city of fontana - comprehensive annual financial report

8/10/2019 City of Fontana - Comprehensive Annual Financial Report

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Fontana, California

ity of Fontana

Comprehensive Annual

Financial Report

Fiscal Year Ending June 30, 2014


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COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE FISCAL YEAR ENDED JUNE 30, 2014

City of FontanaCalifornia

Acquanetta Warren, Mayor

John B. Roberts, Mayor Pro Tem

Jesus Jesse Sandoval, Council Member

Michael Tahan, Council Member

Lydia S. Wibert, Council Member

(At Date of Issuance)

Kenneth R. Hunt, City Manager

PREPARED BY CITY OF FONTANA MANAGEMENT SERVICES DEPARTMENT

Lisa A. Strong, Management Services Director/Deputy City Treasurer

Dawn Brooks, Account ing Manager


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For information about the City of Fontana please visit our website at www.fontana.org.


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CITY OF FONTANA


Year Ended June 30, 2014

TABLE OF CONTENTS

PageNumber

INTRODUCTORY SECTION

Letter of Transmittal iList of Principal Officials viiiCertificate of Achievement for Excellence in Financial Reporting (GFOA) ix

Organizational Chart x

FINANCIAL SECTION

Independent Auditors Report 1

Managements Discussion and Analysis 5

Basic Financial Statements

Government-Wide Financial Statements

Exhibit A - Statement of Net Position 19

Exhibit B - Statement of Activities 20


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TABLE OF CONTENTSPage

NumberFINANCIAL SECTION (continued)

Basic Financial Statements (continued)

Fund Financial Statements

Exhibit C - Balance Sheet Governmental Funds 21

Exhibit D - Reconciliation of the Balance Sheet of Governmental Funds to theStatement of Net Position 22

Exhibit E - Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 23

Exhibit F - Reconciliation of the Statement of Revenues, Expenditures and Changes inFund Balances of Governmental Funds to the Statement of Activities 24

Exhibit G - Statements of Revenues, Expenditures, and Changes in Fund Balances --Budget and Actual

General Fund 25Traffic Congestion Relief - Special Revenue Fund 26Fire Protection District - Special Revenue Fund 27Housing Authority Low/Mod Housing - Special Revenue Fund 28

Exhibit H - Statement of Net Position Proprietary Funds 29


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TABLE OF CONTENTSPage

NumberFINANCIAL SECTION (continued)


Exhibit I - Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds 30

Exhibit J - Statement of Cash Flows - Proprietary Funds 31

Exhibit K - Statement of Fiduciary Net Position 32

Exhibit L Statement of Changes in Fiduciary Net Position 33

Notes to the Financial StatementsNote 1: Organization and Summary of Significant Accounting Policies 35Note 2: Stewardship, Compliance and Accountability 44

Note 3: Cash and Investments 46Note 4: Receivables 50Note 5: Capital Assets 51Note 6: Interfund Receivables, Payables and Transfers 53Note 7: Long-Term Debt 56Note 8: Risk Management 59Note 9: Litigation 60Note 10: Jointly Governed Organization 60


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TABLE OF CONTENTS

PageNumber

FINANCIAL SECTION (continued)


Notes to the Financial Statements (continued)Note 11: Other Post-Employment Benefits 61

Note 12: Retirement Plan 63Note 13: Other Revenue 65Note 14: Classification of Fund Balances 65Note 15: Fund Equity and Net Position Restatements 67Note 16: Fontana Fire Protection District 69Note 17: Successor Agency Trust for Assets of Former Redevelopment Agency 72Note 18: Subsequent Events 83

Combining and Individual Fund Statements and Schedules

Schedule 1 - Combining Balance Sheet Non-Major Governmental Funds 89

Schedule 2 - Combining Statement of Revenues, Expenditures and Changes inFund Balances Non-Major Governmental Funds 94

Schedule 3 - Budgetary Comparison Schedules - Governmental Funds 99

Schedule 4 - Combining State of Net Position All Agency Funds 122

Schedule 5 - Combining Statement of Changes in Assets and Liabilities All Agency Funds 123


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CITY OF FONTANA



TABLE OF CONTENTS

PageNumber

STATISTICAL SECTION

Net Position by Component Last Ten Fiscal Years 129

Changes in Net Position Last Ten Fiscal Years 130

Fund Balances Governmental Funds Last Ten Fiscal Years 132

Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years 133

Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years 135

Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years 136

Principal Property Taxpayers Current Year and Nine Years Ago 137

Property Tax Levies and Collections Last Ten Fiscal Years 138

Ratio of Outstanding Debt by Type Last Ten Fiscal Years 139

Ratio of General Bonded Debt Outstanding Last Ten Fiscal Years 140


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TABLE OF CONTENTS

PageNumber

STATISTICAL SECTION (continued)

Direct and Overlapping Bonded Debt 141

Legal Debt Margin Information Last Ten Fiscal Years 142

Demographic and Economic Statistics Last Ten Fiscal Years 143

Principal Employers Current Year and Nine Years Ago 144

Full-time City Government Employees by Function Last Ten Fiscal Years 145

Operating Indicators by Function/Program Last Ten Fiscal Years 146

Capital Asset Statistics by Function/Program Last Ten Fiscal Years 147

Miscellaneous Statistical Information 148


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December 2, 2014

The Honorable Mayor and City Council

State law requires that all general-purpose local governments publish a complete set of financial statements presented in conformity with generallyaccepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified publicaccountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Fontana for the fiscal yearended June 30, 2014.

This report consists of managements representations concerning the finances of the City of Fontana. Consequently, management assumes fullresponsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making theserepresentations, management of the City of Fontana has established a comprehensive internal control framework that is designed both to protectthe governments assets from loss, theft or misuse, and to compile sufficient reliable information for the preparation of the City of Fontanasfinancial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Fontanascomprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial

statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial reportis complete and reliable in all material respects.

The City of Fontanas financial statements have been audited by Mayer Hoffman McCann P.C., a firm of licensed certified public accountants. Thegoal of the independent audit was to provide reasonable assurance that the financial statements of the City of Fontana for the fiscal year endedJune 30, 2014, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; andevaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonablebasis for rendering an unmodified opinion that the City of Fontanas financial statements for the fiscal year ended June 30, 2014, are fairlypresented in conformity with GAAP. The independent auditors report is presented as the first component of the financial section of this report.

City of FontanaC A L I F O R N I A


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The independent audit of the financial statements of the City of Fontana was part of a broader, federally mandated Single Audit designed to meetthe special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report notonly on the fair presentation of the financial statements, but also on the audited governments internal controls and compliance with legalrequirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports areavailable in the City of Fontanas separately issued Single Audit Report.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the formof Managements Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read inconjunction with it. The City of Fontanas MD&A can be found immediately following the report of the independent auditors.

Profile of the Government

The City of Fontana is located about 50 miles east of Los Angeles. The City spans approximately 42.4 square miles and has a population of202,177. The City was first developed as an organized rural community through the vision of Mr. A. B. Miller. Although self-sufficient, the farmingcommunity was abruptly reshaped to accommodate the industrial revolution in 1942 with the transformation of Mr. Millers farm into a steel mill byHenry J. Kaiser. The area became Southern Californias leading producer of steel and steel-related products. The steel industry dominated theCitys economy until 1984 when the steel mill closed. Today, Fontana has emerged as an affordable suburb, attracting both residents andbusinesses.

The City was incorporated on June 25, 1952, under the laws of the State of California and enjoys all the rights and privileges applicable to ageneral law city. The City is governed by a five member City Council under the Council-Manager form of government. Policy-making andlegislative authority are vested in a governing council consisting of the mayor and four other members. The council is elected on a non-partisanbasis. Council members serve four-year staggered terms, with two council members elected every two years. The mayor is elected to serve afour-year term. The mayor and the four council members are elected at large. The governing council is responsible for, among other things,passing ordinances, adopting the budget, appointing committees, and hiring both the City Manager and City Attorney. The City Manager isresponsible for carrying out the policies and ordinances of the governing council, for overseeing the day-to-day operations of the government, andfor appointing the heads of the various departments.

The City of Fontana employs approximately 562 full-time employees. Services provided include police protection; contracts for fire services; theconstruction and maintenance of highways, streets, and other infrastructure; waste water and sanitation services; and recreational activities andcultural events. In addition to general government activities, the City Council also serves as the Board of Directors of the Fontana IndustrialDevelopment Authority, the Fontana Public Financing Authority, the Fontana Public Facilities Financing Authority, the Fontana Housing Authority,the Fontana Community Foundation, and the Fontana Fire Protection District as well as the Successor Agency for the Former FontanaRedevelopment Agency. Therefore, these activities have been included as an integral part of the City of Fontanas financial statements. Additionalinformation on these entities can be found in Note 1 in the notes to the financial statements.

The annual budget serves as the foundation for the City of Fontanas financial planning and control. Each year the City Council reviews budgetdevelopment guidelines for use in preparing the next years budget. These guidelines are structured to reflect the City Councils goals and


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objectives and to provide the framework in which the Operating Budget is prepared. The Management Services Department is responsible forcompiling the estimated revenues and appropriations for the City Manager. Prior to the beginning of the new fiscal year, the City Council adoptsthe annual Operating Budget at a public meeting.

The Citys budget policy is that all appropriations lapse at fiscal year end. Outstanding encumbrance balances at fiscal year end require re-approval

by the City Council at the First Quarterly Budget Review. The City Council may amend the budget at any time during the fiscal year. Budgetreports are presented to the City Council and the public on a quarterly basis. They include appropriation adjustments and revised revenueprojections as needed. The legal level of budgetary control is set at the department level. Budget-to-actual comparisons are provided in thisreport for each individual governmental fund for which an appropriate annual budget has been adopted.

Factors Affecting Financial Condition

The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specificenvironment within which the City of Fontana operates.

Local economy. For the past five years, the area has faced a host of difficult problems ranging from very high unemployment (8.4%), tostagnant median income levels and growing poverty levels. Although Californias economy is improving in many ways, including employmentgrowth, and increases in retail sales and housing sales, the Inland Empire has experienced a rise in poverty as a result of the most recentrecession.

Job Recovery Picks Up in June 2014. From June 2013 to 2014, the Inland Empire added 34,300 jobs or 2.8% and unemployment dropped from10.6% in June 2013 to 8.4% in 2014. The sectors with the largest job growth were eating & drinking (6.1 percent), logistics (4.5 percent), andconstruction (4.7 percent). The regions job growth is expected to continue partly due to the areas advantage for blue collar sectors(underdeveloped land, modestly priced labor, and growing population.

Retail Sales Are Increasing. Taxable sales are a major city revenue source that is now recovering from a steep downturn. Taxable retail saleswere up 7.2 percent over the last year within the City, which was well above Californias growth of 6.4 percent. The City of Fontana is rankedfourth in taxable retail sales in the Inland Empire with sales of $2.664 billion.

Housing Market Shows Signs of Improvement. The Inland Empires housing markets are showing definite signs of life: home prices are up for bothnew and existing homes and assessed valuations for the city are slightly up, $1.235 billion or 8.8 percent. Existing home sales showed a decreaseof 13.5 percent in quantity but prices have increased 11.6 percent over the last year while new home sales prices showed an increase of 6.6percent.

A full recovery of the Inland Empires economy requires the housing market to again be normal. Consumer fear, high prices and lack of availablehomes for sale continues to slow home sales and prevent the housing market from returning to normal. Affordability is again becoming an issuefor home buyers, particularly in the regions coastal counties where less than 30% of families can now afford their countys median priced homes.


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This has historically driven buyers inland and will likely start to do so again; this trend may give the Inland Empire region a jump start on returningto a normal housing market.

Fontana has competitive advantages related to its neighbors in the Inland Empire as it is now the westernmost city with available space toaccommodate both residential and industrial development. It offers new residents housing cost advantages and companies locating here can

benefit from lower labor costs.

The center of San Bernardino Countys growth is moving west intoFontana. The population has grown 26% over the past ten years and, at202,177 Fontana is the second largest city in San Bernardino County, thethird largest in the Inland Empire. It is likely that Fontanas population willexceed 225,000 by the year 2025.

The 10% growth in year 2007 reflects the completion of the Islandannexation program that added 4.12 square miles to the Citys area and11,840 citizens to its population.

The City of Fontana continued to see a number of significant events duringthe past year despite the struggling economy.

Completed the Police Facility Expansion Project, a $13 million project that brought all departments under one roof.

Completed the planning phase of the Fire Station #73 project; a $6.1 million projectthat will result in the construction of a new 8,800 square foot fire station that willbe located on the corner of Foothill Boulevard at Banana Avenue.

Fontana was named one of the 20 safestcommunities in the United States with apopulation over 200,000.

Expanded the Fontana Reentry SupportTeam (FRST) into a regional programwherey officers act as a conduit between the multitudes of government and private service providersand the early release population. Through this program, Fontana has become a model for othercommunities who are not implementing similar programs based on our success.

The International Association of Chiefs of Police singled out Fontanas Air Support Unit for its use ofcutting-edge technology in monitoring and fighting crime.

0%

5%

10%

60,000

90,000

120,000

150,000

180,000

210,000

20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14

Growth

Rate

Population

Population Growth


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The City of Fontana is currently involved in the construction of th r major interchanges:

I-10 Cherry: The County of San Bernardino is the lead on this $80.6 million joint project with theCity of Fontana, San Bernardino Associated Governments, and Caltrans. The City was successful insecuring $30 million in State Prop 1B Trade Corridor Improvement Funds for the construction of

this project. Construction commenced in October 2012 and is expected to be completed inDecember 2014.

I-10 Citrus: The City of Fontana is the lead on this $52.5 million joint project with the SanBernardino Associated Governments, the County of San Bernardino, and Caltrans. The City hasbeen successful in securing $23.6 million in State Trade Corridor Improvement Funds, $3,238,000in State Transportation Improvement Program Funds, and $238,000 in Federal Funds. Constructioncommenced in February 2012 and the ribbon cutting ceremony was held in May 2014.

I-15 Duncan Canyon: The Duncan Canyon overpass will be converted to an interchangeconnecting it to the I-15. This $40 million project received $1,972,000 in State Local PartnershipProgram Funds and $12 million in Corridor Mobility Improvements Act (CMIA) Prop 1B Funds.Construction has begun and is expected to be completed in November 2014.

Financial Information. Management of the City is responsible for establishing and maintaining internal control designed to ensure that theassets of the government are protected from loss, theft, or misuse, and to ensure that adequate accou nting data are compiled to allow for thepreparation of financial statements in conformity with U.S. generally accepted accounting principles. Internal control is designed to providereasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurances recognizes that: (1) the cost of acontrol should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments bymanagement.

This report consists of managements representations concerning the finances of the City. As a result, management assumes full responsibility forthe completeness and reliability of all of the information presented in this report. Management asserts that, to the best of their knowledge andbelief, this financial report is complete and reliable in all material respects.

Budgetary controls. The City maintains budgetary controls, the objective of which is to ensure compliance with legal provisions embodied in theannual appropriated budget approved by the City Council. Activities of the General Fund, special revenue funds, debt service funds, capital projectfunds, and all the proprietary funds are included in the annual appropriated budget. The level of budgetary control (that is, the level at whichexpenditures cannot legally exceed the appropriated amount) is established at the department level. The City also maintains an encumbranceaccounting system as one technique of accomplishing budgetary control. Encumbrances generally are re-appropriated as part of the followingyears budget.

Regarding long-term financial planning, as of June 16, 2014, the City Council adopted the fiscal year 2014-2015 budget. Additionally, as acompanion to approving the budget plan, a seven-year Capital Improvement Plan was presented to the City Council. The seven-year plan links
http://www.fontana.org/index.aspx?NID=623http://www.fontana.org/index.aspx?NID=623http://www.fontana.org/index.aspx?NID=623http://www.fontana.org/citruscherry


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anticipated expenditures for infrastructure development with community needs and desires and provides a citywide perspective of recommendedprojects and proposed funding sources. The Capital Improvement Plan was finalized in June 2014, and totaled $451.0 million for the seven-yearfiscal period ending June 30, 2021. The seven-year Capital Improvement Plan has been submitted and annually updated, in its present form, since1991, for effective long-range planning purposes. It is City Managements belief that these two plans give City Council members an expandedopportunity to set policy and provide direction for implementation, resulting in improved management efficiency and improved financial results.

Debt administration. At June 30, 2014, the City had a number of debt issues outstanding, as shown in detail in the notes to the financialstatements.

The Citys ratios of net bonded debt to assessed valuation and the amount of net general bonded debt per capita are useful indicators of our debtposition to management, citizens, and investors.

At June 30, 2014, the City has $52.5 million in authorized, outstanding tax supported general obligation bonds with no authorized but unissuedgeneral obligation bonds. This level of general obligation debt is well below the legal limit of $2,098 million, or 15% assessed valuation.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence inFinancial Reporting to the City for the fiscal year ended June 30, 2013. This is the twenty-first consecutive year that the City has received thisaward. The Certificate of Achievement is the highest form of recognition in governmental accounting and financial reporting, and its attainmentrepresents a significant accomplishment by a government unit and its management. In order to be awarded this certificate, a governmental unitmust publish an easily readable and efficiently organized comprehensive annual financial report, with contents that conform to programstandards. These reports must satisfy both generally accepted accounting principles and applicable legal requirements. We believe our current

Comprehensive Annual Financial Report conforms to the Certificate of Achievement program requirements, and are submitting it to the GFOA todetermine its eligibility for a certificate for the fiscal year ended June 30, 2014.

The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement inPopular Annual Financial Reporting to the City for its Popular Annual Financial Report for the fiscal year ended June 30, 2013. This is the

fourteenth consecutive year the City has received this award. This is a prestigious national award recognizing conformance with the higheststandards for preparation of state and local government popular reports. The Award is for a period of one year only. The City will continue toparticipate in the program.

The California Society of Municipal Finance Officers (CSMFO) awarded a Certificate of Award for Outstanding Financial Reporting to the City for itsComprehensive Annual Financial Report for the fiscal year ended June 30, 2005. This Certificate is issued in recognition of meeting professionalstandards and criteria in reporting which reflects a high level of quality in the financial statements. The Certificate is valid for a period of one yearonly. The California Society of Municipal Finance Officers (CSMFO) has advised its members that those who participate in the GovernmentFinance Officers Association of the United States and Canada (GFOA) Certificate of Achievement for Excellence in Financial Reporting need notsubmit their Comprehensive Annual Financial Report to the California Society of Municipal Finance Officers organization.


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The City of Fontana has received the League of California Cities Helen Putnam Award for Excellence in Financial Management in recognition of thefollowing innovative and business-like products:

2001 - Financial Highlights, a Readers Digest version of the Citys annual financial report;

1998 - Financial Performance Reporting Program, a user-friendly monthly report of the Citys financial condition with focus on theGeneral Fund;

1997 - User Fee Program, a comprehensive and accurate fee schedule supporting all of the Citys fees, charges and rates; and

1996 - Municipal Services Fiscal Impact Fee Program, a process of estimating and reporting the fiscal impacts of residential andindustrial construction projects on the cost of recurring City services and implementing a cost/benefit approach to funding newdevelopment as an alternative to using General Fund sources.

The Citys Statement of Investment Policy was awarded a Certification of Excellence Award by the Association of Public Treasurers of the UnitedStates and Canada (APT US&C) in 2000, 2003 and 2006. The award is issued in recognition of written investment policies which meet specificcriteria set forth by the Association such as selection of suitable investment instruments, custody and safekeeping, internal controls, and reporting.

Preparation of this comprehensive annual financial report could not have been accomplished on a timely basis without the support and cooperationof all City of Fontana staff. These dedicated members assisted and contributed to its preparation. Special recognition is given to the Management

Services staff, and specifically to Dawn Brooks, Fe Gugol, Genivive Schwarzkopf, Jeff Moriarty, and Lynn Rogers. Their efforts made it possible toimprove the quality of the information being reported to the citizens, the City Council, and other users on a timely basis. Appreciation is alsoexpressed to the Mayor, the City Council, the City Treasurer and the City Manager for their interest and support in planning and conducting thefinancial activities of the City in a responsible and responsive manner.

Sincerely,

Lisa A. StrongManagement Services Director/Deputy City Treasurer


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CITY OF FONTANALIST OF PRINCIPAL OFFICIALS

(At Date of Issuance)

ELECTED OFFICIALSAcquanetta Warren, Mayor

John B. Roberts, Mayor Pro TemJesus Jesse Sandoval, Council Member

Michael Tahan, Council MemberLydia S. Wibert, Council Member

Janet Koehler-Brooks, City TreasurerTonia Lewis, City Clerk

ADMINISTRATIVE STAFF

Kenneth R. Hunt City Manager

Debbie Brazill Deputy City Manager / Development Services

David R. Edgar Deputy City Manager / Administrative Services

Rodney G. Jones Police Chief

Jon McLinn Fire Chief

Charles E. Hays Public Works Director

Annette Henckel Human Resources Director

Cecilia Lopez-Henderson Deputy City Clerk

Garth W. Nelson Community Services Director

Ricardo Sandoval City Engineering

Lisa A. Strong Management Services Director

James Troyer Community Development Director

Dennis Vlasich Information Technology Director


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The Certificate of Achievement for Excellence inFinancial Reporting (Certificate of Achievement) is

recognized as the highest award in government financialreporting. The Government Finance Officers

Association (GFOA) established the Certificate of

Achievement Program in 1945 to encourage governmentunits to publish excellent comprehensive annual

financial reports (CAFRs) and to provide peerrecognition and educational assistance to the officials

preparing CAFRs. Units choosing to participate in the

program submit copies of their CAFRs for review by animpartial Special Review Committee (SRC) of qualified

judges. Reports meeting program standards are awardedCertificates of Achievement.

The Certificate of Achievement is the highest form of

recognition in governmental accounting and financial

reporting, and its attainment represents a significantaccomplishment by a government unit and its

management.


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2014/2015 Organizational Chart

Effective 7/1/2014

Budgeted 562 FTE City

608 Part-Time FTE City117 FTE Fire

Elected OfficialsMayor

City Council

City Treasurer

City Clerk

City ManagerKenneth R. Hunt

City Attorney

AdministrativeServices

David R. Edgar

Deputy City Manager

PoliceDepartmentRodney G. Jones

Police Chief

DevelopmentServices

Debbie Brazill

Deputy City Manager

Human Resources

Annette Henckel

Management ServicesLisa A. Strong

Information TechnologyDennis Vlasich

EngineeringRicardo Sandoval

Community Services

Garth W. Nelson

Community

DevelopmentJames Troyer

Public WorksCharles E. Hayes

Fire ProtectionDistrict

Jon McLinn

Fire Chief

Office of the City ClerkCecilia Lopez-Henderson

x


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MANAGEMENTS DISCUSSION AND ANALYSIS

This narrative overview and analysis of the City of Fontanas financial activities for the fiscal year ended June 30, 2014 is presented by the

management of the City of Fontana to readers of the Citys financial statements. Management encourages readers to consider the information

presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory

section of this report and the Citys basic financial statements in the financial section of this report.

FINANCIAL HIGHLIGHTS

The Citys governmental and business-type activities resulted in total assets exceeding its liabilities by $1,083.1 million as of June 30,

2014 (current fiscal year). Of this amount, $196.8 million represents the portion for restricted uses as specified by entities outside of the

City government, $120.6 million signifies the amount for unrestricted uses in accordance with finance-related legal requirements as

reflected in the Citys fund structure, and $765.7 million accounts for investments in capital assets in excess of related debt.

The Citys total net position increased $41.9 million during the current fiscal year.

As of the fiscal year end, the Citys Governmental Funds ending fund balances were $320.9 million, an increase of approximately $45

million or 116.3% from the prior fiscal year. Of this balance, $236.0 million is either nonspendable or restricted for use set by various legal

requirements, $3.2 million is committed by the City Council for various uses and $81.7 million is either assigned or unassigned based on

the nature of the funding source.

The General Funds fund balance at the close of the current fiscal year was $79 million, an increase of approximately $33.1 million or

72.1% from the previous year. This General Funds fund balance consists of $1.1 million in nonspendable and restricted fund balance,

$3.2 million committed for the purposes of expenditure control budgeting (ECB) savings ($1.3 million) and for PERS rate fluctuations ($1.9

million), and $74.7 million in assigned and unassigned fund balances. See page 13 for further discussion.

The Citys business-type activities yielded operating revenues of $1.4 million less than the recorded operating expenses of $17.0 million.

General Fund revenues were $1.1 million less than budget, while expenditures were $4.7 million less than budget.

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OVERVIEW OF THE BASIC FINANCIAL STATEMENTS

Managements Discussion and Analysis is intended to serve as an introduction to the Citys basic financial statements. The Citys basic financial

statements include three components: government-wide financial statements; fund financial statements; and notes to the basic financial

statements.

Government-wide f inancial statements. The government-wide financial statementsare designed to provide readers with a broad overview

of the Citys finances, in a manner similar to a private-sector business.

The statement of net positionpresents information on all of the Citys assets and liabilities, with the difference between the two reported as net

assets. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving

or deteriorating.

The statement of activities presents information showing how the governments net position changed during the most recent fiscal year. All

changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash

flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g.,

uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental

revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and

charges (business-type activities). The governmental activities of the City include general government, public safety, public works, community

development, community services and engineering. The business-type activities of the City include sewer and water operations.6


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Component units are included in the basic f inancial statements and consist of legally separate entities for which the City is financially accountable

and that have the same governing board as the City. The blended component units include the Successor Agency of the Former Fontana

Redevelopment Agency, the Fontana Public Financing Authority, the Fontana Housing Authority, the Fontana Industrial Development Authority,

the Fontana Community Foundation and the Fontana Fire Protection District. The redevelopment agency was dissolved as of January 31, 2012

through the Supreme Court decision on Assembly Bill 1X26. See Note 17 of the notes to the financial statements for more information on the

dissolution.

The government-wide financial statements can be found on pages 19 and 20 of this report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been

segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate

compliance with finance-related legal requirements. All the funds of the City can be divided into three categories: governmental funds, proprietary

funds and fiduciary funds.

Governmental fun ds. Governmental fundsare used to account for essentially the same functions reported as governmental activitiesin the

government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus

on near-term inflows and outflows of spendable resources,as well as on balances of spendable resourcesavailable at the end of the fiscal year.

Such information may be useful in evaluating the Citys near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the

information presented for governmental funds with similar information presented for governmental activities in the government-wide financial

statements. By doing so, readers may better understand the long-term impact of the Citys near-term financing decisions. Both the governmental

fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to the

government-wide financial statements in order to facilitate this comparison between governmental fundsand governmental activities.

The City maintains 47 individual governmental funds for financial reporting purposes. Information is presented separately in the governmental

fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance for the General Fund, theTraffic Congestion Relief Special Revenue Fund, the Fire Protection District Special Revenue Fund, the Housing Authority Special Revenue Fund,

the Capital Reinvestment Fund, the Future Capital Projects Fund and the Traffic Mitigation Capital Project Fund, which are considered to be major

funds. Data for the other 40 governmental funds are combined in a single, aggregated presentation. Individual fund data for each of these non-

major governmental funds is provided in the non-major funds supplementary section of this report.

The City adopts an annual appropriated budget for its general fund, special revenue funds, debt service funds, and capital project funds. A

budgetary comparison statement has been provided for the General Fund, Traffic Congestion Relief Special Revenue Fund, the Fire Protection

District Special Revenue Fund and the Housing Authority Low/Mod Housing Special Revenue Fund in the basic financial statements and for the

remaining special revenue funds, the debt service funds, and the capital project funds in the supplementary information.

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The governmental fund financial statements can be found on pages 21-28 of this report.

Proprietary funds. The City maintains two different types of proprietary funds. Enterprise funds are used to report the same functions

presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Sewer and

Water Operations. Internal Service Fundsare an accounting device used to accumulate and allocate costs internally among the Citys various

functions. The City uses an internal service fund to account for its fleet of vehicles. Because this service predominantly benefits governmentalrather than business-type functions, it has been included with governmental activitiesin the government-wide financial statements.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund

financial statements can be found on pages 29-31 of this report.

Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are

not reflected in the government-wide financial statements because the resources of those funds are not available to support the Citys own

programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

The basic fiduciary fund financial statements can be found on page 32-33 of this report.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in

the government-wide and fund financial statements. The notes to the financial statements can be found on pages 35-83 of this report.

Government-wide Financial Analysis

Invested in capital

assets, net of

related debt 71%

Restricted:

Community

development 8%

Restricted:

Public safety

2%

Restricted:Public

works 3%

Restricted: Capital

projects 5%Unrestricted 11%

Net Assets by Type

8


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2014 2013 2014 2013 2014 2013

357,201$ 368,564$ 30,307$ 31,178$ 387,508$ 399,742$

754,760 726,277 74,824 76,589 829,584 802,866

1,111,961 1,094,841 105,131 107,767 1,217,092 1,202,608

92,735 87,726 12,420 13,151 105,155 100,877

26,333 57,753 2,459 2,756 28,792 60,509

119,068 145,479 14,879 15,907 133,947 161,386

703,126 676,167 62,610 63,626 765,736 739,793

196,765 201,817 - - 196,765 201,817

93,002 71,378 27,642 28,234 120,644 99,612

992,893$ 949,362$ 90,252$ 91,860$ 1,083,145$ 1,041,222$

Other liabilities

Total assets

Unrestricted

Total net position

Total liabilities

Net position:

Net investment in capital as sets

Restricted

Gover nm ent al Ac tivit ies Bus ines s-Type Ac tivit ies Total

Current and other assets

Capital assets

Long-term liabilities outstanding

As noted earlier, net position may serve over time as a useful indicator of a governments financial position. The Citys net position are comprised

of Net Investment in Capital Assets; Restricted Net Position; and Unrestricted Net Position. As of June 30, 2014, assets exceeded liabilities by

$1,083.1 million.

The Citys net investment in capital assets (land, buildings, infrastructure, machinery, equipment, and vehicles), less any related debt used to

acquire those assets that is still outstanding, is $765.7 million. The City uses these capital assets to provide services to citizens; consequently,these assets are notavailable for future spending. Although the Citys investment in its capital assets is reported net of related debt, it should be

noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to

liquidate these liabilities. An additional portion of the Citys net position ($196.8 million) represents resources that are subject to external

restrictions on how they may be used. The remaining balance of unrestricted net position ($120.6 million) may be used to meet the governments

ongoing obligations to citizens and creditors.

Net Position

(000 omitted)

9


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Changes in Net Position

(000 omitted)

2014 2013 2014 2013 2014 2013

44,718$ 59,606$ 15,548$ 14,806$ 60,266$ 74,412$

13,247 23,263 - - 13,247 23,263

61,605 796 1,070 448 62,675 1,244

46,049 48,062 - - 46,049 48,062

31,441 29,161 - - 31,441 29,161

6,277 5,882 - - 6,277 5,882

4,643 4,808 - - 4,643 4,808

704 587 - - 704 587

85 102 - - 85 102

8,368 3,169 452 (305) 8,820 2,864

Other 5,740 7,955 - - 5,740 7,955

Total revenues 222,877 183,391 17,070 14,949 239,947 198,340

23,588 22,932 - - 23,588 22,932

70,609 65,336 - - 70,609 65,336

71,174 72,603 - - 71,174 72,603

3,725 28,000 - - 3,725 28,000

20,006 5,815 - - 20,006 5,815

12,929 13,073 - - 12,929 13,073

2,866 2,975 - - 2,866 2,975

- - 16,987 15,578 16,987 15,578

- - 134 550 134 550Total expenses 204,897 210,734 17,121 16,128 222,018 226,862

17,980 (27,343) (51) (1,179) 17,929 (28,522)

1,723 2,309 (1,723) (2,309) - -

19,703 (25,034) (1,774) (3,488) 17,929 (28,522)

973,189 974,396 92,026 95,348 1,065,215 1,069,744

992,892$ 949,362$ 90,252$ 91,860$ 1,083,144$ 1,041,222$

Operating grants and contributions

Capital grants and contributions

General Revenues:

Governmental Ac tivi ties Bus iness-Type Activi ties Total

Revenues:

Program Revenues:Charges for s ervices

Property taxes

Sales tax

Franchise taxes

Business license taxes

Transient occupancy taxes

Motor vehicle in lieu

Investment earnings

Expenses:

General Government

Public Safety

Public Works

Community Development

Engineering

Community Services

Interest on long-term debt

Sewer

Net Position - beginning of year as restated

Net Position - end of year

Water

Change in net posi tion before transfers

Change in net position

Transfers

10


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Governmental activi ties

The most significant revenues of the governmental activities are general taxes (40%), which include property taxes (21%), sales and use taxes

(14%), and various other taxes and revenues (5%), and investment earnings (4%). Program revenues are 53% of the total revenues of the

governmental activities, which include charges for services (20%), operating grants and contributions (6%), and capital grants and contributions

(27%).

Public Works is the most significant (35%) of all governmental activities expenses, followed by public safety (police and fire) (34%), general

government (12%), engineering (10%), interest on long-term debt (1%), and various other programs (8%). Included in these amounts is

depreciation expense, which is 17% of the total expenses for governmental activities.

Governmental activities revenues increased by $39 million (21%) in the current fiscal year. General tax revenues increased by only $0.6 million

(0.7%) and general revenues (not including general taxes) increased by $2.4 million (18%) a result of higher interest rates and the recovery of

investment losses from prior years. Charges for services decreased by $14.8 million (25%) mostly attributed to 1) a decrease in Fire revenues

related to a one time contribution received from the County ($5.6 million) in prior year, 2) a decrease in Public works revenues related to Prop 1B

funds ($5.1 million) that were not received in the current year, and 3) a decrease in Police revenues of $2.4 million related to a decrease in asset

Property taxes

21%

Sales taxes

14%

Franchise taxes

3%

Business licensetaxes

2%Investment

earnings

4%

Other

3%

Charges for

services

20%

Operating

contributions

and grants

6%

Capital

contributions

and grants

27%

REVENUES BY SOURCE -

GOVERNMENTAL ACTIVITIES

-

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

Program Revenues

Expenses

EXPENSES AND PROGRAM REVENUES -

GOVERNMENTAL ACTIVITIES

11


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seizure funds received during the year ($0.9 million) and grant revenues ($1.7 million) that were incorrectly classified as charges for services in the

prior year. Operating contributions and grants decreased by $10.0 million (43.1%) primarily due to the reclassification of revenues received from

Measure I ($12.0 million) that is reported as a capital contribution and grant in the current fiscal year. Capital contributions and grants increased

by $60.8 million primarily due 1) the additional of Measure I revenue ($12 million) that was previously reported as an operating contribution and

grant in the previous fiscal year and 2) the contribution of Successor Agency properties ($26 million) to the City as a result of the State approval of

the Long Range Property Management Plan and other infrastructure assets donated to the City by developers ($19.5).

Governmental activities expenses decreased by $5.8 million (2.8%) in the current fiscal year. The most significant change in governmental

expenses was a decrease in community development expenses of $24.3 million (86.7%) as a result of the completion of various capital projects

including the I-10/Citrus Interchange and an increase in engineering expenses of $14.2 million (244%) as a result of increased construction activity

related the I-10/Cherry and I-15/Duncan Canyon interchange projects in the City. There were no other programs with significant or unusual

changes.

Business-type activi ties

Business-type activities net position decreased by $1.6 million (1.7%).

Business-type activities revenues increased by $2.1 million (14.2%) in the current fiscal year. The increase in revenue is primarily related to an

increase in investment income of $0.8 million due to the interest rates recovering from the economic downfall, capital contributions increased $0.6

million (139%) due to an increase in development activity resulting in infrastructure assets donated to the City by developers and charges for

services increased by $0.7 million (5%), primarily due to increases in sewer service charges.

Investment

earnings

Charges for

services

Capitalcontributions

and grants

Transfers

REVENUES BY SOURCE -

BUSINESS-TYPE ACTIVITIES

-

10,000,000

20,000,000

Sewer Water

Program Revenues

Expenses

EXPENSES AND PROGRAM REVENUES -

BUSINESS-TYPE ACTIVITIES

12


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Total expenses increased $0.9 million (5.8%) in the current fiscal year; primarily due to an increase in wastewater handling charges paid to local

water districts.

Financial Analysis of the Citys Funds

The City of Fontana employs Fund Accounting to ensure and to demonstrate compliance with finance-related legal requirements.

Governmental f unds. The focus of the Citys governmental fundsis to provide information on near-term inflows, outflows, and balances of

spendable resources. Such information is useful in assessing the Citys financing requirements. In particular, assigned and unassigned fund

balancemay serve as a useful measure of a governments net resources available for spending at the end of the fiscal year.

As of the end of the current fiscal year, the Citys governmental funds reported combined ending fund balances of $320.9 million, an increase of

$45 million from the previous year. Of this total amount, $81.7million constitutes assigned or unassigned fund balance,which is available for

spending at the governments discretion. The remainder of fund balance is either nonspendable ($55.5 million), restricted ($180.5 million) or

committed ($3.2 million) and is not available for new spending. Nonspendable fund balance consists of 1) an amount representing long-term

interfund receivables ($55.1 million); 2) deposits held ($0.2 million); and 3) inventories held ($0.2 million). Restricted fund balance includesamounts that are constrained on the use of the resources by outside parties and committed fund balance includes amounts that are constrained

on the use of the resources pursuant to City Council formal action. For additional details of the Citys fund balances, please refer to Note 14 in the

Notes to the Basic Financial Statements.

The general fund is the chief operating fund of the City. At the end of the current fiscal year, the assigned fund balance of the general fund was

$19.5 million, while total fund balance reached $79 million, which was $33.1 million or 72.1% higher than the prior year. The Citys management

assigns fund balance to a particular function, project or activity and may also be assigned for purposes beyond the current year. However,

assigned fund balance is available for appropriation at any time. The General Fund has committed fund balance of $3.2 for purposes of 1) PERS

rate fluctuations ($1.9 million) and 2) $1.3 million for expenditure control budgeting incentives.

The fund balance of the Citys general fund increased by $33.1 million during the current fiscal year, the increase is primarily due to 1) a prior

period adjustment ($27.6 million) that was recorded to remove an unavailable revenue balance that was recorded to add consistency across all

funds for similar type receivable balances related offset for the amounts not currently available for spending and 2) write-off of an advance to

another fund ($5.6 million) that is uncollectible due to a determination by the State Department of Finance. The General fund revenues increased

$2.0 million (2.3%) from the previous fiscal year; this increase is primarily are due to economic recovery and increased consumer confidence and

spending resulting in increased sales tax revenues of $1.9 million and increased property tax revenues of $0.8 million. In addition to an increase

in tax revenues, the General fund experienced a decrease in investment earnings of $0.9 million from the previous fiscal year as a result of the

year-end market value adjust (GASB 31). General fund expenditures increased $4.5 million (5.2%) from the previous fiscal year; the increased

costs were primarily due to increased personnel costs of $2.8 million across all departments, increased internal service charges paid to other

funds of $0.9 million, increased utility costs of $0.4 million and increased legal fees of $0.2 million.13


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The Traffic Congestion Relief special revenue fund has a total fund balance of $10.2 million. The fund balance increased by $22.5 million during

the current fiscal year primarily due to prior period adjustments of $13.5 million; the prior period adjustment was primarily due to an adjustment

that was recorded to remove a duplicate loan receivable balance ($12.6 million) and a duplicate advance from other funds balance ($12.6 million).

The Fire Protection District special revenue fund has a fund balance of $11.1 million. The Fire Protection District accounts for all of the operating

activities of the Fire District. The fund balance increased $5 million during the current fiscal year; the increase is primarily due to current year

revenues ($27.8 million) exceeding current year expenditures ($20.6 million). Revenues decreased $1.3 million (4.2%) as a result of one-time

moneys received in the prior fiscal year and expenditures increased $1.9 million (8.5%) as a result in increased contract costs with the San

Bernardino County Fire for f ire protection services.

The Housing Authority special revenue fund has a fund balance of $82.5 million. The fund balance increased by $0.3 million during the fiscal year,

the increase is primarily due to interest payments received on loans issued to developers for low-moderate income housing in prior years.

The Capital Reinvestment fund has a total fund balance of $7.9 million. The fund balance decreased during the current fiscal year by $2.9 million.

The decrease was caused by expenditures incurred for various projects within the city such as, the Police department expansion project and the

city-wide pavement rehabilitation.

The Future Capital Projects fund has a total fund balance of $54 million. The fund balance decreased during the current fiscal year by $0.8 million

primarily due to a prior period adjustment that was recorded to remove receivable and revenues transactions that were recorded to the fund in

error ($0.8 million).

The Traffic Mitigation fund has a total deficit fund balance of ($23.7)million. The fund balance decreased during the current fiscal year by $1.7

million as a result of contributions to traffic circulation projects such as I-10/Citrus interchange project and the I-15/Duncan Canyon interchange

project.

Proprietary fund s. The Citys proprietary funds provide the same type of information found in the government-wide financial statements, but in

more detail. Unrestricted net position of the Sewer and Water Operations at the end of the year amounted to $27.3 million. The total decline in

net position was $1.8 million; the decrease is primarily due to an increase in wastewater handling charges paid to local water districts.

General Fund Budgetary Highlight s

Over the course of the year, the City Council revised the Citys budget on a quarterly basis. The Council approves supplemental appropriationsthroughout the year based on individual items that are brought forward by various departments. The General Fund budgetary comparisonstatement can be found on page 25 of this report.

14


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Revenues:

During the year the original budget was amended to increase revenues by $2.2 million. The increase is primarily due to the increase in sales tax

revenues received.

General Fund revenues of $87.6 million were less than budgeted revenues of $88.6 million by $1.0 million. The negative variance was primarily

due to lower than expected investment income.

Expenditures:

During the year the original budget was amended to increase appropriations by $3.2 million, primarily to appropriate an additional $1.2 million for

employee contract increases, $0.6 for additional Police staffing and various supplies, $0.3 for increased self-insurance costs, $0.2 for inspection

and plan check services and $0.7 million for various capital projects.

General Fund expenditures were less than budgeted. Of the total appropriations of $95.1 million, approximately 4.9%, or $4.7 million were

unspent. There were no significant variances.

Capital Asset and Debt Administration

Capital assets. The Citys investment in capital assets for governmental and business-type activities as of June 30, 2014, amounts to $829.6

million (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, machinery and equipment,

vehicles and infrastructure (roads, highways, sewer and storm drain systems). The total increase in the Citys investment in capital assets for the

current fiscal year was 0.3%. Major capital asset events during the current fiscal year included the following:

Completed construction of the Police Department Expansion and Training Center,

Completed construction of the I-10/Citrus and the I-10/Cherry Overpasses, and

Continued construction on the I-10/Cherry Overpasses and the 1-15/Duncan Canyon Interchange.

15


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2014 2013 2014 2013 2014 2013

Land 158,717$ 92,837$ -$ -$ 158,717$ 92,837$

Building and improvements 196,444 185,161 1,476 1,522 197,920 186,683

Furniture and equipment 5,079 3,423 126 80 5,205 3,503

Vehicles 7,480 6,423 - - 7,480 6,423

Infrastructure 380,037 389,272 73,101 74,933 453,138 464,205

Intangibles 729 1,116 11 54 740 1,170

Construction in progress 6,274 48,045 110 - 6,384 48,045

Total 754,760$ 726,277$ 74,824$ 76,589$ 829,584$ 802,866$

Governmenta l Acti vi ti es Busi ness-Type Acti vi ti es To ta l

2014 2013 2014 2013 2014 2013

52,490$ 54,825$ -$ -$ 52,490$ 54,825$

11,817 10,813 - - 11,817 10,813

6,750 6,391 206 188 6,956 6,579

17,231 15,095 - - 17,231 15,095

4,447 602 12,214 12,963 16,661 13,565

Total outstanding debt 92,735$ 87,726$ 12,420$ 13,151$ 105,155$ 100,877$

Governmenta l Ac tivi ties Business-Type Act ivi ties To ta l

Lease revenue bonds

Other post employment benefits

Other debt

Claims and judgments

Compensated absences

Capital Assets

(Net of depreciation)

(000 omitted)

Additional information on the Citys capital assets can be found in Note 5 on pages 51-52 of this report.

Long-term debt. At the end of the current fiscal year, the Citys total long-term debt outstanding is $105.2 million. This amount is comprised of

$52.5 million of lease revenue bonds which are secured by future revenue sources from the lease of City property and $52.7 million of various

other loans and obligations payable.

Outstanding Debt

(000 omitted)

Additional information on the Citys long-term debt can be found in Note 7 on pages 56-59 of this report.

16


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Economic Factors and Next Years Budget and Rates

In preparing the budget for Fiscal Year 2014-15, managements goal was to produce an operating budget that adhered to City Council goals and

objectives with an emphasis on cost containment. Expansion of the Citys economic base continues to be a City Council priority.

The Operating Budget for Fiscal Year 2014-15 is f inancially balanced and includes:

General Fund designation of fund balance for contingencies of 15% of recurring appropriations.

An increase in budgeted revenues of $3.6 million (or 4.3%) in the General Fund is primarily attributed to the following;

an increase in sales tax revenue of $1.0 million reflecting the positive economic trends seen statewide

an increase in property tax revenue of $0.36 million reflecting a 4% projected increase in city-wide assessed valuation, offset by one-time

tax increment residual revenue received in the current fiscal year

an increase in franchise fees, business and development-related revenues of $0.46 million reflecting slowly improving economic

conditions

an increase in vehicle license fee (VLF) revenue of $0.79 million reflecting the return of funding related to newly incorporated

annexations (legislation pending)

An increase in budgeted expenditures of $2.6 million or (3.4%) as compared to the Fiscal Year 2013-14 primarily attributed to the following;

$0.84 million contractual obligations related to City staff

$0.53 million of salaries that were previously funded through grants

$0.30 million fleet maintenance cost increases

$0.20 million minimum wage increases

$0.19 million recurring departmental requests

$0.18 million one-time departmental requests

An allocation of $4.89 million of funding for new and ongoing projects across all funds.

Requests for Information

This financial report is designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the City of

Fontanas finances and to show the Citys accountability for the money it receives. Questions concerning any of the information provided in this

report or requests for additional information should be addressed to the Citys Management Services Department at the City of Fontana, 8353

Sierra Avenue, Fontana, CA 92335.

17


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18


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Basic Financial Statements


35/166

Exhibit BCITY OF FONTANAStatement of Activities


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Operating Capital

Charges for Contributions Contributions Governmental Business-type

Expenses Services and Grants and Grants Total Activities Activities Total

General government:City council and commissions 282,830$ -$ -$ -$ -$ (282,830)$ -$ (282,830)$City administration 4,872,757 - - - - (4,872,757) - (4,872,757)Management services 2,398,793 2,639,107 - 43,125 2,682,232 283,439 - 283,439

Information technology 5,345,609 - - - - (5,345,609) - (5,345,609)Human resources 10,687,948 4,665,644 - - 4,665,644 (6,022,304) - (6,022,304)

Public safety:

Police 49,815,765 4,916,477 2,913,874 - 7,830,351 (41,985,414) - (41,985,414)

Fire 20,793,374 - - - - (20,793,374) - (20,793,374)

Public works 71,174,441 16,194,872 6,365,155 49,583,149 72,143,176 968,735 - 968,735Community development 3,724,782 7,586,953 3,967,830 8,976,820 20,531,603 16,806,821 - 16,806,821Community services 12,928,629 5,988,585 - - 5,988,585 (6,940,044) - (6,940,044)Engineering 20,006,242 2,726,083 - 3,002,188 5,728,271 (14,277,971) - (14,277,971)Interest on long-term debt 2,866,029 - - - - (2,866,029) - (2,866,029)

Tota l governmental act ivi ti es 204,897,199 44,717,721 13,246,859 61,605,282 119,569,862 (85,327,337) - (85,327,337)

Business-type activities:Sewer 16,987,089 15,548,412 - 1,069,865 16,618,277 - (368,812) (368,812)Water 134,351 - - - - - (134,351) (134,351)

Total b usiness-type a ctivities 17,121,440 15,548,412 - 1,069,865 16,618,277 - (503,163) (503,163)

Total functions/programs 222,018,639$ 60,266,133$ 13,246,859$ 62,675,147$ 136,188,139$ (85,327,337) (503,163) (85,830,500)

General revenues:

Taxes:Property taxes, levied for general purpose 46,049,227 - 46,049,227Sales taxes 31,440,752 - 31,440,752Franchise taxes 6,276,563 - 6,276,563Business license taxes 4,642,711 - 4,642,711Transient occupancy taxes 704,132 - 704,132

Total taxes 89,113,385 - 89,113,385

Intergovernmental, unrestricted:Motor vehicle in lieu 85,263 - 85,263

Investment earnings 8,368,054 452,288 8,820,342Other 5,739,599 - 5,739,599

Transfers 1,723,160 (1,723,160) -

Total general revenues and transfers 105,029,461 (1,270,872) 103,758,589

Change in net position 19,702,124 (1,774,035) 17,928,089

Net position at beginning of year 949,362,530 91,859,952 1,041,222,482

Restatement of net position 23,828,060 165,743 23,993,803

Net position at end of year 992,892,714$ 90,251,660$ 1,083,144,374$

Functions/Programs

Net (Expense) Revenue and Changes in Net Assets

Governmental activities:

See accompanying notes to financial statements

Statement of ActivitiesFor the Year Ended June 30, 2014

Program Revenues

20

Exhibit CCITY OF FONTANABalance Sheet


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Traffic Fire Future Other Total

Congestion Protection Housing Capital Capital Traffic Governmental Governmental

General Relief District Authority Reinvestment Projects Mitigation Funds Funds

Asset s:

Cash and investments 42,284,010$ 9,873,668$ 10,882,192$ 6,456,769$ 4,791,829$ 2,841,391$ 19,744,136$ 102,068,182$ 198,942,177$Receivables:

Accounts 3,183,295 9,582 - 34,178 - - - 800,534 4,027,589Assessments - - - - - - - 438,371 438,371Interest 131,567 44,754 1,471 1,399,733 - 8,843 45,507 414,783 2,046,658Loans - 12,630,469 - 55,746,762 - - - 6,714,293 75,091,524Loans to Successor Agency 31,825,953 - - 20,079,247 - - - - 51,905,200

Allowance for doubtful accounts (245,690) - - - - - - (177,268) (422,958)Due from other funds 3,440,012 - - - - - - - 3,440,012Due from other governments 6,991,626 1,938,147 201,233 - - - - 5,331,810 14,462,816Inventories 170,832 - - - - - - 887,611 1,058,443Deposits 33,058 1,000 - - 28,500 - 120,000 3,000 185,558Land held for resale - - - - - - - 1,257,528 1,257,528

Advances to other funds - - - - 3,937,106 51,174,020 - 318,658 55,429,784Restricted assets:

Cash with fiscal agent 376,900 - - 24,434 55,980 - - 6,179,121 6,636,435Total assets 88,191,563$ 24,497,620$ 11,084,896$ 83,741,123$ 8,813,415$ 54,024,254$ 19,909,643$ 124,236,623$ 414,499,137$

Liabilities, Deferred Inflows and Fund Balances:

Liabilities:

Accounts payable 5,144,354$ 189,774$ 2,500$ 4,516$ 827,043$ 71,222$ 813,434$ 2,457,638$ 9,510,481$

Deposits payable 183,136 - - 4,050 - - - 106,990 294,176

Retentions payable - 31,350 - - 73,192 - - 864,004 968,546

Due to other funds - - - - - - - 3,440,012 3,440,012

Due to other governments - - - - - - - 10,196,533 10,196,533

Unearned revenue - - - - - - - 4,203,114 4,203,114Advances from other funds - 12,630,469 - - - - 42,799,315 - 55,429,784

Total liabilities 5,327,490 12,851,593 2,500 8,566 900,235 71,222 43,612,749 21,268,291 84,042,646

Deferred inflows of resources:

Unavailable revenues 3,886,782 1,451,323 - 1,232,860 - - - 2,963,929 9,534,894

Tot al def er red i nf lows o f r esources 3 ,886 ,782 1,451,323 - 1,232,860 - - - 2,963,929 9,534,894

Fund balances:

Nonspendable 203,890 1,000 - - 3,965,606 51,174,020 120,000 3,000 55,467,516

Restricted 890,753 10,193,704 11,082,396 82,499,697 55,980 - - 75,791,912 180,514,442Committed 3,190,424 - - - - - - - 3,190,424

Assigned 19,511,605 - - - 3,891,594 2,779,012 - 28,547,282 54,729,493

Unassigned 55,180,619 - - - - - (23,823,106) (4,337,791) 27,019,722Total fund balances 78,977,291 10,194,704 11,082,396 82,499,697 7,913,180 53,953,032 (23,703,106) 100,004,403 320,921,597

Total liabilities, deferred inflows of

resources and fund balances 88,191,563$ 24,497,620$ 11,084,896$ 83,741,123$ 8,813,415$ 54,024,254$ 19,909,643$ 124,236,623$ 414,499,137$


Balance SheetGovernmental Funds

June 30, 2014

Capital ProjectSpecial Revenue

21

Exhibit DCITY OF FONTANA

Reconciliation of the Balance Sheet of Governmental Funds


38/166

Fund balances of governmental funds 320,921,597$

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

Capital assets, net of depreciation, have not been included as financial resources in governmental fund activity. 752,268,664

Long-term debt and compensated absences have not been included in the governmental funds. (75,503,367)

Accrued interest payable from the current portion of interest due on long-term debt has not been reported in the governmental funds. (944,724)

An Internal Service Fund is used by management to charge the costs of fleet management to individual funds. The assets andliabilities of the Internal Service Fund must be added to the Statement of Net Position. 3,847,160

Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. 9,534,894

Governmental funds report all contributions in relation to the Annual Required Contribution (ARC) for OPEB as expenditures, but inthe Statement of Net Position any excess or deficiencies in relation to the ARC are recorded as an asset or a liability. (17,231,510)

Net position of governmental activities 992,892,714$


Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Position

June 30, 2014

22

Exhibit ECITY OF FONTANAStatement of Revenues, Expenditures and Changes in Fund Balances

GovernmentalFunds


39/166

Traffic Fire Future Other

Con gest ion Pr ot ect ion Hou si ng Capi tal Capi tal Tr af fic Gover nm en tal

General Relief District Authority Reinvestment Projects Mitigation Funds Totals

Revenues:

Taxes 61,536,084$ -$ 27,290,769$ -$ -$ -$ -$ 286,532$ 89,113,385$

Licenses and permits 2,214,228 - 379,226 - - - - 1,420,627 4,014,081Intergovernmental 2,429,041 11,980,724 - - - - - 16,812,267 31,222,032Charges for services 6,609,070 - 11,573 - - - 1,343,831 2,658,511 10,622,985Fines and forfeitures 746,472 - - - - - - 2,367,661 3,114,133Special assessments - - - - - - - 15,531,166 15,531,166Investment earnings 4,455,453 315,849 35,031 390,245 170,644 50,272 324,372 2,550,835 8,292,701Contribution from property owners - - - - - - - 2,308,611 2,308,611Other revenue 9,564,549 - - 68,698 - - - 492,700 10,125,947

Total revenues 87,554,897 12,296,573 27,716,599 458,943 170,644 50,272 1,668,203 44,428,910 174,345,041

Expenditures:

Current:General government:

City council and commissions 282,830 - - - - - - - 282,830City administration 4,126,450 - - 120,373 - - - 619,941 4,866,764Management services 2,243,487 - - - - - - 144,767 2,388,254Information technology 5,334,531 - - - - - - - 5,334,531Human resources 7,522,077 - - - - - - 9,631 7,531,708

Public safety:

Police 44,043,898 - - - - - - 5,093,201 49,137,099Fire - - 20,603,094 - - - - 190,262 20,793,356

Public works 10,824,591 - - - 3,857,087 - - 18,039,706 32,721,384Community development 3,436,609 - - - 39,517 - - 244,841 3,720,967Community services 9,611,129 - - - - - - 3,304,672 12,915,801Engineering 2,601,117 1,863,566 - - 214,860 - 5,059,314 10,270,836 20,009,693

Capital Outlay 389,968 1,344,566 - - 1,872,950 85,561 3,975 6,105,796 9,802,816Debt Service:

Principal - - - - - - - 2,335,000 2,335,000Interest - - - - - - - 2,902,744 2,902,744

Total expenditures 90,416,687 3,208,132 20,603,094 120,373 5,984,414 85,561 5,063,289 49,261,397 174,742,947Excess (deficiency)of revenues

over(under)expenditures (2,861,790) 9,088,441 7,113,505 338,570 (5,813,770) (35,289) (3,395,086) (4,832,487) (397,906)

Other Financing Sources (Uses):

10,924,885 - 1,006,100 - 3,045,000 - 506,692 8,408,320 23,890,997(8,101,634) (98,900) (3,161,200) - (173,756) - (405,900) (10,362,947) (22,304,337)

- - - - - - 3,873,854 3,873,854

Sale of capital assets 11,458 - - - - - - - 11,458

Total other financing sources(uses) 2,834,709 (98,900) (2,155,100) - 2,871,244 - 100,792 1,919,227 5,471,972

Net change in fund balances (27,081) 8,989,541 4,958,405 338,570 (2,942,526) (35,289) (3,294,294) (2,913,260) 5,074,066

Fund Balances:

Beginning of fiscal year, as originally stated 45,898,012 (12,260,110) 6,075,499 82,161,127 10,794,148 54,823,125 (21,993,408) 110,452,461 275,950,854Restatements 33,106,360 13,465,273 48,492 - 61,558 (834,804) 1,584,596 (7,534,798) 39,896,677

Beginning of fiscal year, as restated 79, 004, 372 1,205,163 6,123,991 82,161,127 10,855,706 53,988,321 (20,408,812) 102,917,663 315,847,531

Net change in fund balances (27,081) 8,989,541 4,958,405 338,570 (2,942,526) (35,289) (3,294,294) (2,913,260) 5,074,066

End of fiscal year 78,977,291$ 10,194,704$ 11,082,396$ 82,499,697$ 7,913,180$ 53,953,032$ (23,703,106)$ 100,004,403$ 320,921,597$

Special Revenue


Governmental FundsFor the Year Ended June 30, 2014

Long-term debt issued

Capital Projects

Transfers inTransfers out

23

Exhibit FCITY OF FONTANA

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances


40/166

Net change in fund balances - total governmental funds 5,074,066$

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

Governmental funds report capital outlay as expenditures. However, in the Statement of Activities, the cost of t hose assets is allocated overtheir estimated useful lives as depreciation expense. T his is the amount of capital assets recorded in the current period. 7,987,317

In the Statement of Activities, only the gain/loss on the sale of capital assets is reported. However, in the governmental funds, the proceeds from thesale increase financial resources. Thus, the change in net position differs from the change in fund balance by the cost of the capital assets sold. (3,449,924)

Donations of capital assets increase net position in the Statement of Activities, but do not appear in the governmental funds because they are notfinancial resources. 45,535,295

Depreciation expense on capital assets is reported in the Statement of Activities, but they do not require the use of current financial resources.Therefore, depreciation expense is not reported as expenditures in governmental funds. (35,143,684)

Revenues in the Statement of Activit ies that do not provide current financial resources are not reported as unavai lable revenues in the funds. 4,706,362

The issuance of long-term debt provides current financial resources to governmental funds, but issuing debt increases long-term liabilities in theStatement of Net Position. Repayment of bond principal is an expenditure in governmental funds, but the repayment reduces long-termliabilities in the Statement of Net Position. (1,538,854)

Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures

in governmental funds. (1,296,694)

The Internal Service Fund is used by management to charge the costs of fleet management to individual funds. The net gain of the Internal ServiceFund is reported with governmental activities. (34,661)

Governmental funds report all contributions in relation to the Annual Required Contribution (ARC) for OPEB as expenditures, however in the Statement of Activitiesonly the ARC is an expense. (2,137,099)

Change in net position of governmental activities 19,702,124$


of Governmental Funds to the Statement of Activities

For the Year Ended June 30, 2014

24

Exhibit G

Page 1 of 4

CITY OF FONTANAGeneral Fund


41/166

Variance with

Actual Final Budget -

Original Final Amounts Positive (Negative)

Revenues:

Taxes 60,265,000$ 61,750,000$ 61,536,084$ (213,916)$Licenses and permits 2,198,000 2,390,800 2,214,228 (176,572)Intergovernmental 3,058,820 2,268,820 2,429,041 160,221Charges for services 5,945,910 6,694,530 6,609,070 (85,460)Fines and forfeitures 750,300 750,300 746,472 (3,828)Investment earnings 4,637,700 4,838,200 4,455,453 (382,747)Other revenue 9,612,270 9,934,202 9,564,549 (369,653)

Total revenues 86,468,000 88,626,852 87,554,897 (1,071,955)

Expenditures:


City council and commissions 288,610 289,930 282,830 7,100City administration 3,939,560 4,103,577 4,126,450 (22,873)Management services 2,486,540 2,628,178 2,243,487 384,691Information technology 5,126,560 5,707,647 5,334,531 373,116Human resources 6,877,840 7,328,008 7,522,077 (194,069)

Public safety:Police 45,533,470 46,123,266 44,043,898 2,079,368

Public works 11,479,020 11,733,031 10,824,591 908,440Community development 3,343,180 3,660,813 3,436,609 224,204Community services 10,186,900 10,453,208 9,611,129 842,079Engineering 2,389,100 2,818,447 2,601,117 217,330

Capital outlay 215,100 249,435 389,968 (140,533)

Total expenditures 91,865,880 95,095,540 90,416,687 4,678,853

Excess (deficit)of

revenues over expenditures (5,397,880) (6,468,688) (2,861,790) 3,606,898

t er nanc ng ources ses :

Transfers in 11,567,100 11,628,100 10,924,885 (703,215)Transfers out (8,353,240) (8,092,810) (8,101,634) (8,824)Sale of capital assets - - 11,458 11,458

Total other financing sources (uses) 3,213,860 3,535,290 2,834,709 (700,581)

Net change in fund balances (2,184,020) (2,933,398) (27,081) 2,906,317

Fund balances - beginning, as restated 79,004,372 79,004,372 79,004,372 -

Fund balances - ending 76,820,352$ 76,070,974$ 78,977,291$ 2,906,317$


Budget Amounts

For the Year Ended June 30, 2014Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

25

Exhibit G

Page 2 of 4

CITY OF FONTANATraffic Congestion Relief - Special Revenue

S f C


42/166

Variance with



Revenues:

Intergovernmental 2,150,000$ 6,942,891$ 11,980,724$ 5,037,833$Investment earnings - 140,000 315,849 175,849Other revenue - 122,684 - (122,684)

Total revenues 2,150,000 7,205,575 12,296,573 5,090,998

Expenditures:

Current:Engineering 940,950 2,235,895 1,863,566 372,329

Capital outlay 425,300 9,504,694 1,344,566 8,160,128

Total expenditures 1,366,250 11,740,589 3,208,132 8,532,457Excess (deficit)of

revenues over expenditures 783,750 (4,535,014) 9,088,441 13,623,455


Transfers out (98,900) (98,900) (98,900) -Total other financing sources (uses) (98,900) (98,900) (98,900) -

Net change in fund balances 684,850 (4,633,914) 8,989,541 13,623,455

Fund balances - beginning, as restated 1,205,163 1,205,163 1,205,163 -

Fund balances - ending 1,890,013$ (3,428,751)$ 10,194,704$ 13,623,455$


Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and ActualFor the Year Ended June 30, 2014

Budget Amounts

26

Exhibit G

Page 3 of 4

CITY OF FONTANAFire Protection District - Special Revenue

Statement of Re en es E pendit res and Changes in F nd Balances B dget and Act al


43/166

Variance with



Revenues:

Taxes 24,400,000$ 25,000,000$ 27,290,769$ 2,290,769$Licenses and permits 366,000 366,000 379,226 13,226Charges for services 20,000 20,000 11,573 (8,427)Investment earnings - 10,000 35,031 25,031

Total revenues 24,786,000 25,396,000 27,716,599 2,320,599

Expenditures:

Current:Public safety:

Fire 20,426,500 20,616,637 20,603,094 13,543

Total expenditures 20,426,500 20,616,637 20,603,094 13,543Excess (deficit)of

revenues over expenditures 4,359,500 4,779,363 7,113,505 2,334,142


Transfers in 1,006,100 1,006,100 1,006,100 -

Transfers out (3,161,200) (3,161,200) (3,161,200) -Total other financing sources (uses) (2,155,100) (2,155,100) (2,155,100) -

Net change in fund balances 2,204,400 2,624,263 4,958,405 2,334,142

Fund balances - beginning 6,123,991 6,123,991 6,123,991 -

Fund balances - ending 8,328,391$ 8,748,254$ 11,082,396$ 2,334,142$



Budget Amounts

27

Exhibit G

Page 4 of 4

CITY OF FONTANAHousing Authority Low/Mod Housing Fund - Special Revenue

Statement of Revenues Expenditures and Changes in Fund Balances Budget and Actual


44/166

Variance with



Revenues:

Investment earnings 80,000$ 252,000$ 390,245$ 138,245$Other revenue 46,000 46,000 68,698 22,698

Total revenues 126,000 298,000 458,943 160,943

Expenditures:


City administration 80,590 113,590 120,373 (6,783)Capital outlay - 112,100 - 112,100

Total expenditures 80,590 225,690 120,373 105,317Excess (deficit)of

revenues over expenditures 45,410 72,310 338,570 266,260

Net change in fund balances 45,410 72,310 338,570 266,260

Fund balances - beginning 82,161,127 82,161,127 82,161,127 -

Fund balances - ending 82,206,537$ 82,233,437$ 82,499,697$ 266,260$

Budget Amounts



28

Exhibit H

June 30, 2014

CITY OF FONTANAStatement of Net Position

Proprietary Funds


45/166

Governmental

Activi ties

Non-Major Internal Service

Enterprise Fund - Fund -

Sewer Water Fleet

Operations Operations Totals Operations

Assets:Current Assets:

Cash and investments 20,836,888$ 162,244$ 20,999,132$ 1,732,598$Accounts receivables 671,975 - 671,975 22,472

Interest receivable 67,663 783 68,446 6,262Loans receivable 6,303,366 1,805,661 8,109,027 -Loans to Successor Agency 3,305,829 - 3,305,829 -

Allowance for doubtful accounts (3,310,886) - (3,310,886) -Due from other governments 8,280 - 8,280 -

Inventories 73,706 - 73,706 190,869

Total current assets 27,956,821 1,968,688 29,925,509 1,952,201

Noncurrent Assets:Capital assets, not being depreciated 109,904 - 109,904 -Capital assets, net of depreciation 74,714,458 - 74,714,458 2,491,438

Total noncurrent assets 74,824,362 - 74,824,362 2,491,438

Total assets 102,781,183$

city of fontana - comprehensive annual financial report

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