Z7 l0 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, a govemment will not be able to recover the value of 39

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

5. Capital Assets Business type activities (cont): Beginning Deletions/ Ending Balance Additions Transfers Balance The following Is a summary of changes in the capital assets during the fiscal Less accumulated depreciation for year ended June 30, 2005. Buildings (60,404) (4,569) (64,973)

Improvements other than Buildings (298,352) (20,677) 175 (318,854)

Governmental activities: Beginning Deletions/ Ending Machinery and Equipment (1L974) _2.10 (4128,25 Balance Tansfers Total accumulated depreciation 2,275 Capital assets, not being depreciated: Total capital assets being Land $116,925 $7,617 $ (67) $124,475 depreciated, net 593,819 51.826 (495) 645.150 Construction In progress 17.145 24.760 (2.634) 39.271 Total capital assets not being Business type activities 134O070 32.377 (271z1 depreciated 1163346 capital assets, net a1092M Capital assets being depreciated:

Buildings 77,813 (8,422) 69,391 Estimated useful lives used to compute depreciation are as follows:

Improvements other than Buildings 45,088 1,410 (2,902) 46,498 Buildings and Improvements 30-50 years Machinery and Equipment 54,020 3,683 54,801 Infrastructure 438.800 28.454 (5,897) 461,357 Improvements other than Buildings 20-99 years Total capital assets being Machinery and Equipment 3-15 years depreciated 615.721 632.047 Infrastructure 20-100 years Less accumulated depreciation for.

Buildings (24,987) (1,599) 128 (26.458) Depreciation expense was charged to functions of the government as Improvements follows:

other than Buildings (24,413) (1,782) - (26,195)

Machinery and Equipment (41,137) (4,227) 2,739 (42,625)

Infrastructure (1201 (041 5,897 (156.5451 Governmental activities:

Total accumulated depreciation (2248 8.764 (251.8231 General government $ 790 Total capital assets being Public safety 2,780 depreciated, net 373,173 15Q0 (8.487) 380.224 Highways and streets, including depreciation of Governmental activities general infrastructure assets 11,806 capital assets, net Culture and recreation 2,663 Business type activities: Beginning Deletions/ Ending Total depreciation expense - governmental activities Balance Addtilons Transfers Balance Capital assets, not being Business type activities:

depreciated: Electric $15,116 Land $ 32,725 $ 1,051 $ (2,514) $31,262 Construction in progress 66.904 150.679 132.865 Water 6,314 Total capital assets not being Sewer 4,715 depreciated 99.629 (87.232) Refuse 664 Capital assets being depreciated: Special Transportation 301 Buildings 195,466 10,020 205,486 Airport 242 Improvements (243) Public Parking 68 other than Buildings 748,035 63,866 811,658 Machinery and Equipment 37.450 5,160 (2,527) 40.083 Total depreciation and amortization expense -

Total capital assets being (2,7701 1,57227 business type activities depreciated 980,951 40

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed in thousands)

6. Risk Management Changes in Long-Term Obliqations: The following is a summary of changes in long-term obligations during the fiscal year.

The City is exposed to various risks of loss related to torts; theft of, damage Governmental Activities:

to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Property insurance coverage has a limit of $100,000, Due with a deductible of $50. Earthquake and flood insurance coverage has a Beginning Ending Within limit of $15,000, with a deductible of 5% for earthquake and 2% for flood. Balance Additions Reductions Balance One Year Workers' compensation insurance coverage has a limit of $25,000, with a Redevelopment deductible of $4,000 per occurrence. The City carries commercial insurance Agency bonds $131,590 $25,693 $13,259 $144,024 $ 3,695 up to $23,000 for general and auto liability claims greater than $3,000 per General Obligation occurrence. There were no claims settled in the last three fiscal years that Bonds 20,285 5 20,280 410 Pension Obligation exceed insurance coverage. Internal service funds have been established to Bonds 89,540 60,000 1,260 148,280 1,810 account for and finance the uninsured risks of loss. Certificates of Participation 58,706 1,370 57,336 1,715 All funds of the City participate in the Risk Management program and make Capital leases 8,938 133 1,640 7,431 1,764 payments to the Internal Service Funds based on actuarial estimates of the Notes Payable 11,057 412 10,645 458 amounts needed to fund prior and current year claims and incidents that Compensated have been incurred but not reported. Interfund premiums are accounted for Absences 29Q0 12.936 11,560 30o677 10.992 as quasi - external transactions and are therefore recorded as revenues of Total 19J=~762O the Internal Service funds in the fund financial statements.

Business type activities:

Changes in the funds' claims liability amounts are:

Due Workers' Unemployment Public Beginning Ending Within Comoensation Compensation Liability Balance Additions Reductions Balance One Yer Unpaid Claims, Revenue Bonds $440,970 $21,389 $419,581 $22,210 June 30, 2003 $10,353 $ 76 $7,936 $18,365 Notes Payable 11,066 607 10,459 618 Capital Leases 439 47 392 59 Incurred claims 3,442 3,762 7,204 Water Stock Acquisition Claim payments (2,678) Rights 1.039 24- A1 ,01 150 Total Unpaid Claims, June 30, 2004 $11,117 $ 76 $6,091 $17,284 Current Refunding:

Incurred claims (including IBNR's) 3,083 - 3,886 6,969 On November 30, 2004, the City of Riverside Redevelopment Agency sold Claim payments (3.053) - (3651) (6704) $24,115 of Housing Set-Aside Tax Allocation and Refunding Bonds with a true interest cost of 4.65% to provide project funds and to refund $10,200 of Unpaid claims, L .. a .i £IZIW previously outstanding Housing Set-Aside Tax Allocation Bonds. The June 30, 2005 Agency completed the current refunding to reduce aggregate debt service payments over the next 20 years by $3,276 and to obtain an economic gain

7. Long-Term Obligations (difference between present value of the old and new debt service payments) of $1,493.

41

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

In prior years the City defeased certain Revenue and Tax Allocation Bonds Principal by placing the proceeds of the new bonds in an irrevocable trust to provide Outstandinq for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Water City's financial statements. At fiscal year end $2,385 of bonds outstanding are considered defeased. $69,840 1991 Water Revenue Bonds; $25,050 serial bonds, 4.25% to 9.0%, due in annual installments from Long-Term Obligations at June 30, 2005: $675 to $3,100 through October 1, 2002; $25,900 Principal Capital Appreciation Bonds, due in annual Installments Revenue Bonds: Outstanding from $3,235 to $3,240 from October 1, 2003 to October 1, 2010; (partially advance refunded in 1998) $19,425 Electric

$4,710 1994 Water Revenue Bonds (FARECAL Pool);

$98,730 1998 Electric Revenue Bonds (partial $2,420 serial bonds, 4.75% to 5.90%, due in annual refunding issue); $63,165 serial bonds, 4.25% to Installments from $135 to $255 through June 1, 2010; 5.38%, due in annual installments from $4,650 to $2,290 term bonds, 6.0%, due June 1, 2017 3,425

$7,085 through October 1, 2013; $35,565 term bonds, 5%, due October 1, 2022 $ 89,085 $30,965 1998 Water Revenue Bonds (partial refunding issue); $15,055 serial bonds, 4.0% to 5.38%, due in

$47,215 2001 Electric Revenue Bonds; 2.9% to 5.25%, annual installments from $205 to $4,055 through due in annual installments from $2,855 to $4,750 October 1, 2013; $15,910 term bonds, 5%, due through October 1, 2016. 44,360 October 1, 2027 29,230

$75,405 2003 Electric Revenue Bonds; 2.0% to 5.0%, $20,000 2001 Water Revenue Bonds; 2.6% to 5.0%,

due in annual installments from $1,035 to $8,535 due in annual installments from $345 to $1,230 through October 1, 2013. 67,665 through October 1, 2031 18,935 Subtotal 71,015

$27,500 2004 Electric Revenue Bonds; Series A fixed Less: Unamortized bond discount (4.121) rate bonds, 4.0% to 5.25%, due in annual installments $66,894 from $2,615 to $3,695 through October 1, 2014. 27,500 Sewer

$82,500 2004 Electric Revenue Bonds; Series B $49,145 1993 Sewer Revenue Refunding Serial Bonds; Auction Rate Securities, variable rate subject to weekly 4.0% to 7.0%, due in annual installments from $335 to repricing (rate at June 30, 2005 was 2.0%), due in $4,745 through August 1, 2012 $ 31,270 annual installments from $1,250 to $7,000 through Add: Unamortized bond premium 258 October 1, 2029. 31,528 Subtotal 311,110 Total Revenue Bonds Add: Unamortized bond premium 10,049 Remaining revenue bond debt service payments will be made from revenues

$321,159 of the Electric, Water, and Sewer Utility Enterprise funds. Annual debt service requirements to maturity are as follows:

42

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed in thousands)

Electric Utility Fund Water Utility Fund Principal Fiscal Year 2006 Prini Interest Total Princal Interest Total Outstanding

$ 15,015 $ 13,353 $ 28,368 $4,075 $ 2,565 $ 6,640 2007 18,215 12.728 30.943 4,115 2.530 6,645 $6,055 1999 University Corridor/Sycamore Canyon 2008 18,935 11,983 30,918 4.155 2,492 6,647 Merged Project Area, Subordinate Tax Allocation 2009 19,795 11,133 30,928 4,190 2,451 6.641 Bonds, Series B; $1,900 serial bonds, 4.5% to 5.5%

2010 20,725 10,197 30,922 4,245 2,407 6,652 2011-2015 98,580 35,840 134,420 23,370 9,777 33,147 due in annual installments from $35 to $190 through 2016-2020 49,935 17.536 67,471 10.245 5.021 15,266 September 1, 2013; $1,135 term bonds at 5.5% due 2021-2025 37,460 8,814 46,274 6,955 3,320 10.275 September 1, 2018; and $3,020 term bonds at 5.625%

2026-2030 32,450 2.701 35,151 7,265 1,427 8.692 due September 1, 2027 5,575 2031-2035 2,400 122 2,522 Premium (Discount) 1004- 10,049 (4,111 (4,1211

$20,395 1999 Casa Blanca Project Area, Tax Total $124=g Allocation Bonds, Series A; $8,925 serial bonds, 3.4%

to 4.7% due in annual installments from $455 to $780 through August 1, 2014; $2,565 term bonds at 4.75%

Sewer Utility Fund due August 1, 2017; $4,035 term bonds at 4.75% due Fiscal Year Principal Interest 2006 $3,120 $1,780 $4,900 August 1,2021; and $4,870 term bonds at 5.0% due 2007 3,285 1,584 4,869 August 1, 2025. 17,965 2008 3,515 1,346 4,861 2009 3,760 1.092 4,852 $4,550 Arlington Redevelopment Project, 2004 Tax 2010 4,020 819 4,839 2011-2015 13,570 1,040 14,610 Allocation Bonds, Series A; $420 term bonds at 3.8%

Premium 258 258 due August 1, 2014; $615 term bonds at 4.6% due Total August 1, 2024; and $3,515 term bonds at 4.7% due August 1, 2034 4,550 Principal $2,975 Arlington Redevelopment Project, 2004 Tax Redevelopment Agency Bonds: OutstandinM Allocation Bonds; Series B: 5.5% due in annual installments from $85 to $235 through August 1, 2024 2,975

$13,285 1991 Public Financing Authority Revenue Bonds, Series A, Multiple Project Areas; $1,470 serial $26,255 State of California Department of General revenue bonds 7.15% to 7.6%, due in annual Services Project, 2003 Lease Revenue Refunding installments from $100 to $145 through February 1, Bonds, Series A; 2.0% to 5.0% due in annual 2003; and $4,175 term bonds, 8.0%, due in annual installments from $545 to $2,230 through October 1, installments from $155 to $450 through February 1, 2024 24,965 2018 (portion not refunded) $ 200

$4,810 State of California Department of General

$17,025 1999 University Corridor/Sycamore Canyon Services Project, 2003 Lease Revenue Refunding Merged Project Area, Tax Allocation Bonds, Series A; Bonds, Series B; $310 serial bonds 1.20% to 1.42%

$6,205 serial bonds, 3.4% to 4.7% due In annual through October 1, 2004; $620 term bonds at 3.090%

installments from $40 to $570 through August 1, 2014; due Oct. 1, 2008; $1,110 term bonds at 4.340% due

$4,810 term bonds at 4.75% due August 1, 2021; and Oct. 1, 2014 and $2,770 term bonds at 5.480% due

$6,010 term bonds at 5.0% due August 1, 2027 15,550 Oct. 1, 2024 4,500 43

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Principal Principal Outstanding General Obligation Bonds: Outstanding

$40,435 Merged Project Area, 2003 Tax Allocation and Refunding Bonds; $32,720 serial bonds 2.0% to 5.25% $20,000 Fire Facility Projects, Election of 2003 General due in annual Installments from $1,220 to $1,955 Obligation Bond; 3.0% to 5.5%, due in annual through August 1, 2023; and $7,715 term bonds installments from $410 to $1,740 through August 1, at 5.0% due in annual installments from $195 to $2,060 2024 $20,000 through August 2034 39,215 Add; Unamortized bond premium 280 Total General Obligation Bonds S20. 280

$24,115 2005 Housing Set-Aside Tax Allocation Bonds;

$17,025 serial bonds 3.0% to 4.625% due in annual Remaining general obligation bond debt service payments will be made from installments from $505 to $1,165 through August 1, unrestricted revenues of the General fund. Annual debt service requirements 2025; $2,425 term bonds at 5.0% due August 1, 2028; to maturity are as follows:

and $4,665 term bonds at 4.85% due August 1, 2034 24,115 Fiscal Year Interest Total

$1,465 California Statewide Communities Development 2006 $ 410 $ 886 $1,296 Authority 2005 Taxable Revenue Bonds, Series A 2007 515 873 1,388 (CRA/ERAF Loan Program); 3.87% to 5.01% due in 545 857 1,402 2008 annual Installments of $105 to $180 through August 1, 2009 590 840 1,430 2015 1,465 20010 625 819 1,444 Subtotal 141,075 2011-2015 3,920 3,674 7,594 Add: Unamortized bond premium 2,949 2016-2020 5,600 2,698 8,298 Total Redevelopment Agency Bonds 2021-2025 7,795 1,097 8,892 Premium 280 280 Remaining debt service will be paid by the Redevelopment Agency Debt Total

$g0.280 E32 02 Service Funds from future property tax revenues. Annual debt service requirements to maturity are as follows:

Principal Fiscal Year Principal Interest Total Pension Obligation Bonds: Outstandinag 2006 $ 3,695 $6,514 $10,209 2007 3,970 6,233 10,203 $89,540 California Statewide Community Development 2008 4,145 6,102 10,247 Authority (Public Safety) 2004 Taxable Pension 2009 4,305 5,961 10,266 Obligation Bond; 2.65% to 5.896%, due in annual 2010 4,485 5,807 10,292 installments from $1,125 to $10,715 through June 1, $88,280 2011-2015 25,740 26,079 51,819 2023 2016-2020 31,905 19,724 51,629 2021-2025 39,830 10,765 50,595 $30,000 2005 Taxable Pension Obligation Bonds 2026-2030 16,025 3,282 19,307 Series A4 3.85% to 4.78%, due in annual installments 2031-2035 6,975 745 7,720 $630 to $3,860 through June 1,2020 30,000 2,949 2.949 Premium Total 44

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed in thousands)

Principal Remaining certificates of participation debt service payments will be made Outstandina from unrestricted revenues of the Debt Service funds. Annual debt service

$30,000 2005 Taxable Pension Obligation Bonds requirements to maturity are as follows:

Series B (Auction Rate Securities); variable rate subject to weekly repricing (rate at June 30, 2005 was 2.0%), Fiscal Year Interest Total due in annual installments from $1,475 to $6,750 2006 $1,715 $2,658 $ 4,373 30,000 2007 1,785 2,585 4,370 through June 1, 2025.

Total Pension Obligation Bonds 2008 1,870 2,505 4,375 2009 1,950 2,419 4,369 Remaining pension obligation bond debt service payments will be made from 2010 2,045 2,319 4,364 unrestricted revenues of the General fund. Annual debt service requirements 2011-2015 6,840 10,567 17,407 to maturity are as follows: 2016-2020 8,460 8,879 17,339 2021-2025 10,190 6,554 16,744 Fiscal Year Principal Interest Total 2026-2030 10,585 4,010 14,595 2006 $ 1,810 $ 7,553 $ 9,363 2031-2035 10,540 1,086 11,626 1,356 2007 2,020 7,719 9,739 Premium 1,356 $43-582ý 7,642 10,122 Total $10.91 2008 2,480 2009 2,985 7,539 10,524 2010 3,535 7,406 10,941 2011-2015 27,665 33,825 61,490 Principal 2016-2020 50,000 24,353 74,353 Contracts - Enterprise Funds: Outstandina 57,785 7,941 65,726 2021-2025 Total Water stock acquisition rights payable on demand to various water companies, renewable through 2004 Principal Certificates of Participation: Outstandina Notes Payable - Redevelopment Agency:

$6,360 1999 Municipal Improvements Corporation Certificates of Participation; 6.0% to 7.6%, due in These notes payable have been issued to promote annual installments from $310 to $815 through April 1, development and expansion within the City's 2010 $3,550 redevelopment areas.

$53,185 2003 Riverside Public Financing Authority Pepsi Cola Bottling Company of Los Angeles, 10.5%,

Certificates of Participation; 2.0% to 5.0%, due in payable in net annual installments of $341, annual installments from $755 to $2,830 through including principal and interest through June 2020 2,988 September 1,2033 52,430 55,980 HUD Section 108 loan for University Village, Subtotal Add: Unamortized bond premium 1,5736 5.36% to 7.66%, payable in semi-annual Total Certificates of Participation installments beginning August 1, 1996 of

$272 to $425 through August 1, 2015 3,075 45

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed In thousands)

Principal Principal Outstanding Outstanding HUD Section 108 loan for Mission Village Sewer fund loan from State of California for Headworks Project. 6.15% to 6.72%, payable in project, 1.803%, payable in net annual installments of semi-annual installments beginning $477,387, beginning November 6, 1999 through August 1, 1999 of $110 to $420 November 6, 2018 through August 1, 2018 3,965 Total notes payable - Sewer Fund Note payable to California Housing Finance Agency, interest at 3%, payable in annual installments of $88 through 2013, for housing projects. 617 Remaining notes payable debt service payments will be made from Total notes payable - Redevelopment Agency unrestricted revenues of the Sewer fund. Annual debt service requirements to maturity are as follows:

Remaining notes payable debt service payments will be made from unrestricted revenues of the Redevelopment Agency. Ann ual debt service Sewer Fund requirements to maturity are as follows: Fiscal Year Principal Interest Total 2006 $ 618 $199 $ 817 Redevelopment Agency 2007 630 187 817 Fiscal Year Principal Interest Total 2008 642 175 817 2006 $ 458 $ 798 $ 1,256 2009 654 163 817 2007 488 769 1,257 2010 666 151 817 2008 523 738 1,261 2011-2015 3,524 560 4,084 2009 559 704 1,263 2016-2020 3,392 214 3,607 2010 600 667 1,267 2021-2023 333 7 339 2011-2015 3,575 2,656 6,231 Total ilgQd~a S1LSM $1231§ 2016-2020 2,386 1,464 3,850 2021-2025 777 932 1,709 Capital Leases:

2026-2030 1,279 430 1.709 Total The City leases various equipment through capital leasing arrangements in the governmental and proprietary fund types. These activities are recorded for both governmental and business-type activities In the government-wide Principal financial statements. The assets and related obligations under leases in Notes payable - Sewer Fund: Outstanding governmental funds are not recorded in the fund statements. For proprietary funds, the assets and their related liabilities are reported directly in the fund.

Sewer fund loan from State of California for Amortization applicable to proprietary assets acquired through capital lease Cogeneration project, 2.336%, payable in net annual arrangements is included with depreciation for financial statement installments of $339,474, beginning January 29, 2003 presentation. The assets acquired through capital leases are as follows:

through January 29, 2022 $4,455 46

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Governmental Business-Type Following are required debt service ratios for the year ended June 30, 2005.

Asset Activities Activities The ratio measures operating income in relation to debt service. The City is Buildings $8,660 $868 in compliance with these ratios.

Equipment 5,825 Subtotal 14,485 Minimum Debt Service Less: Accumulated Ratio Required Depreciation 1.658) Electric fund 1.10 Total Water fund 1.25 Sewer fund 1.25 The future minimum lease obligations as of June 30, 2005 were as follows:

There are also a number of limitations and restrictions contained in Years Endinq June 30, Governmental Business-type Assessment Bond indentures. The City believes they are in compliance with Activities Activities all significant limitations and restrictions.

2006 $1,955 $86 2007 1,883 73 8. Other Long-Term Obligations 2008 1,723 92 2009 1,469 75 Assessment Districts Bonds (Not obligations of the City) 2010 535 51 2011-2012 517 As of June 30, 2005, the City has several series of Assessment District Total Minimum lease payments 8,082 428 Bonds outstanding in the amount of $59,944. Bonds issued for Less: Amount representing interest improvements in certain special assessment districts, in accordance with the (rates ranging from 2.5% to 9%) (36) provisions of the Municipal Improvements Acts, are liabilities of the property Total capital lease payable (651) owners and are secured by liens against the assessed property. The City Treasurer acts as an agent for the property owners in collecting the The following are legally required debt service cash reserves. These assessments, forwarding the collections to bondholders and initiating amounts, at a minimum, are held by the City or fiscal agents at June 30, foreclosure proceedings, if applicable. Since the debt does not constitute an 2005: obligation of the City, it is not reflected as a long-term obligation of the City and is not reflected in the accompanying basic financial statements.

General Iona-term obligqations:

Redevelopment Agency $ 7,032 Conduit Debt Obligations 4,148 Certificates of Participation Total Mortgage Revenue Bonds outstanding of $15,785 and Industrial Development Revenue Bonds of $11,275 are not included in the Enterprise funds: accompanying financial statements. These bonds are special obligations of Electric $20,443 third parties and payable solely from and secured by a pledge of the receipts Water 4,907 received from the acquired mortgage loans and certain other reserve funds Sewer and related monies. The bonds are not payable from any other revenues or Total S 350 assets of the City or Redevelopment Agency. Neither the faith and credit nor the taxing power of the City, the Redevelopment Agency, the State of California or any political subdivision thereof is pledged to the payment of the principal and interest on the bonds.

47

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed in thousands)

9. Reserved Fund Balances: Advances To/From Other Funds: These balances consist of advances used to fund capital projects in advance of related financing/assessments and for Reserved fund balances at June 30, 2005 for the General Fund and the other long-term borrowing purposes.

Redevelopment Debt Service Fund consist of the following:

The following table shows amounts advanced from funds within the City to Redevelopment other funds within the City at June 30, 2005:

General Debt Service Reserved for: Fund Fund Receivable Fund Payable Fund Amount Encumbrances $8,918 $ -

Interfund receivable 33,715 General Electric $13,690 13,499 Water 5,890 Debt service Prepaid items 176 Sewer 3,768 Notes receivable 70 Nonmajor governmental Police Asset Forfeiture 523 funds 5,163 Fire bond 1.085 Nonmajor enterprise funds 3,532 Total reserved fund balance i4.A QZ Workers' compensation

• 247 Central stores

• 259

10. Interfund Assets, Liabilities and Transfers Central garage

• 1,166 Due From/To Other Funds: These balances resulted from expenditures Redevelopment debt being incurred prior to receipt of the related revenue source. service General 228 The following table shows amounts receivable/payable between funds within Electric General 3 the City at June 30, 2005:

Water General 48 Receivable Fund Payable Fund Amount Sewer General 968 General Nonmajor governmental Nonmajor governmental funds $2,001 funds 8,000 Nonmajor enterprise funds 941 Nonmajor enterprise funds 1,760 Central stores

• 3,979 Nonmajor govermental General 50 funds General 232 Electric Total Workers' compensation

• General 667 Nonmajor governmental

• Internal service funds funds Total

• Internal service funds 48

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Transfers In/Out: Transfers are used to (1) move revenues to the fund that 12. Litigation statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as The City is a defendant in various lawsuits arising in the normal course of debt service payments become due, (3) move the remaining fund balances operations. City management, based in part on the opinion of outside legal of closed funds to the General fund and (4) use unrestricted revenues counsel, does not believe that the ultimate resolution of these matters will collected in the General fund to finance various programs accounted for in have a material affect on the financial position or results of operations of the the other funds in accordance with budgetary operations. City. Management also believes that adequate reserves exist in the internal service funds to cover outstanding lawsuits.

The following table shows amounts transferred to/from funds within the City as of June 30, 2005: On January 1, 2003, the City became a Participating Transmission Owner with the California Independent System Operator (ISO), entitling the City to Transfer In Fund Transfer Out Fund Amount receive compensation for use of its transmission facilities committed to the ISO's operational control. The compensation is based upon the City's General Electric $18,572 Transmission Revenue Requirement (TRR) as approved by the Federal Water 3,487 Energy Regulatory Commission (FERC). The California Investor Owned Nonmajor governmental funds 787 Utilities (IOU's), the California Department of Water Resources (CDWR), and the CPUC, among others, objected to various aspects of the City's TRR at Redevelopment debt the FERC. The City and the objecting parties submitted a settlement Service Nonmajor governmental funds 8,575 agreement for filing. The settlement agreement disposes of all City TRR issues except for CDWR's and CPUC's contention that the City is not entitled Electric General 363 to its TRR for the majority of the transmission facilities committed to the ISO's control. After trial on this issue, the FERC Administrative Law Judge Water General 150 rendered a decision in favor of the City in March 2005. The objecting parties are appealing this decision to the full Commission. It is unknown when the Sewer General 172 Commission will render its decision. If the objecting parties prevail upon appeal, the City may have to refund to the ISO up to $26,600 collected Nonmajor governmental through June 30, 2005.

funds General 935 Redevelopment debt service 17,068 13. City Employees Retirement Plan Nonmajor governmental funds 520 (A) Plan Description. The City of Riverside contributes to the California Public Nonmajor enterprise funds General Employees Retirement System (CalPERS), an agent multiple employer public employee defined benefit pension plan. CalPERS provides retirement Total and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. CaIPERS acts as a common investment

11. Deficit Fund Balance and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by A deficit fund balance of $55 exists in the Library fund at fiscal year end. state statute and City ordinance. Copies of CalPERS annual financial report This deficit will be recovered through the normal course of business in the may be obtained from their executive office: 400 P Street, Sacramento, CA upcoming year 95814.

49

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

(B) Funding Policy. Participants are required to contribute 8% (9% for safety Schedule of funding for CalPERS (unaudited):

employees) of their annual covered salary. The City makes the contributions required of City employees on their behalf and for their account. The City is Entry Age Unfunded/

required to contribute at an actuarially determined rate; the fiscal year 2004- Normal (Overfunded) 2005 rate was 12.340% for non-safety employees, and 31.248% for safety Actuarial Actuarial UAAL as employees, of annual covered payroll. The contribution requirements of plan Actuarial Accrued Actuarial Accrued Annual a %of Valuation Liability Value of uability Funded Covered Covered members and the City are established and may be amended by CalPERS. Assets M2~ Payroll Plan Date (AALU (UAALl Paroll (C) Annual Pension Cost. For 2005, the City's annual pension cost of Misc. 6130/02 $498,057 507,610 (9,553) 101.9 72,257 (13.2)

$28,948 for CalPERS was equal to its annual required contribution of Safety 6130/02 381,311 328,395 52,916 86.1 41,038 128.9

$29,056 less the effect of amortization of the net pension asset of $108. The 57,431 89.9 75,838 75.7 Misc. 6W30/03 568,712 511,281 required contribution was determined as part of the June 30, 2002 actuarial Safety 6/30/03 413,125 329,673 83,451 79.8 44,611 187.1 valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 8.25% Investment rate of return (net of Misc. 6130/04 611,841 537,352 74,488 87.8 77.960 95.5 Safety 6/30104 454,795 440,172 14,623 96.8 48,635 30.1 administrative expenses), (b) projected salary increases of 3.75% per year compounded annually, attributable to inflation, and (c) 3.5% expected long term inflation. The actuarial value of CalPERS assets was determined using During the year, the City issued Pension Obligation Bonds (POB) in the techniques that smooth the affects of short-term volatility in the market value amount of $60,000 in order to partially fund the unfunded actuarial accrued of investments over a four-year period (smoothed market value). CalPERS liability (UUAL) for non-safety employees. The projected actuarial certified unfunded actuarial accrued liability is being amortized as a level percentage unfunded liability for non-safety employees at June 30, 2005 was $73,400.

of projected payroll on a closed basis over 20 years. Proceeds from the bonds of $59,434 were deposited with CalPERS which is recorded as a special item in the Statements of Changes in Revenues, Three-year trend information for CalPERS: Expenditures and Changes in Fund Balances for the funds affected. A total of $147,842 of net pension assets, which includes the 2004 POB sourced Net Pension deposit of $88,300, are included as a deferred charge in the Government-wide Statement of Net Assets. The deferred charge relating to the net Fiscal Year Annual Pension Percentage of Obligation (Asset) pension assets will be amortized over 19 years in accordance with the June 30. Cost (APC) APC Contributed 12,196 100% $0 method used by CalPERS for calculating actuarial gains and losses.

2003 2004 20,051 540% ($88,300)

14. Commitments and Contingencies 2005 28,948 305% ($147,842)

A. Long-Term Electric Utility Commitments Intermountain Power Aaency The City's Electric Utility has entered into a Power Purchases Contract with the Intermountain Power Agency (IPA) for delivery of electric power. The City's share of IPA power is equal to 7.6%, or approximately 137.1 megawatts, of the generation output of IPA's 1,800 megawatt coal-fueled generating station, located in Central Utah. The contract expires in 2027 and the debt fully matures in 2024.

50

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts exoressed in thousands)

The contract constitutes an obligation of the Electric Utility to make payments IPA SCPPA solely from operating revenues and requires payment of certain minimum Inter- Palo Verde Trans- Mead- Mead-mountain Nuclear mission Hoover Phoenix Adelanto charges, which are based on debt service requirements. Such payments are Fiscal Power Generating System Dam Trans- Trans-considered a cost of production and are quantified below. Year Proiect Preiect Upratina mission Total Southern California Public Power Authority 2006 $ 22.532 $ 830 $ 6,968 $ 708 $ 132 $1,388 $32,558 2007 22,361 825 7,192 704 259 2,816 34,157 2008 22,847 825 6,693 704 260 2,819 34,148 The Electric Utility is a member of the Southern California Public Power 2009 22,087 825 6,575 704 259 2,814 33,264 Authority (SCPPA), a joint powers agency. SCPPA provides for the financing 2010 23,026 688 6,329 703 259 2,818 33,823 and construction of electric generating and transmission projects for Thereafter 269.997 4,812 1005.86 2,871 30,744 414.579 Total LUZ=

participation by some or all of its members. To the extent the Electric Utility participates in projects developed by SCPPA, the Electric Utility is obligated for its proportionate share of the project cost The projects and the Electric Take-or-pay commitments expire upon final maturity of outstanding bonds for Utility's proportionate share of SCPPA's obligations are as follows: each project. Final fiscal year maturities are as follows:

Proiect Percent Share Entitlement Proiet Final Maturity Date Palo Verde Nuclear Generating Station 5.40% 11.7MW Intermountain Power Project 2024 Southern Transmission System 10.20% 195.0MW Palo Verde Nuclear Generating System 2017 Hoover Dam Uprating 31.91% 30.0MW Southern Transmission System 2023 Mead - Phoenix Transmission 4.00% 12.0MW Hoover Dam Uprating 2017 Mead - Adelanto Transmission 13.50% 118.0MW Mead-Phoenix Transmission 2020 Mead-Adelanto Transmission 2020 Terms of Take or Pay Commitments In addition to debt service, Riverside's entitlement requires the payment for As part of the take or pay commitments with IPA and SCPPA, the Electric fuel costs, operating and maintenance, administrative and general and other Utility has agreed to pay its share of current and long-term obligations. miscellaneous costs associated with the generation and transmission Payment for these obligations will be made from operating revenues received facilities discussed above. These costs do not have a similar structured during the year that payment is due. A long-term obligation has not been payment schedule as debt service and vary each year. The costs incurred recorded on the accompanying financial statements for these commitments. for 2004 and 2005 fiscal years are as follows:

Interest rates on the outstanding debt associated with the take or pay obligations range from 3.0% to 6.125%. The following schedule details the Fiscal Yea IPA EY MAP MPP Hoover Total amount of principal and interest, which is due and payable by the Electric 2005 21,362 1,906 1,714 212 43 90 25,327 Utility for each project in the fiscal year indicated.

B. Other Commitments Power Purchase Agreements:

The City has executed five firm power purchase agreements for non-renewable power. The agreements are with Deseret Generation and Transmission Cooperative (Deseret) of Murray, Utah; CDWR; and Bonneville Power Administration (BPA). The minimum annual obligations under each of these contracts are shown in the table below.

51

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Minimum Obligations 2005-2006 2011. A second agreement with BPA was executed in 1996 and is for the purchase of firm capacity (50 megawatts during the summer months and 13 Suoolier Caoaaitv Enerav Total megawatts during the winter months) and associated energy beginning April Deseret $3,463 $1,839 $5,302 30, 1996 for twenty years. Effective May 1, 1998, these summer and winter CDWR III 523 523 capacity amounts increased to 60 and 15 magawatts, respectively, for the CDWR IV 682 682 BPA 1.810 remainder of the second agreement 1.810 On July 8, 2003, and June 6, 2003, the City Council and Public Utilities The agreement with Deseret is for five megawatts of capacity and associated Board, respectively, adopted the Renewable Portfolio Standard to increase energy from January 1, 1992, through December 31, 1994, then increasing procurement of renewable resources to reach a target of 20 percent of the to 52 megawatts of capacity and associated energy through December 31, Utility's energy from renewable sources by 2015. The contracts in the 2009. A notice of termination of the power purchase agreement was following table were executed as part of compliance with this standard. The provided to Deseret effective March 31, 1998, resulting in litigation that was Electric Utility has agreements with Bonneville Power Administration for the settled on July 31, 1999. Under the terms of the settlement agreement, the purchase of energy credits that add to the total renewable portfolio. In the notice of termination was rescinded and the power purchase agreement was current year, renewable resources provided approximately 14 percent of the amended to reflect substantial price reductions after fiscal year 2002 through retail energy requirements, approximately 10 percent of the total power the term of the agreement in 2009. In exchange, the Electric Utility paid supply.

Deseret $25 million from reserves, which is reflected on the Statement of Net Assets as unamortized purchase power. On July 1, 2002, the Electric Utility Long-term renewable power purchase agreements:

began to amortize the related price reductions, and will continue to amortize Estimated Maximum Contract Annual Cost the remaining balance over the term of the agreement using the straight-line Supplier I=e Contract Exoiration for 2006 method. As of June 30, 2005, unamortized purchased power was $15,034 Milliken Genco Landfill Gas 2.3MW 12/31/2007 $825 and the Electric Utility had recorded amortization of $3,341. Mid Valley Genco Landfill Gas 2.3MW 12/31/2007 943 Riverside County There are two separate agreements with CDWR. The two agreements, (Badlands Landfill) Landfill Gas 1.2MW 12/31/2008 255 CDWR III and IV are for the purchase of 23 and 30 megawatts of capacity Wintec Wind 1.3MW 4/30/2018 162 Salton Sea Geothermal 20.0MW 5/31/2013 9.619 and associated energy from May through October. CDWR III and CDWR IV are for a period of 15 years beginning June 1, 1996, subject to termination. In Total $11-80 early 2005, CDWR and the City disagreed upon whether the Power Sale Agreements III and IV were still in effect as of December 31, 2004. While Under the terms of the renewable power purchase agreements, Riverside's CDWR believed the agreements were terminated, the City contended that financial obligation is only for actual energy delivered.

CDWR did not provide proper notification under the terms of the power sale On August 23, 2005, the City Council approved an amendment to the Power agreements. During May and June, CDWR continued to provide power Sales Agreement between Salton Sea and the City. The agreement increases the amount of renewable energy available to the City from the under the original terms of the contracts, pending staff's resolution of the dispute. On September 13, 2005, in order to maintain the City's long-term current 20 MW to 46 MW effective June 1, 2009 through May 31, 2020, at relationship with CDWR and to avoid costly litigation, City Council approved the same price under the current contract until 2013, with escalation thereafter based on an inflationary type index. Similar to other renewable the contract amendments, effectively terminating the contract in 2007 and reducing the final two years of the contracts to a period of May through power purchase agreements, the City is only obligated for purchases of September. energy delivered to the City.

An agreement with Bonneville Power Administration (BPA) is for a purchase of firm capacity and associated energy of 23 megawatts in the summer and 16 megawatts in the winter for a period of twenty years ending February 1, 52

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed in thousands)

Construction Commitments: inactive status, effective June 30, 2001. Itcan only be reactivated with authorization from the Agency Board.

As of June 30, 2005, the Electric Utility had major construction commitments of approximately $28,100 with respect to unfinished capital projects, of which On July 1, 1993, the City of Riverside joined with the cities of Anaheim,

$21,300 is for construction of an $85 million, 100 megawatt power plant Of Colton, Compton, Healdsburg, Los Angeles, Palo Alto, Pasadena, Redding, these commitments, $1,400 is expected to be funded by others, $24,600 the North Marin Water District, the Northern California Power Agency, the funded by bonds and $2,100 funded by rates. Sacramento Municipal Utility District, and Turlock Irrigation District to create the Financing Authority for Resource Efficiency of California (FARECal). The As of June 30, 2005, the Water Utility had major construction commitments City of Santa Cruz joined in 1994, Trinity Public Utility District joined in 1996, of approximately $648 with respect to unfinished capital projects, which is and the cities of Azusa and Victorville joined in 2002. The primary purpose of expected to be funded by rates. FARECal is to issue bonds and use the proceeds to promote, advance, encourage and participate in conservation, reclamation and other programs C. Jointly Governed Organizations that are designed to utilize energy or water resources more efficiently.

FARECal is administered by a Board of Directors currently represented by On November 1, 1980, the City of Riverside joined with the cities of Los the cities of Anaheim, Colton, Palo Alto, Pasadena, Azusa, Riverside and Angeles, Anaheim, Vernon, Azusa, Banning, Colton, Burbank, Glendale, Trinity Public Utility District Pasadena, and Imperial Irrigation District to create the Southern California Public Power Authority (SCPPA) by a Joint Powers Agreement under the D. Jointly-Owned Utility Project laws of the State of California. As of July 2001, the cities of Cerritos and San Marcos were admitted as members of SCPPA. In August 2003, the Authority Pursuant to the Settlement Agreement with Southern California Edison rescinded the membership of the City of San Marcos, as the City no longer (SCE) dated August 4, 1972, the City was granted the right to acquire a met the criteria for membership. The primary purpose of the Authority is to 1.79% ownership interest in San Onofre Nuclear Generating Station plan, finance, develop, acquire, construct, operate and maintain projects for (SONGS) Units 2 and 3. Pursuant to the Settlement Agreement, SCE the generation and transmission of electric energy for sale to its participants. agreed to provide the necessary transmission service to deliver the output of The Authority is governed by a Board of Directors, which consists of one SONGS to Riverside. SCE and the City entered into the SONGS representative for each of the members. During the 2005 fiscal year, the Participation Agreement which sets forth the terms and conditions under Electric Utility paid approximately $13,032 to SCPPA under various take-or- which the City, through the Electric Utility, participates in the ownership and pay contracts, which are described in greater detail in Note 14A. These output of SONGS. Other participants in this project include SCE, 75.05 payments are reflected as a component of purchased power in the financial percent; San Diego Gas and Electric Company, 20.00 percent; and the City statements. of Anaheim, 3.16 percent Maintenance and operation of SONGS remains the responsibility of SCE, as operating agent for the City.

On July 1, 1990, the City of Riverside joined with the cities of Azusa, Banning and Colton to create the Power Agency of California (Agency) by a Joint SCE, as operating agent, has declared an *operating impairment' due to Powers Agreement under the laws of the State of California. The City of deterioration of the steam generators ("SGse), which would likely result in Anaheim joined the Agency on July, 1 1996. The primary purpose of the permanent shutdown of the plant in the 2009-2010 timeframe. The estimated Agency is to take advantage of economies of scale resulting from the five cost to replace the SGs is $680 million, of which approximately $12.2 million cities acting in concert. The Agency has the ability to plan, finance, develop, would represent the City's share. The replacement is expected to enable acquire, construct, operate and maintain projects for the generation and plant operations through at least 2022, and perhaps beyond if Nuclear transmission of electric energy for sale to its participants. The Agency is Regulatory Commission approval is obtained. Although the City Council has governed by a Board of Directors (the Board), which consists of one approved participation in the replacement of the SGs, both the City of representative for each of the members. The term of the Joint Powers Anaheim and San Diego Gas and Electric Company have opted not to Agreement is fifty years. On April 5, 2001 the Board placed the Agency in an participate. As a result, upon replacement of the SGs, Riverside will retain its 53

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30, 2005 (amounts expressed in thousands) 1.79 percent share and SCE will assume the interest of those entities opting June 30, 2005 balance of $3,723 as reflected in the balance sheet of the out, for a combined 98.21 percent interest in both units 1 and 2 at SONGS. Refuse fund.

There are no separate financial statements for the jointly-owned utility plant 15. Special Item since each participants interest in the utility plant and operating expenses is included in their respective financial statements. The Electric Utility's share In 1984 the City Council adopted a report by and recommendations of the of the capitalized construction cost and operating expenses is included in the Riverside Canal Abandonment Task Force, which outlined abandoning those financial statements. As of June 30, 2005, Riverside's 1.79% share of the portions of the Riverside Canal (*canalo) that do not serve any agricultural capitalized construction costs for SONGS totaled $132,912 with accumulated water conveyance purposes. One critical component of the abandonment depreciation of $97,647. The Electric Utility made provisions during fiscal required significant construction of new storm drain facilities to carry water year 2005 for nuclear fuel bum of $991 and for future decommissioning cost that would otherwise be carded in the canal. During the current fiscal year, of $1,581 (See Note 1). The Electric Utility's portion of current and long-term the required construction by the Water Fund has been completed. The debt associated with SONGS is included in the accompanying financial remaining portions of the storm drain will be constructed in conjunction with a statements. development project planned adjacent to the canal, and upon completion, the water fund will then abandon it's portions of the canal. These new facilities As a participant in the SONGS, the Electric Utility could be subject to will be owned and operated by the Riverside County Flood Control District.

assessment of additional insurance premiums in the event of a nuclear As a result, the water fund has recorded a charge against operations in the incident at San Onofre or any other licensed reactor in the United States. current period of $3,014, comprising $1,147 in current period and $1,867 in prior period construction costs.

E. Contingencies

16. Subsequent Event To comply with certain State and local regulations, the City is funding the costs of closure and "final capping" of the Tequesquite landfill located in the On September 13, 2005, the City Council authorized the issuance of up to City. This area, comprised of approximately 120 acres, operated as a "Class $130,000 Electric ($65,000 Series A and $65,000 Series B) and $65,000 II Sanitary Landfill" until its closure in 1985. During its operation, the landfill Water, variable rate, Revenue and Refunding bonds, in the form of Auction did not accept hazardous waste and no clean up and abatement or cease Rate Securities, to finance capital improvement programs and refund certain and desist orders have been issued to the City. existing Electric and Water bonds. $60,000 of Electric and $30,000 of Water revenue bonds will be used to finance the costs of certain improvements to The estimated costs as determined by an independent consultant and the City's Electric and Water System as part of the Capital Improvement updated by the City's Engineering Department are associated with flood Program. The remaining portion will be used to refund all the outstanding control upgrades, remediation of possible ground water contamination and 1994 Farecal bond issue and a portion of the outstanding 1998 and 2001 control of methane gas. There Is the potential for these estimates to change Electric and Water bond issues.

due to inflation, deflation, technology, or change In application laws or regulations. To fund the cost, the City imposed a landfill capping surcharge The City Council also approved entering into synthetic interest rate swap on customers effective August 1, 1988. The minimum unamortized agreements on the entire not-to-exceed $130,000 Electric and $65,000 estimated cost of $4,955 is recorded as a deferred charge in the Water issuances. Under the swap agreements, the City pays the accompanying financial statements of the Refuse fund and is being counterparty a fixed rate of 3.201% on the Electric 2005 Series A, 3.204% on amortized on a straight-line basis over the remaining post closure period, the Electric 2005 Series B, and 3.2% on the Water 2005 Revenue and currently 26 years. The estimated cost of meeting the State's requirements Refunding bonds. In exchange the City receives a floating rate index equal was increased by 2.2 million during 2002 based on the engineer's annual to 62.68% of the London Interbank Offered Rate (LIBOR), plus 12 basis review of closure and post-closure maintenance costs. Additionally, points.

payments made during the year of $399 reduced that liability to its 54

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS Fiscal Year Ended June 30. 2005 (amounts expressed in thousands)

Also on September 13, 2005. the City Council authorized a similarly structured synthetic rate swap agreement for the outstanding $82,500 Electric 2004 Series B, Auction Rate Securities. Under the swap agreement, the City pays the counterparty a fixed rate of 3.111% and in exchange the City receives a floating rate index equal to 62.68% of LIBOR, plus 12 basis points.

Although pricing has been determined, the actual issuance and closing for the 2005 Revenue and Refunding bonds will occur on October 6, 2005.

Various risks associated with these derivative instruments (including credit, counterparty, basis, and tax risk) have been identified and analyzed, and are considered acceptable by management, in order to hedge against rising interest rates and better manage the Electric and Water Utility's balance sheets.

55

-I I-City of Riverside Combining Balance Shoot Nonmajor Governmental Funds June 30, 2005 (amounts expressed in thousands)

Special Revenue Housing & Redevelop- NPDES Air Quality Community ment Special Storm Assets Ubrary Gas Tax improvement Development Agency Designation Drain Total Cash and investments $ 2,568 $ 9,430 $ 439 $ 133 $ 4,243 $ 1,666 $ - $ 18,479 Cash and investments at fiscal agent - 6 12,702 12,708 Receivables (net of allowances for uncollectibles):

Interest 101 4 31 16 152 Property taxes 362 362 Accounts 2 2 Intergovernmental 12 492 2,304 315 3,123 Notes 5,662 7.240 12,902 Land & Improvements held for resale 106 106 Total assets $ 2,942 $ 10,023 $ 443 $ 8,107 $ 24.322 $ 1,682 $ 315 $ 47,834 Liabilities and Fund Balances Liabilities Accounts payable 141 $ 379 3 $ 548 $ 16 $ - S 1 $ 1,088 Retainage payable 745 8 753 Unearned revenue 308 5,798 7,154 13,260 Deposits 10 10 Due to other funds - - 1,131 - 314 1,445 Advances from other funds 2,548 - .622 3,170 Total liabilities 2,997 1,124 3 8,107 7,180 315 19,726 Fund balances (deficits):

Reserved for encumbrances 111 1,368 1 710 734 2,924 Reserved for notes receivable 87 87 Reserved for land and improvements held for resale 106 106 Unreserved. designated for future operations 1.565 3,861 134 13,984 19,544 Unreserved, undesignated (1,731) 3,670 305 (710) 2,231 1,682 5,447 Total fund balances (deficits) (55) 8,899 440 17,142 1,682 28,108 Total liabilities and fund balances $ 2,942 $ 10,023 $ 443 $ 8.107 $ 24,322 $ 1,682 $ 315 $ 47,834 continued 57

City of Riverside Combining Balance Sheet Nonnmajor Governmental Funds June 30, 2005 (amounts expressed In thousands)

Debt Service capital Projects Riverside Municipal Special Debt Improvements Capital capital storm Assets Service Corporation Total Outlay Improvement Drain Transportation Cash and investments $ 47 $ 92 $ 139 $ 44.419 $ 22.100 $ 4,336 $

Cash and investments at fiscal agent 642 642 6.434 Receivables (net of allowances for uncollactibles):

Interest I 1 438 235 45 Accounts 52 13 Intergovernmental 5,026 165 118 Prepaid Items 523 Advances to other funds 4 Land & improvements held for resale Total assets: $ 47 $ 735 $ 782 $ 49,935 $ 29,457 $ 4,398 $ 118 m210 WEMMNM Uabillties and Fund Balances Uabilites Accounts payable S . $ - $ $ 1,261 $ 126 $ $ 2 Retalnage payable 92 611 Unearned revenue 1,396 23 25 27 Due to other funds 507 49 Advances from other funds 5,000 Total liabilities 7,749 1,267 25 78 Fund balances Reserved for encumbrances 14,351 1.207 374 Reserved for Interfund receivable 4 Reserved for debt service 47 735 782 Reserved for prepaid Items 523 Unreserved, designated for future operations 27.467 13,183 3.289 Unreserved, undesignated 368 13,277 706 40 Total fund balances 47 735 782 42.186 28.190 4.373 40 Total liabilities and fund balances $ 47 $ 735 $ 782 $ 49,935 $ 29,457 $ 4.398 $ 118 I lMMNMM 58

City of Riverside Combining Balance Sheet No o Gowesnmena Funds June 30, 2005 (amounta expressed In thousand)

Capia Penmanent projects Fund Total Redevelop. Noninwor ment Goveonmentai Asset Agency TotaW special Funds Cash and invesbnents $ 22.937 $ 93.792 $ 1,200 $ 113,610 Cash end investments at fiscal agent 19.640 26.074 39.424 Receivables (net of llowances for uncolctibles):

Interest 225 943 1.096 Property Taxes 382 Accounts 106 171 173 Intergovemmental 505 5.814 8.937 Notes 4.222 4=222 17,124 Prepald items 3.829 4.352 4,352 Advances to other funds 228 232 232 Land & Improvements held for resale 6.280 8.280 6.386 Total easets: $ 57.972 $ 141,880 $ 1,200 $ 191.696 I-

~iabliitie and Fund Balances Liabilites Accounts payable $ 3.67 $ 5.058 $ $ 6.144 Retanage payable 28 731 1.484 Unearned revenue 3.891 5.382 18.622 Deposits 34 34 Due to other funds 556 2.001 Advances from other funds 6,832 11,832 15,002 Total iabilites 14.452 23.571 43.297 Fund balances Reserved for encumbrances 1,983 17.915 20.639 Reserved for interfund receivable 228 232 232 Reserved for debt service 782 Reserved for library services 1.073 1.073 Reserved for prepaid Items 3.829 4,352 4.352 Reserved for notes receivable 427 427 614 Reserved for land and Improvements held for resale 6.280 6.280 6.386 Unreserved. designated for future operations 27.745 71,684 127 91,355 Unreserved, undesignated 3.028 17.419 22868 Total fund balances 43,520 118.309 1.200 148,399 Total Ilab"*es and fund balances $ 57.972 S 141,880 1 1,200 $ 191.696 59

City of Riverside Combining Statement of Revenues, Expenditures, and Changes In Fund Balances Nonmajor Governmental Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Special Revenue Housing and Redevelop- NPDES Air Quality Community ment Special Storm Ubrary Gas Tax Improvement Development Agency Designation Drain Total Revenues Taxes $ 4,796 $ $ - $ - $ 4,248 $ $ - $ 9,044 Intergovernmental 191 5.708 331 8,984 - 15,214 Charges for services 8 8 Fines and forfeitures 210 210 Special assessments 59i5 595 Rental and investment income 15 178 8 63 297 33 594 Miscellaneous 25 24 1,998 317 127 2,491 Total revenues 5,245 5,910 339 11,045 4,862 160 59 95 28,156 Expenditures Current:

General government 1,168 167 953 860 2C10 3,348 Culture and recreation 7,820 7,820 Capital outlay 4,379 21 9,475 941 115 14.931 Total expenditures 7,820 5,547 188 10,428 1,801 31 15 26,099 Excess (deficiency) of revenues over (under) expenditures (2,575) 363 151 617 3,061 160 28 0 2,057 Other financing sources (uses)

Transfers in 735 200 935 Transfers out (2,517) (657) (3.174)

Proceeds from issuance of long-term obligations 12,700 12,700 Sale of capital assets 497 (170) 327 Total other financing sources (uses) before special item 1,232 10,213 (657) 10,788 Special item - pension contribution (2,524) (617) (3,141)

Net Change in fund balances (3.807) 363 151 13,274 (497) 280 9,704 Fund balances (deficits) - beginning 3,812 8,536 289 3,868 2.179 (280) 18,404 Fund balances (deficits) - ending $ (55) $ 8,899 $ 440 $ 17,142 $ 1.682 $ 28,108 continued 60

City of Riverside Combining Statement of Revenues, Expenditures, and Changes In Fund Balances Nonmajor Governmental Funds For the fiscal year ended June 30,2006 (amounts expressed in thousands)

Debt Service Capital Projects Riverside Municipal Special Debt improvements Capital Capital Storm Transportation Service Corporation Totals Outlay Improvement Drain Projects Revenues Taxes $ $ - $ $ $

Ucenses and permits 5,961 1.054 352 Intergovernmental 10,519 Charges for services Fines and forfeitures Special assessments 1,527 32 Rental and investment income 1 898 899 811 525 82 Miscellaneous 236 162 79 1,247 352 Total revenues 1 898 899 13.093 6,648 Expenditures Current General government 7 7 56 38 Culture and recreation Capital outlay 16,506 6,656 920 290 Debt service:

Principal 570 570 Interest 311 311 Total expenditures 888 888 16,562 6,694 920 290 Excess (deficiency) of revenues over (under) expenditures 1 10 11 (3,469) (46) 327 62 Other financing sources (use")

Transfers in 520 Transfers out (130) (520)

Proceeds from issuance of long-term obligations Sale of capital assets 382 Total other financing sources (uses) 382 390 (520)

Net Change in fund balances 1 10 11 (3,087) 344 (193) 62 Fund balances (deficits) - beginning 46 725 771 45,273 27,846 4.566 (22)

Fund balances - ending $ 4 $7 735 $ 782 $ 42.186 $ 28,190 $ 4.373 $ 40 continued 61

City of Riverside Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Permanent Capital Projects Fund Total Redevelop- Nonmajor ment Library Governmental Agency Total Special Funds Revenues Taxes $ $ 9,044 Licenses and pennits 7,015 7,015 Intergovernmental 917 11,788 27,002 Charges for services 8 Fines and forfeitures 13 13 223 Special assessments 1,559 2,154 Rental and investment income 1,240 2,658 27 4,178 Miscellaneous 1,572 2,049 116 4,656 Total revenues 3,742 25,082 143 54,280 Expenditures Current General government 3,739 3,833 7,188 Culture and recreation 162 7,982 Capital outlay 9,063 33,435 48,366 Debt servne:

Principal 570 Interest 311 Total expenditures 12802 37,268 162 64.417 Deficiency of revenues under expenditures (9,060) (12,186) (19) (10,137)

Other financing sources (uses)

Transfers in 17,068 17,588 18,523 Transfers out (6,058) (6,708) (9,882)

Proceeds from issuance of long-term obligations 1,424 1,424 14.124 Sale of capital assets 5,429 5,811 6.138 Total other financing sources before special item 17,863 18,115 28,903 Special Item - pension contribution (787) (787) (3,928)

Net Change in fund balances 8,016 5,142 (19) 14,838 Fund balances - beginning 35,504 113,167 1,219 133,561 Fund balances - ending $ 43.520 $ 118,309 S 1,200 $ 148,399 62

City of Riverside Schedule of Revenues, Expenditures and Changes In Fund Balances -Budget and Actual Nonmajor Governmental Funds For the fiscal year ended June 30, 2005 (amounts expressed In thousands)

Special Revenue Library Gas Tax Air Quality Improvement Variance Variance Variance Final to Final Final to Final Final to Final Budget Actual Budget Budget Actual Budget Budget Actual Budget Revenues Taxes 4,468 $ 4,796 $ 328 $ $ $ $ $ $

Ucenses and permits Intergovernmental 276 191 (85) 5,050 5,708 658 473 331 (142) 8 (1)

Charges for services 9 Fines and forfeitures 200 210 10 Special assessments Rental and Investment Income 14 15 1 250 178 (72) 8 8 Miscellaneous 115 25 (90) 24 24 Total revenues 5,082 5,245 163 5,300 5,910 610 473 339 (134)

Expenditures Current General government 1,179 1,168 11 289 167 122 Culture and recreation 9,606 7.820 1,786 Capital outlay - 10,785 4,379 6,406 102 21 81 Total expenditures 9,606 7,820 1,786 11,9864 5,547 6,417 391 188 203 Excess (deficiency) of revenues over (under) expenditures (4,524) (2,575) 1,949 (6,664) 363 7,027 82 151 69 Other financing sources (uses)

Transfers In 735 735 Transfers out Sale of capital assets 497 497 Total other financing sources 735 1,232 497 Special Item - pension contribution (2,524) (2,524)

Net change in fund balances (3,789) (3,867) (78) (6,664) 363 7,027 82 151 69 Fund balances, beginning 3,812 3,812 8,536 8,536 289 289 Fund balances, ending $ 23 T (55) $ (78) $ 1,872 $ 8.899 7,027 $ 371 $ 440 $ 69 continued 63

City of Riverside Schedule of Revenues, Expenditures and Change" in Fund Balances -Budget and Actual Nonmajor Governmental Funds For the fiscal year ended June 30, 2006 (amounts expressed In thousands)

Special Revenue Housing &Community Development Redevelopment Agency Special Designation Variance Variance Variance Final to Final Final to Final Final to Final Budget Actual Budget Budget Actual Budget Budget Actual Budget Revenues Taxes $ - $ $ $ 3.360 $ 4.248 $ 888 $ - $ $

Licenses and permits Intergovernmental 17,058 8,984 (8,074)

Charges for services Fines and forfeitures Rental and investment income 19 63 44 57 297 240 35 33 (2)

Miscellaneous 2,044 1,998 (46) 65 317 252 127 127 Total revenues 19,121 11,045 (8,076) 3,482 4,862 1,380 35 160 125 Expenditures Current General government 1.072 953 119 988 860 128 Capital outlay 18,078 9,475 8.603 14,998 941 14,057 Total expenditures 19,150 10,428 8,722 15,986 1,801 14,185 Excess (deficiency) of revenues over (under) expenditures (29) 617 646 (12,504) 3,061 15,565 35 160 125 Other financing sources (uses)

Transfers in 200 200 Transfers out (2,517) (2,517) (657) (657)

Proceeds from issuance of long-term obligations 12,700 12,700 Sale of capital assets (170) (170)

Total other financing sources (uses) before special item 10,383 10,213 (170) (657) (657)

Special item - pension contribution - (617) (617)

Net change In fund balances (29) - 29 (2,121) 13,274 15,395 (622) (497) 125 Fund balances, beginning 3,868 3,868 2,179 2,179 Fund balances (deficits), ending $ (29) $ $ 29 $ 1,747 $ 17,142 $ 15,395 $ 1,557 $ 1,682 $ 125 64

City of Riverside Schedule of Revenues, Expenditures and Changes in Fund Balances -Budget and Actual Nonmajor Governmental Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Special Revenue Capital Projects NPDES Storm Drain Capital Outlay Special Capital improvements Variance Variance Variance Final to Final Final to Final Final to Final Budget Actual Budget Budget Actual Budget Budget Actual Budget Revenues Licenses and permits . $ - $ $ $ $ 5.961 $ 5.961 Intergovernmental - 24,656 10,519 (14,137) 365 (365)

Special assessments 397 595 198 350 1,527 1,177 Rental and investment Income - 500 811 311 525 525 Miscellaneous 157 236 79 22 162 140 Total revenues 397 595 198 25,663 13,093 (12,570) 387 6,648 6,261 Expenditures Current General government 447 200 247 123 56 67 38 (38)

Capital outlay 93 115 (22) 66.306 16,506 49,800 21,120 6,656 14,464 Total expenditures 540 315 225 66.429 16,562 49,887 21.120 6,694 14,426 Excess (deficiency) of revenues over (under) expenditures (143) 280 423 (40,766) (3,469) 37.297 (20,733) (46) 20,687 Other financing sources (uses)

Transfers in 520 520 Transfers out - (130) (130)

Sale of capital assets * -382 382 Total other financing sources * -382 382 520 390 (130)

Net change infund balances (143) 280 423 (40,766) (3,087) 37,679 (20,213) 344 20,557 Fund balances (deficits), beginning (280) (280) 45,273 45,273 27,846 27.846 Fund balances (deficits), ending $ (423) $ $ 423 $ 4,507 $ 42,186 $ 37,679 $ 7,633 $ 28,190 $ 20.557

- -MM1MX- = MMM1==M -

65

City of Riverside Schedule of Revenues, Expenditures and Changes In Fund Balances -Budget and Actual Nonmajor Governmental Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Capital Projects Storm Drain Transportation Redevelopment Agency Variance Variance Variance Final to Final Final to Final Final to Final Budget Actual Budget Budget Actual Budget Budget Actual Budget Revenues Licenses and permits $ 150 $ 1.054 $ 904 $ $ - $ $

352 30 Intergovernmental 322 1.268 917 (351)

Fines and forfeitures 13 13 Special assessments 70 32 (38)

Rental and investment income 38 82 44 1.149 1,240 91 Miscellaneous 79 79 114 1,572 1,458 322 352 30 Total revenues 258 1,247 989 2,531 3.742 1,211 Expenditures Current General government 4,977 3,739 1,238 Culture and recreation Capital outlay 3,468 920 2,548 384 290 94 37,719 9,063 28,656 Total expenditures 3,468 920 2,548 384 290 94 42.696 12.80Z 29,894 Excess (deficiency) of revenues over (under) expenditures (3,210) 327 3,537 (62) 62 124 (40,165) (9,060) 31,105 Other financing sources (uses)

Transfers in 10,418 17,068 6,650 Transfers out (520) (520) - (6,058) (6,058)

Proceeds from Issuance of long-term obligations 1,425 1,424 (1)

Sale of capital assets 5,429 5,429 Total other financing sources (uses) before special item (520) (520) - -(62) 62.124 5,785 17,863 12,078

'Special item - pension contribution (787) (787)

(193) 3,537 (82) 62 124 Net change in fund balances (3,730) (34,380) 8,016 42,396 Fund balances (deficits), beginning 4,586 4,566 - (22) (22) e 35,504 35,504 Fund balances (deficits), ending $ 838 $ 4,373 $ 3.537 $ (84) $ 40 $ 124 $ 1,124 $ 43,520 $ 42,396 66

City of Riverside Combining Statement of Not Assets Nonmajor Enterprise Funds June 30, 2006 (amounts expressed In thousands)

Trans- Public Assets Airport Refuse portation Parklng Total Current assets:

Cash and investments $ 123 $ 4,778 $ $ 2,301 $ 7,202 Receivables (net of allowances for uncollectibles)

Interest 4 94 98 Utility billed 428 428 Utility unbilled 596 596 Accounts 43 67 161 271 Intergovernmental 1,664 466 2,130 Prepaid items 1 1 Restricted assets:

Cash and cash equivalents _ 3,217 3,217 Total current assets 1,834 9,180 467 2,462 13,943 Non-current assets:

Deferred charges 256 6,349 671 188 7,464 Capital assets:

Land 7,061 2,103 9,164 Buildings 2,114 22 2,373 4,509 Accumulated depreciation-buildings (770) (6) (1,693) (2,469)

Improvements other than buildings 6,853 325 7,178 Accumulated depreciation-Improvements other than buildings (2,692) (325) (3,017)

Machinery and equipment 276 8,325 1,653 422 10,676 Accumulated depreciation-machinery and equipment (117) (5,555) (894) (416) (6,982)

Construction in progress 4,893 8 16,666 21,567 Total non-current assets 17,874 9,119 1,454 19,643 48,090 Total assets 19,708 18,299 1,921 22,105 62,033 continued 67

City of Riverside Combining Statement of Net Assets Nonmajor Enterprise Funds June 30,2005 (amounts expressed In thousands)

Trans- Public Liabilities Airport Refuse portation Parking Total Current liabilities:

Accounts payable 717 508 12 503 1,740 Accrued payroll 56 675 142 32 905 Unearned revenue 101 117 1 219 Due to other funds 284 657 941 Capital leases-current 17 17 Total current liabilities 891 1,183 555 1,193 3,822 Noncurrent liabilities:

Capital leases 217 217 Advances from other funds 508 2.917 677 1,190 5,292 Landfill capping 3.723 3,723 Total noncurrent liabilities 725 6,640 677 1,190 9.232 Total liabilities 1,616 7,823 1,232 2,383 13,054 Net assets Invested In capital assets, net of related debt 14,221 1,261 783 4,580 20,845 Restricted for other purposes 3,217 3,217 Unrestricted 3,871 5,998 (94) 15,142 24,917 Total net assets $ 18.092 $ 10,476 $ 689 $ 19,722 $ 48,979 68

City of Riverside Combining Statement of Revenues, Expenses, and Changes In Fund Not Assets Nonmajor Enterprise Funds For the Year Ended June 30, 2005 (amounts expressed in thousands)

Trans-Airport Refuse Portatson Public Parking Totals Operating revenues:

Charges for services $ 1,088 $ 14,492 $ 200 $ 2,961 $ 18,741 Operating expenses:

Personal services 447 2,686 1.360 322 4,815 Contractual services 23 2,944 24 672 3,663 Maintenance and operation 186 4,113 329 179 4,807 General 222 1,625 1568 (496) 1,509 Materials and supplies 13 608 191 3 815 Insurance 27 147 188 74 436 Depreciation and amortization 242 664 301 68 1,275 Total operating expenses 1,160 12,787 2,551 822 17,320 Operating income (loss) (72) 1,705 (2,351) 2,139 1,421 Nonoperating revenues (expenses):

Operating grants 182 2,079 2,261 Interest Income 150 137 287 Other 1,829 169 1.998 Loss on retirement of capital assets (275) (60) (335)

Interest expenses and fiscal charges (25) (54) (6) (2) (87)

Total nonoperating revenues 1,711 265 2,013 135 4,124 Income (loss) before capital contributions and transfers 1,639 1,970 (338) 2.274 5,545 37 179 260 Capital contributions Transfers in 99 193 6.164 6,456 Change In net assets 1,775 2,342 (294) 8,438 12.261 Total net assets - beginning 16,317 8,134 983 11,284 36.718 Total net assets - ending 18.092 $ 10,476 689 $ 19,722 $ 48,979 69

City of Riverside Combining Statement of Cash Flows Nonmajor Enterprise Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Trans- Public Airport Refuse portation Parking Totals Cash flows from operating activities:

Cash received from customers and users 1,107 $ 14,533 $ 200 2,924 $ 18,764 Cash paid to employees for services (437) (2,697) (1,412) (325) (4,871)

Cash paid to other suppliers of goods or services (5O4) (10,271) (617) (665) (12.057)

Other receipts (payments) (3,063) 169 (1,389) (4,283)

Net cash provided (used) by operating activities (2,897) 1,734 (1,829) 545 (2,447)

Cash flows from noncapital financing activities:

Transfers In 99 193 - 6,164 6.456 Operating grants 182 1,783 1.965 Advances from interfund receivables 2,913 5,836 8,749 Payments on Interfund receivables 1,000 1,000 Advances to other funds (88) (751) (839)

Net cash provided (used) by noncapital financing activities 3,106 (558) 1,783 13,000 17,331 Cash flows from capital and related financing activities:

Purchase of capital assets (1,283) (866) (159) (11,382) (13,690)

Proceeds from the sale of capital assets 5 5 Principal paid on long-term obligations (4) (4)

Interest paid on long-term obligations (24) (41) (65)

Capital contributions 44 - 44 Net cash used for capital and related financing activities (1,311I) (907) (110) (11,382) (13,710)

Cash flows from investing activities:

Income from investments 136 138 274 Net cash provided by investing activities 136 138 274 Net increase (decrease) in cash and cash equivalents (1,102) 405 (156) 2,301 1,448 Cash and cash equivalents, beginning 1,225 7,590 156 8,971 Cash and cash equivalents, ending 123 $ 7,995 $

- 2,301 $ 10,419 continued 70

City of Riverside Combining Statement of Cash Flows Nonamajor Enterprise Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Trans. Public Airport Refuse portation Parking Totals Reconciliation of operating Income (loss) to net cash provided (used) by operating activities:

Operating Income (loss) (72) $ 1,705 $ (2,351) $ 2,139 $ 1.421 Other receipts 1,829 169 1,998 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization 242 664 301 68 1,275 Increase In utility billed receivable 23 23 Increase in utility unbilled receivable (24) (24)

(Increase) decrease in accounts receivable 19 47 (37) 29 Decrease in intergovernmental receivable (1,661) --

(1) (1,661)

(1)

(Increase) in prepaid items (Decrease) in accounts payable (15) (398) (10) (233) (656)

Increase (decrease) In accrued payroll 10 (11) (52) (3) (56)

Increase (decrease) in deferred revenue 24 (42) (18)

Increase (decrease) in due to other funds (3,273) - 284 (1.389) (4,378)

Decrease In landfill capping (399) - (399)

Net cash provided (used) by operating activities $ (2,897) $ 1.734 $ (1,829) $ 545 $ (2,447)

Noncash financing and Investing activities:

Capital contributions $ 37 $ 179 $ - $ S$ 216 Advance from other funds - pension obligation bonds 258 1,407 677 190 2,532 71

-I I-

-4I II4-l

City of Riverside Combining Statement of Net Assets Internal Service Funds June 30,2005 (amounts expressed In thousands)

Self Insurance Workers' Unemployment Public Central Central Assets Compensation Compensation Liability Stores Garage Totals Current assets:

Cash and Investments $ 8.683 524 $ 9,419 $ . $ 1.510 $ 20.136 Receivables (net of allowances for uncollectibles):

Interest 90 6 103 14 213 Accounts 6 6 Intergovernmental 52 2 2 56 Inventory 4.369 374 4,743 Prepaid items 7 7 Total Current assets 8,825 530 9,522 4,378 1,906 25,161 Deferred charges 245 257 1,155 1.657 Advances to other funds 2,506 2,506 Capital assets:

Buildings 1.488 1,488 Accumulated depreciation-buildings (32) (32)

Machinery and equipment 7 180 9,148 9.335 Accumulated depreclation-machinery and equipment (7) (134) (7,063) (7,204)

Capital assets (net of accumulated depreciation) 46 3,541 3,587 530 9.522 4,681 6,602 32.911 Total assets 11.576 Liabilities Current liabilities:

Accounts payable 8- 64 185 140 397 Accrued payroll 96- 94 434 624 Retainage payable 47 47 Claims and judgments 11,147 76 6,326 17,549 Deposits 19 - 19 Due to other funds - 3,979 3,979 Total current liabilities 11,270 76 6.390 4.258 621 22,615 Advances from other funds 247 - - 259 1.166 1.672 Total liabilities 11,517 76 6.390 4,517 1,787 24,287 Net Assets Invested in capital assets, net of related debt 46 3,541 3.587 59 454 3.132 118 1,274 5,037 Unresticted Total net assets $ 59 $ 454 $ 3,132 $ 164 $ 4,815 $ 8,624 73

City of Riverside Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Funds For the fiscal year ended June 30, 2005 (amounts expressed In thousands)

Self insured Workers' Unemployment Public Central Central Compensation Compensation Liability Stores Garage Totals Operating revenues:

Charges for services $ 3,205 $ 64 $ 7,140 $ 2.484 $ 4,480 $ 17,373 Operating expenses:

Personal services 446 487 2,033 2,966 Contractual services 50 6 6 62 Maintenance and operation 55 - 1 24 1,244 1,324 General 342 9 350 335 570 1,606 Materials and supplies 4 - - 10 115 129 Insurance 3,256 92 4,333 12 45 7,738 Depreciation and amortization 4 - - 14 749 767 Total operating expenses 4,157 101 4,690 882 4,762 14,592 Operating income (loss) (952) (37) 2,450 1,602 (282) 2.781 Nonoperating revenues (expenses):

Interest income 371 18 251 48 688 Other - (279) (279)

Gain (loss) on retirement of capital assets (1) -- 90 89 Interest expense and fiscal charges (2) (2) (11) (15)

Total nonoperating revenues (expenses) 368 18 251 (2) (152) 483 Income (loss) before capital contributions (584) - (19) - 2,701 - 1,600 - (434) 3,264 Capital contributions - 26 26 Change in net assets (584) (19) 2,701 1,600 (408) 3.290 Total net assets - beginning 643 473 431 (1,436) 5.223 5,334 Total not assets - ending $ 59 $ 454 $ 3,132 $ 164 $ 4,815 $ 8,624 74

City of Riverside Combining Statement of Cash Flows Internal Service Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Self Insured Workers' Unemployment Public Central Central Compensation Compensation Uability Stores Garage Total Cash flows from operating activities:

Cash received from customers and users $ 3,175 $ 64 $ 7,140 $ 2,484 $ 4,905 $ 17,768 Cash paid to employees for services (453) - - (489) (2,207) (3,149)

Cash paid to other suppliers of goods or services (3,760) (101) (4,571) (1,994) (2,039) (12,465)

Other (payments) (1) (279) (280)

Net cash provided (used) by operating activities (1,038) (37) 2,569 380 1,874 Cash flows from noncapital financing activities:

Payments on Interfund receivables 547 13 560 Net cash provided by noncapital financing activities 547 13 560 Cash flows from capital and related financing activities:

Purchase of capital assets (930) (930)

Proceeds from the sale of capital assets 1 - 75 76 Net cash provided (used) for capital and related financing activities I * - (855) (854)

Cash flows from Investing activities:

Income from investments 366 17 220 50 653 Net cash provided by Investing activities 366 17 220 50 653 Net increase (decrease) in cash and cash equivalents (124) (20) 2,802 (425) 2,233 Cash and cash equivalents, beginning 8,807 544 6,617 1,935 17.903 Cash and cash equivalents, ending $ 8,683 $ 524 $ 9,419 $ - $ 1,510 $ 20,136 continued 75

City of Riverside Combining Statement of Cash Flows Internal Service Funds For the fiscal year ended June 30, 2005 (amounts expressed in thousands)

Self Insured Workers' Unemployment Public Central Central Reconciliation of operating Income (loss) to net cash Compensation Compensation Liability Stores Garage Total provided (used) by operating activities:

Operating Income (loss) $ (952) $ (37) $ 2,450 $ 1,602 $ (282) $ 2,781 Other (payments) (1) (279) (280)

Adjustments to reconcile operating Income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization 4 14 749 767 (Increase) in accounts receivable (6) (6)

(increase) decrease In Intergovernmental receivables (30) 421 391 (increase) in Inventory (1,786) (63) (1,849) increase (decrease) In accounts payable (83) (116) 36 (120) (283)

(Decrease) in accrued payroll (7) (2) (6) (15)

(Decrease) in unearned revenue (34) (34)

Increase in due to other funds 137 137 Increase in claims and judgments 30 235 265 Net cash provided (used) by operating activities (1,038) $ (37) $ 2,569 $ $ 380 $ 1,874 Noncash financing and Investing activities:

Capital contributions $ 24$ . $ - S - $ 26 $ 26 Advance from other funds - pension obligation bond 247 259 1,166 1.672 76

City of Riv 9rscIde Frciuatary Fumd - Agency Fun di Carmb~ning Statemeant afClhanges In Assets and Lrablfllles For the Fiscal Year Ended J tne 30~, 2005 (aiouistasi epressed inathousands)

Balance Balanace July 1. June 30, 2004 Add~itins DeOductiosts 1006 Ass ets:

Cash and investmentas 5 4,952 $ 9,930 $ 11,691 $ 2. W Cash and Invesinlerbis at fiscal' agent 9,395 11.520 6,91-9 k~teuesi. ieooivable 34 297 283 Roperfy iaxes rsceiwatfe 205 168 205 Tot-alI a s els 14,586 $ 21,913 $ 19,29a $ 17,201 Liabilities:

Accounts payable S1 $ 134 $ 134 $ 1 Due to olier kundf9 0 6 0 6 Held to r bond hold eas 14,585 12,811 10,202 17,194 Total liabilities $ 14,586 $ 12,951 $ W0,336 $ 17,201 77

I .....

- I I-

city of Riverside Capital Assets Used In the Operation of Governmental Funds Schedule By Source June 30, 2005 (amounts expressed in thousands)

Governmental funds capital assets:

Land $ 124,475 Buildings and improvements 69,391 Improvements other than buildings 46,497 Machinery and equipment 54,802 Infrastructure 461,357 Construction in progress 39,271 Total governmental funds capital assets $ 795,793 Investments In governmental funds capital assets by source:

Certificates of participation $ 24,818 Gifts 32,707 Operating revenue 114,457 General obligation bonds 4,536 Revenue bonds 21,104 County contracts and grants 218 State grants 29,035 Asset forfeiture - state 264 Asset forfeiture - federal 657 Housing and community development grants 14,678 Other federal grants 14,987' Community facilities bonds 1,026 Assessment district bonds 397 Capital leases 9,616 RDA tax Increment bonds 2.279 Capital projects funds 525,014 Total governmental funds capital assets $ 795,793 79

City of Riverside Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2005 (amount expressed In thousands)

Construction In Construction in Progress/ Progress/

Buildings Improvements Machinery and Other than and Land Improvements Buildings Equipment Infrastructure Total General government 2,829 $ 18,428 $ 2,978 6,052 $ 0 $ 30,287 Public safety 1,913 27,334 2,441 29,760 0 61.448 Highways and streets 97,104 14,059 0 14,549 461,357 587,069 Recreation and culture 21,340 78,516 11,032 4,158 0 115,046 Community development 1,289 370 0 284 0 1,943 Total governmental funds capital assets $ 124,475 $ 138,707 $ 16,451 $ 64,803 $ 461,357 $ 795,793 80

City of Riverside Capital Assets Used In the Operation of Governmental Funds Schedule of Changes By Function and Activity For the fiscal year ended June 30, 2005 (amount expressed in thousands)

Governmental Governmental Funds Capital Funds Capital Assets Deductions and Assets July 1, 2004 Additions Transfers June 30,2005 General government $ 23,166 $ 8,242 $ 1,120 $ 30,288 Public safety 53,628 9,017 1,197 61,448 Highways and streets 556,499 37,537 6,968 587.068 Recreation and culture 106.140 11.482 2,576 115,046 Community development 10,358 7 8,422 1.943 Total governmental funds capital assets $ 749,791 $ 66,285 $ 20,283 $ 795,793 81

-I b-

Table 1 City of Riverside General Governmental Expenditures by Function Last Ton Fiscal Years LastTenFiscl Yars(in thousands)

Fiscal General Public Highways & C1iture & Debt Year Government Safety Streets REwcreatlon Service Total 1996 $ 65.226 $ 69,545 $ 20.608 $ 29,369 $ 15,792 $ 200,540 1997 41,894 72,329 16,726 26,142 17,024 174.115 1998 37,579 70,116 15,389 17,472 32,575 173,131 1999 40,279 72,687 21,232 18,047 18,552 170.797 2000 47,934 76,386 16,261 20,775 23,296 184,652 2001 52,388 84,134 17,300 23,277 17,480 194,579 2002 46,028 91,245 20,517 36,647 13,959 208.396 2003 45,300 96.487 23,483 31,959 12,255 209,484 2004 56,574 107,637 27,433 28,009 71.974 291,627 2005 48,394 119,036 35.562 40,836 34,329 278,157

1. The table Includes all general governmental types of expenditures from the General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds.

2. The table Includes all component units.

3. Capital outlay expenditures and lease payments have been recorded infunctions.

4. Source: City of Riverside Annual Financial Report.

83

Table 2 City of Riverside General Governmental Revenues by Source Last Ten Fiscal Years (inthousands)

Taxes Ucenses Inter- Charges Use of Fiscal and and governmental for Fines and Money and Miscellaneous Year Special Assessments Permits Revenue Services Forfeitures Property Revenue Total 1996 $ 72,570 $ 5,461 $ 38,097 $ 4,980 $ 886 $ 9,506 $ 5.505 $ 137,005 1997 72,657 6,062 39,858 4,986 964 9,289 10,418 144,234 1998 76,954 6,331 35,534 5,499 872 11,878 4,828 141,896 1999 81,677 7,854 44,055 6,922 1,702 11,856 4,503 158.569 2000 91,031 12,273 42.259 7,160 2,226 12,470 7,900 175.319 2001 93,379 13,232 48,950 7,879 2,330 22,329 6.325 194,434 2002 99,299 12.317 47.410 7,866 2,346 13,017 4.816 187,071 2003 108,610 14,394 43,829 8,878 2.095 11,255 5,042 194,103 2004 123,377 11,343 42,609 10,046 2,188 10,587 7,133 207.283 2005 148,328 14,389 42,568 11.299 2,006 10,915 9,996 239,501

1. The table includes all general governmental types of revenues from the General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds.

2. The table includes all component units.

3. Source: City of Riverside Annual Financial Repor.

84

Table 3 City of Riverside General Governmental Tax Revenues by Source Last Ten Fiscal Years (in thousands)

General Transient Special Fiscal Property Sales and Property utility Street Light Occupancy Assessments Total Year Tax Use Tax Transfer Tax Users Tax Excise Tax Franchises Tax Levied Taxes 1996 $ 22.322 $ 25.395 $ 508 $16,267 $ 221 $ 2,902 $ 1,359 $ 3,596 $ 72,570 1997 21,410 25,415 708 16,569 234 2.833 1,437 4,051 72,657 1998 21,743 28.101 694 17,392 269 3,085 1,652 4,018 76,954 1999 22,629 30.481 936 17,552 312 3,787 1,920 4,060 81,677 2000 24,444 34.571 1,087 18,479 336 3,464 2,064 6,586 91,031 2001 24.973 35,850 1,213 19,613 382 3,746 2,344 5,258 93,379 2002 27,685 39,271 1,568 18,510 36 4,070 2,739 5,420 99,299 2003 31,561 41,995 2,024 19,928 99 3,811 2,868 6,324 108,610 2004 34,250 47,608 2,424 21,362 43 4,261 3,170 6,023 119,141 2005 54,252 54,483 3,279 22,135 9 4.480 3.418 6,272 148,328

1. The table Includes all component units.

2. Source: City of Riverside Annual Financial Report.

85

Table 4 City of Riverside Property Tax Levies and Collections Last Ten Fiscal Years (Inthousands)

Ratio of Percent of Percent of Delinquent Total Tax Outstanding Delinquent Taxes Fiscal Total Tax Current Tax Current Taxes Tax Total Tax Collections to Delinquent to Total Tax Year Levy Collections Collected Collections Collections Total Tax Levy Taxes Levy 1996 $ 23,086 $ 21,787 94.4% $ 535 $ 22,322 96.7% $ 8,135 35.2%

1997 22,202 20,750 93.5% 569 21,319 96.0% 9,019 40.6%

1998 22,429 21,055 93.9% 584 21,639 96.5% 9.810 43.7%

1999 23,113 21.888 94.7% 537 22,425 97.0% 10,497 45.4%

2000 24,241 23,431 96.7% 626 24,057 99.2% 9,994 41.2%

2001 25,205 24,436 96.9% 370 24,806 98.4% 11,081 44.0%

2002 25,237 23.098 91.5% 513 23,611 93.6% 12,707 50.4%

2003 26,050 25,186 96.7% 603 25,789 99.0% 11.715 45.0%

2004 31.954 31,092 97.3% 966 32,058 100.3% 11,612 36.3%

2005 37,144 36,004 96.9% 706 36,710 98.8% 12,046 32.4%

1. The table Includes the City of Riverside Redevelopment Agency.

2. Source: Riverside County Auditor Controller's Office.

3. Total tax collections Include supplemental tax levies not Included in the total tax levy column.

86

Table 5 City of Riverside Assessed and Estimated Actual Value of Taxable Property Last Ton Fisc~al Years (in thousands)

Last Ten Fiscal Yearn (inthousands)

Total Exemptions Total Net Total Estimated Fiscal Secured Unsecured Secured and Veteran, Assessed Exemptions Assessed Actual Year Roll Roi Unsecured Church, etc. Value Homeowners Value Value 1996 $ 10,347,384 $ 557,258 $ 10,904,642 $(1,634,835) $ 9,269,807 S (243.489) $ 9,026,318 $ 9,269,807 1997 10.135,216 548,897 10,684,113 (1.574,851) 9,109,262 (242,473) 8,866.789 9,109,262 1998 10,188,885 540,358 10,729,243 (1.598,304) 9,130,939 (241,776) 8,889,163 9,130,939 1999 10,158,747 576,029 10,734,776 (1,580,501) 9,154,275 (238,588) 8.915,687 9,154,275 2000 10,557.523 632,940 11,190,463 (1,685,818) 9,524,645 (233,807) 9,290,828 9,524,645 2001 11,269,877 686,215 11,956,092 (1,784,167) 10,171,925 (233,376) 9,938,549 10,171,925 2002 12,103,179 799,323 12,902,502 (1,894,558) 11.007,944 (234,557) 10,773.387 11,007,944 2003 13,071,416 980,529 14,051,945 (2,166,760) 11,885,185 (240,201) 11,644,984 11,885,185 2004 14.188,658 845,8568 15,034,516 (2,264,397) 12,770,119 (262,106) 12,508.013 12,770,119 2005 15,540,982 951,211 16,492,193 (2,486,126) 14,006,067 (265,718) 13,740,349 14.006,067

1. Assessed valuations are based on 100 percent of estimated actual value and do not Include Riverside Redevelopment Agency.

2. Source: Riverside County Assessor's Office.

87

Table 6 City of Riverside Property Tax Rates-Direct and Overlapping Governments Last Ten Fiscal Years Fiscal Basic School County of Year Levy City Districts Riverside Other Total 1996 1.00 0.00000 0.00000 0.00000 0.02262 1.02262 1997 1.00 0.00000 0.00000 0.00000 0.02306 1.02306 1998 1.00 0.00000 0.00000 0.00000 0.02179 1.02179 1999 1.00 0.00000 0.00000 0.00000 0.00890 1.00890 2000 1.00 0.00000 0.00000 0.00000 0.00890 1.00890 2001 1.00 0.00000 0.00000 0.00000 0.00890 1.00890 2002 1.00 0.00000 0.00000 0.00000 0.00770 1.00770 2003 1.00 0.00000 0.05000 0.00000 0.00670 1.05670 2004 1.00 0,00000 0.04993 0.00000 0.00610 1.05603 2005 1.00 0.01092 0.04048 0.00000 0.02380 1.07520

1. Information above is taken from the districts that exist within the City of Riverside.

2. If taxes become delinquent, the underlying property may be deeded to the state and sold by the county tax collector for taxes due plus 11/2% per month redemption fee after the third month of being delinquent.

3. All property taxes are collected by the County of Riverside with 1/4 of 1% of the assessment going to the County for collection fee.

4. Rates are based on $100 of assessed valuation.

Source: Riverside County Auditor-Controller's Office.

88

Table 7 City of Riverside Computation of Direct and Overlapping General Obligation Debt As of June 30, 2005 (inthousands)

Total General Percentage Obligation Applicable to City of Riverside Debt City of Riverside* Share of Debt Direct Debt:

City of Riverside $ 220,710 100.00% $ 220,710 Overlapping Debt:

School Districts:

Riverside Unified 53,590 84.38% 45,221 Other Districts:

Metropolitan Water District 419,390 1.03% 4,320 472,980 49,541 Total Overlapping Debt Total Direct and Overlapping Debt $ 693,690 $ 270,251

-Determined by ratio of assessed valuation of property subject to debt service taxation in overlapping agency to valuation of property subject to taxation in the City of Riverside.

Source: Riverside County Auditor-Controllers Office and Other District Offices.

89

Table 8 City of Riverside Computation of Legal Debt Margin For City General Obligation Bonds As of June 30, 2005 (in thousands)

Total Assessed Value. June 30. 2005 $ 14,006.067 Debt limit: 15.00% of Total Assessed Value $ 2.100,910 Amount of debt applicable to debt limit:

Total bonded debt 784,915 Less amount available for repayment of general obligation bonds 0 Other deductions allowed by law:

Revenue bonds 449,245 Redevelopment Agency tax allocation bonds 111,410 Certificates of participation 3.550 Total deductions $ 564.205 Total General Obligation Debt Applicable to Debt Limit 220,710 Legal Debt Margin $ 1,880.200 Debt limit set by City Charter at 15% of total assessed value for general obligation bonds.

Source: Riverside County Assessors Office and City of Riverside Annual Financial Report.

90

Table 9 City of Riverside Ratio of Net General Obligation Bonded Debt to Assessed Value and Bonded Debt per Capita Last Ten Fiscal Years (in thousands)

Ratio of Net Less Bonded Debt Net Bonded Fiscal Assessed Gross Debt Service Net To Assessed Debt per Year Population Value Bonded Debt Fund Bonded Debt Value Capita 1996 243 $9,269,807 $. 0.00%

1997 242 9,109,262 0.00% S 1998 251 9,130,939 $ 0.00%

1999 254 9,154,275 0.00%

2000 260 9,524,645 0.00%

2001 262 10,171.925 0.00%

2002 266 11,007.944 0.00%

2003 274 11,885,185 0.00%

2004 277 12,770,119 162,725 162,725 1.27% 587.45 2005 285 14,006,067 220,710 220,710 1.58% 774.42

1. Population figures supplied by the State of California Finance Departmnent.

2. Assessed value is from Table 5.

3. Gross bonded debt consists of general obligation bonds only.

4. Debt service fund is the amount available for repayment of general obligation bonds.

91

Table 10 City of Riverside Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to Total General Governmental Expenditures Last Ten Fiscal Years (inthousands)

Total Ratio General of Debt Service Fiscal Total Debt Governmental to General Year Principal Interest Service Expenditures Expenditures 1996 $20 $75 $ 200,540 0.00%

1997 174,115 0.00%

1998 173.131 0.00%

1999 170,797 0.00%

2000 184,652 0.00%

2001 194.579 0.00%

2002 208,396 0.00%

2003 209,484 0.00%

2004 291,627 0.00%

2005 2,015 7,594 9,609 278,157 3.45%

1. Table includes all component units.

2. Source: City of Riverside Annual Financial Repor.

92

Table 11 City of Riverside Revenue Bond Coverage Last Ten Fiscal Years (in thousands)

Net Revenue Debt Service Requirements Fiscal Gross Operating Available for Year Revenues Expenses Debt Service Principal Interest Total Coverage Electric 1996 173,112 132,172 40,940 5,865 10,232 16,097 2.54 1997 183.932 137,964 45,968 6,190 9,891 16,081 2.86 1998 207,934 143,828 64,106 6,635 10,371 17,006 3.77 1999 180,171 145,402 34,769 6,555 10,701 17,256 2.01 2000 197,842 150,175 47,667 6,610 10,669 17,279 2.76 2001 271.828 227,081 44,747 6,930 10,350 17,280 2.59 2002 229.529 190,426 39,103 7,385 9,841 17,226 2.27 2003 211,553 157,450 54,103 7,840 10,966 18,806 2.88 2004 239,842 168,162 71,680 10,780 10,183 20,963 3.42 2005 271,987 169,064 102,923 14,555 12,143 26,698 3.86 Water 1996 24,942 15,149 9,793 1,900 2,712 4,612 2.12 1997 26,643 15,013 11,630 2,015 2,599 4,614 2.52 1998 26,126 14.776 11,350 2,265 2,642 4,907 2.31 1999 30.739 15,659 15,080 2,780 2,667 5,447 2.77 2000 33,327 16,397 16,930 2,755 2,591 5,346 3.17 2001 36,259 18,643 17,616 2,955 2,364 5,319 3.31 2002 43,215 19,244 23,971 3,215 2,941 6,156 3.89 2003 36,837 19,928 16,909 3,845 2,720 6,565 2.58 2004 47,093 23,767 23,326 4,010 2,622 6,632 3.52 19,043 4,045 2,591 6,636 2.87 2005 45,626 26,583 Sewer 1996 20,684 11,937 8,747 1.860 3,030 4,890 1.79 1997 21,315 11,894 9,421 1,960 2,917 4,877 1.93 1998 21,530 11,901 9,629 2,075 2,792 4,867 1.98 1999 21,322 12,117 9,205 2,200 2,662 4,862 1.89 2000 23,851 12,300 11,551 2,330 2,557 4,887 2.36 2001 25,056 12,451 12,605 2,435 2,729 5,164 2.44 2002 23,872 12,387 11,485 2,550 2,423 4,973 2.31 2003 24,297 13,433 10,884 2,665 2.165 4,830 2.25 2004 24,176 17,006 7,170 2,800 2,341 5,141 1.39 2005 25.444 19,163 6,281 2,970 2,081 5,031 1.25

1. Gross revenues include operating, interest, and other revenues. Gross revenues also Include the cash portion of impact fees.

2. Operating expenses are net of depreciation. Operating expenses are also net of nuclear fuel bum in the Electric Fund.

Beginning with 2003, operating expenses are also net of the Deseret amortization charge in the Electric Fund.

3. Debt service requirements are the principal and interest expense for the same period.

4. Source: City of Riverside Annual Financial Report.

93

Table 12 City of Riverside Special Assessment Collections Last Ten Fiscal Years (inthousands)

Percentage Fiscal Special Current Assessments of Collections Total Outstanding Year Assessments Billed Collected to Amount Due Assessments 1996 120 117 97.5% 650 1997 124 130 104.8% 540 1998 107 111 103.7% 480 1999 107 73 68.2% 285 2000 75 74 98.7% 245 2001 76 76 100.0% 195 2002 78 83 106.4% 135 2003 0 0 0.00% 0 2004 0 0 0.00% 0 2005 0 0 0.00% 0

1. Street Light Assessment District collections are not Included.

2. Source: City of Riverside Assessment Register and Annual Financial Report.

94

Table 13 City of Riverside Principal Taxpayers June 30, 2005 (inthousands) 2005 Percentage of Assessed Total Assessed Taxpayer Type of Business Valuation Valuation Tyler Mall LTD Partnership Regional Shopping Center $144,601 0.8%

Riverside Healthcare System Healthcare 101,878 0.6%

State Street Bank & Realty Investment 78,581 0.4%

Trust Co. of California BRE Prop Inc. Realty Investment 66,543 0.4%

Calif State Teachers Retirement System Realty Investment 56,482 0.3%

Pepsi Bottling Group Manufacturer 50,607 0.3%

Press Enterprise Newspaper 47,893 0.3%

Rohr/Goodrich Manufacturer 47,007 0.3%

Mission Grove Park Apartments Apartments 45,051 0.3%

Ralphs Grocery Company Grocery 41,064 0.2%

$679,707 3.8%

Source: Riverside County Assessors Office.

95

Table 14 Mlscellanous Statistical Data Page I of 2 June 30, 2005 Geographic Location - In Southern California approximately 50 miles Taxable Retail Sales:(In thousands) east of Los Angeles and 90 miles north of San Diego, contiguous to desert and mountain regions. 2005 $5,293,347 2000 3,219,894 Elevation - Varies from 800 to 1200 feet. 1990 . 2,148,399 1980 994,264 Area and Population: 1970 307,378 Year Area, Square Miles Population 1960 137,326 2005 (January) 79.65 285.537 2000 79.05 259.738 Miles of Streets - 838 1990 77.04 218,499 1980 71.95 165,087 Miles of Sewers - 755 1970 71.52 140,089 1960 43.59 83,714 Number of Street Lights - 28,581

-1950 39.20 46,399 1940 39.20 34,696 Traffic Signals - 322 1930 39.20 30,645 1920 39.20 19,341 Municipal Services and Facilities (budgeted positions shown in full time 1910 39.20 15,212 equivalents);

1900 56.00 7,793 1890 56.00 4,683 Police Budgeted positions 568.83 1883 56.00 2.000 est. Stations 7 Substations 2 2005 population per square mile = 3,585 Helicopters 4 Average Rainfall - 10.22 inches Fire Budgeted positions 221.11 Stations 13 Climate, Average Minimum and Maximum: Active apparatus 30 Spring 50-76 Degrees Reserve apparatus 5 Summer 62-92 Degrees Training Facilities 1 Fall 54-83 Degrees Winter 43-69 Degrees Library Budgeted Positions 97.06 Library branches 5 Date of Incorporation - 1883 Museum Budgeted positions 18.94 Form of Government - Council/Manager Fixed exhibits 8 Special exhibits 1 City Charter Adopted - 1952 Reference library volumes 5,224 Number of Budgeted Positions (full time equivalents): Parks and Budgeted positions 184.92 Recreation Community centers 11 General Government Departments 331.88 Playgrounds 26 Police Department 568.83 Public swimming pools 7 Fire Department 221.11 Softball and baseball diamonds 35 Public Works Department 329.84 Total parks acreage 2,534 Library Department 97.06 Park and Recreation Department 184.92 Museum 18.94 Public Utilities Department 435.60 Airport Department 6.00 2,194.18 96

Table 14 Miscellanous Statistical Data June 30, 2005 Page 2 of 2 Auditorium and Education - Riverside includes portions of Riverside Unified School Exhibit Hall Municipal auditorium seating District and Alvord Unified School District capacity 1,776 Exhibit Hall Riverside Unified School District:

Meeting and showrooms (300 to Senior High Schools 10 20,800 square feet each) 7 Enrollment 13.686 Assembly capacity 40 to 2,000 Middle School (7-8) 6 Enrollment 6,660 Municipal Utilities Budgeted positions - Electric 305.6 Elementary Schools (Klndergarten-6) 31

- Water 130.0 Enrollment 21.965 Number of Accounts - Electric 103,463

- Water 62,492 Miles of overhead distijbution Alvord Unified School District:

system 531.0 Senior High Schools 3 Miles of underground system 622.0 Enrollment 5,485 Annual consumption: Middle School (6-8) 4 Electric (kwh) 1.962,000.000 Enrollment 4.869 Water (ccf) 27.697,000 Elementary Schools (Kindergarten-5) 12 Number of fire hydrants 6.926 Enrollment 9,610 Source of supply:

Electric- Intermountain Power Project Riverside Community College District:

Palo Verde Nuclear Generating Station Riverside City College San Onofre Nuclear Generating Station Enrollment 31,081 Deseret Generation and Transmission Hoover Power Plant Southern Califomia Edison and others State of Califomra University of California, Riverside Water - City owned sources, supplemented as Enrollment 17,104 necessary by Metropolitan Water District School for the Deaf of Southern California Enrollment 470 United States Sherman Institute (Government School for Indians)

Enrollment 633 (est)

Other Schools Califomla Baptist College Enrollment 2.718 La Sierra University, Riverside Enrollment. 1,908 Private or Parochial Schools (Kindergarten-12) 50 Source: Various City Departments and School Districts.

97

Table 15 City of Riverside Demographic Statistics Last Ten Fiscal Years Fiscal Per Capita Median Unemployment Year Population Income Age Rate (1) (2) (3) (4) 1996 243,421 12,497 31.3 9.1%

1997 241.630 12,567 31.6 7.8%

1998 250.799 13,481 31.8 7.0%

1999 254,300 14,093 32.0 6.2%

2000 259,738 13,825 32.2 5.3%

2001 262,335 14,241 32.4 5.2%

2002 265,700 13,687 31.6 6.5%

2003 274,100 14,137 32.1 6.8%

2004 277,030 14,928 30.0 6.2%

2005 285,537 15,070 29.7 5.9%

Sources:

1. State Department of Finance

2. Sales & Marketing Management - 2005 Survey of Buying Power

3. ESRIBIS Business Solutions

4. State of California, Employment Development Department 98

Table 16 City of Riverside Construction, Bank Deposits. and Property Value Last Ten Fiscal Years (values in thousands)

Commercial Construction Residential Construction Bank Deposits Property Values (1) (1) (2) (3)

Fiscal Number of Number of Year Units Value Units Value Commercial Residential 1996 1,804 70.448 2,417 69.378 1,448,021 4,237,613 5,844,620 1997 1,599 56,691 2,654 83,550 2,337,691 4,239,980 5,889,169 1998 1.621 44,194 3,053 100,611 2,700,352 4,139,302 5,948,479 1999 1.710 54,805 3,074 147,977 2,488,049 4.323,469 6.160,694 2000 1,573 47,835 3,694 278,035 2,634,597 3,939.530 6,665.754 2001 1,718 82,009 3,747 273,389 2,559,80W 4,163.934 7,219,923 2002 1,899 91,027 4,099 264.995 2,702,018 4,799,848 7,960,167 2003 1,982 134.945 4,444 316.394 3,007,719 4.933,988 8,471,469 2004 2,153 262,704 4,145 189,004 3.475,359 5,195,623 9,336,641 2005 1,923 126,278 4,542 388,845 NA 5,281,154 10,667,343 Sources:

1. City Planning Department

2. Available from Federal Deposit Insurance Corporation after January 1, 2006.

3. County Land Use Statistical Recap Report 99

YEAR ENDED JUNE 30. 2005 PREPARED BY DEPARTMENT OF FINANCE WILLIAM G. SWEENEY Finance Director

02&14ý'

CITY OF ANAHBIM Comprehensive Annual Financial Report Table of Contents June 30,2005 Pulp INTRODUCTORY SECTION Letter of Transmittal 1 GFOA Certificate of Achievement for Excellence in Financial Reporting 5 CSMFO Certificate of Award for Outstanding Financial Reporting 6 Organization Chart 7 Administrative Personnel 8 FINANCIAL SECTION Independent Auditors' Report 9 Management's Discussion and Analysis (Unaudited) 11 Basic Financial Statements Government-wide Financial Statements Statement of Net Assets 21 Statement of Activities 23 Fund Financial Statements Balance Sheet - Governmental Funds 25 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 26 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 27 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement ofActivities 28 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Budgetary Basis Actual - General Fund 29 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Housing Authority 30 Statement of Fund Net Assets - Proprietary Funds 31 Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds 33 Statement of Cash Flows - Proprietary Funds 34 Statement of Fiduciary Assets and Liabilities - Agency Fund - Mello-Roos 36 Notes to the Financial Statements 37 Combining Individual Fund Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Governmental Funds by Fund Type 65 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds by Fund Type 66 Combining Balance Sheet - Nonmajor Special Revenue Funds 67 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficit) - Nonmajor Special Revenue Funds 69 Combining Balance Sheet - Nonmajor Debt Service Funds 71 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds 72 (continued)

CiTY OF ANAHEIM Comprehensive Annual Financial Report Table of Contents June 30, 2005 (continued) pape Combining Balance Sheet - Nonimajor Capital Projects Funds 73 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonniajor Capital Projects Funds 74 Internal Service Funds Combining Statement of Fund Net Assets - Internal Service Funds 75 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Internal Service Funds 76 Combining Statement of Cash Flows - Internal Service Funds 77 Other Supplementary Schedules Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficit) - Budget and Budgetary Basis Actual - Nonmajor Special Revenue Funds 79 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - All Debt Service Funds 82 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Budgetary Basis Actual - All Capital Projects Funds 83 Capital Assets Used in the Operation of Governmental Funds - Schedule by Source 85 Capital Assets Used in the Operation of Governmental Funds - Schedule by Function and Activity 86 Capital Assets Used in the Operation of Governmental Funds - Schedule of Changes by Function and Activity 87 Statement of Changes in Fiduciary Assets and Liabilities - Agency Fund - Mello-Roos 88 STATISTICAL SECTON (Unaudited)

General Governmental Expenditures by Function - Last Ten Fiscal Years 899 General Governmental Revenues by Source - Last Ten Fiscal Years 89 Assessed Values of All City Property - Last Ten Fiscal Years 90 Current Tax Levies and Tax Collections - Last Ten Fiscal Years 90 Property Tax Rates - All Direct and Overlapping Governments - Last Ten Fiscal Years 91 Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures - Last Ten Fiscal Years 91 Schedule of Direct and Overlapping Bonded Debt 92 Schedule of Debt Ratios - Last Ten Fiscal Years 93 Statement of Legal Debt Margin 93 Schedule of Revenue Bond and Certificates of Participation Coverage - Electric Utility Fund 94 Schedule of Revenue Bond Coverage - Water Utility Fund 94 Schedule of Revenue Bond and Certificates of Participation Coverage - Convention, Sports and Entertainment Venues Fund 95 Demographic Statistics 9 Construction and Bank Deposit Activity - Last Ten Fiscal Years 97 Principal Taxpayers 97 Schedule of Insurance in Force 98 Miscellaneous Statistical Information 99 City of Anaheim Map 100

City ofAnaheim, California In addition to the financial audit, the City is required to undergo an annual Single Audit in conformity with the provisions of the Single Audit Act Amendments of 1996 and the Finance Department U.S. Office of Management (OMB) and Budget Circular A-133, Audits of State, Local Governments, and Non-Profit Organizations.The information related to the Single Audit, including the schedule of expenditures of federal awards, schedule of findings and questioned costs, and auditors' reports on internal control and compliance, is not included with this report and is issued as a separate document.

This CAFR includes all funds of the City. The City provides a full range of services, December 16, 2005 including: police and fire protection, highways and streets, public improvements, planning and zoning, utilities (electric and water), sanitation and solid waste, stadium, convention center, golf courses, street and park maintenance, recreational and cultural To the Honorable Mayor and City Council programs for citizen participation, and general administrative services. In addition to City of Anaheim general governmental activities, the City Council is financially accountable for the Anaheim, California Anaheim Housing Authority, Anaheim Redevelopment Agency, Community Center Authority, Anaheim Public Improvement Corporation, and Anaheim Public Financing Authority; therefore, these activities are included in the reporting entity.

In accordance with the Charter of the City of Anaheim (City), we are submitting the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, ECONOMIC CONDION AND OUTLOOK 2005. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City. We believe the data, as The City is located in northwestern Orange County, about 28 miles southeast of presented, is accurate in all material aspects; that it is presented in a manner designed to downtown Los Angeles and 90 miles north of San Diego. The City lies on a coastal plain, fairly set forth the financial position and results of operations of the City, as measured which is bordered by the Pacific Ocean on the west and the Santa Ana Mountains on the by the financial activity of its various funds; and that all disclosures necessary to enable east. The City is the oldest and second most populous city in Orange County. Anaheim is the reader to gain maximum understanding of the City's financial activities have been home to the Disneyland Resort, the Anaheim Convention Center, and two major league included. professional sports teams--the Anaheim Angels American League Baseball team that utilizes the Angel Stadium ofAnaheim and the Anaheim Mighty Ducks National Hockey The CAFR is presented in three sections: Introductory, Financial, and Statistical. The League team that utilizes the Arrowhead Pond of Anaheim.

Introductory Section includes the table of contents, this transmittal letter, certificates of achievement, the City's organization chart, and a list of administrative personnel. The Anaheim and Orange County are home to a wide spectrum of industries-more than Financial Section includes the report of the independent auditors, Management's 4,600 manufacturing plants are located in the county, most notably aerospace, Discussion and Analysis (MD&A), the basic financial statements including the electronics, machinery, computers, and food product manufacturers. Unionization is government-wide financial statements comprised of the Statement of Net Assets, the prevalent in manufacturing, construction, hotels, trucking, warehousing, grocery stores, Statement of Activities and the accompanying notes to the financial statements. The drug stores, and some larger retail outlets. High-tech businesses are typically nonunion.

Financial Section also includes the fund financial statements including the governmental funds financial statements, the proprietary funds financial statements and As the City continues to attract population growth and economic expansion, its municipal the fiduciary fund financial statements, and the combining individual funds financial services are constantly being improved to serve residential and business needs. This statements for the nonmajor governmental funds and the internal service funds. The growth in City service demand presents the City with significant challenges; and if the Statistical Section includes selected pertinent financial and demographic information, high level of service is to be maintained, the City will need to continue to explore new on a multi-year basis. This transmittal letter is designed to complement and should be methods of obtaining financial resources and more efficient methods to deliver services.

read in conjunction with the MD&A.

1

CITY OF ANAHEIM The unemployment rate in the Orange County, California area for June 2005 was 3.9%/, The City continues to draw from and build on its fiscal responsibility as it maximizes which remains below both the state (5.4%) and national (5.01/6) averages. Increases in the the assets under its control and direction which include the Angel Stadium of Anaheim, professional and business services sectors have provided an overall increase in Orange the Arrowhead Pond, the Anaheim Convention Center, the City's golf courses, and its County job creation over the last twelve months. Anaheim-owned, Anaheim-focused water and electric utilities. Through sound fiscal management, the City continues to operate these economic engines at optimal levels to Tourism related spending provides significant discretionary revenue to the City of assist in better providing for the many other necessities of the community.

Anaheim, and the City closely monitors and projects trends related to this market.

Revenue from tourism was very strong in fiscal year 2005, and local economic forecasts The re-dedication to neighborhood pride is another important facet of the City's indicate continued strength well into fiscal year 2006. The City's revenue from sales and planning and operations. Various programs were established in the Other Capital use taxes continues to be a solid source of revenue, supported by a diversified base that Improvements Fund upon the completion of the Anaheim Resort Revitalization Project is also expected to perform well. to direct increased revenues received from the City's investment in resort improvements toward continued improvements in our community. This and other resources contribute MAJOR INITIATIVES toward infrastructure maintenance including roads, sidewalks, and sewers, new and/or enhanced parks and open space, increased sports fields and gymnasiums, facilities such The Anaheim City Council has provided policy and direction to lead the City on a path as the West Anaheim Police Sub-station and Youth Center, the East Anaheim of long-term investment and improvement for the future. Four major themes have been Gymnasium, Anaheim Hills Golf Clubhouse, Haskett Library in Maxwell Park, and the identified to focus and guide the efforts of the City's overall workplan: Tiger Woods Learning Center at Dad Miller Golf Course.

" A unified, inspirational vision for our City The City's commitment to deliver unparalleled service continues to show Anaheim's

• A fiscally responsible course for our highly valuable assets commitment to being one of the finest municipal workforces in the nation. Anaheim has

" A sense of pride instilled in neighborhoods built a reputation on its consistent delivery of outstanding service that residents,

" A dedication to deliver unparalleled service to our customers businesses and guests have come to expect. The Anaheim Service Initiative, based on examples of the City's outstanding service delivery leaders, was developed to reinforce The vision for our City was recently codified by the City Council's adoption of the most and train others the corporate service culture's best practices.

ambitious planning effort in City history, the updated General Plan and Zoning Code.

As a result of extensive public input, the City created an opportunities based, long-range FINANCIAL INFORMATION planning tool created to address the livability of Anaheim's neighborhoods, beautification efforts, and new land use options for commercial properties, as well as Management of the City is responsible for establishing and maintaining internal control the corresponding infrastructure and transportation needs. The new General Plan is a designed to ensure that the assets of the government are protected from loss, theft, or comprehensive guide for future development and associated City services and facilities. misuse, and to ensure that adequate accounting data are compiled to allow for the It addresses the preservation and enhancement of neighborhoods and maximization of preparation of financial statements in conformity with accounting principles generally open space and recreational opportunities, as well as the continued development of The accepted in the United States of America. Internal control is designed to provide Anaheim Resort and Stadium Area. It also anticipates the completion of the Downtown reasonable, but not absolute, assurance that these objectives are met. The concept of Anaheim Revitalization Project, a vibrant City center and activity hub. In addition to reasonable assurance recognizes that: (i) the cost of a control should not exceed the the General Plan, the City Council also adopted a new overlay zone for the benefits likely to be derived; and (2) the valuation of costs and benefits requires approximately 800 acre Platinum Triangle. When completed, the Platinum Triangle will estimates and judgments by management.

be a vibrant 24-hour, high density, mixed-use, urban environment unique to Orange County that could include up to 9,175 dwelling units, 5 million square feet of office This report consists of management's representations concerning the finances of the space and over 2 million square feet of commercial uses. The introduction of mixed-use City. As a result, management assumes full responsibility for the completeness and opportunities into this area will be the catalyst for realizing the development potential reliability of all of the information presented in this report. Management asserts that, to of The Platinum Triangle's strategic location and surrounding amenities including Angel the best of their knowledge and belief, this financial report is complete and reliable in Stadium of Anaheim, the Arrowhead Pond of Anaheim, The Grove of Anaheim and the all material respects.

Amtrak/Metrolink Station and proposed Anaheim Regional Transportation Intermodal Center (ARTIC).

2

C1TY OF ANAHEIM SINGLE AUDIT. As a recipient of federal awards, the City is also responsible for As of June 30, 2005, the City has $6.6 million in authorized, outstanding tax-supported ensuring that adequate internal control is in place to ensure compliance with applicable general obligation bonds with no authorized but unissued general obligation bonds. This laws and regulations related to those programs. This internal control is subject to level of general obligation debt was well below the legal limit of $3.5 billion, or 15% of periodic evaluation by management and the internal audit staff of the City. assessed valuation. The City's general obligation bonds are rated Aa2 by Moody's Investors Services and rated AA by Standard and Poor's.

As a part of the City's Single Audit, tests are made to determine the adequacy of internal control related to federal award programs, as well as to determine that the City has CASH MANAGEMENT." The City Treasurer invests temporarily idle funds in complied with applicable laws and regulations. No significant instances of accordance with the Government Code and a formal investment policy approved by the noncompliance or internal control weaknesses were identified in the Single Audit for City Council and the Investment Advisory Commission. During fiscal year 2005, funds fiscal year ended June 30, 2005. were invested in such instruments as U.S. Treasury notes, federal agency or U. S.

Government-sponsored enterprise obligations, commercial paper, corporate medium BUDGETARY CONTROLS: The City maintains budgetary controls, the objective of term notes, money market mutual funds, and the Local Agency Investment Fund (State which is to ensure compliance with legal provisions embodied in the annual Pool). The average maturity of the portfolio as of June 30, 2005 was I year and 3 appropriated budget approved by the City Council. Activities of the General Fund, months. Interest earnings for the fiscal year were approximately $13.4 million with an special revenue funds, debt service funds, capital projects funds, and all the proprietary average earned yield of 2.48%. Bond proceeds are not commingled with the portfolio funds are included in the annual appropriated budget The level of budgetary control but are invested pursuant to the bond indentures. Consequently, earnings and yield on (that is, the level at which expenditures cannot legally exceed the appropriated amount) bond proceeds are not reflected in the previously stated figures.

is established at the departmental level. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances RISK MANAGEMENT: Through the utilization of professional risk management generally are reappropriated as part of the following year's budget. techniques of risk identification, risk control, risk transfer, and risk financing, the City has a comprehensive risk management program designed to protect the City's assets and Regarding long-term financial planning, as of June 30, 2005, the City Council adopted resources from accidental loss. In the risk financing area, the City utilizes a combination the fiscal year 2006 budget. Additionally, as a companion to approving the budget plan, of fully funded, actuarially based, self-insurance programs, an excess risk-sharing pool, a five-year Capital Improvement Plan was presented to the City Council. The five-year an industry-captive excess insurer, and commercial insurers. Operational expenses and plan links anticipated expenditures for infrastructure development with community reserves are maintained in the General Benefits and Insurance Fund. The City's Risk needs and desires and provides a citywide perspective of recommended projects and Management Division continues to be very successful with programs that generate proposed funding sources. The Capital Improvement Plan was finalized in May 2005, material cost savings while, at the same time, eliminating or transferring risk to the and totaled $678.5 million for the five-year fiscal period ending June 30, 2010. The maximum extent five-year Capital Improvement Plan has been submitted and annually updated, in its present form, since 1982, for effective long-range planning purposes. It is City OTHMR INFORMATION Management's belief that these two plans give City Council members an expanded opportunity to set policy and provide direction for implementation, resulting in THE INDEPENDENT AUDIT: The City Charter requires an annual audit of the improved management efficiency and improved financial results. financial statements of the City by an independent certified public accountant.

Accordingly, this year's audit was completed by KPMG LLP. In addition to meeting the DEBT ADAINSTRA770N: At June 30, 2005, the City had a number of debt issues requirements set forth in the City Charter, the audit was also designed to meet the outstanding, as shown in detail in the notes to the financial statements. requirements of the Single Audit Act Amendments of 1996 and related OMB Circular A-133. The auditors' report on the basic financial statements is included in the financial The City's ratio of net bonded debt to assessed valuation and the amount of net general section of this report. The auditors' reports related specifically to the single audit are bonded debt per capita are useful indicators of our debt position to management, presented as a separate document.

citizens, and investors.

3

CITY OF ANAHEIM GOVERNMENT FINANCE OFFICERSASSOCTATION OF THE UNITED STATES ACKNOWLEDMEN AND CANADA (GFOA) CERTIFICATE OF AHIEMWENT AWARD: The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City The preparation of this report on a timely basis could not have been accomplished by of Anaheim, California, for its comprehensive annual financial report for the fiscal year the Finance Director alone without the efficient and dedicated service of the entire staff ended June 30, 2004. This was the 29th consecutive year that the City has achieved this of accountants in the Finance Department led by Edward Zacherl, Assistant Finance prestigious award (fiscal years ended 1976 - 2004). In order to be awarded a Certificate Director. Appreciation is also expressed to Council Members Bob Hernandez and Harry of Achievement, a government must publish an easily readable and efficiently organized Sidhu, and Assistant City Manager Tom Wood for their significant contributions as comprehensive annual financial report. This report must satisfy both accounting members of the Audit Committee.

principles generally accepted in the United States of America and applicable legal requirements. In closing, without the leadership and support of the City Council, preparation and results of this report would not have been possible. Its leadership has made possible the A Certificate of Achievement is valid for a period of one year only. We believe our implementation of these important and innovative concepts in fiscal management by the current comprehensive annual financial report continues to conform to the Certificate city.

of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate. Respectfully submitted, CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS (CSMFO)

CERTIFICATE OF AWARD FOR OUTSTANDING FINANCIAL REPORTING: The CSMFO awarded a Certificate of Award for Outstanding Financial Reporting to the City for its CAFR for fiscal year ended June 30, 2004. The certificate is issued in recognition of meeting professional standards and criteria in reporting which reflect a high level of David M. Morgan William G. Swteney quality in the annual financial statements and in the underlying accounting system from City Manager Finance Director which the reports were prepared. This was the 29th consecutive year that the City has received this prestigious State of California award. We believe our current report continues to conform to the Certificate of Award for Outstanding Financial Reporting Program requirements, and we are submitting it to CSMFO.

4

CITY OF ANAHEIM The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate ofAchievement Certificate of for Excellence in Financial Reporting to the City of Anaheim, Achievement California for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2004. The Certificate of Achievement for Excellence is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government in Financial financial reports.

Reporting In order to be awarded a Certificate of Achievement, a Presented to governmental unit must publish an easily readable and efficiently City of Anaheim, organized Comprehensive Annual Financial Report, whose contents conform to program standards. Such reports must satisfy California both generally accepted accounting principles and applicable legal requirements.

For its Comprehensive Annual Financial Report A Certificate of Achievement is valid for a period of one year for the Fiscal Year Ended only. We believe our current report continues to conform to June 30,2004 Certificate of Achievement program requirements, and we are A Cetificate ofAchievemen for E in Financial submitting it to GFOA.

Reporting is prosenned by the Glovernment Finance Officers Associaion ofthe United states and Canada to government units and public enmployee retirenat systens whoe cmrtrebensive annual financial reposts (CAFR&) achieve the h4hest standas igovernment accounting and financisa repoting President Executive Director 5

CITY OF ANAHEIM CaliforniaSociety of J 4lunicipal 5i nance Officers Certificate of Award OutstandingFinancialReporting 2003-04 Presented to the City of Anaheim Thus ceftificate is issued in recognition of uusetingprofessionalstandardsand cilteraIn reporting which reflect a high level of quality in the annualfinanciulstatem&ets and in th. underlyingaccountingsystem from which the reportswere prepared.

February24,2005 mWThaa,* Cawr ProfaidiawaI Te~ackl Standrel Coanmutt Dedicatedto Excellence in MunicipalFinancialManmgement 6

CITY OF ANAHEIM DýT Legend 0 Esdwkm"w 1*O-fV-

• - w.UN 7

CITY OF ANAHEIM Administrative Personnel City Manager David M. Morgan Assistant City Manager Thomas J. Wood Deputy City Manager Joel H. Fick Chief of Police John Welter City Attorney Jack L. White City Clerk Shleyll A. Schroeder City Treasurer Charlene C. Parker Community Development Executive Director Elisa Stipkovich Community Services Director Terry Lowe Convention, Sports & Entertainment Executive Director Gregory L. Smith Finance Director William 0. Sweeney Fire Chief Roger E. Smith Human Resources Director David H. Hill Planning Director Sheri Vander Dussen Public Utilities General Manager Marcie L. Edwards Public Works Director Gary E. Johnson 8

600 Anton Boulevard Telephone 714 850 4300 Suite 700 Fax 714 850 4488 IKkyP',w M,, !W Costa Mesa, CA 92626-7651 Independent Auditors' Report The Honorable Mayor and City Council Management's discussion and analysis on pages 11 through 19 and the pension plan City of Anaheim, California: required supplementary information on page 58 are not a required part of the basic financial statements but are supplementary information required by accounting We have audited the accompanying financial statements of the governmental principles generally accepted in the United States of America. We have applied activities, the business-type activities, each major fund, and the aggregate remaining certain limited procedures, which consisted principally of inquiries of management fund information of the City of Anaheim, California (City), as of and for the year regarding the methods of measurement and presentation of the required ended June 30, 2005, which collectively comprise the City's basic financial supplementary information. However, we did not audit the information and express statements as listed in the table of contents. These financial statements are the no opinion on it.

responsibility of the City's management Our responsibility is to express opinions on these financial statements based on our audit. In accordance with Government Auditing Standards, we have also issued a report dated December 16, 2005 on our consideration of the City's internal control over We conducted our audit in accordance with auditing standards generally accepted in financial reporting and on our tests of its compliance with certain provisions of laws, the United States of America and the standards applicable to financial audits regulations, contracts and grant agreements and other matters. The purpose of that contained in Government Auditing Standazis, issued by the Comptroller General of report is to describe the scope of our testing of internal control over financial the United States. Those standards require that we plan and perform the audit to reporting and compliance and the results of that testing, and not to provide an opinion obtain reasonable assurance about whether the financial statements are free of on the internal control over financial reporting or on compliance. That report is an material misstatement. An audit includes consideration of internal control over integral part of an audit performed in accordance with Government A ting fimancial reporting as a basis for designing audit procedures that are appropriate in Standardsand should be considered in assessing the results of our audit.

the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we Our audit was conducted for the purpose of forming opinions on the financial express no such opinion. An audit includes examining, on a test basis, evidence statements that collectively comprise the City's basic financial statements. The supporting the amounts and disclosures in the financial statements, assessing the combining individual fund statements and schedules listed in the table of contents are accounting principles used and significant estimates made by management, as well as presented for purposes of additional analysis and are not a required part of the evaluating the overall financial statement presentation. We believe that our audit financial statements. The combining individual fund statements and schedules have provides a reasonable basis for our opinions. been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to In our opinion, the financial statements referred to above present fairly, in all material the basic financial statements taken as a whole. The introductory section and respects, the respective financial position of the governmental activities, the business- statistical section have not been subjected to the auditing procedures applied in the type activities, each major fund, and the aggregate remaining fund information of the audit of the basic financial statements and, accordingly, we express no opinion on City of Anaheim, California, as of June 30, 2005, and the respective changes in them.

financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the General and Housing Authority Funds for the year then ended in conformity with accounting principles generally accepted in the United States of America.

December 16, 2005 9

(This page left blank intentionally) 10

CITY OF ANAEM cash flows. Thus, assets, liabilities, revenues and expenses are reported in these statements Management's Discussion and Analysis for some items that will only result in cash flows in future fiscal periods (e.g. uncollected revenues and accrued but unpaid interest expense).

(Unaudited)

As management of the City of Anaheim (City), we offer readers of the City's basic The Statement ofNet Assets presents information on all of the City's assets and liabilities, including capital assets and long-term liabilities, with the difference between the two financial statements this narrative overview and analysis of the financial activities of the reported as net assets. Over time, increases or decreases in net assets may serve as a useful City as of and for the fiscal year ended June 30, 2005. We encourage readers to consider the information presented here in conjunction with additional information that we have indicator of whether the financial position of the City as a whole is improving or furnished in our letter of transmittal, which can be found in the introductory section of deteriorating.

this report and the City's basic financial statements in the financial section of this report All amounts, unless otherwise indicated, are expressed in thousands of dollars. The Statement of Activities presents information showing how the City's net assets changed during the most recent fiscal year. Functional activities are highlighted in this statement whereby direct and indirect functional costs are shown net of related program OVERVIEW OF TIM BASIC FINANCIAL STATBMMMTS revenue. This statement shows the extent to which the various functions depend on This discussion and analysis are intended to serve as an introduction to the City's basic general taxes and non-program revenues for support financial statements. The City's basic financial statements are comprised of three Both the government-wide financial statements distinguish functions of the City that are components: 1) government-wide financial statements, 2) fund financial statements, and principally supported by taxes and intergovernmental revenues (governmental activities)

3) notes to the financial statements. This report also contains other supplementary from other functions that are intended to recover all or a significant portion of their costs information in addition to the basic financial statements themselves.

through user fees and charges (business-type activities). The governmental activities of the City include general government police, fiur, community development planning, COMPONENTS OF public works, community services, public utilities (street lighting), convention, sports and THE ANNUAL FINANCIAL REPORT entertainment (Visitor and Convention Bureau and the Arrowhead Pond of Anaheim), and interest on related long-term debt. The business-type activities of the City include an

[Discussion managementeaand [

It_

tatieminaO Basic Financial [ Reqi Supplementary 1e electric and water utility, solid waste and sanitation, golf courses, and convention, sports and entertainment venues (Anaheim Convention Center, Angel Stadium of Anaheim, and The Grove of Anaheim) operations.

The government-wide financial statements include not only the City itseli but also the Anaheim Housing Authority, Anaheim Redevelopment Agency, Community Center Authority, Anaheim Public Improvement Corporation, and Anaheim Public Financing Government-wide Fes e Authority. Although these entities are legally separate, they function for all practical Financial1 purposes as a part of the City, and therefore have been included as blended component StaemetsStatements Financial Statement units as an integral part of the primary government.

The government-wide financial statements can be found on pages 21-23 of this report Summary 4 PP Detail Fund finial statements. The fund financial statements focus on current available Government-wide financial statement&. The government-wide financial statements are resources and are organized and operated on the basis of funds, each of which is defined comprised of the Statement of Net Assets and the Statement of Activities. These tvo as a fiscal and accounting entity with a self-balancing set of accounts, established for the statements are designed to provide readers with a broad overview of the City's finances purpose of carrying on specific activities or attaining certain objectives in accordance with utilizing the full accrual method of accounting, in a manner similar to a private-sector special regulations, restrictions or limitations. All of the funds of the City can be divided business. Under the full accrual method of accounting, transactions are reported as soon into three categories: governmental funds, proprietary funds, and fiduciary funds.

as the underlying event giving rise to the change occurs, regardless of the timing of related 11

CITY OF ANAHEIM Govenmental funds. Governmental funds ar used to account for essentially the same motorized equipment, duplicating and printing, information services, and office functions reported as governmental activities in the government-wide financial maintenance and equipment operations. Because these services predominantly benefit statements. However, unlike the government-wide financial statements, the governmental governmental rather than business-type functions, they have been included with funds financial statements utilize the modified accrual basis of accounting, which focuses governmental activities in the government-wide financial statements.

on near-term inflow and outflow of spendable resources, as w:l1 as on balances of spendable resources available at the end of the fiscal year. Such information may be useful Proprietary funds provide the same type of information as the government-wide financial inevaluating a government's near-term financial requirements. statements, only in more detail. The proprietary funds financial statements provide separate information for all ofthe enterprise funds, which are considered to be major funds Because the focus of the governmental funds is narrower than that of the government-wide of the City. Conversely, all of the internal service funds are combined into a single, financial statements, it is useful to compare the information presented for the aggregated presentation in the proprietary funds financial statements. Individual fiud data governmental funds with similar information presented for governmental activities in the for the internal service funds is provided in the form of combining statements elsewhere government-wide financial statements. By doing so, readers may better understand the in this report.

long-term impact of the government's near-term financing decisions. Both the governmental funds Balance Sheet and the governmental funds Statement of Revenues, The proprietary funds financial statements can be found on pages 31-35 of this report Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Fiduciary finds. Fiduciary funds awe used to account for resources held for the benefit of parties outside the government Fiduciary funds are not reflected in the government-The City maintains nineteen individual governmental funds. Information is presented wide financial statements because the resources of those funds are not available to support separately in the governmental funds Balance Sheet and in the governmental flmds the City's own programs.

Statement of Revenues, Expenditures and Changes in Fund Balances for the General Fund and Housing Authority Special Revenue Fund, both of which are considered to be major The fiduciary fund financial statements can be found on page 36 of this report funds. Data for the other seventeen governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental Notes to the financial statments. The notes provide additional information that is funds is provided in the form of supplementary combining statements on pages 65-74 of essential to a full understanding of the data provided in the government-wide and fund this report financial statements. The notes to the financial statements can be found on pages 37-63 of this report The City adopts an annually appropriated budget for all governmental and proprietary funds. Budgetary comparison statements for the General Fund and all major special Other supplementay information. In addition to the basic financial statements and revenue funds (Housing Authority) are required to be presented and are included in the accompanying notes, this report also presents combining individual fund statements basic financial statements on pages 29-30 of this report. Additionally, budgetary referred to earlier in connection with nonmajor governmental funds and internal service schedules for the other governmental funds have been provided to demonstrate compliance funds. Also included are the budgetary comparison Schedules of Revenues, Expenditures with the budget and can be found as part of other supplementary schedules on pages 79- and Changes in Fund Balances for all nonmajor special revenue funds, all debt service 83 of this report. funds, and all capital projects funds. These statements and schedules can be found on pages 79-83 of this report.

The governmental funds financial statements can be found on pages 25-28 of this report FINANCIAL HIGHLIGHTS (Amounts in thousands)

Proprietary fund& The City maintains tme different types of proprietary funds.

Enterprise funds are used to report the same functions presented as business-type activities

• The City's net assets increased as a result of this year's operations. Net assets of the inthe government-wide financial statements. The City uses its enterprise funds to account City's governmental activities increased $15,372 (2%) and business-type activities net for its electric and water utility, solid waste and sanitation, golf courses, and convention, assets increased $13,234 (1%).

sports and entertainment venues operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions.

The City uses internal service funds to account for its general benefits and insurance, 12

CITY OF ANAEMM At the close of the current fiscal year, the City's governmental funds reported total " At the end of the current fiscal year, unreserved undesignated fund balance for the ending fund balances of $205,469, an increase of $3,634. More than half of ending General Fund was $39,179, or 20% of the total General Fund expenditures.

fund balances, $119,009, is available for spending at the City's discretion (unreserved fund balance). " The City's total long-term liabilities decreased by $6,705 (less than 1%) during the current fiscal year.

GOVERNIMNT-WIDE FINANCIAL ANALYSIS NET ASSETS JUNE 30,2005 AND 2004 Governmental Business-type Total Activities Activities Government 2005 2004 2005 2004 2005 2004 Current and other assets $ 449,054 $ 426,638 $ 635,031 $ 650,412 $1,084,085 $1,077,050 Capital assets 1,177,304 1,150,311 1,172,394 1,156,750 2,349,698 2,307,061 Total assets 1,626,358 1,576,949 1,807,425 1,807,162 3,433,783 3,384,111 Other liabilities 74,517 54,350 80,986 73,382 155,503 127,732 Long-term liabilities outstanding 907,110 893,240 770,886 791,461 1,677,996 1,684,701 Total liabilities 981,627 947,590 851,872 864,843 1,833,499 1,812,433 Net assets:

invested in capital assets, net of related debt 605,346 576,922 645,802 621,507 1,251,148 1,198,429 Restricted 95,459 91,291 80,700 77,924 176,159 169,215 Unrestricted (deficit) (56,074) (38,854) 229,051 242,888 172,977 204,034 Total net assets $ 644,731 $ 629,359 $ 955,553 $ 942,319 $1,600,284 $1,571,678 By far the largest portion of the City's net assets (78%) reflects its investment in capital offsets the governmental activities deficit unrestricted net assets of $56,074. The Anaheim assets (e.g. land, buildings, utility plant, machinery, equipment, and infrastructure), net of Redevelopment Agency (Redevelopment Agency), a blended component unit of the City, any related debt used to acquire those assets that is still outstanding. The City uses these represents $129,715 of the deficit in unrestricted net assets. The Redevelopment Agency assets to provide services to citizens; consequently, these assets are not available for future was established for the purpose of promoting economic revitalization and eliminating spending. Although the City's investment in capital assets is reported net of related debt, blight within the designated project area of the City. Often these activities do not result in it should be noted that the resources needed to repay this debt must be provided from other residual assets, but rather underwrite the cost of a development activity deemed beneficial sources, since the capital assets themselves cannot be used to liquidate these liabilities. in meeting the Redevelopment Agency's objectives. The resulting Statement of Net Assets reflects the debt obligation to be repaid through future tax revenues, without an offsetting An additional portion of the City's net assets (11%) represents resources that are subject asset While this is a routine function of such an entity, when blended with the City, its to external restrintion on how they may be used. The remaining unrestricted net assets of deficit of unrestricted net assets causes the governmental activities to report a consolidated

$172,977 may be used to meet the City's ongoing obligations to citizens and creditors. Of deficit position.

the unrestricted net assets, $229,051 is attributable to business-type activities, which 13

CITY OF ANAHEIM CHANGE IN NET ASSETS YEARS ENDED JUNE 30,2005 AND 2004 Governmental Business-type Total Activities Activities Government 2005 2004 2005 2004 2005 2004 REVENUES Program revenues:

Charges for services $ 42,581 $ 39,454 $407,453 $417,895 $ 450,034 $ 457,349 Operating grants and contributions 77,870 81,877 2,473 1,471 80,343 83,348 Capital grants and contributions 20,906 11,904 11,513 7,468 32,419 19,372 General revenues:

Taxes; Property taxes 78,620 57,239 78,620 57,239 Sales and use taxes 61,779 56,566 61,779 56,566 Transient occupancy taxes 67,141 63,268 67,141 63,268 Motor vehicle license fees 2,113 21,143 2,113 21,143 Other taxes 10,175 9,561 10,175 9,561 Unrestricted investment earnings 8,071 3,991 16,592 6,120 24,663 10,111 Other 1,499 928 418 1,917 928 Gain (loss) on sale of capital assets (722) 169 (1,164) 1,723 (1,886) 1,892 Total revenues 370,033 346,100 437,285 434,677 807,318 780,777 EXPENSES Program activities:

Governmental activities:

General government 8,221 7,582 8,221 7,582 Police 91,713 77,541 91,713 77,541 Fire 46,596 37,610 46,596 37,610 Community Development 83,183 86,542 83,183 86,542 Planning 13,206 12,628 13,206 12,628 Public Works 39,463 41,672 39,463 41,672 Community Services 28,314 27,050 28,314 27,050 Public Utilities 1,557 1,566 1,557 1,566 Convention, Sports and Entertainment 7,703 7,536 7,703 7,536 Interest on long-term debt 47,105 48,503 47,105 48,503 Business-type activities:

Electric Utility 274,622 280,878 274,622 280,878 Water Utility 41,313 42,949 41,313 42,949 Sanitation 45,429 41.431 45,429 41,431 Golf Courses 4,062 4,278 4,062 4,278 Convention, Sports and Entertainment Venues 46,225 43,406 46,225 43,406 Total expenses 367,061 348,230 411,651 412,942 778,712 761,172 Excess (deficiency) before transfers 2,972 (2,130) 25,634 21,735 28,606 19,605 Transfers in (out) 12,400 11,534 (12,400) (11,534)

Increase in net assets 15,372 9,404 13,234 10,201 28,606 19,605 Net as tsat beginning of year 629,359 619,955 942,319 932,118 1,571,678 1,552,073 Net assets at end of year $644,731 $629,359 $955,553 $942,319 51,600,284 $1,571,678 14

CITY OF ANAHBEIM Govvwmment activilim. The most significant revenues of the governmental activities REVENUES BY SOURCE - are general taxes (59%), which include property taxes (21%), sales and use taxes (17%),

GO UAL ACTIVITIES transient occupancy taxes (18%), other taxes (3%) motor vehicle license fees (VLF) (less than 1%). Program revenues are 39% of the total revenues of the governmental activities, which include charges for services (12%), operating grants and contributions (2 1%), and mwinvml CK16u Other capital grants and contributions (6%).

Odierajte 2% 1 3%

Cluges for leAmls Public safety (police and fie) expenses are most significant (38%) of all governmental Motor veltido 11kcese floes 11%

activities expenses, followed by community development (23%), interest on long-term debt (13%), public works (11%), and various other programs (15%). Included in these

'rrnsumt occupane laxes 19% Op ting grants amounts is depreciation expense, which is 6% of the total expenses for governmental

/-Wand1ccenm activities.

Governmental activities revenues increased $23,933 (7%) in the current fiscal year.

Capital grants and contributions increased $9,002 (76%) primarily due to funding for the Salesndu txes 17% Burlington Northern Santa Fe (BNSF) Soundwall project. The soundwall is approximately 13,000 feet long extending from Imperial Highway (SR-90) to Yorba Linda C itgrants and contnbution rop taxes 6% Boulevard/Weir Canyon Road. Property taxes increased $21,381 (37%), primarily as a 21% result of the effect of shifling revenue from motor vehicle license fees to property taxes

($15,818) as part of the State of California 2004 Budget Act. The overall strength in the economy also contributed to the increase in property taxes, as well as the sales and use taxes increase of $5,213 (9%) and the transient occupancy taxes (TOT) increase of $3,873 EXPENSES AND PROGRAM REVENUES - (6%). Additionally, investment earnings increased $4,080 (102%), primarily due to the GOVERNMENTAL ACTIVITIES reduction in the change in unrealized investment losses.

SIM-Governmental activities expenses increased $18,831 (5%) in the current fiscal year. The most significant change in program expenses was the increase in police expenses of

$14,172 (18%), primarily due to increased costs for benefits, including retirement and worker's compensation costs of $9,399. Additionally, fire expenses increased $8,986 slowa (24%) primarily due to increased costs for benefits, including retirement and workers' compensation costs. These increases were partially offset by various decreases in other 570= programs expenses.

There were no other programs with significant or unusual changes.

SIGA.

so

/ / li I, U ProgramrUeM U Eapaes. /

15

CITY OF ANAHEIM BuWAinuyp aciviti. Business-type activities increased the City's net assets by REVENUES BY SOURCE - S13,234. Key elements of this change are as follows:

BUSINESS-TYPE ACTIVITIES Charges for services of $407,453 decreased $10,442 (3%). The most significant decrease in charges for services is due to the Electric Utility decrease of $6,983 (2%) as a result of Unresticted a decrease of 3% in megawatt hours sold.

Capital grants and contributions 3% Investment earnings of $16,592 increased $10,472 (171%) primarily due to the reduction in the change in unrealized investment losses and $134 million in Electric Utility bond operating grants proceeds received at the end of the prior fiscal year that were available for investment andconrbutons------

during fiscal year 2005.

Program expenses of $411,651 decreased $1,291 (less than 1%). The most significant change in program expenses is the decrease in the Electric Utility of $6,256 (2%). This is primarily due to the decrease in the cost of purchased powe due to decreases in demand.

This decrease was offset by the increase in Sanitation expenses of $3,998 (10%M) primarily related to the implementation of a flow monitoring project as a requirement of the National Pollutant Discharge Elimination System (NPDES) permit and the increase in Convention,

\ aargoa for sevicea Sports and Entertainment Venues expenses of $2,819 (7%) primarily due to increased 93%

labor and professional services expenses.

EXPENSES AND PROGRAM REVENUES - FINANCIAL ANALYSIS OF THI CITY'S FUNDS BUSINESS-TYPE *AIVITIE Governmwatal funds. The focus of the City's governmental funds is to provide

• -h f information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular,

&MM I unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the City's governmental funds reported total ending fund balances of $205,469, an increase of $3,634 in comparison with the prior fiscal year.

tszom 4--

More than half of the total ending fund balances ($119,009) constituted unreserved fund balances, which are considered available for appropriation. The remainder of the fund Sim= 4-- balances is reserved to indicate that it is not available for new spending because it has already been committed 1) to pay debt service ($34,872), and 2) to offset non-current financial resources that arc not anticipated to be liquidated in the near term ($51,588).

Mass I-l General Fund revenues were $25,023 (13%) greater than in the prior fiscal year primarily due to the increases in property taxes, sales taxes and in transient occupancy taxes as discussed in the government-wide financial analysis of governmental activities.

so J--

Wd- L'" 110b.!!_.ebs~ Expenditures increased $11,347 (16%) for police and $7,491 (21%) for fire as discussed in the government-wide financial analysis ofgovernmental activities. There were no other U Program rs M UM M XP"n significant expenditure variances.

16

CITY OF ANAREHIM The Housing Authority revenues and other financing sources decreased by $7,100 (11%) GENERAL FUND BUDGBTARY H[GHIOUHTS and expenditures and other financing uses decreased by $6,784 (11%) primarily due to a decrease in the number of units leased for the Section 8 Rental Assistance Program. During the year the original budget was amended to increase appropriations by $9,280 (5%). Following are the main components of the increase:

Propriotary funds. The City's proprietary funds provide the same type of information * $2,539 for carryover of prior year expenditure appropriations found in the government-wide financial statements, but in more detaiL * $2,046 for additional public warks expenditures for a landslide

• $1,769 for additional police workers' compensation expenditures The Electric Utility's fund net assets increased $13,301 (4%) in the current fiscal year. * $1,769 for additional fire warkers' compensation expenditures The most significant factors of the changes in fund net assets are discussed in the * $750 for additional police expenditures related to the addition of new swom officers government-wide financial analysis of business-type activities. and participation in special events that were not budgeted The Water Utility's fund net assets decreased $1,960 (less than 1%) in the current year. The increase in appropriations was to be funded from additional revenues, primarily There ware no significant or unusual changes. property taxes, of $5,879 and the remaining $3,401 from fund balance.

Sanitation's fund net assets increased $39 (less than 1%) in the current fiscal year. There General Fund revenues of $223,138 exceeded budgeted revenues of $210,992 by $12,146 ware no significant or unusual changes, other than that previously discussed in the (6%). The excess was primarily due to property taxes ($2,860), sales and use taxes government-wide financial analysis of business-type activities. ($4,317) and transient occupancy taxes ($2,947) due to the overall strength in the economy.

The Golf Courses' fund net assets decreased $221 (3%) in the current year. There were no significant or unusual changes. General Fund expenditures were less than budgeted. Of the total appropriations of

$201,581 approximately two percent, or $3,982 went unspent. There were no significant The Convention, Sports and Entertainment Venues fund net assets increased $3,432 (1%) variances.

in the current year. There were no significant or unusual changes.

CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS (net of accumulated depreciation)

JUNE 30,2005 AND 2004 Governmental Business-type Total Activities Activities Government 2005 2004 2005 2004 2005 2004 Land $ 495,006 $ 490,917 S 36,281 $ 31,538 $ 531,287 $ 522,455 Consuction in progress 46,105 19,597 27,951 45,950 74,056 65,547 Nuclear fuel at amortized cost 2,197 2,730 2,197 2,730 Buildings, structures and improvements 141,587 145,125 350,518 360,361 492.105 505,486 Utility plant 741,354 707,339 741,354 707,339 Machinery and equipment 33,950 25,329 14,093 8,832 48,043 34,161 Infastr ure 460,656 469,343 460,656 469,343 Total $1,177,304 $1,150,311 $1,172,394 $1,156,750 $2,349,698 $2,307,061 17

MYrOF ANALEIM Capital assets. The City's investment in capital assets for its governmental and business- increase over the prior fiscal year was two percent, of which governmental activities type activities at June 30, 2005, amounted to $2,349,698 (net of accumulated increased two percent and business-type activities increased one percent depreciation). This investment in capital assets included land, construction in progress, nuclear fuel at amortized cost, buildings, structures and improvements, utility plant, Additional information on the City's capital assets can be found in note 5 of the notes to machinery and equipment, and infrastructure. The total increase in the City's investment the financial statements, on pages 47-48 of this report.

in capital assets resulted from many various projects throughout the City. The total LONG-TERM LIABIITIES JUNE 30,2005 AND 2004 Governmental Business-type Total Activities Activities Government 2005 2004 2005 2004 2005 2004 General obligation bonds S 6,625 S 7,060 $ 6,625 $ 7,060 Revenue bonds 569,016 562,118 $528,130 $543,780 1,097,146 1,105,898 Tax allocation bonds 164,134 168,360 164,134 168,360 Certificates of participation 33,174 36,107 132,952 140,355 166,126 176,462 Capital lease obligations 1,523 2,001 180 349 1,703 2,350 Notes and loans payable 28,669 22,747 15,842 16,678 44,511 39,425 Self-insrance 29,920 26,382 29,920 26,382 Retired medical 74,049 68,465 74,049 68,465 Decommissioning provision 93,782 90,299 93,782 90,299 Total $907,110 $893,240 $770,886 $791,461 $1,677,996 $1,684,701 LoAg-term liabilities, The City's outstanding long-term liabilities, including bonds, ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES certificates of participation, capital leases, notes and loans payable, self-insurance, retired medical, and the provision for decommissioning costs totaled $1,677,996 at June 30, " The unemployment rate in the Orange County, California area for June 2005 was 2005. Of this total, $907,110 (54%) was in governmental activities and $770,886 (46%) 3.9%9, which remains below both the state (5.4%) and national (5.0%) average.

was in business-type activities. The City's outstanding long-term liabilities decreased Increases in the professional and business services sectors have provided an overall

$6,705 (less than 1%) in fiscal year 2005. The decrease is primarily due to the repayment increase in Orange County job creation over the last twelve months.

of principal on long-term liabilities.

" TOT revenue continues to be the City's largest General Fund revenue source. TOT was Additional information on the City's long-term liabilities can be found in note 7 of the budgeted at $64.2 million for the current fiscal year and actual TOT revenue was $67.1 notes to the financial statements, on pages 49-57 of this report. million. The City has budgeted a continuation of this increased hotel demand in fisal year 2006 and has budgeted $70.8 million for the 2006 fiscal year.

18

CITY OF ANABEIM For the 2006 fiscal year, the City appropriated $222.7 million of the budgeted $251.6 REQUESTS FOR INFORMATION million in estimated available fund balance inthe General Fund for spending. This leaves $28.9 million in estimated available reserves, which is 13% of General Fund This financial report is designed to provide a general overview of the City's finances for appropriations. The City's long-standing policy is to maintain General Fund reserves all those with an interest inthe government's finances. Questions concerning any of the of at least 7%to 10% of annual appropriations, information provided in this report or requests for additional information should be addressed to the Office of the Finance Director, City of Anaheim, 200 South Anaheim

" The City annually reviews all of its fees as part of the budget adoption process. Boulevard, Suite 643, Anaheim, California, 92805.

Developer, construction, and other fees applicable to residents and developers doing business with the City were adjusted in June 2005, generally by the average of CPI (3.7%). This is consistent with the City's policy of recovering costs without becoming an undue financial burden on existing tax and rate payers.

" In fiscal year 2006, cities and counties will contribute $700 million ($350 million for cities and $350 million for counties) as part of an effort to assist the State balance its budget (ERAF II). The City's share of the contribution is $3,750 and has been included in the City's fiscal year 2006 budget. The contribution will come from a reduction in the City's secured property taxes.

19

(This page left blank intentionally) 20

MTY OF ANAIHIM Statement of Net Assets June 30, 2005 (in thousands)

Govetrmental Buuinass-y Activities Activitie Total ASSTS Cash and cash equivalents $ 42,930 $ 33,164 S 76,094 Inestments 243,633 192,477 436,110 Accounts receivable, net 9,134 45,671 54,805 Accrued interest receivable 2,562 3,865 6,427 Internal balances, net (675) 675 Due from othe governments 26,312 26,312 Notes receivable, net 44,097 44,097 Inventories 796 7,460 8,256 Land held for resale, net 27,866 27,866 Restricted cash and cash equivalents 32,793 8,619 41,412 Restricted investments 17,594 292,968 310,562 Unamortizod debt issuance costs 1I 7,680 7,691 Bond payment receivable 19,542 19,542 Pipeline receivable 405 405 Prepaids and oher assets 2,001 22,505 24,506 Capital assets, net:

Nondepreciable 541,111 66,429 607,540 Depreciable 636,193 1,105,95 1 42158 Total assets 1,626,358 1,807,425 3,433,783 IJABUJT[ES Accounts payable 20,500 22,808 43,308 Wages payable 22,075 1,348 23,423 Due to other governments 5,734 5,734 Interest payable 13,217 8,831 22,048 Arbitrage rebate liability 183 183 Deposits 4,713 10,142 14,855 Regulatory credits 36,659 36,659 Unearned revenues 8,278 1,015 9,293 Noncurrent liabilities:

Due within one year 30,937 23,950 54,887 Due inmore than one year 876,173 746,936 1,623,109 Total liabilities 981,627 851,872 1,833,499 NETAS8ET8 Invested incapital assets, net of related debt 605,346 645,802 1,251,148 Restricted fo.

Debt service 12,602 57,252 69,854 Capital projects 12,561 18,631 31,192 Community development 45,602 45,602 Streets and roads 20,443 20,443 Other purposes 4,251 4,817 9,068 Unresricted (deficit) (56,074) 229,051 172,977 Total netassets $ 644,731 $ 955,553 $1,600,284 The accompanying notes are an integral part of these financial statements 21

(This page left blank intentionally) 22

CITY OF ANAHEIM Statement of Activities Year Ended June 30, 2005 (inthousands)

Prorni Revnus

_________________Ne& ~)

NiotAnctand Reveuie Operating Capital Chaiuq for Grants and Grants and Govenumental Busns-type FunationalPrograms -R" Allocation Servioe Contributions Contributions Acfiviu Activitics Total Governmental activities:

General government $18,357 $(10,136) $ 1,442 $ 120 $ (6,659) $ (6,659) police 89,865 1,848 9,840 4,164 $ 152 (77,557)

(77,557)

Fire 45,456 1,140 7,909 494 147 (38,046) (38,046)

Community Development 82,397 786 4,667 57,135 22 (21,359) (21,359)

Planning 12,693 513 6,994 1,242 (4,970) (4,970)

Public Works 38,702 761 6,544 13,611 17,324 (1,984) (1,984)

Community Services 27,774 540 4,985 1,104 579 (21,646) (21,646)

Public Utilities 1,557 (1,557) (1,557)

Convention, Sports and Entertainment 7,703 200 2,682 (4,821) (4,821)

Interest on long-term debt 47,105 (47,05) (47,105)

Total governmental activities 371,609 (4,548) 42,581 77,870 20,906 (225,704) (225,704)

Business-type activities:

Electric Utility 272,594 2,028 284,740 34 1,797 $ 11,949 11,949 Water Utility 40,444 869 43,427 1,402 3,516 3,516 Solid Waste and Sanitation 45,118 311 46,480 1,276 2,327 2,327 Golf Courses 3,931 131 5,394 1,332 1,332 Convention, Sports and Entertainment Venues 45,016 1,209 27,412 1,163 8,314 (9,336) (9,336)

Total business-type activities 407,103 4,548 407,453 2,473 11,513 9,788 9,788 Total government $778,712 $450,034 $80,343 $32,419 (225,704) 9,788 (215,916)

General revenues:

Taxes:

Property taxes 78,620 78,620 Sales and use taxes 61,779 61,779 Transient occupancy taxes 67,141 67,141 Motor vehicle license fees (unrestricted intergovernmental) 2,113 2,113 Other hs 10,175 10,175 Unrestricted investment earnings 8,071 16,592 24,663 Other 1,499 418 1,917 Loss on sale of capital assets (722) (1,164) (1,886)

Transfers 12,400 (12,400)

Total general revenues and transfers 241,076 3,446 244,522 Change in net assets 15,372 13,234 28,606 Net assets at beginning of year 629,359 942,319 1,571,678 Net assets at end of year $644,731 $955,553 $1,600,284 The accompanying notes are an integral part of these financial statements 23

(This page left blank intentionally) 24

CITY OF ANAHEIM Balance Sheet Governmental Funds June 30, 2005 (in thousands)

Nonmajor Total Housing Guvconuntal Gowamoutal General Authority Fund Funds ASSETS Cash and cash equivalents $ 4,972 $ 2,181 S 14,856 $ 22,009 lnvesunents 28,598 9,786 84,841 123,225 Accounts receivable, net 8,484 111 8,595 Accrued interest receivable 293 99 1,035 1,427 Notes receivable 16,446 31,804 48,250 Interfimd receivable 10,272 12,145 22,417 Due from other governments 14,466 322 11,524 26,312 Inventories 164 164 Land held for resale, net 27,866 27,866 Prepaids and other assets 168 1,814 1,982 Restricted cash and cash equivalents 32,776 32,776 Restricted investnents 17,121 17,121 Total assets $67,417 $28,834 $235,893 $332,144 LIABILHI1BS AND FUND BALANCES Liabilities:

Accounts payable $ 3,218 $ 478 $ 11,397 S 15,093 Wages payable 4,043 101 276 4,420 Deposits 3,659 71 983 4,713 lnterfind payable 104 27,012 27,116 Due to other governments 5,734 5,734 Deferred liabilities 7,322 16,768 45,509 69,599 Total liabilities 18,346 23,152 85,177 126,675 Fund balances:

Reserved for noncurrent intcrftmd receivable 9,560 12,016 21,576 Reserved for inventories 164 164 Reserved for debt service 34,872 34,872 Reserved for land held for resale 27,866 27,866 Reserved for prepaids and other assets 168 1,814 1,982 Unreserved - designated for debt service, reported inDebt Service Funds 1,457 1,457 Unreserved - designated for capital projects, reported in:

Special Revenue Funds 14,974 14,974 Capital Projects Funds 36,497 36,497 Unreserved - undesignated, reported in:

General Fund 39,179 39,179 Special Revenue Funds 5,682 25,955 31,637 Capital Projects Funds (4,735) (4,735)

Total fund balances 49,071 5,682 150,716 205,469 Total liabilities and fund balances $67,417 $28,834 $235,893 $332,144 The accompanying notes are an integral part of these finacial statements 25

CITY OF ANAHEIM Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2005 (inthousands)

Total fund balances - governmental funds $ 205,469 Amounts reported for governmental activities inthe Statement of Net Assets are different because:

Capital assets used in the operation of governmental funds are not financial resources and, therefore, are not reported in the funds. These assets consist of:

Land $ 495,006 Construction in progress 39,239 Buildings, structures and improvements 214,399 Machinery and equipment 31,298 Infiastructure 713,165 Accumulated depreciation (344,189)

Total capital assets, net 1,148,918 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 57,764 Internal service funds are used by management to charge the costs of certain activities, such as insurance, employee benefits, and fleet services, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities inthe Statement of Net Assets. 47,148 Compensated absences, not otherwise included inthe internal service funds, are not due and payable in the current period and, therefore, ar not reported inthe funds. (362)

Long-term liabilities of governmental funds, including bonds, certificates of participation, and notes and loans payable ($801,035), and accrued interest payable ($13,171), are not due and payable in the current period and, therefore, are not reported inthe funds. (814,206)

Net assets of governmental activities S 644,731 The wccompanying notes are an integral part of these financial statements 26

CITY OF ANABEIM Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2005 (inthodusads)

No=mjo TOWa Genra AthriyGund Farunaids Gnr ud ud Revenues:

Property taxes S 42,878 $ 39,071 S 81,949 Sales and use taxe 59,976 59,976 Transient occupancy taxes 67,141 67,141 Other taxes 7,542 7,542 Licenses, fees and permits 17,315 S 73 1,361 18,749 Integovenmental revenues 9,511 53,116 38,820 101,447 Charges for services 12,130 12,130 Fines, forfeits and penalties 3,454 3,454 Use of money and property 2,554 382 6,208 9,144 Other 637 1,356 4,150 6,143 Total revenues 223,138 54,927 89,610 367,675 Expendiurs City Council 306 306 City Administration 2,261 2,261 City Attorney 3,627 120 3,747 City Clerk 536 536 Human Resources 1,207 1,207 Finance 3,711 3,711 City Treasurer 508 508 Police 82,721 3,808 86,529 Fire 43,760 422 44,182 Community Development 363 54,651 28,370 83,384 Planning 11,024 1,289 12,313 Public Works 15,609 6,639 22,248 Community Services 24,495 1,229 25,724 Public Utilities 1,557 1,557 Convention, Sports and Entertainment 4,967 173 5,140 Capital outlay 676 953 39,672 41,301 Debt service:

Principal retirement 206 9,928 10,134 Interest and fiscal agent charges 65 38,616 38,681 Total expenditures 197,599 55,604 130,266 383,469 Excess (deficiency) of revenues over (under) expenditures 25,539 J67) (40,656) (15,794)

Other financing sources (uses).

Transfers in 25,974 1,000 72,192 99,166 Transfers out (48,668) (291) (39,318) (88,277)

Issuance of debt 125 7,164 7,289 Litigation claim settlement proceeds 1,250 1,250 Total other financing sources (uses) (21,444) 834 40,038 19,428 Net change in fund balances 4,095 157 (618) 3,634 Fund balances at beginning of year 44,976 5,525 151,334 201,835 Fund balances at end of year S 49,071 $ 5,682 $150,716 $205,469 The accompanying notes are an integral part of these financial statements 27

CITY OF ANAHEAIM Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30,2005 (in thousands)

Net change in fund balances - total governmental funds $ 3,634 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 and reported as depreciation expense.

This is the amount by which capital outlays ($41,301) exceeded depreciation ($23,803) in the current period. 17,498 Transfers of capital assets between governmental funds and proprietary funds do not provide current financial resources and are not reported as transfers in the funds. 1,511 The net effect of other miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net assets. 1,540 Revenues that provide current financial resources in the governmental funds but have been reported in the Statement of Activities in prior fiscal years. (3,731)

Proceeds from long-term debt provide current financial resources to governmental funds, but the issuing of debt increases long-term liabilities in the Statement of Net Assets. (7,289)

Repayment of principal on long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. 10,134 Certain expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (6,644)

Internal service funds are used by management to charge the costs of certain activities, such as insurance, employee benefits, and fleet services, to individual funds. The net expense of the internal service funds is reported with governmental activities. (1,281)

Change in net assets of governmental activities $15,372 The accompanying notes are an integral part of these financial statements 28

CITY OF ANAHBEIM Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Budgetary Basis Actual - General Fund Year Ended June 30, 2005 (inthousands)

Budgetal Amounts Varianoll Fia nBeWith-Oriowna Final Actual Over/(Under)

Revenues:

Property taxes $ 21,724 S 40,018 $ 42,878 $ 2,860 Sales and use taxes 55,659 55,659 59,976 4,317 Transient occupancy taxes 64,194 64,194 67,141 2,947 Other taxes 7,142 7,142 7,542 400 Licenses, fees and permits 17,076 17,412 17,315 (97)

Intergovernmental revenues 21.601 8,625 9,511 886 Charges for services 12,437 12,230 12.130 (100)

Fines, forfeits and penalties 2,896 2,896 3,454 558 Use of money and property 2,318 2,316 2,554 238 Other 66 500 637 137 Total revenues 205,113 210,992 223,138 $12,146 Expenditures:

City Council 309 309 306 (3)

City Administration 2,416 2,422 2,267 (155)

City Attorney 3,627 3,627 3,627 (0)

City Clerk 547 551 536 (15)

Human Resources 1,215 1,215 1,207 (8)

Finance 3,833 3,837 3.711 (126)

City Treasurer 580 580 508 (72)

Police 80,488 83,329 83,252 (77)

Fire 41,598 44,264 43,773 (491)

Community Development 313 363 363 0 Planning 11,324 11,770 11,024 (746)

Public Works 14,001 16,421 15,655 (766)

Community Services 25,617 26,326 24,846 (1,480)

Public Utilities 1,592 1,592 1,557 (35)

Convention, Sports and Entertainment 4,841 4,975 4,967 (8)

Total expenditures 192,301 201,581 197,599 (3,982)

Excess of revenues over expenditures 12,812 9,411 25,539 16,128 Other financing sources (uses):

Transfers in 26,557 26,557 25,974 (583)

Transfirs out (42,621) (48,024) (48,668) (644)

Litigation claim settlement proceeds 1,250 1,250 Total other financing uses (16,064) (21,467) (21,444 23 Net change infund balance (3,252) (12.056) 4,095 16,151 Fund balance at beginning of year 44,976 44,976 44,976 Fund balance at end of year $ 41,724 S 32,920 $ 49,071 $16,151 The accomp*nying notes are an integral part of these financial statements 29

CITY OF ANAHEIM Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Housing Authority Year Ended June 30, 2005 (inthousands)

Vanaane with B_ __ _t__Amounts Finl Budget -

Original Final ActUal Over/(Under)

Revenues:

Licenses, fees and permits $ 80 $ 80 $ 73 $ (7)

Intergovernmental revenues 60,116 62,950 53,116 (9,834)

Use of money and property 263 263 382 119 Other 797 797 1,356 559 Total revenues 61,256 64,090 54,927 (9,163)

Expenditures:

Community Development 68,346 72,077 55,604 (16,473)

Total expenditures 68,346 72,077 55,604 (16,473)

Deficiency of revenues under expenditures (7,090) (7,987) (677) 7,310 Other financing sources (uses):

Transfers in 150 150 1,000 850 Transfers out (1,216) (303) (291) 12 Issuance of debt 1,920 1,920 125 (1,795)

Sales of capital assets 3,165 3,165 (3,165)

Total other financing sources 4,019 4,932 834 (4,098)

Excess (deficiency) of revenues and other sources over (under) expenditures and other uses (3,071) (3,055) 157 3,212 Fund balance at beginning of year 5,525 5,525 5,525 Fund balance at end of year $ 2,454 S 2,470 S 5,682 $ 3,212 The accompanying notes ame an integral part of these fmancial statements 30

CrrY OF ANAhEIM Statement of Fund Net Assets Proprietary Funds June 30, 2005 (inthousands)

Businuayp Aadvtie - Enterprise Minds Govammetal Conv"i4 Activites -

Sports and Intenal Electri& Water Golf Entertainment Servic Utility Utility Sanitation Counes Vanua Total Funds ASSETS Current assets:

Cash and cash equivalents S 19,742 $ 4,711 $ 3,993 $ 49 $ 4,669 $ 33,164 $ 20,921 Investments 115,015 27,443 23,247 288 26,484 192,477 120,408 Restricted cash and cash equivalents 6,824 1,000 7,824 Restricted investments 9,714 2,140 11,854 539 Accounts receivable, net 31,726 5,918 6,860 106 1,061 45,671 Accrued interest receivable 2,605 324 236 1 699 3,865 1,135 Interfund receivable 280 280 Inventories 7,274 178 8 7,460 632 Bond payment receivable 1,260 1,260 Prepaids and other assets 349 343 2 694 19 Total current assets 193,529 42,057 34,336 444 34,183 304,549 143,654 Noncurrent assets:

Restricted cash and cash equivalents 795 795 17 Restricted investments 261,655 3,686 15,773 281,114 473 Unamortized debt issuance costs 5,993 222 1,465 7,680 11 Bond payment receivable, less current portion 18,282 18,282 Pipeline receivable 405 405 Interfund receivable, less current portion 700 10,699 11,399 104 Prepaids and other assets 21,811 21,811 Capital assets:

Land 14,308 1,573 316 1,949 18,135 36,281 Buildings, structures and improvements 48 15,581 462,005 477,634 6,603 Utility plant 863,555 288,774 1,152,329 Machinery and equipment 4,116 770 25,557 30,443 47,770 Construction in progress 24,30 5 2,650 _ _ i_ 4 8 _ 18 ,30 996 27,951 6,866 902,168 292,997 4,480 18,300 506,693 1,724,638 61,239 Less accumulated depreciation (335,674) (75,301) (3,721) (5,789) (133,956) (554,441) (32,853)

Nuclear fuel, at amortized cost 2,197 2,197 Capital assets, net 568,691 217,696 759 12,511 372,737 1,172,394 28,386 Total noncurrent assets 858,850 222,009 759 12,511 419,751 1,513,880 28,991 Total assets 1,052,379 264,066 35,095 12,955 453,934 1,818,429 172,645 (contiWed) 31

CiTY OF ANAHEBIM Statement of Fund Net Assets Proprietary Funds June 30, 2005 (n thousands) (continued)

Busniess-typ Activities - Enterprise Funds Gowvenental Acfiviti-Goo Internal Electric Water Santaton Golf. Entertakinent service Utilty Uay Sanitaion Corses aes Total Funds LIABUTI, ES Current liabilities (payable from current assets):

Accounts payable $ 11,492 $ 5,419 S 3,511 $ 74 $ 1,930 $ 22,426 $ 5,407 Wages payable 680 157 96 13 373 1,319 1,071 Interest payable 2,134 2,134 46 Compensated absences 16,222 Long-term obligations 3,546 180 7,837 11,563 16,398 Unearned revenues 1,015 1,015 596 Deposits 5,479 2,236 800 5 1,622 10,142 Interfund payable 548 280 828 Regulatory credits 36,497 162 36,659 Total current liabilities (payable from current assets) 57,694 8,154 4,407 640 15,191 86,086 39,740 Current liabilities (payable from restricted assets):

Accounts payable 382 382 Wages payable 29 29 Interest payable 6,347 350 6,697 Arbitrage rebate liability 181 2 183 Long-term obligations 9,599 2,788 12,387 Total acrrent liabilities (payable from restricted assets) 16,538 3,140 19,678 Total current liabilities 74,232 11,294 4,407 640 15,191 105,764 39,740 Noncurrent liabilities:

Interflnd payable, less current portion 5,556 700 6,256 Long-term obligations, less current portion 501,981 24,483 126,690 653,154 89,677 Provision for decommissioning costs 93,782 93,782 Total noncurrent liabilities 595,763 24,483 5,556 127,390 753,192 89,677 Total liabilities 669,995 35,777 4,407 6,196 142,581 858,956 129,417 FUND NET ASSETS Invested in capital assets, net of related debt 177,746 190,467 759 12,511 264,319 645,802 26,291 Restricted for.

Debt service 43,623 4,297 9,332 57,252 446 Capital projects 10,844 2,177 5,610 18,631 Other purposes 4,817 4,817 Unrestricted (deficit) 145,354 31,348 29,929 (5,752) 32,092 232,971 16,491 Total fund net assets $ 382,384 $228,289 $30,688 $ 6,759 $311,353 959,473 $ 43,228 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. (3,920)

Net assets of business-type activities $955,553 32 The accompanying notes are an integral part of these financial statements

CITY OF ANAHEIM Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds Year Ended June 30, 2005 (Inthousads)

Bwsinea-yp Activitiesa- Enterpriae Fundh Goverimental Acivitie -

Sports and Internal Electric Water Golf Entertainment Sevice Utility Ut$2ty Sanitation Courses Vmuea Total Funds Operating revenues:

Sales of light and power $257,406 $257,406 Transmission revenues 24,085 24,085 Sales of water S 42,336 42,336 Sanitation fees $45,156 45,156 Green fees and cart rentals $ 5,013 5,013 Facilities rental $ 23,253 23,253 Concession fees 181 3,107 3,288 Other 3,249 1,091 1,324 200 1,052 6,916 $112,990 Total operating revenues 284,740 43,427 46,480 5,394 27,412 407,453 112,990 Operatin e=pPnses 146,472 146,472 Fuel and generation of power 37,114 37,114 Cost of purchased water 17,759 17,759 Treatment and pumping of water 3,401 3,401 Maintenance, operations and administation 34,976 12,152 44,928 3,342 25,555 120,953 29,662 Insurance premiums and claims 11,691 Compensated absences and other benefits 73,592 Depreciation and amortization 29,764 6,539 388 579 12,376 49,646 3,788 Total operating expenses 248,326 39,851 45,316 3,921 37,931 375,345 118,733 Operating income (loss) 36,414 3,576 1,164 1,473 (10,519) 32,108 (5,743)

Nonoperating income (expenses):

Intergovernmental revenues 34 1,276 1,310 Interest income 12,669 1,057 658 5 2,203 16,592 3,167 Debt service recovery 1,163 1,163 Other nanoperating income 418 418 Interest expense (25,730) (1,010) (141) (8,068) (34,949) (149)

Gain/(loss) from disposal of capital assets (38) (1,126) (1,164) 87 Total nonoperating income (expenses) (13,027) (16,630) 465 1,896 (136) (5,828) 3,105 Income (loss) before contributions and transfers 23,387 4,041 3,060 1,337 (16,347) 15,478 (2,638)

Capital contributions 2,277 1,402 8,314 11,993 2,183 Transfers in 3,248 142 11,465 14,855 Transfers out (15,611) (7,403) (3,021) (1.700) (27,735)

Change in fund net assets 13,301 (1,960) 39 (221) 3,432 14,591 (455)

Fund net assets at beginning of year 369,083 230,249 30,649 6,980 307,921 43,683 Fund net assets at end of year $382,384 $228,289 $30,688 $ 6,759 $311,353 $ 43,228 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. (1,357)

Change innet assets of business-type activities $ 13,234 The accompanying notes are an integral part of these financial statements 33

CITY OF ANAhEIM Statement of Cash Flows Proprietary Funds Year Ended June 30, 2005 (Inthousads)

Businea-type Ativities - Enterprise Funds Governmmal Activities-Sports and Internal Electric Water Golf Entertainment Service Utilty Uiity Sanitation Coursit -Vaues Total Funds Cash flows fiom operating activities:

Receipts from customers and users $ 297,024 $ 43,037 $43,992 $5,161 S 27,961 $ 417,175 Receipts from interfund services provided 1,691 270 34 1,995 $112,975 Payments to suppliers (186,831) (21,941) (38,326) (2,894) (7,842) (257,834) (16,644)

Payments to employees (26,323) (8,924) (3,745) (458) (14,482) (53,932) (75,044)

Payments for interfund services used (8,429) (3,634) (2,415) (211) (1,938) (16,627) (2,332)

Payments for insurance premiums and claims (7,792)

Other receipts (payments) 418 1,290 200 1,908 (89)

Net cash provided by operating activities 77,132 9,226 830 1,798 3,699 92,685 11,074 Cash flows from noncapital financing activities:

Receipt (payment) of interfund balances 280 434 714 368 Transfers in 11,465 11,465 Transfers out (15,216) (2,417) (3,021) (1,700) (22,354)

Operating grant receipts 34 1,276 1,310 Net cash provided by (used in) noncapital fMnancing activities (14,902) (2,417) (1,745) (1,700) 11,899 (8,865) 368 Cash flows from capital and telated financing acivities:

Proceeds from sale of capital assets 162 162 105 Capital contributions 1,527 87 1,614 Capital purchases (46,179) (8,618) (44) (1,766) (56,607) (10,250)

Nuclear fuel purchases (966) (966)

Debt service recovery 2,338 2,338 Principal payments on long-term debt (485)

(15,875) (2,401) (7,565) (25,841)

Interest payments (25,008) (993) (124) (7,357) (33,482) (153)

Receipt (payment) of interfund balances for capital purposes (144) (280) (424)

Net cash used in capital and related financing activities (86,501) (11,763) (312) (14.630) (113,206) (10,783)

Cuah flar fiom investing aWivities:

Purchase of investment securities (982,349) (80,751) (58,845) (546) (110,629) (1,233,120) (309,909)

Proceeds from sale and maturity of investment securities 989,558 85,771 60,001 743 108,506 1,244,579 311,573 Interest received 14,822 1,478 943 II 2,519 19,773 4,571 Collection of note receivable 73 73 Net cash provided by investing activities 22,031 6,571 2,099 208 396 31,305 6,235 Increase (decrease) in cash and cash equivalents (2,240) 1,617 1,184 (6) 1,364 1,919 6,894 Cash and cash equivalents at beginning of the year 28,806 4,094 2,809 55 4,100 39,864 14,044 Cash and cash equivalents at end of the year $ 26,566 $ 5,711 $ 3,993 $ 49 $ 5,464 $ 41,783 $ 20,938 34 (continued)

CITY OF ANAHEIM Statement of Cash Flows Proprietary Funds Year Ended June 30, 2005(In thousands) (continued)

Business-ype Activitie - Enterris Funds Governmental Conveion. Activities-Electric Water sports and LAterMi Golf Entortainment Service utiity Utility Sanitation Courm Venues Total Funds Reconclation of operating income los) to net cash prnided by operating activites:

Operating income (loss) $36,414 $ 3,576 $1,164 $1,473 $(10,519) $32,108 S(5,743 Adjustment to reconcile operating income (loss) to net cash provided by operating activities:

Depreciation and amortization 29,764 6,539 388 579 12,376 49,646 3,788 Amortization of nuclear fuel 1,499 1,499 Increase in provision for decommissioning costs 3,483 3,483 Other nonoperating income 418 418 Changes in assets and liabilities:

Accounts receivable 5,113 57 (1,248) (37) 216 4,101 91 Inventories (1,099) (14) 2 (1,111) (100)

Prepaids and other assets (4,300) (79) (4,379) 71 Accounts payable (2,677) (1,030) 440 (221) 1,322 (2,166) 2,182 Wages payable 73 (64) 2 (29) (18) 340 Unearned revenues 47 47 31 Compensated absences post retirement and self-insurance liabilities 10,414 Deposits (516) (177) 84 4 284 (321)

Regulatory credits 9,378 9,378 Total adjustments 40,718 5,650 (334) 325 14,218 60,577 16,817 Net cash provided by operating activities $77,132 $ 9,226 $ 830 $1,798 $ 3,699 $92,685 $11,074 Schldle of noncash investing, capital and finamin activities:

Capital contributions $ 270 $ 1,315 $ 8,314 $ 9,899 Transfers in (out) of capital assets 85 (1,738) $ 142 (1,511) $ 2,183 Transfers in (out) of other assets 3,248 (3,248)

Decrease in fair value of investments (2,223) (414) $ (316) (4) (354) (3,311) (1,476)

Reconciliation of cash and cash equivalents:

Cash and cash equivalents $19,742 $ 4,711 $33,993 $ 49 $ 4,669 $33,164 $20,921 Restricted cash and cash equivalents, current portion 6,824 1,000 7,824 Restricted cash and cash equivalents, noncurrent portion 795 795 17 Total cash and cash equivalents $26,566 $ 5,711 $33,993 $ 49 $ 5,464 $41,783 $20,938 The accompanying notes are an integral part of these financial statements 35

CITY OF ANAHEIM Statement of Fiduciary Assets and Liabilities Agency Fund - Mello-Roos June 30, 2005 (inthousands)

ASSEIS Restricted cash and cash equivalents $3,554 Due from other governments 43 Total assets $3,597 LIABIIUTIES Due to bond holders $3,597 The accompanying notes are an integral part of thwe financial sttements 36

CITY OF ANAHEIM Notes to Financial Statements governmental activities and in the fund fimancial statements as the Redevelopment Housing Set-Aside Special Revenue Fund, the Redevelopment Agency Debt Service Fund, (Amounts in thousands) and the Redevelopment Agency Capital Projects Fund. For a copy of separate financial NOTE 1 -

SUMMARY

OF SIGNIFICANTACCOUNTINO POLICIES: statements, contact the Finance Director of the City.

Community Center Authoritv (CCA), a joint powers authority, was created primarily to The financial reporting entity finance the initial construction of the Anaheim Convention Center. A five-member board As defined by accounting principles generally accepted in the United States of America appointed by the City Council governs the CCA. The City has entered into a noncancelable (GAAP) that are established by the Governmental Accounting Standards Board (GASB), long-term lease with the CCA, which provides for lease payments in amounts sufficient to the financial reporting entity consists of the primary government, as well as its component meet the annual debt service requirements on the certificates of participation issued by the units, which are legally separate organizations for which the elected officials of the CCA to fimance the construction of the facility. The lease is a financing arrangement, primary government are financially accountable. Financial accountability is defined as which transfers the ownership of the facility to the City at the end of the lease term, and appointment of a voting majority of the component unit's board, and either a) the ability the sole activity ofthe CCA is to provide financing for the City. As such, the financial data to impose will by the primary government, or b) the possibility that the component unit for the CCA has been blended into the City's CAFR in the government-wide business-type will provide a financial benefit to or impose a financial burden on the primary activities and in the fund fimancial statements with the City's Convention, Sports and government. Entertainment Venues Fund, as all activity related to the Anaheim Convention Center is accounted for in this enterprise fund. The capital lease has been eliminated in the financial statements. For a copy of separate f'mancial statements, contact the Finance Director of the The accompanying financial statements present the City of Anaheim (City), the primary government, and its component units. The fimancial data of the component units are City.

included in the City's reporting entity because of the significance of their operational or Anaheim Public Improvement Corporation (APIC. a non-profit corporation, was created financial relationships with the City.

primarily to finance several construction projects in the City. City Council members, in The component units described below are each legally separate from the City, but are so separate session, serve as the governing board of APIC. The City has entered into intertwined with the City that they are, in substance, the same as the City. They are noncancelable long-term leases with APIC, which provide for lease payments in amounts reported as part of and accountable to the City and blended into the government-wide and sufficient to meet the annual debt service requirements on the certificates of participation fund financial statements. issued by APIC to friance these construction projects. The leases are financing arrangements, which transfer ownership of the constructed assets to the City at the end of the lease terms. The fimancial data of APIC has been blended into various governmental Anaheim Housing Authorbv (lHousing Authoritlv is a separate entity primarily funded by the US. Department of Housing and Urban Development to administer funds received and business-type activities and funds of the City as applicable, and the capital leases have under the Federal Housing Assistance Payments program. City Council members, in been eliminated.

separate session, serve as the governing board of the Housing Authority, and all accounting and administrative functions are performed by the City. The financial activity Anaheim Public Financing Authori (Authority), ajoint powers authority, was established of the Housing Authority has been blended into the City's Comprehensive Annual as a vehicle to reduce local borrowing costs and promote greater use of existing and new Financial Report (CAFR) in the government-wide governmental activities and in the fund financial instruments and mechanisms. City Council members, in separate session, serve financial statements as the Housing Authority Special Revenue Fund. as the governing board of the Authority. Financial activity of the Authority has been blended into the City's CAFR into various governmental and business-type activities and Anaheim Redevelopment Azencv (Redevelopment Agencvy is a separate government funds of the City as applicable.

entity created to develop and execute plans for improvement, rehabilitation and redevelopment of blighted areas within the City. City Council members, in separate The City is a participant in four joint ventures and jointly-owned properties (see note 10),

session, serve as the governing board of the Redevelopment Agency, and all accounting which am not considered part of the financial reporting entity, as the City does not have and administrative functions are performed by the City. The financial activity of the any significant equity interests in the joint ventures and jointly-owned properties.

Redevelopment Agency has been blended into the City's CAFR in the government-wide 37

CY OF ANAHEIM Baske financa statemmt function or program. Indirect expenses for administrative overhead are allocated among the functions and programs using a full cost allocation approach and are presented In accordance with GASB Statement No. 34 - Basic Financial Statements and separately to enhance comparability of direct expenses between governments that allocate Managemvntý Discussion and Analysis for State and Local Govemments, the basic direct expenses and those that do not. Interest on general long-term debt is not allocated financial statements include both government-wide and fund financial statements. to the various functions. Program revenues include: i) charges to customers or users who purchase, use or directly benefit from goods, services or privileges provided by a The government-wide financial statements (Statement of Net Assets and Statement of particular function or program and 2) grants and contributions that are restricted to Activities) report on the City and its component units as a whole, excluding fiduciary meeting the operational or capital requirements of a particular function or program. Taxes, activities. Governmental activities, which normally are supported by taxes and unrestricted investment income and other revenues not identifiable with particular intergovernmental revenues, are reported separately from business-type activities, which functions or programs are included as general revenues. The general revenues support the rely to a significant extent on fees and charges for support. All activities, both net costs of the functions and programs not covered by program revenues.

governmental and business-type, are reported in the government-wide financial statements using the economic resources measurement focus and the accrual basis of Also, part of the basic financial statements are fund financial statements for governmental accounting, which includes long-term assets and receivables as well as long-term debt and funds, proprietary funds and fiduciary funds, even though the lat are excluded from the obligations. The government-wide financial statements focus more on the sustainability of government-wide financial statements. The focus of the fund financial statements is on the City as an entity and the change in aggregate financial position resulting from the major funds, as defined by GASB Statement No. 34. Although this reporting model sets activities of the fiscal period. forth minimum criteria for determination of major funds (a percentage of assets, liabilities, revenues, or expenditures/expenses of fund category and of the governmental and Generally, the effect of interfund activity has been removed from the government-wide enterprise funds combined), it also gives governments the option of displaying other funds financial statements. Net interfund activity and balances between governmental activities as major funds. Other nonmajor funds, as well as the internal service funds, are combined and business-type activities are shown in the government-wide financial statements. The in a single column on the fund financial statements.

"doubling up" effect of internal service fund activity has been eliminated from the government-wide financial statements with the expenses shown in the various functions The City reports the following major governmental funds:

and programs on the Statement ofActivities.

The General Fund is the City's primary operating fund. It accounts for all financial The government-wide Statement of Net Assets reports all financial and capital resources resources of the general government, except those required to be accounted for in of the City (excluding fiduciary funds). It is displayed in a format of assets less liabilities another fund.

equal net assets, with the assets and liabilities shown in order oftheir relative liquidity. Net assets are required to be displayed in three components: 1) invested in capital assets, net The Housing Authority Special Revenue Fund accounts for the providing of housing of related debt, 2) restricted, and 3) unrestricted. Invested in capital assets, net of related assistance to low and moderate-income families in the Anaheim area. Financing is debt is capital assets net of accumulated depreciation and reduced by outstanding balances provided primarily from Federal Section 8, US. Department of Housing and Urban of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, Development (HUD) receipts.

construction, or improvement of those assets. Restricted net assets are those with constraints placed on their use by either. 1) externally imposed by creditors (such as The City reports the following major enterprise funds:

through debt covenants), grantors, contributors, or laws or regulations of other governments, or 2) imposed by law through constitutional provisions or enabling The Electric Utility Fund accounts for the operation of the City's electric utility, a self-legislation. All net assets not otherwise classified as restricted, are shown as unrestricted. supporting activity, which renders services on a user charge basis to residents and Generally, the City would first apply restricted resources when an expense is incurred for businesses located in Anaheim.

purposes for which both restricted and unrestricted net assets are available.

The Water Utility Fund accounts for the operation of the City's water utility, a self-The government-wide Statement of Activities demonstrates the degree to which both supporting activity, which renders services on a user charge basis to residents and direct and indirect expenses of the various functions and programs of the City are offset businesses located in Anaheim.

by program revenues. Direct expenses are those that are clearly identifiable with a specific 38

CITY OF ANAHEIM The Sanitation Fund accounts for the operation of the City's solid waste and sanitation With this measurement focus, operating statements present increases and decreases in net program, a self-supporting activity, which provides for the collection and disposal of current assets and unreserved fund balance as a measure of available spendable resources.

solid waste, street sweeping, and sanitary sewer cleaning on a user charge basis to residents and businesses located in Anaheim. This is the traditional basis of accounting for governmental funds and also is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate The Golf Courses Fund accounts for the operation of the Anaheim Municipal ("Dad to: 1) demonstrate legal and covenant compliance, 2) demonstrate the sources and uses of Miller") Golf Course and the Anaheim Hills Golf Course, a self-supporting activity that liquid resources, and 3) demonstrate how the City's actual revenues and expenditures renders services on a user charge basis. conform to the annual budget. Since the governmental funds financial statements are presented on a different basis than the governmental activities column of the government-The Convention, Sports and Entertainment Venues Fund accounts for the operations of wide financial statements, a reconciliation is provided immediately following each fund the Anaheim Convention Center, Stadium (Angel Stadium of Anaheim, home to the statement. These reconciliations briefly explain the adjustments necessary to transform the Anaheim Angels of the American Baseball League), and The Grove of Anaheim. See fund financial statements into the governmental activities column of the government-wide note 11 for further discussions of the Stadium and The Grove of Anaheim. financial statements.

The internal service funds, which provide services to the other funds of the City, are The proprietary funds financial statements are prepared on the same basis (economic presented in a single column in the proprietary funds fnmancial statements. Because the resources measurement focus and accrual basis of accounting) as the government-wide principal users of the internal service funds are the City's governmental activities, the financial statements. Therefore, most lines for the total enterprise funds on the proprietary assets and liabilities of the internal service funds are consolidated into the governmental funds financial statements will directly reconcile to the business-type activities column on activities column of the government-wide Statement of Net Assets. The costs of the the government-wide financial statements. Because the enterprise funds are combined into internal service fund services are spread to the appropriate function or program on the a single business-type activities column on the government-wide financial statements, government-wide Statement of Activities and the revenues and expenses within the certain interfimd activities between these funds are eliminated in the consolidation for the internal service funds are eliminated from the government-wide financial statements to government-wide financial statements, but are included in the fund columns in the avoid any doubling effect of these revenues and expenses. proprietary funds financial statements. The net costs of the internal service funds are also partially allocated to the business-type activities column on the government-wide financial Mesurcmt focsw and bask of accounting statements. A reconciliation of the total enterprise funds on the fund financial statements to the business-type activities column on the government-wide financial statements is The governmental fund financial statements are prepared on a current financial resources provided on the face of the fund financial statements.

measurement focus and modified accrual basis of accounting. To conform to the modified accrual basis of accounting, certain modifications must be made to the accrual method. Enterprise funds account for operations where the intent of the City is that the costs of These modifications are outlined below: providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges and space rentals. Under GASB Statement No.

A. Revenue is recorded when it becomes both measurable and available (received 34, enterprise funds are also required for any activity whose principal revenue sources within 60 days after year-end). Revenue considered susceptible to accrual includes: meet any of the following criteria: 1) any activity that has issued debt backed solely by property taxes, sales and use taxes, transient occupancy taxes, licenses, fees and the fees and charges of the activity, 2) if the cost of providing services for an activity, permits, intergovernmental revenues (including motor vehicle license fees), including capital costs such as depreciation or debt service, must legally be recovered charges for services, fines, forfeits and penalties, and interest through fees and charges, or it is the policy of the City to establish activity fees or charges to recover the cost of providing services, including capital costs.

B. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general long-term debt are recorded as fund liabilities when due or On the proprietary funds financial statements, operating revenues are those that flow when amounts have been accumulated in the debt service fund for payments to be directly from the operations of the activity, Le. charges to customers or users who purchase made early in the following year. or use the goods or services of that activity. Operating expenses are those that are incurred to provide those goods or services. Non-operating revenues and expenses are items such C. Disbursements for the purchase of capital assets providing future benefits are as investment income and interest expense that are not a result of the direct operations of considered expenditures. Bond proceeds are reported as an other financing source. the activity.

39

CITY OF ANAHEIM Under GASB Statement No. 20, Accounting and FinancialReporting for Proprietary In the governmental funds fmancial statements, due to the extended period of time over Funds and Other Governmental Eatities That Use PropnetaryFundAccountmn the City which notes receivable ame to be collected and the contingent nature of certain sources of has elected for enterprise funds not to apply Financial Accounting Standards Board repayment, the City has generally not recorded the related accrued interest and has recorded (FASB) statements issued after November 30, 1989. deferred revenue equal to the outstanding principal balance of the notes receivable.

The Utility funds follow the uniform system of accounts prescribed by the Federal Energy Regulatory Commission (Electric Utility) and the California Public Utilities Commission (Water Utility). The Utilities are not subject to the regulations of these commissions. Inventories, as determined by annual physical counts, are stated at average cost.

Inventories in the General Fund are recorded as expenditures when used and are reported Fiduciary funds account for assets held by the City in a trustee or agency capacity on under the consumption method of accounting.

behalf of others and, therefore, are not available to support City programs. The reporting focus is upon net assets and changes in net assets and employs accounting principles Land held for reasl similar to proprietary funds. Fiduciary funds are not included in the government-wide financial statements as they are not an asset of the City available to support City programs. The Redevelopment Agency has acquired parcels of land as part of their primary purpose The City currently maintains an agency fund to account for the monies collected and paid to develop or redevelop blighted areas. The Redevelopment Agency records these parcels on behalf of the Mello-Roos Districts located in the City. as land held for resale in their financial records. The properties held for resale are recorded at the lower of cost or estimated net realizable value. At June 30, 2005, land held for resale Cash and Ineshoents with a cost of $57,212 was recorded net of the allowance for decline in value of $29,346 and totaled $27,866, with this amount offset by a reservation of fund balance in the The City pools available cash from all funds for the purpose of increasing income through governmental funds financial statements.

investment activities. Investments in U.S. government and agency securities and corporate notes are carried at fair value based on quoted market prices. Participating guaranteed Rtatricted assets investment contracts and flexible repurchase agreements are carried at fair value based on net realizable value. Money market mutual funds am carried at fair value based on the Certain proceeds of the City's bonds, as well as certain resources set aside for their fund's share price. The City's investment in the State of California Local Agency repayment, are classified as restricted on the Statement of Net Assets, Balance Sheet, or Investment Fund (LAIF) is carried at fair value based on the value of each participating Statement of Fund Net Assets, because they are maintained in separate bank accounts and dollar as provided by LAIF LAW is authorized by California Government Code Section their use is limited by applicable debt covenants. Additionally, resources set aside by the 16429 under the oversight of the Treasurer of the State of California. Commercial paper, Electric Utility for future decommissioning of its ownership share of the units at San non-participating guaranteed investment contracts and negotiable certificates of deposit Onofre Nuclear Generating Station, Units 2 and 3 (SONGS) are classified as restricted are carried at amortized cost (which approximates fair value). Interest income, which on both the government-wide Statement of Net Assets and proprietary funds Statement of includes changes in fair value, on investments is allocated to all funds on the basis of daily Fund Net Assets.

cash and investment balances. See note 2 for further discussion.

Capital assets For purposes of the basic financial statements, the City considers cash equivalents to be highly liquid short-term investments that are readily convertible to known amounts of cash Under GASB Statement No. 34, all capital assets, whether owned by governmental and mature within three months of the date they are acquired. Cash and cash equivalents activities or business-type activities are recorded and depreciated in the government-wide are included in the City's cash and investments pool and in accounts held by fiscal agents. financial statements. No long-term capital assets or depreciation are shown in the governmental funds financial statements.

Notes reeivable Capital assets, including public domain infrastructure (e.g., roads, bridges, sidewalks and In the government-wide financial statements, notes receivable includes accrued interest other assets that are immovable and of value only to the City) are defimed as assets with receivable of $9,324 ranging from 3% to 10% interest rate per annum, net of allowances of an initial, individual cost of more than $5 ($50 for infrastructure) and an estimated useful

$13,477 for uncollectible accounts at June 30, 2005. Allowances for uncollectible accounts life greater than one year. Capital assets are recorded at cost or estimated historical cost if

%treestimated based on certain assumptions; therefore, actual results could differ from the purchased or constructed. Donated capital assets are recorded at the estimated fair market estimates. value at the date of donation. 40

CrrY OF ANAHBEIM The costs of normal maintenance and repairs that do not add to the value of the capital electricity for differences between the Electric Utility's actual cost of power and the amount asset or materially extend capital assets lives are not capitalized Major improvements are billed to customers through standard rates. The over or under collections are recorded as capitalized and depreciated over the remaining useful lives of the related capital assets. regulatory credits until they are refunded to or recovered from utility customers. The Electric Utility obtained Council approval to change the rate from $0.00 to approximately $0.0049 Major outlays for capital assets and improvements are capitalized as the projects are for all retail kilowatt (kWh) sales of electricity except residential lifeline usage beginning constructed. Interest incurred during the construction phase of projects is reflected in the April 1,2001. At June 30, 2005, the liability recorded for regulatory credits totaled $36,497 capitalized value of the asset constructed for proprietary funds. For the year ended June for the Electric Utility.

30, 2005, business-type activities capitalized net interest costs of $1,702 in the government-wide and fund financial statements. Total interest expense incurred by the The Water Utility's rates, rules and regulations provide for a water rate stabilization account business-type activities (and the enterprise funds on the proprietary funds statements) to reflect variations in the cost of water to the Water Utility. This stabilization account before capitalization was $36,651. provides increased flexibility by allowing the adjustment of revenues from the sale of water for differences between the Water Utility's actual cost of water and the amount billed to Capital assets are depreciated using the straight-line method over the following estimated customers through standard rates. The account is funded through expense reimbursements useful lives: such as water supply cost refiuds received from the Metropolitan Water District and Orange County Water District and other miscellaneous credits and revenue. At June 30, 2005, the Buildings, structures and improvements 5 to 85 years liability recorded for regulatory credits totaled $162 for the Water Utility.

Utility plant 5 to 75 years Machinery and equipment 2 to 40 years Deferrd liabilities Infrastructure 25 to 75 years Deferred liabilities arise in governmental funds when revenue does not meet both the Capital assets transferred between funds are transferred at their net book value (cost less "measurable" and "available" criteria for recognition in the current period. Deferred accumulated depreciation), as of the date of the transfer. liabilities also arise, in both governmental and proprietary funds, when resources are received by the government before it has a legal claim to thean, as when grant monies are received prior Debt cots to incurring qualifying expenditures (unearned). In subsequent periods, when both revenue recognition criteria are met, or when the government has a legal claim to the resources, Debt issuance costs in the amount of $7,691 are included in noncurrent assets at June 30, revenue is recognized Deferred liabilities in the governmental funds amounted to $69,599 2005. Unamortized discounts includes unamortized loss on refundings of S 1,312 and has at June 30, 2005. Of this amount, $48,250 represents notes receivable that did not meet the been reduced by unamortized premiums net of unamortized discounts of $8,071, and are available criterion, $13,667 represents various other revenues that did not meet the available reflected in net long-term obligations. Both debt issuance costs and discounts are criterion, and $7,682 represents resources for which the City did not have legal claim.

amortized over the lives of the related bond issues using the effective interest method.

Compensate absomce Accwtion.

Compensated absences, vacation and sick pay, for all City employees are generally paid Accretion is an adjustment of the difference between the price of a bond or certificate of by the General Benefits and Insurance Fund, an internal service fund. The General participation (COP) issued at an original discount and the par value of the bond or COP. Benefits and Insurance Fund is reimbursed through payroll charges to all other funds For the governmental activities debt, the accreted value is recognized as it accrues by fiscal based on estimates of benefits to be earned and used during the fiscal year. It is the policy year. For the business-type activities debt, the accreted value at maturity is recognized at of the City to pay all accumulated vacation pay when an employee retires or terminates.

the time of issuance with an offset to bond or COP discount. Accumulated sick pay in excess of 175 hours0.00203 days <br />0.0486 hours <br />2.893519e-4 weeks <br />6.65875e-5 months <br /> per employee is paid to employees at their then current rate ofpay in January each year or upon termination from the City. Employees Regulatory codits are paid for all accumulated sick pay when they retire from the City. Vested vacation and sick pay benefits are accrued when incurred in the General Benefits and Insurance Fund The Electric Utility's rates, rules and regulations provide for a power cost adjustment billing and at June 30, 2005, totaled $16,222. Also included in the statement ofNet Assets at June factor to reflect variations in the cost of power to the Electric Utility. This billing factor 30,2005, is compensatory time liability of $362. The total compensated absences liability provides increased flexibility by allowing the adjustment of revenues from the sale of of $16,584 is included in wages payable in the Statement of Net Assets at June 30, 2005.

41

CITY OF ANAHEIM Changes in the City's compensated absences liability in fiscal year 2005 were as follows: approved by City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the Compensated absences liability at beginning of year $ 15,254 department level. From the effective date of the budget, the amounts stated therein as Current year compensated absences benefits earned 17,940 proposed expenditures/expenses become appropriations to the various City departments.

Current year compensated absences used (16,610 Throughout the fiscal year the budget was amended to add supplemental appropriations.

Compensated absences liability at end of year $ 16,584 All amendments to the budget which change the total appropriation amount for any department require City Council approval and all increases in appropriations must be Nuclea fhio and decom1ssoningr co-Ats accompanied by an increase in revenue sources of a like amount to maintain a balanced budget. The City Manager has the authority to change individual budget line items within The Electric Utility amortizes the cost of nuclear fuel to expense using the "as burned" a department as long as the total department's appropriation amount is not changed.

method. In accordance with the Nuclear Waste Disposal Act of 1982, the Electric Utility is chaiged a fee for the disposal of nuclear fuel at the rate of one mill per kWh on the The City utilizes an encumbrance system as a management control technique to assist in Electric Utility's share of electricity generated by SONGS. The Electric Utility pays the fee controlling expenditures. All appropriations lapse at the end of the fiscal year, except for quarterly to Southern California Edison Company (SCE), which is acting as the agent for capital projects (other than the Redevelopment Agency Capital Projects Fund), which are SONGS participants. Federal regulations also require the participants to provide for the carried forward until such time as the project is completed or terminated and for future costs of decommissioning SONGS. Decommissioning costs are charged to encumbered balances that are re-appropriated in the next year.

operating expenses and are provided for over the remaining life of the plant. At June 30, 2005, the provision for decommissioning costs totaled $93,782. GASB Statement No. 34 requires that budgetary comparison statements for the General Fund and major special revenue funds be presented in the basic financial statements.

Pension plan These statements must display original budget, amended budget and actual results (on a budgetary basis).

Full-time City employees are members of the State of California Public Employees' Retirement System (System). The City's policy is to fund all pension costs accrued; such Budgeted revenue amounts represent the original budget modified by City Council-costs to be funded are determined annually as of July I by the System's actuary. See note authorized adjustments during the year, which %ere contingent upon new or additional 9 for further discussion. revenue sources. Budgeted expenditure amounts represent original appropriations adjusted for supplemental appropriations during the year. Budgets are prepared in Fund balaams conformity with GAAP using the modified accrual basis of accounting, with the exception of the capital lease in the General Fund and land held for resale in the Redevelopment In the fund financial statements, governmental funds report reservations of fund balances Agency funds, which are budgeted on a cash basis.

for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative Property taxes management plans that are subject to change.

Property taxes attach as an enforceable lien on property as of January 1.Taxes are levied The accumulated deficit fund balances at June 30, 2005, for the Workforce Development, on July 1 and are payable in two installments due on November 1 and February 1 and Community Development Block Grant and Grants funds included in nonmajor become delinquent after December 10 and April 10. The County of Orange, California governmental funds in the amount of $183, $52, and $229, respectively, will be eliminated (County) bills and collects the property taxes and remits them to the City in installments in future years by the receipt of reimbursements for grant expenditures. during the year. City property tax revenues are recognized when levied to the extent that they result in current receivables collectable within 60 days after year-end.

Budgetary principl The County is permitted by State law (Proposition 13) to levy taxes at 1%of full market The City is required by its charter to adopt an annual budget on or before June 30 for the value (at time of purchase) and can increase the property tax rate no more than 2% per ensuing fiscal year. The General, special revenue, debt service, and capital projects year from the full market value at the time of purchase. The City receives a share of this governmental fund types and proprietary fund types have legally adopted budgets basic levy proportionate to what it received in the 1976 and 1978 periods.

42

CITY OF ANAHEIM Enfitiement shazed triwnues and Pants Deposits and investments is comprised of the following at June 30, 2005:

Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure-driven grants are recognized as Cash and Cash and revenue when the qualifying expenditures have been incurre4 all eligibility requirements Cash Cash Restrcted have been met, and reimbursement is received within the availability period. Equivalents Investmnents Equivalents Investmnents Total Governmental activities; General Fund $ 4,72 $ 28,598 $ 33,570 kevane recognition for Eetric Utility, Water Utility and Sauitation d Housing Authorty 2,181 9,786 11,967 Nonmajor governmental funds 14,856 84,841 $32,776 S 17,121 149,594 Revenue is recorded in the period in which services are provided As such, revenue is Internal service funds 20,921 17 473 141,819 Total governmental activities 42,930 243,633 17,594 336950 recorded as billed to customers on a cyclical basis. Residential and smaller commercial 3L29 Business-type activities:

customers are billed bimonthly and all other customers monthly. At June 30, 2005 unbilled Electric Utility 19,742 115,015 6,824 271,369 412,950 but earned service charges recorded in accounts receivable for the Electric Utility, Water Water Utility 4,711 27,443 1,000 5,826 38,980 Utility, and Sanitation Funds amounted to S 13,555, $3,197, and $3,075 respectively. Solid Waste and Sanitation 3,993 23,247 27,240 Golf Courses 49 288 337 Convention, Sports and Use of estimat Entertainment Venues 4_669 26,48 795 15,773 47,721 33,164 192477 _IL8,619 292, 527,2 Total business-type activities Government-wide totals 76,094 436,110 310,562 864,17 The preparation of financial statements in conformity with GAAP requires management Fiduciary fund 3,554 3,554 to make estimates and assumptions that affect the reported amounts of certain assets and Total cash and liabilities and disclosures of contingent assets and liabilities at the date of the financial investments $76,094 4 .44966 $310,52 867.732 statements and the reported amounts of revenues and expenditures/expenses during the reporting period. As such, actual results could differ from those estimates.

Deposits at June 30, 2005, consist of bank balances of $7,878 that mere maintained in various federally regulated financial institutions. The bank balances, with no carrying NOTE 2 - DEPOSITS AND INVESTMENTS:

value at June 30, 2005, represent deposits in transit, outstanding checks, and other reconciling items. Deposits with a bank balance of $395 are insured by the Federal The City maintains a cash and investment pool, which includes the cash balances of all Depository Insurance Corporation. For deposits with a bank balance of $7,483, California funds, and is invested by the City Treasurer to enhance interest earnings. The pooled state statutes require federally regulated financial institutions to secure a city's deposits by interest earned, net of administrative fees, is allocated to each fund based on daily cash pledging collateral consisting of either government securities with a value of 1100/. of a balances. city's total deposits or by pledging frst trust deed mortgage notes having a value of 150%

of a city's total deposits. The collateral is required by regulation to be held by the The City's Investment Policy further limits the permitted investments in Government Code counterparty's agent in the name of the City.

Sections 53600 et al, 16429.1 and 53684 to the following: obligations of the U.S.

government, federal agencies, and government sponsored enterprises; medium -term corporate notes; certificates of deposit; bankers acceptances; commercial paper rated A-I by Standard and Poor's Corporation (S&P), P-I by Moody's Investors Service (Moody's)

The City Treasurer prepares an Investment Policy Statement annually, which is presented or F-I by Fitch Ratings (Fitch); LAIF; repurchase agreements; reverse repurchase to the Investment Advisory Commission for review and the City Council for approval. The agreements; and money market mutual funds. approved Investment Policy is submitted to the California Debt and Investment Advisory Committee in accordance with State Law The City has been actively managing short-term treasuries to enhance revenues. This program has involved buying and selling of up to 10% of the operating portfolio in short-The policy provides the basis for the management of a prudent, conservative investment term treasuries, which are short-term investments of the highest quality. These securities program. Public funds are invested for the maximum security of principal, to meet daily meet the City's investment parameters and can be held to maturity.

cash flow needs, while providing a return. All investments are made in accordance with the California Government Code and, in general, the Treasurer's policy is more restrictive 43

CITY OF ANAHEIM than State law. The City did not have any violations of its policy during the current fiscal authorized for investments held by bond trustees. The table also identifies certain year. Section 53607 ofthe California Government Code allows the Council to delegate its provisions of these debt agreements that address interest rate risk, credit risk, and investment authority to the Treasurer and requires that the Treasurer provide a monthly concentration of credit risk.

report to Council of investment transactions. The annual delegation of authority is incorporated in the investment policy. The Treasurer's Report meets the requirements for Maximum Maximum monthly investment reporting. Maximum Percentage Investment Authorized Investment Tyne Maturity of Portfolio* inOne Issuer Investments Authorized by the California Government Code and the City's Investment US. agency securities None None None Guaranteed investment contracts None None None Collateralized Investment contracts None None None Flexible repurchase agreements None None None The table below identifies the investment types that are authorized for the City by its Mutual funds None None None Investment Policy which is more restrictive than State Code. The table also identifies LAIF None None None certain provisions of the City's Investment Policy that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investments of debt proceeds At June 30, 2005 the investments controlled by fiscal agents exceeded five percent held by bond trustees that are governed by the provisions of debt agreements of the City, concentration in the following Federal agency and guaranteed investment securities:

rather than the general provisions of the California Government Code or the City's Federal Home Loan Bank $75,896 (25%) and Transamerica Life $124,294 (409/6). All Investment Policy. guaranteed investment securities have downgrade language that requires collateral should credit ratings drop below certain levels.

Maximnum Maximum Maximum Percentage Investment Custodial Credit Risk Authorized Investment I=p Matuty of Portfolio* in One Issuer US. Treasury obligations 5 years None None Custodial credit risk for investments is the risk that the City will not be able to recover the US. agency securities 5 years 75% 20% value of investment securities that are in the possession of an outside party. All securities Bankers acceptances 18o days 25% 5%

Commercial paper 270 days 25% 5% owned by the City with the exception of LAIF and money market mutual funds are Negotiable certificates of deposit 3years 15% 5% deposited in trust for safekeeping with a custodial bank different from the City's primary Repurchase agreements 90 days 75% None bank. Securities are not held in broker accounts. Funds held by LAIF and money market Reverse repurchase agreements 92 days 20% None mutual funds are held in the City's name.

Medium term corporate notes 3 years 15% 5%

Money market mutual funds N/A 20% 10%

LAIF N/A 80 Million None Custodial credit risk for investments held by bond trustee is the risk that the City will not Tine certificates of deposit (TCD) 5 years 30% 5% be able to recover the value of investment securities that are in the possession of an outside party. All securities held by bond trustee are in the name of the bond issue in trust for

• Excluding amounts held by bond trustees that are not subject to California Government safekeeping with the bond trustee which is different from the City's primary bank.

Code restrictions InerstRateRisk At June 30, 2005 the City exceeded five percent concentration in the following Federal agency securities: Federal Farm Credit Bank $88,438 (16%), Federal Home Loan Bank Interest rate risk is the risk that changes in interest rates will adversely affect the fair value

$95,148 (17%) and Federal Home Loan Mortgage Corporation $49,077 (9%). of an investment The Treasurer mitigates this risk by investing in longer-term securities only with funds that are not needed for current cash flow purposes and holding these Investments Authorized bX Debt Agreements securities to maturity. The Treasurer uses the segmented time distribution method to identify and manage interest rate risk. In accordance with its Investment Policy, the Investment of debt proceeds held by bond trustees are governed by provisions of the debt Treasurer monitors the segmented time distribution of its investment portfolio and analysis agreements, rather than the general provisions of the California Government Code or the of cash flow demand.

City's Investment Policy. The table below identifies the investment types that are 44

ciTyOF ANAEIUM Interest rate risk for investments held by bond trustees is offset by the fact that the long NOTE 3 - ACCOUNTS RECEIVABLE DUB FROM OTHER GOVERNMENTS, term investments are for the reserve funds with the semi-annual interest payments used to AND CERTAIN INTERFUND TRANSACTIONS, RECEIVABLE AND PAYABLE pay a portion of the debt service. These are long term securities which are not adversely BALANCES:

affected by interest rate changes. Investment contracts for construction funds are usually limited to three years or less. Money market funds are used to accumulate monthly or Accounts receivable for the City's governmental and business-type activities including the semi-annual debt service payments. applicable allowance for uncollectible accounts at June 30, 2005, are as follows:

Information about the sensitivity of the fair values of the City's investments (including Less:

investments held by bond trustees) to market interest rate fluctuations is provided by the Accounts Allowance for Receivable Uncollectibles Total following table. The distribution of the City's investments by maturity at June 30,2005, is Governmental activities:

as follows: General Fund $ 8,484 S 9,048 $(564)

Nonmajor governmental funds 115 (4) III 12 13 25 37 More Internal service funds 539 539 Fair Months to to to Than Total governmental activities 9,702 (568) 9,134 Credit Value or 24 36 60 60 Business-type activities:

bIvenats Rating 6/30/2005 Months Months Months Monfhs Electric Utility 31,781 31,726 (55)

Trmsurerý Pooled Investments: Water Utility 5,922 (4) 5,918 US. Treasury notes Exempt $204,403 S 15,316 $ 93,519 $ 80,781 514,787 Solid Waste and Sanitation 6,987 (127) 6,860 Federal agency securities AAA 242,952 99,522 85,801 57,629 Golf Courses 106 106 Medumat notes Aa2-AA- 14,985 14,985 Convention, Sports and Entertainment Venues 1,061 1,061 Commercial paper PI-AI+ 44,871 44,871 Total business-type activities 45,857 45,671 Mutua fiaxls AAA 21,765 21,765 _(L86)

Total accounts receivable $55,559 S(75J4 $54,805 LAIF Unated 25,682 25,682 Total inestments controlled by CityTreasurer 554,658 222,141 179,320 138,410 14,787 Due from other governments for the City's governmental activities at June 30, 2005, are l nt ts Contmlled by Fscal Agent as follows:

Federal agency securities AAA 91,843 38,376 47,525 S 5,942 Guaranteed investment agreement Urrated 135,071 124,294 10,777 Taxes Collaterized investment contracts Urated 19,074 19,074 Grants Other Total Flexible repurchase agreements Urmad 28,450 2,306 2,396 23,748 Governmental activities:

Mutual fimds AAA 29,279 29,279 General Fund $13,767 $ 94 $605 $14,466 Housing Authority 322 322 LAIF Unrated 9,357 9,357 Nonmajor governmental funds 999 10,525 11,524 Total investments controlled Total due from by fiscal agents 313,074 79,318 171,819 %2,3%59,541 other governments $14,766 $10,941 $605 $26,312 Total Investments $867,732 $301,459 T35-1,139 $138,410 $17,183 $59,54 Revenues are reported net of uncollectible amounts. Total uncollectible amounts related to revenues of the current period are as follows:

General Fund $153 Electric Utility 292 Water Utility 38 Sanitation 123 Otheia 3 Total $609 Net internal balances between governmental activities and business-type activities of $675 are included in the government-wide financial statements at June 30, 2005.

45

CrTY OF ANAHEIM The following interfund receivables and payables are includ ,d in the fund financial Other Capital Improvements Capital Projects Fund from the nonmajor governmental statements at June 30, 2005: funds (Redevelopment Agency Capital Projects Fund). The Redevelopment Agency entered into a Cooperation Agreement with the City on April 1,2003 whereby the City lnterfind Interfund will assist the Redevelopment Agency with the development of Westgate utilizing Receivable Payable $10,000 of funds from the HUD Section 108 loan program. The Redevelopment Governmental funds: $10,272 S 104 Agency is obligated to pay the City for the repayment of the HUD 108 loan from General Fund Housing Authority property tax increment and certain project revenues generated by Westgate. As of June Nonmajor governmental funds 12,145 27012 30, 2005, the Redevelopment Agency has utilized $9,423 of HUD 108 funds to acquire Total governmental funds 22,417 27,116 certain properties.

Enterprise funds:

Electric Utility 980 Golf Coures Of the interfund receivable in the nonmajor governmental funds, $2,394 is due to the 6,104 Convention, Sports and Entertainment Venues 980 Redevelopment Agency Capital Projects Fund from nonmajor governmental funds Total enterprise funds 11,679 7,084 (Other Capital Improvements Capital Projects Fund). On March 15, 1999, the Internal service funds 104 Redevelopment Agency entered into a Cooperation Agreement with the City where the Total $34,200 $34,200 Redevelopment Agency and the City will share in the cost of the west Lincoln Avenue Street improvement project. The Agreement also provides that the Redevelopment There are interfund balances at June 30, 2005 that are generally short-term loans to cover Agency will receive transportation fee credits in the amount of its contribution to the temporary cash deficits in various funds. The following interfund balances are expected project to be repaid in more than one year.

Electric Utility Fund Genera Fund The interfund receivable of $980 in the Electric Utility Fund is due from the Convention, Of the total intcrfund receivable in the General Fund, $3,313 is due from nonmajor Sports and Entertainment Venues Enterprise Fund for the installation of energy efficient governmental funds (Redevelopment Agency Capital Projects Fund). On September 3, HVAC equipment, and building envelope improvements. The loan is payable in 2002, the City loaned the Redevelopment Agency $3,388 in order to acquire two monthly installments of $23 beginning January 2004 until December 2008.

properties for redevelopment The properties are located at 1234 and 1300 South Anaheim Boulevard. The loan is to be amortized over 30 years and is repayable over Convention, Sports and Entertainment Venues Fund five years with the first annual payment due on August 1,2003, and the final lump sum payment due on August 1, 2007. The loan bears interest at the City's average annual The interfund receivable of $10,699 in the Convention, Sports and Entertainment investment yield. Venues Fund is due from nonmajor governmental funds (Redevelopment Agency Capital Projects Fund). The City entered into a Cooperation Agreement with the Of the total interfund receivable in the General Fund, $855 is due from nonmajor Redevelopment Agency on May 14, 1996, for the renovation of the Stadium. The governmental funds (Redevelopment Agency Capital Projects Fund). The balance is Redevelopment Agency ageed to reimburse the City for $10,000 of renovation costs expected to be repaid from future proceeds of the Anaheim Westgate Center (Westgate). plus 5% simple interest on the unpaid balance. The Agencys reimbursement obligation is payable from the Stadium Project Area (SPA) property tax increment revenue. Any Of the total interfund receivable in the General Fund, $6,104 is due from the Golf outstanding balance ceases to be an obligation ofthe Redevelopment Agency on August Courses Fund, On September 24, 2002, the City Council approved a loan up to $6,400 9,2039, the expiration of the SPA. It is expected that the balance will be repaid prior to from the General Fund to the Golf Courses Fund for construction of the Anaheim Hills the expiration of the SPA.

Golf Clubhouse. The loan is payable in annual amounts of not less than $548 beginning in July 2004 until July 2023 and bears interest at the City's investment yield as of June The net transfers of $12,400 from the business-type activities to the governmental 30th of each year. activities on the government-wide Statement of Activities are primarily comprised of operational subsidies to the General Fund that are offset by debt service subsidies to the Nonmior Governmental Funds Convention, Sports and Entertainment Venues Fund and the transfer of capital assets from the business-type activities to governmental activities in the amount of $1,511.

Of the interfund receivable in the nonmajor governmental funds, $9,423 is due to the 46

CITY OF ANAHEIM The following interfund transfers are reflected in the fund financial statements at June 30, NOTE 5 - CAPITAL ASSETS:

2005:

Capital asset activities for the year ended June 30, 2005 are as follows:

Transfers In Transfers Out Beginning Ending Governmental funds: Balance Additions Deletions Balance General Fund S 25,974 $ 48,668 Governmental activities:

Housing Authority 1,000 291 Nondepreciable assets:

Other governmental funds 72192 39,31 Land Total governmental funds 99,166 88,277 S 490,917 19,597 S 5,109 32,467 $ (1,020) $ 495,006 46,105 Construction in progress (5,959 Enterprise funds: Total 510,514 37,576 (6,979) 541,111 Electric Utility 3,248 15,611 Depreciable assets:

Water Utility 7,403 Buildings, structures Solid Waste and Sanitation 3,021 and improvements 219,176 1,992 (166) 221,002 Golf Courses 142 1,700 Machinery and equipment 66,726 14,990 (2,648) 79,068 Convention, Sports and Entertainment Venues Infirastructure 705,956 7,209 713,165 Total enterprise funds 14,855 27,735 Total 991,858 24,191 (2,814) 1,013,235 Total $114,021 i116,012 Total assets 1,502,372 61,767 (9,793) 1,554,346 Less accumulated depreciation for The net difference of transfers in the amount of $1,991 is due to a transfer of capital assets Buildings, strtre from the Electric Utility and Water Utility funds to governmental funds. and improvements (74,051) (5,523) 159 (79,415)

Machinery and equipment (41,397) (6,172) 2,451 (45,118)

The interfund transfers generally are made for the purpose of debt service payments made Infiasuctue (236,613) (15,896 (252,509) from a debt service fund but funded from an operating fund or subsidy transfers. There Total accumulated were no significant transfers during the fiscal year that were either non-routine in nature depreciation (352,061) (27,591 2,610 (377,042)

Total governmental activities or inconsistent with the activities of the fund making the transfer. capital assets, net $1,150,311 $ 34,176 $L(7,183) $1,177,304 NOTE 4 - BOND PAYMENT RECEIVABLE: Business-type activities:

Nondepreciable assets:

Land $ 31,538 $ 4,743 S 36,281 On August 3, 1995, the Los Angeles Rams Football Company, currently the St. Louis Construction in progress 45,950 57,583 $(75,582) 27,951 Rams (Rams), exercised its right to terminate its lease under the Fourth Amendment to the Nuclear fuel at Exhibition Agreement between the Rams and the City (Rams Agreement). Under the amortized cost 2,730 966 (1.499 2,197 Rams Agreement, the Rams became obligated to repay the City for the debt service on the Total 80,218 63,292 (77,081) 66,429 1979 Anaheim (California) Stadium Inc. Lease Revenue Bonds in the principal amount of Depreciable assets:

$28,110, which obligation is supported by an irrevocable standby letter of credit with Buildings, structures Dresdner Bank AG and will be repaid by August 15, 2015. The 1979 Anaheim (California) and improvements 476,804 1,157 (327) 477,634 Stadium Inc. Lease Revenue Bonds were subsequently refunded, and are no longer Utility plant 1,083,972 71,144 (2,787) 1,152,329 Machinery and equipment 26,475 8,767 (4,799) 30,443 outstanding, by a portion of the Convention, Sports and Entertainment Venues Fund 1993 Total 1,587,251 81,068 (7,913) 1,660,406 Refunding Projects Certificates of Participation. At June 30, 2005, there remained Total assets 1.667,469 144,360 (85,994) 1,726,835 principal outstanding of $19,542 on that portion of the Convention, Sports and Less accumulated dereciatian for Entertainment Venues Fund 1993 Refunding Projects Certificates of Participation. During Buildings, structures fiscal year 2005, the Rams reimbursed the City $2,338 (representing $1,175 for principal and improvements (116,443) (10,887) 214 (127,116) and $1,163 for intest) for the current portion of their debt service obligation. The City Utility plant (376,633) (36,303) 1,961 (410,975) accounted for the termination of the lease by recording a bond payment receivable from Machinery and equipment (17,643) (2,456) 3,749 (16,350)

Total accumulated the Rams and a contribution to the Convention, Sports and Entertainment Venues depreciation (510,719 (4966 5,924 (554,441, Enterprise Fund in the amount of the debt obligation assumed by the Rams under the Total business-type activities Rams Agreement capital assets, net $1,156,750 $ 95,714 $(79,070) $1,172,394 47

CITY OF ANAHEIM Depreciation expense was charged to fumctions/programs of the City as follows: RodcwlopmentAgawcy Governmental activities: At June 30, 2005, the Redevelopment Agency earned revenues as lessor from certain General government $ 272 parking structure property and retail spaces, carried at cost of $7,861, less accumulated Police 1,500 depreciation of $5,848, under operating leases. The following is a schedule of minimum Fire 301 Community Development future rentals on noncancelable operating leases at June 30, 2005:

1,113 Planning 154 Public Works 16,302 Fiscal Year Ending 6/30 Community Services 1,598 2006 $ 332 Convention, Sports and Entertainment 2,563 2007 342 Capital assets held by the City's internal service funds are charged 2008 346 to the various functions based on their usage of the assets 3,788 2009 338 Total depreciation expense - governmental activities U27,591 2010 304 201 1-2015 1,309 Business-type activities: 2016-2020 1,338 Electr Utility 29,764 2021-2025 1,265 Water Utility 6,539 2026-2030 1,173 Solid Waste and Sanitation 388 2031-2034 938 Golf Courses 579 Total minimum future rentals $7,685 Convention, Sports and Entertainment Venues 12,376 Total depreciation expense - business-type activities $49,646 NOTE 6 - GENERAL BENEFITS AND INSURANCE FUND:

Capital leases The General Benefits and Insurance Fund, an internal service fund, is used to account for employee compensated absences, retirement and health benefits, workers' compensation Included in the capital assets amounts listed above are the following capitalized leased related benefits, self-insurance, commercial insurance purchases, and alternative risk assets: financing activities. Revenues of the General Benefits and Insurance Fund are derived from charges to City departments using estimates of benefits earned and cost allocation charges established at the beginning of the year and from interest income on reserves.

Machinery and equipment $3.217 At June 30, 2005, the City was fully funded for self-insured workers' compensation and Less acctunulated amortization __(711) general liability claims (self-insured retention levels of $1,000 per occurrence, $750 in Capitalized leased assets, net $2,506 previous years, for workers' compensation claims and $1,000 per occurrence for general liability claims). Above these self-insured retention levels, the City's potential liability is covered through various commercial insurance and intergovernmental risk pooling operating loame programs. Settled claims have not exceeded insurance coverage in any of the past three years, nor does management believe that there are any pending claims that will exceed Hawing Aithority insurance coverage.

At June 30, 2005, the Housing Authority earned revenues as the lessor of land, carried at The unpaid claims liability included in the General Benefits and Insurance Fund is based cost of $25,486 in the government-wide financial statements, under three operating on the results of actuarial studies and includes amounts for claims incurred but not ground leases. These leases to developers are noncancelable. Two of the leases are for a reported, allocated loss adjustment expenses, and unallocated loss adjustment expenses.

term of 55 years, expiring in 2055 and 2057. The term of the third lease is 57 years Claims liabilities are calculated using a discount of three percent and consider the effects expiring in 2060. The total base rent amounts to be collected over the terms of the leases of inflation, multi-year loss development trends, and other economic and social factors. It is the City's practice to obtain full actuarial studies biennially for general liability and are $12,400, $8,700 and $7,505, respectively, with simple interest accruing on unpaid workers' compensation coverages. Premiums are charged by the General Benefits and portions at a rate of 4.0%, 4.5% and 4.00/%respectively. Minimum lease payments are Insurance Fund using various allocation methods that include actual costs, trends in claims calculated annualy, based on residual receipts, as defined in the lease agreements. It is experience, exposure base, and number of participants. Revenues of the General Benefits estimated that the full amounts of the leases are collectible. At June 30,2005, the Housing and Insurance Fund, together with funds to be provided in the future, are expected to Authority has recorded notes receivable due from developers related to these transactions provide adequate resources to meet liabilities as they come due.

of $7,162 in both the government-wide and fund financial statements. 48

CITY OF ANAHEIM Changes in the General Benefits and Insurance Fund's claims liability in fiscal years 2005 Due and 2004 were as follows: Beginning Additions/ Reductions/ Ending Within Balance Proceeds Payments Balance One Year 2005 2004 Governmental activities:

Claims liability at beginning of year $26,382 $24,878 Bonds Payable:

Current year claims and changes in estimates 9,741 7,134 Geneial obligation $ 7,060 $ (435) $ 6,625 $ 455 Claims payments (6,203) (5,630) City lease revenue 509,022 (2.590) 506,432 3,955 Redevelopment Agency 162,108 (3,014) 159,094 2,976 Claims liability at end of year $29,920 $26,382 Accretion (note 1) 59,348 $10147 (1,971) 67,624 Total 737,538 10147 (7,910 739,775 19735 Current year incurred losses increased primarily due to (i) increased workers' COPs:

compensation costs coupled with unrealized cost savings from legislation, which mere city cops 34,048 (2,721) 31,327 2,881 included in prior year actuarial assumptions, and (ii) an increase in self-insured retention Motorized Equipment 2,062 (213) 1,849 227 from $750 to $1,000 per occurrence for workers' compensation in the current fiscal year. Unamortized COP discount (3)

Total 36,107 (2,933) 33,174 Above the self-insured retention of $1,000 per occurrence for workers' compensation Capital lease losses, the City purchases pooled and commercial excess insurance to $75,000 per city 1,470 (206) 1,264 236 Duplicating and Printing 177 (86) 91 52 occurrence. Above the self-insured retention of $1,000 per occurrence for liability losses, Information Services 354 (16) 168 168 the City purchases pooled and commercial excess insurance to $43,000 for all City Total 2,001 (478) 1,523 456 operations, excluding (i) Utilities operations for which the City purchases pooled and Notes and loans payable:

commercial excess insurance to $68,000, and (ii) helicopter operations for which the City city 11,990 5,289 (829) 16,450 1,529 purchases $50,000 of commercial excess insurance (on a first-dollar basis). This excess Redevelopment Agency 8,857 1,875 (538) 10,194 534 liability coverage is procured through the Authority for California Cities Excess Liability Housing Authority 1,900 125 2,025 Total 28,669 2,063 (ACCEL), a joint powers insurance authority pooling catastrophic general, automobile, 22,747 personal injury, and public officials errors and omissions liability losses among twelve Self-insurance (note 7) 26382 29,920 8.094 California cities, through both risk-sharing and joint purchase arrangements. In addition, Retired medical (note 10) 68 465 1,441 (7,857 74,049 7,857 30.937 the City continues to maintain some limited excess liability risk sharing exposure directly Governmental activities total 893,240 40,618 (26,748 90711O with ACCEL. This pooled coverage has exposure (i) from the run-out periods from prior Busirss-type activities:

years in which commercial excess insurance was not obtained, (ii) from losses, which are Bonds payable:

covered under ACCEUs Memorandum of Coverage but not covered under the commercial 510,225 494,845 Electric Utility (15,380) 12,625 excess liability policies, and (iii) from an ACCEL retained layer of $2,000 in excess of Water Utility 13M65 (i,340) 11,925 1,870

$1,000. Each ACCEL member's share of pooled losses is based on a risk-sharing formula Convention, Sports and which includes, but is not limited to, exposure and loss experience factors. Entertainment Venues 23,160 (70) 23,090 75 Unamortized bond In order to provide funds to pay claims, ACCEL collects a deposit from each member. The premium/discount (2,870) (1.730 deposits are credited with investment income at the rate earned on ACCEIs investments. Total 543,780 ____ (15,650) 528,130 COPs:

At June 30, 2005, ACCEns cash and investments totaled $20,834 of which $4,002 consists Electric Utility 22,125 (495) 21,630 520 of deposits provided by the City. The City has no specific equity interest in ACCEL. Convention, Sports and Deposits provided to ACCEL by the City are expensed when paid by the General Benefits Entertainment Venues 112,476 (5,792) 106,684 5,962 and Insurance Fund. Accretion (note I) 7,372 (1,703) 5,669 1,800 Unamortized COP discount (1,6 18) 587 (1,031)

ACCEL is responsible for deciding the risks it will underwrite, monitoring the handling of Total 140,355 _ _ (7,403) 132,952 8,282 large claims, and arranging financial programs. ACCEL does not have any debt outstanding. Capital lease obligation: ISOS For a copy of separate financial statements for ACCEL, contact the Finance Director of the Water Utility 349 ______ (169 180 180 City. Notes and loans payable:

Water Utility 17,212 (892) 16,320 918 Unamortized note discount (534) 56 (478)

NOTE 7 - LONG-TERM LIABILITIES: Total 16,678 15,42 918 Decommissioning The following is a summary of changes in long-term liabilities reported in the provision (note I) 3.483 93,782 government-wide financial statements for the year ended June 30, 2005: Business-type activities total 791,461 3,43 (24,058 770,886 Government-wide total $4,101 $(50, $54,887 49

CITY OF ANAHEIM GOVERI LACTWIV1T[ES: bond insurer to enable the issuer to obtain municipal bond insurance, resulting in the bonds receiving an AAA rating from S&P and an Aaa rating from Moody's. LPMR began BONDS PAYABLE on January 1, 2001, with the first payment made to the trustee on July 7, 2001, for the LPMR generated during the period January through June 2001. Subsequent to that date, At June 30, 2005, bonds payable consisted of the following: LPMR is collected and remitted to the trustee monthly. During the fiscal year ended June 30, 2005, $25,447 was remitted to the trustee.

Range of Authorized Out-Date Final Interest Rates and standing Issued Maturity at Issue Date 6/30/05 Debt service requirements to maturity for the 1993 General Obligation Refunding Bonds Issued City and the 1997 Anaheim Lease Revenue Bonds to be paid by the Municipal Improvements 1993 General Obligation Debt Service Fund from future property tax revenues and by the Anaheim Resort Refunding Bonds 11/01/93 10/01/16 4.00/%-7.0% $ 10,055 $ 6,625 Improvements Debt Service Fund from future LPMR, respectively, are as follows:

1997 Anaheim Lease Revenue Bonds 2/01/97 3/01/37 4.5%/-6.9% 510,427 506,432 Fiscal Year Ending 6/30 Principal Interest Total Accretion 62,584 Total City bonds 2006 S 4,410 $ 22,869 $ 27,279 575,641 2007 5,760 22,609 28,369 2008 7,050 22,274 29,324 RedeWlopnentAgamcy 2009 8,240 21,836 30,076 1992 Project Alpha 2010 9,615 21,290 30,905 Tax Allocation Bonds 2/01/02 12128/18 4.00/6-6.45% 134,433 107,719 2011-2015 72,960 94,827 167,787 Accretion 5,040 2016-2020 77,819 114,153 1997 Project Alpha 191,972 2021-2025 68,089 153,254 221,343 Tax Allocation Bonds, 2026-2030 83,784 172,133 Series A 255,917 6/01/97 2/01/18 4.4/-5.33% 27,905 21,025 2031-2035 103,270 192,389 295,659 2000 Project Alpha 2036-2037 72,060 98,258 170,318 Tax Allocation Bonds, Total bonds Series A & B 12/01/00 2/01/18 4.1%-7.7% 31,850 30,350

$513,057 $935,892 $1,448,949 Total Redevelopment Agency bonds 164,134 Total governmental activities bonds $714,670 $739,775 Included in interest is $62,584 related to accretion on capital appreciation bonds.

Bonds Psyable - City Bonds Payable - developmaent Agancy Loa payment meas"umat Zrnues Debt service requirements to maturity for the Redevelopment Agency Tax Allocation bonds are to be paid by the Redevelopment Agency Debt Service Fund from future tax In February 1997, the Anaheim Public Financing Authority sold $510.4 million of lease increment revenue are as follows:

revenue bonds to construct public improvements in The Anaheim Resort The Bonds are Fiscal Year Ending 6/30 Principal Interest Total special obligations of the Authority payable solely from lease payments to be made by the 2006 $ 2,976 $11,727 $ 14,703 City to the Authority for the use and occupancy of the leased premises. Debt service 2007 3,983 13,417 17,400 requirements to maturity for these lease revenue bonds are paid from lease payment 2008 7,790 9,409 17,199 measurement revenues (LPMR) defined as: 1) 3% of the 15% transient occupancy taxes 2009 8,260 9,373 17,633 (TOT) (i.e. 20% of the total transient occupancy taxes) for all hotel properties in the City, 2010 10,685 8,365 19,050 excluding Disney properties, and 2) 100% of the incremental TOT, sales, and property tax 2011-2015 64,330 30,665 94,995 2016-2019 61,070 7,966 69,036 revenues from all Disney properties over the 1995 base, adjusted each year by the Total bonds $159,094 $90,922 $250,016 Consumer Price Index (CPI) change, with a minimum 2% increase annually. The City is not required to pay any additional sums should the LPMR fall short of the amount required Included in interest is $5,040 related to accretion on capital appreciation bonds.

to pay debt service on the bonds. The Walt Disney Company provided a guarantee to the 50

CrTY OF ANAHEIM CERIIFICATES OF PARTICIPATION CAPITAL LEASE OBLIGATIONS At June 30, 2005, certificates of participation consisted of the follovAwing: The City has a long-term noncancelable lease with Motorola, Inc. to finance the Range of Out- acquisition of certain software utilized by the City's Police Department. The lease Date Final Interest Rates and standing qualifies as a capital lease for accounting purposes as defined under the FASB Statement Issued Maturity at Issue Date Issued 6/30/05 No. 13, Accounting for Leases, and therefore has been recorded at the present value of City future minimum lease payments at the date of inception of the lease. Future minimum 1993 Refunding Projects 1/14/93 8/01/19 5.47%. S 9,696 $ 6,207 lease payments to be made from unrestricted revenues of the General Fund under the 1993 Police Facilities Refinancing Project 7/15/93 8/01/08 4.47% 26,000 8,400 capital lease are as follows:

1993 Arena Land Refinancing 11/01/93 11/01/19 6.00/9-7.505% 21,210 16,720 Fiscal Year Ending 6/30 Total City 31,327 2006 S 296 Motorized Equipment 2007 296 1993 Refunding Projects 1/14/93 8/01/11 5.470/a 4,584 1,849 2008 296 Unamortized COP discount (2) 2009 296 Total Motorized Equipment 1,847 2010 247 Total governmental activities COPs $61,490 $33,174 Total 1,431 Less amount representing interest, variable (167)

Certiiates of Participatiou Payable - City Present value of future minimum lease payments $1,264 Certificates of participation debt service payments are to be paid fium unrestricted The City has long-term noncancelable leases with Xerox Corporation and Cannon Finance revenues of the Certificates of Participation Debt Service Fund. COP debt service Service, Inc. to finance the acquisition of a Xerox Copier and a Canon Digital Color requirements to maturity are as follows: Copier. The leases qualify as capital leases for accounting purposes as defined under the Fiscal Year Ending 6/30 Principal Interest Total FASB Statement No. 13, Accounting for Leases, and therefore have been recorded at the 2006 $ 2,881 $ 1,761 $ 4,642 present value of future minimum lease payments at the date of inception of the leases.

2007 3,040 1,607 4,647 Future minimum lease payments to be made from unrestricted revenues ofthe Duplicating 2008 3,204 1,445 4,649 and Printing Internal Service Fund under these capital leases are as follows:

2009 3,388 1,273 4,661 2010 1,208 1,149 2,357 2011o2015 7,462 4,442 11,904 Fiscal Year Ending 6/30 2016-2020 10,144 1,682 11,826 2006 Total COPS $31,327 $13;359

$59

$44,686 2007 36 Total 95 Certificates of Partic4ip Payable - Motorizd Bquint Les amount representing interest, variable Present value of future minimum lease payments $91 Debt service requirements to maturity for Motorized Equipment certificates of participation are to be paid by the Motorized Equipment Internal Service Fund from future The City has a long-term noncancelable agreement with EDS Corporation to finance the revenues are as follows: acquisition of the City's mainframe computer system. The agreement qualifies as a capital Fiscal Year Ending 6/30 lease for accounting purposes as defined under the FASB Statement No. 13, Accounting Ptrincipal Interest Total

$ 327 for Leases, and therefore has been recorded at the present value of future minimum lease 2006 $ 227 $ 100 payments at the date of inception of the lease. Future minimum lease payments to be made 2007 240 87 327 2008 251 72 323 from unrestricted revenues of the Information Services Internal Service Fund under the 2009 261 58 319 capital lease are as follows:

2010 274 42 316 2011-2012 596 34 630 Fiscal Year Ending 6/30 Total 1,849 393 2,242 Unamortized COP discount 2006

(__2)Less amount $175

__L,)

$1,847 repesenting interest, variable Total COPS $2,24M Present value of future minimum lease payments $168 51

CITY OF ANAHEIM NOTES AND LOANS PAYABLE 5.97% and is payable over 20 years beginning on February 1, 2004 until August 1, 2023.

Loan debt service requirements to maturity are as follows:

At June 30, 2005, notes and loans payable are as follows:

Fiscal Year Ending 6/30 Principal Interest Total Homer Street land acquisition 2006 $ 156 $ 521 $ 677 2007 162 518 680 In July 1995, the Redevelopment Agency executed an installment note secured by a deed 2008 169 513 682 2009 175 508 683 of trust with the County for acquisition of land at 1133 Homer Street and 1170 Anaheim 2010 272 499 771 Boulevard. The land will be developed by the Community Services Department as part of 2011-2015 2,182 2,234 4,416 La Palma Park. The amount of the note is $500 and bears interest at 7.25% per annum for 2016-2020 3,431 1,509 4,940 a term of 15 years. Based on a cooperative agreement between the Redevelopment Agency 2021-2024 3,453 397 3,850 and the Community Services Department, principal and interest on the note will be paid Total notes and loans $10,000 $6,699 F16,699 by the Community Services Department At June 30, 2005, the outstanding balance on the note was $211. Note debt service requirements to maturity are as follows: ComputerAided Dispatch and Records Manag-ment System (CAD/RMS) loan payable Fiscal Year Ending 6/30 Principal Interest Total 2006 $ 37 $15 $ 52 In December 2004, the City entered into an agreement with Suntrust to finance the 2007 39 13 52 acquisition and implementation of the CAD/RMS system. The amount of the loan is 2008 42 10 52 $5,289 and bears interest at 3.30% per annum for aterm of 5 years. Principal and interest 2009 45 7 52 2010 48 51 payments of $578 are due semiannually beginning on June 30, 2005 until December 31, 3

Total notes and loans $211 $48 $259 2009. The outstanding balance at June 30, 2005 was $4,799. Loan debt service requirements to maturity are as follows:

HUD Section 108 guaranteed l"m payable Fiscal Year Ending 6/30 Principl Interest Total 2006 $1,006 $150 $1,156 In May 1999, the City entered into an agreement with HUD, making available $3,000 to 2007 1,040 117 1,157 finance the acquisition of certain property for park use. The loan bears interest ranging 2008 1,074 82 1,156 from 6.56% to 7.22% and is payable over a nine-year period beginning on August 1, 2000 2009 1,110 46 1,156 2010 569 9 578 until August 1, 2008. The outstanding balance at June 30, 2005, was $1,440. Loan debt i4O4 Total notes and loans $4,799 $5,203 service requirements to maturity to be paid from the Community Development Block Grant Special Revenue Fund are as follows:

Redevelopment Agenc notes payable Fiscal Year Ending 6/30 Principa Interest Total 2006 $ 330 $92 $ 422 In July 1989, the Redevelopment Agency executed a note with Savi Ranch Associates, a 2007 350 67 417 California general partnership. The amount ofthe note is $2,707 and bears interest at 9.5%

2008 375 41 416 per annum. The note is payable from net property tax increment as defined in the 2009 385 14 399 Total notes and loans Redevelopment Agency note. If there is insufficient property tax increment to pay for

$1,440 S214 $1,654 principal and interest at the termination of the River Valley project area plan, the note In May 2003, the City entered into an agreement with HUD, making available $10,000 to ceases to be an obligation of the Redevelopment Agency.

provide financial assistance related to the development of Westgate on a former landfill site located at the northeast comer of Beach Boulevard and Lincoln Avenue. The loan is In February 2003, the Redevelopment Agency executed a balloon payment promissory payable from sales tax revenue generated by Westgate, from Community Development note with Suzanna Luiso, a property owner, for the purchase of a commercial development Block Grant yearly entitlement, and from the Redevelopment Agency's property tax site. The amount of the note is $450 and bears simple interest at 6% per annum. The note increment and project participation revenues generated by Westgate. The outstanding is payable at $3 monthly over 10 years, with a balloon payment of $379 in March 2013.

balance at June 30, 2005 was $10,000. The loan bears interest ranging from 1.74% to At June 30, 2005, the outstanding balance of the note is $437.

52

CrrY OF ANAHERIM In November 2004, the Redevelopment Agency executed a promissory note with the Housing Authority CHFA loan agpenemnt Orange County Transportation Authority for the acquisition of various parcels for commercial development The amount of the note is $1,225 and bears 5% interest per In October 2003, the Housing Authority entered into a loan agreement for an amount up to annum. The note is payable at $70 quarterly over 5 years. At June 30, 2005, the $1,800 with the California Housing Finance Agency (CHFA), to provide funding for first-outstanding balance of the note is $1,116. time homebuyers down payment assistance. The note bears 3% simple interest, with principal and interest due in October 2013. At June 30, 2005, the outstanding balance of this In January 2005, the Redevelopment Agency executed a promissory note with Robert and loan is $375.

Betty Williams, co-trustees of the Williams Family Trust, for the acquisition of a certain property for commercial development The amount of the note is $650 and bears 3.5% In November 1999 and April 2000, the Housing Authority entered into separate loan interest per annum. The note is payable over 6 years. At June 30, 2005, the outstanding agreements totaling S1,650 with CHFA to provide funding to several property owners for the balance of the note is $617. rehabilitation of properties to provide affordable housing. The notes bear 3% simple interest, with principal payments in the amount of $1,150 and $500 due in November 2009 and April Redeiwvokmet Agency conkactual commitments 2010, respectively.

As part of the Redevelopment Agency's economic development program to attract and BUSINESS-TYPE ACTIVITIES:

retain businesses in the City, the Redevelopment Agency has entered into various contractual commitments. Generally, the Redevelopment Agency reimburses the business BONDS PAYABLE for its tenant improvement costs from property tax increment revenues received by the Range of Authorized Out-Redevelopment Agency. At June 30, 2005, the outstanding balance of these commitments Date Final Interest Rates and standing totaled $702. Issued Maturity at Issue Date Issued 6/30/05 Eactrio Utility The Redevelopment Agency has entered into an agreement, dated December 15, 1992, 1993 Revenue Bonds 6/01/93 10/01/07 3.50/-5.1% $ 60,700 $ 19,105 with California State Teachers Retirement System (CALSTRS) to share in the 1998 Revenue Bonds 5/01/98 10/0128 4.75%-5.0% 65,000 60,355 1999 Revenue Bonds 9/01/99 10/01/27 4.625% 45,000 45,000 development costs of the Plaza Redevelopment Project. In March 2004, CALSTRS 2002 Revenue Bonds 2/15/02 10/01/31 3.3%-5.25% 178,705 178,705 assigned the agreement to the new owners, Pan Pacific Retail Properties, Inc. (PPRP).The 2003 Revenue Bonds 4/01/03 10/01/22 3.00/&-5.0% 60,415 60,415 PPRP participation note bears 7% simple interest rate and has a maximum term of 25 2004 Revenue Bonds 6/01/04 10/01/34 2.5Y-5.0% 131,265 131,265 years. The Redevelopment Agency's obligation to repay the note is entirely contingent on Total 494,845 the revenues generated by the project. The note will be forgiven at the end of the term Unamortized bond discount (1,000) whether or not the entire amount has been repaid. At June 30, 2005, the outstanding Total Electric Utility 493,845 balance of the participation note is $4,615. Waer Utility 1992 Revenue Bonds 3/15/92 7/01/05 3.1%-6.1% 5,740 600 Debt service requirements to maturity for the Redevelopment Agency notes and 2004 Revenue Bonds 5/01/04 10/01/16 4.0/-4.5% 12,105 11,325 contractual commitments to be paid from future revenues are as follows: Total 11,925 Unamortized bond discount (496)

Fiscal Year Ending 6/30 Total Water Utility 11,429 prmcipal Interest Total 2006 S 534 $ 687 S 1,221 Counvatio, sports and Entertainment VW=e 2007 439 662 1,101 2002 Revenue Bonds 7/02/02 8/01/23 3.0'/,-5.5% 26,260 23,090 2008 464 647 1,111 Unamortized bond discount (234) 2009 607 619 1,226 Total Convention, Sports and Entertainment Venues 22,856 2010 488 593 1,081 Total business-type activities bonds 2011-2015

$585,190 $528,130 1,435 2,694 4,129 2016-2020 4,396 1,657 6,053 2021 1,831 136 1,967 Total notes and contractual commitments $10,194 $7,695 $17,889 53

CIY OF ANAHEIM Bonds Payable - Electri uUIl Boada Payable - Conwatidon, Sports and Entcxtalument Wnemm Bond debt service requirements to maturity for the Electric Utility to be paid from Bond debt service requirements to maturity for the Convention, Sports and Entertainment revenues are as follows: Venues to be paid from revenues are as follows:

Fiscal Year Ending 6/30 Principal Interest Total 2006 S 12,625 $ 23,903 $ 36,528 Fiscal Year Ending 6/30 Principal Interest Total 2007 13,315 23,351 36,666 2006 $ 75 $1,133 S 1,208 2008 13,920 22,735 36,655 2007 75 1,131 1,206 2009 14,735 22,102 36,837 2008 80 1,129 1,209 2010 15,255 21,439 36,694 2011-2015 209 3,215 1,071 4,286 81,625 96,121 177,746 2016-2020 97,165 73,822 2010 3340 944 4,284 170,987 2021-2025 95,425 49,837 145,262 2011-2015 15,815 1,945 17,760 2026-2030 94,675 25,809 120,484 2016-2020 270 90 360 2030-2035 56,105 4,497 60,602 2021-2024 220 24 244 Total 494,845 363,616 858,461 Total 23,090 7,467 30,557 Unamortized bond discount (1,000) Unamortized bond discount (234)

Total bonds $493,845 $363,616 $857,461 Total bonds $22,856 $7,467 $30,323 Bonds Payable - Water Utility CERTIFICA.TE OF PARTICIPATION Bond debt service requirements to maturity for the Water Utility to be paid from revenues Range of Authorized Out-are as follows: Date Final Interest Rates and standing Issued Maturity at Issue Date Issued 6/30/05 Fiscal Year Ending 6/30 Principal Interest Total mWrio Utliy 2006 $ 1,870 S 450 S 2,320 1997 Distribution Plant 5/01/97 4/01/27 4.5%-6.0% $ 25,000 $ 21,630 2007 1,325 380 1,705 Unamortized COP discount (349) 2008 1,375 324 1,699 Total Electric Utility 21,281 2009 1,435 269 1,704 2010 1,490 211 1,701 Coavention, Sports and Entertainment Veues 2011-2015 3,840 477 4,317 1992 Convention Center 2016-2017 590 13 603 Financing Project 1/01/92 8/01/23 3.9%-6.4% 92,777 41,840 Total 11,925 2,124 14,049 Accretion 5,669 Unamortized bond discount (4962 (496$ 1993 Refunding Projects 1/14/93 8/01/19 5.47% 114,564 64,844 Total bonds $11,429 $2,124 $13,553 Unamortized COP discount (682)

Total Convention, Sports and Entertainment Venues S111,671 Total business-type activities COPs $232,341 $132,952 54

CITY OF ANAHEIM Certifica of Participation Payable - Elecic Utiit defined under FASB Statement No. 13, Accounting for Leases, and therefore, has been recorded at the present value of the future minimum lease payments at the date of Certificates of participation debt service requirements to maturity for the Electric Utility inception ofthe lease. Future minimum lease payments to be paid from unrestricted Water to be paid from revenues are as follows: Utility revenues under the terms of this capital lease are as follows:

Fiscal Year Ending 6/30 Principal Interest Total Fiscal Year Ending 6/30 2006 $ 520 S 1,229 $ 1,749 2006 189 2007 545 1,202 1,747 I.ss amount representing interest variable (9)

Present value of future minimum lease payments $180 2008 575 1,173 1,748 2009 610 1,138 1,748 2010 645 1,102 1,747 NOTES AND LOANS PAYABLE 2011-2015 3,845 4,891 8,736 2016-2020 5,045 3,693 8,738 At June 30, 2005, notes and loans payable are as follows:

2021-2025 6,630 2,105 8,735 2026-2027 3,215 280 3,495 Orange County Water District Promissory Note Total 21,630 16,813 38,443 Unamortized COP discount (349) (349) In April 1990, the Water Utility executed a Well Construction Program Agreement with Total COPs $21,281 $16,813 $38,094 the Orange County Water District to assist in financing the construction of three super wells to be located within the City. Advances totaling $2,177 at an interest rate of 3.5% for Certificates ofParticipation Payable- Coawation. Sports and Enterntaimet Venues a period of 15 years were for wells 46, 47 and 49. The outstanding balance on this note at June 30, 2005, totaled $740.

Certificates of participation debt service requirements to maturity for the Convention, Sports and Entertainment Venues Fund to be paid from unrestricted revenues are as State of C"nifomia Realvig Fund Note Payable follows:

Fiscal Year Ending 6/30 priNipal Interest Total In June 2001, the Water Utility executed a note payable to the State of California Revolving Fund at a rate of 2.8% in the amount of $18,063. There are semi-annual 2006 $ 5,962 $ 7,764 $ 13,726 2007 6,143 7,582 13,725 payments of principal and interest in the amount of $592 through June 12, 2021. The 2008 6,327 7,378 13,705 outstanding balance on this note at June 30, 2005, totaled $15,580.

2009 5,396 5,096 10,492 2010 5,669 4,774 10,443 2011-2015 28,276 19,141 47,417 Notes and Loans Payable- Water Utility 2016-2020 39,911 8,201 48,112 2021-2024 9,000 440 9,440 Notes and loans debt service requirements to maturity for the Water Utility are as follows:

Total 106,684 60,376 167,060 Unamortized COP discount (682 (6826 Total COPS $166,378 Fiscal Year Ending 6/30 PrMinl Interest Total

$106,002 $60,376 2006 $ 918 $ 454 $ 1,372 2007 945 427 1,372 Included in interest is $5,669 related to accretion on capital appreciation certificates. 2008 941 400 1,341 2009 935 373 1,308 2010 962 346 1,308 CAPITAL LEASE OBLIGATION 2011-2015 4,619 1,338 5,957 2016-2020 5,270 655 5,925 The City has a long-term noncancelable lease with the Municipal Water District of Orange 2021 1,730 49 1,779 Total 16,320 4,042 20,362 County to finance the acquisition of a 3.002% share in the capacity of the Allen- Unamortized note discount (478) (478)

McColIoch Pipeline. Such lease qualifies as a capital lease for accounting purposes as Total notes and loans sis,942 $4,042 $19,884 55

CiTY OF ANAHEIM ARBITERAG CONDUIT FWNANCINGS The Tax Reform Act of 1986 (Act) substantially revised the treatment to be afforded to city earnings on the proceeds of tax-exempt debt, and now requires the City to calculate and remit rebatable arbitrage earnings to the Internal Revenue Service. Certain of the City's The City has entered into two conduit financings on behalf of community care provider debt and interest earned on the proceeds thereof are subject to the requirements of the Act. facilities and one to facilitate the management agreement for the Arrowhead Pond of The City has accrued a liability for estimated rebatable arbitrage earnings and has set aside Anaheim. In accordance with applicable agreements, the City has no obligation for debt such earnings as restricted cash. At June 30, 2005, the arbitrage rebate liability for service payments and therefore, the debt is not reflected in the accompanying financial governmental and business-type activities was zero and $183, respectively. statements. Bonds payable and certificates of participation related to conduit financings outstanding at June 30, 2005, are as follows:

COMPLANCE WITH DEBT COVENANTS Date Final Amount Outstanding There are various limitations and restrictions contained in the City's bond and certificates Issued Maturity Issued 6/30/05 of participation indentures. The City believes they are in compliance with all significant 1985 West Anaheim limitations and restrictions. Convalescent Home 12/30/85 12/01/05 $ 3,204 $ 2,349 1993 Anaheim Memorial DEBT DEFEASED Hospital Association 10/15/93 5/15/20 46,690 34,160 2003 Anaheim Arena Financing Project 12/i 1/03 6/01/23 42,600 41,500 Certain bonds and certificates of participation defeased by the City prior to June 30, 2005, Total $92,494 $78,009 are summarized below:

Anaheim ousing Authoity Outstanding 6/30/05 The Anaheim Housing Authority has entered into 13 conduit debt financings on behalf of Redwovast Agancy various developers to assist with the acquisition, construction, equipping, rehabilitation Local Government Finance Authority Revenue Bonds, 1986 Issue A $38,410 and refinancing of multifamily residential rental projects within the City of Anaheim. In accordance with the bond documents, neither the City nor the Housing Authority has an Electric Utility Fund Electric System Certificates of Participation, Issue of 1989 2,840 obligation for debt service payments and therefore, the debt is not reflected in the Electric System Revenue Bonds, Issue of 1993 275 accompanying financial statements. Housing Authority revenue bonds related to conduit Electric System Authority Revenue Bonds, First Issue of 1993 61,375 financings outstanding at June 30, 2005, are as follows:

Electric System Authority Revenue Bonds, Second Issue of 1993 58,495 Electric System Revenue Bonds, Issue of 1994 2,145 Date Final Amount Outstanding Issued Maturity Issued 6/30/05 Water Utty Fund Water System Authority Revenue Bond, Issue of 1994 20,000 1985 West Anaheim Royale 12/01/85 12/01/15 $ 4,664 $ 3,439 1990 Bel Age Apartments 8/01/90 8/01/20 10,000 7,000 1992 Heritage Village Park 11/12/92 11/12/07 8,485 5,485 In each of these refundings, the proceeds of the refunding issues mere placed in 1997 Monterey Apartments 5/15/97 5/15/27 4,545 4,245 irrevocable escrow accounts and invested in government securities that, together with 1997 Port Trinidad Apartments 5/15/97 5/15M27 2,140 1,940 interest earnings thereon, will provide amounts sufficient for future payments of interest 1997 Casa Granada Apartments 5/15/97 5/15M27 3,795 3,495 1998 Sage Park Project 11/01/98 11/01/28 5,5W 5,500 and principal on the issues refunded. Refunded debt is not included in the City's 2000 Founins at Anaheim 7/03/00 2/15/33 20,244 20,244 accompanying financial statements as the City has satisfied its obligation through the in- 2000 Cobblestone Apartments 7120/00 3/15/33 3,980 3,880 substance defeasance of these issues. 2000 Seawinds Apartments 7/20/00 7/15/33 7,000 6,900 2000 Park Vista Apartments 7/24/00 7/01/33 27,180 27,180 2001 Solara Court Apartments 1/01/01 12/01/34 8,200 6,260 Total $105,733 $95,568 56

CITY OF ANAHEIM Mdlio-Roos Community Faclhii Dutbi then-existing market conditions, mauld enable the remarketing agent to sell such COPs.

In June 1989, the City issued $26,620 in special tax bonds to finance a portion of the cost of acquisition and construction of facilities in East Anaheim Hills. The bonds mere FairWdua Because interest rates have declined since execution of the swaps, the swaps had authorized pursuant to the Mello-Roos Community Facilities Act of 1982. In April 1995, a negative fair value of $12,060 at June 30, 2005. The swaps' negative fair value may be

$15,389 of the 1989 bonds were advance refunded through the Anaheim Public Financing countered by a reduction in total interest payments required under the variable-rate COPs, Authority and in June 2004, $11,160 of the 1995 bonds were refunded through the creating a lower synthetic interest rate. Because the coupons on the City's variable-rate Anaheim Public Financing Authority. In December 1999, $7,720 of the 1989 bonds were COPs adjust to changing interest rates, the COPs do not have a corresponding fair value refunded by the City. The 2004 and the 1999 bonds are payable from a special assessment increase. The fair values were estimated using the present value of expected cash flows.

tax and are non-recourse bonds secured by the properties. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision of either CreditRisk At June 30, 2005, the City was not exposed to credit risk because the swaps of the foregoing is pledged to the payment of the bonds. The bonds are not general or had negative fair values. However, should interest rates change and the fair values of the special obligations of the City, nor do they contain any credit enhancements that swaps become positive, the City would be exposed to credit risk in the amount of the secondarily pledge existing or future resources of the City, accordingly they are not derivatives' fair values. The swap counterparty was rated AAA by S&P and Aan by reflected in the accompanying financial statements. The City is acting as agent only for Moody's at June 30, 2005. To mitigate the potential for credit risk, if the counterparty's the property owners in collecting the special assessments and forwarding the collections credit quality falls below AA-/Aa3, the fair value of the swaps will be fully collateralized to the fiscal agent. This activity is recorded in an agency fund in the financial statements. by the counterparty with cash or securities. Collateral would be posted with a third-party At June 30, 2005, the 2004 Anaheim Public Financing Authority bonds outstanding custodian.

amounted to $11,210, and the 1999 Mello-Roos bonds outstanding amounted to $6,620.

Termination Risak The City or the counterparty may terminate the swaps if the other party NOT 8 - ITBMREST RATE SWAPS: fails to perform under the terms of the contracts. The swaps may be terminated by the City if the counterparty's credit quality rating falls below "A-" as issued by S&P or "A3" as Objective of the interest rate swaps. As a means to lower its borrowing costs, when issued by Moody's. Additionally, the swaps may be terminated by the counterparty if the compared against fixed-rate bonds at the time of issuance, the City entered into interest City's credit quality rating falls below "BBB-" as issued by S&P or "Baa" as issued by rate swap agreements for certain COPs. The intention of the swaps was to effectively Moody's or if the COPs' credit quality ratings fall below "AA-" as issued by S&P or "Aa3" change the City's variable interest rate on the COPs to a synthetic fixed rate. as issued by Moody's. If the swaps are terminated, the variable-rate COPs would no longer carry synthetic interest rates. Also, if at the time of termination the swaps had negative Terms and fair values. The terms and fair values of the outstanding swaps at June 30, fair values, the City would be liable to the counterparty for a payment equal to the swaps' 2005, are as follows. The City's swap agreements contain scheduled reductions to fair values.

outstanding notional amounts that are expected to approximately follow scheduled or anticipated reductions in the associated COPs payable category. NOTE 9 - RlElREMENT PLANS:

Variable Swap Notional Effective Fixed Rate Rate Fair Termination COP Issues Amounts Date Paid Received Values Date The City contributes to the California Public Employees' Retirement System (PERS), an 1993 Refunding Projects $67.800 1/1/1993 5.47% 2.21%t S( 1,719) /11/2019 agent multiple-employer public employee defined benefit pension plan. PERS provides 1993 Police Facilities retirement and disability benefits, annual cost-of-living adjustments, and death benefits to Refmancing Project 6,450 6/1/1993 4.47% 2.21%0" (~341 811/2008 plan members and beneficiaries. PERS acts as a common investment and administrative

$74,250 U(12,060J agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. A copy of tVariable rate received effective at June 30, 2005. The variable rate received is a PERS' annual financial report may be obtained from its executive office at 400 P Street, weekly interest rate determined by the remarketing agent on the determination date to Sacramento, California 95814.

be the minimum interest rate, which, in the opinion of the remarketing agent under 57

CITY OF ANAHEIM Funding Policy: Participants are required to contribute 7.0% (9.0% for safety employees) Retirement Medical Benefits of their annual covered salary. The City pays participant contributions for miscellaneous employees, while contributions for safety employees are paid by the employees through In addition to the pension benefits described above, the City provides postretirement payroll deductions. In addition, the City is required to contribute at an actuarially medical benefits to eligible retirees (hired prior to January 1, 2002, and Anaheim Police determined rate applied to annual covered payroll; the current rates are 2.364% for Association employees hired prior to July 6, 2001) in accordance with City Personnel miscellaneous employees, 25.494% for fire safety employees and 28.680% for police Resolutions and various Memoranda of Understanding. Depending upon the employee's safety employees. The contribution requirements of plan members and the City are date of hire and employee group, eligibility requirements may be age 50 and five years of established and may be amended by PERS. City service or age 50 and ten years of City service.

Annual Pension Cost For fiscal year 2005, the City's annual pension cost of S29,591 for In all cases, eligible retirees may participate in any health plan made available to active PERS was equal to the City's required and actual contributions. The required contribution City employees. The contribution made by the City toward the cost of the plan is was determined as a part of the 2004 actuarial valuations, using the entry age normal determined by Personnel Resolution or Memorandum of Understanding. At June 30,2005, actuarial cost method. The actuarial assumptions included: (a) 7.75% investment rate of 1,204 retirees or surviving spouses met the various eligibility requirements and were return (net of administrative expenses), (b) projected annual salary increases that vary by receiving benefits.

duration of service, and (c) 2% per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.0%. The actuarial value of PERS assets was The City has several plans with different contribution levels and benefit provisions. City determined using techniques that smooth the effects of short-term volatility in the market contributions vary up to 100% of annual premium cost, depending on the employee's value of investments over a 15-year period (smoothed market value). The PERS unfunded status (single, two-party, family, Medicare participant) and employee group.

actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization periods at June 30, 2004, were 19 years for the The most recent actuarial valuation was as of July 1,2004, using the Projected Unit Credit miscellaneous plan and 32 years for safety fire and police plans for years of service cost method to determine reserving requirements. The valuation was based on the unfunded. following assumptions:

THEEYARTREDIFOMTINFO EM Discount rate 4.5% annual Increase in future payroll 4.0% annual Fiscal Year Annual Percentage of Net Pension Medical trend 9.0% increase in 2005, declining to 5.0%

Ending Pension Cost (APC) APC Contributed Obligation increase by 2010 6130/03 $10,924 100% $0 Non-economic System-wide PERS assumptions 6130/04 20,072 100 0 6/30/05 29,591 100 0 The July 1, 2004, actuarial valuation estimated the current normal cost of the benefit at 3.27% of payroll. An additional 3.34% of payroll was estimated as the cost of amortizing RF1JRDSPLMNAYIFRMATION (Uwa nadtd) prior service obligations over a 30-year perkL Currently, the accrued liability is estimated at $205,551 of which $74,049 is funded, available, and reserved for future obligations and (A) (B) (C) (D) (E) (F)

Excess/ Excess/ $131,502 is unfunded. The City's contribution to the postrfirement medical plan for the Entry Age (Deficiency) (Deficiency) period July 1, 2004 to June 30, 2005 was $5,584.

Actuarial Actuarial Accrued Over Funded Annual of Covered Valuation Asset Liability AAL Ratio Covered Payroll The City provides postretirement medical benefits in the form of defimed contribution Date Value ( (AY(B) Payroll (CY retiree medical plans to eligible retirees in accordance with City Personnel Resolutions 6/30V2 S950,992 $ 931,633 $ 19,359 102.1 S135,360 14.3 and various Memoranda of Understandings for all newly hired employees as of January 1, 6/30/03 954,147 1,020,648 (66,501) 93.5 142,034 (46.8) 2002 (July 6, 2001 for the Anaheim Police Association). Under the plans, the City is 6/3/04 998,831 1,129,864 (131,033) 88.4 145,210 (90.2) required to make one-time contributions ranging from $3 to $8 per employee. The City's total contribution to the plans for the period July 1, 2004 to June 30, 2005, was $468.

58

CITY OF ANAHEIM NOTE 10 - JOINT VENTURES AND JOINTLY-OWNED PROPERTIES: The following entities are members of the Fire Authority: City of Anaheim, City of Fountain Valley, City of Fullerton, City of Garden Grove, City of Huntington Beach, City Authoiy for Oanm County - City Hazardous Mateniab Emrgcy Respowse ofNewport Beach, and the City of Orange.

The City participates in a joint powers authority, the Authority for Orange County-City Public entities in Orange County may receive services from the Fire Authority by Hazardous Materials Emergency Response (Hazmat), for the purposes of responding to, executing an agreement and paying a fair share contribution. Audited financial assessing the nature of, and stabilizing any emergency created by the release or threatened information for the Fire Authority as of and for the year ended June 30, 2005, is as follows:

release of hazardous materials.

Total assets $1,191 The following entities are members of Hazmat: City of Anaheim, Orange County Fire Total liabilities 375 Authority, City of Santa Ana, and the City of Huntington Beach. Members of the Board Members' equity 816 Total revenues 3,721 of Directors consist of one voting Board member and an alternate appointed by the Total expenses 3,711 governing body from the City of Anaheim, Orange County Fire Authority, City of Santa Revenues over expenses 10 Ana, and the City of Huntington Beach.

The City has no significant equity interest in the Fire Authority, and accordingly neither Distribution of fair share contributions to reimburse the provider agencies are as follows: assets nor liabilities of the Fire Authority have been recorded in the City's basic financial City of Anaheim, 27.30/a; Orange County Fire Authority, 27.3%; City of Santa Ana, statements. For a copy of separate financial statements, contact the Finance Director of the 27.30/c; City of Huntington Beach, 18.1/. City.

At the direction of the Board, revenues are disbursed to the provider agencies at the end of Jointly-own utfi plants each preceding quarter. Audited financial information for the joint powers authority as of and for the year ended June 30, 2005, is as follows: The City's Electric Utility owns a 10.04% ownership interest in the coal-fired San Juan Generating Station, Unit 4, located near Waterflow, New Mexico. The other participants Total assets S 67 in Unit 4 and their respective ownership include: Public Service ofNew Mexico, 45.48%;

Total liabilities 45 Members' equity City of Farmington, New Mexico, 8.4 80/9; County of Los Alamos, New Mexico, 7.20%;

22 Total -evenues 149 and M-S-R Public Power Agency, 28.800a There are no separate financial statements for Total expenses 141 this venture, as each participant's interest in the utility plant is included in their respective Revenues over expenses 8 financial statements. The City's cumulative share of construction costs included in the utility plant at June 30, 2005, amounted to $60,237. The City's bonded indebtedness Hazmat does not have any debt outstanding at June 30, 2005. incurred to finance the purchase of the 10.04% ownership interest is also included in the accompanying financial statements.

The City has no significant equity interest in Hazmat, and accordingly neither assets nor liabilities of Hazmat have been recorded in the City's basic financial statements. For a In addition, the City's Electric Utility owns a 3.16% interest as a tenant in common in copy of separate financial statements, contact the Finance Director of the City. SONGS. The other participants and their respective ownership interests in SONGS are:

SCE, 75.05%; San Diego Gas and Electric Company, 20.00%0 and the City of Riverside, Metro CWt Fire At rity California, 1.79%. There are no separate financial statements for this venture, as each participant's interests in the utility plant and operating expenses are included in their The City participates in a joint powers authority, Metro Cities Fire Authority (Fire respective financial statements. At June 30, 2005, the Electric Utility's carrying value Authority), for the purpose of providing a central communication network and record (participating share) of the SONGS was $71,261, net of accumulated depreciation of keeping system to support fire suppression, emergency medical assistance, rescue service, $139,331, which is included in utility plant. The Electric Utility recorded depreciation and related services provided by the members of the Fire Authority. related to the SONGS of $7,495 for the year ended June 30, 2005. The City's bonded indebtedness incurred to finance its portion of the construction costs is also included in the accompanying financial statements.

59

CrrY OF ANA]HEDM The operation and maintenance of SONGS is the responsibility of SCE. The five-member it is obligated for its proportional share of the cost of the project. The City is obligated for San Onofre Board of Review (Board) approves the joint venture's budgets for capital the following percentage of electrical facilities owned by SCPPA:

expenditures and operating expenses. SCE has two participants on the Board, including the chairman; the City and the other participants each have one representative on the Board. Transmission Entitlement Expiration Southern Transmission System (STS) 17.6% 2027 On June 22, 2004, SCE, as operating agent for the SONGS Nuclear Power Plant gave Mead-Adelanto Project (MAP) 13.5% 2030 notice that SCE had, pursuant to Section 16 of the Second San Onofre Operating Mead-Phoenix Project (MPP) 24.2% 2030 Agreement (Agreement), declared an Operating Impairment As a result of SCE's action, Generation Entitlement Expiration on October !1, 2004, the Anaheim Public Utilities (City) exercised its option, pursuant to Hoover Dam Upating (Hoover) 42.6% 2018 Section 16 of the Agreement, not to participate in the restoration work related to the Magnolia Generating Station (Magnolia) 38.0% 2036 impairment and to have its ownership share reduced per provisions of the Agreement The City believes the result will be termination of the City's Ownership Share in fiscal year Take or pav commitments 2010. The potential termination of the City's Ownership Share is contingent upon certain regulatory approvals obtained by SCE and the City obtaining approval from City Council, As part ofthe take or pay commitments with IPA and SCPPA, the Electric Utility has agreed which had not been obtained at June 30,2005. The City cannot predict the outcome and/or to pay its share of current and long-term obligations. Payment for these obligations will be schedule of this matter. made from the operating revenues received during the year that the payment is due. A long-term obligation has not been recorded in the accompanying fmancial statements for these NOT 11 - COM[TMENTS AND CONMhNGENCIES: commitments. The following schedule details the amount of debt service that is due and payable by the Electric Utility for each project and the final maturity date.

bitermountain Pwmt Agen ,

Fiscal Year Ending 6/30 IPA STS MAP MPP Hoover Magnolia Total The Electric Utility has entered into a power purchases contract with the Intermountain 2006 S 39,700 $ 12,265 S 2,852 S 1,586 $ 959 $ 7,162 S 64,524 Power Agency (EPA) for delivery of electric power. The share of IPA power is equal to 2007 38,383 12,740 2,856 1,591 957 7,444 63,971 13.225% of the generation output of IPA'S two coal-fueled generating units located in 2008 39,574 12,562 2,852 1,589 958 7,443 64,978 Delta, Utah. The City is obligated for the following percentage of electrical facilities at 2009 36,853 12,133 2,857 1,586 958 7,444 61,831 IPA: 2010 39,460 12,220 2,928 1,822 957 7,442 64,829 2011-2015 206,824 69,119 14,532 8,490 4,787 37,213 340,965 2016-2020 158,714 69,450 14,513 7,778 2,871 37,215 290,541 Generation Entitlement Expiration 2021-2025 61,852 40,796 37,213 139,861 Intermountain Powvr Project 13.2% 2027 2026-2030 37,212 37,212 2031-2035 37,211 37,211 The contract constitutes an obligation of the Electric Utility to make payments from 2036-2037 20,588 20,588 revenues and requires payment of certain minimum charges. These minimum charges Total $621,360 $241,285 $43,390 $24,442 $12,447 $243,587 $1,186,511 include debt service requirements on the financial obligations used to construct the plant These requirements are considered a cost of purchased power and are quantified below. In addition to debt service, the City's entitlement requires the payment for fuel costs, operations and maintenance (O&M), administration and general (A&G) and other Southern California Public Poemr Authority miscellaneous costs associated with the generation and transmission facilities discussed above. These costs do not have a similar structured payment schedule as debt service, The Electric Utility is a member of the Southern California Public Power Authority however, prior experience indicates that annual costs are generally consistent from year to (SCPPA), a joint powers agency. SCPPA provides for the financing and construction of year. The fiscal year 2006 budget for fuel, O&M, A&G and other costs at these projects electric generating and transmission projects for participation by some or all of its are as follows:

members. To the extent the Electric Utility participates in projects developed by SCPPA, Fiscal Year IPA STS MAP MPP Hoover Magnolia Total 2006 $41,880 $2,705 $225 $120 $78 $43,708 $88,716 60

CITY OF ANAHEIM The Electric Utility has prepaid purchased power costs for the following take or pay credit enhancement supporting the 1993 Issue) from the proceeds of Taxable Lease contracts at June 30, 2005: Revenue Bonds issued by the Anaheim Public Financing Authority in the aggregate amount of $42,600. Effective December 16, 2003, the City and Anaheim Arena SCPPA - Stabilization fund prepayment $17,978 Management LLC (AAM) entered into a Facility Management Agreement (FMA)

SCPPA - Magnolia required prepayment 3,833 whereby AAM has the exclusive right and license to manage, maintain and operate all SCPPA - Hoover required prepayment 291 aspects of the facility in accordance with the FMA through June 30, 2023 with an option San Juan - Fuel acquisition prepayment 58 to extend the term for an additional period not to exceed 10 years. Annual distributions Prepaid purchased power $22,160 to the City, AAM and the County of Orange are required for their respective share of adjusted net revenues, as defined in the FMA. In the event that cash on hand is Sports and Entertainment Arena insufficient to pay operating expenses, debt service, distributions to the City, the County of Orange, or other amounts payable, AAM shall make or cause an affiliate or third-party The City entered into agreements with Ogden Facility Management Corporation of lending institution to make loans for such purposes, as defined in the FMA. Such funds Anaheim (OFM), a subsidiary of Ogden Corporation, now known as Covanta Energy will be repaid from gross revenues or adjusted net revenues, if any, as defined in and in Corporation (Ogden) regarding the construction and operation of a 19,500-seat Sports and accordance with disbursement priorities established in the FMA. At June 30, 2005, the Entertainment Arena (Arrowhead Pond of Anaheim), which was completed in June 1993. outstanding conduit debt on the Arrowhead Pond of Anaheim totaled $41,500. The debt is non-recourse, payable from revenues generated by the facility. Neither the faith and credit The grand opening of this facility occurred on June 18, 1993, and shortly thereafter Ogden nor the taxing power of the City is pledged to the payment of the debt. The debt is not a announced that it was able to secure a National Hockey League (NHL) expansion general or special obligation of the City, nor does it contain any credit enhancements that franchise, "The Mighty Ducks," as a major tenant in the facility, which actually began its secondarily pledge existing or future resources of the City (other than revenues generated first year of operation in September 1993. The agreement with the NHL team runs for 30 by the facility), and accordingly it is not reflected in the accompanying financial years, subject to termination by the tenant after the 1998-99 season, on certain conditions. statements.

As a result of negotiations between the City, Ogden and the owner of the Mighty Ducks, now known as Mighty Ducks Hockey Club, Inc., it was agreed to increase the size of the On January 26, 1999, the City entered into a series of lease transactions for the Arrowhead original $103,500 debt issue which financed construction of the facility by $23,000 to Pond of Anaheim. Under these transactions, the City leased the Arrowhead Pond of reimburse Ogden for the $12,500 Hockey Franchise Fee and additional enhancements to Anaheim to a third party trustee acting for the benefit of an equity investor for a term of the Sports and Entertainment Arena for such items as completing the team locker rooms, approximately 39.2 years. The trustee sublet the facility back to the City for 20 years, the restaurant, and a $3,000 state-of-the-art scoreboard (the 1993 Issue). Final which is shorter than the remaining term of the management agreement between the negotiations resulted in elimination of the City's contingent liability for the first three manager and the City in consideration of an advance rental payment for the entire lease years. Since there was one professional franchise signed during this period, the maximum term. At the end of the sublease, the City has a purchase option to purchase the trustee's contingent liability to the City was $1,500 for years four through eight. A $1,500 payment rights under the lease for a fixed amount. The advance rent payments to the City were was made during fiscal years 1998, 1999, 2000, 2001 and 2002 resulting in the deposited into a trust fund and invested. The cash scheduled to be available from this trust elimination of the City's obligation at June 30, 2002. fund is sufficient to pay the City's rent payments for the term of the sublease and to exercise the City's purchase option at the end of the sublease. The excess of the amount of On November 5, 2003, pursuant to a termination agreement between OFM, Ogden and the advance rent payment made by the trustee to the City over the deposit to the trust the City, OFM agreed to the termination and rejection by OFM of the Second Amended funds, after the payment of transaction expenses and payment to Ogden for agreeing to and Restated Arena Management Agreement (the Management Agreement) dated pledge its interest as manager under the Management Agreement and agreeing to December 1, 1993, whereby OFM had the exclusive right to operate and maintain the undertake certain additional obligations to the transaction, was approximately $4,000.

facility. OFM and Ogden were subject to the jurisdiction of the United States Bankruptcy This amount was recognized by the City as deferred revenue and is being amortized over Court under a Chapter 11 proceeding. On December 8, 2003, the United States the sublease term. The City has secured its obligations to the other parties to these lease Bankruptcy Court approved the rejection of certain existing operating contracts, transactions by a pledge of its respective interest in revenues from the facility, subordinate termination of the Management Agreement and settlement of certain claims under a bank (with certain exceptions) to any interests of the debt holders of the facility. The City's agreement whereby $40,000 was paid to Credit Suisse First Boston (which issued the obligations under these lease transactions are considered to be defeased in substance, and 61

CITY OF ANAHEIM therefore the related liabilities as well as the trust assets have been excluded from the 1.25 acre site was approved with an affiliate of Ogden for the construction of an 1,100-City's financial statements. AAM has pledged its interest as manager under the FMA and seat theatre called "Tinseltown Studios" (now known as "The Grove of Anaheim"). In assuned certain of Ogden's obligations pursuant to separate agreements with the parties November 2002, the City purchased the facility and the land for $6,700 from SMG, a to the lease transactions. Pennsylvania partnership, an affiliate of Aramark Entertainment, Inc., the successor to Ogden Entertainment, Inc. Concurrent with the purchase, the City granted to Stadium Nederlander-Grove LLC (Nederlander) a license to operate the facility for three years with the right to extend another five years, which Nederlander has exercised. Under the terms On May 14, 1996, the City and the California Angels, LP (Team) (renamed Anaheim of the agreement, Nederlander receives a management fee of $150. Additionally, The City Angels), was then managed by Disney Sports Enterprises, Inc. (subsequently known as and Nederlander each participate 50% in the annual net profits and net losses from Anaheim Sports, Inc.), entered into an agreement to provide for the operation and operations, as defimed in the management agreement. Nederlander is responsible for refurbishment of the Stadium. Pursuant to the agreement, the Team assumed responsibility 100% of losses in excess of $400, thereby limiting the City's share of net losses to a for the operation of the Stadium on October 1, 1996. The agreement runs for 33 years maximum of $200 in any given year. Upon expiration of the term of the agreement, the (subject to a limited Team option to cancel at 20 years and the Team's right to extend the City may elect to extend the term or pay the unamortized balance of capital assets term). purchased during the term to Nederlander.

In addition to operational control, the agreement provides for a minimum $100,000 In May 1999, the City approved the sale to Summit Commercial Properties of a 1.5 acre renovation to the Stadium, which was funded by the City ($20,000) and Disney Sports building site on the Sportstown site for $4,190. The transaction closed in March 2000, and Enterprises, Inc. ($80,000 plus overruns). This renovation, which commenced on October the owner, HPMC Stadium Gateway Associates, LLC, constructed a 250,000 square foot, 1, 1996, was substantially complete by the opening of the 1998 baseball season. six-story office building on the parcel. The "Stadium Gateway Anaheim" office building opened for business on October 1, 2001. In April 2003, the building was sold to Principal Under the terms of the agreement, the Team assumed full responsibility for all Stadium Financial Group and is now operated by Stadium Gateway LLC, who has reported 100%

operations and maintenance, including capital maintenance. The Team books all Stadium occupancy. The owner pays the City $160 per year for parking and common area and parking lot events (except for ten annual City events), pays all expenses, and retains maintenance. The City is continuing to pursue other opportunities for future development all revenue (subject to the City's rights to share in certain net revenues) except that the City of the Sportstown site.

credits the Team up to $500 per year adjusted annually for CPI for a capital reserve, calculated on the basis of property taxes. The City's participation in net revenues includes Ttigation amounts received by the Team above certain thresholds including paid admissions ($2.00 per paid admission in excess of 2.6 million admissions per year), net income from non- A number of claims and suits are pending against the City for alleged damages to persons game events (in excess of $2,000 per year adjusted annually for CPI), and parking lot net and/or property and for other alleged liabilities arising out ofmatters usually incident to the income (25% in excess of $4,000 per year adjusted annually for CPI). Additionally, as operation of a city such as Anaheim. Although the aggregate amount asserted for such indicated above, the City retained the right to book and retain all revenue from ten parking lawsuits and claims is significant, in the opinion of City management, the City has strong lot events per year. Major League Baseball consented to the transfer of the Team in fiscal defenses against such claims, and thus the ultimate loss, if any, relating to these claims and year 2003 to interests controlled by Arte Moreno. No changes in the terms of the suits not covered by insurance, will not materially affect the financial position of the City.

agreement with the Team were made in connection with that transfer.

Granta This agreement ensured the retention of the Team under a long-term agreement (the prior agreement with the California Angels expired in 2001), accomplished a major overhaul of Amounts received or receivable from grant agencies are subject to audit and adjustment the Stadium at minimum cost to the City, and provided for the privatization of Stadium by grantor agencies. Any disallowed claims, including amounts already collected, may operations and shift of operating risL constitute a liability of the applicable funds. The amount, if any, of expenditures that may be disallowed by the grantor cannot be determined at this time, although the City expects The Agreement also provided that the City had the right to develop its Sportstown such amounts, if any, to be immaterial.

complex on approximately 42 acres of the parking lot. In 1998 a land sale of $1,000 for a 62

CITY OF ANAHEIM Conkmtmcion and other &ignfw;antcommitments NOTE 12- SUBSEQUENT EVBNTS At June 30, 2005, the City had the following commitments with respect to unfinished Change to Post Emploiyment Benefits capital projects:

Remaining Expected In August 2005, the City restructured employee benefits for its miscellaneous (non-safety)

Construction Completion employees. A pension enhancement (2.7% @ 55) wias adopted in connection with a Commitment Date reduced retir medical benefit This reduced benefit for miscellaneous employees other Automotive Equipment Acquisitions $ 1,580 06/06 than members of the International Brotherhood of Electrical Workers (IBEW), 1) freezes BNSF Railroad Corridor Soundwall 2,537 04/06 service credit as of December 31, 2005, for employees with no less than ten years of East St/Santa An St to South St 541 08/05 service, and 2) transfers over 300 employees that did not meet such criteria from the Haskctt Libray 2,397 01/06 defimed benefit program to the existing defined contribution program. The same pension Katella Avel9th Street to Humor 1,045 08/07 enhancement was adopted for IBEW members whereby benefits for members retiring on Katella Frontage Lighting and Landscape 633 07/05 or after October 1, 2005, wvre transferred into the IBEW's benefit plan. This plan is Lincoln - State College Intersection 999 07/05 provided solely through the terms of a Trust Fund established and maintained by the Park 69/12KV "GIS" Substation & IBEW. The Trust is responsible for determining benefit eligibility and benefit schedules.

Roosevelt Park Facilities 13,837 06/06 Parking Structure 18,786 12/06 SONGS Nuclear Povwr Plant South St/State College to East St 518 08/05 Technology Development 2,141 12/05 As discussed in note 10, the potential termination of the City's Ownership Share in Youth Center and Police Station 6,449 05/06 SONGS is contingent upon certain regulatory approvals obtained by SCE and the City obtaining approval from City Council. On December 15, 2005, the California Public Utilities Commission (CPUC) announced its decision finding the restoration work to be cost effective, but imposing a cap on the amount that SCE may recover from its ratepayers without further CPUC approval. The City remains unable to predict the outcome and/or schedule of this matter.

63

(This page left blank intentionally) 64

Nonmajor Governmental Funds SPECIAL REVENUE FUNDS are used to account for revenue derived from specific taxes or other earmarked revenue sources (other than for major capital projects) that are restricted by law or administrative action to expenditures for specified purposes.

GAs TAX AND ROADS FUND - Established to account for the construction and maintenance of the road network system of the City. Financing is primarily provided by the City's share of Federal, State, and local gasoline taxes. Federal, State, and local regulations require that these gasoline taxes be used to improve and maintain streets, and includes programs that improve the air quality of the region.

WORKFORCE DEVELOPMENT FUND - Established to account for the City's involvement in Federal, State, and local programs to create jobs for the unemployed citizens in the Anaheim area.

COMMUNITY DEVELOPMENT BLOCK GRANT FUND - Established to account for financing of rehabilitation of privately held homes and government infrastructure.

Financing is provided by the Federal Housing and Community Development Act.

COMMUNITY SERVICES FACILITES FUND - Established to account for the development of new parksite, playground, and other community facilities. Financing is provided by State and Federal reimbursement programs in conjunction with fees charged to residential and commercial developers.

SEWER AND STORM DRAIN CONSTRUCTION FUND - Established to account for the construction of the City's sewer and storm drain system. Financing is provided by fees charged to residential and commercial developers.

GRANTS FUND - Established to account for miscellaneous grants requiring segregated fund accounting. Financing is provided by Federal. State, and local agencies.

ANAHEIM RESORT MAINTENANCE DISTRICT FUND - Established to account for the levy and collection of special assessments to pay the cost of annual maintenance and improvements within the maintenance district, for those parcels which specifically benefit from the maintenance and improvements.

NARCOTIC ASSET FORFEITURE FUND - Established to account for funds received from Federal and State agencies which are derived from monies and property seized by the Police Department in drug related incidents. These funds are used to supplement existing resources of the City's law enforcement activities.

REDEVELOPMENT HOUSING SET-ASIDE FUND - Established for the purpose of increasing and improving the community's supply of low and moderate income housing in accordance with the California Community Redevelopment Law. Financing is provided from property tax increment.

DEBT SERVICE FUNDS are used to account for the accumulation of resources and the payment of principal and interest on general debt of the City and related entities.

MUNICIPAL IMPROVEMENTS FUND - Established to accumulate resources for the payment of principal and interest on general obligation bonds of the City. Debt service is financed by property tax revenues.

REDEVELOPMENT AGENCY FUND - Established to accumulate resources for payment of principal and interest on Redevelopment Agency tax allocation bonds. Debt service is financed by property tax revenues.

CERTIFICATES OF PARTICIPATION FUND - Established to accumulate resources for payment of the principal and interest on the certificates of participation for the Parking Facility Project, Police Facilities Projects, Arena Land Acquisition, and other various acquisitions and capital improvements.

ANAHEIM RESORT IMPROVEMENTS FUND - Established to accumulate resources for payment of the principal and interest on the lease revenue bonds for The Anaheim Resort improvements.

CAPITAL PROJECTS FUNDS are established to account for resources used for the acquisition and construction of capital facilities by the City, except for those financed by proprietary funds.

MELLO-Roos PROJECTS FUND - Established to account for road, sewer, and water improvements and the construction of a police sub-station. Financing was provided by the sale of special tax bonds which are secured by and payable from the proceeds of an annual special assessment tax on the property within the district.

REDEVELOPMENT AGENCY FUND - Established to account for the acquisition, relocation, demolition, and sale of property for those portions of Anaheim earmarked as in need of redevelopment related activities. Financing is provided by property tax increment and bond proceeds.

OTHER CAPITAL IMPROVEMENTS FUND - Established to account for miscellaneous capital projects as determined by the City Council. Currently, financing is provided by fees from developers for infrastructure improvements and subsidies from the General Fund.

ANAHEIM RESORT IMPROVEMENTS FUND - Established to account for the public improvements in The Anaheim Resort. Financing was provided by the sale of lease revenue bonds.

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Governmental Funds by Fund Type June 30, 2005 (In thousands)

Nowmwjor Nonmjor Total Special Nonmajor Capital Nonmajor ROVuO Debt Service Pje Gove ktal Funds Funds Fn Funds ASSETS Cash and cash equivalents $ 6,325 $ 1,200 $ 7,331 $ 14,856 Investments 35,825 6,737 42,279 84,841 Accounts receivable, net 71 40 111 Accrued interest receivable 309 346 380 1,035 Notes receivable 22,621 9,183 31,804 Interfund receivable 83 12,062 12,145 Due from other governments 11,188 336 11,524 Land held for resale, net 9,170 18,696 27,866 Prepaids and other assets 709 72 1,033 1,814 Restricted cash and cash equivalents 3,600 12,017 17,159 32,776 Restricted investments 17,121 17,121 Total assets $89,901 $37,829 $108,163 $235,893 IJABUITrS AND FUND BALANCES Liabilities:

Accounts payable $ 5,795 $ 1,428 $ 4,174 $ 11,397 Wages Payable 192 84 276 Deposits 226 757 983 Interfund payable 328 26,684 27,012 Deferred liabilities 32,469 13,040 45,509 Total liabilities 39,010 1,428 44,739 85,177 Fund balances:

Reserved for noncurrent interfund receivable 83 11,933 12,016 Reserved for debt service 34,872 34,872 Reserved for land held for resale 9,170 18,696 27,866 Reserved for prepaids and other assets 709 72 1,033 1,814 Unreserved - designated for debt service 1,457 1,457 Unreserved - designated for capital projects 14,974 36,497 51,471 Unreserved - undesignated 25,955 (4,735) 21,220 Total fund balances 50,891 36,401 63,424 150,716 Total liabilities and fund balances $89,901 $37,829 S108,163 $235,893 65

CITY OF ANAhBEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds by Fund Type Year Ended June 30, 2005 (inthousands)

No:ar Nonmajor Total Special Nonajor CaRital Nonmajor RGVwuc Debt eiviomm tal Funds Funds PFuds Funds Revenues:

Property taxes $10,326 $28,745 $ 39,071 Licenses, fees and permits 1,301 $ 60 1,361 Intergovernmental revenues 38,288 8 524 38,820 Use of money and property 1,394 1,325 3,489 6,208 Other 2,259 1,891 4,150 Total revenues 53,568 30,078 5,964 89,610 Expenditures:

Current:

City Attorney 120 120 Police 3,794 14 3,808 Fire 422 422 Community Development 9,352 5,609 13,409 28,370 Planning 1,185 104 1,289 Public Works 6,188 451 6,639 Community Services 932 297 1,229 Convention, Sports and Entertainment 173 173 Capital outlay 22,663 17,009 39,672 Debt service:

Principal retirement 524 9,099 305 9,928 Interest and fiscal agent charges 107 37,431 1,078 38,616 Total expenditures 45,287 52,139 32,840 130,266 Excess (deficiency) of revenues over (under) expenditures 8,281 (22,061) (26,876) (40,656)

Other financing sources (uses):

Transfers in 2,105 33,115 36,972 72,192 Transfers out (8,758) (24,294) (6,266) (39,318)

Issuance of debt 7,164 7,164 Total other financing sources (uses) (6,653) 8,821 37,870 40,038 Net change in fund balances 1,628 (13,240) 10,994 (618)

Fund balances at beginning of year 49,263 49,641 52,430 151,334 Fund balances at end of year $50,891 $36,401 $63,424 $150,716 66

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2005 (in thousands)

GaS Tax Comm"Any Communty Sewer and and Wozk-rce Dewlopmont Szvicas Storm Dain Roads Dewlopmeat Block Gankt Facilitfis Construction ASSETS Cash and cash equivalents $ 1,424 $ 4 $1,168 S 446 Investments 8,192 $ 1 23 6,803 2,597 Accounts receivable, net 3 2 5 Accrued interest receivable 66 6 58 27 Notes receivable 4,016 Interfund receivable Due from other governments 8,703 296 74 483 Land held for resale, net Prepaids and other assets 139 11 52 Restricted cash and cash equivalents Total assets $18,527 $ 310 $4,128 $8,564 $3,070 LIABIuTIES AND FUND BALANCES Liabilities:

Accounts payable $ 3,393 $ 85 $ 104 $ 339 S 78 Wages payable 64 32 8 7 6 Deposits 1 Interfund payable 129 199 Deferred liabilities 7,262 247 4,068 299 Total liabilities 10,719 493 4,180 845 84 Fund balances (deficits):

Reserved for noncurrent interfund receivable Reserved for land held for resale Reserved for prepaids and other assets 139 11 52 Unreserved - designated for capital projects Unreserved - undesignated 7,669 (194) (52) 7,667 2,986 Total fund balances (deficits) 7,808 (183) (52) 7,719 2,986 Total liabilities and fund balances $18,527 $ 310 $4,128 $8,564 $3,070 (continued) 67

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2005 (Inthousands) (continued)

Anaheim Resort Narcotic RedewlcpMznt Maiznisnance Asset HousMing Grants District Forfeitue Set-Aside Total ASSETS Cash and cash equivalents $ 194 $ 806 $ 481 $ 1,802 $ 6,325 Investments 417 4,632 2,751 10,409 35,825 Accounts receivable, net 23 38 71 Accrued interest receivable 6 43 29 74 309 Notes receivable 18,605 22,621 Interfund receivable 83 83 Due from other governments 1,521 31 80 11,188 Land held for resale, net 9,170 9,170 Prepaids and other assets 503 4 709 Restricted cash and cash equivalents 3,600 3,600 Total assets $2,641 $5,535 $3,261 $43,865 $89,901 LIABIITIES AND FUND BALANCES Liabilities:

Accounts payable $ 861 $ 149 $ 17 $ 769 $ 5,795 Wages payable 21 13 6 35 192 Deposits 225 226 Interfund payable 328 Deferred liabilities 1,988 18,605 32,469 Total liabilities 2,870 162 $ 23 19,634 39,010 Fund balances (deficits):

Reserved for noncurrent interfund receivable 83 83 Reserved for land held for resale 9,170 9,170 Reserved for prepaids and other assets 503 4 709 Unreserved - designated for capital projects 14,974 14,974 Unreserved - undesignated (732) 5,373 3,238 25,955 Total fund balances (deficits) (229) 5,373 3,238 24,231 50,891 Total liabilities and fund balances $2,641 $5,535 $3,261 $43,865 $89,901 68

CITY OF ANAHEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Nonmajor Special Revenue Funds Year Ended June 30, 2005 (inthousands)

Gas Tax Commuiommunmmht S r and and Workorce opmct Sovc Storm Drai Roads DowlopneatBlock rat FadIlities Construction Revenues:

Property taxes Licenses, fees and permits $ 130 $1,080 $ 91 Intergovernmental revenues 22,957 $2,389 $4,627 1,485 419 Use of money and property 81 138 202 81 Other 176 749 Total revenues 23,344 2,389 5,514 2,767 591 Expenditures:

Current City Attorney 120 Police 1,700 Fire Community Development 2,657 1,542 Planning 1,185 Public Works 1,901 331 Community Services 591 237 Capital outlay 16,222 1,456 483 Debt service:

Principal retirement 34 Interest and fiscal agent charges 20 Total expenditures 18,123 2,657 5,138 1,747 814 Excess (deficiency) of revenues over (under) expenditures 5,221 (268) 376 1,020 (223)

Other financing sources (uses):

Transfers in 55 Transfers out (4,649) (428)

Total other financing sources (uses) (4,594) _(428)

Net change in fund balances 627 (268) (52) 1,020 (223)

Fund balances at beginning of year 7,181 85 6,699 3,209 Fund balances (deficits) at end of year $ 7,808 $ (183) $ (52) $7,719 $2,986 (confined) 669

CITY OF ANAHEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Nonmajor Special Revenue Funds Year Ended June 30,2005 (inthousands) (continued)

Anaheim Resort Narcotic Roed lomn M t nAsset E Grant District Foreitum Set-Askc Total Revenues:

Property taxes $3,329 $ 6,997 $10,326 Licenses, fees and permits 1,301 Intergovernmental revenues $ 5,114 $1,297 38,288 Use of money and property 27 68 78 719 1,394 Other 2 4 1,328 2,259 Total revenues 5,143 3,401 1,375 9,044 53,568 Expenditures:

Current:

City Attorney 120 Police 1,643 451 3,794 Fire 422 422 Community Development 5,153 9,352 Planning 1,185 Public Works 23 3,933 6,188 Community Services 104 932 Capital outlay 3,976 499 16 11 22,663 Debt service:

Principal retirement 490 524 Interest and fiscal agent charges 87 107 Total expenditures 6,168 4,432 1,044 5,164 45,287 Excess (deficiency) of revenues over (under) expenditures (1,025) (1,031) 331 3,880 8,281 Other financing sources (uses):

Transfers in 200 1,850 2,105 Transfers out (290) (3,391) (8,758)

Total other financing sources (uses) (290) 200 (1,541) (6,653) net change in fund balances (1,315) (831) 331 2,339 1,628 Fund balances at beginning of year 1,086 6,204 2,907 21,892 49,263 Fund balance (deficits) at end of year $(229) $5,373 $3,238 $24,231 $50,891 70

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Debt Service Funds June 30,2005 (In thousands)

Municipal Redwlopmunt Certficates of Anaheim Rort Impmwenbtm Agenc Participation ImprMM taB Total ASSETS Cash and cash equivalents S 1,200 $ 1,200 Investments 6,737 6,737 Accrued interest receivable $ 4 293 $ 49 346 Due from other governments 16 320 336 Prepaids and other assets 72 72 Restricted cash and cash equivalents 95 518 181 $11,223 12,017 Restricted investments 552 2,306 5,292 8,971 17,121 Total assets $667 $11,446 $5,522 $20,194 $37,829 LIABUIBS AND FUND BALANCES Liabilities:

Accounts payable $ 1,423 $ 5 $ 1,428 Total liabilities 1,423 5 1,428 Fund balances:

Reserved for prepaids and other assets 72 72 Reserved for debt service $667 8,494 5,517 $20,194 34,872 Unreserved - designated for debt service 1,457 1,457 Total fund balances 667 10,023 5,517 20,194 36,401 Total liabilities and fund balances $667 $11,446 $5,522 $20,194 $37,829 71

CITY OF ANAHEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds Year Ended June 30, 2005 (nthousands)

Munidpd Redewvlopmnnt Certifiae of Anaheim Raoa Impwwunm Agcopy Partiipadton Impruvemn Total Revenues:

Property taxes $758 $ 27,987 $ 28,745 Intergovernmental revenues 8 8 Use of money and property 11 871 S 347 $ 96 1,325 Total revenues 777 28,858 347 96 30,078 Expenditures:

Current Community Development 5,609 5,609 Debt service:

Principal retirement 435 3,353 2,721 2,590 9,099 Interest and fiscal agent charges 302 12,452 1,906 22,771 37,431 Total expenditures 737 21,414 4,627 25,361 52,139 Excess (deficiency) of revenues over (under) expenditures 40 7,444 (4,280) (25,265) (22,061)

Other financing sources (uses):

Transfers in 2,763 4,288 26,064 33,115 Transfers out (24,294) (24,294)

Total other financing sources (uses) (21,531) 4,288 26,064 8,821 Net change in fund balances 40 (14,087) 8 799 (13,240)

Fund balances at beginning of year 627 24,110 5,509 19,395 49,641 Fund balances at end of year $667 $10,023 $ 5,517 $ 20,194 $ 36,401 72

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Capital Projects Funds June 30, 2005 (In thousands)

Mello-Roos Radevelopmant Other capital Anaheim Reort Pjeocta Agmwy Impsomnenta Implummenta Total ASSETS Cash and cash equivalents $ 1,924 $ 3,866 $ 1,541 $ 7,331 Investments 11,193 22,228 8,858 42,279 Accounts receivable, net 40 40 Accrued interest receivable 62 215 103 380 Notes receivable 9,183 9,183 Interfund receivable 2,639 9,423 12,062 Land held for resale, net 18,696 18,696 Prepaids and other assets 1,001 32 1,033 Restricted cash and cash equivalents 9,671 5,980 1,508 17,159 Total assets $54,409 $41,744 $12,010 $108,163 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 2,639 $ 1,469 $ 66 $ 4,174 Wages payable 68 12 4 84 Deposits 757 757 Interfund payable 24,290 2,394 26,684 Deferred liabilities 9,183 3,857 13,040 Total liabilities 36,937 7,732 70 44,739 Fund balances:

Reserved for noncurrent interfund receivable 2,510 9,423 11,933 Reserved for land held for resale 18,696 18,696 Reserved for prepaids and other assets 1,001 32 1,033 Unreserved - designated for capital projects 24,557 11,940 36,497 Unreserved - undesignated (4,735) (4,735)

Total fund balances 17,472 34,012 11,940 63,424 Total liabilities and fund balances $54,409 $41,744 $12,010 $108,163 73

CITY OF ANAIEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Projects Funds Year Ended June 30, 2005 (in thousd)

Moflo-Row RedOlopma= Other Capital Anahaem Resort Projeds Agency Impowments Impwanents Total Revenues:

Licenses, fees and permits $ 25 S 35 $ 60 Intergovernmental revenues 524 524 Use of money and property $ 2,652 544 293 3,489 Other 1,720 112 59 1,891 Total revenues 4,372 1,205 387 5,964 Expenditures:

Current:

Police 14 14 Community Development 13,409 13,409 Planning 104 104 Public Works 124 327 451 Community Services $57 240 297 Convention, Sports and Entertainment 173 173 Capital outlay 17 8,503 8,095 394 17,009 Debt service:

Principal retirement 305 305 Interest and fiscal agent charges 580 498 1,078 Total expenditures 74 22,492 9,276 998 32,840 Deficiency of revenues under expenditures (74) (18,120) (8,071) (611) (26,876)

Other fimancing sources (uses):

Transfers in 25,891 11,081 36,972 Transfers out (6,245) (21) (6,266)

Issuance of debt 1,875 5,289 7,164 Total other financing sources (uses) 21,521 16,370 (21) 37,870 Net change in fund balances (74) 3,401 8,299 (632) 10,994 Fund balances at beginning of year 74 14,071 25,713 12,572 52,430 Fund balances at end of year $- $17,472 $34,012 $11,940 $63,424 74

Internal Service Funds INTERNAL SERVICE FUNDS are used to account for the financing of centralized services to City departments on a cost-reimbursement basis (including depreciation).

GENERAL BENEFITS AND INSURANCE FUND - Established to account for employee compensated absences, retirement and health benefits, and self-insurance programs.

MOTORIZED EQUIPMENT FUND - Established to account for motorized equipment used by City departments.

DUPLICATING AND PRINTING FUND - Established to account for central duplicating, printing and mailing services provided to City departments.

INFORMATION SERVICES FUND - Established to account for data processing services to City departments.

OFFICE MAINTENANCE AND EQUIPMENT FUND - Established to account for City office maintenance services and equipment used by City departments.

CITY OF ANAUEIM Combining Statement of Fund Net Assets Internal Service Funds June 30, 2005 (inthousands)

Generd Offie BenefiD Eqplicang Mantenane and Motorized and Inrmation and ASSETS_ Inurance Equipment Printing SOMriM Equipment Total Current assets:

Cash and cash equivalents S 18,031 $ 1,693 $ 161 S 268 S 768 S 20,921 Investments 103,700 9,735 937 1,560 4,476 120,408 Accounts receivable, net 510 20 9 539 Accrued interest receivable 945 III 9 29 41 1,135 Interfwud receivable Inventories 632 632 Prepaids and other assets _F23__ 19 19 Total current assets 123,186 12,210 1,107 1,866 5,285 143,654 Noncurrent assets:

Interfind receivable, less current portion 104 104 Restricted cash and cash equivalents _17 17 Restricted investments 473 473 Unamortized debt issuance costs II 11 Capital assets:

Buildings and improvements 3,230 3,373 6,603 Equipment 81 39,221 552 6,229 1,687 47,770 Construction in progress 6,808 58 6,866 Less accumulated depreciation (40) (25,485 (424) (3,127) _,777) (32,853)

Capital assets, net 41 16,966 128 9,910 1,341 28,386 Total noncurrent assets 145 17,467 128 9,910 -T9 28,991 Total assets 123,331 29,677 1,23.5 11,776 6 172,645 LIABIIELESm Current liabilities:

Accounts payable 1,125 2,903 62 1,035 282 5,407 Wages payable 901 77 8 15 70 1,071 Interest payable 44 1 1 46 Compensated absences 16,222 16,222 Self-insurance liability 8,094 8,094 Long-term debt 227 52 168 447 Post retirement employment benefits 7,857 7,857 Unearned revenues 5%9 5%

Total current liabilities 34,795 3,251 123 1,219 352 39,740 Noncurrent liabilities:

Self-insurance liability, less current portion 21,826 21,826 Long-term debt, less current portion 1,620 39 1,659 Post retirement employment benefits, less current portion 66,192 66,192 Total noncurrent liabilities 88,018 1,620 39 89,677 Total liabilities 122,813 4,871 162 1,219 352 129,417 FUWD NT ASSETS Invested in capital assets, net of related debt 41 15,130 37 9,742 1,341 26,291 Restrict for debt service 446 446 Unrestricted 477 9,230 1,036 815 4,933 16,491 Total find net assets r_518 $ 24,806 $1,073 $10,557 $'6,274 $ 43,228 75

CITY OF ANAHEIM Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Internal Service Funds Year Ended June 30, 2005 (inthousands)

Genral Office Benefits Duplicing Maintenance and Motorizod and Information and Insurance Equipment Ptinting Services Equipmont Total Operating revenues:

Charges for services $84,357 $ 9,119 $1,739 $ 9,978 $7,782 $112,975 Other 2 4 9 15 Total operating revenues 84,359 9,119 1,739 9,982 7,791 112,990 Operating expenses:

Salaries and wages 2,116 3,282 336 409 2,450 8,593 Maintenance and operations 2,201 4,004 1,322 8,595 4,947 21,069 Insurance premiums and claims 11,691 11,691 Compensated absences and other benefits 73,592 73,592 Depreciation 2 2,565 83 1,006 132 3,788 Total operating expenses 89,602 9,851 1,741 10,010 7,529 118,733 Operating income (loss) (5,243) (732) (2) (28) 262 (5,743)

Nonoperating income (expenses):

Interest income 2,615 327 27 76 122 3,167 Interest expense (111) (15) (23) (149)

Gain (loss) from disposal of capital assets 89 (2) 87 Total nonoperating income 2,615 305 10 53 122 3,105 Income (loss) before capital contributions (2,628) (427) 8 25 384 (2,638)

Capital contributions 2,183 2,183 Change in fund net assets (2,628) (427) 8 2,208 384 (455)

Fund net assets at beginning of year 3,146 25,233 1,065 8,349 5,890 43,683 Fund net assets at end of year $ 518 $24,806 $1,073 $10,557 $6,274 $ 43,228 76

CITY OF ANABEIM Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2005 (inthousands)

General Offine Benefits Daplicatings Mainfenance and Motorized and Informiation and Insurance Equlpment Printing Servics -Equipiaxat Total Cash flows fiom opeating activities:

Receipts from interfund services provided $ 84,357 S 9,119 $1,739 $ 9,978 S 7,782 $ 112,975 Payments to suppliers (1,593) (1,062) (944) (8,541) (4,504) (16,644)

Payments for salaries and wages to employees (1,799) (3,280) (336) (404) (2,434) (8,253)

Payments for interfimd services used (855) (357) (440) (226) (454) (2,332)

Payments for insurance premiums and claims (7,792) (7,792)

Payments for compensated absences and other benefits (66,791) (66,791)

Other receipts (payments) 17 (120) 4 10 (89)

Net cash provided by operating activities 5,544 4,300 19 811 400 11,074 Cash flows fom. noncapital finaning activities:

Payment of interfimd balances 368 368 Net cash used in noncapital financing activities 368 368 Cash flows from capital and related financin activities:

Proceeds from sale of capital assets 105 105 Capital purchases (42) (5,831) (18) (4,041) (318) (10,250)

Principal payments of long-term debt (213) (86) (186) (485)

Interest payments (42)___ (113) __(15) )(153 Net cash used in capital and related financing activities (42) (6,052) (119) (4,252) (318) (10,783)

Cash flows from ietng activits Purchase of investment securities (270,771) (24,636) (2,269) (893) (11,340) (309,909)

Proceeds from sale and maturity of investment securities 267,497 26,320 2,386 3,972 11,398 311,573 Interest received 3,869 449 26 109 118 4,571 Net cash provided by investing activities 595 2,133 143 3,188 176 6,235 Increase (decrease) in cash and cash equivalents 6,465 381 43 (253) 258 6,894 Cash and cash equivalents at beginning of the year 11,566 1,329 118 521 510 14,044 Cash and cash equivalents at end of the year S 18,031 S 1,710 S 161 $ 268 $ 768 $ 20,938 (contnued) 77

MY OF ANAHEIM Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2005 (in thousands) (continued)

Geneal office Benefits Diqfficating Maintenance and Motorized and Information and Insurance Equipment Printing Services Equipment Total ReconUiliaon of operating inome (loss) to net cash provided by operating *a*tivitim Operating income (loss) S(5,243) S(732) $ (2) $(28) $262 S(5,743)

Adjustment to reconcile operating income (loss) to net cash provided by (used in) operating activities:

Depreciation 2 2,565 83 1,006 132 3,788 Changes in assets and liabilities:

Accounts receivable 119 (20) (9) 1 91 Inventories (100) .(100)

Prepaids and other assets 30 41 71 Accounts payable (126) 2,544 (62) (163) (11) 2,182 Wages payable 317 2 5 16 340 Unearned revenues 31 31 Compensated absences 1,292 1,292 Self-insurance liability 3,538 3,538 Post retirement employment benefits 5,584 5,584 Total adjustments 10,787 5,032 21 839 138 16,817 Net cash provided by operating activities S 5,544 $4,300 $ 19 $ 811 $400 $11,074 Schedule of noncash investing&capital and noncapital fiancin activities:

Decrease in fair value of investments S(1,348) $ (128) $(1,476)

Transfers in of capital assets $2,183 2,183 Reconciliation of cmah and cash equivalents:

Cash and cash equivalents $18,031 $1,693 $161 $ 268 $768 $20,921 Restricted cash and cash equivalents 17 17 Total cash and cash equivalents $18,031 $1,710 $161 S 268 $768 $20,938 78

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Budget and Budgetary Basis Actual - Nonmajor Special Revenue Funds Year Ended June 30, 2005 (In thousands)

Gu Tax Workfoion Commuinit Development and Roads Development Block Gant Budget Actual Budget Budgt Atual Revenues:

Property taxes Licenses, fees and permits S 200 $ 130 Intergovernmental revenues 55,596 22,957 $3,074 $2,389 $10,092 $4,627 Use of money and property 82 81 68 138 Other 139 176 360 749 Total revenues 56,017 23,344 3,074 2,389 10,520 5,514 Expenditures:

City Attorney 120 120 Police 1,700 1,700 Fire Community Development 3,025 2,657 5,492 1,542 Planning 1,192 1,185 Public Works 55,357 18,123 643 Community Services 816 591 Total expenditures 55,357 18,123 3,025 2,657 9,963 5,138 Excess (deficiency) of revenues over (under) expenditures 660 5,221 49 (268) 557 376 Other financing sources (uses):

Transfers in 55 55 Transfers out (4,649) (4,649) (469) (428)

Sales on capital assets Total other financing sources (uses) (4,594) (4,594) (469) (428)

Net change in fund balances (3,934) 627 49 (268) 88 (52)

Fund balances at beginning of year 7,181 7,181 85 85 Fund balances (deficits) at end of year $ 3,247 7,808 $ 134 (183) $ 88 (52)

Adjustments to reconcile to GAAP:

Purchases of land held for resale Decline in value of land held for resale Proceeds on sale of land held for resale Gain on sale of land held for resale Ending fund balance (deficits)-GAAP basis $ 7,808 $ (183) $ (52)

(continued) 79

CITY OF ANABEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Budget and Budgetary Basis Actual - Nonmajor Special Revenue Funds Year Ended June 30, 2005 (In thou d) (continued)

Community Sewr and Storm Drain Survos Facilitim Constuction Grants Budget ActUa Budget Actual Budget Actual Revenues:

Property taxes Licenses, fees and permits $ 1,413 $1,080 $ 240 $ 91 Intergovernmental revenues 8,025 1,485 419 $29,124 $5,114 Use of money and property 61 202 65 81 2 27 Other 2 Total revenues 9,499 2,767 305 591 29,126 5,143 Expenditures:

City Attorney Police 21,215 3,997 Fire 753 631 Community Development 1,000 P*lning Public Works 6,502 422 1,208 814 5,705 1,436 Community Services 8,737 1,325 1,014 104 Total expenditures 15,239 1,747 1,208 814 29,687 6,168 Excess (deficiency) of revenues over (under) expenditures (5,740) 1,020 (903) (223) (561) (1,025)

Other financing sources (uses):

Transfers in Transfers out (245) (290)

Sales on capital assets 1,400 Total other financing sources (uses) 1,400 (245) (290)

Net change in fund balances (4,340) 1,020 (903) (223) (806) (1,315)

Fund balances at beginning of year 6,699 6,699 3,209 3,209 1,086 1,086 Fund balances (deficits) at end of year $ 2,359 7,719 $2,306 2,986 $ 280 (229)

Adjustments to reconcile to GAAP:

Purchase of land held for resale Decline in value of land held for resale Proceeds on sale of land held for resale Gain on sale of land held for resale Ending fund balance (deficits)-GAAP basis (continued) $7,719 $2,986 $ (229) 80

CIMY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Budget and Budgetary Basis Actual - Nonmajor Special Revenue Funds Year Ended June 30, 2005 (in thousands) (continued)

Anahalm Resor NarcoAicAne Redevelopment Maintenance District BorMt Acu Housing Set-Aside Budget Actual Budget Actua

$Budgt Actual Revenues:

Property taxes $3,417 $ 3,329 $ 6,767 $ 6,997 Licenses, fees and permits Intergovernmental revenues $1,328 $1,297 Use of money and property 167 68 78 483 719 Other 4 4 11,400 4,598 Total revenues 3,588 3,401 1,328 1,375 18,650 12,314 Expenditures:

City Attorney Police 1,738 1,044 Fire Community Development 18,532 7,462 Planning Public Works 6,552 4,432 Community Services Total expenditures 6,552 4,432 1,738 1,044 18,532 7,462 Excess (deficiency) of revenues over (under) expenditures (2,964) (1,031) (410) 331 118 4,852 Other financing sources (uses): 1,850 Transfers in 200 200 303 Transfers out (2,618) (3,391)

Sale of capital assets Total other financing sources (uses) 200 200 (2,315) (1,541)

Net change in fund balances (2,764) (831) (410) 331 (2,197) 3,311 Fund balances at beginning of year 6,204 6,204 2,907 2,907 21,892 21,892 Fund balances (deficits) at end of year $ 3,440 5,373 $2,497 3,238 $19,695 25,203 Adjustments to reconcile to GAAP:

Purchase of land held for resale 3,035 Decline in value of land held for resale (737)

Proceeds on sale of land held for resale (3,298)

Gain on sale of land held for resale 28 Ending fund balance (deficits)-GAAP basis $ 5,373 $3,238 $24,231 81

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - All Debt Service Funds Year Ended June 30, 2005 (inthousands)

Municipal Redvelopmvat Certificaot of Anaktm Resort ImpBge Agean Pardcipaton Improvwnent Budget Ata Budget Acua Budget Budget Actual A

Revenues:

Property taxes $739 $758 $ 27,070 $27,987 Intergovernmental revenues 8 Use of money and property 11 739 871 $ 347 $ 96 Total revenues 739 777 27,809 28,858 347 96 Expenditures:

Finance $ 25,365 25,361 Police $ 2,031 2,031 Community Development 21,916 21,414 269 269 Public Works 739 737 627 627 Convention, Sports and Entertainment 1,700 1,700 Total expenditures 739 737 21,916 21,414 4,627 4,627 25,365 25,361 Excess (deficiency) of revenues over (under) expenditures 40 5,893 7,444 (4,627) (4,280) (25,365) (25,265)

Other financing sources (uses):

Transfers in 2,891 2,763 4,627 4,288 24,946 26,064 Transfers out (10,759) (24,294)

Total other financing sources (uses) (7,868) (21,531) 4,627 4,288 24,946 26,064 Net change in fund balances 40 (1,975) (14,087) 8 (419) 799 Fund balances at beginning of year 627 627 24,110 24,110 5,509 5,509 19,395 19,395 Fund balances at end of year $627 S667 $ 22,135 $10,023 $ 5,509 $ 5,517 $18,976 $ 20,194 82

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Budgetary Basis Actual - All Capital Projects Funds Year Ended June 30, 2005 (inthousands)

M6U1-Roos Radeviuopmcnt Othe capital Anaheims Resort Pudocts B Agency Implummenta Improvements Budget Actual Budget Actual - Budget Ata Budgt Actual Revenues:

Licenses, fees and permits $ 25 $ 35 Intergovernmental revenues $ 800 524 Use of money and property $ 1,843 $ 2,652 395 544 293 Other 6,900 2,023 25 112 59 Total revenues 8,743 4,675 1,220 1,205 387 Expenditures:

Police 5,300 964 Community Development 37,624 18,891 815 803 Planning $ 125 104 Public Works 21,271 7,191 751 721 Community Services $ 74 $ 74 3,672 318 Convention, Sports and Entertainment 841 173 Total expenditures 37,624 18,891 31,058 9,276 1,717 998 Deficiency of revenues under expenditures (74) (74) (28,881) (14,216) (29,838) (8,071) (1,717) (611)

Other financing sources (uses):

Transfers in 13,857 25,891 9,523 11,081 Transfers out (6,245) (2,500) (21)

Issuance of debt 1,875 7,789 5,289 Total other financing sources (uses) 13,857 21,521 14,812 16,370 (21)

Net change in fund balances (74) (74) (15,024) 7,305 (15,026) 8,299 (1,717) (632)

Fund balances at beginning of year 74 74 14,071 14,071 25,713 25,713 12,572 12,572 Fund balances at end of year $- $ (953) 21,376 $10,687 34,012 $10,855 11,940 Adjustments to reconcile to GAAP:

Purchases of land held for resale 1,426 Decline in value of land held for resale (5,024)

Proceeds on sale of land held for resale (303)

Loss on sale of land held for resale Ending fund balance-GAAP basis $17,472 $34,012 $11,940 83

(This page left blank intentionally) 84

CITY OF ANAHEIM Capital Assets Used in the Operation of Governmental Funds Schedule by Source June 30,2005 (in thousands)

(With comparative totals for June 30, 2004) 2005 2004 Governmental funds capital assets:

Land $ 495,006 $ 490,917 Buildings, structures and improvements 214,399 212,820 Machinery and equipment 31,298 26,529 Infrastructure 713,165 705,956 Construction in progress 39,239 16,013 Total governmental funds capital assets $1,493,107 $1,452,235 Investments in governmental funds capital assets by source:

General Fund $ 50,087 $ 50,566 Special revenue funds 1,153,451 1,133,043 Capital projects funds 154,400 138,129 Contributed capital 135,169 130,497 Total investments in governmental funds capital assets by source $1,493,107 $1,452,235 85

CITY OF ANAHEIM Capital Assets Used in the Operation of Governmental Funds Schedule by Function and Activity June 30, 2005 (In thousands)

Buldinaa Machine Const ion, Structunn and and in Total Land Impmowents Equipment Ianfrestructum Progms 2005 General government:

City Administration $ 142 $ 142 City Attorney 250 250 City Clerk 6 6 Human Resources 17 17 Finance 80 80 City Treasurer 9 9 General government buildings $ 1,120 $ 13,871 6 14,997 Total general government 1,120 13,871 510 15,501 Public safety:

Police 2,577 23,027 11,632 S 974 38,210 Fire 3,086 8,377 1,877 70 13,410 Total public safety 5,663 31,404 13,509 1,044 51,620 Community Development 43,551 36,985 209 7,213 87,958 Planning 215 215 Public Works 396,764 1,962 3,751 $713,165 26,143 1,141,785 Community Services 24,549 39,858 3,588 4,748 72,743 Convention, Sports and Entertainment 23,359 90,319 9,516 91 123,285 Total governmental funds capital assets $495,006 $214,399 $31,298 $713,165 $39,239 $1,493,107 86

CITY OF ANAHEIM Capital Assets Used in the Operation of Governmental Funds Schedule of Changes by Function and Activity Year Ended June 30, 2005 (inthousands)

Bala=ce at RetawmwAt and Balane at July , 2004 Addios tlansfem not June 30,2005 General government City Administration $ 99 S 43 $ 142 City Attorney 250 250 City Clerk 6 6 Human Resources 17 17 Finance 80 80 City Treasurer 9 9 General government buildings 14,997 14,997 Total general government 15,458 43 15,501 Public safety:

Police 37,501 1,297 $ 588 38,210 Fire 13,517 393 500 13,410 Total public safety 51,018 1,690 1,088 51,620 Community Development 79,516 8,473 31 87,958 Planning 289 74 215 Public Works 1,117,768 28,191 4,174 1,141,785 Community Services 67,582 6,034 873 72,743 Convention, Sports and Entertainment 120,604 3,817 1,136 123,285 Total governmental funds capital assets $1,452,235 $48,248 $ 7,376 $1,493,107 87

CITY OF ANAHEIM Statement of Changes in Fiduciary Assets and Liabilities Agency Fund - Mello-Roos Year Ended June 30, 2005 (i thousands)

Beginning Ending Balane Additioaw Deduction Balawe ASSETS Restricted cash and cash equivalents $2,507 $2,839 $(1,792) $3,554 Due from other governments 47 2,830 (2,834) 43 Total assets $2,554 $5,669 $(4,626) $3,597 LIABuxT1BS Due to bond holders $2,554 $5,669 $(4,626) $3,597 88

Statistical Section The Statistical Section is included to provide detailed data on the physical, economic, social and political characteristics of the reporting government. It is intended to provide the user with a broader and more complete understanding of the government and its financial affairs than is possible from the basic financial statements and supplementary information included in the Financial Section.

CITY OF ANABEIM General Governmental Expenditures by Function Last Ten Fiscal Years (Inthousands)

(Unaudited)

Convention, capital Outla Fiscal General Public Community Public CommMui Public Sports and and Debt Year Govonument Safety Development Plannin Works Services Utilities Entertainment Service Total 1996 $13,540 $ 83,506 $52,826 $ 6,382 $ 29,836 $13,791 $1,699 $ 334 $ 27,217 $229,131 1997 9,011 82,608 42,377 6,996 49,117 19,822 3,039 4,605 36,876 254,451 1998 18,234 85,009 48,058 7,702 76,404 20,912 3,532 6,482 93,475 359,808 1999 13,512 88,519 45,469 9,096 129,406 22,526 3,530 6,322 125,790 444,170 2000 12,394 91,268 43,848 9,471 126,700 22,949 4,286 6,246 107,419 424,581 2001 12,926 95,967 67,493 10,145 72,964 24,296 2,612 6,738 75,919 369,060 2002 12,403 102,925 72,492 10,463 37,377 26,011 2,651 6,003 81,188 351,513 2003 12,823 110,202 91,933 10,285 21,425 25,938 1,811 4,677 87,231 366,325 2004 11,370 110,633 87,778 11,904 25,224 25,203 1,566 5,353 80,216 359,247 2005 12,276 130,711 83,384 12,313 22,248 25,724 1,557 5,140 90,116 383,469 NOTE: Includes all governmental fund typs.

Source: City Finance Department General Governmental Revenues by Source Last Ten Fiscal Years (inthousands)

(Unaudited)

Transient Race, Intel-Fiscal Property Sales and Occupancy Other Feew and Forfeits and governmental Charg*s for Miscellaneous Year Taxes Use Taxes Taxes Taxes Permits Penlties Services RDveu Total 19% $34,854 $37,676 $44,703 $4,742 $11,858 $1,583 $ 61,914 $14,208 $13,825 $225,363 1997 38,000 40,068 44,992 5,247 11,764 1,518 65,088 21,127 16,258 244,062 1998 39,492 42,214 44,767 5,492 15,677 1,556 78,617 11,515 35,912 275,242 1999 41,131 43,210 45,155 5,755 23,110 2,807 74,225 10,851 30,700 276,944 2000 49,478 46,915 46,183 5,831 16,298 3,187 82,186 10,575 36,099 296,752 2001 53,860 50,733 58,112 6,365 16,299 3,118 85,500 11,712 21,350 307,049 2002 53,018 52,368 57,780 6,460 15,806 2,769 104,434 14,299 18,532 325,466 2003 57,151 54,066 56,199 6,570 15,731 2,673 107,973 14,569 15,790 330,722 2004 60,563 55,409 63,268 7,095 15,578 2,812 108,673 15,241 11,898 340,537 2005 81,949 59,976 67,141 7,542 18,749 3,454 101,447 12,130 15,287 367,675 NOTE: Includes all governmental fund types.

Source: City Finance Department 89

CITY OF ANAHEIM Assessed Values of All City Property Last Ten Fiscal Years (Inthousands)

(Unaudited)

Percent Fiscal Common AwsedFu Incrase Year Pnlpexty Public Utility Unecured Madket Valuation (eea) 1996 $13,467,399 $12,304 $ 868,647 $14,348,350 (1)%

1997 13,506,138 13,557 816,859 14,336,554 -

1998 13,690,399 15,235 937,993 14,643,627 2 1999 14,216,632 13,546 1,040,586 15,270,764 4 2000 15,025,480 15,623 969,070 16,010,173 5 2001 16,348,803 13,432 1,141,173 17,503,408 9 2002 18,376,992 12,050 1,086,486 19,475,528 11 2003 20,136,261 9,503 2,641,697 22,787,461 17 2004 20,816,660 9,572 1,287,967 22,114,199 (3) 2005 22,278,532 9,971 1,162,358 23,450,861 6 Source: Orange County Assessor's Office Current Tax Levies and Tax Collections Last Ten Fiscal Years (inthousands)

(Unaudited)

Total Total Percent of Fiscal Current Current Levy Year Levy Collection Collected 1996 $19,471 $19,379 99.5%

1997 19,291 18,905 98.0 1998 19,854 20,338 102.4 1999 19,333 19,850 102.7 2000 24,915 24,690 99.1 2001 26,860 26,661 99.3 2002 29,203 28,690 98.2 2003 32,856 32,554 99.1 2004 32,326 31,923 98.8 2005 30,868 49,915 161.7 NOTE: The increase in fiscal year 2000 and subsequent years is primarily due to the formation of the Anaheimn Resort Maintenance District.

The increase inTotal Current Collection infiscal year 2005 is due to the effect of shifting revenue from the VLF category to the property tax category, part of the State of California 2004 budget act Sources: City Finance Department and Orange County Assessors Office 90

CITY OF ANAHEIM Property Tax Rates - All Direct and Overlapping Governments Last Ten Fiscal Years (Per $100 Assessed Valuation)

(Unaudited)

Basic County, Elementary High North Metropolitan Fisnal Year city, school Ornge School School Orange County Flood Water Levy City county District District Community College Control District Total 1996 1.0000 0.0041 0.0001 0.0004 0.0089 1.0135 1997 1.0000 0.0049 0.0001 0.0089 1.0139 1998 1.0000 0.0047 0.0089 1.0136 1999 1.0000 0.0045 0.0089 1.0134 2000 1.0000 0.0038 0.0088 1.0126 2001 1.0000 0.0038 0.0088 1.0126 2002 1.0000 0.0035 0.0077 1.0112 2003 1.0000 0.0029 0.0285 0.0257 0.0157 0.0067 1.0795 2004 1.0000 0.0035 0.0250 0.0237 0.0159 0.0061 1.0742 2005 1.0000 0.0030 0.0264 0.0277 0.0144 0.0058 1.0773 NOTE: Based upon a "representative" tax rate area Source: Orange County Auditor/Controller's Office Ratio of Annual Debt Service Expenditures for General Bonded Debt to Total General Governmental Expenditures Last Ten Fiscal Years (inthousds)

(Unaudited)

Total General Ratio of Debt Service to Fiscal Total Debt Governmental General Governmental Year Principal Interest Service Expenditures Expeaditures 1996 S215 $488 $703 $229,131 0.3%

1997 225 473 698 254,451 0.3 1998 245 456 701 359,808 0.2 1999 270 438 708 444,170 0.2 2000 315 419 734 424,581 0.2 2001 330 396 726 369,060 0.2 2002 355 373 728 351,513 0.2 2003 390 345 735 366,325 0.2 2004 400 322 722 359,247 0.2 2005 435 302 737 383,469 0.2 NOTE: Includes all governmental fund types.

Source: City Finance Department 91

CITY OF ANAHEIM Schedule of Direct and Overlapping Bonded Debt (In thousands)

(Unaudited) 9MM11=  % Applicable Bonded Debt DIRECTADOVRAPNTAADASSSHT *T Orang County Teete Plan Obligations 1.359% S 10,342 Metropolitan Water District 1.763 7,394 North Orange Joint Community College District 28.851 71,185 Rawnh Santiago Community College District 15.520 33,012 Anaheim Union High School District 70.809 84,127 Placentia -Yorba Linda Unified School District 12.109 11,833 Anaheim School District 99.805 61,942 Magnolia School District 76.167 7,487 Other School Districts Various 2,587 City ofAnaheim 100.000 6,625 City ofAnaheim Community Facilities Districts 100.000 17,830 Orange Unified School District Community Facilities Districts 100.000 9,905 TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT S 324,269 DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT:

Orange County General Fund Obligations 8.359% S 73,267 Orange County Pension Obligations 8.359 9,343 Orange County Board of Education Certificates of Participation 8.359 1,663 Orange County Transit Authority 8.359 310 Orange County Sanitation District Certificates of Participation 11.399 16,224 Municipal Water District of Orange County Water Facilities Corporation 0.002 1 Yorba Linda County Water District Ctifcates ofParticipation 1.094 115 Orange Unified School District Certificates of Participation 30.457 15,934 Placentia-Yorba Linda Unified School District Certificates of Participation 12.109 636 Anaheim Union High School District Certificates of Participation 70.809 28,929 Fullerton Joint Union High School District Crtificates of Participation 0.297 11 Centalia School District Cartificates of Participation 12.436 443 Fullerton School District Certificates of Participation 0.074 6 City of Anaheim General Fund Obligations 100.000 669,383 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT 816,265 Less: Orange County Transit Authority (80% self-supporting) 248 City of Anaheim Convention Center, Stadium Inc., and Parking Facilities Certificates of Participation (100% self-supporting) 106,684 City of Anaheim Public Financing Authority (100% selfsupporting) 529,522 MWDOC Water Facilities Corporation (100% self-supaorting)

TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $ 179,810 GROSS COMBINED TOTAL DEBT $1,140,534 (I)

NET COMBINED TOTAL DEBT S 504,079 (1) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue, and tax allocation bonds and non-bonded capital lease obligations.

Ratios to 2005 Assessed Valuationr Direct Debt ($6,625) 0.03%

Total Direct and Overlapping Tax and Assessment Debt 1.22%

Ratios to AdiusteAlAssssd AValaion Gross Combined Direct Debt ($676,008) 2.88%

Net Combined Direct Debt ($39,801) 0.17%

Gross Combined Total Debt 4.86%

Net Combined Total Debt 2.15%

State Scdnl Building_ Aid Renayable as of 6/30/051 $0 92 Source: California Municipal Statistics, Inc.

CITY OF ANAHEIM Schedule of Debt Ratios Last Ten Fiscal Years (inthousands)

(Unaudited)

Net Geond Ratlo to Net Genad Fisnd Bonded Amaessed Assessed Bonded Debt Year Debt Valuation Valuation Per Capita Populaidon 1996 $ 9,590 $14,348,350 .07% 293 S32.73 1997 9,365 14,336,554 .07 295 31.75 1998 9,120 14,643,627 .06 301 30.30 1999 8,850 15,270,764 .06 306 28.92 2000 8,535 16,010,173 .05 328 26.02 2001 8,205 17,503,408 .05 330 24.86 2002 7,850 19,475,528 .04 335 23.43 2003 7,460 22,787,461 .03 337 22.14 2004 7,060 22,114,199 .03 343 20.58 2005 6,625 23,450,861 .03 345 19.20 Source: City Finance Department Statement of Legal Debt Mari June 30, 2005 (in thousands)

(Unaudited)

Assessed Valuation $23,450,861 Charter Debt Limit 15% of Assessed Valuation $ 3,517,629 Amount of Debt Applicable to Limit 6,625 Legal Debt Margin $ 3,511,004 Percent of Charter Debt Limit Authorized and Issued .19%

Source: City Finance Department 93

CITY OF ANAHEIM Schedule of Revenue Bond and Certificates of Participation Coverage Electric Utility Fund (Inthousands)

(Unaudited)

Dhvd Net Rownue Debt Service RAquirementa Fiscal Grow Available for Year Debt Service Interest Total Coverage 1996 $253,548 $180,594 $72,954 $12,704 $19,117 $31,821 2.3 1997 249,135 196,242 52,893 13,490 17,218 30,708 1.7 1998 251,929 191,306 60,623 17,716 16,125 33,841 1.8 1999 262,336 194,012 68,324 18,543 18,356 36,899 1.9 2000 287,132 205,699 81,433 15,462 18,082 33,544 2.4 2001 345,615 292,395 53,220 15,731 17,586 33,317 1.6 2002 308,329 238,124 70,205 14,779 16,450 31,229 2.2 2003 280,471 216,841 63,630 15,566 22,625 38,191 1.7 2004 295,988 232,050 63,938 14,840 20,102 34,942 1.8 2005 297,443 218,562 78,881 15,875 24,780 40,655 1.9 NOTES: (1) Gross revenue includes operating revenue plus interest income.

(2) Direct operating expenses includes operating expenses less depreciation and amortization.

Source: City Public Utilities Department Schedule of Revenue Bond Coverage Water Utility Fund (Inthousands)

(Unaudited)

Direct Net Renwue Debt Service Requit"mets Fiscal Grow Operating Available for Year Revenue (1) Debt Service Principal Intelet Total Coverage 1996 $37,603 $24,471 $13,132 $1,055 $2,440 $3,495 3.8 1997 38,966 24,240 14,726 1,120 2,379 3,499 4.2 1998 37,640 22,670 14,970 1,180 2,313 3,493 4.3 1999 40,489 26,900 13,589 1,260 2,234 3,494 3.9 2000 43,539 30,193 13,346 1,330 2,166 3,496 3.8 2001 43,995 26,479 17,516 1,400 2,094 3,494 5.0 2002 43,944 31,103 12,841 1,465 990 2,455 5.2 2003 43,669 29,775 13,894 1,540 906 2,446 5.7 2004 44,659 35,602 9,057 1,625 819 2,444 3.7 2005 44,484 33,312 11,172 1,340 485 1,825 6.1 NOTES: (1) Gross revenue includes operating revenue plus interest income.

(2) Direct operating expenses include operating expenses less depreciation and amortization.

Source: City Public Utilities Department 94

CITY OF ANAHEIM Schedule of Revenue Bond and Certificates of Participation Coverage Convention, Sports and Entertainment Venues Fund (n thousands)

(Unaudited)

Net Raevnue Debt Service Requitements Fiscal Gross Available for Yeao Revmae (1) Debt Service Interest Total Coverage 1996 $39,771 $20,174 $19,597 $5,699 $10,878 $16,577 1.2 1997 35,027 17,620 17,407 5,947 10,560 16,507 1.1 1998 31,646 15,309 16,337 6,285 10,226 16,511 1.0 1999 29,873 13,636 16,237 6,482 9,870 16,352 1.0 2000 33,335 15,248 18,087 6,784 9,497 16,281 1.1 2001 40,435 17,479 22,956 7,179 9,100 16,279 1.4 2002 38,638 18,430 20,208 6,994 8,698 15,692 1.3 2003 41,947 22,174 19,773 7,126 7,525 14,651 1.3 2004 43,802 22,981 20,821 7,585 7,661 15,246 1.4 2005 42,243 25,555 16,688 5,862 9,061 14,923 1.1 NOTES: (1) Gross revenue includes operating revenue, interest income, allocated transient occupancy taxes (transfer), and beginning in 1996, debt service recovery.

(2) Direct operating expenses include operating expenses less depreciation and amortization.

Source: City Finance Department 95

CITY OF ANAHEIM Demographic Statistics June 30,2005 City of Anahoimu Median AMange Buying Annual Orange city Rank in Orag School Inoome Per Population County Population Sin, of County Square Median Enrollment Household Population Percent Population Percent of califomia Unemployment Year MiE Age (000) ($000) (000) Change (000) County cities Rate 1900 3.70 20 5.0%/o 51 1910 3.70 3 20.0% 34 8.8 66 1920 3.70 6 10.0 61 9.8 42 1930 3.70 11 8.3 119 9.2 11 44 1940 3.70 131 8.4 N/A 1950 4.40 15 3.6 216 6.9 68 1960 27.34 104 59.3 704 14.8 12 1970 33.10 167 6.1 1,420 11.8 8 1980 42.05 29.0 25 $25 219 3.1 1,932 11.3 8 4.3%

1990 45.03 34.0 35 33 266 2.1 2,411 11.0 9 2.4 2000 49.79 30.3 62 43 328 2.3 2,846 11.5 10 2.8 2001 49.79 30.3 62 48 330 .6 2,880 11.5 10 3.0 2002 49.79 30.3 63 49 335 1.5 2,939 11.4 10 4.0 2003 49.80 30.3 63 41 337 .6 2,979 11.3 10 4.0 2004 49.90 30.3 65 42 343 1.8 3,017 11.4 10 3.6 2005 49.90 32.3 64 42 345 0.6 3,057 11.3 10 3.9 NOTE: Statistics pertaining to Median Age, School Enrollment, Buying Income per Household & Orange County Unemployment Rate prior to 1980 are not available.

Public School Enrollment includes grades Kindergarten through Sixth, Junior High School and High School.

Source: U.S. Bureau of Census, California Department of Finance, State of California Employment Development Department, Sales & Marketing Management Survey of Buying Power, Center for Demographic Research, California State University, Fullerton, City Planning Department 96

CrrY OF ANAHEIM Construction and Bank Deposit Activity Last Ten Fiscal Years (inthousds)

(Unaudited)

Number of Fiscal Percent Estimated Perent Bank Percent Year Permits Ise Change Valuation Chauge Deposits Change 1996 5 25% $191,556 13% $2,320,273 (12)%

1997 4 (20) 227,413 19 2,431,086 5 1998 5 25 337,638 48 2,407,659 (1) 1999 5 491,296 46 2,859,583 19 2000 4 (20) 214,862 (56) 2,973,078 4 2001 5 25 255,042 19 3,197,393 7 2002 4 (20) 205,750 (19) 3,599,527 13 2003 5 25 202,114 (2) 4,121,197 14 2004 5 190,488 (6) 5,900,644 43 2005 3 (40) 228,374 20 NOTE: Bank deposit statistics for 2005 are not available at the present time.

Source City of Anaheim Planning and Building Divisions and the Findley Reports on California Financial Institutions.

Principal Taxpayers (inthousands)

(Unaudited)

Percent of 2005 2005 Full Market Total City Full Taxpoer Type of Buuimas Valuation of Poperty Market Valuation Walt Disney World Company Family Recreation $3,169,133 13.51%

Allstate Life Insurance Company Insurance Industry 111,282 0.47 Reef America REIT II Property Management 108,431 0.46 Pan Pacific Retail Property Management 87,518 0.37 Boeing North America Aircraft and Navigation Systems 82,683 0.35 Angeli LLC Anaheim Marriott Hotel 73,773 0.31 Joan M TR Schlund Ground Lessor 72,414 0.31 Lennar Platinum Triangle Property Management 70,501 0.30 OTR Pension Fund (Ohio Teachers Retirement) 66,763 0.28 Fairfield Resorts, Inc. Timeshare Apartments 59,102 0.25

$3,901,600 16.61%

Sources: Orange County Assessor's Office and City Finance Department 97

CITY OF ANAHIMM Schedule of Insurance in Force June 30,2005 (Unaudited)

Name of Company Policy Number Policy Prod Type ofCofrage PROPERTY Lexington Insurance Co. RKMI03900344 7/1/04-7/1/05 All Risk Blanket Property, $750,000,000 All-Risk Property (Lead Underwriter) including Flood $50,000 All Risk Property Ded.

S250,000 Flood Deductible (A&Z)

$100,000 Flood Deductible (other)

Lexington Insurance Co. RKMI03900344 7/I/04-7/1/05 Boiler and Machinery $100,000,000 per Accident (Lead Underwriter) (includes Business Interruption/

Extra Expense) Deductibles vary BONDS Hartford Fire Insurance Co. 72B5BCW5216 8/9/04-8/9/05 Public Officials $100,000 (Finance Director)

Hartford Fire Insurance Co. 72BSBCT'9180 7/1/04-7/1/05 Public Officials $100,000 (City Treasurer)

Great American West Insurance GVT375664004 7/!/04-7/1/05 Commercial Blanket Bond, $5,000,000 Faithful Performance Commercial Crime Blanket Bond

$250,000 Loss Inside/Loss Outside

$2,000,000 Depositors Forgery

$5,000,000 Computer Fraud LIABILITY Authority for California Cities ACCO405ANAIOI 7/1/04-7/1/05 Excess Comprehensive General/ $42,000,000 Excess of $1,000,000 Excess Liability/Insurance Company Auto/Public Officials Liability Self-Insured Retention of the State of Pennsylvania/

Lexington Insurance Company/Axis Specialty Insurance/Arch Specialty Insurance Energy Insurance Mutual 501435-03GL 12/31/04-7/1/05 Excess Comprehensive General $25,000,000 Excess of $43,000,000 (Utility Department only) and Auto Liability Underlying Old Republic Insurance Group HL 000706-01 6/30/04-6/30/05 Helicopter Liability (Aviation) $50,000,000 per Occurrence Old Republic Insurance Group ORPR00230901 6/30/04-6/30/05 Heliport Liability (Airport) $20,000,000 per Occurrence WORKEIRS' COMPBNSATION Authority for California Cities CPEIA04EWC-04 7/1/04-7/1/05 Excess Workers! Compensation $75,000,000, Excess of $1,000,000 Excess Liability Self-Insured Retention Source: Finance Department-Risk Management Division 98

CITY OF ANAEDM Miscellaneous Statistical Information (Unaudited)

Founded - October5, 1857 Charter City approved by State Legislature and became effective - January 14,1965 Government - Council-Manager Form Municipal Water Plant - 63,500,000 Gallons Daily Average Distribution 94,000,000 Gallons Peak Daily Distribution 7,848 Hydrants 133,035 Gallons per Minute: System Supply Capacity 747 Miles of Mains 62,205 Customers Municipal Electric Plant - 110,635 Customers 1,490 Circuit Miles of Line 1,860,204 KVA Distribution Capacity Police Protection - 4 Stations 572 Full-time Employees 94 Part-time Employees Fire Protection - 12 Stations 279 Full-time Employees 18 Part-time Employees Sources: City Finance and Public Utilities Departments and City Manager's Office 99

CITY OF ANAHEIM PARKS

9. CLARA BARTON PARK 18. LIMTLE PEOPLES PARK 27. BOYSEN PARK 36. EUCALYPTUS PARK 1926 Clearbiook Ln. 220 W. Elm St 951 State Colleg Blvd. 100 N.Qulnlana Dr.

1. HANSEN PARK 10. CHAPARRAL PARK 19. JULIANNA PARK 25. JUAREZ PARK 37. OAK PARK 1770 2. Broadway 309 E. Julans St. 841 S. Sunlst St. 6400 E. NoN Ranch Rd.

1300 S. Knott St

2. REID PARK 11. WILLOW PARK 20. GEORGE WASHINGTON PARK 29. PIONEER PARK 38. YORSA REGIONAL PARK 1625 W. Crone Ave. 2502E Cypress St. 2566 . UnderMl Ave. 7600 E. La PaIlm Ave.

3100 W. Orange Ave.

3. SCHWEITZER PARK 12. PALM LANE PARK 21. COLONY PARK 30. RIO VISTA PARK 38. OAK CANYON NATURE CENTER 1595 Peals Rd. 210 E. Lincoln Ave. 201 N.Parkvisa St 6700 Wakrit Canyon Rd.

238 S. Bel Air SL

4. MAXWELL PARK 13. SAGE PARK 22. WALNUT GROVE PARK 31. OLIVE HILLS PARK 40. SYCAMORE PARK 1313 Lido PL 905S. Anaheim Blvd. 4200 NoN Ranch Rd. 8268 Monte Vista Rd.

2660 W. Orange Ave.

5. PETER MARSHALL PARK 14. STODDARD PARK 23. CITRUS PARK 32. RIVERDALE PARK 41. CANYON RIM PARK 901 S. Ninth St 104 S. Atchison St 4645 2. RIlverdale Ave. 730 E. Canyon Rim Rd.

801 N. Magnola Ave.

6. BROOKHUPRST COMMUNITY PARK 15. MANZANITA PARK 24. PONDEROSA PARK 33. PERALTA CANYON PARK 42. WEIR CANYON REGIONAL PARK 2271 W. Creeent Ave. 1260 Riaere St 2100 S. Hlestr St 115 N.Pbmey or.

7. JOHN MARSHALL PARK 16. LA PALMA PARK & STADIUM 25. LINCOLN PARK 34. PELANCONI PARK 43. TOYON PARK 2066 Falimouth Ave.

1161 La Palms Park Way 1440 E. Licoln Ave. 222 . Avwnlda Margaits 945 S.WeWr Canyon Rd.

I. MODJESKA PARK 17. PEARSON PARK 28. EDISON PARK 38. IMPERIAL PARK 44. CHINO HILLS STATE PARK 400 N.Harbor Blvd 1145 Baxer St 450 S. ITe*tl Hwy. 4195 Chino Hills Parkway 1331 S. Nutwood St.

Chino Kitls, CA 91709 100

!l: