Carmel Annual Financial Report Fy Ending 2012

7/30/2019 Carmel Annual Financial Report Fy Ending 2012

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CITY OF CARMEL-BY-THE-SEA, CALIFORNIA

ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED

JUNE 30, 2012

Prepared by:

Paul Wood

Interim Finance Director


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City of Carmel-by-the-Sea, CaliforniaBasic Financial Statements

For the year ended June 30, 2012

Table of Contents

i

Page

Table of Contents .................................................................................................................................. i

Organization Chart ........................................................................................................................... iii

List of Officialsiv

Independent Auditors Report ........................................................................................................... 1

Managements Discussion and Analysis (Required Supplementary Information) ....................... 3

Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Assets ........................................................................................................... 17

Statement of Activities ............................................................................................................ 18

Fund Financial Statements:

Governmental Funds:

Balance Sheet ................................................................................................................................ 22

Reconciliation of Governmental Funds Balance Sheet to theStatement of Net Assets ........................................................................................................... 24

Reconciliation of Fund Basis Balance Sheet to Government-wide

Statement of Net Assets Governmental Activities ............................................................... 25Statement of Revenues, Expenditures, and Changes

in Fund Balances Governmental Funds ................................................................................ 26

Reconciliation of Fund Basis Statements to Government-wideStatement of Activities ............................................................................................................ 28

Reconciliation of the Statement of Revenues, Expenditures, and Changesin Fund Balances of Governmental Funds to the Statement of Activities ............................... 29

Statement of Revenues, Expenditures, and Changes inFund Balances - Budget to Actual General Fund and

Major Special Revenue Funds ................................................................................................. 30

FINANCIAL SECTION

INTRODUCTORY SECTION


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Table of Contents, Continued

ii

PageBasic Financial Statements, Continued:

Notes to Basic Financial Statements .......................................................................................... 35

Other Supplemental Information:

Required Supplementary Information:

Other Postemployment Benefits Schedule of Funding Progress ................................................ 64

Combining and Individual Fund Financial Statements and Schedules:

Nonmajor Governmental Funds:

Combining Balance Sheet ............................................................................................................. 68Combining Statement of Revenues, Expenditures, and Changesin Fund Balances ............................................................................................................... 70

Nonmajor Special Revenue Funds:Schedule of Revenues, Expenditures, and Changes in Fund Balances

Budget to Actual ............................................................................................................... 72

Report on Internal Control Over Financial Reporting and on Compliance andOther Matters Based on an Audit of Financial Statements Performed in

Accordance With Government Auditing Standard ..................................................................77


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Organization Chart

iii


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List of Officials

iv

Jason Burnett, Mayor Ken Talmage, Vice Mayor Victoria Beach, Councilmember Paula Hazdovac, Councilmember Steve Hillyard, Councilmember

Jason Stilwell, City Administrator Don Freeman, City Attorney Heidi Burch, Asst City Administrator/ City Clerk James Emery , City Treasurer

Sherman Low, City Engineer Deanna Allen, Finance Specialist Steve McInchak, Information Services Manager

CITY OFFICIALS

CITY COUNCIL


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INDEPENDENT AUDITORS REPORT

To the Honorable Mayor and City Council

of the City of Carmel-by-the-Sea

Carmel-by-the-Sea, California

We have audited the accompanying financial statements of the governmental activities, each major

fund, and the aggregate remaining fund information of the City of Carmel-by-the-Sea, California

(City), as of and for the year ended June 30, 2012, which collectively comprise the Citys basicfinancial statements as listed in the table of contents. These financial statements are the responsibility

of the Citys management. Our responsibility is to express opinions on these financial statements basedon our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United Statesof America and the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether the financial statements are

free of material misstatement. An audit includes consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for

the purpose of expressing an opinion on the effectiveness of the Citys internal control over financialreporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements, assessing the accounting

principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audit provides a reasonable basis for our opinions

In our opinion, the financial statements referred to previously present fairly, in all material respects, the

respective financial position of the governmental activities, each major fund, and the aggregateremaining fund information of the City of Carmel-by-the-Sea, as of June 30, 2012, and the respective

changes in financial position for the year then ended in conformity with accounting principles

generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated April 30,

2013 on our consideration of the Citys internal control over financial reporting and on our tests of its

compliance with certain provisions of laws, regulations, contracts, and grant agreements and othermatters. The purpose of that report is to describe the scope of our testing of internal control over

financial reporting and compliance and the results of that testing, and not to provide an opinion on

internal control over financial reporting or on compliance. That report is an integral part of an auditperformed in accordance with Government Auditing Standards and should be considered in assessing

the results of our audit.


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2

To the Honorable Mayor and City Council

of the City of Carmel-by-the-SeaCarmel-by-the-Sea, California

Page 2

Accounting principles generally accepted in the United States of America require that theManagements Discussion and Analysis, budgetary comparison information and other information

listed in the table of contents, be presented to supplement the basic financial statements. Suchinformation, 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 haveapplied certain limited procedures to the required supplementary 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 forconsistency with managements 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 uswith sufficient evidence to express an opinion or provide any assurance.

Our audit was conducted for the purpose of forming opinions on the financial statements that

collectively comprise the Citys financial statements. The combining and individual nonmajor fundfinancial statements are presented for purposes of additional analysis and are not a required part of the

financial statements. Such 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 subjected 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 auditingstandards generally accepted in the United States of America. In our opinion, the combining and

individual nonmajor fund financial statements are fairly stated in all material respects in relation to thefinancial statements as a whole.

]]TVcT? \vAApril 30, 2013 JJACPA, Inc.


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Managements Discussion and Analysis

3

This section provides a narrative overview and analysis of the financial activities of the City ofCarmel-by-the-Sea (City) for the fiscal year ended June 30, 2012. It should be read in conjunction withthe accompanying transmittal letter and basic financial statements.

FINANCIAL HIGHLIGHTS

As of June 30, 2012, total assets of the City exceeded its liabilities by $39,338,401 (net assets). Theportion of net assets that may be used to meet the governments ongoing obligations to citizens andcreditors (unrestricted net assets) is $7,408,523. The portion of net assets that are restricted andmay only be used for specific purposes is $555,524. The remaining $31,374,354 is invested incapital assets.

As of June 30, 2012, the Citys governmental funds reported combined ending fund balances of$9,368,824. Approximately .5% of this total amount ($46,747) is non-spendable to indicate that itis not available because it represents amounts that are more long-term in nature or will never beconverted to cash. Of the remaining balance, $555,524 is restricted because it represents resourcesthat are required to be spent for specific purposes as provided by an external source. Thecommitted balance of $4,258,441 represents a Council commitment for economic uncertainties andanticipated future short-term structural deficits. The assigned fund balances in Special Revenue andCapital Projects Funds amounted to $1,506,992 and represented Library, Parking and AmbulanceFund items. The remaining fund balance is unassigned.

Capital assets, net of depreciation, increased to $31,374,354 from $18,593,603, mostly due to the

capitalization of the City streets ($13,760,000) and other capital purchases ($1,066,867), routinedepreciation ($714,071) and the remainder to net asset disposition ($422,764).


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Managements Discussion and Analysis, Continued

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OVERVIEW OF THE ANNUAL FINANCIAL REPORT

This Annual Financial Report is in two major parts:

1) Introductory section, which includes the Transmittal Letter and general information;2) Financial section, which includes the Managements Discussion and Analysis (this part), the Basic

Financial Statements, which include the Government-wide and the Fund Financial Statementsalong with the notes to these financial statements and Combining and Individual Fund FinancialStatements and Schedules.

The Basic Financial Statements

The Basic Financial Statements are comprised of the Government-wide Financial Statements and theFund Financial Statements; these two sets of financial statements provide two different views of theCitys financial activities and financial position.

The Government-wide Financial Statements

The Government-wide Financial Statements provide a broad overview of the Citys activities as awhole and comprise the Statement of Net Assets and the Statement of Activities. The Statement of NetAssets provides information about the financial position of the City as a whole, including all its capitalassets and long-term liabilities on the full accrual basis, similar to that used by corporations. The

Statement of Activities provides information about all the Citys revenues and all its expenses, also onthe full accrual basis, with the emphasis on measuring net revenues or expenses of each the Citysprograms. The Statement of Activities explains in detail the change in Net Assets for the year.

All of the Citys activities are grouped into Governmental Activities and Business-type activities, asexplained below. All the amounts in the Statement of Net Assets and the Statement of Activities areseparated into Governmental Activities and Business-type Activities in order to provide a summary ofthese two activities of the City as a whole.

Governmental activities All of the Citys basic services are considered to be governmentalactivities, including general government, community development, economic development, public

safety, animal control, engineering, community events, public improvements, planning and zoning,building inspections, and general administration. These services are supported by general Cityrevenues such as taxes and by specific program revenues such as developer fees.


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OVERVIEW OF THE ANNUAL FINANCIAL REPORT, Continued

The Government-wide Financial Statements, Continued

Business-type activities All the Citys enterprise activities are reported here. The CitysBusiness-type activity funds are the Sewer Service Funds. Unlike governmental services, theseservices are supported by charges paid by users based on the amount of the service they use.

Fund Financial Statements

A fund is a grouping of related accounts that is used to maintain control over resources that have beensegregated for specific activities or objectives. The City, like other state and local governments, usesfund accounting to ensure and demonstrate compliance with finance-related legal requirements. All ofthe funds of the City can be divided into two categories: governmental funds and proprietary funds.

Governmental funds. Governmental funds are used to account for essentially the same functionsreported as governmental activities in the Government-wide Financial Statements. However, unlike theGovernment-wide Financial Statements, Governmental Fund Financial Statements focus on near-terminflows and outflows of spendable resources, as well as on balances of spendable resources available atthe end of the fiscal year. Such information may be useful in evaluating a governments near-termfinancing requirements.

Because the focus of the Governmental Fund Financial Statements is narrower than that of the

Government-wide Financial Statements, it is useful to compare the information presented forgovernmental funds with similar information presented for governmental activities in the Government-wide Financial Statement. By doing so, readers may better understand the long-term impact of thegovernments near-term financial decisions. Both the governmental fund balance sheet and thegovernmental fund statement of revenues, expenditures, and changes in fund balances provide areconciliation to facilitate this comparison between governmental funds and governmental activities.The Governmental Fund Financial Statements provide detailed information about each of the Citysmost significant funds, called major funds. The concept of major funds, and the determination of whichare major funds, was established by GASB Statement 34 and replaces the concept of combining likefunds and presenting them as one total. Instead, each major fund is presented individually, with allnon-major funds summarized and presented only in a single column. Subordinate schedules present the

detail of these non-major funds. Major funds present the major activities of the City for the year, andmay change from year to year as a result of changes in the pattern of the Citys activities.


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6

OVERVIEW OF THE ANNUAL FINANCIAL REPORT, Continued

Fund Financial Statements, Continued

For the fiscal year ended June 30, 2012, the Citys major funds are as follows:

GOVERNMENTAL FUNDS:

General Fund Harrison Memorial Library Special Revenue Fund Parking Special Revenue Fund Ambulance Special Revenue Fund

Notes to the Basic Financial StatementsThe notes provide additional information that is essential to a full understanding of the data provided inthe Government-wide and Fund Financial Statements. The notes to the basic financial statements canbe found on pages 35-62 of this report. Required Supplementary Information follows the notes on Page63.

Combining and Individual Fund Financial Statements and Schedules

The combining statements referred to earlier in connection with non-major governmental funds arepresented immediately following the notes to the financial statements. Combining and individual fundstatements can be found on pages 65-75 of this report.


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7

GOVERNMENT-WIDE FINANCIAL ANALYSIS

As noted earlier, net assets may serve over time as a useful indicator of a governments financialposition.

In the case of the City, assets exceeded liabilities by $25,578,401as of June 30, 2012.

The Summary of Net Assets as of June 30, 2012, and 2011, follows:

2011

Govern- Govern-

mental mental

Activities Activities Changes

Current and other assets 11,027,118$ 11,390,087$ (362,969)$

Noncurrent assets 39,349,535 26,634,170 12,715,365

Total assets 50,376,653 38,024,257 12,352,396

Current and other liabilities 1,377,759 923,715 454,044

Long-term liabilities 9,660,493 9,181,803 478,690

Total liabilities 11,038,252 10,105,518 932,734

Net assets:

Invested in capital

assets, net of relared debt 31,374,354 18,593,603 12,780,751

Restricted 555,524 440,523 115,001

Unrestricted 7,408,523 8,884,613 (1,476,090)

Total net assets 39,338,401$ 27,918,739$ 11,419,662$

Summary of Net Assets

2012


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued

The change in net assets for the fiscal years ended June 30, 2012, and 2011, follows:

2012 2011

Govern- Govern-

mental mental

Activities Activities Changes

Revenues:

Program revenues:

Charges for services 493,248$ 409,677$ 83,571$

Grants and contributions:Operating 871,230 668,762 202,468

Capital - 465,881 (465,881)

General revenues:

Property taxes

and assessments 4,571,481 4,157,789 413,692

Transient occupancy taxes 4,179,900 4,002,509 177,391

Sales tax 1,743,748 1,805,510 (61,762)

Franchises 491,674 476,597 15,077

Business licenses 532,019 591,248 (59,229)

Use of money and property 55,995 109,602 (53,607)

Other general revenues 276,751 142,923 133,828

Total revenues 13,216,046 12,830,498 385,548

Expenses:Governmental activities:

Administration 2,904,382 3,448,824 (544,442)

Infrastructure capitalization (13,760,000) - (13,760,000)

Building maintenance 2,718,581 5,142,244 (2,423,663)

Public safety 4,694,672 1,271,318 3,423,354

Public works 1,790,684 2,619,273 (828,589)

Forest, parks and beaches 1,578,381 638,255 940,126

Culture and recreation 1,314,073 - 1,314,073

Economic development 361,458 - -

Interest and fiscal charges 194,153 50,576 50,576

Total expenses 1,796,384 13,170,490 (11,828,565)

Excess (Deficiency) of revenues over

expenditures before transfers 11,419,662 (339,992) 12,214,113Transfers - - -

Change in net assets 11,419,662 (339,992) 12,214,113

Net assets:

Beginning of year 27,918,739 28,258,731 28,258,731

End of year 39,338,401$ 27,918,739$ 40,472,844$

Changes in Net Assets


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Revenues

The Citys total revenues for governmental were $13,216,046 for the fiscal year ended June 30, 2012.Approximately 79% of the Citys key revenues are generated from three major sources.

The following discusses variances in key revenues from the prior fiscal year:

1. Sales Tax. Annual receipts decreased approximately 3.4%. This decrease is attributed to adecrease in spending. We anticipate that sales tax revenue will remain flat next fiscal year.

2. Property Taxes. Property taxes increased 9.9% over last year reflecting a strengtheningreal estate market over the past year.

3. Transient occupancy taxes. Hostelry taxes increased 4.4% reflecting at least astabilization of tourism and potential benefit from citywide and individual marketingefforts.


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Expenses

Governmental activity expenses of the City for the year totaled $15,556,384 less infrastructurecapitalization of $13,760,000. Public Safety costs represented 30% of total governmental activitiesexpenses and represented the largest single expense for governmental activities.

Governmental Activities

The following table shows the cost of each of the Citys major programs and the net cost of theprograms. Net cost is the total cost less fees and other direct revenue generated by the activities. Thenet cost reflects the financial burden that was placed on the Citys taxpayers by each of the programs.The total cost of services and the net cost of services for the fiscal years ended June 30, 2012, and2011, are as follows:

Total Cost Net Cost Total Cost Net Cost

of Services of Services of Services of Services

Administration 2,904,382$ 2,899,647$ 2,366,964$ 2,037,298$

Infrastructure capitalization (13,760,000) (13,760,000) - -

Building maintenance 2,718,581 2,718,581 1,176,372 1,176,372

Public safety 4,694,672 4,065,576 5,438,855 5,381,002

Public works 1,790,684 1,096,067 1,183,461 1,097,757

Forest, parks and beaches 1,578,381 1,578,381 1,560,321 1,560,321

Culture and recreation 1,314,073 1,278,043 1,032,484 660,983

Economic development 361,458 361,458 361,457 361,457

Interest and fiscal charges 194,153 194,153 50,576 50,576

Total 1,796,384$ 431,906$ 13,170,490$ 12,325,766$

2012 2011


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Revenues by source for the fiscal years ended June 30, 2012, and 2011, are as follows:

Charges forservices 3.73%

Operating grants4.46%

Capital grants2.13%

Property taxes34.59%Transient

occupancy tax31.63%

Sales and use tax13.19%

Franchises 3.72%

Business l icenses4.03%

Use of money &property 0.42% Other 2.09%

Revenues by Source - Governmental Activities2012

Charges forservices 3.19%

Operating grants5.21%

Capital grants3.63%

Property taxes32.41%

Transientoccupancy taxes

31.20%

Sales tax 14.07%

Franchises 3.71%

Business licenses4.61%

Use of moneyand property

0.85%

Other generalrevenues 1.11%

Revenues by Source - Governmental Activities2011


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Financial Analysis of the Governments Funds

The City of Carmel-by-the-Sea uses fund accounting to ensure and demonstrate compliance withfinance-related legal requirements. The fund financial statements focus on individual parts of the Citygovernment, reporting the Citys operations in more detail than the government-wide financialstatements.

Governmental funds. The Citys governmental funds provide information on near-term inflows,outflows, and balances of spending resources. At the fiscal year ended June 30, 2012, the Citysgovernmental funds reported combined fund balances of $9,368,824. This is a decrease of $1,117,277or 10.% under last year. The decrease was mainly due to the use of capital reserves to fund capitalimprovements. The General Fund is the chief operating fund of the City. At the fiscal year ended June30, 2012, General Fund committed and unassigned fund balance totaled $7,259,561 of which$3,001,120 was unassigned.

General Fund Budgetary Highlights

The difference between the final budget and actual revenues reflects a positive amount of $126,127.This was mainly due to an increase in property tax revenue, resulting in property taxes being overbudget.

There was a $110,357 difference between the total original expenditures budget and the total finalamended budget. Actual expenditures were $317,560 over budget (less than 2.5% of budget). This

was mainly due to fees related to the Flanders suit.

Capital Assets

The Citys investment in capital assets for its governmental activities as of June 30, 2012, amount to$39,349,535. This investment in capital assets includes roads, curbs and gutters, streets and sidewalks,and drainage systems.

2012 2011Land 3,488,036$ 3,960,656$Art 1,467,918 1,467,918

Buildings and improvements 19,257,849 20,059,332Vehicles 409,114 451,827Infrastructure 13,760,000 -Machinery and equipment 966,618 614,517

Total 39,349,535$ 26,554,250$

Governmental Activities

More detail of the capital assets and current activity can be found in the notes to the financialstatements on Pages 41 and 42 for significant accounting policies and Note 4 on Page 50 forother capital asset information.


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Debt Administration

Debt, considered a liability of governmental activities, increased by $322,155, reflecting the pay downof the Sunset bond and lease obligations, offset by an increase in the OPEB obligation, see Note 6 onpage 52. Compensated absences decreased by $242,812 to $538,371 of which $179,465 is considered acurrent liability.

Economic Outlook

Fiscal year 2012-2013 will continue to be another challenging year. While rising national consumerspending and confidence, assisted by an extraordinary simulative Federal Reserve, helped to keep theUS economy from a technical recession, most local governments have experienced otherwise.Many local governments have had to deal with the opposing financial needs of state government,particularly here in California, which has an estimated budget deficit of over $20 billion for each yearthrough fiscal year 2015-2016, according to the Legislative Analyst's Office (LAO). The states fiscalcrisis will likely impose any meaningful growth as the battle over budgetary cuts and the relentlesspursuit for locally collected revenues continues. Somewhat promising, recent unemployment figuresfor the Monterey Region have fallen to 10.9 percent from over 12 percent last year. But, home pricesremained suppressed in the region, and are down to levels not seen since 2001. These factors and themany unanswered questions concerning political, fiscal, including international monetary outcomes,will likely result in a relatively weak economic period ahead.

The Citys major General Fund revenue sources are property taxes and transient occupancy tax(hostelry tax). Both of these revenue sources are affected by the current recession. We are estimating amodest increase for both of these revenues in fiscal year 20122013.

The City maintains a multi-year forecasting model to project anticipated revenues and expenditures.The model predicts continued earnings through fiscal year 2022-2023. The Citys financial reserveswill ensure that service levels are maintained until fiscal year 20222023.

Requests for Information

This Annual Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a

general overview of the Citys finances. If you have any questions about this report, need additionalfinancial information, or would like to obtain component unit financial statements, contact the City ofCarmel-by-the-Sea Finance Department, PO Box CC, Carmel-by-the-Sea, CA 93921, or visit theCitys web page at ci.carmel.ca.us/carmel/.


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BASIC FINANCIAL STATEMENTS

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City of Carmel-by-the-Sea, California

Statement of Net Assets

June 30, 2012

Governmental

Activities

ASSETS

Current assets:

Cash and investments 8,923,429$

Cash and investments with fiscal agent 485,365

Receivables:

Accounts receivable 1,318,546

Intergovernmental receivable 297,475

Other receivables 2,303

Total current assets 11,027,118

Noncurrent assets:

Capital assets:Nondepreciable 4,955,954

Depreciable 34,393,581

Total noncurrent assets 39,349,535

Total assets 50,376,653

LIABILITIES

Current liabilities:

Accounts payable and accrued liabilities 768,016

Deposits payable 430,278

Compensated absences - current portion 179,465

Total current liabilities 1,377,759

Noncurrent liabilities:Long-term liabilities:

Claims liabilities 460,000

Compensated absences 358,906

Due within one year 434,487

Due after one year 7,540,694

Net OPEB obligation 866,406

Total noncurrent liabilities 9,660,493

Total liabilities 11,038,252

NET ASSETS

Invested in capital assets, net of related debt 31,374,354

Restricted 555,524

Unrestricted 7,408,523

Total net assets 39,338,401$

The accompanying notes are an integral part of these basic financial statements.

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Statement of Activities


Operating

Charges for Grants and

Functions/Programs Expenses Services Contributions

Primary government:

Governmental activities:

Administration 2,904,382$ 4,735$ -$

Infrastructure capitalization (13,760,000)

Building maintenance 2,718,581 - -

Public safety 4,694,672 39,878 589,218

Public works 1,790,684 412,605 282,012

Forest, parks and beaches 1,578,381 - -Culture and recreation 1,314,073 36,030 -


Interest and fiscal charges 194,153 - -

Total governmental activities 1,796,384 493,248 871,230

Total primary government 1,796,384$ 493,248$ 871,230$

General revenues:

Taxes:

Property taxes, levied for general purposes

Transient occupancy tax, levied for general purposes

Sales and use taxFranchises

Business licenses

Use of money and property

Other general revenues

Total general revenues

Transfers

Total general revenues and transfers

Change in net assets

Net assets:

Beginning of year

Net assets - Ending

Program Revenues


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Governmental

Activities Totals

(2,899,647) (2,899,647)$

13,760,000 13,760,000

(2,718,581) (2,718,581)

(4,065,576) (4,065,576)

(1,096,067) (1,096,067)

(1,578,381) (1,578,381)(1,278,043) (1,278,043)

(361,458) (361,458)

(194,153) (194,153)

(431,906) (431,906)

(431,906) (431,906)

4,571,481 4,571,481

4,179,900 4,179,900

1,743,748 1,743,748491,674 491,674

532,019 532,019

55,995 55,995

276,751 276,751

11,851,568 11,851,568

- -

11,851,568 11,851,568

11,419,662 11,419,662

27,918,739 27,918,739

39,338,401$ 39,338,401$

Net (Expense) Revenue and

Changes in Net Assets

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Balance Sheet

Governmental Funds

June 30, 2012

General Harrison Memorial

Fund Library Parking

ASSETS

Cash and investments 7,359,947$ 522,940$ 698,086$

Cash and investments with fiscal agent 40,986 - -

Receivables:

Accounts 870,694 - -

Intergovernmental 260,489 - -

Other receivable 2,303 - -

Due from other funds 330,199 - -

Total assets 8,864,618$ 522,940$ 698,086$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable and accrued liabilities 714,779$ -$ -$

Deposits payable 430,278 - -

Due to other funds - - -

Claims liabilities 460,000 - -

Total liabilities 1,605,057 - -

Fund balances:

Nonspendable:Endowments - 46,747 -

Restricted reported in:

Special revenue funds - -

Committed 4,258,441 - -

Assigned reported in:

Special revenue funds - 476,193 698,086

Unassigned (deficit), reported in:

General Fund 3,001,120 - -

Total fund balances 7,259,561 522,940 698,086

Total liabilities and fund balances 8,864,618$ 522,940$ 698,086$

Major Funds


Special Revenue Funds

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Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds


General Harrison Memorial

Fund Library Parking

REVENUES:

Taxes and assessments 11,497,256$ -$ -$

Licenses and permits 430,250 - -

Fines and forfeitures 27,385 - -

Intergovernmental 419,326 10,764 -

Use of money and property 226,616 1,579 1,589

Charges for services 60,228 19,154 -

Contributions 26,830 302,330 -

Other revenues 93,944 - -

Total revenues 12,781,835 333,827 1,589

EXPENDITURES:

Current:

Administration 3,122,302 - -

Building maintenance 2,633,987 - -

Public safety 2,985,740 - -

Public works 1,137,360 - -

Forest, parks and beaches 1,122,795 - -

Culture and recreation 125,635 1,168,039 -


Capital outlay 1,599,462 - -

Debt service:

Primcipal - - -

Interest and fiscal charges - - -

Total expenditures 13,088,739 1,168,039 -

REVENUES OVER (UNDER)

EXPENDITURES (306,904) (834,212) 1,589

OTHER FINANCING SOURCES (USES):

Transfers in 6,282,820 886,513 -

Transfers out (7,212,155) - -Total other financing sources (uses) (929,335) 886,513 -

Net change in fund balances (1,236,239) 52,301 1,589

FUND BALANCES:

Beginning of year 8,495,800 470,639 696,497

End of year 7,259,561$ 522,940$ 698,086$

Major Funds


Special Revenue Funds

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Other

Governmental

Ambulance Funds Totals

-$ -$ 11,497,256$

- 182,106 612,356

- 99,969 127,354

- 205,296 635,386

- 2,191 231,975

497,636 20,284 597,302

- - 329,160

- - 93,944

497,636 509,846 14,124,733

- - 3,122,302

- - 2,633,987

377,688 - 3,363,428

- 28,939 1,166,299

- - 1,122,795

- 5,264 1,298,938

- - 361,458

- - 1,599,462

- 315,570 315,570

- 257,771 257,771

377,688 607,544 15,242,010

119,948 (97,698) (1,117,277)

- 579,832 7,749,165

- (537,010) (7,749,165)- 42,822 -

119,948 (54,876) (1,117,277)

- 823,165 10,486,101

119,948$ 768,289$ 9,368,824$

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Reconciliation of Fund Basis Statements to Government-wide Statement of Activities


Capital

Asset Government-

Fund Based Debt Compensated (Additions)/ OPEB wide

Functions/Programs Totals Service Absences Depreciation Retirements Obligation Totals

Governmental activities:

Administration 3,122,302$ -$ (20,456)$ 2,997$ (1,066,867)$ 866,406$ 2,904,382$

Infrastructure capitalizatio - - - - (13,760,000) - (13,760,000)

Building maintenance 2,633,987 - (15,565) 100,159 - - 2,718,581

Public safety 3,363,428 - (39,257) 52,990 1,317,511 - 4,694,672

Public works 1,166,299 - (130,766) 50,436 704,715 - 1,790,684

Forest, parks and beaches 1,122,795 - (23,107) 478,693 - - 1,578,381

Culture and recreation 1,298,938 - (13,661) 28,796 - - 1,314,073

Economic development 361,458 - - - - - 361,458

Capital outlay 1,599,462 (1,599,462) - -Debt service/Interest 573,341 (379,188) - - - - 194,153

Total governmental activities 15,242,010$ (379,188)$ (242,812)$ 714,071$ (14,404,103)$ 866,406$ 1,796,384$


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Reconciliation of the Statement of Revenues, Expenditures, and Changes in

Fund Balances of Governmental Funds to the Statement of Activities


Net change in fund balances - total governmental funds (1,117,277)$

Capital asset purchases capitalized 14,826,867$

Capital asset retirements (422,764)

Depreciation expense (714,071) 13,690,032

Change in interest payable (63,618)

Change in claim liabilities (24,000)

Capital lease obligations (441,881)

Change in compensated absences 242,812 (286,687)

Net OPEB obligation (866,406)

Change in net assets of governmental activities 11,419,662$

Amounts reported for governmental activities in the Statement of Activities are different

because:

Governmental funds report capital outlays as expenditures while governmental

activities report depreciation expense to allocate those expenditures over the life of

the assets:

Some expenses reported in the Statement of Activities do not require the use of

current financial resources and, therefore, are not reported as expenditures in

governmental funds:


Certain employee benefit obligations are recorded on a pay-as-you-go basis in the

governmental funds, but are accrued as liabilities in the Statement of Net Assets:

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Statement of Revenues, Expenditures, and Changes in Fund Balances

Budget to Actual - General Fund and Major Special Revenue Funds, Continued


Positive

Original Final Actual (Negative)

REVENUES:

Taxes and assessments -$ -$ -$ -$

Licenses and permits - - - -

Fines and forfeitures - - - -

Intergovernmental - - - -

Use of money and property - - - -

Charges for services 350,400 350,400 497,636 147,236

Contributions - - - -

Other revenues - - - -

Total revenues 350,400 350,400 497,636 147,236

EXPENDITURES:

Current:

Administration - - - -

Building maintenance - - - -

Public safety 462,400 462,400 377,688 84,712

Public works - - - -

Forest, parks and beaches - - - -

Culture and recreation - - - -

Economic development - - - -

Debt service:

Principal -

Interest and fiscal charges - - - -

Total expenditures 462,400 462,400 377,688 84,712

REVENUES OVER (UNDER)

EXPENDITURES (112,000) (112,000) 119,948 231,948

OTHER FINANCING SOURCES (USES):

Proceeds from sales of assets - - - -

Transfers in 112,000 112,000 - (112,000)

Transfers out - - - -

Total other financing sources (uses) 112,000 112,000 - (112,000)

Net change in fund balances - - 119,948 119,948

FUND BALANCES:

Beginning of year - - - -

End of year -$ -$ 119,948$ 119,948$

(concluded)

Budgeted Amounts

Ambulance

Variance w/Final


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Index to Notes to Basic Financial Statements

34

Page

Note 1 - Summary of Significant Accounting Policies.................................................................... 35Financial Reporting Entity ............................................................................................................. 35

Basis of Presentation ...................................................................................................................... 37

Measurement Focus ....................................................................................................................... 39

Basis of Accounting ....................................................................................................................... 39Assets, Liabilities, and Equity ....................................................................................................... 40

Revenues, Expenditures, and Expenses ......................................................................................... 45

Budgetary Accounting ................................................................................................................... 46

Note 2 Cash and Investments......................................................................................................... 47

Note 3 Accounts Receivable ........................................................................................................... 50

Note 4 Capital Assets ...................................................................................................................... 50

Note 5 Accounts Payable and Accrued Liabilities ....................................................................... 51

Note 6 Long-term Liabilities .......................................................................................................... 52

Note 7 Net Assets/ Fund Balances ................................................................................................. 54

Note 8 Interfund Transactions ...................................................................................................... 56

Note 9 Risk Management ............................................................................................................... 57

Note 10 Public Employee Retirement System .............................................................................. 58

Plan Description............................................................................................................................. 58

Funding Policy ............................................................................................................................... 58

Note 11 Other Post-Employment Benefits.................................................................................... 58

Note 12 Commitments and Contingencies .................................................................................... 61

Note 13 New Accounting Pronouncements................................................................................... 61

Note 14 Subsequent Events ............................................................................................................ 62


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City of Carmel-by-the-Sea, CaliforniaNotes to Basic Financial StatementsFor the year ended June 30, 2012

35

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe City of Carmel-by-the-Sea (City) was incorporated on November, 1956, under the laws andregulations of the State of California (State). The City operates under a City Council/Manager form ofgovernment and provides the following services: public works, planning and building, generaladministrative services, public safety (County Sheriff), fire suppression and prevention services, andsewage treatment services.

The financial statements of the City have been prepared in accordance with accounting principlesgenerally accepted in the United States of America (GAAP) as applied to governmental units. TheGovernmental Accounting Standards Board (GASB) is the standard-setting body for governmentalaccounting and financial reporting. On June 15, 1987, GASB issued a codification of the existingGovernmental Accounting and Financial Reporting Standards which, along with subsequent GASB

pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The Cityapplies all GASB pronouncements to its activities.

In addition, the City applies all Financial Accounting Standards Board (FASB) Statements andInterpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins(ARB) issued after November 30, 1989, unless they conflict with or contradict GASBpronouncements. The more significant of these accounting policies are described below and, whereappropriate, subsequent pronouncements will be referenced.

Financial Reporting Entity

The City operates as a self-governing local government unit within the State. It has limited authority tolevy taxes and has the authority to determine user fees for the services that it provides. The Citys mainfunding sources include sales taxes, other intergovernmental revenue from state and federal sources,user fees, and federal and state financial assistance. All property taxes are paid to San Mateo County(County) as part of the revenue neutrality payment obligation. The financial statements do not reflectthe amounts received on behalf of the City and retained by the County.

The financial reporting entity consists of (a) the primary government, the City, (b) organizations forwhich the primary government is financially accountable, and (c) other organizations for which theprimary government is not accountable, but for which the nature and significance of their relationshipwith the primary government are such that exclusion would cause the reporting entitys financialstatements to be misleading or incomplete. Financial accountability is defined as the appointment of avoting majority of the component units board, and either (a) the City has the ability to impose its willon the organization, or (b) there is a potential for the organization to provide a financial benefit to orimpose a financial burden on the City.


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City of Carmel-by-the-Sea, CaliforniaNotes to Basic Financial Statements, ContinuedFor the year ended June 30, 2012

36

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ContinuedFinancial Reporting Entity,Continued

As required by GAAP, these financial statements present the government and its component units,entities for which the government is considered to be financially accountable. These component unitsare reported on a blended basis. Blended component units, although legally separate entities, are, insubstance, part of the governments operations and so data from these units are combined with data ofthe primary government. The financial statements of the individual component units, if applicable asindicated below, may be obtained by writing to the City of Carmel-by-the-Sea, Finance Department,Post Office Box CC, Carmel-by-the-Sea, CA 93921.

The Citys reporting entity includes the following blended component units:

Carmel Public Improvement AuthorityHarrison Memorial Library

The above component units are included in the Citys basic financial statements using the blendedmethod. There are no component units of the City that meet the criteria for discrete presentation.


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City of Carmel-by-the-Sea, CaliforniaNotes to Basic Financial Statements, ContinuedFor the year ended June 30, 2012

42

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ContinuedAssets, Liabilities, and Equity, Continued

Capital Assets, Continued

Government-Wide Statements

Public domain (infrastructure) capital assets include roads, bridges, curbs and gutters, streets,sidewalks, drainage systems, and lighting systems.

The accounting treatment of property, plant and equipment (capital assets) depends on whether theassets are used in governmental fund operations or proprietary fund operations and whether they are

reported in the government-wide or fund financial statements.

Prior to July 1, 2003, governmental funds infrastructure assets were not capitalized, since then theseassets have been valued at estimated historical cost.

Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement ofActivities, with accumulated depreciation reflected in the Statement of Net Assets. Depreciation isprovided over the assets estimated useful lives using the straight-line method of depreciation. Nodepreciation is recorded in the year of acquisition or in the year of disposition.

The range of estimated useful lives by type of asset is as follows:

Buildings and improvements 20 50 years

Sewer Lines 30 years

Machinery and equipment 5 - 20 years

Computer Software 10 years

Fund Financial Statements

In the fund financial statements, capital assets used in governmental fund operations are accounted foras capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in

proprietary fund operations are accounted for the same way as in the government-wide statements.


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Total

Non-MajorForest General Governmental

Theater Gas Tax Debt Service Funds

83,848$ 144,524$ 1$ 342,456$

- - 400,007 400,007

- 11,986 - 36,986

83,848$ 156,510$ 400,008$ 779,449$

629$ 994$ -$ 11,160$

629 994 - 11,160

155,516 400,008 555,524

83,219 - - 212,765

- - - -83,219 155,516 400,008 768,289

83,848$ 156,510$ 400,008$ 779,449$

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Variance Variance

w/Amended w/Amended

Original Amended Positive Original Amended Positive

Budget Budget Actual (Negative) Budget Budget Actual (Negative)

180,000$ 180,000$ 182,106$ 2,106$ -$ -$ -$ -$

- - - - - - - -

- - - - 114,000 114,000 85,463 (28,537)

- - - - - - - -

- - - - - - - -

180,000 180,000 182,106 2,106 114,000 114,000 85,463 (28,537)

- - - - - - - -- - - -

- - - - - - - -

180,000 180,000 182,106 (2,106) 114,000 114,000 85,463 28,537

- - - - - - - -

(195,000) (195,000) (255,273) (60,273) (347,978) (347,978) (70,088) 277,890

(195,000) (195,000) (255,273) 60,273 (347,978) (347,978) (70,088) (277,890)

(15,000) (15,000) (73,167) 58,167 (233,978) (233,978) 15,375 (249,353)

132,663 132,663 132,663 - 40,523 40,523 40,523 -

117,663$ 117,663$ 59,496$ 58,167$ (193,455)$ (193,455)$ 55,898$ (249,353)$

(continued)

GrantsRoad Impact Fees

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Carmel Annual Financial Report Fy Ending 2012

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