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Home My WebLink About12/20/1999 BAKERSFIELD Patricia J. DeMond, Chair Mike Maggard Mark Salvaggio Staff: Darnell Haynes SPECIAL MEETING NOTICE BUDGET AND FINANCE COMMITTEE of the City Council - City of Bakersfield Monday, December 20, 1999 12:00 noon City Manager's Conference Room Second Floor - City Hall, Suite 201 1501 Truxtun Avenue, Bakersfield, CA AGENDA 1. ROLL CALL 2. APPROVAL OF OCTOBER 13, 1999 AGENDA SUMMARY REPORT 3. PUBLIC STATEMENTS 4. DEFERRED BUSINESS A. UPDATE AND POSSIBLE COMMITTEE RECOMMENDATION ON AGREEMENT AND SECOND DEED OF TRUST WITH THE BAKERSFIELD MUSEUM OF ART - Christensen 5. NEW BUSINESS A. · DISCUSSION REGARDING THE CITY OF BAKERSFIELD INVESTMENT POLICY - Klimko B. DISCUSSION AND POSSIBLE RECOMMENDATION REGARDING THE CITY OF BAKERSFIELD SELECTING A SINGLE INVESTMENT FIRM FOR CUSTODY OF CITY INVESTMENTS - Klimko C. DISCUSSION AND POSSIBLE RECOMMENDATION REGARDING PROPOSAL RECEIVED FROM DAVID TURCH AND ASSOCIATES, WASHINGTON D.C. LOBBYIST - Rojas D. DISCUSSION AND POSSIBLE RECOMMENDATION REGARDING EXCESS FUNDS FROM WILSON PARK PLAYGROUND EQUIPMENT PROJECT - Wager E. DISCUSSION OF FINANCIAL REPORTS 1. CITY OF BAKERSFIELD COMPREHENSIVE ANNUAL FINANCIAL REPORT (ANNUAL AUDIT) CONTENT/ACCOUNTING POLICY PROCEDURES - Klimko 2. BAKERSFIELD CENTENNIAL GARDEN AND CONVENTION CENTER FINANCIAL. STATEMENTS AND AUDITOR LETTERS - Klimko 6. ADJOURNMENT DH:jp DRAFT BAKERSFIELD ~~/? 0.~~-~?.,.4~?, _~-- Patricia J. DeMond, Chair /[lan Tandy, ~it~ ~/l-~ih'~ger Mike Maggard Staff: Darnell Haynes Mark Salvaggio AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 12:00 noon City Manager's Conference Room 1. ROLL CALL Call to Order at 12:07 p.m. Present: Councilmembers: Patricia J. DeMond, Chair; Mark. Salvaggio and Mike Maggard Councilmember Mike Maggard arrived at 12:10 p.m. 2. ADOPT AUGUST 20, 1999 AGENDA SUMMARY REPORT Adopted as submitted. 3. PRESENTATIONS None 4. PUBLIC STATEMENTS None 5. DEFERRED BUSINESS None DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 Page -2- 6. NEW BUSINESS A. REVIEW AND COMMITTEE RECOMMENDATION REGARDING REQUEST FROM KERN COUNTY FOR AIRPORT TERMINAL FUNDING City Manager, Alan Tandy indicated that based on discussions at the City Council, the Intergovernmental Relations Committee and from the joint City/County meeting, Kern County would be requesting $3 million dollars from the City to assist in the airport terminal project. The County indicated they needed a commitment from the City by March 1, 2000, so the money would be in place by the year 2003. Mr. Tandy provided the Committee a range of options with respect to their recommendations concerning the funding level of City participation and how each level would impact City operations. Essentially them am two options the Committee could consider if the City participates at the level of $3 million dollars. One is to accrue cash and capital improvement money between now and 2003. The other would be to participate in a 20-year COP debt obligation. Of the two mechanisms of funding Mr Tandy recommended the Committee consider the debt obligation as the best alternative. He then gave some examples of capital projects that would likely be affected over the next twenty years, if the City participates at the $3 million dollar level in the debt obligation. The numbers staff used in determining the debt obligation are preliminary and based upon averages and norms. Staff assumed 6% interest on a 20 year issue, which converts to a City contribution of $309,000 per year. That number would be refined as time goes on and as the County firms up the term and as interest rates vary. Mr. Tandy also recommended the City keep open the option to transfer the Airpark fund balance, together with the municipal airpark, to Kern County as part of the City's contribution. Staff still believes the transfer makes sense in terms of efficiency in governmental service. The $500,000 fund balance the transfer would carry represents a significant contribution. Another option is to monitor the tobacco tax settlement which will be giving Kern County $24 million dollars in new revenue between now and the year 2003. The City could take the position that this is the best source for financing the airport terminal and improvements. If all of the money becomes restricted, the City could respond with a different funding option. Committee member Maggard expressed his strong support for City financial involvement at a substantial level in developing the airport terminal project. He asked how much the City would save in bond issuance and funding costs if we were to participate with Kern County in issuing the COP's. DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 Page -3- He further stated it would also seem reasonable that some of the tobacco settlement money should be available for the airport terminal project, however, he was not aware of all the details associated with the settlement. He requested that City staff have a very frank conversation with Kern County staff to find out what savings could the City e~tpect by participating in their COP and what monies, if any, might be available from the tobacco settlement to help lessen the City contribution. Committee member Maggard requested staff look into the issue of the Kern County airport enterprise fund issuing the COP's and the revenue stream generated from Kern County airport operations over a period of time be used to help pay off some of the COP debt. His understanding is that revenue stream being paid back to the County is already part of the $8 million that Kern County is going to contribute to the project. Similarly, if the City contributes $3 million towards the project and in essence helps create the revenue stream, then it is not unreasonable for the City to receive some benefit from that revenue stream to pay part of our obligation. Essentially there are three key questions that Committee member Maggard is interested in having clarified by City staff: 1) What level do we participate and how can it be structured? 2) How does the tobacco settlement factor into the equation? 3) If the City were to issue COP's with Kern County, what savings would the City receive? Mr. Tandy stated if Kern County used an internal loan as the funding source to be repaid with a combination of City and County monies, there would be savings to the City because there are no underwriter discount and bond issuance costs on an interfund Ioanl Those savings would be substantial. He further stated that in his last discussions with Kern County officials they indicated they would be using an external debt issue as the funding source. .There are no savings on external debt issues because they carry with them underwriter discount and bond attorney's fees. Even if Kern County issued one County COP for $11 million, of which the City would guarantee $3 million, there would be little savings given the fact that interest rates fluctuate from day to day. City Manager Tandy stated his last information on the tobacco tax settlement reflects that a portion of Proposition 10 monies is restricted and must be used for health related services. However, it his understanding there remains an unrestricted allocation which will give Kern County $9.6 million at the end of this fiscal year and $8 million the following fiscal year. Committee member Maggard reiterated the third question which had to do with the revenue stream that would occur over the years from the airport being used to repay part of the City COP issue as well as the County issue. Mr. Tandy stated it was his belief that Mr. Bishop had built into the first part of the funding all of his revenue stream for debt retirement and operation and maintenance and he is asking for the degree that he has no more revenue and is consumed by that, then is asking the COunty for $8 million and the City for $3 million because he has no mechanism to retire additional debt. DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 Page -4- Mr. Bishop stated that the County's $8 million already includes $3 million in Airport Enterprise funds and he has committed long-term revenues in the amount of $300,000 to $400,000 per year or 50% of all future profits, for the 20 year period required to retire the debt. He stated he could not commit the entire revenue stream because there are operating expenses required to run the airport and he was uncomfortable in committing any revenue over and above that 50% profit level. Committee member Maggard noted that the County General Fund contribution or non-airport funds are really only $5 million. With the prospect of additional funds coming to the County from the tobacco tax settlement he is interested in whether Kern County would increase their $5 million contribution and lower the City's $3 million portion. Mr. Bishop added that he felt the proposed airport terminal is still too small and based on future needs, the terminal should be 65,000 to 70,000 square feet. Mr. Bishop stated they need the additional $3 million dollars from the City. Mr. Bishop stated that if additional funding from the tobacco settlement money does become available he would ask the County to increase its contribution to build a larger terminal. Committee member Salvaggio noted that this is a big policy decision for the Council to make, and feels it warrants further discussion. He said he is in favor of the City making some sort of contribution towards the construction of a new Kern County Airport terminal, but the issue is the impact on the City of Bakersfield's budget. One notable point is the projected increase of 12.3% or close to $900,000 in health premiums for City employees. In addition, there are some capital improvements that must .not be ignored. Committee member Salvaggio is in favor of: 1) keeping the transfer of the Airpark and the $500,000 fund balance open for a year or two; 2) continue to explore the $3 million funding over 20 years on the debt retirement basis; and 3)'urge the County to use the $8 million or so in new money from the tobacco settlement for this high priority project. It would be prudent to talk with Congressman, Bill Thomas, who sent a letter to Congressman Bill Young, Subcommittee of Transportation, Committee on Appropriations, indicating the need for a discretionary grant to Meadows Field. Committee member Salvaggio suggested that the next six months be taken to study the possibility of giving the County $1.5 million, in addition to the Airpark plus the $500,000 fund balance. He asked how committed the County is to this project. Could this possibly be funded without assistance from the City, or less than the $3 million requested? City Manager Tandy replied that the fund balance in the Airpark coupled with a commitment of $1.5 million for a total of $2 million was something that could be done without deep cuts or threatening municipal services. This option was essentially rejected in total by the Board of Supervisors at the joint meeting, with their preference being $3 million dollars. DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 Page -5- Committee Chair DeMond noted that a resolution would not be reached at this meeting. However, slfie had concems about the capital improvements such as road repairs and over 30 signals within the City which need to be constructed and are currently unfunded. It is her assumption the airport terminal is a high priority issue with the County. She questioned whether it is a sufficiently high pdodty project with our citizens to support a general obligation bond issue. Should such a cost be borne by West Kern residents only or residents from the entire county? She requested staff to research the cost. She further stated labor negotiations will take place next year and this obligation will be in addition to the $900,000 increase estimated for insurance premiums. She is willing to help under certain conditions, but not under what has been proposed by Kern County up to this point. All the other aspects that have been brought into question should be considered as well. Committee member Maggard asked how to direct staff to help determine how much is appropriate? Committee Chair DeMond replied that the minutes for this meeting would be -. reviewed and the salient points brought out, which will give staff direction. She requested that the draft minutes be made available to the Committee as a whole in order to determine whether their comments are adequately noted. This would ensure that all manner of funding will be defined so that there is no compromise as to public safety, roads and the most basic services we offer. Mr. Bishop distributed a copy of the letter from the Chairman of the Board of Supervisors. In that letter, the hope is that the City will participate at the $3 million dollar level. But as the architectural design progresses, it is getting to the point that if the City provides less money, it will cost more architectural money to redesign. The plans for the terminal show the projected expanded growth. In that letter a response is requested by March 1, 2000. The initial intent was to get a response by January 1, 2000, but he understands there are still a lot of questions that need to be answered. Mr. Bishop stated he has a meeting with Congressman Thomas on Saturday to further discuss discretionary funding, but the terminal building itself generally does not qualify for discretionary dollars. The Federal government has been asked for the discretionary dollars in the amount of $4.5 million for the land and aprons which is a capacity issue, and the verbal response is that it looks pretty good. There are some of the roads that could qualify, with no response on these yet. The total project is estimated at $20 million. The County will participate with $8 million for the terminal building and of that $8 million, $3 million is Airport Enterprise funding. This project is ranked behind the Health and Human Services Building in County priorities. The anticipated $4.5 million or $5 million Federal funding for the apron and ramp is not part of this discussion. DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 15, 1999 Page -6- City Manager Tandy reiterated the quickest action the City could do would be utilize the fund balance in the airpark, which would involve no reduction in any City program. He asked Mr. Bishop to keep this option open. Mr. Bishop replied that he believed the issue to still be open, and asked if this related to the terminal or if it is an issue that should be considered separately. Committee Chair DeMond told him that it does relate to the terminal. B. REVIEW AND COMMITTEE RECOMMENDATION REGARDING REQUEST FOR FUNDING FOR GREATER BAKERSFIELD 2020 VISION PROJECT A letter was received f rom Greater Bakersfield Vision 2020 requesting City assistance in the amount of $50,000. A representative of Vision 2020 stated that Kern County has decided to make a contribution in the amount of $25,000. No letter of request had been submitted to the County requesting any contribution. Upon request from Committee member Salvaggio, a summary of the major difference between 2020 and Future Bakersfield was presented to the Committee. It was stated that Future Bakersfield had completed Phase 1 of a lOng-term visioning process. While Future Bakersfield involved a limited group of people, Vision 2020 involves the entire community. Residents have the opportunity to voice-what they want for their community in the future, including education, infrastructure, business, civic, and social goals. The process is designed in phases that will complete two action plans over 15 months. It was reported that $1.70,000 has been raised so far, and there is additional funding.available to meet the full budget. This amount did not include the $25,000 contribution made by Kern County. It is hoped that residents would make $1, $5, or $10 contributions. The project will conclude in December 2000. Committee member Salvaggio asked how Vision 2020 interfaced with the Chamber of Commerce? It was stated that the Chamber provides financial support, and the use of an office until the Vision 2020 office opens in three weeks. Any support the Chamber offers is as a separate entity. Committee member Salvaggio stated his support of a contribution and suggested the Veteran's Hall on Wilson Road as a possible location for a future Vision 2020 project meeting. Committee member Maggard voiced his agreement to participate. He suggested returning to the to City and County with community results and needs. 'Committee Chair DeMond suggested that a budget be attached for each project in the final compilation. She recommended a contribution of $25,000 with the monies being allocated from the Council Contingency account. She also noted that no promises are made for contribUtions in the next fiscal year. The Committee unanimously agreed to submit a request to Council for a$25,000 contribution from the Council Contingency account. DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 Page -7- C. REVIEW AND COMMITTEE RECOMMENDATION REGARDING REQUEST FOR FUNDING FROM BOB ELIAS HALL OF FAME City Manager, Alan Tandy reported that the Bob Elias Hall of Fame has been an element of the Convention Center for many years. It was originally located within a secondary entrance to the Convention Center. Since the construction of the arena access has been severely limited to this area. Members of the Bob Elias board approached the City some months ago requesting assistance. The City looked at cabinetry and shelving that would promote more visibility, with an estimated cost of $110,000. Staff worked with the board to reduce costs, and after considerable modifications, the estimate was reduced to $30,000 - $35,000 with a portion to be supported by donated labor. A representative of the Elias Hall of Fame stated that the board would be willing to designate a spot within this new venue to highlight outstanding accomplishments by contemporary City sport figures or teams, such as last year~s World Championship Little League Team and Steve Neal, the World Champion wrestler. As it is a non-profit organization, they request assistance from the City in an amount of $20,000 to $25,000. They have recently hosted a fund raiser and will continue with similar efforts. Committee Chair DeMond stated her desire for the project to become an integral part of the arena. It was explained the difference in cost is the expense of cabinetry. City Manager Tandy further explained stated that the main difference is the plaques would be surface mounted, whereas originally all plaques were going to be within cabinetry. The Committee unanimously agreed to submit a request to Council for a $25,000 contribution from the Council Contingency account. City Manager, Alan Tandy stated that the item is on the October 20, 1999 City Council Agenda. D. REPORT AND COMMITTEE RECOMMENDATION REGARDING PROFESSIONAL TEMPORARY EMPLOYEE PILOT PROGRAM Human Resources Manager, Carroll Hayden reported the results of the 90-day pilot program. The unemployment insurance cost comparison is not available as those costs are charged after a completed quarter. There was a decrease of $10,000 in pre-employment physicals and a 56% decrease in the number of temporary employees who suffe~'ed workers compensation injuries over the same time frame as last year. Some managers noted how proficient it was to have a replacement the next day if one employee didn't work out. This is a service that is difficult for the City to provide. It was also reported that a sexual harassment claim was filed last week by one of the pilot divisions. As the employee involved was hired through an agency, it is the agency's responsibility to investigate and make a recommendation, thus saving the City these costs. DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1999 Page -8- Committee member Maggard asked what the payroll output is for temporary employees on an annual basis, and the estimated cost savings. While the exact figure was not readily available, it was estimated that the costs for each temporary employee is $13 per hour. And the City has approximately 300 to 500 temporaries. It was estimated there would be an annual savings of $800,000 per year. Committee member Salvaggio asked if Chuck Waide was being kept informed of the status of the program, and if any Blue and White collar personnel were concerned that the program would be a means to hinder the City from hiring full-time regular employees. Ms. Hayden indicated that she has been keeping Mr. Waide apprized, who is monitoring the program closely, and the group in question has no problem with the City using full-time temporary employees. Ms. Hayden recommended a report to Council to submit an RFP to make this a City-wide program. The RFP would be for one year, with a two-year option. It is anticipated that one or more agencies would be utilized, depending on the expertise of the agency, in order to get the best bid. Committee Chair DeMond noted that the Administrative Report should include anticipated annual savings and report back with one year with a follow up. The Committee unanimously agreed to recommend theitem be approved by full Council. E. SET FUTURE MEETING DATES The next two meetings will be held November 19, 1999 and February 7, 2000. After the committee checks their respective schedules, it is anticipated meetings will be held in April and in May 2000. Committee Chair DeMond suggested combining the May meeting to be held in tandem with one of the City Budget meetings, as was done in 1999. 7'. COMMITTEE COMMENTS None DRAFT AGENDA SUMMARY REPORT BUDGET AND FINANCE COMMITTEE Wednesday, October 13, 1.999 Page -9- 8. ADJOURNMENT The meeting was adjourned at 1:50 p.m. Staff present: City Attorney,'Alan Tandy; Assistant City Manager John Stinson; Assistant to the City Manager Darnell Haynes; City Attorney Bart Thiltgen; General Services Superintendent, Brad Underwood, and Human Resources Manager, Carroll Hayden. Others present: Ray Bishop, Kern County Airport; James Burger, Bakersfield Californian; Sheryl Barbich and Barbara Hards, Greater Bakersfield Vision 2020; Tammy Brown, KUZZ Radio; Ray Allen; and Angelo Haddad. cc: Honorable Mayor and City Council DWI-I:al S:\Oarnell\Bud and Fin\BF99oct13surn.wpd 9 Page ! of 4 CITY OF BAKERSFIELD INVESTMENT POLICY SCOPE This investment policy applies to the investment activities of the City of Bakersfield and related entities. Idle cash in all funds is pooled for investment purposes except tax exempt bond proceeds, which are separated for arbitrage record keeping as required by federal tax law, and the Firemen's Disability and Retirement Fund which is administered separately under Municipal Code Section 2.92. PURPOSE This policy is intended to provide guidelines for the prudent investment of the City's temporary idle cash, and outline the policies for maximizing the efficiency of the City's cash management system. The ultimate goal is to enhance the economic status of the City while protecting the safety of its pooled cash. POLICY Investments shall be made in the context of the "prudent investor' rule: Investments shall be made with judgement and care, under circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in thc management of their ox~ affairs. not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived. The city is further governed by California Government Code, Section 53600 et. seq. and other imposed legal restrictions. Within the context of these limitations, the following investments are authorized, as further limited herein (Single asterisk * denotes term or percentage imposed bv State statute. Double asterisk ** denotes term or percentage utilized bv City staff which is more restrictive than statute.): United States Treasury Bills, Notes and Bonds are securities which have the full faith and credit of the United States pledged for payment of principal and interest. Although there is no percentage limitation of the dollar amount that can be invested in these categories, thc "prudent investor" rule shall apply. Maturities are limited to three** years from settlement date. Treasury Bills (T-Bills) are short-term debt obligations of the United States government, issued weekly with maturities up to one year. T-Bills are considered to have virtuallv no credit risk and to be the most liquid short-term fixed income instrument. Prices on T-Bills are quoted on a discount basis. The difference between the discount price and the full face value paid at maturity equals the total return. Exhibit "A" Page 2 of 4 Treasury Notes (T-Notes) are initially issued with two to ten year maturities. T-Notes like Bills have virtually no credit risk and have liquidity through an active secondary market. T-Notes are issued at Par ($1,000) with a coupon or fixed rate of intereSt. The price or market value will fluctuate above or below par depending on the coupon rate and whether interest rates are rising or falling. T~notes mature at par. Treasury Bonds (T-Bonds) are initially issued with ten to thirty year maturities and have characteristics similar to T-Notes. Obligations issued by the United States Government Agencies such as the Federal Farm Credit Bank System (FFCB), the Federal Home Loan Bank (FHLB). the Federal Home Loan Mortgage Corporation (FHLMC) and the Federal National Mortgage Association (FNMA). Government agencies issue debt in the form of discount notes, much like T-Bills, and notes and bonds similar to T-Notes and T-Bonds. While agency debt is not a direct obligation of the U.S. government, it is rated AAA, the highest rating. At the time of purchase no more than (10%**) 20%** of the portfolio may be invested in any single agency name. Maturities are limited to three** years from settlement date. Bankers Acceptance (BA) is a time drat~ or bill of exchange,' issued from a letter of credit, and is used to finance international trade. When the accepting bank stamps "accepted" on the draft the bank guarantees payment of the draft at a specified future date and thereby creates an acceptance. BA's are considered extremely' safe in that there has never been a default on a BA. BA's trade on a discount basis and may not exceed 270* days to maturi~'. No more than 10%** of the portfolio may be invested in BA's issued by any one bank. No more than 40%* of the portfolio may be invested in this category. Eligible BA's are those issued bv banks with a short term debt rating of at least A-l** by Standard and Poor's Corporation or P-l** by Moody's Investors Service, Inc.. Commercial Paper (CP) is a short-term promissory note issued by large, well-known and financially strong corporations. CP is sold on a discount basis. The maximum maturity is 270 days with most issued in the 30-50 day maturity range. Eligible (CP) is "prime" quality ranked A-l by Standard and Poor's Corporation or P- 1 by Moody's Investors Service, Inc. and issued by a domestic corporation having assets in excess of $500 million and having an A or higher rating on its long term debt as-provided by Standard and Poor's or Moody's. Purchases of eligible commercial paper may not exceed 180' days to maturity. No more than 10%* of the portfolio may be invested in commercial paper issued by any one corporation. No more than 15%* of the portfolio may be invested in this category. Repurchase Agreements, commonly called Repos, are transactions in which a customer (City of Bakersfield) deposits cash at a fixed rate of interest and receives securities as collateral. Normally the securities are U.S. Treasury notes or bonds and are held by a Federal Reserve Bank. At maturity, the securities are returned and the customer receives principal plus interest. Repos can be done with banks or Page 3 of 4 dealers with which the City has entered into a master repurchase contract that specifies terms and conditions of repurchase agreements. The maturity of Repos shall not exceed (30**) 90** days. No more than 30%** of the portfolio may be invested in this category. Local Agencylnvestment Fund (LAIF) is a State of California managed investment pool for local agencies within the State. Investments may be up to the maximum permitted by State Law or (30%**) 40%** of the .portfolio whichever is less. Time Certificates of Deposit (TCD's) are similar to a savings certificate that anyone can purchase at a bank where there is a fixed rate of interest and a specified maturity date. In the public funds area TCD's are collateralized in accordance with California Government Code and are non-negotiable. At the time of purchase no more than 10%** of the portfolio may be in the TCD's of any one institution. Maturity. is limited to three ** years. No more than (30%**) 40%** of the portfolio may be invested in this category.. Public Agency Savings Account - Demand Deposits are similar to a savings account that anyone can open at a bank. The interest rate is specified at the time of deposit, but is subject to change. All funds can be withdrawn on demand. Like public TCD's, public agency savings accounts are collateralized in accordance with California Government Code. No more than 30%** of the portfolio may be invested in this category. Mutual Funds are money market funds meeting criteria prescribed in Government Code, Section 53601 and related legislation. Investments in this category are limited to funds that invest in U.S. Government Securities and maintain a net asset value of one (daily liquidity). The purchase price of shares shall not include any commission that these companies may charge. No more than 10%* of the portfolio may be invested in the shares of any one mutual fund. No more than (15%*) 20%* of the portfolio may be invested in this category. Mutual Funds are used primarily for the investment of bond proceeds subject to arbitrage reporting. Should an investment percentage and portfolio limitation be exceeded due to the unexpected fluctuation in portfolio size, the affected securities may be held to avoid losses. When market values are such that no loss is indicated, the City Treasurer shall consider restructuring the portfolio basing the decision in part on the expected length of time the portfolio will be imbalanced. Ineligible investments are those that are not described herein, including but not limited to, negotiable certificates of deposit, medium term corporate notes and reverse repurchase agreements. Criteria for selecting investments and the order of priority are: I. Safety. Thc safety and risk associated with an investment refers to the potential loss of principal, interest or a combination of these amounts. The City only operates in those investments that are considered very safe. Page 4 of 4 2. Liquidity. This refers to the "ability to easily sell" at any moment in time with a minimal risk of losing some portion of principal and interest. Liquidity 'is an important investment quality especially when the need for unexpected funds occurs occasionally. 3. yield. Yield is the potential dollar eamings an investment can provide, and sometimes is described as the rate of return. · The prudent investment term for the City's temporarily idle cash vs. the Firemen's Disability and Retirement Fund is markedly different. In order to meet fluctuating vendor payment amounts, City funds must be more liquid (invested for shorter terms) than retirement funds where monthly payments to retirees are a constant amount. Therefore, a five year maximum investment term pursuant to Government Code Section 53601 is appropriate for the retirement funds. Depending on the level of interest rates, a five year term is sometimes necessary to achieve a'6 percent actuarial rate of return. Up to (25) 40 percent of the retirement fund may be invested in securities of a single agency of the four triple A rated United States Government agencies authorized in this policy. These two exceptions of five year maximum investment term and a maximum of 40 percent per agency are necessarv in order to assure retirement funds are fully invested at or above the actuarial investment return rate. Qualified Institutions. The investment staff shall investigate institutions which desire to do business with the City to determine if they are adequately capitalized, make markets in securities appropriate to the City's needs, and arc recommended by managers of portfolios similar to the City's. Whenever possible investments are placed locally. Safekeeping. Securities shall be delivered to the City. by book entD', physical delivery or by third party custodial agreement. Investment Objective. The Cash Management system of the City of Bakersfield is designed to accurately monitor and forecast expenditures and revenues, thus ensuring the investment of monies to the fullest extent possible, including the estimated float for the Active Account and Payroll Account. The City attempts to obtain the highest interest yields possible as long as investments meet the criteria required for safety and liquidity and do not exceed a term of three years and are within portfolio percentage limitations. The City strives to maintain the level of investment of all funds as near 100% as possible through daily and projected cash flow determinations. Cash management and investment transactions are the responsibility of the City Treasurer. The City holds its Treasurer and his designees harmless for responsible investment transactions undertaken in accordance with thc Investment Policy, provided deviations from expectations are reported in a timely manner. The basic premise underlying the City's investment philosophy is, and will continue to be, to ensure that the money is always safe and available when needed. S:\Da~m\ Bilhl N VSTPI .C -OCTI 4wpd CDavid ,.gurch and , ssociat, s June 10, 1998 · ~ V.-.~ I.~-:~ \? ."=' Mr. Alan Tandy '.~ ..... '-' ..... City Manager :~ JUi~ 1 ~ !998 city of Bakersfield .... - 1501 Truxton Avenue 'z,'~g'i"..~.z~{ ;, Bakersfield, California 93301 ' ' '~'~ D'"~'"-' Dear' Alan; I reviewed the $217 billion Transportation Equity Act for the 21st Century and did not see federal funding for the Kern River Freeway project. You told me during our May 6 visit to contact you if there was .anything new to convince the City Council that we could help you. The enclosed success stories for our Southern California clients are forwarded for the Council"s consideration. Regarding the Congressman Ron Packard letter, please note he is the only 'California Representative who will continue to be a member of the House Appropriations Transportation Subcommittee. We would like to be your lobbyist. I will call you next week. Regards, Victor J. Tambone Enclosures cc: The Honorable Bob Price, Mayor ~ Honorable Randy Rowles, Vice Mayor Raul Rojas, Public Works Director Mr. Jacques R. LaRochelle, Engineering Services Manager · 517 2nd STREE% NORTHEAS~ WASHINGTON, D.C. 20002 (202) 543-3744 ..... , .............. -* .......... -- .............. ....... tax ~Jl. · ..o ....... : .... by reducing store hours or SunmY mn,~naLSlafl Wrlterr~#B# as~aultedl Of tho~e, about half To Muc~ crime ht'lh~ wodt ·. closing poA~ of the busP theManYconceptChildof~elping~V°cates work in retail ~si~sses. pl~e:, ness en~ stay at bo~e to ;aisc L iquot store clerk JoAn ~oy~ ~*~ ~ ~ improve ~sibility with lies. But they ~o say mar Dml t~gbt ~e custo~r ~ Lock ~rs not ~ use se~ati~ pus~ ~e ' was kidding when he re- l H~o contact with t~ pu~ bright Jigging 8~ unob~ored I I~rea~ sl~ng during have an intent in eimda caleb-phrase from 1~ win~wS h~h-risk times middle-d~ ~tlies - a receM hit-movie: "Show me the ~ Exchange money ~ Use signs ~d~ating little · I~all bullet-proof gla~ want ~ ~e the ~ebale mp. ~ney." ~ ~liver passe~s, go~s cash is kept on hand arou~ employee ~eas powth Jo pro~s for "] Uod of j~ed around with income ~,' said ~ia]. ~, who wo~ at "It is a dive~ooa~ tac~ Te~sLiquoT in SaD BeTnaTdi- They ate atta~ all Do. that shook ~im up six mouths ago ~eady itit does happen, bul ~ou tail employees across ~e court- rhe~tic to '?be aeco~ time, he said 'l se~ as a ~i~ni~ reminder t~ not to think about it at the t~ who a~ J]l a rJs~ business, to undermine ~bild care,' ~a~ show me ~e m~ey' ~ was oflhe da~ers ]ate-~igbt co~ve~ same time," he said. "Z~you did, ucco~di~ to federal o~clals. Of. ~. De~rab tional ~oJntt~ a gun at me." Jenee store worke~ r~e. you'd be an absolute wreck. You t~ 9lg work place mut~r3 in has ~]ped ]ea~ of th, Dial wasn't bu~ il ~e rob- 'You have Io have it tn t~ won't be able ~ do t~ job." ]99~, nearly half ~e ~Jctims exhaustive be~,b~tbelO:30p.m, holdup back ofTour mind so you're . Dial is among millJons otre- S~S~I~ carein~eeou~. ..... ~ DAY C~ . mfion I ~n~deml':a~ "As we eater a new ~cade ~we ....... ~uthla~ ....... A3 ~1~ .... and a new millennium, we will Nal~ ......... A~ ~ L~ ~ ~ ~r aWe're doing ~ally betwr ~an anyone else and b~ able ~ ~0ok back on ~e ~S~ W~M ......... ~. a a~ege ...... ,~~lon pmje~, the , ~ a time Of building and renew- O~m .......... A7 ~c~ :~ ~ hR the you're being ~Ik~ about across thc nation., n~,- Guy. Pete Wilson said aRer Po~t of V~..A7 F~ib ...... ~~. I *" ~e ~tn~ funding plan was a~ V~ce~l~Pe~ M~ie Map pro,~d. ~e.= .............. ~ ~.~.~g~; '~ ~aD~YINUI David ,,n, our predecessors'did in wem~r ......... A8 Sun ~afl W~t~ Lobbyist for San Bemerdlno Co~ the I~0s and 1~, we are C~ .... San Be~ardJno County will in thc na~'s c~i~l building ~day for an even bet~r ~al ...... O~ '~al~ California in the ~ture." Ed M~ ........ B1 ~in boUMlfuUy ~om lhe fede~l Call it a triple coup for San Daily Question ............. ~nnspottatlon bill awaiting Be~ardino CounO: more bans- Recap ............ · ~sident Clinto~'s sigoature, p~ects just in the county, Turch men~, which J~ ~e county's ~ation mo~y from ~e fe~, ~tmlink ....... perhaps ~re than an~here tn said. tra~portatioocommission, the ata~ and for ~peciai projee~ Obliges ...... ~ Uni~d ~tes. That's in addition ~ the $14.4 Perhaps ~e be~t news ia t~t than ever befog. "We'~ doing visually ~tler billion in federal ~anspor~tion ~e federal money won't be The county will be able to fin- ~ ..... ~n a~e e~e a~ you're ~- ~ndi~ the state will d~ribu~ counted ~ainst t~ region when is~ and fix pro, ets that ~ve Bn~b~l..C1, i~ ~lkcd about acro~ the ns- to the counties ove~* t~ next six separate tran~por~tion funds been on the back burner, ~me of NBA .......... Boa,' David ~tch, ~e count's yea~. from the state are doled ~t, she ~em for ~cadcs. ~cer.**C1. 3, sai~ San Bernardino, Highland, Califm~ate~ue W~hin~on, D.C., io~yist, told "Still, the money does not And San Betnardino ~unty ~ma Lin~, Rialto, Col~n, FOR- ' .................... C2 membe~ o~ San Be~na~ino As- flow until the p~esident h~ did ex~emely wellth~,t~. Golf .............. C6 socht~ Gove~ment~ 1~ wee~ signed the bill,' ~r~ ~aid. %e CaLifornia ~anspo~atiou tans, Rancho Cucamo~a, Victor- NHL .............. C6 -;, - - ~e ~a's ~ree co~ressmen There's little q~stJon ~at Commi~Jon on Tuesday apply- vJile, Hespetia, Ba~w, F~ Ir- M~racing..C7 win, Apple Valley and 0ntar~ ~oreboa;d ..... C7 ~ 3e~ ~w~, R-Redlands, Jay he'll ~i~ It and si~ it soon. ed i~ funding plan -- money each will see ~1 million or mo~ Te~ ............C8 Klm, R-Diamond Bar, and "The news forSan Bernardino that's in addition ~ ~e federal ~o~e B~ D-Son Ber~rdi- County is excellent," ~id Debo- money -- givi~ the county near- comJ~ their way through ~ ~sse s~...C8 no ~ did an ou~tandiag j~ se- rah Bar~ck, acti~ executive ~ $~5 million over the next six federal special pro, ct money. curi~ ~1.1 million for special director for asa~Jated govern- years. See F~DWA2 · Lion King took four nth- 42nd Street, where "The ~'-i'o'z~ ids -- for c. horeography, tormented Brooklyn longshore- top actor-musical award. ~'t~g, sets and the costumes, man in 'A View From The Ran BiOtin, who portrays a King" is playing. ~"[~-b were_~iso do.r~.~ by Taymor, Bridge," which also was chosen · Jewish shopkeeper in the show, Disney's commitment to the 0nl~0 ................................ best revival of a play. won the featured actor-musical Times Square area helped bring ~Pairing fl~.ugn.t.e..r · pp., ... srce struggle wlt~ a eomrolltM prize for best musical revival as coat,, business .and ~ve tip act- vent Inc., wh~h erea~d a new ~+~er, dom~ate~d t~ ~ti~ well ns several musical perform- i~, an emo(wnal Ri~in said. theater, the Ford Center for t~ fires. Ma~e ~ul~ eh, who pl~s ance awards. Na~sha Eichnr~ Several years lat~, be retu~ed Performing Ar~, for "E~ime." N~S DEPARTMENTS ~e dnu~ter, an~ Anna Mann- ~on won ~he best-n~re~a m~ieal ~ the ~ge in "The Subs~nee of ~e 1~-98 Broadway season, so, the ~ra~ica~ mo~er, bo~ prize rot her work as the deeid- Fire" by Jan Hob~n Bnit~ ~h ended Sund~, w~ ex- ,on. So di~ Tom ~u~ who ed~ lost Sully ~owles. "aa~ime," ~e ~ain ?~p?i: peered ~ be ~e ~st m histo~ )o~a~ a Oim-witt.en new.Dar. Alan Caroming, who plays the t~n for 'T~ Lion Ki~'ptczen br~ki~ bo~ attendance and ~IN~N~S ............ An~h~Y LaPag~ia was na~d lnsciv~us mas~er of ceremonies up a ~io of musical prizes -- box-o~ee records. Final fi~res Mst ~tor for his poflx~aZ of a in *'Cabaret," walked offwi~ the ~ok. score nnd orchestrations ~ will be released later ~ls week. Bcmard o Co W thc mot crlodc U~N~ ~omJnu~ ~om A1 it ~si~a~s for fundi~ the Als- ~orlzation of the federal trans- ~e~ardino ~s~iat~ Govern- , meda Corridor Ens~ n series of 9ansan bill. They came to n meu~ belongs. -'The ~ciat projec~ include rn~l ex.asians and ~ade saps- consensus la~e last m~th. ~e Federal transpo~ntion ~nd- ~hjbil~tn~n of San Bernard~- rations from do.town ~s An- previous hill, the Intermo~J ins comes ~om ~he taxe~ drivers $~0~AtP~ ............ co's historic depot, car-p~l gates to S~ B~rnardino. Surface TFonsoor~tion E~ien* ay when t~y purchase ga~- R~II. lanes on Inters~te 215, improved The county is fuz'~er ~nefit- cy Act or ISTEA, was adop~d in ~ne. In 39~, Congress levied an access roads to Ontario Interns- ting ~m ~nding goi~ else- 1991 and expired Sept. ~' cutaddJt~nalthe deficit,4'3'centrnisi~tax the ~ totalhelP tional At~ofl and ~ma LJn~ w~re. The new six-year hill, the Unive~i~ ~dJc~l Center, a~ ~ev~a has ch~en to use ~ ~rnn~por~tion Equi~ Act for. federal ~as ~x to 18.3 cen~ per V~ M0~ m freeway in~erc~nge improve- milJLon of'~ts federal tra~spofln- th~2lstCentu~orTEA-21,~st~ g~llon. Cm.~°[~h'OM*~~. Meats o~ Siena Ayenue iff Fon~a- tiaa mos)ay to help widen Inter- largest single piece of federal It was ~he first time gas tax ~, Paper Avenue in Gallon, state 15 through the San Bernar- transpor~t~ legislation in the money was used to ~nd some- Main Street in Hesperia, River- dina County desert. Metrolink nat~on's bisto~. TEA-21 gives thing other th~ transpo~ati~ sideAvenueinR~altoa~ppe' won ~ $23 million for ~m- California n~ percent increase projee~.T~newbllldtverbt~ CORRECTIONS canoe Aven~ in ~n Bernardi- p~vemen~ to the Ssa Bernardi- over ISTEA. taxbacktotranspo~tion. no Cou~ mil line. Even t~ugh "The final results demon- The bill a~zo. guarantees that receive nt least on. Of n~tio~l i~po~n~e, the ms. of those projects stein Los s~a~ the collec~ve muscle ~ individual s~tes federal ~nnspo~at~on bill ide~ Angeles County, they are necez- Southern California when we u~ ~.5 pe~ent of OJe money people ti~s a ~ude co~tdor for t~c~ sa~ to i~rease the number of ify behind p~e~ that benefit there have pa~d in gasoline tax- or ~l ~ al Ibmy~ txains being o~xnted on the San ~e re.on.' said Mark Pisano, es. The minimum ~arnntee is ne~. calledwhich would~e Sout.bweStgo ~.n ro~hiyPassage'along Bernardino line. exeeul~e all.clot of Southern espectal~ beneficial ~ Califor- ~tersla~ 10 ~o~ San Bernatdi- The House of Representati~s Cnltfo~la Association of ~v- nia, which previously received and ~e Sena~ badmen a~uing e~ments, the metropolitan plan- back a much lair propor~on ·: ~m~' no to ~e Atizonn state line. And for more than a year over renu- ning or~nization to which San than ot~r s~tes. Ri : There is danger' in rctail g ~nUnu~f~m Al wes t~ing to s~p ~e ~an from John Chri~tensea, n security stealing a 12-pack o~ beer last specialist wi~-PM tn South- wor~ed at retail businesses, s~ mon~. ern ~]ifornia.'a~eed but add~ ..... n~ late-night gas stations, liquor "Sometimes. it's a little that some Area gas s~Uons a~ 'c0me~dflndo~ .ieee stores, nc~ordi~ to n re- B&W Market in Fontana. "Some equipped with the protective ' port from the federal ~eupa- people are crazy." 'glass. L~ liana) Safety and Health ~andyRo. owner of Luc~er's ' ' "Some of out facilities a~ ' Administration. The re~rt Jr. cluded a list of L~quor~ in Fonlana, said he ~ nothJng more than a kiosk where ~y~h~nhomeand$20,~ ~tweenp~o~ well aware, of the dangers of you have'a single individual sit- ~y0arh~y~at~ OSHA recomme=dations for pro- wutki~ late at night at his Slur- ting by themselves. For some- .tecti~ empioye-es against rio- ra Ave~me ~lore. Hi~ brother was thi~ like ~at, il (bulletProof [ S~LV lenee. The a~estio~ range robbed in the parking lot by ~n- g~s) is ve/y p~dent," he ~id. from installing bright lights and men four years ago, but the s~re "With a ~ll-size convenience security cameras, to having two has never been heJd up, store, it would be difficult to employees war.ag during high- ~k t~mes, to ~nstaHin8 bullet- fo, 40, said he doesn't feel ~hop around bullet-resistant bar- like a target, but acknowledged FieFs." proof glass. Cai-OSHA published thejobcan be unsettling. Dial, from Terry's ~quor, --lmilar list in 19~5. "I've beeu here for 10 years agreed that bulletproof gl~s h~ ...... ~ e~e~ks said._ -~ and o~ some nights, when the~e iLs..,~d~'awbacks.~... ~.,.i.~., ,h~t~ ave tan June 3, 1998 Mr. David N. M. Turch 517 2nd Street, N.E. Washington~ D.C. 20002 Dear David: Thank you for joining me at the wonderful reception the night before last at Callaway Winery. Your generosity and friendship mean a lot to Jean and me. I appreciate all you are doing for the City of Temecula in Washington, and I look forward to continuing our relationship for many years to come. Hope to see you soon. Sincerely yours, Ron Packard Friends of Ron PaCkard P.O.Box 1549 Carlsbad, CA 92018-1549 FEC ~ 149732 MEMORANDUM TO: Alan Tandy, City Manager FROM: Gregory J. Klimko, Finance Director~/C~ DATE: December 17, 1999 SUBJECT: COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) The City has recently issued it's CAFR for the fiscal year ended June 30, 1999. Certificates of Achievement for Excellence in Financial Reporting issued by the Government Finance Officers Association of the United States and Canada (GFOA) and Award of Outstanding Financial Reporting issued by the California Society of Municipal Finance Officers (CSMFO) have been awarded to Bakersfield consistently over the last 20 years. A primary requirement of these award programs is an "unqualified opinion" by the Independent Auditor shown on pages 1-2 in the CAFR. We will be submitting the current report to the award programs and anticipate receiving the certificates for our consistent high quality financial reporting. The following is a list of documents related to our CAFR and the Financial Statement of the Centennial Garden and ConventionCenter: A. Brown, Armstrong, Randall, Reyes, Paulden & Mc Cown (City's CAFR). 1. Management Letter addressed to the Mayor and City Council (1 Page). No Material Matters. 2. SAS #61 (Statement on Auditing Standards) compliance letter addressed to the Budget and Finance Committee (3 Pages). B. City of Bakersfield CAFR for fiscal year ended June 30,1 999 prepared by the Finance Department (140 Pages). C. Barbich, Longcrier, Hooper & King (Centennial Garden & Convention Center). 1. Management Letter (1 Page). 2. SAS #61Compliance Letter (3 Pages). 3. Financial Statements (17 Pages). GJK/dwb December 17, 1999 (10:50am) S:\Darrin\Gregory\Memo - Tandy - CAFR.wpd Peter C. Brown, CPA Burton H. Mmstrong, CPA To the Honorable Mayor and JerryE. Randall, CPA/AnV Members of the City Council ~iam~ P. Rey~, ce^ City of Bakersfield, California Andrew J. Paulden, CPA Harvey J. McCown, CPA In planning and performing our audit of the general purpose financial statements of the City of Bakersfield, California (City) for the year ended June 30, 1999, we Andrea Rutherford-Hill, CPA considered its internal control structure in order to determine our auditing StevenR. Starbuck, CPA procedures for the purpose of expressing our opinion on the general purpose ^ileen Keeter, CPA financial statements and not to provide assurance on the internal control structure. Lynn R. Krau~se, CPA Our consideration of the internal control structure would not necessarily disclose StacyL. Walters, CPA all matters in the internal control structure that might be material weaknesses ChrisM. Thomburgh, CPA under standards established by the American Institute of Certified Public Accountants. A'material weakness is a condition in which the design or operation Jacqueline L. Anton, CPA of one or more of the internal control structure elements does not reduce to a Joan M. Anderson, CPA relatively Iow level the risk that errors or irregularities in amounts that would be Bradley M. Hankins, CPAmaterial in relation to the financial statements being audited may occur and not be Julianne V. Sawyer, CPAdetected within a timely period by employees in the normal course of performing Edc}~.~,CP^ their assigned functions. However, we noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. This report is intended solely for the information and use of the Audit Committee, City Council, management, and other authorized regulatory agencies. However, · this report is a matter of public record, and its distribution is not limited. BROWN ARMSTRONG RANDALL REYES PAULDEN & McCOWN ACCOUNTANCY CORPORATION Bakersfield, California October 8, 1999 MEMBER of SiC Practice Section of the American Institute of Certified Public Accountants Peter C. Brown, CPA REQUIRED COMMUNICATION WITH AUDIT COMMITTEES BurtonH. Armstrong, CPA IN ACCORDANCE WITH STATEMENT ON AUDITING Jerry E. Randall, CPA/ABV Benjamin P. Reyes, CPA Andrew J. Paulden, CPA Harvey J. gcCown, CPA To the Budget and Finance Committee Andrea Rutherford-I-Iill, CPA City of Bakersfield, California StevenR. Starbuck, CPA We have audited the general purpose financial statements of the City of Bakersfield for AileenKeeter, CPA the year ended June 30, 1999, and have issued our report thereon dated October 8, 1999; Professional standards require that we provide you with the following information Lynn R. Krausse, CPA related to our audit. Stacy L. Walters, CPA Our Responsibility under Generally Accepted Auditino Standards Chris M. Thomburgh, CPA JacquetineL. Anton, CPA As stated in our engagement letter, our responsibility, as described by professional JoanM. Anderson, CPA standards, is to 'plan and perform our audit to obtain reasonable: but not absolute, assurance that the general.purpose financial statements are free of material Bradley M. Hankins, CPA misstatement and are fairly presented in accordance with generally accepted accounting JulianneV. Sawyer, CPA principles. Because of the concept of reasonable assurance and because we did not perform a detailed examination of all transactions, there is a dsk that matedal errors, Eric H. )(in, CPA fraud, or other illegal acts may exist and not be detected by us. As part of our audit, we considered the internal control of the City of Bakersfield. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.. Si.qnificant Accountinq Policies Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the City of Bakersfield are described in Note I to the general purpose financial statements. No new accounting polities were adopted and the application of existing policies was not changed dudng fiscal year 1999. We noted no transactions entered into by the. City of Bakersfield dudng the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. M[MBER of $~C Practice Section of the American Institute o[ Certified Public Accountants Accountin.q Estimates Accounting estimates are an integral part of the general purpose financial statements prepared by management and are based on managemenrs knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the general purpose financial statements and because of the possibility that future events affecting them may differ significantly from those expected. There were no sensitive estimates affecting the financial statements. Si.qnificant Audit Adiustments For purposes of this letter, professional standards define a significant audit adjustment as a proposed correction of the general purpose financial statements that, in our judgment, may not have been detected except through our auditing procedures. These adjustments may include those proposed by us but not recorded by the City of Bakersfield that could potentially cause future financial statements to be materially misstated, even though we have concluded that such adjustments are not material to the current financial statements. We proposed no audit adjustments that could, in our judgment, either individually or in the aggregate, have a significant effect on the City of Bakersfield's financial reporting process. Disa.qreements with Manaqement For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the general purpose financial statements or the auditor's' report. We are pleased to report that no such disagreements arose during the course of our audit. Discussions with Manaqement We discussed with management the proper reporting of the financial activities of the Centennial Garden. The City has elected to report the activity in a special revenue fund. Although acceptable, we did suggest that the City consider reporting the activity in an enterprise fund. We also discussed the proper reporting of suite lease revenue. The financial activities of the Centennial Garden are accounted for in the Transient Occupancy Taxes Spedal Revenue Fund. The activity includes the audited information of the City's agent, Ogden Entertainment. Ogden prepares this audited information on the accrual basisof accounting. The City adjusts this information to the modified accrual basis of accounting. The significant adjustments are attributable to the treatment of deferred suite lease revenue. Ogden defers suite lease revenue as unearned in accordance with the accrual basis of' accounting. In accordance with the modified basis of accounting, the City does not defer suite lease revenue. Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a 'second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's general purpose financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Issues Discussed Pdor to Retention of Independent Auditors We generally discuss a vadety of matters, including the application of accounting principles and auditing standards, with management each year pdor to retention as the City of Bakersfield's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a conditiOn to.our retention. Difficulties Encountered in PerforminR the Audit We encountered no significant difficulties in dealing with management in performing our audit. This information is intended solely for the use of the City of Bakersfield and management of the City of Bakersfield and is not intended to be and should not be used by anyone other than these specified parties. BROWN ARMSTRONG RANDALL REYES PAULDEN & McCOWN ACCOUNTANCY CORPORATION Accoumancy Corporation October 28, 1999 Ogden Entertainment, Inc. Bakersfield Centennial Garden and Convention Center 100 ! Truxtun Avenue Bakersfield, CA 93301 We have audited the financial statements of Bakersfield Centennial Garden and Convention Center ("The Facility") for the year ended June 30, 1999 and have issued our report thereon dated October 28, 1999. In'planning and performing our audit of the financial statements of the facility we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. We also considered compliance with laws and regulations in accordance with the government audit standards issued by the GAO. As a result of our audit, we noted no matters involving the internal control over financial reporting and its operations that we considered to be material weaknesses or would require further discussion. This letter is intended Solely for the information and use of Ogden Entertainment, Inc. and the City of Bakersfield. Very truly yours, BARBICf~ Lg,~GCRIER H/OtOPER & KING ¢;:\Clicnts\g347XAu dlt. do¢ 5001 E. Commercenter Drive, Suite 350 · EO. Box 11171 · Bakersfield, California93389 · Fax (661) 631-0244 · (661) 631-1171 1319 Marsh Street · San Luis Obispo, California93401 · Fax (805) 541-4024 · (805) 541-2500 Barbich Accoun~cy Coqx~ra~on October 28, 1999 Ogden Entertainment, Inc. Bakersfield Centennial Garden & Convention Center 1001 Truxtun Avenue Bakersfield, CA 93301 We have audited the financial statements of Bakersfield Centennial Garden & Convention Center, ("the'Facility") for the year ended June 30, 1999, and have issued our report thereon dated October 28, 1999. Professional standards require that we provide you with the following information related to our audit. Our responsibility under Generally Accepted Auditing Standards As stated in our engagement letter dated September 9, 1999, our responsibility, as. described by professional standards, is to plan and perform our audit to obtain reasonable, but not abSolute, assurance that the financials statements are free of material misstatement and are fairly presented in accordance with generally accepted accounting principles. Because of the concept of reasonable assurance and because we did not perform a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts; including fraud and defalcations, may exist and not be detected by us. As part of our audit, we considered the internal control of Ogden Entertainment, Inc., ("Ogden"). Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. 5001 E. Commercenter Drive, Sure 350 · i~O. Box 11171 · Bakersfield, California93389 · Fax (661) 631-0244 · (661) 631-1171 1319 Marsh Street · Sm~ Luis Obispo, California 93401 · Fax (805) 541-4024 ° (805) 541-2500 October 28, 1999 Ogden Entertainment, Inc. Page two Significant Accounting Policies Management has the responsibility for selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the Facility and Ogden are described in Note 1 to the financial statements. We noted no transactions entered into by the Facility during the year that were both significant and unusual, and of which, .under professional standards, we are required to inform you, or transactions for which there is a lack of authority guidance or consensus. Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. There are no significant accounting estimates affecting the financial statements. Significant Audit A~ustments For purposes of this letter, professional standards define a significant audit adjustment as a proposed correction of the financial statements that, in our judgement, may not have been detected except through our auditing procedures. These adjustments may include those proposed by us but not recorded by the Facility that could potentially cause future financial statements to be materially misstated, even though we have concluded that such adjustments are not material to the current financial statements. We proposed no audit adjustments that could, in our judgement, either individually or in the aggregate, have a significant effect on the Facility financial reporting process. Disagreements with Mana~;ement For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. October 28, 1999 Ogden Entertainment, Inc. Page three Consultations with Other Independent Accountants. In some cases, management may decided to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the Facility' financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. · Issues Discussed Prior to Retention of Independent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Facility' auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with Ogden in performing and completing our audit. In performing our audit, we encountered an accounting issue between Ogden and the City of Bakersfield relative to the accounting for prepaid suite contract revenues. We concurred with Ogden's accounting of prepaid suite contract revenues, whereas the City of Bakersfield did not agree with the accounting policy utilized by Ogden. This issue relates to the timing of when revenue is recognized for accounting purposes. The 'difference is a result of the City using governmental fund type accounting and the Facility using proprietary fund accounting, as required by generally accepted accounting' principles. The City's contract with. Ogden also required generally accepted accounting principles be used by Ogden to account for the operations of the Facility. The financial statements, as prepared by Ogden, reflect the appropriate accounting treatment. This information is intended solely for the use of the management of Ogden Entertainment, Inc. and the City of Bakersfield and should not be used for any other purpose. However, this report is a matter of public record, and its distribution is not limited BARBIe ~! ~,ONGCRJER HOOPER & Accom ( ,v,~ Corpora~on KING Barbich Lp~ngcrier nooper &Kin§_. Accountancy Corporation Bakersfield Centennial Garden & Convention Center Financial Statements Year Ended June 30, 1999 CONTENTS Page(s) Independent Auditors' Report On The Financial Statements 1 Financial Statements Balance sheet 2 Statement of revenue and expenses 3 Statement of changes in retained deficit 4 Statement of cash flows 5 Notes to Financial Statements 6 - 14 Independent Auditors' Report on the Supplementary Information 15 Supplementary Information Schedule of operating expenses 16 Independent Auditors' Report On Compliance And On Internal Control Over Financial Reporting Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards 17 In accordance with Government Auditing Standards, we have also issued a report dated October 28, 1999 on our consideration of Ogden Entertainment, Inc.'s internal control over · financial reporting and our assessment of its compliance with certain provisions of laws, regulations, contracts and grants. / BAm~LONC;CR/~R I-XOO}'ER & I~INC; Acco n cyCor ~' ion ~y: ~e~'~. ~:!~g, CPA'X Bake~ifol,~:a October 28, 1999 -1- Bakersfield Centennial Garden & Convention Center Balance Sheet June 30, 1999 ASSETS Current Assets Cash $ 1,567,195 Accoums receivable, trade 188,839 Accoums receivable, other 54,776 Inventory 3,197 Prepaid expenses 39,555 1,853,562 Property and Equipment, at cost 3,795 Less accumulated depreciation 1,265 2,530 $ 1,856,092 LIABILITIES AND RETAINED DEFICIT Current Liabilities Accoums payable, trade $ 116,400 Accoums payable, other 54,293 Accrued expenses 101,382 Deferred revenue 1,607,840 Advance from City of Bakersfield 570,284 2,450,199 Commitments Retained Deficit Unappropriated (594,107) $ 1,856,092 See Notes to Financia'l Statements. 2 Bakersfield Centennial Garden & Convention Center Statement of Revenue and Expenses For the Year Ended June 30, 1999 (Period of Inception) Net revenues: Facilities rent $ 1,205,269 Event expense reimbursements 533,815 Suite and premium seats 491,393 Concession commission 399,048 Signage and advertising 207,374 Parking 101,244 Merchandise 70,110 Ticketing fees 69,006 3,077,259 Direct event expenses: Event labor 918,454 Other direct event expenses 115,169 Event advertising 46,247 1,079,870 Gross profit 1,997,389 Operating expenses 2,608,280 Operating loss (610,891) Nonoperating income: Interest income 16,784 Net loss $ (594,107) See Notes to Financial statements. 3 Bakersfield Centennial Garden & Convention Center Statement of Changes in Retained Deficit Year Ended June 30, 1999 (Period of Inception) Retained earnings, beginning of year $ -O- Net loss (594,107) Retained deficit, end of year $ (594,107) See Notes to Financial Statements. -4- Bakersfield Centennial Garden & Convention Center Statement of Cash Flows For the Year Ended June 30, 1999 Cash flows from operating activities: Operating loss $ (610,891) Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation 1,265 Increase ~n accounts receivable (243,615) Increase ~n inventory (3,197) Increase m prepaid expenses (39,555) Increase in accounts payable 170,693 Increase ~n accrued expenses 101,382 Increase ~n deferred revenue 1,607,840 Net cash provided by operating activities 983,922 Cash flows from investing activities: Payments for purchase of property and equipment (3,795) Interest income 16,784 Net cash provided by investing activities 12,989 Cash flows from financing activities: Net increase in advances from the City of Bakersfield 570,284 Net increase in cash and cash equivalents 1,567,195 Cash and cash equivalents at beginning of year -O- Cash and cash equivalents at end of year $ !,567,195 See Notes to Financial statements. -5- Bakersfield Centennial Garden & Convention Center Notes to Financial Statements Note 1. Nature of Business and Significant Accounting Policies Nature of Business: The City of Bakersfield ("the City") owns the Bakersfield Centennial Garden and Convention Center ("the Facilities"). The Centennial Garden is an arena, built by the City, which was completed and began operations in October 1998. It is the only building of its kind in the Bakersfield area. On August 6, 1997, the City issued a request for proposals for services prior to the opening of the Centennial Garden and the operation and management of the Facilities thereafter. In an agreement dated January 28, 1998, the City contracted with Ogden Entertainment, Inc. ("the Company") for these services for an initial period of five years. The contract term was subsequently extended for an additional five-year term and the agreement is effective through June 30, 2008. The Company worked during the January 14, 1998 through June 30, 1998 pre-opening phase and assumed management responsibilities of the Facilities on July 1, 1998. The Company was hired by the City for its expertise in the management, operation and marketing of public assembly Facilities. The Company currently manages similar Facilities throughout the United States. The activity of the Facilities is recorded in a special revenue fund of the City's accounting records. The City owns all the assets of the Facilities and accordingly, all amounts related to the operation of the Facilities belong to the City. The Company has a fiduciary responsibility under the management agreement to maintain and operate the Facilities in the best interests of the City and the community. Fund accounting: Enterprise Funds are used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges or (b) where the governing body has decided that periodic determination of revenue earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purpose. -6- Notes to Financial Statements Revenue Recognition: Suite and premium seat contracts Revenues .from suite and premium seat contracts are recognized over the contract period per the contract terms. Contracts are billed twice a year with the entire contract amount payable prior to the contract period. The suite and premium seat payments are recorded as deferred revenue until earned and recognized over the contract period. Signage and advertising contracts Revenues from Signage and advertising contracts are recognized over the contract period per the contract terms. Contracts are billed according to the contract terms. Payments are recorded as deferred revenue until earned and recognized over the 'contract period. Ticket sales The Company, through its contract with Ticketmaster, sells tickets to Facility events as an agent of the event holder at the on site box office location and through telephone, internet and outlet locations. All revenues from the sale of tickets belong to the event holder. The ticket sales are recorded as deferred revenue when sold. After the event has occurred, settlement with the event holder takes place. The net of total ticket sales less event expenses such as facility rent 'and reimbursement of direct event expenses is then paid to or received from the event holder. The event ticket revenues are removed from the deferred revenue account at the time of settlement. The Facilities eam a ticketing fee on the sale of event tickets that take place through telephone, intemet and outlet locations. Revenues are recorded as deferred revenue at the time of sale and are recognized at the time of event settlement. Event revenues Revenues from Facilities events such as facilities rent, direct event expense reimbursements, concession commissions, parking and merchandise are recognized at the time of event settlement. Notes to Financial Statements Basis of accounting: The accompanying financial statements have been prepared on the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recognized when incurred. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those ~estimates. Cash and cash equivalents: For purposes of reporting cash flows, cash and cash equivalents include cash on hand and amounts deposited with banks. Categories of investment risk: In accordance with the Governmental Accounting Standard Board Statement No. 3, the City's deposits are categorized to give an indication of the level of risk assumed by the City at June 30, 1999. The categories are described as follows: Category 1 - Insured or registered investments held by the entity or by its agent in the entity's name. Category 2 - Uninsured or unregistered investments for which the securities are held by the pledging financial institution's trust department or agent in the entity's name. -8- Notes to Financial Statements Category 3 - Uninsured and unregistered investments for which the securities · are held by the pledging financial institution or by its trust department or agent but not in the entity's name. Catego~_ Carrying 1 2 3 Value Cash and cash equivalents $ 216,701 $ -0- $ 1,350,494 $ 1,567,195 At .June 30, 1999, the carrying amount of financial institution deposits was $1,567,195 and the bank balance was $1,870,929 of which only $300,000 is covered by federal depository insurance. Concentration of credit risk: Credit is extended, in the form of accounts receivable, to customers located primarily in California. Inventory: Inventory is stated at lower of cost or market. Property and equipment: Property and equipment are recorded at cost. Depreciation is computed using the straight line method over estimated useful lives of 3 years. Maintenance and repairs of property and equipment are charged to operations and major improvements are capitalized. Upon retirement, sale or other disposition of property and equipment, the cost and accumulated depreciation are eliminated from the accounts and gain or loss is included in the statement of income. -9- Notes to Financial Statements Note 2. Deferred Revenue Deferred revenue at June 30, 1999 consists of the following: Ticket sales, future events $1,005,248 Suite contracts 456,469 Advertising contracts 105,125 Ticket rebates 24,723 Event deposits 8,775 Other 7,500 $1,607,840 Note 3. Advance From City of Bakersfield The City advanced funds to the Facilities to provide the needed working capital to begin oPerations. In addition, during the normal course of business, the City pays expenses that are allocated to the operation of the Facilities. These expenses include payroll and related expenses for the City employees and rent and utilities for the office space used by the Company. The amount of the advance fluctuates throughout the year depending on allocated monthly expenses and additional cash flow needs. The advance is an inter-company account that is eliminated in the consolidation for the preparation of the City's financial statements. During the year ended June 30, 1999, the initial $250,000 working capital advance was repaid and the amount due at June 30, 1999 was $570,284. Note 4. Administrative Services Agreement The Company provides administrative services for the City under an original five-year agreement, which was subsequently extended for an additional five-year period. Compensation for these services is a base fee of $150,000 for the first year, paid in equal monthly installments. The base fee increases by 3% per year each year thereafter until the'agreement has terminated. Notes to Financial Statements In addition to the base fee, the' Company receives an incentive relative to the amount of the reduction, if any, in net operating loss for each fiscal year. The Company receives an incentive of 1) 10% of the first $350,000 in net operating loss reduced; 2) 20% of the next $500,000 in net operating loss reduced; 3) 30% of any net operating surplus in any one fiscal year. All of the incentive calculations are based upon a projected annual net operating loss of $850,000. Beginning July 1, 2003, the incentive is $25,000 for every year the net operating loss is below $300,000. If the net operating surplus in any fiscal year reaches $350,000, then the incentive fee will cease. For the year ended June 30, 1999 the Company received $178,548 in management and incentive fees. The computatiOn of the incentive fee is based upon the books and records of the Facilities maintained by the Company. The accounting records for the Facilities must be maintained in accordance with generally accepted accounting principles and industry standards. The Company is required under the agreement with the City to have an annual audit at the end of the fiscal year. Under the management agreement with the City, the Company has the right to operate or contract with others to operate concession and catering services for the facilities during the initial five-year term of the.contract, effective through June 30, 2003. The City has not extended this portion of the management agreement. The Company has contracted with its food and beverage division to operate these services. The food and beverage division is a related entity under common management at the Company's corporate level. Operations of this food and beverage division are not included in the facilities financial statements. The Facility is entitled to receive 35% of the first $1.2 million in gross concession receipts and 40% of receipts in excess of $1.2 million and 15% of gross concession receipts to the suites. For the year ended June 30, 1999 the Facility received $462,000 in gross concession and catering receipts from the Food and Beverage division. The Facility is entitled to receive 75% of the net novelty receipts and the Company receives the remaining 25%. For the year ended June 30, 1999 the Facility received $70,093 and the Company received $23,383 in net novelty receipts from the Food and Beverage division. -11- Notes to Financial Statements Note 5. Commitments The Company has entered into various long-term contracts and leases. At June 30, 1999 outstanding commitments consist of the following: Ticket sales The Company has entered into a licensed user agreement with Ticketmaster to be the exclusive provider for ticket sales for any event presented by the Company at the Facilities. Under the agreement, Ticketmaster has the authority to act as an agent for the Company for ticket sales to the general public by any and all means including telephone, internet, and outlet locations. Ticketmaster earns fees from the ticket sales such as inside ticket charges, customer convenience charges, credit card charges, handling charges and ticket sales royalties. Some fees are subject to increases throughout the contract term. Ticketmaster collects these fees as tickets are sold and the net amount is remitted to the Company weekly. The initial term of the agreement is for five years and the agreement is effective through August 31, 2003. The contract automatically renews for one two-year period unless terminated in accordance with the provisions of the contract. Concert promoter The Company has entered into a booking service agreement with Nederlander- Bakersfield, Inc. as the exclusive musical concert promoter for the Facilities. Nederlander has contracted to pay a minimum annual guarantee of $175,000 in facilities rent and reimbursement of direct event expenses through the concerts it promotes at the Facilities. Nederlander is entitled to 25-50% of amounts in excess of the minimum annual guarantee based upon various target levels. The facilities rent and annual guarantee amounts are subject to escalation each year over the contract period based upon increases in the Consumer Price Index, but not more than 4% per year. For the year ended June 30, 1999, Nederlander paid $165,400 in facilities rent less reimbursement of direct expenses with an estimated amount of $35,100 due for the excess of the minimum annual guarantee. The contract year is different than the Facilities fiscal year. Therefore, the excess of the minimum annual guarantee is allocated over two of the Facilities' fiscal years. The agreement is effective through December 31, 2003 unless terminated earlier in accordance with the provisions of the agreement. - 12- Notes to Financial Statements Personnel services The Company has entered into an independent contractor's agreement with Staff Pro, Inc. to provide personnel services for the Facilities, which include ushers, ticket takers and security. Under the agreement, Staff Pro, Inc. receives the actual wages for personnel working at the Facilities plus a payroll overhead mark-up of 33.7% of the wage rate and a management fee of 10% of the actual wages plus overhead mark-up. The Company guarantees $30,000 for the minimum annual management fee for the initial year. The management fee is subject to negotiation on the anniversary date of the agreement. The agreement is effective through August 1,2001 unless terminated earlier in accordance with the provisions of the agreement. Maintenance staff The Company has entered into an independent contractor's agreement with Maintenance Staff, Inc. for janitorial, set-up, breakdown and related services at the Facilities. Maintenance Staff, Inc. receives a contracted hourly rate of pay for personnel working at the Facilities. The rates are subject to increases based upon increases in the state or federal minimum wage, FICA or Medicare rates. The agreement is effective through July 15, 2001 unless terminated earlier in accordance with the provisions of the agreement. Hockey lease The City has entered into a lease agreement, which has been assigned to Flying Puck, for exclusive use of the Facilities for West Coast Hockey League (WCHL) games. Flying Puck has agreed to pay a minimum of $160,000 per season for use of the Facilities. The $160,000 consists of lease fees of $5,000 per game played plus 7.5%' of ticket sales above certain levels per year, which increase over the contract term. The lease fees are subject to increase beginning in the third year of the contract and every two years thereafter based upon the Consumer Price Index adjustments. Flying Puck receives $5,000 for each suite leased for hockey tickets. For the year ended June 30, 1999, Flying Puck received $120,000 for the twenty-four suites leased. The agreement is effective through June 30, 2004 or ten days following the date the last WCHL playoff game of 2004 is played, whichever occurs first unless terminated earlier in accordance with the provisions of the agreement. The contract has two options for renewal for terms of seven years each. Prior to the exercise of either option, the parties shall negotiate new lease fees. - 13- Notes to Financial Statements Basketball lease The Company has entered into a lease agreement with the Cai State Bakersfield Foundation (Cai State) for exclusive use of the Facilities for Cal State University Bakersfield men's basketball games. A lease fee of $4,000 per game plus 7.5% of ticket sales above certain levels is charged for use of the Facilities. Cal State receives $2,500 for each suite leased that includes basketball tickets. For the year ended June 30, 1999, Cai State received $52,500 for suite ticket options. The agreement is effective through October 31, 2001 unless terminated earlier in accordance with the provisions of the agreement. The contract has two options for renewal for terms of five years each. Prior to the exercise of either option, the parties shall negotiate new lease fees. - 14- B ich Accotmuncy Coq~orafion Independent Auditors' Report on the Suppletnenta~_ Information Ogden Entertainment, Inc. Bakersfield Centennial Garden & Convention Center Bakersfield, California The accompanying information shown on page 16 is presented only for purposes of additional analysis and is not a required part of the basic financial statements. Our audit of the basic financial statements was made tbr the purpose of lbrming an opinion on those state~nents taken as a whole. The accompanying information has been subjected to the procedures applied in the audit of the basic.financial statements. In our opinion, the accompanying information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. BARBI ~flfl~)NGCRIE~R HOOPER & KING orpor_at_i 5 Bakersfield, Califor~a j/ October 28, 1999 ~ -15- 5001 E. Commercenter Drive, Suite 350 · P.O. Box 11171 ,, Bakersfield, California 93389 ° Fax (661) 631-0244 · (661) 631-1171 1319 Marsh Street ,, San Luis Obispo, California93401 o. Fax (805) 541-4024 · (805) 541-2500 Bakersfield Centennial Garden & Convention Center Schedule of Operating Expenses Year Ended June 30, 1999 (Period of Inception) Full time staff $ 1,028,807 Utilities 465.396 Management fees 178.548 Security 140.504 Insurance 137.038 Equipment rental 127 271 Hockey premium 120 000 Contract maintenance 87,674 Supplies 69,194 Part time staff 49,515 Credit card fees 42,311 Miscellaneous 39,439 Marketing 28,332 Travel 21,613 Telephone 15,434 Printing 12,522 Office supplies 12.438 Professional fees 11 000 Repairs and maintenance 6 078 Postage 4 365 Employment ad fees 3 654 Training 2 632 Uniform 1 803 Dues and subscriptions 1 447 Depreciation 1,265 $ 2,608,280 - 16- Internal Control Over Financial Reporting In planning and performing our audit, we considered Ogden Entertainment, Inc.'s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be deteCted within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting find its operation that we consider to be material weaknesses. This report is intended solely for the info~ation and use of management, others within the organization and The City of Bakersfield and is not intended to be and should not be used by anyone other than these specified parties. BARBI~H~NGCRI~ HOOPER & KING Bakersfiel~ ~alifor~a ff October 28, 1999 ~ - 17-