city annual financial report fye 6-30-2013

CITY OF CARMEL-BY-THE-SEA, CALIFORNIA

ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED

JUNE 30, 2013

Prepared by:

Paul Wood Finance Director

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City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 Table of Contents

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Page

Table of Contents .................................................................................................................................. i Organization Chart ........................................................................................................................... iii List of Officials ………………………………………………………………………………………iv

Independent Auditors’ Report ........................................................................................................... 1

Management’s Discussion and Analysis (Required Supplementary Information) ....................... 3

Basic Financial Statements:

Government-Wide Financial Statements: Statement of Net Position ........................................................................................................ 15 Statement of Activities ............................................................................................................ 16

Fund Financial Statements:

Governmental Funds: Balance Sheet ................................................................................................................................ 20 Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position ........................................................................................................ 22 Reconciliation of Fund Basis Balance Sheet to Government-wide Statement of Net Position – Governmental Activities ............................................................. 23 Statement of Revenues, Expenditures, and Changes

in Fund Balances – Governmental Funds ................................................................................ 24 Reconciliation of Fund Basis Statements to Government-wide Statement of Activities ............................................................................................................ 26 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ............................... 27

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget to Actual – General Fund and Major Special Revenue Funds ................................................................................................. 28

FINANCIAL SECTION

INTRODUCTORY SECTION

City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 Table of Contents, Continued

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Page Basic Financial Statements, Continued:

Notes to Basic Financial Statements .......................................................................................... 33

Other Supplemental Information:

Required Supplementary Information: Other Postemployment Benefits – Schedule of Funding Progress ................................................ 61

Combining and Individual Fund Financial Statements and Schedules:

Nonmajor Governmental Funds: Combining Balance Sheet ............................................................................................................. 66 Combining Statement of Revenues, Expenditures, and Changes

in Fund Balances ............................................................................................................... 68

Nonmajor Special Revenue Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual ............................................................................................................... 70

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in

Accordance With Government Auditing Standard .................................................................. 75

City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 Organization Chart

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City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 List of Officials

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Jason Burnett, Mayor Ken Talmage, Vice Mayor Victoria Beach, Councilmember Carrie Theis, Councilmember Steve Hillyard, Councilmember

Jason Stilwell, City Administrator

Don Freeman, City Attorney

Susan Paul, Administrative Services Director

James Emery, City Treasurer

Sherman Low, City Engineer

CITY OFFICIALS

CITY COUNCIL

7080 Donlon Way, Suite 204, Dublin, CA 94568 ● phone (925) 556-6200 ● fax: (510) 217-5930 www.jjacpa.com

INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor and City Council of the City of Carmel-by-the-Sea Carmel-by-the-Sea, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, the aggregate remaining fund information, and the budgetary comparison information of the City of Carmel-by-the-Sea, California (City), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

To the Honorable Mayor and City Council of the City of Carmel-by-the-Sea Carmel-by-the-Sea, California Page 2

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and budgetary comparison information and other information listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual nonmajor fund financial statements and the introductory sections are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements and the introductory sections are the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and the introductory sections are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

The combining and individual nonmajor fund financial statements and the introductory sections has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated January 31, 2014 on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.

]]TVcT? \ÇvA January 31, 2014 JJACPA, INC. Dublin, CA

City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 Management’s Discussion and Analysis

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This section provides a narrative overview and analysis of the financial activities of the City of Carmel-by-the-Sea (City) for the fiscal year ended June 30, 2013. It should be read in conjunction with the accompanying transmittal letter and basic financial statements. FINANCIAL HIGHLIGHTS ♦ As of June 30, 2013, total assets of the City exceeded its liabilities by $32,377,893 (net position).

The portion of net position that may be used to meet the government’s ongoing obligations to citizens and creditors (unrestricted net position) is $2,205,463. The portion of net position that is restricted and may only be used for specific purposes is $566,992. The remaining $29,605,438 is invested in capital assets.

♦ As of June 30, 2013, the City’s governmental funds reported combined ending fund balances of

$10,558,901. Approximately .4% of this total amount ($46,747) is non-spendable to indicate that it is not available because it represents amounts that are more long-term in nature or will never be converted to cash. Of the remaining balance, $566,992 is restricted because it represents resources that are required to be spent for specific purposes as provided by an external source. The committed balance of $2,898,615 represents a Council commitment for economic uncertainties and anticipated future short-term structural deficits. The assigned fund balances in Special Revenue Funds amounted to $1,793,249 and represented Library, Parking and Ambulance Fund items. The remaining fund balance is unassigned.

♦ Capital assets, net of depreciation, decreased to $37,285,185 from $39,349,535, due to depreciation

and adjustments of ($1,256,304) and net capital asset retirements and adjustments of ($808,046).

City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 Management’s Discussion and Analysis, Continued

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OVERVIEW OF THE ANNUAL FINANCIAL REPORT This Annual Financial Report is in two major parts: 1) Introductory section, which includes the Transmittal Letter and general information; 2) Financial section, which includes the Management’s Discussion and Analysis (this part), the Basic

Financial Statements, which include the Government-wide and the Fund Financial Statements along with the notes to these financial statements and Combining and Individual Fund Financial Statements and Schedules.

The Basic Financial Statements The Basic Financial Statements are comprised of the Government-wide Financial Statements and the Fund Financial Statements; these two sets of financial statements provide two different views of the City’s financial activities and financial position. The Government-wide Financial Statements The Government-wide Financial Statements provide a broad overview of the City’s activities as a whole and comprise the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities on the full accrual basis, similar to that used by corporations. The Statement of Activities provides information about all the City’s revenues and all its expenses, also on the full accrual basis, with the emphasis on measuring net revenues or expenses of each the City’s programs. The Statement of Activities explains in detail the change in Net Position for the year. All of the City’s activities are grouped into Governmental Activities, as explained below. ♦ Governmental activities – All of the City’s basic services are considered to be governmental

activities, including general government, community development, economic development, public safety, animal control, engineering, community events, public improvements, planning and zoning, building inspections, and general administration. These services are supported by general City revenues such as taxes and by specific program revenues such as developer fees.

Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds.


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OVERVIEW OF THE ANNUAL FINANCIAL REPORT, Continued Fund Financial Statements, continued 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 the Governmental Fund Financial Statements is narrower 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 Statement. By doing so, readers may better understand the long-term impact of the government’s near-term financial 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 Governmental Fund Financial Statements provide detailed information about each of the City’s most significant funds, called major funds. The concept of major funds, and the determination of which are major funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them as one total. Instead, each major fund is presented individually, with all non-major funds summarized and presented only in a single column. Subordinate schedules present the detail of these non-major funds. Major funds present the major activities of the City for the year, and may change from year to year as a result of changes in the pattern of the City’s activities. For the fiscal year ended June 30, 2013, the City’s major funds are as follows: GOVERNMENTAL FUNDS:

General Fund Harrison Memorial Library Special Revenue Fund Parking Special Revenue Fund Ambulance Special Revenue Fund

Notes to the Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the Government-wide and Fund Financial Statements. The notes to the basic financial statements can be found on pages 33-60 of this report. Required Supplementary Information follows the notes on page 61. Combining and Individual Fund Financial Statements and Schedules The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the notes to the financial statements. Combining and individual fund statements can be found on pages 63-73 of this report.


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GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets exceeded liabilities by $32,377,893 as of June 30, 2013. The Summary of Net Position as of June 30, 2013, and 2012, follows:

2013 2012Govern- Govern-mental mental

Activities Activities Changes

Current and other assets 12,042,025$ 11,027,118$ 1,014,907$ Noncurrent assets 37,285,185 39,349,535 (2,064,350)

Total assets 49,327,210 50,376,653 (1,049,443)

Current and other liabilities 2,440,181 1,812,246 627,935 Long-term liabilities 14,509,136 9,226,006 5,283,130

Total liabilities 16,949,317 11,038,252 5,911,065

Net position:Net invested in capital assets 29,605,438 31,374,354 (1,768,916)

Restricted 566,992 555,524 11,468 Unrestricted 2,205,463 7,408,523 (5,203,060)

Total net position 32,377,893$ 39,338,401$ (6,960,508)$

Summary of Net Position


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued The change in net position for the fiscal years ended June 30, 2013, and 2012, follows:

2013 2012Govern- Govern-mental mental

Activities Activities Changes

Revenues:Program revenues:

Charges for services 702,381$ 493,248$ 209,133$ Grants and contributions:

Operating 1,474,331 871,230 603,101 General revenues:

Property taxesand assessments 4,652,176 4,571,481 80,695

Transient occupancy taxes 4,615,598 4,179,900 435,698 Sales tax 2,760,414 1,743,748 1,016,666 Franchises 981,831 491,674 490,157 Business licenses 577,364 532,019 45,345 Use of money and property 69,735 55,995 13,740

Other general revenues 98,331 276,751 (178,420) Total revenues 15,932,161 13,216,046 2,716,115

Expenses:Governmental activities:

Administration 9,481,135 2,904,382 6,576,753 Building maintenance 3,763,094 2,718,581 1,044,513 Public safety 4,193,157 4,694,672 (501,515) Public works 1,896,305 1,790,684 105,621 Forest, parks and beaches 472,123 1,578,381 (1,106,258) Culture and recreation 2,405,481 1,314,073 1,091,408 Economic development 304,587 361,458 (56,871) Interest and fiscal charges 376,787 194,153 182,634

Total expenses 22,892,669 15,556,384 7,336,285

Excess (Deficiency) of revenues overexpenditures before transfers (6,960,508) (2,340,338) (4,620,170)

Transfers - - -

Special Item:Infrastructure capitalization - 13,760,000 (13,760,000)

Change in net position (6,960,508) 11,419,662 (4,620,170)

Net position:Beginning of year 39,338,401 27,918,739 11,419,662 End of year 32,377,893$ 39,338,401$ 6,799,492$

Changes in Net Position


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued Revenues The City’s total revenues for governmental were $15,932,161 for the fiscal year ended June 30, 2013. Approximately 75% of the City’s key revenues are generated from three major sources. The following discusses variances in key revenues from the prior fiscal year:

1. Property Taxes. Property taxes increased 1.77% over last year reflecting a continuing strengthening real estate market over the past year.

2. Transient occupancy taxes. Hostelry taxes increased 10.42% reflecting a continuing growth in tourism and potential benefit from citywide and individual marketing efforts.

3. Sales Tax. Annual receipts increased 4.8%. This increase is attributed to increases in

building and construction (+21%) and hotels and restaurants (+8%) offset by decreases in general consumer goods (-1%) and business and industry (-34%). We anticipate that sales tax revenue will continue to rebound next fiscal year at about a 4% rate. Beginning in April, 2013, the City started collecting an additional 1% use tax pursuant to the passage of Measure D in the November, 2012 election. Receipts for the three months ended June 30, 2013 were in excess of $682,000.


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued Expenses Governmental activity expenses of the City for the year totaled $22,892,669. Public Safety costs represented 18.32% of total governmental activities expenses and represented the largest single expense for governmental activities. Governmental Activities The following table shows the cost of each of the City’s major programs and the net cost of the programs. Net cost is the total cost less fees and other direct revenue generated by the activities. The net cost reflects the financial burden that was placed on the City’s taxpayers by each of the programs. The total cost of services and the net cost of services for the fiscal years ended June 30, 2013, and 2012, are as follows:

Total Cost Net Cost Total Cost Net Costof Services of Services of Services of Services

Administration 9,481,135$ 9,461,314$ 2,904,382$ 2,899,647$ Building maintenance 3,763,094 3,763,094 2,718,581 2,718,581 Public safety 4,193,157 3,250,139 4,694,672 4,065,576 Public works 1,896,305 1,118,292 1,790,684 1,096,067 Forest, parks and beaches 472,123 472,123 1,578,381 1,578,381 Culture and recreation 2,405,481 1,969,621 1,314,073 1,278,043 Economic development 304,587 304,587 361,458 361,458 Interest and fiscal charges 376,787 376,787 194,153 194,153

Total 22,892,669$ 20,715,957$ 15,556,384$ 14,191,906$

2013 2012


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued Revenues by source for the fiscal years ended June 30, 2013, and 2012, are as follows:

Charges for services4.41%

Operating grants9.25%

Property taxes29.20%

Transient occupancy taxes

28.97%

Sales tax17.33%

Franchises6.16%

Business licenses3.62%

Use of money and property

0.44%

Other general revenues0.62%

Revenues by Source - Governmental Activities 2013

Charges for services 3.73%

Operating grants 4.46%

Capital grants 2.13%

Property taxes 34.59%Transient

occupancy tax 31.63%

Sales and use tax 13.19%

Franchises 3.72%

Business licenses 4.03%

Use of money & property 0.42% Other 2.09%

Revenues by Source - Governmental Activities2012


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued

Financial Analysis of the Government’s Funds

The City of Carmel-by-the-Sea uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements focus on individual parts of the City government, reporting the City’s operations in more detail than the government-wide financial statements.

Governmental funds. The City’s governmental funds provide information on near-term inflows, outflows, and balances of spending resources. At the fiscal year ended June 30, 2013, the City’s governmental funds reported combined fund balances of $10,558,901. This is an increase of $1,190,077 or 12.7% over last year. The increase is due to both a surplus of revenue vs. budget, and a savings on expenditures vs. budget. The General Fund is the chief operating fund of the City. At the fiscal year ended June 30, 2013, General Fund committed and unassigned fund balance totaled $8,151,913 of which $5,253,298 was unassigned.

General Fund Budgetary Highlights

The difference between the final budget and actual revenues reflects a positive amount of $1,383,550. This was mainly due to an increase in all tax revenues, property, sales and transient occupancy taxes.

There was a $577,538 difference between the final expenditure budget and actual expenditures. Actual expenditures were $577,538. More than this amount ($651,785) was due to unbudgeted debt service payments for the new Pension Obligation Bonds. Otherwise, the General Fund expenditures reflect a surplus against budget.

Capital Assets

The City’s investment in capital assets for its governmental activities as of June 30, 2013, amount to $37,285,185. This investment in capital assets includes roads, curbs and gutters, streets and sidewalks, and drainage systems.

2013 2012Land 3,633,723$ 3,488,036$ Art 1,467,918 1,467,918 Buildings and improvements 17,997,655 19,257,849 Vehicles 347,338 409,114 Infrastructure 13,301,333 13,760,000 Machinery and equipment 537,218 966,618

Total 37,285,185$ 39,349,535$

Governmental Activities

More detail of the capital assets and current activity can be found in the notes to the financial statements on pages 39 and 40 for significant accounting policies and Note 4 on page 48 for other capital asset information.


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GOVERNMENT-WIDE FINANCIAL ANALYSIS, Continued Debt Administration Debt, considered a liability of governmental activities, increased by $5,869,566, reflecting the pay down of the Sunset bond and lease obligations, offset by an increase in the OPEB obligation, and the issuance of the new Pension Obligation Bonds, see Note 6 on page 49. Compensated absences decreased by $79,995 to $458,376 of which $273,981 is considered a current liability.

Economic Outlook

Fiscal year 2013-2014 will continue to be another “hard to forecast” year. While consumer spending continues to rise at a modest pace, still assisted by an extraordinarily simulative Federal Reserve, it is hard to predict what consumers will do when the Fed takes its foot off the gas pedal. The State of California has seen larger than expected revenue surpluses brought about by Proposition 30’s personal income tax rates for high-income taxpayers and healthy local property tax growth, but the state’s Legislative Analyst’s Office (LAO) expresses cautious optimism due to economic and political uncertainty. On issues that relate to us more locally, Wells Fargo’s “California Economic Outlook” states that California tourism continues to rebound with hotel occupancy and ADR (average daily room rate). Average daily rates in the San Francisco and San Jose areas are up roughly 8 to 10 percent year to date. From our records, we confirm the trend with Carmel’s YOY (year over year) ADR increasing 8%. Somewhat promising, recent unemployment figures for the Monterey Region have fallen to 10.9 percent from over 12 percent last year. Additionally, home prices are rising in the coastal region, and are adding to local coffers in property taxes. These factors and the many unanswered questions concerning political, fiscal, including international monetary outcomes, will likely result in a relatively weak economic period ahead.

The City’s major General Fund revenue sources are property tax, hostelry tax and sales tax. All of these revenue sources are rising currently, but with the economy in such slow recovery, and for such unsustainable reasons, we must prepare ourselves for an economic slowdown. We are estimating an increase for sales tax revenue in fiscal year 2013–2014 of 3-4%. Also, in fiscal year 2013–2014, we are estimating property taxes to increase 4-5%.

The City maintains a multi-year forecasting model to project anticipated revenues and expenditures. The model projects continued increased revenues through fiscal year 2017-18, along with increased investments in infrastructure maintenance, capital outlay and IT backbone and infrastructure. If the national economy reverses, there will be a correlated reduction in this capital spending.

Requests for Information

This Annual Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. If you have any questions about this report, need additional financial information, or would like to obtain component unit financial statements, contact the City of Carmel-by-the-Sea Finance Department, PO Box CC, Carmel-by-the-Sea, CA 93921, or visit the City’s web page at ci.carmel.ca.us/carmel/.

BASIC FINANCIAL STATEMENTS

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City of Carmel-by-the-Sea, CaliforniaStatement of Net Position

June 30, 2013


ASSETSCurrent assets:

Cash and investments 9,012,438$ Cash and investments with fiscal agents 400,008 Receivables:

Accounts receivable 809,875 Intergovernmental receivable 929,066 Other receivables 890,638 Total current assets 12,042,025

Noncurrent assets:Capital assets:

Nondepreciable 5,101,641 Depreciable 32,183,544 Total noncurrent assets 37,285,185

Total assets 49,327,210

LIABILITIESCurrent liabilities:

Accounts payable and accrued liabilities 562,889 Deposits payable 460,235 Interest payable 47,793 Compensated absences - current portion 273,981 Due within one year 1,095,283

Total current liabilities 2,440,181 Noncurrent liabilities:

Long-term liabilities:Claims liabilities 460,000 Compensated absences 184,395 Due after one year 12,749,464 Net OPEB obligation 1,115,277 Total noncurrent liabilities 14,509,136

Total liabilities 16,949,317

NET POSITIONNet invested in capital assets 29,605,438 Restricted 566,992 Unrestricted 2,205,463

Total net position 32,377,893$

Total liabilities and net position 49,327,210$

The accompanying notes are an integral part of these basic financial statements.

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City of Carmel-by-the-Sea, CaliforniaStatement of Activities

For the year ended June 30, 2013

OperatingCharges for Grants and

Functions/Programs Expenses Services ContributionsPrimary government:Governmental activities:

Administration 9,481,135$ 19,821$ -$ Building maintenance 3,763,094 - - Public safety 4,193,157 167,723 775,295Public works 1,896,305 433,928 344,085Forest, parks and beaches 472,123 - - Culture and recreation 2,405,481 80,909 354,951Economic development 304,587 - - Interest and fiscal charges 376,787 - -

Total governmental activities 22,892,669 702,381 1,474,331

Total primary government 22,892,669$ 702,381$ 1,474,331$

General revenues: Taxes:

Property taxes, levied for general purposesTransient occupancy tax, levied for general purposesSales and use tax

FranchisesBusiness licensesUse of money and propertyOther general revenues

Total general revenuesTransfers

Total general revenues and transfers

Change in net positionNet position:

Beginning of yearNet position - Ending

Program Revenues


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GovernmentalActivities Totals

(9,461,314)$ (9,461,314)$ (3,763,094) (3,763,094) (3,250,139) (3,250,139) (1,118,292) (1,118,292)

(472,123) (472,123) (1,969,621) (1,969,621)

(304,587) (304,587) (376,787) (376,787)

(20,715,957) (20,715,957)

(20,715,957) (20,715,957)

4,652,176 4,652,176 4,615,598 4,615,598 2,760,414 2,760,414

981,831 981,831 577,364 577,364

69,735 69,735 98,331 98,331

13,755,449 13,755,449 - -

13,755,449 13,755,449

(6,960,508) (6,960,508)

39,338,401 39,338,401 32,377,893$ 32,377,893$

Net (Expense) Revenue andChanges in Net Position

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Fund

Governmental Funds:

General Fund

Harrison Memorial Library Special Revenue Fund

Parking Special Revenue Fund

Ambulance Special Revenue Fund Accounts for activities associated with ambulance service billings,which have been outsourced to a third party.

FUND FINANCIAL STATEMENTS

Description

MAJOR FUNDS

The Fund Financial Statements present only individual major fiunds, while non-major funds are combined in a single column. Major funds are defined as having significant activities or balances in the current year.

Accounts for activities associated with the Harrison Memorial Library

Accounts for activities associated with parking in-lieu fees.

Primary operating fund of the City; accounts for all activities except those legally or administratively required to be accounted for in other funds.

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City of Carmel-by-the-Sea, CaliforniaBalance Sheet

Governmental Funds

June 30, 2013

General Harrison MemorialFund Library Parking

ASSETS

Cash and investments 7,165,306$ 614,752$ 698,086$ Cash and investments with fiscal agents - - - Receivables:

Accounts 146,812 - - Intergovernmental 892,080 - - Other receivable 890,638 - -

Due from other funds 452,477 - -

Total assets 9,547,313$ 614,752$ 698,086$

LIABILITIES AND FUND BALANCES

Liabilities:Accounts payable and accrued liabilities 475,165$ -$ -$ Deposits payable 460,235 - - Due to other funds - - - Claims liabilities 460,000 - -

Total liabilities 1,395,400 - -

Fund balances:Nonspendable:

Endowments - 46,747 - Restricted reported in:

Special revenue funds - - Committed 2,898,615 - - Assigned reported in:

Special revenue funds - 568,005 698,086Unassigned (deficit), reported in:

General Fund 5,253,298 - -

Total fund balances 8,151,913 614,752 698,086

Total liabilities and fund balances 9,547,313$ 614,752$ 698,086$

Major Funds


Special Revenue Funds

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NonmajorGovernmental

Ambulance Funds Totals

-$ 534,294$ 9,012,438$ 400,008 400,008

663,063 - 809,875 - 36,986 929,066 - - 890,638 - - 452,477

663,063$ 971,288$ 12,494,502$

86,259$ 1,465$ 562,889$ - - 460,235

452,477 - 452,477 - - 460,000

538,736 1,465 1,935,601

- - 46,747

- 566,992 566,992 - - 2,898,615

124,327 402,831 1,793,249

- - 5,253,298

124,327 969,823 10,558,901

663,063$ 971,288$ 12,494,502$

21

City of Carmel-by-the-Sea, CaliforniaReconciliation of the Governmental Funds Balance Sheet

to the Statement of Net Position

June 30, 2013

Total fund balances - total governmental funds 10,558,901$

37,285,185

Compensated absences (458,376)$ Long-term liabilities (13,844,747) Net OPEB obligation (1,115,277) (15,418,400)

(47,793)

Net position of governmental activities 32,377,893$


Amounts reported for governmental activities in the Statement of Net Position aredifferent because:

Long-term liabilities are not due and payable in the current period and,therefore, are not reported in the governmental funds balance sheet.

Capital assets used in governmental activities are not current financialresources and, therefore, are not reported in the governmental funds balancesheet.

Interest payable on long-term debt does not require the use of current financial resources and, therefore, is not reported in the governmental funds.

22

City of Carmel-by-the-Sea, CaliforniaReconciliation of Fund Basis Balance Sheet to Government-wide Statement of Net Position


June 30, 2013

Governmental Funds Changes Statement of

Balance Sheet Reclassifications in GAAP Net PositionASSETS

Current assets:Cash and investments 9,012,438$ -$ -$ 9,012,438$ Cash and investments with fiscal agents 400,008 400,008 Receivables:

Accounts receivable 809,875 - - 809,875 Intergovernmental receivable 929,066 - - 929,066 Other receivable 890,638 - - 890,638

Due from other funds 452,477 (452,477) - - Total current assets 12,494,502 (452,477) - 12,042,025

Noncurrent assets:Capital assets, net - - 37,285,185 37,285,185

Total noncurrent assets - - 37,285,185 37,285,185 Total assets 12,494,502$ (452,477)$ 37,285,185$ 49,327,210$

LIABILITIESCurrent liabilities:

Accounts payable and accrued liabilities 562,889$ -$ -$ 562,889$ Deposits payable 460,235 - - 460,235 Due to other funds 452,477 (452,477) - - Interest payable - - 47,793 47,793 Compensated absences - current - - 273,981 273,981 Due within one year 1,095,283 1,095,283

Total current liabilities 1,475,601 (452,477) 1,417,057 2,440,181 Noncurrent liabilities:

Long-term liabilities:Claims liabilities 460,000 - - 460,000 Compensated absences - - 184,395 184,395 Due after one year - 12,749,464 12,749,464 Net OPEB obligation - - 1,115,277 1,115,277 Total noncurrent liabilities 460,000 - 14,049,136 14,509,136 Total liabilities 1,935,601 (452,477) 15,466,193 16,949,317

FUND BALANCES/NET POSITIONFund balances:Nonspendable:

Endowments 46,747 (46,747) - - Restricted reported in:

Special revenue funds 566,992 (566,992) - - Assigned reported in:

Special revenue funds 1,793,249 (1,793,249) - - Capital projects funds - - - -

Unassigned (deficit), reported in:General Fund 5,253,298 (5,253,298) Special revenue funds - - - -

Net position:Net invested in capital assets - - 29,605,438 29,605,438 Restricted - - 566,992 566,992 Unrestricted - 10,558,901 (8,353,438) 2,205,463

Total fund balances/ net position 10,558,901 - 21,818,992 32,377,893 Total liabilities and net position 12,494,502$ (452,477)$ 37,285,185$ 49,327,210$


23

City of Carmel-by-the-Sea, CaliforniaStatement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds


General Harrison MemorialFund Library Parking

REVENUES:Taxes and assessments 12,505,034$ -$ -$ Licenses and permits 1,011,292 - - Fines and forfeitures 16,647 - - Intergovernmental 378,410 4,050 - Use of money and property 283,233 1,273 - Charges for services 88,200 18,098 - Contributions 3,884 350,901 - Other revenues 109,392 - -

Total revenues 14,396,092 374,322 -

EXPENDITURES:Current:

Administration 3,029,816 - - Building maintenance 2,263,763 - - Public safety 3,114,048 - - Public works 1,313,412 - - Forest, parks and beaches 466,021 - - Culture and recreation 673,022 1,227,965 - Economic development 304,587 - -

Capital outlay 651,785 - - Debt service:

Principal 410,434 - - Interest and fiscal charges 216,284 - -

Total expenditures 12,443,172 1,227,965 -

REVENUES OVER (UNDER)EXPENDITURES 1,952,920 (853,643) -

OTHER FINANCING SOURCES (USES):Proceeds from sales of assets 2,346 - - Transfers in 4,924,039 945,455 - Transfers out (5,986,953) - - Proceeds from bond issuance 6,280,000 - - Retirement of PERS side fund (6,280,000) - -

Total other financing sources (uses) (1,060,568) 945,455 -

Net change in fund balances 892,352 91,812 -

FUND BALANCES:Beginning of year 7,259,561 522,940 698,086

End of year 8,151,913$ 614,752$ 698,086$

Major Funds



24

OtherGovernmental

Ambulance Funds Totals

-$ -$ 12,505,034$ - 183,800 1,195,092 - 116,521 133,168 - 226,844 609,304

168 - 284,674 606,299 25,769 738,366

- - 354,785 - - 109,392

606,467 552,934 15,929,815

- - 3,029,816 - - 2,263,763

912,836 - 4,026,884 - 28,192 1,341,604 - - 466,021 - 17,209 1,918,196 - - 304,587 - - 651,785

- - 410,434 - 112,710 328,994

912,836 158,111 14,742,084

(306,369) 394,823 1,187,731

- - 2,346 310,748 121,747 6,301,989

- (315,036) (6,301,989) - - 6,280,000 - - (6,280,000)

310,748 (193,289) 2,346

4,379 201,534 1,190,077

119,948 768,289 9,368,824

124,327$ 969,823$ 10,558,901$

25

City of Carmel-by-the-Sea, CaliforniaReconciliation of Fund Basis Statements to Government-wide Statement of Activities


Capital

Asset Government-

Fund Based Debt Compensated (Additions)/ OPEB wide

Functions/Programs Totals Service Absences Depreciation Retirements Obligation Adjustment Totals

Governmental activities:

Administration 3,029,816$ 6,280,000$ (79,995)$ 2,055$ -$ 248,871$ 388$ 9,481,135$

Infrastructure capitalization - - - - - - -

Building maintenance 2,263,763 - - 39,888 1,459,443 - 3,763,094

Public safety 4,026,884 - - 166,273 - - - 4,193,157

Public works 1,341,604 - - 554,701 - - - 1,896,305

Forest, parks and beaches 466,021 - - 6,102 - - - 472,123

Culture and recreation 1,918,196 - - 487,285 - - 2,405,481

Economic development 304,587 - - - - - 304,587

Capital outlay 651,785 (651,397) - (388) -

Debt service/Interest 739,428 (362,641) - - - - - 376,787

Total governmental activities 14,742,084$ 5,917,359$ (79,995)$ 1,256,304$ 808,046$ 248,871$ -$ 22,892,669$


26

City of Carmel-by-the-Sea, CaliforniaReconciliation of the Statement of Revenues, Expenditures, and Changes in

Fund Balances of Governmental Funds to the Statement of Activities


Net change in fund balances - total governmental funds 1,190,077$

Capital asset purchases capitalized 651,397$ Capital asset retirements (1,459,443) Depreciation expense (1,256,304) (2,064,350)

410,434

Change in interest payable (47,793) Change in compensated absences 79,995 32,202

The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt and related items.

Bond issuance (6,280,000)

Net OPEB obligation (248,871)

Change in net position of governmental activities (6,960,508)$

Amounts reported for governmental activities in the Statement of Activities aredifferent because:

Governmental funds report capital outlays as expenditures whilegovernmental activities report depreciation expense to allocate thoseexpenditures over the life of the assets:

Some expenses reported in the Statement of Activities do not require theuse of current financial resources and, therefore, are not reported asexpenditures in governmental funds:


Certain employee benefit obligations are recorded on a pay-as-you-gobasis in the governmental funds, but are accrued as liabilities in the

Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position

27


Budget to Actual - General Fund and Major Special Revenue Funds


PositiveOriginal Final Actual (Negative)

REVENUES:Taxes and assessments 11,373,698 11,484,861 12,505,034$ 1,020,173$ Licenses and permits 895,000 895,000 1,011,292 116,292 Fines and forfeitures 195,200 195,200 16,647 (178,553) Intergovernmental 86,700 158,715 378,410 219,695 Use of money and property 59,300 59,300 283,233 223,933 Charges for services 90,700 94,200 88,200 (6,000) Contributions - - 3,884 3,884 Other revenues 125,266 125,266 109,392 (15,874)

Total revenues 12,825,864 13,012,542 14,396,092 1,383,550


Administration 3,118,986 3,087,145 3,029,816 57,329 Building maintenance 2,358,243 2,367,575 2,263,763 103,812 Public safety 3,368,141 3,139,902 3,114,048 25,854 Public works 1,205,221 1,169,912 1,313,412 (143,500) Forest, parks and beaches 518,567 535,636 466,021 69,615 Culture and recreation 722,670 711,756 673,022 38,734 Economic development 306,735 306,735 304,587 2,148

Capital outlay - - 651,785 (651,785) Debt service:

Principal 285,000 285,000 410,434 (125,434) Interest and fiscal charges 252,200 252,200 216,284 35,916

Total expenditures 12,135,763 11,855,861 12,443,172 (587,311)

REVENUES OVER (UNDER)EXPENDITURES 690,101 1,156,681 1,952,920 796,239

OTHER FINANCING SOURCES (USES):Proceeds from sales of assets - - 2,346 2,346 Transfers in 575,002 585,002 4,924,039 4,339,037 Transfers out - - (5,986,953) (5,986,953) Proceeds from bond issuance - 6,280,000 Retirement of PERS side fund - (6,280,000)

Total other financing sources (uses) 575,002 585,002 (1,060,568) (1,645,570)

Net change in fund balances 1,265,103 1,741,683 892,352 (849,331)

FUND BALANCES:Beginning of year 7,259,561 7,259,561 7,259,561 -

End of year 8,524,664$ 9,001,244$ 8,151,913$ (849,331)$

General Fund


Budgeted AmountsVariance w/Final

28

Positive PositiveOriginal Final Actual (Negative) Original Final Actual (Negative)

-$ -$ -$ -$ -$ -$ -$ -$ - - - - - - - - - - - - - - - - - - 4,050 4,050 - - - -

1,000 1,000 1,273 273 - - - - 19,000 19,000 18,098 (902) - - - -

300,200 300,200 350,901 50,701 - - - - - - - - - - - -

320,200 320,200 374,322 54,122 - - - -

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

1,309,176 1,276,828 1,227,965 48,863 - - - - - - - - - - - -

- - - - - - - - - - - - -

1,309,176 1,276,828 1,227,965 48,863 - - - -

(988,976) (956,628) (853,643) 102,985 - - - -

- - - - - - - - - - 945,455 945,455 - - - - - - - - - - - -

- - 945,455 945,455 - - - -

(988,976) (956,628) 91,812 1,048,440 - - - -

522,940 522,940 522,940 - 698,086 698,086 698,086 -

(466,036)$ (433,688)$ 614,752$ 1,048,440$ 698,086$ 698,086$ 698,086$ -$

(continued)

Harrison Memorial Library Parking

Budgeted Amounts Budgeted AmountsVariance w/Final Variance w/Final

29


Budget to Actual - General Fund and Major Special Revenue Funds, Continued


PositiveOriginal Final Actual (Negative)

REVENUES:Taxes and assessments -$ -$ -$ -$ Licenses and permits - - - - Fines and forfeitures - - - - Intergovernmental - - - - Use of money and property - - 168 168 Charges for services 370,000 370,000 606,299 236,299 Contributions - - - - Other revenues - - - -

Total revenues 370,000 370,000 606,467 236,467


Administration - - - - Building maintenance - - - - Public safety 803,179 782,576 912,836 (130,260) Public works - - - - Forest, parks and beaches - - - - Culture and recreation - - - - Economic development - - - -

Debt service:Principal - Interest and fiscal charges - - - -

Total expenditures 803,179 782,576 912,836 (130,260)

REVENUES OVER (UNDER)EXPENDITURES (433,179) (412,576) (306,369) 106,207

OTHER FINANCING SOURCES (USES):Proceeds from sales of assets - - - - Transfers in - - 310,748 310,748 Transfers out - - - -

Total other financing sources (uses) - - 310,748 310,748

Net change in fund balances (433,179) (412,576) 4,379 416,955

FUND BALANCES:Beginning of year 119,948 119,948 119,948 -

End of year (313,231)$ (292,628)$ 124,327$ 416,955$

(concluded)

Budgeted Amounts

AmbulanceVariance w/Final


30

31

NOTES TO BASIC FINANCIAL STATEMENTS

City of Carmel-by-the-Sea, California Basic Financial Statements For the year ended June 30, 2013 Index to Notes to Basic Financial Statements

32

Page Note 1 - Summary of Significant Accounting Policies .................................................................... 33

Financial Reporting Entity ............................................................................................................. 33 Basis of Presentation ...................................................................................................................... 35 Measurement Focus ....................................................................................................................... 37 Basis of Accounting ....................................................................................................................... 37 Assets, Liabilities, and Equity ....................................................................................................... 38 Revenues, Expenditures, and Expenses ......................................................................................... 43 Budgetary Accounting ................................................................................................................... 44

Note 2 – Cash and Investments ......................................................................................................... 45 Note 3 – Accounts Receivable ........................................................................................................... 48 Note 4 – Capital Assets ...................................................................................................................... 48 Note 5 – Accounts Payable and Accrued Liabilities ....................................................................... 49 Note 6 – Long-term Liabilities .......................................................................................................... 49 Note 7 – Net Position/ Fund Balances .............................................................................................. 52 Note 8 – Interfund Transactions ...................................................................................................... 54 Note 9 – Risk Management ............................................................................................................... 55 Note 10 – Public Employee’s Retirement System ........................................................................... 56

Plan Description ............................................................................................................................. 56 Funding Policy ............................................................................................................................... 56

Note 11 – Other Post-Employment Benefits .................................................................................... 56 Note 12 – Commitments and Contingencies .................................................................................... 59 Note 13 – New Accounting Pronouncements ................................................................................... 59

City of Carmel-by-the-Sea, California Notes to Basic Financial Statements For the year ended June 30, 2013

33

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The City of Carmel-by-the-Sea (City) was incorporated on November, 1956, under the laws and regulations of the State of California (State). The City operates under a City Council/Manager form of government and provides the following services: public works, planning and building, general administrative services, public safety (County Sheriff), fire suppression and prevention services, and sewage treatment services. The financial statements of the City have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. On June 15, 1987, GASB issued a codification of the existing Governmental Accounting and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. The City applies all GASB pronouncements to its activities. In addition, the City applies all Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) issued after November 30, 1989, unless they conflict with or contradict GASB pronouncements. The more significant of these accounting policies are described below and, where appropriate, subsequent pronouncements will be referenced. Financial Reporting Entity The City operates as a self-governing local government unit within the State. It has limited authority to levy taxes and has the authority to determine user fees for the services that it provides. The City’s main funding sources include sales taxes, other intergovernmental revenue from state and federal sources, user fees, and federal and state financial assistance. All property taxes are paid to San Mateo County (County) as part of the revenue neutrality payment obligation. The financial statements do not reflect the amounts received on behalf of the City and retained by the County. The financial reporting entity consists of (a) the primary government, the City, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Financial accountability is defined as the appointment of a voting majority of the component unit’s board, and either (a) the City has the ability to impose its will on the organization, or (b) there is a potential for the organization to provide a financial benefit to or impose a financial burden on the City.

City of Carmel-by-the-Sea, California Notes to Basic Financial Statements, Continued For the year ended June 30, 2013

34

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Financial Reporting Entity, Continued As required by GAAP, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable. These component units are reported on a blended basis. 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 data of the primary government. The financial statements of the individual component units, if applicable as indicated below, may be obtained by writing to the City of Carmel-by-the-Sea, Finance Department, Post Office Box CC, Carmel-by-the-Sea, CA 93921. The City’s reporting entity includes the following blended component units:

Carmel Public Improvement Authority Harrison Memorial Library

The above component units are included in the City’s basic financial statements using the blended method. There are no component units of the City that meet the criteria for discrete presentation.


35

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Basis of Presentation Government-Wide Financial Statements The statement of Net Position and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided by a given function or segment, 2) operating grants and contributions, and 3) capital grants and contributions restricted to the operating or capital requirements of a specific function or segment. All taxes and internally dedicated resources are reported as general revenues rather than program revenues. Fund Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, liabilities, fund equity, revenues, and expenditures/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria:

a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental fund are at least ten percent of the corresponding total for all funds of that category or type; and,

b. Total assets, liabilities, revenues, or expenditures/expenses of the individual

governmental fund are at least five percent of the corresponding total for all governmental funds combined.

The City reports the following major funds:

General Fund Harrison Memorial Library Special Revenue Fund Parking Special Revenue Fund Ambulance Special Revenue Fund


36

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Basis of Presentation, Continued Descriptions of these funds are included on the divider page preceding the Governmental Funds Balance Sheet. The funds of the financial reporting entity are described below: Governmental Funds General Fund The General Fund is used to account for resources traditionally associated with the City which are not required legally or by sound financial management to be accounted for in another fund. From this fund are paid the City’s general operating expenditures, the fixed charges, and the capital costs that are not paid through other funds. Special Revenue Funds The Special Revenue Funds are used to account for specific revenues that are legally or otherwise restricted to expenditures for particular purposes. Debt Service Fund The Debt Service Fund is used to account for financial resources used for the repayment of debt.


37

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Measurement Focus Measurement focus is a term used to describe which transactions are recorded within the various financial statements. On the government-wide Statement of Net Position and the Statement of Activities, governmental and business-type activities are presented using the economic resources measurement focus. The accounting objectives of this measurement focus are the determination of net income, financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Fund equity is classified as net position, which serves as an indicator of financial position. In the fund financial statements, the “current financial resources” measurement focus is used for governmental funds. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. Basis of Accounting

In the government-wide Statement of Net Position and Statement of Activities, governmental and business-type activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when “measurable and available.” Measurable means knowing or being able to reasonably estimate the amount. Available means the amount is collectible within the current period or soon enough thereafter to pay current liabilities. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within 60 days after year end, with the exception of grant revenues and ambulance billing revenues. Grant revenues and ambulance billing revenues are considered to be available if collected within 180 days of the end of the current fiscal period.


38

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Basis of Accounting, Continued Property taxes, transient occupancy taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. All other revenue items are considered to be measurable and available only when cash is received by the government. Expenditures (including capital outlay) are recorded when the related fund liability is incurred. Assets, Liabilities, and Equity Cash Deposits and Investments The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. The City pools cash and investments from all funds for the purpose of increasing income through investment activities. Highly liquid money market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Market value is used as fair value for those securities for which market quotations are readily available. Interfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as “due to and from other funds.” Long-term interfund loans (noncurrent portion) are reported as “advances from and to other funds.” Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Position. See Note 9 for details of interfund transactions, including receivables and payables at year-end.


39

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Assets, Liabilities, and Equity, Continued Receivables In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Major receivable balances for the governmental activities include property taxes, sales and use taxes, utility user taxes, intergovernmental subventions, interest earnings, and expense reimbursements. In the fund financial statements, material receivables in governmental funds include revenue accruals such as property tax, sales tax, utility user tax, and intergovernmental subventions since they are usually both measurable and available. Non-exchange transactions collectible but not available, such as property tax, are deferred in the fund financial statements in accordance with the modified accrual basis, but not deferred in the government-wide financial statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. The loans receivable are recorded in the fund statements, but are deferred to indicate they do not represent current financial resources. The loans are recognized when advanced in the government-wide statements. The City’s experience is that all accounts receivable are collectible; therefore an allowance for doubtful accounts is unnecessary. Prepaid Items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. In the governmental fund financial statements, prepaid items are offset with a reservation of fund balance for long-term assets to indicate they do not constitute current resources available for appropriation. Capital Assets The City's assets are capitalized at historical cost or estimated historical cost, if actual is unavailable, except for donated Capital Assets which are recorded at their estimated fair value at the date of donation. Policy has set the capitalization threshold for reporting at $5,000 for non-infrastructure capital assets and $25,000 for infrastructure capital assets.


40

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Assets, Liabilities, and Equity, Continued Capital Assets, Continued Government-Wide Statements Public domain (infrastructure) capital assets include roads, bridges, curbs and gutters, streets, sidewalks, drainage systems, and lighting systems. The accounting treatment of property, plant and equipment (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements. Prior to July 1, 2003, governmental funds’ infrastructure assets were not capitalized, since then these assets have been valued at estimated historical cost. Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation. No depreciation is recorded in the year of acquisition or in the year of disposition. The range of estimated useful lives by type of asset is as follows:

Buildings and improvements 20 – 50 years Sewer Lines 30 years Machinery and equipment 5 - 20 years Computer Software 10 years

Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements.


41

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Assets, Liabilities, and Equity, Continued Compensated Absences Employees accrue vacation, sick, holiday, and compensatory time off benefits. City employees have vested interests in the amount of accrued time off, with the exception of sick time, and are paid on termination. Also, annually an employee may elect to be compensated for up to 40 hours of unused annual leave. However, this is contingent upon the employee using at least 40 hours during the previous year and, the employee having a minimum balance of 80 annual leave hours after the payment. All vacation pay is accrued when incurred in the government-wide and proprietary financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations or retirements and is currently payable. The City had no employee resignations or retirements for which compensated absences should be accrued in governmental funds at year-end. The general fund is typically used to liquidate compensated absences. Equity Classification Government-Wide Statements Equity is classified as net position and is displayed in three components:

a. Net invested in capital assets – consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.

b. Restricted net position – consists of net position with constraints placed on the use by

external groups such as creditors, grantors, contributors, or by laws or regulations of other governments or law through constitutional provisions or enabling legislation.

c. Unrestricted net position – all other net position that do not meet the definition of

“restricted” or “net invested in capital assets”.


42

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Equity Classification, Continued Fund Financial Statements Governmental fund equity is classified as fund balance. Fund balance is classified as nonspendable, restricted, committed, assigned, or unassigned. Proprietary fund equity is classified the same as in the government-wide statements. The classifications for governmental funds are defined as follows for the City: Nonspendable Fund Balance –

Assets that will never convert to cash (prepaid items, inventory). Assets that will not convert to cash soon enough to affect the current period (long-term notes or

loans receivable). Resources that must be maintained intact pursuant to legal or contractual requirements (the

principal of an endowment). Restricted Fund Balance –

Resources that are subject to externally enforceable legal restrictions imposed by parties altogether outside the government (creditors, grantors, contributors and other governments).

Resources that are subject to limitations imposed by law through constitutional provisions or enabling legislation (e.g., Gas Tax).

Committed Fund Balance –

Self imposed limitations set in place prior to the end of the period (encumbrances, economic contingencies and uncertainties).

Limitation at the highest level of decision-making (Council) that requires formal action at the same level to remove.

Assigned Fund Balance –

Amounts in excess of nonspendable, restricted, and committed fund balance in funds other than the general fund automatically are reported as assigned fund balance.

Unassigned Fund Balance –

Residual net resources. Total fund balance in the general fund in excess of nonspendable, restricted, committed and

assigned fund balance (surplus). Excess of nonspendable, restricted, and committed fund balance over total fund balance

(deficit).


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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Revenues, Expenditures, and Expenses Property Tax The County of Monterey (County) is responsible for the collection and allocation of property taxes. Under California law, property taxes are assessed and collected by the County up to 1% of the full cash value of taxable property, plus other increases approved by the voters and distributed in accordance with statutory formulas. The City recognizes property taxes when the individual installments are due, provided they are collected within 60 days after year-end. Secured property taxes are levied on or before the first day of September of each year. They become a lien on real property on March 1 preceding the fiscal year for which taxes are levied. These taxes are paid in two equal installments; the first is due November 1 and delinquent with penalties after December 10; the second is due February 1 and delinquent with penalties after April 10. Secured property taxes, which are delinquent and unpaid as of June 30, are declared to be tax defaulted and are subject to redemption penalties, cost, and interest when paid. If the delinquent taxes are not paid at the end of five years, the property is sold at public auction and the proceeds are used to pay the delinquent amounts due. Any excess is remitted, if claimed, to the taxpayer. Additional tax liens are created when there is a change in ownership of property or upon completion of new construction. Tax bills for these new tax liens are issued throughout the fiscal year and contain various payments and delinquent dates, but are generally due within one year. If the new tax liens are lower, the taxpayer receives a tax refund rather than a tax bill. Unsecured personal property taxes are not a lien against real property. These taxes are due on March 1, and become delinquent, if unpaid on August 31. The City participates in an alternative method of distribution of property tax levies and assessments known as the “Teeter Plan.” The State Revenue and Taxation Code allow counties to distribute secured real property, assessment, and supplemental property taxes on an accrual basis resulting in full payment to cities each fiscal year. Any subsequent delinquent payments and penalties and interest during a fiscal year will revert to Monterey County.


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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Interfund Transfers Resources are reallocated between funds by reporting them as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. Budgetary Accounting The City Council establishes budgets for the General Fund and all Special Revenue Funds, except for certain Special Revenue Funds for which expenditures are controlled by grant funding or by assessments received. Budgetary control is legally maintained at the fund level for these funds. Department heads submit budget requests to the City Manager. The City Manager prepares an estimate of revenues and prepares recommendations for the next year’s budget. The preliminary budget may or may not be amended by the City Council and is adopted by resolution by the City Council on or before June 30 in accordance with the municipal code. The City Council may amend the budget by motion during the fiscal year. Only the Council can authorize transfers between funds and approve inter-fund loans. The City Manager is authorized to transfer budgeted amounts within a fund without formal council action or approval. The City Manager is authorized to increase expenditures in relation to revenues in funds receiving assigned revenues without approval by the City Council. Expenditures may not legally exceed appropriations at the fund level, which is the legal level of control. Supplemental appropriations, which increase appropriations, may be made during the fiscal year. There were no material supplemental appropriations made for the fiscal year ended June 30, 2013. Budget information is presented for the General and budgeted Special Revenue Funds in the fund financial statements. The budget information is presented on a basis consistent with generally accepted accounting principles. Appropriations, except open project appropriations, and unexpended grant appropriations, lapse at the end of each fiscal year. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates.


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2. CASH AND INVESTMENTS At June 30, 2013, the City’s pooled cash and investments, classified by maturity, consisted of the following stated at fair value:

Fair<1 1 to 2 >2 Deposits Market Value

Pooled cash, at fair valueCash in bank -$ -$ -$ 2,693,403$ 2,693,403$ Petty cash - - - 1,105 1,105

Total pooled items - - - 2,694,508 2,694,508

Certificate of Deposits - - 1,998,017 - 1,998,017 Money Market 411,561 - 411,561 State of California Local Agency Investment Fund 4,308,360 - - - 4,308,360

Total pooled investments - interest obligations 4,719,921 - 1,998,017 - 6,717,938 Total cash equivalents and investments pooled 4,719,921$ -$ 1,998,017$ 2,694,508$ 9,412,446$

Amounts reported in:Governmental activities - Unrestricted 9,012,438$ Governmental activities - Restricted 400,008

Total 9,412,446$

Maturities (in years)

Pooled investments, at fair value

Cash equivalents and investments pooled

Weighted AverageInvestment Type Fair Value Maturity (Years)

Certificates of Deposit 1,998,017 3.15Money Market 411,561 N/ALAIF 4,308,360 N/A

Total fair value 6,717,938$


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2. CASH AND INVESTMENTS, Continued

California statutes authorize cities to invest idle or surplus funds in a variety of credit instruments as provided for in the California Government Code, Section 53600, Chapter 4 – Financial Affairs. The table below identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. During the year ended June 30, 2013, the City’s permissible investments included the following instruments:

Maximum MaximumMaximum Percentage Investment

Authorized Investment Type Maturity of Portfolio in One IssuerU.S. Treasury Obligations 5 years None NoneU.S. Agency Securities 5 years 50% 50%Bankers' Acceptances 180 days 40% 30%High-Grade Commercial Paper 270 days 15% 10%Negotiable Certificates of Deposit 5 years 30% 30%LAIF N/A None NoneLocal Government Investment Pools N/A None NoneMedium-term Corporate Notes 5 years 30% 30%Money Market Mutual Funds N/A 20% 10%Collateralized Negotiable Investments 5 years 50% 50%Repurchase Agreements 92 days 15% 5%

Interest rate risk – In accordance with its investment policy, the City manages its exposures to declines in fair values by limiting the weighted average maturity of its investment portfolio to less than 5 years. As of June 30, 2013, the weighted average maturity was 3.15 years.

Credit risk – As of June 30, 2013, the City’s investments in money market funds were rated AAA by Standard & Poor’s and Fitch Ratings, and Aaa by Moody’s Investors Service. The State of California Local Agency Investment Fund is not rated. The City’s policy related to credit risk is to invest in only AAA rated securities as measured by Standard & Poor’s and Fitch Ratings or unrated securities backed by the full faith and credit of the State of California. The current portfolio adheres to this credit risk policy.

Concentration of credit risk – The City’s investment policy does not allow for an investment in any one issuer that is in excess of five percent of the government’s total investments. The investments made by the City Treasurer are limited to those allowable under State statutes as incorporated into the City’s Investment Policy, which is accepted annually by the City Council. There were no concentrations in any one issuer for the year.

The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF) which has invested 1.96% of the pool funds in Structured Notes and Asset-Backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as to changes in interest rates.


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2. CASH AND INVESTMENTS, Continued Custodial credit risk – deposits. For deposits, this is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The City’s Investment Policy addresses custodial credit risk, which follows the Government Code. As of June 30, 2013, the City had a balance of $2,443,403 in the pool exposed to custodial credit risk because they exceeded the $250,000 Federal Deposit Insurance Corporation’s insurance limits. The uninsured bank balance is collateralized by the pledging financial institutions at 110% of the deposits, in accordance with the State of California Government Code. Custodial credit risk – investments. For investments, this is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside counterparty. For the investments maintained by the City, no security was uninsured or unregistered or held by a brokerage firm which is also the counterparty for the security. At June 30, 2013, the carrying amount of the City’s deposits was $2,019,052 and the balances in financial institutions were $2,308,643. Of the balance in financial institutions, $250,000 was covered by federal depository insurance and $2,058,643 was collateralized as required by State law (Government Code Section 53630), by the pledging financial institution with assets held in a common pool for the City and other governmental agencies, but not in the name of the City. As of June 30, 2013, the City’s investments were held by the City’s custodial agent, but not in the City’s name, and were insured up to specified limits by the Securities Investor Protection Corporation (SPIC) and supplemental private insurance up to a limit of $150 million. Investment in LAIF: LAIF is stated at amortized cost, which approximates fair value. The LAIF is a special fund of the California State Treasury through which local governments may pool investments. The total fair value amount invested by all public agencies in LAIF is $58,852,094,221 of which the City had a balance of $4,308,360, which approximated market value and was managed by the State Treasurer. Of the total invested, 98.04% was invested in non-derivative financial products and 1.96% in structured notes and asset-backed securities. The Local Investment Advisory Board (Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. 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.


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3. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2013:

GovernmentalActivities

Accounts 809,875$ 30.8%Intergovernmental 929,066 35.3%Other receivables 890,638 33.9%

Total accounts receivable 2,629,579$ 1.00

These amounts resulted in the following concentrations in receivables:

Other Governments 30.8% Individuals/Businesses 35.3% Other 33.9%

Amounts do not indicate a significant concentration (greater than 25%) with any single individual, business, or agency. 4. CAPITAL ASSETS

Capital asset activity for the year ended June 30, 2013, was as follows:

Balance Transfers/ BalanceJuly 1, 2012 Additions Deletions Adjustments June 30, 2013

Governmental activities:Nondepreciable assets:

Land 3,488,036$ 145,687$ -$ 3,633,723$ Art 1,467,918 - - - 1,467,918

Total nondepreciable assets 4,955,954 145,687 - - 5,101,641

Depreciable assets:Buildings and improvements 25,918,132 342,223 (1,060,955) 25,199,400 Infrastructure 13,760,000 - - - 13,760,000 Vehicles 2,272,099 71,334 - 2,343,433 Machinery & equipment 2,532,625 92,153 - (398,488) 2,226,290

Total depreciable assets 44,482,856 505,710 - (1,459,443) 43,529,123 Total 49,438,810 651,397 - (1,459,443) 48,630,764

Accumulated depreciation:Buildings and improvements (6,660,284) (541,461) - - (7,201,745) Infrastructure - (458,667) - - (458,667) Vehicles (1,862,985) (133,110) - - (1,996,095) Machinery & equipment (1,566,006) (123,066) - - (1,689,072)

Total accumulated depreciation (10,089,275) (1,256,304) - - (11,345,579)

Net depreciable assets 34,393,581 (750,594) - (1,459,443) 32,183,544

Total net capital assets 39,349,535$ (604,907)$ -$ (1,459,443)$ 37,285,185$


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4. CAPITAL ASSETS, Continued

Depreciation expense for capital assets was charged to functions as follows:

Administration 2,055$ Building maintenance 39,888 Public safety 166,273 Public works 554,701 Forest, parks and beaches 6,102 Culture and recreation 487,285

Total 1,256,304$

5. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consisted of the following at June 30, 2013:

GovernmentalActivities Total

Accounts payable 309,039$ 309,039$ 55%Accrued payroll and related liabilities 253,850 253,850 45%

Total 562,889$ 562,889$

These amounts resulted in the following concentrations in payables:

Vendors 55% Employees 45%

Amounts do not indicate a significant concentration (greater than 25%) with any single vendor or employee. 6. LONG-TERM LIABILITIES

The following is a summary of changes in long-term liabilities for the year ended June 30, 2013: Balance Transfers/ Balance Due Within

July 1, 2012 Additions Retirements June 30, 2013 One YearGovernmental Activities:

Sunset Center COP 7,295,000$ -$ (285,000)$ 7,010,000$ 285,000$ Countywide Radio Project 336,050 - (15,675) 320,375 17,009 Capital Lease Obligations 344,131 201,721 (196,480) 349,372 213,274 Pension Obligation Bonds - 6,280,000 (115,000) 6,165,000 580,000

Total governmental debt 7,975,181$ 6,481,721$ (612,155)$ 13,844,747$ 1,095,283$

Compensated absences 538,371 - (79,995) 458,376 273,981 Claims liabilities 460,000 - - 460,000 - Net OPEB obligation 866,406 248,871 - 1,115,277 -

Total governmental activities 9,839,958$ 6,730,592$ (692,150)$ 15,878,400$ 1,369,264$


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6. LONG-TERM LIABILITIES, Continued Sunset Center COP

In 2010, the Carmel Public Improvement Authority, a component unit of the City, refunded previously issued Certificates of Participation in the amount of $7,485,000, bearing an average interest rate of 4.73%, secured by general revenues of the City, and matures in October 2031. The original proceeds were used to remodel the Sunset Cultural Center property. Interest is payable semi-annually on October 1st and April 1st with principal payments due each October 1st. The outstanding balance due at June 30, 2013 was $7,010,000.

Countywide Radio Project

In 2009, the City entered into a participation agreement with Monterey County to provide funding related to the "Next Generation Radio Project," a Federal Communications Commission mandated alteration of public safety and local government radio systems. Estimated payments will change should individual local jurisdictions elect out of the project. The outstanding balance due at June 30, 2013 was $320,375.

Capital Lease Obligations

In 2009, the City entered into a lease purchase agreement to acquire firefighting equipment in the amount of $435,982, bearing interest at 4.5%, secured by equipment, with interest and principal payments due annually on July 1st, and matures in July 2015.

During fiscal year 2010, the City purchased vehicles and accessories for its public safety department through a lease purchase agreement in the amount of $77,195 at an interest rate of 2%, payable annually on December 1st through 2012 under this agreement.

Additionally, in 2010, the City purchased a wheel loader through a lease purchase agreement in the amount of $126,262 at an interest rate of 3.3% payable monthly through December 2012.

Pension Obligation Bonds

On November 29, 2012, the City issued $6,280,000 in 2012 Taxable Pension Obligation Bonds, the purpose of which was to fund certain PERS side fund obligations. The bonds bear an interest rate of .55% to 3.1% and mature on June 1, 2023. The outstanding balance due at June 30, 2013 was $6,165,000.

Compensated Absences

The City records employee absences, such as vacation, illness, and holidays, for which it is expected that employees will be paid as compensated absences. Compensated absences had a balance of $458,376 at June 30, 2013; of that amount $273,981 is expected to be paid within a year.

Claims Liabilities

The City has recorded a liability for potential claims in excess of amounts covered by the insurance pool. See Note 9 for further discussion on the City’s risk management activities.


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6. LONG-TERM LIABILITIES, Continued Net OPEB Obligation A net OPEB obligation is the cumulative differences between annual OPEB cost and an employer’s contributions to a plan. At June 30, 2013, the City had a Net OPEB Obligation of $1,115,277 See Note 11 for further discussion on OPEB. Future debt service for Governmental Activities at June 30, 2013, is as follows for all debt except compensated absences and claims liabilities:

Year Ending

June 30,

Principal Interest Principal Interest Principal Interest

2014 285,000$ 219,763$ 17,009$ 12,655$ 213,274$ 8,515$

2015 290,000 213,963 17,681 11,983 67,227 3,325

2016 295,000 208,063 18,379 11,285 68,871 1,682

2017 300,000 202,063 19,105 10,559 - -

2018 310,000 194,313 19,860 9,804 - -

2019-2023 1,675,000 831,688 111,706 36,614 - -

2024-2028 1,985,000 530,838 116,635 12,332 - -

2029-2032 1,870,000 115,000 - - - -

Total 7,010,000$ 2,515,691$ 320,375$ 105,232$ 349,372$ 13,522$

Due within one year 285,000$ 219,763$ 17,009$ 12,655$ 213,274$ 8,515$

Due after one year 6,725,000 2,295,928 303,366 92,577 136,098 5,007

Total 7,010,000$ 2,515,691$ 320,375$ 105,232$ 349,372$ 13,522$

Principal Interest Principal Interest

2014 580,000$ 122,593$ 1,095,283$ 363,526$

2015 580,000 118,243 954,908 347,514

2016 585,000 112,443 967,250 333,473

2017 595,000 105,131 914,105 317,753

2018 605,000 96,205 934,860 300,322

2019-2023 3,220,000 277,825 5,006,706 1,146,127

2024-2028 - - 2,101,635 543,170

2029-2032 - - 1,870,000 115,000

Total 6,165,000$ 832,440$ 13,844,747$ 3,466,885$

Due within one year 580,000$ 122,593$ 1,095,283$ 363,526$

Due after one year 5,585,000 709,847 12,749,464 3,103,359

Total 6,165,000$ 832,440$ 13,844,747$ 3,466,885$


Sunset Center COP County-wide Radio Project Capital Lease Obligations

Pension Obligation Bonds Total


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7. NET POSITION/ FUND BALANCES Net Position

GovernmentalActivities

Net invested in capital assets 29,605,438$ Restricted 566,992 Unrestricted 2,205,463

Total 32,377,893$

Restricted balances are for the same purposes as fund balance restrictions because external restriction requirements are the same. See descriptions of the restrictions below.

Fund Balance Nonspendable, Restricted and Committed fund balance consisted of the following at June 30, 2013:

Nonspendable:Major Funds:

Harrison Memorial Library 46,747$ Total Major Funds - Nonspendable 46,747

Restricted:Nonmajor Funds:

Gas Tax 166,983 Debt service 400,009 Total Nonmajor Funds - Restricted 566,992

Total Restricted 566,992$

Committed:General Fund Reserve 2,898,615$

Total Committed 2,898,615$


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7. NET POSITION/ FUND BALANCES, Continued

The following describes the purpose of each nonspendable, restriction, and commitment account used by the City:

Nonspendable

Harrison Memorial Library Endowment - used to segregate that portion of fund balance to indicate that bequest and endowment amounts do not represent available, spendable resources because the principal is nonspendable.

Restricted

Gas Tax – represents amounts restricted for street purposes by the California Streets and Highways Code.

Debt service – represents amounts restricted for repayment of debt.

Committed

General Fund Reserve – represents amounts committed through Council Resolution for economic uncertainties and anticipated future short-term structural deficits. This amount can be changed only by Council Resolution.

There were no deficit net position or fund balances at June 30, 2013.

Excess of Expenditures and Transfers Over Appropriations: Expenditures and transfers exceeded appropriations for the year ended June 30, 2013, for the following funds:

Total ExcessExpenditures Expenditures

Final Budget and Transfers over AppropriationsGovernmental ActivitiesMajor Funds:

General Fund 11,855,861$ 18,430,125$ (6,574,264)$ Ambulance 782,576 912,836 (130,260)

Non-major Funds:Special Revenue Funds:

Traffic Safety* - 116,000 (116,000) Road Impact Fees* - 130,000 (130,000) Grants* - 2,900 (2,900) Forest Theater* - 17,209 (17,209)

* Indicates Fund is not budgeted

Sufficient fund balance existed in all of these funds to cover the excesses.


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8. INTERFUND TRANSACTIONS Due to and due from other funds consisted of the following as of June 30, 2013:

Due from Due toOther Funds Other Funds

Governmental ActivitiesMajor Funds:

General Fund 452,477$ -$ Ambulance - 452,477

Total Major Funds 452,477 452,477 Total 452,477$ 452,477$

Due to and from balances result 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. 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, and (2) use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.

Transfers consisted of the following at June 30, 2013:

Transfers In Transfers OutGovernmental ActivitiesMajor Funds:

General Fund 4,924,039$ 5,986,953$ Harrison Memorial Library - Special Revenue 945,455 - Ambulance - Special Revenue 310,748 - Total Major Funds 6,180,242 5,986,953

Non-major Funds:Special Revenue Funds:

Traffic Safety - 116,000 Road Impact Fees - 130,000 Gas Tax - 60,000 Total Non-major Special Revenue Funds - 306,000

Debt Service Funds:General Debt Service 121,747 9,036

Total Non-major Debt Service Funds 121,747 9,036 Total Non-major Funds 121,747 315,036 Total Governmental Activities 6,301,989 6,301,989 Total Transfers 6,301,989$ 6,301,989$


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8. INTERFUND TRANSACTIONS, Continued The General Fund received transfers from various programs to fund activities in the General Fund for which these revenue sources are dedicated. The General Fund also transferred amounts to the General Debt Service Fund to fund the current debt service payments. 9. RISK MANAGEMENT The City of Carmel-by-the-Sea (City) is a member of CSAC-EIA (California State and County Excess Insurance Authority) which is a shared risk pool. CSAC-EIA covers claims for City for both Workers Compensation and General Liability. The City’s Liability SIR is pre-funded through CSAC-EIA for 8 quarters of payments made on behalf of City. Currently, the SIR fund for the City with CSAC-EIA is maintained at $8,414. If the pre-funded SIR balance drops below this amount, the City is billed by CSAC-EIA to replenish the fund to the $8,414 level. For Fiscal Year 2013/2014, this pre-funded level will increase to $10,784 because of claims paid on behalf of the City. The City does not make claim payments, they are all issued by the city's third party administrator from a CSA-EIA account. The City has two layers of Liability coverage through CSAC-EIA and under the first layer, the Primary General Liability layer, there is an SIR (Self Insured Retention) of $10,000 per claim. Thereafter, the next layer of coverage kicks in (General Liability 1 program) which carries an SIR of $100,000 which is satisfied by exhausting the coverage limit of $100,000 under the Primary Liability program. The maximum limit of coverage under the primary General Liability 1 program is $25 million. The City retains the risk of loss above $25 million. For Workers Compensation, the City is a member of both the CSAC-EIA Primary Workers Compensation program and then, the CSAC-EIA Excess Workers Compensation program. The Primary Workers compensation program provides dollar 1 coverage to the City for Workers Compensation claims. In other words, City has no deductible or SIR. This layer of Workers Compensation coverage carries a maximum limit of $125,000 per occurrence. Thereafter, CSAC-EIA's excess coverage steps in and the SIR (Self Insured Retention) is $125,000 which again, is satisfied by exhausting the limits of coverage under the Primary Workers Compensation program. The upper limit of coverage under the Excess Workers Compensation program is "statutory". What this means is that regardless of the total cost of the claim, it is covered under the CSAC-EIA Excess Workers Compensation program. There is absolutely no monetary exposure to the City under these two Workers Compensation programs except for the premium costs to purchase this coverage. The City has had no settlements which exceeded insurance coverage in the last three fiscal years and no significant changes or reductions in insurance coverage during the current year.


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10. PUBLIC EMPLOYEES’ RETIREMENT SYSTEM Plan Description The City of Carmel-by-the-Sea contributes to the California Public Employees Retirement System (PERS), a cost-sharing multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments, 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. All permanent and part-time employees working at least 1,000 hours per year are enrolled in PERS. Under PERS, benefits vest after five years of service. Upon retirement, participants are entitled to an annual retirement benefit, payable for life, in an amount equal to a benefit factor multiplied by their highest average monthly salary over 12 consecutive months of employment. Benefit provisions and all other requirements are established by State statute. The establishment and amendment of specific benefit provisions of the Plan is authorized by resolution of the City Council. PERS requires plans with less than 100 active participants to participate in risk pools. The City participated in the Miscellaneous 2% at 55 Risk Pool and in the Safety 3.0% at 50 Risk Pool for the year ended June 30, 2013. Copies of the PERS annual financial report may be obtained from their Executive Office at 400 P Street, Sacramento, CA 95814. Funding Policy The City is required to contribute at an actuarially determined rate. The current rate is 11.522% of the annual covered payroll for miscellaneous employees and 27.849% for safety employees. In November 2012, the City paid off a side-fund balance due to PERS by issuing Pension Obligation Bonds. This decreased the rate for miscellaneous employees in 2012-13 and all subsequent years. The City’s contributions for the years ended June 30, 2013, 2012, and 2011 were $896,806 (exclusive of side fund payoff), $1,204,375, and $1,553,399, respectively, which were equal to the required contributions for each year. Active PERS plan members are required to contribute a percentage of their annual covered salary. The percentage required is up to 8% for miscellaneous employees and 9% for safety employees. The contribution requirement of plan members and the City are established and may be amended by PERS. 11. OTHER POST EMPLOYMENT BENEFITS Plan Description. The City of Carmel-by-the-Sea Retiree Healthcare Plan (Plan) is a single-employer defined benefit healthcare plan administered by the City. The Plan provides access to lifetime healthcare benefits to eligible retirees and their dependents. The City provides retiree medical benefits through the California Public Employees’ Retirement System healthcare program (PEMHCA). For eligible retirees, the City contributes not less than 5% of the active contribution times years in PEMHCA (max $100/month increase). The City pays actives the PEMHCA minimum, and the City joined PEMHCA in 1998. The City’s retiree contribution is $112.00 for 2012, $115 for 2013 and $119 for 2014.


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11. OTHER POST EMPLOYMENT BENEFITS, Continued Plan Description, Continued Eligibility: Employees are eligible to participate in the City’s Retiree Healthcare Plan if they retire directly from the City under CalPERS with five years of PERS service (there is no minimum service requirement if retirement is due to a service-connected disability.) Since PEMHCA is a community rated plan for most employers, an implied subsidy is not reflected under GASB 45. The City does not provide dental, vision, life, or Medicare Part B reimbursement to retirees. The Retiree Healthcare Plan does not issue a financial report. Membership of the plan consisted of the following at June 30, 2013

Retirees and beneficiaries receiving benefits 29 Other participants fully eligible for benefits 38 Other participants not yet fully eligible for benefits 57

Total 124

Funding Policy. The contribution requirements of the Plan participants and the City are established by and may be amended by the City. The City currently does not prefund plan benefits. The Annual Required Contribution (ARC) is an amount actuarially determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefit Other Than Pensions. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.

For fiscal year 2013, the City contributed $55,137 for current benefit payments.

Annual OPEB Cost and Net OPEB Obligation. The City’s annual other postemployment benefit cost (expense) is calculated based on the annual required contribution (ARC) of the employer. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.


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11. OTHER POST EMPLOYMENT BENEFITS, Continued

Annual OPEB Cost and Net OPEB Obligation, Continued

The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the City’s Net OPEB obligation:

Annual required contribution $ 309,226 Interest on net OPEB obligation 30,324 Adjustment to annual required contribution _ (35,542) Annual OPEB cost (expense) $ 304,008 Benefit payments made __(55,137) Increase (Decrease) in net OPEB obligation $ 248,871 Net OPEB obligation – beginning of year __866,406_ Net OPEB obligation – end of year $ 1,115,277

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for fiscal year 2013 and the two preceding fiscal years were as follows:

Fiscal Year

Ended Annual

OPEB Cost

Percentage of Annual OPEB

Cost Contributed

Net OPEB

Obligation

6/30/11 $265,640 6% $630,971 6/30/12 284,309 17% 866,406 6/30/13 304,008 18% 1,115,277

Funded Status and Funding Progress. The funded status of the Plan as of June 30, 2009, the Plan’s most recent actuarial valuation date, was as follows:

Actuarial accrued liability (AAL) $ 2,752,948 Actuarial value of Plan assets 0 Unfunded actuarial accrued liability (UAAL) $ 2,752,948 Funded ratio (actuarial value of Plan assets/AAL) 0% Covered payroll (active Plan participants) $5,432,667 UAAL as a percentage of covered payroll 50.67%

Actuarial valuations of an ongoing plan involve estimates of the value of expected benefit payments and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.


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11. OTHER POST EMPLOYMENT BENEFITS, Continued Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan participants) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan participants to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. For the June 30, 2009, actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 3.5% discount rate. Premiums were assumed to increase with a pre-Medicare medical cost increase rate of 8.4% for HMOs and 9.0% for PPOs for 2013, both grading down to 4.5% for 2017 and thereafter. The post-Medicare medical cost increase rates were 8.7% for HMOs and 9.3% for PPOs for 2013, both grading down to 4.5% for 2017 and thereafter. The total UAAL calculated in the June 30, 2009, valuation was amortized as a level percentage of projected payroll over a fixed 21-year period beginning fiscal year 2013. 12. COMMITMENTS AND CONTINGENCIES The City is a party to claims and lawsuits arising in the ordinary course of business. The City’s management and legal council are of the opinion that the ultimate liability, if any, arising from these claims will not have material adverse impact on the financial position of the City. The City participates in a number of federal and state assisted grant programs. These programs are subject to program compliance audits by the grantors. The amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time although the City expects such amounts, if any, to be immaterial. 13. NEW ACCOUNTING PRONOUNCEMENTS The GASB has issued Statement No. 65, “Item Previously Reported as Assets and Liabilities.” This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. The City implemented this Statement in Fiscal year 2012-13. The GASB has issued Statement No. 66, “Technical Corrections – 2013”. The objective of this Statement is to improve accounting and financial reporting for a governmental financial reporting entity by resolving conflicting guidance that resulted from the issuance of two pronouncements, Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, and No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The implementation of this Statement did not have an effect on these financial statements.


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13. NEW ACCOUNTING PRONOUNCEMENTS, Continued The GASB has issued Statement No. 67, “Financial Reporting for Pension Plans”. The objective of this Statement is to improve financial reporting by state and local governmental pension plans. This Statement replaces the requirements of Statements No. 25, “Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans” and No. 50, “Pension Disclosures” as they relate to pension plans that are administered through trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. The requirements of Statements 25 and 50 remain applicable to pension plans that are not administered through trusts covered by the scope of this Statement and to defined contribution plans that provide postemployment benefits other than pensions. This Statement is effective for periods beginning after June 15, 2013. The implementation of this statement will not have an effect on these financial statements. The GASB has issued Statement No. 68, “Accounting and Financial Reporting for Pensions - An Amendment of GASB Statement No. 27” The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement establishes accounting and financial reporting requirements related to pensions for governments whose employees are provided with pensions through pension plans that are covered by the scope of this Statement, as well as for nonemployer governments that have a legal obligation to contribute to those plans. This Statement will be effective for periods beginning after June 15, 2014. The City will implement this Statement in fiscal year 2014-15. The GASB has issued Statement No. 69, “Government Combinations and Disposals of Government Operations”. This Statement establishes accounting and financial reporting standards related to government combinations and disposals of government operations. This Statement will be effective for government combinations and disposals of government operations occurring in financial reporting periods beginning after December 15, 2013. The City will implement this Statement in fiscal year 2014-15, if applicable. The GASB has issued Statement No. 70 “Accounting and Financial Reporting for Nonexchange Financial Guarantees”. The objective of this Statement is to improve accounting and financial reporting by state and local governments that extend and receive nonexchange financial guarantees. This Statement will be effective for periods beginning after June 15, 2013. The City will implement this Statement in fiscal year 2014-15, if applicable.

City of Carmel-by-the-Sea, California Required Supplementary Information For the year ended June 30, 2013

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Required Supplementary Information Other Postemployment Benefits Schedule of Funding Progress

Actuarial Valuation

Date

Actuarial Value of Assets

(a)

Actuarial Accrued Liability

(b)

Unfunded Actuarial Accrued Liability

(b-a)

Funded Ratio (a/b)

Covered Payroll

(c)

UAAL as a Percentage of

Covered Payroll ((b-a)/c)

n/a n/a n/a n/a n/a n/a n/a 6/30/091 $0 $2,752,948 $2,752,948 0% $5,432,667 50.67%

1 The 6/30/09 Actuarial Accrued Liability was calculated using a discount rate of 3.5%.


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COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

63


64

Fund Type

Special Revenue Funds:Traffic Safety

Road Impact Fees

Grants Accounts for grants utilized for specific purposes

Forest Theater Accounts for activities related to the Forest Theater

Gas Tax

Debt Service Funds:General

Accounts for road impact fees used for transportation relatedexpenditures.

NON-MAJOR GOVERNMENTAL FUNDS

Description

Accounts for traffic safety and public safety augmentation funds for police and fire

Accounts for activities related to the repayment of the Certificate of Participation and capital lease obligations

Accounts for revenues collected in accordance with the Streets and Highway Code

65

City of Carmel-by-the-Sea, CaliforniaCombining Balance Sheet

Nonmajor Governmental Funds

June 30, 2013

Traffic RoadSafety Impact Fees Grants

ASSETS

Cash and investments 14,673$ 113,296$ 158,083$ Cash and investments with fiscal agents - - - Receivables:

Accounts - - - Interest - - - Intergovernmental - - 25,000

Total assets 14,673$ 113,296$ 183,083$

LIABILITIES AND FUND BALANCES

Liabilities:Accounts payable -$ -$ -$ Due to other funds - - - Deferred revenue - - -

Total liabilities - - -

Fund Balances:RestrictedAssigned, reported in:

Special revenue funds 14,673 113,296 183,083Unassigned (deficit), reported in:

Special revenue funds - - - Total fund balances 14,673 113,296 183,083

Total liabilities and fund balances 14,673$ 113,296$ 183,083$


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TotalNon-Major

Forest General GovernmentalTheater Gas Tax Debt Service Funds

92,254$ 155,987$ 1$ 534,294$ - - 400,008 400,008

- - - - - - - - - 11,986 - 36,986

92,254$ 167,973$ 400,009$ 971,288$

475$ 990$ -$ 1,465$ - - - - - - - -

475 990 - 1,465

166,983 400,009 566,992

91,779 - - 402,831

- - - - 91,779 166,983 400,009 969,823

92,254$ 167,973$ 400,009$ 971,288$

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City of Carmel-by-the-Sea, CaliforniaCombining Statement of Revenues, Expenditures and Changes in Fund Balances

Nonmajor Governmental Funds


Traffic RoadSafety Impact Fees Grants

REVENUES:Fees and permits -$ 183,800$ -$ Fines and forfeitures 116,521 - - Intergovernmental - - 130,085Use of money and property - - - Charges for services - - -

Total revenues 116,521 183,800 130,085


Public works - - 2,900Culture and recreation - - -

Debt Service:PrimcipalInterest and fiscal charges

Total expenditures - - 2,900

REVENUES OVER (UNDER)EXPENDITURES 116,521 183,800 127,185

OTHER FINANCING SOURCES (USES):Transfers in - - - Transfers out (116,000) (130,000) -

Total other financingsources (uses) (116,000) (130,000) -

REVENUES AND OTHER FINANCINGSOURCES OVER (UNDER)EXPENDITURES AND OTHERFINANCING (USES) 521 53,800 127,185

FUND BALANCES:Beginning of year 14,152 59,496 55,898

End of year 14,673$ 113,296$ 183,083$


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TotalNon-Major

Forest General GovernmentalTheater Gas Tax Debt Service Funds

-$ -$ -$ 183,800$ - - - 116,521 - 96,759 - 226,844 - - - -

25,769 - - 25,769

25,769 96,759 - 552,934

- 25,292 - 28,192 17,209 - - 17,209

- - 112,710 112,710

17,209 25,292 112,710 158,111

8,560 71,467 (112,710) 394,823

- - 121,747 121,747 - (60,000) (9,036) (315,036)

- (60,000) 112,711 (193,289)

8,560 11,467 1 201,534

83,219 155,516 400,008 768,289

91,779$ 166,983$ 400,009$ 969,823$

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City of Carmel-by-the-Sea, CaliforniaCombining Statement of Revenues, Expenditures and Changes in Fund Equity Special Revenue Funds - Budget and ActualNonmajor Governmental FundsFor the year ended June 30, 2013

Variance w/Amended

Original Amended PositiveBudget Budget Actual (Negative)

REVENUES:Fees and permits -$ -$ -$ -$ Fines and forfeitures - - 116,521 116,521

Intergovernmental - - - -

Use of money and property - - - -

Charges for services - - - - Total revenues - - 116,521 116,521

EXPENDITURES:Public works - - - -

Culture and recreation - - - -

Total expenditures - - - -

REVENUES OVER (UNDER) EXPENDITURES - - 116,521 (116,521)

OTHER FINANCING SOURCES (USES):Transfers in - - - - Transfers out - - (116,000) 116,000

Total other financing sources (uses) - - (116,000) 116,000

REVENUES AND OTHER FINANCING SOURCESOVER (UNDER) EXPENSES AND OTHERFINANCING (USES) - - 521 (521)

FUND BALANCE:Beginning of year 14,152 14,152 14,152 -

End of year 14,152$ 14,152$ 14,673$ (521)$

Traffic Safety

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Variance Variance w/Amended w/Amended

Original Amended Positive Original Amended PositiveBudget Budget Actual (Negative) Budget Budget Actual (Negative)

-$ -$ 183,800$ 183,800$ -$ -$ -$ -$ - - - - - - - - - - - - - - 130,085 130,085

- - - - - - - -

- - - - - - - - - - 183,800 183,800 - - 130,085 130,085

- - - - - - 2,900 2,900 - - - -

- - - - - - 2,900 (2,900)

- - 183,800 (183,800) - - 127,185 (127,185)

- - - - - - - - - - (130,000) (130,000) - - - - - - (130,000) 130,000 - - - -

- - 53,800 (53,800) - - 127,185 (127,185)

59,496 59,496 59,496 - 55,898 55,898 55,898 -

59,496$ 59,496$ 113,296$ (53,800)$ 55,898$ 55,898$ 183,083$ (127,185)$

(continued)

GrantsRoad Impact Fees

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City of Carmel-by-the-Sea, CaliforniaCombining Statement of Revenues, Expenditures and Changes in Fund Equity Special Revenue Funds - Budget and Actual, ContinuedNonmajor Governmental FundsFor the year ended June 30, 2013

Variance w/Amended

Original Amended PositiveBudget Budget Actual (Negative)

REVENUES:Fees and permits -$ -$ -$ -$ Fines and forfeitures - - - -

Intergovernmental - - - -

Use of money and property - - - -

Charges for services - - 25,769 25,769 Total revenues - - 25,769 25,769

EXPENDITURES:Public works - - - -

Culture and recreation - - 17,209 (17,209)

Total expenditures - - 17,209 (17,209)

REVENUES OVER (UNDER) EXPENDITURES - - 8,560 8,560

OTHER FINANCING SOURCES (USES):Transfers in - - - - Transfers out - - - -

Total other financing sources (uses) - - - -

REVENUES AND OTHER FINANCING SOURCESOVER (UNDER) EXPENSES AND OTHERFINANCING (USES) - - 8,560 8,560

FUND BALANCE:Beginning of year 83,219 83,219 83,219 -

End of year 83,219$ 83,219$ 91,779$ 8,560$

Forest Theater

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Variance Variance w/Amended w/Amended

Original Amended Positive Original Amended PositiveBudget Budget Actual (Negative) Budget Budget Actual (Negative)

-$ -$ -$ -$ -$ -$ 183,800$ 183,800$ - - - - - - 116,521 116,521

72,450 72,450 96,759 24,309 72,450 72,450 226,844 154,394

2,500 2,500 - (2,500) 2,500 2,500 - (2,500)

- - - - - - 25,769 25,769 74,950 74,950 96,759 21,809 74,950 74,950 552,934 477,984

- - 25,292 (25,292) - - 28,192 28,192 - - - - - 17,209 (17,209)

- - 25,292 (25,292) - - 45,401 10,983

74,950 74,950 71,467 3,483 74,950 74,950 507,533 432,583

- - - - - - - - (100,000) (100,000) (60,000) (40,000) (100,000) (100,000) (306,000) (206,000) (100,000) (100,000) (60,000) (40,000) (100,000) (100,000) (306,000) 206,000

(25,050) (25,050) 11,467 (36,517) (25,050) (25,050) 201,533 638,583

155,516 155,516 155,516 - 368,281 368,281 368,281 -

130,466$ 130,466$ 166,983$ (36,517)$ 343,231$ 343,231$ 569,814$ (226,583)$

(concluded)

TotalGas Tax

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7080 Donlon Way, Suite 204, Dublin, CA 94568 ● phone (925) 556-6200 ● fax: (510) 217-5930 www.jjacpa.com

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL

STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Honorable Mayor and City Council City of Carmel-by-the-Sea Carmel-by-the-Sea, California We have audited, in accordance with the auditing standard generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Carmel-by-the-Sea (City), as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise City of Carmel-by-the-Sea’s basic financial statements, and have issued our report thereon dated January 31, 2014. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of internal control of the City’ internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we considered to be material weaknesses. However, material weaknesses may exist that we have not identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

]]TVcT? \ÇvA January 31, 2014 JJACPA, INC. Dublin, CA

city annual financial report fye 6-30-2013

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