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COMPREHENSIVE
ANNUAL
FINANCIAL REPORT
CITY OF RANCHO MIRAGE, CALIFORNIA
FINANCIAL HIGHLIGHTS
USING THIS ANNUAL REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our discussion and analysis of the City of Rancho Mirage's financial performance provides an overview
of the City's financial activities for the fiscal year (FY) ended June 30, 2009 Please read it in conjunction
with the accompanying transmittal letter and the accompanying basic financial statements.
The City's net assets from governmental activities increased slightly (.5 to $196 5 million as a
result of this year's operating and capital activities. All of the City's financial activities are considered
governmental activities.
During the year, the City's revenues ($61 3 million) exceeded expenses ($60.4 million) by
approximately $911,000. The term City includes the General Fund, Redevelopment Agency, Housing
Authority, Library and all other Funds identified in this report.
In the City's General Fund, expenditures ($21 9 million) exceeded revenues ($20 9 million) by
approximately $1 million before transfers to and from other funds. After considering transfers to and
from other funds, revenues and transfers in ($23 million) exceeded expenditures and transfers out
($22.5 million) by approximately $500,000. It is important to note that the General Fund's financial
statements include the financial activities of the License Tax Fund, the two COPS (Citizens Option for
Public Safety) Funds and the Aqua Caliente Band of Cahuilla Indians (ACBCI) Fee Fund.
At June 30, 2009, the General Fund's undesignated fund balance ($8 million) and designations for
prudent reserve ($23 million), disaster recovery ($25 million) and public facilities ($10 million) was
approximately $66 million an increase of approximately $1.6 million from June 30, 2008. The
undesignated fund balance and the three designations totaling approximately $66 million is strictly
that of the General Fund and excludes the fund balance of the four Funds referenced in the preceding
paragraph.
Beginning in February 1994, the City Council adopted a prudent reserve policy for the General Fund.
The goal of the policy was that fund balance available for additional spending should never be less
than one year's operating expenditures. The General Fund's fund balance never reflected a prudent
reserve designation on the balance sheet until FY 2007 -08 when the City Council established a
prudent reserve designation. The amount of the prudent reserve designated each year is based on
current operating budget rounded up to the nearest million. Based on the operating budget for FY
2009 -10 of $22.6 million, the prudent reserve at June 30, 2009 is $23 million At that same time, the
City Council further established on the balance sheet designations for disaster recovery ($25 million)
and public facilities renovation, upgrade and acquisitions ($10 million).
The City's capital assets increased to $163.8 million from $159.2 million
This annual report consists of a series of financial statements. The Statement of Net Assets, which
identifies the City's assets, liabilities and net assets, and the Statement of Activities, which identifies
revenues and expenses, provide summary information about the activities of the City as a whole and allow
a longer -term view of the City's finances. Fund Financial Statements of the City's major and non -major
governmental funds tell how City services were financed in the short term as well as what remains for
future spending. Fund financial statements also report the City's operations in more detail than the
government -wide statements by providing information about the City's most significant funds.
Reporting the City as a Whole: The Statement of Net Assets and the Statement of Activities
One of the most important questions asked about the City's finances is, "Is the City as a whole better off
or worse off as a result of this year's activities The Statement of Net Assets and the Statement of
Activities report information about the City as a whole and about its activities in a way that helps answer
this question. These statements include all assets and liabilities using the accrual basis of accounting,
which is similar to the accounting used by most private- sector companies. All of the current year's
revenues and expenses are taken into account regardless of when cash is received or paid. On the other
hand the Fund Financial Statements are reported on the modified accrual basis of accounting as discussed
on the next page.
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These two statements report the City's net assets and changes in them. The City's net assets, the
difference between assets and liabilities, are one way to measure the City's financial health or financial
position. Over time, increases or decreases in the City's net assets indicate whether its financial health is
improving or deteriorating. However, consideration should also be given to other non financial factors,
such as changes in the economy that may cause a decrease in consumer spending. The City's net assets
increased this year by approximately $910,800 from June 30, 2008 to June 30, 2009, due to the following:
First, revenues including bond proceeds exceeded expenditures including bond issuance costs by
approximately $13.63 million Second, there was a net increase in capital assets in the amount of
approximately $9 06 million primarily due to construction activities. Third, there was a net increase in
long -term liabilities in the amount of approximately $17 1 million due to the $22,040,000 July 2008
Redevelopment Agency bond issue partially offset by debt service payments made. Fourth, accumulated
depreciation increased by approximately $4 47 million and fifth, accrued interest payable on outstanding
bonds increased by approximately $214,000.
All of the City's services are considered to be governmental activities. The Statement of Net Assets and
the Statement of Activities present information about these governmental activities, including general
government, community development, public safety and public works. Transient occupancy tax, sales tax,
interest income, construction permits, franchise fees, property tax and other revenues finance these
activities.
Reporting the City's Most Significant Funds: Fund Financial Statements
The Fund Financial Statements provide detailed information about the most significant funds and not the
City as a whole. Included are the General, Library, Fire Tax, Housing Authority, Low Cost Housing,
Whitewater Debt Service, Northside Debt Service, Whitewater Capital Projects and Northside Capital
Projects Funds as well as lesser funds reported collectively as Non -major Governmental Funds. Some
funds are required to be established by State law However, management establishes many other funds to
help it control and manage money for particular purposes or to show that it is meeting legal
responsibilities for using certain taxes, grants, and other money The City currently has just one type of
fund governmental —which uses the following accounting approach.
Governmental funds focus on how money flows into and out of those funds and the balances left at year-
end that are available for spending. All of the City's services are reported in governmental funds. These
funds are reported using an accounting method called the modified accrual accounting. Under this
method of accounting, revenues are recognized in the accounting period in which they become measurable
and available to finance expenditures of the current fiscal period while expenditures are generally
recognized in the accounting period in which the liability is incurred with certain exceptions. For
example, the issuance of long -term debt does not result in the recording of an expenditure in governmental
funds. However, as principal and interest payments are made, the expenditure is recorded.
The governmental fund statements provide a detailed short -term view of the City's general government
operations and the basic services it provides. Governmental fund information helps the reader determine
whether there are more or fewer financial resources that can be spent in the near future to finance the
City's programs. The relationship (or differences) between governmental activities (reported in the
Statement of Net Assets and the Statement of Activities) and governmental funds is described in a
reconciliation following each of the fund financial statements.
The City as Trustee: Reporting the City's Fiduciary Responsibilities
The City is the trustee, or fiduciary, for certain amounts held on behalf of developers, property owners and
others. The City's fiduciary activities are reported in a separate Statement of Fiduciary Assets and
Liabilities. We exclude these activities from the City's other financial statements because the City cannot
use these assets to finance its operations. The City is responsible for ensuring that the assets reported in
these funds are used for their intended purposes.
THE CITY AS A WHOLE
The City's net assets for the fiscal year ended June 30, 2009 were $196.48 million as shown in Table 1.
Table 2 shows changes in net assets of approximately $911,800 due to the reasons previously listed.
4
Table 1
Net Assets
As of June 30, 2009 and 2008
Governmental Activities
2009 2008
Current and other assets 224,171,468 205,621,313
Capital assets 163.828.657 159.234.608
Total Assets 388.000.125 364.855.921
Long -term debt outstanding 177,075,414 159,970,886
Other liabilities 14.441.107 9.312.280
Total Liabilities 191.516.521 169.283.166
2009 2008
Net assets:
Invested in capital assets, net of debt 71,406,020 69,623,504
Restricted 41,643,355 50,412,303
Unrestricted 83.434.229 75.536.948
Total Net Assets 196.483.604 195 572.755
The City's Net Assets are made up of three components: Investment in Capital Assets Net of Related
Debt, Restricted Net Assets and Unrestricted Net Assets. Unrestricted net assets, the part of net assets that
can be used to finance day -to -day operations, account for approximately 42% of the total net assets.
Table 2
Changes in Net Assets
Year -Ended June 30, 2009 and 2008
Revenues
Program Revenues
Charges for services 4,226,144 5,233,322
Operating grants and contributions 2,803,831 2,849,755
Capital and grants contributions 97,179 797,410
Taxes
Tax Increment Net of Pass Through Payments 20,452,592 19,008,630
Property taxes 3,409,321 3,358,308
Transient occupancy taxes 4,634,439 5,157,302
Sales tax 4,470,537 5,515,465
Franchise taxes 1,240,960 1,222,758
Motor Vehicle In -Lieu tax 62,110 71,072
Library and fire services tax 8,997,464 7,924,540
Interest income, net of change in fair value 10,517,778 9,199,944
Other 444 438 994.205
Total Revenues 61 356 793 61 132.711
5
Governmental Activities
2009 2008
Expenses
General government
Public safety
Public works
Cultural and recreation
Interest on long -term debt and
Other charges
Total Expenses
Increase (decrease) in net assets
Program Revenues
12%
Interest Income
Other
18%
Library Fire Services
15%
Interest on Long -Term Debt and
Other Charges
16%
Cultural Recreation
7%
Public Works
22%
SOURCES OF REVENUE
Taxes
55%
I FUNCTIONAL EXPENSES I
6
2009 2008
22,518, 896 16,021,080
10,446,535 10,201,495
13,393,378 12,040,334
4,322,608 3,964,894
9364.527 7.972.330
60.445.944 50.200.133
910,849 11,132,578
General Government
38%
Public Safety
17%
MI Pr opert y Tax
Transient Occupancy Tax
O SalesTax
pother
The City's total governmental activities revenues increased slightly to $61,356,793 compared to
$61,332,711 for last year. Property taxes, which include Redevelopment Agency tax increment revenue
net of pass through payments, accounts for approximately 39% of the total revenues for the current year.
Other major revenue sources include interest income net of change in fair value at 17 transient
occupancy tax at 7.5% and sales tax at 7.3
The slight overall net increase of approximately $24,000 is due to increases in library and fire services
taxes ($1.07 million), increased interest revenue net of change in fair value ($1.3 million) due primarily to
the increases in fair market value and property tax revenue including tax increment net of pass through
payments ($1.5 million). The increase in property tax revenue net of pass through payments is primarily
due to a $2.7 million additional payment in FY 2007 -08 to Riverside County due to a "catch -up provision"
in the pass- through agreement with Riverside County
These increases were offset by decreases in sales tax revenue ($1 million), transient occupancy tax
revenue ($500,000), program revenue ($1 7 million) and other revenue ($550,000). The decreased sales
tax and transient occupancy tax revenues are both due to the slumping economy The decrease in program
revenue is primarily due to decreased charges for services, such as developer fees, also due to the
slumping economy The decrease in other revenue is primarily due to revenue received in FY 2007 -08
related to a lawsuit settlement and fees received related to Eisenhower Medical Center's bond issue.
Total cost of all governmental activities was $60,445,944 compared to $50,200,133 for last year. This
$10.2 million increase is primarily due to land purchases by the Housing Authority ($5 9 million) and
increased expenditures for capital projects ($4 4 million) In FY 2008 -09 the Housing Authority
purchased Rancho Palms Mobile Home Park ($5 5 million) and property on Da Vall Drive ($430,000).
Regarding capital improvement expenditures, several large projects were continued or begun in FY 2008-
09 such as the utility undergrounding projects in several residential areas; vacating of Rancho Palms
Mobile Home Park and the construction of San Jacinto Villas, the Housing Authority's new senior
housing project.
Government Activities
Table 3 presents the cost of each of the City's activities general government, public safety, and public
works —as well as each program's net cost (total cost less revenues generated by the activities). The net
costs show the extent to which the City's general revenues support each of the City's programs
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
Table 3
Net Cost of' Governmental Activities
As of June 30, 2009 and 2008
2009 2008
Total Cost of Net Cost of Total Cost of Net Cost of
Services Services Services Services
General Government 22,518,896 19,928,673 16,021,080 11,702,172
Public Safety 10,446,535 9,763,193 10,201,495 9,795,421
Public Works 13,393,378 10,415,363 12,040,334 9,028,807
Cultural and recreation 4,322,608 3,447,034 3,964,894 2,820,916
Interest on long -term debt
other charges 9 764.527 9 764.527 7.972.330 7.972.330
Totals S 60445 944 53 315390 50200.133 41 319.646
At year -end the City's Governmental Funds reported a combined fund balance of $211,773,400. This
includes the General Fund's total fund balance of $75,490,961 of which $8,077,681 is undesignated, $23
million is designated for prudent reserve, $25 million is designated for disaster recovery, $10 million is
designated for public facilities, $1,911,357 is designated for continuing appropriations and $1,847,222 is
reserved for encumbrances. The General Fund's undesignated fund balance and designations for prudent
reserve, disaster recovery and public facilities increased by approximately $1 6 million due primarily to
the following:
Revenues and transfers in exceeded expenditures and transfers out by approximately $514,000.
Net decrease of approximately $1 1 million in other reserves such as encumbrances and continuing
appropriations.
7
As noted on page 3, the General Fund's financial statements include the financial activities of the License
Tax Fund, the two COPS (Citizens Option for Public Safety) Funds and the Aqua Caliente Band of
Cahuilla Indians (ACBCI) Fee Fund. However, the General Fund's undesignated fund balance and
designations for prudent reserve, disaster recovery and public facilities decrease noted above is for the
General Fund only
Other major funds:
The Library Fund's fund balance decreased slightly to $2,462,248 from $2,486,756 due to operating
expenditures exceeding revenues and transfers in by approximately $24,500. It has always been
known that, with the opening of the new and larger library in January 2006, the General Fund would
eventually have to provide an operating subsidy to the Library Currently it is anticipated that the
operating subsidy will begin in FY 2013 -14
The Fire Tax Fund's total fund balance increased to $884,806 from $567,658 due to revenues and
transfers in exceeding expenditures by $317,148. Since FY 2002 -03 the General Fund has provided
an operating subsidy to the Fire Fund in order for it to maintain a $0 undesignated fund balance. This
year no operating subsidy was required due to decreased expenditures primarily as a result of State
mandated furloughs, a new required transfer in from the Redevelopment Agency as a result of a new
bond issue completed in FY 2008 -09 and a new transfer in from the General Fund for revenue
received from the Agua Caliente Band of Cahuilla Indians' casino.
The Housing Authority's total fund balance is $21,369,558 all of which is reserved for affordable
housing projects. The approximate $2 6 million decrease in fund balance is due to expenditures
(including land purchases and capital projects) and transfers out exceeding revenues and transfers in.
The Redevelopment Agency's Low Cost Housing Fund's fund balance decreased from $31,840,220 to
$28,746,327 due to increased transfers out to the Housing Authority Fund to reimburse it for capital
expenditures. The Low Cost Housing Fund's fund balance is available to reimburse the Housing
Authority, from bond proceeds, for the development of additional affordable housing. After
accounting for debt service on outstanding bonds and some minor operating costs, the annual balance
of tax increment revenue is transferred to the Housing Authority, a separate legal entity, where it is
used for the retention, development and other costs and expenditures related to the provision of
affordable housing. In December 2003, the Redevelopment Agency issued $67,760,405 in bonds. Of
this amount, $34,565,000 was tax allocation housing bonds which are accounted for in this Fund.
The Whitewater Project Area Debt Service Fund's fund balance increased from $987,066 to
$2,490,101 due to revenues exceeding expenditures and transfers out primarily due to increased tax
increment and decreased pass through payments. In FY 2007 -08 there was a $2.7 million additional
pass- through payment to Riverside County due to what is known as the "catch -up provision" in their
pass- through agreement.
The Northside Project Area Debt Service Fund's fund balance also increased to $8,993,730 from
$2,561,634 This approximate $6.4 million increase is due to revenues and transfers in exceeding
expenditures and transfers out primarily due to the transfers in from the Northside Capital Projects
Fund to establish a reserve fund for the $22,040,000 July 2008 bond issue (approximately $1.5
million) and debt service payments due in FY 2009 -10 (approximately $4.8 million)
The Whitewater Project Area Capital Projects Fund's fund balance decreased from $8,494,840 to
$4,813,584. The decrease of $3,681,256 is due to expenditures exceeding revenues and transfers in
primarily due to increased capital projects expenditures ($2 million) and an increased General Fund
reimbursement ($1.2 million).
The Northside Project Area Capital Projects Fund's fund balance increased to $50,442,343 from
$37,013,701 The $13,428,642 increase is primarily due to the $22,040,000 July 2008 bond issue less
cost of issuance ($312,870), transfers to the Northside Debt Service Fund to establish a reserve fund
for the new bond issue and for FY 2009 -10 debt service payments ($6 3 million) and increased
expenditures in excess of revenues ($2 million) primarily for capital improvement projects.
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General Fund Budgetary Highlights
Revenues: Due to the continuing slumping economy, various budget adjustments were approved by the
City Council at mid -year. See the Budgetary Comparison Schedule for details. Final year -end revenues
exceeded budgeted amounts by approximately $1.3 million primarily due to unrealized gains on
investments that were not budgeted because the City's practice is to hold investments to maturity.
Expenditures: Various expenditure budget adjustments were approved by the City Council at mid -year
and year -end. See the Budgetary Comparison Schedule. Actual expenditures of $21,972,762 were
$7,319,564 less than the final budget primarily due to budgeted capital improvement projects not being
completed by the end of the fiscal year (approximately $4.2 million) and reduced expenditures in all
General Fund divisions (approximately $3.1 million).
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
At the end of fiscal year 2009, the City had $163.8 million invested in a broad range of capital assets,
including land, buildings, park facilities, streets, traffic signals and vehicles and equipment. This amount
represents a net increase (including additions and deletions) of approximately $4.6 million over last year
and includes the purchase of Rancho Palms Mobile Home Park and the continuing construction of San
Jacinto Villas which is the Housing Authority's new senior housing project. More detailed information
regarding the activity for the year ended June 30, 2009 can be found in the notes to the financial
statements section (note 5).
2008
2009
I
Land Rights of way
Buildings and improvements
Furniture Fixtures
Equipment
Infrastructure
Work -in- Progress
20 4000 ,000
Table 4
Capital Assets at Year -End
(Net of Depreciation)
June 30, 2009 and 2008
Government
2009
37,735,668
38,035,493
1,362,769
1,060,172
83,875,130
1.759.426
Totals $163.828.658
CAPITAL ASSETS I
40 4000 ,000 6 4000 ,000
9
80,0 00,000
Activities
2008
32,075,074
38,282,677
1,272,192
954,298
85,316,073
1.334.294
1.59.234.608
I00 0004000
Work -in- Progress
Infrastructure
Equipment
Furniture
Fixtures
Buildings and
Improvements
Land Rights of
Way
Debt
At year -end the City's governmental activities had $177,075,414 in bonds, claims payable, ACBCI Pay
Back Deficit and compensated absences compared to $159,970,886 at the prior year -end. The increase of
approximately $17 1 million is primarily due to the net effect of debt service payments and the
$22,040,000 July 2008 bond issue. Regarding the ACBCI (Agua Caliente Band of Cahuilla Indians or
Tribe) Pay Back Deficit, in 2001 the City entered into an agreement to reimburse the Tribe for Bob Hope
Drive/Dinah Shore Drive street improvements. The agreement calls for reimbursement in 10 installments
in the amount of $220,000 from Development Impact Fees collected in the Street Interchange
component in a calendar year. If the collections are less than $220,000 in a calendar year, the payment
will be equal to the amount collected with the balance being recorded as a "Pay Back Deficit" and to be
paid when collections exceed $220,000 in a calendar year More detailed information can be found in the
notes to the financial statements (note 6).
Revenue Bonds
Tax Allocation Bonds
Claims Payable
ACBCI Pay Back Deficit
Compensated Absences
Table 5
Outstanding Debt at Year -End
June 30, 2009 and 2008
Government Activities
2009 2008
Totals
5,310,000
169,690,462
444,587
92,287
1 538.078
177.075.414
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
The General Fund's FY 2008 -09 actual operating revenues totaled approximately $24 million FY 2009-
10 operating revenues are budgeted at approximately $23 million a net decrease of approximately $1
million The net decrease is due to estimated decreases in various revenue sources primarily sales tax
($500,000), transient occupancy tax ($506,000) and interest on investments ($930,000) partially offset by
an increase in the Housing Authority reimbursement ($503,000) and development agreement revenue
from the Agua Caliente Band of Cahuilla Indians ($572,000). Revenue estimates will be reviewed at mid-
year to see if adjustments are warranted.
The City's General Fund has budgeted operating appropriations in the amount of $22.6 million for FY
2009 -10. This is a decrease of approximately $1.6 million compared to the FY 2008 -09 budget and is a
result of detailed review of each budget request. Appropriations will also be reviewed during the mid-
year review in January 2010.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors
with a general overview of the City's finances and to show the City's accountability for the money it
receives. If you have questions about this report or need additional financial information, contact the
City's Finance Department at the City of Rancho Mirage, 69 -825 Highway 111, Rancho Mirage,
California 92270, (760) 770 -3207
10
5,470,000
152,842,643
293,114
-0-
1.365.129
159 970