Comprehensive Annual Financial Report - Fiscal Year Ended

MAYORLori Holt Pfeiler

CITY COUNCILMarie Waldron

CITY MANAGERClay Phillips

ASSISTANT CITY MANAGERJack Anderson

, Mayor Pro TemTom D’Agosta Ed Gallo Ron Newman

DIRECTOR OF COMMUNITY DEVELOPMENTCharles Grimm

DIRECTOR OF COMMUNITY SERVICESDon Anderson

DIRECTOR OF FINANCEGilbert Rojas

DIRECTOR OF HOUSING NEIGHBORHOOD SERVICESJerry Van Leeuwen

DIRECTOR OF HUMAN RESOURCESGail Sullivan

DIRECTOR OF INFORMATION SYSTEMSMark Becker

DIRECTOR OF PUBLIC WORKSPat Thomas

CHIEF OF POLICEDuane White

FIRE CHIEFVic Reed

CITY ATTORNEYJeffrey Epp

CITY CLERKMarsha Whalen

CITY TREASURERKenneth Hugins

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Prepared by the

Finance Department

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CITY OF ESCONDIDO Comprehensive Annual Financial Report

Table of Contents

June 30, 2004

Page INTRODUCTORY SECTION: Principal Officers 1 Table of Contents 3 Organization Chart 7 Letter of Transmittal 8 Certificate of Achievement for Excellence in Financial Reporting 12 Certificate of Award for Outstanding Financial Reporting 13 FINANCIAL SECTION: Independent Auditor’s Report 17 Management’s Discussion and Analysis (Unaudited) 19 Basic Financial Statements: Government-wide Financial Statements:

Statement of Net Assets 31 Statement of Activities 32

Fund Financial Statements: Governmental Funds: Balance Sheet 34 Reconciliation of the Balance Sheet to the Statement of Net Assets 35 Statement of Revenues, Expenditures, and Changes in Fund Balances 36 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 38

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Table of Contents

June 30, 2004

Page FINANCIAL SECTION (Continued): Proprietary Funds:

Statement of Net Assets 39 Statement of Revenues, Expenses, and Changes in Fund Net Assets 41 Combining Statement of Cash Flows 42 Fiduciary Funds:

Statement of Fiduciary Net Assets 46 Statement of Changes in Fiduciary Net Assets 47 Notes to the Financial Statements 48

Required Supplementary Information (Unaudited): Schedule of Funding Progress – Public Safety and Miscellaneous Employees Retirement System 84

Budgetary Comparison Schedule General Fund 85 Low and Moderate Income Housing Special Revenue Fund 89 Notes to Required Supplementary Information 90 Supplementary Information: Budgetary Comparison Schedule Community Development Commission Debt Service Fund 92 Nonmajor Governmental Funds: Combining Balance Sheet 100 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 104

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Table of Contents

June 30, 2004

Page FINANCIAL SECTION (Continued): Budgetary Comparison Schedules: Certain Special Revenue Funds:

Street Fund 108 Parks and Recreation Fund 109 Community Development Block Grant Fund 110 Landscape and Assessment District Fund 111 Storm Water Management Fund 112 Miscellaneous Fund 113 Debt Service Funds:

Vineyard Golf Course Fund 114 Internal Service Funds:

Statement of Net Assets 118 Statement of Revenues, Expenses and Changes in Fund Net Assets 120 Combining Statement of Cash Flows 122

Agency Funds:

Combining Statement 127

Statements of Changes 128

STATISTICAL SECTION (Unaudited): Government-wide Information: Government-wide Expenses by Function – Last Three Fiscal Years 132 Government-wide Revenues – Last Three Fiscal Years 133

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Table of Contents

June 30, 2004

Page STATISTICAL SECTION (Continued): Fund Information: General Governmental Revenues by Source – Last Ten Fiscal Years 134 General Governmental Expenditures by Function – Last Ten Fiscal Years 136 Secured Property Tax Levies and Collections – Last Ten Fiscal Years 138 Schedule of Assessed Valuation – Last Ten Fiscal Years 140 Property Tax Rates - Direct and Overlapping Governments – Last Ten Fiscal Years 142 Special Assessment Collections – Last Ten Fiscal Years 143 Computation of Legal Debt Margin 144 Ratio of General Bonded Debt to Assessed Valuation and Net Bonded Debt Per Capita – Last Ten Fiscal Years 145 Ratio of Annual Debt Service for General Bonded Debt to Total Governmental Expenditures – Last Ten Fiscal Years 146 Direct and Overlapping Bond Debt 147

Revenue Bond Coverage, Water and Wastewater Enterprise Funds – Last Ten Fiscal Years 148

Demographic Statistics – Last Ten Fiscal Years 149 Bank Deposits and Construction and Business Activity – Last Ten Fiscal Years 150 Largest Employers 152 Principal Taxpayers 153 Miscellaneous Statistics 154

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CITY OF ESCONDIDO

Electorate

City Treasurer

City Attorney ———————————–

City Manager ———————— Assistant City Manager

Finance Fire Department

Information Systems

Police Department

Human Resources Public Works

City ClerkHousing &

Neighborhood Services

Community Development

Community Services

Mobile Home Rent ReviewBoard

ORGANIZATION CHART

CouncilCommunity Development

Commission

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Gilbert Rojas Director of Finance 201 North Broadway, Escondido, CA 92025 Phone: 760-839-4322 Fax: 760-746-0612

October 29, 2004 Honorable Mayor, City Council, and Citizens of the City of Escondido: It is our pleasure to present the Comprehensive Annual Financial Report (CAFR) of the City of Escondido for the fiscal year ended June 30, 2004. This report consists of management's representations concerning the finances of the City of Escondido. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Escondido has established a comprehensive internal control framework that is designed both to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Escondido's financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City of Escondido's comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The City of Escondido's financial statements have been audited by Moreland & Associates, Inc., a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Escondido for the fiscal year ended June 30, 2004, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City of Escondido's financial statements for the fiscal year ended June 30, 2004, are fairly presented in conformity with GAAP. The Independent Auditors’ Report is presented as the first component of the financial section of this report. The independent audit of the financial statements of the City of Escondido was part of a broader, federally mandated "Single Audit" designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the City’s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the City of Escondido's Finance Department separately issued Single Audit Report.

Lori Holt Pfeiler, Mayor Marie Waldron, Mayor Pro Tem Tom D'Agosta Ed Gallo Ron Newman

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Letter of Transmittal October 29, 2004

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This Letter of Transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Escondido's MD&A can be found immediately following the Independent Auditors’ Report. Profile of the Government The City of Escondido is located in north San Diego County, approximately 30 miles north of the City of San Diego, California. Escondido is an established community incorporated on October 8, 1888 under the general laws of the State of California. The City has grown to a current population of 140,505. Within the 35 square miles that comprise the City, there are many residential communities; the largest enclosed regional mall in San Diego County; a regional hospital; 22 hotels; an auto center; many office, industrial, and commercial centers; and civic, cultural, and recreational facilities. The City operates under a Council-Manager structure. The City Council is comprised of five Council members, elected at large on a staggered basis for a term of four years. The Mayor is directly elected for a four-year term. The City Treasurer is also elected to a four-year term. The City Council appoints the City Manager and the City Attorney. The operating departments include Finance, Human Resources, Planning and Building, Community Development, Community Services, Police, Fire, Information Systems, City Clerk, and Public Works. The City provides the following services to its residents: police and fire protection, water and sewer services, building safety regulation and inspection, circulation and public facility capital improvement construction, street and park maintenance, refuse collection, planning and zoning, a full range of recreational programs for citizen participation, a senior center, and two libraries. Financial administration of the City is the responsibility of the Director of Finance. The Finance Department management staff includes a Finance Manager, which supervises the City's day-to-day accounting and budget operations and a Revenue Manager, which oversees the day-to-day treasury and utility billing operations. The City Treasurer is an elected position serving a term of four years and is responsible for investing the City's portfolio and bond administration. Factors Affecting Financial Condition Local Economy. The local economy continues to expand, as reflected in the San Diego County jobless rate, which is 3.8%, down .4% from one year ago. The employment gains are from construction and healthcare employment. Long-term Financial Planning. The City is currently negotiating with developers interested in building a seven story, 200 room Marriott hotel on a city owned parking lot between the California Center for the Arts and Escondido City Hall. The hotel would include a pool and upscale restaurant. The City would build a multi story parking garage and allow the hotel access to the conference rooms within the Arts Center.

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The City of Escondido and Sempra Energy Resources have reached an agreement on a proposal to build a 550-megawatt power plant as part of an industrial park development. Sempra has also agreed to provide $1.2 million for immediate road improvements and will guarantee the purchase of reclaimed water from the City’s new reclamation plant. The purchase of reclaimed water will be for a minimum of $950,000 up to a maximum of $2 million. In addition to the increase in property taxes, the City will benefit from a franchise tax on natural gas used at the plant of about $1.5 million per year. The industrial park development is expected to generate 4,000 to 5,000 new jobs. Cash Management. Cash management within the City is facilitated through a central investment pool to maximize earnings. Each fund possesses an interest in the total portfolio based on the cash book balance. All investment earnings are distributed to each fund based on the funds interest in the total pool. The City’s portfolio of $127.0 million is invested primarily in U.S. Government Securities. $50.2 million of the portfolio has maturity dates of less than one year. The balance of the portfolio matures from one to five years. The average yield on investments at June 30, 2004, was 3.78 percent, which was a decrease from 4.06 percent at June 30, 2003. The amount of interest earned in 2003-04 was $6.2 million. This represented a decrease compared to the 2002-03 amounts. The City Council has adopted a comprehensive investment policy (as required by state law) specifying the type and term of City investments. This policy has allowed the City Treasurer flexibility without endangering the safety, liquidity, or yield of the total portfolio. Risk Management. The City of Escondido is a member of the San Diego Pooled Insurance Program Authority (SANDPIPA) which provides general liability insurance. SANDPIPA is a joint venture of twelve cities located within San Diego County. As a member, the City carries a self-insured retention of $500,000 and is insured through SANDPIPA from $500,000 to $2,000,000. In addition, SANDPIPA has purchased excess insurance coverage from $2,000,000 to $37,000,000 for all its members. Escondido participates in the property, boiler and machinery, faithful performance bond, and excess workers’ compensation programs on an insured or self-insured retention basis with deductibles of $10,000 or under per occurrence; except for the Workers’ Compensation Program which carries a retention of $500,000/occurrence. The Workers’ Compensation Program is self-insured and administered by a third party administrator. Reserves are funded for both incurred and incurred but not reported (IBNR) losses. The City’s Risk Management and Benefits offices oversee the management of these programs so as to assure that the cost of risk to the City is kept at a minimum.

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Awards and Acknowledgments. The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Escondido for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2003. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement program's requirements and we are submitting it to the GFOA to determine its eligibility for another certificate. The City also participates in the California Society of Municipal Finance Officers' Certificate of Award Program for outstanding Financial Reporting. This award is designed to recognize and encourage excellence in financial reporting by state and local governments. The City received this award for its 2002-03 CAFR. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the Finance Department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. We would like to extend our appreciation to the Mayor, City Council, City Manager, and each City department for their cooperation and support in conducting the fiscal operations of the City. Respectfully submitted, Gilbert Rojas Director of Finance

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Financial

Section

1201 DOVE STREET, SUITE 680 NEWPORT BEACH, CALIFORNIA 92660 (949) 221-0025

570 RANCHEROS DRIVE, SUITE 260 SAN MARCOS, CA 92069 (760) 752-3390

October 29, 2004

The Honorable City Council of the City of Escondido, California

Independent Auditors' Report

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information ofthe City of Escondido, California, as of and for the year ended June 30, 2004, whichcollectively comprise the City's basic financial statements as listed in the table of contents.These financial statements are the responsibility of the City of Escondido's management.Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in theUnited States of America and the standards applicable to financial audits contained inGovernment Auditing Standards issued by the Comptroller General of the United States.Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-typeactivities, each major fund, and the aggregate remaining fund information of the City of Escondido, California, as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated October 29, 2004 on our consideration of the City of Escondido's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

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The management's discussion and analysis and other required supplementary information identified in the accompanying table of contents are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The accompanying introductory section, the major fund budgetary comparison schedules and the combining and individual nonmajor fund financial statements and schedules listed as supplementary information in the table of contents, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The major fund budgetary comparison schedules and the combining and individual nonmajor fund financial statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

As management of the City of Escondido (City), we offer readers of the financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2004. We encourage readers to consider the information presented here in conjunction with additional information furnished in our Letter of Transmittal, which can be found on pages 8-11 of this report. Financial Highlights • At the close of the most recent fiscal year, the assets of the City exceeded its liabilities by

$346,968,857 (net assets). Of this amount, $83,490,393 (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.

• The government’s total net assets increased by $14,196,369. 3.2 percent of the increase is from governmental activities, while business type activities increased by 6.4 percent.

• As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $129,811,868, a decrease of $2,128,259 in comparison with the prior year. Approximately 27 percent of this total amount, $35,342,336, is available for spending at the government’s discretion (unreserved fund balance).

• At the end of the current fiscal year, the unreserved fund balance for the General Fund was $32,682,961, or 51 percent of total General Fund expenditures.

Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. These financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. In addition to the basic financial statements, this report also contains other supplementary information. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets 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 in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

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The government-wide financial statements distinguish functions of the City, which are mainly supported by taxes and intergovernmental revenues, are listed as governmental activities. Other functions that are intended to recover all or a significant portion of their costs through user fees and charges, are listed as business-type activities. The governmental activities of the City include general government, public safety, cultural and recreation, public works, and community development. The business-type activities of the City include Water and Wastewater Funds, as well as a Golf Course Fund. The government-wide financial statements include not only the City itself (known as the primary government), but also the legally separate Community Development Commission (the redevelopment authority). The Community Development Commission functions as an integral part of the primary government and has been included in these financial statements. The government-wide financial statements can be found on pages 31-33 of this report. 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 of Escondido can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds are more narrow than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains twenty-four individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General Fund, Low and Moderate Income Housing Fund, and the Community Development Commission Debt Service Fund, which are considered to be major funds. Data from the other twenty-one governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds are provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its General Fund. A budgetary comparison statement has been provided for the General Fund to demonstrate compliance with this budget. The governmental fund financial statements can be found on pages 34-38 of this report.

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Proprietary funds. The City maintains two different types of proprietary funds, the Enterprise and the Internal Service Funds. The Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The enterprise funds are used to account for its Water, Wastewater, and Golf Course Operations Funds. The Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its’ Vehicle and Equipment Maintenance, General Liability, Workers' Compensation Insurance, Central Services, Insurance, and Building Maintenance Funds. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide detailed information for the Water and Wastewater Funds, both of which are considered to be major funds and the Golf Course Fund, which is the only remaining nonmajor fund. Conversely, all internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds are provided in the form of combining statements elsewhere in this report. The proprietary fund financial statements can be found on pages 39-45 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary fund financial statements can be found on pages 46-47 of this report. Notes to the financial statements. The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 48-82 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s progress in funding its obligation to provide pension benefits to its employees. Required supplementary information can be found on pages 84-90 of this report. The combining statements referred to earlier, in connection with nonmajor governmental funds and internal service funds, are presented immediately following the required supplementary information on pensions. Combining and individual fund statements and schedules can be found on pages 100-128 of this report. Government-wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. At the close of the most recent fiscal year, the City’s assets exceeded liabilities by $346,968,857.

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The largest portion of the City’s net assets, 58 percent, reflect investments in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investments in capital assets are reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources. Capital assets themselves cannot be used to liquidate these liabilities.

Governmental Business-type

2004 2003 2004 2003 2004 2003Current and other assets $161,876 $162,387 $39,910 $39,584 $201,786 $201,971Capital assets 207,393 200,294 206,589 200,379 413,982 400,673

Total assets 369,269 362,681 246,499 239,963 615,768 602,644Long-term liabilities outstanding 118,098 119,193 117,425 118,213 235,523 237,406Other liabilities 24,072 23,376 9,204 9,089 33,276 32,465

Total liabilities 142,170 142,569 126,629 127,302 268,799 269,871Net assets:Invested in capital assets, net of related debt 104,173 93,468 96,141 91,396 200,314 184,864 Restricted 63,164 68,667 63,164 68,667 Unrestricted 59,762 57,977 23,728 21,264 83,490 79,241

Total net assets $227,099 $220,112 $119,869 $112,660 $346,968 $332,772

Totalactivities activities

City of Escondido’s Changes in Net Assets(Amounts expressed in thousands)

An additional portion of the City’s net assets, 18.2 percent, represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets, $83,490,393, may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. Governmental activities. Governmental activities increased the City’s net assets by $6,987,140, thereby accounting for 49 percent of the total growth in the net assets. Key elements of this increase are as follows:

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2004 2003 2004 2003 2004 2003Revenues:Program revenues:

Charges for services $14,750 $13,787 $50,739 $44,701 $65,489 $58,488 Operating grants and contributions 13,618 14,698 13,618 14,698 Capital grants and contributions 6,947 5,279 4,414 5,145 11,361 10,424

General revenues: Sales tax 32,619 31,218 32,619 31,218

Property taxes 23,193 21,514 23,193 21,514 Other taxes 13,835 15,169 13,835 15,169 Other 3,550 4,057 1,940 2,757 3,490 6,814

Total revenues 108,512 105,722 57,093 52,603 165,605 158,325

Expenses:General government 7,547 7,278 7,547 7,278 Public safety 49,131 46,935 49,131 46,935 Cultural and recreation 13,186 12,670 13,186 12,670 Public works 12,579 18,711 12,579 18,711 Community development 11,029 10,646 11,029 10,646 Interest and fiscal charges 8,076 7,149 8,076 7,149 Water 32,298 29,884 32,298 29,884 Wastewater 16,359 15,598 16,359 15,598 Golf 1,204 1,136 1,204 1,136

Total expenses 101,548 103,389 49,861 46,618 151,409 150,007

Increase in net assets before transfers 6,964 2,333 7,232 5,985 14,196 8,318 Transfers 23 2,763 (23) (2,763)Increase in net assets 6,987 5,096 7,209 3,222 14,196 8,318 Net assets – July 1 220,112 215,016 112,660 109,438 332,772 324,454 Net assets – June 30 $227,099 $220,112 $119,869 $112,660 $346,968 $332,772

Governmental activities

Business-type activities Total

(Amounts expressed in thousands)City of Escondido’s Changes in Net Assets

Key elements of this increase are as follow: • Property taxes increased significantly during the year. Most of this increase is the result of

soaring prices in the housing market. • Sales tax receipts were up considerably, reflecting a strong regional economy. • Motor vehicle in lieu fees shown in other taxes, decreased by 22.7 percent, reflecting the State

of California diverting these funds to the State’s budget shortfall.

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___________________________________________________________________________________

Expenses and Program Revenues – Governmental Activities (expressed in thousands of dollars)

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

GeneralGovernment

Public Safety Cultural &Recreation

Public Works CommunityDevelopment

Interest & FiscalCharges

Expenses Program Revenues

___________________________________________________________________________________

Revenues by Source – Governmental Activities

13%6%

21%30%

14%

13%

3%

Charges for Service Grants and Contributions Capital Grants and ContributionsSales Tax Property Taxes Other TaxesOther

___________________________________________________________________________________

Business-type activities. Business-type activities increased the City’s net assets by $7,209,229, accounting for 51 percent of the total growth in the government’s net assets. Key elements of this increase are as follows:

• Charges for services for business-type activities increased by 13.5 percent. Water and Wastewater Funds account for a majority of this increase.

• The Municipal Golf Course finished its second year of operations at a deficit. Revenue from the rounds of golf played continued to be lower than originally anticipated.

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__________________________________________________________________________________

Expenses and Program Revenues – Business-type Activities (expressed in thousands of dollars)

$ 0

$ 5 ,00 0

$1 0 ,00 0

$1 5 ,00 0

$2 0 ,00 0

$2 5 ,00 0

$3 0 ,00 0

$3 5 ,00 0

$4 0 ,00 0

W ate r W as tew a te r G o lf

E xpenses P rog ram R evenues

___________________________________________________________________________________

Revenues by Source - Business-type Activities

8%

88%

2%2%

Capital Grants & Contributions Charges for Service Use of Money and Property Miscellaneous

___________________________________________________________________________________

Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

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As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $129,811,858, a decrease of $2,128,259 in comparison with the prior year. Approximately 24 percent of this total amount, or $35,342,336, constitutes unreserved fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is reserved to indicate that it is not available for new spending because it has already been committed to pay debt service of $5,739,817 or for a variety of other restricted purposes. The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unreserved fund balance of the General Fund was $32,682,961, while total fund balance reached $45,202,760. As a measure of the General Fund’s liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. The unreserved fund balance represents 51 percent of total General Fund expenditures, while total fund balance represents 70 percent of that same amount. During the current fiscal year, the fund balance of the City’s General Fund increased by $1,614,521. Key factors in this growth are as follows:

• An increase in the sales tax revenue by $2,383,537. • Department expenses were significantly under the adopted budget due to a hiring freeze initiated

by City management. The Low and Moderate Income Housing Fund has a total fund balance of $31,564,321, all of which is reserved. The net increase of $3,050,482 is partially due to an increase in HELP loan proceeds as well as an increase in the HOME revenue. The Community Development Commission Debt Service Fund has a total fund balance of $5,462,338, all of which is reserved for the debt service payment. The increase in the fund balance is due to the increase in assessed valuation within the redevelopment area. Proprietary funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. At the end of the current fiscal year, the unrestricted net assets of the Water and Wastewater Fund amounted to $3,923,323, and $20,405,116 respectively. The total growth in net assets was the result of an increase of $4,473,505 in the Water Fund and $3,617,034 in the Wastewater Fund. Other factors concerning the finances of these two funds have already been addressed in the discussion of the City’s business-type activities.

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General Fund Budgetary Highlights Differences between the original and the final budget were relatively minor ($2,163,172 increase in appropriations) and can be briefly summarized as follows:

• $ 369,245 in miscellaneous increases in general government activities • 293,440 in increases allocated to the police department • 1,075,020 in increases allocated to the fire department • 157,465 in increases allocated for public works • 98,423 in decreases in cultural and recreation activities • 366,425 in increases in community development activities

Actual General Fund expenditures were $1,933,720 less than the final fiscal year 2003-04 budget amounts. Items carried over to fiscal year 2004-05 comprised $708,395 of that amount. Significant savings were realized in general government, public works, and community development due to staffing vacancies. Savings in cultural and recreation are mainly do to programs in progress but not completed. The budget for these programs is included in the carryovers, which are listed above. During the year, revenues exceeded budgetary estimates by $1.5 million and along with the reserves, provided funding for all amendments to the 2003-04 budget. Capital Asset and Debt Administration Capital assets. As of June 30, 2004, the City’s investments in capital assets for its governmental and business type activities are $413,981,112 (net of accumulated depreciation). This investment in capital assets includes land, buildings and systems, improvements, machinery and equipment, park facilities, roads, highways, and bridges. The total increase in the City’s investment in capital assets for the current fiscal year is 3 percent.

2004 2003 2004 2003 2004 2003Land $28,378 $27,868 $2,891 $2,891 $31,269 $30,759 Buildings and systems 79,552 83,359 10,425 10,940 89,977 94,299Improvements other than buildings 1,923 2,180 4,645 448 6,568 2,628Machinery and equipment 4,720 5,700 1,124 1,458 5,844 7,158Infrastructure 57,731 56,283 101,506 96,423 159,237 152,706Construction in progress 35,088 24,905 85,998 88,219 121,086 113,124Total $207,392 $200,295 $206,589 $200,379 $413,981 $400,674

TotalGovernmental

activitiesBusiness type

activities

Additional information on the City’s capital assets can be found in the notes on pages 62-64 of this report.

27

Long-term debt. At the end of the current fiscal year, the City has total bonded debt outstanding of $176,000,184. The City debt represents bonds secured solely by specified revenue sources (i.e., revenue bonds or lease obligations).

2004 2003 2004 2003 2004 2003Certificates of participation $4,895 $5,165 $61,680 $62,315 $66,575 $67,480 Special assessment debt with governmental 90 105 90 105Lease revenue bonds 88,921 91,997 6,195 6,300 95,236 98,463Tax allocation bonds 13,521 16,945 13,521 16,945Capital lease 578 792 120 166 578 792Total $107,915 $114,899 $68,085 $68,886 $176,000 $183,785

Governmentalactivities

Business typeactivities Total

Additional information on the City’s long-term debt can be found in the notes on pages 66-77 of this report. Economic Factors and Next Year’s Budgets and Rates • The unemployment rate for the City is currently 3.8 percent, which is a decrease from a rate of

4.2 percent a year ago. • Inflationary trends in the region compare favorably to national indices.

All of these factors were considered in preparing the City’s Operating Budget for the 2004-2005 fiscal year. Requests for Information This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Escondido, Finance Department, 201 North Broadway, Escondido, CA 92025.

28

Basic Financial

Statements

29

30

CITY OF ESCONDIDOStatement of Net Assets

June 30, 2004

Governmental Business-type Assets Activities Activities Total

Cash and investments $ 102,778,396 $ 19,955,571 $ 122,733,967Restricted cash and investments 13,023,460 14,306,793 27,330,253Receivables, net of allowances 35,299,494 7,125,136 42,424,630Internal balances 2,040,651 (2,040,651)Due from other governments 5,646,799 280,668 5,927,467Inventory, at cost 166,304 158,886 325,190Deposits 246,036 123,511 369,547Deferred bond issue costs 266,675 266,675Land held for resale 2,408,960 2,408,960Capital assets:

Not being depreciated 63,825,889 88,889,745 152,715,634 Being depreciated, net 143,566,618 117,698,860 261,265,478

Total Assets 369,269,282 246,498,519 615,767,801

Liabilities

Payables:Accounts 4,335,888 4,317,962 8,653,850Interest 1,015,894 1,234,294 2,250,188Deposits 7,050,536 7,050,536Retentions 117,304 117,304

Accrued expenses 1,884,728 290,912 2,175,640Deferred revenue 645,186 645,186Long-term obligations:

Payables due within one year: Employee leave benefits 518,265 76,278 594,543 Capital lease 182,544 39,059 221,603 Loans 74,275 2,217,843 2,292,118 Bonds 8,075,000 130,000 8,205,000 Certificates of participation 290,000 780,000 1,070,000Payables due in more than one year: Connection rights 15,009,279 15,009,279 Employee leave benefits 5,585,261 686,499 6,271,760 Claims 9,766,300 1,882,700 11,649,000 Capital lease 395,676 80,532 476,208 Deposits 537,431 537,431 Loans 3,147,971 34,038,713 37,186,684 Bonds, net 94,597,395 5,947,372 100,544,767 Certificates of participation, net 4,605,000 59,242,847 63,847,847

Total Liabilities 142,169,919 126,629,025 268,798,944

Net Assets

Invested in capital assets, net of related debt 104,172,967 96,141,070 200,314,037Restricted for:

Debt service 1,151,890 1,151,890Low and moderate income housing 26,538,944 26,538,944Capital projects 1,330,450 1,330,450Other purposes 34,143,143 34,143,143

Unrestricted 59,761,969 23,728,424 83,490,393

Total Net Assets $ 227,099,363 $ 119,869,494 $ 346,968,857

See Accompanying Notes to Financial Statements.31

Operating CapitalCharges for Grants and Grants and

Functions/Programs Expenses Services Contributions Contributions

Governmental activities:General government $ 7,546,703 $ 154,900 $ 671,631 $ 165,555Public safety 49,131,586 7,772,419 1,815,435 454,612Cultural and recreation 13,185,703 1,997,154 1,359,981 291,634Public works 12,579,425 2,833,676 5,567,408 6,034,703Community development 11,028,920 1,991,669 4,203,083Interest and fiscal charges 8,075,513

Total Governmental Activities 101,547,850 14,749,818 13,617,538 6,946,504

Business-type activities:Water 32,297,470 32,502,340 2,611,887Wastewater 16,359,318 17,663,139 1,802,643Golf 1,204,061 573,165

Total Business-type Activities 49,860,849 50,738,644 4,414,530

Total $ 151,408,699 $ 65,488,462 $ 13,617,538 $ 11,361,034

General Revenues Taxes: Sales taxes Property taxes Other taxes Use of money and property MiscellaneousTransfers

Total General Revenues and TransfersChange in Net AssetsNet Assets - Beginning of Year

Net Assets - End of Year

Program Revenues

CITY OF ESCONDIDOStatement of Activities

For the Year Ended June 30, 2004


Net (Expense) Revenue andChanges in Net Assets

Governmental Business-typeActivities Activities Total

$ (6,554,617) $ $ (6,554,617)(39,089,120) (39,089,120)

(9,536,934) (9,536,934)1,856,362 1,856,362

(4,834,168) (4,834,168)(8,075,513) (8,075,513)

(66,233,990) (66,233,990)

2,816,757 2,816,7573,106,464 3,106,464(630,896) (630,896)

5,292,325 5,292,325

(66,233,990) 5,292,325 (60,941,665)

32,619,181 32,619,18123,193,418 23,193,41813,835,116 13,835,116

2,750,045 933,992 3,684,037800,333 1,005,949 1,806,282

23,037 (23,037)

73,221,130 1,916,904 75,138,0346,987,140 7,209,229 14,196,369

220,112,223 112,660,265 332,772,488

$ 227,099,363 $ 119,869,494 $ 346,968,857

33

CITY OF ESCONDIDOBalance Sheet

Governmental FundsJune 30, 2004

Special DebtRevenue Service

Low and Community Total Moderate Development Governmental Governmental

Assets General Income Housing Commission Funds FundsAssets:

Cash and investments $ 24,029,768 $ 4,344,031 $ 6,706,695 $ 50,941,383 $ 86,021,877Restricted cash and investments 11,015,519 2,007,941 13,023,460Receivables (net): Accounts 3,130,514 807,439 3,937,953 Interest 447,930 60,696 60,339 618,172 1,187,137 Taxes 398,632 73,350 243,062 7,540 722,584 Notes 13,110 3,394 4,735,748 4,752,252 Loans 23,990,178 346,839 24,337,017Due from: Other funds 3,727,312 3,727,312 Other governments 4,841,488 11,313 793,998 5,646,799Land held for resale, at cost 2,408,960 2,408,960Advances to other funds 11,827,549 694,978 869,988 13,392,515

Total Assets $ 48,416,303 $ 31,586,900 $ 18,025,615 $ 61,129,048 $ 159,157,866

Liabilities and Fund BalanceLiabilities:

Accounts payable $ 603,598 $ 9,128 $ $ 3,340,323 $ 3,953,049Accrued expenditures 1,706,788 12,177 72,469 1,791,434Due to other funds 1,622,395 1,622,395Deposits payable 12,274 1,274 7,036,988 7,050,536Deferred revenue 890,883 645,186 1,536,069Advances from other funds 12,563,277 829,238 13,392,515

Total Liabilities 3,213,543 22,579 12,563,277 13,546,599 29,345,998

Fund Balance:Reserved for: Advances to other funds 11,827,549 694,978 869,988 13,392,515 Land held for resale 2,408,960 2,408,960 Low and moderate income housing 4,466,811 4,466,811 Non-current loans and notes receivable 13,110 23,993,572 4,666,257 28,672,939 Specific purpose 679,140 4,204,478 4,883,618 Debt service 5,462,338 277,479 5,739,817Reserved for Current Projects:

Special revenue 6,583,371 6,583,371Capital projects 28,321,501 28,321,501

Unreserved; designated Economic uncertainty 12,677,957 12,677,957 Underground waivers 549,213 549,213 Library trust 457,965 457,965 Bond contingency 3,600,254 3,600,254 Carryovers 708,395 708,395 Building replacement 10,392,800 10,392,800

Future projects: Special revenue 1,669,915 1,669,915 Capital projects 989,460 989,460

Unreserved 4,296,377 4,296,377

Total Fund Balance 45,202,760 31,564,321 5,462,338 47,582,449 129,811,868

Total Liabilities and Fund Balance $ 48,416,303 $ 31,586,900 $ 18,025,615 $ 61,129,048 $ 159,157,866

Nonmajor


CITY OF ESCONDIDOReconciliation of the Balance Sheet to the Statement of Net Assets

Governmental FundsJune 30, 2004

Fund balances for governmental funds $ 129,811,868

Amounts reported for governmental activities in the statement of net assets are different because:

Capital assets $ 396,480,119Ending accumulated depreciation (192,315,880) 204,164,239

890,883

9,741,473

Long-term liabilities (113,949,133)Deferred bond costs 266,675 (113,682,458)

Interest payable (1,015,894)Accretion (2,810,748) (3,826,642)

Net assets of governmental activities $ 227,099,363

Capital assets used in governmental activities are not financial resources and,therefore, are not reported in the funds. Capital assets allocated from internalservice funds are included in the internal service fund adjustment below.

Internal service funds are used by management to charge the costs ofactivities involved in rendering services to departments within the City. Theassets and liabilities of the internal service funds are included in the statementof net assets.

Interest on long-term liabilities is not accrued in governmental funds, butrather is recognized as an expenditure when due.

Long-term liabilities, including bonds payable, are not due and payable in thecurrent period and therefore are not reported in the funds. Long-termliabilities allocated from internal service funds are included in the internalservice fund adjustment above.

Other long-term assets are not available to pay for current-periodexpenditures and, therefore, are deferred in the funds.


CITY OF ESCONDIDOStatement of Revenues, Expenditures,

and Changes in Fund BalancesGovernmental Funds




General Income Housing Commission Funds FundsRevenues: Sales tax $ 29,941,830 $ $ $ 2,677,351 $ 32,619,181 Other taxes 14,264,414 3,176,043 12,704,173 676,129 30,820,759 Licenses and permits 1,137,389 41,328 1,178,717 Fines and forfeits 2,009,866 2,009,866 Intergovernmental 8,406,282 1,859,755 6,312,852 16,578,889 Charges for services 6,853,979 5,780,051 12,634,030 Special assessments 509,713 509,713 Lease income 90,253 90,253 Investment income (96,084) 296,621 155,382 846,713 1,202,632 Miscellaneous 2,837,566 7,280 1,492,728 4,337,574

Total Revenues 65,355,242 5,429,952 12,859,555 18,336,865 101,981,614

Expenditures: Current: General government 5,399,687 896,324 6,296,011 Public safety 40,520,926 1,538,806 42,059,732 Public works 8,276,288 2,464,129 10,740,417 Cultural and recreation 6,355,952 4,371,453 10,727,405 Community development 3,504,386 2,234,919 143,855 1,817,786 7,700,946 ERAF payment 694,978 694,978 Agency tax sharing agreement 2,227,303 2,227,303 Capital projects 14,095,598 14,095,598 Debt service: Principal retirements 7,330,360 270,000 7,600,360 Interest and fiscal charges 4,223,616 419,308 4,642,924

Total Expenditures 64,057,239 2,234,919 14,620,112 25,873,404 106,785,674

Excess (Deficiency) of Revenues Over Expenditures 1,298,003 3,195,033 (1,760,557) (7,536,539) (4,804,060)

Nonmajor


CITY OF ESCONDIDOStatement of Revenues, Expenditures,

and Changes in Fund BalancesGovernmental Funds (Continued)For the Year Ended June 30, 2004



General Income Housing Commission Funds FundsOther Financing Sources (Uses): Sale of property 314,382 310,459 631,815 1,256,656 Proceeds of loan issuance 1,850,000 1,850,000 Transfers in 1,704,136 183,290 2,488,300 6,967,915 11,343,641 Transfers out (1,702,000) (2,488,300) (115,891) (7,468,305) (11,774,496)

Total Other Financing Sources (Uses) 316,518 (144,551) 2,372,409 131,425 2,675,801

Net Change in Fund Balance 1,614,521 3,050,482 611,852 (7,405,114) (2,128,259)

Fund Balances at Beginning of Year 43,588,239 28,513,839 4,850,486 54,987,563 131,940,127

Fund Balances at End of Year $ 45,202,760 $ 31,564,321 $ 5,462,338 $ 47,582,449 $ 129,811,868

Nonmajor

37

CITY OF ESCONDIDOReconciliation of the Statement of Revenues,

Expenditures, and Changes in Fund Balances ofGovernmental Funds to the Statement of Activities


Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds: $ (2,128,259)

Capital outlay $ 14,095,598Contributed capital assets 3,760,419Capital asset expenditures within the functions 368,728Depreciation (10,541,412)Retirement and sale of capital assets (1,818,902) 5,864,431

890,883

(2,271,339)

Principal retirements 7,600,360Accreted value (2,810,748)Other adjustments (158,188) 4,631,424

Change in net assets of governmental activities $ 6,987,140

Governmental funds report capital outlays as expenditures. However, in the statementof activities the cost of these assets are allocated over their estimated useful lives andreported as depreciation expense. This is the amount by which capital outlays,contributed capital assets, retirements, and capital related expenditures exceededdepreciation in the current period.

Internal service funds are used by management to charge the costs of activitiesinvolved in rendering services to departments within the City. The assets andliabilities of the internal service funds are included in the statement of net assets.

The issuance of long-term debt provides current financial resources to governmentalfunds, while the repayment of the principal of long-term debt consumes the currentfinancial resources of governmental funds. Neither transaction however, has any effecton net assets.

Revenues in the statement of activities that do not provide current financial resourcesare not reported as revenues in the funds.



Proprietary FundsJune 30, 2004

Internal Golf Course Service

Water Wastewater (Nonmajor) Total Funds Assets

Current Assets:Cash and investments $ $ 16,372,829 $ $ 16,372,829 $ 20,339,261Receivables, net Accounts 4,889,833 547,161 1,215 5,438,209 166,263 Interest 67,516 248,553 12,090 328,159 277,994 Notes 14,292 1,069,303 1,083,595 Assessments 90,000 90,000Due from other funds 731,300 731,300Due from other governments 280,668 280,668Inventory 32,616 32,616 292,574Deposits 76,647 76,647 292,900Other assets 102,233 102,233 1,236Advances from other funds 5,417,677 5,417,677

Total Current Assets 10,389,318 19,339,814 224,801 29,953,933 21,370,228

Long-term assets:Restricted cash, and investments:Cash with fiscal agent 10,998,629 2,693,306 614,858 14,306,793

Total Restricted Assets 10,998,629 2,693,306 614,858 14,306,793

Capital assets: Land 1,494,199 320,360 1,076,000 2,890,559 Land improvements 335,810 17,633 244,531 597,974 Buildings 14,354,435 12,069,066 344,468 26,767,969 1,121,796 Golf course 4,314,066 4,314,066 Water system 57,322,173 57,322,173 Electric system 3,433,127 3,433,127 Recycled water system 15,088,140 15,088,140 Sewer system 66,580,445 66,580,445 Machinery and equipment 1,581,353 1,098,149 484,151 3,163,653 17,872,912 Construction in progress 11,942,756 74,056,428 85,999,184 Less accumulated depreciation (28,378,852) (31,480,020) (447,663) (60,306,535) (15,028,590)

Total Capital Assets (Net of Accumulated Depreciation) 62,085,001 137,750,201 6,015,553 205,850,755 3,966,118

Total Long-term Assets 73,083,630 140,443,507 6,630,411 220,157,548 3,966,118

Total Assets 83,472,948 159,783,321 6,855,212 250,111,481 25,336,346

(Continued)



Proprietary Funds (Continued)June 30, 2004

Internal Golf Course Service

Water Wastewater (Nonmajor) Total FundsLiabilities

Current Liabilities: Accounts payable 3,873,908 349,978 19,316 4,243,202 457,600 Accrued expenses 118,752 110,387 42,189 271,328 112,878 Retentions payable 117,304 117,304 Due to other funds 2,528,084 286,728 2,814,812 21,405 Current portion of leases payable 220,929

Total Current Liabilities 6,638,048 460,365 348,233 7,446,646 812,812

Current Liabilities payable from restricted assets:

Current portion of bonds payable 15,000 115,000 130,000 Current portion of COP payable 475,000 305,000 780,000 Current portion of loans payable 2,217,843 2,217,843 Accrued interest payable 622,782 511,947 99,565 1,234,294

Total Current Liabilities Payable From Restricted Assets 1,097,782 3,049,790 214,565 4,362,137

Long-Term Liabilities: Advances from other funds 5,417,677 5,417,677 Connection rights payable 9,816,616 5,192,663 15,009,279 Employee leave benefits payable 387,730 333,915 721,645 11,649,000 Deposits payable 535,653 1,778 537,431 242,807 Leases payable 408,493 Bonds payable 75,000 5,872,372 5,947,372 Certificates of participation payable 32,758,045 26,484,802 59,242,847 Loans payable 1,955,835 32,082,878 34,038,713

Total Long-Term Liabilities 45,453,879 69,588,713 5,872,372 120,914,964 12,300,300

Total Liabilities 53,189,709 73,098,868 6,435,170 132,723,747 13,113,112

Net Assets:Invested in capital assets, net of related debt 26,359,916 66,279,337 28,179 92,667,432 3,336,696Unrestricted 3,923,323 20,405,116 391,863 24,720,302 8,886,538

Total Net Assets $ 30,283,239 $ 86,684,453 $ 420,042 117,387,734 $ 12,223,234

Adjustment to reflect the consolidation of internalservice fund activities to related enterprise funds 2,481,760

Net assets of business-type activities $ 119,869,494

40

CITY OF ESCONDIDOStatement of Revenues, Expenses, and Changes in Fund Net Assets

Proprietary FundsFor the Year Ended June 30, 2004

Golf Course Internal ServiceWater Wastewater (Nonmajor) Total Funds

Operating Revenues: Charges for services $ 32,502,340 $ 14,363,962 $ 570,561 $ 47,436,863 $ 19,065,910

Operating Expenses: Personnel services 4,685,297 4,047,850 8,733,147 3,265,519 Purchased water 13,960,763 13,960,763 Contractual services 535,061 535,061 Administrative expenses 4,031,167 1,929,213 5,960,380 1,464,468 Benefit claims 4,801,368 Supplies 1,355,452 823,073 2,178,525 228,174 Repairs and maintenance 909,466 861,041 1,770,507 826,002 Depreciation 1,913,680 2,323,018 253,897 4,490,595 1,350,288 Utilities 1,130,214 1,354,505 2,484,719 1,134,805 Fuel 543,222 Professional services 1,097,545 1,652,293 54,232 2,804,070 3,229,870 Insurance premiums 227,988 247,032 18,000 493,020 5,937,716 Rent 196,658 200,495 397,153 12,945 Other 341,722 215,961 34,078 591,761 207,600

Total Operating Expenses 29,849,952 13,654,481 895,268 44,399,701 23,001,977

Operating Income (Loss) 2,652,388 709,481 (324,707) 3,037,162 (3,936,067)

Non-Operating Revenues (Expenses): Investment income (8,658) 240,625 3,734 235,701 228,294 Rents and concessions 608,541 7,035 615,576 Interest and fiscal charges (2,116,582) (1,567,406) (308,793) (3,992,781) (39,668) Interest on connection rights (840,243) (840,243) Intergovernmental 822,574 340,617 1,163,191 Miscellaneous 953,805 (33,861) 5,754 925,698 303,356

Total Non-Operating Revenues (Expenses) 259,680 (1,860,268) (292,270) (1,892,858) 491,982

Income (Loss) Before Transfers and Capital Contributions 2,912,068 (1,150,787) (616,977) 1,144,304 (3,444,085)

Transfers in 9,992 10,514 120,000 140,506 642,000Transfers out (200,000) (50,000) (250,000) (101,652) Total Transfers (190,008) (39,486) 120,000 (109,494) 540,348 Income (Loss) Before Capital Contributions 2,722,060 (1,190,273) (496,977) 1,034,810 (2,903,737)

Capital contributions 1,751,245 4,807,307 6,558,552 248,266

Changes in Net Assets 4,473,305 3,617,034 (496,977) 7,593,362 (2,655,471)Net Assets at Beginning of Year 25,809,934 83,067,419 917,019 109,794,372 14,878,705

Net Assets at End of Year $ 30,283,239 $ 86,684,453 $ 420,042 $ 117,387,734 $ 12,223,234

Change in Net Assets $ 7,593,362Adjustment to reflect the consolidation of internal service fund activities to related enterprise funds (384,133)

Change in net assets of business-type activities $ 7,209,229


Water WastewaterCash Flows from Operating Activities Cash received from customers $ 32,321,797 $ 14,272,844 Cash paid to employees for services (4,657,554) (4,065,461) Cash paid to other suppliers of goods or services (23,361,121) (7,552,975) Cash from rents and concessions 608,541 Cash from other sources 944,986 54,401

Net Cash Provided by (Used for) Operating Activities 5,856,649 2,708,809

Cash Flows from Noncapital Financing Activities Intergovernmental revenue 822,574 340,617 Cash paid for startup costs (71,809) Cash received from other funds 2,538,076 Cash paid to other funds (117,677)

Net Cash Provided by (Used for) Noncapital Financing Activities 3,242,973 268,808

Cash Flows from Capital and Related Financing Activities Purchase and construction of capital assets (5,650,720) (2,269,856) Sale of capital assets Refunds (payments) on connection right (921,196) 487,027 Cash received from special assessments 15,000 Interest payments on bonds (2,065,982) (1,543,104) Interest payments on connection right (840,243) Principal payments on bonds (385,000) (265,000) Interest payments on leases Principal payments on leases Capital grants received 2,436,743 Proceeds from loans payable 1,343,503 (979,896)

Net Cash Provided by (Used for) Capital and Related Financing Activities (7,679,395) (2,959,329)

Cash Flows from Investing Activities Investment income received 77,204 261,412

Net Increase (Decrease) in Cash and Cash Equivalents 1,497,431 279,700Cash and Cash Equivalents at Beginning of Year 9,501,198 18,786,435

Cash and Cash Equivalents at End of Year $ 10,998,629 $ 19,066,135

Reconciliation of Cash Equivalents to the statement of net assets Cash and investments $ $ 16,372,829 Restricted assets 10,998,629 2,693,306

Cash and Cash Equivalents at the End of Year $ 10,998,629 $ 19,066,135

CITY OF ESCONDIDOCombining Statement of Cash Flows

Proprietary FundsFor the Year Ended June 30, 2004


Golf Course Internal (Nonmajor) Totals Service Funds

$ 571,417 $ 47,166,058 $ 18,952,337(8,723,015) (3,246,407)

(653,455) (31,567,551) (14,906,571)7,035 615,5765,754 1,005,141 244,333

(69,249) 8,496,209 1,043,692

1,163,191(71,809)

256,728 2,794,804(117,677) 433,926

256,728 3,768,509 433,926

(7,920,576) (747,676)72,876

(434,169)15,000

(302,032) (3,911,118)(840,243)

(105,000) (755,000)(39,668)

(242,222)2,436,743

363,607

(407,032) (11,045,756) (956,690)

2,391 341,007 202,198

(217,162) 1,559,969 723,126832,020 29,119,653 19,616,135

$ 614,858 $ 30,679,622 $ 20,339,261

$ $ 16,372,829 $ 20,339,261614,858 14,306,793

$ 614,858 $ 30,679,622 $ 20,339,261

(Continued)

43


Water Wastewater

Reconciliation of Operating Income to Net Cash Provided by, (Used For) Operating Activities

Operating Income (Loss) $ 2,652,388 $ 709,481

Adjustments to Reconcile Operating Income to Ne Cash Provided by (Used for) Operating Activities Depreciation expense 1,913,680 2,323,018 Amortization expense Cash from rents and concessions 608,541 Cash from other sources 953,805 54,401 Change in Assets and Liabilities (Increase) decrease in accounts receivable (114,041) (91,120) (Increase) decrease in employee tuition loan (Increase) decrease in inventories (Increase) decrease in deposits (Increase) decrease in notes receivable (8,819) Increase (decrease) in accounts payable (110,146) (269,362) Increase (decrease) in accrued expenses 19,766 20,849 Increase (decrease) in employee leave benefits payables 7,977 (38,460) Increase (decrease) in customer deposits (66,502) 2 Increase (decrease) in estimated leave claims payable

Total Adjustments 3,204,261 1,999,328

Net Cash Provided by (Used for) Operating Activities $ 5,856,649 $ 2,708,809

Noncash Investing, Capital and Financing Activities Contributed property, plant and equipment $ 1,751,245 $ 1,227,639 Bond amortization 57,283 28,487

CITY OF ESCONDIDOCombining Statement of Cash Flows

Proprietary Funds (Continued)


Golf Course Internal (Nonmajor) Totals Service Funds

$ (324,707) $ 3,037,162 $ (3,936,067)

253,897 4,490,595 1,350,28834,078 34,0787,035 615,5765,754 1,013,960 244,333

(625) (205,786) (112,337)(1,236)

1,481 1,481 (19,535)(54,290) (54,290)

(8,819)4,246 (375,262) (162,563)3,882 44,497 19,741

(30,483) 10,404(66,500)

3,650,664

255,458 5,459,047 4,979,759

$ (69,249) $ 8,496,209 $ 1,043,692

$ $ 2,978,884 $ 248,2667,986 93,756

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Trust AgencyFund Funds

Assets

Cash and investments $ 146,400 $ 467,151Restricted assets - cash with fiscal agent 231,885 781,145Receivables: Interest 1,573 4,258 Taxes 7,944 2,204

Total Assets $ 387,802 $ 1,254,758

Liabilities

Due to bondholders $ 328,713 $ 1,254,758

Total Liabilities 328,713 $ 1,254,758

Net Assets

Held in trust $ 59,089

CITY OF ESCONDIDOStatement of Fiduciary Net Assets

Fiduciary FundsJune 30, 2004


TrustFund

Additions

Special assessments $ 253,080 Investment income 2,281

Total additions 255,361

Deductions

Administrative expenses 25,000 Professional services 8,747 Principal retirements 45,000 Interest and fiscal charges 183,180

Total deductions 261,927

Change in net assets (6,566) Net Assets - beginning 65,655

Net Assets - ending $ 59,089

CITY OF ESCONDIDOStatement of Changes in Fiduciary Net Assets

Fiduciary FundsFor the Year Ended June 30, 2004


CITY OF ESCONDIDO Notes to Financial Statements

June 30, 2004 I. Summary of Significant Accounting Policies

A. Reporting Entity

The City of Escondido (City) was incorporated in 1888 and operates under a Council/Manager form of government. The Council is composed of five members. As required by generally accepted accounting principles, the financial statements present the government and its component units for which the government is considered financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and so data from these units are combined with the data of the primary government. Each blended component unit as described below has a June 30 year end. Blended Component Units Escondido Community Development Commission The Community Development Commission (Commission) was established in 1984 for the purpose of preparing and carrying out plans for improvement, rehabilitation and redevelopment of blighted areas within the territorial limits of the City. The City Council acts as the Commission’s governing board and exerts significant influence over its operations. The funds of the Commission have been included in the governmental activities of the financial statements. Separate financial statements of the City of Escondido Community Development Commission can be obtained from the Finance Department at:

City of Escondido 201 North Broadway Escondido, California 92025

The Escondido Vehicle Parking District (District) was established in 1962 for the purpose of acquiring and improving parking lots in Escondido. The City Council acts as the District’s governing board and exerts significant influence over its operations. The funds of the District have been included in the governmental activities of the financial statements. Separate financial statements are not prepared for this blended component unit. The City and Commission formed the Escondido Joint Powers Financing Authority (Authority). The Authority was established in 1991 for the purpose of providing for the financing of public capital improvements for the Members through the issuance of bonds by the Authority and the leasing of the public capital improvements to the Members and/or the acquisition of obligations pursuant to which public capital improvements are financed by or for the benefit of the Members. The City Council acts as the Authority’s governing board and exerts significant influence over its operations. The funds of the Authority have been included in the governmental activities of the financial statements. Separate financial statements are not prepared for this blended component unit.

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CITY OF ESCONDIDO Notes to Financial Statements (Continued)

June 30, 2004 B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements and eliminations have been made to minimize the double counting of internal activities. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide, proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when the liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, claims and judgments are not recognized until paid.

49


June 30, 2004 Property taxes, charges for services, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.

The City reports the following major governmental funds:

The General Fund is the general operating fund of the City. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. From this fund are paid the general operating expenses not paid through other funds.

The Low and Moderate Income Housing Special Revenue Fund was established to account for the 20 percent tax increment housing set-aside required by the State when a redevelopment project area is created. The funds will be used to assist low and moderate income families within the city.

The Community Development Commission Debt Service Fund was established to account for the receipt of tax increment funds received through the creation of a redevelopment project area. The funds will be used to service debt related to the project area which includes advances from other funds and 1989 Tax Allocation Bonds that have been refunded by Lease Revenue Bonds. The debt was issued to provide financing for the construction of a new City Hall and Civic Center complex. This fund also accounts for the debt related to the purchase of two mobilehome parks purchased by the Housing Division of the Community Development Commission. The 1999 Lease Revenue Bonds were issued for the advance refunding of 1991 certificates of participation issued for the purchase of the mobilehome parks, and funding is provided for debt service by the rental of the mobilehome park lots to residents supplemented by the tax increment.

The City reports the following major proprietary funds:

The Water Fund is used to account for the financial activity of the City’s water utility. The costs of providing these services to the general public are financed or recovered primarily through user charges.

The Wastewater Fund is used to account for the financial activity of the City’s sewer utility. The costs of providing these services to the general public are financed or recovered primarily through user charges.

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June 30, 2004 Additionally, the City reports the following fund types: Governmental Funds: The Special Revenue Funds are used to account for proceeds of specific revenue sources that are legally restricted or otherwise designated for specific purposes. The Debt Service Funds are used to account for the accumulation of resources for and the payment of principal and interest on general long-term debt. The Capital Projects Funds are used to account for financial resources used for the acquisition or construction of major capital facilities. The Permanent Funds are used to account for resources that are legally restricted, to the extent that only earnings and not principal, may be used for purposes that support the City’s programs. Proprietary Funds: The Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises. Costs are financed or recovered primarily through user charges. The Internal Service Funds are utilized to finance and account for activities involved in rendering services to departments within the City. Costs of services are accumulated in these funds and charged to user departments as such costs are incurred. Services provided by these funds include insurance, building maintenance, equipment maintenance and central services. Fiduciary Funds: Fiduciary Fund financial statements include a Statement of Net Assets. The City fiduciary funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The City has a private purpose trust fund and agency funds. The Agency funds are accounted for on an accrual basis of accounting as are the proprietary funds explained above.

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June 30, 2004 The City reports the following fiduciary funds which are excluded from the government-wide financial statements:

The Private-Purpose Trust Fund is used to account for resources legally held in trust for the Hidden Trails Community Facilities District. The Agency Funds are used to account for money and property held by the City as trustee or custodian.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance.

As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government’s water and sewer function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to members, customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the Water Enterprise Fund, the Sewer Enterprise Fund, and of the government’s internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then use unrestricted resources as needed.

52


June 30, 2004 D. Assets, Liabilities, and Net Assets or Equity

1. Cash and Investments

Investments are reported in the accompanying statement of net assets at fair value, except for certain certificates of deposit and investment contracts that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest rates.

Changes in fair value that occur during a fiscal year are recognized as investment income 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 investments.

The City pools cash and investments of all funds, except for 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 based on each fund’s average cash and investment balance. For purposes of the statement of cash flows, the City considers all highly liquid investments (including restricted assets) with maturity of three months or less when purchased to be cash equivalents. Cash invested in the City’s cash management pool is also considered to be cash equivalents. 2. Receivables and Payables Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds.” Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

53


June 30, 2004 The amounts recorded as a receivable due from other governments include amounts collected or provided by Federal, State and County governments and not remitted to the City as of June 30, 2004. The County of San Diego assesses, bills, and collects taxes for the City. 3. Inventories

Inventories within the various fund types consist of materials and supplies valued at cost, which approximates market, on the first-in, first-out basis. The costs of governmental fund type inventories are recorded as expenditures when consumed rather than when purchased.

4. Land Held for Resale

The Low and Moderate Income Housing Fund land held for resale is valued at lower of cost or market. Reported land held for resale is equally offset by a fund balance reserve, which indicates that it does not constitute available spendable resources. The land held for resale consists of lots in two mobilehome parks that the City owns and is holding until sold. It is anticipated that these lots could take several years to sell.

5. Cash and Investments with Fiscal Agents The City has monies held by trustees or fiscal agents pledged to the payment or security of certain bonds. The California Government Code provides that these monies, in the absence of specific statutory provisions governing the issuance of bonds, may be invested in accordance with the ordinance, resolutions or indentures specifying the types of investments its trustees or fiscal agents may make. These ordinances, resolutions and indentures are generally more restrictive than the City’s investment policy. 6. Capital Assets

Capital assets, which include property, plant, equipment and infrastructure assets, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated assets are valued at the fair value of the assets on the date on which they were contributed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. The City utilizes a capitalization threshold of $5,000 - $10,000 depending on asset type.

54


June 30, 2004

Depreciation is charged to operations using the straight-line method over the estimated useful lives of the assets as follows: Structures and improvements 20-40 years Machinery and equipment 3-15 years Infrastructure 20-50 years 7. Accounting for Capital Leases

The City has entered into several leases that provide for the transfer of title to the City upon the exercise of a bargain purchase option or upon the payment of all required lease payments. These leases are classified as capital leases. In the accompanying financial statements, the assets acquired by means of capital leases are reported in the amount of the present value of the total lease payments. The related liability is presented in the amount of the present value of the future lease payments.

8. Employee Leave Benefits

Depending upon length of employment, City employees earn 12 to 27 vacation days a year. Sick leave is accrued at the rate of 12 days per year except for Fire Safety which earns six twenty-four hour shifts. Employees can carry forward to subsequent years two to three years worth of earned but unused vacation leave benefits depending on employee group. Upon termination, the City is obligated to compensate employees for all earned but unused vacation days. The earned but unused sick leave benefits are not payable in the event of employee termination. These benefits are considered to be contingent liabilities subject to the continuation of the employee relationship. Such sick leave benefits are therefore not recorded as liabilities in the accompanying financial statements. In the government-wide financial statements, a liability is accrued for all earned but unused vacation leave benefits relating to the operations of the funds. This liability will be liquidated as either additional cash payments in the event of employee termination or as part of budgeted salary expenditures if used by employees as compensated leave time while still employed by the City. In the fund financial statement governmental funds accrue current liabilities for material vacation leave benefits due on demand to governmental fund employees that have terminated prior to year-end. Non-current amounts will be recorded, as fund expenditures in the year in which they are paid or become due on demand to terminated employees.

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June 30, 2004 9. Long-term Obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

10. Claims and Judgments

The City records a liability for litigation, judgments and claims when it is probable that an asset has been impaired or a liability has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. This liability is recorded in the internal service funds, which account for the City’s self-insurance activities.

11. Post Employment Medical and Other Benefits

The City does not offer City-paid benefits to retirees. 12. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change.

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June 30, 2004

II. Stewardship, Compliance and Accountability

A. Budgetary Data The City adopts an annual operating budget prepared on the modified accrual basis for its general, certain special revenue and certain debt service funds. Under Section 2-59 of the Escondido City Code, the City Manager is required to prepare and submit to the City Council the annual budget of the City and administer it after adoption. Each year, the City Manager submits a proposed budget to the City Council during early May. The City Council holds budget hearings during May and early June. The final budget is adopted by the City Council before June 30. The legal level of budgetary control is at the department level. The City Manager is authorized to transfer budgeted amounts between the accounts of any department; however, any revisions that alter the total appropriations of any department must be approved by City Council.

No budgetary comparisons are presented for certain special revenue, certain debt service, capital projects or proprietary funds as the City is not legally required to adopt an annual budget for those funds.

In addition to the annual operating budget the City adopts a Five-Year Capital Improvement Program. Funds are appropriated for the first year of the plan with years two through five included for planning purposes. Funds are appropriated on a project basis and are carried over until expended or the project is closed. The legal level of budgetary control is at the project level. The City Manager is authorized to transfer budgeted amounts between projects when transfers are less than $5,000 or 10% of the project. Transfers in excess of the budget policy amount must be approved by the City Council.

The City holds a midyear budget review meeting at which time revenue and expenditure projections are reviewed. Any necessary changes are approved by the City Council. Prior period appropriations lapse unless they are reappropriated through the formal budget process. The City controls its expenditures using encumbrance accounting. B. Excess of Expenditures Over Appropriations The following individual fund exceeded its expenditures budget:

Fund Amount Over Budget

Community Development Commission Debt Service $1,107,027

These expenditure were funded with a combination of excess revenues or by the available fund balance.

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June 30, 2004 C. Deficit Fund Equity

The following funds had deficit net assets at June 30, 2004: Workers’ Compensation Internal Service Fund $(4,958,394)

This deficit is expected to be eliminated with future revenues from reimbursements and transfers.

III. Detailed Notes on All Funds

A. Cash and Investments

At June 30, 2004, cash and investments are reported in the accompanying financial statements as follows:

Governmental activities $ 115,801,856Business-type activities 34,262,364Fiduciary funds 1,626,581

$ 151,690,801 Cash and investments were comprised of the following as of June 30, 2004

Deposits with Financial Institutions $ 2,527,897Investments 128,189,593Investments with Fiscal Agents 20,967,611Petty Cash and Cash Drawer 5,700

$ 151,690,801

The City follows the practice of pooling cash and investments of all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures (see Note III F).

Interest income earned on pooled cash and investments is allocated monthly to the various funds based on the month-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund. The City is generally authorized under the City of Escondido Investment Policy to invest in demand deposits with financial institutions; obligations of the U.S. Government (at least 80% of portfolio is the target; the percentage may fluctuate depending on market conditions, but will never be lower than 70%); certificates of deposit with banks and savings and loans

58


June 30, 2004 doing business in the State of California; Prime Banker’s Acceptances (no more than 20% of portfolio); Prime Commercial Paper (no more than 15% of portfolio); Repurchase agreements and Money Market Funds whose underlying collateral consists of the foregoing (Repurchase agreements are limited to 10% of the portfolio and Money Market funds are limited to 20% of the portfolio); Local Agency Investment Fund of the State of California and San Diego County’s Investment Pool which includes the purchase of Reverse Repurchase agreements, and pools and other investment structures incorporating the aforementioned investments. Short-term investments of the City are required to be not less than 50 percent of the total annual general fund operating budget of the City.

The California Government Code requires California banks and savings and loan associations to secure a City’s deposits by pledging government securities as collateral. The market value of pledged securities must equal at least 110% of a City’s deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total deposits. The City may waive collateral requirements for deposits, which are fully insured up to $100,000 by federal depository insurance. Deposits of cities and other state or local governments are classified in three categories to give an indication of the level of credit risk assumed by the City. Category 1 includes deposits that are insured or collateralized with securities held by the City or its agent in the City’s name. Category 2 includes deposits collateralized with securities held by the pledging financial institution’s trust department or agent in the City’s name. Category 2 also includes deposits collateralized by an interest in an undivided collateral pool held by an authorized Agent or Depository in the City’s name and is subject to certain regulatory requirements under State law. Category 3 includes deposits collateralized with securities held by the pledging financial institution or by its trust department or agent but not in the City’s name. Category 3 also includes any uncollateralized deposits.

Investments of cities and other state or local governments are classified in three categories to give an indication of the level of risk assumed by the entity at year-end. Category 1 includes investments that are insured or registered or for which the securities are held by the City or its agent (other than the institution through which the City purchased the securities) in the City’s name. Investments held “in the City’s name” include securities held in a separate custodial or fiduciary account and identified as owned by the City in the custodian’s internal accounting records. Category 2 includes uninsured and unregistered investments for which the dealer’s agent holds the securities in the City’s name (or by the trust department of the dealer if the dealer was a financial institution and another department of the institution purchased the securities for the City). Category 3 includes uninsured and unregistered investments for which the securities are held by the dealer’s trust department or agent, but not in the City’s name. Category 3 also includes all securities held by the broker-dealer agent of the City (the party that purchased the securities for the City) regardless of whether or not the securities are being held in the City’s name.

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June 30, 2004 Deposits and Investments held by the City at June 30, 2004 are summarized by category below:

Category1 2 3 Amount

Demand Deposits:

Demand Accounts (bank balance) $ 100,000 $ 3,886,806 $ $ 3,986,806

Add: deposits in transit 154,887Less: outstanding warrants (1,613,796)

Total Deposits $ 100,000 $ 3,886,806 $ - $ 2,527,897

Pooled Investments:

LAIF * $ $ $ $ 21,835,768Money market mutual funds * 3,246,149Tennessee Valley Authority 1,037,840 1,037,840Federal Home Loan Bank 52,119,922 52,119,922Federal Home Loan Mortgage Corp. 16,543,340 16,543,340FNMA 23,482,978 23,482,978FFCB 9,923,596 9,923,596

Total Investments $ 103,107,676 $ - $ - $ 128,189,593

Category Fair1 2 3 Value

Investment with Fiscal Agents:

Cash Balance $ $ $ $ 30,818United States Treasury Notes 10,491,813 10,491,813Mutual Funds * 10,444,980

Total Investments with Fiscal Agents $ - $ - $ 10,491,813 $ 20,967,611

* Not subject to categorization.

The amount of all investments reflected in the above table is at fair value.

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June 30, 2004

Required Disclosures Regarding Investments

The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section §16429 under the oversight of the Treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, and corporations. The City of Escondido has also invested in certain variable rate government securities, including securities with interest rates that vary inversely to certain prescribed indices.

Included in City investments is an investment in a limited partnership holding various mortgage-backed securities. This investment was authorized by City Council after extensive legal research as to the legality of the investment. Although this type of investment is not specifically listed in the state Government Code as an allowable investment for cities, the City concluded at that time that the state Government Code does not prohibit such an indirect holding of mortgage-backed securities in the form of a limited partnership interest.

B. Allowance for Uncollectible Receivables

The Community Development Commission has entered into agreements with various parties to establish low and moderate housing loans. At June 30, 2004, the outstanding loan receivable total $23,990,178. All receivables are shown net of an allowance for uncollectibles which is at June 30 as follows:

Fund Amount

General Fund $ 951,556Water Enterprise Fund 70,400

$ 1,021,956 The General Fund allowance is mainly for paramedic and DUI cost recovery activities.

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June 30, 2004

C. Capital Assets A summary of changes in capital asset activity for the City’s governmental activities for the year ended June 30, 2004 is as follows:

Balance at Balance at July 1, 2003 Increases Decreases June 30, 2004

Governmental activities:

Capital assets, not being depreciated:Art works $ $ 359,772 $ $ 359,772Land 27,867,830 589,270 (78,902) 28,378,198Construction in progress 24,904,320 14,473,992 (4,290,393) 35,087,919

Total capital assets, not being depreciated 52,772,150 15,423,034 (4,369,295) 63,825,889

Capital assets, being depreciated:Land improvements 10,822,387 89,229 (359,772) 10,551,844Buildings 124,719,699 397,956 (102,600) 125,015,055Machinery and equipment 26,623,446 185,392 (403,931) 26,404,907Motorized vehicles 2,341,817 956,115 (149,402) 3,148,530Infrastructure 176,233,500 6,695,287 182,928,787

Total capital assets, being depreciated 340,740,849 8,323,979 (1,015,705) 348,049,123

Less accumulated depreciation for:Land Improvements (8,642,664) (347,231) 1,500 (8,988,395)Buildings (41,360,554) (4,102,229) (45,462,783)Machinery and equipment (23,265,321) (1,414,132) 371,444 (24,308,009)Motorized vehicles (525,658) (525,658)Infrastructure (119,950,036) (5,247,624) (125,197,660)

Total accumulated depreciation (193,218,575) (11,636,874) 372,944 (204,482,505)

Total capital assets, being depreciated, net 147,522,274 (3,312,895) (642,761) 143,566,618

Governmental activities capital assets, net $ 200,294,424 $ 12,110,139 $ (5,012,056) $ 207,392,507

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June 30, 2004

Balance at Balance at July 1, 2003 Increases Decreases June 30, 2004

Business-type activities:

Capital assets, not being depreciated:Land $ 2,890,559 $ $ $ 2,890,559 Construction in progress 88,219,450 7,884,220 (10,104,484) 85,999,186

Total capital assets, not being depreciated 91,110,009 7,884,220 (10,104,484) 88,889,745

Capital assets, being depreciated:Land improvements 493,845 147,808 (43,679) 597,974 Buildings 26,833,131 143,517 26,976,648 Machinery and equipment 5,969,511 59,032 (212,303) 5,816,240 Motorized vehicles 549,315 189,229 738,544 Golf course 4,314,066 4,314,066 Water system 50,405,614 6,916,560 57,322,174 Electrical system 3,433,127 3,433,127 Sewer system 65,116,567 1,463,878 66,580,445 Recycled water system 10,699,207 4,388,933 15,088,140

Total capital assets, being depreciated 167,814,383 13,308,957 (255,982) 180,867,358

Less accumulated depreciation for:Land improvements (46,045) (18,634) 36,945 (27,734) Buildings (15,893,103) (658,997) (16,552,100) Machinery and equipment (5,060,714) (332,811) 85,591 (5,307,934) Motorized vehicles (123,302) (123,302) Golf course (95,868) (143,802) (239,670) Water system (14,013,194) (1,361,650) (15,374,844) Electrical system (2,164,150) (129,140) (2,293,290) Sewer system (21,084,622) (1,636,454) (22,721,076) Recycled water system (187,919) (340,629) (528,548)

Total accumulated depreciation (58,545,615) (4,745,419) 122,536 (63,168,498)

Total capital assets, being depreciated, net 109,268,768 8,563,538 (133,446) 117,698,860

Business-type activities capital assets, net $ 200,378,777 $ 16,447,758 $ (10,237,930) $ 206,588,605 Construction in progress in the governmental activities consists primarily of additions to infrastructure, park upgrades, police department building improvements, finance and public art projects.

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June 30, 2004 Business-type construction in progress consists primarily of expansion of the wastewater treatment plant, construction of a reclamation distribution system and water and sewer line installation projects.

Depreciation expense of $16,382,293 was charged to the following functions:

Governmental Activities

Business-type Activities

General government $ 919,077 $Public safety 6,134,927 Cultural and recreation 1,599,538 Public works 1,897,091 Community development 1,086,241 Water 2,061,883 Wastewater 2,429,640 Golf 253,896

Total $ 11,636,874 $ 4,745,419 D. Interfund Receivable, Payable and Transfers Due to/from other funds:

Due from other fundsWastewater

Due to other funds General Fund Fund Total

Water Fund $ 2,528,084 $ $ 2,528,084 Nonmajor Governmental Funds 891,095 731,300 1,622,395 Nonmajor Business-Type Funds 286,728 286,728 Internal Service 21,405 21,405

Total $ 3,727,312 $ 731,300 $ 4,458,612 These balances resulted from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made.

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June 30, 2004 Advances to/from other funds:

Advances From:Low and Nonmajor

Water Moderate Income GovernmentalAdvances To: General Fund Fund Housing Fund Total

CDC Debt Service $ 11,668,299 $ $ 694,978 $ 200,000 $ 12,563,277 Wastewater Fund 5,417,677 5,417,677 Nonmajor Governmental Funds 159,250 669,988 829,238

Total $ 11,827,549 $ 5,417,677 $ 694,978 $ 869,988 $ 18,810,192 The advances were primarily used for the following: 1. The Community Development Commission Debt Service Fund has received monies from

the General Fund and the Street Special Revenue Fund for use in its operations. Interest is accrued at the average annual 20-year municipal bond rate plus one percent, which equated to 7.04% for the year ended June 30, 2004. Accrued interest on the advances amounting to $17,204,253 is not reflected in the accompanying financial statements. Interest is recorded when it becomes payable from available spendable resources. The amount of the long-term advances to other funds has been offset by a fund balance reserve amount. At June 30, 2004, the outstanding balance is $11,868,299.

2. In March 2001, the City issued $25,730,000 Revenue Certificates of Participation Water

Bonds. See note III E. Of which, $5,500,000 was advanced to the Wastewater Fund. The repayment of the advance has been calculated based on the Wastewater Funds prorata share over the life of the bond. The principal payments range from $82,323 to $376,129. At June 30, 2004 the amount of $5,417,677 remains outstanding.

3. The City entered into agreements for the purchase of the downtown parking lots and

Vineyard golf course improvements. These advances totaled $829,238 at June 30, 2004. 4. The Community Development Commission Low and Moderate Income Housing fund

entered into an agreement with the Community Development Commission Debt Service Fund for an advance in the amount of $694,978.

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June 30, 2004 Interfund transfers:

Transfers InLow and OtherModerate Community Nonmajor Nonmajor

General Income Development Governmental Enterprise Golf InternalTransfers Out: Fund Housing Commission Funds Water Wastewater Course Service Total

General Fund $ $ $ $ 940,000 $ $ $ 120,000 $ 642,000 $ 1,702,000 Low and Moderate

Income Housing 2,488,300 2,488,300 Community

DevelopmentCommission 115,891 115,891

Enterprise: Water 200,000 200,000 Wastewater 50,000 50,000 Internal Service 101,652 101,652 Other Nonmajor

Governmental Funds 1,704,136 67,400 5,676,263 9,992 10,514 7,468,305

Total $ 1,704,136 $ 183,291 $ 2,488,300 $ 6,967,915 $ 9,992 $ 10,514 $ 120,000 $ 642,000 $ 12,126,148

Transfers are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to the debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. E. Long-Term Liabilities

Governmental Activities: Employee Leave Benefits Payable The City’s policies relating to employee leave benefits are described in Note I D. This liability will be paid in future years from future resources primarily from the general fund. $6,103,078 Claims Payable (Note I D) $9,766,300

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June 30, 2004 Obligation Under Capital Lease In 2002, the City entered into an Equipment Lease for computer equipment in the amount of $85,856. Title transfers to the City at the termination of lease, the annual principal and interest installment is $18,983 and interest on the lease is 4.32%. $ 68,388

In 1998, the City entered into an Equipment Lease for a fire truck in the amount of $465,317; title transfers to the City at termination of the lease; the annual principal and interest installment is $60,750 and interest on the lease is 5.48%. In 1999, the City entered into an Equipment Lease for two fire trucks in the amount of $315,000; title transfers to City at termination of lease; the annual principal and interest installment is $73,123 and interest on the lease is 5.61%. In 2002, the City entered into an Equipment Lease for two fire trucks in the amount of $630,019; title transfers to City at termination of lease; the annual principal and interest installment is $137,210 and interest on the lease is 4.53%. 509,832

$578,220

Loan Payable

In 2002 and 2004, the Community Development Commission of the City of Escondido received loans from the California Housing Finance Agency. The proceeds of the loan are to be used to finance the acquisition of Washington Plaza Apartments and Trinity Apartments, respectively. The terms of the loans are ten years with an annual interest rate of 3%. Payment is deferred for the term of the loan. $2,650,000 The Escondido Community Development Commission (Commission), a component unit of the City of Escondido, entered into a Disposition and Development Agreement on July 22, 1992 with Arroyo Energy Limited Partnership, a California limited partnership (Developer). The Agreement was entered into for the purpose of developing an ice arena and health club facility within the redevelopment area. Under the terms of the Agreement, the Commission would pay $1,000,000 to the Developer, attributable to the site of the development (net of the site’s pro rata share of any existing pass-through agreements and the required low and moderate income housing deposits). The interest rate on the loan is 10%, and the annual payment of interest and principal is $131,500 commencing 1995 and ending 2009. 572,246

$3,222,246

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June 30, 2004 Certificates of Participation

In December 1993, the City of Escondido issued $6,775,000 of taxable Certificates of Participation to provide financing for the acquisition of an 18-hole golf course. The principal is due annually in amounts ranging from $160,000 to $645,000 on September 1 of each year commencing with 1995 through the year 2014. Interest is payable semiannually on March 1 and September 1 of each year commencing September 1, 1994, at rates ranging from 5.5% to 8.4%. The reserves are fully funded. $4,895,000 Tax Allocation Bonds

In January 1992, the Escondido Joint Powers Financing Authority issued $35,986,152 Revenue Bonds Series 1992 for the purpose of making a loan to the Escondido Community Development Commission. In December 2001, the Commission issued $22,420,000 Revenue Bonds to advance refund $23,585,000 of the bonds. The remaining bonds consist of capital appreciation bonds in the initial amounts of $612,259 and $568,893 due on September 1, 2012 and September 1, 2013, respectively, in the accreted amounts of $2,240,000 each. The outstanding balance at June 30, 2004 includes $1,409,922 of accreted value of the capital appreciation bonds. $ 2,591,074 In March 1993, the Escondido Joint Powers Financing Authority issued $24,790,000 Revenue Bonds Series 1993A for the purpose of making a loan (advance) to the Escondido Community Development Commission. Principal is due annually in amounts ranging from $1,050,000 to $2,055,000 on September 1 of each year through the year 2009. Interest is payable semiannually on March 1 and September 1 of each year commencing September 1, 1993 at rates ranging from 3.00% to 5.20%. The reserves are fully funded. 10,930,000

$13,521,074 Lease Revenue Bonds

In May 1995, the Commission issued $51,385,757 of Certificates of Participation (COP) Lease Revenue Bonds to advance refund $41,000,000 of the 1992 COP to provide financing for the Civic Center Construction project. The 1995 refunding COP bear interest rates between 5.50% and 6.65% and were issued under a trust agreement dated May 1, 1995 with the First Interstate Bank of California as trustee. The refunding COP mature between September 1, 2003 through September 2018 in amounts ranging from $2,140,730 to $5,136,800. Bonds maturing on or after September 1, 2005, are subject

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June 30, 2004 to optional redemption in any amount at the discretion of the Commission, on any date on or after September 1, 2003 at redemption prices ranging from 100% to 102% of principal. Additionally, $12,195,000 Term Bonds are due September 1, 2018 and are subject to mandatory redemption from a sinking fund account in amounts ranging from $850,000 to $1,845,000. Interest is payable semiannually on March 1 and September 1 of each year commencing on March 1, 1996, at rates ranging from 5.6% to 6.0%.

Capital appreciation bonds in the initial amount of $26,970,757 are due annually in accreted maturity amounts ranging from $2,605,000 to $7,010,000 on September 1 of each year through the year 2018 commencing in 2003. The outstanding balance at June 30, 2004 includes $19,103,379 of accreted value of the capital appreciations bonds. The reserve was fully funded. $68,251,299

In March 1999, the Community Development Commission of the City of Escondido issued $6,625,000 in Lease Revenue Bonds which bear interest rates between 3.63% and 4.7% to advance refund $6,160,000 of outstanding 1991 Mobile Home Parks Project Certificates of Participation (COPS). The $6,625,000 1999 Lease Revenue Bonds are due in annual installments through 2021 of $155,000 to $215,000. In addition, term bonds of $1,885,000 at 5.0% interest mature on March 1, 2021. The Bonds maturing on or after March 1, 2015 will be subject to redemption at the option of the Commission from any available funds as a whole or in part on any date on or after March 1, 2009, at redemption prices ranging from 100% to 102%. The Term Bonds maturing March 1, 2021 are subject to mandatory redemption from a sinking fund account in amounts ranging from $235,000 to $310,000. The reserve was fully funded. 2,335,000

In December 2001, the Commission issued $22,420,000 of Lease Revenue Bonds to refund $22,005,000 of the 1992 Certificates of Participation which were issued to refund certain certificates of participation originally issued by the City of Escondido in 1986 to finance a portion of the construction of the City Hall. The Bonds are due in annual installments from 2002 through 2011, with interest rates ranging from 3.00% to 4.25% and annual installments of $1,970,000 to $2,580,000. 18,335,000

Total Lease Revenue Bonds $88,921,299

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June 30, 2004 Debt Service Requirements to Maturity – Governmental Activities

The annual requirements to amortize outstanding long-term debt including accreted values of the City’s Governmental Activities as of June 30, 2004, excluding amounts for employee leave benefits payable, claims payable and loans payable are as follows (expressed in thousands of dollars):

Capital Lease Certificates of Tax Allocation Lease RevenueYear Ending Payable Participation Bonds Bonds

June 30 Principal Interest Principal Interest Principal Interest Principal Interest

2005 $ 182 $ 27 $ 290 $ 406 $ 1,605 $ 514 $ 6,470 $ 2,3122006 161 19 315 383 1,685 433 6,640 2,2292007 169 11 340 358 1,770 346 6,820 2,0842008 66 3 365 331 1,860 255 7,100 1,8902009 395 301 1,955 157 7,400 1,684

2010-2014 3,190 1,001 4,295 53 42,665 4,9862015-2019 2,240 38,515 1,8052020-2022 440 67

Total Debt Service Payments $ 578 $ 60 $ 4,895 $ 2,780 $ 15,410 $ 1,758 $ 116,050 $ 17,057

Summary of Changes in Long-term Liabilities for Governmental Activities

Balance at Balance at Due withinJuly 1, 2003 Additions Reductions June 30, 2004 one year

Employee leave benefits payable $ 6,129,908 $ 11,310 $ (38,140) $ 6,103,078 $ 518,265 Claims payable 6,695,339 3,436,440 (365,479) 9,766,300Capital lease payable 791,888 (213,668) 578,220 182,544 Loan payable 1,439,769 1,850,000 (67,523) 3,222,246 74,275 1993 Taxable Certificates of

Participaton 5,165,000 (270,000) 4,895,000 290,000 1992 Tax Allocation Revenue Bonds 2,432,309 158,765 2,591,0741993 Tax Allocation Revenue Bonds 12,465,000 (1,535,000) 10,930,000 1,605,000 1995 Lease Revenue Bonds 67,837,154 2,651,982 (2,237,837) 68,251,299 4,305,000 1999 Lease Revenue Bonds 3,855,000 (1,520,000) 2,335,000 140,000 2001 Lease Revenue Bonds 20,305,000 (1,970,000) 18,335,000 2,025,000

Totals $ 127,116,367 $ 8,108,497 $ (8,217,647) $ 127,007,217 $ 9,140,084

Excludes a bond premium of $230,021.

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June 30, 2004 Business-type Activities:

Connection Rights Payable

In 1982, the City raised funds for water and sewer improvements by selling in advance rights to connect to the utility system. The holders of those rights could sell or transfer those rights to others. The value of the rights resulted from the ability of the holder to redeem the rights to the City in order to connect to the system. The amounts collected represent connection fees collected in advance of the connection. The amounts collected are recorded as a liability until earned at the time of connection. The purchase price for sewer connection rights sold was $1,500 per right. Per the contract, the rights increase in value at 10% per year till May 31, 2007. As of that date, a sewer right will be valued at $21,872. The purchase price for water connection rights sold was $900 per right. Per the contract, the rights increase in value at 10% per year till July 1, 1993. At that time, each right was valued at $3,230. There was no limit to the number of rights purchased under a contract or the number of contracts an individual might purchase. Both contracts allowed several options to the purchaser. These options were: 1) The rights could be used by the purchaser at the time of pulling building permits, thus waiving the current fee being charged by the Building Department; 2) if the owner of the rights sold the property for which the rights were originally purchased, the rights could be transferred to the new owner; 3) the last option was to turn in the right to the City of Escondido for the purpose of resale on a “first come, first served” basis. Resales are determined monthly and paid based on receipts from current connection fees on building permits.

Interest on connection rights represents the increase in the obligation of the City to the holders of the rights as a result of rates of increase stipulated in the City’s agreement with the holders of the rights. $15,009,279

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June 30, 2004 Employee Leave Benefits Payable

The City’s policies relating to employee leave benefits are described in Note I D8 of the Notes to Financial Statements. This liability will be paid in future years from future resources. $762,777 Claims Payable (Note I D) $1,882,700 Obligation Under Capital Lease In 1998, the City entered into an Equipment Lease for a fire truck; the present value of total lease payments is $465,317; title transfers to City at termination of lease; the annual principal and interest installment is $60,750 and interest on the lease is 5.48%. In 1999, the City entered into an Equipment Lease for a fire truck; the present value of total lease payments is $315,000; title transfers to City at termination of lease; the annual principal and interest installment is $73,123 and interest on the lease is 5.61%. In 2002, the City entered into an Equipment Lease for a fire truck; the present value of total lease payments is $630,019; title transfers to City at termination of lease; the annual principal and interest installment is $137,163 and interest on the lease is 4.53%. $119,591 Deposits Payable The City collects deposits from water customers when water service is initiated and when credit issues arise. These deposits are refunded when service is canceled or after a period specified by the Water Department in the case of additional credit-related deposits. $537,431 Special Assessment Debt with Government Commitment In February 1994, the City issued bonds for the Assessment District No. 93-1 (Bernardo Avenue/Hamilton Lane Sewer). Proceeds from the bonds are to be used by the City to provide sewer service to specific residences. The bonds were issued in the amount of $242,461 and bear an interest rate of 3.75% to 6.10%, depending on the date of maturity. Bonds are payable annually beginning September 2, 1995 through September 2, 2008. The property owners benefiting from the 1915 Act Assessment District improvements are directly liable for repayment of the Special Assessment Bonds pursuant to the Improvement Bond Act of 1915 and the Municipal Improvement Act of 1913. The City is not directly liable for repayment of the bonds. The City may, at its sole

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June 30, 2004 option and in its sole discretion, elect to advance available surplus funds of the City to pay for any delinquent installments pending sale, reinstatement, or redemption of the delinquent property. However, bond owners should not rely upon the City to advance monies to the Redemption Fund if the Reserve Fund were ever depleted. The liability for the bonds along with a corresponding assessments receivable have been included in the Wastewater Fund. $90,000 Revenue Certificates of Participation In March 2001, the City issued $25,730,000 in Revenue Certificates of Participation with an average interest rate of 5.4% to (i) finance certain improvements to the City’s Hale Avenue Resource Recovery Facility (the “HARRF Project”) (ii) finance various capital improvements to the Water System (the “Water Project”) and (iii) advance refund $6,860,000 of outstanding 1996 Water Revenue Bonds with an average interest rate of 5%, which were originally executed and delivered to provide funds for the refunding of certain water revenue bonds of the City issued in 1974 and 1989 which in turn financed the acquisition, construction and improvement of certain elements of the Water System.

The $25,730,000 Revenue Certificates of Participation are due in annual installments beginning March 1, 2001 through 2032 of $85,000 to $7,050,000 with varying interest rates from 5% to 6% per annum. At June 30, 2004, the reserve was fully funded.

The Certificates with stated maturities on or after September 1, 2011, will further be subject to prepayment prior to their respective stated maturities, as a whole or in part on any date in the order of maturity as directed by the City in a Written Request provided to the Trustee at least 60 days prior to the prepayment date and by lot within each maturity in integral multiples of $5,000, on or after September 1, 2010 from amounts prepaid by the City pursuant to the Installment Purchase Agreement at a Prepayment Price (expressed as a percentage of the principal amount of such Certificates to be prepaid) ranging from 100% to 101% plus interest accrued. In addition the term bonds maturing on September 1, 2018 through 2031, in the amounts ranging from $1,925,000 to $6,000,000 and with interest ranging from 5.625% to 6%, are subject to mandatory sinking fund prepayment. Unamortized bond discounts and deferred charges are $696,499 at June 30, 2004. $25,065,000

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June 30, 2004

On August 2002, the City issued $9,170,000 in Revenue Certificates of Participation, Series 2002 A, to finance the cost of construction of certain replacements to water lines and other capital improvements to the water system. The $9,170,000 Revenue Certificates of Participation are due in annual installments beginning September 1, 2004 through 2023 of $70,000 to $145,000 with varying interest rates from 1.7% to 5% per annum. In addition, there is $7,275,000 of term bonds with an interest rate of 5% due September 2024 through 2033 in amounts ranging from $145,000 to $2,275,000, which are subject to mandatory sinking fund prepayment. At June 30, 2004, the reserve was fully funded.

The Certificates with stated maturities on or after September 1, 2011, will further be subject to prepayment prior to their respective stated maturities, as a whole or in part on any date in the order of maturity as directed by the City in integral multiples of $5,000, on or after September 1, 2011 from amounts prepaid by the City pursuant to the Installment Purchase Agreement at a Prepayment Price (expressed as a percentage of the principal amount of such Certificates to be prepaid) ranging from 100% to 101% plus interest accrued. Unamortized bond discounts and deferred charges are $305,456 at June 30, 2004. $9,170,000 Certificates of Participation In November 1996, the City of Escondido issued $33,440,000 Certificates of Participation to provide funds for a refunding of City of Escondido 1972 Sewer revenue Bonds, Series A. The Certificates of Participation were used for the acquisition of Daley Ranch and related water and sewer connection rights. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City’s financial statements.

The 1996 refunding COP bear interest rates between 4.50% and 5.40% and were issued under a trust agreement dated December 1, 1996 with Wells Fargo Bank as trustee. Subsequently, Wells Fargo Bank merged with Bank of New York. The refunding COP mature between September 1, 1999 through September 1, 2016 in the

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June 30, 2004 amounts ranging from $25,000 to $3,825,000. In addition, $18,865,000 of Term Certificates are due on September 1, 2026. At June 30, 2004, the reserve was fully funded. Unamortized bond discounts and deferred charges are $655,198 at June 30, 2004. $27,445,000 2001 Lease Revenue Bonds In April 2001, the City of Escondido issued $6,300,000 in Lease Revenue Bonds to provide financing for the acquisition and construction of an 18-hole golf course. The principal is due annually on September 1 in amounts ranging from $70,000 to $240,000, commencing 2003 and ending 2020. In addition, $3,770,000 of Term Bonds are due September 1, 2030. Interest is payable semiannually on March 1 and September 1 of each year commencing September 1, 2001, at rates ranging from 3.5% to 5.12%. The reserves are fully funded. Unamortized bond discount and deferred charges are $207,628 at June 30, 2004. $6,195,000 Loan Payable

In 1999, the City of Escondido entered into an agreement with the State Water Resources Control Board (State Board) for a revolving fund loan program. The fund was established with a combination of Federal Clean Water Act funds and State matching funds. The proceeds were used to construct a Tertiary Treatment Facility for local wastewater and a delivery system for recycled water to a specified number of local users. There are two phases in the Tertiary Treatment Facility project, and the loan was set up with sub-loan amounts for each phase. The City is obligated to repay the State Board on the Federal Disbursement Amount as principal and the Local Match Amount as interest on the loan. The Federal Disbursement portion is 83.33% and the Local Match portion is 16.67% of the total loan balance. The first phase of the Tertiary Treatment Facility project was completed on May 25, 2001. During fiscal year 2002-03 the City increased the outstanding loan balance on the second phase of the projects by $4,912,366. The project was competed on April 1, 2003.

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June 30, 2004 The principal and interest on the first phase loan is due annually on May 25 in the amount of $488,990 commencing 2002 and ending 2021. The principal and interest on the second phase loan is due annually on April 1 in the amount of $1,676,754 commencing 2004 and ending 2023. $34,300,721

In 2002, the City of Escondido entered into an agreement with the Department of Water Resources for a loan program. The fund was provided in part from a Federal Capitalization Grant for Drinking Water State Revolving Funds. The proceeds are used to construct the Gravity Float Line Capital Project. Repayment is scheduled to begin on January 1, 2005, with semi-annual payments of $65,459 with varying interest rates from 1.94% to 3.16%. The repayment schedule may change depending on the actual completion date, and the amount of repayments may change based on recalculation with actual disbursement amounts at the completion of the project. At June 30, 2004 the project was not completed. 1,955,835

$36,256,556 Debt Service Requirements to Maturity – Business-type Activities The annual requirements to amortize outstanding long-term debt of the City’s Business-type Activities as of June 30, 2004, excluding amounts for connection rights payable, employee leave benefits payable, claims payable, deposits payable and loans payable are as follows (expressed in thousands of dollars):

Special AssessmentYear Ending Lease Payable Water Revenue COP Wastewater COP Lease Revenue Bonds Bonds

June 30 Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest

2005 $ 39 $ 6 $ 475 $ 1,857 $ 305 $ 1,521 $ 115 $ 297 $ 15 $ 52006 34 4 495 1,834 360 1,505 130 292 15 42007 36 2 520 1,810 425 1,487 140 287 20 32008 11 545 1,784 490 1,464 150 432 20 22009 575 1,756 560 1,438 70 277 20 1

2009-2013 3,355 8,304 3,475 6,890 510 1,3322014-2018 4,385 7,269 5,640 5,789 850 1,1852019-2023 5,840 5,819 8,850 3,440 1,305 9262024-2028 7,765 3,890 7,340 649 1,930 5172029-2033 10,280 1,378 995 52

Total Debt Service $ 120 $ 12 $ 34,235 $ 35,701 $ 27,445 $ 24,183 $ 6,195 $ 5,597 $ 90 $ 15

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June 30, 2004

Summary of Changes in Long-term Liabilities for Business-type Activities:

Balance at Balance at Due withinJuly 1, 2003 Additions Reductions June 30, 2004 one year

Connection Rights Payable $ 15,443,448 $ 487,028 $ (921,197) $ 15,009,279 $Employee Leave Benefits Payable 791,926 10,023 (39,172) 762,777 76,278 Claims Payable 1,302,997 654,560 (74,857) 1,882,700Capital Lease Payable 165,612 (46,021) 119,591 39,059 Deposits Payable 603,931 3,400 (69,900) 537,431Loan payable 35,892,949 1,343,503 (979,896) 36,256,556 2,217,843 Special Assessment Debt 93-1 105,000 (15,000) 90,000 15,000 2000 Water Revenue COP 25,450,000 (385,000) 25,065,000 405,000 2002 Water Revenue COP 9,170,000 9,170,000 70,000 1996 Wastewater COP 27,695,000 (250,000) 27,445,000 305,000 2001 Reidy Creek Lease Revenue Bond 6,300,000 (105,000) 6,195,000 115,000

Totals $ 122,920,863 $ 2,498,514 $ (2,886,043) $ 122,533,334 $ 3,243,180

Excludes bond and COP discounts of $1,864,781.

F. Rate Covenants

Under various debt issues, the City has agreed to set charges for water and wastewater services each year at rates sufficient to produce net revenues (after paying operating and maintenance expenses, excluding depreciation and interest) of at least 1.20 and 1.00 times the debt service on the bonds for that year for the Water and Wastewater Fund, respectively. For the year ended June 30, 2004, the City met this requirement, as follows:

Water Wastewater

Gross revenues, excluding intergovernmental revenue $ 34,056,028 $ 14,570,726

Operating and maintenance expenses,excluding depreciation and interest 27,936,272 11,331,463

Net revenues 6,119,756 3,239,263

Amount required:Debt service payments 2,263,371 1,783,328 Coverage required 1.20 1

Amount required 2,716,045 1,783,328

Excess of net revenues $ 3,403,711 $ 1,455,935

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June 30, 2004

IV. Other Information A. Self-Insurance and Contingent Liabilities

The City is a member of the San Diego Pooled Insurance Program Authority (SANDPIPA) which provides liability coverage to its members. As a member, the City carries a self-insured retention of $500,000 and is insured through SANDPIPA from $500,000 to $2,000,000. In addition, SANDPIPA has purchased excess insurance coverage above $2,000,000 to $35,000,000 for all of its members, including the City.

The Board of Directors elects three members (including a President and Vice President) to the Executive Committee, which has the responsibility for overseeing all operations of SANDPIPA, including preparation and submission of the annual operating budget to the Board of Directors for its approval and modification, if deemed necessary.

Annual premiums and assessments are approved by the Board of Directors and are adjusted each year based on the following criteria:

Each city’s incurred losses;

Each city’s share of such losses and other expenses as a proportion of all cities’ such

losses;

Each city’s contribution to reserves, including reserves for incurred-but-not reported losses;

Each city’s share of costs to purchase excess insurance; and

Each city’s share of costs to purchase any additional coverage.

If and when SANDPIPA is dissolved, the remaining assets, after all premiums and assessments have been paid and final disposition of all claims has been determined, will be distributed to members proportionate to each city’s cash contributions made during the life of SANDPIPA. Until dissolution, however, no city has identifiable equity in SANDPIPA. As of June 30, 2004, the City has recorded general self-insurance and workers’ compensation liabilities of $11,649,000. The City is self-insured for workers’ compensation, but has purchased outside insurance coverage for individual claims in excess of $250,000 up to a maximum of $5,000,000 per claim. Only the probable amounts of loss as estimated by legal counsel and the City, including an estimate for incurred but not reported losses, have been recorded as liabilities in the accompanying financial statements.

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June 30, 2004 Increases and decreases in claim liabilities for changes in estimates are charged to expense in the period in which the estimates are adjusted. For the past three years, no settlements or claims payments have exceeded the amount of the applicable insurance coverage. For the past two fiscal years, the changes in the City’s liability for claims payable are summarized as follows:

Claims

IncurredBeginning and Changes Less Claim EndingBalance in Estimates Payments Balance

2002-03 $ 5,624,583 $ 5,272,321 $ (2,898,568) $ 7,998,3362003-04 7,998,336 6,343,749 (2,693,085) 11,649,000 B. Mortgage Revenue Bonds Without Government Commitment

The City has issued mortgage revenue bonds for low-income multifamily dwellings. These bonds are not included in the accompanying financial statements, as these bonds are payable solely from the related mortgage loans in which the bond proceeds were invested. They are as follows:

Original Balances at

Issue Amount June 30, 2004 Due Date

Morning View Terrace $ 11,000,000 $ 10,080,000 January 1, 2007Terrace Garden 8,100,000 7,425,000 July 1, 2007Redwood Terrace, Series 91 15,200,000 9,930,000 November 1, 2007

Total Mortgage Revenue Bonds $ 34,300,000 $ 27,435,000 C. Special Assessment Debt Without Government Commitment

In January 1998 the City issued $4,435,000 in Limited Obligation Improvement Refunding Bonds for the Auto Parkway project. Interest payments commenced March 2, 1999 and are paid semiannually thereafter on September 2 and March 2 of each year. Principal payments commenced September 2, 1999 and are paid annually in amounts ranging from $10,000 to $190,000, commencing 1999 and ending 2008. In addition, $2,575,000 of Term Bonds are due September 2, 2018. These bonds were issued to refund the Limited Obligation Bonds issued in July 1988 for Assessment District No. 86-1-R. On June 30, 2004 the 86-1-R Limited Obligation Improvement Refunding Bonds outstanding were $3,340,000.

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June 30, 2004 In August 1998 the City issued $5,105,000 in Limited Obligation Refunding Bonds for Assessment District No. 98-1 (Rancho San Pasqual). Interest payments commenced March 2, 1999 are paid semiannually thereafter on March 2 and September 2 and annual principal payments are made on September 2 in amounts ranging from $80,000 to $165,000 commencing 1999 and ending 2013. In addition, $3,215,000 of Term Bonds are due September 2, 2026. These bonds were issued to refund the Limited Obligation Improvements Bonds issued in September 1995 for Rancho San Pasqual Assessment District No. 95-1. On June 30, 2004 the 98-1 Limited Obligation Refunding Bonds outstanding were $4,525,000.

In October 2001, the City issued $3,085,000 is Special Tax Bonds for Community Facility District No. 2000-01 (Hidden Trails). Interest payments commenced September 1, 2002 and are paid semiannually thereafter on September 1 and March 1 of each year. Principal payments commence September 1, 2003 and are paid annually in amounts ranging from $45,000 to $110,000, commencing 2003 and ending 2020. In addition, $1,785,000 of Term Bonds are due September 1, 2031. The bonds were issued to finance various public improvements needed to develop property located within Community Facilities District No. 2000-01 (Hidden Trails). The principal outstanding balance as of June 30, 2004 was $3,040,000. The bonds are secured by and payable from the proceeds of annual special assessment taxes levied and collected on the property within the Districts. The bonds are not general or special obligations of the City of Escondido. The City is not obligated in any manner for the payment of debt service in the event of default by the property owners but is only acting as an agent for the property owners in collecting the assessments, forwarding the collections to bondholders, and initiating foreclosure proceedings, if appropriate. Neither the faith and credit nor taxing power of the City is pledged to the payment of these bonds. Accordingly, no liability for these bond issuances has been recorded and all debt service transactions have been recorded as an agency fund.

D. Prior Year Defeasance of Debt

In prior years the City defeased certain general obligations and other bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service payments on the old bonds. Accordingly the trust account assets and liability for the defeased bonds are not included in the City’s financial statements. On June 30, 2004, $31,915,000 of bonds outstanding are considered defeased.

E. Other Guarantees and Commitments

1. The City has executed a commercial guarantee agreement which establishes a

commercial line of credit in the amount of $1,250,000 for the California Center for the Arts, Escondido.

80


June 30, 2004 2. The City has executed a commercial loan guarantee agreement which establishes a loan

amount of $1,250,000 for the Escondido Humane Society. F. City Employees Retirement Plans –

1. Defined Benefit Pension Plan

Plan Description

The City of Escondido contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement, disability benefits, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Copies of PERS’ annual financial report may be obtained from their executive office: 400 P Street, Sacramento, California 95814.

Funding Policy Participants are required to contribute 7% (9% for safety employees) of their annual covered salary. The City makes the contributions required of City employees on their behalf and for their account. For the year ended June 30, 2003, the amount contributed by the City on behalf of the employees was $2,299,893. The City is required to contribute at an actuarially determined rate calculated as a percentage of covered payroll. The employer contribution rate for the year ended June 30, 2004 was 0% for miscellaneous employees and 7.253% for police and fire employees. Separately funded plans have been established for each employee group. Benefit provisions and all other requirements are established by state statute and City contract with employee bargaining groups. Annual Pension Cost For the year ended June 30, 2004, the City’s annual pension cost (employer contribution) of $1,731,791 for safety and $0 for miscellaneous employees was equal to the City’s required and actual contributions. The required contribution was determined as part of the June 30, 2003, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses), (b) projected annual salary increases that vary by duration of service, (c) 3.50% inflation, (d) 3.75% payroll growth, and (e) individual salary growth using a merit scale varying by duration of employment coupled with an assumed annual

81


June 30, 2004 inflation component of 3.50% and an annual production growth of 0.25%. The actuarial value of PERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a four-year period (smoothed market value). PERS’ unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on a closed basis. PERS has combined the prior service unfunded liability and the current service unfunded liability into a single initial unfunded liability. The single funding horizon for this initial unfunded liability is June 30, 2016.

THREE-YEAR TREND INFORMATION FOR SAFETY EMPLOYEES Annual Pension Percentage of Net Pension Fiscal Year Cost (APC) APC Contributed Obligation

6/30/02 $ 917,491 100% $ - 0 - 6/30/03 1,250,812 100% - 0 - 6/30/04 1,731,791 100% - 0 –

THREE-YEAR TREND INFORMATION FOR MISCELLANEOUS EMPLOYEES Annual Pension Percentage of Net Pension Fiscal Year Cost (APC) APC Contributed Obligation

6/30/02 $ -0- 100% $ - 0 - 6/30/03 -0- 100% - 0 - 6/30/04 -0- 100% - 0 -

2. Defined Contribution Plan

In accordance with the Federal Omnibus Budget Reconciliation Act of 1990, the City established pension benefits for all of its part-time employees through Public Agency Retirement System (PARS) which is a defined contribution plan, qualifying under sections 401 and 501 of the Internal Revenue Code. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings.

For the year ended June 30, 2004, the City’s total and covered payroll was $2,237,034. The City made employer contributions of $83,889 (3.75 percent of covered payroll), and employees contributed $83,889 (3.75 percent of covered payroll). All eligible employees are covered by the plan and are fully vested. Employer liabilities are limited to the amount of current contributions. The plan covers part-time, seasonal, or temporary employees, and all employees not covered by another retirement system, subject to the requirements of Section 3121 of the Internal Revenue Code.

82

Required Supplementary Information

83

UAAL asActuarial a % ofValuation Funded Covered

Date Ratio Payroll

6/30/01 $ 115,599,093 $ 124,642,560 $ (9,043,467) 107.8% $ 15,371,852 (58.8) %

6/30/02 125,970,515 118,407,022 7,563,493 94.0% 16,202,656 46.7 %

6/30/03 146,212,854 122,008,222 24,204,632 83.4% 17,828,021 135.8%

UAAL asActuarial a % ofValuation Funded Covered

Date Ratio Payroll

6/30/01 $ 96,282,989 $ 122,161,430 $ (25,878,441) 126.9% $ 27,811,913 (93.0) %

6/30/02 106,808,760 115,844,515 (9,035,755) 108.5% 29,722,913 (30.4) %

6/30/03 127,105,456 119,223,636 7,881,820 93.8% 31,437,050 25.1%

Safety Employees

Miscellaneous Employees

AccruedLiability

(AAL)Entry Age

ActuarialValue of

Assets

CITY OF ESCONDIDO

Schedule of Funding ProgressJune 30, 2004

Public Employees Retirement System

UnfundedAAL

(UAAL)CoveredPayroll

AccruedLiability Actuarial Unfunded

(AAL) Value of AAL CoveredEntry Age Assets (UAAL) Payroll

See Note to Required Supplementary Information.84

Variance Over

Amounts Actual (Under)Revenues:

Sales tax $ 28,428,000 $ 28,928,000 $ 29,941,830 $ 1,013,830

Other Taxes:Property taxes 6,830,000 6,830,000 7,313,201 483,201 Property transfer tax 525,000 525,000 862,733 337,733 Franchise tax 4,252,500 4,252,500 3,507,997 (744,503) Transient occupancy tax 1,133,000 1,133,000 1,150,441 17,441 Business license tax 672,000 672,000 1,430,042 758,042

Total Other Taxes 13,412,500 13,412,500 14,264,414 851,914

Licenses and Permits:Bicycle licenses 275 275 446 171 Building permits 1,065,500 1,245,500 1,113,174 (132,326) Mobilehome setup 20,400 20,400 23,769 3,369

Total Licenses and Permits 1,086,175 1,266,175 1,137,389 (128,786)

Fines and Forfeits:Vehicle code fines 683,400 683,400 643,575 (39,825) Parking ticket fines 239,700 239,700 175,025 (64,675) Library fines 142,200 142,200 123,514 (18,686) Booking fees 530,000 539,084 9,084 Other fines 405,960 405,960 528,668 122,708

Total Fines and Forfeits 1,471,260 2,001,260 2,009,866 8,606

Intergovernmental:State motor vehicle in lieu 8,200,000 5,700,000 6,207,775 507,775 Grants 215,000 897,415 607,450 (289,965) Rincon fire operation fees 1,270,000 1,270,000 1,428,068 158,068 Miscellaneous agencies 52,000 228,145 162,989 (65,156)

Total Intergovernmental 9,737,000 8,095,560 8,406,282 310,722

(Continued)

Original Final

CITY OF ESCONDIDOGeneral Fund

Budgetary Comparison Schedule

BudgetAmounts


Budget


Variance Over

Amounts Actual (Under)Charges for Services:

Zoning and subdivision fees 87,550 87,550 174,305 86,755 Annexation fees 10,000 10,000 12,944 2,944 Sale of maps and publications 3,000 3,000 2,087 (913) Plan check fees 339,000 339,000 279,247 (59,753) Environmental impact report 51,500 51,500 19,963 (31,537) Engineering and inspection fee 764,550 764,550 1,250,564 486,014 Special police services 629,850 629,850 565,588 (64,262) Fire and paramedic services 3,836,000 3,852,200 3,783,115 (69,085) Processing fees 94,000 94,000 75,838 (18,162) Other 129,400 129,400 360,288 230,888 Older adult/oasis 202,095 202,095 183,312 (18,783) Senior meal payments 32,000 32,000 22,952 (9,048) Audio visual rentals 134,000 134,000 123,776 (10,224)

Total Charges for Services 6,312,945 6,329,145 6,853,979 524,834

Investment income 1,002,000 1,102,000 (96,084) (1,198,084)

Miscellaneous:Rent 2,477,000 2,477,000 2,533,670 56,670 Contributions 24,000 38,700 36,229 (2,471) Mobile home fees 25,000 25,000 29,823 4,823 Library trust donations 20,000 40,502 20,502 Other 132,000 132,000 197,342 65,342

Total Miscellaneous 2,658,000 2,692,700 2,837,566 144,866

Total Revenues 64,107,880 63,827,340 65,355,242 1,527,902

(Continued)

Budget Budget


Budgetary Comparison Schedule (Continued)For the Year Ended June 30, 2004

Original Final

Amounts


Variance Over

Amounts Actual (Under)Expenditures: General government:

City council 208,415 214,415 213,914 (501) City manager 717,675 1,085,480 1,071,880 (13,600) City attorney 172,455 223,140 238,901 15,761 City clerk 355,110 412,660 335,149 (77,511) City treasurer 208,600 215,265 211,334 (3,931) Finance 834,310 910,645 789,105 (121,540) Human resources 518,020 559,875 395,004 (164,871) Information systems 1,726,360 1,817,795 1,688,593 (129,202) Other 849,825 520,740 455,807 (64,933)

Total General Government 5,590,770 5,960,015 5,399,687 (560,328)

Public Safety: Police 26,229,445 26,522,885 26,645,739 122,854 Fire 12,897,255 13,972,275 13,875,187 (97,088)

Total Public Safety 39,126,700 40,495,160 40,520,926 25,766

Public Works: Highways and streets 8,682,415 8,839,880 8,276,288 (563,592)

Cultural and Recreational: Library 3,714,587 3,868,244 3,625,688 (242,556) Community services 1,035,870 1,057,410 984,283 (73,127) Community relations 1,963,160 1,611,215 1,604,785 (6,430) Grants and contracts 169,450 247,775 141,196 (106,579)

Total Cultural and Recreational 6,883,067 6,784,644 6,355,952 (428,692)

Community DevelopmentPlanning 1,512,865 1,680,195 1,500,463 (179,732) Building 703,895 780,865 621,057 (159,808) Code enforcement 969,105 993,555 910,148 (83,407) Economic development 358,970 456,645 472,718 16,073

Total Community Development 3,544,835 3,911,260 3,504,386 (406,874)

(Continued)

General FundBudgetary Comparison Schedule (Continued)


Amounts

Original FinalBudget

CITY OF ESCONDIDO

Budget


Over

Amounts (Under)

Total Expenditures 63,827,787 65,990,959 64,057,239 (1,933,720)

Excess (Deficiency) of Revenues Over Expenditures 280,093 (2,163,619) 1,298,003 3,461,622

Other Financing Sources (Uses):Sale of property 314,382 314,382 Transfers in 1,640,000 1,700,500 1,704,136 3,636 Transfers out (660,000) (11,318,800) (1,702,000) 9,616,800

Total Other Financing Sources (Uses) 980,000 (9,618,300) 316,518 9,934,818

Net Change in Fund Balance 1,260,093 (11,781,919) 1,614,521 13,396,440

Fund Balance at Beginning of Year 43,588,239 43,588,239 43,588,239

Fund Balance at End of Year $ 44,848,332 $ 31,806,320 $ 45,202,760 $ 13,396,440

Amounts

Variance


Actual

Budgetary Comparison Schedule (Continued)For the Year Ended June 30, 2004

Original FinalBudget Budget


CITY OF ESCONDIDOLow and Moderate Income Housing Special Revenue Fund

Budgetary Comparison ScheduleFor the Year Ended June 30, 2004

Original Final VarianceBudget Budget Over

Amounts Amounts Actual (Under)Revenues:

Other taxes 2,951,440$ 2,951,440$ 3,176,043$ 224,603$ Intergovernmental 958,950 958,950 1,859,755 900,805Lease income 209,100 209,100 90,253 (118,847)Investment income 370,000 370,000 296,621 (73,379)Miscellaneous 7,750 7,750 7,280 (470)

Total Revenues 4,497,240 4,497,240 5,429,952 932,712

Expenditures:Community development 1,725,419 2,580,519 2,234,919 (345,600)

Excess (Deficiency) of Revenues Over Expenditures 2,771,821 1,916,721 3,195,033 1,278,312

Other Financing Sources (Uses):Sale of property 310,459 310,459Proceeds from long-term debt 1,850,000 1,850,000Transfers in 450,000 450,000 183,290 (266,710)Transfers out (398,395) (398,395) (2,488,300) (2,089,905)

Total Other Financing Sources (Uses) 51,605 51,605 (144,551) (196,156)

Net Change in Fund Balance 2,823,426 1,968,326 3,050,482 1,082,156

Fund Balance at Beginning of Year 28,513,839 28,513,839 28,513,839

Fund Balance at End of Year 31,337,265$ 30,482,165$ 31,564,321$ 1,082,156$


CITY OF ESCONDIDO Notes to Required Supplementary Information

June 30, 2004

Budgetary Data The City adopts an annual operating budget prepared on the modified accrual basis for its general, certain special revenue and certain debt service funds. Under Section 2-59 of the Escondido City Code, the City Manager is required to prepare and submit to the City Council the annual budget of the City and administer it after adoption. Each year, the City Manager submits a proposed budget to the City Council during early May. The City Council holds budget hearings during May and early June. The final budget is adopted by the City Council before June 30. The legal level of budgetary control is at the department level. The City Manager is authorized to transfer budgeted amounts between the accounts of and department; however, any revisions that alter the total appropriations of any department must be approved by City Council. No budgetary comparisons are presented for certain special revenue, certain debt service, capital projects or proprietary funds as the City is not legally required to adopt an annual budget for those funds. The City holds a midyear budget review meeting at which time revenue and expenditure projections are reviewed. Any necessary changes are approved by the City Council. Prior period appropriations lapse unless they are reappropriated through the formal budget process. The City controls its expenditures using encumbrance accounting.

90

Supplementary Information

91

Final VarianceBudget Over


Taxes $ 11,805,770 $ 12,704,173 $ 898,403Investment income 450,00 155,38 (294,618)

Total Revenues 12,255,770 12,859,555 603,785

Expenditures:Community development 26,715 143,855 117,140ERAF payment 694,980 694,978 (2)Agency tax sharing agreement 2,219,245 2,227,303 8,058Principal retirements 6,337,840 7,330,360 992,520Interest and fiscal charges 4,234,305 4,223,616 (10,689)

Total Expenditures 13,513,085 14,620,112 1,107,027

Excess (Deficiency) of Revenues Over Expenditures (1,257,315) (1,760,557) (503,242)

Other Financing Sources (Uses):Transfers in 813,395 2,488,300 1,674,905Transfers out (115,891) (115,891)

Total Other Financing Sources 813,395 2,372,409 1,559,014

Net Change in Fund Balance (443,920) 611,852 1,055,772

Fund Balance at Beginning of Year 4,850,486 4,850,486

Fund Balance at End of Year $ 4,406,566 $ 5,462,338 $ 1,055,772

Community Development Commission Debt Service Fund


CITY OF ESCONDIDO


92

SPECIAL REVENUE FUNDS

STREET FUND

This fund was established to account for transactions related to:

• Gasoline taxes received under Sections 2106, 2107, and 2107.5 of the Streets and Highways Code. These funds are utilized solely for street-related purposes such as new construction, rehabilitation or maintenance.

• Traffic impact fees which are collected from developers. These fees are used exclusively for street improvements that are required as the result of growth and development.

• Traffic Congestion Relief grants from California Dept. of Transportation. These funds provide monies to cities based on population levels for the rehabilitation and improvement of streets and other transportation purposes.

PARK DEVELOPMENT AND RECREATION FUND


• The purchase and development of parks with funding received from park development fees collected from developers.

• Improvements in Kit Carson Park. Funding is received through a lease agreement with Ernest Hahn Development Company for the North County Fair Mall.

• All Parks and Recreation transactions. This fund also includes operation activities for the Community Center and activity for the Municipal Golf Course.

• The revenue received from the sale of mitigation credits. The funds will be used to provide maintenance services at Daley Ranch.

COMMUNITY DEVELOPMENT BLOCK GRANT FUND

This fund was created to account for transactions related to the Community Development Block Grant provided by the Federal Government. The resources are expended for community development and housing assistance.

93


Continued

LANDSCAPE AND ASSESSMENT DISTRICT FUND

This fund was created to account for transactions related to:

• The maintenance of landscaping in the Rancho Verde subdivision area and other portions of the landscape maintenance district. Funding is provided through special assessments on property owners who receive direct benefit.

• The maintenance of landscaping in the Parkwood subdivision area. Funding is provided through special assessments on property owners who receive direct benefit.

• The maintenance of landscaping in the Country Club Lane Assessment District. Funding is provided through special assessments on property owners who receive direct benefit.

• Improvements in the Reidy Creek Assessment District. Funding is provided through special assessments on property owners who receive direct benefit.

• The Rancho San Pasqual Special Assessment District. Funding is provided through special assessments on property owners who receive direct benefits.

STORM WATER MANAGEMENT FUND

This fund was established to account for revenues received from utility billings. These funds are used for storm drain improvements.

LAW ENFORCEMENT FUND


• Revenue received by the Police Department through the asset forfeiture program. The funds must be used to supplement and enhance existing law enforcement budgets.

• Transactions related to the law enforcement grants received from the Federal and State Government. These funds are used to provide front line law enforcement services and must supplement existing services.

94


Continued

CABLE TECHNOLOGY FUND

This fund was created to account for a Technology Grant from Cox Communications for the purchase and installation of telecommunications equipment and services.

MISCELLANEOUS FUND


• The maintenance and operation of the City-owned public parking lots. Funding is provided by parking permit revenues.

• Revenue received from the sale of recycled materials. The funds are used to further the effort of recycling within the city.

• The Community Service Center. Primary funding is from private grants with additional funding from the County and the City.

• A portion of sales tax revenue received for fire safety in accordance with the passage of SB8.

• Public art fees, which are assessed when development occurs. The funds will be used to provide public art throughout the city.

DEBT SERVICE FUNDS

VINEYARD GOLF COURSE DEBT SERVICE FUND

This fund was created to account for transactions related to debt issued for the development of the Municipal Golf Course. Funding is provided by repayment of a loan to Escondido Consulting, Inc.

95

CAPITAL PROJECT FUNDS

STREET IMPROVEMENT FUND

This fund was created to account for projects related to street improvements. Funding is provided from a variety of sources which include transfers from Gas Tax and Traffic Impact Funds.

STORM DRAINS FUND

This fund was created to account for funds collected from developers when projects create a need for improvements to the City’s storm drain basin system. Funds are held until collections for a specific basin make an improvement possible.

QUAIL HILLS ASSESSMENT DISTRICT FUND

This fund was created to account for transactions related to the improvement projects in the Quail Hills Assessment District. Funding is provided through special assessments on the property tax rolls.

GENERAL CAPITAL PROJECTS FUND

This fund was created to account for transactions related to general capital projects. These projects are typically funded through transfers from General, Public Facilities, and Water and Sewer funds.

COUNTY TRANSPORTATION STREET AND BICYCLE PROJECTS FUND

This fund was established to account for funds received:

• Through the adoption of San Diego County Special Proposition A, which provides a transportation sales tax override to fund local street improvements.

• From SANDAG relative to the Transportation Development Act. Expenditures in this fund pertain to the development of bike paths.

96

CAPITAL PROJECT FUNDS

Continued

PUBLIC FACILITIES FUND

This fund was created to account for developer fees collected for public facility needs that are created as the result of growth and development in the city.

COMMUNITY DEVELOPMENT COMMISSION FUND

This fund was established to account for transactions related to projects in the Community Development Commission. Projects were primarily related to the Civic Center project and improvements in the downtown area. Funding was primarily provided through bond issues and advances from the City’s General Fund. Advances will be repaid through tax increment funds received from the redevelopment project area.

STATE PARK BOND ACT FUND

This fund was established to account for funds received from the State Bond Act of 2000 that are to provide for the acquisition, development, or improvement of safe, open and accessible local park and recreational facilities.

97

PERMANENT FUNDS

DALEY RANCH FUND

This fund was created to fund the City's long-term management and maintenance efforts, of Daley Ranch, as stated in the agreement with the Wildlife Agencies.

RYAN TRUST FUND

This fund was created to account for the monies received from the Frances B. Ryan Trust. The Trust was established to create the Pioneer Room, a historical perspective of Escondido, and to provide financing for its ongoing operation.

HEGYI TRUST FUND

This fund was established to account for funds received from the Hegyi Family Trust. Expenditure of these funds are related to the Library's Volunteer Recognition Program.

DEPOSIT TRUST FUND

This fund was created to account for deposits received and held by the City as an agent for individuals, developers, private organizations, and other governmental agencies.

98

99

Special Revenue FundsLandscape

Community andand Development Assessment

Street Recreation Block Grant DistrictAssets:

Cash and investments $ 7,381,958 $ 2,118,011 $ $ 424,176Restricted cash and investmentsReceivables:

Accounts 9,443 254,129Interest 95,519 28,091 5,048Taxes 7,538Notes 4,666,257 69,491Loans

Due from other governments 243,422 249,394Advances to other funds 200,000

Total Assets $ 7,930,342 $ 7,066,488 $ 318,885 $ 436,762

Liabilities and Fund Balances:

Liabilities:Payables: Accounts $ 729,755 $ 150,826 $ 51,162 $ 18,143 Deposits 59,890Accrued expenditures 57,761 8,710Due to other funds 189,522Deferred revenue 69,491Advances from other funds 200,000

Total Liabilities 729,755 468,477 318,885 18,143

Fund Balances (Deficits):Reserved for: Advances to other funds 200,000 Non-current receivables 4,666,257 Specific purpose 781,186 833,913 418,619 Debt service Current projects 5,338,463 911,823Unreserved: Designated for future projects 880,938 186,018

Total Fund Balances 7,200,587 6,598,011 418,619

Total Liabilities and Fund Balances $ 7,930,342 $ 7,066,488 $ 318,885 $ 436,762

Parks

CITY OF ESCONDIDOCombining Balance Sheet

Nonmajor Governmental FundsJune 30, 2004

100

Special Revenue Funds Capital Projects Funds

Vineyard Storm Water Law Cable Golf Street StormManagement Enforcement Technology Miscellaneous Course Improvement Drains

$ 327,293 $ 480,947 $ 594,935 $ 1,010,695 $ $ 1,326,786 $ 3,817,889710,323

349,745 1,7604,357 7,961 8,024 14,453 16,136 53,380

32,453200,000

$ 331,650 $ 521,361 $ 602,959 $ 1,374,893 $ 710,323 $ 1,544,682 $ 3,871,269

$ 65,071 $ 52,469 $ $ 31,434 $ $ 20,138 $ 62,35950,000

3,241 668 1,915432,844

225,641629,238

68,312 278,778 662,587 432,844 70,138 62,359

200,000

263,338 242,583 379,221 422,053277,479

333,085 943,164 3,386,857

602,959 331,380

263,338 242,583 602,959 712,306 277,479 1,474,544 3,808,910

$ 331,650 $ 521,361 $ 602,959 $ 1,374,893 $ 710,323 $ 1,544,682 $ 3,871,269

(Continued)

FundsDebt Service

101

CountyQuail Hills General TransportationAssessment Capital Street and Public

District Projects Bicycle Projects FacilitiesAssets:

Cash and investments $ 25,258 $ 6,258,813 $ 14,525,016 $ 5,361,101Restricted cash and investments 1,297,618Receivables:

Accounts 192,362Interest 91,877 208,451 73,704TaxesNotesLoans 346,839

Due from other governmentsAdvances to other funds

Total Assets $ 25,258 $ 7,995,147 $ 14,925,829 $ 5,434,805

Liabilities and Fund Balances:

Liabilities:Payables: Accounts $ $ 214,360 $ 1,702,984 $ 4,864 Deposits 2,440Accrued expenditures 174Due to other funds 731,300Deferred revenue 350,054Advances from other funds

Total Liabilities 216,974 2,053,038 736,164

Fund Balances (Deficits):Reserved for: Advances to other funds Non-current receivables Specific purpose 25,258 838,307 Debt service Current projects 7,153,563 12,872,791 3,860,334Unreserved: Designated for future projects 624,610

Total Fund Balances 25,258 7,778,173 12,872,791 4,698,641

Total Liabilities and Fund Balances $ 25,258 $ 7,995,147 $ 14,925,829 $ 5,434,805

CITY OF ESCONDIDOCombining Balance Sheet

Nonmajor Governmental FundsJune 30, 2004

Capital Projects Funds

102

TotalState Nonmajor

Park Bond Daley Ryan Hegyi Deposit GovernmentalAct Ranch Trust Trust Trust Funds

$ 135,836 $ $ 108,320 $ 377,018 $ 21,666 $ 6,645,665 $ 50,941,383 2,007,941

807,439 2,426 1,394 5,092 293 1,966 618,172

2 7,540 4,735,748

346,839 268,729 793,998

469,988 869,988

$ 608,250 $ 268,729 $ 109,714 $ 382,110 $ 21,959 $ 6,647,633 $ 61,129,048

$ $ $ $ $ $ 236,758 $ 3,340,323 109,714 382,110 21,959 6,410,875 7,036,988

72,469 268,729 1,622,395

645,186 829,238

268,729 109,714 382,110 21,959 6,647,633 13,546,599

469,988 869,988 4,666,257 4,204,478

277,479 104,792 34,904,872

33,470 2,659,375

608,250 47,582,449

$ 608,250 $ 268,729 $ 109,714 $ 382,110 $ 21,959 $ 6,647,633 $ 61,129,048

CommunityDevelopmentCommission

Permanent FundsCapital Projects Funds

103

Parks CommunityAnd Development

Street Recreation Block GrantRevenues:

Sales tax $ $ $Other taxes 676,129Licenses and permitsIntergovernmental 2,586,705 1,248,945Charges for services 877,360 2,218,739Special assessmentsInvestment income 139,139 408,121Miscellaneous 9,443 240,742

Total Revenues 3,612,647 3,543,731 1,248,945Expenditures: Current:

General government Public safety Public works 328,055 49,422 Cultural and recreation 2,934,585 Community development 1,497,660

Capital projects 2,146,328 1,465,484 121,332 Debt Service: Principal retirements Interest and fiscal charges

Total Expenditures 2,474,383 4,449,491 1,618,992

Excess (Deficiency) of Revenues Over Expenditures 1,138,264 (905,760) (370,047)

Other Financing Sources (Uses):Sale of property 463,907Transfers in 1,998,847 515,547Transfers out (2,180,710) (1,578,392)

Total Other Financing Sources (Uses) (181,863) (1,062,845) 463,907

Net Change in Fund Balance 956,401 (1,968,605) 93,860

Fund Balance at Beginning of Year 6,244,186 8,566,616 (93,860)

Fund Balance at End of Year $ 7,200,587 $ 6,598,011 $ 0


Special Revenue Funds

CITY OF ESCONDIDOCombining Statement of Revenues, Expenditures,

and Changes in Fund BalanceNonmajor Governmental Funds

104

Debt Service

Landscapeand Vineyard

Assessment Storm Water Law CableDistrict Management Enforcement Technology Miscellaneous Course

$ $ $ $ $ $

41,328858,663

826,478 754,436509,71310,289 11,421 19,046 24,190 44,484 21,465

520,002 837,899 877,709 24,190 840,248 21,465

1,173,463428,085 874,202 509,965

249,519

287,905

270,000419,308

428,085 874,202 1,173,463 1,047,389 689,308

91,917 (36,303) (295,754) 24,190 (207,141) (667,843)

55,879 690,790(373,000) (66,500)

(373,000) (10,621) 690,790

91,917 (36,303) (295,754) (348,810) (217,762) 22,947

326,702 299,641 538,337 951,769 930,068 254,532

$ 418,619 $ 263,338 $ 242,583 $ 602,959 $ 712,306 $ 277,479

(Continued)

Special Revenue Funds

Golf

Funds

105

Quail HillsStreet Assessment

Improvement DistrictRevenues:

Sales tax $ $ $Other taxesLicenses and permitsIntergovernmental 337,500Charges for services 303,418Special assessmentsInvestment income (111,751) 16,634Miscellaneous 31,075

Total Revenues 256,824 320,052Expenditures: Current:

General government Public safety Public works 133,814 Cultural and recreation Community development

Capital projects 1,233,333 111,744 Debt Service: Principal retirements Interest and fiscal charges

Total Expenditures 1,233,333 245,558

Excess (Deficiency) of Revenues Over Expenditures (976,509) 74,494

Other Financing Sources (Uses):Sale of propertyTransfers in 697,620 Transfers out (1,841,909) (50,000)

Total Other Financing Sources (Uses) (1,144,289) (50,000)

Net Change in Fund Balance (2,120,798) 24,494

Fund Balance at Beginning of Year 3,595,342 3,784,416 25,258

Fund Balance at End of Year $ 1,474,544 $ 3,808,910 $ 25,258

Storm Drains



CITY OF ESCONDIDOCombining Statement of Revenues, Expenditures,

and Changes in Fund BalanceNonmajor Governmental Funds (Continued)

106

TotalGeneral County State NonmajorCapital Transportation Public Park Bond GovernmentalProjects Street Projects Facilities Act Funds

$ $ 2,677,351 $ $ $ $ 2,677,351676,12941,328

488,139 792,900 6,312,852799,620 5,780,051

509,713207,279 (13,794) 60,870 7,899 1,421 846,713

329 1,184,789 26,350 1,492,728

207,608 4,336,485 886,840 7,899 794,321 18,336,865

854,478 41,846 896,324151,669 213,674 1,538,80672,561 29,095 38,930 2,464,129

815,577 371,772 4,371,453231,026 76,122 12,978 1,817,786158,220 8,092,658 54,860 423,734 14,095,598

270,000419,308

2,283,531 8,092,658 415,597 51,908 795,506 25,873,404

(2,075,923) (3,756,173) 471,243 (44,009) (1,185) (7,536,539)

67,400 100,508 631,8152,962,046 42,956 2,578 1,652 6,967,915

(98,094) (179,896) (992,968) (106,836) (7,468,305)

2,931,352 (36,432) (990,390) (105,184) 131,425

855,429 (3,792,605) (519,147) (149,193) (1,185) (7,405,114)

6,922,744 16,665,396 5,217,788 757,443 1,185 54,987,563

$ 7,778,173 $ 12,872,791 $ 4,698,641 $ 608,250 $ 0 $ 47,582,449

Commission


CommunityDevelopment

107



Intergovernmental $ 2,599,950 $ 2,586,705 $ (13,245)Charges for services 551,000 877,360 326,360Investment income 155,000 139,139 (15,861)Miscellaneous 9,443 9,443

Total Revenues 3,305,950 3,612,647 306,697

Expenditures:Public works 1,701,241 328,055 (1,373,186)Capital projects 5,187,077 2,146,328 (3,040,749)

Total Expenditures 6,888,318 2,474,383 (4,413,935)

Excess (Deficiency) of Revenues Over Expenditures (3,582,368) 1,138,264 4,720,632

Other Financing Sources (Uses):Transfers in 1,830,990 1,998,847 167,857Transfers out (1,500,000) (2,180,710) (680,710)

Total Other Financing Sources (Uses) 330,990 (181,863) (512,853)

Net Change in Fund Balance (3,251,378) 956,401 4,207,779




CITY OF ESCONDIDOStreet Special Revenue Fund


108



Other taxes $ 620,000 $ 676,129 $ 56,129Charges for services 2,262,940 2,218,739 (44,201)Investment income 612,000 408,121 (203,879)Miscellaneous 11,500 240,742 229,242

Total Revenues 3,506,440 3,543,731 37,291

Expenditures:Public works 101,501 49,422 (52,079)Cultural and recreation 3,061,845 2,934,585 (127,260)Capital projects 2,274,485 1,465,484 (809,001)

Total Expenditures 5,437,831 4,449,491 (988,340)

Excess (Deficiency) of Revenues Over Expenditures (1,931,391) (905,760) 1,025,631

Other Financing Sources (Uses):Transfers in 515,547 515,547Transfers out (1,568,392) (1,578,392) (10,000)

Total Other Financing Sources (Uses) (1,052,845) (1,062,845) (10,000)

Net Change in Fund Balance (2,984,236) (1,968,605) 1,015,631




CITY OF ESCONDIDOParks and Recreation Special Revenue Fund


109

CITY OF ESCONDIDOCommunity Development Block Grant Special Revenue Fund

Budgetary Comparsion ScheduleFor the Year Ended June 30, 2004



Intergovernmental $ 2,135,000 $ 1,248,945 $ (886,055)

Expenditures:Community development 1,192,694 1,497,660 304,966Capital projects 1,777,607 121,332 (1,656,275)

Total Expenditures 2,970,301 1,618,992 (1,351,309)

Excess (Deficiency) of Revenues Over Expenditures (835,301) (370,047) 465,254

Other Financing Sources:Sale of property 463,907 463,907

Net Change in Fund Balance (371,394) 93,860 465,254

Fund Balance at Beginning of Year (93,860) (93,860)

Fund Balance at End of Year $ (465,254) $ 0 $ 465,254

110



Special assessments $ 508,215 $ 509,713 $ 1,498Investment income 10,289 10,289

Total Revenues 508,215 520,002 11,787

Expenditures:Public works 536,805 428,085 (108,720)

Net Change in Fund Balance (28,590) 91,917 120,507

Fund Balance at Beginning of Year 326,702 326,702

Fund Balance at End of Year $ 298,112 $ 418,619 $ 120,507


CITY OF ESCONDIDOLandscape and Assessment District Special Revenue Fund


111



Charges for services $ 785,145 $ 826,478 $ 41,333Investment income 6,000 11,421 5,421

Total Revenues 791,145 837,899 46,754

Expenditures:Public works 1,092,040 874,202 (217,838)

Net Change in Fund Balance (300,895) (36,303) 264,592


Fund Balance at End of Year $ (1,254) $ 263,338 $ 264,592


CITY OF ESCONDIDOStorm Water Management Special Revenue Fund


112



Licenses and permits $ 40,000 $ 41,328 $ 1,328Charges for services 561,000 754,436 193,436Investment income 16,000 44,484 28,484

Total Revenues 617,000 840,248 223,248

Expenditures:Public works 446,415 509,965 63,550Cultural and recreation 251,530 249,519 (2,011)Capital projects 618,979 287,905 (331,074)

Total Expenditures 1,316,924 1,047,389 (269,535)


Other Financing Sources (Uses):Transfers in 50,870 55,879 5,009Transfers out (66,500) (66,500)

Total Other Financing Sources (Uses) (15,630) (10,621) 5,009

Net Change in Fund Balance (715,554) (217,762) 497,792


Fund Balance at End of Year $ 214,514 $ 712,306 $ 497,792


CITY OF ESCONDIDOMiscellaneous Special Revenue Fund


113



Investment income $ $ 21,465 $ 21,465

Expenditures:Principal retirements 270,000 270,000Interest and fiscal charges 420,790 419,308 (1,482)

Total Expenditures 690,790 689,308 (1,482)


Other Financing Sources:Transfers in 690,790 690,790

Net Change in Fund Balance 22,947 22,947


Fund Balance at End of Year $ 254,532 277,479 $ 22,947


CITY OF ESCONDIDOVineyard Golf Course Debt Service Fund


114

INTERNAL SERVICE FUNDS

BUILDING MAINTENANCE FUND

This fund was created to account for financial activity related to the maintenance and repair of all City-owned buildings. Funding is provided through charges to other departments, based on square footage, common area allocation, and specific maintenance projects. A reserve for replacement will be accumulated to replace carpeting, air conditioning, roofing and other maintenance items.

VEHICLE AND EQUIPMENT MAINTENANCE FUND

This fund was created to account for transactions related to the maintenance, operation, and replacement of the City’s vehicles, whereby the City can more accurately determine the full cost of services. Such costs to other departments are billed through charges to used departments in the form of a rental payment for each piece of equipment.

CENTRAL SERVICES FUND


• The provision of postage, telephone, and copying services. Funding is provided through charges to other departments based on actual usage.

• The provision of a central stores warehouse. Funding is provided through charges to user departments.

WORKERS' COMPENSATION FUND

This fund was created to account for transactions related to the City’s self-insurance provision of general liability insurance. Funding is provided through charges to other departments based on future risk evaluation, prior claims experience, and other factors.

GENERAL LIABILITY SELF-INSURANCE FUND

This fund was created to account for transactions related to the City’s self-insurance provision of Workers’ Compensation insurance. Funding is provided through charges to other departments based on payroll expense.

115

INTERNAL SERVICE FUNDS

Continued

INSURANCE FUND


• The provision of health and life insurance for City employees. Funding is provided through charges to other departments based on employee participation.

• The provision of vision insurance to City employees. Funding is provided through charges to other departments based on employee participation.

• Property insurance obtained for the City. Funding is provided through charges to other departments based on replacement cost of the property and square footage allocations.

• The provision of dental insurance to City employees. Funding is provided through charges to other departments based on employee participation.

• The provision of unemployment insurance. Funding is provided through charges to other departments based on payroll expense.

116

117

CITY OF ESCONDIDO

Vehicle andBuilding Equipment

Maintenance MaintenanceAssets

Current Assets:Cash and investments $ 3,824,288 $ 5,577,233Receivables: Accounts 45,513 Interest 53,042 79,726 Employee tuition loansInventory 40,142Deposits

Total Current Assets 3,877,330 5,742,614

Capital Assets:Buildings 718,726 342,000Equipment 320,047 17,535,425

Total Capital Assets 1,038,773 17,877,425 Less Accumulated Depreciation (379,672) (14,584,912)

Net Capital Assets 659,101 3,292,513

Total Assets 4,536,431 9,035,127

Liabilities

Current Liabilities (payablefrom current assets):Accounts payable 115,908 57,660Accrued expenses 41,362 21,341Current portion of leases payable 220,929Due to other funds

Total Current Liabilities 157,270 299,930

Long-Term Liabilities:Estimated claims payableEmployee leave benefits payable 134,720 61,844Leases payable 408,493

Total Long-Term Liabilities 134,720 470,337

Total Liabilites 291,990 770,267

Net AssetsInvested in capital assets, net of related debt 659,101 2,663,091Unrestricted 3,585,340 5,601,769

Total Net Assets (Deficit) $ 4,244,441 $ 8,264,860

Statement of Net AssetsInternal Service Funds

June 30, 2004

118

Insurance Total

$ $ 4,563,866 $ 5,373,624 $ 1,000,250 $ 20,339,261

73,389 47,361 166,2631,671 57,713 75,699 10,143 277,994

1,236 1,236252,432 292,574

250,000 42,900 292,900

254,103 4,944,968 5,449,323 1,101,890 21,370,228

61,070 1,121,79617,440 17,872,912

78,510 18,994,708(64,006) (15,028,590)

14,504 3,966,118

268,607 4,944,968 5,449,323 1,101,890 25,336,346

51,581 134,615 38,233 59,603 457,6005,613 2,686 41,876 112,878

220,92921,405 21,405

78,599 137,301 38,233 101,479 812,812

9,763,000 1,886,000 11,649,0007,645 3,061 35,537 242,807

408,493

7,645 9,766,061 1,886,000 35,537 12,300,300

86,244 9,903,362 1,924,233 137,016 13,113,112

14,504 3,336,696167,859 (4,958,394) 3,525,090 964,874 8,886,538

$ 182,363 $ (4,958,394) $ 3,525,090 $ 964,874 $ 12,223,234

LiabilityCentralServices

Workers'Compensation Self-Insurance

General

119


Maintenance MaintenanceOperating Revenues:

Charges for services $ 3,012,336 $ 2,914,788

Operating Expenses:Personnel services 1,872,743 773,673Administrative expenses 27,504 19,992Benefit claimsSupplies 86,576 23,675Repairs and maintenance 352,477 403,784Depreciation 71,883 1,276,878Utilities 703,113 7,976Fuel 543,222Professional services 508,552 33,145Insurance premiums 22,176 16,092Rent 12,945Other 54,725 45,913

Total Operating Expenses 3,712,694 3,144,350

Operating Income (Loss) (700,358) (229,562)

Non-Operating Revenues (Expenses):Investment income 136,414 29,948Interest and fiscal charges (39,668)Miscellaneous 44,208 79,422

Total Non-Operating Revenues (Expenses) 180,622 69,702

Income (Loss) Before Transfers and Capital Contributions (519,736) (159,860)

Transfers in 642,000Transfers out (101,652)

Total Transfers 540,348

Income (Loss) Before Capital Contributions 20,612 (159,860)

Capital contributions 248,266

Net Assets (Deficit) at Beginning of Year 4,223,829 8,176,454

Net Assets (Deficit) at End of Year $ 4,244,441 $ 8,264,860

CITY OF ESCONDIDOStatement of Revenues, Expenses, and Changes in Fund Net Assets

Internal Service FundsFor the Year Ended June 30, 2004

120

Compensation Insurance Total

$ 1,281,783 $ 3,595,900 $ 1,749,020 $ 6,512,083 $ 19,065,910

208,846 119,673 290,584 3,265,5196,984 334,188 1,011,780 64,020 1,464,468

4,616,888 (374,387) 558,867 4,801,368112,724 942 2,980 1,277 228,174

67,619 161 1,961 826,0021,527 1,350,288

415,131 4,021 60 4,504 1,134,805543,222

329,671 1,483,011 751,633 123,858 3,229,8707,560 262,792 286,567 5,342,529 5,937,716

12,9455,347 9,472 21,546 70,597 207,600

1,155,409 6,831,148 1,700,179 6,458,197 23,001,977

126,374 (3,235,248) 48,841 53,886 (3,936,067)

4,235 32,332 4,022 21,343 228,294(39,668)

11,477 97,458 20,680 50,111 303,356

15,712 129,790 24,702 71,454 491,982

142,086 (3,105,458) 73,543 125,340 (3,444,085)

642,000(101,652)

540,348

142,086 (3,105,458) 73,543 125,340 (2,903,737)

248,266

40,277 (1,852,936) 3,451,547 839,534 14,878,705

$ 182,363 $ (4,958,394) $ 3,525,090 $ 964,874 $ 12,223,234

CentralServices

Workers'GeneralLiability

Self-Insurance

121


Maintenance MaintenanceCash flows from Operating Activities:

Cash received from customers $ 3,012,336 $ 2,886,447Cash paid to employees for services (1,863,623) (763,000)

Cash paid to other suppliers ofgoods or services (1,740,223) (1,133,097)

Cash from other sources 44,208 20,399

Net Cash Provided by (Used for) Operating Activities (547,302) 1,010,749

Cash Flows from Noncapital Financing Activities:

Cash paid to other funds 540,348

Cash Flows from Capital and RelatedFinancing Activities:

Purchase of fixed assets (747,676)Sale of fixed assets 72,876Interest payments on leases (39,668)Principal payments on leases (242,222)

Net Cash Provided by (Used for) Capital and Related Financing Activities (956,690)

Cash Flows from Investing Activities:Investment income received 134,688 16,786

Net Increase in Cash and Cash Equivalents 127,734 70,845

Cash and Cash Equivalents at Beginning of Year 3,696,554 5,506,388

Cash and Cash Equivalents at End of Year $ 3,824,288 $ 5,577,233

CITY OF ESCONDIDOInternal Service Funds

Combining Statement of Cash FlowsFor the Year Ended June 30, 2004

122

GeneralLiability

Self-Insurance Insurance Total

$ 1,281,783 $ 3,522,512 $ 1,749,020 $ 6,500,239 $ 18,952,337(208,664) (121,179) (289,941) (3,246,407)

(981,373) (2,697,931) (2,160,014) (6,193,933) (14,906,571)11,477 97,458 20,680 50,111 244,333

103,223 800,860 (390,314) 66,476 1,043,692

(106,422) 433,926

(747,676)72,876

(39,668)(242,222)

(956,690)

3,199 18,651 6,966 21,908 202,198

819,511 (383,348) 88,384 723,126

3,744,355 5,756,972 911,866 19,616,135

$ 0 $ 4,563,866 $ 5,373,624 $ 1,000,250 $ 20,339,261

(Continued)

ServicesCentral Workers'

Compensation

123

Vehicle andReconciliation of Operating Income to Net Cash Building Equipment Provided by Operating Activities Maintenance Maintenance

Operating Income (Loss) $ (700,358) $ (229,562)

Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided by(Used for) Operating Activities:

Depreciation expense 71,883 1,276,878Cash from other sources 44,208 20,399Change in assets and liabilities:

(Increase) decrease in accounts receivable (28,341)(Increase) decrease in employee tuition loans(Increase) decrease in inventories (15,716) Increase (decrease) in accounts payable 27,846 (23,583) Increase (decrease) in accrued expenses 3,540 2,922 Increase (decrease) in employee leave benefits payable 5,579 7,752 Increase (decrease) in estimated claims payable

Total Adjustments 153,056 1,240,311

Net Cash Provided by (Used for) Operating Activities $ (547,302) $ 1,010,749

Noncash Investing, Capital and Financing Activities:Contributed property, plant and equipment $ 248,266

CITY OF ESCONDIDOInternal Service Funds

Combining Statement of Cash Flows (Continued)For the Year Ended June 30, 2004

124

GeneralLiability

Self-Insurance Insurance Total

$ 126,374 $ (3,235,248) $ 48,841 $ 53,886 $ (3,936,067)

1,527 1,350,28811,477 97,458 20,680 50,111 244,333

(73,388) (10,608) (112,337)(1,236) (1,236)

(3,819) (19,535)(32,518) (77,456) (19,499) (37,353) (162,563)

1,184 (50) 12,145 19,741(1,002) (1,456) (469) 10,404

4,091,000 (440,336) 3,650,664

(23,151) 4,036,108 (439,155) 12,590 4,979,759

$ 103,223 $ 800,860 $ (390,314) $ 66,476 $ 1,043,692

$ 248,266

CentralServices

Workers'Compensation

125

AGENCY FUNDS

AUTO PARKWAY ASSESSMENT DISTRICT FUND

This fund was created to account for debt service payments on 1915 Act Assessment bonds paid from special assessments collected and remitted to a fiscal agent-trustee. The bonds were issued to finance capital improvements in the Auto Parkway District, including drainage and road improvements, sewer, lighting, and other improvements.

RANCHO SAN PASQUAL FUND

This fund was created to account for the debt service payments collected directly from property owners and remitted to bondholders for payment on Rancho San Pasqual bonds, issued to finance certain public improvements within the City's Assessment District No. 95-1.

126

AutoParkway

Assessment RanchoDistrict San Pasqual Total

Assets

Cash and investments $ 227,956 $ 239,195 $ 467,151Restricted assets - cash with fiscal agent 394,781 386,364 781,145Receivables: Interest 2,039 2,219 4,258 Taxes 28 2,176 2,204

Total Assets $ 624,804 $ 629,954 $ 1,254,758

Liabilities

Due to bondholders $ 624,804 $ 629,954 $ 1,254,758

Total Liabilities $ 624,804 $ 629,954 $ 1,254,758

CITY OF ESCONDIDOCombining Statement of Agency Funds

June 30, 2004

127

Balance atDeductions

Auto Parkway Assessment District

Assets Cash and investments $ 262,808 $ 305,960 $ (340,812) $ 227,956 Restricted assets - cash with fiscal agent 382,855 17,768 (5,842) 394,781 Receivables: Interest 2,772 2,039 (2,772) 2,039 Taxes 39 28 (39) 28

Total Assets $ 648,474 $ 325,795 $ (349,465) $ 624,804

LiabilitiesAccounts payable $ $ 340,326 $ (340,326) $Due to bondholders 648,474 479,059 (502,729) 624,804

Total Liabilities $ 648,474 $ 819,385 $ (843,055) $ 624,804

Rancho San Pasqual

Assets Cash and investments $ 229,462 $ 371,857 $ (362,124) $ 239,195 Restricted assets - cash with fiscal agent 376,958 19,931 (10,525) 386,364 Receivables: Interest 2,277 2,219 (2,277) 2,219 Taxes 2,358 2,176 (2,358) 2,176

Total Assets $ 611,055 $ 396,183 $ (377,284) $ 629,954

LiabilitiesAccounts payable $ $ 360,594 $ (360,594) $Due to bondholders 611,055 504,786 (485,887) 629,954

Total Liabilities $ 611,055 $ 865,380 $ (846,481) $ 629,954

CITY OF ESCONDIDOStatement of Changes in Agency Funds


June 30, 2004AdditionsBalance at

June 30, 2003

128

Statistical

Section

131

Category 2001-02 2002-03 2003-04

General government $9,294,091 $7,278,160 $7,546,703

Public safety 40,704,987 46,934,431 49,131,586

Cultural and recreation 11,526,832 12,670,230 13,185,703

Public works 14,956,310 18,711,369 12,579,425

Community development (1) 3,662,190 10,646,006 11,028,920

Interest and fiscal charges 10,896,096 7,149,247 8,075,513

Loss from retirement of assets 423,000

Water 26,531,041 29,884,159 32,297,470

Wastewater 13,434,840 15,598,418 16,359,318

Golf 1,135,468 1,204,061

TOTALS $131,429,387 $150,007,488 $151,408,699

(1) In fiscal year 2001-02 the agency tax sharing agreements, building, planning, code enforcement, andeconomic development expenditures were classified within General Government or Interest and Fiscal Charges. In the subsequent years, these expenditures are classified within CommunityDevelopment.

Source: City of Escondido Finance Department.

CITY OF ESCONDIDOGovernment-wide Expenses by Function

Last Three Fiscal Years

132

Category 2001-02 2002-03 2003-04

Program Revenues:

Charges for services $55,332,584 $58,487,660 $65,488,462

Operating grants and contribution 25,497,517 14,698,267 13,617,538

Capital grants and contributions 17,869,767 10,423,518 11,361,034

General Revenues:

Taxes 57,178,552 67,900,971 69,647,715

Use of money and property 7,414,283 8,026,802 3,684,037

Miscellaneous 1,916,166 824,358 1,806,282

Contributions 529,239

Special Item - Economic development incentive (2,036,512)

TOTALS $165,738,108 $158,325,064 $165,605,068


CITY OF ESCONDIDOGovernment-wide Revenues

Last Three Fiscal Years

133

Category 1994-95 1995-96 1996-97 1997-98

Sales tax $16,785,186 $20,405,715 $20,495,323 $22,093,228

Property tax 11,649,557 12,110,269 11,128,282 12,163,240

Property transfer tax 182,741 119,537 243,363 420,388

Franchise tax 2,096,833 2,022,395 1,944,148 2,063,589

Transient occupancy tax 488,933 503,747 536,841 640,582

Business license tax 910,388 999,339 1,034,766 1,084,919

Licenses and permits 582,703 663,080 918,788 1,084,586

Fines and forfeitures 561,518 311,824 468,593 455,045

Intergovernmental 10,322,030 11,109,599 11,286,303 12,437,590

Charges for services 5,386,470 5,571,871 5,348,553 5,298,217

Special assessments 1,534,821 385,285 375,637 348,979

Community services 247,427 182,288 190,642 266,954

Use of money and property 5,709,422 6,117,358 6,118,503 5,895,011

Park and recreation fees 535,815 667,604 670,042 986,314

Contributions 102,224 7,976 81,365 62,862

Miscellaneous 4,142,012 3,291,309 4,091,638 3,560,126

TOTALS (1) $61,238,080 $64,469,196 $64,932,787 $68,861,630

(1) Includes General, Special Revenue, Debt Service, and Capital Projects Funds.


CITY OF ESCONDIDOGeneral Governmental Revenues by Source

Last Ten Fiscal Years

134

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

$23,565,067 $27,226,164 $26,593,336 $31,734,157 $31,217,876 $32,619,181

15,135,818 17,268,226 18,290,957 19,372,806 21,513,677 23,193,417

610,642 736,278 451,553 492,777 611,610 862,733

2,084,911 2,221,136 2,807,735 3,743,845 4,079,232 4,184,126

843,249 952,784 1,141,134 1,022,851 1,090,329 1,150,441

1,191,346 1,229,257 1,314,478 1,337,856 1,353,804 1,430,042

984,522 926,287 760,933 987,764 1,317,849 1,178,717

854,046 1,476,643 1,585,365 1,612,866 1,928,933 2,009,866

13,384,194 14,309,043 18,092,081 18,822,723 19,888,610 16,578,889

7,504,535 7,957,135 5,943,801 8,996,708 9,249,237 10,085,251

379,396 382,015 235,809 322,711 361,982 509,713

224,468 251,984 290,334 226,712 333,645 330,040

5,140,367 5,037,350 8,987,246 7,008,758 6,037,634 1,202,632

1,325,802 1,472,586 1,761,444 1,877,803 2,003,034 2,218,739

12,083 21,670 9,711 16,545 32,945 36,229

2,861,272 3,550,038 3,623,500 3,784,621 3,040,470 4,391,598

$76,101,718 $85,018,596 $91,889,417 $101,361,503 $104,060,867 $101,981,614

135

Category 1994-95 1995-96 1996-97 1997-98

General government $4,642,826 $5,137,589 $4,823,747 $4,884,908

Public safety 22,903,140 22,790,884 23,845,071 26,033,139

Public works 5,159,044 5,394,499 5,363,001 6,450,939

Culture and recreation 6,160,083 6,760,665 8,259,536 10,401,523

Community development 3,006,789 3,158,744 3,092,669 4,355,522

Capital projects 24,279,096 12,130,632 17,793,210 7,778,391

Bond issue costs - - - -

Debt service 11,872,555 9,991,250 8,925,096 7,975,133

TOTALS (1) $78,023,533 $65,364,263 $72,102,330 $67,879,555



CITY OF ESCONDIDOGeneral Governmental Expenditures by Function


136

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

$5,411,647 $6,199,304 $7,229,520 $7,775,441 $5,844,918 $6,296,011

27,994,445 29,333,777 31,444,785 35,177,607 40,062,738 42,059,732

8,482,884 9,408,632 9,151,894 11,259,226 14,748,096 13,038,321

7,111,223 7,629,797 9,548,422 9,945,286 11,568,694 10,951,028

5,139,190 4,732,519 2,864,746 3,482,827 9,860,308 10,401,169

10,098,943 15,289,775 14,459,312 13,931,466 16,430,287 11,796,129

267,516 - - 3,272,759 - -

8,670,939 7,983,046 9,585,758 10,771,479 12,152,617 12,243,284

$73,176,787 $80,576,850 $84,284,437 $95,616,091 $110,667,658 $106,785,674

137

Category 1994-95 1995-96 1996-97 1997-98

Total tax levy $4,284,998 $4,464,177 $4,431,144 $4,356,516

Current tax collections (1) 4,135,635 4,333,578 4,315,639 4,232,974

Percent of current taxes collected 96.51 97.07 97.39 97.16

Delinquent tax collections (1) 239,024 182,746 168,159 182,504

Total tax collections (1) 4,374,659 4,516,324 4,483,798 4,415,478

Ratio of total tax collections to total tax levy 102.09 101.17 101.19 101.35

Outstanding delinquent taxes 414,601 376,810 337,346 281,121

Ratio of delinquent taxes to total tax levy 9.68 8.44 7.61 6.45

(1) Total tax collections do not include property taxes collected for the Community DevelopmentCommission in the following amounts: 1994/95 - $5,208,242, 1995/96 - $5,638,982, 1996/97 -$5,185,336, 1997/98 - $5,575,304, 1998/99 - $7,682,739, 1999/00 - $9,009,306, 2000/01 -$10,006,352, 2001/02 - $10,509,436, 2002/03 - $11,860,699, and 2003/04 - $12,704,173.

Source: County of San Diego, Auditor and Controller's Office.

CITY OF ESCONDIDOSecured Property Tax Levies and Collections


138

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04

$4,660,002 $5,104,037 $5,482,980 $5,881,201 $6,364,173 $7,015,758

4,517,452 4,944,496 5,244,692 5,746,464 6,205,238 6,814,320

96.94 96.87 95.65 97.71 97.50 97.13

130,589 111,075 122,698 124,928 117,200 123,792

4,648,041 5,055,571 5,367,390 5,871,393 6,322,438 6,938,111

99.74 99.05 97.89 99.83 99.34 98.89

263,894 266,580 337,323 212,012 229,885 260,056

5.66 5.22 6.15 3.60 3.61 3.71

139

Estimated EstimatedFiscal Assessed Actual Assessed ActualYear Valuation (1) Value Valuation Value

1994-95 $5,225,637,734 $5,225,637,734 $157,621,805 $157,621,805

1995-96 5,307,808,766 5,307,808,766 169,550,179 169,550,179

1996-97 5,396,580,486 5,396,580,486 170,854,982 170,854,982

1997-98 5,252,896,819 5,252,896,819 204,127,220 204,127,220

1998-99 5,549,575,582 5,549,575,582 208,411,413 208,411,413

1999-00 6,127,511,864 6,127,511,864 229,809,627 229,809,627

2000-01 6,582,230,159 6,582,230,159 236,648,980 236,648,980

2001-02 7,079,496,249 7,079,496,249 247,320,156 247,320,156

2002-03 7,656,792,012 7,656,792,012 242,746,635 242,746,635

2003-04 8,330,767,634 8,330,767,634 253,041,202 253,041,202

(1) Includes City of Escondido and Community Development Commission assessed values.

Source: County of San Diego Auditor and Controller's Office.

CITY OF ESCONDIDOSchedule of Assessed Valuation


Real Property Personal Property

140

Less Less Net EstimatedProperty Homeowner's Assessed Actual

Exemptions Exemptions Valuation Value

$92,682,840 $115,679,777 $5,174,896,922 $5,383,259,539

99,224,853 118,744,339 5,259,389,753 5,477,358,945

108,285,023 118,691,783 5,340,458,662 5,567,435,468

123,238,458 119,580,024 5,214,205,557 5,457,024,039

111,817,056 120,793,091 5,525,376,848 5,757,986,995

141,349,387 126,621,290 6,089,350,814 6,357,321,491

150,401,892 128,341,771 6,540,135,476 6,818,879,139

156,943,063 132,805,073 7,037,068,269 7,326,816,405

178,100,826 133,818,795 7,587,619,026 7,899,538,647

232,688,153 139,165,316 8,211,955,367 8,583,808,836

Exemptions Total

141

Fiscal School OtherYear City County District District Total

1994-95 0.1061 0.1615 0.7365 0.0411 1.0452

1995-96 0.1050 0.1588 0.7436 0.0412 1.0486

1996-97 0.1042 0.1588 0.7544 0.0414 1.0588

1997-98 0.1028 0.1584 0.7635 0.0408 1.0655

1998-99 0.1028 0.1583 0.7579 0.0393 1.0583

1999-00 0.1028 0.1582 0.7542 0.0393 1.0545

2000-01 0.1028 0.1581 0.7502 0.0381 1.0492

2001-02 0.1028 0.1580 0.7753 0.0371 1.0731

2002-03 0.1028 0.1580 0.7753 0.0371 1.0731

2003-04 0.1028 0.1579 0.7711 0.0365 1.0683

Property tax rates are based on $1,000 of assessed valuation.

Source: County of San Diego Auditor and Controller's Office and Planning and Land Use Department.

CITY OF ESCONDIDOProperty Tax Rates

Direct and Overlapping GovernmentsLast Ten Fiscal Years

142

Current Total Ratio ofFiscal Assessment Assessment Collections toYear Billings Collected Amount Due

1994-95 $577,815 $1,534,821 265.62 %

1995-96 496,410 493,413 99.40

1996-97 890,552 890,552 100.00

1997-98 898,115 877,671 97.72

1998-99 798,277 792,661 99.30

1999-00 718,872 715,810 99.57

2000-01 789,108 784,523 99.42

2001-02 730,594 723,916 99.09

2002-03 708,977 701,366 98.93

2003-04 696,597 689,512 98.98

Source: County of San Diego, Auditor and Controller's Office.

CITY OF ESCONDIDOSpecial Assessment Collections


143

Total valuation (1) $6,854,440,987

Debt limit - 15 percent of total valuation $1,028,166,148

Amount of debt applicable to debt limit:

Bonded debt - general 0

Less amounts available:

Held by Debt Service Fund 0

Total amount of debt applicable to debt limit 0

Legal debt margin $1,028,166,148

Valuation excludes the assessed valuation allocated to the Community Development Commissionfor Redevelopment Tax Allocation increment.


CITY OF ESCONDIDOComputation of Legal Debt Margin

June 30, 2004

144

(1)Net Redevelopment General (2) Percentage Per

Fiscal Assessed Assessed Net Assessed Outstanding of Total Capita (3)Year Valuation Valuation Valuation Principal Valuation Debt Population

1994-95 5,174,896,922$ 767,128,685$ 4,407,768,237$ 490,000$ 0.0111 % 4 120,034

1995-96 5,378,134,092 808,489,379 4,569,644,713 390,000 0.0085 3 118,286

1996-97 5,288,295,473 765,306,919 4,522,988,554 285,000 0.0063 2 119,916

1997-98 5,214,205,557 776,312,465 4,437,893,092 175,000 0.0039 1 123,148

1998-99 5,525,376,848 858,646,394 4,666,730,454 60,000 0.0013 1 125,597

1999-00 6,089,350,814 1,040,278,458 5,049,072,356 0 0.0000 0 127,813

2000-01 6,540,135,476 1,171,730,988 5,368,404,488 0 0.0000 0 137,023

2001-02 7,037,068,269 1,266,059,206 5,771,009,063 0 0.0000 0 136,956

2002-03 7,587,619,026 1,396,419,458 6,191,199,568 0 0.0000 0 138,015

2003-04 8,211,954,367 1,496,679,696 6,715,274,671 0 0.0000 0 140,505

(1) Amounts represent the allocation of assessed valuation to the Community Development Commission forRedevelopment Tax Allocation increment. 1985-86 was the initial year that the Community DevelopmentCommission qualified for Redevelopment Tax Allocation increment.

(2) Source: City of Escondido Finance Department and County of San Diego Auditor and Controller's Office.

(3) All figures represent data as of January 1.Source: California State Department of Finance.

CITY OF ESCONDIDORatio of General Bonded Debt to Assessed Valuation

and Net Bonded Debt Per CapitaLast Ten Fiscal Years

145

(2)(1) Total

Fiscal Total Debt GovernmentalYear Principal Interest Service Expenditures

1993-94 $95,000 $29,125 $124,125 $101,565,670 0.1 %

1994-95 95,000 24,930 119,930 120,182,232 0.1

1995-96 100,000 20,620 120,620 65,364,263 0.2

1996-97 105,000 17,258 122,258 72,102,330 0.2

1997-98 110,000 12,612 122,612 67,879,555 0.2

1998-99 115,000 7,744 122,744 73,176,787 0.2

1999-00 60,000 2,655 62,655 80,576,850 0.1

2000-01 0 0 0 84,284,437 0.0

2001-02 0 0 0 95,616,091 0.0

2002-03 0 0 0 110,667,658 0.0

2003-04 0 0 0 106,785,674 0.0

(1) Debt Service requirement on General Obligation Bonds comprised of 1958 Sewer Bond Series 1and 2, and 1967 Storm Drain, Park, and Fire Protection Bonds and 1967 Series B StormDrainage Bonds. General Obligation Bonds were defeased as of July 1, 2000.



Ratio ofService to

GovernmentalExpenditures %

CITY OF ESCONDIDORatio of Annual Debt Service for General Bonded Debt to

Total Governmental ExpendituresLast Ten Fiscal Years

146

2003-04 Assessed Valuation: $6,854,440,987 (Adjusted Assessed Valuation after deducting $1,496,679,696 redevelopment incremental valuation.)

Percentage DebtApplicable 6/30/2004

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:City of Escondido Hidden Trails Community Facilities District 100.000 % $3,040,000City of Escondido 1915 Act Bonds 100.000 7,955,000 Total Direct Tax and Assessment Debt 10,995,000Metropolitan Water District 0.558 2,496,911San Marcos Unified School District School Facilities Improvement District No. 1 4.140 840,545San Marcos Unified School District Community Facilities District No. 1 100.000 3,245,000Escondido Union High School District 73.866 30,778,469Escondido Union School District 74.615 47,652,588San Pasqual Union School District 56.653 842,062Valley Center Unified School District 0.001 39 Total Overlapping Tax and Assessment Debt 85,855,614

TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $96,850,614

DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT:

City of Escondido Certificates of Participation 100.000 % $110,941,299

San Diego County General Fund Obligations 2.975 12,843,521San Diego County Pension Obligations 2.975 37,749,118San Diego County Superintendent of School Obligations 2.975 61,806Palomar Community College District Certificates of Participation 13.277 1,209,535San Marcos Unified School General Fund Obligations 6.829 441,495Escondido Union School District Certificates of Participation 74.615 10,315,524 Total Overlapping General Fund Obligation Debt 62,620,999

TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT $173,562,298

COMBINED TOTAL DEBT $270,412,912

Ratios to Assessed Valuation: Total Direct and Overlapping Tax and Assessment Debt 1.160%

Ratios to Adjusted Assessed Valuation: Combined Direct Debt ($84,555,010) 1.230% Combined Total Debt 3.560%

State School Building and Repayable as of 6/30/04 $0

Source: California Municipal Statistics

CITY OF ESCONDIDODirect and Overlapping Bond DebtFor the Year Ended June 30, 2004

147

(1) (2) Net RevenueFiscal Gross Operating Available forYear Revenue Expenses Debt Service Principal Interest Total

1994-95 26,282,277$ 21,624,254$ 4,658,023$ 580,000$ 708,889$ 1,288,889$ 361.40 %

1995-96 29,345,252 24,495,666 4,849,586 627,461 657,149 1,284,610 377.51

1996-97 37,916,660 25,563,900 12,352,760 705,000 146,469 851,469 1,450.76

1997-98 31,611,550 23,994,917 7,616,633 620,000 1,206,689 1,826,689 416.96

1998-99 36,518,604 27,845,631 8,672,973 660,000 1,958,078 2,618,078 331.27

1999-00 38,361,414 30,575,751 7,785,663 620,000 1,756,095 2,376,095 327.67

2000-01 43,238,559 33,738,114 9,500,445 225,000 2,936,520 3,161,520 300.50

2001-02 49,446,742 37,311,887 12,134,855 265,000 3,014,581 3,279,581 370.01

2002-03 48,085,853 37,034,927 11,050,926 305,000 3,232,935 3,537,935 312.36

2003-04 49,789,945 39,267,735 10,522,210 755,000 3,718,091 4,473,091 235.23

(1) Total revenue includes interest.

(2) Total operating expenses exclusive of depreciation.

(3) Includes principal and interest of Water and Sewer Revenue Bonds only. It does not include the GeneralObligation Bonds reported in the General Fund.


(3)Debt Service Requirements

Coverage

CITY OF ESCONDIDORevenue Bond Coverage

Water and Wastewater Enterprise FundsLast Ten Fiscal Years

148

(2) (3) (4)Fiscal (1) School Per Capita MedianYear Population Enrollment Income Age

1994-95 120,034 23,286 20,617$ 32.0 7.0

1995-96 118,286 24,330 22,900 31.8 6.3

1996-97 119,916 24,765 23,969 32.7 4.9

1997-98 123,148 26,055 25,944 32.9 3.9

1998-99 125,597 27,730 27,500 33.2 3.4

1999-00 127,813 26,870 28,393 33.3 2.9

2000-01 137,023 25,467 33,025 33.2 3.2

2001-02 136,956 25,844 34,500 33.2 4.2

2002-03 138,015 26,233 35,979 31.5 4.1

2003-04 140,505 27,257 37,000 31.5 4.2

(1) Source: California State Department of Finance.

(2) Source: Escondido Union Elementary School District and Escondido Union High SchoolDistrict.

(3) Based on County-wide forecast.Source: San Diego Chamber of Commerce.

(4) Based on County-wide averages.Source: San Diego Association of Governments (SANDAG).

(5) Based on County-wide averages.Source: Employment Development Department, State of California.

(5)Unemployment

Rate

CITY OF ESCONDIDODemographic StatisticsLast Ten Fiscal Years

149

(3)Number Number Number

Fiscal of of ofYear Permits Units Permits

1994-95 $ 1,346,019 24 $ 17,316,841 179 $ 31,974,518 1,139 $ 14,491,493

1995-96 1,362,423 16 10,589,717 392 45,458,260 1,104 15,613,657

1996-97 1,386,567 33 13,055,114 382 77,022,071 1,127 15,515,416

1997-98 1,473,251 20 10,463,832 465 94,683,011 1,213 16,445,773

1998-99 1,503,534 30 17,470,828 278 71,973,849 1,433 21,663,525

1999-00 1,564,027 31 27,747,955 277 59,944,204 1,343 20,269,947

2000-01 1,645,037 29 28,561,675 234 43,764,535 1,180 21,178,434

2001-02 1,859,692 45 33,342,080 329 68,003,048 1,372 21,812,349

2002-03 2,118,351 37 25,746,527 384 98,541,170 1,586 25,769,522

2003-04 (4) 23 13,382,486 460 96,347,942 1,424 27,289,167

(1) Source: City of Escondido Building Department.

(2) Source: City of Escondido Finance Department.

(3) Source: The Findley Reports on California Financial Institution.

(4) 2004 data for banks will not be available until 12/31/04.

(1) (1)Miscellaneous

Construction PermitsCommercial

Construction PermitsResidential

Construction Permits

CITY OF ESCONDIDOBank Deposits and Construction and Business Activity


(1)

BankDeposits

(in thousands) Valuation Valuation Valuation

150

$ 63,782,852 $ 542,895 (7.39) % $ 910,388 2.68 %

71,661,634 624,813 15.09 999,339 9.77

105,592,601 871,268 39.44 1,034,766 3.55

121,592,616 1,029,731 18.19 1,084,919 4.85

111,108,202 915,935 (11.05) 1,191,346 9.81

107,962,106 861,197 (5.98) 1,229,257 3.18

93,504,644 718,508 (16.57) 1,314,478 6.93

123,157,477 945,309 31.57 1,337,856 1.78

150,057,219 1,147,086 21.35 1,353,803 1.19

137,019,595 1,028,257 (10.36) 1,430,042 5.63

PercentageChange

TotalValuation

(2)Permit

Revenue

(2)BusinessLicenseRevenue

PercentageChange

151

Name of Company Employment

Manufacturing

R and M Industries, Inc. 113

Freeberg Industrial Fabrication 92

Special Products Division 87

U S Circuit Inc. 77

Jeropa Swiss Precision, Inc. 76

Wickline Bedding Co. 72

C H Machine 58

Unique Lighting Systems Inc. 50

Non-Manufacturing

Escondido Union School District 2,240

Palomar Medical Center 1,450

City of Escondido 1,156

Bergelectric 900

Escondido Union High School District 800

North County Transit District 585

Pacific Bell 504

Nordstrom, Inc. 413

Albertsons 409

SDG&E 407

County of San Diego 400

Superior Ready Mix 375

CITY OF ESCONDIDOLargest Employers

June 30, 2004

Source: City of Escondido Economic Development.

152

AssessedPrincipal Taxpayers Valuation

North County Fair $152,976,187 2.02 %

Goal Line Limited Partnership 56,989,181 (1) 0.75

Conrad Prebys Trust 53,915,676 (1) 0.71

Morning View Terrace 29,785,989 (1) 0.39

PG&E Dispersed Generating Company 28,050,083 0.37

Cox Communications San Diego Inc. 36,628,537 (1) 0.48

Frit Escondido Promenade LLC 25,109,724 (1) 0.33

CT Operating Partnership 24,241,280 (1) 0.32

LVND Limited 20,481,373 (1) 0.27

Albertson's Inc. 23,220,015 (1) 0.31

TOTAL $451,398,045 5.95 %

(1) Value represents multiple parcel totals.

(2) Net assessed valuation for 2003-04 is $8,211,954,367.


(2)

CITY OF ESCONDIDOPrincipal Taxpayers

June 30, 2004

Percentageof Total

Net AssessedValuation

153

Year of incorporation 1888

Form of government Council/Manager

Number of full time employees (excluding police and fire) 460

Facilities and services: Miles of streets 288 Number of street lights 4,503 Area in square miles 36.97 Culture and recreation: Community/cultural 3 Parks (developed) 13 Park acreage 431 Lake sites 2 Lake sites acreage 1,700 Sportsfields 41 Swimming pools 2 Tennis courts 17 Daley Ranch acreage 3,050 Fire protection: Number of stations 5 Number of fire personnel and officers 109 Number of calls answered 10,420 Number of inspections conducted 3,054 Police protection: Number of stations 1 Number of police personnel and officers 232 Number of patrol units 120 Number of law violations: Physical arrests 6,304 Traffic violations 10,252 Parking violations 6,647 Sewer system: Miles of sanitary sewers 362 Miles of storm drains 327 Number of treatment plants 1 Number of service connections 25,703 Daily average treatment in gallons 14,300,000 Maximum daily capacity of treatment in gallons 18,000,000 Water system: Miles of water mains 375 Number of service connections 25,073 Number of fire hydrants 4,018 Daily average consumption in gallons 30,365,000 Maximum daily capacity of plant in gallons 75,000,000

CITY OF ESCONDIDOMiscellaneous Statistics

June 30, 2004

154

Facilities and services not included in the reporting entity:

Education:

Number of elementary schools 16

Number of elementary school instructors 759 Number of middle schools 4 Number of middle school instructors 320 Number of secondary schools 6 Number of secondary instructors 380 Hospitals: Number of hospitals 1 Number of patient beds 319

Compiled by City of Escondido Finance Department.

155

156

Documents

Comprehensive Annual Financial Report - Fiscal Year Ended