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ACFR FY 2018-2019• Comprehensive Annual Financial Report For the Year Ended June 30, 2019 *�Fy+��lia Ili '00 City of Poway Poway, California Comprehensive Annual Financial Report Year Ended June 30, 2019 Prepared by the Finance Department of the City of Poway This page intentionally left blank. CITY OF POWAY Comprehensive Annual Financial Report Year Ended June 30, 2019 Table of Contents INTRODUCTORY SECTION PAGE NUMBER Letter of Transmittal i Principal Officers vii Organization Chart viii GFOA Certificate of Achievement for Excellence in Financial Reporting ix FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 5 Basic Financial Statements: Government —Wide Financial Statements Statement of Net Position 18 Statement of Activities 20 Fund Financial Statements: Governmental Fund Financial Statements: Balance Sheet — Governmental Funds 25 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 26 Statement of Revenues, Expenditures, and Changes in Fund Balances 27 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 28 Proprietary Fund Financial Statements: Statement of Net Position 31 Statement of Revenues, Expenses, and Changes in Net Position 32 Statement of Cash Flows 33 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Position 37 Statement of Changes in Fiduciary Net Position 38 Notes to the Basic Financial Statements 41 Required Supplementary Information: Budgetary Information 89 Budgetary Comparison Schedule — General Fund 90 Budgetary Comparison Schedule — Housing Authority Fund 91 CITY OF POWAY Comprehensive Annual Financial Report Year Ended June 30, 2019 Table of Contents (Continued) Schedule of Changes in Net Pension Liability and Related Ratios, Last 10 Years — Miscellaneous Plan 92 Schedule of Plan Contributions, Last 10 Years — Miscellaneous Plan 93 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 94 Schedule of Plan Contributions, Last 10 Years — Safety Plan 95 Schedule of Changes in Net Pension Liability and Related Ratios, Last 10 Years — Retirement Enhancement Plan 96 Schedule of Plan Contributions, Last 10 Years — Retirement Enhancement Plan 97 Supplementary Information: Non -Major Governmental Funds: Combining Balance Sheet 103 Combining Statement of Revenues, Expenditures and Changes in Fund Balance 107 Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual Non -Major Special Revenue Funds: Fire Protection 112 800 MHz Communication System 113 Gas Tax 114 Drainage 115 Miscellaneous Grants 116 AB 939 Integrated Waste Management 117 Community Development Block Grant 118 Transportation Development Act 119 Proposition A 120 SB 1186 Disabled Access Law 121 Excess SAFE Reserve 122 Regional Arterial Traffic Mitigation 123 Fire Protection Impact Fees 124 BEGIN Program 125 Housing In -Lieu 126 Abandoned Vehicle Fees 127 Habitat In -Lieu 128 Maintenance Districts 129 Road Repair 130 Non -Major Debt Service Fund: City Debt Service 131 Non -Major Permanent Fund: Mary Patricia Ross Trust 132 CITY OF POWAY Comprehensive Annual Financial Report Year Ended June 30, 2019 Table of Contents (Continued) Non -Major Capital Projects Funds: Park Improvement Capital Projects Fund 133 Street Improvement Capital Projects Fund 134 Municipal Improvement Capital Projects Fund 135 Internal Service Fund: Statement of Net Position 138 Statement of Revenues, Expenses and Changes in Net Position 139 Statement of Cash Flows 140 Fiduciary Funds: Combining Statement of Fiduciary Net Position —Agency Funds 143 Combining Statement of Changes in Assets and Liabilities — Agency Funds 144 STATISTICAL SECTION Net Position by Component — Last Ten Fiscal Years 150 Changes in Net Position — Last Ten Fiscal Years 152 Fund Balances, Governmental Funds — Last Ten Fiscal Years 154 Changes in Fund Balances, Governmental Funds — Last Ten Fiscal Years 156 Assessed Value of Taxable Property — Last Ten Fiscal Years 158 Direct and Overlapping Property Tax Rates — Last Ten Fiscal Years 160 Principal Secured Property Taxpayers — Current Year and Nine Years Ago 161 Assessed Value of Taxable Property Successor Agency and Redevelopment Tax Increment Property Tax — Last Ten Fiscal Years 162 Redevelopment Property Tax Levies and Collections — Fiscal Years 2010-2012 163 General Property Tax Levies and Collections — Last Ten Fiscal Years 164 Ratios of Outstanding Debt by Type — Last Ten Fiscal Years 165 Ratios of General Bonded Debt Outstanding — Last Ten Fiscal Years 166 Direct and Overlapping Debt as of June 30, 2019 167 Legal Debt Margin Information — Last Ten Fiscal Years 168 Pledged Revenue Coverage — Last Ten Fiscal Years 170 Demographic and Economic Statistics — Last Ten Calendar years 171 Principal Employers — Current Year and Nine Years Ago 172 Full -Time -Equivalent City Employees by Function — Last Ten Fiscal Years 173 Operating Indicators — Last Ten Fiscal Years 174 Capital Assets Statistics — Last Ten Fiscal Years 176 This page intentionally left blank. Introductory Section This page intentionally left blank. / STEVE VAUS, Mayor DAVE GROSCH, Deputy Mayor CAYLIN FRANK, Councilmember BARRY LEONARD, Councilmember JOHN MULLIN, Councilmember December 31, 2019 CITY OF POWAY Honorable Mayor, Councilmembers and Residents of Poway, It is with great pleasure to present the City of Poway's Fiscal Year (FY) 2018-19 Comprehensive Annual Financial Report (CAFR). This report has been prepared in conformity with generally accepted accounting principles (GAAP) and has been audited in accordance with generally accepted auditing standards by Davis Farr, LLP, a firm of licensed certified public accountants. This CAFR includes the financial activity for all funds of the city. Included within the city's financial statements is the financial information of the Poway Housing Authority, Poway Public Financing Authority, and the Successor Agency to the Poway Redevelopment Agency (formerly the Poway Redevelopment Agency). Although the entities are legally separate from the city, their financial operations are closely related. Their activities are included with the activities of the city because the City Council serves as the board of directors and can impose its will on these entities. There is, therefore, a financial benefit/burden relationship. The CAFR consists of management's representation concerning the finances of the city. Consequently, responsibility for the accuracy of the data and completeness and fairness of the presentation, including all disclosures, rests with the city. We assert that, to the best of our knowledge and belief, this report is complete and reliable in all material respects. All disclosures necessary to enable an understanding of the city's financial activities have been included. Management Discussion and Analysis (MD&A) immediately follows the independent auditor's report and provides a narrative introduction, overview and analysis of the basic financial statements. MD&A complements this letter of transmittal and should be read in conjunction with it. PROFILE OF THE GOVERNMENT The City of Poway (Poway) incorporated on December 1, 1980, under the general laws of the State of California. The city operates under a Council -Manager form of government. The City Council serves as the legislative and policy -making body of the city and enacts the laws that protect the general welfare of the community. The City Manager is appointed by the City Council and serves as the Chief Executive Officer. The City Manager is responsible for the administration of all city affairs and the implementation of policies established by the Council. The City Attorney is also appointed by, and serves, the City Council. The City Manager appoints all other City of Poway staff. Poway provides water, sewer, street maintenance, fire, paramedic, parks, recreation, planning and building services. The city contracts with the County of San Diego Sheriff's Department for law enforcement and with the City of San Diego for wastewater treatment services. City Hall Located at 13325 Civic Center Drive Mailing Address: P.O. Box 789, Poway, California 92074-0789 www.poway.org ECONOMIC CONDITION AND OUTLOOK Poway is located along the coastal foothills of San Diego County, 20 miles north of downtown San Diego and three miles east of Interstate 15. The city spans 39 square miles and has a population of 50,207. While there is a broad continuum of housing options, Poway consists of mostly single-family homes. Poway's median home value is around $740,000. The Poway Unified School District is a national leader in K-12 public education. Poway continues to be recognized as an exceptional place to live. Poway was named the 18th Safest City in California in January 2019 by Safewise.com and is regularly recognized as having one of the lowest crime rates of any city in the county. In 2018 Poway was the safest incorporated city in San Diego County with an FBI crime index of 11.41 crimes per 1,000 residents. This low crime rate can be attributed, in part, to the County of San Diego Sheriff Department's engagement with the community and its proactive law enforcement techniques. Businesses in Poway offer well -paying jobs. Some of the city's top employers include General Atomics, Geico, Poway Unified School District, Delta Design, Palomar Medical Center Poway, Mitchell Repair Information Company, and Sysco Food Services. Poway has a labor force (the number of people who work or are available for work) of 26,400. The city's unemployment rate is 2.6 percent compared to the state's unemployment rate of 3.5 percent. Poway is known as the "City in the Country." More than 7,000 acres, representing over 30 percent of Poway's land use, has been set aside as preserved natural open space. Residents enjoy a high quality of life supported by the city's 232 acres of parkland and 76 miles of riding, hiking, and biking trails. Poway has long relied on conservative fiscal assumptions to plan ahead with multi -year fiscal forecasts and capital plans. The City Council continued to support a conservative approach in adopting the budget for FY 2018-19. The city's General Fund closed the fiscal year with a $0.72 million surplus which was primarily the result of higher than expected property taxes and sales taxes coupled with lower than anticipated expenditures. In accordance with the Council adopted General Fund Reserve Policy, the Council also added $1.64 million to the city's reserves to maintain reserves at the adopted policy level of 45% of operating expenditures, or $20.93 million, for FY2018-19. Poway, like other municipalities in California, continues to see substantial increases to employer contribution rates to the California Public Employees' Retirement System (CaIPERS). CaIPERS has revised its actuarial methodology and, coupled with its lower than projected earnings in previous years, this has resulted in a significant escalation in anticipated retirement costs for all employee groups over the next several years. The most recently completed actuarial analysis indicates that the city has approximately $55 million in unfunded liability, approximately 17% higher than the previous report. Long-term revenue growth is not projected to keep pace with rising pension costs. Historically, the City Council has used year-end savings and one-time monies to reduce unfunded pension plan liabilities and for capital reinvestment. Concerns about the operating budget's ability to bear future increases prompted the city to hire a specialized actuary to evaluate the city's funded status and future obligations. This analysis, completed September 2018, recommended committing additional funds to CaIPERS and/or establishing a Section 115 Trust to mitigate some of the impact of the projected increases. The city staff is currently analyzing the most fiscally prudent approach for the City Council's consideration. It will be important for the city to continue to work with its employees to identify measures that will ensure increases in ongoing compensation costs do not outpace revenue growth. ii As part of the city's ongoing commitment to maintain a balanced budget and adequate reserves, there is a continued focus on cost recovery for recreation programs. The city reviewed and updated fees and policies for the Poway Community Swim Center to increase cost recovery and implement best practices. The city also increased water and wastewater rates in March 2019 to recover pass -through costs and fund the continued proper maintenance of the utility infrastructure including necessary capital projects. At that time, direction was provided by the City Council to city staff to pursue a cost -of -service study to evaluate different rate structures and how these impact different classes of customers (e.g., residential, non-residential). As a result of updating the Poway Road Specific Plan last year, the city executed a development agreement for "Poway Commons," a mixed -use development with 97 market rate residential units, 44 affordable senior apartments, including retail on the north and south sides of Poway Road. It also issued building and grading permits for "The Outpost" mixed -use project with 53 apartments and 42,000 square feet of commercial space. Building permits were issued for a new 4,584 square foot Chick-Fil-A restaurant on Poway Road. A draft environmental impact report, specific plan application and related development plans and planning permits were submitted and reviewed for "The Farm in Poway," a 118-acre specific plan proposed to include 160 residential homes, as well as agricultural, recreational and retail uses to revitalize private property that once operated as a country club. Several tenant improvements projects for General Atomics, the largest employer in the South Poway Business Park, were approved, totaling over 120,000 square feet. Planning and grading permits were issued for two tilt -up industrial buildings totaling 535,000 square feet in the park as well. The City Council continues to support the preservation of open space by using its Habitat In -Lieu Fee Fund to purchase additional land. An important part of Poway's rural image is defined by its natural environmental features, including the mountains that surround it, the creeks that cross the valley floor, and its open space. The city purchased two properties, totaling close to 59 acres, with the Habitat In -Lieu Fee Fund at a cost of $490,000. The city was a co -applicant with the Trust for Public Lands on two grants that were used to acquire 162 acres of prominent open space, along with $125,000 from the Habitat In -Lieu Fee Fund. The City also acquired three additional properties at no cost. The total open space acquired during FY2018-19 was over 345 acres. Poway prides itself as the "city that volunteers." Volunteer rangers, ushers, docents, tour guides, teens, CERT members and others contributed over 27,000 hours of service this past year. In addition, the County of San Diego Sheriff's Senior Volunteer Patrol and its over 50 community members volunteered more than 16,000 hours to supplement law enforcement at events and incidents throughout the city. The city continues to be recognized for exceptional community programming. The Winter Festival Special Needs event received the California Parks and Recreation Society's Creating Community Award of Excellence. This event gives special needs participants a safe, inclusive Winter Festival event to play together in the great outdoors and builds their connections within the larger Poway community. Poway was also recognized for its outstanding Information Technology governance and operation practices with an Excellence in IT Practices Award by the Municipal Information Systems Association of California. iii MAJOR INITIATIVES Reinvesting in the city's infrastructure remains a top priority. The city completed sixteen capital improvement projects (CIPs) this fiscal year including the Community Park Electrical Upgrades project, Water Treatment Plant Rehabilitation and Pump Station 1 Electrical Upgrades project, and rehabilitation of the Alta Mira Reservoir. Another seven CIP projects are under construction, including Buehler Reservoir Rehabilitation and the Espola Road Safety Improvements project. Eleven other projects are in the pre -construction phase with another nine projects in various stages of design. A large piece of the overall capital improvement program is the city's 10-year $18,000,000 water infrastructure rehabilitation plan. The city begins the fifth year of the plan with three water projects under construction, and another seven in various stages of design. These ten projects include security upgrades at Poway Dam, three reservoir rehabilitation projects, and extensive upgrades at the city's Water Treatment Plant with budgets totaling over $6,300,000. Escrow closed in April 2019 for Villa de Vida, an affordable 54-unit multi -family rental housing development for adults with disabilities. Poway Housing Authority worked with Villa de Vida and Mercy Housing California to secure the tax credits needed to make this 64,545 square -foot project a reality. Construction began on May 1, 2019. In May 2018 the City approved a consultant agreement for the preparation of construction documents for the new community center (Center) that will replace the aging buildings with a multi -use, multi -generational facility at the same location (Community Park). The construction documents were completed in June 2019 and a notice inviting bids was advertised on June 6 and 13, 2019. The city intends to pay cash to build the Center. The city staff was able to meet its goal of maintaining existing programming during the construction process by ensuring that city programs found space at other city facilities and by assisting the Poway Senior Center, a 501(c)(3) that operates out of the community center, with finding a temporary location allowing them to continue providing services during construction. The Poway Swim Center renovations were completed in Fall 2018 and included replacing the pool deck and pool plaster, creating a toddler "splash pad" play space, remodeling the locker rooms, adding a new administration building and update mechanical equipment. A memorial honoring America's service members missing in action and prisoners of war was unveiled at the Poway Veterans Park on Veterans Day (November 11, 2018). The Public Works Department initiated a Proposition 218 ballot in April 2019 to adjust assessments in the landscape maintenance district (LMD) for commercial properties in the South Poway Business Park. Assessments for this area had not been increased since 1996. Because of limited funds, the LMD was unable to keep up with rising costs and maintain the area as it had in the past. The ballot measure was successful (55% voted for the increase) and 327 commercial properties were detached from the existing LMD and annexed into a new one with a consumer price index (CPI) not to exceed 3 percent. The purpose of the CPI is to keep the current service level and reinvest in landscaping and maintenance. At the City Council's request, an LMD advisory group was formed in 2018 to work alongside city staff to move forward a Proposition 218 ballot for two LMDs that cover landscaping along Twin Peaks and Espola Roads. A 2018 ballot in both districts was unsuccessful. The goal of the advisory committee is to develop a master landscape plan, provide public outreach and a communication platform to help with a successful re -ballot. The re -balloting process is slated for early 2021. iv The Fire Department replaced an aging fire engine designed for wildfire responses. The city now has a specialized wildland fire apparatus at every fire station, improving the Fire Department's deployment to vegetation fires within the city's jurisdiction. Emergency preparedness in the event of a disaster remains a critical on -going initiative for Poway. The city held a Community Emergency Response Team (CERT) academy resulting in the graduation of 23 community members. To date, over 89 residents have been trained in care and sheltering. An important function of emergency preparedness is coordination of disaster funding and grants submittals. During the year, the city received over $42,000 in grant funding and $319,000 in FEMA reimbursement. In FY2018-19, the Fire Department signed a contract with a new vendor for the pickup and disposal of hazardous waste, including medical sharps containers and expired non -controlled medications. By adjusting management of this program, the city was able to reduce its hazardous waste disposal fees by 99%, while simultaneously increasing services provided by the vendor. The Fire Department also improved its management and security of controlled medications and narcotics with the purchase of digital controlled substances vaults. Located at each fire station and in all fire apparatus, this new system allows paramedics to digitally inventory controlled substances and record the usage of controlled substances. These new vaults include automated security notification capabilities and resulted in the discontinuation of paper documentation and management. The Finance and Human Resources Departments completed a multi -year implementation of the new Enterprise Resource Planning (ERP) system with the rollout of the Budget Development, HR and Payroll modules. These modules provide a central system for data entry, electronic approval, and reporting and enhance information coordination across departments. Also included is an employee self-service web and mobile application for time card entry, employee benefits/pay information and electronic paycheck distribution. The Finance Department is also implementing Customer Connect, a user-friendly customer portal for the city's water and wastewater customers. It will be available over smartphones, tablets, and computers and provide customers a more efficient payment process. This system is expected to be implemented in the latter half of FY2019-20. INTERNAL FRAMEWORK Management has established a comprehensive internal control framework that is designed to protect the city's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the costs of a control should not exceed the benefits likely to be achieved and the valuation of costs and benefits requires estimates and judgements by management. BUDGETARY CONTROLS In addition to internal controls, the city maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the General Fund, Special Revenue Funds, and all other governmental funds, are included in the annual appropriated budget. The budget is arranged by department, division and fund and is presented by the City Manager to the five - member Council -appointed Budget Review Committee. The Budget Review Committee provides the City Council with a written review of the proposed budget. The review is presented, along with the City Manager's proposed budget, to the City Council. The City Council then adopts the budget prior to the beginning of the v fiscal year, and it serves as the foundation for the city's financial planning and control. The budget is reviewed at mid -year, and necessary adjustments are made to ensure that expenditures are not outpacing anticipated revenues. RELEVANT FINANCIAL POLICIES The significant accounting policies of the city are described in the Notes to the Basic Financial Statements. These accounting policies have been approved by the city's independent certified public accountant and are in conformance with the recommendations of the American Institute of Certified Public Accountants and the Governmental Accounting Standards Board. ANNUAL AUDIT The California Government Code requires general law cities, such as Poway, to be audited annually by independent certified public accountants selected by the City Council. The goal of an independent audit is to provide reasonable assurance that the financial statements of the city are free of material misstatements. This requirement has been met and the auditor's independent report is included in this report. AWARDS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Poway for its FY2017-18 CAFR. To be awarded the certificate, the report must be easy to read and organized in an efficient manner with content that conforms to program standards. Such a report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current report conforms to the program requirements, and we are submitting it to the GFOA to determine its eligibility for the certificate. ACKNOWLEDGEMENTS I would like to extend my gratitude to the Finance Department for their professionalism and dedication which has made the publication of this report possible. I would also like to thank the Mayor, City Council and City Manager for their leadership and support in conducting the financial operations of the city in a responsible manner consistent with the city's mission to protect and enhance the quality of life for present and future generations alike. Finally, I would like to acknowledge the hard work and dedication of all City of Poway employees as evidenced by the long list of accomplishments and initiatives included in this transmittal letter. Respectfully Submitted, -L7 Aaron Beanan Director of Finance vi CITY OF POWAY Principal Officers June 30, 2019 City Council Mayor Steve Vaus Deputy Mayor Dave Grosch Council Members: Caylin Frank Barry Leonard John Mullin City Manager City Attorney Assistant City Manager Director of Finance Director of Human Resources Director of Development Services Director of Public Works Director Community Services Director of Safety Services City Clerk Appointed Officials Administrative Personnel Chris Hazeltine Alan Fenstermacher Wendy Kaserman Donna Goldsmith Jodene Dunphy Robert Manis Michael Obermiller Brenda Sylvia Mark Sanchez Faviola Medina vii CITY OF POWAY ORGANIZATION CHART June 30, 2019 Successor Agency to the Redeye to pme nt Aga ncy City Clerk FIrianCe 1. F1rli+rc6 s. Call CAW Services 3. Informalio+n Tech naloEly 4. Suppan St, MC el 0, CipeLnl M rl; rrdti Residents CRy Council Planning Commissic» Housing A Ut ho rity Dity Manager H Urnwl ResouiVeS 1. Henan li.rrawiaxi 2. FHA INarwrpamwrt Community arvioes 1•1 I•; • 12 r Economic Development Cleve lop men' Services Lour§' i1 PUbI I0 Work$ 5afety 5.erMicn 1. LNsun9u Ici4 1. PYnrn" 1. Way IAtom Ulm Mom 1_ FireSupprassion 2, Lake Operation' 2. Marra Ins pmeIoi 2, Watnr Supply >. fire Pow4.1114 1 a_ Aguilar Conley 3_ CVEY Proloci 1 3_ &away PunrpIng & ]_ Par./modes I. Pallonnin9 kin a. Land DIME.i%. n1 Wsposil A. Law Eniofertrea1 Cooler i. Engkippifig 4, WINN'OburlhiAen 5. Oki P atm Park In pedlim 3. 1YasitiwairrColIscllon 8. Library i, TratrlicEnginoofin 9 d, ileelalreedWeer 7_ heleValve 7. Mown Wale( 7_ Liginhurnak 41wriins 1Llrtiteii Ilimmpolibill 1. 9IriitM Uirdince 8. Conwni ilrRack & f♦waingPragrama 9, Ram Water SFlaad iw. 5.0. NIminieleal4n Con#al 10. Vehicle 4Egrip,idain 11_ EnvIr nnorb ilRo irroi 12 Rarlik Trade; Lai14SCap4 IVlaintenerrae ii Fsc•lssIlalnlinance 14. Spec4al Obt & Condarcla 0 Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of Poway California For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2018 P ?iztlu.w' Executive Director/CEO ix This page intentionally left blank. x Financial Section This page intentionally left blank. DavisFarr CERTIFIED PUBLIC ACCOUNTANTS City Council City of Poway Poway, California Davis Farr LLP 2301 Dupont Drive I Suite 200 I Irvine, CA 92612 Main: 949.474.2020 I Fax: 949.263.5520 Independent Auditor's Report Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Poway, California, as of and for the year ended June 30, 2019, and the related notes to the basic financial statements, which collectively comprise the City's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Poway's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 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 of Poway, California, as of June 30, 2019, and the respective changes in financial position and, 1 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, Schedules of Changes in Net Pension Liability and Related Ratios, Last Ten Years - Miscellaneous and Retirement Enhancement Plans, Schedules of Plan Contributions, Last Ten Years - Miscellaneous, Safety, and Retirement Enhancement Plans, and Schedule of the City's Proportionate Share of the Plan's Net Pension Liability and Related Ratios - Safety Plan, 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 of Poway's basic financial statements. The combining and individual non -major fund financial statements, the introductory section, the budget to actual schedules, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual non -major fund financial statements and budget to actual schedules 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 to 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 budget to actual schedules, are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory section and the 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 December 31, 2019 on our consideration of the City of Poway's internal control over 2 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 of Poway's internal control over financial reporting and compliance. iscayr u-P Irvine, California December 31, 2019 3 This page intentionally left blank. 4 MANAGEMENT'S DISCUSSION AND ANALYSIS The City of Poway (City) offers readers this narrative overview and analysis of the City's financial activities for the fiscal year ended June 30, 2019. It should be read in conjunction with the accompanying letter of transmittal beginning on page i and the accompanying basic financial statements. FINANCIAL HIGHLIGHTS • The City's net position increased by $3.4 million or 1.4% to $236.9 million. The increase is a result of the governmental activities increased by $3.5 million and the business -type activities decreased by $0.1 million. • The City's total revenues exceeded total expenses by $3.4 million. The total revenues, which included program revenues, taxes, and other revenues was $97.1 million. The total expenses was $93.7 million. • The Governmental Activities net position increased by $3.5 million or 2.1% to $173.9 million primarily due to total revenue increased by $1.7 million and total expenses decreased by 1.7 million. • The General Fund reported a net change in fund balance of $0.7 million or 1.1% increase to $66.4 million mainly due to higher than expected property and sales taxes coupled with lower than anticipated expenditures. • The General Fund actual revenues were more than the final budget by $1.5 million, while actual expenditures were $22.6 million less than final budget. The expenditure variance is primarily attributable to the Capital Outlay category, which accounted for $19.5 million of the variance. • At the end of the fiscal year, the General Fund unassigned fund balance was $7.3 million or 14.4% of total General Fund expenditures. OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) The discussion and analysis provided here is intended to serve as an introduction to the City's basic financial statements. The basic financial statements consist of three components: (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, which 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; and (3) notes to the basic financial statements. The report also includes supplemental information intended to furnish additional detail to support the basic financial statements themselves. The Statement of Net Position and the Statement of Activities (Government -wide) The government -wide financial statements are designed to provide readers with a broad view of the City's finances, in a manner similar to a private -section business. The Statement of Net Position presents financial information on all of the City's assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Overtime, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. 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 Activities presents information showing how the City's net position changed during the current fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported, for some items, that will result in cash flows in future fiscal periods, (e.g., uncollected taxes and earned but unused vacation leave). 5 Both of the government -wide financial statements mentioned above distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, public works, development services, and community services, which are financed mostly by property taxes, sales taxes, motor vehicle license fees and franchise fees. Whereas the business -type activities include the water and sewer systems, which the City charges a fee to customers to cover all or most of the cost of the services provided. The government -wide financial statements include not only the City itself (known as the primary government), but also the include the blending of two component units: 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. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. 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 three types of fund financial statements, which use different accounting approaches, are 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. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is described through the reconciliation in the Notes to the 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. These funds are reported using the full accrual accounting method. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. • Fiduciary funds - 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 the City's operations. The City maintains two different types of fiduciary funds. The Agency Fund accounts for deposits held in trust for specific purpose and the Private -Purpose Trust Fund account for the Successor Agency to the Poway Redevelopment Agency. 6 Governmental Activities THE CITY AS A WHOLE The City's analysis focuses on the City's net position (Table 1) and changes in net position (Table 2) of the governmental and business -type activities. Table 1 Summary of Net Position (in thousands) Business- Type Activities Total Primary Government 2019 2018 Assets: Current and other assets $ 106,959 Capital assets 123,929 Total assets 230,888 Deferred Outflows Liabilities: Long-term debt outstanding Other liabilities Net pension liability Total liabilities Deferred Inflows Net position: Net Investment in capital assets Restricted Unrestricted Total net position 8,434 2019 2018 $ 102,011 $ 41,574 121,518 31,143 223,529 72,717 10,532 1,250 13,920 14,782 7,187 5,456 43,324 42,622 64,431 62,860 1,022 837 112,261 108,495 22,034 20,626 39,574 41,243 2019 2018 $ 38,908 $ 148,533 $ 140,919 32,118 155,072 153,636 71,026 303,605 1,750 9,684 295 292 2,353 1,984 8,097 7,139 10,745 9,415 14,215 9,540 51,421 294,555 12,282 15,074 7,440 49,761 75,176 72,275 142 135 1,164 972 31,143 31,937 32,118 31,108 143,404 22,034 71,511 140,613 20,626 72,351 $ 173,869 $ 170,364 $ 63,080 $ 63,226 $ 236,949 $ 233,590 Analysis of net position The net position of the primary government increased by $3.4 million in fiscal year 2019. The total assets increased $9.0 million and total liabilities increased $2.9 million. Deferred outflows of resources decreased $2.6 million and deferred inflows of resources increased $0.2 million. The following analysis of governmental and business -type activities provides more detailed information for these changes. Governmental Activities The net position of governmental activities increased by $3.5 million or 2.1% from $170.4 million to $173.9 million. The following is an explanation of the significant changes between fiscal years as shown in Table 1 above: • Current and other assets increased $4.9 million or 4.9% principally due to an increase in cash and investments. • Capital assets increased $2.4 million or 2.0% (net of depreciation and additions) as detailed in Table 3. The increase is mainly a result of the land acquisitions for preservation of open space. • Governmental long-term debt decreased $0.9 million. The decrease was attributable to scheduled principal payments. 7 • Governmental other liabilities increased by $1.7 million or 31.7% mainly due to an increase of vendor invoices received after the fiscal year ended and the accrual of payroll expenses. • Pension related items including Deferred Outflows, Net Pension Liability, and Deferred Inflows, had a net increase of $3.0 million or 9.1%. • Net Investment in capital assets increased by $3.8 million or 3.5% primarily due to the additions of land acquisitions for preservation of open space. • Restricted net position increased by $1.4 million or 6.8%, primarily due to increases in drainage, maintenance districts, streets and transportation with decreases in debt service, housing and other purposes categories. • 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 $1.7 million, or 4.0% primarily due to normal operations. The cost of all governmental activities this year was $59.9 million as shown on Tables 2 and 2.1 below. Of this cost, $14.3 million was paid by program revenues, which consisted of $10.4 million from those who directly benefited from the programs, $3.9 million from grant subsidies received from other governmental organizations for both capital and operating activities, and $48.6 million was financed through general revenues. Items of significance within Table 2 are described after the table. Table 2 Changes in Net Position (in thousands) Governmental Activities Business -Type Activities Total Primary Government 2019 2018 2019 2018 2019 2018 Revenues: Program Revenues: Charges for services $ 10,389 $ 9,836 $ 31,723 $ 34,070 $ 42,112 $ 43,906 Operating grants and contributions 2,125 2,323 - - 2,125 2,323 Capital grants and contributions 1,809 199 - 4 1,809 203 Total Program Revenues 14,323 12,358 31,723 34,074 46,046 46,432 General Revenues: Property taxes 23,820 24,154 Sales tax 16,249 13,981 Other taxes 4,985 5,896 Investment & misc. 5,983 8,956 23,820 24,154 16,249 13,981 4,985 5,896 3,504 4,753 Total General Revenues Total revenues Expenses: General government Public safety Public works Development services Community services Interest & charges Water Sewe r Total expenses Change in net position before transfers & others Special item Transfers Change in net positon after transfers & others Net position - 7/1 Net position - 6/30 48,558 48,784 62,881 61,142 2,479 2,479 34,202 4,203 4,203 38,277 51,037 52,987 97,083 99,419 7,352 8,048 - 7,352 8,048 26,563 25,140 - - 26,563 25,140 13,032 15,818 - - 13,032 15,818 6,098 4,793 - - 6,098 4,793 6,445 7,373 - - 6,445 7,373 407 430 - - 407 430 24,027 25,503 24,027 25,503 9,799 8,798 9,799 8,798 59,897 61,602 33,826 34,301 93,723 95,903 2,984 (460) 376 3,976 3,360 3,516 26,204 - 26,204 522 427 (522) (427) - 3,506 26,171 (146) 170,363 144,192 63,226 3,549 3,360 29,720 59,677 233,589 203,869 $ 173,869 $ 170,363 $ 63,080 $ 63,226 $ 236,949 $ 233,589 8 Fiscal Year 2019 Governmental Activities (Graphic representation of Table 2 in percentages) Sources of Revenue Capital grants 2.9% Operating grants 3.4% i' Charges for services 16.5% Program Expenses evelopment services 10.2% Public works 21.8% Interest & Charges 0.7 % Community services 10.8% Revenues Total revenues increased by $1.7 million or 2.8%. The following is an explanation of the changes between fiscal years as shown in Table 2 above: • The total program revenues increased by $2.0 million or 15.9%, mainly due to $1.5 million grants received from the State of California to purchase the land for preservation of open space. • The total general revenues remained relatively the same, with a minor decrease of $0.2 million or 0.5%. Sales tax increased by $2.3 million or 16.2% mainly due to better performances by two taxpayers. The other taxes decreased by $0.9 million or 15.5%, and the investment and miscellaneous revenues decreased by $1.2 million or 26.3%. Expenses Total expenses decreased by $1.7 million or 2.8%. The following is an explanation of the significant changes between fiscal years as shown in Table 2 above: • The public safety expenses increased by $1.4 million or 5.7%. The law enforcement contract with the County of San Diego and pension costs accounted for the majority of the increase. • The public works expenses decreased by $2.8 million or 17.6%. A very minor portion of the decrease is a result of the transfer of four meter -reading staff from the Public Works department to the Customer Services Division to create better efficiency. The remainder of the decrease is mainly due to one-time adjustments made in the prior fiscal year that were not repeated in this fiscal year. • The development services expenses increased by $1.3 million or 27.2%. The increase is mainly due to one-time adjustments made in the prior fiscal year that were not repeated in this fiscal year. 9 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 total revenues generated by the activities) is presented on Table 2.1. The net cost shows the extent to which the general taxes support each of the City's programs. Table 2.1 Net Cost of Governmental Activities (in thousands) Total Cost of Services Program Revenues Net Cost of Services 2019 2018 2019 2018 2019 2018 General government $ 7,352 Public safety 26,563 Public works 13,032 Development services 6,098 Community services 6,445 Interest and fiscal charges 407 Totals $ 30, 000 $20,000 $10, 000 so -$10, 000 -$20,000 -$30,000 $ 59,897 $ 8,048 $ 25,140 15,818 4,793 7,373 430 $ 61,602 $ 641 2,484 3,220 4,588 3,390 $ 960 2,723 2,855 2,875 2,944 $ (6,711) (24, 079) (9,812) (1,510) (3,055) (407) $ (7,088) (22,417) (12,963) (1,918) (4,429) (430) 14,323 $ 12,357 $ (45,574) $ (49,245) Fiscal Year 2019 Total Cost of Services, Program Revenues and Net Cost of Services Governmental Activities (in thousands) General government Public safety Public works Development services Community Interest and services fiscal charges ■ Total Cost of Services ■ Program Revenues ■ Net Cost of Services Total resources available during the year to finance Governmental activities were $233.2 million, which consisted of Net Position at July 1, 2018 of $170.4 million, Program Revenues of $14.3 million, General revenues of $48.6 million, and Transfers of $0.5 million. Total Governmental expenditures during the year were $59.9 million. The Governmental Net Position resulted in a $3.5 million increase, ended with $173.9 million at June 30, 2019. 10 Business -Type Activities The net position of business -type activities decreased by $0.1 million or 0.2% from $63.2 million to $63.1 million. As shown in Table 2.2 below, Program Revenues were $31.7 million, while the cost of providing all business -type activities this year was $33.8 million, resulting in a decrease of $2.1 million. However, the decrease is offset by the net increase of $2.0 million from investment & miscellaneous revenues and transfers, as shown in Table 2 above, resulted in a net position decrease of $0.1 million. The following is an explanation of the changes between fiscal years as shown in Table 2 above. Water Activities The water total operating revenues decreased by $4.5 million or 15.7% primarily attributed to decreases in demand, and the temporary drought recovery surcharge that was implemented while revenues were lower due to decreased consumption, ended in December 2018 as scheduled. The water total operating expenses were decreased by $1.5 million or 5.7% mainly related to the lower water demand. Sewer Activities The sewer total operating revenues decreased by $0.4 million or 4.6% due to the reduction in Other revenues. The sewer total operating expenses increased by $1.0 million or 11.4% mainly as a result of increase in maintenance and operations costs. Table 2.2 Net Cost of Business -Type Activities (in thousands) Total Cost Program Net Cost of Services Revenues of Services 2019 2018 2019 2018 2019 2018 Water $ 24,027 $ 25,503 $ 22,984 $ 25,586 $ (1,043) $ 83 Sewer 9,799 8,798 8,737 8,488 (1,062) (310) Totals $ 33,826 $ 34,301 $ 31,721 $ 34,074 $ (2,105) $ (227) FUND HIGHLIGHTS $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $o -$5,000 Fiscal Year 2019 Total Cost of Services, Program Revenues and Net Cost of Services Business -Type Activities (in thousands) Water Sewer • Total Cost of Services ■ Program Revenues • Net Cost of Services 11 General Fund Revenue Actual revenues compared favorably to the final budget, resulting in a $1.5 million positive variance (excluding other financing sources). The major variances were in Taxes, Charges for services, and Use of money and property. Actual Taxes revenue was $0.8 million higher than budgeted primarily due to higher than anticipated Sales Tax revenue of $0.7 million and Property Tax revenue of $0.4 million offset by $0.2 million reduction from the Redevelopment Property Tax Trust Fund. Charges for services revenue was less than budget by $0.3 million mainly as a result of various demands for services were lower than anticipated. Use of money and property had a favorable variance of $1.0 million, however, the variance was attributable to the unrealized gains. Expenditures The final appropriations for the City's General Fund expenditures at year-end were $22.6 million more than actual expenditures (excluding other financing uses). The largest component of the budget to actual variance, $19.5 million, was in the Capital Outlay category, which is mainly attributable to previously approved projects, such as a new community center and the street improvement project, that have not yet been completed. The remaining $3.1 million positive variance is related to the operations of the various governmental functions. Specifically, savings of about $1.2 million in salaries and benefits were achieved as a result of 35 vacancies that occurred during various parts of the fiscal year. The remaining $1.9 million positive variance was resulted from not replacing all the vehicles identified for replacement, the partial closure of the community swimming center in the beginning of the fiscal year, the City of San Diego bill credit for previous overcharges in the Fire Dispatch Service contract, and several park and playground refurbishment projects not completed prior to the fiscal year ended. 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 expenditures exceed revenues by $571,743 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 for general government continued 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 made a $700,000 loan to the developer for the Villa de Vida affordable housing project. 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 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. 12 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, net of depreciations, had an increase of $1.4 million. The increase is mainly due to the land acquisitions for preservation of open space. The net $5.6 million increase in Improvements was primarily due to capitalization of two Capital Improvement Program (CIP) projects. One was the $3.6 million Poway Swim Center Renovations project completed in Fall 2018. The other was a partially complete Espola Road Safety Improvements project at a cost of $2.6 million. (See Table 3 below & Notes 4 and 17 to the Basic Financial Statements.) Table 3 Capital Assets (Net of Depreciation) (in thousands) Governmental Business -Type Activities Activities Fiduciary Total 2019 2018 2019 2018 2019 2018 2019 2018 Land $ 43,724 $ 40,396 $ 77 $ 77 $ 2,865 $ 2,865 $ 46,666 $ 43,338 Buildings 25,359 26,678 1,808 2,274 - 27,167 28,952 Improvements 9,399 3,392 27,268 27,646 36,667 31,038 Infrastructure 38,598 41,759 38,598 41,759 Equip&Vehicles 5,821 4,677 1,223 1,165 7,044 5,842 Construction-in-Prog 1,028 4,616 767 956 1,795 5,572 Totals $ 123,929 $ 121,518 $ 31,143 $ 32,118 $ 2,865 $ 2,865 $ 157,937 $ 156,501 Debt At year-end, the City had $13.1 million in Governmental debt, $0.3 million in Business -Type debt, and $145.6 million in Fiduciary debt (Table 4). The overall decrease in bond balances was due to scheduled principal payments and premium/discount amortizations. The decreased Loans Payable balance was attributable to the forgiven outstanding balance of the Owner Participation agreement with AZ Poway, LLC (dba Mossy Nissan) on the fifteenth year. The total Compensated Absences increase was a result of the normal course of operations. (See Table 4 below & Note 5 to the Basic Financial Statements.) Table 4 Outstanding Debt (in thousands) Governmental Business -Type Activities Activities Fiduciary Total 2019 2018 2019 2018 2019 2018 2019 2018 Tax Allocation Bonds $ - $ - $ - $ - $ 145,646 $ 154,505 $ 145,646 $ 154,505 Certificates of Participation 12,385 13,196 - - 12,385 13,196 Loans Payable - - 3,339 - 3,339 Compensated Absences 1,535 1,586 295 292 1,830 1,878 Totals $ 13,920 $ 14,782 $ 295 $ 292 $ 145,646 $ 157,844 $ 159,861 $ 172,918 13 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET In considering the update of the City Budget for FY2019-20, the City Council and management anticipated the growth in General Fund revenues to not keep pace with the growth in expenditures. This is due in large part to rising pension costs, as well as rising law enforcement costs. Property tax is expected to increase moderately. Sales tax revenue is projected to decline slightly, which can be attributed to a slightly slowing economy, as well as potential issues associated with the recent transfer of the State Sales Tax reporting function from the State Board of Equalization to the California Department of Tax and Fee Administration (CDTFA). The adopted FY2019-20 budget was balanced. For General Fund budget, revenues were projected to be $49.5 million and expenditures were projected to be slightly less, at $49.0 million. However, at the time of the budget adoption, the memoranda of understanding between the City and the Poway Firefighters' Association (Safety) and the Teamster Local 911 (Non -Safety) were both due to expire on June 30, 2019. Therefore, the proposed budget did not include any across the board salary increase for either the represented (Safety and Non -Safety) employees or unrepresented (Management/Confidential) employees. 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. City staff is concerned about future pressure on water rates including new legislation signed by the California Governor that establishes a 55-gallons per capita daily (GPCD) indoor water use standard, that decreases to 50 GPCD beginning January 1, 2030. Additional state regulations as well as future usage patterns within Poway, is expected to have an impact on water rates going forward. The FY2019-20 sewer rates do not fully recover the operating and capital costs of sewer operations. Additionally, as a member of the Metro Wastewater Joint Powers Authority, it is expected that the majority of the Sewer Fund's current fund balance will be needed for Poway's share of the Pure Water Program. One of the benefits of the Pure Water Program is to divert sewage flow from the Point Loma Treatment Plant which would lower the City's sewer treatments costs. 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. Based on the challenges facing the water and sewer funds, the City Council directed city staff to initiate a new water and sewer cost -of -service study during the 2019 rate setting process. City staff held a series of public workshops in the Fall of 2019, during which the City Council and members of the public had an opportunity to review and comment on different rate structure options prior to the City Council making a final selection for the 2020 rate setting process. The goals of the study are to help ensure compliance with the law, ensure each rate payer class is paying their proportionate share of the water and sewer costs, and ensure the financial sustainability of the Water and Sewer Funds. CONTACTING THE CITY'S FISCAL MANAGEMENT This financial report is designed to provide the City's 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 go online at http://www.poway.org. 14 BASIC FINANCIAL STATEMENTS This page intentionally left blank. 16 GOVERNMENT -WIDE FINANCIAL STATEMENTS CITY OF POWAY Statement of Net Position June 30, 2019 Primary Government Governmental Business -Type Activities Activities ASSETS Total Current assets: Cash and investments (note 2) $ 83,621,726 30,961,201 114,582,927 Cash and investments with fiscal agents (note 2) 624,154 624,154 Receivables: Taxes 3,570,854 3,570,854 Accounts 750,981 5,272,999 6,023,980 Interest 994,407 - 994,407 Due from other governments 538,234 538,234 Prepaid items 51,342 51,342 Land held for resale 5,367,000 - 5,367,000 Inventories 127,080 3,507,391 3,634,471 Total current assets 95,645,778 39,741,591 135,387,369 Noncurrent assets: Notes receivable Internal balances Loans to the Successor Agency to the Poway Redevelopment Agency Loans to other governments Capital assets: Nondepreciable assets (note 4) Depreciable assets, net (note 4) Total capital assets Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Deferred loss on refunding of debt Pension related (note 6) 10,005,226 (51,006) 1,359,619 44,752,953 79,175,700 123,928,653 135,242,492 230,888,270 161,095 8,273,401 51,006 1,695,258 85,433 843,944 30,299,355 10,005,226 3,054,877 85,433 45,596,897 109,475,055 31,143,299 155,071,952 32,974,996 168,217,488 72,716,587 303,604,857 1,249,677 161,095 9,523,078 Total deferred outflows of resources 8,434,496 1,249,677 9,684,173 See accompanying notes to financial statements (Continued) 18 CITY OF POWAY Statement of Net Position June 30, 2019 (Continued) Primary Government Governmental Business -Type Activities Activities LIABILITIES Current liabilities: Accounts payable 5,206,637 Accrued liabilities 1,538,481 Accrued interest payable 190,385 Deposits - Unearned revenue 252,241 Long-term debt - due within one year (note 5) 2,364,066 Total current liabilities 9,551,810 Noncurrent liabilities: Long-term debt - due in more than one year (note 5) Net pension liability (note 6) Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension related (note 6) NET POSITION 11,556,033 43,323,616 54,879,649 64,431,459 1,022,203 Net investment in capital assets 112,260,900 Restricted for: Drainage 3,357,386 Fire protection 159,084 Grants 231,048 Housing 2,358,859 Maintenance districts 8,453,934 Other purposes 2,085,051 Parks and recreation 876,723 Streets 3,007,857 Transportation 1,504,280 Total restricted Unrestricted Total net position 1,918,659 193,065 156,955 84,024 295,290 Total 7,125,296 1,731,546 190,385 156,955 336,265 2,659,356 2,647,993 12,199,803 8,096,731 11,556,033 51,420,347 8,096,731 62,976,380 10,744,724 75,176,183 141,682 1,163,885 31,143,299 143,404,199 3,357,386 159,084 231,048 2,358,859 8,453,934 2,085,051 876,723 3,007,857 1,504,280 22,034,222 - 22,034,222 39,573,982 $ 173,869,104 31,936,559 71,510,541 63,079,858 236,948,962 See accompanying notes to financial statements 19 CITY OF POWAY Statement of Activities Year Ended June 30, 2019 Program Revenues Operating Capital Total Charges for Contributions Contributions Program Functions/Programs Expenses Services and Grants and Grants Revenues Primary government: Governmental activities: General government Public safety Public works Development services Community services Interest and fiscal charges $ 7,352,494 165,049 26,562,602 1,810,431 13,031,776 3,157,508 6,097,846 2,175,062 6,445,379 3,081,321 407,214 - 475,999 673,458 62,258 913,005 641,048 2,483,889 3,219,766 1,500,000 4,588,067 308,484 3,389,805 Total governmental activities 59,897,311 10,389,371 2,124,720 1,808,484 14,322,575 Business -type activities: Water 24,026,914 22,984,400 - - 22,984,400 Sewer 9,798,612 8,737,411 - - 8,737,411 Total business -type activities 33,825,526 31,721,811 - - 31,721,811 Total primary government $ 93,722,837 42,111,182 2,124,720 1,808,484 46,044,386 See accompanying notes to financial statements 20 CITY OF POWAY Statement of Activities Year Ended June 30, 2019 Functions/Programs Primary government: Net (Expense) Revenue and Changes in Net Position Governmental Business -type Activities Activities Total Governmental activities: General government $ (6,711,446) - (6,711,446) Public safety (24,078,713) - (24,078,713) Public works (9,812,010) - (9,812,010) Development services (1,509,779) - (1,509,779) Community services (3,055,574) - (3,055,574) Interest and fiscal charges (407,214) - (407,214) Total governmental activities (45,574,736) - (45,574,736) Business -type activities: Water - (1,042,514) (1,042,514) Sewer - (1,061,201) (1,061,201) Total business -type activities - (2,103,715) (2,103,715) Total primary government (45,574,736) (2,103,715) (47,678,451) General revenues: Taxes: Property taxes 23,819,845 - 23,819,845 Sales tax 16,248,747 - 16,248,747 Transient occupancy taxes 674,230 - 674,230 Franchise taxes 1,601,759 - 1,601,759 Other taxes 2,709,246 - 2,709,246 Total taxes 45,053,827 - 45,053,827 Investment earnings 2,267,414 1,144,612 3,412,026 Miscellaneous 1,237,072 1,334,723 2,571,795 Transfers in (out) 522,111 (522,111) - Total general revenues and transfers 49,080,424 1,957,224 51,037,648 Change in net position 3,505,688 (146,491) 3,359,197 Net position, beginning of year 170,363,416 63,226,349 233,589,765 Net position, end of year $ 173,869,104 63,079,858 236,948,962 See accompanying notes to financial statements 21 This page intentionally left blank. 22 FUND FINANCIAL STATEMENTS Governmental Fund Financial Statements Proprietary Fund Financial Statements Fiduciary Fund Financial Statements GOVERNMENTAL FUND FINANCIAL STATEMENTS CITY OF POWAY Balance Sheet Governmental Funds June 30, 2019 Special Revenue Fund Total Housing Non -major Total General Authority Governmental Governmental Fund Fund Funds Funds ASSETS Cash and investments $ 50,495,097 Receivables: Taxes 3,540,647 Notes 10,005,226 Accounts 646,603 Interest 992,359 Due from other funds (note 3) 182,241 Due from other governments 220,390 Prepaid items 51,342 Land held for resale 5,367,000 Inventories, at cost 127,080 Advances to fiduciary funds Cash and investments with fiscal agents Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds (note 3) Unearned revenue Total liabilities 1,601,381 27,599 610,976 $ 71,627,985 2,239,956 $ 3,334,195 1,459,242 312,433 10,616 29,636 5,105,870 40,252 20,552,142 30,207 76,779 2,048 317,844 748,643 624,154 72,648,620 3,570,854 10,005,226 750,981 994,407 182,241 538,234 51,342 5,367,000 127,080 1,359,619 624,154 22,351,817 96,219,758 1,310,928 65,415 312,147 222,605 4,655,739 1,524,657 624,580 252,241 1,911,095 7,057,217 Deferred inflows of resources: Unavailable revenue 164,683 81,792 246,475 Total deferred inflows of resources 164,683 - 81,792 246,475 FUND BALANCES Nonspendable 15,550,648 Restricted - Committed 20,961,853 Assigned 22,536,818 Unassigned 7,308,113 Total fund balances Total liabilities, deferred inflows of resources and fund balances 2,199, 704 66,357,432 2,199,704 $ 71,627,985 2,239,956 20,391,215 (32,285) 15,550,648 22,590,919 20,961,853 22,536,818 7,275,828 20,358,930 88,916,066 22,351,817 96,219,758 See accompanying notes to financial statements 25 CITY OF POWAY Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2019 Total Fund Balances - Total Governmental Funds $ 88,916,066 Amounts reported for governmental activities in the Statement of Net Position were different because: Capital assets used in governmental activities were not current financial resources and, therefore, were not reported in the funds. Non -depreciable Depreciable, net of accumulated depreciation Deferred losses on refunding of debt did not require current financial resources but were deferred and subject to capitalization and amortization on the Government -Wide Statement of Net Position. Deferred inflows and outflows of resources related to pensions have not been reported in the governmental funds: Pension related deferred outflows of resources (net of $100,575 reported in Internal Service Fund) Pension related deferred inflows of resources (net of $11,309 reported in Internal Service Fund) 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 Compensated absences (net of $30,674 reported in Internal Service Fund) Long-term liabilities - due in more than one year Long-term debt Pension related (net of $619,246 reported in Internal Service Fund) Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability in the Governmental Funds Balance Sheet. Unavailable revenues recorded in governmental fund financial statements resulting from activities in which revenues were earned but funds were not available were recognized as revenues in the Government -Wide Financial Statements. Internal service funds were used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds were included in governmental activities in the Government -Wide Statement of Net Position. $ 44,752,953 79,175,700 8,172,826 123,928,653 161,095 (1,010,894) 7,161,932 (829,512) (1,503,880) (11,556,033) (42,704,370) (56,593,795) (190,385) 246,475 10,239,063 Net position of governmental activities $ 173,869,104 See accompanying notes to financial statements 26 CITY OF POWAY Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2019 Special Revenue Fund Total Housing Non -major Total General Authority Governmental Governmental Fund Fund Funds Funds REVENUES Taxes $ 39,050,341 - 5,997,874 45,048,215 Licenses and permits 636,007 - - 636,007 Intergovernmental 740,726 - 1,800,773 2,541,499 Charges for services 4,346,688 48,259 - 4,394,947 Fines and forfeitures 174,431 - - 174,431 Use of money and property 1,652,609 84,350 901,593 2,638,552 Developer fees 3,031,986 - 1,225,656 4,257,642 Assessments levied - - 1,913,839 1,913,839 Other revenues 212,951 67,871 322,321 603,143 Total revenues EXPENDITURES Current: General government Public safety Public works Development services Community services Capital outlay Debt service: Principal Interest and fiscal charges Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in (note 3) Transfers out (note 3) 49,845,739 200,480 6,157,824 25, 092,171 4,401,878 4,977,009 5,834,051 4,148,024 8,160 764,063 50,610,957 772,223 (765,218) (571,743) 2,808, 242 (1,323,909) 12,162,056 62,208,275 154,877 6,005,454 3,101, 833 790,000 416,310 6,165, 984 25, 247,048 10,407,332 5,741,072 5,834,051 7,249,857 790,000 416,310 10,468,474 61,851,654 1,693,582 356,621 1,591, 304 (780,124) 4,399, 546 (2,104,033) Total other financing sources (uses) 1,484,333 - 811,180 2,295,513 Net change in fund balance 719,115 (571,743) 2,504,762 2,652,134 Fund balances, beginning of year 65,638,317 2,771,447 17,854,168 86,263,932 Fund balances, end of year $ 66,357,432 2,199,704 20,358,930 88,916,066 See accompanying notes to financial statements 27 CITY OF POWAY Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year ended June 30, 2019 Net change in fund balances - total governmental funds $ 2,652,134 Amounts reported for governmental activities in the Statement of Activities were different because: Governmental funds report capital outlay as expenditures. However, in the Government -Wide Statement of Activities, the cost of those assets will be allocated over their estimated useful lives as depreciation expense. Capital asset expenditures Depreciation expense Loss due to disposition of capital assets The issuance of long-term debt provides current financial resources to governmental 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. Principal payments on long-term debt Changes in pension related items Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Change in compensated absences Change in interest expense on long term debt Amortization of deferred loss on bond refunding Amortization of bond premium 2005 Certificates of Participation Amortization of bond premium 2012 Certificates of Participation 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 revenue of the internal service fund was reported with governmental activities. $ 8,131,703 (5,646,346) (74,488) 790,000 (2,841,633) 53,111 9,096 (11,933) 2,978 17,454 2,410,869 (2,051,633) 70,706 208,779 214,833 Change in net position of governmental activities $ 3,505,688 See accompanying notes to financial statements 28 This page intentionally left blank. 29 PROPRIETARY FUND FINANCIAL STATEMENTS CITY OF POWAY Statement of Net Position Proprietary Funds June 30, 2019 Water Governmental Activities - Internal Service Sewer Total Fund ASSETS Current assets: Cash and investments $ 10,771,252 20,189,949 30,961,201 Receivables: Accounts 3,856,758 1,416,241 5,272,999 Inventories 3,481,860 25,531 3,507,391 Due from other funds 31,346 19,660 51,006 Total current assets 18,141,216 21,651,381 10,973,106 391,333 39,792,597 11,364,439 Noncurrent assets: Advances to the Successor Agency to the Poway Redevelopment Agency 1,173,173 522,085 1,695,258 Due from other governments 85,433 - 85,433 Capital assets: Nondepreciable 767,147 76,797 843,944 Depreciable 62,322,288 36,542,262 98,864,550 Less accumulated depreciation (43,346,387) (25,218,808) (68,565,195) Total net capital assets 19,743,048 11,400,251 31,143,299 Total noncurrent assets Total assets DEFERRED OUTFLOWS OF RESOURCES Pension related items 21,001,654 11,922,336 32,923,990 39,142,870 33,573,717 72,716,587 1,093,729 155,948 LIABILITIES Current liabilities: Accounts payable 1,811,464 Accrued liabilities 165,473 Deposits 156,955 Unearned revenue 58,230 Compensated absences due within one year 255,777 Total current liabilities Noncurrent liabilities: Net pension liability Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension related items 107,195 27,592 25,794 39,513 2,447,899 200,094 7,021,887 1,074,844 7,021,887 1,074,844 9,469,786 1,274,938 123,815 17,867 11,364,439 1,249,677 100,575 1,918,659 193,065 156,955 84,024 295,290 550,898 13,824 30,674 2,647,993 595,396 8,096,731 619,246 8,096,731 619,246 10,744,724 1,214,642 141,682 11,309 NET POSITION Net investment in capital assets 19,743,048 11,400,251 31,143,299 Unrestricted 10,899,950 21,036,609 31,936,559 Total net position $ 30,642,998 32,436,860 10,239,063 63,079,858 10,239,063 See accompanying notes to financial statements 31 CITY OF POWAY Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds Year Ended June 30, 2019 Water Governmental Activities - Internal Service Sewer Total Fund OPERATING REVENUES Charges for services $ 22,902,385 8,416,676 31,319,061 Connection fees 82,015 320,735 402,750 Other 1,268,966 65,757 1,334,723 Total operating revenues 24,253,366 8,803,168 33,056,534 OPERATING EXPENSES Personnel services 5,253,694 798,545 6,052,239 Maintenance and operations 3,386,810 7,913,247 11,300,057 Administrative expenses 513,587 - 513,587 Cost of purchased water 13,280,941 - 13,280,941 Depreciation 1,591,882 1,086,820 2,678,702 Total operating expenses 24,026,914 9,798,612 33,825,526 Operating income 226,452 (995,444) (768,992) NONOPERATING REVENUES (EXPENSES) Interest revenue Gain on sale of property Other nonoperating revenue Total nonoperating revenues (expenses) Income before transfers 378,093 766,519 1,144, 612 378,093 766,519 1,144,612 604,545 (228,925) 375,620 TRANSFERS Transfers in 20,657 10,481 31,138 Transfers out (368,998) (184,251) (553,249) Total transfers (348,341) (173,770) (522,111) Change in net position 256,204 (402,695) (146,491) Net position, beginning of year 30,386,794 32,839,555 63,226,349 Net position, end of year $ 30,642,998 32,436,860 63,079,858 See accompanying notes to financial statements 3,139,034 3,139,034 481,495 1,133,138 1,614, 633 1,524,401 300,438 160,265 3,131 463,834 1,988,235 4,226 (1,777,628) (1,773,402) 214,833 10,024,230 10,239,063 32 Cash flows from operating activities: Cash received from customers Cash received from interfund charges Cash paid to employees for services Cash paid to suppliers for goods or services Other Net cash provided by operating activities CITY OF POWAY Statement of Cash Flows Proprietary Funds For the year ended June 30, 2019 Governmental Activities - Internal Service Water Sewer Total Fund $ 24,064,352 8,714,215 32,778,567 (3,961,517) (624,542) (4,586,059) (17,221,186) (7,869,728) (25,090,914) 1,268,966 65,757 1,334,723 4,150,615 285,702 4,436,317 3,139, 034 (349,353) (725,926) 2,063,755 Cash flows from noncapital financing activities: Loans to other governments 64,013 705,775 769,788 - Loan repayment to the Successor Agency 87,310 41,592 128,902 - Due to (from) other funds - - - - Advances (to) from other funds - - - Other nonoperating revenues - - - 3,131 Cash received from other funds 22,201 225,812 248,013 443,626 Cash paid to other funds (906,620) (184,251) (1,090,871) (2,168,961) Net cash used for noncapital financing activities (733,096) 788,928 55,832 (1,722,204) Cash flows from capital and related financing activities: Acquisition of capital assets (1,652,764) (51,173) (1,703,937) Proceeds from sale of capital assets - - - 160,265 Net cash provided by (used for) capital and related financing activities (1,652,764) (51,173) (1,703,937) 160,265 Cash flows from investing activities: Interest income 378,093 766,519 1,144,612 300,438 Net cash provided by investing activities 378,093 766,519 1,144,612 300,438 Net increase in cash and investments 2,142,848 1,789,976 3,932,824 802,254 Cash and investments, beginning of year 8,628,404 18,399,973 27,028,377 10,170,852 Cash and investments, end of year $ 10,771,252 20,189,949 30,961,201 10,973,106 See accompanying notes to financial statements 33 City of Poway Statement of Cash Flows Proprietary Funds Year Ended June 30, 2019 (Continued) Water Governmental Activities - Internal Service Sewer Total Funds Reconciliation of operating income to net cash provided by operating activities: Operating income $ 226,452 (995,444) (768,992) 1,524,401 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,591,882 1,086,820 2,678,702 (Increase) decrease in assets: Accounts receivable 1,054,975 (18,597) 1,036,378 Inventories (342,377) (4,759) (347,136) Deferred outflows - pension related 412,638 87,874 500,512 23,205 Increase (decrease) in liabilities: Accounts payable 291,913 42,014 333,927 405,751 Accrued liabilities 10,616 6,264 16,880 1,461 Compensated absences 2,416 458 2,874 1,960 Net pension liability 872,311 85,981 958,292 106,083 Unearned revenue (9,777) (4,599) (14,376) - Deposits 32,338 - 32,338 - Deferred inflows - pension related 7,228 (310) 6,918 894 Net cash provided by operating activities $ 4,150,615 285,702 4,436,317 2,063,755 There were no noncash investing, capital and financing activities during fiscal year ended June 30, 2019. See accompanying notes to financial statements 34 This page intentionally left blank. 35 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. Successor Agency to the Poway Redevelopment 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). 36 CITY OF POWAY Statement of Fiduciary Net Position Fiduciary Funds June 30, 2019 Successor Agency to the Poway Agency Redevelopment Funds Agency ASSETS Current assets Cash and investments (note 2) $ 2,685,113 7,832,355 Receivables: Interest 4,993 Prepaid charges 228,170 Total current assets Noncurrent assets Capital assets: Nondepreciable (note 4) 2,685,113 8,065,518 2,864,759 Total noncurrent assets 2,864,759 Total assets $ 2,685,113 LIABILITIES Current liabilities Accounts payable $ 46,820 Long-term debt - due within one year (note 5) Total current liabilities Noncurrent liabilities Developer deposits Advances from City of Poway (note 3) Interest payable Long-term debt - due in more than one year (note 5) 10,930,277 9,028,510 46,820 9,028,510 2,638,293 3,054,877 271,920 136,617,815 Total noncurrent liabilities 2,638,293 139,944,612 Total liabilities $ 2,685,113 148,973,122 DEFERRED INFLOWS OF RESOURCES Deferred gain on refunding of debt 1,104,260 NET POSITION (DEFICIT) Held in trust for retirement of obligations of the former Poway Redevelopment Agency See accompanying notes to financial statements $ (139,147,105) 37 CITY OF POWAY Statement of Changes in Fiduciary Net Position Year Ended June 30, 2019 Successor Agency to the Poway Redevelopment Agency ADDITIONS Redevelopment Property Tax Trust Fund $ 50,589,594 Investment earnings 440,135 Other revenue 3,607,418 Total additions 54,637,147 DEDUCTIONS Enforceable obligations payments 36,294,774 Administration expenses 849,859 Interest expense and fiscal charges 4,714,773 Total deductions Change in net position Net position (deficit), beginning of year Net position (deficit), end of year 41,859,406 12,777,741 (151,924,846) $ (139,147,105) See accompanying notes to financial statements 38 This page intentionally left blank. 39 NOTES TO THE BASIC FINANCIAL STATEMENTS CITY OF POWAY Notes to the Basic Financial Statements June 30, 2019 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. Although the following are legally separate from the City, they have been "blended" as though they are part of the City because the component unit's governing body is substantially the same as the City's and there is a financial benefit or burden relationship between the City and the component unit; management of the City has operational responsibilities for the component units; and/or the component units provide services entirely, or almost entirely, to the City or otherwise exclusively, or almost exclusively, benefits the City, even though it does not provide services directly to it. Component units for which the City is considered financially accountable are described below: Poway Public Financing Authority The Poway Public Financing Authority (the "Authority"), a blended component unit of the City, 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. 41 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (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"), a blended component unit of the City. 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. 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. 42 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) 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 regard 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 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. 43 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) 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. 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. 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. 44 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) 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. 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. 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 45 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) 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. 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 o Overall o Custodial Credit Risk o 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. The City categorizes its fair value measurement within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the relative inputs used to measure the fair value of the investments. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Authority has the ability to access. Level 2: Inputs to the valuation methodology include: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive markets; • Inputs other than quoted prices that are observable for the asset or liability; • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. 46 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) Level 3: Inputs to the valuation methodology include are unobservable and significant to the fair value measurement. Unobservable inputs reflect the City's own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the City's own data. 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. 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. 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 47 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) 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. 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. The City has two items that qualify for reporting in this category, deferred loss on refunding of debt and outflows related to pensions. 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. The City has two items that qualifies for reporting in this category, deferred inflows related to pensions and unavailable revenues. 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. 48 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) 1. 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 straight-line 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. J. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plan fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refund of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. The following timeframes are used for pension reporting: Valuation Date Measurement Date Measurement Period Valuation Date Measurement Date Measurement Period CaIPERS Plans June 30, 2017 June 30, 2018 July 1, 2017 to June 30, 2018 PARS Plan June 30, 2018 June 30, 2019 July 1, 2018 to June 30, 2019 Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. 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. 49 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) The difference between projected and actual earning sis amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members with benefits (active, inactive, and retired) as of the beginning of the measurement period. K. 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. L. 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. 50 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 1— Summary of Significant Accounting Policies (Continued) M. 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. 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 an 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. N. 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. 51 CITY OF POWAY Notes to the Basic Financial Statements (Continued) 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, 2019: Cash and investments Cash and investments with fiscal agents Total Government -Wide Statement of Net Position Fiduciary Funds Governmental Business -Type Statement of Activities Activities Net Position $ 83,621,726 30,961,201 Total 10, 517, 468 125,100, 395 624,154 - - 624,154 $ 84, 245, 880 30, 961, 201 10, 517, 468 125, 724, 549 Cash, cash equivalents, and investments consisted of the following at June 30, 2019: Cash on hand $ 8,500 Demand deposits 789,614 Investments 124,926,435 Total $ 125,724,549 A. Cash Deposits The carrying amounts of the City's demand deposits were $789,614 at June 30, 2019. Bank balances at June 30, 2019, were $1,912,762 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. 52 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 2 — Cash, Cash Equivalents and Investments (continued) 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. 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. Authorized Investment Type Maximum Maximum Maximum Percentage Investment Maturity of Portfolio* in One Issuer* U.S. Treasury Obligation 5years None None U.S. Agency Securities 5 years 75% 25% Bankers Acceptances 180 days 40% 5% Medium -Term and Corporate Notes 5years 30% 5% Money Market Mutual Funds N/A 20% 10% Mortgage Backed Securities 5years 20% None Asset Backed Securities 5 years 20% None Commercial Paper 270 days 25% 5% Municipal Bonds 5years 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 53 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 2 — Cash, Cash Equivalents and Investments (Continued) investment policy. The table below identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. Authorized Investment Type Maximum Maximum Maximum Percentage Investment 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 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: Remaining Maturities 12 Months Investment Type Amounts or Less 13 to 24 Months 25 to 60 More than Months 60 Months U.S. Treasury Bills U.S. Agencies CalTrust Investment Pool - Short term CalTrust Investment Pool - Medium term Medium -Term and Corporate Notes Local Agency Investment Fund (LAIF) San Diego County Investment Pool Certificates of Deposit Held by bond trustee: Money Market Funds Total $ 11,035,860 40,004,279 11,136,533 11,293,865 21,426,732 29,311,301 43,711 50,000 5,497,245 22,356,899 11,136,533 15,401,616 29,311,301 43,711 50,000 624,154 624,154 1,990,782 3,547,833 11,061,083 6,586,297 11,293,865 3,999,420 2,025,696 $ 124,926,435 84,421,459 28,345,150 12,159,826 54 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 2 — Cash, Cash Equivalents and Investments (Continued) 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, 2019 for each investment type: Investment Type Minimum Rating S&P Moody's Fair Value U.S. Treasury Bills U.S. Agencies CalTrust Investment Pool -Short term CalTrust Investment Pool -Medium term Medium -Term and Corporate Notes Local Agency Investment Fund (LAIF) San Diego County Investment Pool Certificates of Deposit Held by bond trustee: Money Market Funds Total Concentration of Credit Risk exempt exempt exempt Aaa AA Aaa AAf AAf not rated N/A not rated not rated A-/A3 AA Aaa N/A not rated not rated AAAf AAAf not rated N/A exempt exempt AAA AAAm Aaamf $ 11, 035, 860 40, 004, 279 11,136, 533 11, 293, 865 21, 426, 732 29, 311, 301 43,711 50,000 624,154 $ 124,926,435 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 CaITRUST 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. Investments in any one issuer that represent 5% or more of the total City's investments are as follows: Issuer Investment Type Fannie Mae Federal Farm Credit Federal Home Loan U.S. Agencies U.S. Agencies U.S. Agencies D. Investment in Local Agency Investment Funds Reported Amount % of Investments 10,453,426 10, 024, 986 13, 539, 955 8% 8% 11% The City's investments with Local Agency Investment Funds ("LAIF") at June 30, 2019, 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: 55 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 2 — Cash, Cash Equivalents and Investments (Continued) 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, 2019, the City had $29,311,301 invested in LAIF, which had invested 1.77% 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 CaITRUST The City is a voluntary participant in the Investment Trust of California (CaITRUST) 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 CaITRUST financial statements are available from CaITRUST's offices at 400 Capitol Mall, Suite 702, Sacramento, CA 95814. As of June 30, 2019, the City had $22,430,398 invested in CaITRUST. The City's investment in this pool is reported in the accompanying financial statements at fair value. 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. 56 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 2 — Cash, Cash Equivalents and Investments (Continued) At June 30, 2019, the City had $43,711 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 The following table presents the balances of the assets measured at fair value on a recurring basis as ofJune 30, 2019. Fair Value Measurement Using Investments by Not Subject to Fair Value Level Total Level 1 Level 2 Level 3 GASB 72 U.S. Treasury Bills $ 11,035,860 U.S. Agencies 40,004,279 CalTrust Investment Pools 22,430,398 Medium -Term and Corporate Notes 21,426,732 Local Agency Investment Fund (LAIF) 29,311,301 San Diego County Investment Pool 43,711 Certificates of Deposit 50,000 Held by Bond Trustees 624,154 Total investments by fair value level 11,035,860 50,000 $ 124,926,435 11,085,860 Note 3 — Interfund Transactions A. Due To and Due From Other Funds As ofJune 30, 2019, balances were as follows: Due to other funds 40,004,279 21,426,732 22,430,398 29,311,301 43,711 624,154 61,431,011 - 52,409,564 Due from other funds General Water Sewer Internal Service Fund Fund Fund Fund Total Governmental Activities: General Fund $ - - 312,433 312,433 Non -major Governmental Funds 182,241 31,346 19,660 78,900 312,147 Total due to other funds $ 182,241 31,346 19,660 391,333 624,580 These balances resulted from loans to cover negative cash balances and capital replacement costs as ofJune 30, 2019. 57 CITY OF POWAY Notes to the Basic Financial Statements (Continued) B. Advances To and Advances From Fiduciary Funds The advances to fiduciary funds were primarily used for the following: Advances from governmental funds Successor Agency to the Advances to fiduciary funds Poway RDA Governmental Activities: Housing Authority Non -major Governmental Funds Business -Type Activities Water Fund Sewer Fund Total 610,976 748,643 1,173,173 522,085 $ 3,054,877 The City Council authorized various advances to the former Poway Redevelopment Agency, which now reside in the Successor Agency, totaling $3,054,877. As approved by the California Department of Finance, these advances are being repaid through fiscal year 2032-33. The advance bears 3% interest rate, payable over 18 years. C. Transfers To and From Other Funds Transfers for the year ended June 30, 2019: Transfers Out Transfers In Water Sewer Internal Non -major Enterprise Enterprise Service Governmental General Fund Fund Fund Funds Total General Fund Non -major Governmental Funds Water Enterprise Fund Sewer Enterprise Fund Internal Service Funds Total $ - 20,657 10,481 4,226 1,288,545 1,323,909 780,124 - 780,124 181,180 - - - 187,818 368,998 69,310 - - - 114,941 184,251 1,777,628 - - - 1,777,628 $ 2,808,242 20,657 10,481 4,226 1,591,304 4,434,910 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. 58 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 4 — Capital Assets A. Governmental Activities A summary of changes in capital assets for governmental activities for the year ended June 30, 2019: Balance at Balance at June 30, 2018 Additions Deletions June 30, 2019 Non -Depreciable Assets Land $ 40, 396, 057 3,328,229 - 43, 724, 286 Construction in progress 4,616,362 3,202,638 (6,790,333) 1,028,667 Total non -depreciable assets 45,012,419 6,530,867 (6,790,333) 44,752,953 Depreciable Assets Buildings 64,557,527 - 64,557,527 Improvements other than buildings 5,534,166 6,207,953 - 11,742,119 Infrastructure 146,527,689 - 146,527,689 Machinery and equipment 19,359,850 2,183,216 (663,556) 20,879,510 Total depreciable assets 235,979,232 8,391,169 (663,556) 243,706,845 Less accumulated depreciation Buildings (37,880,246) (1,318,749) Improvements other than buildings (2,142,311) (200,905) Infrastructure (104,768,536) (3,161,091) Machinery and equipment (14,682,774) (965,601) 589,068 (39,198, 995) (2,343,216) (107, 929, 627) (15, 059, 307) Total accumulated depreciation (159,473,867) (5,646,346) 589,068 (164,531,145) Total depreciable assets, net 76,505,365 2,744,823 (74,488) 79,175,700 Total governmental activities $ 121,517,784 9,275,690 (6,864,821) 123,928,653 The $6,790,333 in deletions from construction in progress is shown as $6,207,953 in additions to improvements other than buildings and $582,380 in additions to machinery and equipment. Governmental activities depreciation expense for capital assets for the year ended June 30, 2019: General government $ 844,708 Public safety 817,844 Public works 3,499,930 Community services 483,864 Total depreciation expense $ 5,646,346 59 CITY OF POWAY Notes to the Basic Financial Statements (Continued) 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, 2019: Balance at Balance at June 30, 2018 Additions Deletions June 30, 2019 Non -Depreciable Assets Land $ 76,797 - - 76,797 Construction in progress 956,087 1,390,212 (1,579,152) 767,147 Total non -depreciable assets 1,032,884 1,390,212 (1,579,152) 843,944 Depreciable Assets Buildings 21,128,309 - - 21,128,309 Improvements other than buildings 71,949,535 1,579,152 - 73,528,687 Machinery and equipment 3,893,829 313,725 - 4,207,554 Total depreciable assets 96,971,673 1,892,877 - 98,864,550 Less accumulated depreciation Buildings (18,853,731) (466,621) - (19,320,352) Improvements other than buildings (44,303,833) (1,957,002) - (46,260,835) Machinery and equipment (2,728,929) (255,079) - (2,984,008) Total accumulated depreciation (65,886,493) (2,678,702) - (68,565,195) Total depreciable assets, net 31,085,180 (785,825) - 30,299,355 Total business -type activities $ 32,118,064 604,387 (1,579,152) 31,143,299 Business -type activities depreciation expense for capital assets for the year ended June 30, 2019: Water Enterprise Fund Sewer Enterprise Fund Total depreciation expense $ 1,591,882 1,086,820 $ 2,678,702 60 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 4 — Capital Assets (Continued) C. Fiduciary Activities A summary of changes in capital assets for fiduciary activities for the year ended June 30, 2019: Non -Depreciable Assets Land Balance at Balance at June 30, 2018 Additions Deletions June 30, 2019 $ 2,864,759 - 2,864,759 Total non -depreciable assets 2,864,759 - Total fiduciary activities $ 2,864,759 - Note 5 — Long -Term Debt A summary of changes in long-term debt for the year ended June 30, 2019: 2,864,759 2,864,759 Classification Amount Amount Balance Balance Due Within Due In More June 30, 2018 Additions Reductions June 30, 2019 One Year Than One Year Governmental Activities Certificates of Participation $ 13,195,977 (810,432) 12,385,545 829,512 11,556,033 Compensated Absences 1,585,705 1,959,230 (2,010,381) 1,534,554 1,534,554 Total governmental activities $ 14,781,682 1,959,230 (2,820,813) 13,920,099 2,364,066 11,556,033 Business -Type Activities Compensated Absences $ 292,416 322,725 (319,851) 295,290 295,290 Total business -type activities $ 292,416 322,725 (319,851) 295,290 295,290 Fiduciary Funds Tax Allocation Bonds $ 154,504,588 Notes Payable 3,338,564 (8,858,263) 145,646,325 (3,338,564) - 9,028,510 136,617,815 Total fiduciary activities $ 157,843,152 (12,196,827) 145,646,325 9,028,510 136, 617, 815 61 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 5 - Long -Term Debt (Continued) A. Governmental Activities Long -Term Debt Certificates of Participation at June 30, 2019, consisted of the following: Classification Amount Amount Balance Balance Due Within Due in More June 30, 2018 Additions Reductions June 30, 2019 One Year Than One Year 2005 Certificates of Participation $ 2,000,000 - (185,000) 1,815,000 195,000 1,620,000 Bond Premium 15,170 - (2,978) 12,192 2,703 9,489 2012 Certificates of Participation 11,025,000 (605,000) 10,420,000 615,000 9,805,000 Bond Premium 155,807 - (17,454) 138,353 16,809 121,544 Total Certificates of Participation $ 13,195,977 2005 Certificates of Participation (810,432) 12,385,545 829,512 11,556,033 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, 2019, the City's portion of the outstanding balance of the 2005 Certificates of Participation was $1,815,000. The annual requirements to amortize the City portion of Certificates of Participation outstanding at June 30, 2019: Year Ending June 30, Principal Interest Total 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 230,000 39,150 269,150 2025-2027 755,000 52,088 807,088 Total $ 1,815,000 343,519 2,158,519 62 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 5 — Long -Term Debt (Continued) 2012 Certificates of Participation 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. 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 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, 2019, the outstanding balance of the 2012 Certificates of Participation was $10,420,000. The annual requirements to amortize Certificates of Participation outstanding at June 30, 2019: Year Ending June 30, Principal Interest Total 2020 $ 615,000 314,770 929,770 2021 630,000 300,933 930,933 2022 645,000 283,608 928,608 2023 665,000 264,258 929,258 2024 685,000 244,308 929,308 2025 - 2029 3,745,000 900,538 4,645,538 2030 - 2033 3,435,000 282,375 3,717,375 Total $ 10,420,000 2,590,790 13,010,790 B. Fiduciary Funds Long Term Debt Tax Allocation Bonds Tax Allocation Bonds at June 30, 2019, consisted of the following: 2015A Tax Allocation Bonds Bond Premium 2015BTax Allocation Bonds Total Tax Allocation Bonds Balance June 30, 2018 $ 133,110,000 16,304,588 5,090,000 $ 154,504,588 Classification Amount Amount Balance Due Within Due in More Additions Reductions June 30, 2019 One Year Than One Year (1,885,000) (1,883,263) (5,090,000) 131, 225,000 7,190,000 124,035,000 14, 421, 325 1,838,510 12, 582, 815 (8,858,263) 145,646,325 9,028,510 136,617,815 63 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 5 - Long -Term Debt (Continued) 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 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, 2019, the balance of the 2015A Tax Allocation Bonds was $131,225,000.The annual requirements to amortize the bonds outstanding at June 30, 2019: Year Ending June 30, Principal Interest Total 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 8,770,000 4,902,250 13, 672, 250 2025-2029 48, 540, 000 17, 310, 750 65, 850, 750 2030-2033 42, 900, 000 4,964,875 47, 864, 875 Total $ 131,225,000 50,792,200 182,017,200 2015B Tax Allocation Bonds On July 1, 2015, the Successor Agency to the Poway Redevelopment Agency (Successor Agency) issued the 2015E 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 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. 64 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 5 — Long -Term Debt (Continued) As of June 30, 2019, the balance of the 2015B Tax Allocation Bonds was paid off. Notes Payable Notes payable at June 30, 2019, consisted of the following: Classification Amount Amount Balance Balance Due Within Due in More June 30, 2018 Additions Reductions June 30, 2019 One Year Than One Yea! Mossy Nissan $ 3,338,564 (3,338,564) - Total Notes Payable $ 3,338,564 (3,338,564) - 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. As of June 30, 2019, the fifteenth annual payment was made and as such, the Owner Participation agreement was forgiven. 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, 2019, the outstanding balance of governmental activities and business -type activities compensated absences were $1,534,554 and $295,290, respectively. Note 6 — Pension Plan Summary The City currently has two pension plans administered by California Public Employees' Retirement System (CaIPERS) and one retirement enhancement plan administered by the Public Agency Retirement Services (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 deferred outflows of resources, deferred inflows of resources, net pension liability and pension expense: 65 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 6 — Pension Plan Summary (Continued) Miscellaneous Safety PARS Total Deferred Outflows of Resources $ 4,337,163 4,083,348 1,102,567 9,523,078 Deferred Inflows of Resources (506,491) (545,600) (111,794) (1,163,885) Net Pension Liability (33,205,519) (15,638,347) (2,576,481) (51,420,347) Pension Expense 6,032,830 3,179,378 683,955 9,896,163 The net pension liabilities for the City's pension plans are primarily liquidated by funding from the General, Water, Sewer and Internal Service funds based on their proportionate personnel costs each year. Note 7 — Defined Benefit Pension Plans — CaIPERS 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 CaIPERS. 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, 2017, 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 CaIPERS audited financial statements are publicly available reports that can be obtained at CaIPERS 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 CaIPERS. 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. CaIPERS 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 CaIPERS' website, at www.calpers.ca.gov. 66 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) Benefits Provided CaIPERS 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. 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 CaIPERS 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 CaIPERS Board. The Plans' provisions and benefits in effect at June 30, 2019: Miscellaneous Plans 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% Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensations Safety Plan On or After Prior to January 1, 2011 Prior On or After January 1, 2011 to January 1, 2013 January 1, 2013 3.0% @ 50 5 years service monthly for life 50 & Up 3.0% @ 55 5 years service monthly for life 50-55 & Up 2.7% @ 57 5 years service monthly for life 50-57 & Up 3.0% 2.4% to 3.0% 2.0% to 2.7% 67 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) Employees Covered At June 30, 2018 (measurement date), the following employees were covered by the benefit terms: Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 239 47 Inactive employees entitled to but not yet receiving benefits 211 44 Active employees 176 53 Total Contributions 626 144 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 CaIPERS' 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. 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. 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, 2018, using an annual actuarial valuation as of June 30, 2017 rolled forward to June 30, 2018, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability: 68 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) Actuarial Methods and Assumptions Used to Determine Total Pension Liability Actuarial Cost Method Asset Valuation Method Actuarial Assumptions: Discount Rate Inflation Salary Increase Investment Rate of Return (1) Mortality Rate Table (2) Post Retirement Benefit Increase Entry Age Normal Market Value of Assets 7.15% 2.50% Varies by Entry age and Service 7.15% Derived using CaIPERS' membership data for all funds Contract COLA up to 2.50% until purchasing power protection allowance floor on purchasing power applies, 2.55% thereafter (1) Net of pension plan investment and administrative expenses; includes inflation. (2) The mortality table was used was developed based on CaIPERS' specific data. The table includes 15 years of mortality improvements using Society of Actuaries Scale 90% of scale MP 2016. For more details on the table, please refer to the 2017 experience study report (based on CaIPERS demographics data from 1997 to 2015) that can be found on the CaIPERS website. Discount Rate The discount rate used to measure the total pension liability was 7.15%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at the statutorily required rates, actuarially determined. Based on those assumptions, the Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on plan on investment was applied to all periods of projected benefit payments to determine the total pension liability. 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, except 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. 69 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) The expected rate of return was set by calculating the 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 expected real rate of return by asset class: Asset Classl Assumed asset Real Return Real Return allocation Years 1- 102 Year 11+3 Global Equity 50.0% 4.80% 5.98% Global Fixed Income 28.0% 1.00% 2.62% Inflation Assets 0.0% 0.77% 1.81% Private Equity 8.0% 6.30% 7.23% Real Assets 13.0% 3.75% 4.93% Liquidity 1.0% 0.00% (0.92%) Total 100.0% 1 In the system's CAFR, Fixed Income is included Global Debt Securities; Liquidity is included in Short-term Investment; Inflation Assets are included both Global Equity Securities and Global Debt Securities. 2 An expected inflation of 2.00% used for this period 3 An expected inflation of 2.92% used for this period Pension Plan Fiduciary Net Position Detailed information about each pension plan's fiduciary net position is available in the separately issued CaIPERS financial reports. 70 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) Miscellaneous Plan The following table shows the Plan's change in net pension liability over the measurement period. Increase (Decrease) Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) (a) (b) (c) = (a) - (b) Balance at: 6/30/2017 (VD) $ 110,101,216 77,440,054 32,661,162 Changes Recognized for the Measurement Period: Service Cost 1,801,815 - 1,801,815 Interest on the Total Pension Liability 7,769,440 - 7,769,440 Changes of Benefit Terms Changes of Assumptions (586,664) - (586,664) Differences between Expected and Actual Experience 1,018,162 1,018,162 Net Plan to Plan Resource Movement (189) 189 Contributions - Employer 2,452,303 (2,452,303) Contributions -Employee 844,131 (844,131) Net Investment Income 6,511,984 (6,511,984) Benefit Payments, including Refunds of Employee Contributions (5,540,276) (5,540,276) Administrative Expense (120,673) 120,673 Other miscellaneous income/(expense) (229,160) 229,160 Net Changes during 2017-18 4,462,477 3,918,120 544,357 Balance at: 6/30/2018 (MD) $ 114,563,693 81,358,174 33,205,519 Valuation Date (VD), Measurement Date (MD). Safety Plan 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, 2018, 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, 2017, rolled forward to June 30, 2018, using standard update procedures. 71 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) The City's proportion of the net pension liability was determined by CaIPERS using the output from the Actuarial Valuation System and the fiduciary net position, as provided in the CaIPERS Public Agency Cost -Sharing Allocation Methodology Report, which is a publicly available report that can be obtained at CaIPERS' 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, 2017, and 2018, was as follows: Proportionate Share of NPL - June 30, 2016 Proportionate Share of NPL-June 30, 2017 Change - Increase Safety Plans 0.25775% 0.26652% 0.00877% The following table shows the Plan's proportionate share of the net pension liability over the measurement period. Increase (Decrease) Plan Total Pension Plan Fiduciary Plan Net Pension Liability Net Position Liability (a) (b) (c) _ (a) - (b) Balance at: 6/30/2017 (VD) $ 57,427,165 42,025,848 15,401,317 Balance at: 6/30/2018 (MD) 59,842,721 44,204,374 15,638,347 Net changes during 2017-18 $ 2,415,556 2,178,526 237,030 Valuation Date (VD), Measurement Date (MD) 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% Current Discount Rate Discount Rate + 1% (6.15%) (7.15%) (8.15%) Miscellaneous Plan Net Pension Liability $ 47,953,285 33,205,519 20,955,746 Safety Plan Net Pension Liability 23,888,049 15,638,347 8,879,193 72 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) Amortization of Deferred Outflows and Deferred Inflows of Resources 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. 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 5yearstraight-line amortization and actual earnings All other amounts Straight-line amortization over the expected average remaining service lifetime (EARSL) of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period For the year ended June 30, 2019, the City recognized pension expense of $6,032,830 and $3,208,742 for the Miscellaneous and Safety Plans, respectively. At June 30, 2019, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Miscellaneous Safety Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Differences between Expected and Actual Experience $ 667,072 (122,125) 336,015 (1,275) Changes of Assumptions 1,577,817 (384,366) 1,534,395 (207,017) Net Difference between Projected and Actual Earnings on Pension Plan Investments 192,393 105,879 Change in Employer's Proportion 442,874 (29,438) Difference in Actual vs Projected Contributions 117,102 (307,870) Pension Contributions Subsequent to Measurement Date 1,899,881 1,547,083 $ 4,337,163 (506,491) 4,083,348 (545,600) 73 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 7 — Defined Benefit Pension Plans — CaIPERS (Continued) $1,899,881 and $1,547,083 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 fiscal year ended June 30, 2020. Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Measurement Deferred Outflows/(Inflows) of Period Ended Resources June 30, Miscellaneous Safety 2019 $ 2,596,571 1,567,953 2020 353,908 883,781 2021 (803,755) (352,751) 2022 (215, 933) (108, 318) 2023 Thereafter 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, 2018, 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. 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 CaIPERS "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. 74 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 8 — Defined Benefit Pension Plan — Retirement Enhancement Plan (Continued) 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 CaIPERS. The Plan is closed to all employees hired after January 9, 2012 ("soft -freeze"). The Plan's provisions and benefits in effect at June 30, 2019 (measurement date), are summarized as follows: Supplemental Hire date On or before January 9, 2012 Benefit formula 2.7% @ 55 less CaIPERS 2.0% @ 55 Benefit vesting schedule from date of hire Benefit payments life only annuity Retirement age 55 Monthly benefits, as a % of eligible compensation 13.54% Required employee contribution rates none 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. Employer Contributions for the measurement period ended June 30, 2019, are $868,670. 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, 2019, 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. 75 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 8 — Defined Benefit Pension Plan — Retirement Enhancement Plan (Continued) Actuarial Methods and Assumptions Used to Determine Total Pension Liability Supplemental Valuation Date June 30, 2018 Measurement Date June 30, 2019 Actuarial Cost Method Entry Age Normal Asset Valuation Method None Actuarial Assumptions: Discount Rate 6.50% Inflation 2.75% Salary Increases 2.75% Investment Rate of Return 6.50% Cost of Living Adjustment 2.00% Mortality Rate Table Pre -retirement: CaIPERS Miscellaneous Non -Industrial Rates. Post -retirement: CaIPERS Miscellaneous Non- industrial rates Employees Covered At June 30, 2018 (actuarial valuation date), the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits Active employees Supplemental 73 74 Total 147 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. 76 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 8 — Defined Benefit Pension Plan — Retirement Enhancement Plan (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, 2018 June 30, 2019 Discount rate 7.00% 6.50% Long-term expected rate of return, net of investment expense 7.00% 6.50% 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. 77 CITY OF POWAY Notes to the Basic Financial Statements (Continued) 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 Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (c) = (a) - (b) Balances as of June 30, 2018 $ 17,760,919 $ 16,062,696 $ 1,698,223 Changes for the year: Service Cost 227,611 - 227,611 Interest on the Total Pension Liability 1,138,559 - 1,138,559 Effect of Plan Changes - - Effect of Economic Demographic Gains or Losses 382,609 382,609 Effect of Assumptions Changes or Inputs 973,111 973,111 Benefit Payments (959,590) (959,590) Employer Contributions 866,896 (866,896) Member Contributions - - Net Investment Income 1,002,486 (1,002,486) Administrative Expenses - (25,750) 25,750 Net Changes during 2018-19 1,762,300 884,042 878,258 Balance as of June 30, 2019 $ 19,523,219 $ 16,946,738 $ 2,576,481 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 6.50%, 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 (5.50%) or 1 percentage point higher (7.50%) than the current rate. Net Pension Liability Discount Rate - 1% Current Discount Discount Rate + 1% (5.50%) Rate (6.50%) (7.50%) $ 4,959,995 $ 2,576,481 $ 574,117 78 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 8 — Defined Benefit Pension Plan — Retirement Enhancement Plan (Continued) 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 For the year ended June 30, 2019, the City incurred a pension expense of $683,955 for the Plan. As of June 30, 2019, the City has deferred outflows and deferred inflows of resources related to pensions: Differences between Expected and Actual Experience Changes of Assumptions Net Difference between Projected and Actual Earnings on Pension Plan Total Deferred Outflows of Deferred Inflows of Resources Resources 342,038 756,864 3,665 1,102,567 (111, 794) (111, 794) Amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense: Deferred Measurement Outflows/(Inflows) of Period Ended Resources, Net June 30, PARS 2020 $ 330,597 2021 186,867 2022 299,105 2023 174,204 2024 Thereafter 79 CITY OF POWAY Notes to the Basic Financial Statements (Continued) 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 non -forgivable rehabilitation loans at June 30, 2019 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, 2019 is $1,675,950. 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, 2019 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, 2019 is $37,352,839. 80 CITY OF POWAY Notes to the Basic Financial Statements (Continued) 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 power's 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. 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 81 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 10 — Risk Management (Continued) $100,000 to statutory limits are distributed based on the outcome of cost allocation within the first and second loss layers. For 2018-19 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 from $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 $176,654,752. 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, 2019, no liability was recorded in the accompanying basic financial statements. 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 82 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 11—Joint Venture (continued) 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 audited information of the JPA for the fiscal year ended June 30, 2019, which is the latest information available: Amounts in Thousands Total Assets Total Liabilities Total Equity Total Revenues Total Expenses Net Increase in Fund Equity 491 8 483 348 337 11 The 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, 2019, the following funds had deficit net position: Fund Type Fund Deficit Special Revenue Fund 800 MHz Communication System $ (32,285) Fiduciary Fund Successor Agency to the Poway Redevelopment Agency (139,147,105) The 800 MHz Special Revenue fund had a deficit balance of $(32,285) due to the timing of collections of the voter -approved special tax. Successor Agency to the Poway Redevelopment Agency - The Successor Agency to the Poway Redevelopment Agency Private Purpose Trust fund had an accumulated deficit of $(139,147,105), 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. 83 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 13 — 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. B. Construction Various construction projects were in progress at June 30, 2019 with an estimated cost to complete of approximately $16,283,983 in all fund types. C. 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. Purpose Special Internal General Revenue Enterprise Service Fund Funds Funds Funds Total Water Projects $ - - 1,341,283 - 1,341,283 Sewer Projects - 676,173 - 676,173 Drainage Projects 12,989 4,000 - 16,989 Street Projects 1,931,670 223,729 - 2,155,399 Computer Equipment and Software - 189,405 189,405 Vehicles - 179,070 179,070 Facilities 350,255 - 6,644 356,899 Professional Services 318,833 6,545 - 325,378 Total Outstanding Encumbrances $ 2,613,747 234,274 2,017,456 375,119 5,240,596 D. Other Matters As of June 30, 2019, 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. 84 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 14 — Fund Balances Classification The City's fund balances at June 30, 2019: Major Funds Total Housing Non -Major General Authority Governmental Fund Fund Funds Total Nonspendable: Prepaid items $ 51,342 - - 51,342 Inventories 127,080 - - 127,080 Land held for resale 5,367,000 - - 5,367,000 Notes receivable 10,005,226 - - 10,005,226 Total nonspendable 15,550,648 - - 15,550,648 Restricted: Debt service payments - - 556,697 556,697 Drainage - - 3,357,386 3,357,386 Fire protection - - 159,084 159,084 Grants - - 231,048 231,048 Housing - 2,199,704 159,155 2,358,859 Maintenance districts - - 8,453,934 8,453,934 Other purposes - - 2,085,051 2,085,051 Parks and recreation - - 876,723 876,723 Streets - - 3,007,857 3,007,857 Transportation - - 1,504,280 1,504,280 Total restricted - 2,199,704 20,391,215 22,590,919 Committed: Economic volatility 6,986,990 - - 6,986,990 Extreme events 13,974,863 - - 13,974,863 Total committed 20,961,853 - - 20,961,853 Assigned: Capital projects 17,152,463 Contractual services 223,463 Library 258,499 Parks and recreation 316,480 Public education & govt programming 617,940 Public safety 113,565 Repair and maintenance 3,854,408 Total assigned 17,152,463 223,463 258,499 316,480 617,940 113,565 3,854,408 22,536,818 - - 22,536,818 Unassigned 7,308,113 - (32,285) 7,275,828 Total unassigned 7,308,113 - (32,285) 7,275,828 Total fund balances $ 66,357,432 2,199,704 20, 358, 930 88, 916, 066 85 CITY OF POWAY Notes to the Basic Financial Statements (Continued) Note 15 — Expenditures in Excess of Appropriations Excess of expenditures over appropriations in individual funds at the function level (level of budgetary control) is as follows at June 30, 2019: Final Governmental Funds - Non -Major Fund Budget Expenditures Excess Special Revenue Funds: 800 MHz Communication System $ 154,340 154,877 537 86 This page intentionally left blank. 87 REQUIRED SUPPLEMENTARY INFORMATION CITY OF POWAY Required Supplementary Information June 30, 2019 Note 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 Housing Authority Fund. 89 CITY OF POWAY Required Supplementary Information Budgetary Comparison Schedule - General Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 38,216,120 38,216,120 39,050,341 834,221 Licenses and permits 699,860 699,860 636,007 (63,853) Intergovernmental 346,400 810,400 740,726 (69,674) Charges for services 4,510,400 4,620,295 4,346,688 (273,607) Fines and forfeitures 100,000 100,000 174,431 74,431 Use of money and property 892,140 663,050 1,652,609 989,559 Developer fees 3,007,000 3,024,124 3,031,986 7,862 Other revenues 193,610 193,610 212,951 19,341 Total revenues 47,965,530 48,327,459 49,845,739 EXPENDITURES Current: General government Public safety Public works Development services Community services Capital outlay Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balance Fund balance, beginning of year Fund balance, end of year 8,567,130 25,232,610 4,656,280 5,678,440 6,205,480 1,631,230 6,910,742 25,755,532 4,768,507 5,810,968 6,380,590 23,607,693 51,971,170 73,234,032 (4,005,640) (24,906,573) 988,110 (1,131,190) 3,118,209 (1,370,570) (143,080) 1,747,639 $ (4,148,720) (23,158,934) 6,157,824 25,092,171 4,401,878 4,977,009 5,834,051 4,148,024 1,518,280 752,918 663,361 366,629 833,959 546,539 19,459,669 50,610,957 22,623,075 (765,218) 24,141,355 2,808,242 (1,323,909) (309,967) 46,661 1,484,333 (263,306) 719,115 23,878,049 65,638,317 $ 66,357,432 90 CITY OF POWAY Required Supplementary Information Budgetary Comparison Schedule - Housing Authority Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Charges for services $ 61,640 61,640 48,259 (13,381) Use of money and property 40,070 40,070 84,350 44,280 Other revenues 40,000 40,000 67,871 27,871 Total revenues EXPENDITURES Current: General government Development services Total expenditures Excess (deficiency) of revenues over (under) expenditures 141,710 141,710 7,700 17,704 130,000 943,110 137,700 960,814 4,010 (819,104) 200,480 58,770 8,160 9,544 764,063 179,047 772,223 188,591 (571,743) 247,361 Net change in fund balance $ 4,010 (819,104) (571,743) 247,361 Fund balance, beginning of year 2,771,447 Fund balance, end of year $ 2,199,704 91 Measurement Period CITY OF POWAY Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios Last 10 Years* Miscellaneous Plan 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 TOTAL PENSION LIABILITY Service Cost $ 1,515,714 1,463,621 1,552,133 1,785,822 1,801,815 Interest 6,646,592 6,973,473 7,241,818 7,456,135 7,769,440 Difference Between Expected and Actual Experience - 179,245 (444,504) (471,057) 1,018,162 Changes of Assumptions - (1,692,043) 6,085,867 (586,664) Benefit Payments, Including Refunds of Employee Contributions (3,875,819) (4,300,520) (4,757,620) (5,058,914) (5,540,276) Net Change in Total Pension Liability 4,286,487 2,623,776 3,591,827 9,797,853 4,462,477 Total Pension Liability- Beginning 89,801,273 94,087,760 96,711,536 100,303,363 110,101,216 Total Pension Liability - Ending (a) $ 94,087,760 96,711,536 100,303,363 110,101,216 114,563,693 PLAN FIDUCIARY NET POSITION Net Plan to Plan Resource Movement $ - - (189) Contributions - Employer 1,590,147 1,651,614 1,961,662 2,311,817 2,452,303 Contributions - Employee 716,942 773,660 778,160 806,615 844,131 Net Investment Income 11,075,599 1,674,500 387,630 7,966,356 6,511,984 Benefit Payments, Including Refunds of Employee Contributions (3,875,819) (4,300,520) (4,757,620) (5,058,914) (5,540,276) Administrative Expenses - (82,323) (44,608) (105,594) (120,673) Other Miscellaneous Income/(Expense) - - (229,160) Net Change in Fiduciary Net Position 9,506,869 (283,069) (1,674,776) 5,920,280 3,918,120 Plan Fiduciary Net Position - Beginning 63,970,749 73,477,618 73,194,551 71,519,775 77,440,054 Plan Fiduciary Net Position - Ending (b) $ 73,477,618 73,194,549 71,519,775 77,440,055 81,358,174 Plan Net Position Liability - Ending (a) - (b) $ 20,610,142 23,516,987 28,783,588 32,661,161 33,205,519 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 78.09% 75.68% 71.30% 70.34% 71.02% Covered Payroll $ 10,373,075 10,272,463 10,938,986 11,566,248 11,662,050 Plan Net Pension Liability as a Percentage of Covered Payroll 198.69% 228.93% 263.13% 282.38% 284.73% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only five years are presented. Notes to Schedule: 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, 2017 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: GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement period is without reduction of pension plan administration expense. In 2016, there were no changes in assumptions. In 2017, The accounting discount rate reduced from 7.65% to 7.15%. In 2018, demographic assumptions and inflation were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. 92 CITY OF POWAY Required Supplementary Information Schedule of Plan Contributions Last 10 Years* Miscellaneous Plan Fiscal Year 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 Actuarially determined contribution $ 1,651,614 1,961,662 2,311,817 2,452,302 1,899,881 Contributions in relation to the actuarially determined contributions Contribution deficiency (excess) Covered payroll Contributions as a percentage of covered payroll (1,651,614) (1,961,662) (2,311,817) (2,452,302) (1,899,881) 10,272,463 10,938,986 11,566,248 11,662,050 12,831,311 16.08% 17.93% 19.99% 21.03% 14.81% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only five years are presented. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019 were derived from the June 30, 2016, Funding Valuation Report. Actuarial Cost Method Entry Age Normal Amortization Method/Period For details, see June 30, 2016, Funding Valuation Report. Asset Valuation Method Actuarial Value of Assets. For details, see June 30, 2016, Funding Valuation Report. Inflation 2.75% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return 7.375% Net of Pension Plan Investment and Administrative Expenses; includes Inflation. Retirement Age The probabilities of Retirement are based on the 2014 CalPERS Experience Study for the period from 1997 to 2007. 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 BB published by the Society of Actuaries. 93 CITY OF POWAY Required Supplementary Information 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* Measurement Date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 Employer's Proportion of the Collective Net Pension Liability' 0.14119% 0.25032% 0.25757% 0.25775% 0.26652% Safety Plan Employer's Proportion Share of the Collective Net Pension Liability $ 8,785,355 10,314,344 13, 340,151 15,401,317 15,638,347 Employer's Covered Payroll 4,733,734 4,875,746 4,765,209 4,813,604 4,948,089 Employer's Proportionate Share of the Collective Net Pension Liability as a Percentage of the Employer's Covered Payroll 185.59% 211.54% 279.95% 319.95% 316.05% Pension's Plans Fiduciary Net Position as a Percentage of the Total Pension Liability 81.42% 79.03% 74.44% 74.14% 73.39% 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. * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only five 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, 2017 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: GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate of 7.50% used for the June 30, 2014 measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015 measurement period is without reduction of pension plan administration expense. In 2016, there were no changes in assumptions. In 2017, The accounting discount rate reduced from 7.65% to 7.15%. In 2018, demographic assumptions and inflation were changed in accordance to the CaIPERS Experience Study and Review of Actuarial Assumptions December 2017. 94 CITY OF POWAY Required Supplementary Information Schedule of Plan Contributions Last 10 Years* Safety Plan Fiscal Year Ended 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 Actuarially determined contribution $ 1,159,123 1,322,635 1,340,317 1,517,719 1,547,083 Contributions in relation to the actuarially determined contributions (1,159,123) (1,172,369) (1,340,317) (1,517,719) (1,547,083) Contribution deficiency (excess) 150,266 - - - Covered payroll 4,875,746 4,765,209 4,813,604 4,948,089 5,696,517 Contributions as a percentage of covered payroll 23.77% 27.76% 27.84% 30.67% 27.16% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only five years are presented. Notes to Schedule: Change in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. However, individual employers in the Plan may have provided a benefit improvement to their employees by granting Two Years Additional Service Credit to member retiring during a specified time period (a.k.a. Golden Handshakes). Change in Assumptions: In 2015, the discount rate was changed from 7.5 percent (net of administrative expense) to 7.65 percent to correct for an adjustment to exclude administrative expense. In 2017, the discount rate was changed from 7.65 percent to 7.15 percent. In 2018, demographic assumptions and inflation rate were changed in accordance to the CaIPERS Experience Study and Review of Actuarial Assumptions December 2017. The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2019 were derived from the June 30, 2016, Funding Valuation Report. Actuarial Cost Method Entry Age Normal Amortization Method/Period For details, see June 30, 2016, Funding Valuation Report. Asset Valuation Method Market Value of Assets. For details, see June 30, 2016 Funding Valuation Report. Inflation 2.75% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return 7.375% Net of Pension Plan Investment and Administrative Expenses; Retirement Age The probabilities of Retirement are based on the 2014 CaIPERS Experience Study for the period from 1997 to 2007. Mortality The probabilities of mortality are based on the 2014 CaIPERS 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 BB published by the Society of Actuaries. 95 CITY OF POWAY Required Supplementary Information Schedule of Changes in Net Pension Liability and Related Ratios Last 10 Years* Retirement Enhancement Plan Measurement Date 2014-15 2015-16 2016-17 2017-18 2018-19 TOTAL PENSION LIABILITY Service Cost $ 252,845 253,408 235,041 228,468 227,611 Interest 1,071,102 1,117,733 1,148,044 1,191,080 1,138,559 Effect of plan changes - - - - Effect of economic/demographic gains or losses 32,923 (231,575) 52,208 382,609 Effect of assumptions changes or inputs - - - 973,111 Benefit payments (628,101) (689,668) (753,594) (876,349) (959,590) Net Change in Total Pension Liability 695,846 714,396 397,916 595,407 1,762,300 Total Pension Liability - Beginning 15,357,354 16,053,200 16,767,596 17,165,512 17,760,919 Total Pension Liability - Ending (a) 16,053,200 16,767,596 17,165,512 17,760,919 19,523,219 PLAN FIDUCIARY NET POSITION Contributions -Employer $ 1,302,085 1,379,421 3,846,093 1,560,917 866,896 Net Investment Income 205,418 (43,672) 1,332,806 1,062,788 1,002,486 Benefit Payments, Including Refunds of Employee Contributions (628,101) (689,668) (753,594) (876,349) (959,590) Administrative Expenses (18,030) (18,906) (24,614) (25,431) (25,750) Net Change in Fiduciary Net Position 861,372 627,175 4,400,691 1,721,925 884,042 Plan Fiduciary Net Position - Beginning 8,451,533 9,312,905 9,940,080 14,340,771 16,062,696 Plan Fiduciary Net Position - Ending (b) 9,312,905 9,940,080 14,340,771 16,062,696 16,946,738 Plan Net Position Liability - Ending (a) - (b) 6,740,295 6,827,516 2,824,741 1,698,223 2,576,481 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 58.01% 59.28% 83.54% 90.44% 86.80% Covered Payroll $ 8,347,917 7,653,837 7,041,971 6,666,563 5,276,686 Plan Net Pension Liability as a Percentage of Covered Payroll 80.74% 89.20% 40.11% 25.47% 48.83% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only five years are presented. Notes to Schedule: 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. In 2019, the accounting discount rate reduced from 7.00% to 6.50%. 96 Contractually Determined Fiscal Year Contributions CITY OF POWAY Required Supplementary Information Schedule of Plan Contributions Last 10 Years* Retirement Enhancement Plan Contribution in Relation to the Contractually Determined Contributions Contribution Deficiency (Excess) Employer's Covered Payroll Contributions as a Percentage of Covered Payroll 6/30/2015 6/30/2016 6/30/2017 6/30/2018 6/30/2019 $ 1,298,155 (1,302,085) 1,335,335 (1,379,421) 1,320,199 (3,846,093) 1,427,809 (1,560,917) 813,314 (866,896) (3,930) (44,086) (2,525,894) (133,108) (53,582) 7,807,232 7,653,837 7,041,971 6,666,563 5,276,686 16.68% 18.02% 54.62% 23.41% 16.43% * Measurement date 6/30/2014 (fiscal year 2015) was the first year of implementation, therefore, only five years are presented. Notes to Schedule: The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2018-19 were from the June 30, 2018 actuarial valuation. Valuation Timing Actuarially determined contribution rates are calculated as of June 30, 2018, and are applied the following fiscal year. Actuarial Cost Method Amortization Method/Period Asset Valuation Method Inflation Salary Increases Cost of Living Adjustments Investment Rate of Return Payroll Growth Withdrawal/Disability Retirement Age Mortality Maximum Benefits and Salary Family Composition Form of Payment Entry Age Normal Level dollar, closed periods, The actuarial value of assets is the market value of assets as provided by Public Agency Retirement Services. 2.50% Varies by years of Service 2.00% 6.50% 2.75% Consistent with Non -Industrial rates used to value Miscellaneous Agency CaIPERS Pension Plans. The retirement rates are consistent with those used to value the Miscellaneous CaIPERS 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. Pre -Retirement: Consistent with the Non -Industrial rates used to value the Miscellaneous CaIPERS Pension Plans. Post -Retirement: Consistent with the Non -Industrial rates used to value the Miscellaneous CaIPERS Pension Plans. No benefit or salary maximum is applied. 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. Single Life Annuity 97 SUPPLEMENTARY INFORMATION This page intentionally left blank. 99 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. 100 NON -MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued) Proposition A Fund — Used 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 the expenditures 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. 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 as funding becomes available. 101 NON -MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS (Continued) Maintenance Districts Fund — Used to account for 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 — Use to account for financing of 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. 102 CITY OF POWAY Combining Balance Sheet Non -major Governmental Funds June 30, 2019 Special Revenue Funds 800 MHz Fire Communication Gas Protection System Tax Drainage Miscellaneous Grants ASSETS Cash and investments $ 45,034 1,383,333 2,666,319 309,629 Receivables: Taxes 4,785 352 7,309 Accounts 1,476 30 Interest 1,229 Advances to other funds Due from other governments 113,237 Advances to fiduciary funds 748,643 Restricted assets: Cash and investments with fiscal agents Total assets LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds Advances from other funds Unearned revenues Total liabilities 4,785 46,615 1,384,809 3,422,271 422,896 78,900 577,895 34,267 2 6,350 7,793 24,013 - 62,536 34,522 45,831 78,900 612,164 64,885 116,160 Deferred inflows of resources: Unavailable revenue - - 81,792 Total deferred inflows of resources - 81,792 FUND BALANCES (deficit) Restricted Unassigned Total fund balances (deficit) 4,785 772,645 3,357,386 224,944 (32,285) 4,785 (32,285) 772,645 3,357,386 224,944 Total liabilities, deferred inflows of resources and fund balances $ 4,785 46,615 1,384,809 3,422,271 422,896 103 (Continued) Special Revenue Funds AB 939 Integrated Community Transportation SB 1186 Excess Waste Development Development Disabled SAFE Management Block Grant Act Proposition A Access Law Reserve 770,532 366,656 770,633 18,082 153,015 49,820 22,016 18,272 820,352 22,016 384,928 770,633 18,082 153,015 30,211 2,795 1,333 223 19,221 30,211 22,016 1,333 223 790,141 790,141 383,595 770,633 383,595 770,633 17,859 153,015 17,859 153,015 820,352 22,016 384,928 770,633 18,082 153,015 104 City of Poway Combining Balance Sheet Non -major Governmental Funds June 30, 2019 (Continued) Special Revenue Funds Regional Fire Arterial Protection Abandoned Traffic Impact BEGIN Housing Vehicle Habitat Mitigation Fees Program In -lieu Fees In -lieu ASSETS Cash and investments $ 350,052 154,299 6,104 159,155 330,243 942,729 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 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable Accrued liabilities Due to other funds Advances from other funds Unearned revenues Total liabilities Deferred inflows of resources: Unavailable revenue Total deferred inflows of resources 350,052 154,299 6,104 159,155 330,243 942,729 FUND BALANCES (deficit) Restricted 350,052 154,299 6,104 159,155 330,243 942,729 Unassigned Total fund balances (deficit) 350,052 154,299 6,104 159,155 330,243 942,729 Total liabilities, deferred inflows of resources and fund balances $ 350,052 154,299 6,104 159,155 330,243 942,729 105 Special Revenue Funds Debt Service Permanent Fund Fund Capital Projects Funds Total City of Poway Mary Non -major Maintenance Road Debt Patricia Park Street Municipal Governmental Districts Repair Service Ross Trust Improvement Improvement Improvement Funds 8,689,640 177,889 225,464 96,629 780,094 1,739,989 416,622 20,552,142 17,761 25,453 164,319 819 30,207 76,779 2,048 317,844 748,643 624,154 624,154 8,732,854 342,208 850,437 96,629 780,094 1,739,989 416,622 22,351,817 271,785 - 412,543 1,310,928 7,135 - 65,415 151,490 312,147 142,250 222,605 278,920 293,740 412,543 1,911,095 81,792 81,792 8,453,934 342,208 556,697 96,629 780,094 1,739,989 4,079 20,391,215 (32,285) 8,453,934 342,208 556,697 96,629 780,094 1,739,989 4,079 20,358,930 8,732,854 342,208 850,437 96,629 780,094 1,739,989 416,622 22,351,817 106 CITY OF POWAY Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -Major Governmental Funds For the year ended June 30, 2019 Special Revenue Funds 800 MHz Fire Communication Gas Protection System Tax Drainage REVENUES Taxes $ 636,888 135,843 985,957 1,388,117 Intergovernmental - - - Use of money and property - 2,609 23,314 106,950 Developer fees - - - 32,634 Assessments levied - - - - Other revenues - - 65,026 1,365 Total revenues 636,888 138,452 1,074,297 1,529,066 EXPENDITURES Current: Public safety - 154,877 - - Public works - - 1,235,735 854,010 Capital outlay - - - 250,429 Debt service: Principal - - - - Interest and fiscal charges - - - - Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfer out 154,877 1,235,735 1,104, 439 636,888 (16,425) (161,438) 424,627 (636,091) 1,818 Total other financing sources(uses) (636,091) - - 1,818 Net change in fund balances 797 (16,425) (161,438) 426,445 Fund balances (deficit), beginning of year 3,988 (15,860) 934,083 2,930,941 Fund balances (deficit), end of year $ 4,785 (32,285) 772,645 3,357,386 107 (Continued) Special Revenue Funds AB 939 Integrated Community Transportation SB 1186 Excess Miscellaneous Waste Development Development Disabled SAFE Grants Management Block Grant Act Proposition A Access Law Reserve 1,474,700 1,633,489 38,003 111,009 18,272 5,465 21,509 10,864 10,461 416 4,460 217,742 - - 7,439 1,638,954 277,254 111,009 29,136 1,485,161 7,855 4,460 1,436 886,962 1,563,350 228,552 111,009 18,648 7,934 1,563,350 228,552 111,009 20,084 894,896 75,604 48,702 - 9,052 590,265 7,855 4,460 (139,416) (139,416) (63,812) 48,702 - 9,052 590,265 7,855 4,460 288,756 741,439 - 374,543 180,368 10,004 148,555 224,944 790,141 - 383,595 770,633 17,859 153,015 108 CITY OF POWAY Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non -Major Governmental Funds For the year ended June 30, 2019 Special Revenue Funds (Continued) 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 10,044 3,827 128 4,558 9,624 34,684 Developer fees 17,464 29,212 5,750 Assessments levied Other revenues Total revenues EXPENDITURES Current: Public safety Public works Capital outlay Debt service: Principal Interest and fiscal charges 27,508 33,039 128 10,308 9,624 34,684 638,233 Total expenditures 638,233 Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES Transfers in Transfer out 27,508 33,039 128 10,308 9,624 (603,549) Total other financing sources(uses) Net change in fund balances 27,508 33,039 128 10,308 9,624 (603,549) Fund balances (deficit), beginning of year 322,544 121,260 5,976 148,847 320,619 1,546,278 Fund balances (deficit), end of year $ 350,052 154,299 6,104 159,155 330,243 942,729 109 Special Revenue Funds Debt Service Permanent Fund Fund Capital Projects Funds Total City of Poway Mary Non -major Maintenance Road Debt Patricia Park Street Municipal Governmental Districts Repair Service Ross Trust Improvement Improvement Improvement Funds 455,661 237,711 1,913,839 30,749 920,708 - - - - - 5,997,874 1,800,773 1,226 297,559 2,816 23,369 89,880 119 901,593 260,225 880,371 - 1,225,656 1,913,839 322,321 2,637,960 921,934 297,559 2,816 283,594 970,251 119 12,162,056 154,877 2,384,773 642,538 - - - - - 6,005,454 283,678 - - - - - - 3,101,833 790,000 416,310 790,000 416,310 2,668,451 642,538 1,206,310 - - - - 10,468,474 (30,491) 279,396 (908,751) 2,816 283,594 970,251 119 1,693,582 655,321 - 934,165 - - - - 1,591,304 (4,617) - - - - (780,124) 655,321 - 929,548 - - - - 811,180 624,830 279,396 20,797 2,816 283,594 970,251 119 2,504,762 7,829,104 62,812 535,900 93,813 496,500 769,738 3,960 17,854,168 8,453,934 342,208 556,697 96,629 780,094 1,739,989 4,079 20,358,930 110 This page intentionally left blank. 111 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fire Protection Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 633,000 633,000 636,888 3,888 Total revenues 633,000 633,000 636,888 3,888 OTHER FINANCING (USES) Transfers out - (633,000) (636,091) (3,091) Total other financing (uses) (633,000) (633,000) (636,091) (3,091) Net change in fund balance - 797 797 Fund balance, beginning of year 3,988 3,988 3,988 Fund balance, end of year $ 3,988 3,988 4,785 797 112 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual 800 MHz Communication System Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 136,000 136,000 135,843 (157) Use of money and property 600 600 2,609 2,009 Total revenues 136,600 136,600 138,452 1,852 EXPENDITURES Current: Public safety - 154,340 154,877 (537) Total expenditures - 154,340 154,877 (537) Net change in fund balance 136,600 (17,740) (16,425) 1,315 Fund balance (deficit), beginning of year (15,860) (15,860) (15,860) Fund balance (deficit), end of year $ 120,740 (33,600) (32,285) 1,315 113 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Gas Tax Special Revenue Fund Year Ended June 30, 2019 REVENUES Taxes Use of money and property Other revenues Total revenues Budget Amounts Actual Variance with Original Final Amounts Final Budget $ 1,231,390 7,560 57,130 1,231,390 7,560 57,130 1,296,080 1,296,080 985,957 23,314 65,026 (245,433) 15,754 7,896 1,074,297 (221,783) EXPENDITURES Current: Public works 4,337,180 1,487,350 1,235,735 251,615 Total expenditures 4,337,180 1,487,350 1,235,735 251,615 Net change in fund balance (3,041,100) (191,270) (161,438) 29,832 Fund balance, beginning of year 934,083 934,083 934,083 Fund balance, end of year $ (2,107,017) 742,813 772,645 29,832 114 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Drainage Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 1,477,260 1,477,260 1,388,117 (89,143) Use of money and property 45,020 67,120 106,950 39,830 Developer fees 124,230 124,230 32,634 (91,596) Other revenues - 1,365 1,365 Total revenues 1,646,510 1,668,610 1,529,066 EXPENDITURES Current: Public works 1,090,340 999,324 854,010 Capital outlay 350,000 565,076 250,429 Total expenditures 1,440,340 1,564,400 1,104,439 OTHER FINANCING SOURCES Transfers in 4,040 1,818 Total other financing sources 4,040 1,818 Net change in fund balance 206,170 108,250 426,445 Fund balance, beginning of year 2,930,941 2,930,941 2,930,941 Fund balance, end of year $ 3,137,111 3,039,191 3,357,386 (139,544) 145,314 314,647 459,961 (2,222) (2,222) 318,195 318,195 115 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Miscellaneous Grants Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental $ 125,670 1,625,670 1,633,489 7,819 Use of money and property 1,930 1,930 5,465 3,535 Total revenues 127,600 1,627,600 1,638,954 11,354 EXPENDITURES Capital outlay 25,670 1,586,919 1,563,350 23,569 Total expenditures 25,670 1,586,919 1,563,350 23,569 OTHER FINANCING USES Transfers out (139,416) (139,416) Total other financing uses (139,416) (139,416) Net change in fund balance 101,930 (98,735) (63,812) 34,923 Fund balance, beginning of year 288,756 288,756 288,756 Fund balance, end of year $ 390,686 190,021 224,944 34,923 116 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual AB 939 Integrated Waste Management Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental $ 23,000 23,000 38,003 15,003 Use of money and property 6,800 6,800 21,509 14,709 Other revenue 199,240 199,240 217,742 18,502 Total revenues 229,040 229,040 277,254 48,214 EXPENDITURES Capital outlay 200,000 249,843 228,552 21,291 Total expenditures 200,000 249,843 228,552 21,291 Net change in fund balance 29,040 (20,803) 48,702 69,505 Fund balance, beginning of year 741,439 741,439 741,439 Fund balance, end of year $ 770,479 720,636 790,141 69,505 117 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Community Development Block Grant Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental $ 150,900 150,900 111,009 (39,891) Total revenues 150,900 150,900 111,009 (39,891) EXPENDITURES Capital outlay 150,900 245,046 111,009 134,037 Total expenditures 150,900 245,046 111,009 134,037 Net change in fund balance - (94,146) - 94,146 Fund balance, beginning of year - - Fund balance, end of year $ - (94,146) - 94,146 118 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Transportation Development Act Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Intergovernmental $ 5,000 5,000 Use of money and property 3,520 3,520 Other revenue 5,000 5,000 Total revenues EXPENDITURES Current: Public works Capital outlay Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year 13,520 13,520 5,000 5,000 5,000 363,455 10,000 368,455 3,520 (354,935) 374,543 18,272 10,864 13,272 7,344 (5,000) 29,136 15,616 1,436 3,564 18,648 344,807 20,084 348,371 9,052 363,987 374,543 374,543 $ 378,063 19,608 383,595 363,987 119 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Proposition A Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 1,481,000 1,481,000 1,474,700 (6,300) Use of money and property 500 500 10,461 9,961 Total revenues 1,481,500 1,481,500 1,485,161 3,661 EXPENDITURES Current: Public works 1,207,698 886,962 320,736 Capital outlay 369,400 435,277 7,934 427,343 Total expenditures 369,400 1,642,975 894,896 748,079 Net change in fund balance 1,112,100 (161,475) 590,265 751,740 Fund balance, beginning of year 180,368 180,368 180,368 Fund balance, end of year $ 1,292,468 18,893 770,633 751,740 120 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual SB 1186 Disabled Access Law Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 70 70 416 346 Other revenue 1,050 1,050 7,439 6,389 Total revenues 1,120 1,120 7,855 6,735 Net change in fund balance 1,120 1,120 7,855 6,735 Fund balance, beginning of year 10,004 10,004 10,004 Fund balance, end of year $ 11,124 11,124 17,859 6,735 121 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Excess SAFE Reserve Special Revenue Fund Year Ended June 30, 2019 REVENUES Use of money and property Total revenues EXPENDITURES Capital outlay Budget Amounts Actual Variance with Original Final Amounts Final Budget $ 1,500 1,500 4,460 2,960 1,500 1,500 4,460 2,960 141,872 - 141,872 Total expenditures - 141,872 - 141,872 Net change in fund balance 1,500 (140,372) 4,460 144,832 Fund balance, beginning of year 148,555 148,555 148,555 Fund balance, end of year $ 150,055 8,183 153,015 144,832 122 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Regional Arterial Traffic Mitigation Special Revenue Fund Year Ended June 30, 2019 REVENUES Use of money and property Developer fees Total revenues EXPENDITURES Capital outlay Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year Budget Amounts Actual Variance with Original Final Amounts Final Budget $ 2,500 223,470 2,500 10,044 223,470 17,464 225,970 225,970 7,544 (206,006) 27,508 (198,462) 200,000 200,007 - 200,007 200,000 200,007 - 200,007 25,970 25,963 322,544 27,508 1,545 322,544 322,544 $ 348,514 348,507 350,052 1,545 123 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Fire Protection Impact Fees Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 900 900 3,827 2,927 Developer fees 13,930 13,930 29,212 15,282 Total revenues 14,830 14,830 33,039 18,209 Net change in fund balance 14,830 14,830 33,039 18,209 Fund balance, beginning of year 121,260 121,260 121,260 Fund balance, end of year $ 136,090 136,090 154,299 18,209 124 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual BEGIN Program Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 60 60 128 68 Total revenues 60 60 128 68 Net change in fund balance 60 60 128 68 Fund balance, beginning of year 5,976 5,976 5,976 Fund balance, end of year $ 6,036 6,036 6,104 68 125 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Housing In -Lieu Special Revenue Fund Year Ended June 30, 2019 REVENUES Use of money and property Developer fees Total revenues EXPENDITURES Capital outlay Budget Amounts Actual Variance with Original Final Amounts Final Budget $ 2,500 42,500 2,500 42,500 45,000 45,000 4,558 2,058 5,750 (36,750) 10,308 (34,692) 136,719 - 136,719 Total expenditures - 136,719 - 136,719 Net change in fund balance 45,000 (91,719) 10,308 102,027 Fund balance, beginning of year 148,847 148,847 148,847 Fund balance, end of year $ 193,847 57,128 159,155 102,027 126 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Abandoned Vehicle Fees Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 3,300 3,300 9,624 6,324 Total revenues 3,300 3,300 9,624 6,324 Net change in fund balance 3,300 3,300 9,624 6,324 Fund balance, beginning of year 320,619 320,619 320,619 Fund balance, end of year $ 323,919 323,919 330,243 6,324 127 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Habitat In -Lieu Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 15,500 15,500 34,684 19,184 Developer fees 17,000 17,000 (17,000) Total revenues EXPENDITURES Capital outlay 32,500 32,500 703,605 34,684 2,184 638,233 65,372 Total expenditures - 703,605 638,233 65,372 Net change in fund balance 32,500 (671,105) (603,549) 67,556 Fund balance, beginning of year 1,546,278 1,546,278 1,546,278 Fund balance, end of year $ 1,578,778 875,173 942,729 67,556 128 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Maintenance Districts Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 440,810 440,810 455,661 14,851 Use of money and property 74,290 74,290 237,711 163,421 Assessment levied 1,871,820 1,871,820 1,913,839 42,019 Other revenue - 30,749 30,749 Total revenues 2,386,920 2,386,920 2,637,960 251,040 EXPENDITURES Current: Public works 2,670,730 2,942,623 2,384,773 557,850 Capital outlay - 2,033,019 283,678 1,749,341 Total expenditures 2,670,730 4,975,642 2,668,451 2,307,191 Excess (deficiency) of revenues over (under) expenditures (283,810) (2,588,722) (30,491) 2,558,231 OTHER FINANCING SOURCES Transfers in - 655,450 655,321 (129) Total other financing sources - 655,450 655,321 (129) Net change in fund balance (283,810) (1,933,272) 624,830 2,558,102 Fund balance, beginning of year 7,829,104 7,829,104 7,829,104 Fund balance, end of year $ 7,545,294 5,895,832 8,453,934 2,558,102 129 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Road Repair Special Revenue Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Taxes $ 834,500 Use of money and property 2,000 Total revenues EXPENDITURES Current: Public works Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year 834,500 2,000 836,500 836,500 920,708 86,208 1,226 (774) 921,934 85,434 - 755,700 642,538 113,162 - 755,700 642,538 113,162 836,500 80,800 62,812 279,396 198,596 62,812 62,812 $ 899,312 143,612 342,208 198,596 130 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual City Debt Service Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 287,400 287,400 297,559 10,159 Total revenues 287,400 287,400 297,559 10,159 EXPENDITURES Debt service: Principal - 790,000 790,000 - Interest and fiscal charges - 418,750 416,310 2,440 Total expenditures - 1,208,750 1,206,310 2,440 Excess (deficiency) of revenues over (under) expenditures 287,400 (921,350) (908,751) 12,599 OTHER FINANCING SOURCES (USES) Transfers in - 935,890 934,165 (1,725) Transfers out - (4,617) (4,617) - Total other financing sources (uses) - 931,273 929,548 (1,725) Net change in fund balance 287,400 9,923 20,797 10,874 535,900 535,900 535,900 Fund balance, end of year $ 823,300 545,823 556,697 10,874 131 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Mary Patricia Ross Trust Permanent Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 950 950 2,816 1,866 Total revenues 950 950 2,816 1,866 Net change in fund balance 950 950 2,816 1,866 Fund balance, beginning of year 93,813 93,813 93,813 Fund balance, end of year $ 94,763 94,763 96,629 1,866 132 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Park Improvement Capital Projects Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 2,000 2,000 23,369 21,369 Developer fees 335,080 335,080 260,225 (74,855) Total revenues 337,080 337,080 283,594 (53,486) Net change in fund balance 337,080 337,080 283,594 (53,486) Fund balance, beginning of year 496,500 496,500 496,500 Fund balance, end of year $ 833,580 833,580 780,094 (53,486) 133 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Street Improvement Capital Projects Fund Year Ended June 30, 2019 REVENUES Use of money and property Developer fees Total revenues EXPENDITURES Capital outlay Budget Amounts Actual Variance with Original Final Amounts Final Budget $ 5,000 (441,310) 204,330 204,330 209,330 (236,980) 89,880 531,190 880,371 676,041 970,251 1,207,231 64,609 - 64,609 Total expenditures - 64,609 - 64,609 Net change in fund balance 209,330 (301,589) 970,251 1,271,840 Fund balance, beginning of year 769,738 769,738 769,738 Fund balance, end of year $ 979,068 468,149 1,739,989 1,271,840 134 CITY OF POWAY Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Municipal Improvement Capital Projects Fund Year Ended June 30, 2019 Budget Amounts Actual Variance with Original Final Amounts Final Budget REVENUES Use of money and property $ 40 40 119 79 Total revenues 40 40 119 79 Net change in fund balance 40 40 119 79 Fund balance, beginning of year 3,960 3,960 3,960 Fund balance (deficit), end of year $ 4,000 4,000 4,079 79 135 This page intentionally left blank. 136 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. 137 CITY OF POWAY Statement of Net Position Internal Service Fund - Vehicle Maintenance Fund June 30, 2019 ASSETS Current assets: Cash and investments Due from other funds $ 10,973,106 391,333 Total current assets 11,364,439 Total assets 11,364,439 DEFERRED OUTFLOWS OF RESOURCES Pension related 100,575 LIABILITIES Current liabilities: Accounts payable Accrued liabilities Compensated absences due within one year 550,898 13,824 30,674 Total current liabilities 595,396 Noncurrent liabilities: Net pension liability 619,246 Total noncurrent liabilities Total liabilities DEFERRED INFLOWS OF RESOURCES Pension related NET POSITION Unrestricted Total net position 619,246 1,214,642 11,309 10,239,063 $ 10,239,063 138 CITY OF POWAY Statement of Revenues, Expenses and Changes in Net Position Internal Service Fund - Vehicle Maintenance Fund June 30, 2019 OPERATING REVENUES Charges for services $ 3,139,034 Total operating revenues 3,139,034 OPERATING EXPENSES Personnel services Maintenance and operations Total operating expenses Operating income 481,495 1,133,138 1,614,633 1,524,401 NONOPERATING REVENUES Interest revenue 300,438 Gain on sale of property 160,265 Other nonoperating revenue 3,131 Total nonoperating revenues 463,834 Income before transfers 1,988,235 TRANSFERS Transfers in Transfers out Total transfers Change in net position Net position, beginning of year Net position, end of year 4,226 (1,777,628) (1,773,402) 214,833 10,024,230 $ 10,239,063 139 CITY OF POWAY Statement of Cash Flows Internal Service Fund - Vehicle Maintenance Fund Year Ended June 30, 2019 Cash flows from operating activities: Cash receipts from interfund charges $ 3,139,034 Cash paid to employees for services (349,353) Cash paid to suppliers of goods or services (725,926) Net cash provided by opearting activities 2,063,755 Cash flows from noncapital financing activities: Other nonoperating revenues 3,131 Transfers from other funds 443,626 Transfer to other funds (2,168,961) Net cash (used for) noncapital financing activities (1,722,204) Cash flows from capital and related financing activities: Sale of capital assets Net cash provided by capital and related financing activities 160,265 160,265 Cash flows from investing activities: Interest income 300,438 Net cash provided by investing activities Net increase in cash and investments Cash and investments, beginning of year Cash and investments, end of year 300,438 802,254 10,170,852 $ 10,973,106 Reconciliation of operating income to net cash provided by operating activities: Operating income $ 1,524,401 Adjustments to net cash provided by operating activities: (Increase) decrease in assets: Deferred outflows - pension related 23,205 Increase (decrease) in liabilities: Accounts payable 405,751 Accrued liabilities 1,461 Compensated absences 1,960 Net pension liability 106,083 Deferred inflows - pension related 894 Total adjustments 539,354 Net cash provided by operating activities $ 2,063,755 There were no noncash investing, capital and financing activities during fiscal year ended June 30, 2019. 140 This page intentionally left blank. 141 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 of 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 of 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 of AD No. 00-1 Bond Deposits collected through property tax assessments remitted to fiscal agent -trustee for payment on bonds. 142 CITY OF POWAY Combining Statement of Fiduciary Net Position - Agency Funds June 30, 2019 Total Developer Agency Deposits Funds ASSETS Cash and investments $ 2,685,113 2,685,113 Total assets $ 2,685,113 2,685,113 LIABILITIES Accounts payable $ 46,820 46,820 Developer deposits $ 2,638,293 2,638,293 Total liabilities $ 2,685,113 2,685,113 143 CITY OF POWAY Combining Statement of Changes in Assets and Liabilities Agency Funds Year Ended June 30, 2019 DEVELOPER DEPOSITS FUND Assets Cash and investments Total assets Balance Balance June 30, 2018 Additions Deletions June 30, 2019 $ 2,975,932 758,946 (1,049,765) 2,685,113 $ 2,975,932 758,946 (1,049,765) 2,685,113 Liabilities Accounts payable $ 19,898 906,581 (879,659) 46,820 Developer deposits 2,956,034 80,343 (398,084) 2,638,293 Total liabilities $ 2,975,932 986,924 (1,277,743) 2,685,113 PARKWAY BUSINESS CENTRE CFD No. 88-1 BOND DEPOSITS FUND Assets Cash and investments $ 3,235 24 (3,259) Total assets $ 3,235 24 (3,259) Liabilities Accounts payable $ 3,257 - Developer deposits (22) 22 (3,257) Total liabilities $ 3,235 22 (3,257) HIGH VALLEY ROAD AD No. 96-1 BOND DEPOSITS FUND Assets Cash and investments $ 26,811 2,177 (28,988) Total assets $ 26,811 2,177 (28,988) Liabilities Accounts payable $ 26,620 689 (27,309) Developer deposits 191 2,361 (2,552) Total liabilities $ 26,811 3,050 (29,861) 144 CITY OF POWAY Combining Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended June 30, 2019 Balance Balance June 30, 2018 Additions Deletions June 30, 2019 OLD COACH WATERLINE AD No. 00-1 BOND DEPOSITS FUND Assets Cash and investments $ 11,443 319 (11,762) Total assets $ 11,443 319 (11,762) Liabilities Accounts payable $ 11,362 294 Developer Deposits 81 398 Total liabilities $ 11,443 692 ALL AGENCY FUNDS Assets Cash and investments Total assets (11,656) (479) (12,135) $ 3,017,421 761,466 (1,093,774) 2,685,113 $ 3,017,421 761,466 (1,093,774) 2,685,113 Liabilities Accounts payable $ 61,137 907,564 (921,881) 46,820 Developer Deposits 2,956,284 83,124 (401,115) 2,638,293 Total liabilities $ 3,017,421 990,688 (1,322,996) 2,685,113 145 This page intentionally left blank. 146 Statistical Section This page intentionally left blank. 148 STATISTICAL SECTION This part of the City of Poway's comprehensive annual financial report presents detailed information as context for understanding the information in the financial statements, note disclosures, and required supplementary information 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. 149 City of Poway Net Position by Component Last Ten Fiscal Years (accrual basis of accounting) Governmental activities Net investment in capital assets Restricted Unrestricted - as restated Total governmental activities net position Business -type activities Net investment in capital assets Restricted Unrestricted - as restated Total business -type activities net position Primary government Net investment in capital assets Restricted Unrestricted - as restated Total primary government net position Fiscal Year 2019 2018 2017 2016 $ 112,260,900 22,034,222 39,573,982 173,869,104 $ 108,494,835 20,641,475 41,227,106 170,363,416 $ 82,020,900 20,453,766 41,716,900 144,191,566 $ 83,171,720 20,846,798 40,985,170 145,003,688 31,143,299 31,936,559 32,118,064 31,108,285 32,941,440 26,735,432 34,817,565 21,537,274 63,079,858 63,226,349 59,676,872 56,354,839 143,404,199 22,034,222 71,510,541 140,612,899 20,641,475 72,335,391 114,962,340 20,453,766 68,452,332 117,989,285 20,846,798 62,522,444 $ 236,948,962 $ 233,589,765 $ 203,868,438 Note: The City restated the Unrestricted Net Position as of June 30, 2014 for the implementation of GASB 68. $ 201,358,527 150 Fiscal Year 2015 2014 2013 2012 2011 2010 $ 86,341,264 27,543,292 38,671,488 $ 90,442,061 28,126,711 33,998,725 $ 94,657,067 25,637,627 63,928,726 $ 93,097,532 24,523,246 59,865,964 $ 50,255,141 $ 46,412,443 70,931,373 78,369,565 (71,148,492) (93,996,026) 152,556,044 152,567,497 184,223,420 177,486,742 50,038,022 30,785,982 36,827,442 272,301 26,130,925 38,731,821 279,579 26,867,660 40,746,468 279,604 33,305,899 42,846,682 279,575 34,543,173 43,976,262 280,450 36,469,136 43,508,027 280,450 35,320,341 63,230,668 65,879,060 74, 331, 971 77,669,430 80,725,848 79,108,818 123,168,706 27,815,593 64,802,413 $ 215,786,712 129,173,882 28,406,290 60,866,385 $ 218,446,557 135,403,535 135,944,214 25,917,231 24,802,821 97,234,625 94,409,137 $ 258,555,391 $ 255,156,172 94,231,403 89,920,470 71,211,823 78,650,015 (34,679,356) (58,675,685) $ 130,763,870 $ 109,894,800 151 City of Poway Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Expenses Governmental Activities: General government $ 7,352,494 $ 8,048,190 $ 7,897,624 $ 5,131,272 $ 5,196,033 $ 5,227,809 $ 5,981,436 $ 14,226,478 $ 17,144,376 $ 23,947,500 Public safety 26,562,602 25,139,954 22,939,218 22,347,525 21,500,327 20,906,884 20,213,645 19,514,321 18,899,606 19,475,481 Public works 13,031,776 15,818,102 13,424,529 12,381,234 11,595,286 11,863,623 12,283,876 12,484,070 12,622,204 12,595,756 Development services 6,097,846 4,793,032 4,122,212 3,821,920 3,664,378 3,815,282 3,745,329 2,767,969 2,348,622 4,423,865 Community services 6,445,379 7,372,710 7,695,548 7,197,816 5,843,807 6,115,485 5,063,022 4,848,768 14,398,426 25,213,955 Interest and fiscal charges 407,214 429,617 443,901 505,811 481,905 509,206 (249,757) 8,247,159 17,232,642 14,969,311 Total governmental activities 59,897,311 61,601,605 56,523,032 51,385,578 48,281,736 48,438,289 47,037,551 62,088,765 82,645,876 100,625,868 Business -type activities: Water 24,026,914 25,502,524 21,005,264 21,502,464 22,349,556 23,314,233 22,367,122 20,652,724 18,143,829 18,226,463 Sewer 9,798,612 8,797,837 8,564,971 8,730,955 9,451,529 9,434,739 10,069,336 8,374,223 7,651,228 7,522,634 Total business -type activities 33,825,526 34,300,361 29,570,235 30,233,419 31,801,085 32,748,972 32,436,458 29,026,947 25,795,057 25,749,097 Total primary government expenses $ 93,722,837 $ 95,901,966 $ 86,093,267 $ 81,618,997 $ 80,082,821 $ 81,187,261 $ 79,474,009 $ 91,115,712 $ 108,440,933 $ 126,374,965 Program revenues Governmental Activities: N Charges for services: lri N General government $ 165,049 $ 352,830 $ 326,019 $ 276,113 $ 280,796 $ 260,802 $ 118,347 $ 120,126 $ 96,397 $ 91,745 Public safety 1,810,431 2,171,552 2,067,306 1,884,369 1,759,543 1,908,337 2,155,607 2,030,510 2,121,984 2,131,729 Public works 3,157,508 2,740,562 2,727,104 2,733,956 2,699,095 2,753,917 2,738,196 3,537,666 4,422,522 4,479,896 Development services 2,175,062 1,975,450 1,648,388 1,780,160 1,558,945 1,534,304 1,384,543 1,049,318 1,584,838 1,332,714 Community services 3,081,321 2,595,229 2,862,789 2,625,260 2,570,423 2,436,024 2,243,495 2,160,596 2,111,476 2,821,718 Operating grants and contributions 2,124,720 2,322,871 1,133,734 1,356,811 1,543,785 1,706,081 1,811,203 4,760,819 5,857,360 7,615,477 Capital grants and contributions 1,808,484 198,584 270,802 120,271 90,379 66,168 99,831 833,137 1,155,384 1,246,555 Total governmental activities 14,322,575 12,357,078 11,036,142 10,776,940 10,502,966 10,665,633 10,551,222 14,492,172 17,349,961 19,719,834 Business -type activities: Charges for services: Water 22,984,400 25,583,581 21,450,064 18,590,894 20,629,080 23,381,953 22,207,174 20,612,607 18,694,318 17,881,695 Sewer 8,737,411 8,486,571 8,396,553 8,003,913 7,423,494 7,347,502 7,228,097 7,300,875 8,759,001 8,651,681 Capital grants and contributions 3,589 - - - Total business -type activities 31,721,811 34,073,741 29,846,617 26,594,807 28,052,574 30,729,455 29,435,271 27,913,482 27,453,319 26,533,376 Total primary government revenues $ 46,044,386 $ 46,430,819 $ 40,882,759 $ 37,371,747 $ 38,555,540 $ 41,395,088 $ 39,986,493 $ 42,405,654 $ 44,803,280 $ 46,253,210 Net (expense)/revenue Governmental activities (45,574,736) (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) Business -type activities (2,103,715) (226,620) 276,382 (3,638,612) (3,748,511) (2,019,517) (3,001,187) (1,113,465) 1,658,262 784,279 Total primary government net expense $ (47,678,451) $ (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) City of Poway Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 General revenues and Other Changes in Net Position Governmental Activities: Taxes: Property taxes $ 23,819,845 Sales taxes 16,248,747 Motor vehicle license tax - Transient occupancy tax 674,230 Franchise taxes 1,601,759 Other taxes 2,709,246 Total taxes 45,053,827 Investment earnings 2,267,414 Miscellaneous 1,237,072 Sale/disposal of capital assets - Transfers 522,111 Extraordinary Item Total governmental activities Business -type activities: Investment earnings Contributed capital Miscellaneous Transfers Extraordinary Item Total business -type activities Total primary government Change in Net Position Governmental activities Business -type activities Total primary government $ 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 13,981,478 13,774,763 13,172,467 12,520,103 13,418,087 13,692,553 11,276,884 10,418,322 9,833,390 22,085 26,685 262,412 150,641 654,235 609,306 615,482 573,531 523,112 483,568 462,508 433,934 367,434 1,611,000 1,466,388 1,639, 956 1,696,186 1,555, 816 1,491, 227 1,512, 878 1,465,926 1,491, 231 3,630,276 3,247,931 3,423,165 3,192,356 2,761,696 1,816,574 626,421 616,466 629,589 44,030,815 41,264,392 39,306,357 36,980,699 38,447,252 38,884,154 48,619,337 64,157,796 63,999,043 1,468,845 1,165,528 1,845,972 1,380,030 1,573,545 1,000,883 1,297,998 5,964,802 8,287,516 3,285,592 1,805,482 1,195,244 1,330,954 1,846,762 3,374,664 542,954 512,858 1,251,844 - - - (385,253) - (2,088,434) 13,561,625 - 426,823 439,366 467,591 (1,539,113) 1,425 (36,694) 2,284,985 350,874 470,498 26,204,302 (9,758,882) - - 128,406,347 - 49,080,424 75,416,377 44,674,768 33,056,282 37,767,317 41,868,984 43,223,007 179,063,187 84,547,955 74,008,901 1,144,612 264,609 102,656 230,982 149,611 217,194 23,733 1,334,723 3,938,311 3,382,361 1,077,957 1,261,448 82,930 47,583 (522,111) (426,823) (439,366) (467,591) (310,940) (441,725) (4,078,565) 65,593 276,439 (407,588) (2,284,985) 254,279 463,177 4,225,637 55,363 503,595 (350,874) (470,498) 1,957,224 3,776,097 3,045,651 (3,237,217) 1,100,119 (141,601) $ 51,037,648 $ 79,192,474 $ 47,720,419 $ 29,819,065 $ 38,867,436 $ 41,727,383 $ 42,886,735 $ $ 3,505,688 $ 26,171,850 $ (812,122) $ (7,552,356) $ (11,453) $ 4,096,328 $ 6,736,678 (146,491) 3,549,477 3,322,033 (6,875,829) (2,648,392) (2,161,118) (3,337,459) (336,272) (1,942,953) (41,232) 4,721,911 $ 177,120,234 $ 84,506,723 $ 78,730,812 $ 131,466,594 $ 19,252,040 $ (6,897,133) (3,056,418) 1,617,030 5,506,190 3,359,197 $ 29,721,327 $ 2,509,911 $ (14,428,185) $ (2,659,845) $ 1,935,210 $ 3,399,219 $ 128,410,176 $ 20,869,070 $ (1,390,943) City of Poway Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) General Fund Non -spendable Restricted Committed Assigned Unassigned Reserved Unreserved: Designated Undesignated Total General Fund Fiscal Year 2019 2018 2017 2016 $ 15,550,648 $ 15,639,036 $ 10,477,915 $ 10,286,955 20,961,853 22,536,818 7,308,113 19,321,583 16,613,992 14,063,706 40,438,366 14,649,159 40,367,436 16,010,227 $ 66,357,432 $ 65,638,317 $ 65,565,440 $ 66,664,618 All Other Governmental Funds Non -spendable $ - $ - $ - $ Restricted 22,590,919 20,641,475 20,453,766 20,846,798 Committed - Assigned Unassigned (32,285) (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 $ 22,558,634 $ 20,625,615 $ 20,453,766 $ 20,846,798 Total Fund Balance $ 88,916,066 $ 86,263,932 $ 86,019,206 $ 87,511,416 Note: The City implemented GASB 54, which established new classifications for fund balances, in Fiscal Year 2011. 154 $ Fiscal Year 2015 2014 2013 2012 2011 2010 $ 10,495,426 $ 10,134,007 $ 10,157,087 $ 10,218,860 $ 10,151,108 10,022,691 10,026,079 9,999,309 10,019,883 10,037,638 15,870,595 15,383,344 7,173,822 6,666,188 6,466,719 29,285,138 26,624,039 30,695,920 22,906,009 23,955,242 - - - 4,647,709 31,724,737 $ 65,673,850 $ 62,167,469 $ 58,026,138 $ 49,810,940 $ 50,610,707 $ 36,372,446 $ - $ - $ - $ - $ - $ 10,151,108 27,543,292 28,126,711 25,929,921 23,733,859 62,455,191 8,564,840 (88,658) - 51,660,768 20,795,704 - 5,913,093 $ 27,543,292 $ 28,126,711 $ 25,929,921 $ 23,733,859 $ 70,931,373 $ 78,369,565 $ 93,217,142 $ 90,294,180 $ 83,956,059 $ 73,544,799 $ 121,542,080 $ 114,742,011 155 City of Poway Changes In Fund Balances, Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2019 2018 2017 2016 Revenues Taxes $ 45,048,215 $ 44,030,815 $ 41,264,392 $ 39,306,357 Licenses and permits 636,007 698,848 691,524 608,914 Intergovernmental 2,541,499 1,449,537 978,759 1,252,604 Charges for services 4,394,947 2,682,918 2,870,826 2,629,776 Fines and forfeitures 174,431 150,968 137,772 121,246 Use of money and property 2,638,552 1,376,993 1,116,686 1,664,836 Developer Fees 4,257,642 5,538,625 4,339,215 4,317,628 Assessment levied 1,913,839 1,900,026 1,919,533 1,926,988 Other revenues 992,253 3,280,099 1,802,405 1,241,968 Total revenues 62,597,385 61,108,829 55,121,112 53,070,317 Expenditures Current: General government 6,165,984 4,356,172 4,920,707 4,713,981 Public safety 25,247,048 24,361,353 22,842,844 21,857,490 Public works 10,796,442 11,665,054 10,914,521 10,063,808 Development services 5,741,072 4,503,384 4,305,937 4,067,434 Community services 5,834,051 5,837,896 6,197,514 5,954,740 Capital outlay 7,249,857 10,049,051 7,898,228 2,855,748 Debt service: Principal 790,000 770,000 755,000 735,000 Principal -early retirement -sale of capital asset - - Interest and fiscal charges 416,310 438,961 452,512 514,008 Transfers to fiduciary funds - - Tax shift Tax increment reimbursements Total expenditures 62,240,764 61,981,871 58,287,263 50,762,209 Excess of revenues over (under) expenditures Other Financing Sources (Uses) Proceeds from issuance of debt Refunding bond activity -net Proceeds from sale of capital assets Transfers in (out) net Total other financing sources 356,621 (873,042) (3,166,151) 2,308,108 2,295,513 1,117,768 1,673,941 1,745,048 2,295,513 1,117,768 1,673,941 1,745,048 Extraordinary Items - (9,758,882) Net change in fund balance $ 2,652,134 $ 244,726 $ (1,492,210) $ (5,705,726) Debt service as a percentage of noncapital expenditures 2.2% 2.1% 2.2% 2.5% 156 Fiscal Year 2015 2014 2013 2012 2011 2010 $ 36,980,699 546,742 1,361,671 2,564,852 135,609 1,265,837 4,013,227 1,903,369 1,328,515 $ 38,447,252 561,251 828,278 2,386,206 184,855 1,495,911 4,806,170 1,898,872 1,834,531 50,100,521 52,443,326 $ 38,996,849 $ 51,939,098 543,838 507,908 1,062,851 1,564,484 1,671,506 1,439,891 527,006 554,570 2,188,570 3,291,466 4,029,232 3,279,373 1,895,888 1,874,967 2,862,343 497,517 53,778,083 64,949,274 $ 66,623,806 457,905 1,800,145 3,232,221 678,468 7,821,732 4,516,243 1,902,409 729,933 $ 67,411,848 433,517 2,994,005 3,140,274 750,551 12,180,028 3,711,578 1,886,300 2,228,662 87,762,862 94,736,763 4,372,077 4,202,841 4,239,824 5,798,899 2,680,162 6,056,348 21, 299,851 20,433,826 19,536,711 18,889,733 18,328,287 18,966,380 9,526,140 9,639,766 9,971,383 10,084,437 9,990,368 9,943,681 3,811,954 3,830,435 3,779,577 2,807,935 2,388,077 4,475,943 5,212,917 4,912,545 4,733,922 4,678,369 9,894,345 9,048,983 1,603,241 2,282,947 860,039 8,542,370 16,818,821 27,639,839 715,000 700,000 635,000 2,405,000 6,703,020 7,150,000 - 26,720,000 490,336 506,527 570,087 6,820,619 17,972,119 14,943,766 - 440,300 444,282 - 2,820,770 13,700,882 48,711 5,948,554 2,380,740 47,031,516 46,949,187 44,770,825 60,076,073 120,264,523 114,306,562 3,069,005 5,494,139 9,007,258 4,873,201 (32,501,661) (19,569,799) 14,350,000 105,109 169,930 161,049 (15,013,350) - 842,166 38,300,000 (146,043) 843,982 1,225,186 3,823,436 831,800 2,745,545 (146,043) 843,982 1,404,002 3,928,545 39,301,730 2,906,594 (56,799,027) $ 2,922,962 $ 6,338,121 $ 10,411,260 $ (47,997,281) $ 6,800,069 $ (16,663,205) 2.6% 2.6% 2.7% 15.8% 22.1% 21.3% City of Poway Assessed Value of Taxable Property Last Ten Fiscal Years Fiscal Year Assessed Value Ended Personal June 30, Land Improvements Property Total Exemptions 2010 $ 3,640,861,781 $ 4,548,446,929 $ 288,729,686 $ 8,478,038,396 $ (183,766,176) 2011 3,606,251,228 4,540,602,915 276,448,124 8,423,302,267 (178,136,001) 2012 3,638,418,566 4,608,371,669 286,292,343 8,533,082,578 (193,398,758) 2013 3,604,077,934 4,615,585,498 294,522,436 8,514,185,868 (212,901,964) 2014 3,770,334,144 4,733,730,176 298,807,480 8,802,871,800 (227,065,282) 2015 3,980,268,935 4,944,098,407 286,435,733 9,210,803,075 (236,519,578) 2016 4,198,319,498 5,193,793,825 287,853,187 9,679,966,510 (243,798,083) 2017 4,360,983,790 5,372,307,118 303,567,743 10,036,858,651 (248,041,928) 2018 4,572,607,138 5,547,678,336 299,989,126 10,420,274,600 (255,512,475) 2019 4,827,930,308 5,779,676,596 326,995,646 10,934,602,550 (270,178,713) Note: 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. Source: San Diego County Assessor's Office 158 Net Taxable Value before HOE $ 8,294,272,220 8,245,166,266 8,339,683,820 8,301,283,904 8,575,806,518 8,974,283,497 9,436,168,427 9,788,816,723 10,164,762,125 10,664,423,837 Assessed Value (Continued) Homeowners Exemptions (HOE) $ (78,218,791) (77,678,375) (76,787,840) (75,843,150) (74,913,680) (74,448,910) (73,706,162) (73,044,158) (72,492,736) (71,935,662) Net Taxable Value $ 8,216,053,429 8,167,487,891 8,262,895,980 8,225,440,754 8,500,892,838 8,899,834,587 9,362,462,265 9,715,772,565 10,092,269,389 10,592,488,175 Change Estimated Total From Tax Direct Prior Year Revenues Tax Rate 1.86% $ 9,189,474 0.211% - 0.59% 9,169,316 0.211% 1.17% 9,374,419 0.211% - 0.45% 9,311,665 0.211% 3.35% 9,648,224 0.211% 4.69% 10,117,764 0.211% 5.20% 10,614,545 0.211% 3.77% 11,043,425 0.211% 3.88% 11,498,968 0.211% 4.96% 22,527,293 0.211% 159 City of Poway Direct and Overlapping Property Tax Rates Last Ten Fiscal Years Overlapping Rates Poway Education Palomar Fiscal Year Unified Revenue Community Total 1% Ended City Direct School San Diego Augmentation College Property Tax June 30, Rate District County Fund District All Other Rate 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% 2019 0.211% 0.389% 0.167% 0.118% 0.067% 0.047% 1.000% Rates for Voter Approved Bond Indebtedness Poway Fiscal Year Total 1% Unified Total Ended Property School Property Tax June 30, Tax Rate City Rate District All Other Rate 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% 0.045% 1.100% 2019 1.000% 0.000% 0.063% 0.045% 1.108% Note: 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. Source: San Diego County Assessor's Office 160 City of Poway Principal Secured Property Taxpayers Current Year and Nine Years Ago Taxpayer 2019 2010 Percentage Percentage of Total City of Total City Net Net Taxable Assessed Assessed Assessed Secured Taxable Assessed Secured Secured Value Rank Value Secured Value Rank Value Sorrento West Properties, Inc. HCPLS Poway, LLC Ventas, Inc. RREEF CPIF Kirkham Way JV, LLC San Miguel Valley Corp. Hometown Poway Royal Estates, LLC P M I Summerlyn, LLC Vons Business Properties Costco Wholesale Corp. Harsch Investment Properties, LLC Slough Poway I, LLC PDP Pomerado, LLC PR Stowe, LLC Government Employees Insurance Co. Sysco Food Services Toray Membrane USA, Inc. Fairfield Township, LLC Poway Crossing Investors, LLC Total Total City net assessed secured value $ 406,017,588 1 3.81% $ 98,320,391 2 1.16% 122,788,295 2 1.15% 83,950,289 3 0.79% 58,409,038 4 0.55% 53,884,741 5 0.51% 43,844,153 6 0.41% 43,668,709 7 0.41% 42,047,816 8 0.39% 41,899,722 9 0.39% 36,032,725 5 0.43% 41,666,201 10 0.39% 107,626,000 1 1.27% 71,061,721 3 0.84% 40,508,901 4 0.48% 35,286,922 6 0.42% 35,179,588 7 0.41% 35,075,350 8 0.41% 34,411,912 9 0.41% 31,900,500 10 0.38% $ 938,176,552 8.80% $ 525,404,010 6.20% $ 10,664,423,837 $ 8,294,272,220 Source: County of San Diego Offices of the Auditor and Controller, and Assessor's Office 161 City of Poway Assessed Value of Taxable Property Successor Agency & Redevelopment Tax Increment Property Tax Last Ten Fiscal Years Fiscal Year Assessed Value Change Estimated Total Ended Personal Base Year Net Taxable From Tax Direct June 30, Land Improvements Property Total Exemptions Values Value Prior Year Revenues Tax Rate Redevelopment Agency 2010 $ 1,698,144,577 $ 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% 2011 1,669,652,573 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 Agency 2012 1,645,381,909 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% 2013 1,625,001,094 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% 2014 1,673,995,306 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% 2015 1,765,636,957 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% 2016 1,858,719,377 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% 2017 1,913,629,433 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% 2018 2,000,869,745 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% N 2019 2,102,590,313 2,889,374,758 270,699,765 5,262,664,836 (108,159,006) (186,287,869) 4,968,217,961 5.23% 49,682,180 1.000% Note: 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; 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 life of each agency. Poway's Redevelopment Agency was scheduled to expire in January 2037. Source: San Diego County Assessor's Office City of Poway Redevelopment Property Tax Levies and Collections Fiscal Years 2010 - 2012 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 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 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. Source: San Diego County Assessor's Office 163 City of Poway General Property Tax Levies and Collections Last Ten Fiscal Years Fiscal Year Ended June 30, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Within The Year of Levy Current Tax Levy $ 16,665,674 14,772,947 14,976,590 15,044,676 15,325,043 12,524,910 12,958,510 13,390,895 13,802,364 14,345,375 Current Collected $ 16,276,757 14,515,679 14,752,163 14,897,994 15,160,972 12,418,741 (2) 12,859,128 13,279,054 13,694,433 14,229,865 Cumulative Prior Years of Levy Percent of Levy Prior Years' Collected Levies 97.67% 98.26% 98.50% 99.03% 98.93% 99.15% 99.23% 99.16% 99.22% 99.19% $ 849,654 808,521 702,501 550,273 507,586 470,515 312,585 285,552 267,874 254,246 Collection from Prior Years' Levies (1) $ 490,668 411,305 232,773 214,571 226,146 278,069 143,345 140,081 133,325 134,667 Percent of Prior Years' Levies Collected 57.75% 50.87% 33.13% 38.99% 44.55% 59.10% 45.86% 49.06% 49.77% 52.97% Total Collections to Date Total Levies $ 17,515,328 15,581,468 15,679,092 15,594,949 15,832,630 12,995,425 13,271,094 13,676,447 14,070,237 14,599,621 Notes: (1) San Diego County does not break out prior years' collections by fiscal year, therefore, the amount reported is the cumulative amount collected during that fiscal year for all prior year levies, not the amount related to each fiscal year. (2) The significant decrease was due to the final assessment for the Community Facilities District #88-1 being in the prior fiscal year. That amount was $3,209,813. Source: San Diego County Assessor's Office Total Collections $ 16,767,426 14,926,983 14,984,936 15,112,565 15,387,118 12,696,810 13,002,474 13,419,135 13,827,758 14,364,532 Percentage 95.73% 95.80% 95.57% 96.91% 97.19% 97.70% 97.98% 98.12% 98.28% 98.39% City of Poway Ratios of Outstanding Debt by Type Last Ten Fiscal Years Fiscal Year Ended June 30, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Governmental Activities Tax Allocation Bonds Certificates of Participation Loan Payable $ 234,987,072 228,957,393 $ 48,454,096 20,870,836 17,627,771 16,753,498 16,261,467 15,522,575 14,764,508 13,987,299 13,195,977 12,385,546 $ 2,400,513 2,542,009 Business -type Activities Revenue Bonds Total Percentage Primary of Personal Per Government Income Capita Private Purpose Trust Certificates of Tax Allocation Participation Bonds Loan Payable Total Private Purpose Trust $ 1,380,571 $ 1,182,394 969,149 745,904 512,660 264,415 287,222,252 12.39% $ 5,518 253,552,632 11.53% 5,265 18,596,920 0.81% 384 17,499,402 0.72% 360 16,774,127 0.69% 342 15,786,990 0.62% 322 14,764,508 0.54% 295 13,987,299 0.49% 278 13,195,977 0.45% 263 12,385,546 0.41% 246 Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements. The Private Purpose Trust's Tax Allocation Bonds were refunded in July 2015. Source: City of Poway Finance Department $ - $ 2,344,312 1,986,311 1,618,877 1,237,034 840,722 430,053 222,516,942 2,672,503 215,576,452 2,780,463 208,316,472 2,885,549 200,633,015 2,971,614 172,587,873 3,087,885 163,593, 731 3,193,031 154,504,587 3,338,564 145,646,325 - 227,533,757 220,343,226 212,820,898 204,841,663 176,516,480 167,216,815 157,843,151 145,646,325 City of Poway Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years Outstanding General Bonded Debt Fiscal Year Tax Percent of Ended Allocation Assessed Per June 30, Bonds Value (a) Capita 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 2019 145,646,325 1.33% 2,894 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, 2019 2018-19 Assessed Valuation: $ 10,664,423,837 Estimated Share Debt % of Overlapping OVERLAPPING TAX AND ASSESSMENT DEBT: Outstanding Applicable (t) Debt Metropolitan Water District $ 48,050,000 0.364% $ 174,902 Palomar Community College District 618,718,625 8.703% 53,847,082 Poway Unified School District School Facilities Improvement District No. 2002-1 134,315,766 39.649% 53,254,858 Poway Unified School District School Facilities Improvement District No. 2007-1 174,158,985 40.282% 70,154,722 Escondido Union High School District 85,428,729 0.074% 63,217 San Pasqual Union School District 197,458 2.234% 4,411 Palomar Pomerado Hospital District 431,124,259 12.692% 54,718,291 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $ 232,217,483 DIRECT & OVERLAPPING GENERAL FUND DEBT: San Diego County General Fund Obligations $ 255,365,000 2.027% $ 5,176,249 San Diego County Pension Obligations 508,765,000 2.027% 10,312,667 San Diego County Superintendent of Schools General Fund Obligations 10,085,000 2.027% 204,423 Palomar Community College District Certificates of Participation 2,140,000 8.703% 186,244 Escondido Union High School District Certificates of Participation 54,250,000 0.074% 40,145 Poway Unified School District Certificates of Participation 56,110,000 23.759% 13,331,175 City of Poway Certificates of Participation 12,385,546 100.000% 12,385,546 TOTAL OVERLAPPING GENERAL FUND DEBT $ 41,636,449 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): $ 131,225,000 100.000% $ 131,225,000 TOTAL DIRECT DEBT TOTAL OVERLAPPING DEBT $ 12,385,546 $ 392,693,386 COMBINED TOTAL DEBT $ 405,078,932 (2) Ratios to 2018-19 Assessed Valuation: Total Overlapping Tax and Assessment Debt Total Direct Debt Combined Total Debt 2.18% 0.12% 3.80% Ratios to Redevelopment Successor Agency Incremental Valuation ($4,968,217,961): Total Overlapping Tax Increment Debt 2.64% Notes: (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. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non -bonded capital lease obligations. 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. Source: California Municipal Statistics, Inc. and City of Poway Finance Department 167 City of Poway Legal Debt Margin Information Last Ten Fiscal Years Fiscal Year 2019 2018 2017 2016 Assessed valuation $ 5,696,205,876 $ 5,443,613,176 $ 5,227,958,736 $ 5,024,927,288 Conversion percentage 25% 25% 25% 25% Adjusted assessed valuation 1,424,051,469 1,360,903,294 1,306,989,684 1,256,231,822 Debt limit percentage 15% 15% 15% 15% Debt limit 213,607,720 204,135,494 196,048,453 188,434,773 Total net debt applicable to limit: General obligation bonds Legal debt margin 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. 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. Source: City of Poway Finance Department San Diego County Assessors Office 168 Fiscal Year 2015 2014 2013 2012 2011 2010 $ 4,789,751,105 $ 4,567,470,473 $ 4,408,143,750 $ 4,437,851,067 $ 4,340,755,570 $ 4,350,898,397 25% 25% 25% 25% 25% 25% 1,197,437,776 1,141,867,618 1,102,035,938 1,109,462,767 1,085,188,893 1,087,724,599 15% 15% 15% 15% 15% 15% 179,615,666 171,280,143 165,305,391 166,419,415 162,778,334 163,158,690 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 169 City of Poway Pledged Revenue Coverage Last Ten Fiscal Years Fiscal Year Ended June 30, 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Tax Allocation Bonds Tax Increment $ 39,377,603 39,015,261 21,926,632 RPTTF Distribution 16,047,570 39,511,570 40,907,420 42,495,591 44,786,412 46,953,802 47,750,166 50,733,852 Debt Service Principal $ 5,555,000 5,775,000 6,180,000 6,695,000 7,020,000 7,450,000 7,440,000 7,110,000 7,205,000 6,975,000 Interest $ 11,877,545 11, 658,142 11,411,148 11,169,832 10,889,354 10,565,336 6,558,087 6,895,377 6,802,425 6,674,688 Total Coverage 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 Finance Department $ 17,432,545 2.26 17,433,142 2.24 17,591,148 2.16 17,864,832 2.21 17,909,354 2.28 18,015,336 2.36 13,998,087 3.20 14,005,377 3.35 14,007,425 3.41 13,649,688 3.72 170 City of Poway Demographic and Economic Statistics Last Ten Calendar Years Personal Per Capita Unemployment Calendar Year Population Income Personal Income Labor Force Rate 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% 2019 50,320 3,053,923,177 60,690 25,700 2.7% Sources: 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 171 City of Poway Principal Employers Current Year and Nine Years Ago Employer 2019 2010 Percentage Percentage Number of of Total City Number of of Total City Employees Rank Labor Force Employees Rank Labor Force General Atomics Aeronautical Systems 7,160 1 27.86% 2,392 1 8.54% GEICO Direct 1,720 2 6.69% 1,250 3 4.46% Poway Unified School District 1,366 3 5.32% 1,341 2 4.79% Delta Design, Inc. 750 4 2.92% Pomerado Hospital 740 5 2.88% 776 4 2.77% Mitchell Repair Information Company 400 6 1.56% Sysco Food Services of SD 385 7 1.50% 455 6 1.63% Walmart 370 8 1.44% 345 9 1.23% Arch Health Partners 300 9 1.17% Costco Wholesale Corp. 295 10 1.15% Cohu Inc. 626 5 2.24% Digirad Corporation 358 8 1.28% Core Logic Credco 400 7 1.43% City of Poway Mitchell Repair Information Company Neal Electric Corporation 309 10 1.10% Total 13,486 52.47% 8,252 29.47% Total City Labor Force 25,700 28,000 Sources: City of Poway Economic Development Division -by Employer State of California Employment Development Department -Total City Labor Force 172 City of Poway Full -Time -Equivalent City Employees by Function Last Ten Fiscal Years Function 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 General government 35.98 31.21 32.44 32.44 29.48 28.96 27.96 31.96 33.96 41.00 Public Safety (a) 57.00 58.00 56.00 56.00 55.00 54.00 54.00 54.00 54.00 54.00 Public works 82.36 86.84 89.36 88.36 84.36 79.96 81.96 85.96 84.96 84.98 Redevelopment Services - - - - - - - - 9.35 9.71 Community Services 50.39 50.03 49.47 48.99 46.49 45.78 45.57 46.25 46.03 47.48 Development Services 25.50 25.50 22.50 22.50 21.96 22.96 23.96 30.96 29.96 29.96 Total (b) 251.23 251.58 249.77 248.29 237.29 231.66 233.45 249.13 258.26 267.13 Notes: Amounts shown are the number of full -time -equivalents (FTEs) approved in each operating budget for the fiscal year. (a) Not including law enforcement services, which are provided through contract with the County of San Diego Sheriff. (b) FY2010 to FY2018 numbers are updated to reflect the FTEs. In previous years' reports, only the full-time positions were reported. Source: City of Poway Financial Plan 173 City of Poway Operating Indicators Last Ten Fiscal Years Function 2019 2018 2017 2016 2015 General government: Business registrations issued Vendor payments processed 2,253 1,859 1,987 1,509 1,510 6,203 6,689 6,623 6,705 Public Safety: Arrests made 978 900 900 1,079 1,214 Fire emergency responses 5,706 5,146 4,755 4,564 4,229 Safety Inspections 2,100 2,451 2,652 2,587 3,069 Development Services: Building permits issued Building inspections 2,168 2,465 2,013 2,444 2,070 8,572 9,023 9,600 9,162 12,488 Culture and recreation: Performing arts center attendance 51,806 56,573 56,637 57,908 60,276 Library -number of holdings in collection (1) (1) (1) (1) (1) Library -number of holdings circulated 924,021 897,531 863,874 782,599 733,689 Athletic field permits issued 301 335 285 225 232 Highways and streets: Roads resurfaced in square feet 122,250 204,000 306,543 306,000 237,024 Roads slurry sealed in square feet 4,282,280 4,231,308 4,627,262 4,933,522 4,378,483 Pot holes repaired/work orders 216 189 191 213 193 Water: Residential water customers 12,673 12,662 12,631 12,625 12,765 Commercial water customers 509 500 495 493 658 All other water customers 821 816 812 811 / Average daily consumption (mg) 7.48 9.47 8.13 7.39 8.21 Sewer: Residential sewer customers 11,417 11,410 11,391 11,381 11,530 Commercial sewer customers 488 480 475 472 630 All other sewer customers 331 328 329 329 / Average daily treatment (mg) 2.41 2.35 2.68 2.48 2.53 Notes: (1) Because of County -wide interbranch loan program, this statistic is no longer tracked. Source: City of Poway 174 2014 2013 2012 2011 2010 1,285 1,522 1,418 1,317 1,192 6,426 6,770 7,020 7,063 7,804 1,069 1,038 1,123 1,145 1,334 4,099 3,846 3,638 3,811 3,691 2,899 2,687 2,474 2,863 1,606 1,504 1,345 1,237 1,176 1,144 8,221 8,349 5,981 6,126 6,580 55,652 59,389 59,897 53,249 61,214 93,951 75,000 96,000 104,367 125,977 709,823 782,288 693,783 765,704 638,494 282 156 161 152 148 299,038 188,561 201,968 207,968 290,877 4,379,695 3,928,425 4,563,496 4,369,160 4,369,503 175 644 1,323 571 193 12,674 12,509 12,523 12,439 12,492 645 529 464 496 514 not reported / 10.66 10.16 9.36 8.99 9.57 11,498 11,474 11,383 11,241 11,225 627 623 782 770 774 not reported / 2.73 2.86 3.01 3.27 3.15 175 City of Poway Capital Assets Statistics Last Ten Fiscal Years Function 2019 2018 2017 2016 2015 Public Safety: Number of fire stations Number of sheriff stations 3 1 3 3 3 3 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 (billion/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 176 2014 2013 2012 2011 2010 3 3 3 3 3 1 1 1 1 1 3,059 3,059 3,073 3,073 3,045 56 55 55 55 55 1 1 1 1 1 1 1 1 1 1 19 19 19 19 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 56 165 165 165 165 165 289 289 289 289 253 1.11 1.11 1.11 1.11 1.11 186 186 186 186 175 64 64 64 64 64 177 This page intentionally left blank. 178