county of san diego · 2019. 2. 22. · county of san diego comprehensive annual financial report...

County of San Diego

California

Comprehensive

Annual Financial

ReportFor the Fiscal Year Ended June 30, 2005

Chief Administrative Officer Walter F. Ekard

Compiled under the direction of Chief Financial Officer Donald F. Steuer

Auditor and Controller Tracy M. Sandoval

Board of Supervisors

First District Greg Cox Second District Dianne Jacob Third District Pam Slater-Price Fourth District Ron Roberts Fifth District Bill Horn

CONTENTS Comprehensive Annual Financial Report For the Year Ended June 30, 2005 2

CONTENTS

CONTENTS

Introductory Section Letter of Transmittal ........................................................................................ 5GFOA Certificate of Achievement................................................................... 13Board of Supervisors ....................................................................................... 14Organizational Chart ...................................................................................... 16Other Elected and Appointed Officials ........................................................... 18

Financial Section Independent Auditor’s Report......................................................................... 21Management’s Discussion and Analysis .......................................................... 23Basic Financial Statements:

Government-wide Financial Statements:Statement of Net Assets .....................................................................................................42Statement of Activities .......................................................................................................43

Fund Finanical Statements:Balance Sheet - Governmental Funds ...............................................................................45Reconciliation of the Governmental Funds Balance sheet to the Government-wide

Statement of Net Assets .................................................................................................46Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds ...........................................................................................................................47Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund

Balances of Governmental Funds to the Statement of Activities ....................................48Statement of Net Assets - Proprietary Funds......................................................................49Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds ...50Statement of Cash Flows - Proprietary Funds ....................................................................51Statement of Fiduciary Net Assets - Fiduciary Funds .........................................................52Statement of Changes in Fiduciary Net Assets - Fiduciary Funds.......................................53

Contents - Notes to the Financial Statements ...................................................................55Notes to the Financial Statements ....................................................................................59

Required Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual

General Fund .............................................................................................................. 112Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual

Tobacco Securitization Special Revenue Fund ............................................................. 114Notes to Required Supplementary Information ............................................................... 115Schedule of Funding Progress .......................................................................................... 116

Combining and Individual Fund Statements and Schedules: Combining Balance Sheet - Nonmajor Governmental Funds .......................................... 121

Combining Balance Sheet - Nonmajor Governmental Funds - Special Revenue .......... 122Combining Balance Sheet - Nonmajor Governmental Funds - Debt Service ............... 127Combining Balance Sheet - Nonmajor Governmental Funds - Capital Projects........... 128

Combining Statement of Revenues, Expenditures and Changes in Fund Balances -

3 Comprehensive Annual Financial Report For the Year Ended June 30, 2005

Nonmajor Governmental Funds ................................................................................. 129Combining Statement of Revenues, Expenditures and Changes in Fund Balances

Nonmajor Governmental Funds - Special Revenue ................................................ 130Combining Statement of Revenues, Expenditures and Changes in Fund Balances

Nonmajor Governmental Funds - Debt Service...................................................... 135Combining Statement of Revenues, Expenditures and Changes in Fund Balances

Nonmajor Governmental Funds - Capital Projects ................................................. 136Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Road Fund ............................................................................................... 137Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Housing and Community Development Fund......................................... 138Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Air Pollution Fund................................................................................... 139Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Lighting Maintenance District Fund........................................................ 140Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - County Library Fund ............................................................................... 141Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Asset Forfeiture Program Fund................................................................. 142Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Inmate Welfare Program Fund................................................................. 143Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Inactive Wastesites Fund.......................................................................... 144Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Cable TV Fund........................................................................................ 145Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Parkland Dedication Fund ....................................................................... 146Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - County Service Districts Fund ................................................................. 147Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Flood Control District Fund.................................................................... 150Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Housing Authority Fund.......................................................................... 151Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Realignment Fund ................................................................................... 152Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Public Safety Fund ................................................................................... 153Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - IHSS Fund............................................................................................... 154Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Nonmajor - Other Special Districts Fund.................................................................... 155Combining Statement of Net Assets - Enterprise Funds .................................................. 158Combining Statement of Revenues, Expenses and Changes in Fund Net Assets -

Enterprise Funds ......................................................................................................... 159Combining Statement of Cash Flows - Enterprise Funds................................................. 160Combining Statement of Net Assets - Internal Service Funds .......................................... 162Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets -

Comprehensive Annual Financial Report For the Year Ended June 30, 2005 4

Internal Service Funds ................................................................................................. 164Combining Statement of Cash Flows - Internal Service Funds ........................................ 166Combining Statement of Changes in Assets and Liabilities - Agency Funds..................... 170

Statistical Section Comparison of Expenditures County Governmental Funds............................................. 171Comparison of Revenues by Source County Governmental Funds .................................. 172Comparison of County Assessed Value, Taxes Levied and Tax Collections

County General and Library Funds ............................................................................. 173Comparison of Assessed Valuations Secured and Unsecured............................................174Ratio of Net General Obligation Bonded Debt to Assessed Value and Net

General Obligation Bonded Debt per Capita .............................................................. 175Comparison of Secured Property Tax Rates - All Overlapping Governments................... 176Comparison of Ratio of Annual Debt Service for General Bonded Debt to Total

General Governmental Expenditures ........................................................................... 177Comparison of Computation of Legal Debt Margin........................................................ 178Comparison of Construction, Bank Deposits and Property Values .................................. 179Comparison of Demographic Statistics ............................................................................ 180Comparison of Revenue Bond Coverage Water and Sewer Bonds ................................... 181Estimated Direct and Overlapping Bonded Debt ............................................................ 182Principal Taxpayers ......................................................................................................... 184General Information........................................................................................................ 185Special Districts ............................................................................................................... 186Maintained Roads............................................................................................................ 186Sewers Maintained by Wastewater Management ............................................................. 187Registered Voters ............................................................................................................. 187Total County Employees at June 30 ................................................................................ 187Major Industry Group of Employed Persons for San Diego County................................188

County of San Diego

Introductory Section

County of San Diego Comprehensive Annual Financial Report For the Year Ended June 30, 2005 5

Letter of TransmittalDecember 19, 2005

Honorable Members of the Board of SupervisorsCounty of San DiegoSan Diego County Administration CenterSan Diego, California, 92101

Ladies and Gentlemen:

We are pleased to present the ComprehensiveAnnual Financial Report (CAFR) of the Countyof San Diego, California (the County) for thefiscal year ended June 30, 2005 with theIndependent Auditor's Report, submitted incompliance with California Government CodeSection 25253. The Auditor and Controller'sdepartment has prepared the CAFR inconformance with the principles and standardsfor financial reporting set forth by theGovernmental Accounting Standards Board(GASB). Responsibility for both the accuracy ofthe data and the completeness and fairness ofthe presentation, including all disclosures, restswith the County. We believe that the data, aspresented, is accurate in all material respects;that its presentation fairly shows the financialposition and the changes in financial position asmeasured by the financial activity of its variousfunds; and that the included disclosures willprovide the reader with an understanding ofthe County's financial affairs.

The CAFR was prepared to satisfy the financialreporting requirements for State and localgovernments issued by the GASB, which requirethat management provide a narrativeintroduction, overview, and analysis toaccompany the Basic Financial Statements inthe form of a Management's Discussion &Analysis (MD&A). This letter of transmittal isdesigned to complement the MD&A and

should be read in conjunction with it. TheMD&A immediately follows the independentauditor’s report and provides a narrativeintroduction, overview, and analysis of thefinancial statements.

The CAFR has been audited by theIndependent certified public accounting firm ofMacias Gini & Company LLP which has issuedan unqualified ("clean") opinion on the Countyof San Diego's financial statements for the yearended June 30, 2005. The IndependentAuditor’s Report is located at the front of thefinancial section of this report.

SAN DIEGO COUNTY PROFILESan Diego County is the southernmost majormetropolitan area in the State of California andcovers 4,255 square miles, extending 70 milesalong the Pacific Coast from Mexico to OrangeCounty, and inland 75 miles to Imperial Countyalong the international border shared withMexico. Riverside and Orange counties formthe northern boundary. The County enjoys awide variety of climate and terrain, from coastalplains and fertile inland valleys to mountainranges and the Anza-Borrego Desert in the east.The Cleveland National Forest occupies muchof the interior portion of the County. Theclimate is equable in the coastal and valleyregions where most resources and population

Introductory Section

6 Comprehensive Annual Financial Report For the Year Ended June 30, 2005 County of San Diego

are located. The average annual rainfall in thecoastal areas is 10 inches, so that the County ishighly dependent on imported water.

The County population in January 2005 wasestimated to be 3,051,280, an increase of 1.3%over January 2004, making it the third largestcounty by population in California behind LosAngeles and Orange counties. There are 18incorporated cities in the County; of them, theCity of San Diego is the largest, with populationof approximately 1.306 million, and Del Mar isthe smallest, with a population of approximately4.5 thousand. In addition, Tijuana, Mexico, withan estimated population of 1.2 million, is asubstantial urban neighbor with a sharedborder, workforce, and economy.

The racial and ethnic composition of theCounty is as diverse as its geography.According to population projections by theState of California Department of Finance, SanDiego's population breakdown in 2010 will be46% White, 34% Hispanic, 11% Asian and PacificIslander, 6% Black, and 3% all other groups. From1990 to 2000, the growth in the Hispanicpopulation, 47%, significantly exceeded totalCounty population growth of 13%. San DiegoAssociation of Governments (SANDAG) projectsthat both the Hispanic and Asian populationshares will continue to increase through 2030.SANDAG also projects an older San DiegoCounty by 2030, based on statistics such asmedian age.

COUNTY GOVERNMENT, ECONOMY AND OUTLOOK The County was incorporated on February 18,1850, and functions under a charter adopted in1933, as subsequently amended from time totime. A five-member Board of Supervisorselected to four-year terms in district nonpartisanelections governs the County. The Board ofSupervisors appoints the Chief AdministrativeOfficer and the County Counsel. The ChiefAdministrative Officer appoints the ChiefFinancial Officer. Elected officials include theAssessor/Recorder/ County Clerk, DistrictAttorney, Sheriff and Treasurer-Tax Collector.

Many of the County's functions are requiredunder County ordinances or by State or Federalmandate, as County government is the deliverysystem for Federal, State and local programs.

The County supports a wide range ofservices to its residents including regionalservices such as courts and elections, publichealth and welfare, and environmentalservices. The County also provides theunincorporated areas public safety, basiccommunity services such as planning andparks, and infrastructure such as roads andwaste disposal. State and federally mandatedprograms, primarily in the social and healthservices areas, are directed to be maintainedat certain minimum levels, with eligible costssubject to reimbursement according to specificguidelines; however, not all mandated costsare reimbursed.

In recent years the County has enjoyedeconomic stability, outpacing the Stateeconomy despite a downturn in Californiabetween 2001 and 2003. For example, theunemployment rate for the County has beenlower than that of the State for the last 5 years,and at July 2005 was 4.4% as compared to 5.2%for the State. Since the early 1990's San DiegoCounty has seen an increasing diversification ofeconomic activity and has evolved as a hub forresearch and development (R&D) and productmanufacturing in telecommunications,biotechnology, military products, electronicsand information technology.

Much of San Diego's economic strength isderived from employment gains, commercialand industrial development and steadypopulation growth. Looking forward, the Stateand Federal economies are expected to growmoderately, with increases in businessinvestment and slower growth in consumerspending. The San Diego economy is expectedto perform in line with the expansion of theState and Federal economies and to maintainits favorable position in relation to suchcomparative statistics as unemployment andtaxable sales.

The County's economic base consists of asignificant manufacturing presence in the fieldsof electronics and shipbuilding, a large touristindustry attracted by the favorable climate ofthe region, and a considerable defense-relatedpresence. Highlights of County employment asof July 2005 are listed below.• Non-agricultural employment totaled

1,277,200 jobs.


• The services industry constitutes the largestemployment sector and accounted forapproximately 44.6% of nonagriculturalemployment, with a total of 569,500employed.

• The wholesale and retail trade industries werethe second largest, non-government sector,comprising approximately 14.6% of non-agricultural employment with a total of186,900 jobs.

• Government accounted for approximately16.5% of total employment andmanufacturing accounted for an additional8.2%. San Diego's military presence isanticipated to remain relatively stable andmay even increase due to the consolidationof military operations and facilities. In 2002,the U.S. Department of Defense contributedabout $12.8 billion (revised down from earlierestimates of $13.6 billion), and in 2003 thisfigure increased to $13.4 billion. Figures for2004 are not available, but military payrollsand base expenditures are expected toremain stable with some growth anticipatedin defense contracts. Agriculture accountedfor approximately 0.88% of totalemployment.

• The construction and transportation sectorsof employment are greatly influenced by thegeneral health of the economy due to thefact that they serve the local marketexclusively. The construction industry inparticular has a significant multiplier effecton the economy as a whole. These twosectors are therefore directly influenced bythe growth of population and housing.Construction also benefited in 2004 from theongoing low interest rates. Rising interestrates threaten to dampen growth in 2005and 2006. However, demand will continue toexpand, fueled by population growth.

• Employment growth over the next year willbe led by increases in service and tradeindustries (i.e., biotech, telecommunications,tourism, trade, and "diversified"manufacturing). Overall, the San Diegoeconomy in 2005 is expected to addapproximately 25,000 jobs, down slightly from29,000 in 2004.

County revenues based on the local economysuch as property taxes, sales taxes, and chargesfor services have benefited from the region'sstrength. For example, new real estateconstruction plus active resale markets over thelast 5 years have resulted in an increase of 67%in the assessed value of property subject toproperty taxes (net of exemptions). Goingforward, real estate markets are expected toremain strong but growth will be moremoderate. In addition to conditions ofdemand and supply, real estate market activityis also affected by interest rates. Mortgagerates increased marginally in 2005, but are stilllow by historical standards. However, keyinterest rates are expected to gradually rise inthe near term.

The difficult side of accelerating property valuesis that housing has become less affordable forSan Diegans. Based on the CaliforniaAssociation of Realtors' Housing AffordabilityIndex, San Diego's housing affordability, ameasure indicating the average household'sability to afford a median-price home, stands at9% for August 2005, down from 10% as of August2004. Transportation demands and trafficcongestion will affect the current and futurequality of life, given suburban residential growthand business expansion, such as the gamingindustry, outside city centers on formerly ruraland agricultural land.

GENERAL MANAGEMENT SYSTEMThe General Management System (GMS) is theformal comprehensive guide for planning,implementing, monitoring and rewarding allfunctions and processes of CountyGovernment. The GMS establishes goodbusiness practices and fiscal discipline, both ofwhich are essential to achieve the County ofSan Diego's vision, "A County Government thathas earned the respect and support of itsresidents." The purpose of the GMS is tooptimize the efficient application of resources inthe delivery of services to our residents. Theseresources include not just taxpayer dollars, butall San Diego County assets, including ourunique natural and cultural resources, theexpertise and creativity of County employees,and the informed interest of County residents.The idea behind the GMS is straightforward:County government will be able to provide


superior services if it sets sound goals andapplies strong management principles toachieve those goals.

The County has an annual budget of more than$4 billion and almost seventeen thousandemployees who serve about three millionresidents spread over more than 4,000 squaremiles. Coordination, fiscal and operationaldiscipline, and shared commitment are vital.The GMS facilitates and organizes the goalsetting process. The GMS then links goal settingand long-range planning and resourceallocation to goal attainment, which includesmonitoring, evaluation, cooperation,motivation, and recognition. The GMS helpsensure that County employees adhere to coreprinciples, promoting a culture that values ouremployees, partners, and customers andinstitutionalizes continuous improvement andinnovation.

The GMS process begins with a long-range, five-year strategic planning process. This is followedby the short-term, two-year operationalplanning process, which encompasses thebudget process and wherein eachdepartment's strategic objectives andresources allocated to achieving them aredetailed. Monitoring and control take placethroughout the year. Evaluation mechanismsare used to ensure that goals are tracked, plansfollowed, and risks identified. Functionalthreading maximizes efficient use of personneland material resources by coordinating staffand linking the functions they perform.Motivation, rewards, and recognitionencourage continuing progress by rewardingthose who meet and exceed goals. The systemcompletes a full circle in a fiscal year andbegins again with a review of the Strategic Planand development of a new Operational Plan.

County management defines andcommunicates GMS objectives. Lines ofauthority flow from the Board of Supervisors tothe Chief Administrative Officer (CAO), AssistantCAO (ACAO), and the five Group GeneralManagers/Deputy CAOs. These seniormanagers supervise appointed departmentheads, from whom authority flows down to linestaff. Despite the crucial role of management,the success of the GMS depends on strong andeffective leadership at all levels of County

service. Every County employee isexpected to help set goals, strive to achievethem, and be rewarded for achievement.

The GMS helps ensure that sound planning,preparedness, and improvement becomepermanent organizational ethics. With the GMSas a guide, the County continues to use strongfiscal management practices, while remainingfocused on providing superior services toCounty residents. The principles and proceduresoutlined by the GMS are meant to apply toevery County function on an ongoing basis.

STRATEGIC AND OPERATIONAL PLANNING (BUDGETARY) PROCESSAs noted above, a five-year Strategic Plan isupdated annually to provide long-termdirection to County managers and staff. Itembodies the tenets of County's GMS and isbuilt on mutually held expectations for thefuture. Each fiscal year a two-year OperationalPlan is prepared and details each department'sstrategic objectives and the resources requiredto achieve them. The Operational Plan ismonitored regularly and is linked to the GMSsystem of rewards and recognition. The annualLine-Item Budget incorporates the first year ofthe Operational Plan and is formally adoptedby the Board of Supervisors pursuant toGovernment Code 29000. During the yeardepartments may request budget adjustmentsfor new and existing programs. In addition, theCAO reviews the status of the County'sperformance against budget in a quarterlystatus report to the Board of Supervisors.

STRATEGIC INITIATIVES AND ACHIEVEMENTSSan Diego continues to adjust to the threesignificant external events of the last few years.

In late October 2003, four simultaneous wildfires,known collectively as "Firestorm 2003", burnedalmost 400,000 acres in San Diego County,causing loss of life and extensive damage toboth public and private property. Countygovernment initiated short and long-termresponses including emergencycommunications and public safety responses,spearheading the efforts at regional fireprotection and communications systems


upgrades, coordinating Federal EmergencyManagement Agency funding and othergrants, and rebuilding County property. WhileFederal and State funding sources providedfunding for cleanup, support, and prevention offuture catastrophic disasters, County resourceswere and will be expended in order to restorebalance and safety to the physicalenvironments of San Diego County.

Second, the failure of State government todevelop a viable long-term solution to itsbudget imbalance remains a risk to fundingand stability of County programs, since Stateaid is the primary source of County revenues.Although, according to the CaliforniaLegislative Analyst's Office (LAO) the Californiaeconomy has improved, the budget still relieson one-time spending such as debt issuanceand has a structural operating shortfall. Riskand uncertainty surrounding State support tolocal governments for mandated as well asdiscretionary programs persisted throughoutFiscal Year 2004-05 and is expected to remain.

Finally, the September 11, 2001, terrorist attacksand ensuing domestic and international Warson Terrorism continue to color all public safetyand emergency preparedness efforts of localgovernment. During the fiscal year, San DiegoCounty developed and coordinated theCountywide Homeland Security Exercise andEvaluation Program through the Office ofEmergency Services. The Office of EmergencyServices also administered $22 million in StateHomeland Security grant funds provided toCounty departments, fire protection districtsand the incorporated cities for protectiveequipment, training and exercises to respond toterrorist incidents.

In spite of the events in the externalenvironment, County government continues tofollow the map of the five-year long-termStrategic Plan developed within the discipline ofthe GMS. The County's Strategic Plan definesbroad organization-wide goals as StrategicInitiatives, which help prioritize specific 'front-line' County efforts and programs. The StrategicInitiatives are:

• KIDS

Improve opportunities for children

• THE ENVIRONMENT

Promote natural resource managementstrategies that ensure environmentalpreservation, quality of life, and economicdevelopment.• SAFE AND LIVABLE COMMUNITIES

Promote safe and livable communities

The Strategic Plan also recognizes thatmaintaining operational excellence is whatenables us to accomplish our Strategic Initiativegoals. Key Required Disciplines of operationsinclude:• Fiscal Stability• Customer Satisfaction• Regional Leadership• Skilled, Competent Workforce• Essential Infrastructure• Information Management• Accountability/Transparency• Continuous Improvement

Within the structure of the two-year operationalplanning process, the County plans for andattains interim progress toward achievement ofthe Strategic Initiatives. Some of the significantsteps of the last year were:

KIDS• Supported self-sufficiency of families with

children by collecting and disbursing $103.7million in child support to families despitereductions in State funding for local childsupport agencies.

• Provided quality care and supportiveservices for at-risk children and youth in thedependency and delinquency systemsthrough effective management oflegislation, cases, and programs.

• Provided 2,500 low-income, working familiesfree tax preparation assistance for theEarned Income Credit (EITC) program,returning $3.5 million in tax credits andrefunds back into the community.

• Increased by 4,450, the number of eligiblechildren enrolled in Medi-Cal and HealthyFamilies to enhance access to physical anddental prevention.


• Decreased the harmful effects on children'shealth by allocating $0.4 million to replacefour pre-1987 diesel school buses and $0.4million to fund fifty-one particulate traps ondiesel school buses.

• Enhanced safety for children throughsidewalk, bicycle, and equestrian pathwayprojects.

• Promoted enhanced homework centers atthe libraries, resulting in a 15% increasedusage of the centers increasing children andteens' opportunities to succeed in school.

• Promoted children and teens' awareness ofthe voting process by recruiting student pollworkers for the November 2004 PresidentialElection and providing local schools withpolling booths and mock voting materials.

• Identified legal issues associated with factorsthat place children at risk in juveniledependency petitions prior to filing inJuvenile Court.

THE ENVIRONMENT• Adopted the first Multi-Hazard Mitigation Plan

in California approved by the FederalEmergency Management Agency (FEMA)including San Diego County and all eighteenincorporated cities.

• Prevented over 42,000 cubic yards of debrisfrom entering rivers, bays, and the ocean bycontinuing systemic culvert, drainagechannel, and road cleaning programs.

• Complied data from throughout the westernUnited States on wildfire mitigation and post-fire restoration practices, costs, impacts, andmaintenance.

• Acquired over 500 acres of park and/orpreserve land by leveraging Federal, State,and private funding with general purposerevenue.

• Encouraged energy efficiency in 103 units ofaffordable housing developed withassistance from County housing programs.

• Installed stormwater managementimprovements at the County OperationsCenter.

SAFE AND LIVEABLE COMMUNITIES• Strengthened the County's ability to respond

to an emergency by facilitating theparticipation of all eighteen incorporatedcities in emergency preparedness trainingexercises and developing a three-yearCountywide Homeland Security Exercise andEvaluation Program through the Office ofEmergency Services.

• Assisted 10 communities in theunincorporated areas of the County in thedevelopment of evacuation/emergencyplans.

• Successfully conducted three emergencypreparedness drills with public health staffand community partners which focused onintegrating military and civilian capabilitiesfor managing the consequences of potentialbioterrorist attacks, implementing quarantinein order to contain a public health threat,and enhancing statewide hospital response.

• Obtained State and Federal reimbursementof costs resulting from Firestorm 2003, foursimultaneous wildfires that burned almost400,000 acres. Still working with FEMA onreimbursement of private property debrisremoval costs.

• Completed surveys on 4,472 parcels over atotal of 20,066 acres in 19 of 20 Countymanaged projects and to date 175,836 treeshave been marked for removal.

• Expanded the Condition Assessmentprogram for County facilities to includeAmericans with Disabilities Act (ADA)requirements.

CERTIFICATE OF ACHIEVEMENTThe Government Finance Officers Associationof the United States and Canada (GFOA)awarded a Certificate of Achievement forExcellence in Financial Reporting to the Countyfor its Comprehensive Annual Financial Report(CAFR) for the fiscal year ended June 30, 2004.In order to be awarded a Certificate ofAchievement, a government must publish aneasily readable and efficiently organized CAFR.This report must satisfy both generally acceptedaccounting principles and applicable legalrequirements.


A Certificate of Achievement is valid for aperiod of one year only. We believe our currentreport continues to meet the Certificate ofAchievement Program's requirements and weare submitting it to the GFOA to determine itseligibility for another certificate.

OTHER AWARDS AND RECOGNITIONS Even with the financial and environmentalchallenges of Fiscal Year 2004-05, the Countywas recognized for many activities thathighlight progress in the Strategic Plan Initiatives.County programs received awards foroperational and service delivery achievements,technological innovations, and prudent fiscalmanagement. • In 2005, 41 County of San Diego programs

were selected for Achievement Awards bythe National Association of Counties (NACo).The NACo awards extend to efforts in allthree of the Strategic Initiatives. San DiegoCounty received the highest number ofawards given to any county for suchaccomplishments as the Youth EmploymentPreparation, Work Safe/Stay HealthyProgram, School Health & AbsenteeismReporting Exchange, Firestorm recovery, andHomeland Security Exercise & Evaluation.

• The County of San Diego ranked in a tie for2nd among counties with populations of500,000 or more, on a list of the nation's mostdigital-savvy counties, according to the 2005Digital Counties Survey, which examined howcounty governments use informationtechnology to deliver services to citizens. Thenationwide survey was conducted jointly bythe Center for Digital Government, NACo,and Government Technology magazine.

• County Television Network (CTN), the localgovernment access channel for the Countyof San Diego, was awarded two Emmy

awards by the National Association ofTelevision Arts and Sciences/PacificSouthwest Chapter and also received a totalof nine Government Programming Awards in2005 from the National Association ofTelecommunications Officers Association.

• GFOA awarded a Distinguished BudgetPresentation Award for the fiscal year 2004-05.

• The County of San Diego was one of only tenCalifornia Counties to receive a ChallengeAward from the California State Associationof Counties (CSAC) in November, 2004 forthe Risk Mitigation and Litigation Program.

• The Department of Environmental Healthreceived the George Washington Medalawarded by the Freedom Foundation for itsProgram "The Christmas Train". The GeorgeWashington Medal is the nation's highestcivilian honor for projects, words or deedsthat reflect the best of the American spirit ofvolunteerism by offering constructivesolutions for contemporary problems.

• The Department of Environmental Health'sHazardous Materials Division was named asthe recipient of the 2005 ContinuingChallenge Innovation and Technologiesaward. This award was presented inrecognition of the achievements made inmaking hazardous materials disclosureinformation available to all emergencyresponders electronically in the San DiegoArea.


ACKNOWLEDGMENTSWe would like to express our appreciation to the accounting staffs of County departments and thestaff of the Auditor and Controller's department whose coordination, dedication and professional-ism are responsible for the preparation of this report. We would also like to thank Macias Gini &Company LLP for their professional support in the preparation of the CAFR. Lastly, we thank themembers of the Board of Supervisors, the Chief Administrative Officer, Group/Agency General Man-agers and their staffs for using sound business practices while conducting the financial operations ofthe County.

Respectfully,

DONALD F. STEUER

Chief Financial Officer

TRACY M. SANDOVAL

Auditor and Controller



Pam Slater-PriceDistrict 3

Chair

Bill HornDistrict 5 Vice Chair

Greg Cox District 1 Dianne Jacob District 2 Ron Roberts District 4


SAN DIEGO COUNTY ORGANIZATIONAL CHART


Organizational ChartOrganizational Chart


Organizational Chart

Other Elected and Appointed Officials

Organizational Chart



Elected OfficialsAssessor/Recorder/County Clerk........................................................................................Gregory J. Smith

District Attorney ............................................................................................................... Bonnie M. Dumanis

Treasurer/Tax Collector ........................................................................................................... Dan McAllister

Sheriff............................................................................................................................................. Bill Kolender

Chief Administrative Office Chief Administrative Officer ..........................................................................................................Walt Ekard

Assistant Chief Administrative Officer ...................................................................Helen N. Robbins-Meyer

General ManagersDCAO/General Manager Community Services Group................................................... Alex A. Martinez

Chief Financial Officer/General Manager Finance & General

Government Group........................................................................................................Donald F. Steuer

Agency Director Health & Human Services Agency ..................................................... Jean M. Shepard

DCAO/General Manager Land Use & Environment Group..........................................Robert R. Copper

DCAO/General Manager Public Safety Group.............................................................W. Harold Tuck, Jr.

Department HeadsAgriculture, Weights & Measures....................................................................................Kathleen A. Thuner

Air Pollution Control District ..................................................................................................Richard J. Smith

Alternate Public Defender ........................................................................................... Timothy A. Chandler

Animal Services.....................................................................................................................Dawn Danielson

Auditor & Controller/ACFO ...................................................................................................Tracy Sandoval

Chief of Staff - CAO ..............................................................................................................Janice Graham

Child Support Services ................................................................................................Tom Boardman, Ph.D.

Civil Service Commission ............................................................................................................ Patt Zamary

Clerk of the Board ..........................................................................................................Thomas J. Pastuszka

County Counsel .................................................................................................................... John J. Sansone

County Technology Office................................................................................................ Michael L. Moore

Emergency Services.............................................................................................................Deborah Steffen

Environmental Health..................................................................................................................Gary Erbeck

Other Elected and Appointed



Farm & Home Advisor .......................................................................................................... Terrell P. Salmon

General Services....................................................................................................................... John McTighe

AIS & HHSA-East Region ....................................................................................................... Pamela B. Smith

HHSA-Central & South Regions ..............................................................................................Rene Santiago

HHSA-North Coastal, Inland & Central Regions ................................................................Nick Macchione

Public Health Officer .................................................................................................. Nancy L. Bowen, M.D.

Adult & Children's Mental Health ......................................................................................... Alfredo Aguirre

Housing & Community Development ..............................................................................Catherine J. Trout

Human Resources....................................................................................................................... Carlos Arauz

Internal Affairs ............................................................................................................................... Eloy G. Villa

Library........................................................................................................................................... Jose Aponte

Media & Public Relations................................................................................................. Michael Workman

Medical Examiner....................................................................................................................Glenn Wagner

Parks & Recreation ....................................................................................................................Renee E. Bahl

Planning & Land Use ...................................................................................................................... Gary Pryor

Probation..................................................................................................................................... Vincent laria

Public Defender.......................................................................................................................... Steve Carroll

Public Works ............................................................................................................................. John L. Snyder

Purchasing & Contracting.................................................................................................Winston F. McColl

Registrar of Voters......................................................................................................................Mikel D. Haas

Strategy & Intergovernmental Affairs........................................................................................Marilyn Buck


Financial Section


515 S. Figueroa Street, Ste. 325

Los Angeles, California 90071

2 13 .6 12 .0 200 PHONE

213.286.6426 FAX

INDEPENDENT AUDITOR’S REPORT


County of San Diego, California

We have audited the accompanying financial statements of the governmental activities, the business-type

activities, the discretely presented component unit, each major fund, and the aggregate remaining fund

information of the County of San Diego, California (County), as of and for the year ended June 30, 2005,

which collectively comprise the County’s basic financial statements as listed in the table of contents.

These financial statements are the responsibility of the County’s management. Our responsibility is to

express opinions on these financial statements based on our audit. We did not audit the financial

statements of the First 5 Commission of San Diego (Commission), the discretely presented component

unit, and the San Diego County Employees Retirement Association (SDCERA), which represents 63%,

65%, and 6% of the assets, net assets/fund balances and revenues, respectively, of the aggregate

remaining fund information as of and for the year ended June 30, 2005. Those financial statements were

audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it

relates to the amounts included for the Commission and SDCERA, is based on the reports of the other

auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of

America and the standards applicable to financial audits contained in Government Auditing Standards,

issued by the Comptroller General of the United States. The financial statements of SDCERA were not

audited in accordance with Government Auditing Standards. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement. An audit includes consideration of internal control over financial reporting as a

basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the County’s internal control over financial reporting.

Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence

supporting the amounts and disclosures in the financial statements, assessing the accounting principles

used and the significant estimates made by management, as well as evaluating the overall financial

statement presentation. We believe that our audit and the reports of other auditors provide a reasonable

basis for our opinions.

In our opinion, based on our audit and the reports of other auditors, the financial statements referred to

above present fairly, in all material respects, the respective financial position of the governmental

activities, the business-type activities, the discretely presented component unit, each major fund, and the

aggregate remaining fund information of the County as of June 30, 2005, and the respective changes in

financial position and cash flows, where applicable, thereof for the year then ended in conformity with

accounting principles generally accepted in the United States of America.

Independent Auditor’s Report

Financial Section


As discussed in Note V. of the basic financial statements, effective July 1, 2004, the County adopted the

provisions of Governmental Accounting Standards Board (GASB) Statement No. 40 – Deposit and

Investment Risk Disclosures – an amendment of GASB Statement No. 3.

In accordance with Government Auditing Standards, we have also issued our report dated

December 19, 2005 on our consideration of the County’s internal control over financial reporting and on

our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements

and other matters. The purpose of that report is to describe the scope of our testing of internal control

over financial reporting and compliance and the results of that testing, and not to provide an opinion on

the internal control over financial reporting or on compliance. That report is an integral part of an audit

performed in accordance with Government Auditing Standards and should be considered in assessing the

results of our audit.

The management’s discussion and analysis, budgetary comparison information, and schedule of funding

progress on pages 23 through 39, 112 through 114, and 116, respectively, are not a required part of the

basic financial statements but are supplementary information required by accounting principles generally

accepted in the United States of America. We and the other auditors have applied certain limited

procedures, which consisted principally of inquiries of management regarding the methods of

measurement and presentation of the required supplementary information. However, we and the other

auditors did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively

comprise the County’s basic financial statements. The introductory section, combining and individual

nonmajor fund financial statements and schedules, and statistical tables are presented for purposes of

additional analysis and are not a required part of the basic financial statements. The combining and

individual nonmajor fund financial statements and schedules have been subjected to the auditing

procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all

material respects in relation to the basic financial statements taken as a whole. The introductory section

and statistical tables have not been subjected to the auditing procedures applied by us and the other

auditors in the audit of the basic financial statements and, accordingly, we express no opinion on them.

Certified Public Accountants

Los Angeles, California

December 19, 2005


Management’s Discussion and Analysis

This section of the County of San Diego's(County) Comprehensive Annual FinancialReport provides a narrative overview andanalysis of the basic financial activities of theCounty as of and for the year ended June 30,2005. The intent of the information presentedhere, in conjunction with the Letter ofTransmittal is to provide the reader with aclearer picture of the County's overall financialstatus. Unless otherwise indicated, all amountsin this section are expressed in thousands ofdollars.

Financial Highlights• The assets of the County exceeded liabilities

at the close of the fiscal year 2004-2005 by$2.18 billion (net assets). Of this amount, $224million is restricted for specific purposes(restricted net assets), and $2.43 billion isinvested in capital assets, net of relateddebt. The remaining portion of the net assetsrepresents a deficit balance in unrestrictednet assets of $465 million.

• Total net assets increased by $201 million. Forgovernmental activities, revenues exceededexpenses by $198 million. For business typeactivities, revenues exceeded expenses by$3 million.

• General revenues for governmental activitieswere $970 million. Of this amount, propertytaxes and property taxes in lieu of vehiclelicense fees accounted for $646 million or 67percent; other taxes, interest and othergeneral revenues accounted for $324 millionor 33 percent.

• Program revenues for governmentalactivities were $2.2 billion. Of this amount,$1.8 billion or 81 percent was attributable to

operating grants and contributions whilecharges for services accounted for $414million or 19 percent.

• The total expenses for governmentalactivities were $2.99 billion. Public assistanceaccounted for $973 million or 33 percent ofthis amount, while public protectionaccounted for $960 million or 32 percent.Additionally, health and sanitationaccounted for $546 million or 18 percent.

Overview of the Financial StatementsThis discussion and analysis is intended to serveas an introduction to the County's basicfinancial statements. The County's basicfinancial statements comprise threecomponents: 1) Government-wide financialstatements 2) Fund financial statements, and 3)Notes to the basic financial statements.Required Supplementary Information isincluded in addition to the basic financialstatements.

The illustration below depicts the requiredcomponents of the basic financial statements.

Don SteuerChief Financial Officer

Tracy M. SandovalAuditor and Controller

master page



Government-wide Financial Statements aredesigned to provide readers with a broadoverview of County finances, in a mannersimilar to a private-sector business.

The statement of net assets presents informationon all County assets and liabilities, with thedifference between the two reported as netassets. Over time, increases or decreases in netassets may serve as a useful indicator ofwhether the financial position of the County isimproving or deteriorating.

The statement of activities presents informationshowing how the County's net assets changedduring the most recent fiscal year. All changesin net assets are reported as soon as theunderlying event giving rise to the changeoccurs, regardless of the timing of related cashflows. Thus, revenue and expenses are reportedin this statement for some items that will result incash flows in future fiscal periods (e.g.,uncollected taxes and earned but unusedvacation leave).

Both of the aforementioned government-widefinancial statements distinguish functions of theCounty that are principally supported by taxesand intergovernmental revenues(governmental activities) from other functionsthat are intended to recover all or a significantportion of their costs through user fees andcharges (business-type activities). Thegovernmental activities of the County includegeneral government, public protection, publicways and facilities, public assistance, healthand sanitation, recreational and cultural, andeducation. The business-type activities of theCounty include airport operations, wastewatermanagement and sanitation districts.

Fund Financial Statements are groupings ofrelated accounts that are used to maintaincontrol over resources that have beensegregated for specific activities or objectives.The County, like other state and localgovernments, uses fund accounting to ensureand demonstrate compliance with finance-related legal requirements. All of the funds of

the County can be divided into threecategories: governmental funds, proprietaryfunds and fiduciary funds.

Governmental funds are used to account foressentially the same functions reported asgovernmental activities in the government-wide financial statements. However, unlike thegovernment-wide financial statements,governmental funds financial statements focuson near-term inflows and outflows of spendableresources, as well as on balances of spendableresources available at the end of the fiscal year.Such information may be useful in evaluating acounty's near-term financing requirements.

Because the focus of governmental funds isnarrower than that of the government-widefinancial statements, it is useful to compare theinformation presented for governmental fundswith similar information presented forgovernmental activities in the government-wide financial statements. By doing so, readersmay better understand the long-term impact ofthe government's near-term financingdecisions. Both the governmental fundsbalance sheet and the governmental fundsstatement of revenues, expenditures andchanges in fund balances provide areconciliation to facilitate this comparisonbetween governmental funds andgovernmental activities.

The County maintains twenty-eight individualgovernmental funds. Information is presentedseparately in the governmental funds balancesheet and in the governmental funds statementof revenues, expenditures and changes in fundbalances for the General Fund and theTobacco Securitization Special Revenue Fund,both of which are considered to be majorfunds. Data from the other twenty-sixgovernmental funds are combined into asingle, aggregated presentation. Individualfund data for each of these nonmajorgovernmental funds is provided in theCombining Financial Statements andSupplementary Information section in thisreport.



Proprietary funds are generally used to accountfor services for which the County chargescustomers - either outside customers, or internaldepartments of the County. Proprietary fundsprovide the same type of information as thegovernment-wide financial statements, only inmore detail. The County maintains the followingtypes of proprietary funds:

Enterprise funds are used to report the samefunctions presented as business-type activities inthe government-wide financial statements. TheCounty uses enterprise funds to account forsanitation services, wastewater managementand airport operations. These nonmajorenterprise funds are combined andaggregated. Individual fund data for eachnonmajor enterprise fund is provided in theCombining Financial Statements andSupplementary Information section in thisreport.

Internal service funds are an accounting deviceused to accumulate and allocate costsinternally among the County's various functions.Internal service funds are used to account forthe financing of public works andcommunications equipment; the financing ofmaterials and supplies (purchasing); for start upservices for new and existing county servicedistricts; for the County's uninsured riskmanagement activities; the financing of fleetservices; for facilities management activities; forthe financing of information technologyservices; and for the financing of clothing andpersonal sundry items for personsinstitutionalized at various County facilities.Additionally, mail services are included withinthe facilities function, and printing and recordstorage services are included in the purchasingfunction. Because all of these servicespredominantly benefit governmental ratherthan business-type functions, they have beenincluded within governmental activities in thegovernment-wide financial statements.

The County's eight internal service funds arecombined into a single, aggregatedpresentation in the proprietary funds financialstatements. Individual fund data for the internalservice funds is provided in the form ofcombining statements in the CombiningFinancial Statements/Schedules andSupplementary Information section in thisreport.

Fiduciary funds are used to account forresources held for the benefit of parties outsidethe government. Fiduciary funds are notreflected in the government-wide financialstatements because the resources of thesefunds are not available to support the County'sown programs. The accounting used forfiduciary funds is much like that used forproprietary funds.

Notes to the Basic Financial Statements provideadditional information that is essential to a fullunderstanding of the data provided in thegovernment-wide and fund financialstatements.

Required Supplementary Information is presentedconcerning the County's General Fundbudgetary schedule, and San Diego CountyEmployees Retirement Association (SDCERA)pension schedules. The County adopts anannual appropriated budget for its GeneralFund. A budgetary comparison schedule hasbeen provided for the General Fund todemonstrate compliance with this budget. Inaddition, a budgetary comparison schedulehas been provided for the TobaccoSecuritization Special Revenue Fund for it wasdetermined to be a major governmental fund.The SDCERA pension schedules have beenprovided to present SDCERA's progress infunding its obligation to provide pensionbenefits to County employees.



Combining Financial Statements/Schedules and Supplementary Information section of this report pre-sents combining and individual fund statements and schedules referred to earlier that provide infor-mation for nonmajor governmental funds, enterprise funds and internal service funds and arepresented immediately following the Required Supplementary Information section of this report.

Government-wide Financial Analysis

Analysis of Net AssetsNet assets may serve over time as a usefulindicator of a government's financial position. Inthe case of the County, assets exceededliabilities by $2.18 billion at the close of fiscalyear 2004-2005. The County also had positivebalances in two of its categories of net assets,(Invested in capital assets net of related debtand Restricted net assets). Unrestricted netassets had a deficit balance of $465 million.

The largest portion of the County's net assets(111 percent) reflects its investment of $2.43billion in capital assets (e.g. land, infrastructure,buildings, and equipment); less any relatedoutstanding debt used to acquire those assets.The County uses these capital assets to provideservices to citizens; consequently, these assetsare not available for future spending.

Although the County's investment in capitalassets is reported net of related debt, it shouldbe noted that the resources needed to repay

this debt must be provided from other sources,since the capital assets themselves cannot beliquidated for these liabilities.

An additional portion of the County's net assets,$224 million (10 percent), represents resourcesthat are subject to external restrictions on howthey may be used. External restrictions includethose imposed by grantors, contributors, laws/regulations of other governments, or restrictionsimposed by law through constitutionalprovisions or legislation.

The remaining portion of the County's net assetsrepresents a deficit unrestricted net assetsbalance of $465 million (an increase of $125million). This increase was in large part due toincreased Property taxes collected in lieu ofvehicle license fee(VLF) revenue ($204 million),decrease in the State allocation of sales taxand VLF ($121 million) and an increase in othertaxes ($44 million). A more detailed discussionof these revenue sources can be found belowin the Analysis of Changes in Net AssetsRevenues section.

Net AssetsJune 30, 2005 (In Thousands)

Primary GovernmentGovernmental Activities Business-Type Activities Total

2005 2004 2005 2004 2005 2004ASSETS

Current and other assets $ 2,456,419 1,678,164 79,091 81,031 2,535,510 1,759,195Capital assets 2,674,393 2,680,570 87,581 81,938 2,761,974 2,762,508Total assets 5,130,812 4,358,734 166,672 162,969 5,297,484 4,521,703

LIABILITIESLong-term liabilities 2,335,192 2,301,177 3,250 3,538 2,338,442 2,304,715Other liabilities 771,977 231,636 2,696 1,588 774,673 233,224Total liabilities 3,107,169 2,532,813 5,946 5,126 3,113,115 2,537,939

NET ASSETSInvested in capital assets, net of related debt 2,341,126 2,324,806 84,416 78,485 2,425,542 2,403,291Restricted 223,565 169,983 223,565 169,983Unrestricted (541,048) (668,868) 76,310 79,358 (464,738) (589,510)Total net assets $ 2,023,643 1,825,921 160,726 157,843 2,184,369 1,983,764



Analysis of Changes in Net AssetsThe County's net assets increased by $201 million during the fiscal year 2004-2005. (Certain fiscalyear 2003 - 2004 balances were reclassified to conform with the current year presentation.) Governmental activities:

Governmental activities increased the County's net assets by $197.7 million for the year ended June 30, 2005, accounting for 99% of the total increase in net assets. Governmental activities operating revenues exceeded operating expenses by $196.9 million. Transfers provided a total increase in net assets of $.8 million.

Changes in Net AssetsFor the Year Ended June 30, 2005 (In Thousands)

Governmental Activities Business-type Activities Total2005 2004 2005 2004 2005 2004

Revenues:Program revenues

Charges for services $ 414,384 351,928 30,651 27,404 445,035 379,332Operating grants and contributions 1,769,805 1,747,368 3,700 4,671 1,773,505 1,752,039Capital grants and contributions 32,303 67,357 1,036 1,539 33,339 68,896

General revenues Property taxes 441,716 412,587 441,716 412,587Property taxes in lieu of vehicle license

fees 203,788 203,788

Other taxes 96,927 52,489 96,927 52,489State allocation of sales tax and vehicle

license fees 106,548 227,688 106,548 227,688

Interest 38,066 21,992 1,730 417 39,796 22,409Other 83,079 92,138 287 24 83,366 92,162

Total revenues 3,186,616 2,973,547 37,404 34,055 3,224,020 3,007,602Expenses:

Governmental Activities General government 232,826 286,997 232,826 286,997Public protection 960,227 1,124,382 960,227 1,124,382Public ways and facilities 122,797 164,551 122,797 164,551Health and sanitation 545,805 592,426 545,805 592,426Public assistance 972,592 1,017,705 972,592 1,017,705Education 27,394 31,722 27,394 31,722Recreation and cultural 21,405 26,774 21,405 26,774Interest expense 106,612 91,897 106,612 91,897

Business-type Activities Airport 8,117 7,373 8,117 7,373Wastewater Management 5,076 4,005 5,076 4,005Sanitation Districts 20,564 15,828 20,564 15,828

Total expenses 2,989,658 3,336,454 33,757 27,206 3,023,415 3,363,660Excess (deficiency) before transfers 196,958 (362,907) 3,647 6,849 200,605 (356,058)

Transfers 764 673 (764) (673) Increase (decrease) in net assets 197,722 (362,234) 2,883 6,176 200,605 (356,058)

Net assets at beginning of year 1,825,921 2,188,155 157,843 151,667 1,983,764 2,339,822Net assets at end of year $ 2,023,643 1,825,921 160,726 157,843 2,184,369 1,983,764



Revenues:

Total revenues for governmental activities were$3.19 billion, an increase of 7 percent or $213million from the previous year. Total programrevenues increased $50 million, due in part toincreases in realignment revenues which fundhealth, mental health and social servicesprograms.

The $163 million increase in general revenues isprimarily due to the following:

$29 million of the increase was due to propertytaxes, which increased 7% over the previousyear. The increase was due to significantgrowth in assessed property values as realestate activity remained strong.

$204 million of the increase is due to propertytaxes in lieu of vehicle license fee(VLF) revenue.Beginning in Fiscal Year 2004-2005, the County'sshare of general purpose VLF was eliminatedand replaced with property tax revenuepreviously distributed in the County foreducation funding via the EducationalRevenue Augmentation Fund(ERAF). The ERAFfund was established by state law in Fiscal Year1992-93 to capture prescribed amounts ofproperty tax to be shifted from localgovernmental agencies to local schools. Theswap of property tax for VLF general purpose

revenues resulted from the State's Fiscal Year2004-05 budget actions and the signing ofSB1099. The mechanism used to shift propertytax revenues from ERAF to cities and countieswas the establishment of a new VLF PropertyTax Compensation Fund which holds initialallocations of property tax before distributionsto cities and counties in January and May of thefiscal year. The County's share of this "swapped"revenue was $204 million.

$121 million represents a decrease in the Stateallocation of sales tax and VLF. Decreases inVLF are a result of the "swap" explained abovewhile decreased sales taxes were caused bythe State's exchange of sales tax revenue forproperty tax revenue. Effective July 1, 2004,provisions of AB7X1, one of the 2003-04 Statebudget bills referred to as the "triple flip" tookeffect. It redirected one-quarter cent of salestax to the State to repay up to $15 billion inbonds authorized by Proposition 57 (March2004) to help the State finance its past debt. Inturn, the State replaced the County's loss ofsales tax revenue with a like amount of propertytax revenue.

Interest earnings increased $16 million or 73%, asthe annual pool investment earnings rateincreased to 2.24% from the prior year of 1.59%.



Expenses:

Total expenses for governmental activities were$2.99 billion, a decrease of 10% or $347 millionfrom the prior year. Public assistance is thelargest function in expense (33 percent),followed by public protection (32 percent) andhealth and sanitation (18 percent).

The total decrease in program expenses isattributed generally to the following:

$450 million represented savings as a result ofthe prior year's contributions paid to SDCERA toreduce the County's unfunded accruedactuarial liability (UAAL). This was offset byBoard action to pay down $25 million of theUAAL in the current fiscal year, for a net overalldecrease in this category of expense of $425million. The reduced expense was applicableacross all functions.

Offsetting the above decrease are thefollowing increases in expenses:

$30 million is attributable to increases in salariesand benefit costs, an increase of 2.4% over theprevious year. As a service delivery entity, theCounty's major cost component is salaries andbenefits, amounting to approximately 43% ofthe total County expenditures. The County'soverall strategy whereby some positions aredeleted, some are frozen and others aretemporarily funded has minimized the impact ofnegotiated salary increases and increasedbenefit costs.

$15 million is attributable to increased interestexpense on borrowings to meet cash flowneeds of operations.

$3 million represents basic increases in the costsof services and supplies across all functions.

Expenses and Program Revenues - Governmental Activ ities ( In Thousands)

$10

$200,010

$400,010

$600,010

$800,010

$1,000,010

$1,200,010

Generalgovernment

Public protection Public ways andfacilities

Health andsanitation

Expenses Program revenues

(Continued on Next Page)



Revenues By Sources:

The County's governmental activities rely onseveral sources of revenue to finance ongoingoperations. As shown, for governmentalactivities overall, without regard to program,operating grants and contributions are thelargest single source of funds (56 percent).Operating grants and contributions are moniesreceived from parties outside the County andare generally restricted to one or more specificprograms. Examples of operating grants andcontributions include State and Federalrevenue for public assistance programs and forhealth and sanitation programs. Generalrevenues such as property taxes and propertytaxes in lieu of vehicle license fees are notshown by program, but are effectively used to

support program activities County-wide.Combined, these revenues account for 20% ofgovernmental activities.

At the end of fiscal year 2004-2005, totalrevenues for the governmental activities were$3.19 billion, while total expenses forgovernmental activities were $2.99 billion.

(Continued) Expenses and Program Revenues - Governmental Activities ( In Thousands)

$10

$200,010

$400,010

$600,010

$800,010

$1,000,010

$1,200,010

Public assistance Education Recreation andcultural

Interest expense

Expenses Program revenues



Other factors concerning the finances of theCounty's major governmental funds arediscussed in the Governmental Funds section ofthe "Financial Analysis of the County's Funds."Business-type Activities:

The net assets of business-type activitiesincreased by $2.9 million or 1.8%, indicating thatthese activities generated revenues sufficient tocover the costs of operations. Revenues

increased 9% to $37.4 million due to an increasein charges for services and expenses of 20% to$33.7 million, primarily due to increased costs ofsewage processing and costs of repairs andmaintenance.

Revenues By Source - Governmental Activities (In Thousands)

56%

1%

14%

6%3% 3% 1% 3% 13%

Charges for servicesOperating grants and contributionsCapital grants and contributionsProperty taxesProperty taxes in lieu of vehicle license feesOther taxesState allocation of sales tax and vehicle license feesInterestOther



Financial Analysis of the County FundsThe County uses fund accounting todemonstrate and ensure compliance withfinance-related legal requirements. Governmental Funds:

The focus of the County's governmental funds isto provide information on near-term inflows,outflows, and balances of resources that areavailable for spending. Such information isuseful in assessing the County's financingrequirements. In particular, unreserved fundbalance may serve as a useful measure of agovernment's net resources available forspending at the end of the fiscal year. Types ofMajor Governmental Funds reported by theCounty include the General Fund and theTobacco Securitization Special Revenue Fund.Nonmajor Governmental Funds include SpecialRevenue Funds, Debt Service Funds, andCapital Project Funds.

As of the end of fiscal year 2004-2005, theCounty's governmental funds reportedcombined ending fund balances of $1.52billion, an increase of $224 million in comparisonwith the prior year fund balance. Of the totalJune 30, 2005 amount, $942 million constitutesunreserved fund balance, which is available forspending at the County's discretion. Theremainder of fund balance is reserved toindicate that it is not available for new spendingbecause it has already been committed, (1) toliquidate existing contracts and purchaseorders ($177 million), (2) for landfill closure costs($26 million), (3) to pay debt service ($148million), and (4) for a variety of other purposes($225 million).

Revenues for governmental functions overalltotaled $3.12 billion representing a 6 percentincrease. Expenditures for governmentalfunctions, totaled $3.0 billion, a 13 percentdecrease from the fiscal year ended June 30,2004.

Revenues By Source - Business Type Activities (In Thousands)

82%

10%3% 5% 0%

Charges for servicesOperating grants and contributionsCapital grants and contributionsInterestOther



General Fund:

The General Fund is the chief operating fund ofthe County. At the end of fiscal year 2004-2005,the unreserved fund balance of the GeneralFund was $376 million, while total fund balancewas $667 million, an increase of $116 millionfrom fiscal year 2003-2004. This was primarilyattributed to increases in property tax revenuesof $215 million, federal aid of $31 million andcharges for current services of $8 million offsetby a decrease in State aid of $138 million. As ameasure of the General Fund's liquidity, it maybe useful to compare both unreserved fundbalance and total fund balance to total fundexpenditures. Unreserved fund balancerepresents 15 percent of total General Fundexpenditures of $2.5 billion, while total fundbalance represents 26 percent of that sameamount.Tobacco Securitization Special Revenue Fund:

This Special Revenue Fund is used to accountfor the $411 million (net of closing costs andreserve requirements) the County received fromthe Tobacco Asset Securitization Corporationrelated to the sale of 25 years of tobaccosettlement revenue in fiscal year 2001-2002. TheCounty will continue to invest these funds ininvestment products to maximize the sustainedlong-term use of these dollars. At the end offiscal year 2004-2005, fund balance was $332million, a decrease of $14 million from fiscal year2003-2004. This represents the net of transfers outof the fund of $23 million to support healthrelated program expenditures and interestearnings of $9 million.

Other Governmental Funds:

Other Governmental funds consist of twenty-sixnonmajor funds, which include SpecialRevenue Funds, Debt Service Funds, andCapital Project Funds. Individual fund data foreach of these nonmajor governmental funds isprovided in the Combining FinancialStatements and Supplementary InformationSection of this report. As of the end of fiscal year2004-2005, the Fund Balance of the OtherGovernmental Funds totaled $518 million, an

increase of $122 million over the prior year. Thechange is primarily due to the following: anincrease in the fund balance of the SANCALCapital Projects Fund of $63 million due toproceeds from a bond issuance; an increase of$52 million in the fund balance of the PensionObligation Bonds Fund due to transfers in of$106 million and principal and interestpayments of $16 million and $41 million,respectively; an increase of $16 million in thefund balance of the Edgemoor DevelopmentFund due to proceeds from the sale of capitalassets.Proprietary Funds:

The County's proprietary funds provide thesame type of information found in thegovernment-wide financial statements, but inmore detail. The nonmajor Enterprise Fundsand the Internal Service Funds are combinedinto single, aggregated presentations in theproprietary fund financial statements with theindividual fund data provided in combiningstatements, which can be found in theCombining Financial Statements/Schedulesand Supplemental Information section of thisreport. Due to the quantitative nature of theSanitation Districts, the County has elected notto report them as a major fund beginning fiscalyear 2004-05.

As of the end of fiscal year 2004-2005, the NetAssets of the Enterprise Funds totaled $160million, an increase of $3 million over the prioryear, primarily due to an increase in the netassets of the Airport Fund as a result of anincrease in charges for services of $2 million anda decrease in non-operating expenses of $1.7million.

Net Assets of the Internal Service Funds totaled$103 million, a decrease of $10 million from theprior year. The net change in the InternalService Funds is primarily due to a decrease of$6 million in the Risk Financing Fund due to anexcess of claims ($43 million) over revenue ($37million); a decrease in the FacilitiesManagement Fund of $3 million due to increaseutilities ($2 million) and repairs and



maintenance costs ($1 million); and a decreaseof $1 million in the Fleet Services Fund due toincreased fuel expense.Fiduciary Funds:

The County maintains fiduciary funds for theassets of the Pension Trust Fund, the InvestmentTrust Fund, and the Agency Funds. Pension Trust Fund:

This fund is under the control of the Board ofRetirement. The fund accumulates employerand employee contributions and earnings fromthe fund's investments. Disbursements aremade from the fund for retirement, disabilityand death benefits and refunds. This fundincludes all assets of the retirement system. Asof the end of fiscal year 2004-2005, the netassets of the Pension Trust Fund totaled $6.4billion, an increase of $850 million over the prioryear. The change is primarily due to thefollowing: (a) County and membercontributions of $356 million, (b) appreciation inthe fair value of pension trust investments andinvestment income of $795 million; less (c)member benefits paid and pension costs of$302 million. Investment Trust Fund:

This fund was established to account for theexternal portion of the County Treasurer'sinvestment pool. This fund consists of schooldistricts, special districts, and funds held forother governments. The Investment Trust Fund'snet assets totaled $2.6 billion, an increase in netassets of $164 million, primarily resulting fromundistributed school bond proceeds,undistributed property tax collections andprepaid unsecured taxes. Agency Funds:

The Agency Funds maintain assets held in anagent capacity for other governments,organizations and individuals. These assets donot support the County's programs or services.Any portion of the Agency Funds' assets held at

fiscal year end for other County funds, arereported in those funds rather than in theAgency Funds.

General Fund Budgetary HighlightsThe County's final budget differs from theoriginal budget in that it contains supplementalappropriations approved during the fiscal yearfor various programs and projects, as well astransfers of appropriations, budget corrections,re-budgets, and account reclassifications. AtJune 30, 2005, the variances between theoriginal and final budgets for the excess ofrevenues over expenditures, $49.5 million, andfor other financing sources, $35.5 million,resulted in a total change of $85 million inbudgeted fund balance between the originaland final budgets.

Increased appropriations caused significantvariances between the original and the finalbudgets as follows:• $33.2 million for the Integrated Property Tax

System funded from securitizing therepayment of the Vehicle License Fee Gaploan.

• $25 million to reduce the unfunded actuarialaccrued liability to SDCERA also funded fromsecuritizing the repayment of the VehicleLicense Fee Gap loan.

• $7.5 million increase based on increasedState revenues. The Governor's ProposedBudget cut funding in the ProbationDepartment Temporary Assistance for NeedyFamilies (TANF). The shortfall would haveresulted in the closure of a juvenile campand ranch treatment beds and otherreductions in juvenile and adult probationservices, therefore, General PurposeRevenues replaced the TANF funding forthese programs in the County's AdoptedOperational Plan. In the final State budget,however, State General Revenues wereallocated to continue State categoricalfunding for these programs. This allowed theCounty to reallocate the General Purpose



Revenues to fund a variety of one-time andon-going services including capital projects,major maintenance and increased costs inthe Defense Attorney/ContractAdministration department.

• $7.4 million for salaries and benefits forincentives earned through the County's FiscalYear 2003-2004 Quality First program, fundedby fund balance.

• $16.2 million net change in appropriatedmanagement reserves for future one-timeprojects.

• $8.4 million for costs associated with closingthe San Marcos landfill, funded from theEnvironmental Trust Fund ($3 million), LandAcquisition-Divestiture Holding Fund ($4million) and the Solid Waste Landfill ClosureReserve ($1.4 million), bringing the totalproject cost to $23.2 million.

• $7.7 million to fund unbudgeted expendituresrelated to revenue sharing requirements ofthe Memorandum of Understanding with theState Courts and for payments forundesignated fees pursuant to Assembly Bill1759 based on traffic court fines, fees andforfeitures ($6.5 million) and fund balance($1.2 million).

• $8.8 million to fund increased costs in the In-Home Supportive Services Program in Agingand Independence Services based onincreased funding from the StateDepartment of Social Services.

• $60.5 million reduction in appropriations forcarryover adjustments for year-endencumbrances.

Actual revenues fell short of the final budgetedamounts by $80 million, while expenditures fellshort of the budgeted amount by $275.7 million.The combination of revenue and expenditureshortfalls resulted in a net favorable operatingvariance of $195.7 million. Other financingsou

county of san diego · 2019. 2. 22. · county of san diego comprehensive annual financial report...

Documents