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ACFR FY 2017-2018Poway Community Swim Center Splash Pad Comprehensive Financial Report For the Year Ended June 30, 2018 C ITY OF POWAY, CALIFORNIA     City of Poway Poway, California Comprehensive Annual Financial Report For the Year Ended June 30, 2018 Prepared by the Finance Department of the City of Poway     This page intentionally left blank. City of Poway Comprehensive Annual Financial Report For the Year Ended June 30, 2018   Table of Contents ……..i ……vi …..vii viii …...1 …..4 Basic Financial Statements: Government - Wide Financial Statements: 18 20 Fund Financial Statements: Governmental Fund Financial Statements: 23 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position…………….………….…...………………….…………………………… 24 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds……………..….………………………………..……………………...……25 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities …………………..……………...…26 Proprietary Fund Financial Statements: Statement of Net Position…………………………………………………….…………….……………..……28 Statement of Revenues, Expenses and Changes in Net Position…………..…………………….……… 29 Statement of Cash Flows………………………..………..………………………………………….…………30 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position…………………………………………………..………………..………33 Statement of Changes in Fiduciary Net Position…………………………………...………………..………34 35 Required Supplementary Information (Unaudited): 93 94 95 Schedule of Changes in Net Pension Liability and Related 96 Schedule of Plan Contributions, Last 10 Years - Miscellaneous Plan…………………………………………………97 Schedule of the City's Proportionate Share of the Plan's Net Pension Liability and 98 99 Schedule of Changes in Net Pension Liability and Related 100 101 FINANCIAL SECTION INTRODUCTORY SECTION Letter of Transmittal………………….…….…………….…………..…….…......……………………………………….…...…… Principal Officers………………….……………...……………………..………………..……..………….………...…..………… Organization Chart…………….….……..…………………………….….……………………..…………....…………...……...… GFOA Certificate of Achievement for Excellence in Financial Reporting………………….….….…….……….…..………… Independent Auditor's Report…………………….…………………...……………………………………………………….. Ratios, Last 10 Years - Miscellaneous Plan………………………………………………………………….……..… Related Ratios as of the Measurement Date, Last 10 Years - Safety Plan……………………………………… Ratios, Last 10 Years - Retirement Enhancement Plan….……………………………………………………...… Schedule of Plan Contributions, Last 10 Years - Retirement Enhancement Plan.………………….……...………… Management's Discussion and Analysis (Unaudited)……...….……………………….………………………………….. Statement of Net Position……………….....…….……..……………………….………………………………………… Statement of Activities……………………………………………..……………….….…………….……………………… Balance Sheet - Governmental Funds...……………………………………..…..………………………..……… Notes to Basic Financial Statements……………………………………….………………………………….……..………… Budgetary Information…………………………..……………....…….……………..…………………………..………… Budgetary Comparison Schedule - General Fund………………..……………………...….………………..………… Budgetary Comparison Schedule - Housing Authority Fund………………………………………..….……………...… Schedule of Plan Contributions, Last 10 Years - Safety Plan……………………………………...…………………… City of Poway Comprehensive Annual Financial Report For the Year Ended June 30, 2018 (Continued)   Table of Contents (Continued) Non-Major Governmental Funds: 106 110 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Non-Major Special Revenue Funds: Fire Protection……………..……………..……...…………………...………….……………………..……… 114 800 MHz Communication System………….…..……………………………...………..…………….………115 Gas Tax…………………………………….……………………………………….....…………………..………116 Drainage…….………………………...……………………...………...……….………..……………............. 117 Miscellaneous Grants……………………….……………………………………...…………..……………… 118 AB 939 Integrated Waste Management…….………………………………..……………….….……….……119 Community Development Block Grant………………………………………….………………...…...………120 Transportation Development Act………………………………………………………………..……….……121 Proposition A………………………………………………………….….…………….……………..…………122 SB 1186 Disabled Access Law…………………………………………………….………………..…..………123 Excess SAFE Reserve……………………………………………………..……………………..……………124 Regional Arterial Traffic Mitigation…………………………………………….……………………..…...……125 Fire Protection Impact Fees……………………………………………………….…………….………...……126 BEGIN Program…………………………………………….………………………….……...………...………127 Housing In-lieu………………………………………………………………………….…………………..……128 Abandoned Vehicle Fees………………………………………………………………………………………129 Habitat In-lieu…………………………………………………………………………………..…...……...……130 Maintenance Districts…………………………………………………………………….…….………………131 Road Repair………………………………………………………………………………………………………132 Non-Major Debt Service Fund: City Debt Service……………………………..…..…………………….….…………………....………………133 Non-Major Permanent Fund: Mary Patricia Ross Trust……………...………….………...…………..………………….…………………..134 Non-Major Capital Project Funds: Park Improvement Capital Projects Fund……………………....…….………….……………...……………135 Street Improvement Capital Projects Fund……………………....…….………….……………...………… 136 Municipal Improvement Capital Projects Fund…………………..….……………..…...……….....…………137 Internal Service Fund 139 140 141 Fiduciary Funds: 143 144 148 Combining Statement of Revenues, Expenditures and Changes in Fund Balance………………….….…............. Statement of Net Position………………………………………………………………………..…………...…………… Statement of Revenues, Expenses and Changes in Net Position…………………………..…………..……………… Statement of Cash Flows………….……………………………………………………………….……..…...…………… Combining Statement of Fiduciary Net Position - Agency Funds………..…………………...…………...…………… Combining Statement of Changes in Assets and Liabilities - Agency Funds………………..…...…………...……… STATISTICAL SECTION (Unaudited) Combining Balance Sheet…….………………………………………………………………………...………….……… Net Position by Component – Current and Prior Nine Years…………………………………………………………………… City of Poway Comprehensive Annual Financial Report For the Year Ended June 30, 2018 (Continued)   Table of Contents (Continued) 150 152 154 156 158 159 160 161 162 163 164 165 166 168 169 170 171 172 174 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements Performed in Accordance with 176Government Auditing Standards …….………..….…….…….....…………..…..……………...….……………………… Changes in Net Position – Current and Prior Nine Years……………………………………………………………………… Fund Balances, Governmental Funds – Last Ten Fiscal Years………………………………………………………………… Changes in Fund Balances, Governmental Funds – Last Ten Fiscal Years……………………………………….………… Assessed Value of Taxable Property – Last Ten Fiscal Years ………………………………………………………………… Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years………………………………………………………… Principal Secured Property Tax Payers – Current and Nine Years Ago……………………………………………………… Assessed Value of Taxable Property Successor Agency and Redevelopment Tax Increment Property Tax – Last Ten Fiscal Years………………………………………………………………………………………… Redevelopment Property Tax Levies and Collections – Fiscal Years 2008-2012……………………………………….. General Property Tax Levies and Collections – Last Ten Fiscal Years………………………………………………………. Ratios of Outstanding Debt by Type – Last Ten Fiscal Years…………………………………………………………………… Ratios of General Bonded Debt Outstanding – Last Ten Fiscal Years………………………………………………………… Direct and Overlapping Debt as of June 30, 2017…………………………………………………………………………...…… Legal Debt Margin Information – Last Ten Fiscal Years………………………………………………………………………… Capital Assets Statistics – Current and Prior Nine Years ……………………………………………………………………… Pledged Revenue Coverage – Last Ten Fiscal Years…………………………………………………………………………… Demographic and Economic Statistics – Last Ten Calendar Years ................................................................................ Principal Employers – Current Year and Nine Years Prior ............................................................................................... Full-Time-Equivalent City Employees by Function – Last Ten Fiscal Years ..................................................................... Operating Indicators – Current and Prior Nine Years …………………………………………………………………...………     This page intentionally left blank.     Introductory Section     This page intentionally left blank.   -vi- City of Poway Principal Officers City Council Mayor Steve Vaus Deputy Mayor Barry Leonard Council: Caylin Frank Dave Grosch John Mullin Appointed Officials City Manager Tina White City Attorney Alan Fenstermacher Administrative Personnel Assistant City Manager Wendy Kaserman Director of Finance Donna Goldsmith Director of Human Resources Jodene Dunphy Director of Development Services Robert Manis Director of Public Works Michael Obermiller Director Community Services Robin Bettin Director of Safety Services Mark Sanchez City Clerk Nancy Neufeld   ‐vii-   -viii-     Financial Section     This page intentionally left blank.   -2- We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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, as of June 30, 2018, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, Schedule of Proportionate Share of the City's Net Pension Liability and Related Ratios as of the Measurement Date, Schedules of Changes in Net Pension Liability and Related Ratios and Schedules of Plan Contributions, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, budgetary comparison schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual non-major fund financial statements and budgetary comparison information are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual non-major fund financial statements and budgetary comparison information are fairly stated in all material respects in relation to the financial statements as a whole.   -3- The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 28, 2019, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.  San Bernardino, California January 28, 2019     This page intentionally left blank.   -4-   MANAGEMENT’S DISCUSSION AND ANALYSIS As management of the City of Poway (City), we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2018. It should be read in conjunction with the accompanying transmittal letter beginning on page i and the accompanying basic financial statements. All amounts, unless otherwise indicated, are expressed in thousands of dollars. FINANCIAL HIGHLIGHTS  The City’s total assets increased by 14.6% to $233.6 million, primarily as a result of the transfer of property from the Successor Agency. Without the transfer total assets increased by 1.72%, or $3.5 million, which was due to normal operations.  During the year, the City’s revenues including program revenues, taxes, and other governmental revenues were more than governmental and business activity expenses, net of special items, by $3.5 million.  Total revenues from all sources were $99.4 million.  Total cost of all City programs was $95.9 million.  Governmental net position was $170.4 million.  The General Fund reported a Net change in fund balance of $72,877.  Actual revenues received in the General Fund were more than the final budget by $4.3 million while actual expenditures were $26.6 million less than final budget before other financing sources and uses. The expenditure variance is primarily attributable to the Capital Outlay category which accounted for $23.5 million of the variance.  At the end of the fiscal year, unassigned fund balance for the General Fund was $14.1 million or 27.3% of total General Fund expenditures (excluding other financing uses).  The impact of Governmental Accounting Standards Board Statement No. 68 Accounting and Financial Reporting for Pensions (GASB 68) resulted in an increase of pension expense in the current year. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The three components of the financial statements are: (1) Government-wide financial statements, which include the Statement of Net Position and the Statement of Activities. These statements provide information about the activities of the City as a whole. (2) Fund financial statements describe how City services are financed in the short term as well as what resources are available for future spending. Fund financial statements also report the City’s operations in more detail than the government-wide statements by providing information about the City’s most significant funds. (3) Notes to the financial statements. Reporting the City as a Whole The Statement of Net Position and the Statement of Activities (Government-wide) A frequently asked question regarding the City’s financial health is whether the year’s activities contributed positively to the overall financial well-being. The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities 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 accounted for regardless of when cash is received or paid. These two statements report the City’s net position and changes thereto. Net position, the difference between assets and liabilities, are one way to measure the City’s financial health, or financial position. Over time, increases or decreases in net position is an indicator of whether the financial health is improving or deteriorating.   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -5- However, it is important to consider other nonfinancial factors such as changes in the City’s property tax base, or condition of the City’s roads, to accurately assess the overall health of the City. The Statement of Net Position and the Statement of Activities present information about the following: `  Governmental activities - All of the City’s basic services are considered to be governmental activities, including general government, public safety, public works, and community services. Property taxes, sales taxes, motor vehicle license fees and franchise fees finance most of these activities.  Proprietary activities/Business-type activities - The City charges a fee to customers to cover all or most of the cost of the services provided. The City’s Water and Sewer systems are reported in this category.  Component units - The City’s governmental activities include the blending of two separate legal entities: the Poway Housing Authority and the Poway Public Financing Authority. Although legally separate, these “component units” are important because the City is financially accountable for them. Reporting the City’s Most Significant Funds Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by State law and by bond covenants. However, management establishes many other funds that aid in the administration of resources for particular purposes or to meet legal responsibilities associated with the usage of certain taxes, grants, and other money. The City’s two kinds of funds, governmental and proprietary, use different accounting approaches as explained below.  Governmental funds - Most of the City’s basic services are reported in governmental funds. Governmental funds focus on how resources flow in and out with the balances remaining at year-end that are available for spending. These funds are reported using an accounting method called modified accrual, 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 shows whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds through the reconciliation in the Notes to Basic Financial Statements, Note 1.  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 Position and the Statement of Activities. These two statements report the City’s net position and changes thereto. Net position, the difference between assets and liabilities, is one way to measure the City’s financial health, or financial position. Over time, increases or decreases in net position are an indicator of whether the financial health is improving or deteriorating. Again, it is important to consider other nonfinancial factors such as changes in the City’s property tax base or condition of the City’s roads to accurately assess the overall health of the City.   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -6- The City as Trustee Reporting the City’s Fiduciary Responsibilities The City is the trustee, or fiduciary, for certain amounts held on behalf of developers, property owners, and others. These fiduciary activities are reported in separate Statements of Fiduciary Net Position and Changes in Fiduciary Net Position. The City is responsible for ensuring that the assets are used for their intended purposes. Therefore, fiduciary activities are excluded from the City’s other financial statements because the assets cannot be used to finance operations. The Successor Agency to the Poway Redevelopment Agency is a Private Purpose Trust Fund and is included in the Fiduciary Fund Financial Statements. THE CITY AS A WHOLE Our analysis focuses on the net position (Table 1) and changes in net position (Table 2) of the City’s governmental and business activities, as well as a brief discussion of the private purpose trust. Table 1 City of Poway Net Position (in Thousands) Assets: Current and other assets $ 102,011 $ 100,882 $38,908 $33,426 $ 140,919 $ 134,308 $8,091 $ 14,370 Capital assets 121,518 95,823 32,118 32,941 153,636 128,764 2,865 40,862 Total assets 223,529 196,705 71,026 66,367 294,555 263,072 10,956 55,232 Deferred Outflows 10,532 9,012 1,750 1,336 12,282 10,348 - - Liabilities: Long-ter m debt outstanding 14,782 15,541 292 250 15,074 15,791 157,843 167,217 Other liabilities 5,456 5,452 1,984 1,752 7,440 7,204 3,618 3,698 Net pension liability 42,622 39,129 7,139 5,820 49,761 44,949 - - Total liabilities 62,860 60,122 9,415 7,822 72,275 67,944 161,461 170,915 Deferred Inflows 837 1,403 135 204 972 1,607 1,420 1,736 Net position: Net Investment in capital assets 108,495 82,021 32,118 32,941 140,613 114,962 Held in trust (151,925) (117,419) Restricted 20,626 20,454 - - 20,626 20,454 Unrestricted 41,243 41,717 31,108 26,736 72,351 68,453 Total net position $170,364 $ 144,192 $63,226 $59,677 $ 233,590 $ 203,869 $ (151,925) $ (117,419) 2018 2017 2018 2017 2018 Private Purpose Trust 2017 20172018 Governmental Business TotalActivities Activities The City’s combined net position for the fiscal year ended June 30, 2018, were $233.6 million. The City has chosen to account for its water and sewer operations as enterprise funds, which is shown as Business Activities on Table 1. Post dissolution, the former Poway Redevelopment Agency is now accounted for as a Private Purpose Trust Fund. The City’s net position for governmental activities increased by 18.2% from $144.2 million to $170.4 million. The following is an explanation of the governmental activity changes between fiscal years as shown in Table 1: Current and other assets increased $1.1 million or 1.1% principally due to normal operations as described below. Cash decreased, and Land held for resale increased as the result of the purchase of properties from the Successor Agency.   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -7-  Capital assets increased $25.7 million (net of depreciation and additions) as detailed in Table 3. This increase was caused by additions of capital assets from the Successor Agency ($26.2) million, depreciation ($5.7) million and additions ($5.2) million that included swim center renovations, a new boat dock, and street improvements.   Governmental long-term debt decreased $.8 million. The decrease was attributable to scheduled principal payments.  Governmental other liabilities remained virtually the same as in the prior year.  Pension related items including Deferred Outflows, Net Pension Liability, and Deferred Inflows, had a net increase of 4.0%. The change to the net balance was primarily due to the reduction of the discount rate by the California Public Employees’ Retirement System (CalPERS).  Invested in capital assets net of debt increased by $26.9 million primarily due to acquisition of capital assets from the Successor Agency.  Restricted net position increased by $0.2 million, or 0.8%. The increase is primarily attributable to an increase in the Streets category related to fees collected for a large industrial project and decrease in Housing related to the purchase of property. The other changes in this category were reflective of normal activity within the restricted funds.  Unrestricted net position, the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants or other legal requirements, decreased by $0.5 million, or 1.1%, again primarily due to normal operations. Significant items will be discussed in the Governmental Activities section. Governmental Activities The cost of all Governmental activities this year was $61.6 million as shown on Table 2 and 2.1. Of this cost, $9.8 million was paid for by those who directly benefited from the programs, $2.5 million was subsidized by grants received from other governmental organizations for both capital and operating activities, and $48.8 million was financed through general City revenues. Overall governmental program revenues, including intergovernmental aid and fees for services were $12.4 million. Items of significance within Table 2 are described after the table   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -8- Table 2 City of Poway Changes in Net Position (in Thousands) Revenues: Program Revenues: Charges for services $ 9,836 $ 9,632 $ 34,070 $29,847 $ 43,906 $ 39,479 $ - $ - Operating grants and contributions 2,323 1,134 - - 2,323 1,134 - - Capital grants - - and contributions 199 271 4 - 203 271 - - General Revenues: - - Property taxes 24,154 22,166 - - 24,154 22,166 47,750 46,954 Sales tax 13,981 13,775 - - 13,981 13,775 - - Other taxes 5,896 5,323 - - 5,896 5,323 - - Investment & misc. 4,753 2,971 4,203 3,484 8,956 6,455 673 3,122 Total revenues 61,142 55,272 38,277 33,331 99,419 88,603 48,423 50,076 Expenses: General government 8,048 7,898 - - 8,048 7,898 46,007 39,808 Public safety 25,140 22,939 - - 25,140 22,939 - - Public works 15,818 13,424 - - 15,818 13,424 - - Development services 4,793 4,122 - - 4,793 4,122 - - Community services 7,373 7,696 - - 7,373 7,696 - - Interest & charges 430 444 - - 430 444 4,968 4,963 Water - - 25,503 21,005 25,503 21,005 - - Sewer - - 8,798 8,565 8,798 8,565 - - Total expenses 61,602 56,523 34,301 29,570 95,903 86,093 50,975 44,771 Change in net position before transfers (460) (1,251) 3,976 3,761 3,516 2,510 (2,552) 5,305 Loss on sale of property - - - - - - (4,504) (2,109) Special item 26,204 - - - 26,204 - (26,204) - Transfers 427 439 (427) (439) - - - - Change in net positon after transfers 26,171 (812) 3,549 3,322 29,720 2,510 (33,260) 3,196 Net position - 7/1 144,192 145,004 59,677 56,355 203,869 201,359 (118,665) (121,861) Net position - 6/30 $ 170,363 $ 144,192 $ 63,226 $59,677 $ 233,589 $ 203,869 $ (151,925) $ (118,665) Governmental Business TotalActivities Activities Private Purpose Trust 2018 2017 2018 2017 2018 2017 2018 2017 Revenues:  Property taxes increased by 9.0% which includes revenues from the Redevelopment Property Tax Trust Fund (RPTTF). When adjustments are made for the RPTTF revenue in both fiscal years, the remaining property taxes increased by 4.2%. Property values have continued to increase, which has resulted in the reassessment of many properties that received temporary assessment reductions during the Great Recession.  Sales tax increased by 1.5%, with the largest increase, of the seven major sales tax categories, being in Building & Construction. Sales tax revenues may have been adversely affected because of timing issues with the state’s new sales tax reporting system.  The remaining taxes increased by 10.7%. This includes taxes that are used for street purposes, franchise fees and transient occupancy tax. The gas and electric franchise fee increased by $149 and the transient occupancy tax increased by $45. The remaining increase was related to taxes collected for streets, including the new Road Maintenance and Rehabilitation Account funds ($294).  Investment earnings increased by 26.0% due to rising interest. As an example, the yield on two-year treasury notes increased from 1.38% on June 30, 2017 to 2.52% on June 29, 2018. The increase was partially offset by a loss in market value which was also caused by the rising interest rates.  The Miscellaneous revenue category increased by $1.8 million, or 101.1%. The current year is primarily higher due to one-time revenue related to the sale of land that was owned by Successor Agency and sold to the City and outside parties. The proceeds from these sales were distributed to all taxing agencies, and the City’s share, $1.2 million is included in this category.   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -9-  Charges for services increased by 2.1%, caused primarily by increases in Public Safety for ambulance fees, and in Development Services for inspection fees. Those increases were partially offset by a decrease in Community Services program fees due to the closure of the City pool for repair and improvements.  Operating Grants and contributions increased by 104.9%. The increase was caused by a significant street improvement revenue. Expenses:  General Government Expenses increased 1.9%. There was a decrease related to the purchase of non-capitalized equipment, which was offset by increased pension costs.  The Public Safety line increased by 9.6%. The law enforcement contract with the County of San Diego accounted for 4.4% of the increase, while fire suppression accounted for 5.1% of the increase. Fire suppression’s increase included higher amounts for salaries, benefits and overtime. These increases were driven by the new labor agreement and decreased vacancies, higher pension costs, as well greater mutual aid participation. As a result of the mutual aid participation, the City also had an increase in mutual aid reimbursements.  Public Works had an 17.8% increase in expenses. Increased pension costs contributed to the increase, as well as increased costs in park maintenance and street maintenance. Also contributing to the increase was an analysis by the City which resulted in the General Fund being charged a higher amount for city-wide maintenance operations. Also, the Park Maintenance division was previously performing water conservation duties, so a portion of its costs were allocated to the Water Fund. Those duties were no longer being actively performed so that allocation was discontinued also causing increased costs in the General Fund.  The Development Services department increased by 16.3%. The increase can be primarily attributed to building inspection and capital improvement oversight of projects funded by the General Fund.  Community Services had a decrease of 4.2%. The decrease is primarily related to the closure of the City pool for significant rehab and improvements which led to reduced operating expenses during the closure.  Interest and fiscal charges decreased by 3.2%. The decrease is related to lower interest expense. There were no significant changes in this category.   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -10- General government $ 8,048 $ 7,898 $ 960 $ 552 $ (7,088) $ (7,346) Public safety 25,140 22,939 2,723 2,491 (22,417) (20,448) Public works 15,818 13,424 2,855 2,820 (12,963) (10,604) Development services 4,793 4,122 2,875 1,815 (1,918) (2,307) Community services 7,373 7,696 2,944 3,358 (4,429) (4,338) Interest and fiscal chgs 430 444 - - (430) (444) Totals $ 61,602 $ 56,523 $ 12,357 $11,036 $ (49,245) $ (45,487) 2018 of Services 2018 2018 2017 Table 2.1 Net Cost of Governmental Activities (in Thousands ) 20172017 Program Revenues Net Cost of Services Total Cost Fiscal Year 2018 Governmental Activities (Graphic representation of Table 2 in percentages)   Net Cost of Governmental Activities The City’s programs include: General Government, Public Safety, Public Works, Development Services and Community Services. Each program’s net cost (total cost less revenues generated by the activities) is presented on Table 2.1. The net cost shows the extent to which the City’s general taxes support each of the City’s programs.     Sources of Revenue Program Expenses    City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -11-   Fiscal Year 2018                                                                               Total Cost of Services, Program Revenues & Net Cost –Governmental Activities (in thousands) Total resources available during the year to finance governmental operations were $232.0 million consisting of Net Position at July 1, 2017 of $144.2 million, Program Revenues of $12.4 million, General Revenues of $48.8 million, Transfers of $0.4 million, and the transfer from the Successor Agency of $26.2. Total Governmental Activities during the year were $61.6 million; thus, Net Position increased to $170.4 million. Business-Type Activities Net Position of the Proprietary Funds (Business-Type activities) at June 30, 2018, as reflected in Table 1 were $63.2 million. As shown in Table 2.2, program revenues were $34.1 million, while the cost of providing all Proprietary (Business-Type) Activities this year was $34.3 million, resulting in a decrease of $0.2 million. The net increase of $3.8 million from other revenues, non-operating activity and transfers resulted in a Net Position increase of $3.5 million, or 6.9%. The water revenue increase can be attributed to volume increases related to eased usage restrictions and increased rates. While water purchases did increase, additionally the overall increase in the cost of services was related to the adjustment for pensions. The other revenue increased because the temporary drought recovery surcharge that was implemented while revenues were lower due to decreased consumption, was in full effect for the entire fiscal year. However, the drought recovery surcharge is scheduled to end in December 2018. There was no significant change in the Sewer fund’s activity. Operating revenues slightly increased due to rate increases, and Other revenue was down because while the fund once again received refunds for prior year over-allocations of sewage transportation costs, they were less than received in the previous year. The overall result was an increase in the fund’s net position.     Water $ 25,503 $ 21,005 $ 25,586 $ 21,450 $ 83 $ 445 Sewer 8,798 8,565 8,488 8,397 (310) (168) Totals $ 34,301 $ 29,570 $ 34,074 $ 29,847 $ (227) $ 277 Table 2.2 Net Cost of Business Activities (in Thousands) Total Cost Program Net Cost of Services Revenue of Services 2018 2017 2018 2017 2018 2017   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -12-   Fiscal Year 2018 Total Cost of Services, Program Revenues & Net Cost – Business Activities (in thousands) FUND HIGHLIGHTS General Fund: Actual revenues compared favorably to the final budget, resulting in a $4.3 million positive variance (excluding other financing sources). The major variances were in Taxes, Charges for Services, Developer Fees and Other Revenue. Actual Taxes revenue was again higher than budgeted due to distributions from the Redevelopment Property Tax Trust Fund, which accounted for $1.6 million of the variance. Other property related taxes ($305,000), and sales tax ($335,000) also contributed to the positive variance. The Charges for services variance was caused by higher than expected cell site lease revenue due to fewer sites being decommissioned than expected, and higher lease revenue due to the acquisition of properties from the Successor Agency that had existing leases. The increase in Developer Fees was caused by both Development Services and Safety Services plan check and inspection fees, as well as general planning fees and staff time reimbursement charges. The variance in the Other revenues category was related to the City receiving its proportionate share from the Successor Agency to the City of Poway Redevelopment Agency selling property in accordance with its Long-Range Property Management Plan. The final appropriations for the City’s General Fund expenditures at year-end were $26.6 million more than actual expenditures (excluding other financing uses). The largest component of the budget to actual variance, $23.5 million, was in the Capital Outlay category. The variance in the Capital Outlay category is attributable to delays in previously approved projects such as a new community center, the undergrounding of overhead lines, and swim center improvements, as well as the recording as the purchase of land held for resale of $5.4 million which was budgeted as a capital outlay, but recorded as an asset in the General Fund. The variance in the General Government category was primarily caused by delays in equipment purchases, as well as partial year vacancies in the Finance and Human Resources departments. The savings in Public Works was from Park and Facilities Maintenance, with the savings being throughout the divisions. The savings in Development Services is from staffing turnover, spending less on nuisance abatement than anticipated, spending less on external plan check costs, and savings for storm water compliance, though a significant encumbrance was outstanding at year-end. The savings in the remaining expenditure categories is reflective of the City’s ongoing efforts to manage costs. There were no unusual items that contributed to the savings in any of these categories. During the fiscal year, the City produced a midyear budget update, which enhanced focus on the City’s financial position and the current factors affecting that position.   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -13-   Housing Authority Special Revenue Fund: The City of Poway created its Housing Authority during fiscal year 2010-11 and transferred all of the Poway Redevelopment Agency’s housing assets to the Housing Authority. As a result of ABX1 26, the Housing Authority was able to retain its capital assets and any related income, but was required to transfer its liquid assets as of February 1, 2012 to the Successor Agency. With the passage of subsequent legislation, AB 1484, twenty-percent of the City’s advances to the former Poway Redevelopment Agency were transferred to the Housing Authority. The Housing Authority’s revenues and other financing sources exceeded its expenditures by $105,247 for operations. Revenues were primarily made up of lease payments from properties owned by the Housing Authority and residual payments from its non-profit partners that own and operate affordable housing projects. Expenditures continue to be minimal as the Housing Authority continues to explore how to best use these funds to improve the quantity and quality of affordable housing in the City. The Housing Authority did purchase land for a future affordable housing site, and received assistance from the Housing In-lieu fund to make the purchase. Non-major Governmental Funds: Three of the Non-major Governmental Funds had activity that should be noted. The Proposition A Fund had a use of fund balance because projects that were planned for the prior fiscal year, but delayed, were completed in the current fiscal year. The Housing In-lieu Fund provided funding to the Housing Authority for the purchase of land for a future affordable housing site. The Street Improvement Fund had unusually large fees related to the development of two large industrial buildings. FIDUCIARY FUNDS Successor Agency to the City of Poway Redevelopment Agency: The provisions of ABX1 26 include the creation of the Successor Agency to the City of Poway Redevelopment Agency effective February 1, 2012. All balances previously associated with the Poway Redevelopment Agency were transferred to the Successor Agency. A seven-member Oversight Board was created to oversee the Successor Agency. The Successor Agency is accounted for as a Private Purpose Trust Fund and therefore both capital assets and long-term liabilities are included in the fund. The Successor Agency must prepare Recognized Obligation Payment Schedules (ROPS) for review and approval by its Oversight Board, as well as the State Controller’s Office, the State Department of Finance, and the County of San Diego. Through this process, the Successor Agency is to receive sufficient funding (formerly the Poway Redevelopment Agency’s tax increment revenue) to pay for the approved items on the ROPS. Any funds in excess of ROPS requirements are distributed to the appropriate taxing agencies based on each agency’s pro rata share of the one-percent property tax. During the fiscal year, as part of its Long-Range Property Management Plan (LRPMP), all but one of the Successor Agency’s remaining properties were sold. Five properties were sold to the City with the intent that they be developed in accordance with the vision for the area that was foreseen when they were purchased by the former Redevelopment Agency. Three properties were sold to private parties via auctions. One property remains with the Successor Agency as it is tied to a long-term lease. Finally, all the remaining capital assets were moved to the City in accordance with the LRPMP. The activity is reflected in the Capital Asset section below   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -14-   CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets: The capital assets of the City are those assets that are used in the performance of City functions. Capital Assets include land, buildings, facility improvements, infrastructure, equipment and vehicles. Total capital assets decreased by $13.1 million primarily due to sales of Successor Agency owned assets of $4.4 million and current year depreciation of $8.3 million offset by construction costs of $6.6 million for the swim center renovation, a new boat dock at Lake Poway, Espola Road safety improvements, and reservoir rehabilitation. In addition, land was purchased by the City from the Successor Agency for $5.4 million which resulted in a net loss to the Successor Agency of $2.4 million. Finally, a $26.2 million, net of depreciation, of land, buildings and infrastructure was moved from the Successor Agency to the City in accordance with the Long-Range Property Management Plan. Depreciation on capital assets is recognized in the Government-Wide financial statements. (See Table 3 & Notes 4 and 17 to the financial statements) Debt: At year-end, the City had $14.8 million in governmental-type debt, $292,000 in Proprietary debt, and $157.8 million in Fiduciary debt (Table 4). The overall decrease in bond balances was due to scheduled principal payments and premium/discount amortizations. The increased Loans Payable balance was attributable to accrued interest related to the operating covenant with AZ Poway, LLC (dba Mossy Nissan) which exceeded the payment required under the covenant. The Compensated Absences increases were a result of the normal course of business. (See Table 4 & Note 5 to financial statements) Fiduciary 2018 2017 Tax Allocation Bonds $ - $ - $ - $ - $ 154,505 $163,594 $154,505 $ 163,594 Certificates of Participation 13,196 13,987 - - - 430 13,196 14,417 Revenue Bonds - - - - - - - - Loans Payable - - - - 3,339 3,193 3,339 3,193 Comp Absences 1,586 1,554 292 250 - - 1,878 1,804 Total $ 14,782 $ 15,541 $ 292 $ 250 $ 157,844 $167,217 $172,918 $ 183,008 2017 Table 4 City of Poway Outstanding Debt at Year-End (In Thousands) Governmental Business TotalActivities Activities 2018 2017 2018 2017 2018   City of Poway  June 30, 2018 Comprehensive Annual Financial Reporting  -15-   NEXT YEAR’S BUDGET AND ECONOMIC FACTORS In considering the update of the City Budget for fiscal year 2018-2019, the City Council and management continue to expect improvement in the local economy. Both property tax and sales tax are expected to moderately increase over fiscal year’s 2017-18 budgeted revenues. Increases in the budget for property and sales taxes, as well as for Investment Income and Development Services fees, are the primary reasons that the total General Fund revenue budget is projected to be 6.7% higher than that of Fiscal Year 2017-18 revenue budget. Property taxes are expected to continue to rise, though at a slightly slower pace since assessed values for properties that received reductions during the Great Recession have already started to be recovered over the previous three years. Sales taxes are also expected to continue to increase, with no significant increase expected in any one sector. The continued rise in interest rates is expected to increase investment income, and development activity along Poway Road is expected to increase both Development Services revenues and expenditures. General Fund expenditures are budgeted to grow by 7.6%, which was a result of increases in most City functions. One consideration when looking at the increase is that the City’s labor agreements were approved after the adoption of the Fiscal Year 2017-18 budget, so that adopted budget did not include those increases. Therefore, when comparing the two budgets it should be noted that there are in essence two fiscal years’ worth of labor increases in the Fiscal Year 2018-19 budget. As mentioned above, increases in Development Services expenditures are partially offset by additional revenues in these areas. The increase in the City’s Finance Department’s budget was primarily caused by the inclusion of additional personnel expenses for succession planning, and one-time overlap of support costs for two Electronic Resource Planning Systems. During Fiscal Year 2018-19 the City will be converting from its 25-year legacy system to Tyler Munis. There was also a 6% increase in the contract with the County of San Diego for law enforcement services. The City’s initial projections showed a moderate operating surplus of $852,000. Aside from the General Fund, the other budget activity of note concerns the City’s Water and Sewer funds. The Water Fund is being closely monitored because of the significant state-wide water conservation efforts over the past several years. Poway’s consumption was significantly reduced through Fiscal Year 2015-16, but water restrictions were eased, and Poway’s consumption has now increased for the past two years by 13.3% for Fiscal Year 2017-18. However, it was still necessary to increase water rates in January 2018. The City is scheduled to hold a Water and Sewer Rate Workshop in January 2019 where the rate proposal for the next year will be discussed. Projected consumption as well as the estimated pass-through costs will be the determining factors that affect future rate adjustments. The Sewer Fund had accumulated resources over several years in anticipation of significant pass-through costs from San Diego Metro as part of the planned upgrade of sewer treatment facilities at the Point Loma wastewater treatment plant. However, now San Diego has created a Pure Water program which will divert a significant amount of wastewater from the Point Loma Facility. During Fiscal Year 2017-18 the City participated in negotiations for a reinstated regional wastewater agreement that will include the Pure Water program. Over the next several years a portion of these reserves will be used to fund Poway’s portion of this program. The fund is continually analyzed to ensure its long-term stability. CONTACTING THE CITY’S FISCAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City’s finances and to show the City’s fiduciary responsibility for the funds it receives. If you have questions about this report or need additional financial information, contact the City’s Finance Department, at the City of Poway, 13325 Civic Center Drive, Poway, California 92064 or online at http://www.poway.org.   -16- BASIC FINANCIAL STATEMENTS     This page intentionally left blank.   -17- GOVERNMENT-WIDE FINANCIAL STATEMENTS City of Poway Statement of Net Position June 30, 2018 The accompanying notes are an integral part of these financial statements. -18-  Governmental Activities Business-Type Activities Total ASSETS Current assets: Cash and investments 78,935,151$ 27,028,377$ 105,963,528$ Cash and investments with fiscal agents 627,958 - 627,958 Receivables: Taxes 3,062,142 - 3,062,142 Accounts 782,885 6,309,377 7,092,262 Interest 856,612 - 856,612 Due from other governments 319,246 - 319,246 Prepaid items 121,433 - 121,433 Land held for resale 5,367,000 - 5,367,000 Inventories 140,207 3,160,255 3,300,462 Total current assets 90,212,634 36,498,009 126,710,643 Noncurrent assets: Notes receivable 10,010,396 - 10,010,396 Internal balances 269,741 (269,741) - Loans to the Successor Agency to the Poway Redevelopment Agency 1,518,492 1,824,160 3,342,652 Loans to other governments - 855,221 855,221 Capital assets: Nondepreciable assets 45,012,419 1,032,884 46,045,303 Depreciable assets, net 76,505,365 31,085,180 107,590,545 Total capital assets 121,517,784 32,118,064 153,635,848 Total noncurrent assets 133,316,413 34,527,704 167,844,117 Total assets 223,529,047 71,025,713 294,554,760 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on refunding of debt 173,028 - 173,028 Pension related 10,358,871 1,750,189 12,109,060 Total deferred outflows of resources 10,531,899 1,750,189 12,282,088 Primary Government City of Poway Statement of Net Position June 30, 2018 (Continued) The accompanying notes are an integral part of these financial statements.  -19- Governmental Activities Business-Type Activities Total LIABILITIES Current liabilities: Accounts payable 3,938,820$ 1,584,732$ 5,523,552$ Accrued liabilities 1,081,185 176,185 1,257,370 Accrued interest payable 199,481 - 199,481 Deposits - 124,617 124,617 Unearned revenue 236,888 98,400 335,288 Long-term debt - due within one year 2,367,918 284,030 2,651,948 Total current liabilities 7,824,292 2,267,964 10,092,256 Noncurrent liabilities: Long-term debt - due in more than one year 12,413,764 8,386 12,422,150 Net pension liability 42,622,262 7,138,439 49,760,701 Total noncurrent liabilities 55,036,026 7,146,825 62,182,851 Total liabilities 62,860,318 9,414,789 72,275,107 DEFERRED INFLOWS OF RESOURCES Pension related 837,212 134,764 971,976 NET POSITION Net investment in capital assets 108,494,835 32,118,064 140,612,899 Restricted for: Debt service 535,900 - 535,900 Drainage 2,930,941 - 2,930,941 Fire protection 125,248 - 125,248 Grants 294,732 - 294,732 Housing 2,920,294 - 2,920,294 Maintenance Districts 7,829,104 - 7,829,104 Other Purposes 2,622,300 - 2,622,300 Parks and recreation 590,313 - 590,313 Streets 1,915,188 - 1,915,188 Transportation 877,455 - 877,455 Total restricted 20,641,475 - 20,641,475 Unrestricted 41,227,106 31,108,285 72,335,391 Total net position 170,363,416$ 63,226,349$ 233,589,765$ Primary Government City of Poway Statement of Activities For the Year Ended June 30, 2018 The accompanying notes are an integral part of these financial statements. -20-  Operating Capital Total Charges for Contributions Contributions Program Functions/Programs Expenses Services and Grants and Grants Revenues Primary government: Governmental activities: General government 8,048,190$ 352,830$ 607,115$ -$ 959,945$ Public safety 25,139,954 2,171,552 551,042 - 2,722,594 Public works 15,818,102 2,740,562 114,799 - 2,855,361 Development services 4,793,032 1,975,450 899,420 - 2,874,870 Community services 7,372,710 2,595,229 150,495 198,584 2,944,308 Interest and fiscal charges 429,617 - - - - Total governmental activities 61,601,605 9,835,623 2,322,871 198,584 12,357,078 Business-type activities: Water 25,502,524 25,583,581 - 2,108 25,585,689 Sewer 8,797,837 8,486,571 - 1,481 8,488,052 Total business-type activities 34,300,361 34,070,152 - 3,589 34,073,741 Total primary government 95,901,966$ 43,905,775$ 2,322,871$ 202,173$ 46,430,819$ ` Program Revenues City of Poway Statement of Activities For the Year Ended June 30, 2018 (Continued) The accompanying notes are an integral part of these financial statements.  -21- Governmental Business-type Functions/Programs Activities Activities Total Primary government: Governmental activities: General government (7,088,245)$ -$ (7,088,245)$ Public safety (22,417,360) - (22,417,360) Public works (12,962,741) - (12,962,741) Development services (1,918,162) - (1,918,162) Community services (4,428,402) - (4,428,402) Interest and fiscal charges (429,617) - (429,617) Total governmental activities (49,244,527) - (49,244,527) Business-type activities: Water - 83,165 83,165 Sewer - (309,785) (309,785) Total business-type activities - (226,620) (226,620) Total primary government (49,244,527) (226,620) (49,471,147) General revenues: Taxes: Property taxes 24,153,826 - 24,153,826 Sales tax 13,981,478 - 13,981,478 Transient occupancy taxes 654,235 - 654,235 Franchise taxes 1,611,000 - 1,611,000 Other taxes 3,630,276 - 3,630,276 Total taxes 44,030,815 - 44,030,815 Investment earnings 1,468,845 264,609 1,733,454 Miscellaneous 3,285,592 3,938,311 7,223,903 Transfers in (out) 426,823 (426,823) - Total general revenues and transfers 49,212,075 3,776,097 52,988,172 Special Item: Transfer of capital assets 26,204,302 - 26,204,302 Change in net position 26,171,850 3,549,477 29,721,327 Net position, beginning of year 144,191,566 59,676,872 203,868,438 Net position, end of year 170,363,416$ 63,226,349$ 233,589,765$ Changes in Net Position Net (Expense) Revenue and     This page intentionally left blank.   -22- FUND FINANCIAL STATEMENTS Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements     This page intentionally left blank. City of Poway Balance Sheet - Governmental Funds June 30, 2018 The accompanying notes are an integral part of these financial statements.  -23-  Special Revenue Fund Total Housing Non-major Total General Authority Governmental Governmental Fund Fund Funds Funds ASSETS Cash and investments 48,470,359$ 2,128,970$ 18,164,970$ 68,764,299$ Receivables: Taxes 3,040,775 - 21,367 3,062,142 Notes 10,010,396 - - 10,010,396 Accounts 646,478 24,445 111,962 782,885 Interest 855,387 - 1,225 856,612 Due from other funds 274,747 - - 274,747 Advances to other funds 1,335,921 - 17,576 1,353,497 Due from other governments 73,753 - 245,493 319,246 Prepaid items 121,433 - - 121,433 Land held for resale 5,367,000 - - 5,367,000 Inventories, at cost 140,207 - - 140,207 Advances to fiduciary funds - 668,531 849,961 1,518,492 Restricted assets: Cash and investments with fiscal agents - - 627,958 627,958 Total assets 70,336,456$ 2,821,946$ 20,040,512$ 93,198,914$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable 3,317,151$ 14,769$ 461,753$ 3,793,673$ Accrued liabilities 1,017,536 - 51,286 1,068,822 Due to other funds - - 328,128 328,128 Advances from other funds 360,500 - 1,109,275 1,469,775 Unearned revenue - 35,730 201,158 236,888 Total liabilities 4,695,187 50,499 2,151,600 6,897,286 Deferred inflows of resources: Unavailable revenue 2,952 - 34,744 37,696 Total deferred inflows of resources 2,952 - 34,744 37,696 FUND BALANCES Nonspendable 15,639,036 - - 15,639,036 Restricted - 2,771,447 17,870,028 20,641,475 Assigned 16,613,992 - - 16,613,992 Committed 19,321,583 - - 19,321,583 Unassigned 14,063,706 - (15,860) 14,047,846 Total fund balances 65,638,317 2,771,447 17,854,168 86,263,932 Total liabilities, deferred inflows of resources and fund balances 70,336,456$ 2,821,946$ 20,040,512$ 93,198,914$ City of Poway Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2018 The accompanying notes are an integral part of these financial statements.  -24- Total Fund Balances - Total Governmental Funds 86,263,932$ Amounts reported for governmental activities in the Statement of Net Position were different because: resources and, therefore, were not reported in the funds. Non-depreciable 45,012,419$ Depreciable, net of accumulated depreciation 76,505,365 121,517,784 on the Government-Wide Statement of Net Position. 173,028 reported in the governmental funds: Pension related deferred outflows of resources (net of $123,780 reported in Internal Service Fund) 10,235,091 Pension related deferred inflows of resources (net of $10,415 reported in Internal Service Fund) (826,797) 9,408,294 Long-term liabilities were not due and payable in the current period and therefore were not reported in the governmental funds. Long-term liabilities - due within one year Long-term debt (810,432) Compensated absences (net of $27,890 reported in Internal Service Fund) (1,529,596) Long-term liabilities - due in more than one year Long-term debt (12,385,545) Pension related (net of $513,163 reported in Internal Service Fund) (42,109,099) Compensated absences (net of $824 reported in Internal Service Fund) (27,395) (56,862,067) Funds Balance Sheet.(199,481) Statements.37,696 Statement of Net Position.10,024,230 Net position of governmental activities 170,363,416$ Deferred inflows and outflows of resources related to pensions have not been Capital assets used in governmental activities were not current financial Deferred losses on refunding of debt did not require current financial resources but were deferred and subject to capitalization and amortization activities to individual funds. The assets and liabilities of the internal service funds were included in governmental activities in the Government-Wide Interest payable on long-term debt did not require current financial resources. resulting from activities in which revenues were earned but funds were not available were recognized as revenues in the Government-Wide Financial Unavailable revenues recorded in governmental fund financial statements Internal service funds were used by management to charge the costs of certain Therefore, interest payable was not reported as a liability in the Governmental City of Poway Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds For the Year Ended June 30, 2018 The accompanying notes are an integral part of these financial statements.  -25-  Special Revenue Fund Total Housing Non-major Total General Authority Governmental Governmental Fund Fund Funds Funds REVENUES Taxes 38,620,527$ -$ 5,410,288$ 44,030,815$ Licenses and permits 698,848 - - 698,848 Intergovernmental 783,241 - 666,296 1,449,537 Charges for services 2,623,079 59,839 - 2,682,918 Fines and forfeitures 150,968 - - 150,968 Use of money and property 881,797 40,295 454,901 1,376,993 Developer fees 4,458,832 - 1,079,793 5,538,625 Assessments levied - - 1,900,026 1,900,026 Other revenues 2,875,390 59,667 345,042 3,280,099 Total revenues 51,092,682 159,801 9,856,346 61,108,829 EXPENDITURES Current: General government 4,348,184 7,988 - 4,356,172 Public safety 24,203,074 - 158,279 24,361,353 Public works 5,443,423 - 6,221,631 11,665,054 Development services 4,468,523 34,861 - 4,503,384 Community services 5,837,896 - - 5,837,896 Capital outlay 7,292,310 831,705 1,925,036 10,049,051 Debt service: Principal - - 770,000 770,000 Interest and fiscal charges - - 438,961 438,961 Total expenditures 51,593,410 874,554 9,513,907 61,981,871 Excess (deficiency) of revenues over (under) expenditures (500,728) (714,753) 342,439 (873,042) OTHER FINANCING SOURCES (USES) Transfers in 1,679,384 820,000 1,314,282 3,813,666 Transfers out (1,105,779) - (1,590,119) (2,695,898) Total other financing sources (uses) 573,605 820,000 (275,837) 1,117,768 Net change in fund balance 72,877 105,247 66,602 244,726 Fund balances, beginning of year 65,565,440 2,666,200 17,787,566 86,019,206 Fund balances, end of year 65,638,317$ 2,771,447$ 17,854,168$ 86,263,932$ City of Poway Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2018 The accompanying notes are an integral part of these financial statements.  -26- Net change in fund balance - total governmental funds 244,726$ different because: Capital asset expenditures 5,188,167$ Depreciation expense (5,693,254) Loss due to disposition of capital assets (4,669) (509,756) Capital Assets related to transfer of operations is included in the special item on the Statement of Activities.26,204,302 Principal payments on long-term debt 770,000 Changes in pension related items (1,473,838) (703,838) Change in compensated absences (51,301) Change in interest expense on long term debt 9,344 Amortization of deferred loss on bond refunding (11,933) Amortization of bond premium 2005 Certificates of Participation 3,236 Amortization of bond premium 2012 Certificates of Participation 18,086 (32,568) (58,357) 1,027,341 Change in net position of governmental activities 26,171,850$ Government-Wide Statement of Activities, the cost of those assets will be allocated over their estimated useful lives as depreciation expense. Governmental funds report capital outlay as expenditures. However, in the funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when the debt is first issued, whereas these are deferred and amortized in the statement of activities. The issuance of long-term debt provides current financial resources to governmental current financial resources and, therefore, are not reported as expenditures in Some expenses reported in the statement of activities do not require the use of governmental funds. Amounts reported for governmental activities in the Statement of Activities were revenue of the internal service fund was reported with governmental activities. Revenues in the Government-wide Statement of Activities that did not provide current financial resources are not reported as revenues in the funds. The Internal service fund was used by management to charge the costs of certain activities, such as insurance and fleet management, to individual funds. The net   -27- PROPRIETARY FUND FINANCIAL STATEMENTS City of Poway Statement of Net Position Proprietary Funds June 30, 2018 The accompanying notes are an integral part of these financial statements. -28- Governmental Activities - Internal Service Water Sewer Total Fund ASSETS Current assets: Cash and investments 8,628,404$ 18,399,973$ 27,028,377$ 10,170,852$ Receivables: Accounts 4,911,733 1,397,644 6,309,377 - Inventories 3,139,483 20,772 3,160,255 - Due from other funds 32,890 20,491 53,381 - Total current assets 16,712,510 19,838,880 36,551,390 10,170,852 Noncurrent assets: Advances to other funds - 214,500 214,500 439,400 Advances to the Successor Agency to the Poway Redevelopment Agency 1,260,483 563,677 1,824,160 - Loans to other governments 149,446 705,775 855,221 - Capital assets: Nondepreciable 956,087 76,797 1,032,884 - Depreciable 60,480,584 36,491,089 96,971,673 - Less accumulated depreciation (41,754,505) (24,131,988) (65,886,493) - Total net capital assets 19,682,166 12,435,898 32,118,064 - Total noncurrent assets 21,092,095 13,919,850 35,011,945 439,400 Total assets 37,804,605 33,758,730 71,563,335 10,610,252 DEFERRED OUTFLOWS OF RESOURCES Pension related items 1,506,367 243,822 1,750,189 123,780 LIABILITIES Current liabilities: Accounts payable 1,519,551 65,181 1,584,732 145,147 Accrued liabilities 154,857 21,328 176,185 12,363 Deposits 124,617 - 124,617 - Unearned Revenue 68,007 30,393 98,400 - Compensated absences due within one year 246,746 37,284 284,030 27,890 Total current liabilities 2,113,778 154,186 2,267,964 185,400 Noncurrent liabilities: Advances from other funds 537,622 - 537,622 - Compensated absences 6,615 1,771 8,386 824 Net pension liability 6,149,576 988,863 7,138,439 513,163 Total noncurrent liabilities 6,693,813 990,634 7,684,447 513,987 Total liabilities 8,807,591 1,144,820 9,952,411 699,387 DEFERRED INFLOWS OF RESOURCES Pension related items 116,587 18,177 134,764 10,415 NET POSITION Net investment in capital assets 19,682,166 12,435,898 32,118,064 - Unrestricted 10,704,628 20,403,657 31,108,285 10,024,230 Total net position 30,386,794$ 32,839,555$ 63,226,349$ 10,024,230$ City of Poway Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2018 The accompanying notes are an integral part of these financial statements. -29- Governmental Activities - Internal Service Water Sewer Total Fund OPERATING REVENUES Charges for services 25,345,527$ 8,408,917$ 33,754,444$ 3,078,163$ Connection fees 238,054 77,654 315,708 - Other 3,200,735 737,576 3,938,311 - Total operating revenues 28,784,316 9,224,147 38,008,463 3,078,163 OPERATING EXPENSES Personnel services 4,716,874 624,565 5,341,439 237,069 Maintenance and operations 3,884,728 7,086,404 10,971,132 1,221,644 Administrative expenses 523,744 - 523,744 - Cost of purchased water 14,852,123 - 14,852,123 - Depreciation 1,513,219 1,086,868 2,600,087 - Total operating expenses 25,490,688 8,797,837 34,288,525 1,458,713 Operating income 3,293,628 426,310 3,719,938 1,619,450 NONOPERATING REVENUES (EXPENSES) Interest revenue 113,720 150,889 264,609 60,171 Interest expense and fiscal charges (11,836) - (11,836) - Gain on sale of property - - - 25,378 Grant revenue 2,108 1,481 3,589 6,309 Other nonoperating revenue - - - 6,978 Total nonoperating revenues (expenses) 103,992 152,370 256,362 98,836 Income before transfers 3,397,620 578,680 3,976,300 1,718,286 TRANSFERS Transfers in 33,364 22,240 55,604 9,580 Transfers out (318,940) (163,487) (482,427) (700,525) Total transfers (285,576) (141,247) (426,823) (690,945) Change in net position 3,112,044 437,433 3,549,477 1,027,341 Net position, beginning of year 27,274,750 32,402,122 59,676,872 8,996,889 Net position, end of year 30,386,794$ 32,839,555$ 63,226,349$ 10,024,230$ City of Poway Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2018 The accompanying notes are an integral part of these financial statements.  -30- Governmental Activities - Internal Service Water Sewer Total Fund Cash flows from operating activities: Cash received from customers 25,209,554$ 8,428,191$ 33,637,745$ -$ Cash received from interfund charges - - - 3,085,845 Cash paid to employees for services (3,827,482) (611,195) (4,438,677) (339,021) Cash paid to suppliers for goods or services (19,218,309) (6,928,474) (26,146,783) (1,291,554) Cash paid to other City funds (221,166) (84,017) (305,183) - Other 3,200,735 737,576 3,938,311 - Net cash provided by operating activities 5,143,332 1,542,081 6,685,413 1,455,270 Cash flows from noncapital financing activities: Payments received on loan to the Business Park Fiduciary Fund - 5,059 5,059 - Loans to other governments (149,446) (656,773) (806,219) 5,397 Loan repayment to the Successor Agency 6,326 - 6,326 - Due to (from) other funds (2,469) (1,341) (3,810) - Advances from other funds (401,250) - (401,250) - Other nonoperating revenues - - - 6,978 Transfers from other funds 33,364 22,240 55,604 9,580 Transfers to other funds (318,940) (163,487) (482,427) (700,525) Net cash used for noncapital financing activities (832,415) (794,302) (1,626,717) (678,570) Cash flows from capital and related financing activities: Acquisition of capital assets (1,664,129) (112,581) (1,776,710) - Sale of capital assets - - - 25,378 Capital grant revenue 2,108 1,481 3,589 6,309 Payment of interest and fees (11,836) - (11,836) - Net cash provided by (used for) capital and related financing activities (1,673,857) (111,100) (1,784,957) 31,687 Cash flows from investing activities: Interest income 113,720 150,889 264,609 60,171 Net cash provided by investing activities 113,720 150,889 264,609 60,171 Net increase in cash and investments 2,750,780 787,568 3,538,348 868,558 Cash and investments, beginning of year 5,877,624 17,612,405 23,490,029 9,302,294 Cash and investments, end of year 8,628,404$ 18,399,973$ 27,028,377$ 10,170,852$ City of Poway Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2018 (Continued) The accompanying notes are an integral part of these financial statements.  -31- Governmental Activities - Internal Service Water Sewer Total Funds Reconciliation of operating income to net cash provided by operating activities: Operating income 3,293,628$ 426,310$ 3,719,938$ 1,619,450$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,513,219 1,086,868 2,600,087 - (Increase) decrease in assets: Accounts receivable (374,027) (58,380) (432,407) 7,682 Inventories (311,487) 89 (311,398) - Increase (decrease) in liabilities: Accounts payable 30,966 43,431 74,397 (69,910) Accrued liabilities 28,903 (3,430) 25,473 (4,516) Compensated absences 42,885 (617) 42,268 (19,360) Net Pension Liability 817,604 17,417 835,021 (78,076) Unearned revenue 68,007 30,393 98,400 - Deposits 33,634 - 33,634 - Net cash provided by operating activities 5,143,332$ 1,542,081$ 6,685,413$ 1,455,270$     This page intentionally left blank.   -32- FIDUCIARY FUND FINANCIAL STATEMENTS Agency funds are used to account for assets held by the City as an agent for individuals, private organizations, other governments, and/or other funds. RDA Successor Agency Private Purpose Trust Fund is used to account for monies received from the San Diego County Auditor Controller for the repayment of the enforceable obligations of the former Poway Redevelopment Agency. These funds are restricted for the sole purpose of payment of items on an approved Recognized Payment Obligation Schedule (ROPS).     This page intentionally left blank. City of Poway Statement of Fiduciary Net Position Fiduciary Funds June 30, 2018 The accompanying notes are an integral part of these financial statements.  -33- Successor Agency to the Poway Agency Redevelopment Funds Agency ASSETS Current assets Cash and investments 3,017,421$ 7,798,953$ Receivables: Interest - 1,835 Prepaid charges, net - 290,619 Total current assets 3,017,421 8,091,407 Noncurrent assets Capital assets: Nondepreciable - 2,864,759 Total noncurrent assets - 2,864,759 Total assets 3,017,421$ 10,956,166 LIABILITIES Current liabilities Accounts payable 61,137$ - Long-term debt - due within one year - 8,958,261 Total current liabilities 61,137 8,958,261 Noncurrent liabilities Developer deposits 2,956,284 - Advances from City of Poway - 3,342,652 Interest payable - 275,010 Long-term debt due - in more than one year - 148,884,891 Total non current liabilities 2,956,284 152,502,553 Total liabilities 3,017,421$ 161,460,814 DEFERRED INFLOWS OF RESOURCES Deferred gain on refunding of debt 1,420,198 NET POSITION (DEFICIT) Held in trust for retirement of obligations of the former Poway Redevelopment Agency (151,924,846)$ City of Poway Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2018 The accompanying notes are an integral part of these financial statements.  -34- Successor Agency to the Poway Redevelopment Agency ADDITIONS Redevelopment Property Tax Trust Fund 47,750,165$ Investment earnings 234,202 Other revenue 438,428 Total additions 48,422,795 DEDUCTIONS Enforceable obligations payments 45,031,330 Administration expenses 975,371 Interest expense and fiscal charges 4,967,776 Loss on sale of property 4,503,803 Loss on transfer of property 26,204,302 Total deductions 81,682,582 Change in net position (33,259,787) Net position (deficit), beginning of year, as restated (118,665,059) Net position (deficit), end of year (151,924,846)$   -35- City of Poway Comprehensive Annual Financial Report For the year ended June 30, 2018 Notes to Basic Financial Statements City of Poway Notes to Basic Financial Statements June 30, 2018 -36- Note 1 – Summary of Significant Accounting Policies The basic financial statements of the City of Poway, California, (the “City”) have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as applied to governmental agencies. The Governmental Accounting Standards Board (“GASB”) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below: A. Financial Reporting Entity The City was incorporated December 1, 1980, under the general laws of the State of California. The City operates under a Council-Manager form of government and provides the following services: public safety (police – through the County of San Diego, and fire), community services, engineering services, planning services, public works, general administrative services, and capital improvements. As required by U.S. GAAP, these basic financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization’s governing body and either the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City’s financial statements to be misleading or incomplete. Component units for which the City is considered financially accountable are described below: Poway Public Financing Authority The Poway Public Financing Authority (the “Authority”) is a joint powers authority organized pursuant to the State of California Government Code, Section 6500. The Authority exists under a Joint Exercise of Power Agreement dated October 8, 1991, between the City and the former Poway Redevelopment Agency (the “Agency”). Its purpose is to assist in financing and refinancing projects for the benefit of the City and the Agency. The Authority was included within the scope of the reporting entity of the City because its governing body is composed in its entirety of council members of the City. Separate financial statements can be obtained from the Finance Department located at Poway City Hall. City of Poway Notes to Basic Financial Statements June 30, 2018 -37- Note 1 – Summary of Significant Accounting Policies (Continued) A. Financial Reporting Entity (Continued) Housing Authority On March 1, 2011, the City Council of the City of Poway declared a need for a housing authority in the City of Poway and adopted a resolution forming the Poway Housing Authority (the “Housing Authority”). The creation of the Housing Authority provides the City legal authority to continue monitoring ongoing rent and income compliance at affordable housing developments. The former Poway Redevelopment Agency (the “Agency”) and the Housing Authority prepared a Cooperation Agreement to provide for implementation of certain low and moderate income housing projects and to make payments by the Agency to the Housing Authority for the costs to the Housing Authority for performing its obligations. The Agency was dissolved due to the passage of Assembly Bill x1 26 which became effective on October 1, 2011. In accordance with Health and Safety code 34175(b), on February 1, 2012, all housing assets, liabilities and fund balance of the Agency were transferred to the Housing Authority as the Successor Agency to the Poway Redevelopment Agency. The Housing Authority was included within the scope of the reporting entity of the City because its governing body is composed in its entirety of council members of the City. Separate financial statements can be obtained from the Finance Department located at Poway City Hall. B. Basis of Accounting and Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and means by which spending activities are controlled. City of Poway Notes to Basic Financial Statements June 30, 2018 -38- Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Government–Wide and Fund Financial Statements The City’s Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. These basic financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories:  Charges for services  Operating contributions and grants  Capital contributions and grants Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business- type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:  Due to and from other funds  Advances to and from other funds  Transfers in and out City of Poway Notes to Basic Financial Statements June 30, 2018 -39- Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in fund balances as presented in these statements to the net position presented in the government-wide financial statements. The City has presented all major funds that met those qualifications. All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are real and personal property tax, other local taxes, franchise fees, forfeitures and penalties, motor license fees, rents and concessions, interest revenue, and state and federal grants and subventions. Expenditures are recorded in the accounting period in which the related fund liability is incurred except for interest on long-term debt, claims and judgments, and compensated absences, which are recorded only when due. Unearned revenues arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unearned revenue is removed from the balance sheet and revenue is recognized. The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. City of Poway Notes to Basic Financial Statements June 30, 2018 -40- Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements (Continued) The City reports the following major governmental funds: The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The Housing Authority Fund receives lease payments from properties owned by the Authority as well as residual payments from its non-profit partners that own and operate affordable housing projects that received funding from the former Redevelopment Agency. The fund is not required to be reported as a major fund every year but is reported as such due to the significance of its operations. Proprietary Fund Financial Statements Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows for all proprietary funds. A separate column representing the internal service fund is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the government-wide financial statements. Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Change in Fund Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses. City of Poway Notes to Basic Financial Statements June 30, 2018 -41- Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Proprietary Fund Financial Statements (Continued) The City reports the following major proprietary funds: The Water Enterprise Fund is used to account for the provision of water services to the residents of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to administration, operations, maintenance, financing and related debt service, and billing and collection. The Sewer Enterprise Fund is used to account for the provision of sewer services to the residents of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to administration, operations, maintenance, financing and related debt service, and billing and collection. The City reports one internal service fund that is used to account for vehicle maintenance services provided to the City’s fleet of vehicles for which the user divisions are charged. Fiduciary Fund Financial Statements The Agency Funds are custodial in nature (assets equal liabilities) and use the accrual basis of accounting, but do not involve measurement of results of operations. The City reports agency funds used to account for the collection of assessments from owners of property with their respective Districts, and for the remittance of such assessments to the bondholders as required by the Mello-Roos Community Facilities Act of 1982. The Private Purpose Trust Fund is used to account for non-housing activities of the City of Poway Successor Agency on behalf of the former Poway Redevelopment Agency. C. Cash, Cash Equivalents and Investments The City pools its available cash for investment purposes. The City considers pooled cash and highly liquid investments held with financial institutions, a fiscal agent, and in a pooled account with the State, to be cash equivalents. The cash flow statements require presentation of “cash and cash equivalents.” For the purposes of the statement of cash flows, the City considers all proprietary fund pooled cash and investments as “cash and cash equivalents,” as such funds are available to the various funds as needed. With respect to cash and investments with fiscal agents, the City considers all investments with an original maturity of less than three months to be cash equivalents. City of Poway Notes to Basic Financial Statements June 30, 2018 -42- Note 1 – Summary of Significant Accounting Policies (Continued) C. Cash, Cash Equivalents and Investments (Continued) The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF) which has invested a portion of the pooled funds in structured notes and asset-backed securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these structured notes and asset-backed securities are subject to market risk and to change in interest rates. The City adheres to certain disclosure requirements, if applicable for deposit and investment risk that are specified for the following areas:  Interest Rate Risk  Credit Risk  Overall  Custodial Credit Risk  Concentration of Credit Risk  Foreign Currency Risk The City pools cash and investments of all funds, except assets held by fiscal agents. Each fund’s share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds on each fund’s average cash and investment balance. Investments are reported in the accompanying financial statements at fair value. Changes in fair value that occur during a fiscal year are recognized as investment earnings reported for that fiscal year. Investment income includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation, maturity, or sale of an investment. D. Inter-fund Transactions Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds” (i.e., current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the governmental-wide financial statements as “interfund balances.” E. Inventories Inventories within the various fund types consist of water, materials and supplies which are valued at cost on a first-in, first-out basis. Reported expenditures reflecting the purchase of supplies have been restated to reflect the consumption method of recognizing inventory- related expenditures. City of Poway Notes to Basic Financial Statements June 30, 2018 -43- Note 1 – Summary of Significant Accounting Policies (Continued) F. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, streets, sidewalks, medians and storm drains), are reported in the applicable governmental or business-type activities in the Government-Wide Financial Statements. City policy has set the capitalization threshold for reporting capital assets at $5,000. Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated assets are valued at acquisition value at the requisition date. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows: Buildings 10-50 years Buildings improvements 10-100 years Furniture and Equipment 5-20 years Infrastructure 20-50 years The City defines infrastructure as the basic physical assets that allow the City to function. These assets include streets, bridges, sidewalks, drainage systems, and lighting systems, etc. Each major infrastructure system can be divided into subsystems. For example the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, landscaping and land. These subsystems are not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems. For infrastructure systems, the City elected to use the “Basic Approach” for infrastructure reporting. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest on construction-related debt incurred during the period of construction for business-type and proprietary fund assets is capitalized as a cost of the constructed assets. Capital assets acquired under capital lease are capitalized at the net present value of the total lease payments. Capital Assets Acquired Under Lease Purchase Contracts The long-term principal portion of debt on non-proprietary capital assets acquired through lease purchase contracts is accounted for in the government-wide financial statements as “capital lease obligations.” A capital asset is recorded at the net present value of total lease payments in the government-wide financial statements. City of Poway Notes to Basic Financial Statements June 30, 2018 -44- Note 1 – Summary of Significant Accounting Policies (Continued) G. Deferred Inflows and Deferred Outflows of Resources Deferred outflows of resources are transactions that result in the consumption of net position in one period that are applicable to future periods and are not considered assets. Deferred outflows of resources are required to be presented separately after assets on the statement of net position. Deferred inflows of resources are transactions that result in the acquisition of net position in one period that are applicable to future periods and are not considered to be liabilities. Deferred inflows of resources are required to be presented separately after liabilities on the statement of net position. H. Compensated Absences Government-Wide Financial Statements For governmental and business-type activities, compensated absences are recorded as incurred and the related expenses and liabilities are reported. Fund Financial Statements In governmental funds, compensated absences are recorded as expenditures in the years paid, as it is the City’s policy to liquidate any unpaid compensated absences at June 30 from future resources, rather than currently available financial resources. In proprietary funds, compensated absences are expensed to the various funds in the period they are earned, and such fund’s share of the unpaid liability is recorded as a long-term liability of the fund. Vested or accumulated compensated absences are recorded in proprietary funds as an expense and liability of those funds as the benefits accrue to employees. I. Long-Term Debt Government-Wide Financial Statements Long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of applicable premium or discount. Fund Financial Statements The governmental fund financial statements do not present long-term debt but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position. City of Poway Notes to Basic Financial Statements June 30, 2018 -45- Note 1 – Summary of Significant Accounting Policies (Continued) J. Net Position In the Government-Wide Financial Statements and proprietary fund financial statements, net position is classified as follows: Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets. Restricted – This component of net position consists of restricted assets and deferred outflows of resources reduced by liabilities and deferred inflows of resources related to those assets. Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. When expenses are incurred for purposes for which both restricted and unrestricted net position are available, the City’s policy is to apply restricted net position first, then unrestricted net position as it is needed. K. Fund Balances In the Governmental Fund Financial Statements, fund balances are classified in the following categories: Nonspendable – Items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds. Restricted – Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributions, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation. Committed – Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body through council resolutions, etc., and that remain binding unless removed in the same manner. The City Council is considered the highest authority for the City. City of Poway Notes to Basic Financial Statements June 30, 2018 -46- Note 1 – Summary of Significant Accounting Policies (Continued) K. Fund Balances (Continued) Assigned – Assigned fund balances encompass the portion of net fund resources reflecting the government’s intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The City Council has authorized the City Manager for that purpose. Unassigned – This classification includes all residual fund balances for the General Fund that has not been restricted, committed or assigned to specific purposes within the General Fund. The General Fund is the only fund that reports a positive unassigned fund balance amount. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance amounts. It is the City’s policy to consider restricted fund balance spent first when expenditure is incurred for purposes for which both restricted and unrestricted fund balance are available. Similarly, when an expenditure is incurred for purposes for which amounts in any of the unrestricted classifications of fund balance could be used, the City considers committed amounts to be reduced first, followed by assigned amounts and then unassigned amounts. In addition to the Fund types described earlier, the City reports the following fund types: The Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted to expenditure for special purposes other than debt service or capital projects. The Capital Projects Funds are used to account for and report financial resources that are restricted or assigned to expenditures for capital outlays including the acquisition or construction of capital facilities and other capital assets. The Debt Service Fund is used to account for the principal and interest payments on current and long-term debt. The Internal Service Fund is used to account for the financing of special activities that provide services within the City. The primary activity of the City’s Internal Service Fund is vehicle and equipment maintenance. L. Use of Estimates The preparation of the basic financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the disclosure of contingent assets and liabilities at the date of the basic financial statements and the related reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the estimates are reasonable. City of Poway Notes to Basic Financial Statements June 30, 2018 -47- Note 2 – Cash, Cash Equivalents and Investments The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds. This pooled cash is invested by the City Treasurer to enhance earnings. The pooled interest earned is allocated to the funds based on average month-end cash balances of the various funds. The following is a summary of cash and investments at June 30, 2018: Fiduciary Funds Governmental Business-Type Statement of Activities Activities Net Position Total Cash and investments 78,935,151$ 27,028,377$ 10,816,374$ 116,779,902$ Cash and investments with fiscal agents 627,958 - - 627,958 Total 79,563,109$ 27,028,377$ 10,816,374$ 117,407,860$ Government-Wide Statement of Net Position Cash, cash equivalents, and investments consisted of the following at June 30, 2018: Cash on hand 7,777$ Demand deposits 943,318 Investments 116,456,765 Total 117,407,860$ City of Poway Notes to Basic Financial Statements June 30, 2018 -48- Note 2 – Cash, Cash Equivalents and Investments (Continued) A. Cash Deposits The carrying amounts of the City’s demand deposits were $943,318 at June 30, 2018. Bank balances at June 30, 2018, were $2,507,166 which were fully insured or collateralized with securities held by the pledging financial institutions in the City’s name as discussed below: The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are fully insured by the Federal Deposit Insurance Corporation. The City, however, has not waived the collateralization requirements. The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund. B. Investments City Cash & Investment Pool The table below identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. City of Poway Notes to Basic Financial Statements June 30, 2018 -49- Note 2 – Cash, Cash Equivalents and Investments (Continued) B. Investments (Continued) City Cash & Investment Pool (Continued) This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s investment policy. Maximum Maximum Maximum Percentage Investment Authorized Investment Type Maturity of Portfolio* in One Issuer* U.S. Treasury Obligation 5 years None None U.S. Agency Securities 5 years 75% 25% Bankers Acceptances 180 days 40% 5% Medium-Term and Corporate Notes 5 years 30% 5% Money Market Mutual Funds N/A 20% 10% Mortgage Backed Securities 5 years 20% None Asset Backed Securities 5 years 20% None Commercial Paper 270 days 25% 3% Municipal Bonds 5 years 30% 5% Negotiable Certificates of Deposits 5 years 30% 5% Local Agency Investment Fund (LAIF) N/A None None County of San Diego Investment Pool N/A None None CalTrust Joint Powers Authority N/A None None Obligation of any State 5 years None None * Excluding amounts held by trustee that are not subject to California Government Code restriction. Investment Authorized by Debt Agreements Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreement, rather than the general provisions of the California Government Code or the City’s investment policy. The table below identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. Maximum Maximum Maximum Percentage Investment Authorized Investment Type Maturity of Portfolio in One Issuer Repurchase agreement 1 year None 30% Money Market Mutual Funds N/A None None U.S. Agency Securities 5 years 75% 25% Investment Contracts 30 years None None Local Agency Investment Fund (LAIF) N/A None None City of Poway Notes to Basic Financial Statements June 30, 2018 -50- Note 2 – Cash, Cash Equivalents and Investments (Continued) C. Risk Disclosures Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value is to changes in the market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity: 12 Months 13 to 24 25 to 60 More than Investment Type Amounts or Less Months Months 60 Months U.S. Treasury Bills 13,886,728$ 8,960,517$ 2,969,649$ 1,956,562$ -$ U.S. Agencies 36,409,814 16,865,214 15,636,881 3,907,719 - Municipalities 1,233,432 1,233,432 - - - CalTrust Investment Pool - Short term 10,836,888 10,836,888 - - - CalTrust Investment Pool - Medium term 10,848,111 - 10,848,111 - - Medium-Term and Corporate Notes 21,319,559 3,974,040 13,416,425 3,929,094 - Local Agency Investment Fund (LAIF) 21,182,148 21,182,148 - - - San Diego County Investment Pool 62,126 62,126 - - - Certificates of Deposit 50,000 50,000 - - - Held by bond trustee: Money Market Funds 627,959 627,959 - - - Total 116,456,765$ 63,792,324$ 42,871,066$ 9,793,375$ -$ Remaining Maturities Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The following presentation is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual rating as of June 30, 2018 for each investment type: City of Poway Notes to Basic Financial Statements June 30, 2018 -51- Note 2 – Cash, Cash Equivalents and Investments (Continued) C. Risk Disclosures (Continued) Credit Risk (Continued) Minimum Investment Type Rating S&P Moody's Fair Value U.S. Treasury Bills N/A N/A N/A 13,886,728$ U.S. Agencies Aaa AA Aaa 36,409,814 Municipalities Aaa AA not rated 1,233,432 CalTrust Investment Pool-Short term AAf AAf not rated 10,836,888 CalTrust Investment Pool-Medium term N/A not rated not rated 10,848,111 Medium-Term and Corporate Notes A-/A3 AA Aaa 21,319,559 Local Agency Investment Fund (LAIF) N/A not rated not rated 21,182,148 San Diego County Investment Pool AAAf AAAf not rated 62,126 Certificates of Deposit N/A exempt exempt 50,000 Held by bond trustee: Money Market Funds N/A AAAm Aaamf 627,959 Total 116,456,765$ Concentration of Credit Risk The City’s Policy states that not more than 25% of the portfolio shall be invested in any one entity or any one instrument to protect the City from concentration of credit risk, with the following exceptions: U.S. Treasury Obligations and investments pools (State of California – Local Agency Investment Fund and CalTrust Investment Pool). In addition, purchases of commercial paper must not exceed 25% of the value of the portfolio at any time and single issuer holdings must not exceed 5% per issuer. The City is in compliance with these provisions of the Policy. The following is a chart of the City’s investment portfolio: Trustee/Custodian Investment Type Reported Amount Union Bank U.S. Treasuries 13,886,728$ Union Bank U.S. Agencies 36,409,814 Union Bank Municipalities 1,233,432 Union Bank Corporates 21,319,559 Wells Fargo CalTrust Investment Pool 21,684,999 Wells Fargo Certificates of Deposit 50,000 State Treasurer Office LAIF 21,182,148 San Diego County Investment Pool 62,126 US Bank Money Market 627,959 116,456,765$ City of Poway Notes to Basic Financial Statements June 30, 2018 -52- Note 2 – Cash, Cash Equivalents and Investments (Continued) D. Investment in Local Agency Investment Funds The City’s investments with Local Agency Investment Funds (“LAIF”) at June 30, 2018, included a portion of the pooled funds invested in Medium-Term and Short-Term Structured Notes and Asset-Backed Securities. These investments included the following: Structured Notes are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables. The Local Investment Advisory Board provides oversight for LAIF. The Board consists of five members as designated by statute. The State Treasurer, as Chairman, or his designated representative appoints two members qualified by training and experience in the field of investment or finance, and two members who are treasurers, finance or fiscal officers or business managers employed by any county, city or local district or municipal corporation of this state. As of June 30, 2018, the City had $21,182,148 invested in LAIF, which had invested 2.67% of the pooled investment funds in short-term and medium-term Structured Notes and Asset- Backed Securities. The fair value of the City’s position in the pool is the same as the value of the pool shares. E. Investment in CalTRUST The City is a voluntary participant in the Investment Trust of California (CalTRUST) a Joint Powers Authority. CalTRUST is a program established by public agencies in California for the purpose of pooling and investing local agency funds. CalTRUST invests in fixed income securities eligible for investment pursuant to California Government Code Sections 53601, et. seq. and 53635, et. seq. Investments in CalTRUST are highly liquid, as deposits can be converted to cash within 24 hours without loss of interest. The balance available for withdrawal is based on the accounting records maintained by CalTRUST, which are recorded on a fair market value basis. Separate CalTRUST financial statements are available from CalTRUST’s offices at 400 Capitol Mall, Suite 702, Sacramento, CA 95814. As of June 30, 2018, the City had $21,684,999 invested in CalTRUST. The City’s investment in this pool is reported in the accompanying financial statements at fair market value. City of Poway Notes to Basic Financial Statements June 30, 2018 -53- Note 2 – Cash, Cash Equivalents and Investments (Continued) F. Investment in San Diego County Investment Pool The City is a voluntary participant in the County Treasury Pool (“County Pool”) which is regulated under the oversight of the Treasurer of the County of San Diego. The fair value of the City’s investment in the County Pool is reported in the accompanying financial statements based upon the City’s pro-rata share of the fair value provided by the County Pool for the entire portfolio. The balance available for withdrawal is based on the accounting records maintained by the Pool. Included in the County Pool’s investment portfolio are collateralized and negotiable certificates of deposit, floating rate securities issued by federal agencies and corporations, money market funds, repurchase agreements and commercial paper. At June 30, 2018, the City had $62,126 invested in the San Diego County Investment Pool. The City’s investment in this pool is reported in the accompanying financial statements at fair market value. G. Fair Value Measurements GASB Statement No. 72, Fair Value Measurements and Application, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of quoted prices (unadjusted) for identical assets and liabilities in active markets that a government can access at the measurement date, Level 2 inputs are derived principally from or corroborated by observable market data by correlation or other means for an asset or liability, and Level 3 inputs have the lowest priority and consist of unobservable inputs for an asset or liability. The following table presents the balances of the assets measured at fair value on a recurring basis as of June 30, 2018. Not Subject to Fair Value Level Total Level 1 Level 2 Level 3 GASB 72 U.S. Treasury Bills 13,886,728$ 13,886,728$ -$ -$ -$ U.S. Agencies 36,409,814 36,409,814 - - - Municipal Bonds 1,233,432 - 1,233,432 - - CalTrust Investment Pools 21,684,999 - - - 21,684,999 Medium-Term and Corporate Notes 21,319,559 - 21,319,559 - - Local Agency Investment Fund (LAIF) 21,182,148 - - - 21,182,148 San Diego County Investment Pool 62,126 - - - 62,126 Certificates of Deposit 50,000 50,000 - - - Held by Bond Trustees 627,959 - - - 627,959 Total investments by fair value level 116,456,765$ 50,346,542$ 22,552,991$ -$ 43,557,232$ Fair Value Measurement Using Investments by City of Poway Notes to Basic Financial Statements June 30, 2018 -54- Note 3 – Interfund Transactions A. Due To and Due From Other Funds As of June 30, 2018, balances were as follows: General Water Sewer Due to other funds Fund Fund Fund Total Governmental Activities: Non-major Governmental Funds 274,747$ 32,890$ 20,491$ 328,128$ Total due to other funds 274,747$ 32,890$ 20,491$ 328,128$ Due from other funds These balances resulted from loans to cover negative cash balances as of June 30, 2018. B. Advances To and Advances From Other Funds Non-major Governmental General Water Advances to other funds Funds Fund Fund Total Governmental Activities: General Fund 798,299$ -$ 537,622$ 1,335,921$ Non-major Governmental Funds 17,576 - - 17,576 Business-Type Activities Internal Service Fund 78,900 360,500 - 439,400 Sewer Fund 214,500 - - 214,500 Total advances to other funds 1,109,275$ 360,500$ 537,622$ 2,007,397$ Advances from other funds C. Advances To and Advances From Fiduciary Funds Advances from governmental funds Successor Agency to the Advances to fiduciary funds Poway RDA Total Governmental Activities: Housing Authority 668,531$ 668,531$ Non-major Governmental Funds 849,961 849,961 Business-Type Activities Water Fund 1,260,483 1,260,483 Sewer Fund 563,677 563,677 Total 3,342,652$ 3,342,652$ City of Poway Notes to Basic Financial Statements June 30, 2018 -55- Note 3 – Interfund Transactions (Continued) C. Advances To and Advances From Fiduciary Funds (Continued) The advances to fiduciary funds were primarily used for the following: The City Council authorized various advances to the former Poway Redevelopment Agency, which now reside in the Successor Agency, totaling $3,342,652. As approved by the California Department of Finance, these advances are being repaid through fiscal year 2032-33. D. Transfers To and From Other Funds Transfers for the year ended June 30, 2018, were as follows: Water Sewer Internal Non-major Enterprise Enterprise Service Governmental Transfers In General Fund Fund Fund Funds Total General Fund -$ 150,980$ 57,760$ 700,525$ 770,119$ 1,679,384$ Housing Authority - - - - 820,000 820,000 Non-major Governmental Funds 1,040,595 167,960 105,727 - - 1,314,282 Water Enterprise Fund 33,364 - - - - 33,364 Sewer Enterprise Fund 22,240 - - - - 22,240 Internal Service Funds 9,580 - - - - 9,580 Total 1,105,779$ 318,940$ 163,487$ 700,525$ 1,590,119$ 3,878,850$ Transfers Out Transfers are primarily used for the following:  Move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them;  Move receipt restricted to the debt service from the funds collecting the receipts, to the debt service fund as debt service payments become due;  Move available funds to capital project funds for approved projects;  Move available funds to new funds, or closed funds, at the direction of the Council. City of Poway Notes to Basic Financial Statements June 30, 2018 -56- Note 4 – Capital Assets A. Governmental Activities A summary of changes in capital assets for governmental activities for the year ended June 30, 2018 is as follows: Balance at Balance at June 30, 2017 Transfers* Additions Deletions June 30, 2018 Non-Depreciable Assets Land 32,082,894$ 8,362,684$ 830,268$ (879,789)$ 40,396,057$ Construction in progress 512,113 - 4,470,581 (366,332) 4,616,362 Total non-depreciable assets 32,595,007 8,362,684 5,300,849 (1,246,121) 45,012,419 Depreciable Assets Buildings 51,091,788 13,075,366 390,373 - 64,557,527 Improvements other than buildings 3,251,555 2,282,611 - - 5,534,166 Infrastructure 128,788,431 17,739,258 - - 146,527,689 Machinery and equipment 18,886,858 - 743,066 (270,074) 19,359,850 Total depreciable assets 202,018,632 33,097,235 1,133,439 (270,074) 235,979,232 Less accumulated depreciation Buildings (24,703,381) (11,834,758) (1,342,107) - (37,880,246) Improvements other than buildings (1,402,492) (538,914) (200,905) - (2,142,311) Infrastructure (98,717,489) (2,881,945) (3,169,102) - (104,768,536) Machinery and equipment (13,967,039) - (981,140) 265,405 (14,682,774) Total accumulated depreciation (138,790,401) (15,255,617) (5,693,254) 265,405 (159,473,867) Total depreciable assets, net 63,228,231 17,841,618 (4,559,815) (4,669) 76,505,365 Total governmental activities 95,823,238$ 26,204,302$ 741,034$ (1,250,790)$ 121,517,784$ *For additional information on transfers, see Note 17. Governmental activities depreciation expense for capital assets for the year ended June 30, 2018 is as follows: General government 866,623$ Public safety 830,284 Public works 3,498,507 Community services 497,840 Total depreciation expense 5,693,254$ City of Poway Notes to Basic Financial Statements June 30, 2018 -57- Note 4 – Capital Assets (Continued) B. Business-type Activities A summary of changes in capital assets for business-type activities for the year ended June 30, 2018 is as follows: Balance at Balance at June 30, 2017 Additions Deletions June 30, 2018 Non-Depreciable Assets Land 76,797$ -$ -$ 76,797$ Construction in progress 1,301,813 2,093,010 (2,438,736) 956,087 Total non-depreciable assets 1,378,610 2,093,010 (2,438,736) 1,032,884 Depreciable Assets Buildings 21,128,309 - - 21,128,309 Improvements other than buildings 70,034,543 1,914,992 - 71,949,535 Machinery and equipment 3,783,853 207,445 (97,469) 3,893,829 Total depreciable assets 94,946,705 2,122,437 (97,469) 96,971,673 Less accumulated depreciation Buildings (18,386,905) (466,824) - (18,853,729) Improvements other than buildings (42,410,614) (1,893,221) - (44,303,835) Machinery and equipment (2,586,356) (240,042) 97,469 (2,728,929) Total accumulated depreciation (63,383,875) (2,600,087) 97,469 (65,886,493) Total depreciable assets, net 31,562,830 (477,650) - 31,085,180 Total business-type activities 32,941,440$ 1,615,360$ (2,438,736)$ 32,118,064$ Business-type activities depreciation expense for capital assets for the year ended June 30, 2018 is as follows: Water Enterprise Fund 1,513,219$ Sewer Enterprise Fund 1,086,868 Total depreciation expense 2,600,087$ City of Poway Notes to Basic Financial Statements June 30, 2018 -58- Note 4 – Capital Assets (Continued) C. Fiduciary Activities A summary of changes in capital assets for fiduciary activities for the year ended June 30, 2018 is as follows: Balance at Balance at June 30, 2017 Transfers* Restatement* Additions Deletions June 30, 2018 Non-Depreciable Assets Land 21,774,792$ (8,362,684)$ -$ -$ (10,547,349)$ 2,864,759$ Total non-depreciable assets 21,774,792 (8,362,684) - - (10,547,349) 2,864,759 Depreciable Assets Buildings 17,581,603 (15,357,977) (2,223,626) - - - Infrastructure 17,739,258 (17,739,258) - - - - Total depreciable assets 35,320,861 (33,097,235) (2,223,626) - - - Less accumulated depreciation Buildings (13,351,561) 12,373,672 977,889 - - - Infrastructure (2,881,945) 2,881,945 - - - - Total accumulated depreciation (16,233,506) 15,255,617 977,889 - - - Total depreciable assets, net 19,087,355 (17,841,618) (1,245,737) - - - Total fiduciary activities 40,862,147$ (26,204,302)$ (1,245,737)$ -$ (10,547,349)$ 2,864,759$ *For additional information on transfers and restatement, see Note 17 and 18 respectively. All depreciation was recorded in the Successor Agency to the Poway Redevelopment Agency private purpose trust fund. City of Poway Notes to Basic Financial Statements June 30, 2018 -59- Note 5 – Long-Term Debt A summary of changes in long-term debt for the year ended June 30, 2018: Amount Amount Balance Balance Due Within Due In More June 30, 2017 Additions Reductions June 30, 2018 One Year Than One Year Governmental Activities Certificates of Participation 13,987,299$ -$ (791,322)$ 13,195,977$ 810,432$ 12,385,545$ Compensated Absences 1,553,764 1,558,061 (1,526,120) 1,585,705 1,557,486 28,219 Total governmental activities 15,541,063$ 1,558,061$ (2,317,442)$ 14,781,682$ 2,367,918$ 12,413,764$ Business-Type Activities Compensated Absences 250,148$ 285,122$ (242,854)$ 292,416$ 284,030$ 8,386$ Total business-type activities 250,148$ 285,122$ (242,854)$ 292,416$ 284,030$ 8,386$ Fiduciary Funds Certificates of Participation 430,053$ -$ (430,053)$ -$ -$ -$ Tax Allocation Bonds 163,593,731 - (9,089,143) 154,504,588 8,858,261 145,646,327 Notes Payable 3,193,031 224,154 (78,621) 3,338,564 100,000 3,238,564 Total fiduciary activities 167,216,815$ 224,154$ (9,597,817)$ 157,843,152$ 8,958,261$ 148,884,891$ Classification A. Governmental Activities Long-Term Debt Certificates of Participation at June 30, 2018, consisted of the following: Amount Amount Balance Balance Due Within Due in More June 30, 2017 Additions Reductions June 30, 2018 One Year Than One Year 2005 Certificates of Participation 2,180,000$ -$ (180,000)$ 2,000,000$ 185,000$ 1,815,000$ Bond Premium 18,406 - (3,236) 15,170 2,977 12,193 2012 Certificates of Participation 11,615,000 - (590,000) 11,025,000 605,000 10,420,000 Bond Premium 173,893 - (18,086) 155,807 17,455 138,352 Total Certificates of Participation 13,987,299$ -$ (791,322)$ 13,195,977$ 810,432$ 12,385,545$ Classification 2005 Certificates of Participation In April 2005, the City issued 2005 Refunding Certificates of Participation in the amount of $8,245,000 to refund and defease the City’s outstanding 1995 and 1996 Certificates of Participation. The original 1995 Certificates of Participation were used for several projects such as the City’s pool and Performing Arts Center, while the 1996 Certificates of Participation were used to build the City’s Sheriff Substation. The 2005 Refunding Certificates of Participation consisted of $6,830,000 serial certificates maturing from 2005 through 2020 in annual installments of $305,000 to $610,000 and term certificates of $1,415,000 maturing in 2026. Interest is payable semi-annually on February 1 and August 1 at rates ranging from 3.00% to 4.50%. Certificates maturing on or after August 1, 2016 are subject to optional redemption in whole or in part, on any date beginning August 1, 2015. Certificates maturing on August 1, 2026 are subject to mandatory redemptions on August 1 of each year beginning August 1, 2021. At February 1, 2012, $2,335,000 was transferred to the Successor Agency. City of Poway Notes to Basic Financial Statements June 30, 2018 -60- Note 5 – Long-Term Debt (Continued) A. Governmental Activities Long-Term Debt (Continued) 2005 Certificates of Participation (Continued) At June 30, 2018, the City’s portion of the outstanding balance of the 2005 Certificates of Participation was $2,000,000. The annual requirements to amortize the City portion of Certificates of Participation outstanding at June 30, 2018, are as follows: Year Ending June 30, Principal Interest Total 2019 185,000$ 83,875$ 268,875$ 2020 195,000 76,153 271,153 2021 205,000 67,903 272,903 2022 210,000 58,950 268,950 2023 220,000 49,275 269,275 2024 - 2027 985,000 91,238 1,076,238 Total 2,000,000$ 427,394$ 2,427,394$ 2012 Certificates of Participation On October 5, 2012, the City issued 2012 Refunding Certificates of Participation to provide for the defeasance and refunding of 2003 Certificates of Participation, to fund a reserve account for the Certificates, and to pay costs incurred in connection with executing and delivering the Certificates. The City leased certain existing property to the Public Financing Authority (the “PFA”) pursuant to a Site and Facilities Lease dated as of January 1, 2003, as amended by an Amendment to Site and Facilities Lease, dated as of October 1, 2012. The Certificates are payable solely from and secured by certain lease payments to be made by the City to the PFA. The interest with respect to the Certificates is payable on January 1 and July 1 of each year, commencing January 1, 2013 at rates ranging from 2.00% to 3.25%. At June 30, 2018, the outstanding balance of the 2012 Certificates of Participation was $11,025,000. The annual requirements to amortize Certificates of Participation outstanding at June 30, 2018, are as follows: Year Ending June 30, Principal Interest Total 2019 605,000$ 326,870$ 931,870$ 2020 615,000 314,770 929,770 2021 630,000 300,933 930,933 2022 645,000 283,608 928,608 2023 665,000 264,256 929,256 2024 - 2028 3,635,000 1,009,588 4,644,588 2029 - 2033 3,330,000 388,383 3,718,383 2034 900,000 29,250 929,250 Total 11,025,000$ 2,917,658$ 13,942,658$ City of Poway Notes to Basic Financial Statements June 30, 2018 -61- Note 5 – Long-Term Debt (Continued) B. Fiduciary Funds Long Term Debt Certificates of Participation Certificates of Participation at June 30, 2018, consisted of the following: Amount Amount Balance Balance Due Within Due in More June 30, 2017 Additions Reductions June 30, 2018 One Year Than One Year 2005 Certificates of Participation 430,000$ -$ (430,000)$ -$ -$ -$ Bond Premium 53 - (53) - - - Total Certificates of Participation 430,053$ -$ (430,053)$ -$ -$ -$ Classification 2005 Certificates of Participation In April 2005, the City issued 2005 Refunding Certificates of Participation in the amount of $8,245,000 to refund and defease the City’s outstanding 1995 and 1996 Certificates of Participation. The original 1995 Certificates of Participation were used for several projects such as the City’s pool and Performing Arts Center, while the 1996 Certificates of Participation were used to build the City’s Sheriff Substation. The 2005 Refunding Certificates of Participation consisted of $6,830,000 serial certificates maturing from 2005 through 2020 in annual installments of $305,000 to $610,000 and term certificates of $1,415,000 maturing in 2026. Interest is payable semi-annually on February 1 and August 1 at rates ranging from 3.00% to 4.50%. Certificates maturing on or after August 1, 2016 are subject to optional redemption in whole or in part, on any date beginning August 1, 2015. Certificates maturing on August 1, 2026 are subject to mandatory redemptions on August 1 of each year beginning August 1, 2021. At February 1, 2012, $2,335,000 was transferred to the Successor Agency. At June 30, 2018, the Successor Agency’s portion of the outstanding balance of the 2005 Certificates of Participation was paid off in full. City of Poway Notes to Basic Financial Statements June 30, 2018 -62- Note 5 – Long-Term Debt (Continued) B. Fiduciary Funds Long Term Debt (Continued) Tax Allocation Bonds Tax Allocation Bonds at June 30, 2018, consisted of the following: Amount Amount Balance Balance Due Within Due in More June 30, 2017 Additions Reductions June 30, 2018 One Year Than One Year 2015A Tax Allocation Bonds 133,110,000$ -$ -$ 133,110,000$ 1,885,000$ 131,225,000$ Bond Premium 18,188,731 - (1,884,143) 16,304,588 1,883,261 14,421,327 2015B Tax Allocation Bonds 12,295,000 - (7,205,000) 5,090,000 5,090,000 - Total Tax Allocation Bonds 163,593,731$ -$ (9,089,143)$ 154,504,588$ 8,858,261$ 145,646,327$ Classification 2015A Tax Allocation Bonds On July 1, 2015, the Successor Agency to the Poway Redevelopment Agency (Successor Agency) issued 2015A Tax Allocation Bonds in the amount of $133,110,000 for the purpose of effecting a refunding of the Poway Redevelopment Agency’s outstanding Paguay Redevelopment Project Tax Allocation Refunding Bonds, Series 2000, Series 2001 and Series 2003. The bonds are dated July 1, 2015 and mature on June 15, 2033 in the principal amount and bear interest from 4% to 5%. Interest is payable semi-annually on June 15 and December 15 through 2033. The bonds maturing on December 15, 2026, December 15, 2027, June 15, 2028, December 15, 2028 and on December 15, 2029 are subject to optional redemption prior to maturity at the option of the Successor Agency. The Successor Agency reduced its aggregate debt service payments by $50,776,463 which resulted in an economic gain of $25,436,195. The Successor Agency has pledged all revenues and all of the monies in the Redevelopment Obligation Retirement Fund and all monies in the Debt Service Fund. No funds or properties, other than those previously stated, shall be pledged for the payment of the principal or interest or redemption premium on the bonds. As of June 30, 2018, the balance of the 2015A Tax Allocation Bonds was $133,110,000. City of Poway Notes to Basic Financial Statements June 30, 2018 -63- Note 5 – Long Term Debt (Continued) B. Fiduciary Funds Long Term Debt (Continued) Tax Allocation Bonds (Continued) 2015A Tax Allocation Bonds (Continued) The annual requirements to amortize the bonds outstanding at June 30, 2018 are as follows: Year Ending June 30, Principal Interest Total 2019 1,885,000$ 3,300,525$ 5,185,525$ 2020 7,190,000 6,454,450 13,644,450 2021 7,545,000 6,108,625 13,653,625 2022 7,935,000 5,726,500 13,661,500 2023 8,345,000 5,324,750 13,669,750 2024 - 2028 47,845,000 19,711,625 67,556,625 2029 - 2033 40,835,000 7,032,125 47,867,125 2034 11,530,000 434,125 11,964,125 Total 133,110,000$ 54,092,725$ 187,202,725$ 2015B Tax Allocation Bonds On July 1, 2015, the Successor Agency to the Poway Redevelopment Agency (Successor Agency) issued the 2015B Tax Allocation Bonds in the amount of $26,845,000 for the purpose of effecting a refunding of the Poway Redevelopment Agency’s outstanding Paguay Redevelopment Project Tax Allocation Refunding Bonds, Series 2007. The bonds are dated July 1, 2015 and mature on June 15, 2019 in the principal amount of $26,845,000 and bears interest from 0.50% to 2.35%. Interest is paid semi-annually on June 15 and December 15 through 2033. The bonds are not subject to optional redemption prior to maturity. The Successor Agency reduced its aggregate debt service payments by $15,094,128 which resulted in an economic gain of $3,786,053. The Successor Agency has pledged all revenues and all of the monies in the Redevelopment Obligation Retirement Fund and all monies in the Debt Service Fund. No funds or properties, other than those previously stated, shall be pledged for the payment of the principal or interest on the bonds. City of Poway Notes to Basic Financial Statements June 30, 2018 -64- Note 5 – Long Term Debt (Continued) B. Fiduciary Funds Long Term Debt (Continued) Tax Allocation Bonds (Continued) 2015B Tax Allocation Bonds (Continued) As of June 30, 2018, the balance of the 2015B Tax Allocation Bonds was $5,090,000. The annual requirements to amortize the bonds outstanding at June 30, 2018 are as follows: Year Ending June 30, Principal Interest Total 2019 5,090,000$ 73,637$ 5,163,637$ Total 5,090,000$ 73,637$ 5,163,637$ Notes Payable Notes payable at June 30, 2018, consisted of the following: Amount Amount Balance Balance Due Within Due in More June 30, 2017 Additions Reductions June 30, 2018 One Year Than One Year Mossy Nissan 3,193,031$ 224,154$ (78,621)$ 3,338,564$ 100,000$ 3,238,564$ Total Notes Payable 3,193,031$ 224,154$ (78,621)$ 3,338,564$ 100,000$ 3,238,564$ Classification The former Poway Redevelopment Agency (the “Agency”) entered into an Owner Participation Agreement with AZ Poway LLC (dba Mossy Nissan) that went into effect upon issuance of the certificate of completion for the Mossy Nissan automobile dealership on July 11, 2003. The Agency purchased an operating covenant for $1,900,000 that accrues interest at the rate of 7% per annum. Annual payment of the operating covenant is based on 50% of the net new sales in effect until (i) the purchase price and accrued interested is paid in full, or (ii) the fifteenth annual payment is made. The operating covenant is deemed paid in full after the fifteenth annual payment is made, and all remaining balances, including accrued interest, are forgiven. The outstanding balance in the amount of $2,598,406 was transferred to the Successor Agency on February 1, 2012 due to the dissolution of the Agency. The remaining balance on the notes was $3,338,564 at June 30, 2018. City of Poway Notes to Basic Financial Statements June 30, 2018 -65- Note 5 – Long Term Debt (Continued) C. Compensated Absences This liability represents the total unpaid vacation and compensatory time earned by employees of the City. Since this amount is paid to the employee upon termination of employment, there is no fixed payment schedule for earned but unpaid compensated absences. The compensated absences are predominately associated with the General Fund, Water Fund and Sewer Fund. At June 30, 2018, the outstanding balance of governmental activities and business-type activities compensated absences were $1,585,705 and $292,416, respectively. Note 6 – Pension Plan Summary The City currently has a total of two pension plans administered by CalPERS and one retirement enhancement plan administered by PARS. The pension plans consist of a miscellaneous agent plan and a cost-sharing safety plan (see Note 7 for a full description of the plans). The retirement enhancement plan serves as a supplemental defined benefit pension plan (see Note 8 for a full description of the plan). The summary of the pension related liability, deferred inflows of resources and deferred outflows of resources are as follows: Miscellaneous Safety PARS Total Deferred Outflows of Resources - Pension related 7,278,674$ 4,749,090$ 81,296$ 12,109,060$ Deferred Inflows of Resources - Pension related (411,833) (408,422) (151,721) (971,976) Pension Liability 32,661,161 15,401,317 1,698,223 49,760,701 Note 7 – Defined Benefit Pension Plans – CalPERS A. General Information about the Pension Plans Plan Descriptions The Plans consist of an agent multiple-employer defined benefit pension plan and a public agency cost-sharing multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS). City of Poway Notes to Basic Financial Statements June 30, 2018 -66- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) A. General Information about the Pension Plans (Continued) Plan Descriptions (Continued) Miscellaneous – Agent, Multiple-Employer Defined Benefit Pension Plan A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the plan’s June 30, 2016, Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (Plan) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of individual rate plans (benefit tiers) within a safety risk pool (police and fire) and a miscellaneous risk pool (all other). Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under GASB Statement No. 68. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City sponsors one safety plan in safety risk pools. Benefit provisions under the Plan are established by State statute and the City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS’ website, at www.calpers.ca.gov. Benefits Provided CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. City of Poway Notes to Basic Financial Statements June 30, 2018 -67- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) A. General Information about the Pension Plans (Continued) Benefits Provided, (Continued) The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board. The Plans’ provisions and benefits in effect at June 30, 2018, are summarized as follows: On or After Prior to January 1, 2011 Prior On or After Hire date January 1, 2011 to January 1, 2013 January 1, 2013 Benefit formula 2.0% @ 55 2.0% @ 60 2.0% @ 62 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 - 63 & Up 50 - 63 & Up 52-67 & Up Monthly benefits, as a % of eligible compensations 1.426% to 2.418% 1.092% to 2.418% 1.0% or 2.5% Required employee contribution rates 7.000% 7.000% 6.250% Required employer contribution rates 21.612% 21.612% 21.612% On or After Prior to January 1, 2011 Prior On or After Hire date January 1, 2011 to January 1, 2013 January 1, 2013 Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57 Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 & Up 50-55 & Up 50-57 & Up Monthly benefits, as a % of eligible compensations 3.0% 2.4% to 3.0% 2.0% to 2.7% Required employee contribution rates 9.000% 9.000% 11.500% Required employer contribution rates 18.615% 16.842% 11.990% Miscellaneous Plans Safety Plan City of Poway Notes to Basic Financial Statements June 30, 2018 -68- Note 7 – Defined Benefit Pension Plans – CalPERS A. General Information about the Pension Plans (Continued) Employees Covered At June 30, 2016 (valuation date), the following employees were covered by the benefit terms: Miscellaneous Plan Inactive employees or beneficiaries currently receiving benefits 224 Inactive employees entitled to but not yet receiving benefits 206 Active employees 171 Total 601 Contributions Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. Miscellaneous – Agent, Multiple-Employer Defined Benefit Pension Plan The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2018, were $2,452,302. Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan For public agency cost-sharing plans covered by either the Miscellaneous or Safety risk pools, the Plan’s actuarially determined rate is based on the estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2018, were $1,517,719. City of Poway Notes to Basic Financial Statements June 30, 2018 -69- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) A. General Information about the Pension Plans (Continued) Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan The actual employer payments of $1,340,317 made to CalPERS by the City during the measurement period ended June 30, 2017, differed from the City’s proportionate share of the employer’s contributions of $1,450,314 by $109,997, which is being amortized over the expected average remaining service lifetime in the Public Agency Cost-Sharing Multiple Employer Plan. B. Net Pension Liability The City’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2017, using an annual actuarial valuation as of June 30, 2016 rolled forward to June 30, 2017, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows. Actuarial Methods and Assumptions Used to Determine Total Pension Liability Valuation Date June 30, 2016 Measurement Date June 30, 2017 Actuarial Cost Method Entry Age Normal Asset Valuation Method: Market Value of Assets Actuarial Assumptions: Discount Rate 7.15% Inflation 2.75% Salary Increase (1) 3.3% - 14.2% Investment Rate of Return (2)7.65% Mortality Rate Table (3) Derived using CalPERS' membership data for all funds Post Retirement Benefit Increase Contract COLA up to 2.75% until purchasing power protection allowance floor on purchasing power applies, 2.75% thereafter (1) Annual increase vary by category, entry age, and duration of service (2) Net of pension plan investment and administrative expenses; includes inflation (3) The mortality table used was developed based on CalPERS' specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on the table, please refer to the 2014 experience study report. All other actuarial assumptions used in the June 30, 2016, valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under Forms and Publications. City of Poway Notes to Basic Financial Statements June 30, 2018 -70- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) B. Net Pension Liability (Continued) Change of Assumptions In fiscal year 2016-17, the financial reporting discount rate for the PERF C was lowered from 7.65 percent to 7.15 percent. Discount Rate The discount rate used to measure the total pension liability was 7.15 percent and reflects the long-term expected rate of return for the Plan net of investment expenses and without reduction for administrative expenses. To determine whether the municipal bond rate should be used in the calculation of the discount rate for public agency plans (including PERF C), the amortization and smoothing periods adopted by the Board in 2013 were used. For the Plan, the crossover test was performed for a miscellaneous agent plan and a safety agent plan selected as being more at risk of failing the crossover test and resulting in a discount rate that would be different from the long-term expected rate of return on pension investments. Based on the testing of the plans, the tests revealed the assets would not run out. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability for PERF C. The crossover test results can be found on CalPERS’ website, at www.calpers.ca.gov. The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses. The following table reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the CalPERS Board effective on July 1, 2015. City of Poway Notes to Basic Financial Statements June 30, 2018 -71- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) B. Net Pension Liability (Continued) Discount Rate (Continued) Asset Class New Strategic Allocation Real Return Years 1 - 101 Real Return Year 11+2 Global Equity 47.0% 4.90% 5.38% Global Fixed income 19.0% 0.80% 2.27% Inflation Sensitive 6.0% 0.60% 1.39% Private Equity 12.0% 6.60% 6.63% Real Estate 11.0% 2.80% 5.21% Infrastructure and Forestland 3.0% 3.90% 5.36% Liquidity 2.0% (0.40%) (0.90%) Total 100.0% 1 An expected inflation of 2.5% used for this period 2 An expected inflation of 3.0% used for this period Pension Plan Fiduciary Net Position Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CalPERS’ audited financial statements, which are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. The plan fiduciary net position disclosed in the GASB 68 accounting valuation report may differ from the plan assets reported in the funding actuarial valuation report due to several reasons. First, for the accounting valuations, CalPERS must keep items such as deficiency reserves, fiduciary self-insurance and Other Post-Employment Benefits (OPEB) expense included as assets. These amounts are excluded for rate setting purposes in the funding actuarial valuation. In addition, differences may result from early Comprehensive Annual Financial Report closing and final reconciled reserves. City of Poway Notes to Basic Financial Statements June 30, 2018 -72- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) C. Net Pension Liability and Proportionate Share of Net Pension Liability Miscellaneous Plan The following table shows the Plan’s change in net pension liability over the measurement period. Increase (Decrease) Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability/(Asset) (c) = (a) - (b) Balance at: 6/30/2016 (VD)100,303,363$ 71,519,775$ 28,783,588$ Changes Recognized for the Measurement Period: • Service Cost 1,785,822 - 1,785,822 • Interest on the Total Pension Liability 7,456,135 - 7,456,135 • Changes of Benefit Terms • Changes of Assumptions 6,085,867 - 6,085,867 • Differences between Expected and Actual Experience (471,057) - (471,057) • Net Plan to Plan Resource Movement - - - • Contributions - Employer - 2,311,817 (2,311,817) • Contributions - Employee - 806,615 (806,615) • Net Investment Income - 7,966,356 (7,966,356) • Benefit Payments, including Refunds of - - - Employee Contributions (5,058,914) (5,058,914) - • Administrative Expense - (105,594) 105,594 Net Changes during 2016-17 9,797,853 5,920,280 3,877,573 Balance at: 6/30/2017 (MD)110,101,216$ 77,440,055$ 32,661,161$ Valuation Date (VD), Measurement Date (MD). Safety Plan The following table shows the Plan’s proportionate share of the net pension liability over the measurement period. Plan Total Pension Liability (a) Plan Fiduciary Net Position (b) Plan Net Pension Liability (c) = (a) - (b) Balance at: 6/30/2016 (VD) 52,189,011$ 38,848,860$ 13,340,151$ Balance at: 6/30/2017 (MD) 57,427,165$ 42,025,848$ 15,401,317$ Net changes during 2016-17 5,238,154$ 3,176,988$ 2,061,166$ Increase (Decrease) Valuation Date (VD), Measurement Date (MD) City of Poway Notes to Basic Financial Statements June 30, 2018 -73- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) C. Net Pension Liability and Proportionate Share of Net Pension Liability (Continued) The City’s net pension liability for each of the cost sharing, multiple-employer Plans is measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2017, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2016, rolled forward to June 30, 2017, using standard update procedures. The City’s proportion of the net pension liability was determined by CalPERS using the output from the Actuarial Valuation System and the fiduciary net position, as provided in the CalPERS Public Agency Cost-Sharing Allocation Methodology Report, which is a publicly available report that can be obtained at CalPERS’ website under Forms and Publications, at www.calpers.ca.gov. The City’s proportionate share of the net pension liability for each Plan as of June 30, 2016, and 2017, was as follows: Safety Plans Proportionate Share of NPL - June 30, 2016 0.25757% Proportionate Share of NPL - June 30, 2017 0.25775% Change - Increase 0.00018% Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability of each Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage-point higher (8.15 percent) than the current rate: Discount Rate - 1% (6.15%) Current Discount Rate (7.15%) Discount Rate + 1% (8.15%) Miscellaneous Plans' Net Pension Liability 47,271,229$ 32,661,161$ 20,566,230$ Safety Plans' Net Pension Liability 23,436,358$ 15,401,317$ 8,833,073$ Subsequent Events There were no subsequent events that would materially affect the results presented in this disclosure. Recognition of Gains and Losses Under GASB 68, gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. City of Poway Notes to Basic Financial Statements June 30, 2018 -74- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) C. Net Pension Liability and Proportionate Share of Net Pension Liability (Continued) Recognition of Gains and Losses (Continued) The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss: Difference between projected and actual earnings 5 year straight-line amortization All other amounts Straight-line amortization over the average expected remaining service lives of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period For the agent, multiple employer plan, the expected average remaining service lifetime (EARSL) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). For the cost sharing, multiple employer plan, the EARSL is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the Public Agency Cost Sharing Multiple-Employer Plan (PERF C). The EARSL for the miscellaneous agent plan for the June 30, 2017, measurement date is 2.7 years, which was obtained by dividing the total service years of 1,630 (the sum of remaining service lifetimes of the active employees) by 601 (the total number of participants: active, inactive, and retired). Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund. The EARSL for the Plan for the 2016-17 measurement period is 3.8 years, which was obtained by dividing the total service years of 490,088 (the sum of remaining service lifetimes of the active employees) by 130,595 (the total number of participants: active, inactive, and retired). Note that inactive employees and retirees have remaining service lifetimes equal to 0. Also note that total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund. City of Poway Notes to Basic Financial Statements June 30, 2018 -75- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions Miscellaneous Plan As of the start of the measurement period (July 1, 2016), the net pension liability is $28,783,588. For the measurement period ending June 30, 2017, (the measurement date), the City incurred a pension expense of $4,974,832 for the Plan. A complete breakdown of the pension expense is as follows: Description Amount Service Cost 1,785,822$ Interest on the Total Pension Liability 7,456,135 Changes of Benefit Terms - Recognized Changes of Assumptions 1,815,348 Recognized Differences between Expected and Actual Experience (292,626) Net Plan to Plan Resource Movement - Employee Contributions (806,615) Projected Earnings on Pension Plan Investments (5,027,236) Recognized differences between Expected and Actual Earnings on Plan Investments (61,590) Administrative Expenses 105,594 Total Pension Expense 4,974,832$ Safety Plan As of the start of the measurement period (July 1, 2016), the net pension liability for the safety plan is $13,340,151. For the measurement period ending June 30, 2017 (the measurement date), the City incurred a pension expense of $2,283,241 for the safety plan.  As of June 30, 2018, the City has deferred outflows and deferred inflows of resources related to pensions as follows: Deferred Outflows of Resources Deferred Inflows of Resources Deferred Outflows of Resources Deferred Inflows of Resources Differences between Expected and Actual Experience -$ (411,833)$ 167,710$ (43,727)$ Changes of Assumptions 3,831,842 - 2,432,218 (186,606) Net Difference between Projected and Actual Earnings on Pension Plan Investments 994,530 - 530,319 - Change in Employer's Proportion - - 101,124 - Difference in Actual vs Projected Contributions - - - (178,089) Pension Contributions Subsequent to Measurement Date 2,452,302 - 1,517,719 - 7,278,674$ (411,833)$ 4,749,090$ (408,422)$ Miscellaneous Safety City of Poway Notes to Basic Financial Statements June 30, 2018 -76- Note 7 – Defined Benefit Pension Plans – CalPERS (Continued) D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (Continued) These amounts above are net of outflows and inflow recognized in the 2016-17 measurement period expense. $2,452,302 and $1,517,719 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Measurement Period Ended June 30, Miscellaneous Safety 2018 1,902,725$ -$ 2019 2,663,710 711,932 2020 435,927 1,486,243 2021 (587,823) 935,082 2022 - (310,308) Thereafter Deferred Outflows/(Inflows) of Resources, Net E. Payable to the Pension Plan At June 30, 2018, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2018. Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan A. General Information about the Pension Plan Plan Description The Plan is a single-employer, agent, supplemental employee defined benefit pension plan (the plan II) administered by the Public Agency Retirement Services (PARS) Phase II Systems. A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not account purposes), and membership information are listed in the July 1, 2017, Annual Actuarial Valuation Report. Details of the benefits provided can be obtained from the actuarial valuation reports. PARS issues a publicly available financial report that includes financial statement and required supplementary information for the plan II. That report may be obtained by writing to PARS, 3961 MacArthur Boulevard, Suite 200, Newport Beach, California, 92660. City of Poway Notes to Basic Financial Statements June 30, 2018 -77- Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan (Continued) A. General Information about the Pension Plan (Continued) Benefits provided The Retirement Enhancement Plan provides a benefit equal to the PARS "2.7% at 55" plan factor (formula is a static 2.7% at age 55 and older), less the CalPERS "2.0% at 55" plan factor times final compensation for all years of benefit service. The Plan provides a pre-retirement death benefit for the eligible surviving spouse of any active employee who dies after attaining the minimum age requirement and completing the required years of service for the supplemental retirement benefit. The benefit will be equal to the participant’s retirement benefit, actuarially reduced as if the participant had retired and elected a 100% joint-and-survivor annuity and paid as an annuity over the lifetime of the surviving spouse. There is no death benefit payable if there is no surviving spouse. City Councilmembers who do not meet eligibility requirements at termination of employment, but will meet the eligibility requirements at a later date, will be eligible for a deferred retirement benefit upon meeting all the requirements including retirement under CalPERS. The Plan is closed to all employees hired on or before January 9, 2012 ("soft-freeze"). The Plan’s provisions and benefits in effect at June 30, 2018 (measurement date), are summarized as follows: Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates 13.54% none 21.42% 55 Supplemental On or before January 9, 2012 2.7% @ 55 less CalPERS 2.0% @ 55 from date of hire life only annuity Contributions Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through PARS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. For the measurement period ended June 30, 2017 (the measurement date), the employer’s contribution rate is 21.42 percent of annual payroll. Employer contribution rates may change if plan contracts are amended. Employer Contributions for the measurement period ended June 30, 2018, are $1,560,917. City of Poway Notes to Basic Financial Statements June 30, 2018 -78- Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan (Continued) B. Net Pension Liability The City’s net pension liability for the Retirement Enhancement Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2018, using an annual actuarial valuation as of June 30, 2018. A summary of principal assumptions and methods used to determine the net pension liability is as follows. Actuarial Methods and Assumptions Used to Determine Total Pension Liability Supplemental Valuation Date June 30, 2017 Measurement Date June 30, 2018 Actuarial Cost Method Entry Age Normal Asset Valuation Method None Actuarial Assumptions: Discount Rate 7.00% Inflation 2.75% Salary Increases (1)3.5% - 9.90% Investment Rate of Return 7.00% Cost of Living Adjustment 2.00% Mortality Rate Table (1) Includes inflation. Graded based on years of service, 3.50% after 30 years of service. Pre-retirement: CalPERS Miscellaneous Non-Industrial Rates. Post-retirement: CalPERS 1997-2011 Healthy Retiree Tables (sex distinct) projected using Scale AA and base year of 2008. Discount rate GASB 67 and 68 generally require that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan's Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 and 68 will often require that the actuary perform complex projections of future benefit payments and asset values. City of Poway Notes to Basic Financial Statements June 30, 2018 -79- Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan (Continued) B. Net Pension Liability (Continued) Discount rate (continued) GASB 67 and 68 (paragraph 29) do allow for alternative evaluations of projected solvency, if such evaluation can reliably be made. GASB does not contemplate a specific method for making an alternative evaluation of sufficiency; it is left to professional judgment. The following circumstances justify an alternative evaluation of sufficiency for the City of Poway:  The City of Poway has at least a 5-year history of paying at least 100% of the Actuarially Determined Contribution (previously termed the Annual Required Contribution).  The Actuarially Determined Contribution is based on a closed amortization period, which means that payment of the Actuarially Determined Contribution each year will bring the plan to a 100% funded position by the end of the amortization period.  GASB 67 and 68 specify that the projections regarding future solvency assume that plan assets earn the assumed rate of return and there are no future changes in the plan provisions or actuarial methods and assumptions, which means that the projections would not reflect any adverse future experience which might impact the plan's funded position. Based on these circumstances, the City believes that the detailed depletion date projections outlined in GASB 67 and 68 will show that the Fiduciary Net Position is always projected to be sufficient to cover benefit payments and administrative expenses. June 30, 2017 June 30, 2018 Discount rate 7.00% 7.00% Long-term expected rate of return, net of investment expense 7.00% 7.00% Municipal bond rate N/A N/A The plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculating the total pension liability is equal to the long-term expected rate of return. Pension Plan Fiduciary Net Position Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in the City’s GASB 68 Employer Accounting Information report. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of each plan. Investments are reported at fair value. City of Poway Notes to Basic Financial Statements June 30, 2018 -80- Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan (Continued) C. Changes in the Net Pension Liability The following table shows the changes in net pension liability recognized over the measurement period. Increase (Decrease) Total Pension Liability (a) Plan Fiduciary Net Position (b) Net Pension Liability (c) = (a) - (b) Balances as of June 30, 2017 17,165,512$ 14,340,771$ 2,824,741$ Changes for the year: • Service Cost 228,468 - 228,468 • Interest on the Total Pension Liability 1,191,080 - 1,191,080 • Effect of Plan Changes - - - • Effect of Economic Demographic Gains or Losses 52,208 - 52,208 • Effect of Assumptions Changes or Inputs - - - • Benefit Payments (876,349) (876,349) - • Employer Contributions - 1,560,917 (1,560,917) • Member Contributions - - - • Net Investment Income - 1,062,788 (1,062,788) • Administrative Expenses - (25,431) 25,431 Net Changes during 2017-18 595,407 1,721,925 (1,126,518) Balance as of June 30, 2018 17,760,919$ 16,062,696$ 1,698,223$ Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City of Poway Retirement Enhancement Plan, calculated using the discount rate of 7%, as well as what Plan's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (6.00%) or 1 percentage point higher (8.00%) than the current rate. Discount Rate - 1% (6.00%) Current Discount Rate (7.00%) Discount Rate + 1% (8.00%) Net Pension Liability 3,815,007$ 1,698,223$ (202,500)$ City of Poway Notes to Basic Financial Statements June 30, 2018 -81- Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan (Continued) C. Changes in the Net Pension Liability (Continued) Subsequent Events There were no subsequent events that would materially affect the results presented in this disclosure. Recognition of Gains and Losses Investment gains/losses are recognized in pension expense over a period of five years; economic/demographic gains/losses and assumption changes or inputs are recognized over the average remaining service life for all active and inactive members. D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions As of the start of the measurement period (July 1, 2017), the net pension liability is $2,824,741. For the measurement period ending June 30, 2017 (the measurement date), the City incurred a pension expense of $505,960 for the Plan. As of June 30, 2018, the City has deferred outflows and deferred inflows of resources related to pensions as follows: Deferred Outflows of Resources Deferred Inflows of Resources Differences between Expected and Actual Experience 59,950$ (151,721)$ Changes of Assumptions - - Net Difference between Projected and Actual Earnings on Pension Plan 21,346 - Pension Contributions Subsequent to Measurement Date - - Total 81,296$ (151,721)$ City of Poway Notes to Basic Financial Statements June 30, 2018 -82- Note 8 – Defined Benefit Pension Plan – Retirement Enhancement Plan (Continued) D. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions (Continued) Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Measurement Period Ended Deferred Outflows/(Inflows) of Resources, Net June 30, PARS 2019 87,514$ 2020 5,761 2021 (137,969) 2022 (25,731) 2023 - Thereafter - E. Payable to the Pension Plan At June 30, 2018, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2018. Note 9 – City and Housing Authority Rehabilitation Loan Programs Housing Rehabilitation Loan Program There are two types of housing rehabilitation loans. Forgivable rehabilitation loans are forgiven at a rate of 10% per year given all loan covenants are met. Non-forgivable loans are due upon the sale, transfer or foreclosure of the property. Due to the contingent repayment schedule of these loans, an expenditure is recorded when the loan is made and no receivable is included in the accompanying basic financial statements. The balance of the forgivable rehabilitation loans at June 30, 2018 is $0, and the balance of the non-forgivable rehabilitation loans at June 30, 2018 is $102,128. BEGIN Program Loans This program is sponsored by a State of California grant to aid first-time buyers in the purchase of affordable housing in the City of Poway. These loans have a thirty year term with a one percent interest rate. If the property is transferred or sold within five years the loan must be repaid. After five years, if the property is transferred or sold the loan must be assumed by the buyer for the remaining term. At the end of the thirty years the loan must be repaid with principal and interest. Per the grant terms, loan repayments must be re-loaned. Due to the contingent nature of the repayment schedule of these loans, an expenditure is recorded when the loan is made and no receivable is included in the accompanying basic financial statements. The balance of the BEGIN loans, including accrued interest, at June 30, 2018 is $1,660,509. City of Poway Notes to Basic Financial Statements June 30, 2018 -83- Note 9 – City and Housing Authority Rehabilitation Loan Programs (Continued) Affordable Housing Loans These loans are made to aid in the purchase of affordable housing in the City of Poway. They are for a 45 year term with no interest and if there is a sale, transfer or foreclosure before the end of the term the loan must be assumed by an income qualified buyer and the 45 year term starts over. Due to the contingent nature of the repayment schedule of these loans, an expenditure is recorded when the loan is made and no receivable is included in the accompanying basic financial statements. The balance of these Affordable Housing loans at June 30, 2018 is $3,907,632. Development Loans The City, through the Housing Authority, has development loans primarily for affordable rental housing projects and for one group home for the developmentally disabled. The affordable rental housing loans have 55 year terms with three percent simple interest. Loan payments are made from residual receipts and generally do not cover the annual accrued interest. Therefore, due to the contingent nature of the repayment schedule of these loans, an expenditure is recorded when the loan is made and no receivable is included in the accompanying basic financial statements. The balance of the development loans, including accrued interest, at June 30, 2018 is $36,698,434. Note 10 – Risk Management The City is a member of the California Joint Powers Insurance Authority (“Authority”). The Authority is composed of 117 California public entities and is organized under a joint powers agreement pursuant to California Government Code Section 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 9-member Executive Committee. The audited Financial Statements can be obtained from the City of Poway. No settlements have exceeded the City’s insurance coverage for each of the past three years. City of Poway Notes to Basic Financial Statements June 30, 2018 -84- Note 10 – Risk Management (Continued) Each member pays an annual contribution at the beginning of the coverage period. A retrospective adjustment is then conducted annually thereafter, for coverage years 2012-13 and prior. The total funding requirement for self-insurance programs is based on an actuarial analysis. Costs are allocated to individual agencies based on payroll and claims history, relative to other members of the risk sharing pool. Additional information regarding the cost allocation methodology is provided below. A. General Liabilities In the liability program claims are pooled separately between police and non-police exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $30,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $30,000 to $750,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. (4) Incurred costs from $750,000 to $50 million, are distributed based on the outcome of cost allocation within the first and second loss layers. The overall coverage limit for each member, including all layers of coverage, is $50 million per occurrence. Costs of covered claims for subsidence losses have a sub-limit of $40 million per occurrence. B. Workers’ Compensation In the workers’ compensation program claims are pooled separately between public safety (police and fire) and non-public safety exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $50,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. (4) Incurred costs in excess of $100,000 to statutory limits are distributed based on the outcome of cost allocation within the first and second loss layers. City of Poway Notes to Basic Financial Statements June 30, 2018 -85- Note 10 – Risk Management (Continued) B. Workers’ Compensation (continued) For 2017-18 the Authority’s pooled retention is $2 million per occurrence, with reissuance to statutory limits under California Workers’ Compensation Law. Employer’s liability losses are pooled among members to $2 million. Coverage from $2 million to $5 million is purchased as part of a reissuance policy, and Employer’s Liability losses form $5 million to $10 million are pooled among members. C. Pollution Legal Liability Insurance The City of Poway participates in the pollution legal liability insurance program (formerly called environmental 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 Poway. Coverage is on a claims-made basis. There is a $50,000 deductible. The Authority has a limit of $50 million for the 3-year period from July 1, 2017 through July 1, 2020. Each member of the Authority has a $10 million sub-limit during the 3-year term of the policy. D. Property Insurance The City of Poway participates in the all-risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. City of Poway property is currently insured according to a schedule of covered property submitted by the City of Poway to the Authority. City of Poway property currently has all- risk property insurance protection in the amount of $170,388,689. There is a $10,000 deductible per occurrence except for non-emergency vehicle insurance which has a $2,500 deductible. Premiums for the coverage are paid annually and are not subject to retrospective adjustments. E. Crime Insurance The City purchases crime insurance coverage in the amount of $1,000,000 with a $2,500 deductible. The fidelity coverage is provided through the Authority. Premiums are paid annually and are not subject to retroactive adjustments. At June 30, 2018, no liability was recorded in the accompanying basic financial statements. City of Poway Notes to Basic Financial Statements June 30, 2018 -86- Note 11 – Joint Venture The City is a member of the Regional Solid Waste Association Joint Powers Authority (“JPA”). The JPA was formed on September 1, 1997 by the cities of Del Mar, Encinitas, National City, Poway, Solana Beach and Vista to provide stable, long-term, cost effective options for all aspects of regional solid waste disposal. Each member provides a proportionate percentage of revenue to cover all costs related to the obligations and liabilities of the JPA when they become due and payable. In the event of dissolution of the JPA, any money or assets in possession of the Regional Solid Waste Association after the payment of all liabilities, costs, expenses and charges shall be distributed to the member agencies in proportion to their contributions determined as of the time of termination. The activities of the JPA are supervised by a board consisting of one elected member of the legislative body of each of the member agencies. The City of Escondido joined the JPA as a special contract party for the purpose of working on Regional Household Hazardous Waste issues. Summarized unaudited information of the JPA for the fiscal year ended June 30, 2018 is as follows: Total Assets 479$ Total Liabilities 7$ Total Equity 472$ Total Revenues 315$ Total Expenses 329$ Net Increase in Fund Equity (14)$ Amounts in Thousands City’s share of the JPA’s assets and liabilities are not available. Separate financial statements of the JPA are available at the City of Poway. Note 12 – Deficit Net Position At June 30, 2018, the following funds had deficit net position: Fund Type Fund Deficit Special Revenue Fund 800 MHz Communication System (15,860)$ Fiduciary Fund Successor Agency to the Poway Redevelopment Agency (151,924,846)$ City of Poway Notes to Basic Financial Statements June 30, 2018 -87- Note 12 – Deficit Net Position (Continued) Successor Agency to the Poway Redevelopment Agency - The Successor Agency to the Poway Redevelopment Agency Private Purpose Trust fund had an accumulated deficit of $(151,924,844), which resulted from the issuance of tax allocation bonds that were intended to be repaid by the former Poway Redevelopment Agency’s future property tax increment revenue. Now that the Redevelopment Agency has been dissolved, the Successor Agency expects to receive sufficient Redevelopment Property Tax Trust Fund distributions through the remaining life of the bonds to fully fund their repayment. The 800 MHz Special Revenue fund had a deficit balance of $(15,860) which resulted from an inter-fund loan from the Internal Service fund which was used for its share of payments to the County of San Diego for system infrastructure improvements. The collection of assessments in future years will be sufficient to eliminate the deficit. Note 13 – Property Taxes Property taxes are levied on March 1 and are payable in two installments: November 1 and February 1 of each year. Property taxes become delinquent on December 10 and April 10, for the first and second installments, respectively. The lien date is January 1. The County of San Diego, California (the “County”) bills and collects property taxes and remits them to the City according to a payment schedule established by the County. The County is permitted by State law to levy taxes at 1% of full market value (at time of purchase) and can increase the property tax rate no more than 2% per year. The City receives a share of this basic tax levy proportionate to what it received during the years 1980-1981. Property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided the taxes are received within 60 days after the end of the fiscal year. Property taxes received after this date are not considered available as a resource that can be used to finance the current year operations of the City and, therefore, are not recorded as revenue until collected. No allowance for doubtful accounts was considered necessary. Note 14 – Contingent Liabilities and Commitments A. Litigation The City is a defendant in certain legal actions arising in the normal course of operations. The accompanying basic financial statements reflect a liability for the probable amounts of loss associated with these claims. City of Poway Notes to Basic Financial Statements June 30, 2018 -88- Note 14 – Contingent Liabilities and Commitments (Continued) B. Grants The City participates in a number of programs that are fully or partially funded by grants received from federal, state, and county governments. Expenditures financed by grants are subject to audit by the appropriate grantor agency. If expenditures are disallowed due to non- compliance with grant program regulations, the City may be required to reimburse the grantor agency. As of June 30, 2018, significant amounts of grant expenditures have not been audited by the grantor agencies, but the City believes that disallowed expenditures, if any, based on subsequent audits will not have a material effect on any of the individual governmental funds or the City’s overall financial position. C. Construction Various construction projects were in progress at June 30, 2018 with an estimated cost to complete of approximately $14,750,336 in all fund types. D. Significant Encumbrances Encumbrances represent purchase orders, contracts or other commitments for the expenditure of monies. However, because these commitments will be honored in subsequent years, they do not constitute an expenditure or liability for financial statement purposes. At fiscal year-end, the City had the following significant encumbrances. Special General Enterprise Revenue Purpose Fund Funds Funds Total Water Projects -$ 819,876$ -$ 819,876$ Sewer Projects - 78,111 - 78,111 Drainage Projects 88,000 - - 88,000 Street Projects 2,365,929 482,808 - 2,848,737 Computer Equipment and Software 169,905 - - 169,905 Vehicles 1,339,948 - - 1,339,948 Facilities 2,308,594 - - 2,308,594 Professional Services 107,221 - 3,401 110,622 Total Outstanding Encumbrances 6,379,597$ 1,380,795$ 3,401$ 7,763,793$ E. Other Matters As of June 30, 2018, in the opinion of City management, there were no additional outstanding matters that would have a significant effect on the financial position of the funds of the City. City of Poway Notes to Basic Financial Statements June 30, 2018 -89- Note 15 – Commitments Under Developer Agreements On April 1, 1999, the former Poway Redevelopment Agency (the “Agency”) entered into an Owner Participation Agreement with a developer with regard to certain parcels of real estate located in the Project Area within the boundaries of Community Facilities District (“CFD”) No. 88-1. In order to provide for the funding of certain public improvements associated with the project, the Agency will pay the developer on each annual payment date, an amount equal to gross property tax increment allocated to and received by the Agency with respect to the site, less the housing set-aside and the County and City administrative charges for the previous fiscal year ending June 30 preceding the annual payment date. City of Poway Notes to Basic Financial Statements June 30, 2018 -90- Note 16 – Fund Balances Classification The City’s fund balances at June 30, 2018 are tabulated below by fund types. Total Housing Non-Major General Authority Governmental Fund Fund Funds Total Nonspendable: Prepaid Items 121,433$ -$ -$ 121,433$ Inventories 140,207 - - 140,207 Land held for resale 5,367,000 - - 5,367,000 Notes Receivable 10,010,396 - - 10,010,396 Total nonspendable 15,639,036 - - 15,639,036 Restricted: Debt Service Payments - - 535,900 535,900 Drainage - - 2,930,941 2,930,941 Fire Protection - - 125,248 125,248 Grants - - 294,732 294,732 Housing - 2,771,447 148,847 2,920,294 Maintenance Districts - - 7,829,104 7,829,104 Other Purposes - - 2,622,300 2,622,300 Parks and Recreation - - 590,313 590,313 Streets - - 1,915,188 1,915,188 Transportation - - 877,455 877,455 Total restricted - 2,771,447 17,870,028 20,641,475 Committed: Economic Volatility 6,440,524 - - 6,440,524 Extreme Events 12,881,059 - - 12,881,059 Total committed 19,321,583 - - 19,321,583 Assigned: Capital Projects 11,404,089 - - 11,404,089 Contractual Services 197,182 - - 197,182 Equipment/ Furniture 8,007 - - 8,007 Library 255,775 - - 255,775 Parks and Recreation 280,571 - - 280,571 Public Education & Govt Programming 588,452 - - 588,452 Public Safety 104,648 - - 104,648 Repair and Maintenance 3,775,268 - - 3,775,268 Total assigned 16,613,992 - - 16,613,992 Unassigned 14,063,706 - (15,860) 14,047,846 Total unassigned 14,063,706 - (15,860) 14,047,846 Total fund balances 65,638,317$ 2,771,447$ 17,854,168$ 86,263,932$ Major Funds City of Poway Notes to Basic Financial Statements June 30, 2018 -91- Note 17 – Special Item (Transfer of Capital Assets) The Successor Agency transferred capital asset to the City in accordance with the approved Long Range Property Management Plan. The following capital assets were transferred from the Successor Agency to the City: Related to transfer of capital assets Land (8,362,684)$ Buildings (15,357,977) Infrastructure (17,739,258) A/D- Building 12,373,672 A/D- Infrastructure 2,881,945 Total special item (26,204,302)$ Note 18 – Prior Period Restatement During the fiscal year ended June 30, 2018, the City discovered that Land improvements from the prior year sale were still being reported on the City’s financial statements. Therefore, an adjustment to beginning fund balance and net position has been recorded to account for these variances. Beginning Net Position, as previously reported Restatement Beginning Net Position, as restated Fiduciary Fund Successor Agency to the Poway Redevelopment Agency (117,419,322)$ (1,245,737)$ (118,665,059)$     This page intentionally left blank.   -92- City of Poway Comprehensive Annual Financial Report For the year ended June 30, 2018 Required Supplementary Information (Unaudited) City of Poway Required Supplementary Information For the Year Ended June 30, 2018 -93- 1) Budgetary Information The City prepares its budgets on the basis of estimated expenditures and, accordingly, the budget amounts included in the accompanying financial statements are presented on a basis consistent with generally accepted accounting principles. The City Manager presents a proposed budget to the City Council appointed Budget Review Committee (BRC) in May. The BRC holds public budget meetings during May and early June. The final budget is adopted by the City Council during late June. No budget expenditures can be disbursed without proper appropriations. Once the budget is adopted, no additional fund appropriations can be authorized without the Council’s approval. The level of budget control (the level on which expenditures may not legally exceed appropriations) is the individual fund level. The City Manager can authorize budget transfers between departments without additional appropriations. The City holds a mid-year budget review meeting. During the meeting, all the budget expenditures are reviewed and projections for the whole year are made. Therefore, any necessary changes are submitted for approval by the City Council with a resolution. Annual appropriated budgets are adopted for the general, special revenue (except for the Performing Arts Center Trust), the permanent funds, and one debt service fund. Budgets are adopted on a basis consistent with generally accepted accounting principles. Budgeted amounts are as originally adopted and as further amended by the City Council. Capital improvement projects budgets are adopted upon project approval and remaining project balances are carried forward to subsequent fiscal years until the project’s completion. Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders and contracts) outstanding at year-end are reported as reservations of fund balances and do not constitute expenditures or liabilities. The commitments will be reappropriated and honored in the subsequent year. The following are the budget comparison schedules for the General Fund and major special revenue funds. 2) Expenditure in Excess of Appropriations Final Governmental Funds - Non-Major Fund Budget Expenditures Excess Special Revenue Funds: Housing Authority 32,450$ 34,861$ (2,411)$ Maintenance Districts Fund - 185,431 (185,431) City of Poway Required Supplementary Information For the Year Ended June 30, 2018 -94- Budgetary Comparison Schedule, General Fund Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 35,828,350$ 36,238,350$ 38,620,527$ 2,382,177$ Licenses and permits 693,050 693,050 698,848 5,798 Intergovernmental 371,930 658,520 783,241 124,721 Charges for services 2,458,410 2,506,940 2,623,079 116,139 Fines and forfeitures 130,000 130,000 150,968 20,968 Use of money and property 863,920 863,920 881,797 17,877 Developer fees 3,932,440 4,133,750 4,458,832 325,082 Other revenues 741,230 1,561,230 2,875,390 1,314,160 Total revenues 45,019,330 46,785,760 51,092,682 4,306,922 EXPENDITURES Current: General government 7,133,486 7,110,015 4,348,184 2,761,831 Public safety 23,555,220 24,237,957 24,203,074 34,883 Public works 4,163,335 4,241,175 5,443,423 (1,202,248) Development services 5,289,871 5,611,291 4,468,523 1,142,768 Community services 6,059,515 6,225,247 5,837,896 387,351 Capital outlay 21,024,284 30,742,925 7,292,310 23,450,615 Total expenditures 67,225,711 78,168,610 51,593,410 26,575,200 Excess (deficiency) of revenues over (under) expenditures (22,206,381) (31,382,850) (500,728) 30,882,122 OTHER FINANCING SOURCES (USES) Transfers in 4,404,529 4,978,891 1,679,384 (3,299,507) Transfers out (2,326,720) (2,836,852) (1,105,779) 1,731,073 Total other financing sources (uses) 2,077,809 2,142,039 573,605 (1,568,434) Net change in fund balance (20,128,572)$ (29,240,811)$ 72,877 29,313,688$ Fund balance, beginning of year 65,565,440 Fund balance, end of year 65,638,317$ Budget Amounts City of Poway Required Supplementary Information For the Year Ended June 30, 2018 -95- Budgetary Information (Continued) Budgetary Comparison Schedule, Housing Authority Fund Actual Variance with Original Final Amounts Final Budget REVENUES Charges for services 49,120$ 49,120$ 59,839$ 10,719$ Use of money and property 22,000 22,000 40,295 18,295 Other revenues 40,000 40,000 59,667 19,667 Total revenues 111,120 111,120 159,801 48,681 EXPENDITURES Current: General government 10,400 10,400 7,988 2,412 Development services 10,000 32,450 34,861 (2,411) Capital outlay 554,319 1,645,819 831,705 814,114 Total expenditures 574,719 1,688,669 874,554 814,115 Excess (deficiency) of revenues over (under) expenditures (463,599) (1,577,549) (714,753) (765,434) OTHER FINANCING SOURCES (USES) Transfers in - 820,000 820,000 - Total other financing sources (uses) - 820,000 820,000 - Net change in fund balance (463,599)$ (757,549)$ 105,247 862,796$ Fund balance, beginning of year 2,666,200 Fund balance, end of year 2,771,447$ Budget Amounts City of Poway Required Supplementary Information For the Year Ended June 30, 2018 -96- Schedule of Changes in Net Pension Liability and Related Ratios Last 10 Years* Miscellaneous Plan Measurement Measurement Measurement Measurement Period Period Period Period 6/30/2014 6/30/2015 6/30/2016 6/30/2017 TOTAL PENSION LIABILITY Service Cost 1,515,714$ 1,463,621$ 1,552,133$ 1,785,822$ Interest 6,646,592 6,973,473 7,241,818 7,456,135 Changes of Benefit Terms - - - - Difference Between Expected and Actual Experience - 179,245 (444,504) (471,057) Changes of Assumptions - (1,692,043) - 6,085,867 Benefit Payments, Including Refunds of Employee Contributions (3,875,819) (4,300,520) (4,757,620) (5,058,914) Net Change in Total Pension Liability 4,286,487 2,623,776 3,591,827 9,797,853 Total Pension Liability - Beginning 89,801,273 94,087,760 96,711,536 100,303,363 Total Pension Liability - Ending (a) 94,087,760$ 96,711,536$ 100,303,363$ 110,101,216$ PLAN FIDUCIARY NET POSITION Contributions - Employer 1,590,147$ 1,651,614$ 1,961,662$ 2,311,817$ Contributions - Employee 716,942 773,660 778,160 806,615 Net Investment Income 11,075,599 1,674,500 387,630 7,966,356 Benefit Payments, Including Refunds of Employee Contributions (3,875,819) (4,300,520) (4,757,620) (5,058,914) Administrative Expenses - (82,323) (44,608) (105,594) Net Change in Fiduciary Net Position 9,506,869 (283,069) (1,674,776) 5,920,280 Plan Fiduciary Net Position - Beginning 63,970,749 73,477,618 73,194,551 71,519,775 Plan Fiduciary Net Position - Ending (b) 73,477,618$ 73,194,549$ 71,519,775$ 77,440,055$ Plan Net Position Liability - Ending (a) - (b) 20,610,142$ 23,516,987$ 28,783,588$ 32,661,161$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 78.09% 75.68% 71.30% 70.34% Covered Payroll 10,373,075$ 10,272,463$ 10,938,986$ 11,566,248$ Plan Net Pension Liability as a Percentage of Covered-Employee Payroll 198.69% 228.93% 263.13% 282.38% Notes to Schedule: * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only four years are presented. Changes in Benefit Terms: The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30, 2016 valuation date. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes). Changes in Assumptions: In 2017, the accounting discount rate reduced from 7.65 to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflected an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate. City of Poway Required Supplementary Information For the Year Ended June 30, 2018 (Continued) -97- Schedule of Plan Contributions Last 10 Years* Miscellaneous Plan Contribution in Contributions as Relation to the a Percentage of Contractually Contractually Contribution Covered- Determined Determined Deficiency Employer's Employee Contributions Contributions (Excess) Covered Payroll Payroll 2014-15 1,651,614$ (1,651,614)$ -$ 10,272,463$ 16.08% 2015-16 1,961,662$ (1,961,662)$ -$ 10,938,986$ 17.93% 2016-17 2,311,817$ (2,311,817)$ -$ 11,566,248$ 19.99% 2017-18 2,452,302$ (2,452,302)$ -$ 11,662,050$ 21.03% Notes to Schedule: Actuarial Cost Method Entry Age Normal Amortization Method/Period For details, see June 30, 2014, Funding Valuation Report. Asset Valuation Method Inflation 2.75% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return Retirement Age Mortality The probabilities of mortality are based on the 2014 CalPERS Experience Study for the period from 1997 to 2007. Pre-retirement and Post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries. * Measurement period 2013-14 (fiscal year 2014-15) was the first year of implementation, therefore, only four years are presented. The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2016-17 were derived from the June 30, 2014, Funding Valuation Report. Fiscal Year Actuarial Value of Assets. For details, see June 30, 2014, Funding Valuation Report. 7.50% Net of Pension Plan Investment and Administrative Expenses; includes Inflation. The probabilities of Retirement are based on the 2014 CalPERS Experience Study for the period from 1997 to 2007. City of Poway Required Supplementary Information For the Year Ended June 30, 2018 (Continued) -98- Schedule of the City's Proportionate Share of the Plan's Net Pension Liability and Related Ratios as of the Measurement Date Last 10 Years* Safety Plan Employer's Proportionate Share of the Collective Net Pension's Plans Employer's Employer's Pension Liability Fiduciary Net Proportion of Proportion as a Percentage Position as a the Collective Share of the of the Employer's Percentage of Net Pension Collective Net Employer's Covered- the Total Liability1 Pension Liability Covered Payroll Employee Payroll Pension Liability 6/30/2014 0.14119% 8,785,355$ 4,733,734$ 185.59% 81.42% 6/30/2015 0.25032% 10,314,344$ 4,875,746$ 211.54% 79.03% 6/30/2016 0.25757% 13,340,151$ 4,765,209$ 279.95% 74.44% 6/30/2017 0.25775% 15,401,317$ 4,813,604$ 319.95% 74.14% * Measurement date June 30, 2014 was the first year of implementation, therefore, only four years are presented. Measurement Date 1 Proportion of the collective net pension liability represents the plan's proportion of PERF C, which includes both the Miscellaneous and Safety Risk Pools excluding the 1959 Survivors Risk Pool. City of Poway Required Supplementary Information For the Year Ended June 30, 2018 (Continued) -99- Schedule of Plan Contributions Last 10 Years* Safety Plan Contribution in Contributions as Relation to the a Percentage of Contractually Contractually Contribution Covered- Determined Determined Deficiency Employer's Employee Contributions Contributions (Excess) Covered Payroll Payroll 2014-15 1,159,123$ (1,159,123)$ -$ 4,875,746$ 23.77% 2015-16 1,322,635$ (1,172,369)$ 150,266$ 4,765,209$ 24.60% 2016-17 1,340,317$ (1,340,317)$ -$ 4,813,604$ 27.84% 2017-18 1,517,719$ (1,517,719)$ -$ 4,948,089$ 30.67% Notes to Schedule: Change in Benefit Terms: None * Measurement period 2013-14 (fiscal year 2014-15) was the first year of implementation, therefore, only four years are presented. Change in Assumptions: In 2017, the accounting discount rate was reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan plan administrative expense). In 2014, amounts reported were based on the 7.5 discount rate. Fiscal Year City of Poway Required Supplementary Information For the Year Ended June 30, 2018 (Continued) -100- Schedule of Changes in Net Pension Liability and Related Ratios Last 10 Years* Retirement Enhancement Plan Measurement Date Measurement Date Measurement Date Measurement Date 2014-15 2015-16 2016-17 2017-18 TOTAL PENSION LIABILITY Service Cost 252,845$ 253,408$ 235,041$ 228,468$ Interest 1,071,102 1,117,733 1,148,044 1,191,080 Effect of plan changes - - - - Effect of economic/demographic gains or losses - 32,923 (231,575) 52,208 Effect of assumptions changes or inputs - - - - Benefit payments (628,101) (689,668) (753,594) (876,349) Net Change in Total Pension Liability 695,846 714,396 397,916 595,407 Total Pension Liability - Beginning 15,357,354 16,053,200 16,767,596 17,165,512 Total Pension Liability - Ending (a) 16,053,200$ 16,767,596$ 17,165,512$ 17,760,919$ PLAN FIDUCIARY NET POSITION Contributions - Employer 1,302,085$ 1,379,421$ 3,846,093$ 1,560,917$ Net Investment Income 205,418 (43,672) 1,332,806 1,062,788 Benefit Payments, Including Refunds of Employee Contributions (628,101) (689,668) (753,594) (876,349) Administrative Expenses (18,030) (18,906) (24,614) (25,431) Net Change in Fiduciary Net Position 861,372 627,175 4,400,691 1,721,925 Plan Fiduciary Net Position - Beginning 8,451,533 9,312,905 9,940,080 14,340,771 Plan Fiduciary Net Position - Ending (b) 9,312,905$ 9,940,080$ 14,340,771$ 16,062,696$ Plan Net Position Liability - Ending (a) - (b) 6,740,295$ 6,827,516$ 2,824,741$ 1,698,223$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 58.01% 59.28% 83.54% 90.44% Covered Payroll 8,347,917$ 7,653,837$ 7,041,971$ 6,666,563$ Plan Net Pension Liability as a Percentage of Covered Payroll 80.74% 89.20% 40.11% 25.47% Notes to Schedule: * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only four years are presented. Changes in Benefit Terms: None Changes in Assumptions: The retirement, disability, salary scale and pre-retirement mortality assumptions were updated to be consistent with those recommended for CalPERS actuarial valuations of public agency pension plans. These new demographic assumptions are described in the January 2014 experience study of the California Public Employees Retirement System. This study used data from 1997 to 2011. The post-retirement mortality was updated to the CalPERS 1997-2011 Healthy Retiree Mortality Tables (sex-distinct) with an assumed base year of 2008 and full generational projections using Scale AA. City of Poway Required Supplementary Information For the Year Ended June 30, 2018 (Continued) -101- Schedule of Plan Contributions Last 10 Years* Retirement Enhancement Plan Contribution in Contributions as Relation to the a Percentage of Contractually Contractually Contribution Covered- Fiscal Year Determined Determined Deficiency Employer's Employee Contributions Contributions (Excess) Covered Payroll Payroll 2014-15 1,298,155$ (1,302,085)$ (3,930)$ 7,807,232$ 16.68% 2015-16 1,335,335$ (1,379,421)$ (44,086)$ 7,653,837$ 18.02% 2016-17 1,320,199$ (3,846,093)$ (2,525,894)$ 7,041,971$ 54.62% 2017-18 1,427,809$ (1,560,917)$ (133,108)$ 6,666,563$ 23.41% Notes to Schedule: Valuation Timing Actuarial Cost Method Amortization Method/Period Asset Valuation Method Inflation Salary Increases Varies by years of Service Cost of Living Adjustments 2.00% Investment Rate of Return 7.00% Payroll Growth 3.00% Withdrawal/Disability Retirement Age Mortality Maximum Benefits and Salary No benefit or salary maximum is applied. Family Composition Form of Payment Single Life Annuity Pre-Retirement: Consistent with the Non-Industrial rates used to value the Miscellaneous CalPERS Pension Plans. Post-Retirement: CalPERS 1997-2001 Healthy Retiree Mortality Tables (sex- distinct) with an assumed base year of 2008 and full generational improvements using Scale AA. 85% of active members are asssumed to have an eligible beneficiary who is potentially eligible to receive a preretirement death benefit. Wives are assumed to be three years younger than their husbands. Entry Age Normal Level dollar, closed periods, 7 years amortization period 0.00% growth rate The actuarial value of assets is the market value of assets as provided by Public Agency Retirement Services. 2.75% * Measurement period 2013-14 (fiscal year 2014-15) was the first year of implementation, therefore, only four years are presented. The actuarial methods and assumptions used to set the actuarially Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which the contributions are reported. Consistent with Non-Industrial rates used to value Miscellaneous Agency CalPERS Pension Plans. The retirement rates are consistent with those used to value the Miscellaneous CalPERS Pension Plans 2.7% at age 55. The rates used are those for retirees with 20 years of service, with an increased retirement rate of 20% at age 55.   -102- SUPPLEMENTARY INFORMATION     This page intentionally left blank.   -103- NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS: Fire Protection Fund – Used to account for revenues received from the Fire Protection Special Tax. Voters approved this special tax in June 1997. It is used to pay for a portion of the costs of fire protection within the City of Poway. 800 MHz Communication System Fund – Used to account for revenues received from the 800 MHz Regional Communication System Special Tax. Voters approved this special tax in June 1998. It is used to pay for the City's share of the County-wide radio backbone system, and a portion of the annual maintenance expenses. Gas Tax Fund – Used to account for revenues received and expenditures made for street maintenance. Financing is provided by the City's share of State gasoline taxes made pursuant to the California State Constitution and authorized by the State Legislature. Drainage Fund – Used to account for operations of the flood control and drainage division. Financing is provided by developer's drainage fees and flood zone fees from the County. Poway Municipal Code Section 16.72 requires the segregation of the funding. Miscellaneous Grants Fund – Used to account for grants from various agencies used for operations and maintenance, and to account for specific in-lieu fees from developers. Financing for grants is provided by the State, County and Federal Government. Such grants provide for payment of all current operating costs and may be used only for specified purposes. AB 939 Integrated Waste Management Fund – Used to account for revenue received from a fee collected with solid waste disposal that was created as a result of AB 939. All revenues in this fund are to be used to reduce the toxicity of solid waste in landfills and improve the management of waste resources. Community Development Block Grant Fund – Used to account for revenues received and expenditures made for community development and housing assistance. Financing is provided under agreement with the county whereby the City is a secondary recipient with funds made available from the U.S. Department of Housing and Urban Development under the Housing and Community Development Acts of 1974 and 1977. Transportation Development Act Fund – Used to account for revenues received and expenditures made for transportation development, transit and related studies. Funding is provided to the City as secondary recipient under agreements with the county and with the San Diego Association of Governments.   -104- NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued): Proposition A Fund – To account for the San Diego County special Proposition A one-half (1/2) cent transportation sales tax which became effective July 1, 1988. All revenues of this fund must be expended for certain transportation related purposes. SB 1186 Disabled Access Law Fund – Used to account for revenue received from a fee collected upon issuance of a business registration that was created as a result of AB 1186. All revenues in this fund are to be used to pay for certified access specialists in local building departments and to pay for educational and training resources at the state and local level to promote compliance. Excess SAFE Reserve Fund – Used to account for revenue received related to the dissolution of the San Diego Service Authority for Freeway Emergencies (SAFE), and their expenditure for motorist aid services and support. Regional Arterial Traffic Mitigation Fund – Used to account for new fees required by the San Diego Association of Governments. Fire Protection Impact Fees Fund – Used to account for revenues received and expenditures made for fire protection improvements. Financing is provided primarily from developer fees. BEGIN Program Fund – The Building Equity and Growth in Neighborhoods program (BEGIN) is funded by the California Department of Housing and Community Development to provide down payment assistance to low and moderate income first-time home buyers of newly constructed homes. Housing In-lieu Fund – Used to account for revenues received and expenditures made for affordable housing. Funding is provided primarily from developer fees that are collected in-lieu of the developer providing inclusionary affordable housing units. The funds are used by the City to support its first-time home buyer program, Supporting Home Ownership in Poway (SHOP), which is available to low and moderate income homebuyers. Abandoned Vehicle Fees Fund – Used to account for fees collected from the sale and citation of abandoned vehicles remitted from San Diego County. A budget was not adopted for this fund. Habitat In-lieu Fund – Used to account for revenues received and expenditures made for the mitigation of environmental impacts to natural habitat. Funding is provided primarily from developer fees that are collected in-lieu of the developer providing actual land. The funds are used by the City to purchase open space as land and funding become available.   -105- NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued): Maintenance Districts Fund receives assessments from property owners based on the proportionate share of the costs, as estimated by an engineer’s report. Assessments are collected via tax rolls. The fund is used for lighting, landscape and maintenance. Road Repair – Used to account for revenues received and expenditures made for road maintenance and rehabilitation. Financing is provided by the City’s share of the Road Maintenance and Rehabilitation account revenues pursuant the Road Repair and Accountability Act of 2017 (SB1) DEBT SERVICE FUND: City of Poway Debt Service Fund – Used to account for lease payments received and transfers in from other funds that are used to make debt service payments. PERMANENT FUND: Mary Patricia Ross Trust Fund – Used to account for revenue and expenses provided by a private estate to finance community park and recreation purposes. The principal must be maintained intact until 2006. Interest income must also be used to finance such recreational purposes. CAPITAL PROJECTS FUNDS: Park Improvement Fund – Used to account for the financing and construction of park facilities throughout the City. Street Improvement Fund receives revenues and expenditures made for street improvements. Financing is provided primarily from developer's traffic mitigation fees. City Ordinance No. 80 authorized the collection and the segregation of the funding. Municipal Improvement Fund – Used to account for the financing and construction of the Old Coach water line. The remaining funds are to be used for the maintenance and operation costs of the water line. City of Poway Combining Balance Sheet Non-Major Governmental Funds June 30, 2018 -106- 800 MHz Fire Communication Gas Miscellaneous Protection System Tax Drainage Grants ASSETS Cash and investments -$ 62,126$ 1,113,378$ 2,157,485$ 337,156$ Receivables: Taxes 3,988 265 - 5,656 - Accounts - - 2,826 - 30 Interest - 649 - - - Advances to other funds - - - 17,576 - Due from other governments - - - - 34,744 Advances to fiduciary funds - - - 849,961 - Restricted assets: Cash and investments with fiscal agents - - - - - Total assets 3,988$ 63,040$ 1,116,204$ 3,030,678$ 371,930$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable -$ -$ 154,262$ 36,732$ -$ Accrued liabilities - - 27,859 18,484 - Due to other funds - - - - 34,044 Advances from other funds - 78,900 - - - Unearned revenues - - - 44,521 14,386 Total liabilities - 78,900 182,121 99,737 48,430 Deferred inflows of resources: Unavailable revenue - - - - 34,744 Total deferred inflows of resources - - - - 34,744 FUND BALANCES (deficit) Restricted 3,988 - 934,083 2,930,941 288,756 Unassigned - (15,860) - - - Total fund balances 3,988 (15,860) 934,083 2,930,941 288,756 Total liabilities, deferred inflows of resources and fund balances 3,988$ 63,040$ 1,116,204$ 3,030,678$ 371,930$ Special Revenue Funds City of Poway Combining Balance Sheet Non-Major Governmental Funds June 30, 2018 (Continued) -107- AB 939 Integrated Community Transportation SB 1186 Excess Waste Development Development Disabled SAFE Management Block Grant Act Proposition A Access Law Reserve 737,627$ 14,694$ 359,952$ 187,229$ 10,238$ 148,555$ - - - - - - 49,589 - - - - - - - - - - - - - - - - - - 86,950 17,288 - - - - - - - - - - - - - - - 787,216$ 101,644$ 377,240$ 187,229$ 10,238$ 148,555$ 45,777$ 14,694$ 2,697$ 6,861$ -$ -$ - - - - 234 - - 86,950 - - - - - - - - - - - - - - - - 45,777 101,644 2,697 6,861 234 - - - - - - - - - - - - - 741,439 - 374,543 180,368 10,004 148,555 - - - - - - 741,439 - 374,543 180,368 10,004 148,555 787,216$ 101,644$ 377,240$ 187,229$ 10,238$ 148,555$ Special Revenue Funds City of Poway Combining Balance Sheet Non-Major Governmental Funds June 30, 2018 (Continued) -108- Regional Fire Arterial Protection Abandoned Traffic Impact BEGIN Housing Vehicle Habitat Mitigation Fees Program In-lieu Fees In-lieu ASSETS Cash and investments 325,093$ 121,260$ 5,976$ 148,847$ 320,619$ 1,547,078$ Receivables: Taxes - - - - - - Accounts - - - - - - Interest - - - - - - Advances to other funds - - - - - - Due from other governments - - - - - - Advances to fiduciary funds - - - - - - Restricted assets: Cash and investments with fiscal agents - - - - - - Total assets 325,093$ 121,260$ 5,976$ 148,847$ 320,619$ 1,547,078$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable 2,549$ -$ -$ -$ -$ 800$ Accrued liabilities - - - - - - Due to other funds - - - - - - Advances from other funds - - - - - - Unearned revenues - - - - - - Total liabilities 2,549 - - - - 800 Deferred inflows of resources: Unavailable revenue - - - - - - Total deferred inflows of resources - - - - - - FUND BALANCES (deficit) Restricted 322,544 121,260 5,976 148,847 320,619 1,546,278 Unassigned - - - - - - Total fund balances 322,544 121,260 5,976 148,847 320,619 1,546,278 Total liabilities, deferred inflows of resources and fund balances 325,093$ 121,260$ 5,976$ 148,847$ 320,619$ 1,547,078$ Special Revenue Funds City of Poway Combining Balance Sheet Non-Major Governmental Funds June 30, 2018 (Continued) -109- Debt Service Permanent Fund Fund Total Mary Non-major Maintenance Road Debt Patricia Park Street Municipal Governmental Districts Repair Service Ross Trust Improvement Improvement Improvement Funds 7,959,219$ -$ 213,052$ 93,813$ 804,728$ 1,492,885$ 3,960$ 18,164,970$ 11,458 - - - - - - 21,367 59,517 - - - - - - 111,962 - - 576 - - - - 1,225 - - - - - - - 17,576 - 106,511 - - - - - 245,493 - - - - - - - 849,961 - - 627,958 - - - - 627,958 8,030,194$ 106,511$ 841,586$ 93,813$ 804,728$ 1,492,885$ 3,960$ 20,040,512$ 196,381$ -$ -$ -$ 1,000$ -$ -$ 461,753$ 4,709 - - - - - - 51,286 - 43,699 163,435 - - - - 328,128 - - - - 307,228 723,147 - 1,109,275 - - 142,251 - - - - 201,158 201,090 43,699 305,686 - 308,228 723,147 - 2,151,600 - - - - - - - 34,744 - - - - - - - 34,744 7,829,104 62,812 535,900 93,813 496,500 769,738 3,960 17,870,028 - - - - - - - (15,860) 7,829,104 62,812 535,900 93,813 496,500 769,738 3,960 17,854,168 8,030,194$ 106,511$ 841,586$ 93,813$ 804,728$ 1,492,885$ 3,960$ 20,040,512$ Capital Projects FundsSpecial Revenue Funds City of Poway Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Governmental Funds For the Year Ended June 30, 2018 -110- 800 MHz Fire Communication Gas Miscellaneous Protection System Tax Drainage Grants REVENUES Taxes 636,285$ 135,637$ 1,018,492$ 1,367,769$ -$ Intergovernmental - - 15,576 224,058 261,916 Use of money and property - 2,038 7,574 50,014 1,804 Developer fees - - - 56,953 - Assessments levied - - - - - Other revenues - - 64,563 3,997 - Total revenues 636,285 137,675 1,106,205 1,702,791 263,720 EXPENDITURES Current: Public safety - 158,279 - - - Public works - - 1,135,455 686,590 - Capital outlay - - - 996,593 61,546 Debt service: Principal - - - - - Interest and fiscal charges - - - - - Total expenditures - 158,279 1,135,455 1,683,183 61,546 Excess (deficiency) of revenues over (under) expenditures 636,285 (20,604) (29,250) 19,608 202,174 OTHER FINANCING SOURCES (USES) Transfers in - - - 3,835 - Transfer out (636,178) - - - (129,324) Total other financing sources (uses) (636,178) - - 3,835 (129,324) Net change in fund balances 107 (20,604) (29,250) 23,443 72,850 Fund balances, beginning of year 3,881 4,744 963,333 2,907,498 215,906 Fund balances (deficit), end of year 3,988$ (15,860)$ 934,083$ 2,930,941$ 288,756$ Special Revenue Funds City of Poway Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Governmental Funds For the Year Ended June 30, 2018 (Continued) -111- AB 939 Integrated Community Transportation SB 1186 Excess Waste Development Development Disabled SAFE Management Block Grant Act Proposition A Access Law Reserve -$ -$ -$ 1,518,950$ -$ -$ 28,199 105,862 16,879 - - - 5,055 - 2,654 2,506 35 1,056 - - - - - - - - - - - - 226,565 - 409 - 4,057 - 259,819 105,862 19,942 1,521,456 4,092 1,056 - - - - - - - - 409 1,420,169 - - 212,243 105,862 16,879 251,570 - - - - - - - - - - - - - - 212,243 105,862 17,288 1,671,739 - - 47,576 - 2,654 (150,283) 4,092 1,056 - - - - - - - - - - - - - - - - - - 47,576 - 2,654 (150,283) 4,092 1,056 693,863 - 371,889 330,651 5,912 147,499 741,439$ -$ 374,543$ 180,368$ 10,004$ 148,555$ Special Revenue Funds City of Poway Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Governmental Funds For the Year Ended June 30, 2018 (Continued) -112- Regional Fire Arterial Protection Abandoned Traffic Impact BEGIN Housing Vehicle Habitat Mitigation Fees Program In-lieu Fees In-lieu REVENUES Taxes -$ -$ -$ -$ -$ -$ Intergovernmental - - - - - - Use of money and property 2,627 745 73 8,940 2,281 10,464 Developer fees 43,275 45,858 - 12,200 - 73,389 Assessments levied - - - - - - Other revenues - - - - - - Total revenues 45,902 46,603 73 21,140 2,281 83,853 EXPENDITURES Current: Public safety - - - - - - Public works - - - - - - Capital outlay 57,755 - - - - 16,068 Debt service: Principal - - - - - - Interest and fiscal charges - - - - - - Total expenditures 57,755 - - - - 16,068 Excess (deficiency) of revenues over (under) expenditures (11,853) 46,603 73 21,140 2,281 67,785 OTHER FINANCING SOURCES Transfers in - - - - - - Transfer out - - - (820,000) - - Total other financing sources (uses) - - - (820,000) - - Net change in fund balances (11,853) 46,603 73 (798,860) 2,281 67,785 Fund balances, beginning of year 334,397 74,657 5,903 947,707 318,338 1,478,493 Fund balances (deficit), end of year 322,544$ 121,260$ 5,976$ 148,847$ 320,619$ 1,546,278$ Special Revenue Funds City of Poway Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Governmental Funds For the Year Ended June 30, 2018 (Continued) -113- Debt Service Permanent Fund Fund Total Mary Non-major Maintenance Road Debt Patricia Park Street Municipal Governmental Districts Repair Service Ross Trust Improvement Improvement Improvement Funds 438,695$ 294,460 -$ -$ -$ -$ -$ 5,410,288$ 13,806 - - - - - - 666,296 54,425 - 287,765 667 5,216 8,933 29 454,901 - - - - 91,240 756,878 - 1,079,793 1,900,026 - - - - - - 1,900,026 45,451 - - - - - - 345,042 2,452,403 294,460 287,765 667 96,456 765,811 29 9,856,346 - - - - - - - 158,279 2,747,360 231,648 - - - - - 6,221,631 185,431 - - - 11,065 10,024 - 1,925,036 - - 770,000 - - - - 770,000 - - 438,961 - - - - 438,961 2,932,791 231,648 1,208,961 - 11,065 10,024 - 9,513,907 (480,388) 62,812 (921,196) 667 85,391 755,787 29 342,439 375,528 - 934,919 - - - - 1,314,282 - - (4,617) - - - - (1,590,119) 375,528 - 930,302 - - - - (275,837) (104,860) 62,812 9,106 667 85,391 755,787 29 66,602 7,933,964 - 526,794 93,146 411,109 13,951 3,931 17,787,566 7,829,104$ 62,812$ 535,900$ 93,813$ 496,500$ 769,738$ 3,960$ 17,854,168$ Capital Projects FundsSpecial Revenue Funds     This page intentionally left blank. City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fire Protection Special Revenue Fund For the Year Ended June 30, 2018 -114- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 633,000$ 633,000$ 636,285$ 3,285$ Total revenues 633,000 633,000 636,285 3,285 OTHER FINANCING (USES) Transfers out (633,000) (636,180) (636,178) 2 Total other financing (uses) (633,000) (636,180) (636,178) 2 Net change in fund balance - (3,180) 107 3,287 Fund balance, beginning of year 3,881 3,881 3,881 - Fund balance, end of year 3,881$ 701$ 3,988$ 3,287$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 800 MHz Communication System Special Revenue Fund For the Year Ended June 30, 2018 -115- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 136,000$ 136,000$ 135,637$ (363)$ Use of money and property 200 200 2,038 1,838 Total revenues 136,200 136,200 137,675 1,475 EXPENDITURES Current: Public Safety 160,124 160,124 158,279 1,845 Total expenditures 160,124 160,124 158,279 1,845 Net change in fund balance (23,924) (23,924) (20,604) 3,320 Fund balance, beginning of year 4,744 4,744 4,744 - Fund balance (deficit), end of year (19,180)$ (19,180)$ (15,860)$ 3,320$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Gas Tax Special Revenue Fund For the Year Ended June 30, 2018 -116- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 1,056,190$ 1,056,190$ 1,018,492$ (37,698)$ Intergovernmental - - 15,576 15,576 Use of money and property 11,500 11,500 7,574 (3,926) Other revenues 57,330 57,330 64,563 7,233 Total revenues 1,125,020 1,125,020 1,106,205 (18,815) EXPENDITURES Current: Public works 2,149,161 1,779,288 1,135,455 643,833 Total expenditures 2,149,161 1,779,288 1,135,455 643,833 Net change in fund balance (1,024,141) (654,268) (29,250) 625,018 Fund balance, beginning of year 963,333 963,333 963,333 - Fund balance, end of year (60,808)$ 309,065$ 934,083$ 625,018$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Drainage Special Revenue Fund For the Year Ended June 30, 2018 -117- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 1,265,100$ 1,265,100$ 1,367,769$ 102,669$ Intergovernmental - - 224,058 224,058 Use of money and property 17,340 17,340 50,014 32,674 Developer fees 26,040 26,040 56,953 30,913 Other revenues - - 3,997 3,997 Total revenues 1,308,480 1,308,480 1,702,791 394,311 EXPENDITURES Current: Public works 724,721 728,717 686,590 42,127 Capital outlay 1,207,871 1,182,329 996,593 185,736 Total expenditures 1,932,592 1,911,046 1,683,183 227,863 OTHER FINANCING SOURCES Transfers in 4,700 4,700 3,835 (865) Total other financing sources 4,700 4,700 3,835 (865) Net change in fund balance (619,412) (597,866) 23,443 621,309 Fund balance, beginning of year 2,907,498 2,907,498 2,907,498 - Fund balance, end of year 2,288,086$ 2,309,632$ 2,930,941$ 621,309$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Miscellaneous Grants Special Revenue Fund For the Year Ended June 30, 2018 -118- Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental 125,710$ 125,710$ 261,916$ 136,206$ Use of money and property 1,860 1,860 1,804 (56) Total revenues 127,570 127,570 263,720 136,150 EXPENDITURES Capital outlay 367,587 375,728 61,546 314,182 Total expenditures 367,587 375,728 61,546 314,182 OTHER FINANCING USES Transfers out (100,000) (129,330) (129,324) 6 Total other financing uses (100,000) (129,330) (129,324) 6 Net change in fund balance (340,017) (377,488) 72,850 450,338 Fund balance, beginning of year 215,906 215,906 215,906 - Fund balance, end of year (124,111)$ (161,582)$ 288,756$ 450,338$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual AB 939 Integrated Waste Management Special Revenue Fund For the Year Ended June 30, 2018 -119- Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental 22,600$ 22,600$ 28,199$ 5,599$ Use of money and property 6,940 6,940 5,055 (1,885) Other revenue 197,160 197,160 226,565 29,405 Total revenues 226,700 226,700 259,819 33,119 EXPENDITURES Capital outlay 262,086 262,086 212,243 49,843 Total expenditures 262,086 262,086 212,243 49,843 Net change in fund balance (35,386) (35,386) 47,576 82,962 Fund balance, beginning of year 693,863 693,863 693,863 - Fund balance, end of year 658,477$ 658,477$ 741,439$ 82,962$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Community Development Block Grant Special Revenue Fund For the Year Ended June 30, 2018 -120- Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental 136,050$ 136,050$ 105,862$ (30,188)$ Total revenues 136,050 136,050 105,862 (30,188) EXPENDITURES Capital outlay 136,228 200,013 105,862 94,151 Total expenditures 136,228 200,013 105,862 94,151 Net change in fund balance (178) (63,963) - 63,963 Fund balance, beginning of year - - - - Fund balance, end of year (178)$ (63,963)$ -$ 63,963$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Transportation Development Act Special Revenue Fund For the Year Ended June 30, 2018 -121- Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental 5,000$ 5,000$ 16,879$ 11,879$ Use of money and property 3,970 3,970 2,654 (1,316) Other revenue 5,000 5,000 409 (4,591) Total revenues 13,970 13,970 19,942 5,972 EXPENDITURES Current: Public works 5,000 5,000 409 4,591 Capital outlay 375,334 375,334 16,879 358,455 Total expenditures 380,334 380,334 17,288 363,046 Net change in fund balance (366,364) (366,364) 2,654 369,018 Fund balance, beginning of year 371,889 371,889 371,889 - Fund balance, end of year 5,525$ 5,525$ 374,543$ 369,018$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Proposition A Special Revenue Fund For the Year Ended June 30, 2018 -122- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 1,552,170$ 1,514,070$ 1,518,950$ 4,880$ Use of money and property 500.00 500.00 2,506 2,006 Total revenues 1,552,670 1,514,570 1,521,456 6,886 EXPENDITURES Current: Public works 1,352,170 1,518,086 1,420,169 97,917 Capital outlay 317,447 317,447 251,570 65,877 Total expenditures 1,669,617 1,835,533 1,671,739 163,794 Net change in fund balance (116,947) (320,963) (150,283) 170,680 Fund balance, beginning of year 330,651 330,651 330,651 - Fund balance, end of year 213,704$ 9,688$ 180,368$ 170,680$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual SB 1186 Disabled Access Law Special Revenue Fund For the Year Ended June 30, 2018 -123- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 50$ 50$ 35$ (15)$ Other revenue 1,050 1,050 4,057 3,007 Total revenues 1,100 1,100 4,092 2,992 Net change in fund balance 1,100 1,100 4,092 2,992 Fund balance, beginning of year 5,912 5,912 5,912 - Fund balance, end of year 7,012$ 7,012$ 10,004$ 2,992$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Excess SAFE Reserve Special Revenue Fund For the year ended June 30, 2018 -124- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 1,640$ 1,640$ 1,056$ (584)$ Total revenues 1,640 1,640 1,056 (584) EXPENDITURES Capital outlay 141,872 141,872 - 141,872 Total expenditures 141,872 141,872 - 141,872 Net change in fund balance (140,232) (140,232) 1,056 141,288 Fund balance, beginning of year 147,499 147,499 147,499 - Fund balance, end of year 7,267$ 7,267$ 148,555$ 141,288$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Regional Arterial Traffic Mitigation Special Revenue Fund For the Year Ended June 30, 2018 -125- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 3,000$ 3,000$ 2,627$ (373)$ Developer fees 27,020 27,020 43,275 16,255 Total revenues 30,020 30,020 45,902 15,882 EXPENDITURES Capital outlay 56,092 57,762 57,755 7 Total expenditures 56,092 57,762 57,755 7 Net change in fund balance (26,072) (27,742) (11,853) 15,889 Fund balance, beginning of year 334,397 334,397 334,397 - Fund balance, end of year 308,325$ 306,655$ 322,544$ 15,889$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fire Protection Impact Fees Special Revenue Fund For the Year Ended June 30, 2018 -126- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 690$ 690$ 745$ 55$ Developer fees 3,510 3,510 45,858 42,348 Total revenues 4,200 4,200 46,603 42,403 Net change in fund balance 4,200 4,200 46,603 42,403 Fund balance, beginning of year 74,657 74,657 74,657 - Fund balance, end of year 78,857$ 78,857$ 121,260$ 42,403$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual BEGIN Program Special Revenue Fund For the Year Ended June 30, 2018 -127- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 70$ 70$ 73$ 3$ Total revenues 70 70 73 3 Net change in fund balance 70 70 73 3 Fund balance, beginning of year 5,903 5,903 5,903 - Fund balance, end of year 5,973$ 5,973$ 5,976$ 3$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Housing In-lieu Special Revenue Fund For the Year Ended June 30, 2018 -128- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 9,000$ 9,000$ 8,940$ (60)$ Developer fees 8,000 8,000 12,200 4,200 Total revenues 17,000 17,000 21,140 4,140 EXPENDITURES Capital outlay 259,379 136,719 - 136,719 Total expenditures 259,379 136,719 - 136,719 OTHER FINANCING SOURCES Transfers out - (820,000) (820,000) - Total other financing sources - (820,000) (820,000) - Net change in fund balance (242,379) (939,719) (798,860) 140,859 Fund balance, beginning of year 947,707 947,707 947,707 - Fund balance, end of year 705,328$ 7,988$ 148,847$ 140,859$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Abandoned Vehicle Fees Special Revenue Fund For the year ended June 30, 2018 -129- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 3,540$ 3,540$ 2,281$ (1,259)$ Total revenues 3,540 3,540 2,281 (1,259) Net change in fund balance 3,540 3,540 2,281 (1,259) Fund balance, beginning of year 318,338 318,338 318,338 - Fund balance, end of year 321,878$ 321,878$ 320,619$ (1,259)$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Habitat In-lieu Special Revenue Fund For the year ended June 30, 2018 -130- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 14,000$ 14,000$ 10,464$ (3,536)$ Developer fees 17,000 17,000 73,389 56,389 Total revenues 31,000 31,000 83,853 52,853 EXPENDITURES Capital outlay 3 16,073 16,068 5 Total expenditures 3 16,073 16,068 5 Net change in fund balance 30,997 14,927 67,785 52,858 Fund balance, beginning of year 1,478,493 1,478,493 1,478,493 - Fund balance, end of year 1,509,490$ 1,493,420$ 1,546,278$ 52,858$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Maintenance Districts Special Revenue Fund For the year ended June 30, 2018 -131- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 415,530$ 415,530$ 438,695$ 23,165$ Intergovernmental - - 13,806 13,806 Use of money and property 82,760 82,760 54,425 (28,335) Assessment levied 1,438,310 1,869,820 1,900,026 30,206 Other revenue - - 45,451 45,451 Total revenues 1,936,600 2,368,110 2,452,403 84,293 EXPENDITURES Current: Public works 3,270,377 3,462,238 2,747,360 714,878 Capital outlay - - 185,431 (185,431) Total expenditures 3,270,377 3,462,238 2,932,791 529,447 Excess (deficiency) of revenues over (under) expenditures (1,333,777) (1,094,128) (480,388) 613,740 OTHER FINANCING SOURCES Transfers in 375,650 375,650 375,528 (122) Total other financing sources 375,650 375,650 375,528 (122) Net change in fund balance (958,127) (718,478) (104,860) 613,618 Fund balance, beginning of year 7,933,964 7,933,964 7,933,964 - Fund balance, end of year 6,975,837$ 7,215,486$ 7,829,104$ 613,618$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Road Repair Special Revenue Fund For the year ended June 30, 2018 -132- Actual Variance with Original Final Amounts Final Budget REVENUES Taxes 288,930$ 288,930$ 294,460$ 5,530$ Total revenues 288,930 288,930 294,460 5,530 EXPENDITURES Current: Public works 250,000 250,000 231,648 18,352 Total expenditures 250,000 250,000 231,648 18,352 Net change in fund balance 38,930 38,930 62,812 23,882 Fund balance, beginning of year - - - - Fund balance, end of year 38,930$ 38,930$ 62,812$ 23,882$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual City Debt Service Fund For the year ended June 30, 2018 -133- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 285,740$ 285,740$ 287,765$ 2,025$ Total revenues 285,740 285,740 287,765 2,025 EXPENDITURES Debt service: Principal 1,200,000 1,200,000 770,000 430,000 Interest and fiscal charges 446,450 446,450 438,961 7,489 Total expenditures 1,646,450 1,646,450 1,208,961 437,489 Excess (deficiency) of revenues over (under) expenditures (1,360,710) (1,360,710) (921,196) 439,514 OTHER FINANCING SOURCES (USES) Transfers in 1,372,300 1,373,540 934,919 (438,621) Transfers out (4,620) (4,620) (4,617) 3 Total other financing sources (uses) 1,367,680 1,368,920 930,302 (438,618) Net change in fund balance 6,970 8,210 9,106 896 Fund balance, beginning of year 526,794 526,794 526,794 - Fund balance, end of year 533,764$ 535,004$ 535,900$ 896$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Mary Patricia Ross Trust Permanent Fund For the year ended June 30, 2018 -134- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 950$ 950$ 667$ (283)$ Total revenues 950 950 667 (283) Net change in fund balance 950 950 667 (283) Fund balance, beginning of year 93,146 93,146 93,146 - Fund balance, end of year 94,096$ 94,096$ 93,813$ (283)$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Park Improvement Capital Projects Fund For the year ended June 30, 2018 -135- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 2,500$ 2,500$ 5,216$ 2,716$ Developer fees 63,870 63,870 91,240 27,370 Total revenues 66,370 66,370 96,456 30,086 EXPENDITURES Capital outlay 11,065 11,065 11,065 - Total expenditures 11,065 11,065 11,065 - Net change in fund balance 55,305 55,305 85,391 30,086 Fund balance, beginning of year 411,109 411,109 411,109 - Fund balance, end of year 466,414$ 466,414$ 496,500$ 30,086$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Street Improvement Capital Projects Fund For the year ended June 30, 2018 -136- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 5,000$ 5,000$ 8,933$ 3,933$ Developer fees 94,650 94,650 756,878 662,228 Total revenues 99,650 99,650 765,811 666,161 EXPENDITURES Capital outlay 74,634 74,634 10,024 64,610 Total expenditures 74,634 74,634 10,024 64,610 Net change in fund balance 25,016 25,016 755,787 730,771 Fund balance, beginning of year 13,951 13,951 13,951 - Fund balance, end of year 38,967$ 38,967$ 769,738$ 730,771$ Budget Amounts City of Poway Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Municipal Improvement Capital Projects Fund For the year ended June 30, 2018 -137- Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property 40$ 40$ 29$ (11)$ Total revenues 40 40 29 (11) Net change in fund balance 40 40 29 (11) Fund balance, beginning of year 3,931 3,931 3,931 - Fund balance, end of year 3,971$ 3,971$ 3,960$ (11)$ Budget Amounts   -138- INTERNAL SERVICE FUND Vehicle Maintenance Fund - Used to account for the cost of operating a maintenance facility for automotive equipment used by other City departments. Such costs to other departments are billed on a direct cost basis. The Vehicle Maintenance Fund is responsible for financing replacement vehicles, as necessary. City of Poway Statement of Net Position Internal Service Fund - Vehicle Maintenance Fund June 30, 2018 -139- ASSETS Current assets: Cash and investments 10,170,852$ Advances to other funds 439,400 Total current assets 10,610,252 Total assets 10,610,252 DEFERRED OUTFLOWS OF RESOURCES Pension related 123,780 LIABILITIES Current liabilities: Accounts payable 145,147 Accrued liabilities 12,363 Compensated absences due within one year 27,890 Total current liabilities 185,400 Noncurrent liabilities: Compensated absences 824 Net pension liability 513,163 Total noncurrent liabilities 513,987 Total liabilities 699,387 DEFERRED INFLOWS OF RESOURCES Pension related 10,415 NET POSITION Unrestricted 10,024,230 Total net position 10,024,230$ City of Poway Statement of Revenues, Expenses and Changes in Net Position Internal Service Fund - Vehicle Maintenance Fund For the year ended June 30, 2018 -140- OPERATING REVENUES Charges for services 3,078,163$ Total operating revenues 3,078,163 OPERATING EXPENSES Personnel services 237,069 Maintenance and operations 1,221,644 Total operating expenses 1,458,713 Operating income 1,619,450 NONOPERATING REVENUES Interest revenue 60,171 Gain on sale of property 25,378 Grant revenue 6,309 Other nonoperating revenue 6,978 Total nonoperating revenues 98,836 Income before transfers 1,718,286 TRANSFERS Transfers in 9,580 Transfers out (700,525) Total transfers (690,945) Change in net position 1,027,341 Net position, beginning of year 8,996,889 Net position, end of year 10,024,230$ City of Poway Statement of Cash Flows Internal Service Fund - Vehicle Maintenance Fund For the year ended June 30, 2018 -141- Cash flows from operating activities: Cash receipts from interfund charges 3,085,845$ Cash paid to employees for services (339,021) Cash paid to suppliers of goods or services (1,291,554) Net cash provided by operating activities 1,455,270 Cash flows from noncapital financing activities: Due from other governments 5,397 Other nonoperating revenues 6,978 Transfers from other funds 9,580 Transfer to other funds (700,525) Net cash (used for) noncapital financing activities (678,570) Cash flows from capital and related financing activities: Sale of capital assets 25,378 Capital grant revenue 6,309 Net cash provided by capital and related financing activities 31,687 Cash flows from investing activities: Interest income 60,171 Net cash provided by investing activities 60,171 Net increase in cash and investments 868,558 Cash and investments, beginning of year 9,302,294 Cash and investments, end of year 10,170,852$ Reconciliation of operating income to net cash provided by operating activities: Operating income 1,619,450$ Adjustments to net cash provided by operating activities: (Increase) decrease in assets: Accounts receivable 7,682 Increase (decrease) in liabilities: Accounts payable (69,910) Accrued liabilities (4,516) Compensated absences (19,360) Net Pension Liability (78,076) Total adjustments (164,180) Net cash provided by operating activities 1,455,270$   -142- FIDUCIARY FUNDS AGENCY FUNDS The agency funds are used to account for assets held by the City as an agent. Agency funds include the following: Developer Deposits Fund - Used to account for the collection and payments of development deposits from and on behalf of the collective and individual developers. Parkway Business Centre CFD No. 88-1 Bond Deposits Fund - Used to account for debt service payments CFD No. 88-1 Bond Deposits collected through property tax assessments remitted to fiscal agent-trustee for payment on bonds. High Valley Road AD No. 96-1 Bond Deposits Fund - Used to account for debt service payments AD No. 96-1 Bond Deposits collected through property tax assessments remitted to fiscal agent-trustee for payment on bonds. Old Coach Waterline AD No. 00-1 Bond Deposits Fund - Used to account for debt service payments AD No. 00-1 Bond Deposits collected through property tax assessments remitted to fiscal agent-trustee for payment on bonds.   This page intentionally left blank. City of Poway Combining Statement of Fiduciary Net Position Agency Funds June 30, 2018 -143- Parkway Business Old Coach Centre CFD High Valley Water Line No. 88.1 Road AD No. 96-1 AD No. 00-1 Total Developer Bond Bond Deposits Bond Deposits Agency Deposits Deposits Fund Fund Fund Funds ASSETS Cash and investments 2,975,932$ 3,235$ 26,811$ 11,443$ 3,017,421$ Total assets 2,975,932$ 3,235$ 26,811$ 11,443$ 3,017,421$ LIABILITIES Accounts payable 19,898$ 3,257$ 26,620$ 11,362$ 61,137$ Developer deposits 2,956,034 (22) 191 81 2,956,284 Total liabilities 2,975,932$ 3,235$ 26,811$ 11,443$ 3,017,421$ City of Poway Combining Statement of Changes in Assets and Liabilities Agency Funds For the year ended June 30, 2018 -144- Balance Balance June 30, 2017 Additions Deletions June 30, 2018 Assets Cash and investments 2,893,316$ 705,725$ (623,109)$ 2,975,932$ Total assets 2,893,316$ 705,725$ (623,109)$ 2,975,932$ Liabilities Accounts payable 20,595$ 19,898$ (20,595)$ 19,898$ Developer deposits 2,872,721 685,827 (602,514) 2,956,034 Total liabilities 2,893,316$ 705,725$ (623,109)$ 2,975,932$ Assets Cash and investments -$ 3,235$ -$ 3,235$ Total assets -$ 3,235$ -$ 3,235$ Liabilities Accounts payable -$ 3,257$ -$ 3,257$ Developer deposits - - (22) (22) Total liabilities -$ 3,257$ (22)$ 3,235$ Assets Cash and investments 26,620$ 191$ -$ 26,811$ Total assets 26,620$ 191$ -$ 26,811$ Liabilities Accounts payable 26,620$ -$ -$ 26,620$ Developer deposits - 191 - 191 Total liabilities 26,620$ 191$ -$ 26,811$ HIGH VALLEY ROAD AD No. 96-1 BOND DEPOSITS FUND CFD No. 88-1 BOND DEPOSITS FUND DEVELOPER DEPOSITS FUND PARKWAY BUSINESS CENTRE City of Poway Combining Statement of Changes in Assets and Liabilities Agency Funds For the year ended June 30, 2018 (Continued) -145- Balance Balance June 30, 2017 Additions Deletions June 30, 2018 Assets Cash and investments 11,362$ 81$ -$ 11,443$ Total assets 11,362$ 81$ -$ 11,443$ Liabilities Accounts payable 11,362$ -$ -$ 11,362$ Developer Deposits - 81 - 81 Total liabilities 11,362$ 81$ -$ 11,443$ Assets Cash and investments 2,931,298$ 709,232$ (623,109)$ 3,017,421$ Total assets 2,931,298$ 709,232$ (623,109)$ 3,017,421$ Liabilities Accounts payable 58,577$ 23,155$ (20,595)$ 61,137$ Developer Deposits 2,872,721 685,827 (602,514) 2,956,034 Total liabilities 2,931,298$ 709,254$ (623,131)$ 3,017,421$ ALL AGENCY FUNDS AD No. 00-1 BND DEPOSITS FUND OLD COACH WATERLINE     This page intentionally left blank.   -146- Statistical Section   This page intentionally left blank.   -147- STATISTICAL SECTION This part of the City of Poway's comprehensive annual financial report presents detailed information as context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government's overall financial health. Contents Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the government's most significant local revenue sources. Debt Capacity These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. Sources: Unless otherwise noted, the information in these schedules is derived from the comprehensive annual financial reports for the relevant year. City of Poway Net Position by Component Current and Prior Nine Fiscal Years (accrual basis of accounting) -148- Year Ended Year Ended Year Ended Year Ended June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 Governmental activities Net investment in capital assets 108,494,835$ 82,020,900$ 83,171,720$ 86,341,264$ Restricted 20,641,475 20,453,766 20,846,798 27,543,292 Unrestricted - as restated 41,227,106 41,716,900 40,985,170 38,671,488 Total governmental activities net position 170,363,416 144,191,566 145,003,688 152,556,044 Business-type activities Net investment in capital assets 32,118,064 32,941,440 34,817,565 36,827,442 Restricted - - 272,301 Unrestricted - as restated 31,108,285 26,735,432 21,537,274 26,130,925 Total business-type activities net position 63,226,349 59,676,872 56,354,839 63,230,668 Primary government Net investment in capital assets 140,612,899 114,962,340 117,989,285 123,168,706 Restricted 20,641,475 20,453,766 20,846,798 27,815,593 Unrestricted - as restated 72,335,391 68,452,332 62,522,444 64,802,413 Total primary government net position 233,589,765$ 203,868,438$ 201,358,527$ 215,786,712$ The City is reporting its ten year history with the implementation of GASB 44 in fiscal year 2006. The City restated the Unrestricted Net Position as of June 30, 2014 for the implementation of GASB 68. Note: The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003. The City implemented the retroactive reporting of infrastructure in fiscal year 2007. City of Poway Net Position by Component Current and Prior Nine Fiscal Years (accrual basis of accounting)  (Continued) -149- Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended June 30, 2014 June 30, 2013 June 30, 2012 June 30, 2011 June 30, 2010 June 30, 2009 90,442,061$ 94,657,067$ 93,097,532$ 50,255,141$ 46,412,443$ 36,713,773$ 28,126,711 25,637,627 24,523,246 70,931,373 78,369,565 99,252,462 33,998,725 63,928,726 59,865,964 (71,148,492) (93,996,026) (98,283,120) 152,567,497 184,223,420 177,486,742 50,038,022 30,785,982 37,683,115 38,731,821 40,746,468 42,846,682 43,976,262 43,508,027 39,127,764 279,579 279,604 279,575 280,450 280,450 280,469 26,867,660 33,305,899 34,543,173 36,469,136 35,320,341 34,194,395 65,879,060 74,331,971 77,669,430 80,725,848 79,108,818 73,602,628 129,173,882 135,403,535 135,944,214 94,231,403 89,920,470 75,841,537 28,406,290 25,917,231 24,802,821 71,211,823 78,650,015 99,532,931 60,866,385 97,234,625 94,409,137 (34,679,356) (58,675,685) (64,088,725) 218,446,557$ 258,555,391$ 255,156,172$ 130,763,870$ 109,894,800$ 111,285,743$ City of Poway Changes in Net Position Current and Prior Nine Years (accrual basis of accounting) Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year EndedJune 30, 2018June 30, 2017June 30, 2016June 30, 2015June 30, 2014June 30, 2013June 30, 2012June 30, 2011June 30, 2010June 30, 2009Expenses:Governmental Activities:General Government8,048,190$ 7,897,624$ 5,131,272$ 5,196,033$ 5,227,809$ 5,981,436$ 14,226,478$ 17,144,376$ 23,947,500$ 23,261,446$ Public Safety25,139,954 22,939,218 22,347,525 21,500,327 20,906,884 20,213,645 19,514,321 18,899,606 19,475,481 19,227,914 Public Works15,818,102 13,424,529 12,381,234 11,595,286 11,863,623 12,283,876 12,484,070 12,622,204 12,595,756 11,213,841 Development Services4,793,032 4,122,212 3,821,920 3,664,378 3,815,282 3,745,329 2,767,969 2,348,622 4,423,865 5,226,071 Community Services7,372,710 7,695,548 7,197,816 5,843,807 6,115,485 5,063,022 4,848,768 14,398,426 25,213,955 16,195,999 Interest and fiscal charges429,617 443,901 505,811 481,905 509,206 (249,757) 8,247,159 17,232,642 14,969,311 16,692,399 Total governmental expenses61,601,605 56,523,032 51,385,578 48,281,736 48,438,289 47,037,551 62,088,765 82,645,876 100,625,868 91,817,670 Business-type activities:Water25,502,524 21,005,264 21,502,464 22,349,556 23,314,233 22,367,122 20,652,724 18,143,829 18,226,463 18,697,576 Sewer8,797,837 8,564,971 8,730,955 9,451,529 9,434,739 10,069,336 8,374,223 7,651,228 7,522,634 8,011,470 Total business-type expenses34,300,361 29,570,235 30,233,419 31,801,085 32,748,972 32,436,458 29,026,947 25,795,057 25,749,097 26,709,046 Total primary government expenses95,901,966$ 86,093,267$ 81,618,997$ 80,082,821$ 81,187,261$ 79,474,009$ 91,115,712$ 108,440,933$ 126,374,965$ 118,526,716$ Program revenues:Governmental Activities:Charges for services:General Government352,830$ 326,019$ 276,113$ 280,796$ 260,802$ 118,347$ 120,126$ 96,397$ 91,745$ 105,084$ Public Safety2,171,552 2,067,306 1,884,369 1,759,543 1,908,337 2,155,607 2,030,510 2,121,984 2,131,729 2,413,197 Public Works2,740,562 2,727,104 2,733,956 2,699,095 2,753,917 2,738,196 3,537,666 4,422,522 4,479,896 4,868,530 Development Services1,975,450 1,648,388 1,780,160 1,558,945 1,534,304 1,384,543 1,049,318 1,584,838 1,332,714 1,388,448 Community Services2,595,229 2,862,789 2,625,260 2,570,423 2,436,024 2,243,495 2,160,596 2,111,476 2,821,718 3,033,466 Operating grants and contributions2,322,871 1,133,734 1,356,811 1,543,785 1,706,081 1,811,203 4,760,819 5,857,360 7,615,477 5,826,044 Capital grants and contributions198,584 270,802 120,271 90,379 66,168 99,831 833,137 1,155,384 1,246,555 2,110,463 Total program revenues12,357,078 11,036,142 10,776,940 10,502,966 10,665,633 10,551,222 14,492,172 17,349,961 19,719,834 19,745,232 Business-type activities:Charges for services:Water25,583,581 21,450,064 18,590,894 20,629,080 23,381,953 22,207,174 20,612,607 18,694,318 17,881,695 16,714,571 Sewer8,486,571 8,396,553 8,003,913 7,423,494 7,347,502 7,228,097 7,300,875 8,759,001 8,651,681 8,651,968 Capital grants and contributions3,589 - - - - - - - - - Total program revenues34,073,741 29,846,617 26,594,807 28,052,574 30,729,455 29,435,271 27,913,482 27,453,319 26,533,376 25,366,539 Total primary government program revenue46,430,819$ 40,882,759$ 37,371,747$ 38,555,540$ 41,395,088$ 39,986,493$ 42,405,654$ 44,803,280$ 46,253,210$ 45,111,771$ Net (expense)/revenueGovernmental activities(49,244,527) (45,486,890) (40,608,638) (37,778,770) (37,772,656) (36,486,329) (47,596,593) (65,295,915) (80,906,034) (72,072,438) Business-type activities(226,620) 276,382 (3,638,612) (3,748,511) (2,019,517) (3,001,187) (1,113,465) 1,658,262 784,279 (1,342,507) Total primary governmentnet (expense)(49,471,147)$ (45,210,508)$ (44,247,250)$ (41,527,281)$ (39,792,173)$ (39,487,516)$ (48,710,058)$ (63,637,653)$ (80,121,755)$ (73,414,945)$ -150- City of Poway Changes in Net Position Current and Prior Nine Years (accrual basis of accounting) (Continued) General revenues and Other Changes in Net Position:Governmental Activities:Taxes:Property taxes 24,153,826$ 22,166,004$ 20,455,287$ 18,998,523$ 20,188,541$ 21,378,147$ 34,713,961$ 50,960,736$ 51,526,758$ 51,190,712$ Sales taxes13,981,478 13,774,763 13,172,467 12,520,103 13,418,087 13,692,553 11,276,884 10,418,322 9,833,390 10,325,455 Motor vehicle license tax- - - - - 22,085 26,685 262,412 150,641 173,673 Transient occupancy tax654,235 609,306 615,482 573,531 523,112 483,568 462,508 433,934 367,434 247,787 Franchise taxes1,611,000 1,466,388 1,639,956 1,696,186 1,555,816 1,491,227 1,512,878 1,465,926 1,491,231 1,590,066 Other Taxes3,630,276 3,247,931 3,423,165 3,192,356 2,761,696 1,816,574 626,421 616,466 629,589 597,880 Total taxes44,030,815 41,264,392 39,306,357 36,980,699 38,447,252 38,884,154 48,619,337 64,157,796 63,999,043 64,125,573 Investment earnings1,468,845 1,165,528 1,845,972 1,380,030 1,573,545 1,000,883 1,297,998 5,964,802 8,287,516 9,879,153 Miscellaneous3,285,592 1,805,482 1,195,244 1,330,954 1,846,762 3,374,664 542,954 512,858 1,251,844 607,387 Sale/disposal of capital assets- - - (385,253) - - (2,088,434) 13,561,625 - - Transfers426,823 439,366 467,591 (1,539,113) 1,425 (36,694) 2,284,985 350,874 470,498 147,503 Extraordinary Item26,204,302 - (9,758,882) - - - 128,406,347 - - - Total governmental activities75,416,377 44,674,768 33,056,282 37,767,317 41,868,984 43,223,007 179,063,187 84,547,955 74,008,901 74,759,616 Business-type activities:Property taxes- - - - - - - - - - Investment earnings264,609 102,656 230,982 149,611 217,194 23,733 65,593 254,279 463,177 1,987,778 Contributed capital- - - - - - - - 4,225,637 4,720,039 Miscellaneous3,938,311 3,382,361 1,077,957 1,261,448 82,930 47,583 276,439 55,363 503,595 933,994 Transfers(426,823) (439,366) (467,591) (310,940) (441,725) (407,588) (2,284,985) (350,874) (470,498) (147,503) Extraordinary Item- (4,078,565) - - - - - - - Total business-type activities3,776,097 3,045,651 (3,237,217) 1,100,119 (141,601) (336,272) (1,942,953) (41,232) 4,721,911 7,494,308 Total primary government79,192,474$ 47,720,419$ 29,819,065$ 38,867,436$ 41,727,383$ 42,886,735$ 177,120,234$ 84,506,723$ 78,730,812$ 82,253,924$ Change in Net PositionGovernmental activities26,171,850$ (812,122)$ (7,552,356)$ (11,453)$ 4,096,328$ 6,736,678$ 131,466,594$ 19,252,040$ (6,897,133)$ 2,687,178$ Business-type activities3,549,477 3,322,033 (6,875,829) (2,648,392) (2,161,118) (3,337,459) (3,056,418) 1,617,030 5,506,190 6,151,801 Total primary government29,721,327$ 2,509,911$ (14,428,185)$ (2,659,845)$ 1,935,210$ 3,399,219$ 128,410,176$ 20,869,070$ (1,390,943)$ 8,838,979$ Notes:The City is reporting its ten year history with the implementation of GASB 44 in fiscal year 2006.The City began to report accrual information when it implemented GASB Statement 34 in fiscal year 2003. The City implemented theretroactive reporting of infrastructure in fiscal year 2007.-151- City of Poway Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) -152-  June 30, 2018 2017 2016 2015 General Fund Non-spendable 15,639,036$ 10,477,915$ 10,286,955$ 10,495,426$ Restricted - - - - Committed 19,321,583 - - 10,022,691 Assigned 16,613,992 40,438,366 40,367,436 15,870,595 Unassigned 14,063,706 14,649,159 16,010,227 29,285,138 Reserved - - - - Unreserved: Designated - - - - Undesignated - - - - Total General Fund 65,638,317$ 65,565,440$ 66,664,618$ 65,673,850$ All Other Governmental Funds Non-spendable -$ -$ -$ -$ Restricted 20,641,475 20,453,766 20,846,798 27,543,292 Committed - - - - Assigned - - - - Unassigned (15,860) - - - Reserved - - - - Unreserved: Designated: Special revenue funds - - - - Debt service funds - - - - Capital projects funds - - - - Undesignated: Special revenue funds - - - - Debt service funds - - - - Capital projects funds - - - - Total all Other Governmental Funds 20,625,615$ 20,453,766$ 20,846,798$ 27,543,292$ Total Fund Balance 86,263,932$ 86,019,206$ 87,511,416$ 93,217,142$ Note: The City implemented GASB 54, which established new classifications for fund balances, in Fiscal Year 2011. City of Poway Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (Continued) -153- June 30, 2014 2013 2012 2011 2010 2009 10,134,007$ 10,157,087$ 10,218,860$ 10,151,108$ -$ -$ - - - - - - 10,026,079 9,999,309 10,019,883 10,037,638 - - 15,383,344 7,173,822 6,666,188 6,466,719 - - 26,624,039 30,695,920 22,906,009 23,955,242 - - - - - - 4,647,709$ 5,561,391$ - - - - 31,724,737 32,152,754 - - - - - - 62,167,469$ 58,026,138$ 49,810,940$ 50,610,707$ 36,372,446$ 37,714,145$ -$ -$ -$ -$ -$ -$ 28,126,711 25,929,921 23,733,859 62,455,191 - - - - - - - - - - - 8,564,840 - - - - - (88,658) - - - - - - 51,660,768$ 62,868,328$ - - - - - - - - - - - - - - - - 20,795,704 24,840,402 - - - - 5,913,093 5,982,341 - - - - - - - - - - - - 28,126,711$ 25,929,921$ 23,733,859$ 70,931,373$ 78,369,565$ 93,691,071$ 90,294,180$ 83,956,059$ 73,544,799$ 121,542,080$ 114,742,011$ 131,405,216$ City of Poway Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) -154-  2018 2017 2016 2015 Revenues Taxes 44,030,815$ 41,264,392$ 39,306,357$ 36,980,699$ Licenses and permits 698,848 691,524 608,914 546,742 Intergovernmental 1,449,537 978,759 1,252,604 1,361,671 Charges for services 2,682,918 2,870,826 2,629,776 2,564,852 Fines and forfeitures 150,968 137,772 121,246 135,609 Use of money and property 1,376,993 1,116,686 1,664,836 1,265,837 Developer Fees 5,538,625 4,339,215 4,317,628 4,013,227 Assessment levied 1,900,026 1,919,533 1,926,988 1,903,369 Other revenues 3,280,099 1,802,405 1,241,968 1,328,515 Total revenues 61,108,829 55,121,112 53,070,317 50,100,521 Expenditures Current: General government 4,356,172 4,920,707 4,713,981 4,372,077 Public safety 24,361,353 22,842,844 21,857,490 21,299,851 Public works 11,665,054 10,914,521 10,063,808 9,526,140 Development services 4,503,384 4,305,937 4,067,434 3,811,954 Community services 5,837,896 6,197,514 5,954,740 5,212,917 Capital outlay 10,049,051 7,898,228 2,855,748 1,603,241 Debt service: Principal 770,000 755,000 735,000 715,000 Principal-early retirement-sale of capital asset - - - Interest and fiscal charges 438,961 452,512 514,008 490,336 Transfers to fiduciary funds - - - - Debt Issuance Costs - - - - Tax shift - - - - Tax increment reimbursements - - - - Total expenditures 61,981,871 58,287,263 50,762,209 47,031,516 Excess of revenues over (under) expenditures (873,042) (3,166,151) 2,308,108 3,069,005 Other Financing Sources (Uses) Proceeds from issuance of debt - - - - Refunding bond activity -net - - - - Proceeds from sale of capital assets - - - - Transfers in (out) net 1,117,768 1,673,941 1,745,048 (146,043) Total other financing sources 1,117,768 1,673,941 1,745,048 (146,043) Extraordinary Items - - (9,758,882) - Net change in fund balance 244,726$ (1,492,210)$ (5,705,726)$ 2,922,962$ Debt service as a percentage of noncapital expenditures 2.1% 2.2% 2.5% 2.6% Year Ended June 30, Note: The City implemented GASB 34 beginning with the fiscal year ended June 30, 2003. Prior to that time, interfund loans were treated as "Other Financing Sources" and classified as "Proceeds from issuance of debt" in the fund receiving the loan. City of Poway Changes in Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) (Continued) -155- 2014 2013 2012 2011 2010 2009 38,447,252$ 38,996,849$ 51,939,098$ 66,623,806$ 67,411,848$ 66,062,646$ 561,251 543,838 507,908 457,905 433,517 422,948 828,278 1,062,851 1,564,484 1,800,145 2,994,005 2,889,804 2,386,206 1,671,506 1,439,891 3,232,221 3,140,274 2,954,967 184,855 527,006 554,570 678,468 750,551 852,535 1,495,911 2,188,570 3,291,466 7,821,732 12,180,028 14,862,137 4,806,170 4,029,232 3,279,373 4,516,243 3,711,578 3,897,877 1,898,872 1,895,888 1,874,967 1,902,409 1,886,300 1,873,179 1,834,531 2,862,343 497,517 729,933 2,228,662 1,013,135 52,443,326 53,778,083 64,949,274 87,762,862 94,736,763 94,829,228 4,202,841 4,239,824 5,798,899 2,680,162 6,056,348 6,733,135 20,433,826 19,536,711 18,889,733 18,328,287 18,966,380 18,673,036 9,639,766 9,971,383 10,084,437 9,990,368 9,943,681 8,566,157 3,830,435 3,779,577 2,807,935 2,388,077 4,475,943 5,279,297 4,912,545 4,733,922 4,678,369 9,894,345 9,048,983 9,741,990 2,282,947 860,039 8,542,370 16,818,821 27,639,839 17,981,861 700,000 635,000 2,405,000 6,703,020 7,150,000 6,855,000 - - - 26,720,000 - - 506,527 570,087 6,820,619 17,972,119 14,943,766 16,732,005 440,300 444,282 - - - - - - - - - - - - - 2,820,770 13,700,882 - - - 48,711 5,948,554 2,380,740 6,205,709 46,949,187 44,770,825 60,076,073 120,264,523 114,306,562 96,768,190 5,494,139 9,007,258 4,873,201 (32,501,661) (19,569,799) (1,938,962) - 14,350,000 105,109 169,930 161,049 154,734 - (15,013,350) - - - - - 842,166 - 38,300,000 - - 843,982 1,225,186 3,823,436 831,800 2,745,545 644,351 843,982 1,404,002 3,928,545 39,301,730 2,906,594 799,085 - - (56,799,027) - - - 6,338,121$ 10,411,260$ (47,997,281)$ 6,800,069$ (16,663,205)$ (1,139,877)$ 2.6% 2.7% 15.8% 22.1% 21.3% 25.8% Year Ended June 30, City of Poway Assessed Value of Taxable Property Last Ten Fiscal Years -156- Fiscal Year Assessed Value Ended Personal Net Taxable June 30, Land Improvements Property Total Exemptions Value before HOE 2009 3,647,796,486$ 4,472,160,193$ 254,000,489$ 8,373,957,168$ (166,537,126)$ 8,207,420,042$ 2010 3,640,861,781 4,548,446,929 288,729,686 8,478,038,396 (183,766,176) 8,294,272,220 2011 3,606,251,228 4,540,602,915 276,448,124 8,423,302,267 (178,136,001) 8,245,166,266 2012 3,638,418,566 4,608,371,669 286,292,343 8,533,082,578 (193,398,758) 8,339,683,820 2013 3,604,077,934 4,615,585,498 294,522,436 8,514,185,868 (212,901,964) 8,301,283,904 2014 3,770,334,144 4,733,730,176 298,807,480 8,802,871,800 (227,065,282) 8,575,806,518 2015 3,980,268,935 4,944,098,407 286,435,733 9,210,803,075 (236,519,578) 8,974,283,497 2016 4,198,319,498 5,193,793,825 287,853,187 9,679,966,510 (243,798,083) 9,436,168,427 2017 4,360,983,790 5,372,307,118 303,567,743 10,036,858,651 (248,041,928) 9,788,816,723 2018 4,572,607,138 5,547,678,336 299,989,126 10,420,274,600 (255,512,475) 10,164,762,125 Source: San Diego County Assessor's Office In 1978 the voters of the State of California passed Proposition 13 which resulted in dramatic tax reform as it relates to property tax collections. Proposition 13 established a property tax of 1% based upon the assessed value of the property being taxed. Each year the assessed value of property may be increased by an "inflation factor" that may not exceed 2%. With few exceptions, property is only re-assessed at the time that it is sold to a new owner. At that point the new assessed value is fixed at the purchase price of the property. Due to the nature of Proposition 13, over time the assessed value base has become significantly undervalued when compared to the true market value of the property. Because the true market value is not tied to any type of annual valuation process, there is no reliable means of determining the market value of the parcels within the City and therefore this amount is not disclosed. City of Poway Assessed Value of Taxable Property Last Ten Fiscal Years (Continued) -157-  Assessed Value (Continued) Change Estimated Total Homeowners Net Taxable From Tax Direct Exemptions (HOE) Value Prior Year Revenues Tax Rate (78,430,066)$ 8,128,989,976$ 1.86% 9,282,993$ 0.211% (78,218,791) 8,216,053,429 1.07% 9,189,474 0.211% (77,678,375) 8,167,487,891 -0.59% 9,169,316 0.211% (76,787,840) 8,262,895,980 1.17% 9,374,419 0.211% (75,843,150) 8,225,440,754 -0.45% 9,311,665 0.211% (74,913,680) 8,500,892,838 3.35% 9,648,224 0.211% (74,448,910) 8,899,834,587 4.69% 10,117,764 0.211% (73,706,162) 9,362,462,265 5.20% 10,614,545 0.211% (73,044,158) 9,715,772,565 3.77% 11,043,425 0.211% (72,492,736) 10,092,269,389 3.88% 11,498,968 0.211% City of Poway Direct and Overlapping Property Tax Rates Last Ten Fiscal Years -158- Overlapping Rates Poway Educational Palomar Total 1% Fiscal Year City Unified Revenue Community Property Ended Direct School San Diego Augmentation College All Tax June 30, Rate District County Fund District Other Rate 2009 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2010 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2011 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2012 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2013 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2014 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2015 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2016 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2017 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% 2018 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% Rates for Voter Approved Bond Indebtedness Total 1% Poway Total Fiscal Year Property Unified Property Ended Tax City School All Tax June 30, Rate Rate District Other Rate 2009 1.000% 0.000% 0.047% 0.035% 1.082% 2010 1.000% 0.000% 0.055% 0.031% 1.086% 2011 1.000% 0.000% 0.055% 0.042% 1.097% 2012 1.000% 0.000% 0.055% 0.041% 1.096% 2013 1.000% 0.000% 0.055% 0.041% 1.096% 2014 1.000% 0.000% 0.055% 0.040% 1.095% 2015 1.000% 0.000% 0.055% 0.040% 1.095% 2016 1.000% 0.000% 0.055% 0.040% 1.095% 2017 1.000% 0.000% 0.055% 0.045% 1.100% 2018 1.000% 0.000% 0.055% 0.044% 1.100% Source: San Diego County Assessor's Office In 1978 the voters of the State of California passed Proposition 13 which resulted in dramatic tax reform as it relates to property tax collections. Proposition 13 established a property tax of 1% based upon the assessed value of the property being taxed. The 1.00% is shared by all taxing agencies which the subject property resides within. Because the rate is fixed at 1.00%, each agency's portion of the 1.00% does not change materially from year-to-year. Rates over the 1.00% are for voter approved bonded indebtedness. City of Poway Principal Secured Property Tax Payers Current Year and Nine Years Ago -159- 2018 2009 Taxable % of Total Taxable % of Total Assessed City Assessed Assessed City Assessed Secured Value Rank Secured Value Secured Value Rank Secured Value Sorrento West Properties Inc 315,394,937$ 1 3.03%88,745,482$ 1 1.06% HCPLS Poway I LLC 101,311,386 2 0.97% Ventas Inc 80,690,401 3 0.77% San Miguel Valley Corp 65,769,732 4 0.63% Hometown Poway Royal Estates LLC 42,141,634 5 0.40% P M I Summerlyn LLC 41,973,000 6 0.40% Sysco Food Services 37,500,000 7 0.36%35,374,370 5 0.42% Costco Wholesale Corp 36,499,129 8 0.35%35,326,203 6 0.42% Poway Crossings Investors LLC 35,369,861 9 0.34%31,275,000 9 0.37% C T Crosthwaite I LLC 34,731,000 10 0.33% Slough Poway I LLC 66,779,944 3 0.80% Prudential Insurance 39,714,613 4 0.47% PDP Pomerado LLC 69,558,551 2 0.83% Government Employees Insurance Co.35,299,468 7 0.42% Fairfield Township LLC 33,686,003 8 0.40% Poway Tech Center Investors LLC 27,030,000 10 0.32% 791,381,080$ 7.58% 462,789,634$ 5.53% Source: San Diego County Assessor's Office City of Poway Assessed Value of Taxable Property Successor Agency & Redevelopment Tax Increment Property Tax Last Ten Fiscal Years Fiscal YearAssessed ValueChange Estimated TotalEndedPersonalBase Year Net Taxable FromTaxDirectJune 30,Land Improvements PropertyTotalExemptionsValuesValue Prior Year Revenues Tax RateRedevelopment Agency20091,666,217,121$ 2,208,050,046$ 191,508,808$ 4,065,775,975$ (66,638,280)$ (186,287,869)$ 3,812,849,826$ 1.73% 38,500,704$ 1.010%20101,698,144,577 2,286,610,454 213,648,005 4,198,403,036 (68,141,344) (186,287,869) 3,943,973,823 3.44% 39,822,711 1.010%20111,669,652,573 2,277,541,902 210,644,139 4,157,838,614 (67,140,049) (186,287,869) 3,904,410,696 -1.00% 39,482,933 1.011%Successor Agency20121,645,381,909 2,296,714,929 219,462,356 4,161,559,194 (73,438,572) (186,287,869) 3,901,832,753 -0.07% 39,018,328 1.000%20131,625,001,094 2,299,815,065 244,826,073 4,169,642,232 (90,214,209) (186,287,869) 3,893,140,154 -0.22% 38,931,402 1.000%20141,673,995,306 2,366,297,428 249,192,369 4,289,485,103 (94,861,189) (186,287,869) 4,008,336,045 2.96% 40,083,360 1.000%20151,765,636,957 2,462,514,646 237,703,511 4,465,855,114 (95,034,853) (186,287,869) 4,184,532,392 4.40% 41,845,324 1.000%20161,858,719,377 2,594,263,565 243,714,010 4,696,696,952 (99,167,944) (186,287,869) 4,411,241,139 5.42% 44,112,411 1.000%20171,913,629,433 2,680,780,152 252,543,674 4,846,953,259 (99,807,403) (186,287,869) 4,560,857,987 3.39% 45,608,580 1.000%20182,000,869,745 2,762,424,969 245,541,310 5,008,836,024 (101,399,206) (186,287,869) 4,721,148,949 3.51% 47,211,489 1.000%Source: San Diego County Assessor's OfficeIn 1978 the voters of the State of California passed Proposition 13 which resulted in dramatic tax reform as it relates to property tax collections. Proposition 13established a property tax of 1% based upon the assessed value of the property being taxed. Each year the assessed value of property may be increased by an"inflation factor" that may not exceed 2%. With few exceptions, property is only re-assessed at the time that it is sold to a new owner. At that point the newassessedvalue is fixed at the purchase price of the property. Due to the nature of Proposition 13, over time the assessed value base has become significantly undervaluedwhen compared to the true market value of the property. Because the true market value is not tied to any type of annual valuation process, there is no reliable meansof determining the market value of the parcels within the City and therefore this amount is not disclosed.AB XI 26 dissolved all Redevelopment Agencies in California and created Successor Agencies to manage the dissolution process which will last the lifeof eachagency. Poway's Redevelopment Agency was scheduled to expire in January 2037.-160- City of Poway Redevelopment Property Tax Levies and Collections Fiscal Years 2009-2012 -161-  Within The Year of Levy Collections Fiscal Year Current Current Percent From Prior Ended Secured Secured of Levy Years' Total June 30, Tax Levy Collected Collected Levies Collections 2009 38,031,377$ 37,099,651$ 97.55% 1,465,939$ 38,565,590$ 2010 39,609,344 38,592,272 97.43% 1,495,015 40,087,287 2011 39,189,880 38,684,907 98.71% 1,399,870 40,084,777 2012 39,162,627 21,655,038 55.30% 580,773 22,235,811 Source: San Diego County Assessor's Office Note 1:San Diego County does not break out prior years' collections by fiscal year, therefore, the amount reported in the Collections From Prior Years' Levies column is the cumulative amount collected during that fiscal year for all prior year levies, not the amount related to each fiscal year. Note 2:As part of AB XI 26 the Agency's last tax increment distribution was received in January 2012. Consequently, the Percent of Levy Collected was only 55.30%. Note 3:AB XI 26 dissolved all Redevelopment Agencies in California and created Successor Agencies to manage the dissolution process which will last the life of each agency. Poway's Redevelopment Agency was scheduled to expire in January 2037. Note 4:As part of AB XI 26 the Redevelopment Agency' was dissolved and the last tax increment distribution was received in January 2012, which is why there is less than ten years of activity presented. City of Poway General Property Tax Levies and Collections Last Ten Fiscal Years Within The Year of LevyCumulative Prior Years of LevyTotal Collections to DateFiscal YearCurrentCurrentPercentCollections PercentEndedSecuredSecuredof LevyPrior From Prior of Prior Year'sTotalTotalJune 30,Tax LevyCollectedCollected Year's Levies Year's Levies Levies Collected Levies Collections Percentage200917,295,459$ 16,805,480$ 97.17% 674,580$ 378,562$ 56.12% 17,970,039$ 17,184,042$ 95.63%201016,665,674 16,276,757 97.67% 849,654 490,66857.75% 17,515,328 16,767,426 95.73%201114,772,947 14,515,679 98.26% 808,521 411,30550.87% 15,581,468 14,926,983 95.80%201214,976,590 14,752,163 98.50% 702,501 232,77333.13% 15,679,092 14,984,936 95.57%201315,044,676 14,897,994 99.03% 550,273 214,57138.99% 15,594,949 15,112,565 96.91%201415,325,043 15,160,972 98.93% 507,586 226,14644.55% 15,832,630 15,387,118 97.19%201512,524,910 12,418,741 99.15% 470,515 278,06959.10% 12,995,425 12,696,810 97.70%201612,958,510 12,859,128 99.23% 312,585 143,34545.86% 13,271,094 13,002,474 97.98%201713,390,895 13,279,054 99.16% 285,552 140,08149.06% 13,676,447 13,419,135 98.12%201813,390,895 13,279,054 99.16% 285,552 140,08149.06% 13,676,447 13,419,135 98.12%Source: San Diego County Assessor's OfficeNote: San Diego County does not break out prior years' collections by fiscal year, therefore, the amount reported in the Collections From Prior Years' Levies column is the cumulative amount collected during that fiscal year for all prior year levies, not the amount related to each fiscal year. The significant decrease in the June 30, 2015 Current Secured Tax Levy was due to the final assessment for theCommunity Facilities District #88-1 being in the prior fiscal year. That amount was $3,209,813.-162- City of Poway Ratios of Outstanding Debt by Type Last Ten Fiscal Years Business-typeGovernmental Activities Activities Private Purpose TrustFiscal Year Tax Certificates Total Percentage Certificates Tax TotalEnded Allocation of Loan Revenue Primary of Personal Per of Allocation Loan PrivateJune 30, Bonds Participation Payable Bonds Government Income Capita Participation Bonds Payable Purpose Trust2009 240,800,638$ 50,068,163$ 2,282,702$ 1,568,547$ 294,720,050$ 12.61% 5,765 - - - - 2010234,987,072 48,454,096 2,400,513 1,380,571 287,222,252 12.39% 5,518 - - - - 2011228,957,393 20,870,836 2,542,009 1,182,394 253,552,632 11.53% 5,265 - - - - 2012- 17,627,771 - 969,149 18,596,920 0.81% 384 2,344,312 222,516,942 2,672,503 227,533,757 2013- 16,753,498 - 745,904 17,499,402 0.72% 360 1,986,311 215,576,452 2,780,463 220,343,226 2014- 16,261,467 - 512,660 16,774,127 0.69% 342 1,618,877 208,316,472 2,885,549 212,820,898 2015- 15,522,575 - 264,415 15,786,990 0.62% 322 1,237,034 200,633,015 2,971,614 204,841,663 2016- 14,764,508 - - 14,764,508 0.54% 295 840,722 172,587,873 3,087,885 176,516,480 2017- 13,987,299 - - 13,987,299 0.49% 278 430,053 163,593,731 3,193,031 167,216,815 2018- 13,195,978 - - 13,195,978 0.45% 263 - 154,504,587 3,338,564 157,843,151 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. The Tax Allocation Bonds were refunded in July 2015.Source: City of Poway Finance Department-163- City of Poway Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years -164-  Outstanding General Bonded Debt Fiscal Year Tax Percent of Ended Allocation Assessed Per June 30, Bonds Value (a) Capita 2009 -$ 0.00% - 2010 - 0.00% - 2011 - 0.00% - 2012 222,516,942 2.61% 4,599 2013 215,576,452 2.53% 4,439 2014 208,316,472 2.37% 4,253 2015 200,633,015 2.18% 4,091 2016 172,587,873 1.78% 3,445 2017 163,593,731 1.63% 3,255 2018 154,504,587 1.48% 3,077 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. (a) Assessed value has been used because the actual value of taxable property is not readily available in California. The Tax Allocation Bonds were refunded in July 2015. Source: City of Poway Finance Department City of Poway Direct and Overlapping Debt As of June 30, 2018 -165-  2017-18 Assessed Valuation: 10,164,762,125$ Estimated Share Debt % of Overlapping OVERLAPPING TAX AND ASSESSMENT DEBT:Outstanding Applicable (1) Debt Metropolitan Water District 60,600,000$ 0.369% 223,614$ Palomar Community College District 627,826,320 8.764% 55,022,699 Poway Unified School District School Facilities Improvement District No. 2002-1 139,985,766 39.710% 55,588,348 Poway Unified School District School Facilities Improvement District No. 2007-1 176,749,937 40.348% 71,315,065 Escondido Union High School District 87,884,694 0.077% 67,671 San Pasqual Union School District 243,535 2.284% 5,562 Palomar Pomerado Hospital District 436,358,740 12.787% 55,797,192 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 1,529,648,992$ 238,020,151$ DIRECT & OVERLAPPING GENERAL FUND DEBT: San Diego County General Fund Obligations 273,220,000$ 2.050% 5,601,010$ San Diego County Pension Obligations 558,525,000 2.050% 11,449,763 San Diego County Superintendent of Schools General Fund Obligations 10,785,000 2.050% 221,093 Palomar Community College District Certificates of Participation 2,720,000 8.764% 238,381 Escondido Union High School District Certificates of Participation 55,510,000 0.077% 42,743 Poway Unified School District Certificates of Participation 61,718,869 23.811% 14,695,880 City of Poway Certificates of Participation 13,195,977 100.000% 13,195,977 TOTAL OVERLAPPING GENERAL FUND DEBT 975,674,846$ 45,444,847$ OVERLAPPING TAX INCREMENT DEBT (Successor Agency): Tax Allocation Bonds 138,200,000$ 100.000% 138,200,000$ Certificates of Participation - 100.000% - TOTAL OVERLAPPING TAX INCREMENT DEBT 138,200,000$ 138,200,000$ TOTAL DIRECT DEBT 13,195,977$ TOTAL OVERLAPPING DEBT 408,469,021$ COMBINED TOTAL DEBT 421,664,998$ (2) Ratios to 2017-18 Assessed Valuation: Total Overlapping Tax and Assessment Debt 2.34% Total Direct Debt 0.13% Combined Total Debt 4.15% Ratios to Redevelopment Successor Agency Incremental Valuation ($4,721,148,949): Total Overlapping Tax Increment Debt 2.93% Notes: (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc. and City of Poway Finance Department Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City. This schedule estimates the portion of the outstanding debt of those overlapping governments that is borne by the residents and businesses of the City. This process recognizes that, when considering the City's ability to issue and repay long-term debt, the entire debt burden borne by the residents and businesses should be taken into account. However, this does not imply that every taxpayer is a resident, and therefore responsible for repaying the debt, of each overlapping government. (1) The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the district's total taxable assessed value. City of Poway Legal Debt Margin Information Last Ten Fiscal Years -166-  2018 2017 2016 2015 2014 Assessed valuation 5,443,613,176$ 5,227,958,736$ 5,024,927,288$ 4,789,751,105$ 4,567,470,473$ Conversion percentage 25% 25% 25% 25% 25% Adjusted assessed valuation 1,360,903,294 1,306,989,684 1,256,231,822 1,197,437,776 1,141,867,618 Debt limit percentage 15% 15% 15% 15% 15% Debt limit 204,135,494 196,048,453 188,434,773 179,615,666 171,280,143 Total net debt applicable to limit: General obligation bonds - - - - - Legal debt margin 0.00% 0.00% 0.00% 0.00% 0.00% Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. Source: City of Poway Administrative Services Department San Diego County Assessors Office The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation. However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the state. FISCAL YEAR City of Poway Legal Debt Margin Information Last Ten Fiscal Years (Continued) -167-  2013 2012 2011 2010 2009 4,408,143,750$ 4,437,851,067$ 4,340,755,570$ 4,350,898,397$ 4,394,570,216$ 25% 25% 25% 25% 25% 1,102,035,938 1,109,462,767 1,085,188,893 1,087,724,599 1,098,642,554 15% 15% 15% 15% 15% 165,305,391 166,419,415 162,778,334 163,158,690 164,796,383 - - - - - 0.00% 0.00% 0.00% 0.00% 0.00% FISCAL YEAR City of Poway Pledged Revenue Coverage Last Ten Fiscal Years -168-  Tax Allocation Bonds Fiscal Year Debt Service Ended Tax RPTTF June 30, Increment Distribution Principal Interest Total Coverage 2009 38,940,302$ -$ 5,340,000$ 12,068,451$ 17,408,451$ 2.24 2010 39,377,603 - 5,555,000 11,877,545 17,432,545 2.26 2011 39,015,261 - 5,775,000 11,658,142 17,433,142 2.24 2012 21,926,632 16,047,570 6,180,000 11,411,148 17,591,148 2.16 2013 - 39,511,570 6,695,000 11,169,832 17,864,832 2.21 2014 - 40,907,420 7,020,000 10,889,354 17,909,354 2.28 2015 - 42,495,591 7,450,000 10,565,336 18,015,336 2.36 2016 - 44,786,412 7,440,000 6,558,087 13,998,087 3.20 2017 - 46,953,802 7,110,000 6,895,377 14,005,377 3.35 2018 - 47,750,166 7,205,000 6,802,425 14,007,425 3.41 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. RPTTF is the acronym for the Redevelopment Property Tax Trust Fund Source: City of Poway Administrative Services Department City of Poway Demographic and Economic Statistics Last Ten Calendar Years -169-  Per Capita Calendar Personal Personal Labor Unemployment Year Population Income Income Force Rate 2009 51,126 2,336,764,956$ 45,706$ 28,100 6.1% 2010 52,056 2,318,838,039 44,545 28,000 6.3% 2011 48,155 2,198,908,930 45,663 27,900 6..2% 2012 48,382 2,292,564,112 47,385 28,600 5.5% 2013 48,559 2,418,759,897 49,811 29,100 4.3% 2014 48,979 2,434,069,144 49,696 28,900 3.6% 2015 49,041 2,530,249,449 51,595 26,000 3.2% 2016 50,103 2,723,859,688 54,365 25,900 3.3% 2017 50,253 2,832,825,802 56,371 25,500 2.8% 2018 50,207 2,934,102,264 58,440 26,000 3.2% Source: Population - State of California Department of Finance Personal Income - State of California Department of Finance/U.S. Bureau of Economic Analysis Employment Information - State of California Employment Development Department - Fiscal Year City of Poway Principal Employers Current Year and Nine Years Prior -170-  2018 2009 Percent of Percent of Number of Total Number of Total Employer Employees Rank Employment Employees Rank Employment General Atomics Aeronautical Systems 4,571 1 17.58% Geico Direct 1,720 2 6.62% 1,500 1 5.34% Poway Unified School District 1,366 3 5.25% 1,462 2 5.20% Delta Design, Inc. 750 4 2.88% Pomerado Hospital 738 5 2.84% 743 3 2.64% A.O. Reed & Co. 450 6 1.73% Sysco Food Services of SD 385 7 1.48% 456 5 1.62% Walmart 367 8 1.41% 340 8 1.21% H M Electronics, Inc 300 9 1.15% Arch Health Partners 300 10 1.15% Cohu Inc.650 4 2.31% Digirad Corporation 434 6 1.54% First American Credco 416 7 1.48% City of Poway 310 9 1.10% Mitchell Repair Information Company 265 10 0.94% Total 10,947 42.10% 6,576 23.40% Total City Labor Force 26,000 28,100 Sources: City of Poway Economic Development Division-by Employer State of California Employment Development Department-Total City Labor Force City of Poway Full-Time-Equivalent City Employees by Function Last Ten Fiscal Years -171-  Function 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 General government 30 31 31 29 28 27 31 33 40 35 Public Safety (a) 58 56 56 55 54 54 54 54 54 57 Public works 82 85 84 81 79 81 85 84 83 92 Redevelopment Services - - - - - - - 9 9 9 Community Services 20 20 20 20 20 20 20 20 20 27 Development Services 25 22 22 21 22 23 30 29 29 37 215 214 213 206 203 205 220 229 235 257 Notes: Amounts shown are the number of positions approved in each operating budget for the fiscal year. (a) Law enforcement services are provided through contract with the County of San Diego Sheriff. Source: City of Poway Financial Plan The City is reporting its ten year history starting with the implementation of GASB 44 in fiscal year 2006, and in this instance was able to add an additional two years. City of Poway Operating Indicators Current and Prior Nine Years -172-  Function 2018 2017 2016 2015 2014 General government: Business registrations issued 1,859 1,987 1,509 1,510 1,285 Vendor payments processed 6,203 6,689 6,623 6,705 6,426 Public Safety: Arrests made 900 900 1,079 1,214 1,069 Fire emergency responses 5,146 4,755 4,564 4,229 4,099 Safety Inspections 2,451 2,652 2,587 3,069 2,899 Development Services: Building permits issued (1) 2,465 2,013 2,444 2,070 1,504 Building inspections 9,023 9,600 9,162 12,488 8,221 Culture and recreation: Performing arts center attendance 56,573 56,637 57,908 60,276 55,652 Library-number of holdings in collection (3) (3) (3) (3) 93,951 Library-number of holdings circulated 897,531 863,874 782,599 733,689 709,823 Athletic field permits issued 335 285 225 232 282 Highways and streets: Roads resurfaced in square feet 204,000 306,543 306,000 237,024 299,038 Roads slurry sealed in square feet 4,231,308 4,627,262 4,933,522 4,378,483 4,379,695 Pot holes repaired/work orders (2) 189 191 213 193 175 Water: Residential water customers 12,662 12,631 12,625 12,765 12,674 Commercial water customers 500 495 493 658 645 All other water customers 816 812 811 ---------------------------------------- Average daily consumption (mg) 9.47 8.13 7.39 8.21 10.66 Sewer: Residential sewer customers 11,410 11,391 11,381 11,530 11,498 Commercial sewer customers 480 475 472 630 627 All other sewer customers 328 329 329 ---------------------------------------- Average daily treatment (mg) 2.35 2.68 2.48 2.53 2.73 Source: City of Poway Notes: (1) In Fiscal Year 2007-08 the Development Services Department changed the method used to count the number of permits issued which led to the large decrease from the previous year. (2) In Fiscal Year 2008-09 the Public Works Department began reporting pot holes fixed rather than pot holes work orders. (3) Because of County-wide interbranch loan program this statistic is no longer tracked. City of Poway Operating Indicators Current and Prior Nine Years (Continued) -173-  2013 2012 2011 2010 2009 1,522 1,418 1,317 1,192 942 6,770 7,020 7,063 7,804 8,936 1,038 1,123 1,145 1,334 1,015 3,846 3,638 3,811 3,691 3,711 2,687 2,474 2,863 1,606 2,104 1,345 1,237 1,176 1,144 1,157 8,349 5,981 6,126 6,580 7,417 59,389 59,897 53,249 61,214 68,993 75,000 96,000 104,367 125,977 124,977 782,288 693,783 765,704 638,494 562,865 156 161 152 148 144 188,561 201,968 207,968 290,877 600,000 3,928,425 4,563,496 4,369,160 4,369,503 4,980,000 644 1,323 571 193 147 12,509 12,523 12,439 12,492 12,458 529 464 496 514 514 ----------------------not reported------------------------------------------------------------- 10.16 9.36 8.99 9.57 11.61 11,474 11,383 11,241 11,225 11,191 623 782 770 774 770 ----------------------not reported------------------------------------------------------------- 2.86 3.01 3.27 3.15 3.43 City of Poway Capital Assets Statistics Current and Prior Nine Years -174-  Function 2018 2017 2016 2015 2014 Public Safety: Number of fire stations 3 3 3 3 3 Number of sheriff stations 1 1 1 1 1 Public works: Total number of streetlights 3,059 3,059 3,059 3,059 3,059 Signal controlled intersections 56 56 56 56 56 Health and welfare: Senior center facilities 1 1 1 1 1 Culture and recreation: Number of Libraries 1 1 1 1 1 Number of Performing Arts Centers 1 1 1 1 1 Number of Parks 19 19 19 19 19 Acres of developed parks 232 232 232 232 232 Number of reserves/preserves 2 2 2 2 2 Acres of reserves/preserves 2,400 2,400 2,400 2,400 2,400 Miles of trails 56 56 56 56 56 Highways and streets: Miles of roadway 165 165 165 165 165 Water: Miles of water lines 289 289 289 289 289 Water storage capacity (billon/gallons) 1.11 1.11 1.11 1.11 1.11 Sewer: Miles of sewer lines 186 186 186 186 186 Miles of storm sewers 64 64 64 64 64 Source: City of Poway City of Poway Capital Assets Statistics Current and Prior Nine Years (Continued) -175-  2013 2012 2011 2010 2009 3 3 3 3 3 1 1 1 1 1 3,059 3,073 3,073 3,045 3,045 55 55 55 55 55 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 19 19 19 18 18 232 232 232 232 232 2 2 2 2 2 2,400 2,400 2,400 2,400 2,400 56 56 56 56 56 165 165 165 165 165 289 289 289 253 253 1.11 1.11 1.11 1.11 1.11 186 186 186 175 175 64 64 64 64 64     This page intentionally left blank.   -177- Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Bernardino, California January 28, 2019