CITY OF EMERYVILLE

List of City Officials (as of June 30, 2005)

City Council and Redevelopment Agency Board

Mayor...... Dick L. Kassis Vice-Mayor...... Gary L. Caffey Councilmember...... Ruth Atkin Councilmember...... Ken Bukowski Councilmember...... Nora Davis

Appointed Officials and Department Heads

City Manager/Treasurer/Redevelopment Agency Executive Director...... John Flores City Attorney/Redevelopment Agency General Counsel...... Michael Biddle City Clerk/Assistant to the City Manager...... Karen Hemphill Community Services Director ...... Suzy Wallace Economic Development and Housing Director ...... Patrick O’Keeffe Finance Director (Interim) ...... Karan Reid Fire Chief ...... Stephen Cutright Human Resources Director...... Delores Turner Planning and Building Director ...... Charles Bryant Police Chief...... Ken James Public Works Director/City Engineer...... Henry Van Dyke

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The City of Emeryville Management’s Discussion and Analysis

With the 2004-05 Comprehensive Annual Financial Report (CAFR), the City will have complied with the provisions of Governmental Accounting Standards Board Statement 34 (GASB 34), “Basic Financial Statements—and Management’s Discussion & Analysis—for State and Local Governments” for four consecutive years. To obtain a complete picture of the City’s financial condition, this document should be read in conjunction with the accompanying Transmittal Letter and Basic Financial Statements.

FINANCIAL HIGHLIGHTS

The comparisons in the discussion and analysis below are between 2004-05 and 2003-04. All increases and decreases are expressed relative to 2003-04 results. In August 2004, the City issued $78.8 million in 2004 Series A Revenue Bonds to fund capital projects. The bond issuance resulted in significant increases in assets and liabilities of the City compared to fiscal 2004. Highlights of fiscal 2004-05 include the following:

Citywide • The assets of the City totaled $314.1 million, an increase of $84.8 million. Total assets consisted of $307.7 million in governmental activities and $6.4 million in business-type activities. • Total liabilities increased $79.1 million to $216.9 million. Total liabilities comprised $216.7 million from governmental activities and $.2 million from business-type activities. • Net assets totaled $97.1 million, an increase of $5.7 million. Of this amount, $34.7 million was reported as “unrestricted net assets” and may be used to meet the government’s ongoing obligations to citizens and creditors. • Citywide revenues totaled $66.2 million, an increase of $7.9 million. • Total Citywide expenses were $59.4 million, an increase of $11.8 million.

Governmental Funds • Governmental fund balances increased by $78.1 million in fiscal 2005, from $108.6 in fiscal 2004. Of the $186.7 million ending fund balance, $6.1 million represents undesignated fund balances available for appropriation. • Governmental fund revenues increased $7.3 million to $61.8 million in fiscal 2005. • Governmental fund expenditures were $64.0 million, an increase of $7.2 million from $56.8 million in fiscal 2004. • Net transfers and other financing sources were $80.3 million in fiscal 2005, an increase of $80.7 million from 2004. • The total general fund balance increased by $1.4 million from the prior year. The undesignated fund balance of the general fund on June 30, 2005 was $6.1 million.

Sewer Enterprise Fund • Net Assets of the Sewer Enterprise fund, the City’s only enterprise fund, increased $0.6 million in fiscal 2005. • Sewer Enterprise fund revenues amounted to $0.9 million compared to $1.6 million in fiscal 2004. • Sewer Enterprise fund expenditures of $.4 million, a decrease of $.2 million from fiscal 2004.

3 Management’s Discussion and Analysis

OVERVIEW OF THE FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

For certain entities and funds, the City acts solely as a depository agent. For example, the City has several assessment districts for which the City provides fiduciary statements showing the cash balances and activities of these districts. These statements are separate from, and their balances are excluded from, the City’s financial statements.

Government-wide Financial Statements The Government-wide Financial Statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to private-sector businesses.

The statement of net assets presents all of the City’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases and decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The statement of activities presents information on how the City’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in actual cash flows in future fiscal periods such as revenues pertaining to uncollected taxes.

Both of these government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to cover all or in part a portion of their cost through user fees and charges (business-type activities). The governmental activities of the City include City Council, City Manager, City Attorney, Finance, Human Resources, Planning and Building, Economic Development and Housing, Property Based Improvement District, Police, Fire, Public Works, Child Development, Recreation, Senior Center, and non-departmental services. These services are supported by general City revenues such as taxes and by specific program revenues such as fees. The City’s only enterprise activity, the Sewer Fund, is reported under Business- type Activities.

The government-wide financial statements include not only the City itself (known as the primary government), but also a legally separate redevelopment agency and a public financing authority for which the City is financially accountable.

Fund Financial Statements Fund financial statements are designed to report groupings of related accounts, which are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and

4 Management’s Discussion and Analysis

demonstrate finance-related legal compliance. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.

Governmental Funds are used to account for essentially the same functions as the government- wide activities in the government-wide financial statements. However, unlike the government- wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources at the end of the fiscal year. Such information may be useful in determining what financial resources are available in the near future to finance the City’s programs.

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 funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The Fund financial statements provide detailed information about each of the City’s most significant funds, called Major Funds. Each major fund is presented individually, with all non- major funds summarized and presented only in a single column. Subordinate schedules present the detail of these non-major funds. Major funds represent the major activities of the City for the year. The City’s General Fund is always a major fund, but other funds classified as major funds may vary from year to year as a result of changes in the pattern of the City’s activities. The City had the following seven major governmental funds in fiscal 2005: General Fund, 1976 Project Area Operating, Shellmound Project Area Operating, Low/Moderate Income Housing Operating, Housing Revolving Loan Operating, Shellmound Capital, 2004 Series A Revenue Bond.

Proprietary Funds are generally used to account for services for which the City charges customers – either outside customers, or internal units or departments of the City. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. Proprietary funds are used to present the same functions as business-type activities in the government-wide financial statements. The City uses proprietary funds to report the Sewer System and Internal Service funds.

Fiduciary Funds are used to account for resources held for the benefit of the City’s employees and parties outside of the City. The City’s pension fund (closed system prior to joining PERS) and agency funds are reported under Fiduciary funds. Since the resources of these funds are not available to support the City’s own programs, they are not reflected in the government-wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds.

Notes to the 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.

5 Management’s Discussion and Analysis

FINANCIAL PERFORMANCE

The following is a condensed summary of the City’s net assets for governmental and business type activities:

Table 1 Statement of Net Assets ($ in millions) Governmental Business-Type Activities Activities Total 2005 2004 2005 2004 2005 2004 Cash and Investments 200.0 121.5 3.7 3.2 203.7 124.7 Other Assets 43.6 38.5 0.1 0.9 43.7 39.4 Capital Assets 64.1 63.4 2.6 2.6 66.7 66.0 Total Assets 307.7 223.4 6.4 5.8 314.1 229.2

Long-Term Debt 207.2 129.7 0.2 0.2 207.4 129.9 Other Liabilities 9.5 7.9 0.0 0.0 9.5 7.9 Total Liabilities 216.7 137.6 0.2 0.2 216.9 137.8

Net Assets: Invested in Capital Assets, net of debt 39.6 40.4 2.4 2.4 42.0 42.8 Restricted 20.5 16.9 0.0 1.8 20.4 18.7 Unrestricted 30.9 28.5 3.8 1.4 34.7 29.9 Total Net Assets 91.0 85.8 6.2 5.6 97.1 91.4

Citywide Financial Statements – Governmental Activities The following analysis focuses on the net assets and changes in net assets of the City’s Governmental Activities, presented in the Citywide Statement of Net Assets and Statement of Activities.

The City’s governmental net assets increased from $85.8 million to $91.0 million in fiscal 2005. This change results from the following:

• Cash and investments increased by $78.5 million, mainly a result of the issuance of the 2004 Series A Revenue Bonds in the amount of $78.8 million in August 2004. • Other assets increased $5.1 million due to $2.0 million of unamortized debt issuance costs associated with the 2004 Series A bond issue and an increase in receiveables of $3.1 million; accounts receivable increased $1.0 million, loans and notes receivable and accrued interest increased $2.1 million due to the City’s continuing low/moderate housing and business retention loan programs. • Long-term debt increased $77.5 million primarily a result of the $78.8 million bonds issued in August 2004.

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• Other liabilities increased $1.6 million primarily due to an increase in accrued interest of $1.1 million related to the 2004 Series A bonds.

Citywide Financial Statements – Business-Type Activities-Sewer Fund The following analysis focuses on the net assets and changes in net assets of the City’s sole Business-Type Activity, the Sewer Fund, presented in the Citywide Statement of Net Assets and Statement of Activities.

The City’s Business-type net assets increased $.6 million to $6.2 million in fiscal 2005 attributable to increased Cash and Investments over fiscal 2004.

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Table 2 Changes in Net Assets Net Assets at June 30, 2005 ($ in millions) Governmental Business Type Activities Activities Total 2005 2004 2005 2004 2005 2004 Revenues Charges for services 5.94 6.60 0.93 1.59 6.87 8.19 Operating contributions & grants 3.57 3.38 3.57 3.38 Capital contributions & grants 0.00 0.54 0.00 0.54 Property Taxes 1.25 1.16 1.25 1.16 Incremental Property Tax 22.49 22.17 22.49 22.17 Franchise Tax 0.95 0.94 0.95 0.94 Sales Taxes 7.34 6.61 7.34 6.61 Business License Taxes 4.96 4.65 4.96 4.65 Transient Occupancy Tax 3.19 3.02 3.19 3.02 Utility Users 2.24 2.18 2.24 2.18 Other Taxes and Fines 0.39 0.26 0.39 0.26 Motor Vehicle In Lieu 0.61 0.34 0.61 0.34 Investment Earnings 6.98 2.31 0.11 0.07 7.09 2.38 Other 5.20 2.49 0.04 5.20 2.53 Total Revenues 65.11 56.65 1.04 1.70 66.15 58.35 Expenses City Council 0.12 0.13 0.12 0.13 City Manager 0.63 0.73 0.63 0.73 City Attorney 0.53 0.56 0.53 0.56 Finance 1.80 1.70 4.21 1.70 Human Resources 0.46 0.47 0.46 0.47 Planning & Building 2.44 1.79 2.43 1.79 Economic development 1.65 1.05 1.65 1.05 Redevelopment 15.09 9.33 14.22 9.33 Non-departmental operations 5.58 2.32 4.90 2.32 Property Based Improvement District 1.72 1.63 1.72 1.63 Police 7.59 8.12 7.23 8.12 Fire 5.56 5.96 5.24 5.96 Public works 3.55 3.68 3.39 3.68 Child development 1.47 1.55 1.46 1.55 Recreation 1.15 1.20 1.15 1.20 Senior center 0.42 0.41 0.42 0.41 Interest on long-term debt 9.27 6.36 9.27 6.36 Sewer 0.39 0.56 0.39 0.56

Total Expenses 59.03 46.99 0.39 0.56 59.42 47.55 Increase(Decrease) in Net Assets, before Transfers 6.08 9.66 0.65 1.14 6.73 10.8 Transfers 0.08 0.08 (0.08) (0.08) 0.00 0.00 Increase (Decrease) in Net Assets 6.16 9.74 0.57 1.06 6.73 10.80 Beginning Net Assets, restated 84.8 76.05 5.61 4.54 90.41 80.6

Ending Net Assets 90.96 85.79 6.18 5.61 97.14 91.4

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Governmental Activities – Revenues

Table 2 shows that governmental revenues totaled $65.1 million in fiscal 2005, an increase of $8.5 million. While all general revenues categories showed an increase for fiscal 2005 compared to fiscal 2004, the change primarily results from an increase in sales tax of $0.7 million, an increase in other revenues of $2.7 million, and an increase in investment earnings of $4.7 million. The increase in other revenues is due to a change in presentation of the administrative reimbursement from the Redevelopment Agency to the General fund; this was presented as a transfer-in in the fiscal 2004 and in 2005 the reimbursement is classified as reimbursement (other) revenue. The increase in investment earnings is due to a more favorable investment environment, a larger investment portfolio as the result of bond proceeds from the 2004 Series A issue and a small positive market revaluation adjustment in 2005 compared with a negative adjustment of $1.9 million in 2004.

Program revenues such as charges for services, operating grants and contributions, and capital grants and contributions are generated from or restricted to each activity. Program revenues experienced a slight decrease due to a decline in activities as well as reduced amount of grants received in 2005 compared with 2004.

General revenues are composed of taxes and other revenues not specifically generated by or restricted to individual activities. All tax revenues, investment earnings, rents for governmental facilities, and fees for services are included in general revenues.

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The Total Revenues Chart below includes only current year revenues and includes all funds, not just the General Fund.

Total Revenues, Governmental Activities - 2005

Operating contributions & Motor Vehicle In Miscellaneous grants Lieu 8% Charges for services 5% 1% Investment Earnings 9% 11% Capital contributions Other Taxes & grants and Fines 0% 1% Property Taxes 2%

Utility Users 3%

Transient Occupancy Tax 5% Incremental Property Sales Taxes Business License Franchise Tax Tax 11% Taxes 1% 35% 8%

Business-Type Activities – Revenues Table 2 shows revenues from business-type activities (Sewer Fund) totaled $1.0 million in fiscal 2005, a decrease of $.7 million. The decrease is due lower sewer connection fees received during the year as a result of reduced construction permit activity compared with fiscal 2004.

Governmental Activities – Expenses Table 2 presents a comparison of fiscal 2005 and fiscal 2004 expenses (excluding encumbrances) by governmental activities and interest on long-term debt. Total expenses from governmental activities were $59.0 million in fiscal 2005, an increase of $12.0 million. Redevelopment agency expenses increased $5.8 million due to the reclassification of the presentation of the reimbursement for administrative services to the General Fund ($2.7 million) and increased redevelopment activities. In 2005, the reimbursement ($2.7 million) was shown as an expense whereas in 2004 ($3.0 million) it was presented as a transfer out (other financing use). Expenses for non-departmental operations increased $3.3 million primarily due to $1.7 million payment to reduce the miscellaneous retirement liability in 2005, $.4 million payment to the State for the Educational Revenue Augmentation Fund (ERAF) payment in 2005 and $.8 million increase in grant fund expenditures. Interest on long-term debt increased $2.9 million in response to increased interest due on the bonds issued in August 2004.

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The Functional Expenses Chart below includes only current year expenses for governmental activities and is not limited to only the General Fund.

Functional Expenses, Governmental Activities – 2005

Interest on long-term City Manager City Attorney Human Resources debt 1% 1% Sewer 1% Senior center 16% 1% 0% Finance Planning & Building City Council 3% 4% Recreation 0% 2% Child development Economic 2% development 3% Public works 6% Redevelopment Fire 26% 9% Non-departmental Police Property Based operations 13% Improvement District 9% 3%

Business-Type Activities – Expenses Table 2 shows expenses from business-type activities (Sewer fund) totaled $.4 million in fiscal 2005, down $.2 million from the prior year’s expenses due to reduced construction activity.

FUND FINANCIAL STATEMENTS

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of resources that are available for spending. 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. Types of governmental funds reported by the City include the General Fund, Special Revenue Funds, Debt Service Funds and Capital Projects Funds.

At the end of the current fiscal year, the City’s governmental funds reported combined fund balances of $186.7 million, an increase of $78.1 million. As discussed earlier in this analysis, the increase is primarily the result of increased cash and investments from the 2004 Series A bonds issued in August 2004. Governmental fund revenues increased $7.3 million to $61.8 million due to a combination of factors. Investment earnings increased $5.6 million due to a larger portfolio to invest (new funds received from the bond proceeds) and a more favorable investment environment. Miscellaneous revenues increased $2.7 million due to the reclassification of the reimbursement of administration costs to the General Fund from the Redevelopment Agency.

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In fiscal 2004 this reimbursement in the amount of $3.0 million was reported as an Other Financing Source (transfer-in).

Governmental Fund expenditures increased $7.2 million this year to $64.0 million due to a combination of factors: • Redevelopment expenses increased $5.6 million, $2.7 million due to the reclassification of the administrative reimbursement to the General Fund from a transfer out in fiscal 2004 to expenses in fiscal 2005 and $2.9 million related to increased redevelopment activities. • Non-departmental expenses increased $3.0 million primarily due to $1.7 million payment to reduce the miscellaneous retirement liability in 2005, $.4 million payment to the State for the Educational Revenue Augmentation Fund (ERAF) payment in 2005 and $.8 million increase in grant fund expenditures. • Capital outlay decreased $8.3 million as the City completed fewer projects in fiscal 2005 compared to 2004. • Increased debt service of $4.3 million related to the new 2004 Series A bonds. • Increased planning and economic development activities account for approximately $1.5 million increase over the previous year.

General Fund - The General Fund is the chief operating fund of the City. At the end of the current fiscal the unreserved, undesignated fund balance of the General Fund was $6.1 million while total fund balance was $10.1 million. 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, undesignated fund balance represents 25.4 percent of total fund expenditures and recurring transfers out of $24.0 million while total fund balance represents 42.1 percent of that same amount.

General Fund revenues increased $6.1 million to $27.5 million in fiscal 2005. Investment earnings increased $2.0 million attributable to the market revaluation of the City’s investment portfolio (non-cash) of negative $1.9 million in fiscal 2004 that did not occur in fiscal 2005. Miscellaneous revenues increased $3.0 million mainly due to the reclassification of the administration reimbursement from the Redevelopment Agency to the General Fund from transfer-in (Other Financing Source) in 2004 ($3.0 million) to miscellaneous revenue in 2005 ($2.7 million). General Fund revenues exceed budget by $1.3 million; the largest variance was an increase in tax collections of $.9 million, a result of slight increases in sales, business license, transit occupancy, real estate transfer and motor vehicle in lieu taxes.

General Fund expenditures were $23.0 million, up $1.2 million from the prior year of $21.8 million. The increase is mainly attributable to increased planning activities ($.6 million) and increased non-departmental ($.4 million) for the State required payment to the Educational Revenue Augmentation Fund (ERAF). All departments ended the year within budget.

Emeryville Project Area Operating Fund – This fund accounts for receipt of tax increment revenue allocated to the project area and expenditures for operations. This fund transfers monies to fund debt service requirements. Revenues increased $.36 million to a total of $14.6 million over the prior year. Tax increment revenues amounted to $14.3 million in fiscal 2005 compared to $13.9 million in fiscal 2004 due to increased improvements in this project area.

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Total expenditures increased $2.4 million to $4.4 million in 2005 from $1.9 million in 2004 due in part to a reclassification in presentation of the reimbursement for administration services from the Redevelopment Agency to the General Fund. In 2005, the reimbursement ($2.9 million) was shown as an expense whereas in 2004 it ($2.9 million) was presented as a transfer out (other financing use). Net total expenditures were also impacted by a payment to the Educational Revenue Augmentation Fund (ERAF) of $1.4 million, an increase of $.8 million over the previous year. This payment was required by the State of California as part of the State’s effort to balance the State’s budget.

Transfers out decreased $.88 million from the prior year due to the reclassification in presentation discussed above, an increase in transfers to debt service of $1.8 million attributable to the 2004 Series A Revenue bonds, and a decrease of $.9 million in transfers to capital projects. In fiscal 2005 transfers out for the 20 percent set aside for low and moderate-income housing programs amounted to $2.9 million compared to $2.8 million in the prior year.

Shellmound Project Area Operating Fund – This Fund accounts for the receipt of tax increment revenue allocated to the Project Area and expenditures for operations and capital projects, and transfers monies to fund debt service requirements.

Total fiscal 2005 revenues of $8.3 million remained relatively unchanged from fiscal 2004 revenues. Tax increment revenues amounted to $8.2 million in 2005 unchanged from the previous year.

In fiscal 2005 expenditures increased by $.9 million to $4.2 million from $3.4 million in 2004 due in part to a reclassification in presentation of the reimbursement for administration services from the Redevelopment Agency to the General Fund. In 2005, the reimbursement ($.6 million) was shown as an expense whereas in 2004 it ($.6 million) was presented as a transfer out (other financing use). Pass through agreements to other agencies according to fiscal agreements remained unchanged at $2.9 million compared to 2004. Net total expenditures were impacted by a payment to the Educational Revenue Augmentation Fund (ERAF) of $.50 million, an increase of $.24 million from fiscal 2004. This payment was required by the State of California as part of the State’s effort to balance the State’s budget.

Transfers out decreased $.4 million due to the reclassification in presentation discussed above, an increase in transfers to debt service of $1.0 million attributable to the 2004 Series A Revenue bonds and a decrease of $.3 million in transfers to the capital projects fund. Transfers out to the 20 percent set-aside for low and moderate-income housing programs amounted to $1.6 million, unchanged from the previous year.

Low/Moderate Income Housing Operating Fund - This Fund accounts for the receipt of the mandated 20 percent set-aside of tax increment revenue from both the Emeryville and Shellmound Project Areas for Low and Moderate Income Housing Programs, and for debt service expenditures.

Total revenue of $.17 million was relatively unchanged from fiscal 2004. Expenditures increased by $.74 million to $.98 million from fiscal 2004 due to increased community development activity and the reclassification in presentation of the reimbursement for administration services from the Redevelopment Agency to the General Fund. In 2005, the

13 Management’s Discussion and Analysis reimbursement ($.6 million) was shown as an expense whereas in 2004 it ($.6 million) was presented as a transfer out (other financing use).

In Fiscal 2005, the Redevelopment Agency transferred $4.5 million into this fund representing the portion of tax increment required to be set aside for low and moderate-income housing programs. Transfers out total $4.6 million, an increase of $1.1 million over the prior year. Transfers to the Housing Capital fund increased $1.6 million and transfers for debt service increased $.13 million.

Housing Revolving Loan Fund - This fund accounts for the Redevelopment Agency’s First Time Homebuyer Loans. The fund received loan payments and payoffs in the amount of $.5 million and made investments in new loans of $.5 million during the fiscal year.

Shellmound Capital Projects Fund -This Fund accounts for resources from the Shellmound Redevelopment Project Area dedicated by the Redevelopment Agency for specific capital projects of the Project Area. At the close of fiscal 2005, this fund held $29.6 million in assets and had a designated fund balance of $8.6 million.

2004 Series A Revenue Bond Capital Projects Fund – This fund accounts for bond proceeds from the 2004 Series A Revenue bond issue. Funds are dedicated for capital projects within the Redevelopment Project areas and for low/moderate income housing projects. At the close of fiscal 2005, this fund had a designated fund balance of $74.5 million.

Performance of Enterprise Funds The City operates the Sewer Enterprise Fund, its only Business-type Activity. The Sewer Fund uses another agency to treat wastewater. Expenses are paid from customer service charges. In fiscal 2005, net assets increased $.6 million to $6.2 million. Sewer Enterprise revenues may vary from year to year due to the level of new development which affects connection fee revenue.

GENERAL FUND BUDGETARY HIGHLIGHTS

General Fund variances between the original and final amended budget resulted in a slight increase in budgeted revenues and transfers in ($.04 million), and an increase in appropriations and transfers out of $1.8 million.

Fiscal year 2004-05 was the first of a two-year budget adopted June 29, 2004. Budgeted revenues and expenditures were amended to reflect revised estimates for the 2005 year. The most significant increase was $1.7 million in transfers to the PERS Liability fund to reduce the outstanding retirement liability; the budget amendment was approved in December 2004.

The Council has a policy to maintain a General Fund balance of at least 25 percent with a goal of 50 percent. At the end of each fiscal year, an analysis is prepared of the City’s outstanding unfunded liabilities and capital projects and transfers are approved to fund these obligations while maintaining a minimum fund balance of 25 percent.

CAPITAL ASSETS

GASB 34 requires the City to record all its capital assets including infrastructure. Infrastructure includes roads, bridges, signals and similar assets used by the entire population. Although 14 Management’s Discussion and Analysis

GASB 34 allowed the City four years to record all its infrastructure assets in its financial statements, as of June 30, 2004 all assets were included in the financial statements. The table below shows capital assets and the amount of accumulated depreciation for these assets as of June 30, 2005 for Governmental and Business-type Activities (further detail may be found in Note 7 to the financial statements).

Table 4 Capital Assets June 30, 2005 ($ millions) 2005 2004 Governmental Activities Land and Construction in Progress 23.33 19.21 Park Improvements and other Improvements 4.17 4.49 Buildings and Improvements 29.35 29.35 Furnishings, Vehicles and Equipment 6.26 6.09 Marina Improvements 4.31 4.31 Grading, Curb & Gutter, Sidewalks & Driveways 31.58 31.17 Less Accumulated Depreciation (34.90) (31.24) Total Governmental 64.10 63.38 Business-Type Activities (Sewer) Construction in progress 0.02 0.00 Automobile and Equipment 0.00 0.00 Improvements 3.51 3.46 Less Accumulated Depreciation (0.94) (0.88) 2.59 2.58 Total Business-Type

Governmental Activities capital assets net of depreciation, increased by $.72 million compared to fiscal 2004. Increases in land and construction in progress are attributable to construction in progress of $4.0 million for capital projects not completed by the end of the current fiscal year.

During fiscal 2005, Emeryville’s capital improvement projects focused on street improvements, Marina Breakwater, Doyle Street Undergrounding, Emeryville Greenway Improvements, New Roof for the Police Building, and improving Recreation facilities.

The City depreciates all its capital assets over their estimated useful lives, as required by GASB 34. The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all users. Additional information on capital assets and depreciable lives may be found in Note 7.

DEBT ADMINISTRATION

Each of the City’s debt issues is discussed in detail in Note 8 to the financial statements. At June 30, 2005, the City’s debt comprised: 15 Management’s Discussion and Analysis

Table 5 Long-term Debt at End of Fiscal 2005 ($ in millions) 2005 2004 Governmental Activity Debt: Redevelopment Agency Bonds: Public Financing Authority Revenue Bonds, 2004 Series A, 3.50% - 5.00%, due 9/01/34 78.79 0.00 2002 Series A, 2.00% - 5.25% due 9/01/21 20.77 21.64 2001 Series A, 4.00% - 5.20%, due 9/01/31 21.64 22.15 2001 Series B, 7.02% - 7.20%, due 9/01/31 3.36 3.39 1998 Series B, 4.00% - 5.00%, due 9/01/28 45.79 46.71 1998 Series C, 5.75% - 6.75%, due 9/01/26 16.33 16.65 Series 1995, 4.00% - 6.20%, due 9/01/25 6.19 6.34 Unamortized Bond Premium 1.54 0.00 Total Redevelopment Agency Bonds 194.41 116.88 City Obligations: Public Financing Authority Lease Revenue Bonds 1998 Series A, 3.80% - 5.00%, due 5/01/28 6.19 6.34 Capital Lease, 5.4% due 7/24/05 0.19 0.37 Compensated Absences 3.11 2.84 Claims and Judgments 3.35 3.44 Total City Obligations 12.84 12.99 Total Governmental Activity Debt 207.25 129.87 Business-Type Debt (Sewer) Loan Payable, 3.00%, due 5/18/13 0.17 0.19 Total Debt 207.42 130.06

In August of 2004, $78.8 million in Revenue Bonds were issued to provide financing for various redevelopment, low and moderate income housing projects and to fund a debt service reserve fund. Repayment of these bonds will be covered by the Redevelopment Agency’s tax increment revenue.

ECONOMIC OUTLOOK

The economy of the City is discussed in the accompanying Transmittal Letter and in this Discussion and Analysis.

CONTACTING THE CITY’S FINANCIAL MANAGEMENT

The CAFR is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. Questions about this report should be directed to the Finance Department, at 1333 Park Avenue, Emeryville, California. This report and other financial reports can be viewed on the City of Emeryville website at: www.ci.emeryville.ca.us.

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STATISTICAL SECTION

The statistical section contains comprehensive statistical data which relates to physical, economic, social and political characteristics of the City. It is intended to provide users with a broader and more complete understanding of the City and its financial affairs than is possible from the financial statements and supporting schedules included in the financial section.

In this section, readers will find comparative information related to the City’s revenue sources, expenditures, property tax valuations, levies and collections, general obligation bonded debt, sewer revenue debt service, demographics and pension plan funding. Where available, the comparative information is presented for the last ten fiscal years.

In addition, this section presents information related to the City’s legal debt margin computation, principal taxpayers, and other miscellaneous statistics pertaining to services provided by the City. Because the statistics come from different sources, they are sometimes inconsistent. For example the California Department of Finance and the U.S. Census have different population statistics.

In contract to the financial section, the statistical section information was not subject to independent audit.

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City of Emeryville – Miscellaneous Statistics June 30, 2005

GENERAL STATISTICS Date of City Incorporation 1896 Population 8261 (California Department of Finance estimate) Registered Voters 4692 (Alameda County Registrar of Voters) Form of Government Council/Manager Employees (Full Time Equivalents) 197

PUBLIC SAFETY Fire Protection Police Protection Fire Stations 2 Police Stations 1 Firefighter Positions 30 Police Officers 39 Support Personnel 1 Support Personnel 20

PARKS AND COMMUNITY FACILITIES Community Facilities Senior Center Child Development Center Recreation Center Eight Parks covering 20 acres: 61st Mini-Park, Christie Park, Davenport Park, Marina Park, Point Emery, Shorebird Park, Stanford Avenue Park, Temescal Creek Park

STREETS AND SEWERS Miles of Streets 19.2 Miles of Sewer Lines 15.0 City served by East Bay Municipal Utility District (EBMUD)

EDUCATION Emery Unified School District Anna Yates Elementary School Emery Secondary School Private Schools Pacific Rim International School (Elementary Education) Ex’Pression College for Digital Arts National Holistic Institute (Massage Therapy) Silicon Valley College (Technology Eduction)

PUBLIC TRANSPORTATION Emery Go-Round Shuttle connecting Emeryville with MacArthur BART station AC Transit Bus Service Bay Area Rapid Transit (BART) Rail Service

SALES TRANSACTIONS: Taxable Sales Transactions for Calendar Year 2004 Permits Taxable Transactions in Thousands Retail Total 427 $596,471 All Others 321 $103,250 Total 748 $699,721

Source: City of Emeryville, MBIA Muniservices, & Alameda County Registrar of Voters

132 Statistical

City of Emeryville – Assessed Value of Taxable Property 2004-05 Last Ten Fiscal Years ($)

2,800,000,000 2,650,000,000 2,500,000,000 2,350,000,000 2,200,000,000 2,050,000,000 1,900,000,000 ) 1,750,000,000 ($ e u

l 1,600,000,000 a

V 1,450,000,000 d e

s 1,300,000,000 s e s 1,150,000,000 As

t 1,000,000,000

Ne 850,000,000 700,000,000 550,000,000 400,000,000 250,000,000 100,000,000 -50,000,000 6 7 8 9 0 1 2 3 4 5 9 9 9 9 0 0 0 0 0 0 1995/ 1996/ 1997/ 1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 2004/

Ex e m pt i o n s Personal Property Real Property (Includes land and

Fiscal Real Personal Gross Net Year Property* Property Assessed Value Exemptions Assessed Value 1995/96 1,104,836,796 185,948,247 1,290,785,043 (20,732,210) 1,270,052,833 1996/97 1,087,064,391 191,348,035 1,278,412,426 (21,583,846) 1,256,828,580 1997/98 1,114,304,762 209,515,581 1,323,820,343 (22,363,073) 1,301,457,270 1998/99 1,199,806,062 220,992,791 1,420,798,853 (21,938,826) 1,398,860,027 1999/00 1,238,262,699 187,476,917 1,425,739,616 (32,197,238) 1,393,542,378 2000/01 1,558,383,664 216,979,752 1,775,363,416 (49,559,535) 1,725,803,881 2001/02 1,772,280,644 305,964,910 2,078,245,554 (37,237,649) 2,041,007,905 2002/03 2,022,040,548 356,017,244 2,378,057,792 (37,416,761) 2,340,641,031 2003/04 2,277,982,731 317,640,769 2,595,623,500 (39,163,976) 2,556,459,524 2004/05 2,428,730,524 300,120,138 2,728,850,662 (39,177,936) 2,689,672,726 *Includes land and improvements Source: County of Alameda – Auditor/Controller Office

136 Statistical

City of Emeryville – Property Tax Rates, All Overlapping Governments (Per $100 of Assessed Valuation) Last Ten Fiscal Years

1.0000

0.9000 ) $ 0.8000 red d

n 0.7000 u 0.6000 er H P (

s 0.5000 e t 0.4000 Ra x a 0.3000 T

y East Bay Countywide T ax

ert 0.2000 East Bay Regional Park p o

r East Bay Municipal Utility District 0.1000 P Transit District 0.0000 Peralta College 6 8 9 97 / School District 9 99 / 1 00 0 02 03 04 1995 05 1996/ 998/ 00/ 2/ 1997 1 1999/ 20 2001/ 200 2003/ 2004/

Fiscal School Peralta Transit East Bay Regional Countywide Total Year District College District Municipal Park Tax Utility District 1995/96 0.0489 0.0057 0.0230 0.0000 0.0094 1.0000 1.0870 1996/97 0.0350 0.0065 0.0220 0.0096 0.0081 1.0000 1.0812 1997/98 0.0350 0.0065 0.0220 0.0096 0.0081 1.0000 1.0812 1998/99 0.0385 0.0056 0.0167 0.0091 0.0092 1.0000 1.0791 1999/00 0.0403 0.0051 0.0000 0.0087 0.0088 1.0000 1.0629 2000/01 0.0317 0.0077 0.0000 0.0085 0.0065 1.0000 1.0544 2001/02 0.0257 0.0154 0.0000 0.0084 0.0072 1.0000 1.0567 2002/03 0.0228 0.0176 0.0000 0.0084 0.0065 1.0000 1.0553 2003/04 0.0224 0.0159 0.0000 0.0079 0.0057 1.0000 1.0519 2004/05 0.0204 0.0208 0.0000 0.0076 0.0057 1.0000 1.0545

Source: County of Alameda – Auditor/Controller Office

137 Statistical

City of Emeryville – Computation of Direct and Overlapping Bonded Debt June 30, 2005

2004-2005 Assessed Valuation $2,698,709,726 Redevelopment Incremental Valuation 2,157,189,594 Adjusted Assessed Valuation $541,520,132

REDEVELOPMENT TAX INCREMENT DEBT: APPLICABLE DEBT AT % 6/30/2005 1995 Revenue Bonds, Series B 100. $ 6,190,000 1998 Revenue Bonds, Series B 100. 45,790,000 1998 Revenue Bonds, Series C (Taxable) 100. 16,330,000 2001 Revenue Bonds, Series A 100. 21,639,800 2001 Revenue Bonds, Series B (Taxable) 100. 3,360,000 2002 Revenue Bonds, Series A 100. 20,770,000 2004 Revenue Bonds, Series A 100. 78,790,000 Total Overlapping Tax Increment Debt $192,869,800 DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Bay Area Rapid Transit District 0.162 $ 162,000 Peralta Community College District 1.266 1,850,006 Emery Unified School District 100. 6,855,000 Oakland Unified School District 0.002 6,219 City of Emeryville 100. 0 City of Emeryville 1915 Act Bonds 100. 11,990,000 East Bay Municipal Utility District (Self Supporting) 0.458 13,969 East Bay Municipal Utility District, Special District No. 1 1.164 447,849 East Bay Regional Park District 0.239 347,602 Total Gross Direct and Overlapping Tax and Assessment Debt $21,672,645 Less: East Bay Municipal Utility District (Self Supporting) 0.458 13,969 Total Net Direct and Overlapping Tax and Assessment Debt $21,658,676

GROSS DIRECT AND OVERLAPPING TAX AND ASSESSEMENT AND TAX INCREMENT DEBT $214,542,445 NET DIRECT AND OVERLAPPING TAX AND ASSESSEMENT AND TAX INCREMENT DEBT $214,528,476

OVERLAPPING GENERAL FUND OBLIGATION DEBT: Alameda County General Fund Obligations 0.406 $2,587,531 Alameda County Pension Obligations 0.406 1,245,865 Alameda County Superintendent of Schools Certificates of 0.406 8,282 Participation Alameda-Contra Costa Transit District Certificates of Participation 0.484 100,357 Oakland Unified School District Certificates of Participation 0.002 541 City of Emeryville General Fund Obligations 100. 6,190,000 Total overlapping General Fund Obligation Debt $10,132,576

GROSS COMBINED TOTAL DEBT $31,805,221 NET COMBINED TOTAL DEBT $31,791,252

138 Statistical

City of Emeryville – Computation of Direct and Overlapping Bonded Debt Continued

Ratios to Incremental Valuation: Overlapping Tax Increment Debt 8.94% Ratios to 2003-04 Assessed Valuation: Direct Debt 0.00% Gross Direct and Overlapping Tax and Assessment Debt 0.80% Net Direct and Overlapping Tax and Assessment Debt 0.80% Gross Direct and Overlapping Tax, Assessment and Tax Increment Debt 7.95% Net Direct and Overlapping Tax, Assessment and Tax Increment Debt 7.95% Ratios to Adjusted Assessed Valuation Combined Direct Debt ($6190,000) 1.14% Gross Combined Total Debt 5.87% Net Combined Total Debt 5.87%

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/05 : $2

Source: California Municipal Statistics Inc.

139 Statistical

City of Emeryville – Computation of Legal Debt Margin June 30, 2005

2004-2005 Assessed Valuation $2,698,709,726

Bonded Debt limit – 15% of assessed value $404,806,459

Source: City of Emeryville

140 Statistical

City of Emeryville – Demographic Statistics Last Ten Fiscal Years

Population Alameda City Fiscal City Percent County Population Year Population Change Population % of County 1994/95 6,492 0.82% 1,331,027 0.49% 1995/96 6,453 -0.60% 1,342,598 0.48% 1996/97 6,575 1.89% 1,375,850 0.48% 1997/98 7,058 7.35% 1,409,162 0.50% 1998/99 7,276 3.09% 1,433,309 0.51% 1999/00 7,311 0.48% 1,454,302 0.50% 2000/01 7,300 -1.18% 1,462,900 0.49% 2001/02 7,300 1.04% 1,486,600 0.49% 2002/03 7,550 3.42% 1,496,200 0.50% 2003/04 7,675 1.66% 1,498,000 0.51% 2004/05 8,261 7.64% 1,507,500 0.55%

8,500 1,550,000

8,000 1,500,000 7,500

7,000 1,450,000

6,500

1,400,000 6,000

5,500 1,350,000

5,000

1,300,000 4,500

4,000 1,250,000 96 97 98 99 00 01 02 03 04 05 6 1 3 7 9 8 0 2 4 5 9 9 9 0 0 0 9 0 0 0 / / / / / / / / / / 95 96 98 00 02 97 99 01 03 04 1995/ 1996/ 1997/ 1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 2004/ 19 19 19 19 19 20 20 20 20 20

City Population Alameda County Population

Source: State of California, Department of Finance estimate

141 Statistical

City of Emeryville – Property Values and Construction Last Ten Fiscal Years

Commercial Construction Residential Construction * Bank Summary Fiscal Commercial Number of Number of New Residential Number of Total Deposits Year Valuation Permits Residential Units Valuation Institutions (In Thousands) 1994/95 12,596,138 454 0 413,952 3 84,752 1995/96 25,650,375 411 6 1,277,844 3 79,999 1996/97 23,042,656 409 232 11,148,356 3 69,721 1997/98 25,528,581 474 152 8,258,359 3 80,060 1998/99 138,835,858 650 15 811,386 3 105,565 1999/00 167,467,915 453 67 11,277,585 4 123,916 2000/01 88,414,810 596 2 300,000 4 143,685 2001/02 105,120,765 734 130 8,443,576 5 144,049 2002/03 64,620,118 972 436 52,176,154 5 147,783 2003/04 27,321,052 883 531 97,818,658 5 186,467 2004/05 33,924,060 815 23 13,673,566 5 212,713

Bank Summary 250,000 6

200,000 5 4 )

$ 150,000 ( s

r 3 a l l 100,000

Do 2

50,000 1

0 0 6 7 8 9 0 1 2 3 4 5 9 9 9 9 0 0 0 0 0 0 1995/ 1996/ 1997/ 1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 2004- Total Deposits (In Thousands) Number of Institutions

Commercial Construction Residential Construction

160,000,000 100,000,000 90,000,000 140,000,000 80,000,000 120,000,000

) 70,000,000 ) $ $

( 100,000,000 60,000,000 ( s s r

r 50,000,000 a 80,000,000 a l l l l 40,000,000 60,000,000 Do Do 30,000,000 40,000,000 20,000,000 20,000,000 10,000,000 0 0 96 97 98 99 00 01 02 03 04 05 96 97 98 99 00 01 02 03 04 05 4- 5/ 6/ 7/ 8/ 9/ 0/ 1/ 2/ 3/ 1995/ 1996/ 1997/ 1998/ 1999/ 2000/ 2001/ 2002/ 2003/ 199 199 199 199 199 200 200 200 200 200 2004- Commercial Valuation Residential Valuation

Source: City of Emeryville, State Banking Department, Federal Deposit Insurance Corporation

142 Statistical

City of Emeryville – Top Twenty Property Taxpayers June 30, 2005

2004-05 Percentage of Total Taxpayer Assessed Value Assessed Valuation

Chiron Corporation $292,195,507 10.96% Bay Street Partners LLC 158,516,445 5.94% SPK Emeryville Properties LLC 150,919,418 5.66% Pixar 115,343,991 4.33% Emery Station Joint Venture 110,019,574 4.13% Sand Hill Northwest Properties 93,265,220 3.50% Bay Center Office LLC 50,496,248 1.89% Marketplace Mortgage LLC 49,609,228 1.86% HPTMI Properties Trust 42,419,296 1.59% BEP Emery Tech 41,155,460 1.54% Regency Centers LP 38,964,001 1.46% Hardage Hotels III LP 38,183,378 1.43% Spieker Properties LP 36,781,092 1.38% Ikea Property Inc. 33,016,977 1.24% Bay Center Apartments Associates 32,068,619 1.20% 65th Hollis LLC 27,942,340 1.05% Hollis Street Investors LLC 27,071,421 1.01% Catellus Finance LLC 23,228,607 0.87% Cetus Corporation 18,181,183 0.68% Siebel Systems 17,827,139 0.67%

Total $1,397,205,144 52.39%

Total Assessed Valuation $2,666,715,044

Source: MBIA Muniservices

143 Statistical

City of Emeryville – 25 Largest Employers June 30, 2005

Employer Product/Service Employees

Chiron Corporation Research, Development, Manufacturing 2290 -Pharmaceutical Biotech Products Pixar Computer Animated Film Production 735 Leapfrog Children's Toy Maker 465 AC Transit Public Transportation 431 Oaks Card Club Card-room 410 IKEA Household Furnishings Retailer 242 Siebel Systems Software Development/Sales 225 Home Depot Hardware & Building Supplies 202 Peet's Coffee Coffee Roaster 202 City of Emeryville Government 201 LECG (Navigant Consulting) Consultants 165 State Farm Insurance Insurance Company 157 VNA(Visiting Nurses Assn.) Home Medical Care 154 Matsco Financial Financial Services 153 Netopia Internet Browser Development 124 Hero Arts Rubber Stamps Rubber Stamp Manufacture 113 LFR Levine Fricke Engineering/Applied Scientists 105 Chevy's Restaurant and Corporate Office 105 Holiday Inn Bay Bridge Hotel 98 George M. Martin Co. Machine Manufacture 92 Courtyard by Marriot Hotel 84 Aldon Computer Group Software Development & Sales 83 Bishop Barry Law Firm 78 Ratcliff Architects Architectural Design 75 Ex’Pressions Educational Center for New Media 75

Source: City of Emeryville

144 Statistical

City of Emeryville – Assessed Value Summary 2004-05

Secured Unitary/State Board Unsecured Taxable Roll Roll Total Parcel Count 4,395 1,699 6,094 Tax Rate Areas 7 7

Values: Land 528,634,271 1,390,556 6,331,015 536,355,842 Improvements 1,779,698,484 442,639 112,233,559 1,892,374,682 Personal Property 82,945,820 248,480 216,925,838 300,120,138 Total 2,391,278,575 2,081,675 335,490,412 2,728,850,662

Exemptions: Homeowners 8,941,800 95,200 9,037,000 Real Estate/Personal Property 17,395,648 12,745,288 30,140,936 Total Exemptions 26,337,448 12,840,488 39,177,936

Net Value 2,364,941,127 2,081,675 322,649,924 2,689,672,726

Source: Alameda County Auditor / Controller Office

145 Statistical

City of Emeryville – Use Category Summary June 30, 2005

Parcels by Landuse Net Assessed Value by Landuse

Commerc ial 10.3% Industrial Indus trial 9.6% 13.4% Institutional/ C ommer c ial Vacant/ 58.1% Undetermined 3.2% Residential Public 53.0% 0.9%

Institutional/ Recreational Vacant/ 0.4% Undetermined Residential Public 16.8% 23.9% 3.2% Recreational 7.1%

Land Use Secured Secured Net Unsecured Unsecured Total Net Percent Parcel Assessed Value Parcel Net Assessed Assessed Value of Net Count Count Value Assessed Value Commercial 212 1,403,563,496 414 $146,694,295 $1,550,257,791 58.1% Industrial 329 277,192,882 260 81,253,943 358,446,825 13.4% Institutional 74 38,508,765 70 12,157,972 50,666,737 1.9% Public 133 0 934 59,416,426 59,416,426 2.2% Recreational 430 10,264,935 1 6,286 10,271,221 0.4% Residential 3,217 636,188,049 20 1,467,995 637,656,044 23.9% Total 4,395 2,365,718,127 1,699 300,996,917 2,666,715,044 100.0%

Source: MBIA Muniservices

146 Statistical

City of Emeryville – Distribution of the 1% Property Tax June 30, 2005

Alameda County General Fund 43.71% City of Emeryville 21.82%

Emery Unified School District 11.50%

All Other Taxing Districts 22.97% Total 100.00%

Property Tax Breakdown

All Other Taxing Districts 23% Alameda County 43% Emery Unified School District 12% City of Emeryville 22%

Source: Alameda County Auditor-Controller Agency

147 Statistical

City of Emeryville – Sales Tax Dollar Breakdown June 30, 2005

State of California 6.00% City of Emeryville 0.95% Alameda County 0.80% Alameda County Essential Healthcare Services 0.50% Bay Area Rapid Transit 0.50% 8.75%

Total Sales Tax Rate 8.75%

State of California

0.50% 0.50% City of Emeryville 0.80% Alameda County 0.95% 6.00% Alameda County Essential Heathcare Services Bay Area Rapid Transit

Source: State Board of Equalization

148