City Services

Finance Department

The City of Sonora ’s governmental activities include police and fire protection, public works, community development (building and planning), grants and special programs and general government. Sales tax, property tax, vehicle license fees, transient occupancy tax, user fees, and franchise fees finance these activities. Financial highlights for the fiscal year ended June 30, 2006 are outlined below and shown in more detail in the accompanying tables.

FINANCIAL HIGHLIGHTS

The City’s governmental activities total assets exceeded liabilities (net assets) at the close of the fiscal year by $14,281,582 an increase of $2,488,066 over 2005. Of this amount, $2,909,834 is in unrestricted net assets, which is available to meet the City’s ongoing financial obligations.

CITY OF SONORA
NET ASSETS
JUNE 30, 2006 AND 2005

	Governmental Activities
	2006	2005
Current and other assets	$ 8,688,133	$ 6,910,193
Capital assets	8,430,445	7,674,805
Total assets	17,118,578	14,584,998

Long-term liabilities outstanding	1,768,765	1,807,947
Other liabilities	1,068,231	983,535
Total liabilities	2,836,996	2,791,482

Net assets:
Invested in capital assets, net of related debt	6,661,679	5,866,858
Restricted	4,710,069	3,522,941
Unrestricted	2,909,834	2,403,717
Total net assets	$ 14,281,582	$ 11,793,516

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

General and program revenues exceeded expenses by $2,488,066. City program expenses totaled $7,221,755 for 2006. Public safety (police and fire protection) costs comprised $3,878,690 or 54% of this amount.

CITY OF SONORA
STATEMENT OF ACTIVITIES
FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

	Governmental Activities
	2006	2005
Revenues:
Program Revenues:
Charges for services	$ 939,188	$ 948,040
Operating grants and contributions	268,310	220,986
Capital grants and contributions	1,894,037	766,419
General Revenues:
Property tax	1,740,306	1,553,952
Sales tax	3,849,624	2,945,617
Motor vehicle tax	105,923	50,303
Transient lodging tax	214,839	210,967
Motor fuel tax	103,042	115,013
Other taxes	149,751	136,764
Investment earnings	345,130	214,035
Gain on sale of assets	99,671	-
Total revenues	$ 9,709,821	$ 7,162,096
Expenses:
General government	1,029,096	841,046
Public safety	3,878,690	2,916,733
Public works	1,153,550	886,658
Community development (building & planning)	874,098	966,256
Culture and leisure	161,610	112,963
Interest on long-term debt	124,711	144,151
Total expenses	$ 7,221,755	$ 5,867,807
Increase in net assets	$ 2,488,066	$ 1,294,289

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

The City’s General Fund ended the year with a fund balance of $3,085,644, an increase of $280,148 from the previous year. General Fund revenues exceeded expenditures by $280,148 largely as a result of the sale of the City-owned Homeless Shelter to the Amador Tuolumne Community Action Agency in November, 2005 for $223,000. General Fund expenditures totaled $4,501,581. Police and fire protection costs were $1,812,455 or 40% and $625,858 or 14%, respectively, of total General Fund expenditures.

The formation of a Special Sales and Use Tax District (Measure I) provided sales tax revenue of $1,426,759 in fiscal year 2006. These funds were used for the hiring of additional personnel, wage and benefit enhancements and equipment purchases in the police, fire and public works departments.

NEXT YEAR’S BUDGET – FISCAL YEAR 2007 ECONOMIC FACTORS

In preparing the budget for fiscal year 2007, City management has taken into consideration the following economic factors:

The State of California ’s adopted budget for fiscal year 2007 did not negatively impact cities, counties, special districts or redevelopment agencies in terms of state mandated revenue losses from the sources listed below:

Sales tax - the State continues to implement prior legislation that exchanges a portion of the City’s sales tax revenue for property tax revenue. This exchange has no effect on the City’s total revenue; however, different distribution dates of these two types of revenue, as in the prior year, will adversely affect the City’s cash flow and interest earnings.

Vehicle license fees – the City’s allocation of motor vehicle license fees will be administered consistent with adopted legislation that exchanges a portion of the City’s vehicle license fee revenue for property tax revenue. Different distribution dates of these two types of revenue will adversely affect the City’s cash flow and interest earnings. Future increases to this portion of vehicle license fee revenue will be tied to increases in assessed property values instead of population growth as in the past. Overall, property values continue to increase as the economy remains healthy.

Property tax revenue shifts to the Education Relief Augmentation Fund – the State suspended the transfer of a portion of Redevelopment Agency property tax revenue to fund education. There is discussion in the legislature that the transfer of Redevelopment Agency property tax revenue may again be suspended in fiscal year 2008.

Proposition 42 monies continue to be paid to cities and counties to provide funding for transportation improvement projects. Funding was reinstated in fiscal year 2006 and is expected to be funded in fiscal year 2007.

· An overall strong economy continues to increase the City’s sales tax revenue. Sales tax remains the largest City revenue source.

· Despite a slow down in the sale of existing homes, there continues to be a demand for housing. Remodels are helping to keep building permit revenue on target.

· Property tax revenue continues to grow, despite a slow down in existing home sales. Housing prices are being reduced, but had been somewhat over-inflated. The pricing correction is still promoting higher property assessed values.

· The formation of a Special Sales and Use Tax District (Measure I) was approved by City of Sonora voters in August, 2004. A ½% sales tax increase within the City limits was effective January 1, 2005 and is continuing to provide revenue for the police, fire and public works departments. The sales tax increase is expected to generate approximately $1,427,000 in revenue in fiscal year 2007.

For fiscal year 2007, the City’s General Fund recurring revenues are projected to increase by $88,900 or 2%. General fund expenditures are budgeted to increase by $214,300 or 5%. Total projected revenues and expenses for the upcoming fiscal year are budgeted at $4,414,700 and $4,387,900, respectively.

City management continues to take a position of conservative revenue projection and modest increases to General Fund department expenditures. There were no positions added to the General Fund and no major capital expenditures budgeted. As noted, Special Sales and Use Tax District (Measure I) revenue will be used for additional personnel, wage and benefit enhancements and capital acquisitions for police, fire and public works in accordance with City Council approved expenditure plans.

Karen Stark, Finance Director
City of Sonora
94 N. Washington St.
Sonora, CA 95370
Phone (209) 532-6331
Fax (209) 532-2738