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CITY OF BERKELEYCALIFORNIA

Comprehensive Annual Financial Report

For the fiscal year endedJune 30, 2010

Prepared by Finance DepartmentRobert HicksDirector of Finance

CITY OF BERKELEYComprehensive Annual Financial ReportFor the Fiscal Year Ended June 30. 2010

TABLE OF CONTENTS

INTRODUCTORY SECTIONLetter of Transmittal I - ISGFOA Certificate of AchievementGovernment Structure 20List of Elected and Appointed Officials 21Organizational Chart 22

FINANCIAL SECTIONIndependent Auditors Report 23-21

Majnaeements Discussion and Analysis 25-44

Basic Financial Statements 45Government—wide Financial Statements:

Statement of Nct Assets 46Statement of Activities 47

Fund Financial StatementsGovernmental Funds:

Balance Shed 48-49Reconciliation of the Governmental Funds Balance Sheet

to the Government—wide Statement of Net Assets - Govertimental Activities 50Statement of Revenues. Expenditures. and Changes in Fund Balances 51-52Reconciliation of the Statetneint of Revenues. Expenditures and Chatiges in

Fund Balances of Governmental Funds to the Statement of Activities - Govertitnental Acti’ ties 53

Proprietary Funds:Statement of Net Assets 54Statement of Revenues. Expenses and Chittiges iti Fund Net Assets 55Statement of Cash Flows 56-57

Fiduciary Funds:Statement of Fiduciary Net Assets 58Statement of Changes in Fiduciary Net Assets 59

Notes to the Financial Statements 60-130

Required Supplementary Information: 131Schedule of Revenues. Expenditures and Changes in Fttnd Balances - General Fund - Budgetary Basis 132Schedule of Revenues. Expenditures and Chauges in Fund Balances

- Other Major Special Revenue Funds - Budgetary Basis 133-136Schedule of Funding Progress - CALPERS. Safety Members Pension Fund (SMPF).Police Retirement Income Benefit Plan, and OPEB Plans 137-139Note to Required Supplementary Informaiton 140

Other Supplementan Information:Combining and Individual Fund Statements and Schedules: 141

Schedule of Revenues. Expenditures. and Changes in Fund Balances -

Budget and Actual - Major Capital Project Fund - Bttdgetarv Basis 42-143

Fund legend for Nonmajor Governmental Funds 144-151

Combining Balance Sheet 152-160Combining Statement of Revenues. Expenditures and Changes in Fund Balances 161-168

CITY OF BERKELEYComprehensive Annual Financial ReportFor the Fiscal Year Ended June 30. 2010

TABLE OF CONTENTS

Schedule of Revenues. Expenditures. and Changes in Fund Balances -

Budget and Acujal - Budget1iry Basis 169-186

Fund legend for Internal Service Funds 187

Combining Statement of Net Assets - Internal Service Funds 188Combining Statement of Re enucs. Expenses and Changes in Fund Net

Assess - Internal Service Funds 189Combining Statement nf Cash Flows — Internal Service Fttnds 190—191

Fund legend for Fiduciary Funds 192

Combining Statement of Fiduciary Net Assets - Pensions andOther Employee Benefit Trust Funds 193

Combining Statement of Changes in Fiduciary Net Assets — Pension andOther Employee Benefit Trnst Funds 194

Ftind legend for Agency Funds 195

Combining Statement of Fiduciary Net Assets — Agency Funds 196Siaiement of Changes in Assets and Liabilities - Agency Funds 197

STATISTICAL SECTIONIndex to Statistical Sectiun 198Financial Trends:

Net Assets by Component 199Chatsees in Net Asscts 200-202Fund Balance. Govemtuental Funds 203Chanees in Fund Balances. Governmental Funds 204-205

Revenue Capacity:Assess Value and Estimated Actual Values of Taxable Property 206Direct and Overlapping Property Tax Rates 207Principle Propert Tax Payers 208Property Tax levies and Collections 209

Debt Capacity:Ratios of Outstanding Debt by Type 210Ratios of General Bonded Debt Outstanding 211Direct and Overlapping Governmental Activities Debt 212Legal Debt Margin Information 213Pledged Revenue Coverage 214

Demographic and Economic Information:Demographic and Economic Statistics 215Principal Emplocrs 216Full-Time-Equivalent City Government Employees by Funciio&Program 217

Operating Information:Operating Indicators 218-220Capital Asset Statistics by Function/Program 221

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL AND ON COMPLIANCEAND OTHER MATTERS BASED ON AX AUDIT OF FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITH GOVERAMFNTAUDITINGST,4NDARDS 222-223

Summary Schedule of Prior Audit Findings 224Schedule of Findings and Responses 225-228

MEMORANDUM

DATE: December 28, 2010

TO: Honorable Mayor and Members of the City Council, City Manager, and Citizensof the City of Berkeley

FROM: Robert Hicks. Director of Finance

RE: Presentation of the Comprehensive Annual Financial Report

Attached is the Comprehensive Annual Financial Report (CAFR) of the City of Berkeley for thefiscal year ended June 30. 2010. The CAFR has been prepared by the Finance Department inconformance with the principles and standards for financial reporting set forth by theGovernmental Accounting Standards Board (GASB). Responsibility for the accuracy,comprehensiveness and fairness of the presented data, including all disclosures, rests with theCity’s management. The report has been compiled in a manner designed to fairly set forth thefinancial position and results of operations of the City as measured by the financial activity of itsvarious funds. All disclosures necessary to enable the reader to gain an understanding of theCity’s financial affairs have been included.

The City prepared the CAFR in accordance with generally accepted accounting principles, whichincluded using the financial reporting requirements prescribed by GASB Statement No. 34. BasicFinancial Statements and Management’s Discussion and Analysis for State and LocalGovernments (GASB 34). This statement requires that management provide a narrative overviewand analysis to introduce the basic financial statements in the form of Management’s Discussionand Analysis (MD&A). This letter of transmittal is designed to complement the MD&A andshould be read in conjunction with it. The MD&A can be found immediately folLowing theindependent auditor’s report.

THE REPORTING ENTITY

This report combines the financial statements of the City, the Berkeley Redevelopment Agency(BRA), the Berkeley Housing Authority (BHA), and the Rent Stabilization Board (RSB) inaccordance with principles defining the governmental reporting entity adopted by theGovernmental Accounting Standards Board (GASB). The Rent Stabilization Board is adiscretely presented component unit because the citizens elect its nine-member Board ofCommissioners. The Berkeley Housing Authority is a discretely presented component unitbecause HUD required the City to appoint an independent board responsible for oversight ofBI-TA, and the City provides significant financial support to BHA. The financial operations of theBRA, though legally separate from the City, are closely related to the City. In fact, in separatesessions, the City Council members serve as the governing board of the BRA. As a result, the

Depariment of FinanceOfflce of the Director

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December 28, 2010Presentation of the Comprehensive Annual Financial ReportPage 2

BRA is presented as a blended component unit in the financial statements. The financialactivities of the BRA are included with the capital project and debt service fund types.

PROFILE OF THE CITY

The City of Berkeley is located in Alameda County on the east side of the San Francisco Bayapproximately ten (10) miles east of San Francisco. The City encompasses a total area ofapproximately 19 square miles and has an estimated population of 108,855. giving it the highestpopulation density of any city in the East Bay. The City is defined to a large degree, bothculturally and economically, by the presence of the University of Ca]ifornia campus located onthe eastern side of the City.

The City of Berkeley is among the oldest cities in California. It was founded in 1864,incorporated as a town in 1878, and incorporated as a city in 1909. The original City Char er wasadopted in 1895. At the geographic midpoint of the Greater Bay Area, Berkeley is 20 minutesfrom San Francisco and close to population centers in Contra Costa County and the SiliconValley. The City is governed by a City Council composed of members elected from eightdistricts to serve four-year terms, and a Mayor who serves as the president of the City Council.elected citywide to a four-year term. The City’s FY 2010 adopted budget included $333,355,332of expenditures and reserves, of which S 148.500,040 was allocated to the General Fund of theCity and S 184.855.292 to all other funds. The City employs approximately 1.600 career full-timeequivalent employees.

The City provides a full range of services exceeding that of most similarly sized cities inCalifornia: services include public safety (police and fire); sanitation and sewer; housing; leisure(pai:ks. recreation and marina); health and human services including City funded health clinics;animal control; public improvements: planning and zoning; general and administrative services;and library services. In addition, the City’s reporting entity includes the financial activities of theRedevelopment Agency, the Housing Authority and the Rent Stabilization Board.

The budget process is the vehicle through which the City establishes goals and objectives, andprioritizes the desired programs or services that the City should provide, and which can befinanced by the City’s projected revenue for the budget year. It is the vehicle through whichpolicy decisions are made, effected, controlled and monitored. Under the City Charter, the CityManager is responsible for preparing and recommending an operating budget and a capitalimprovements budget for City Council consideration and adoption.

The City of Berkeley employs a two-year budget process. In year one of the biennial budgetcycle, the City Council formally adopts authorized appropriations for the first year of the two-year budget and approves “planned” appropriations for the second fiscal year. In year two of thebudget cycle, the City Council considers revisions and formally adopts authorized appropriationsfor the second fiscal year. Although the budget cycle covers a two-year period, the City Charterrequires that the City Council adopt an annual appropriations ordinance for each budget year.

The City’s Capital Budget is considered as part of the City’s Five-Year Capital ImprovementPlan. Upon adoption each year by Council. the projects included in the annual budget representlegal appropriations. Capital expenditures are not fully “consumed” in the year of expenditurebut instead produce long-term, tangible, future benefits.

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December28, 2010Presentation of the Comprehensive Annual Financial ReportPage 3

In addition to this budget planning process, the City maintains budgetary controls. The City’sobjective in maintaining budgetary control is to ensure compliance with legal provisionsembodied in the annual appropriated budget approved by the City Council. The City Manager isauthorized to transfer budgeted amounts within funds as deemed necessary in order to meet theCity’s needs. However, revisions that alter the total budget or move amounts from one fund toanother must be approved by the City Council. Activities of the General Fund, Special RevenueFunds, Debt Service Funds. Capital Project Funds, and Proprietary Funds are included in theannual appropriated budget.

The City maintains an encumbrance accounting system as one technique of accomplishingbudgetary control. Purchase orders, contracts, and other commitments for the expenditure ofmoney are secured in order to reserve that portion of the applicable appropriation. Encumbrancesoutstanding at year-end are reported as reservations of fund balance. Unencumbered amountslapse at year-end and may be appropriated as part of the following year’s budget.

Moving Toward an Integrated Budget Process. The City is continually improving its budgetprocess and service delivery to align policy goals, program objectives and resources, and servicedelivery — including establishing useful performance goals and integrating them with sustainableperformance goals. The two-year budget allows time to effectively integrate goal-setting andpolicy-making processes, with the establishment of performance targets and the allocation ofresources. Short-term program and service objectives can be developed, and resources to meetthese objectives can be appropriately allocated through the budget process. To complete thecycle, performance measures will be used to evaluate if services were effective and policy goalsmet. This information can feed the subsequent assessment of community conditions and trendsfor the next budget and performance cycle.

• Developing a Service-Based Outcomes Budget. Over the next few budget cycles, theCity will continue to design a budget process, which focuses on services and includesperformance and benchmark information to assist in evaluating program outcomes and howeffectively resources are used. Full implementation and benefits of a performance-basedbudget cannot be achieved without organizational changes in other areas.

LOCAL ECONOMY

FY2OIO was a period of significant economic turmoil in the country, the State, the Bay area andthe City. It was dominated by a loss of jobs, low consumer confidence, tighter credit standards,less willingness on the part of banks to lend, and lower levels of consumer and businessspending. The economic conditions resulted in declines in nearly all economically-sensitiverevenue sources, and most property-related revenue sources and charges for services. There wasa slight decrease of $138,077 in property-related revenues and a $4,137,264 decrease ineconomically-sensitive income.

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December 28. 2010Presentation of the Comprehensive Annual Financial ReportPage 4

Table 1

PROPERTY-RELATED TAXES (modified accrual basis of accounting)I Description FY 2009 FY_2010 Difference

Real property $ 37,119,822 $ 37.247,825 $ 128,003 .3%Personal property fl747115 2,356,590 (117,529) E (4.8)%Supplemental flJ57,531 532.794 (724.737) (57.6)%

; Property transfer 7,881,209 8,345,841 464.632 5.9%i Redemptions 1,905.672 2.017.226 1 11,554 5.9%Total [Tö,638,353 $ 50,500,276 ($138,077)

Table 2

I ECONOMICALLY-SENSITIVE INCOME (modified accrual basis of accounting)

Description FY 2009 FY 2010 DifferenceT13,9o7,ñW Es 12333,983 ThA73237) fl78.4)%

Business license tax 13,388.429 13,505,958Transient occupancy

r

3.671,362 3,673,023

117,529 .9%

1.661tax

__________ _______________________ ________________________

IInvestment income r 8,745,699 fl 5,433,878 “(3,311,821) (37.9)%

Es 39,712,716 E35,346$42r$(4365$68) (11.0)% -

!,ie/uiles appraxiniotelv 53.0 ,,,iIIion in o,,e—iinie increase in the ,i,orket value of ui resn,lenis lie/ti b, the General Fund in FY 2009 and5557.040 increase ,,, IV 2010. a c a result ala 5uhstal,tiai decline in interest ‘vies after the City puirhased the iuvesto,enis. GASB Siaie,ne,,ijVu,n/,er 3? requires that iniesu, cii’s held ‘it year—cud he n,arked- ra—,na,ket. and the ‘unease or decrease in the ma ,ket a/ne of the 11,1 rsune,, isbe added it’ a, subt roe, edfro;n interest income.

Despite the decrease in the financial position of the City’s General Fund in FY 2010. the City ofBerkeley continued to be financially strong and to benefit from par icipation in the Bay Area’sdiverse and stable economy. During FY 2010. the City’s bond rating from Standard and Poors,one of the national rating agencies, remained at AA+; and the rating from Moody’s remained thesame at Aa3.

The City is home to the main campus of the University of California. With over 35,000 studentsand approximately 14,444 employees, the University provides a high degree of economicstability for the City and has spurred growth in the high technology and biotechnology sectors.The Lawrence Berkeley Laboratory also has 3,735 employees, and the Alta Bates MedicalCenter has approximately 3,100 employees. Despite the large student population, the City has anaverage median family income of S91,514.

During the fiscal year, the local economy slumped consistent with regional and national trends.Berkeley’s current economic base consists of approximately 12,000 licensed businessesoperating in the City. These businesses include private manufacturing, technology research, retailand service businesses, educational services, healthcare and social assistance, consulting, artsand entertainment, hospitality services, along with several state, federal, and non-profitinstitutions. These businesses provide employment for 52,000 (down from 53,300 in June 2009),according to the State Economic Development Department. This economic base generated

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slightly over $5.1 billion in gross business receipts in the 2009 calendar year, up approximately$760 million or 17.5% from $4.34 billion in 2008. Also, the City had over $1.28 billion intaxable sales during the fiscal year, down sharply from the $1.42 billion in FY 2009. In addition,the City’s unemployment rate (as reported by the State of California Employment DevelopmentDepartment) rose from 10.8% in June 2009 to 11.3% in June 2010, compared to 11.5% for theCounty, 12.2% for the state and 9.5% for the U.S.

After increasing from $8.7 billion to $11.9 billion or an average of 6.5%, over the last five years,growth in assessed valuation on secured property slipped significantly in FY 2010, to 1.4% inFY 2010. Despite the slip, assessed value is at a strong level of $105,316 per capita. The tax baseis diverse, with the top ten property taxpayers accounting for slightly more than 5.0% of totalassessed valuation. Residential construction weakened significantly with the estimated value ofpermits totaling S44.137,040 (down from SI 13.415.612 in FY 2009), but commercialconstruction remained at the FY 2009 level with the estimated value of permits issued totaling$40,512,824, versus $40,785,465 in FY2009.

The City takes an active role in guiding economic development to serve the business andresidential community. The City manages a number of programs intended to assist in localbusiness expansion and retention efforts, provides permit assistance to new businesses, seeksappropriate sites, and works directly with Local businesses and merchant organizations toimprove the local business climate. Major implementation programs have also been initiated andare funded, in part, by a grant from the Metropolitan Transportation Commission (MTC),including development of financing programs to pay for street and open space improvements.managing parking for greater efficiency, and the construction of new shared parking facilities asnew development occurs.

Since 1994, the City CoLmcil has resolved to promote environmentally sustainable businesses inBerkeley and formally adopted the Precautionary Principle based on the outcomes of the KyotoAccord.

Community Planning -- City Work Plan. One of the major components of the City’ s efforts todevelop an integrated budget process is the establishment of policy priorities by the CityCouncil. One outcome of this process is an attempt. through the budget, to align City Counciland community expectations with resources available to the City to deliver desired results.

The City Council approves a composite of Citywide Critical Initiatives and Special Projects forthe upcoming fiscal year and reviews its top priorities. Establishment of clear City Councilpriorities helps ensure that certain programs and initiatives receive the management andresources needed to deliver timely results. Council confers with the City Manager and staffregarding priorities and maintenance of the work plan projects.

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A]JDRESSING LONG-TERM UNCERTAINTIES

The City will be facing higher retirement costs in FY 2012 that may create a General Funddeficit, if steps aren’t taken to address the problem. One of the adopted Council fiscal policies islong-term planning. Staff will continue to review the budget in the context of a 5-year plan.Since staff anticipates significant cost increases in FY 2012, staff will continue to updateprojections for FY 2012 and beyond. The budget development policies frame staff’s approach:

• Multi-year forecasting• Looking for long-term budget balancing strategies-not short-term fixes• Engaging and informing Council early and often• Harvesting good ideas throughout the organization• Streamlining overhead through a flatter organization• Managing unfunded liabilities

In order to address the forecasted $9.6 million deficit in FY 2012, all proposed balancingmeasures for FY 2011 must be implemented on a recurring basis, and additional balancingmeasures totaling at least $4 million must be implemented.

The current proposal is to address this projected shortfall through S2 million in new revenue and$2 million in new recurring expenditure cuts. Increased costs would result in the need for moreexpenditure reductions. Setting aside funds in the Reserve account helps to address economicuncertainties and smooth out sudden and dramatic program reductions.

LONG-TERM DEBT RATINGS

Standard& Poor’s Corporation and Moody’s Investors Service assigned the General ObligationBonds ratings of AA+ and Aa3, respectively, upon their issuance. The City was able to maintainthese ratings in the face of challenges to the local economy and the City’s budgets, due to aproven record of sound fiscal management by the Mayor, City Council and City staff.

SPENDING LIMITATION

Article XIIIB of the California Constitution, also kiown as the GANN spending limit, restrictsthe amount of “proceeds of taxes” California governments may spend. As of June 30, 2010, theCity was $24.1 million or 14.4% under the total Article XIHB (Gann) spending limitation. TheCity was not impacted by the spending limitation in FY 2010 or FY 2011.

MAJOR IMPACTS AND INITIATIVES

1. 311 CALL CENTER

The City has established a centralized 311 Customer Service Call Center to provide first-callresolution for 80% of all routine requests for service and information. Instead of having to figureout which of the City’s 390 published telephone numbers to call, members of the public are ableto simply dial 311 within Berkeley (from outside Berkeley, customers dial 981-CITY to accessthe 3 11 Call Center). Using Community Relationship Management software, trained CustomerService Representatives answer questions, process business transactions, and track service

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requests and follow-up for all City Departments. This helps free up departmental staff to work onmore complicated, non-routine customer service issues. The 311 Call Center is working toincrease the number of online services accessible via the City’s website, expand the use ofCommunity Relationship Management (CRM) software throughout all City departments, andaugment services provided through the City’s Interactive Voice Response (IVR) system;

2. MAJOR CAPITAL PROJECTS

a. Marina Plati and Waterfront Oven’iew The Parks Recreation & Waterfront Departmentcontinues to work with the Waterfront Commission to refine the Marina Fund financial forecasts.making recommendations to increase fees and reviewing critical Capital Projects. The basis forthese recommendations comes from the Marina Plan, which was adopted by Council on July 8,2003 and continues to guide the division.

The Marina Plan identifies major capital costs associated with maintaining and enhancing theBerkeley Marina and associated parkiands. Since the Marina is funded through an enterprisefund, 100% of the costs associated with its operation and maintenance are funded throughrevenues generated from Marina operations, berth rentals, leases or alternative sources such asgrants or loans. Financial forecasts indicate that shortfalls will occur and that new revenuesources are needed. Without infrastructure improvements, docks will be removed from serviceand the Marina basin may eventually fill with silt.

b. Parks Funding for parks and recreation facilities infrastructure improvements is limited andthe City has developed a greater reliance on outside grant funding. The passage of Measure AA,which is an extension of Measure WW provides funding for major capital projects. In 2008, theCity of Berkeley was allocated $4,876,584 in funding, and in FY 2010, the department hasdeveloped a list of projects to be undertaken.

c. Camps The Parks, Recreation and Waterfront Department is continuously working with theDepartment of Forestry on their recommendations to make the camps compliant. TheDepartment is in the process of completing the Tuolumne Master Plan. which identifies all thenecessary capital improvement. All costs for the operation and maintenance as well as Ihe capitalimprovements come from the Playground Camp Fund, which is directly funded by camp fees. Arecently approved fee increase by the City Council should help alleviate the fund’s projectedfunding shortfall.

L Animal Shelter The City’s Animal Services operations are currently housed at 2013 2nd Street,in a facility that was built in 1940. It is in poor condition, seismically unsafe, suboptimal for themaintaining of healthy animals, and is not conducive for promoting animal adoptions orattracting members of the public to visit. In 2002, Measure I was passed and authorized aGeneral Obligation Bond for $7.2 million for land acquisition and construction of a newmunicipal animal shelter. The City Council appointed a subcommittee composed of members ofthe City Council and the Citizens’ Humane Commission to explore possible locations for a newanimal shelter. Recently, widespread agreement was reached among all stakeholders that thelocation at 1 Bolivar Drive is an ideal location for a new animal shelter facility. It is adjacent toAquatic Park. affords easy access to areas for exercising and socializing animals and is not inclose proximity to any residential uses. The General Obligation Bonds in the amount of $7.2million were issued on January 9, 2008, and the City has bought the property at 1 Bolivar Drive.

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On April 20, 2010 the City Council authorized the execution and delivery of Certificates ofParticipation in the aggregate principal amount not to exceed $5,750,000 to finance the project,and those Certificates of Participation were issued in May 2010. Construction is expected to becompleted by June 2011.

e. Branch LibrariesAt an election held on November 4, 2008. two-thirds of the voters passed Measure FF,authorizing an amount of $26,000,000 of General Obligation Bonds to provide funds to financerenovations, construction, seismic and access improvements, and expansion of program areas atfour neighborhood branch libraries in the City. The library system provides more than 500,000books, videos, DVDs, cassettes, CDs, books on tape, and microfilm for children and adults.However, the branches are old and out-of-date, and must be improved in order to support theover 800.000 visits made during the year. Most branches have not been renovated in more thanthree decades. The buildings have crowded spaces, suffer from structural and infrastructuraldamage, need to be ADA-accessible, and lack the infrastructure to meet current and futuretechnology needs. The funding will bring the library buildings up to current code standards, meetseismic requirements, make all of the branches fully accessible to Berkeley’s diverse population,provide environmentally sustainable “green” operations. and create adequate space for the ToolLibrary and Berkeley Reads, the adult literacy programs.

3. COMMUNITY EMERGENCY PREPARATION

The following overview describes the City’s comprehensive efforts to reduce risk, to betterprepare for disasters and safety actions taken last year to ensure community safety andpreparedness. Other City efforts include staff training, response preparations, exercises,community preparedness initiatives, local and regional coordination and other preventiveprograms that are underway or are in development.

a. Pre-Disaster Mitigation Efforts The community has the highest per capita investment in riskreduction in California. Since 1989, Berkeley has invested in community sustainability on manyfronts. The City Council established an Office of Emergency Services in July 1989 and convenedthe commission that later became the Disaster Fire and Safety Commission. This leadershipcontinued and acted to make risk reduction and community sustainability a priority.

Thus far, the City’s mitigation efforts include addressing soft-story and masonry earthquakeretrofits, pandemic flu response, global warming, disaster preparedness and response, andvegetation management. The City is also working with multiple departments in updating itsMitigation Plan to mitigate potential risks for all hazards in Berkeley. Hazards includeearthquakes, wildfires. landslides, floods, hazardous materials accidents, terror attacks and othermulti-hazard events.

b. Employee Disasrer Response Train mR Training for City staff is required to meet the mandatesof California Code of Regulations Title 19 Section 2401, 2930 and 2935, and the HomelandSecurity Presidential Directive 5 that requires workers to use the Standardized EmergencyManagement system and the National Incident Management System. All local government staffare designated Disaster Service Workers, according to State law. Consequently, it is critical thatthe City provide adequate training for staff to know their disaster response responsibilities andhave learning opportunities to deepen that knowledge. Keeping training and disaster exercises on

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the organization’s larger schedule is a challenge when months of advance planning and practicemust be maintained. In FY 2010, the City’s training programs included National IncidentManagement (NIMS) and Incident Command System (ICS) 300 and 400 courses.

c. Community Disaster Preparedness The City has always been a leader in engaging communityand neighborhood groups to be disaster ready. The City offered training classes, madepresentations to the public, updated the City’s website information, and engaged in otheroutreach activities to strengthen disaster preparedness for the Berkeley community. The freeyear-round Community Emergency Response Training (CERT) classes are offered to anyoneliving or working in the Berkeley community and cover basic preparedness. disaster mentalhealth, disaster first aid, fire suppression. light search and rescue, shelter operations. and radiocommunication/incident command system. A consistent number of individuals, about 700.attended at least one CERT class every year.

Berkeley voters approved Measure GG in November of 2008, providing critical resources toensure minimum staffing of all fire suppression companies; enhance the City’s EmergencyOperations Center: and to continue to focus on community preparedness, including resources forCommunity Emergency Response Training (CERT) and community caches. In 2009. the City ofBerkeley opened another application period for disaster cache supplies to be awarded in 2010.These disaster caches will supplement the forty-one already distributed caches throughout theCity and help to bolster the community’s resilience in a disaster.

ci. Response The City uses an emergency notification system to keep people informed duringdisasters. The Berkeley Emergency Notification System (BENS) is a telephone notificationsystem that can contact residents and businesses through an automatic message service center inthe event of an emergency. Berkeley’s emergency radio station is 1610 AM. Over the years, theCity has activated its Emergency Operations Center (EOC) and responded to a number ofdisasters. The most recent disaster was the Oil Spill in November 2007.

e. Recoi’en’ The City’s Finance Department has established procedures and protocols todocument expenditures incurred during disaster operations. These procedures were very effectivefor submitting documentation for FEMA approval for all disaster reimbursements.

.1 Health and Human Service ProRranis The Public Health Division (PH) receives CDC andstate health dept grants (Total: $266,998 in FY 2010) to develop plans for large PH emergenciessuch as bioterrorism or pandemic influenza, to plan for needs of special needs and vulnerablepopulations, and coordinate with health care providers, clinics and hospitals on emergency surgecapacity. Additionally. PH received a total of 55 16,376 in Public Health Emergency Responsefunds from the CDC (a one-time provision) to respond to the HIN1 pandemic. In FY 2010. P1-Icoordinated its response to the H1NI pandemic by activating its PH Departmental OperationsCenter (DOC) in April 09. The DOC remained fully activated for more than 2 weeks, and thenpartially activated from then until February 2010. During the activation, PH planned andconducted two simultaneously-run exercises — a Full Scale Flu Vaccination Exercise for thecommunity and a First Responder Flu Vaccination Exercise (Oct 09). PH has also planned andconducted several mobile H1N1 vaccination clinics in the community (Feb-June 10). and isworking with the Aging Services Division to develop a mass prophylaxis agreement (MOU) inwhich the Meals on Wheels program would be part of the distribution of medication/vaccinations

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in a public health emergency event. PH has continued collaborating with the Office ofEmergency Services in providing disaster preparedness education and resources to all Berkeleyresidents, particularly in South and West Berkeley.

g. Disaster Fire Protection In the November 2000 election, Berkeley voters approved MeasureQ. which provided $8,000,000 in funding for an Above Ground Portable Water System. Thissystem is designed to provide water for firefighting independent of the domestic water systemprovided by the local water district. The engineering studies of the domestic water systeminfrastructure determined that after a major earthquake or in event of high fire flow demands thatcan occur during wild land/urban firestorms, the system may not be usable or able to supportfirefighting operations. The City has contracted \vith Hydrants Systems located in Holland for apump and hose system that will allow use of salt or fresh water sources like the San FranciscoBay or lakes to provide water for firefighting.

The system includes two 6,000-gpm pumps (HS 900) and six containers each with one mile of12 inch ultra large diameter hose. The pumps and containers can be moved and deployed bytrucks using a lift arm loading system. For more information on the system go to the Hydrantswebsite at Hytrans.com.

Due to unforeseen delays, construction on the 8.000 square foot warehouse will begin in 2010- and both the water system and warehouse should both be operational by the end of 2010.

h. Other Disaster MillRation Efforts The City’s Corporation Yard facility plays a crucial role inthe City’s overall operations and serves as a center for emergency response and disaster recoveryoperations. The building is seismically unsafe. In July 2006, the City was awarded a FEMA PreDisaster Grant for $2.8 million to reconstruct the building to be seismically safe. City matchingfunds of $962.633 is required by FEMA. The project design has been completed andconstruction began in August of 2010.

4. ECONOMIC DEVELOP’WNT

Berkeley’s economic development strategy seeks to build on existing strengths to accomplishgoals that have been identified by the City Council and citizen planning processes:

a Revitc,lfte Down town Berkeley mid strcn!hen its role in the local and rekional econonn’.Despite the nation’s recent economic challenges, the Downtown Arts District continues to buildon its success in attracting regional nighttime attendance. In 2009, the Berkeley RepertoryTheatre bucked national trends by increasing subscriber numbers and total attendance (180,000).Also in the 2010 fiscal year, the new $12 million, 440 seat “Freight and Salvage” musicalperformance venue opened in the Arts District across from the Berkeley Repertory Theatre.New quality restaurants have been attracted to the Downtown, including “Gather” in the newDavid Brower nonprofit office building and Revival Restaurant and Bar, just one block from theBerkeley Repertory and Aurora Theaters. Additions to the housing stock in the Downtowninclude 143 new condo units at the Arpeggio project on Center Street that are scheduled to becomplete by the autumn of 2010 and 148 units of rental housing on the NW corner of Universityand Martin Luther King Jr. Way that opened in June 2010. That project also included a new

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Trader Joe’s grocery store to meet the shopping needs of existing and future residents of the area.The City and the University recently completed a Downtown planning process that will allow theUniversity to build 800,000 square feet of new office, research and public service space on thewest side of the campus. The first such project, Helios West, a 112,800 square foot building thatwill house the Energy Biosciences Institute, is now under construction on a site bounded byOxford, Berkeley Way, Shattuck and Hearst. The City and the University are also continuingto work together to build a new hotel and conference center and relocate the Berkeley ArtMuseum/Pacific Film Archive to a new facility in the Downtown that will cost in excess of $60million. The historic Shattuck Hotel underwent a complete $20 million renovation of its 200hotel rooms and reopened in June 2009.

I,. Strengthen neiQhborhood commercial districts such as Solano. Ehnwood. Telegraph. FourthStreet. San Pablo. North Shattuck and University Avenue. The City seeks to encourage shoppingopportunities close to residential neighborhoods, which reduces the need to drive. Efforts areunderway to support expansion of district-based niche marketing campaigns that recognize localstrengths and “district identity”. The City facilitates four business improvement districts (BIDs)in the Downtown. Telegraph. Elmwood, and North Shattuck commercial districts that generatefunds through a self assessment to help promote and maintain their districts.

The Office of Economic Development also contracts with a community-led “Buy LocalBerkeley” initiative which is currently also fiscally supported by the Downtown BerkeleyAssociation. The effort uses multiple communication channels to encourage residents to shop atlocal, independent businesses to retain money and tax revenues in the community. Buy LocalBerkeley has over 400 affiliated businesses and over 5,000 subscribers to its electronicnewsletter.

c. Suppart creation of good fobs for local residents. While about 25% percent of the jobs inBerkeley are in the public sector (14,444 at UC Berkeley. 3.735 at LBL. 1.600 City of Berkeley.1,200 Berkeley Unified School District. 300 Berkeley City College). about 39,836 are in theprivate sector (l quarter 2009). Large private sector employers include Alta Bates SummitMedical Center (Alta Bates and Herrick campuses) with 3,100, the Bayer Corporation with1,659, Kaiser Permanente with 700 and Pacific Steel Casting with 600. However, more than 85%of Berkeley’s 3300 private employers have fewer than 20 employees, Berkeley’s strong sectorsinclude biomedical! biopharmaceutical, computer systems design services, printing andpublishing, environmental consulting services, and arts and entertainment. More than 300“Green” businesses (i.e., businesses that either help the environment or enterprises that haveinstituted environment-friendly practices) have located in Berkeley. The City’s Work Sourceemployment program requires certain new and expanding businesses to consider Berkeleyresidents first in their hiring. In December 2009, the City’s local hiring efforts werestrengthened when the State of California extended its Enterprise Zone program to WestBerkeley, the area bounded by San Pablo Avenue on the east, the 1-80 Freeway on the west,Oakland on the south and Albany to the north. The 800 employers in this area are eligible forState tax credits for new hires of eligible workers and for qualified purchases of new equipment.

d. Increase technology transfer from UC Berkeley and Lawrence Berkeley National Laboratonand encourage startups in the Downtown and West Berkeley. During the last two fiscal years,federal, state and private sources have provided more than a billion dollars in new funding forresearch at UC Berkeley and Lawrence Berkeley National Laboratory in areas that are national

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priorities such as biofuels, energy conservation,, advanced telecommunications and biomedicalengineering. Even more than in the past, Berkeley has the opportunity to attract local startupsthat are commercializing new technology as well as attract national companies to set up researchcenters in Berkeley. These companies benefit from the City’s entrepreneurial climate and frominteraction with UC faculty and graduate students. The City is working with developers to makecertain that appropriate workspace will be available for the startups that will result from newresearch initiatives in growing sectors such as biofuels.

e. Generate GIS-based economic data to inoizitor and analyze local business trends and help fillconlnjercja( vacancies. Economic Development staff has completed a complete GIS groundfloor space inventory in all the City’s commercial districts. This effort has proven very valuableas an analytic tool and the results have enabled staff to generate reports that outline and assesssectoral and sub-secroral trends within specific commercial neighborhoods. Staff have alsocompleted a GIS-based inventory and contact listing of all commercial spaces within 5 blocks ofthe U.C. Berkeley Campus in order to attract and incubate new companies emerging from theUniversity and Lawrence Berkeley National Lab. In coordination with the Telegraph andDowntown BIDs, staff is now sponsoring a website that will show all vacant commercial spacein the City. Staff is also exploring ways to generate similar data for the West Berkeley industrialarea.

f Market Berkeley’s visitor appeal and support Berkeley’s Hotel/Motel Industn’. The Cityprovides annual support to the Berkeley Convention and Visitors’ Bureau for its comprehensivemarketing efforts aimed at promoting local tourism and hospitality services. The BerkeleyConvention and Visitors’ Bureau also runs the Berkeley Film Office that markets the City to thefilm and television industry

g. Build on Berkeley’s strength as a regional hub of arts and culture. More than 130 arts andcultural organizations comprise an arts community that collectively is among the largestemployment sectors in Berkeley. The arts provide some 3.400 jobs. reach an annual audience of1.7 million people, and have a combined budget of 570 million. Arts, culture, entertainment andrestaurants help drive the City’s economic engine. In addition, the City promotes the arts and hashelped established the Downtown as a regional center for the arts, culture and entertainment. TheAddison Street Ails District is now a major venue for theatre perfonnances and includes the 160-seat Aurora Theatre, the original Berkeley Repertory’s 400-seat theatre, the BerkeleyRepertory’s 600-seat Roda Theatre, the Jazz school (a nationally recognized school for jazzperformance and study) and the completion of a new 400 + seat venue for the Freight & Salvage.The Berkeley Poetry Walk was installed in the sidewalks on Addison Street, and pubhc artprojects continue to appear in the Downtown and adjacent areas of Berkeley. Berkeley’seconomic development strategy seeks to build on existing strengths to accomplish goals thathave been identified by the City Council and citizen planning processes.

5. CLIMATE ACTION PLAN

In November 2006, 81 percent of Berkeley voters endorsed Measure G, which set the goal ofreducing the community’s greenhouse gas emissions by 80 percent by 2050. The Measure alsodirected the Mayor to develop a Climate Action Plan to reach that target.

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The Berkeley Climate Action Plan was adopted by City Council on June 2, 2009. The Planguides the development, enhancement, and ultimately the implementation of actions thataggressively cut Berkeley’s greenhouse gas emissions. The Plan includes the following:

6. An inventory of Berkeley’s main greenhouse gas emissions sources7. A forecast of how those emissions are expected to change over time8. Recommendations for actions the City government and community can implement to achieve

greenhouse gas reductions and other community benefits such as increased green jobopportunities and improved public health

9. A tirneline for the Plan’s impletnentation. including identifying existing and potential costsand funding sources

Initial implementation of the Plan during the first year after adoption has taken three main forms:(1) Establishing several progress indicators that better enable staff to transparently monitor

and report progress toward achieving the Plan’s goals. These metrics are available onlineat www.citvofberkeley.info/climate

(2) Specific program and policy development and launch, such as the Money for EnergyEfficiency rebate program for Berkeley residents and businesses

(3) Securing grant funds to suppor CAP implementation. The City has secured over $6million in Climate Action Plan-related grant funding between 2009 and the present.

Using the Climate Action Plan as a guide, the City will continue to advance efforts to reducelocal greenhouse gas emissions and achieve other associated benefits.

6. BERKELEY REDEVELOPMENT AGENCY

The Berkeley Redevelopment Agency adopted new Five-Year Implementation Plan for WestBerkeley and Savo Island on December 8. 2009, authorizing completion of the expenditure of theremaining bond proceeds and net available tax increment funding to complete capital projectsincluding the Aquatic Park Connection (APC) and a list of 15 West Berkeley CirculationImprovement projects identified in the West Berkeley Circulation Master Plan Report andprioritized by the APC for Agency action.

Refinancing of Agency debt triggered new pass through payments in FY 2006 of tax incrementto other taxing entities. The highest supplemental Educational Revenue Augmentation Fund(SERAF) payments were demanded in FY 2010 and upheld by the Courts, though now subject toan appeal. Additional ERAF payments required by the state in FY 2009 were refunded after asuccessful court challenge by local redevelopment agencies. As such, the Fiscal Year 2010-2014Implementation Plans accounted for limited funding. assuming the projected takes in FY 2010and FY 2011, as well as the alternatives should the SERAF take be invalidated by the Courts.

As pail of the bond refinancing actions, the Agency Board passed resolutions to extend theability of the Agency to collect tax increment revenue in West Berkeley through December 31,2015. Savo Island Project Area extends to 2026.

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U Active Projects — West Berkeley

The FY 2010-2014 West Berkeley Implementation Plan proposes tax increment and bondproceeds to implement the following projects in FY 2010 and FY 2011:

Aquatic Park Connection The Aquatic Park Connection is a set of pedestrianand bike enhancements within the public right of way between the West BerkeleyRedevelopment Project Area and the new 1-80 Bicycle and Pedestrian Overpassthat joins Aquatic Park to the Marina. Although this proposed project extendsoutside of the West Berkeley Project Area, the Agency has identified it as adevelopment project that will enhance the overall Redevelopment Area, as well asthe immediate Rail Stop and Transit Plaza area. The total estimated project cost is$4 million, with the Agency initially allocating $989,000 for the design andconstruction of priority elements. With the revised Implementation Plan in FY2006. the Agency allocated S1.4M to APC design and construction of priorityimprovements, adding undergrounding to the preliminary components for FY2010 Agency construction. Wayfinding signage included in this project wasdesigned in FY 2007, manufactured at the end of FY 2009 and installed in FY2010. A construction crew was contracted and undergrounding specifications(revised to including the now adjacent Berkeley Animal Shelter) were completedin FY 2010. and construction is expected to begin in FY 2010 and completed inFY 2011.

Agency-sponsored construction of streetscape improvements and undergroundingis targeted to the west end of Addison at Aquatic Park’s north entrance and therail crossing on Addison. Adjacent proposed development is responsible foradjacent streetscape development, compliant with the Master Plan’s design. Thiswill significantly reduce the gap in funding for the Agency, leaving pockets ofunimproved areas that may be fundable with grant sources. The first compliantproject was completed in FY 2009 including all the APC streelscape elements andmanufacturing of unique design elements such as bike rack/tree guards, seat wallswith Ohlone weaving design elements, and skate stoppers. Two additional blocksare finalizing construction at the end of FY 2010 with the completion of privatedevelopment at the corner of Addison and Fourth Streets.

• West Berkeley Circulation Master Plan Report, Oulet Zone and Seed MoneyPrioritization - In FY 2008, the Agency contracted with Wilbur Smith andAssociates to complete a comprehensive multimode West Berkeley CirculationMaster Plan (WBCMP) Report for West Berkeley with City support forgeography extending beyond the Project Area. The WBCMP Report’s area isbounded by San Pablo Avenue to West Frontage Road and Albany andEmeryville borders. The WBCMP Report included a description of existing andfuture conditions, a ranked capital improvements list, Implementation PlanReport, Transportation Demand Management Report, Financing Strategy andImprovement Plan. The City also received a simulation model to be used inanalyzing development in the Project Area and in areas proximate to the ProjectArea. A Feasibility Study for a Quiet Zone (QZ), in which trains do not blowhorns at vehicle crossings. was also commissioned. The WBCMP Report and QZ

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Study identified prioritized needs for $55M and up to $10.5M in their respectivereports.

The FY 2010-2014 Implementation Plan included $200,000 for the transportationanalysis of an Environmental Impact Report (EIR) of the West Berkeley Project(a separate land use project of the City’s Planning and Development Department)that requires updating of the land use assumptions of the WBCMP Report for it toremain a current analytic tool. Further, the Agency supported use of $8,500 of theseed money for a Nexus Study for a West Berkeley Transportation Services Fee.Finally, the PAC recommended and the Agency adopted recommendations forcapital projects to be prioritized for the remainder of the seed funds ($271,500).

• WB Circulation Improvement Projects - The FY 2010-2014 ImplementationPlan identified up to $659,500 for circuthtion improvements in West Berk&eyprioritized in the WBCMP Report and directly affecting multi-modal access to theProject Area. The projects recommended for implementation include:

Truck/Auto• Addlupdate truck routing signage to existing truck routes inside and

outside the Project Area on Ashby, Oilman. University, San Pablo, andadd 2nd St and 6thl7th St to the truck route network with signageincluded in implementation

• Implement a leading protected left phase for NB traffic at San Pablo andDwight

• Create additional NB/SB left turn lane along 6th at Channing• Create additional EB/WB lane along Allston Way at• Add EB right turn pocket (—100’) at Hearst and 6th

Pedestrian Enhancements

• Improve pedestrian crossings along University (6th to 10th) - to addsidewalk bulbs. ADA compliant pedestrian refuges, directional curbramps, truncated domes, signal countdown heads, audible crosswalks andimproved crossing times on University Avenue between 6th and 10thStreets.

• Pave sidewalks in Northwest Berkeley residential areas lacking existingsidewalks including:

o adjacent to James Kenney Park on 7th and 8th (between Virginiaand Delaware),

o 9th Street between Cedar and Page,o west side of 8th between Camelia and Oilman.o along east side of 7th between Camelia and Harrison, ando along Harrison between 7th and 8th

• Improve pedestrian crossings including directional pedestrian curb rampsand installation of audible signals along San Pablo at Oilman. Cedar,University, Dwight and Ashby

• Install additional audible signals along San Pablo at Delaware, Allston,and Grayson as well as at 6th and Hearst

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December 28. 2010Presentation of the Comprehensive Airnual Financial ReportPage 16

Remove pedestrian actuation from controller at University and San Pabloand make pedestrian walk phase with audiMe signal automatic on all legs(staff note night phasing may need to be varied from day light hours)

• Improve pedestrian crossings along Oilman between 5th and 10th toinclude pavement striping, perpendicular curb ramps and truncated domeswhere appropriate and needed

Bicycle Enhancements

• Apply bike intersection treatment 1 (signage and striping) to key arterialscrossing the 9th Street Bike Boulevard at Cedar, Dwight and Heinz

• Connect Virginia and Channing bike boulevards to bike bridge bydesignating 4th Street (between Hearst and Channing), 5th Street (betweenVirginia and Hearst), and Hearst (between 5th and 4th Streets) as bikeboulevards

Transit Enhancements

• Improve the Transit Stops on University from 6th to 10th Streets based onSan Pablo Corridor bus stop guidelines (Type A, C. D. and E stops).

• Improve lighting and shelters at San Pablo bus stops at Cedar and Virginia

These projects were funded with $271,500 in FY 2010, as discussed above.camed forward for expenditure with an additional 5388,000 (allocated in FY2011) for implementation in FY 20 11 and funds were transferred from theAgency to the City of Berkeley. In FY 2011, Public Works will implement thoseprojects among these that are feasible with the available funding.

L Active Projects — Savo Island

The FY 2010-2014 Savo Island Implementation Plan proposes tax increment revenue raised inFY 2010-2014 be used to accelerate debt repayment. as the tax increment financing limitapproaches, and with the remainder, continue support of the Savo Island Housing Cooperative.The Coop was loaned $130,000 by the Agency for pre-development costs associated with amajor rehabilitation effort funded by HUD in FY 2010.

7. LEGISLATIVE IMPACTS

• Passage of the State’s FY 2011 Budget: Through the State budget process, the Statecan enact legislation that significantly impacts the source, amount and timing of thereceipt of revenues by local agencies, including the City. After taking major hits torevenue and cash flow from the passage of the State’s FY 2010 budget on July 28,2009, staff expects more pain from the State’s FY 2011 budget. The Governor issuedthe FY 2011 “May Revise” on May l4tN That addressed a projected $17.9 billion gapwith $19.1 billion in solutions, including a $1.2 billion reserve. The budget drasticallycuts critical social programs, including eliminating CaIWORKS and state-fundedchildcare. reducing and changing MediCAL benefits, and slicing Mental Healthrealignment by 60%, which would be a $1.2 million hit to Berkeley programs based

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on current revenues. In addition, the Senate and Assembly have adopted a new $3surcharge on parking violations as a part of the FY 2011 State budget. The surcharge.which will be included in a pertinent budget trailer bill, would go into effect onOctober 1. 2010. The delayed implementation is intended to provide localgovernment entities with sufficient time to retool their computer systems toaccommodate the surcharge. Staff is reviewing the impact to Berkeley and whetherthe City has the ability to further increase its parking fines to cover this additionalState burden on parking fine revenue. A loss of $3 per citation would result in a lossof revenue to the General Fund of $850,000-S 1,000,000. This will either result in anincrease in the parking fines to cover the loss of funds or additional General Fundbudget reductions to absorb the $3 per citation surcharge.

AWARDS

The Government Finance Officers Association (GFOA) awarded a Certificate of Achievementfor Excellence in Financial Reporting to the City for its Comprehensive Annual Financial Reportfor the fiscal year ended June 30, 2009. In order to receive this prestigious award of theCertificate of Achievement, the government must publish and submit such report to the GFOAfor their evaluation. This report satisfied both generally accepted accounting principles andapplicable legal requirements. A Certificate of Achievement is valid for a period of one yearonly. We believe that our current comprehensive annual financial report continues to fulfill theCertificate of Achievement Program’s requirements and we are submitting it to the GFOA todetermine its eligibility for another certificate.

The City also received the GFOAs award for Distinguished Budget Presentation for thebiennium (two-year period) beginning July 1, 2009. We believe that our cunent budget continuesto conform to program requirements and we have submitted it to the GFOA to determine itseligibility for another award.

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ACKNOWLEDGMENTS

The preparation of this report could not be accomplished without the efforts of the followingindividuals: The Accounting Manager, Marvin Tam, the Project Lead, Victor Lo and the entireAccounting Division of the Finance Department; the accounting firm of Caporicci & Larson,Inc., and the continued support of sound financial management by Mayor Torn Bates and theCity Council, the City Manager, Phil Kamlarz, and his staff particularly the Budget Manager,Tracy Vesely.

Due to the efforts of the entire City staff, the City’s accounting and financial reporting systemscontinue to improved along with the quality of the information being reported to our citizens, theCity Council, Department heads and managers, bond-holders, Federal, State and countyagencies, and to other users of the City’s financial reports.

Respect,M-l mitted,

/2½Robert HicksDirector of Finance

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Certificate ofAchievementfor Excellence

in FinancialReporting

Presented to

City of Berkeley

CaliforniaFor its Comprehensive Annual

Financial Report

for the Fiscal Year Ended

June 30, 2009

A Certificate of Achievement for Excellence in FinancialReporting is presented by the Government Finance Officers

Association of the United States and Canada togovernment units and public employee retirement

systems whose comprehensive annual financialreports (CAFRs) achieve the higheststandards in government accounting

and financial reporting.

President

Executive Director

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2010

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City

Man

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DIRECTORY OF CITY OFFICIALS

ELECTED OFFICIALS

City Auditor — Ann-Marie Hogan

Mayor — Tom BatesVice-Mayor-- Linda Maio

Council members

Linda MaioDarryl MooreMax AndersonJesse ArreguinLaurie CapitelliSusan Wengrf

Kriss WorthingtonGordon Wozniak

APPOINTED BY CITY COUNCIL

City Manager— Phil Kamlarz

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CITY OF BERKELEY

ORGANIZATIONAL CHART

PUBLIC WORKS ECONOMIC DEVELOPMENTPARKS, RECREATION &

WATERFRONT

FINANCE

FIRE

BERKELEY HOUSING AUTHORITY

BOARD OF LIBRARY TRUSTEES—J

LIBARY j

HEALTH SERVICES

HOUSING & COMMUNITYSERVICES

PLANNING

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01Caporicci & Larson. Inc.A Subsidiary ofMarcuni LLPCertified Public Accountants

INDEPENDENT AUDITORS’ REPORT

To the Honorable Mayor and Members of City Councilof the City of Berkeley

Berkeley, California

We have audited the accompanying financial statements of the governmental activities, the business-typeactivities, the aggregate discretely presented component units, each major fund, and the aggregateremaining fund information of City of Berkeley, California (City), as of and for the year ended June 30, 2010,which collectively comprise the City’s basic financial statements as listed in the table of contents. Thesefinancial statements are the responsibility of the City’s, management. Our responsibility is to expressopinions on these financial statements based on our audit. We did not audit the financial statements of theBerkeley Housing Authority, which represent 69.8 percent, 92.5 percent, and 83.9 percent, respectively, ofthe assets, net assets, and revenues of the aggregate discretely presented component units. Those financialstatements were audited by other auditors whose report thereon has been furnished to us, and our opinion,insofar as it relates to the amounts included for Berkeley Housing Authority, is based on the report of theother auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards, issuedby the Comptroller General of the United States, Those standards require that we plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes consideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, weexpress no such opinion. An audit also includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements, assessing the accounting principles used and thesignificant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit and the report of other auditors provide a reasonable basis for ouropinions.

In our opinion, based on our audit and the report of other auditors, the financial statements referred toabove present fairly, in all material respects, the respective financial position of the governmental activities,the business-type activities, the ‘aggregate discretely presented component units, each major fund, and theaggregate remaining fund information of the City, as of June 30, 2010, and the respective changes infinancial position and, where applicable, cash flows thereof for the year then ended in conformity withaccounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated December 28, 2010,on our consideration of the City’s internal control over financial reporting and on our tests of its compliancewith certain provisions of laws, regulations, contracts, and grant agreements and other matters. Thepurpose of that report is to describe the scope of our testing of internal control over financial reporting andcompliance and the results of that testing, and not to provide an opinion on internal control over financialreporting or on compliance. That report is an integral part of an audit performed in accordance withGovermnent Auditing Standards and should be considered in assessing the results of our audit.

wwwc’Icpa .com

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Berkeley, CaliforniaPage Two

The Management Discussion and Analysis and the Required Supplementary Information on pages 25 to 44and pages 131 to 140, are not a required part of the basic financial statements, but are supplementaryinformation required by accounting principles generally accepted in the United States of America. We andthe other auditors have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods of measurement and presentation of the required supplementaryinformation. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the City’s basic financial statements. The introductory section, combining and individual fundstatements and schedules and the statistical tables are presented for purposes of additional analysis and arenot a required part of the basic financial statements. The combining and individual fund statements andschedules have been subjected to the auditing procedures applied by us and the other auditors in the auditof the basic financial statements and, in our opinion, based on our audit and the report of other auditors, arefairly presented in all material respects in relation to the basic financial statements taken as a whole. Theinformation identified in the table of contents as the introductory and statistical sections have not beensubjected to the auditing procedures applied in the audit of the basic financial statements, and, accordingly,we express no opinion on them.

ówia, .

Caporicci & Larson, Inc.San Francisco, CaliforniaDecember 28, 2010

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MANAGEMENT’S DISCUSSION AND ANALYSIS

As management of the City of Berkeley, we offer readers of the City of Berkeley’s financialstatements this narrative overview and analysis of the financial activities of the City of Berkeley forthe fiscal year ended June 30, 2010. We encourage readers to consider the information presentedhere in conjunction with additional information that we have furnished in our letter of transmittal,which can be found on pages 1-18 of this report. All amounts, unless otherwise indicated, areexpressed in millions of dollars.

Financial Highlights

• The City’s assets exceeded its liabilities (net assets) by $406.2 million at the close of the fiscalyear ended June 30, 2010. Included in this amount was a balance of $40.5 million inunrestricted net assets. Unrestricted net assets are net assets that may be used to meet the City songoing obligations to citizens and creditors.

• During the year, the City’s total net assets increased by $0.7 million from $405.5 million to$406.2 million. Governmental activities revenues increased by $5.5 million while governmentalactivities expenses increased $5.4 million. Business-type activities revenues decreased by $0.3million, while business activities expenses decreased by $1.2 million.

• As of June 30, 2010 the City’s governmental funds repor ed a combined ending fund balance of$156.9 million, an increase of $9.5 million. Approximately 45.8% percent of this total amount($71.8 million) is available for spending at the government’s discretion unresen’ecl fundbalance).

• The total cost of all City programs increased by $4.2 million from $288.6 to $292.8 million.This was accounted for primarily by increases (decreases) of $0.3 million in GeneralGovernment, $1.2 million in Public Safety, $0.7 million in Highways and Streets. ($6.0) millionin Health and Welfare, $4.5 million in Community Development/Housing, $2.0 million inCulture and Recreation, $1.8 million in Economic Development, $0.9 million in Interest onlong-term debt, ($0.6) million in Refuse Service, ($0.2) million in Parking-related, $0.4 millionin Marina operations and maintenance, $0.2 million in Sewer services. $0.1 million in Cleanstorm water, and ($1.1) million in Permit Service Center.

• At June 30. 2010 unreserved fund balance for the General fund was $37.2 million or 27.1% ofFY20 10 total General fund expenditures and transfer out.

• The City’s total long-term debt increased by $14.1 million during the current fiscal year. Thisincrease was accounted for by the following: (1) Proceeds and premium from the AnimalShelter Certificates of Participation issue of $5,750,000 and $402,855 respectively; (2) principalpayments of ($5,462,011); (3) increase in claims and judgments payable of $493,320: (4)increase in workers compensation payable of $2,196,000; (5) increase in compensated absencespayable of $665,812; (6) increase in loan proceeds of $6,000,000 for HUD Section 108 loan forEd Roberts Campus and 52.359.801 for Harbor Construction ; (7) Decrease in capital leaseobligations of ($362,015) (8) increase in other postemployment benefit obligation of $204,077,and (9) increase in net pension obligation of Police Retirement Income Benefit Plan of51,849.063.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to the City of Berkeley’s basicfinancial statements. The City’s basic financial statements are comprised of three components: I)government-wide financial statements, 2) fund financial statements. and 3) notes to financialstatements. This report also contains other supplementary information in addition to the basicfinancial statements themselves.

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Government-wide financial statements. The govennneni-uide financial statements are designedto provide readers with a broad overview of the City’s finances, in a manner similar to a privatesector business.

The statement of net assets presents information on all of the City’s assets and liabilities, with thedifference between the two reported as net assets. Over time, increases or decreases in net assetsmay serve as a useful indicator of whether the financial position is improving or deteriorating. Youwill need to consider other nonfinancial factors, such as changes in the City’s property tax base andthe condition of the City’s roads, to assess the overall health of the City.The statement of activities presents information showing how the government’s net assets changedduring the fiscal year. All changes in net assets are reported as soon as the underlying event givingrise to the change occurs, regardless of the timing of related cash flows. Thus, revenues andexpenses are reported in this statement for some items that will only result in cash flows in futurefiscal periods (e.g., uncollected taxes and earned but unused vacation leave).Both of the government-wide financial statements distinguish functions of the City that areprincipally supported by taxes and intergovernmental revenues from other functions that areintended to recover all or a significant portion of their costs through user fees and charges(business-tjpe activities). The governmental activities of the City include all of the City’s basicservices that are considered to be governmental activities: general government, public safety.highways and streets, health and welfare, culture-recreation. community development/housing andeconomic development. Property taxes, business license taxes, transient occupancy taxes, salestaxes, utility users’ taxes, ambulance fees and franchise fees finance most of these activities. Thebusiness-type activities of the City include a Parking related operation, a Clean Storm Wateroperation, a Marina. a Sanitary Sewer operation, a Refuse Collection and Disposal operation. aPermit Service Center, and Building Purchases and Management.The government-wide financial statements include not only the City itself (known as the primarygovernmcnt). but also a legally separate Rent Stabilization Board and Housing Authority for whichthe City is financially accountable. Financial information for these component units are reportedseparately from the financial information presented for the primary government itself. The BerkeleyRedevelopment Agency, although also legally separate, function for all practical purposes as adepartment of the City of Berkeley, and therefore has been included as an integral part of theprimary government

The government-wide financial statements can be found on pages 46-47 of this report.

Fund financial statements. A/iendis a grouping of related accounts that is used to maintain controlover resources that have been segregated for specific activities or objectives. The City of Berkeley.like other state and local governments, uses fund accounting to ensure and demonstrate compliancewith finance-related legal requirements. Some funds are required to be established by State law andby bond covenants. However, the City Council establishes many other funds to help it control andmanage money for particular purposes or to show that it is meeting legal responsibilities for usingcertain taxes, grants, and other money. All of the funds of the City of Berkeley can be divided intothree categories: governmental, proprietary, and fiduciary

s Governmental funds—Governmental fiends are used to account for essentially the samefunctions reported as governmental activities in the government-wide financial statements.However, unlike the government-wide financial statements, governmental fund financialstatements focus on near-term inflows and outflows of spendable resources, as well as onbalances of spendable resources available at the end of the fiscal year. Such information may beuseful in evaluating a government’s near-term financing requirements.Because the focus of governmental funds is narrower than that of the government-wide financialstatements, it is useful to compare the information presented for governmental fiends withsimilar information presented for governmental activilie.v in the government-wide financialstatements, By doing so, readers may better understand the long-term impact of thegovernment’s near-term financing decisions. Both the governmental fund balance sheet and thegovernmental fund statement of revenues, expenditures, and changes in fund balances provide a

26

reconciliation to facilitate this comparison between gorerninentcil fiends and governmentalactivities.

The City of Berkeley maintains 83 individual governmental funds. Information is presentedseparately in the governmental fund balance sheet and in the governmental fund statement ofrevenues, expenditures, and changes in fund balances for the General fund, Grant fund. Libraryfund, CDBG hind, Park Tax fund, Measure FF Branch Renovation, and Capital Improvementsfund, all of which are considered to be major funds. Data from the other 76 governmental hindsare combined into a single, aggregated presentation.

The City of Berkeley adopts an annual appropriated budget for its General fund, special revenuehinds (except CA Housing Finance Agency fund; Gilman Sport Field hind; Special Gas Taxfund; Special Gas Tax hind; Fire Assessment District hind; Solano Avenue Bid fund;Underground District fund; Lillie B. Wall Memorial fund; East bay Public Utility hind; Fund forImpounded and Unneutered). capital project hinds (except Public EducationlGovt Access Fac.Fund; Measure G Fire Seismic Project; Capital Improvement Administration: StreetImprovement: 97 GO Bonds Measure 5; Savo Island Project; 2010 COP Animal Shelter fund),and debt service funds (except 2010 COP Animal Shelter fund). The budgetary comparisonschedules have been provided for the General Fund and major Special Revenue Funds todemonstrate compliance with this budget under “Required Supplementary Information otherthan MD&A section”. The basic governmental fund financial statements can be found on pages48-53 of this report.

Proprietary fluids—The City of Berkeley maintains two different types of proprietary funds.Enterprise funds are used to report the same functions presented as business-type activities inthe government-wide financial statements. The City of Berkeley uses enterprise funds toaccount for its, Refuse Collection/Disposal, Marina Operation/Maintenance, Sanitary Sewer,Clean Storm Water. Permit Service Center, Off-Street Parking, Parking Meter, and BuildingPurchase and Management operations, which are all considered to be major funds of the City ofBerkeley. Internal service funds are an accounting device used to accumulate and allocate costsinternally among the City of Berkeley’s various functions. The City of Berkeley uses internalservice funds to account for its equipment maintenance, building maintenance, supplywarehouse, computer replacement, workers’ compensation program, sick leave and vacationpayout, public liabilities, and catastrophic loss reserves. Because these services predominantlybenefit governmental rather than business-type functions, they have been included withingovermnental activities in the government—wide financial statements.Proprietary hinds provide the same type of information as the government-wide financialstatements, only in more details. The eight internal service funds are combined into a single,aggregated presentation in the proprietary fund financial statements. Individual fund data for theinternal service funds is provided in the form of combining statements elsewhere in this report.The basic proprietary fund statements can be found on pages 54-57 of this report.Fiduciacy funds. Fiduciary funds are used to account for resources held for the benefit of partiesoutside the government. Fiduciary funds are not reflected in the government-wide financialstatement because the resources of those hinds are not available to support the City ofBerkeley’s own programs. The accounting used for fiduciary funds is much like that forproprietary funds.

The basic fiduciary fund financial statements can be found on pages 58-59 of this report.

Notes to the financial statements. The notes provide additional information that is essential to afull understanding of the data provided in the government-wide and fund financial statements. Thenotes to the financial statements can be found on pages 60-130 of this report.

Other information. In addition to the basic financial statements and accompanying notes, thisreport also presents certain required supplementary information concerning the City of Berkeley’sprogress in funding its obligation to provide pension benefits and other postemployment benefits toits employees. Required supplementary information can be found on pages 131-140 of this report.

27

The combining statements referred to earlier in connection with non-major governmental funds andinternal service funds are presented immediately following the required supplementary informationon pensions and other postemployment benefits. Combining and individual fund statements andschedules can be found on pages 141-197 of this report.

Government-wide Financial Analysis

As noted earlier, net assets may serve over time as a useful indicator of a government’s financialposition. In the case of the City of Berkeley, assets exceeded liabilities by $406.2 million at theclose of the fiscal year ended June 30, 2010.

By far the largest portion of the City of Berkeley’s net assets 65.1% reflects its investment in capitalassets (e.g., infrastructure, land, buildings, machinery and equipment. construction in progress): lessany related debt used to acquire those assets that are still outstanding. The City of Berkeley usesthese capital assets to provide services to citizens; consequently, these assets are not available forfuture spending. Although the City of Berkeley’s investment in its capital assets is reported net ofrelated debt, it should be noted that the resources needed to repay this debt must be provided fromother sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Table 1City of Berkeley

Net Assets(Jn Millions)Governmental Business type

Assets:Current and other assetsCapital assets

Total assets

Liabilities:Other liabilitiesLong-term debt outstanding

Total Liabilities

Net assets:Invested in capital assets, net of related debtRestricted for Debt servicesRestricted for Special purposesRestricted for Capital projectUnrestricted

Total net assets

Activities2009 2010 2009 2009

$ 239.0 $ 224.5 $ 50.5 $ 54.0 $ 289.5 $278.5201.3 199.0 161.8 157.2 363.! 356.2140.3 423.5 212.3 211.2 652.6 634.7

45.7 43.0 5.7 5.3 51.4 48.3154.9 142.3 40.1 38.7 195.1 181.0200.6 185.3 45.8 44.0 246.5 229.3

127.5 141.3 137.2 138.1 264.7 279.411.3 9.7 - - 11.3 9.757.! 66.5 57.1 66.532.6 30.0 32.6 30.011.2 (9.3) 29.3 29.1 40.5 19.8

S 239.7 S 238.2 5166.5 $167.2 S 406.2 5405.4

Restricted net assets 24.9% represent debt services, special purposes. and capital projectrequirements. The remaining balance of unrestricted net assets 10% may be used to meet the City’songoing obligations to citizens and creditors.At June 30. 2010 and June 30, 2009. the City was able to report positive balances in unrestricted netassets for its business-type activities.

Activities2010

Total2010

28

The City’s net assets from governmental activities increased 0.63% from $238.2 million to $239.7million. This increase represents the degree to which increases in ongoing revenues have exceededsimilar increases in ongoing expenses and transfers.

Governmental activities. Governmental activities increased the City’s net assets by $1.5 million.Business-type activities decreased the City’s net assets by SO.7 million. Key elements of thesechanges are as follows:

29

ReenuesProgram revenues:

Charges forservicesOperating contributions and grantsCapital contributions and grants

Total program revenuesneral revenues

Taxes:

Property taxesFor general purposesFor debt serviceFor special purposes

Sales taxesUtility users taxesTransient occupancy taxesBusiness license taxOther taxes

Motor vehicle feesInvestment incomeMiscellaneous

Total general revenues

Total reenL1es

ExpensesEneral govemnientPublic safetyHighways and streetsHealth and welfareCulture and recreationCommunity developmenChousingEconomic developmentInterest on long-tenn debtParking related

Marina operations and maintenanceSewer servicesClean storm waterRefuse servicesPermit service center

Building purchase and managementTotal epenses

Increase in net assets lrt’ore transfers

Trans fers

Increase (decrease) in net assets

Table 2Changes in Net Assets

(In Millions)ven,mental

Activities

2010 2009

50.5 49.98.6 8.6

30.2 24.512.7 13.914.4 14.73.7 3.7

13.5 13.43.5 3.38.5 8.56.0 9.42.5 1.8

154.1 151.7

3.58.5

1.1 0.9 7.1

50.5

8.6

30.2 24.512.7 13.914.4 14.73.7 3.7

[3.5 13.4

_________ ________

2.5 1.81.1 0.9 155.2 152.6

221.9 216.4 71.7 72.0

32.5

9.6

_________ ________

2.9221.2 215.8 71.6

0.7 0.6

0.8 0.71.5 1.3

293.6 288.4

7.4 7.6 7.45.0 4.6 5.0

11.2 11.0 11.23.0 2.9 3.0

0.1 (0.8)

5.2 3.45.2 4.3

7.64.6

11.0

2.9

0.8 (0.2)

(0.8) (0.7) - -

(0.7) (1.5) 0.8 (0.2)

Net assets, July 1 (restated)

__________ __________ _____________________ __________

Net assets, June 30

(a) FY2 (109 totals have bee,, restated due to prior period adjustments increasing accounts receivableby 52,687,790, notes receivable bj’ 5235,000 and other payahles by S 13,424.

Business-typeActivities Total

2010 2009 2010 2009

28.0 27.531.7

8.]

67.8

31.45.8

64.7

70.6 71.1 98.6 98.6-

- 31.7 31.4

_________ ________

8.1 5.870.6 71.! 138.4 135.8

49.9

8.6

j.j

8.510.3

29.6 29.3 29.6 29.384.4 83.2 84.4 83.213.8 13.! 3.8 13.124.] 30.1 2.I 30.134.6 32.6 34.6 32.624.3 19.8 24.3 19.8

5.2 3.45.2 4.3

33.1 32.5 33.]10.7 9.6 10.72.9 2,9 2.9

72.8 292.8 288.6

238.2 237.0 167.2 168.7 405.4 405.7239.7 238.2 (a) 166.5 167.2 406.2 405.4

30

Total governmental activities revenues increased approximately $5.5 million. Key factors in thatincrease were the following:

Charges for services increased by $0.5 million or 0.23%, which was primarily attributableto:

o A decrease of $608,083 or 8.4% in general governmental fees. For late billing fireinspection ($0.3 million) and residential preferential parking ($0.3 million).

o An increase of $1,100,000 for parking citation collection in Public Safety.

• Operating grants and contributions increased $0.3 million. This was due to some newprojects in FY20 10. For example,

o The University Avenue 6th Avenue and around San Pablo Project: $0.3 million

• Capital grants and contributions increased $2.3 million primarily due to the Ed RobertsCampus project.

• Property taxes for general purposes increased $.6 million or 1.2%. Key components of thatincrease are as follows:

o Real Property Tax revenues increased $764,768 or 2.1 % to $37,400,679 in FY 2010, from$36,635,911 in FY 2009, primarily due to a 1.834% increase in assessed values.

o Supplemental Tax revenues declined S509.866 or 46% to $599,711 in FY 2010, from$1.1 09,577 in FY 2009. Property’ sales activity increased but was dominated by manytransactions whose market values were less than their assessed values.

o Redemptions (i.e., collections on prior years’ real property taxes) increased $386,154 or22.6%.

o Unsecured property taxes decreased $117,617 or 4.8%.

• Property taxes for debt service were unchanged primarily due to (I) a decrease for AnimalShelter General Obligation bonds of $1,617,901 due to an erroneous over-collection in FY2009: an increase for the Special tax of $l%430,743 collected for the Library Measure FFGeneral Obligation bonds issued in FY 2010; (3). The tax rates for Measure S GeneralObligation Bonds declined in FY2O1O due to the refinancing of the bonds at lower interestrates in FY 2007. This resulted in a reduction ofSl35,674 in the taxes collected in FY 2010.

• Property taxes for special purposes increased $5.7 million primarily due to the collection of$5.2 million for Fire Protection and Emergency Response (Measure GG’). passed by votersin November 2008.

• Business License Tax (BLT) revenues increased $117,529 or .9% to $13,505,958 in FY2010, from $13,388,429 in FY 2009. The Finance Department has an aggressive program toincrease revenue, especially Business License Taxes. The BLT increase reported for FY2010 was more than accounted for by the BLT collections of $687,564 generated by FinanceDepartment audits.

• Investment income decreased $3.4 million or 36.0% in FY 2010. Investment income is thetotal interest income earned plus the change in the market value of investments during thefiscal year. GASB Statement No. 3 1 requires governments to mark investments to marketvalue, whether or not the intent is to hold them to maturity. Interest income during FY 200increased, even though the Federal Reserve Board cut short-term rates to nearly zero andkept them there. However. Investment income decreased by $3.3 million due to a $42million increase in the market value of the City’s investments in FY 2009 versus amillion increase in FY 2010. GASB Statement No. 31 requires that this increase be added tothe total interest income, to calculate investment income for the year.

31

• Sales tax revenues declined $1171237 to S12.733.983 in FY 2010 from S13.907.220 in FY2009.The decline was caused by a severe recession that resulted in a significant loss ofjobs and asignificant slowdown in consumer and business spending. Economic categories with significantdeclines include: New car sales; miscellaneous retail; building materials-retail; food markets;apparel stores; frmiture!appliances; and recreation products.

• Utility Users Tax revenues decreased 5246,883 as the sharp decline in gas rates and a slightdecline in gas usage more than offset an increase in electric rates and a slight decline inelectric usage.

• Motor vehicle fees increased 5148.256 or 1.8%, due to the 1.834% growth in assessedvalues of real property. which is used to calculate the increase or decrease in approximately95% of motor vehicle fees.

General Government expenses increased by $0.3 million for the following reasons:

• Miscellaneous professional fees decrease of $150,000

• Other miscellaneous expense decrease of $100,000

• Salaries and wages increased, due to the increase of 2% in COLAs, but that increase wasoffset by the effects of the hiring freeze.

Public Safety expenses increased by $1.2 million in FY2OIO. Contributing factors were asfollows:

• Salaries and wages increased, due to the 2% COLAs and employee benefits increased as aresult of the increase in the Police retiree medical contribution rate from 3.26% to 5.78%.

Highway and Streets expenses increased by $0.7 million as follows:

• Salaries and wages increased, due to the increase of 2% COLAs and employee benefits.such as medical insurance.

Health and Welfare expense decreased by $6.0 million as follows:

• The transfer of Aging Service and Youth Employment division to Housing, which reducedboth salaries and fringe benefits by 53.0 million.

• A reduction in capital project spending due to the completion of the Gilman Sport field inJune 2009, which saved about $0.4 million.

• A reduction in personnel in various divisions of the Department of Health Service.

Community Development/Housing expenses increased S4.5 million primarily due to thefollowing:

• The transfer of Aging Service and Youth Employment division from Department of HealthService, which increased total salaries and fringe benefits by $3.0 million.

32

Economic Development expenses increased SI .8 million primarily for the following reason:

• An increase in expenses totaling $2.0 million on the Ed Roberts Campus project.

Interest Expense on Lone-Term Debt increased by $0.9 million as follows:

• An increase in interest payments related to the Measure FE Library General Obligationbond.

• An increase in fiscal charge due to the 2010 Certificates of Participation issued for theAnimal Shelter project.

The following charts illustrate the City’s governmental expenses by function and revenues bysource. As shown, General revenues such as property, sales, utility users and business license taxesare not shown by function but are effectively used to support citywide programs. Taxes are by farthe largest segment of revenues (61.78%) followed by grants and subventions (21.77%) and chargesfor services (12.62%). Public safety is the largest function in terms of expenses (38.16%), followedby culture and recreation (15.63%), general government (13.3 8%). and community development(11.01%).

Fiscal Year 2010 Governmental Activities(See Table 2)

Sources of Revenue

Grants &Subvenfions

21 .77%

• Taxed61 78%

h./ Invesirnern

ncOme2.70%

C Other113%

33

Functional ExpensesEconomfcDeveIopmeo

2.36%

CommunityDevelop me nL_

11.01%

CulturePecreatiorL A

15.63%

• Health & Weltare_%10.89%

HighwaysStreets6.26%

——-——-_____e GeneraGovernment

13 .38%

L Public Saety36.16%

The City’s Business-type activities provide the same type of informationfund financial statements, but in less detail. During FY 2010, Business-typeCity’s net assets by $799,053. Key elements of this decrease are as follows:

found in the proprietaryactivities decreased the

• Charge for services for business-type activities decreased by 0.7 percent. The big declinewas from Marina leases in FY2OIO as a result of a FY2009 ‘ease settlement with theDoubletree Hotel in the amount of $422,663 and two payments for June 2009 of$424,675.60 each that typically would have been received in July 2009 or FY2OIO. Inaddition, less revenue was generated as a result of the poor economy.

• The Marina operations and maintenancewere due to the increase in professional($174,920), as a result of the replacement

expenses increased by 8.7 percent. Such increasesand specialized services ($105,921) and Suppliesof docks A and B.

-—— Interest

2.3 1%

Business-type activities.

34

0)0C,——‘;- r,—_

CNCICo CD,

cCN

- a)a)U

I—E

a

zm

Sources of RevenueBusiness -type Activites

— C Investment?nccmeC Grants & - 1 53%

Subventicns N0.00% II

ir

Program Revenue and ExpenseBusiness - type Activities

$35, 000 000

$30,000,000

$25,000,000

$20000000

$16000000

$10, DOD , 000

$5,D00,000

$0

(NCDCO

CO0(N

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CD(N

Co

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C—

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CoI—,(N

Co(N00)

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CD(N

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F’—U)0)

(N

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a Expense

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Caa

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GoCCoa)

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U,a)C)

a)(1)I)(0

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35

Financial Analysis of the City’s Funds

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance withfinance-related legal requirements.

Governmental funds. The focus of the City’s govei’nmeni’al funds is to provide information onnear-term inflows, outflows, and balances of spendable resources. Such information is useful inassessing the City’s financing requirements. In particular, unreserved fund balance may serve asa useful measure of a government’s net resources available for spending at the end of the fiscalyear.

As of June 30. 2010, the City’s governmental funds reported combined fund balances of $156.9million, an increase of $9.5 million from the prior fiscal year. The bulk of the increase camefrom $5.2 million in special taxes for Fire Protection and Emergency Response (Measure GOand $6.2 million from the issuance of Certificates of Participation for the Animal Shelter Project(including the premium received).

The General Fund is the chief operating hind of the City. As of June 30, 2010 unreserved hindbalance of the General Fund was $37.2 million and total fund balance was $43.3 million. As ameasure of the General Fund’s liquidity, it may be useful to compare both unreserved fundbalance and total fund balance to total expenditures. Unreserved fund balance represents 27.1%of total General Fund expenditures and transfer out of $137.1 million, while total fund balancerepresents 31.6 percent of that same amount.

• The fund balance of the City’s General Fund decreased by $1.8 million (a decrease of $1.8million from operations and $52,580 from a prior period adjustment). The decrease inoperations was primarily accounted for by the following:

o The General Fund generated an excess of revenues over expenditures in FY 2010 ofS4.156.386. as operating revenues totaled 5132.162.334 and operating expenditurestotaled SI 28,005,949; however.

o General Fund operating transfers out in FY 2010 totaled ($9.1 17,440), which exceededoperating transfers in of $3,204,774, for net transfers out of ($5,912,666); and

o Prior period adjustments of $52,580.

• The fund balance of the City’s Grants Fund decreased by $7.2 million (an increase of $0.8million from operations and ($7925,219) from prior period adjustments). The increase inoperations was primarily accounted for by the following:

o Grants operating transfers-in in FY20 10 totaled S2.55 1,897. which offset the deficiencyof revenue under expenditures for ($1,787,866), for a net result of $764,031.

• The fund balance of the City’s Library Fund decreased by $9.6 million (an increase of $0.3million from operations and decrease of $9,955,299 from a prior period adjustment). Theincrease in operations was primarily accounted for by the following:

o An excess of revenues over expenditures in FY20 10 of $337,907, as revenues totaled$14,539,543 and operating expenditures totaled (514.201.636). Operating revenuesincreased primarily as a result of a .8015% cost of living increase in the special tax for theprovision of library services, which offset personnel COLAs averaging about 2%.

36

o Tn FY2009 the proceeds from the measure ff Library Branch Renovations bond issuewere combined with the Library Fund. In Fy2010, a restatement was done to report theMeasure ff Library Branch Renovations bond proceeds activities as a separate majorfund.

• The fund balance of the City’s CDBG Fund decreased by $0.2 million (a decrease of $0.2million from operations). The decrease in operations was primarily accounted for by thefollowing:

o The CDBG Fund generated a deficiency of revenues under expenditures in FY 2010 of($157,550). as operating revenues totaled S3,297,107 and operating expenditures totaled($1454.65?).

During FY2O1O, the City received $527,357 in American Recovery and ReinvestmentAct (ARRA) of 2009 grant funds versus $0 received during FY2009. However, thespending in ARRA projects also increased by $631,412 in FY2O1O. As a result, adeficiency of revenues under expenditures inculTed.

• The fund balance of the City’s Park Tax Fund decreased by $0.3 million. The decrease inoperations was primarily accounted for by the following:

o A deficiency of revenues under expenditures in FY 2010 of (S338.986), as operatingrevenues totaled $8.842.877 and operating expenditures totaled ($9,135,620); and

o Park Tax Fund operating transfers out in FY 2010 totaled ($46,243).

The Park Tax revenue in FY2O1O had an increase of .8015%. which accounted for anincrease in revenue of $69,974 more than the total received in FY2009. However, suchincrease was offset by the decrease of miscellaneous revenues and private contributions.As a result, the total revenues in FY2O1O had a decrease of ($186,577) from FY2009. Inaddition, the total expenditures in FY2OIO for recreation and culture had an increase of$7 14.259.

• The fund balance of the City’s Measure FF Branch renovation Fund increased by $8.5million (a decrease of $1.4 million from operations and increase of $9,955,299 from a priorperiod adjustment). The decrease in operations was primarily accounted for by thefollowing:

o A deficiency of revenues under expenditures in FY 2010 of ($1,444,340), as operatingrevenues totaled $13,641 and operating expenditures totaled ($1,457,981).

o In FY2009 the proceeds from the measure ff Library Branch Renovations bond issuewere combined with the Library Fund. In Fy20 10, a restatement was done to report theMeasure ff Library Branch Renovations bond proceeds activities as a separate majorfund.

• The fund balance of the City’s Capital Improvement Fund decreased by $1.1 million (adecrease of $1.3 million from operations and an increase of $225,000 from a prior periodadjustment). The decrease in operations was primarily accounted for by the following:

o The Capital Improvement Fund generated a deficiency of revenues over expenditures inFY 2010 of ($4,029,223), as operating revenues totaled S15.857 and operatingexpenditures totaled ($4,045,080);

37

o General Fund operating transfers-in in FY 2010 totaled 53.300,000, which exceededoperating transfers out of ($552,207). for net transfers out of $2,747,793 and

o Prior period adjustments of $225,000.

The decline of 51.3 million in operations was a result of no excess transfer tax revenuesbeing available in FY2O1O to fund street maintenance projects. The City established apolicy of funding one time street maintenance projects with the total of the transfer taxrevenue that exceeded $10.5 million in the following year. Transfer tax revenues totaled$12.6 million in FY2008, so $2.1 million was available for FY2009 projects. Transfertax revenues in FY2009 totaled 58 million, so no funds were available to fund FY2OIOstreet maintenance projects.

• The fund balance of the Other Governmental Funds increased by $13.1 million (an increaseof $13.3 million from operations and a decrease of 5243.351 from a prior periodadjustment). The increase in operations was primarily accounted for by the following:

o The Other Governmental Funds generated an excess of revenues over expenditures in FY2010 of $2,305,557, as operating revenues totaled $34,7J3,885 and operatingexpenditures totaled ($32,408,329); However,

o General Fund operating transfers-in in FY 2010 totaled $5,495,592. but the totaloperating transfers out of (S6.620,630). for net transfers out of (51.125.038): However.

o There were issuance of notes and loans of 56.000.000, issuance of certificate ofparticipation for 55,750.000 and premium on certificates of participation for 5403.977and

o Prior period adjustments of 5243.351.

General Fund Budgetary Highlights:

The City Council approved an original annual appropriation ordinance of 5148.500.040.including transfers out for FY 2010. and made supplementary budget appropriations totaling$5,801,258 during the year. The supplementary budget appropriations consisted of thefollowing: (1) FY 2009 outstanding encumbrances of $2,553,297; (2) unencumbered carryoversof $1,198,718, which were re-appropriated; (3) other budget adjustments of $2,049,243. Atyear-end, the FY 2010 General fund budget was reduced by the total of the FY 2010 outstandingencumbrances (52,762,840) and related budget, which were rolled over to FY 2011, andincreased by other adjustments of 543.699, for a final budget of 5151,807.263.

General fund expenditures were $7.1 million less than the approved budget, and the followingfunctions accounted for most of this total:

• General government - 53.6 million under budget: The balance is due to personnel savingsdue to a hiring freeze and unspent non-personnel funds.

• Public Safety- 51.2 under budget: This was primarily due to shifting eligible Fire overtimecosts to the voter approved Measure GG Fund and savings from vacant positions.

• Highways & Streets- 5.4 million under budget: This balance was due to personnel savingsdue to vacant positions.

38

• HeaLth & Welfare- $.07 million under budget: An overage in personnel expenditures wasoffset by non-personnel savings.

• Culture & Recreation- $.8 million under budget: The balance is the result of not fullyspending funds appropriated for the Oilman Sports Field project in FY 2010. These fundswill be expended in FY 2011.

• Community Development & Housing- $.3 million under budget: Thispersonnel savings from vacant positions as well as Housing staffAmerican Recovery and Reinvestment Act employment grant.

• Economic Development- .8 million under budget: Balance was the result of salary savingsfrom a vacant position and unspent non-personnel ftinds.

• Interest and fiscal charges-$.02 million over budget: This was due to higher interest expensefor the Tax and Revenue Anticipation Notes issued by the City during the fiscal year.

Proprietary funds. The City’s proprietary funds provide the same type of information found inthe government-wide financial statements, but in more detail.

Unrestricted net assets of the enterprise funds as of June 30, 2010 totaled $29,321,880, asfollows:

Balance ( Deficit)Fund Unrestricted Net Assets

Refuse CollectionsMarhia OperationsSanitary SewerClean Storm WaterPermit Service CenterOff-street ParkingParking MeterBuilding Purchase and Management

Total

S 148.9391.716,245

17,600.2133 18.886

3.5 16,8876.774,301

92,141(845.733)

S 29.321.880

• The net decrease of (S308,101) in net assets in the Refuse fund resulted from the following:

o Fee income that increased S3.020.845 or 10% due to a 20% increase in rates approved byCouncil. The poor economy and more competition offset part of the effects of the rateincrease.

o Operating costs decreased by $613,344. Factors contributing to this decrease were thefollowing: (1) Landfill disposal services decreased by $397,174; (2) Recycling servicesdecreased by $458,134; (3) Indirect costs decreased by $245,415, with a decrease in theindirect cost rate; (4) Salaries mid Wages increased by $75,936 or 1%, in line with 2%COLAs; and employee benefits increased by $208,068 or 3%. due to the 2% COLAs andincreases in medical insurance and other employee benefits.

• The net decrease of(S86.83l) in the Marina fund net assets was primarily due to the following:

o Operating income increased by $38,517. as revenues ($4,787,137) exceeded operatingexpenses ($4,748,620).

was primarily due tocharging time to an

39

o Operating revenues decreased by $556,714 or 10%. Factors causing the decrease in FY 2010were as follows: (1) A $422,663 lease settlement recorded as revenue in FY 2009; and (2) A$316,349 performance bond payment from a contractor, after the first contractor withdrewfrom the Nature Center project.

o Operating expenses increased by $384,567 or 8.8%. Factors causing the increase were asfollows: Increase in professional and specialized services ($105,921) and Supplies(SI 74,920), as a result of the replacement of docks A and B.

• The net increase of $1,822,059 in the Sanitary Sewer Fund was primarily due to thefollowing:

o Operating income increased by $1,073,624, as revenues ($12,352,405) exceededoperating expenses ($11,278,781).

o An increase of investment earnings of $263,028 to $850,349 from $587,321 in prior yearto $850,349 this year.

• The net decrease of 51.648,394 in the Permit Service Center Fund net assets was primarily dueto the following:

o There was an operating loss of (S 1.683.318), as operating revenues ($7.908.608) wereexceeded by operating expenses ($9,591,926).

o Operating revenues decreased by ($2,228,927) or 21.9%, primarily due to a big decrease inBuilding Permits (S1.5l&685). Plan Check Fees (Sl63.467) and Other Fees ($470,908) inFY 2010 as a result of the poor economy (especially the real estate market) and the difficultyof developers to get bank financing for projects. The estimated value of residential permitsdeclined from $113.4 million in FY 2009 to $44.1 million in FY 2010,

o Operating expenses decreased by $1,132,059 or 10.6%. Factors causing the decrease were thefollowing: (1) Salaries and wages decreased by $393,338 and employee benefits decreased by$178,182, despite COLAs of about 2%, as a result of a reduction in personnel related to citywide budget cuts and a decline in demand for services; (2) Specialized and ProfessionalServices decreased by $32 1.537 due to the decline of $120,717 in a contract for expeditedland use permitting services and a decrease in a plan check service contract and anengineering services contract; and (3) thdirect costs decreased by $225,860 due to thedecrease in staff positions.

• The net increase in the net assets of $256,915 for the Parking-related Operation consisted of a$52,157 increase for Off-Street Parking Operations and an increase of $204,758 in net assets forParking Meter operations. This was compared to a decrease in net assets of ($486,624) in FY2009: $77,787 for the Off-Street Parking Fund and ($564,411) for the Parking Meter Fund).o Key factors for the Off-Street Parking Operations were: Operating revenues ($2,891,700)

exceeded operating expenses ($2,681,039) by $210,661.

o Key factors for the increase in Parking Meter Operations: Operating revenues ($5,339,501)exceeded operating expenses ($4,527,829) by $8 11.672. While revenues in FY 2010increased by $571,249 or 11.9% over those in FY 2009, operating expenses decreased by$396,184 or 8%. In addition, the Transfer Out to the General Fund in FY 2010 ($608,650)was $200,000 more than the Transfer Out in FY 2009 ($408,650). These factors lead to theincrease in net assets of $204,758 during the fiscal year.. factor causing an increase in theOff-Street Parking Operations was that the Oxford Garage revenues increased $245,877because it was only open five months in FY 2009. and 12 months in FY 2010. This increase

40

was partially offset by a $49,949 decline in TelegraphlChanning Garage mall leases, as aresult of the poor economy. The primary factor leading to the revenue increase of $571,249for the Parking Meter Operations was that 132 Pay and Display stations were in operation forseven to nine months in FY 2009, and 12 months in FY 2010.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital assets The City’s investment in capital assets for its governmental and business-typeactivities as of June 30. 2010 amounts to $363.1 million (net of accumulated depreciation), which is$6.9 million more than the total as June 30. 2009. This investment in capital assets includes land,buildings, improvements, machinery and equipment. infrastructure and construction in progress(See Table 3 below.).

Capital assets for governmental activities increased by $2.3 million primarily due toinfrastructure assets. and machinery and equipment. Total capital assets for businessincreased by $4.6 million primarily due to an increase in infrastructure assets andother than buildings.

Table 3

an increase intype activitiesimprovements

City of BerkeleyCapital Assets at Year-End

(Net of Depreciation, in Millions)

GovernmentActivities

Business-TypeActivities Total

Additional information on the City’sreport.

2010 2009 2010 2009 2010 2009

Long-term debt. At year-end, the City had total long-term obligations from governmental activitiesof $155.0 million, an increase of $12.7 million or 8.9% from the previous year (as shown in table4). The June 30, 2010 total included: $68.7 million in general obligation bonds, $6.15 million inCertificates of Participation including a premium of $0.4 million, $7.5 million in lease revenuebonds, $2.8 million in pension refunding bonds, $5.2 million in tax allocation bonds, $4.1 million incapital lease obligations, loans and notes payable of $12.6 million, S 14.9 million in compensatedabsences, and $24.8 million in workers’ compensation and public liability judgments and claims. Anet OPEB Obligation and Net Pension Obligation of $0.9 million and $7.3 million, respectively,were added. Please refer to Note 1 .D to the Financial Statements for more details.

Land $ 22.3 $ 22.3 $ 3.0 $ 3.0 $ 25.3 $ 25.3Buildings and improvements 69.1 71.1 25.9 26.4 95.0 97.5Improvements other than buildings 7.6 7.6 8.8 5.5 16.4 13.1Machinery and equipment 20.7 11.2 1.2 1.5 21.9 12.7Infrastructure 80.6 80.5 122.9 120.9 203.5 201.4Construction in progress 1.0 6.2 1.0 6.2

$201.3 $ 199.0 $161.8 $ 157.2 5363.1 $ 356.2

capital assets can be found in note Ill C on page 78-80 of this

41

General obligation bondsLease revenue bondsPension rethnding bondsCertificates of participation -

- including $0.4 premium

Tax allocation bondsCapital leasesLoans and notes payableCompensated absencesJudents and claimsNet OPEB ObligationNet Pension Obligation

Table 4City of Berkeley

Outstanding Debt, at Year-End(Jn Millions)

Business-TypeGovernmentActivities

2010 2009Activities

2010 2009

Additional information on the City’s long-term debt can be found in note III D on pages 84-92 ofthis report.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES

The City’s current economic base consists of approximately 12,000 licensed businesses operating inthe City. These businesses include private manufacturing, technology research, retail and servicebusinesses, along with several state, federal, and non-profit organizations. The City is home to themain campus of the University of California, with over 35,000 students and approximately 14,444employees. The University provides a high degree of economic stability for the City and hasspurred growing high technology and biotechnology sectors. The economic base generates slightlymore than $5.1 billion in gross business receipts (up from $4.34 billion) and about $1.28 billion intaxable sales (down from S 14.2 billion). Taxable property values growth slowed significantly,increasing only 1.4% to S 12.1 billion in FY 2010, after averaging 6.5% annually during the last fiveyears. The job picture also worsened slightly in Berkeley according to the State EconomicDevelopment Department. with the City’s unemployment rate rising to 11.3% in June 2010 from10.8% in June 2009.

Total2010 2009

S 68.7 $ 71.4 68.7 $ 71.47.5 7.6 4.2 $ 4.5 11.7 12.12.8 3.3 2.8 3.36.2 26.1 26.8 32.2 26.8

5.2 6.0 5.2 6.04.1 4.4 4.1 4A

12.6 6.8 7.0 4.7 19.6 lL514.9 14.3 2.5 2.4 17.4 16.724.8 22.1 24.8 22.1

0.9 0.8 0.3 0.3 1.2 1.17.3 5.5 7.3 5.5

$ 155.0 $142.3 $ 40.1 $38.7 $195.1 $181.0

Standard & Poor’s Corporation and Moody’s Investorsbonds ratings of AA+/Aa3 upon their issuance.

Service assigned the general obligation

42

The City’s two-year budget (2010-11) balances the forecasted two-year General Fund deficit of$6.5 million through a combination of recurring cuts (about 2% of the General Fund budget). whilemanaging the City’s unfunded liabilities. The budget provides a plan to control costs, maximizeCity resources and fund priority services. The budget plan is primarily based on expenditurereductions, as well as program reorganizations, and limited new revenue. Staff continues to focusefforts on maximizing revenues through a number of special revenue-focused projects, such asauditing business license tax, hotels and parking lot operators and increasing sales/use taxes.Several of the underlying budget assumptions are very sensitive to economic changes and assume amild economic recovery in FY 2011. While modest growths in property-related revenues areprojected, these growth rates are lower than in previous years. This includes assuming that PropertyTransfer Tax revenue rebounds from the $8 million level to back up to $9 million a yeam Thebudget also forecasts an increase in parking fines, utility users’ taxes and transient occupancy taxes:and it assumes stable sales tax and business license tax revenue. The City expects General Fundrevenues in FY 2011 to increase by 3.7% to approximately $144.8 million, from $139.7 million inFY 2010. The budget reduces General Fund expenditures by $5.3 million. Expenditures areprojected to total $146.0 million for FY 2011. down SI .7 million from the $147.7 million in FY2010. Revenues do not include fund balance, which is used to balance with expenditureappropriations.

REQUESTS FOR INFORMATION

This financial report is designed to provide our citizens. taxpayers. customers. investors, andcreditors with a general overview of the City’s finances and to show the City’s accountability forthe money it receives. If you have questions about this report or need additional financialinformation, contact the City’s Finance Department. at the City of Berkeley, 2180 Milvia Street,Third Floor. California 94704.

43

THIS PAGE LEFT INTENTIONALLY BLANK

44

BASIC FINANCIAL STATEMENTS

45

City of BerkeleyStatement of Net Assets

June 30, 2010

ASSETSCash and investmentsReceivables (net of allowance for uncollectibles)InventoriesDue from Component unit

•nal batancesperty h&d for resale

P rpaidsDeferred costsRestricted assets:

Cash and investmentsCapital assets not being deprecated:

LardConstruction in progress

Capital assets net of accumulated decreciatior.:BuildingsImprovements other than buildingsMachinery and equipmentInfrastructure

Net OPEB assets - FireTotal assets

LIABILIT;ESAccounts payableAccrued salaries and wagesAdvances - rent registrationDue to primary governmentAccrued Interest PayableDeposit HeldOther LiabilitiesTax and revenue anticLpation notesNoncurrent liabilities (Note III):

Due within one yearDue in more than one year

Total liabilities

NET ASSETSInvested In capital assets, net of related debtRestricted for:

Debt serviceSpecial purposesCapital projects

UnrestrictedTotal net assets

Primary Government Component UnitsGovernmental Bus ness-Type Rent Berkeley

Activities Activities Total Stabilization Housing Authority

$ 143554204 $ 34,641,599 S 178,195,803 $ 4024,414 $ 1638,46083,500,649 3,325,165 86,825814 1 36,091

33,461 33461201629 201829106320 (106,320)211347 211347

1,5571,388,808 1388808

9,887,712 1 2,620,755 22,508467 2,343775

22.327,797 2,979,050 25,306,847 2,579,621984.860 984,860

69092,611 25,903,874 94,996,485 2,684,9327,620,345 8,774,439 16,394,784

20,705,301 1,162,121 21,867,421 50,841 39,87580,595,403 122,987,964 203,583,367

108,531 108,581440.319 227 212,288647 652,607,874 4,075,255 9,424.311

5,724,520 2,306,527 8,031,047 83,879 308,7609,124,702 2,046,452 11,171,154 1 52,340

2,817,881201 .829

1,747,715 769,894 2,537,609675,643 369,783 1,045,426 199,764 243 229

3406,580 171,767 3,578,34725,000,000 25,000,000

16,239,956 1,506,011 17,745,967 18,175 168,504138,698,108 35.619.817 177,317,925 221.384 1,371.529200.617,223 45810.251 246,427.475 3,493,423 2,293,851

127,500,179 137,156516 264,656,695 50,841 3,863,536

11260,187 11,260,18757,125,062 57.125,06232,614,564 32,514,564 2,346,33411.202,012 29,321,880 40.523.892 533.991 920.589

$239,702,004 $ 166,478,396 $406,180,400 $ 581,832 S 7,130,460

The accompanying notes are an integral part of these financial statements 46

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City of BerkeleyBalance Sheet

Governmental FundsJune 30, 2010

GeneralFund

Special Revenue

Grants Library CDBG Park Tax

ax and revenue anticipation noteTotal liabilities

EncumbrancesAdvanceProperty held for resaleNotes receivableDebt service

7,5392751,353,7804,998,911

9,314,083201,829

3,313,193490,900

477,6085,777,327

25,000,00040.827,109

2,762,840

313, 193

37,211,689

18,362

9,643,885

21,945.73318.528

71,803159,621

2,237235,611

901,840

72,8664,781,904

S 56,902,860 $ 7.795,248 $ 3,311,243 $

ASSETSCash and investments in treasuryRestricted Cash and investmentsReceivables (net of allowance

where applicable):AccountsInterestTaxesSpecial assessmentsS ubve nti o ns)g rantsDue from other fundsDue from components unitsAdvance to other fundsNotes receivableOther

Property held for resale

Total assets

LIABILITIESAccounts payableAccrued salaries and wagesOther liabilitiesDue to other fundsAdvance from other fundsDeposits heldDeferred revenueT

S 2,933,611

138,917

S 84,114,831 $ 39,421,756 $ 3,542,667 $ 5,994,458

FUND BALANCESReserved for:

1,749,133 421,154 212,3175:849,849 770,456 628.3561,973,192 593,356 345

11,472.199

7,574,793 71,803

20831,958 912,821

5,124,457 96,335

21.945,733

(8,480,392) 2,533,511

5 3,072,528

131,261 103,13161,891 363,823

645,959

591,364 33,747

1 430.475 500,701

230,942 345,85672,866

4,781,904

(521,729) 2,225,971

4,563,983 2,571,827

S 5.994,458 $ 3,072.528

Unreserved and undesignated, reported in:General fundSpecial revenue fundsCapital projects funds

Total fund balances

Total liabilities and fund ba!arces

43,287,722 18,589,798 2,629,846

$ 84,114,831 S 39,421.756 $ 3,542,667

The accompanying noles are an integral part of these financial slalernen’.s 48

City of BerkeleyBalance Sheet

Governmental FundsJune 30, 2010

Capital Project

Cash and investments in treasuryRestricted Cash and investmentsReceivables (net of allowance

where appilcable):AccountsInterestTaxesSpecial assessmentsSubventions/g rantsDue from other fundsDue from components unitsAdvance to other fundsNotes receivableOther

Property held for resale

________________ _______________

LIABILITIESAccounts payableAccrued salaries and wagesOther liabilitiesDue to other fundsAdvance from other fundsDeposits heldDeferred revenueTax and revenue anticipation note

_________________ ________________

Total liabilities

_________________ ________________

FUND BALANCESReserved for:

EncumbrancesAdvance

Property held for resaleNotes receivableDebt service

Unreserved and undesignated, reported inGeneral fundSpecial revenue fundsCapital projects funds

Total fund balances

________________ _______________

Total liabilities and fund balances $ 8.635342 S 19879.908

ASSETS

OtherMeasure FF Capital Governmental Governmental

Branch Renov Improvement Funds

—-

Funds

Total

S 8,635,342 $ 6,886,530 $ 34,605,0419,887,712

1 000,000501,303

3,551,799

7,940,276

Total assets

919,045399,791400,764

1,069,814

15,645,601

$ 121,069,8779,887,712

9478,9192,490.4855,471,478

298,53811,615,53812,865,881

201,82972,866

53,626706509,428211,347

_______________

211,347S 8,635,342 $ 19.879,908 S 63,139,115 $ 227.800.503

123,921 349,909 1,713,921 4,804,746462 48,509 832,620 8,555,966

452,448 3,019,341641,403 12,759,561

72,866 72,86612,942 185,093 675,643

502,303 1,509,325 16,060,66125,000.000

124,383 913,663 5,407,675 70,948,783

2,801,514 1,272,792 7,358,285 1 9,993,02072,866

211,347 211,3477,940,276 15,645,601 53,626,706

11,125,069 11,125,069

37,211,68913,037,921 8,795,283

5,709,445 9,753177 10,353,219 25,815,840

8.510,959 18,965,245 57,731,440 155,851820

$ 63,139,115 S 227.800.603

The accompanying notes are an integral part of these rinancia: statemar.ts. 49

City of BerkeleyReconciliation of the Balance Sheet of Governmental Funds

To the Statement of Net AssetsJune 30. 2010

Fund balances — total governmental funds (Page 49)

Amounts reported for governmental activities in the Statement of net assets are different

Capital assets used in governmental activities are not financial resources and,not reported in the funds.

Net OPEB assets and Net pension obligatinn in governmental activities are notresources and therefore, are not reported in the uds.

Other long-term assets are not availble to pay for current period expenWtures and.therefore, are deferred in the funds.

Internal service funds are used by management to charge the costs of public liability,equipment maintenance, building maintenance. suppy warehouse, workers compensation.electrical warehouse and catastrophic loss services to individual funds.The assets and liabilities of the internal services funds are included in governmentalactivities in the statement of net assets.

$ 156,851,820

Long-term liabilities. including bonds payable. are not due and payable in the currentperiod and, therefore, are not reported in the funds.

Acciued Interest Payable on long-term debtBonds, certificates of participation, notes and loans

Compensated absences

Net assets of governmental activities (Page 46)

The accompanying notes are an integral pan of these financial statements.

(1,674.204)(102,909,7] 5)(14,320,288)

S 239.702.004

LandConstruction in progress

BuildingsImprovements other than buildings

Machinery and equipmentIi irastruciure

Net pension obligation - PoliceNet OPEB obligation - Misc Retiree

Net OPEB assets - Fire

22,327,797984,860

68.576.1067.506 .94 88 .222,947

80,595,403

(7.336.257)(853,597)

10 8,58 I

16.060.6611,388,808

4,172,134

L.ferred revenueDefened charge

50

City of BerkeleyStatement of Revenues, Expenditures,

and Changes in Fund BalancesGovernmental Funds

For the Fiscal Year ended June 30, 2010

Special Revenue

General Grants Library CDBG Park Tax

Revenues:Taxes $ 96.351120 S - $ 13,858502 S - $ 8,730.440Licenses and permits 742.347Intergovernmental 9.164.661 27,753065 204,511 3,187.457Charges for service 6463,531 274,283

- 26,005Fines and penalties 10:805,100 293.318Rents and royalties 127,201 255Franchise 1,914,871Private contributions and donations 475,971 149,178Investment income 5,433.878 467 1,228 10,543 76.695Miscellaneous 683,654 58,189 32,451 99,107 9,737

Total revenues 132,162,334 28,086,304 14,539,543 3,297,107 8.8d2.877

Expenditures:Current:

General government 26,743,079 40,491 23,785 16,000 61,603Public safety 76,813,671 308,175 23,823Highway and streets 1,727,890 3,407,744Hearth and welfare 6,869,707 14,626,270Culture-recreation 5,551,017 505018 14,177,851 9,050,194Community development and housing 6,951,742 8,934.246 3,436.657Economic development 2,199,244 2,051,926

Debt service:Frincipal repaymentInterest and fiscal charges .l02,777Cost of issuance 45,822

Capital outlay:Highway and streetsCommunity development and housing

Total expenditures 128,005.949 29,873,870 14,201,636 3,454,557 9,135,620

Excess(deficiency) of revenues over(under) expendIures 4,156,386 (1,787,866) 337,907 (157,550) (292.743)

Other financing sources(uses):Transfers in 3,204,774 2,551,897Transfers out (9,117,440) (46,243)Issuance of notes and loansIssuance of certificates of participationPremium on certificates of participationSale of caplai assets

Total other financing sources(uses) (5,912,666) 2,551.897 -- (46.243)

Net change in fund balances (1,756,280) 764,031 337,907 (157,550) (338,986)

Fund Balance, July 1,2009 as restated 45,044,003 17,825,768 2,291,939 4,721,533 2,910,813

Fund Balance, June 30, 2010 $ 43.287,722 S 18,589.798 $ 2.629,848 S 4,563,983 $ 2,571,827

The acccn-pary:rg notes are en inegrai part cii these frraciai staiemer.s.

City of BerkeleyStatement of Revenues, Expenditures,

and Changes in Fund BalancesGovernmental Funds

For the Fiscal Year ended June 30, 2010Capital Prolect

Other TotalMeasure FF Capital Governmental Governmental

Branch Rencv Improvement Funds Funds

Revenues:Taxes $ - $

- $ 20,629,390 $ 139,569,452Licenses and permits 325,583 1,067,931Intergovernmental 8,689,424 48,999,218Charges for service 7,320 4,162,369 10,933,508Fines and penalUes 59.953 ii.56,371Rents and royalties 333.287 460743Frar,cnise 1,914,871Private contributions and donations 40,106 665,255Investment income 13,641 4,537 327,970 5,868,959Miscellaneous 4,000 145,803 1,032,941

Total revenues 13.641 15,857 34,713,885 221,671,249

Expendilures:Current.General governmenl 450,962 1,228,837 28,564,757Public safety 6,848,518 s3:99a.1e7Highway and streets 6.202.062 11,337,696Health and welfare 2.231.960 23,727,937Culture-recreation 1.457981 548,072 1,707,143 32,997,276Community development and housing 2,242,058 21,566,702Economic development 33,378 851,484 5,136,033

Debt service:Principal repayment 4,399.000 4.399.0CC’Interest and fiscal charges 3,880,911 4.983,688Cost of issuance 159,565 206,367Capital outlay:Highway and streets 2,099,646 205,040 2,304,687Community development and housing 913,021 2,451,749 3,364,770

Total expendilures 1,457,981 4.045.080 32.498.329 222,583,121

Excess(deficiency) of revenues over(under) expenditures (1,444,340) (4,029,223) 2,305,557 (911,872)

Other financing sources(uses):Transfers in 3,300,000 5,495.592 14.552,253Transfers out (552,207) (6,620,630) (16,336,520)Issuance of notes and loans 6.000.000 6.000,CCOIssuance of certificates of participation 5,750,000 5,750,000Premium on certificates of participation 403,977 403,977Sale of capital assets 1,452 1,452

Total other fnancing sources(uses)- 2,747.793 1:030.391 10,37’,172

Net change in fund balances (1,444,340) (1,281,430) 13,335,947 9,459,300

Fund Balance, July 1,2009 as restated 9.955,299 20,247.675 44,395.493 147.392,523

Fund Balance, June 30, 2010 $ 8,510,959 $ 18,966,245 $ 57.731,441 $ 156,851,822

The accompany,ng notes are an inlegral part of Ihese financial statements.

52

City of BerkeleyReconciliation of the Statement of Revenues, Expenditure, and Change in

Fund Balances of Governmental Funds to the Statement of ActivitiesPer the Year Ended June 30, 2010

Net change in fund balances — total governmental funds (Page 52) S 9.459,300

Amounts reported for governmental activities in the Statement of Activities are differentbecause:

Governmental funds report capital outlays as expenditures. However, in the Statementof Activities the cost of those assets is al!ocated over their estimated useful lives andreterted .5 depreciation expense.

The capital outlay expenditures are therefore added back to fund balance. 12,316,245Depreciation expense is therefore deducted from fund balance. (9.706,806)

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

Deferred revenue - Tax receivable 93.479Deferred revenue - Grant receivable (194.038)

Deferred revenue - Accounts receivable 250,515

lcsuance of long term debt provides current financial resources to governmental fundsbut incurring debt increases long-term liabilities in the Statement of Net Assets.Repayment of principal on long-term debts is an expenditures in the governmentalfunds, but in the Statment of Net Assets the repayment reduces long-term liabilities.

Issuance of loan (6,000,000)Issuance of Cetificates of Participation (5.750.000)

Principal pay:nents 4599.000Capitalization of premium on debt (-103.977)Capitalizati “ fcosts of issuance 159,565

Some expenses reported iii the Statement of Activities do not requir. he use of currentfinancial resources and, therefore, are not repcrted expenditures in ge’ ernniental funds.

Compensated absences (458.i35)Amortization ofpreniium on dcbt 1.122

Amortization of bond issuance costs (54,247)Net pen on obligation - Police (1,849,063)

Net OPEB Oblication - Misc Retiree (145,342)Net OPEB assets - Fire 29,268

Accrued Interest Payable (42,575)

Internal service funds are used by management to charge the costs of certain activates toindividual funds. The net revenue (expense) of the internal service funds is reportedwith governmental activities.

Loss (3,262,343)Transfers in 2,621,275

Change in net assets of governmental activities (Page 47)

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

S 1.463.244

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01

-J

CITY OF BERKELEYStatement of Fiduciary Net Assets

Fiduciary FundsJune 30, 2010

Pension and OtherPost-employment

BenefitTrust Funds Agency Funds

AssetsCash and cash equivalentsRestricted cash and cash equivalentsInvestments, at fair value

Corporate BondsNotes receivableTaxes receivableInterest receivableOther accounts receivableTotal assets

$ 7,179,3322,630,205

12,178,351517.000

378,852

22 883, 740

$ 3:627,305

161,575

378,926$ 4,167,806

LiabilitiesPension benefits payableOther agency obligationsOther PayablesTotal liabilities

3,799,674368,132

$ 4,167,806

Net AssetsHeld in trust for pension benefitsHeld in trust for OPEB benefits

8,558,92914,265,570

Total net assets $ 22,824,499


48,44110,800

59,241

58

CITY OF BERKELEYStatement of Changes in Fiduciary Net Assets

Fiduciary FundsFor the Year Ended June 30, 2010

ADDITIONS:

Pension and OtherPost-employment

BenefitTrust Funds

Contributions; EmployerInvestment income

Total Additions

$ 4,950,1791568,9566,519135

DEDUCTIONS:

Benefits;ServiceDisability

Administrative expensesTotal Deductions

2,790,218457,960

76,2403.324.418

Change in net assets 3,194,717

Net Assets - beginning

Net Assets - ending

19,629,782

$ 22,824,499


59

CITY OF BERKELEY

Notes to the Basic Financial Statements

June 30, 2010

I) Summary of Significant Accounting Policies

A. Description of the Reporting Entity

The City of Berkeley (the City) is a municipal corporation created under the laws of the State ofCalifornia. The City operates under its own charter. The current charter provides for a Council-Managerform of government and the City is governed by an elected mayor and eight-member council. The Cityprovides the following services: public safety (police and fire); sanitation and sewer; housing; leisure(parks, recreation, and marina); health and human services, including City funded health clinics; animalcontrol; public improvements; planning and zoning; libraty services; and general and administrativeservices.

As required by generally accepted accounting principles, these financial statements present the City ofBerkeley- and its component units, entities for which the City is considered to be financially accountable.Blended component units, although legally separate entities, are, in substance, part of the City’soperations. The City is considered to be financially accountable for an organization if the City appoints avoting majority of that organization or there is a potential for that organization to provide specificfinancial benefits to or impose specific financial burdens on the City- The City is also considered to befinancially accountable for an organization if that organization is fiscally dependent (i.e.. it is unable toadopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). Incertain cases, other organizations are included as component units if the nature and significance of theirrelationship with the City are such that their exclusion would cause the City’s financial statements to bemisleading or incomplete. Each discretely presented component unit is reported in a separate column inthe government-wide financial statements (see note below for description) to emphasize that it is legallyseparate from the City.

Blended Component Units. The Redevelopment Agency (BRA) serves all the citizens of the City and isgoverned by a board comprised of the City of Berkeley’s elected council. Budgeting, accounting andadministrative functions are performed by the City. The BRA is a duly and validly existingredevelopment agency under the Community Development Law (Part I of Division 24, sections 3300 etseq) of the Health and Safety Code of the State of California. The BRA has two active project areas: WestBerkeley and Savo Island. The BRA is reflected as a West Berkeley Improvement Capital Project fundand Debt Service fund, and Savo Island is reflected as a Capital Project fund and Debt Service fund.

Discretely Presented Component Units. The Rent Stabilization Board (Rent Board) is responsible forthe proper administration of programs to regulate residential rents; protecting tenants from unwarrantedrent increases and arbitrary, discriminatory or retaliation evictions; helping maintain the diversity of theBerkeley community; and to ensure compliance with legal obligations relating to the rental of housing.The nine member Board of Commissioners is elected by the citizens. However, the Rent Board is fiscallydependent upon the City because the City Council must approve its annual budgets and authorize anybonded debt.

60

(I) Summary of Significant Accounting Policies (Continued)

The Berkeley Housing Authority (BHA) is a Public Housing Agency as defined in Section 8 of the UnitedStates Housing Act of 1937, and a public body corporate and politic established pursuant to the CaliforniaHousing Authorities Law, Health and Safety code Section 34200 et seq. It was organized in 2007 underthe laws of the State of California and was established to administer rental assistance programs with theobjective of providing affordable, decent, safe, and sanitary housing for low-income residents of the Cm’.The RI-IA has a 7-member Board of Commissioners appointed by the Mayor of the City. Although theBHA is a legally distinct entity operating within the geographical jurisdiction of the City of Berkeley, ithas been determined that the BRA’s financial statements would be presented as a discrete component unitof the City’s financial statements in response to the oversight change and the significant financialassistance provided by the City to the BHA. On June 12, 2007, the City Council adopted ResolutionNumber 63,714-N .S. authorizing the City Manager to enter into a contract with BRA to provide for asubsidy subject to the Council’s future approval of the portion of the subsidy allocated in the budget forFY 2010. The City’s FY 2010 budget includes a General Fund operating subsidy in the amount of$300,000 for the BE-IA. The subsidy will be revocable in the event of BRA’s default in the agreement withthe City. As a condition of providing the subsidy, the City will impose requirements to ensure that BRAis continuing to meet its federal obligations and that the new Board is functioning properly. In addition,because BRA operations are not self-supporting, the City agreed to continue to provide some of theongoing support services to BHA, including human resources, payroll, information technology andfinance. The term of this agreement is one year from the date of the execution of the agreement on May 4,2010 by both parties.

Complete financial statements for each of the individual component units may be obtained at the entity’sadministrative offices:

Rent Stabilization Board Berkeley Housing Authority2125 Milvia Street 1901 Fairview StreetBerkeley, California Berkeley, California

Berkeley Redevelopment Agency2118 Milvia StreetBerkeley, California

B. Government-wide Financial Statements

The government-wide financial statements (i.e.. the statement of net assets and the statement of activities)report information on all of the non-fiduciary activities of the primary government and its componentunits. For the most part, the effect of interfund activity has been rcmoved from these statements except inthe case of interfund services provided and used, which are not eliminated in the consolidation process.Governmental activities, which normally are supported by taxes and intergovernmental revenues, arereported separately from business-type activities, which rely to a significant extent on fees and charges forsupport. Likewise, the primary government is reported separately from certain legally separate componentunits for which the primary government is financially accountable.

The statement of activities demonstrates the degree to which the direct expenses of a given function areoffset by program revenues. Direct expenses are those that are clearly identifiable with a specificfunction. Program revenues include 1) charges to customers or applicants who purchase. use, or directlybenefit from goods, services, or privileges provided by a given function and 2) grants and contributions

61


that are restricted to meeting the operational or capital requirements of a particular function. Taxes andother items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental fLinds, proprietary funds, and fiduciary funds,even though the latter are excluded from the government-wide financial statements. Major individualgovernmental funds and major individual enterprise funds are reported as separate columns in the fundfinancial statements.

C Measurement Focus, Basis of Accounting, and Financial StatementPresentation

The government-wide financial statements are reported using the economic resources meas ureineni focusand the accrual basis of accounting, as are the proprietary and fiduciary fund financial statements.Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless ofthe timing of related cash flows. Property taxes are recognized as revenues in the year for which they arelevied. Grants are recognized as revenues as soon as all eligibility requirements imposed by the grantorhave been met. Governmental fund financial statements are reported using the currentfInancial resourcesineasurenientfoczts and the modified accrual basis of accounting. Revenues are recognized as soon asthey are both measurable and available. Revenues are considered to be available when they are collectiblewithin the current period or soon enough thereafter to pay liabilities of the current period. For thispurpose. the City considers revenues to be available if they are collected within 60 days of the end of thecurrent fiscal year. Expenditures generally are recorded when a liability is incurred, as under accrualaccounting. However, debt service expenditures, as well as expenditures related to compensated absencesand claims and judgments, are recorded only when payment is due.

Property taxes, utility users taxes, transient occupancy taxes, ambulance fees. interest, and sales taxesassociated with the current fiscal year are all considered susceptible to accrual and so have beenrecognized as revenues of the current fiscal year. All other revenue items are considered to be measurableand available only when the City receives cash.

The City reports the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all financial resources of the City,except those required to be accounted for in another fund.

The Grants Fund accounts for grant monies received from other governments and private sources to beused to cover expenditures for providing public services and improving public safety.

The Library Fund accounts for all monies received and expended for the operation of the City’s mainand branch libraries; the major source of revenues are special taxes approved by two thirds of the voters,but the fund also receives gifts, bequests, donations and library fees.

The LDBG Fund accounts for the block grant received from the U.S. Department of Housing and UrbanDevelopment. The grant is to allow the City to revitalize neighborhoods, expand affordable housing andeconomic opportunities, and/or improve community facilities, principally to benefit low and moderate-income persons.

The Park Tax Fund is used to account for the receipt and expenditure of the special tax approved by twothirds of the voters on May 6, 1997 and re-authorized in November 2000 and November 2008. It is used

62


for the direct cost of acquisition and maintenance of improvements related to parks and landscape in theCity.

The Measure FF Branch Renovation Fund is used to account for the receipt and expenditures of theproceeds from the General Obligation bonds approved by over two thirds of the voters on November 4,2008, to finance renovations, construction, seismic and access improvements, and expansion of programareas at four neighborhood branch libraries in the City.

The Capital Improvement Fund accounts for expenditures for land, buildings, major reconstructionand renovation of structures, and for major landscaping or park improvements financed by local revenues.

The government reports the following major proprietary funds:

The Refuse Collection/Disposal Fund accounts for the monies received and expended from refusecollection services, including the surcharge to provide for expenses incurred in the collection and disposalof solid waste materials as well as for plans, surveys, engineering expenses. property acquisition andconstruction costs of facilities for finure refuse disposal.

The Marina Operations Fund accounts for the day-to-day operations of the Berkeley Marina.

The Sanitary Sewer Fund accounts for the collection of revenues from sanitary sewer charges, and theexpenses related to the operation. maintenance, replacement, reconstruction, and repair of sanitaryfacilities.

The Clean Storm Water Fund accounts for the fees collected to improve the quality of storm waterdischarged from the City’s storm drainage system.

The Permit Service Center Fund accounts for revenues from customers processing development permitapplication (ie.. building and zoning permits) and the funds expended to operate the permit reviewfunctions of the Permit Service Center.

The Off Street Parking Fund accounts for the operations of the City’s Center Street garage, Sather Gategarage, Sather Gate Mail leases, and Oxford/Fulton parking lot.

The Parking Meter Fund accounts for the collection of coins from the City’s parking meters and for thepurchasing, leasing, installing, repairing, maintaining, operating, removing, and policing of the meters.

The Building Purchases & Management Fund accounts for the purchase and management of thebuilding at 1947 Center Street.

Additionally, the City reports the following fund types:

Internal Service Funds account for equipment maintenance, building maintenance and replacement,supply warehouse. computer replacement, workers’ compensation, sick and vacation payouts, publicliability, and catastrophic loss services to other departments of the City on a cost reimbursement basis.

The Pension Trust Funds accounts for the activities of the Safety Members Pension Fund. PoliceRetirement and Pension Annuity Fund, which provides pension benefits on a pay-as-you-go basis for fireand police employees hired on or before February 28, 1973; and the Police Retirement Income BenefitPlan.

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The Other Post-employment Benefits Trust Funds account for the Retiree Medical Benefit Trust andFire Medical Trust funds and allocated sources to provide medical benefits for retirees.

The Agency Funds account for the Community Facilities District No. 1 Disaster Fire Protection specialassessment tax monies, the Thousand Oaks Heights Applicant Funded Utility Lndergrounding specialassessment tax monies. District 47 Underground/Miller, Sick Leave Entitlement, and Measure H SchoolTax.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989 generallyare followed in both the government-wide and proprietary fund financial statements to the extent thatthose standards do not conflict with or contradict guidance of the Governmental Accounting StandardsBoard. Governments also have the op/ion of following subsequent private sector guidance for theirbusiness-type activities and enterprise funds, subject to this same limitation. The City has elected not tofollow subsequent private-sector guidance.

The effect of interfund activity has been eliminated from the government-wide financial statements.Amounts reported as program revenues include I) charges to customers or applicants for goods, services,or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions,including special assessments. General revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from nonojierating items. Operatingrevenues and expenses generally result from providing services and producing and delivering goods inconnection with a proprietary fund’s principal ongoing operations. The principal operating revenues forall the enterprise funds and internal service funds are charges to customers for sales and services.Operating expenses for enterprise funds and internal service funds include personnel services, employeebenefits, repairs and maintenance, professional services, transportation, materials and supplies, claims andjudgments. rent, insurance, utilities, communications, general administration and depreciation on capitalassets. All revenues and expenses not meeting this definition are reported as non-operating revenues andexpenses.

When both restricted and unrestricted resources are available for use, it is the City’s policy to userestricted resources first, and then unrestricted resources as they are needed.

D. Implementation ofAccounting Principles

During fiscal year 2010, the City adopted the following GASB Statements:

In June 2007. GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible Assets.This Statement requires that all intangible assets not specifically excluded by its scope provisions beclassified as capital assets. Accordingly, existing authoritative guidance related to the accounting andfinancial reporting for capital assets should be applied to these intangible assets, as applicable. ThisStatement also provides authoritative guidance that specifically addresses the nature of these intangibleassets. Such guidance should be applied in addition to the existing authoritative guidance for capitalassets. The adoption of GASB Statement No.51 did not have an impact on the financial position, resultsof operations, or cash flows of the reporting entity.

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E. Assets, Liabilities, c’rndNetAssets or Equity

1. Deposits and InvestmentsThe City’s cash and cash equivalems are considered to be cash on hand, demand deposits, and shortterm investments with original maturities of three months or less from the date of acquisition.

State of California statutes authorize the City to invest in obligations of the U.S. Treasury, itsagencies and instrumentalities, certificates of deposits, commercial paper rated A-I/P-I, medium termcorporate notes rated A or its equivalent or better by Moodys or Standard & Poor’s, asset backedcorporate notes, negotiable certificates of deposits, bankers acceptances, mutual funds, guaranteedinvestment contracts, repurchase agreements. reverse repurchase agreements when authorized by theCity Council, and the State Treasurers investment pool (Local Agency Investment Fund).

The City does not utilize the Local Agency Investment Fund, as this fund is not in compliance withthe City’s nuclear free ordinance.

Investments for the City, as well as for its component units, are reported at fair value. The value isdetermined based upon market closing prices. The fair value of mutual funds is stated at share value.Income from pooled investments is aflocated to the individual funds based on the fund averagemonthly balance in relation to the total pooled investments.

2. Receivables and PayablesTransactions between funds that are representative of long-term lending/borrowing arrangementsoutstanding at the end of the fiscal year are referred to as “advances to/advances from other funds”.All other outstanding balances between funds are reported as “due to/from other funds”. The lattertransactions are typically loans from the General Fund to cover cash shortages in other funds thatresult from the pooled cash arrangement. The loans are short-term in nature and generally result fromthe time lag in receiving grant reimbursements. The amounts are repaid to the General Fund when thegrant reimbursements are made. Any residual balances between the governmental activities andbusiness type activities are reported in the government-wide financial statements as internal balances.

Advances between funds are offset by a fund balance reserve account in applicable City funds toindicate the extent to which they are not available for appropriation and are not expendable availablefinancial resources.

All trade accounts receivable are presented net of allowance for doubtful accounts. No allowances fordoubtful accounts have been provided for taxes or rental registration fees. Property taxes are levied asof July 1 on property assessed on the same date. Alameda County assesses properties, bills for,collects and distributes property taxes as follows:

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Secured UnsecuredValuationulien dates January 1 January 1

Levy dates July 1 July 1Due dates 50% on Nov. I July 1

50% on Feb. I

Delinquent as of Dec. 10 (for Nov.) August31Apr. 10 (for Feb)

The term “unsecured” refers to taxes on businesses’ furniture and equipment. Property taxes aresecured by liens on the property being taxed.

Property taxes are recorded as revenue when they become both measurable and available to financeexpenditures in the fiscal year. Deferred revenue is recorded for the amount included in taxesreceivable, which is not collected within 60 days after fiscal year-end.

3. InventoriesAll inventories are valued at the lower of cost or market on a first-in-first-out basis. inventory in theSupplies Warehouse Fund consists of postage supplies held for consumption by all departments of theCity. The cost is recorded as an expense in the appropriate fund at the time inventory items arewithdrawn for use (consumption method).

4. Property Heldfor ResaleProperty held for resale in the West Berkeley Improvement Capital Projects Fund is recorded at thelower of cost or market value, with an equal amount recorded as a reservation of fund balance.

5. Restricted AssetsCertain proceeds of the City’s Off-Street Parking enterprise fund revenue bonds. thc BuildingPurchases and Management enterprise fund certificates of participation, Animal Shelter fundCertificates of Participation, Berkeley Redevelopment Agency’s debt service and capital projectfunds revenue bond proceeds, as well as certain resources set aside for their repayment, are classifiedas restricted assets on the statement of net assets because they are maintained in separate bankaccounts and their use is limited by applicable bond covenants.

The debt service account is used to segregate resources accumulated for principal payments; theconstruction account is used to report those proceeds of the reventie bond issuance that are restrictedfor use in construction; the interest account is used to segregate resources accumulated for interestpayments; the debt service reserve account is used to segregate resources set aside to make uppotential future deficiencies in the interest account and the debt service accotint; and the cost ofissuance account is used to segregate proceeds of the revenue bond issuance that are to be used to paythe cost of issuance.

6. Gap/ta! AssetsCapital assets, which include land, buildings. machinery, construction in progress and irtrastructureassets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmentalor business-type activities columns in the government-wide financial statements. Capital assets aredefined by the City as assets with an initial, individual cost of more than S 1,000 for non-infrastructure

66


assets and $100,000 for infrastructure assets, and an estimate useful life in excess of two years. Suchassets are recorded at historical cost or estimated historical cost if purchased or constructed. Donatedcapital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materiaflyextend assets lives are not capitalized. Major outlays for capital assets and improvements arecapitalized as projects are constructed.

Property, buildings, machinery and equipment. furniture and fixtures, vehicles and infrastructure ofthe priman’ government, as well as the component units, is depreciated using the straight—line methodover the following estimated useful lives:

Assets YearsBuildings 30Building improvements 30Machinery and equipment 4-5Furniture and fixtures 7Infrastructure:

Roadway/Street:Pavement 30Sidewalk, curb and gutter 15Traffic siunals/devices 40Street lights 10Street trees 25Guard rails 50Retaining walls 50Paths (Residentia) 60

Sanitary sewer system:Pipelines 50Structures 50

Storm drain system:Pipelines 50Structures 50

Vehicles 5-10Other 5

7. compensated AbsencesIt is the City’s policy to permit employees to accumulate earned but unused vacation and sick paybenefits. Vacation pay is accrued when incurred in proprietary funds and is reported as a fundliability. In governmental funds, compensated absences are recorded as expenditures in the year paid,as it is the City’s policy to liquidate any unpaid compensated absences at June 30 from futureresources, rather than currently available financial resources. The City has established an InternalService Fund (Sick and Vacation Payout Fund) to pay for compensated absences when a workerleaves the City or retires The City uses the vested method for calculating compensated absences.

The personnel policies of the City do not allow employees to accrue vacation in excess of eight weeks(320 hours). For example, when a miscellaneous employee (Police and Fire sworn employees have

67


different formulas) is terminated or retires, with a vested pension with twenty years of service, anemployee is entitled to be paid 38% of the accrued sick leave balance and 62% of the balance can beused for CALPERS credit. Employees with at least twenty-eight (28) years of benefited City serviceor an employee retiring on permanent disability arising out of and incurred in the course and scope oftheir employment with City with at least twenty-eight (28) years of benefited service shall be entitledto receive payment in an amount equal to fifty percent (50%) of their accrued sick leave days up to amaximum of (200) unused sick leave days. The employee has the option of using the payoutentitlement for retiree medical insurance premium payments. The liability for retirees who do notchoose the payout option is paid from the medical sick leave entitlement trust fund.

8. Long-term ObligationsIn the government-wide financial statements, and proprietary fund types in the fund financialstatements, long-term debt and other long-term obligations are reported as liabilities in the applicablegovernmental activities, business-type activities, or proprietary fund type statement of net assets.Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life ofthe bonds using the effective interest method. Bonds payable are reported net of the applicable bondpremium or discount.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, aswell as bond issuance costs, during the current period. The face amount of debt issued is reported asother financing sources. Premiums received on debt issuances are reported as other financing sourceswhile discounts on debt issuances are reported as other financing uses. Issuance costs, whether or notwithheld from the actual debt proceeds received, are reported as debt service expenditures.

9. Fund EquityIn the fund financial statements, governmental ftinds report reservations of fund balance for amountsthat are not available for appropriation or are legally restricted by outside parties for use for a specificpurpose. Designations of fund balance represent tentative management plans that are subject tochange.

Following is a briefdescription of the nature of certain fund balance reserves as of June 30. 20i0:

Reserved for Encumbrances - Reserves have been established in all funds to account for the portionof purchase orders and contracts awarded for which the goods or services had not yet been received asof June 30, 2010.

Reservedfor Plo/es Receivable - A reserve has been established in the General fund, CDBG, Grants,Citywide Revolving Loan, Capital Improvement, Business and Economic Development. Section 108I-HiD loans. CA Housing Finance agency special revenue funds and other Capital Projects funds andSavo Island Debt Service fund for the amount of loan principal due more than one year from the endof the fiscal year.

Reserved for Property Held for Resale - The fund balance of the capital projects funds has beenreserved for land and improvements held for resale by the Berkeley Redevelopment Agency, toindicate that it does not represent a currently available expendable financial resource.

Rese;-ved for Debt Service -Reserves have been established in the debt service funds to account forcash and investments held by fiscal agents restricted so]ely for paying debt service.

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Reserved for Advances - A reserve has been established in the CDBG fund for amounts due fromBerkeley Redevelopment Agency, which are not expected to be repaid during the fiscal year and, as aresult, are not appropriable.

JO. At AssetsNet assets of the government-wide and proprietary funds are categorized as invested in capital assets,net of related debt; restricted or unrestricted. Invested in capital assets, net of related debt, is thatportion of net assets that relates to the City’s capital assets reduced by accumulated depreciation andby any outstanding debt incurred to acquire, construct or improve those assets, excluding unexpendedproceeds.

Restricted net assets is that portion of net assets that has been restricted for general use by externalparties (creditors. grantors, contributors, or laws or regulations of other governments) or imposed bylaw through consiitutonal provisions or enabling legislation. Unrestricted net assets consist of all netassets do not meet the definition of either of the other two components.

11. Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally acceptedin the United States requires management to make estimates and assumption that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements. Estimates also affect the reported amounts of revenues andexpenditures/expenses during the reporting period. Actual results could differ from those estimates.

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CITY OF BERKELEY

Notes to the Basic Financial Statements (Continued)June 30, 2010

II) Stewardship, Compliance, and Accountability

a) Excess of Expenditures I Over Appropriations

The following non-major governmental funds expenditures exceeded appropriations at the legal level ofbudgetary control (the fund level):

Amount

Section 108 HUD Loan-Grant Asst. S (217) (2)

Paramedic Assessment Dist. (18,242)Domestic Violence Prevention (7,314) (2)

Animal Shelter Land/Bldg. (132,964) (2)

Sales Lease Financing (1928) (2)

09 Measure ff Library (795) (2)

2007 GO Refunding Bonds Series B (849) (2)

Berkeley Repertory Theatre lease Revenue Bonds (4.588) (2)

GO Bonds Animal Shelter (849) (2)

2007 GO Bonds Series A (794) (2)

0) An amendment to the appropriations ordinance was not prepared. A transfer from the GeneralFund will be needed to cover the excess.

(2) An amendment to the appropriations ordinance was not prepared. The fund balance was used tocover the excess.

B. Deficit Fund Balances/Net Assets

The following funds had deficit fund balances I net assets on June 30, 2010:

(1) Special Revenue Funds

The State Gas Tax 2106 Fund has a fund balance deficit of$J91,lSl, which will be eliminated when thetax allocation is received.

The Paramedic Assessment District Fund has a fund balance deficit of $311,212, which will be eliminatedby a subsidy from the General Fund.

The Underground District Fund has a fund balance deficit of $108,871. The Budget Office will reviewthe fund and determine the course of action in FY 2010.

The Domestic Violence Prevention Fund has a fund balance deficit of $36,140, which will be eliminatedby more timely expenditure reimbursements.

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(II) Stewardship, Compliance, and Accountability (Continued)

The Tobacco Control Fund has a fund balance deficit of $41,691, which will be eliminated by moretimely expenditure reimbursements.

(2) capital Project Funds

The Capital Improvement Administration Fund has a fund balance deficit of $1,611, which will beeliminated by better allocation of project management fees to the appropriate City projects.

Park Acquisition Fund has a fund balance deficit of $1,817, which will be eliminated by the receipt ofrental income.

(3,) Internal Service Funds

The Workers’ Compensation Fund has a deficit in net assets of $12,588,092. Total projected current yearclaims incurred but not paid are recorded as an expense resulting in negative net assets. As a matter ofpolicy, current year claims are paid from current year revenues from all operating departments. For theWorkers’ Compensation Fund, a workers’ compensation actuarial study is being conducted and the ratescharged to departments will be consistent with that study.

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CITY OF BERKELEY

III. Detailed Notes on All Funds

A. Cash and Investments

Cash and investments as of June 30.value as follows:

Primary Government (exceptFiduciary funds)Fiduciary Funds

_________________

Subtotal Primary GovernmentComponent Units

Berkeley Housing AuthorityRent Stabilization Board

Subtotal Component Units —

Total cash and investments =

Cash and investments as of June 30, 2010 consist of the following:

Cash and deposits:Cash on handDeposits with financial institutions

Total cash and depositsInvestments:

Investments for City govemrne:n. excluding trust fundsInvestments held in trust for police retirement and retiree medical

Total investments

Total cash, deposits and investments

$ 23,04416,767,173

16,790,217

205,357,54512,178.351

2 17,535,896

S 234.326.113

Equity in pooled cash and investments held by treasuiyCash and investments held by fiscal agentCash and investments of retirement plansCash and investments of Agency funds

S 186,202,45422,508,46621,987,888

3,627,305

Total cash, deposits and investments S 234,326,113

Notes to the Basic Financial Statements (Continued)June 30, 2010

2010 are classified in the accompanying financial statements at fair

Unrestricted

$ 178.195,80322,984.988

201,180,791

S 1,638.4604,024.4145,662,874

Restricted Total

S 22.508.468 S 200.704.2712,630,205 25,615,193

25,138,673 226.319,464

5 2.343.775 $ 3,982,2354.024.414

2.343,775 8.006.649

S 27.482.448 $ 234326,113S 206,843,665

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(III) Detailed Notes on All Funds (Continued)

Pooled Cash and Investments Held in City Treasury - The City maintains a cash and investmentpool that is available for use by all funds and component units. Each fund’s portion of this pool isdisplayed on the governmental fund balance sheets and proprietary fund statement of net assets as“cash and investments held in treasury”

Restricted Cash and Investments- The Ci has other investments, not held by the City Treasury.that are invested pursuant to governing bond covenants. These amounts are reflected as restricted cashin the financial statements.

Investments in Retirement Plans - The funds of the retirement plans and retiree medical plans areinvested pursuant to City investment policies established specifically for those plans by the CityCouncil. The objective of the investment policies is to maximize the expected return of the plans’ at theacceptable level of risk.

1. InvestmentsInvestments Authorized by the California Government Code and the City of Berkeley InvestmentPolicies:

The table below identifies the investment types that are authorized for the City of Berkeley’s pooledinvestment policies. The table also identifies certain provisions of the California Government Codeand/or the City’s investment policies that address interest rate risk, and concentration of credit risk.This table does not address investments of debt proceeds held by bond trustees that are governed by theprovisions of debt agreements of the City, rather than the general provisions of the CaliforniaGovernment Code.

Maximum MaximumMaximum Percentage/Dollar Investment

Authorized Investment Type Maturity of Portfolio in one issuerLocalAgencybonds 5years 5% N/AU.S. Treasury Securities 5 years 25% N/AU.S. Agency Securities 5 years 100% N/ABanker’s Acceptances 180 days 40% 30%Commercial Paper 180 days 25% $5M or 2%Negotiable Certificates of Deposit 5 years 30% N/ARepurchase Agreements lyear 10% N/AMedium-Term Notes 5 years 30% N/AGuaranteed Investment Contracts 5 years 25% N/AMoney Market funds N/A 100% N/AMortgage pass-Through Securities 5 years 20% N/ACountyPooled Investment Funds N/A N/A N/AJPA Pools (other investment pools) N/A N/A N/A

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(III) Detailed Notes on All Funds (Continued)Investments Authorized by Debt Agreements

Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements,rather than the general provisions of the California Government Code or the City’s investment policies.The table below identifies the investment types that are authorized for investments held by bondtrustees. The table also identifies certain provisions of these debt agreements that address interest raterisk, and concentration of credit risk.

Maximum MaximumMaximum Percentage/Dollar Investment

Authorized Investment Type Maturity Of Portfolio In One IssuerU.S. Treasury Securities 5 years 25% N•AU.S. Agency Securties 5 years 100% N/AMoney Market Mutual Funds N/A 10% in any fund N/AGuaranteed Investment Contracts 5 years 25% N/A

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value ofaninvestment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fairvalue to changes in market interest rates. One of the ways that the City manages its exposure to interestrate risk is by purchasing a combination of shorter tenn and longer term investments and by timing cashflows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenlyover time as necessary to provide the cash flow and liquidity needed for operations.

The City has the intention to hold all investments to maturity. The average maturity of theCity’s pooled investments governed by the Investment Policies was approximately 36.9 monthsas of June 30, 2010.

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City’s Investments

Information about the sensitivity of the fair values of the City’s investments (excluding investmentsheld in trust for retiree medical plans) to market interest rate fluctuations is provided by the followingtable that shows the distribution of the City’s investments by maturin:

Investment Maturities (in years)

Total [esslha!1 I 1-2 2-3 3-4 4-5

LS.AgencvSecuri:ies S 37.885.061.3 S 5.131.250 S 4.303.760 S 5.098.450523.351.604

MediuinTermNoies 59.333.810 11,497.320 37.295.390 10.541.100

Money Market Funds 104,862,594 104.862.594

Gunnteed Investment Contracts 3.276.077 3.276.077

TotaLnvestnients S 205.357.545 S 113.269.921 $ 11.197.320 S 41.599.150 15.639.550 S 23.351.684

Trust Fund Investments

In accordance with Government Code Sections 53620-53622, the assets of the City of Berkeley retireemedical plan trusts may be invested in any form or type of investments deemed prudent by the CiCouncil. These plans are authorized by investment policies approved by the City Council to invest invarious types of investments, up to a maturity of 30 years. These OPEB and pension investments arereported at fair value, as follows:

Investment Maturities (in years)Total Lessthanl 1-2 2-3 3-4 4-5 5ormore

Medium Term Notes S 12.178.351 S 310.383 $ 653.718 $ 11.214250

Total wesunents $ 12.178.351 S 310.383 S -$ - $ - S 653,718 $ 11.214,250

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Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holderof the investment. This is measured by the assignment of a rating by a nationally recognized statisticalrating organization. Presented below is the minimum rating required by the California GovernmentCode, the City’s investment policies, or debt agreements and the actual rating as of year end for eachinvestment pe.

City’s Investments

MinimumLegal Amount Rating

Investment Rating Held at June 30. 2010U.S. Agency Securities AAA $ 37,885,064 AAAMedium Term Notes A 59,333,810 A’AAMoney Market Funds N/A 104,862,594 Not ratedGuaranteed Investment Contracts N/A 3,276,077 Not rated

Total Investments S 205.357.545

Trust Fund Investments

MinimumLegal Amount Rating

Investment Rating Held at June 30, 2010MediumTermNotes A $ 12.178,351 A

Total Investments S 12.178.351

• The issuer of commercial paper must have the highest rating from two nationally recognizedrating agencies, not one (as required by the State).

• Purchases of corporate notes shall be limited to securities rated “A” or higher by Moody’s and“A” or higher by Standard and Poor’s.

• Purchases of long-term (i.e., beyond five years) corporate bonds are limited to the RetireeMedical Plan Trust Fund and debt service reserve funds. Issuers must have a Moody’s creditrating of”A3” or higher and Standard and Poor’s rating of “A-”or higher.

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Concentration of Credit Risk

The investment policies of the City contain no limitations on the amount that can be invested in any oneissuer beyond that stipulated by the California Government Code. Investments in any one issuer (otherthan U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or moreof total City investments are as follows:

FNMA Federal Agency Securities $ 14,533,460Federal Home Loan Bank Federal Agency Securities 8,316,001Federal Home Loan Mortgage Corp. Federal Agency Securities 15,035,600

Custodial Credit Risk

For an investment, custodial credit risk is the risk that the City will not be able to recover the value ofits investments or collateral securities that are in the possession of an outside party if the counter partyfails. All of the City’s investments except money market mutual funds and guaranteed investmentcontracts are subject to custodial risk. However, the California Government Code and the City’sinvestment policies do not contain legal or policy requirements that would limit the exposure tocustodial risk for investments. The City’s investments, OPEB trust fund investments and pension fundinvestments are held by Wells Fargo, in the Trust and Custody Department, which is separate from theoperations of the bank. In addition. Wells Fargo maintains a Financial Institution Bond of at least $100million which provides protection from losses sustained by employee dishonesty. burglary, robbery,check forgery, securities forgery, computer crime, safe deposit, etc.

2. DepositsCustodial credit risk for deposits is the risk that, in the event of the failure of a depository financialinstitution, the City will not be able to recover its deposits. Included as deposits are bank deposits. Inaccordance with the California Government Code, demand deposits that aren’t insured must becollateralized with governmental securities at 110 percent of all such deposits or pledging of first deedmortgage notes equal to 150% of the City’s deposits. The collateral must be held by the bank in theCity’s name. The following chart presents bank deposit balances for the primary government, itscomponent units, and fiduciary funds as of June 30, 2010. Deposits are listed in terms of whether theyare exposed to custodial credit risk (i.e., the risk that in the event of a bank failure, the City’s depositsmay not be returned). Deposits are exposed to custodial credit risk if they are either, (1) uninsured anduncollateralized. (2) uninsured and collateralized with securities held by the pledging financialinstitution, or (3) uninsured and collateralized with securities held by the pledging financial institution’strust department or agent, but not in the name of the City.

77

(III) Detailed Notes on All Funds (Continued)Bank Deposit Balances

Deposits Exposed to Custodial Credit Risk

TotalPrimary Component Units Fiduciary Funds Bank

Description Government BRA Rent Board OPEB Funds Others BalancesUninsured andcollateralized withsecurities held bypledginginstitutions trustdepartment or

9,020,084 3,101,828 274,051 368,552 377,487 13,142,002

S 9.020.084 S 3,101,828 S 274,051 S 368.552 $ 377.487 S 13,142.002

of investments based on quoted market prices for the securities held, which are included as investmentincome in the General Fund, as follows:

Interest income S 4,876,838Net increase in the fair value of investments 557.040

Total investment income $ 5,433.878

agent, but not inCity’s nameTotal bankbalance - alldeposits

The City applies the provision of GASB 31, AccountingInvesinienis and for External Investment Fools, which requiresfair value. For the fiscal year ended June 30, 2010, the City had

and Financial Reporting for Certaingovernments to present investments atsubstantially increased in the fair value

78

(III) Detailed Notes on All Funds (Continued)B. Receivables

Receivables as of year-end for the City’s individual governmental major funds, non-majorgovernmental funds, and internal service fund, including the applicable allowance for uncollectibieaccounts, are as follows:

Special assessments I 59,620

OtherPast Capital Uovenimental

Improvement Funds

138,917

InternalService

Fund Total

S 920,952 5 9,811

298,537

Sub yen I ions is’ant 9,642,885 901,840 1.069.814 11,615.539

Notes 3,313,193 21,945,733 4.781.904 8,940.216 I 6.440,828 55.421.933

490,900 18,528

Gross receivables 47,994,233 31.626,507 231,423 5,924,623 158,917 9,441,579 19,232,148 9,821 114,599,253

Less: allowance for

Details of Notes Receivable as of June 30, 2010 are as follows:Capital Nonmajor Total

Receivables as of year-end for the City’s major enterprise funds, including the applicable allowance foruncollectible accounts, are as follows:

Permit

Refuse Marina Sanitary Clean Storm Service Off-Street ParkingCollection Operations

Accounts Receivable $1,249,568Less: allowance tor

mscollectiblcs

T ot al receivables

Sever ‘Water Center Parking Meter Total

Receivables:

.4 ccocn;s

:nlerest

Taxes

General Grant Libraty CDBO Tax

537.837,449 518,362 $

353780

4,998.911 71.803

55,268 S

235,ét I

0:0cm

501.303 399.791

400,764

S38 , 79 .8 52

2.490.485

5,471,478

509.428

cncetecthles 50,298.75) 0.031) 797.15:’ (2) (31,098.604)

Net total receivable 5 7,696.059 531.626.507 5231423 S5,92L592 S38.9i? 5 9.441.579 518.455,0:1 S 9,557 S 83,500649

General Grant CDBG Improvement Governmental NotesNotes Receivables Fund Fund Fund Fund Funds receivableDevelopment Loans: $ 2,912,886 S 20.990.136 $ 3,076,600 S 8.886.634 5 15,467.512 $ 51.333,7685. 8. Rental Rehabilitation 260000 488.875 748,875CALHOMESeniorHomeRepair 755.597 1.162.705 53.642 1,971.944RelsabiIitatinn-Fmerncy Repair 33.724 33,724Rehabilitation-Senior Disabled 20.000 20,0001st Time I-Iomebuyer honte lomm 200.000 200,000ADDI

-

OED-Citywtde Loics 53,026 627.349 680,375OED- W13 Building Acuisition Fund 87.280 87.280OFD-Mortgi Loan 77,000 77,000OED- Revolving Loan 268.967 268.967Grass notes receivable 3,313,192 21.945,732 4,781.904 8.940,276 16,410.828 55.421,932

Less: allowance for uncollectibles (795228) (795.228)

Total receivables, net S 5.313.192 S 21,945.732 $ 4.781.904 S 8.940.276 $ 15.645.601 $ 54.626.706

$353,326 $1,686,811 $154,791 $111,319 $173,153 £1,918 $3,730,887

(9.047) (186,632) (38,500) (51.4491 (120,394) (105,722)

S1.240.521 S 166.694 51,686.811 S 116.291 S 59,870 $ 53.059 S 1,918 $ 3.325,165

79


Development Loans-Governmental Activities

This loan program began in 991 and the City awards loans to developers every year. The first year ofmaturity starts in 2046, and most of the loans may be forgiven. Development loans normally are charged 6%simple interest per annum, with a range of 3% to 6%. The agreements require the borrower to pay annualinterest only, at the lesser of 50% of the property’s net cash flow or the amount of interest calculated at 6%.The loans may be forgiven after 55 years from the loan date, if the terms of the agreement are satisfied.

Senior Rehabilitation Loans-Governmental ActivitiesThis loan program began in 1980. The City is unable to predict the maturity dates of the loans because

most of them are only due upon sale of the property. 90% of these loans are deferred with no monthlypayments required. Interest rates range between 0% and 6%.

80


Capital Assets

Capital asset activity for the year ended June 30, 2010 was as follows:Primary Go’.ernment Becinnina Ending

Balance Additior.s Deletions Transfer BaanceCove rn mental activities:Capita! assets, not being depreciated:Land S 22.327,79? 5 - S - S - 5 22.527.797Construction in progsess 6.134,546 922.913 14828.048) (1,241,55]) 984.860Total capital assets, not being depreciated 28,462.343 922,913 14,828.048) (1.241.551) 23.312.657

Capital assets, being depreciated:

Buildings 126.129,319 1.284,957 127.414.276Improvements other than buildings 8,728.836 341.936 (26.809) 9,043,963Machinery and equipment 55.668.685 11.646.770 (996.810) 1.27:350 67,590.005infrastructure 159.693,600 4.821.498 164.515.098Total capital assets being depreciated 350.220.441 18.095.161 (996.810) 1.244.551 368,563.343

1.ess accumulated depreciation for

Buildings (54.973,051) (3.348,614) (58,321,665)improvements other than buildings (1.130,209) (293,409) (1,423.618)Machinery andequipnient (44.452,555) (3.334.295) 902,145 (46,884,705)Infrastructure (79,184,697) (4.734.998) (83,91 9.695)Total accumulated depreciation (179.740,512) (11.711,316) 902,145 (190.549.683)

Total capita;’ assets. beingdepreciated. net 170.479,929 6.383.845 (94.655) 1,244,551 178,013.660

Govern mental activities capita! assets, net 5l98,942.272 S 7,306,758 5(4.922,713) 5 5 201.325,317

Beainning EndingBalance Additions Deletions Transfer Balance

B usia ess-type activities:Capital assets, not being depreciated:

Land S 2.979,050 $ . S $ . $ 2,979.050Total capital assets, not beingdcprec:ated 2,979,050 . - - 2,979,050

Capital assets. be:ng depreciated:

I3uiidines 37.850,885 357,082 38.207.967Improvements other than buildings 6.655,265 3.590.196 0.245.461Machinery and equipment 8.875,968 96,837 (119,493) 8,853,312Infrastrticture 160,710,677 4,783,960 165,494,637Total capital assctsheingdepreciated 214.092,795 8.828,075 (119,493) . 222,801,377

Less accumulated depreciation for:

Buildings (11.478,229) (825,864) (12.304,0931Improvements other than buidins (1.171.821) (299.201) (1,471.022)Machinery and equipment (7.408,519) (396.980) 114.308 (7,691.191)Infrastructure (39.779,402) (2.727,271) 142,506.673)Total acctenulated&preciation (59.837.971) (4.249.316) 114.308 t63.972,979t

Total capital assets, being depreciated. net 154,254,824 4,578.759 (5,185) 158,828,398

Business-type activities capital assets, net $157,233,874 $ 4,578.759 S (5,185) S $ 161,807,448


C. CapIto! Assets.

Depreciation expense was charged to functionsiprograms of the primary government as follows:

Government ActivitiesGeneral government $ 974,366Public safety 1,123,404Highways and streets 4,845.675Health and human services 108,279Cukure and recreation 1672.309Community development/housing & economic development 982.774Amount reported in the internal service funds 1004.509

Total depreciation expense - governmental activities $ 11.71 1.316

Business-type ActivitiesRefuse services $ 119,247Marina operations 319,705Sanitary seer 2.215.752Building purchases and management 588,258Clean storm water 561,607Permit service center 10,757Parking-related 433,991

Total depreciation expense - business-type activities $ 4,249,316

Discretely Presented Component Units

Capital asset activity for the Rent Stabilization Board for the fiscal year ended June 30, 2010 was asfollows:

Balance. Balance.July 1. 2009 Increase Decrease June 30, 2010

Capital assets, being depreciated:Machinery and Equipment S 329,540 $ - $ (12,891) S 316,649

Less accumulated depreciation for:Machinery and Equipment (272.809) (5.890) 12.891 (265.808)

Rent StabHization Beard. capitai assets. net S 56.731 S (5.890) S - S 50.841

82

(ITT) Detailed Notes on All Funds (Continued)

Capital asset activity for the Berkeley Housing Authority for the fiscal year ended June 30% 2010was as follows:

Balance. Balance,July 1,20094 Increase Decreases June 30,20104

Capital assets, not being depreciated:Land S 2.579,621 S -

- S 2.579,621Construction in progress 11.787 (41,787) -

Total capital assets, not being depreciated 2.621.408- (41,787) 2,579.621

Capital assets, being depreciated:Buildings and improvements 6.327.669 369,862 6,697,531Machinen and equipment 308.462 7.884 316.346lmprovennts other than building improvements 57.737

_____________

57.737

Total capital assets, being depreciated 6,693,868 377.746 7,071,614

Less accumulated depreciation forBuildings and improvements (3,725,152) (287,447) (4,012,599)Machinery and equipment (263.628) (12.843) (276.471)Improvements other than building improvements (57.737) (57.737)

Total accumulated depreciation (4,046,518) (300,290) (4,346.808)

Total capital assets, being depreciated, net 2.647.350 77.456 2.724.806

Housing Authority activities, capital assets, net $ 5.268.758 S 77.456 S (41.787) S 5.304,427

83


The Composition of Interfund Balances as of June 30, 2010. is as follows:

flue to Due fioni

Due Due Adnance Adance Component Comp”nentFund To From To From Units UnitsPritnarv Go?rnment:Generalfund - 9.314.083 - - - 201829Grants Fund 11.472.199CDBG Fund 645,959 72.866Capital Improvement Fund 3.551.799Nonmajor Governmental Funds 64 1.403 72.866Enterprise Funds:

Bui!ding?urchases 106.320& Manament Fund

TOTAL S 32,865,88! S 12,865,881 S 72,866 S 72,866 S - S 201,829

Due to Due FromPrimary Primary

Government GovernmentComponent Units:Berkeley Housing Authority S 201.829 S

(i) The “Due to Other Funds” arc loans from the General Fund to cover cash shortages in other funds that result from the pooled casharrangement. The loans are shon-tenn in nature and generally result from the delay in anl reimbursements. The amounts are repaid tothe General Fund as tlae gain reimbursements are made.

(ii) The advances to other hinds are lona-tenn in nature and consisted of Community Development Block Grant loans to BerkeleyRedevelopment Agency. which the Berkeley Redevelopmcnt Agency uses to make lo-uicome property loans to City residents Asthe loans are repaid or properties sold, the proceeds are used to repay the Community Development B:ock Gran: Fnnd.

84


Interfund Transfers:

Nonmajor Governmental Funds 2.604.774 2.551.897 1.43 6,5 2 7 27.432 6.620.630Enterprise Funds:

Off Siree ParknE

Parking Mete: 600000

Total Transfer-In

25.085

7.920 7.920

8.650 608.650

The $9,117,440 General Fund transfers out include (1) subsidies of $490,186 to Paramedic Fund;(2) $3,300,000 to pay for capital improvement projects; (3) transfer of $579,760 to pay debt servicefor the refunding pension bonds; (4) 51,778,476 to the Public Liability Fund and $500,000 to theCatastrophic Loss Fund; and (5) $1,953,018 in matching funds for public health programs; and (6)$516,000 subsidy to State Lighting Assessment District. Other significant transfers out from otherfunds included (1) Realignment Fund transfer to General Fund for public health programs, requiredby the State ($2,604,774); (2) Parking Meter Fund transfer to General Fund ($600,000); and (3)Transfers from enterprise and internal service funds to help fund the operations of the CatastrophicLoss Fund ($842,799).

The General Fund received transfers in of $2,604,024 from the Health State Realignment Fund,5600.000 from the Parking Meter Fund, and $750 from the Grant Fund.

Fund Fund

Capital N’onnaior Cean Storm wa:er In:ernal TotalGeneral Gram Iranrove. Gcvernni.etal b:erDrise Service Transfer-

General Fund

Park Ta fund

Capital Improvement Fund

CDBG

Fund

$ - $ - $3,300,000

Funds Fund

$ 3.538.964 $2.883

509.131

Funds

- $ 2,278.476

12.130

$

Out

9.117,440

J3fl75 552,207

Refuse Cdllecticn II 870 110.870Marina Operats 8.157 16,890 25.017Sanitaiy Sewer 102.522 102,522Clean Storm Water 25.085

S 3,204.774 $ 2.551.897 $ 3.300.000 $ 5.495.592 $ 43,076 $ 2,621.275 $ 17,216,614

85

(III) Detailed Notes on All Funds (Continued)D. Leases

Operating Leases

The government leases building and office facilities and other equipment under non-cancelableoperating leases. Total costs for such leases were $1,555,429 for the year ended June 30, 2010. Thefuture rninimLlln lease payments for these leases are as follows:

Year Ending June30 Amount2011 $1,471,4642012 1,467,2452013 273,899Total $3.2 12,608

Capital Leases

The City has entered into leases for financing the acquisition of fire equipment. These leaseagreements quali as capital leases for accounting purposes and therefore, have been recorded atthe present value of their future minimum lease payments as of the inception date. The assetsacquired through capital leases include four engines and two trucks which are allocated among fourfire stations. The Acquisition amount for the equipment described in this schedule to be paid to thevendor is $4,439,584 (excluding sales tax of S386,276 to be payable to the State Board ofEqualization) with the contract rate is 4.38%. The capital leases are as follows:

vemmentalAct iv ties

Assets:Machineiy and Equipment $4,825,860Less: Accumulated depreciation (382.04)

Total $4,443,813

The future minimum lease obligations and the net present value of these minimum lease payments as ofJune 30, 2010. were as follows:

Fiscal Year Interest Principal Total2011 $174,497 $378,597 $553,0942012 157,733 395,361 553.0942013 140.226 412.868 553.0942014 121,945 431,149 553,0942015 102,853 450,241 553,094

2016-2019 203,024 2,009,352 2,212,376Totals 900,277 4,077,568 4,977,846

86

(III) Detailed Notes on All Funds (Continued)E. Bonds, Capita! Leases, NOteS, Loans and Oilier Long-Term Obligations

The following is a summary of Long-term obligations of the City as of June 30, 2010:

Governmental ActivitiesFinal Remaining

Maturity Interest PrincipalType of Obligation and Purpose: FY Rates AmountGovernmental Activities Long-Term ObligntionsGeneral Obligation Bonds:

GO 2007 Refunding hondsSeries A. Fire Safezy (Measure G) 2027 3.90%-5.00% S 3.915000GO 2002 Refunding bonds. Fire Safety (Measure G) 2020 1 .35%-4.50% I 1.730.000GO 2007 Refunding bonds. Series B (Measure 5): 2029 3.50%-4.4Oto 35,855.000

Library. Martin Luther King, Jr.Civic Center and Downtown

GO bonds 2008 Animal shelter 2037 3.50%-4.30% 7,200.00009 Measure FF library 2040 l.25%-5.30% 10.000.000

General obligation bonds 68.700.000

Revenue Bonds:Berkeley Repertory Theatre 2029 4.10%-5.70% 7.460.000Sale lease financing 2018 3.8C%-5.25% 2,755.000West Berkeley improvement Fund Bonds - BRA 2015 2.80%-4.75% 4.210.000WBIP Subordinated Tax Allocation Bonds - BRA 2012 4.30%-5.40% 1,000.000

Revenue bonds 15.125.000

2010 COP -Animal Shelter, including premium of $402855 2011 3.00%-5.75% 6.152.855Capital Lease Pavah!c:

Fire Engines and Trucks 2019 4.38% 4.077.568

Capital lease payable 4.077.568

Loans Payabe:CHFA 2012 3.00% 500.000FIUD 108- Adeline Street 2023 4.25% 344,000HUD 108- UNA 2025 4.25% 603.860HUD 108-David Brower 2016 3.646%-6320% 4.000.000FIUD 108 B-02-MC-06-008- BRA 2014 3.46%-4.83% 667,000Ed Roberts Campus 2029 Variable 6,000.000Retiree Medical 2026 8.00% 517.000

Loans payable 12.631.860Other Long-Term Obligations

Accrued Vacation and Sick Leave 14.890,470Accrued Workers’ Compensation Claims and Judgments 23,390,000Accrued Public Liability Claims and Judgments 1.415,664Net Pension Obligation-Police Retirement Income Benefit 7,336,257Net OPEB Obligation-MRHP 918.389

Other payahles 47.950.780

Governmental Activites Total Long-Term Obligations S 154.938.064

87


Bus inc s s-Type Activities Long-Term ObligationsFinal Remaining

Maturity Interest PrincipalType of Obligation and Purnose Date Rates AntuntBusiness-Type Acthities Long-Term ObligationsRevenue Bonds - Cerage Improvements 2022 3.25%-4.25% $ 4,235,000Certificates of Participation 2033 2.50%-5.00% 26,080,000Notes Payable - Harbor Construction 4 2016 4. 50%-7.90% 947.027Notes Payable - Harbor Construction S until paid 4.50% 6.009.659Compensated absences 2,548,155Net OPEB Obligation-MRHP 305,986Business-Type Activities, total Long-Term Obligations 540.125.828

Business-type Activities

Revenue Bonds

Garage improvements: On July 19, 2005, BJPFA issued $5,620,000 in lease revenue bonds, onbehalf of the City, to refund, at a lower interest rate. the outstanding bonds that were issued tofinance improvements to the Center Street and Sather Gate garages, and to finance certain newimprovements to the garages. Jnterest rates ranging from 3.25%-4.25% are payable semi-annuallyon March 1st. and September 1st. Principal is due annually on October 1st. The bonds matureMarch 1, 2022 and are collateralized solely by the City’s pledge of the net revenues of the City’sOff Street Parking Fund.

Year Ending

June 30 Principal Interest

2011 $ 285,000 $ 166,2432012 300,000 156,6242013 305,000 146,1242014 320,000 135,1432015 330,000 123,144

2016-2020 1,850,000 413,0622021-2025 845,000 54,1882026-2030

$ 4,235,000 $ 1,194,528

88


Certificates of Participation

On April 1,2003, Berkeley Joint Powers Financing Authority issued $27,950,000 in Certificates ofParticipation on behalf of the City to purchase and renovate the building at 1947 Center Street.Annual principal payments on the debt will range from $265,000 in FY 2007 to $1,795,000 in FY2033. Interest rates wiN range from 2.5% in FY 2005 to 5.00% in FY 2033. The Certificates ofParticipation will be repaid from the income derived from leasing floors in the acquired buildingand the leasing costs saved by housing some City departments’ staff in the building. Certificates ofParticipation debt service requirements to maturity are provided below:

Year Ending


2011 $ 695,000 $ 1,189,9462012 720,000 1,167,0112013 745,000 1,141,8112014 770,000 1,114,805

2015 800,000 1,085,5452016-2020 4,520,000 4,910,8102021-2025 5,615,000 3,820,6322026-2030 7,080,000 2,358,7132031-2035 5,135,000 521,7502036-2040

2041-2045

$ 26,080,000 $ 17,311,023

Notes Payable

• Harbor Construction 4

For the period October 30, 1986 to March 31, 1999, the City of Berkeley borrow d a totalof $2 million with the California State Department of Boating and Waterways for thedevelopment of the Berkeley Marina Rehabilitation project. The loan is payable on AugustI of each year at an interest rate of4.5%. This loan vill mature on August 1,2016.

89

(III) Detailed Notes on All Funds (Continued)Year Ending

June 30

2011.

2012

2013

2014

2015

2016

2017

Total

Principal Interest

$ 118,097 $ 42,616

123,411 37,302

128,965 31,748

134,768 25,945

140,833 25,845

147,170 19,880

153,786 6,920

$ 947,027 $ 190,258

• Harbor Construction S

The City of Berkeley borrowed a total of 56.009,659 of the $9.0 million maximum loanamount from the California State Department of Boating and Waterways. The purpose ofthis loan is financing for the demolition and replacement of wooden docks and wood pilesinto a new marina berthing system and concrete piles. New utilities, including electricalpower and water are to be installed. The new docks and gangways were to be designed andbuilt for barrier-free access. In addition, existing restroom buildings were to be replaced.The loan is payable on August I of each year with an interest of 4.50%. The amortizationschedule will not be available until the final draw down reaches $9.0 million. Currently, theCalifornia State Department of Boating and Waterways provides an annual statement of theamount of interest the City is required to pay.

Governmental-type Activities

General Obligation Bonds

The City issues general obligation bonds to provide funds for the acquisition and construction ofmajor capital facilities. General obligation bonds have been issued for governmental activities. Theoriginal amount of general obligation bonds issued in prior years was $81,500,000. Generalobligation bonds are direct obligations and pledge the full faith and credit of the government. Thesebonds generally are issued as 25-30 year serial bonds with amounts of principal maturing each year.General obligation bonds currently outstanding are as follows:

90

(III) Detailed Notes on All Funds (Continued)PurposeGovernmentalGovernmental

Interest Rates2.00%-7.5%4.01%-5.6%

3.50%-4.30%1.25%-S .30%

Amount$ 15,645,000

35.855.000

7,200,00010.000,000

5 68.700.000

Annual debt service requirements to maturity for general obligations bonds are as follows:

Years Ending June 302011

2012

201320142015

20 16-2020202 1-20252026-203 02031-20352036-2040

Principal

$ 2,695,0002,675,0002,855,0003,015,0003,165,000

17,065,00015,040,00013,930,0004,030,0004,230,000

Interest

$ 2,928,6972,822,1532,713,8952,586,1332.448,846

10,156,7086,781,6223.423,0371,574,556

495,067

Total S 68,700,000 S 35,930,714

On November 1, 2002, the City issued 5 17,865,000 in General Obligation Refunding bonds torefund its 1996 Measure G (Series A) and 1995 Measure G (Series B) General Obligation bonds.The interest rates on the Refunding bonds range between I .35%-4.50% and the final maturity isSeptember 1,2020.

The 2002 General Obligation bonds were issued to finance facilities to increase the level of fireprotection in the City, including the construction of a jointly funded. multi-jurisdictional firestation, the seismic retrofitting of City buildings which house public safety personnel andequipment. the replacement of water mains and the seismic retrofitting of other City buildings.

Advance Refunding of General Obligation Bonds:

The 2007 Series A Bonds were issued by the City to (I) refund its City of Berkeley 1997 GeneralObligation Bonds (Election of 1992, Series C), dated July 1, 1997, in the principal amount ofSl0,500.000, and (2) and to pay for costs of issuance of the Series A Bonds, On June 07, 2007, theCity of Berkeley issued $4,340,000 of General Obligation Bonds with interest rates ranging from3.9% to 5.0% to advance refund prior General Obligation Bonds with interest rates ranging from4.800% to 5.625% and a par value of $8,975,000.

Activities - Measure G (2002 & 2007 Series A)Activities - Measure 5 (2007 Series B)

Governmental Activities - Animal Shelter 2008Governmental Activities - Neighborhood Branch Library 2009

91

(III) Detailed Notes on All Funds (Continued)The net proceeds from the issuance of the Refunding General Obligation 2007 Series A Bonds wereused to purchase U.S. government securities and those securities were deposited in an irrevocabletrust with an escrow agent to provide debt service payments untiL the bonds were called on July 9.2007. The advance refunding met the requirements of an in-substance defeasance and the termbonds were removed from the City’s government-wide financial statements.

The 2007 Series B Bonds were issued by the City to (I) refund its City of Berkeley 1997 GeneralObligation Bonds (Election of 1996, Series A), dated June 1, 1997, in the principal amount of$10,000,000: (2) its City of Berkeley 1998 General Obligation Bonds (Election of 1996, Series B),dated December 1, 1998. in the principal amount of 525.000,000; (3) its City of Berkeley ]999General Obligation Bonds (Election of 1996, Series C), dated August 1. 1999, in the principalamount ofSl4,000.000. and, with the l996A Bonds and the 1996B Bonds, the “1996 Bonds”, and(4) and to pay for costs of issuance of Bonds. The 1996 Bonds were issued to acquire property,expand and retrofit the Main Library, internally retrofit (as the most cost-effective means to achieveearthquake safety) and improve the Martin Luther King, Jr. Civic Center building, and revitalize thedowntown/Civic Center area. On June 7,2007, the City of Berkeley issued 541.245.000 of GeneralObligation Bonds with interest rates ranging from 3.5% to 4.4% to advance refund prior GeneralObligation Bonds with an interest rate of5.375% and a par value of 542.425.000.

The net proceeds from the issuance of the Genera] Obligation Bonds were used to purchase U.S.government securities and those securities were deposited in an inevocable trust with an escrowagent to provide debt service payments until the bonds were called on July 9, 2007 and September9, 2007. The advance refunding met the requirements of an in-substance defeasance and the termbonds were removed from the City’s government—wide financial statements.

2008 Animal Shelter Bonds

On January 9, 2008, the City of Berkeley issued $7,200,000 of General Obligation Bonds withinterest rates ranging from 3.50% to 4.30%. Interest is payable semi-annually on March 1 andSeptember 1, and principal is payable annually on September 1, with the 1 principal payment onSeptember 1,2010. The bonds were issued to finance a new Animal Shelter to replace the existingshelter in the City of Berkeley, and to pay for costs of issuing the bonds. The General Obligationbonds mature on September 1, 2037, but are callable on or after September 1, 2017.

2009 Neighborhood Branch Library Improvement Project Bonds

On April 14, 2009, the City of Berkeley issued the first series of bonds to be issued from anaggregate authorized amount of 526.000,000 of General Obligation Bonds duly approved by atleast two-thirds of the voters voting on Measure FF at an election held on November 4. 2008. toprovide funds to finance renovations, construction, seismic and access improvements, andexpansion of program areas at four neighborhood branch libraries in the City. The interest rates onthe bonds range from 1.25% to 5.30%. Interest is payable semi-annually on March 1 and September1, and principal is payable annually on September 1. The General Obligation bonds mature onSeptember 1, 2039, but are callable on or afier September 1. 2019.

92

(III) Detailed Notes on All Funds (Continued)Revenue Bonds

The government also issues bonds where the government pledges income derived fitm the acquiredor constructed assets or tax increment or the General Fund to pay debt service.

Revenue bond debt service requirements to maturity are as follows:

Year Ending

June30 Principal Interest

2011

2012

2013

2014

2015

2016-2020

2021-2025

2026-2030

S $

Tax Allocation Bonds

The Berkeley Redevelopment Agency (BRA) had two tax allocation bond issues outstanding as ofJune 30, 2010, as follows:

• West Berkeley Redevelopment Project Refunding Boncic of2005: On October 6. 2005, BRAissued S7,880000 in bonds to defease and redeem the outstanding 1996 West BerkeleyDevelopment Project bonds and the 1997 Subordinated Tax Allocation Bonds. Therefunding bonds will mature on June 1, 2015, and inlerest is payable semi-annually onDecember 1st and June 1st. Interest rates range from2.8%-4.7S% and are payable semiannually on June 1st. and December 1st. Principal is payable annually on June 1st. Thebonds are secured by tax increment revenues.

• West Berkeley Redevelopment Project Subordinated TcLvable Tax Allocation Bonds of1997: On December 1. 1997, BRA issued SI .000.000 of subordinated taxable tax allocationbonds with variable interest rates to finance the cost of implementing the RedevelopmentPlan. The bonds are term bonds and will mature on December 15, 2012. The bonds aresecured by tax increment revenues.

Lease Revenue Bonds

Theatre facility and park acquisition: On October 1. 1999, BJPFA issued 59,125.000 in leaserevenue bonds, on behalf of the City. to acquire a new theatre facility and a 6.4 acre park and parkfacilities. Interest rates ranging from 4.1%-5.7% are payable semi-annually on April 1st. andOctober I st. Principal is due annually on October 1st.

$ 1,480,000

2,455,000

1,460,000

1,470,000

1,490,000

2,370,000

2,030,000

2,670,000

15,425,000

$ 707,780

647,078

585,931

522,930

458,043

1,633,280

1,060, 675

397,575

6,013,292

93

(III) Detailed Notes on All Funds (Continued)Refunding Pension Bonds

The City has an obligation pursuant to an ordinance to make payments, on behalf of the SafetyMembers Pension Board, to certain retired City police and fire personnel. On May 1. 1998, the Cityissued debenture bonds in the amount of $12,415,000 to refund certificates of participation, whichwere issued to purchase a funding and risk agreement that provides payments to the SafetyMembers Pension fund to assist in funding the City’s pension obligation. Interest rates range from3.8%-5.25% and are payable semi-annually on June 1st. and December 1st. Principal is payableannually on June 1st.

Certificates of Participation (COP)

On May 19, 2010, the Berkeley Joint Powers Financing Authority issued $5,750,000 of Certificatesof Participation to provide funds to the City to finance a portion of the acquisition and constructionof an animal shelter. Annual principal payments on the debt will range from $100,000 in FY 2013to $385,000 in FY 2041. Interest rates will range from 3.0% in FY 2013 to 5.75% in FY 2041. TheCertificates of Participation will be repaid from a transfer frnm the Capital Improvement Fund. Theface value of the Certificates of Participation was deposited into two separate funds: 54.896.625was recorded in the Capital Projects —2010 COP Animal Shelter Fund for project construction; and$853,375 was recorded in the Debt Service Funds —2010 Animal Shelter for capitalized interest.

COP debt service requirements to maturity are as follows:

- $ 208,777

314,475312.975

309,725

306,269

1,463,188

1,308,063

1,075.825

766,044356,356

11,069

6,432,766

Year Ending


$2011

20122013

2014

2015

2016-2020

2021-2025

2026-2030

2031-20352036-20402041-2045

100.000

100,000

105,000

555,000

705,000

930,000

1,235,0001.635.000

385,000

5,750.000-- $

94

(III) Detailed Notes on All Funds (Continued)Loans Payable

• CHFA

On January 2002, the City of Berkeley received $500,000 from California Housing FinanceAgency. Loan funds shall be used exclusively to provide for a revolving source of funds fromwhich to make loans to nonprofit developers for the purpose of financing the acquisition ofsites for development, and existing single-family and multifamily properties HUD 108 —

Adeline Street. There is no amortization table available as it is simple interest at 3% perannum. The City has to pay back in fiscal year 2012.

• HUD 108— Adeline Street

In August 7, 2003, the City of Berkeley borrowed $500,000 from the U.S.Housing and UrbanDevelopment (HUD) Section 108 Loan Guarantee Program to bridge a ftinding gap thatresulted from a 30% increase in construction costs of 3222 Adeline Street Apartments andanticipated increases for monthly utility costs. The apartments consist of a 19-unit mixed-useproject for persons with disabilities and their families. Though the City as the grantee isrequired to make the loan payments, the funds for the repayment are the obligation andresponsibility of the project developer as with any conventional loan a developer may secure.The 108 Loan is secured by a first or second lien on the property and by a pledge of an incomestream, such as monthly rents. The interest rate is 4.25%. and interest is payable semiannuallyon February I and August 1 of each year. This loan will mature on August 1,2022.

HUD 108- Adeline StreetYear Ending

June30 Principal interest

2011 S 26.000 $ 17,00]20I2 26,000 15,8842013 26.000 14,70]2014 26,000 13,467

2015 26,000 12,198

2016-2020 130,000 40.8862021-2023 84,000 7,411

Total S 344,000 S 121.547

• HUD 108- University Avenue Neighborhood Apartments (UNA)

As of June 30, 2010, the City of Berkeley made a total drawdown of $603,860 of the$705,000 loan commitment from the U.S. Housing and Urban Development (HUD) Section108 Loan Guarantee Program. The purpose of this loan is to help finance the costsassociated with the development of certain real property located at 179 and 725University Avenue. Berkeley, California.

95

(III) Detailed Notes on All Funds (Continued)The interest rate is variable until the date HUD converts it into a permanent loan or theredemption date, whichever is earlier. These dates have not been determined. During theinterim period, interest will be billed by HUD on the first day of February, May, Augustand November. A schedule of principal and interest will be provided by HUD after theconversion of the loan.

• HUD 108- David Brower

In December, 2007, the City of Berkeley borrowed $4,000,000 from the U.S. Housing andUrban Development (HUD) Section 108 Loan Guarantee Program. The loan is for thedevelopment of the Oxford Plaza and David Brower Center which is expected to createjobs for low and moderate income persons. The interest rates ranged from 3.6460% to6.320%. Interest is payable quarterly. This loan will mature on August 1,2015.

This loan is cunently interest only until the date HUD converts it into a permanent loan orthe redemption date, whichever is earlier. These dates have not been determined. Duringthe interim period, interest will be billed by HUD on the first day of February. May, Augustand November. A schedule of principal and interest will be provided by BUD after theconversion of the loan.

• HUD 108 B-02-MC-06-008-BHA

On August 7,2003, the City of Berkeley received a loan from the U.S. Housing and UrbanDevelopment (f-lCD) Section 108 Loan Guarantee Program in the amount of S1.400.000.The same loan process was loaned to Berkeley Housing Authority for funding therehabilitation of the 75 units in the Public Housing Operating Fund Program. The interestrates ranged from 3.46% to 4.80%. The interest payment is due semiannually as ofFebruary 1 and August I of each year, commencing on February 1. 2004. This loan willmature on August 1, 2014.

Year Ending

June 30

_______________ _______________

2011

2012

2013

2014

Total

HUD 108- B02-MC-06-008-BHA

Principal Interest

S 151.000 S 27.136161,000 20,428

172,000 12,847

183,000 4,419

S 667.000 S 64,830

96

(III) Detailed Notes on All Funds (Continued)• HUD 108- Ed Roberts Campus

In August 2009, the City of Berkeley accepted a S6,000,000 loan from the U.S. Departmentof Housing and Urban Development (HUD) Section 108 Loan Guarantee Program andexecute a loan agreement with The Ed Roberts Campus, Inc. to construct a public facilitythat will operate primarily as a one-stop service center for people with disabilities. Theinterest rate is variable and is payable quarterly. The loan will mature on August 15. 2028.

This loan is currently interest only until the date HUD converts it into a permanent loan orthe redemption date, whichever is earlier. These dates have not been determined. Duringthe interim period, interest will be billed by HUD on the first day of February, May, Augustand November. A schedule of principal and interest will be provided by HUD after theconversion of the loan.

• Retiree Medical

On April 4, 2003, Berkeley Redevelopment Agency received S600,000 in loan proceedsfrom the City of Berkeley’s Retiree Medical Benefit Trust Fund for the Savo Island project.The loan interest rate is 8M°/b. The purpose of the loan is to finance the rehabilitation ofcertain developments benefiting the Savo island Project Area. While the original purposewas to rehabilitate the Savo Island Housing Cooperative in the Savo Island Project Area,that project has not proceeded to date, though currently in development of a fundingproposal to HUD. Therefore funds were used in other South and West Berkeley affordablehousing projects (Ashby Lofts at 9th and University serving families and Margaret BrelandCourt Senior Housing on San Pablo Avenue). These projects have been constructed andoccupied. The 2005-2010 Savo Implementation Plan allocated use of the funds to “expandand improve the City’s supply of affordable housing.” The loan payments are on March 1and September 1 of each year, and it will be paid off on September 1,2025. Repayments ofthe loan will be secured by a pledge of tax increment revenue.

Retiree MedicalYear Ending

June30 Principal Interest

2011 $ 17,000 $ 40,6802Q12 18,000 39,2802013 20,000 37,7602014 22,000 36,080

2015 23,000 34,2802016-2020 147,000 139.440

2021-2025 216,000 67,360

2026 54,000 2,160

Total S 517,000 S 397,040

97

(III) Detailed Notes on All Funds (Continned)

Changes in Long-Term Liabilities

Long-term liability activity for the year ended June 30, 2010, was as follows:

Go verninental ActivitiesBonds payable:

General obligation bondsRevenue bonds

________________ ______________ _______________

—

Total bonds payable 84,125,000 4,175,000

Capital leases 4,077.569Certificates of Participation 5,750,000Premium on COP 402,855Notes and loans payable 12,631,860Claims and judgments 24,805.664Compensated absences 14,890,472Net OPEB obligation 918,389Net pension obligation

_________________ _______________ ________________

7.336.257Governmental Activities

Long-term Liabilities

________________ ______________ _______________

Business-type ActivitiesCertificates of participationRevenue bondsNotes payableCompensated absencesNet OPEB obligations

_________________ _______________ ________________ ________________________________

Business-type ActivitiesLong-term Liabilities

_________________ _______________ ________________ ________________________________

Debt Compliance

There are a number of limitations and restrictions contained in the bonds’ indentures. The Citybelieves it is in compliance with all significant limitations and restrictions, except as follows:

The City currently has outstanding parking revenue bonds which require a net revenue pledge. Thebond covenants require the City to maintain 125% of debt service from net revenues. At the timeof the financing, the city anticipated taking one of the three parking facilities off line fordevelopment of a new parking structure for a period of time which would reduce the amount of netrevenues and therefore prevent the covenant from being met. The City maintains significant fundbalances which are available for debt service and can be used in the event net revenues do not equalthe debt service payments. As of June 30. 2010, the City was able to pay its debt service from netrevenues without the need to draw on fund balances. The City will be taking actions in fiscal year2010/Il to either increase parking rates (therefore increasing the net revenue) or decreasing parkingrevenue bonds with the application of some of the significant hind balances.

BeginningBalance Additions Reductions

EndingBalance

Due WithinOne Yr

S 2.695.0001,480.000

S 68,700,00015,425,000

S 71.430.000 $ (2.730.000)16,910,000 . (1.485.000)

88,340,000 - (4,215,000)

4,439,583 (362,015)5.750.000

403.977 (1.122)6,815,860 6.000.000 (184.000)

22,116.344 7,816,35] (5,127,031)14.336,077 9,644,688 (9,090.293)

762,807 1,676,463 (1,520,881)5.487,194 3,030,566 (1,181.503)

S 142.297.865 S 34,322.045 $ (21,681.845)

S 26,755,000 S - S (675,000)4,510,000 (275,000)4,709,898 2.359.801 (113.01])2,436,740 1,823,849 (1,712.453)

257.491 570.807 (522.312)

5 38,669,129 $ 4,754,457 $ (3,297.756)

378,597

194,00010,362,6641,129,695

S 154.938.064 S 16,239.956

S 26,080,000 $ 695,0004,235.000 285,0006.956.688 1 I 8,0972.548.154 407.914

3 05 .9 86

5 40,125,828 $ 1,506,011

98

(III) Detailed Notes on All Funds (Continued)Arbitrage

The Tax Reform Act of 1986 instituted arbitrage restrictions related to the issuance of tax-exemptbonds issued after August 31. 1986. Those regulations relate to the investment of tax-exempt bondproceeds at an interest yield greater than the interest yield paid to bondholders. An independentfirm performs arbitrage rebate calculations to determine the applicability of federal arbitrageregulations. There were no bond issues with a positive arbitrage rebate liability during the fiscalyear.

Compensated Absences

It is the policy of the City to record the cost of vested vacation and sick leave as earned. Earnedvacation and sick leave that is taken during the year is payable from the fund(s) the employee’ssalary or wage is chargeable to. The vested compensated absences balances for employees whoretire or otherwise leave the City are paid from the Sick Leave and Vacation Payouts InternalService Fund at the time of departure.

Internal Service Funds

These funds predominantly serve the governmental funds. Accordingly, long-term liabilities forthem are incuded as part of the totals above for governnientai activities. At June 30, 2010,$570,184 in compensated absences, $24,805,664 in claims and judgments payables, and $64,792 inNet OPEB Obligation are included in the above amounts. The liabilities for workers’ compensationare paid from the Workers’ Compensation Internal Service Fund and the liabilities for publicliability claims are paid from the Public Liability Internal Service Fund.

Special Assessment Debt Without City Commitment

On June 1, 2002, the City issued $9,750,000 in Community Facilities District No. I bonds (fordisaster fire protection). pursuant to the Mello-Roos Community Facilities Act of 1982 (beingsection 5331 1 et seq. of the California Government Code and City Council Resolution #66,615-N.S). The bends were issued to finance a mobile disaster fire protection system for the delivery ofauxiliary fire fighting water, including transportation pumping units, ultra large diameter hose,transport and support vehicles, portable hydrants, accessory fittings, hose bridges, and a storage siteor sites, together with incidental expenses related thereto. These bonds will be repaid from amountslevied against property owners benefited by the disaster fire protection system. The amounts leviedagainst property owners to repay the bonds are accounted for in an agency fund. The faith andcredit or taxing power of the City is not pledged to the pa ment of the bonds. Accordingly, the debthas not been included in the basic financial statements. The bonds are due in annual installmentsranging from $270,000 to S760.000, and have an interest rate ranging between 3.0% and 4.75%.The City is not obligated in any way to repay the debt in the event of a default. The total principaloutstanding as of June 30, 2010 was 56.990.000.

Conduit Bond Issues

On June 1, 1992, the City issued refunding revenue bonds on behalf of Alta Bates Medical Centerin the amount of 593.200.000. This issue was refinanced in August 1997 for $88,660,000. Theamount outstanding at June 30, 2010 totaled 559,015,000 and is due as follows:

99

(III) Detailed Notes on All Funds (Continued)August 30, 2009 to August 15, 2010 $ 3,285,000August 20, 2010 to August30, 2023 55,730,000

S 59.015.000

In addition, on June 1, 1993, the City issued variable rate revenue bonds on behalf of the BerkeleyYoung Men’s Christian Association in the amount of $10,755,000. The bonds were re-offered onJune 1, 1998. The amount outstanding at June 30, 2008 totaled 58.51 5,000 but it was fully paid inJuly 2008 by a re-offering of bonds in July 2008. The amount outstanding at June 30, 2010 totaled$15,865,000. These bonds are not included in the accompanying financial statements as neither thefaith and credit nor the taxing power of the City of Berkeley have been pledged to the payment ofthese obligations.

Tax Revenue Anticipation Notes Payable

The City issued $25,000,000 of tax revenue anticipation notes with a coupon rate of 1.0% and ayield of 0.42% in October 2009, in order to alleviate the strain on working capital prior to thereceipt of property tax revenues in December. The notes are recorded in the General Fund, Interestand principal on these notes are payable on October 28, 2010 by the General Fund (In FY2OII, theissue date was moved up to July 1,2010 and increased to $50 million. The notes were issued with acoupon rate of 2.0% and yield of .40%). The City has maintained a MIG-1 rating on its short-termissues. A schedule of changes in the Tax Revenue Anticipation Note follows:

July 1, 2009 IncreasesS 25.000.000 S 25,000,000

DecreasesS 25,000.000

June 30, 2010S 25.000.000

Pledged Revenue

• City Pledge to Berke’ey Joint Powers Financing Authority: On July 19, 2005, the Cityissued $5,620,000 of bonds called the Revenue Bonds, 2005 Series A (City of BerkeleyParking System Financing Project), which were collateralized solely by the City’s pledgeof the net revenues of the City’s Off Street Parking Fund. The bonds were issued to refund,at a lower interest rate, the outstanding bonds that were issued to finance improvements tothe Center Street and Sather Gate garages, and to finance certain new improvements to thegarages. The City payments pledged as of June 30, 2010 total $6,786,909, and the pledgedCity payments are scheduled from fiscal years 2011 to 2022. The City has pledged andassigned to Berkeley Joint Powers Financing Authority approximately 100 percent of theCity’s rights to the net revenues of the Off Street Parking Fund. For FY 2010, the pledgedrevenues totaled $7,439,872 compared with debt service of $450,180.

• City Pledge to The Bank of New York Trust Company: On October 5, 2005, theBerkeley Redevelopment Agency (BRA) issued 57.880,000 of bonds called the WestBerkeley Redevelopment Project 2005 Refunding Tax Allocation Bonds. The bonds wereissued to fund various redevelopment projects of the BRA’s West Berkeley Redevelopment

100

(III) Detailed Notes on All Funds (Continued)Project and to refund, at a lower interest rate, some outstanding bonds. Tax incrementrevenues are pledged in their entirety to the payment of principal and interest on the bonds.Pledged BRA payments are scheduled from fiscal years 2011 to 2015. BRA has pledgedand assigned to The Bank of New York Trust Company (on behalf of the bondholders)approximately 58.905,405 or 100 percent of the BRA’s rights to the tax incrementrevenues. For FY 2010, the pledged revenues totaled $1,781.081 compared with debtservice of $845,572.

City Pledge to The Bank of New York Trust Company: On October 6, 1999, the City ofBerkeley issued 59.125.000 of bonds called the Berkeley Joint Powers Financing AuthorityLease Revenue Bonds. Series 1999. The bonds were issued for the acquisition of a theatreand park facilities. All of the revenues and fund balance are pledged in their entirety to thepayment of principal and interest on the bonds. The City has pledged and assigned toBerkeley Joint Powers Financing Authority approximately 100 percent of the City’s rightsto the revenues and 100% of the fund balance of the Berkeley Repertory Theatre Fund. ForFY 2010, the pledged revenues totaled $40,963 and pledged fund balance totaled 5645.877.compared with debt service of 5639,886. The fund was subsidized by a S410,898 TransferIn from the General Fund.

City Pledge to Depository Trust Company (DTC): On October 28, 2009, the City ofBerkeley issued $25,000,000 of FY 2010 Tax and Revenue Anticipation Notes. The Noteswere issued to provide moneys to meet the City’s General Fund cash flow requirementsduring the 2009-10 fiscal year commencing July 1. 2009 and ending June 30, 2010,including current expenditures. capital expenditures, and the discharge of other obligationsor indebtedness. The City pledges to deposit in a special fund (a) an amount equal to 50%of the principal amount of the Notes in Januaiy 2010; (b) an amount equal to 50% of theprincipal amount of the Notes in the month of May 2010; and (c) an amount sufficient topay interest as due on the Notes at their maturity, in the month of May 2010. The Citypledges 525.3 million in General Fund taxes and other revenue received in 2009-10.Pledged City payments are scheduled from fiscal years 2010 to 2011. The City has pledgedand assigned to DTC (on behalf of the note holders) approximatey $25.3 million or 17.6percent of the City’s rights to the General Fund annual revenues. For FY 2010, the pledgedrevenues totaled $26 million compared with debt service of $26 million.

Proposition IA Borrowing by the State of California: Under the provisions ofProposition IA and as part of the 2009-10 budget package passed by the California statelegislature on July 28, 2009, the State of California borrowed 8% of the amount of propertytax revenue, including those property taxes associated with the in-lieu motor vehicle licensefee, the triple flip in lieu sales tax, and supplemental property tax, apportioned to cities,counties and special districts (excluding redevelopment agencies). The state is required torepay this borrowing plus interest by June 30, 2013. After repayment of this initialborrowing. the California legislature may consider only one additional borrowing within aten-year period.

The amount of this borrowing pertaining to the City of Berkeley was $ 4,310,725

101

(III) Detailed Notes on All Funds (Continued)Authorized with the 2009-10 State budget package, the Proposition IA SecuritizationProgram was instituted by the California Statewide Communities Development Authority(“California Communities’). a joint powers authority sponsored by the California StateAssociation of Counties and the League of California Cities, to enable local governments tosell their Proposition IA receivables to California Communities. Under the SecuritizationProgram, California Communities simultaneously purchased the Proposition IA receivablesand issued bonds (“Prop IA Bonds”) to provide local agencies with cash proceeds in twoequal installments, on January 15, 2010 and May 3, 2010. The purchase price paid to thelocal agencies equaled 100% of the amount of the property tax reduction All transactioncosts of issuance and interest were paid by the State of California. Participaiing localagencies have no obligation on the bonds and no credit exposure to the State. The Cityparticipated in the securitization program and accordingly property taxes have beenrecorded in the same manner as if the State had not exercised its rights under PropositionIA. The receivable sale proceeds were equal to the book value and, as a result no gain orloss was recorded.

102


Restricted assets

The balance of the restricted asset accounts in the enterprise and governmental funds are as follows:

Enterprise Funds:

Off Street Parking Fund:Revenue bond construction accountRevenue bond debt service reserve account

Building Acquisition Fund:COP 2003 Acquisition and construction accountCOP 2003 debt service reserve account

$ 3,108,026456,624

3,564,650

Total Enterprise Funds:

Governmental Funds:RDA 2005 Proceeds account (West Berkeicy Improvement capital project fund)RDA 2005 Redevelopment fund account (West Berkeley Improvement capital project fund)RDA 2005 2005 Reserve account (West Berkeley Improvement debt service fund)RDA 2005 Special fund account (West Berkeley Improvement debt service fund)

COP 2010 Project fund account (2010 COP Animal shelter capital project fund)COP 2010 Cost of issuance account (2010 COP Animal shelter capital project fund)COP 2010 Reserve fund account (2010 COP Animal shelter debt service fund)COP 2010 Capital interesi account (2010 COP Animal sheker debt service fund)

Berkeley Repertory Theatre debt service fundSale lease financing debt service fund

Total Govemmental Funds:

$ 12,620,755

$ 1,223,254

521,979788,003645,969

$ 9,887,712

7,166,5051,889,6009,056,105

5,100,000

12,287412,975

4.40,400

645,874

96,970

103

CITY OF BERKELEY

Notes to the Basic Financial Statement (Continued)June 30, 2010

IV. Other Information

A. Restatement of Fund Balance and Net Assets

1. Governmental Activities:Dais nrc Slice I S laicuin., I of

Gown’,nrnlal Funds NVI .-e’S,’r..nuv.i (.Jihn

Gcnera Grni, Lthran CDBG I’.jL IS i’u,cI’F U9r,:aI GeinwiniMsi .“.diuinwn n G”ernmen.dGnernnwnt1

FueJ Fur.J F’a,-J Fund Ta’ Bna Rt,u,s. inipiu”Cnkni Fu,nJ’ Ai:c’ Ao,,irFund thlann’JNci

.•tseis. al June 311.ZWI9. as iwnnioi.si.reported

S 44.991.427 $ 25,7511.9117 $ 12.247.239 S 4,711.545 S 2.9111.1113 S - 5 211.0224,75 $ 44.639.94-] 5 91.1129.1124 5 235.312.549

Rnhacrnenl:

Ca,h 42. 31) ‘3555.299, 9555.29) 42 1 1])’

-“‘ar4 Rntr:’abkTh11779(, (,.\791i

Nane, Rn,.n-.*-L- 22.1IoI :2” (II,

(SI her pay able I (4)11 2.544 44’ I 3.424

Gemmed Revenue 7.927.765] III] , 15(4 65]’ 11.129.4211

N”” aabk

Inte’.es i pas aisic

flIt’flaI nervier fund

in9eres acccued

F’, nd ftilai’emslNm I

•vsse is. ai June 30.2159. as reslaled S 45.044.103 .5 ‘7.925.765 S 2.291.939 5 4.721.533 5 2.9111.9 I 3 $ 9.955.299 S 211.247.675 5 44.395.4’13 9(1.646.241 2311 236.762

There was a misclassification of $42,130 in cash between the General Fund and a non-major governmentalfund in prior years. In FY2009. the construction proceeds of the measure ff Library Branch Renovationsbond proceeds, totaling $9.955.299. were inadvertently recorded in the Library Fund., a correcting priorperiod adjustment was made to establish a separate capital fund for these bond proceeds, which are to bespent on Library branches’ renovations and expansions. Notes receivable for tenant security depositstotaling 5225.000 was inadvertently omitted from the general ledger in prior years. The City overstatedother liabilities totaling $l3.424 in prior years ($10,450 in General Fund. S 2.544 in Grants Fund and S 430in Other Governmental Funds) due to problems in the held voucher account dating back to FY 1999.Parking Ticket Receivables of $2,687,790 recorded in the Duncan Parking Ticket Module was inadvertentlyomitted from the City’s general ledger in prior years. This amount was offset in a deferred revenue accountin the governmental fund balance sheet. There was a total of S8.129.428 of prior period adjustments due tothe deferral of revenue among Grants fund. CDBG and non-major governmental funds for grantsreceivable not collected within the 60 day availability period. In prior years. this amount was not deferred.

104

(IV) Other Information (Continued)

B. Risk Management

The City is exposed to various risks of loss related to torts: theft of. damace to and destruction ofassets; errors and omissions; injuries to employees: and natural disasters.

1. Public LiabilityThe City has excess coverage for Public Liability claims between $350,000 and $1,000,000 throughBay Cities Joint Powers Insurance Authority (BCJPIA). The California Affiliated RiskManagement Authority (CARMA) provides additional coverage to BCJPIA and its member entitiesfrom claims in excess of$I million to 529 million. The program is administered through the PublicLiability Internal Service Fund which is funded through transfers from the General Fund on abudgetary basis of S 175,000 is required as of August 1st each year. Disbursements from the PublicLiability Internal Service Fund are restricted to the payment of liability claims, personnel and otherinvestigation costs.

The City is a member of the Bay Cities Joint Powers Insurance Authority (BCJPIA) for its liabilitycoverage. BCJPIA was created in 1986 to develop effective risk management programs to reducethe amount and frequency of losses; to provide for pooled self-insurance among member agencies,to share the risk of self-insured losses; and to jointly purchase and provide administrative and otherservices including. but not limited to claims adjusting. data processing, risk management, lossprevention, accounting services, actuarial services, and legal services in connectien with theprogram. BCJP1A consists of 15 cities, three towns, one joint recreation committee, oneredevelopment agency and one police authority all located within the metropolitan Bay Area.

BCJPIA provides General Liability, Auto Liability, and Errors & Omissions coverage for itsmembers in excess of the member’s retained limit, or Self-Insured Retention (SIR), up to$1 .000,000 per occurrence.

Each Member retains the portion of every loss that falls within their SIR, ranging from $5,000 to$500,000. The City’s SIR is $350,000. BCJPIA is also a member of the California Affiliated RiskManagement Authorities (CARMA). a risk-sharing joint powers authority. When losses exceed the51.000,000 per occurrence limit. CARMA provides coverage up to 525.000.000. BCJPIA isgoverned by a Board of Directors, which is comprised of appointed officials from the memberentities.

Condensed unaudited accrual basis financial information of BCJPIA as of and for the year endedJune 30, 2010 is as follows (amounts expressed in thousands):

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Total assets

Total liabilties

Net assets

Total revenues

Total expenses

Net income

$ 23.331

(13,268)

S 10.063

S 10,323

9,146

5 1,177

To the extent that allocated losses and administrative expenses exceed contributions previously paidand other income, the BCJPIA may assess its member’s additional premiums. Complete financialstatements of BCJPIA can be obtained from: Bay Cities Joint Powers Insurance Authority,6371 Auburn Blvd.. Suite B, Citrus Heights. CA 95621-0488.

2. Workerc’ Compensation

The City is self insured for workers’ compensation. Payments are madeCompensation Self-Insurance Internal Service Fund by transfers from all Cityavailable to pay claims and administrative costs of the program.

to the Workers’funds. Funds are

At June 30, 2010. $l,4l5664 and S23.390.000 have been accrued for public liability, and workerscompensation claims, respectively.

These accruals represent estimates of amounts to ultimately be paid for reported claims and uponpast experience, recent claim settlement trends and other information. It is the City’s practice toobtain an actuarial study on an annual basis. Although the amount of actual losses incurred throughJune 30, 2010 are dependent on future developments, based upon information from theadministrators and others involved with the administration of the programs, the City’s managementbelieves that the aggregate accrual is adequate to cover such losses.

Changes in the balance of claim liabilities during the fiscal yearfollows:

for all self-insurance funds are as

Balance, July 1,2008Incurred claims and changes in estimatesClaims paid

Balance, June, 30,2009Incurred claims and changes in estimatesClaims paid

Balance, June. 30, 2010

Public WorkersLiability Compensation Total

S 1,774,928 S 18,137,000 S 19,911,928(285,692) 8,462.747 8,177,055(566,892) (5,405,747) (5,972,639)

922,344 21,194,000 22,116,3441,216,650 6,599,701 7,816,351(723.330) (4.403.701) (5,127,03 i)

S 1.415,664 S 23,390.000 $ 24,805,664

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(IV) Other Information (Continued)There were no significant reductions in insurance coverage from the prior year in public liabilityand there were no settlements exceeding the limits of the Citys excess coverage for the past threeyears.

C’. Contingent Liabilities

Grants

Amounts received or receivable from grant agencies are subject to audit and adjustment by grantoragencies, principally the federal government. Any disallowed claims, including amounts alreadycollected, may constitute a liability of the applicable funds. The amount, if any. of expenditureswhich may be disallowed by the grantor cannot be determined at this time although Citymanagement expects such amounts, if any. to be immaterial.

Lawsuits and Claims

There are a number of lawsuits and claims pending against the City. Included in these are a numberof property damage, civil suits, and personal injury seeking damages in excess of the City’sinsurance limits. The aggregate amount of the uninsured liabilities of the City which may resultfrom all suits and claims will not, in the opinion of City management. materially affect the City’sfinances, or impair its ability to otherwise meet its obligations.

D. Defined Benefit Pension Plans

1. California Public Employees’ Retirement SystemPlan Description

The City contributes to three plans in California Public Employees’ Retirement System (CaIPERS).The first plan covers all of the City’s full-time and part-time benefited sworn uniformed fireemployees and all chiefs (Safety Fire Plan). The second covers all of the City’s full-time and part-time benefited sworn uniformed police employees and all chiefs (Safety Police Plan). The thirdplan covers all remaining eligible City employees (Miscellaneous Plan). These plans are agentmultiple-employer defined benefit pension plans administered by CaIPERS, which acts as acommon investment and administrative agent for participating public employers within the State ofCalifornia. State statutes within the Public Employees’ Retirement Law establish a memo of benefitprovisions as well as other requirements. The City may select optional benefits provisions from thebenefit menu by contract with CaIPERS and adopted through City ordinance. Optional benefits thatthe City has contracted for the Miscellaneous Plan include, but are not limited to, the 2.7% at age55 retirement benefit formula, single highest year final compensation credit for unused sick leave,and post retirement survivor allowance. The benefits include (among others) service retirement.non-industrial disability retirement, industrial disability retirement, post-retirement death benefit,and pre-retirement death benefits. CaIPERS issues a separate comprehensive annual financialreport, which may be obtained from the CaIPERS Executive Office - 400 P Street, Sacramento, CA95814.

.All full-time and part-time benefited sworn uniformed fire employees and all chiefs are eligible toparticipate in CaIPERS Safety Fire Plan and all full-time and part-time benefited sworn uniformedpolice employees and all chiefs are eligible to participate in CaIPERS-Safety Police Plan. All otherfull-time, regular “at will” and part-time employees in the career service are required to be enrolledin the CaIPERS Miscellaneous Plan. CaIPERS pension benefits vest after five years of service. The

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(IV) Other Information (Continued)Safety Plans pension benefits are based on the employees’ years of service, age and finalcompensation and the Miscellaneous Plan pension benefits are based on the employee’s years ofCaIPERS benefited service, age at retirement, and single highest year of compensation. Thesebenefit provisions and all other requirements are established by State statute and City ordinance.

Part-time and hourly employees working less than half time are excluded from CaIPERSparticipation regardless of the number of hours worked through an hourly exclusion contractamendment. These employees are enrolled in the Public Agency Retirement System, (PARS),which is established under Internal Revenue Code Section 401(a) as a tax qualified multipleemployer trust.

Funding Policy

Miscellaneous Plan members are required by statute to contribute 8% of their annual coveredsalary. The Employer Paid Member Contribution (EPMC) is the method the City uses for reportingthe employee contribution for Miscellaneous Plan employees. CaIPERS’ recognizes the EPMCmethod of making the employee contribution in Public Employment Retirement Law (PERL)Section 20691 The 8% employee contribution is not included in base pay but is instead madethrough a separate payroll transaction to CaIPERS as “special compensation” and is not subject tofederal or state taxes until the money is distributed at time of retirement or when otherwisewithdrawn from CaIPERS. CaIPERS’ recognizes the EPMC as special compensation” in theCalifornia Code of Regulations (Chapter 2 of Division I of Title 2, Subchapter I, Article 5) Section571(a)(1). Safety Fire Plan and Safety Police Plan members are required to contribute 9% of theirannual covered salary.

The City is required to contribute the actuarially detemined remaining amounts necessary to ftndthe benefits for its members. The actuarial methods and assumptions used are those adopted by theCaIPERS Board of Administration. The requ red employer contribution rate for the year endedJune 30, 20010 was 16.004%, 23.497%, and 35.738% for Miscellaneous Plan, Safety Fire Plan andSafety Policy Plan employees annual covered payroll, respectively. The contribution requirementsof the plan members are established by State statute, and the employer contribution rates areestablished and may be amended by CaIPERS.

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(IV) Other Information (Continued)Miscellaneous Public Safety - Public Safety -

Plan Fire Plan Police PlanCity Employer Required Contribution

for year ended June 30. 2010 S 14.444.453 S 3,598,119 S 7,756,713

Employees’ contributionforvearer.dd June3O.2010 S 7.243.272 S 1.378.18: S 1.953,406

Actuarial valuation date June 30, 2008 June 30. 2008 June 30, 2008

Actuarial cost method Entry Age Normal Entry Age Normal Entry Age Nona!Cost Method Cost Method Cost Method

Amortization method for actuarial Level percentage of Level percentage of Level percentage ofaccrued liabilities projected payroll projected payroll projected payroll

Remaining amortization period 28-year period, closed 30-year period, closed 30-year period, closed

Actuarial asset valuation ne:hod 15 year smooth market 15 year smooth market 15 year smooth market

Investment rate of return 7.75% 775% 7.75%

Projected salary increases 3.25% to 14.45% 3.25% to 13.15% 3.25% to 13.155%

Gro1h in overali payroll/Cost-of-living 3.25% 3.25% 3.25%

Inflation component 3.00% 3.00% 3.00%Active lileTtibers 1188 127 176Retired members & beneficiaries 1588 179 234

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Three-year trend information for the CaIPERS plans are as follows:

Annual Percentage NetFiscal Year Pension ofAPC Pension

Ended Cost (APC) Contributed ObligationMiscellaneous Plan

6/30/2008 $13,568,559 100% $ N/A6/30/2009 15.02L060 100% S N/A6/30/20 10 14.444.453 100% S N/A

Public Safety - Fire Plan6/30/2008 $3,664,818 100% $ N/A6/30/2009 3,827,880 100% $ N/A6/30/2010 3,598,119 100% $ N/A

Public Safety - Police Plan6/30/2008 56,855,811 100% $ N/A6/30/2009 7,758,151 100% S N/A6/30/2010 7,756,713 100% $ N/A

Funded Status and Funding Progress-CaIPERS Plans

The funded status of the CaIPERS plans as of June 30, 2008, the most recent actuarial date, is asfollows:

Unfunded UAALActurial Actuarial as

Actuarial Actuarial Accrued Accrued PercentageValuation Asset Liability- Liability- Funded Covered of covered

Date Value Entry Age UAAL Ratio Payroll PayrollCaIPERS - Miscellaneous Plan

6/30/2008 $ 493,477,863 $ 561,891,793 $ 68,413,930 89.50% $86,150,561 79.4%

CaIPERS- Public Safety- Fire Plan6/30/2008 $ 160,099,069 $ 178,219,311 $ 18,120,242 92.5% $13,860,072 130.7%

CaIPERS - Public Safety - Police Plan6/30/2008 $ 190,186,515 $ 250,205,289 S 60,018,774 78.2% $19,609,940 306.1%

The schedule of funding progress, presented as required supplementary information following thenotes to the financial statements, presents multi-year trend information about whether the actuarialvalue of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilitiesfor benefits.

110

(IV) Other Information (Continued)Berkeley Police Retirement Income Benejit Plan

Plan Description

The City sponsors a Retiree Income Benefit Plan for its Police retirees. This plan is a singleemployer plan which provides defined income benefits (i.e., Pension plan) for Police employeeswho retired from the City on or after July 1, 1989, who were also vested in a CaIPERS pension,who had ten years of service with the Berkeley Police Department and retire from the City on orafter age 50. Benefits commence 10 years after retirement for retirements before July 6, 1997, fiveyears after retirement for retirements before July 1, 2007, and two years after retirement forretirements after July 1, 2007. In addition, retirees receiving a disability or industrial disabilityretirement benefit from CaIPERS are eligible.

The plan is administered by The Lipman Company (TLC). The establishment and amendments ofbenefit provisions are negotiated between the employee bargaining units and the City, and areapproved by the City Council. The plan does not issue a publicly available financial report thatincludes financial statements and required supplementary information. At July 1, 2008, the date ofthe most recent actuarial valuation, there were 184 active members, 85 retired employees receivingcurrent benefits and 39 retired employees in deferred pay status. The City pays a monthly inconiebenefit equal to the City’s active employee two party Kaiser rate (5938.96 for calendar year FY2010) regardless of marital status. The income benefit is prorated by service based on the following‘ears of service of the retiree, effective July 1, 2007 (prior to July I, 2007, the vesting percentagewas 75% for 20-24 years of service):

Years of Service City PercentageLess than 10 0%

lOtol4 25%15to19 50%

20 or more 1 00%

Benefits are paid from a Section 401(a) trust and arc therefore taxable to the retiree when paid.Benefits are payable for the retiiees lifetime, and continue to the retiree’s surviving spouse for hisor her lifetime.

Summary of significant accounting policies — basis of accounting and valuation of investments

The financial statements of the Berkeley Police Retirement Income Benefit Plan are prepared usingthe accrual basis of accounting. The City’s contributions are recognized in the period in which thecontributions are due. There are no plan member contributions. Benefits and refunds arerecognized when due and payable in accordance with the terms of the plan. All plan investmentsare reported at fair value. The fair value of the investments are based on the market value on thedate of the actuarial report.

Funding Policy

The City’s current targeted funding policy is equal to the service cost for active employees plus anamount to amortize unfunded liabilities over an open 30-year period (rolling 30 year amortization)as a level percentage of payroll. Plan members are not required to contribute to the Plan. Theestimated required employer contribution rate for the year ended June 30, 2010 was 3.26% ofcovered payroll for Police employees. For FY 2010, the City contributed 51,181,503, which was$1,574,703 less than the ARC of 52,756,206 for this plan. The unpaid contribution as of June 30,

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(IV) Other Information (Continued)2010 of 57.336.257 to fund this pension obligation is recorded as a liability. Any changes to thecontribution requirements of the plan are negotiated by the bargaining units and City LaborNegotiating team, and approved by the City Manager and City Council.

The following shows the calculation of the Annual Required Contributions for FY 2010:

Amount

Nonna Cost at Year End $ 958,905Amortization of UAAL 1.797,301

Annual Required Contribution (ARC) $ 2.756.206

The actuarial cost method used for determining the benefit obligations is the Projected Unit BenefitCost Method. Under this method, the actuarial present value of projected benefits is the value ofbenefits expected to be paid for current actives and retirees and is calculated based on certainassumptions and census data. The Actuarial Accrued Liability (AAL) is the actuarial present valueof benefits attributed to employee service rendered prior to the valuation date. The AAL equals thepresent value of benefits mu]tiplied by a fraction equal to service to date divided by sen-iceexpected at retirement. The Normal cost is the actuarial present value of benefits attributed to oneyear of service. This equals the present value of benefits divided by service at expected retirement.Since retirees are not accruing any more service, their normal cost is zero. In determining theAnnual Required Contribution, the unfunded AAL is amortized as a level percentage of payrollsover 30 years. The actuarial assumptions included (a) 6.5% investment rate of return (net ofadministrative expenses): (b) inflation increases are tied to the City’s 2-party Kaiser premium andare assumed to be 8% for FY 2010, with increases grading down by .5% per year to 5% for FY2016 and thereafter; (c) 3% annual payroll increase: (d) 60% of retirees are assumed to retire with acovered spouse; and (e) female spouses are assumed to be three years younger than male spouses.

Three-year trend information for the Berkeley Police Retirement Income benefit plan is as follows:

Annual Percentage NetFiscal Year Pension Contribution ofAPC Pension

Ended Cost (APC) Made Contributed Obligation

6/30/2008 $2,315,698 $586,286 25% 53.383,7986/30/2009 2,925,396 822,000 28% 5,487,1946/30/2010 3,030,566 1,181,503 39% 7,336,257

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The following tables show the annual pension cost and net pension obligations, and the increase inthe net pension obligation for the year:

Determination of Net Pension ObligationAnnual Required Contribution $ 2,756,206

Interest on prior year Net Pension Obligation 274,360Adjustment to ARC

______________

Annual Pension Cost 3,030,566Contributions Made 1181.503

Increase in Net Pension Obligation 1,849,063Net Pension Obligation - beginning of year 5,487.194

Net Pension Obligation - end of year $ 7,336,257

Status and Funding Progress

As of July 1, 2008, the most recent actuarial valuation date, the plan was 12.7% funded. Theactuarial accrued liability for benefits was $37.2 million, and the actuarial value of assets was $4.7million, resulting in an unfunded accrued liability of $32.5 million. The fair value of the assetswere determined using market values as of the date of the actuarial report. The schedule of fundingprogress, presented as required supplementary information following the notes to the financialstatements, presents multi-year trend information about whether the actuarial value of plan assets isincreasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Fundedstatus of the plan as of July 1,2008, the most recent actuarial valuation date is as follows:


Actuarial Actuarial Accrued Accrued PercentageValuation Asset Liability- Uability- Funded Covered of covered

Date Value Entry Age UAAL Ratio Payroll PayrollBerkeley Police Retirement Income Benefit Plan

7/1/2008 $ 4,734,673 $ 37,241,858 $ 32,507,185 12.7% $ 21,898,343 148.4%

The Statement of net assets and Statement of Changes iii net assets for the Berkeley PoliceRetirement Income benefit Plan as of end and for the year ended June 30, 2010 (using the accrua’basis of accounting), are as follows:

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(IV) Other Information (Continued)Statement of Net Assets

Berkeley Police Retirement Income Benefit Plan

AssetsCash and cash equivalentsInvestments, at fair value

Corporate notesInterest receivable

Total assets

LiabilitiesRetiree pension payable

Total liabilities

Net assetsHeld in trust for OPEB benefits

Total net assets

June 30, 2010

S 1,718,741

4,148,99562,108

5,929.844

1.120

1,120

5.928,724

S 5,928,724

Additions:

Statement of changes in Net AssetsBerkeley Police Retirement Income Benefit Plan

For the Year Ended June 30, 2010

Contribution: EmployerInvestment income

S 1.181.503455,322

Total additions

Deductions:Benefits:

ServiceAdministrative expenses

Total deductions

Change in net assets

Net assets - beginning

Net assets - ending

1.636.825

855.1667.980

863.146

773.679

5,155.045

S 5.928.724

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2. Safety Members Pension Fund

Plan Description

The City maintains the Safety Members Pension Fund (SMPF). This plan is a single-employerdefined benefit pension plan for fire and police officers that retired before March 973. InMarch 1973, all active fire and police officers were transferred from SMPF to CaIPERS. The SafetyMembers Pension Board administers the plan. The authority under which benefit provisions areestablished or may be amended is the Berkeley Municipal Code chapters 4.20, 4.24, 4.28 and 4.32.At July 1, 2010, the date of the most recent actuarial valuation, there were 28 retired members andsurviving spouses.

Service and disability retirement benefits are based on a percentage of salary at retirement,multiplied by years of service. Benefits are adjusted annually by either;

(a) Current active salary increases (based on the same rank at retirement) or

(b) The increase in the California Consumer Price Index (with a l% minimum and a 3%cap). SMPF also provides surviving spouse benefits.


The financial statements of the Safety Members Pension Fund are prepared using the accrual basisof accounting. The City’s contributions are recognized in the period in which the contributions aredue. There are no plan member contributions. Benefits and refunds are recognized when due andpayable in accordance with the terms of the plan. All plan investments are reported at fair value.The fair value of the investments is based on the market value on the date of the actuarial report.

Funding Policy

The City pays SMPF benefits on a pay-as-you-go basis. In February 1989, the Berkeley CivicImprovement Corporation (BCIC) purchased, on behalf of the City, a Guaranteed Income Contract(GIC) from Massachusetts Mutual. This contract provides annual payments through 2018 and anannual guaranteed 9.68% rate of return (net of expenses). The City pays the difference betweenactual benefit payments and contract provided annual payments, from the General Fund. Additionalamounts may be paid, in 2008 through 2017, under a Risk Agreement to compensate the City forthe difference between the amounts paid by the City to its pensioners and the actuarially determinedamounts.

The City is required to determine the plan’s annual pension cost (APC) based on the most recentactuarial valuation. The APC equals the plan’s annual required contribution (ARC), adjusted forhistorical differences between the ARC and amounts contributed. The actuary has determined theCity’s annual required contribution and amounts contributed. The actuary has determined the City’sARC is the greater of (a) a 20-year amortization of the unfunded actuarial liability, or (b) actualbenefit payments made for the year. For the year ended June 30, 2010, the City’s ARC wasSI ,666,559 and was equal to the benefit payments during the year. The City contributed this

115

(IV) Other Information (Continued)amount for the year through a $665,168 payment from the GIC plus $1,001,391 paid from theGeneral Fund. The actuarial liability was determined using the unit credit actuarial cost method.

The actuarial assumptions included (a) 80% investment return. (b) 1992 CaIPERS ExperienceTable. (c) projected annual benefit increases of 5% a year for full fluctuating and 3% a year for CPICOLAs. Both (a) and (c) include a 3% annual inflation component. The following table provideshistorical information of the Annual Pension Cost:

Annual Percentage NetFiscal Year Pension of APC Pension

Ended Cost (APC) Contributed Obligation7/112008 Sl,783.940 100% N/A7/1/2009 1.756.185 100% N/A7/1/2010 1,666,559 100% N/A

Prior to 1997. the actuarial valuation did not calculate an Annual Pension Cost. Consequently.consistent with GASB 27, the Net Pension Obligation at transition (July 1, 1996) equaled zero. Theplan’s unfunded actuarial accrued liability is being amortized as a Level percentage of projectedpayrolls on a closed basis. The amortization period of the unfunded actuarial liability endsJune 30,2017. A copy of the stand-alone financial report may be obtained at 2180 Milvia Street.Berkeley, CA.

Contributions and benefits are recognized in the Statement of Changes in fiduciaiy net assets usingthe accrual basis of accounting. The fair value of the SMPE assets was determined by market valueas reflected in the provisions of the guaranteed investment contract with Massachusetts Mutual.

Funded Status and Funding Progress

The schedule of funding progress, presented as required supplementary information following thenotes to the financial statements, presents multi—year trend information about whether the actuarialvalue of plan assets is increasing or decreasing over time relative to the actuarial liabilities forbenefits. Funded status of the SMPF as of June 30, 2010, the most recent actuarial date, is asfollows:


Actuarial Actuarial Accrued Accrued PercentageValuation Asset Uability- Liability- Funded Covered of covered

Date Value Entry Age UAAL Ratio Payroll PayrollBerkeley Safety members Pension Fund

7/1/2010 $ 2,630,205 $ 6,895,254 $ 4,265,049 38.1% N/A N/A

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E. Other Post-Employment Benefits

The City has adopted the provisions of GASB Statement No. 45 (GASB 45), Accounting andFinancial Reporting for Post-employment Benefits Other Than Pensions. The Statement establishesstandards for the measurement, recognition, and display of OPER costs/contributions and relatedliabilities (assets), note disclosures, and if applicable, required supplementary information iii thefinancial reports of state and local government employers. The City has also adopted GASBStatement No. 43 (GASB 43), Financial Reporting for Post-employment Benefit Plans Oilier ThanPension Plans. GASB 43 applies to the City’s post-employment healthcare plans and requiresadditional disclosures with respect to the healthcare plans.

1. Berkeley Fire Employees Retiree Health PlaitPlan Description

The City of Berkeley Fire Employees Retiree Health Plan (FRHF) is a single-employer definedbenefit medical plan administered by The Lipman Company (TLC). It is reported in an OtherEmployee Benefit Trust Fund of the City. To be eligible for benefits, sworn Fire employees mustretire from the City on or after July 1. 1997, be vested in a CaIPERS pension, and retire from theCity on or after age 50. Benefits commence immediately upon retirement. Benefits are payable forthe retiree’s lifetime and continue for his or her covered spouse’s/domestic partner’s lifetime. Theamount the City contributes toward the Fire Employees Retiree Health Plan is 4.5% per yearregardless of the amount of increase in the underlying premium rate. The establishment andamendments of benefit provisions are negotiated between the employee bargaining units and theCity Labor Negotiating Team, and are approved by the City Manager and City Council. The FRHFdoes not issue a publicly available financial report that includes financial statements and requiredsupplementary information. The City’s portion of the benefit is based on the following years ofservice of the retiree:

Years of Sen’ice City PercentageLessthanl0 0%

lOto 14 25%15to19 50%20to24 75%

2sormore 100%

The City makes a contribution towards the medical premium. For employees who retired on orafter July 1,2006: The maximum City payment is equal to the City’s percentage of the base ratesof $374.03 per month (single party) and 8746.16 per month (two part’) as of July I, 2009. AfterAge 65 (eligible for Medicare): For all Medicare eligible retirees of retirement age, the maximumpayment is equal to the City’s percentage of the 2001 single or 2-party Health Net Senior Plus rate(depending on whether retiree has a covered dependent) increased by 4.5% per year. Themaximum City payment is equal to the City’s percentage of the base rates of 5224.27 per month(single party) and 8448.53 per month (two parties) as of July 1, 2009. As of July 1,2008, therewere 117 active employees, 38 retirees receiving benefits and zero terminated employees entitled toreceive benefits in the future.

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The financial statements of the Berkeley Fire Employees Retiree Healthaccrual basis of accounting. The City’s contributions are recognizedcontributions are due. There are no plan member contributions.recognized when due and payable in accordance with the tenns of theare reported at fair value. The fair value of the investments are baseddate of the actuarial report.

Funding Policy

Plan are prepared using thein the period in which theBenefits and refunds are

plan. All plan investmentson the market valne on the

FRHF plan members are not required to contribute to the plan. The City’s targeted funding policy isequal to the service cost for active employees plus an amount to amortize unfunded liabilities over30 years (rolling 30 year amortization) as a level percentage of payroll. The employer contributionrate for the year ended June 30, 2010 was 5.0% of covered payroll for Fire employees. The Citystrives to contribute the annual required contribution of the eniplover (ARC), an amount actuariallydetermined in accordance with the parameters of GASB Statement 45.The ARC represents a levelof funding that, if paid on an ongoing basis, is projected to cover normal cost each year andamortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.The current ARC rate is 4.60% of annual covered payroll. For FY 2010 the City contributed$721,667, which was $26,095 more than the ARC of $695,572 for this plan. Any changes to thecontribution requirements of the plan are negotiated by the bargaining units and City LaborNegotiating team, and approved by the City Manager and City Council.

Annual OPEB Cost and Net OPEB Obligation (Asset)

The City’s annual OPEB cost (expense) is calculated based on the ARC of the City, an amount thatwas actuarially determined by using the Projected Unit Benefit Cost method (one of the actuarialcost methods in accordance with the parameters of GASB Statement No. 45). Under this method,the actuarial present value of projected benefits is the value of benefits expected to be paid forcurrent active employees and retirees and is calculated based on certain assurnptior.s and censusdata. The following tables show the components of the City’s annual OPEB cost for the year, theamount actually contributed to the plan, and changes in the City’s net OPEB asset to FRHF:

Determination of Net OPEB AssetAnnual Required Contribution

Interest on prior year Net OPEB Obligation

Annual OPEB CostContributions Made

Increase Net OPEB AssetNet OPEB Asset - beginning of year

Net OPEB Asset - end of year

$ 695,572(3,173)

692,399(721.667)

(29,268)(79.3B)

S (108.58!)

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The following table shows the calculation of the Annual Required Contributions and employers’schedule of contributions for FY 2010:

Normal Cost at Year EndAmortization of UAAL

Annual Required Contribution (ARC)

$ 389.7603 05.8 12

S 695.572

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and thenet OPEB asset for FY 2010 and the two preceding years were as follows:

Fiscal YearEnded

6/3 0/2 0086/3 0/20096/30/2010

AnnualOPEBCost

5488.502

694,422692,399

Percentageof Annual OPEB

Contributed121%

89%104%

NetOPEBAsset

$153,388

79,313

108,581

Funded Status and Funding Progress

As of July 1, 2008, the date of the most recent actuarial report, the plan was 37.0% funded. Theactuarial accrued liability for benefits was $9.3 million, and the actuarial value of the assets was$3.5 million, resulting in an unfunded actuarial accrued liability (UAAL) of $5.9 million. Thecovered payroll (annual payroll of active employees covered by the plan) was approximately$15,107,000.

Funded Status of the Plan as of July 1,2008Actuarial Accrued Liability (AAL)Actuarial Value of Plan Assets

Unfunded Actuarial Accrued Liability (UAAL)

Funded Ratio (Actuarial Value of Plan Assets/UAAL)

Covered Payroll (Payroll ofActive Plan Members)UAALas a Percentage ofCovered Payroll

$ 9,340,8123,455,055

$ 5,885.757

3 7.0%

$ 15.107,00039.0%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts andassumptions about the probability of occurrence of events far into the future. Examples includeassumptions about future employment, mortality, and the healthcare cost trends. Amountsdetermined regarding the funded status of the plan and the annual required contributions of theemployer are subject to continual revision as actual results are compared with past expectations andnew estimates are made about the future. The schedule of funding progress, presented as requiredsupplementary information following the notes to the financial statements, presents multi-year trendinformation about whether the actuarial value of plan assets is increasing or decreasing over limerelative to the actuarial accrued liabilities for benefits.

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Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the planas understood by the employer and the plan members) and include the types of benefits provided atthe time of each valuation and the historical pattern of sharing of benefit costs between theemployer and plan members to that point. The actuarial methods and assumptions used includetechniques that are designed to reduce the effects of short-tenn volatility in actuarial accruedliabilities and the actuarial value of assets. consistent with the long-term perspective of thecalculations.

In the July I, 2008 actuarial valuation, the actuarial cost method used for determining the benefitobligations is the Projected Unit Benefit Cost Method. Under this method. the actuarial presentvalue of projected benefits is the value of benefits expected to be paid for current actives andretirees and is calculated based on certain assumptions and census data. The Actuarial AccruedLiability (AAL) is the actuarial present value of benefits attributed to employee service renderedprior to the valuation date. The AAL equals the present value of benefits multiplied by a fractionequal to service-to-date over service at expected retirement. The Normal Cost is the actuarialpresent value of benefits attributed to one year of service. This equals the present value of benefitsdivided by service at expected retirement. Since retirees are not accruing any more service, theirnormal cost is zero. In determining the Annual Required Contribution (ARC). the unfunded AAL isamortized as a level percentage of payrolls over 30 years on an open basis.

The actuarial assumptions included (a) 6.0% investment rate of return (net of administrativeexpenses); (b) annual healthcare cost trend is projected to increase at a rate higher than 4.5% (c)benefit increases are fixed at 4.5% per year, based on the bargaining agreement; (d) 70% of retireesare assumed to retire with a covered spouse; and (e) female spouses are assumed to be three yearsyounger than male spouses.

2. Berkeley Miscellaneous Employees Retiree Heal/li PlanPlan Description

The City of Berkeley Retiree Health Premium Assistance Plan (RHPAP) is a single-employerdefined benefit medical plan administered by The Lipman Company (TLC). It is an OtherEmployee Benefit Trust Fund of the City, which provides retiree health benefits to eligible retireesand his/her spouse or domestic partner. The establishment and amendments of benefit pi-ovisionsare negotiated between the employee bargaining units and the City, and are approved by the CityCouncil. The RHPAP does not issue a publicly available financial report that includes financialstatements and required supplementary information.

Employees are eligible for retiree health benefits if they satisl5’ the following requirements:

• Retirees who are at least age 50, with at least 8 years service with the City at the time ofseparation from service are eligible to receive retiree health benefits commencing at age 55.

• Benefits are payable for the retiree’s lifetime and continue for his or her coveredspouse’sldomesiic partner’s lifetime. The City pays the monthly cost of the monthlypremiums up to a participant’s applicable percentage of the base dollar amount and subjectto annual 4.5% increases as specified in the Retiree Health Premium Assistance Plan

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(IV) Other Information (Continued)document regardless of the amount of increase in the underlying premium rate. The basemonthly dollar amount paid by the City for FY 2008 was as follows

Age 55 to 65 Base Dollar Amount (Rounded)

Single Party $247

Two Party $494

Age 65 + Base Dollar Amount (Rounded)

IBEW Local 1245, SEIU SEW Local 1021 Career BenefitedLocal 1021 Maintenance Community Unrepresented

and Clerical. Public Services EmployeesEmployees Local 1

Single Party $24 $96 $127

Two Party $48 $192 $254

One Over 65/One $271 $343 $374Under 65

The City’s portion of the benefit is based on the following years of service of the retiree:

Fully CompletedYears of Service City Percentage

8 30%9 40%10 50%11 58%12 66%13 74%14 82%15 90%16 92%17 94%18 96%19 98%

20- 100%

As of July 1, 2008, there were 1,154 active employees, 181 terminated participants and 190 retirees.

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The financial statements of the Berkeley Miscellaneous Employees Retiree Health Plan areprepared using the accrual basis of accounting. The City’s contributions are recognized in theperiod in which the contributions are due. There are 110 plan member contributions. Benefits andrefunds are recognized when due and payable in accordance with the terms of the plan. All planinvestments are reported at fair value. The fair value of the investments are based on the marketvalue on the date of the actuarial report.

Funding Policy

RHPAP plan members are not required to contribute to the plan. The City’s targeted funding policyis equal to the normal cost for active employees plus an amount to amortize unfunded liabilitiesover 30 years as a level percentage of payrolls. The employer contribution rate for the year endedJune 30, 2010 was I.08% of covered payroll for Miscellaneous Local 1021 Maintenance andClerical employees and 2.58% for Miscellaneous Local 1021 Community Services and careerbenefited unrepresented employees. The City is required to contribute the annual requiredcontribution of the enipiover (ARC), an amount actuarially determined in accordance with theparameters of GASB Statement 45.The ARC represents a level of funding that, if paid on anongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarialliabilities (or funding excess) ovet a period not to exceed 30 years. The current ARC rate is 2.44%of annual covered payroll. For FY 2010, the City contributed 52.045.619. which was S!50.5 15 lessthan the ARC of 52.196.134 for this plan. Any changes to the contribution requirements of the planare negotiated by the bargaining units and City negotiating staff, and approved by the City Council.

Annual OPEB Cost and Net OPEB Obligation

The City’s annual OPEB cost (expense) is calculated based on the ARC of the City, an amount thatwas actuarially detenined by using the Projected Unit Benefit Cost method (one of the actuarialcost methods in accordance with the parameters of GASB Statement No. 45). Under this method.the actuarial present value of projected benefits is the value of benefits expected to be paid forcurrent active employees and retirees and is calculated based on certain assumptions and censusdata.

The following table shows the components of the City’s annual OPEB cost for the year, the amountactually contributed to the plan, and changes in the City’s net OPEB obligation to RHPAP:

Determination of Net OPEB Obligation

Annual Required Contribution $2,196,134interest on prior year Net OPEB Obligation 51,136

Annual OPEB Cost 2,247,270Contributions Made 2,045.619

Increase in Net OPEB Obligation 201,651Net OPEB Obligation - beginning of year 1,022.724Net OPEB Obligation - end of year 51,224,375

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(IV) Other Information (Continued)The following shows the calculation of the Annual Required Contributions and schedule ofemployer contributions for FY 2010:

AmountNormal Cost at Year End S 1,136.334Amortization of LAAL 1059.300Annual Recuired Contribution (ARC) S 2,196.134

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and thenet OPEB obligation for FY 2010 arid the two preceding years were as follows:

Annual Percentage NetFiscalYcar OPEB ofAnnualOPEB OPEB

Ended Cost Contributed Obligation6/30/2008 $1,389,393 90% 5366,6436/30/2009 2.217,666 71% 1,022,7266/30/2010 2,247,270 91% 1,224.375

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(IV) Other Information (Continued)Funded Status and Funding Progress

As of July 1, 2008, the date of the most recent actuarial report, the plan was 24.6% fUnded. Theactuarial accrued liability for benefits was $22.1 million, and the actuarial value of the assets was$5.5 million, resulting in an unfunded actuarial accrued liability (UAAL) of $16.7 million. Thecovered payroll (annual payroll of active employees covered by the plan) was approximately$89,867,000.

Funded Status of the Plan as ofJulv 1,2008Actuarial Accrued Liability (AAL) S 22,133.755Actuarial Value of Plan Assets 5.450,647L’nfijrtded Actuarial Accrued Liability (UAAL) S 16.683,108

Funded Ratio (Actuarial Value of Plan Assets/LIAAL) 24.6%Covered Payroll (Payroll of Active Plan Members) $ 89,867,000UAALas a Percentage ofCovered Payroll 186%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts andassumptions about the probability of occurrence of events far into the future. Examples includeassumptions about future employment, mortality, and the healthcare cost trends. Amountsdetermined regarding the funded status of the plan and the annual required contributions of theemployer are subject to continual revision as actual results are compared with past expectations andnew estimates are made about the future. The schedule of funding progress, presented as requiredsupplementary information following the notes to the financial statements, presents multi-year trendinformation about whether the actuarial value of plan assets is increasing or decreasing over timerelative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

Projections of beneflts for financial reporting purposes are based on the substantive plan (the planas understood by the employer and the plan members) and include the types of benefits provided atthe time of each valuation and the historical pattern of sharing of benefit costs between theemployer and plan members to that point. The actuarial methods and assumptions used includetechniques that are designed to reduce the effects of short-term volatility in actuarial accruedliabilities and the actuarial value of assets, consistent with the long-term perspective of thecalculations.

In the July 1. 2008 actuarial valuation, the actuarial cost method used for determining the benefitobligations is the Projected Unit Benefit Cost Method. Under this method, the actuarial presentvalue of projected benefits is the value of benefits expected to be paid for current actives andretirees and is calculated based on certain assumptions and census data. The Actuarial AccruedLiability (AAL) is the actuarial present value of benefits attributed to employee service renderedprior to the valuation date. The AAL equals the present value of benefits multiplied by a fractionequal to service-to-date over service at expected retirement. The Normal Cost is the actuarialpresent value of benefits attributed to one year of service. This equals the present value of benefitsdivided by service at expected retirement. Since retirees are not accruing any more service, theirnormal cost is zero. In determining the Annual Required Contribution (ARC), the unfunded AAL isamortized as a level percentage of payrolls over 30 years on an open basis.

The actuarial assumptions included (a) 7.0% investment rate of return (net of administrativeexpenses); (b) annual healthcare cost trend is projected to increase at a rate higher than 4.5% Cc)

124

(IV) Other Information (Continued)benefit increases are fixed at 4,5% per year. based on the bargaining agreement; (d) 70% of retireesare assumed to retire with a covered spouse; and (e) female spouses are assumed to be three yearsyounger than male spouses.

Financial Statements For OPEB Plans

The Statement of OPEB Net Assets and Statement of Changes iii OPEB Net Assets as of and forthe year ended June 30. 2010, using the accrual basis of accounting. are as follows:

Statement of OPEB Net AssetsJune 30, 2010

MiscellaneousRetiree Fire Retiree

Medical Plan Medical Plan

AssetsCash and cash equivalents S 3,827,058 $ 1,585,092investments, at fair value

Corporate notes 4,626,556 3,402,800Notes receivable 517,000Interest receivable 272,411 44.333

Total assets 9243.025 5.032.225

LiabilitiesOther accounts payable 7,960 1.720

Total liabilities 7,960 1,720

Net AssetsField in trust for OPEB benefits 9.231065 5.030505rotal net assets S 9.235.065 S 5.030,505

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ADDITIONS:

Statement of Changes in OPEB Net Assets

For the Year Ended June 30, 2010

Contributions: EmployerInvestment incomeOther income

Total Additions

DEDUCTIONS:

Benefits:ServiceAdministrative expensesTotal Deductions

Change in net assets

S 2,045.619476,486

S 721,667384.460

Miscellaneous RetireeMedical Plan

Fire RetireeMedical Plan

1522,105 L106.127

492,812 239,54251,280 11,080

544.092 250,622

1,978,013 855,505

7,257,052 4,175,000

5 9,235.065 $ 5,030,505

Net Assets beginning

Net Assets - ending

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F. Defined Contribution Plans

1. Supplemental Retirement and Income Plaits (‘SRIP)There are three separate Supplemental Retirement and Income Plans (SRIP) that were enacted byOrdinance at different times and are set forth in the Berkeley Municipal Code as follows:

Supplementary Retirement and Income Plan I — Berkeley Municipal Code Chapter 4.36.101 et seq.

Supplementary Retirement and Income Plan II — Berkeley Municipal Code Chapter 4.38.101 et seq.

Supplementary Retirement and Income Plan III — Berkeley Municipal Code Chapter 439.101 etseq.

SRIP I and SRIP 11 cover non-sworn employees. SRIP Ill covers SVOrIt Police personnel except forthe Police Chief who is included in SRIP II.

SRIP I

On January 1, 1983, Ordinance No. 5450-NS., which was codified in the Berkeley Municipal Codeunder Chapter 4.36.101 et seq., established SRIP I. The SRIP I plan consists of two components: I)a defined contribution money purchase pension plan adopted in accordance with Sections 40 1(a)and 50 1(a) of the Internal Revenue Code, and 2) an employer paid disabilit benefit.

Money Purchase Pension Plan: The administrators of the money purchase pension plan areHartford Life Insurance Company and Prudential Retirement Services. The plan is a definedcontribution plan whereby the City contributes 5.7% of salary up to a salary of $32,400 into a taxdeferred and self directed investment account and 1% of salary tip to a salary of $32,400 into adisability reserve account for each covered employee (all pennanent City employees). The totalassets of SRIP I available for benefits at June 30, 2010, was $8,280,793. which was comprised ofparticipant accounts, in the amount of $8,183,202. These assets are the property of the individualaccount holders and not the property of the City. These assets cannot be used to pay disabilitybenefits.

Disability Benefit: Employees hired after January 1, 1983 but prior to July 22, 1988, who becamedisabled in their own occupation are entitled to receive a disability income benefit equal to 60% oftheir highest compensation, reduced by any disability payments they receive from Social Security,State Disability Insurance, or Workers’ Compensation. Employees hired after July 21, 1988 are noteligible for benefits under this plan which was closed to new enrollees.

Benefits are payable for the disabled participant’s lifetime or until recovery from disability. Thethird party administrator is Cigna. Currently, the City pays the monthly cost of the monthlydisability benefits on a pay-as-you-go basis. There were a total of 180 closed groups of participants,56 active employees and 78 disabled participants receiving benefits. The unfunded liability forSRIP I at July 1,2008, the date of the last actuarial study, was $13,055,000. For FY 2010, the Citypaid total SRIP I disability payments ofSI,657,924.

With the inception of SRIP II. the City contracted with Standard Insurance Company of Oregon toprovide a portion of disability benefits through a Long Term Disability plan for those activeemployees remaining in SRIP I on or after July 22, 1988. Subsequently, the City prospectivelydropped the Long Tern) Disability plan provided by Standard Insurance Company of Oregon andpurchased a Long Term Disability plan from Hartford Life Insurance Company. Later, the City

127

(IV) Other Information (Continued)dropped the Long Term Disability plan provided by Hanford Life and purchased a Long TermDisability Plan from UNUM Provident. Ultimately, the City chose to delete the Long TermDisability plan and self fund the benefit. The disability benefits of all those in SRIP I disabled priorto July 22, 1988 as well as the self-insured portion of SRIP I disability benefits arising on or afterJuly 22. 1988 applicable to SRIP I coverage, are paid from City contributions.

sm ii

On July 22. 1988, Ordinance No. 5900-N.S., which was codified in the Berkeley Municipal Codeunder Chapter 4.38.101 et seq., established SRIP 11, a defined contribution money purchase pensionplan adopted in accordance with Sections 40 1(a) and 501(a) of the Internal Revenue Code. The planis a defined contribution money purchase pension plan. whereby the City contributes 6.7% of salaryup to a salary of S32,400 into a tax deferred and self directed investment account for each eligibleemployee. Enrollment in the plan is mandaton for all eligible persons hired on or after July 22,1988. and elective for those eligible and hired prior to July 22, 1988.

SR1P Ill

Effective January 1, 1989, the City established SRIP III, which was codified iii the BerkeleyMunicipal Code under Chapter 439.101 et seq., a defined contribution money purchase pensionplan adopted in accordance with Sections 401(a) and 501(a) ofthe Internal Revenue Code. The planis a defined contribution plan, whereby the City contributes 2% of salary up to a salan of 532.400into a tax deferred and self directed investment account for all sworn police officers except thePolice Chief.

The total assets of SRIP II and SR[P III available for benefits at June 30, 2010 were $48,649,739,and there were 2,089 participants.

The City Council is responsible for establishing or amending (through changes in the BerkeleyMunicipal Code) retirement provisions and contribution requirement for all SRJP plans. Theseinvestments are held by trustees for the benefit of the participants and are not included in the City’sbasic financial statements.

The City’s contributions (required and actual) and covered payroll for the year ended June 30, 2010were as follows:

City’s City’s Covered % of CoveredPlan Contributions Payroll Payroll

SRIP I $ 93,536 $ 1,640,973 5.7%SRIP II 2,518,275 37,560,826 6.7%SRIP III 124,202 5,738,788 2.0%

128


2. Pitb/ic Agency Retirement System (PARS)On September 14. 1993, the City Council adopted Resolution # 57,141- NS. authorizing a contractwith the Public Agency Retirement System (PARS) to administer a 401(a) retirement plan for theCity’s hourly and daily employees, effective October 1, 1993. This retirement plan is an alternativeto participation in Social Security. The plan is a defined contribution plan whereby the City andemployee each contribute 3.75% of salary into a tax deferred savings account. These benefits arenon-forfeitable at all times, meaning that the benefit may be distributed to the employee only uponretirement or separation from service or death (with certain restrictions). All tempora and hourlyemployees are eligible and enrolled in the plan. There were a total of8ls active and 1,277 inactiveparticipants in this plan as of June 30, 2010.

The total asset of PARS available for benefits at June 30, 2010 was $2,782,195, which wascomprised of participant accounts. The City Council is responsible for establishing or amending(through changes in the Berkeley Municipal Code) retirement provisions and contributionrequirements for the PARS plan. These investments are held by trustees for the benefit of theparticipants and are not included in the City’s basic financial statements.

The City’s contribution (required and actual) and covered payroll for the year ended June 30, 2010were as follows:

Contributions asFiscal City’s Covered a % of CoveredYear Contributions Payroll Payroll

2010 $ 228,021 $ 6,080.471 3.75%

129


G. Related Party Transaction

In June 2010, The City recruited a new Chief of Police. Included as part of the compensationpackage was a $500,000, 15 year or due- on- sale, 3% interest only housing assistance loan made tothe Chief of Police. The loan is secured by a note signed by the Chief of Police and his spouse, anda deed of trust on the residence that was purchased. The payments may be deferred and there is noprepayment penalty. The loan and accrued interest must be repaid in full within 12 months of theChief of Polic&s separation with the City.

H. Subsequent Events

1. 2010 Neighborhood Branch Library Improvement Project Bonds

On July 20, 2010, the City of Berkeley issued the second series of bonds totaling $16 million froman aggregate authorized amount of $26,000,000 of General Obligation Bonds duly approved by atleast two-thirds of the voters voting on Measure FF at an election held on November 4, 2008. toprovide funds to finance renovations, construction, seismic and access improvements, andexpansion of program areas at four neighborhood branch libraries in the City. The interest rates onthe bonds range from .45% to 4%. Interest is payable semi-annually on March 1 and September 1,and principal is payable annually on September I. The General Obligation bonds mature onSeptember 1. 2039. but are callable on or after September I, 2020. The other $10 million of the $26million authorized by the voters was issued on April 14, 2009.

2. FY 2011 Tax and Revenue Anticipation Notes

TypicaIl. the City issues 525,000.000 of tax revenue anticipation notes in October in order toalleviate the strain on working capital prior to the receipt of property tax revenues in December. hipy 2011, the issue date was moved up to July 1, 2010 and increased to $50 million. The notes wereissued with a coupon rate of 2.0% and yields of .40%., the notes are recorded in the General Fund.Interest and principal on these notes are payable on June 30, 2011 by the General Fund. The Cityhas maintained a MIG- I rating on its short-term issues.

The amount of the issue was increased by 525 million because staff determined that it waseconomically beneficial for the City to prepay PERS costs at the beginning of the fiscal year at adiscounted rate of approximately 3.7% (total of $26 million), rather than pay them each payrollperiod. This discounted rate is equivalent to a rate of return of over 7%. Prepaying the PERS costswill generate a reduction in these costs of nearly $900,000 in FY 20)1. The additional S25 millionborrowed to prepay the PERS costs will be repaid from the collection of the PERS charges from allCity departments each payroll period in FY 2011.

130

REQUIRED SUPPLEMENTARYINFORMATION

(Other than MD&A)

131

CITY OF BERKELEY

Required Supplementary lnbrmaitcnSchedule of Re*nues, Expenditures and Changes in Fund Balances - Budget and Actual

General Fund - Budgetary Basis

For the Fiscal Year Ended June 30, 2010

Vahance with

Final BudgetOngna Final Actual Posft’eBudge: Budget Amount

Reenues:

Taxes $ 103,694,606 $ 103,694,606 $ 96,219,535 $ (7,475071)Licenses and permits 305000 404,676 742,347 337.671lntergo’ernrnentaF 9,042,383 9,042.383 9.195,282 152.899Charges tbrservces 6.681,137 6,857.133 6.460,891 (396242)Fr”es and pelaltes ‘2026.685 ‘2.026.665 9,379,268 (2,647.217)Rents ard rcya:ies 109.020 107,020 127,201 23,181Franchise 1,965539 1.955509 1,691.152 (274 357)Prie:e contibuticns and dcrat’c’n 205,OcO 205.000 475,971 273,971Indirect cost reimbursement 5,156,000 5,156,000 4,943,274 (212.726)lnestment income 5.200,000 5,200,000 5,388,379 188.379Miscellaneous 275,000 275,000 682,450 407,450

Total re’enues 144,660340 144,934,012 135,305,950 (9,628,062)Expenditures:

General goernment 34,288,609 35.316.154 31 453,533 3,562,651Public safety 78,049,622 78,056,028 76,811,585 1,244443Highway and streets 1,885,266 2,159,266 1,727,890 431,396Health and welfare 7.064,794 6,937,654 6,869707 67,947Culture-recreation 5,239,702 6,362.543 5.551,017 811,526Community de2lopmentIhousing 6,931,761 7,228.023 6,946.742 281,281Eccnornic ce’.eoprert 2,0’3.727 3.309.547 2,174,244 835,303

DeS: seAce:

Prr.cipal repayment 162.444 162,444 162.444teres: and tscat charges 872,497 872,497 1,102,777 (230,260)Cost of issuance 8.469 46,822 (38,353)

Total expendituros 136.505,422 139,812,645 132,684,286 7,128,359

Excess (deficiency) of re’enues oer

(under) expenditures 8,154,918 5,121,367 2,621,664 (2,499,703)

Other inancir.g sources (uses):

Trarsfers in 3226.521 3.226 521 3.204,174 (21,747)Transfars cut (11,994,618) (11,994,618) (9,117.440: 2.877,178lnterfiand repayments 71,074 71.074 1,554,701 1.483,627lnterfiund athences (4,029,480) (4,029,480)

Total other financing inflows (outflows) (8,697,023) (8,697.023) (8,387.445) 309.578

Net change in fljnd balance (542.105) (3,575.656) (5.765,781) (2,190,125)

Fund balance, beginn:ng of year, as restated 24.173.787 24.173 757 22:73,787

Furd balance, end of year S 23.631.682 S 20.598,13’ $ 18,4C8,c6 S (2,193.125)

Explanation of differences between budgetary basis to modified aecruat basis:Net change in hind balances - budgetary basis (5,765,781)

Rccei’ieble accrual 1.799,659Due tolfrom ad’iences 4.029,480Due tcfflron’ repayments (1.554,701’:Liability accruals (264.936;

Net change in fund balances - G&AP bass $ (1.756.280)

132

CITY OF BERKELEYRequired SuppIementan Informaiton

Schet. e cf Re.e,ues. Exped.tses and Changes in Func Balaices - Bud;et ad aotualSpecial Revenue Funds

Grants Fund- Budgeta,-v BasisFor the Fiscal Year Ended June 30. 2010

Variance thFinal Budget

Original Final Actual PositiveBudget Budget Amount (Negative)

Revenues:Taxes $ - $ 149.719 S 284.043 S 131,324Licenses and pennits 399.90l 294.868 (105.033)Intergovernmental 22.878.854 32.513.140 27502,902 (5.010253)Charges for senices 129.861 29.864 274284 144.420Investment income 42. 42.000 40.597 (1.403)Private contributions and donation 5.636 5.636Miscellaneous 12.425 12.425

Totalrevenues 23.050.718 33234.624 28.414.756 (4.819.868)Expenditures:

Current:General government 8.000 60.331 40.490 19.841Public safety 339.632 974.929 281.990 692339I-Iighway and streets 2.570,757 5.7 10.352 3.407.746 2302.606l-Teahh and welfare 15.615.907 18.765.967 14.626.268 4.139.699Cuhure-rccreabn 178.404 726,552 505.019 221.533Community development and housing 4.468.987 I l.870.527 8.925.449 2.945.078Economic 42\Iopmet:t 3.232.750 4.133.119 2.152.451 1,980.668

‘l’otal expenditures 26.4 14.437 4224 1.777 29.939.412 12.302.365Excess (deti&ncy) of revenues over

(under) expenditures (3.363.719J (9007.l53) (1.524.656) 7.481497Other financing sources (uses):

Transfers in 2.551,897 2.551,897 2.551,897Transfers outReceipt of can repayment 8.000 8.000 79.781 71.781Sale of capind assets

Total other fiancing inflows (outflows) 2.559.897 2.559.897 1631.678 71.781Net change in fund balance (803.822) (6.447.256) 1.107,021 7.554,277Fond balance. ginning of year. as restated (5.954.192) (5.954.192) (5.954.192)Fund bahmce, end of;car S (6.758.014) S (12.401.448) S (4147.170) S 7.554277

Explanation of differences bet,.cen budgetary basis to modified accrual basis:Net change in fund balances - budgetary basis S 1.107.021

Receivable accrual (328,749)Notes receivable accrual (79.780)Pasahie accrt.al 65,543

Net change in fund balances’ GAAP basis S 761.031

133

CITY OF BERKEI..EYRequired Supplemenran Informaiton

Sce&!e of Ree,ues EXperdilLieS aid Cha—ges n Fu9d Ba!arces - Bud;et and Acua.Special Revenue Funds

Ltrarv Fund - Budgetary BasisFor the Fiscal Year Ended June 30. 200

Total expenditures

Excess (deficiency) of revenues over(under) expenditures

Fund balances. bginning of year. as restated

Fund balance, end ofyear

14.4-46.820 14.966.915 4201.637 785278

(352.482) (671.786) 316.598 988.384

2.153.073 2.153.973 2.153.973 -

$ .801.491 S 1.482.187 $ 2.470.571 $ 988.384

EpIanaIion ofdifferences between budgetan basis to modified accrual basis:

S 337.907

Revenues:

TaxesIntergovernmentalFhes and penaltiesRents and royaltiesInvestment hwornePrtvale contnbutions and donatonNksceltaneous

Total revenues


ariance s,ilhFinal Budget


S 13.469.716 $ 13.670.507 $ 13,814.489 $ 173.982200.000 200.000 197.316 (2.684)250.000 250.000 293.318 43.318

2.000 2,000 255 (1.745)1228 1.228

142.122 142.122 149.178 7.05630.500 30.500 32.452 1.952

14.094.338 14295.129 14.518235 223.106

General government 19.892 27242 23.785 3.457Culture-recreation 14.42&928 14,939.673 14.177.852 761.821

Net change i fund b&ances . budgetary basisReceivable accrual

Net change h f.nd balances - GAAP basis

$ 316.5982 1.308

134

Revc flues:Taxes

Special Revenue FundsCDBG Fund - Budaetarv Basis

For the Fiscal Year Ended June 30. 2010

Variance ii(hFinal Budget

Oñginal Final Actual PositiveBudget Budget Amount (Negative)

Licenses and perrnizsIntergovernmentalInvestment thcorneMiscellaneous

Expenditures:

Current:

Total revenues

$ 320&082 $ 4250.549 S 2,669.016 (I.58L533)17.000 17.000 0.543 (6.457)

133,000 133.000 148294 15,294

3355.082 4.lOu59 2.827,852 (l.572.697

Genera) goverr.me:stCommunity development and housingEconomic development

Total expenditures

Excess (deficncv) of revenues over(under) experditures

16.000 16.000 16,0003.335.953 1.593.403 3.584.617 1,008.786

188.780 593.030

3.540.733 5,202433 3.600,617 I .008.786

(185.651) (801.884) (772.765) 29,119

(185.65) (80lfl4) (7727651 291t9

6520 6.520 6.520

5 (179.131) S (795364) $ (766245) $ 29.1 19

Net change in find balance

Fund balances, beginnmg of year

______________________________________________________________________

Fund balance, end ofyc ar

Explanation of ditrere nets be hvec n budgetan basis to niodilie d accrual has is:Net ctangc a fund haiances - budgetary basts S 1772765)

Reeeiab)e accrual 518,4-elNotes receivable accrua:s 149.186)Pa’ebe accrual 145.961

Net change in fund balances . GAAP basis 5 (157.550)

135

CITY OF BERKELEYRequired Supplementary lnfoi-maiton

Schedule of Rexenues. Expenditures and Changes in Fund Balances - Budget a:d ActualSpecial Revenue Funds

ParkTax- Budgetary BasisFor the Fiscal Year Ended June 30. 2010

Charges for servicesRents and royaltiesI flVCStfllCflt income

M,sce3aneous


General governmentPublic safetyCulture-re creationCommunity development and housing

____________

Tota] expenditures

Excess (deficiency) of revenues over(under) expenditures

_____________

Net changes in find balances

Fund balances. bcainring of year

Fund balance, end of year

Explanation ofdifferences between budgetarv basis to modified accrnal basis:Net change h fund balances - budgetary basis

ReceLabie accrualLiability Accruais

Revenues

Taxes

Variance withFinal Budget


total revenues

S 8.493.507 S 8.493.507 S &723.059 $ 229.55230.000 30.000 26.005 (3.995)

6.000 6.000 9.737 3,73748.454 4&454 76.695 28.241

Other financing uses:

Transfers out

Total other financing outflows

8.577.961 8.577.961 8.835A96 257.535

63.990 64.817 61.604 3.21326.032 26.032 23.823 2.209

9371.849 10.292.439 9.021.867 1.270.572497 (497)

9.86 1.871 10.383,288 9,107.792 1.275.496

(1.283.910) (1,805,327) (272,296) 1.533.031

(16243) (46.243) (46.243)

(46.243) (46.213) (46.243) -

(1.330.153) (1.851.570) (318.539) 1.533.031

2384207 2384.207 2.813.025 128.818

S 1.054.054 S 532.637 S 2.494.486 S 1.961.849

Net change in fund balances - GAAP basis

S (318.539)7.381

(27.828)

S (338.986)

136

CITY OF BERKELEY

Requircil Supplementary’ Information (Unaudited)Schedules of Funding Progress

June 30,2010

REQUIRED SUPPLEMENTARY INFORMATION

I. Defined Pension Benefit Plans — Sc?; edules ofFunding Progress


Actuarial Actuarial Accrued Accrued PercentageValuation Asset Liability- Liability- Funded Covered of covered

Date Value Entry Age UAAL Ratio Payroll PayrollCaIPERS - Miscellaneous Plan

6/30/2006 $ 418,618,449 481,343,029 $ 62,724,580 87.00% 76,605,875 81.9%6/30/2007 457,881,731 520,958,627 63,076,896 87.90% 81,759,740 77.1%6/30/2008 493,477,863 561,891,793 68,413,930 89.50% 86,150,561 79.4%

CaIPERS - Public Safety- Fire Plan6/30/2006 $ 143,235,774 $ 162,199,258 $ 18,963,424 88.3% 12,845,910 147.6%6/30/2007 152,029,266 167,177,150 15,147,884 90.9% 13,263,627 114.2%6/30/2008 160,099,069 178,219,311 18,120,242 92.5% 13,860,072 130.7%

CaIPERS - Public Safety - Police Plan

6/30/2006 $ 166,753,852 $ 223,237,577 $ 56,483,725 74.7% 18,079,875 312.4%6/30/2007 179,644,843 238,151,498 58,506,655 75.4% 19,033,451 307.4%6/30/2008 190,186,515 250,205,289 60,018,774 78.2% 19,609,940 306.1%

Berkeley Police Retirement Income Benefit Plan7/1/2004 $ 2,906,452 $ 11,542,756 $ 8,636,304 25.2% N/A N/A7/1/2006 4,008,562 28,981,990 24,973,428 13.8% 16,387,c 152.4%7/1/2008 4,734,673 37,241,858 32,507,185 12.7% 21,898,343 148.4%

Berkeley Safety members Pension Fund

7/1/2008 3,496,723 8,153,217 4,656,494 42.9% N/A N/A7/1/2009 3,042,685 7,611,896 4,569,211 40.0% N/A N/A7/1/2010 2,630,205 6,895,254 4,265,049 38.1% N/A N/A

137

CITY OF BERKELEY

Required Supplementary Information (Unaudited)Schedules of Funding Progress

June 30, 2010REQUIRED SUPPLEMENTARY INFORMATION

2. Employers’ Schedule of Contribution- Berkeley Police Retirement IncomeBenefit Plait

AnnualFiscal Year Required Percentage

Ended Contribution Contributed6/30/2008 $ 2,925,396 25.0%6/30/2009 2.315,698 28.0%6/30/20 10 3,030,566 39.0%

3. Defined Other-Post Employment Benefits Plans-Schedules of Funding Progressand Sclz edifies ofEmployer Contributions

SCHEDULES OF FUNDING PROGRESS

Unfunded UAALActuarial Actuarial as

Actuarial Actuarial Accrued Accrued PercentageValuation Asset Liability- Liabilib — Funded Covered of Covered

Date Value Entn Ace UAAL Ratio Payroll PayrollBerkeley Fire Employees Retiree Health Plan (FRHF)

7/1i2005 N/A N/A N/A N/A N/A N/A7/1/2006 S 2,389,564 S 6,607.389 S 4,217,825 36.2% S 10.513,000 40.0%7/1/2008 5 3,455,055 $ 9,340,812 5 5,885.757 37.0% S 15,107,000 39.0%

only two years of actuarial repors are available

8erkeley Miscellaneous Employees Retiree Health Plan (RHPAP)7/1/2006 3,654,997 14,559,206 10,904,209 251% 70,272,000 155%7/1/2007 4,497,529 14,984,493 10.486.964 30.0% 87,064,000 120%7/1/2008 5,450,647 22,133.755 16,683,108 24.6% 89,867,000 18.6%

Employers’ Schedule of Contributions- Berkeley Fire Employees Retiree Health Plan (FRHF)

Annual

Fiscal Year Required Percentage

Ended Contribution Contributed

6/30/2007 $ 488,502 110.0%

6/30/2008 488,502 121.0%

6/30/2009 695,572 89.2%

6/30/2010 695,572 104.0%Only four years of actuarial reports are available

138

CITY OF BERKELEY

Required Supplementary Information (Unaudited)Schedules of Funding Progress

June 30. 2010

REQUIRED SUPPLEMENTARY INFORMATION

Employers’ Schedule of Contributions Berkeley Miscellaneous Employees Retiree Health Plan(RHPAP)

AnnualFiscal Year Required Percentage

Ended Contribution Contributed6/30/2007 S 1.269.504 83.4%6/30/2008 1.378.827 89.5c6/30/2009 2,196.134 71.1%6/30/2010 2,196,134 93.2%

only four years of actuarial reports are available

139

CITY OF BERKELEY

Notes to Required Supplementary Information

June 30, 2010

REQUIRED SUPPLEMENTARY LNFORMATION (Continued)Budgetary Information

Prior to June 1, the City Manager submits to the City Council a proposed operating budget or theupcoming fiscal year. The proposed budget includes a summary of the proposed expenditures andforecasted revenues, and available cash balances (i.e. budget basis fund balance/net assets for theCity’s General Fund, Special Revenue Funds; Capital Project Funds; all Enterprise Funds, and allInternal Service Funds. The City of Berkeley adopts an annual appropriated budget for its Generalfund, special revenue funds (except CA Housing Finance Agency fund; Gilman Sport Field fund;Special Gas Tax fund; Special Gas Tax fund; Fire Assessment District fund; Solano Avenue Bidfund; Underground District fund; Lillie B. Wall Memorial fund: East bay Public Utility fund; Fundfor Impounded and Unneutered), capital project funds (except Public Education/Govt Access Fac.Fund; Measure G Fire Seismic Project; Capital Improvement Administration; Street Improvement;97 GO Bonds Measure 5; Savo Island Project; 2010 COP Animal Shelter fund), and debt servicefunds (except 2010 COP Animal Shelter fund).

The City Council adopts an annual budget by resolution prior to July 1 of each fiscal year. Theannual budget indicates appropriations by fund. The Council may adopt supplemental appropriationsduring the year. At the fund level, expenditures may not legally exceed appropriations. The CityManager is authorized to transfer budgeted amounts between departments or programs within anyfund. Any revisions or transfers that alter the total appropriations of any fund must be approved bythe City Council. The City utilizes a five-year capital plan, which is updated annually. CapitalProject Funds are appropriated annually as part of the regular budget process. Any unused funds arere-appropriated to the following fiscal year until the project is completed.

The City Council approved an original annual appropriation ordinance of $333,355,332 and madesupplementary budget appropriations totaling $65,329,237 during the year. The supplementarybudget appropriations consisted of the following: (I) FY2009 outstanding encumbrances of

S 14,132,206; (2) unencumbered carryovers of $27,761,527; and (3) other budget adjustments of$23,435,504. Encumbrance accounting, under which purchase orders, contracts and othercommitments for the expenditure of money are recorded in order to reserve that portion of theapplicable appropriation, is employed as an extension of formal budgetary integration ingovernmental fund types.

Encumbrances outstanding at yearend are reported as reservations of fund balances. They do notconstitute expenditures or liabilities because the commitments will be honored during the subsequentyear.

Budgetarf Results Reconciled to Results in Accordance with GAAP

The adopted budget adopted and actual results reported in the governmental funds’ budgetaryschedules are on a modified cash basis, which is inconsistent with generally accepted accountingprinciples (GAAP). Under this budget basis, revenues are recorded when received, and interffindloans and repayments are recorded as other financing sources/uses, instead of increases anddecreases in the due to/due from accounts.

140

Combining and IndividualFund Statements and

Schedules

141

Revenues:

Expend lures:Capital outlay:

Cu lure-tee reauon

CITY OF BERKELEYRequired SupplementarY lnformaiton

Budgetaiw Comparison ScheduleCapital Projects Fund

Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and ActualMeasure FE Branch Renovation- Budgetan Basis

For the Fiscal Year EnJed June 30, 2010

Variance withFinal Budget

Original Final Actual PositiveBudget B ud2et Antoun C (Negative)

Dcbl Service:

CosI of IssuanceTotal expccr.di:ures

Excess (deficiency) of revenues o’ Cr(under, expenditures

F-and baances, begin:sing ofvear. as rcsta:ed

Fund balance, end of year

2,400 :.:oo9,884.604 7.782,664 1,457.980 6.324.682

6.073.7:6 8:75,556 (i,44,34C) 9,6l9.996

9.955.299 9,955.299 9,955.299

S 9.955.299 S 9.955,299 S 8.513.959 S 9.519,996)

Explanation of differences between budgetary basis to modified accrual basis:Net change in lund balances - budgetary basis S (1.444.340)

Net change in fund balances - GAAP basis S l1,14,3401

intel revenues

Indirect cost reinthursement S 15.943,520 S 5.943,320 S - SInvestment income I 5,000 5,000 13,641 (1,359)

15.958.320 15.958,320 5,t tI.359)

9.384,501 7.780,264 L457,980 6.322,28e

142

CITS OF BERKELEYBudgclai Coniparisnn Sclieditle

Capital Pmjccis FundExpenditsifts and Changes in Fund Balapires - Budget and Artlia)

Capital niproveinciti - BudgelaR’ BasisFor the Fiscal Year Ended June 50. 2010

Charges for serviceslit ‘es 1111cm incoiTle

N Ii see I Iatieotts

Expendilltres:

Capiia oullas:

General goveninleillHighway and TrectCli liii rc-recreai iouCcuiituuuunilv developnictuuluottsingI:rOnOniic developnieni

Total c\ocndiiuures

cess dcli etc 1ev of rcvc tilt Cs over

id cr1 cx pcnd p ‘cures

Oilier fttiaiicing sources I uses I:

‘I ratus fers inTransfers oto

Explanalion ofdiflerences hem ccii budgetary basis to mIiried accrual basis:Nc’ cluanoc ml lund balances - httdgctars basis

Due airom advancesAccounis Payable Accrual

Note receivables accntals

Schedule sic Res ernie’.

Revenues,

To, a I revLilu Cs

‘atiance withFinal Budget

Original Fi,ial Actual Positi’Budget Budget Amount (Negative)

S - S - S 7.320 S 7.32025.000 25.000 4.537 120.465)

4(10(1 6.056 2.056

25.0 214.1100 7913 ll.087i

464.208 621.843 450.962 170.8815.154.694 5.329.020 2.142.722 3.186.298

588.749 I .253.792 548.072 705,720988.035 1924.336 976.863 947.47545.753 93.a.554 35.378 901.176

5.239.39 10.065.545 4.1 5.998 5.911.547

5.2 14.439) 110.034.515) 4.134.085) 5.91)0.460

6.000.000 6.000.000 3.500.000 12.700.000l(748,233) (748.233) 1500.13]) 239.102

5.251.767 5.251.767 2.790.869 2,460,898p

37.328 (4.782.778) ) 1.343,2161 3.439.562

12.113.253 12.413.253 12.413.253

S 12.450.581 S 7.630.475 S 11.070.037 S 3.439.562

Toial oilier fi,paiictng infloss s lolutfioseid

Net change- in fund balance

Fund balances. beginning of year

Fund balance, end ot year

Net citatuge itt fund balances - GAAP basis

11,343.216)

0543.068 I

S 104.8 54

S 1.281.4301

143

Nonmajor Governmental Funds

SPECIAL REVENUE FUNDS

Special Revenue funds are used to account for proceeds of specific revenue sources (otherthan capital projects) that are legally restricted to expenditure for specific purposes. The useof special revenue funds is required if legally or otherwise mandated.

Asset ForfeitureFund established to account for monies received from the seizure and forfeiture ofassets acquired by the City as a result of narcotics related law enforcement.

Special Tax for DisabledFund established to account for special tax, which is solely for providing emergencyservices and incidental case management for severely physically disabled persons.

Workforce Investment ActFund established to account for funds provided by allocation of WorkforceInvestment Act grant funds

Sec 108 HUD Loan Grant AssistantFund established to account for funds for Sec 108 HUD loan and its disbursement.

California Housing Finance AgencyFund established to account for funds for operating a local housing program.

Gilman Sports FieldFund established to account for funds for Gilman sports field.

Animal ShelterFund established to account for funds donated for providing animal shelter andrelated services.

Paramedic Assessment DistrictFund established to account for special tax assessed for paramedic service

Tieback Mitigation R-O-WFund established for the collection of mitigation fees from developers for the futurepotential cost associated in removing tiebacks or any other cost associated in thePublic right of way.

Domestic Violence Prevention Vital StatisticsFund established to account for the surcharge for birth and death certificates that areissued by the Berkeley Public Health Vital Statistics unit to be used in theadministration and coordination of domestic violence and family violence preventionactivities.

144

Affordable Child CareFund established from fees collected from developers of large scale commercialdevelopment to assist low-income families with monthly child care payments.

Inclusionary Housing ProgramFund established to account for the administration of the lnclusionary HousingProgram, whereby 20% of new units in apartment projects in the City of Berkeleymust be offered at a rent or sale price that is affordable to low income households.The City charges fees fcr the administration and monitoring of this program.

Condo Conversion ProgramFund established to account for the administration of the affordable housing. Housingdepartment can charge 10% of the revenue for program delivery costs.

Playground CampFund received from registration and miscellaneous fees for the purpose of operatingthe City’s vacation camp and day camps.

Special Gas Tax Fund (30)Fund established to account for City’s gasoline tax apportionment revenues. Gas taxfunds are restricted to maintenance and construction of certain City street. This funddoes not have much activity at the present.

Special Gas Tax Fund - DiscFund established to receive monies from City’s gasoline tax apportionment revenuefor discretionary use.

State -2106Fund established to receive monies from City’s gasoline tax apportionment revenueper Section 2106, Streets and Highway Code.

State -2107Fund established to receive monies from City’s gasoline tax apportionment revenueper Section 2107, Streets and Highway Code

State - 2107.5Fund established to receive monies from City’s gasoline tax apportionment revenueper Section 2107.5, Streets and Highway Code.

State — SB300Fund established to account for the money received under the state’s SB300program.

State— Prop 111Fund established to receive monies from State Proposition 111 for the highway trafficcongestion relief and spending.

State Proposition 172Fund established to receive monies from sales tax to be used for public safety.

145

Traffic Congestion ReliefFund established to receive monies from State to be used for highway and streetpurpose.

Rental Housing Safety ProgramFund established to receive monies by charging an annual per unit fee to the rentalhousing property owner, imposing fines to all related violations. The purpose of thisfund is to provide and streamline the Rental Housing Safety Program (RHSP) whilemaintaining the overall goal of having owners, tenants, and the City work together toincrease the safety of all residential rental units.

Measure B: Local Streets and RoadsFund established to account for the tax assessed for local streets and roads.

Measure B: Bike and PedestriansFund established to receive monies used for the maintenance of bike and pedestrianlanes.

Measure B: ParatransitFund established to account for the revenue assessed from property tax to be usedfor expenses related for paratransit services.

Fire Assessment DistrictFund established to account for the $55,000,000 Fire Protection Bond Measure(11/92) and monies collected from the fire assessment district. These funds are tobe used solely to finance the acquiring, and constructing and equipping of a new firestation, the repairing and seismic retrofitting of five existing fire stations, thereplacement of deteriorated four-inch water mains with eight-inch mains and theconcurrent street overlay work necessitated with the issuance of the bonds.

CFD#1 District Fire Protect BDFund established to account for fire and disaster tax passed in Bond Measure GG in2009. The monies collected are for emergency responses.

Street LightingFund established to receive special assessment district monies used formaintenance and or servicing of existing and future public lighting facilities, and theinstallation or construction of public lighting for the maintenance of servicing thereof,including grading, clearing, removal of debris, the installation of curbs and gutters)walls, sidewalks or paving or water, irrigation, drainage or electrical facilities.

Solano Avenue BidFund established to account for the revenue assessed from the Solano Avenue’sbusiness district to be used for expenses related for cleaning, repairing andadvertising improvement for the district in order to general aggressive sales benefitas a long term goal.

Underground DistrictFund established to account for Fire District Underground property assessments.

Downtown Business Improvement DistrictFund established to be used to contract with Downtown Berkeley association forDowntown revitalization program.

146

Telegraph Business Improvement DistrictFund established to receive special real property assessments monies, which isused to improve the commercial business district of Telegraph area. Themanagement district provides maintenance, revitalization and marketing servicesabove and beycnd those provided by the City of Berkeley.

North Shattuck Business Improvement DistrictFund established for the purpose of collecting and accounting for bid revenues.

Business Economic DevelopmentFund established to receive monies from a federal grant (Economic DevelopmentAdministration) for the purpose of providing loans to eligible South Berkeleyestablishments under a program approved by the City Council.

Citywide RLF (Revolving Loan Fund)Fund established to account for Citywide Commercial revolving loan fund forrevitalization of business enterprises and job stimulation.

Employee Computer LoanFund established to account for interest free loans made to employees to purchasecomputers, and for the repayment of those loans.

Miles LabFund established to provide job training for Berkeley residents.

Employee TrainingFund established to provide training to city employees

UC SettlementFund established to account for agreed upon expenses to be shared between City ofBerkeley and University of California, Berkeley.

Private Party SidewalksFund established to account for reimbursements from private parties, which werepreviously passed through Landscape Assessment District Fund, now a parks tax,and all sidewalk funding is to be removed from this fund.

Public ArtFund established to set aside funds for the development of visual art in public places,including art developed in conjunction with city construction projects.

Lillie B. Wall MemorialFund established to provide day nursing care to needy children in the City ofBerkeley

Vital and Health StatisticsFund established to account for monies held in trust for vital and health statisticprogram.

East Bay Public Utilities CommissionFund initiated to oversee expenses involved in the construction of certain publicimprovements in Assessment District No. 1960-1 in the City of Berkeley.

147

Other Special DepositsFund established to receive monies left in trust with the City of Berkeley for specificpurposes from various sources.

Health State Aid RealignmentFund established to receive monies (Assembly Bill 1491) from vehicle license feesand state sales tax to support public health activities within the Citys healthjurisdiction. This fund provides for the ongoing fiscal relief measure in response tothe local funding dilemma created by Proposition 13. These funds replace theAssembly Bill S allocations normally received by the city for providing Public HealthServices.

Tobacco ControlFund established to receive State monies from special tax on cigarettes to providepublic health education and outreach on tobacco use prevention and cessation.

Mental Health State Aid RealignmentFund established to receive monies from State sales tax fcr the purpose of providingmental health services to the citizens of Berkeley and Albany.

City Opt. Public Safety TrustFund established to receive monies from State as a result of Assembly Bill 3229 forthe purpose of purchasing radio equipment for the Communications Center of thenew public safety building.

Fund for Impounded and UnneuteredFund established to account for monies held in trust for impounded and unneuteredanimals.

Alameda County Abandoned Vehicle Abatement AuthorityFund established to provide an interest bearing abandoned and inoperative vehiclefund in accordance with requirements mandated by the California Vehicle Code:section 22710.

148

CAPITAL PROJECT FUNDS

Capital projects funds are used to account for financial resources to be used for theacquisition or construction of major capital facilities (other than those financed by proprietaryfunds and trust funds).

Public, Education & Government Access FacilitiesFund established to account for monies received from the Cable TelevisionFranchise. These monies are to be used for capital expenditure for PEG studios,video production equipment, mobile production van(s), internal wiring connections,and related capital items,

Measure C: Fire Seismic ProjectsFund established to account for fire seismic projects.

Measure C: Public Safety BuildingFund established to account for the retrofit of public safety building.

Capital Project AdministrationFund estab!ished to account for money received for the support the administration ofthe capital projects group

Street Improvement FundFund established by Resolution 26,971 to receive shared County Gas Tax revenuesfrom the City of Berkeley and County of Alameda for use on specific streetimprovement projects. Contract is for five years, fiscal year 1968-89 through fiscalyear 1992-93.

97 General Obligation Bonds Measure SFund established to account for capital improvements in Berkeley’s Main Library,Civil Center, and downtown Berkeley area.

Park Acquisition DevelopmentMonies provided by an annual tax levy of $20 for each $100 of assessed valuation.This levy ended after FY 1979-80. A minimum of 75% of the revenues are used forthe acquisition and development of real property which are used for recreation andopen space purposes determined by the Recreation and Parks Commission andPlanning Commission. The balance of the Fund (up to 25%) may be used for therenovation of existing City park properties and for associated administrativeexpenses.

West Berkeley Improvement FundFund established to account for capital improvement in the west Berkeley projectarea for Berkeley Redevelopment Agency.

West Berkeley: Low and Moderate HousingFund established to account for 20% set aside from tax increment in west Berkeleyproject area that is for the purpose of developing low and moderate income housing.

149

Savo Island ProjectFund established to account for capital improvement in the Savo Island project areafor Berkeley redevelopment agency.

Savo Island Project: Low and Moderate HousingFund established to account for 20% set aside from tax increment in Savo Islandproject area that is mainly for the purpose of developing low and moderate incomehousing.

Animal Shelter Land/BldgFund established to receive monies for acquisition of facilities for animal shelter.

2010 COP Animal ShelterFund established to account for 2010 municipal bond measure solely for the purposeof building a new animal shelter.

150

DEBT SERVICE FUNDS

Funds established to account for the accumulation of resources for, and the payment of,general long-term debt principal and interest.

Sale Lease FinancingFund established to receive monies and to make interest and debt service paymentsfor the 96 Refunding Lease Revenue Bonds (BJPFA).

09 Measure FE - LibraryFund established to account for a bond measure FF in 2009— the library’s retrofittingprojects, part of the monies received are for furniture and fixture.

West Berkeley Improvement FundFund established to account for the west Berkeley project area’s 2005 bonds and forreceiving tax increment money to pay against the indebtedness.

Savo Island Improvement FundFund established to receive tax increment money and to account for payment of debtfrom City’s miscellaneous retiree medical trusts.

GO 2007 Refunding BondsFund established to receive monies and to make interest and principal payment onthe Berkeley 2007 General obligation refunding bonds replacing the old Measure Sseries A, B, C.

Berkeley Repertory TheatreFund established to receive monies and to make interest and principal payment onthe Berkeley Joint Powers Financing Authority Lease Revenue Bonds, Series 1999.The proceeds of the bonds are used to acquire a new theater facility with a park tobe constructed by the Berkeley Repertory Theatre or other public facilities.

GO 2002 Refunding BondsFund established to receive monies and to make interest and principal payment onthe Berkeley 2002 General Obligation bonds replacing the old Measure G series Aand B.

GO 2007 Refunding Bonds ProceedsFund established to receive Proceeds from the 2007 General Obligation Refundingbonds which replaced the old Measure G series C.

GO 2008 Animal Shelter— Measure IFund established to receive monies and to make interest and principal payment onthe Berkeley 2002 General Obligation bond for the animal shelter.

2010 COP Animal Shelter

Fund established to receive funds to finance a portion of the acquisition andconstruction of an animal shelter

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INTERNAL SERVICE FUNDS

Internal service funds used to account for the financing of goods or services provided by onedepartment to other departments of the City, on a cost reimbursement basis.

Equipment Maintenance and ReplacementFund derived from rental rates are used to maintain and replace equipmentsfor the Corporation yard.

Building MaintenanceFund established to account for charges for service by the Public Works BuildingMaintenance Division for the maintenance of City buildings.

SuppLy Warehouse FundFund established for maintaining an inventory of office materials and supplies in theCity’s warehouse facility. Departmental budgets are charged for this service.

Computer ReplacementFund established to systematically modernize our Citywide PC infrastructure andsafeguard the efficiency of our network operations. each department is required tocontribute based on annual budget times a fl-action, which is the number of existingPCs within the department to the whole city. One twelfth of the annual budgetedamount was charged each month.

Workers’ Compensation Self-InsuranceFund established to pay for expenditures made solely for the purpose of payingworkers’ compensation insurance claims costs, legal fees attendant thereto, disabilitybenefits, related medical benefits, payment of any settled disability claims orjudgments, administrative costs and all matters relating thereto; which departmentalbudgets are charged.

Sick Leave & Vacation PayoutsFund established as the sick leave and vacation leave accrual fund for the purpose ofaccounting for payouts of unused and terminal sick and vacation benefits.

Public LiabilityEach fiscal year monies from the General Fund are deposited in this fund to restore

the balance of at least $175,000. Expenditures from this fund are made solely for thepurpose of paying public liability claims investigation and adjustment costs, legal defensecosts1 and payment of any settled public liability claim or adjustment. The General Fundreimburses expenditures for this fund

Catastrophic LossFund established to protect the City from severe financial hardship and disruption ofongoing service occasioned by the award of public liability judgment in excess of$250,000.

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Fiduciary Funds

Pension and Other Employee Benefit Trust Funds

Police Retirement fundThis fund is used to account for the single-employer income benefits pension plan forBerkeley police officers that retired on or after July 1, 1989.

Safety Member Pension Fund/Pension Annuity FundThis fund is used to account for the single-employer defined benefit pension plan for fireand police officers that retired before March 1973.

Fire MedicalThis fund is used to account for the single-employer defined benefit medical plan forsworn fire officers that retire on or after July 1, 1997.

Retiree MedicalThis fund is used to account for the single-employer defined benefit medical plan forretirees and his/her spouse or domestic partner.

192

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Agency Funds

District 47 Underground/MillerThis fund is used to account for property tax collected and bond proceeds for the District47 residents for the underground utility.

Sustainable EnergyThis fund is used to account for property tax collected and bond proceeds for therenewable solar system for the Berkeley citizens.

Thousand Oaks UndergroundingThis fund is used to account for property tax collected and bond proceeds for theThousand Oaks District residents for the underground utility.

Measure H School TaxThis fund is used to account for property tax under Measure H for the Berkeley UnifiedSchool District.

CFD No. I Disaster Fire Protection Mello-RoosThis fund is used to account for property tax collected and bond proceeds for theCommunity Fire District Mello-Roos.

Sick Leave EntitlementThis fund is used to account for unused sick leave balance for retiree.

195

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Index to Statistical Section

This part of the comprehensive annu& financial report presents detailed information as acontext for understanding what the information in the financial statements, notedisclosures, and required supplementary information says about the City’s overallfinancial health.

Contents Page

Financial Trends 199-205These schedules contain trend information to help the reader understandhow the City’s financial performance and well-being have changed overtime.

Revenue Capacity 206-209These schedules contain information to help the reader assess the factorsaffecting the City’s ability to generate its property tax.

Debt Capacity 210-214These schedules present infonation to help the reader assess theaffordability of the City’s current levels of outstanding debt and theCity’s ability to issue additional debt in the future.

Demographic and Economic Information 215-217These schedules offer demographic and economic indicators to helpthe reader understand the environment within which the City’sfinancial activities take place and to help make comparisons over timeand with other governments.

Operating Information 2 18-221These schedules contain information about the City’s operations andresources to help the reader understand how the City’s financial informationrelates to the services the City provides and the activities it peForius.

Sources: Unless otherwise noted, the information in these schedoles is derived from thecomprehensive annual financial reports for the relevant year. The City implementedStatement 34 in fy2002; schedules presenting government-wide information includeinformation beginning in that year.

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inue

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ityof

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und

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ance

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rces

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s):

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nsfe

rsin

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nsfe

rsou

lL

oans

issu

edR

efun

ding

bond

sis

sued

Cer

tifi

cate

sof

part

tcip

atio

nis

sued

Pre

miu

mon

debt

Pay

men

tto

refu

nded

bond

ses

crow

agen

tR

efun

ded

bond

sre

dem

ptio

npr

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ales

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las

sets

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ces

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conc

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d

Not

es:

(1)

The

oer

centa

ge

indi

cate

dfo

rF

isca

lY

ear

2004

issi

gnf

cani

lyhi

gher

due

toth

eea

rly

reli

rerr

eni.

ofL

ease

Rev

enue

Bon

dsis

sueo

in19

96(2

)T

heFY

2006

amo

un

tis

rest

ateo

Exce

ss(d

ef:c

ienc

y)of

reven

ues

over

(und

er)

expe

nd!t

ures

2002

2003

2004

2005

°isc

al_Y

ear

__

__

___

__

__

__

__

__

__

__

__

__

__

_

2006

2007

2008

2039

2010

4,14

2

3.99

9,78

69,

390,

891

(1,3

78.1

16)

(91

,87

2)

22.1

52,

164

(27,

005.

267)

9,3

94,0

00

21,5

8222

1.92

7(6

,040

,000

)(4

4,96

0,62

7)(8

46,3

00)

__

__

__

__

__

__

__

__

23,4

701.

530,

333

2.21

8,52

6

__

__

__

__

__

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__

__

22.6

34,0

32(2

4,01

7,08

2)11

,894

,000

Deb

tse

rvic

eas

aper

centa

ge

ofno

ncap

ital

expa

ndit

ures

813

%

14.5

52,

263

(16.

336,

520)

6.00

0,0

00

1,88

22,

490

1,45

2

65

1%

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537%

8.59

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%

Sourc

e:C

ityot8

ei*el

eyF

inan

ceD

epar

tmen

t

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edule

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ityof

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kele

yA

sses

sed

Val

uean

dE

stim

ated

Act

ual

Val

ues

ofT

axab

leP

rope

rty

Las

tT

enF

isca

lY

ears

(In

Th

ou

san

ds

ofD

olla

rs)

Com

mer

cial

Tot

alT

axab

leE

stim

ated

Fis

cal

Res

iden

tial

Util

ityan

dIn

dust

rial

Inst

itut

iona

lL

ess:

Ass

esse

dT

otal

Dir

ect

Act

ual

Tax

able

Yea

rP

rope

rty

Pro

pert

yP

rope

rty

Pro

pert

yE

xem

ptio

nsV

alue

Tax

Rat

eV

alue

2001

$513

90

22

$2640

$1

70

6,0

43

$12

0,79

2$

(351

,510

)$

7,32

0,00

710

.87

$7320,0

07

2002

5,5

58.8

85

2523

t795,0

77

125,

595

(368

,619

)7,

850,

698

10.8

77,

850,

698

2003

5,98

1,69

12,

463

1,91

1,66

012

6,73

7(3

73,1

30)

8,39

5,68

11075

8,39

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120

046,4

66,9

78

2,52

72,

013.

079

131,

659

(360

.677

)8,

974,

920

10.7

38,

974,

920

2005

7,0

05

22

33,

075

1,96

6,68

014

9,09

2(4

33,0

86)

9,55

7,15

610

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9,55

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620

067,

673,

198

2,52

02,

085,

365

156,

657

(415

,243

)10

,332

,984

10.6

510

,332

,984

2007

8,41

5,41

12,

335

22

35

,74

321

2,84

7(4

86,9

55)

11,3

53,2

9210

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9220

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114,

801

1,32

52,

353,

222

23fl

.899

(538

,391

)11

,161

,856

10.4

511

,161

,858

2009

9,76

2,01

147

42,

496,

734

2zo,

j15

(570

,449

)11

,918

,885

10.5

511

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,885

2010

9,91

5,72

347

42:

570,

430

269.

072

(669

.646

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112

.086

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Not

e:

1.In

1978

,th

evo

ters

ofth

eS

tate

ofC

alif

orni

apas

sed

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posi

tion

13w

hich

limite

dta

xes

toa

max

imum

rate

of1%

bas

edup

onth

eass

ess

ed

valu

eof

the

prop

erty

bein

gta

xed.

Eac

hy

ear

the

asse

ssed

valu

eof

prop

erty

may

bein

crea

sed

byan

“inf

latio

nfa

ctor

”(l

imite

dto

am

axim

umin

crea

seof

2’,

‘.

With

few

exce

ptio

ns,

prop

erty

ison

lyre

asse

ssed

atth

eti

me

that

itis

sold

toa

new

owne

r,A

tth

atpo

int,

the

new

asse

ssed

valu

eis

reas

sess

edat

the

pu

rch

ase

pric

eof

the

prop

erty

sold

.O

nly

six

yea

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asse

ssed

valu

ean

des

tim

ated

actu

alta

xabl

eva

lue

dat

ain

this

form

atw

asav

aila

ble.

So

urc

e:A

lam

eda

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nty

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itor

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olle

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es,

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ears

(Rat

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ofA

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City

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ect

Rat

esO

verl

appi

ngR

ates

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eral

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alta

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ayE

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nal

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Rat

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nsit

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alR

ate

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00.

8710

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008

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220

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00.

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2010

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00.

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7

Not

es:

(1)

In19

78,

Ca(

ifor

nia

vote

rspas

sed

Pro

posi

tion

13w

hich

sets

the

prop

erty

tax

rate

ata

1.00

%(o

r$1

0pe

r$1

,000

ofas

sess

edva

lue)

fixe

dam

ount

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his

1.00

%is

shar

edby

all

taxi

ngag

enci

esfo

rw

hich

the

sub

ject

prop

erty

resi

des

with

in.

Inad

diti

onto

the

1.00

%fi

xed

amou

nt,

prop

erty

owne

rsar

ech

arged

tax

esas

ap

erce

nta

ge

ofas

sess

edpr

oper

tyv

alu

esr

the

paym

ent

ofC

ity,

scho

ol,

and

othe

rdi

stri

ct’s

bond

s.

So

urc

e:A

lam

eda

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itor

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trol

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edu

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pert

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centa

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able

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c.,

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centa

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able

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esse

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nty

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VIII

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ofB

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Pro

pert

yT

axL

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san

dC

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ctio

ns,

Las

tT

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(In

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ou

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ds

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rs)

Not

e:(1

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evie

sin

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and

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cure

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rope

rty.

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lect

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insu

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bas

edon

reve

nue

rece

ived

from

the

Cou

nty

for

the

fisc

alye

aren

dsh

own.

The

City

do

esno

tre

ceiv

ein

form

atio

nfr

omth

eC

ount

yth

atsp

ecif

ies

how

muc

hof

the

sub

seq

uen

tco

flec

tion

rece

ived

belo

ngs

toea

chfi

scal

year

.S

ubse

quen

tco

llec

tion

sfo

rbo

thta

xty

pes

incl

ude

pen

alti

esan

din

tere

stas

sess

edon

the

prev

ious

lyun

paid

amou

nts

.A

sa

resu

lt,

tota

lco

Hec

tion

sfo

rea

chle

vyy

ear

are

not

pre

sen

ted

.

(3)

Unse

cure

dco

llec

tion

sin

subse

quen

tyea

rsis

not

aval

able

for

fisc

alyc

urs

prio

rto

2002

.

Fis

cal

Col

lect

edw

ithin

the

Yea

rT

axes

Lev

ied

Fis

cal

Yea

rof

the

Lev

yE

nded

for

the

Per

centa

ge

Jun

e30

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isca

lY

ear

(1)

Am

ount

ofL

evy

Col

lect

ion

inS

ub

seq

uen

tY

ears

(2)

Sec

ure

dU

nse

cure

d(3

)T

otal

2001

23,3

3922

,854

97.9

2%68

268

220

0224

,936

24,3

0497

.47%

462

4851

020

0326

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26,0

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654

8774

120

0428

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27,3

9797

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688

9978

720

0530

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8497

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652

2267

420

0632

,681

31,9

0997

.64%

695

1671

120

0735

,643

34,3

3596

.33%

1,18

911

81,

308

2008

38

20

236

,422

95.3

4%1680

100

1,78

020

0940787

38,8

9195

.35%

1757

139

1,89

620

1041

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39,9

5196

,71%

So

urc

e:A

lam

eda

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nty

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itor

-C

ontr

olle

r’s

Off

ice

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edul

eIX

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ofB

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able

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2.45

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1,62

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1,74

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96,3

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67.9

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110

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551,

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3,54

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012

,550

920

4,59

6c

85,4

8620

0864

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6,70

511

,715

473

5,58

488

,732

2009

71,4

306,

503

10,9

404,

440

6,28

399

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68,7

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545,

210

10,2

154,

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1,26

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27,9

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375,

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094.

510

26,7

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data

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2005

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110

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94%

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220

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55

11

71

51!

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775

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3010

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59

70

88,3

400.

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824

2010

68,7

0010

,215

‘‘

5,21

084

,125

0.70

%77

8

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es:

Det

ails

rega

rdin

gth

eci

ty’s

outs

tand

ing

debt

can

befo

und

inth

eno

tes

toth

efi

nanc

ial

stat

emen

ts.

(a)

See

Sch

edul

eV

for

prop

erty

valu

eda

tafo

rF

Y20

0Ito

2010

(b)

Pop

ulat

ion

data

can

befo

und

insc

hedu

le14

.

Sou

rce:

Fin

ance

Dep

artm

ent,

City

ofB

erke

ley

Schedule XlCity of Berkeley

Dfrect and Ovenapping Governmental Activfties DebtAs of Jre 30. 2013

(In Thousands of Dollars, except assessed valuation)

2009-IC Assessed Valuabon S 12 085,052 645Redev&opmert Incremental Valuation: 177320992Adjusted Assessed ValuatEcn: S 11938.731,653

EstimatedEstimated Share of Direct

Debt Outstanding Percentage and OverlappingDIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: 6/3012010 Aoo[icable (jJ Debt 6/30/ICBay Area Rapid Transit District 5423,000 2.82% S 12,46East flay Municipal Utility District, Special District No. 1 27.255 21.01% 5.726Perafla Community College Disuict 445645 22.77% 101478Serkeley Unified School District 213,759 100,00% 213,753City of Berkeley Community Facilities District No. 1 6,990 100.00% 6,990East flay Regional Park District 196,775 4.41% 8,672Cty of Berkeley Thousand Oaks Heights AFUU Assessment Disttct 1.370 100.00% 1370

SUBTOTAL OVERLA2PING TAX AND ASSESSMENT DEBT 350,35

TOTAL NET OVERLAPPING TAX AND ASSESSMENT DEBT 350,135

DIRE AND OVERLAPPING GENERAL FUND DEBT:Alameda County and Coliseum Obligations 5419,006 7.40% $ 31,023Alameda County Iension Obhgaticns 178,387 7.40% 13,208Alameda-Contra Costa Transit District Certificates of Participation 40,335 8.98% 3,622Peralta Community College District Pension Obligations 155,369 22.77% 35,379

TOTAL OVERLAPPING GENERAL FUND DEBT 83,232

CITY DIRECT DEBT 105,583

TOTAL DIRECT AND OVERLAPPING DEBT $ 189,815

GROSS COMBINED TOTAL DEBT (2) $ 539950NET COMBINED TOTAL DEBT $ 539,950

Notes.

Overlapping governments are those that coincide, at least in part, with the geographic boundaries of the City This scheduleestimates the portion of the outstanding debt of those overlapping governments that is hcrne by the residents and businesses ofthe City. This process recognizes that, when considerng the Cit/s abilty to :ssue and ‘epay ong-term debt, the entire debtburden borne by the residents and ousinesses should be taken into accounL However, th s does not mpiy that eve.? taxpayer isa resident, and theeore responstble for mpaying the debt, of ea& veiapping government.

(2) Excludes tax and revenue anticipation nctes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bondedcapital lease

Source: California Municipal Statistics, Inc.

212

Sch

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Schedule XVIICity of BerkeleyOperatic: indicatorsCurrent arc last two flscal years

Fiscal Year Fiscal Year Fiscal ‘Year2008 2009 2010

FUNCTION/PROGRAM

General governmentBuilding Permits Issued

Rss;derta; Permits Issues 1822 1.526Residential Permits Value $ 76.889,732 S 113 415 812 $ 44,137,DecCcnmec:al Permits Issued 378 376 35cCommercial Permits Value $ 75,644,224 5 40,785,465 $ 40,512,824

Residential Parking PermitsNumber of Daily Permits Issued 36,000 41.236 32.824Number of 14 Day Permits Issued 1,760 1 609 1.286Number ofAnrua. Permits tssued 14,500 4 43 14340

City ClerkNumber of Council Resolutions Passed 366 415 441Number of Ordinances Passed 47 51 52Number of Contracts Passed 538 546 569

General ServicesNumber of Purchase O-ders Issued 5,813 5,205 5,306

PolicePhysical Arrests 3,659 2,758 3,479Parking Violations 339,941 285,729 251,542Traffic Violations 313,597 17,252 15,331DUI Arrests 244 210 197

FireSlructure Fires 104 88 60Vehicle Fire 40 31 29Other E:es 272 51 177Medical Calls 7,921 7.947 8,211Haz-mat Calls 52 83 73Other Calls 3,478 3,474 3,416CutofCity 224 156 60

Department of Heal:, Servrces (e) 1)Heath Inspections and Permits 8,453 8.714 7,404Home Delivered Meal (e) 2) 700’S 62679Pubbc Health Services Encounters (e) 3) 66,700 65,445 75,800Mobile Crisis Visits 2,800 3,039 2465Summer and year-round jobs provided for youth (e) 2) 618 475

Housing and Community Services Department (e) 1) (e)2)Home Delivered Meal (e) 2) 70.015 62679 63 355Surner and year-round obs prctides for youth Ce) 2) 359 475 495

LisraryNumber of visits made to Library Branches 1524,973 1,411.112 1,523,017Number of people that are registered library card holders 84.513 95,275 95,917Number of times materials from the library circulated (items checked out) 1,738,888 1.951,032 2,081,583

(Continued)

218

Schedule XVIICity of BerkeleyOperating IndicatorsCurrent and last two fiscal years

Fiscal Year Fiscal Year Fiscal Year2008 2009 2010

FUNCTION/PROGRAMBerkeley Housing Authority

Percentage of Section 8 Voucher Units Leased 92% 90% 96%Percentage of Public Housing Units Occupied 87% 95% 89%Average number of monlhly Section 8 Units leased 1673 1,651 1763Approved number of Section 8 Units 1841 1841 1841Total Housing Assistance Payments (HAP) S 19,202642 $ 16,782,311 $ 20,526,565Average monthly HAP per unit $ 956 $ 948 $ 970

Solid Waste ManagementDiversion Rate (pending State Approval) (a) 065 0% (a) 0% (a)Transfer Station Customers (b) 123,538 110829 108,068

Total incoming tons at transfer stationRefuse and C&D 79,736 77,419Organics 30631 34,170Total incoming tons 110367 111,589

Landlilted Tons (c) 90,432 68,420 63.094Recycled /Compcsted Tons (d) 50,842 45,053 49,882Totat tons exiting transfer staticn (c) 141,274 113,473 112,976

Recycling MethodRecycled/Ccmposted tons:Organics collection to compost facility 16,824 19,420Organics - public Io compost facility 12,085 14.750Transfer Station Salvage 1,723 1,732C&O Diverted at sorting facility 14,426 13.980

TOTAL TRANSFER STATION DIVERSION 45,059 49.882

Buybackdropoff 5,100 4.018Ecology Center Residential Curbside 7,479 6.741Ccmmercial recycling 3,154 2.927

TOTAL RECYLINC COLLECTION aI CCC (Not at transfer station) 15,733 13.686TOTAL CITY CONTROLLED DIVERSION 60,792 63.568

Other Public WorksStreet Resurfacing/Overlay/Reconstruction (miles) 2 0 4ADA Compliance: New Curb Ramps 213 0 133Traffic Circles - Cumulalive 54 55 55Street Poles with Lighls - Cumulative 7.860 7,860 7860

MarinaNumberof Berths i,ioi 1,101 1,035Number cf Occupied Berths 798 873 920Number of new berthers 183 194 157Number of paid launchers 4.515 6,234 4,566Launch Ramp Total Revenue (0 $ 24.172 $ 44,243 $ 51,972

ParkingNumber of Pay and Display Meters Operating 74 210 213Number of Duncan Meters Operating 2.622 1,655 2.045

Planning and Development DepartmentCustomers Served 23,495 22.083 23,301Building & Safety Inspections Performed 19,255 20,544 20,154Tcxics: CUPA Inspections 413 302 349Redevelopment: Number of active projecls 5 5 5

Sanitary SewerNumber of CustomerAccounls Billed 30,192 31,214 30,948

(Concluded)

219

Schedule XVIICity Cf BerkeeyOperating IndicatorsCurrent ar,d ‘asr twO tscal years

Fiscal Year Fiscal Year Fiscal Year2008 2009 2010FUNCTION)PROGRAM

(a) Cal:’orn a ‘egistat or. SBO16 changed measurenner,t requirerrertsAdopling measurement requirements ot pounds per person pa’ day instead of divemicn rates which are r.o longer in usa.2)Aocptmg measuemer requirements ci pounds SOr person per day ‘nstead of di’a,.cn rates v.i’cf’ are rc longer itt u-SO

(b) “Customers’ are alt paying customers regardless of the own hey come from,Landtitled and recycled tons are all Ions going through the transfer slation. It inoludes SWMD collection trucks, as well as payingcustomers,

(C) Outside tons not included in transfer station tons:1) Tons colecled by crivate haulers and laker to other lsdt’.ls2) Tone lel,vered by members of the cube to other iandtns or transfer srat:ons3) Sere’ey tons recyo’ed cy the private sector

(d) Recycl.r.; Melricd new tts year provides toe detail of Total Ciry-conlroires DiversionCe) Deparnmental Reorganization.

1) health and Human Services restructuring now named Depariment of Health Services, Housing Department renamed to Housing andCommunity Services DepartenL Public Health, Housing and Community Services along with Planning and Development Dapanment althave changes in their department composition and functions in 2010

‘Arenong BERKELEY Muvo:OAL CODE SECTIONS 2.53.0’ 9 2 53.023. 2 50.03-3. 2 SC’ 040. 2 50 350, 2.50.360. 2.5’ .020.2.62 010, 2.62.020. 2.62 030, and 2.60.040 To Renect updated organizational changes2) Program moved 2310 to Hcusg and Community Services Denarimenls

3) Health Education and linkages to services indicator no longer measured as operating indicator

4) Oparatng indicalor “Heallh Edacation and linkages to services” now referred to as “Public Health Services Encounters”(0 Launch Ramp Fees increased midway through each year from $5 FY2008, lo $10 FY200g. then to $15 FY2OIO

220

Scnedule XViIICity of BerkeleyCapital Asset Statistics by Fnctc/PcgramCurrent and last two fisca years

Fiscai Year Fiscal Year Fiscal Year2008 2009 2010

Function/Program

liceNumber of Stations 1 1 1Number of Patrol Units 97 81 91Parking Enforcement Vehicles 31 45 32

FireNumber of Stations 7 7 7Number of Fire Trucks 12 12

LibraryCentral Library 1 1Branch Libraries 4 4 4

Berkeey Housinc AuthortyNumber of Public Housing Un its SHA Run 61 61 61Number of Pblic Houswg Units State Run 14 14 14

total 75 75 75

Solki VVasle ManagementCc ution Vehicles 29 26 26Su:.port Vehicles 18 20 20TransferTractors 9 10 9Transfer Trailers 9 9 8

Other Public WorksStreets (rr!es) 216 216 216Streetlic-s 7860 7,860 7860Traffic S xriais 134 134 13-4Sdewaiks (miles) 300 300 300

Parks and RecreationNumber of Parks 52 52 52Public Swimming Pools 4 2 3Over night Summer Camps 3 3 3Number of Ccrnrnunity Centers 4 4 4Number of Club Houses 2 2 2Community Gardens 5 6 6Nature Center/Adventure Playground 1 1 1

Sanitary SewerPublic Sanitary Sewer Mains (miles) 270 270 270Public Sewer Laterals (miles) 130 130 130

ParkingNumber of Parking Garages 2 3 3Number of Prrkine Lots 2 2 2Number of Of Str:et Parking Meter Spaces 130 139 139Number of (ufl Street Parking Garage Spaces 850 937 937

Source: Operating /ndicators were prnwded cy the var/Gus operating departments

221

01Caporicci & Larson, Inc.A Szthsidiaiy ofMa rcunz LIPCert ifteci Public Accountants

INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING ANDON COMPLIANCE AND OTHER MATrERS BASED ON AN AUDIT OF FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


Berkeley, California

We have audited the financial statements of the governmental activities, the business-type activities,the aggregate discretely presented component units, each major fund, and the aggregate remainingfund information of City of Berkeley, California (City), as of and for the year ended June 30, 2010,which collectively comprise the City’s basic financial statements and have issued our report thereondated December 28, 2010. Our report includes a reference to other auditors. We conducted our audit inaccordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Other auditors audited the financial statements of theBerkeley Housing Authority, as described in our report on the City’s financial statements. This reportdoes not include the results of the other auditors’ testing of internal control over financial reporting orcompliance and other matters that are reported on separately by those auditors.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the City’s internal control over financialreporting as a basis for designing our auditing procedures for the purpose of expressing an opinion onthe financial statements, but not for the purpose of expressing an opinion on the effectiveness of theCity’s internal control over financial reporting. Accordingly, we do not express an opinion on theeffectiveness of the City’s internal control over financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described inthe preceding paragraph and was not designed to identify all deficiencies in internal control overfinancial reporting that might be significant deficiencies or material weaknesses and therefore, therecan be no assurance that all deficiencies, significant deficiencies or material weaknesses have beenidentified. However, as discussed in the schedule of findings and responses, we identified certaindeficiencies in internal control over financial reporting that we consider to be material weaknesses andother deficiencies that we consider to be significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allowmanagement or employees, in the normal course of performing their assigned functions, to prevent ordetect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combinationof deficiencies, in internal control such that there is a reasonable possibility that a materialmisstatement of the City’s financial statements will not be prevented, or detected arid corrected on atimely basis. We consider the deficiencies described in the accompanying schedule of findings andresponses as items 2010-01 and 2010-02 to be material weaknesses.

wwc.lcpa coin

222

To the Honorable Mayor and Members of City Councilof tile City of Berkeley

Berkeley, CaliforniaPage Two

A significant deficiency is a deficiency, or a combination of deficiencies in internal control that is lesssevere than a material weakness, yet important enough to merit attention by those charged withgovernance. We consider the deficiency described in the accompanying schedule of findings andresponses as item 2010-03 to be a significant deficiency.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether City’s financial statements are free of materialmisstatement, 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 onthe determination of financial statement amounts. However, providing an opinion on compliance withthose provisions was not an objective of our audit, and accordingly, we do not express such an opinion.The results of our tests disclosed an instance of noncompliance or other matters that is required to bereported under Government Auditing Standards and which is described in the accompanying schedule offindings and responses as item 2010-04.

The City’s response to the findings identified in our audit is described in the accompanying schedule offindings and responses. We did not audit the City’s response and, accordingly, we express no opinionon it.

This report is intended solely for the information and use of management, City Council, others withinthe entity, and federal awarding agencies and pass-through entities and is not intended to be andshould not be used by anyone other than these specified parties.

cAu’-, .

Caporicci & Larson, Inc.San Francisco, CaliforniaDecember 28, 2010

223

City of BerkeleySummary Schedule of Prior Audit Findings

For the year ended June 30, 2010

Financial Statement Findings

The following addresses the status of financial statement findings reported in the fiscal year ended June30, 2009 schedule of findings:

Matters that are repeated in the accompanying schedule of findings and responses:

• Restatement of Previously Issued Financial Statements (revised and included in current yearcomment 2010-01)

• Review of Journal Entries (revised and included in current year comment 2010-03)

Matters that are not repeated in the accompanying schedule of findings and responses:

• Computer Control

224

City of BerkeleySchedule of Findings and Responses


2010-01 Restatement of Previously Issued Financial Statements (Material Weakness)

Criteria: The City is responsible for the fair presentation of the financial statements inconformity with accounting principles generally accepted in the United States of America.

Condition: The City has restated its previously issued financial statements to correct severalaccounting errors related to accounts receivable (52.6 million), deferred revenues ($8.1 miHion),Library Fund(59.9 million), notes receivables (SO.2 million), and other miscellaneous errors.

Cause: The City’s internal controls over financial reporting did not identify’ the misstatementsin a timely maimer resulting in the restatements.

Effect: The previous financial statements were not fairly stated in conformity with accountingprinciples generally accepted in the United States of America.

Recommendation: We recommend that the Cit-v enhance its internal control over financialreporting to ensure complete and accurate financial reporting. The City can accomplish this byexpanding its year-end closing procedures to ensure that all nonroutine and nonsystematictransactions were accounted for, the appropriate accounting standards were applied, andtransactions were accounted for in the proper period.

View of Responsible Officials and Planned Corrective Action: We concur. Finance willexpand the year-end closing procedures. In addition, Finance staff will provide training to thedepartmental staff who are responsible for maintaining those financial transactions. Furthermore, staff will estimate bad debt expenses and establish an allowance for doubtful accounts forthem, instead of waiting for uncollectible transactions to be written off.

225



2010-02 Preparation of Financial Statements (Material Weakness)

Criteria: The City is responsible for the fair presentation of the financial statements inconformity with accounting principles generally accepted in the United States of America.

Condition: Misstatements were discovered in the financial statements and note disclosuresprepared by the City.

Cause: The City does not have an adequate review process in place to ensure financialstatements and related note disclosures are free of material misstatements and that all requireddisclosure have been properly reflected.

Effect: The financial statements and related note disclosures were not prepared in accordancewith accounting principles generally accepted in the United States of America.

Recommendation: We recommend that the City enhance its review process over financialreporting to ensure proper preparation of financial statements.

View of Responsible Officials and Planned Corrective Action: We concur and will addressthis when we develop the written policies arid procedures for review and approval of journalentries.

226

City of BerkeleyScheduJe of Findings and Responses


2010-03 Review of Journal Entries (Significant Deficiency)

Criteria: All journal entries need to be properly reviewed and approved before they get postedto the financial systems.

Condition: The journal entry review process is not consistent among City departments: somedepartments perform an independent review of all journal entries prepared, while some do not.In addition, journal entries sent to the Accounting Division do not always have supportingdocuments attached.

Cause: The City does not have a formal written policy regarding the review, and approvalprocess of journal entries by the individual departments and the Accounting Division.

Effect: Unauthorized or unsupported journal entries may get posted to the financial systemswhich can result in a material misstatement in the City’s financial statements.

Recommendation: We recommend that the City develop a formal written policy for the reviewand approval of journal entries. The policy should document the process required to befollowed by each department to review and approve journal entries. The City should ensurethat the process designed for each department will improve accuracy and ensure properauthorization of the journa] entries.

View of Responsible Officials and Planned Corrective Action: We concur. Draft writtenpolicies and procedures for the review and approval of journal entries is in progress.

227



2010-04 Compliance with Debt Covenants (Compliance)

Criteria: The Debt Covenant for the City’s 2005 Series A Parking Revenue Bonds requires theCity to maintain Net Revenues of the Parking Fund each year to equal at least 125% of theannual debt service.

Condition: For the fiscal year ended June 30, 2010, the City’s Parking Fund Net Revenuesequaled 90% of the arnuial debt service payments, which did not meet the required debt servicecoverage ratio.

Cause: One of the three parking facilities was taken off line for the development of a newparking structure. As a result, parking revenues were reduced.

Effect: The City was not in compliance with the debt covenants of the 2005 Series A ParkingRevenue Bonds.

Recommendation: The City should closely monitor the net revenues from the parking facilitiesto ensure the compliance with related debt covenants.

View of Responsible Officials and Planned Corrective Action: Prior to the issuance of therevenue bonds, City management, the City’s Financial Advisor and the City’s Bond Counselagreed to include available fund balance in the definition of net revenues, to allow a cushion tomeet the coverage covenant when one of the parking facilities was taken off line for thedevelopment of a new parking structure. This provision was inadvertently left out of theOfficial Statement and bond covenants.

The City will closely monitor the net revenues from the parking facilities, and take actionstoward ensuring compliance with the related debt covenants.

228

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