CITY OF TRACY California TRACY 'F/J' Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 COMPREHENSIVE ANNUAL FINANCIAL REPORT of the CITY OF TRACY, CALIFORNIA For the fiscal year ended June 30, 2016 Prepared by the Finance Department MARTHA GARCIA Interim Finance Director ROBERT HARMON, CPA Senior Accountant ALLAN J. BORWICK Budget Officer PEGGY BARNES ANNE BELL LAURA BORJON AMANDA CORDOVA DON HIGGINS ROSEMARIE MARQUEZ STACEY MERJIL LINDA MONIZ Accounting Technician Management Analyst II Accountant Accounting Assistant Senior Accounting Assistant Accounting Technician Accounting Assistant Accounting Coordinator KELLY MURILLO Accounting Assistant VERONICA NUNEZ Accounting Assistant DELORES OHM Payroll Coordinator SARA REMONDA Senior Accounting Assistant GRACE SEGURA Senior Accounting Assistant RAQUEL VOTAW Senior Accounting Assistant VERA WHITTENBURG ISABEL YAMADA Accountant Accounting Technician T H I S PAG E I NTENTIO NALLY LEFT B LAN K Introductory Section THIS PAGE INTENTIONALLY LEFT BLANK CITY OF TRACY Comprehensive Annual Financial Report For the Year Ended June 30, 2016 I INTRODUCTORY SECTION: Table of Contents ......................................................................................................................................................... i Organization Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v List of Elected Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. vi List of Other Officials . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii GFOA Certificate of Achievement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii Letter of Transmittal . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix I FINANCIAL SECTION: Independent A uditor's Report . . ......... .......................................................................... ............................................. Management's Discussion and Anal:ysis ................................................................................................................. 1 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities ....................................................................................................................... ............................................................................................................................ 21 22 Fund Financial Statements: Governmental Funds: Balance Sheet . . ................. ................................ ................................................................................... Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ............................................................................................................... Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................ 26 29 30 Reconciliation of the Net Change in Fund Balances Governmental Funds with the Change in Net Position Governmental Activities . . . . . . . . . . . . . ........... . . . . . . . . . . . . . . . . . . . . . . . . 32 CITY OF TRACY Comprehensive Annual Financial Report For the Year Ended June 30, 2016 I FINANCIAL SECTION (Continued): Proprietary Funds: Statement of Net Position ................................................................................. . . . ................................... Statement o f Revenues, Expenses and Changes in Fund Net Position Statement o f Cash Flows ................................................. ........................................................................................................................ 34 36 38 Fiduciary Funds: Statements of Fiduciary Net Position ............................................................ ......................................... Statement of Changes in Fiduciary Net Position Notes to Basic Financial Statements ................................................................................... ............................................................................... . ........................ 42 43 45 Required Supplementary Information: Modified Approach to Reporting Street Pavement Costs ........................................................................... Schedule of Changes in Net Pension Liability and Related Ratios - Miscellaneous Plan ........................ Schedule of Contributions - Miscellaneous Plan ........................................................................................ Schedule of Changes in Net Pension Liability and Related Ratios - Safety Plan Schedule of Contributions - Safety Plan ..................................... ..................................................................................................... Postemployment Benefit Plans Other Than Pensions (OPEB) Schedule of Funding Progress ................ 1 00 101 1 02 1 03 1 04 1 05 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: General Fund .......................................................................................................................................... Housing Successor Fund TEA Grant Fund ....................................................................................................................... .................................................................................................................................... South County Fire Authority Fund ....................................................................................................... Community Development Fees Fund ................................................................................................... Notes to Required Supplementary Information .......... ................................................................................ II 1 06 1 07 1 08 1 09 1 10 111 CITY OF TRACY Comprehensive Annual Financial Report For the Year Ended June 30, 2016 I FINANCIAL SECTION (Continued) : Supplemental Information: Major Governmental Funds, Other Than the General Fund and Special Revenue Funds: Lease Revenue Bonds Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual . 2008 . 1 15 ...................................... ................. ................ .... .. Non-major Governmental Funds: Combining Balance Sheet . . .................................... ........................................................ ........................ 120 Combining Statement of Revenues, Expenditures and Changes in Fund Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 6 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual. ........................................................................................................................ 132 Internal Service Funds: Combining Statement ofNet Position ............................................... . .......... . .... . ............................ Combining Statement of Revenues, Expenses and Changes in Fund Net Position . ....... ................ 138 139 Combining Statements o f Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 0 Agency Funds: Combining Statement of Changes in Assets and Liabilities - All Agency Funds . . ..... ... .................... 143 I STATISTICAL SECTION: Financial Trends: Net Position by Component - Last Ten Fiscal Years Changes in Net Position - Last Ten Fiscal Years . ..................................... ....................................... . . .... .......................... ................................................... Program Revenues by Function/Program - Last Ten Fiscal Years Fund Balances, Governmental Funds - Last Ten Fiscal Years . .. . .. lll . . ................. . . ............................... Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years T ax Revenues by Source - Last Ten Fiscal Years . ............... ..................... ........ .......... .. ............ . ......... . . ............................ . ....... . .. . . ...... ... . . ............ . . . ............... .......... 153 1 54 156 1 57 158 . . . . . . . 1 59 . .. ... CITY OF TRACY C omprehensive Annual Financial Report For the Year Ended June 30, 2016 I STATISTICAL SECTION (Continued) I Revenue Capacity: Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Direct and Overlapping Property Tax Rates- Last Ten Fiscal Years .... ............................................. . .... Principal Property Taxpayers - Current Fiscal Year and Nine Years Ago Property Tax Levies and Collections - Last Ten Fiscal Years .................. ............................................. ........................... .................................... 1 60 161 1 62 1 63 ' Sales Tax Rates - Direct and Overlapping Governments Taxable Sales by Category - Last Ten Calendar Years ....................................................................... .............. .......................................................... . . Principal Sales Tax Producers - Current Fiscal Year and Nine Years Ago Water and Wastewater Rates - Last Ten Fiscal Years ............................................ ............................................................................ 1 64 1 65 1 66 1 67 Debt Capacity: Ratios of Outstanding Debt by Type - Last Ten Fiscal Years ................................................................ Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years Direct and Overlapping Governmental Activities Debt . . Legal Debt Margin Information - Last Ten Fiscal Years Pledged Revenue Coverage - Last Ten Fiscal Years ..................................................... ........................................................................ ....................................................................... .............................................................................. 1 68 1 69 1 70 171 1 72 Demographic and Economic Information: Demographic and Economic Statistics - Last Ten Fiscal Years Principal Employers - Current Year and Nine Years Ago ............................................................. ...................... . . .................................. ........... 1 73 1 74 Operating Information: Full-Time and Part-Time C ity Employees by Function - Last Ten Fiscal Years ...................................................................................................................... Operating Indicators by Function - Last Ten Fiscal Years ......................................... . ........................... Capital Asset Statistics by Function - Last Ten Fiscal Years lV ................................................................. 1 75 1 76 1 77 City of Tracy ORGANIZATION CHART City Population City Electorate I I I City Council ----- City Treasurer Mayor & 4 Council Members I I City Attorney City Manager Police Department Public Works Department Parks & Recreation Department - "'"" - ... I Boards & Commissions Fire Department Development Services Department - "'"" - v Administrative Services Department Utilities Department CITY OF TRACY, CALIFORNIA COUNCIL- MANAGER FORM OF GOVERNMENT June 30, 2016 CITY COUNCIL MICHAEL MACIEL Mayor ROBERT RICKMAN Mayor Pro Tem MARV MITRACOS Council Member VERONICA VARGAS Council Member NANCY YOUNG Council Member OTHER ELECTED OFFICIALS RAYMOND McCRAY City Treasurer VI CITY OF TRACY, CALIFORNIA OTH ER CITY OFFICIALS Troy Brown City Manager Stephanie Garrabrant-Sierra Assistant City Manager Bill Sartor City Attorney Martha Garcia Interim Finance Director OTH ER D EPARTM ENT H EADS Randall Bradley Fire Chief Larry Esquivel Police Chief Andrew Malik Development Services Director Don Scholl Public Works Director Kuldeep Sharma Utilities Director Andre Pichley Parks & Recreation Director Vll Government Finance Officers Association Certificate of Achievement · for Excellence in Financial Reporting Presented to City of Tracy California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 Executive Director/CEO rf viii � TRACY 'F/}' CITY OF TRACY Office of City Manager Telephone: (209) 831-6000 333 Civic Center Plaza Fax: (209) 831-6120 Tracy, CA 95376 Think Inside the Triangle'" February 16, 2017 Honorable Mayor and City Council Members Citizens of the City of Tracy: The Tracy Municipal Code requires that all funds, accounts, and financial transactions of the City be subjected to an annual audit by an independent certified public accountant that is selected by the City Council. The Municipal Code further specifies that after the close of the fiscal year, an annual financial report covering all funds and financial operations shall be prepared and submitted to the City Council. This report is published to fulfill that requirement for the fiscal year ended June 30, 2016. Management assumes full responsibility for the completeness and reliability of the information contained in this report based upon a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. Profile of the Government Tracy is located on the western edge of the Central Valley in San Joaquin County. The City is 60 miles east of San Francisco and 70 miles south of Sacramento. The City is situated within a triangle formed by three interstate freeways: 1-5, 1-205 and 1-580. Tracy was founded in 1878 as a railroad center. It was incorporated as a city in 1910. For many decades, it served both as a railroad center and farm market town. Since World War II, it has been the location of a defense supply center. By 1960, the City's employment base included a few food-processing plants and small­ related manufacturing operations. A state correctional facility as well as a federal and a state water project facility are located nearby. During the 1980s, Tracy experienced a period of major growth influenced by the East Bay area of the San Francisco Bay region with its high cost of housing. Tracy, with more affordable housing than the Bay area, continues to be an attractive residential location for many Bay area workers. Tracy is now considered an outer suburb of the Bay area, rather than a small agricultural and industrial town. The population and size of Tracy has increased from 18,428 and 7.0 square miles in 1980 to 89,208 and 29.1 square miles in 2016. The City operates under the council-manager form of government. Policymaking and legislative authority are vested in the City Council, which consists of a Mayor and a four member Council. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing committees, and hiring the City Manager and City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the government, and for appointing the heads of the government's departments. The Council is elected on a non-partisan basis. Council members are elected to four-year staggered terms, with two Council members elected every two years. The Mayor is elected every two years. ix Our independent auditors, Maze and Associates, have issued an unmodified ("clean") opinion on the City of Tracy's financial statements for the fiscal year ended June 30, 2016. The independent auditor's report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complements this letter and should be read in conjunction with it. Local Economy California's economic recovery has outpaced many parts of the nation as unemployment has dropped and the state's budget outlook has turned positive. While California has experienced some job growth, the June 2016 unemployment rate of 5.4% remains higher than the national average of 4.9%. San Joaquin County's unemployment rate of 8. 3% is higher than both California and the nation; however, it continues to decline. The City of Tracy is a little lower than the County at 7%. Because agriculture still remains an important segment of the San Joaquin Valley economies, seasonal unemployment is always much higher than the national average. On a positive note, the local economy for Tracy is tied more closely to the bay area; residents tend to work in the Livermore Valley, East Bay, and San Jose, where the economy is not significantly influenced by seasonal agriculture production. While the recession negatively impacted the bay area, the effects were not nearly as severe (e.g. housing collapse) as those experienced in the San Joaquin Valley. Property and sales taxes are a significant revenue source for the City. Together, in FY 15/16 they represented 72% of the City's total general fund revenues, including Measure E, which fund public safety, recreation and other general governmental services. The economic recession of 2008 and the subsequent decline in home values had significant effects on property taxes. Assessed valuations for all property types in Tracy have increased for the second year in a row. Housing prices are now approaching pre-recessionary levels and the outlook is for a slow but continued recovery. However, property tax revenue generally lags behind increases in valuations, so revenue expectations, while improving, remain guarded. Sales tax continues to be a very important part of the City's revenue mix. Excluding the special Measure E sales tax which sunsetted in March of 2016, sales tax revenue has exceeded the pre-recession high set in 2007. Sales taxes are significantly more volatile because they are subject to economic fluctuations such as consumer confidence, interest rates, unemployment and other factors that impact household income. While we anticipate continued short term prosperity in sales taxes, it is unknown what the long term future holds for sales tax recovery. Long-term Financial Planning The Tracy Municipal Code requires that the City Council adopt a budget by no later than the close of the fiscal year. This annual budget serves as the foundation for the City of Tracy's financial planning and control. The budget is prepared by fund (i.e. General Fund, Enterprise Fund, etc), by department (e.g. Police, Fire, etc), and by program (i.e. Patrol Services, Traffic Enforcement, Fire Support, etc). Department heads may transfer resources within a department as they see fit with the approval of the City Manager. Transfers between departments; however, need special approval from the City Council. As evidenced by this financial report and others before it, the City has been significantly impacted by the economic recession. Prior to FY 12/13, the City utilized reserves for five consecutive years; FY 15/16 was the fourth year that revenues exceeded expenditures, albeit with the aid of Measure E sales tax. At the beginning of this economic downturn, the City had $38,733,794 million in total reserves (combination of General Fund and the Reserve for Economic Uncertainty Fund). On June 30, 2016, the City had $40,655,597 in reserves. Fiscal Year 15/16 was also x the last year of Measure E receipts, and the City entered FY 16/17 with structural deficit. With unassigned reserves as of June 30, 2016 of $34.4 million, this represents approximately 61% of expected General Fund expenses in FY 15/16. In November of 2016, the City of Tracy voted to approve a half-cent Measure V sales tax for a term of 20 years. The City is expecting implementation of the half-cent Measure V sales tax in April of 2017. Measure V is expected to generate approximately $8 million annually and the City of Tracy is committed to maintaining fiscally sustainability while providing public safety, maintaining the backbone of the City and enhancing the City's infrastructure and amenities. Major Initiatives Continued Investments in the Community The City continues to invest in community infrastructure to enhance the quality of life for the citizens of Tracy. • Joe Wilson Pool opened in Spring of 2016, which provides the pool with accompanying shade structures, splash pad, and a passive solar system and HVAC. • Legacy Fields -the 160 acre site will host softball, baseball, football, soccer and potentially lacrosse. • 11th Street Bridge Replacement -Originally built in 1936 with two lanes, the bridge was later widened to four lanes in 1960. The condition of the bridge has deteriorated with time and the City awarded a construction contract in March 2015 to rebuild the bridge to current structural and seismic standards. Construction began in April 2015 and is expected to conclude in late 2017. Continued Implementation of 5-year Fiscal Plan Continued implementation of a 5-year plan to allow the City to be fiscally sound upon the sunset date of the Measure E half-cent sales tax set to end in March 2016. The City's fiscal strategy, including expenditure reduction measures and revenue enhancements have had a positive impact on the City's sustainability. However, rises in uncontrollable costs such as CalPERS and health care, and the continued lag in property tax recovery was an indicator that the City was facing a structural deficit upon the expiration of measure E. That said, in November of 2016, the City of Tracy voted to approve a half­ cent Measure V sales tax for a term of 20 years. The City is expecting implementation of the half-cent Measure V sales tax in April of 2017. Measure V is expected to generate approximately $8 million annually conversely the 5-year fiscal plan has a structural surplus. Implementation of Financial Systems Modernization Plan The City continues to update its financial systems with two new important systems: • On July 1, 2015, the City completed the first phase of a multi-year project to replace the City's financial, budget, human resource and community development software with an integrated Enterprise Resource Planning system. The financial and budget pieces are now in operation with additional phases in progress. When completed in 2018, a total of fifteen different systems will have been replaced with a single, comprehensive ERP system. xi Major Initiatives (continued) Implementation of Governance Strategy The City Council adopted a governance strategy in 2013 designed to retain and attract talent, enhance fiscal stability, improve the use of technology, and enhance transparency for the betterment of the community of Tracy. This initial two-year plan includes fifteen specific action items addressing Public Safety, Quality of Life, Economic Development and Governance. Implementation of Transparency Initiatives The City has started implementing a transparency initiative designed to provide timely financial information to the residents of Tracy via the City's website in a user-friendly, easy to navigate format. The first stages of this endeavor can be seen on the City Interactive Budget and City Financial Transactions web page of the Finance Department. In response to the economic challenges over the past several years, the City implemented a variety of efficiency and restructuring actions which will continue to provide additional cost savings in future years. The City also anticipated that new revenue would be necessary to avoid additional reductions that would negatively impact public services. In this regard, Tracy voters approved Measure V (a half-cent sales tax with a 20-year sunset) in November 2016. Beginning in April 2017, this new long-term temporary revenue source, combined with prior expense reductions, provides a stable fiscal environment. The City continues to look for new opportunities to continue its commitment to providing efficient, yet quality services. GASB 54 The City is required to produce its financial statements in conformity with GASB 54. This GASB requirement concerns mainly the designation of fund balance into use categories. In addition, Statement 54 clarifies how rainy-day amounts are reported by treating stabilization arrangements as a specified purpose. Consequently, amounts constrained to stabilization must be reported as restricted or committed fund balance in the General Fund if they meet the other criteria for those classifications. In October 2014, the City Council adopted a new stabilization policy and created three stabilization reserves. The General Fund balance of $40.7 million is actually comprised of $18.6 million in the General Fund, $10.1 million in the Contingency/Emergency Reserve, $5 million in the Budget Stabilization Reserve and $7 million in the Measure E Mitigation Reserve. The City has a long reputation for excellent fiscal management. It demonstrated the discipline to increase reserves during the boom years instead of using non-sustainable revenues to fund new programs or services. Additionally, the City implemented its long term fiscal strategy years before the economy deteriorated in late FY 08/09. The successful passage of Measure V affirms the community's confidence in the fiscal management of the City. xii GASB 45 Much attention has been given to the unfunded liability of "Other Post-Employment Benefits" (OPEB) of government employees. In response, the Governmental Accounting Standards Board (GASB) issued Statement #45, which is an effort for governments to identify their obligations for expenses associated with post-employment other than pensions. Governments have pension obligations to their current and retired employees and these are calculated and accounted for. However, most governments have not accounted for other post-employment benefits such as health insurance. As these expenses can represent a huge future liability of the government, identification of their costs is essential. GASB 45 requires the government to have an actuarial study done in order to identify the cost of other post­ employment benefits. The City of Tracy implemented its GASB 45 requirement with the FY 06/07 financial report - two years before it would have been required. The City took this step because it believes GASB 45 to be an important component of judging the financial position of any governmental unit. Also, the City has a tradition of early implementation of significant GASB requirements. The City was one of the first in the nation (including being one of only 3 cities in California) to implement GASB 34, several years before the requirement to do so. The City of Tracy does not provide for the payment of health insurance for its retired employees. As such it does not have a significant GASB 45 liability that many governments have. However, retired employees are allowed to purchase the City's health insurance (including spouse or family coverage) either through direct payment or from the employee's medical insurance bank. The ability of a retired employee to obtain coverage at an active employee rate constitutes a significant economic benefit to the retiree, called an "implicit subsidy" under GASB 45. The City obtained the firm of Demsey, Filliger & Associates to perform an actuarial valuation of this "implicit subsidy. The results of this actuarial valuation can be found in note 11 to the financial statements in this report. The annual required contribution to address this liability is just $446,268 per year, rather than the much higher amounts of many other cities. Suffice to say, this smaller GASB 45 liability is a great benefit to the City's true and long term financial strength. GASB 68 & 71 These accounting standards deal with reporting of pension liabilities. These statements establish standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. These new standards were designed to improve and provide transparency to the accounting and financial reporting for state and local government defined benefit pension plans and to bring governmental employer accounting and reporting standards closer in line with private sector requirements. The City implemented GASB Statement No. 68 and GASB Statement No. 71 in FY 14/15. In prior years, information on the pension liabilities was disclosed in the note disclosure and required supplementary information sections of the CAFR. With the implementation of GASB 68, the net pension liability is reported on the face of the Statement of Net Position, effectively reducing an entity's overall net position. Thus, GASB 68 changed the accounting and financial reporting requirements of pension obligations by reporting pension obligations not only on the note disclosure and required supplementary information sections but also on the face of the basic financial statements. GASB 68 affects the reporting and accounting "presentation" of the City's pension liability; however, it is not a new liability and the City has been disclosing and is profoundly aware of this liability. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Tracy for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2015. This was the 28th consecutive year that the government has received this prestigious award. In order xiii I II to be awarded a Certificate of Achievement, the government had to publish an easily readable and efficiently organized CAFR that satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. In addition, the City also received the GFOA's Distinguished Budget Presentation Award for its annual budget document for FY 16/17. In order to qualify for the Distinguished Budget Presentation Award, a government's budget document must be found proficient as a policy document, a financial plan, an operations guide, and a communications device. The preparation of the Comprehensive Annual Financial Report was made possible by the dedicated service of the entire Administrative Services Department staff. Each member of the Department has my appreciation for the contributions made in the preparation of this report. We also would like to express special appreciation to Senior Accountant, Robert Harmon, CPA, whose long hours, dedication, and attention to detail made possible the successful completion of the annual audit. Respectfully submitted, Martha Garcia Interim Finance Director xiv Financial Section THIS PAGE INTENTIONALLY LEFT BLANK MAZE & ASSOCIATES INDEPENDENT AUDITOR'S REPORT To the Honorable Members of the City Council City of Tracy, California Report on Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activitie s, each maj or fund, and the aggregate remaining fund information of the City of Tracy, California, as of and for the year ended June 3 0, 20 1 6, and the related notes to the financial statements, which collectively comprise the City ' s basic financial statements as listed in the Table of Contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the fmancial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit involves ·performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessm ent of the risks of material misstatement of the fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City 's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenes s of the City's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the fmancial statements. We beli eve that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the fmancial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 3 0, 20 1 6, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. T 925.930.0902 Accountancy Corporation F 925.930.0135 3478 Buskirk Avenue, Suite 215 E maze@mazeassociates.com Pleasant Hill, CA 94523 w mazeassociates.com Changes in Accounting Principles Management adopted the provisions of Governmental Accounting Standards Board Statement No. 72-Fair Value Measurement and Application, which became effective during the year ended June 30, 2016 as discussed in Note 1 J to the financial statements. Management early-implemented the provisions of Governmental Accounting Standards Board Statement No. 82 -Pension Issues -An Amendment of GASE Statements No. 67, No. 68, and No. 73 during the year ended June 30, 2016 as noted in the Pension-Related Required Supplementary Information. The emphasis of these matters does not constitute a modification to our opinions. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management's Discussion and Analysis and the other Required Supplementary Information listed in the Table of Contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to this information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City' s basic financial statements as a whole. The Introductory Section, Supplemental Information, and Statistical Section listed in the Table of Contents are presented for purposes of additional analysis and are not a required part of the financial statements. The Supplemental Information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subj ected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplemental Information is fairly stated in all material respects in relation to the basic fmancial statements as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic fmancial statements and, accordingly, we do not express an opinion or provide any assurance on them. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 16, 2017, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 in considering the City's internal control over financial reporting and compliance. Pleasant Hill, California February 16, 2017 3 TH I S PAGE I NTE NTIONALLY LEFT B LAN K MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion and analysis provides an overview of the City of Tracy' s financial performance for the fiscal year ended June 3 0, 20 1 6. This report has been prepared in accordance with Generally Accepted Accounting Principles (GAAP) as established by the Governmental Accounting Standard Board (GASB). We encourage our readers to consider this information in conjunction with the information provided in the accompanying basic financial statements and notes thereto. FINANCIAL IDGHLIGHTS • • • The City's assets and deferred outflows of resources exceeds its liabilities and deferred inflows of resources at the close of the 2 0 1 5- 1 6 fiscal year by $ 1 . 0 3 6 billion (Net Position). Of this amount $ 3 4.0 million (Unrestricted Net Position) is designated to be used to meet ongoing obligations to citizens and creditors; $ 1 45 .7 million is restricted for capital proj ects, debt service and legally segregated taxes, grants, and fees; and $ 8 56.8 million is invested in capital assets. The Unrestricted Net Position reflects the inclusion of a Net Pension Liab ility of $56.9 million in accordance with Governmental Accounting Standards Board (GASB) Statement No. 68 -Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27. As of June 3 0, 20 1 6, the governmental fulld s reported combined fund balances of $ 1 5 2 . 0 million, of which $ 1 46. 1 million is available to meet the City' s current and future needs (Restricted, Committed, Assigned, and Unassigned balances) . As of June 3 0, 20 1 6 the fund balance for the General Fund was $ 40 . 7 million of which $5 . 9 million is designated as Non-Spendable for items such as deposits, prepaid assets, inter-fund advances, and inventory. Assigned fund balance was $ . 4 million, designated for items such as economic revitalization and public facilities oversizing, and the unassigned balance was $34.4 million. OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT The Management' s Discussion and Analysis is intended to serve as an introduction to the C ity' s basic financial statements which are comprised of the following sections: 1 ) Introductory Section, which includes the Transmittal Letter and general information, 2) Management's Discussion and Analysis, 3 ) The Basic Financial Statements, which include the Government-wide and the Fund Financial Statements, along with the Notes to these financial statements, 4) Required Supplemental Information, 5 ) Combining Statements for Non-major Governmental Funds and Internal Service Funds, 6) Statistical Information 5 The Basic Financial Statements The Basic Financial Statements are comprised of the Government-wide Financial Statements and the Fund Financial Statements. These two sets of financial statements provide two different views of the City' s financial activities and financial position. Government-wide Financial Statements The Government-wide Financial Statements provide a longer-term view of the City's activities as a whole and are presented in a manner similar to a private-sector business. These statements ar� comprised of: Statement ofNet Position -Presents information on all City assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference between them reported as Net Position. Over time, increases or decreases in Net Position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. Statement ofActivities -Presents information reflecting any change in the government's net position during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs (regardless of the timing of related cash flows). Thus revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation and compensated time leaves). Both of the Government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (government 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) . • Governmental activities -All of the City's basic services are considered to be governmental activities, including general government, public safety, public ways and facilities/transportation, public works, and culture and leisure. These services are supported by general city revenues such as taxes, and by specific program revenues such as developer fees. The City ' s governmental activities include not only the City of Tracy (known as the primary government), but also the activities of the Tracy Operating Partnership Joint Powers Authority, S outh County Fire Authority and Tracy Public Financing Authority, which are controlled by and dependent on the City. While they are separate legal entities, City Council serves in separate sessions as the governing body of the Tracy Operating Partnership Joint Powers Authority and the Tracy Public Financing Authority and the City is financially accountable for those entities as well as the South County Fire Authority. The financial activities of all three entities have been aggregated and merged (termed "blended") with those of the City in the accompanying financial statements. Pursuant to ABX 126 ("AB 26"), approved by Governor Brown on June 28, 20 1 1 and upheld by the California State Supreme Court on December 29,20 1 1 , the Tracy Community Development Agency ("Agency") was dissolved on January 3 1 , 2 0 1 2 . The former Agency is now administered under the name of Successor Agency to the Community Development Agency of the City of Tracy. The activities of the Successor Agency can be found in the Fiduciary Fund Section of the F inancial Statements . • B usiness-type activities -All of the City' s enterprise activities are reported here, including water, wastewater, drainage, solid waste, transit, and airport. Unlike governmental services, these services are supported by charges paid by users based on the amount of the service they use. 6 Fund Financial Statements The Fund Financial Statements report the City's operations in more detail than the Government-wide Statements and fo cus primarily on the short-term activities of the City's General Fund and other maj or funds . The Governmental Fund Financial Statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt and other long-term amounts . Enterprise and Internal Service Fund Financial Statements are prepared on the full accrual basis and include all their assets, deferred outflows of resources . liabilities and deferred inflows of resources, both current and long­ term. Each maj or fund is presented individually, with all non-maj or funds summarized and presented only in a single column. Subordinate schedules present the detail of these non-major funds. Major funds present the maj or activities of the City for the year, and may change from year to year as a result of changes in the pattern of the City' s activities . A "fund" i s a grouping o f related accounts that is used to maintain control over resources that have been segregated for specific activities and obj ectives . All of the City's funds can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. • Governmental Funds -These funds are used to account for essentially the same functions reported as governmental activities in the Government-wide Financial Statements. Governmental Fund F inancial Statements focus on near-term inflows and outflows of spendable resources and are therefore prepared on the modified accrual basis. Capital assets and other long-lived assets, along with long-term liabilities, are not presented in the Governmental Fund Financial Statements . The C ity of Tracy has 34 governmental funds of which 8 are considered major funds for presentation purposes. Each maj or fund is presented separately in the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund B alances. The financial information for the remaining non-maj or governmental funds is combined into a single, aggregated presentation. • Proprietary Funds -The City maintains two different types of proprietary funds; Enterprise Funds and Internal Service Funds. Enterprise Funds are used to report the same functions presented as "business-type activities" in the Government-wide Financial Statements . Internal Service Funds account for the financial activity of the C ity's central services departments, vehicle and equipment replacement, central garage, building maintenance, and self-insurance . Financial statements for proprietary funds are prepared on the full accrual basis and include all their assets and liabilities, current and long-term. Since the City's Internal Service Funds provide goods and services only to the City's governmental activities, their activities are reported only in total at the fund level . Internal Service Funds may not be maj or funds because their revenues are derived from other City funds. These revenues are eliminated in the City-wide financial statements and any related profits or losses are returned to the activities which created them. • Fiduciary Funds -These funds are used to account for resources held for the benefit of parties outside the government. Fiduciary Funds are not reflected in the Government-wide Financial Statements because the resources of those funds are not available to support the City's own programs. The accounting used for Fiduciary Funds is similar to that used for Proprietary Funds . With the dissolution of the Community Development Agency per ABX 126 and AB 1 484, the activities of the Successor Agency to the Tracy Community Development Agency are reported as a Private Purpose Trust Fund in the Fiduciary Fund section. 7 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. Comb ining Statements This section of the report includes additional detailed information about non-maj or governmental, internal service and agency funds. Required Supplemental Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the financial activities of the City. GOVERNMENT-WIDE FINANCIAL ANALYSIS -As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City, combined net position (government and business-type activities) totaled $ 1 .03 6 billion at the close of the fiscal year ended June 3 0, 2 0 1 6. This is an increase of $23 million from June 3 0, 20 1 5 . Net Position The following table reflects the Summary of Net Position for the fiscal year ended June 3 0, 20 1 6 with comparative data for the fiscal year ended June 3 0, 20 1 5 . Summary o f Net Position at June 30 (in thousands of dollars) Governmental Business-Type Activities C ash and Investments Other Assets Capital Assets Total Assets Total 20 1 5 $ 1 76,3 82 47,926 549,624 773 ,572 20 1 6 $ 44,475 6,764 340,374 3 9 1 ,6 1 3 20 1 5 $ 37,874 9,045 353,658 400,577 20 1 6 $ 208, 1 44 66,58 1 9 1 6,839 1 , 1 9 1 ,564 7,223 6,405 754 577 7,977 6,982 26, 174 77,201 1 03,375 23, 1 1 5 76,8 7 1 99,986 6,004 42,729 48,733 9,2 14 44,475 53,689 32, 1 78 1 1 9,930 1 52, 1 0 8 32,33 0 1 2 1 ,346 1 53 ,675 9,848 12,8 1 5 1 ,042 1 ,406 1 0,890 14,22 1 553,9 1 3 1 45,380 (5,343) 526,467 1 52,3 80 (1 1 ,67 1 ) 3 02,887 347 39,357 3 14,492 346 3 1 ,22 1 856,80 1 145,728 34,0 1 3 840,959 1 52,726 1 9,550 Deferred Outflows Related to Pensions Current Liabilities Non-Current Liabilities Total Liabilities Deferred Inflows Related to Pensions Net Investment in Capital Assets Restricted Unrestricted Total Net Position Activities 20 1 6 $ 1 63,669 59,8 17 576,465 799,59 1 $ 693 ,950 $ 667, 1 76 $ 8 342,592 $ 346,059 $ 1 ,036,543 20 1 5 2 14,255 56,972 902,922 1 , 1 74, 1 59 $ $ 1 ,0 1 3 ,235 The City' s Government-wide Net Position as of June 3 0, 2 0 1 6, comprised the following: • Cash and investments comprised of $203 .2 million in the city treasury and $4 .9 million of restricted cash held by fiscal agents . This represents a decrease of $4. 5 million in restricted cash and investments. The decrease is primarily attributable to capital projects activity. • Governmental receivables were comprised of $2 1 .2 million of current receivables and $ 3 2 . 7 million of long-term receivables. Long-term receivables are primarily related to grants and loans provided by the former Community Development Agency designed to encourage the construction of or improvement to low-to-moderate-income housing. The grants and loans have varying repayment terms and interest rates. • Net capital assets of $9 1 6 . 8 million include the C ity's infrastructure in addition to all other City assets. • Restricted Net Position, totaling $ 1 45 .4 million, is restricted for capital projects ($ 1 04.4 million), low-moderate income housing proj ects ($ 1 6 . 5 million), debt service ($ 1 0 .0 million), and $ 1 4 . 5 million may b e spent o n other projects as specified b y funding source restrictions . • Unrestricted Net Position totals $34.0 million and is designated to be used to finance day to day operations without constraints established by debt covenants or other legal requirements or restrictions. While these assets are technically unrestricted, most of these assets are committed or assigned for a specific use. The negative unrestricted balance of $ 5 . 3 million in Governmental Activities and the decrease in the restricted balance of Business-type Activities reflects the prior year implementation of GASB Statement No. 68 and the related Net Pension Liability of $ 5 6 . 8 million. The Change in Net Position expressed as the change in revenues and expenses through June 3 0, 2 0 1 6 is further reflected in the Statement of Changes in Net Position. 9 Statement of Changes in Net Position Fiscal Year Ended June 30 (in thousands of dollars) Governmental B usiness-type Activities Activities Totals 2016 20 1 5 20 1 6 20 1 5 $ 1 2,821 $ 1 1,136 $ 52,982 $ 5 1 ,037 $ 65,803 $ 62, 1 73 1 2,8 1 1 1 3 ,097 2,04 1 1 ,608 1 4,852 1 4,705 Capital Grants and Contributions 3 7,084 40,45 1 3,302 8,652 40,385 49, 1 03 Total Program Revenues 62,7 1 6 64,684 5 8,325 6 1 ,297 1 2 1 ,04 1 1 25,98 1 1 9,63 8 2 9,709 1 7,709 29,3 12 1 9,63 8 29,708 1 7,709 29,3 12 (6 1 0) 1 ,957 5, 1 08 2,583 20 1 6 20 1 5 Revenues Program Revenues: Charges for S ervices Operating Contributions and Grants General Revenues : Property Taxes Other Taxes Other General Revenues and Transfers Special Item Total General Revenues and Special Item Total Revenues 5,7 1 7 626 3 , 1 62 3 , 1 62 5 1 ,899 48,978 5,7 1 7 626 54,454 49,603 1 1 4,6 1 5 1 1 3,662 64,042 6 1 ,923 1 75,495 1 75,584 1 3 ,629 2 1 ,922 1 5,936 8,794 23,081 3, 134 1 ,345 7,907 2 1 ,556 1 6,005 7,667 1 9,905 3 ,289 1,337 1 3 ,629 2 1 ,922 1 5,93 6 8,794 23,08 1 3,134 1 ,345 7,907 2 1 ,556 1 6,005 7,667 1 9,905 3,289 1,337 23,6 1 0 1 7,040 1 9,477 3 ,436 703 2,967 22,659 1 6,522 20,899 3 ,485 775 3 , 1 69 23,6 1 0 1 7,040 1 9,477 3,436 703 2,967 1 44,899 Expenses General Government Police Fire Development & Engineering Public Works Parks & Community Services Interest on Long-term Debt Unallocated Depreciation 22,659 1 6,522 20,899 3,485 775 3 , 1 69 Water Wastewater Solid Waste Storm Drainage Airport Transit Total Expenses Change in Net P osition Net Position, B eginning Net Position, Ending 87,841 77,666 67,509 67,233 1 55,350 2 6,774 3 5,996 (3,467) (5,3 1 0) 23,307 3 0,685 667, 1 76 63 1 , 1 80 3 46,059 3 5 1 ,369 1 , 0 1 3,235 982,550 $ 693,95 1 $667, 1 76 $ 342,592 $ 346,059 $ 1 ,036,543 $ 1 , 0 1 3,235 10 Revenues Total governmental activity revenues increased by $953 thousand. This increase is primarily attributable to increased property taxes and other revenue. Expenses Expenses for the City totaled $ 1 5 5 . 3 million and $ 1 44.9 million for the years ended June 3 0, 20 1 6 and 2 0 1 5 , respectively. Governmental activities incurred $ 8 7 . 8 million of expenses while business-type activities incurred $67 . 5 million. Of the Governmental Activities,'the largest expenses were in Public S afety ($3 7 . 9 million), Public Works ($23 . l million), and General Government ($ 1 3 .6 million) . Governmental Activities The net cost of each of the City's largest programs associated with Governmental Activities is tabled below. These programs include general government, public safety, public works, culture and leisure, and interest and fiscal charges . Net cost is defined as total program cost less the revenues generated by those specific activities. For most governmental programs expenses have been greater than the revenue generated to support them. Cost of Services by P rogram - Governmental Activities 30, 2016 (in thousands of dollars) Fiscal Year Ended June Net Revenue/(Expense) From S ervices 20 1 6 20 1 5 Program ($ 1 0,53 0) ($ 4,0 5 7) (29,266) (27,923 ) 1 7,770 22, 1 3 2 Culture and Leisure ( 1 ,754) ( 1 ,796) Interest and Fiscal Charges ( 1 ,345) ( 1 ,3 3 7) ($ 25,125) ($ 12,981) General Government Public Safety Public ways and facilities/transportation Total Net Revenue/(Expense) Net revenues/expenses to General Government increased by $ 6 . 5 million, largely due to increased non departmental expenses of $4.0 million due to the remittance of $4 . 5 million to the Successor Agency to satisfy the demand of the State Controller' s Office related to the Non-Housing Due Diligence Review as discussed in Note 1 6A. 11 Business-Type Activities Changes in Business-Type Activities by Program 30 (in thousands of dollars) Fiscal Year Ended June Business-type Activities 20 1 6 20 1 5 Net Revenue (Expense) from Business-type A ctivities Water ( $ 8 , 8 5 8) ($ 5 , 9 5 1 ) Wastewater (2, 672) (2, 5 0 8) Airport Solid Waste 1 , 846 3,3 5 7 4,2 5 7 2,878 (958) (93 7) (2,799) (2,776) ($ 9,184) ($ 5,937) Transit Drainage Total Business-type Activities Net revenues of Business-type Activities decreased $ 3 .2 million as a result of decreased revenues related to Charges for combined with an increase in operating expenses of $ . 6 million. FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance related legal requirements . The focus of the City's Governmental Funds is to provide information on near-term inflows, outflows, and balances of spending resources . Such information is useful in assessing the City's financing requirements. The classification of spendable fund balances to committed, assigned, and unassigned, is intended to be helpful in measuring the resources available for spending at the end of the fiscal year. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. At June 3 0 , 2 0 1 6, the City's governmental funds reported combined fund balances of $ 1 52 .0 million, which is a decrease of $ 1 1 . 5 million compared with the prior year. This decrease is largely attributable to the $ 1 4 . 1 million net change in fund balance in the General Projects and Tracy Infrastructure Master Plans Fund. Governmental fund revenues were $ 1 1 0 . 4 million this year. The General Fund accounted for 5 5 % of this total. Expenditures were $ 1 20 . 0 million this year. Of this total, $ 5 5 . 7 million was in the General Fund. 12 General Fund At June 3 0, 20 1 6, the General Fund balance was comprised of $ 5 . 9 million in non-spendable balances, $.4 million of assigned balances and $34.4 million in unassigned balances. Fund balances have been classified in accordance with GASB 5 4 . While amounts have been categorized as unassigned, they may be informally earmarked by the City Council for specific purposes . Housing Successor Fund On June 2 8, 20 1 1 the State of California adopted ABx l 26, amended by AB 1 484 on June 27, 20 1 2, which dissolved redevelopment agencies as of January 3 1 , 2 0 1 2 . All assets of the former Redevelopment Agency were transferred as prescribed by law to either the Housing Successor or to the Successor Agency. The City of Tracy elected to become the Housing Successor and established the Housing Successor Special Revenue Fund to account for the housing assets and activities formally provided by the Tracy Community Development Agency. As of June 3 0, 20 1 6, the fund balance of the Housing Successor Special Revenue Fund was comprised of $.9 million in cash and investments and $2 . 8 million in loans to the Successor Agency. TEA Grant Fund The TEA Grant Fund had revenues of $7.9 million and expenses of $ 1 0.3 million, all for capital projects . The fund balance was ($2.9) million and decreased over prior year balance of ($.6) million. South County Fire Authority Fund The South County Fire Authority Fund had revenues of $ 6 . 5 million and expenses of $5 . 9 million. The fund balance of $ 1 . 8 million was an increase of $ . 7 million over the prior year. Community Development Fees Special Revenue Fund The Community Development Fees Special Revenue Fund had revenues of $ 6 . 8 million and expenses of $9 . 1 million. The activities in this fund were reported in the General Fund prior to July 1 , 20 1 5 . 2008 Lease revenue Bonds Fund The fund balance of the 2008 Lease Revenue B ond Fund remained essentially unchanged at $.7 million over the prior year. General Projects Fund The General Projects Fund had revenues of $3 .3 million and expenses of $ 1 4 . 1 million. The fund balance of $ 6 . 7 million was a decrease of $ 8 . 4 million over the prior year. Tracy Infrastructure Master Plan Fund The Tracy Infrastructure Master Plan Fund had revenues of $ . 9 million and expenses of $ 7 . 5 million. The fund balance of $ 1 4.3 million was a decrease of $ 5 . 7 million over the prior year. 13 Proprietary Funds The City's Proprietary Funds provide the same type of information found in the Government-Wide Financial Statements, but in more detail. The City's Proprietary Funds are comprised of the Water Utility Fund, the Wastewater Utility Fund, Drainage Fund, Solid Waste Fund, Municipal Airport and Municipal Transit Funds. Proprietary Fund net position totaled $342 .6 million at June 3 0, 20 1 6 . Proprietary operating revenues were $53 . 0 million and operating expenses were $ 6 6 . 0 million in fiscal 2 0 1 6 . Water Fund The net position of the Water Fund is $ 1 45 .5 million. Approximately ($.3) million of the Fund's net position was unrestricted at the fiscal year end with a net investment in capital assets of $ 1 45 . 8 million. Activities for the year were comprised of $ 1 3 . 1 million in operating revenues for the current year and $22 . 5 million in operating expenses. The decrease in revenues is a direct result of mandatory conservation efforts to meet current State mandates . Wastewater Fund The net position of the Wastewater Fund is $ 1 1 7 . 5 million for the current year. Operating revenues for fiscal year 20 1 6 were $ 1 3 .6 million, an increase of 3 . 8% from fiscal year 20 1 5 . Operating expenditures decreased by $ 0 . 5 million or 3 .2% from fiscal year 20 1 5 . A total of $ 89 . 3 million of the fund's net position is invested in capital assets, with $27 . 9 million unrestricted. Solid Waste Fund Operating revenues for fiscal year 20 1 6 totaled $25 . 1 million. Operating expenses were $20 . 9 million. The unrestricted net position was $ 1 4 . 7 million at year-end. Drainage Fund The net position of the Drainage Fund is $46 .2 million for the current year. Operating revenues for fiscal year 2 0 1 6 were $ . 6 million, with no significant change from fiscal year 20 1 5 . A total of $46 . 0 million of the fund's net position is invested in capital assets, with $ . 2 million unrestricted. A irport Fund Operating revenues for the Airport Fund were $ .4 million. A total of $ 8 .7 million of the fund' s net position is invested in capital assets, with ($3 . 5 ) million unrestricted. Transit Fund The operating revenue for this fund totaled $ . 1 million as of June 3 0, 2 0 1 6 . Operating expenses were $3 .2 million, an increase of $.2 million over the prior year. The result was a loss of $ 1 .0 million before contributions and transfers . A total of $ 1 3 .0 million of the fund ' s net position is invested in capital assets, with $ . 3 million unrestricted. 14 GENERAL FUND BUD GETARY IDGHLIGHTS The final amended budget for the General Fund totaled $59.2 million. The difference in appropriations between the original budget and the final amended budget was $5 .3 million, largely due to increased appropriations for the non departmental expenses of $4.0 million related to the remittance of $4 . 5 million to the Successor Agency to satisfy the demand of the State Controller' s Office related to the Non-Housing Due Diligence Review as discussed in Note 1 6A. As the economy continues to recover, General Fund revenues exceeded their budgeted forecasts by $4.9 million. As previously noted, Tax Revenue collected for the City surpassed proj ections by $2.4 million. At the end of the fiscal year, the total actual expenses of the General Fund were $3 .5 million under the total amended budget. $ . 9 million of this variance was attributable to lower public safety expenses, primarily related to delays in hiring new personnel. An additional $ 1 .0 million was attributable to public works related to delays in capital projects engineering. The remaining variance resulted from General Fund operating departments prudently operating under budget. 15 CAPITAL ASSETS At the end of fiscal 2 0 1 6 the City had $9 1 6 . 8 million, net of depreciation, invested in a broad range of capital assets used in governmental and business type activities, as shown in below. Capital Assets are discussed in more detail in Note 6 in the Notes to the Basic Financial Statements. Capital Assets Fiscal Year Ended June 30 (in thousands of dollars) Governmental Business-type Activities Activities 20 1 5 20 16 Non-depreciable assets Land $ Streets and Roads Construction in-Progress Total 175,6 1 0 227,666 38,666 44 1 ,942 $ 20 1 5 2016 1 7 1 ,93 8 222,927 20,650 4 1 5,5 1 5 $ Totals 1 1 ,871 1 1 ,84 1 1 7,0 1 3 28,884 13,624 25,465 1 87,48 1 227,666 5 5,679 470,826 $ 20 1 5 2016 $ $ 1 83,779 222,927 34,274 440,980 Depreciable assets Buildings and 87,087 85,453 1 3 5,265 1 35,266 222,352 220,7 1 9 88,695 82,853 9 1 ,093 90,205 1 79,788 173,05 8 27,583 20,877 30,9 1 0 13,557 1 ,053 27,5 82 1 8,548 29,839 1 3 ,356 972 44,79 1 25 1 ,760 76,745 44,6 1 7 248,375 76,745 27,583 20,877 75,70 1 265,3 17 77,978 27,582 1 8,548 74,456 26 1 ,73 1 77,7 1 7 ( 1 3 5,239) (124,854) (28 8, 1 64) (267,0 1 5) (423 ,403) (39 1 ,869) 1 34,523 1 3 3,749 3 1 1 ,490 328, 1 93 446,013 46 1 ,943 Improvements Improvements Grading, Curbs & Gutters Sidewalks & Driveway Approaches Traffic S ignals Equipment Infrastructure Intangible Assets Less : accumulated depreciation Net depreciable assets Total Capital Assets $ 576,465 $ 549,264 $ 340,374 $ 3 53,658 $ 9 1 6,839 $ 902,922 The City depreciates all its capital assets over their estimated useful lives, except for roads, which are reported using the Modified Approach. The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all users. Additional information on depreciable lives may be found in Note 6 to the financial statements . The Modified Approach requires the City to employ an asset management system that maintains a current inventory of these assets, estimates annual costs to maintain them, and assesses the condition of the assets in a replicable way. The City has elected to use the modified approach discussed above with respect to its roads, most of which are relatively new. The City' s policy is to maintain these roads at an overall condition index level averaging 73 %, instead of providing depreciation. During the fiscal year 20 1 6, the City expended $2, 1 86,853 to preserve its roads, and the condition index level was 7 1 . The City estimates that it will be required to expend approximately $5,05 7,022 in fiscal year 20 1 7 to maintain its roads and return them to a condition level of 73 . 16 DEBT SERVICE ADMINISTRATION Each of the City' s debt issues is discussed in detail in Note 7 in the Notes to the Basic Financial Statements. At the end of the year, the City had total long-term debt outstanding of $22 . 6 million in debt associated with Governmental Activities and $3 7 . 8 million in debt associated with Business-Type Activities. Outstanding Debt Fiscal Year Ended June 30 (in thousands of dollars) Business-type Governmental Activities Activities 20 1 5 20 1 6 2008 Lease Revenue B onds 2007 Lease Revenue B onds-A 2007 Lease Revenue B onds-B $ 1 8,650 2,690 1 ,080 $ C apital Leases 132 P G&E LED Street Light Program 2004 Wastewater Revenue B onds 1 8,845 2,690 1 , 1 90 826 1 95 $ Totals 20 1 5 20 1 6 0 $ 25,2 1 5 2016 0 $ 1 8,650 2,690 1 ,080 20 1 5 $ 1 32 25,2 1 5 25,935 1 8,845 2,690 1 , 1 90 826 195 25,935 State o f C alifornia-Department of 12 Transportation Loan 12 State of C alifornia-Department of Total Long Term Liabilities 1 3 ,565 12,6 1 9 Health S ervices Loan $ 22,552 $ 23 ,746 $ 37,834 $ 3 9,5 12 1 2,6 1 8 $ 60,3 86 1 3 ,565 $ 63,258 ECONOMIC OUTLOOK AND MAJOR INITIATIVES As reflected in this fiscal report, the City is experiencing the positive effects in an improved economic climate. Property values have continued to increase and sales tax is strong and has surpassed the highs established in 2007. These positive changes have enabled the City to replenish its reserves for the third consecutive year. However, the City must continue its path of fiscal prudence as it prepares for future increases to CalPERS pension costs. More detail about the City's economic outlook is discussed in the accompanying transmittal letter. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City's finances. Questions about this report should be directed to the Finance Department, at 3 3 3 Civic Center Plaza, Tracy, CA 9 5 3 7 6 . 17 TH I S PAG E I NTENTI O NALLY L E FT B LAN K CITY OF TRACY STATEMENT OF NET POSITION AND STATEMENT OF ACTMTIES The Statement of Net Position and the Statement of Activities summarize the entire City' s financial activities and financial position. The Statement of Net Position reports the difference between the City' s total assets and deferred outflows of resources and the City' s total liabilities and deferred inflows of resources, including all the City ' s capital assets and all its long-term debt. The Statement o f Net Position summarizes the financial position of all of the City ' s Governmental Activities in a single column, and the financial position of all of the City' s Business-type Activities in a single column; these columns are followed by a Total column that presents the financial position of the entire City. The City' s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Proj ects and Debt Service Funds. Since the City' s Internal S ervice Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City' s Business-type Activities include all its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City' s net position. It is also prepared on the full accrual basis, which means it includes all the City' s revenues and all its expenses, regardless of when cash changes hands. This differs from the "modified accrual" basis used in the Fund fmancial statements, which reflect only current assets, current liabilities, deferred outflows/inflows of resources, available revenues and measurable expenditures . The Statement of Activities presents th e City' s expenses first, listed b y program, followed b y the expenses of its business-type activities. Program revenues-that is, revenues which are generated directly by these programs-are then deducted from program expenses to arrive at the net expense of each The City' s general revenues are then listed in the governmental and business-type program. Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position. Both of these Statements include the financial activities of the City, Tracy Operating Partnership Joint Powers Authority, S outh County Fire Authority and the Tracy Public Financing Authority, which are legally separate but are component units of the City because they are controlled by the City, which is fmancially accountable for the activities of these entities. 19 T H I S PAG E I NT E NT I O NALLY LEFT BLAN K CITY OF TRACY STATEMENT OF NET POSITION JUNE 30, 2016 ASSETS Cash and investments (Note 3) Restricted cash and investments (Note 3) Cash and investments with fiscal agents (Note 3) Accounts receivable Inventory Interest receivable Prepaid items Internal balances (Note 4) Deposits (Note 5I) Loans receivable (Note 5) Advances to CDA successor agency (Note 5) Capital assets, not being depreciated (Note 6) Capital assets, being depreciated, net of accumulated depreciation (Note 6) Total Assets DEFERRED OUTFLOWS OF RESOURCES Related to pensions (Note 1 0) LIABILITIES Accounts payable Accrued interest payable Deposits payable Unearned revenue Compensated absences (Note l G) : Due within one year Due in more than one year Claims liabilities (Note 13): Due in more than one year Long-term debt (Note 7): Due within one year Due in more than one year Net pension liability (Note 10) Net OPEB obligation (Note 1 1) Governmental Activities Business-Type Activities $ 1 59, 1 1 0,85 1 6 1 ,671 4,496,776 2 1 , 1 77,23 1 $44, 127,5 12 347,627 10,40 1 , 828 570,994 24 1 ,00 1 1 63 ,275 (4,6 1 3,057) Total $203 ,23 8,363 61,67 1 4,844,403 3 1 ,579,059 570,994 579,465 165,204 33 8,464 1 ,929 4,6 13,057 1 ,000,000 29,882,972 2,803 ,520 44 1 ,942,634 28,883,636 1,000,000 29,882,972 2,803,520 470,826,270 1 34,522,7 14 3 1 1,490,25 1 446,0 12,965 799,95 1,819 391,613,067 1 , 1 9 1 ,564,886 7,222,746 754,572 7,977,3 1 8 7,757,0 10 3 12,29 1 1 5,026,9 13 1 ,693 ,006 2,323,525 97,060 1,63 1 , 1 3 1 57,489 10,080,53 5 409,35 1 16,65 8,044 1 ,750,495 986,92 1 2,049,958 1 8 1 ,678 429,445 1 , 1 68,599 2,479,403 1 12,494 1 12,494 398,279 22, 153,552 50,700,669 2, 1 84, 1 14 1,713,269 36, 120,63 8 6, 178,935 2, 1 1 1 ,548 58,274, 190 56,879,604 2, 1 84, 1 14 103,375,207 48,733, 1 70 152, 1 08,377 9,848,59 1 1 ,04 1 ,986 10,890,577 NET POSITION (Note 9) Net investment in capital assets 553,9 13,517 302,887,607 856,801, 124 Restricted for: Debt service Public safety Streets and roads Community development Special districts Projects Housing 9,948,9 1 8 3 ,258,374 4,328,172 1 ,550, 1 13 5,3 50,908 1 04,4 14,809 16,529,284 347,627 10,296,545 3,258,374 4,328,172 1 ,550, 1 1 3 5,3 50,908 104,4 14,809 16,529,284 1 45,3 80,578 347,627 145,728,205 39,357,249 34,0 13,92 1 $342,592,483 $ 1 ,036,543 ,250 Total Liabilities DEFERRED INFLOWS OF RESOURCES Related to pensions (Note 10) Total Restricted Net Position (5,343 ,328) Unrestricted $693 ,950,767 Total Net Position See accompanying notes to basic financial statements 21 CITY OF TRACY STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 20 1 6 Functions/Programs Governmental Activities: General government Economic development General government Finance Non-departmental Public safety Police Fire Public ways and facilities/transportation Development and engineering Public works Culture and leisure Cultural arts Parks and community services Interest and fiscal charges Total Governmental Activities Business-type Activities: Water Wastewater Airport Solid waste Transit Drainage Total Business-type Activities Total Charges for Services Expenses Program Revenues Operating Grants and Contributions $ 125 3 60,046 $6 8 1 ,279 $983,583 4,004,676 3 ,327,664 5,3 12,87 1 495 , 1 02 2 1 ,92 1 ,980 1 5,935,860 73 1 ,02 1 278,654 1 ,274,6 1 6 6,260,744 8,793 ,79 1 23,080,744 6,8 1 6,305 3 ,093,302 4,594,569 1 ,336, 1 76 1 ,798, 155 1 ,345,075 3 00,305 746,246 87,840,575 12,82 1 , 106 22,658,739 1 6,52 1 ,797 775,469 20,898,944 3 , 1 68,500 3,485,476 13,101, 168 1 3 , 6 1 5,963 402,962 25, 1 56, 1 94 96,47 1 608,929 67,508,925 $ 1 55,349,500 $ 1 ,427,295 135, 120 46,892 3 92,427 34,748,739 333 ,054 12,8 1 1 ,208 3 7,083 ,527 699,534 233 ,474 2,2 1 9, 1 07 2,04 1 , 1 84 72,477 77,743 52,98 1 ,687 2,04 1 , 1 84 3,302,335 $65,802,793 $ 1 4,852,392 $40,3 85,862 General revenues : Taxes: Property taxes Franchise taxes Sales and use taxes Transient occupancy tax Business license tax Transfer tax Motor vehicle in lieu, unrestricted Gain from sale of property Other revenue Interest income Transfers (Note 4) Special Item: Transfer of capital assets from Successor Agency (Note 6A) Total general revenues, transfers and special item Change in Net Position Net Position-Beginning Net Position-Ending See accompanying notes to basic fmancial statements 22 Capital Grants and Contributions Net (Expense) Revenue and Changes in Net Position Governmental Activities Business-type Activities Total $ 1 , 125, 1 1 6 (3,644,630) (3,327,664) (4,682,649) $ 1 , 125, 1 1 6 (3,644,63 0) (3,327,664) (4,682,649) ( 1 9,869,45 1) (9,396,462) ( 1 9,869,45 1 ) (9,396,462) ( 1 ,585,059) 1 9,355,866 ( 1 , 585,059) 1 9,355,866 (1 ,03 5,87 1) (7 1 8,855) {1 ,345,0752 ( 1 ,035,87 1 ) (7 1 8,855) {1 ,345,0752 {25 , 124,7342 {25, 124,734) (25, 124,734) 1 9,63 8,06 1 2,775,984 24,37 1 ,002 1 ,378,802 8 14,2 1 0 3 68,922 34,4 1 6 829,326 2,667,973 999,506 (5, 140,999) ($8,858,037) (2,672,360) 1,846,600 4,257,250 (958,368) {2,798,8042 (8,858,03 7) (2,672,3 60) 1 , 846,600 4,257,250 (95 8,3 68) {2,798,8042 {92 1 83 , 7 1 92 {9, 1 83 ,7 1 92 (9, 1 83,71 9) (34,308,453 ) 9,879 15,301 550,862 5,140,999 1 9,638,06 1 2,775,984 24,37 1 ,002 1 ,378,802 8 14,2 1 0 368,922 34,4 1 6 839,205 2,683 ,274 1 ,550,3 6 8 3 , 1 62,0 1 7 3 , 1 62,0 17 5 1 ,899,220 5,71 7,04 1 57,6 1 6,26 1 26,774,486 (3,466,678) 23,307,808 667, 1 76,28 1 346,059, 1 6 1 1 , 0 1 3 ,235,442 $69329502767 $342,592,483 $ 1203625432250 23 TH I S PAG E I NT E NTIO NALLY LEFT BLAN K FUND FINANCIAL STATEMENTS MAJOR GOVERNMENTAL FUNDS The funds described below were determined to be Maj or Funds by the City in fiscal 201 6 . Individual non­ maj or funds may be found in the Supplemental Section. GENERAL FUND The General Fund is used for all the general revenues of the City not specifically levied or collected for other City funds and the related expenditures . The General Fund accounts fo r all financial resources o f a governmental unit which are not accounted for in another fund. HOUSING SUCCESSOR This fund was established to account for housing activities assumed by the City from the former Tracy Commuriity Development Agency and revenues and expenditures related to the low and moderate income housing program. TEA GRANT Established to account for the revenues from transportation efficiency act grant proj ects. SOUTH COUNTY FIRE A UTHORITY This fund was established to account for revenues and liabilities of the Authority, which is a Joint Powers Agreement between the City and the Tracy Rural Fire District. The Authority is responsible for fire prevention and suppression in parts of the City and in surrounding unincorporated areas. COMMUNITY DEVELOPMENT FEES This fund was established to account for revenues and expenditures of the Building, Engineering and Planning Divisions. These funds were added in FY 1 5- 1 6 to better account for these specific activities and restricted revenue sources. Prior to FYI 5 - 1 6, these activities were in the General Fund. 2008 LEASE REVENUE BONDS FUND Established to accumulate funds for the payment of debt service on the 2008 lease revenue bonds that were originally issued to reflect prior certifications of participation and finance construction of certain City facility. GENERAL PROJECTS Established to account for capital proj ects financed through transfers from the General Fund. TRA CY INFRASTR UCTURE MASTER PLANS The Tracy Infrastructure Master Plans were approved in 20 1 2 and 20 1 3 and cover all subsequent new development in areas of the City not covered by their own fmancing plan. Capital development fees are levied on developments in these areas and expenditures for various capital facilities to support the developments are accounted for in 6 functional categories. 25 CITY OF TRACY GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 20 16 Housing Successor General TEA Grant South County Fire Authori� Community Development Fees ASSETS Cash and investments (Note 3) Restricted cash and investments (Note 3) Cash and investments with fiscal agents (Note 3 ) Accounts receivable Interest receivable Due from other funds (Note 4) Prepaid items Deposits (Note 5I) Loans receivable (Note 5) Advances to CDA successor agency (Note 5) Advances to other funds (Note 4) Total Assets $847,400 5 1 ,671 $29,02 1 ,46 1 6,413, 1 88 4 1 , 1 53 1 ,966,600 774 $ 1 0,5 16 $ 1 ,527, 108 $9, 1 8 1 ,264 5,946,803 1 ,262, 108 3 ,77 1 1,132,499 2,5 1 0 330 12,824, 1 83 2,803,520 524,443 5 , 1 22,537 5,366,594 $ 16,529,284 $43,334,2 13 $5,95723 19 $7,9 1 5,524 $10,3 14,093 $95,073 5,1 50,000 $60,866 $ 1 , 124, 103 1 8,838 5 , 1 22,537 9,3 1 6,260 LIABILITIES Accounts payable Due to other funds (Note 4) Deposits payable Advances from other funds (Note 4) Unearned revenue Total Liabilities $ 1 ,601 ,937 754,686 3022723 12359,794 2,659,346 5,245,073 52202,24 1 3,655,333 902,774 3,6552333 902,774 1 1 ,800, 157 DEFERRED INFLOWS OF RESOURCES Unavailable revenue - accounts receivable Unavailable revenue - loans 192270 $ 1 2,824, 1 83 Total Deferred Inflows of Resources 19,270 12,824z183 FUND BALANCES Fund balance (Note 9): Nonspendable Prepaid items Advances Loans receivable Restricted Assigned Unassigned Total Fund B alances Total Liabilities, Deferred Inflows of Resources and Fund Balances 774 5 ,366,594 505, 1 73 330 3,705 , 1 0 1 358,44 1 34,424,6 1 5 1 , 8 1 0,509 {2,943 ,0872 40,655,597 3 ,705, 1 0 1 $43 ,334,2 1 3 $ 1 6,5292284 {2,943,0872 1 , 8 10,509 $5,957,3 19 $7,9 1 5 ,524 See accompanying notes to basic financial statements 26 {1,486,3942 {1,486,0642 $10,3 14,093 Tracy Infrastructure Master Plans Other Governmental Funds Total Governmental Funds $14,29 1 ,73 1 $87,329, 1 17 1 0,000 3 ,3 46,54 1 6, 1 43 ,3 8 1 25 1 ,6 1 2 1 ,747,454 $ 1 44,358,25 8 61,67 1 4,496,776 2 1 , 176,5 1 2 336,442 9,536,600 1 ,929 1 ,000,000 29,882,972 2,803,520 7, 1 14,048 $ 1 02,040,739 $220,768,728 2,000,000 $2, 8 1 6,523 1 7,600 2,937, 129 1 ,747,454 3 0,489 $7,443,0 1 8 5,167,600 1 5,026,9 1 3 6,869,99 1 1 ,693 ,006 3,744,5 1 6 7,549, 1 95 36!200,528 $9,200,000 3 ,750,000 2,2 1 1 ,809 8,308, 107 24,255,262 9,200,000 5,96 1 ,809 32,563,369 825 1 ,929 5,366,594 505,173 1 10, 190,830 5,946,352 29z993z953 2008 Bonds General Proj ects $665,767 $ 1 ,483,894 Lease Revenue 1 , 1 50,23 5 278,533 3 5,53 1 1 ,865 7,570,000 825 1 ,000,000 2,2 1 1 ,809 9,200,000 $9,867,632 $ 1 0,482!662 $14,327!262 $ 1 ,744,516 667,632 1 , 1 50,23 5 5,587,9 1 1 $14,327,262 88,530,09 1 {12 1 8 12 667,632 6273 8, 146 14,327,262 88,529,735 1 52,004,83 1 $9,867,632 $ 1 0 ,482,662 $14!327,262 $ 1 02z040z739 $220,768!728 27 TH I S PAG E I NTENTIO NALLY L E FT B LAN K CITY OF TRACY Reconciliation of the GOVERNMENTAL FUNDS-- BALANCE SHEET to the STATEMENT OF NET POSITION JUNE 30, 20 1 6 $ 1 52,004,83 1 Fund balances of Governmental Funds Amounts reported for Governmental Activities in the Statement ofNet Position are different from those reported in the Governmental Funds above because of the following: CAPITAL ASSETS Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds Balance Sheet. 569,223 ,53 1 ALLOCATION OF INTERNAL SERVICE FUND NET POSITION Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain activities, such as insurance and central services and maintenance to individual governmental funds. The net current assets of the Internal Service Funds are therefore included in Governmental Activities in the following line items in the Statement ofNet Position. Cash and investments Accounts receivable Prepaid Capital assets (net of accumulated depreciation) Accounts payable Compensated absences Claims and judgments payable Net pension liability and pension-related deferred outflows/inflows ofresources 14,752,593 719 2,022 7,24 1 , 8 1 7 (3 1 3 ,992) (2 1 7,827) (1 12,494) (1 ,793,540) ACCRUAL OF NON-CURRENT REVENUES AND EXPENSES Revenues which are unavailable on the Fund Balance Sheets, because they are not available currently are taken into revenue in the Statement of Activities. 32,563 ,369 LONG-TERM ASSETS AND LIABILITIES The assets and liabilities below are not due and payable in the current period and therefore are not reported in the Funds: Long-term debt Interest payable Compensated absences Net pension liability and pension-related deferred outflows/inflows ofresources Net OPEB obligation NET POSITION OF GOVERNMENTAL ACTIVITIES See accompanying notes to basic financial statements 29 (22,55 1 ,83 1 ) (3 12,29 1 ) (2,8 1 9,052) (5 1 ,532,974) (2, 1 84, 1 14) $693,950,767 CITY OF TRACY GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE FISCAL YEAR ENDED JUNE General 30, 20 16 South Community Housing TEA County Fire Development Successor Grant Authori!l'. Fees REVENUES $46,3 1 6,573 2,940,002 237,437 1 , 1 4 1 ,2 1 7 1 ,827, 1 3 8 4,833 ,574 3 92,427 1 3 5 , 120 3 24942326 Taxes Licenses, permits and fees Fines and penalties Use of money and property Intergovernmental Charges for current services Special assessments Contributions Other revenue $ 1 ,971 ,228 $525, 1 1 7 $7,927,342 4,84 1 ,037 4 040 6 1 ,3 1 7, 8 1 4 Total Revenues $9,883 6,208,237 3 1 3 ,524 525, 1 1 7 729272342 6253 1 ,644 628 16,305 EXPENDITURES Current: General government 5 8 1 ,642 3 ,670,685 3 ,429,302 5,558,520 Economic development General government Finance Non-departmental 1 84,630 7 1 3 ,770 Public safety 23 , 1 07,2 1 4 1 1 ,0 1 9, 1 60 Police Fire 5,672,596 Public ways and facilities/transportation 62 1,012 4,275, 1 44 Development and engineering Public works 8,416,366 Culture and leisure 1 ,45 1 ,658 1 ,65 8,607 252,077 Cultural arts Parks and community services Capital outlay 1 0,26 1,488 1 6,036 1 0,26 12488 52873 ,262 Debt service: 63,278 Principal Interest and fiscal charges 55,688,299 Total Expenditures 92130, 1 3 6 EXCES S O F REVENUES OVER (UNDER) 5,629,5 1 5 EXPENDITURES 525, 1 1 7 (2,334, 1 46) 658,382 (223 13283 1 ) OTHER FINANCING SOURCES (USES) Proceeds from sale of property 4) 4) Transfers in (Note Transfers (Note Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES 1 ,250,000 (3 ,877,3 5 1} 827,767 (2,62723 5 1} 827,767 3 ,002, 164 525, 1 1 7 (2,334, 1 46) 658,382 FUND BALANCES , JULY 1, 20 1 5 3 726532433 321 792984 (608,94 1} 1 , 1 52, 1 27 FUND BALANCES , JUNE 30, 20 1 6 $4026552597 $327052 1 0 1 ($22943 ,087} $ 1 , 8 1 02509 See accompanying notes to basic financial statements 30 ( 1 ,486,064) ($ 12486,064} 2008 Lease Revenue B onds $8, 1 25 400,000 408 , 1 25 General Proj ects Tracy Other Total Infrastructure Governmental Governmental Master Plans Funds Funds $483 1 ,857,929 $ 1 78,636 1 ,47 1 ,45 1 7 1 4,307 323292863 8922943 $2,80 1 ,821 3 25,263 435,397 1 ,072,780 2, 1 9 1 ,968 9, 1 8 8 1 2,398,535 3 ,438,806 2,908 $49, 1 1 8,394 5 ,236,493 672,8 3 4 2,936,24 1 20,4 1 2,6 1 4 9,997,323 1 4,976,720 3 ,573 ,926 32501 ,274 22,676,666 1 1 0,425,8 1 9 40 1 ,941 1 42,9 1 0 983,583 3 ,998,225 3 ,429,302 6,489,362 2 1 7,072 1 4 , 1 05,489 7,5 1 1,83 1 195,000 l , 1 47A69 6 1 0,076 23 ,71 7,290 1 6,69 1 ,756 4,3 16 5 ,097,23 8 9,04 1 ,694 9,3 72,3 8 2 9,309,462 1 ,45 1 ,658 1 ,658,607 4 1 ,456,3 8 3 1 1 0,000 1 74,280 3 68,278 1 ,3 2 12749 1 1 92980,269 1 4 , 1 05z489 725 1 1283 1 1 6,067,295 (934,344) ( 1 0277526 26) (6,6 1 8,888) 6,609,37 1 (9,55 4,450 ) 942,320 545,00 1 1 , 827,564 8 8 1 ,637 284,325 279,700 (4,872233 72 829,326 6,008,98 8 (82749,6882 9422320 2,372,565 8 8 12637 (4230823 1 22 (129 1 1 23 742 1 23 42,469 (8,403 ,06 1 ) (5,737,25 1) 2,3 0 1 ,059 ( 1 1 ,465,824) 6592656 1 5 , 1 4 1 ,207 20206425 1 3 8622282676 16324702655 $6672632 $6,73 8 , 1 46 $1 42327 2262 $8825292735 $ 1 5 22004283 1 7,976 31 CITY OF TRACY Reconciliation of the NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS with the CHANGE IN NET POSITION - GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 20 1 6 The schedule below reconciles the Net Change in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in Net Position of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis. NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($ 1 1 ,465,824) Amounts reported for governmental activities in the Statement of Activities are different because of the following: CAPITAL ASSETS TRANSACTIONS Governmental Funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. The capital outlay and other capitalized expenditures are therefore added back to fund balance Depreciation expense is deducted from the fund balance (Depreciation expense is net of internal service fund depreciation of $ 1 , 3 8 1 ,099 which has already been allocated to serviced funds) Assets transferred from the Successor Agency are added to fund balance 32,863,380 (9,404, 1 90) 3 , 1 62,0 1 7 LONG-TERM DEBT PROCEEDS AND PAYMENTS Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement ofNet Position. Repayment of bond principal is an expenditure in the governmental funds, but in the Statement of Net Position the repayment reduces long-term liabilities. Repayment of debt principal is added back to fund balance 368,278 ACCRUAL OF NON-CURRENT ITEMS The amounts below included in the Statement of Activities do not provide (or require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change): Postretirement benefit accrual Interest payable Net pension liability and pension-related deferred outflows/inflows of resources Unavailable revenue Compensated absences (270,757) 2,805 3,226,807 6,592,89 1 (75,326) ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY Internal Service Funds are used by management to charge the costs of certain activities, such as equipment acquisition, maintenance, and insurance to individual funds. The portion of the net revenue (expense) of these Internal Service Funds arising out of their transactions with governmental funds is reported with governmental activities, because they service those activities. Change in Net Position - All Internal Service Funds CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES See accompanying notes to basic financial statements 32 1,774,405 $26,774,486 MAJOR PROPRIETARY FUNDS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges . The City has determined all of its enterprise funds to be maj or funds in fiscal 2016 , as identified below. WA TER UTILITY FUND This fund accounts for the provision of water services to residents of the City. All activities necessary to provide such services are accounted for in this fund, including administrative, operations, capital improvements, maintenance, fmancing, and related debt service, and billing and collection. WASTEWA TER UTILITY FUND This fund accounts for the activities associated with operating and maintaining the City' s sewer and surface drainage system. All activities necessary to provide such services are accounted for in this fund including administration, operations, capital improvements, maintenance, financing, and related debt service, and billing and collection. M UNICIPAL AIRPORT FUND This fund accounts for the activities associated with the operations and maintenance of the City' s airport. SOLID WASTE FUND This fund accounts for the provision of refuse collection services to residents of the City, accomplished through a franchised operator. This fund is also used to account for the activities of the City' s recycling program. M UNICIPAL TRANSIT FUND This fund accounts for the activities associated with the operations and maintenance of the City's public transit activities, and has particular emphasis on serving the elderly and handicapped. DRAINAGE FUND Activities of the City's storm drainage operations are accounted for in this fund. 33 !: CITY OF TRACY PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 20 1 6 Enterprise Funds Wastewater Utili� Water Utili� ASSETS Current assets Cash and investments (Note 3 ) Cash and investments with fiscal agents (Note 3 ) Accounts receivable Inventory Interest receivable Prepaid expenses Total current assets Non-current assets Advances to other funds (Note 4) Capital assets, not being depreciated (Note 6) Capital assets, being depreciated (Note 6) Total non-current assets Total Assets DEFERRED OUTFLOWS OF RESOURCES Related to pensions LIABILITIES Current liabilities Accounts payable Accrued interest payable Deposit payable Due to other funds (Note 4) Unearned revenue Current portion- compensated absences Current portion- long-term debt (Note 7) Noncurrent liabilities Advances from other funds (Note 4) Loans payable (Note 7) Compensated absences Claims payable Certificates of participation payable (Note 7) Net pension liability (Note 1 0) Total noncurrent liabilities Total Liabilities DEFERRED INFLOWS OF RESOURCES Related to pensions (Note 1 0) Solid Waste Municipal Transit $28,660,972 347,627 2,324,043 $ 1 83 ,745 $ 12,752,948 $475,956 82,206 3 , 4 1 3 ,65 1 2,143,343 128,955 1 ,7 6 1 402000 69,906 555 2,583 932,492 3 1 246 1 2597 30727 1 2 1 6223 7,060 2,62 1 2882 822,223 2,688,492 1 5 5 ,767,039 12,775,905 1 0 1 ,3 87,3 89 7,464,46 1 122862432 1 ,427,226 1 1,558,3 3 1 1 59,277,754 1 14, 1 63,294 8,750,893 12,985,557 1 63,4 1 0,246 1452624,89 1 920582605 1 6223 7,060 1 5 ,607,439 406233 5 272,290 12,600 14,699 27,999 577,396 244,698 97,060 4,500 1 04,800 1,360,893 1 6,885 $ 1 , 129,759 2,399,0 1 1 570,994 32,728 867,549 Total current liabilities Municipal Airport 5 1 ,447 2,419,000 93,030 968,269 70, 1 80 745,000 4,057 423 1 ,950,000 57,489 7,5 1 9 2,506,244 1 , 1 6 1 ,43 8 2257923 04 1,3 6 1 ,3 1 6 2,03 1 2893 1 ,066,280 1 1 ,650,63 8 249,4 1 7 149,678 6,78 1 2,03 5 1 1 ,702 3 ,327,3 39 24,470,000 2,229,690 1 032 1 73 1 20,369 2292274 1 5 ,227,394 26,849,3 6 8 121 762234 1 22,404 2402976 1 727332638 28,0 1 0,806 3 ,755,538 1 ,4832720 22272,869 5 6 1 , 107 3 76,004 1 7 399 20,298 3 82664 1 45,836,624 89,295,92 1 347,627 27,866,823 8,750,893 NET POSITION (Note 9) Net investment in capital assets Restricted for debt services Unrestricted Total Net Position {3 14,7882 $ 1 1 7,5 1 0 ,3 7 1 $ 1 45,52 1 ,836 {324522625) 1 4,747,74 1 33 82348 $5,298,268 $ 1 4,747,74 1 $ 1 3 ,323,905 See accompanying notes to basic financial statements 34 12,985,557 ! Enterprise Funds Drainage Totals Governmental Activities­ Intemal Service Funds $ 14,752,593 5,068 122,720 $44, 1 27,5 12 347,627 1 0,40 1 ,828 570,994 24 1 ,00 1 1 632275 1 ,09 1 ,494 55,852,237 1 427552334 4,527,552 4 1 A9 1 2060 822,223 28,883 ,636 3 1 1 ,490,25 1 7224 1 , 8 1 7 46,0 1 826 1 2 3 4 1 2 1 96, 1 1 0 7224 1 , 8 1 7 4721 1 0, 1 06 397,048,347 2 12997, 1 5 1 20,649 7542572 2092293 1 8,853 2,323 ,525 97,060 1 ,63 1 , 1 3 1 4,3 69,000 57,489 1 8 1 ,678 127 132269 3 1 3 ,992 732,957 1 0,373 , 1 52 377 3 1 5 9,832 1 , 066,280 1 1 ,650,638 429,445 1 692090 24,470,000 62 1 78,935 127132822 1782922 4327952298 129802820 9 1 1 ,879 54, 1 6 8,450 22358, 1 3 5 2825 1 4 1204 1 2986 289z0 1 1 46,0 1 8,6 1 2 7,24 1 , 8 1 7 1 7 1 ,750 302,887,607 347,627 3 923572249 1 223 1 7248 1 $46, 190,362 $342,592,483 $ 19,559,298 $924, 1 3 2 3 9,574 707,63 5 6,469 719 2,022 63,323 1 54,504 1 12,494 35 CITY OF TRACY PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION FOR TIIE FISCAL YEAR ENDED JUNE 30, 20 1 6 Enterprise Funds Municipal Ai!:QOrt Solid Waste Municipal Transit Water Utili� Wastewater Utili� OPERATING REVENUES Sales and charges for services Other operating revenue $ 1 3, 1 0 1 , 1 68 5,358 $13,61 5,963 9,868 $402,962 $25, 156, 1 94 75 $96,47 1 Total Operating Revenues 1 3 , 1 06,526 13,625,83 1 402,962 25, 156,269 96,47 1 3,587,825 9,226,712 565,580 6,998,46 1 45 1,243 463 , 1 63 88,858 20,834,002 64,942 2,043,894 69,447 9,09 1,701 7,89 1 ,554 1 82,678 Total Operating Expenses 22,47 1 , 8 1 8 15,341,258 734,699 20,898,944 3 , 1 5 1 ,3 94 Operating Income (Loss) (9,36 5,292 ) (1,71 5,427) (3 3 1 ,737) 4,257,325 (3,054,923) 83, 8 1 3 ( 1 86,92 1) 203,439 ( 1 , 1 80,330) (209) 1,761 (40,770) 190,927 {103, 1 08} {977, 100} {3 9,009} 190,927 {9,468,40 0} {2,692,527} {3 70,746} 4,448,252 2,248,433 670,700 263,032 2,004,000 2,2 1 9, 1 07 72,477 Net Contributions and Transfers 2,9 1 9, 1 3 3 2,267,032 2,2 1 9, 1 07 72,477 Change in net position (6,549,267) OPERATING EXPENSES Purchase of water Maintenance and operation Administration Insurance costs and claims Depreciation NONOPERATING REVENUES (EXPENSES) Operating grants Interest income Interest (expense) Gain/loss on disposal...
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