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1991-1992 CAFR (Seven Months ) -K/7D- Peat Marwick Certified Public Accountants CITY OF CHINO HILLS General Purpose and Combining Financial Statements and Supplementary Information Seven months ended June 30, 1992 (With Independent Auditors' Report Thereon) CITY OF CHINO HILLS General Purpose and Combining Financial Statements Seven months ended June 30, 1992 Table of Contents Pace FINANCIAL SECTION: Independent Auditors' Report 1 Combined Financial Statements--("Liftable" General Purpose Financial Statements) : Combined Balance Sheet--All Fund Types and Account Groups 2 Combined Statement of Revenues, Expenditures and Changes in Fund Balances--All Governmental Fund Types 3 Combined Statement of Revenues, Expenses and Changes in Retained Earnings--All Proprietary Fund Types Combined Statement of Cash Flows--All Proprietary Fund Types Combined Statement of Revenues, Expenditures and Other financing Sources (Uses) --Budget and Actual on a Budgetary Basis--All Governmental Fund Types 4 Notes to General Purpose Financial Statements 7 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS: Special Revenue Funds: Combining Balance Sheet 30 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 31 Capital Projects Funds: Combining Balance Sheet 32 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 34 Agency Funds: Combining Balance Sheet 36 Combining Statement of Additions, Deductions and Changes in Assets/Funds Held for Others 37 - i - A /D Ak 1 Peat Marwick Certified Public Accountants Orange County Office Center Tower 650 Town Center Drive Costa Mesa, CA 92626 Independent Auditors' Report Honorable Members of the City Council City of Chino Hills: We have audited the general purpose financial statements of the City of Chino Hills, California as of and for the period December 1, 1991 to June 30, 1992, as listed in the accompanying table of contents. These general purpose financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit in accordance with those standards includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose 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 opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Chino Hills, at June 30, 1992 and the results of its operations for the period then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the City of Chino Hills, taken as a whole. The combining financial statements and schedules listed in the accompanying table of contents are presented for purposes of additional analysis and are not a required part of the general purpose financial statements of the City of Chino Hills. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the component unit financial statements taken as a whole. /409/V1 taa)e- November 25, 1992 EMIMember Firm of eId Peat Marwck Goerdeter CITY OF CHINO HILLS Combined Balance Sheet All Fund Types and Account Groups June 30, 1992 Proprietary Fiduciary Governmental Fund Types Fund Fund Tvoe Account Groups Special Capital General General Total General Revenue Projects Enterprise Agency Fixed Long-Term (Memorandum Assets and Other Debits Fund Funds Funds Fund Fund Assets Debt Only) Cash and investments (note 2) $ 829,945 22,503,687 45,957,051 7,297,677 32,576,348 - - 109,164,708 Receivables (net, where applicable of allowance): Accounts - - - 888,576 - - - 888,576 Interest 8,954 271,403 539,138 146,461 330,771 - - 1,296,727 Special assessment receivable--current - 281,177 - - 900,614 - - 1,181,791 Deferred special assessments receivable - 608,918 - - - - - 608,918 Lease payments receivable (note 3) - - - 2,907,181 - - - 2,907,181 Due from other funds (note 4) - - - 43,122 - - - 43,122 Materials and supply inventory - - - 338,662 - - - 338,662 Restricted assets (note 2): Cash and investments held by the County 96,154 - - 4,859,241 - - - 4,955,395 Cash and investments with fiscal agents - - - 2,468,674 - - - 2,468,674 Advances to other funds (note 4) - 2,400,000 50,000 - - - - 2,450,000 Property, plant and equipment, net (note 5 and 18) - - - 39,372,670 - 5,313,907 - 44,686,577 Unamortized issuance costs - - - 168,294 - - - 168,294 Investment in water facilities authority (note 6) - - - 5,814,347 - - - 5,814,347 Amount to be provided for retirement of long-term debt (note 7) - - - - - - 4.994.699 4.994,699 Total assets $ 935,053 _2,605,185 46,546,189 64,304,905 33,807,733 5,313,907 4,994,699 181,967,671 • - •1 ... • .- Liabilities: Accounts and contracts payable $ 179,775 1,251,710 2,118,460 866,767 165,383 - - 4,582,095 Advances from developers (note 14) 96,154 - - - - - 4,921,751 5,017,905 Funds held for others (note 7) - - - - 27,832,997 - - 27,832,998 Due to other funds (note 4) - 43,122 - - - - - 43,122 Due to other governments - 1,077 - - - - - 1,077 Salaries and benefits payable 143,699 3,182 - 48,949 - - - 195,830 Obligations under reverse repurchase agreements (note 2) 145,670 4,920,205 11,113,473 3,118,422 5,809,353 - - 25,107,123 Customer deposits - - 8,555 540,716 - - - 549,271 Due to Chino Basin Municipal Water District (notes 2 and 8) - - - 4,318,525 - - - 4,318,525 Advances from other funds (note 4) - 50,000 2,400,000 - - - - 2,450,000 Capital lease obligation (note 9) - - - 123,023 - - - 123,023 Installment obligation due Inland Empire Public Facilities Corporation (note 6) - - - 19,916,355 - - - 19,916,355 Installment obligation due Water Facilities Authority (note 6) - - - 2,350,544 - - - 2,350,544 Accrued interest payable to Inland Empire Facilities Corporation - 138,879- - - - 138,879 Inspection deposits (note 10) - - - 1,057,348 - - - 1,057,348 Advances for construction (note 11) - - - 697,465 - - - 697,465 Employee compensated absences (note 7) - - - - - - 72.948 72,94a Total liabilities ,565,298 6.269.296 15,640,488 33.176,993 33,807,733 - 4,994,699 94,454,507 Equity and other credits: Contributed capital (notes 12 and 18) - - - 25,084,263 - - - 25,084,263 Investment in general fixed assets - - - - - 5,313,907 - 5,313,907 Retained earnings - - - 6,043,649 - - - 6,043,649 Fund balances- Reserved for deferred special assessments receivable - 506,027 - - - - - 506,027 Reserve for payment of accelerated fees (note 14) - 567,566 - - - - - 567,566 Reserved for encumbrances 78,597 1,787,633 2,026,031 - - - - 3,892,261 Unreserved 291.158 16,934,663 28,879.670 - - - 46,105,491 Total equity and other credits 369.755, 19.795.889 30.905.701 31 - 5.313.907 - 87.513,164. Total liabilities, equity and other credits $ 935,053 26,065,185 46,546,189 64,304,905 33,807,733 5,313,907 759,207 181,967,671 See accompanying notes to general purpose financial statements - 2 - CITY OF CHINO HILLS Combined Statement of Revenues, Expenditures and Changes in Fund Balances All Governmental Fund Types Year ended June 30, 1992 Governmental Fund Tvnes Special Capital Total General Revenue Projects (Memorandum Fund Funds Funds Only) Revenues: Taxes $ 252,270 7,196,807 - 7,449,077 Intergovernmental 1,006,768 635,414 - 1,642,182 Community development services 18,552 - - 18,552 Use of money and property 26,302 833,302 2,795,016 3,654,620 Development fees (note 15) 4,757,394 - 4,757,394 Interfund recovery and other revenue (note 15) 988,750 5.658.195, - 6.646.945 Total revenues 2.292,642 19,081,112 2,795,016 24,168,770 Expenditures: Current: — - -- -- --Salar-ies-and-benef-its-- _732,002 164,967__ _ - __ ___896,969 Services and supplies 1,190,885 4,439,889 8,217,445 13,848,219 Trust deposits - 4,468,237 - 4,468,237 Other charges - - 1,655,639 (1,655,639) Capital outlay - 400,670 3,557,208 3,957,878 Total expenditures 1,922,887 9.473,763 13,430.292 24,826,942 Excess (deficiency) of revenues over expenditures 369.75.5, 9.607.349 (10.635.276) (658.172) Other financing sources (uses): Operating transfers in (note 4) - 863,253 5,156,068 6,019,321 Operating transfers out (note 4) - (6.020.667) - (6.07.0.667) Total other financing sources (uses) - (5.157.414) 5.156.068 (1.346) Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses 369,755 4,449,935 (5,479,208) (659,518) Fund balances, beginning of year (note 18) - 15,343,782 36,387,081 51,730,863 Residual equity transfer to other funds (note 16) - - (1,252,699) (1,252,699) Residual equity transfer from other funds (note 16) - 2.172 1.250.527 1.252.699 Fund balances, end of year $ 369,755 19,795,889 30,905,701 51,071,345 See accompanying notes to general purpose financial statements. - 3 - CITY OF CHINO HILLS Combined Statement of Revenues, Expenses and Changes in Retained Earnings All Proprietary Fund Types Seven month period ended June 30, 1992 Operating revenues: Water sales $ 3,795, 033 Sanitation services 1,428,842 Permit and inspection fees 24,325 Meter and installation fees 69, 079 Other services 45,840 Total operating revenues 5,363, 119 Operating expenses: Purchased water 418, 573 Salaries and benefits 1, 148,459 Sanitation services 709,731 Utilities 280,334 Professional services 529, 065 Depreciation and amortization 636,306 Repairs and maintenance 409,208 Services and supplies 113,325 Other general and administrative 95,271 Total operating expenses 4,340,272 Operating income 1, 022,847 Non-operating revenues (expenses) : Equity in earnings of Water Facilities Authority (notes 2 and 6) (218,956) Interest earnings 795, 189 Tax and assessment revenue 74,848 Other non-operating revenue 820 Interest expense (533,704) Total non-operating revenues (expenses) 118, 197 Net income 1, 141, 044 Retained earnings, beginning of period 4,902, 605 Retained earnings, end of period $ 6, 043, 649 See accompanying notes to general purpose financial statements. - 4 - CITY OF CHINO HILLS Combined Statement of Cash Flows Seven month period ended June 30, 1992 Cash flows from operating activities: Operating income $ 1,022,847 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation and amortization 636,306 Provision for doubtful accounts (68,699) Equity in losses of Water Facilities Authority (218,956) Changes in assets and liabilities: Increase in accounts receivable (54,723) Increase in materials and supplies inventory (41,224) Decrease in due from other funds 4,354 Increase in accounts and construction contracts payable 68,590 Increase in accrued employee benefits payable 8,154 Decrease in due to other funds (1,200) Increase in customer deposits 18,709 Net cash provided by operating activities 1,374,158 Cash flows from noncapital financing activities - Increase in obligation under reverse repurchase agreements 1,407,132 Cash flows from capital and related financing activities: Principal repayments on long-term debt (321,383) Payment to Chino Basin Municipal Water District (343,035) Repayment of advances for construction (219,949) Inspection deposits received 28,937 Contributed capital received 4,314,325 Bond interest paid (947,714) Capital lease payments (59,153) Purchases of property, plant and equipment (5,877,625) Lease payments received 76,760 Net cash used by capital and related financing activities (3,348,837) Cash flows from investing activities: Decrease in reverse repurchase agreements (1,407,132) Interest received 795,189 Other (136,346) Net cash (used) by investing activities (748,289) Decrease in cash and cash equivalents (1,315,836) Cash and cash equivalents at beginning of period l2,_823.006 Cash and cash equivalents at end of year (see note 2) $ 11,507,170 See accompanying notes to general purpose financial statements. - 5 - CITY OF CHINO HILLS Notes to General Purpose Financial Statements June 30, 1992 (1) Reporting Entity and Summary of Significant Accounting Policies 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 is comprised of a combination of the San Bernardino County Service Area No. 70 ("CSA 70" ) , Zone Chino Hills, portions of County of San Bernardino (the "County") , and San Bernardino County Waterworks No. 8 (the "District") . The City operates under a Council-Manager form of government and provides the following services: contracted public safety (police and fire) , lighting and landscaping, public improvements, water, sanitation, planning and zoning and general administrative services, animal control, building and safety, community services and street and highway maintenance. The reporting entity includes two landscaping and lighting districts, the activity of seven Community Facilities Districts (CFD' s) located within the District. Inclusion within the reporting entity is appropriate as the CFD's are also governed ex-officio by the City Council. They are CFD #1 - Rolling Ridge, CFD #2 - Los Ranchos, CFD #4 - The Oaks, CFD #5 - Soquel Canyon, Rincon and Woodview, CFD #6 - Carbon Canyon, CFD #8 - Butterfield, CFD #9 - Ricon Village and the Regional fund. These CFD's were formed pursuant to the terms and provisions of the Mello-Roos Community Facilities Act of 1982 (the "Act") (Chapter 2.5, Part 1, Division 2, Title 5, of the California Government Code) . Authorized activities under the Act include the construction, expansion, rehabilitation or purchase of the specified regional facilities among which are school facilities, fire station facilities, public library facilities and government centers. In addition, the Act authorizes expenditures for parks and park facilities, street and access improvements and drainage improvements. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. - 6 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The various funds are summarized by type in the general purpose financial statements. The following fund types and account groups are used: Governmental Fund Types: General Fund: The General Fund is the general operating fund of the City and accounts for all revenues and expenditures of the City not encompassed within other fund types. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. General operating expenses and the capital improvement costs that are not paid through other funds are paid from the General Fund. Special Revenue Funds: The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Debt Service Funds: The Debt Service Funds are used to account for the accumulation of resources for and the payment of general long-term debt principal and interest. Capital Projects Funds: The Capital Projects Funds are used to account for resources received and used for the acquisition or construction of capital facilities and improvements. Proprietary Fund Type: .Enterprise Fund: The Enterprise Funds are used to account for operations that are financed and operated in a manner similar to a private business enterprise, where the costs of the goods and services are provided to the general public. Fiduciary Fund Type: Agency Funds: Agency Funds are used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governmental entities and other funds. Agency Funds are custodial in nature and do not involve the measurement of operations. The Agency Funds account for the collection of tax proceeds and the payment of special assessment debt. Account Groups: General Fixed Assets Account Group: This group of accounts is established to account for all general fixed assets. General Lona-Term Debt Account Group: This group of accounts is established to account for all long-term debt. - 7 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Measurement Focus All governmental funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance (net current assets) is considered a measure of "available spendable resources . " Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long- term amounts are not recognized as governmental fund type expenditures or fund liabilities. Instead, they are reported as liabilities in the General Long-Term Debt Account Group. Basis of Accounting The basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the general purpose financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The City's accounting policies conform to generally accepted accounting principles as applicable to governmental units. All governmental funds are accounted for using the modified accrual basis of accounting. Their revenues are recognized when they become measurable and available to finance operations of the current year. The primary revenue sources susceptible to accrual are property and sales taxes, state gas tax subventions and investment income. Under the modified accrual basis of accounting, expenditures are generally recognized when the related fund liability is incurred. An exception to this general rule is principal and interest on general long- term debt, which is recognized when due. Interest revenues and delinquent special assessments expected to be collected within the current year are accrued. Expenditures are generally recognized when the related fund liability is incurred, except for interest on long-term obligations which is recognized when the payment is due. All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are recognized when they are earned, and their expenses are recognized when they are incurred. Unbilled utility service receivables are recorded at year-end and amounted to $335,289 at June 30, 1992. - 8 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Budgets and Budgetary Accounting The City did not prepare a budget for the seven-month period after incorporation, and therefore, budget to actual schedules are not presented. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods and services. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded in order to reserve that portion of the applicable appropriation, is employed. Encumbrances do not constitute expenditures nor liabilities but are reported as reservations of the fund balances since the commitments will be honored in subsequent years. Encumbrances are liquidated when the services or materials are received or when cancelled. Cash and Investments Investments are carried at cost or amortized cost. No loss is recorded when the market values decline below cost as such declines are considered temporary. The City intends to hold the investments either until maturity or until market values equal or exceed cost. The City pools cash and investments of all funds except for amounts held as restricted assets. The pooled cash is invested in several State or Municipal investment funds. These include the State of California Local Agency Investment Fund ("LAIF") , San Bernardino County Investment Pool and Los Angeles County Investment Fund. The primary objective for the investment of City funds is security of principal with secondary emphasis on liquidity and rate of return. Materials and Supplies Inventory 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 fixed assets and depreciated upon installation. The remaining items are recorded as expenditures when used in accordance with the consumption method. Inventories are capitalized at the lower of cost or market on a FIFO (first-in, first-out) basis. - 9 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Property, Plant and Equipment General fixed asset acquisitions are recorded as expenditures in the Governmental Fund Types at the time of purchase. Fixed assets costing $1, 000 or more are capitalized, at cost, in the General Fixed Assets Account Group. Infrastructure expenditures including the construction costs of streets, roads, bridges, drainage and lighting systems, have been excluded from the general fixed assets account group because they generally are immovable and of value only to the governmental unit. Depreciation is not provided on general fixed assets. Proprietary fund property, plant and equipment owned by the City are carried at purchase cost or cost of construction. These costs include payroll related costs such as pensions and other fringe benefits . Contributed fixed assets are recorded at fair market value at the time they are received and consist primarily of water distribution systems contributed by real estate developers. Depreciation is charged to operations using a straight-line method, based on the average useful life of the asset. The estimated useful lives of the assets are as follows: Utility plant in service 5 - 100 years Pipeline in service 40 - 75 years Meters 30 years Vehicles 4 - 10 years Equipment 3 - 12 years Compensated Absences The City is obligated to compensate employees for all earned but unused vacation days accumulated. Liabilities for vacation, holiday benefits, sick pay and compensatory time are recorded when earned. Compensated absence liabilities are reported in the General Long-Term Debt Account Group because it is not expected that they will be paid with current available resources. City employees receive from 10 to 20 vacation days each year, depending upon length of service. Installment Obligation Discount and Issuance Costs Installment obligation issuance costs and the discount on the installment obligation due Inland Empire Public Facilities Corporation are amortized using the straight-line method, which approximates the effective interest rate method over the term of the obligation. - 10 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Property Taxes The County levies, collects and apportions property taxes for all taxing jurisdictions within the County including school and special districts. Property taxes are determined by applying approved rates to the property's assessed values, which are generally at 100% of full cash or market value. Article XIIIA of the State of California Constitution limits the property tax levy to support general government services of the various taxing jurisdictions to $1.00 per $100 of full cash value. Taxes levied to service voter-approved debt prior to June 30, 1978 are excluded from this limitation. Secured property taxes are levied in two equal installments, November 1 and February 1. They become delinquent with penalties on December 11 and April 11, respectively. The lien date is March 1 of each year. Unsecured property taxes are due on the March 1 lien date and become delinquent with penalties on August 31. Total Columns Total columns in the accompanying general purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not purport to present financial position or results of operations of the District in conformity with generally accepted accounting principles. Such data is not comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. (2) Cash and Investments The City has elected to pool all cash and investments with three different State and Municipal investment funds for the purpose of increasing earnings, while maintaining a high degree of safety, through investment activities . Interest earned on pooled investments is apportioned monthly or quarterly to the participating agencies based upon each fund's average daily deposit balance during the allocation period. Cash and investments at June 30, 1992 consisted of the following: Deposits $ 636, 159 Pooled Funds: Cash in County treasury 72,421,426 Investments: Reverse repurchase agreements $ 25, 107, 123 Investments with other agents 11. 000, 000 Total investments 36. 107. 123 Total cash and investments $ 109, 164,708 - 11 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Deposits Deposits consist of demand deposit accounts . Deposits in banks are maintained in financial institutions which provide deposit protection on the bank balance from the Federal Depository Insurance Corporation. The California Government Code requires California banks and savings and loan associations to secure a City's deposits by pledging government securities as collateral. The market value of pledged securities must equal at least 110% of a City's deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City's deposits. The City' s deposits are held in the City' s name. As of June 30, 1992, the deposit balances were as follows: Bank Book Category 1 Category 2 Category 3 Balance Balance Deposits: Cash in bank $ 154, 641 481,518 - 636, 159 585,331 Additionally, up to $200, 000 of the above amount is insured by the Federal Depository Insurance Corporation. The City's deposits at year-end are categorized below to give an indication of the level of credit risk assumed by the City at year-end. Category 1 - Insured or collateralized with securities held by the City or its agent in the City's name. Category 2 - Collateralized with securities held by the pledging financial institution's trust department or agent in the City' s name. Category 3 - Uncollateralized. Investments Under provisions 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: • United States Treasury obligations • Securities of the U.S. Government, or its agencies and Instrumentalities of Government Sponsored Corporations • Bankers' Acceptances • Commercial Paper • Repurchase Agreements • Local Agency Investment Fund demand deposits • Other investments that may be authorized by City through the State of California Governmental Code. - 12 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The City' s investments at year-end are categorized below to give an indication of the level of credit risk assumed by the City at year-end. Cateaory 1 - Insured or registered, or securities held by the City or its agent in the City's name. Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the City's name. Category 3 - Uninsured and unregistered, with securities held by the counterparty's, or by its trust department or agent, but not in the City's name. At June 30, 1992, the City's investments consisted of the following: Cateaory Carrying Market 1 2 3 Amount Value State of California Local Agency Investment Fund $ - 400, 000 - 400, 000 400, 000 Total investments - 400, 000 - 400, 000 400, 000 Cash and investments with other agents - 10. 600. 000 - 10. 600, 000 10, 615,360 Total $ - 11, 000, 000 - 11, 000, 000 11, 015,360 The City pools all cash and investments, including reverse repurchase agreements, with the County for the purpose of increasing earnings through investment activities. Interest earned on pooled investments is apportioned quarterly to the participating funds based upon each fund' s average daily deposit balance during the allocation period. No disclosure of the individual deposits and investments is provided or required. The major risk with a reverse repurchase agreement transaction is market risk, which results from the margin built into the agreement. If the buyer-lender in a reverse repurchase agreement transaction cannot or will not return the securities or their value at the end of the agreement, the seller-borrower may lose all or part of the margin. The credit risk, expressed in economic terms, is the difference between the market value of the underlying securities (including accrued interest) and the amount of the reverse repurchase agreement obligation (including accrued interest) . As the City pools its reverse repurchase agreements with the County, this risk is also pooled. - 13 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Restricted Assets--Cash and Investments The City's restricted assets--cash and investments held by the County at June 30, 1992 consist of the following: Road trust deposits $ 96, 154 Customer deposits 540,716 Deposits for Chino Basin Municipal Water District (see note 8) 4,318, 525 $ 4,955,395 Restricted Assets--Cash and Investments Held by Fiscal Agents Fiscal agents acting on behalf of the City hold all investment funds from long-term debt issuances. Bond indentures specify the types of securities in which debt proceeds can be invested. Investments by fiscal agents consist primarily of U.S. Government securities . These securities, which are held by the counterparty or by its trust department or agent, are not in the City's name and are uninsured and unregistered. Cash and investments with fiscal agents at June 30, 1992 are as follows: Cash held by other County agencies-- inspection deposits (see note 10) $ 1, 057,348 Construction funds relating to installment obligation due Inland Empire Public Facilities Corporation (see note 6) 1,203,838 Reserve fund relating to installment obligation due Water Facilities Authority 207.488 $ 2,468, 674 For purposes of the statement of cash flows, cash and investments consist of the following at June 30, 1992 (excludes reverse repurchase agreements of $3, 118,422) : Cash and investments $ 4, 179,255 Restricted cash and investments held by the County 4,859,241 Restricted cash and investments with fiscal agents 2. 468. 674 Total $ 11, 507,170 (3) Lease Payments Receivable Leases include certain water improvements, facilities, capacity rights and real and related personal property to the City of Chino and the Monte Vista Water District. The lease provides that, upon satisfaction of the terms of the agreement, legal title to the facilities will transfer to the lessees. - 14 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The following is a schedule of minimum lease payments receivable by years as of June 30, 1992: Year Ending June 30, 1993 $ 429, 500 1994 430, 144 1995 431, 187 1996 430, 577 1997 429, 675 Thereafter 2, 583, 883 Minimum lease payments 4,734, 966 Less unearned interest (1, 827,785) Lease receivable $ 2,907, 181 (4) Interfund Receivables, Payables and Operating Transfers Interfund Receivables and Payables Individual interfund receivables and payables as of June 30, 1992 are as follows: Due From Due to Fund Other Funds Other Funds Enterprise: Water Utility $ - 43, 122 Special Revenues: Lighting and Landscape 1 33,768 - Lighting and Landscape 2 7,938 - City Service Areas 1,416 - 43, 122 - Total $ 43, 122 43, 122 - 15 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Advances from/to other funds at June 30, 1992 are: Advances from , Advances to Fund Other Funds Other Funds Special Revenue: Trust/Revolving Funds: CSA #48 - Sleepy Hollow Community Park $ 50, 000 - Development Fee Surcharge - 600, 000 Development Fee - 1,800, 000 Capital Projects: Pomona Trust 2, 400, 000 - Landscape and Lighting - Zone IE CIF - 50. 000 Total $ 2,450, 000 2,450, 000 Operating Transfers The aggregate amounts of operating transfers in and out as reflected on the Combined Statement of Revenues, Expenditures and Changes in Fund Balances of $6, 019,351 and $6, 020, 668, respectively, do not equal because of an adjustment made after incorporation. Operating transfers for the twelve months ended June 30, 1992 are equal. (5) Property. Plant and Equipment General Fixed Assets The following is a summary of changes in general fixed assets account group for the period ended June 30, 1992: Balance Balance December 1, 1991 Additions Deletions June 30, 1992 Equipment $ 743,147 4,570,760 - 5,313,907 - 16 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Proprietary Fund The following is a summary of proprietary fund-type fixed assets at June 30, 1992 (see note 19) : Utility plant: Land $ 5, 059,943 Easements 415,337 Utility plant in service 8, 663, 969 Pipeline in service 21, 521, 063 Meters 687, 507 Construction in progress 6,375,780 Total utility plant 42,723,599 Other physical property: Vehicles 1, 197, 645 Equipment 983, 691 Total other physical property 2, 181,336 Total property, plant and equipment 44,904,935 Less accumulated depreciation and amortization (5,532,265) Net property, plant and equipment $ 39,372, 670 During fiscal year 1992, the City finance department performed a complete physical inventory and valuation of the City's fixed assets. Adjustments made to reflect the results of this physical inventory and valuation amounted to a decrease in general fixed assets of $3,281, 401 and are included in the balances presented as of June 30, 1992. Construction in progress at June 30, 1992 is comprised of assets under construction and includes District yard site improvements and various wells and transmission lines. The District capitalized interest of $414, 010 to construction in progress for the seven months ended June 30, 1992. (6) Investment in Water Facilities Authority (Joint Powers Act) On February 19, 1980, the CSA 70 Zone CH entered into a joint powers agreement with other local entities to create the Water Facilities Authority (the "WFA") . It was formed in order to acquire and construct facilities that would supply water within the boundaries of WFA members. The governing Board of Directors consists of 1 member appointed from each participating agency and has approval of all budget and finance activities. On November 13, 1986, WFA issued Refunding Certificates of Participation 1986 Series A (Agua de Lejos Project) ("WFA Debt") with a principal amount totaling $33,715, 000. The registered certificates were - 17 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements issued in denominations of $5, 000 each with fixed interest rates ranging from 4.00% to 6.75%. Each participant in the joint venture has pledged gross revenues and has covenanted to set rates and charges at a level sufficient to maintain net revenue equal to at least 1.25 times the aggregate amount of its installment payments to WFA and any parity debt which shall become due and payable within the succeeding 12 months. The City is liable to repay 7 .52415% of the WFA Debt and has recorded this portion of the WFA Debt, $2,350,544, in the financial statements. The City used the equity method to record its investment in WFA. The components of the City's investment in Water Facilities Authority at June 30, 1992 are summarized as follows: City contributed capital $ 2, 925,370 Portion of WFA Debt assumed, excluding related reserve fund of $207,488 2, 144, 195 Cumulative equity in earnings at WFA 744,782 Total investment in WFA $ 5,814,347 By agreement, allocations of planned capacity and entitlement are as follows: Participant Percentacte City of Chino Hills 15.7% Monte Vista Water District 24.0 City of Chino 5.9 City of Ontario 31.4 City of Upland 23 .0 Total 100.0% - 18 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Unaudited financial information of the Water Facilities Authority for the fiscal year ended June 30, 1992 is summarized as follows: City WFA Share Total assets $ 49,597,930 $ 11, 075,217 Total liabilities $ 33, 161, 953 $ 7,405, 064 Total fund equity $ 16, 435,972 $ 3, 670, 152 Operating revenues $ 4,402,421 $ 983, 060 Operating expenses (5,964, 456) (1,331, 863) Non-operating revenue 763, 815 170, 560 Net income (loss) (798,220) (178,243) Retained earnings, beginning of year 4, 133, 564 923, 024 Retained earnings, end of year $ 3,335,344 $ 744,782 Property, plant and equipment $ 35, 690,786 $ 7, 969, 653 Net working capital $ 10, 156,330 $ 2,267, 908 Capital contributions $ 13, 100, 628 $ 2,925,370 The participants and their unaudited financial contributions through June 30, 1992 were as follows: 1992 Amount Percent City of Chino Hills $ 2,925,370 22.33% Monte Vista Water District 2,223, 176 16.97 City of Chino 1, 819, 677 13 .89 City of Ontario 3,729,748 28.47 City of Upland 2.402. 657 18.34 Total $ 13, 100, 628 100.00% Installment Obligation Due Inland Empire Public Facilities Corporation In May 1986, the County formed the Inland Empire Public Facilities Corporation ( " IEPFC" ) , a California nonprofit public benefit corporation, to assist the County in financing, refinancing, acquiring, constructing, and improving public facilities. On June 1, 1988, IEPFC sold $20 , 120, 000 of certificates of participation (the "1988 Certificates") to refund the $10, 625, 000 Water System Acquisition Project Certificates of Participation, finance the acquisition by the County of San Bernardino Public Facilities Corporation ("Facilities Corporation" ) of a water distribution and irrigation system ( "Facilities" ) , finance various improvements to the District ' s water system and to pay expenses relating to the issuance of the Certificates. - 19 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements On March 15, 1990, the District sold $21, 510, 000 in Certificates of Participation (the "1990 Refunding Certificates") which were used to refund the $20, 120, 000 1988 Certificates . The 1990 Refunding Certificates are payable at an adjustable interest rate which will be set semiannually by a remarketing agent based on prevailing financial market conditions, after an initial rate of 6.70% through May 31, 1996. The 1990 Refunding Certificates are secured by an installment sale agreement between the District, now the City, and the IEPFC. The proceeds of the 1990 Refunding Certificates were used to purchase U.S. Government Securities, which were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the refunded 1988 Certificates. As a result, the 1988 Certificates are considered to be defeased, and the related liability has been removed from the accompanying financial statements. The District refunded the 1988 Certificates to reduce its total debt service payments over the next 28 years by potentially $4.6 million based on the initial rate of 6.70%, which would result in an economic gain (difference between the present value of the debt service payments on the old and new debt) of $1.7 million. The maximum interest rate cannot exceed 12% per annum. If this maximum rate was in effect throughout the 28 years of debt service payments, the potential risk would be to increase the payments by $10 .1 million and result in an economic loss of $3 .0 million. The District recognized an accounting loss of $1,824, 046 in fiscal year 1990 as a result of this refunding principally because the amount of the 1990 Refunding Certificates exceeds the liability owed on the 1988 Certificates. In June 1992, the 1988 Certificates were fully defeased. The following summarizes the assets (consisting of remaining proceeds of the 1988 Certificates) held by a trustee as of June 30, 1992 (see note 2) : Construction fund $ 1, 195, 091 Delivery cost and payment funds 8,747 $ 1,203,838 The Facilities were originally acquired by the Facilities Corporation from the Pomona Valley Water Company. The facilities were subsequently sold to the IEPFC. Simultaneously, the IEPFC and the District entered into an installment sale agreement (the "Agreement" ) which provided for the sale of the facilities to the District. The Agreement requires the District, and now the City, to establish rates and collect charges to provide "net revenues" equal to at least 1.10 times the sum of: (i) the aggregate annual payment requirements with respect to the Agreement; (ii) any payments required with respect to parity obligations in such year. - 20 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The installment obligation repayment terms virtually coincide with the terms of the 1990 Refunding Certificates which require principal and interest payments from the City to the IEPFC through June 1, 2018. The installment obligation bears interest through May 31, 1996 at the rate of 6.70%. Thereafter, the rate will be adjusted to the prevailing market rate every six months, payable semi-annually on May 15 and November 15 of each year, 15 days before the Certificates are due. The annual requirements to repay the installment obligation as of June 30, 1992, assuming that the 6.70% interest rate stays in effect for the full term of the installment obligation, are as follows: Interest Total Annual Year Ending June 30, Principal Expense Payment 1993 $ 300, 000 1,364, 120 1, 664, 120 1994 320, 000 1,344, 020 1, 664, 020 1995 345, 000 1,322, 580 1, 667, 580 1996 365, 000 1,299,465 1, 664,465 1997 395, 000 1,275, 010 1, 670, 010 Thereafter 18,335, 000 16, 698, 075 35,333, 075 20, 060, 000 23,303,270 43, 663,270 Less current installment (300, 000) Less unamortized discount (443, 645) $ 19,316,355 The City has the option of prepaying on or after June 1, 1993 any Certificate installments due on or after June 1, 1994. At redemption, the City will be required to pay a prepayment premium equal to the following amounts expressed as a percentage of the total principal amount prepaid: Pates of Prepayment Payment June 1, 1993 and December 1, 1995 3 .0% June 1, 1994 and December 1, 1996 2.5% June 1, 1995 and December 1, 1997 1.5% June 1, 1996 and December 1, 1998 0.5% June 1, 1997 and thereafter 0.0% Installment Obligation Due Water Facilities Authority The City's participation in the debt of the Water Facilities Authority is 7 .52415% share of the Water Facilities Authority's debt. Such debt matures as scheduled below: Maturity Type Interest Price (Oct. 1) Amount Serial 4 to 6.70 100.00 1990 to 2000 $ 7, 000, 000 Term 6.75 97 .25 2001 15,970, 000 Term 5.50 83 .00 2015 9,340. 000 $ 32,310, 000 - 21 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The following summarizes the future minimum installment payments due by the City: Year Ending June 30, 1993 $ 191,231 1994 191, 864 1995 191,864 1996 192,369 1997 192,949 Thereafter 3,553, 664 Total minimum payments 4,513,941 Less current principal installment (44, 016) Less amount representing interest (2, 163,397) $ 2,306,528 (7) Lone-Term Debt General Long-Term Debt Account Group The following is a summary of changes in general long-term debt for the period ended June 30, 1992: Balance Balance December 1, June 30, 1991 Additions Retirement 1992 Compensated absences $ 77,035 - 4,087 72,948 Advances from developers (notes 14 and 18) 4.813.982 107.769 - 4.921.751 $ 4,891,017 107,769 4,087 4,994,699 Compensated Absences The City' s policies related to compensated absences are described in note 1. This liability, to be paid in future years from future resources, at June 30, 1992 totaled $72,948. Debt Without Government Obligations Excluded from the long-term debt account group 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. The City is not legally or morally obligated for payment of the bonds. Included in the Agency Fund is $27,832,997 of funds held for others relating to these obligations. - 22 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The debt outstanding at June 30, 1992 consists of the following individual issues: $33, 170, 000 1988 Assessment District No. 85-1-R, serial bonds due in annual installments of $240, 000 to $2, 585, 000 through September 2, 2021; interest ranging from 6.7% to 8% $ 29,935, 000 $24, 549, 858 1987 Assessment District No. 86-1, Series A serial bonds due in annual install- ments of $60, 000 to $1, 585, 000 through September 2, 2007; interest ranging from 6.50% to 8.35% 6,920, 000 $7, 422, 157 1988 Assessment District No. 86-1, Series B serial bonds due in annual installments of $155, 000 to $640, 000 through September 2, 2007; interest ranging from 6.40% to 8.38% 5,285, 000 $8,707, 354 1988 Assessment District No. 87-1, serial bonds due in annual installments of $110, 000 to $755, 000 through September 2, 2009; interest ranging from 7.10% to 7.70% 6, 010, 000 $4,990, 000 1988 Community Facilities District No. 1, Special Tax Bonds, Series "A" , due in annual installments of $45, 000 to $575, 000 through September 1, 2011; interest ranging from 6.60% to 7.90% 4,905, 000 $4, 180, 000 1988 Community Facilities District No. 1, Special Tax Bonds, Series "B" , due in annual installments of $65, 000 to $415, 000 through September 1, 2011; interest ranging from 5.50% to 7.65% 4, 180, 000 $5,310, 000 1988 Community Facilities District No. 2, Special Tax Bonds, Series "A" , due in annual installments of $55, 000 to $615, 000 through September 1, 2011; interest ranging from 5.50% to 7.65% 5,310, 000 $2,795, 000 1988 Community Facilities District No. 4, Special Tax Bonds, Series "A" , due in annual installments of $25, 000 to $320, 000 through September 1, 2011; interest ranging from 6.60% to 7.90% 2,745, 000 - 23 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements $2, 030, 000 1988 Community Facilities District No. 5, Special Tax Bonds, Series "A" , due in annual installments of $20, 000 to $235, 000 through September 1, 2011; interest ranging from 6.60% to 7.90% 1,995, 000 $2, 880, 000 1988 Community Facilities District No. 8, Special Tax Bonds, Series "A" , due in annual installments of $25, 000 to $335, 000 through September 1, 2011, interest ranging from 6.20% to 8.00% 2,840, 000 $5, 435, 000 1991 Community Facilities District No. 9, Special Tax Bonds, Series "A" , due in annual installments of $15, 000 to $615, 000 through September 1, 2015; interest ranging from 6.00% to 8.38% 5, 435, 000 $17, 065, 000 1991 Community Facilities District No. 9, Special Tax Bonds, Series "B", due in one annual installment of $17, 065, 000 on September 1, 1988; interest rate at 8.00% 17, 065, 000 $ 92, 625, 000 Improvement Act of 1915 Special Assessment Bonds Payable The City issued special assessment bonds under the Improvement Act of 1915 totaling $407, 000 to finance sewer and water improvements. The related debt service is provided by property tax assessments from benefited property owners. Under the 1915 Act, individual bonds do not represent liens against specific parcels of land in the City. If a property is foreclosed in the event of a property owner's delinquency, the District is required to pay delinquent installments of principal and interest until either the property is resold or redeemed by the defaulting property owner. If the District has no funds for the scheduled payments, it must levy a tax on all assessible property in the District. A reserve fund was established with bond proceeds to cover payments in the event of such defaults. Because the bonds are not an obligation of the District, the remaining reserve fund of $68, 352 and bonds payable of $385, 000 at June 30, 1992 have not been recorded in the City's financial statements. (8) Deposits for/Due to Chino Basin Municipal Water District The City assumed responsibility to account for certain sewage facility development fees when CSA 70, Zone Q, was annexed by the predecessor CSA 70, Zone CH District. The City acts as the collecting agent and the amount collected equals the amount due to the Chino Basin Municipal Water District (the "CBMWD") . The fees to finance the construction of certain Chino Basin Municipal Water District plant improvements and modifications - 24 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements are collected under a contractual agreement with CBMWD. The corresponding deposits for CBMWD are included in restricted assets - cash and investments (see note 2) . Fees collected for CBMWD and held by the City at June 30, 1992 were $4,318,525. (9) Capital Lease Obligation Capital leases for computer equipment were entered into at interest rates of 7 .95% and 7 .50%. The following summarizes all future lease payments and the corresponding principal (present value) as of June 30, 1992: Year Ending Capital Operating June 30, Leases Lease 1993 $ 64, 169 10, 122 1994 64, 169 - 1995 5,536 - Minimum future lease payments 133, 873 10, 122 Less interest (10, 850) Present value of future minimum lease payments 123, 023 Less current installments (59, 029) Capital lease obligations, excluding current installments $ 63,994 (10) Inspection Deposits The City contracts with outside engineers to inspect new housing tracts and other completed projects. These contractors are paid from developer fees collected and disbursed through the County on behalf of the City. Fees collected for the City and held by other County agencies at June 30, 1992 were $1, 057,348 (see note 2) . (11) Advances for Construction In the Agreement for the acquisition of the Pomona Valley Water Company ( "Pomona Valley") , the District, now 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 - 25 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements annually, and within 20 years of the origination of each individual advance with final payment on all advances by the year 2003 . The balance of unpaid advances at June 30, 1992 was $697, 465. (12) Contributed Capital Contributed capital is the portion of equity derived from pipeline constructed and serviced by developers and donated to the City. Such equity also includes connection fees received from developers and customers to joint new or extend existing water systems, as well as proceeds from special assessment bonds issued to finance utility plant in service. The following is a summary of contributed capital: December 1, June 30, 1991 Additions 1992 Developer contributions $ 10,842,462(1) - 10,842,462 Connection fees 8,971, 071 2,940,445 11,911, 516 Portion of utility plant in service financed by special assessments 430,285 - 430,285 Chino Hills assessment bond proceeds 1,900, 000 - 1,900, 000 Total $ 22, 143,818 2,940,445 25, 084,263 (1) As restated; see note 18. (13) Pension Plan Substantially all employees of the City are members of the San Bernardino County Employee 's Retirement Association ( "SBCERA" ) , a multiple employer defined benefit pension plan (the "Plan") . Employees become eligible for membership on their first day of regular employment and become fully vested after 5 years. Regular members are eligible for retirement benefits upon completion of 10 years of service and attaining age 50, or 30 years of service regardless of age. Retirement benefits are calculated at 2% of final compensation for each completed year of service based on a normal retirement age of 55 for regular members. The Plan also provides disability benefits to members and death benefits to beneficiaries of members. 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 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. Actuarially computed costs are determined using the projected unit credit method. - 26 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements The pension benefit obligation is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases estimated to be payable in the future as a result of employee service to date. The measure is the present value of credited projected benefits and is intended to help users assess the SBCERA funding status on a going-concern basis, assess progress made in accumulating assets to pay benefits when due, and make comparisons with other public employee retirement systems. The pension benefit obligation was determined as part of an actuarial valuation at June 30, 1992 . Significant actuarial assumptions, which are the same as those used for the actuarially determined contribution requirement, used in the valuation include: • a rate of return on the investment of present and future assets of 8% per year compounded annually, • projected salary increases of 5% per year compounded annually, attributable to inflation, • additional projected salary increases of 1% per year attributable to merit and longevity, • pre- and post-retirement mortality based on the 1971 Group Annuity Mortality Table set back 1 year for men and 7 years for women, and • assumed 2% per year cost of living increases. The Plan's pension benefit obligation was not calculated separately for the City. However, the Plan's total pension benefit obligation at June 30, 1992 was approximately $1,225, 000, 000, compared to net assets available for pension benefits, at cost, of approximately $983,894, 000, and at market, of approximately $1, 048,918, 000. Additional information concerning SBCERA, including 10-year historical trend information, which is reported to provide indications of progress made in accumulating sufficient assets to pay benefits when due, may be found in the SBCERA 1992 annual financial report. (14) Advances from Developers Advances from developers included in the General Long-Term Debt Account Group represents 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. $567, 566 is expected to be refunded in fiscal year 92/93 . These remaining amounts are expected to refunded to the developers starting July 1, 1993 . (15) Development Fees and Administrative Recovery Development fees represent amounts collected from developers for building permits to begin residential and commercial building construction. Proceed from such fees are used to fund improvements made in the City. - 27 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements Interfund recovery revenue primarily represents amounts charged by the general fund to other funds to recover administrative costs incurred on behalf of these funds. (16) Residual Equity Transfers During the seven-month period ending June 30, 1992, the City combined certain lighting and landscape zones to provide a more equitable distribution of the assessments within the City. Transfers were also made to separate Assessment District Series A and Series B bond issues . These combinations of funds resulted in residual equity-transfers from other funds of $2, 172 in the Special Revenue Funds and residual equity transfers to and from of $1,252, 699 and $1,250, 527, respectively, in the Capital Projects Funds. (17) Commitments and Contingencies Reimbursement Agreements The County (and the City) requires developers who are constructing new developments within the City to build certain infrastructure and reservoir facilities in order to provide water to the new development and surrounding area. These facility improvements are dedicated to the City upon completion and certain approved costs of the facility improvements are reimbursed to the developer as set forth in the reimbursement agreement . At June 30, 1992, the City has five reimbursement agreements outstanding totaling approximately $9, 520, 507 (note 6) . Construction Contracts The City is committed to approximately $110, 000 on open construction contracts as of June 30, 1992. Litiaation The City is involved in various lawsuits that, in the opinion of management, based in part by advise from its general counsel, will not materially impact the current fiscal 1993-1994 operations. - 28 - (Continued) CITY OF CHINO HILLS Notes to General Purpose Financial Statements (18) Prior Period Adjustment Contributed capital and fixed assets in the Proprietary Fund for the beginning of the period have been restated to reflect the City' s adjustment relating to fixed assets, which were purchased primarily from developer contributions, as follows (see note 5) : Developers Fixed Contributions Assets (see note 12) Balance, before restatement $ 14, 123, 863 42, 644, 071 Adjustment to fixed assets 3,281,401 3,281,401 Balance, beginning of period $ 10,842,462 39,372, 670 Prior to the City's incorporation, certain advances from developers to CSA 70 in the Parkway Phasing (Capital Projects) Fund were classified as deferred revenue. During the seven months ended June 30, 1992, the City determined that these advances would more correctly be classified as advances from developers in the Long Term Debt Account Group as these advances will not be repaid until after June 30, 1993 (see note 14) . As such, the City' s adjustments relating to these advances is as follows: Long-Term Capital Projects Debt Fund Deferred Developer J3alance Revenue Advances Balance, before restatement $ (4,768,909) 4,235,492 686,259 Adjustment 4,235,492 (4,235,492) 4,235,492 Balance, beginning of period $ (533,417) - 4,921,751 (19) Subsequent Event The Chino Hills Capital Improvement Corporation, a California nonprofit public benefit corporation, was established on May 19, 1992 to facilitate the financing of capital improvements on behalf of the City of Chino Hills. On September 1, 1992, the City issued Certificates of Participation in the amount of $2, 490, 000 for civic center improvements . The certificates begin maturing on September 1, 1993 through September 1, 1999, with interest rates ranging from 3 .75% - 5.75%. - 29 - Schedule 1 CITY OF CHINO HILLS Combining Balance Sheet Special Revenue Funds June 30, 1992 CHMO Total pcihtina and T,andscane Adminis- Development Gas Air (Memorandum Assets District 1 District a CSA tration Fee FBA Tax Quality Measure I Only) Cash and investments $ 7,964,260 226,728 760,499 576,003 10,324,333 2,004,785 527,291 8,653 111,135 22,503,687 Interest receivable 107,465 2,981 8,850 9,371 119,514 22,569 4,891 - 762 271,403 Special assessment receivable-current 227,570 53,607 - - - - - - - 281,177 Deferred special assessment receivable - - - - 506,027 - 61,410 - 41,481 608,918 Advances to other funds - - - - 2.400.000 - - - - 2.400.000 Total assets $ 8,299,295 283,316 769,349 580,374 13,349,874 2,027,354 593,592 8,653 153,378 26,065,185 J,iah,litips and Fund Faulty Liabilities: Accounts payable $ 336,288 34,866 43,391 41,251 768,296 25,993 1,625 - - 1,251,710 Due to other funds 33,769 7,938 1,415 - - - - - - 43,122 Due to other governments - - - 1,077 - - - - - 1,077 Salaries and benefits payable 3,182 - - 3,182 Obligations under reverse repurchase agreements 1,574,924 54,955 184,210 98,589 2,385,428 463,607 131,555 - 26,937 4,920,205 Advances from other funds - - 50.000 - - _ - - - - 50.000 Total liabilities 1.948.163 97.759 279.016 140.917 3.153.724 489.600 133.180 - 26.937 6.269.296- Fund balances: Reserved for deferred special assessments receivable - _ Reserve for payment of accelerated fees - _ -567,566 - - - - 506,027 567,566 567,566 Reserved for encumbrances 548,220 20,912 22,441 113,095 1,079,470 - 3,995 - - 1,787,633 Unreserved - undesignated 5,802.912 164.645 467,892 326,36a 8,043,087 1,537.754 956.917 8,653 126,441 .16,934.663 6.351,132 185.557 490.333 439.457 10.196.150 1.537,754 460,412 8,653 126.441 19,795,889 Total liabilities and fund equity $ 8,299,295 283,316 769,349 580,374 13,349,874 2,027,354 593,592 8,653 153,378 26,065,185 See accompanying independent auditors' report. - 30 - ,Schedule 2 CITY OF CHINO HILLS Combining Statement of Revenues, Expenditures and Changes in Fund Balance Special Revenue Funds Seven months ended June 30, 1992 CHMO Total JocThtina and i,andscane Adminis- Development Gas Air (Memorandum pistrict 2 District 2 OA tration Fee PBA TeN Duality Measure I Only) Revenues• Taxes $ 6,181,320 499,297 435,197 80,993 - - - - - 7,196,807 Use of money and property 269,078 7,234 21,172 - 454,219 74,092 6,745 - 762 833,302 Intergovernmental 20,868 - - - - - 480,214 8,653 125,679 635,414 Developer fees - - - - 4,395,175 362,219 - - - 4,757,394 Other revenues 56.944 51.875. - - 5.313.297 236,079 - - - 5.658.195 Total revenues 6.528.210 559.406 456.369 80,993 10.162.691 672.390 486.959 8.653 126.441 /9.081.112 Expenditures: Current: Salaries and benefits 154,007 10,695 265 - - - - - - 164,967 Services and supplies 1,993,744 318,089 240,837 80,993 1,096,921 682,758 26,547 - - 4,439,889 Trust deposits - - - - 4,468,237 - - - - Capital outlay 129.475 - 19,065 - - 252,130 - - 4,468,237 400,670 Total expenditures 2.277,226 328,784 260,167 80.993 5.565.158 934,888 26,547 - 9,473,763 Excess (deficiency) of revenues over expenditures 4.250.981 229.622 196.202 _ - 4,597,533 (262,498) 460,412 8,653 126,441 9,607,349 Other financing sources and (uses) Operating transfers in - - - - 599,128 264,125 - - - 863,253 Operating transfers out (1.747.031) (46,552) - - (3.962,959) (264.125) - - - (6.020,667) Total other financing sources (uses) 0.747.031) (46.552) - - (3 363.831) - - - (5.157.414) Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses 2,503,953 183,070 196,202 - 1,233,702 (262,498) 460,412 8,653 126,441 4,449,935 Fund balance, beginning of year 3,847,179 2,487 294,131 439,457 8,960,276 1,800,252 - - - 15,343,782 Residual equity transfer from other funds - - - - 2.172 - - - -- 2,172 Fund balance, end of year $ 6,351,132 185,557 490,333 439,457 10,196,150 1,537,754 460,412 8,653 126,441 19,795,889 See accompanying independent auditors' report. - 31 - Schedule 7, CITY OF CHINO HILLS Combining Balance Sheet Capital Pro3ects Funds June 30, 1992 Special Park Pomona J,ic.htina and 1,andscaop Construc- Develop- Parkway Construc- Grand Ave. Soerial A5gesgment Districts Assets District 1 District 2 tion sent Phasing tion Mitiaation AD #85-1 AD 886-1 AD #87-1 Cash and investments $ 6,083,132 274,557 667,847 93,679 617,188 3,154,118 - 342,718 1,834,839 484,391 Interest receivable 61,861 2,709 8,206 1,674 6,803 36,987 - 5,790 21,729 5,410 Advances to other funds 50,000 - - - - - - - - - Total assets $ 6,194,993 277,266 676,053 95,353 623,991 3,191,105 - 348,508 1,856,568 489,801 J,iabilitiec and Fund Faulty Liabilities: Accounts payable $ 26,991 - 19,716 3,340 - - - 539 33,770 27,965 Obligations under reverse repurchase agreements 1,473,983 66,548 160,056 15,386 147,996 751,021 - 83,035 443,733 117,408 Customer deposits - - 7,555 1,000 - - - - - - Advances from other funds - - - - - 2,400,000 - - - - Total liabilities 1.500.974 66.548 187.327 19.726 147.996 3.151.021 - 83.574 477.503 145.373 Fund balances: Reserved for encumbrances 223,729 6,788 304,163 32,056 - - - - 97,174 241,787 Unreserved - undesignated 4.470.290 203.930 184,561 43.571 475.995 40.084 - 264.934 1.281.891 102.641 4.694.019 210.718 488.726 75.627 475.995 40.084 - 264.934 J.379.065, 144.428 Total liabilities and fund equity $ 6,194,993 277,266 676,053 95,353 623,991 3,191,105 - 348,508 1,856,568 489,801 See accompanying independent auditors' report. - 32 - . Schedule 3 (Continued) CITY OF CHINO HILLS Combining Balance Sheet Capital Projects Funds (Continued) June 30, 1992 Community Facilities Districts #5 #1 #2 #4 Soquel Canyon #9 Total Rolling Los The Ricon and #8 Ricon (Memorandum Assets. }tea,onal, Ridge ganchnq Oaks Woodview jlutterfield Village Only) Cash and investments $ 1,977,897 246,993 5,326,560 31,093 114,165 13,371 24,694,503 45,957,051 Interest receivable 24,188 2,882 62,235 363 5,702 1,429 291,170 539,138 Advances to other funds - - - - - - - 50.000 Total assets $ 2,002,085 249,875 5,388,795 31,456 119,867 14,800 24,985,673 46,546,189 J,iah,l,ties and Fund Faulty Liabilities: Accounts payable $ 464,515 - 666,163 - - - 875,461 2,118,460 Obligations under reverse repurchase agreements 479,408 59,867 1,291,065 7,537 27,672 3,241 5,985,517 11,113,473 Customer deposits - - - - - - - 8,555 Advances from other funds - _ - - - - - 2,400,000 Total liabilities 943,923 59,867 1,957,228 7,537 27,672 3,241 6,860,978 15,640,488 Fund balances: Reserved for encumbrances 921,000 3,000 176,726 7,200 12,408 - - 2,026,031 Unreserved - undesignated 137,162. 187,008 3,254,841 16,719 79,787 11,559 18,124,695 28,879,670 1,058,162. 190,008 3,431,567 23,919 92,195 11,559 18,124.695 30,905,701 Total liabilities and fund equity $ 2,002,085 249,875 5,388,795 31,456 119,867 14,800 24,985,673 46,546,189 See accompanying independent auditors' report - 33 - Srhednlp 4 CITY OF CHINO HILLS Combining Statement of Revenues, Expenditures and Changes in Fund Balance Capital Projects Funds Seven months ended June 30, 1992 Special Park Pomona J,1ahtina and Landscape Construc- Develop- Parkway Construc- Grand Ave Special AcseSement Districts District 1 District 2 tion ment Phasing tion Miticatiort AD #85-1 AD #86-1 AD #87-1 Revenues: Use of money and property $ 798,970 6,604 33,442 5.656 860,312 - 2,173 22,407 80.221 18,983 Expenditures: Current- Services and supplies 38,305 1,862 1,883,995 3,617 - - - 2,043 135,857 149,880 Other charges - - - - - 1,651,569 - - 4,070 - Capital outlay 495.630 2.187, 88.OB1 74.521 - - - 2,92.461 188.626 26.558 Total expenditures 533,935 1,862 1,972.076 78,140 - 1.651,569 294.504 328,553 176,438 Excess (deficiency) of revenues over expenditures (334,965) 2,559 (1,938,634) (72.484) 860,312 (1,651,569) 2,173 (272,097) (248,332) (157,455) Other financing sources: Operating transfers in 1.745,684 46.552 2.390.532 30,200 149,100 - - - Total other financing sources 1.745.684 46.552 2,390.532 30.200 149.100 - - - - - Excess (deficiency) of revenues and other financing sources over expenditures 1,410,719 49,111 451,898 (42,284) 1,009,412 (1,651,569) 2,173 (272,097) (248,332) (157,455) Fund balance, beginning of year 3,283,299 161,607 36,828 117,911 (533,417) 1,691,653 - 537,031 1,627,397 501,883 Residual equity transfer to other funds (23) - - - - - (2,173) - (1,250,132) - Residual equity transfer from other funds 24 - - - - - - - 1,250,132 - Fund balance, end of year $ 4,694,019 210,718 488,726 75,627 475,995 40,084 - 264,934 1,379,065 344,428 See accompanying independent auditors' report. - 34 - Schedule 4 (Continued) CITY OF CHINO HILLS Combining Statement of Revenues, Expenditures and Changes in Fund Balance Capital Projects Funds (Continued) Seven months ended June 30, 1992 Community Facilities Districts #5 #1 #2 #4 Soquel Canyon #9 Total Rolling Los The Ricon and #8 Rican (Memorandum )9eaional. Ridoe Ranchos Oaks Woodview putterfielci Village Only) Revenues. Use of money and property $ 66.714 300.540 255.348 4.085 20.934 175,67k 742.951 2.795.016 Expenditures: Current- Services and supplies 15,693 3,928,143 112,886 4,479 97,502 709,058 1,134,125 8,217,445 Other charges - - - - - - 1,655,639 Capital outlay .,_]74,909 - 672,468 - 266,184 - 275.585 3,557,208 Total expenditures 1.190.602 2.928.143 785.354 4.479 363.686 709.058 1.409.710 23.430.292 Excess (deficiency) of revenues over expenditures (..123.888) (2.627.601) (530.006) (394) (342.752) (5,33.384) (666.757) (10.635.276) Other financing sources: Operating transfers in 794.000 - - - - - - 5.156.068 Total other financing sources 794,000 - - - - - - 5.156,068 Excess (deficiency) of revenues and other financing sources over expenditures (329,888) (3,627,603) (530,006) (394) (342,752) (533,384) (4,154,168) (5,479,208) Fund balance, beginning of year 1,388,050 3,817,611 3,961,573 24,313 434,947 544,943 18,791,452 36,387,081 Residual equity transfer to - - - - - - (371) (1,252,699) Residual equity transfer from - - - - - 371 1,250.527 Fund balance, end of year $ 1,058,162 190,008 3,431,567 23,919 92,195 11,559 14,637,284 30,905,701 See accompanying independent auditors' report. - 35 - Schedule 5 CITY OF CHINO HILLS Combining Balance Sheet Agency Funds June 30, 1992 Community Facilities Districts Chino #5 Unified #1 #2 #4 Canyon #6 #8 #9 Total School Special Assessment Districts Rolling Los The Ricon and Carbon Butter- Ricon (Memorandum AssPrs Dictrirr AD 86- AD 87-1 1 AD 86-1 $eaional Ridce $anrhos Oaks y7oodyiew Canyon field Village Only) Cash and investments $ 104,924 8,405,797 8,330,434 1,470,673 118,321 3,049,996 1,223,312 2,836,218 1,555,291 4,433 1,581,242 3,895,707 32,576,348 Interest receivable 882 48,820 104,252 15,693 2,489 33,772 13,107 31,757 17,076 - 17,455 45,468 330,771 Special assessment receivable- current - 93.442 365,188 304,601 - 40,068 - _ 36,025 29,261 - 32,029 _ - 900,614 Total assets $ 105,806 8,548,059 8,799,874 1,790,967 120,810 3,123,836 1,236,419 2,904,000 1,601,628 4,433 1,630,726 3,941,175 33,807,733 Liabilities and Fund Equity Liabilities: Accounts payable $ 103,112 - - - 61,237 - - - 973 - 61 - 165,383 Funds held for others 2,255 7,722,553 7,629,061 1,434,502 30,894 2,384,570 941,251 2,216,550 1,223,679 3,359 1,247,400 2,996,923 27,832,997 Obligations under reverse repurchase agreements 439 825,506 1,170,813 356,465 28,679 739,266 295,168 687.450 376,976 1,074 383,265 944,252 5,809.353 Total liabilities $ 105,806 8,548,059 8,799,874 1,790,967 120,810 3,123,836 1,236,419 2,904,000 1,601,628 4,433 1,630,726 3,941,175 33,807,733 See accompanying independent auditors' report. - 36 - Schedule 6 CITY OF CHINO HILLS Combining Statement of Additions, Deductions and Changes in Assets/Funds Held for Others Agency Funds Seven months ended June 30, 1992 Communvty Facilities nhstricts Chino #5 Unified 81 #2 84 Canyon #6 88 #9 Total School Snecial Assessment Districts Rolling Los The Ricon and Carbon Butter- Ricon (Memorandum District AD 85-1 AD 86-1 AD 87-1 Regional Ridge Ranchos Oaks y7oodvt.ew Canyon field Village Only) Additions. Special assessments $ - 2,127,524 1,447,609 642,407 - 861,177 505,805 656,718 477,654 3,359 519,730 - 7,241,983 Use of money and property 2,255 211,538 438,718 86,946 25,964 101,259 38,756 89,916 45,525 - 52,695 110,669 1,204,241 Other revenues - - - 145,941 - 37,000 - 4,479 35.264 - 548 - 223,232 Total additions 2,255 2.339,062 1.886,327 875.294 25.964 999,436 544.561 751,113 558,443 3.359 572,973 110,669 8.669.456 Deductions: Current: Services and supplies - 6,456 21,435 5,805 813,407 262,075 61,463 12,629 9,926 - 165,078 - 1,358,274 Trust deposits - 1,313,210 999,290 456,620 - 417,940 254,852 122,215 88,822 - 126,707 - 3,779,656 Other charges - 35,100 114,450 51,300 - - - - - Capital outlay - - - - 3,200 - - - - 200,850 Debt service. - - - - 3,200 Principal - 1,170,000 3,815,000 1,710,000 - 6,695,000 Interest - 1,231,211 654.522 293.043 - 381.305, 245.802 105.972 76.985 - 110.024 60'1_157 3.700.021, Total deductions - 3,755,977 5,604.697 2.516,768 816.607 1.061.320 562.117 240.816 175,733 - 401.809 601,157 15,737.001 Other. Long-term debt proceeds - 2,435.910 4,568,240 2,047.970 - 417,940 254,852 122.215 88,822 - 126,707 3,487.411 13,550,067 Total other - 2.435.910 4.568.240 2.047.970 - 417.940 '54.852 122.215 88.827 - 126.707 3.487.411 13.550.067 Net additions (deductions) 2,255 1,018,995 849,870 406,496 (790,643) 356,056 237,296 632,512 471,532 3,359 297,871 2,996,923 6,482,522 Assets/funds held for others: Beginning of year - 6,703,558 6,779.191 1.028.006 821.537 2,028.514 703.955 1,584,038 752,147 - 949.529 - 21.350,475 Assets/funds held for others End of year $ 2,255 7,722,553 7,629,061 1,434,502 30,894 2,384,570 941,251 2,216,550 1,223,679 3,359 1,247,400 2,996,923 27,832,997 See accompanying independent auditors' report. 37 -