Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2009
(4) POLLUTION REMEDIATION
On December 1, 2006 the City entered into a settlement agreement with a consortium of oil companies
in relation to methyl tertiary butyl ether (“MTBE”) contamination that had occurred at the City’s
Charnock Well Field. The agreement called for the oil companies to pay the City $131.0 million in
exchange for the obligation by the City to treat any water which does not meet applicable standards for
MTBE, tertiary butyl alcohol (“TBA”) and related petroleum hydrocarbons promulgated by the
California Department of Health Services.
To meet this treatment obligation the City is constructing a remediation plant to filter the water using
the proceeds of the settlement.
The City measured the liability by the cost of construction/remediation contracts which include a
contingency of 10% for unforeseen costs and therefore the City’s expected outlays are $85,481,000
which is the present value of the cost of the contracts plus the cost of the plant operations.
The pollution remediation expenditures have no future value once the remediation is complete; therefore
the City has recorded these amounts as remediation liability and expense.
Because the MTBE remediation is fully funded by a settlement whose proceeds have already been
received, $85,481,000 has been recognized as income during the year.
Additionally, the City engages in an ongoing program of pollution remediation related to its various
properties. Two such sites are currently undergoing remediation in the form of either soil or vaporous
contaminant removal or containment. By State law these occurrences are required to be reported to
California Department of Health Services.
As of June 30, 2009, total remediation expenses of $92,315,000 have been recorded in the Statement of
Activities and as a component of accrued liabilities on the Statement of Net Assets.
(5) CASH AND INVESTMENTS
Cash and investments as of June 30, 2009 are classified in the accompanying financial statements as
follows:
Statement of net assets:
Cash and investments $ 598,738,328
Restricted cash and investments 17,523,919
Restricted cash with fiscal agent 27,484,796
Fiduciary funds:
Restricted cash and investments 3,896,199
Total cash and investments $ 647,643,242
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