seeing none let us go to our first item mister tamari oh thank you mister chair members of the committee bob samara acting assistant city administrator two items today the first is a relates to the home funds david rao who is our housing project planner he will be given the report and then we'll move on to the second item which is the capper very good thank you good afternoon chairman francisco and finance committee members this is a request that the finance committee consider and recommend to city council that they approve a request for people self help housing corporation for a preliminary award of an additional five hundred thousand a city home funds for the development and construction of low income rental housing located at five ten to five twenty nor annually that are used to promote affordable housing through activities such as acquisition rehabilitation new construction and tenant based rental assistance a request for proposals an rfp was released by the city's housing division in october people's self help housing corporations application meets the affordable housing priorities outlined in the city's five year consolidated plan and the housing element in addition the proposal meets the rfp criteria regarding the developers expertise in home funded projects and compliance with home regulations and funding guidelines the proposed project also meets the requirement for cost financial feasibility timing energy efficiency and conservation effective august rd two thousand and fourteen the home final rule was amended to provide that a participating jurisdiction may preliminary award home funds for a proposed project but may not commit funds through a binding written agreement until all other financing for the project is secured people self help is seeking low income housing tax credits to complete the project financing ample and the city's preliminary award of home funds will assist in that effort the project has a total of forty units thirty nine of the units are for very low and low income tenants five one bedroom units twenty two bedroom units fourteen three bedroom units and one two bedroom managers unit there's community space and an on site laundry facility eight of the units w have project based section eight vouchers and this project was received final approval by abr on august i'm sorry on april th two thousand and fourteen people self help acquired the property with financial assistance from the city's former redevelopment agency housing set aside funds in the form of a two million dollar acquisition loan in june of two thousand and thirteen the city provided a nine hundred thousand dollar home loan for pre development and construction costs the project is approved by the city and construction will commence immediately if additional funding from the march two thousand and fifteen income housing tax credit application is secured reserving this preliminary award will increase people's self help tax credit application score and significantly enhanced a chance of being awarded tax credits the project's total cost is approximately sixteen million dollars people self help serves as the sole developer owner and general contractor for the project and its affiliate the duncan group serves as the management agent for the development team as mentioned earlier the project has obtained all necessary city approvals and is ready to start construction once the necessary funding is  project financing as you can see the biggest item is the low income housing tax credits which is a little over ten point four million dollars obtaining funding necessary to construct and complete the project has been extremely challenging people self help is applied for low income housing tax credits on two occasions in two thousand and fourteen the application process is extremely competitive and they were very close to being awarded tax credits people self help plans to apply again for low income housing tax credits in march two thousand and fifteen and the additional five hundred thousand a home funds will significantly enhance their application score and chances of being awarded the tax credits this will enable them to fund construct and complete the project if this request is approved the existing home loan agreement would be amended to reflect the total balance of one four million dollars the total principal amount will have a three percent interest rate for a term of fifty five years maturing in the year twenty seventy payments will be due on the loan on a residual receipts basis this means that no payments are due until the net income of the project after payment of necessary operating expens sufficient to support such payments any unpaid remaining balance at the end of the term is doing payable in full home regulations require that the project must be completed by july th two thousand and seventeen if the preliminary award of five hundred thousand dollars of home funds is approve people self help will be provided a letter to include with their tax credit application if the tax credits are allocated to the project staff will return to council to seek approval to formally commit the additional home funds in the form of a loan long term affordability the covenant requires that the property remain affordable to low income residences for ninety designated as floating units and distributed proportionately by bedroom count throughout the project a floating designation provides people self help with the flexibility to maintain the home assisted units throughout the affordable payer period although the specific designated units may vary with availability could you define what a home assisted unit is yes it's the the home phones are targeted towards specific unit so that dictates things like the affordability period and what the rents and income levels should be on those specific units and so how does how do those requirements differ from other units in this project that's an excellent question chairman francisco there's a there's a layered amount of affordability requirements on this project the tax credits have what's called  regulatory agreement and that has a term of fifty five years and that dictates the terms of the rents and the incomes on the and the the affordability levels of the project which are anything from extremely low to very low to low income then you also have home funds on individual units that have a slightly different set of rules and then layered over all of that you have our ninety year covenant which extends people self help has been one of the city's longtime affordable housing partners their mission is to provide affordable housing and programs leading to self sufficiency for low income families seniors and other special needs groups people self help is the recipient of numerous local state and national awards acknowledged acknowledging its leadership and performance and affordable housing they have long term staff with extensive experience and affordable housing development and management the project meets the city's consolidated plan and housing element priorities high rents combined with a low supply of affordable housing opportunities make this project ideal for the city of santa barbara staff supports the award and requests that the finance committee recommend that city council approved the five hundred thousand dollar home preliminary award to people's self help housing corporation this concludes my presentation and i'll be happy to answer any questions you might have i'd also like to point out we have several representatives from people's self help in the audience if you'd like to direct questions towards them very good thank you okay we'll start with questions from committee members  chair can you go back to the cost slide and my question is about the permits and engineering and suchlike which seemed out out sized so the architect engineering permits fees a no i don't know seems like a really big number for that and and and that to your point these are estimates so it's possible that some are high some are low so why don't  similar cost and they get squeezed into this category so there's more than just architect engineering permit fees so i can give you an idea of what the actual city and development impact fees and and school fees are which let me see if i can find that here in this layout i'm sorry the the city fees charge like department fees for such water hookups for example or school fees the that we have to  correct so those are if i can find them on my my list here there may be i think less than three hundred thousand dollars in total the architect engineering fees going to be around the five hundred thousand dollars mark totally get her remember that we we've gone through a couple of appeals on this so we've had to incur some additional professional fees on this project then maybe we know probably would not have well i'm game to leave it at kindly tease that out a how much of where do where does this project sit in that context and any way frame that for us a little more please remember white i'd be happy to the the home program is allocated out of the federal government on an annual basis and what we've seen is a fairly substantial reduction in what's allocated annually the city gets a little bit more than three hundred thousand a year and to give you an idea in the four or five years ago is about eight to nine hundred thousand so in this particular case we ran an rfp for seven hundred eighty two thousand which was a combination of several years and some program income off of some loans that we had collected on and we had five applications and between home funds and other funds and was subject to council's approval i think we're going to be able to actually fund all of them and as far as the home program goes each year it's it's entered into the budget through congress in the senate and then it's part pared down negotiated and we finally get a released figure it's it's possible that the city may not get an allocation at all of city funds because there is a rule if you receive less than five hundred thousand in consecutive years that they have the option to not award you any funds what happens so what happens in this instance if that i mean are we it's just the money that we're talking about here is money that's in hand it's not money that yes that would that is correct that's what you're talking about okay and then the money has been gathered and then as you say an rfp process has occurred there were several applicants for and there was the two million to start with right that the city put in and then now we're coming back with another five hundred thousand that was the  housing set aside funds was two million dollars to purchase the property and then nine hundred days yes the very last fund alack and then the nine hundred thousand of home funds a couple of years ago and this is an additional five hundred thousand  for a total of one point four million in home funds in terms of typical subsidies for the city three four million dollars for thirty nine affordable units is less than a hundred thousand and our typical subsidies have been about a hundred and twenty thousand so in terms of our investment assuming we get the tax credits it's a pretty good leveraged investment for what we're getting okay thank you very much sure mister arp i don't have any specific questions about this project but i would like to know not necessarily at a finance committee meeting maybe even just offline how you track all the different projects that the city has we know the affordability expiration dates the number of units the outstanding loan balances and stuff like that i'd like to have kind of a big picture in my mind about all of that at some point in the future remember hard i'd be happy to supply you and the rest of the committee with that information thanks to dirt or randolph we have an extremely extensive tracking system  and anything up for exploration we try to do our best to maintain the affordability i know you're doing that aggressively and that just would be helpful to me to understand that big picture you know are we looking at a wave of affordable units coming do is you know we're pushing these new projects far into the future but obviously there was a period of time we did a lot of projects and they must be coming up soon for that's correct there are projects that are up for expiration  we've been trying to do if there's also a loan involved to extend the affordability and extend the long term at the same time and and introduce a guaranteed monthly payment so that it's a win win for both parties thank you okay are there any public comments on this item thank you chair francisco and members of the finance committee as you know i'm trevormartinson architect planner and forensic and i represented arc bosch and the halley shareholders regarding issues on this project  first of all i have to agree with mister white there are some funny numbers here i find it difficult to believe that nine point one million dollars is going to be the total construction cost materials and labor i i have a question about that and of course what mister white mentioned again and and just yesterday i received a letter from patricia ripa of fema and the city was copied on this and she has suggested that we review the issues that we have and that our opportunity to submit a better technical data on this project is still open and so we are going to do that as soon as doctor post gets back from his trip we will be doing that issue and letting the city and fema know this project is still out for corrections on the building permit and there is a quite an issue as you know back in july when we had our last appeal with the city council stan mendez structural engineer provided georgia australia in the building department and the city a rather significant amount of corrections that had to be done to this project and make it meet the minimum building code standards and i have not seen all of this yet but when they do finally come in with the corrections and if these corrections have not been addressed we're just going to have to make an appeal to the fire and building code appeals  and this is you know something that we're concerned about and hopefully we're going to be able to work this out we do not want to say that we don't want this project we just want to make sure that it is safe for the occupants and the families that are going to be using the property thank you thank you mister martinson okay if there's no further public comment i'll close public comment and to the committee for a discussion and a recommendation sure i do have one area of question of course and that is it's a project does go over budget is the people self help there to cover the overage or how does that handle it in any case  thank you john fowler president people self help housing and yes people's is there we've been there for forty five years this is our fifth project in the city of santa barbara and we are in the third hopefully final plan check with the city and we don't see any major issues coming up through minor corrections so we're pretty pretty well through the process but i would say as far as you know this isn't our first rodeo we we've built a few of these  as i say and our last three projects were brought in on time and one hundred budget and and so we we have a pretty good in house construction department that we believe puts these great numbers together for us and as you know for staff will tell you that you have to know your numbers going into the tax credit application because they can't move on you once you apply those are the numbers and the construction numbers so we spent a fair amount of time making sure and drilling down those numbers and bidding them up and making sure that those applications are accurate so yes we do have the financial resources a very strong balance sheet to support any type of construction overruns but we're not anticipating that thank you thank you so then i would move the staff recommendation to move forward with the five hundred thousand dollars home funds to be dedicated to this project is that i don't have the agenda information okay that's second very good any further discussion good afternoon chair francisco committee members i did bring a few extra copies of the comprehensive annual financial report in case you don't have your copies today as bob  few different sections will be talking about the background of a kaffir the layout and contents of the report financial highlights some key footnote disclosures i want to go over with you and the audit requirements and results that's for the background some of this might be a little familiar from last year but i want to go over a little bit what exactly is a kaffir part what part of what a capper is is an annual financial report that's prepared in the core nationally recognized accounting and financial reporting standards what we call gaap generally accepted accounting principles basically it just presents the financial condition of the city at a point in time as well as a result of operations as a whole and for the individual funds but also it goes beyond that  beyond just that financial report it's comprehensive because it provides information beyond the financial report it does this in order to qualify for the gfo a award and also to just communicate and provide more information for the reader then we get into why do we prepare prepare kafir well there's several reasons but bottom line the most important one is its required both by city charter as well as by state law it's also really important in issuing bonds bond rating agencies use the use of capper to determine credit risk to set interest rates and once again as i mentioned before it's really important for communicating important financial data to users and the public next i wanted to talk about the layout and contents of the kafir there really are three sections of the caf our main sections the first is the introductory section in there is the letter of transmittal that is prepared by paul casey and bob mario this gives a little information about the city as well as about the kafir there's also some information about the city organization it has an org chart information about the city officials some other city organizational information the next is the financial section and this is what is actually covered by the audit opinion in that section is going to have the independent auditors report that rich kikuchi we'll be talking a little bit more about it has a management's discussion and analysis which talks has some comparative analysis from  scal year thirteen to fiscal year fourteen we have the basic financial statements which is what i'll be focusing my presentation on today as well as the notes to the basic financial statements which provides a little bit more information on the basic financial statements and the third section is the statistical section this is unaudited a lot of this is multi years trend data financial data demographic information and there's several pages of that in the very back of the  now getting into the financial data there's really two different types of statements in the kafir we have government wide statements which is prepared on an accrual basis gatsby thirty four i believe it was in two thousand and one came out and required cities to present their financial statements in a government wide basis which is an accrual basis showing all assets all very similar to the private sector we also provide the information on in a fund financial statement so that shows the individual funds it's more of a short term basis it doesn't show capital assets a long term debt so the first one i'm going to go over is going to be the government wide statements this is the statement of net position this is showing both the governmental activities and the business activities the governmental is more associated with the local government and what is supported by taxes and intergovernmental revenues includes things such as the general fund special revenue funds other governmental funds internal service funds the business type activities are really more than enterprise funds and it's what they really rely on user fees charges for services so the purpose here is really to identify what is the condition the financial condition of the city at a point in time at june thirty two thousand and fourteen so the first thing we look at is in total assets for the city as a whole there's over a billion dollars in total assets about six hundred million of those are business type related to the enterprise funds the remaining about five hundred million relate to governmental activities when you compare that to the liabilities there's only about two hundred million in liabilities which is a much smaller amount as compared to the total assets and then we look at  net position and you'll see you'll notice that the majority of the net position is related to net investment capital assets of what this is is your total capital assets including infrastructure less accumulated depreciation less outstanding debt used to build construct improve those assets the next and there's about seven hundred million of your net position is investment in capital assets the next item is restricted these are restrictions from creditors gran contributors their external restrictions we have about sixty nine million dollars that are restricted in your net position a lot of this about fifty two million is related to the affordable housing special revenue fun reserves and also capital projects that have been assigned or committed that are not don't have external restrictions these names could you explain or maybe give an example of an on current liability an on current liability in advance and do do pension funding or underfunding do they figure into that that number on the government on that yes it does the we have the net pension obligation that's on here but it next year when we have the the new gatsby sixty eight i believe it is it's going to become a very large number but right now it's it's a just your net pension obligation which is not a very significant number but it will become a very large number  the next statement is actually your statement of activities and where this differs from the statement of net position is the activity for the fiscal year is how the city did for that period of time from july one through june thirty and this is broken up into two  two parts it's the governmental and the business type you can also find this on page twenty seven if you want to look at it in in the kafir but the first one i'm going to look at is the governmental activities and the main point here is what we try to look at is these are all the general fund other governmental funds and we're looking at all the functions the admin public safety public works community services community development how much are they subsidized subsidized by general revenues you'll notice that we look at the expenses then the program revenues we get to a net and that's the net subsidy so it's what we would expect for example public safety has a net subsidy of fifty million dollars because public safety which is fire police doesn't have a lot of program revenues they don't generate a lot of program revenues they really are sub subsidized by things such as taxes or franchise revenues or other general revenues so in total for all of the general activity governmental activities it's about eighty million dollars of net subsidy then we have about eighty five million dollars of taxes the other revenues are comprised of things such as franchise fees transfers about nine hundred thousand and the one thing i wanted to point out we have a one time gain on transfer of capital assets this just is a one time thing that we have in fiscal year fourteen during the fiscal year the california department of finance agreed to it was about sixty seven million dollars of capital assets that were former rda assets are transferred to the successor agency the department of finance agreed these really do belong to the city so they are transferred back to the city in fiscal year fourteen and it of those sixty seven million about thirty eight related to governmental activities the remainder were downtown parking assets so those would be business type activities so that's why you see the gain on transfer of capital assets of about thirty eight million dollars so the total change in that position is about fifty one million dollars but once you remove that one time gain the total is about thirteen million dollars and the change in that position any questions on this one right great i'll move on to the business type activities so the difference in business type activities as to governmental activities is that we're not looking for how are the enterprise funds subsidized by general revenues really they should be each of these individual funds should have enough program revenues to cover their program expenses so you'll notice where you have expenses revenues in the net the net should not be a negative number because there should be sufficient revenues you'll notice that all of the enterprise funds do have sufficient program revenues to cover the expenses so for net business type activities we have about five six million in net revenues and all of the funds i think last year we had one fund that didn't have sufficient program revenues to cover expenses but this year there were all sufficient program revenues in addition to the program revenues we have some investment income some other miscellaneous revenues some negatives and transfers that were between the two types of activities and then this is the other part of the gain i was mentioning they twenty eight twenty nine million related to the downtown parking fund so in total we have a change in that position of about thirty five million dollars but once you remove that one time gain it's about six million dollars that really is th net change in that position so these are the government wide statements we're gonna move on to the individual funds and they you know the main fund we're going to talk about right now is the general fund and how the general fund is different from the government wide is it is modified accrual so we don't show capital assets or long term debt so the main thing i wanted to point out here is that we have about thirty eight million dollars in assets a large portion of that is cash on investments over twenty million dollars we have about seven million dollars in liabilities and about thirty one million dollars in fun balance and i wanted to spend a little bit of time talking about the fund balance the non spendable is what i was mentioning earlier it's it's a lot of the categories are similar they're not exactly the same with the government wide but the non spendable is related to the loans receivable and the advances because they're in a form that's not spendable so we have to identify that the restricted our balances that are restricted by external creditors  or laws regulations and that's going to include your encumbrances at the end of the year they committed those are amounts that are actually identified by city council action so that's going to include your city policy reserves and assigned hour amounts that have been determined by the city administrator or finance director so those are going to include things such as the i have capital carry overs for the year which is why it's not a very large balance so i wanted to talk just a little bit about the general fund final results this is one a schedule that we provide on page eighty nine it's part of the required supplementary information and what it does is look at it actually provides the original budget the final annual budget is the amounts i'm showing here actuals for the year than what the variances are the revenues and the expenditures include the transfers as well there's about one seven million of transfers in included in revenues and about three six million of transfers out included in expenditures the transfers in are made up of numerous items some of the things are saber net grant reimbursement to the general fund we also transfer the rental housing mediation program to the general fund those are a few examples the expenditures are primarily related to capital projects we have the fifty percent surplus that gets transferred out at the end of the year was about one point one point eight million we also have other capital projects we had the fms replacement that gets transferred and they're they're mostly capital project transfers out so in total our revenues are to the good for about a million dollars and but we do have that anticipated year end variance that we budget so really the it's about two point two million that our revenues are to the good and our expenditures are about three million dollars but once you remove that one two million anticipated your invariance it's about what is it one nine million but in total we're to the good for about a little over four so we expect to spend a certain amount of money and we spend less than we expected correct and so then that's where the three million dollars comes in as we just spent three million dollars less than we expected correct so then that goes to the line of savings including that we had revenues higher th by a million dollars than we expected correct so we had more revenues than we expected and we have we spent less than we expected so we actually had four million dollar positive variance all right thank you i'm sorry yeah one one those are that's the budget to actual that's just where we ended the year versus budget mister samara was pointing out that that's just our budget variance our actual results are comparing your revenues  expenditures so our end of the year result was one seven million so and that was after that one eight transfer to the capital outlay fund that we do is per policy reserves so we ended up about it was a you know at three point when it's that three point six surplus for the year and then we transfer out that one point eight as part of our policy and so that's that's how the year actually ended up okay but compared to where we budgeted we were four million dollar positive variance to where we budgeted this is a slide we often present at year end but i wanted to provide this information just to do a quick review of where our reserve balances are compared to policy reserves at fiscal year at june thirty two thousand and fourteen so per city policy for disaster reserves and contingency reserves we were the policies require about twenty eight point eight million dollars we are at about twenty six point nine about thirty i mean it's about twenty seven excuse me so we're about one point eight million dollars below policy reserves this does include that one point eight million dollar transfer out that we did for the fifty percent of the surplus i wanted to show i think it might be a little bit easier to see the trend so this is the trend since two thousand and eight and i did want to point out that that gap between policy reserves and actuals is actually narrowing so we have gotten closer to the policy reserves in two thousand and fourteen and over the last several years there's one other fund i wanted to touch on we talked a little bit about this last year because last year we did have a deficit and we also do this year but we actually have a new fund as well so this is why i wanted to talk about this and it's and thirty four in the kafir but we have a self insurance fund that is we actually have to funds that are summed up into one fund on the kafir for cafo reporting purposes but it's made up of two funds there's the self insurance trust fund which is what we had last year as well our new fund is the post employment benefits fund i want to first talk about the self insurance trust fund starting last year we started having a deficit in this fund it was due to the increase in the estimated claims payable and i wanted to point this out because even though it's that claim that estimate claims payable liability has decreased a little bit this year we still are showing a deficit in this fund so it's still this fund is still is still running  so i wanted to point that out yeah sure just to kind of give you a heads up it's better than when it was last year we were about two point six two point five last year a deficit so it's dropped down to one point three  this year we're not seeing great results we're seeing higher than expected claims costs for both workers compensation and also for liability so we are probably in a into this current year fiscal fifteen we might be back up to over two million dollars in a deficit and as we'll talk about on the the work session the budget work session we are gonna every recommending an increase in funding to this fund from all the various funds including the general fund of about half a million dollars because we just the trend isn't looking good and the fact that we're in a deficit we want to just resolve over some period of time not right away but that's really why we wanted to show you this kind of a heads up this has been a trend we've seen the last couple years unfavorable claims and the actuaries saying we need more money in the bank thing we currently have so we're gonna to resolve this at some point in the near future okay the second fund the post employment benefits fund this is a new fund that was created in two thousand and fourteen we moved all in in the past the post employment benefits which is going to be a retiree medical implied subsidy in your sick leave the additional benefits we part of we allow for post employment benefits we now move to those from the individual funds to the this new fund post employment benefits fund in the internal service funds so that's why you see a large deficit in this fund we are we are at doing allocations to this fund to cover costs related to the retiree medical as well as the sick leave but we are not funding the implied subsidy at this time add one thing to that so in fifteen this current fiscal year i'm sorry fourteen it was the first year that we decided that we were going to start trying to get ahead of this liability that's been out there they're referred to as other post employment benefits so everything excluding  pension which we already kind of disclosed but these liabilities have been you know on the paper a lot last several years that they're growing and they're really not being funded and so there's additional disclosures required but we wanted to get a little bit ahead of that and start putting some money aside to start covering these costs that are payable in the future when people retire so you can see we have about four hundred thousand dollars in the first year but we will try to try to get ahead of this a little bit more but the number down below thirteen point seven million dollars is what we currently are supposed to have in the bank and we don't we have four hundred thousand so it's going to take us a while before we get to the point where we're able to you know fully fund this and julie will talk about this the next slide the one piece we are not covering and don't have to get into this but it's what we call is the implied subsidy it's the fact that we have retirees who are participating in our insurance programs group insurance programs and they get the same rate as existing employees so it's really a discounted rate that they get in the murse as opposed to they were separately rated or went out the other element sure policy so they are subsidized we are required to to disclose what that subsidy is and in a sense pre fund that and that's part of the liability that's required to disclose but we are not putting money in the bank for that so while recovering as a retired chair and obviously one of the sort of frame everything we're doing today when we're presented i mean i haven't i would a matt it wasn't there on thursday and it wasn't there on last thursday so i haven't had a chance to this book is is new to me today and and i look certainly won't study it in every detail but i will have a look at it but going forward so it serves many numbers here that we'd like to at least i would like to have a little thing and one topic of course that we've talked about i think consistently in the last few years has been all of the benefit packages particular retirement has been a focal element and we've seen for example variables are we have a nice new little batch of benefits that was that the pers board approved this year how are those affecting us i'd appreciate hearing about that how many people have retired how much of the how much has gone out in the last year on in these various areas i mean that is to say the the people retiring and getting that side amount some of that information and it could be helpful as a session to have in finance committee over the next you know couple three months just it's obviously both for us and for the public to the small number of folks that do do look at the tv version of it i would appreciate that we have more about we'd be happy to do that we do that every few years we kind of come here and talk about compensation benefits and all those things and every year when we do the kafir we do try to point out we focus on on the other post employment benefits and pensions and you'll see other slides on that so we try to give you a sense of where we're at with that but yeah we can definitely do that additional session thank you mister chair at a question so is that a other post employment benefit number that thirteen billion seven hundred thousand dollars does that include that implied subsidy for the retirees yes could you tell me the difference between the because that is to me i understand that you have to report it but there is actually no financial obligation to that  those people are getting the benefit of us having a group we're probably getting the benefit of the fact that our group's bigger because they're part of our group so there is actually no financial obligation to having those people part of our medical benefits as retirees because they're paying for it so what percentage of that thirteen million some thousand dollars does that artificial transaction represent i do have a slide coming up that talks about the total liability related to all of these benefits i can go over that that will at least show you the breakdown but the implied subsidy is a much larger percentage than the retiree medical or the sick leave that's incredibly important because that is adding stream li deceptive number then if that is i would picture at the older component of our of our insured population as being a a liability and additional liability in comparison to the to the employee population because of i would imagine that the older folks are going to be costing i mean if they were on their own they're going to be a higher cost so is that a do we benefit from the larger group yes probably and do we not benefit from them being older folks would be the other piece of that and for us to have a little sense of perspective on that might be helpful to someone they're only oh until they're sixty five isn't that correct exactly but there is a cost to that our retirement plans this is also in our footnotes on page sixty three to sixty five and what we're presenting here is what is the funded status of our retirement plan with calpers the first column they accrued liability what we're showing it this says  evaluation date of six thirty two thousand and eleven it's for the fiscal year two thousand and fourteen but it shows in the first column which is called accrued liability this is how much we should have in the bank at six thirty two thousand and fourteen to fund our obligation and then the second one which the second column called the actuarial value of the assets this is what we actually have and now it's not the market value it's just the actuarial value of the assets the next column which is is the difference between the two the unfunded liability and then what is the funded status so using the actuarial value of assets we are between seventy seven and seventy nine percent funded for the miscellaneous plans safety fire and safety police then we look at the annual covered payroll which is the total payroll for which the rates are based on and we look at what what are we unfunded what is the unfunded liability as a percentage of payroll and why this is important is because when there's a smaller base it's a higher risk because you have less of a base to be able to change to affect those rates so for fire it's a smaller base it's a higher risk so the next slide is the exact same information the only difference is that now we're looking at the market value of the assets as opposed to the actuarial value of the assets and what you'll notice is that it it significantly changes our funded status in the prior slide this is the first slide i showed you we were between seventy seven and seventy nine percent funded using the new market value of assets we are now between sixty nine and seventy percent so it's about a ten percent drop using the market value of assets and why this is important is because this truly is the value of the assets and with a new gatsby statement that we actually have to in next year and i'll talk a little bit more about that this is what we have to use it's a market value of assets when we are determining what the true unfunded liability is could you explain what the difference is between those two types of valuation the actuary uses it's a smooth you know i might l it impacts rates so it gives it allows it to move from between eighty percent at least they used to between eighty percent in a hundred twenty percent before it had any material impact on their rates so even though you might have a market value of eighty million dollars they may still allow  may still be using a hundred million in turn as an actuarial value of assets because it's not so far apart and so they don't react as quickly to the rate adjustments then would they but maybe should if they were really using the eighty million dollar in my example so it just allows it to fluctuate before heading any short term impact on a rate so they would sort of smooth use that as a way to smooth that because they knew their market values would go up and down so they look over twenty year period that drop may be temporary maybe you go up in the next few years so rather than react too quickly they allow it to fluctuate and you as you'll see they they're no longer are doing that they stop doing that because they recognized that was a little bit sort of a funny number the real number is the market value in terms of measuring where you're at it from a funded status perspective and you'll see the next slide to shows where we're at more recently with that this third slide is using the most recent actuarial report that we received in october of two thousand and fourteen you'll notice as a valuation date of six thirty two thousand and thirteen as opposed to six thirty two thousand and eleven and this uses the most recent market value of the assets you notice that i'll just go back real quickly we've actually gone slightly up in the miscellaneous plan for funded status from sixty nine to seventy one percent however for safety and fire we've gone down in the funded status so this is the most recent data this was the prior data so it's dropped from about seventy percent to sixty nine percent and this is the information that we will have to use to report our unfunded liability on our financial statements going forward so we will actually the actuarial report no longer provides this actuarial market actuarial value of assets anymore they only provide a market value of assets and the reason pers will start next year with their dramatic increases to the rates over a five year period that they're expected to be somewhere close to fifty percent increase in rates but because we've had very strong returns in the last several years since the recession and there's there were still only seventy percent fund and this pretty similar across the state in terms of other plans and so they their plan is to get to a hundred percent funded by within twenty years and so in order to get there they have to do five years of some steep increases than they would level off thereafter but that's they finally decided that's the only way for us to get to a hundred percent and you know in a reasonable period of time rather than relying on returns being higher than what they've assumed which is seventy a half percent so this is the table that we were referring to a little bit earlier about the other post employment benefits this will give you a better idea of what that breakdown is between retiree medical implied subsidy and sick leave this is what the actuarial accrued liability the total liability outstanding if we were to book the complete liability you'll notice that the retiree medical is about ten point six million the implied subsidy is twenty two point two million and the sick leave is about six million so out of thirty eight million over twenty two million of it is implied subsidies so it is is a significant portion of that amount the last footnote i wanted to talk briefly about is related to streets infrastructure and the pci the pavement condition index and we've reported several times to you on this because it is something that is deteriorating deteriorating with time it's also a potential unfunded liability for the city under this under accounting standards we actually have to disclose the condition of our pavements and so we do this in our footnote and the schedule actually shows the condition of the pavement the estimated cost to keep the pavement condition at a what we call a seventy and the pci rating at seventy and then what we actually spent per years you'll notice that in fiscal year two thousand and nine ten the estimate was about four point seven million to reach keep that pci rating of a seventy three point two million was spent so over time you'll notice that pci right rating has been dropping pretty significantly all the way through two thousand and fourteen you will notice there was a slight uptick between two thousand and thirteen and two thousand and fourteen that was entirely due to the former state route two hundred and twenty five being relinquished to the city and it was relinquished and a excellent state so that gave us a small tick up in the pci rating but the trend is that it's going to continue to drop and we established a minimum of sixty and we are close to falling below that sixty and it is currently rating of sixty four which is what the city is out at the end of the fiscal year is an at risk standing now move on to the audit requirements and results very briefly the objective what is the objective an audit it's really to just express an opinion as to whether the financial statements are fairly presented in conformity with generally accepted accounting principles and also the auditors review and evaluate our internal control procedures and our audit results were that the city received what we call an unmodified audit opinion and what this is is a clean opinion that our financial statements are presented fairly and also that the auditors had no disagreements with city management no material weaknesses or significant deficiencies and internal controls were identified and there were no indications of fraudulent or inappropriate activities and rich kikuchi from lsl well i'm sure expand on that a little bit in just a moment the last item i wanted to talk very briefly about and i know i've mentioned this several times throughout the presentation but we do have this new gatsby out statement number sixty eight accounting and finance financial reporting for pensions and we talked about this a little bit last year but why it's so important now is its effective next year and so it's going to be significant on our balance sheet and every governmental agencies balance sheets it's now we're going to have to actually show these unfunded liabilities or these pension obligations on our balance sheet as opposed to just having a note disclosure and it's also usually as i mentioned using the market value not that actuarial value of the assets in addition to showing it on our balance sheet we're going to also have to do several additional required disclosures so our financial statements are going to look different next year so i just want to let you know and be prepared that it is it's going to look a lot different so this would show up on the on the summary sheet that we started out with the government wide correct and that's the one that bond rating agencies look at they do an inter mister samara wants to speak to but that you know the thing is it's gonna be on everybody's you know it's gonna every government agency has to implement this and it's going to be a significant liability for all agencies so i'm not sure you know if they're gonna they're gonna have to take that into consideration for all agencies you know i don't expect it's gonna have any impact on credit ratings because if it's always been there we've always disclosed it it's just where you represent it now it's gonna be on the face of the balance sheet versus and to put notes but it doesn't change the exposure or the obligation okay thank you and unless yeah thank you for welcoming me here again i know when you saw me you were thinking wow another year went by so quickly the auditors already here but time does go by quickly and another audit is just been completed so again my name is rich kikuchi and i'm here representing lsl cpas your auditors and i'm here to present to you your june thirty two thousand and fourteen capper along with julie and bob and i'm i'm gonna talk briefly about the audit process so in regards to the there we go yeah in regards to the other process well julie just shared a bunch of information there's a lot of information that goes into that capper and so you know in a nutshell we've been engaged to really be another set of eyes to work with the city finance department in putting together this capper for you  and the result or the final product is that opinion letter as far as the auditors go and we have as julie mentioned issued an unmodified opinion which is that's what you want that's a that's a clean opinion and so in order to do that there were several hours many many many hours that we spent on this audit and it also it all started with assessing the internal controls here at the city those those procedures those policies that are set in place to safeguard the assets we look at that primarily at a financial statement level we want to make sure that the information that's being recorded in your general ledger is properly being summarized because that's the information that we use to put together this kaffir so we kind of we go from them we do some testing of transactions from there very you know the source document all the way to the post seen in the general ledger oops okay and so it all started with coming out and doing our interim audit and so we were here in the month of may and at that time we  a lot of time most of our time looking at the internal controls here at the city so we did a lot of interviewing we did a lot test work we did a assessment of the different areas of the city  and it all went very well we feel that the internal controls established here at the city are sound and so we felt comfortable with the information that was summarized in your general ledger and so then we came back out in september and at that time that's what we call our year end audit and at that time we basically focused on all the account analysis all the work that we needed to do in order to render an opinion and also help to assist and put together this comprehensive annual financial report like julie mentioned there's a basic financial statements there's also the fun level the footnotes and also the statistical section and the nmda name so we are part of that that whole process and as i mentioned we did a lot of tests work a lot of hours and you know that's a big document that you have but it really is not indicative of all the hours that we spent and julie and bob spent you know putting that  document together but based on the test work that i put in and my staff put in like i mentioned we have issued an unmodified opinion which is the clean a clean opinion that we feel that the amounts in that document are materially correct and you can make decisions based on that and we feel that it's a good snapshot it's a good summary of the the financial results at june thirty two thousand and fourteen the products that that come out of our audit are well there's three of them the first and the primary one is a capper there's also two other letters that we issue it's the sas one hundred and fifteen or the internal control letter and also our auditors communication letter and the sass one hundred and fifteen letter you know during the course of our audit like i mentioned we we look at the internal controls of the city we you know we're we cross various departments it's not just in the finance area but we're looking at different departments if during the course of our audit we felt that there was a significant deficiency in internal controls or there were material weaknesses that we might want to report to you because we are reporting to you we will put that in that letter there was nothing that came to our attention that warranted reporting to you so you know it's a quote unquote clean letter the the audit the other letter which we issue annually as that auditors communication letter in there and actually julie mentioned that on one of the slides so we we would put in that letter of things like if there were difficulties disagreements during the audit we would report that to you we talked about significant accounting changes we talked about the new guess fees that are coming up and and we touched upon that gatsby sixty eight is the big one that we've been talking about actually for the last couple years i think we've been talking about that where the pension liability will be on the the statement of net position and so that's those are type of communications that we put in that letter y communication letter u has to be sixty eight i think well one other thing i just wanted to point out regarding that is it's really financial statement it's a financial statement reporting so we are going to report the liability on the statement in that position that it's for the whole keys of transparency but it doesn't really it's not really reported on the city's books it's kind of an unusual thing it's it's for my financial statement purposes only so it doesn't really affect the general fund or any other fund the liabilities there and so it just kind of gives the reader more of a clear picture of what that unfunded liability is i just want to mention that to you so yeah we put a lot of work into this and that document that capra that you have in front of you is you know we abide by all the guidelines that the geophone has established there's there's all there's actually a very long checklist that we need to follow in order to make sure that it's award quality so that we would that the city would get the award for excellence in financial reporting city has been doing has been receiving that that award in the last few years and it's because of the hard work that bob and julie have been putting in and auditors have been part of that too it's a joint effort and so were we're fully expecting to get the award again and we'll be issuing that for the chief away award and so that capper is in accordance with all those guidelines and also all the the gatsby standards that seemed to be coming up all the time so in summary lsl has been engaged to perform a financial audit and  we have issued an unmodified opinion on those statements that snapshot at june thirty two thousand and fourteen and we've issued those two other letters to you that were quote unquote clean letters i do want to use this opportunity to thank bob and julie especially julie just amazingly hard work it was putting this thing together this year and i just want to point that out and but we feel really good about that document that you have in front of you and that's kind of a snapshot of the audit and the financials and i'm certainly here to answer any questions if you might have any regarding the audit carry any questions mis when you talk about all the hours that your staff put into testing yes could you just give an example of what that is make it a little more concrete as far as the type of testing or the volume of hours type of testing  when we come out at the interim that's where we're centered upon looking at the internal controls so we there's a variety of test work that we do say for instance on disbursement we might select a particular check we might judgment police select a particular check look at make sure it was has a properly approved invoice make sure that that  invoice has been properly is mathematically correct we will determine that it was properly coded to the right account and then we will trace that post scene all the way through the general ledger making sure that not only was the cash relieved that in the proper amount but it was also expensed in the proper account so that's an example of that okay thank you just two comments one two of without them this capper wouldn't exist to be completely honest but they are from the account division and they worked for six months on producing this report so i just want to take a minute to thank them for all their hard work thank you both okay anything else do we need a recommendation on this mister samara we do so just to accept their the report and to recommend to council their acceptance we are going to be presenting a modified version of this report to council but yeah we can take that actually be great okay i'll move those recommendations second all those in favor hi thank you thank you meeting adjourned