Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Management’s Discussion and Analysis, Continued
Year ended June 30, 2009
Governmental Activities. Governmental activities decreased the City’s governmental activities net
assets by $6.7 million for the current fiscal year. It should be noted that this decline in governmental
activities net assets is due, in part, to transfers of $5.8 million to proprietary funds. In addition, general
services expenditures were $50.1 million higher than the prior fiscal year primarily due to accrued
pollution remediation costs of $92.3 million.
Business-type Activities. Business-type activities increased the City’s business-type activities net assets
by $35.9 million. A key element for this growth in net assets was the increase of $33.2 million in capital
grants and contributions for the current fiscal year.
FINANCIAL ANALYSIS OF THE CITY'S MAJOR FUNDS
As noted earlier, the City uses fund accounting to demonstrate compliance with finance-related legal
requirements.
Governmental funds. The focus of the City’s governmental funds is to provide information on nearterm
inflows, outflows, and balances of spendable resources. Such information is useful in assessing the
City’s financial requirements. In particular unreserved fund balance may serve as a useful measure of a
government’s net resources available for spending at the end of the fiscal year.
At the end of the current fiscal year, the City’s governmental funds reported total fund balances of $440.6
million, $14.5 million or 3.4% increase in comparison with the prior year. Approximately $264.4 million
or 60.0% total fund balances constitutes unreserved (designated and undesignated) fund balance, which is
available to meet the City’s current and future needs. The remainder of fund balance is reserved to
indicate that it is not available for new spending because it has been committed to a variety of restricted
purposes. Restrictions, commitments, or other limitations do not significantly affect the availability of
fund resources for future use.
General Fund
The General Fund is the chief operating fund of the City. At the end of the current fiscal year, the
unreserved (designated and undesignated) fund balance of the General Fund was $155.5 million, while
total fund balance was $197.0 million, which was $48.2 million or 32.4% greater than the prior year’s
General Fund total fund balance. As a measure of the General Fund’s liquidity, it may be useful to
compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund
balance represents 60.7% of total General Fund expenditures, while total fund balance represents 76.8%
of total General Fund expenditures.
The City’s management designates unreserved fund balance to a particular function, project or activity.
Fund balance may also be designated for purposes beyond the current year. However, designated fund
balance is available for appropriation at any time. Of the $155.5 million General Fund unreserved fund
balance, 95.1% is designated. The most significant designations are $56.4 million for future
expenditures, $30.3 for continuing capital projects, $25.3 million for operating contingency, $8.2 million
for economic uncertainty, and $9.6 million for compensated absences. Unreserved and undesignated fund
balance at year-end was $7.7 million. This amount constitutes funds available for spending at the
government’s discretion.
The General Fund fund balance increased $48.2 million during the fiscal year ended June 30, 2009. A
variety of variances from the prior year--both positive and negative--contribute to the increase as follows:
9