Annual Comprehensive Financial Report, 2017-18

Cover photo of Turri Road, Los Osos taken by Mark Maier, Auditor-Controller-Treasurer-Tax Collector’s Office COUNTY OF SAN LUIS OBISPO COMPREHENSIVE ANNUAL FINANCIAL REPORT JUNE 30, 2018 TABLE OF CONTENTS Page INTRODUCTORY SECTION Letter of Transmittal .............................................................................................................. 3 Certificate of Achievement for Excellence in Financial Reporting ................................................... 13 List of Elected and Appointed Officials...................................................................................... 14 Organizational Chart ............................................................................................................... 15 FINANCIAL SECTION Independent Auditor’s Report ................................................................................................. 19 Management’s Discussion and Analysis .................................................................................... 25 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position ........................................................................................... 45 Statement of Activities ................................................................................................ 46 Fund Financial Statements: Governmental Funds: Balance Sheet – Governmental Funds .......................................................................... 51 Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position – Governmental Activities ............... 52 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds .................................................................... 53 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities .............................................................................................. 54 Proprietary Funds: Statement of Fund Net Position ................................................................................... 55 Statement of Revenues, Expenses, and Changes in Fund Net Position ............................ 56 Statement of Cash Flows ............................................................................................ 57 Fiduciary Funds: Statement of Fiduciary Net Position ............................................................................. 58 Statement of Changes in Fiduciary Net Position ................................................................. 59 Notes to the Basic Financial Statements ........................................................................... 63 Required Supplementary Information: Description ...................................................................................................................... 109 Schedule of the County’s Proportionate Share of the San Luis Obispo County Pension Plan’s Net Pension Liability ....................................................................................... 110 Schedule of the County’s Contributions to the San Luis Obispo County Pension Plan .................. 111 Other Post-Employment Benefits (OPEB) Plan Schedule of Changes in the County’s Net OPEB Liability and Related Ratios ................................................................................... 112 Other Post-Employment Benefits (OPEB) Plan Schedule of Actuarially Determined Plan Contributions and Related Ratios ................................................................ 113 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual Comparison – General Fund ........................................................................ 114 Notes to Required Supplementary Information ........................................................................ 116 Page FINANCIAL SECTION (Continued) Other Supplementary Information: Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Nonmajor Governmental Fund Descriptions ....................................................................... 121 Combining Balance Sheet ................................................................................................ 123 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ............... 124 Nonmajor Debt Service Funds: Combining Balance Sheet .................................................................................... 125 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................................................. 126 Nonmajor Special Revenue Funds: Combining Balance Sheet .................................................................................... 127 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................................................. 130 Nonmajor Special Revenue Funds – Special Districts: Combining Balance Sheet .................................................................................... 133 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................................................. 134 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget to Actual Comparison: Capital Projects Fund ....................................................................................................... 137 Public Facilities Corporation .............................................................................................. 138 Pension Obligation Bonds ................................................................................................. 139 SLO County Financing Authority ................................................................................... 140 Community Development Special Revenue Fund ........................................................... 141 County Medical Services Program (CMSP) Special Revenue Fund .................................... 142 Emergency Medical Services Special Revenue Fund ....................................................... 143 Driving Under the Influence Programs Special Revenue Fund ......................................... 144 Fish and Game Special Revenue Fund .......................................................................... 145 Road Impact Fees Special Revenue Fund ..................................................................... 146 Library Special Revenue Fund ...................................................................................... 147 Parks Special Revenue Fund ........................................................................................ 148 Public Facilities Fees Special Revenue Fund .................................................................. 149 Roads Special Revenue Fund ....................................................................................... 150 Wildlife Grazing Special Revenue Fund ......................................................................... 151 Flood Control Districts Special Revenue Funds .............................................................. 152 Lighting Control Districts Special Revenue Funds ........................................................... 153 County Service Area Districts Special Revenue Funds .................................................... 154 Nonmajor Enterprise Funds: Nonmajor Enterprise Fund Descriptions ............................................................................ 157 Combining Statement of Net Position ................................................................................ 158 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................ 159 Combining Statement of Cash Flows ................................................................................. 160 Page FINANCIAL SECTION (Continued) Other Supplementary Information (Continued): Combining and Individual Fund Statements and Schedules (Continued): Internal Service Funds: Internal Service Fund Descriptions.................................................................................... 165 Combining Statement of Net Position ................................................................................ 167 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................ 168 Combining Statement of Cash Flows ................................................................................. 169 Internal Service Funds – Insurance Funds: Combining Statement of Net Position ................................................................... 170 Combining Statement of Revenues, Expenses, and Changes in Net Position ............ 171 Combining Statement of Cash Flows..................................................................... 172 Fiduciary Funds: Fiduciary Fund Descriptions ............................................................................................. 175 Agency Funds: Combining Statement of Fiduciary Net Position ..................................................... 176 Combining Statement of Changes in Assets and Liabilities ...................................... 177 Investment Trust Funds: Combining Statement of Fiduciary Net Position ..................................................... 178 Combining Statement of Changes in Fiduciary Net Position .................................... 179 General Fund – Detailed Budgetary Comparison Schedules: Detail Schedule of Expenditures – Budget to Actual Comparison – General Fund ................. 183 STATISTICAL SECTION (UNAUDITED) Statistical Section Table of Contents ........................................................................................ 193 Net Position by Component ..................................................................................................... 195 Changes in Net Position .......................................................................................................... 196 Fund Balances, Governmental Funds ............................................................................................ 198 Changes in Fund Balances, Governmental Funds ...................................................................... 199 Estimated 30 Year Pension Liability Funding .............................................................................. 201 Assessed Valuation ................................................................................................................. 202 Direct and Overlapping Property Tax Rates .............................................................................. 203 Principal Property Taxpayers ................................................................................................... 204 Property Tax Levies and Collections ......................................................................................... 205 Special Assessment Billings and Collections .............................................................................. 206 Ratios of Total Debt Outstanding ............................................................................................. 207 Ratios of General Obligation Debt Outstanding ......................................................................... 208 Legal Debt Margin Information ................................................................................................ 209 Demographic and Economic Statistics ...................................................................................... 210 Principal Employers ................................................................................................................ 211 Full Time Equivalent County Government Employees by Function ............................................... 212 Operating Indicators by Function ............................................................................................. 213 Capital Asset Statistics by Function .......................................................................................... 214 ____________________________________________________________ INTRODUCTORY SECTION ____________________________________________________________ 1 2 COUNTY OF SAN LUIS OBISPO AUDITOR - CONTROLLER  TREASURER - TAX COLLECTOR James P. Erb, CPA Auditor-Controller  Treasurer-Tax Collector James W. Hamilton, CPA Assistant Auditor-Controller  Treasurer-Tax Collector December 14, 2018 Honorable Board of Supervisors County of San Luis Obispo 1055 Monterey Street, Suite D430 San Luis Obispo, California 93408 To the Citizens of San Luis Obispo County and Your Honorable Board: The Comprehensive Annual Financial Report (CAFR) of the County of San Luis Obispo (County) for the fiscal year ended June 30, 2018, is hereby submitted as mandated by Sections 25250 and 25253 of the Government Code of the State of California. These statutes require that the County publish a complete set of financial statements audited in accordance with Generally Accepted Auditing Standards (GAAS) by a firm of licensed certified public accountants. The County prepares its financial statements in accordance with Generally Accepted Accounting Principles (GAAP). The requirements for financial reporting in accordance with GAAP are established by the Governmental Accounting Standards Board (GASB). This report consists of management's representations concerning County finances. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework designed to protect the government's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the County's financial statements in conformity with GAAP. The County's comprehensive framework of internal controls has been designed to provide a reasonable, rather than an 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 report is complete and reliable in all material respects. The County's financial statements have been audited by Brown Armstrong Accountancy Corporation, a firm of licensed certified public accountants. The goal of the independent audit was to provide a reasonable assurance that the financial statements of the County for the fiscal year ended June 30, 2018, are free of any material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the County's financial statements for the fiscal year ended June 30, 2018, are fairly presented and inconformity with GAAP. The independent auditor's report is presented as the first component of the financial section of this report. 3 The independent audit of the County's financial statements was part of a broader, federally mandated "Single Audit" designed to meet the requirements imposed by federal granter agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in the County's separately issued Single Audit Report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and the two should be read in conjunction with each other. The County's MD&A can be found immediately following the report of the independent auditors. Profile of the Government The County of San Luis Obispo, incorporated in 1850, is located on the central coast of the State of California, midway between Los Angeles and San Francisco. The county currently occupies a land area of 3,616 square miles and serves a population of 280,101 residents. Approximately 43% of the population resides in the unincorporated area. The seven incorporated cities in the county are Arroyo Grande, Atascadero, Grover Beach, Morro Bay, Paso Robles, Pismo Beach, and San Luis Obispo. A five-member County Board of Supervisors is the legislative authority and governance for the County. Each supervisor is elected to a four-year term in nonpartisan districts. The terms are staggered with two supervisors being elected then three supervisors being elected in alternating election years. The Board is responsible, among other things, for establishing ordinances, adopting the budget, appointing committees, and hiring the County Administrator and non-elected department heads. The County Administrator is responsible for carrying out the policies and ordinances of the Board and for overseeing the day-to-day operations of the County. The County has five elected department heads responsible for the offices of the County Clerk-Recorder, Assessor, Auditor-Controller- Treasurer-Tax Collector, District Attorney, and Sheriff- Coroner. The County provides a full range of services, including public safety and fire protection; construction and maintenance of highways, streets, and other infrastructure; health and social programs that promote the well-being of the community; and recreational activities and cultural events. The annual budget serves as the foundation for the County's financial planning and control. The County Budget Act, as presented in California Government Code Sections 29000 and 30200, provides the general provisions and requirements for preparing and approving the County budget. All County departments are required to submit budget requests to the County Administrator. The budgets are then reviewed by the County Administrator and compiled into a proposed budget with a County Administrator's recommendation. Public hearings are set in the month of June, with the Board of Supervisors adopting the final budget before the start of the next fiscal year. The proposed budget is prepared by fund, function (e.g., Public Safety), and department or 4 division (e.g., Sheriff). During the year, department heads may make transfers of appropriations within a division with the approval of the County Administrator and Auditor- Controller - Treasurer - Tax Collector. Transfers of appropriations between departments or increases in the budget from new revenue sources, reserves and/or contingencies require Board of Supervisors' approval. Monthly estimates for both revenues and expenditures are used to assist departments with budgetary control, and quarterly reports are submitted by each department to the County Administrator and the Board on the status of the departmental budgets. Budget-to-actual comparisons are provided in the Comprehensive Annual Financial Report for each individual governmental fund for which an appropriated annual budget has been adopted. For the General Fund this comparison is presented as part of the required supplementary information immediately following the notes to the financial statements. For other governmental funds with appropriated annual budgets, this comparison is presented in the governmental funds subsection of the statements. The County has various blended component units which primarily provide utility and debt financing services. The County's only discretely presented component unit is First 5, which allocates funds from the California Children and Families Trust Fund and advocates for quality programs and services, supporting children prenatal to age 5, to ensure that every child is healthy and ready to learn in school. 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 specific environment within which the County operates. 5 Employment:  Unemployment in the county as of September 2018 was 2.7% which is lower than both the state rate of 4.1% and the national rate of 3.7%. During the same period last year, unemployment in the county was 3.6%.  The State of California has a major presence in the County of San Luis Obispo with California Men's Colony, Atascadero State Hospital, CalTrans, and the California Polytechnic State University, making the State the largest employer in the county. The decrease in the county's unemployment rate has closely followed the decreasing trend in state unemployment over the past several years. Wages:  Average income increased by 3.4% to $45,814, from 2016 to 2017 (most recent data) for the residents of the County of San Luis Obispo, as reported by the Bureau of Labor Statistics.  For the last two years, the county's top earning occupational groups have remained largely unchanged. As reported by the Tribune, the highest earning 2017 occupational groups consisted of healthcare practitioners, business managers, architects and engineers, and computer and mathematical professionals. 6 Retail Sales:  Indicative of a healthy economy, sales tax revenue increased $1,174,265 or 11.7% from June 2017 to June 2018.  With the featuring of several local towns on top ten travel destination lists, the county continues to benefit fiscally from the tourism industry. Tourists spent approximately $311 million in retail locally in 2017 as reported by the tourism marketing agency SLO CAL. Real Estate: A healthy real estate market fueled by the desirable living location continued to drive the local housing marketing as the county's median home price increased to $605,000 as of August 2018. This is a 6.2% increase from the same period in the prior year. Additionally, property tax revenue indicators continue to illustrate the strength of the local economy.  Discretionary property tax receipts were $125 million in FY 2017-18, an increase of 4.2% over the prior year.  The total tax levy on secured property was $522,527,763 for FY 2017-18, an increase of 5.5% from the previous year.  Property Transfer Tax is related to the value and number of real estate transactions during the year. The county's unincorporated areas' property transfer taxes increased 12.5% in FY 2017-18; this is the eighth straight year with an increase.  The property tax delinquency rate of 0.9% has remained steady over the last three years. The steadiness in the rate continues to demonstrate a stabilization in the local economy. 7 Tourism:  Transient Occupancy Tax (TOT) in the unincorporated areas increased 11.0% in the 2017-18 fiscal year, while the seven incorporated cities budgeted a 6.4% increase for the same time period.  The scenic coastline, small town atmospheres and rolling vineyards continue to make San Luis Obispo County a desired tourist destination. From farm to table cuisine to hikes and beautiful walks on the beach, San Luis Obispo County has an abundance of activities that appeal to tourists and residents alike. Visit SLO CAL reported tourism had a $2.4 billion economic impact in 2017, a 5.9% growth since 2014. Long-term financial planning:  The FY 2018-19 budget's growth continues to be conservative as the County remains committed to maintaining a strategic reserve. The final 2018-19 comprehensive budget authorized a $631.9 million governmental fund spending level, an increase over the $611.3 million budget for FY 2017-18. The budget provides support to the development of departmental programs and services and assists County operations in responding to the continuously changing needs of constituents. The ongoing increase in property tax revenue along with other key economic indicators such as transient occupancy tax and sales tax growth allowed for a moderate increase in the FY 2018-19 spending level. The General Fund has $523 million appropriated to finance the current year's expenditures including contingencies, with $13 million placed in general reserves and $13.2 million earmarked for designations.  Each year a 5-year Capital Improvement Program (CIP) is compiled. The CIP is a plan for short-range and long-range capital acquisition and development. It also includes plans to improve or rehabilitate County-owned roads and facilities. The plan provides the mechanism for estimating capital requirements; setting priorities; monitoring and evaluating the progress of capital projects; and informing the public of projected capital improvements and unfunded needs. While the CIP covers a five-year planning period, it is updated each year to reflect ongoing changes as new projects are added, existing projects are modified, and completed projects are removed from the plan document. The five- year CIP does not appropriate funds; rather it serves as a budgeting tool, identifying those capital project appropriations to be made through the adoption of the County's annual budget. The FY 2018-19 capital budget recommended 8 funding for thirteen capital projects. Total 2018-19 appropriations for Capital Projects increased 59% from the prior year and are approximately $4.1 million. Some of the existing projects will be completed over multiple years.  In September 2018, Governor Jerry Brown signed Senate Bill 1090, a bipartisan bill that will provide $85 million in economic assistance to the community. The bill is an effort to lessen the effects of lost tax revenue that will result from the closure of the Diablo Canyon Nuclear Power Plant. PG&E plans to close the plant by fiscal year 2024-25. The new law also calls for the California Public Utilities Commission to approve elements of the Joint Proposal Agreement developed by the County, San Luis Coastal Unified School District, and the incorporated cities.  The San Luis Obispo County cannabis business tax was approved by 76% of voters on June 6, 2018. The local initiative allows for the assessment of a 4% general tax on gross sales of all cannabis related businesses, effective July 1, 2018. The tax for cannabis businesses will remain at 4% until July 1, 2020 at which time it increases 2% every subsequent year until a maximum rate of 10% is reached. The Board of Supervisors has the authority to temporarily remove the tax rate or reduce the rate. While it is challenging to know how much revenue the cannabis tax will generate due to few cannabis businesses having completed the licensing process, it is estimated tax revenues will be approximately $1.4 million in FY 2018-19. Relevant Financial Policies:  Balanced Budget: The County Administrative Officer shall present a balanced budget for all County operating funds on an annual basis.  Ongoing Budget Administration: The County Administrative Officer shall submit Quarterly Financial Status Reports to the Board of Supervisors. The reports shall provide expenditure and revenue projections and identify and clarify projected variances along with recommendations and proposed corrective actions.  Budget Priorities: The budget is an effort to allocate resources in an effective and efficient manner in order to achieve the County's vision of a Safe, Healthy, Livable, Prosperous, and Well-Governed Community.  Use of "One-Time" Funds: One-time revenue shall be dedicated for use for one time expenditures. Annual budgets will not be increased to the point that ongoing operating costs become overly reliant upon cyclical or unreliable one- time revenues.  Adopt a Formal Debt Policy: A comprehensive Debt Management Policy was developed by the Auditor-Controller and approved by the Debt Advisory Committee. It was adopted by the Board of Supervisors on December 14, 2010. 9  Cost Recovery through Fees: Utilize fees to recover costs where reasonable and after all cost savings options have been explored.  Pension Cost: Governor Brown implemented a Public Employee Pension Reform Act (PEPRA) which took effect on January 1, 2013. In compliance with PEPRA the County established a Tier Ill retirement plan that complies with or exceeds the requirements of the pension reform legislation. In addition, the County and most labor units have adopted a 50/50 funding split between the County and the employees. As of December 31, 2017, approximately 38% of County employees fall under PEPRA. Major Initiatives  Countywide: Joint department efforts continued in the development and approval of the permanent cannabis ordinances, the drafting of cannabis business tax and the refining of the cannabis application, licensing and appeal processes. The permanent inland and coastal zone ordinances were adopted by the Board of Supervisors on November 27, 2017. County residents approved the Cannabis Tax Measure on June 5, 2018. The tax is only assessed to mitigate the potential impacts of legal use in the unincorporated areas of San Luis Obispo County. Beginning July 1, 2018, the tax is assessed at 4% of gross receipts and will automatically increase 2% annually starting July 1, 2020 to a maximum of 10%.  Veterans Services: Increased the number of claims on behalf of veterans by 39% while decreasing the time between when the claims were filed and when benefits were received by 36%. Hosted, The Wall That Heals, a Vietnam Veterans' Memorial that was visited by more than 12,000 people.  Public Health: Increased distribution of the life-saving opioid antidote naloxone through grant funding. In addition, developed protocols to enable local law enforcement agencies to administer the antidote.  Sheriff: Completed and distributed active shooter first responder maps for 98 schools within the county. Worked collaboratively with allied law enforcement agencies to develop and implement a communication protocol when responding to an incident.  Animal Services: Worked with Public Works staff to continue the planning of a new shelter facility to replace the 43-year-old current one. The $13.7 million shelter is a joint project with all seven cities that is anticipated to break ground mid-2019.  Planning- Community Development: Distributed $4,840,049 in federal grant funds for affordable housing, public facilities and public services to individuals, cities, unincorporated communities and local non-profit organizations. 10  Airports: Increased commercial passengers by more than 23% between 2016 and 2017, making it the fifth fasting growing airport in the United States. The growth resulted from the completion of the 56,000 square foot terminal and the expanded frequency of passenger flights.  Library: Increased services with the addition of passport registration and film streaming giving patrons access to more than 30,000 free films. Installed new automated self-checkout system and expanded the Spanish language collections.  Public Works: Completed 60 miles of chip seal and surface treatments on local roads and 11 miles of asphalt overlay on roads to improve pavement preservation.  District Attorney: Created a vertical gang prosecution program and hired a Deputy District Attorney whose duties include anti-gang efforts through educational and outreach programs in addition to the aggressive vertical prosecution of gang crimes.  Behavioral Health: Completed construction and began operations of the new Crisis Stabilization Unit in April 2018. The unit allows medical professionals to stabilize up to four community members at a time who are experiencing a serious mental health issue and is expected to serve over 1,000 individuals annually. Awards and Acknowledgments Awards:  The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County of San Luis Obispo for its comprehensive annual financial report (CAFR) for the fiscal year ended June 30, 2017. This was the thirty-second consecutive year that the County has received this prestigious award. In order to be awarded a Certificate of Achievement the County published an easily readable and efficiently organized Comprehensive Annual Financial Report (CAFR). This report satisfied both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program's requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgements: The preparation of the Comprehensive Annual Financial Report would not have been possible without the efficient and dedicated services of the staff of the Auditor- Controller-Treasurer-Tax Collector's Office. We would like to acknowledge the special efforts of our Enterprise Financial System Operations Division and our independent 11 auditors, Brown Armstrong Accountancy Corporation, for their assistance in the report preparation. We would also like to express our appreciation to all County departments who assisted in this process and to the Board of Supervisors for its leadership responsibility and unfailing support to ensure the continued general fiscal health and integrity of the County. 12 13 COUNTY OF SAN LUIS OBISPO LIST OF ELECTED AND APPOINTED OFFICIALS JUNE 30, 2018 Elected Officials Board of Supervisors District #1 Chairperson .............................................................................. John Peschong District #2 ............................................................................................... Bruce S. Gibson District #3 ........................................................................................................ Adam Hill District #4 ................................................................................................... Lynn Compton District #5 .................................................................................................. Debbie Arnold Other Elected Officials Assessor ......................................................................................... Tom J. Bordonaro Jr. Auditor-Controller-Treasurer-Tax Collector-Public Administrator ....................... James P. Erb Clerk-Recorder ........................................................................................... Tommy Gong District Attorney ................................................................................................. Dan Dow Sheriff-Coroner ........................................................................................... Ian Parkinson Appointed Officials Agricultural Commissioner ..................................................................... Martin Settevendemie Airport General Manager ..................................................................................... Kevin Bumen Behavioral Health Administrator ............................................................................ Anne Robin Central Services ................................................................................................ Will Clemens Chief Probation Officer ........................................................................................ James Salio Child Support Services Director ................................................................................. Julie Paik County Administrator ......................................................................................... Wade Horton County Counsel ................................................................................................... Rita L. Neal County Fire ......................................................................................................... Scott Jalbert Farm Advisor ................................................................................................. Katherine Soule Health Agency Director ......................................................................................... Michael Hill Human Resources Director ..................................................................... Tami Douglas-Schatz Information Technology Director ........................................................................... Daniel Milei Library Director ..................................................................................... Christopher Barnickel Parks Director ....................................................................................................... Nick Franco Planning .................................................................................... Marvin Rose, Interim Director Public Health Officer .................................................................................... Penny Borenstein Public Works Director ........................................................................................ Colt Esenwein Social Services Director ...................................................................................... Devin Drake Veterans Services Director .......................................................................... Christopher Lopez 14 COUNTY OF SAN LUIS OBISPO ORGANIZATIONAL CHART Citizens of San Luis Obispo County Special Districts Governed Boards, Commissions and ---------------- Board of Supervisors* ------------------ by the Board of Supervisors Committees County Administrator Health & Land Public Community Fiscal & Internal Human Based Protection Services Administrative Support Services Auditor- Controller- Agricultural Child Support County Health Agency Airports Treasurer-Tax Commissioner Services Counsel Public Health Collector-Public Mental Health Administrator* Drug & Alcohol Animal Services Medical Services Planning & Administrative County Fire** Farm Advisor Central Services Building Office District Human Public Works Social Services Library Assessor* Attorney* Resources Emergency Veterans' Parks & Information Clerk-Recorder* Services Services Recreation Technology Probation Sheriff- Coroner* * Elected Officials **Contract 15 16 ____________________________________________________________ FINANCIAL SECTION ____________________________________________________________ 17 18 INDEPENDENT AUDITOR’S REPORT To the Honorable Board of Supervisors County of San Luis Obispo Report on the Financial Statements 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 Luis Obispo, California (County), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility 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 San Luis Obispo County, a discretely presented component unit. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the First 5 San Luis Obispo County, are based solely on the reports of the other auditor. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the County’s preparation and fair presentation of the financial statements in order to design 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 19 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, 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, 2018, and the respective changes in financial position, and where applicable, cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Emphasis of Matters As discussed in Note 1 to the financial statements, the County implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, during fiscal year 2018. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of the County’s proportionate share of the San Luis Obispo County pension plan’s net pension liability, schedule of the County’s contributions to the San Luis Obispo County pension plan, other post-employment benefits (OPEB) plan schedule of changes in the County’s net OPEB liability and related ratios, other post-employment benefits (OPEB) plan schedule of actuarially determined plan contributions and related ratios, and budgetary comparison information for the General Fund, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information 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 section 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 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements taken as a whole. 20 The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and schedules and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2018, 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 in considering the County’s internal control over financial reporting and compliance. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California December 14, 2018 21 22 ____________________________________________________________ MANAGEMENT’S DISCUSSION AND ANALYSIS ____________________________________________________________ 23 24 COUNTY OF SAN LUIS OBISPO MANAGEMENT’S DISCUSSION AND ANALYSIS JUNE 30, 2018 As management of the County of San Luis Obispo (the County), we offer readers the County’s financial statements, this narrative overview and analysis of the financial activities of the County for the fiscal year ended June 30, 2018. We encourage readers to consider the information presented here in conjunction with the transmittal letter at the front of this report and the County’s financial statements, which begin on page 41. All amounts, unless otherwise indicated, are expressed in thousands of dollars. FINANCIAL HIGHLIGHTS  In fiscal year (FY) 2017-18 the County implemented GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions (GASB 75). GASB 75 revises and establishes accounting and financial reporting requirements for state and local governments that provide their employees with other post-employment benefits (OPEB). GASB 75 requires the County to recognize its long-term obligation for post-employment benefits, other than pension, as a liability, and to more comprehensively and comparably measure the annual costs of OPEB benefits. Accordingly, the County has recognized an obligation of $10.7 million for its long-term OPEB liability.  The assets of the County exceeded its liabilities at the close of the most recent fiscal year by $1,353,826 (net position). The majority of this amount, $1,468,483, is the net investment in capital assets, while $29,836 is restricted for specific purposes (restricted net position). Unrestricted net position indicates the portion of net position which may be used to meet the County’s ongoing obligations to citizens and creditors; however, the recording of the County’s pension liability in accordance with GASB Statement No. 68 (GASB 68) and the County’s OPEB liability in accordance with GASB 75 created a negative unrestricted net position of $144,493.  The County’s net position decreased by $18,555. $4,457 of the change is for current fiscal year activity, while $2,042 relates to a prior period adjustment, and $12,056 relates to the changes effected by GASB 75. The increase in net investment in capital assets represents capital acquisitions during the year reduced by depreciation and increased by retirement of long-term debt (Table A). The decrease in restricted net position represents the degree to which increases in revenues exceeded increases in expenses (Table B). Negative unrestricted net position primarily increased due to the recording of the County’s OPEB liability in accordance with GASB 75.  As of June 30, 2018, the County’s governmental activities reported combined ending net position of $997,303, a decrease of $19,516 in comparison with the prior year. Due to the recording of the long-term pension and OPEB obligations, no amount of governmental net position is available for spending at the County’s discretion for current and future needs (unrestricted net position) (Table A).  Business-type activities posted net program loss of $1,791 before general revenues, contributions and transfers from other funds, a decrease of $19,964 when compared to net program income of $18,173 in the prior year. The difference from the prior year is primarily due to decreased capital grants and contributions of $20,248 related to the construction of a new Airport terminal and Los Osos wastewater treatment plant.  At the end of the fiscal year, the entire $288,240 fund balance of the General Fund was either nonspendable $18,511, restricted $10,083, committed $152,501 or assigned $107,145.  Consistent with the prior year, the County prepaid its $53.2 million employer retirement contribution to the San Luis Obispo County Pension Trust (Pension Trust) in July of 2018. The prior year prepayment was $49.5 million. The County will save $1.5 million by prepaying the employer retirement contribution. 25 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements include four components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to the financial statements, and 4) required supplementary information. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The Government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the County’s assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The Statement of Activities presents information showing how the government’s 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 the 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 employee vacation balances). Both of the government-wide financial statements distinguish functions of the County 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 cost through user fees and charges (Business- type Activities). The governmental activities of the County include public protection, public ways and facilities, health and sanitation, public assistance, education, recreation and cultural services, and general government. The main business-type activities of the County include the airport, golf courses, flood control districts, the Nacimiento water project, the Los Osos wastewater project and county services areas. Blended component units are included in our basic financial statements and consist of legally separate entities for which the County is financially accountable and that have substantially the same board as the County or provide services entirely to the County. They include county service areas, flood control districts, waterworks districts, lighting maintenance districts, and the San Luis Obispo County Public Facilities Corporation and San Luis Obispo County Financing Authority. The County discretely presents the First 5 San Luis Obispo County component unit. The mission of First 5 is to allocate funds from the California Children and Families Trust Fund and advocate for quality programs and services, supporting children prenatal to age 5, to ensure that every child is healthy and ready to learn in school. First 5 does not meet the requirements for blending, and therefore its financial activities are presented separately from the County. The government-wide financial statements can be found on pages 45 to 47 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 County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds - Governmental funds are used to account for essentially the same functions reported as Governmental Activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term 26 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) inflows and outflows of spendable resources, as well as on the balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s 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 government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between Governmental Funds and Governmental Activities. The County maintains twenty-six individual governmental funds organized according to their type: general, special revenue, debt service, and capital projects. Information is presented separately in the governmental funds’ balance sheet and in the governmental funds’ statement of revenues, expenditures, and changes in fund balances for the General Fund, the Capital Projects Fund, and the Debt Service Pension Obligation Bonds Fund, which are considered to be major funds. Data from the remaining twenty-three governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements found in the other supplementary information section of this report. A budgetary comparison statement has been provided for the General Fund and any major special revenue funds to demonstrate compliance with the budget and can be located in the required supplementary section of the report. Individual budgetary data for each of the nonmajor governmental funds is provided in the other supplementary information section of this report. The basic governmental fund financial statements can be found on pages 51 to 54 of this report. Proprietary funds - The County maintains two different types of proprietary funds, enterprise and internal service funds. Enterprise funds are used to report the same functions presented as Business-type Activities in the government-wide financial statements. The County uses enterprise funds to account for the airport, golf course, wastewater facility, flood control districts, waterworks districts and county service areas. Internal service funds are an accounting device used to accumulate and allocate costs internally among the County’s various functions. The County uses internal service funds to account for its vehicle operations and maintenance, public works services, other post-employment benefits, and self- insurance programs. Because these services predominately benefit governmental rather than business- type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The Airport, Nacimiento Water Contract, Lopez Flood Control, and Los Osos Wastewater funds are considered to be major funds of the County and are presented separately in the proprietary fund financial statements. All other enterprise funds have been combined into a single column for presentation. The seven internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service and enterprise funds is provided in the form of combining statements found in the other supplementary information section of this report. The basic proprietary fund financial statements can be found on pages 55 to 57 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 County’s 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 pages 58 to 59 of this report. 27 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Notes to the Basic 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 basic financial statements can be found on pages 63 to 106 of this report. Required Supplementary Information – The notes to the basic financial statements are followed by a section of required supplementary information (RSI) that further explains and supports the information in the financial statements. The required supplementary information can be found on pages 109 to 116 of this report. Other Supplementary Information - In addition to the basic financial statements, accompanying notes, and required supplementary information, this report also presents certain other supplementary information concerning the County’s General Fund, special revenue funds budgetary schedules, and combining and individual fund statements and schedules. Combining and individual fund statements and schedules – The combining and individual fund statements and schedules referred to earlier provide information for nonmajor governmental funds, nonmajor enterprise funds, internal service funds, and fiduciary funds and are presented following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 121 to 134 and 157 to 179 of this report. Budgetary comparison schedules - The budgetary comparison schedules (other than the General Fund which is presented with the individual General Fund statements) for the Capital Projects, Pension Obligation Bonds, Public Financing Corporation, Financing Authority, and nonmajor Special Revenue funds can be found on pages 137 to 154 of this report. Detail budgetary schedules demonstrating legal level of compliance with budgetary control for the General Fund are presented on pages 183 to 190 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As stated earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the County, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $1,353,826 as detailed in the table below: Table A Statement of Net Position June 30, 2018 (in thousands) 2017- June 30, 2018 June 30, 2017 2018 Total Total Govern- Business- Primary Govern- Business- Primary Total mental Type Govern- mental Type Govern- % Activities Activities ment Activities Activities ment Chg Assets: Current assets $ 518,137 $ 140,569 $ 658,706 $ 541,589 $ 151,111 $ 692,700 (4.9%) Other long-term assets 3,329 10,320 13,649 4,269 11,405 15,674 (12.9%) Capital assets 1,212,274 603,100 1,815,374 1,199,499 594,181 1,793,680 1.2% Total assets 1,733,740 753,989 2,487,729 1,745,357 756,697 2,502,054 (0.6%) Deferred Outflows of Resources 115,667 4,956 120,623 150,597 5,462 156,059 (22.7%) Liabilities: Long-term liabilities 683,941 361,781 1,045,722 784,217 369,539 1,153,756 (9.4%) Other liabilities 73,889 39,604 113,493 71,146 37,058 108,204 4.9% Total liabilities 757,830 401,385 1,159,215 855,363 406,597 1,261,960 (8.1%) Deferred Inflows of Resources 94,274 1,037 95,311 23,772 - 23,772 300.9% 28 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) 2017- June 30, 2018 June 30, 2017 2018 Total Total Govern- Business- Primary Govern- Business- Primary Total mental Type Govern- mental Type Govern- % Activities Activities ment Activities Activities ment Chg Net position: Net investment in capital assets 1,185,073 283,410 1,468,483 1,178,967 270,246 1,449,213 1.3% Restricted 29,836 - 29,836 64,822 - 64,822 (54.0%) Unrestricted (217,606) 73,113 (144,493) (226,970) 85,316 (141,654) 2.0% Total net position $ 997,303 $ 356,523 $ 1,353,826 $ 1,016,819 $ 355,562 $ 1,372,381 (1.4%) Analysis of Net Position The County’s total net position decreased by $18,555, or 1.4%. The decrease was a combination of decreases in total assets ($14 million), deferred outflows of resources ($35 million), and total liabilities ($103 million) along with increased deferred inflows of resources ($72 million). Causes for the changes in each of these categories are detailed below. The overall decrease in total assets is primarily due to outflows of governmental activities’ cash, offset slightly by increased governmental activity capital assets. A significant cash decrease occurred with the County’s $46 million final debt service payments on the 2003 Series A Standard and 2009 Series A Term Pension Obligation Bonds. Notable capital asset increases in governmental activities are related to the near-completion of the Bob Jones Trail in the Parks Fund, upgrades of various County roads, and a variety of information technology investments. In the other long-term assets category, the removal of the OPEB asset ($1.1 million) in accordance with GASB 75 and a reduction in restricted cash in business- type activities caused by the refunding of the 2007 Nacimiento Pipeline Project Series A Revenue Bonds also contributed to the decrease in total assets. Of the 22.7%, $35,436, decrease in deferred outflows of resources, $26 million was caused by differences in projected and actual earnings of the pension plan, $11 million related to changes in actuarial assumptions for the County’s pension obligation, and the difference was comprised of various smaller changes in employer proportion of the pension plan and differences between expected and actual experience. Total liabilities of the County decreased $102,745, or 8.1%. The largest contributor to the decrease is a reduction in the County’s net pension obligation of $73.8 million. Net debt issuances and repayments further decreased the County’s long-term liabilities by $38.8 million in governmental activities and $7.2 million in business-type activities, while an increase in the landfill closure/postclosure liability increased governmental long-term liabilities by $1.4 million. The addition of the County’s OPEB liability caused an increase in long-term liabilities of $10.7 million. The overall decrease in long-term liabilities was offset by a $5.1 million increase in current liabilities comprised of a variety of routine small increases and decreases. The County recorded deferred inflows of resources related to pensions for the first time in FY 2017-18. The deferred inflows of resources included $1.0 million of differences between expected and actual experience and $71.3 million of differences in projected and actual investment earnings of the pension plan and were the primary drivers of the 300.9% increase in deferred inflows of resources over the prior year. Unrestricted net position indicates the portion of net position which may be used to meet the County’s ongoing obligations to citizens and creditors. The recording of the County’s pension liability, per the requirements of GASB 68, along with the current year addition of the County’s OPEB liability per the requirements of GASB 75, caused the County’s unrestricted net position to remain negative indicating that the majority of the County’s net position is invested in capital assets or otherwise restricted for use. The most significant portion of the County’s net position, $1,468,483 of total net position, reflects its net investment in capital assets (e.g., land and easements, structures and improvements, infrastructure, and 29 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) equipment), less any outstanding related debt used to acquire those assets. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County’s 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. The remaining $29,836, or 2.2%, of the balance of the County’s net position represents resources that are subject to external restrictions on how they may be used. At the end of the current fiscal year, the County reported positive balances for business-type activities in all net position categories. Total net position for governmental activities decreased $19.5 million. The decrease is comprised of a $5.5 million decrease due to normal operating activities, a $2.1 million prior period adjustment to record governmental activity debt, and an $11.9 million liability to record the effects of the GASB 75, OPEB, implementation. Total net position for business-type activities increased $1.1 million due to normal operating activities and was reduced by $111 thousand due to the implementation of GASB 75. The overall effect of the changes, prior period adjustment and normal operating activities was a decrease of $18.6 million in the County’s total net position. Net Investment in Capital Assets for business-type activities increased $13.2 million. This increase is primarily due to the new Airport terminal and the Los Osos Wastewater treatment plant construction activity that does not have related debt. The remainder is comprised of an increase in State Water project water rights and reductions to capital related debt from scheduled debt service principal payments. Net Investment in Capital Assets for governmental activities increased $6.1 million. The majority of the increase is associated with construction in progress for several large projects, including the Women’s Jail, and Roads and Parks upgrades, which have no related debt, along with the retirement of capital related long-term debt. The $34,986, 54.0% decrease to Restricted net position for governmental activities is primarily a consequence of the decrease in resources that were used for final debt service payments on the 2003 Series A Standard and 2009 Series A Term Pension Obligation Bonds. The Public Protection function had a $4.3 million decrease in restricted net position related to the winding down of the Women’s’ Jail construction project. Restricted net position increased slightly for the Public Ways and Facilities, Recreation and Cultural Services, and Education functions and decreased slightly for the General Government, Health and Sanitation, and Public Assistance functions. The increases and decreases are mostly due to fluctuations in purchase obligations. Restricted net position represents net position of the County which is subject to constraints imposed by creditors, grantors, contributors, laws, or regulations. There was a decrease of $2.8 million in Unrestricted net position reported in connection with the Total Primary Government. This category represents the portion of the County’s net position which is not subject to constraints imposed by creditors, grantors, contributors, laws, or regulations. When positive, this amount may be used to meet the County’s general obligations. The decrease was due to excess general expenses over net program revenues and increased expense related to the posting of the OPEB liability in compliance with GASB 75. The table on the next page indicates the changes in net position for governmental and business-type activities: 30 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Table B Statement of Activities For the Year Ended June 30, 2018 (in thousands) 2017- June 30, 2018 June 30, 2017 2018 Govern- Business- Total Govern- Business- Total Total mental Type Primary mental Type Primary % Activities Activities Government Activities Activities Government Chg Revenues: Program revenues: Charges for services $ 59,620 $ 47,276 $ 106,896 $ 59,092 $ 42,576 $ 101,668 5.1% Operating grants and contributions 253,197 426 253,623 233,686 1,178 234,864 8.0% Capital grants and contributions 10,089 5,217 15,306 15,632 25,465 41,097 (62.8%) General revenues: Property taxes 180,051 3,858 183,909 173,153 3,814 176,967 3.9% Other taxes 25,708 - 25,708 23,072 - 23,072 11.4% Interest and investment income 3,171 1,272 4,443 3,289 630 3,919 13.4% Grants not restricted to specific programs 2,740 - 2,740 63 - 63 4,249.2% Other revenues 2 - 2 5 338 343 (99.4%) Total revenues 534,578 58,049 592,627 507,992 74,001 581,993 1.8% Expenses: General government 56,858 - 56,858 56,390 - 56,390 0.8% Public protection 183,814 - 183,814 187,255 - 187,255 (1.8%) Public ways and facilities 41,606 - 41,606 32,098 - 32,098 29.6% Health and sanitation 103,822 - 103,822 99,150 - 99,150 4.7% Public assistance 122,753 - 122,753 125,102 - 125,102 (1.9%) Education 12,754 - 12,754 12,787 - 12,787 (0.3%) Recreation and cultural services 8,927 - 8,927 10,385 - 10,385 (14.0%) Interest on Long-term debt 11,840 - 11,840 4,555 - 4,555 159.9% Airport - 7,966 7,966 - 6,391 6,391 24.6% Golf - 3,297 3,297 - 3,111 3,111 6.0% State Water Contract - 5,909 5,909 - 5,571 5,571 6.1% Nacimiento Water Contract - 14,044 14,044 - 14,191 14,191 (1.0%) Lopez Flood Control - 7,072 7,072 - 6,387 6,387 10.7% Lopez Park - 3 3 - 4 4 (25.0%) General Flood Control - 1,056 1,056 - 851 851 24.1% County Service Areas - 4,445 4,445 - 4,218 4,218 5.4% Los Osos Wastewater - 10,918 10,918 - 10,322 10,322 5.8% Total expenses 542,374 54,710 597,084 527,722 51,046 578,768 3.2% Excess/(deficiency) before transfers (7,796) 3,339 (4,457) (19,730) 22,955 3,225 (238.2%) Transfers 2,267 (2,267) - (2,292) 2,292 - - Change in net position (5,529) 1,072 (4,457) (22,022) 25,247 3,225 (238.2%) Net position - beginning of year 1,016,819 355,562 1,372,381 1,038,841 330,315 1,369,156 0.2% Prior Period Adjustment (2,042) - (2,042) - - - - Cumulative change of effect in accounting principle (11,945) (111) (12,056) - - - - Net position - end of year $ 997,303 $ 356,523 $ 1,353,826 $ 1,016,819 $ 355,562 $ 1,372,381 (1.4%) 31 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Analysis of Governmental and Business-type Activities Governmental Activities Governmental Activities decreased the County’s net position by $19.5 million compared to a decrease of $22.0 million in the prior year. Overall, total revenues for governmental activities increased $26.6 million, or 5.2%. A prior period adjustment of $2.0 million to reflect the addition of the long-term component of a PG&E California Energy Commission (CEC) loan received by the County in FY 2016-17 and a change in accounting principle to book the OPEB liability ($11.9 million) were the main contributors to the decrease in net position. Remaining significant factors contributing to the decrease in net position from the prior year are detailed below: Property Taxes rose $6.9 million or 4.0% over the prior year, a function of the regular 2% increase in assessed property value allowed by California’s Proposition 13. Other Taxes rose $2.6 million or 11.4% driven by increases in sales ($1.2 million), transient occupancy ($1.0 million), transfer ($337 thousand) and other ($77 thousand) taxes. The increases in taxes reflect the County’s continued economic stability and status as a popular tourist destination. Operating Grants and Contributions increased by $19.5 million or 8.3% due to increases in Public Protection ($6.0 million) caused by the recognition of state aid that was deferred in the prior year due to unavailability; Public Ways and Facilities ($1.6 million) from new road maintenance and rehabilitation state aid; Health and Sanitation ($8.9 million) had increased Mental Health Services Act funding; and Public Assistance ($3.0 million) received increased state realignment for Social Services programs. Capital Grants and Contributions fell by $5.5 million or 35.5% due to a decrease in state construction funding for the Women’s Jail Expansion project but was offset slightly by an increase to roads funding. Grants not Restricted to Specific Programs increased by $2.7 million due to a cumulative state payment of prior year claims for state-mandated cost reimbursements. Total expenses from governmental activities increased $14.7 million or 2.8% over the prior year. Increases to General Government ($468 thousand), Public Ways and Facilities ($9.5 million) and Health and Sanitation ($4.7 million) were offset by decreases in Public Protection ($3.4 million), Public Assistance ($2.4 million), Recreation and Cultural Services ($1.5 million) and Education ($33 thousand). Public Ways and Facilities expenditures increased due to additional roads resurfacing projects, and Health and Sanitation expenditures increased due to professional services related to mental health programs. Decreases in Public Protection professional services expenditures were the result of the Women’s Jail Expansion project winding up and decreases in Public Assistance were due to decreased pension expense. The Recreation and Cultural Services decrease relates to lower expenses for supplies and maintenance services in Parks. In addition, interest on long-term debt increased $7.3 million due to the retirement of the 2003 Series A Standard A and 2009 Series A Term Pension Obligation Bonds. For FY 2017-18, the County was able to maintain its General Fund contingencies at a level of 5%, while still making investments in the many programs and services provided to the community. Business-type Activities Business-type activities increased the County’s net position by $961 thousand compared to an increase of $25.2 million in the previous year. Revenues exceeded expenses by $3.3 million, a transfer of $2.3 million to governmental activities, and an $111 thousand adjustment for GASB 75, OPEB, resulted in the total increase to net position. Key elements of current year business-type activity are as follows: Total revenue decreased $16.0 million or 21.6% from the preceding year. The largest decrease occurred in Capital Grants and Contributions ($20.2 million), a result of decreased federal construction funding from the prior year for the new Airport terminal. 32 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) The decrease in Capital Grants and Contributions was slightly offset by a $4.7 million increase in Charges for Services attributable to increased charges to customers of the Los Osos wastewater treatment plant. Expenses for business-type activities increased $3.7 million or 7.2% from the prior year. Within business- type activities, the largest increase, $1.6 million was caused by costs related to the new Airport terminal. The remainder of the change is the result of various small increases and decreases among the other enterprise funds. FUND FINANCIAL STATEMENT ANALYSIS FINANCIAL ANALYSIS OF THE COUNTY'S FUNDS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental Funds The focus of the County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is beneficial in assessing the County’s financing requirements. In particular, total fund balance less the nonspendable portion may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. Total fund balance consists of the following components (see footnote 11 for additional detail):  Nonspendable fund balance, $18,535, increased by $15.0 million, 423.9% from the prior year. Nonspendable fund balance represents amounts that are not spendable in form or are legally or contractually required to be maintained intact, and includes (1) inventories of $117, (2) prepaid items of $466, and (3) long-term receivables of $17,952. The increase from the prior year primarily relates to increased advances from the General Fund to pay debt related to the new Airport terminal and to provide funds for the Los Osos wastewater treatment plant project.  Restricted fund balance, $34,833, increased $8.0 million or 29.8% from the prior year. Restricted fund balance represents amounts that are subject to externally enforceable legal restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation. Significant components of this balance include amounts restricted for (1) Tax reduction reserves of $3,250, (2) General government programs of $809, (3) Public protection programs of $188, (4) Mental Health Services Act funds of $5,836, (5) Public facilities of $11,793, (6) Traffic impact programs of $9,593, and (7) Debt service of $3,329. The majority of the increase to restricted fund balance relates to an increase in amounts restricted in the General Fund for general government programs and Mental Health Services Act programs.  Committed fund balance, $214,808, decreased 17.2% or $44.6 million from the prior year. Committed fund balance represents amounts with constraints imposed by the Board of Supervisors for specified purposes. Significant components of this balance include commitments for (1) Flood control programs, $20,703, (2) Tax reduction reserve, $40,186, (3) Automation projects, $13,604, (4) Roads, $12,365, (5) Building replacement, $40,088, (6) Solar plant mitigation, $5,579, (7) Capital projects, $16,451, and (8) Maintenance projects, $10,924. The most significant component to the change in committed fund balance was the reduction of resources committed to pay pension obligation bonds. In the prior fiscal year, $44,351 was committed for the upcoming final payments on the 2003 Series A Standard and 2009 Series A Term Pension Obligation Bonds. With the payments being made, committed funds for pension obligation bonds are $8,929, an 80% decrease.  Assigned fund balance, $107,145, decreased $19.5 million or 15.4% from the prior year. Assigned fund balance represents amounts the County intends to use for specific purposes that are neither restricted nor committed. Significant components of this balance include (1) Behavioral Health programs, $16,844, (2) Tax reduction reserve, $11,877, (3) Sheriff-Coroner programs, $11,221, and (4) Subsequent Fiscal Year Budget, $31,859. The largest changes in the assigned fund balance category were decreases to general government programs ($5.9 million), 33 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) public ways and facilities programs ($5.9 million), Behavioral Health programs ($6.0 million), and subsequent fiscal year budget ($5.6 million) assignments. The County had negative unassigned fund balance of $3.0 million in the Pension Obligation Bonds fund resulting from the payoff of the 2003 Series A Standard and 2009 Series A Term Pension Obligation Bonds. As of the end of the current fiscal year, the County’s governmental funds reported combined ending fund balance of $372,283, a decrease of 10.6%, or $44,088 in comparison with the prior year. Approximately 85.7% of the total fund balance, or $318,915, is available to meet the County’s current and future needs. General Fund The General Fund is the chief operating fund of the County. As of the end of the current fiscal year, spendable fund balance of the General Fund was $269,729 while total fund balance reached $288,240. As a measure of the General Fund’s liquidity, it is useful to compare both total fund balance and spendable fund balance to total fund expenditures of $450 million. Spendable fund balance represents 60.0% of the total fund expenditures, while total fund balance represents 64.1% of the same amount, a 7.7% decrease from the prior year. During the current fiscal year, the fund balance of the General Fund decreased by $9.0 million. The following provides an explanation for significant contributors to the change in the General Fund’s fund balance.  Total revenues exceeded total expenditures by $33.7 million. General Fund revenues ended the year with an increase of $18.7 million or 4.0% over the prior year.  The largest revenue increase occurred in Aid from Other Governmental Agencies, which increased by $12.4 million. Increased state funding for Social Services programs caused the majority of the increase. Other large increases include Taxes with a $6.2 million increase, and Fines, Forfeitures, and Penalties which increased $1.3 million. Taxes increased due to property taxes which are allowed up to a 2% increase by California’s Proposition 13. Fines, Forfeitures, and Penalties increased primarily due to increased court fines. The overall increase in revenues was offset in part by a $561 thousand decrease in Other Revenues related to reduced loan proceeds, and a $711 thousand decrease in Use of Money and Property related to related reduced fair market value of investments and interest revenue.  Total expenditures in the General Fund increased $35.6 million, 8.6%, from the prior year. Expenditures increased across all functions; negotiated salaries and benefit raises increased costs in all functions and were the major component in the overall rise. In addition, greater professional services expenditures for Behavioral Health and Social Services programs, and the Assessor’s conversion of paper file documents to electronic files also contributed to the increased expenditures. Capital Projects The Capital Projects Fund handles construction projects for the County’s governmental funds. The fund ended the fiscal year with a total fund balance of $18.0 million. Capital outlay expenditures exceeded revenues by $9.1 million and net transfers totaled $4.1 million. The combination of these two factors resulted in a $5.0 million decrease in fund balance for the current year. Funding for specific projects comes primarily from use of designations, public facilities fees, issuance of long-term debt, and aid from other government agencies. The General Fund transferred $2.0 million to the Capital Projects Fund, of which $653 thousand is for the Women’s Jail Expansion project and the remainder going toward general government, public health and parks projects. Significant current year activities of the Capital Projects Fund are discussed in the Capital Assets section under governmental activities. Governmental Fund Revenues Revenues for all governmental funds combined totaled $543.8 million in the current fiscal year and was an increase of approximately 2.8%, or $14.9 million, from the prior fiscal year revenues of $528.9 million. 34 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) The following table presents the amount of revenues from various sources and also displays increases or decreases from the prior year. Table C Revenues Classified by Source Governmental Funds Fund Financial Statements For the Year Ended June 30, 2018 (in thousands) 2017-2018 2016-2017 Increase/(Decrease) Percent Percent Percent Amount of Total Amount of Total Amount Change Revenues by Source: Taxes $ 203,583 37.4% $ 196,822 37.2% $ 6,761 3.4% Licenses, Permits, Franchises 11,140 2.0% 11,446 2.2% (306) (2.7%) Fines, Forfeitures, and Penalties 5,977 1.1% 4,339 0.8% 1,638 37.8% Revenues from the Use of Money and Property 3,779 0.7% 3,984 0.8% (205) (5.1%) Aid from Governmental Agencies 262,660 48.3% 254,350 48.0% 8,310 3.3% Charges for Current Services 49,793 9.2% 49,460 9.4% 333 0.7% Other Revenues 6,869 1.3% 8,481 1.6% (1,612) (19.0%) Total $ 543,801 100% $ 528,882 100% $ 14,919 2.8% The following provides an explanation of revenues by source that changed significantly over the prior year in the governmental funds.  Taxes increased $6.8 million or 3.4% primarily due to the regular 2% increase in assessed property value allowed by California’s Proposition 13.  Licenses, Permits, and Franchises decreased $306 thousand or 2.7%. The decrease was driven by a reduction in building permits and building plans review fees being collected.  Fines, Forfeitures, and Penalties increased $1.6 million or 37.8%. The increase was primarily due to court fines and collections related to vehicle infractions.  Revenues from the Use of Money and Property decreased $205 thousand or 5.1% due to a decrease in the fair market value of various investments and decreased interest earnings from the prior year.  Other Revenues decreased $1.6 million or 19.0%. The decrease is a combination of reduced sales of real property from the prior year and a settlement on defaulted bond proceeds for construction in the prior year. The following table presents the amount of expenditures by function as well as increases or decreases from the prior year. 35 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Table D Expenditures by Function Including Capital Outlay Governmental Funds Fund Financial Statements For the Year Ended June 30, 2018 (in thousands) 2017-2018 2016-2017 Increase/(Decrease) Percent Percent Percent Amount of Total Amount of Total Amount Change Expenditures by Function: General Government $ 60,445 10.2% $ 54,918 11.1% $ 5,527 10.1% Public Protection 175,175 29.6% 164,839 33.2% 10,336 6.3% Public Ways and 42,254 7.1% 29,077 5.9% 13,177 45.3% Facilities Health and Sanitation 99,885 16.9% 88,623 17.9% 11,262 12.7% Public Assistance 117,066 19.8% 113,392 22.9% 3,674 3.2% Education 11,640 2.0% 11,560 2.3% 80 0.7% Recreation and Cultural Services 10,358 1.8% 9,963 2.0% 395 4.0% Principal payments 50,989 8.6% 7,576 1.5% 43,413 573.0% Interest on Long-Term Debt 11,666 2.0% 4,639 0.9% 7,027 151.5% Capital outlay 11,828 2.0% 11,554 2.3% 274 2.4% Total $ 591,306 100% $ 496,141 100% $ 95,165 19.2% The following provides an explanation of the expenditures by function that changed significantly over the prior year.  General Government expenditures increased $5.5 million or 10.1%. Salaries and Benefits across all functions, including General Government, increased due to regular employee step increases. Expenditures for professional services in the General Government function also increased with the Assessor’s project to digitize paper files to an electronic format.  Public Protection expenditures increased $10.3 million or 6.3%. The increase related to increased salaries and services & supplies spread across multiple departments: specifically, increased billings from the State to County Fire for services and increased Planning and Building professional services related to the new permit tracking software system implementation and cannabis-related business licensing application processing.  Public Ways and Facilities expenditures increased $13.1 million or 45.3%. The increase is attributable to microsurfacing, overlay, and chip seal projects throughout the County. In addition, various construction projects like the San Juan Creek Pedestrian Bridge and Klau Creek Bridge being undertaken resulted in increased expenditures.  Health and Sanitation expenditures increased $11.3 million or 12.7%. Increases in Behavioral Health professional services included expenditures for youth and adult outpatient services as well as for Mental Health Services Act programs enhanced crisis and adult full- service partnership services.  Principal and Interest Payments on Long-Term Debt increased by $50.4 million or 412.9% due to the early payoff of the 2009 Series A Term Pension Obligation Bonds. Proprietary Funds The County’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. The following table shows actual revenues, expenses, and results of operations for the 2017-18 fiscal year. 36 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Table E Statement of Revenues, Expenses and Results of Operations Proprietary Funds Fund Financial Statements For the Year Ended June 30, 2018 (in thousands) Major Nonmajor Funds Funds Total Nacimiento Lopez Other Water Flood Los Osos Enterprise Total Airport Contract Control Wastewater Funds Enterprise Operating revenues $ 7,191 $ 15,709 $ 6,677 $ 4,495 $ 13,278 $ 47,350 Operating expenses 7,641 5,968 5,963 7,486 14,438 41,496 Operating income (loss) (450) 9,741 714 (2,991) (1,160) 5,854 Non- operating revenues (expenses), net 20 (7,063) 234 (3,433) 2,414 (7,828) Net income (loss) before contributions and transfers (430) 2,678 948 (6,424) 1,254 (1,974) Contributions and transfers, net 1,924 24 - 567 435 2,950 Change in net position $ 1,494 $ 2,702 $ 948 $ (5,857) $ 1,689 $ 976 All the enterprise funds are expected to continue to meet their ongoing cost of operations and to be able to maintain sufficient reserves in the long-term.  The Airport Fund reported an operating loss of $450 thousand, $118 thousand less than the prior year loss of $568 thousand. Net position increased by $1.5 million compared to an increase in net position of $14.7 million in the prior year. Capital contributions decreased by $13.2 million from the prior year due to finishing construction of and opening the new airport terminal. Enplanement activity grew for the fifth consecutive year with a 25.8% increase over the prior year. The new terminal and additional flight destinations resulted in increased passenger traffic.  The Nacimiento Water Contract Fund realized operating income of $9.7 million, an increase of $299 thousand from the prior year’s operating income of $9.4 million. The increase is primarily attributable to a $568 thousand increase in water sales over the prior year. The increased revenue and slight decrease in operating expenses caused net position to go from negative $1.9 million to positive $770 thousand.  The Lopez Flood Control Fund reported a $714 thousand in operating income, a $999 thousand decrease from the prior year. The decrease in operating income was primarily attributable to increased services and supplies expense of $906 thousand from increased maintenance costs. The increased expenditures resulted in a lower change in net position from the prior year. In FY 2016-17, net position increased $1.8 million, compared to $948 thousand this year, a $829 thousand decrease. 37 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)  The Los Osos Wastewater Fund reported an operating loss of $3.0 million, a decrease of $1.6 million over the prior year. FY 2016-17 was the first year the wastewater treatment plant began full service operations, with additional homeowners continuing to connect to the sewer in FY 2017-18. With service operations increasing, operating revenues and expenses both showed significant increases from the prior year. Increased usage resulted in additional user revenue of $2.2 million, but also came with increased services and supplies cost of $769 thousand. Operating revenue increased by $2.2 million and operating expenses increased $616 thousand. Capital contributions decreased by $7.1 million contributing significantly to the overall net position decrease of $5.9 million, compared to a $4.4 million increase in the prior year. GENERAL FUND BUDGETARY HIGHLIGHTS The original budget for expenditures and transfers out increased by $41.5 million, or 8.2%, during the year, leading to the final amended budget. This increase was funded in part by increases in budgeted revenues and transfers in of $17.1 million and the use of reserves and designations for the balance. Unanticipated revenues totaling $7.7 million in State and Federal Aid, $5.7 million in Other Revenue, $1.9 million in Charges for Current Services, $294 thousand in Fines, Forfeitures, and Penalties, $360 thousand in Interfund Revenues, and $1.1 million in Other Financing Sources financed the budget augmentations. The largest budget expenditure augmentations occurred in the functional areas of General Government ($18.1 million), Public Protection ($10.0 million), Public Ways and Facilities ($6.3 million), Health and Sanitation ($3.6 million), and Public Assistance ($3.2 million). The $18.1 million in the General Government function augmentations were primarily for the maintenance and upgrade of County facilities. The Public Protection augmentations were divided among Sheriff-Coroner programs which received $4.8 million in augmentations, Planning and Building programs augmentations of $2.9 million, and County Fire which received an additional $2.3 million for vehicle replacements and supplies. Public Ways and Facilities augmentations of $6.3 million are primarily for construction costs related to the Spanish Springs Development. Health and Sanitation augmentations relate to Mental Health Services Act programs, which received $1.5 million, and Public Health programs receipt of $2.1 million in augmentations. The $3.2 million increase in the Public Assistance function relates almost entirely to Social Services including foster care and adoption assistance, housing placement and supportive services. $64 thousand of the Public Assistance augmentation went to Veterans’ Services programs. At the close of the fiscal year, actual General Fund expenditures were 87.4% of the current budget, while General Fund revenues were realized at 99.9% of budget. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At June 30, 2018, the County had $1.8 billion invested in a broad range of capital assets, including land, buildings, systems improvements, machinery and equipment, park facilities, golf courses, airport facilities, roads, bridges, dams, and water and sewer lines (see Table F). This amount represents a net increase (including additions and deductions) of $21.7 million or 1.2% from last year. 38 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Table F Capital Assets June 30, 2018 (in thousands) Govern- Govern- Business- Business- Total Total mental mental Type Type Capital Capital Activities Activities Activities Activities Assets Assets Total June 30, June 30, June 30, June 30, June 30, June 30, Percent 2017 2018 2017 2018 2017 2018 Change Land $ 795,397 $ 795,505 $ 35,619 $ 36,520 $ 831,016 $ 832,025 0.1% Water Rights - - 54,067 56,434 54,067 56,434 4.4% Other Property Non Depreciable - - 1,968 1,968 1,968 1,968 - Construction- in-progress 20,260 19,727 38,856 4,107 59,116 23,834 (59.7%) Structures & Improvements 250,795 259,579 170,658 205,262 421,453 464,841 10.3% Equipment 88,070 95,752 3,895 9,947 91,965 105,699 14.9% Other Property Depreciable 340 845 554 554 894 1,399 56.5% Infrastructure Depreciable 389,248 406,692 369,114 380,493 758,362 787,185 3.8% Subtotal 1,544,110 1,578,100 674,731 695,285 2,218,841 2,273,385 2.5% Less Accumulated Depreciation (344,611) (365,826) (80,550) (92,185) (425,161) (458,011) 7.7% Total $ 1,199,499 $ 1,212,274 $ 594,181 $ 603,100 $ 1,793,680 $ 1,815,374 1.2% Major additions and future commitments in capital assets - Governmental Activities County Roads had the majority of additions in governmental activities with $15.2 million worth of assets. Microsurfacing, overlay, and chip seal projects throughout the County comprised most of the road additions. Other major roads projects include the widening of Price Canyon Road to improve bike lanes in the south county and constructing the San Juan Creek Pedestrian Bridge in the north county. Other notable capital asset additions during FY 2017-18 include the Women’s Jail Expansion ($5.8 million), Parks upgrades and expansion at the Nipomo Community Park ($407 thousand) and San Miguel Community Park ($290 thousand), and Information Technology communications equipment related to the new County phone system ($1.8 million). Major additions and future commitments in capital assets - Business-type Activities Within business-type activities, $11.2 million of the additions relate to the $173 wastewater system for the community of Los Osos. Other major additions include construction at the Airport which increased capital assets by $6.7 million. More detailed information about the County's capital assets is presented in Notes 4 and 5 in the financial statements. 39 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) Debt Administration At the end of the current fiscal year, the County of San Luis Obispo had total notes and bonds payable of $491 million. In July 2003, the County issued Pension Obligation Bonds to refund the Unfunded Actuarial Accrued Liability due to the Pension Trust. In 2009, the County issued the 2009 Series A Term Bonds to refund and defease the 2003 Series B Auction Rate Bonds. In FY 2017-18, two Pension Obligation Bonds were retired. The 2003 Series A Standard Bonds matured and were paid off and the 2009 Series A Term Bonds were paid off prior to maturity, leaving a remaining balance on the County’s Pension Obligation Bonds at the end of FY 2017-18 at $99.4 million. Pension Obligation Bonds debt service payments are funded by County payroll benefits. The remainder of the County’s debt consists of: $42.9 million in certificates of participation, which are repaid from a variety of revenues; $89.7 million in State loans; $76.7 million in assessment bonds relating to the Los Osos Wastewater project, and $173.5 million in revenue bonds which are repaid with water service revenue. General Obligation Bonds totaling $8.7 million are backed by the full faith and credit of the County. Table G Outstanding Debt June 30, 2018 (in thousands) Govern- Govern- Business- Business- Total mental mental Type Type Outstanding Total Activities Activities Activities Activities Debt Outstanding Total June 30, June 30, June 30, June 30, June 30, Debt Percent 2017 2018 2017 2018 2017 June 30, 2018 Change Certificates of participation $ 22,303 $ 26,942 $ 16,831 $ 16,006 $ 39,134 $ 42,948 9.7% Pension Obligation Bonds 143,890 99,407 - - 143,890 99,407 (30.9%) State notes - 2,056 85,674 87,667 85,674 89,723 4.7% Revenue bonds - - 179,168 173,528 179,168 173,528 (3.1%) General obligation bonds - - 9,140 8,658 9,140 8,658 (5.3%) Assessment Bonds - - 78,089 76,746 78,089 76,746 (1.7%) $ 166,193 $ 128,405 $ 368,902 $ 362,605 $ 535,095 $ 491,010 (8.2%) The decrease from the prior year for the County’s certificates of participation, notes, and bonds payable was $44.1 million, or 8.2%. This decrease is the net of new debt issuances and scheduled debt payments being made, including the retirement of the 2003 Series A Standard Bonds and 2009 Series A Term Bond pertaining to Pension Obligation Bonds. In FY 2017-18, the County issued $27,045 of 2018 Series A Nacimiento Water Project Revenue Bonds. The bonds will be repaid from and secured by water sales revenues. Additional information on the issuance of debt can be found in Note 10 to the financial statements. State statutes limit the amount of general obligation debt a governmental entity may issue to 1.25% of its net assessed valuation. The current debt limitation for the County is $667.7 million. Other liabilities include compensated absences of $29.1 million for governmental activities and $373 thousand for business-type activities; landfill postclosure costs of $6.9 million; and a self-insurance liability of $18.9 million. More detailed information about the County’s long-term debt and other long- term liabilities is presented in Note 10 to the financial statements. 40 MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued) ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES  The County is committed to providing services with integrity, collaboration, professionalism, accountability and responsiveness, and these values are reflected in the Fiscal Year 2017-18 budget which represents conservative growth compared to the Fiscal Year 2016-17 budget. The County’s conservative approach to budgeting has ensured its ability to sustain fiscal health in recent years and will be central to the County’s ability to respond to potential changes in State and Federal policy.  In prior years, the elimination of the In-Home Supportive Services Maintenance of Effort contribution decreased State funding; however, the County expects to receive an additional $8.9 million in State funding for critical transportation infrastructure projects with the April 2017 passage of Senate Bill 1.  The closure of Diablo Canyon Power Plant (Diablo Canyon) in 2025 will have significant ramifications to the local community. According to a 2013 study by the California Polytechnic State University in San Luis Obispo, Diablo Canyon, one of the largest employers in the County, contributes approximately $1 billion annually to the local economy. In total, over 80 governmental agencies receive unitary tax paid by Diablo Canyon’s owner, PG&E, with the County directly receiving over $8 million annually. In addition, the County receives over $2 million annually to fund emergency preparedness and response activities, and PG&E spends approximately $2.6 million annually on emergency equipment, infrastructure and training which provides a general benefit to the community. The closure of Diablo Canyon will incrementally reduce the County’s discretionary revenue over the next several years, reduce emergency preparedness resources in the long-term, and eliminate a significant number of high paying jobs, which will impact the overall economic landscape of the community.  Currently, economic indicators show signs of a stable local economy:  Property transfer taxes for unincorporated areas came in 12.5% higher than the preceding year reflecting stabilization in the value and number of real estate transactions.  County assessed property tax valuations increased from $50.7 million to $53.4 million or 5.4%.  Transient Occupancy Tax (bed tax) collections continued an upward trend in FY 2017-18, with a 11% increase over FY 2016-17.  The Board of Supervisors adopted the FY 2018-19 budget in June 2018, with a $79.1 million fund balance in the General Fund, of which $31.9 million was appropriated to finance the current year’s expenditures including contingencies. $13 million was placed in general reserves, and $11.2 million was earmarked for designations. The total General Fund budget for FY 2018-19 is $522.9 million, a 2.5% increase from the previous year. The County budget also includes community-wide results and indicators as well as department goals and performance measures that gauge how departments are meeting the needs of the community. REQUESTS FOR INFORMATION This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the County's finances and to show the County's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the County Auditor-Controller- Treasurer-Tax Collector, Post Office Box 1149, San Luis Obispo, California 93406-1149. This report is also available online at www.slocounty.ca.gov. 41 42 ____________________________________________________________ BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS ____________________________________________________________ 43 44 COUNTY OF SAN LUIS OBISPO STATEMENT OF NET POSITION JUNE 30, 2018 (In Thousands) Primary Government Governmental Business-Type Component Unit Activities Activities Total First 5 ASSETS Current Assets: Cash and cash equivalents $ 407,633 $ 53,365 $ 460,998 $ 8,447 Accounts receivable, net 199 2,968 3,167 - Property taxes receivable 13,001 - 13,001 - Other receivables 1,479 110,491 111,970 - Due from other governments 43,034 1 58 43,192 6 18 Deposits with others - 99 99 14 Internal balances 27,557 (27,557) - - Inventories 607 31 638 - Prepaid items 734 1,014 1,748 3 Other assets 3 15 - 315 - Loans receivable 23,578 - 23,578 - Total Current Assets 518,137 140,569 658,706 9,082 Noncurrent Assets: Restricted cash with fiscal agent 3,329 9,985 13,314 - Prepaid insurance - 3 35 335 - Capital Assets: Nondepreciable 815,232 99,029 914,261 - Depreciable, net 397,042 504,071 901,113 - Total Noncurrent Assets 1,215,603 613,420 1,829,023 - Total Assets 1,733,740 753,989 2,487,729 9,082 DEFERRED OUTFLOWS OF RESOURCES Deferred pensions 114,682 1,138 115,820 - Deferred OPEB 9 85 10 995 - Deferred loss on refunding - 3,808 3,808 - Total Deferred Outflows of Resources 115,667 4,956 120,623 - LIABILITIES Current Liabilities: Salaries and benefits payable 12,356 1 27 12,483 22 Accounts payable 19,395 8,739 28,134 4 38 Deposits from others 4,930 3,604 8,534 - Accrued interest 3 19 4,649 4,968 - Other current liabilities 1,700 - 1,700 - Unearned revenue 1,554 12,072 13,626 - Bonds and notes payable 9,428 10,238 19,666 - Compensated absences 20,419 1 75 20,594 - Landfill closure/postclosure costs 4 81 - 481 - Self-insurance payable 3,307 - 3,307 - Total Current Liabilities 73,889 39,604 113,493 4 60 Long-Term Liabilities: Net pension liability 523,731 5,302 529,033 72 Net OPEB liability 10,591 1 06 10,697 - Bonds and notes payable 118,977 356,175 475,152 - Compensated absences 8,642 1 98 8,840 - Landfill closure/postclosure costs 6,400 - 6,400 - Self-insurance payable 15,600 - 15,600 - Total Long-Term Liabilities 683,941 361,781 1,045,722 72 Total Liabilities 757,830 401,385 1,159,215 5 32 DEFERRED INFLOWS OF RESOURCES Deferred pensions 71,673 6 66 72,339 27 Deferred bond refunding - 3 71 371 - Deferred community development loans 22,601 - 22,601 - Total Deferred Inflows of Resources 94,274 1,037 95,311 27 NET POSITION Net investment in capital assets 1,185,073 283,410 1,468,483 - Restricted for: General government 2,204 - 2,204 - Public protection 3,205 - 3,205 - Health and sanitation 1 10 - 110 - Public assistance 6 - 6 - Public ways and facilities 21,517 - 21,517 - Recreation and cultural services 58 - 58 - Education 24 - 24 - Debt service 2,712 - 2,712 - Unrestricted (217,606) 73,113 (144,493) 8,523 Total Net Position $ 997,303 $ 356,523 $ 1,353,826 $ 8,523 The accompanying notes are an integral part of these financial statements. 45 COUNTY OF SAN LUIS OBISPO STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Program Revenues Fees, Fines, Operating Capital and Charges Grants and Grants and Functions/Programs Expenses for Services Contributions Contributions Total Governmental activities: General government $ 56,858 $ 12,937 $ 321 $ 349 $ 13,607 Public protection 183,814 23,667 58,184 6 56 82,507 Public ways and facilities 4 1,606 6,155 11,506 8,893 26,554 Health and sanitation 103,822 7,501 76,494 - 83,995 Public assistance 122,753 1,763 105,848 - 107,611 Education 12,754 2,006 173 - 2,179 Recreation and cultural services 8,927 5,591 671 1 91 6,453 Interest on long-term debt 1 1,840 - - - - Total governmental activities 542,374 59,620 253,197 10,089 322,906 Business-type activities: Airport 7,966 7,158 396 2,211 9,765 Golf 3,297 2,584 - - 2,584 State Water Contract 5,909 6,110 14 - 6,124 Nacimiento Water Contract 1 4,044 15,709 6 24 15,739 Lopez Flood Control 7,072 6,677 7 - 6,684 Lopez Park 3 - - - - General Flood Control 1,056 9 09 - - 909 County Service Areas 4,445 3,662 3 - 3,665 Los Osos Wastewater 1 0,918 4,467 - 2,982 7,449 Total business-type activities 5 4,710 47,276 426 5,217 52,919 Total primary government $ 597,084 $ 106,896 $ 253,623 $ 15,306 $ 375,825 Component unit: First 5 San Luis Obispo $ 2,095 $ - $ 2,191 $ - $ 2,191 The accompanying notes are an integral part of these financial statements. 46 COUNTY OF SAN LUIS OBISPO STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Net (Expense) Revenue and Changes in Net Position Governmental Business-Type Component Unit Functions/Programs Activities Activities Total First 5 Governmental activities: General government $ (43,251) $ - $ (43,251) Public protection (101,307) - (101,307) Public ways and facilities (15,052) - (15,052) Health and sanitation (19,827) - (19,827) Public assistance (15,142) - (15,142) Education (10,575) - (10,575) Recreation and cultural services (2,474) - (2,474) Interest on long-term debt (11,840) - (11,840) Total governmental activities (219,468) - (219,468) Business-type activities: Airport - 1,799 1,799 Golf - (713) ( 713) State Water Contract - 2 15 215 Nacimiento Water Contract - 1,695 1,695 Lopez Flood Control - (388) ( 388) Lopez Park - (3) (3) General Flood Control - (147) ( 147) County Service Areas - (780) ( 780) Los Osos Wastewater - (3,469) (3,469) Total business-type activities - (1,791) (1,791) Total primary government $ (219,468) $ (1,791) $ (221,259) Component unit: First 5 San Luis Obispo $ 96 General Revenues and Transfers: Taxes: Property taxes 180,051 3,858 183,909 - Sales and use taxes 11,203 - 11,203 - Transient occupancy taxes 10,540 - 10,540 - Transfer tax 3,031 - 3,031 - Other taxes 934 - 934 - Grants not restricted to specific programs 2,740 - 2,740 - Interest earnings not restricted to specific programs 3,171 1,272 4,443 112 Other revenues 2 - 2 - Transfers 2,267 (2,267) - - Total General Revenues and Transfers 213,939 2,863 216,802 112 Change in net position (5,529) 1,072 (4,457) 208 Net position - beginning of year 1 ,016,819 355,562 1,372,381 8,315 Prior period adjustment (2,042) - (2,042) - Cumulative effect of change in accounting principle (11,945) (111) (12,056) - Net position - end of year $ 9 97,303 $ 356,523 $ 1,353,826 $ 8,523 The accompanying notes are an integral part of these financial statements. 47 48 ____________________________________________________________ BASIC FINANCIAL STATEMENTS FUND FINANCIAL STATEMENTS ____________________________________________________________ 49 50 COUNTY OF SAN LUIS OBISPO BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 (In Thousands) Debt Service Nonmajor Total General Capital Projects Pension Obligation Governmental Governmental Fund Fund Bonds Funds Funds ASSETS Cash and cash equivalents $ 271,763 $ 19,957 $ 1,296 $ 67,881 $ 360,897 Restricted cash with fiscal agent - 1,529 3 1,797 3,329 Accounts receivable, net 84 - - 100 184 Accrued property taxes receivable 13,000 - - 1 13,001 Other receivables 1 ,479 - - - 1,479 Due from other governments 37,686 1,348 - 4,000 43,034 Due from other funds 9 ,909 - - - 9,909 Inventories 117 - - - 117 Prepaid items 442 - - 24 466 Loans receivable - - - 23,578 23,578 Advances to other funds 18,673 - - 3,223 21,896 Other assets 275 - 3,610 1,247 5,132 Total assets $ 353,428 $ 22,834 $ 4,909 $ 1 01,851 $ 483,022 LIABILITIES Salaries and benefits payable $ 10,622 $ - $ - $ 530 $ 11,152 Accounts payable 12,503 2,730 - 3,235 18,468 Deposits from others 2 ,208 - - 1,688 3,896 Unearned revenue 562 826 - 166 1,554 Notes payable - current 276 - 7,944 - 8,220 Other current liabilities 1 ,700 - - 1,208 2,908 Advances from other funds - - - 429 429 Due to other funds 5 ,940 - - 310 6,250 Total liabilities 33,811 3,556 7,944 7,566 52,877 DEFERRED INFLOWS OF RESOURCES Unavailable revenue 31,377 1,298 - 1,609 34,284 Deferred loans - - - 23,578 23,578 Total deferred inflows of resources 31,377 1,298 - 25,187 57,862 FUND BALANCES Nonspendable 18,511 - - 24 18,535 Restricted 10,083 1,529 3 23,218 34,833 Committed 152,501 16,451 - 45,856 214,808 Assigned 107,145 - - - 107,145 Unassigned - - (3,038) - (3,038) Total fund balances 288,240 17,980 (3,035) 69,098 372,283 Total liabilities, deferred inflows of resources, and fund balances $ 353,428 $ 22,834 $ 4,909 $ 1 01,851 $ 483,022 The accompanying notes are an integral part of these financial statements. 51 COUNTY OF SAN LUIS OBISPO RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES JUNE 30, 2018 (In Thousands) Total Fund Balances - Total Governmental Funds $ 372,283 Amounts reported for Governmental Activities in the Statement of Net Position were different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. 1,198,805 Accrued property tax and grant revenues are not available to pay for current-period expenditures and, therefore, are deferred in the funds. 34,284 Internal service funds are used by the County to charge the costs of vehicle fleet management, comprehensive public works services, and operations of the County's workers' compensation, protected self-insurance, unemployment, and dental insurance programs to individual funds. The assets and liabilities are included in governmental activities in the Statement of Net Position. (8,607) Adjustments for internal service funds are necessary to "close" those funds by charging additional amounts to participating business-type activities to completely cover the internal service funds' costs for the year. 2,431 Interest on long-term debt is recognized as it accrues, regardless of when it is due. (319) The pension liability of governmental funds is not due and payable in the current period, and therefore is not reported in the fund financial statements. (476,838) The other post-employment benefit (OPEB) of governmental funds is not due and payable in the current period, and therefore is not reported in the fund financial statements. (9,631) The unamortized portion of changes to the net pension liability, the net difference between projected and actual earnings on pension plan investments, and contributions subsequent to the pension liability measurement date are not reported in the fund financial statements for governmental funds. 39,795 The unamortized portion of changes to the net other post-employment benefit (OPEB) liability, the net difference between projected and actual earnings on OPEB investments, and contributions subsequent to the OPEB liability measurement date are not reported in the fund financial statements for governmental funds. 896 Repayment and issuance of community development loans are reported as revenue and expenditures in the fund statements which contribute to the change in fund balance. However, in the Statement of Net Position loan repayments and issuances change deferred inflows. 977 Long-term liabilities,includingbondsandnotespayable,arenot dueand payableinthecurrent period and, therefore, are not reported in the governmental funds as follows: Bonds and notes payable $ (123,794) Compensated absences (26,098) Landfill closure/postclosure costs ( 6,881) (156,773) Net Position of Governmental Activities $ 997,303 The accompanying notes are an integral part of these financial statements. 52 COUNTY OF SAN LUIS OBISPO STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Debt Service Nonmajor Total General Capital Projects Pension Obligation Governmental Governmental Fund Fund Bonds Funds Funds REVENUES Taxes $ 188,853 $ - $ - $ 14,730 $ 203,583 Licenses, permits, and franchises 11,139 - - 1 11,140 Fines, forfeitures, and penalties 4 ,559 455 - 963 5 ,977 Use of money and property 2 ,664 175 385 555 3 ,779 Aid from other governments 237,095 476 - 25,089 262,660 Charges for services 33,708 1,343 - 14,742 49,793 Other revenues 5 ,226 257 617 769 6 ,869 Total revenues 483,244 2,706 1,002 56,849 543,801 EXPENDITURES Current: General government 60,445 - - - 60,445 Public protection 171,187 - - 3,988 175,175 Public ways and facilities 7 ,292 - - 34,962 42,254 Health and sanitation 93,736 - - 6,149 99,885 Public assistance 116,291 - - 775 117,066 Education 568 - - 11,072 11,640 Recreation and cultural services - - - 10,358 10,358 Debt service: Principal payments - - 49,830 1,159 50,989 Interest and fiscal charges - - 10,749 917 11,666 Capital outlay - 11,828 - - 11,828 Total expenditures 449,519 11,828 60,579 69,380 591,306 Excess (deficiency) of revenues over (under) expenditures 33,725 (9,122) (59,577) (12,531) ( 47,505) OTHER FINANCING SOURCES (USES) Transfers in 2 ,269 4,335 25,584 22,594 54,782 Transfers out ( 45,026) (216) - (6,123) ( 51,365) Total other financing sources (uses) ( 42,757) 4,119 25,584 16,471 3 ,417 Net change in fund balances (9,032) (5,003) (33,993) 3,940 ( 44,088) Fund balances - beginning 297,272 22,983 30,958 65,158 416,371 Fund balances - ending $ 288,240 $ 17,980 $ (3,035) $ 69,098 $ 372,283 The accompanying notes are an integral part of these financial statements. 53 COUNTY OF SAN LUIS OBISPO RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Net Change in Fund Balances - Total Governmental Funds $ (44,088) Amounts reported for governmental activities in the Statement of Revenues, Expenditures, and Changes in Fund Balances were different because: PropertytaxandintergovernmentalrevenueintheStatementofActivitiesthat donotprovidecurrentfinancialresourcesarenotreportedasrevenuesinthe funds. 11,026 Governmentalfundsreportcapitaloutlayasexpenditures. Theseexpenditures havenoeffectonnetposition.Capitaloutlayexpendituresthathavenoeffect on net position are reported in the following functional categories: Capital outlay $ 2,628 General government 4,829 Public protection 8,353 Public ways 15,461 Health and sanitation 12 Public assistance 14 Education 22 Recreation and cultural services 3,191 34,510 IntheStatementofActivities,thecostofcapitalassetsisallocatedovertheir estimated useful lives and reported as depreciation expense. (21,359) The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to decrease net position. (249) Bond proceeds are reported as financing sources in governmental funds and thuscontributetothechangeinfundbalance.IntheStatementofNetPosition, however, issuing debt increases long-term liabilities and does not affect the StatementofActivities.Similarly,repaymentofprincipalisanexpenditureinthe governmental funds, but reduces the liability in the Statement of Net Position. Proceeds from issuance of debt ( 5,879) Debt principal payments 51,247 SomeexpensesreportedintheGovernment-WideStatementofActivitiesdonot requiretheuseofcurrentfinancialresources. Therefore,theyarenotreported as expenditures in governmental funds: Change in compensated absences $ (1,199) Change in accrued interest payable 1,178 Change in landfill closure/postclosure costs ( 1,187) Change in net OPEB liability 1 96 Change in deferred OPEB outflows 8 96 Change in Net Pension Liability 65,970 Change in deferred pension outflows (32,415) Change in deferred pension inflows (64,688) Capital appreciation bond accretion ( 1,011) Amortization of debt premiums, discounts and issuance costs 84 (32,176) InternalservicefundswereusedbytheCountytochargethecostsofvehicle fleetmanagement,comprehensivepublicworksservices,andoperationsofthe County'sworkers'compensation,protectedself-insurance,unemployment,and dentalinsuranceprogramstoindividualfunds. Thenetrevenueorexpenditure effect of internal service funds is reported with governmental activities. 4 30 Repayment and issuance of community development loans are reported as revenue and expenditures in the fund statements which contribute to the change in fund balance. However, in the Statement of Net Position loan repayments and issuances change deferred inflows and do not affect the Statement of Activities. 1,105 The net (revenue) expense allocable to business-type activities (96) Change in Net Position of Governmental Activities $ (5,529) The accompanying notes are an integral part of these financial statements. 54 COUNTY OF SAN LUIS OBISPO STATEMENT OF FUND NET POSITION PROPRIETARY FUNDS JUNE 30, 2018 (In Thousands) Business-Type Activities - Enterprise Funds Governmental Nacimiento Nonmajor Total Activities Water Lopez Los Osos Enterprise Enterprise Internal Airport Contract Flood Control Wastewater Funds Funds Service Funds ASSETS Current assets: Cash and investments $ 5,705 $ 15,956 $ 8,938 $ 4,608 $ 18,158 $ 53,365 $ 46,736 Accounts receivable, net - 1 - 1 2,966 2,968 15 Other receivables 4 28 - - 110,063 - 110,491 - Due from other governments 1 58 - - - - 1 58 - Due from other funds 5,940 - - 3 10 - 6,250 - Deposits with others - - - - 99 99 - Inventories - - - - 31 31 4 90 Prepaid items 1 - 48 - 9 65 1,014 2 68 Total current assets 12,232 15,957 8,986 114,982 22,219 174,376 47,509 Noncurrent assets: Advances to other funds - - - - 1 15 1 15 - Restricted cash with fiscal agent - 9,498 - - 4 87 9,985 - Prepaid insurance - 3 35 - - - 3 35 - Capital assets: Nondepreciable: Land 24,036 3,259 2,155 5,406 1,663 36,519 - Construction in progress 1,048 1 19 9 81 - 1,960 4,108 - Water rights - - - - 56,434 56,434 - Other property - - 1,968 - - 1,968 - Depreciable: Infrastructure, net 5 54 148,806 22,586 176,147 1,809 349,902 - Structures and improvements, net 82,339 8,925 33,362 8 24 21,348 146,798 2 79 Equipment, net 5,931 6 1 98 2 50 4 90 6,875 13,191 Other property, net - - - - 4 96 4 96 - Total noncurrent assets 113,908 170,948 61,250 182,627 84,802 613,535 13,470 Total assets 126,140 186,905 70,236 297,609 107,021 787,911 60,979 DEFERRED OUTFLOWS OF RESOURCES Deferred pensions 6 02 - - - 5 36 1,138 10,199 Deferred OPEB 5 - - - 5 10 89 Deferred loss on refunding - 3,808 - - - 3,808 - Total deferred outflows of resources 6 07 3,808 - - 5 41 4,956 10,288 LIABILITIES Current liabilities: Salaries and benefits payable 64 - - - 63 1 27 1,204 Accounts payable 2,044 5 91 1 01 1 38 5,865 8,739 9 28 Interest payable 83 2,472 3 56 1,681 57 4,649 - Self-insurance payable - - - - - - 3,307 Deposits from others 78 2 38 1 67 - 3,121 3,604 1,034 Unearned revenue 53 8,935 6 04 - 2,480 12,072 - Due to other funds 9,909 - - - - 9,909 - Accrued vacation and sick leave - current 98 - - - 77 1 75 1,841 Notes and bond payable - current 63 4,285 2,173 3,177 5 40 10,238 - Total current liabilities 12,392 16,521 3,401 4,996 12,203 49,513 8,314 Noncurrent liabilities: Self-insurance liability - - - - - - 15,600 Advances from other funds 8,247 - - 12,755 5 80 21,582 - Accrued vacation and sick leave 72 - - - 1 26 1 98 1,122 Notes and bonds payable 4 44 173,051 32,317 142,823 7,540 356,175 - Net OPEB Liability 57 - - - 49 1 06 9 60 Net Pension Liability 2,863 - - - 2,439 5,302 46,893 Total noncurrent liabilities 11,683 173,051 32,317 155,578 10,734 383,363 64,575 Total liabilities 24,075 189,572 35,718 160,574 22,937 432,876 72,889 DEFERRED INFLOWS OF RESOURCES Deferred pensions 3 20 - - - 3 46 6 66 6,985 Bond refunding - 3 71 - - - 3 71 - Total deferred inflows of resources 3 20 3 71 - - 3 46 1,037 6,985 NET POSITION Net investment in capital assets 113,401 ( 2,915) 26,760 69,928 76,236 283,410 13,470 Unrestricted (11,049) 3,685 7,758 67,107 8,043 75,544 (22,077) Total net position $ 102,352 $ 770 $ 34,518 $ 137,035 $ 84,279 358,954 $ (8,607) Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds ( 2,431) Net Position of Business-Type Activities per Government-Wide Financial Statements $ 356,523 The accompanying notes are an integral part of these financial statements. 55 COUNTY OF SAN LUIS OBISPO STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Business-Type Activities - Enterprise Funds Governmental Nacimiento Nonmajor Total Activities Water Lopez Los Osos Enterprise Enterprise Internal Airport Contract Flood Control Wastewater Funds Funds Service Funds OPERATING REVENUES: Charges for services $ 7,134 $ 15,709 $ 6,670 $ 4,495 $ 13,243 $ 47,251 $ 58,684 Other revenues 57 - 7 - 35 99 1 16 Total operating revenues 7,191 15,709 6,677 4,495 13,278 47,350 58,800 OPERATING EXPENSES: Salaries and benefits 1,625 - - - 1,624 3,249 32,555 Services and supplies 2,730 3,725 4,503 3,381 11,546 25,885 18,293 Other charges 28 - 3 - - 31 - Insurance and compensation claims - - - - - - 3,606 Depreciation 3,034 2,198 1,406 4,058 1,085 11,781 2,771 Countywide cost allocation 2 24 45 51 47 1 83 5 50 5 65 Total operating expenses 7,641 5,968 5,963 7,486 14,438 41,496 57,790 Operating income (loss) (450) 9,741 7 14 ( 2,991) ( 1,160) 5,854 1,010 NONOPERATING REVENUES (EXPENSES): Property taxes - - 1,287 - 2,571 3,858 - Interest income - 1,022 63 44 1 42 1,271 2 91 Interest expense (52) (8,091) ( 1,123) ( 3,477) (315) (13,058) - Other nonoperating revenues (expenses) (324) - - - (1) (325) 2 79 Aid from governmental agencies 3 96 6 7 - 17 4 26 - Total nonoperating revenues (expenses) 20 (7,063) 2 34 ( 3,433) 2,414 ( 7,828) 5 70 Income (loss) before contributions and transfers (430) 2,678 9 48 (6,424) 1,254 (1,974) 1,580 Capital contributions 2,211 24 - 2,982 - 5,217 - Transfers in 1 06 - - - 4 93 5 99 - Transfers out (393) - - ( 2,415) (58) ( 2,866) ( 1,150) Change in net position 1,494 2,702 9 48 ( 5,857) 1,689 9 76 4 30 Net position - beginning 100,915 (1,932) 33,570 142,892 82,644 ( 8,059) Cumulative effect of change in accounting principle (57) - - - (54) (978) Net position - beginning (restated) 100,858 (1,932) 33,570 142,892 82,590 ( 9,037) Net position - ending $ 102,352 $ 770 $ 34,518 $ 1 37,035 $ 84,279 $ (8,607) Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds 96 Change in Net Position of Business-Type Activities per Government-Wide Financial Statements $ 1,072 The accompanying notes are an integral part of these financial statements. 56 COUNTY OF SAN LUIS OBISPO STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Business-Type Activities - Enterprise Funds Governmental Nacimiento Nonmajor Total Activities Water Lopez Los Osos Enterprise Enterprise Internal Airport Contract Flood Control Wastewater Funds Funds Service Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and third parties $ 7,013 $ 21,610 $ 6 ,698 $ 4,816 $ 13,285 $ 53,422 $ - Receipts from interfund billings - - - - - - 58,793 Payments for goods and services (7,266) (3,586) (4,494) (3,428) (11,531) (30,305) (15,842) Payments to employees for services (1,498) - - - (1,462) (2,960) (29,786) Payments for insurance benefits - - - - - - (4,262) Payments for premiums - - - - - - (3,658) Net cash provided (used) by operating activities (1,751) 1 8,024 2,204 1,388 292 2 0,157 5,245 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Property tax proceeds - - 1,287 - 2,571 3,858 - Grants and subsidies from other governmental agencies 5,822 6 7 - 17 5,852 - Advances from other funds - - - - 9 9 - Due from other funds (5,940) - - - - (5,940) - Transfers from other funds 106 - - - 493 599 - Transfers to other funds (393) - - (2,415) (58) (2,866) (1,150) Net cash provided (used) by noncapital financing activities (405) 6 1,294 (2,415) 3,032 1,512 (1,150) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchases and construction of capital assets (6,709) (86) (136) (11,854) (2,827) (21,612) (2,698) Proceeds from issuance of long-term debt - - - 5,234 - 5,234 - Proceeds from sale of capital assets - - - - - - 332 Advances to other funds - - - - 18 18 - Advances from other funds 5,543 - - 7,136 (17) 1 2,662 - Due to other funds 4,082 - - - - 4,082 - Due from other funds - - - (310) - (310) - Capital contributions 2,211 24 - 5,124 - 7,359 - Principal paid on capital debt ( 59) (4,572) (2,245) (2,977) (521) (10,374) - Interest paid on capital debt ( 53) (9,154) (1,195) (3,425) (351) (14,178) - Net cash provided (used) by capital and related financing activities 5,015 (13,788) (3,576) (1,072) (3,698) (17,119) (2,366) CASH FLOWS FROM INVESTING ACTIVITIES: Interest received - 1,022 63 44 142 1,271 291 Net cash provided (used) by investing activities - 1,022 63 44 142 1,271 291 Net increase (decrease) in cash and cash equivalents 2,859 5,264 (15) (2,055) (232) 5,821 2,020 CASH AND CASH EQUIVALENTS: Beginning of year 2,846 2 0,190 8,953 6,663 1 8,877 5 7,529 44,716 End of year $ 5,705 $ 25,454 $ 8 ,938 $ 4,608 $ 18,645 $ 63,350 $ 46,736 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating income (loss) $ (450) $ 9 ,741 $ 714 $ (2,991) $ (1,160) $ 5 ,854 $ 1,010 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 3,034 2,198 1,406 4,058 1,085 1 1,781 2,771 Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources: Receivables, net (165) 2 - 321 (680) (522) (7) Inventory - - - - (31) (31) ( 32) Prepaid items (1) - (12) - 91 78 ( 17) Accounts payable (4,318) 90 33 - 335 (3,860) (700) Deposits from others 35 94 42 - 12 183 107 Salaries and benefits payable ( 12) - - - (14) (26) (693) Deferred outflows - pension 160 - - - 174 334 3,500 Deferred outflows - OPEB (5) - - - (5) (10) ( 89) Net OPEB liability - - - - (5) (5) ( 18) Net pension liability (326) - - - (353) (679) (7,123) Deferred inflows - pension 320 - - - 346 666 6,985 Unearned revenue ( 13) 5,899 21 - 482 6,389 - Accrued vacation and sick leave ( 10) - - - 15 5 207 Self-insurance liability - - - - - - (656) Total adjustments (1,301) 8,283 1,490 4,379 1,452 1 4,303 4,235 Net cash provided (used) by operating activities $ (1,751) $ 18,024 $ 2 ,204 $ 1,388 $ 292 $ 20,157 $ 5 ,245 The accompanying notes are an integral part of these financial statements. 57 COUNTY OF SAN LUIS OBISPO STATEMENT OF FIDUCIARY NET POSITION AGENCY AND INVESTMENT TRUST FUNDS JUNE 30, 2018 (In Thousands) SAN LUIS OBISPO PENSION TRUST FUND DECEMBER 31, 2017 (In Thousands) Investment San Luis Obispo Agency Trust County Funds Funds Pension Trust June 30, 2018 June 30, 2018 December 31, 2017 ASSETS Cash and cash equivalents $ 105,097 $ 465,483 $ 34,474 Contributions receivable - - 2,826 Accrued interest and dividends receivable - - 7 65 Accounts receivable - - 29 Securities sold - - 13,981 Prepaid benefits - - 62 Investments pension trust: Bonds and notes, at fair value - - 261,760 International fixed income, at fair value - - 147,039 Collateralized mortgage obligations, at fair value - - 2,656 Domestic equities, at fair value - - 302,662 International equities, at fair value - - 332,950 Alternative investments, at fair value - - 95,192 Real estate, at fair value - - 176,799 Capital assets-net of accumulated depreciation - - 2,855 Total assets $ 105,097 $ 465,483 $ 1,374,050 LIABILITIES Agency obligations $ 105,097 $ - $ - Securities purchased - - 8,529 Accrued liabilities - - 1,013 Prefunded contributions - - 24,037 Total liabilities $ 1 05,097 $ - $ 3 3,579 NET POSITION Net position held in trust for pool participants $ - $ 465,483 $ - Net position restricted for pensions - - 1,340,471 Total net position $ - $ 465,483 $ 1 ,340,471 The accompanying notes are an integral part of these financial statements. 58 COUNTY OF SAN LUIS OBISPO STATEMENT OF CHANGES IN FIDUCIARY NET POSITION INVESTMENT TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) SAN LUIS OBISPO PENSION TRUST FUND FOR THE YEAR ENDED DECEMBER 31, 2017 (In Thousands) Investment San Luis Obispo Trust County Funds Pension Trust June 30, 2018 December 31, 2017 ADDITIONS Contributions: County contributions $ 1,074,396 $ - Employer contributions - 42,341 Member contributions - 30,467 Total contributions 1,074,396 72,808 Investment income: Realized and unrealized gains and losses - 169,242 Interest 4,241 3,493 Dividends - 8,769 Real estate management trust income - (10) Real estate operating income, net - 4 65 Other investment income, net - - Investment expenses - (3,320) Total investment income 4,241 178,639 Total additions 1,078,637 251,447 DEDUCTIONS Benefits: Monthly benefit payments - 85,052 Refunds of contributions - 2,857 Death benefits - 7 48 Total benefits - 88,657 Administrative expenses - 2,045 Prefunded discount amortization - 1,517 Total administrative expenses - 3,562 Distributions from investment pool 1 ,014,918 - Total deductions 1 ,014,918 92,219 Change in net position 6 3,719 1 59,228 Net position - beginning 4 01,764 1 ,181,243 Net position - ending $ 4 65,483 $ 1,340,471 The accompanying notes are an integral part of these financial statements. 59 60 ____________________________________________________________ NOTES TO THE BASIC FINANCIAL STATEMENTS ____________________________________________________________ 61 62 COUNTY OF SAN LUIS OBISPO NOTES TO THE BASIC FINANCIAL STATEMENTS (IN THOUSANDS) JUNE 30, 2018 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. FINANCIAL REPORTING ENTITY The County of San Luis Obispo (the County) was established by an act of the California State Legislature on February 18, 1850 as one of California’s original 27 Counties. The County is a political subdivision of the State of California and may exercise the powers specified by the Constitution and laws of the State. The County exercises its powers through an elected five-member Board of Supervisors. The County provides various services on a countywide basis including public protection, public ways and facilities, health and sanitation, public assistance, education, and recreational and cultural services. The County reporting entity includes all significant organizations, departments, and agencies over which the County is considered financially accountable. The component units discussed below are included in the County’s reporting entity because of the significance of their operational and financial relationships with the County. The accompanying financial statements present the financial position of the County and those County-related entities that meet the criteria for component units established by the Governmental Accounting Standards Board (GASB) Statement Nos. 14, 61 and 80. Blended Component Units These component units are so intertwined with the County that they are, in substance, the same as the County and, therefore, are blended and reported as if they were part of the County. Each of the following entities have governing bodies which are substantively the same as the governing body of the County, are fiscally accountable to the County, and have a significant relationship with the County, and therefore are included in its government-wide, governmental fund and proprietary fund financial statements: County Service Areas – County Service Areas have been established for the purpose of providing specific services to distinct geographical areas within the county. These services include drainage and sewer collections facilities maintenance, street lighting energy charges, centralized septic services, wastewater disposal and treatment, and fire and emergency medical services in various unincorporated areas of the county. Flood Control and Water Conservation Districts – Flood control and water conservation districts have been established for the purpose of providing specific flood and conservation services to distinct geographical areas within the county. These services include weather and hydrological data collections services, water delivery, water treatment and distribution services, and the construction of the Lopez Dam Seismic Remediation project. SLO County Financing Authority (the Authority) - The Authority was created to assist in the financing, construction, and equipping of public facilities for one or both of the Authority’s members. San Luis Obispo County Public Facilities Corporation (PFC) - The PFC is a nonprofit public benefit corporation organized to assist public agencies within the County of San Luis Obispo with the acquisition and construction of various public facilities. Separate financial statements or additional financial information for each of the component units may be obtained from the Auditor-Controller-Treasurer-Tax Collector at 1055 Monterey, Room D290, San Luis Obispo, CA 93408. 63 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Also, included in the accompanying financial statements as investment trust funds are the assets of numerous self-governed schools, special districts, and regional boards and authorities for which the County Treasurer acts as custodian of those assets. The financial reporting for these governmental entities, which are independent of the County, is limited to the total amount of cash and investments and the related fiduciary responsibility of the County for disbursement of these assets. Activities of these entities are administered by separate boards and are independent of the County Board of Supervisors. The County Auditor-Controller-Treasurer-Tax Collector makes disbursements upon the request of the entity’s officers. The County Board of Supervisors has no effective authority to govern, manage, approve budgets, assume financial accountability, establish revenue limits, nor to appropriate surplus funds available in these entities. Seven cities and numerous self-governed special districts provide services to the residents of the county. The operations of these entities have been excluded from the basic financial statements as each entity conducts its own day-to-day operations and answers to its own governing board. Discretely Presented Component Unit First 5 San Luis Obispo County (First 5) – First 5 was created in 1998 with the passage of Proposition 10, the California Children and Families First Act. First 5’s mission is to allocate funds from the California Children and Families Trust Fund and advocate for quality programs and services, supporting children prenatal to age 5, to ensure that every child is healthy and ready to learn in school. First 5 is governed by a nine-member commission that includes public officials and community leaders from the fields of early childhood education, health care, and family support. The County can influence the day-to-day operations and financial decisions of First 5 as the County Board of Supervisors appoints all commission members. First 5 is reported as a discretely presented component unit because its governing body is not substantively the same as the County’s governing body, and it does not provide services entirely or exclusively to the County. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Government-wide Financial Statements The Government-wide financial statements consist of the statement of net position and the statement of activities that report information about the County and its component units. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. The statements distinguish between governmental and business-type activities of the County. Governmental activities generally are financed through taxes, intergovernmental revenues and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the County and for each function of the County’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Internal activities and indirect expenses are consolidated in the statement of activities. Examples of expenses that have been eliminated include the allocation of indirect costs under the County-wide Cost Allocation Plan and internal payments for services provided between departments. Amounts reported as program revenues include 1) fees, fines and charges to customers or applicants for goods or services offered by the programs, 2) operating grants and contributions that are restricted to meeting the operational requirements of a particular program, and 3) capital grants and contributions restricted to particular programs. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. 64 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Enterprise funds, reported as business-type activities, distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with an enterprise fund’s principal ongoing operation. The principal operating revenues of the County enterprise funds (Airport, Nacimiento Water Contract, Lopez Flood Control Project, Los Osos Wastewater, and nonmajor enterprise) are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The County’s internal service funds also distinguish operating revenues and expenses from nonoperating items, receive revenue primarily from charges to customers, and have services, administrative expenses, and deprecation of capital assets as costs; however, the internal service funds are reported as governmental activities in the Government-wide financial statements because they principally serve internal County operations. Fund Financial Statements The fund financial statements report detailed information about the County’s funds, including fiduciary funds and blended component units. Separate statements are provided for each fund category – Governmental, Proprietary, and Fiduciary even though the latter are excluded from the Government-wide financial statements. The emphasis of the Governmental and Proprietary Fund financial statements is on major individual funds. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The internal service funds are presented in a single column on the face of the proprietary fund statements. New Accounting Pronouncements For the fiscal year ended June 30, 2018, the County implemented the following Governmental Accounting Standards Board (GASB) Statements:  GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (GASB 75). The requirements of this statement are effective for financial statement periods beginning after June 15, 2017. GASB 75 improves accounting and financial reporting for postemployment benefits other than pensions, also known as other postemployment benefits (OPEB). This statement guides state and local government employers in accounting and financial reporting for OPEB, providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency.  GASB Statement No. 85, Omnibus 2017 (GASB 85). The requirements of this statement are effective for financial statement periods beginning after June 15, 2017. GASB 85 improves financial reporting by addressing practice issues that have been identified during implementation and application of certain GASB statements and thus, enhances consistency in the application of the identified accounting and financial reporting requirements ultimately improving the usefulness of information for financial statement users. The statement establishes accounting and financial reporting requirements for blending component units, goodwill, fair value measurement and application, and postemployment benefits.  GASB Statement No. 86, Certain Debt Extinguishment Issues (GASB 86). The requirements of this statement are effective for financial statement periods beginning after June 15, 2017. GASB 86 improves consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources (resources other than the proceeds of refunding debt) are placed in an irrevocable trust for the sole purpose of extinguishing debt. The statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished as well as improving notes to the financial statements for debt that is defeased in substance. 65 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) The County reports the following Major Governmental Funds:  The General Fund is the County’s primary operating fund. The General Fund is used to account for all revenues and expenditures necessary to carry out the basic governmental activities of the County that are not accounted for through other funds. For the County, the General Fund includes such activities as public protection, public ways and facilities, health and sanitation, public assistance, education, and recreational and cultural services.  The Capital Projects Fund is used to account for the financial resources restricted for the acquisition or construction of specific projects, or items other than those financed by proprietary funds.  The Debt Service Pension Obligation Bonds Fund is used to account for the accumulation of monies for payment of taxable pension obligation bonds. These bonds were issued to fund the County’s unfunded actuarial accrued liability (UAAL). In prior years, this Debt Service Pension Obligation Bonds Fund has been reported as a nonmajor governmental fund. However, this year, two bonds were paid off and the increased expenditures were enough to qualify the fund as a major fund. The County reports the following Major Proprietary Funds:  The Airport Fund accounts for the maintenance, operations, and development of the County- owned commercial service airports in San Luis Obispo and Oceano.  The Nacimiento Water Contract Fund accounts for the activities and delivery of water associated with the Nacimiento water supply reservoir and the contract with Monterey County.  The Lopez Flood Control Fund accounts for the maintenance, water treatment and water distribution services of the Lopez Dam Flood Control Zone 3, which provides water to south San Luis Obispo County, and the activities of the Lopez Dam Seismic Remediation Project.  The Los Osos Wastewater Fund accounts for the construction, operation and maintenance of the wastewater treatment plant serving the community of Los Osos.  Additionally, the County reports on Internal Service Funds. Internal Service Funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the County or to other governments on a cost-reimbursement basis. Internal Service Funds account for the activities of fleet operations, construction management services, and self-insurance programs such as workers’ compensation, long-term disability, employee benefits, and personal injury & property damage. The County reports the following Fiduciary Funds:  The Pension Trust Fund accumulates contributions from the County and its employees, as well as earnings from the fund’s investments. Disbursements are made from the fund for retirement, disability and death benefits (based on a defined benefit formula), and administrative expenses. This fund includes all assets of the San Luis Obispo County Pension Trust as of December 31, 2017.  The Investment Trust Funds account for the assets of legally separate entities that deposit cash with the County Treasurer. These entities include school and community college districts, other special districts governed by local boards, regional boards and authorities and pass through funds for tax collections for cities. These funds represent the assets, primarily cash and investments, and the related liability of the County to disburse these monies on demand. The County reports on 95 different Investment Trust Funds. 66 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued)  The Agency Funds account for the resources held by the County in a custodial capacity on behalf of other agencies. The County reports on 135 different Agency Funds. These include accounts for temporary holding of funds for the tax assessment areas created under the 1915 Improvement Act, temporary clearing funds, and other temporary holding funds not classified in other agency categories. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The Government-wide, Proprietary, and Fiduciary Fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, except that Agency Fund financial statements have no measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Nonexchange transactions, in which the County gives (or receives) value without directly receiving (or giving) equal value in exchange, include property tax, sales tax, transient occupancy taxes, grants, entitlements, and donations. On an accrual basis of accounting, revenues from property taxes are recognized in the fiscal year for which the taxes are levied. Revenues from sales and transient occupancy taxes are recognized when the underlying transactions take place. Revenues from grants and similar items are recognized as soon as all eligibility requirements imposed by the provider have been satisfied. Governmental Fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized as soon as they become both measurable and available. The County considers all revenues in governmental funds to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the County considers property tax revenues and all other revenues to be available if they are collected within 60 days of the end of the current fiscal period. It is the County’s policy to submit reimbursement and claim requests for federal and state grant revenues within 30 days of the end of the program cycle, and payments are generally received within 90 days. Property taxes, franchise taxes, licenses, and interest are considered to be susceptible to accrual. Expenditures generally are recorded when the related liability is incurred, as under accrual accounting. However, prepaid items, such as rent expense, are recorded using the consumption method which recognizes expenses during the period benefited by the prepayment. Debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recognized as expenditures only to the extent that payment is due. General capital assets acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. The County eliminates the effect of interfund activity from the Government-wide financial statements by consolidating internal activities and indirect expenses in the statement of activities. Interfund services provided and used are not eliminated in the process of consolidation. When both restricted and unrestricted resources are available for use, it is the County’s policy to use restricted resources first, and then unrestricted resources as they are needed. D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND EQUITY Deposits and Investments As required by Government Code Section 27130, a treasury oversight committee serves the County. The committee consists of a representative appointed by the Board of Supervisors, the Auditor-Controller- Treasurer-Tax Collector, the Superintendent of Schools, a representative from the County's school districts and community college, and one member from the public at large. The committee meets annually and is subject to the California open meeting statutes. 67 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Cash balances of substantially all funds are pooled and invested by the County Treasurer for the purpose of increasing earnings through investment activities. State statutes authorize the County to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds, repurchase agreements, and the State Treasurer’s Investment Pool. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and External Investment Pools, investments held by the County Treasurer are stated at fair value at June 30, 2018. The fair value of pooled investments is determined annually and is based on current market prices. The County pool is not registered with the Securities and Exchange Commission as an investment company and does not issue separate investment reports. The County has not provided or obtained any legally binding guarantees to support the value of the shares. Participants may withdraw up to the amortized cost of their respective shares as displayed on the combined balance sheet. The share of the Treasurer's pool related to involuntary participants is 99.74 percent. Cash and Cash Equivalents The County’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short- term investments with original maturities of three months or less from the date of acquisition. All short- term cash surpluses are maintained in the County Treasury cash and investments pool, the earnings from which are allocated quarterly to each fund based on average daily cash balances. Receivables and Payables All trade and property tax receivables are shown net of an allowance for uncollectible accounts. No uncollectible allowance is recorded for enterprise special district receivables, which are primarily for water service billings. These receivables are written off in the year they become uncollectible. Deferred Outflows and Inflows of Resources In addition to assets, the financial statements may report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position or fund balance that is applicable to a future reporting period. In addition to liabilities, the financial statements may report a separate section for deferred inflows of resources which are defined as an acquisition of net position or fund balance that is applicable to a future reporting period. Property Tax The County is responsible for the assessment, collection, and apportionment of property taxes for all taxing jurisdictions within the County, including schools, cities, and special districts. Property taxes, for which the lien date is January 1, are payable in two equal installments, November 1 and February 1, and become delinquent on December 10 and April 10, respectively. Property taxes receivable are recognized when levied. Property taxes on the unsecured roll are due on the January 1 lien date and become delinquent on August 31. The County is permitted by Article XIII-A of the State of California Constitution (known as Proposition 13) to levy a maximum tax of $1.00 per $100.00 of full cash value. Property taxes are accounted for in the Unapportioned Property Tax and Interest Fund, an Agency Fund, until allocation and disbursement to the taxing jurisdictions. Beginning in fiscal year 1993-94, the County of San Luis Obispo adopted the "Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds" provided for in Revenue and Taxation Code Sections 4701-4717, which is commonly known as the "Teeter Plan". The Teeter Plan has no impact on tax rates or collection procedures. It merely changes the way the collections of delinquent taxes and penalties are distributed among the taxing agencies. Those agencies participating in the Teeter Plan receive 100% of the secured property taxes billed each year without regard to delinquencies. The General Fund covers the delinquent amount to all agencies and, in return, receives the delinquent 68 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) taxes, penalties and interest when collected. As a result of the Teeter Plan, secured property taxes receivable are recorded in the General Fund only, and there is no allowance for uncollectible amounts. Penalties and interest are deposited into the Tax Loss Reserve Fund. Once the Tax Loss Reserve Fund balance exceeds 25% of the secured delinquent roll, the excess may be credited to the General Fund. The Teeter Plan was amended beginning fiscal year 2001-02 by removing unitary tax payments (including PG&E), so that all agencies in the County will share in any delinquency that may occur. Unsecured property is not part of the Teeter Plan. Unsecured property taxes receivable are accrued to taxing agencies, net of the uncollectible amount which is estimated based on prior year collections. Interfund Transactions Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). All other outstanding balances between funds are reported as “due to/from other funds” in the fund financial statements. Any residual balances outstanding between the governmental activities and business-type activities are reported in the Government-wide financial statements as “internal balances.” Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in the applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Inventories and Prepaid Items Inventories held by the General Fund, and the Public Works and Garage Internal Service Funds, are carried at cost (first-in, first-out). The Internal Service Funds’ inventories are controlled by perpetual inventory systems, and are adjusted as appropriate to reflect year-end physical inventory counts. Governmental Funds (other than the General Fund) record inventory as expenditures when purchased. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the Government-wide and Fund financial statements. Capital Assets Capital assets, which include land, structures and improvements, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activity columns in the Government-wide financial statements. Capital assets are defined as assets with an initial individual cost greater than the capitalization threshold for the specified type of asset and an estimated useful life beyond a single fiscal period. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets and capital assets received in a service concession arrangement are recorded at acquisition value. General infrastructure assets acquired prior to July 1, 1980, are reported at estimated historical cost using deflated replacement costs. Normal maintenance and repairs are not capitalized, but are charged to operations when incurred. Betterments or major improvements, which significantly increase values, change capacities, or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operations. Capital outlays are recorded as expenditures in the General, Special Revenue, and Capital Projects Funds and as capital assets in the Proprietary Funds and Government-wide financial statements to the extent the County’s capitalization thresholds are met. Interest incurred during the construction phase on 69 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) financing capital assets of business-type activities is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. Amortization of assets acquired under capital leases is included in depreciation and amortization. Facilities and improvements, infrastructure, and machinery and equipment of the primary government, as well as the component units, are depreciated using the straight-line method over the estimated useful lives. The capitalization thresholds and estimated useful lives of specific asset types are as follows: Asset Type Capitalization Threshold Estimated Useful Life Land No threshold --------------- Infrastructure $100,000 20 to 100 years Structures & Improvements $25,000 15 to 50 years Equipment $5,000 2 to 15 years Capital Lease By asset type Lease term or useful life Compensated Absences The County’s policy is to permit employees to accumulate earned but unused vacation and sick leave benefits. Each year-end, a liability is accrued for the balance of unpaid compensatory time off, sick leave, and vacation earned. Accumulated benefits will be liquidated in future years as employees elect to use them. In the normal course of business, all payments of these accumulated benefits will be funded from appropriations in the year in which they are to be paid. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee designations and retirements. Long-term Obligations In the Government-wide financial statements, and in proprietary funds in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Pensions For purposes of measuring the net pension liability and deferred outflows/inflows of resources relating to pensions and pension expense, information about the fiduciary net position of the County’s pension plan with San Luis Obispo County Pension Trust (SLOCPT) and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis as they are reported by SLOCPT. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefits’ terms. Investments are reported at fair value. Other Postemployment Benefits (OPEB) For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the County’s OPEB Plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by San Luis Obispo County Pension Trust 70 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) (SLOCPT). For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value, except for money market investments and participating interest‐earning investment contracts that have a maturity at the time of purchase of one year or less, which are reported at cost. Fund Equity In the fund financial statements, governmental funds report fund balance in classifications based primarily on the extent to which the County is bound to honor the constraints on the specific purposes for which amounts in the funds can be spent. The fund balance classifications used are nonspendable, restricted, committed, assigned and unassigned (see Note 11 for a description of these categories). In circumstances when an expenditure is made for a purpose for which amounts are available from multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. E. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. DETAIL NOTES ON ALL FUNDS 2. CASH AND CASH EQUIVALENTS Cash in Treasury Investments made by the Treasurer are regulated by the California Government Code (CGC) and by the County's Investment Policy (IP). The objectives of the policy in order of priority are safety and preservation of capital, liquidity sufficient to meet scheduled cash flow needs, and then yield, subject to safety and liquidity, while maintaining compliance with federal, state, and local laws and regulations. The San Luis Obispo County Investment Pool (County Pool) is rated by Fitch Ratings, one of the Nationally Recognized Statistical Rating Organizations. Fitch has consistently rated the County Pool with their highest rating since Fiscal Year (FY) 1994-95. Fitch reaffirmed the County Pool’s “AAAf/S1” rating on April 21, 2017. The County Pool’s “AAA” fund credit quality rating reflects the “pool’s lowest vulnerability to losses as a result of defaults in its portfolio and is based on the actual and prospective average credit quality of the pool’s investments.” The “f” suffix to the Fund Credit Quality Rating indicates a fund rather than an individual issue or issuer. The County Pool’s “S1” market sensitivity rating reflects the pool’s low market risk and capacity to return stable principal value to meet anticipated cash flow requirements, even in adverse interest rate environments. The County Treasury Oversight Committee (CTOC) was created by the Board of Supervisors' Resolution and consists of five members. The CTOC monitors and reviews quarterly the management of public funds maintained in the investment pool in accordance with the CGC. The CTOC and the Board of Supervisors review and approve the IP annually. The County Treasurer prepares and submits a comprehensive investment report to the members of the CTOC and the investment pool participants every quarter. The report covers the type of investments in the pool, maturity dates, par value, actual costs and fair value. The CGC directs the CTOC to cause an annual IP compliance audit. A list of providers for the annual compliance audit is specified in the Board Resolution which created the CTOC. These providers are the County Auditor in conjunction with or in addition to work directed by the CGC, independent certified public accountants (CPAs) selected to review the County’s Comprehensive Annual 71 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Financial Report, and independent CPAs as deemed appropriate. Brown Armstrong Accountancy Corporation was selected to perform an Annual Investment Program Compliance Audit for the FY ended June 30, 2018. The results of these audits have been presented to the Board of Supervisors on a yearly basis. All such audits from prior years have had no findings. Under the CGC, the County may purchase as investments: obligations issued by the United States Treasury; obligations, participations, or other instruments of or issued by a federal agency or a United States government-sponsored enterprise; obligations of state and local agencies of this state and any of the other 49 states; bankers’ acceptances; commercial paper; negotiable certificates of deposit; repurchase agreements; medium-term corporate notes; debt issuances guaranteed by the International Bank for Reconstruction (IBRD), International Finance Corporation (IFC), or the Inter-American Development Bank (IADB) that are eligible for purchase and sale within the United States; as well as other investments established by the CGC. The CGC prohibits investments in derivatives which include inverse floaters, range notes, or mortgage-derived, interest strips and any security that could result in zero interest accrual if held to maturity. While securities lending and reverse repurchase agreements are considered permitted investments per the CGC, the County IP prohibits these types of investments. The County maintains a combined pool of cash and investments which provides cash flow for the funding needs of the County, school districts, and other local agencies required by law to keep funds in the Treasury. The combined pool’s investments are stated at fair value, and have a weighted-average maturity of 1.30 years. Interest is apportioned to the separate funds based on the individual fund's average daily balance. Securities are held in a customer-segregated safekeeping account during the fiscal year. A Cash Statement and Asset List is requested monthly from the appropriate institutions and verified against records maintained in the Treasury. The County’s combined pool has invested in the CalTRUST Short-Term Fund (CTSTF). CalTRUST is a Joint Powers Agency Authority created by local public agencies to provide a method for local public agencies to pool their assets for investment purposes. CalTRUST is governed by a Board of Trustees made up of experienced local agency treasury and investment officers. The CalTRUST Board sets overall policies for the program and selects and supervises the activities of the investment manager, currently BlackRock. Public agencies invest in shares of beneficial interest with a Net Asset Value (NAV) that fluctuates. CalTRUST attempts to minimize NAV fluctuation. This type of investment is an authorized investment under CGC §53601 (p). As of June 30, 2018, the CTSTF NAV was $0.998 per $1.00 of investment. The County’s combined pool has invested in the State’s Local Agency Investment Fund (LAIF). This fund is not registered with the Securities and Exchange Commission as an investment company, but is required to invest according to the CGC. Market valuation is conducted quarterly. LAIF provided a fair value dollar factor of 0.998126869 for its portfolio as of June 30, 2018. The fair value of the investments in LAIF is the pool participant’s amount invested balance multiplied by the fair value dollar factor. As of June 30, 2018, 2.67% of the LAIF pool includes structured notes and asset-backed securities. The Local Investment Advisory Board, which consists of five members as designated by statute, provides oversight for LAIF. The County’s combined pool includes funds deposited in collateralized interest-bearing bank accounts hereinafter referred to as Public Investment Money Market Accounts (PIMMAs). Per CGC §53631 et seq., PIMMAs are depository accounts, not investments, and are fully liquid and collateralized by eligible securities. Even though PIMMAs are not investments by code, they are included in the County’s combined pool and are treated internally as investments for tracking, management, and reporting purposes. Governmental Accounting Standards Board (GASB) Statement No. 31 requires governmental external investment pools to report certain investments at fair value in the financial statements and report the change in the fair value of investments in the year in which the change occurred. In compliance with these requirements, the fair value of the County's combined pool is determined annually and is based on current market prices received from the securities custodian, CalTRUST, and LAIF, except for instruments which are carried at amortized cost plus accrued interest. The County Treasury has provided a fair value 72 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) dollar factor of 0.993554762450 in the Quarterly Report of Investments as of June 30, 2018, which can be used for financial reporting by the pool participants. The fair value of the investments is the pool participant’s amount invested balance multiplied by the fair value dollar factor. The table below identifies the investment types that are authorized for the County by the CGC. The County’s combined pool is further restricted by both the County IP and the Treasurer’s written policies and procedures to reduce exposure to investment risks. The County IP gives the County Treasurer the authority to act in the best interest of the County in the face of changing market conditions and circumstances by making written exceptions to the County IP and the Treasurer’s written policies and procedures within the limits of the CGC and all relevant laws. As of June 30, 2018, the table represents the County’s IP or where more restrictive, the Treasurer’s written policies and procedures, that address interest risk, credit risk, and concentration of credit risk. Maximum Maximum Investment Type Percentage Maximum Investment in One Issuer Maturity of Portfolio Investment types utilized by the combined pool in FY 2017-18 U.S. Treasury Notes 4 years 100% N/A U.S. Government Agencies: Federal Home Loan Bank 4 years 20% N/A U.S. Government Agencies: Farm Credit Bank 4 years 20% N/A Local Agency Investment Fund (LAIF) N/A 15% N/A CDARS 1 year 15% 1% Money Market Mutual Funds (Shares of Beneficial Interest) 15% per issuer. Requires specific written issued by a Joint Powers Authority N/A 15% approval of County Treasurer for each type of investment. Supranationals 10% per issuer (IBRD, IFC, or IADB only). 4 years 20% Must have AAA/A-1+ by 1 of the 3 credit rating agencies. Investments authorized, but not utilized in FY 2017-18 U.S. Treasury Bonds 4 years 100% N/A U.S. Treasury Bills Maximum 100% N/A issued Bankers’ Acceptances-Domestic 30 days 10% 4% Commercial Paper 30 days 5% 2% Collateralized Certificates of Deposit 1 year 5% 1% Tri-Party Repurchase Agreements 15% of all 30 days N/A repos Cash Management Bills Maximum 100% N/A issued Bonds, Notes, Warrants, other evidences of indebtedness No more than 10% of issuer debt and of any local agency within this state assets. Requires specific written approval 1 year 5% of County Treasurer for each type of investment. Bonds issued by a Local Agency Requires specific written approval of 1 year 5% County Treasurer for each type of investment. Registered State Warrants Requires specific written approval of 1 year 10% County Treasurer for each type of investment. Pledged Funds held by a trustee or fiscal agent Per specific statutory provisions or in accordance with the ordinance, resolution, indenture, or agreement of a local agency providing for the issuance. Investments not authorized in FY 2017-18 U.S. Government Agencies: Federal National Mortgage Assoc. U.S. Government Agencies: Federal Home Loan Mortgage Corp. Bankers’ Acceptances-Foreign Negotiable Certificates of Deposit Bi-Party Repurchase Agreements Medium-Term Notes Money Market Mutual Funds (Shares of Beneficial Interest) issued by diversified management companies Treasury Notes or Bonds of this state Registered Treasury Notes or Bonds of any of the other 49 United States Notes, Bonds, or other obligations that are at all times secured by a valid first priority security interest Mortgage Pass-Through Securities 73 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Investments not authorized in the County’s IP Reverse Repurchase Agreements Securities Lending Agreements Interest Rate Risk In accordance with its IP, the County manages its exposure to declines in fair values by structuring the portfolio so that securities mature to meet cash flow requirements for ongoing operations and thereby avoiding the need to sell securities on the open market prior to maturity. Custodial Credit Risk The County minimizes this type of credit risk by pre-qualifying the custodial financial institution, and requiring the custodian to hold securities in the County Treasurer's name. Credit Risk The County minimizes its exposure to credit risk by pre-qualifying the financial institutions limiting investments to the safest types of securities, diversifying the portfolio, and setting limits per issuer. Concentration of Credit Risk At June 30, 2018, the County did not have investments in medium-term notes. The following is a summary of the credit quality distribution and concentration of credit risk by investment type as a percentage of the County's Investment Pool's fair value at June 30, 2018. Investment Type S&P Moody's % of Portfolio* U.S. Government Agencies AA+ Aaa 39.47% U.S. Treasuries AA+ Aaa 35.78% Supranationals AAA Aaa 8.82% CalTRUST-Short-Term Fund AAf/S1+ Not Rated 8.24% LAIF Not Rated Not Rated 7.69% Total 100.00% *Bank Deposit accounts such as PIMMAs are tracked, managed, and reported as part of the County’s combined pool and are included in portfolio percentage limit calculations. GASB Statement No. 40 requires that investments in single issuers exceeding 5% of the County’s pooled investments be disclosed as concentrations of credit risk. As of the year ended June 30, 2018, the following investments exceeded the 5% disclosure threshold: % of Investment Type Portfolio* U.S. Government Agencies-Federal Home Loan Bank 20.54% U.S. Government Agencies-Farm Credit Bank 18.93% Supranationals - IBRD 8.82% *Federal Home Loan Bank is 16.86% of the County’s combined pool inclusive of the PIMMAs and therefore is within the limits authorized in the IP. 74 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) At June 30, 2018, the County had the following investments and interest-bearing deposits (in thousands): Weighted Average Maturity Instrument Maturity Dates Interest Rate % Years Fair Value Cost Supranationals 7/30/18-2/08/21 1.820%-2.750% 1.20 $ 74,807 $ 74,693 U.S. Treasuries 7/15/18-5/15/21 0.820%-2.542% 1.43 303,282 305,211 U.S. Government Agencies 9/14/18-6/11/21 0.880%-2.586% 1.72 334,601 337,756 LAIF On Demand 1.420% - 65,180 65,000 CalTRUST On Demand 1.850% - 69,880 69,964 Total Investments in County Treasury 1.30 $ 847,750 $ 852,624 Deposits in Financial Institutions $ 203,100 $ 203,100 Cash on Hand 214 214 Total Cash held in Treasury 1,051,064 1,055,938 Deposits in Transit 1,618 1,618 Outstanding Warrants (15,662) (15,662) Total 1,037,020 1,041,894 Imprest Cash 1,483 1,483 Non-pool Cash Deposits 1,522 1,522 Other Cash Deposits 3,006 3,006 Total Cash and Cash Equivalents $ 1,040,025 $ 1,044,899 Restricted Cash with Fiscal Agent Fair Value Cost U.S. Government & Federal Agencies $ 11,785 $ 11,785 Certificates of Deposit & Money Market Accounts 1,529 1,529 Total 13,314 13,314 Total restricted and unrestricted cash and cash equivalents $ 1,053,339 $ 1,058,213 Total Cash and Investments Summary Fair Value Total Governmental Activities $ 410,962 Total Business-type Activities 63,350 Total Fiduciary Funds 570,580 Total Component Unit 8,447 Total Cash and Investments $ 1,053,339 The following represents a condensed statement of net position and changes in net position for the Treasurer's investment pool as of June 30, 2018 (in thousands): Fair Value Statement of Net Position: Net position held for pool participants $ 1,037,020 Equity of internal pool participants $ 571,540 Equity of external pool participants (voluntary and involuntary) 465,480 Total Equity $ 1,037,020 Statement of Changes in Net Position: Revenue $ 13,497 Investment costs (857) Net deposits 43,548 Change in fair value (5,840) Net change in pool net position 50,350 Net position at July 1, 2017 986,672 Net position at June 30, 2018 $ 1,037,020 75 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Fair Value Measurements The County categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is divided into 3 levels with each level based on the source used to measure the fair value of the asset. The County has the following recurring fair value measurements as of June 30, 2018: Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Investments by fair value level (Level 1) (Level 2) (Level 3) Debt securities US Treasuries $ 303,282 $ 303,282 $ - $ - US Government Agencies 334,601 334,601 - - Supranationals 74,807 74,807 - - Total measured at fair value 739,690 739,690 - - Investments measured at amortized cost LAIF 65,180 - - - CalTRUST 69,880 - - - Total investments in County Treasury $ 847,750 $ - $ - $ - Restricted Cash with Fiscal Agent Cash and investments at June 30, 2018 that are restricted by legal or contractual requirements are comprised of the following (in thousands): Various Governmental Funds Amount Required lease reserves for long-term debt $ 11,756 Restricted interest on lease reserves 29 Restricted for Contractor Retentions 1,529 Total Restricted Cash $ 13,314 Cash Deposits Outside of the Treasury Pool At fiscal year-end, the carrying amount of the County's other cash deposits was $1,323,902 and the combined financial institutions' balance was $1,523,035. The difference of $199,133 between the County's deposit balance and the financial institutions' balance results from transactions in transit, and outstanding warrants and bond coupons. The entire bank balance of $1,523,035 was covered by federal depository insurance or by collateral held by the County's agent in the County's name. 76 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) 3. RECEIVABLES Accounts receivable at year-end of the County’s major individual funds and nonmajor and Internal Service Funds in the aggregate, including the applicable allowance for uncollectible accounts, are as follows (in thousands): Governmental Activities Nonmajor Internal Special Service General Fund Revenue Funds Funds Accounts $ 84 $ 100 $ 15 Receivable Allowance for - - - Doubtful Accounts Net Accounts $ 84 $ 100 $ 15 Receivable Business-Type Activities Nonmajor Nacimiento Water Los Osos Enterprise Contract Wastewater Funds Accounts $ 1 $ 1 $ 2,966 Receivable Allowance for - - - Doubtful Accounts Net Accounts $ 1 $ 1 $ 2,966 Receivable 4. CAPITAL ASSETS A summary of changes in capital assets for the year ended June 30, 2018, is as follows (in thousands): Balance Transfers & Balance Governmental Activities July 1, 2017 Additions Retirements Adjustments June 30, 2018 Capital assets, not being depreciated: Land $ 795,397 $ 52 $ - $ 56 $ 795,505 Construction in progress 20,260 6,549 (229) (6,853) 19,727 Total capital assets, not being depreciated 815,657 6,601 (229) (6,797) 815,232 Capital assets, being depreciated: Structures and improvements 250,795 7,136 (19) 1,667 259,579 Equipment 88,070 8,743 (3,081) 2,020 95,752 Infrastructure 389,248 14,422 - 3,022 406,692 Other property 340 417 - 88 845 Total capital assets, being depreciated 728,453 30,718 (3,100) 6,797 762,868 77 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Less accumulated depreciation for: Structures and improvements (84,755) (5,876) 18 - (90,613) Equipment (52,676) (7,407) 2,897 - (57,186) Infrastructure (207,151) (10,842) - - (217,993) Other property (29) (5) - - (34) (344,611) (24,130) 2,915 - (365,826) Total accumulated depreciation 383,842 6,588 (185) 6,797 397,042 Total capital assets being depreciated, net $1,199,499 $ 13,189 $ (414) $ - $ 1,212,274 Governmental activities capital assets, net Balance Transfers & Balance Business-Type Activities July 1, 2017 Additions Retirements Adjustments June 30, 2018 Capital assets, not being depreciated: Land $ 35,619 $ 166 $ - $ 735 $ 36,520 Construction in progress 38,856 1,403 - (36,152) 4,107 Water rights 54,067 2,367 - - 56,434 Other property 1,968 - - - 1,968 Total capital assets, not being depreciated 130,510 3,936 - (35,417) 99,029 Capital assets, being depreciated: Infrastructure 369,114 11,243 - 136 380,493 Structures and improvements 170,658 4,547 (427) 30,484 205,262 Equipment 3,895 1,299 (44) 4,797 9,947 Other property 554 - - - 554 Total capital assets, being depreciated 544,221 17,089 (471) 35,417 596,256 Less accumulated depreciation for: Infrastructure (23,564) (7,027) - - (30,591) Structures and improvements (54,272) (4,298 107 - (58,463) Equipment (2,656) (456) 39 - (3,073) Other property (58) - - - (58) (80,550) (11,781) 146 - (92,185) Total accumulated depreciation 463,671 5,308 (325) 35,417 504,071 Total capital assets being depreciated, net $ 594,181 $ 9,244 $ (325) $ - $ 603,100 Business-type activities capital assets, net Depreciation Expense Depreciation expense was charged to functions as follows (in thousands): Governmental Activities Amount General Government $ 4,540 Public Protection 3,887 Public Ways and Facilities 10,512 Health and Sanitation 959 Public Assistance 251 Education 397 Recreational and Cultural Services 813 Capital assets held by the County’s internal service funds are charged to the various functions based on their usage of the assets 2,771 Total Depreciation Expense-Governmental Activities $ 24,130 78 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Business-Type Activities Amount Airport $ 3,034 Los Osos Wastewater 4,058 Nacimiento Water Contract 2,198 Lopez Flood Control 1,406 Nonmajor Enterprise 1,085 Total Depreciation Expense-Business-type Activities $ 11,781 5. CONSTRUCTION IN PROGRESS AND RELATED COMMITMENTS Construction in Progress accounts reflect the amount within governmental and business-type funds for construction projects which are not yet complete. The following is a schedule of major projects included in Construction in Progress as of June 30, 2018 (in thousands): Governmental Activities Expended to Committed Remaining Project June 30, 2018 Funds Budget Roads Infrastructure $ 12,005 $ 8,151 $ 20,029 Budget Prep Replacement System 1,327 783 - Health – SLO – Crises Stabilization 1,156 - 54 MS Office 365 Project 839 54 - Health – COC – Animal Services Facility 524 575 644 Los Osos Landfill Remediation 467 26 572 Templeton to Atlas Connector 420 - 140 Business-Type Activities Expended to Committed Remaining Project June 30, 2018 Funds Budget Airport Car Wash Conversion $ 1,042 $ - $ 547 6. LEASES County as Lessor The County's General Fund and Enterprise Funds receive revenue from various properties leased to others under agreements classified as operating leases in accordance with Financial Accounting Standards Board (FASB) Statement No. 13. The leases cover periods ranging generally from 1 to 55 years. The General Fund leases portions of the former County General Hospital. The original cost of these facilities was $12,313. As of June 30, 2018, they had a carrying value of $8,214 net of accumulated depreciation of $3,395. The Airport leases portions of airport land to various operators. The cost and carrying value of the original Airport land area is $2,011. 79 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) The following is a schedule of minimum future rental payments to be received under these non- cancelable operating leases at June 30, 2018 (in thousands): Year Ending June 30 General Fund Airport 2019 $ 380 $ 572 2020 255 526 2021 132 488 2022 132 488 2023 107 488 Later Years 833 8,285 Total $ 1,839 $ 10,847 Minimum future rental payments do not include contingent rental payments, which are received as stipulated in the lease contracts. These contingent rental payments are based on the monthly revenues of the concessionaire operating on the premises. Contingent rental payments amounted to $3,019 for the fiscal year ended June 30, 2018. County as Lessee Operating Leases: The County has commitments under long-term real property operating lease agreements for facilities used in operations. These leases do not meet any of the four criteria for capitalization set by FASB 13. The County is the lessee under operating leases for real property used to house certain County functions. In addition to real property leases, the County has also entered into operating leases for equipment, of which most are data processing and office equipment leases. Management expects that, in the normal course of business, leases that expire will be renewed or replaced by other leases. Commitments under the operating lease agreements for equipment, as described above, are not material. Rental payments for fiscal year ended June 30, 2018 totaled $4,045. The following rental costs represent future minimum payments under leases that have remaining non-cancelable terms in excess of one year as of June 30, 2018 for the next five years and for each five-year period thereafter (in thousands): Year Ending Minimum Lease June 30 Payments 2019 $ 3,338 2020 3,246 2021 2,771 2022 2,533 2023 1,823 2024-2028 5,758 2029-2033 2,703 2034-2038 1,050 Total $ 23,222 7. RISK MANAGEMENT The County is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The County has self-insurance programs for liability, workers' compensation, unemployment insurance and dental coverage. There were no liability claims settlements and there were seven workers’ compensation claim settlements that have exceeded insurance coverage during the past three fiscal years. Insurance coverage for liability and workers' compensation above the County's self-insured retention (SIR) is provided through the California State Association of Counties (CSAC) Excess Insurance Authority. The County is a member of CSAC 80 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Excess Insurance Authority, a joint powers authority whose purpose is to develop and fund programs of excess insurance for its member counties. The authority is solvent; self-insurance and authority limits are as follows: Type of Coverage Self-Insurance Authority Liability $ 250,000 per occurrence $ 25,000,000 Workers' Compensation $ 250,000 per occurrence Statutory Unemployment $ 166,276 maximum ----- Dental None–Funded by Employees ----- Annual actuarial valuations are obtained for the Workers' Compensation and the General Liability Funds. These valuations provide the basis for premiums charged to insured departments. The County's SIR amounts are paid directly, without the use of purchased annuity contracts. Financial information on CSAC Excess Insurance Authority is available on request from the Office of Risk Management, County of San Luis Obispo. The estimated claims liability for the Protected Self-Insurance Fund was recorded at a discounted 85% confidence level, and the estimated liability for the Workers' Compensation Self-Insurance Fund was also recorded at a discounted 85% confidence level. Beginning of Current year claims, the fiscal year changes & Balance at fiscal liability estimates Claim payments year-end 2016-17 $ 18,707 $ 4,948 $ 4,092 $ 19,563 2017-18 $ 19,563 $ 3,179 $ 3,835 $ 18,907 8. INTERFUND RECEIVABLES AND PAYABLES The composition of interfund balances at June 30, 2018, was (in thousands): Payable Fund (Due to Balance) Receivable Fund (Due from Balance) Amount General Fund Airport $ 5,940 Airport General Fund 9,909 Nonmajor Governmental Funds Los Osos Wastewater 310 Total $ 16,159 The Airport Fund owes the General Fund $9,909 for construction costs relating to the new airport terminal project. The General Fund owes the Airport Fund $5,940, which represents undrawn loan proceeds relating to the airport terminal construction. 81 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) The Flood Control District’s Special Revenue Fund owes the Los Osos Wastewater Project Fund $310 related to an Integrated Regional Water Management grant. Payable Fund (Advances from Balance) Receivable Fund (Advances to Balance) Amount Nonmajor Governmental Funds General Fund $ 314 Nonmajor Enterprise Funds 115 429 Nonmajor Enterprise Funds General Fund 162 Nonmajor Governmental Funds 418 580 Airport General Fund 8,247 Los Osos Wastewater General Fund 9,950 Nonmajor Governmental Funds 2,805 12,755 Total $ 22,011 Nonmajor Governmental Funds’ advances from Nonmajor Enterprise Funds of $115 are comprised of funds from the Lopez Park Enterprise Fund to the Parks Special Revenue Fund for future debt service obligations. Advances related to the General Fund include an internal loan to the County Services Area 21 Special Revenue Fund of $76 and a loan of $238 related to the restoration of the Cayucos Pier. The Nonmajor Enterprise Funds advances of $580 represent internal loans received by the County Services Areas Special Districts Enterprise Funds from the General Fund ($42) and from the County Services Area 10 Special Revenue Fund ($255), and from the General Flood Control Zone Special Revenue Fund ($163). The Golf Fund also received $120 from the General Fund. The Airport owes the General Fund $8,247 for internal loans for various projects including the refinancing of a State loan for the construction of hangars. The Los Osos Wastewater Fund received a long-term operating loan from the General Flood Control Zone Special Revenue Fund of $2,805 and $9,950 from the General Fund. 9. TRANSFERS A reconciliation of transfers is detailed below (in thousands): Transfer From Transfer To Amount General Fund Pension Obligation Bonds Fund $ 23,872 Nonmajor Governmental Funds 18,607 Capital Projects Fund 2,010 Airport Fund 106 Nonmajor Enterprise Funds 431 45,026 Capital Projects Fund General Fund 144 Nonmajor Governmental Funds 72 216 82 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Nonmajor Governmental Funds General Fund 1,785 Pension Obligation Bonds Fund 459 Capital Projects Fund 2,325 Nonmajor Governmental Funds 1,492 Nonmajor Enterprise Funds 62 6,123 Airport Fund General Fund 337 Pension Obligation Bonds Fund 56 393 Los Osos Wastewater Fund Nonmajor Governmental Funds 2,415 Nonmajor Enterprise Funds General Fund 1 Pension Obligation Bonds Fund 49 Nonmajor Governmental Funds 8 58 Internal Service Funds General Fund 2 Pension Obligation Bonds Fund 1,148 1,150 Total Transfers $ 55,381 General Fund transfers to Nonmajor Governmental Funds included contributions to the following Special Revenue Funds: Roads ($12,645), Library ($667), Community Development ($1,454), Flood Control Zone ($57), County Service Area Special Revenue Fund ($162) and Parks ($3,622). The General Fund also transferred $23,872 to the Pension Obligation Bonds Debt Service Fund to finance debt service payments, $106 to the Airport Fund, $400 to the Golf Fund, $31 to County Service Area Enterprise Fund, and $2,010 to the Capital Projects Fund for various capital projects. The Capital Projects Fund transferred $144 to the General Fund for a fiber optics project and $72 related to a Parks Fund coastal access project. Nonmajor Governmental Fund transfers consist of contributions of Public Facilities Fees revenue from the Public Facilities Fees Special Revenue Fund to the General Fund ($398) for debt service, to the Parks Fund ($637) primarily related to Nipomo parks projects, and to the Capital Projects Fund ($2,325) to fund parks and other capital and maintenance projects. The Parks Special Revenue Fund made transfers to the Pension Obligation Bonds Debt Service Fund ($186) and to the Lopez Park Enterprise Fund ($3) for debt service. The Road Impact Fee Special Revenue Fund transferred Impact Fees of $452 to the General Fund for debt service and $855 to the Roads Fund for capital and maintenance projects. The County Medical Services Program Fund (CMSP) transferred $794 to the General Fund to close the CMSP Fund. The Flood Control Zone Fund transferred $140 in to the General Fund for sustainable groundwater plans. Community Services Area 21 transferred $1 to the General Fund for debt service. The Library Fund ($243) and the Driving Under the Influence Fund ($30) made transfers to the Pension Obligation Bonds Debt Service Fund to finance debt service payments. Other Nonmajor Governmental Fund transfers of $59 occurred between various County Service Area Special Revenue to Enterprise Funds. The Airport Enterprise Fund transferred $337 to the General Fund and $56 to the Pension Obligation Bonds Fund for debt service. The Los Osos Wastewater Fund transferred $2,340 to the Flood Control Zone Fund related to an Integrated Water Resources Management grant and $75 for debt service. 83 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Transfers from Nonmajor Enterprise Funds included $49 of transfers from the Golf Enterprise Fund to the Pension Obligation Bonds Debt Service Fund and $1 from Flood Control Zone Enterprise Fund to Flood Control Zone Special Revenue Fund. County Services Area 23 Enterprise Fund transferred $7 to County Service Area 21 Special Revenue Fund and $1 to the General Fund. The Garage Internal Service Fund transferred $2 to the General Fund due to early vehicle retirement. Internal Service Fund transfers to the Pension Obligation Bonds Debt Service Fund for debt service by the Public Works ($1,095) and Garage ($53) Internal Service Funds. 10. BONDED INDEBTEDNESS AND LONG-TERM DEBT Changes in Long-term Liabilities Long-term liability activity for the year ended June 30, 2018, is as follows (in thousands): Beginning Ending Balance Balance Due within Governmental Activities July 1, 2017 Adjustments Additions Reductions June 30, 2018 one year Bonds and notes payable: Certificates of participation (COP) $ 21,411 $ - $ 6,000 $ 1,276 $ 26,135 $ 1,329 Unamortized discount on COP (83) - - (4) (79) - Unamortized premium on COP 975 - - 89 886 - State notes - - 2,197 141 2,056 155 Pension Obligation Bonds 143,890 - 5,347 49,830 99,407 7,944 Total bonds and notes payable 166,193 - 13,544 51,332 128,405 9,428 Other liabilities: Compensated absences 27,655 - 19,909 18,503 29,061 20,419 Landfill postclosure costs 5,694 - 1,856 669 6,881 481 Self-insurance 19,563 - 3,179 3,835 18,907 3,307 Total other liabilities 52,912 - 24,944 23,007 54,849 24,207 Total Governmental Activities $ 219,105 $ - $ 38,488 $ 74,339 $ 183,254 $ 33,635 Beginning Ending Balance Balance Due within Business-Type Activities July 1, 2017 Adjustments Additions Reductions June 30, 2018 one year Bonds and notes payable: Certificates of participation $ 16,470 $ - $ 36 $ 828 $ 15,678 $ 867 Unamortized premium on COP 361 - - 33 328 - State notes 85,674 - 5,236 3,243 87,667 3,258 Revenue bonds 173,535 - 27,045 32,170 168,410 4,285 Unamortized premium on revenue 9,623 - 326 1,023 8,926 - bonds Unamortized outflows on bond (3,990) - 182 - (3,808) - refinancing General obligation bonds 8,350 - - 425 7,925 440 Unamortized premium on general 790 - - 57 733 - obligation bonds Assessment bonds 78,089 - - 1,343 76,746 1,388 Total bonds and notes payable 368,902 - 32,825 39,122 362,605 10,238 84 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Beginning Ending Balance Balance Due within July 1, 2017 Adjustments Additions Reductions June 30, 2018 one year Other liabilities: Compensated absences 368 - 162 157 373 175 - Total other liabilities 368 162 157 373 175 Total Business-Type Activities $ 369,270 $ - $ 32,987 $ 39,279 $ 362,978 $ 10,413 Annual debt service requirements for governmental activities as of June 30, 2018, are summarized as follows: Governmental Activities Certificates of Participation Pension Obligation Bonds Unaccreted Year Ended June 30, Principal Interest Principal Appreciation Interest Total 2019 $ 1,329 $ 1,084 $ 7,741 $ 203 $ - $ 7,944 2020 1,378 1,030 7,832 648 - 8,480 2021 1,431 974 7,899 1,141 - 9,040 2022 1,494 916 7,945 1,675 - 9,620 2023 1,557 850 7,975 2,250 - 10,225 2024-2028 8,678 3,165 39,919 21,136 - 61,055 2029-2033 3,627 1,809 20,096 18,020 - 38,116 2034-2038 4,170 951 - - - - 2039-2043 1,280 349 - - - - 2044-2048 1,191 93 - - - - Total $ 26,135 $ 11,221 $ 99,407 $ 45,073 $ - $ 144,480 Governmental Activities (Continued) State Notes Year Ended June 30, Principal Interest 2019 $ 155 $ 20 2020 157 19 2021 158 17 2022 160 15 2023 162 14 2024-2028 832 45 2029-2033 432 6 Total $ 2,056 $ 136 Business-Type Activities Certificates of Participation State Notes Revenue Bonds Year Ended June 30, Principal Interest Principal Interest Principal Interest 2019 $ 867 $ 706 $ 3,258 $ 1,865 $ 4,285 $ 7,522 2020 903 668 3,331 1,792 4,285 7,520 2021 942 628 3,409 1,714 4,510 7,298 2022 989 584 3,488 1,634 4,745 7,064 2023 1,038 536 3,571 1,553 4,990 6,817 2024-2028 5,952 1,839 17,861 6,543 29,125 29,917 2029-2033 2,970 594 14,371 4,622 36,765 22,269 2034-2038 446 321 12,503 3,348 46,380 12,658 2039-2043 535 233 13,805 2,046 33,325 2,100 2044-2048 641 126 12,070 610 - - 2049-2053 395 28 - - - - Total $ 15,678 $ 6,263 $ 87,667 $ 25,727 $ 168,410 $ 103,165 85 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Business-Type Activities (continued) General Obligation Bonds Assessment Bonds Year Ended June 30, Principal Interest Principal Interest 2019 $ 440 $ 394 $ 1,388 $ 2,092 2020 460 374 1,415 2,053 2021 485 351 1,460 2,013 2022 510 327 1,505 1,973 2023 540 300 1,541 1,931 2024-2028 3,155 1,021 8,385 8,984 2029-2033 2,335 179 9,627 7,747 2034-2038 - - 11,051 6,328 2039-2043 - - 12,674 4,699 2044-2048 - - 14,540 2,831 2049-2053 - - 13,160 736 Total $ 7,925 $ 2,946 $ 76,746 $ 41,387 Long-term liabilities at June 30, 2018 consisted of the following: Original Date of Semi Annual Issue Outstanding at Issue Maturity Interest Rates Installments Amount 6/30/2018 Governmental Activities Certificates of Participation 2007 Series A 2/8/2007 2037 4% - 4.25% $304 - $308 $5,090 $3,960 Used to finance the construction of the Paso Robles Courthouse building. Debt service is provided by court fines specifically designated and restricted for new construction or major renovation of court facilities. 2008 Series A 1/23/2008 2038 4% - 4.625% $440 - $451 7,325 5,810 Used to finance improvements to the Vineyard Drive Interchange. Debt service is provided by Development Fees. 2012 Series A 10/15/2012 2028 0.5% -5.0% $1,034-$1,289 14,427 10,482 Lease Revenue Refunding Bonds used to refund the 2002 A Certificates of Participation. The original COP was partially used to finance a portion of the new government center. Debt service is provided by semi-annual payments funded by general County revenues. IBank Loan 10/01/2016 2046 3.75% $240 - $320 6,000 5,883 Loan from the California Infrastructure & Economic Development Bank (I-Bank) used for the final construction costs of the new terminal building at the San Luis Obispo County Regional Airport. The debt is backed by the General Fund and repaid using a combination of Passenger Facility Charges, Customer Facility Charges, and other local funding from Airport operations. $32,842 $26,135 State Notes The loan from the California Energy Commission (CEC) is to be used for energy conservation projects. Projects to be implemented by the loan were identified through the Sustainable Solutions Turnkey program with PG&E. These projects will provide estimated long-term energy savings to the County of $140,000 annually. 2015 2030 1.00% $175 $2,197 $2,056 Pension Obligation Bonds Used to refund the Unfunded Actuarial Accrued Liability (UAAL) due to the Pension Trust as of July 2, 2003, as determined by an outside actuary. Debt service payments are expected to be funded by County payroll benefits. 2003 Series A Standard Bonds and 2009 Series A Term Bonds in the amounts of $44,305,000 and $42,565,000 respectively, were paid off during the fiscal year. 2003 Series C Capital Appreciation Bonds (CAB) 7/2/2003 2031 5.27% - 5.73% zero - $15,000 $44,199 $144,480 2003 Series C CABs Unaccreted Interest - (45,073) $44,199 $99,407 86 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Original Date of Semi Annual Issue Outstanding Issue Maturity Interest Rates Installments Amount at 6/30/2018 Business-Type Activities Certificates of Participation US Department of Agriculture 4/30/2009 2049 4.375% $6 - $86 $1,631 $1,470 (USDA) 2009 Used to finance a water system improvement project in County Service Area 23. Debt service is provided by water sales revenues. 2011 Refunding Lopez Dam 5/12/2011 2030 2.0% - 5.5% $928 - $934 11,990 8,840 Remediation Used to refund the 2000 A COP issue. The original COP was used to improve and retrofit the Lopez Dam. Debt service is provided by semi-annual lease payments made by the Lopez Flood Control District for the use of the retrofitted facilities. 2012 Series A 10/15/2012 2028 0.5% - 5.0% $381 - $475 5,323 3,867 Lease Revenue Refunding Bonds used to refund the 2002 A Certificates of Participation. The original COP was partially used to the finance the Dairy Creek Golf Course. Debt service is provided by semi-annual lease payments from the Dairy Creek Golf Course. USDA 2013 07/01/2013 2053 2.75% $18 - $67 1,621 1,501 Used to finance a water system improvement project in County Service Area 10A. Debt service is provided by water sales revenues. $20,565 $15,678 Original Date of Interest Semi Annual Issue Outstanding Business-Type Activities Issue Maturity Rates Installments Amount at 6/30/2018 State Notes The County has borrowed from the State of California Department of Water Resources and the California Department of Transportation to finance the construction of water and wastewater systems in unincorporated areas and to construct hangars at the San Luis Obispo airport. State loans are repaid with water and wastewater service revenue and hangar rental revenue. Cayucos Water Treatment Facility 1998 2023 3.0315% $174 $3,011 $799 Lopez Recreation Area 2004 2024 2.5132% $21 325 115 Lopez Water Treatment Plant Upgrade 2006 2028 2.60% $1,672 25,945 16,992 Airport Fuel Farm 2007 2025 4.6557% $86 1,000 507 Los Osos Waste Water Project 2012 2046 2.0% $336-$598 69,461 69,254 $99,742 $87,667 Revenue Bonds 2007 Nacimiento Pipeline Project Series 5.196% - B 9/26/2007 2040 5.571% $2,132 - $2,646 38,565 34,250 Used to build the Nacimiento Water Delivery Project. Debt service is provided by water sales revenues of participating cities and districts payable under water delivery contracts. 2015 Nacimiento Water Project Revenue Refunding Bonds Series A 8/5/2015 2038 3.0%-5.0% $2,603-$8,097 107,115 107,115 The 2007 bonds were used to build the Nacimiento Water Delivery Project. Debt service is provided by water sales revenues of participating cities and districts, payable under water delivery contracts. The 2015 Series A Nacimiento Water Project Revenue Refunding Bonds were issued to provide funds to advance refund certain 2007 Series A Nacimiento Water Project Revenue Bonds. 2018 Nacimiento Water Project Revenue Refunding Bonds Series A 5/7/2018 2040 3.0% - 5.0% $1,063 - $9,173 $27,045 $27,045 Used to refund all of the outstanding 2007 Nacimiento Water Project Revenue Bonds Series A which were used to build the Nacimiento Water Delivery Project. Debt service is provided by water sales revenues of participating cities and districts, payable under water delivery contracts. $172,725 $168,410 General Obligation Bonds 2011 Refunding – Lopez Dam Remediation 5/12/2011 2030 2.0% - 5.5% $833 - $840 $10,760 $7,925 Used to refund the 2000 A general obligation (GO) issue. The original GO Bonds were used to improve and retrofit the Lopez Dam. Debt service is provided by applicable property taxes. Assessment Bonds 2012 2037 2.75% $1,609 - $3,245 $83,129 $76,746 Issued to the USDA to finance the construction of the Los Osos Wastewater Project. Debt service will be provided by amounts levied against property owners who benefit from the project. 87 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Public Facilities Corporation The SLO County Public Facilities Corporation (PFC) was incorporated on September 7, 1994. The PFC is a nonprofit public benefit corporation organized to assist public agencies within the County of San Luis Obispo with the acquisition and construction of various public facilities. Financing Authority The SLO County Financing Authority was formed on August 22, 2000, as a joint exercise of powers authority between the County and the Lopez Flood Control District, which administers Lopez Dam. The Authority was created to assist in the financing, construction, and equipping of public facilities for one or both of the members. Description of Long-Term Lease Arrangements The County formed the Public Facilities Corporation and the Financing Authority for the purpose of issuing debt. On behalf of the County, these two entities issued all currently outstanding certificates of participation and the Lopez Dam remediation general obligation bond. Therefore, the County makes semi-annual lease payments in lieu of debt service to these entities from a variety of sources including State and Federal revenues, penalty assessments, golf course fees, water contract payments, and property taxes. For lease payment details, see above schedules for specific type of debt. Description of Special Assessment Bonds Special assessment debt has been issued to provide funds for the construction of streets, utility and water delivery systems. These bonds will be repaid from amounts levied against the property owners benefited by this construction. The County acts in an agent capacity for the assessment districts. In the event that a deficiency exists because of unpaid or delinquent special assessments at the time a debt service payment is due, the County must provide resources to cover the deficiency until other resources, for example, foreclosure proceeds, are received. Special assessment principal outstanding at June 30, 2018, totals $77,657 with interest rates from 2.52% to 6.85%. Accrued Vacation and Sick Leave Pay and Compensatory Time Off County employees have accumulated unpaid vested benefits for compensatory time off, sick leave and vacation earned of $29,434 at June 30, 2018. The accumulated benefits will be liquidated in future years as employees elect to use them. In the normal course of business, all payments of these accumulated benefits will be funded from appropriations in the year in which they are to be paid. The liability for compensated absences is typically liquidated from the Parks, County Medical Services Program, Driving Under the Influence Program, Library and General funds. Legal debt margin State statutes limit the amount of general obligation debt a governmental entity may issue to 1.25% of its net assessed valuation. The current debt limitation for the County is $667,700 with a margin of $659,775. Rebatable Arbitrage Earnings The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of tax- exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of tax-exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest 88 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service. During the current year, the County performed calculations of excess investment earnings and at June 30, 2018, had an arbitrage liability of $236,039. Subsequent Events Related to Bonded Indebtedness and Long-Term Debt The County plans to borrow up to $14 million for a replacement Animal Services Shelter. The County and the Cities of Arroyo Grande, Atascadero, Grover Beach, Morro Bay, Paso Robles, Pismo Beach and San Luis Obispo are parties to a Memorandum of Agreement (MOA) for the allocation of construction and financing costs for a replacement Animal Services Shelter. The MOA provides the County sole discretion as to financing terms. While the debt will be issued by the County, the MOA commits each participating agency to contribute towards debt service based on their proportional use of the shelter. Total project costs for the Animal Services Shelter are currently estimated at $14.8 million, plus financing costs. Exact amounts will be known when bids are received. Based on estimated costs of $14.8 million, the amount of the project to be financed is expected to be in the $12-$14 million range, with some portion of the total project being funded directly by the County. Certificates of Participation (COP) are the recommended bond structure under which security for the debt is secured by the constructed asset, the Animal Shelter. A bond term of 25-30 years is anticipated and consistent with County Debt Policy guidance that debt duration not exceed the useful life of the asset. Market pricing received in April 2018 for a COP structure indicated “all-in” interest cost (inclusive of issuance costs) of 3.54% for a 25-year term. An increase of 50 basis points was projected to produce an all-in interest cost of 4.03%. Both scenarios are within the estimated range of financing costs provided to the participating agencies in the MOA. The County plans to refund the entire $5,810,000 outstanding principal of the 2008 Series A Vineyard Drive Interchange COP along with the issuance of the new Animal Services Shelter financing. By combining the refunding of the Vineyard Drive COP with the Animal Services financing, the County will take advantage of the Vineyard Drive COP refunding opportunity with minimal additional effort to County staff and with reduced overall issuance costs compared to handling each debt individually. The Vineyard Drive COP is backed by the County General Fund but debt service is paid for with developer fees. An April 2018 market update indicated a refunding would produce cash flow savings of $908,927, or 11.59% of par, well above the County Debt Policy guideline of minimum 3% savings for undertaking refunding efforts. If market conditions change and do not indicate savings, the Vineyard Drive COP refunding will not be undertaken. At its July 16, 2018 meeting, the County’s Debt Advisory Committee approved the recommendation to proceed with the refunding of the 2008 Series A Vineyard Drive Interchange COP in parallel with the Animal Services Shelter financing. The recommendation will be transmitted to the SLO County Financing Authority Board and to the Board of Supervisors as required. 11. NET POSITION/FUND BALANCES The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted and unrestricted. Net Investment in Capital Assets - This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category. Net Investment in Capital Assets at June 30, 2018, is as follows (in thousands): Amount Governmental activities $ 1,185,073 Business-type activities 283,410 Total $ 1,468,483 89 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Restricted Net Position - This category presents net position with external restrictions imposed on its use by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Included in total restricted net position at June 30, 2018, is $21,386 restricted due to enabling legislation. Included in total restricted net position at June 30, 2018, is $11,794 of Public Facility Fees and $9,593 of Road Impact Fees restricted due to enabling legislation. The remaining $8,449 of restricted net position is restricted due to restrictions imposed by creditors, grantors, or contributors. Restricted net position at June 30, 2018, for governmental activities is as follows (in thousands): Amount RESTRICTED FOR: General Government Purchase obligations for Board of Supervisors related professional services $ 1 Purchase obligations for Non-Departmental related professional services 7 Purchase obligations for Admin related professional services 39 Purchase obligations for Assessor related equipment and professional 354 services Purchase obligations for County Counsel related professional services 2 Purchase obligations for Human Resources related professional services 76 Purchase obligations for Utilities Management software and professional 42 services Purchase obligations for building maintenance projects 60 Purchase obligations for Information Technology related training, 148 software and professional services Purchase obligations for Auditor-Controller-Treasurer-Tax Collector 65 related professional services Purchase obligations for capital projects 51 Claims, contracts and other restrictions imposed by grantors or 1,359 contributors Total General Government 2,204 Public Protection Purchase obligations for Waste Management related professional services 17 Purchase obligations for Grand Jury related supplies 1 Purchase obligations for District Attorney software support and supplies 27 Purchase obligations for Sheriff-Coroner related training, professional 78 services and supplies Purchase obligations for Animal Services professional services 11 Purchase obligations for Probation related safety equipment 42 Purchase obligations for fire protection related software and equipment 1,454 Purchase obligations for Planning related professional services 909 Purchase obligations for capital projects 64 Purchase obligations for flood control related engineering and 602 environmental services Total Public Protection 3,205 Health and Sanitation Purchase obligations for Behavioral Health related professional services 77 Purchase obligations for Public Health related professional services 33 Total Health and Sanitation 110 Public Ways and Facilities Purchase obligations for Public Works related software and professional 52 services Purchase obligations for CSA 21 for related professional services 78 Road impact fees restricted by enabling legislation for road maintenance 9,593 and construction Public facilities fees restricted by enabling legislation for public facilities 11,794 Total Public Ways and Facilities 21,517 90 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Recreation and Culture Services Parks equipment and maintenance services 58 Public Assistance Purchase obligation for Law Enforcement professional services 6 Education Library equipment 24 Debt Service 2,712 Total Restricted Net Position $ 29,836 Unrestricted Net Position - This category represents net position of the County, not restricted for any project or other purpose. Unrestricted net position at June 30, 2018, is as follows (in thousands): Amount Governmental activities $ (217,606) Business-type activities 73,113 Total $ (144,493) In the fund financial statements, governmental funds report fund balance in classifications based primarily on the extent to which the County is bound to honor the constraints imposed on the use of resources reported in the funds. In circumstances when an expenditure is made for a purpose for which amounts are available from multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. As prescribed by GASB Statement No. 54, the following classifications are used to identify the components of fund balance:  Nonspendable Fund Balance - includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example: inventories, prepaid amounts, and long-term notes receivable.  Restricted Fund Balance – includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of the resource provider.  Committed Fund Balance – includes amounts that can only be used for the specific purposes determined by formal action of the County’s highest level of decision-making authority. As prescribed by the State of California County Budget Act, fund balance commitments are established, modified or rescinded by resolution adopted by a four-fifths vote of the Board of Supervisors at regular or special meetings. The general reserve, however, is only established, cancelled, increased or decreased at the time of adopting the budget except in cases of legally declared emergency.  Assigned Fund Balance – comprises amounts intended to be used by the County for specific purposes that are neither restricted nor committed. As a practice, for financial statement presentation the County Auditor-Controller-Treasurer-Tax Collector assigns non-restricted and non-committed fund balance of the General Fund to its intended purpose. Assigned fund balance can be identified by departments and the County Administrative Officer for specific uses during the County’s budgeting process. Budgets requested by departments require approval by the County Board of Supervisors. 91 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued)  Unassigned Fund Balance – is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. Fund balances for all the major and nonmajor governmental funds as of June 30, 2018, are distributed as follows: Capital Pension Nonmajor General Projects Obligation Gov’tl Fund Fund Bonds Fund Funds Total Nonspendable: Inventories $ 117 $ - $ - $ - $ 117 Prepaid items 442 - - 24 466 Advances to other funds 17,952 - - - 17,952 Subtotal 18,511 - 24 18,535 Restricted for: Tax reduction reserves 3,250 - - - 3,250 General Government 809 - - - 809 programs Public Protection programs 188 - - - 188 Mental Health Services Act 5,836 - - - 5,836 Public facilities - - - 11,793 11,793 Traffic impact programs - - - 9,593 9,593 Wildlife and grazing - - - 35 35 programs Debt service - 1,529 3 1,797 3,329 Subtotal 10,083 1,529 3 23,218 34,833 Capital Pension Nonmajor General Projects Obligation Gov’tl Fund Fund Bonds Fund Funds Total Committed to: Maintenance projects 10,924 - - - 10,924 Assessor projects 354 - - - 354 County Counsel services 302 - - - 302 Other general government 6,142 - - - 6,142 Fire equipment 2,717 - - - 2,717 Planning programs 909 - - - 909 Other public protection 890 - - - 890 Public health programs 958 - - - 958 Behavioral Health 76 - - - 76 programs Social Services’ programs 56 - - - 56 Veterans’ Services 105 - - - 105 programs Public works engineering 1,066 - - - 1,066 & consulting services Fish and game programs - - - 176 176 Flood control programs - - - 20,703 20,703 Lighting programs - - - 455 455 Community development - - - 296 296 programs 92 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Capital Pension Nonmajor General Projects Obligation Gov’tl Fund Fund Bonds Fund Funds Total Emergency medical - - - 901 901 services Roads - - - 12,365 12,365 Community service areas - - - 2,309 2,309 Driving under the - - - 702 702 influence programs Library - - - 3,673 3,673 Parks - - - 3,356 3,356 Wildlife and grazing - - - 5 5 programs General reserve 13,000 - - - 13,000 Internal financing 3,352 - - - 3,352 Solar plant safety 843 - - - 843 Solar plant mitigation 5,579 - - - 5,579 Automation projects 13,604 - - - 13,604 Building replacement 40,088 - - - 40,088 Organizational 1,704 - - - 1,704 development Tax reduction reserve 40,186 - - - 40,186 Lease financing 717 - - - 717 Capital Projects - 16,451 - - 16,451 Pension Obligation Bonds 8,929 - - - 8,929 Debt service - - - 915 915 Subtotal 152,501 16,451 - 45,856 214,808 Capital Pension Nonmajor General Projects Obligation Gov’tl Fund Fund Bonds Fund Funds Total Assigned to: Tax reduction reserve 11,877 - - - 11,877 General government 2,996 - - - 2,996 Clerk-Recorder programs 1,017 - - - 1,017 Sheriff-Coroner programs 11,221 - - - 11,221 Probation programs 7,771 - - - 7,771 District Attorney 3,852 - - - 3,852 programs Waste Management 2,616 - - - 2,616 programs Planning programs 2,118 - - - 2,118 Emergency Services 1,268 - - - 1,268 Other public protection programs 4,393 - - - 4,393 Foster Care and Adoption programs 4,267 - - - 4,267 Veterans’ Services programs 146 - - - 146 Public ways and facilities 1,361 - - - 1,361 Behavioral Health 16,844 - - 16,844 programs - Public Health programs 2,863 - - - 2,863 Parks projects 559 - - - 559 Subsequent Fiscal Year - 31,859 - - 31,859 Budget Imprest cash 117 - - - 117 Subtotal 107,145 - - - 107,145 93 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Capital Pension Nonmajor General Projects Obligation Gov’tl Fund Fund Bonds Fund Funds Total Unassigned to: Pension obligation bonds - - (3,038) - (3,038) Subtotal - - (3,038) - (3,038) Total $ 288,240 $ 17,980 $ (3,035) $ 69,098 $ 372,283 12. LAPSING ENCUMBRANCES The County allows some encumbrances to lapse at year-end and then automatically reappropriates them as part of the subsequent year’s budget. The following is a summary of lapsing encumbrances at June 30, 2018, to be reappropriated during the next fiscal year (in thousands): Function Total Encumbrances General Government $ 1,496 Health & Sanitation 2,174 Public Protection 4,626 Public Assistance 382 Public Ways and Facilities 11,971 Education 221 Recreational and Cultural Services 1,315 Total Lapsing Encumbrances $ 22,185 13. OTHER COMMITMENTS In 1965, San Luis Obispo County Flood Control and Water Conservation District (District) began payments in accordance with a contract with the State Department of Water Resources (DWR) for a water supply from the State Water Project. Estimated future principal payments for the State Water contract will total $27,278 over the next 17 years. The estimated amounts vary by year. For example, the principal amount due in 2018 is $982 while $2,254 is due in 2035. In 1992 the District entered Water Supply Contracts, of like terms, with various sub-contractors which presently provide resources to cover approximately 85% of the capital costs. The contract with the DWR expires in 2035. A proposed project, the California WaterFix, would require a contract extension agreement for financing beyond 2035. 14. CONTINGENT LIABILITIES The County is subject to various lawsuits, inverse condemnation cases, personnel actions, disputes over tax assessments, and other actions incidental to the ordinary course of County operations. In the opinion of the County Counsel, the total potential claims against the County not covered by insurance, resulting from litigation would not materially affect the financial statements of the County at June 30, 2018. 94 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) 15. LANDFILL POSTCLOSURE CARE COSTS The Los Osos Landfill is a closed facility under the responsibility of the County. State and federal laws and regulations require the County of San Luis Obispo to perform various maintenance and monitoring activities at the site. By agreement with the land owner, the County assumed responsibility for all closure and postclosure costs when the facility stopped accepting waste. As of this date, the landfill closure is complete and only postclosure costs remain. The remaining estimated liability for landfill postclosure costs as of June 30, 2018, is $6,881 (in 2018 dollars). Of this, $4,375 is for the Maintenance Cost and $2,506 is the Corrective Action Cost. The cost estimates were provided by a licensed professional geologist in the Post Closure Maintenance Plan dated July 2017 and the Engineers Estimate of Corrective Action Update dated March 18, 2016. Both reports are required to be updated every five years. However, the actual cost of postclosure care may be higher (or lower) due to inflation, changes in technology, or changes in landfill laws and regulations. Therefore, the cost estimate will be reviewed and adjusted as needed for changes in these factors. 16. TAX ABATEMENTS Tax abatements are agreements between the County and individuals or entities in which the County promises to forgo tax revenues and the individual or entity promises to take specific action that contributes to San Luis Obispo County’s economic development or otherwise benefits the county’s citizens. The County offers property tax abatements through the Agricultural Preserve Program (Program), as provided by the California Land Conservation Act of 1965 also known as the “Williamson Act”. The purpose of the Program is to protect agricultural lands and limited types of open space and outdoor recreation lands of statewide importance. Local agreements are administered under the County Rules of Procedure to Implement the Land Conservation Act of 1965, which were first adopted in 1972. Participation in the Program is voluntary; the agricultural preserve is established at the landowner’s request if Program criteria are met. Once a landowner enters into a contract with the County, the land is reassessed based on the agricultural income producing capability of the land, and the abatement is determined by specific dollar amount. To be eligible for the Program, individual properties must be within a rural use category and meet a minimum size requirement of 40-100 acres depending on the type of land being preserved. Landowners must agree to keep the land in large parcels ranging from 20-320 acres, not to create new parcels smaller than the applicable minimum, and not to create separate conveyance of an existing parcel that would result in separate ownership smaller than the agricultural preserve minimum parcel size. In return, the County will reassess the property on the basis of the agricultural income producing capacity of the land. The minimum term of a contract is 20 years, except for properties located within one mile of an urban reserve line or adjacent to a village reserve line which are eligible for a 10-year minimum term contract. Non-renewal is the most common method for a landowner to terminate a land conservation project; however, a property owner may request cancellation of a land conservation contract in order to terminate the contract on all or a portion of the property within one year after an application is accepted for processing. Under the nonrenewal process, the annual tax assessment increases over a defined period until the assessment reflects the Proposition 13 value, including the annual inflationary factor, of the property. Under the cancellation process, a significant onetime cancellation fee is assessed based upon a certain percentage of the current fair market value of the property. For the fiscal year ended June 30, 2018, the Agricultural Preserve Program tax abatements were $14,069. 95 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) 17. DEFINED BENEFIT PENSION PLAN Description of the System that Administers the Pension Plan San Luis Obispo County Pension Trust (SLOCPT or the Pension Trust) is a public employee retirement system established by the County of San Luis Obispo on November 1, 1958. Ten years later, the Board of Supervisors adopted the present By-Laws and the San Luis Obispo County Employees Retirement Plan (the “Plan”) to provide retirement benefits to the employees of the County. The Pension Trust is administered by the Board of Trustees to provide retirement, disability, death, and survivor benefits for its members. Plan Description The County of San Luis Obispo (the “County”) contributes to the San Luis Obispo County Employees Retirement Plan (the “Plan”), which is an independent multiple-employer cost sharing contributory defined benefit pension plan consisting of five employers: the County of San Luis Obispo (the “Employer”), the Superior Court in San Luis Obispo County, the San Luis Obispo Local Agency Formation Commission, the San Luis Obispo Air Pollution Control District and the San Luis Obispo County Pension Trust. The Plan exists, operates and is constituted under the authority of Section 53215 of Section 17 of Article XVI of the California Constitution and the Government Code Article 1.5 (Pension Trusts), of Chapter 2 (Officers and Employees), of Part 1 (Powers and Duties Common to Cities, Counties and Other Agencies), of Division 2 (Cities, Counties and Other Agencies), of Title 5 (Local Agencies) of the California Government Code. Pursuant to the foregoing California Government Code provisions, the County of San Luis Obispo Board of Supervisors established the Pension Trust by the adoption of Chapter 2.56 of the San Luis Obispo County Code. Following the adoption of Chapter 2.56 of the County Code, the Board of Supervisors adopted the By-Laws of the Pension Trust. The San Luis Obispo County Employees Retirement Plan is part of those By-Laws. The County of San Luis Obispo Board of Supervisors has the sole authority to amend the Plan’s provisions. Participation in the Plan is mandatory for all regular employees. Participants are currently broken into 3 Tiers depending on date of hire: Tier 1 Tier 1 generally includes members hired before January 1, 2011. As of December 31, 2017, there were 1,284 active County employed members in Tier 1. Tier 2 Tier 2 generally includes members hired on or after January 1, 2011 but before January 1, 2013. Tier 2 only applies to members hired after the date each bargaining unit adopted Tier 2. Members hired in a bargaining unit that did not adopt Tier 2 are considered Tier 1 members. As of December 31, 2017, there were 312 active County employed members in Tier 2. Tier 3 Tier 3 includes all members hired on or after January 1, 2013. As of December 31, 2017, there were 974 active County employed members in Tier 3. The Pension Trust and the Plan are both administered by the San Luis Obispo County Pension Trust Board of Trustees (the “Trustees”). Separate stand-alone financial statements are issued for the Plan and are available at the County of San Luis Obispo Auditor-Controller-Treasurer-Tax Collector's office. The Plan’s financial statements are prepared on the accrual basis of accounting. All assets are invested and held pursuant to, and in accordance with, the Investment Policy of the Plan. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due pursuant to formal commitments and statutory or contractual requirements. Benefits and refunds are recognized when due and payable in accordance with the terms of the Plan. 96 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Plan investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. All other securities are valued at the last reported market price at current exchange rates. Summary of Plans and Eligible Participants The active number of County employees and their respective tiers covered by the benefit terms as of December 31, 2017, are shown in the following table: Tiers Summary of Plan Active members Miscellaneous Tier 1 Vested after accumulation of five years of Pension Trust service credit & 1,053 eligible to receive a Service Retirement Allowance after vesting and members attaining a minimum age of 50. Miscellaneous Tier 2 Vested after accumulation of five years of Pension Trust service credit & 260 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 50. Miscellaneous Tier 3 Vested after accumulation of five years of Pension Trust service credit & 875 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 52. Probation Tier 1 Vested after accumulation of five years of Pension Trust service credit & 80 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 50. Probation Tier 2 N/A - Probation Tier 3 Vested after accumulation of five years of Pension Trust service credit & 35 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 50. Safety Tier 1 Vested after accumulation of five years of Pension Trust service credit & 151 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 50. Safety Tier 2 Vested after accumulation of five years of Pension Trust service credit & 52 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 50. Safety Tier 3 Vested after accumulation of five years of Pension Trust service credit & 64 members eligible to receive a Service Retirement Allowance after vesting and attaining a minimum age of 50. Benefit Provisions Members terminating employment before accruing five years of Pension Trust service credit forfeit the right to receive retirement benefits unless they establish reciprocity with another public agency within the prescribed time-period. Non-vested members who terminate service are required to withdraw their accumulated contributions plus accrued interest. The employer contributions forfeited by non-vested members are absorbed back into the Pension Trust Fund. Members who terminate after earning five years of Pension Trust service credit may leave their contributions on deposit and, upon reaching age eligibility, elect to take a retirement. Differences between expected and actual experience for vested or non-vested benefits may result in an increase or decrease to pension expense and net pension liability. Plan participants, upon vesting and attaining the minimum retirement age, are entitled to annual retirement benefits as defined in the Plan document. The applicable retirement formula, minimum retirement age, compensation base, post-retirement cost-of-living adjustment, cost-of-living adjustment carry over, and final compensation maximum may differ depending upon the Plan provisions in effect at the member’s date of hire, the member’s classification, the member’s age, and the member’s bargaining unit. Participants receive their accumulated plan benefits as a life annuity payable monthly upon retirement. In the event of total and permanent disability, participants, upon satisfaction of membership service requirements and other applicable provisions of the Plan, receive disability benefits as defined in the Plan document. The Plan also provides a death benefit of $1,000 (one-thousand) paid to a beneficiary or estate if a member dies after retirement. 97 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) For members within Tier 1, final average salary is the average monthly salary based on the highest twelve consecutive months of earnings and may include a compensation pickup for various management bargaining units. For members with Tier 2 or Tier 3 benefits, final average salary is the average monthly salary based on the highest thirty-six consecutive months of earnings with no pickup. The retirement benefit for Tier 1, Tier 2, and Tier 3 members includes post-retirement cost-of-living adjustments (COLAs) based upon the Consumer Price Index. Tier 1 member COLAs are limited to a maximum of 3% annually. For Tier 2 and Tier 3 members, COLAs are limited to a maximum of 2% annually. There is no minimum COLA requirement, and COLAs must be approved by the Board of Trustees annually. Description of the terms of the Plan’s Deferred Retirement Option Program (DROP) Deferred Retirement Option Program (DROP): A Tier 1 member age 50 or more with 5 or more years of service may elect to participate in the Pension Trust’s DROP. An equal amount to the amount that would have been paid had the member retired, is deposited into a DROP account monthly. The addition to the DROP account is increased each year by the Cost-of-Living Adjustment approved by the Board of Trustees not to exceed 3% per year. Members electing to enter DROP must participate a minimum of 6 months up to a maximum of 5 years. Upon actual retirement, the member may receive the accumulated DROP account balance in the form of a lump sum or as an annuity payment. Contributions Plan members are required by statue to contribute to the pension plan. Members’ contribution rates are formulated based on age at date of entry and the actuarially calculated future benefits. The County is required by statute to contribute the remaining amounts necessary to finance the estimated benefits accrued to its members. Member and employer contribution rates for each plan are as follows: EMPLOYER EMPLOYEE CONTRIBUTION CONTRIBUTION PLAN RATES RATES Miscellaneous Tier 1 18.62-23.72% 14.59-22.97% Miscellaneous Tier 2 18.62-23.72% 8.41-16.07% Miscellaneous Tier 3 18.13-22.49% 7.77-15.43% Probation Tier 1 20.04-20.11% 20.83-27.36% Probation Tier 2 Not negotiated Not negotiated Probation Tier 3 19.54-19.61% 9.59-19.64% Safety Tier 1 27.97-34.64% 19.12-30.79% Safety Tier 2 27.97-34.64% 13.01-21.70% Safety Tier 3 27.36-34.03% 11.81-18.74% The County’s contributions to the Plan for the past three fiscal years were equal to the required contributions for each year and are noted in the chart below. County contributions Fiscal Year Ended (in thousands) June 30, 2016 $31,997 June 30, 2017 $35,415 June 30, 2018 $42,046 In addition, the County contributes towards post-employment benefits other than retirement (See Note 17). 98 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) The San Luis Obispo County Employees Retirement Plan establishes the basic obligations for employer and member contributions and benefits to and of the retirement system. The actual employer and member contribution rates in effect each year are based on recommendations made by an independent actuary that are approved by the Board of Trustees and adopted by the San Luis Obispo County Board of Supervisors. The entire Plan is 68.3% funded as of January 1, 2018; since this is a multi-employer cost sharing plan, the funded status is the same for all employees across the board. In general, this indicates that for every dollar of benefits due, SLOCPT had approximately 68.3 cents available for payment. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Total pension liability represents the portion of the actuarial present value of projected benefit payments attributable to past periods of service for current and inactive employees. The County’s share of the total pension liability as of December 31, 2017, was $1,784,671. The County’s share of the Plan’s fiduciary net position was $1,255,638 as of the same date. As of December 31, 2017, the Plan’s fiduciary net position was 70.36% of the total pension liability. At June 30, 2018, the County reported a liability of $529,033 for its proportionate share of the net pension liability of the Plan. The net pension liability was measured as of December 31, 2017. The total pension liability used to calculate the net pension liability was determined by an actuarial valuation date of January 1, 2017. The actuarial assumptions used in the January 1, 2017 valuation were based on the results of an actuarial experience study for the period January 1, 2011 through December 31, 2015. Measurements as of December 31, 2017, are based on the fair value of assets on that date, and the Total Pension Liability as of the valuation date, January 1, 2017. The actuarial assumptions were rolled forward to the Pension Trust Plan’s fiscal year-end of December 31, 2017. There were no significant events between the January 1, 2017 valuation date and the December 31, 2017 measurement date for the Pension Plan’s GASB Statement No. 67 valuation. The County’s proportion of the net pension liability was based on a projection of the County’s long-term share of contributions to the Plan relative to the projected contributions of all the Plan’s participants, actuarially determined. At December 31, 2017, the County’s proportionate share was 93.67%, compared to 93.10% at December 31, 2016, an increase of 0.57%. For the year ended June 30, 2018, the County recognized pension expense of $77,142. Pension expense represents the change in the net pension liability during the measurement period, adjusted for actual contributions and the deferred recognition of changes in investment gain/loss, actuarial gain/loss, actuarial assumptions or method and plan benefits. At December 31, 2017, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources (in thousands) (in thousands) Deferred outflows of resources – change in proportion $ 3,178 $ - Deferred outflows and inflows of resources – difference between expected and actual experience 6,427 1,023 Deferred outflows of resources – changes in actuarial assumptions 34,893 - Deferred outflows and inflows of resources – net difference between projected and actual earnings on pension plan investments 49,761 71,316 County contributions subsequent to the measurement date 21,561 - $ 115,820 $ 72,339 99 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Deferred outflows of resources above represent the unamortized portion of changes to net pension liability, changes in actuarial assumptions, and the net difference between projected and actual earnings on pension plan investments along with deferred outflows of resources of $21,561 for contributions for the fiscal year ending June 30, 2018 made subsequent to the measurement date of December 31, 2017. The $21,561 of subsequent contributions will be recognized as reduction of the net pension liability in the fiscal year ending June 30, 2019. The difference between projected and actual investment earnings on pension plan investments is amortized over five years on a straight-line basis beginning in the year in which they occur. One-fifth was recognized in pension expense during the Plan’s measurement period, and the remaining difference will be amortized over the remaining four-year period. Changes in assumptions and difference between expected and actual experience are recognized over the average expected remaining service lives of all employees that are provided with pensions through the Plan, determined as of January 1, 2017, and is 4.9676 years. The difference between the actual employer contributions and the proportionate share of the employer contributions during the measurement period ended December 31, 2017 is also recognized over 4.9676 years. Amortizable amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in future pension expense as follows: Year Ending Net Deferred Outflows and Inflows June 30 of Resources (in thousands) 2019 $ 24,309 2020 18,193 2021 (3,353) 2022 (17,229) 2023 - Thereafter - Total $ 21,920 Actuarial Assumptions The total pension liability in the January 1, 2017 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.625% Amortization growth rate Level percentage of payroll Salary increases 2.875% plus service-related merit component COLA increases 2.625% for Tier 1 and 2.00% for Tier 2 and Tier 3 Investment rate of return 7.125%, net of administrative expense Post-Retirement Mortality RP-2014 Mortality Tables with generational mortality improvements using scale MP-2015, a 105% multiplier for healthy males and 115% multiplier for healthy females, and white-collar adjustment applied to RP-2014 The actuarial assumptions used in the January 1, 2017 valuation were based on the results of an actuarial experience study for the period January 1, 2011 – December 31, 2015. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best estimate ranges of expected future real rates of return are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage, adjusted for expected inflation. The target allocation and best estimates of real rates of return for each major asset class are summarized in the following table: 100 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Weighted Average Long-Term Target Expected Real Asset Class Allocation Rate of Return Fixed Income 30% 1.58% Domestic Equities 20% 2.38% International Equities 20% 6.05% Alternative Investments 15% 3.77% Real Estate 15% 4.57% Discount Rate The discount rate used to measure the total pension liability was 7.125%. The projection of cash flows used to determine the discount rate assumed that Plan member contributions will be made at the current contribution rate and that Employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following table presents the net pension liability of all plan employers collectively - the County’s proportionate share is not broken out - calculated using the discount rate of 7.125%, as well as what all employers’ cumulative net pension liability would be if it were calculated using a discount rate that is one percentage-point lower, 6.125%, or one percentage-point higher, 8.125%, than the current rate: 1% Discount 1% Decrease Rate Increase (in thousands) (in thousands) (in thousands) 6.125% 7.125% 8.125% All Employers’ net pension liability $ 823,172 $564,775 $352,821 (includes contract agencies) Pension Plan Fiduciary Net Position Detailed information about the Plan’s fiduciary net position is available in the separately issued San Luis Obispo County Pension Trust CAFR. 18. POST-EMPLOYMENT HEALTHCARE BENEFITS General Information about the OPEB Plan Plan Description The County’s San Luis Obispo County Retiree Health Care Plan (the OPEB Plan), an agent multi-employer defined post-employment benefit (OPEB) plan is administered by the County utilizing an irrevocable trust. The OPEB Plan is funded solely funded by the County for the benefit of its employees. The County assists eligible retirees by paying a portion of their premiums for medical care. The County Board of Supervisors must approve any modification, alteration, or amendment of OPEB benefits. In April 2010, the County established an irrevocable trust with the California Employer’s Retiree Benefit Trust (CERBT) to prefund the future cost of retiree health insurance benefits. The CERBT is an IRS Section 115 trust fund administered by CalPERS. CalPERS issues a publicly available financial report consisting of financial statements and required supplementary information for the CERBT. The report may be obtained by writing to CalPERS, Lincoln Plaza North, 400 Q Street, Sacramento, CA 95811. 101 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) Benefit Eligibility and Employees Covered To be eligible for benefits, a member must be eligible to retire, attain a minimum age of 50-52, depending on date of hire, and complete a minimum of 5 years of service with the County. In addition, the member must begin receiving their County pension within 120 days of termination of employment. Members receiving disability retirements are also eligible to receive the retirement reimbursement. In the event of a retirant’s death, qualified surviving spouses and dependents under the age of 23 are eligible to receive the OPEB benefit. At June 30, 2018 a total of 4,198 employees were covered by the OPEB Plan’s benefit terms: Active Plan Members 3,077 Inactive Plan Members 996 Inactive Plan members entitled to but not yet receiving benefits 125 Total 4,198 Benefits Provided The County contracts with BCC to provide healthcare, vision, and dental benefits to eligible county retirees and their dependents. Through BCC, retirees are offered substantially the same health plans as active County employees as well as unique plans for retirees receiving Medicare benefits. Retirees who elect to participate in a County-sponsored health insurance plan are eligible to a monthly subsidy funded by the County’s OPEB benefit. The amounts the County contributes toward retiree medical premiums depends on bargaining unit. In FY 17-18 the County provided the following to eligible retirees: Non-management Employees Management Employees Calendar Year 2017 $128 per month $139 per month Calendar Year 2018 $133 per month $139 per month Contributions The County makes all contributions to the trustee for investment and reinvestment pursuant to the terms of the agreement with the CERBT. Employees are not required to contribute to the plan. For the fiscal year ended June 30, 2018, the funding was a combination of direct premium payments to contracted medical, dental and vision providers, plus a contribution of $995 thousand to the CERBT. The County has selected the Actuarially Determined Contribution (ADC) funding method of contributing 100% of the ADC to fund the CERBT. Net OPEB Liability The County reported a net OPEB liability of $10.7 million as of June 30, 2018. The June 30, 2018 net OPEB Liability was determined by the actuary using roll-forward procedures from the actuarial valuation dated June 30, 2017. There were no significant events between the June 30, 2017 and the June 30, 2018 dates which impacted the OPEB Plan’s GASB Statement No. 75 valuation roll-forward. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are 102 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The actuarial calculation for the County’s scheduled reimbursements to actual and potential retirants is sufficiently small enough that the County’s premium reimbursement is less than the recalculated health premium rates at each age; therefore, the County does not have a retiree premium implicit rate subsidy. The total OPEB liability as of June 30, 2018 was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Inflation 2.625% Medical inflation 3.0% Expensing method Entry Age Normal cost method Amortization growth rate Level percentage of payroll over a rolling amortization period of 15 years Reimbursement eligibility 40% of all retirants will apply for and receive the reimbursement Salary increases 2.625% per annum COLA increases 3.375% per annum Investment rate of return 7.28% Post-retirement mortality RP-2000 Mortality Tables projected to the year 2021 with a 10- year “set-forward” for disabled lives The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period January 1, 2011 through December 31, 2015. Discount Rate The actuarially assumed discount rate of 7.28% per annum, compounded annually, reflects the County’s current policy of pay-as-you-go plus additional funding of the OPEB liability, and the County’s ongoing selection of a “less conservative” (Strategy 1) portfolio invested by the CERBT. The periods of projected benefit payments to which the long-term expected rate of returns are applied is determined by the CERBT. Based on these assumptions, the OPEB Plan’s fiduciary net position was projected to be available to make projected future benefit payments for current members for all future years. Therefore, the long- term expected rate of return on the OPEB Plan investments was applied to all periods of projected benefit payments to determine the total liability. 103 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) The CERBT Strategy 1 portfolio consists of the following assets managed internally by the California Public Employees Retirement System (CalPERS) and/or external advisors: Geometric Geometric Target Return 1 -10 Return 11 -60 Asset Class Allocation Target Range Years Years Global Equity 59% plus/minus 5% 6.80% 8.90% Fixed Income 25% plus/minus 5% 3.10% 5.54% Treasury Inflation-Protected Securities 5% plus/minus 3% 2.25% 4.38% (TIPS) Global Real Estate Investment Trusts 8% plus/minus 5% 5.50% 5.79% (REITs) Commodities 3% plus/minus 3% - - Cash - plus 2% - - The long-term expected real rate of return for Strategy 1 is assumed to be 4.53%. The long-term annualized expected real rate of investment returns, net of expenses, for the CERBT Strategy 1 portfolio is a geometric representation of the combined compound returns for time periods 1 – 10 years and 11-60 years. Changes in the Net OPEB Liability The table below shows the changes in the total OPEB liability, the OPEB Plan fiduciary net position, and the net OPEB liability over the past fiscal year: Total OPEB Plan Fiduciary Net OPEB Liability Less Net Position Equals Liability Balances as of June 30, 2017 $26,775 $15,860 $10,915 Projected Changes for fiscal year-end June 30, 2018: Service Cost 688 - 688 Interest Cost 1,949 - 1,949 Actuarial Gains/Losses - - - Change in Assumptions - - - Net Investment Income - 1,155 (1,155) Benefit Payments (1,690) (1,690) - Employer Contributions - 1,707 (1,707) Administrative Expenses - (7) 7 Net Projected Changes 947 1,165 (216) Projected Balances as of June 30, 2018 $27,722 $17,025 $10,697 Total OPEB liability represents the portion of the actuarial present value of projected benefit payments to be provided to current and inactive employees that is attributable to the employees’ past periods of service. Plan fiduciary net position describes the resources available to pay for the cost of OPEB benefits. The Net OPEB liability is the amount remaining after the OPEB Plan’s fiduciary net position is offset against the County’s total OPEB liability. At June 30, 2018, the OPEB Plan’s fiduciary net position was 61.41% of the total OPEB liability. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Costs The following table presents the net OPEB liability calculated using the discount rate of 7.28%, as well as what the liability would be if it were calculated using a discount rate that is one percentage-point lower, 6.28%, or one percentage-point higher, 8.28%, than the current rate: 104 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) 1% Discount 1% Decrease Rate Increase (in thousands) (in thousands) (in thousands) 6.28% 7.28% 8.28% Net OPEB Liability $ 29,435 $26,775 $23,417 The Public Employees’ Medical and Hospital Care Act (PEMHA) established minimum employer contributions toward medical benefits for employers’ participating in the CalPERS Health Program. Although the County does not participate in the CalPERS Health Program, the County’s practice is to contribute the minimum (PEMHA) benefit amount to eligible county retirees and their dependents. Consequently, the actuary determined the County’s net OPEB liability to be independent of healthcare cost trend rates, and a sensitivity analysis for healthcare costs was not performed. OPEB Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2018, the County recognized OPEB expense of $1,158. OPEB expense represents the change in the net OPEB liability during the measurement period, adjusted for actual contributions and the deferred recognition of changes in investment gain/loss, actuarial gain/loss, actuarial assumptions or method and plan benefits. The County’s discretely presented component unit did not report any OPEB liability, expense or deferred outflows or inflows of resources. At June 30, 2018, the County reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources (in thousands) (in thousands) Deferred outflows and inflows of resources – difference between expected $ $ and actual experience - - Deferred outflows of resources – changes in actuarial assumptions - - Deferred outflows of resources – net difference between projected and actual earnings on pension plan investments - - County contributions subsequent to the measurement date 995 - $ 995 $ - In the current fiscal year there were no amortizable amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB that will be recognized in future pension expense. The Schedule of Changes in the County’s Net OPEB Liability and Related Ratios and the Schedule of Actuarially Determined Contributions and Plan Contributions and Related Ratios are included as Required Supplementary Information following the Notes to the Financial Statements and present multi-year trend information about the OPEB liability, OPEB Plan fiduciary net position, actuarially determined contributions, and covered-employee payroll. 19. CHANGE IN ACCOUNTING PRINCIPLE In June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, to improve accounting and financial reporting by state and local governments for other post-employment benefits (OPEB). As of July 1, 2017, the County implemented Statement No. 75, decreasing beginning net position in the government-wide statements by $12.1 million ($12.0 million in governmental activities and $111 105 NOTES TO THE BASIC FINANCIAL STATEMENTS (Continued) thousand in business-type activities), to remove a $1.1 million net OPEB asset reported in FY 2017-2018 under prior accounting standards, and to establish a beginning net OPEB liability of $10.9 million. The portion of the restatement reportable in the Fund Financial Statements was $57 thousand in the Airport Enterprise Fund, $54 thousand the Golf Enterprise Fund, $924 thousand in the Public Works Internal Service Fund, and $54 thousand in the Garage Internal Service Fund. The discretely presented component unit, First 5 San Luis Obispo County, did not record an OPEB obligation. 20. PRIOR PERIOD ADJUSTMENTS The County recorded a prior period adjustment of $2.0 million in the government-wide statements to reflect the addition of the long-term component of the PG&E CEC loan received by the County in FY 16- 17. The loan supports energy-efficiency upgrades in County facilities. 21. SUBSEQUENT EVENTS Current provisions of the County’s Retirement Plan permit the County to prepay its obligation to the Pension Trust on an annual basis. On July 15, 2018, the County made an advance payment of $53.2 million representing the County’s FY 2018-19 employer retirement and employer paid portion of employee normal retirement contributions to the Pension Trust. The prepayment resulted in a savings of $1.5 million to the County. On July 6, 2017 the Cayucos Fire Protection District (Cayucos Fire) Board of Directors filed an application for dissolution of Cayucos Fire. On July 5, 2018, the County and Cayucos Fire agreed to terms of dissolution, with the County agreeing to take over operations of Cayucos Fire. The County anticipates assuming Cayucos Fire operations in November 2018. In FY 18-19 the Cayucos Fire revenues were budgeted at $595 thousand and expenditures were budgeted at $811 thousand. 106 ____________________________________________________________ REQUIRED SUPPLEMENTARY INFORMATION ____________________________________________________________ 107 108 REQUIRED SUPPLEMENTARY INFORMATION Required supplementary information includes financial information and disclosures that are required by the Governmental Accounting Standards Board (GASB) but are not considered a part of the basic financial statements. Such information includes:  Schedule of the County’s Proportionate Share of the San Luis Obispo County Pension Plan’s Net Pension Liability  Schedule of the County’s Contributions to the San Luis Obispo County Pension Plan  Other Post-Employment Benefits (OPEB) Plan Schedule of Changes in the County’s Net OPEB Liability and Related Ratios  Other Post-Employment Benefits (OPEB) Plan Schedule of Actuarially Determined Plan Contributions and Related Ratios  Budgetary Comparison Schedule – General Fund  Notes to Required Supplementary Information 109 COUNTY OF SAN LUIS OBISPO REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE COUNTY’S PROPORTIONATE SHARE OF THE SAN LUIS OBISPO COUNTY PENSION PLAN’S NET PENSION LIABILITY FOR THE LAST 10 FISCAL YEARS* (in thousands) County's proportionate Plan fiduciary County's County's share of the net net position as Measurement proportion of proportionate County's covered- pension liability a percentage Date the net pension share of the employee as a percentage of of the total December 31st liability net pension liability payroll covered-employee payroll pension liability 2013 92.64% $ 354,823 $ 1 53,942 ** 230.49%** 74.78% 2014 92.65% $ 391,423 $ 1 57,730 ** 248.16%** 73.53% 2015 92.92% $ 506,626 $ 1 66,433 ** 304.40%** 67.57% 2016 93.10% $ 602,805 $ 1 72,192 ** 350.08% 64.59% 2017 93.67% $ 529,033 $ 1 86,278 ** 284.00% 70.36% *In accordance with paragraph 81.a of GASB Statement No. 68 effective June 30, 2014, employers must disclose a 10-year history of their proportionate share of the pension plan’s net pension liability. Additional years will be presented as they become available. **Restated in accordance with the GASB Statement No. 82 definition of covered payroll as the payroll on which contributions to a pension plan are based as of the measurement date. 110 COUNTY OF SAN LUIS OBISPO REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE COUNTY’S CONTRIBUTIONS TO THE SAN LUIS OBISPO COUNTY PENSION PLAN FOR THE LAST 10 FISCAL YEARS* (in thousands) County’s actual Actuarially Contribution contributions as a Fiscal year ending required Actual deficiency County’s covered- percentage of covered- June 30th contributions contributions (excess) employee payroll employee payroll 2014 $ 30,956 $ 28,867 ^ $ 2,089 $ 155,754 ** 18.53% 2015 $ 30,687 $ 30,174 ^ $ 513 $ 162,273 ** 18.59% 2016 $ 32,839 $ 31,997 ^ $ 843 $ 170,552 ** 18.76% 2017 $ 35,066 $ 35,415 ^ $ (349) $ 181,338 ** 19.53% 2018 $ 45,153 $ 42,046 ^ $ 3,107 $ 190,135 22.11% *In accordance with paragraph 81.a of GASB Statement No. 68 effective June 30, 2014, employers must disclose a 10-year history of their contributions to the pension plan. Additional years will be presented as they become available. ^Restated to reflect a fiscal year measurement period. **Restated in accordance with the GASB Statement No. 82 definition of covered payroll as the payroll on which fiscal year contributions to a pension plan are based. Separate stand-alone financial statements were issued for the Pension Plan and are available at the County of San Luis Obispo Auditor-Controller’s office located at the County Government Center Room D220, San Luis Obispo, CA 93408. 111 COUNTY OF SAN LUIS OBISPO REQUIRED SUPPLEMENTARY INFORMATION OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN SCHEDULE OF CHANGES IN THE COUNTY’S NET OPEB LIABILITY AND RELATED RATIOS FOR THE LAST 10 FISCAL YEARS* (in thousands) Total OPEB Liability: Service cost $ 688 Interest 1,949 Actual gains/losses - Change in assumptions - Benefit payments ( 1,690) Net change in total OPEB liability 9 47 Total OPEB liability - beginning 26,775 Total OPEB liability - ending (a) $ 27,722 Plan Fiduciary net position: Employer contributions $ 1,707 Net investment income 1,155 Benefit payments ( 1,690) Administrative expense (7) Net change in plan fiduciary net position 1,165 Plan fiduciary net position - beginning 15,860 Plan fiduciary net position - ending (b) $ 17,025 County's net OPEB liability - ending (a) - (b) $ 10,697 Plan fiduciary net position as a percentage of the total OPEB liability 61.4% Covered-employee payroll $ 190,136 County's net OPEB liability as a percentage of covered- employee payroll 5.6% *Employers must disclose a 10-year history of changes in the OPEB Plan. Additional years will be presented as they become available. 112 COUNTY OF SAN LUIS OBISPO REQUIRED SUPPLEMENTARY INFORMATION OTHER POST-EMPLOYMENT BENEFITS (OPEB) PLAN SCHEDULE OF ACTUARIALLY DETERMINED PLAN CONTRIBUTIONS AND RELATED RATIOS FOR THE LAST 10 FISCAL YEARS* (in thousands) Actuarially Plan Contributions Annual Plan Contributions Fiscal Year Ended Determined Plan Over/(Under) Covered-Employee as a % of June 30th Contribution (ADC) Contributions ADC Payroll Covered-Employee Payroll 2017 $ 1,707 $ 1,420 $ (287) $ 181,338 0.78% *Employers must disclose a 10-year history of OPEB Plan actuarially determined contributions. Additional years will be presented as they become available. 113 COUNTY OF SAN LUIS OBISPO REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Variance with Original Final Actual Final Budget Revenues: Taxes $ 181,174 $ 181,174 $ 188,853 $ 7,679 Licenses, permits, and franchises 10,263 10,263 11,139 876 Fines, forfeitures, and penalties 3,825 4 ,119 4 ,179 60 Use of money and property 2,230 2 ,230 1 ,627 (603) Aid from other governments 236,183 243,955 237,095 (6,860) Charges for services 31,809 34,139 33,708 (431) Other revenues 4,258 9 ,886 5 ,226 (4,660) Total Revenues 469,742 485,766 481,827 (3,939) Expenditures: Current: General government 54,138 67,820 50,601 17,219 Public protection 177,258 187,225 171,187 16,038 Public ways and facilities 4,358 10,603 7 ,292 3,311 Health and sanitation 97,297 100,893 93,736 7,157 Public assistance 121,813 124,994 116,291 8,703 Education 585 588 568 20 Contingencies 24,103 21,165 - 21,165 Total Expenditures 479,552 513,288 439,675 73,613 Excess (Deficiency) of Revenues Over (Under) Expenditures (9,810) (27,522) 42,152 69,674 Other Financing Sources (Uses): Transfers in 2,718 3 ,846 1 ,276 (2,570) Transfers out (29,405) ( 36,876) ( 43,945) (7,069) Total Other Financing Sources (Uses) (26,687) (33,030) ( 42,669) (9,639) Net Change in Fund Balances (36,497) (60,552) (517) 60,035 Fund Balances, Beginning 223,365 223,365 223,365 - Fund Balances, Ending $ 186,868 $ 162,813 $ 222,848 $ 6 0,035 114 COUNTY OF SAN LUIS OBISPO REQUIRED SUPPLEMENTARY INFORMATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Explanation of Differences between Budgetary Inflows and Outflows and Accounting Principles Generally Accepted in the United States of America Revenues and Expenditures Sources/Inflows of Resources: Actual amounts (budgetary basis) "Total Revenues" from the budgetary comparison schedule $ 481,827 Revenues for funds not meeting the special revenue fund definition which are presented with the General Fund for financial reporting purposes 1,417 Total revenues as reported on the Statement of Revenues, Expenditures, and Changesin Fund Balances - Governmental Funds $ 483,244 Uses/Outflows of Resources: Actual amounts (budgetary basis) "Total Expenditures" from the budgetary comparison schedule $ 439,675 Expenditures for funds not meeting the special revenue fund definition which are presented with the General Fund for financial reporting purposes 9,844 Total expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds $ 449,519 Other Financing Sources (Uses) of Resources Actual amounts (budgetary basis) "Total Other Financing Sources (Uses)" from the budgetary comparison schedule $ (42,669) Other financing sources (uses) for funds not meeting the special revenue fund definition which are presented with the General Fund for financial reporting purposes (88) Total Other Financing Sources (Uses) as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds $ (42,757) 115 COUNTY OF SAN LUIS OBISPO NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2018 1. BUDGETARY BASIS OF ACCOUNTING A. BUDGETARY ACCOUNTING In accordance with the provisions of Sections 29000 through 29144 inclusive of the California Government Code and other statutory provisions, commonly known as the County Budget Act, the County of San Luis Obispo (the County) prepares and legally adopts a final budget on or before August 30th for each fiscal year. The County operation, commencing July 1st, is governed by the proposed budget, adopted by the Board of Supervisors (Board), in June of the prior year unless the final budget is adopted before June 30. After the budget is approved, the appropriations can be added to, subtracted from, or changed only by Board resolution. All such changes must be within the revenues and reserves estimated as available in the final budget or within revised revenue estimates as approved by the Board. During the fiscal year ended June 30, 2018 the Board of Supervisors approved all necessary supplemental appropriations. Generally, the effects of the supplemental appropriations are to increase the budget for cost of living adjustments and new programs and grants financed by other governmental agencies. An operating budget is adopted each fiscal year for Governmental Funds on a basis consistent with generally accepted accounting principles. Additionally, encumbrance accounting is utilized to assure effective budgetary control. Encumbrances outstanding at year end represent the estimated amount of the expenditures ultimately to result if the unperformed contracts in process at year end are completed or purchase commitments satisfied. Such year end encumbrances are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year and included in the subsequent year’s budget. Unencumbered appropriations lapse at year end. All Governmental, Enterprise, and Internal Service Funds that are under the control of the Board of Supervisors, have legally adopted annual budgets except for the Public Facilities Corporation and Public Financing Authority debt service fund. Although the Enterprise and Internal Service Funds have adopted budgets, there is no appropriation of expenditures and these budgets only serve as spending plans for the year. The legal level of budgetary control (the level on which expenditures may not legally exceed appropriations) is at the department/budget unit and object level except for capital assets, which are controlled at the sub-object level. Object levels of expenditures are as follows: salaries and benefits, services and supplies, other charges, capital assets, and contingencies. Sub-object levels of expenditures for capital assets are land, structures and improvements, and equipment. B. BUDGETARY EXPENDITURES IN EXCESS OF APPROPRIATION During the current fiscal year, no governmental funds had excess expenditures over the related appropriations at the legal level of budgetary control. 116 ____________________________________________________________ OTHER SUPPLEMENTARY INFORMATION ____________________________________________________________ 117 118 ____________________________________________________________ COMBINING FINANCIAL STATEMENTS NONMAJOR GOVERNMENTAL FUNDS ____________________________________________________________ 119 120 NONMAJOR GOVERNMENTAL FUNDS DEBT SERVICE FUNDS: Debt service funds are used to account for the accumulation of resources for and the payment of general long-term debt principal and interest. San Luis Obispo County Public Facilities Corporation (PFC) The PFC is a non-profit public benefit corporation organized to assist public agencies within the County of San Luis Obispo with the acquisition and construction of various public facilities. SLO County Financing Authority The SLO County Financing Authority is a joint exercise of powers authority created to assist in the financing, construction, and equipping of public facilities for its members. SPECIAL REVENUE FUNDS: Special revenue funds are used to account for revenues that are restricted by law or administrative actions to expenditures for specified purpose. Nonmajor special revenue funds used by the County are listed below: Community Development Program Accounts for pass through grants from Housing and Urban Development (HUD) entitlements to be distributed to the County and other local agencies. County Medical Services Program (CMSP) Accounts for resources used to provide for the County Medical Services program which provides medical care for indigents pursuant to the County’s obligation under Welfare and Institution Code Section 17000 et seq. Emergency Medical Services Accounts for payments to physicians, hospitals, and other providers of emergency medical care from revenues imposed and collected by the courts. Driving Under the Influence Programs Accounts for resources collected from persons convicted of driving under the influence to provide education and rehabilitation programs. Fish and Game Accounts for funds generated by fines levied as a result of Fish and Game violations. Road Impact Fees Accounts for resources collected from developers to add, maintain, and improve roads in specific areas where the fees were allocated. 121 NONMAJOR GOVERNMENTAL FUNDS (Continued) Library Accounts for resources used to provide library services throughout the County. Parks Accounts for resources used to provide parks and recreational services countywide. Public Facilities Fees Accounts for resources collected from the building permit process to build public facilities such as fire and law enforcement stations, library and general government structures. Roads Accounts for resources used to maintain the County road system. Wildlife and Grazing Accounts for resources used to provide for range improvements and the control of predators. SPECIAL REVENUE SPECIAL DISTRICT FUNDS: Flood Control Districts Accounts for resources used to provide control and conservation of flood and storm waters, which are mutually exclusive of Enterprise Flood Control District funds. Lighting Districts Accounts for resources used to provide street lighting in unincorporated areas of the County. County Service Areas Accounts for resources used to provide for water and sewer services which are mutually exclusive of Enterprise Fund County Service Areas. 122 COUNTY OF SAN LUIS OBISPO COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2018 (In Thousands) Total Debt Special Nonmajor Service Revenue Governmental Funds Funds Funds Assets Cash and cash equivalents $ 916 $ 66,965 $ 67,881 Restricted cash with fiscal agent 1,797 - 1,797 Accrued property taxes receivable - 1 1 Accounts receivable - 1 00 1 00 Due from other governments - 4,000 4,000 Loans receivable - 23,578 23,578 Advances to other funds - 3,223 3,223 Prepaid items - 24 24 Other assets 1,207 40 1,247 Total assets $ 3,920 $ 97,931 $ 1 01,851 Liabilities Salaries and benefits payable $ - $ 530 $ 530 Accounts payable - 3,235 3,235 Deposits from others - 1,688 1,688 Unearned revenue - 1 66 1 66 Other current liabilities 1,208 - 1,208 Due to other funds - 3 10 3 10 Advances from other funds - 4 29 4 29 Total liabilities 1,208 6,358 7,566 Deferred Inflows of Resources Unavailable revenue - 1,609 1,609 Deferred loans - 23,578 23,578 Total deferred inflows of resources - 25,187 25,187 Fund Balance Nonspendable - 24 24 Restricted 1,797 21,421 23,218 Committed 9 15 44,941 45,856 Total fund balances 2,712 66,386 69,098 Total liabilities, deferred inflows of resources, and fund balances $ 3,920 $ 97,931 $ 1 01,851 123 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Total Debt Special Nonmajor Service Revenue Governmental Funds Funds Funds Revenues Taxes $ - $ 14,730 $ 14,730 Licenses, permits, and franchises - 1 1 Fines, forfeitures, and penalties - 9 63 9 63 Use of money and property 20 5 35 5 55 Aid from other governments - 25,089 25,089 Charges for services 2,076 12,666 14,742 Other revenues - 7 69 7 69 Total revenues 2,096 54,753 56,849 Expenditures Current: Public protection - 3,988 3,988 Public ways and facilities - 34,962 34,962 Health and sanitation - 6,149 6,149 Public assistance - 7 75 7 75 Education - 11,072 11,072 Recreation and cultural services - 10,358 10,358 Debt service: Principal payments 1,159 - 1,159 Interest and fiscal charges 9 17 - 9 17 Total expenditures 2,076 67,304 69,380 Excess (deficiency) of revenues over (under) expenditures 20 (12,551) (12,531) Other Financing Sources (Uses) Transfers in - 22,594 22,594 Transfers out - (6,123) ( 6,123) Total other financing sources (uses) - 16,471 16,471 Net change in fund balances 20 3,920 3,940 Fund balances - beginning 2,692 62,466 65,158 Fund balances - ending $ 2,712 $ 66,386 $ 69,098 124 COUNTY OF SAN LUIS OBISPO COMBINING BALANCE SHEET NONMAJOR DEBT SERVICES FUNDS JUNE 30, 2018 (In Thousands) Total Debt Service Debt Service Nonmajor Public Facilities Financing Debt Service Corporation Authority Funds Assets Cash and cash equivalents $ 898 $ 1 8 $ 916 Restricted cash with fiscal agent 4 58 1,339 1,797 Other assets 3 30 8 77 1,207 Total assets $ 1,686 $ 2,234 $ 3,920 Liabilities and Fund Balance Liabilities Other current liabilities $ 331 $ 877 $ 1,208 Total liabilities 3 31 8 77 1,208 Fund Balances Restricted 4 58 1,339 1,797 Committed 8 97 18 9 15 Total fund balances 1,355 1,357 2,712 Total liabilities and fund balances $ 1,686 $ 2,234 $ 3,920 125 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR DEBT SERVICES FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Total Debt Service Debt Service Nonmajor Public Facilities Financing Debt Service Corporation Authority Funds Revenues Use of money and property $ - $ 2 0 $ 2 0 Charges for services 7 57 1,319 2,076 Total revenues 7 57 1,339 2,096 Expenditures Debt service: Principal payments 3 15 8 44 1,159 Interest and fiscal charges 4 42 4 75 9 17 Total expenditures 7 57 1,319 2,076 Excess (deficiency) of revenues over (under) expenditures - 20 20 Other financing sources (uses) Transfers in - - - Transfers out - - - Total other financing sources (uses) - - - Net change in fund balances - 20 20 Fund balances - beginning 1,355 1,337 2,692 Fund balances - ending $ 1,355 $ 1,357 $ 2,712 126 COUNTY OF SAN LUIS OBISPO COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS JUNE 30, 2018 (In Thousands) Emergency Driving Under Community Medical the Influence Development CMSP Services Programs Assets Cash and cash equivalents $ 1,683 $ - $ 350 $ 740 Accrued property taxes receivable - - - - Accounts receivable, net - - - - Due from other governments - - 5 51 - Loans receivable 23,578 - - - Advances to other funds - - - - Prepaid items - - - 4 Other assets - - - - Total assets $ 25,261 $ - $ 901 $ 744 Liabilities Salaries and benefits payable $ - $ - $ - $ 3 1 Accounts payable 3 47 - - 6 Deposits from others 1,040 - - - Unearned revenue - - - - Due to other funds - - - - Advances from other funds - - - - Total liabilities 1,387 - - 37 Deferred Inflows of Resources Unavailable revenue - - - - Deferred loans 23,578 - - - Total deferred inflows of resources 23,578 - - - Fund Balances Nonspendable - - - 4 Restricted - - - - Committed 2 96 - 9 01 7 03 Assigned - - - - Unassigned - - - - Total fund balances 2 96 - 9 01 7 07 Total liabilities, deferred inflows of resources, and fund balances $ 25,261 $ - $ 901 $ 744 Continued 127 COUNTY OF SAN LUIS OBISPO COMBINING BALANCE SHEET (Continued) NONMAJOR SPECIAL REVENUE FUNDS JUNE 30, 2018 (In Thousands) Road Public Fish and Impact Facilities Game Fees Library Parks Fees Assets Cash and cash equivalents $ 192 $ 9,593 $ 4,021 $ 4,572 $ 11,793 Accrued property taxes receivable - - - - - Accounts receivable, net - - - 100 - Due from other governments - - - - - Loans receivable - - - - - Advances to other funds - - - - - Prepaid items - - - 20 - Other assets - - - - - Total assets $ 192 $ 9,593 $ 4,021 $ 4,692 $ 11,793 Liabilities Salaries and benefits payable $ - $ - $ 242 $ 257 $ - Accounts payable 14 - 104 557 - Deposits from others - - - 150 - Unearned revenue - - - - - Due to other funds - - - - - Advances from other funds - - - 353 - Total liabilities 14 - 346 1,317 - Deferred Inflows of Resources Unavailable revenue - - - - - Deferred loans - - - - - Total deferred inflows of resources - - - - - Fund Balances Nonspendable - - - 20 - Restricted - 9,593 - - 11,793 Committed 178 - 3,675 3,355 - Assigned - - - - - Unassigned - - - - - Total fund balances 178 9,593 3,675 3,375 11,793 Total liabilities, deferred inflows of resources, and fund balances $ 192 $ 9,593 $ 4,021 $ 4,692 $ 11,793 Continued 128 COUNTY OF SAN LUIS OBISPO COMBINING BALANCE SHEET (Continued) NONMAJOR SPECIAL REVENUE FUNDS JUNE 30, 2018 (In Thousands) Total Nonmajor Wildlife Special Special Revenue Roads Grazing Districts Funds Assets Cash and cash equivalents $ 12,992 $ 40 $ 20,989 $ 66,965 Accrued property taxes receivable - - 1 1 Accounts receivable, net - - - 100 Due from other governments 2,982 - 4 67 4,000 Loans receivable - - - 23,578 Advances to other funds - - 3,223 3,223 Prepaid items - - - 24 Other assets 40 - - 40 Total assets $ 16,014 $ 40 $ 24,680 $ 97,931 Liabilities Salaries and benefits payable $ - $ - $ - $ 530 Accounts payable 1,843 - 3 64 3,235 Deposits from others 4 98 - - 1,688 Unearned revenue 1 66 - - 166 Due to other funds - - 3 10 310 Advances from other funds - - 76 429 Total liabilities 2,507 - 7 50 6,358 Deferred Inflows of Resources Unavailable revenue 1,142 - 4 67 1,609 Deferred loans - - - 23,578 Total deferred inflows of resources 1,142 - 4 67 25,187 Fund Balances Nonspendable - - - 24 Restricted - 35 - 21,421 Committed 12,365 5 23,463 44,941 Assigned - - - - Unassigned - - - - Total fund balances 12,365 40 23,463 66,386 Total liabilities, deferred inflows of resources, and fund balances $ 16,014 $ 40 $ 24,680 $ 97,931 129 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Emergency Driving Under Community Medical the Influence Development CMSP Services Programs Revenues Taxes $ - $ - $ - $ - Licenses, permits, and franchises - - - - Fines, forfeitures, and penalties - - 9 35 - Use of money and property 1 1 1 4 Aid from other governments 4,261 31 - - Charges for services - - - 1,397 Other revenues 1 - - 1 Total revenues 4,263 32 9 36 1,402 Expenditures Current: Public protection - - - - Public ways and facilities - - - - Health and sanitation 6,149 - - - Public assistance - - 7 75 - Education - - - 1,233 Recreation and cultural services - - - - Total expenditures 6,149 - 7 75 1,233 Excess (deficiency) of revenues over (under) expenditures ( 1,886) 32 1 61 1 69 Other financing sources (uses) Transfers in 1,454 - - - Transfers out - (794) - (30) Total other financing sources (uses) 1,454 (794) - (30) Net change in fund balances (432) (762) 1 61 1 39 Fund balances - beginning 7 28 7 62 7 40 5 68 Fund balances - ending $ 296 $ - $ 901 $ 707 Continued 130 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (Continued) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Road Public Fish and Impact Facilities Game Fees Library Parks Fees Revenues Taxes $ - $ - $ 8,959 $ - $ - Licenses, permits, and franchises - - - 1 - Fines, forfeitures, and penalties 27 - - 1 - Use of money and property - 73 18 164 106 Aid from other governments - - 153 213 - Charges for services - 2,553 133 5,590 2,275 Other revenues - - 485 76 - Total revenues 27 2,626 9,748 6,045 2,381 Expenditures Current: Public protection 23 - - - - Public ways and facilities - - - - - Health and sanitation - - - - - Public assistance - - - - - Education - - 9,839 - - Recreation and cultural services - - - 10,358 - Total expenditures 23 - 9,839 10,358 - Excess (deficiency) of revenues over (under) expenditures 4 2,626 (91) (4,313) 2,381 Other financing sources (uses) Transfers in - - 667 4,331 - Transfers out - (1,306) (243) (189) (3,360) Total other financing sources (uses) - (1,306) 424 4,142 (3,360) Net change in fund balances 4 1,320 333 (171) (979) Fund balances - beginning 174 8,273 3,342 3,546 12,772 Fund balances - ending $ 178 $ 9,593 $ 3,675 $ 3,375 $ 11,793 Continued 131 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES (Continued) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Total Nonmajor Wildlife Special Special Revenue Roads and Grazing Districts Funds Revenues Taxes $ 1,804 $ - $ 3,967 $ 14,730 Licenses, permits, and franchises - - - 1 Fines, forfeitures, and penalties - - - 963 Use of money and property 58 - 1 09 535 Aid from other governments 20,159 19 2 53 25,089 Charges for services 1 80 - 5 38 12,666 Other revenues 2 01 - 5 769 Total revenues 22,402 19 4,872 54,753 Expenditures Current: Public protection - 2 3,963 3,988 Public ways and facilities 34,871 - 91 34,962 Health and sanitation - - - 6,149 Public assistance - - - 775 Education - - - 11,072 Recreation and cultural services - - - 10,358 Total expenditures 34,871 2 4,054 67,304 Excess (deficiency) of revenues over (under) expenditures (12,469) 17 8 18 (12,551) Other financing sources (uses) Transfers in 13,500 - 2,642 22,594 Transfers out - - (201) (6,123) Total other financing sources (uses) 13,500 - 2,441 16,471 Net change in fund balances 1,031 17 3,259 3,920 Fund balances - beginning 11,334 23 20,204 62,466 Fund balances - ending $ 12,365 $ 40 $ 23,463 $ 66,386 132 COUNTY OF SAN LUIS OBISPO COMBINING BALANCE SHEET NONMAJOR SPECIAL REVENUE FUNDS – SPECIAL DISTRICTS JUNE 30, 2018 (In Thousands) Flood Control Lighting County Districts Districts Service Areas Total Assets Cash and cash equivalents $ 18,405 $ 455 $ 2,129 $ 20,989 Accrued property taxes receivable - - 1 1 Due from other governments 4 67 - - 4 67 Advances to other funds 2,968 - 2 55 3,223 Total assets $ 21,840 $ 455 $ 2,385 $ 24,680 Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities Accounts payable $ 364 $ - $ - $ 364 Due to other funds 3 10 - - 3 10 Advances from other funds - - 76 76 Total liabilities 6 74 - 76 7 50 Deferred Inflows of Resources Unavailable revenue 4 67 - - 4 67 Total deferred inflows of resources 4 67 - - 4 67 Fund Balances Nonspendable - - - - Committed 20,699 4 55 2,309 23,463 Total fund balances 20,699 4 55 2,309 23,463 Total liabilities, deferred inflows of resources, and fund balances $ 21,840 $ 455 $ 2,385 $ 24,680 133 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NONMAJOR SPECIAL REVENUE FUNDS – SPECIAL DISTRICTS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Flood Control Lighting County Districts Districts Service Areas Total Revenues Taxes $ 3,549 $ 3 7 $ 381 $ 3,967 Use of money and property 91 3 15 1 09 Aid from other governments 2 51 - 2 2 53 Charges for services 5 23 11 4 5 38 Other revenues - 5 - 5 Total revenues 4,414 56 4 02 4,872 Expenditures Current: Public protection 3,898 65 - 3,963 Public ways and facilities - - 91 91 Total expenditures 3,898 65 91 4,054 Excess (deficiency) of revenues over (under) expenditures 5 16 (9) 3 11 8 18 Other financing sources (uses) Transfers in 2,474 - 1 68 2,642 Transfers out (141) - (60) (201) Total other financing sources (uses) 2,333 - 1 08 2,441 Net change in fund balances 2,849 (9) 4 19 3,259 Fund balances - beginning 17,850 4 64 1,890 20,204 Fund balances - ending $ 20,699 $ 455 $ 2,309 $ 23,463 134 ____________________________________________________________ BUDGETARY COMPARISON SCHEDULES CAPITAL PROJECTS FUND PUBLIC FACILITIES CORPORATION PENSION OBLIGATION BONDS FUND SLO COUNTY FINANCING AUTHORITY NONMAJOR GOVERNMENTAL FUNDS ____________________________________________________________ 135 136 COUNTY OF SAN LUIS OBISPO CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Fines, forfeitures, and penalties $ - $ - $ 455 $ 455 Use of money and property - - 1 75 1 75 Aid from other governments - 3,295 4 76 (2,819) Charges for services 50 1,757 1,343 (414) Other revenues - 40 2 57 2 17 Total revenues 50 5,092 2,706 (2,386) Expenditures Capital outlay 2,587 25,557 11,828 13,729 Total expenditures 2,587 25,557 11,828 13,729 Excess (deficiency) of revenues over (under) expenditures ( 2,537) (20,465) ( 9,122) 11,343 Other financing sources (uses) Transfers in 2,062 12,976 4,335 (8,641) Transfers out - (216) (216) - Total other financing sources (uses) 2,062 12,760 4,119 (8,641) Net change in fund balances (475) (7,705) (5,003) 2,702 Fund balances - beginning 22,983 22,983 22,983 - Fund balances - ending $ 22,508 $ 15,278 $ 17,980 $ 2,702 137 COUNTY OF SAN LUIS OBISPO PUBLIC FACILITIES CORPORATION SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ - $ - $ - $ - Charges for services - - 7 57 7 57 Total revenues - - 7 57 7 57 Expenditures Debt service: Principal payments - - 3 15 (315) Interest and fiscal charges - - 4 42 (442) Total expenditures - - 7 57 (757) Excess (deficiency) of revenues over (under) expenditures - - - - Other financing sources (uses) Transfers in - - - - Transfers out - - - - Total other financing sources (uses) - - - - Net change in fund balances - - - - Fund balances - beginning 1,355 1,355 1,355 - Fund balances - ending $ 1,355 $ 1,355 $ 1,355 $ - 138 COUNTY OF SAN LUIS OBISPO PENSION OBLIGATION BONDS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ - $ 3,787 $ - $ (3,787) Use of money and property 90 90 3 85 2 95 Other revenues 11,079 14,915 6 17 (14,298) Total revenues 11,169 18,792 1,002 (17,790) Expenditures Debt service: Principal payments 7,265 49,830 49,830 - Interest and fiscal charges 3,373 6,415 10,749 ( 4,334) Total expenditures 10,638 56,245 60,579 ( 4,334) Excess (deficiency) of revenues over (under) expenditures 5 31 (37,453) (59,577) (22,124) Other financing sources (uses) Transfers in 2,000 2,000 25,584 23,584 Total other financing sources (uses) 2,000 2,000 25,584 23,584 Net change in fund balances 2,531 (35,453) (33,993) 1,460 Fund balances - beginning 30,958 30,958 30,958 - Fund balances - ending $ 33,489 $ (4,495) $ (3,035) $ 1,460 139 COUNTY OF SAN LUIS OBISPO SLO COUNTY FINANCING AUTHORITY SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ - $ - $ 2 0 $ 2 0 Charges for services - - 1,319 1,319 Total revenues - - 1,339 1,339 Expenditures Debt service: Principal payments 8 44 (844) Interest and fiscal charges - - 4 75 (475) Total expenditures - - 1,319 ( 1,319) Excess (deficiency) of revenues over (under) expenditures - - 20 20 Net change in fund balances - - 20 20 Fund balances - beginning 1,337 1,337 1,337 - Fund balances - ending $ 1,337 $ 1,337 $ 1,357 $ 2 0 140 COUNTY OF SAN LUIS OBISPO COMMUNITY DEVELOPMENT SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ - $ - $ 1 $ 1 Aid from other governments 3,276 7,313 4,261 (3,052) Other revenues - - 1 1 Total revenues 3,276 7,313 4,263 (3,050) Expenditures Current: Health and sanitation Services and supplies 1,342 1,385 1,841 (456) Other charges 2,888 7,382 4,308 3,074 Contingencies 44 44 - 44 Total expenditures 4,274 8,811 6,149 2,662 Excess (deficiency) of revenues over (under) expenditures (998) ( 1,498) ( 1,886) (388) Other financing sources (uses) Transfers in 9 54 1,454 1,454 - Total other financing sources (uses) 9 54 1,454 1,454 - Net change in fund balances (44) (44) (432) (388) Fund balances - beginning 7 28 7 28 7 28 - Fund balances - ending $ 684 $ 684 $ 296 $ ( 388) 141 COUNTY OF SAN LUIS OBISPO COUNTY MEDICAL SERVICES PROGRAM (CMSP) SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ - $ - $ 1 $ 1 Aid from other governments - - 31 31 Charges for services - - - - Other revenues - - - - Total revenues - - 32 32 Expenditures Current: Public assistance Salaries, wages, and benefits - - - - Services and supplies - - - - Total expenditures - - - - Excess (deficiency) of revenues over (under) expenditures - - 32 32 Other financing sources (uses) Transfers in - - - - Transfers out - (794) (794) - Total other financing sources (uses) - (794) (794) - Net change in fund balances - (794) (762) 32 Fund balances - beginning 7 62 7 62 7 62 - Fund balances - ending $ 762 $ (32) $ - $ 3 2 142 COUNTY OF SAN LUIS OBISPO EMERGENCY MEDICAL SERVICES SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Fines, forfeitures, and penalties $ 800 $ 800 $ 935 $ 135 Use of money and property 1 1 1 - Total revenues 8 01 8 01 9 36 1 35 Expenditures Current: Public assistance Services and supplies 8 01 1,122 7 75 3 47 Total expenditures 8 01 1,122 7 75 3 47 Net change in fund balances - (321) 1 61 4 82 Fund balances - beginning 7 40 7 40 7 40 - Fund balances - ending $ 740 $ 419 $ 901 $ 482 143 COUNTY OF SAN LUIS OBISPO DRIVING UNDER THE INFLUENCE PROGRAMS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ 2 $ 2 $ 4 $ 2 Charges for services 1,284 1,284 1,397 1 13 Other revenues 35 35 1 (34) Total revenues 1,321 1,321 1,402 81 Expenditures Current: Education Salaries, wages, and benefits 8 76 8 76 8 25 51 Service and supplies 4 28 4 28 4 08 20 Contingencies 33 33 - 33 Total expenditures 1,337 1,337 1,233 1 04 Excess (deficiency) of revenues over (under) expenditures (16) (16) 1 69 1 85 Other financing sources (uses) Transfers out - - (30) (30) Total other financing sources (uses) - - (30) (30) Net change in fund balances (16) (16) 1 39 1 55 Fund balances - beginning 5 68 5 68 5 68 - Fund balances - ending $ 552 $ 552 $ 707 $ 155 144 COUNTY OF SAN LUIS OBISPO FISH AND GAME SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Fines, forfeitures, and penalties $ 2 0 $ 2 0 $ 2 7 $ 7 Total revenues 20 20 27 7 Expenditures Current: Public protection Services and supplies 23 24 23 1 Total expenditures 23 24 23 1 Excess (deficiency) of revenues over (under) expenditures (3) (4) 4 8 Net change in fund balances (3) (4) 4 8 Fund balances - beginning 1 74 1 74 1 74 - Fund balances - ending $ 171 $ 170 $ 178 $ 8 145 COUNTY OF SAN LUIS OBISPO ROAD IMPACT FEES SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ - $ - $ 7 3 $ 7 3 Charges for services - 4 23 2,553 2,130 Total revenues - 4 23 2,626 2,203 Expenditures Current: Public protection Other charges - - - - Total expenditures - - - - Excess (deficiency) of revenues over (under) expenditures - 4 23 2,626 2,203 Other financing sources (uses) Transfers in - - - - Transfers out ( 2,212) (3,710) ( 1,306) 2,404 Total other financing sources (uses) ( 2,212) (3,710) ( 1,306) 2,404 Net change in fund balances ( 2,212) ( 3,287) 1,320 4,607 Fund balances - beginning 8,273 8,273 8,273 - Fund balances - ending $ 6,061 $ 4,986 $ 9,593 $ 4,607 146 COUNTY OF SAN LUIS OBISPO LIBRARY SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 8,754 $ 8,754 $ 8,959 $ 205 Use of money and property 17 17 18 1 Aid from other governments 1 16 1 16 1 53 37 Charges for services 1 29 1 29 1 33 4 Other revenues 41 5 16 4 85 (31) Total revenues 9,057 9,532 9,748 2 16 Expenditures Current: Education Salaries, wages, and benefits 6,277 6,427 6,127 3 00 Services and supplies 3,633 3,873 3,692 1 81 Other charges 5 2 54 4 2 50 Capital outlay - 24 16 8 Contingencies 4 95 3 22 - 3 22 Total expenditures 10,410 10,900 9,839 1,061 Excess (deficiency) of revenues over (under) expenditures ( 1,353) ( 1,368) (91) 1,277 Other financing sources (uses) Transfers in 6 67 6 67 6 67 - Transfers out (50) - (243) (243) Total other financing sources (uses) 6 17 6 67 4 24 (243) Net change in fund balances (736) (701) 3 33 1,034 Fund balances - beginning 3,342 3,342 3,342 - Fund balances - ending $ 2,606 $ 2,641 $ 3,675 $ 1,034 147 COUNTY OF SAN LUIS OBISPO PARKS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Fines, forfeitures, and penalties $ 152 $ 257 $ 1 $ ( 256) Licenses, permits, and franchises - - 1 1 Use of money and property 1 45 1 45 1 64 19 Aid from other governments 3 42 2 13 1 71 Charges for services 5,424 5,908 5,590 (318) Other revenues 82 68 76 8 Total revenues 5,806 6,420 6,045 (375) Expenditures Current: Recreation and cultural services Salaries, wages, and benefits 5,253 5,388 5,210 1 78 Services and supplies 3,768 4,976 4,972 4 Other charges 9 35 1,128 1 76 9 52 Capital outlay 4 95 2,041 - 2,041 Contingencies 2 00 - - - Total expenditures 10,651 13,533 10,358 3,175 Excess (deficiency) of revenues over (under) expenditures (4,845) ( 7,113) (4,313) 2,800 Other financing sources (uses) Transfers in 4,867 5,796 4,331 ( 1,465) Transfers out (21) (21) (189) (168) Total other financing sources (uses) 4,846 5,775 4,142 ( 1,633) Net change in fund balances 1 (1,338) (171) 1,167 Fund balances - beginning 3,546 3,546 3,546 - Fund balances - ending $ 3,547 $ 2,208 $ 3,375 $ 1,167 148 COUNTY OF SAN LUIS OBISPO PUBLIC FACILITIES FEES SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Use of money and property $ - $ - $ 106 $ 106 Charges for services 1,924 1,924 2,275 3 51 Total revenues 1,924 1,924 2,381 4 57 Other financing sources (uses) Transfers out ( 1,650) (5,367) ( 3,360) 2,007 Total other financing sources (uses) ( 1,650) (5,367) ( 3,360) 2,007 Net change in fund balances 2 74 (3,443) (979) 2,464 Fund balances - beginning 12,772 12,772 12,772 - Fund balances - ending $ 13,046 $ 9,329 $ 11,793 $ 2,464 149 COUNTY OF SAN LUIS OBISPO ROADS SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 1,721 $ 1,721 $ 1,804 $ 8 3 Use of money and property 25 25 58 33 Aid from other governments 13,773 36,674 20,159 (16,515) Charges for services 1 96 3 24 1 80 (144) Other revenues - 1,245 2 01 (1,044) Total revenues 15,715 39,989 22,402 (17,587) Expenditures Current: Public ways and facilities Services and supplies 18,289 21,907 34,809 (12,902) Other charges 4 46 5 36 62 4 74 Capital outlay 10,590 43,418 - 43,418 Total expenditures 29,325 65,861 34,871 30,990 Excess (deficiency) of revenues over (under) expenditures (13,610) (25,872) (12,469) 13,403 Other financing sources (uses) Transfers in 13,406 15,808 13,500 ( 2,308) Transfers out (4) (4) - 4 Total other financing sources (uses) 13,402 15,804 13,500 ( 2,304) Net change in fund balances (208) (10,068) 1,031 11,099 Fund balances - beginning 11,334 11,334 11,334 - Fund balances - ending $ 11,126 $ 1,266 $ 12,365 $ 11,099 150 COUNTY OF SAN LUIS OBISPO WILDLIFE GRAZING SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Aid from other governments $ 4 $ 4 $ 1 9 $ 1 5 Total revenues 4 4 19 15 Expenditures Current: Public protection Services and supplies 4 4 2 2 Total expenditures 4 4 2 2 Excess (deficiency) of revenues over (under) expenditures - - 17 17 Net change in fund balances - - 17 17 Fund balances - beginning 23 23 23 - Fund balances - ending $ 2 3 $ 2 3 $ 4 0 $ 1 7 151 COUNTY OF SAN LUIS OBISPO FLOOD CONTROL DISTRICTS SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 3,352 $ 3,352 $ 3,549 $ 197 Use of money and property 45 45 91 46 Aid from other governments 6,845 7,049 2 51 (6,798) Charges for services 5 23 5 23 5 23 - Other revenues 1 1 - (1) Total revenues 10,766 10,970 4,414 (6,556) Expenditures Current: Public protection Services and supplies 6,639 7,688 3,886 3,802 Other charges 4,413 4,413 12 4,401 Capital outlay 8 44 8 84 - 8 84 Total expenditures 11,896 12,985 3,898 9,087 Excess (deficiency) of revenues over (under) expenditures ( 1,130) (2,015) 5 16 2,531 Other financing sources (uses) Transfers in 3,703 3,703 2,474 (1,229) Transfers out ( 5,605) (5,605) (141) 5,464 Total other financing sources (uses) ( 1,902) (1,902) 2,333 4,235 Net change in fund balances ( 3,032) (3,917) 2,849 6,766 Fund balances - beginning 17,850 17,850 17,850 - Fund balances - ending $ 14,818 $ 13,933 $ 20,699 $ 6,766 152 COUNTY OF SAN LUIS OBISPO LIGHTING CONTROL DISTRICTS SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 3 9 $ 3 9 $ 3 7 $ (2) Use of money and property 2 2 3 1 Charges for services 9 9 11 2 Other revenues 3 3 5 2 Total revenues 53 53 56 3 Expenditures Current: Public protection Services and supplies 60 60 65 (5) Capital outlay 68 97 - 97 Total expenditures 1 28 1 57 65 92 Excess (deficiency) of revenues over (under) expenditures (75) (104) (9) 95 Other financing sources (uses) Transfers in - - - - Transfers out - - - - Total other financing sources (uses) - - - - Net change in fund balances (75) (104) (9) 95 Fund balances - beginning 4 64 4 64 4 64 - Fund balances - ending $ 389 $ 360 $ 455 $ 9 5 153 COUNTY OF SAN LUIS OBISPO COUNTY SERVICE AREA DISTRICTS SPECIAL REVENUE FUNDS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budgeted Amounts Actual Variance with Original Final Amounts Final Budget Revenues Taxes $ 365 $ 365 $ 381 $ 1 6 Use of money and property 9 9 15 6 Aid from other governments 1 65 1 65 2 (163) Charges for services 4 4 4 - Total revenues 5 43 5 43 4 02 (141) Expenditures Current: Public ways and facilities Services and supplies 3 03 2 90 91 1 99 Capital outlay 38 38 - 38 Total expenditures 3 41 3 28 91 2 37 Excess (deficiency) of revenues over (under) expenditures 2 02 2 15 3 11 96 Other financing sources (uses) Transfers in 1,041 1,041 1 68 (873) Transfers out (1,073) ( 1,086) (60) 1,026 Total other financing sources (uses) (32) (45) 1 08 1 53 Net change in fund balances 1 70 1 70 4 19 2 49 Fund balances - beginning 1,890 1,890 1,890 - Fund balances - ending $ 2,060 $ 2,060 $ 2,309 $ 249 154 ____________________________________________________________ COMBINING FINANCIAL STATEMENTS NONMAJOR ENTERPRISE FUNDS ____________________________________________________________ 155 156 NONMAJOR ENTERPRISE FUNDS ENTERPRISE FUNDS: Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the governing body is to have the costs of providing goods or services to the general public on a continuing basis be financed primarily through user charges, or where the County has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability or other purposes. General Flood Control Zone Accounts for resources used to provide control and conservation of flood and storm waters, which are mutually exclusive of Special Revenue Funds. State Water Project Accounts for revenues, expenses and net position relating to the countywide taxpayers’ obligations associated with the State Water Project, which provides for the delivery of state water into the County. Golf Accounts for the operations and maintenance of County-owned golf courses located in Atascadero, Morro Bay, and San Luis Obispo. Lopez Park Accounts for the accumulation of resources for the repayment of State loans related to the Lopez Lake recreational area. County Service Areas Accounts for resources used to provide for a variety of services such as street lighting, drainage, sewer and road maintenance, which are mutually exclusive of the Special Revenue Funds County Service Areas. 157 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF NET POSITION NONMAJOR ENTERPRISE FUNDS JUNE 30, 2018 (In Thousands) General Flood State Water County Control Zone Project Golf Lopez Park Service Areas Total Assets Current assets: Cash and cash equivalents $ 1,199 $ 13,054 $ 300 $ 23 $ 3,582 $ 18,158 Accounts receivable, net 75 2,657 38 - 196 2,966 Inventories - - 31 - - 31 Prepaid items - - 965 - - 965 Deposits with others - - - - 99 99 Total current assets 1,274 15,711 1,334 23 3,877 22,219 Noncurrent assets: Restricted cash with fiscal agent - - 487 - - 487 Advances to other funds - - - 115 - 115 Capital assets: Nondepreciable Land - - 1,333 - 330 1,663 Construction in progress - - 220 - 1,740 1,960 Water rights - 56,434 - - - 56,434 Depreciable Infrastructure, net - 49 6 - 1,754 1,809 Structures and improvements, net - 6,036 7,889 - 7,423 21,348 Equipment, net - 2 227 - 261 490 Other property, net - - - - 496 496 Total noncurrent assets - 62,521 10,162 115 12,004 84,802 Total assets 1,274 78,232 11,496 138 15,881 107,021 Deferred Outflows of Resources Deferred pensions - - 536 - - 536 Deferred OPEB - - 5 - - 5 Total deferred outflows of resources - - 541 - - 541 Liabilities Current liabilities: Accounts payable 13 5,743 89 - 20 5,865 Salaries and benefits payable - - 63 - - 63 Deposits from others - 2,946 - - 175 3,121 Interest payable - - 35 - 22 57 Unearned revenue - 2,221 - - 259 2,480 Accrued vacation and sick leave - current - - 77 - - 77 Notes and bonds payable - current - - 323 18 199 540 Total current liabilities 13 10,910 587 18 675 12,203 Noncurrent liabilities: Advances from other funds - - 120 - 460 580 Accrued vacation and sick leave - noncurrent - - 126 - - 126 Notes and bonds payable - noncurrent - - 3,872 97 3,571 7,540 Net OPEB Liability - - 49 - - 49 Net Pension Liability - - 2,439 - - 2,439 Total noncurrent liabilities - - 6,606 97 4,031 10,734 Total liabilities 13 10,910 7,193 115 4,706 22,937 Deferred Inflows of Resources Deferred pensions - - 346 - - 346 Total deferred inflows of resources - - 346 - - 346 Net Position Net investment in capital assets - 62,521 5,480 - 8,235 76,236 Unrestricted 1,261 4,801 (982) 23 2,940 8,043 Total net position $ 1,261 $ 67,322 $ 4,498 $ 23 $ 11,175 $ 84,279 158 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) General Flood State Water County Control Zone Project Golf Lopez Park Service Areas Total Operating revenues Charges for services $ 909 $ 6,110 $ 2,582 $ - $ 3,642 $ 13,243 Other revenues - - 2 - 3 3 35 Total operating revenues 909 6,110 2,584 - 3,675 13,278 Operating expenses Salaries and benefits - - 1,624 - - 1,624 Services and supplies 1,048 5,656 1,074 - 3,768 11,546 Depreciation - 204 366 - 515 1,085 Countywide cost allocation 10 26 96 - 5 1 183 Total operating expenses 1,058 5,886 3,160 - 4,334 14,438 Operating income (loss) (149) 224 (576) - ( 659) (1,160) Nonoperating revenues (expenses) Property taxes - 2,075 - - 496 2,571 Interest income 12 100 - - 3 0 142 Interest expense - (38) (140) (3) ( 134) (315) Other nonoperating revenues (expenses) - - (1) - - (1) Aid from governmental agencies - 14 - - 3 17 Total nonoperating revenues (expenses) 12 2,151 (141) (3) 395 2,414 Income (loss) before contributions and transfers (137) 2,375 (717) (3) ( 264) 1,254 Transfers in - - 400 3 9 0 493 Transfers out - - (49) - (9) (58) Change in net position (137) 2,375 (366) - ( 183) 1,689 Net position - beginning 1,398 64,947 4,918 23 11,358 82,644 Cumulative effect of change in accounting principle - - (54) - - (54) Net position - beginning (restated) 1,398 64,947 4,864 23 11,358 82,590 Net position - ending $ 1 ,261 $ 67,322 $ 4,498 $ 23 $ 11,175 $ 84,279 159 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF CASH FLOWS NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) General Flood State Water Control Zone Project Golf Cash Flows From Operating Activities Receipts from customers $ 909 $ 5,986 $ 2,592 Payments to employees for services - - (1,462) Payments for goods and services (1,135) (5,421) (1,058) Net cash provided (used) by operating activities (226) 565 72 Cash Flows from Noncapital Financing Activities Property tax proceeds - 2,075 - Grants and subsidies from other governmental agencies - 14 - Advances from other funds - - 9 Transfers from other funds - - 400 Transfers to other funds - - ( 49) Net cash provided (used) by noncapital financing activities - 2,089 360 Cash Flows from Capital and Related Financing Activities Purchases and construction of capital assets - (2,368) ( 97) Proceeds from sale of capital assets - - - Advances to other funds - - - Advances from other funds - - - Principal paid on capital debt - - (311) Interest paid on capital debt - (38) (175) Net cash provided (used) by capital and related financing activities - (2,406) (583) Cash Flows from Investing Activities Interest received 12 100 - Net cash provided (used) by investing activities 12 100 - Net increase (decrease) in cash and cash equivalents (214) 348 (151) Cash and cash equivalents at beginning of year 1,413 12,706 938 Cash and cash equivalents at end of year $ 1,199 $ 13,054 $ 787 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating income (loss) $ (149) $ 224 $ (576) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense - 204 366 Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources: (Increase) decrease in: Receivables, net (75) (517) 8 Inventory - - ( 31) Prepaid items - - 91 Deferred outflows - pensions - - 174 Deferred outflows - OPEB - - (5) Increase (decrease) in: Accounts payable (2) 299 56 Deposits from others - - - Salaries and benefits payable - - ( 14) Deferred inflows - pensions - - 346 Net OPEB liability - - (5) Net pension liability - - (353) Unearned revenue - 355 - Accrued vacation and sick leave - - 15 Total adjustments (77) 341 648 Net cash provided (used) by operating activities $ (226) $ 565 $ 72 160 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF CASH FLOWS (Continued) NONMAJOR ENTERPRISE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) County Lopez Park Service Areas Total Cash Flows From Operating Activities Receipts from customers $ - $ 3,798 $ 13,285 Payments to employees for services - - (1,462) Payments for goods and services - (3,917) (11,531) Net cash provided (used) by operating activities - (119) 292 Cash Flows from Noncapital Financing Activities Property tax proceeds - 496 2,571 Grants and subsidies from other governmental agencies - 3 17 Advances from other funds - - 9 Transfers from other funds 3 90 493 Transfers to other funds - (9) (58) Net cash provided (used) by noncapital financing activities 3 580 3,032 Cash Flows from Capital and Related Financing Activities Purchases and construction of capital assets - (362) (2,827) Proceeds from sale of capital assets - - - Advances to other funds 18 - 18 Advances from other funds - (17) ( 17) Principal paid on capital debt ( 18) (192) (521) Interest paid on capital debt (3) (135) (351) Net cash provided (used) by capital and related financing activities (3) (706) (3,698) Cash Flows from Investing Activities Interest received - 30 142 Net cash provided (used) by investing activities - 30 142 Net increase (decrease) in cash and cash equivalents - (215) (232) Cash and cash equivalents at beginning of year 23 3,797 18,877 Cash and cash equivalents at end of year $ 23 $ 3,582 $ 18,645 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating income (loss) $ - $ (659) $ (1,160) Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense - 515 1,085 Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources: (Increase) decrease in: Receivables, net - (96) (680) Inventory - - (31) Prepaid items - - 91 Deferred outflows - pensions - - 174 Deferred outflows - OPEB - - (5) Increase (decrease) in: Accounts payable - (18) 335 Deposits from others - 12 12 Salaries and benefits payable - - (14) Deferred inflows - pensions - - 346 Net OPEB liability - - (5) Net pension liability - - (353) Unearned revenue - 127 482 Accrued vacation and sick leave - - 15 Total adjustments - 540 1,452 Net cash provided (used) by operating activities $ - $ (119) $ 292 161 162 ____________________________________________________________ COMBINING FINANCIAL STATEMENTS INTERNAL SERVICE FUNDS ____________________________________________________________ 163 164 INTERNAL SERVICE FUNDS INTERNAL SERVICE FUNDS: Internal Service Funds are used to account for the financing of goods and services provided by one department to other departments on a cost-reimbursement basis. Internal Service Funds used at the County are listed below: Garage Accounts for resources used to provide a vehicle fleet of cars, trucks, and law enforcement vehicles for use by various County departments at the lowest possible maintenance and operating costs. Public Works Accounts for resources used to provide comprehensive engineering services in the form of manpower, equipment and contractual services and supplies to all departments, agencies, and private citizens as requested or required by state law or local ordinance. Combined Insurance Funds Accounts for the operations of the County’s Workers’ Compensation, Protected Self-Insurance, Unemployment, Dental Insurance, and Other Post-Employment Benefits (OPEB) programs. 165 166 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS JUNE 30, 2018 (In Thousands) Combined Public Insurance Garage Works (5 Funds) Total Assets Current assets: Cash and cash equivalents $ 3,998 $ 15,811 $ 26,927 $ 46,736 Accounts receivable, net - 15 - 15 Inventories 15 4 75 - 4 90 Prepaid items - 17 2 51 2 68 Total current assets 4,013 16,318 27,178 47,509 Noncurrent assets: Capital assets: Structures and improvements, net 5 2 74 - 2 79 Equipment, net 5,747 7,444 - 13,191 Total noncurrent assets 5,752 7,718 - 13,470 Total assets 9,765 24,036 27,178 60,979 Deferred Outflows of Resources Deferred pensions 5 62 9,637 - 10,199 Deferred OPEB 5 84 - 89 Total deferred outflows of resources 5 67 9,721 - 10,288 Liabilities Current liabilities: Accounts payable 1 42 3 33 4 53 9 28 Salaries and benefits payable 57 1,147 - 1,204 Self-insurance liability - - 3,307 3,307 Deposits from others - 1,034 - 1,034 Accrued vacation and sick leave 76 1,765 - 1,841 Total current liabilities 2 75 4,279 3,760 8,314 Noncurrent liabilities: Self-insurance liability - - 15,600 15,600 Accrued vacation and sick leave 1 04 1,018 - 1,122 Net OPEB liability 53 9 07 - 9 60 Net pension liability 2,573 44,320 - 46,893 Total noncurrent liabilities 2,730 46,245 15,600 64,575 Total liabilities 3,005 50,524 19,360 72,889 Deferred Inflows of Resources Deferred pensions 3 28 6,657 - 6,985 Total deferred inflows of resources 3 28 6,657 - 6,985 Net Position Net investment in capital assets 5,752 7,718 - 13,470 Unrestricted 1,247 (31,142) 7,818 (22,077) Total net position $ 6,999 $ (23,424) $ 7,818 $ (8,607) 167 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Combined Public Insurance Garage Works (5 Funds) Total Operating revenues Charges for services $ 6,220 $ 38,358 $ 14,106 $ 58,684 Other revenues 23 93 - 1 16 Total operating revenues 6,243 38,451 14,106 58,800 Operating expenses Salaries and benefits 1,601 30,674 2 80 32,555 Services and supplies 3,043 8,300 6,950 18,293 Insurance benefit payments - - 3,606 3,606 Depreciation 1,806 9 65 - 2,771 Countywide cost allocation 1 03 1 29 3 33 5 65 Total operating expenses 6,553 40,068 11,169 57,790 Operating income (loss) (310) ( 1,617) 2,937 1,010 Nonoperating revenues (expenses) Interest income 25 70 1 96 2 91 Other revenues (expense) 2 78 1 - 2 79 Total nonoperating revenues (expenses) 3 03 71 1 96 5 70 Income (loss) before transfers (7) ( 1,546) 3,133 1,580 Transfers in - - - - Transfers out (56) ( 1,094) - ( 1,150) Change in net position (63) ( 2,640) 3,133 4 30 Net position - beginning 7,116 (19,860) 4,685 ( 8,059) Cumulative effect of change in accounting principle (54) (924) - (978) Net position - beginning (restated) 7,062 (20,784) 4,685 ( 9,037) Net position - ending $ 6,999 $ (23,424) $ 7,818 $ (8,607) 168 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Combined Public Insurance Garage Works (5 Funds) Total Cash Flows From Operating Activities Receipts from interfund billings $ 6,243 $ 38,444 $ 14,106 $ 58,793 Payments for goods and services (3,497) (8,462) (3,883) (15,842) Payments to employees for services (1,454) (27,801) (531) (29,786) Payments for insurance benefits - - (4,262) (4,262) Payments for premiums - - (3,658) (3,658) Net cash provided (used) by operating activities 1,292 2,181 1,772 5,245 Cash Flows from Noncapital Financing Activities Transfers to other funds (56) (1,094) - (1,150) Net cash provided (used) by noncapital financing activities (56) (1,094) - (1,150) Cash Flows from Capital and Related Financing Activities Purchases and construction of capital assets (2,024) (674) - (2,698) Proceeds from sale of capital assets 332 - - 332 Net cash provided (used) by capital and related financing activities (1,692) (674) - (2,366) Cash Flows from Investing Activities Interest received 25 70 196 291 Net cash provided (used) by investing activities 25 70 196 291 Net increase (decrease) in cash and cash equivalents (431) 483 1,968 2,020 Cash and cash equivalents at beginning of year 4,429 15,328 24,959 44,716 Cash and cash equivalents at end of year $ 3,998 $ 15,811 $ 26,927 $ 46,736 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating income (loss) $ (310) $ (1,617) $ 2,937 $ 1,010 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 1,806 965 - 2,771 Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources: (Increase) decrease in: Receivables, net - (7) - (7) Inventory (6) (26) - ( 32) Prepaid expenses - (17) - ( 17) Deferred outflows - pensions 164 3,336 - 3,500 Deferred outflows - OPEB (5) (84) - ( 89) Increase (decrease) in: Accounts payable (345) (97) (258) (700) Deposits from others - 107 - 107 Salaries and benefits payable (24) (418) (251) (693) Deferred inflows - pensions 328 6,657 - 6,985 Net OPEB liability (1) (17) - ( 18) Net pension liability (334) (6,789) - (7,123) Accrued vacation and sick leave 19 188 - 207 Self-insurance liability - - (656) (656) Total adjustments 1,602 3,798 (1,165) 4,235 Net cash provided (used) by operating activities $ 1,292 $ 2,181 $ 1,772 $ 5,245 169 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF NET POSITION INTERNAL SERVICE FUNDS – INSURANCE JUNE 30, 2018 (In Thousands) Workers' Protected Unemployment Dental Compensation Self-Insurance Insurance Insurance OPEB Total Assets Current assets: Cash and cash equivalents $ 19,794 $ 6,110 $ 166 $ 702 $ 155 $ 26,927 Prepaid expenses 251 - - - - 251 Total current assets 20,045 6,110 166 702 155 27,178 Total assets 20,045 6,110 166 702 155 27,178 Liabilities Current liabilities: Accounts payable 393 1 - 59 - 453 Self-insurance liability 2,458 849 - - - 3,307 Total current liabilities 2,851 850 - 59 - 3,760 Noncurrent liabilities: Self-insurance liability 13,465 2,135 - - - 15,600 Total noncurrent liabilities 13,465 2,135 - - - 15,600 Total liabilities 16,316 2,985 - 59 - 19,360 Net Position Unrestricted 3,729 3,125 166 643 155 7,818 Total net position $ 3,729 $ 3,125 $ 166 $ 643 $ 155 $ 7,818 170 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS – INSURANCE FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Workers' Protected Unemployment Dental Compensation Self-Insurance Insurance Insurance OPEB Total Operating revenues Charges for services $ 7,231 $ 3,000 $ 155 $ 1,383 $ 2,337 $ 14,106 Total operating revenues 7,231 3,000 155 1,383 2,337 14,106 Operating expenses Salaries and benefits 280 - - - - 280 Services and supplies 3,464 1,765 29 144 1,548 6,950 Insurance benefit payments 1,295 - 122 1,456 733 3,606 Countywide cost allocation 156 170 1 6 - 333 Total operating expenses 5,195 1,935 152 1,606 2,281 11,169 Operating income (loss) 2,036 1,065 3 (223) 56 2,937 Nonoperating revenues (expenses) Interest income 138 48 1 7 2 196 Total nonoperating revenues (expenses) 138 48 1 7 2 196 Income (loss) before transfers 2,174 1,113 4 (216) 58 3,133 Change in net position 2,174 1,113 4 (216) 58 3,133 Net position - beginning 1,555 2,012 162 859 97 4,685 Net position - ending $ 3,729 $ 3,125 $ 166 $ 643 $ 155 $ 7,818 171 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF CASH FLOWS INTERNAL SERVICE FUNDS – INSURANCE FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Workers' Protected Unemployment Dental Compensation Self-Insurance Insurance Insurance OPEB Total Cash Flows From Operating Activities Receipts from interfund billings $ 7 ,231 $ 3,000 $ 155 $ 1,383 $ 2,337 $ 14,106 Payments for goods and services (2,345) (1,094) (30) (127) (287) (3,883) Payments to employees for services (531) - - - - (531) Payments for insurance benefits (1,648) (303) ( 122) (1,456) (733) (4,262) Payments for premiums (1,285) (850) - - (1,523) (3,658) Net cash provided (used) by operating activities 1,422 753 3 (200) (206) 1,772 Cash Flows from Noncapital Financing Activities Grants and subsidies from other governmental agencies - - - - - - Transfers to other funds - - - - - - Net cash provided (used) by noncapital financing activities - - - - - - Cash Flows from Capital and Related Financing Activities Purchases and construction of capital assets - - - - - - Proceeds from sale of capital assets - - - - - - Net cash provided (used) by capital and related financing activities - - - - - - Cash Flows from Investing Activities Interest received 138 48 1 7 2 196 Net cash provided (used) by investing activities 138 48 1 7 2 196 Net increase (decrease) in cash and cash equivalents 1,560 801 4 (193) (204) 1,968 Cash and cash equivalents at beginning of year 1 8,234 5 ,309 162 895 359 24,959 Cash and cash equivalents at end of year $ 19,794 $ 6,110 $ 166 $ 702 $ 155 $ 26,927 Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities Operating income (loss) $ 2 ,036 $ 1,065 $ 3 $ (223) $ 56 $ 2,937 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Changes in assets and liabilities: Increase (decrease) in: Accounts payable (10) (9) - 23 (262) (258) Salaries and benefits payable (251) - - - - (251) Self-insurance liability (353) (303) - - - (656) Total adjustments (614) (312) - 23 (262) (1,165) Net cash provided (used) by operating activities $ 1 ,422 $ 753 $ 3 $ (200) $ (206) $ 1,772 172 ____________________________________________________________ COMBINING FINANCIAL STATEMENTS FIDUCIARY FUNDS ____________________________________________________________ 173 174 FIDUCIARY FUNDS AGENCY FUNDS: These funds account for assets held by the County as an agent for various local governments. The County has the following types of Agency Funds: 1915 Act Service Funds Account for temporary holding of funds for tax assessment areas created under the 1915 Improvement Act. Clearing and Revolving Funds Serve as a temporary holding fund for subsequent disposition to an outside agency or taxing authority. Other Agency Funds Account for temporary holding of funds that are not specifically classified in other agency categories. INVESTMENT TRUST FUNDS: These funds are used by the County to account for the assets of legally separate entities who deposit cash with the County Treasurer. These include school and community college districts; other special districts governed by local boards, regional boards and authorities; courts and pass through funds for tax collections for cities. These funds represent the assets, primarily cash and investments, and the related liability of the County to disburse these monies on demand. The County combines Investment Trust Funds into four reporting types because of their similar nature: School Districts, Special Districts, Courts, and Other Local Boards. 175 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF FIDUCIARY NET POSITION AGENCY FUNDS JUNE 30, 2018 (In Thousands) Clearing and 1915 Act Other Revolving Funds Service Funds Agency Funds (88 Funds) (17 Funds) (30 Funds) Total ASSETS Cash and cash equivalents $ 6 5,134 $ 903 $ 3 9,060 $ 105,097 Total assets $ 6 5,134 $ 903 $ 3 9,060 $ 105,097 LIABILITIES Assets held as agency for others $ 6 5,134 $ 903 $ 3 9,060 $ 105,097 Total liabilities $ 6 5,134 $ 903 $ 3 9,060 $ 105,097 176 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Balance Balance June 30, 2017 Additions Deletions June 30, 2018 Clearing and Revolving Funds (88 Funds) Assets: Cash and cash equivalents $ 47,258 $ 1,268,134 $ 1,250,258 $ 65,134 Total assets $ 47,258 $ 1,268,134 $ 1,250,258 $ 65,134 Liabilities: Assets held as agency for others $ 47,258 $ 1,268,134 $ 1,250,258 $ 65,134 Total liabilities $ 47,258 $ 1,268,134 $ 1,250,258 $ 65,134 1915 Act Service Funds (17 Funds) Assets: Cash and cash equivalents $ 1,321 $ 177 $ 595 $ 903 Total assets $ 1,321 $ 177 $ 595 $ 903 Liabilities: Assets held as agency for others $ 1,321 $ 177 $ 595 $ 903 Total liabilities $ 1,321 $ 177 $ 595 $ 903 Other Agency Funds (30 Funds) Assets: Cash and cash equivalents $ 31,286 $ 422,911 $ 415,137 $ 39,060 Total assets $ 31,286 $ 422,911 $ 415,137 $ 39,060 Liabilities: Assets held as agency for others $ 31,286 $ 422,911 $ 415,137 $ 39,060 Total liabilities $ 31,286 $ 422,911 $ 415,137 $ 39,060 Total All Agency Funds Assets: Cash and cash equivalents $ 79,865 $ 1,691,222 $ 1,665,990 $ 105,097 Total assets $ 79,865 $ 1,691,222 $ 1,665,990 $ 105,097 Liabilities: Assets held as agency for others $ 79,865 $ 1,691,222 $ 1,665,990 $ 105,097 Total liabilities $ 79,865 $ 1,691,222 $ 1,665,990 $ 105,097 177 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF FIDUCIARY NET POSITION INVESTMENT TRUST FUNDS JUNE 30, 2018 (In Thousands) School Special Other Districts Districts Courts Local Boards (38 Funds) (32 Funds) (6 Funds) (19 Funds) Total ASSETS Cash and cash equivalents $ 425,165 $ 1 7,893 $ 1,950 $ 2 0,475 $ 465,483 Total assets $ 425,165 $ 1 7,893 $ 1,950 $ 2 0,475 $ 465,483 NET POSITION Net position held in trust for pool participants $ 425,165 $ 1 7,893 $ 1,950 $ 2 0,475 $ 465,483 Total Net Position $ 425,165 $ 1 7,893 $ 1,950 $ 2 0,475 $ 465,483 178 COUNTY OF SAN LUIS OBISPO COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION INVESTMENT TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) School Special Other Districts Districts Courts Local Boards (38 Funds) (32 Funds) (6 Funds) (19 Funds) Total Additions Contributions to pooled investments $ 1,011,782 $ 1 0,279 $ 2 0,161 $ 3 2,174 $ 1,074,396 Interest 3,803 224 - 214 4,241 Total additions 1,015,585 10,503 20,161 32,388 1,078,637 Deductions Distributions from investment pool 9 51,958 9,177 20,053 33,730 1,014,918 Total deductions 9 51,958 9,177 20,053 33,730 1,014,918 Change in net position 63,627 1,326 108 (1,342) 63,719 Net position - beginning 3 61,538 16,567 1,842 21,817 4 01,764 Net position - ending $ 425,165 $ 1 7,893 $ 1,950 $ 2 0,475 $ 465,483 179 180 ____________________________________________________________ GENERAL FUND DETAIL BUDGETARY COMPARISON SCHEDULES ____________________________________________________________ 181 182 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget General Government - Expenditures Legislative and Administrative Administrative Office Salaries, wages, and benefits $ 2,038 $ 2,014 $ 1,871 $ 143 Services and supplies 560 584 282 302 Expenditure transfers and reimbursements (85) (85) (87) 2 Total 2,513 2,513 2,066 447 Board of Supervisors Salaries, wages, and benefits 1,532 1,532 1,411 121 Services and supplies 228 228 149 79 Expenditure transfers and reimbursements (41) (41) (41) - Total 1,719 1,719 1,519 200 Clerk/Recorder Salaries, wages, and benefits 2,211 2,302 2,196 106 Services and supplies 1,171 1,465 980 485 Capital outlay 20 498 462 36 Expenditure transfers and reimbursements - - (3) 3 Total 3,402 4,265 3,635 630 Total Legislative and Administrative 7,634 8,497 7,220 1,277 Finance Assessor Salaries, wages, and benefits 9,009 9,009 8,594 415 Services and supplies 999 1,638 1,109 529 Capital outlay 30 55 20 35 Total 10,038 10,702 9,723 979 Auditor-Controller-Treasurer-Tax Collector-Public Administrator Salaries, wages, and benefits 7,866 8,029 7,650 379 Services and supplies 665 718 581 137 Expenditure transfers and reimbursements (25) (25) (26) 1 Total 8,506 8,722 8,205 517 Total Finance 18,544 19,424 17,928 1,496 183 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget General Government - Expenditures (Continued) Counsel County Counsel Salaries, wages, and benefits 3,768 3,865 3,635 230 Services and supplies 770 1,208 858 350 Total Counsel 4,538 5,073 4,493 580 Personnel Personnel Salaries, wages, and benefits 2,866 2,957 2,842 115 Services and supplies 780 965 711 254 Capital outlay 7 7 6 1 Expenditure transfers and reimbursements - - (9) 9 Total Personnel 3,653 3,929 3,550 379 Property Management Facilities Management Salaries, wages, and benefits 4,317 4,217 3,988 229 Services and supplies 3,809 4,008 3,689 319 Expenditure transfers and reimbursements ( 1,698) (1,698) ( 1,816) 118 Total 6,428 6,527 5,861 666 Maintenance Projects Services and supplies 6,111 16,855 5,829 11,026 Total 6,111 16,855 5,829 11,026 Central Services Salaries, wages, and benefits 1,649 1,652 1,585 67 Services and supplies 2,773 2,770 2,707 63 Other charges 103 103 103 - Expenditure transfers and reimbursements (540) (540) (516) (24) Total 3,985 3,985 3,879 106 Total Property Management 16,524 27,367 15,569 11,798 184 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget General Government - Expenditures (Continued) Other General Information Technology Salaries, wages, and benefits 12,273 12,343 11,827 516 Services and supplies 4,740 4,782 4,281 501 Expenditure transfers and reimbursements ( 5,497) (5,520) ( 5,789) 269 Other charges 23 23 8 15 Total 11,539 11,628 10,327 1,301 Risk Management Salaries, wages, and benefits 934 949 905 44 Services and supplies 843 843 843 - Expenditure transfers and reimbursements (61) (61) (61) - Total 1,716 1,731 1,687 44 Non-Department Financing Uses Expenditure transfers and reimbursements (12,451) (12,451) (12,494) 43 Other charges - - 60 (60) Total (12,451) (12,451) (12,434) (17) Contributions to Other Agencies Services and supplies 1,942 2,098 1,889 209 Other charges 51 51 - 51 Total 1,993 2,149 1,889 260 Non-Departmental Other Expenditures Services and supplies 448 473 372 101 Total 448 473 372 101 Total Other General 3,245 3,530 1,841 1,689 Total General Government 54,138 67,820 50,601 17,219 Public Protection - Expenditures Judicial Court Operations Fund Other charges 2,427 2,427 2,401 26 Total 2,427 2,427 2,401 26 District Attorney Salaries, wages, and benefits 14,984 15,098 14,402 696 Services and supplies 1,779 1,926 1,823 103 Other charges 202 332 320 12 Capital outlay - 7 5 2 Expenditure transfers and reimbursements (116) (116) (71) (45) Total 16,849 17,247 16,479 768 185 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget Public Protection - Expenditures (Continued) Child Support Services Salaries, wages, and benefits 3,571 3,571 2,904 667 Services and supplies 946 946 872 74 Total 4,517 4,517 3,776 741 Grand Jury Salaries, wages, and benefits 37 37 12 25 Services and supplies 98 100 83 17 Total 135 137 95 42 Public Defender Services and supplies 6,761 6,761 6,259 502 Total 6,761 6,761 6,259 502 Total Judicial 30,689 31,089 29,010 2,079 Police Protection Sheriff-Coroner Salaries, wages, and benefits 60,357 63,266 61,530 1,736 Services and supplies 12,557 12,472 12,181 291 Other charges 109 532 507 25 Capital outlay 131 783 474 309 Expenditure transfers and reimbursements (192) (192) (142) (50) Total Police Protection 72,962 76,861 74,550 2,311 Detention and Correction Probation Department Salaries, wages, and benefits 18,038 18,038 16,988 1,050 Services and supplies 4,991 5,025 4,684 341 Capital outlay - 59 24 35 Expenditure transfers and reimbursements (319) (319) (397) 78 Total Detention and Correction 22,710 22,803 21,299 1,504 186 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget Public Protection - Expenditures (Continued) Fire Protection County Fire Services and supplies 22,053 22,446 20,221 2,225 Capital outlay 813 2,534 1,121 1,413 Other charges - 156 - 156 Total Fire Protection 22,866 25,136 21,342 3,794 Protective Inspection Agricultural Commissioner Salaries, wages, and benefits 5,143 5,143 4,917 226 Services and supplies 886 980 950 30 Expenditure transfers and reimbursements (2) - - - Other charges 26 26 26 - Total Protective Inspection 6,053 6,149 5,893 256 Other Protection Animal Services Salaries, wages, and benefits 1,777 1,820 1,753 67 Services and supplies 921 987 954 33 Total 2,698 2,807 2,707 100 Emergency Services Salaries, wages, and benefits 875 875 823 52 Services and supplies 773 807 528 279 Other charges 340 344 140 204 Capital outlay 95 95 94 1 Expenditure transfers and reimbursements - - (2) 2 Total 2,083 2,121 1,583 538 Planning Department Salaries, wages, and benefits 12,191 11,566 10,824 742 Services and supplies 3,616 7,241 3,073 4,168 Other charges 52 64 47 17 Capital outlay 5 12 12 - Total 15,864 18,883 13,956 4,927 187 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget Public Protection - Expenditures (Continued) Waste Management Services and supplies 1,309 1,352 830 522 Other charges 24 24 17 7 Total 1,333 1,376 847 529 Total Other Protection 21,978 25,187 19,093 6,094 Total Public Protection 177,258 187,225 171,187 16,038 Public Ways and Facilities - Expenditures Public Works Public Works Services and supplies 4,358 5,716 2,409 3,307 Other charges - 4,854 4,850 4 Capital outlay - 33 33 - Total Public Works 4,358 10,603 7,292 3,311 Total Public Ways and Facilities 4,358 10,603 7,292 3,311 Health and Sanitation - Expenditures Health Public Health Salaries, wages, and benefits 21,798 21,820 19,846 1,974 Services and supplies 6,057 6,707 6,020 687 Other charges 1,946 3,097 1,399 1,698 Capital outlay 20 117 12 105 Expenditure transfers and reimbursement ( 2,125) (2,125) ( 2,336) 211 Total 27,696 29,616 24,941 4,675 Behavioral Health Salaries, wages, and benefits 36,353 34,978 32,984 1,994 Services and supplies 33,162 34,835 34,577 258 Other charges 1,495 2,818 2,720 98 Expenditure transfers and reimbursement ( 1,409) (1,409) ( 1,486) 77 Capital outlay - 55 - 55 Total 69,601 71,277 68,795 2,482 Total Health 97,297 100,893 93,736 7,157 Total Health and Sanitation 97,297 100,893 93,736 7,157 188 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget Public Assistance - Expenditures Administration Department of Social Services Salaries, wages, and benefits 49,370 49,640 47,564 2,076 Services and supplies 18,826 19,119 18,250 869 Other charges 10,649 11,862 9,555 2,307 Capital outlay 62 62 14 48 Expenditure transfers and reimbursement (66) (66) (66) - Total Administration 78,841 80,617 75,317 5,300 Aid Programs Aid Foster Care Non-Fed Services and supplies 92 92 92 - Other charges 25,382 26,215 24,520 1,695 Expenditure transfers and reimbursement (238) (238) (105) (133) Total 25,236 26,069 24,507 1,562 Calworks Assistance Other charges 11,570 11,570 10,473 1,097 Total 11,570 11,570 10,473 1,097 Total Aid Programs 36,806 37,639 34,980 2,659 General Assistance General Assistance Other charges 1,242 1,242 895 347 Total General Assistance 1,242 1,242 895 347 Veterans Services Veterans Services Salaries, wages, and benefits 618 637 610 27 Services and supplies 75 125 125 - Other charges - 105 - 105 Total Veterans Services 693 867 735 132 189 COUNTY OF SAN LUIS OBISPO GENERAL FUND DETAIL SCHEDULE OF EXPENDITURES BUDGET TO ACTUAL COMPARISON (Continued) FOR THE YEAR ENDED JUNE 30, 2018 (In Thousands) Budget Variance with Original Final Actual Final Budget Public Assistance - Expenditures (Continued) Other Assistance Law Enforcement Med Care Salaries, wages, and benefits 3,190 3,179 3,029 150 Services and supplies 1,640 2,049 1,973 76 Expenditure transfers and reimbursement (599) (599) (638) 39 Total Other Assistance 4,231 4,629 4,364 265 Total Public Assistance 121,813 124,994 116,291 8,703 Education - Expenditures Agriculture Education Farm Advisor Salaries, wages, and benefits 467 468 448 20 Services and supplies 118 120 120 - Total Agriculture Education 585 588 568 20 Total Education 585 588 568 20 Total General Fund Expenditures (Before Contingencies) 455,449 492,123 439,675 52,448 Contingencies Appropriation for Contingencies Contingencies - General Fund Appropriation for contingency 24,103 21,165 - 21,165 Total Appropriation for Contingencies 24,103 21,165 - 21,165 Total Contingencies 24,103 21,165 - 21,165 Total General Fund Expenditures $ 4 79,552 $ 513,288 $ 4 39,675 $ 73,613 Explanation of Differences between Budgetary Outflows and GAAP Expenditures Uses/Outflows of Resources Actual amounts (budgetary basis) from the Budget to Actual Comparison Schedule $ 4 39,675 Differences - budget to GAAP: - Expenditures by funds no longer meeting the special revenue fund classification which are presented with the General Fund for financial reporting purposes. 9,844 Total expenditures as reported on the Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds $ 4 49,519 190 ____________________________________________________________ STATISTICAL SECTION ____________________________________________________________ 191 192 COUNTY OF SAN LUIS OBISPO Statistical Section This part of the County of San Luis Obispo’s (County) comprehensive annual financial report presents detailed information as a context for understanding this year’s financial statements, note disclosures, and required supplementary information. Page Financial Trends Information These schedules contain trend information that may assist the reader in assessing the County’s current financial performance by placing it in historical perspective ......................... 195 Revenue Capacity Information These schedules contain information that may assist the reader in assessing the viability of the County’s two most significant local revenue sources: property taxes and sales taxes .............................................................................................................................. 202 Debt Capacity Information These schedules present information that may assist the reader in analyzing the affordability of the County’s current levels of outstanding debt and the County’s ability to issue additional debt in the future ..................................................................................... 207 Demographic and Economic Information These schedules offer economic and demographic indicators that are commonly used for financial analysis and that can enhance a reader’s understanding of the County’s present and ongoing financial status .............................................................................................. 210 Operating Information These schedules contain service and infrastructure indicators about how the information in the County’s financial statements relates to the services the County provides and the activities it performs ......................................................................................................... 212 193 194 COUNTY OF SAN LUIS OBISPO NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Governmental Activities Net investment in capital assets $ 1 ,063,955 $ 1 ,071,844 $ 1 ,084,978 $ 1 ,099,885 $ 1 ,103,924 $ 1 ,112,934 $ 1 ,130,241 $ 1 ,168,573 $ 1 ,178,967 $ 1 ,185,073 Restricted 41,188 36,385 36,258 31,477 28,863 43,109 37,722 41,230 64,822 29,836 Unrestricted 192,271 206,786 234,786 265,454 304,257 325,113 (150,074) (170,962) (226,970) (217,606) Total governmental activities net position $ 1 ,297,414 $ 1 ,315,015 $ 1 ,356,022 $ 1 ,396,816 $ 1 ,437,044 $ 1 ,481,156 $ 1 ,017,889 $ 1 ,038,841 $ 1 ,016,819 $ 997,303 Business-type Activities Net investment in capital assets $ 167,188 $ 160,627 $ 149,097 $ 153,801 $ 167,138 $ 188,485 $ 213,455 $ 237,157 $ 270,246 $ 283,410 Unrestricted 12,266 18,117 38,665 33,081 58,433 98,097 97,173 93,158 85,316 73,113 Total business-type activities net position $ 179,454 $ 178,744 $ 187,762 $ 186,882 $ 225,571 $ 286,582 $ 310,628 $ 330,315 $ 355,562 $ 356,523 Total Primary Government Net investment in capital assets $ 1 ,231,143 $ 1 ,232,471 $ 1 ,234,075 $ 1 ,253,686 $ 1 ,271,062 $ 1 ,301,419 $ 1 ,343,696 $ 1 ,405,730 $ 1 ,449,213 $ 1 ,468,483 Restricted 41,188 36,385 36,258 31,477 28,863 43,109 37,722 41,230 64,822 29,836 Unrestricted 204,537 224,903 273,451 298,535 362,690 423,210 ( 52,901) ( 77,804) (141,654) (144,493) Total primary government net position $ 1 ,476,868 $ 1 ,493,759 $ 1 ,543,784 $ 1 ,583,698 $ 1 ,662,615 $ 1 ,767,738 $ 1 ,328,517 $ 1 ,369,156 $ 1 ,372,381 $ 1 ,353,826 Notes: With the implementation of GASB Statement No. 68, which required the presentation of the County's net pension obligation, Unrestricted Net Position became negative. Source: Statement of Net Assets for FY 2007-2008 through 2011-2012 Statement of Net Position beginning in 2012-2013 and ongoing 195 COUNTY OF SAN LUIS OBISPO CHANGES IN NET POSITION LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Expenses Governmental Activities General government $ 41,658 $ 36,561 $ 35,344 $ 35,231 $ 34,507 $ 36,866 $ 45,598 $ 53,282 $ 56,390 $ 56,858 Public protection 136,755 134,768 132,413 136,219 142,353 148,135 162,432 170,134 187,255 183,814 Public ways and facilities 24,713 24,927 27,365 27,120 28,474 28,253 34,136 33,418 32,098 41,606 Health and sanitation 66,542 68,199 66,657 65,799 69,222 74,313 78,137 88,326 99,150 103,822 Public assistance 97,803 96,645 98,841 96,435 97,929 99,449 110,470 118,089 125,102 122,753 Education 10,967 10,390 10,057 10,000 9,922 9,611 9,457 11,934 12,787 12,754 Recreation and cultural services 7,561 8,708 7,363 7,344 9,735 7,745 9,755 8,702 10,385 8,927 Interest on long term debt 5,433 6,356 6,787 6,620 6,041 5,270 5,124 4,602 4,555 11,840 Total Governmental Activities Expenses 391,432 386,554 384,827 384,768 398,183 409,642 455,109 488,487 527,722 542,374 Business-type Activities Expenses Airport 4,559 5,204 7,732 5,422 5,435 5,664 6,187 6,117 6,391 7,966 Golf 3,249 2,974 2,690 2,863 2,779 2,608 2,968 3,131 3,111 3,297 State Water Contract 5,661 5,630 6,705 6,761 5,536 5,992 6,351 5,848 5,571 5,909 Nacimiento Water Contract 10,144 10,613 11,844 11,901 14,738 13,840 15,776 14,888 14,191 14,044 Lopez Dam Flood Control 6,189 5,813 6,499 5,752 6,548 6,116 6,128 6,220 6,387 7,072 Lopez Park - - - - - - 4 4 4 3 General Flood Control 712 831 928 1,816 746 809 845 824 851 1,056 Transit 987 1,143 1,105 8 - - - - - - County Service Areas 3,434 3,744 3,877 3,836 3,779 3,857 4,194 4,065 4,218 4,445 Los Osos Wastewater 5 6,672 344 231 235 3,807 10,322 10,918 Total Business-type Activities Expenses 34,935 35,952 41,385 45,031 39,905 39,117 42,688 44,904 51,046 54,710 Total Primary Government Expenses $ 426,367 $ 422,506 $ 426,212 $ 429,799 $ 438,088 $ 448,759 $ 497,797 $ 533,391 $ 578,768 $ 597,084 Program Revenues Governmental Activities Fees, Fines, Charges for Services General government $ 17,729 $ 12,878 $ 13,971 $ 17,545 $ 16,575 $ 14,678 $ 12,407 $ 13,702 $ 14,839 $ 12,937 Public protection 23,285 21,072 20,843 15,679 16,352 23,035 20,774 20,768 21,231 23,667 Public ways and facilities 4,190 3,234 11,549 5,069 5,465 4,356 4,255 9,434 7,462 6,155 Health and sanitation 6,863 7,026 7,453 6,014 5,196 6,570 6,631 7,179 6,757 7,501 Public assistance 2,784 925 2,399 2,366 2,920 2,070 2,077 2,107 2,032 1,763 Education 1,922 2,304 2,037 2,545 3,583 1,723 2,998 1,952 1,644 2,006 Recreation and cultural services 3,931 3,822 3,714 3,952 4,435 4,537 5,056 4,975 5,127 5,591 Operating Grants and Contributions General Government 751 377 1,120 628 122 252 54 735 748 321 Public Protection 38,080 40,034 37,244 45,646 50,477 54,233 62,359 63,528 52,205 58,184 Public ways and facilities 10,406 10,679 9,446 11,813 15,018 14,688 14,145 11,025 9,918 11,506 Health and sanitation 49,149 57,784 48,567 44,741 55,064 57,344 62,338 61,950 67,626 76,494 Public assistance 83,175 81,525 86,479 85,505 87,912 89,640 94,775 98,414 102,784 105,848 Education 260 259 289 175 175 102 105 124 132 173 Recreation and cultural services 178 177 357 18 350 - 131 153 273 671 Capital Grants and Contributions General government 384 449 279 843 8 69 156 45 - 349 Public protection 82 - - - - 3,315 9,701 4,420 7,820 656 Public ways and facilities 5,966 10,259 7,411 12,930 3,479 5,570 6,435 6,031 6,655 8,893 Health and sanitation - - - - - - - - - - Public assistance - - - - - - - - - - Recreation and cultural services 423 173 81 247 50 282 1,776 10,804 1,157 191 Total Governmental Activities 249,558 252,977 253,239 255,716 267,181 282,464 306,173 317,346 308,410 322,906 Source: Statement of Activities (continued) 196 COUNTY OF SAN LUIS OBISPO CHANGES IN NET POSITION (Continued) LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Business-type Activities Fees, Fines, Charges for Services Airport 3,734 3,541 3,888 3,719 4,053 4,493 4,883 5,165 5,662 7,158 Golf 2,879 2,653 2,590 2,690 2,639 2,779 2,967 2,589 2,291 2,584 State Water Contract 5,767 6,513 6,453 6,609 6,185 6,358 6,562 6,846 5,941 6,110 Nacimiento Water Contract 284 355 7,968 13,893 13,800 13,685 9,682 17,048 15,149 15,709 Lopez Dam 5,494 6,164 6,359 6,440 6,174 6,123 6,208 6,530 6,708 6,677 Lopez Park - - - - - - - - - - General Flood Control Zone 637 661 1,870 1,252 730 861 794 960 904 909 Transit 63 - - - - - - - - - County Service Areas 2,658 2,784 3,090 3,186 3,352 3,312 3,408 - 2,301 3,662 Los Osos Wastewater - - - - - - - 3,551 3,620 4,467 Operating Grants and Contributions Airport 144 182 180 372 132 127 126 126 126 396 Golf - - - 5 - - 269 - 1,017 - State Water Contract 8 8 10 10 13 13 13 13 14 14 Nacimiento Water Contract 31 31 30 28 29 12 9 9 - 6 Lopez Dam Flood Control 15 15 15 15 15 8 8 8 - 7 Lopez Park - - - - - - - - - - Transit - 1,172 1,097 - - - - - - - General Flood Control 962 - - - - - - - - - County Service Areas 4 4 3 3 3 3 211 295 3 3 Los Osos Wastewater - - - 35 1 - - 2,810 18 - Capital Grants and Contributions Airport 6,750 4,310 2,074 138 572 1,770 365 7,069 15,379 2,211 Nacimiento Water Contract - - - - - - - - - 24 County Service Areas 275 339 288 64 294 2 - - - - Los Osos Wastewater - - 9,357 9,127 35,717 57,507 26,385 4,157 10,086 2,982 Total Business-type Activities Revenues 29,705 28,732 45,272 47,586 73,709 97,053 61,890 57,176 69,219 52,919 Total Primary Government Revenues $ 279,263 $ 281,709 $ 298,511 $ 303,302 $ 340,890 $ 379,517 $ 368,063 $ 374,522 $ 377,629 $ 375,825 Net (Expense)/Revenues Governmental Activities $ (141,874) $ (133,577) $ (131,588) $ (129,052) $ (131,002) $ (127,178) $ (148,936) $ (171,141) $ (219,312) $ (219,468) Business-Type Activities (5,230) (7,220) 3,887 2,555 33,804 57,936 19,202 12,272 18,173 (1,791) Total Primary Government net expense $ (147,104) $ (140,797) $ (127,701) $ (126,497) $ (97,198) $ (69,242) $ (129,734) $ (158,869) $ (201,139) $ (221,259) General Revenue and Other Changes in Net Position Governmental Activities Property Taxes $ 141,195 $ 132,723 $ 139,214 $ 140,288 $ 143,182 $ 152,256 $ 155,374 $ 163,367 $ 173,153 $ 180,051 Other Taxes 14,389 13,358 14,393 16,330 23,940 22,088 22,984 21,953 23,072 25,708 Interest and investment income 4,646 1,690 986 1,202 733 599 3,174 4,401 3,289 3,171 Unrestricted Grants 4,890 3,972 3,520 3,978 3,537 1,727 13,327 3,140 63 2,740 Other revenues - - 172 - 4 - - - 5 2 Transfers 845 (565) 150 8,048 (166) (790) (2,676) (768) (2,292) 2,267 Special Item - - - - - (2,800) - - - Total Governmental Activities 165,965 151,178 158,435 169,846 171,230 173,080 192,183 192,093 197,290 213,939 Business-type Activities Property Taxes 3,678 3,654 3,841 3,799 4,145 4,402 4,782 4,782 3,814 3,858 Other Taxes 27 28 28 28 29 32 - - - - Interest and investment income 6,190 1,900 965 755 385 595 659 847 630 1,272 Other revenues 572 363 447 31 160 40 183 268 338 - Transfers (845) 565 (150) (8,048) 166 790 2,676 768 2,292 (2,267) Total Business-type Activities 9,622 6,510 5,131 (3,435) 4,885 5,859 8,300 6,665 7,074 2,863 Total Primary Government $ 175,587 $ 157,688 $ 163,566 $ 166,411 $ 176,115 $ 178,939 $ 200,483 $ 198,758 $ 204,364 $ 216,802 Change in Net Position Governmental Activities $ 24,091 $ 17,601 $ 26,847 $ 40,794 $ 40,228 $ 45,902 $ 43,247 $ 20,952 $ (22,022) $ (5,529) Business-Type Activities 4,392 (710) 9,018 (880) 38,689 63,795 27,502 18,937 25,247 1,072 Total Primary Government $ 28,483 $ 16,891 $ 35,865 $ 39,914 $ 78,917 $ 109,697 $ 70,749 $ 39,889 $ 3,225 $ (4,457) Source: Statement of Activities 197 COUNTY OF SAN LUIS OBISPO FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2009 2010 General Fund Reserved $ 40,561 $ 49,543 Unreserved 63,626 66,559 Total General Fund $ 104,187 $ 116,102 All Other Governmental Funds Reserved $ 42,697 $ 39,243 Unreserved, reported in: Special Revenue Funds 51,703 55,513 Capital Projects Fund 23,248 20,859 Debt Service Funds - - Total all other Governmental Funds $ 117,648 $ 115,615 2011 2012 2013 2014 2015 2016 2017 2018 General Fund Nonspendable $ 3,333 $ 3,176 $ 3,092 $ 779 $ 5,089 $ 3,454 $ 3,535 $ 18,511 Restricted 7,113 6,682 4,005 3,214 2,945 2,872 2,649 10,083 Committed 62,380 68,880 96,365 116,940 138,140 168,619 164,492 152,501 Assigned - - 104,237 118,248 125,112 122,925 126,596 107,145 Unassigned 87,741 102,291 - - - - - - Total General Fund $ 160,567 $ 181,029 $ 207,699 $ 239,181 $ 271,286 $ 297,870 $ 297,272 $ 288,240 All Other Governmental Funds Nonspendable $ 352 $ 390 $ 596 $ - $ 920 $ 3,776 $ 3 $ 24 Restricted 22,065 19,788 18,311 20,164 20,563 21,317 24,192 24,750 Committed 55,446 61,144 65,903 74,240 78,508 61,926 94,904 62,307 Assigned 94 - - - - - - - Unassigned - - - - (486) - - ( 3,038) Total all other Governmental Funds $ 77,957 $ 81,322 $ 84,810 $ 94,404 $ 99,505 $ 87,019 $ 119,099 $ 84,043 Note: In 2011, the County began implementation of GASB Statement No. 54, which changed the classifications of the fund balance. Fund balance information in years prior to 2011 is presented according to the previous guidelines. Source: Balance Sheet - Governmental Funds 198 COUNTY OF SAN LUIS OBISPO CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenues Taxes $ 1 54,155 $ 153,910 $ 155,419 $ 160,920 $ 171,771 $ 177,765 $ 178,740 $ 185,764 $ 196,822 $ 203,583 Licenses, permits, and franchises 8 ,006 6,906 7,413 7,863 9,247 10,694 10,452 10,539 11,446 11,140 Fines, forfeitures, and penalties 6 ,973 6,078 7,993 6,750 6,654 5,257 5,686 5,173 4 ,339 5,977 Revenues from use of money and property 4 ,122 1,644 1,242 2,273 1,475 1,373 3,864 4,939 3 ,984 3,779 Aid from governmental agencies 1 88,794 199,771 194,625 206,372 209,234 229,283 261,351 256,490 254,350 262,660 Charges for current services 5 4,208 47,065 56,486 45,538 41,690 50,071 43,530 46,308 49,460 49,793 Other revenues 6 ,856 5,358 6,531 8,451 11,342 6 ,235 9,110 11,504 8 ,481 6,869 Total revenues 423,114 420,732 429,709 438,167 451,413 480,678 512,733 520,717 528,882 543,801 Expenditures Current: General government 51,461 45,162 50,321 45,850 44,374 44,317 51,207 54,461 54,918 60,445 Public protection 140,746 136,857 135,636 138,579 143,832 148,155 157,783 156,096 164,839 175,175 Public ways and facilities 42,139 31,093 37,261 40,338 34,178 28,528 29,903 41,044 29,077 42,254 Health and sanitation 67,267 68,442 68,472 67,830 70,021 74,586 75,116 81,591 88,623 99,885 Public assistance 98,170 96,248 100,202 97,185 98,059 99,442 107,104 111,227 113,392 117,066 Education 11,016 13,020 10,191 9,973 9,901 12,205 11,388 10,534 11,560 11,640 Recreational and cultural services 8,654 8,313 7,187 6,998 7,538 7,993 10,104 9,888 9,963 10,358 Debt service: Principal payments 3,264 3,790 4,595 4,435 4,065 5,412 6,070 6,788 7,576 50,989 Interest and fiscal charges 5,181 5,954 6,464 6,289 5,863 5,419 5,209 4,687 4,639 11,666 Debt issuance costs - 550 - - 269 - - - - - Capital outlay 2,849 1,965 3,399 5,540 3,692 11,312 20,019 30,465 11,554 11,828 Total expenditures 430,747 411,394 423,728 423,017 421,792 437,369 473,903 506,781 496,141 591,306 Excess (deficiency) of revenues over (under) expenditures (7,633) 9,338 5,981 15,150 29,621 43,309 38,830 13,936 32,741 (47,505) Continued 199 COUNTY OF SAN LUIS OBISPO CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS (Continued) LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Other Financing Sources Refunding certificates of participation issued - - - - 14,427 - - - - - Premium on refunding certificates of participation issued - - - - 1,418 - - - - - Proceeds of long-term debt - - - - - - - - - - Refunding bonds issued - 42,565 - - - - - - - - Payment to refunded escrow agent - (42,000) - - (16,400) - - - - - Discount on certificates of participation issued - - - - - - - - - - Transfers in 4 3,523 33,044 34,421 35,815 48,113 26,502 3 3,299 35,803 57,668 54,782 Transfers out ( 42,833) (33,065) ( 33,595) (27,138) (47,021) ( 25,935) (34,924) (35,641) ( 58,927) (51,365) Total other financing sources and uses 6 90 544 8 26 8,677 5 37 567 (1,625) 1 62 (1,259) 3 ,417 Special Item - - - - - (2,800) - - - - Net change in fund balances $ ( 6,943) $ 9,882 $ 6,807 $ 23,827 $ 30,158 $ 41,076 $ 37,205 $ 14,098 $ 31,482 $ (44,088) Debt Service as a percentage of 2.13% 2.51% 2.80% 2.73% 2.48% 2.61% 2.57% 2.54% 2.62% 11.25% non-capital expenditures Source: Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 200 COUNTY OF SAN LUIS OBISPO ESTIMATED 30 YEAR PENSION LIABILITY FUNDING SCHEDULE BASED ON JANUARY 1, 2018 ACTUARIAL VALUATION WITH TIER 3 (AB 340) 7.00% INVESTMENT RATE OF RETURN ASSUMPTION 3.00% PAYROLL GROWTH ASSUMPTION IN 2018 AND 2.75% THEREAFTER Input Market Determined Actuarial Actuarial Value Valuation as of Return for Past Contribution Compensation Determined Accrued of Assets Total Normal Market Value of Funded Ratio January 1, Fiscal Year Rate at Valuation Contribution Liability (AAL) (AVA) Unfunded AAL Funded Ratio Cost Rate Assets (MVA) Using MVA 2018 14.92% 42.19% $ 197 $ 83 $ 1,946 $ 1,329 $ 617 68.3% 21.15% $ 1 ,340 68.9% 2019 7.00% 42.80% 202 86 2,026 1,399 627 69.0% 20.54% 1,421 70.2% 2020 7.00% 42.62% 207 88 2,105 1,475 631 70.0% 20.09% 1,505 71.5% 2021 7.00% 41.71% 212 88 2,184 1,573 611 72.0% 19.67% 1,590 72.8% 2022 7.00% 40.69% 217 88 2,262 1,675 587 74.0% 19.24% 1,675 74.0% 2023 7.00% 40.42% 222 90 2,339 1,759 580 75.2% 18.87% 1,759 75.2% 2024 7.00% 40.18% 227 91 2,415 1,843 571 76.3% 18.54% 1,843 76.3% 2025 7.00% 39.98% 233 93 2,489 1,928 561 77.5% 18.25% 1,928 77.5% 2026 7.00% 39.80% 238 95 2,561 2,014 547 78.6% 17.98% 2,014 78.6% 2027 7.00% 39.62% 244 97 2,632 2,100 532 79.8% 17.73% 2,100 79.8% 2028 7.00% 39.48% 250 99 2,701 2,187 514 81.0% 17.51% 2,187 81.0% 2029 7.00% 39.35% 256 101 2,768 2,275 493 82.2% 17.31% 2,275 82.2% 2030 7.00% 39.23% 262 103 2,834 2,364 470 83.4% 17.13% 2,364 83.4% 2031 7.00% 39.13% 268 105 2,897 2,454 443 84.7% 16.97% 2,454 84.7% 2032 7.00% 39.03% 275 107 2,959 2,547 412 86.1% 16.81% 2,547 86.1% 2033 7.00% 38.95% 282 110 3,019 2,641 378 87.5% 16.68% 2,641 87.5% 2034 7.00% 38.86% 289 112 3,077 2,738 339 89.0% 16.55% 2,738 89.0% 2035 7.00% 38.79% 297 115 3,134 2,838 296 90.6% 16.44% 2,838 90.6% 2036 7.00% 38.73% 304 118 3,190 2,942 248 92.2% 16.34% 2,942 92.2% 2037 7.00% 38.67% 312 121 3,246 3,050 195 94.0% 16.25% 3,050 94.0% 2038 7.00% 38.61% 320 124 3,300 3,164 136 95.9% 16.17% 3,164 95.9% 2039 7.00% 38.57% 329 127 3,354 3,283 71 97.9% 16.09% 3,283 97.9% 2040 7.00% 16.02% 337 54 3,408 3,408 - 100.0% 16.02% 3,408 100.0% 2041 7.00% 15.96% 346 55 3,461 3,461 - 100.0% 15.96% 3,461 100.0% 2042 7.00% 15.91% 355 57 3,515 3,515 - 100.0% 15.91% 3,515 100.0% 2043 7.00% 15.86% 365 58 3,569 3,569 - 100.0% 15.86% 3,569 100.0% 2044 7.00% 15.83% 375 59 3,624 3,624 - 100.0% 15.83% 3,624 100.0% 2045 7.00% 15.79% 385 61 3,681 3,681 - 100.0% 15.79% 3,681 100.0% 2046 7.00% 15.77% 395 62 3,738 3,738 - 100.0% 15.77% 3,738 100.0% 2047 7.00% 15.74% 406 64 3,798 3,798 - 100.0% 15.74% 3,798 100.0% 2048 7.00% 15.73% 417 66 3,860 3,860 - 100.0% 15.73% 3,860 100.0% Discussion: This schedule is prepared by the SLO County Pension Trust's actuary and is a supplement to the annual Actuarial Valuation Report. Its purpose is to estimate progress towards fully funding the Actuarial Accrued Liability of the San Luis Obispo County Employees Retirement Plan. Current policy of the Plan Sponsor is to fund the Retirement Plan such that the Unfunded AAL reaches $0 over the 30 years ending in 2040. Notes: Subject to change annually. Funding policy of the Plan Sponsor subject to change. Assumes no actuarial gains and losses, other than from assets. Based on constant population. Tier 3 changes include no DROP, 2% COLA, pay limited to Social Security Taxable Wage Base ($117,000 for 2014), 3 year Final Average Compensation for members hired on or after January 1, 2013. The Unfunded Actuarial Liability presented in this schedule and used for funding purposes is calculated using the smoothed actuarial value of Plan assets. This differs from the Net Pension Liability used for financial statement reporting under GASB Statement No. 68 which is measured using the market value of of Plan assets. Amounts in this schedule differ from those used for financial reporting. This schedule contains values based on a January 1, 2018 actuarial valuation report. Net Pension Liability and related amounts used for financial reporting are based on a June 30, 2018 actuarial valuation report. All dollar amounts in millions. Source: Gabriel Roeder Smith & Company Supplementary exhibit to the 2018 SLO County Pension Trust Actuarial Valuation Report For the Year Beginning January 1, 2018 201 COUNTY OF SAN LUIS OBISPO ASSESSED VALUATION* LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) Percentage Increase Fiscal Net Assessed from Prior Year Secured Unsecured Exemptions Valuations Year Tax Rate 2009 $ 4 2,348,044 $ 1,132,435 $ (891,949) $ 42,588,530 5.3% 1.0020 2010 42,185,284 1,148,662 (914,309) 42,419,637 -0.4% 1.0020 2011 41,846,720 1,118,384 (927,194) 42,037,910 -0.9% 1.0029 2012 41,223,923 1,081,597 (965,089) 41,340,431 -1.7% 1.0030 2013 41,667,316 1,138,202 (1,009,234) 41,796,284 1.1% 1.0040 2014 42,900,845 1,195,631 (1,036,531) 43,059,945 3.0% 1.0040 2015 45,288,599 1,230,775 (1,093,212) 45,426,162 5.5% 1.0040 2016 48,037,099 1,257,845 (1,122,568) 48,172,375 6.0% 1.0037 2017 50,458,742 1,362,539 (1,173,683) 50,647,598 5.1% 1.0040 2018 53,278,739 1,386,183 (1,248,961) 53,415,961 5.5% 1.0040 Source: County Assessed Values, Exemptions and Growth % Book 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 202 tnecreP Total Net Assessed Value Increase from Prior Year Percent Increase from Prior Year for Fiscal Year Ended June 30 *Due to Article XIII‐A,added to the California Constitution by Proposition 13 in 1978, the County does not track the estimated actual value of all County properties. Proposition 13 fixed the base for valuation of real property at the full cash value which appeared on the Assessor's 1975‐76 assessment roll. Thereafter, full cash value can be increased to reflect: (1) annual inflation up to two percent; (2) current market value at time of ownership change; and (3) market value for new construction. As a result, similar properties can have substantially different assessed values based on the date of purchase. COUNTY OF SAN LUIS OBISPO DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (PER $100 OF ASSESSED VALUES) (UNAUDITED) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 County Direct Rates General 1 .0000 1.0000 1.0000 1.0000 1 .0000 1.0000 1.0000 1 .0000 1 .0000 1 .0000 State Water Project 0 .00220 0.00220 0 .00290 0.00300 0.00400 0.00400 0.00400 0 .00374 0.00400 0.00400 Total Direct Rate 1.00220 1.00220 1.00290 1.00300 1.00400 1.00400 1.00400 1.00374 1.00400 1.00400 Cities, Schools, and Special Districts Combined Rates Arroyo Grande 0.0464 0.0464 0.0470 0.0477 0 .0576 0.0580 0.0569 0.0756 0 .0680 0.1085 Atascadero 0 .0975 0.0975 0.0975 0.0442 0 .0452 0.0452 0.0590 0.1373 0 .1373 0.1373 Grover Beach 0 .0382 0.0382 0.0389 0.0396 0 .0495 0.0499 0.0509 0.0940 0 .1023 0.1599 Morro Bay 0 .0492 0.0492 0.0499 0.0501 0 .0510 0.0510 0.0510 0.0688 0 .0683 0.0683 Paso Robles 0 .0948 0.0988 0.0389 0.0816 0 .0815 0.0815 0.0782 0.0955 0 .0828 0.0828 Pismo Beach 0 .0382 0.0382 0.0389 0.0396 0 .0495 0.0499 0.0509 0.0700 0 .0680 0.1085 San Luis Obispo - - - - - - - 0.0683 0 .0683 0.0683 Note: Rates shown represent the most common rates encountered for the tax rate areas within these cities. Source: County Property Tax Rate Book 203 COUNTY OF SAN LUIS OBISPO PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND TEN YEARS AGO (In Thousands) (UNAUDITED) Fiscal Year 2018 Fiscal Year 2009 Percentage of Percentage of Assessed Total County Assessed Total County Taxpayer Industry Value Rank Assessed Value Value Rank Assessed Value Pacific Gas & Electric Co. Utility $ 2 ,663,682 1 4.99% $ 2,404,690 1 5.65% Phillips 66 Company Oil Refinery 137,197 2 0.26% - - - Jamestown Premier Commercial 111,018 3 0.21% - - - AT&T California Telephone 109,458 4 0.20% 84,563 3 0.20% CAP VIII - Mustang Village LLC Apartments 90,677 5 0.17% 73,522 4 0.17% E&J Gallo Winery Winery 76,338 6 0.14% - - - Firestone Walker LLC Brewery 65,986 7 0.12% - - - Pasquini Charles Jr TRE ETAL Multi-Property Owner 60,244 8 0.11% - - - Brodiaea Inc Land Management 57,716 9 0.11% - - - Dynegy Morro Bay LLC Utility 57,158 10 0.11% - - - TOSCO Corp Petroleum & Gas - - - 146,709 2 0.34% Beringer Wine Estates Company Winery - - - 66,017 5 0.16% Plains Exploration & Prod Co Petroleum & Gas - - - 60,220 6 0.14% Martin Hotel Mgmt Co LLC Hotel - - - 5 9,976 7 0.14% Southern California Gas Co. Utility - - - 59,229 8 0.14% Twin Cities Com. Hospital Hospital - - - 55,970 9 0.13% Charter Communications Communications - - - 47,542 10 0.11% Total $ 3 ,429,474 6.42% $ 3,058,438 7.18% Total County Assessed Value $ 53,415,961 $ 42,588,530 Source: County Property Tax System 204 COUNTY OF SAN LUIS OBISPO PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) Collected within the Total Levy Fiscal Year of the Levy Fiscal for the Collected % of Collections in Delinquent % of Year Fiscal Year Amount Original Levy Subsequent Years* Amount Levy Delinquent 2009 $ 416,262 $ 400,120 96.12% N/A $ 1 6,142 3.88% 2010 4 12,698 398,951 96.67% N/A 1 3,747 3.33% 2011 4 08,623 397,830 97.36% N/A 1 0,793 2.64% 2012 4 03,472 396,238 98.21% N/A 7,234 1.79% 2013 4 05,225 399,807 98.66% N/A 5,418 1.34% 2014 4 21,140 416,450 98.89% N/A 4,690 1.11% 2015 4 47,088 442,330 98.94% N/A 4,758 1.06% 2016 4 70,629 466,465 99.12% N/A 4,164 0.88% 2017 4 95,277 490,890 99.11% N/A 4,387 0.89% 2018 5 22,528 517,777 99.09% N/A 4,751 0.91% Note: Amounts do not include Tax collections for Bonds or Special Assessments Source: County Property Tax Booklet *Collections in Subsequent Years are not available from the County's current property tax system 205 COUNTY OF SAN LUIS OBISPO SPECIAL ASSESSMENT BILLINGS AND COLLECTIONS (IN THOUSANDS) (UNAUDITED) Special Special Year ended Assessment Assessment June 30, Billings Collected (a) (a) 2011 $ - $ 3,127 * √ 2012 3,664 3,786 * 2013 3,494 3,545 * 2014 3,497 3,630 2015 3,489 3,598 2016 3,496 3,633 2017 3,490 3,577 2018 5,063 5,196 Note: The billings and collections shown are for the Special Assessment Bonds related to the Los Osos project for which the County has established redemption funds for the purpose of facilitating bond payment in the case of delinquent accounts. 2011 was the first year of special assessment billings and collections. Source: a.County Property Tax System * Amounts restated √ In 2011 the special assessment collected source is Public Works by County Enterprise System. 206 COUNTY OF SAN LUIS OBISPO RATIOS OF TOTAL DEBT OUTSTANDING LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Governmental Activities Certificates of Participation $31,920 $30,420 $28,820 $27,895 $25,662 $24,640 $23,600 $22,527 $21,411 $26,135 Less deferred amounts: For issuance discounts: (115) (111) (107) (103) ( 99) (95) (91) (87) (83) (79) Add deferred amounts: For issuance premiums: - - - - 1,329 1,240 1,152 1,063 975 886 State notes - - - - - - - - - 2,056 Pension Obligation Bonds 127,169 125,444 122,689 119,429 115,624 111,234 146,219 145,291 143,890 99,407 Total bonds and notes payable 158,974 155,753 151,402 147,221 142,516 137,019 170,880 168,794 166,193 128,405 Business-Type Activities Certificates of Participation 2 0,848 2 0,657 1 9,897 1 9,060 1 7,920 1 8,257 1 7,745 1 7,194 1 6,470 15,678 Add deferred amounts: For issuance premiums: - - - - 492 459 426 393 361 328 State Note 3 2,283 3 2,418 3 1,024 3 5,884 3 4,399 4 6,529 7 2,774 8 6,611 8 5,674 87,667 Revenue Bonds 196,456 196,450 196,444 193,483 190,389 187,170 183,813 177,198 173,535 168,410 Add deferred amounts: For issuance premiums: 6,371 6,371 6,371 6,158 5,945 5,732 5,519 1 0,058 9,623 8,926 Unamortized outflow on Bond Refinancing - - - - - - - (4,171) (3,990) (3,808) General Obligation Bonds 1 1,450 1 1,155 1 0,760 1 0,245 9,890 9,530 9,155 8,760 8,350 7,925 Add deferred amounts: For issuance premiums: - - 1,128 1,072 1,015 959 902 846 790 733 Bond Anticipation Notes - - 8,677 - - - - - - - Assessment Bonds - - - 1 5,364 3 9,527 7 6,438 7 9,829 7 9,396 7 8,089 76,746 Total bonds and notes payable 267,408 267,051 274,301 281,266 299,577 345,074 370,163 376,285 368,902 362,605 Total Outstanding Debt $426,382 $422,804 $425,703 $428,487 $442,093 $482,093 $541,043 $545,079 $535,095 $491,010 Percentage of Personal Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Percentage of Assessed Value of Taxable Property* 1.00% 1.00% 1.01% 1.04% 1.06% 1.12% 1.19% 1.13% 1.06% 0.92% Net outstanding debt Per Capita $ 1,576.69 $ 1,547.42 $ 1,571.06 $ 1,578.32 $ 1,624.28 $ 1,770.08 $ 1,972.50 $ 1,960.88 $ 1,916.46 $ 1,752.97 Note: See the Demographic Statistics Schedule for detail information on personal income and population. Source: Notes to the Financial Statements, Note 10 * Due to Article XIII-A, added to the California Constitution by Proposition 13 in 1978, the County does not track the estimated actual value of all County properties; therefore, the ratio of net outstanding debt to the estimated actual value of taxable property is unable to be determined; however, the ratio of net outstanding debt to the assessed value of taxable property is determinable and presented in the table. 207 COUNTY OF SAN LUIS OBISPO RATIOS OF GENERAL OBLIGATION DEBT OUTSTANDING LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Certificates of Participation $18,361 $17,730 $17,075 $16,400 $14,427 $13,675 $12,915 $12,137 $11,326 $10,482 Less deferred amounts: For issuance discounts: - - - - (99) (95) (91) (87) (83) (79) Add deferred amounts: For issuance premiums: - - - - 1,330 1,240 1,152 1,063 975 886 General Obligation Bonds 11,450 11,155 10,760 10,245 9,890 9,530 9,155 8,760 8,350 7,925 Add deferred amounts: For issuance premiums: - - 1,128 1,072 1,015 959 902 846 790 733 State Notes - - - - - - - - - 2,056 Assessment Bonds - - - 15,364 39,527 76,438 79,829 79,396 78,089 76,746 Less resources restricted for principal repayment (3,683) (3,551) (2,848) (2,893) (2,684) (2,683) (2,683) (2,688) (2,692) (2,712) Net Total General Obligation Debt $ 26,128 $ 25,334 $ 26,115 $ 40,188 $ 63,406 $ 99,064 $ 1 01,179 $ 99,427 $ 96,755 $ 96,037 Percentage of Personal Income N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Percentage of Assessed Value of Taxable Property1 0.06% 0.06% 0.06% 0.10% 0.15% 0.23% 0.22% 0.21% 0.19% 0.19% Net outstanding debt Per Capita $ 96.62 $ 92.72 $ 96.38 $ 148.03 $ 232.96 $ 363.73 $ 368.87 $ 357.68 $ 346.53 $ 342.87 Note: See the Demographic Statistics Schedule for detail information on personal income and population. Source: Notes to the Financial Statements, Note 10 1 Due to Article XIII-A, added to the California Constitution by Proposition 13 in 1978, the County does not track the estimated actual value of all County properties; therefore, the ratio of net outstanding debt to the estimated actual value of taxable property is unable to be determined; however, the ratio of net outstanding debt to the assessed value of taxable property is determinable and presented in the table. 208 COUNTY OF SAN LUIS OBISPO LEGAL DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS (In Thousands) (UNAUDITED) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Assessed Value of Property (a) (b) $ 4 2,588,529 $ 42,419,637 $ 42,037,909 $ 41,340,430 $ 41,796,283 $ 43,059,945 $45,426,163 $48,172,375 $50,647,598 $53,415,961 Debt Limit, 1.25% of Assessed Value 532,357 530,245 525,474 516,755 522,454 538,249 567,827 602,155 633,095 667,700 Amount of Debt Applicable to Limit General Obligation Bonds (c) 11,450 11,155 11,888 11,317 10,905 10,489 10,057 9,606 9,140 8,658 Less: Resources Restricted to Paying Principal - - - - - - - - - - Total Debt Applicable 1 1,450 11,155 11,888 11,317 10,905 10,489 10,057 9 ,606 9,140 8,658 Legal Debt Margin $ 520,907 $ 519,090 $ 513,586 $ 505,438 $ 511,549 $ 527,760 $ 557,770 $ 592,549 $ 623,955 $ 659,042 Total Debt Applicable as a Percentage of the Debt Limit 2.15% 2.10% 2.26% 2.19% 2.09% 1.95% 1.77% 1.60% 1.44% 1.30% Source: (a) Property Assessed Value BOE report (years 2000-2008) (b) Countywide Assessed Values & Exemptions 2009 and ongoing years (c) Footnote 10 Bonded Indebtedness and Long-Term Debt Assessed value calculation (in thousands) Locally Assessed-Secured San Luis Obispo Countywide $50,231,425 Pipeline Right-of-Way (Unitary) 6,161 Aircraft 161,828 Total Local Assessed 50,399,414 State Assessed Local Utility 6,815 Unitary 3,009,732 Total State Assessed 3,016,547 Combined Assessed Values Sub-Total Combined Assessed Values 53,254,133 Aircraft 161,828 Total Combined Assessed Values $53,415,961 209 COUNTY OF SAN LUIS OBISPO DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS (UNAUDITED) Personal Income Unemployment Calendar Population (in thousands) Per Capita Income Median Age School Enrollment Rate Year (1,a) (2,a,d) (2,a,d) (4,c) (3,b,e) (2,a) 2009 270,429 $10,237,494 $38,179 39.30 44,874 9.0 2010 273,231 10,532,649 38,994 39.40 44,351 10.0 2011 270,966 10,966,438 40,322 40.30 44,104 9.9 2012 271,483 12,008,355 43,698 39.20 43,022 8.5 2013 272,177 12,547,278 45,388 39.50 42,600 6.4 2014 272,357 12,823,005 45,947 39.50 42,911 5.3 2015 274,293 14,034,209 49,873 39.30 41,853 4.4 2016 277,977 14,552,207 51,442 39.00 43,117 4.5 2017 279,210 N/A N/A N/A 43,112 3.6 2018 280,101 N/A N/A N/A 42,713 3.2 Sources: 1. State Department of Finance 2. Employment Development Department, Research Division, Los Angeles 3. California Department of Education & Cuesta College 4. U.S. Census Bureau Notes: N/A = not available a. Data for Calendar Years b. Data includes kindergarten through grade 12 and Cuesta College c. Calendar year 2012 -2016 figures are projections based on the American Community Survey 5-Year Estimates d. Prior years were revised per the US Department of Commerce e. Data for School Year ending in the stated calendar year 210 COUNTY OF SAN LUIS OBISPO PRINCIPAL EMPLOYERS CURRENT YEAR AND TEN YEARS AGO (UNAUDITED) 2018 2009 Number of Percentage of Total Number of Percentage of Total Employer Employees Rank County Employment Employees Rank County Employment Cal Poly State University, SLO 3,000 1 2.15% 2,693 1 1.91% County of San Luis Obispo 2,920 2 2.09% 2,570 2 1.82% Atascadero State Hospital 2,000 3 1.43% 2,200 3 1.56% Pacific Gas and Electric Company 1,866 4 1.34% 1,719 5 1.22% California Men's Colony 1,517 5 1.09% 2,000 4 1.42% Cal Poly Corporation 1,400 6 1.00% 1,641 6 1.16% Tenet Healthcare 1,305 7 0.94% 1,100 8 0.78% Compass Health Inc 1,200 8 0.86% - - - Lucia Mar Unified School District 1,000 9 0.72% 1,080 9 0.76% Paso Robles Public Schools 935 10 0.67% - - - Cuesta College - - - 1,559 7 1.10% San Luis Coastal Unified School District - - - 873 10 0.62% Total Employment Labor Force 139,500 141,200 Source: 1. SLO Chamber of Commerce 2. State of California Employment Development Department 3. 2008-2009 San Luis Obispo County CAFR 211 COUNTY OF SAN LUIS OBISPO FULL TIME EQUIVALENT COUNTY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* General Government 485.25 451.00 442.75 437.50 438.25 430.75 436.75 440.50 430.75 437.50 Public Protection 879.50 799.75 783.25 808.25 812.00 817.25 832.25 848.25 867.00 909.50 Public Ways and Facilities 199.25 202.25 194.25 193.75 193.75 188.75 190.75 207.75 234.75 237.75 Health and Sanitation 421.00 424.75 424.00 430.50 445.25 464.00 485.25 505.50 556.00 536.50 Public Assistance 437.25 426.75 424.75 425.75 428.00 478.00 500.75 524.00 524.00 523.00 Education 87.50 78.50 78.50 77.50 75.50 75.50 75.50 77.50 78.00 77.75 Recreation and Cultural Services 58.00 56.00 56.00 52.00 52.00 55.00 59.00 60.00 61.00 61.00 Total 2,567.75 2,439.00 2,403.50 2,425.25 2,444.75 2,509.25 2,580.25 2,663.50 2,751.50 2,783.00 Source: County Budget Report Notes: 2009-2017 Position allocation figures were calculated at the time of budget preparation for the following year. * Position allocation figures are calculated based on the adopted budget. Figures include limited-term but do not include part-time or contract positions. 212 COUNTY OF SAN LUIS OBISPO OPERATING INDICATORS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Function / Department 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Recreation and Cultural Services Parks Day Use Passes 47,156 47,011 51,519 57,135 56,601 42,821 57,564 n/a n/a n/a Daily Passes n/a n/a n/a n/a n/a 246,727 239,140 189,232 230,915 257,220 Annual Passes 3,547 2,220 1,992 2,357 2,406 2,998 3,137 n/a n/a n/a Annual Vehicle Passes n/a n/a n/a n/a n/a 8,744 12,584 9,614 6,504 8,066 Daily Boat Launches 16,864 15,802 15,602 16,133 14,809 26,110 23,706 16,001 16,312 24,340 Annual Boat Passes 752 627 618 238 551 1,412 1,245 480 1,383 1,353 Public Protection Planning and Building Total Permits Issued 2,261 2,067 2,073 2,086 2,070 2,622 3,139 3,355 3,927 3,542 Number of New Affordable Housing ** 105 82 80 39 44 13 151 99 65 133 Sheriff Jail bookings 14,158 13,025 12,682 12,966 13,273 12,583 11,375 11,018 11,774 11,324 Average daily population 540 551 558 679 717 780 679 603 632 621 Health and Sanitation Mental Health Total number of patient days in State Hospitals 365 364 n/a n/a n/a n/a n/a n/a n/a n/a Day Treatment Days provided to youth in out-of-county group home facilities*** 2,692 2,212 2,937 1,588 1,885 1,764 1,613 1,381 604 n/a Public Health Number of Children enrolled in the Healthy Families Program 5,450 5,709 n/a n/a n/a n/a n/a n/a n/a n/a Percentage of the State allocated caseload enrolled in the Women, Infants & Children (WIC) Program 98 97 100 99 99 95 91 86 76 72 Percentage of live born infants whose mothers received prenatal care in the first trimester. 78 78 7 8.5 8 1.7 80 79 79 80 78 78 Public Assistance Social Services Percentage of child abuse/neglect referrals where a response is required within 10 days that were timely 88.7 94.1 96.8 97.6 98.0 96.1 97.9 97.0 n/a n/a Percentage of child abuse/neglect referrals where a response is required within 10 days and where contact was made within the required period. n/a n/a n/a n/a n/a n/a n/a n/a 91.0 95.0 Education Library Annual number of items circulated per capita 9.2 9.4 10.0 10.1 10.1 9.8 9.6 10.5 10.3 11.6 Annual Expenditure per capita for total Library budget $ 3 8.43 $ 35.35 $ 35.35 $ 35.25 $ 34.35 $ 35.50 $ 36.13 $ 36.27 $ 38.10 $ 40.36 Public Ways and Facilities Roads Pavement Condition Rating for all County roads (70 = "good") 62 65 60 58 60 61 61 65 66 65 Airport Airport Takeoffs and Landings 95,419 88,161 80,556 80,158 71,428 66,696 71,001 71,181 71,001 77,917 Passenger Enplanements 132,748 125,152 139,909 134,244 132,315 147,105 149,558 155,744 180,141 226,588 Source: County Budget Performance Indicators ** This measure was revised in FY 2017-18 to include homeless set aside units provided and rehab units funded. ***Performance measure deleted in FY 2017-18 due to Continuum of Care Reform effective 1/1/2017. 213 COUNTY OF SAN LUIS OBISPO CAPITAL ASSET STATISTICS BY FUNCTION LAST TEN FISCAL YEARS (UNAUDITED) Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Recreation and Cultural Services County golf courses 3 3 3 3 3 3 3 3 3 3 Park acreage 13,422 13,422 13,572 13,424 13,424 13,583 13,583 13,583 13,583 13,583 Public Protection Correction facility capacities (a) 693 693 689 637 717 797 797 797 909 999 Public Ways and Facilities Miles of county roads 1,336 1,329 1,332 1,333 1,335 1,336 1,336 1,338 1,338 1,339 Airport Number of runways 2 2 2 2 2 2 2 2 2 2 Note: Majority of County assets are in buildings and equipment, which are under the Functional area of General Government (a) Amount is all holdings actual totals, including Main Jail, Women's Jail, West Housing, West Dorm, Honor Farm, and Weekender Barracks Source: County management 214 215