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2005-2006 CAFRCity Of Chino Hills California COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2006 CIT`( OF CHINO HILLS, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED JUNE 30, 2006 Prepared by: Department of Finance INTRODUCTORY SECTION CITY OF CHINO HILLS INCORPORATED 1 99 1 CITY OF CHINO HILLS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2006 TABLE OF CONTENTS Page Number INTRODUCTORY SECTION Tableof Contents.................................................................................................................. i Letterof Transmittal.............................................................................................................. v OrganizationalChart............................................................................................................. ix CityOfficials.......................................................................................................................... x Certificate of Achievement for Excellence in Financial Reporting ........................................ A FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS 3 Government—Wide Financial Statements Statement of Net Assets................................................................................................ 11 Statement of Activities.................................................................................................... 12 Fund Financial Statements Balance Sheet — Governmental Funds.......................................................................... 14 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets................................................................................ 17 Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds............................................................................ 18 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities............................................................................................. 20 Budgetary Comparison Statement — General Fund ....................................................... 21 Budgetary Comparison Statement — Landscape and LightingDistrict........................................................................................................ 22 Budgetary Comparison Statement — Existing Infrastructure Fee .................................. 23 Statement of Net Assets — Proprietary Funds............................................................... 24 Statement of Revenues, Expenses and Changes in Fund Net Assets — Proprietary Funds..................................................................................... 26 Statement of Cash Flows — Proprietary Funds.............................................................. 27 Statement of Fiduciary Net Assets — Fiduciary Funds ................................................... 29 Notes to Financial Statements.............................................................................................. 31 CITY OF CHINO HILLS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2006 TABLE OF CONTENTS Page Number COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES Combining Balance Sheet — Nonmajor Governmental Funds ....................................... 61 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Nonmajor Governmental Funds ............................... 65 Budgetary Comparison Schedules Sleepy Hollow Road Improvement.......................................................................... 69 CityFacilities Fees................................................................................................... 70 TrafficFacilities Fees............................................................................................... 71 StormDrain Facilities Fees...................................................................................... 72 ParklandFees.......................................................................................................... 73 TrafficSignal Fees................................................................................................... 74 GasTax................................................................................................................... 75 AirQuality................................................................................................................ 76 FederalGrants......................................................................................................... 77 Measure................................................................................................................... 78 SolidWaste.............................................................................................................. 79 StreetSweeping...................................................................................................... 80 FrontlinePolicing..................................................................................................... 81 MiscellaneousGrants.............................................................................................. 82 Capital Improvement Fund...................................................................................... 83 CFD#9 Rincon Village............................................................................................ 84 CFD#10 Fairfield Ranch......................................................................................... 85 Combining Statement of Net Assets — Internal Service Funds ...................................... 86 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets — Internal Service Funds.............................................................. 87 Combining Statement of Cash Flows — Internal Service Funds ..................................... 88 Combining Balance Sheet — All Agency Funds............................................................. 89 Combining Statement of Changes in Assets and Liabilities — AIIAgency Funds..................................................................................................... 90 CITY OF CHINO HILLS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2006 TABLE OF CONTENTS Page Number STATISTICAL SECTION Last Ten Fiscal Years Net Assets by Component..................................................................................... 100 Changesin Net Assets.......................................................................................... 101 Fund Balances of Governmental Funds................................................................ 103 Changes in Fund Balances of Governmental Funds ............................................. 104 Assessed Value and Estimated Actual Value of Taxable Property ....................... 106 Direct and Overlapping Property Tax Rates.......................................................... 107 Principal Property Tax Payers............................................................................... 108 Property Tax Levies and Collections..................................................................... 109 Ratios of Outstanding Debt by Type...................................................................... 112 Direct and Overlapping Governmental Activities Debt .......................................... 113 Legal Debt Margin Information............................................................................... 114 Pledged—Revenue Coverage................................................................................. 115 Demographic and Economic Statistics.................................................................. 118 PrincipalEmployers............................................................................................... 119 Full—Time—Equivalent City Government Employees by Function/Program........... 122 Operating Indicator by Function/Program.............................................................. 123 Capital Asset Statistics by Function/Program........................................................ 124 CITY OF CHINO HILLS INC OR P OR ATE D 1 9 9 1 This page intentionally left blank. IX City of Chin November 8, 2006 V 1 11111✓ The Honorable Mayor and City Council City of Chino Hills, California State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with auditing standards generally accepted in the United States of America by a. firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report (CAFR) for the City of Chino Hills for the fiscal year ended June 30, 2006. This report consists of management's representations concerning the finances of the City of Chino Hills. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Chino Hills has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft or misuse and to compile sufficient reliable information for the preparation of the City of Chino Hills' financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Chino Hills' comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements are free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. Lance, Soll, & Lunghard, Certified Public Accountants, have issued an unqualified ("clean") opinion of the City of Chino Hills' financial statements for the year ended June 30, 2006. 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 of transmittal and should be read in conjunction with it. City of Chino Hills Profile The City of Chino Hills was incorporated in December 1991 as a general law City and operates under the Council -Manager form of government. The City, located in southwestern San Bernardino County, has a population of 77,969 and has a land area of 46 square miles. Since its incorporation, the City continues to grow and is one of the few areas in Southern California in which significant numbers of single-family residential units are still being constructed. The City is one of the largest master -planned communities in Southern California and, at build -out, is expected to have about 85,500 residents. The City of Chino Hills provides a full range of services including: police protection (via contract with the County of San Bernardino Sheriff's Department); solid waste disposal services (via contract with Chino City Council: Ed M. Graham Curt Hagman W.C. "Bill" Kruger Gary G. Larson Gwenn E. Norton -Perry 2001 Grand Avenue, Chino Hills, CA 91709 • (909) 364-2600 • FAX (909) 364-2695 9 www.chinohills.org Hills Disposal); the construction and maintenance of streets and infrastructure; economic development; recreational activities and cultural events. Fire protection services are provided by the Chino Valley Independent Fire District, an entity governed by its own independently elected board of directors and financed by its own share of property taxes, contractual charges, and other fees. The City has developed a reputation for being a family oriented community with significant amounts of recreation opportunities for its youths and adults. Chino Hills is now ranked on the "Best of" lists compiled by Money Magazine. In 2004 we were ranked 8th on the list of "Best Places in the West with a Population under 100,000." In 2005, we were ranked as #68 on the top "100 Best Places to Live in the USA." The City has historically been recognized as one of the safest communities in Southern California, and continues to be recognized as a California Healthy City. A comprehensive financial plan was developed to fund all necessary infrastructure required for new residential and commercial development. Through the use of special assessment districts as well as benefit assessment districts and development fees, funds were made available for the installation of parks, infrastructure, and government facilities, and the maintenance of the City's open space, parks, and landscaped areas. A non-partisan five -member council elected to serve staggered four-year terms governs the City. The City's elections are consolidated with the statewide general election held in November of even numbered years. The City Council appoints the City Manager, City Clerk, and City Attorney as well as members of various commissions and citizen advisory groups ensuring a broad base of citizen input into the City's decision-making process. The City's budget policy provides for an orderly process that allows for the adoption of the annual budget by June 30 of each year. The City maintains a budget control system to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the General Fund, Special Revenue Funds, and Capital Project Funds are included in the annual appropriated budget. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the department level within the General Fund and at the fund level for all other funds. Budget appropriations lapse at the end of the fiscal year, with the exception of contract commitments and capital improvement projects, which are re -budgeted as of July 1 in the next fiscal year. Local Economy. The economic condition of the area in which the City is located (in southwestern San Bernardino County) points to future growth for the City of Chino Hills. However, in November 1999, the residents of Chino Hills voted in Proposition "U" that essentially states that voter approval is needed for any new development proposed for a higher density than is allowed per the General Plan. This does not affect projects with densities equal to or lower than allowed per the General Plan or projects that already have approved tract maps. The City of Chino Hills shows a promising future for approved projects while new, higher density development may be difficult to implement due to the voter approved initiative. Chino Hills is one of the most desirable cities in the County of San Bernardino with median income nearly double the County average. The strong, positive reputation due to good schools and low crime is anticipated to keep fueling the demand for residential construction. In the 2005-06 fiscal year, 122 residential units were built. Residential construction was dominated by single-family tract homes though the development includes custom home lots and multi -family housing projects. It is estimated that at least 484 residential units will be completed in the 2006-07 fiscal year. Since incorporation in 1991, the City's population has grown from an estimated 42,691 to 77,969, approximately an 83% increase. Given the vacant land that remains to be developed under the General Plan, projects currently under consideration and the attractiveness of the Chino Hills marketplace, our population is projected to grow to an estimated 85,500 at the end of the current five-year operating plan. Additionally, the City is aggressively seeking commercial economic development within the City. A number of retail commercial sites are available for development and the City is actively marketing these sites. In recent years several major retail outlets have located in the City as anchors for a retail power center. At this time, however, the City is primarily a "bedroom community' with very little commercial and industrial businesses. Long -Term Goals, Efforts And Actions. The challenges presented by the demands of providing essential municipal services during a dynamic growth cycle, continues to be a principal challenge for Chino Hills. It is vital that the processes needed to sustain the organization over the long term continue to be developed, clarified and refined as appropriate. A continued focus on maintenance of the City's existing infrastructure is reflected within both the Operating and Capital Improvement budgets. This maintenance effort is critical, on a proactive basis, to minimize our costs over the long term. The City of Chino Hills is seizing the unique opportunity of constructing The Shoppes/Government Center project. This project consists of the following six components: 1) a new retail center with up to 550,000 square feet of retail, restaurant, and office space; 2) a new civic center with up to 200,000 square feet of public institutional uses for City Hall, library, law enforcement, and fire district administration; 3) up to 235 multi -family dwelling units on The Shoppes Residential site; 5) a new community park that includes up to 46 acres; 6) up to 125 multi -family dwelling units on the Park Residential site. It is anticipated that this effort will continue through fiscal year 2007-08. These projects are critical to the City's economic future and worthy of the resources being devoted toward their completion. Relevant Financial Policies Cash Management: Cash temporarily idle during the year was invested in demand deposits and pooled investment accounts operated by the State of California's Local Agency Investment Fund, the San Bernardino County Investment Pool, and the Los Angeles County Investment Pool. The average yield on maturing investments during the fiscal year was about 3.89 percent, and the amount of interest earnings on all invested funds amounted to $4,587,503. This was $1,924,007 more than was earned in the prior fiscal year. The City's investment policy is to mitigate market and credit risk while maintaining market yield on its portfolio. Monthly reports to the City Council include the fair value of the portfolio and a certification that the City has adequate funds to meet expenditures for the following six-month period. Major Initiatives The City of Chino Hills continues an aggressive Capital Improvement Program effort, utilizing staff and consultant resources, to implement projects in a timely and cost effective manner. A coordinated approach to the Capital Improvement Program is critical to meet the facility and infrastructure needs of our current residents and businesses as well as the infrastructure needs that growth in Chino Hills will require. The Capital Improvement Program is not only a critical program element of the Engineering Department's objectives, but the entire organization's. The management and implementation of our Capital Improvement Program deserves and will continue to receive the attention of the entire organization. Chino Hills' commitment to infrastructure improvements is demonstrated by the City's Long -Term Capital Improvement Program and includes appropriations of $225,515,400 that includes projects in the following categories such as: Streets $ 54,081,200 Public Facilities $ 76,366,800 Parks/Open Space $ 27,839,900 Landscape Projects $ 1,439,500 Water $ 31,176,700 vii Recycled Water $ 9,072,800 Sewer/Storm Drain $ 7,267,800 Developer Funded $ 18,270,700 Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2005. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report, the contents of which conform to program standards. Such report must also satisfy both U.S. generally accepted accounting principles (GAAP) and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current Comprehensive Annual Financial Report conforms to the Certificate of Achievement Program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of the Comprehensive Annual Financial Report on a timely basis was made possible by the dedicated efforts of the Finance Department staff. We wish to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. Credit also must be given to the Mayor and the City Council for their unfailing support for maintaining the highest standards of professionalism in the management of the City of Chino Hills' finances. espectfully submitted, s N. La Belle City Manager hinaync nca er rector viii THE CITY OF CHINO HILLS ORGANIZATION OF CITY GOVERNMENT OPERATING SUMMARY City of Chino Hills Voters City Council Various Commissions City Clerk I I City Manager I I City Attorney Community Community Engineering Finance Public Facilities Development Services Department Department and Department Department Operations Department ix CITY OF CHINO HILLS LIST OF ELECTED AND APPOINTED OFFICIALS ELECTED OFFICIALS - CITY COUNCIL Ed M. Graham Gwenn Norton -Perry Curt Hagman W.C. "Bill" Kruger Gary G. Larson Mayor Mayor Pro Tem Council Member Council Member Council Member APPOINTED OFFICIALS Douglas N. La Belle City Manager Kathleen Gotch Assistant City Manager Mary M. McDuffee City Clerk Mark D. Hensley City Attorney Ray Holland Interim City Engineer Dan Joseph Interim Community Development Director Michael Fleager Community Services Director Pat Hagler Public Facilities and Operations Director Judy R. Lancaster Finance Director/City Treasurer x Certificate of Achievement for Excellence in Financial Reporting Presented to City of Chino Hills, California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2005 A Certificate of Achievement for Excellence in Financial Reporting is presented by the Government Finance Officers Association of the United States and Canada to government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. FF�cEr E DOF W UWTEDSTATES y AND ti ' yD�►�N �� >� SEAL anti kCASO President AK�W 441-�IJIGOZ" Executive Director X1 CITY OF CHINO HILLS I N C O R P O R A T E D 19 91 This page intentionally left blank. Xii FINANCIAL SECTION CITY OF CHINO HILLS I N C O R P O R A T E D 1 9 9 1 LLS I Lance Soil & Lunghard LLP Certified Public Accountants INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council City of Chino Hills, California Brandon W. Burrows Donald L. Parker Michael K. Chu David E. Hale A Professional Corporation Donald G. Slater Richard K. Kikuchi Retired Robert C. Lance 1914-1994 Richard C.Soll Fred J. Lunghard, Jr. 192&1999 We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Chino Hills, California (the City), as of and for the year ended June 30, 2006, which collectively comprise the City's basic financial statements as listed in the Table of Contents. These financial statements are the responsibility of the City of Chino Hills' management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business—type activities, each major fund, and the aggregate remaining fund information of the City of Chino Hills as of June 30, 2006, and the respective changes in financial position and cash flows where applicable thereof, and the respective budgetary comparison for the General Fund, Landscape and Lighting District Fund, and the Existing Infrastructure Fee Fund 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 September 21, 2006, on our consideration of the City of Chino Hills' internal control over financial reporting and our tests of its compliance with certain laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management's discussion and analysis is not a required part of the basic financial statements, but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 75 YF—ARS �W, AV 1929 2004 06 Ex6e'� 203 N. Brea Blvd., Suite 203 a Brea, CA 92821-4056 a (714) 672-0022 a Fax (714) 672-0331 a www.1sic ap s.com ISLLuanc,e l s ghard LLP CERTIFIED PUBLIC ACCOUNTANTS To the Honorable Mayor and Members of the City Council City of Chino Hills, California Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying introductory section, the combining and individual fund statements, budgetary schedules and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements taken and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The accompanying introductory section and statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and accordingly, we express no opinion on them. PAP September 21, 2006 2 MANAGEMENT'S DISCUSSION & ANALYSIS CITY OF CHINO HILLS INCORPORATED 1 9 9 1 MANAGEMENT'S DISCUSSION AND ANALYSIS The following is a narrative overview and analysis of the City of Chino Hills' financial statements for the fiscal year ended June 30, 2006. Information presented here should be taken into consideration with additional information furnished in the letter of transmittal and the City's financial statements. FINANCIAL HIGHLIGHTS • The total net assets of the City of Chino Hills increased $25.3 million from $383.2 million to $408.5 million in the fiscal year 2005-06. • The City's governmental funds combined ending fund balances remain at $51 million at June 30, 2006. Of this $51 million, $19.5 million was reserved and $31.5 million was designated for special projects. • General Fund fund balance decreased by $2.6 million with total revenues of $27.6 million and total expenses of $30.2 million. • Water Utility Fund showed steady growth with an increase in net assets by $4.6 million at June 30, 2006, as compared to an increase of $4.8 million in prior year. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statement of Net Assets and Statement of Activities (on pages 11, 12 and 13) provide information about the activities of the City as a whole and present a long-term view of the City's finances. Fund financial statements start on page 14. For governmental activities, these fund statements tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report the City's operation in more detail than the government -wide statements by providing information about the City's most significant funds and other funds. The remaining fiduciary (Agency) fund statement provides financial information about activities for which the City acts solely as a trustee or agent for the benefit of those outside of the government. REPORTING THE CITY AS A WHOLE The Statement of Net Assets and the Statement of Activities: The analysis of the City as a whole begins on page 11. The Statement of Net Assets and the Statement of Activities report information about the City as a whole and about its activities. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private -sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the City's net assets and changes. Net assets are the difference between assets and liabilities, which is one way to measure the City's financial health, or financial position. Over time, increases or decreases in the City's net assets are an indication of whether its financial health is improving or deteriorating. However, other non- financial factors such as changes in the economy due to external factors that will cause a decrease in consumer spending also needs to be taken into consideration. In the Statement of Net Assets and the Statement of Activities, the City's activities are separated as follows: Governmental activities — Most of the City's basic services are reported in this category, including the general government (city manager, city clerk, finance, etc.), public safety (police protection), public works, community development, cultural and leisure, and interest on long-term debt. Property taxes, sales tax, motor vehicle in -lieu fees, interest income, franchise fees, state and federal grants, contributions from other agencies, and other revenues finance these activities. Business -type activities — The City charges a fee to customers to cover all or most of the cost of certain services it provides. The City's water and sewer utilities are reported in this category. REPORTING THE CITY'S MOST SIGNIFICANT FUNDS Fund Financial Statements: The fund financial statements provide detailed information about the most significant funds and other funds - not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, management established many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other resources. The City's two types of funds are governmental and proprietary. Governmental funds - Most of the City's basic services are reported in governmental funds, which focus on how money flows in and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. The differences of results in the Governmental Fund financial statements to those in the Government -Wide financial statements are explained in a reconciliation following each Governmental Fund financial statement. Proprietary funds - When the City charges customers for the services it provides, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Activities. In fact, the City's enterprise funds are the same as the business -type activities that are reported in the government -wide statements but provide more detail and additional information such as a statement of cash flows. THE CITY AS TRUSTEE Reporting the City's Fiduciary Responsibilities: The City is the trustee, or fiduciary, for certain funds held on behalf of those entities outside of the government. The City's fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. These activities are excluded from the City's other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. THE CITY AS A WHOLE The following is an analysis that summarizes the City's net assets at fiscal year ended June 30, 2005 and 2006, respectively: Current and other assets Capital & intangible assets Total Assets Long -Term Liabilities Outstanding Other Liabilities Total Liabilities Net Assets: Invested in capital assets, net of related debt Restricted Unrestricted Total Net Assets 2006 2005 Governmental Activities 27,535 $68,149 $58,584 231,844 214,374 299,993 272,958 35,854 37,824 13,079 3,288 48,933 41,112 196,573 177,027 26,951 25,314 27,535 29,505 251,059 231,846 Net Assets (Summarized) (2,928) As of June 30, 2006 9,494 (in thousands) 6,566 2006 2005 Business -Type Activities $58,636 $51,445 128,131 130,407 186,767 181,852 26,580 27,538 2,705 3,003 29,285 30,541 101,716 90,729 901 915 54,865 59,667 157,482 151,311 4 2006 Total $126,785 359,975 486,760 62,434 15,785 78,219 298,289 27,853 82,399 408,541 2005 Total Change $110,029 $16,756 344,781 15,194 454,810 31,950 65,362 (2,928) 6,291 9,494 71,653 6,566 267,756 30,533 26,229 1,624 89,172 (6,773) 383,157 25,384 Current and other assets had increased by $16.8 million, or 15.2% from $110.0 million to $126.8 million. This was primarily attributed to the increase in the cash and investments under the governmental activities for $17.4 million. Capital and intangible assets increased by a net of $15.2 million due to land acquisitions of $10.0 million under the governmental activities for the new Government Center and the new Community Park, and other newly constructed infrastructures and projects. On the other hand, long-term and other liabilities increased by a net of $6.6 million, was a direct result of a $5.9 million advance payment balance at year end from the developer to relocate and construct the New Community Park. This deposit will be reduced as reimbursements for the park project incur. Unrestricted net assets decreased $6.8 million from $89.2 million to $82.4 million as compared to prior year, due to the financing of the land acquisitions under the governmental activities, and the construction of a major water line through the City of Chino under the business -type activities. The overall result was an increase of a total of $25.3 million in the net assets from $383.2 million to $408.5 million in fiscal year 2005-06. The following is a summary of Statements of Activities that records the Changes in Net Assets: Changes in Net Assets As of June 30, 2006 (in thousands) Increase (Decrease) in $19,213 $9,979 $6,171 $6,549 25,384 16,528 $8,856 Net Assets Beginning Balance of Net 231,846 221,866 151,311 144,762 383,157 366,628 16,528 Assets Ending Balance of Net 251,059 231,846 157,482 151,311 408,541 383,157 25,384 Assets 5 2006 2005 2006 2005 2006 2005 Governmental Business -Type Activities Activities Total Total Change Revenues: Program Revenues: Charges for services $14,069 $12,081 $20,747 $18,593 34,816 30,674 $4,142 Operating grants and contributions 5,600 2,715 0 0 5,600 2,715 2,885 Capital grants and contributions 23,624 11,145 2,803 0 26,427 11,145 15,282 General Revenues: Property taxes 7,697 6,445 0 0 7,697 6,445 1,252 Sales taxes 4,991 4,575 0 0 4,991 4,575 416 Franchise taxes 2,048 1,754 0 0 2,048 1,754 294 Business license taxes 144 138 0 0 144 138 6 Othertaxes 501 565 0 0 501 565 (64) Intergovernmental, 537 1,951 0 0 536 1,951 (1,415) unrestricted Use of money and 3,528 2,306 1,653 843 5,182 3,149 2,033 property Other Revenues 412 679 12 5,950 424 6,629 (6,205) Gain on investment in joint 0 0 0 530 0 530 (530) venture Total Revenues 63,151 44,354 25,215 25,916 88,366 70,270 18,096 Expenses: General government 5,271 4,707 0 0 5,271 4,707 564 Public safety 7,710 6,316 0 0 7,710 6,316 1,394 Public works 23,693 16,338 0 0 23,693 16,338 7,355 Community development 3,077 3,557 0 0 3,077 3,557 (480) Culture and leisure 3,192 2,962 0 0 3,192 2,962 230 Interest on long-term 994 495 0 0 994 495 499 debt Water Utility 0 0 14,369 15,079 14,369 15,079 (710) Sewer Utility 0 0 4,285 4,288 4,285 4,288 (3) Loss on investment in joint 0 0 390 0 390 0 390 venture Total Expenses 43,938 34,375 19,044 19,367 62,982 53,742 9,240 Increase (Decrease) in $19,213 $9,979 $6,171 $6,549 25,384 16,528 $8,856 Net Assets Beginning Balance of Net 231,846 221,866 151,311 144,762 383,157 366,628 16,528 Assets Ending Balance of Net 251,059 231,846 157,482 151,311 408,541 383,157 25,384 Assets 5 The City's overall financial situation improved in term of overall revenues. However, overall expenditures also increased during FY 2005-06. The overall revenues had increased drastically by $18.1 million, or 25.8% as compared to prior year. This was primarily due to increases in capital contribution from developer ($7.0 million) and operating grant ($2.0 million) under the Governmental Activities, for the New Community Park and the Los Serranos Infrastructure projects, respectively. Other factors which attributed to the overall increase in revenues included: 1) higher Vehicle In -Lieu Fee of $0.9 million based on higher property value and population growth, 2) higher return on investments by $1.2 million, and 3) higher level of development activities by $1.4 million. For the revenues related to the business -type activities, there was no significant change compared to FY 2005-06. On the other hand, overall expenditures also increase by $9.2 million, or 17.2% as compared to last fiscal year. Expenditures under governmental activities for Public Works had increased significantly by $7.4 million during FY 2005- 06, due to increase in operating costs and capital projects spending. As population continued to grow in the City, demand for public services and protection also increased. Expenditures for Public Safety had leaped up by another $1.4 million compared to FY 2004-05, due to increase in law enforcement personnel and related expenditures by $1.1 million. Interest expenses related to long-term debts payments were $0.5 million higher than last fiscal year, due to interest rate upward adjustments. For the expenses related to business -type activities, cost of operations remained at the same level as compared to prior year. The overall impact was an increase of $8.8 million to the City's change in net assets from $16.5 million to $25.3 million in FY 2005-06. Governmental Activities The following presents the cost of each of the City's six largest programs — general government, public safety, community development, culture and leisure, public works and interest on long-term debt — as well as each program's net cost (total cost less revenues generated by the activities). The net cost shows the financial burden that was placed on the City's taxpayers by each of these functions. Governmental Activities As of June 30, 2006 (in thousands) 2006 2005 Total Cost of Services Total Total General government $5,271 $4,707 Public safety 7,710 6,316 Public works 23,693 16,338 Community development 3,077 3,557 Culture and leisure 3,192 2,962 Interest on long-term debt 995 495 Total $43,938 $34,375 Net Cost of Services 2006 2005 General government ($175) $541 Public safety (6,416) (5,549) Public works (11,256) (6,946) Community development 20,413 5,986 Culture and leisure (2,216) (1,971) Interest on long-term debt (995) (495) Total ($645) ($8,434) THE CITY'S FUNDS Chance $564 1,394 7,355 (480) 230 500 $9,563 Chance ($716) (867) (4,310) 14,427 (245) (500) $7,789 The governmental funds balance sheet is shown on page 14 and 15. The combined fund balance included the general fund balance of $15.2 million, of which $0.6 million was reserved for encumbrances and interfund loans, and $14.6 million was unreserved but designated for special purposes. There is a decrease of $2.6 million in the General Fund fund 9 balance primarily due to capital spending during the fiscal year. As for the Existing Infrastructure Fee Fund, fund balance improved from a deficit of ($0.3) million to a positive balance of $0.5 million compared to prior year. The improvement of the deficit gap was a result of the timing difference when the actual development fee revenues collected, exceeded the development fee credits given during the year for developers who have development agreements with the City. Overall capital spending level had increased significantly, because of the construction of the new Community Park at a new location in order to make the current site available for the future Government Center, and the land acquisitions to the surrounding areas. General Fund Budgetary Highlights During the year, the City Council reviewed and revised the City budget as recommended by the staff. Adjustments were made on a quarterly basis as the City's staff requested additional appropriations to cover the cost of projects that either had change orders for additional work, or the estimated cost at the beginning of the project was underestimated. Adjustments were also made as department heads requested increases or decreases to their budgets to maintain their current level of services. All amendments that either increase or decrease appropriations are approved by the City Council. For the General Fund, actual revenues of $45.5 million were in line with budget of $45.0 million with a variance of $0.5 million, or 1.2 percent above the overall budget. This is consistent with a $0.5 million variance as in FY 2004-05. Both motor vehicle in -lieu fees and sales tax had experienced growth by $1.0 million and $0.4 million due to continue increase in population and sales volume, respectively. Actual expenses were $30.3 million, about $6.6 million less than total amount appropriated at $36.9 million. This is a combined result of capital spending of $2.9 million budgeted but not yet spent in the current fiscal, lesser than anticipated legal costs of $0.5 million, and lesser than budgeted engineering services of $0.7 million, etc. Among all the programs, public safety remained the largest program in the General Fund, with a total budget of $7.7 million, or 21% of the overall General Fund budget. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City of Chino Hills had $360.0 million invested in the capital assets, as compared to $344.8 million in FY 2004-05. Net increase in the capital assets is approximately $15.2 million. Capital Assets at Year -End (Net of Depreciation) For the Year Ended June 30, 2006 (in thousands) The City purchased land parcels surrounding the existing Community Park in order to convert the current site into the future Government Center. Majority of the land acquisitions were completed in the FY 2005-06 for about $10.0 million, and the land was recorded under the government activities column. The increase of $9.7 million under construction -in - progress represented about $3.2 million expenditures for the New Community Park in progress, and $3.4 million in constructing and widening the surrounding streets to prepare for the new Government Center. It is anticipated the total capital spending for the New Community Park to be $16.9 million, with an expected completion date in the FY 2006-07. 7 2006 2005 2006 2005 2006 2005 Governmental Business -Type Activities Activities Total Total Change Land and easements 28,576 18,609 3,607 3,607 32,183 22,216 9,967 Construction -in -progress 17,946 8,241 5,960 16,702 23,906 24,943 (1,037) Structures and 28,630 28,033 969 1,014 29,599 29,047 552 improvements Utility plant in service 0 0 15,862 16,377 15,862 16,377 (515) Meters 0 0 1,612 1,273 1,612 1,273 339 Pipeline in service 198 202 88,031 78,999 88,229 79,201 9,028 Equipment 427 478 185 159 612 637 (25) Vehicle 1,614 1,035 0 0 1,614 1,035 579 Infrastructure 154,453 157,776 0 0 154,453 157,776 (3,323) Water & capacity rights 0 0 11,905 12,276 11,905 12,276 (371) Total 231,844 214,374 128,131 130,407 359,975 344,781 15,194 The City purchased land parcels surrounding the existing Community Park in order to convert the current site into the future Government Center. Majority of the land acquisitions were completed in the FY 2005-06 for about $10.0 million, and the land was recorded under the government activities column. The increase of $9.7 million under construction -in - progress represented about $3.2 million expenditures for the New Community Park in progress, and $3.4 million in constructing and widening the surrounding streets to prepare for the new Government Center. It is anticipated the total capital spending for the New Community Park to be $16.9 million, with an expected completion date in the FY 2006-07. 7 The new Government Center project has a budget of over $66 million, and will be funded primarily by development fees and Community Facilities District funds. For the business -type activities, a major water pipeline was finally completed in the current fiscal year for $11 million, and no fiscal impact to the over all capital assets since the amount was recorded as construction -in -progress in prior year. Please refer to Note 5 on P.45-46 for further details on capital assets. Debt At year-end, the City's governmental activities had $35.9 million in long-term debts including development fee related obligations, capital lease obligations, and compensated absences, as compared to $37.8 million in prior year, a net decrease of $1.9 million during the fiscal year. Please refer to Note 6 on P. 47-52 for further details on the City's long-term liabilities. Outstanding Debt at Year -End For Fiscal Year Ended June 30, 2006 (in thousands) Total 35,854 37,824 26,580 27,538 62,434 65,362 (2,928) For the obligations related to the governmental activities, 98.33% were development related and owed to developers who had previously installed major infrastructure throughout the City. Reduction in these commitments was given in the form of development fee credits when the developers pulled construction permits with the City during the year. Other obligation included $0.6 million of compensated absences liabilities owed to the City's employees. In addition, the City's business -type activities had $26.6 million in long-term debts and they were recorded primarily in the Water Utility and Sewer Utility funds. Currently, the principal debt outstanding at June 30, 2006 was $ 9.4 million and $15.2 million for the 2002 and 2003 Certificate of Participations (C.O.P.), respectively. The 2002 Water C.O.P. was issued to acquire as well as construct major improvements to the water system, whereas the 2003 Water C.O.P was issued to refund the 1996 Water C.O.P. (Note 1): McCoy Equestrian Center has a lease amount outstanding at June 30, 2006 for $16, which was reduced by the annual payment of $1 paid in FY 2005-06. (Note 2): Business -type activities has a capital lease amount of $253 outstanding at June 30, 2005. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET In preparing the budget for 2006-07, the following economic factors have been taken into account: • State of California's financial situation would continue to improve. • New legislations would not materially impact the current revenue sources to the City. • Upward adjustments in the investment earnings rate would slow down as compared to prior years. Key budget assumptions for forecasting General Fund revenues in FY 2006-07 include the following: • The City's Motor Vehicle License Fees (VLF) revenue would continue to grow as property value and population increase. • As the City will have the first theater and new retail stores open in the new fiscal year, sales tax is budgeted at $0.5 million higher than prior year. A 2006 2005 2006 2005 2006 2005 Governmental Business -Type Activities Activities Total Total Chance Compensated absences 583 478 172 145 755 623 132 Advances from developers 891 891 0 0 891 891 0 Advances for construction 0 0 22 23 22 23 (1) Development fee program 34,366 36,407 3,238 3,238 37,604 39,645 (2,041) obligations Capital lease obligations 14 48 0 (Note 2) 14 48 (34) Equestrian center lease (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Note 1) (Notes) Certificates of Participation 0 0 24,560 25,660 24,560 25,660 (1,100) Less: Deferred amount on 0 0 (1,308) (1,418) (1,308) (1,418) 110 Refunding unamortized bond 0 0 (104) (110) (104) (110) 6 discount Total 35,854 37,824 26,580 27,538 62,434 65,362 (2,928) For the obligations related to the governmental activities, 98.33% were development related and owed to developers who had previously installed major infrastructure throughout the City. Reduction in these commitments was given in the form of development fee credits when the developers pulled construction permits with the City during the year. Other obligation included $0.6 million of compensated absences liabilities owed to the City's employees. In addition, the City's business -type activities had $26.6 million in long-term debts and they were recorded primarily in the Water Utility and Sewer Utility funds. Currently, the principal debt outstanding at June 30, 2006 was $ 9.4 million and $15.2 million for the 2002 and 2003 Certificate of Participations (C.O.P.), respectively. The 2002 Water C.O.P. was issued to acquire as well as construct major improvements to the water system, whereas the 2003 Water C.O.P was issued to refund the 1996 Water C.O.P. (Note 1): McCoy Equestrian Center has a lease amount outstanding at June 30, 2006 for $16, which was reduced by the annual payment of $1 paid in FY 2005-06. (Note 2): Business -type activities has a capital lease amount of $253 outstanding at June 30, 2005. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET In preparing the budget for 2006-07, the following economic factors have been taken into account: • State of California's financial situation would continue to improve. • New legislations would not materially impact the current revenue sources to the City. • Upward adjustments in the investment earnings rate would slow down as compared to prior years. Key budget assumptions for forecasting General Fund revenues in FY 2006-07 include the following: • The City's Motor Vehicle License Fees (VLF) revenue would continue to grow as property value and population increase. • As the City will have the first theater and new retail stores open in the new fiscal year, sales tax is budgeted at $0.5 million higher than prior year. A City will also have the first hotel open in FY 2006-07, with transient -occupancy -tax to be added to the General Fund revenue sources. Development activities within the City are projected to be at 484 in residential units in FY 2006-07 and the permit fee will continue to fund the related operations. Investment earning was projected at about $1.1 million or at a rate of 4.40 percent. The Operating Budget for fiscal year 2006-07 is a well-balanced budget that reflects the City's commitment to foster steady, controlled growth and provide the highest level of service to the community within the City's financial constraint and is consistent with the City Council's goals and objectives. Questions or requests for information regarding the City of Chino Hills' 2006-07 budget should be sent to the Finance Department at the address below. SUBSEQUENT EVENTS The City issued $49.7 million of Community Facilities District Revenue Bonds on August 30, 2006. The purpose of the issuance is to provide funds for the construction of the new Government Center and related infrastructure. Please refer to Note 13 on P. 60 for details. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City of Chino Hills' finances and to show the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City's Finance Department, at the City of Chino Hills, 2001 Grand Avenue, Chino Hills, CA 91709. CITY OF CHINO HILLS INC ORP ORATED 1 9 9 1 This page intentionally left blank. 10 BASIC FINANCIAL STATEMENTS CITY OF CHINO HILLS INCORPORATED 1 99 1 CITY OF CHINO HILLS STATEMENT OF NET ASSETS .LUNE 30, 2006 Total Net Assets $ 251,058,968 $ 157,481,959 $ 408,540,927 See Notes to Financial Statements 11 Primary Government Governmental Business -Type Activities Activities Total Assets: Cash and investments $ 79,054,793 $ 28,203,108 $ 107,257,901 Receivables: Accounts 883,819 2,759,131 3,642,950 Accrued interest 520,274 237,049 757,323 Taxes 1,430,029 - 1,430,029 Special assessments 91,574 901,584 993,158 Internal balances (18,652,806) 18,652,806 - Due from other agencies 274,052 2,781 276,833 Due from other governments 868,865 - 868,865 Due from developers 3,028,387 128,183 3,156,570 Inventories - 114,441 114,441 Deferred charges - 550,692 550,692 Investment in joint venture - 6,184,882 6,184,882 Restricted assets: Cash and investments 230,945 - 230,945 Cash and investments with fiscal agent 418,755 901,348 1,320,103 Capital assets not being depreciated 46,522,173 9,566,826 56,088,999 Capital assets, net of depreciation 185,321,454 118,564,471 303,885,925 Total Assets 299,992,314 186,767,302 486,759,616 Liabilities: Accounts payable 5,629,827 1,288,627 6,918,454 Accrued liabilities 687,856 114,279 802,135 Accrued interest - 82,955 82,955 Deposits - 1,211,327 1,211,327 Retentions payable 532,732 - 532,732 Due to developers 53,128 8,160 61,288 Unearned revenues 6,175,646 - 6,175,646 Noncurrent liabilities: Due within one year 35,700 1,128,000 1,163,700 Due in more than one year 35,818,457 25,451,995 61,270,452 Total Liabilities 48,933,346 29,285,343 78,218,689 Net Assets: Invested in capital assets, net of related debt 196,572,923 101,715,882 298,288,805 Restricted for: Public works 16,880,699 - 16,880,699 Development fees projects 7,893,079 - 7,893,079 Capital projects 1,156,047 - 1,156,047 Debt service 1,021,590 901,348 1,922,938 Unrestricted 27,534,630 54,864,729 82,399,359 Total Net Assets $ 251,058,968 $ 157,481,959 $ 408,540,927 See Notes to Financial Statements 11 CITY OF CHINO HILLS STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2006 Total General Revenues and Transfers Change in Net Assets Net Assets at Beginning of Year Net Assets at End of Year See Notes to Financial Statements 12 Program Revenues Operating Capital Charges for Contributions Contributions Expenses Services and Grants and Grants Functions/Programs Primary Government: Governmental Activities: General government $ 5,271,426 $ 5,096,254 $ - $ - Public safety 7,709,721 1,180,499 113,140 M - Public works 23,693,162 4,746,512 666,456p� 7,024,208 Community development 3,077,001 2,070,238 4,820,122,- 16,599,523 Culture and leisure 3,191,791 975,332 - Interest on long-term debt 994,463 - _ - Total Governmental Activities 43,937,564 14,068,835 5,599,718 23,623,731 Business -Type Activities: Water utility 14,369,015 16,341,865 - 2,307,168 Sewer utility 4,285,136 4,404,840 - 496,365 Total Business -Type Activities 18,654,151 20,746,705 - 2,803,533 Total Primary Government $ 62,591,715 $ 34,815,540 $ 5,599,718 $ 26,427,264 General Revenues: Taxes: Property taxes, levied for general purpose Sales taxes Franchise taxes Business licenses taxes Other taxes Intergovernmental, unrestricted Motor vehicle in lieu Use of money and property Gain (Loss) on sale of assets Gain (Loss) on investment in joint venture Other Total General Revenues and Transfers Change in Net Assets Net Assets at Beginning of Year Net Assets at End of Year See Notes to Financial Statements 12 CITY OF CHINO HILLS STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2006 Net (Expenses) Revenues and Changes in Net Assets Primary Government Governmental Business -Type Activities Activities Total $ (175,172) (6,416,082) (11,255,986) 20,412,882 (2,216,459) (994,463) (645,280) (645,280) 7,696,773 4,991,352 2,047,801 144,613 501,058 536,507 3,528,476 412,136 19,858,716 19,213,436 231,845,532 $ 251,058,968 4,280,018 616,069 $ (175,172) (6,416,082) (11,255,986) 20,412,882 (2,216,459) (994,463) (645,280) 4,280,018 616,069 4,896,087 4,896,087 4,896,087 4,250,807 1,653,347 11,747 (390,308) 1,274,786 6,170,873 151,311,086 $ 157,481,959 7,696,773 4,991,352 2,047,801 144,613 501,058 536,507 5,181,823 11,747 (390,308) 412,136 21,133,502 25,384,309 383,156,618 $ 408,540,927 See Notes to Financial Statements 13 CITY OF CHINO HILLS BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables (net of allowances): Accounts Interest Taxes Special assessments Due from other agencies Due from other governments Due from developers Due from other funds Advances to other funds Restricted assets: Cash and investments Cash and investments with fiscal agents Total Assets Liabilities and Fund Balances: Liabilities: Accounts payable Accrued liabilities Retentions payable Due to other funds Due to developers Deferred revenues Unearned revenues Advances from other funds Total Liabilities Fund Balances: Reserved for: Encumbrances Acquisition of facilities Special assessments Advances to other funds Unreserved: Unreserved, reported in nonmajor: Special revenue funds Capital projects funds Designated for: Structural replacement Cash flow Emergencies and contingencies Special projects Undesignated Total Fund Balances Total Liabilities and Fund Balances See Notes to Financial Statements General Special Revenue Funds Landscape Existing and Lighting Infrastructure District Fee $ 31,059,354 $ 8,778,011 $ 3,646,529 491,843 3,636 - 261,772 64,153 37,493 1,215,494 - - - 87,158 - 274,052 - - 241,756 - - 618,843 - 2,344,013 357,671 422,800 - 384,450 3,436,100 - $ 34,905,235 $ 12,791,858 $ 6,028,035 $ 452,580 $ 261,209 $ - 605,840 44,760 - 515,587 61,461 - - - 53,128 1,021,590 - - 17,137,067 - 5,437,241 19,732,664 367,430 5,490,369 187,129 - - - - 677,633 - - 744,853 384,450 3,436,100 - 180,848 3,954,801 - 3,225,244 3,753,956 - 10,861,165 - _ 333,735 - _ - 1,279,571 (884,820) 15,172,571 12,424,428 537,666 $ 34,905,235 $ 12,791,858 $ 6,028,035 14 CITY OF CHINO HILLS BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2006 Liabilities and Fund Balances: Liabilities: Accounts payable Capital Project $ 1,345,243 $ 5,538,321 Accrued liabilities Fund 29,966 680,566 Retentions payable 532,732 Other Total Due to other funds Capital Governmental Governmental Due to developers Improvement Funds Funds Assets: - - 1,021,590 Cash and investments $ 9,642,421 $ 22,486,801 $ 75,613,116 Receivables (net of allowances): - 3,246,100 25,820,408 Accounts - 370,006 865,485 Interest - 131,934 495,352 Taxes - 214,535 1,430,029 Special assessments - 4,416 91,574 Due from other agencies - - 274,052 Due from other governments - 627,109 868,865 Due from developers - 65,531 3,028,387 Due from other funds 35,762 175,900 992,133 Advances to other funds - 3,860,997 7,681,547 Restricted assets: Cash and investments 70,372 160,573 230,945 Cash and investments with fiscal agents - 418,755 418,755 Total Assets $ 9,748,555 $ 28,516,557 $ 91,990,240 Liabilities and Fund Balances: Liabilities: Accounts payable $ 3,479,289 $ 1,345,243 $ 5,538,321 Accrued liabilities - 29,966 680,566 Retentions payable 532,732 - 532,732 Due to other funds - 576,401 1,153,449 Due to developers - - 53,128 Deferred revenues - - 1,021,590 Unearned revenues 5,736,534 439,112 6,175,646 Advances from other funds - 3,246,100 25,820,408 Total Liabilities 9,748,555 5,636,822 40,975,840 Fund Balances: Reserved for: Encumbrances 8,005,023 194,197 8,386,349 Acquisition of facilities - 2,036,125 2,713,758 Special assessments - - 744,853 Advances to other funds - 3,860,997 7,681,547 Unreserved: Unreserved, reported in nonmajor: Special revenue funds - 15,632,369 15,632,369 Capital projects funds - 1,156,047 1,156,047 Designated for: Structural replacement - - 4,135,649 Cash flow - - 6,979,200 Emergencies and contingencies - - 10,861,165 Special projects - - 333,735 Undesignated (8,005,023) - (7,610,272) Total Fund Balances - 22,879,735 51,014,400 Total Liabilities and Fund Balances $ 9,748,555 $ 28,516,557 $ 91,990,240 See Notes to Financial Statements 15 CITY OF CHINO HILLS INC OR P OR ATE D 19 91 This page intentionally left blank. 16 CITY OF CHINO HILLS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2006 Fund balances of governmental funds $ 51,014,400 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets net of depreciation have not been included as financial resources in governmental fund activity. 230,106,109 Long-term debt and compensated absences have not been included in the governmental fund activity: Long-term debt payable (35,270,704) Compensated absences (574,273) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 1,021,590 Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The assets and liabilities of the internal service funds must be added to the statement of net assets. 4,761,846 Net assets of governmental activities $ 251,058,968 See Notes to Financial Statements 17 CITY OF CHINO HILLS STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 Revenues: Taxes Special assessments Licenses and permits Intergovernmental Charges for services Development fees Contribution from property owners Fines and forfeitures Use of money and property Miscellaneous Total Revenues Expenditures: Current: General government Public safety Public works Community development Culture and leisure Capital outlay Debt service: Principal retirement Interest and fiscal charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out Other debts issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances: Beginning of Year End of Year Special Revenue Funds Landscape Existing and Lighting Infrastructure $ 15,028,374 $ - $ - 5,163,930 - 2,440,976 - - 621,494 - - 5,811,278 1,354,145 - - - 2,860,037 - 148,584 - 585,743 - - 2,153,172 413,867 152,538 963,577 28,151 - 27,604,614 7,108,677 3,012,575 See Notes to Financial Statements 18 4,613,221 - - 7,580,482 - - 3,594,185 6,703,903 - 2,773,274 - 637,501 2,231,472 - - 71,803 60,897 - 142,617 - 1,669,792 615,083 - 323,927 21,622,137 6,764,800 2,631,220 5,982,477 78,534 (8,688,238) (8,609,704) (2,627,227) 17,799,798 $ 15,172,571 343,877 381,355 233,588 (481,792) (248,204) 95,673 12,328,755 $ 12,424,428 250,581 250,581 631,936 (94,270) $ 537,666 CITY OF CHINO HILLS STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 Capital Project Fund Other Total Capital Governmental Governmental Improvement Funds Funds Revenues: Taxes $ - $ - $ 15,028,374 Special assessments Licenses and permits Intergovernmental Charges for services Development fees Contribution from property owners Fines and forfeitures Use of money and property Miscellaneous Total Revenues Expenditures: Current: General government Public safety Public works Community development Culture and leisure Capital outlay Debt service: Principal retirement Interest and fiscal charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out Other debts issued Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances: Beginning of Year End of Year See Notes to Financial Statements - 207,357 5,371,287 - - 2,440,976 - 5,422,501 6,043,995 - 3,513,075 10,678,498 - 1,255,624 4,115,661 11,228,236 2,799,046 14,175,866 - - 585,743 - 696,234 3,415,811 - 11,616 1,003,344 11,228,236 13,905,453 62,859,555 - 863 4,614,084 - 121,794 7,702,276 - 6,533,380 16,831,468 - 128,706 3,539,481 - 165,908 2,397,380 24,787,883 259,206 25,179,789 - 64,520 1,876,929 - 55,453 994,463 24,787,883 7,329,830 63,135,870 (13,559,647) 6,575,623 (276,315) 13,559,647 44,815 13,916,584 - (4,746,554) (13,916,584) - - 250,581 13,559,647 (4,701,739) 250,581 - 1,873,884 (25,734) - 21,005,851 51,040,134 $ - $ 22,879,735 $ 51,014,400 19 CITY OF CHINO HILLS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2006 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities differs from the amounts reported in the statement of activities because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Compensated absences 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. Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The net revenues (expenses) of the internal service funds are reported with governmental activities. Change in net assets of governmental activities See Notes to Financial Statements 20 (25,734) 16,892,216 2,075,690 (127,265) (122,982) 521,511 $ 19,213,436 CITY OF CHINO HILLS BUDGETARY COMPARISON STATEMENT GENERAL FUND YEAR ENDED JUNE 30, 2006 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 17,799,798 $ 17,799,798 $ 17,799,798 $ - Resources (inflows): Taxes Licenses and permits Intergovernmental Charges for services Fines and forfeitures Use of money and property Miscellaneous Transfers from other funds Amounts Available for Appropriation Charges to Appropriation (Outflow): General government: City council City manager City clerk City attorney Finance Human Resources Risk management Non -departmental Public safety: Emergency preparedness Code enforcement Law enforcement Neighborhood services Public works: Public facilities and operations Engineering Community development: Community development Building and safety Planning Economic development Culture and leisure: Recreation Community services administration Capital outlay Debt service: Principal Interest and fiscal charges Transfers to other funds Total Charges to Appropriations Budgetary Fund Balance, June 30 See Notes to Financial Statements 13,451,900 1,381,600 389,600 6,659,800 560,100 1,538,000 1,910,900 334,500 44.026.198 13,940,000 1,481,600 389,600 6,474,000 560,100 1,679,200 2,296,700 334,500 44,955,498 15,028,374 2,440,976 621,494 5,811,278 585,743 2,153,172 963,577 78,534 45,482,946 1,088,374 959,376 231,894 (662,722) 25,643 473,972 (1,333,123) (255,966) 527,448 199,100 211,600 181,187 30,413 1,258,300 1,318,000 1,137,505 180,495 582,400 617,200 550,115 67,085 750,000 750,000 298,421 451,579 1,413,900 1,495,400 1,399,205 96,195 298,800 316,500 276,344 40,156 908,200 919,900 728,820 191,080 62,500 62,500 41,624 20,876 52,600 54,800 45,271 9,529 188,600 197,200 165,449 31,751 6,779,500 6,810,100 6,753,277 56,823 668,000 683,600 616,485 67,115 2,076,400 2,200,000 1,943,845 256,155 2,201,200 2,338,500 1,650,340 688,160 815,500 860,300 651,832 208,468 1,144,800 1,250,200 1,108,032 142,168 1,039,300 1,091,700 894,429 197,271 131,700 136,900 118,981 17,919 2,109,900 2,120,200 1,654,496 465,704 638,500 659,500 576,976 82,524 20,000 101,400 71,803 29,597 411,900 411,900 142,617 269,283 193,200 633,300 615,083 18,217 4,604,400 11,613,000 8,688,238 2,924,762 28,548,700 36,853,700 30,310,375 6,543,325 $ 15,477,498 $ 8,101,798 $ 15,172,571 $ 7,070,773 21 CITY OF CHINO HILLS BUDGETARY COMPARISON STATEMENT LANDSCAPE AND LIGHTING DISTRICT YEAR ENDED JUNE 30, 2006 Budgetary Fund Balance, July 1 Resources (Inflows): Special assessments Charges for services Use of money and property Miscellaneous Contribution from property owners Transfers from other funds Amounts Available for Appropriation Charges to Appropriation (Outflow): Public works Capital outlay Transfers to other funds Total Charges to Appropriations Budgetary Fund Balance, June 30 See Notes to Financial Statements Variance with $ 10,851,255 $ 9,689,555 $ 12,424,428 $ 2,734,873 22 Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) $ 12,328,755 $ 12,328,755 $ 12,328,755 $ - 5,100,500 5,100,500 5,163,930 63,430 1,347,600 1,347,600 1,354,145 6,545 188,800 340,100 413,867 73,767 - - 28,151 28,151 - 148,600 148,584 (16) 531,700 531,700 233,588 (298,112) 19,497,355 19,797,255 19,671,020 (126,235) 6,851,700 6,928,100 6,703,903 224,197 57,500 61,000 60,897 103 1,736,900 3,118,600 481,792 2,636,808 8,646,100 10,107,700 7,246,592 2,861,108 $ 10,851,255 $ 9,689,555 $ 12,424,428 $ 2,734,873 22 CITY OF CHINO HILLS BUDGETARY COMPARISON STATEMENT EXISTING INFRASTRUCTURE FEE YEAR ENDED JUNE 30, 2006 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ (94,270) $ (94,270) $ (94,270) $ - Resources (Inflows): Development fees 4,167,400 4,167,400 2,860,037 (1,307,363) Use of money and property 60,400 74,600 152,538 77,938 Other debts issued - - 250,581 250,581 Amounts Available for Appropriation 4,133,530 4,147,730 3,168,886 (978,844) Charges to Appropriation (Outflow): Community development 1,102,500 1,102,500 637,501 464,999 Debt service.- ervice:Principal Principal 952,300 952,300 1,669,792 (717,492) Interest and fiscal charges 259,300 259,300 323,927 (64,627) Total Charges to Appropriations 2,314,100 2,314,100 2,631,220 (317,120) Budgetary Fund Balance, June 30 $ 1,819,430 $ 1,833,630 $ 537,666 $ (1,295,964) See Notes to Financial Statements 23 CITY OF CHINO HILLS STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2006 Business -Type Activities - Governmental Enterprise Funds Activities - Water Sewer Internal Utility Utility Totals Service Funds Assets: Current Cash and investments $ 22,719,131 Receivables: 468,806 Accounts 2,290,325 Interest 177,965 Due from other funds 75,045 Due from other agencies - Due from other developers 124,215 Inventories 113,818 Restricted assets: - Cash with fiscal agents 901,348 Total Current Assets 26,401,847 Noncurrent Advances to other funds 4,534,840 Deferred charges 550,692 Investment in joint venture 6,184,882 Capital assets - net of accumulated depreciation 102,422,502 Total Noncurrent Assets 113,692,916 Total Assets $ 140,094,763 See Notes to Financial Statements 24 $ 5,483,977 $ 28,203,108 $ 3,441,677 468,806 2,759,131 18,334 59,084 237,049 24,922 86,367 161,412 - 2,781 2,781 - 3,968 128,183 - 623 114,441 - - 901,348 - 6,105,606 32,507,453 3,484,933 17,926,805 22,461,645 - 550,692 - 6,184,882 25,708,795 128,131,297 1,737,518 43,635,600 157,328,516 1,737,518 $ 49,741,206 $ 189,835,969 $ 5,222,451 CITY OF CHINO HILLS STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2006 Liabilities and Net Assets: Liabilities: Current: Accounts payable Accrued payroll payable Accrued interest payable Deposits Due to other funds Due to other developers Compensated absences Certificates of participation Total Current Liabilities Noncurrent: Advances from other funds Advances for constructions Due to other developers Compensated absences Certificates of participation Total Noncurrent Liabilities Total Liabilities Net Assets: Invested in capital assets, net of related debt Restricted for debt service Unrestricted Total Net Assets Total Liabilities and Net Assets Business -Type Activities - Governmental Enterprise Funds Activities - Water Sewer Internal Utility Utility Totals Service Funds $ 917,921 $ 370,706 $ 1,288,627 $ 91,506 88,101 26,178 114,279 7,290 82,955 - 82,955 - 948,359 262,968 1,211,327 - - 96 96 - 8,160 - 8,160 - 1,500 1,500 3,000 500 1,125,000 - 1,125,000 - 3,171,996 661,448 3,833,444 99,296 3,421,200 - 3,421,200 - 22,027 - 22,027 - 3,237,533 - 3,237,533 - 126,188 43,552 169,740 8,680 22,022,695 - 22,022,695 - 28,829,643 43,552 28,873,195 8,680 32,001,639 705,000 32,706,639 107,976 76,007,087 25,708,795 101,715,882 1,737,518 901,348 - 901,348 - 31,184,689 23,327,411 54,512,100 3,376,957 108,093,124 49,036,206 157,129,330 5,114,475 $ 140,094,763 $ 49,741,206 $ 189,835,969 $ 5,222,451 Reconciliation of Net Assets to the Statement of Net Assets: Net assets per Statement of Net Assets - Proprietary Funds Prior years' accumulated adjustment to reflect the consolidation of internal service funds activities related to enterprise funds Current year internal service funds activity adjustment Net Assets of Business -Type Activities See Notes to Financial Statements 25 $ 157,129,330 265,656 86,973 $ 157,481,959 CITY OF CHINO HILLS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2006 Operating Revenues: Charges for services Meter and installation fees Other Total Operating Revenues Operating Expenses: Salaries and benefits Professional and contractual services Purchased water Repairs and maintenance Services and supplies Other general and administrative Utilities Depreciation and amortization Total Operating Expenses Operating Income (Loss) Nonoperating Revenues (Expenses): Interest earnings Interest expense Gain (Loss) on disposition of assets Gain (Loss) on investment in Joint Ventures Total Nonoperating Revenues(Expenses) Income (Loss) Before Contributions Contributions from developers Contributions from property owners Contributions from governmental funds Changes in Net Assets Net Assets: Beginning of Fiscal Year End of Fiscal Year Business -Type Activities - Governmental Enterprise Funds Activities - Water Sewer Internal Utility Utility Totals Service Funds $ 15,964,329 $ 4,386,819 94,397 - 283,139 18,021 16,341,865 4,404,840 1,510,945 550,152 5,101,161 825,966 177,989 1,476,565 463,049 3,016,526 13,122,353 3,219,512 788,008 (1,314,498) 11,747 (390,308) 425,542 2,255,607 187,117 44,028 369,700 19,729 1,002,550 4,304,273 100,567 $ 20,351,148 94,397 301,160 20,746,705 1,936,487 2,805,759 5,101,161 1,013,083 222,017 1,846,265 482,778 4,019,076 17,426,626 3,320,079 865,339 1,653,347 - (1,314,498) 11,747 (390,308) $ 1,494,572 1,494,572 112,168 245,039 217,989 226,047 148,731 350,541 1,300,515 194,057 112,665 (905,051) 865,339 (39,712) 112,665 2,314,461 965,906 3,280,367 306,722 1,848,024 200,472 2,048,496 459,144 295,893 755,037 4,621,629 1,462,271 6,083,900 301,762 608,484 103,471,495 47,573,935 151,045,430 4,505,991 $108,093,124 $ 49,036,206 $157,129,330 $ 5,114,475 Reconciliation of Changes in Net Assets to the Statement of Activities Changes in net assets per the Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds Adjustment to reflect the consolidation of the current fiscal year internal service funds activities related to enterprise funds Changes in Net Assets of Business -Type Activities See Notes to the Financial Statements 26 $ 6,083,900 86,973 $ 6,170,873 CITY OF CHINO HILLS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2006 Cash Flows from Operating Activities: Cash received from customers and users Cash paid to supplies for good and services Cash paid to employees for services Net Cash Provided (Used) by Operating Activities Cash Flows from Non -Capital Financing Activities: Due to other funds Due from other funds Advances to other funds Net Cash Provided (Used) by Non -Capital Financing Activities Cash Flows from Capital and Related Financing Activities: Contribution from developers Contribution from property owners Reimbursement cost Advances for construction Acquisition and construction of capital assets Proceeds from sales of capital assets Principal paid on note payable Principal paid on certificate of participation Interest paid on capital debt Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows from Investing Activities: Acquisition of investments in joint venture Interest received Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Business -Type Activities - Governmental Enterprise Funds Activities - Water Sewer Internal Utility Utility Total Service Funds $ 17,309,079 $ 4,165,686 $ 21,474,765 $ 1,497,924 (8,933,251) (2,896,640) (11,829,891) (856,064) (1,486,469) (405,011) (1,891,480) (110,340) 6,889,359 864,035 7,753,394 531,520 (7,933) 51 51 (34,876) (42,809) (8,496,641) (8,496,641) (7,933) (8,531,466) (8,539,399) 1,859,803 200,946 2,060,749 - 459,144 295,893 755,037 - (1,376) - (1,376) - (1,347,187) (361,558) (1,708,745) (626,620) 11,747 - 11,747 - (253) - (253) - (1,100,000) - (1,100,000) - (1,201,207) - (1,201,207) - (1,319,329) 135,281 (1,184,048) (626,620) (1,124,093) - 705,198 872,990 (1,124,093) - 1,578,188 104,202 (418,895) 872,990 454,095 104,202 5,143,202 (6,659,160) (1,515,958) 9,102 Cash and Cash Equivalents at Beginning of Year 18,477,277 12,143,137 30,620,414 3,432,575 Cash and Cash Equivalents at End of Year $ 23,620,479 $ 5,483,977 $ 29,104,456 $ 3,441,677 See Notes to Financial Statements 27 CITY OF CHINO HILLS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED JUNE 30, 2006 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in due from other agencies (Increase) decrease in due from other governments Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase (decrease) in deposits payable Increase (decrease) in fund held for others Increase (decrease) in compensated absences Total Adjustments Business -Type Activities - Governmental Enterprise Funds Activities - Water Sewer Internal Utility Utility Total Service Funds $ 3,219,512 $ 100,567 $ 3,320,079 $ 194,057 3,016,526 1,002,550 4,019,076 350,541 633,038 9,033 642,071 3,352 - (162) (162) - 39,929 - 39,929 - (338,369) (9,059) (347,428) (20,237) 6,369 10,497 16,866 1,979 294,247 (248,025) 46,222 - - (11,400) (11,400) - 18,107 10,034 28,141 1,828 3,669,847 763,468 4,433,315 337,463 Net Cash Provided (Used) by Operating Activities $ 6,889,359 $ 864,035 $ 7,753,394 $ 531,520 Non -Cash Investing, Capital, and Financing Activities: Contributions of capital assets - - - 301,762 See Notes to Financial Statements 28 CITY OF CHINO HILLS STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables: Interest Special assessments Restricted assets: Cash and investments with fiscal agents Total Assets Liabilities: Accounts payable Deposits Due to Inland Empire Utilities Agency Advances from other funds Funds held for others Total Liabilities See Notes to Financial Statements 29 Agency Funds $ 36,099,369 275,789 163,528 7,650,760 $ 44,189,446 $ 37,796 4,765,499 254,238 901,584 38230.329 $ 44,189,446 CITY OF CHINO HILLS INC ORP ORATED 1 9 9 1 This page intentionally left blank. 30 NOTES TO THE FINANCIAL STATEMENTS CITY OF CHINO HILLS INCORPORATED 1 99 1 CITY OF CHINO HILLS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Note 1: Organization and Summary of Significant Accounting Policies a. Description of the Reporting Entity The City of Chino Hills (the "City") was incorporated December 1, 1991 under the General Laws of the State of California. The City operates under a Council—Manager form of government and provides the following services: contracted police, lighting and landscaping, public improvements, water, sanitation, planning and zoning, general administrative services, contracted animal control, building and safety, community services, and street and highway maintenance. As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Chino Hills and its component units, entities for which the City is considered financially accountable. The inclusion of an organization within the scope of the reporting entity of the City of Chino Hills is based on the provision of GASB Statement No. 14 and 39. The blended component units discussed below, although legally separate entities, are in substance part of the government operation and data from these component units has been combined herein. The City of Chino Hills Redevelopment Agency The Chino Hills Redevelopment Agency (the Agency) was activated November 12, 2003, pursuant to the State of California Health and Safety Code Section 33000 entitled "Community Development Law." The primary purpose of the Agency is to serve as the second "public agency" in the formation of a joint powers agreement (JPA). It is not intended that the Agency conduct any activities other than to participate in the JPA formation process. The JPA will be formed to facilitate the purpose of executing Marks—Roos bond offerings. There was no financial activity during the fiscal year 2005-2006. The City of Chino Hills Public Financing Authority The City of Chino Hills Public Financing Authority (the Authority) was created by a joint exercise of joint powers agreement between the City of Chino Hills and the Chino Hills Redevelopment Agency on November 12, 2003, by virtue of the laws of the State of California pursuant to Section 2.02 hereof. The purpose of the Authority is to provide through the issuance of debt, financing necessary for various capital improvements. The Authority is administered by the Board of Directors who are the members of the City Council and the Mayor. The Authority's primary source of income will be installment sale, loan and lease payments received from the City, which will be used to meet the debt service requirements on debt issues. The Authority does not have taxing power. Separate financial statements for the Authority are not prepared. 31 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) b. Government—Wide and Fund Financial Statements The government—wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business—type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government—wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. c. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government—wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government. 32 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) The City reports the following major governmental funds: The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Landscape and Lighting District Special Revenue Fund accounts for receipts and expenditures of money in the benefit assessment district zones for operating expenditures, maintenance and capital outlay for street lighting, landscaping and parks located within the district. The Existing Infrastructure Fee Special Revenue Fund accounts for receipts and expenditures of money in the facilities' development programs, which provides for the reimbursement of expenditures to property owners who constructed the facilities in the program. The Capital Improvement Fund accounts for receipts and expenditures of money for construction of various projects. The City reports the following major proprietary funds: The Water Utility Fund accounts for the revenues and expenses for the operation, maintenance, and facilities' improvements of the City's water production, transmission and distribution system. The Sewer Utility Fund accounts for the revenues and expenses for the collection and treatment (via contract) of the liquid waste generated within the City. Additionally, the City reports the following fund types: Special Revenue Funds used to account for taxes and other revenues, which are set aside for a specific purpose in accordance with law or administrative regulation. Capital Projects Funds used to account for resources used for the acquisition and construction of major capital facilities. Internal Service Funds used to account for the financing of goods and services provided by one department to other departments of the City. Agency Funds used to account for money and property held by the City as trustee or custodian. They are also used to account for various assessment districts and community facilities districts for which the City acts as an agent for debt service activity. Private—sector standards of accounting and financial reporting issued prior to December 1989 generally are followed in both the government—wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private—sector guidance for their business—type activities and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private—sector guidance. 33 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) As a general rule, the effect of interfund activity has been eliminated from the government—wide financial statements. Exceptions to this general rule are charges between the government's proprietary funds function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non—operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Enterprise Funds and of the Internal Service Funds are charges to customers for sales and services. Operating expenses for Enterprise Funds and Internal Service Funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non—operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, and then unrestricted resources as they are needed. d. Assets, Liabilities and Net Assets or Equity Cash and Investments All cash and investments, except those that are held by fiscal agents, are held in a City pool. These pooled funds are available upon demand, and therefore are considered cash and cash equivalents for purposes of the statement of cash flows. Investments held by fiscal agents with an original maturity of three months or less are also considered cash equivalents. Investments for the City are reported at fair value. The City's policy is generally to hold investments until maturity or until market values equal or exceed cost. The State Treasurer's Investment Pool and Counties Treasurer's Investment Pool operate in accordance with appropriate state laws and regulations. The reported value of the pool is the fair value of the pool shares. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds," (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non—current portion of interfund loans). All other outstanding balances between funds are reported as "due to/from other funds." Any residual balances outstanding between the governmental activities and business—type activities are reported in the government—wide financial statements as "internal balances." 34 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. All trade and property tax receivables are shown net of an allowance for uncollectibles. Property tax revenue is recognized on the modified accrual basis, that is, in the fiscal year for which the taxes have been levied providing they become available. Available means then due, or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period. The County of San Bernardino collects property taxes for the City. Tax liens attach annually as of 12:01 A.M. on the first day in January preceding the fiscal year for which the taxes are levied. Taxes are levied on both real and personal property as it exists on that date. The tax levy covers the fiscal period July 1 to June 30. All secured personal property taxes and one—half of the taxes on real property are due November 1; the second installment is due February 1. All taxes are delinquent if unpaid on December 10 and April 10, respectively. Unsecured personal property taxes become due on the first of March each year and are delinquent if unpaid on August 31. Functional Classifications Expenditures of the Governmental Funds are classified by function. Functional classifications are defined as follows: General Government includes legislative activities that have a primary objective of providing legal and policy guidelines for the City. Also included in this classification are those activities that provide management or support services across more than one functional area. Public Safety includes those activities that involve the protection of people and property. Public Works includes those activities that involve the maintenance and improvement of City streets, roads and park development and maintenance. Community Development includes those activities that involve the enhancing of the general quality of life. Culture and Leisure includes those activities that involve recreation. Capital Outlay includes those activities that involve the acquisition of capital assets. Debt Service includes those activities that account for the payment of long—term debt principal, interest and fiscal charges. 35 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) Inventories and Prepaid Items Materials and supplies consist of water pipe, meters, valves, tools and miscellaneous items used in installing, monitoring and repairing these items. The water pipe, meters, valves and long—term items are removed from inventory and capitalized as capital assets and depreciated upon installation. The remaining items are recorded as expenses when used in accordance with the consumption method. Inventories are recorded at the lower of cost or market on a first—in, first—out (FIFO) basis. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government—wide and fund financial statements. The fund balances in the governmental fund types have been reserved for amounts equal to the prepaid items in the fund—level statements, since these amounts are not available for appropriation. Restricted Assets Certain proceeds of debt issues, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. In addition, funds have been restricted for future capital improvements by City resolution. Capital Assets Capital assets which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business—type activities columns in the government—wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. In accordance with GASB Statement No. 34, the City has reported its general infrastructure assets which include streets, sidewalks, curbs and gutters, handicap ramps, trails and equestrian fencings. The City has assigned no value to its rights of way. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business—type activities is included as part of the capitalized value of the assets constructed. Property, plant and equipment of the primary government, as well as the component units, are depreciated using the straight—line method over the following estimated useful lives: 36 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) Assets Years Equipment 3-12 Vehicles 4-10 Utility Plan in Service 5-100 Meters 15 Pipeline in Service 30-50 Infrastructure 20-60 Intangible Assets Intangible assets are capitalized at cost, while contributed assets are recorded at fair market value at the time received. Amortization has been provided on a straight—line basis over their estimated useful lives as follows: Assets Years Water Rights 40 Capacity Rights 40 Deferred Charges Deferred charges consist of issuance costs representing capitalized costs incurred in connection with the issuance of long—term debt in proprietary funds. These costs are amortized on a straight—line basis. Balance at July 1, 2005 $ 585,065 2005-2006 amortization expense (34,373) Balance at June 30, 2006 $ 550,692 Compensated Absences In accordance with GASB Code Section C60, the City of Chino Hills records a liability for vacation and compensatory leave that is earned and unused at year—end. Sick leave liability recorded has been estimated using the "vesting method", which is calculated "...based on the sick leave accumulated at the balance sheet date by those employees who are currently eligible to receive termination payments as well as other employees who are expected to become eligible in the future to receive such payments." Vacation, sick and compensatory leave liabilities relating to governmental funds that have matured at June 30, 2006, have been recorded in the General Fund as compensated absences payable. The liability for governmental activity that have not matured at June 30, 2006 is reported on the statement of net assets under non— current liabilities. Liabilities relating to proprietary funds are recorded within those respective funds. 37 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) Long—Term Obligations In the government—wide financial statements and proprietary fund types in the fund financial statements, long—term debt and other long—term obligations are reported as liabilities in the applicable governmental activities, business—type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Reconciliation of Government—Wide and Fund Financial Statements Explanation of certain differences between the governmental fund balance sheet and the government—wide statement of net assets: The governmental fund balance sheet includes reconciliation between fund balance — governmental funds and net assets of governmental activities as reported in the government—wide statement of net assets. One element of that reconciliation explains that 'long—term debts and compensated absences have not been included in the governmental fund activity." The details of the $35,270,704 long—term debt difference is as follows: Long-term debt: Advances from developers Development fee program obligations Capital lease obligations Equestrian center lease Net adjustment to reduce fund balance of total governmental funds to arrive at net assets of governmental activities M4 $ 890,550 34,366,568 13,570 16 $ 35,270,704 City of Chino Hills Notes to Financial Statements (Continued) Note 1: Summary of Significant Accounting Policies (Continued) Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the government—wide statement of activities: The governmental fund statement of revenues, expenditures and changes in fund balances includes a reconciliation between net changes in fund balances — of total governmental funds and changes in net assets of governmental activities as reported in the government—wide statement of activities. One element of that reconciliation explains that "Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense." The details of this $16,892,216 difference is as follows: Capital outlay $ 25,781,802 Depreciation expense (8,889,586) Net adjustment to increase net changes in fund balances of total governmental funds to arrive at changes in net assets of governmental activities $ 16,892,216 11. STEWARDSHIP Note 2: Stewardship, Compliance and Accountability a. Budget Procedures All financial activities of the General Fund, Special Revenue Funds and Capital Projects Funds are part of the appropriated budget. Appropriated amounts are as originally adopted or as amended by the City Council throughout the year. The following general procedures are followed in establishing the annual budget: 1. The annual budget adopted by the City Council provides for the general operation of the City. It includes proposed expenditures and estimated revenues. 2. The City Manager is authorized to transfer appropriations between programs and funds up to $10,000 without approval by the City Council. In addition, the City Manager has unlimited authority to transfer appropriations between items and accounts within the same department funded by the General Fund and within the same function funded by a special revenue, debt service or capital projects fund. 3. The budget is formally integrated into the accounting system and employed as a management control device during the year for all funds. 4. The budget is adopted on an annual basis. 5. The budget is adopted on a basis which differs from accounting principles generally accepted in the United States of America in that encumbrances are included as expenditures. The modified accrual basis of accounting is employed in the preparation of the budget. 39 City of Chino Hills Notes to Financial Statements (Continued) Note 2: Stewardship, Compliance and Accountability (Continued) 6. At fiscal year—end, operating budget appropriations lapse; however, incomplete capital improvement project appropriations within Capital Projects Funds, and authorized non—capital appropriations are rebudgeted in the following fiscal year. 7. The legally adopted budget requires that expenditures not exceed appropriations at the department level for the General Fund and the fund level for Special Revenue and Capital Projects Funds. b. Encumbrances Encumbrance accounting is employed as an extension of formal budgetary integration in governmental funds. Encumbrances such as purchase orders, contracts and other commitments for the expenditure of monies, are reported as reservations of fund balances. Outstanding encumbrances at year—end are reappropriated in the following year. c. Excess of Expenditures Over Appropriations Excess of expenditures over appropriations at the budgetary level of control for the major funds are as follows: Fund Expenses Appropriations Excess Existing Infrastructure Fee $ 2,631,220 $ 2,314,100 $ 317,120 111. DETAILED NOTES ON ALL FUNDS Note 3: Cash and Investments At June 30, 2006, cash and investments were reported in the accompanying financial statements as follows: Governmental activities $ 79,704,493 Business -type activities 29,104,456 Fiduciary funds 43,750,129 Total Cash and Investments $ 152,559,078 The City of Chino Hills maintains a cash and investment pool that is available for use for all funds. Each fund type's position in the pool is reported on the combined balance sheet as cash and investments. The City has adopted an investment policy which authorizes it to invest in various investments. Deposits At June 30, 2006, the carrying amount of the City's deposits was $1,578,527 and the bank balance was $1,644,571. The $66,044 difference represents outstanding checks and other reconciling items. M61 City of Chino Hills Notes to Financial Statements (Continued) Note 3: Cash and Investments (Continued) The California Government Code requires California banks and savings and loan associations to secure an Entity's deposits by pledging government securities with a value of 110% of an Entity's deposits. California law also allows financial institutions to secure Entity deposits by pledging first trust deed mortgage notes having a value of 150% of a Entity's total deposits. The Entity Treasurer may waive the collateral requirement for deposits that are fully insured up to $100,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking. The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an "Agent of Depository" has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency. Authorized Investments Under provision of the City's investment policy and in accordance with Section 53601 of the California Government Code, the City may invest in the following types of investments: • Bonds issued by the City • Repurchase Agreements • Registered state warrants or treasury notes or bonds of this State • Bonds, notes or warrants of any local agency within this State • United States treasury notes, bonds, bills or certificates of indebtedness • Obligations of a federal agency or United States government sponsored agency • Negotiable certificates of deposit • Mutual Funds • State and County Investment Pools Investment Pool Oversight State of California Local Agency Investment Fund LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer's office audits the fund annually. Los Angeles County Investment Pool The investment section of the County Treasurer's office monitors the pool daily for compliance with the government code and investment guidelines. The Auditor — Controller's Office audits it quarterly for compliance. The Board of Supervisors receives an investment report monthly. 41 City of Chino Hills Notes to Financial Statements (Continued) Note 3: Cash and Investments (Continued) San Bernardino County Investment Pool The County's Treasury Oversight Committee, which was established by the Board of Supervisors pursuant to the government code, reviews the annual investment policy and investment reports and oversees the portfolio's annual audit. Investment Authorized by Debt Agreements: The City has monies held by trustees or fiscal agents pledged to the payment or security of certain bonds and certificates of participation. The California Government Code provides that these monies, in the absence of specific statutory provisions governing the issuance of bonds or certificates, may be invested in accordance with the ordinance, resolutions or indentures specifying the types of investments its trustee or fiscal agents may make. Included in the monies held by trustees or fiscal agents are deposits with various institutions for the payment of long—term debt. GASB Statement No. 31: The Entity adopted GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, as of July 1, 1997. GASB Statement No. 31 establishes fair value standards for investments in participating interest earning investment contracts, external investment pools, equity securities, option contracts, stock warrants and stock rights that have readily determinable fair values. Accordingly, the Entity reports its investments at fair value in the balance sheet. All investment income, including changes in the fair value of investments, is recognized as revenue in the operating statement. Credit Risk The City's investment policy limits investments in medium—term notes (MTN's) to those rated "A" or higher by Standard and Poor's (S&P) or by Moody's. As of June 30, 2006, the City did not have investment in medium—term notes. Investments in U.S. government securities are not considered to have credit risk; therefore their credit quality is not disclosed. As of June 30, 2006, the City's investments in external investment pools and money market mutual funds are unrated. Custodial Credit Risk The custodial credit risk for deposits is the risk that in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. As of June 30, 2006, none of the City's deposits or investments was exposed to custodial credit risk. 42 City of Chino Hills Notes to Financial Statements (Continued) Note 3: Note 4 Cash and Investments (Continued) Concentration of Credit Risk The City's investment policy imposes restrictions for certain types of investments with any one issuer. With respect to concentration risk as of June 30, 2006, the City has not invested more than 10% of its total investments in any one issuer. Investments guaranteed by the U.S. government and investments in mutual funds and external investment pools are excluded from this requirement. Interest Rate Risk The City's investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The City's investment policy states that purchases of investments will be restricted to securities with a final state maturity not to exceed three years. The City has elected to use the segmented time distribution method of disclosure for its interest rate risk. As of June 30, 2006, the City had the following investments and original maturities: Money Market Mutual Funds - held by fiscal agent Investment Agreements California Local Agency Investment Fund Los Angeles County Investment Pool San Bernardino County Investment Pool Investment Maturities (in Years) 6 months 1 to 3 Fair or less years Value 7,598,171 - 7,598,171 - 1,372,692 1,372,692 37,918,847 - 37,918,847 62,992,204 - 62,992,204 41,098,637 - 41,098,637 $149,607,859 $ 1,372,692 $150,980,551 Interfund Receivable, Payable and Transfers The composition of interfund balances as of June 30, 2006 is as follows: Due To/From Other Funds Funds Due To Other Funds: General Fund Landscape and Lighting District Sewer Utility Nonmajor Governmental Funds Total Due From Other Funds: Landscape Nonmajor General and Lighting Capital Water Sewer Governmental Fund District Improvement Utility Utility Funds Total $ - $ 422,800 $ - $ 8,187 $ 84,600 $ - $ 515,587 - - 61,461 - - 61,461 - 96 - - 96 357,671 - 35,762 5,301 1,767 175,900 576,401 $ 357,671 $ 422,800 $ 35,762 $ 75,045 $ 86,367 $ 175,900 $ 1,153,545 43 City of Chino Hills Notes to Financial Statements (Continued) Note 4: Interfund Receivable, Payable and Transfers (Continued) The due to the Landscape and Lighting District Fund for $422,800 from the General Fund is for the Sport Park Project. The other interfund balances were the results of routine interfund transactions not cleared prior to year—end. Advances To/From Other Funds Funds Advances From Other Funds: General Fund Existing Infrastructure Water Utility Nonmajor Governmental Fund Fiduciary Fund Total Advances To Other Funds: Landscape Nonmajor General and Lighting Water Sewer Governmental Fund District Utility Utlity Funds Total $ - $ 3,436,100 $ 72,279 - 3,560,977 384,450 - - - - 901,584 $ 11,527,325 $ 2,101,363 $ 17,137,067 292,530 1,583,734 5,437,241 3,421,200 - 3,421,200 2,685,750 175,900 3,246,100 - - 901,584 $ 384,450 $ 3,436,100 $ 4,534,840 $ 17,926,805 $ 3,860,997 $ 30,143,192 During the prior years, the Landscape and Lighting District Fund and the Sewer Utility Fund advanced $3,436,100 and $5,802,400, respectively, to the General Fund for the Big League Dream Sports Park Project. Also the Sewer Utility Fund advanced $3,421,200 to the Water Utility Fund for construction of various projects. Interfund Transfers Transfers In General Fund Lighting and Landscape District Capital Improvement Nonmajor Governmental Total $ 8,688,238 $ 481,792 $ 4,746,554 $ 13,916,584 The transfers in to the Capital Improvement Fund and the Landscape and Lighting District fund from the other funds were to cover construction costs of various projects. 44 Transfers Out: Lighting and General Landscape Nonmajor Fund District Governmental Total $ - $ - $ 78,534 $ 78,534 233,588 - - 233,588 8,409,835 481,792 4,668,020 13,559,647 44,815 - - 44,815 $ 8,688,238 $ 481,792 $ 4,746,554 $ 13,916,584 The transfers in to the Capital Improvement Fund and the Landscape and Lighting District fund from the other funds were to cover construction costs of various projects. 44 City of Chino Hills Notes to Financial Statements (Continued) Note 5: Capital Assets Capital asset activity for the year ended June 30, 2006 was as follows: Governmental Activities: Capital assets, not being depreciated: Land Construction -in -progress Total Capital Assets, Not Being Depreciated Capital assets, being depreciated: Buildings Structures other than buildings Equipment Vehicles Pipeline in service Infrastructure Total Capital Assets, Being Depreciated Less accumulated depreciation: Buildings Structures other than buildings Equipment Vehicles Pipeline in service Infrastructure Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Governmental Activities Capital Assets, Net Beginning Balance Increases $ 18,609,087 $ 9,967,691 $ 8,241,208 15,172,073 26,850,295 25,139,764 Decreases Transfers Ending Balance 835 $ - $ 28,575,943 - (5,467,051) 17,946,230 835 (5,467,051) 46,522,173 26,088,553 - - 5,527 26,094,080 9,348,860 - - 2,078,314 11,427,174 1,501,225 75,654 - - 1,576,879 2,969,477 892,135 127,727 - 3,733,885 217,375 - - - 217,375 224,576,700 603,466 - 3,383,210 228,563,376 264,702,190 1,571,255 127,727 5,467,051 271,612,769 4,274,371 868,088 3,131,001 617,721 1,023,446 126,722 1,933,848 313,669 15,217 4,347 66,801,032 7,309,580 77,178,915 9,240,127 187,523,275 (7,668,872) - 5,142,459 - - 3,748,722 - - 1,150,168 127,727 - 2,119,790 - - 19,564 - 74,110,612 127,727 - 86,291,315 - 5,467,051 185,321,454 $ 214,373,570 $ 17,470,892 $ 835 $ - $ 231,843,627 45 City of Chino Hills Notes to Financial Statements (Continued) Note 5: Capital Assets (Continued) Total Capital Assets, Being Depreciated Less accumulated oepreaation: Buildings and improvements Structure other than building Utility plant in service Pipeline in service Meters Equipment Water rights Capacity rights Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Business -Type Activities Capital Assets, Net 153,824,496 1,281,326 116,620 11,169,091 166,158,293 252,449 Beginning 36,407 10,066 Ending 608,381 Balance Increases Decreases Transfers Balance Business -Type Activities: 31,802 2,532,553 401,077 19,457 Capital assets, not being depreciated: Land $ 3,068,883 $ - $ - $ - $ 3,068,883 Easements 537,940 - - - 537,940 Construction -in -progress 16,701,675 427,419 (11,169,091) 5,960,003 Total Capital Assets, Not Being Depreciated 20,308,498 427,419 (11,169,091) 9,566,826 Capital assets, being depreciated: Buildings and improvements 1,012,550 - - - 1,012,550 Structure other than building 290,234 - - - 290,234 Utility plant in service 24,193,367 - - 94,127 24,287,494 Pipeline in service 110,634,127 755,038 - 11,074,964 122,464,129 Meters 2,347,881 468,747 116,620 - 2,700,008 Equipment 483,623 57,541 - - 541,164 Water rights 14,668,150 - - - 14,668,150 Capacity rights 194,564 - - - 194,564 Total Capital Assets, Being Depreciated Less accumulated oepreaation: Buildings and improvements Structure other than building Utility plant in service Pipeline in service Meters Equipment Water rights Capacity rights Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Business -Type Activities Capital Assets, Net 153,824,496 1,281,326 116,620 11,169,091 166,158,293 252,449 34,744 36,407 10,066 7,816,571 608,381 31,634,425 2,798,197 1,074,636 129,945 324,868 31,802 2,532,553 401,077 19,457 4,864 - 287,193 - 46,473 - 8,424,952 - - 34,432,622 116,620 - 1,087,961 - - 356,670 - 2,933,630 - 24,321 43,691,366 4,019,076 116,620 - 47,593,822 110,133,130 (2,737,750) - 11,169,091 118,564,471 $ 130,441,628 1 (2,310,331) $ - $ - $ 128,131 ,297 Depreciation and amortization expense was charged to functions/programs of the primary government as follows: Governmental Activities General Activities 607,350 Culture and Leisure 800,860 Community Development 6,723 Public Safety 7,445 Public Works 7,467,208 Equipment Maintenance 319,825 Data Processing 30,716 $ 9,240,127 Business -Type Activities: Water Utility $ 3,016,526 Sewer Utility 1,002,550 $ 4,019,076 46 City of Chino Hills Notes to Financial Statements (Continued) Note 6: Long—Term Debt a. Governmental Activities The following is a summary of changes in Long—Term Debt for the year ended June 30, 2006: Long-term debt repayments per governmental funds financial statements. $ 1,876,929 Long-term debt payments made by Assessment District Agency Funds. Repayment is made by giving a building permit fee credit against assessments previously paid to the Assessment District Funds. 449,344 Compensated absences payouts. 47,326 Total Deletions per Changes in Long -Term Debt Schedule $ 2,373,599 Compensated Absences The City's policies relating to compensated absences are described in Note 1 of the Notes to Financial Statements. This liability will be paid in future years from the General Fund. $ 583,455 Advances From Developers Advances from developers represent monies owed to developers for development fees collected in advance. The City will repay these developers by allowing them to use the $2,700 credit per unit against their development fees as they obtain their building permit releases. There is no fixed repayment schedule. $ 890,550 47 Balance at Balance at Due Within July 1, 2005 Additions Deletions June 30, 2006 One Year Compensated absences $ 478,160 $ 152,621 $ 47,326 $ 583,455 $ 25,000 Advances from developers 890,550 - - 890,550 - Development Fee Program obligations 36,407,498 250,581 2,291,514 34,366,565 - Capital Lease obligations 48,329 - 34,758 13,571 10,699 Equestrian Center lease 17 - 1 16 1 Totals $ 37,824,554 $ 403,202 $ 2,373,599 $ 35,854,157 $ 35,700 Long-term debt repayments per governmental funds financial statements. $ 1,876,929 Long-term debt payments made by Assessment District Agency Funds. Repayment is made by giving a building permit fee credit against assessments previously paid to the Assessment District Funds. 449,344 Compensated absences payouts. 47,326 Total Deletions per Changes in Long -Term Debt Schedule $ 2,373,599 Compensated Absences The City's policies relating to compensated absences are described in Note 1 of the Notes to Financial Statements. This liability will be paid in future years from the General Fund. $ 583,455 Advances From Developers Advances from developers represent monies owed to developers for development fees collected in advance. The City will repay these developers by allowing them to use the $2,700 credit per unit against their development fees as they obtain their building permit releases. There is no fixed repayment schedule. $ 890,550 47 City of Chino Hills Notes to Financial Statements (Continued) Note 6: Long -Term Debt (Continued) Development Fee Program Obligations The City has executed many agreements with outside developers requiring developers to provide funding up -front for the costs of backbone infrastructure (major thoroughfares, water and sewer mains, etc.) concurrent with the development of their residential and commercial projects. This up -front funding is generally in the form of the developer constructing the backbone infrastructure. Future development fees will be used to reimburse the developers (either as credits against fees owed or cash reimbursements if not fully credited) for their costs. A liability has been recorded for the project costs incurred to date, including estimated construction -in -progress and estimated interest payable related to one of the projects. There is no fixed repayment schedule. $34,366,565 Capital Lease Obligations The City entered into lease purchase agreements throughout fiscal year 2000-2001 for 10 copiers. Except for two copiers that will be paid off in the next two fiscal year, the other eight copiers were paid off in the current fiscal year. $ 13,571 The debt service payments to maturity were as follows: Year Ending June 30 Principal Interest Total 2007 10,674 1,136 11,810 2008 2,897 62 2,959 Subtotal $ 13,571 $ 1,198 $ 14,769 Equestrian Center Lease On December 30, 1996, the City entered into a lease with the McCoy Equestrian Center trust to provide property for the equestrian center. The lease is for a period of 25 years for $1 per year with options to renew on an annual basis. $ 16 48 City of Chino Hills Notes to Financial Statements (Continued) Note 6: Long -Term Debt (Continued) b. Business Type Activities The following is a summary of changes in Proprietary Funds debt for the year ended June 30, 2006: The City entered into a lease purchase agreement for a copier. As of June 30, 2006 the capital lease was paid off. Certificated of Participation On December 2, 2003, the City issued $18,210,000. in Certificates of Participation. The certificates consist of serial certificates maturing in principal amounts of $940,000 to $1,460,000 beginning June 2004 through June 2018 with interest rates ranging from 2.00% to 4.20%. The certificates were issued in order to refund $17,330,000 million of outstanding installment obligations due on the 1996 Water Certificates of Participation. The refunding of the 1996 Certificates of Participation resulted in a reduction of the City's total debt service payments over the next 14 years by $2.1 million and an economic gain (difference between the present values of the debt service payments on the old and new debt) of $1.5 million. 49 $ 15,160,000 Balance at Balance at Due Within July 1, 2005 Additions Deletions June 30, 2006 One Year Advances for construction $ 23,403 $ - $ 1,376 $ 22,027 $ - Capital lease obligations 253 - 253 - - Development program obligations 3,237,533 - - 3,237,533 - Certificates of participation 25,660,000 - 1,100,000 24,560,000 1,125,000 Compensated absences 144,599 31,652 3,511 172,740 3,000 Totals 29,065,788 $ 31,652 $ 1,105,140 27,992,300 $ 1,128,000 Deferred amount on refunding (1,417,563) $ - $ (109,394) (1,308,169) Unamoritzed bond discount (109,899) - (5,763) (104,136) Total Long -Term Debt $ 27,538,326 $ 26,579,995 Capital Lease Obligations The City entered into a lease purchase agreement for a copier. As of June 30, 2006 the capital lease was paid off. Certificated of Participation On December 2, 2003, the City issued $18,210,000. in Certificates of Participation. The certificates consist of serial certificates maturing in principal amounts of $940,000 to $1,460,000 beginning June 2004 through June 2018 with interest rates ranging from 2.00% to 4.20%. The certificates were issued in order to refund $17,330,000 million of outstanding installment obligations due on the 1996 Water Certificates of Participation. The refunding of the 1996 Certificates of Participation resulted in a reduction of the City's total debt service payments over the next 14 years by $2.1 million and an economic gain (difference between the present values of the debt service payments on the old and new debt) of $1.5 million. 49 $ 15,160,000 City of Chino Hills Notes to Financial Statements (Continued) Note 6: Long -Term Debt (Continued) The annual requirements to amortize the Certificates of Participation outstanding as of June 30, 2006, were as follows: Year Ending June 30 Principal Interest Total 2007 $ 1,090,000 $ 517,095 $ 1,607,095 2008 1,110,000 495,295 1,605,295 2009 1,145,000 470,320 1,615,320 2010 1,170,000 440,550 1,610,550 2011 1,205,000 405,450 1,610,450 2012-2016 6,745,000 1,363,090 8,108,090 2017-2018 2,695,000 169,620 2,864,620 Total $ 15,160,000 $ 3,861,420 $ 19,021,420 On June 1, 2002, the City issued $9,545,000 in Certificates of Participation. The Certificates consist of serial certificates maturing in principal amounts of $20,000 to $685,000 beginning June 1, 2003 through June 2028 with interest rates ranging from 1.900% to 5.125% and term certificates of $3,140,000 maturing on June 1, 2032 with an interest rate of 5.300%. The Certificates were issued for the acquisition, construction and installation of certain improvements to the City's water system. $ 9,400,000 The annual requirements to amortize the certificates of participation outstanding as of June 30, 2006, were as follows: Year Ending June 30 Principal Interest Total 2007 $ 35,000 $ 478,361 $ 513,361 2008 35,000 477,259 512,259 2009 30,000 476,104 506,104 2010 30,000 475,024 505,024 2011 35,000 473,854 508,854 2012-2016 135,000 2,349,654 2,484,654 2017-2021 1,820,000 2,190,936 4,010,936 2022-2026 2,805,000 1,612,349 4,417,349 2027-2031 3,630,000 811,488 4,441,488 2032 845,000 44,363 889,363 Total $ 9,400,000 50 $ 9,389,392 $ 18,789,392 City of Chino Hills Notes to Financial Statements (Continued) Note 6: Long -Term Debt (Continued) Advances for Construction In the agreement for the acquisition of the Pomona Valley Water Company (Pomona Valley), the City agreed to assume responsibility for repayment of certain cash advances made to Pomona Valley by various developers and individuals under individual contracts for the construction of main extension pipeline and special facilities. The advances are to be repaid, without interest, based on a percentage of water revenues received from the main extension pipeline payable annually and within 20 years of the origination of each individual advance. $ 22,027 Development Program Obligations The City has executed many agreements with outside developers requiring developers to provide funding up -front for the costs of backbone infrastructure (major thoroughfares, water and sewer mains, etc.) concurrent with the development of their residential and commercial projects. This up -front funding is generally in the form of the developer constructing the backbone infrastructure. Future development fees will be used to reimburse the developers for their up- front funding. A liability has been recorded for the project costs incurred to date. $ 3,237,533 Compensated Absences The City's policies relating to compensated absences are described in Note 1 of the Notes to Financial Statements. This liability will be paid in future years by the Water Utility Fund and the Sewer Utility Fund. $ 172,740 c. Assessment District and Community Facilities District Bond Issues Excluded from the liabilities are special assessment and special tax bonds related to various special assessment districts and community facilities' districts included within the City. The City acts as an agent for the property owners benefited by the projects financed from the bond proceeds in collecting the assessments and taxes, forwarding the collections to bond holders, and initiating foreclosure proceedings, if appropriate. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds, and the City is not legally obligated for payment of the bonds. Included in the Agency fund is $38,230,329 of funds due to bondholders relating to these obligations. 51 City of Chino Hills Notes to Financial Statements (Continued) Note 6: Long -Term Debt (Continued) The debt outstanding at June 30, 2006, consists of the following individual issues: 2000 $13,040,000 Community Facilities District No. 10, Special Tax Bonds, serial bonds due in annual installments of $35,000 to $405,000 through September 1, 2016, $2,040,000 term bonds due September 1, 2020, and $12,955,000 $8,495,000 term bonds due September 1, 2030; interest ranging from 5.40% to 6.95%. 1998 $14,860,000 Community Facilities District No. 9, Special Tax Bonds, due in annual installments of $55,000 to $270,000 through $ 7,305,000 September 1, 2010, plus term bonds due September 1, 2022 and September 1, 2023; interest rates varying from 4.40% to 6.45%. 1994 $7,265,000 Reassessment District of 1994, Limited Obligation Bonds due in annual installments of $380,000 to $420,000 through $ September 2, 2008; interest ranging from 5.50% to 7.50%. This bond issue was paid off during the current fiscal year. 1995 $26,440,000 Reassessment District of 1995, Limited Obligation Bonds due in annual installments of $120,000 to $975,000 through $10,660,000 September 2, 2021; interest ranging from 4.90% to 7.20%. 2004 $14,560,000 Community Facilities District Special Tax Refunding Bonds due in annual installments of $1,530,000 to $2,075,000 through September 1, 2011; interest ranging from 2.00% to 3.00%. The bonds were issued to defease $3,725,000 of 1991 Community Facilities — District No. 2, Special Tax Bonds, Series "A", $5,815,000 of 1993 Community Facilities — $10,965,000 District No. 1, Special Tax Refunding Bonds, $1,805,000 of 1993 Community Facilities — District No. 4, Special Tax Refunding Bonds, $1,340,000 of 1993 Community Facilities — District No. 5, Special Tax Refunding Bonds and $1,875,000 of 1993 Community Facilities — District No. 8, Special Tax Refunding Bonds. Assessment District No. 80-1 The County of San Bernardino, prior to the City's incorporation in 1991, formed Assessment District No. 80-1. The County informed the City of the existence of this District and pursuant to the directive of the Local Agency Formation Commission, the City should have assumed the responsibility of the District upon its incorporation. Bonds issued for the District are $430,285, 1980 Assessment District No. 80-1 serial bonds due in annual installments of $9,000 to $24,000 through July 2, 2021 with an interest rate of 5%. The balance outstanding as of June 30, 2006 was $152,000. 52 City of Chino Hills Notes to Financial Statements (Continued) Note 7: Pension Plan Plan Description The City of Chino Hills contributes to the San Bernardino County Employees' Retirement Association (SBCERA), a cost—sharing multiple—employer public employee defined benefit pension plan. Although legally established as a single employer plan, the City of Chino Hills, the City of Big Bear Lake, the County Supervisors Association of California, and the South Coast Air Quality Management District were later included along with the County of San Bernardino (the County) and are collectively referred to as the "Participating Members." Substantially all employees of the Participating Members are covered by the plan. SBCERA provides retirement and disability benefits, annual cost— of—living adjustments and death benefits to plan members and beneficiaries. SBCERA acts as a common investment and administrative agent for the Participating Members. Benefit provisions and all other requirements are established by the California County Employees' Retirement Act of 1937. Copies of SBCERA's annual financial report may be obtained from their executive office: 348 West Hospitality Lane, Third Floor, San Bernardino, CA 92415-0014. Funding Policy The contribution requirements of plan members and the City are established and may be amended by SBCERA. Employees are required to contribute a percentage of their annual compensation to the Plan based on the member's age at entry into the Plan. The City pays the employee's contribution up to 7% of their salary. The City also contributes an amount, based on actuarial assumptions that together with employee contributions, is intended to provide sufficient reserves for payment of all prospective benefits to members. Employer rates are as follows: Category General Members Required Contributions Member Rates as a Percentage of Covered Payroll 17.94% For fiscal year 2005-2006, the City's annual pension cost of $2,092,652 for SBCERA was equal to the City's required and actual contributions. The required contribution was determined as part of the June 30, 2005 actuarial valuation using the entry age normal actuarial cost method. A summary of the principal assumptions and methods used to determine the annual pension cost is shown below: Valuation date Actuarial cost method Amortization method Remaining amortization period Assets valuation method Actuarial assumptions Investment rate of return Projected salary increases Cost of living adjustments 53 June 30, 2005 Entry age normal actuarial cost method Level percent of payroll 20 years Market value of assets less unrecognized market value gains and losses from each of the last five years 8.00% City: 4.25% to 11.48% Safety 4.25% to 11.74% Contingent upon CPI maximum increases with a 2% City of Chino Hills Notes to Financial Statements (Continued) Note 7: Pension Plan (Continued) Three -Year Trend Information for SBCERA (Amount in Thousands) Percentage of Note 8: Liability, Property and Workers' Compensation Protection a. Description of Self—Insurance Pool Pursuant to Joint Powers Agreement The City is a member of the California Joint Powers Insurance Authority (the Authority). The Authority is composed of 109 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self—insured losses, to purchase excess insurance or reinsurance, and to arrange for group— purchased insurance for property and other coverage. The Authority's pool began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine member Executive Committee. b. Self—Insurance Programs of the Authority General Liability — Each member government pays a primary deposit to cover estimated losses for fiscal year 2005-2006. Six months after the close of a fiscal year, outstanding claims are valued. A retrospective deposit computation is then made for each open claims year. Loss development reserves are allocated by pool and by loss layer. Costs are spread to members as follows: the first $30,000 of each occurrence is charged directly to the member; costs from $30,000 to $750,000 and the loss development reserves associated with losses up to $750,000 are pooled based on a member's share of losses under $30,000. Losses from $750,000 to $10,000,000 and the loss development reserves associated with losses $750,000 to $10,000,000 are pooled based on payroll. Costs of covered claims above $10,000,000 are currently paid by excess insurance. The protection for each member is $50,000,000 per occurrence and $50,000,000 annual aggregate. Administrative expenses are paid from the Authority's investment earnings. Workers' Compensation — The City of Chino Hills also participates in the workers' compensation pool administered by the Authority. Loss development reserves are allocated by pool and by member loss layer. Members retain the first $50,000 of each claim. Losses from $50,000 to $100,000 and the loss development reserves associated with losses up to $100,000 are pooled based on the member's share of losses under $50,000. Losses from $100,000 to $2,000,000 and loss development reserves associated with losses from $100,000 to $2,000,000 are pooled based on payroll. Costs from $2,000,000 to $150,000,000 are transferred to an excess insurance policy. Costs in excess of $150,000,000 are pooled among Members based on payroll. Administrative expenses are paid from the Authority's investment earnings. 54 Required Required Contributions Fiscal Year Contributions Contributed 6/30/2004 $1,454 100% 6/30/2005 $1,793 100% 6/30/2006 $2,093 100% Note 8: Liability, Property and Workers' Compensation Protection a. Description of Self—Insurance Pool Pursuant to Joint Powers Agreement The City is a member of the California Joint Powers Insurance Authority (the Authority). The Authority is composed of 109 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self—insured losses, to purchase excess insurance or reinsurance, and to arrange for group— purchased insurance for property and other coverage. The Authority's pool began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine member Executive Committee. b. Self—Insurance Programs of the Authority General Liability — Each member government pays a primary deposit to cover estimated losses for fiscal year 2005-2006. Six months after the close of a fiscal year, outstanding claims are valued. A retrospective deposit computation is then made for each open claims year. Loss development reserves are allocated by pool and by loss layer. Costs are spread to members as follows: the first $30,000 of each occurrence is charged directly to the member; costs from $30,000 to $750,000 and the loss development reserves associated with losses up to $750,000 are pooled based on a member's share of losses under $30,000. Losses from $750,000 to $10,000,000 and the loss development reserves associated with losses $750,000 to $10,000,000 are pooled based on payroll. Costs of covered claims above $10,000,000 are currently paid by excess insurance. The protection for each member is $50,000,000 per occurrence and $50,000,000 annual aggregate. Administrative expenses are paid from the Authority's investment earnings. Workers' Compensation — The City of Chino Hills also participates in the workers' compensation pool administered by the Authority. Loss development reserves are allocated by pool and by member loss layer. Members retain the first $50,000 of each claim. Losses from $50,000 to $100,000 and the loss development reserves associated with losses up to $100,000 are pooled based on the member's share of losses under $50,000. Losses from $100,000 to $2,000,000 and loss development reserves associated with losses from $100,000 to $2,000,000 are pooled based on payroll. Costs from $2,000,000 to $150,000,000 are transferred to an excess insurance policy. Costs in excess of $150,000,000 are pooled among Members based on payroll. Administrative expenses are paid from the Authority's investment earnings. 54 City of Chino Hills Notes to Financial Statements (Continued) 8: Liability, Property and Workers' Compensation Protection (Continued) c. Purchased Insurance Environmental Insurance — The City of Chino Hills participates in the pollution legal liability and remediation legal liability insurance which is available through the Authority. The policy covers sudden and gradual pollution of scheduled property, streets and storm drains owned by the City of Chino Hills. Coverage is on a claims—made basis. There is a $50,000 deductible. The Authority has a limit of $50,000,000 for the three year period from July 1, 2005 through June 30, 2008. Each member of the Authority has a $10,000,000 limit during the three year term of the policy. Property Insurance — The City of Chino Hills participates in the all—risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. The City of Chino Hills property is currently insured according to a schedule of covered property submitted by the City of Chino Hills to the Authority. Total all—risk property insurance coverage is $36,123,472. There is a $5,000 per loss deductible. Premiums for the coverage are paid annually and are not subject to retroactive adjustments. Earthquake and Flood Insurance — The City of Chino Hills purchases earthquake and flood insurance on a portion of its property. The earthquake insurance is part of the property protection insurance program of the Authority. The City of Chino Hills property currently has earthquake protection in the amount of $8,615,738. There is a deductible of 5% of value with a minimum deductible of $100,000. Premiums for the coverage are paid annually and are not subject to retroactive adjustments. Fidelity Bonds — The City of Chino Hills purchases blanket fidelity bond coverage in the amount of $1,000,000 with a $2,500 deductible. The fidelity coverage is provided through the Authority. Premiums are paid annually and are not subject to retroactive adjustments. d. Adequacy of Protection During the past three fiscal years, none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage, therefore there have been no claims payable for the past three years. There have been no significant reductions in pooled or insured liability coverage from coverage in the prior year. Note 9: Contingencies a. Litigation The City is involved in several pending lawsuits of a nature common to many similar jurisdictions. City management estimates that potential claims against the City not covered by insurance, will not have a material adverse effect on the financial statements of the City. b. Voter Initiatives The California Supreme Court issued an opinion in December 1995 relating to the validity of Proposition 62, which was passed by the voters in 1986 (the Guardino case). This case could potentially affect the City with respect to the monies the City received and will receive, from the County of San Bernardino pursuant to the Measure I voter—approved initiative, and the monies the City has received and will receive, from its business license fees and from its property transfer tax. The City cannot further assess its potential liabilities at this time until additional opinions are issued by the State of California courts. 55 City of Chino Hills Notes to Financial Statements (Continued) Note 9: Contingencies (Continued) 2. Proposition 218, which was approved by the voters in November 1996, will regulate the City's ability to impose, increase and extend taxes, assessments and fees. Any new, increased or extended taxes, assessments and fees subject to the provisions of Proposition 218 require voter approval before they can be implemented. Additionally, Proposition 218 provides that these taxes, assessments and fees are subject to the voter initiative process and may be rescinded in the future by the voters. Therefore, the City's ability to finance the services for which the taxes, assessments and fees were imposed may be significantly impaired. The taxes, fees and assessments that are subject to the provisions of Proposition 218 that the City currently imposes for its own benefit or as an agent for a special district, or receives from other governmental agencies, potentially include the Measure I taxes, business license fees, community facilities districts, special taxes, landscape and lighting district assessments, street sweeping assessments, water utility fees, sewer utility fees and refuse disposal fees. Certain language in the initiative is unclear as to the scope and impact of the proposition. Future court rulings or state legislation may clarify these issues. At this time it is uncertain how Proposition 218 will affect the City's ability to maintain or increase the revenue it receives from taxes, assessments and fees. 3. A general plan initiative was passed by City residents in November 1999 which removed the City Council's ability to increase residential density zoning. An increase in residential zoning density would require a majority voter approval. Current zoning on a significant amount of developable residential parcels in the City is of a lower density of units per acre than the density desired by residential developers. This change could significantly slow down development in the City due to the voter approval requirement. Note 10: Joint Venture a. Water Facility Authority On February 19, 1980, the Water Facilities Authority (the Authority) was created under a joint exercise of powers agreement between the CSA 70 Zone CH (now part of the City of Chino Hills) and other local entities. It was formed for the acquisition and construction of facilities directly benefiting the participants by supplying water to the inhabitants within the boundaries of its members. Thus, each participant has an ongoing financial interest in the Authority. The governing Board of Directors consists of one member appointed from each participating agency and has approval of all budget and finance activities. The City's investment in the Authority has been recorded under the equity method of accounting and is shown as an investment in joint venture in the Water Enterprise Fund. On September 30, 1997, the Authority issued $24,455,000 in 1997 Refunding Certificates of Participation (COPs) for the purpose of refunding $25,820,000 of the outstanding 1986 COPs. The 1997 Refunding COPs carry interest rates from 4.00% to 5.30% and will be repaid in various principal increments with the final payment due on October 1, 2015. 56 City of Chino Hills Notes to Financial Statements (Continued) Note 10: Joint Venture (Continued) Each participant in the joint venture has pledged gross revenues from its respective Enterprise Fund and has agreed to restrictive covenants that establish rates and charges for each respective water enterprise fund at levels sufficient to maintain net revenues equal to at least 1.25 times the aggregate amount of each respective party's installment payments to the Authority as well as any parity debt that shall become due and payable within the succeeding 12 months. On March 21, 1996, the Board of Directors of the Authority approved the prepayment by the City of Chino Hills of its installment payment obligation pursuant to the 1986 Installment Purchase Agreement between the Authority and its participants. As a result of such prepayment and redemption of such 1986 Certificates, the City of Chino Hills has no further obligation for the payment of installment payments to the Authority. The City's investment in the Authority at June 30, 2006 was $3,656,374. Audited financial information of the Authority for the fiscal year ended June 30, 2006, was summarized as follows: Water Facilities Authority Net Assets: Total assets Total liabilities Total Net Assets Water Facilities Authority Changes in Net Assets: Operating revenues Operating expenses Operating loss before depreciation and amortization Depreciation and amortization Operating revenue (loss) Nonoperating revenues (expenses) Contributions Change in net assets Beginning Net Assets Ending Net Assets 57 $ 37,938,170 18, 789, 571 $ 19,148,599 16,238,492 (16,210,737) 27,755 (1,030,836) (1,003,081) 242,473 1,321,920 561,312 18,587,287 $ 19,148,599 City of Chino Hills Notes to Financial Statements (Continued) Note 10: Joint Venture (Continued) The participants and their audited financial contributions through June 30, 2006, were as follows: City of Chino Hills Monte Vista Water District City of Chino City of Ontario City of Upland Non -Participants Total Amount Percent 5,188,339 19.09% 4,271,199 15.72% 3,998,578 14.72% 8,542,799 31.44% 5,063,258 18.63% 107,399 0.40% $ 27,171,572 100.00% Financial statements of the Authority can be obtained from the office of Charles Z. Fedak & Co., 6081 Orange Avenue, Cypress, California 90630. b. Chino Basin Desalter Authority On January 15, 2002, the Chino Basin Desalter Authority (the Authority) was created under a joint exercise of powers agreement between the City of Chino Hills and other neighboring government agencies. This agreement was formed to successfully manage the groundwater resources in the Chino Basin. The governing Board of Director consists of one representative appointed from each participating agency and has the power and responsibility to adopt budgets, operating plans and finance activities to further the purpose of the Authority. The City's investment in the Authority has been recorded under the equity method of accounting and is shown as an investment in joint venture in the Chino Basin Desalter Authority. At June 30, 2006, the City's investment in the Authority was $2,850,323. On February 28, 2002, the Chino Basin Desalter Authority issued the 2002A Variable Rate Demand Desalter Revenue Bonds in the total amount of $100,000,000. The 2002A Bonds provided funding for (i) the acquisition of the Chino Desalter, (ii) partial funding for the expansion, design and construction of Chino Desalter, and (iii) fund capitalized interest and debt service reserve fund. The variable rate bonds are due in annual installments of varying amounts through November 1, 2035. 58 City of Chino Hills Notes to Financial Statements (Continued) Note 10: Joint Venture (Continued) Unaudited financial information of the Authority for the fiscal year ended June 30, 2006 is summarized as follows: Chino Basin Desalter Authority Net Assets: Total assets $ 231,236,215 Total liabilities (157,780,136) Total Net Assets $ 73,456,079 Chino Basin Desalter Authority Changes in Net Assets: 6.00% Operating revenues $ 5,592,845 Operating expenses (4,930,942) Operating gain before depreciation and amortization 661,903 Depreciation and amortization (2,201,689) Operating revenue (loss) (1,539,786) Nonoperating revenues (expenses) 3,582,391 Change in net assets 2,042,605 Beginning Net Assets 71,413,474 Ending Net Assets $ 73,456,079 The participants' contributions through June 30, 2006 were as follows: JCSD City of Chino Hills City of Chino City of Norco City of Ontario Santa Ana River Co. Total 59 Amount Percent $ 3,662,806 34.10% 2,249,091 20.90% 2,891,688 26.90% 662,597 6.00% 832,411 7.90% 449,818 4.20% $ 10,748,411 100.0% City of Chino Hills Notes to Financial Statements (Continued) Note 11: Fund Equity a. Reserves and Designations Fund balance reserves and designations are as follows: Note 12: Commitments The City has no significant operating leases outstanding. It has ongoing agreements with developers in which the City will be required to reimburse the developers for the costs of infrastructure built. Note 13: Subsequent Events On August 30, 2006, the Chino Hills Financing Authority issued $49,660,000 Chino Hills Financing Authority Revenue Bond (Community Facilities District Bond Program), Series B to provide funds to purchase the Series 2006 CFD Bonds. E Landscape Existing Other General and Lighting Infrastructure Capital Governmental Fund District Fee Improvement Funds Reserved: Encumbrances $ 187,129 $ - $ - $ 8,005,023 $ 194,197 Acquisition of facilities - - 677,633 - 2,036,125 Special assessments - - 744,853 - - Advances to other funds 384,450 3,436,100 - - 3,860,997 Total Reserved $ 571,579 $ 3,436,100 $ 1,422,486 $ 8,005,023 $ 6,091,319 Landscape Other General and Lighting Governmental Fund District Funds Designated: Special revenue funds $ - $ $ 15,632,369 Capital project funds - - 1,156,047 Structural replacement 180,848 3,954,801 - Cash flow 3,225,244 3,753,956 - Emergencies and contingencies 10,861,165 - - Special projects 333,735 - - Total Designated $ 14,600,992 $ 7,708,757 $ 16,788,416 Note 12: Commitments The City has no significant operating leases outstanding. It has ongoing agreements with developers in which the City will be required to reimburse the developers for the costs of infrastructure built. Note 13: Subsequent Events On August 30, 2006, the Chino Hills Financing Authority issued $49,660,000 Chino Hills Financing Authority Revenue Bond (Community Facilities District Bond Program), Series B to provide funds to purchase the Series 2006 CFD Bonds. E SUPPLEMENTARY INFORMATION CITY OF CHINO HILLS INCORPORATED 1 99 1 CITY OF CHINO HILLS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2006 $ 161 $ - $ $ - Accrued liabilities - Special Revenue Funds Sleepy City Traffic Storm Drain - Hollow Road Facilities Facilities Facilities Improvement Fees Fees Fees Assets: Total Liabilities 161 510,200 - Cash and investments $ 66,366 $ 3,215,843 $ 3,472,875 $ 1,411,761 Receivables (net of allowances): Reserved for: Accounts - - - - Interest 490 24,369 29,809 10,088 Taxes - - _ _ Special assessments 412 - - - Due from other governments - - - - Due from developers - - - 65,531 Due from other funds - - - - Advances to other funds - 761,482 140,597 2,783,018 Restricted assets: Total Liabilities and Fund Balances $ 67,268 $ 4,001,694 $ 3,643,281 $ Cash and investments - - _ - Cash and investments with fiscal agents - - _ _ Total Assets $ 67,268 $ 4,001,694 $ 3,643,281 $ 4,270,398 Liabilities and Fund Balances: Liabilities: Accounts payable $ 161 $ - $ $ - Accrued liabilities - Due to other funds - 264,000 - Unearned revenue - - Advances from other funds - 246,200 - Total Liabilities 161 510,200 - - Fund Balances: Reserved for: Encumbrances - - - 54,525 Acquisition of facilities - 2,036,125 - - Advances to other funds - 761,482 140,597 2,783,018 Unreserved: Designated for: Structural replacement - _ _ _ Undesignated 67,107 693,887 3,502,684 1,432,855 Total Fund Balances 67,107 3,491,494 3,643,281 4,270,398 Total Liabilities and Fund Balances $ 67,268 $ 4,001,694 $ 3,643,281 $ 4,270,398 61 CITY OF CHINO HILLS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables (net of allowances): Accounts Interest Taxes Special assessments Due from other governments Due from developers Due from other funds Advances to other funds Restricted assets: Cash and investments Cash and investments with fiscal agents Total Assets Liabilities and Fund Balances: Liabilities: Accounts payable Accrued liabilities Due to other funds Unearned revenue Advances from other funds Total Liabilities Fund Balances: Reserved for: Encumbrances Acquisition of facilities Advances to other funds Unreserved: Designated for: Structural replacement Undesignated Total Fund Balances Total Liabilities and Fund Balances Special Revenue Funds Parkland Traffic Air Fee Signal Fee Gas Tax Quality $ 7,412,986 $ 158,954 $ 2,092,683 $ 437,868 16,269 1,186 17,895 3,226 - - 132,072 - 24,336 $ 7,429,255 $ 160,140 $ 2,242,650 $ 465,430 $ 12,010 $ - $ 70,736 $ - - - 26,869 - 175,900 - - 2,999,900 - - - 3,187,810 - 97,605 139,672 - - - 4,101,773 160,140 2,145,045 465,430 4,241,445 160,140 2,145,045 465,430 $ 7,429,255 $ 160,140 $ 2,242,650 $ 465,430 62 CITY OF CHINO HILLS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables (net of allowances): Accounts Interest Taxes Special assessments Due from other governments Due from developers Due from other funds Advances to other funds Restricted assets: Cash and investments Cash and investments with fiscal agents Total Assets Liabilities and Fund Balances: Liabilities: Accounts payable Accrued liabilities Due to other funds Unearned revenue Advances from other funds Total Liabilities Fund Balances: Reserved for: Encumbrances Acquisition of facilities Advances to other funds Unreserved: Designated for: Structural replacement Undesignated Total Fund Balances Total Liabilities and Fund Balances Special Revenue Funds Federal Solid Street Grant Measure I Waste Sweeping $ 11,085 $ 2,210,288 $ 400,992 $ 565,205 159 - 369,847 - - 18,475 - 4,265 - 82,463 - - - - - 4,004 396,628 - - - - - 175,900 - - - 175,900 160,573 - - $ 568,445 $ 2,311,226 $ 770,839 $ 925,274 $ 514,216 $ - $ 721,219 $ 26,901 3,097 - - - 40,047 - 49,620 - 11,085 - - - 568,445 - 770,839 26,901 175,900 98,506 - 2,311,226 - 898,373 $ 568,445 $ 2,311,226 $ 770,839 $ 925,274 63 CITY OF CHINO HILLS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables (net of allowances): Accounts Interest Taxes Special assessments Due from other governments Due from developers Due from other funds Advances to other funds Restricted assets: Cash and investments Cash and investments with fiscal agents Total Assets Liabilities and Fund Balances: Liabilities: Accounts payable Accrued liabilities Due to other funds Unearned revenue Advances from other funds Total Liabilities Fund Balances: Reserved for: Encumbrances Acquisition of facilities Advances to other funds Unreserved: Designated for: Structural replacement Undesignated Total Fund Balances Total Liabilities and Fund Balances Special Revenue Funds Capital Project Funds CFD # 9 CFD # 10 Frontline Miscellaneous Rincon Fairfield Policing Grant Village Ranch $ 29,497 $ 257,644 $ 742,754 $ - $ 22,486,801 Total Governmental Funds 370,006 252 - 5,610 - 131,934 - - - - 214,535 - - - 4,416 206,145 - - 627,109 - - - 65,531 - - - - 175,900 - - - - 3,860,997 - - - - 160,573 - - - 418,755 418,755 $ 29,749 $ 463,789 $ 748,364 $ 418,755 $ 28,516,557 35,762 428,027 463,789 $ - $ 1,345,243 - 29,966 11,072 576,401 - 439,112 - 3,246,100 11,072 5,636,822 - 194,197 - 2,036,125 - 3,860,997 - - - - 98,506 29,749 - 748,364 407,683 16,689,910 29,749 - 748,364 407,683 22,879,735 $ 29,749 $ 463,789 $ 748,364 $ 418,755 $ 28,516,557 64 CITY OF CHINO HILLS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 Special Revenue Funds Sleepy City Traffic Storm Drain Hollow Road Facilities Facilities Facilities Improvement Fees Fees Fees Revenues: Special assessments $ 10,081 $ - $ - $ _ Intergovernmental _ Charges for services _ _ _ _ Development fees - 255,075 26,520 579,804 Contribution from property owners _ _ _ _ Use of money and property 2,007 113,278 134,064 128,039 Miscellaneous _ _ _ _ Total Revenues 12,088 368,353 160,584 707,843 Expenditures: Current: General government 408 _ _ _ Public safety _ Public works _ _ Community development - 33,089 5,000 23,539 Culture and leisure _ - _ _ Capital outlay _ _ _ - Debt service: Principal retirement - - - 61,548 Interest and fiscal charges - 24,165 - - Total Expenditures 408 57,254 5,000 85,087 Excess (Deficiency) of Revenues Over(Under)Expenditures 11,680 311,099 155,584 622,756 Other Financing Sources (Uses): Transfers in _ - Transfers out - (118,441) (638,082) (60,265) Total Other Financing Sources (Uses) - (118,441) (638,082) (60,265) Net Change in Fund Balances 11,680 192,658 (482,498) 562,491 Fund Balances: Beginning of Year 55,427 3,298,836 4,125,779 3,707,907 End of Year $ 67,107 $ 3,491,494 $ 3,643,281 $ 4,270,398 C� CITY OF CHINO HILLS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 Special Revenue Funds Parkland Traffic Air Fee Signal Fee Gas Tax Quality Revenues: Special assessments $ - $ - $ - $ _ Intergovernmental Charges for services Development fees Contribution from property owners Use of money and property Miscellaneous Total Revenues Expenditures: Current: General government Public safety Public works Community development Culture and leisure Capital outlay Debt service: Principal retirement Interest and fiscal charges Total Expenditures Excess (Deficiency) of Revenues Over (Under) Expenditures Other Financing Sources (Uses): Transfers in Transfers out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances: Beginning of Year End of Year 1,421,729 95,465 314,916 79,309 - - 2,799,046 - - - 56,533 3,858 90,465 12,969 - - 5,916 5,700 3,170,495 83,167 1,518,110 114,134 455 - - 1,070,555 - 67,078 - - - - 82,835 - 2,972 - - - 31,288 - - - 101,338 - 1,153,390 455 3,069,157 83,167 364,720 113,679 (1,007,916) - (1,098,291) (4,869) (1,007,916) - (1,098,291) (4,869) 2,061,241 83,167 (733,571) 108,810 2,180,204 76,973 2,878,616 356,620 $ 4,241,445 $ 160,140 $ 2,145,045 $ 465,430 CITY OF CHINO HILLS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 Special Revenue Funds Federal Solid Street Grant Measure I Waste Sweeping Revenues: Special assessments $ - $ - $ - $ 197,276 Intergovernmental 1,855,187 1,253,471 - - Charges for services - - 3,513,075 - Development fees - - - _ Contribution from property owners - _ _ - Use of money and property - 81,579 - 29,904 Miscellaneous - _ _ _ Total Revenues 1,855,187 1,335,050 3,513,075 227,180 Expenditures: Current: General government - Public safety 25,394 - - - Public works 1,708,700 2,900 3,513,075 236,598 Community development - - - _ Culture and leisure 165,908 - - - Capital outlay _ Debt service: Principal retirement Interest and fiscal charges - - _ _ Total Expenditures 1,900,002 2,900 3,513,075 236,598 Excess (Deficiency) of Revenues Over (Under) Expenditures (44,815) 1,332,150 - (9,418) Other Financing Sources (Uses): Transfers in 44,815 - - - Transfers out - (1,135,181) - - Total Other Financing Sources (Uses) 44,815 (1,135,181) - Net Change in Fund Balances - 196,969 - (9,418) Fund Balances: Beginning of Year - 2,114,257 - 907,791 End of Year $ - $ 2,311,226 $ - $ 898,373 67 CITY OF CHINO HILLS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2006 Special Revenue Funds Capital Project Funds CFD # 9 CFD # 10 Total Frontline Miscellaneous Rincon Fairfield Governmental Policing Grant Village Ranch Funds Revenues: Special assessments $ - $ - $ - $ - $ 207,357 Intergovernmental 113,140 683,509 - - 5,422,501 Charges for services - - - - 3,513,075 Development fees - - - - 1,255,624 Contribution from property owners - - - - 2,799,046 Use of money and property 457 - 28,502 14,579 696,234 Miscellaneous - - - - 11,616 Total Revenues 113,597 683,509 28,502 14,579 13,905,453 Expenditures: Current: General government - - - - 863 Public safety 96,400 - - - 121,794 Public works - - 33 1,519 6,533,380 Community development - - - - 128,706 Culture and leisure - - - - 165,908 Capital outlay - - 176,371 - 259,206 Debt service: Principal retirement - - - - 64,520 Interest and fiscal charges - - - - 55,453 Total Expenditures 96,400 - 176,404 1,519 7,329,830 Excess (Deficiency) of Revenues Over (Under) Expenditures 17,197 683,509 (147,902) 13,060 6,575,623 Other Financing Sources (Uses): Transfers in - - - - 44,815 Transfers out - (683,509) - - (4,746,554) Total Other Financing Sources (Uses) - (683,509) - - (4,701,739) Net Change in Fund Balances 17,197 - (147,902) 13,060 1,873,884 Fund Balances: Beginning of Year 12,552 - 896,266 394,623 21,005,851 End of Year $ 29,749 $ - $ 748,364 $ 407,683 $ 22,879,735 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE SLEEPY HOLLOW ROAD IMPROVEMENT YEAR ENDED JUNE 30, 2006 M Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 55,427 $ 55,427 $ 55,427 $ - Resources (Inflows): Special assessments 10,700 10,700 10,081 (619) Use of money and property 1,300 1,300 2,007 707 Amounts Available for Appropriation 67,427 67,427 67,515 88 Charges to Appropriation (Outflow): General government 600 600 408 192 Total Charges to Appropriations 600 600 408 192 Budgetary Fund Balance, June 30 $ 66,827 $ 66,827 $ 67,107 $ 280 M CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE CITY FACILITIES FEES YEAR ENDED JUNE 30, 2006 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 3,298,836 $ 3,298,836 3,298,836 $ - Resources (Inflows): Development fees Use of money and property Amounts Available for Appropriation Charges to Appropriation (Outflow): Community development Debt service: Principal Interest and fiscal charges Transfers to other funds Total Charges to Appropriations Budgetary Fund Balance, June 30 510,400 510,400 255,075 (255,325) 74,700 92,200 113,278 21,078 3,883,936 3,901,436 3,667,189 (234,247) 10,900 30,900 33,089 (2,189) 264,000 264,000 - 264,000 13,300 19,500 24,165 (4,665) 3,893,100 325,900 118,441 207,459 4,181,300 640,300 175,695 464,605 $ (297,364) $ 3,261,136 $ 3,491,494 $ 230,358 70 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE TRAFFIC FACILITIES FEES YEAR ENDED JUNE 30, 2006 Budgetary Fund Balance, July 1 Resources (Inflows): Development fees Use of money and property Amounts Available for Appropriation Charges to Appropriation (Outflow): Community development Transfers to other funds Total Charges to Appropriations Budgetary Fund Balance, June 30 Budget Amounts Original Final $ 4,125,779 $ 4,125,779 Actual Amounts $ 4,125,779 Variance with Final Budget Positive (Negative) $ - 63,000 63,000 26,520 (36,480) 80,700 99,600 134,064 34,464 4,269,479 4,288,379 4,286,363 (2,016) 5,000 5,000 5,000 - 2,030,800 3,503,200 638,082 2,865,118 2,035,800 3,508,200 643,082 2,865,118 $ 2,233,679 $ 780,179 $ 3,643,281 $ 2,863,102 71 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE STORM DRAIN FACILITIES FEES YEAR ENDED JUNE 30, 2006 72 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 3,707,907 $ 3,707,907 $ 3,707,907 $ - Resources (Inflows): Development fees 671,900 671,900 579,804 (92,096) Use of money and property 56,700 70,000 128,039 58,039 Amounts Available for Appropriation 4,436,507 4,449,807 4,415,750 (34,057) Charges to Appropriation (Outflow): Community development 14,000 86,700 23,539 63,161 Debt service: Principal 216,800 216,800 61,548 155,252 Transfers to other funds 891,100 425,300 60,265 365,035 Total Charges to Appropriations 1,121,900 728,800 145,352 583,448 Budgetary Fund Balance, June 30 $ 3,314,607 $ 3,721,007 $ 4,270,398 $ 549,391 72 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE PARKLAND FEES YEAR ENDED JUNE 30, 2006 Budgetary Fund Balance, July 1 Resources (Inflows): Development fees Contribution from property owners Use of money and property Amounts Available for Appropriation Charges to Appropriation (Outflow): Community development Debt service: Principal Interest and fiscal charges Transfers to other funds Total Charges to Appropriations Budget Amounts Original Final $ 2,180,204 $ 2,180,204 Actual Amounts $ 2,180,204 Variance with Final Budget Positive (Negative) 690,300 690,300 314,916 (375,384) - 2,799,100 2,799,046 (54) 45,100 55,600 56,533 933 2,915,604 5,725,204 5,350,699 (374,505) 68,500 206,800 67,078 139,722 181,900 181,900 2,972 9,100 18,000 31,288 4,540,200 6,916,900 1,007,916 4,799,700 7,323,600 1,109,254 178,928 (13,288) 5,908,984 6,214,346 Budgetary Fund Balance, June 30 $ (1,884,096) $ (1,598,396) $ 4,241,445 $ 5,839,841 73 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE TRAFFIC SIGNAL FEES YEAR ENDED JUNE 30, 2006 74 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 76,973 $ 76,973 $ 76,973 $ - Resources (Inflows): Development fees - - 79,309 79,309 Use of money and property 1,800 1,800 3,858 2,058 Amounts Available for Appropriation 78,773 78,773 160,140 81,367 Budgetary Fund Balance, June 30 $ 78,773 $ 78,773 $ 160,140 $ 81,367 74 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE GAS TAX YEAR ENDED JUNE 30, 2006 Budget Amounts Original Final Budgetary Fund Balance, July 1 as Restated $ 2,878,616 $ 2,878,616 Resources (Inflows): Intergovernmental 1,426,400 1,426,400 Use of money and property 45,200 55,700 Miscellaneous - - Amounts Available for Appropriation 4,350,216 4,360,716 Charges to Appropriation (Outflow): Actual $ 2,878,616 Variance with Final Budget Positive (Negative) 1,421,729 (4,671) 90,465 34,765 5,916 5,916 4,396,726 36,010 Public works 1,260,400 1,314,500 1,070,555 243,945 Capital outlay 62,500 85,100 82,835 2,265 Transfers to other funds 1,958,200 3,142,400 1,098,291 2,044,109 Total Charges to Appropriations 3,281,100 4,542,000 2,251,681 2,290,319 Budgetary Fund Balance, June 30 $ 1,069,116 $ (181,284) $ 2,145,045 $ 2,326,329 75 CITY OF CHINO HILLS BUDGET COMPARISON SCHEDULE AIR QUALITY YEAR ENDED JUNE 30, 2006 76 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 356,620 $ 356,620 $ 356,620 $ - Resources (Inflows): Intergovernmental 90,000 90,000 95,465 5,465 Use of money and property 8,300 8,300 12,969 4,669 Miscellaneous - - 5,700 5,700 Amounts Available for Appropriation 454,920 454,920 470,754 15,834 Charges to Appropriation (Outflow): General government - - 455 (455) Capital Outlay - 71,300 - 71,300 Transfers to other funds - 5,000 4,869 131 Total Charges to Appropriations - 76,300 5,324 70,976 Budgetary Fund Balance, June 30 $ 454,920 $ 378,620 $ 465,430 $ 86,810 76 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE FEDERAL GRANTS YEAR ENDED JUNE 30, 2006 Budget Amounts Original Final Actual Amounts Variance with Final Budget Positive (Negative) Budgetary Fund Balance, July 1 $ - $ - $ - $ - Resources (Inflows): Intergovernmental 1,778,100 1,831,800 1,855,187 23,387 Transfers from other funds - - 44,815 44,815 Amounts Available for Appropriation 1,778,100 1,831,800 1,900,002 68,202 Charges to Appropriation (Outflow): Public safety 32,200 33,600 25,394 8,206 Culture and leisure 139,700 181,300 165,908 15,392 Public works 1,606,200 1,708,700 1,708,700 - Total Charges to Appropriations 1,778,100 1,923,600 1,900,002 23,598 Budgetary Fund Balance, June 30 $ - $ (91,800) $ - $ 91,800 77 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE MEASURE I YEAR ENDED JUNE 30, 2006 Budgetary Fund Balance, July 1 Resources (Inflows): Intergovernmental Use of money and property Amounts Available for Appropriation Charges to Appropriation (Outflow): Public works Transfers to other funds Total Charges to Appropriations Budgetary Fund Balance, June 30 Budget Amounts Original Final $ 2,114,257 $ 2,114,257 Actual Amn� �n4e $ 2,114,257 Variance with Final Budget Positive (Negative) 1,113,700 1,113,700 1,253,471 139,771 25,100 30,900 81,579 50,679 3,253,057 3,258,857 3,449,307 190,450 2,900 2,900 2,900 - 2,025,500 2,372,000 1,135,181 1,236,819 2,028,400 2,374,900 1,138,081 1,236,819 $ 1,224,657 $ 883,957 $ 2,311,226 $ 1,427,269 78 i CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE SOLID WASTE YEAR ENDED JUNE 30, 2006 79 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ - $ - $ - $ - Resources (Inflows): Charges for services 3,487,400 3,513,100 3,513,075 (25) Amounts Available for Appropriation 3,487,400 3,513,100 3,513,075 (25) Charges to Appropriation (Outflow): Public works 3,487,400 3,513,100 3,513,075 25 Total Charges to Appropriations 3,487,400 3,513,100 3,513,075 25 Budgetary Fund Balance, June 30 $ - $ - $ - $ - 79 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE STREET SWEEPING YEAR ENDED JUNE 30, 2006 :N Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 907,791 $ 907,791 $ 907,791 $ - Resources (Inflows): Special assessments 197,700 197,700 197,276 (424) Use of money and property 4,800 23,100 29,904 6,804 Transfers from other funds 175,900 175,900 - (175,900) Amounts Available for Appropriation 1,286,191 1,304,491 1,134,971 (169,520) Charges to Appropriation (Outflow): Public works 287,300 287,300 236,598 50,702 Total Charges to Appropriations 287,300 287,300 236,598 50,702 Budgetary Fund Balance, June 30 $ 998,891 $ 1,017,191 $ 898,373 $ (118,818) :N CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE FRONTLINE POLICING YEAR ENDED JUNE 30, 2006 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 12,552 $ 12,552 $ 12,552 $ - Resources (Inflows): Intergovernmental 100,400 100,400 113,140 12,740 Use of money and property - - 457 457 Amounts Available for Appropriation 112,952 112,952 126,149 13,197 Charges to Appropriation (Outflow): Public safety 100,400 100,400 96,400 4,000 Total Charges to Appropriations 100,400 100,400 96,400 4,000 Budgetary Fund Balance, June 30 $ 12,552 $ 12,552 $ 29,749 $ 17,197 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE MISCELLANEOUS GRANTS YEAR ENDED JUNE 30, 2006 Budgetary Fund Balance, July 1 Resources (Inflows): Intergovernmental Use of money and property Amounts Available for Appropriation Charges to Appropriation (Outflow): Transfers to other funds Total Charges to Appropriations Budgetary Fund Balance, June 30 Budget Amounts Original Final Variance with Final Budget Actual Positive Amounts (Negative) 6,270,500 6,595,700 683,509 (5,912,191) 100 100 - (100) 6,270,600 6,595,800 683,509 (5,912,291) 5,270,600 10,203,900 683,509 9,520,391 5,270,600 10,203,900 683,509 9,520,391 $ 1,000,000 $ (3,608,100) $ - $ 3,608,100 E:O i I CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE CAPITAL IMPROVEMENT YEAR ENDED JUNE 30, 2006 Budgetary Fund Balance, July 1 Resources (Inflows): Contribution from property owners Transfers from other funds Amounts Available for Appropriation Charges to Appropriation (Outflow): Capital outlay Total Charges to Appropriations Budgetary Fund Balance, June 30 Budget Amounts Original Final Variance with Final Budget Actual Positive Amounts (Negative) 65,949,000 70,760,500 11,228,236 (59,532,264) 36,626,600 51,169,600 13,559,647 (37,609,953) 102,575,600 121,930,100 24,787,883 (97,142,217) 102,575,600 121,930,100 24,787,883 97,142,217 102,575,600 121,930,100 24,787,883 97,142,217 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE CFD #9 RINCON VILLAGE YEAR ENDED JUNE 30, 2006 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 as Restated $ 896,266 $ 896,266 $ 896,266 $ - Resources (Inflows): Use of money and property 45,100 45,100 28,502 (16,598) Amounts Available for Appropriation 941,366 941,366 924,768 (16,598) Charges to Appropriation (Outflow): Public works - - 33 (33) Capital outlay 580,100 227,500 176,371 51,129 Total Charges to Appropriations 580,100 227,500 176,404 51,096 Budgetary Fund Balance, June 30 $ 361,266 $ 713,866 $ 748,364 $ 34,498 CITY OF CHINO HILLS BUDGETARY COMPARISON SCHEDULE CFD #10 FAIRFIELD RANCH YEAR ENDED JUNE 30, 2006 Variance with Final Budget Budget Amounts Actual Positive Original Final Amounts (Negative) Budgetary Fund Balance, July 1 $ 394,623 $ 394,623 $ 394,623 $ - Resources (Inflows): Use of money and property Amounts Available for Appropriation Charges to Appropriation (Outflow): Public works Capital outlay Total Charges to Appropriations Budgetary Fund Balance, June 30 6,700 6,700 14,579 7,879 401,323 401,323 409,202 7,879 1,600 1,600 1,519 81 331,200 331,200 - 331,200 332,800 332,800 1,519 331,281 $ 68,523 $ 68,523 $ 407,683 $ 339,160 85 CITY OF CHINO HILLS COMBINING STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS JUNE 30, 2006 Assets: Current: Cash and investments Receivables (net of allowances): Accounts Interest Total Current Assets Noncurrent: Capital assets - net of accumulated depreciation Total Noncurrent Assets Total Assets Liabilities and Net Assets: Liabilities: Current: Accounts payable Accrued liabilities Compensated absences Total Current Liabilities Long -Term: Compensated absences Total Long -Term Liabilities Total Liabilities Net Assets: Invested in capital assets, net of related debts Unrestricted Total Net Assets Total Liabilities and Net Assets 0 Equipment Data Maintenance Processing Total $ 2,702,550 $ 739,127 $ 3,441,677 - 18,334 18,334 19,679 5,243 24,922 2,722,229 762,704 3,484,933 1,644,988 92,530 1,737,518 1,644,988 92,530 1,737,518 $ 4,367,217 $ 855,234 $ 5,222,451 $ 59,331 $ 32,175 $ 91,506 6,732 558 7,290 500 - 500 66,563 32,733 99,296 8,680 - 8,680 8,680 - 8,680 75,243 32,733 107,976 1,644,988 92,530 1,737,518 2,646,986 729,971 3,376,957 4,291,974 822,501 5,114,475 $ 4,367,217 $ 855,234 $ 5,222,451 CITY OF CHINO HILLS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS INTERNAL SERVICE FUNDS YEAR ENDED JUNE 30, 2006 Operating Revenues: Charges for services Total Operating Revenues Operating Expenses: Salaries and benefits Professional and contractual services Repairs and maintenance Services and supplies Other general and administrative Depreciation Total Operating Expenses Operating Income (Loss) Non -Operating Revenues (Expenses): Interest income Total Non -Operating Revenues (Expenses) Net Income (Loss) Before Contributions Capital contributions Change in Net Assets Net Assets: Beginning of fiscal year End of fiscal year EM Equipment Data Maintenance Processing Totals $ 1,011,672 $ 482,900 $ 1,494,572 1,011,672 482,900 1,494,572 112,168 - 112,168 1,398 243,641 245,039 189,151 28,838 217,989 160,909 65,138 226,047 62,380 86,351 148,731 319,825 30,716 350,541 845,831 454,684 1,300,515 165,841 28,216 194,057 90,102 22,563 112,665 90,102 22,563 112,665 255,943 50,779 306,722 301,762 - 301,762 557,705 50,779 608,484 3,734,269 771,722 4,505,991 $ 4,291,974 $ 822,501 $ 5,114,475 CITY OF CHINO HILLS COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS YEAR ENDED JUNE 30, 2006 Cash Flows from Operating Activities: Cash received from customers and users Cash payments to supplies for good and services Cash payments to employees for services Net Cash Provided (Used) by Operating Activities Cash Flows from Capital and Related Financing Activities: Purchases of capital assets Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows from Investing Activities: Interest received Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash and Cash equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation Changes in assets and liabilities: (Increase) decrease in accounts receivable Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase (decrease) in compensated absences Total Adjustments Net Cash Provided (Used) by Operating Activities Non -Cash Investing, Capital, and Financing Activities: Contributions of capital assets W Equipment Data $ 194,057 Maintenance Processing Total $ 1,011,672 $ 486,252 $ 1,497,924 (436,856) (419,208) (856,064) (110,340) - (110,340) 1,421 558 1,979 464,476 67,044 531,520 298,635 38,828 337,463 (590,373) (36,247) (626,620) $ 301,762 $ (590,373) (36,247) (626,620) 83,688 20,514 104,202 nn wee (42,209) 20,514 104,202 51,311 9,102 2,744,759 687,816 3,432,575 $ 2,702,550 $ 739,127 $ 3,441,677 $ 165,841 $ 28,216 $ 194,057 319,825 30,716 350,541 - 3,352 3,352 (24,439) 4,202 (20,237) 1,421 558 1,979 1,828 - 1,828 298,635 38,828 337,463 $ 464,476 $ 67,044 $ 531,520 $ 301,762 $ - $ 301,762 CITY OF CHINO HILLS COMBINING BALANCE SHEET ALL AGENCY FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables: Interest Special assessments Restricted assets: Cash and investments with fiscal agents Total Assets Liabilities: Accounts payable Deposits Due to Inland Empire Utilities Agency Advances from other funds Funds held for others Total Liabilities $ 33 $ - $ 2,460 $ 586 91,134 1,045,348 4,313,880 2,072,240 $ 91,167 $ 1,045,348 $ 4,316,340 $ 2,072,826 CFD # 1 AD # 1980 AD # 1994 AD # 1995 Rolling Ridge $ 90,512 $ 1,038,161 $ 848,333 $ 1,443,140 655 7,187 7,073 15,912 - - 17,875 22,558 - - 3,443,059 591,216 $ 91,167 $ 1,045,348 $ 4,316,340 $ 2,072,826 $ 33 $ - $ 2,460 $ 586 91,134 1,045,348 4,313,880 2,072,240 $ 91,167 $ 1,045,348 $ 4,316,340 $ 2,072,826 CITY OF CHINO HILLS COMBINING BALANCE SHEET ALL AGENCY FUNDS JUNE 30, 2006 Assets: Cash and investments Receivables: Interest Special assessments Restricted assets: Cash and investments with fiscal agents Total Assets Liabilities: Accounts payable Deposits Due to Inland Empire Utilities Agency Advances from other funds Funds held for others Total Liabilities CFD # 2 CFD # 4 CFD # 5 CFD # 6 Los Ranchos The Oaks Rincon Village Carbon Canyon $ 7,300,805 $ 10,356,278 $ 2,830,877 $ 1,154,254 70,324 81,042 36,429 10,180 33,500 13,854 28,343 1,159 378,724 183,522 136,239 - $ 7,783,353 $ 10,634,696 $ 3,031,888 $ 1,165,593 $ 1,134 $ 412 $ 1,516 $ 106 - - 901,584 - 7,782,219 10,634,284 2,128,788 1,165,487 $ 7,783,353 $ 10,634,696 $ 3,031,888 $ 1,165,593 Kc CITY OF CHINO HILLS COMBINING BALANCE SHEET ALL AGENCY FUNDS JUNE 30, 2006 91 CFD # 8 CFD # 9 CFD # 10 General Butterfield Rincon Village Fairfield Ranch Agency Fund Totals Assets: Cash and investments $ 2,479,066 $ 2,823,491 $ 688,466 $ 5,045,986 $ 36,099,369 Receivables: Interest 21,911 20,694 4,382 - 275,789 Special assessments 10,141 9,272 26,826 - 163,528 Restricted assets: Cash and investments with fiscal agents 190,633 1,485,210 1,242,157 - 7,650,760 Total Assets $ 2,701,751 $ 4,338,667 $ 1,961,831 $ 5,045,986 $ 44,189,446 Liabilities: Accounts payable $ 1,071 $ 4,066 $ 163 $ 26,249 $ 37,796 Deposits - - - 4,765,499 4,765,499 Due to Inland Empire Utilities Agency - - - 254,238 254,238 Advances from other funds - - - - 901,584 Funds held for others 2,700,680 4,334,601 1,961,668 - 38,230,329 Total Liabilities $ 2,701,751 $ 4,338,667 $ 1,961,831 $ 5,045,986 $ 44,189,446 91 CITY OF CHINO HILLS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAD ENDED JUNE 30, 2006 Balance Balance July 1, 2005 Additions Deletions June 30, 2006 Special Assessment - District #1980 Assets: Cash and investments $ 67,344 $ 43,473 $ 20,305 $ 90,512 Receivables: Interest 373 655 373 655 Special assessments 1,642 - 1,642 - Restricted assets: Cash and investments with fiscal agents 12,000 - 12,000 - Total Assets $ 81,359 $ 44,128 $ 34,320 $ 91,167 Liabilities: Accounts payable $ - $ 33 $ - $ 33 Funds held for others 81,359 44,095 34,320 91,134 Total Liabilities $ 81,359 $ 44,128 $ 34,320 $ 91,167 Special Assessment - District #1994 Assets: Cash and investments $ 1,178,749 $ 1,082,005 $ 1,222,593 $ 1,038,161 Receivables: Interest 6,065 7,187 6,065 7,187 Special assessments 29,701 - 29,701 - Restricted assets: Cash and investments with fiscal agents 899,284 - 899,284 - Total Assets $ 2,113,799 $ 1,089,192 $ 2,157,643 $ 1,045,348 Liabilities: Accounts payable $ 175 $ - $ 175 $ - Funds held for others 2,113,624 1,089,192 2,157,468 1,045,348 Total Liabilities $ 2,113,799 $ 1,089,192 $ 2,157,643 $ 1,045,348 Special Assessment - District #1995 Assets: Cash and investments $ 836,746 $ 3,201,143 $ 3,189,556 $ 848,333 Receivables: Interest 5,213 7,073 5,213 7,073 Special assessments 36,105 17,875 36,105 17,875 Restricted assets: Cash and investments with fiscal agents 3,375,152 67,907 - 3,443,059 Total Assets $ 4,253,216 $ 3,293,998 $ 3,230,874 $ 4,316,340 Liabilities: Accounts payable $ 2,783 $ 2,460 $ 2,783 $ 2,460 Funds held for others 4,250,433 3,291,538 3,228,091 4,313,880 Total Liabilities $ 4,253,216 $ 3,293,998 $ 3,230,874 $ 4,316,340 CITY OF CHINO HILLS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAD ENDED JUNE 30, 2006 Balance Balance July 1, 2005 Additions Deletions June 30, 2006 Community Facilities District #1 Rolling Ridge Assets: Cash and investments $ 2,309,979 $ 1,507,916 $ 2,374,755 $ 1,443,140 Receivables: Interest 10,877 15,912 10,877 15,912 Special assessments 18,502 22,558 18,502 22,558 Restricted assets: Cash and investments with fiscal agents 587,514 3,702 - 591,216 Total Assets $ 2,926,872 $ 1,550,088 $ 2,404,134 $ 2,072,826 Liabilities: Accounts payable $ - $ 586 $ - $ 586 Funds held for others 2,926,872 1,549,502 2,404,134 2,072,240 Total Liabilities $ 2,926,872 $ 1,550,088 $ 2,404,134 $ 2,072,826 Community Facilities District #2 Los Ranchos Assets: Cash and investments $ 10,175,729 $ 2,533,507 $ 5,408,431 $ 7,300,805 Receivables: Accounts - _ Interest 52,264 70,324 52,264 70,324 Special assessments 33,100 33,500 33,100 33,500 Restricted assets: Cash and investments with fiscal agents 376,353 2,371 - 378,724 Total Assets $ 10,637,446 $ 2,639,702 $ 5,493,795 $ 7,783,353 Liabilities: Accounts payable $ - $ 1,134 $ - $ 1,134 Funds held for others 10,637,446 2,638,568 5,493,795 7,782,219 Total Liabilities $ 10,637,446 $ 2,639,702 $ 5,493,795 $ 7,783,353 CITY OF CHINO HILLS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAD ENDED JUNE 30, 2006 Community Facilities District #4 The Oaks Assets: Cash and investments Receivables: Interest Special assessments Restricted assets: Cash and investments with fiscal agents Total Assets Liabilities: Accounts payable Funds held for others Total Liabilities Community Facilities District #5 Rincon Village Assets: Cash and investments Receivables: Accounts Interest Special assessments Restricted assets: Cash and investments with fiscal agents Total Assets Liabilities: Accounts payable Advances from other funds Funds held for others Total Liabilities Community Facilities District #6 Carbon Canyon Assets: Cash and investments Receivables: Interest Special assessments Total Assets Liabilities: Accounts payable Funds held for others Total Liabilities Balance July 1, 2005 Additions Deletions Balance June 30, 2006 $ 10,405,572 $ 1,271,265 $ 1,320,559 $ 10,356,278 50,846 81,042 50,846 81,042 9,999 13,854 9,999 13,854 $ 182,367 $ 1,155 $ - $ 183,522 $ 10,648,784 $ 1,367,316 $ 1,381,404 $ 10,634,696 $ - $ 106 $ - $ 106 $ - $ 412 $ - $ 412 $ 10,648,784 $ 1,366,904 $ 1,381,404 $ 10,634,284 $ 10,648,784 $ 1,367,316 $ 1,381,404 $ 10,634,696 $ 4,941,513 $ 2,103,686 $ 4,214,322 $ 2,830,877 24,490 36,429 24,490 36,429 28,314 28,343 28,314 28,343 135,386 853 - 136,239 $ 5,129,703 $ 2,169,311 $ 4,267,126 $ 3,031,888 $ 62 $ 1,516 $ 62 $ 1,516 901,584 - - 901,584 4,228,057 2,167,795 4,267,064 2,128,788 $ 5,129,703 $ 2,169,311 $ 4,267,126 $ 3,031,888 $ 1,351,331 $ 246,020 $ 443,097 $ 1,154,254 6,608 10,180 6,608 10,180 2,134 1,159 2,134 1,159 $ 1,360,073 $ 257,359 $ 451,839 $ 1,165,593 $ - $ 106 $ - $ 106 1,360,073 257,253 451,839 1,165,487 $ 1,360,073 $ 257,359 $ 451,839 $ 1,165,593 CITY OF CHINO HILLS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAD ENDED JUNE 30, 2006 95 Balance Balance July 1, 2005 Additions Deletions June 30, 2006 Community Facilities District #8 Butterfield Assets: Cash and investments $ 2,925,359 $ 774,489 $ 1,220,782 $ 2,479,066 Receivables: Accounts - _ Interest 14,242 21,911 14,242 21,911 Special assessments 13,428 10,141 13,428 10,141 Restricted assets: Cash and investments with fiscal agents 189,439 1,194 - 190,633 Total Assets $ 3,142,468 $ 807,735 $ 1,248,452 $ 2,701,751 Liabilities: Accounts payable $ 68 $ 1,071 $ 68 $ 1,071 Funds held for others 3,142,400 806,664 1,248,384 2,700,680 Total Liabilities $ 3,142,468 $ 807,735 $ 1,248,452 $ 2,701,751 Community Facilities District #9 Rincon Village Assets: Cash and investments $ 2,641,010 $ 857,077 $ 674,596 $ 2,823,491 Receivables: Interest 12,697 20,694 12,697 20,694 Special assessments 11,757 9,272 11,757 9,272 Restricted assets: Cash and investments with fiscal agents 1,495,603 - 10,393 1,485,210 Total Assets $ 4,161,067 $ 887,043 $ 709,443 $ 4,338,667 Liabilities: Accounts payable $ 11,886 $ 4,066 $ 11,886 $ 4,066 Funds held for others 4,149,181 882,977 697,557 4,334,601 Total Liabilities $ 4,161,067 $ 887,043 $ 709,443 $ 4,338,667 Community Facilities District #10 Fairfield Ranch Assets: Cash and investments $ 655,461 $ 1,021,889 $ 988,884 $ 688,466 Receivables: Interest 2,647 4,382 2,647 4,382 Special assessments 16,358 26,826 16,358 26,826 Restricted assets: Cash and investments with fiscal agents 1,228,407 13,750 - 1,242,157 Total Asscts $ 1,902,873 $ 1,066,847 $ 1,007,889 $ 1,961,831 Liabilities: Accounts payable $ - $ 163 $ - $ 163 Funds held for others 1,902,873 1,066,684 1,007,889 1,961,668 Total Liabilities $ 1,902,873 $ 1,066,847 $ 1,007,889 $ 1,961,831 95 CITY OF CHINO HILLS COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES ALL AGENCY FUNDS YEAD ENDED JUNE 30, 2006 General Agency Fund Assets: Cash and investments Total Assets Liabilities: Accounts payable Deposits Due to Inland Empire Utilities Agency Total Liabilities Total - All Agency Funds Assets: Cash and investments Receivables: Interest Special assessments Restricted assets: Cash and investments with fiscal agents Total Assets Liabilities: Accounts payable Deposits Due to Inland Empire Utilities Agency Advances from other funds Funds held for others Total Liabilities $ 491,059 Balance $ 491,059 $ 37,796 4,363,962 401,537 - Balance July 1, 2005 - Additions 254,238 Deletions June 30, 2006 $ 7,279,760 $ 427,786 $ 2,661,560 $ 5,045,986 $ 7,279,760 $ 427,786 $ 2,661,560 $ 5,045,986 $ 476,085 $ 26,249 $ 476,085 $ 26,249 4,363,962 401,537 - 4,765,499 2,439,713 - 2,185,475 254,238 $ 7,279,760 $ 427,786 $ 2,661,560 $ 5,045,986 $ 44,768,553 $ 15,070,256 $ 23,739,440 $ 36,099,369 186,322 275,789 186,322 275,789 201,040 163,528 201,040 163,528 8,481,505 90,932 921,677 7,650,760 $ 53,637,420 $ 15,600,505 $ 25,048,479 $ 44,189,446 $ 491,059 $ 37,796 $ 491,059 $ 37,796 4,363,962 401,537 - 4,765,499 2,439,713 - 2,185,475 254,238 901,584 - - 901,584 45,441,102 15,161,172 22,371,945 38,230,329 $ 53,637,420 $ 15,600,505 $ 25,048,479 $ 44,189,446 STATISTICAL SECTION CITY OF CHINO HILLS INCORPORATED 1 99 1 1 I Statistical Section This part of the City of Chino Hills' comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the city's overall financial health. Contents Financial Trends - These schedules contain trend information to help the reader understand how the city's financial performance and well-being have changed over time. 1 Net Assets by Component ' 2 Changes in Net Assets 3 Fund Balances of Governmental Funds 4 Changes in Fund Balances of Governmental Funds 1 1 1 1 1 1 1 Revenue Capacity - These schedules contain information to help the reader assess the factors affecting the city's ability to generate its property and sales taxes. 5 Assessed Value and Estimated Actual Value of Taxable Property 6 Direct and Overlapping Property Tax Rates 7 Principal Property Tax Payers 8 Property Tax Levies and Collections Debt Capacity - These schedules present information to help the reader assess the affordability of the city's current levels of outstanding debt and the city's ability to issue additional debt in the future. 9 Ratios of Outstanding Debt by Type 10 Direct and Overlapping Governmental Activities Debt 11 Legal Debt Margin Information 12 Pledged -Revenue Coverage Demographic and Economic Information - These schedules offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place and to help make comparisons over time and with other governments. 13 Demographic and Economic Statistics 14 Principal Employers Operating Information - These schedules contain information about the city's operations and resources to help the reader understand how the city's financial information relates to the services the city provides and the activities it performs. 15 Full -Time -Equivalent City Government Employees by Function/Program 16 Operating Indicators by Function/Program 17 Capital Assets Statistics by Function/Program Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. The city implemented Statement 34 in 2003; schedules presenting government -wide information include information beginning in that year. 97 Page 99 105 111 117 121 CITY OF CHINO HILLS INC ORP ORATED 1 9 9 1 This page intentionally left blank. Financial Trends Schedule 1 City of Chino Hills Net Assets By Component Last Four Fiscal Years (accrual basis of accounting) Business -type activities Invested in capital assets, net of related debt $ 80,051,419 Fiscal Year $ 90,729,037 $ 101,715,882 2003 2004 2005 2006 Government activities Unrestricted 54,809,237 55,154,461 59,667,148 Invested in capital assets, net of related debt $ 158,522,217 $ 170,214,503 $ 177,027,176 $ 196,572,923 Restricted 24,454,187 24,793,566 25,313,102 26,951,415 Unrestricted 22,455,591 26,761,061 29,505,254 27,534,630 Total governmental activities net assets $ 205,431,995 $ 221,769,130 $ 231,845,532 $ 251,058,968 Business -type activities Invested in capital assets, net of related debt $ 80,051,419 $ 87,951,967 $ 90,729,037 $ 101,715,882 Restricted 5,539,052 1,180,447 914,901 901,348 Unrestricted 54,809,237 55,154,461 59,667,148 54,864,729 Total business -type activities net assets $ 140,399,708 $ 144,286,875 $ 151,311,086 $ 157,481,959 Primary government Invested in capital assets, net of related debt $ 238,573,636 $ 258,166,470 $ 267,756,213 $ 298,288,805 Restricted 29,993,239 25,974,013 26,228,003 27,852,763 Unrestricted 77,264,828 81,915,522 89,172,402 82,399,359 Total primary government activities net assets $ 345,831,703 $ 366,056,005 $ 383,156,618 $ 408,540,927 100 Schedule 2 City of Chino Hills Changes in Net Assets Last Four Fiscal Years (accrual basis of accounting) 101 Fiscal Year 2003 2004 2005 2006 Expenses Governmental Activities: General government $ 4,791,760 $ 5,791,059 $ 4,706,563 $ 5,271,426 Public safety 4,685,540 5,267,519 6,316,390 7,709,721 Public works 24,190,015 24,644,445 16,338,394 23,693,162 Community development 13,540,354 2,676,842 3,557,317 3,077,001 Culture and leisure 2,517,511 3,018,462 2,961,591 3,191,791 Interest on long-term debt 606,644 380,809 495,042 994,463 Total Governmental Activities expenses 50,331,824 41,779,136 34,375,297 43,937,564 Business -Type Activities: Water utility 13,988,695 14,540,120 15,078,649 14,369,015 Sewer utility 3,984,971 4,013,704 4,288,240 4,285,136 Total Business -Type Activities Expenses 17,973,666 18,553,824 19,366,889 18,654,151 Total Primary Government Expenses $ 68,305,490 $ 60,332,960 $ 53,742,186 $ 62,591,715 Program Revenues Governmental Activities: Charges for services: General government $ 5,002,488 $ 5,111,368 $ 5,248,069 $ 5,096,254 Public safety 587,025 603,561 605,589 1,180,499 Public works 3,069,353 3,396,199 3,882,515 4,746,512 Community development 1,762,324 1,498,104 1,354,772 2,070,238 Culture and leisure 1,011,135 1,035,082 990,265 975,332 Operating Contributions 2,417,924 2,121,376 2,715,236 5,599,718 Capital Contributions and Grants 18,210,072 11,418,393 11,145,328 23,623,731 Total Governmental Activities Program Revenues 32,060,321 25,184,083 25,941,774 43,292,284 Business -Type Activities: Charges for services: Water utility 13,060,808 14,672,595 14,314,657 16,341,865 Sewer utility 4,114,787 4,250,684 4,278,320 4,404,840 Capital Contributions and Grants - - - 2,803,533 Total Business -Type Activities Program Revenues 17,175,595 18,923,279 18,592,977 23,550,238 Total Primary Government Program Revenues $ 49,235,916 $ 44,107,362 $ 44,534,751 $ 66,842,522 Net Governmental Activities (18,271,503) (16,595,053) (8,433,523) (645,280) Business -Type Activities (798,071) 369,455 (773,912) 4,896,087 Total primary Government Net Expense (19,069,574) (16,225,598) (9,207,435) 4,250,807 101 Bueiness-Type Activities Use of money and property 920,415 Fiscal Year 842,926 1,653,347 Gain on investment in joint venture 2003 2004 2005 2006 General Revenues and Other Charges in Net Assets 475,065 - 11,747 Governmental Activities: (261,929) - - (390,308) Taxes: 6,690,095 5,850,206 1,789,448 - Property taxes, levied for general purpose $ 2,139,115 $ 2,391,352 $ 6,704,552 $ 7,696,773 Sales taxes 3,300,701 3,890,159 4,574,678 4,991,352 Franchise taxes 1,494,117 1,683,595 1,753,414 2,047,801 Business licenses taxes 117,410 132,450 137,873 144,613 Othertaxes 396,549 497,029 565,394 501,058 Motor Vehicle In Lieu 4,056,601 3,335,980 1,692,165 536,507 Use of money and property 1,695,715 1,088,166 2,305,598 3,528,476 Other revenues and transfers 1,135,604 225,130 679,008 412,136 Total Governmental Activities 14,335,812 13,243,861 18,412,682 19,858,716 Bueiness-Type Activities Use of money and property 920,415 406,944 842,926 1,653,347 Gain on investment in joint venture - - 529,868 - Gain on sale of assets 475,065 - 11,747 Loss in investment in joint venture (261,929) - - (390,308) Other revenues and transfers 6,690,095 5,850,206 1,789,448 - Contributions - - 4,160,594 - Total Business -Type Activities 7,823,646 6,257,150 7,322,836 1,274,786 Total Primary Government 22,159,458 19,501,011 25,735,518 21,133,502 Changes in Net Assets Governmental Activities (3,935,691) (3,351,192) 9,979,159 19,213,436 Business -Type Activities 7,025,575 6,626,605 6,548,924 6,170,873 Total Primary Government $ 3,089,884 $ 3,275,413 $ 16,528,083 $ 25,384,309 102 Schedule 3 City of Chino Hills Fund Balances of Governmental Funds Last Four Fiscal Years (modified accrual basis of accounting) General Fund Reserved Unreserved/Designated Total General Fund All Other Governmental Funds Reserved Unreserved: Unreserved, reported in nonmajor, Special revenue funds Capital Projects funds Designated for: Structural replacement Cash flow Undesignated Total all other Governmental Funds Fiscal Year 2003 2004 2005 2006 1,346,436 981,699 656,814 571,579 13,026,938 13,257,304 17,142,984 14,600,992 14,373,374 14,239,003 17,799,798 15,172,571 8,137,347 15,978,422 2,746,725 7,392,443 19,139,469 2,914,495 11,298,311 14,825,821 1,075,563 18,954,928 15,632,369 1,156,047 5,550,059 4,719,463 4,667,542 3,954,801 2,531,286 2,898,175 2,982,169 3,753,956 (3,026,278) (3,468,902) (1,609,070) (7,610,272) 31,917,561 33,595,143 33,240,336 35,841,829 103 Schedule 4 City of Chino Hills Changes in Fund Balances of Governmental Funds Last Four Fiscal Years (modified accrual basis of accounting) 104 Fiscal Year 2003 2004 2005 2006 Revenues: Taxes $ 11,263,343 $ 11,657,289 $ 14,723,571 $ 15,028,374 Special Assessments 5,332,321 5,356,117 5,876,774 5,371,287 Licenses and permits 2,035,885 1,733,174 1,370,704 2,440,976 Intergovernmental 3,672,868 3,180,817 3,106,971 6,043,995 Charges for services 9,369,932 9,863,549 10,351,236 10,678,498 Development fees 9,958,702 3,763,910 2,710,135 4,115,661 Contribution from property owners 996,276 1,189,508 2,010,270 14,175,866 Fines and forfeiture 301,987 354,012 575,160 585,743 Use of money and property 1,592,313 1,057,207 2,242,131 3,415,811 Miscellaneous 1,150,261 601,302 786,143 1,003,344 Total revenues 45,673,888 38,756,885 43,753,095 62,859,555 Expenditures: Current: General government 4,168,525 5,184,585 4,102,552 4,614,084 Public safety 4,674,473 5,263,470 6,303,899 7,702,276 Public works 21,235,554 17,198,835 14,192,320 16,831,468 Community development 2,359,836 2,672,650 3,587,253 3,539,481 Culture and leisure 1,952,138 2,159,952 2,196,976 2,397,380 Capital outlay 11,379,811 6,710,597 8,524,106 25,179,789 Debt service: Principal retirement 2,753,395 1,459,123 1,755,461 1,876,929 Interest and fiscal charges 606,644 380,809 495,042 994,463 Total expenses 49,130,376 41,030,021 41,157,609 63,135,870 Excess (deficiency) of revenues over (under) expenditures (3,456,488) (2,273,136) 2,595,486 (276,315) Other financing sources (uses): Transfers in 12,532,497 6,782,853 5,012,996 13,916,584 Transfers out (12,532,497) (5,967,753) (5,012,996) (13,916,584) Other debt issued 268,113 3,001,247 513,259 250,581 Total other financing sources (uses) 268,113 3,816,347 513,259 250,581 Net change in fund balances / net assets $ (3,188,375) $ 1,543,211 $ 3,108,745 $ (25,734) Debt service as a percentage of noncapital expenditures 8.9% 5.4% 6.9% 7.6% 104 Revenue Capacity 105 Schedule 5 City of Chino Hills Assessed Value and Estimated Actual Value of Taxable Property, Last Ten Fiscal Years (in thousands of dollars) Total Total Taxable Direct Fiscal Residential Commercial Other Assessed Tax Year Property Property Property Exemption Value Rate 1997 $ 3,004,364 $ 204,009 n/a $ 71,667 $ 3,280,040 $1.00 1998 3,200,627 227,893 n/a 75,256 3,503,776 1.00 1999 3,395,604 243,857 n/a 77,763 3,717,224 1.00 2000 n/a n/a n/a 80,014 4,036,940 1.00 2001 n/a n/a n/a 78,061 4,266,586 1.00 2002 n/a n/a n/a 83,251 4,719,735 1.00 2003 n/a n/a n/a 84,759 5,148,753 1.00 2004 5,221,647 192,198 162,834 89,910 5,666,589 1.00 2005 5,751,757 207,832 174,517 91,308 6,225,414 1.00 2006 6,310,533 230,589 228,009 91,672 6,860,803 1.00 Source: San Bernardino County Auditor/Controller-Property Tax Division and HDL Coren & Cone. 106 Schedule 6 City of Chino Hills Direct and Overlapping Property Tax Rates, Last Ten Fiscal Years (rate per $100 of assessed value) Fiscal Year City Direct Rates General Basic Tax Levy' 1997 $ 1.0000 1998 1.0000 1999 1.0000 2000 1.0000 2001 1.0000 2002 1.0000 2003 1.0000 2004 1.0000 2005 1.0000 2006 1.0000 Overlapping Rates Chino Unified Metropolitan San School Water Bernardino District District County $ 0.0490 $ 0.0089 $ - - 0.0089 - - 0.0089 - - 0.0089 - - 0.0088 - - 0.0088 - 0.0490 0.0067 - 0.0527 0.0061 - 0.0452 0.0058 - 0.0634 0.0052 - Source: San Bernardino County Auditor/Controller-Recorder and Assessor. 107 Schedule 7 City of Chino Hills Principal Property Tax Payers, Current Year and Nine Years Ago Source: (1) HDL Coren & Cone and (2) San Bernardino County Assessor. 108 2006 1997 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value (1) Rank Value Value (2) Rank Value Chino Crossroads One LLC $ 60,653,640 1 0.90% - - CAFI Chino Hills LLC 36,985,717 2 0.54% - Village Oaks Inc. 32,468,166 3 0.48% WRI Chino Hills LLC 30,755,685 4 0.45% - ERP Operating Limited Partnership 20,251,197 5 0.30% 20,184,000 2 0.62% Pan Pacific Retail Properties Inc. 19,344,910 6 0.29% - - Calle Privada Partners LLC 17,797,244 7 0.26% - - Sears Roebuck & Company 17,080,239 8 0.21% - - SAF Woodview LLC 16,007,977 9 0.24% - - LDC Cougar LLC 15,231,740 10 0.22% - - K/B Retain Properties - - 22,380,000 1 0.68% Standard Pacific Corp. - - 13,919,000 3 0.42% LBK, L.P. - - 13,701,000 4 0.42% Zufu Properties Company, LTD. - - 12,466,000 5 0.38% Sterling Builders, Inc. - - 10,924,000 6 0.33% Lewis Development Company - - 10,385,000 7 0.32% Quong-Lebowitz - - 9,866,000 8 0.30% Evans Withycombe Residential, L.P. - - 9,076,000 9 0.28% Sumitomo Realty/Development, CA. Inc. - - 8,969,000 10 0.27% Total $ 266,576,515 3.89% $ 131,870,000 4.02% Source: (1) HDL Coren & Cone and (2) San Bernardino County Assessor. 108 Schedule 8 City of Chino Hills Property Tax Levies and Collections, Last Ten Fiscal Years Fiscal Collected within the Year Taxes Levied Fiscal Year of the Levy Collections Total Collections to Date Ended for the Percentage in Subsequent Percentage June 30, Fiscal Year Amount of Levy Years Amount of Levy 1997 $ 1,299,949 $ 1,187,694 91.4% 58,805 $ 1,246,499 95.9% 1998 1,379,405 1,267,811 91.9% 59,089 1,326,900 96.2% 1999 1,473,928 1,360,530 92.3% 68,643 1,429,173 97.0% 2000 1,600,751 1,455,148 90.9% 60,025 1,515,173 94.7% 2001 1,695,233 1,605,518 94.7% 60,810 1,666,328 98.3% 2002 1,866,919 1,783,954 95.6% 72,318 1,856,272 99.4% 2003 2,033,010 1,963,816 96.6% 79,485 2,043,301 100.5% 2004 2,250,501 2,217,021 98.5% 85,370 2,302,391 102.3% 2005 2,462,079 2,312,787 93.9% 82,560 2,395,347 97.3% 2006 2,720,557 2,537,125 93.3% - 2,537,125 93.3% Sources: San Bernardino County Auditor/Controller-Recorder.. 109 CITY OF CHINO HILLS INCORPORATED 1 9 9 1 This page intentionally left blank. 110 Debt Capacity 111 Schedule 9 City of Chino Hills Ratios of Outstanding Debt by Type, Last Four Fiscal Years (dollars in thousands, except per capita) Governmental Business -type Activities Activities Special Certificates Total Fiscal Assessment of Primary Year Bonds Participation Government Percentage of Personal Income a Per Capita 2003 52,923 26,835 $ 79,758 0.09% 1,093 2004 49,937 26,740 $ 76,677 0.08% 1,004 2005 47,000 25,660 $ 72,660 n/a 934 2006 42,037 24,560 $ 66,597 n/a 854 Notes: Details regarding the city's outstanding debt can be found in the notes to the financial statements. a See Demographic and Economic Statistics schedule (schedule 13) for personal income and population data. 112 Schedule 10 City of Chino Hills Direct and Overlapping Governmental Activities Debt As of June 30, 2006 Fiscal Year 2005-06 Assessed Valuation : $6,860,803,463 Direct and Overlapping General Fund Obligation Debt: San Bernardino County General Fund Obligations Debt % City's Share of Overlapping Tax and Assessment Debt: Outstanding Applicable (1) Debt 6/30/06 Metropolitan Water District $ 389,565,000 0.470% $ 1,830,956 Chaffey Community College District Certificates of Participation 113,050,000 15.815% 17,878,858 Chino Valley Unified School District 96,545,000 52.964% 51,134,094 City of Chino Hills 1915 Act Bonds 10,812,000 100.000% 10,812,000 City of Chino Hills - Community Facilities District #1 4,355,000 100.000% 4,355,000 City of Chino Hills - Community Facilities District #2 2,820,000 100.000% 2,820,000 City of Chino Hills - Community Facilities District #4 1,365,000 100.000% 1,365,000 City of Chino Hills - Community Facilities District #5 1,010,000 100.000% 1,010,000 City of Chino Hills - Community Facilities District #8 1,415,000 100.000% 1,415,000 City of Chino Hills - Community Facilities District #9 7,305,000 100.000% 7,305,000 City of Chino Hills - Community Facilities District #10 12,955,000 100.000% 12,955,000 Total Overlapping Tax and Assessment Debt $ 112,880,908 Direct and Overlapping General Fund Obligation Debt: San Bernardino County General Fund Obligations $ 885,315,000 7.248% $ 64,167,631 San Bernardino County Pension Obligations 761,360,591 7.248% 55,183,416 Chaffey Community College District General Fund Obligations 2,620,000 15.815% 414,353 Chino Valley Unified School District Certificates of Participation 49,380,000 52.964% 26,153,623 City of Chino Hills 0 100.000% 0 West Valley Vector Control District Certificates of Participation 4,190,000 43.218% 1,810,834 Total Direct and Overlapping General Fund Obligation Debt $ 147,729,857 COMBINED TOTAL DEBT $ 260,610,765 (2) Source: California Municipal Statistics, Inc. Note: (1) Percentage of overlapping agency's assessed valuation located within boundaries of the city. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non -bonded capital lease obligations. 113 Schedule 11 City of Chino Hills Legal Debt Margin Information, Last Ten Fiscal Years (dollars in thousands) Legal Debt Margin Calculation for Fiscal Year 2006 Assessed value Debt limit (15% of assessed value) Debt applicable to limit: General obligation bonds Less: Amount set aside for repayment of general obligation debt Total net debt applicable to limit Legal debt margin $ 6,860,803 1,029,120 $ 1,029,120 Total net debt Legal Applicable to Debt Fiscal Year Debt Limit Limit Margin 1997 $ 492,006 $ - $ 492,006 1998 525,566 - 525,566 1999 557,583 - 557,583 2000 605,541 - 605,541 2001 639,988 - 639,988 2002 707,960 - 707,960 2003 772,313 - 772,313 2004 849,988 - 849,988 2005 933,812 - 933,812 2006 1,029,120 - 1,029,120 114 Schedule 12 City of Chino Hills Pledged -Revenue Coverage, Last Four Fiscal Years (dollars in thousands) Notes: (1) Operating expenses do not include interest, depreciation, or amortization expenses. (2) Details regarding the city's outstanding debt can be found in the notes to the financial statements. 115 Water Certificate of Participation Utility Less: Net Fiscal Assessment Fiscal Service Operating Available Debt Service Coverage Year Charges Expenses (1) Revenue Principal Interest Coverage 2003 $ 13,061 $ 9,540 $ 3,521 $ 790 $ 1,783 1.37 2004 14,673 10,002 4,671 975 1,376 1.99 2005 14,315 11,022 3,293 1,080 1,277 1.40 2006 15,964 13,122 2,842 1,100 1,314 1.18 Notes: (1) Operating expenses do not include interest, depreciation, or amortization expenses. (2) Details regarding the city's outstanding debt can be found in the notes to the financial statements. 115 Special Assessment Bonds Special Fiscal Assessment Debt Service (2) Year Collections Principal Interest Coverage 2003 $ 11,999 $ 4,765 $ 3,712 1.42 2004 11,837 3,741 3,455 1.64 2005 10,914 2,937 2,750 1.92 2006 11,627 4,963 2,647 1.53 Notes: (1) Operating expenses do not include interest, depreciation, or amortization expenses. (2) Details regarding the city's outstanding debt can be found in the notes to the financial statements. 115 CITY OF CHINO HILLS INC ORP ORATED 1 9 9 1 This page intentionally left blank. 116 Demographic and Economic Information 117 Schedule 13 City of Chino Hills Demographic and Economic Statistics, Last Ten Calendar Years Sources: (1) Population - State of California. (2) Personnal Income and Per Capita Personal Income are not available at the City's level. The information presented here is for the Riverside -San Bernardino -Ontario, California (MSA) area, provided by U.S. Department of Commerce. (3) Unemployment Rate - California Labor Market. 118 Personal Per Income (2) Capita Calendar (thousands Personal Unemployment Year Population (1) of dollars) Income (2) Rate (3) 1997 51,418 $ 60,478,203 $ 19,879 n/a 1998 54,667 65,613,539 21,110 n/a 1999 58,086 69,402,740 21,760 n/a 2000 60,236. 74,787,087 22,808 2.4% 2001 69,183 80,405,780 23,773 2.4% 2002 70,952 84,150,669 24,021 2.9% 2003 72,994 89,307,163 24,499 3.2% 2004 76,400 97,559,778 25,769 2.9% 2005 77,819 n/a n/a 2.5% 2006 77,969 n/a n/a 2.3% Sources: (1) Population - State of California. (2) Personnal Income and Per Capita Personal Income are not available at the City's level. The information presented here is for the Riverside -San Bernardino -Ontario, California (MSA) area, provided by U.S. Department of Commerce. (3) Unemployment Rate - California Labor Market. 118 Schedule 14 City of Chino Hills Principal Employers, Current Year and Nine Years Ago Total 3,074 7.61% n/a Source: City Community Relations Department, Finance Department, and California Labor Market. Note: "Total city employment 40,400, provided by California Labor Market. 119 n/a 2006 1997 Percentage Percentage of Total City of Total City Employer Employees Rank Employment" Employees Rank Employment Chino Valley Unified School District 1,600 1 3.96% n/a n/a n/a Costco 233 2 0.58% n/a n/a n/a Albertson's, Inc. 216 3 0.53% n/a n/a n/a Boys Republic 200 4 0.50% n/a n/a n/a City of Chino Hills 190 5 0.47% n/a n/a n/a Lowe's 180 6 0.45% n/a n/a n/a Best Buy 140 7 0.35% n/a n/a n/a The Great Indoors 110 8 0.27% n/a n/a n/a PMAC-Fairfield 105 9 0.26% n/a n/a n/a Chino Valley Independent Fire District 100 10 0.25% n/a n/a n/a Total 3,074 7.61% n/a Source: City Community Relations Department, Finance Department, and California Labor Market. Note: "Total city employment 40,400, provided by California Labor Market. 119 n/a CITY OF CHINO HILLS INC ORP ORATED 1 9 9 1 This page intentionally left blank. 120 Operating Information 121 Schedule 15 City of Chino Hills Full -Time -Equivalent City Government Employees by Function/Program, Full-time Equivalent Employees as of June 30 2006 Function/Program General government Legislative 6 City Manager 10 Finance 14 Public Safety 7 Public Works 36 Community Development 20 Culture and Leisure 36 Water Utility 22 Sewer Utilitiy 7 Total 158 Source: City Finance Department. Notes: A full-time employee is scheduled to work 2,080 hours per year (including vacation and sick leave). Full -time -equivalent employment is calculated by dividing total labor hours by 2,080. 122 Schedule 16 City of Chino Hills Operating Indicators by Function/Program, Last Ten Fiscal Years Function/Program General government Building permits issued Building inspections conducted Refuse collection Refuse collected (tons per day) Recyclables collected (tons per day) Other public works Street resurfacing (miles) Potholes repaired Water New connections Water main breaks Average daily consumption (million gallons) Peak daily consumption (million gallons) Sewage System Average daily sewage treatment (million gallons) Sources: Various city departments. Fiscal Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2,295 2,298 1,872 1,767 1,827 1,584 1,832 1,787 1,715 1,799 n/a n/a n/a 14,325 18,047 14,338 11,114 12,135 13,373 10,540 n/a n/a n/a n/a n/a n/a n/a n/a n/a 243.0 n/a n/a n/a n/a n/a n/a n/a n/a n/a 73.0 n/a n/a n/a n/a n/a n/a n/a n/a n/a 56.8 n/a n/a n/a n/a n/a n/a n/a n/a n/a 120 n/a n/a n/a n/a n/a n/a n/a n/a n/a 104 n/a n/a n/a n/a n/a n/a n/a n/a n/a 24 13.46 11.56 12.93 14.16 14.71 15.63 14.79 15.46 14.97 14.49 n/a n/a n/a n/a n/a n/a n/a n/a n/a 25.31 6.1 6.7 5.8 4.7 5.0 6.0 6.5 6.5 7.1 7.1 123 Schedule 17 City of Chino Hills Capital Asset Statistics by Function/Program, Last Ten Fiscal Years Function/Program Other public works Streets (miles) Traffic signals Parks and recreation Parks Acreage Playgrounds Baseball/softball diamonds Soccer/football fields Community centers Water Water mains (miles) Fire hydrants Storage capacity (million gallons) Sewage System Sanitary sewers (miles) Storm sewers (miles) Fiscal Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 189 170 220 160 192 193 186 186 189 189 n/a n/a n/a n/a n/a n/a n/a n/a n/a 42 30 31 34 34 34 34 37 37 37 38 179 195 235 235 235 208 218 218 218 248 n/a n/a n/a n/a n/a n/a n/a n/a n/a 27 n/a n/a n/a n/a n/a n/a n/a n/a n/a 14 n/a n/a n/a n/a n/a n/a n/a n/a n/a 7 n/a n/a n/a n/a n/a n/a n/a n/a n/a 5 283 285 285 285 285 295 240 245 250 250 n/a n/a n/a n/a n/a n/a n/a n/a n/a 2,500 31 31 31 35 35 35 38 38 38 38 243 245 245 245 245 255 215 200 202 202 156 190 190 190 190 190 75 80 82 82 Sources: Various city departments. Notes: No capital asset indicators are available for the general government. 124