City Council
259 N. Wilma Avenue
Ripon, CA 95366
MEMO
To: Honorable City Council
From: Lisa Roos, City Clerk & Finance Director
Date: 11/12/2024
Subject: Audited financial statements
RECOMMENDED ACTION:
No action is required at this time. Resolutions will be presented in December for acceptance of the City of Ripon Financial Statements and the Money Purchase Thrift Pension Plan Financial Statements and the Independent Auditors Reports for the fiscal year ending June 30, 2024.
BACKGROUND:
The City utilizes a number of funds to track revenue and expenses used to conduct the business of the various City departments. These funds are classified by three categories - “Operating Funds”, “Capital Funds”, and “Restricted Funds”. Attached is a flowchart showing each of these fund categories along with the breakdown of the different funds within each of these categories.
The City of Ripon’s Financial Statements and Independent Auditor’s Report as of June 30, 2024 has specific requirements and verbiage that must be used based upon auditing standards, which does not necessarily match the City’s day-to-day terminology. The terms used within the audit to refer to our funds are Governmental Funds, Proprietary Funds (also referred to as BusinessType Activities) and Fiduciary Funds. Below is a description of these funds and how they relate to our flowchart of fund categories.
Governmental Funds – Most of the City’s basic services are reported in governmental funds that focus on how money flows in and out of those funds and the balances left at year end that are available for spending. These funds are noted on our flowchart as General Fund Operating Funds, Capital Funds and also the Restricted Funds except for Redevelopment.
Proprietary Funds – The City charges customers for the services it provides.
Sometimes throughout the audit these funds are also noted as Business-Type Activities.
These funds are noted on our flowchart as Enterprise Operating Funds. Fiduciary Funds – These funds are established to serve as the custodian for assets held in a trustee or agency capacity for others and, therefore, cannot be used to support the City’s own programs. These funds are our Successor Redevelopment Agency Funds noted on our flowchart under Restricted Funds.
The term “restricted” on our fund category flowchart and within the audit have different meanings. On our fund category flowchart, Restricted Funds are funds that we have restricted internally for different needs, as noted. In the audit, Restricted Funds are restricted because of constraints placed on the resources either externally imposed by creditors, grantors, contributors or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. This may be because of grants or different funding sources that have not yet been expended.
DISCUSSION/ANALYSIS:
The audits for the City of Ripon and for the Money Purchase Thrift Pension Plan for the fiscal year ending June 30, 2024 were completed by Price Paige & Company. As noted in the audit communication letters, there were no significant audit findings, no difficulties encountered between the auditors and staff, and no disagreements between management and the auditors.
The audit communication letters also have verbiage that is required by new auditing standards.
These new standards require the auditors to disclose to the Governing Council areas they have identified as significant risks in the City. These areas were a point of focus for the auditors this year. As noted in the letter, the identification of such risks of material misstatements does not necessarily indicate that there were instances of error or omission.
This memorandum is to serve as a narrative overview and analysis of the financial activities of the City of Ripon for the fiscal year ending June 30, 2024. We encourage readers to consider the information presented here in conjunction with the information that is included in the financial audit.
Financial Highlights:
General Fund:
General Fund operating revenue increased by $261,624 (or 2%) as compared to the previous fiscal year.
General Fund operating expenses increased by $232,031 (or 2%) as compared to the previous fiscal year.
During the fiscal year ending June 30, 2024, a total of $753,621 was transferred from the General Fund. Transfers were made to the Department Capital Fund ($475,000), Landscape Districts ($65,251), CNG Capital Reserve ($51,565), and CalPERS Contingency Fund ($161,805).
The City’s share of CalPERS unfunded liability increased significantly due to the smaller than normal returns during the prior fiscal year. Fortunately, not all employees of the City of Ripon participate in CalPERS, so the City’s unfunded liability is much less than other municipalities ($7,112,876 as of June 30, 2023 CalPERS Valuation Report). Since fiscal year 2017-2018, $1,663,036 has been transferred to a CalPERS Contingency Fund and a $250,000 prepayment towards the City’s unfunded accrued liability has been made.
During fiscal year 22/23, the City transferred the CalPERS Contingency Fund balance into a Section 115 Trust. The Trust balance at June 30, 2024 was $1,520,041.
Street & Road Funds:
At the end of the fiscal year ending June 30, 2024, the fund balances of the Street & Road Operating Fund was $5,348,393 and the Street & Road Reserve Fund was $2,968,313.
During FY 22/23, a Street & Road Reconstruction Fund was created and had an ending balance of $1,705,171 at June 30, 2024. The City will continue to deposit funds into this Fund annually for reconstruction projects. The Street & Road Operating Fund balance increased by $793,556 during fiscal year 23/24.
In FY 21/22, SJCOG changed the policy regarding the use of Local Transportation Fund (LTF) revenue that impacts the City of Ripon. The City must allocate 25% of this revenue to transit related expenses. Based upon the timing of receiving these funds, the City of Ripon will have lower funds available by 25% in future years, beginning in FY 22/23.
The following table is a summary of the Street & Road Operating Fund revenue and expenses for the fiscal year ending June 30, 2024 as compared to the previous fiscal year:
FY 2022-23 FY 2023-24
Operating Revenue $2,728,028 $2,975,545
Highway User Tax Account 415,660 459,848
Local Transportation Fund 626,942 1,596,187
Measure K Local Streets 409,643 459,431
Senate Bill 1 356,191 419,942
Street & Road Misc. Revenue1 919,592 40,137
Operating Expenses $656,892 $638,238
Street & Road Maintenance 302,096 254,144
Landscape Maintenance 325,316 353,624
Administration 25,617 25,728
Engineering 3,863 4,742
Capital Projects $359,087 $395,165
Transfer to Street & Road
Reconstruction Fund $546,643 $1,148,585
Street & Road Operating Fund Ending
Balance $4,554,836 $5,348,393
1 Includes grant income in FY 2022-23 and FY 2023-2024 for the Stockton Ave Rehabilitation. The following is a summary of major Street & Road capital expenses during the year ending June 30, 2024:
o $259,032 for the Stockton Avenue Rehabilitation Phase 2 Project o $14,598 for the Lower Stanislaus River Multi-Use Trail Project o $28,753 for the South of Main Rehabilitation Project
o $5,424 for the Utility Maintenance Asphalt Patch Project o $87,358 for Roadway Striping
Enterprise Operating Funds:
At the end of the fiscal year ending June 30, 2024, the Enterprise Operating Funds had the following activity by source:
FY 2022-23 FY 2023-24
Fund Ending
Balance Income Expenses
Balance
Prior to
Transfer
Transfer
Final Ending
Balance
Water $926,514 $3,853,297 ($2,811,573) $1,968,238 ($1,041,724) $926,514 Sewer $697,426 $2,101,216 ($1,374,863) $1,423,779 ($726,353) $697,426 Garbage $211,230 $2,650,585 ($2,488,899) $372,916 ($161,686) $211,230 During fiscal year 2023-2024, the Sewer Enterprise Operating Fund was able to transfer to the Sewer Enterprise Capital Fund the recommended amount made by Tom Pavletic from Municipal Financial Services for future capital replacement. However, the Water and Garbage Enterprise Funds were only able to transfer the current year’s cash flow and not the recommended amounts of $1,100,000 and $280,000, respectively.
Enterprise Capital Funds:
The following is a summary of the fund balance of each Enterprise Capital account for fiscal year ending June 30, 2024, as compared to the previous fiscal year:
FY 2022-23 FY 2023-24
Fund Ending
Balance Income Expenses
Balance
Prior to
Transfer
Transfer
Final Ending
Balance
Water $7,320,875 $367,045 ($823,042) $6,864,878 $1,041,724 $7,906,602 Sewer $1,548,837 $28,485 ($787,988) $789,334 $365,286 $1,154,620 Sewer WWTP Reserve $1,497,635 $38,005 ($0) $1,535,640 $361,067 $1,896,707 Garbage $868,700 $97,041 ($216) $965,525 $161,686 $1,127,211 Storm Drain $341,600 $4,103 ($353,149) ($7,446) $0 ($7,446) The following is a summary of major Enterprise Capital expenses during the year ending June 30, 2024:
Water Enterprise Capital Summary:
o $102,000 for drilling of Well #19 Project
o $10,000 for design of Well #3 Project
o $29,000 for the Stockton Avenue Rehabilitation Project o $600,000 related to the Corporation Yard Project
o $42,000 for the Utility Maintenance Asphalt Patch Project o $67,000 for ½ of two pick-up trucks (paid by Water & Sewer Enterprise Capital Funds)
Sewer Enterprise Capital Summary:
o $23,000 for the Stockton Avenue Rehabilitation Project o $600,000 related to the Corporation Yard Project
o $98,000 for the Percolation Pond Rehabilitation Project o $67,000 for ½ of two pick-up trucks (paid by Water & Sewer Enterprise Capital Funds)
Garbage Enterprise Capital Summary:
o There were no major capital expenditures in the Garbage Enterprise Capital Fund in FY 23/24
Storm Drain Enterprise Capital Summary:
o $12,000 for the Stockton Avenue Rehabilitation Project o $341,000 related to the Corporation Yard Project
PFFP Capital Funds:
The following is a summary of the fund balance of each PFFP Capital Fund for fiscal year ending June 30, 2024, as compared to the previous fiscal year:
FY 2022-23 FY 2023-24
Fund Ending
Balance Income Expenses Transfers Final Ending Balance
Water $2,981,047 $327,450 ($27,617) $3,280,880
SSJID Connection Reserve $871,876 $93,855 ($0) $965,731 Garbage ($755,441) $15,948 ($19,021) ($758,514)
Wastewater $5,685,746 $745,002 ($0) $6,430,748
Storm Drain $2,415,848 $320,546 ($0) $2,736,394
Transportation $1,843,788 $1,089,743 ($228,736) $2,704,795 RTIF $1,614,803 $95,757 ($0) $1,710,560
Parks & Recreation $45,651 $32,593 ($0) $78,244
Police ($1,193,034) $10,074 ($30,185) ($1,213,145)
City Hall ($3,804,693) $20,516 ($96,359) ($3,880,536)
Corporation Yard $7,246,3541 $201,499 ($6,100,113) ($44,000) $1,303,7401 Library ($615,202) $1,633 ($15,583) ($629,152)
TOTAL $16,336,743 $12,729,745
1Balance differs from audited financial statements because audit refers to City’s transfers or balances as advances to and/or from other funds.
The following is a summary of major PFFP capital expenses during the year ending June 30, 2024:
o $27,000 for the South County Water Project
o $6,100,000 for the Corporation Yard Project
The City advanced construction for the City Hall, Police Department and Library buildings and constructed each to a size that accommodates the future growth of the General Plan, which resulted in negative balances to these funds since fees from future growth have not yet been collected. With that, the revenue from this growth over the term of the buildout of the City’s general plan is necessary to relieve these negative balances. Goodwin & Associates re-evaluated the negative fund balances in early 2021 to ensure that the PFFP development fees for these funds are sufficient to ensure that enough revenue is collected from the future growth within the City’s general plan.
Debt Obligations:
In 2011, the Ripon Redevelopment Agency loaned the Parks and Recreation PFFP Fund $3.3 million to construct the Mistlin Softball Fields. The loan repayment was made with half the Parks and Recreation PFFP fees collected since the loan was made. As of March 30, 2020, the total loan amount has been collected, of which $1,689,238 will remain with the City and $583,413 will be returned to the State to be distributed to the various taxing entities at some point in the future. Until the funds are returned, this amount will continue to show as a liability in the table below.
At the end of the fiscal year ending June 30, 2024, the City’s total debt obligation was $30,975,712. This balance is summarized in the table below:
Debt Balance @
6/30/23
Additions in
FY 23/24
Paid in
FY 23/24
Ending Balance
@ 6/30/24
2011 Sewer Bonds $550,000 $175,000 $375,000
2006 Water Revenue Bonds $4,055,000 $330,000 $3,725,000 2012 Water Revenue Bonds $1,255,000 $235,000 $1,020,000 2020 Redevelopment Bonds $19,556,098 $224,707 $19,331,391 Parks & Recreation loan to
City and Redevelopment
Agency
$550,028 $33,385 $0 $583,4131
Water Surcharge Installation
Project; repaid by surcharges
collected until 2025
$442,133 $192,669 $249,464
City Loan to Corp Yard
Project
$0 $5,687,300
+$65,056
$60,912 $5,691,444
TOTAL $26,408,259 $5,785,741 $1,218,288 $30,975,712
1This liability balance will be adjusted to the balance when the money was available for the Department of Finance to collect ($534,846.47). This will be done in fiscal year ending June 30, 2025.
Economic Development Incentive Program:
In May 2017, through Resolution 17-22, the City Council adopted an Economic Development Incentive Program to stimulate private sector investment in sales tax producing development in Ripon with the goal of retaining and growing the tax structure and jobs that are essential to maintaining a high quality of life for Ripon residents. At the end of the fiscal year ending June 30, 2024, the City’s outstanding Economic Incentives were $1,528,153. This balance is summarized in the table below:
Business Original
Incentive
Balance @
6/30/23
Tax received to
offset incentive in
FY 23/24
Ending
Balance @
6/30/24
JKB Living $655,417 $525,826 $44,570 $481,256
Happy Daze RV $1,311,746 $1,304,102 $257,205 $1,046,897 TownePlace Suites by Marriott1 $416,426
TOTAL $1,829,928 $301,775 $1,528,153
1 In 2021/2022, the City Council approved this incentive plan, but TownePlace Suites by Marriott has not taken advantage of it yet.
Money Purchase Thrift Pension Plan (Non-PERS Retirement Plan):
The draft audit for the Money Purchase Thrift Pension Plan Financial Statements is also attached for review. The net position available for benefits increased $2,721,336 during fiscal year ending June 30, 2024. During fiscal year ending June 30, 2024, the Plan had a significant appreciation ($1,200,000) in the fair value of investments especially compared to the prior year.
Attachments:
1. Budget Category Reporting Summary
2. Fund Balances 2024.06.30
3. 2024.06.30 RIPON Audit Committee Letter
4. 2024.06.30 RIPON Govt Auditing Standards Report
5. 2024.06.30 RIPON Financial Statements
6. 2024.06.30 RIPON PENSION Audit Committee Letter
7. 2024.06.30 RIPON PENSION Financial Statements