ML083510232

Annual Corporate Financial Reports

ML083510232
Person / Time
Site:	San Onofre
Issue date:	12/10/2008
From:	Scherer A Southern California Edison Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
Download: ML083510232 (261)

Text

SOUTHERN CALIFORNIA A. Edward Scherer

__EDISON Director Nuclear Regulatory Affairs An EDISON INTERNATIONAL Company December 10, 2008 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 1 with the Federal Energy Regulatory Commission: the City of Riverside, California (for the fiscal year ending June 30, 2007);

and the City of Anaheim, California (for the fiscal year ending June 30, 2007). Each report includes the appropriate certified financial statement required by Section 50.71(b).

If you have any questions or need additional information regarding this matter, please contact me at 949-368-7501.

Sincerely, Enclosures cc: E. E. Collins, Regional Administrator, NRC Region IV N. Kalyanam, NRC Project Manager, San Onofre Units 2 and 3 G. G. Warnick, NRC Senior Resident Inspector, San Onofre Units 2 and 3 P.O. Box 128 0 1K San Clemente, CA 92674

FINANCIAL RT 07 11/16/07 9:15 AM Page 2 CITY OF RIVERSIDE, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR ENDED JUNE 30, 2007 Prepared by the City Manager's Office - Finance Division Paul C. Sundeen, Assistant City Manager/Chief Financial Officer 3900 Main Street, Riverside, California 92522 (951) 826-5660 This report was printed on recycled stock

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CITY OF RIVERSIDE COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 TABLE OF CONTENTS INTRODUCTORY SECTION Page L etter of Transm ittal .............................................................................................. .... v GFOA Certificate of Achievem ent ...................................................................................... ix Legislative and City O fficials ........................................................................................... x Organization Chart............................................................... x FINANCIAL SECTION Independent A uditor's R eport ............................................................................................. 1 M anagem ent's Discussion and A nalysis ................................................................................. 3 Basic Financial Statements:

Government-wide Financial Statements:

Statem ent of N et A ssets .......................................................................................... 21 Statem ent of A ctivities ........................................................................................... 22 Fund Financial Statements:

Balance Sheet - Governm ental Funds .......................................................................... 23 Reconciliation of the Balance Sheet of Governmental Funds to Statement of Net Assets .............. 24 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds ......... 25 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activitites .................................................. 26 Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual -

G eneral F und ......................................................................................... . ...... 27 Statement of Net Assets - Proprietary Funds .................................................................. 28 Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds .............. 30 Statement of Cash Flows - Proprietary Funds ................................................................ 31 Statement of Fiduciary Net Assets - Fiduciary Fund - Agency Fund ...................................... 33 N otes to Financial Stateml ents ...................................................................................... 34 Combining and Individual Fund Statements and Schedules:

Combining Balance Sheet - Nonmajor Governmental Funds .............................................. 61 Combining Statement of Revenues, Expenditures and Changes in Fund Balances -Nonmajor G overnm ental Funds ........................................................................................ 63 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual -

N onm ajor Governm ental Funds ............................................................................ 65 Combining Statement of Net Assets -Nonmajor Enterprise Funds. .......................... 69 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Nonmajor Enterprise Funds......................................................... 71

CITY OF RIVERSIDE COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 TABLE OF CONTENTS FINANCIAL SECTION (CONT.)

Combining Statement of Cash Flows - Nonmajor Enterprise Funds ....................................... 72 Combining Statement of 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 Combining Statement of Changes in Assets and Liabilities - Fiduciary Fund ............................ 79 Capital Assets Used in the Operation of Governmental Funds:

Schedule by Source .......................................................................................... 81 Schedule by Function and A ctivity ......................................................................... 82 Schedule of Changes by Function and Activity ........................................................ 83 STATISTICAL SECTION Table 1 Net Assets by Component - Last Seven Fiscal Years ........................................................ 86 2 Changes in Net Assets - Last Seven Fiscal Years ............................................................ 87 3 Fund Balances of Governmental Funds - Last Ten Fiscal Years ........................................... 89 4 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years ............................. 90 5 Business-Type Activities Electricity Revenues By Source - Last Seven Fiscal Years .................. 92 6 Governmental Activities Tax Revenues By Source - Last Seven Fiscal Years ......................... 93 7 Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years ............ 94 8 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years .................................... 95 9 Principal Property T axpayers .................................................................................... -96 10 Property Tax Levies and Collections - Last Ten Fiscal Years .................... ................ I ..... 97 1 Electricity Sold by Type of Customer- Last Ten Fiscal Years ............................................. 98 12 Electricity Rates - Last Ten Fiscal Y ears ....................................................................... 99 13 Top -10 Electricity Customers - Current Year and Nine Years Ago ....................................... 100 14 Ratios of Outstanding Debt by Type - Last Ten Fiscal Years ............................................. 10I 15 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years ...................................... 102 16 D irect and Overlapping D ebt ................................................................................. 103 17 Legal Debt Margin Information - Last Ten Fiscal Years .................................................... 105 18 Pledged-Revenue Coverage Governmental Activity Debt - Last Ten Fiscal Years .................. 106 19 Pledged-Revenue Coverage Business Type Activity Debt - Last Ten Fiscal Years .................. 107 20 Demographic and Economic Statistics - Last Ten Fiscal Years .......................................... 108 21 Principal Employers - Current Year and Nine Years Ago ................................................ 109 22 Full-Time Equivalent City Government Employees by Function - Last Ten Fiscal Years ............ 110

CITY OF RIVERSIDE COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2007 TABLE OF CONTENTS STATISTICAL SECTION (CONT.) Page Table 23 Operating Indicators by Function - Last Ten Fiscal Years ................................................ 111 24 Capital Asset Statistics by Function - Last Ten Fiscal Years ............................................. 112 25 Cash Debt Reserves Tax Allocation Bonds - Last Ten Fiscal Years .................................... 113

October 12, 2007 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, 2007:

Thisreport 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 inf6nnation presented in this report. To provide a reasonable basis for makiing these ;representations., management has. established a comnprehensiVe internal control framework that is designed both to protect the City's assets from. loss, theft, or misuse and to compile. sufficient reliable informnation for the preparation (if the City's financial..statements in conformity with accounting principles, generallyaccepted 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 fromn material, misstatement. As manageihent, we assert that; to .the best of our knowledge and belief. this financial repot. is completeand reliable in all material.respects.

The Citys financial, statements have been audited by Mayer Hoffman McCann P.C., a firn of certified public. accountants. The independenit 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, 2007. The independent auditor's repoort 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. Thesereports are available in the City's separately issued Single Audit Report.

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 ofithe independent auditors.

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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, ajland area of 80.9'62 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-yeaf 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 .odinances, adopting the budget, appointing committees, and hiring the City Manager, City Attorney and City Clerk. The City Manager is respwnsible 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 ona 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 finafncial statements. Additional information on these. legally separate entities can be found in.Note 1 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 ýthe City Council for review at, least thirty-five calendar days prior .to the beginning of each fiscal year. The Councii 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 fiJnd and department. Department heads may make. triansfers of appropriations within a department, Transfers of appropriations between departments- however,, require the approval of the Council.

Budget-to-actual. comparisons are provided iný 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 271 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 65.

Local economy., The City is located in the Inland Einpire; which consists of Riverside and San Bernardino Counties. The population of the Inland Empire at 415 million people is larger than:24 states. The City leads the Inland Empire in most measures of economic power, including population,, income., employment, bank deposits, assessed. valuation, office space and college enrollment. The

,population of the City is 295,730 which places the City as the seventh largestinSouthern California.

The Inland Empire has a: very-strong economic environment4. as does the. City. This area is expected to add about 49,000 jobs during the calendar year 2007. 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.

Priorities for the future: A Citywide Strategic Planning document has been developed through a seriesof meetings, workshops, and-surveys with thecommunity, elected officials, and City employees, The plan, as updatedsets forth four goals as follows:

o Economic.Development o Growth and Annexation

• Transportation.

o Liveable: Communities and Neighborhoods Long-term financial planning. Annually, the City updates a five. (5) year Capital Improvement Program (CIP). Planned capital expendittires during fiscal years 2.007/081- 20i1/12 total $ 909million. The level of capital improvements is significantly greater than the. historical ,level. The projects encompass all. seven.Council wardsand enhance the-life of all residents. Funding comes from.

multiple sources, including existing funds;. General Fund certificates of participation, Redevelopment Agency tax allocation bonds:

regional, state and federal:funds anid, the proposed sale of property deemed to be surplius. In addition to routine electric, water, sewer and transpottationi-related projects,'tlhe CIP includesimiprovements to all parks in the City; railroad grade separations; library, museum, convention centerand MunicipaqlAuditorium improvements/expansions/rehabilitations; and. public safety projects.

.Cash management policies and practices. Cash temporarily idle during the year ,was invested principally in. federal agency securities,. mohey'market. funds and medium tenn, notes. The maturities of the investmfients do not exceed five (5) years, with the

average maturity not exeeding three (3)years. All securities are held in third party safekeeping by Union Bank of California as agent for-the' City. All transactions originated and authorized by the City are transacted on a delivery versus payment (DVP) basis in order to' perfect delivery, The ayerage yield on the inyestmnents was 4.2% for the-fiscal year.

Risk management. Risk exposures to the assets of the City are managed through a Icombination, of self-insuired retention and insurance coverage. The City believes.it has current assets adequate to cover the actuarially determined. liability for general liability

'and workers" compensation claims, including estimated claims incurred but not reported, as they become payable. The City maintains excess liability insurance to provide coverage beyond a self-insured retention of $3,O00,000..per occurrence for both general liability and Workers' compensation.

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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 finarncial statements.

Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of AchieVement for Excellence in Financial Reporting to the City of RierSidefor its compr~ehensiVe annual financial report (CAFR) for the. fiscal yeat ended June 30, 2006. This was the twentieth 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 requiremients, This award is valid for a period.of one yearonly., We believe that-ourcurrent CAFR continues to meet tile Program's requirements and' we are submitting it to the GFOA again this year.

The preparation of this- report would nothave been possible without thle efficient and dedicated services of the entire staff of the Finance Division, particularly the leadership ofTerr Willoughby, Controller. we Would like to express our appreciation to all members of the Divisioa who assisted and contributed to .its preparation. Credit also must be. given to the Mayor and the City Council for their unfailingsupport for maintaining the highest standards of professionalism in the management of the City's finances.

Respectfully submitted, Bradley J. s Paul C.. Sundeen City Ma 'er Assistant City Manager/CFO/Treasurer Viii

crti fietaie ofI The Government Finance Officers Association of the United States for Excellence and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Riverside for our in Fmainacial Comprehensive Annual Financial Report for the fiscal year ended

-Reporting June 30, 2006.

'City ol Rivctside In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, whose contents conform to fur dIle~~ K~KF~~

program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only.

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

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LEGISLATIVE OFFICIALS OR( A\IZATIO\7 CHA~RT Ronald 0. Loveridge ............................................. Mayor Dom Betro ................................ Councilmember-Ward 1 Andy Melendrez ........................ Councilmember- Ward 2 Art Gage ................................... Councilmember - Ward 3 Frank Schiavone ........... Councilmember- Ward 4 Ed Adkison ............................... Councilmember - Ward 5 Nancy Hart ............................... Councilmember-Ward 6 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 Mark S. Ripley ....................................... Airport Director 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 ........................... General Services Director Rhonda Strout ....................... Human Resources Director Barbara Custen ....................................... Library Director Ennette Nusbaum ................................... Museum Director Ralph Nuflez ......................... Park and Recreation Director David Wright ................................ Public Utilities Director Siobhan Foster .............................. Public Works Director

• Appointed by City Council x

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Honorable Mayor and Members of the City Council City of Riverside Riverside, California INDEPENDENT AUDITORS' REPORT 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, 2007, which: collectively comprise, the City's basic financial statements, as listed in the table of contents. T*hese 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 Siandards, 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 misstatemeniit. 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.

In our opinion, the financial statements referred to above present fairly, in all material. respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the. aggregate remaining fund information of.the City of Riverside, California, as of June 30, 2007, and the: respective changes in financial position and cash flows, where applicable, and the respective budgetary comparison for the general. fund for the year then ended, in confornity with accounting principles generally accepted in the.United States of America.

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Honorable Mayor and Membersof the City Council City of Riverside Page Two The Management's Discussi6n and Analysis. as listed in the table of contents, is not a required.part of the basic financial statements but i..s supplementary information required by accounting principles generally accepted in the 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 infornation. However, we did not audit, the inform ation and express no opinion on it.

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 mad oilier schedules, listed in the 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 in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

The 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 in the audit of the basic financial statements and,.accordingly, we express no opinion on it.

In accordance with Government Auditing Standards, we have also issued our.report dated October 12, 2007 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 in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Irvine, Califorma October 12, 20.07 2

-.Management's Discussion and Analysis As management of the City of Riverside, we offer this narrative overview and analysis of financial activities for the fiscal year ended June 30, 2007. 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 govern-ment-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.

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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 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 21-22 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.

Governmental funds. 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 spendable resources 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, the Redevelopment Agency Debt Service Fund, the Capital Outlay Fund, and the Redevelopment Capital Project Fund all of which are major funds. Data from the other thirteen governmental funds are combined into a single, aggregated presentation. Individual fund 4

data for each of these non-major governmental funds is provided in the form of combining statements and can be found on pages 61-68 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 governmental fund financial statements can be found on pages 23-27 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 government-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 combining statements and can be found on pages 69-78 in this report.

The basic proprietary fund financial statements can be found on pages 28-32 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 33 of this report, and the combining statement can be found on page 79.

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 34 of this report.

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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 financial position.

Governmental Business type Activities Activities Total 2007 2006 2007 .2006 2007 2006 Current and other assets $814,979 $569,741 $ 454,149 $ 481,914 $ 1,269,128 $ 1,051,655 Capital assets, net 72,2536 660,14 948,36 877,67 1,740,8421,381 Total assets 1,607,15 1,%22,35 14255 ,3951 3,09,702,846 Current liabilities 118,973 90,849 92,584 88,681 211,557 179,530 Long-term liabilities 70,0 40997 49,3 3 5418111,2L37 934,131 Total liabilities 8209277 500,822 581,817 612839 1,402,794 1,113,66 Net assets:

Invested incapital assets, net of related debt 712,801 622,336 520,059 425,285 1,232,860 1,047,621 Restricted 415,618 158,038 57,613 71,386 473,231 229,424 Unrestricted (341,881) (51,261) 242,9665,4 (98,915) 9,8 Total net assets $79137SZS46.7J 12 $167.7 $1475,825-The City's assets exceeded liabilities by $1,607,176 at June 30, 2007, an increase of $13 1,351 from June 30, 2006.

By far the largest portion of the City's net assets (77 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 (29 percent) represents resources that are subject to external restrictions on how they may be used. The remaining unrestricted net assets may be used to meet the government's ongoing obligations to citizens and creditors. Of this amount, $242,966 is held by the business type activities; and negative $341,881 is held by the governmental activities. The Riverside Redevelopment Agency (the Agency), a blended component unit of the City, represents $276,012 of negative unrestricted net assets for 2007 and was a negative $112,747 in the prior year. The remaining governmental activities of the City have 6

negative unrestricted net assets of $65,869 in 2007 and a positive $61,486 in 2006. This decrease in unrestricted net assets is primarily due to the restriction of net assets for unspent bond proceeds pertaining to capital projects.

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. Tile 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 City's total net assets increased by $131,351 during the current fiscal year, which reflects the growth in both the governmental

($57,425) and business type ($73,926) 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 is a condensed summary of activities of the City's governmental and business type operations for the period ended June 30, 2007 with the prior fiscal year presented for comparative purposes. Also included in the following analysis are revenue and expense graphs to aid in understanding the results of the current year's activities.

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Governmental Business Type Activities Activities Tta Total 2007 2006 2007 2006 2007 2006 Revenues:

Program Revenues:

Charges for services $61,520 $ 63,656 $370,854 $338,092 $ 432,374 $ 401,748 Operating Grants and Contributions 12,101 13,150 1,939 2,704 14,040 15,854 Capital Grants and Contributions 10,557 18,618 40,066 29,293 50,623 47,911 General Revenues:

Sales taxes 55,666 57,522 55,666 57,522 Property taxes 106,114 80,934 106,114 80,934 Other taxes and fees 35,859 34,434 35,859 34,434 Grants and contributions not restricted to specific programs 29,743 29,743 39,653 39,632 Other 29,959 43,296 Total revenues 344,290 400,48 767,715 Expenses:

General government 80,353 74,458 80,3-53 74,458 Public safety 134,062 120,470 134,062 120,470 Highways and streets 28,944 20,757 28,944 20,757 Culture and recreation 32,964 32,602 32,964 32,602 Interest on long-term debt 26,378 16,358 26,378 16,358 Electric 232,346 226,186 232,346 226,186 Water 42,108 39,486 42,108 39,486 Sewer 29,510 27,299 29,510 27,299 Refuse 16,490 14,546 16,490 14,546 Airport 1,20 1 1,004 1,201 1,004 Transportation 2,831 2,917 2,831 2,917 Public Parking 2,701 2,701 Total expenses 30Q2,701 264,645 630,949 578,784 Increase in net assets and transfers: 31,669 79,645 105,097 85,909 136,766 165,554 Transfers 31,171 (31,171) (25,576)

Increase in net assets 62,840 105,221 73,926 60,333 136,766 165,554 Net assets - beginning - restated 723,698 6729.1813 746,712 68,79 1,470,410 1,310,271 Net assets - ending 8

Governmental activities. Governmental activities increased the City's net assets by $62,840 accounting for 46 percent of the total growth in net assets. The net assets in the prior fiscal year increased by $105,221. Key elements of this year's activity in relation to the prior year are as follows:

Revenues:

• Operating and capital grants and contributions, in total, decreased approximately $9,100 in 2007 primarily due to decreased grant funding for street capital projects.

• Property taxes increased approximately $25,180 in 2007, principally because of the strong local economy, increased property values and the expansion of redevelopment project areas and activities.

• Grants and contributions not restricted to specific programs decreased $10,000 mainly due to a decrease in developer contributed assets.

• The total net decrease in Other general revenues was approximately $13,400 primarily due to an issuance of special assessment debt in the prior year, offset by an increase in investment income in the current year.

Expenditures and Transfers:

• While significant variances between years exist for the various expense functions, the total net increase was approximately $32 million. The more significant items are: (1) increased salaries and benefits, including the addition of sworn officers, (2) increased costs associated with capital projects and development activities, (3) increased personnel costs associated with the addition of public works personnel connected with enhanced highway and streets maintenance, and (4) increased costs resulting from additional park and recreation programs. Transfers to governmental funds increased $5,595 primarily due to increased operating revenue realized by the Electric and Water funds.

9

Expenses and Programs Revenues - Governmental Activities - Fiscal Year Comparison 2007 vs. 2006

$160,000

$140,000 -

0',07 Expenses

$120,000 - EF06 Expenses EY07 Program revenues

$100,000 - 0'06 Program revenues

$80,000 -

$60,000 -

$40,000 -

$20,000 -

$o 4-General Public safety Highways and Culture and Interest on government streets recreation long-term debt 10

Revenues by Source - Governmental Activities - Fiscal Year Comparison 2007 2006 Capital grants and contributions Capital grants and 5%

contributions 3% Operating grants and contributions 4% Property taxes Operating grants and 23%

contributions 4%

Charges for services 18%

Charges for services 17%

Grants and S:ales taxes Grants and restricted to contributions not specific programs contributions not 17%

9% restricted to specific -

programs Franchise 12% Miscellaneous taxes

/

Miscellan \Franchise 2%

taxes 8% 1%

1%

inons-e / . Other V Utility users taxes 8%

Investment%income 1% Utility 6%

Intergovernmental, sers taxes Intergovernmental, unrestricted 7%

unrestricted 1% I1%

II

Business type activities. Business type activities increased the City's net assets by $73,926, accounting for 54 percent of the total growth in net assets. The net assets of business type activities increased by $60,333 in the prior year. Key elements of this year's increase in relation to the prior year are as follows:

" In 2007, charges for services increased $32,762 to $370,854 primarily due to an increase in the volume of electric and water sales, an electric rate increase, the effects of the third and final year of an overall 8% water rate increase, as well as the implementation of the first year of the five year Safe W.A.T.E.R. rate plan consisting of a 12% increase effective November 1, 2006.

• Capital grants and contributions increased $10,773 in the current year to $40,066. The increase is due to a City contribution for the construction of a fiber optic network as well as contributions resulting from settlement agreements relating to litigation pertaining to contaminated ground water.

• Other revenues decreased by $9 million mainly due to a prior year sale of surplus land.

" The total net increase in expenses in Business type activities was approximately $14 million. Significant items include increased depreciation expense due to the completion of the Riverside Energy Resource Center, increased interest costs, as well as overall increases in staffing levels.

Expenses and Program Revenues - Business Type Activities - Fiscal Year Comparison 2007 vs. 2006

$300,000 $17,000

$ 16,000

$275,000 M'07 Expenses $15,000

$250,000 P m $14,000 '07 Expenses 07Pormevns

$22,00 - '07 Program revenues $13,000- []'07 Program revenues

$22,00'06 Expenses $12,000 - E'06 Expenses

$200,000 - 0'06 Program revenues $ 0 06 Program revenues

• $10,000

$175,000 -  :: $10,000

$9,000

$150,000 -

$8,000

$125,000 -: $7,000

$100,000 $6,000

• ,:$5,000

$75,000

$4,000

$50,000 $3,000

$25,000 2,000 Electric Water Sewer eu....

• r ....... ,

Refuse ýirporl ransportal on ar ng 12

Revenues by Source - Business Type Activities - Fiscal Year Comparison 2007 2006 Operating grants and contributions 1%

Capital grants and contributions 9% Capital grants and contributions 7%

Investment income 3%

• M Investment Income 4% Miscellaneous Miscellaneous 5%

1%

Charges for services-86%

Charges for services 84%

13

Financial Analysis of the City's Funds Governmentalfunds. The focus of the City's governmentalfunds 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 summarizes the balance sheet of the City's General Fund, Redevelopment Debt Service Fund, Capital Outlay Fund, Redevelopment Capital Projects Fund, and Total Governmental Funds. As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements.

Redevelopment Redevelopment Other Total General Fund Debt Service Capital Outlay Capital Projects Governmental Funds Governmental Funds 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 Total assets $ 178,892 $202,033 $38,185 $41,302 $ 142,152 $42,494 $ 235,973 $ 66,139 $ 113,655 $216,148 $708,857 $568,116 Total liabilities $ 84,126 $ 73,136 $27,457 $26,689 $ 6,952 $ 5,423 $ 35,135 $ 23,715 $ 30,480 $ 55,719 $184,150 $ 184,682 Fund balances Reserved 50,631 59,930 10,728 14,613 28,586 8,219 39,846 13,404 29,221 39,560 159,012 135,726 Unreserved:

Designated for economic cont. 34,000 30,000 - - - - - - 34,000 30,000 Designated for future operations 10,135 35,487 20,751 28,852 154,923 27,571 25,512 94,190 211,321 186,100 Undesignated - 3,480 - 85,863 - 6,069 1,449 28,442 26,679 120,374 31,608 Total 94,766 128,897 10,728 14,613 135,200 37,071 200,838 42,424 83,175 160,429 524,707 383,434 Total liabilities and fund balances $ 178,892 $202,033 $38,185 $41,302 $142,152 $42,494 $ 235,973 $ 66,139 $ 113,655 $216,148 $708,857 $568,116 14

As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $708,857, an increase of $140,741 in comparison with the prior year. About 30% of this amount ($159,012) 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, $245,321 has been designated for specific capital projects and economic contingencies, leaving $120,374 without a commitment; at June 30, 2006 the comparable amount was $31,608. The increase in Fund balance is due to monies received from bond proceeds that are not committed to specific 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

$44,135, all of which was designated for future operations and economic contingencies, leaving $0 unreserved and undesignated; the comparable number at June 30, 2006 was $3,480. The total fund balance equaled $94,766 at June 30, 2007, a decrease of $34,131 F from the prior year. This decrease was primarily due to increased planned spending for capital projects.

The Redevelopment debt service fund has a total fund balance of $10,728 all of which is reserved for the payment of debt service. A net decrease in the fund balance occurred during the current year.

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 $137,708, $46,950, and $9,534 respectively. The total growth in net assets for these funds was $13,854, $11,605 and a decrease of $55,182, respectively as a result of routine operations.

15

General-Fund Budgetary Highlights Original Final Actual Variance with Budget Budget Amounts Final Budget Total Revenues $185,707 $197,575 $183.716 $ (13,859)

Expend itures:

General Government 45,749 81,418 32,883 48,535 Public Safety 162,481 166,899 153,226 13,673 Highways & Streets 18,911 24,594 20,760 3,834 Culture & Recreation 31,922 33,600 27,090 6,510 Debt Service 15.516 16,868 17,612 (744)

Total Expenditures 2i74,579 32L3,39 251.571 71,808 Deficiency of Revenue Under Expenditures (88,872) (125,804) (67,855) 57,949 Other Financing Sources 2984 9,7 3,111,5 Net Change in Fund Balances (59,023) (96,227) (36,724) 59,503 Beginning Fund Balance 131,490i 131,490 131490 _____

Ending Fund Balance 2A 242 Final budgeted revenues increased from the amount originally budgeted as a result of grant related programs and financing associated with capital projects.

Total budgeted expenditures increased from the amount originally budgeted by 'approximately $48,000, from $275,000 to $323,000.

The reasons for this increase can be generally summarized as follows:

" The Development department added appropriations of $3 1,000 for construction costs associated with the Fox Theatre Renovation and the Orange Terrace Library.

" The Police department added appropriations of $4,400 primarily for grant funded operational charges and the addition of sworn officers.

Li The General Services department added appropriations of $3,400 primarily for capital projects and maintenance.

u The Public Works departments added appropriations of $ 6,000 primarily for increased costs associated with programs such as animal control, tree maintenance, and the addition of the photo red light program.

16

L3 Other miscellaneous appropriations were added in other departments throughout the year of approximately $4,700.

Actual amounts differed from the Final Fund budget as follows:

i -Actual total revenues were less than the amount budgeted due to lower than anticipated development activity within the City resulting in decreased sales and property taxes as well as intergovernmental revenue being under budget due to the timing of receipts for grant funded projects.

L Budgeted expenditures exceeded actual amounts by approximately $72,000. As in prior years, this excess is associated with capital projects not completed at year-end. Such projects and related amounts are carried over to the next fiscal year.

u The net effect of all of the above was a favorable variance from the amounts budgeted of $59,503.

Capital Asset and Debt Administration Capital assets. The City's investment in capital assets for governmental and business type activities as of June 30, 2007 amounted to

$1,740,842 (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 $203,011 ($132,342 for governmental activities including internal service funds and $70,669 for business type activities).

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

($66,800); Magnolia Police Station ($19,600); Sewer Mains ($7,000); Electric Utility upgrades ($17,717); Water Utility upgrades

($11,072) and Fire Station Relocations ($12,500).

Construction in progress totaled $160,938 at June 30, 2007. Some of the major projects in process are the Casa Blanca Energy Demonstration Center, the 230 KV Substation, Mountain View Substation Modernization, Reid Park Improvements, City Hall Improvements, and the Fire Training Facility. Depreciation expense during the fiscal year was $20,636 for governmental activities and $35,889 for business type activities.

17

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

Governmental Business Type Activities Activities Total 2007 2006 2007 2006 2007 2006 Land $191,694 $163,594 $ 30,413 $ 30,372 $ 222,107 $ 193,966 Buildings 72,179 49,807 157,155 159,075 229,334 208,883 Improvements other than Buildings 30,792 23,587 648,113 632,265 678,905 655,852 Machinery and equipment 25,299 14,478 16,673 13,861 41,972 28,339 Infrastructure 407,586 353,402 407,586 353,402 Construction in progress 55 326 95,952 42,064 .160,938 97,390 64 986 Total Additional information on the City's capital assets can be found in note 5 on page 42 of this report.

Long-term debt. At the end of the current fiscal year, the City had total debt outstanding of $1,191,237 which includes bonded debt of $1,136,231.

City of Riverside's Long-Term Debt Governmental Business Type Activities Activities Total 2007 2006 2007 2006 2007 2006 Lease/Revenue Bonds $296,598 $140,195 $474,332 $509,577 $770,930 $649,772 General Obligation Bonds 19,331 19,858 *- 19,331 19,858 Pension Obligation Bonds 144,450 146,470 i44,450 146,470 Certificates of Participation 192,874 55,571 - - 092,874. 55,571 Notes Payable 9,759 10,215 9,211 9,841 18,970 20,056 Capital Leases 4,929 6,008 253 317 5,182 6,325 Landfill Capping 3,121 3,444 3,121 3,444 Arbitrage Liability 1,343 - 1,343 Compensated Absences 34,063 31,656 S- 34,063 31,656 Water Acquisition Rights 973 979 973 979 Total SM70-.04 $40*9.97_3 $489,233 5215 $191237 m

18

The City's total debt increased by $257,379 (28 percent) during the current fiscal year due to the issuance of $160,507 in Revenue bonds and $139,139 in Certificates of Participation.

The City's Electric Utility maintains "A+" and "AA-" ratings, from Standard & Poors and Fitch, respectively, for their revenue bonds, while the Water Utility maintains "AA" ratings from both rating agencies. The City's general obligation bond ratings are "AA-" and "AA", respectively.

State statutes limit the amount of general obligation debt a governmental entity may issue to 15 percent of its total adjusted assessed valuation. The legal debt margin for the City is $451,055, after deducting the general obligation debt of $19,331.

Additional information on the City's long-term debt can be found in note 7 beginning on page 43 of this report.

Economic Factors and Next Year's Budget and Rates L[ The assessed value for taxable property in the City increased 12.2% between fiscal year 2006 and fiscal year 2007.

LI Property taxes increased between fiscal year 2006 and 2007 by 31% primarily as a result of new development, the expansion of redevelopment activity and increased assessed value.

LI Unemployment in Riverside County is 6.5% as compared to 5.4% for 2006.

LI 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, 2007 as follows:

• Miscellaneous Plan-21.81% to 21.295%

• Safety Plan - 28.015% to 28.405%

At the time of budget preparation for fiscal year 2008, the economic outlook for the City was considered to be very good. The General Fund Budget for fiscal year 2008 of approximately $204 million was adopted as balanced, not having to utilize any reserves.

19

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.

20

City of Riverside Statement of Net Assets June 30, 2007 (amounts expressed in thousands)

Governmental Business-type Assets Activities Activities Total Cash and investments $ 210,719 $ 188,816 $ 399,535 Receivables, net 69,821 53,772 123,593 Inventory 5,916 1,061 6,977 Nuclear material inventory - 1,535 1,535 Prepaid items 8,728 6,433 15,161 Deferred charges 130,332 45,385 175,717 Internal balances 9,560 (9,560) -

Land and improvements held for resale 40,090 - 40,090 Restricted assets:

Cash and cash equivalents - 86,260 86,260 Cash and investments at fiscal agent 313,648 79,569 393,217 Other - 878 878 Capital leases receivable 26,165 26,165 Land and other capital assets not being depreciated 256,680 126,365 383,04*5 Capital assets (net of accumulated depreciation) 535,856 821,941 1,357,797 Total assets 1,607,515 1,402,455 3,009,970 Liabilities Accounts payable and other current liabilities 46,586 33,568 80,154 Accrued interest payable 10,205 2,781 12,986 Unearned revenue 3,456 1,524 4,980 Deposits 30,737 3,924 34,661 Current liabilities payable from restricted assets - 181 181 Claims and judgments payable 27,989 - 27,989 Decommissioning liability - 50,606 50,606 Noncurrent liabilities:

Due within one year 23,400 28,507 51,907 Due in more than one year 678,604 460,726 1,139,330 Total liabilities 820,977 581,817 1,402,794 Net Assets Invested in capital assets, net of related debt 712,801 520,059 1,232,860 Restricted for:

Expendable:

Capital projects 379,942 - 379,942 Debt service 2,660 48,800 51,460 Public works 6,505 3,217 9,722 Low mod housing 25,196 - 25,196 Programs - 5,596 5,596 Nonexpendable 1,315 i,315 Unrestricted (341,881) 242,966 (98,915)

Total net assets $ 786,538 $ 820,638 $ 1,607,176 The notes to the financial statements are an integral part of this statement.

21

City of Riverside Statement of Activities For the fiscal year ended June 30,2007 (amounts expressed in thousands)

Net (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 $ 111,439 $ (15,543) $ 10,245 $ 6,550 $ 1,375 $ (77,726) $ (77,726)

Public safety 114,312 9,875 12,410 3,916 - (107,861) (107,861)

Highways and streets 22,556 3,194 30,563 65 7,879 12,757. 12,757 Culture and recreation 28,016 2,474 8,302 1,570 1,303 (19,315) (19,315)

Interest on long-term debt 26,378 - (26,378) (26,378)

Total governmental activities 302,701 - 61,520 12,101 10,557 (218,523) (218,523)

Business type activities:

Electric 232,346 278,888 9,781 $" 56,323 56,323 Water 42,108 47,080 20,074 25,046 25,046 Sewer 29,510 24,057 5,036 (417) - (417)

Refuse 16,490 15,833 7 (650) (650)

Airport 1,201 1,263 4,959 5,021 5,021 Transportation 2,831 302 1,939 209 (381) (381)

Public parking 3,762 3,431 (331) (331)

Total business type activities 328,248 370,854 1,939 40,066 84,611 84,611 Total $ 630,949 $ 432,374 $ 14,040 $ 50,623 (218,523) 84,611 (133,912)

General revenues:

Taxes:

Sales 55,666 55,666 Property 106,114 106,114 Utility users 25,384 25,384 Franchise 5,031 5,031 Other 3,581 3,581 Intergovernmental, unrestricted 1,863 1,863 Grants and contributions not restricted to specific programs 29,743 - 29,743 Investment income 18,582 16,988 35,570 Miscellaneous 4,228 3,498 7,726 Subtotal 250,192 20,486 270,678 Transfers, net 31,171 (31,171)

Total general revenues, special items, and transfers 281,363 (10,685) 270,678 Change in net assets 62,840 73,926 136,766 Net assets - beginning - restated 723,698 746,712 1,470,410 Net assets - ending $ 786,538 $ 820,638 $ 1,607,176 The notes to the financial statements are an integral part of this statement.

, 22

City of Riverside Balance Sheet Governmental Funds June 30, 2007 (amounts expressed in thousands)

Other Total Redevelopment Redevelopment Governmental Governmental Assets General Fund Debt Service Capital Outlay Capital Projects Funds Funds Cash and investments .$ 82,012 $ 3,631 $ 22,262 $ 40,978 $ 57,558 $ 206,441 Cash and investments at fiscal agent 15,778 - 7,495 113,048 147,053 30,274 313,648 Receivables (net of allowance for uncollectibles)

Interest 955 107 382 231 660 2,335 Property taxes 16,080 517 16,597 Sales tax 10,221 10,221 Utility billed 706 706 115 Accounts 4,140 787 1,651 4 6,697 Intergovernmental 6,585 4,633 180 3,726 15,124 Notes 70 3,933 13,839 17,842 Capital lease receivable 26,165 26,165 Prepaid items 691 1 692 Deposits 176 7,852 8,028 Due from other funds 7,435 4,122 11,557 Advances to other funds 31,626 31,626 Land & improvments held for resale 2,593 - 31,509 5,988 40,090 Total assets: $ 178,892 $ 38,185 $ 142,152 $ 235,973 $ 112,567 $ 707,769 Liabilities and fund balances Liabilities:

Accounts payable $ 8,064 $ 763 $ 2,384 $ 14,949 $ 2,094 $ 28,254 Accrued payroll 11,457 - 15 11,472 Retainage payable 164 13 994 4,699 5,870 Intergovernmental 163 163 Unearned revenue 15,208 26 ,165 1,554 3,882 14,472 61,281 Deposits 30,727 - 10 30,737 Due to other funds 50 529 - - 4,998 5,577 Advances from other funds 18,293 - 3,001 15,310 3,104 39,708 Total liabilities: 84,126 27 ,457 6,952 35,135 29,392 183,062 Fund balances:

Reserved 50,631 10,728 28,586 39,846 29,221 159,012 Unreserved, designated for economic contingencies 34,000 34,000 Unreserved, designated for future operations General fund 7,288 7,288 Special revenue funds 7,714 7,714 Capital project funds 20,751 154,923 17,798 193,472 Unreserved, undesignated General fund 2,847 2,847 Special revenue funds 15,017 15,017 Capital project funds 85,863 6,069 13,425 105,357 Total fund balances 94,766 10,728 135,200 200,838 83,175 524,707 Total liabilities and fund balances $ 178,892 $ 38,185 $ 142,152 $ 235,973 $ 112,567 $ 707,769 The notes to the financial statements are an intergral part of this statement.

23

CITY OF RIVERSIDE RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS June 30, 2007 (amounts expressed in thousands)

Total fund balances - governmental funds $524,707 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. 788,346 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. 9,021 Pension contributions were expenditures at the fund level but are deferred as a net pension asset and subject to capitalizaton and amortization in the Statement of Net Assets. 119,668 Revenues that do not meet the "availability" criteria for revenue recognition and therefore, are deferred in the funds. 57,825 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 $ (451,949)

Accrued Interest Payable (10,205)

Certificates of Participation Payable (192,874)

Notes Payable (9,759)

Capital Leases Payable (4,929)

Bond Premiums (8,431)

Compensated Absences (33,488)

(711,635)

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. (1,394)

Net assets of governmental activities $786,538 24

City of Riverside Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the fiscal year ended June 30, 2007 (amounts expresed in thousands)

R edevelopment Redevelopment Other Governmental Total Governmental General Fund Debt Service Capital Outlay Capital Projects Funds Funds Revenues Taxes $ 135,390 $ 39,811 $ $ $ 15,930 $ 191,131 Licenses and permits 7,821 5,163 12,984 Intergovernmental 12,069 200 21,434 242 13,989 47,934 Charges for services 11,903 11,914 Fines and forfeitures 2,559 2,778 Special assessments 3,963 1,784 423 6,170 Rental and investment income 6,827 3,820 3,112 3,925 4,903 22,587 Miscellaneous 3,184 393 417 74 2,096 6,164 Total revenues 183,716 44,224 26,747 4,241 42,734 301,662 Expenditures Current:

General government 32,883 3,194 728 9,764 4,844 51,413 Public Safety 153,226 153,226 Highways and Streets 20,760 20,760 Culture and Recreation 27,090 9,359 36,449 Capital Outlay 50,668 28,964 37,438 117,070 Debt service:

Principal 5,826 5,559 660 12,045 Interest 11,786 7,856 1,688 21,330 Bond issuance costs 805 1,746 2,551 Total expenditures 251,571 17,414 51,396 38,728 55,735 414,844 Excess (deficiency) of revenues over (under) expenditures (67,855) 26,810 (24,649) (34,487) (13,001) (113,182)

Other financing sources (uses):

Transfers in 32,656 11,673 28 45,782 2,562 92,701 Transfers out (1,922) (45,782) (9,214) (4,612) (61,530)

Issuance of bonds 1,390 122,276 154,880 16,644- 295,190 Premiums on bonds issued 2,024 186 2,213 32 4,455 Sales of capital assets 397 288 (760) 616 541 Total other financing sources and uses 31,131 (30,695) 122,778 192,901 15,242 331,357 Net Change in fund balances (36,724) (3,885) 98,129 158,414 2,241 218,175 Fund balances - beginning, as restated 131,490 14,613 37,071 42,424 80,934 306,532 Fund balances - ending 94,766 $ 10,728 $ 135,200 $ 200,838 $ 83,175 $ 524,707 The notes to the financial statements are an integral part of this statement.

25

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, 2007 (amounts expressed in thousands)

Net change in fund balances-total governmental funds $218,175 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 Asset additions $ 158,436 Depreciation Expense (19,817) 138,619 Revenues in the statement of activities that do not meet the "availability" criteria for revenue recognition and therefore are not reported as revenue in the funds. 6,005 The amortization of the net pension asset reported in the statement of activities does not require the use of current financial resources and, therefore, is not reported as an expenditure in the governmental funds. (651)

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 immediately 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 12,045 Deferred Charges 5,152 Compensated Absences (2,475)

Interest (6,990)

Premiums on the issuance of LTD (4,455)

Proceeds from LTD (295,190) (291,913)

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. (7,395)

Change in net assets of governmental activities $ 62,840 The notes to the financial statements are an integral part of this statement.

26

City of Riverside Statement of Revenues, Expenditures and Changes In Fund Balances - Budget and Actual General Fund For the year ended June 30, 2007 (amounts expressed In thousands)

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

Taxes $ 141,917 $ 141,917 $ 135,390 $ (6,527) Police 87,760 90,681 86,197 4,484 Licenses and permits 8,402 8,402 7,821 (581) Fire 63,642 64,572 57,049 7,523 Intergovernmental 13,001 18,921 12,069 (6,852) Animal regulation 2,967 3,534 2,670 864 Charges for services 11,116 11,441 11,903 462 Building and zoning inspection 4,043 4,043 3,243 800 Fines and forfeitures 2,355 4,639 2,559 (2,080) Street lighting 4,069 4,069 4,067 2 Special assessments 3,905 3,905 3,963 58 Total public safety 162,481 166,899 153,226 13,673 Rental and investment income 3,197 4,389 6,827 2,438 Miscellaneous 1,814 3,961 3,184 (777) Highways and streets 18,911 24,594 20,760 3,834 Total revenues 185,707 197,575 183,716 (13,859) Culture and recreation 31,922 33,600 27,090 6,510 Expenditures Debt service:

General government: Principal 4,560 5,826 5,826 0 Mayor 574 574 527 47 Interest 10,956 11,042 11,786 (744)

Council 130 130 0 130 Total debt service 15,516 16,868 17,612 (744)

Manager 16,137 17,540 15,502 2,038 Attorney 78 78 60 18 Total expenditures 274,579 323,379 251,571 71,808 Clerk 184 344 180 164 Community Development 11,736 12,127 10,716 1,411 Deficiency of revenue under expenditures (88,872) (125,804) (67,855) 57,949 Human Resources 4,542 4,640 3,828 812 General Services 29,210 32,583 18,049 14,534 Other financing sources (uses)

Information System 14,809 14,841 14,348 493 Transfers in 31,321 31,399 32,656 1,257 Development 4,661 34,873 6,195 28,678 Transfers out (1,572) (1,922) (1,922) 0 Sale of capital assets 100 100 397 297 Subtotal 82,061 117,730 69,405 48,325 Total other financing sources 29,849 29,577 31,131 1,554 Allocated expenditures (36,312) (36,312) (36,522) 210 Net change in fund balances (59.023) (96,227) (36,724) 59,503 Total general government 45,749 81,418 32,883 48,535 continued Fund balance, beginning 131,490 131,490 131,490 0 The notes to the financial statements are an integral part of this statement. Fund balance, ending $ 72,467 $ 35,263 $ 94,766 $ 59,503 27

City of Riverside Statement of Net Assets Proprietary Funds June 30, 2007 (amounts expressed in thousands)

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

Cash and investments $ 105,388 $ 40,127 $ 34,002 $ 9,299 $ 188,816 $ 4,278 Receivables (net allowances for uncollectibles)

Interest 1,311 399 185 111 2,006 246 Utility billed 13,492 2,558 596 548 17,194 Utility unbilled 14,238 2,732 817 644 18,431 Accounts 7,964 1,390 1,066 395 10,815 32 Intergovernmental 295 448 4,583 5,326 21 Nuclear materials inventory 1,535 1,535 Inventory 1,061 1,061 5,916 Prepaid items 6,430 2 1 6,433 8 Due from other funds 50 50 Restricted assets:

Cash and cash equivalents 63,749 15,148 4,127 3,236 86,260 Cash and investments at fiscal agent 71,519 8,050 - '79,569 Public benefit programs receivable 766 766 Conservation & reclamation programs receivable 112 112 Total current assets 286,737 70,966 41,855 18,816 418,374 10,501 Non-current assets:

Advances to other funds 3,669 20 22,104 25,793 17,079 Deferred charges 27,670 6,841 3,828 7,046 45,385 1,643 Capital assets:

Land

• 7,049 9,892 2,698 10,774 30,413 Buildings 15,287 14,799 180,254 22,050 232,390 1,488 Accumulated depreciation-buildings (3,635) (2,857) (65,719) (3,024) (75,235) (92)

Improvements other than buildings 621,436 339,087 48,059 7,178 1,015,760 Accumulated depreciation-improvements other than buildings (250,370) (105,030) (8,919) (3,328) (367,647)

Machinery and equipment 17,769 9,741 7,027 13,594 48,131 10,122 Accumulated depreciation-machinery and equipment (12,132) (6,303) (4,676) (8,348) (31,459) (7,328)

Construction in progress 57,308 27,067 713 10,864 95,952 Total non-current assets 484,051 293,257 185,369 56,806 1,019,483 22,912 Total assets 770,788 364,223 227,224 75,622 1,437,857 33,413 continued 28

City of Riverside Statement of Net Assets Proprietary Funds June 30, 2007 (amounts expressed in thousands)

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

Accounts payable 12,098 3,901 2,044 1,097 19,140 809 Accrued payroll 5,942 1,959 1,472 1,022 10,395 592 Retainage payable 3,508 423 94 4,025 Intergovernmental 8 8 Claims and judgments 27,989 Unearned revenue 112 210 1,202 1,524 Deposits 2,580 1,343 1 3,924 Due to other funds 2,898 2,898 3,132 Capital leases-current 42 17 59 Water stock acquisitions-current 150 150 Landfill capping - current 300 300 Current liabilities payable from restricted assets:

Revenue bonds 19,460 4,355 3,515 27,330 Accrued interest 1,851 318 612 2,781 Other payables 180 180 Total current liabilities 45,627 12,561 7,989 6,537 72,714 32,522 Non-current liabilities:

Revenue bonds 334,751 90,745 21,506 447,002 Arbitrage payable 927 416 1,343 Notes payable 9,211 9,211 Capital leases 28 166 194 Advances from other funds 13,390 5,761 3,685 9,669 32,505 2,285 Decommissioning liability 50,606 50,606 Water stock acquisitions 823 823 Landfill capping 2,821 2,821 Total non-current liabilities 399,674 97,745 34,430 12,656 544,505 2,285 Total liabilities 445,301 110,306 42,419 19,193 617,219 34,807 Net Assets Invested in capital assets, net of related debt 132,605 193,589 169,293 22,061 517,548 4,190 Restricted for debt service 46,830 12,525 5,978 65,333 Restricted for other purposes 3,217 3,217 Restricted for programs 8,344 853 9,197 Unrestricted 137,708 46,950 9,534 31,151 225,343 (5,584)

Total net assets $ 325,487 $ 253,917 $ 184,805 $ 56,429 $ 820,638 $ (1,394)

The notes to the financial statements are an integral part of this statement.

29

City of Riverside Statement of Revenues, Expenses, and Changes in fund Net Assets Proprietary Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

Business-type Activities - Enterprise Funds Governmental Other Total Activities-Enterpri se Enterprise Internal Service Electric Water Sewer Funds Funds Funds Operating revenues:

Charges for services $ 278,888 $ 47,080 $ 24,057 $ 20,829 $ 370,854 $ 14,148 Operating expenses:

Personal services 17,274 7,528 8,406 6,055 39,263 3,122 Contractual services 4,370 2,137 780 4,444 11,731 130 Maintenance and operation 158,230 9,007 7,349 6,139 180,725 1,445 General 16,110 10,293 3,839 4,164 34,406 2,030 Materials and supplies 529 658 1,955 842 3,984 380 Insurance 395 233 276 193 1,097 14,859 Depreciation and amortization 20,836 7,783 5,333 2,137 36,089 819 Total operating expenses 217,744 37,639 27,938 23,974 307,295 22,785 Operating income (loss) 61,144 9,441 (3,881) (33,145) 63,559 (8,637)

Nonoperating revenues (expenses):

Operating grants 1,939 1,939 Interest income 11,118 2,931 2,439 500 16,988 1,283 Other 1,351 1,062 16 738 3,167 48 Gain (loss) on retirement of capital assets 485 (74) (38) (42) 331 (10)

Capital improvement fees 5,014 - 5,014 Interest expense and fiscal charges (14,602) (4,469) (1,572) (310) (20,953) (79)

Q Total non-operating revenues (expenses) (1,648) (550) 5,859 2,825 6,486 1,242 Income before capital contributions and transfers 59,496 8,891 1,978 (320) 70,045 (7,395)

Capital contributions 9,781 20,074 22 5,175 35,052 Transfers in 150 150 Transfers out (27,393) (3,928) - (31,321)

Change in net assets 41,884 25,037 2,000 5,005 73,926 (7,395)

Total net assets -- beginning ,283,603 228,880 182,805 5 1,424 746,712 6,001 Total net assets -- ending $ 325,487 $ 253,917 $ 184,805 $ 56,429 $ 820,638 $ (1,394) 30

City of Riverside Proprietary Funds Statement of Cash Flows For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

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 $ 271,148 $ 48,527 $ 23,181 $ 20,559 $ 363,415 $ 14,519 Cash paid to employees for services (18,591) (7,681) (8,366) (6,004) (38,642) (3,175)

Cash paid to other suppliers of goods or services (174,648) (21,510) (13,904) (15,620) (225,682) (11,508)

Other receipts 1,351 1,062 23 738 3,174 51 Net cash provided (used) by operating activities 81,260 20,398 934 (327) 102,265 (113)

Cash flows from noncapital financing activities:

Transfers in 150 150 Transfers out (27,393) (3,928) (31,321)

Operating grants 2,765 2,765 Advances from interfund receivables 5,912 5,912 Payments on interfund receivables 8 12,710 12,718 Advances to other funds (144) (62) (2,044) (1,229) (3,479) (16,771)

Net cash provided (used) by noncapital financing activities (27,537) (3,982) 10,666 7,598 (13,255) (16,771)

Cash flows from capital and related financing activities:

Purchase of capital assets (43,733) (25,469) (11,974) (8,220) (89,396) (1,457)

Purchase of nuclear fuel (632) (632)

Proceeds from the sale of capital assets 555 103 4 66U Principal paid on long-term obligations (18,815) (4,305) (3,959) (20) (27,099)

Interest paid on long-term obligations (14,656) (3,445) (1,687) (310) (20,098) (79)

Capital improvement fees 5,014 5,014 Capital contributions 6,263 5,611 22 819 12,715 Net cash used for capital and related financing activities (71,018) (27,505) (12,580) (7,731) (118,834) (1,536)

Cash flows from investing activities:

Purchase of investments (5,371) (4) (5,375)

Income from investments 12,051 3,276 2,702 544 18,573 1,310 Net cash provided by investing activities 6,680 3,272 2,702 544 13,198 1,310 Net change in cash and cash equivalents (10,615) (7,817) 1,722 84 (16,626) (17,110)

Cash and cash equivalents, ending (including $69,801 for Electric,

$29,327 for Water and $3,993 for Sewer in restricted accounts) 169,169 63,092 36,407 12,451 281,119 21,388 Cash and cash equivalents, ending (including $53,166 for Electric,

$15,148 for Water and $4,127 for Sewer in restricted accounts) 158,554 $ 55,275 $ 38,129 $ 12,535 $ 264,493 $ 4,278 continued 31

City of Riverside Proprietary Funds Statement of Cash Flows For the fiscal year ended June 30, 2007 (amounts expressed in thousands) continued 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) $ 61,144 $ 9,441 $ (3,881) $ (3,145) $ 63,559 $ (8,637)

Other receipts 1,351 1,062 16 738 3,167 32 Adjustments to reconcile operating income to net cash provided (used) by operating activities:

Depreciation and amortization 20,836 7,783 5,333 2,137 36,089 819.

Amortization of pension costs 87 38 24 .14 163 9 Amortization (burn) of nuclear fuel 4,456 4,456 (Increase) in utility billed receivables (1,249) (840) (41) (96) (2,226)

(Increase) in utility unbilled receivables (1,687) (178) (18) (12) (1,895)

(Increase) decrease in accounts receivable (5,256) 2,128 (890) (189) (4,207) (21)

.(Increase) decrease in intergovernmental receivables 603 (342) 73 29 363 412 (Increase) decrease in prepaid items 121 366 2 489 (1)

(Increase) in nuclear materials inventory (508) (508)

(Increase) decrease in inventory (160) (160) 1,227 Increase (decrease) in accounts payable 479 479 (595)

Increase (decrease) in accrued payroll (3,059) 1,110 726 35 (1,188) (62)

Increase (decrease) in retainage payable 596 (191) 16 421 Increase in intergovernmental receivables 165 79 75 319 Increase (decrease) in deferred revenue (64) 6 (58)

Increase (decrease) in deposits (1) 7 6 (Decrease) in due to other funds (151) (57) (208) (1,301)

Increase in claims and judgments 8,005 Increase in decommissioning liabilitity 3,527 3,527 (Decrease) in landfill capping _ (323) (323)

Net cash provided by operating activities $ 81,260 $ 20,398 $ 934 $ (327) $ 102,265 $ (113)

Schedule of noncash financing and investing activities:

Contribution in aid $ 3,518 $ 14,462 $ 22 $ 49 $ 18,051 $

The notes to the financial statements are an integral part of this statement.

32

City of Riverside Statement of Fiduciary Net Assets Fiduciary Fund June 30, 2007 (amounts expressed in thousands)

Agency Funds Assets:

Cash and investments $ 11,187 Cash and investments at fiscal agent 9,161 Interest receivable 108 Property tax receivables 418 Total assets $ 20,874 Liabilities:

Accounts payable $ 11 Held for bond holders 20,863 Total liabilities $ 20,874 The notes to the financial statements are an integral part of this statement 33

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (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 government-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 intergovernmental 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 Financinq 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 government-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 government-wide financial statements are reported using the economic matters. resources measurement focus and the accrual basis of accounting for the proprietary fund financial statements. Agency funds report only assets and Complete financial statements for each of the individual component units liabilities, therefore have no measurement focus. Revenues are recorded except the Riverside Municipal Improvement Corporation (which does not when earned and expenses are recorded when a liability is incurred, 34

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS.

For the year ended June 30, 2007 (amounts expressed in thousands) regardless of the timing of related cash flows. Property taxes are recognized be measurable and available only when the government receives cash, and as revenues in the year for which they are levied on the property. Grants are therefore not susceptible to accrual.

and similar items are recognized as revenue as soon as all eligibility requirements have been met. An allowance for doubtful accounts is The government reports the following major governmental funds:

maintained for the utility and other miscellaneous receivables. Agency funds report only assets and liabilities, therefore have no measurement focus. The General fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those Governmental fund financial statements are reported using the current required to be accounted for in another fund.

financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable The Redevelopment Agency's debt service fund accounts for the and available. Revenues are considered to be available when they are resources accumulated and payments made for principal and interest on collectible within the current period or soon enough thereafter to pay liabilities long-term obligation debt of the Redevelopment Agency.

of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current The Capital Outlay fund accounts for the construction and installation of fiscal period, except for grant revenue which is (6) months and sales tax street and highway capital improvements for the City, including revenue which is seven (7) months, as described below. Grant revenue is improvements funded by the 1/2 % sales tax approved by Riverside County recognized if received within six (6) months of year end to enable the in 1988.

matching of revenue with applicable expenditures. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. The Redevelopment Agency's capital project fund for the acquisition, However, debt service expenditures, as well as expenditures related to relocation, demolition and sale of land for those portions of the City compensated absences and claims and judgments, are recorded only when designated to be in need of redevelopment activities.

payment is due.

The government reports the following major proprietary funds:

Effective with the previous fiscal year, the State temporarily began to exchange 25% of sales taxes for an equal amount of property taxes to The Electric fund accounts for the activities of the City's electric

• securitize a short-term State bond issue. The State bond issue will remain distribution operations.

outstanding for an uncertain number of years, but is currently estimated not to exceed eight (8) years. These in-lieu sales taxes will be paid to the City by The Water fund accounts for the activities of the City's water distribution the State on a different calendar than sales taxes, which are paid monthly, operations.

three months in arrears. The vast majority of the in-lieu amount will be paid during the applicable fiscal year; however, the final payment of the in-lieu The Sewer fund accounts for the activities of the City's sewer systems.

.sales taxes will not be paid until the January following the end of the applicable fiscal year. The City has budgeted this final payment in the Additiohally, the government reports the following fund types:

current fiscal year and will continue this practice during this temporary period, effectively extending the availability period to seven (7) months for the in-lieu Internal service funds account for the central stores, central garage, and sales taxes and thus provide consistency in the reporting of sales tax the three self-insured risks of workers compensation, unemployment and revenue. public liability on a cost reimbursement basis.

Property taxes, special assessments, sales taxes, franchise taxes, licenses, The agency (fiduciary) fund is used to account for special assessments charges for services, amounts due from other governments and interest that service no-commitment debt.

associated with the current fiscal period are all considered to be susceptible to accrual. Other revenue items such as fines and permits are considered to 35

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

The permanent fund is a governmental fund that is used to report D. Cash and Investments resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the City's Library The City values its cash and investments in accordance with the provisions programs. Restricted for other purposes on the Statement of Net Assets of Government Accounting Standards Board (GASB) Statement No. 31, includes $1 million of permanent fund principal which are considered "Accounting and Financial Reporting for Certain Investments and External nonexpendable net assets. Investment Pools (GASB 31)," which requires governmental entities, including governmental external investment pools, to report certain Pronouncements regarding accounting and financial reporting issued by the investments at fair value in the statement of net assets/balance sheet and Financial Accounting Standards Board prior to December 1, 1989 generally recognize the corresponding change in the fair value of investments in the are followed in both the government-wide and proprietary fund financial year in which the change occurred. Fair value is determined using published statements to the extent that those standards do not conflict with or market prices.

contradict guidance of the Governmental Accounting Standards Board.

Governments also have the option of following subsequent private-sector Cash accounts of all funds are pooled for investment purposes to enhance guidance for their business-type activities and enterprise funds, subject to safety and liquidity while maximizing interest earnings. Investments are this same limitation. The City has elected not to follow subsequent private- stated at fair value. All highly liquid investments (including restricted assets) sector guidance. with a maturity of 90 days or less when purchased are considered cash equivalents. Cash and investments held on behalf of proprietary funds by Significant interfund activity has been eliminated from the government-wide the City Treasurer are considered highly liquid and are classified as cash financial statements with the exception of charges between the City's equivalents for the purpose of presentation in the Statement of Cash Flows:

electric, water, sewer and refuse functions and various other functions of the City. Elimination of these charges would distort the direct costs and program E. Restricted Cash and Investments revenues reported for the various functions concerned.

Certain proceeds of Enterprise fund revenue bonds, as well as certain Amounts reported as program revenues include 1) charges to customers for resources set aside for their repayment, are classified as restricted assets on goods, services, or privileges provided, 2) operating grants and contributions, the statement of net assets because their use is limited by applicable bond and 3) capital grants and contributions, including special assessments. covenants. Additionally, unspent proceeds received from the City's landfill Internally dedicated resources are reported as general revenues rather than capping surcharge are also recorded as restricted assets.

as program revenues. Likewise, general revenues include all taxes.

F. Land and Improvements Held for Resale Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from Land and improvements held for resale are generally acquired under providing services and producing and delivering goods in connection with a Developer Disposition Agreements in the normal course of Redevelopment proprietary fund's principal ongoing operations. The sewer fund also Agency activity. The Developer Disposition Agreements provide for transfer recognizes as operating revenue the portion of connection fees intended to of property to developers after certain redevelopment obligations have been recover the cost of connecting new customers to the system. Operating fulfilled. Additionally, the General fund has acquired property which is to be expenses for enterprise funds and internal service funds include the cost of held for resale at a later date. This property is carried at cost until an event sales and services, administrative expenses, and depreciation on capital occurs to indicate a lower net realizable value.

assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. G. Inventory Supplies are valued at-cost using the average-cost method. Costs are charged to user departments when consumed rather than when purchased.

36

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

H. Prepaid Items City employees generally receive one day of sick leave for each month of employment with unlimited accumulation. Upon retirement or death, certain Payments to vendors for services benefiting future periods are recorded as employees or their estates receive a percentage of unused sick leave paid in prepaid items and expenditures are recognized when items are consumed. a lump sum based on longevity. The General, Library, Redevelopment Agency Capital Projects and the Housing and Community Development I. Capital Assets and Nuclear Fuel Special Revenue funds have been used'to liquidate such balances.

Capital Assets The liability associated with these benefits is reported in the government-wide statements. Vacation and sick leave of proprietary funds is recorded as Capital assets,- which include property, plant, equipment, and infrastructure an expense and as a liability of those funds as the benefits accrue to assets ( e.g., roads, bridges, sidewalks, right of way, and similar items), are employees.

reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital K. Long-Term Obligations assets as assets with an initial, individual cost of more than five thousand dollars and an estimated useful life in excess of one year. Such assets are Long-Term Debt recorded at historical cost or estimated historical cost if purchased or constructed. Costs include: labor; materials; interest during construction; in the government-wide financial statements and proprietary fund types in the allocated indirect charges such as engineering, construction and fund financial statements, long-term debt and other long-term obligations are transportation equipment, retirement plan contributions and other fringe reported as liabilities in the applicable governmental activities, business-type 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 Decommissioning 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.

37

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Amounts held in the trust account are classified as restricted assets in the the reimbursed fund and accounted for as expenditures or expenses in the accompanying balance sheet. To date, the Electric Utility has set aside fund to which the transaction is applicable.

$50,606 in cash and investments with the trustee as Riverside's estimated share of the decommissioning cost of San Onofre. Based on a cost estimate During the year, transactions occur between individual funds for goods completed by Southern California Edison and approved by the California provided or services rendered. Related receivables and payables are Public Utilities Commission, the Electric Utility plans to set aside classified as "due from/to other funds" on the accompanying fund level approximately $1,600 per year to fund this obligation. Decommissioning is statements. The noncurrent portion of long-term interfund loans receivable expected to commence around the year 2014. are reported as interfund receivables/payables and, for governmental fund types, are equally offset by a fund balance reserve to indicate that the L. Claims and Judgments Payable receivable does not constitute available expendable financial resources.

Interfund payables also include accrued interest, which has been offset by Claims and judgments payable are recognized when it is probable that a deferred revenue.

liability has been incurred and the amount of loss can be reasonably estimated. Such claims, including an estimate for claims incurred but not Any residual balances outstanding between the governmental activities and reported at year end, are recorded as liabilities in the appropriate internal business-type activities are reported in the government-wide financial service fund. statements as "internal balances".

M. Fund Equity P. Unearned Revenues In the fund financial statements, reserves represent those portions of fund Governmental -and proprietary funds report unearned revenue on the equity not available for appropriation or legally segregated for a specific statement of net assets. Unearned revenues arise in governmental funds future use. Designated fund balances represent amounts identified by when potential revenue does not meet both the "measurable" and "available" management or the governing board for the future use of financial resources. criteria for recognition in the current period. Unearned revenues also arise when the government receives resources before it has a legal claim to them, N. Net Assets as when grant monies are received prior to meeting all eligibility requirements. in subsequent periods, when both revenue recognition criteria Net assets represent the difference between assets and liabilities. Net are met, or when the government has a legal claim to the resources, revenue assets invested in capital assets, net of related debt, consists of capital is recognized. The majority of the City's governmental fund unearned assets, net of accumulated depreciation, reduced by the outstanding revenue for June 30, 2007 relates to unearned revenue on a capital lease.

balances of any borrowings used for the acquisition, construction or See Note 4.

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

0. Interfund Transactions the county throughout the fiscal year and then allocated and paid to the county, cities and school districts based on complex formulas prescribed by Interfund transactions are accounted for as revenues and expenditures or State statutes.

expenses. Transactions, which constitute reimbursements, are eliminated in 38

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Property taxes are calculated on assessed values as of January 1 for the During the period December through February of each fiscal year, ensuing fiscal year. On July 1 of the fiscal year the levy is placed and a lien department heads prepare estimates of required appropriations for the is attached to the property. Property taxes are due in two installments. The following fiscal year. These estimates are compiled into a proposed first installment is due November 1 and is delinquent on December 10. The operating budget that includes a summary of proposed expenditures and second installment is due February 1 and is delinquent on April 10. Property financial resources and historical data for the preceding fiscal year. The taxes receivable represent current and prior years' uncollected tax levies, operating budget is presented by the City Manager to the City Council for adjusted for uncollectable amounts. review. Public hearings are conducted to obtain citizen comments. The City Council generally adopts the budget during one of its June meetings. The R. Use of Estimates City Manager is legally authorized to transfer budgeted amounts between divisions and accounts within the same . department. Transfer of The preparation of financial statements in conformity with accounting appropriations between departments or funds and increased appropriations principles generally accepted in the United States of America requires must be authorized by the City Council. Expenditures may not legally exceed management to make estimates and assumptions that affect the reported budgeted appropriations at the departmental level within a fund. All amounts of assets and liabilities, disclosure of contingent assets and appropriations shall lapse at the end of the fiscal year to the extent they have liabilities at the date of the financial statements, and the reported amounts of not been expended or lawfully encumbered, except for appropriations for revenue and expenditures.ISpecifically, the City has made certain estimates capital projects which shall continue to their completion.

and assumptions relating to the revenues due and expenditures incurred through fiscal year end, collectability of its receivables, the valuation of 3. Cash and Investments property held for resale, the useful lives of capital assets, and the ultimate outcome of claims and judgments. Actual results may differ from those Cash and investments at fiscal year end consist of the following:

estimates and assumptions.

S. Implementation of new accounting principles Investments $392,505 504,455 Investments at fiscal agent GASB has issued two pronouncements prior to June 30, 2007 (for years 896,960 ending after June 30, 2007) that have effective dates that may impact future Cash on hand and in transit 2,400 financial presentations. Management has currently determined that GASB $89,36 No. 45, "Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions" and GASB No. 47, The amounts are reflected in the government-wide statement of net assets:

"Accounting for Termination Benefits" apply to the City, and are currently evaluating the impacts of implementing the pronouncements. Cash and investments $399,535 Restricted cash and cash equivalents 86,260 393,217

2. Legal Compliance - Budgets Restricted cash and investments at fiscal agent Total per statement of net assets 879,012 Budgets are adopted on a basis consistent with accounting principles Fiduciary fund cash and investments 20,348 1899.3-60 generally accepted in the United States of America. Annual appropriated budgets are adopted for all departments within the general, special revenue and capital project funds. Formal budgets are not employed for debt service The City follows the practice of pooling cash and investments of all funds funds because debt indenture provisions specify payments. The permanent except for funds required to be held by outside fiscal agents under the fund is not budgeted. provisions of bond indentures, which are administered by outside agencies.

39

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Interest income earned on pooled cash and investments is allocated monthly investments of debt proceeds held by bond fiscal agents. Permitted to funds based on the beginning and month-end balances. Interest income investments are specified in related trust agreements and include the from cash and investments held at fiscal agents is credited directly to the following:

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 Securities of the U.S. Government and its sponsored agencies in the name of the City. Bankers' Acceptances rated in the single highest classification Commercial Paper rated in the single highest classification 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 Relatinq to Interest Rate Risk Repurchase Agreements 1 Year 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 changes in market interest rates. The City's investment policy requires that Commercial Paper of "prime" quality 270 Days 25%

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 for funds reserved in the San Onofre Nuclear Generating Station Decommissioning Account for which the five-year maturity limitation may be extended to the term of the operating license.

Investments Authorized by Debt Agqreements Provisions of debt agreements, rather than the general provisions-of the California Government Code or the City's investment policy, govern 40

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Remaining Maturity (in Months) - - any one issuer that represent 5% or more of total City investments are as 12 Months 13 to 24 25 to 60 More than follows:

Investment Type or Less Months Months 60 Months Money Market Funds $31,239 $31,239 $ - $ - $ issuer Investment Type Reported Amount Federal Agency Securities 240,712 49,650 34,455 156,607 FHLB Federal Agency Securities $158,386 Corp Medium Term Notes 19,654 19,654 State Investment Pool 100,900 100,900 Held by Fiscal Agent Custodial Credit Risk Money Market Funds 33,514 33,514 Investment Contracts 391,335 59,028 166,216 118,210 47,881 Corp Med Term Notes 984 . 984 Custodial credit risk for deposits is the risk that, in the event of the failure of a -

Commercial Paper 26,973 24,539 2,434 depository financial institution, a government will not be able to recover its Fed Agency Securities 51 649 19,904 1,697 9,224 20,824

$222.022 168.2O5 deposits or will not be able to recover collateral securities that are in the Total $896.960 $319758 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-The City assumes that callable investments will not be called. dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another Disclosures Relatinq to Credit Risk party. The City's investment policy requires that a third party bank trust department hold all securities owned by the City. All trades are settled on a Generally, credit risk is the risk that an issuer of an investment will not fulfill delivery vs. payment basis through the City's safekeeping agent. The City its obligation to the holder of the investment. This is measured by the has no deposits with financial institutions; bank balances are swept daily into assignment of a rating by a nationally recognized statistical rating a money market account.

organization. Presented below is the actual rating as of year-end for each 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 Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the Investment Type AAA Aa A-1 Unrated City's investment in this pool is reported in the accompanying financial statements at amounts based upon the City's pro-rata share of the fair value Money Market Funds $31,239 $ - $16 $ $31,239 Federal Agency Securities 240,712 240,712 provided by LAIF for the entire LAlF portfolio (in relation to the amortized cost Corp Medium Term Notes 19,654 19,654 of that portfolio). The balance available for withdrawal is based on the State Investment Pool 100,900 100,900 accounting records maintained by LAIF, which are recorded on an amortized Held by Fiscal Agent cost basis.

Money Market Funds 33,514 33,514 Investment Contracts- 391,335 - 391,335 Corp Med Term Notes 984 984 4. Capital Lease Receivable Commercial Paper 26,973 26,973 Fed Agency Securities 51,649 51,649 s717.32 The Redevelopment Agency has a direct financing lease arrangement with Total $20522 $26 1152-39 the State of California (the State) for a twelve-story office building. The lease term is for thirty years and the State takes ownership of the facility at the Concentration on Credit Risk conclusion of that term. The lease calls for semi-annual payments not less than the debt service owed by the Redevelopment Agency on the lease The investment policy of the City contains no limitations on the amount that can be invested in any, one issuer beyond that stated above. Investments in 41

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 BeinigI HIJjU"0IV AIJI OOQ 14 ;

II

+k LI IIUOOI 4

UO revenue bonds issued for the purchase and renovation of the building. The Business type activities: Deletions/ Ending future minimum lease payments to be received are as follows: Balance Additions Transfers Balance Capital assets, not being depreciated:

2008 $ 2,298 Land $ 30,372 $44 $ (3) $30,413 2009 2,324 Construction in progress 103,01 (49,113) 9,5 2010 2,355 Total capital assets not being depreciated 103,045 (49,116) -126,365 2011 2,381 2012 2,413 Capital assets being depreciated:

Buildings 228,937 3,452 1 232,390 Thereafter Improvements Total Due 45,968 other than Buildings 973,640 43,336 (1,216) 1,015,760 Less: amount applicable to interest (19,803) Machinery and Equipment 43,65' ,21 (1,729) 48,131 Total capital lease receivable $26,165 Total capital assets being depreciated 1,246,222 53,003 (2,944) 1,29,28 Less accumulated depreciation for:

5. Capital Assets Buildings (69,862) (5,375) 2 (75,235)

Improvements other than Buildings (341,375) (27,249) 977 (367,647)

The following is a summary of changes in the capital assets during the fiscal Machinery and Equipment (29,784) (3,265) 1,591 (31,458) year ended June 30, 2007. Total accumulated depreciation (44 1,021) (35,889) (474,340)

Total capital assets being depreciated, net 80,21 171144 82,41 Governmental activities: Beginning Deletions/ Ending Balance Additions Transfers Balance Business type activities Capital assets, not being depreciated: capital assets, net S877,637 $120,159 S(990 948306 Land $163,594 '$34,265 $(6,165) $191,694 Construction in progress 5536 4,3 (36,573) 6498 Estimated useful lives used to compute depreciation are as follows:

Total capital assets not being depreciated 218,90 8049 (42.738)

Buildings and Improvements 30-50 years Capital assets being depreciated:

Buildings 77,724 24,139 101,863 Improvements other than Buildings 20-99 years Improvements Machinery and Equipment 3-15 years other than Buildings 51,619 9,035 60,654 Infrastructure 20-1 00 years Machinery and Equipment 57,114 15,469 (4,774) 67,809 Infrastructure 66,801 Depreciation expense was charged to functions of the government as Total capital assets being depreciated 707,513 115,444 (4.774) 818,183 follows:

Less accumulated depreciation for:

Buildings (27,917) (1,767) (29,684) Governmental activities:

Improvements General government $ 2,307 other than Buildings (28,032) (1,830) (29,862) Public safety 2,378 Machinery and Equipment (42,636) (4,422) 4,548 (42,510)

Infrastructure (167,654) (12.6 17) (180,271) Highways and streets, including depreciation of Total accumulated depreciation (266,239) (20,636) (282,327) general infrastructure assets 13,401 Total capital assets being Culture and recreation2,5 depreciated, net 441,27 9480 (226) 53,5 Total depreciation expense - governmental activities $206-36 Governmental activities capital assets, net $6601945150 426 $253 42

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Business type activities: Workers' Unemployment Public Electric $20,836 Compensation Compensation Liability Total Water 7,783 Unpaid Claims, Sewer 5,333 June 30, 2005 $11,147 $ 76 $6,326 $17,549 Incurred claims 8,176 - 4,657 12,833 Refuse 892 Special Transportation 385 Claim payments (5,589) - (4,809) (10398)

Airport 221 Unpaid Claims, Public Parking 439 June 30, 2006 13,734 76 6,174 19,984 Total depreciation and amortization expense - Incurred claims business type activities $35.889 (including IBNR's) 14,251 - 7,432 21,683 Claim payments (8,298) S5,380) (13,678)

6. Risk Management Unpaid claims, $19687 $76 $8,226 S-U27~

June 30, 2007 The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Property insurance coverage has a limit of $100,000, 7. Long-Term Obligations with a-deductible of $50. Earthquake and flood insurance coverage has a limit of $15,000, with a deductible of 5% for earthquake and 2% for flood. Changes in Long-Term Obligations: The following is a summary of changes Workers' compensation insurance coverage has a limit of $25,000, with a in long-term obligations during the fiscal year:

deductible of $3,000 per occurrence. The City carries commercial insurance up to $23,000 for general and auto liability claims greater than $3,000 per Governmental Activities:

occurrence. There were no claims settled in the last three fiscal years that exceed insurance coverage. Internal service funds have been established to Due account for and finance the uninsured risks of loss. Beginning Ending Within Balance Additions Reductions Balance One Year All funds of the City participate in the Risk Management program and make Redevelopment Agency bonds $140,195 $160,507 $4,104 $296,598 $4,145 payments to the Internal Service Funds based on actuarial estimates of the General Obligation amounts needed to fund prior and current year claims and incidents'that Bonds 19,858 527 19,331 545 have been incurred but not reported. Interfund premiums are accounted for Pension Obligation as quasi - external transactions and are therefore recorded as revenues of Bonds 146,470 2,020 144,450 2,480 the Internal Service funds in the fund financial statements. Certificates of Participation 55,571 139,139 1,836 192,874 1,870 Capital leases 6,008 1,103 2,182 .4,929 1,656 Changes in the funds' claims. liability amounts are:

Notes Payable 10,215 456 9,759 517 Compensated.

Absences $0319656 15,185 12,778 34$063 123187 Total 43

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Business-type activities: Principal Due Outstanding Beginning Ending Within $75,405 2003 Electric Revenue Bonds; 2.0% to 5.0%,

Balance Additions Reductions Balance One Year due in annual installments from $1,035 to $8,535 Revenue Bonds $509,577 $ $35,245 $474,332 $27,330 through October 1, 2013. 53,880 Notes Payable 9,841 630 9,211 642 Capital Leases 317 64 253 85 $27,500 2004 Electric Revenue Bonds; Series A fixed Landfill Capping 3,444 323 3,121 300 rate bonds, 4.0% to 5.25%, due in annual installments Arbitrage Liability 1,343 - 1,343 from $2,615 to $3,695 through October 1, 2014. 24,885 Water Stock Acquisition Rights 979 6 973 150 $82,500 2004 Electric Revenue Bonds; Series B Total $524-158 f27.671 $ $28,507 Auction Rate Securities, variable rate subject to weekly repricing (rate at June 30, 2007 was 3.7%), due in Advance Refunding: annual installments from $1,250 to $7,000 through October 1, 2029. 82,500 In prior years the City defeased certain Revenue and Tax Allocation Bonds.

by placing the proceeds of the new bonds in an irrevocable trust to provide $115,725 2005 Electric Refunding/Revenue Bonds; for all future debt service payments on the old bonds. Accordingly, the trust Series A and B; Auction Rate Securities, variable rate account assets and the liability for the defeased bonds are not included in the subject to weekly repricing (rate at June 30, 2007 was City's financial statements. At fiscal year end $62,735 of bonds outstanding 3.7%), due in annual installments from $600 to $10,375 are considered defeased. through October 1, 2035. 115,125 Longq-Term Obligations at June 30, 2007: Subtotal 352,830

. Principal Outstanding Add: Unamortized bond premium 7,469 Revenue Bonds:

Less: Unamortized deferred bond refunding costs (6,087)

Electric $360,299

$98,730 1998 Electric Revenue Bonds (partial refunding issue); $63,165 serial bonds, 4.25% to Water.

5.38%, due in annual installments from $4,650 to

$7,085 through October 1, 2013; $35,565 term bonds, $69,840 1991 Water Revenue Bonds; $25,050 serial 5%, dueOctober 1, 2022 (partially advance refunded in bonds, 4.25%to 9.0%, due in annual installments from 2005). $47,315 $675 to $3,100 through October 1,2002; $25,900 Capital Appreciation Bonds, due in annual installments

$47,215 2001 Electric Revenue Bonds; 2.9% to 5.25%, from $3,235 to $3,240 from October 1, 2003 to October due in annual installments from $2,855 to $4,750 1,2010; (partially advance refunded in 1998) $12,950 through October 1, 2016 (partially advance refunded in 2005). 29,125 44

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Principal Electric Utility Fund Water Utility Fund Outstandingq

$30,965 1998 Water Revenue Bonds (partial refunding Fiscal Year Principal Interest Total Principal Interest Total issue); $15,055 serial bonds, 4.0% to 5.38%, due in 2008 $19,460 $ 13,602 $ 33,062 $4,355 $3,194 $ 7,549 annual installments from $205 to $4,055 through 2009 20,345 12,735 33,080 4,375 3,153 7,528 2010 21,300 11,781 33,081 4,415 3,109 7,524 October 1, 2013; $15,910 term bonds, 5%, due 2011 22,295 10,810 33,105 4,465 3,063 7,528 October 1, 2027 20,990 2012 21,050 9,744 30,794 4,590 3,110 7,700 2013-2017 86,690 35,085 121,775 22,310 11,338 33,648

$20,000 2001 Water Revenue Bonds; 2.6% to 5.0%, 2018-2022 41,490 23,520 65,010 11,430 7,889 19,319 2023-2027 38,575 16,388 54,963 14,025 5,806 19,831 due in annual installments from $345 to $1,230 2028-2032 42,275 9,587 51,862 15,700 3,447 19,147 through October 1, 2031 (partially advance refunded in 2033-2036 39,350 2,366 41,716 13,850 890 14,740 2005) 4,850 Premium (Discount) 7469 7469 (1906) -9 (1.906)

Total $360.299 $145618 505,917 $97609 S44999 1142608

$61,125 2005 Water Refunding/Revenue Bonds; Auction Rate Securities, variable rate subject to weekly Sewer Utility Fund repricing (rate at June 30, 2007 was 3.6%), due in Fiscal Year Principal Interest Total annual installments from $400 to $3,950 through 2008 $ 3,515 $1,346 $4,861 2009 3,760 1,092 4,852 October 1, 2035 4,020 819 4,839 2010 2011 4,305 571 4,876 Subtotal 99,515 2012 4,520 350 4,870 Less: Unamortized bond discount (1,906) 2013 4,745 119 4,864 Premium 156 156 Less: Unamortized deferred bond refunding costs (2,510) 54.297 5293L18 Total $2S5021

$97,609 Principal Sewer Redevelopment Agency Bonds: Outstanding

$49,145 1993 Sewer Revenue Refunding Serial Bonds; $13,285 1991 Public Financing Authority Revenue 4.0% to 7.0%, due in annual installments from $335 to Bonds, Series A, Multiple Project Areas; $1,470 serial

$4,745 through August 1, 2012 $ 24,865 revenue bonds 7.15% to 7.6%, due in annual Add: Unamortized bond premium 156 installments from $100 to $145 through February 1, 25,021 2003; and $4,175 term bonds, 8.0%, due in annual installments from $155 to $450 through February 1, Total Revenue Bonds 1482.9-29 2018 (portion not refunded) $ 180 Remaining revenue bond debt service payments will be made from revenues $17,025 1999 University Corridor/Sycamore Canyon of the Electric, Water, and Sewer Utility Enterprise funds. Annual debt Merged Project Area, Tax Allocation Bonds, Series A; service requirements to maturity are as follows: $6,205 serial bonds, 3.4% to 4.7% due in annual installments from $40 to $570 through August 1, 2014;

$4,810 term bonds at 4.75% due August 1, 2021; and

$6,010 term bonds at 5.0% due August 1, 2027 14,750 45

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Principal Principal Outstandinq Outstanding

$6,055 1999 University Corridor/Sycamore Canyon $40,435 Downtown/Airport Merged Project Area, 2003 Merged Project Area, Subordinate Tax Allocation Tax Allocation and Refunding Bonds; $32,720 serial Bonds, Series B; $1,900 serial bonds, 4.5% to 5.5% ,bonds 2.0% to 5.25% due in annual installments from due in annual installments from $35 to $190 through $1,220 to $1,955 through August 1, 2023; and $7,715 September 1, 2013; $1,135 term bonds at 5.5% due term bonds at 5.0% due in annual installments from September 1, 2018; and $3,020 term bonds at 5.625% $195 to $2,060 through August 2034 36,680 due September 1, 2027 5,315

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

$20,395 1999 Casa Blanca Project Area, Tax $17,025 serial bonds 3.0% to 4.625% due in annual Allocation Bonds, Series A; $8,925 serial bonds, 3.4% installments from $505 to $1,165 through August 1, to 4.7% due in annual installments from $455 to $780 2025; $2,425 term bonds at 5.0% due August 1, 2028; through August 1, 2014; $2,565 term bonds at 4.75% and $4,665 term bonds at 4.85% due August 1, 2034 23,045 due August 1, 2017; $4,035 term bonds at 4.75% due August 1,2021; and $4,870 term bonds at 5.0% due August 1, 2025. 16,865 $1,465 California Statewide Communities Development Authority 2005 Taxable Revenue Bonds, Series A

$4,550 Arlington Redevelopment Project, 2004 Tax (CRA/ERAF Loan Program); 3.87% to 5.01% due in Allocation Bonds, Series A; $420 term bonds at 3.8% annual installments of $105 to $180 through August 1, due August 1, 2014; $615 term bonds at 4.6% due 2015 1,360 August 1, 2024; and $3,515 term bonds at 4.7% due August 1, 2034 4,475 $8,340 Downtown/Airport Merged Project Area and Casa Blanca Project Area 2007 Tax Allocation Bonds,

$2;975 Arlington Redevelopment Project, 2004 Tax Tax Exempt, Series A, serial bonds 4.0% to 4.25% due Allocation Bonds; Series B: 5.5% due in annual in annual installments from $20 to $590,000 through installments from $85 to $235 through August 1, 2024 2,800 August 1, 2025; $4,980 term bonds at 4.5% due August 1, 2029; $410 term bonds at 4.375% due August 1, 8,340

$26,255 State of California Department of General 2037 Services Project, 2003 Lease Revenue Refunding Bonds, Series A; 2.0%/o to 5.0% due in annual $14,850 Downtown/Airport Merged Project Area and installments from $545 to $2,230 through October 1, Casa Blanca Project Area 2007 Tax Allocation Bonds, 2024 23,740 Taxable, Series B, $4,050.term bonds at 5.2% due August 1, 2017; $10,800 term bonds at 5.8% due 14,850

$4,810 State of California Department of General August 1, 2028 Services Project, 2003 Lease Revenue Refunding Bonds, Series B; $310 serial bonds 1.20% to 1.42%

through October 1, 2004; $620 term bonds at 3.090%

due Oct. 1, 2008; $1,110 term bonds at 4.340% due Oct. 1, 2014 and $2,770 term bonds at 5.480% due Oct. 1, 2024 4,200 46

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Principal Principal Outstanding General Obligation Bonds: OutstandinQ

$89,205 University Corridor/Sycamore Canyon Merged Project Area, Arlington Project Area, Hunter $20,000 Fire Facility Projects, Election of 2003 General Park/Northside Project Area, Magnolia Center Project Obligation Bond; 3.0% to 5.5%, due in annual Area, and La Sierra/Arlanza Project Area 2007 Tax installments from $410 to $1,740 through August 1, Allocation Bonds, Tax-Exempt, Series C, serial bonds 2024 $19,075 4.0% to 5.0% due in annual installments from $50 to Add; Unamortized bond premium 256

$3,210 through August 1, 2025; $17,955 term bonds at Total General Obligation Bonds $19.331 4.5% due August 1, 2030; $47,775 term bonds at 5.0%

due August 1, 2037 89,205 Remaining general obligation bond debt service payments will be made from Unrestricted revenues of the General fund. Annual debt service requirements

$43,875 University Corridor/Sycamore Canyon Merged to maturity are as follows:

Project Area, Arlington Pfoject Area, Hunter Park/Nort&side Project Area, Magnolia Center Project Fiscal Year Principal Interest Total Area, and La Sierra/Arlanza Project Area 2007 Tax 2008 $ 545 $ 1,109 $1,654 Allocation Bonds, Taxable, Series D, $15,740 term 2009 590 1,130 1,720 bonds due August 1, 2017; $28,135 term bonds due 2010 625 1,155 1,780 August 1,2032 43,875 2011 675 1,183 1,858 Subtotal 289,680 2012 725 1,212 1,937 Add: Unamortized bond premium 6,918 2013-2017 4,525 6,597 11,122 Total Redevelopment Agency Bonds, $296.598 2018-2022 6,450 7,908 14,358 2023-2025 4,940 4.683 9,623 Remaining debt service will be paid by the Redevelopment Agency Debt Premium 256 256 Service Funds from future property tax revenues. Annual debt service Total $1 9.331 $24.977 $44.308 requirements to maturity are as follows; Fiscal Year Principal Interest Total 2008 $ 4,145 $12,585 $16,730 2009 6,250 13,931 20,181 2010 6,625 13,670 20,295 2011 6,925 13,380 20,305 2012 7,235 13,071 20,306 2013-2017 41,395 61,397 102,792 2018-2022 54,585 50,746 105,331 2023-2027 63,035 41,885 104,920 2028-2032 49,025 37,746 86,771 2033-2037 43,685 26,262 69,947 2038-2042 6,775 3,997 10,772 Premium 6,918 6,918 Total $296.598 $288-670 $585.268 47

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Principal Principal Pension Obligation Bonds: Outstanding Certificates of Participation: Outstanding

$89,540 California Statewide Community Development $6,360 1999 Municipal Improvements Corporation Authority (Public Safety) 2004 Taxable Pension Certificates of Participation; 6.0% to 7.6%, due in Obligation Bond; 2.65%)to 5.896%, due in annual annual installments from $310 to $815 through April 1, installments from $1,125 to $10,715 through June 1, $85,765 2010 $ 2,280 2023

$53,185 2003 Riverside Public Financing Authority

$30,000 2005 Taxable Pension Obligation Bonds Certificates of Participation; 2.0% to 5.0%, due in Series A; 3.85% to 4.78%, due in annual installments annual installments from $755 to $2,830 through

$630 to $3,860 through June 1,2020 28,685 September 1,2033 50,200

$30,000 2005 Taxable Pension Obligation Bonds $19,945 2006 Galleria at Tyler Public Improvements Series B (Auction Rate Securities); variable rate subject Certificates of Participation; 4.0% to 4.5%, due in to weekly repricing (rate at June 30, 2007 was 5.3%), annual installments from $435 to $735 through due in annual installments from $1,475 to $6,750 September 1, 2024 19,945 through June 1, 2025. 30,000 Total Pension Obligation Bonds $144,450 $59,475 Riverside Renaissance Certificates of Participation Series 2007A; variable rate subject to Remaining pension obligation bond debt service payments will be made from weekly repricing (rate at June 30, 2007 was 3.7%), due unrestricted revenues of the General fund. Annual debt service requirements in annual installments from $1,350 to $3,350 through 59,475 to maturity are as follows: March 1,2037 Fiscal Year Principal Interest Total $59,500 Riverside Renaissance, Certificates of 2008 $ 2,480 $ 7,642 $ 10,122 Participation Series 2007B; variable rate subject to 2009 2,985 7,539 10,524 weekly repricing (rate at June 30, 2007 was 3.7%) due 2010 3,535 7,406 10,941 --in annual installments from $1,350 to $3,350 through 2011 4,130 7,241 11,371 March 1, 2037 59,500 2012 4,780 7,042 11,822 Subtotal 191,400 2013-2017 35,565 30,802 63,367 Add: Unamortized bond premium 1,474 2018-2022 61,635 18,551 80,186 Total Certificates of Participation $1 92.874 2023-2025 29,340 2,483 31,823 Total $144.450 Remaining certificates of participation debt service payments will be made from unrestricted revenues of the Debt Service funds. Annual debt service requirements to maturity are as follows:

48

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Fiscal Year Principal Interest Total 2008 $1,870 $ 7,445 $9,315 Outstanding 2009 1,950 7,360 9,310 Note payable to California Housing Finance Agency, 2010 2,045 7,260 9,305 interest at 3%, payable in annual installments of $88 2011 1,275 7,124 11,099 through 2013, for housing projects. 477 2012 4,500 6,977 11,477 2013-2017 25,355 32,214 57,549 Total notes payable - Redevelopment Agency $-9.759 2018-2022 30,755 26,877 57,632 2023-2027 35,820 20,287 56,107 Remaining notes payable debt service payments will be made from 2028-2032 42,495 12,667 55,162 unrestricted revenues of the Redevelopment Agency. Annual debt service 2033-2037 42,655 3,946 46,601 requirements to maturity are as follows:

Premium 1,474 1,474 Total $192874 $132.157 $325-031 Redevelopment Agency Fiscal Year Principal Interest Total 2008 $ 517' $ 744 $ 1,261 Principal 2009 552 711 1,263 Contracts - Enterprise Funds: Outstanding 2010 593 675 1,267 2011 638 635 1,274 Water stock acquisition rights payable on 2012 685 592 1,277 demand to various water companies $973 2013-2017 3,437 1,656 5,092 2018-2022 1,281 1,293 2,575 Principal 2023-2027 777 933 1,709 Notes Payable - Redevelopment Agency: Outstanding 2028-2032 1,279 430 1,709 Total $9.759 $7.668 $17.4-27 These notes payable have been issued to promote development and expansion within the City's redevelopment areas. Principal Notes payable - Sewer Fund: Outstanding Pepsi Cola Bottling Company of Los Angeles, 10.5%,

payable in net annual installments of $341, Sewer fund loan from State of California for including principal and interest through June 2020 $2,987 Cogeneration project, 2.336%, payable in net annual installments of $339,474, beginning January 29, 2003 HUD Section 108 loan for University Village, through January 29, 2022 $ 4,088 5.36% to 7.66%, payable in semi-annual installments beginningAugust 1, 1996 of Sewer fund loan from State of California for Headworks

$272 to $425 through August 1, 2015 2,700 project, 1.803%, payable in net annual installments of

$477,387, beginning November 6, 1999 through HUD Section 108 loan for Mission Village November 6, 2018 Project, 6.15% to 6.72%, payable in semi-annual installments beginning Total notes payable - Sewer Fund $9-211 August 1, 1999 of $110 to $420 through August 1, 2018 3,595 49

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Remaining notes payable debt service payments will be made from The future minimum lease obligations as of June 30, 2007 were as follows:

unrestricted revenues of the Sewer fund. Annual debt service requirements to maturity are as follows: Years Ending June 30, Governmental Business-type Activities Activities Sewer Fund 2008 $1,749 $ 92 Fiscal Year Principal Interest Total 2009 1,520 75 2008 $ 642 $175 $ 817 2010 848 51 2009 654 163 817 2011 809 51 474 2010 6666 151 817 2012 _0 2011 679 138 817 Total Minimum lease payments 5,400 269 2012 692 125 816 Less: Amount representing interest 2013-2017 3,659 426 4,084 (rates ranging from 2.5% to 9%) (471) (16) 2018-2021 .2 20 92 2,313 Total capital lease payable $4929 $253 Total $9.211 $1.270 t104-81 The following are legally required debt service cash reserves. These Capital Leases: amounts, at a minimum, are held by the City or fiscal agents at June 30, 2007:

The City leases various equipment through capital leasing arrangements in the governmental and proprietary fund types. These activities are recorded General lonq-term obligations:

for both governmental and business-type activities in the government-wide Redevelopment Agency $ 7,033 financial statements. The assets and related obligations under leases in Certificates of Participation 5,486 governmental funds are not recorded in the fund statements. For proprietary Total 112 -519 funds, the assets and their related liabilities are reported directly in the fund.

Amortization applicable to proprietary assets acquired through capital lease Enterprise funds:

arrangements is included with depreciation for financial statement Electric $30,108 presentation. The assets acquired through capital leases are as follows: Water 9,427 Total $39535 Governmental Business-Type Asset Activities Activities Buildings $8,660 $868 Following are required debt service ratios for the year ended June 30, 2007.

Equipment 61519 The ratio measures operating income in relation to debt service. The City is Subtotal 15,179 868 in compliance with these ratios, except for the Sewer fund. The Sewer fund Less: Accumulated has not raised sewer rates in over 20 years. Management is in the process Depreciation (2,217) (167) of preparing a rate increase that is anticipated to be approved by City Council Total 12a9_62 $70 by fiscal year 07/08.

Minimum Debt Service Ratio Required Electric fund 1.10 Water fund 1.25 Sewer fund 1.25 50

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

There are also a number of limitations and restrictions contained in assessments, forwarding the collections to bondholders and initiating Assessment Bond indentures. The City believes they are in compliance with foreclosure proceedings, if applicable. Since the debt does not constitute an all significant limitations and restrictions. 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.

Landfill Capping: Conduit Debt Obligations State and Federal laws and regulations require the City to place a final cover Mortgage Revenue Bonds outstanding of $16,975 and industrial on all active landfills when closed and to perform certain maintenance and Development Revenue Bonds of $11,275 are not included in the monitoring functions at the landfill site for 30 years after closure. To comply accompanying financial statements. These bonds are special obligations of with-these laws and regulations, the City is funding the costs of closure and third parties and payable solely from and secured by a pledge of the receipts "final capping" of the Tequesquite landfill located in the City. This area, received from the acquired mortgage loans and certain other reserve funds comprised of approximately 120 acres, operated as a "Class II Sanitary and related monies. The bonds are not payable from any other revenues or Landfill" until its closure in 1985. During its operation, the landfill did not assets of the City or Redevelopment Agency. Neither the faith and credit nor accept hazardous waste and no clean up and abatement or cease and desist the taxing power of the City, the Redevelopment Agency, the State of orders have been issued to the City. The capacity used at June 30, 2007 was California or any political subdivision thereof is pledged to the payment of the 100%. principal and interest on the bonds.

The estimated costs as determined by an independent consultant and 9. Interest Rate Swaps on Revenue Bonds updated by the City's Engineering Department are associated with flood control upgrades, remediation of possible ground water contamination and Objective: As a means to lower borrowing costs, when compared against control of methane gas. All potential costs have been recognized in the fixed-rate bonds at the time of issuance in September 2005, the City entered financial statements. There is the potential for these estimates to change into interest rate swap agreements in connection with its $115,725 2005 due to inflation, deflation, technology, or change in laws or regulations. To Electric Refunding/Revenue Bonds (Series A and B) and $61,125 2005 fund the cost, the City imposed a landfill capping surcharge on customers Water Refunding/Revenue Bonds. Also in September 2005, the City entered effective August 1, 1988. The minimum unamortized estimated cost of into the interest rate swap agreement for the $82,500 2004 Electric Revenue

$4,559 is recorded as a deferred charge in the accompanying financial Bonds (Series B). The intention of the swap was to effectively change the statements of the Refuse fund and is being amortized on a straight-line basis City's variable interest rate on the bonds to a synthetic fixed rate of 3.11% for over the remaining post closure period, currently 23 years. The estimated the 2004 Electric Revenue Bonds (Series B) and 3.20% for the other cost of meeting the State's requirements was increased by $2.2 million respective Revenue Bonds. In March 2007, the City entered into additional during 2002 based on the engineer's annual review of closure and post- interest rate swap agreements in connection with its $59,475 2007 Series A closure maintenance costs. Certificates of Participation, and its $59,500 2007 Series B Certificates of Participation.

8. Other Long-Term Obligations Terms: Under the swaps, the City pays the counterparty a fixed payment as Assessment Districts Bonds (Not obligations of the City) noted above and receives a variable payment computed as 62.68% of the London Interbank Offering Rate ("LIBOR") one month index plus 12 basis As of June 30, 2007, the City has several series of Assessment District points. The swaps have notional amounts equal to the principal amounts Bonds outstanding in the amount of $74,508. Bonds issued for stated above. Starting in fiscal year 2007, the notional value of the swaps improvements in certain special assessment districts, in accordance with the and the principal amounts of the associated debt decline by $300 to $7,000 provisions of the Municipal Improvements Acts, are liabilities of the property until the debt is completely retired in fiscal year 2036. The bonds' variable owners and are secured by liens against the assessed property. The City rate coupons are established on a weekly basis through the results of an Treasurer acts as an agent for the property owners in collecting the 51

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 For he yar ededJune30. 007(amonts enx~nrecsced in thousa~nds' auction process administered through an auction agent, termed Auction Rate. COP 2007A COP 2007B TIE Floating TIE Floating Securities ("ARS"). Bonds Bonds The bonds and the related swap agreements for the 2004 Electric Revenue Terms Rates Rates Bonds mature on October 1, 2029 and the 2005 Electric and Water Interest rate Swap:

Refunding/Revenue Bonds both mature .on October 1, 2035. The 2007 Fixed payment to counterparty Fixed 3.396% 3.396%

63.00 LIBOR Series A and B Certificates of Participation mature on March 1, 2037. As of Variable payment from counterparty V + 7 bps (3.42160%) (3.42160%)

June 30, 2007 rates were as follows: Net interest rate swap payments (.0256%) (.0256%)

Variable-rate bond coupon payments ARS 3.60767% 3.63165%

Synthetic interest rate on bonds 3.5820Z% 3-00%

2005 Water 2005 Electric Refunding/ Refunding/

Revenue Revenue Fair Value: As of June 30, 2007, in connection with all swap arrangements, Bonds Bonds the transactions had a total positive fair value of $17,816. Because the Series A Series A coupons on the City's variable-rate bonds adjust to changing interest rates, the bonds do not have a corresponding fair value decrease. The fair value Terms Rates Rates was developed by a pricing service using the zero-coupon method. This Interest rate Swap:

Fixed payment to counterparty Fixed 3.2000% 3.2010% method calculates the future net settlement payments required by the swap, 62.68 LIBOR assuming that the current forward rates implied by the yield curve correctly Variable payment from counterparty + 12 bps (3.26362%) (3.35345%) anticipate future spot interest rates. These payments are then discounted Net interest rate swap payments (.06362%) (.15245%)

using the spot rates implied by the current yield curve for hypothetical zero-Variable-rate bond coupon payments ARS 3.12994% 3.22244% coupon bonds due on the date of each future net settlement of the swap.

Synthetic interest rate on bonds 136299%

Credit risk: As of June 30, 2007, the City was exposed to credit risk in the 2005 Electric 2004 amount of $17,816 because the swap had a positive fair value. The swap Refunding/ Electric counterparties, Bear Stearns and Merrill Lynch were rated A+ and AA-,

Revenue Revenue respectively by Standard & Poor's. To mitigate the potential for credit risk, if Bonds Bonds Series B Series B either counterparties's credit quality falls below A-, the fair value of the swap will be collateralized by the counterparty with U.S. Government securities.

• Terms Rates Rates Collateral would be posted with a third-party custodian.

Interest rate Swap:

Fixed payment to counterparty Fixed 3.2040% 3.1110% Basis risk: As noted above, the swaps expose the City to basis risk should 62.68 LIBOR Variable payment from counterparty + 12 bps (3.37995%) (3.22906%) the relationship between LIBOR and the auction-rate converge, changing the Net interest rate swap payments (.17595%) (.11806%) synthetic rate on the bonds. If a change occurs that results in the rates' Variable-rate bond coupon payments ARS 3.25034% 3.10258% moving to convergence, the expected cost savings may not be realized.

Synthetic interest rate on bonds _3.gZ439% :iB5%

Termination risk: The derivative contract uses the international Swap Dealers Association Master Agreement, which includes standard termination events, such as failure to pay and bankruptcy. The Schedule to the Master Agreement includes an "additional termination event." That is, a swap may be terminated by the City if either counterparty's credit quality falls below "BBB-" as issued by Standard and Poor's. The City or the counterparty may terminate a swap if the other party fails to perform under the terms of the 52

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands) contract. If a swap is terminated, the.variable-rate bond would no longer RDA RDA carry a synthetic interest rate. Also, if at the time of termination a swap has a negative fair value, the City would be liable to the counterparty for a payment Debt Capital Capital equal to the swap's fair value. Reserved for: General Service Outlay Projects Encumbrances $ 13,803 $ - $ 28,586 $ 8,046 Swap payments and associated debt: As of June 30, 2007, the debt service requirements of the variable-rate debt and net swap payments assuming Interfund receivable 31,627 current interest rates remain the same, for their term are summarized as Debt service 2,333 follows. As rates vary, variable-rate bond interest payments and net swap Prepaid items 691 payments will vary.

Notes receivable 70 291 Variable-Rate Bonds Fire bond 1,847 Fiscal Year Interest Capital Assets 2,593 - - 31,509 Ending Rate $ 50,631 $ 2,333 $ 28,586 $ 39,846 Total reserved fund balance June 30 Principal Interest Swaps, Net Total 2008 $ 950 $ 8,056 $ (164) $ 8,842 2009 975 8,026 (163) 8,838 2010 1,000 7,995 (163) 8,832 11. Interfund Assets, Liabilities and Transfers 2011 3,725 11,602 (236) 15,091 2012 6,200 11,408 (160) 17,448 Due From/To Other Funds: These balances resulted from expenditures 2013-2017 53,700 52,862 (742) 105,820 being incurred prior to receipt of the related revenue source.

2018-2022 67,400 42,676 (590) 109,486 2023-2027 74,600 31,083 (420) 105,263 The following table shows amounts receivable/payable between funds within 2028-2032 84,225 18,709 (246) 102,688 the City at June 30, 2007:

2032-2037 84,550 4$658 (53) 86,155 Total 1377,3-25 $197.0_75 $ (2.937) $571.463 Receivable Fund Payable Fund Amount General Nonmajor governmental

10. Reserved Fund Balances: funds $4,303 Central stores

• 3,132 7,435 Reserved fund balances at June 30, 2007 for the General Fund, Redevelopment Debt Service Fund, Capital Outlay Fund and the Redevelopment Debt Service Fund consist of the following: Redevelopment Capital Non Major Governmental 3,593 Projects Redevelopment Debt Service 529 4,122 Electric General 50 Total $11,607

• Internal service funds 53

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

Advances To/From Other Funds: These balances consist of advances used Transfers In/Out: Transfers are used to (1) move revenues to the fund that to fund capital projects in advance of related financing/assessments and for statute -or budget requires to expend them, (2) move receipts restricted to other long-term borrowing purposes. debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, (3) move the remaining fund balances The following table'shows amounts advanced from funds within the City to of closed funds to the General fund and (4) use unrestricted revenues other funds within the City at June 30, 2007: collected in the General fund to finance various programs accounted for in the other funds in accordance with budgetary operations.

Receivable Fund Payable Fund Amount General Electric $13,390 The following table shows amounts transferred to/from funds within the City Water 5,761 as of June 30, 2007:

Sewer 3,685 Nonmajor governmental Transfer In Fund Transfer Out Fund Amount Funds 4,350 Nonmajor enterprise funds 2,805 General Electric $27,393 Workers' compensation

• 242 Water 3,928 Central stores

• 253 Special Designation 1,257 1,140 Special Capital Imlmrovement 78 Central garage

• 31,626 32,656 Electric General 3,019 RDA Special Revenue General Fund 200 Central Stores* 650 200 3,669 RDA Debt Service RDA Special Revenue 3,207 Water General 20 RDA Capital Projects 8,466 11,673 Sewer General 15,253 Nonmajor governmental RDA Capital Projects RDA Debt Service funds 3,001 3,850 Nonmajor enterprise funds 22,104 Library General Fund 1,572 RDA Capital Projects 748 Workers' compensation* Nonmajor governmental 10,367 24320 funds CDBG Community Dev RDA Rehabilitation 42 Liability Insurance Nonmajor governmental 3,697 42 Trust* funds Nonmajor enterprise funds 3,015 COPS-2006 COPS Debt Service 28 6,712 28 Total

$4ZJ4_,U_ Refuse General Fund 150 150

• Internal service funds Total $92.851 54

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

12. Deficit Fund Balances/Net Assets 14. City Employees Retirement Plan Deficit fund balance/net assets exist in the Workers Compensation ($6,493), (A) Plan Description. The City of Riverside contributes to the California Public and the Public Liability ($806) funds at fiscal year end. The deficit in these Employees Retirement System (CaIPERS), an agent multiple employer funds will be reduced based on a rate increase implemented in the public employee defined benefit pension plan. CalPERS provides retirement subsequent fiscal year. Management's analysis shows that continuing cost and disability benefits, annual cost-of-living adjustments, and death benefits control together with the rate increase will eliminate these deficits over the to plan members and beneficiaries. CalPERS acts as a common investment next few years. and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by

13. Litigation 7 state statute and City ordinance. Copies of CalPERS annual financial report may be obtained from their executive office: 400 P Street, Sacramento, CA The City is a defendant in various lawsuits arising in the normal course of 95814.

operations. City management, based in part on the opinion of outside legal counsel, does not believe that the ultimate resolution of these matters will (B) Funding Policy. Participants are required to contribute 8% (9% for safety have a material affect on the financial position or results of operations of the employees) of their annual covered salary. The City makes the contributions City. Management also believes that adequate reserves exist-in the internal required of City employees on their behalf and for their account. The City is service funds to cover outstanding lawsuits. required to contribute at an actuarially determined rate; the fiscal year 2006-2007 rate was 13.181% for non-safety employees, and 19.015% for safety On January 1, 2003, the City became a Participating Transmission Owner -employees, of annual covered payroll. The contribution requirements of plan with the California Independent System Operator (ISO), entitling the City to members and the City are established and may be amended by CalPERS.

receive compensation for use of its transmission facilities committed to the ISO's operational control. The compensation is based upon the City's (C) Annual Pension Cost. For 2007, the City's annual pension cost of Transmission Revenue Requirement (TRR) as approved by the Federal $35,053 for CalPERS was equal to its annual required contribution of Energy Regulatory Commission (FERC). The California Investor Owned $34,226 plus the effect of amortization of the net pension asset of $826. The Utilities (IOU's), the California Department of Water Resources (CDWR), and required contribution was determined as part of the June 30, 2004 actuarial the CPUC, among others, objected to various aspects of the City's TRR at valuation using the entry age normal actuarial cost method. The actuarial the FERC. The City and the objecting parties submitted a settlement assumptions included (a) 7.75% investment rate of return (net of agreement for filing. The settlement agreement disposes of all City TRR administrative expenses), (b) projected salary increases of 3.25% per year issues except for CDWR's and CPUC's contention that the City is not entitled compounded annually, attributable to inflation, and (c) 3.0% expected long to its TRR for the majority of the transmission facilities committed to the term inflation. The actuarial value of CalPERS assets was determined using ISO's control. After numerous FERC hearings, briefings, and decisions on techniques that smooth the affects of short-term volatility in the market value this TRR issue, FERC issued a final order in favor of the City in late 2006. of investments over a four-year period (smoothed market value). CalPERS CDWR appealed this order to the U.S. Court of Appeals for the D.C. Circuit, unfunded actuarial accrued liability is being amortized as a level percentage but CDWR subsequently withdrew this petition, and the court issued an order of projected payroll on a closed basis over 20 years.

dismissing the case on July 9, 2007. As a result of the dismissal, approximately $49 million collected from the ISO through June 30, 2007 but Three-year trend information for CalPERS:

previously held in reserves, has now been released to the Electric Utility's Net Pension unrestricted operating cash reserve account, and is available for current Fiscal Year Annual Pension Percentage of Obligation operations or other strategic purposes upon approval of the Public Utilities June 30 Cost (APC) APC Contributed (Asset)

Board and the City Council. 2005 $28,948 305% ($147,842) 2006 30,684 100% ($147,546) 2007 35,053 100% ($147,521) 55

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

A total of $147,521 of net pension assets are included as a deferred charge Southern California Public Power Authority in the Government-wide Statement of Net Assets. The deferred charge relating to the net pension assets will be amortized over 19 years in The Electric Utility is a member of the Southern California Public Power accordance with the method used by CalPERS for calculating actuarial gains Authority (SCPPA), a joint powers agency. SCPPA provides for the financing and losses. and construction of electric generating and transmission projects for 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 Schedule of funding for CaIPERS: for its proportionate share of the project cost. The projects and the Electric Utility's proportionate share of SCPPA's obligations are as follows:

Entry Age Unfunded/ Proiect Percent Share Entitlement Normal (Overfunded) Palo Verde Nuclear Generating Station 5.40% 11.7MW Actuarial Actuarial UAAL as Actuarial Accrued Actuarial Accrued Annual a % of Southern Transmission System 10.20% 195.0MW Valuation Liability Value of Liability Funded Covered Covered Hoover Dam Uprating 31.91% 30.0MW Plan Date (AAL) Assets (UAAL) Ratio Payroll Payroll Mead - Phoenix Transmission 4.00% 12.0MW Mead - Adelanto Transmission 13.50% 118.0MW Misc. 6/30/03 568,712 511,281 57,431 89.9 75,838 75.7 Safety 6/30/03 413,125 329,673 83,452 79.8-, 44,611 187.1 Terms of Take or Pay Commitments Misc. 6/30/04 611,841 537,352 74,489 87.8 77,960 95.5 Safety 6/30/04 454,795 440,172 14,623 96.8 48,635 30.1 As part of the take or pay commitments with IPA and SCPPA, the Electric Utility has agreed to pay its share of current and long-term obligations.

Misc. 6/30/05 655,642 634,694 30,948 96.8 84,290 24.9 Payment for these obligations will be made from operating revenues received Safety 6/30/05 486,880 468,652 18,228 96.3 50,368 36.2 during the year that payment is due. A long-term obligation has not been recorded on the accompanying financial statements for these commitments.

15. Commitments and Contingencies 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 A. Long-Term Electric Utility Commitments amount of principal and interest, which is due and payable by the Electric Utility for each project in the fiscal year indicated.

Intermountain Power Aaencv The City's Electric Utility has entered into a Power Purchases Contract with IPA SCPPA Inter- Palo Verde Trans- Mead- Mead-the Intermountain Power Agency (IPA) for delivery of electric power. The mountain Nuclear mission Hoover Phoenix Adelanto City's share of IPA power is equal to 7.6%, or approximately 137.1 Fiscal Power Generating System Dam Trans- Trans-megawatts, of the generation output of IPA's 1,800 megawatt coal-fueled Year Project Proiect Prooect UoratinoQ mission mission Total generating station, located in Central Utah. The contract expires in 2027 and 2008 $ 704 $ 260 $2,819 $ 32,559

$ 20,886 $ 849 $ 7,041 the debt fully matures in 2024. 2009 21,852 846 6,923 704 259 2,814 33,398 2010 22,626 709 6,677 703 259 2,818 33,792 The contract constitutes an obligation of the Electric Utility to make payments 2011 26,440 706 6,711 702 289 2,814 37,662 solely from operating revenues and requires payment of certain minimum 2012 24,061 704 6,775 701 287 2,797. 35,325 Thereafter 210,212 3,481 91,126 4,167 2 295 253133 336,14 charges, which are based on debt service requirements. Such payments are Total $a26.7zl $7295 $1252.53 $7-681 $3,649 $509150 considered a cost of production and are quantified below.

56

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30. 2007 (amounts exoressed in thousands)

Take-or-pay commitments expire upon final maturity of outstanding bonds for each project. Final fiscal year maturities are as follows: The agreement with Deseret is for five megawatts of capacity and associated energy from January 1, 1992, through December 31, 1994, then increasing to 52 megawatts of capacity and associated energy through December 31, Proiect Final Maturity Date 2009. A notice of termination of the power purchase agreement was Intermountain Power Project 2024 provided to Deseret effective March 31, 1998, resulting in litigation that was Palo Verde Nuclear Generating System 2017 settled on July 31, 1999. Under the terms of the settlement agreement, the Southern Transmission System 2023 notice of termination was rescinded and the power purchase agreement was Hoover Dam Uprating 2017 amended to reflect substantial price reductions after fiscal year 2002 through Mead-Phoenix Transmission 2020 the term of the agreement in 2009. In exchange, the Electric Utility paid Mead-Adelanto Transmission 2020 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 In addition to debt service, Riverside's entitlement requires the payment for began to amortize the related price reductions, and will continue to amortize fuel costs, operating and maintenance, administrative and general and other the remaining balance over the term of the agreement using the straight-line miscellaneous costs associated with the generation and transmission method. As of June 30, 2007, unamortized purchased power was $8,352 facilities discussed above. These costs do not have a similar structured and the Electric Utility had recorded amortization of $3,341.

payment schedule as debt service and vary each year. The costs incurred for 2006 and 2007 fiscal years are as follows: There are two separate agreements with CDWR. The two agreements, CDWR III and IV are for the purchase of 23 and 30 megawatts of capacity Fiscal Year IPA Pv STS MAP MPP Hoover Total and associated energy from May through October. CDWR III and CDWR IV 2006 24,121 2,122 1,845 220 43 96 28,447 2007 2,122 are for a period of 15 years beginning June 1, 1996, subject to termination. In 24,227 1,948 249 49 96 28,691 early 2005, CDWR and the City disagreed upon whether the Power Sale B. Other Commitments Agreements III and IV were still in effect as of December 31, 2004. While CDWR believed the agreements were terminated, the City contended that Power Purchase Agreements: CDWR did not provide proper notification under the terms of the power sale agreements. During May and June, CDWR continued to provide power The City has executed five firm power purchase agreements for non- under the original terms of the contracts, pending staff's resolution of the renewable power. The agreements are with Deseret Generation and dispute. On September 13, 2005, in order to maintain the City's long-term Transmission Cooperative (Deseret) of Murray, Utah; CDWR; and Bonneville relationship with CDWR and to avoid costly litigation, City Council approved Power Administration (BPA). The minimum, annual obligations under each of the contract amendments, effectively terminating the contract in 2007 and reducing the final two years of the contracts to a period of May through these contracts are shown in the table below.

.September.

An agreement with Bonneville Power Administration (BPA) is for a purchase of firm capacity and associated energy of 23 megawatts in the summer and Minimum Obligations 2006-2007 16 megawatts in the winter for a period of twenty years ending February 1, 2011. A second agreement with BPA was executed in 1996 and is for the Supplier Capacity Ener$8 Total purchase of firm capacity (50 megawatts during the summer months and 13 Deseret $3,463 $1,824 $5,287 megawatts during the winter months) and associated energy beginning April CDWR III 446 446 30, 1996 for twenty years. Effective May 1, 1998, these summer and winter CDWR IV 581 581 capacity amounts increased to 60 and 15 magawatts, respectively, for the BPA 861 861 remainder of the second agreement.

$1.824 57

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands)

As of June 30, 2007, the Water Utility had major construction commitments On July 8, 2003, and June 6, 2003, the City Council and Public Utilities of approximately $19,276 with respect to unfinished capital projects. Of these Board, respectively, adopted the Renewable Portfolio Standard to increase commitments, $10,106 is expected to be funded by bonds, $8,099 by other procurement of renewable resources to reach a target of 20 percent of the sources and $1,071 funded by rates.

Utility's energy from renewable sources by 2015. The contracts in the following table were executed as part of compliance with this standard. The C. Jointly Governed Organizations Electric Utility has agreements with Bonneville Power Administration for the purchase of energy credits that add to the total renewable portfolio. In the On November 1, 1980, the City of Riverside joined with the cities of Los current year, renewable resources provided approximately 13 percent of the Angeles, Anaheim, Vernon, Azusa, Banning, Colton, Burbank, Glendale, retail energy requirements, approximately 11 percent of the total power Pasadena, and Imperial Irrigation District to create the Southern California supply. Public Power Authority (SCPPA) by a Joint Powers Agreement under the

/ laws of the State of California. As of July 2001, the cities of Cerritos and San Long-term renewable power purchase agreements: Marcos were admitted as members of SCPPA. In August 2003, the Authority Estimated rescinded the membership of the City of San Marcos, as the City no longer Maximum Contract Annual Cost met the criteria for membership. The primary purpose of the Authority is to Supplier TLpe Contract Expiration for 2008 plan, finance, develop, acquire, construct, operate and maintain projects for Milliken Genco Landfill Gas 2.3MW 12/31/2007 $416 12/31/2007 475 the generation and transmission of electric energy for sale to its participants.

Mid Valley Genco Landfill Gas 2.3MW Riverside County 256 The Authority is governed by a Board of Directors, which consists of one (Badlands Landfill) Landfill Gas 1.2MW 12/31/2008 representative for each of the members. During the 2007 fiscal year, the Wintec Wind 1.3MW 4/30/2018 176 Electric Utility paid approximately $16,854 to SCPPA under various take-or-Salton Sea Geothermal 20.0MW 5/31/2013 9,645 pay contracts, which are described in greater detail in Note 14A. These Total 27.1MW payments are reflected as a component of purchased power in the financial statements.

Under the terms of the renewable power purchase agreements, Riverside's financial obligation is only for actual energy delivered. 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 On August 23, 2005, the City Council approved an amendment to the Power Powers Agreement under the laws of the State of California. The City of Sales Agreement between Salton Sea and the City. The agreement Anaheim joined the Agency on July, 1 1996. The primary purpose of the increases the amount of renewable energy available to the City from the Agency is to take advantage of economies of scale resulting from the five current 20 MW to 46 MW effective June 1, 2009 through May 31, 2020, at cities acting in concert. The Agency has the ability to plan, finance, develop, the same price under the current contract until 2013, with escalation acquire, construct, operate and maintain projects for the generation and thereafter based on an inflationary type index. Similar to other renewable transmission of electric energy for sale to its participants. The Agency is power purchase agreements, the City is only obligated for purchases of governed by a Board of Directors (the Board), which consists of one energy delivered to the City. representative for each of the members. The term of the Joint Powers Agreement is fifty years. On April 5, 2001 the Board placed the Agency in an Construction Commitments: inactive status, effective June 30, 2001. It can only be reactivated with authorization from the Agency Board.

As of June 30, 2007, the Electric Utility had major construction commitments of approximately $15,508 with respect to unfinished capital projects. Of these D. Jointly-Owned Utility Project commitments, $11,264 is expected to be funded by bonds, $1,274 funded by rates and $2,970 by others. Pursuant to the Settlement Agreement with Southern California Edison (SCE) dated August 4, 1972, the City was granted the right to acquire a 58

CITY OF RIVERSIDE NOTES TO BASIC FINANCIAL STATEMENTS For the year ended June 30, 2007 (amounts expressed in thousands) 1.79% ownership interest in San Onofre Nuclear Generating Station As a participant in the SONGS, the Electric Utility could be subject to (SONGS) Units 2 and 3. Pursuant to the Settlement Agreement, SCE assessment of additional insurance premiums in the event of a nuclear agreed to provide the necessary transmission service to deliver the output of incident at San Onofre or any other licensed reactor in the United States.

SONGS to Riverside. SCE and the City entered into the SONGS Participation Agreement which sets forth the terms and conditions under 16. Restatement of Net Assets/Fund Balance which the City, through the Electric Utility, participates in the ownership and output of SONGS. Other participants in this project include SCE, 75.05 The City's Net Assets for Governmental Activities and Fund balance at June percent; San Diego Gas and Electric Company, 20.00 percent; and the City 30, 2007 have been restated to properly classify land which was purchased of Anaheim, 3.16 percent. Maintenance and operation of SONGS remains from the Water fund as land held for-resale rather than as a capital asset and the responsibility of SCE, as operating agent for the City. to properly report the asset at their original acquisition cost.

SCE, as operating agent, has declared an "operating impairment" due to The restatements had the following effect on the Net Assets for deterioration of the steam generators ("SGs"), which would likely result in Governmental Activities:

permanent shutdown of the plant in the 2009-2010 timeframe. The estimated cost to replace the SGs is $680 million, of which approximately $12.2 million Beginning, as previously reported $729,113 would represent the City's share. The replacement is expected to enable Land Purchase (5,415) plant operations through at least 2022, and perhaps beyond if Nuclear Beginning, as restated $723-698 Regulatory Commission approval is obtained. Although the City Council has approved participation in the replacement of the SGs, the City of Anaheim The restatements had the following effect on Beginning Fund Balance:

has opted not to participate. As a result, upon replacement of the SGs, Riverside and San Diego Gas and Electric Company will retain their General Fund respective 1.79 and 75.05 percent shares and SCE will assume Anaheim's Beginning, as previously reported $128,897 interest-resulting in a 78.21 percent interest in both units 1 and 2 at SONGS. Land Purchase 2,593 Beginning, as restated 1131-490 The original operating license for SONGS units 2 and 3 was set to expire in 2013; however, this was subsequently extended due to a construction recapture provision, and now expires February 16, 2022 and November 15, 2022 for Units 2 and 3 respectively.

There are no separate financial statements for the jointly-owned utility plant since each participant's interest in the utility plant and operating expenses is included in their respective financial statements. The Electric Utility's share of the capitalized construction cost and operating expenses is included in the financial statements. As of June 30, 2007, Riverside's 1.79% share of the capitalized construction costs for SONGS totaled $138,575 with accumulated depreciation of $108,709. The Electric Utility made provisions during fiscal

.year 2006 for nuclear fuel burn of $911 and for future decommissioning cost of $1,581 (See Note 1). The Electric Utility's portion of current and long-term debt associated with SONGS is included in the accompanying financial statements.

59

City of Riverside Combining Balance Sheet Nonmajor Governmental Funds June 30, 2007 (amounts expressed in thousands)

Special Revenues Housing & Special Air Quality Community Redevelopment Designation NPDES Storm Assets Library Gas Tax Improvements Development Agency Fund Drain Total Cash and investments $ 2,718 $ 9,238 $ 744 $ 85 $ 14,011 $ $ $ 26,796 Cash and investestments at fiscal agent 7 8,447 8,454 Receivables (net of allowances for uncollectibles):

Interest 36 119 9 138 302 Property taxes 517 517 Accounts 1 2 1 4 Intergovernmental 111 1,831 199 423 2,564 Notes 5,993 7,846 13,839 Prepaid items 1 1 Advances to other funds Land & improvements held for resale - - - - 5,988 - 5,988 Total assets $ 3,273 $ 9,468 $ 753 $ 7,918 $ 36,630 $ $ 423 $ 58,465 Liabilities and fund balances Liabilities Accounts payable $ 37 $ 437 $ 30 $ 1,035 $ 53 $ $ 3 $ 1,595 Accrued payroll 9 2 4 - 15 Retainage payable 3,247 3,247 Unearned revenue 281 6,267 7,777 14,325 Deposits 10 - 10 Due to other funds 3,594 420 4,014 Advances from other funds 2,492 612 - 3,104 Total liabilities 2,819 3,684 32 7,918 11,434 423 26,310 Fund balances Reserved:

Reserved for noncurrent loans receivable 70 70 Reserved for encumbrances 100 2,066 30 1,026 143 3,365 Reserved for fixed assets 5,988 5,988 Reserved-for prepaid items I 1 Reserved for debt service Reserved for interfund receivable Reserved for library services Unreserved, designated for future operations 595 7,119 7,714 Unreserved, undesignated 353 3,718 96 (1,026) 11,876 15,017 Total fund balances 454 5,784 721 25,196 S- 32,155 Total liabilities and fund balances $ 3,273 $ 9,468 $ 753 $ 7,918 $ 36,630 $ $ 423 $ 58,465 continued 61

City of Riverside Combining Balance Sheet Nonmajor Governmental Funds June 30, 2007 (amounts expressed in thousands)

Permanent Debt Service Capital Projects Fund Riverside Municipal Total Nonmajor Improvements Special Capital Library Governmental Assets Debt Service Corporation Total Improvement Storm Drain Transportation Total Special Funds Cash and investments $ 50 $ 118 $ 168 $ 23,944 $ 5,335 $ $ 29,279 $ 1,315 $ 57,558 Cash and investments at fiscal agent - 14,026 14,026 7,794 - -7,794 30,274 Receivables(net of allowances for uncollectibles):

Interest 2 294 62- 356 660 Property taxes 517 Accounts 4 Intergovernmental 28 1,134 1,162 3,726 Notes 13,839 Prepaid items 1 Advances to other funds Land & improvements held for resale 5,988 Total assets $ 51 $ 14,145 $ 14,196 $ 32,060 $ 5,397 $ 1,134 $ 38,591 $ 1,315 $ 112,567 Liabilities and fund balances Liabilities:

Accounts payable $ $ - $ $ 463 $ 1 $ 35 $ 499 $ $ 2,094 Accrued payroll 15 Retainage payable 1,443 9 1,452 4,699 Unearned revenue 16 25 106 147 14,472 Deposits 10 Due to other funds 984 984 4,998 Advances from other funds 3,104 Total liabilities - - 1.922 - 35 - 1,125 - 3,082 - 29,392 Fund balances (deficits):

Reserved Reserved for noncurrent loans receivable 70 Reserved for encumbrances 3,159 93 6 3,258 6,623 Reserved for fixed assets - 5,988 Reserved for prepaid items 1 Reserved for debt service 51 14,145 14,196 14,196 Reserved for interfund receivable 1,028 1,028 - 1,028 Reserved for library services - 1,315 1,315 Unreserved, designated for future operations 14,108 3,690 17,798 - 25,512 Unreserved, undesignated 11,843 .1,579 3 13,425 - 28,442 Total fund balances 51 14,145 14,196 30,138 5,362 9 35,509 - 1,315 83,175 Total liabilities and fund balances $ 51 $ 14,145 $ 14,196 $ 32,060 $ 5,397 $ 1,134 $ 38,591 $ 1,315 $ 112,567 62

City of Riverside Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

Special Revenue Housing and Air Quality Community Redevelopment Special NPDES Storm Library Gas Tax Improvement Development Agency Designation Drain Total Revenues Taxes 5,969 $ $ - $ 9,961 $ $ 15,930 Intergovernmental 256 6,969 347 6,086 199 13,857 Charges for services 11 11 Fines and forfeitures 219 219 Special assessments - -423 423 Rental and investment income 89 537 33 56 805 - 1,520 Miscellaneous 73 979 448 - 1,500 Total revenues 6,617 7,506 380 7,121 11,413 423 33,460 Expenditures Current:

General government 1,642 254 898 1,349 228 4,371 Culture and recreation 9,208 9,208 Capital outlay 9,546 6,265 1,427 195 17,433 Total expenditures 9,208 11,188 254 7,163 2,776 423 31,012 Excess (deficiency) (2,591) (3,682) 126 (42) 8,637- 2,448 of revenues over (under) expenditures Other financing sources (uses)

Transfers in 2,320 42 200 2,562 Transfers out (3,249) (1,257) (4,506)

Sales of capital assets 522 4 526 Total other financing sources (uses) 2,842 42 (3,045) (1,257) (1,418)

Net Change in fund balances 251 (3,682) 126 5,592 - (1,257) 1,030 Fund balances - beginning -* 203 9,466 595 19,604 1,257 31,125 Fund balances - ending $ 454 $ 5,784 721 $ $ 25,196 $ - $ 32,155 continued 63

City of Riverside Combining Statement of Revenues, Expenditures, and Changes in Fund Balances NonmajorGovernmental Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

Permanent Debt Service Capital Projects Fund Riverside Municipal Total Nonmajor Debt Improvements Total Debt Special Capital Transportation Total Capital Library Governmental Service Corporation Service Improvement Strom Drain Projects Projects Special Funds Revenues Taxes $ $ $

$ $ $ 15,930 Licenses and permits 4,415 748 5,163 5,163 Intergovernmental 132 132 13,989 Charges for services 11 Fines and forfeitures 219 Special assessments 423 Rental and investment income 3 1,091 1,094 1,974 262 2,236 53 4,903 Miscellaneous 208 140 348 248 2,096 Total revenues 3 1,091 1,094 6,597 1,150 132 7,879 301 42,734 Expenditures Current:

General government 238 238 225 10 235 4,844 Culture and recreation 151 9,359 Capital outlay 19,185 633 187 20,005 37,438 Debt service:

Principal 660 660 660 Interest 1,688 1,688 1,688 Bond issuance costs 1,746 1,746 1,746 Total expenditures 4,332 4,332 19,410 643 187 20,240 151 55,735 Excess (deficiency) 3 (3,241) - (3,238) (12,813) - 507 - (55) - (12,361) 150 (13,001) of revenues over (under) expenditures Other financing sources (uses)

Transfers in 2,562 Transfers out (28) (28) (78) (78) (4,612)

Proceeds from issuance of bonds 16,644 16,644 16,644 Premiums on bonds issued 32 32 32 Sales of capital assets 90 90 616 Total other financing sources (uses) 16,648 16,648 12 - - 12 15,242 Net Change in fund balances 3 13,407 13,410 (12,801) - 507 - (55) - (12,349) 150 2,241 Fund balances - beginning 48 738 786 42,939 4,855 64 47,858 1,165 80,934 Fund balances - ending $ - 51 $ 14,145 $ 14,196 $ 30,138 $ 5,362 $ 9 $ 35,509 $ 1,315 $ 83,175 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, 2007 (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 $ 6,224 $ (255) $ $ $ $ $

$ 5,969 Intergovernmental 298 256 (42) 7,350 6,969 (381) 340. 347 7 Charges for services 14 11 (3)

Fines and forfeitures 190 219 29 13 89 76 60 517 477 33 33 Rental and investment income Miscellaneous 122 73 (49)

Total revenues 6,861 6,617 (244) 7,410 7,506 96 340 380 40 Expenditures Current General government 1,435 1,642 (207) 485 254 231 Culture and recreation 12,435 9,208 3,227 Capital outlay 15,420 9,546 5,874 281 281 Total expenditures 12,435 9,208 3,227 16,855 11,188 5,667 766 254 512 Excess (deficiency) of revenues over (under) expenditures (5,574) (2,591) 2,983 (9,445) (3,682) 5,763 (426) 126 552 Other financing sources (uses)

Transfers in 1,572 2,320 748 Sales of capital assets 522 522 Total other financing sources 1,572 2,842 1,270 Fund balances (deficit), beginning 203 203 9,466 9,466 595 595 Fund balances (deficit), ending $ (3,799) $ 454 $ 4,253 $ 21 $ 5,784 $ 5,763 $ 169 $ 721 $ 552 (continued) 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, 2007 (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 $ $ 5,915 $ 9,961 $ 4,046 $ $

Intergovernmental 16,676 6,086 (10,590) 250 199 (51)

Rental and investment income 56 56 53 805 752 50 - (50)

Miscellaneous 1,040 979 (61) 10 448 438 --

Total revenues 17,716 7,121 (10,595) 6,228 11,413 5,185 50 (50)

Expenditures Current

• General government 919 898 21 1,416 1,349 67 Capital outlay 16,555 6,265 10,290 14,684 1,427 13,257_

Total exlpenditures 17,474 7,163 10,311 16,100 2,776 13,324 -

Excess (deficiency) of revenues over (under) expenditures 242 (42) (284) (9,872) 8,637 18,509 50 (50)

Other financing sources (uses)

Transfers in 42 42 200 200 Transfers out - - 3,207 (3,249) (6,456) (1,257) (1,257)

Sale of capital assets 4 4 Total other financing sources (uses) 42 42 3,407 (3,045) (6,452) (1,257) (1,257)

Net change in fund balances 242 (242) (6,465) 5,592 12,057 50 (1,257) (1,307)

Fund balances, beginning - 19,604 19,604 - 1,257 1,257 Fund balances (deficits), ending $ 242 $ (242) $ 13,139 $ 25,196 $ 12,057 $ 1,307 $ - $ (1,307)

(continued) 66

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, 2007 (amounts expressed In thousands)

Special Revenue Capital Projects NPDES Storm Drainr 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 $ S S $ $ $ $ 4,415 $ 4,415 Intergovemmenlal 73,204 21,434 (51,770) 210 (210)

Special assessments 565 423 (142) 350 1,784 1,434 Rental and investment income 1,000 3,112 2,112 1,974 1,974 Miscellaneous 1,50i 417 (1,084) 187 208 21 Total revenues 565 423 (142) 76,055 26,747 (49,308) 397 6,597 6,200 Expenditures Current General government 328 228 100 53,708 728 52,980 8,500 225 8.275 Culture and recreation Capital outlay 267 195 72 109,811 50,668 59,143 39,014 19,185 19,829 Total expenditures 595 423 172 163,519 51,396 112,123 47,514 19,410 28,104 Excess (deficiency) of revenues over (under) expenditures (30) 30 (87,464) (24,649) 62,815 (47,117) (12,813) 34,304 Other financing sources (uses)

Transfers in 28 28 Transfers out (78) (78)

Issuance of bonds 122,276 122,276 Premiums on bonds issued 186 186 Sales of capital assets 288 288 90 90 S- 122,778 122,778 (78) 12 90 Total other financing sources Net change in fund balances (30) 30 (87,464) 98,129 185,593 (47,195) (12,801) 34,394 Fund balances, beginning - - 37,071 37,071 - 42,939 42,939 Fund balances (deficits), ending $ (30) $ $ 30 $ (50,393) $ 135,200 $ 185,593 $ (4,256) $ 30,138 $ 34,394 (continued) 67

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, 2007 (amounts expressed In thousands)

Capital Projects Storm Drain 1-1.-..-.,

...... 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 $ $ 748 $ 748 $ $ - $ $ $ $

Intergovemmental 452 132 (320) 2,687 242 (2,445)

Charges for services 200 (200)

Rental and investment income 30 262 232 1,215 3,925 2,710 Miscellaneous 140 140 152 74 (78)

Total revenues 230 1,150 920 452 132 (320) 4,054 4,241 187 Expenditures Current General government 10 (10) 7,219 6,764 455 Capital outlay 4,195 633 3,562 438 187 251 207,401 28,964 178,437 Total expenditures 4,195 643 3,552 438 187 251 214,620 35,728 178,892 Excess (deficiency) of revenues over (under) expenditures (3,965) 507 4,472 14 (55) (69) (210,566) (31,487) 179,079 Other financing sources (uses)

Transfers in 45,782 45,782 Transfers out (819) (819)

Issuance of bonds 154,880 154,880 Premiums on bonds issued 2,213 2,213 Sale of capital assets (760) (760)

Total other financing sources (uses) 45,782 201,296 155,514 507 4,472 14 (164,784) 169,809 334,593 Net change in fund balances (3,965) (55) (69)

Fund balances, beginning 4,855 4,855 64 64 42,424 42,424 Fund balances, ending $ g890 $ 5,362 $ 4,472 $ .78 $ 9 $ (69) $ (122,360) $ 212,233 $ 334,593 68

City of Riverside Combining Statement of Net Assets Nonmajor Enterprise Funds June 30, 2007 (amounts expressed in thousands)

Assets Airpori Refuse Transportation Public Parking Total Current assets:

Cash and investments $ $ 2,309 $ 1,143 $ 5,847 $ 9,299 Receivables (net of allowance for uncollectibles)

Interest 71 4o 111 Utility billed 548 548 Utility unbilled 644 644 Accounts 155 239 I 395 Intergovernmental 4,449 134 4,583 Nuclear materials inventory Inventory Prepaid items Due from other funds Advances to other funds Restricted assets:

Cash and cash equivalents 3,236 3,236 Total Current assets 4,604 7,047 1,277 5,888 18,816 Non-current assets:

Deferred charges 254 5,941 665 186 7,046 Capital assets:

Land 7,061 -3,713 10,774 Buildings 2,114 22 19,914 22,050 Accumulated depreciation-buildings (867) (7) (2,150) (3,024)

Improvements other than buildings 6,853 325 7,178 Accumulated depreciation-improvements other than buildings (3,003) (325) (3,328)

Machinery and equipment 258 10,771 1,746 819 13,594 Accumulated depreciation-machinery and equipment (122) (6,402) (1,356) (468) (8,348)

Construction in progress 10,613 251 10,864 Total non-current assets: 23,161 10,561 1,070 22,014 56,806 Total assets 27,765 17,608 2,347 27,902 75,622 continued 69

City of Riverside Combining Statement of Net Assets Nonmajor Enterprise Funds June 30, 2007 (amounts expressed in thousands)

Liabilities Airport Refuse Transportation Public Parking Total Current liabilities:

Accounts payable 509 573 14 1 1,097 Accrued payroll 58 768 151 45 1,022 Unearned revenue 97 1,105 1,202 Deposits 1 Due to other funds 2,898 2,898 Capital leases-current 17 17 Landfill capping-current 300 - 300 Total Current liabilities 3,580 1,641 1,270 46 6,537 Non-current liabilities:

Capital leases 166 - 166 Advances from other funds 349 1,376 662 7,282 9,669 Landfill capping 2,821 - 2,821 Total non-current liabilities 515 4,197 662 7,282 12,656 Total liabilities 4,095 5,838 1,932 7,328 19,193 Net Assets Invested in capital assets, net of related debt 14,695 2,140 791 4,435 22,061 Restricted for other purposes 3,217, - 3,217 Unrestricted 8,975 6,413 (376) 16,039 31,151 Total net assets 23,670 $ 11,770 $ 415 $ 20,574 $ 56,429 70

City of Riverside Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Nonmajor Enterprise Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

Airport Refuse Transportation Public Parking Totals Operating revenues:

Charges for services $ 1,263 $ 15,833 $ 302 $ 3,431 $ 20,829 Operating expenses:

Personal services 460 3,697 1,450 448 6,055 Contractual services 42 3,534 32 836 4,444 Maintenance and operation 154 5,250 457 278 6,139 General 220 2,146 253 1,545 4,164 Materials and supplies 13 619 204 6 842 Insurance 27 86 15 65 193 Depreciation and amortization 221 1,091 386 439 2,137 Total operating expenses - 1,137 16,423 2,797 3,617 23,974 Operating Income (loss) 126 (590) (2,495) (186) (3,145)

Nonoperating revenues (expenses):

Operating grants 1,939 1,939 Interest income 350 150 500 Other 38 183 517 738 Loss on retirement of capital assets - (42) (42)

Interest expense and fiscal charges (64) (67) (34) (145) (310)

Total non-operating revenues (26) 424 1,905 - 522 - 2,825 Income before capital contributions and transfers 100 (166) (590) 336 (320)

Capital contributions 4,959 7 209 5,175 Transfers in - 150 150 Change in net assets 5,059 (9) (381) 336 5,005 Total net assets - beginning 18,611 11,779 796 20,238 51,424 Total net assets - ending $ 23,670 $ 11,770 $ 415 $ 20,574 $ 56,429 71

City of Riverside Combining Statement of Cash Flows Nonmajor Enterprise Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

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

Cash received from customers and users 1,209 $ 15,576 $ 308 $ 3,466 $ 20,559 Cash paid to employees for services (451) (3,678) (1,437) (438) (6,004)

Cash paid to other suppliers of goods or services 51 (11,922) (950) (2,799) (15,620)

Other receipts 38 183 - 517 738 Net cash provided (used) by operating activities 847 159 (2,079) 746 (327)

Cash flows from noncapital financing activities:

Transfers in 150 150 Operating grants 2,765 2,765 Advances from interfund receivables 2,898 3,014 5,912 Payments on interfund receivables Advances to other funds (51) (754) (7) (387) (1,229)

Net cash provided (used) by noncapital financing activities 2,817 (604) 2,758 2,627 7,598 Cash flows from capital and related financing activities:

Purchase of capital assets (5,132) (2,677) (411) (8,220)

Proceeds from the sale of capital assets Principal paid on long-term obligations (20) (20)

Interest paid on long-term obligations (64) (67) (34) (145) (310)

Capital contributions 603 7 209 _ 819 Net cash provided (used) for capital and related financing activities (4,613) (2,737) 175 (556) (7,731)

Cash flows from investing activities:

Income from investments 3 398 - 143 544 Net cash provided by investing activities 3 398 - 143 544 Net change in cash and cash equivalents (946) (2,784) 854 2,960 84 Cash and cash equivalents, beginning 946 8,329 289 2,887 12,451 Cash and cash equivalents, ending 5,545 $ 1,143 $ 5,847 $ 12,535 continued 72

City of Riverside Combining Statement of Cash Flows Nonmajor Enterprise Funds For the fiscal year ended June 30, 2007 (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) $ 126 $ (590) (2,495) $ (186) (3,145)

Other receipts 38 183 517 738 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization 221 1,091 386 439 2,137 Amortization of pension costs 1 9 4 14 (Increase) in utility billed receivable (96) (96)

(Increase) in utility unbilled receivable (12) (12)

(Increase) decrease in accounts receivable (53) (149) 6 7 (189)

Decrease in intergovernmental receivable 29 29 Increase (decrease)in accounts payable 501 36 11 (69) 479 Increase in accrued payroll 8 10 9 8 35 Increase in deferred revenue 1 6 (Decrease) in landfill capping - (323) - (323)

Net cash provided (used) by operating activities $ 847 $ 159 $ (2,079) $ 746 $ (327)

Schedule of noncash financing and investing activities:

Contribution in aid $ 0 $ 7 $ 42 $ 0 $ 49 73

- Y I-

-

• City of Riverside Combining Statement of Net Assets Internal Service Funds June 30, 2007 (amounts expressed in thousands)

Self-Insurance

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

Cash and investments $ 2,662 $ 348 $ 821 $ - $ 447 $ 4,278 Receivables (net of allowances for uncollectibles):

Interest 150 4 2 246 Accounts 32 32 Intergovernmental 18 3 21 Inventory 5,307 609 5,916 Prepaid items 1 7 8 Total current assets 2,831 352 911 5,314 1,093 10,501 Deferred charges 243 S- 255 1,145 1,643 Advances to other funds 10,367 6,712 - 17,079 Capital Assets:

Buildings 1,488 1,488 Accumulated depreciation-buildings (92) (92)

Machinery and equipment 7 148 9,967 10,122 Accumulated depreciation-machinery and equipment (7) S- (126) (7,195) (7,328)

Capital assets (net of accumulated depreciation) S- 22 4,168 4,190 Total assets 13,441 352 7,623 5,591 6,406 33,413 Liabilities Current liabilities:

Accounts payable 2 203 167 437 809 Accrued payroll 3 111 478 592 Claims and judgements 19,687 76 8,226 27,989 Deposits Due to other funds 3,132 - 3,132 Advances from other funds 242 903 1,140 2,285 Total current liabilities 19,934 76 8,429 4,313 2,055 34,807 Total liabilities 19,934 76 8,429 4,313 2,055 34,807 Net Assets Invested in capital assets, net of related debt S- 22 4,168 4,190 Unrestricted (6,493) 276 (806) 1,256 183 (5,584)

Total net assets $ (6,493) $ 276 $ (806) $ 1,278 $ 4,351 $ (1,394) 75

City of Riverside Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

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

Charges for services $ 3,895 $ 75 $ 3,454 $ 1,463 $ 5,261 $ 14,148 Operating expenses:

Personal services 313 - - 525 2,284 3,122 Contractual services 17 11 - 102 130 Maintenance and operation 58 - - 22 1,365 1,445 General 417 11 379 395 828 2,030 Materials and supplies i - - 294 85 380 Insurance 8,573 202 6,062 6 16 14,859 Depreciation and amortization - - 10 809 819 Total operating expenses 9,379 213 6,452 1,252 5,489 22,785 Operating Income (loss) (5,484) (138) (2,998) 211 (228) (8,637)

Nonoperating revenues (expenses):

Interest Income 777 22 448 - 36 1,283 Other 19 - (3) 32 48 Gain on retirement of capital assets - (10) (10)

Interest expense and fiscal charges (12) - (12) (55) (79)

Total non-operating revenue (expenses) 784 22 448 (15) 3 1,242 Change in net assets (4,700) (116) (2,550) 196 (225) (7,395)

Total net assets - beginning (1,793) 392 1,744 1,082 4,576 6,00i Total net assets - ending $ (6,493) $ 276 $ (806) $ 1,278 $ 4,351 $ (1,394) 76

City of Riverside Combining Statement of Cash Flows Internal Service Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

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

Cash received from customers and users $ 3,899 $ 75 $ 3,454 $ 1,465 $ 5,626 $ 14,519 Cash paid to employees for services (399) - - (529) (2,247) (3,175)

Cash paid to other suppliers of goods or services (3,112) (213) (4,687) (921) (2,575) (11,508)

Other 19 32 51 Net cash provided (used) by operating activities 407 (138) (1,233) 15 836 (113)

Cash flows from noncapital financing activities:

Advances to other funds (10,043) - (6,712) (3) (13) (16,771)

Net cash provided by noncapital financing activities (10,043) (6,712) (3) (13) (16,771)

Cash flows from capital and related financing activities:

Interest paid on long-term obligation (12) (12) (55) (79)

Purchase of capital assets (1,457) (1,457)

Net cash (used) for capital and related financing activities (12) (12) (1,512) (1,536)

Cash flows from investing activities:

Income from investments 771 24 469 46 1,310 771 24 469 46 1,310 Net increase (decrease) in cash and cash equivalents (8,877) (114) (7,476) (643) (17,110)

Cash and cash equivalents, beginning 11,539 462 8,297 1,090 21,388 Cash and cash equivalents, ending $ 2,662 $ 348 $ 821 $ $ 447 $ 4,278 continued 77

City of Riverside Combining Statement of Cash Flows Internal Service Funds For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

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

Operating income (loss) (5,484) $ (138) $ (2,998) $ 211 $ (228) $ (8,637)

Other - 32 32 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization 10 809 819 Amortization of pension costs 1 1 7 9 (Increase) in account receivable (21) (21)

(Increase) in intergovernmental receivable 24 386 412 (Increase) in prepaid items (1) (1)

(Increase) in inventory 1,353 (126) 1,227 Increase (decrease) in accounts payable 1 (287) (256) (53) (595)

Increase (decrease) in accrued payroll (87) (5) 30 (62)

Increase in due to other funds (1,301) (1,301)

Increase (decrease) in claims and judgments 5,953 2,052 _ - 8,005 Net cash provided (used) by operating activities 407 $ (138) $ (1,233) $ 15 $ 836 $ (113) 78

City of Riverside Fiduciary Fund - Agency Fund Combining Statement of Changes in Assets ahd Liabilities For the fiscal year ended June 30, 2007 (amounts expressed in thousands)

Balance Balance July 1, June 30, 2006 Additions Deductions 2007 Assets:

Cash and investments $ 6,776 $ 9,578 $ 5,167 $ 11,187 Cash and investments at fiscal agent 13,287 5,276 9,402 9,161 Interest receivable 64 865 821 108 Property taxes receivable 214 418 214 418 Total assets $ 20,341 $ 16,137 $ 15,604 $ 20,874 Liabilities:

Accounts payable $ 0 $ 140 $ 129 $ 11 Held for bond holders 20,341 12,276 11,754 20,863 Total liabilities $ 20,341 $ 12,416 $ 11,883 $ 20,874 79

City of Riverside*

Capital Assets Used in the Operation of Governmental Funds Schedule By Source June 30, 2007 (amounts expressed in thousands)

Governmental funds capital assets:

Land $ 191,694 Buildings and improvements 102,042 Improvements other than buildings 60,662 Machinery and equipment 67,622 Infrastructure 587,856 Construction in progress 64,987 Total governmental funds capital assets $ 1,074,863 Investments in governmental funds capital assets by source:

Certificates of participation $ 50,941 Gifts 136,346 Operating revenue 189,456 General obligation bonds 4,483 Revenue bonds 21,104 County contracts and grants 218 State grants 32,597 Asset forfeiture - state 121 Asset forfeiture - federal 1,744 Housing and community development grants 17,025 Other federal grants 22,410 Community facilities bonds 1,026 Assessment district bonds 397 Capital leases 13,038 RDA tax increment bonds 2;278 Capital projects funds 581,679 Total governmental funds capital assets* $ 1,074,863 81

City of Riverside Capital Assets Used in the Operation of Governmental Funds Schedule By Function and Activity June 30, 2007 (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 $ 8,372 $ 34,273 $ 16,816 $ 10,077 $ 0 $ 69,538 Public safety 12,743 42,405 0 34,266 0 89,414 Highways and streets 148,425 16,430 530 18,731 587,858 771,974 Recreation and culture 20,865 95,237 21,628 4,251 0 141,981 Community development 1,289 370 0 297 0 1,956 Total governmental funds capital assets $ 191,694 $ 188,715 $ 38,974 $ 67,622 $ 587,858 $ 1,074,863 82

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, 2007 (amount expressed in thousands)

Governmental Governmental Funds Capital Funds Capital Assets Deductions and Assets July 1, 2005 Additions Transfers June 30, 2006 General government $ 53,931 32,173 $ 30,331 $ 55,773 Public safety 66,423 42,723 5;741 103,405 Highways and streets 680,361 92,323 710 771,974 Recreation and culture 123,523 27,697 8,591 142,629 Community development 2,195 1,026 2,139 1,082 Total governmental funds capital assets $ 926,433 $ 195,942 $ 47,512 $ 1,074,863 83

-. 4! . I.............. ......... .............

-I I-

City of Riverside Statistical Section For the year ended June 30, 2007 Table of Contents This part of the City's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health.

Contents Paue Financial Trends 86 These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time.

Revenue Capacity 92 These schedules contain information to help the reader assess the factors affecting the City's ability to generate property and sales taxes.

Debt Capacity 101 These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Information 108 These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place and to help make comparisons over time and with other governments.

Operating Information 111 These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs.

Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The City implemented Statement 34 in the year ended June 30, 2001; schedules presenting government-wide information include information beginning in that year.

Table 1 City of Riverside Net Assets by Component Last Seven Fiscal Years (accrual basis of accounting) (ntosns (in thousands)

Fiscal Year 2001 2002 2003 2004 2005 2006 2007 Governmental activities Invested in capital assets, net of related debt $ 422,886 $ 465,803 $ 471,380 $ 484,784 $ 515,354 $ 622,336 $ 71 2,801 Restricted 106,320 115,352 106,862 137,126 154,957 158,038 415,618 Unrestricted (54,406) (59,893) (10,227) (41,353) (46,419) (51,261). (335,928)

Total governmental activities net assets $ 474,800 $ 521,262 $ 568,015 $ 580,557 $ 623,8 92 $ 729,113 $ 792,491 Business-type activities Invested in capital assets, net of related debt $ 279,165 $ 293,936 $ 323,094 $ 341,041 $ 402,377 $ 425,285 $ 520,059 Restricted 31,154 38,535 40,869 49,242 54,540 71,386 57,613 Unrestricted 172,344 177,537 .181,985 217,762 229,462 250,041 242,966 Total business-type activities net assets $ 482,663 $ 510,008 $ 545,948 $ 608,045 $ 686,379 $ 746,712 $ 820,638 Primary government Invested in capital assets, net of related debt $ 702,051 $ 759,739 $ 794,474 $ 825,825 $ 917,731 $ 1,047,621 $ 1,232,860 Restricted 137,474 153,887 147,731 186,368 209,497 . 229,424 473,231 Unrestricted 117,938 117,644 171,758 176,409 183,043 198,780 (92,962)

Total primary government net assets $ 957,463 $1,031,270 $ 1,113,963 $ 1,188,602 $ 1,310,271 $ 1,475,825 $ 1,613,129 The City of Riverside implemented GASB 34 for the fiscal year ended June 30, 2001. Information prior to the implementation of GASB 34 is not available.

86

Table 2 City of Riverside Changes in Net Assets Last Seven Fiscal Years (accrual basis of accounting) (in thousands) Page 1 of 2 Fiscal Year 2001 2002 2003 2004 2005 2006 2007 Expenses Governmental activities:

General government $ 60,688 $ 47,245 ,$ 59,530 $ 63,000 $ 58,460 $ 74,458 $105,486 Public safety 71,285 80,944 88,969 102,500 110,969 120,470 114,312 Highways and streets 12,277 6,819 15,625 22,017 20,364 20,757 22,556 Culture and Recreation 10,512 29,607 29,236 22,988 26,353 32,602 28,016 Interest on long-term debt 8,083 7,727 7,696 10,996 15,885 16,358 26,378 Total governmental activities expenses 162,845 172,342 201,056 221,501 232,031 264j645 296,748 Business-type activities:

Electric 251,185 215,131 186,917 196,727 200,030 226,186 232,346 Water 27,460 28,978 29,715 33,921 36,709 39,486 42,108 Sewer 19,463 19,214 20,053 23,273 26,108 27,299 29,510 Refuse 11,069 10,821 11,577 11,510 12,841 14,546 16,490 Airport 892 1,045 1,151 1,088 1,185 1,004 1,201 Transportation 1,580 1,735 2,110 2,286 2,557 2,917 2,831 Public parking -- 1,392 1,389 824 2,701 3,762 Total business-type activities expenses 311,649 276,924 252,915 270,194 280,254 314,139 328,248 Total primary government expenses $ 474,494 $449,266 $453,971 $491,695 $512,285 $578,784 $624,996 Program Revenues Governmental activities:

Charges for services:

General government $ 27,910 $ 20,265 $ 22,675 $ 26,160 $ 25,995 $ 24,683 $ 10,245 Public safety 6,680 5,855 6,427 6,799 6,982 5,845 12,410 Highways and streets 22,067 18,891 20,867 22,286 23,108 25,412 30,563 Culture and recreation 5,121 4,671 8,304 5,056 7,002 7,716 8,302 Operating grants and contributions 3,490 7,257 12,716 12,935 16,140 13,150 12,101 Capital grants and contributions 617 19,528 2,144 1,136 5,292 18,618 10,557 Total governmental activities program revenues 65,885 76,467 73,133 74,372 84,519 95,424 84,178 Business-type activities:

Charges for services:.

Electric 259,420 216,106 204,293 233,102 252,322 259,572 278,888 Water 26,597 29,527 28,637 32,382 34,002 37,613 47,080 Sewer 20,428 20,457 21,172 21,672 21,967 21,510 24,057 Refuse 11,475 11,220 .11,795 13,759 14,492 15,160 15,833 Airport 955 1,089 1,046 1,051 1,088 1,162 1,263 Transportation -137 116 170 185 200 238 302 Public parking -- 2,385 2,760 2,961 2,837 3,431 Operating grants and contributions 2,411 2,992 3,663 1,723 2,261 2,704 1,939 Capital grants and contributions 3,293 1,877 4,976 26,390 32,317 29,293 40,066 Total business-type activities program revenues 324,716 283,384 278,137 333,024 361,610 370,089 412,859 Total primary government program revenues $ 390,601 $359,851 $351,270 $407,396 $446,129 $465,513 $497,037 continued 87

Table 2 City of Riverside Changes in Net Assets Last Seven Fiscal Years (accrual basis of accounting) (inthousands) Page 2 of 2 Fiscal Year 2001 2002 2003 2004 2005 2006 2007 Net Revenues (Expense)

Governmental activities $ (96,960) $ (95,875) $(127,923) $(147,129) $(147,512) $(169,221) $- $(212,570)

Business-type activities. 13,067 6,460 25,222 62,830 81,356 55,950 - 84,611 Total primary government net expense $ (83,893) $ (89,415) $(102,701) $ (84,299) $ (66,156) $(113,271) $127,959)

$.

General Revenues and Other Changes in Net Assets Governmental activities:

Taxes Sales $ 33,981 $ 38,467 $ 41,691 $ 46,624 $ 53,348 $ 57,522 $ 55,666 Property 35,037 29,471 33,584 35,911 61,553 80,934 106,114 Utility Users 3,746 18,510 19,928 21,362 22,133 23,502 25,384 Franchise 19,613 4,070 3,811 4,261 4,481 4,813 5,031 Other 2,725 2,777 2,967 3,213 3,828 4,372 3,581 Intergovernmental, unrestricted 13,772 14,848 15,533 12,528 1,795 1,747 1,863 Unrestricted grants and contributions - - - 18,710 15,220 39,653 - 29,743 Investment earnings 13,297 11,058 8,064 1,284 7,815 10,150 18,582 Miscellaneous 14,091 5,079 2,241 5,476 5,756 26,173 4,228 Transfers 17,527 18,057 18,218 10,302 14,918 25,576 31,171 Contributions - - - (2,800) - -

Total governmental activities 153,789 142,337 146,037 156,871 190,847 274,442 281,363 Business-type activities:

Unrestricted grants and contributions 19,501 12,638 15,972 - - -

Investment income 16,022 12,780 9,115 5,016 7,548 11,259 16,988 Miscellaneous 2,414 5,624 3,849 4,553 7,362 18,700 3,498 Special item 2,982 7,900 - - (3,014) -

Transfers (17,527) (18,057) (18,218) (10,302) (14,918) (25,576) (31,171)

Total business-type activities 23,392 20,885 10,718 (733) (3,022) 4,383 (10,685)

Total primary government $177,181 $ 163,222 $ 156,755 $ 156,138 $ 187,825 $ 278,825 $ 270,678 Change in Net Assets Governmental activities $ 56,829 $ 46,462 $ 18,114 $ 9,742 $ 43,335 $ 105,221 $ 68,793 Business-type activities 36,459 27,345 35,940 62,097 78,334 60,333 73,926 Total primary government $ 93,288 $ 73,807 $ 54,054 $ 71,839 $ 121,669 $ 165,554 $ 142,719 The City of Riverside implemented GASB 34 for the fiscal year ended June 30, 2001. Information prior to the implementation of GASB 34 is not available.

88

Table 3 City of Riverside Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (in thousands) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 General fund Reserved $ 5,008 $ 4,245 $ 11,049 $ 9,089 $ 10,947 $ 14,362 $ 17,268 $ 44,487 $ 59,930 $ 50,631 Unreserved 27,061 28,149 33,643 61,048 63,829 67,376 117,259 109,266 68,967 44,135 Total general fund $ 32,069 $ 32,394 $ 44,692 $ 70,137 $ 74,776 $ 81,738 $134,527 $153,753 $128,897 $ 94,766 All other governmental funds Reserved 23,638 30,346 25,564 30,589 29,856 28,123 35,177 47,677 54,173 99,986 Unreserved, reported in:

Special revenue funds 8,415 21,992 23,945 12,350 12,168 14,691 14,960 24,991 26,718 22,731 Capital projects funds 48,765 63,034 68,027 65,698 67,211 69,444 93,722 89,303 94,070 307,224 Permanent funds - - 1,355 1,457 1,232 1,219 127 81 -

Total all other governmental funds $ 80,818 $115,372 $117,536 $109,992 $110,692 $113,490 $145,078 $162,098 $175,042 $ 429,941 89

Table 4 City of Riverside Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis accounting) (in thousands) Page I of 2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Revenues:

Taxes $ 72,936 $ 77,617 $ 84,445 $ 88,121 $ 93,879 $102,286 $113,118 $142,056 $ 170,638 $ 191,131 Licenses and permits 6,331 7,854 12,273 13,232 12,317 14,394 11,343 14,389 16,351 12,984 Intergovernmental 35,534 44,055 42,259 48,960 47,410 43,829 42,609 42,568 55,178 47,934 Charges for services 5,499 6,922 7,160 7,879 7,866 8,878 10,046 11,299 11,538 11,914 Fines and forfeitures 872 1,702 2,226 2,330 2,346 2,095 2,188 2,006 2,098 2,778 Special assessments 4,018 4,060 6,587 5,258 5,420 6,324 10,259 6,272 6,247 6,170 Use of money and property 11,878 11,856 12,470 22,329 13,017 11,255 10,587 10,915 14,324 22,587 Miscellaneous 4,828 4,503 7,900 6,325 4,816 5,042 7,133 9,996 8,502 6,164 Total revenues $141,896 $158,569 $175,320 $ 194,434 $187,071 $194,103 $207,283 $239,501 $284,876 $ 301,662 Expenditures:

General government $ 24,318 $ 22,046 $ 19,942 $ 28,552 $ 27,748 $ 22,031 $ 36,938 $ 28,800 $ 49,381 $ 51,413 Public safety 70,116 72,687 76,386 84,134 91,245 96,487 107,637 119,036 131,688 153,226 Highways and streets 7,071 9,292 9,388 9,979 10,551 12,034I 12,124 13,446 12,171 20,760 Culture and recreation 16,933 17,573 18,856 21,239 23,835 27,579 25,919 34,180 34,264 36,449 Capital outlay 25,497 30,647 36,784 33,195 41,058 39,098 37,035 48,366 87,972 117,070 Debt Service:

Principal 23,445 7,082 14,559 9,326 6,174 4,470 2,422 8,599 9,733 12,045 Interest 9,130 9,285 8,268 8,154 7,785 7,785 9,945 15,025 19,205 21,330 Debt issuance costs - 2,185 469 - - - 950 1,538 - 2,551 Total expenditures $176,510 $170,797 $184,652 $ 194,579 $208,396 $209,484 $232,970 $268,990 $344,414 $ 414,844 Excess of revenues over (under) expenditures $ (34,614) $ (12,228) $ (9,332) $ (145) $ (21,325) $ (15,381) $ (25,687) $ (29,489) $ (59,538) $(113,182) continued 90

Table 4 City of Riverside Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years (modified accrual basis accounting) (in thousands) Page 2 of 2 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Other financing sources (uses):

Transfers in $ 49,869 $ 39,089 $ 32,914 $ 41,364 $ 31,305 $ 36,202 $ 41,440 $49,944 $ 59,545 $ 84,306 Transfers out (31,612) (21,258) (15,902) (23,837) (13,248) (17,984) (31,338) (35,026) (33,969) (53,135)

Sales of general capital assets 1,304 (225) (191) 168 153 1,314 (675) 6,230 1,281 541 Advances from other funds 2,052 918 613 1,599 - 81 - - - -

Long-term obligation proceeds 3,379 48,936 6,360 - 8,454 750 247,594 85,578 20,969 295,190 Premiums on bonds issued - - - - - - 113 - 4,455 Payments to refunded bond agent - (20,360) - - - - (58,657) (9,167) - -

Total other financing sources (uses) 24,992 47,100 23,794 19,294 26,664 20,363 198,364 97,672 47,826 331,357 Special item - pension contribution (88,300) (32,141)

Net change in fund balances $ (9,622) $ 34,872 $ 14,462 , $ 19,149 $ 5,339 $ 4,982 $ 84,377 $ 36;042 $ (11,712) $218,175 Debt service as a percentage of noncapital expenditures 10.000% 10.100% 12.240% 10.010% 8.300% 6.640% 31.350% 16.200% 14.390% 16.410%

(1) (2) (2)

(1) Higher than average debt service included $16 million interfund advance payoff.

(2) Restatement of debt service principal payments to reflect proper reporting of payment to refunded bond agent for refundingsduring the fiscal year.

91

Table 5 City of Riverside Business-Type Activities Electricity Revenue By Source Last Seven Fiscal Years (accrual basis of accountinq) (in thousands)

Other Fiscal Residential Commerical Industrial Wholesale Other Transmission Operating Total Year Sales Sales Sales Sales- Sales Revenue Revenue Revenues 2001 $ 65,426 $ 45,478 $ 51,558 $ 73,090 $ 21,897 $ $ 1,971 $ 259,420 2002 64,625 46,265 49,487 46,505 7,447 1,777 216,106 2003 68,649 48,974 52,380 17,806 5,619 8,661 2,230 204,319 2004 80,872 57,079 56,117 9,581 6,354 20,917 2,182 233,102 2005 79,786 59,998 59,157 15,249 6,337 20,213 12,697 253,437 2006 85,243 53,773 71,084 11,952 7,139 20,043 9,183 258,417 2007 94,426 55,421 83,698 9,913 5,713 20,097 9,536 278,804 The City started receiving Transmission Revenue in 2003.

The City of Riverside implemented GASB 34 for the fiscal year ended June 30, 2001. information prior to the implementation of GASB 34 is not available.

92

Table 6 City of Riverside Governmental Activities Tax Revenues By Source Last Seven Fiscal Years (accrual basis of accountina) (in thousands)

Utility Fiscal Sales Property Users Franchise Other Total Year Tax Tax Tax Tax Tax Taxes 2001 $ 35,037 $ 33,981 $ 19,613 $ 3,746 $ 2,725 $ 95,102 2002 38,467 29,471 18,510 4,070 2,777 93,295 2003 41,691 33,584 19,928 3,811 2,967 101,981 2004 46,624 35,911 21,362 4,261 3,213 111,371 2005 53,348 61,553 22,133 4,481 1,795 143,310 2006 57,522 80,934 23,502 4,813 4,372 171,143 2007 55,666 106,114 25,384 5,031 3,581 195,776 The City of Riverside implemented GASB 34 for the fiscal year ended June 30, 2001. Information prior to the implementation of GASB 34 is not available.

93

Table 7 City of Riverside Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years (in thousands)

City Redevelopment Agency Fiscal Total Year Taxable Taxable Direct Ended Less: Assessed Less: Assessed Tax June 30 Secured Unsecured Exemptions Value Secured Unsecured Exemptions Value Rate 1998 $ 10,188,885 $ 540,358 (1,840,080) $ 8,889,163 N/A N/A N/A N/A 1.000 1999 10,158,747 576,029 (1,819,089) 8,915,687 N/A N/A N/A N/A 1.000 2000 10,557,523 632,940 (1,899,625) 9,290,838 N/A N/A N/A N/A 1.000 2001 11,269,877 686,215 (2,017,543) 9,938,549 N/A N/A N/A N/A 1.000 2002 12,103,179 799,323 (2,129,115) 10,773,387 1,240,768 205,181 (16,263) 1,429,686 1.000 2003 13,071,416 980,529 (2,406,961) 11,644,984 1,390,108 276,506 (27,690) 1,638,924 1.000 2004 14,188,658 845,858 (2,526,503) 12,508,013 1,508,478 228,775 (30,286) 1,706,967 1.000 2005 .15,540,982 951,211 (2,751,844) 13,740,349. 1,775,655 158,148 (33,654) 1,900,149 1.010 2006 17,557,341 1,058,995 (4,002,177) 14,614,159 2,914,600 210,025 (51,992) 3,072,633 1.009 2007 20,672,126 1,140,891 (5,417,388) 16,395,629 4,145,700 410,625 (93,261) 4,463,064 1.009 Notes:

In 1978 the votersof the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only re-assessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above.

Assessed valuations are based on 100 percent of estimated actual value.

NA - not available Source: Riverside County Auditor-Controller 94

Table 8 City of Riverside Direct and Overlapping Property Tax Rates Last Ten Fiscal Years City Direct Rates Overlapping Rates ivMoreno General Alvord Jurupa Riverside Valley Obligation Total Unified Unified Unified Unified Fiscal Basic Debt Direct School School School School Year Rate Service Rate District District District District 1998 1.00 1.000 0.041 0.000 0.007 1999 1.00 1.000 0.095 0.000 2000 1.00 1.000 0.116 2001 1.00 1.000 0.134 2002 1.00 1.000 0.128 2003 1.00 1.000 0.116 0.060 0.050 2004 1.00 1.000 0.076 0.060 0.050 2005 1.00 0.010 1.010 0.075 0.060 0.040 0.034 2006 1.00 0.009 1.009 0.073 0.060 0.041 0.031 2007 1.00 0.008 1.008 0.058 0.029 0.035 0.023 Notes:

In 1978, California voters passed Propostion 13 which sets the property tax rate at a 1.00% fixed-amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of the various intergovernmental overlapping debt.

Source: Riverside County, Auditor-Controller's Office 95

Table 9 City of Riverside Principal Property Taxpayers June 30, 2007 (in thousands) 2007 1998 Percentage of Percentage of Taxable Total Taxable Taxable Total Taxable Assessed Assessed Assessed Assessed Property Owner Value Rank Value Value Rank Value Tyler Mall LTD Partnership $ 154,056 1 0.7%

BRE Prop. Inc. 147,691 2 0.7%

La Sierra University 112,207 3 0.5%

Riverside Healthcare System 103,978 4 0.5% 80,078 2 0.8%

State Street Bank 81,756 5 0.4% 79,228 3 0.8%

Centex Homes 78,112 6 0.4%

Rohr/Goodrich 66,894 7 0.3% 64,391 4 0.7%

La Sierra College 64,230 8 0.3%

Riverside Plaza 63,553 9 0.3%

Press Enterprise 61,540 10 0.3% 44,175 5 0.4%

Ohio Teacher Retirement 132,799 1 1.4%

Metal Container Corp 42,847 6 0.4%

Wal Mart Stores 36,701 7 0.4%

Secretary Housing/Urban Dev of Washington D.C. 33,917 8 0.3%

Charter Communications Entertainment 32,310 9 0.3%

RREEF America Reit Corp 32,063 10 0.3%

Totals $ 934,017 4.5% 578,509 5.8%

Notes:

The amounts shown above include assessed value data for both the City and the Redevelopment Agency.

Source: California Municipal Statistics, Inc.

96

Table 10 City of Riverside Property Tax Levies and Collections Last Ten Fiscal Years (in thousands)

Delinquent Tax Fiscal Year Total Tax Collected within the Collections Ended Levy for Fiscal Year of the Levy for Fiscal Total Fiscal Year Collections June 30 Fiscal Year Amount Percentage of Levy Year Amount Percentage of Levy 1998 $ 22,429 $ 21,055 93.9% $ 584 $21,639 96.5%

1999 23,113 21,888 94.7% 537 22,425 97.0%

2000 24,241 23,431 96.7% 626 24,057 99.2%

2001 25,205 24,436 96.9% 370 24,806 98.4%

2002 25,237 23,098 91.5% 513 23,611 93.6%

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

2004 31,954 31,092 97.3% 966 32,058 100.3%

2005 37,144 36,004 96.9% 706 36,710 98.8%

2006 53,680 51,503 95.9% 746 52,249 97.3%

2007 74,305 66,751 89.8% 934 67,685 91.1%

Notes:

The table includes the City of Riverside Redevelopment Agency. Total Tax collections include supplemental tax levies not included in the total tax levy column.

Source: Riverside County Auditor Controller's Office 97

Table 11 City of Riverside Electricity Sold by Type of Customer, Last Ten Fiscal Years (in millions of kilowatt-hours)

Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Type of Customer:

Residential 555.0 575.0 594.0 610.0 600.0 618.0 707.0 675.0 696.0 748.0 Commercial 404.0 406.0 436.0 432.0 434.0 451.0 522.0 530.0 474.0 456.0 Industrial 620.0 619.0 651.0 654.0 629.0 658.0 687.0 707.0 810.0 924.0 Wholesale sales 135.0 151.0 419.0 600.0 541.0 378.0 354.0 470.0 287.0 295.0 Other 45.0 46.0 53.0 54.0 53.0, 49.0 52.0 50.0 58.0 39.0 Total 1,759.0 1,797.0 2,153.0 2,350.0 2,257.0 2,154.0 2,322.0 2,432.0 2,325.0 2,462.0 Total direct rate Monthly Base Rate 1 3.06 3.06 3.06 3.06 3.06 3.18 3.28 3.36 3.36 5.00 Rate per 250 KWH 20.18 20.18 20.18 20.18 20.18 20.98 21.65 22.20 22.20 22.20 Rates are based on a monthly base rate plus energy charge for the first 250 KWH.

The Utility charges an excess use rate 'over 250 KWH.

Source: Riverside Public Utilities, Finance Services 98

Table 12 City of Riverside Electricity Rates Last Ten Fiscal Years (Average Rate in Dollars per Kilowatt-Hour)

Fiscal Year Ended June 30 Residential Commercial Industrial Other 1998 0.10726 0.10663 0.08298 0.11385 1999 0.10744 0.10632 0.08163 0.11319 2000 0.10767 0.10640 0.08081 0.11090 2001 0.10798 0.10637 0.07925 0.11112 2002 0.10768 0.10615 0.07844 0.11206 2003 0.10990 0.10779 0.07901 0.11869 2004 0.11439 0.10936 0.08167 0.12271 2005 0.11813 0.11321 0.08369 0.12768 2006 0.12222 0.11330 0.08798 0.12373 2007 0.12621 0.12164 0.09059 0.14493 NOTE:

Rates are based on a monthly base rate plus an energy charge for the first 250 KWH. The Utility charges an excess use rate over 250 KWH.

Source: Riverside Public Utilities, Finance Services 99.

Table 13 City of Riverside Top 10 Electricity Customers Current Year and Nine Years Ago 2007 1998 Percent of Percent of Electricity Total Electric Electricity Total Electric Electricity Customer Charges Revenues Charges Revenues County Agency $ 6,737,345 2.82% N/A N/A State University 6,208,160 2.59% N/A N/A Local Government 6,190,517 2.59% N/A N/A Local School District 3,858,521 1.61% N/A N/A Grocery Store 2,997,336 1.25% N/A N/A Corporation 2,267,071 0.95% N/A N/A Shopping Mall 2,040,225 0.85%- N/A N/A Hospital 1,664,993 0.70% N/A N/A Corporation 1,653,565 0.69% N/A N/A Corporation 1,614,061 0.67% N/A N/A

$ 35,231,794 14.73% N/A N/A Retail Sales Per Financial Statements $ 239,258,513 N/A - not available Source: Riverside Public Utilities, Finance Services 100

Table 14 City of Riverside Ratios of Outstanding Debt by Type Last Ten Fiscal Years (in thousands)

Governmental Activities General Pension Certificates Fiscal Obligation Redevelopment Revenue Assessment Obligation of Capital Notes Year Bonds Bonds Bonds Bonds Bonds Participation Leases Payable 1998 $ $ 95,774 $ 10,295 $ 480 $ $ 7,865 $ 4,666 $ 9,571 1999 116,600 8,595 285 7,440 5,375 13,674 2000 115,605 6,795 245 6,050 4,719 12,998 2001 113,980 2,830 195 5,615 7,316 11,629 2002 111,880 525 135 5,150 6,430 11,096 2003 109,615 4,650 5,517 11,447 2004 20,285 131,590 89,540 58,706 8,938 11,057 2005 20,280 144,024 148,280 57,336 7,431 10,645 2006 19,858 140,195 146,470 55,571 6,008 10,215 2007 19,331 296,598 144,450 192,874 4,929 9,759 Business-Type Activities Total Percentage Fiscal Revenue Loans Capital Primary of Personal Per Year Bonds Payable Leases Government Income Capita 1998 $ 331,592 $ $ 107 $ 460,350 13.62% 1.84 1999 321,058 7,956 428 481,411 13.43% 1.89 2000 310,424- 7,956 409 465,201 12.96% 1.79 2001 299,244 7,315 653 448,777 12.01% 1.71 2002 355,621 6,966 571 498,374 13.70% 1.88 2003 342,559 11,524 498 485,810 12.54% 1.77 2004 440,970 11,066 439 772,591 18.68% 2.79 2005 419,581 10,459 392 818,428 19.02% 2.87 2006 509,577 9,841 317 898,052 14.29% 3.12 2007 482,929 9,211 253 1,160,334 17.37% 3.92 Source: City of Riverside Notes to Financial Statements and Statistical Table 19.

101

Table 15 City of Riverside Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (in thousands, except per capita amount)

General Certificates Tax Percent of Fiscal Obligation Pension of Allocation Assessed Pe r Year Bonds Bonds Participation Bonds 2 Total Value 1 Cap ita 1998 $ $ $ 95,774 $ 95,774 1.08% $ 396 1999 116,600 116,600 1.31% 483 2000 115,605 115,605 1.24% 478 2001 113,980 113,980 1.15% 472 2002 111,880 111,880 1.04% 463 2003 109,615 109,615 0.94% 454 2004 20,285 89,540 58,706 131,590 300;121 2.40% 1 ,242 2005 20,280 148,280 57,336 144,024 369,920 2.69% 1 ,531 2006 19,858 146,470 55,571 140,195 362,094 2.48% 1 ,499 2007 19,331 144,450 192,874 291,776 648,431 3.95% 2 ,193 Notes:

General bonded debt is debt payable with governmental fund resources and general obligation bonds recorded in enterprise funds (which, the City has none.)

Assessed value has been used because the actual value of taxable property is not readily available in the State'of California.

2 Amount presented is net of restricted resources held for the repayment of outstanding debt principal.

Source: City of Riverside Notes to Financial Statements and Reserve Cash Reconciliation maintained by City Finance Division.

102

Table 16 City of Riverside Direct and Overlapping Debt As of June 30, 2006 Page I of 2 City Assessed Valuation: $ 16,395,628,541 Redevelopment Agency Incremental Valuation: 4,463,063,852 Adjusted Assessed Valuation: $ 11,932,564,689 Estimated Outstanding Share of Percentage Debt Overlapping Applicable 3 06/30/2006 Debt Direct and Overlapping Tax and Assessment Debt:

Metropolitan Water District 1.017% $ 3,961,876 $ 40,292 Riverside City Community College District 30.102% 20,149,108 6,065,284 Alvord Unified School District 67.749% 32,282,399 21,871,002 Riverside Unified School District 84.037% 99,239,293 83,397,725 Corona-Norco Unified School District 0.002% 1,090 0 Jurupa Unified School District 0.001% 561 0 Moreno Valley Unified School District 4.005% 2,002,498 80,200 City of Riverside 100% 19,590,000 19,590,000 Riverside Unified School District Community Facilities Districts 96.650-100% 94,426,090 91,262,816 City of Riverside Community Facilities Districts 100% 54,223,000 54,223,000 City of Riverside 1915 Act Bonds 100% 43,220,000 43,220,000 Total Direct and Overlapping Tax and Assessment Debt: $ 369,095,915 $ 319,750,320 continued 103

Table 16 City of Riverside Direct and Overlapping Debt As of June 30, 2006 Page 2 of 2 Direct and Overlapping General Fund Debt:

Riverside County General Fund Obligations 12.065% $ 76,072,910 $ 9,178,197 Riverside County Pension Obligations 12.065% 47,879,349 5,776,643 Riverside County Board of Education Certificates of Participation 12.065% 1,356,106 163,614 Alvord Unified School District Certificates of Participation 67.748% 16,350,980 11,077,462 Corona-Norco Unified School District Certificates of Participation 0.002% 1,668 0 Jurupa Unified School District Certificates of Participation 0.001% 80 0 Moreno Valley Unified School District Certificates of Participation 4.005% 1,072,739 42,963 Riverside Unified School District General Fund Obligations 84.037% 22,122,740 18,591,287 City of Riverside General Fund Obligations 100% 55,315,000 55;315,000 (1)

City of Riverside Pension Obligations 100% 146,470,000 146,470,000 Total Gross Direct and Overlapping General Fund Debt: 366,641,572 246,615,166 Less: Riverside County Self-Supporting Obligations 2,363,665 2,363,665 Total Net Direct and Overlapping General Fund Debt: $ 364,277,907 $ 244,251,501 Net Direct and Overlapping Debt: $ 564,001,821 Gross Direct and Overlapping Debt: $ 566,365,486 (2)

(1) Excludes certificates of participation to be sold (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.

(3) For debt repaid with property taxes, the percentage of overlapping debt applicable is estimated using taxable assessed property values. Applicable percentages were estimated by determining the portion of another governmental unit's taxable assessed value that is within the city's boundaries and dividing it by each unit's total taxable assessed value.

Overlapping governments are those that coincide at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government.

Source: California Municipal Statistics, Inc.

Note: July 1, 2006 is the latest information available from the California Municipal Statistics, Inc. for this schedule.

104

Table 17 City of Riverside Legal Debt Margin Information Last Ten Fiscal Years (in thousands) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Assessed valuation $8,889,163 $8,915,687 $9,290,838 $9,938,549 $10,773,387 $11,644,984 $12,508,013 $13,740,349 $14,614,159 $16,395,629 Conversion percentage 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%

Adjusted assessed valuation 2,222,291 2,228,922 2,322,710 2,484,637 2,693,347 2,911,246 3,127,003 3,435,087 3,653,540 4,098,907 Debt limit percentage 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%

Debt limit 333,344 334,338 348,406 372,696 404,002 436,687 469,050 515,263 548,031 614,836 General obligation bonds - - 20,285 20,280 19,858 19,331 Pension obligation bonds 89,540 148,280- 146,470 144,450 Total net debt applicable to limit: 109,825 168,560 166,328 163,781 Legal debt margin $ 333,344 $ 334,338 $ 348,406 $ 372,696 $ 404,002 $ 436,687 $ 359,225 $ 346,703 $ 381,703 $ 451,055 Total net debt applicable to the limit as a percentage of debt limit 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 23.4% 32.7% 30.4% 26.6%

The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect a the time that the legal debt margin was enacted by the State of California for local governments located within the State.

Source: City of Riverside, Statistical Table 6 and Notes to Financial Statements.

105

Table 18 City of Riverside Pledged-Revenue Coverage Governmental Activity Debt Last Ten Fiscal Years (in thousands)

Tax Allocation Bonds Debt Service Tax Fiscal Year Increment Principal Interest Coverage 1998 $ 11,179 $

• 1,902 $ 7,540 1.18 1999 11,832 2,466 7,970 1.13 2000 12,829 1,894 7,194 1.41 2001 13,279 3,099 7,363 1.27 2002 14,859 2,745 7,252 1.49 2003 16,180 2,694 7,371 1.61 2004 17,410 1,873 (1) 9,599 1.52 2005 21,242 4,507 (1) 6,307 1.96 2006 35,268 4,390 7,236 3.03 2007 49,772 4,727 7,663 4.02 Source: Annual Financial Report, Redevelopment Agency (1) Restatement of debt service principal payments to reflect proper reporting of payment to refunded bond agent during the fiscal year.

106

Table 19 City of Riverside Pledged-Revenue Coverage Business Type Activity Debi Last Ten Fiscal Years (in thousands)

Electric Revenue Bonds Water Revenue bonds Utility

• Less: Net Utility Less: Net Fiscal Service Operating Available Debt Service Service Operating Available Debt Service Year Charges Expenses Revenue Principal Interest Coverage Charges Expenses Revenue Principal Interest Coverage 1998 $ 207,934 $ 143,828 $ 64,106 $ 6,635 $ 10,371 3.77 $ 26,126 $ 14,776 $ 11,350 $ 2,265 $ 2,642 2.31 1999 180,171 145,402 34,769 6,555 10,701 2.01 30,739 15,659 15,080 2,780 2,667 2.77 2000 197,842 150,175 47,667 6,610 10,669 2.76 33,327 16,397 16,930 2,755 2,591 3.17 2001 271,828 227,081 44,747 6,930 10,350 2.59 36,259 18,643 17,616 2,955 2,364 3.31 2002 229,529 190,426 39,103 7,385 9,841 2.27 43,215 19,244 23,971 3,215 2,941 3.89 2003 211,553 157,450 54,103 7,840 10,966 2.88 36,837 19,928 16,909 3,895 2,720 2.56 2004 239,842 168,162 71,680 10,780 10,183 3.42 47,093 23,767 23,326 4,010 2,622 3.52 2005 271,987 169,064 102,923 14,555 12,143 3.86 45,626 26,583 19,043 4,045 2,591 2.87 2006 275,478 191,758 83,720 15,015 14,545 2.83 51,313 27,385 23,928 3,875 .3,388 3.29 2007 301,414 192,450 108,964 18,815 13,549 3.37 70,736 29,856 40,880 4,300 3,113 5.51 Sewer Revenue Bonds Sewer Less: Net Fiscal Charges Operating Available Delbt Service Year and Other Expenses Revenue Principal Interest Coverage 1998 $ 21,530 $ 11,901 $ 9,629 $ 2,075 $ 2,792 1.98 1999 21,322 12,117 9,205 2,200 2,662 1.89 2000 23,851 12,300 11,551 2,330 2,557 2.36 2001 25,056 12,451 12,605 2,435 2,729 2.44 2002 23,872 12,387 11,485 2,550 2,423 2.3i 2003 24,297 13,433 10,864 2,665 2,165 2.25 2004 24,176 17,006 7,170 2,800 2,341 1.39 2005 25,444 19,163 6,281 2,970 2,061 1.25 2006 23,482 20,393 3,089 3,120 1,691 0.64 2007 26,534 22,806 3,728 3,285 1,469 0.78 Source: City of Riverside, Propriety Fund Statement of Revenues, Expenses and Changes in Net Fund Balance.

107

Table 20 City of Riverside Demographic and Economic Statistics Last Ten Fiscal Years Personal Per Income Capita Fiscal (amounts expressed Personal Unemployment Year Population in thousands) Income Rate 1998 250,799 $ 3,381,021,319 $ 13,481 7.0 1999 254,300 3,583,849,900 14,093 6.2 2000 259,738 3,590,877,850 13,825 5.3 2001 262,335 3,735,912,735 14,241 5.2 2002 265,700 3,636,635,900 13,687 6.5 2003 274,100 3,874,951,700 14,137 6.8 2004 277,030 4,135,503,840 14,928 6.2 2005 285,537 4,303,042,590 15,070 5.9 2006 288,203 6,283,978,212 21,804 5.4 2007 295,730 6,681,723,620 22,594 6.5 Source: City of Riverside, Development Department 108

Table 21 City of Riverside Principal Employers Current Year and Nine Years Ago 2007 1998 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment University of California 6,470 1 4.2% N/A N/A N/A Riverside Unified School District 4,000 2 2.6% N/A N/A N/A City of Riverside 2,600 3 1.7% N/A N/A N/A Riverside Community College 2,000 4 1.3% N/A N/A N/A Fleetwood Motorhome Svc 1,875 5 1.2% N/A N/A N/A Alvord Unified School District 1,669 6 1.1% N/A N/A N/A Riverside Community Hospital 1,600 7 1.0% N/A N/A N/A Press-Enterprise. Co 1,090 8 0.7% N/A N/A N/A Parkview Community Hospital 1,000 9 0.6% N/A N/A N/A Riverside Medical Clinic 600 10 0.4% N/A N/A N/A Total 22,904 14.7% N/A N/A N/A - not available Source: City of Riverside, Development Department 109

Table 22 City of Riverside Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Function General government 283.38 273.50 276.22 288.26 313.29 314.39 318.36 331.88 377.15 412.22 Public safety Police 531.70 530.70 534.95 544.65 560.65 569.65 567.83 568.83 589.33 618.33 Fire Firefighters and officers 187.64 187.64 188.64 218.64 217.65 218.65 219.65 221.11 221.73 251.73 Highways and streets 266.00 266.10 267.10 269.10 266.10 280.10 285.10 281.35 262.35 286.35 Sanitation 44.49 44.49 44.49 44.49 44.49 44.49 48.49 48.49 59.49 60.29 Culture and recreation 244.42 249.28 256.52 265.08 282.93 301.97 302.92 300.92 311.45 324.26 Airport 5.00 5.00 5.00 5.00 6.00 6.00 6.00 6.00 6.00 7.00 Water 128.00 119.00 121.00 122.00 123.00 123.00 130.00 130.00 133.00 142.00 Electric 277.71 273.60 276.60 280.60 282.60 291.60 295.60 305.60 337.60 351.35 Total 1,968.34 1,949.31 1,970.52 2,037.82 2,096.71 2,149.85 2,173.95 2,194.18 2,298.10 2,453.53 Source: City of Riverside, Budget Office 110

Table 23 City of Riverside Operating Indicators by Function Last Ten Fiscal Years Fiscal Year Function/Program 19 98 1999 2000 2001 2002 2003 2004 2005 2006 2007 Police Arrests 12,243 11,034 8,756 9,638 10,047 10,541 11,951 11,280 10,093 9,827 Fire 24,115 Number of calls answered 21,639 20,920 22,824 23,968 24,886 25,876 26,505 26,696 27,458 Inspections N/A N/A N/A N/A N/A 14,229 16,306 17,028 19,261 7,261 l1i Public works:

Street resurfacing (miles) N/A N/A N/A 109.09 104.04 67.39 62.37 102.45 51.26 73.40 Parks and recreation Number of recreation classes 14,492 14,492 14,492 14,492 14,619 S14,787 15,135 15,195 16,272 19,079 Number of facility rentals 26,327 26,327 26,327 26,327 26,533 26,854 27,014 27,074 27,483 32,980 Water Number of accounts 58,214 58,383 58,538 58,905 59,176 59,890 61,668 62,492 62,985 63,431 Annual consumption (ccf) 24,9925,154 26,777,544 29,285,011 28,044,248 29,419,027 2 8,232,000 30,407,000 27,697,000 28,682,000 32,110,208 Electric Number of accounts 90,607 92,213 93,147 95,205 96,503 98,459 100,766 103,463 104,294 105,226 Annual consumption (kwh) 1,624,, 389,147 1,646,453,088 1,734,156,468 1,749,842,407 1,716,000,000 1,77'6,000,000 1,968,000,000 1,962,000,000 2,038,000,000 2,431,000 Sewer:.

New connections N/A N/A N/A 4,073 5,267 5,825 7,034 9,621 16,717 15,423 Average daily sewage treatment 27.22 32.33 30.92 32.59 34.75 33.15 35.24 38.07 35.91 32.50 (millions of gallons) 1 Inspections were not tracked prior to 2003 N/A - not available Source: City of Riverside, various departments

-j IlI

Table 24 City of Riverside Capital Asset Statistics by Function Last Ten Fiscal Years Fiscal Year 1998 1999 2000 2001 2002 2003 2004 2005 (l) 2006 2007 Function Public Safety Police Stations 2 2 2 2 2 2 2 2 3 3 Substations 9 9 9 9 9 7 11 7 5 4 Helicopters 4 4 4 4 4 4 4 4 4 4 Fire Stations 13 13 13 13 13 13 13 13 ~ 13 14 Active apparatus 25 25 26 26 26 30 30 30 29 30 Reserve apparatus 6 6 4 4 5 6 5 5 6 6 Training facilities 1 1 1 1 1 1 1 1 1 1 Highways and streets Streets (miles) 796.84 804.04 811.74 819.18 816.34 1,100.00 829.00 836.00 845.35 852.04 Streetlights 26,144 27,406 27,622 27,841 28,058 28,246 28,401 28,581 28,847 29,028 Traffic signals 283 283 287 299 320 320 322 322 353 358 Culture and recreation Parks acreage 2,465.60 2,664.60 2,664.60 2,664.60 2,665.00 2,534.00 2,500.00 2,534.00 2,534.00 2,800.00 Community centers 10 10 10 10 10 10 10 11 11 11 Playgrounds 31 31 32 32 35 30 26 26 27 38 Swimming pools 9 9 9 9 9 6 6 7 6 7 Softball & baseball diamonds 36 36 36 36 36 34 34 35 33 44 Library branches 5 5 5 5 5 7 5 5 6 6 Museum exhibit-fixed 65 51 51 51 51 52 11 8 7 13 Museum exhibit-special 4 7 7 7 11 13 4 1 - 2 Museum reference library volumes 2,575 2,575 2,575 2,575 2,600 2,750 3,000 5,224 5,500 5,600 Water Fire hydrants 6,402 6,390 6,504 6,566 6,715 - 6,763 6,763 6,926 7,127 7,187 Sewer Sanitary sewers (miles) 1,100 1,100 1,100 1,100 800 . 750 755 755 810 840 Electric Miles ofoverhead distribution system 546.9 546.0 543.9 554.9 539.1 593.3 539.0 531.0 527.0 528.0 Miles ofunderground system 497.9 515.1 523.5 540.1 575.8 538.2 608.0 622.0 663.0 704.0 Source: City ofRiverside,various departments (1) During the 2004/05 fiscalyear, fourpolicesubstations closed.

112

Table 25 City of Riverside Cash Debt Reserves Tax Allocation Bonds Last Ten Fiscal Years (in thousands)

Cash Debt Reserve Minimun Required Tax Allocation Bond Reserve 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1988 Issue Series A Revenue Bonds $ 492 $ 505 $ -$ -$ -$ -$ -$ -$ -$

1991 Issue $13,285,000 Series A 28 509 79 75 76 76 74 29 29 29 29 1994 Issue PFA Multiple Project Areas A/B 900 900 900 911 927 902 904 906 1994 Issue RDA CA Towers Series A 2,481 2,481 2,699 2,699 2,699 2,411 2,411 1994 Issue RDA CA Towers Series B 431 427 465 465 417 431 431 1999 Issue $17,025,000 Series A Univ Corr 1,257 1,257 1,259 1,220 1,256 1,257 1,257 1,257 .1,257 1,257 1999 Issue $6,055,000 Series B Univ Corr 442 442 442 442 443 442 442 442 442 442 1999 Issue $20,395,000 Casa Blanca 343 344 340 340 341 344 344 344 344 348 2004 Issue A Arlington $4,550,000 301 299 305 309 309 2004 Issue B Arlington $2,975,000 197 195 199 198 193 2003 Issue A Cal Towers $26;255,000 2,341 2,342 2,342 2,342 2,342 2003 Issue B Cal Towers $4,810,000 371 371 371 371 371 2004 Issue A Multiple Project $24,115,000 1,753 1,753 1,753 1,753 2004 ERAF loan $1,465,000 2007 Issue PFA Mult Proj Areas A $8,340,000 2007 Issue PFA Mult Proj Areas B $14,850,000 2007 Issue PFA Mult Proj Areas C $9,205,000 2007 Issue PFA Mult Proj Areas D $43,875,000

$ 11,337 $ 4,822 $ 6,186 $ 6,191 $ 6,121 $ 5,860 $ 5,863 $ 6,185 $ 7,042 $ 7,045 $ 7,044 113

-S

-4~r

PREPARED BY DEPARTMENT OF FINANCE WILLIAM G. SWEENEY Finance Director

CITY OF ANAHEIM Comprehensive Annual Financial Report Table of Contents June 30, 2007 Page INTRODUCTORY SECTION Letter of Transmittal I GFOA Certificate of Achievement for Excellence in Financial Reporting 5 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 Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 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 Budgetary Basis Actual - Housing Authority 30 Statemenit of Fund Net Assets - Proprietary Funds 31 Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietaiy Funds 33 Statement of Cash Flows - Proprietary Funds 34 Statement of Fiduciary Assets and Liabilities - Agency Fund 36 Notes to the Financial Statements 37 Required Supplementary Information 66 Combining Individual Fund Statements and Schedules Nonmajor Governmental Funds Combining Balance Sheet - Nonmajor Governmental Funds by Fund Type 67 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds by Fund Type 68 Combining Balance Sheet - Nomnajor Special Revenue Funds 69 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Nomnajor Special Revenue Funds 71 Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits) - Budget and Budgetary Basis Actual - All Nonmajor Special Revenue Funds 73 (continued)

CITY OF ANAHEIM Comprehensive Annual Financial Report Table of Contents June 30, 2007 (continued)

Page Combining Balance Sheet - Nonmajor Debt Service Funds 78 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Debt Service Funds 79 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Budgetary Basis Actual - All Nonmajor Debt Service Funds 80 Combining Balance Sheet - Nonmajor Capital Projects Funds 82 Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Projects Funds 83 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Budgetary Basis Actual All Nonnajor Capital Projects Funds 84 Internal Service Funds Combining Statement of Fund Net Assets - Internal Service Funds 85 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets - Internal Service Funds 86 Combining Statement of Cash Flows - Internal Service Funds 87 Fiduciary Funds Statement of Changes in Fiduciary Assets and Liabilities -Agency Fund - Mello-Roos 89 STATISTICAL SECTION (unaudited)

Net Assets by Component - Last Six Fiscal Years 92 Changes in Net Assets - Last Six Fiscal Years 93 Governmental Activities Tax Revenues by Source - Last Six Fiscal Years 95 Fund Balances of Governmental Funds - Last Ten Fiscal Years 96 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 97 General Government Tax Revenues by Source - Last Four Fiscal Years 98 Assessed Value of Taxable Property - Last Four Fiscal Years 99 Property TaxRates - Direct and Overlapping Governments - Last Four Fiscal Years 100 Principal Properly Tax Payers - Last Ten Fiscal Years 101 Property Tax Levies and Collections - Last Four Fiscal Years 103 Ratios of Outstanding Debt by Type - Last Four Fiscal Years 104 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 105 Direct and Overlapping Governmental Activities Debt 106 Legal Debt Margin Information - Last Ten Fiscal Years 108 Pledged-Revenue Coverage - Last Ten Fiscal Years 109 Demographic and Economic Statistics - Last Four Fiscal Years Ill Principal Employers - Last Four. Fiscal Years 112 Full-time Equivalent City Government Employees by Function/Program - Last Four Fiscal Years 113 Operating Indicators by Function - Last Four Fiscal Years 114 Capital Asset Statistics by Function - Last Four Fiscal Years 115 City of Anaheim Map 116

In addition to the financial audit, the City is required to undergo an annual Single Audit City of Anaheim, California in conformity with the provisions of the Single Audit Act Amendments of 1996 and the Finance Department U.S. Office of Management and Budget (OMB) Circular A-]33, 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 3, 2007 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 CONDITION AND OUTLOOK 2007. 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 Los Angeles Angels of Anaheim American League Baseball team that utilizes the Angel Stadium of Anaheim, and the Anaheim Ducks The CAFR is presented in three sections: Introductory, Financial, and Statistical. The National Hockey League team that utilizes the Honda Center.

Introductory Section includes the table of contents, this transmittal letter, certificate 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 4,600 Financial Section includes the report of the independent auditors, Management's manufacturing plants are located in the county, most notably aerospace, electronics, Discussion and Analysis (MD&A), the basic financial statements including the machinery, computers, and food product manufacturers. Unionization is prevalent in government-wide financial statements comprised of the Statement of Net Assets and the manufacturing, construction, hotels, trucking, warehousing, grocery stores, drug stores, Statement of Activities, and the accompanying notes to the financial statements. The 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. This section also includes the combining services are constantly being improved to serve residential and business needs. This individual funds financial statements for the nonmajor governmental funds and the growth in City service demand presents the City with significant challenges; and if the internal service funds. The Statistical Section includes selected pertinent financial and high level of service is to be maintained, the City will need to continue to explore new demographic information,"on a multi-year basis. This transmittal letter is designed to methods of obtaining financial resources and more efficient methods to deliver services.

complement and should be read in conjunction with the MD&A. The unemployment rate in the Orange County, California area for June 2007 was 3.9%,

which remained below both the state (5.2%) average and the national (4.5%) average.

I

CITY OF ANAHEIM Tourism related spending provides significant discretionary revenue to the City of The City continues to draw from and build on its fiscal responsibility as it maximizes Anaheim, and the City closely monitors and projects trends related to this market. the assets under its control and direction. These assets include the Angel Stadium of Revenue from tourism was very strong in fiscal year 2007, and local economic forecasts Anaheim, Honda Center, Anaheim Convention Center, the City's golf courses, and its indicate continued strength well into fiscal year 2008. The City's revenue from sales and Anaheim-owned, Anaheim-focused water and electric utilities. Through sound fiscal use taxes continues to be a significant source of revenue, although there are indications management, the City continues to operate these economic engines at optimal levels to that the growth in this revenue is slowing. assist in better providing for the many other necessities of the community.

MAJOR INITIATIVES The re-dedication to neighborhood pride is another important facet of the City's planning and operations. Various programs were established in the Other Capital The Anaheim City Council has provided policy and direction to lead the City on a path Improvements Fund upon the completion of the Anaheim Resort Revitalization Project of long-term investment and improvement for the future. Four objectives have been to direct increased revenues received from the City's investment in resort improvements identified to focus and guide the efforts of the City's overall workplan: toward continued improvements in our community. This and other resources contribute toward infrastructure maintenance including roads, sidewalks, sewers, new and/or

• Vision enhanced parks and open space, increased sports fields and gymnasiums, and facilities

• Responsibility such as the West Anaheim Police Sub-station and Youth Center, the East Anaheim

• Pride Gymnasium, East Anaheim Library, Anaheim Hills Golf Clubhouse, Haskett Library in

• Service Maxwell Park, the Twila Reid Fire Station, and the Tiger Woods Learning Center at Dad Miller Golf Course.

The vision for our City was codified by the City Council's adoption of the most ambitious planning effort in City history, the updated General Plan and Zoning Code. The City's commitment to deliver unparalleled service continues to show Anaheim's As a result of extensive public input, the City created an opportunities-based, long-range commitment to being one of the finest municipal workforces in the nation. Anaheim has planning tool created to address the livability of Anaheim's neighborhoods, built a reputation on its consistent delivery of outstanding service that residents, beautification efforts, and new land use options for commercial properties, as well as businesses and guests have come to expect. The new Anaheim Anytime innovative web the corresponding infrastructure and transportation needs. The new General Plan is a and phone systems foster a new communicative spirit among City employees and the comprehensive guide for future development and associated City services and facilities. community. Each day, the 2,500 employees know they can positively affect change for It addresses the preservation and enhancement of neighborhoods and maximization of the people who live, work, and visit our City.

open space and recreational opportunities, as well as the continued development of The Anaheim Resort and Stadium Area. It also anticipates the completion of the Downtown In addition to all of the major initiatives, the City has been celebrating its 150th Anaheim Revitalization Project, a vibrant City center and activity hub. In addition to anniversary. The celebration officially began in October 2006 and events to mark this the'. General Plan, the City Council also adopted a new overlay zone for the momentous milestone of the City's history will continue through 2007.

approximately 800-acre Platinum Triangle. When completed, the Platinum Triangle will be a vibrant 24-hour, high density, mixed-use, urban environment unique to Orange FINANCIAL INFORMATION County. The City is currently considering increasing the amount of allowable residential development from 10,266 to 18,363 dwelling units, commercial development from 2.2 Management of the City is responsible for establishing and maintainilng internal control million to over 5.5 million square feet and office,development from 5 million to over designed to ensure that the assets of the government are protected finom loss, theft, or 16.8 million square feet. The introduction of mixed-use opportunities into this area will misuse, and to ensure that adequate accounting data are compiled to allow for the be the catalyst for realizing the development potential of the Platinum Triangle's preparation of financial statements in conformity with U. S. generally accepted strategic location and surrounding amenities including Angel Stadium of Anaheim, the accounting principles. Internal control is designed to provide reasonable, but not Honda Center; The Grove of Anaheim and the Amtrak/Metrolink Station and proposed absolute, assurance that these objectives are met. The concept of reasonable assurance Anaheim Regional Transportation Intermodal Center (ARTIC). recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.

2

CITY OF ANAHEIM This report consists of management's representations concerning the finances of the CASH MANAGEMENT: The City Treasurer invests temporarily idle funds in City. As a result, management assumes full responsibility for the completeness and accordance with the California Government Code and a formal investment policy reliability of all of the information presented in this report. Management asserts that, to approved by the City Council and the Investment Advisory Commission. During fiscal the best of their knowledge and belief, this financial report is complete and reliable in year 2007, funds were invested in such instruments as U.S. Treasury obligations, U.S.

all material respects. agency securities, commercial paper, corporate medium-term notes, money market mutual funds, and the Local Agency Investment Fund (State Investment Pool). The BUDGETARY CONTROLS: The City maintains budgetary controls, the objective of average maturity of the portfolio as of June 30, 2007 was one year and one month (400 which is to ensure compliance with legal provisions embodied in the annual days). Interest earnings for the fiscal year were approximately $22.0 million with an appropriated budget approved by the City Council. Activities of the General Fund,- average earned yield of 4.09%. Bond proceeds are not commingled with the portfolio special revenue funds, debt service funds, capital projects funds, and all the proprietary but are invested pursuant to the bond indentures. Consequently, earnings and yield on funds are included in the annual appropriated budget. The level of budgetary control bond proceeds are not reflected in the previously stated figures.

(that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the departmental level. The City also maintains an encumbrance RISK MANAGEMENT Through the utilization of professional risk mafiagement accounting system as one technique of accomplishing budgetary control. Encumbrances techniques of risk identification, risk control, risk transfer, and risk financing, tihe City generally are re-appropriated as part of the following year's budget. has a comprehensive risk management program designed to protect the City's assets and resources from accidental loss. In the risk financing area, the City utilizes a combination Regarding long-term financial planning, as of June 19, 2007, the City Council adopted of fully funded, actuarially based, self-insurance programs, an excess risk-sharing pool, the fiscal year 2008 budget. Additionally, as a companion to approving the budget plan, an industry-captive excess insurer, and commercial insurers. Operational expenses and a five-year Capital Improvement Plan was presented to the City Council. The five-year reserves are maintained in the General Benefits and Insurance Fund. The City's Risk plan links anticipated expenditures for infrastructure development with community Management Division continues to be very successful with programs that generate needs and desires and provides a citywide perspective of recommended projects and material cost savings while, at the same time, eliminating or transferring risk to the proposed funding sources. The Capital Improvement Plan was finalized in June 2007, maximumn extent.

and totaled $578.9 million for the five-year fiscal period ending June 30, 2012. The five-year Capital Iniprovement Plan has been submitted and annually updated, in its OTHER INFORMATION present form, since 1982, for effective long-range planning purposes. It is City Management's belief that these two plans give City Council members an expanded THE INDEPENDENT AUDIT: The City Charter requires an annual audit of the opportunity to set policy and provide direction for implementation, resulting in financial statements of the City by an -independent certified public accountant.

improved management efficiency and improved financial results. Accordingly, this year's audit was completed by KPMG LLP. In addition to meeting the requirements set forth in the City Charter, the audit was also designed to meet the DEBT ADMINISTRATION: At June 30, 2007, the City had a number of debt issues requirements of the Single Audit Act Amendments of 1996 and related OMB Circular outstanding, as shown in detail in the notes to the financial statements. A-133. The auditors' report on the basic financial statements is included in the financial section of this report. The auditors' reports related specifically to the single audit are The City's ratio of net bonded debt to assessed valuation and the amount of net general presented as a separate document.

bonded debt per capita are useful indicators of our debt position to management, citizens, and investors. GOVERNMENT FINANCE OFFICERS ASSOCIATION OF THE UNITED STATES AND CANADA (GFOA) CERTIFICATE OF ACHIEVEMENT AIVARD: The GFOA As of June 30, 2007, the City has $5.7 million in authorized, outstanding tax-supported awarded a Certificate of Achievement for Excellence in Financial Reporting to the City general obligation bonds with no authorized but unissued general obligation bonds. This of Anaheim, California, for its comprehensive annual financial report for the fiscal year level of general obligation debt was well below the legal limit of $4.0 billion, or 15% of ended June 30, 2006. This was the 31st consecutive year that the City has achieved this assessed valuation. The City's general obligation bonds are rated Aa2 by Moody's prestigious award (fiscal years ended June 30, 1976 through 2006). In order to be Investors Service and rated AA by Standard and Poor's Corporation. awarded a Certificate of Achievement, a government must publish an easily readable 3

CITY OF ANAHEIM and efficiently organized comprehensive annual financial report. This report must In closing, without the leadership and support of the City Council, preparation and satisfy both U.S. generally accepted accounting principles and applicable legal results of this report would not have been possible. Its leadership has made possible the requirements. implementation of these important and innovative concepts in fiscalmanagement by the City.

A Certificate of Achievement is valid for a period of one year only. We believe our current comprehensive annual financial report continues to conform to the Certificate Respectfully submitted, of Achievement Program's requirements and we are submitting it to GFOA to determine its eligibility for another certificate.

ACKNOWLEDGMENTS David M. Morgan William G. Sweeney The preparation of this report on a timely basis could not have been accomplished by City Manager Finance Director the Finance Director alone without the efficient and dedicated service of the entire staff of accountants in the Finance Department led by Deborah Moreno, Assistant Finance Director. Appreciation is also expressed to Mayor Pro Tern Bob Hernandez, Council Member Harry Sidhu, and Assistant City Manager Tom Wood for their significant contributions as members of the Audit Cormnittee.

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CITY OF ANAHEIM The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement 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, 2006. The Certificate of Achievement for Excellence is a prestigious national award recognizing conformance with the inFinancial highest standards for preparation of state and local government financial reports.

Reporting Presented to In order to be awarded a Certificate of Achievement, a 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, 2006 Certificate of Achievement program requirements, and we are A Certificate of Achievement for Excellence in Financial Reporting is presented by (he Government Finance Officers submitting it to GFOA.

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 and financial reporting.

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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 Linda Nguyen City Treasurer Henry W. Stern Community Development Executive Director Elisa Stipkovich Community Services Director Terry D. Lowe Convention, Sports & Entertainment Executive Director Greg Smith Finance Director William G. Sweeney Fire Chief Roger Smith Human Resources Director Kristine Ridge Planning Director Sheri Vander Dussen Public Utilities General Manager Marcie L. Edwards Public Works Director Natalie Meeks 8

M"RP KPMG LLP Suite 700 600 Anton Boulevard Costa Mesa, CA 92626-7651 Independent Auditors' Report The Honorable Mayor and City Council of the City of Anaheim, CA:

We have audited the basic financial statements of the governmental activities, the In accordance with Government Auditing Standards,we have also issued a report business-type activities, each major fund, and the aggregate remaining fund dated December 3, 2007 on our consideration of the City's internal control over information of the City of Anaheim, California (City) as of and for the year ended financial reporting and on our tests of its compliance with certain provisions of June 30, 2007, which collectively comprise the City's basic financial statements as laws, regulations, contracts, and grant agreements and other matters. The purpose listed in tie table of contents. These financial statements are the responsibility of of that report is to describe the scope of our testing of Internal control over financial tile City's management. Our responsibility is to express opinions of these financial reporting and compliance and the results of that testing, and not to provide an statements based on our audit. opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government We conducted our audit in accordance with auditing standards generally accepted Auditing Standards and should be considered in assessing the results of our audit.

in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Controller General of Management's Discussion and Analysis on pages 11 through 19 and the pension the United States. Those standards require that we plan and perform the audit to plan supplementary information on page 66 are not a required part of the basic obtain reasonable assurance about whether the financial statements are free of financial statements but are supplementary information required by the U.S.

material misstatement. An audit includes consideration of internal control over generally accepted accounting principles. We have applied certain limited financial reporting as a basis for designing audit procedures that are appropriate in procedures, which consisted principally of inquiring of management regarding the the circumstances, but not -for the purpose of expressing an opinion on the methods of measurement and presentation of the required supplementary effectiveness of tile City's internal control over financial reporting. Accordingly, information. However, we did not audit the information and express no opinion on we express no such opinion. An audit also Includes examining, on a test basis, it.

evidence supporting the amounts and disclosures' in the financial statements, assessing the accounting principles used and significant estimates made by Our audit was conducted for the purpose of forming opinions on the financial -

management, as well as evaluating the overall financial statement presentation. We statements that collectively comprise the City's basic financial statements. The believe that our audit provides a reasonable basis for our opinions. combining individual fund statements and schedules as listed in the table of contents are presented for the purposes of additional analysis and are not a required In our opinion, the financial statements referred to above present' fairly, in all part of the basic financial statements. The combining individual fund statements material respects, the respective financial position of the governmental activities, and schedules have been subjected to the auditing procedures applied in the audit of the business-type activities, each major fund, and the aggregate remaining fund the basic financial statements and in our opinion, are fairly stated in all material information of. the City of Anaheim, California, as of June 30, 2007, and the respects in relation to the basic financial statements taken as a whole. The respective changes in the financial position, and where applicable, cash flows, introductory section and statistical seition have not been subjected to the auditing thereof and the respective budgetary comparison for the General and Housing procedures applied in the audit of the basic financial statements and, accordingly, Authority Funds for the year then ended in conformity with U.S. generally accepted. we express no opinion on them.

accounting principles.

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CITY OF ANAHEIM cash flows. Thus, assets, liabilities, revenues and expenses are reported in these statements Management's Discussion and Analysis f6r some items that will only result in cash flows in future fiscal periods (e.g. uncollected revenues and accrued but unpaid interest expense).

(Unaudited)

The Statement of Net Assets presents information on all of the City's assets and liabilities, As management of the City of Anaheim (City), we offer readers of the City's basic 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 decrease§ in net assets may serve as a useful City as of and for the fiscal year ended June 30, 2007. We encourage readers to consider indicator of whether the financial position of the City as a whole is improving or the information presented here in conjunction with additional information that we have deteriorating.

furnished in our letter of transmittal, which can be found in the introductory section of this report and the City's basic financial statements in the financial section of this report. All The Statement of Activities presents information showing how the City's net assets amounts, unless otherwise indicated, are expressed in thousands of dollars.

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 THE BASIC FINANCIAL STATEMENTS revenue. This statement shows the extent to which the various functions depend on general taxes and non-program revenues for support.

This discussion and analysis are intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three The government-wide financial statements distinguish functions of the City that are components: 1) governmrent-wide financial statements, 2) fund financial statements, and principally supported by taxes and intergovernmental revenues (governmental activities)

3) notes to 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, fire, 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 Honda Center), and interest on related long-term debt. The business-type activities of the City include an electric and water utility, sanitation, golf courses, and convention, sports and entertainment venues IMa nagets I nancial (Anaheim Convention Center, Angel Stadium of Anaheim, and The Grove of Anaheim)

Discussion and Statesii operations.

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

The government-wide financial statements can be found on pages 21-23 of this report.

bummiary - r uetaii Fund financial statements. The fund financial statements focus on current available Government-wide financial statements. 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 two as a fiscal and accounting entity with a self-balancing set of accotmts, 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 II

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

on near-term inflow and outflow of spendable resources, as well 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 in evaluating a government's near-term financial requirements. statements, only in more detail. The proprietary funds financial statements provide separate information for all of the 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 fund 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 funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the govermnent-The City maintains 17 individual goverrunental funds. Information is presented separately wide financial statements because the resources of thosefunds are not available to support in the governmental funds Balance Sheet and in the govermnental funds Statement of the City's own programs.

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 funds. Data The fiduciary fund financial statements can be found on page 36 of this report.

for the other 15 governmental funds are combined into a single, aggregated presentation.

Individual fund data for each of these nonmajor governmental funds is provided in the Notes to the financial statements. '[lie notes provide additional information that is form of supplementary combining statements on pages 62-72, 78-79, and 82-83 of this essential to a full understanding of the data provided in the government-wide and fund report. financial statements. The notes to the financial statements caii be found on pages 37-65 of this report.

The City adopts an annually appropriated budget for all governmental and proprietary funds. Budgetary comparison statements for the General Fund and the major special Other supplementary information. In addition to the basic financial statements and revenue fund (Housing Authority) are required to be presented and are inclided in the accompanying notes, this report also presents combining individual find statements basic financial statements on pages 29-30 of this report. , Additionally, budgetary: referred to earlier in conlection with nonmajor goverunental 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 73- and Changes in Fund Balances for all nonmajor special revenue funds, all debt service 77, 80-81, and 84 of this report. funds, and all capital projects funds. These statements and schedules can be found on pages 67-89 of this report.

The governmental funds financial statements-can be found on pages 25-28 of this report.

FINANCIAL HIGHLIGHTS (Amounts in thousands)

Proprietary funds. The City maintains two 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 in the government-wide financial statements. The City uses its enterprise funds to account City's governmental activities decreased $2,527 (less than 1%) and business-type for its electric and water utility, sanitation, golf courses, and convention, sports and activities net assets increased $37,196 (4%).

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 At the close of the current fiscal year, the City's governmental funds reported total internal service funds to account for its general benefits and insurance, motorized ending fund balances of $206,533, a decrease of $10,216 (5%). 28%X, of ending fund 12

CITY OF ANAHEIM balances, $57,574, is available for spending at tile City's discretion (unreserved fund The City's total capital assets increased by $149,478 (6%) during the current fiscal balance). year.

At the end of the current fiscal year, unreserved undesignated fund balance for the The City's total long-term liabilities increased by $185,273 (11%) during the current General Fund was $44,722, or 19% of the total General Fund expenditures. fiscal year.

GOVERNMENT-WIDE FINANCIAL ANALYSIS NET ASSETS JUNE 30, 2007 AND 2006 Governmental Business-type Total Activities Activities Government 2007 2006 2007 2006 2007 2006 Current and other assets $ 485,098 $ 470,713 $ 695,334 $ 595,363 $1,180.432 $1,066.076 Capital assets 1,233,214 1.231,832 1,320,144 1,172,048 2,553,358 2,403,880 Total assets 1,718,312 1.702,545 2,015,478 1,767,411 3,733,790 3,469.956 Other liabilities 82,923 80,914 145,427 103,544 228,35) 184,458 Long-term liabilities outstanding 931,213 914,928 920,393 751,405 1,851,606 1,666.333 Total liabilities 1,014,136 995,842 1,065,820 854,949 2,079,956 1,850,791 Net assets:

Invested in capital assets, net of related debt 667,414 - 668,628 707,119 660,769 1,374.533 1,329,397 Restricted 69,949 99,443 38,572 36,008 108,521 135,451 Unrestricted (deficit) (33,187) (61,368) 203,967 215,685 170,780 154,317 Total net assets $ 704,176 $ 706,703 $ 949,658 S 912,462 $1,653,834 $1,619,165 By far the largest portion of the City's net assets (83%) reflects its investment in capital offsets the governmental activities unrestricted net deficit of $33,187. The Anaheim assets (e.g. land, buildings, utility plant, machinery, equipment, and infrastructure), net of Redevelopment Agency (Redevelopment Agency), a blended component unit of tile City, any related outstanding debt, used to acquire those assets. The City uses these assets to represents $128,699 of the deficit in unrestricted net assets. The Redevelopment Agency provide services to citizens; consequently, these assets are not available fir 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 Agencys 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 (7%) represents resources that are subject to asset. While this is a routine function of such an entity, when blended with the City, its external restriction 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

$170,780 may be used to meet the City's ongoing obligations to citizens and creditors. Of deficit position.

the unrestricted net assets, $203,967 is attributable to business-type activities, which 13

CITY OF ANAHEIM CHANGE IN NET ASSETS YEARS ENDED JUNE 30, 2007AND 2006 Governmental Business-type Total Activities Activities Government 2007 2006 2007 2006 2007 2006 REVENUES Program revenues:

Charges for services $ 62,865 $ 62,031 $451,219 $452,261 $ 514,084 $ 514,292 Operating grants and contributions 97,633 87,024 1,160 2,556 98.793 89,580 Capital grants and contributions 30,123 29,004 4,808 5,749 34,931 34,753 General revenues:

Taxes:

Property taxes 98,647 90,299 98,647 9(0,299 Sales and use taxes 65,944 68,024 65,944 68,024 Transient occupancy taxes 83,914 75,979 83,914 75,979 Motor vehicle license fees 1,866 2,595 1,866 2,595 Other taxes 10,337 10,817 10,337 10,817 Unrestricted investment earnings 17,597 12,346 27,375 16,850 44,972 29,196 Other 1,701 5,078 1,701 5,078 Total revenues 470,627 443,197 484,562 477,416 955,189 920,613 EXPENSES Program activities:

Governmental activities:

General government 10,951 7,394 10,951 7,394 Police 115,714 98,484 115,714 98,484 Fire 50,727 50,957 50,727 50,957 Community Development 93,089 87,814 93,089 87,814 Planning 16,107 14,493 16,107 14,493 Public Works 44,473 42,029 44,473 42,029 Community Services 36,827 31,712 36,827 31,712 Public Utilities 1,800 1,704 1,800 1,704 Convention, Sports and Entertainment 10,539 8,652 10,539 8,652 Interest on long-term debt 50,053 46,431) 50,053 46,430 Business-type activities:

Electric Utility, 338,514 365,277 338,514 365,277 Water Utility 51,672 47,225 51,672 47,225 Sanitation 48,946 47,163 48,946 47,163 Golf Courses . 4,365 4,433 4,365 4,433 Convention, Sports and Entertainment Venues 46,743 47,965 46,743 47,965 Total expenses 430,280 389,669 490,240 512,1)63 920,520 901,732 Excess (deficiency) before transfers 40,347 53,528 (5,678) (34,647) 34,669 18,881 Transfers in (out) (42,874) 8,444 42,874 (8,444)

Increase (decrease) in net assets. (2,527) 61,972 37,196 (43,091) 34,669 18,881 Net assets at beginning of year 706,703 644,731 912,462 955,553 1,619,165 1,600,284 Net assets at end of year $704,176 $706,703 $949,658 $912,462 $1,653,834 $1,619,165 14

CITY OF ANAHEIM REVENUES BY SOURCE - Governmental activities. The most significant revenues of the governmental activities GOVERNMENTAL ACTIVITIES are general taxes (55%), which include property taxes (21%), sales and use taxes (14%),

transient occupancy taxes (18%), other taxes (2%), and motor vehicle license fees (VLF)

Oiher axes Ott<1%

stricted investtntt (less than 1%). Program revenues are 41% of the total revenues of the governmental eanrnngs 2% OtUnre Charges for serites activities, which include charges for services (13%), operating grants and contributions 21%

(21%), and capital grants and contributions (7%).

Operartinggearntand Motor vehicle license fees

<1% \ Public safety (police and fire) expenses are the most significant (39%) of all governmental Trasient ccupancytaxes activities expenses, followed by community development (22%), interest on long-term 18%

debt (12%), public works (10%), and various other programs (17%). Included in these amounts is depreciation expense, which is 7% of the total expenses for governmental activities.

Governmental activities revenues increased $27,430 (6%) in the current fiscal year.

Operating grants increased $12,149 (14%) and capital grants increased $1,119 (4%)

primarily due to an increase in Urban Area Security Initiative (UASI) grant revenues. The overall strength in the economy, increased property assessments, and Disneyland's 50th Capital gaanrsad Sales and usetaxes Property a-es contiburions anniversary celebration contributed to the increases in property taxes of $8,348 (9%) and 21% 7%

14% transient occupancy taxes (TOT) of $7,935 (10%).

Governmental activities expenses increased $40,611 (10%) in the current fiscal year. The most significant change in governmental expenses was due to the increased police EXPENSES AND PROGRAM REVENUES - expenses of $17,230 (10%). Of this, over 40% of the increase related to expenses for the GOVERNMENTAL ACTIVITIES UASI grant. In addition, police expenses increased due to the implementation of the Anaheim Family Justice Center, which provides a "one-stop" community center, capable S120.000 of serving the victims of domestic violence, child abuse, elder abuse and sexual assault.

Five sworn positions and additional training were also added to police. Community S100,000 development expenses increased $5,275 (6%), primarily due to the increase in U.S.

Department of Housing and Urban Development (HUD) Section Eight Program for rental

$80.000 assistance. Community services expenses increased $5,115 (16%), primarily due to the

$60.000 operational requirements of new or expanded facilities, including the Haskett Library expansion, Central Library renovation, the new East Hills Library, West Anaheim Youth

$40,000 Center, and East Anaheim Gym.

$20.000 There were no other programs with significant or unusual changes.

0 ~0 .~ 0 /

I 4'

0 / ~, ~ '40. 400

'4 4 ~ I 1<

I .4' ~0 Cl f I

/

Progran revenues

• Expenses -

15

CITY OF ANAHEIM REVENUES BY SOURCE - Business-type activities. Business-type activities increased the City's net assets by BUSINESS-TYPE ACTIVITIES $37,196. Key elements of this change are as follows:

Unrestricted investrent Operatinggrants and Capital g rants and earnings, 6% Charges for services of $451,219 decreased $1,042 (less than 1%). The decrease in contributions contributinnts,I%_

<1% charges for services from the Electric Utility of $12,771 (4%) was primarily due to a decrease in wholesales energy revenues resulting from a decrease in supply and lower prices. This decrease was offset by increases in all other business-type activities, most notably the increase of $4,951 (18%) from Convention, Sports, and Entertainment Venues due to greater use of the facilities and services.

Operating grants and contributions of $1,160 decreased $1,396 (55%). This decrease was primarily due to the Sanitation decrease of $1,J60 (93%) primarily due to grant revenues in the prior year that did not recur.

I Chaiges far servises Total expenses of $490,240 decreased $21,559 (4%). The most significant change in 93%

program expenses is the decrease in the Electric Utility of $26,763 (7%). This is primarily due to a $4,542 decrease in purchased power costs and a decrease in depreciation expense of $21,462 for the San Onofre Nuclear Generating Station units 2 and 3 (SONGS) due to EXPENSES AND PROGRAM REVENUES - the sale of the City's ownership interest on December 29, 2006 (see note I for further

. BUSINESS-TYPE ACTIVITIES discussion).

$350.000-

$315,000

$280.000

$245,000

$210.000

$175.000

$140.0001

$105,000

$70,000

$35,000

$-

Electric Utility Water Utility Sanitatirn Golf Courses Conenttion, Spocrts alstdEnrttainmtt Venues ri Program revenues U Expenses 16

CITY OF ANAIHEIM FINANCIAL ANALYSIS OF THE CITY'S FUNDS Proprietary funds. The City's proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail.

Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such The Electric Utility's fund net assets decreased $20,441 (6%) in the current fiscal year.

information is useful in assessing the City's financing requirements. In particular, The most significant factors of the change in fund net assets are discussed in the unreserved fund balance may serve as a useful measure of a government's net resources government-wide financial analysis of business-type activities.

available for spending at the end of the fiscal year.

The Water Utility's fund net assets increased $193 (less than 1%) in the current fiscal year.

As of the end of the current fiscal year, the City's governmental funds reported total ending There were no significant or unusual changes.

fund balances of $206,533, a decrease of $10,216 in comparison with the prior fiscal year.

28% of the ending fund balances, $55,298, constituted unreserved fund balances, which Sanitation's fund net assets increased $55,697 (172%) in the current fiscal year. The are considered available for appropriation. The remainder of the fund balances is reserved change primarily resulted from transfer of $51,425 in sewer related capital assets from to indicate that it is not available for new spending because it has already been committed governmental activities.

1) to pay debt service ($44,594), 2) related to land held for resale by the Redevelopment Agency ($64,074), and 3) to offset non-current financial resources that are not anticipated The Golf Courses' fund net assets decreased $301 (4%) in the fiscal current year. There to be liquidated in the near term (S40,291). were no significant or unusual changes.

General Fund revenues were $19,017 (8%) greater than in the prior fiscal year primarily The Convention, Sports and Entertaimnent Venues fund net assets increased $4,578 (1%)

due to-the increases in property taxes and transient occupancy taxes as discussed in the in the current fiscal year. The most significant factors of tile change in fund net assets are government-wide financial analysis of governmental activities. discussed in the govermnent-wide financial analysis of business-type activities.

General Fund expenditures increased $18,557 (9%) in the current fiscal year. The most GENERAL FUND BUDGETARY HIGHLIGHTS significant change in General Fund expenditures was due to the increase in the Police Department of $5,364 (6%), primarily from the Anaheim Family Justice Center, During the year the original budget was amended to increase appropriations by $9,454 additional personnel, and training. In addition, Community Services expenditures (3%). Following are the main components of the increase:

increased $3,469 (13%), primarily due to the operational requirements of new or expanded * $3,362 for carryovers of prior year expenditures.

facilities. Capital outlay increased $1,437 (266%), primarily due to the acquisition of a * $1,960 for additional Public Works expenditures. $1,000 for the final phase of the historic home for preservation, corridor beautification, and computer automation for the State College Boulevard Master Plan improvements; $350 for costs related to the Central Library renovation. Debt service increased $1,653 (194%), primarily due to Circle Haven and Ramsgate landslides.

payments for the Police Department's Computer-Aided Dispatch and Records * $2,557 for additional Community Services expenditures. $750 for acquisition and Management System (CAD/RMS) loan that were paid by nomnajor governmental funds structural improvement costs for preservation of a historic home and $1,291 for in prior years. costs associated with the new Muzeo.

• $787 for additional Fire expenditures. $625 for overtime costs related to Master The Housing Authority Fund revenues decreased by $766 (1%). Expenditures decreased Mutual Aid and Federal Disaster Responses.

by $4,498 (6%). This decrease in expenditures resulted from a $9,669 reduction in capital outlay due to the prior year aquisition of affordable housing land and improvements, and was partially offset by an increase of approximately $4,200 in the HUD Section 8 rental assistance program.

17

CITY OF ANAHEIM The increases in appropriations were to be funded primarily from fund balance. General Fund expenditures were less than budgeted. Of the total appropriations of

$242,518, approximately 3%, or $8,432, went unspent. There were no significant General Fund revenues of $262,785 exceeded budgeted revenues of $254,269 by $8,516 variances.

(3%). The excess was primarily due to property taxes ($2,950) and transient occupancy taxes ($4,103) due to the overall strength in the economy.

CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS (net of accumulated depreciation)

JUNE 30, 2007 AND 2006 Governmental Business-type Total Activities Activities Government 2007 2006 2007 2006 2007 2006 Land $ 548,260 $ 521,904 S 56,487 S 37,593 $ 604.747 $ 559,497 Construction in progress 42,025 46,982 145,715 76,745 187,740 123,727 Nuclear fuel at amortized cost 2,792 2,792 Buildings, structures and improvements 170,341 148,510 391,780 342,903 562,121 491,413 Utility plant 715,106 699,513 715,106 699,513 Machinery and equipment 52,699 41,539 11,056 12,502 63,755 54,041 tnfrastructure 419,889 472,897 419,889 472,897 Total $1,233,214 $1,231,832 $1,320,144 $1,172,048 $2,553,358 $2,403,880 Capital assets. The City's investment in capital assets for its governmental and business- 6%, of Which governmental activities increased less than 1% and business-type activities type activities at June 30, 2007,, amounted to $2,553,358 (net of accumulated increased 13%. The increase in business-type activities is primarily due to construction in depreciation). This investment in capital assets included land, construction in progress, progress for the electric substations and distribution system.

buildings, structures and improvements, utility plant, machinery and equipment, and infrastructure. The total increase in the City's investment in capital assets resulted from Additional information on the City's capital assets can be found in note 5 of the notes to many various projects throughout the City. The total increase over the prior fiscal year was the financial statements, on pages 48-49 of this report.

18

CITY OF ANAHEIM LONG-TERM LIABILITIES JUNE 30, 2007 AND 2006 Governmental Business-type Total Activities Activities Goverlnsent 2007 2006 2007 2006 2007 2006 General obligation bonds $ 5,700 $ 6,170 $ 5,70(1 $ 6,17(0 Revenue bonds 582,272 575,125 $706.126 $513,874 1,288,398 1,088,999 TFaxallocation bonds 152,135 159,664 152,135 159,664 Certificates of participation 26,788 30,066 96,475 125,088 123,263 155,154 Capital lease obligations 2,484 2,220 267 274 2,751 2,494 Notes and loans payable 57,614 43,331 14,081 14,976 71,695 58.307 Self-insurance 30,897 30,828 30,897 30,828 Retired medical 73,323 67,524 73,323 67,524 Decommissioning provision 103,444 97,193 103,444 97,193 Total $931,213 $914,928 $920393 $751,405 $1,851,606 $1,666,333 Long-terin liabilities. The City's outstanding long-tenn liabilities, including bonds, For the 2008 fiscal year, the City appropriated $267,057 in estimated available certificates of participation, capital leases, notes and loans payable, self-insurance, retired resources of $298,45(0 for General Fund for spending. This leaves approximately medical, and the provision for decommissioning costs totaled $1,851,758 at June 30, 2007. $31,393 in estimated available reserves, which is 12% of General Fund Of this total, $931,213 (50%) was in governmental activities and $920,393 (50%) was in appropriations. The City's long-standing policy is to maintain General Fund business-type activities. The City's outstanding long-term liabilities increased $185,273 reserves of at least 7% to 10% of annual appropriations.

(11%) in fiscal year 2007. The increase is primarily due to the issuance of new revenue bonds by the Electric Utility ($206,035) and Sanitation ($47,710), which was partially The City annually reviews all of its fees as part of the budget adoption process.

offset by the refunding of $21,110 of Electric Utility certificates of participation and Developer, construction, and other fees applicable to residents and developers

$49,625 of Electric Utility revenue bonds. doing business with the City were adjusted in June 2006, generally by the average of Consumer Price Index (CPI) of approximately 3%. This is consistent with the Additional intformation on the City's long-term liabilities ban be found in note 8 of the City's policy of recovering costs without becoming an undue financial burden oil notes to the financial statements, on pages 50-58 of this report. existing tax and rate payers.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES REQUESTS FOR INFORMATION The unemployment rate in the Orange County, California area for June 2007 was This financial report is designed to provide a general overview of the City's finances for 3.9%, which remains below both the state (5.2%) and national (4.5%) average. all those with an interest in the government's finances. Questions concerning any of the 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 Boulevard, Suite 643, Anaheim, California, 92805.

19

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CITY OF ANAHEIM Statement of Net Assets June 30, 2007 (In thousands)

Governmental Business-type Activities Activities Total ASSETS Cash and cash equivalents S 84,454 $ 84,584 $ 169,038 Investments 177,146 177,229 354,375 Accounts receivable, net 11,347 50,140 61.487 Accrued interest receivable 2,726 5,708 8,434 Internal balances, net 2,029 (2,029)

Due frotn other goverunents 46,807 46,807 Notes receivable, net 39,384 39,384 Inventories 847 7,133 7,980 Land held for resale, net 64,074 . 64,074 Prepaid and other assets 1,687 26,472 28,159 Restricted cash and cash equivalents 24,963 17,151 42,114 Restricted investments 25,669 303.045 328,714 Unamortized debt issuance costs 3,965 8,710 12.675 Bond payment receivable 16,927 16,927 Pipeline receivable 264 264 Capital assets, net:

Nondepreciable 590,285 202,202 792,487 Depreciable 642,929 1,117,942 1 760,871 Total assets 1,718,312 2,015,478 3,733,790 LIABILITIES Accounts payable 29,213 47,786 76,999 Wages payable 23,199 1,965 25,164 Due to other governments 6,041 6,041 Interest payable 10,452 9,865 20,317 Short-terns notes payable 2,759 2,759 Arbitrage rebate liability 215 215 Deposits 5,023 11,594 16,617 Regulatory credits 73,468 73,468 Unearned revenues 6,236 534 6,770 Noncurrent liabilities:

Due within one year 43,264 25,527 68,791 Due in more than one year 887,949 894,866 1,782,815 Total liabilities 1,014,136 1,065,820 2,079,956 NET ASSETS Invested in capital assets, net of related debt 667,414 707,119 1,374,533 Restricted for:

Debt service 1,932 12,115 14,047 Capital projects 8,558 20,052 28,610 Community development 33,658 33,658 Streets and roads 21,068 21,068 Other purposes 4,733 6,405 11,138 Unrestricted (deficit) 33,187) 203,967 170,780 Total net assets $ 704,176 $ 949,658 $1,653,834 The accompanying notes are an integral part of these-financial statements. 21

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CITY OF ANAHEIM Statement of Activities Year Ended June 30, 2007 (In thousands)

Net (Expense) Revenue and Program Revenues Changes in Net Assets Indirect Operating Capital Expenses Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Allocation Services Contributions Contributions Activities Activities Total Governmental activities:

General government $ 23.190 $(12,239) $ 4,557 $ 304 $ (6,090) $ (6,090)

Police 113,047 2,667 7,590 12,292 $ 4,230 (91,602) (91,602)

Fire 50,189 538 11,033 312 153 (39,229) (39.229)

Community Development 92,035 1,054 6,713 69,058 163 (17,155) (17,155)

Planning 15.388 719 10,790 1,455 (3,862) (3,862)

Public Works 43,300 1,173 11,662 12,770 17,616 12,425) (2,425)

Community Services 35,739 1,088 10,320 1,442 808 (24,257) (24,257)

Public Utilities 1,800 (1,800) (1,800)

Convention, Sports and Entertainment 10,539 201) 7,153 (3,186) (3.186)

Interest on long-term debt 50,053 (50,053) (50,053)

Total governmental activities 435,280 (5,000) 62,865 97,633 (239,659) (239,659)

Business-type activities:

Electric Utility 336,216 2,298 310,074 50 1,918 $(26,472) (26,472)

Water Utility 50,687 985 49,600 1,714 (358) (358)

Sanitation 48,612 334 53,215 93 4,362 4,362 Golf Courses 4,241 124 " 6,022 1,657 1,657 Convention, Sports and Entertainment Venues 45,484 1,259 32,308 1,017 1,176 (12,242) (12.242)

Total business-type activities 485,240 5,000 451,219 4,808 (33,053 (33,053)

Total government $920,520 $ $514,084 $98,793 $34,931 (239,659) (33,053) (272,712)

General revenues:

Taxes:

Property taxes 98,647 98,647 Sales and use taxes 65,944 65,944 Transient occupancy taxes 83,914 83,914 Motor vehicle license fees 1,866 1,866 Other taxes 10,337 10,337 Unrestricted investment earnings 17,597 27,375 44,972 Other 1,701 1,701 Transfers (42,874) 42,874 Total general revenues and transfers 237.132 70,249 307,381 Change in net assets (2,527) 37,196 34.669 Net assets at beginning of year 706,703 912,462 1,619,165

$ 704,176 $949,658 $1 ý653,834 Net assets at end of year The accompanying notes are an integral part of these financial statements. 23

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CITY OF ANAHEIM Balance Sheet Governmental Funds June 30, 2007 (In thousands)

Nonmajor Total Housing Governmental Governmental General Authority Funds Funds ASSETS Cash and cash equivalents $10,926 $ 3,289 $ 23,173 $ 37,388 Investments 22,814 6,868 49,329 79,011 Accounts receivable, net 10,410 65 10,475 Accrued interest receivable 392 63 882 1,337 Notes receivable 654 19,838 22,355 42,847 Due from other finds 17,718 657 11,611 29,986 Due from other govermunents 15,518 284 31,005 46.807 Inventories 256 256 Land held for resale, net 64,074 64,074 Prepaid and other assets 2,024 1,323 3,347 Restricted cash and cash equivalents 5,727 19,218 24,945 Restricted investments 25,197 25,197 Total assets $80,712 $36,726 $248,232 $365,670 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 7565 $ 1,267 $ 14,548 $ 23,380 Wages payable 4,870 117 406 5,393 Short-term note payable 2,759 2,759 Interest payable on short-terin note 64 64 Deposits 3,636 78 1,309 5,023 Due to other funds 79 34,964 35,043 Due to other governments 196 5,764 81 6,041 Deferred revenues 8,432 21,403 51,599 81.434 Total liabilities 24,778 28,629 105,730 159,137 Fund balances:

Reserved for encumbrances 2,687 16,700 19,387 Reserved for noncurrent due from other funds 6,245 162 10,894 17,301 Reserved for inventories 256 256 Reserved for debt service 44.594 44,594 Reserved for land held for resale 64,074 64,074 Reserved for prepaid and other assets 2,024 1,323 3,347 Unreserved - designated for debt service, reported in:

Debt Service Funds 2,276 2,276 Unreserved - designated for capital projects, reported in:

Special Revenue Funds 2.4315 2,415 Capital Projects Funds 35,510 35,510 Unreserved - undesignated, reported in:

General Fund 44,722 44.722 Special Revenue Funds 7,935 (8,445) (510)

Capital Projects Funds (26,839) (26,839 Total fund balances 55,934 8,097 142,502 206,533 Total liabilities and fund balances $80,712 $36,726 $248,232 $365,670 The accompanying notes are an integral part of these financial statements. 25

r CITY OF ANAHEIM Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2007 (In thousands)

Total fund balances - governmental funds $ 206,533 Amounts reported for governmental activities in the 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 $ 548,260 Construction in progress 42,025 Buildings, structures and improvements 254,811 Machinery and equipment 48,870 Infrastructure 672,647 Accumulated depreciation (358,796)

Total capital assets, net 1,207.817 Other long-term assets are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 72,586 Payment of debt issuance costs use current financial resources in the governmental funds but increase assets in the Statement of Net assets 4,017 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 in the Statement of Net Assets. 49,364 Compensated absences, not otherwise included in the internal service funds, are not due and payable in the current period and, therefore, are not reported in the funds. (267)

Long-term liabilities of governmental funds, including bonds, certificates of participation, and notes and loans payable ($825,526), and accrued interest payable ($10,348), are not due and payable in the current period and, therefore, are not reported in the funds. (835,874)

Net assets of governmental activities $ 704,176 The accompanying notes are an integral part of these financial statements. 26

CITY OF ANAHEIM Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2007 (In thousands)

Nonmajor Total Housing Governmental Governmental General Authority Funds Funds Revenues:

Property taxes $ 57,268 $ 45,218 $ 102!486 Sales and use taxes 66,761 66,761 Transient occupancy taxes 83,914 83,914 Other taxes 7,531 7.531 Licenses, fees and permits 23,229 S 93 14,669 37,991 Intergovernmental revenues 3,750 62,048 45,729 111,527 Charges for services 12,469 357 134 12,960 Fines, forfeits and penalties 3,689 3,689 Use of money and property 3,777 4,704 9,727 18,208 Other 397 539 6,665 7,601 Total revenues 262,785 67,741 122,142 452,668 Expenditures:

Current:

City Council 275 275 City Administration 2,890 2,890 City Attorney 4,519 119 4,638 City Clerk 1,045 1,045 Human Resources 1,081 1,081 Finance 4,868 19 4,887 City Treasurer 538 538 Police 97,693 11,774 109,467 Fire 47,860 341 48,201 Conmmunity Development 1017 65,188 28,584 94.789 Planning 13.468 1,294 14,762 Public Works 17,375 9,445 26,820 Conmmunity Services 30.619 2,169 32,788 Public Utilities 1,791 1,791 Convention, Sports and Entertainment 6,118 1,281 7,399 Capital outlay 1,978 29 74,154 76,161 Debt service:

Principal retirement 2,273 24 15,768 18,065 Interest and fiscal agent charges 230 2 40,955 41,187 Debt issuance costs 4,017 4,017 Total expenditures 235,638 65,243 189,920 490,801 Excess (deficiency) of revenues over (under) expenditures 27,147 2.498 (67,778) (38,133)

Other financing sources (uses):

Transfers in 30,506 3,664 67,079 101,249 Transfers out (57,950) (2,237) (30,841) (91,028)

Issuance of refunding bonds 256,320 256,320 Discount on refunding bonds (3,186) (3,186)

Payment to refunded bond escrow agent (255,325) (255,325)

Issuance of notes payable 238 18,000 18,238 Capital leases 1,552 2 95 1,649 Total other financing sources (uses) (25.892 1,667 52,142 27,917 Net change in fund balances 1.255 4,165 (15,636) (10,216)

Fund balances at beginning of year 54.679 3,932 158,138 216,749 Fund balances at end of year $ 55,934 $ 8,097 $ 142,502 $ 206.533 The accompanying notes are an integral part of these financial statements. 27

CITY OF ANAHEIM Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2007 (In thousands)

Net change in fund balances - total governmental funds $ (10,216)

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

Governmental funds reportecapital 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 ($76,161) exceeded depreciation ($25,896) in the current period. 50,265 Transfers of capital assets between governmental funds and proprietary funds do not require the use of current financial resources and are not reported as transfers in the funds. (53,395)

The net effect of other miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase net assets. 5,616 Revenues in the Statement of Activities do not provide current financial resources and are not reported as revenues in the governmental funds. 2,663 Proceeds from long-term debt ($268,296), net of debt issuance costs of ($4,017) provide current financial resources to governmental funds, but the issuing of debt increases long-tenn liabilities in the Statement of Net Assets. (264,279)

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. 270,104 Certain expenses reported in the Statement of Activities that do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. (3,665)

Internal service funds are used by management to charge the costs of certain activities, such as insurance, employee benefits, an*d fleet services, to individual funds. The net revenue of the internal service funds is reported with goverunental activities. 380 Change in net assets of governmental activities $ (2,527)

The accompanying notes are an integral part of these financial statements. 28

CITY OF ANAHEIM Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Budgetary Basis Actual - General Fund Year Ended June 30, 2007 (In thousands)

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

Property taxes $ 54,093 $ 54,318 S 57,268 $ 2,950 Sales and use taxes 68,778 68,778 66,761 (2,017)

Transient occupancy taxes 79,811 79,811 83,914 4,103 Other taxes 8,065 8,065 7,531 (534)

Licenses, fees and permits 20,455 20,757 23,229 2,472 Intergovernmental revenues / 3,830 3,861 3,750 (j111)

Charges for services 12,520 12,510 12,469 (41)

Fines, forfeits and penalties 3.188 3,188 3,689 501 Use of toney and property 2,325 2,131 3,777 1,646 Other 850 850 397 (453)

Total revenues 253,915 254,269 262,785 8,516 Expenditures:

City Council 286 286 275 (11)

City Administration 3,371 3,430 2,899 (531)

City Attorney 4,733 4,733 4,551 (182)

City Clerk 983 1,061 1,040 (21)

I-luman Resources 1,046 1,095 1,090 (5)

Finance 4,812 5,050 4,878 (172)

City Treasurer 643 645 538 (107)

Police 98,982 99,224 98,795 (429)

Fire 47,324 49,864 47.932 (1,932)

Community Development 1,301 1,301 1,017 (284)

Planning 13,808 14,153 13,614 (539)

Public Works 16,552 18,779 17,835 (944)

Conmmunity Services 31,828 34,979 31,713 (3,266)

Public Utilities 1,733 1,796 1,791 (5)

Convention, Sports and Entertainment 5,662 6,122 6.118 (4)

Total expenditures 233,064 242,518 234,086 -(8,432)

Excess of revenues over expenditures 20,851 11,751 28,699 16,948 Other financing sources (uses):

Transfers in 32,70(0 32,700 30,506 (2,194)

Transfers out (57,046) (57,046) (57,950) (904)

Proceeds from the sale of capital assets 2(0 20 (20)

Total other financing uses (24,326 (24,326) (27,444) (3,118)

Net change in fund balance (3,475) (12,575) 1,255 13,830 Fund balance at beginning of year 54,679 54,679 54,679 Fund balance at end of year $ 51,204 $ 42.104 S 55,934 $13,831)

The accompanying notes are an integral part of these financial statements.

29

CITY OF ANAHEIM Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Budgetary Basis Actual - Housing Authority Year Ended June 30, 2007 (In thousands)

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

Licenses, fees and permits $ 70 S 70 $ 93 $ 23 Intergovernmental revenues 60,849 63,961 62,048 (1,913)

Charges for services 386 386 357 (29)

Use of money and property 463 463 4,704 4,241 Other 583 583 539 (44)

Total revenues 62,351 65,463 67,741 2,278 Expenditures:

Community Development 66,360 69,108 65,241 (3,867)

Total expenditures 66,360 69,108 -65,241 -(3,867)

Excess (deficiency) of revenues over (under) expenditures (4,009) (3,645) 2,500 6,145 Other financing sources (uses):

Transfers in 1,023 1,023 3,664 2,641 Transfers out (1,668) (5,168) (2,237) 2,931 Issuance of long-term debt 1,400 1,400 238 (1,162)

Proceeds from the sale of capital assets 2,660 2,660 _____(2,660)

Total other financing sources (uses) 3,415 (85) 1,665 1,750 Net change in fund balances (594) (3,730) 4,165 7,895 Fund balance at beginning of year 3,932 3,932 3,932 ___

Fund balance at end of year $ 3,338 S 202 $ 8,097 $ 7,895

'[le acconipanying notes are an integral part of these financial statements. 330

CITY OF ANAHEIM Statement of Fund Net Assets Proprietary Funds June 30, 2007 (in thousands)

Business-type Activities - Enterprise Funds Convention, Governmental Sports and Activities -

Electric Water Golf Entertainment Internal Utility Utility Sanitation Courses Venues Total Service Funds ASSETS Current assets:

Cash and cash equivalents $ 55,135 $ 9,245 $ 10,600 $ 221 $ 9,383 $ 841584 $ 47,066 Investments 115,764 19,410 22,137 461 9,457 177,229 98,135 Restricted cash and cash equivalents 1,271 1,538 2,809 Restricted investments 3,298 47,412 50,710 Accounts receivable, net 35,039 6,120 6,865 197 1,919 50,140 872 Accrued interest receivable 4,150 347 486 3 -722 5,708 1,389 Interfund receivable 280 280 17 Inventories 6,847 281 5 7,133 591 Bond payment ieceivable 1,455 1,455 Prepaid and other assets 143 281 1 425 40 Total current assets 217,358 40,253 89,038 882 32,942 380,473 148,110 Noncurrent assets:

Restricted cash and cash equivalents 13,540 802 14,342 18 Restricted investments 234,643 1,920 15,772 252,335 472 Unamortized debt issuance costs 6,992 142 519 1,057 8,710 7 Bond payment receivable, less current portion 15,472 15,472 Pipeline receivable 264 264 Interfund receivable, less current portion 140 10,368 10,508 62 Prepaids and other assets 26,047 26,047 Capital assets:

Land 33,974 2,113 316 1,949 18,135 56,487 Buildings, structures and improvements 52,728 16,286 472,580 541,594 6,679 Utility plant 738,006 298,860 1,036,866 Machinery and equipment 4,202 968 25,662 30,832 58,522 Construction in progress 1,022 13 865 145,715 135,831 7,984 907,811 308,957 58,268 19,216 517,242 1,811,494 65,201 Less accunulated depreciation (235,359) (86,401) (5,275) (6,870) (157,445) (491,350) (39,804)

Capital assets, net 672,452 222,556 52,993 12,346 359,797 1,320,144 25,397 Total noncurrent assets 953,814 224,882 53,512 12,346 403,268 1,647,822 25,956 Total assets 1,171,172 265,135 $142,550 13,228 436,210 2,028,295 174,066 (continued) 31

CITY OF ANAHEIM Statement of Fund Net Assets Proprietary Funds June 30, 2007 (In thousands) (continued)

Business-type Activities - Enterprise Funds Convention, Governmental Sports and Activities -

Electric Water Golf Entertainment Internal Utility Utility Sanitation Courses Venues Total Service Funds LIABILITIES Current liabilities (payable liom current assets):

Accounts payable $ 32,629 $ 9,060 $ 4,123 $ 294 $ 1,235 $ 47,341 $ 5,833 Wages payable 902 337 119 15 561 1,934 1,286 Interest payable 210 1,923 2,133 40 Compensated absences 16,253 Long-tenn obligations 3,750 32 7 1 8,403 12,193 16,360 Unearned revenues 534 534 2,611)

Deposits 7,153 1,939 732 3 1,767 11,594 Intetfund payable 548 280 828 Regulatory credits 72,640 828 731,68 Total current liabilities (payable from current assets) 117,074 12,196 5,191 861 14,703 150,025 42,382 Current liabilities (payable from restricted assets):

Accounts payable 445 445 Wages payable 31 31 Interest payable 7,447 285 7,732 Arbitrage rebate liability 213 2 215 Long-term obligations 11,018 2.316 13,334 Total current liabilities (payable from restricted assets) 19,154 2,603 21,757 Total current liabilities 136,228 14,799 5,191 861 14,703 171,782 42,382 Noncurrent liabilities:

Interfund payable, less current portion 4,842 140 4,982 Long-term obligations, less current portion 611,071 20,225 49,231 110,895 791,422 89,327 Provision for decommissioning costs 103,444 103.444 Total noncurrent liabilities 714,515 21(,225 49,231 4,842 111,035 899,848 89,327 Total liabilities 850,743 35,024 54,422 5,703 125,738 1,071,630 131,709 FUND NET ASSETS Invested in capital assets, net of related debt 163,918 202,308 51,959 12,345 276,589 707,119 24,428 Restricted for:

Debt service 10,690 1,425 12,115 Capital projects 10,685 2,226 7,141 20,052 Other purposes 6,405 6,405 Unrestricted (deficit) 128,731 24,152 36,169 (4,820) 26,742 210,974 17,929 Total fund net assets 320,429 $230,111 $ 88,128 $ 7,525 $ 310,472 956,665 $ 42,357 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. (7,007)

Net assets of business-type activities $949,658 TIle accompanying notes are an integral part of these financial statelnents. 32

CITY OF ANAHEIM Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds Year Ended June 30, 2007 (In thousands)

Business-type Activities - Enterprise Funds Convention, Governmental Sports and Activities -

Electric Water Golf Entertainment Internal Utility Utiliiy Sanitation Courses Venues Total Service Funds Operating revenues:

Sales of light and power $278,653 $278.653 Transmission revenues 28,797 28,797 Sales of water $ 48,062 48,062 Solid waste collection fees $38,485 38,485 Wastewaler fees 10,113 10.113 Street cleaning fees 3,159 3,159 Green fees and cart rentals $ 5,543 5,543 Facilities rental $ 24,678 24,678 Concession fees 259 6,477 6,736 Other 2,624 1 1,458 220 1,153 6,993 $139,183 Total operating revenues 310,074 49,61)0 .53,215 6,022 32,308 451,219 139,183 Operating expenses:

Cost of purchased power .198,957 198,957 Fuel and generation of power 35,154 35,154 Cost of purchased water 22,922 22,922 Treatment and pumping of water 5.605 5,605 Maintenance, operations and administration 31,229 14,676 47,252 3,490 26,727 123,374 36,891 Insurance premiums and claims 7,408 Compensated absences and other benefits 99,291 Depreciation and amortization 49.927 6.954 1,246 670 12,406 71,203 5,664 Total operating expenses 315,267 50,157 48,498 4,160 39,133 457,215 149,254 Operating income (loss) (5,193) (557) 4,717 1,862 (6,825) (5,996) (10,071)

Nonoperating income (expenses):

Intergovernmental revenues 50 93 143 Interest income 20,297 1,995 1,869 22 3,192 27,375 7,559 Debt service recovery 1,017 1,017 Interest expense (22,188) (739) (192) (185) (6,990) (30,294) (84)

(201) (201) 146 Gain (loss) from disposal of capital assets

'total nonoperating income (expenses) (1,841) 1,256 1,770 (163) (2,982) (1,960) 7,621 Income (loss) before contributions and transfers (7,034) 699 6,487 1,699 (9,8017) (7,956) (2,450)

Capital contributions 2,908 1,980 51,425 1,890 58,203 Transfers in 456 12,495 12.951 300 Transfers out (16,315) (2,942) (2,215) (2,000) (23,472)

Change in fund net assets (20,441) 193 55,697 (301) 4,578 39,726 (2,150)

Fund net assets at beginning of year 340,870 229,918 32,431 7,826 305,894 44,507 Fund net assets at end of year $320,429 $230, t11 $88,128 $ 7,525 $310.472 $ 42.357 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds. (2,530)

Change in net assets of business-type activities $37,196 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, 2007 (Inthousands)

Business-type Activities - Enterprise Funds Convention, Governmsental Sports and Activities -

Electric WMater Golf Entertainment Internal Utility Utility Sanitation Courses Venues Total Service Funds Cash flows from operating activities:

Receipts from customers and users $ 338,666 $ 48,950 $ 52,204 $ 5,712 $ 30,592 $ 476,124 Receipts from interfund services provided -695 294 59 1,048 $138,908 Payments to suppliers (204,909) (25,661) (39,609) (2,723) (7,887) (280,789) (23,872)

Payments to employees (32,277) (10,557) (4,632) (500) (16,066) (64,032) (104,456)

Payments for interfund services-used (8,640) (4,333) (2,761) (207) (2,708) (18,649) (2,809)

Payments for insurance premiums and claims (7,016)

Other receipts 1,399 220 1,619 2,143 Net cash provided by operating activities 93,535 8,693 6,660 2,502 3,931 115,321 2,898 Cash flows from noncapital financing activities:

Receipt of interfund balances 280 331 611 6 Transfers in 12,495 12,495 300 Transfers out (15,859) (2,566) (2,215) (2,000) (22,640)

Operating grant receipts 50 93 143 Net cash provided by (used in) noncapital financing activities (15,529) (2,566) (2,122) (2,000) 12,826 (9,391) 306 Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 250 Proceeds of borrowing net of premium 209,453 49,229 258,682 Transfers to escrow agent (72.178) (72,178)

Capital contributions 1,916 746 2,662 (142,797) (7,095)

Capital purchases (7,066) (2,261) (78) (159,297) (3,003)

Debt service recovery 2,372 2,372 Principal payments on long-term debt (13,314) (2,309) (8) (1) (8,129) (23,761) (346)

Interest payments (25,419) (815) (1) (185) (6,824) (33,244) (95)

Payment of interfund balances for capital purposes (376) (363) (280) (1,019)

Debt issuance costs (2,418) (335) (2,753)

Net cash provided by (used in) capital and related financing activities (44,757) (9,820) 46,624 (627) (19,956) (28,536) (3,194)

Cash flows from investing activities:

Purchase of investment securities (595,386) (32,468) (161,241) (505) (52,253) (841,853) (136,868)

Proceeds from sale and maturity of investment securities 600,256 42,306 119,056 791 60,381 822,790 169,351 Interest received 19,867 2,124 1,778 22 3,3o6 27,097 7,980 Collection of note receivable 68 68 Net cash provided by (used in) investing activities 24,737 12,030 (40,407) 308 11,434 8,102 410,463 hk&ease in cash and cash equivalents 57,986 8,337 10,755 183 8,235 85,496 40,473 Cash and cash equivalents at beginning of the year 10,689 2,179 1,383 38 1,950 16,239 6,611 Cash and cash equivalents at end of the year $ 68,675 $ 10,516 $ 12,138 $ 221 $ 10,185 $ 101,735 $ 47,084 34 (continued)

CITY OF ANAHEIM Statement of Cash Flows Proprietary Funds Year Ended June 30, 2007 (in thousands) (continued)

Business-type Activities - Enterprise Funds Convention, Goverulmental Sports and Activities -

Electric Water Golf . Entertainment Internal Utility Utility Sanitation Courses Venues Total Service Funds Reconciliation of 6perating income (loss) to net cash provided by operating activities:

Operating income (loss) $ (5,193) $ (557 $ 4,717 $ 1,862 $ (6,825) $ (5,996) ( 10.071)

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

Depreciation and amortization 49,927 6,954 1,246 670 12,406 71,203 5,664 Amortization of nuclear fuel 548 548 Increase in provision for decommissioning costs 6,251 6,251 Changes in assets and liabilities:

Accounts receivable (8) (529) 506 (93) (1,107) (1,231) 562 Inventories 1,632 (69) 2 1,565 146 Prepaid and other assets 2,132 Ill 115 2,358 Accounts payable 8,895 2,526 221 59 (162) 11,539 (1,570)

Wages payable 56 84 29 1 111 281 (59)

Unearned revenues 31 31 1,885 Compensated absences, post retirement and self-insurance liabilities 6,341 Deposits 7,825 18 (59) (641)) 7,147 Regulatory credits 21,470 155 21,625 Total adjustments 98,728 9,250 1,943 640 10,756 121,317 12,969 Net cash provided by operating activities $ 93,535 $ 8,693 $ 6,660 $ 2,502 $ 3,931 $ 115,321 $ 2,898 Schedule of noncash investing, capital and noncapital financing activities:

Capital contributions $ 2 $ 967 $ 1,177 S 2,146 Capital assets financed through capital leases 77 33 $ 4 40 154 $ 47 Transfers in (out) of capital assets 1,496 (240) 51,425 714 53,395 Decrease in fair value of investments (841) (128) (118) S (2) (104) (1,193) (491)

Reconciliation of cash and cash equivalents:-

Cash and cash equivalents $ 55,135 $ 9,245 $ 10,600 S 221 $ 9,383 $ 84,584 $ 47.066 Restricted cash and cash equivalents, current portion 1,271 1,538 2,809 Restricted cash and cash equivalents, noncurrent portion 13 540 802 14,342 18 Total cash and cash equivalents $68,675 .$10,516 $ 12,138 $ 221 $ 10,185 S 101,735 $ 47,084 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, 2007 (In thousands)

ASSETS Restricted cash and cash equivalents $4,277 Due from other governments 164 Total assets $4,441 LIABILITIES Due to bond holders $4,441 The accompanying notes are an integral part of these financial statements. 36

CITY OF ANAHEIM governmental activities and in the fund financial statements as the Redevelopment Notes to Financial Statements 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 the Redevelopment Agency's separate financial statements, contact the Finance Director of the City.

NOTE 1 -

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES:

Community Center Authority tCCA), a joint powers authority, was created primarily t6 The financial reporting entity finance the initial construction of the Anaheim Convention Center. A five-member board appointed by the City Council governs the CCA. The City has entered into a noncancelable As defined by U. S. generally accepted accounting principles (GAAP) that are established long-term lease with the CCA, which provides for lease payments in amounts sufficient to by the Governmental Accounting Standards Board (GASB), the financial reporting entity meet the annual debt service requirements on the certificates of participation issued by the consists of the primary government, as well as its component units, which are legally CCA to finance the construction of the facility. The lease is a financing arrangement, separate organizations for which the elected officials of the primary government are which transfers the ownership of the facility to the City at the end of the lease ternm, and financially accountable. Financial accountability is-defined as appointment of a voting the sole activity of the CCA is to provide financing for the City. As such, the financial data majority of the component unit's board, and either a) the ability to impose will by the for the CCA has been blended into the City's CAFR in the government-wide business-type primary goverrnunent, or b) the possibility that the component unit will provide a financial activities and in the fund financial statements with the City's Convention, Sports and benefit to or impose a financial burden on the primary government.

Entertaimnent 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 The accompanying financial statements present the City of Anaheim (City), the primary statements. For a copy of the CCA's separate financial statements, contact the Finance government, and its component units. The financial data of the component units are Director of the City.

included in the City's reporting entity because of the significance of their operational or financial relationships with the City.

Anaheim Public Improvement Corporation (APIC), a nion-profit corporation, was created 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 inio intertwined with the City that they are, in substance, the same as the City. They ate 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 tile annual debt service requirements on the certificates of participation fund financial statements.

issued by APIC to finance these construction projects: The leases are financing arrangements, which transfer ownership of the constructed assets to the City at the end of Anaheim Housing Authority (Housing Authority) is a separate entity primarily funded by the lease terms. The financial data of APIC has been blended into various governmental the U.S. Department of Housing and Urban Development to administer funds received and business-type activities and finds 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 Authority (Authority), a joint 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 find financiai 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 Agency (Redevelopment Agency) 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 three joint ventures and jointly-owned properties (see note 12),

session, serve as the governing board of the Redevelopment Agency, and all accounting which are not considered part of the financial reporting entity, as the City does not have and administrative functions are performned 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

CITY OF ANAHEIM Basic financial statements by program revenues. Direct expenses are those that are clearly identifiable with a specific function or program. Indirect expenses for administrative overhead are allocated among In accordance with GASB Statement No. 34 - Basic Financial Statements and the functions and programs using a full cost allocation approach and are presented Management .' Discussion and Analysis f.or State and Local Governments, the basic separately to enhance comparability of direct expenses between governments that allocate financial statements include both government-wide and fund financial statements. direct expenses and those that do not. Interest on general long-term debt is not allocated to the various functions. Program revenues include: 1) charges to customers or users who The government-wide financial statements (Statement of Net Assets and Statement of purchase, use or directly benefit fiom goods, services or privileges provided by a Activities) report on the City and its component units as a whole, excluding fiduciary particular function or program and 2) grants and contributions that are restricted to activities. Governmental activities, which normally are supported by taxes and meeting the operational or capital requirements of a particular function or program. Taxes, intergovernmental revenues, are reported separately from business-type activities, which unrestricted investment income and other revenues not identifiable with particular rely to a significant extent on fees and charges for support. All activities, both functions or programs are included as general revenues. The general revenues support the governmental and business-type, are reported in the government-wide financial net costs of the functions and programs not covered by program revenues.

statements using the economic resources measurement focus and the accrual basis of accounting, which includes long-term assets and receivables as well as long-term debt and Also, part of the basic financial statements are fund financial statements for governmental obligations. The government-wide financial statements focus more on the sustainability of funds, proprietary finds and fiduciary funds, even though the latter are excluded from the the City as an entity and the change in aggregate financial position resulting from the government-wide financial statements. The focus of the find financial statements is on activities of the fiscal period. major fuids, as defined by GASB Statement No. 34. Although this reporting model sets forth minimum criteria for determination of major funds (a percentage of assets, liabilities, Generally, the effect of interfund activity has been removed from the government-wide revenues, or expenditures/expenses of fund category and of the governmental and financial statements, except for interfund services provided and used. Net interfund enterprise funds combined), it also gives governments the option of displaying other funds activity and balances between governmental activities and business-type activities are as major funds. Other nonmajor funds, as well as the internal service funds, are combined shown in the government-wide financial statements. The "doubling up" effect of internal in a single column on the fund financial statements.

service fund activity has been eliminated from the government-wide financial statements with the expenses shown in the various functions and programs on the Statement of The City reports the following major governmental funds:

Activities.

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 foe 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 of their 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 represents capital assets net of accumulated depreciation which is reduced by provided primarily from Federal Section 8, U.S. Department of Housing and Urban outstanding balances of any bonds, notes or other borrowings that are attributable to the Development (HUD) receipts.

acquisition, 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.

38

CITY OF ANAHEIM The Sanitation Fund accounts for the operation of the City's solid waste and sanitation accrual basis of accounting, certain modifications must be made to the accrual method.

program, a self-supporting activity, which provides for the collection and disposal of These modifications are outlined below:

solid waste, street sweeping, and sanitary sewer cleaning on a user charge basis to residents and businesses located in Anaheim. Revenue is recorded when it becomes both measurable and available (received within 60 days alter year-end). Revenue considered susceptible to accrual includes:

The Golf Courses Fund accounts for the operation of the Anaheim Municipal ("Dad property taxes, sales and use taxes, transient occupancy taxes, licenses, fees and Miller") Golf Course and the Anaheimn Hills Golf Course, a self-supporting activity that permits, intergovernmental revenues (including motor vehicle license fees),

renders services on a user charge basis. charges for services, fines, forfeits and penalties, and interest.

The Convention, Sports and Entertainment Venues Fund accounts for the operations of Expenditures are recorded when the related fund liability is incurred. Principal and the Anaheim Convention Centel, Angel Stadium ofAnaheim, and The Grove of Anaheim. interest on general long-term debt are recorded as fund liabilities when due or See note 13 for further discussions of the Angel Stadium of Anaheim and The Grove of when amounts have been accumulated in the debt service fund for payments to be Anaheim. made early in the following year.

The internal service funds, which provide services to the other funds of the City, are

• Disbursements for the purchase of capital assets providing future benefits are presented in a single colunm in the proprietary funds financial statements. Because the considered expenditures. Bond proceeds are reported as an other financing source.

principal users of the internal service funds are the City's governmental activities, the assets and liabilities of the internal service funds are consolidated into the governmental With this measurement focus, operating statements present increases and decreases in net activities column of the government-wide Statement of Net Assets. The costs of the current assets and unreserved fund balance as a measure of available spendable resources.

internal service fund services are spread to the appropriate function or program on the government-wide Statement of Activities and the revenues and expenses within the This is the traditional basis of accounting for governmental funds and also is tile manner internal service funds are eliminated from the govermnent-wide financial statements to in which these funds are normally budgeted. This presentation is deemed most appropriate avoid any doubling effect of these revenues and expenses. The City operates five internal to: 1) demonstrate legal and covenant compliance, 2) demonstrate the sources and uses of service funds: liquid resources, and 3) demonstrate how the City's actual revenues and expenditures conform to the annual budget. Since the governmental funds financial statements are The General Benefits and Insurance Fund is used to account for employee presented on a different basis than the governmental activities column of the government-compensated absences, retirement and health benefits, and self-insurance programs. wide financial statements, a reconciliation is .provided immediately following each fund statement. These reconciliations briefly explain the adjustments necessary to transform the The Motorized Equipment Fund is used to account for motorized equipment used by fund financial statements into the governmental activities column of the government-wide City departments. financial statements.

The Duplicating and Printing Fund is used to account for central duplicating, printing, The proprietary funds financial statements are prepared on the same basis (economic and mailing services provided to City departments. resources measuremeent focus and accrual basis of accounting) as the government-wide financial statements. Therefore, most lines for the total enterprise funds on the proprietary The Infonnation Services Fund is used to account for data processing services to City funds financial statements will directly reconcile to the business-type activities column on departments. the government-wide financial statements. Because the enterprise funds are combined into a single business-type activities column oin the government-wide financial statements, The Municipal Facilities Maintenance Fund is used to account for office maintenance certain interfund activities between these funds are eliminated in the consolidation for the services and equipment used by City departments. government-wide financial statements, but are included in the fund columns in the proprietary funds financial statements. The net costs of the internal service funds are also Measurement focus and basis of accounting partially allocated to the business-type activities column on the government-wide financial statements. A reconciliation of the total enterprise funds on the fund financial statements The governmental funds financial statements are prepared on a current financial resources to the business-type activities column on the governuent-wide financial statements is measurement focus and modified accnial basis of accotmting. To conform to the modified provided on the face of the flud financial statements.

39

CITY OF ANAHEIM Enterprise funds account for operations where the intent of the City is that the costs of fund's share price. The City's investment in the State of California Local Agency providing goods or services to the general public on a continuing basis be financed or Investment Fund (LAIF) is carried at fair value based on the value of each participating recovered primarily through user charges and fees. Under GASB Statement No. 34, dollar as provided by LAIE LAIF is authorized by California Government Code Section enterprise funds are also required for arty activity whose principal revenue sources meet 16429 under the oversight of the Treasurer of the State of California. Commercial paper, any of the following criteria: 1) any activity that has issued debt backed solely by the fees non-participating guaranteed investment contracts and negotiable certificates of deposit and charges of the activity, 2) if the cost of providing services for an activity, including are carried at amortized cost (which approximates fair value). Interest income, which capital costs such as depreciation or debt service, must legally be recovered through fees includes'changes in fair value, on investments is allocated to all funds on the basis of daily and charges, or it is the policy of the City to establish activity fees or charges to recover cash and investment balances. See note 2 for further discussion.

the cost of providing services, including capital costs.

For purposes of the basic financial statements, the City considers cash equivalents to be On the proprietary funds financial statements, operating revenues are those that flow highly liquid short-term investments that are readily convertible to known amounts of cash directly from the operations of the activity, i.e. chatges to customers or users who purchase and mature within three months of the date they are acquired. Cash and cash equivalents or use the goods or services of that activity. Operating expenses are those that are incurred are included in the City's cash and investments pool and in accounts held by fiscal agents.

to provide those goods'or services. Non-operating revenues and expenses are items such as investment income and interest expense that are not a result of the direct operations of Notes receivable the activity.

In the government-wide financial statements, notes receivable of $39,384 includes accrued Under GASB Statement No. 20, Accounting and FinancialReporting .br Proprietary interest receivable of $10,658, ranging from 3% to 10% interest per anmum, and is net of Funds and Other Governmental Entities That Use ProprietaryFundAccounting,the City allowances of $14,121 for uncollectible accounts at June 30, 2007. Allowances for has elected for proprietary funds not to apply Financial Accounting Standards Board uncollectible accounts were estimated based on certain assumptions; therefore, actual results (FASB) statements issued after November 30, 1989. could differ from the estimates.

The Electric and Water .Utility funds follow the uniform system of accounts prescribed by In the governmental funds financial statements, due to the extended period of time over the Federal Energy Regulatory Commission (Electric Utility) and the California Public which notes receivable are to be collected and the contingent nature of certain sources of Utilities Commission (Water Utility). The utilities are not subject to the regulations of repayment, the City has generally not recorded the related accrued interest and has recorded these commissions. deferred revenue equal to the outstanding principal balance of the notes receivable.

Fiduciary funds account for assets held by the City in a trustee or agency capacity on Inventories 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 Inventories, as determined by annual physical counts, are stated at average cost.

similar to proprietary funds. Fiduciary funds are not included in the government-wide Inventories in the General Fund are recorded as expenditures when used and are reported financial statements as they are not an asset of the City available to support City programs. under the consumption method of accounting.

The City currently maintains an agency fund to account for the monies collected and paid on behalf of the Mello-Roos Districts located in the City. Land held for resale Cash and investments The Redevelopment Agency has acquired parcels of land as part of their primary purpose to develop or redevelop blighted areas. The Redevelopment Agency records these parcels The City pools available cash from all funds for the purpose of increasing income through as land held for resale in their financial records. The properties held for resale are recorded investment activities. Investments in U.S. government and agency securities and corporate at the lower of cost or estimated net realizable value. At June 30, 2007, land held for resale notes are carried at fair value based on quoted market prices. Participating guaranteed with a cost of $89,700 was recorded net of the allowance for decline in value of $25,626 investment contracts and flexible repurchase agreements are carried at fair value based on and totaled $64,074, with this amount offset by a reservation of fund balance in the net realizable value. Money market mutual funds are carried at fair value based on the governmental funds financial statements.

40

CITY OF ANAHEIM Restricted assets Capital assets transferred between fuids are transferred at their net book value (cost less accumulated depreciation), as of the date of the transfer.

Certain proceeds of the City's bonds, as well as certain resources set aside for their repayment, are classified as restricted on the Statement of Net Assets, Balance Sheet, or Debt costs Statement of Fund Net Assets, because they are maintained in separate bank accounts and their use is limited by applicable debt covenants. Additionally, resources set aside by the Debt issuance costs in the amount of $12,675 are included in noncurrent assets at June 30, Electric Utility for future decommissioning of its ownership share of the San Onofre 2007. Unamortized discounts, consisting of refunding costs of $11,820 reduced by Nuclear Generating Station, Units 2 and 3 (SONGS) and the San Juan Generating Station, premiums net of discounts of $8,427, are reflected in net long-term obligations. Both debt Unit 4, are classified as restricted on both the government-wide Statement of Net Assets issuance costs and premiums net of discounts are amortized over the life of the related and proprietary funds Statement of Fund Net Assets. bond issue using the effective interest method. Refunding costs are amortized over the life of the new bond or the life of the old bond, whichever is shorter, using the effective interest Capital assets method.

Under GASB Statement No. 34, all capital assets, whether owned by governmental Accretion activities or business-type activities are recorded and depreciated in the govenunent-wide financial statements. No long-term capital assets or depreciation are shown in the Accretion is an adjustment of the difference between the price of a bond or certificate of governmental funds financial statements. participation (COP) issued at an original discount and the par value of the bond or COP For the governmental activities debt, the accreted value is recognized as it accrues by fiscal Capital assets, including public domain infrastructure (e.g., roads, bridges, sidewalks and year. For the business-type activities debt, the accreted value at maturity is recognized at other assets that are immovable and of value only to the City) are defined as assets with the time of issuance with an offset to bond or COP discount.

an initial, individual cost of more than $5 ($50 for infrastructure) and an estimated useful life greater than one year. Capital assets are recorded at cost or estimated historical cost if Regulatory credits purchased or constructed. Donated capital assets are recorded at the estimated fair market value at the date of donation. Tire Electric Utility's rates, rules and regulations provide for a power cost adjustment billing factor to reflect variations in the cost of power to the Electric Utility. This billing factor The costs of nomal maintenance and repairs that do not add to the value of the capital provides increased flexibility by allowing the adjustment of revenues from the sale of asset or materially extend capital assets lives are not capitalized. Major improvements are electricity for differences between the Electric Utility's actual cost of power and the amount capitalized and depreciated over the remaining useful lives of the related capital assets. billed to customers through standard rates. The over or under collections are recorded as regulatory credits until they are refinded to or recovered from utility customers. The Electric Major outlays for capital assets and improvements are capitalized as the projects are Utility obtained City Council approval to change the rate from $0.0099 to $0.0149 for all constructed. Interest incurred during the construction phase of projects is reflected in the domestic retail kilowatt hour (kWh) sales and from $0.0090 to $0.0140 for all non-domestic capitalized value of the asset constructed for proprietary funds. For the year ended June retail kWh sales of electricity, except residential lifeline usage customers, begimming January 30, 2007, business-type activities capitalized net interest costs of $5,318 in the 1,2007. At June 30, 2007, the liability recorded for regulatory credits totaled $72,640 for the government-wide and fund financial statements. Total interest expense incurred by the Electric Utility.

business-type activities (and the enterprise funds on the proprietary funds statements) before capitalization was $35,612. The Water Utility's rates, rules and regulations provide for a water rate stabilization account to reflect variations in the cost of water to the Water Utility. This stabilization account Capital assets are depreciated using the straight-line method over the following estimated provides increased flexibility by allowing the adjustment of revenues from the sale of water useful lives: for differences between the Water Utility's actual cost of water and the amount billed to customers through standard rates. The account is funded through expense reimbursements Buildings, structures and improvements 5 to 85 years such as water supply cost refunds received from theMetropolitan Water District and Orange Utility plant 5 to 75 years County Water District and other miscellaneous credits and revenue. At June 30, 2007 the Machinery and equipment 2 to 40 years liability recorded for regulatory credits totaled $828 for the Water Utility.

Infrastructure 25 to 75 years 41

CITY OF ANAHEIM Deferred revenues California where it is located. The Electric Utility funds the reserve and recognizes this expense over the remaining useful life of the generating plant. A separate trust account Deferred revenues arise hi govenmnental funds when reveniue does not meet both the has been established for prior and future amounts funded and these amounts are classified "measurable" and "available" criteria for recognition in the current period. Deferred as restricted assets in the accompanying balance sheets. At June 30, 2007, the provision revenues also arise, in both governmental and proprietary funds, when resources are received for decommissioning costs totaled $102,124. For the year ended June 30,-2007, the by the government before it has a legal claim to them, as when grant monies are received prior Electric Utility has recorded decommissioning costs incurred for SONGS in the amount to incurring qualifying expenditures/expenses (unearned). hi subsequent periods, when both of $5,811, which is included in the fuel and generation component in operating expenses.

revenue recognition criteria are met, or when the government has a legal claim to the resources, revenue is recognized. Deferred revenues in the governmental funds amounted to The City sold its ownership share in SONGS to Southern California Edison (SCE) on

$81,434 at June 30, 2007. Of this amount, $42,847 representsnotes receivable that did not December 29, 2006. The Electric Utility's decision to divest SONGS was largely based on meet the available criterion, $33,261 represents various other revenues that did not meet the the need for operating flexibility to provide both peak and base load power, ongoing cost available criterion, and $5,326 represents resources for which the City did not have legal concerns for environmental disposal of nuclear waste and marine mitigation, as well as claim.' escalating decommissioning costs. See note 12 for further discussion.

Compensated absences The California Public Utilities Commission approved a cost estimate by SCE for the decommissioning costs of SONGS. The Electric Utility currently has $102,124 in trust for Compensated absences, vacation and sick pay, for all City employees are generally paid the decommissioning costs with an assumed rate of return of 4% per year. At June 30, by the General Benefits and Insurance Fund, an internal service fund. The General 2007, SCE's future cost estimate for the Electric Utility's share of decommissioning costs Benefits and Insurance Fund is reimbursed through payroll charges to all other funds is $105,887. Based on an assumed 4% rate of return, it is estimated that the Electric based on estimates of benefits to be earned and used during the fiscal year. It is the policy Utility's current reserve of $11)2,124 will grow to $183,919 by 2022, which exceeds SCE's of the City to pay all accumulated vacation pay when an employee retires or terminates. future cost estimate of $158,984. Based on these estimates the Electric Utility does not 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 expect that it will need to further fund the provision for decommissioning with cash then current rate of pay in January each year or upon termination from the City. Employees contributions for SONGS.

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 has a 10.04% ownership interest of the San Juan Generating Station, and at June 30, 2007, totaled $16,253 and is included in wages payable in the Statement Unit 4 (SJ). The Electric Utility is providing for the future demolition and reclamation of Net Assets. Also included in wages payable in the Statement of Net Assets at June 30, costs of its ownership share of SJ. As of June 30, 2007 the Electric Utility has recorded a 2007, is compensatory time liability of $267. provision for decommissioning costs for SJ of $1,320. For the year ended June 30, 2007 the Electric Utility has recorded decommissioning costs incurred for SJ of $440 in Changes in the City's compensated absences liability in fiscal year 2007 were as follows: operating expenses. Based on the cost estimates, the Electric Utility has estimated $440 in costs per year until 2027 to fund this obligation.

Compensated absences liability at beginning of year $ 16,244 Current year compensated absences benefits earned 18,542 Pension plan Current year compensated absences used (18,266)

Compensated absences liability at end of year $ 16,520 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 The compensated absences liability is expected to be liquidated during the next fiscal year costs to be funded are determined annually as of July 1 by the System's actuary. See note and is considered a current liability in the financial statements.

II for further discussion.

Nuclear fuel and decommissioning costs Net assets restricted by enabling legislation Federal regulations require the Electric Utility to provide for the future decommissioning The government-wide Statement of Net Assets reports $69,949 of governmental activities costs of its ownership share of SONGS. The Electric Utility has established a provision for restricted net assets, of which $32,216 is restricted by enabling legislation.

decomnnissioning costs of SONGS and restoration of the beachfiont at San Onofre, 42

CITY OF ANAHEIM Fund balances Property taxes In the fund financial statements, governmental funds report reservations of fund balances Property taxes attach as an enforceable lien on property as of January I. Taxes are levied for amounts that are not available for appropriation or are legally restricted by outside on July 1 and are payable in two installments due on November 1 and February I and parties for use for a specific purpose. Designations of fund balance represent tentative become delinquent after December 10 and April 10. The County of Orange, California management plans that are subject to change. (County) bills and collects the property taxes and remits them to the City in installments during the year. City property tax revenues are recognized when levied to the extent that The accumulated deficit fund balances at June 30, 2007, for Workforce Development, they result in current receivables collectable within 60 days after year-end.

Community Development Block Grant, and Grants funds included in nonmajor governmental funds in the amount of $109, $360 and $9,386 respectively, will be The County is pennitted by State law (Proposition 13) to levy taxes at 1% of full market eliminated in future years by the receipt of reimbursements for grant expenditures. value (at time of purchase) and can increase the property tax rate no more than 2% per year from the full market value at the time of purchase. The City receives a share of this Budgetary principles basic levy proportionate to what it received in the 1976 and 1978 periods.

The City is required by its charter to adopt an ammal budget on or before June 30 for the Entitlements, shared revenues and grants ensuing fiscal year. The General, special revenue, debt service, and capital projects governmental fund types and proprietary fund types have legally adopted budgets Entitlements and shared revenues are recorded at the time of receipt or earlier if the approved by City Council. The level of budgetary control (that is, the level at which susceptible to accrual criteria are met. Expenditure-driven grants are recognized in the expenditures cannot legally exceed the appropriated amount) is established at the fund financial statements as revenue when the qualifying expenditures have been incurred, department level. From the effective date of the budget, the amounts stated therein as all eligibility requirements have been met, and reimbursement is received within the proposed expenditures/expenses become appropriations to the various City departments. availability period.

Throughout the fiscal year the budget was amended to add supplemental appropriations.

All amendments to the budget which change the total appropriation amount for any Revenue recognition for Electric Utility, Water Utility, and Sanitation Funds department require City Council approval and all increases in appropriations must be accompanied by an increase in revenue sources of a like amount to maintain a balanced Revenue is recorded in the period in which seivices are provided. Residential and smaller budget. The City Manager has the authority to change individual budget line items within commercial customers are billed bimonthly and all other customers monthly. At June 30, a department as long as the total department's appropriation amount is not changed. 2007 unbilled but earned service charges recorded in accounts receivable for tile Electric Utility, Water Utility, and Sanitation Funds amounted to $14,456, $3,428, and $3,694 The City utilizes an encunbrance system as a managemennt control technique to assist in respectively.

controlling expenditures. All appropriations lapse at the end of the fiscal year, except for capital projects (other than the Redevelopment Agency Capital Projects Fund), which are Use of estimates carried forward until such time as the project is completed or terminated and for encumbered balances that are re-appropriated in the next year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and GASB Statement No. 34 requires that budgetary comparison statements for the General liabilities and disclosures of contingent assets and liabilities at the date of the financial Fund and major special revenue funds be presented in the basic financial statements. statements and the reported amounts of revenues and expenditures/expenses during the These statements must display original budget, amended budget and actual results. reporting period. As such, actual results could differ from those estimates.

Budgeted revenue amounts represent the original budget modified by City Council- NOTE 2 - DEPOSITS AND INVESTMENTS:

authorized adjustments during the year, which were contingent upon new or additional revenue sources. Budgeted expenditure amounts represent original appropriations The City maintains a cash and investment pool, which includes the cash balances of all adjusted for supplemental appropriations during the year. Budgets are generally prepared funds, and is invested by the City Treasurer to enhance interest earnings. The pooled in conformity with GAAP using the modified accrual basis of accounting, with tile interest earned, net of administrative fees, is allocated to each fund based on daily cash exception of capital leases and land held for resale, which are budgeted on a cash basis.

balances.

43

CITY OF ANAHEIM The City's investment policy further limits the permitted investments in California Investments Government Code (Government Code) Sections 53600 et al, 16429.1 and 53684 to the following: obligations of the United States government, federal agencies, and government The City Treasurer prepares an investment policy statement annually that is presented to sponsored enterprises- medium-term corporate notes; certificates of deposit; bankers' the Investment Advisory Commission for review and then to the City Council for approval.

acceptances; commercial paper rated A-I by Standard and Poor's Corporation (S&P), P-1 The approved investment policy is submitted to the California Debt and Investment by Moody's Investors Service (Moody's) or F- I by Fitch Ratings (Fitch); LAIF; repurchase Advisory Committee in accordance with Government Code.

agreements; reverse repurchase agreements; and money market mnutual funds.

The policy provides the basis for the management of a prudent, conservative investment Deposits and investments are comprised of the following at June 30, 2007: program. Public funds are invested for the maximum security of principal, to meet daily cash flow needs, while providing a return. All investments are made in accordance with Restricted the Government Code and, in general, the City Treasurer's policy is more restrictive than Cash and Cash and Government Code. The City did not have any violations of its policy during the current Cash Cash Restricted fiscal year. Section 53607 of the Government Code allows the City Council to delegate Equivalents Investments Equivalents Investments Total its investment authority to the City Treasurer and requires that the City Treasurer provide Governmental activities:

General Fund S 10,926 $ 22,814 $ 33,740 a monthly report to the City Council of its investment transactions. The annual delegation Housing Authority 3,289 6,868 $5,727 15,884 of authority is incorporated in the investment policy. The City Treasurer's report meets Nonmajor governmental funds 23,173 49,329 19,218 $ 25,197 116,917 the requirements for monthly investment reporting.

Internal service funds 47,066 98.135 18 472 145,691 Total governmental activities 84,454 177,146 24_,2963 25,669 312,232 Business-type activities: Investments authorized by the Government Code and the City's investment policy Electric Utility 55,135 115,764 13,540 234,643 419,082 Water Utility 9,245 19,410 1,271 5,218 35,144 The table below identifies the investment types that are authorized for the City by its Sanitation 10,600 22,137 1,538 47,412 81,687 221 461 682 investment policy which is more restrictive than Government Code. The table also Golf Courses Convention, Sports and identifies certain provisions of the City's investment policy that address interest rate risk, Entertainment Venues 9,383 19,457 802 15,772 45,414 credit risk, and concentration of credit risk. This table does not address investments of Total business-type activities 84.584 177.229 17,151 303,045 582.009 debt proceeds held by bond trustees. Investments of bond proceeds held by trustees are Government-wide total 169,038 354,375 42,114 328,714 894,241 4,277 governed by the provisions of each debt agreements.

Fiduciary fund _ 4,277 Total cash and investments $169,038 $354_375 $46,391 $328-714 $898-518 Maximnumn Maximumn Percentage Investment Deposits and investments is comprised of the following at June 30, 2007: Maturity of Portfolio* in One Issuer Authorized Investment Type Deposits $ 4,713 U.S. Treasury obligations 5 years None None Investments 893,805 U.S. agency securities 5 years 75% 20%

$898,518 Bankers' acceptances 180 days 25% 5%

Total deposits and investments Commercial paper 270 days 25% 5%

Negotiable certificates of deposit 3 years 15% 5%

At June 30, 2007, deposits of $4,713, with a corresponding bank balance of $6,171, were Repurchase agreements 90 days 75% None maintained in various federally regulated financial institutions. The difference of $1,458 Reverse repurchase agreements 92 days 20% None represents deposits in transit, outstanding checks, and other reconciling items. Deposits Medium-tenm corporate notes 5 years 15% 5%

Money market nmutual finds N/A 20% IO%

with a bank balance of $480 are insured by the Federal Depository Insurance Corporation.

LAIF N/A $80,000 None For deposits with a bank balance of $5,691, California state statutes require federally Time certificates of deposit (TCD) 5 years 30% 5%

regulated financial institutions to secure a city's deposits by pledging collateral consisting of either government securities with a value of 110% of a city's total deposits or by *Excluding amounts held by bond trustee that are not subject to Government Code pledging first trust deed mortgage notes having a value of 150% of a city's total deposits. restrictions The collateral is required by regulation to be held by the counterparty's agent in the name of the City.

44

CITY OF ANAHIEINI At June 30, 2007 the City exceeded five percent concentration in the following U.S. party. All securities held by bond trustees are in the name of the bond issue in trust for agency securities: Federal Famn Credit Bank $47,143 (8%), Federal Home Loan Bank safekeeping with the bond trustee, which is different from the City's primary bank.

$74,162 (13%), Federal Home Loan Mortgage Corporation $33,341 (6%), and Federal National Mortgage Association $41,516 (7%). Interest rate risk Investments authorized by debt agreements Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City Treasurer mitigates this risk by investing in longer-term Investment of debt proceeds held by bond trustees is governed by provisions of the debt securities only with funds that are not needed for current cash flow purposes and holding agreements, rather than the general provisions of the Government Code or the City's these securities to maturity. The City Treasurer uses the segmented time distribution investment policy. The table below identifies the investment types that are authorized for method to identify and manage interest rate risk. In accordance with the City investment investments held by bond trustees. The table also identifies certain provisions of these policy, the City Treasurer monitors the segmented time distribution of its investment debt agreements that address interest rate risk, credit risk, and concentration of credit risk. portfolio and analysis of cash flow demand.

Maximum Maxinmum Investments held by bond trustees are typically long-term securities which are not Maxinum Percentage Investment adversely affected by interest rate changes. Guaranteed ilvestment contracts for Authorized Investment Type Maturity Allowed in One Issuer construction funds are usually limited to three years or less.

U.S. Treasury obligations None None None U.S. agency securities None None None Guaranteed investment contracts None None None Information about the sensitivity of the fair values of the City's investments (including Collateralized investment contracts None None None investments held by bond trustees) to market interest rate fluctuations is provided by the Flexible repurchase agreements None None None following table that shows the distribution of the City's investments by maturity at June 30, Money market mutual funds None None None LAIF None None None 2007:

12 13 25 37 More At June 30, 2007 the investments controlled by fiscal agents exceeded five percent Fair Months to to to Than concentration in the following U.S. agency securities, guaranteed investment contracts, Credit Value or 24 36 60 60 and collateralized investment contracts: Federal Home Loan Bank $58,312 (18%), Itvestments a 6/30/2007 Less Months Months Months Months Federal Home Loan Mortgage Corporation $26,928 (8%), XL Asset Funding Corporation Investments controlled by City Treasurer:

$47,412 (15%), and Rabobank Nederland $62,244 (19%). All guaranteed investment U.S. Treasury obligations Exempt S162,134 $101.436 $60,698 U.S. agency securities AAA 201,080 57.663 50,935 S 7,009 S 851473 contracts have downgrade language that requires collateral should credit ratings drop Medium-term notes AI-A+ 22.251 4,999 10,206 7.046 below certain levels. Commercial paper PI-A + 105,203 105,203 Money market uintual funds AAA 33,831 33,831 Custodial credit risk LAIF Unrated 46,100 46.100 Total investments controlled by City Treasurer 570,599 351,279 116,632 73 __

Custodial credit risk for investments is the risk that the City will not be able to recover the Investments controlled by bond trustees:

value of investment securities that are in the possession of an outside party. All securities U.S. Treasury obligations Exempt 607 607 owned by the City with the exception of LAIF and money market mutual fuids are U.S. agency securities AAA 100,058 28,411 71,647 deposited in trust for safekeeping with a custodial bank different from the City's primary Guaranteed investment contracts Unrated 64,296 47,412 $16,884 bank. Securities are not held in broker accounts. Funds held by L-AIF and money market Collateralized inveslment contracts Unrated 96,214 62,244 33,970 Flexible repurchase agreements Unrated 37,066 2.397 25,053 9,616 mutual funds are held in the City's name. Money market mutual funds AAA 22,959 22,959 LAIF Unrated 2,006 2.006 Custodial credit risk for investments held by bond trustees is the risk that the City will not Total investments controlled be able to recover the value of investment securities that are in the possession of an outside by bond trustees 323,206 25.572 112.053 21,41_ 96,700 60,470 Total investments $893,805 $376,851 $221,685 4 $182,173 $60.470 45

CITY OF ANAHEIM NOTE 3 -ACCOUNTS RECEIVABLE, DUE FROM OTHER GOVERNMENTS, Interfund receivable and payable balances INTERFUND RECEIVABLE AND PAYABLE BALANCES, AND CERTAIN INTERFUND TRANSACTIONS: Net internal balances between governmental activities and business-type activities of

$2,029 are included in the government-wide financial statements at June 30, 2007.

Accounts receivable Interfund receivables and payables that are included in the fund financial statements at Accounts receivable for the City's governmental and business-type activities, including the June 30, 2007, are as follows:

applicable allowance for uncollectible accounts at June 30, 2007, are as follows:

Interfund Interfund Less: Receivable Payable Accounts Allowance for Governmental funds:

Receivable Uncollectibles Total General Fund $17,718 $ 79 Governmental activities: -

Ilousing authority 657 General Fund $11,544 $(1,134) $ 10,410 Nonmajor governtiental funds 11.611 34.964 Nonmaajor governmental funds 67 (2) 65 Total governmental funds 29,986 35,043 Internal service funds 872 872 Enterprise funds:

Total governmental activities 12.483 (*.136) 11,347 Electric Utility 4201 Business-type activities: Golf Courses 5,390 Electric Utility 35,147 (108) 35,039 Convention, Sports and Entertaimtient Venues 10,368 420 Water Utility 6,123 (3) 6,120. Total enterprise funds 10,788 5,810 Sanitation 6.923 (58) 6,865 Internal service funds 79 Golf Courses 197 197 total $40,853 $40,853 Convention, Sports and Entertainment Venues 1,953 (34)

Total business-type activities 50,343 (203) 50,140 Certain interfund balances at June 30, 2007 that are generally short-term loans to cover Total accounts receivable $62.826 $(1.339) $61,487 temporary cash deficits in various funds. The following interfund balances are expected lo be repaid in more than one year:

Due from other governments General Fund Due from other governments for the City's governmental activities at June 30, 2007, are as follows: Of the total intierfund receivable in the General Fund, $855 is due from nonmajor governmental funds (Redevelopment Agency Capital Projects Fund). The balance is Taxes Grants Other Total expected to be repaid frotifuture proceeds of the Anaheitn Westgate Center (Westgate).

Governmental activities:

General Fund $15,221 $297 $15,518 Housing Authority $ 284 284 Of the total interfund receivable in the General Fund, $5,390 is due from the Golf Nonusajor governmental funds 697 30,308 31,005 Courses Fund: On September 24, 2002, the City Council approved a loan up to $6,400 Total due from from the General Fund to the Golf Courses Fund for construction of the Anaheim Hills other governments $15,918 $30,592 $297 Golf Clubhouse. The loan is payable in annual amounts of not less than $548 beginning in July 2005 until July 2023 and bears interest at the City's investment yield as of June Revenues are reported net of estimated uncollectible amounts. TIotal estimated 30th of each year.

uncollectible amounts related to revenues of the current period are as follows:

Housing Authority General Fund $193 Electric Utility 352 19 Of the total interfund receivable in the Housing Authority Special Revenue Fund, $162 Water Utility Sanitation 134 is due from nonmajor governmental ftnds (Redevelopment Agency Capital Projects Othcrs 33 Fund). On May 26, 2006, the Housing Authority entered into an agreement with the Total $731 46

CITY OF ANAHIEIM Redevelopment Agency to receive up to $200 in EPA Brownfields Revolving Loan Agency's reimbursement obligation is payable from the Stadium Project Area (SPA)

Funds for mitigation activities at the Vine Street Affordable Housing site. property tax increment revenue. Any outstanding balance ceases to be an obligation of the Redevelopment Agency on August 9, 2039, the expiration of the SPA. It is expected Norunajor Governmental Funds that the balance will be repaid prior to the expiration of the SPA.

Of the interfund receivable in the nonmajor governmental funds, $9,105 is due to the Certain interfund transactions Other Capital Improvements Capital Projects Fund from nonmajor government funds (Redevelopment Agency Capital Projects Fund). The Redevelopment Agency entered The net transfers of $42,874 from the governmental activities to the business-type into a Cooperation Agreement with the City on April 1, 2003 whereby the City will activities on the government-wide Statement of Activities are primarily comprised of assist the Redevelopment Agency with the development of Westgate utilizing $10,000 operational subsidies from business-type activities to the General Fund offset by debt of fund from the HUD Section 108 loan program. The Redevelopment Agency is service subsidies to the Convention, Sports and Entertainment Venues Fund. This amount obligated to pay the City for the repayment of the HUD 108 loan from property tax is reduced by the transfer of capital assets from governmental activities to business-type increment and certain project revenues generated by Westgate. At June 30, 2007, the activities in the amount of $53,395. The transfer of capital assets includes sewer system Redevelopment Agency had utilized $9,423 of HUD 108 funds to acquire certain infrastructure capital assets, with a net book value of $51,425, that were transferred from properties. governmental activities to business-type activities and are included in capital contributions in the Sanitation Fund.

Of the interfund receivable in the nonmajor governmental funds, $1,788 is due to the Redevelopment Agency Capital Projects Fund from nonmajor goverrunental funds The following interfund transfers are reflected in the fund financial statements at June 30, (Other Capital Improvements Capital Projects Fund). On March 15, 1999, the 2007:

Redevelopment Agency entered into a Cooperation Agreement with the City where the Transfers In Transfers Out 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 Governmental funds:

General Fund $ 30,506 $ 57,950 Agency will receive transportation fee credits in the amount of its contribution to the Housing Authority 3,664 2,237 project. Nonmajor governmental funds 67 079 30,841 Total governmental funds 101,249 91,028 Electric Utility Fund Enterprise funds:

Electric Utility 16,315 Water Utility 456 2,942 The interfund receivable of $420 in the Electric Utility Fund is due from the Convention. 2,215 Sanitation Sports and Entertainment Venues Enterprise Fund for the installation of energy efficient Golf Courses 2,000 HVAC equipment, and building envelope improvements. The loan is payable in Convention, Sports and Entertainment Vensues 12,495 monthly installments of $23 beginning January 2005 through December 2008. Total enterprise funds 12,951 23,472 Internal service funds 300 Total $114,500 $t14,500 Convention, Sports and Entertainment Venues Fund The interfund receivable of $10,368 in the Convention, Sports and Entertainment The interfund transfers generally are made for the purpose of debt service payments made Venues Fund is due from nonmajor governmental funds (Redevelopment Agency from'a debt service fund but funded from an operating fund or subsidy transfers.

Capital Projects Fund). The City entered into a Cooperation Agreement with the Excluding the transferred capital assets detailed previously, there were no other significant Redevelopment Agency on May 14, 1996, for the renovation of the Angel Stadium of transfers during the fiscal year that were either non-routine in nature or inconsistent with Anaheim. The Redevelopment Agency agreed to reimburse the City for $10,000 of the activities of the fund making the transfer.

renovation costs plus 5% simple interest on the unpaid balance. The Redevelopment 47

CITY OF AiNAHEIM NOTE 4 - BOND PAYMENT RECEIVABLE: NOTE 5 - CAPITAL ASSETS:

Capital asset activities for the year ended June 30, 2007, were as follows:

On August 3, 1995, the Los Angeles Rams Football Company, currently the St. Louis Beginning Transfers Ending Rams (Rains), exercised its right to terninate its lease under the Fourth Amendment to the Balance Additions In (Out) Deletions Balance Exhibition Agreement between the Rams and the City (Rams Agreement). Under the Governmental activities:

Rams Agreement, the Rains became obligated to repay the City for the debt service on the Nondepreciable assets:

1979 Anaheim (California) Stadium Inc. Lease Revenue Bonds in the principal amount of Land $ 521,904 $ 26,277 $ 79 $ 548,260 Construction in progress 46.982 44,664 (48,70)9 $ (912 42,025

$28,110, which obligation is supported by an irrevocable standby letter of credit with Total 568,886" 70,941 (48,630) (912) 590.285 Dresdner Bank AG and will be repaid by August 15, 2015. The 1979 Anaheim (California)

Depreciable assets:

Stadium. Inc. Lease Revenue Bonds were subsequently refunded, and are no longer Buildings, structures outstanding, by a portion of the Convention, Sports and Entertainment Venues Fund 1993 and improvements 233,705 2,799 25,100 (114) 261,490 Refunding Projects Certificates of Participation. At June 30, 2007, there remained Machinery and equipment 93,418 13.563 8,241 (7,830) 107,392 principal outstanding of $16,927 on that portion of the Convention, Sports and Infrastructure 741,502 714 (68.354) (1,2151 672,647 Total 1,068,625 17,076 (35,013) (9,159) 1,041,529 Entertainment Venues Fund 1993 Refunding Projects Certificates of Participation. During Total assets 1,637,511 88,017 (83,643) (10,071) 1,631,814 fiscal year 2007, the Rams reimbursed the City $2,372 (representing $1,355 for principal and $1,017 for interest) for the current portion of their debt service obligation. The City Less accumnulated depreciation fbr:

accounted for the termination of the lease by recording a bond payment receivable from Buildings, structures and improvements (85,195) (6,059) 105 (91,149) the Rams and a contribution to the Convention, Sports and Entertainment Venues *(54,693)

Machinery and equipment (51,879) (9,886) 7,072 Enterprise Fund in the amount of the debt obligation assumed by the Rams under the Infrastructure (268,6105)(15,615) 30,248 1,214 (252,758)

Rains Agreement. Total accumulated depreciation (405,679) (31,560) 30,248 8.391 (398,600)

Total governmental activities capital assets, net ý$I,2382 $ 56,457 $L13,395) $ (1,680) $1,233 214 Business-type activities:

Nondepreciable assets:

Land $ 37,593 $ 18,894 $ 56,487 Construction in progress 76,745 $164,715 (95,207) $ (538) 145,715 Nuclear fuel at amortized cost 2,792 531 - (3,323) I Total 117,130 165,246 (76,313) (3,861) 202,202 Depreciable assets:

Buildings, structures and improvements 480,658 2,345 58,738 (147) 541,594 Utility plant .189,138 1,078 70,787 (224,137) 1,036,866 Machinery and equipment 30,229 691 183 (271) 30,832 Total ,700,025 4,114 129,708 (224,555) 1,609,292 Total assets 1817,155 169,360 53,395 (228,416) 1,811,494 Less accumulated depreciation for:

Buildings, structures and improvements (137,755) (12,099) 40 (149,814)

Utility plant (489,625) (56,881) 224,746 (321,760)

Machinery and equipment (17,727) 12,223) 174 (19,776)

Total accumulated depreciation 645,107) (71,203) 224,960 (491,350)

Total business-type activities capital assets, net $1 ,172,048 $ 98,157 $ 53,395 $ (3,456) $1,320,144 See note 12 for discussion of the sale of the SONGS utility plant. 48

CITY OF ANAHEIM Depreciation expense was charged to functions/programs of the City during fiscal year $6,120, under operating leases. The following is a schedule of minimum future rentals on 2007 as follows: noncancelable operating leases at June 30, 2007:

Govermnental activities: Fiscal Year Ending June 30 General government $ 360 S 257 21)08 Police 2,065 258 2009 Fire- 638 2t)10 259 Community Development 1,295 2011 260 Planning 214 2012 261 Public Works 15,971 20)!13-2017 1,320 Community Services 2,216 2t)1 8-2022 1,352 Convention, Sports and Entertaimnent 3,137 2023-2027 1,188 Capital assets held by the City's internal service funds are chaiged 2028-2032 1,172 to the various functions based on their usage of the assets 5,664 2033-2034 469 Total depreciation expense - governmental activities $31,560 Total minimum future rentals $6,796 Business-type activities:

Electric Utility 49,927 NOTE 6 - GENERAL BENEFITS AND INSURANCE FUND:

Water Utility 6,954 Sanitation 1,246 670 The General Benefits and Insurance Fund, atn internal service fund, is used to account for Golf Courses Convention, Sports and Entertainment Venues employee compensated absences, retirement and health benefits, workers' compensation Total depreciation expense - business-type activities $71,203 related benefits, self-insurance, commercial insurance purchases, and alternative risk financing activities. Revenues of the General Benefits and Insurance Fund are derived Capital leases from charges to City departments using estimates of benefits earned and cost allocation charges established at the beginning of ttle year and from interest income on reserves.

Included in the capital assets amounts listed above are the following capitalized leased assets: At June 30, 2007, the City was fully funded for self-insured workers' compensation and Governmental Business-type general liability claims (self-insured retention levels of $ 1,000 per occurrence for workers' Activities Activities Total compensation claims and $1,000 per occurrence for general liability claims). Above these Machinery and equipment $ 9,570 $ 679 $10,249 self-insured retention levels, the City's potential liability is covered through various Less accumulated amortization (2,863) _(356 (3,219) commercial insurance and intergovernmental risk pooling programs (collectively, Capitalized leased assets, net $ 6,707 $ 323 "Insurance"). 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 Operating leases insurance coverage.

Housing Authority The unpaid claims liability included in the General Benefits and Insurance Fund is based At Jtime 30, 2007, the Housing Authority earned revenues as the lessor of land, carried at on the results of actuarial studies and includes amounts for claims incurred but not cost of $40,461 in the government-wide financial statements, under four operating ground reported and allocated loss adjustment expenses. Claims liabilities are calculated using a leases. These leases to developers are noncancelable. Two of the leases are for a term of discount rate of 4% and consider the effects of inflation, multi-year loss development 55 years, expiring in 2055 and 2057. Two of the leases are for a tern of 57 years, expiring trends, and other economic and social factors. It is the City's practice to obtain fitll in 2060 and 2063. The total base rent amounts to be collected over the terms of the leases actuarial studies biennially for general liability and workers' compensation coverages.

are $12,400, $8,700, $7,505, and $7,900, respectively, with simple interest accruting on Pretniutns are charged by the General Benefits and Insurance Fund using various unpaid portions at a rate of 4.0%, 4.5%, 4.0%, and 4.0%, respectively. Minimum lease allocation methods that include actual costs, trends in claims experience, exposure base, payments are calculated annually, based on residual receipts, as defined in the lease and number of participants.

agreements. It is estimated that the full amounts of the leases are collectible. At June 30, 2007, the Housing Authority has recorded notes receivable due from developers related to Changes in the General Benefits and Insurance Fund's claims liability in fiscal years 2007 these transactions of $6,267 in both the governttent-wide and fund financial statements. and 2006 were as follows:

2007 2006 Redevelopment Agency Current liability at begituning of year $30,828 $29,920 Current year claims and chatges in estimates 6,137 7,891 At June 30, 2007, the Redevelopment Agency earned revenues as lessor from certain Claims payments (6,068) (6,983) parking structure property, carried at cost of $6,739, less accumulated depreciation of Claims liability at end of year $30,897 $30,828 49

CITY OF ANAHEIM Current year total incurred losses remained essentially unchanged compared to the prior Beginning Additions/ Reductions/ Ending Within Balance Proceeds Paymenrts Balance One 1Year year. Governmental activities:

Bonds Payable:

Above the self-insured retention of $1,000 per occurrence for workers' compensation General obligation $ 6,170 S (470) $ 5,700 $ 480 City lease revenue 502,477 $256,320 (253.589) 505,208 5,320 losses, the City purchases excess insurance to $75,000 per occurrence. Above the self- Redevelopment Agency 156,117 (3,982) 152,135 7,790 insured retention of $1,000 per occurrence for liability losses, the City purchases excess Accretion 76,195 10,873 (3,742) 83,326 insurance for all City operations to $45,000 per occurrence, excluding (i) utilities Untamortized bond discount (6,262) (6,262)

Total 740.959 26) 931 (261,7831 740.107 operations for which the City purchases excess insurance to $70,000 per occurrence, and COPs:

(ii) helicopter operations for which the City purchases $50,000, per occurrence, of 25,406 City COPs 28,446 13,040) 3,204 commercial excess insurance (on a first-dollar basis). The first layer of excess liability loss Motorized Equipment COPs 1.622 (240) 1,382 251 Unattortized COP discount 2 coverage is procured through the Authority for California Cities Excess Liability 30,066

'tolal (3.2781 26.788 3,455 (ACCEL), a joint powers insurance authority pooling catastrophic general, automobile, Capital lease obligations:

personal injury, and public officials errors and omissions liability losses among twelve City 1,997 1,641 (1,286) 2,352 1,140 Redevelopment Agency 31 6 (16) 21 17 California cities, through both risk-sharing and joint purchase arrangements. The City, Housing Autlority 2 (24) 26 13 48 therefore, continues to maintain some limited excess liability risk sharing exposure Itternal Service Funds 144 47 (106) 85 35 directly with ACCEL. This pooled coverage has exposure (i) from the run-out periods Total 2,220 I 696 (1.432) 2 484 1,205 from prior years in which commercial excess insurance was not obtained, (ii) from losses Notes and loans payable:

City 14.921 (1.590) 13,331 1,660 which are covered under ACCELs Memorandum of Coverage but not covered under the Redevelopment Agency. 26,159 18.000 (2,365) 41.794 7,289 commercial excess liability policies, and (iii) from anACCEL retained layer for fiscal year Housing Authority 2.251 238 2.489 Total 43 331 18.238 (3,95 5) 57,614 8.949 2007 of $4,000 in excess of $1,000. Each ACCEL member's share of pooled losses is 30,828 Self-insurance (note 6) 6 137 (6,0681 30 897 8.278 based on a risk-sharing formula which includes, but is not limited to, exposure and loss Retired medical (note 10) 67,524 12 671 (6,872) 73 323 7 787 experience factors. Governmental activities total 914,928 299 673 (283,388) 931.213 43.264 Business-type activities:

In order to provide funds to pay claims, ACCEL collects a deposit from each member. The Bonds payable:

deposits are credited with investmnent income at the rate earned on ACCEUs investments. Electric Utility 480,230 206,035 (62.845) 623,420 14,690 At June 30, 2007, ACCEUs cash and investments totaled $26.450, of which $4,576 Water Utility 10,1154 (1.324) 8.730 1,375 Sanitation 47,710 47,710 consists of deposits provided by the City. The City has no specific equity interest in Convention. Sports and ACCEL. Deposits provided to ACCEL by the City are expensed when paid by the General Entertainment Venues 23,015 (75) 22,940 80 Benefits and Insurance Fund. Unantortized bond premium, net 575 (207 2.958 3.326 Total 513 874 253,538 61.286) 706.126 16,145 ACCEL is responsible for deciding the risks it will underwrite, monitoring the handling of COPs:

large claims, and arranging financial programs. ACCEL does not have any debt Electric Utility 21,110 (21,110)

Convention, Sports and 6,327 outstanding. For a copy of ACCEL's separate financial statements, contact the Finance Entertainment Venues 100,723 (6,144) 94,579 Director of the City. Accretion 3,869 (1.891) 1,978 1.978 Unamnorlized COP discoumt 532 (82)

Total 125 088 (28,613) 96,475 8 305 NOTE 7 - SHORT-TERM NOTE PAYABLE: Capital lease obligations:

Electric Utility 166 77 (94) 149 78 On January 12, 2007 the Redevelopment Agency entered into an agreement to purchase Water Utility 68 33 (39) 62 32 Sanitatiotn 17 4 (8) 13 7 property and improvements located at 700 South Street. The purchase was financed Golf Courses 2 (t) 1 through a short-term note of $2,759 with simple interest of 5% payable on or before July Convention, Sports and 18 12, 2007. The entire balance of the note was outstanding at June 30, 2007. The short-tenn Entertainment Venues 21 40 (19) 42 Total 274 154 (161 267 136 note and associated interest payable are reflected in both the governmental funds financial Notes and loans payable:

statements as a current liability as well as on the government-wide financial statements. Water Utility - 15,401 (945) 14,456 941 Unantortized note discount 50 (375)

Total 14,976 (895) 14081 941 NOTE 8 - LONG-TERM LIABILITIES: Decommissioning provision 97,193 6,251 - 103.444 The following is a summary of changes in long-term liabilities reported in the Business-type activities total 751,405 259943 (90,955 920 393 25 527 Government-wide total $1,666,333 $559_616 $(374,343) $1 851 606 S68 791 government-wide financial statements for the year ended June 30, 2007:

See note 12 for discussion of decommissioning provision. 50

CITY OF ANAHEIM GOVERNMENTAL ACTIVITIES: transient occupancy taxes (TOT) (i.e. 20% of the total transient occupancy taxes) for all hotel properties in the City, excluding Disney properties, and 2) 100% of the incremental BONDS PAYABLE TOT, sales, and property tax revenues from all Disney properties over the 1995 base, adjusted each year by the CPI change, with a minimum 2% increase annually. The City is At June 30, 2007, bonds payable consisted of the following: not required to pay any additional sums should the LPMR fall short of the amount required to pay debt service on the bonds. The Walt Disney Company provided a guarantee to the Range of Authorized Out- bond insurer to enable the issuer to obtain municipal bond insurance, resulting in the Date Final Interest Rates and standing bonds receiving an AAA rating from S&P and an Aaa rating from Moody's.

Issued Maturity at Issue Date Issued 6/30/07 City LPMR began on January 1, 2001, with the first payment made to the trustee on July 7, 1993 General Obligation Refunding Bonds 11/01/93 10/01/16 4.0%-7.0% $ 10,055 $ 5,700 2001, for the LPMR generated during the period January through June 2001. Subsequent 1997 Anaheim Lease to that date, LPMR is collected and remitted to the trustee monthly. During the fiscal year Revenue Bonds 2/01/97 3/01/37 4.5%-6.9% 510,427 248,888 ended June 30, 2007, $33,026 was remitted to the trustee.

Accretion 83,326 2007 Anaheim Lease Debt service requirements to maturity for the 1993 General Obligation Refunding Bonds, Revenue Refunding Bonds 6/01/07 3/01/37 4.1%-5.5% 256,320 256,320 the 1997 Anaheim Lease Revenue Bonds, and the 2007 Anaheim Lease Revenue Total 594,234 Unamortized bond discount (6,262) Refunding Bonds to be paid by the Municipal Improvements Debt Service Fund from Total City bonds 587,972 future property tax revenues and by the Anaheim Resort Inprovements Debt Service Fund from futture LPMR, respectively, are as follows:

Redevelopment Agency 1992 Project Alpha Fiscal Year Ending 6/30 Principal Interest Total Tax Allocation Bonds 2/01/02 12/28/18 4.0%-6.45% 134,433 10t4,0t00 2008 $ 5,800 $ 17,356 $ 23,156 1997 Project Alpha 2009 6,735 20,387 27,122 TFax Allocation Bonds, 2010 7,835 19,956 27,791 Series A 6/01/97 2/01/18 4.4%-5.3% 27,905 18,640 2011 9,325 19,448 28,773 2000 Project Alpha 2012 13,545 19,781 33,326 Tax Allocation Bonds, 2013-2017 96,470 79,21)0 175,670 31,850 29,495 2018- 202 2 Series A & B 12/01/00 2/01/18 4.1%-7.7% 63,405 138,8610 2102,265 Total Redevelopment Agency bonds 1.52,135 2023-2027 77,768 156,619 234,387 Total governmental activities bonds $970,990 $740),107 2028-2032 92,953 177,563 270,516 2033-2037 137,072 214,282 351,354 Total 510,908 863,452 1,374,360 Bonds Payable - City Unamortized bond discount (6,262) (6,262)

$863,452 Total bonds $54,46 $1,368,098 Lease payment measurement revenues Included in interest is $83,326 related to accretion on capital appreciation bonds.

In February 1997, the Anaheim Public Financing Authority sold $510,427 of lease revenue bonds to construct public improvements in The Anaheim Resort. In JAme 2007, the Bonds Payable - Redevelopment Agency Authority sold $256,320 of lease revenue bonds to defease $248,335 of the 1997 lease revenue bonds. The bonds are special obligations of the Authority payable solely from Debt service requirements to maturity for the Redevelopment Agency Tax Allocation lease payments to be made by the City to the Authority for the use and occupancy of the bonds are to be paid by the Redevelopment Agency Debt Service Fund from ftture tax leased premises. Debt service requirements to maturity for these lease revenue bonds are increment revenue are as follows:

paid from lease payment measurement revenues (LPMR) defined as: 1) 3% of the 15%

51

CITY OF ANAHEIM Fiscal Year Ending 6/30 Principal Interest Total Fiscal Year Ending 6/30 Principal Interest Total 2008 $ 7.790 $ 9,409 $ 17,199 2008 $ 251 $ 72 $ 323 2009 8,260 9,373 17,633 2009 261 58 319 2010 10,685 8,365 19,050 2010 273 42 315 2011 11,355 7,684 19,039 2011 290 26 316 2012 12.060 6,960 19,020 2012 307 8 315 2013-2017 72.675 22,105 94,780 Total COPs $1,382 f2_06 $1,588 2018-2019 29,310 1,882 31,192 Total bonds $152,135 $65,778 $217,913 CAPITAL LEASE OBLIGATIONS CERTIFICATES OF PARTICIPATION The City has a long-term noncancelable lease with Motorola, Inc. to finance the acquisition of certain software utilized by the City's Police Department. The lease At June 30, 2007, certificates of participation consisted of the following:

qualifies as a capital lease for accounting purposes as defined under the FASB Statement Range of Authorized Out- No. 13, AccountingJbr Leases, and therefore has been recorded at the present value of Date Final Interest Rates and standing future mininmum lease payments at the date of inception of the lease. Future minimum Issued Maturity at Issue Date Issued 6/30/07 lease payments to be made from unrestricted revenues of the General Fund under the City capital lease ate as follows:

1993 Refunding Projects 1/14/93 8/01/19 5.47% $ 9,696 $ 5,631 1993 Police Facilities Refinancing Project 7/15/93 8/01/08 4.47% 26,000 4,400 Fiscal Year Ending 6/30 1993 Arena Land 21)08 $296 Refinancing 11/01/93 11/01/19 6.0%-7.50% 21,210 15,375 2009 296 Total City 25.406 2010 247 Total 839 Motorized Equipment Less amount representing interest, variable 1993 Refunding Projects 1/14/93 8/01/11 5.47% 4,584 1,382 (60)

Total governmental activities COPs $61,490 $26,788 Present value of future minimum lease payments S779 Certificates of Participation Payable - City The City also has a long-term noncancelable agreement with HP Financial Services to finance the acquisition of the City's server, desktop, and portable computer equipment.

Certificates of participation debt service payments are to be paid from unrestricted The agreement qualifies as a capital lease for accounting purposes as defined under the revenues of the Certificates of Participation Debt Service Fund. COP debt service FASB Statement No. 13, Accounting./br Leases, and therefore has been recorded at the requiremtents to maturity are as follows: present value of future minimumn lease payments at the date of inception of the lease.

Future minimum lease payments to be made front unrestricted revenues of the City under Fiscal Year Ending 6/30 Principal Interest Total the capital lease are as follows:

2008 $ 3,204 $1,445 $ 4,649 2009 3,388 1,272 4,660 (1overninental Business-type Total 2010 1,208 1,149 2,357 Fiscal Year Ending 6/30 Activities Activities City 2011 1,303 1,070 2,373 2008 $ 973 $143 $1,116 2012 1,390 985 2,375 2009 720 97 817 2013-2017 8,447 3,439 11,886 2010 77 40 117 2018-2020 6,466 630 7,096 Total 1,770 280 2,050 Total COPs $25,406 $9,990 $35,396 Less amount representing interest, variable (65) (13) (78)

Present value of future minimum lease payments $1,705 $267 $1,972 Certificates of Participation Payable - Motorized Equipment Debt service requirements to maturity for Motorized Equipment certificates of participation to be paid by the Motorized Equipment Internal Service Fund from future revenues are as follows:

52

CITY OF ANAHEIM NOTES AND LOANS PAYABLE Fiscal Year Ending 6/30 Principal Interest Total 2008 $ 169 $ 513 $ 682 At June 30, 2007, notes and loans payable are as follows: 2009 175 508 683 2010 272 499 771 2011 355 486 841 Notes and Loans Payable - City 2012 397 469 866 2013-2017 2,661 1,995 4,656 Homer Street land acquisition 2018-2022 3,948 1,097 5,045 2023-2024 1,705 94 1,799 Total notes and loans $9,682 $5,661 $15,343 In July 1995, the Redevelopment Agency executed an installment note secured by a deed of trust with the County for acquisition of at 1133 Homer Street and 1170 Anaheim Boulevard. The amount of the note is $500 and bears interest at 7.25% per annum for a Computer-Aided Dispatch and Records Management System (CAD/RMS) loan payable term of 15 years. Based on a cooperative agreement between the Redevelopmeint Agency and the Community Services Department, principal and interest on the note will be paid In December 20)05, the City entered into an agreement with SunTrust to finance the by the Community Services Department. At June 30, 2007, the outstanding balance on the acquisition and implementation of the CAD/RMS system. The amount of the loan is note was $136. Note debt service requirements to maturity are as follows: $5,289 and bears interest at 3.30% per annum for a term of 5 yeats. Principal and interest payments of $578 are due semiannually beginning on June 30, 2006 until December 3 1, Fiscal Year Ending 6/30 Principal Interest Total 2009. The outstanding balance at June 30, 2007 was $2,753. Loan debt service 2008 $ 42 $10 $ 52 requirements to maturity are as follows:

2009 45 7 52 2010 49 3 52 Fiscal Yea- Ending 6/30 Principal Interest Total Total notes and loans $136 $20 $156 2008 $1,074 $ 82 $1,156 2009 1,110 46 1,156 2010 569 9 578 HUD Section 108 auaranteed loans Payable Total notes and loans $2,753 $137 $2,890 In May 1999, the City entered into an agreement with HUD, making available $3,000 to finance the acquisition of certain property for park development. The loan bears interest Notes and Loans Payable - Redevelopment Agency ranging from 6.56% to 7.22% and is payable over a nine-year period beginning on August 1, 2000 until August 1, 2008. The outstanding balance at June 30, 2007, was $760. Loan Redevelopment Agency Savi Ranch Associates note payable debt service requirements to maturity to be paid from the Community Development Block Grant Special Revenue Fund are as follows: In July 1989, the Redevelopment Agency executed a note with Savi Ranch Associates, a California general partnership. The amount of the note is $2,707 and bears interest at 9.5%

Fiscal Year Ending 6/30 Principal Interest Total per annum. The note is payable from net property tax increment as defined in the 2008 $375 $41 $416 Redevelopment Agency note. If there is insufficient property tax increment to pay for 2009 385 14 399 principal and interest at the termination of the River Valley project area plan in November Total notes and loans $760 $55 $815 2031, the note ceases to be an obligation of the Redevelopment Agency.

In May 2003, the City entered into an agreement with HUD, making available $10,000 to Redevelopment Agency Orange County Transportation Authority note payable 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 August 2005,tthe Agency executed a purchase price promissory note with the Orange payable from sales tax revenue generated by Westgate, from Community Development County Transportation Authority (OCTA) for $12,998 for the acquisition of certain sites Block Grant yearly entitlement, and from the Redevelopment Agency's property tax and $1,059 for the repayment of the balance of the November 2004 OCTA (Stingray) note.

increment and project participation revenues generated by Westgate. The outstanding The amount of the note is $14,057 and bears an adjustable interest rate equal to OCTA's balance at June 30, 2007 was $9,682. The loan bears interest ranging from 1.74% to short term portfolio yield for the 12 month period ending June 30 each year. The note is 5.97% and is payable over 20 years beginning on February 1, 2005 until August 1, 2023. payable quarterly, commencing in October 2005 and matures in October 2011. At June 30, Loan debt service requirements to maturity are as follows: 2007, the outstanding balance of the note was $6,978.

53

CITY OF ANAHEIM Redevelopment Agency Note Purchase Agreement - Citigroup Global Markets Inc. In March 2006, the Redevelopment Agency entered into a business loan agreement with Pacific Western Bank for the acquisition of an affordable housing site at 2748 West On November 14, 2006, the Redevelopment Agency entered into a note purchase Lincoln Avenue. The amount of the note is $3,500 and bears 6.625% interest per annum.

agreement with Citigroup Global Markets Inc. for a bridge loan of $18,000 to pay half of The note is payable over two years at $23 per month with a balloon payment of $3,438 on the purchase price of an approximately 18.3-acre industrial property at the northeast its maturity date in March 2008. The outstanding balance of this note at June 30, 2007 was corner of Olive and South streets. The note bears an initial interest rate of 6.44% per $3,465.

annum and is adjustable monthly beginning on December 1, 2007 at a note rate defined in the note purchase agreement. Interest is payable monthly and principal matures on In June 2006, the Redevelopment Agency entered into a business loan agreement with November 14, 2008 or earlier, as provided in the note purchase agreement. The Pacific Western Bank for the acquisition of an affordable housing site at 1287 East Lincoln outstanding balance of this note at June 30, 2007 was $18,000. Avenue. The amount of the note is $4,800 and bears 7.375% interest per annum. Interest on the note is payable monthly and the entire note balance is payable on its maturity in July Redevelopment Agency Williams note payable 2007. The outstanding balance of this note at June 30, 2007 was $4,800.

In January 2005, the Redevelopment Agency executed a promissory note with Robert and Debt service requirements to maturity for the Redevelopment Agency notes payable and Betty Williams, co-trustees of the Williams Family Trust, for the acquisition of property contractual commitments to be paid from future revenues are as follows:

for commercial development: The amount of the note is $650 and bears 3.5% interest per annum. The note is payable over six years. At June 30, 2007, the outstanding balance of Fiscal Year Ending 6/30 Principal Interest Total 2008 $ 7,289 $ 3,081 $10,370 the note was $413.

2009 23,978 1,450 25,428 2010 2,516 725 3,241 Redevelopment Agency contractual commitments 2011 887 573 1,460 2012 309 551 860 As part of the Redevelopment Agency's economic development program to attract and 2013-2017 2,328 2,503 4,831 2018-2022 1,780 1,904 3,684 retain businesses in the City, the Redevelopment Agency has entered into various 1,910 1,910 2023-2027 contractual comumitments. Generally, the Redevelopment Agency reimburses the business 2028-2032 2,707 for its tenant improvement costs from property tax increment revenues received by the Total notes and contractual commitnents $41,794 $ý14 911 S56,705 Redevelopment Agency. At June 30, 2007, the outstanding balance of these commitments totaled $392: Notes and Loans Payable - Ilouising Authority California State Teachers Retirement System (CALSTRS) has entered into an agreement, Housing Authority CHFA loan agreements dated December 15, 1992, with the Agency to share hi the development costs of the Plaza Redevelopment Project. In March 2004, CALSTRS assigned the agreement to the new In October 2003, the Housing Authority entered into a loan agreement for an amount up owners, Pan Pacific Retail Properties, In. (PPRP).The PPRP participation note bears 7% to $1,800 with the California Housing Finance Agency (CHFA), to provide funding for simple interest rate and has a maximum term of 25 years. The Redevelopment Agency's first-time homebuyers down payment assistance. The note bears 3% simple interest, with obligation to repay the note is entirely contingent on the revenues generated by the project. principal and interest due in October 2013. At June 30, 2007, the outstanding balance of The note will be forgiven at the end of the tenm whether or not the entire amount has been this loan was $839.

repaid. At June 30, 2007, the outstanding balance of the participation note was $4,615.

In November 1999 and April 2000, the Housing Authority entered into separate loan The Redevelopment Agency entered into a purchase and sale agreement dated November agreements totaling $1.650 with CHFA to provide funding to several property owners for 24, 2002 with Suzanna Luiso, a property owner, for the purchase of a future commercial the rehabilitation of properties to provide affordable housing. The notes bear 3% simple development site located at 1687 West Lincoln Avenue for $900. One half of tile purchase interest, with principal payments in the amount of $1,150 and $500 due in November 2009 price or $450 was paid in cash and the balance of $450 by a promissory note bearing 6% and April 2010, respectively.

simple interest per annum. The note is payable over 10 years at $3 per month with a balloon payment of $379 on its maturity date of March 1, 2013. The outstanding balance of this note at June 30, 2007 was $424.

54

CITY OF ANAHEIM BUSINESS-TYPE ACTIVITIES: Bonds Payable - Water Utility BONDS PAYABLE 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 6/30/07 Fiscal Year Ending 6/30 Principal Interest "Total Electric Utility 5

3. %-5.1% 200)8 $1,375 $ 325 $ 1,700 1993 Revenue Bonds 6/01/93 10/01/07 $ 60,700 $ 6,615 1998 Revenue Bonds 5/01/98 10/01/28 4.75%-5.0% 65,000 8.035 2009 1,435 269 1,704 1999 Revenue Bonds 9/01/99 10/01/27 3.0%-5.0% 45,000 41,8105 2010 1,490 210 1,7010 2002 Revenue Bonds 2/15/02 10/01/31 3.3%-5.25% 178,705 178,705 2011 880 163 1,043 2003 Revenue Bonds 4/01/03 10/01/22 3.0%-5.0% 60,415 55,990 2012 915 127 1,042' 2004 Revenue Bonds 6/01/04 10/01/34 3.0%-5.0% 131,265 126,235 2013-2017 2,635 200 2,835 2007 Revenue Bonds 2/01/07 10/01/39 4.0%-5.0% 206,035 206,035 Total 8,730 1,294 10,024 Total 623,420 (300) (30)0)

Unamortized bond discount Unamortized bond premium 2,270 Total bonds $8,430 $1,294 $ 9,724 Total Electric Utility 625.690 Water Utilitv Bonds Payable - Sanitation 2004 Revenue Bonds 5/01/04 10/01/16 4.0%-4.5% 12,105 8,730 Unamortized bond discount (300)

Total Water Utility 8,430 Bond debt service requirements to maturity for Sanitation to be paid from revenues are as follows:

Sanitation 21007 Revenue Bonds 5/23/07 2/01/39 3.55%-5.0% 47,710 47,710 Unamortized bond premium 1,515 Fiscal Year Ending 6/30 Principal Interest Total Total Sanitation 49,225 2008 $ 1,532 $ 1,532 2009 2,224 2,224 Convention, Sports and Entertainment Venues 2,223 2,998 2010 $ 775 2002 Revenue Bonds 7/02/02 8/01/23 3.0%-5.5% 26,26(0 22,940 2011 805 2.192 2,997 Uniamortized bond discount (159) 2012 835 2,160 2,995 Total Convention, Sports and Entertainment Venues 22,781 S$83 3,195 $706,126 2013-2017 4,805 10,188 14,993 Total busiriess-type activities bonds 2018-2022 5,985 8,998 14,983 2023-2027 7,560 7,424 14,984 Bonds Payable - Electric Utility 21128-2032 9,445 5,544 14,989 Bond debt setvice requirements to maturity for the Electric Utility to be paid fiom 2033-2037 11,910 3,078 14,988 revenues are as follows: 2038-2039 5,590 401 5,991 Total 47,710 45,964 93,674 Fiscal Year Ending 6/30 Principal Interest Total 1,515 Unatnortized bond premium 1,515 2008 $ 14,690 $ 29,450 $ 44,140 T*tal bonds $49,225 $45,964 ý$94189 2009 15,370 28,798 44,168 2010 15,995 28,123 44,118 2011 16,725 27,379 44,104 2012 17,040 26,607 43,647 2013-2017 97,510 120,364 217,874 2018-2022 101,365 94,981 196,346 2023-2027 108,630 69,623 178,253 2028-2032 138,445 39,695 178,140 2033-2037 81,935 12,560 94,495 2038-2039 15,715 354 16,069 Total 623.420 477.934 1,101,354 Unamortized bond premiutn 2,270 2,270

$625,690 $477.934 $1,103,624 Total bonds 55

CITY OF ANA14EIM Bonds Payable - Convention, Sports and Entertainment Venues Included in interest is $1,978 related to accretion on capital appreciation certificates.

Bond debt service requirements to maturity for the Convention, Sports and Entertainment NOTES AND LOANS PAYABLE Venues to be paid fron revenues are as follows:

Fiscal Year Ending 6/30 Principal Interest Total Notes and Loans Payable -Water Utility 2008 $ 80 $1,129 $ 1,209 2009 3,215 1,071 4,286 At June 30, 2007, notes and loans payable are as follows:

2010 3,340 944 4,284 2011 3,505 777 4,282 Orange County Water District promissory note 2012 3,520 583 4,103

.2013-2017 8,885 627 9,512 In April 1990, the Water Utility executed a Well Construction Program Agreement with 2018-2022 305 69 374 the Orange County Water District to assist in financing the construction of three super 2023-2024 90 2 92 wells to be located within the City. Advances totaling $2,177 at an interest rate of 3.5% for Total 22,940 5,20)2 28,142 a period of 15 years were for wells 46, 47 and 49. The outstanding balance on this note at Unamortized bond discount (159) (159)

June 30, 2007, totaled $408.

Total bonds $22_781 $27,983 State of California Revolving Fund note pavable CERTIFICATES OF PARTICIPATION Range of Authorized Out- In June 2001, the Water Utility executed a note payable to the State of California Date Final Interest Rates and standing Revolving Fund at a rate of 2.8% in the amount of $18,063. There are semi-annual Issued Maturity at Issue Date Issued 6/30/07 payments of principal and interest in the amount of $592 through June 12, 2021. The Convention, Sports and Entertainment Venues outstanding balance on this note at June 30, 2007, totaled $14,048.

1992 Convention Center Financing Project 1/01/92 8/01/23 3.9%-6.4% $ 92,777 $39,192 Notes and loans debt service requirements to maturity for the Water Utility are as follows:

Accretion 1,978 1993 Reftmding Projects 1/14/93 8/01/19 5.47% 114,564 55,387 Fiscal Year Ending 6/30 Principal Interest Total Unamortized COP discount (82) 2008 $ 941 $ 400 $ 1,341

$207,341 $96,475 Total business-type activities COPs 2009 935 373 1,308 2010 963 346 1,309 2011 899 318 1,217 Certificates of Participation Payable - Convention, Sports and Entertainment Venies 2012 892 293 1,185 2013-2017 4,849 1,076 5,925 Certificates of participation debt service requirements to maturity for the Convention. 2018-2021 4,977 354 5,331 Sports and Entertainment Venues Fund to be paid from unrestricted revenues are as Total 14,456 3,160 17,616 Unamortized note'discount (375) (375) follows:

Total notes and loans $14,081 $3,160 $17,241 Fiscal Year Ending 6/30 Principal Interest Total 2008 $ 6,327 $ 7.378 $ 13,705 ARBITRAGE 2009 5,396 5,096 10M492 2010 5.669 4.774 10,443 2011 The Tax Reform Act of 1986 (Act) substantially revised the treatment to be afforded to 6,027 4,435 10,462 2012 6.388 4.076 10,464 earnings on the proceeds of tax-exempt debt, and now requires the City to calculate and 2013-2017 32,013 15,319 47,332 remit rebatable arbitrage earnings to the Internal Revenue Service. Certain of the City's 2018-2022 30.759 3.877 34,636 debt and interest earned on the proceeds thereof are subject to the requirements of the Act.

2023-2024 2,000 75 2,075 Total 45,030 139,609 The City has accrued a liability for estimated rebatable arbitrage earnings and has set aside 94,579 Unamortized COP discount (82) (82) such earnings as restricted cash. At June 30, 2007, the arbitrage rebate liability for Total COPs $94,497 $45,030 $139,527 governmental and business-type activities was zero and $215, respectively.

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CITY OF ANAHEIM COMPLIANCE WITH DEBT COVENANTS CONDUIT FINANCINGS There are various limitations and restrictions contained in the City's bond and certificates City of participation indentures. The City believes they are in compliance with all significant limitations and restrictions. The City has entered into two conduit financings on behalf of community care provider facilities and one to facilitate the management agreement for the Honda Center (formerly DEBT ISSUANCES the Arrowhead Pond) of Anaheim. In accordance with applicable agreements, the Cityhas no obligation for debt service payments and therefore, the debt is not reflected in the City - Debt Refunding accompanying basic financial statements. Bonds payable and certificates of participation related to conduit financings outstanding at June 30, 2007, are as follows:

In June of 2007, the Authority sold $256,320 of lease revenue bonds, of which $255,325 was deposited in escrow funds to advance refund and defease $248,335 of the 1997 Date Final Amount Outstanding Anaheim Lease Revenue Bonds. The City reduced its total debt service payments over the Issued Maturity Issued 6/30/07 life of the bonds by $19,957, and obtained an economic gain (difference between net 1985 West Anaheim present value of the debt service payments onl the old debt and new debt) of $10,456. Convalescent Home 12/30/85 12/01/05 $ 3,204 $ 1,959 1993 Anaheim Memorial Electric Utility - Debt Refunding Hospital Association 10/15/93 5/15/20 46,690t 30/,920t 2003 Anaheim Arena Financing Project 12/11/03 6/01/23 42,600 39,500 Total $92,494 $72,379 In February of 2007, the Electric Utility sold $209,453 of revenue bonds, of which

$73,467 was deposited in escrow funds to advance refund and defease $2,1 10 in Electric Anaheim Housing Authority System Certificates of Participation and to advance refund and partially defease $49,625 of Anaheim Public Financing Authority 1998 revenue bonds. The Electric Utility reduced The Anaheim Housing Authority has entered into conduit debt financings on behalf of its total debt service payments over the life of the bonds by $9,236, and obtained an various developers to assist with the acquisition, construction, equipping, rehabilitation economic gain of $4,315.

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 Debt Defeased obligation for debt service payments and therefore, the debt is not reflected in the accompanying basic financial statements. Housing Authority revenue bonds related to Certain bonds and certificates of participation defeased by the City prior to June 30, 2007, conduit financings outstanding at June 30, 2007, are as follows:

are summarized below:

Outstanding 6/30/07 Date Final Amlount Outstanding City Issued Maturity Issued 6/30/07 1997 Anaheim Lease Revenue Bonds $248,335 1985 West Anaheim Royale 12/01/85 12/(01/15 $ 4,664 $ 3,079 1990 Bel Age Apartments 8/01//90 8/01/20 101001) 6,600 Redevelopment Agency - 1992 Heritage Village Park 11/12/92 11/12/07 8,485 5,485 Local Government Finance Authority Revenue Bonds, 1986 Issue A 38,410 1997 Monterey Apartments 5/15/97 5/15/27 4,545 4,045 1997 Port Trinidad Apartments 5/15/97 5/15/27 2,140 1,940 Electric UtilitEl i U1997 Casa Granada Apartments 5/15/97 5/15/27 3,795 3,395 Electric System Certificates of Participation, Issue of 1997 3,240 1998 Sage Park Project Electric System Revenue Bonds, Issue of 1998 49,625 2000 Cobblestone Apartments 11/01/98 11/01/28 5,500 5,500 7/20/00 3/15/33 3,980 3,780 2000 Seawinds Apartments 2000 Paris Apartments 7/20/00 7/15/33 7,000 6,700 In each of these refundings, the proceeds of the refunding issues were placed int 2000 Park Vista Apartments 7/24/00 / 7/01/33 27,180 27,180 irrevocable escrow accounts and invested in governlnent securities that, together with 2001 Solara Court Apartments 1/01/01 12/01/34 8,200 6,110 interest earnings thereon, will provide amounts sufficient for future payments of interest Total $85,489 $73,814 and principal on the issues refunded. Refunded debt is not included in the City's accompanying basic financial statements as the City has satisfied its obligation through the in-substance defeasance of these issues.

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CITY OF ANAHEIM Mello-Roos Community Facilities Districts Condensed Statement of Net Assets Iln February 2007, the City issued $9,060 in special tax bonds to finance a portion of the Assets cost of acquisition and construction of facilities in the Platinum Triangle of Anaheim. The Current assets $ 9,936 bonds were authorized pursuant to the Mello-Roos Community Facilities Act of 1982. The Restricted assets 49,469 Capital assets 52,_600 bonds are payable from a special assessment tax and are non-recourse bonds secured by 112,005 Total assets the properties. Neither the faith and credit nor the taxing power of the City, the State of California or any political subdivision of either of the foregoing is pledged to the payment Liabilities of the bonds. The bonds are not general or special obligations of the City, nor do they Current liabilities 606 contain any credit enhancements that secondarily pledge existing or future resources of the Current liabilities payable from restricted assets 550 City, accordingly they are not reflected in the accompanying basic financial statements. Noncurrent liabilities 49,225 The City is acting as agent only for the property owners in collecting the special Total liabilities 50,381 assessments and forwarding the collections to the fiscal agent. This activity is recorded in an agency fund in the basic financial statements. At June 30, 2007, the 2007 Mello-Roos Net Assets bonds outstanding amounted to $9,060. Invested in capital assets, net of related debt 51,578 Unrestricted 10,046 Total net assets $ 6_ .624 In June 1989, the City issued $26,620 in special tax bonds to finance a portion of the cost of acqtuisition and construction of facilities in East Anaheiml Hills. The bonds were authorized pursuant to the Mello-Roos Colmmunity Facilities Act of 1982. In April 1995, Condensed Statement of Revenues, Expenses and Changes in Net Assets

$15,389 of the 1989 bonds were advance refunded through the Anaheim Public Financing Wastewater fees (pledged against bonds) $ 10,113 Depreciation and amortization (1,102)

Authority and in June 2005, $11,160 of the 1995 bonds were refunded through the Authority. In December 1999, $7,720 of the 1989 bonds were refunded by the City. The Other operating expenses (6,734) 2005 and the .1999 bonds are payable from a special assessment tax and are non-recourse Total operating income 2.277 bonds secured by the properties. Neither the faith and credit nor the taxing power of the Nonoperating income (expenses)

Interest income 380 City, the State of California or any political subdivision of either of the foregoing is Other nonoperating income 59 pledged to the payment of the bonds. The bonds are not general or special obligations of (192)

Interest expense the City, nor do they contain any credit enhancements that secondarily pledge existing or Transfers out (269) future resources of the City, accordingly they are not reflected in the accompanying basic Capital contributions 51,425 financial statements. The City is acting as agent only for the property owners in collecting Total nonoperating income 51,403 the special assessments and forwarding the collections to the fiscal agent. This activity is Change in net assets 53,680 recorded in an agency fund in the basic financial statements. At June 30, 2007, the 2004 Net assets at beginning of year 7.944 Anaheim Public Financing Authority bonds outstanding amounted to $9,375, and the 1999 *Net assets at end of year $ 61,624 Mello-Roos bonds outstanding anmounted to $5,530.

Condensed Statement of Cash Flows NOTE 9 - SEGMENT INFORMATION: Net cash provided by (used in):

Operating activities $ 3,207 The Sanitation Fund issued revenue bonds to finance sewer system expansion and Noncapital financing activities (210) improvements. The Sanitation Fund accounts for three activities: solid waste collection, Capital and related financing activities 46,633 waste water, and street cleaning. However, investors in the revenue bonds rely solely on Investing activities (45,742) revenue generated through waste water activities for repayment.- Summary financial Net increase 3,888 Beginning cash and cash equivalents 353 infornation for waste water activities is presented below:

Ending cash and cash equivalents $ 4,241 58

CITY OF ANAHEIM NOTE 10 - INTEREST RATE SWAPS: Moody's at June 30, 2007. To mitigate the potential for credit risk, if the counterparty's credit quality falls below AA-/Aa3, the fair value of the swaps will be fully collateralized Objective of the interest rate swaps. As a means to lower its borrowing costs, when by the cotmterparty with cash or securities. Collateral would be posted with a third-party compared against fixed-rate bonds at the time of issuance, the City entered into interest custodian.

rate swap agreements for certain COPs. The intention of the swaps was to effectively change the City's variable interest rate on the COPs to a synthetic fixed rate. Termination Risk. The City or the counterparty may terminate the swaps if the other party fails io perform under the terms of the contracts. The swaps may be terminated by the City Terms and fair values. The teris and fair values of the outstanding swaps at June 30, if the counterparty's credit quality rating falls below "A-" as issued by S&P or "A3" as 2007, were as follows. The City's swap agreements contain scheduled reductions to issued by Moody's. Additionally, the swaps may be terminated by the counterparty if the outstanding notional amounts that are expected to approximately follow scheduled oi" City's credit quality rating falls below "BBB-" as issued by S&P or "Baa" as issued by anticipated reductions in the associated COPs payable. Moody's or if the COPs' credit quality ratings fall below "AA-" as issued by S&P or "Aa3" as issued by Moody's. If the swaps are terminated, the variable-rate COPs would no longer Variable Swap carry synthetic interest rates. Also, if at the time of termination the swaps had negative Notional Effective Fixed Rate Rate Fair Termiination fair values, the City would be liable to the counterparty for a payment equal to the swaps' COP Issues Amotunts Date Paid Received Values Date fair values.

1993 Refunding Projects $62,400 1/1/1993 5.47% 3.35%t -$(5,960) 8/1/2019 1993 Police Facilities NOTE 11 - RETIREMENT PLANS:

Refinancing Project 4,400 6/1/1993 4.47% 3.35%t (47) 8/1/2008

$66,800 $(6,007)

PERS tVariable rate received effective at June 30, 2007. The variable rate received is a The City contributes to the California Public Ensployees' Retiretnent System (PERS), an weekly interest rate detenmined by the-remarketing agent on the deternmination date to agent multiple-employer public employee defined benefit pension plan. PERS provides be the minimum interest rate, which, in the opinion of the remarketing agent under retirement and disability benefits, annual cost-of-living adjustments, and death benefits to then-existing nmarket conditions, would enable the remarketing agent to sell such plan members and beneficiaries. PERS acts as a common investment and administrative COPs. agent for participating public entities within the State ofCalifornia. Benefit provisions and all other requirements are established by State statute and City ordinance. A copy of Fair Value. Because interest rates have declined since execution of the swaps, the swaps PERS' annual financial report may be obtained from its executive office at 400 P Street, had a negative fair value of $6,007 at June 30, 2007. The swaps' negative fair value may Sacramento, California 95814.

be countered by a reduction in total interest payments required under the variable-rate COPs, creating a lower synthetic interest rate. Because the coupons on the City's variable- Funding Policy: Participants are required to contribute 8.0% (9.0% for fire safety rate COPs adjust to changing interest r:ates, the COPs do not have a corresponding fair employees and 11.5% for police safety employees) of their annual covered salary. For value increase. The fair values were estimated using the present value of expected cash miscellaneous employees the City pays 7% of the participant contributions and the flows. The fair value of the swaps are not recorded in the accompanying financial employee pays 1%. For Police safety employees 9% of the 11.5% is paid by the City and statements. the employee pays the remaining 2.5%. For Fire safety employees, the entire 9% is paid by the employees. In addition, the City is required to contribute at an actuarially Credit Risk. At June 30, 2007, the City was not exposed to credit risk because the swaps determined rate applied to annual covered payroll; the current rates are 15.793% for had negative fair values. However, should interest rates change and the fair values of the miscellaneous employees, 23.823% for fire safety employees and 24.(169% for police swaps become positive, the City would be exposed to credit risk in the amount of the safety employees. The contribution requirements of plan members and the City are derivatives' fair values. The swap counterparty was rated AA+ by S&P and Aal by established and may be amended by PERS.

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CITY OF ANAHEIM Annual Pension Cost: For fiscal year 2007, the City's. annual pension cost of $48,023 for The most recent actuarial valuation was as of July 1, 2006, using the Projected Unit Credit PERS was equal to the City's required and actual contributions. The required contribution cost method to determine reserving requirements. The valuation was based on the was determined as a part of the 2006 actuarial valuations, using the entry age normal following assumptions:

actuarial cost method. The actuarial assumptions included: (a) 7.75% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by Discount rate 4.5% annual duration of service, and (c) 2% per year cost-of-living adjustments. Both (a) and (b) Increase in future payroll 4.0% annual included an inflation component of 3%. The actuarial value of PERS assets was Medical trend 11.0% increase in 2007, declining to 5.0%

determined using techniques that smooth the effects of short-term volatility in the market increase by 2013 value of investments over a 15-year period (smoothed market value). The PERS unfunded Non-econolnic System-wide PERS assumptions based on actuarial accrued liability is being amortized as a level percentage of projected payroll on pension formula of the employee group a closed basis. The average remaining amortization periods at June 30, 2006, were 22 years for the miscellaneous plan and 32 years for safety fire and police plans for years of The July 1, 2006, actuarial valuation estimated the current normal cost of the benefit at service unfunded. See Required Supplementary Information immediately following the 1.74% of payroll. An additional 3.20% of payroll was estimated as the cost of amortizing notes to the financial statements. prior service obligations over a 30-year period as a level percentage of total payroll.

Currently, the accrued liability is estimated at $198,385 of which $125,062 is unfunded Trend information for PERS and $73,323 is funded, available, and reserved for future obligations.

Fiscal Year Annual Percentage of Net Pension Changes were made to the postreiirement medical benefits for members of IBEW

- Ending Pension Cost (APC) APC Contributed Obligation bargaining unit. Those members of the IBEW that retired on or before October 15, 2005 6/30/05 $29,591 100% $0 may be eligible for the City's defined benefit postretirement medical benefits. Members 6/30/06 42,734 100 0 of the IBEW retiring after that date are eligible for benefits from a trust established by the 6/30/07 48,023 100 0 IBEW. Benefits are determined by the trustees of the IBEW Trust. The City's liability is liutited to atn annual contribution equal to a specified percentage of pay less the annual Retirement Medical Benefits cost of funding retirees before October i5, 2005. The specified percentage is four percent initially and will go to five percent on December 26, 2008. In October 2005, the City In addition to the pension benefits described above, the City provides postretirement transferred a portion of the reserve earmarked for providing retiree medical benefits to medical benefits to eligible retirees (hired prior to January 1, 1996, Anaheim Police IBEW employees to tile IBEW Trust such that the actuarial liability of retirees as of Association employees hired prior to July 6, 2001, and Anaheim Fire Association October 15, 2005 and futtre retirees were similarly funded. Such determination was based employees hired prior to November 9, 2001) in accordance with City Personnel on the actuarial assumptions and methods reflected in the July 1, 2004 valuation and Resolutions and various Memoranda of Understanding. Depending upon the employee's participant data as of October 15, 2005. For the period July 1, 2006 to June 30, 2007, the date of hire and employee group, minimum eligibility requirements are age 50 and 5 years City's contribution to the IBEW trust was $207.

of City service.

Miscellaneous employees hired on or aller January 1, 1996 and before January 1, 2002 The City has several plans with different contribution levels and benefit provisions. City (not represented by the Anaheim Police Association, the Anaheimi Fire Association or the contributions vary up to 100% of annual premium cost, depending on the employee's International Brotherhood of Electrical Workers) were transitioned from the defined Medicare eligibility, year of hire, age and employee group. benefit post retirement medical plan to the defined contribution post relirement medical plan. A one-time contribution of $.07 per month of service was made to a newly The City's contributions toward the cost of these defined benefits are generally advance established retiree health savings account for those eligible employees on or about funded on an actuarial basis to a dedicated reserve but contributions are not required. For December 31, 2005. Total contributions to participant accounts under this provision were the period July 1, 2006 to June 30, 2007, the City's contribution to the postretirement $1,685. Participation in the retiree health savings account is mandatory for that group of medical plan was $12,671. employees and requires an employee contribution of 2% of their regular earnings at June 30, 2007.

60

CITY OF ANAHEIM The City provides postretirement medical benefits in the form of contributions to defined At the direction of the Hazmat Board, rev'enues are disbursed to the provider agencies at contribution retiree medical plans in accordance with City Personnel Resolutions and the end of each preceding quarter. Audited financial information for the joint powers various Memoranda of Understandings for all newly hired employees as of January 1, authority as of and for the year ended June 30, 2007, is as follows:

1996 (July 6, 2001 for the Anaheim Police Association and November 9, 2001 for the Anaheim Fire Association employees). Under the plans, the City is required to make one- Total assets $ 68 Total liabilities 45 time contributions ranging from $3 to $8 per employee. The City's total contribution to Members' equity 23 the plans for the period July 1, 2006 to June 30, 2007, was $678. All active employees Total revenues 159 (including those eligible for the defined benefit retiree medical plan) are eligible to total expenses 158 participate in the plan through voluntary contributions of the value of sick or vacation Revenues over expenses hours up to certain limits, into their retiree health savings accounts. These accounts are Hazmat does not have any debt outstanding at June 30, 2007.

available to reimburse costs incurred after retirement for medical and other welfare benefits.

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 copy In all cases, eligible retirees may participate in any health plan made availableto active of Hazmat's separate financial statements, contact the Finance Director of the City.

City employees. The contribution made by the City toward the cost of the plan is determined by Personnel Resolution or Memorandwn of Understanding. At June 30, 2007, Metro Cities Fire Authority 1,167 retirees or surviving spouses met the various eligibility requirements and were receiving benefits.

The City participates in a joint powers authority, Metro Cities Fire Authority (Fire Authority), for the purpose of providing a central commuunication network and record NOTE 12 - JOINT VENTURES AND JOINTLY-OWNED PROPERTIES:

keeping system to support fire suppression, emergency medical assistance, rescue service, and related services provided by the members of the Fire Authority.

Authority for Orange County - City Hazardous Materials Emergency Response The following entities are members of the Fire Authority: City of Anaheim, City of The City participates in a joint powers authority, the Authority for Orange County-City Fountain Valley, City of Fullerton, City of Garden Grove, City of Huntington Beach, City Hazardous Materials Emergency Response (Hazmat), for the purposes of responding to, of Newport Beach, and the City of Orange.

assessing the nature of, and stabilizing any emergency created by the release or threatened release of hazardous materials.

Public entities in Orange County may receive services from the Fire Authority by executing an agreement and paying a fair share contribution. Audited financial The following entities are members of Hazmat: City of Anaheim, Orange Counity Fire infonnation for the Fire Authority as of and for the year ended June 30, 2007, is as follows:

Authority, City of Santa Ana, and the City of Huntington Beach. Members of the Board of Directors (Hazmat Board) consist of one voting Board member and an alternate appointed Total assets $1,266 by the governing body from the City of Anaheim, Orange County Fire Authority, City of Total liabilities 468 Santa Ana, and the City of Huntington Beach. Members' equity 798 Total revenues 4.326 Total expenses 4,207 Distribution of fair share contributions to reimburse the provider agencies are as follows: Revenues over expenses 119 City of Anaheim, 27.3%; Orange County Fire Authority, 27.3%; City of Santa Arta, 27.3%;

and City of Huntington Beach, 18.1%.

61

CITY OF ANAHEIM The City has no significant equity interest in the Fire Authority, and accordingly neither the Electric Utility ceased recording all related operating expenses, except marine assets nor liabilities of the Fire Authority have been recorded in the City's basic financial mitigation costs and spent fuel storage charges, as of December 29, 2006. The original statements. For a copy of the Fire Authofity's separate financial statements, contact the useful life (through 2022) of the SONGS utility plant assets was decreased and Finance Director of the City. depreciation was accelerated in fiscal years 2007 and 2006. Based on the SONGS settlement agreement, the Electric Utility is responsible for the Citys share of marine Jointly-owned utility plants mitigation costs up to $2,300, and SCE is responsible for costs between $2,300 and

$7,300. The Electric Utility is responsible for spent fuel storage charges until the federal The City's Electric Utility owns a 10.04% ownership interest in the coal-fired San Juan government takes possession.

Generating Station, Unit 4, located near Waterflow, New Mexico. The other participants in Unit 4 and their respective ownership include: Public Service of New Mexico, 45.48%; As a former participant in SONGS, the Electric Utility is subject to assessment of City of Farmington, New Mexico, 8.48%; County of Los Alamos, New Mexico, 7.20%; retrospective insurance premiums in the event of a nuclear incident at SONGS or any other and M-S-R Public Power Agency, 28.80%. There are no separate financial statements for licensed reactor in the U.S.

this venture, as each participant's interest in the utility plant is included in their respective financial statements. The City's cumulative share of construction costs included in the NOTE 13 - COMMITMENTS AND CONTINGENCIES:

utility plant at June 30, 2007, amounted to $66,929. The City's bonded indebtedness incurred to finance the purchase of the 10.04% ownership interest is also included in the Intermnountain Power Agency basic financial statements.

The Electric Utility has entered into a power purchases contract with the Intermountain Pursuant to a settlement agreement with SCE dated August 4, 1972, the City was granted Power Agency (IPA) for delivery of electric powel: The share of IPA power is equal to the right to acquire a 1.66% ownership interest in SONGS and subsequently, ownership 13.225% of the generation output of IPA's two coal-fueled generating units located in was later increased to 3.16%. In the settlement agreement, SCE agreed to provide the Delta, Utah. The City is obligated for the following percentage of electrical facilities at necessary transmission service to deliver the output of SONGS to the City. As a result of IPA:

a restructuring agreement between SCE and the City, these transmission services are now Generation Entitlement Expiration provided by California Independent System Operator (CAISO). SCE and the City entered

• ntermountain Power Project 13.2% , 2027 into' the SONGS Operating Agreement that sets forth the terms and conditions under which the City, through the Electric Utility, participates in the ownership and output of The contract constitutes an obligation of the Electric Utility to make payments from SONGS. Maintenance and operation of SONGS remains the responsibility of SCE. revenues and requires payment of certain minimum charges. These minimum charges include debt service requirements on the financial obligations used to construct the plant.

On June 22. 2004, SCE, as operating agent for the SONGS, gave notice that SCE had These requirements are considered a cost of purchased power and are quantified below.

declared an Operating Impairment. As a result of SCE's action, on October 11, 2004, the City exercised its option not to participate in the restoration work related to the impairment Southern California Public Power Authority and to have its ownership share reduced per provisions of the Agreement. On December 20, 2005, the City and SCE entered into an agreement for the City to transfer its interest The Electric Utility is a member of the Southern Calirornia Public Power Authority in SONGS to SCE once SCE obtained approval from the California Public Utilities (SCPPA), a joint powers agency. SCPPA provides for the financing and construction of Commission (CPUC), California State Lands Commission, and U.S. Nuclear Regulatory electric generating and transmission projects for participation by some or all of its Commission (NRC). SCE obtained all such approvals prior to the sale date. members. To the extent the Electric Utility participates in projects developed by SCPPA, it is obligated for its proportional share of the cost of the project. The City is obligated for The City sold its ownership interest of SONGS to SCE on December 29, 2006. the following percentage of electrical facilities owned by SCPPA:

Accordingly, utility plant, in the amount of $214,134, was removed from capital assets and 62

CITY OF ANAHEIM Transmission Entitlement Expiration year. The fiscal year 2007 expenses for ftel, O&M, A&G and other costs at these projects Southern Transmission System (STS) 17.6% 2027 were as follows:

Mead-Adelanto Project (MAP) 13.5% 2030 Mead-Phoenix Project (MPP) 24.2% 2030 Fiscal Year IPA STS MAP MPP Hoover Magnolia Gas Total 2007 $44,739 $2,680 $213 $304 $263 $37,964 $365 $86,528 Generation Entitlement Expiration Hoover Dam Uprating (Hoover) 42.6% 2018 The Honda Center Magnolia Generating Station (Magnolia) 38.0% 2037 SCPPA Natural Gas Project - Pinedale 62.5% 2008 Effective December 16, 2003, the City and Anaheim Arena Management LLC (AAM)

SCPPA Natural Gas Project - Barnett 55.6% 2008 entered into a Facility Management Agreement (FMA) whereby AAM has the exclusive right and license to manage, maintain and operate all aspects of the facility in accordance Take or pay commitments with the FMA through June 30, 2023 with an option to extend tile term for an additional period not to exceed 10 years. Annual distributions to the City, AAM and the County of As part of the take or pay commitments with IPA and SCPPA, the Electric Utility has Orange are required for their respective share of adjusted net revenues, as defined in the agreed to pay its share of current and long-term obligations. Payment for these obligations FIVMA. In the event that cash on hand is insufficient to pay operating expenses, debt will be made from the operating revenues received during the year that the payment is due. service, distributions to the City, the County of Orange, or other amounts payable, AAM A long-term obligation has not been recorded on the accompanying basic financial shall make or cause an affiliate or third-party lending institution to make loans for such statements for these commitments. The following schedule details the amount of debt purposes, as defined in the FMA. Such funds will be repaid from gross revenues or service that is due and payable by the Electric Utility for each project and the final adjusted net revenues, if any, as defined in and in accordance with disbursement priorities maturity date. established in the FMA. At June 30, 2007, tile outstanding conduit debt ott tile Honda Fiscal Center totaled $39,500. The debt is non-recourse, payable from revenues generated by the Year Natural facility. Neither the faith and credit nor the taxing power of the City is pledged to the Ending 6/30 IPA STS MAP MPP Hoover Magnolia Gas Total payment of the debt. The debt is not a general or special obligation of the City, nor does 2008 $ 38,708 $ 12,320 $ 2,856 $ 1,591 $ 957 $ 5,240 $44,290 S 105X962 it contain any credit enhancements that secondarily pledge existing or future resources of 2009 35,711 11,891 2,852 1,589 957 8,814 61,814 the City (other than revenues generated by the facility), and accordingly it is not reflected 2010 37,889 11,978 2,857 1,586 956 8,990 64.256 in the accompanying basic financial statements.

2011 39,123 12,114 2,928 1,822 957 8,988 65.932 2012 41,333 15,018 2,917 1,815 956 8,989 71.1028 2013-2017 181,320 67,405 14,511 8,228 4,787 44,940 321,191 On January 26, 1999, the City entered into a series of lease transactions for the Honda 2018-2022 138,079 69,315 11,616 6,225 956 35,416 261,607 Center. Under these transactions, the City leased the Honda Center to a third party trustee 2023-2027 9,103 12,751 35,502 57,356 acting for the benefit of an equity investor for a term of approximately 39.2 years. The 2028-2032 35,663 35,663 trustee sublet the facility back to the City for 20 years, which was shorter than the then 2033-2037 52,58 4 51,580

$10,526 $244,122 $44.290 $1,096,389

ý$22856 remaining term of the management agreement between the third-party manager at that Total $5212266 12:1:2:792 L40,537 time (Manager) and the City in consideration of an advance rental payment for the entire lease term. At the end of the sublease, the City has a purchase option to purchase the In addition to debt service, the City's entitlement requires the payment for fuel costs, trustee's rights under the lease for a fixed amount. The advance rent payments to the City operations and maintenance (O&M), administration and general (A&G) and other were deposited into a trust fund and invested. The cash scheduled to be available from this miscellaneous costs associated with the generation and transmission facilities discussed trust fund is sufficient to pay the City's rent payments for the term of the sublease and to above. These costs do not have a similar structtred payment schedule as debt service, exercise the City's purlchase option at the end of the sublease. The excess of the atnount of however, prior experience indicates that annual costs are generally consistent from year to 63

CITY OF ANAHEIM the advance rent payment made by the trustee to the City over the deposit to the trust known as "The Grove of Anaheim"). In November 2002, the City purchased the facility finds, after the payment of fransaction expenses and payment to the Manager for agreeing and the land for $6,700 from its then owner, SMG, a Pennsylvania partnership, an affiliate to pledge its interestas Manager under the management agreement then in effect and of Aramark Entertainment, Inc. Concurrent with the purchase, the City granted to agreeing to undertake certain additional obligations to the transaction, was approximately Nederlander-Grove LLC (Nederlander) a license to operate the facility for three years with

$4,000. This amount was recognized by the City as deferred revenue and is being the right to extend another five years. Under the terms of the agreement, Nederlander amortized over the sublease term. The City has secured its obligations to the other parties receives a management fee of $150. Nederlander paid-the City $295 for the year ended to these lease transactions by a pledge of its respective interest in revenues from the June 30, 2007 for parking and common area maintenance. Additionally, The City and facility, subordinate (with certain exceptions) to any interests of the debt holders of the Nederlander each participate 50% in tile annual net profits and net losses from operations, facility. The City's obligations urnder these lease transactions are considered to be defeased as defined in the management agreement. Nederlander is responsible for 100% of losses in substance, and therefore the related liabilities as well as the trust assets have been in excess of $400, thereby limiting the City's share of net losses to a maximum of $200 in excluded from the City's financial statements. The City's and AAM's respective rights any given year. The City may elect to terminate the agreement prior to expiration of the under the FMA are subject in certain respects to the effect of the 1999 lease transaction. term under certain conditions, and pay the unamortized balance of capital assets purchased during the tern to Nederlander.

Angel Stadium of Anaheim In May 1999, the City approved the sale to Summit Commercial Properties of a 1.5 acre On May 14, 1996, the City and the California Angels, LP (Team), which was then building site on the development site for $4,190. The transaction closed in March 2000, managed by Disney Sports Enterprises, Inc. (subsequently known as Anaheim Sports, and the owner, HPMC Stadium Gateway Associates, LLC, constructed a 250,000 square Inc.), entered into an agreement to provide for the -operation and refurbishmlent of the foot, six-story office building on the parcel. The "Stadium Gateway Anaheim" office Stadium. Pursuant to the agreement, the Team assumed responsibility for the operation of building opened for business on October 1, 2001. It is currently owned and operated by the Stadium on October 1, 1996. The agreement runs for 33 years (subject to a limited Maguire Properties - Stadium Gateway, L.P. The owner paid tile City $189 for the year Team option to cancel at 20 years and the Team's right to extend the term). ended June 30, 2007, for parking and common area maintenance. The City is continuing to pursue other opportunities for future development of the development site.

Under the terms of the agreement, the Team assumed full responsibility for all Stadium operations and maintenance, including capital maintenance. The Team books all Stadium Litigation and parking lot events (except for ten annual City events), pays all expenses, and retains all revenue (subject to the City's rights to share in certain net revenues) except that the City A number of claims and suits are pending against the City for alleged damages to persons credits the Team up to $500 per year adjusted annually for CPI for a capital reserve, and/or property and for other alleged liabilities arising out of matters usually incident to the calculated on the basis of property taxes. The City's participation in net revenues includes operation of a city such as Anaheim. Although the aggregate amount asserted for such amounts received by the Team above certain thresholds including paid admissions ($2.00 lawsuits and claims is significant, in the opinion of City management, the City has strong per paid admission in excess of 2.6 million admissions per year),

net income from non- defenses against such claims, and thus tile ultimate loss, if any, relating to these claims and game events (in excess of $2,000 per year adjusted annually for CPI), and parking lot net suits not covered by insurance, will not materially affect the financial position of the City.

income (25% in excess of $4,000 per year adjusted ainually for CPI). Additionally, as indicated above, the City retained the right to book and retain all revenue from ten parking Grants lot events per year. Major League Baseball consented to the transfer of the Team in fiscal year 2003 to interests controlled by Arte Moreno. No changes in the. terms of the Amounts received or receivable from grant agencies are subject to audit and 'adjustment agreement with the Team were made in connection with that transfer. by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures that may The Agreement also provided that the City had the right to develop approximately 42 acres be disallowed by the grantor cannot be determined at this time, although the City expects of the parking lot development site. In 1998 a land sale of $1,000 for a 1.25 acre site was such amounts, if any, to be immaterial.

approved for the construction of a 1,100-seat theatre called "Tinsettown Studios" (now 64

CITY OF ANAHEIM Construction and other significant commitments NOTE 14- SUBSEQUENT EVENTS:

At June 30, 2007, the City had the following commitments with respect to unfinished Pacific Western Bank business loan agreement capital projects:

In July 2007, the Redevelopment Agency exercised its option to extend the repayment of Remaining Expected its business loan agreement with Pacific Western Bank of $4,800 from July 2007 to Construction Completion January 2008.

Capital Proiect Commitment Date Anaheim 69/12 kilovolt Geographic Information System (GIS)

Substation $20,643 12/09 Prepaid gas project\

Anaheim Hills Road. Transmission Water Main Phase 1 2,269 04/08 Automotive Equipment Acquisitions 12,840 03/08 Anaheim is a participant in the SCPPA-owned "Gas Project No. 1" which includes the Brookhurst - La Pahna Sewer Improvement 1,196 02/08 acquisition of a fixed quantity of natural gas to be delivered over approximately 30 years CIM Public Improvement Project 12,050 06/08 beginning July 1, 2008, by J. Aron & Company tinder a Prepaid Natural Gas Sales Direct Buried Cable Replacement - Phase V 4,405 12/07 Agreement between J. Aron and SCPPA. The Prepaid Natural Gas Sales Agreement Energy Field Project-Site Improvements 3,884 03/08 provides for the delivery of gas to delivery points on the natural gas pipelines that serve Fleet Facility Underground Fuel Storage Tank Replacement 561 12/07 the project participants. Each project participant has its own Prepaid Natural Gas Sales Houston Avenue, Gilbert Street, Cornet Avenue, Gorton Street, 11/07 Agreement and the City's agreement amounts to $82,725 over the next 30 years. Bonds Clover Avenue and Fulton Street Sewer Improvements 1,937 were issued to fund the prepayment by SCPPA dated October 1, 2007.

Katella Avenue-Phase It from east of Jean Street to intersection of Easy Way and Sumac Lane Sewer Improvement 1,996 12/07 Katella Smart Street - Demolition 974 06/08 Lewis 230 kilovolt Extension 4,887 12/07 Lincoln and Dale Sewer hIprovement 988 10/07 Orange Avenue Street Improvement!Beach Boulevard-Magnolia Avenue 1,194 09/07 Right of Way. Clearing and Demolition for the Gene Autry Way/I-5 Highway and High Occupancy. Vehicle Interchange Project 1,109 .01/09 State College Boulevard Median and Landscape Beautification From Sotith Street to Broadway (Phase 4B) 858 08/07 Technology Development 3,684 06/08 Underground District No. 52 Phase II 960 10/07 Underground District No. 40 Santa Ana Canyon Road 965 12/107 Well No. 48 at Dad Miller Golf Course 603 05/08 Well No. 34 at Willow Park 881 01/08 65

CITY OF ANAHEIM Required Supplementary Information (In thousands)

Miscellaneous Employees Retirement System - Schedule of Funding Progress (A) (B) (C) (D) (E) (F)

Unfunded UL as a Actuarial Actuarial Liability Funded Ratios Annual  % of Valuation Value of Accrued (UL) -AMA Market Covered Payroll Date Assets (AVA) Liability (A) - (B) (A)/(B) Value Payroll (C)/(E) 6/30/04 $522,367 $570,446 $48,079 91.6% 90.0% $92,707 51.9%

6/30/05 558,080 609,265 51,185 91.6% 94.0% 95,981 53.3%

6/30/06 605,003 684,994 79,991 88.3% 93.4% 97,014 82.5%

Police Safety Employees Retiremint System - Schedule of Funding Progress (A) (B) (C) (D) (E) (F)

Unfunded UL as a Actuarial Actuarial Liability Funded Ratios Annual  % of Valuation Value of Accrued (UL) AVA Market Covered Payroll Date Assets (AVA) Liability (A) - (B) (A)/(B) Value Payroll (C)/(E) 6/30/04 $290,017 $343,815 $53,798 84.4% 83.1% $32,839 163.8%

6/30/05 313,669 370,553 56,884 84.6% 87.2% 35,178 161.7%

6/30/06 - 336,967 392,350 55,383 85.9% 91.3% 35,807 154.7%

Fire Safety Employees Retirement System - Schedule of Funding Progress (A) (B) (C) (D) (E) - (F)

Unfunded UL as a Actuarial Actuarial Liability Funded Ratios Annual  % of Valuation Value of Accrued (UL) AVA Market Covered Payroil Date Assets (AVA) Liability (A) - (B) (A)/(B) Value Payroll (C)/(E) 6/30/04 $186,447 $215,603 $29,156 86.5% 85.1% $19,665 148.3%

6/30/05 200,637 229,605 28,968 87.4% 89.9% 20,672 140.1%

6/30/06 213,734 250,239 36,505 85.4% 90.6% 20,625 177.0%

66

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 and provide the unemployed citizens in the Anaheim area with job training opportunities.

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 FACILITIES FUND - Established to account for the development of new park sites, playgrounds, 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 various 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 district against those parcels which specifically benefit from the enhanced 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 and notes payable. Debt service is financed by property tax increment.

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 revehue bonds for The Anaheim Resort improvements.

CAPITAL PROJECTS FUNDS are used to account for resources used for the acquisition and construction of capital facilities by the City, except for those financed by pro-prietary funds.

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.

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Governmental Funds by Fund Type June 30, 2007 (In thousands)

Nonmajor Nonmajor Nonmajor Total Special Debt Capital Nonmajor Revenue Service Projects Governmental Funds Funds Funds Funds ASSETS Cash and cash equivalents $ 5,568 $ 4;208 $ 13,397 $ 23,173 Inveshments 11,677 8,767 28,885 49,329 Accounts receivable, net 42 23 65 Accrued interest receivable 256 202 424 882 Notes receivable 13,368 8.987 22,355 Due from other funds 1 11,610 11,611 Due from other governments 30,306 537 162 31,005 Land held for resale, net 19,421 44,653 64,074 Prepaid and other assets 1,209 3 111 1,323 Restricted cash and cash equivalents 5,667 11,066 2,485 19,218 Restricted investments 25,197 25,197 Total assets $87,515 $49,980 $110,737 $248,232 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 4,917 $ 3,044 $ 6,587 $ 14,548 Wages payable 316 90 406 Short-term note payable 2,759 2,759 Interest payable on short-term note 64 64 Deposits 141 1,168 1,309 Due to other funds 9,422 63 25,479 34,964 Due to other governments 73 8 81 Deferred revenue 42,594 9,005 51,599 Total liabilities ' 60,286 3,107 42,337 .105,730 Fund balances:

Reserved for encumbrances 12,628 4,072 16,700 Reserved for noncurrent due from other funds I 10,893 10,894 Reserved for debt service 44,594 44,594 Reserved for land held for resale 19,421 44.653 64,074 Reserved for prepaid and other assets 1,209 3 111 1,323 Unreserved - designated for debt service 2,276 2,276 Unreserved - designated for capital projects 2,415 35,510 37,925 Unreserved - undesignated (8,445) (26,839) (35,284)

Total fund balances 27,229 46,873 68,400 142,502 Total liabilities and fund balances $87,515 $49,980 $110,737 $248,232 67

CITY OF ANAIIEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds by Fund type Year Ended June 30, 2007 (in thousands)

Nonmajor Nonmajor Total Special Nonmajor Capital Nonnmajor Revenue Debt Service Projects Governmental Funds Funds Funds Funds Revenues:

Property taxes $ 11,982 $ 33,236 $ 45,218 Licenses, fees and permits 4,779 $ 9,890 14,669 Intergovernmental revenues 45,561 6 162 45,729 Charges for services 134 134 Use of money and property 3,069 1,786 4,872 9,727 Other 3,278 3,387 6,665 Total revenues 68,803 35,028 18,311 122,142 Expenditures:

Current:

City Attorney 119 119 Finance 19 19 Police 11,439 335 11,774 Fire 341 341 Community Development 11,993 2,729 13,862 28,584 Planning 1,294 1,294 Public Works 8,446 999 9,445 Community Services 1,917 252 2,169 Convention, Sports and Entertainment 1,281 1,281 Capital outlay 45,630 28,524 74,154 Debt service:

Principal retirement 82 15,148 538 15,768 Interest and fiscal agent charges 15 40,353 587 40,955 Debt issuance costs 3,815 202 4,017 Total expenditures 81,276 62,064 46,580 189,920 Deficiency of revenues under expenditures (12,473) (27,036) (28,269) (67,778)

Other financing sources (uses):

Transfers in 3,188 43,065 20,826 67,079 Transfers out (11,312) (11,723) (7,806) (30,841)

Issuance of refunding bonds 256,320 256,320 Discount on refunding bonds (3,186) (3,186)-

Payment to refunded bond escrow agent (255,325) (255,325)

Issuance of note payable 18,000 18,000 Capital leases 76 19 95 Total other financing sources (uses) (8,048) 29,151 31,039 52,142 Net change in fund balances (20,521) 2,115 2,770 (15,636)

Fund balances at beginning of year 47,750 44,758 6 158,138 Fund balances at end of year $ 27,229 $ 46,873 $ 68,400 $ 142,502 68

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2007 (In thousands)

Gas Tax Community Community Sewer and and Workforce Development Services Storm Drain Roads Development Block Grant Facilities Construction ASSETS Cash and cash equivalents $ 178 $ $ 871 $ 1,567 Investments 371 6 1,829 3,290 Accounts receivable, net 4 $ 3 4 Accrued interest receivable 27 5 31 46 Notes receivable 4,460 Due from other funds Due from other governments 17,498 681 813 Land held for resale, net Prepaid and other assets 1,133 23 Restricted cash and cash equivalents Total assets $19,211 $ 707 $ 5,289 $2,731 $ 4,903 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 1,826 $ 192 $ 754 $ 662 $ 16 Wages payable 76 37 75 5 2 Short-term note payable Interest payable on short-term note Deposits Due to other funds 453 118 Due to other governments 38 1 1 15 Deferred revenue 16,415 133 4,819 .

Total liabilities 18,355 816 5,649 800 18 Fund balances (deficits):

Reserved for encumbrances 9,027 1,234 1,031 178 Reserved for noncurrent due from other funds Reserved for land held for resale Reserved for prepaid and other assets 1,133 23 Unreserved - desiginated for capital projects Unreserved - undesignated (9,304 (1,366) (1,391) 1,753 4,885 Total fund balances (deficits) 856 (109) -(360) 1,931 4,885 Total liabilities and fund balances $19,211 $ 707 $ 5,289 $2,731 $ 4,903 (continued) 69

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2007 (Inthousands) (continued)

Anaheim Resort . Narcotic Redevelopment Maintenance Asset Housing Grants District Forfeiture Set-Aside Total ASSETS Cash and cash equivalents $1,332 $ 904 $ 715 $ 5,568 Investments 2,783 1,897 1,501 11,677 Accounts receivable, net 3 28 42 Accrued interest receivable $ 20 38 27 62 256 Notes receivable 8,908 13,368 Due from other funds I I Due from other governments 11,155 28 131 30,306 Land held for resale, net 19,421 19,421 Prepaid and other assets 53 1,209 Restricted cash and cash equivalents 289 5,378 5,667 Total assets $11,464 $4,184- $2,828 $36,198 $87,515 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 718 $ 370 $ 379 $ 4,917 Wages payable 39 17 $ 3 62 316 Short-term note payable 2,759 2,759 Interest payable on short-term note 64 64 Deposits 141 141 Due to other funds 7,756 1,095 9,422 Due to other governments 18 " 73 Deferred revenue 12,319 8,908 42,594 Total liabilities 20,850 387 3 13,408 60,286 Fund balances (deficits):

Reserved for encumbrances 131 2 125 900 12,628 Reserved lor noncurrent due from other funds 1 I Reserved for land held tbr resale 19,421 19,421 Reserved for prepaid and other assets 53 1,209 Unreserved - designated for capital projects 2,415 2,415 Unreserved - undesignated (9,517) 3,795 2,700 (8,445)

Total fund balances (deficits) (9,386) 3,797 2,825 22,790 27,229 Total liabilities and fuind balances $11,464 $4,184 $2,828 $36,198 $87,515 70

CITY OF ANAHEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Nonmajor Special Revenue Funds Year Ended June 30, 2007 (In thousands)

Gas Tax Community Community Sewer and and NVorkforce Development Services Storm Drain Roads Development Block Grant Facilities Construction Revenues:

Property taxes Licenses, fees and permits $ 1,983 $ 1,935 $ 861 Intergovernmental revenues 24,523 $3,555 $6,909 701 Charges for services 134 Use of money and property 231 168 263 215 Other 942 -624 167 _ _

Total revenues 27,813 3,555 7,701 3,066 1,076 Expenditures:

Current:

City Attorney 119 Police Fire Community Development 3,241 2,396 Planning 1,294 Public Works 4,301 1 Community Services 819 935 Capital outlay 20,278 27 3,392 4,274 237 Debt service:

Principal retirement 5 11 1 39 Interest and fiscal agent charges ____1 ____13 Total expenditures 24,584 3,280 8,021 5,261 238 Excess (deficiency) of' revenues over (under) expenditures- 3,229 275 - 320) (2,195) 838 Other financing sources (uses):

Transfers in 758 597 Transfers out (4,933) (451)

Capital leases 16 21 Total other financing sources (uses) (4,159) 21 146 Net change in fund balances (930) 296 (174) (2,195) 838 Fund balances (deficits) at beginning of year 1,786 (405) (186) 4,126 4,047, Fund balances (deficits) at end of year $ 856 $ (109) $ (360) $ 1,931 .$4,885 (continued) 771

CITY OF ANAHEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Nonmajor Special Revenue Funds Year Ended June 30, 2007 (In thousands) (continued)

Anaheim Resort Narcotic Redevelopment Maintenance Asset Housing Graints District Forfeiture Set-Aside Total Revenues:

Property taxes $ 3,840! $ 8,142 $11,982 Licenses, fees and permits 4,779 Intergovernmental revenues $ 8,844 $1,029 45,561 Charges for services 134 Use of money and property 79 242 106 1,765 3,069 Other 75 5 62 1,403 3,278 Total revenues 8,998 4,087 1,197 11,310 68,803 Expenditures:

Current:

City Attorney 119 Police 10,508 931 11,439 Fire 341 341 Community Development 6,356 11,993 Planning 1,294 Public Works 42 4,102 8,446 Community Services 163 1,917 Capital outlay 4,265 1,510 62 11,585 45,630 Debt service:

Principal retirement 15 2 5 4 82 Interest and fiscal agent charges 1 15 Total expenditures - 15,335 5,614 998 17,945 81,276 Excess (deficiency) of revenues (6,337) (1,527) 199 (6,635) (12,473) over (under) expenditures Other financing sources (uses):

Transfers in 200 1,633 3,188 Transfers out (5,928) (11,312)

Capital leases 32 4 3 76 Total other financing sources (uses) 32 204 (4,292) (8,048)

Net change in fund balances (6,305) (1,323) 199 (10,927) (20,521)

Fund balances (deficits) at beginning of year (3,081) 5,120 2,626 33,717 47,750

$2,825 -$ 22,790 $ 2_7 229 Fund balances (deficits) at end of year $(9,386) $ 3J97 72

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Budget and Budgetary Basis Actual -All Nonmajor Special Revenue Funds Year Ended June 30, 2007 (n thousands)

Gas Tax and Roads Workforce Development Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Property taxes Licenses, fees and pennits $ 229 $ 1,983 $ 1,754 Intergovernmental revenues 78,575 24,523 (54,052) $4,161 $3,555 $(606)

Charges for services 108 134 26 Use of money and property 15 231 216 Other _ _942 942 Total revenues 78,927 27,813 (51,114) 4,161 3,555 (606)

Expenditures:

City Attorney Police Fire Community Development 3,756 3,259 (497)

Planning Public Works 76,538 24,568 (51,970)

Community Services )

Total expenditures 76,538 24,568 (51,970) "- 3,756 3,259 (497)

Excess of revenues over expenditures 2,389 3,245 856 405 296 (109)

Other financing sources (uses):

Transfers in 758 758 Transfers out (4,933 (4,933 Total other financing sources (uses) (4,175) (4,175)

Net change in fund balance (1,786) (930) 856 405 296- (109)

Fund balances (deficits) at beginning of year 1,786 1,786 (405) .405)

Fund balances (deficits) at end of year $ 856 $ 856 $ (109) $ (109)

Adjustments to reconcile to GAAP:

Purchases of land held for resale Conversion of land held for resale to capital assets Decline in value of land held for resale Ending fund balance - GAAP basis $ 856 $(10.9)

(continued) 73

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Budget and Budgetary Basis Actual -All Nonmajor Special Revenue Funds Year Ended June 30, 2007 (In thousands) (continued)

Community Development Block Grant Community Services Facilities Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Property taxes Licenses, fees and permits $ 4,519 $ 1,935 $(2,584)

Intergovernmental revenues $12,036 $6,909 $(5,127) 2,751 701 (2,050)

Charges for services Use of money and property 85 168 83 87 263 176 Other 400 624 224 2,100 167 (1,933 Total revenues 12,521 7,701 (4,820) 9,457 3,066 (6,391)

Expenditures:

City Attorney 120 119 (1)

Police Fire Community Development 6,457 4,568 (1,889)

Planning 1,320 1,294 (26)

Public Works 2,865 1,218 (1,647) 3,706 2,292 (1,414)

Community Services 1,140 822 (318) 9,877 2,969 (6,908)

Total expenditures 11,902 8,021 (3,881) 13,583 5,261 (8,322)

Excess (deficiency) of revenues over (under) expenditures 619 (320) (939) (4,126) (2,195) 1,931 Other financing sources (uses):

Transfers in 597 597 Transfers out (418) (451) (33)

Total other financing sources (uses) (418) 146 564 Net change in fund balance 201 (174) (375) (4,126) (2,195) 1,931 Fund balances (deficits) at beginning of year (186) (186) 4,126 4,126 Fund balances (deficits) at end of year $ 15 (360) $ (375) $ 1,931 $ 1,931 Adjustments to reconcile to GAAP:

Purchases of land held for resale Conversion of land held for resale to capital assets Decline in value of land held for resale Ending fund balance - GAAP basis $ (360) $ 1,931 (continued) 74

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Budget and Budgetary Basis Actual -All Nonmajor Special Revenue Funds Year Ended June 30, 2007 (In thousands) (continued)

Sewer and Storm Drain Construction Grants Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Property taxes Licenses, fees and permits $ 290 $ 861 $ 571 Intergovernmental revenues $31,453 $ 8,844 S(22,609)

Charges for services Use of money and property 83 215 132 79 79 Other 48 75 27 Total revenues 373 1,076 703 31,501 8,998 (22,503)

Expenditures:

City Attorney Police 24,698 14,583 (10,115)

Fire 679 457 (222)

Community Development Planning Public Works 611 238 (373) 42 42 Community Services 3,001 221 (2,780)

Total expenditures 611 238 (373) 28,420 15,303 (13,117)

Excess (deficiency) of revenues over (under) expenditures (238) 838 1,076 3,081 (6,305) (9,386)

Other financing sources (uses):

Transfers in Transfers out Total other financing sources (uses)

Net change in fund balance (238) 838 1,076 3,081 (6,305) (9,386)

Fund balances (deficits) at beginning of year 4,047 4,047 (3,081) (3,081)

Fund balances (deficits) at end of year $3,809 4,885 $1,076 $ (9,386) S (9,386)

Adjustments to reconcile to GAAP:

Purchases of land held forresale Conversion of land held for resale to capital assets Decline in value of land held for resale Ending fund balance - GAAP basis $4,885 $ (9,386)

(continued) 75

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Budget and Budgetary Basis Actual- All Nonmajor Special Revenue Funds Year Ended June 30, 2007 (Inthousands) (continued)

Anaheim Resort Maintenance District Narcotic Asset Forfeiture Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Property taxes $ 3,939 $ 3,840 $ (99)

Licenses, fees and permits Intergovernmental revenues $1,362 $1,029 $(333)

Charges for services Use of money and property 91 242 151 106 106 Other 4 5 1 62 62 Total revenues 4,034 4,087 53 1,362 1,197 (165 Expenditures:

City Attorney Police 1,818 998 (820)

Fire Community Development Planning Public Works 7,483 5,610 (1,873)

• Community Services Total expenditures 7,483 5,610 (1,873) 1,818 998 (820)

Excess (deficiency) of revenues over (under) expenditures (3,449) (1,523) 1,926 (456) 199 655 Other financing sources (uses):

Transfers in 200 200 Transfers-out Total other financing sources 200 200 Net change in fund balance (3,249) (1,323) 1,926 (456) 199 655 Fund balances (deficits) at beginning of year 5,120 5,120 2626 2,626 Fund balances (deficits) at end of year $ 1,871 3,797 $ 1,926 $2,170 2,825 $ 655 Adjustments to reconcile to GAAP:

Purchases of land held for resale Conversion of land held for resale to capital assets Decline in value of land held for resale Ending fund balance - GAAP basis $ 3,797 $2,825 (continued) 76

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances (Deficits)

Budget and Budgetary Basis Actual -All Nonmajor Special Revenue Funds Year Ended June 30, 2007 (In thousands) (continued)

Redevelopment Housing Set-Aside Final Variance Budgeted Actual with Final Amounts Amounts Budget Revenues:

Property taxes $ 9,213 $ 8,142 $ (1,071)

Licenses, fees and permits Intergovernmental revenues Charges for services Use of money and property 13,854 1,765 (12.089)

Other 600 1,403 803 Total revenues 23,667 11,310 (12,357)

Expenditures:

City Attorney Police Fire Community Development 17,917 13,043 (4,874)

Planning Public Works Community Services Total expenditures 17,917 13,043 (4,874)

Excess (deficiency) of revenues over (under) expenditures 5,750 1,733) (7,483)

Other financing sources (uses):

Transfers in 700 1,633 933 Transfers out (2,387) (5,92(3,541 Total other financing sources (uses) (1,687) (4,295) (2,608)

Net change in fund balance 4,063 (6,028) (10,091)

Fund balances (deficits) at beginning of year 33,717 33,717 Fund balances (deficits) at end of year $37,780 27,689 $(10,091)

Adjustments to reconcile to GAAP:

Purchases of land held for resale 5,921 Conversion of land held for resale to capital assets (9,430)

Decline in value of land held for resale (1,390)

Ending fund balance - GAAP basis $ 22,790 77

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Debt Service Funds.

June 30, 2007 (In thousands)

Municipal Redevelopment Certificates of Anaheim Resort Improvements Agency Participation Improvements Total ASSETS Cash and cash equivalents $200 $ 4,005 $ 3 $ 4,208 Investments 419 8,343 5 8,767 Accrued interest receivable 5 119 48 $ 30 202 Due from other governments 12 525 537 Prepaid and other assets 3 3 Restricted cash and cash equivalents 520 103 10,443 11,066 Restricted investments ___2,306 5,365 17,526 25,197 Total assets $636 $15,821 $5,524 $27,999 $49,980 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 2,961 $ 5 $ 78 $ 3,044 Due to other funds ______63 63 Total liabilities 2,961 5 141 3,107 Fund balances:

Reserved for debt service $636 10,581 5,519 27,858 44,594 Reserved for prepaid and other assets 3 .3 Unreserved - designated for debt service ___2,276 ________2,276 Total fund balances 636 12,860 5,519 27,858 46.873 Total liabilities and fund balances $636 $15,821 $5,524 $27,999 S49,980 78

CITY OF ANAHIEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Debt. Service Funds Year Ended June 30, 2007 (in thousands)

Municipal Redevelopment Certificates of Anaheim Resort Improvements Agency Participation Improvements Total Revenues:

Property taxes $668 $ 32,568 $ 33,236 Intergovermmental revenues 6 6 Use of"money and property 18 1,036 $ 313 $ 419 1,786 Total revenues 692 33,604 313 419 35,028 Expenditures:

Current:

Finance 19 19 Community Development 2,729 2,729 Debt service:

Principal retirement 470 6,348 3,040 5,290 15,148 Interest and fiscal agent charges 262 16,137 1,607 22,347 40,353 Debt issuance costs 3,815 3,815 Total expenditures 732 25,214 4,647 31,471 62,064 Excess (deficiency) of revenues over (under) expenditures (40) 8,390 (4,334) (31,052) (27,036)

Other financing sources (uses):

Transfers in 3,369 4,330 35,366 43,065 Transfers out (11,723) (11,723)

Issuance of refunding bonds 256,320 256,320 Discount on refunding bonds (3,186) (3,186)

Payment to refunded bond escrow agent (255,325 (255,325)

Total other financing sources (uses) (8,354) 4,330 33,175 29,151 Net change in fund balances (40) 36 (4) 2,123 2,115 Fund balances at beginning of year 676 12,824 5,523 25,735 44,758 Fund balances at end of year $636 $ 12,860 $ 5,519 $ 27,858 $ 46,873 79

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Budgetary Basis Actual -All Debt Service Funds Year Ended June 30, 2007 (In thousands)

Municipal Improvements Redevelopment Agency Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Property taxes $733 $668 $(65) $ 27,647 $ 32,568 $ 4,921 Intergovernmental revenues 6 6 Use of money and property 18 18 556 1,036 480 Other 402 (402)

Total revenues 733 692 (41_) 28.605 33,604 4,999 Expenditures:

Finance Police Community Development 733 732 (1) 29,095 25,214 (3,881)

Public Works Convention, Sports and Entertainment Total expenditures 733 732 (1) 29,095 25,214 (3,881)

Excess (deficiency) of revenues over (under) expenditures (40) (40) (490) 8,390 8,880 Other financing sources (uses):

Transfers in 6.303 3,369 (2,934)

Transfers out (11,780) (11,723) 57 Issuance of refunding bonds Discount on refunding bonds Payment to refunded bond escrow agent Total other financing sources (uses) (5,477) (8,354) (2,877)

Net change in fund balance (40) (40) (5,967) 36 6,003 Fund balance at beginning of year 676 676 - 12,824 12,824 Fund balance at end of year $676 $636 $(40) $ 6,857 $ 12,860 $ 6,003 (continued) 80

CITY OF ANAHEIM Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Budgetary Basis Actual - All Debt Service Funds Year Ended June 30, 2007 (in thousands) (continued)

Certificates of Participation Anaheim Resort Improvements Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Property taxes 1ntergovernmental revenues Use of money and property $ 194 $ 313 $ 119 S 419 $ 419 Other Total revenues 194 313 119 419 419 Expenditures:

Finance $ 31,475 31,471 (4)

Police 2,040 2,040 Community Development 270 270 Public Works 629 629 Convention, Sports and Entertainment 1,708 1,708 Total expenditures 4,647 4,647 31,475 31,471 (4)

Excess (deficiency) of revenues over (under) expenditures (4,453) (4,334) 119 (31,475) (31,052) 423 Other financing sources (uses):

Transfers in 4,647 4,330 (317) 34,186 35,366 1,180 Transfers out Issuance of refunding bonds 256,320 256,320 Discount on refunding bonds (3,186) (3,186)

Payment to refunded bond escrow agent (255,325) (255,325)

Total other financing sources (uses) 4,647 4,330 (317) 31,995 33,175 1,180 Net change in fund balances 194 (4) (198) 520 2,123 1,603 Fund balance at beginning of year 5,523 25,735 25,735 Fund balance (deficit) at end of year $ 5,717 $ 5,519 $(198) $ 26,255 $ 27,858 $ 1,603 81

CITY OF ANAHEIM Combining Balance Sheet Nonmajor Capital Projects Funds June 30, 2007 (In thousands)

Redevelopment Other Capital Agency Improvements Total ASSETS Cash and cash equivalents $ 1,099 $12.298 $ 13,397 Investments 2,644 26,241 28,885 Accounts receivable, net 23 23 Accrued interest receivable 34 390 424 Notes receivable 8,987 8,987 Due from other funds 2,505 9,105 11,610 Due from other governments 162 162 Land held for resale, net 44,653 44,653 Prepaid and other assets 111 ill Restricted cash and cash equivalents 22 2,463 2,485 Total assets $60,240 $50,497 $110,737 LIABILITIES AND FUND BALANCES Liabilities:

Accounts payable $ 5,443 $ 1,144 $ 6,587 Wages payable 68 22 90 Deposits 1,168 1,168 Due to other funds 23,691 1,788 25,479 Due to other governments 8 *8 Deferred revenue 9,005 9.005 Total liabilities 39,375 2,962 42,337 Fund balances:

Reserved for encumbrances 1,152 2,920 4,072 Reserved for noncurrent due from other funds 1,788 9,105 10,893 Reserved for land held for resale 44,653 44,653 Reserved for prepaid and other assets Ill 1ll Unreserved - designated for capital projects 35,510 35,510 Unreserved - undesignated (26,839) (26,839)

Total fund balances 20,865 47,535 68,400 Total liabilities and fund balances $ 60,240 $50,497 $110,737 82

CITY OF ANAHEIM Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Capital Projects Funds Year Ended June 30, 2007 (In thousands)

Redevelopment Other Capital Agency Improvements Total Revenues:

Licenses, fees and permits S9,890 S9,890 Intergovernmental revenues $ 162 162 Use of money and property 2,367 2,505 4,872 Other 653 2,734 3,387 Total revenues 3,182 15,129 18,311 Expenditures:

Current:

Police 335 335 Community Development 13,848 14 13,862 Public Works 999 999 Community Services 252 252 Convention, Sports and Entertainment 1,281 1,281 Capital outlay 15,444 13,08(0 28,524 Debt service:

Principal retirement 13 525 538 Interest and fiscal agent charges 1 586 587 Debt issuance costs 202 _____202 Total expenditures 29,508 17,072 46,580 Deficiency of revenues under expenditures (26,326) (1,943) (28,269)

Other financing sources (uses):

Transfers in 16,687 4,139 20,826 Transfers out (1,326) (6,4801) (7,806)

Issuance of note payable 18,000 18,000 Capital leases 3 16 19 Total other financing sources (uses) 33,364 (2,325) 31,039 Net change in fund balances 7,038 (4,268) 2,770 Fund balances at beginning of year 13,827 51,803 65,630 Fund balances at end of year S 20,865 $47,535 $ 68,400 83

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, 2007 (In thousands)

Redevelopment Agency Other Capital Improvements Final Variance Final Variance Budgeted Actual with Final Budgeted Actual with Final Amounts Amounts Budget Amounts Amounts Budget Revenues:

Licenses, fees and permits $ 4,030 $ 9.890 S 5,860 Intergovernmental-revenues $ 400 $ 162 $ (238) 850 (850)

Use of money and property 2,550 2,367 (183) 152 2,505 2,353 Other 40,529 16,971 (23,558) 212 2,734 2,522 Total revenues 43,479 19,500 (23,979) 5,244 15,129 9,885 Expenditures:

Police 1,986 1,708 (278)

Fire 900 (900)

Community Development 65,530 59,235 (6,295) .1,113 1,111 (2)

Public Works 664 (664) 23,569 10,978 (12,591)

Community Services 7,961 1,978 (5,983)

Convention, Sports and Entertainment 1,281 1,281 Total expenditures 66,194 59,235 (6,959) 36,810 17,056 (19,754)

Deficiency of revenues under expenditures (22,715) (39,735) (17,020) (31,566) (1,927) 29,639 Other financing sources (uses):

Transfers in 31,850 16,687 (15,163) 4,348 4,139 (209)

Transfers out (18,410) (1,326) 17,084 (1,000) (6,480) (5,480)

Issuance of long-term debt 20,660 18,000 (2,660 Total other financing sources (uses) 34,100 33,361 (739 3,348 (2,341) (5,689 Net change in fund balance 11,385 (6,374) (17,759) (28,218) (4,268) 23,950 Fund balance at beginning of year 13,827 13,827 51,803 51,803 Fund balance at end of year $ 25,212 7,453 $(17,759) $ 23,585 47,535 $ 23,950 Adjustments to ieconcile to GAAP:

Proceeds on sale of land held for resale (16,542)

Purchase deposits on land held for resale 2,000 Purchases of land held for resale 39,104 Conversion of land held for resale to capital assets (7,445)

Decline in value of land held for resale (1,481)

Loss on sale of land held for resale (2,224)

Ending fund balance - GAAP basis $ 20,865 $47,535 84

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.

MUNICIPAL FACILITIES MAINTENANCE - Established to-account for City office maintenance services and equipment used by City departments.

CITY OF ANAHEIM Combining Statement of Fund Net Assets Internal Service Funds June 30, 2007 (in thousands)

General Benefits Duplicating Municipal and Motorized and Information Facilities Insurance Equipment Printing Services Maintenance Total ASSETS Current assets:

Cash and cash equivalents $ 40,993 $ 3,156 $ 175 874 S 1,868 $ 47.066 Investments 85,615 6,590 368 1,836 3,726 98,135 Accounts receivable, net 872 872 Accrued interest receivable 1,194 100 4 41 50 1,389 Interfund receivable 17 17 Inventories 591 591 Prepaid and other assets 40 40 Total current assets 128,731 10,437 547 2,751 5,644 148,110 Noncurrent assets:

hIterfund receivable, less current portion 62 62 Restricted cash and cash equivalents 18 18 Restricted investments 472 472 Unamortized debt issuance costs 7 7 Capital assets:

Buildings and improvements 3,230 3,449 6,679 Equipment 108 39,978 491 15,712 2,233 58,522 Less accumulated depreciation (77) (28,142 (460) (7220) (3,905) (39,804)

Capital assets, net 31 15,066 31 8,492 1,777 25,397 Total noncurrent assets 93 15,563 31 8,492 1,777 25,956 Total assets 128,824 26,000 578 11,243 7,421 174,066 LIABILITIES Current liabilities:

Accounts payable 3,946 404 146 842 495 5,833 Wages payable 1,088 85 10 14 89 1,286 Interest payable 40 40 Compensated absences 16,253 16,253 Self-insurance liability 8,278 8.278 Long-term debt 6 259 20 9 295 Postretircercnt employment benefits 7,787 7,787 Unearned revenues 910 0.700 2,610 Total current liabilities 38,268 2,488 157 876 593 42,382 Noncurrent liabilities:

Self-insurance liability, less current portion 22,619 22,619 Long-tern obligations, less current portion 6 1,136 1 24 5 1,172 Postretirement employment benefits, less current portion 65,536 65,536 lotal noncurrent liabilities 88,161 1,136 1 24 5 89,327 Total liabilities 126,429 3,624 158 900 598 131,709 FUND NET ASSETS Invested in capital assets, net of related debt 19 14,169 29 8,448 1,763 24,428 Restricted for debt service Unrestricted 2,376 8,207 391 1,895 5,060 17,929 Total fund net assets $ 2,395 $ 22,376 $ 420 $10,343 S 6,823 $ 42,357 85

CITY OF ANAHEIM Combining Statement of Revenues, Expenses and Changes in Fund Net Assets Internal Service Funds Year Ended June 30, 2007 (In thousands)

General Benefits Duplicating Municipal and Motorized and Information Facilities Insurance Equipment Printing Services Maintenance Total Operating revenues:

Charges for services $105,690 $10,610 $1,803 $12,216 $ 8,589 $138,908 Other 182 1 5 87 275 Total operating revenues 105,872 10,611 1,803 12,221 8,676 139,183 Operating expenses:

Salaries and wages 2,870 3,753 363 479 3,247 10.712 Maintenance and operations 2,814 4,997 1,335 10,629 6,404 26.179 Insurance premiums and claims 7,408 7,408 Compensated absences and other benefits 99,291 99,291 Depreciation 21 41 1,994 128 5,664 Total operating expenses 112,404 12,230 1,739 13,102 - 9,779 149,254 Operating income (loss) (6,532) (1,619) 64 (881) (1,103) (10,071)

Nonoperating income (expenses):

Interest income 6,687 495 17 128 232 7,559 Interest expense (1) (79) (1) (2) (I) (84)

Gain (loss) from disposal of capital assets 148 (2 146 Total nonoperating income 6,686 564 14 126 231 7,621 Income (loss) before transfers in 154 (1,055) 78 (755) (872) (2,450)

Transfers in 300 300 Change in fund net assets 154 (1,055) 78 (455) (872) (2,150)

Fund net assets at beginning of year S2,41 23,431 342 101798 7,695 442*57

$ 2,395 $22,376 $ 420 $10,343 $ 6,823 $ 42,357 Fund net assets at end of year 86

CITY OF ANAHEIM Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2007 (In thousands)

General Benefits Duplicating Municipal and Motorized and Information Facilities Insurance Equipment Printing Services Maintenance Total Cash flows from operating activities:

Receipts fronm interfund services provided $ 105,690 $ 10,610 $ 1,803 $ 12,216 $ 8,589 $ 138,9t08 Payments to suppliers (1,966) (4,837) (1,218) (10,053) (5,798) (23,872)

Payments to employees (2,941) (3,761) (361) (479) (3,229) (10,771)

Payments for interfund services used (1,241) (404) (79) (653) (432) (2,809)

Payments for insurance premiums and claims (7,016) (7,916)

Payments for compensated absences and other benefits (93,685) (93,685)

Other receipts 187 1,864 5 87 2,143 Net cash provided by.(used in) operating activities (972) 3,472 145 1,036 (783) 2,898 Cash flows from noncapital financing activities:

Payment of interfund balances 6 6 Transfers in 300 300 Net cash provided by noncapital financing activities 6 300 306 Cash flows from capital and related financing activities:

Proceeds from sale of capital assets 250 250 Capital purchases (2,066) (365) (572) (3,003)

Principal payments on long-term debt (7) (248) (39) (42) (10) (346)

Interest payments I1) (90) (2) (1) (95)

Net cash used in capital and related financing activities (8) (2,154) (40) (409) (583) (3,194)

Cash flows from investing activities:

Purchase of investment securities (118,01l) * (11,187) (602) (3,385) (3,683) (136,868)

Proceeds from sale and maturity of investment securities 147,089 12,128 629 3,138 6,367 169,351 Interest received 7,093 517 23 114 233 7,980 Net cash provided by (used in) investing activities 36,171 1,458 50 (133) 2,917 40,463 Increase in cash and cash equivalents 35,197 2,776 155 794 1,551 40,473 Cash and cash equivalents at beginning of the year 5,796 398 20 80 317 6,611 Cash and cash equivalents at end of the year $ 40,993 $ 3,174 $ 175 $ 874 $1,868 $ 47,084 (continued) 87

CITY OF ANAHEIM Combining Statement of Cash Flows Internal Service Funds Year Ended June 30, 2007 (Inthousands) (continued)

General Benefits Duplicating Municipal and Motorized and Information Facilities Insurance Equipment Printing Services Maintenance - Total Reconciliation of operating income (loss) to net cash provided by operating activities:

Operating income (loss) $(6,532) $ (1,619) $ 64 $ (881) $(1,103 $ (10,071)

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

Depreciation 21 3,480 41 1.994 128 5,664 Changes in assets and liabilities:

Accounts receivable 527 17 18 562 Inventories 146 146 Prepaid and other assets Accounts payable (1,443) (244) 20 (77) 174 (1,570)

Wages payable (71) (8) 2 18 (59)

Unearned revenues 185 1,700 1,885 Compensated absences 473 473 Self-insurance liability 69 69 Post retirement employment benefits 5,799 5,799 Total adjustments 5,560 .5,091 81 1,917 320 12,969 "Net cash provided by (used in) operating activities $ (972) $ 3,472 $ 145 $ 1.036 $ (783) $ 2,898 Schedule of noncash financing and investing activities:

Capital assets finanfced through capital leases $ 3 S 3 $ 2 $ 36 S 3 S 47 Decrease in fair value of investments (456) (35) (491)

Reconciliation of cash and cash equivalents:

Cash and cash equivalents- $ 40,993 $ 3,156 $ 175 $ 874 S 1,868 $ 47,066 Restricted cash and cash equivalents 18 18 Total cash and cash equivalents $ 40,993 $ 3,174 $ 175 $ 874 $ 1,868 $ 47,084

(

88

CITY OF ANAHEIM Statement of Changes in Fiduciary Assets and Liabilities Agency Fund - Mello-Roos Year Ended June 30, 2007 (n thousands)

Beginning Ending Balance Additions Deductions Balance ASSETS Restricted cash and cash equivalents $3,587 $ 9,757 $ (9,067) $4,277 Due from other governments 44 2,674 (2,554) 164 Total assets $3,631 $12,431 $(L1,621) $4,441 LIABILITIES Due to bond holders $3,631 $ 9,750 $ (8,940) $4,441 89

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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 OFANAHEIM STATISTICAL SECTION (Unaudited)

The Statistical Section is included to provide financial statement users with additional historical perspective, context, and detail for use in evaluating the information contained within the financial statements, notes to the financial statements, and required supplementary information with the goal of providing the user a better understanding of the City's economic condition.

Contents Page Financial trends These schedules contain information to help the reader understand how the City's financial performance and well-being have changed over time.

Net Assets by Component - Last Six Fiscal Years 92 Changes in Net Assets - Last Six Fiscal Years 93 Governmental Activities Tax Revenues by Source - Last Six Fiscal Years 95 Fund Balances of Governmental Funds - Last Ten Fiscal Years 96 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years 97 Revenue capacity These schedules contain information to help the reader assess the Citys most significant local revenue sources.

General Government Tax Revenues by Source - Last Four Fiscal Years 98 Assessed Value of Taxable Property - Last Four Fiscal Years 99 Property Tax Rates - Direct and Overlapping Governments - Last Four Fiscal Years IOU Principal Property Tax Payers - Last Ten Fiscal Years 101

- Property Tax Levies and Collections - Last Four Fiscal Years 103 Debt capacity These schedules contain information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Ratios of Outstanding Debt by Type - Last Four Fiscal Years 104 Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years 105 Direct and Overlapping Governmental Activities Debt -As of Julie 30, 2007 106 Legal Debt Margin - Last Ten Fiscal Years 108 Pledged-Revenue Coverage - Last Ten Fiscal Years 109 Demographic and economic information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place.

Demographic and Economic Statistics - Last Four Fiscal Years Ill Principal Employers - Last Four Fiscal Years 112 Operating information These schedules contain service and infrastructure data to help the reader noderstand how the information in the City's financial statements relate to the services the City provides and the activities it performs.-

Full-time Equivalent City Government Employees by Function/Program - Last Four Fiscal Years 113 Operating Indicators by Function - Last Four Fiscal Years 114 Capital Assets Statistics by Function - Last Four Fiscal Years 115 City of Anaheimo Map , 116 Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant fiscal year. 91

CITY OF ANAHEIM Net Assets by Component Last Six Fiscal Years (In thousands)

(Accrual basis of accounting)

Fiscal Year 2007 2006 2005 2004 2003 2002 Governmental Activities Invested in captial assets, net of related debt $ 667,414 $ 668,628 $ 613,300 $ 584,875 $ 522,073 S 516,931 Restricted 69,949 99,443 87,505 111,344 112,168 138,241 Unrestricted (33,187) (61,368) (56,074) (66,860) (14,286) (25,751)

Total Governmental Activities 704,176 706,703 644,731 629,359 619,955 629,421 Business-type Activities Invested in capital assets, net of related debt 707,119 660,769 697,647 673,244 666,361 639,652 Restricted 38,572 36,008 28,855 26,187 33,188 30,849 Unrestricted 203,967 215,685 229,051 242,888 232,569 248,968 Total Business-type Activities 949,658 912,462 955,553 942,319 932,118 919,469 Total Government Invested in capital assets, net of related debt 1,374,533 1,329,397 1,310,947 1,258,119 1,188,434 1,156,583 Restricted 108,521 135,451 116,360 137,531 145,356 169,090 Unrestricted 170,780 154,317 172,977 176,028 218,283 223,217 Total Government $1,653,834 $1,619,165 $1,600,284 $1,571,678 $1,552,073. $1,548,890

.<Total Gov ernment Net Assets Si 500,000 ----

1,250,000 ul6oomo 70,050000 0_ I 2007 20020056 2004 2003 2002-Fiscal b R es M Invested iniCapital Assets, Net of Related Debt E Restnicted D Unrestricted Source: Finance Department, City of Anaheim 92

CITY OF ANAH EIM Changes in Net Assets Last Six Fiscal Years (in thousands)

(Accrual basis of accounting)

Fiscal Year 2007 2006 2005 2004 2003 2002 Program Revenues Governmental activities:

Charges for services General government $ 4,757 $ 4,516 1,642 $ 1,413 $ 1,651 $ 1,662 Police 7,590 7,346 9,840 7,460 8,369 7,236 Fire 11,033 8,942 7,909 6,879 6,475 6,391 Community Development 6,713 6,122 4,667 9,972 6,843 5,753 Planning 10,790 9,031 6,994 3,739 3,869 3,773 Public Works 11,662 7,653 6,544 5,501 6,339 7,294 Community Services 10,320 18,421 4,985 4,490 3,936 4,629 Total charges for services 62,865 62,031 42,581 39,454 37,482 36,738 Operating grants and contributions 97,633 87,024 77,870 81,877 75,594 72,111 Capital grants and contributions 30,123 29,004 20,906 11,904 13,009 15,581 Governmental activities program revenues 190,621 178,059 141,357 133,235 126,085 124,430 Business-type activities:

Charges for services Electric Utility 310,074 322,845 284,740 295,723 272,024 300,474 Water Utility 49,6(10 46'926 43,427 44,395 41,801 41,845 Sanitation 53,215 49,397 46,480 48,085 43,045 41,809 Golf Courses 6,022 5,736 5,394 5,546 5,401 5,739 Convention, Sports and Entertainment Venues 32,308 27,357 27,412 28,146 22,509 21,688 Total charges for services 451,219 452,261 407,453 421,895 384,780 411,555 Operating grants and contributions 1,160 2,556 2,473 1,471 1,560 3,622 Capital grants and contributions 4,808 5,749 11,513 7,468 5,389 13,113 Business-type activities program revenues 457,187 460,566 421,439 430,834 391,729 428,290 Total government program revenues 647,808 638,625 562,796 564,069 517,814 552,720 Expenses Governmental activities:

General government 10,951 7,394 8,943 7,582 9,793 6,780 Police 115,714 98,484 91,713 77,541 78,313 73,336 Fire 50,727 50,957 46,596 37,610 36,928 38,146 Community Development 93,089 87,814 83,183 86,542 89,212 67,389 Planning 16,107 14,493 13,206 12,628 11,118 11,492 Public Works 44,473 42,029 39,463 41,672 37,443 53,584 Community Services 36,827 31,712 28,314 27,050 27,397 29,209 Public Utilities 1,800 1,704 1,557 1,566 1,811 2,928 Convention, Sports and Entertainment 10,539 8,652 7,703 7,536 7,211 8,577 Interest on long-term debt 50,053 46,430 47,105 48,503 47,405 46,098 Governmental activities expenses 430,280 389,669 367,783 348,230 346,631 337,539 (continued) 93

CITY OF ANAHEIM Changes in Net Assets Last Six Fiscal Years (In thousands)

(Accrual basis of accounting) (continued)

Fiscal Year 2007 2006 2005 2004 2003 2002 Business-type activities:

Electric Utility 338,514 365,277 274,622 280,878 264,583 280,358 Water Utility 51,672 47,225 41,313 42,949 37,065 38,616 Sanitation 48,946 47,163 45,467 41,431 40,249 38,563 Golf Courses 4,365 4,433 4,062 4,278 3,699 3,745 Convention, Sports and Entertainment Venues 46,743 47,965 47,351 43,406 43,197 40,500 Business-type activities expense 490,240 512,063 412,815 412,942 388,793 401,782 Total government expenses 920,520 901,732 780,598 761,172 735,424 739,321 Net (Expense) / Revenue Governmental activities (239,659) (211,610) (226,426) (214,995) (220,546) (213,109)

Business-type activities (33,053) (51,497) 8,624 17,892 2,936 26,508 Total government, net (expense) / revenue (272,712) (263,107) (217,802) (197,103) (217,610) (186,601)

General Revenues and Other Changes in Net Assets Governmental activities:

Taxes:

Property taxes $ 98,647 $ 90,299 $ 78,620 $ 57,239 $ 53,809 $ 49,867 Sales and use taxes 65,944 68,024 61,779 56,566 53,251 52,875 Transient occupancy taxes 83,914 75,979 67,141 63,268 56,199 57,780 Motor vehicle license fees 1,866 2,595 2,113 21,143 19,360 18,751 Other taxes 10,337 10,817 10,175 9,561 8,935 8,885 Unrestricted investment earnings 17,597 12,346 8,071 3,991 12,678 15,035 Other 1,701 5,078 1,499 1,097 2,852 3,825 Transfers (42,874) 8,444 12,400 11,534 3,996 3,809 Governmental activities 237,132 273,582 241,798 224,399 211,080 210,827 Business-type activities:

Unrestricted investment earnings 27,375 16,850 16,592 6,120 13,658 13,388 Other 418 1,723 51 Transfers 42,874 (8,444) (12,400) (11,534) -(3,996) (3,809)

Business-type activities 70,249 8,406 4,610 (3,691) 9,713 9,579 Total government 307,381 281,988 246,408 220,708 220,793 220,406 Change in Net Assets Governmental activities (2,527) 61,972 15,372 9,404 (9,466) (2,282)

Business-type activities 37,196, (43,091) 13,234 14,201 12,649 36,087 Total government change in net assets $ 34,669 $ 18,881 $ 28,606 $ 23,605 $ 3,183 $ 33,805 Source: Finance Department, City of Anaheim 94

CITY OF ANAIIEIM Governmental Activities Tax Revenues by Source Last Six Fiscal Years (In thousands)

(Accrual basis of accounting)

Motor Sales Transient Vehicle Fiscal Property and Use Occupancy License Other Year Taxes Taxes Taxes Fees' Taxes Total 2007 $98,647 $65,944 $83,914 $ 1,866 $10,337 $260,708 2006 90,299 68,024 75,979 2,595 10,817 247,714 2005 78,620 61,779 67,141 2,113 10,175 219,828 2004 57,239 56,566 63,268 21,143 9,561 207,777 2003 53,809 53,251 56,199 19,360 8,935 191,554 2002 49,867 52,875 57,780 18,751 8,885 188,158

• $100,000 90,000 60.000 40,000 20,000 i 0

'2007 2006 2005 2004 .2003 2002 Fiscal vesi MtProperty Taxes El Sales and Use Taxes ElTransient Occupancy Taxes I M Motor Vehicle License Fees at Other Taxes The decrease in motor vehicle license fees starting from fiscal year 2005 is due to the shifting of revenue from motor vehicle license fees category to the property tax category. This was part of the State of California 2004 Budget Act.

Source: Finance Department, City of Anaheim 95

CITY OF ANAHEIM Fund Balances of Governmental Funds Last Ten Fiscal Years (In thousands)

(Modified accrual basis of accounting)

Fiscal Year 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 General Fund Reserved $ 11,212 $ 10,604 $ 9,892 $ 10,225 S 7,045 S 3,628 $ 3,620 $ 4,496 $ 17,985 $.18,997 Unreserved - designated 293 4,872 208 204 Unreserved - undesignated 44,722 44,075 39,179 34,458 31,096 32,740 25,336 19,099 13,344 13,952 Total General Fund 55,934 54,679 49,071 44,976 43,013 36,576 29,160 23,595 31,329 32,949 Housing Authority Fund Reserved 162 92 198 11 33 788 108 Unreserved - undesignated 7,935 3,840 5,682 5,525 4,854 4,347 4,503 4,618 5,170 4,1-19 Total Housing Authority Fund 8,097 3,932 5,682 5,525 5,052 4,347 4,514 4,651 5,958 4,227 Nonmajor Governmental Funds Reserved 137,585 135,654 76,568 91,787 103,136 103,463 87,162 89,158 93,545 113,529 Unreserved - designated, reported in:

Special revenue funds 2,415 9,1012 14,974 7,993 13,305 15,983 7,668 11,262 Debt service funds 2,276 1,137 1,457 Capital projects funds 35,510 36,951 36,497 24,538 33,194 53,890 99,390 135,710 244,849 399,555 Unreserved - undesignated, reported in:

Special revenue funds (8,445) (437) 25,955 27,016 17,406 12,022 13,438 12,985 7,992 11,163 Capital projects funds (26,839) (24,269) (4,735)

Total nonmajor governmental funds 142,502 158,138 150,716 151,334 153,736 182,680 215,973 245,521 357,648 524,247 Total governmental funds' $206,533 $216,749 $205,469 $201,835 $201,801 $223,603 $249,647 $273,767 $394,935 $561,423

' Restatements of fund balances have not been reflected for certain years.

Source: Finance Department, City of Anaheim 96

CITY OF ANAHEIM Changes in Fund Balances of GovernmentalFunds Last Ten Fiscal Years (In thousands)

(Modified accrual basis of accounting)

Fiscai Year 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 Revenues Property taxes $ 102,486 $ 90,323 $ 81,949 $ 60,563 S 57,151 S 53,018 $ 53,860 $ 49:478 $ 41,131 $ 39,492 Sales and use taxes 66,761 66,045 59,976 55,409 54,066 52,368 50,733 46,915 43,210 42,214 Transient occupancy takes 83,914 75,979 67,141 63,268 56,199 57,780 58,112 46,183 45,155 44,767 Othertaxes 7,531 7,862 7,542 7,095 6,570 6,460 6,365 5,831 5,755 5,492 Licenses, fees and permits 37,991 40,625 18,749 15,578 15,731 15.806 16,299 16,298 23,110 15,677 Intergovernmental revenues 111,527 103,653 101,447 108,673 107,973 104,434 85,500 82,186 74,225 78,617 Charges for services 12,960' 12,649 12,130 15,241 14,569 14,299 11.712 10,575 10,851 11.515 Fines, forfeits and penalties 3,689 3,464 3,454 2,812 2,673 2,769 3,118 3,187 2,807 1,556 Use of money and property 18,208 13,203 9,144 8,408 12,354 13,878 20.108 23,290 29,111 34,713 Other 7,601 18,164 6,143 3,490 3,436 4,654 1,242 12,809 1,589 1,199 Total revenues 452,668 431,967 367,675 340,537 330,722 325,466 307,049 296,752 276,944 275,242 Expenditures General government 15,354 13,667 12,276 11,370 12,823 12,403 16,462 12,394 15,417 19,816 Police 109,467 94,602 86,529 74,356 74,518 68,274 64,585 60,274 59,581 56,946 Fire 48,201 48,383 44,182 36,277 35,684 34,651 31,382 30,994 28,166 27,523 Community Development 94,789 89,098 83,384 87,778 91,984 72,919 67,493 43,848 49,082 51,467 Planning 14,762 13,907 12,313 11,904 10,285 10,463 10,145 9,471 8,850 7,456 Public Works 26,820 24,646 22,248 25,224 21,425 37,377 72,964 126,700 128,282 75,192 Community Services 32,788 28,753 25,724 25,203 25,938 26,011 24,296 22,949 21,555 19,850 Public Utilities 1,791 1,704 1,557 1,566 1,811 2,651 2,612 4,286 3,475 3,477 Convention, Sports and Entertainment 7,399 6,131 5,140 5,353 4,677 6,003 6,738 6,246 6,322 6,482 Capital outlay 76,161 77,738 41,301 32,195 40,881 35,310 32,713 66,002 84,560 51,429 Debt service:

Principal 18,065 19,032 10,134 9,391 8,020 7,797 5,768 5,309 4,783 3,919 Interest and fiscal agent charges 41,187 39,037 38,681 38,630 38,330 38,081 37,438 36,108 36,447 38,127 Debt issuance costs' 4,017. _T_5___T _T_

Total expenditures 490,801 456,698 383,469 359,247 366,376 351,940 372,596 424,581 446,520 361,684 Revenues over (under) expenditures (38,133) (24,731) (15,794) (18,710) (35,654) (26,474) (65,547) (127,829) (169,576) (86,442)

Other financing sources (uses)

Transfers in 101,249 95,535 99,166 73,939 67,407 66,480 52,381 53,758 38,796 43,187 Transfers out (91,028) (84,325) (88,277) (62,970) (63,759) (56,470) (45,906) (54,200) (39,099) (41,514)

Issuance of refunding bonds 253,134_

Payment to refunded bond escrow agent (255.325)

Issuance of long-term debt 18,238 22,583 7,289 7,775 4,450 31,968 3,212 1,705 Special items 1,250 Proceeds from the sale of capital assets 20 5,754 "-

Capital leases 1,649 2,198 Total other financing sources 27,917 36,011 19,428 18,744 , 13,852 10,010 38,443 2,770 1,402 1,673 Net change in fund balances $ (10,216) $ 11,280 $ 3,634 $ 34 $ (21,802) $ (16,464) $ (27,104) $(125,059) $(168,174) $ (84,769)

Debt service as a percentage of non-capital expenditures 15.26% 15.33%. 14.27% 14.68% 14.24% 14.49% 12.71% 11.55% 11.39% 13.55%

' Prior to the implementation of GASB Statement No. 34 in 2002, debt issuance costs were not displayed as expenditures but were recorded as part of issuance of long-term debt in the fund financial statements.

Source: Finance Department, City of Anaheim 97

CITY OF ANAHEIM General Government Tax Revenues by Source Last Four Fiscal Years (In thousands)

(Modified accrual basis of accounting)

Secured Unsecured Supplemental Property Sales Transient Fiscal Pfoperty Property Property Taxes and Use Occupancy Other Year Taxes Taxes Taxes in-lieu of VLF' Taxes Taxes Taxes Total 2007 $62,881 $9,945 $4,580 $25,080 $66,761 $83,914 $7,531 $260,692 2006 53,137 9,409 4,207 23,570 66,045 75,979 7,862 240,209 2005 49,510 9,244 3,626 19,569 59,976 67,141 7,542 216,608 2004 49,847 8,591 2,125 55,409 63,268 7,095 186,335 90,000-80,000-70,000-60,000-

'qi 50,00i0-

":' 40,000-30,000-

'1/2 20,000-10,000

'

.2007 2006 ,  : 2005 2004

. g F-1Secured l'ropelly Taxes E3Unsecured l'roperty Taxes

,

• t OrPrp'leaxes i-lieu of VLF Li Sales and Use Taxes lansient Occupancy Taxes Tr Collection of property taxes in-lieu of VLF starting in fiscal year 2005 is due to the shifting of revenue from motor vehicle license fees category to the property tax category. This was part of the State of California 2004 Budget Act.

Source: Finance Department, City of Anaheim 98

CITY OF ANAHEIM Assessed Value of Taxable Property Last Four Fiscal Years (In thousands)

(Modified accrual basis of accounting)

Fiscal Year 2007 2006 2005 2004 City of Anaheim Secured property $26,507,229 $24,081,039 $22,288,504 $20,826,232 Unsecured property 2,442,959 1,117,310 1,162,358 1,287,967 Total City of Anaheim 28,950,188 25,198.349 23,450,862 22,114,199 Anaheim Redevelopment Agency Secured property 2,838,528 2,574,542 2,332,303 2,177,936 Unsecured property 813,249 734,299 748,144 731,733 Total Anaheim Redevelopment Agency 3,651,777 3,308,841 3,080,447 2,909,669 Total Taxable Assessed Value $32,601,965 $28,507,190 $26,531,309 $25,023,868 Total Direct Tax Rate 0.1105% 0.1109% 0.1112% 0.1117%

Assessed Property VlIie

$30,000,000 25000,000 20,000,000 15 000000 4

5,000.000 -

0 207. 2005 2004 Fisc"1Year E]City of Anaheinm

• Anaheim Redevelopment Agency Source: Auditor-Controller, County of Orange 99

CITY OF ANAHEIM Property Tax Rates Direct and Overlapping Governments Last Four Fiscal Years Fiscal Year 2007 2006 2005 2004 City of Anaheim Total City Rate 0.1082% 0.1082% 0.1082% 0.1082%

City General Obligation Bond Fund 0.0023% 0.0027% 0.0030% 0.0035%

Total Direct Rate' 0.1105% 0.1109% 0.1112% 0.1117%

Range of Overlapping Rates Elementary School Districts Rate 0.3202% 0.3259% 0.3242% 0.3228%

High School Districts Rate 0.2134% 0.2143% 0.2175% 0.2135%

Community College Districts Rate 0.0917% 0.0940% 0.0917% 0.0)932%

Water District Rate 0.0138% 0.0143% 0.0149% 0.0152%

Special Districts Rate 0.0753% 0.0753% 0.0753% 0.0753%

County Rate 0.2426% 0.2426% 0.2426% 0.2426%

Direct and Overlapping Rates' 1.0675% 1.0773% 1.0774% 1.0743%

Excludes rates associated with Mello-Roos Districts.

2 In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1% fixed amount. Valuations of real property are frozen at the value of the property in 1975, with an allowable adjustment up to 2% per year for inflation. However; property is reassessed to its current value when a change of ownership occurs. New construction, including tenant improvementsi is assessed at its current value. This 1% is shared by all taxing agencies for which the subject property resides. In 1986, the State Constitution was amended to allow rates over the I% base rate for voter approved general obligation debt.

Source: Auditor-Controller, County of Orange 100

CITY OF ANAHEIM Principal Property Tax Payers Last Ten Fiscal Years (In thousands)

Fiscal Year 2007 2006 2005 2004 2003 Percentage of Total City Taxable Taxable Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Assessed Assessed Tax Payer Rank Value Value Rank Value Rank Value Rank Value Rank Value Walt Disney World Company 1 $3,466,814 10.63% 1 $3,383,738 $3,169. 133 1 $3,140,270 1 $3,011,080 2 205,049 0.63% 2 142,276 8 70,501 Lennar Platinum Triangle Kaiser Foundation Health 3 149,332 0.46% 3 108,181 Anaheim Hotel Partnership 4 129,662 0.40%

PPC Anaheim Apartments 5 104,040 0.32% 4 102,000 CREA / Nexus Anaheim 6 95,333 0.29%

Anaheim Memorial Hospital 7 88,254 0.27% 8 83,576 Maguire Properties 8 81,600 0.25%

Boeing North America 9 81,428 0.25% 7 84,336 5 82,683 2 127,443 2 135,401 Angeli LLC 10 78,733 0.24% 6 73,773 5 72,327 5 71,001 Allstate Life Insurance Company 5 99,035 2 111,282 3 109,100 3 120.30(0 Pan Pacific Retail 6 89,368 4 87,518 Hilton Hospitality Inc. 9 75,249 Macquarie Office Trust 10 72,522 Reef America REIT II 3 108,431 4 106,456 4 104,316 Joan MTR Schlund 7 72,414 6 70,994 6 70,488 OTR 9 66,763 7 65,401 9 49,455 Fairfield Resorts, Inc. 10

• 59,102 9 57,872 8 56,048 Atrium Plaza, LLC 8 65,308 7 64,971 Pacific Sunwear California, Inc. 10 55,968 James P Crawford Kilroy Realty LP PC and RS Chao Family LTD 1o 49,455 Living Stream Prologis California I LLC UKA LLC Spieker Properties Equitable Pacific Security Capital Taromina Industries, Inc Weyerhauser Company Kwikset Corperation Catellus Development Corp.

$4,480,245 $4,240,281 $3,901,600 $3,871,139 $3,732,515 Total (continued) 101

CITY OF ANAHEIM Principal Property Tax Payers Last Ten Fiscal Years (Inthousands)

(continued)

Fiscal Year 2002 2001 2000 1999 1998 Taxable Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Assessed Tax Payer Rank Value Rank Value Rank Value Rank Value Rank Value Walt Disney World Company 1 $2,267,576 1 $1,457,785 1 $1,339,334 1 $1,030,221 1 $1,096,999 Lennar Platinum Triangle Kaiser Foundation Health Anaheim Hotel Partnership PPC Anaheim Apartments CREA / Nexus Anaheim Anaheim Memorial Hospital Maguire Properties Boeing North America 2 143,228 2 149,113 2 176,450 2 178,771 2 173,884 Angeli LLC 3 69,609 3 76,880 Allstate Life Insurance Company Pan Pacific Retail Hilton Hospitality Inc.

Macquarie Office Trust Reef America REIT 1I 6 61,241 Joan MTR Schlund 4 68,385 4 67,044 7 45,543 OTR 7 58,182 6 60,041 5 55,01)4 4 51,017 6 48,964 Fairfield Resorts, Inc. 9 53,612 8 57,005 Atrium Plaza, LLC Pacific Sunwear California, Inc.

James P. Crawford 5 65,388 5 64,105 10 43,553 Kilroy Realty LP 8 57,437 7 58,834 4 57,004 5 45,514 PC and RS Chao FamilyLTD 10 49,746 9 43,935 8 .43,600 4 51,764 Living Stream 9 47,818 Prologis California I LLC 10 46,707 6 45,767 UKA LLC 3 77,520 Spieker Properties 8 45,026 8 43,330 Equitable Pacific 3 96,269 3 94,517 Security Capital 6 44,539 7 43,717 Taromina Industries, Inc 7 43,930 10 40,603 Weyerhauser Company 9 40,812 9 43,203 Kwikset Coi'peration 10 40,612 Catellus Development Corp. - 5 50,155 Total $2,894,404 $2,085,332 $1,929,172 $1,615,285 $1,687,136 Source: Finance Department, City ofAnaheim, H-dL Coren & Cone, Orange County Assessor 102

CITY OF ANAHEIM Property Tax Levies and Collections Last Four Fiscal Years (In thousands)

Coliected within the Fiscal Total Collections Year of the Levy as of 6/30 Delinquent Fiscal Total Secured Percentage Tax Percentage Year Tax Levy Amount of Levy Collections Amount of Levy 2007 $64,237 $62,101 96.67% $534 $62,635 97.51%

2006 57,488 56,462 98.22% 532 56,994 99.14%

2005 53,217 52,519 98.69% 741 53,260 100.08%

2004 49,877 49,005 98.25%. 596 49,601 99.45%

Source: Auditor-Controller, County of Orange 103

CITY OF ANAHEIM Ratios of Outstanding Debt by Type Last Four Fiscal Years (Inthousands, except per capita amount)

Fiscal Year 2007 2006 2005 2004 Governmental Activities Bonds $740,107 $740,959 S 739,775 S 737,538 Certificates of participation 26,788 30,066 33,174 36,107 Notes and loans 57,614 43,342 28,669 22,747 Capital leases 2,484 2,220 1,523 2,001 Total governmental activities 826,993 816,587 803,141 798,393 Business-type Activities Bonds 706,126 513,874 528,130 543,780 Certificates of participation 96,475 125,087 132,952 140,355 Notes and loans 14,081 14,976 15,842 16,678 Capital leases 267 275 180 349 Total business-type activites 816,949 654,212 677,104 -701,162 Total Government $1,643,942 $1,470,799 $1,480,245 $1,499,555 Percentage of personal income 17.92% 16.52% 17.04% 17.71%'V Per capita $ 4,757 $ 4,292 S 4,326 S 4,395 Note: Per capita amounts are estimates

-Source: California State Department of Finance and Finance Department, City of Anahiefi 104

CITY OF ANAHEIM Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (In thousands, except per capita amnount)

Fiscal Year 2007 2006 2005 2004 2003 Bonds General obligation S5,700 $6,170 S6,625 $ 7,060 S7,460 Lease revenue 588,534 575,125 569,016 562,118 554,361 TFax allocation 152,135 159,664 164,134 168,360 172,258 Total bonds 746,369 740,959 739,775 737,538 734,079 Less amounts available in debt service fond 39,075 39,232 -30,812 44,132 41,461 Total net obligation bonds outstanding $707,294 $701,727 $708,963 $693,406 $692,618 Percentage of assessed value of property 2.17% 2.46% 2.67% 2.77% 3.04%

Per capita $ 2,047 $ 2,048 $ 2,072 $ 2,032 $ 2,055 FiscallYear 2002 2001 2000 1999 1998 Bonds General obligation $ 7,850 $8,205 $ 8,535 $ 8,850 $ 9,120 Lease revenue 546,152 538,207 530,717 523,658 517,005 Tax allocation 175,953 179,449 148,790 149,954 151,103 Total bonds 729,955 725,861 688,042 682,462 677,228 Less amounts available in debt service fond 44,916 36,900 59,066 70,118 86,201 Total net obligation bonds outstanding $685,039 $688,961 $628,976 $612,344 $591,027 Percentage of assessed value of property 3.52% 4.30% 3.93% 4.01% 4.04%

Per capita $ 2,045 $ 2,088 $ 1,918 $ 2,001 $ 1,964 Note: Details regarding the City's outstanding debt can be found in the notes to the basic financial statements.

Source: Finance Department, City of Anaheim 105

CITY OF ANAHEIM Direct and Overlapping Governmental Activities Debt As of June 30, 2007 (In thousands)

Estimated Estimated City's Share Debt Percentage of Direct City Direct Debt Outstanding Applicable Debt Bonds $ 740,107 100.00000% $ 740,107 Certificates of participation 26,788 100.00000% 26,788 Notes and loans 57,614 100.00000% 57,614 Capital leases 2,484 100.00000% 2,484 Total City Direct Debt $ 826,993 826,993 Estimated Estimated City's Share Debt Percentage of Overlapping Overlapping Debt Repaid with Property Taxes Outstanding Applicable Debt Anaheim Elementary School District $ 65,730 99.23000% $ 65,221 Buena Park Elementary School District 12,080 0.09000% 11 Centralia Elementary School District 17,085 12.05000% 2,059 Fullerton Elementary School District 47,575 0.16000% 76 Anaheim Union High School District 126,159 67.72000% 85,439 Magnolia School District 9,320 68.10000% 6,347 North Orange Joint Community College Districts 232,521 28.98000% 67,387 Rancho Santiago Conmmunity College Districts 324,638 13.02000% 42,271 Metropolitan Water District (MWD) 389,565 1.72000% 6,708 Fullerton Joint Union High School District 57,912 0.00296% 171 Placentia - Yorba Linda Unified School District 95,923 20.28000% 19.451 Metropolitan Water District - Anaheim City 73,489 8.21000% 6,031 Total Overlapping Debt Repaid with Property Taxes $1,451,997 301,172 Total Direct and Overlapping Other Debt $1,128,165 (continued) 106

CITY OF ANAHEIM Direct and Overlapping Governmental Activities Debt As of June 30, 2007 (In thousands)

(continued) 2006-07 Assessed Valuation $32,601,965 Redevelopment Incremental Valuation (3,651,777)

Adjusted Assessed Valuation $28,950,188 Direct Debt 2.857%

Overlapping Debt Repaid with Property Taxes 1.040%

Note: In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1% fixed amount. This 1% is shared by all taxing agencies for which the subject property resides. In 1986, the State Constitution was amended to allow rates over the 1% base rate for voter approved general obligation debt.

Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the government's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government.

Source: HdL Coren & Cone 107

CITY OF ANAHEIM Legal Debt Margin Last Ten Fiscal Years (In thousands)

Fiscal Year 2007 2006 2005 2004 2003 Debt limit $3,976,084 $3,612,156 $3,343,276 $3,123,935 $3,418,119 Total net debt applicable to limit (5,700) (6,170) (6,625) (7,060) (7,460)

Legal debt margin $3,970,384 $3,605,986 $3,336,651 $3,116,875 $3,410,659 Total net debt applicable to the limit as a percentage of debt limit 0.14% 0.17% 0.20% . 0.23% 0.22%

Legal Debt Margin Assessed property value $26,507,229 $24,081,039 $22,288,504 $20,826,232 $22,787,461 Debt limit (15% of total assessed value) 3,976,084 3,612,156 3,343,276 3,123,935 3,418,119 Fiscal Year 2002 2001 2000 1999 1998 Debt limit $2,882,716 $2,587,106 $2,363,255 $2,252,829 $2,158,778 Total net debt applicable to limit (7,850) (8,205) (8,535) (8,850) (9,120)

Legal debt margin $2,874,866 $2,578,901 $2,354,720 $2,243,979 $2,149,658 Total net debt applicable to the limit as a percentage of debt limit 0.27% 0.32% 0.36% 0.39% 0.42%

Legal Debt Margin Assessed property value $19,218,106 $17,247,371 $15,755,036 $15,018,863 $14,391,851 Debt limit (15% of total assessed value) 2,882,716 2,587,106 2,363,255 2,252,829 2,158,778 Note:

Under State Finance Law, the City's outstanding general obligation debt should not exceed 15 percent of total assessed property value. By law, the general obligation debt subject to the limitation may be offset by amounts set aside for repaying general obligation bonds.

Source: Finance Department, City of Anaheim 108

CITY OF ANAHEIM Pledged-Revenue Coverage Last Ten Fiscal Years (In thousands)

Electric Utility Revenue Bonds aiid Certificates of Participation Less Net Fiscal Gross Operating - Available Debt Service Year Revenue Expenses Revenue Principal Interest Total. Coverage 2007 $330,421 $265,340 $65,081 $13,220 $22,177 $35,397 1.8386 2006 336,091 268,274 67,817 13,145 25,132 38,277 1.7717 2005 297,443 218,562 78,881 15,875 24,780 40,655 1.9403 2004 295,988 232,050 63,938 14,840 20,102 34,942 1.8298 2003 280,471 216,841 63,630 15,566 22,625 38,191 1.6661 2002 308,329 238,124 70,205 14,779 16,450 31,229 2.2481 2001 345,615 292,395 53,220 15,731 17,586 33,317 1.5974 2000 287,132 205,699 81,433 15,462 18,082 33,544 2.4276 1999 262,336 194,012 68,324 18,543 18,356 36,899 1.8516 1998 251,929 191,306 60,623 17,716 16,125 33,841 1.7914 W~ater Utility Revenue Bonds Less Net Fiscal Gross Operating Available Debt Service Year Revenue Expenses Revenue Principal Interest Total Coverage 2007 $51,595 $43,203 $8,392 $1,325 $379 $1,704 4.9249 2006 47,904 39,110 8,794 1,870 450 2,320 3 .7905 2005 44,484 33,312 11,172 1,340 485 1,825 6. 1216 2004 44,659 35,602 9,057 1,625 819 2,444 3.7058 2003 43,669 29,775 13,894 1,540 906 2,446 5.6803 2002 43,944 31,103 12,841 1,465 990 2,455 5.2305 2001 43,995 26,479 17,516 1,400 2,094 3,494 5.0 132 2000 43,959 30,193 13,766 1,330 2,166 3,496 3.9376 1999 40,489 26,900 13,589 1,260 2,234 3,494 3. 8892 1998 37,640 22,670 14,970 1,180 2,313 3,493 4.2857 (continued)10 109

CITY OF ANAHEIM Pledged-Revenue Coverage Last Ten Fiscal Years (In thousands)

(continued)

Convention, Sports and Entertainment Venues Revenue Bonds and Certificates of Participation Less Net Fiscal Gross Operating Available Debt Service Year Revenue Expenses Revenue Principal Interest Total Coverage 2007 $49,012 $26,727 $22,285 $6,219 $ 8,713 $14,932 1.4924 2006 42,099 27,939 14,160 6,037 8,897 14,934 0.9482 2005 42,243 25,555 16,688 5,862 9,061 14,923 1.1183 2004 43,802 22,981 20,821 7,585 7,661 15,246 1.3657 2003 41,947 22,174 19,773 7,126 7,525 14,651 1.3496 2002 38,638 18,430 20,208 6,994 8,698 15,692 1.2878 2001 40,435 17,479 22,956 7,179 9,100 16,279 1.4102 2000 33,335 15,248 18,087 6,784 9,497 16,281 1.1109 1999 29,873 13,636 16,237 6,482 9,870 16,352 0.9930 1998 31,646 15,309 16,337 6,285 10,226 16,511 0.9895 Note: Operating expenses exclude amortization and depreciation.

Source: Finance Department, City of Anaheim 110

CITY OF ANAHEIM Demographic and Economic Statistics Last Four Fiscal Years Personiil Per Education Income Capita Level in Fiscal (thousands Personal Median Years of School Unemployment Year Population of dollars) Income Age Schooling Enrollment Rate 20)07 345,559 $9,172,173 $26,543 32 2 12.2 2 .65,539 3.90%

2006 342,717 8,901,046 25,972 32 2 12.2 2 65,000 3.70%

2005 342,186 8,686,734' 25,386 322 12.2 2 64,154 3.90%

2004 341,184 8,466,140 24,814 30 12.2 2 64,600 3.60%

Pei~entajleGr9wtL 0/o Fiscal Year

. 1 [3 2007 M 2006 02005 02004 1 Projection based on 10 year running average 2 Median age and education level based on census 2000 Source: California State Department of Finance Anaheim City Superintendent of Schools State of California, Employment Development Department State Department of Commerce and Labor III

CITY OF ANAHEIM Principal Employers Last Four Fiscal Years Fiscal Year 2007 2006 2005 2004 Percentage of Total City Employer Rank Employees Employment Rank Employees Rank Employees Rank Employees Disneyland Resort 1 21,710 12.9% 1 21,950 1 22,180 1 22,650 Kaiser Foundation Hospital 2 3,660 2.2% 2 3,660 2 2,580 4 1,500 Anaheim Memorial Hospital Medical Center 3 1,185 0.7% 6 1; 185 6 1,185 6 1,185 Alstyle Apparel 4 1,000 0.6% 4 1,600 7 1,000 8 1,000 Honda Center 5 1,000 0.6% 7 1,000 Northgate Gonzalez Supermarkets 6 1,000 0.6% 8 1,000 Hilton Anaheim 7 920 0.5% 5 1,200 8 960 7 1,000 Long Beach Mortgage 8 800 0.5% 10 800 West Anaheim Medical Center 9 774 0.5% 9 774 9 774 Anaheim Marriott 10 730 0.4%

Boeing North America 3 3,500 4 1,750 2 3,500 Opal Concepts 3 2,000 3 2,000 Anaheim Sports Incorporated 5 1,200 5 1,200 Aramark at Angels Stadium of Anaheim 10 700 10 700 SBC Communications 9 700 Source: California Employment Development Department Inside Prospects Database 2005 amounts are estimates 112

CITY OFANAHEIM Full-time Equivalent City Government Employees by Function/Program Last Four Fiscal Years Fiscal Year 2007 2006 2005 2004 Function/Program City Council 5 5 5 5 City Administration 24 21 20 19 City Attorney 35 32 32 32 City Clerk 7 7 7 7 Human Resources 25 23 22 22 Finance 63 63 63 65 City Treasurer 6 6 6 6 Police 591 582 570 568 Fire 290 288 285 285 Community Development 114 120 119 112 Planning 96 95 96 96 Public Works 249 247 245 245 Community Services 183 183 179 188 Public Utilities 354 337 335 331 Convention, Sports and Entertainment 88 86 86 86 Total 2,130 2,095 2,070 2,067 Source: City of Anaheim 113

CITY OF ANAHEIM Operating Indicators by Function Last Four Fiscal Years Fiscal Year 2007 2006 2005 2004 Function/Program Parks Number of park acres maintained per full-time equivalent employee 10.52 10.52 10.39 10.39 Number of sports fields prepared 66 66 66 69 Cost per acre of parks $10,288 $9,960 $8,791 $9,144 Cost per sports field maintained $4,747 $4,596 $4,828 $4,377 City Libraries Total circulation - books 1,536,044 1,363,327 1,422,072 1,689,744 Reference questions answered 87,318 67,663 93,964 151,379 Information assistance 294,940 318,089 375,944 450,052 Patrons (patron visits) 1,373,002 1,176,441 1,147,079 1,267,487 Patrons (borrowers) 161,278 139,611 114,700 100,690 Programs offered 3,923 2,740 3,559 3,572 Program attendance 129,661 84,631 79,912 99,330 Electronic resources users 257,089 227,005 206,569 201,739 Community Services Programs Number of youth program participants 362,839 362,839 354,505 346,171 Number of youth program participants in recreation classes 13,675 15,200 14,886 14,886 Number of adult program sports teams 756 812 820 639 Number of park rangei contacts 140,000 139,773 88,935 132,633 Anaheim Convention Center Number of events serviced 347 337 310 262 Number of attendees 1,098,000 1,002,000 1,202,000 992,000 Percentage of occupancy 82.0% 68.0% 76.5% 84.5%

Fire Department Fire responses 649 687 519 590 False alarm responses 719 678 581 579 Mutual aid responses 2,296 2,271 2,530 2,441 Medical responses 16,326 16,679 13,783 14,130 Hazardous condition responses (spills, leaks, bomb removal, power line down, etc.) 263 322 138 134 Other responses (persons in distress, controlled burn, smoke scares, animal rescues, etc.) 10,420 9,984 9,041 8,760 Sources: Various City Departments 114

CITY OF ANAIIEIM Capital Assets Statistics by Function Last Four Fiscal Years Fiscal Year 2007 2006 2005 2004 Function/Program Parks Community parks 11 11 I1 II Mini parks 6 6 6 6 Neighborhood parks 20 20 21 21 Special use parks 6 6 6 6 City Libraries Branch libraries 6 5 4 5 Book mobiles 2 2 1 1 Books in collection 568,593 575,120 440,601 460,230 Library collections 618,512 618,512 509,212 501,084 Anaheim Convention Center Square footage available 1,130,000 1,130,000 1,130,000 1,130,000 Number of exhibit halls 5 5 5 5 Fire Department Fire stations 79 10 101 10 Training center 7 1 1 Fire trucks, engines, and other vehicles 79 72 72 71 Source: Various City Departments 115

CITY OF ANAHE IM Legend

• CITY HALL 200 S. ANAHEIMB1LVD.

A FIRE STATIONS

• POLICE STATIONS

• LIBRARIES CITY FACILITIES

" HEUPORT PARKS

1. HANSEN PARK 11. WILLOW PARK 21. COLONY PARK " 31. OLIVE HILLS PARK 41. CANYON RIM PARK 1300 S. Knott St. 1625 W. Crone Ave. 210 E. Lincoln Ave. 4200 Nohl Ranch Rd. 7305 E. Canyon Rim Rd.

2. REID PARK 12. PALM LANE PARK 22. WALNUT GROVE PARK 42. TOYON PARK 905 S. Anaheim Blvd. 32. RIVERDALE PARK 3100 W. Orange Ave. 1595 Palais Rd. 945 S.Weir Canyon Rd.

4545 E. Riverdale Ave.

3. SCHWEITZER PARK 13. SAGE PARK 23. CITRUS PARK 33. PERALTA CANYON PARK 43. ROOSEVELT PARK 238 S. Bel Air St. 1313 Lido PI. 104 S. Atchison St. 115 N. Pinney Dr. 8160 E.Bauer Rd.

4. MAXWELL PARK 14. STODDARD PARK 24. PONDEROSA PARK 34. PELANCONI PARK 44. ROSS PARK 2660 W. Orange Ave. 901 S. Ninth St. 2100 S. Haster St. 222 S. Avenida Margarita 1280 W. Santa Ana St.

5. PETER MARSHALL PARK 15. MANZANITA PARK 25. LINCOLN PARK 45. COTTONWOOD PARK

35. IMPERIAL PARK 801 N. Magnolia Ave. 1260 Riviera St. 1440 E. Lincoln Ave. 450 S. Imperial Hwy. 853 W. Cottonwood Cir.

6. BROOKHURST COMMUNITY PARK 16. LA PALMA PARK & STADIUM 26. EDISON PARK 46. DEER CANYON PARK

36. EUQALYPTUS PARK Mohler & Santa Ana Rd.

2271 W. Cresent Ave. 1151 La Palma Park Way 1145 Baxter St. 100 N. Quintana Dr.

7. JOHN MARSHALL PARK 17. PEARSON PARK 27. BOYSEN PARK 37. OAK PARK 2066 Falmouth Ave. 400 N. Harbor Blvd. 951 State College Blvd. 6400 E. Nohl Ranch Rd.

8. MODJESKA PARK 18. LITTLE PEOPLES PARK 28. JUAREZ PARK 38. YORBA REGIONAL PARK 1331 S. Nutwood St. 220 W. Elm St. 841 S. Sunkist St. 7600 E. La Palma Ave.

9. CLARA BARTON PARK 19. JULIANNA PARK 29. PIONEER PARK 39. OAK CANYON NATURE CENTER 1926 Clearbrook Ln. 309 E. Juliana St. 2565 E. Underhill Ave. 6700 Walnut Canyon Rd.

10. CHAPARRAL PARK 20. GEORGE WASHINGTON PARK 30. RIO VISTA PARK 40. SYCAMORE PARK 1770 E. Broadway 250 E. Cypress St. 201 N. Parkvista St. 8268 Monte Vista Rd.

116