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Comrehensive Annual Financial Report - FY ended 6-30-16 (2 of 3)
COUNTY OF BUTTE, CALIFORNIA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE GOVERNMENT-WIDE STATEMENT OF NET POSITION JUNE 30,2016 Amounts reported forgovernmental activities in the statement of net position are different because: Fund balances-total governmental funds $ 136,834,213 Capital assets used in governmental activities are notfinancial resources and, therefore,are not reported in the governmental funds. These assets consist of: La nd 2,740,002 Construction in progress 2,842,230 Infrastructure 585,910,490 Structures and improvements 71,153,148 Equipment 62,864,431 Less:accumulated depreciation (564,072,001) Total capital assets 161,438,300 Some of the County's revenue will be collected afteryear-end, but is not available soon enough to payforthe current period's expenditures, and therefore is reported as unavailable revenue in the governmental funds. 3,238,695 Interest payable on long-term debt does not require current financial resources, therefore, interest payable is not reported as a liability in the Governmental Funds Balance Sheet. (152,247) Deferred lease incentive has not been included as financial resources in the governmental funds (97,500) Internal service funds are used bythe countyto charge the costof liability, malpractice, and worker's compensation insurance to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. 4,935,178 Long-term liabilities applicable to the County's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Interest on long-term debt is not accrued in governmental funds, but ratheris recognized as an expenditure when due. All liabilities are reported in the statement of net assets. Balances as of June 30,2016 are: Certificates of participation (8,583,287) Bonds payable (48,480,000) Notes payable (653,694) Capital leases (449,916) Other postemployment benefits (26,961,184) Compensated absences (15,106,067) Net pension liability (155,839,648) Total long-term liabilities (256,073,796) Deferred outflows and inflows of resources related to pensions are applicable to future periods and therefore,are not reported in the funds. Deferred outlows 16,815,333 Deferred inflows (19,402,449) Total deferred pension balances (2,587,116) Net position of governmental activities $ 47,535,727 The accompanying notes are an integral part of these financial statements. 22 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30,2016 Public Behavioral Other Total General Social Services Health Health Road Governmental Governmental Fund Fund Fund Fund Fund Funds Funds REVENUES Taxes $ 63,462,798 $ - $ - $ $ - $ 807,189 $ 64,269,987 Licenses and permits 3,410,254 41,535 97,863 54,146 - 3,603,798 Fines,forfeitures,and penalties 7,697,620 61,381 237,003 118,470 12,925 16,623 8,144,022 Revenue from use of moneyand property 5,491,089 177,808 205,235 216,365 145,873 630,295 61866,665 Aid from other governments 41,841,348 126,740,205 13,429,787 54,919,256 9,476,219 10,404,939 256,811,754 Charges forservices 19,525,032 222,307 3,342,762 2,844,695 1,866,471 1,873,846 29,675,113 Other 3,216,072 8,175 9,674 238,825 63,753 2,974 3,539,473 Total revenues 144,644,213 127,251,411 17,322,324 58,337,611 11,619,387 13,735,866 372,910,812 EXPENDITURES: Cu rre nt: General government 24,749,282 - - - - 4,193,140 28,942,422 Public protection 103,115,737 597,424 - 8,608,040 112,321,201 Publicways and facilities - - - - 15,264,800 1,623,100 16,887,900 Health and sanitation - 16,605,170 55,297,437 - 232,271 72,134,878 Public assistance 128,069,570 - - 810,643 128,880,213 Education 3,654,022 - - 3,654,022 Recreation and cultural services - 116,409 116,409 Debt Service: Principal 9,235 2,269,421 2,278,656 Interest - - - - 2,090,317 2,090,317 Total expenditures 131,528,276 128,666,994 16,605,170 55,297,437 15,264,800 19,943,341 367,306,018 Excess (deficiency)of revenues over(under)expenditures 13,115,937 (1,415,583) 717,154 3,040,174 (3,645,413) {6,207,475) 5,604,794 OTHER FINANCING SOURCES(USES): Sales of capital assets 89,153 - 51,994 21,981 163,128 Capital lease 34,059 - - 34,059 Issuance of debt - - - - 3,203,805 3,203,805 Transfers in 1,572,491 1,154,901 724,304 884,782 1,699,585 9,782,380 15,818,443 Transfers out (8,009,891) (1,002,672) (174,280) (1,959,198) (118,678) (4,097,005) (15,361,724) Total other fine ncing sources(uses) (6,314,188) 152,229 550,024 (1,074,416) 1,632,901 8,911,161 3,857,711 Netchange in fund balances 6,801,749 (1,263,354} 1,267,178 1,965,758 (2,012,512) 2,703,686 9,462,505 Fund balances,beginning 51,469,691 6,426,943 12,143,852 7,593,401 8,667,719 41,070,102 127,371,708 Fund balances,ending $ 58,271,440 $ 5,163,589 $13,411,030 $ 9,559,159 $ 6,655,207 $ 43,773,788 $136,834,213 The accompanying notes are an integral part of these financial statements. 23 COUNTY OF BUTTE, CALIFORNIA RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE GOVERNMENT-WIDE STATEMENTS OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30,2016 The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental funds Statement of Revenues,Expenditures,and Changes in Fund Ba]anee s,which measure only changes in current assets and current liabilities on the modified accrual basis,with the Change in Net Position ofGovemmental Activities reported in the Statement of Activities,which is prepared on the full accrual basis. Net change to fund balances-total governmental funds $ 9,462,505 Amounts reported for govern mental activitles in the statements of activities a re different because: Governmental funds reported capital outlay as expenditures. However,in the statement of activities,the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Capital outlay expenditures are therefore added back to Lund balances 9,855,920 Depreciation expense not reported in governmental funds (25,415,793) Other capital asset adjustments (106,338) Debt proceeds provide current financial resources to governmental funds;however issuing debt increases long-term liabilities in the statement of net position.Repayment of debt principal is an expenditure in the governmental funds,butin the statementof net position the repayment reduces long-term liabilities. Principal payments 2,278,656 Capital lease (34,0591 Proceeds from issuance of debt (3,203,805) Intereston long-term debt is not accrued in governmental funds,butratheris recognized as an expenditure when paid (144,171) Underthe modified accrual basis of accounting used in the governmental funds, expenditures are not recognized for transactions thatare normally paid with expendable available financial resources. In the statement of activities,however, which is presented on the accrual basis,expenses and liabilities are reported regardless of when financial resources are available(net change). Other postemployment benefits (3,402,469) Compensated absences (144,139) Netpension liability [36.044.7011 (19,591,309) Amortization of deferred lease incentive reduces rentexpense in the Statement of Activities 2,500 Revenues in the Statement of Activities thatdo not provide current financial resources are not reported as revenue in the funds 1,112,804 Deferred inflow lease incentive (100,000) Deferred inflow pension 20,382,534 Deferred outflow pension 1,641,157 21,923,691 internal service funds are used bythe Countyto charge the costs of liability, malpractice,and worker's compensation insurance to individual funds. The net revenue of internal service funds is reported with governmental activities. (2,963,431) Change In net position of governmental activities $ {6,822,830) The accompanying notes are an integral part of these financial statements. 24 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF NET POSITION PROPRIETARY FIEND JUNE 30,2016 Business Type Governmental Activities Activities Neal Road Internal Service Landfill Funds ASSETS Current assets: Cash and investments $ 17,477,937 $ 12,582,188 Cash and investments with fiscal agent 2,330,844 187,015 Imprest cash 2,800 - Interest receivable 39,933 291095 Accounts receivable 558,862 - Due from other funds 581. - Prepaid items 26,906 - Total current assets 20,437,863 12,798,298 Noncurrent assets: Capital assets: Nondepreciable: Land 420,932 - Construction in progress 4,314,219 - Depreciable: Structures 19,871,848 - Eguipment 4,655,393 45,461 Less: Accumulated depreciation (6,274,848) (40,428) Total capital assets, net 22,987,544 5,033 Total noncurrent assets 22,987,544 5,033 Total assets 43,425,407 12,803,331 Deferred outflows of resources 161,937 - continued The accompanying notes are an integral part of these financial statements. 25 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF NET POSITION PROPRIETARY FUNDS(continued) JUNE 30,2016 Business Type Governmental Activities Activities Neal Road Internal Service Landfill Funds LIABILITIES Current liabilities: Due to otherfunds $ - $ 6,057 Interest payable 131,650 - Accounts payable 842,338 29,096 Accrued salaries and benefits 57,645 - Capital lease payable, current portion 213,706 - COP payable, current portion 950,000 - Claims and judgments, current portion - 2,600,000 Compensated absences, current portion 20,000 - Total current liabilities 2,215,339 2,635,153 Noncurrent liabilities: Capital lease payable 320,646 - COP payable, less current portion 5,437,724 - Claims and judgments, less current portion - 5,233,000 Compensated absences, less current portion 169,813 - Landfill closure/post-closure care costs 6,757,705 Net pension liability 1,643,876 - Total noncurrent liabilities 14,329,764 5,233,000 Total liabilities 16,545,103 7,868,153 Deferred inflows of resources 208,260 - NET POSITION Net investment in capital assets 16,065,466 5,033 Unrestricted 10,768,515 4,930,1.45 Total net position $ 26,833,981 $ 4,935,178 The accompanying notes are an integral part of these financial statements. 26 COUNTY OF BUTTE, CALIFORNIA STATEMENT REVENUES,EXPENSES,AND CHANGES IN NET POSITION PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30,2016 Business Type Governmental Activities Activities Neal Road Internal Service Landfill Funds OPERATING REVENUES Charges for services $ 8,226,163 $ 6,792,705 Other revenue 179,708 - Total operating revenues 8,405,871 6,792,705 OPERATING EXPENSES Salaries and employee benefits 1,342,648 300,763 Service and supplies 2,786,836 3,466,683 Claims and judgments - 5,744,101 Depreciation 645,781 6,057 Landfill closure/post-closure care cost 2,601,857 - Total operating expenses 7,377,122 9,517,604 Operating income (loss) 1,028,749 (2,724,899) NONOPERATING REVENUES(EXPENSES) Interest income 233,271 218,187 Interest expense (278,606) - Gain (loss) on sale of assets 121,109 - Total nonoperating revenues(expenses) 75,774 218,187 NET INCOME(LOSS) BEFORE CAPITAL CONTRIBUTIONS AND TRANSFERS 1,104,523 (2,506,712) Capital contributions 29,500 - Transfers out - (456,719) Change in net position 1,134,023 (2,963,431) Net position, beginning of year 25,699,958 7,898,610 Net position,end of year $ 26,833,981 $ 4,935,178 The accompanying notes are an integral part of these financial statements. 27 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30,2016 Business Type Governmental Activities Activities Neal Road Internal Service Landfill Funds CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 8,305,967 $ 6,815,982 Cash paid to suppliers for goods and services (2,092,802) (8,491,571) Cash paid to employees for services (1,435,851) (300,763) Net cash provided (used) by operating activities 4,777,314 (1,976,352) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Principal repayment on loans payable (50,000) - Transfers out - (456,719) Net cash provided (used) by noncapital financing activities (50,000) (456,719) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Payments related to the acquisition of capital assets (4,247,539) Sale of capital assets 121,109 - Principal repayment on longterm debt (928,545) - Principal repayment on capital lease payable (210,110) - Interest paid (296,906) - Net cash provided (used) by capital and related financing activities (5,561,991) - continued The accompanying notes are an integral part of these financial statements. 28 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS(continued) FOR THE FISCAL YEAR ENDED JUNE 30,2016 Business Type Governmental Activities Activities Neal Road Internal Service Landfill Funds CASH FLOWS FROM INVESTING ACTIVITIES: Interest received (paid) 193,338 189,092 Net cash provided (used) by investing activities 193,338 189,092 Net increase (decrease) in cash and cash equivalents (641,339) (2,243,979) Cash and cash equivalents, beginning 20,452,920 15,013,182 Cash and cash equivalents, ending 19,811,581 12,769,203 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO STATEMENT OF NET ASSETS: Cash and investments 17,477,937 1.2,582,1.88 Cash and investments with fiscal agent 2,330,844 187,015 Imprest cash 2,800 - Total cash and investments $ 19,811,581 $ 12,769,203 continued The accompanying notes are an integral part of these financial statements. 29 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS(continued) FOR THE FISCAL YEAR ENDED JUNE 30,2016 Business Type Governmental Activities Activities Beal Road Internal Service Landfill f=unds Reconciliation of Operating Income (Loss) to Net Cash Provided(Used) by Operating Activities: Operating income (loss) $ 1,028,749 $ (2,724,899) Adjustment to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 645,779 6,057 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (99,323) 23,277 Due from other governments (581) - Deferred outflow (17,359) Increase (decrease) in: Accounts payable 694,034 (61,787) Accrued salaries and benefits (11,456) - Compensated absences (22,968) - Landfill closure/post-closure cost 2,601,859 - Claims and judgments - 781,000 Net pension liability 183,510 - Deferred inflow (224,930) - Net cash provided (used) by operating activities $ 4,777,314 $ (1,976,352) continued The accompanying notes are an integral part of these financial statements. 30 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30,2016 Investment Agency Trust Funds ASSETS Cash and investments $ 233,176,244 $ 22,878,923 Imprest cash 19,340 - Due from other governments - 23,167 Interest receivable 171 95,725 Property tax receivable - 10,728,094 Total assets 233,195,755 33,725,909 LIABILITIES Agency funds held for others - 33,725,909 Total liabilities - $ 33,725,909 NET POSITION Held intrust for pool participants 233,195,755 Total net position $ 233,195,755 The accompanying notes are an integral part of these financial statements. 31 COUNTY OF BUTTE, CALIFORNIA STATEMENT OF CHANGES IN FIDUCIARY NET POSITION INVESTMENT TRUST FUNDS FOR THE FISCAL YEAR ENDED JUNE 30,2016 Additions: Contributions to pooled investments $ 1,581,388,129 Interest and investment income 3,137,211 Total additions 1,584,525,340 Deductions: Distributions from investment pool (1,594,797,135) Total deductions (1,594,797,135) Net increase (10,271,795) Net position, beginning 243,467,550 Net position,ending $ 233,195,755 The accompanying notes are an integral part of these financial statements. 32 ii Fo` C A L I F 0 R N 11 A 33 r r„ %/ //,,��/!�/% % CALIFORNIA Basic Financial Statements- Notes to the Basic Financial Statements 34 COUNTY OF BUTTE, CALIFORNIA NOTES TDTHE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 3O,7O16 1. Summary of Significant Accounting Policies A. The Financial Reporting Entity The County of Butte,which was incorporated as a County in 1850 as one of the State's original 27 counties, is a legal subdivision of the State of California charged with governmental powers. The County's powers are exercised through a Board of Supervisors, which, as the governing body of the County, is responsible for the legislative and executive control of the County., As required by accounting principles generally accepted in the United States of America,these financial statements present the government and its component units; legally separate entities for which the County is considered to be financially accountable. Financial accountability is demonstrated by the County Board of Supervisors acting asthe governing board for each ofthe component units. Blended conmponent units, although legally separate entities are, in substance, part of the County's operations: therefore data from these units are combined with data ofthe primary government. Each blended component unit has aJune 3O, 2O16fiscal year-end. Discretely presented component units, also legally separate entities are separately stated from the County in the financial report.These component units are financially accountable to the County but for all practical purposes,function mn their own. In evaluating how to define the County for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in Governmental Accounting Standards Board (GASB)Statement No. 14"The Financial Reporting Entity." Based on the criteria established by GASB 14, as amended byGASB Statement No. 39, the reporting entity also includes the following blended component units, which are Special Districts under control nfthe Board ofSupervisors: CSA#11Durham CSA#1JStirling City Lighting CSA#14East Chico CSA#16West Chico CSA#17South Onmvi|Ue—Las P|umanPark CSA#27Riuhna|e CSA#33Oro-Wyandotte CSA#36Glen Haven CSA#62Rancho DeThunder CSA#G7Vista Del Cerro CSA#75 North Park CSA#78Woodside CSA#O5Carriage Manor CSA#92Rosewood Subdivision CSA#1D3Morris Subdivision CSA#151Mulberry Street CSA#21Oakridge CSA#6DCrestwood CSA#G9LindoGardens CSA#B2Stirling City CSA#71Joshua:Tree#2 CSA#141 Mountain Oaks Subdivision 35 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 1^ Summary of Significant Accounting Policies(continued) A. The Financial Reporting Entity (continued) lo CSA#47Eaixtand Guynm CSA#4Sierra Del Oro CSA#7GQuail Run CSA#23 Pleasant Valley CSA#79Big Chico Creek Estates CSA#I4Chico—Mud Creek CSA#g6Si|vertreeSubdivision CSA#25Shasta Umion CSA#97Stoney Brook CSA#87Keefer Road/Rock Creek CSA#101Carriage Estates Subdivision CSA#95Copley Acres CSA#1O2Meadowlark Acres CSA#98Oro Monte Estates CSA#116Pistachio Grove Estates CSA#119 South Fork Estates CSA#125Willow Bend Subdivision C5A#128Wildflower EstsSubdivision CSA#129Orchard House Estates CSA#1G9,Sierra Moon Subdivision CSA#177Blossom Estates CSA#26 Therma|ilLoSewer and Drainage CSA#31 Biggs(Schohr's)Swimming PuaU—Recneatinm CSA#34 Gridley Swimming Pool—Recreation CSA#37 Gridley—Biggs Ambulance CSA#90 Southgate Acres Drainage and Fire Protection CSA#94 Sycamore Valley Sewer, Lighting, and Drainage CSA#114County nfButte—Nitrate Study Plan CSA#131 Walnut Manor —LiQhdng, Drainage, and Landscape CSA#135Keefer Creek Estates—Lighting, Drainage, and Sewer CSA#137 Durham-Dayton Industrial Partners for Extended Structural Fire Protection CSA#149Biggers Subdivision—Lighting, Drainage, and Snow removal TonrihaSubdivision—Street lighting, Drainage and Road maintenance SiskiyouGrove Estate—Street lighting, Drainage and Road maintenance The County hos created the Public Facilities Financing Corporation (Corporation) for the purposes offacilitating the financing of public projects within the County. The Board of Supervisors appoints the governing board of the Corporation and it is responsible for the fiscal and administrative activities of the entity. For financial reporting purposes capitalized leases between the County and the Corporation have been eliminated and the financial data ofthe entity has been, included within the County's reporting entity and isaccounted for im a debt service fund. 36 COUNTY OFBUTTE, CALIFORNIA NOTES TOTHE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 1. Summary of Significant Accounting Policies(continued) A. The Financial Reporting Entity(continued) Excluded fronthe,Reporting Entit Local Board Governed Districts and School Di�stricts: These potential component units have been excluded from the reporting entity. They are legally separate primary governmental units. The financial reporting forthese governmental entities,which are independent of the County, are limited tothe total amount for cash and investments and the related fiduciary responsibilities of the County for disbursement of these assets. Activities of school districts and local board governed districts are administered by boards which are separately elected and which are independent of the County Board of Supervisors. The following local board governed districts and school districts have been excluded from the County's financial statements: Ell Medio Fire District Bangor Cemetery Gridley-Biggs Cemetery Kimshem/Cemetery Orov|Ne[emetery Chico Area Recreation & Park Paradise Cemetery Durham Recreation & Park Pine Creek Cemetery Feather River Recreation QPark Thompson Flat Cemetery Paradise Recreation & Park Upham Cemetery R|chwakeRecreation 8\ Park Butte County Mosquito Abatement Butte Creek Drainage DurbamK4osqm|toAbate meot Drainage District#1 Onovl|Ue &1esquito Abatement Drainage District#2 Rlichva|e Sanitary8penating Drainage District#1OO Drainage District#200 Butte County Association ofGovernments 0uzztaHCommunity Services Butte County Resource Conservation Children's and Families Commission Butte County Office ofEducation Reclamation District#833 Representing County School Districts Rock Creek Reclamation District Butte County Fair Sacramento River Reclamation District 37 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 1. Summary of Significant Accounting Policies(continued) A. The Financial Reporting Entity(continued) Certain entities have separate elected boards and provide services to residents, generally within the geographic boundaries of the County. In addition,these entities are excluded from the reporting entity because they are not financially accountable to the County. B. Basis of Presentation t New Accounting Pronouncements The following Governmental Accounting Standards Board (GASB) Statements have been implemented: Statement 72—Fair Value measurement and Application addresses accounting and financial 1 reporting issues related to fair value measurements. The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance on determining this fair value for financial reporting purposes. In determining the fair value measurement, the Statement allows the use of valuation techniques which are consistent with the market approach, the cost approach, or the income approach. The requirements for GASB 72 are effective for periods beginning June 15,2015 and thereafter. Butte County currently uses the market approach when valuing its investments to record fair value. Implementation of GASB 72 did not have a significant impact on the financial statements. Statement 76-The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments supersedes GASB 55. The objective of this statement is to identify (in the context of the current governmental financial reporting environments) the hierarchy of generally accepted accounting principles. The requirements of GASB 76 are effective forfiscal years beginning after June 15, 2015. There was no impact on the County's Financial Statements as a result of implementation of GASB 76. Government-Wide Financial Statements While separate government-wide and fund financial statements are presented, they are interrelated.The governmental activities column incorporates data from governmental funds and internal service funds, while business-type activities incorporate data from the government's enterprise funds.Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. The statement of activities presents a comparison between program expenses and program revenues for each segment of the business-type activities of the County and for each function of the County's governmental activities. Program expenses include direct expenses, which are clearly identifiable with a specific function, and allocated indirect 38 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and Investments continued Investments Authorized by the California Government Code and the County's Investment Policy The table below identifies the investment types that are authorized for the County by the California Government Code (or the County's investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the County's investment policy, where more restrictive)that address interest rate risk,credit risk, and concentration of credit risk.This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the County, rather than the general provisions of the California Government Code or the County's investment policy. Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio in One Issuer f Local Agency Bonds 5 years None None U.5.Treasury Obligations 5 years None None U.S.Agency Securities 5 years None None Banker's Acceptances 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year 20% None Reverse Repurchase Agreements 92 days 20%of base value None Medium-Term Notes 5 years 30% None Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund(LAIF) N/A None None JPA Pools(other investment pools) N/A None None Excluding amounts held by bond trustee that are not subject to California Government Code restrictions. Investments Authorized by Debt Agreements Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the County's investment policy. The to ble below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk,credit risk,and concentration of credit risk. Maximum Maximum Authorized Maximum Percentage Investment Investment lyp e Maturity Allowed in One Issuer U.S.Treasury Obligations None None None U.S.Agency Securities None None None Banker's Acceptances 180 days None None Commercial Paper 270 days None None Money Market Mutual Funds N/A None None Investment Contracts 30 years None None Local Agency Investment Fund(LAIF) None None None Butte County Treasurer's Pooled Portfolio None None None 49 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and investments(continued) Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment.Generally,the longerthe maturity of an investment,the greaterthe sensitivity of its fair value to changes in market interest rates. One of the ways that the County manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the County's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the County's investments by maturity: Remaining Maturity By Fair Value" Investment Total Lessthan One to Two to Three to Fourto Type Fair Value One year Two years Three years Four years Five years WITH TREASURER: FAMCA $ 36,747,146 $ 3,184,774 $ 23,439,572 $ - $ 10,122,800 $ - FFCB 45,790,448 14,995,605 15,782,003 5,000,980 5,011,685 5,000,175 FHLB 35,727,495 - 10,083,625 5,110,875 15,271,125 5,261,870 FHLMC 24,673,058 5,000,795 14,657,623 - - 5,014,640 FNMA 39,367,974 - 15,036,380 9,297,984 15,033,610 TVA 5,096,885 5,096,885 - - - IBRD 16,097,439 - 3,000,400 5,055,825 8,041,614 BANK CD 500,000 500,000 - - MUNICI PAL BONDS 31,259,441 5,050,000 - 8,213,460 10,233,130 7,762,851 US TREASURY NOTE 9,182,536 - - - 9,182,536 - NEGOTIABLECD 5,000,384 75Q000 500,000 999,610 749,428 2,001,346 CALTRUST 4,549 4,549 - - - - CAMP 20,020,437 20,02Q437 LAIF 95,486,764 95,486,764 - - - CORPORATE NOTES 41,822,961 10,076,697 7,792,463 14,403,011 9,550,791 MMF 1,002,283 1,002,283 - - - - TOTAL WITH TREASURER 407,779,841 161,168,789 90,291,666 33,727,936 74,475,304 48,116,106 WITH FISCAL AGENTS: MONEY MARKET $ 1,556,503 $ 1,556,503 $ - $ - $ - $ BUSINESS CHECKING 187,708 187,708 DISCOVERY BENEFITS" 6,598 6,598 - FHLMC 1,232,111 - 1,232,111 LA I F 1,638 1,638 - TOTAL WITH FISCAL AGENTS 2,984,557 1,752,446 1,232,111 - TOTAL INVESTMENTS $ 410,764,358 $ 162,921,235 $ 90,291,666 $ 34,960,046 $ 74,475,304 $ 48,116,106 50 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and Investments (continued) Disclosures Relating to Credit Risk(continued) Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by(where applicable)the California Government Code,the County's investment policy, or debt agreements, and the actual rating as of fiscal year end for each investment type. Rating asof FiscalYearEnd Minimum SBP/Moody's Investment Fair Legal AA-/Aa3 Not Type Value Rating AA+/Aaa AAAIAaa AAA/Aa1 AA+AA-!A1 AA-AA+IAa1 Rated WITH TREAS U RER- FAMCA $ 36,747,146 N/A $ - $ $ $ $ $ 36,747,146 FFCB 45,790,448 N/A 45,790,448 - FHLB 35,727,495 N/A 35,727,495 FHLMC 24,673,058 NIA 24,673,058 FNMA 39,367,974 NIA 39,367,974 - - - TVA 5,096,885 NIA 5,096,885 IBRD 16,097,439 NIA 16,097,439 - BANK CD 500,000 N/A - 500,000 MUNICIPAL BONDS 31,259,441 N/A 3,059,940 5,167,750 4,652,591 18,379,160 - USTREASURY NOTE 9,182,536 N/A 9,182,536 - - - - - NEGOTIABLECD 5,000,384 NIA - - 5,000,384 CALTRUST 4,549 NIA 4,549 CAMP 20,020,437 NIA - 20,020,437 LAIF 95,486,764 N/A 95,486,764 CORPORATENOTES 41,822,961 A 5,D17,055 2,727,243 9,338,566 24,740,098 - MMF 1,002,283 A - - - - 1,002,283 MONEY MARKET 1,556503 A 1,556,503 BUSINESS CHECKING 187,707 N/A - - 187,707 DISCOVERY BENEFITS 6,598 N/A - 6,598 FHLMC 1,232,112 N/A 1,232,112 - LAIF 1,637 NIA _ 1,637 Total $410,764,358 $167,644,065 $21,884,622 $5,167,750 $13,991,157 $43,119,258 $158,957,506 51 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASK FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and Investments[continued Concentration of Credit Risk The investment policy of the County contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of total County investments are as follows: Investment Reported Issuer Tvpe Amount Federal Agricultural Mortgage Corp. Federal agency securities $ 36,747,146 Federal Farm Credit Bank Federal agency securities 45,790,448 Federal Home Loan Bank Federal agency securities 35,727,495 Federal Home Loan Mortgage Corp. Federal agency securities 24,673,058 Federal National Mortgage Assoc. Federal agency securities 39,367,794 Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the riskthat,in the event ofthefailure of the counterparty(e.g.,broker-dealer)to a transaction,a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party.The California Government Code and the County's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits:The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110%of the total amount deposited by the public agencies.California law also allows financial institutions to secure County deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. It is the County's practice to disallow first trust deed mortgage notes as collateral for the County's secured deposits. Investment in State Investment Pool The County is a voluntary participant in the Local Agency investment Fund (LAIF)that is regulated by the California Government Code under the oversight of the Treasurer of the State of California. This fund is not registered with the Securities and Exchange Commission as an investment company, but is required to invest according to California State Code. Participants in the pool include voluntary and involuntary participants, such as special districts and school districts for which there are legal provisions regarding their investments. The Local Investment Advisory Board(Board) has oversight responsibility for LAIF. The Board consists of five members as designated by State Statute. The fair value of the County's investment in this pool is reported in the accompanying financial statements at amounts based upon the 52 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2015 2. Cash and Investments(continued) Investment in State Investment Pool (continued) County's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio).The balance available for withdrawal is based on the accounting records maintained by LAIF,which are recorded on an amortized cost basis. Investment Trust of California Joint Powers Authority Pool The County Treasurer's Pool maintains an investment in the Investment Trust of California Joint Powers Authority Pool ("CaITRUST"). CaITRUST is not registered with the Securities and Exchange Commission as an investment company, but is overseen by a Board of Trustees composed of officials of the public agencies that participate in CaITRUST. The fair value of the County's position in the pool is approximately the same as the value of the pool shares. Fair Value Measurements GASB statement 72 Fair Value Measurements and Application, sets for the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities(Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under GASB 72 are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the County has the ability to access. Level 2 Inputs to the valuation methodology include: • Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive markets; • Inputs other than quoted prices that are observable for the asset or liability; • Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs reflect the County's own assumptions about the inputs market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the County's own data. The asset's level within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. 53 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and Investments(continued) The determination of what constitutes observable requires judgment by the County's management. County management considers observable data to be that market data which is readily available,regularly distributed or updated, reliable, and verifiable not proprietary, and provided by multiple independent sources that are actively involved in the relevant market. The categorization of an investment within the hierarchy is based upon the relative observability of the inputs to its fair value measurement and does not necessarily correspond to County management's perceived risk of that investment. The following is a description of the valuation methods and assumptions used by the County to estimate the fair value of its investments. There have been no changes in the methods and assumptions used for the previous year end. The methods described may produce a fair value calculation that may not be indicative of the realizable value or reflective of future fair values. County management believes its valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. When available, quoted prices are used to determine fair value. When quoted prices in active markets are available, investments are classified within Level 1 of the fair value hierarchy. The County's Level 1 investments primarily consist of investments in corporate debt securities, and mutual funds. When quoted prices in active markets are not available,fair values are based on evaluated prices received from the County's custodian of investments. For the large portion of the County's portfolio,the County's custodians generally use a multi-dimensional relational model. Inputs to their pricing models are based on observable markets inputs in active markets. The inputs to the pricing models are typically benchmark yields, reported trades, broker-dealer quotes, issuer spreads and benchmark securities,among others. The County owns no Level 2 or 3 investments. 54 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and Investments(continued) Fair Value Measurement Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Investments byfairvalue level 6/3P1201 Levell Level 2 Level 3 Debt securities FAMCA $ 36,747,146 $ 36,747,146 $ $ FFCB 45,790,448 45,790,448 - FHLB 35,727,495 35,727,495 - - FHLMC 24,673,058 24,673,058 - FNMA 39,367,974 39,367,974 TVA 5,096,885 5,096,885 - IBRD 16,097,439 16,097,439 - - BANK CD 500,000 500,000 - - MUNICIPAL BONDS 31,259,441 31,259,441 - USTREASURYNOTES 9,182,536 9,182,536 NEGOTIABLECD 5,000,384 5,000,384 - CALTRUST 4,549 4,549 - - CORPORATE NOTES 41,822,961 41,822,961 - MMF 2,746,493 2,746,493 DISCOVERY BENEFITS 6,598 6,598 FHLMC 1,232,112 1,232,112 - - Total investment byfairvalue level $ 295,255,519 295,255,519 - - Investments measured at amortized costs CAMP 20,020,437 LA I F 95,488,402 Total investments measured at fair value $ 410,764,358 55 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASK FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 2. Cash and Investments(continued) Treasury Investment Pool Condensed Financial Information for the Treasurer's Investment Pool In lieu of separately issued financial statements for the Treasurer's investment pool, condensed financial information is presented below as of and for the fiscal year ended June 30, 2016: Statement of Net Position Net Position held for pool participants $ 416,384,946 Equity of internal pool participants 183,208,702 Equity of external pool participants (voluntary and involuntary) 233,176,244 Total Equity 416,384,946 Statement of Changes in Net Position Net Position held for pool participants atJuly 1, 2015 421,740,088 Net change in investments by pool participants (5,355,142) Net Position held for pool participants at June 30, 2016 $ 416,384,946 3. Interfund Transactions Interfund Receivables/Payables The interfund balances as of June 30, 2016 are as follows: Balances due to/from other funds: Receivable Fund Payable Fund Amount General Fund Nonmajor Governmental Funds $ 270,709 General Fund Social Services Fund 3,818 Social Services Fund County General Fund 15,209 Road Operation Fund Neal Road Landfill 581 Road Operation Fund County General Fund 4,879 Nonmajor Governmental Funds Internal Services Fund 6,057 Total $ 301,253 These interfund balances result from the time lag between the dates that(1)interfund goods and services are provided or reimbursable expenditures occur, and (2) payments between funds are made. 56 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 3. Interfund Transactions (continued) Transfers to/from other funds: Transfers are indicative of funding for capital projects,lease payments or debt service,subsidies of various County operations and re-allocations of special revenue. The following schedule briefly summarizes the County's transfer activity: Transfers From Transfers To Amount Reason General Fund Behavioral HeaIthFund $ 884,782 Transfer for maintenance of effort Public Health Fund 724,304 Transfer for maintenanceof effort Social Services Fund 1,154,901 Transfer for county shareof costs Nonmajor Governmental Funds 223,431 Transfer for debt service Nonmajor Governmental Funds 482,563 Transfer for capital projects Nonmajor Governmental Funds 685,000 Transfer for county match Nonmajor Governmental Funds 2,088,053 Transfer for equipment Nonmajor Governmental Funds 1,766,857 Transfer for debt service-POB 8,009,891 Social Services Fund General Fund 288,357 Transferfor publicsafety and supportservices NonmajorGovernmental Funds 37,569 Tra nsfer for ca pi ta I projects Nonmajor Governmental Funds 676,746 Transferfordebtservice-POB 1,002,672 Public Health Fund Nonmajor Governmental Funds 174,280 Transfer for debtservice-POB 174,280 Behavioral Health Fund General Fund 456,666 Transfer for supportservices Nonmajor Governmental Funds 1,104,557 Transfer for capital projects Nonmajor Governmental Funds 16,024 Transfer endowment to permanentfund Nonmajor Governmental Funds 381,951 Transfer for debtservice-POB 1,959,198 Road Fund Nonmajor Governmental Funds 118,678 Transfer for debt service-POB 118,678 57 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 3. Interfund Transactions continued Transfers to/from other funds (continued): Transfers From Transfers To Amount Reason Nonmajor Governmental Funds General Fund 834,361 Transferforsupportservices Road Fund 1,699,585 Transfer for facility services Nonmajor Governmental Funds 33,861 Transfer for capital projects Nonmajor Governmental Funds 760,000 Transfer for matching Nonmajor Governmental Funds 672,172 Tra nsfer for debt servi ce Nonmajor Governmental Funds 97,026 Transferfordebtservice-PDB 4,097,005 Internal Service Funds Nonmajor Governmental Funds 444,179 Transfer for debtservice Nonmajor Governmental Funds 12,540 Transfer for equipment replacement 456,719 Total Transfers 15,818,443 58 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 S. Long-Term Obligations continued Fiscal Year Ending Governmental Business Type June 30, Activities Activities 2017 $ 132,666 $ 222,780 2018 132,666 222,780 2019 132,666 104,976 2020 123,430 - Total minimum lease payments 521,428 550,536 Less: Amount representing interest 71,512 16,184 Pres entvaiueofminimumleasepayments $ 449,916 $ 534,352 The following is a schedule of net remaining property leased under capital leases at June 30, 2016: Capital Lease Acquisition Accumulated Value Depreciation Net Remaining Governmental Activities: Chico Memorial Halls 1,254,300 159,095 $ 1,095,205 2016 Ford F-250 34,059 27,651 6,408 $ 1,101,613 Business type Activities: 2013 Caterpillar Model D8TDozer 678,924 169,731 $ 509,193 2014 Advantage 500 Landfill Compactor 664,809 87,095 577,714 $ 1,086,907 Business-Type Activities On December 24,2012,the County entered into a Lease Purchase Agreement to finance the purchase of a 2013 Caterpillar D8TTrack Type Tractor for the Neal Road Recycling and Waste Facility. Commencing on December 24, 2013, principal and interest payments are due annually on the 24"day of each December. The final payment is due on December 24, 2017.The interest rate is fixed at 1.7740%. On February 20, 2015,the County entered into a Lease Purchase Agreement to finance the purchase of a 2014 Advantage 500 Landfill Compactor for the Neal Road Recycling and Waste Facility. Commencing on February 20, 2015, principal and interest payments are due annually on the 20th day of each February. The final payment is due on February 20, 2019. The interest rate is fixed at 1.6410%. 63 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 S. Long-Term Obligations (continued), Operating Leases The County is committed under various non-cancellable operating leases for office buildings and equipment. The minimum future lease commitments on the real estate leases are as follows: Rental expense was$5,267,514 for all funds for the year ended June 30,2016. Year Ended June 30, Payments 2017 $ 4,619,114 2018 4,221,461 2019 1,092,513 2020 795,164 2021 685,771 Total five year commitment $ 11,414,023 Lease Incentive The County entered into a long term agreement for office space on September 24, 2015. The agreement remains in effect for a period of 20 years,and can be renewed for an additional term of 10 years. Under the terms of the agreement,the County received an initial payment of$100,000. The payment has been deferred and will be recognized as a reduction of rent expense on a straight line basis over the 30-year term of the agreement, or until the agreement is terminated at which time the remaining balance will be recognized as income. Changes in the deferred lease incentive payment liability forthe year ended June 30,2016 are summarized as follows: Amount Beginning Ending Due Within Balance Additions Reduction Balance One Year Office Lease - 100,000 2,500 97,500 3,333 64 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 S. Long-Term Obligations(continued) Bonds Payable At June 30, 2016, bonds outstanding consist of the following: Pension Obligation Bonds: The pension obligation bonds were issued in three series (A, B, and C) in 2004. These bonds were issued to save future interest costs associated with the County's pension obligations. Series A is comprised of serial and term bonds with fixed interest rates. The average coupon rate is 5.996% over the remaining life of the bonds. Series B has a variable rate derived from the one month LIBOR index plus a margin of .30%. (The County elected to exercise its option to prepay Series C on September 1, 2007). For fiscal year 2015/2016,the average rate paid for Series B was.61863%. The next payment of interest for Series A is due December 1,2016. The interest payments for Series B are calculated and paid the first business day of each month. Principal payments for both Series A and B are due annually through maturity in fiscal year 2034. As of June 30, 2016, the estimated (Series B is a variable rate) annual debt service requirements to maturity for the Pension Obligation Bonds are as follows: Fiscal Year Ending June 30, Principal Interest Total 2017 $ 735,000 $ 2,711,956 $ 3,446,956 2018 880,000 2,672,698 3,552,698 2019 1,045,000 2,625,382 3,670,382 2020 1,215,000 2,568,921 3,783,921 2021 1,405,000 2,503,019 3,908,019 2022-2026 10,335,000 11,132,668 21,467,668 2027-2031 17,605,000 7,489,394 25,094,394 2032-2034 15,260,000 1,779,671 17,039,671 Total $ 48,480,000 $ 33,483,709 $ 81,963,709 65 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 5. Lone-Term Obligations{continued] Notes Payable At lune 30, 2016, notes outstanding consist of the following: The County has in operation solar panels to generate power for certain County buildings.This solar project was funded in 2005, in part, through notes from the California Energy Commission totaling $3,167,000. Principal and interest, at a fixed rate of 3.95%, are due semi-annually beginning in fiscal year 2005-06. One note was fully repaid June 22,2016. As of June 30, 2016,annual debt service requirements to maturity are as follows: Fiscal Year Ending June 30, Principal Interest Total 2017 $ 253,836 $ 23,346 $ 277,182 2018 263,961 13,220 277,181 2019 135,898 2,691 138,589 Total $ 653,695 $ 39,257 $ 692,952 66 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 5. Long-Term Obligations(continued) Certificates of Participation Governmental Activities 2010 Bangor Fire Station Certificates of Participation On August 11, 2010, the County issued $1,100,000 in Certificates of Participation. The proceeds, have funded the majority of the costs associated with the construction of improvements to Bangor Fire Station #55. Commencing with the interest only payment on February 1, 2011,a payment of interest only is due on February 1 of each year and a payment comprised of principal and interest is due on August 1 of each year. The interest rate is fixed at 4.0%per year. The final principal payment is due on August 1, 2050. Fiscal Year Ending June 30, Principal Interest Total 2017 $ 14,000 $ 41,160 $ 55,160 2018 15,000 40,580 55,580 2019 15,000 39,980 54,980 2020 16,000 39,360 55,360 2021 17,000 38,700 55,700 2022-2026 93,000 147,740 240,740 2027-2031 115,000 166,600 281,600 2032-2036 140,000 142,100 282,100 2037-2041 168,000 117,600 285,600 2042-2046 205,000 80,780 285,780 2047-2050 182,333 32,360 214,693 Total $ 980,333 $ 886,960 $ 1,867,293 67 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 5. Long-Term Obligations(continued) Certificates of Participation(continued) Hall of Records Certificates of Participation On July 17, 2014,the County issued$8,000,000 in Certificates of Participation with funds borrowed from USDA Rural Housing. Last year$4,796,195 was drawn, during this year $3,203,805 was drawn bringing the total Certificates to$8,000,000. The proceeds funded the construction costs for the Hall of Records which was completed in December 2015. Commencing on July 1,2015,a principal and interest payment is due on July 1 of each year and an interest only payment is due on January 1 or each year. The interest rate is fixed at a rate of 3.5% per annum. The final principal payment is due July 1, 2054. Fiscal Year Ending June 30, Principal Interest Total 2017 $ 98,000 $ 260,584 $ 358,584 2018 102,000 260,889 362,889 2019 105,000 257,266 362,266 2020 109,000 253,521 362,521 2021 113,000 249,636 362,636 2022-2027 626,000 1,184,987 1,810,987 2028-2032 741,000 1,178,599 1,919,599 2033-2037 881,000 924,152 1,805,152 2038-2042 1,046,000 755,887 1,801,887 2043-2047 1,243,000 556,054 1,799,054 2048-2052 1,476,000 318,738 1,794,738 2053-2054 1,062,954 59,966 1,122,920 Total $ 7,602,954 $ 6,260,279 $ 13,863,233 68 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 5. Long-Term Obligations(continued) Business-Type Activities On November 1, 2006, the County issued $12,025,000 in Certificates of Participation (COPs), to finance certain capital improvements for the expansion of the Neal Road Recycling and Waste Facility. The improvements include module closures and environmental mitigation. Commencing July 1,2008,interest ranging from 3.4%to 4.5%is payable semiannually on January 1 and July 1 of each year. The average rate of interest for the certificates is 3.995%. Beginning on July 1,2009, principal payments are due on July 1 of each year. Fiscal Year Ending June 30, Principal Interest Total 2017 $ 950,000 $ 244,300 $ 1,1.94,300 2018 985,000 205,600 1,190,600 2019 1,025,000 162,837 1,187,837 2020 1,075,000 11.5,587 1,190,587 2021 1,120,000 69,000 1189000 2022 1,165,000 23,300 1,188,300 Total $ 6,320,000 $ 820,624 $ 7,140,624 Loan Payable Business-Type Activities In 2006,the County received a zero interest loan from the California Integrated Waste Management Board in the amount of $500,000 for operations at the Neal Road Recycling and Waste Facility. The final payment was made on June 1, 2016. 69 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 5. Lone-Term Obligations(continued) Compensated Absences Upon termination, an employee may be compensated for sick leave amounts accrued over 240 hours at half the normal pay rate not to exceed$3,000. Employees other than non-represented groups hired after June 30,2010 will not be eligible for sick-leave buyout nor will they receive one year of County-paid health benefits after retirement. Retirees other than non-represented groups who retired on or after January 1, 2010 will be subject to a limit on County reimbursements equal to the sum of the Blue Shield HMO premium, Delta DPO and vision premiums. Vacation is accrued at varying rates depending on an employee's years of services. Upon termination, an employee is paid at 100% of the amount accrued. Compensated absences for vacation are paid out at the employee's current rate of pay. Administrative leave is accrued by employees exempt from paid overtime and may be accrued up to a maximum of 352 hours. The County does not accrue for compensated absences in its governmental fund statements and recognizes liabilities for compensated absences only if they are due and payable in an event such as termination. However, in the statement of activities the expense is allocated to each function based on usage. The compensated absences liability attributable to the governmental activities will be liquidated as follows: General Fund 54%, Social Services Fund 17%, Public Health Fund 6%, Behavioral Health Fund 14%, Road Fund 5%, and Nonmajor Funds 4%. Landfill Closure and Post-Closure Costs State and federal laws and regulations require the County operator to place a final cover on its Neal Road Landfill site when it stops accepting waste,and to perform certain maintenance and monitoring functions at the site for thirty years after closure. Although closure and post-closure care costs will be paid only near to or after the date the landfill stops accepting waste,the County reports a portion of these closure and post-closure care costs as an operating expense in each period based on landfill capacity used as of each balance sheet date. The County )Veal Road Landfill Joint Technical Document (JTD) was revised in May 2016, resulting in change of available landfill capacity from the original design in 2002.The new calculated capacity for the Landfill is smaller compared with the original design,which resulted in a greater percent of capacity filled. According to the revised JTD document,as of August 31,2016,the estimated highest closure costs,highest correction costs and highest post-closure costs are $12,018,919, $1,818,437 and $10,139,327, respectively. Annually, the Landfill adjusts estimated closure and correction costs due to changes in inflation and capacity. Such changes resulted in an increase to the Landfill closure, correction care and post-closure liability and caused an increase in expense. Based upon new estimated capacity,28.18 percent capacity is reported to date as the cumulative usage as of June 30,2016. The$6,757,705, reported as landfill closure and corrective action and post-closure liability at June 30,2016, represents the 28.18 percent of the estimated closure and corrective action and post-closure costs. 70 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 S. Lone-Term Obligations (continued) Landfill Closure and Post-Closure Costs(continued): The County will recognize the remaining estimated closure costs of $17,218,978 as the remaining estimated capacity is filled. These amounts are based on what it would cost to perform all closure, corrective actions and post-closure maintenance in 2016. The County expects to close the landfill in the fiscal year 2031. In addition, the County Board established a Pledge of Revenue in 2005 to demonstrate financial responsibility for post-closure maintenance of the Neal Road Landfill. The amount of $337,978 Pledge Revenue per year in 2016 dollars for the thirty years period of post-closure maintenance, representing the most recent post-closure maintenance cost estimate of$10,139,327. The County is required by state and federal laws and regulations to make annual contributions to a separate fund to finance closure and post-closure care. The County is in compliance with these requirements. Limitations and Restrictions There are a number of limitations and restrictions contained in the various debt indentures. The County's management believes that the County is in compliance with all significant limitations and restrictions. Rebatable Arbitrage Earnings The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of tax- exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of all tax-exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service at least every five years. During the current year, the County performed calculations of excess investment earnings on various bonds and financings and at June 30, 2016 does not expect to incur a liability. 71 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 6. Restricted Net Position/Fund Balances Fund Balances Fund balances are presented in the following categories: nonspendable, restricted, committed, assigned and unassigned. A detailed schedule of fund balances at June 30, 2016 is as follows: Other Total Behavioral Governmental Governmental General Social Services Public Health Health Road Funds Funds Nonspendable: Prepaid items $ 204,448 $ 15,476 $ - $ - $ - $ 16,287 $ 236,211 Inventory 34,170 - - - 256,224 - 290,394 238,618 15,476 - - 256,224 16,287 526,605 Restricted: Purpose offund - 2,869,377 12,803,752 9,559,159 6,398,983 43,757,501 75,388,772 Electronic Recording 161,887 167.,887 SSN Truncation 43,841 - - - - - 43,841 Recording System 2,264,880 - - - - - 2,264,880 Micrographics 335,587 - - - - - 335,587 Vital Health Statistics 4,230 - - - - - 4,230 Federal Forfeitures 256,204 - - - - - 256,204 Treasury Federal Forfeiture 711,034 - - - - - 711,034 Criminalist tab 30,917 - - - - - 30,917 Criminal Justice Construction 1,487,689 - - - - - 1.487,689 Ward Welfare 145,825 - - - - - 145,825 CCPIA 642,344 - - - - - 642,344 Inmate Welfare 1,942,225 - - - - - 1,942,225 DNA LocaIID 118,428 - - - - - 118,428 Vehicle Maintenance 297,128 - - - - 297,128 Vehicle Replacement 262,552 - - - - - 262,552 Crime Prevention 5,210 - - - - - 5,210 DrugandGangActivity 267,567 - - - - - 267,567 Federal Revenue Share 1,643,951 - - - - - 1,643,951 Treasury Federal Seizure 51,913 - - - - - 51,913 Survey Monument ,265,676 - - - - - 265,676 Community Cost Share 841,795 - - - - - 841,795 Water Tender 792,745 - - - - - 792,745 Library Donation 507,008 - - - - - 507,008 Title IVH 574,887 - - - - - 574,887 State Local Forfeiture 72,497 - " - - 72,497 Environmental Consumer Protec 295,490 - - - - - 295,490 Real Estate Fraud 378,696 378,696 2011 Realignment 12,729,877 2,278,736 607,278 - - - 15,615,891 27,132,083 5,148,113 13,411,030 9,S59,159 6,398,983 43,757,501 105,406,869 Committed: General Reserve 7,500,000 - - - - - 7,500,000 7,500,000 ^ - - - - 7,500,000 Assigned: Secure Rural Schools 28,867 - - 28.867 28,867 - - - - - 28,867 Unassigned fund balance: 23,371,872 - - - - - 23,371,872 Total Fund Balances $ 58,271,440 $ 5,163,589 $ 13,411,030 $ 9,559,159 $ 6,655,207 $ 43,773,788 $136,834,213 72 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 6. Restricted Net_Position/Fund Balances(continued) The restricted component of net position are assets that are subject to constraints either externally imposed by creditors,grantors, contributors, or laws or regulations of other governments,or imposed by law through constitutional provisions or enabling legislation. The Board of Supervisors adopted the Fund Balance Reserve Policy in January 2010. The policy was created to allow the County to respond strategically and responsibly to legally declared emergencies as defined in Government Code § 29086. This policy sets forth the parameters and funding methods the County may utilize to establish and maintain an adequate General Fund reserve. General Reserve requirements are classified as follows: • Appropriation for Contingencies—during the annual public hearing on the Recommended Budget, the Board will consider maintaining an amount equal to or greater than five percent (5%) of the proposed budget for the General Fund. • General Fund Reserve—should be maintained at an amount equivalent to two months operating expenses for all County governmental funds. • Excess Fund Balance Available — when the Fund Balance Available is less than estimated the Auditor-Controller will be directed to reduce the Appropriation for Contingencies. When the Fund Balance Available is greater than estimated the direction will be to, in order of priority,ensure the Appropriation for Contingencies is at the five percent (5%) level, increase the General Fund Reserve to maintain the two months of operating expenses, designate for known and quantified unfunded liabilities,such as Employee pension plan, other Post-Employment benefits or accrued Employee leave. • Unreserved Fund Balance — should be maintained to provide adequate working capital and accommodate required adjustments to other reserve accounts, including advances to other funds. • Other Designations of the General Fund—establishment of these policies do not preclude the Board of Supervisors from setting aside additional funds for a specific project, program or capital item. Net Position The government-wide statement of net position reports $137 million of restricted net position. Net investment in capital assets,was comprised of the following: Governmental Business-Type Activities Activities Capital assets,net of accumulated depreciation $161,443,334 $22,987,544 OutstandingprincipaIofcap!tai-related debt (91686,898) (6,922,078} Net investment in capital assets $151,756,436 $16,065,466 73 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County Em to ees Retirement Plan Defined Benefit Pension Plan A. General Information about the Pension Plan Plan Description All qualified permanent and probationary employees are eligible to participate in the Butte County's separate Safety and Miscellaneous Plans, agent multiple-employer defined benefit pension plan administered by the California Public Employees' Retirement System (CAPERS),which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and Butte County Resolution. CaIPERS issues publicly available reports that include a full description of the pension plans including benefit provisions, actuarial assumptions and membership information that may be viewed on their website: http://www.calpers.ca.gov Benefits Provided CaIPERS provides service retirement disability and death benefits, annual cost of living adjustments to plan members, who must be public employees and/or beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 20 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law. The contribution requirements of plan members and the County are established and may be amended by the Board of Supervisors in accordance with union contracts and plan provisions. 74 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County Employees Retirement Plan Defined Benefit Pension Plan The Plans' provisions and benefits in effect at June 30,2016, are summarized as follows Miscellaneous Prior to January 1, On or after Hire Date 2013 January 1, 2013 Benefit formula 2% @55 2% @ 62 Benefit vesting schedule 5 years of service 5 years of service Benefit payment monthly for life monthly for life Retirement age 50-55 52 -67 Monthly benefits,as a%of eligible compensation 2.00% 2.00% Required employee contribution rates 7% 6.25% Required employer contribution rates 12.447% 12.447% Safety Prior to January 1, On or after Hire Date 2013 January 1, 2013 Benefit formula 2%-3% @ 50 2.%7 @ 57 Benefit vesting schedule 5 years of service 5 years of service Benefit payment montly for life montly for life Retirement age 50 50-57 Monthly benefits, as a%of eligible compensation 2.00% 2.00% Required employee contribution rates 9% 11% Required employer contribution rates 21.621% 21.621% Employe s Covered: Miscellaneous Safety Inactive employees or beneficiaries receiving benefits 1,711 268 Inactive employees entitled to but not yet receiving benefits 1.,318 153 Active employees 1,915 299 Total 4,944 720 75 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County Employees Retirement Plan(Defined Benefit Pension Plan) Contributions: Section 20814(c) of the California Public Employees' Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on July 1 following notice of a change in rate. The total plan contributions are determined through CalPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year,with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of the employees. For the measurement period ended June 30 ,2015 (the measurement date), the average active employee contribution rate is 6.757 percent of the annual pay for the Miscellaneous Plan, and 8.778 percent of annual pay for the Safety Plan. The employer's contribution rate is 11.652 percent of the annual payroll for the Miscellaneous Plan, and 19.837 percent for the Safety Plan. Employer contribution rates may change if plan contracts are amended. It is the responsibility of the employer to make necessary accounting adjustments to reflect the impact due to any Employer Paid Member Contributions or situations where members are paying a portion of the employer contribution. B. Net Pension Liability Butte County's net pension liability for each Plan is measured as the total pension liability,less the pension plan's fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2015 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. Miscellaneous Safety Valuation Date June 30, 2014 June 30, 2014 Measurement Date June 30, 2015 June 30, 2015 Actuarial cost Method Entry-Age Normal Cost Method Actuarial Assumptions Discount Rate 7.65% 7.65% Inflation 2.75% 2.75% Payroll Growth a Varies Varies Investment Rate of Return Z 7.50% 7.50% Mortality Rate Table 3 Derived using CalPERS' Membership Data Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing Power applies, 2.75%thereafter I Varies by Entry Age and Service 2 Net of pension plan investment and administrative expenses,includes inflation 3 The mortality table used was based on Ca1PERS'specific data. The table includes 20 years of mortality improvement using the Society of Actuaries Scale BB. 76 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County_Employees Retirement Plan (Defined Benefit Pension Plan) (continued) Discount Rate The discount rate used to measure the total pension liability was 7.65 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CaIPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore,the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 7.65 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called "GASB Crossover Testing Report"that can be obtained at Ca1PERS'website under the GASB 68 section. According to Paragraph 30 of Statement 68 the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. This difference was deemed immaterial to the agent multiple-employer plan. CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability management review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time there is a change in methodology. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the fund asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years)and the long-term (11 —60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. 77 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County Employees Retirement Plan(Defined Benefit Pension Plan)(continued) The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumption applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses. Pension New Strategic Real Return Real Return Allocation Years 1-101 Years 11+2 Global Equity 47.0% 5.259/6 5.71% Global Fixed Income 19.0 0.99 2.43 Inflation Sensitive 6.0 0.45 3.36 Private Equity 12.0 6.83 6.95 Real Estate 11,0 4.50 5.13 Infrastructure and Forestland 3.01 4.501 5.09 Liquidity 2.0 (0.55) (1.05) 1 An expected inflation of 2.5%usedforthis period 2 An expected inflation of 3.0%used for this period C. Changes in the Net Pension Liability The changes in the Net Pension Liability for each Plan follows: Increase (Decrease) Miscellaneous Plan: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) a) b (c)=(a)-(b) Balance at: 6/30/2014(valuation date)1 562,533,726 456,859,373 105,674,353 Changes Recognized for the Measurement Period Service Cost 13,217,345 13,217,345 1 nterest on Tota I Pens i on Li a bi I i ty 41,354,694 41,354,694 Changes of Benefit Terms - Differences between Expected and Actual Experience (4,859,869) (4,859,869) Changes of Assumptions (9,887,725) (9,887,725) Contributions from the Employer 11,089,733 (11,089,733) Contributions from Employees 6,599,733 (6,599,733) Net Investment Income 2 10,310,386 (10,310,386) Benefit Payments, including Refunds of Employee Contribution (27,621,131) (27,621,131) - Administrative Expenses (512,996) 512,996 Net Change during 2014-15 12,203,31.4 (134,275) 12,337,589 Balance at: 6/30/2015 (measurement date) 574,737,040 456,725,098 118,013,942 78 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL_STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County Employees Retirement Plan (Defined Benefit Pension Plan) (continued) Increase (Decrease) Safety Plan: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) (a) (b) (c)=(a)-(b) Balance at: 6/30/2014(valuation date)1 158,164,947 124,044,353 34,120,594 Changes Recognized for the Measurement Period Service Cost 4,630,445 4,630,445 1 nterest on Tota I Pens i on Li a bi I i ty 11,705,847 11,705,847 Changes of Benefit Terms - Differences between Expected and Actual Experience (1,153,098) (1,153,098) Changes of Assumptions (3,063,979) (3,063,979) Contributions from the Employer 4,084,403 (4,084,403) Contributions from Employees 1,717,710 (1,717,710) Net Investment Incomez 2,751,766 (2,751,766) Benefit Payments, including Refunds of Employee Contribution (6,490,975) (6,490,975) - Administrative Expenses (141,776) 141,776 Net Change during 2034-15 5,628,240 1,921,128 3,707,112 Balance at:6/30/2015 (measurement date) 163,793,187 125,965,481 37,827,706 Increase (Decrease) Neal Road Landfill-Miscellaneous Plan: Total Pension Plan Fiduciary Net Pension Liability Net Position Liability/(Asset) a (b) (c) (a)-(b) Balance at: 6/30/2014(valuation date)1 7,773,933 6,313,566 1,460,367 Changes Recognized for the Measurement Period Service Cost 182,657 182,657 Interest on Total Pension Liability 571,501 571,501 Changes of Benefit Terms - Differences between Expected and Actual Experience (67,161) (67,161) Changes of Assumptions (136,643) (136,643) Contributions from the Employer 144,578 (144,578) Contributions from Employees 86,927 (86,927) Net Investment I ncome 2 142,484 (142,484) Benefit Payments, including Refunds of Employee Contribution (381,710) (381,710) - Administrative Expenses (7,144) 7,144 Net Change during 2014-15 1 168,644 1 (14,865)1 183,509 Balance at: 6/30/2015 (measurement date) 7,942,577 6,298,701 1,643,876 79 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FORTH E FISCAL YEAR ENDED JUNE 30,2016 7. County Employees Retirement Plan (Defined Benefit Pension Plan)(continued) Sensitivity of Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Plan as of the measurement date,calculated using the discount rate of 7.50 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-paint lower(6.50 percent) or 1 percentage point higher(8.50 percent)than the current rate: Miscellaneous Safety Neal Road Landfill 1%Decrease 6.65% 6.65% 6.65% Net Pension Liability 192,875,152 61,560,814 2,670,263 Current Discount Rate 7.65% 7.65% 7.65% Net Pension Liability 118,011,942 37,827,707 1,643,876 1% Increase 8.65% 8.65% 8.65% Net Pension Liability 55,711,909 18,383,161 771,304 Subsequent Events There were no subsequent events that would materially affect the results presented in this disclosure. D. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2016, Butte County recognized pension expense of($1,194,965). At June 30, 2016, Butte County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflow of Resources Governmental Business-type Governmental Business-type Activities Activities Activities Activities Pension contributions subsequent to measurement date 16,815,333 161,937 Differences between actual and expected experience 7,285,692 49,487 Changes in assumptions on plan investments 3,580,956 100,684 Net difference between projected and actual earnings 8,535,801 58,089 Tata 1 16,815,333 161,937 19,402,449 208,260 80 COUNTY OF BUTTE, CALIFORNIA !VOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 7. County Employees Retirement Plan_(Defined Benefit Pension Plan) (continued) Deferred outflows of resources of$16,815,333 for governmental activities, and $161,937 for business- type activities related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the yearended June 30,2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Deferred Inflows of Resources Year Ended Governmental Business-type June 30 2017 8,522,973 95,229 2018 8,522,973 95,229 2019 7,746,784 84,504 2020 (5,390,281) (66,702) 2021 - 81 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 8. Other Post-Employment Benefits(OPEB) Plan Description The County sponsor's healthcare coverage under the California Public Employees Medical and Hospital Care Act("PEMHCA"),commonly referred to as PERS Health. PEMHCA provides health insurance through a variety of Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) options. Participation in PEMHCA is financed in part by the County through a contribution to PEMHCA of$122.00 per employee per month for 2015. The $122.00 per month increased by law to $125.00 on January 1, 2016, and will be changed by CAL-PERS and legislation for years 2017 and thereafter. Delta Dental (Premier and DPO),vision and life insurance are also available. Post-Retirement Coverage The County also offers medical,dental and vision coverage(but not life insurance)to its retirees who meet certain requirements per the County's agreement with the employee. The County makes the required statutory PEMHCA contribution as described above. Furthermore, the County will make additional contributions towards certain eligible retirees' premiums until age 65 according to the County's agreements with its various employee groups,as describe below. Retirees who have completed at least 10 cumulative years of service with the County, have accrued sick leave in excess of certain hours, and elect retiree health insurance rather than the sick leave payout option, are eligible to receive reimbursements from the County for the cost of medical, dental and vision insurance (offset bythe County's statutory contribution to PEMHCA.) Employees otherthan non-represented groups hired after June 30, 2010 will not be eligible forsick-leave buyout nor will they receive one year of County-paid health benefits after retirement. Retirees other than non-represented groups who retired on or after January 1, 2010 will be subject to a limit on County reimbursements equal to the sum of the Blue Shield HMO premium, Delta DPO and vision premiums. For BCEA-General, BCEA-SSW, BCMEA, BCCOA-General, BCCOA-Supervisory, PPOA, PPOA-Mgmt, Supervisor's Administrative Services Assistants, and Miscellaneous and Assistant Probation Officer positions within the"Assistant Department Heads and Non-Represented"group,the retiree may make an irrevocable election at the time of retirement to receive one of the following benefit options in addition to 12 months of County-paid health insurance: 1) One month of retiree-only premiums for each day of accrued sick leave at retirement; 2) One month of 2-party premiums(employee and spouse)for each 2 1/2 days in excess of 30 days accrued sick leave to cover both employee and spouse until age 65;or 3) One month of retiree-only premiums for each day of accrued sick leave until the sick leave credit is exhausted orthe retiree reaches age 65,and one month of premiums for spousal coverage for each day of accrued sick leave in excess of thirty days until the sick leave credit is exhausted or the spouse reaches age 65. For DSA General, DSA Management, Under Sheriffs, and BCPEA, the retiree will receive 12 months of County-paid retiree-only health coverage. In addition, each one day of accrued sick leave is converted to one month of retiree-only health insurance premiums and credited to an account for the retiree. Premiums of the retiree and dependents, if applicable,are deducted from the account until it is depleted, or until the retiree reaches age 65, if earlier. 82 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 8. Other Post-Employment Benefits(OPEB) (continued) Elected and appointed department heads or officials retiring in goad standing before age 65 under the provisions of the County's contract with PERS may continue to cover themselves and eligible dependents under the health plans. The County pays the full premium until age 65. In all cases, once the additional County contributions (as described above) end, the County pays the applicable PEMHCA statutory contribution for the remainder of the retiree's lifetime. Changes in Eligibility for Sick-Leave Buy-out Employees other than non-represented groups hired after June 30,2010 will not be eligible for sick-leave buyout nor will they receive one year of County-paid health benefits after retirement. Retirees other than non-represented groups who retired on or after January 1, 2010 will be subject to a limit on County reimbursements equal to the sum of the Blue Shield HMO premium, Delta DPO and vision premiums. Healthcare Premiums Blue PERS PERS PERS Delta Delta Shield Kaiser Chocie Care Select Premier Dental HMO HMO PPO PPO PPO Dental PPO Vision Basic Plan Retiree $ 964.91 $ 755.27 $ 795.57 $ 886.15 $ 727.47 $ 32.50 $ 29.90 $ 14.15 Retiree+1 1,929.82 1,510.54 1,591.14 1,772.30 1,454.94 70.20 65.10 14.15 Family 2,508.77 1,963.70 2,068.48 2,303.99 1,891.42 104.20 102.30 14.15 Medicare SuR1219mental Retiree N/A 297.23 366.38 408.04 366.38 N/A N/A N/A Retiree+1 N/A 594.46 732.76 816.08 732.70 N/A N/A N/A Family N/A 891.69 1,099.14 1,224.12 1,018.41 N/A N/A N/A The following table shows January 1, 2016 monthly PERS Health (PEMHCA) premiums for retirees within the Other Northern California region (Bay Area/Sacramento for Kaiser). Dental and vision rates in effect for 2015-16 are also included. Funding Policy As required by GASB 45, an actuary will determine the County's Annual Required Contributions (ARC) at least once every two fiscal years. The ARC is calculated in accordance with certain parameters, and includes (1) the Normal Cost for one year, and (2) a component for amortization of the total unfunded actuarial accrued liability(UAL)over a period not to exceed 30 years. GASB 45 does not require pre-funding of OPER benefits. Therefore, the County's funding policy is to continue to pay healthcare premiums for retirees as they fall due. However, the County has elected to establish a trust for the Post-Employments Benefits in April 2015. FY2015-2016 contribution of$686,869 to the trust was made on July 25,2016. 83 COUNTY OF BUTTE,CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 8. Other Post-Employment Benefits(OPEB) (continued) The Board of Supervisors reserves the authority to review and amend this funding policy from time to time, in order to ensure that the funding policy continues to best suit the circumstances of the County. Annual OPEB Cost and Net OPEB Obligation/(Asset) The following table shows the components of the County's Annual OPEB Cost for the fiscal year ended June 30, 2016, the amount actually contributed to the plan, and changes in the County's Net OPER Obligation/(Asset): Annual required acontibution(ARC)for 2015-16 7,710,808 Intereston NetOPEB Obligation 942,349 Amorti zati on a dj ustment to ARC (1,362,402) Annual OPER Cost 2015-16 7,290,755 Employer Contribution* (3,888,286) Change in Net OPEB Obligation 2015-16 3,402,469 Net OPEB Obligation 6/30/2015 23,558,715 Net OPEB Obligation 6/30/2016 26,961,184 *multi plied by the implicit subsidy factor 1.5038,see page 6 of June 30,2015 valuation report The County's Annual OPEB Cost,the percentage of Annual OPEB Cost contributed to the plan,and the Net OPEB Obligation/(Asset)for the fiscal years ended June 30,2014,2015,and 2016 are as follows: The general fund and the special revenue funds have typically been used in prior years to liquidate the net OPEB obligation. Percentage of Net OPEB Fiscal Year Annual Actual Employer Annual OPEB Obligation Ended OPES Cost Contribution Cost Contri buted (Asset) 6/30/2014 $ 5,128,273 $ 2,059,669 40.16% $ 20,888,733 6/30/2015 $ 5,073,559 $ 2,403,577 47.37% $ 23,558,715 6/30/2016 $ 7,290,755 $ 3,888,286 53.33% $ 26,961,184 84 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 8. Other Post-Employment Benefits(OPEB)(continued) Schedule of Funding Progress Projected Unit Credit UAAL as a Actual Actuarial Actuarial Unfunded Percentage Valuation Value of Accrued AAL Funded Covered ofCoverd Date Assets Liability (URAL) Ratio Payroll Payroll July 1,2011 $ $ 38,478,208 $ 38,478,208 0% $ 106,227,594 36.22% July 1,2013 $ $ 47,629,292 $ 47,629,292 0% $ 110,918,547 42,94% July 1,2015 $ $ 63,812,459 $ 63,812,459 0% $ 114,246,103 55.86% The funded status of the plan as of the most recent three actuarial valuations was as follows: Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the Annual Required Contributions of the County are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information fallowing the notes to the financial statements,presents multiyeartrend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and pian members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets,consistent with the long-term perspective of the calculations. The plan's most recent actuarial valuation was performed as of July 1, 2015. In that valuation, the Projected Unit Credit (PUC) Cost Method was used. The actuarial assumptions included a 4.5 percent investment rate of return (net of administrative expenses) and an annual healthcare cost trend rate of 8 percent initially, reduced by decrements to an ultimate rate of 5 percent after 3 years. These assumptions reflect an implicit 3 percent general inflation assumption. The County's unfunded actuarial accrued liability is being amortized as a level dollar amount on an open basis over 30 years. The remaining amortization period as of June 30, 2016 was 28 years. The County's plan is considered a single-employer plan under GASB 45. 85 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 9. Risk Management The County is exposed to various risk of loss related to torts;theft of,damage to,and destruction of assets; errors and omissions; injuries to employees;and natural disasters. The County has three risk management funds (Internal Service Funds) to consolidate the County's insurance programs that are partially self-insured. Fund revenues are primarily premium charges to other funds and are planned to equal estimated expenses resulting from self-insurance programs, liability insurance coverage in excess of the self-insured amount, and operating expenses. The primary activities of the funds consist of risk management programs related to the following: General Liability Insurance Unemployment Insurance Workers' Compensation Insurance For general liability and workers' compensation claims, the County is a participant in the California State Association of Counties (CSAC) — Excess Insurance Authority excess liability insurance program. The County maintains a self-insured retention(SIR)of$100,000 per occurrence for its general liability program and $125,000 for its workers' compensation program. The purpose of the pool is to spread the adverse effects of losses among the member agencies. The County pays an annual basic premium for excess coverage and is assessed an annual risk premium based on an actuarial review that estimates each of the program's participant's ultimate liabilities. Should the actual lasses among participants be greater than anticipated, the County will be assessed its pro rata share of that deficiency. Conversely, if the actual lasses are less than anticipated,the County will be refunded its pro rata share of the excess. Commercial insurance covers claims between $100,000 and $20,000,000 for general liability. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. The County is fully self-insured for its unemployment insurance program. Quarterly billings from the State Employment Development Department are sent to the County's claims reviewers, R.E. Harrington, Inc. After the claims are reviewed by R.E. Harrington, Inc.,they are turned over to the County for payment. It is the County's policy to accrue to the Internal Service Fund the estimated liability, as determined with the assistance of independent actuaries, for claims in cases where such amounts are reasonably determinable and where the likelihood of liability exists. All operating funds participate in the program and make payments to the insurance funds based on actuarial estimates of the amounts needed to pay prior and current year claims, and to allow accrual of estimated incurred but not reported claims. These claims liability estimates are based on the requirements of GASB Statements No. 10 and 30 and include estimate claims incurred but not yet reported as of June 30, 2016. The claims liability includes all allocated loss adjustment expenses as well as non-incremental claims adjustment expenses. Changes in the insurance funds'claims liability amount during the fiscal years ended June 30, 2015 and 2016 were as follows: 86 COUNTY OF BUTTE, CALIFORNIA NOTES TO THE BASIC FINANCIAL.STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2016 9. Risk Management(continued) Claims Current Year Claims Liability Claims and Changes Current Year Liability Fiscal Year July 1 in Estimates Claims June 30 2014-2015 $ 6,779,000 $ (3,900,547) $ 4,173,547 $ 7,052,000 2015-2016 $ 7,052,000 $ (4,708,081) $ 5,489,081 $ 7,833,000 10.Contingencies Grants The County participates in a number of grant programs funded, in whole or part, by federal, state and other sources. These programs are subject to program compliance audits by the grantors or their representatives. The audits of these programs for or including the fiscal year ended June 30, 2016, have not yet been conducted. Additionally, certain audits related to prior fiscal years have not been finalized. Accordingly, the County's compliance with applicable grant requirements will be established at some future date. The amount,if any,of expenditures which may be disallowed by the granting agencies cannot be determined at this time,although,the County expects such amounts, if any,to be immaterial. Litigation , The County is a defendant in various matters of litigation. Of these matters, management and County's legal counsel do not anticipate any material effect on the June 30,2016 financial statements. 11. Subsequent Events California State Budget The State is the source for a significant amount of Butte County's revenues. The State has adopted a balanced budget for the 2016-2017 fiscal year and the County doesn't anticipate additional state cuts. However, as in the past, if State revenue is cut midyear the County will make the necessary adjustments to address the reductions. Debt Refunding On July 1,2016,the County executed a loan with Capital one for$4,220,000. The funds were received on July 6, 2016. The proceeds were used for a current refunding of Certificates of Participation (COPS) for Neal Road Recycling and Waste Facility improvements. The COPS were issued with an average rate of 3.995%. The refunding was undertaken to reduce total debt service payments by$344,957 overthe next 6 years and resulted in an economic gain of$320,675. 87 88 CALIFORNIA Required Supplementary Information 89 COUNTY OF BUTTE, CALIFORNIA COUNTY EMPLOYEE'S RETIREMENT PLAN (Defined Benefit Pension Plan) Schedule of Changes in Net Pension Liability and Related Ratios For the Fiscal Year Ended lune 30,2016 MISCELLANEOUS PLAN 2016 2015 Total Pension Liability: Service cost $ 13,400,002 $ 13,859,395 Interest 41,926,195 40,193,350 Difference between expected and actual experience (4,927,030) - Changes in assumptions (10,024,368) - Benefit payments including refunds of employee contributions (28,002,841) (25,453,443) Net Change in Total Pension Liability 121371,958 28,599,302 Total Pension Liability- Beginning 570,307,659 541,708,357 Total Pension Liability- Ending(A) 582,679,617 570,307,659 Plan Fiduciary Net Position: Contributions- Employer 11,234,311 10,606,484 Contributions- Employee 6,686,660 6,497,335 Net investment income 10,452,870 69,463,572 Benefit payments including refunds of employee contributions (28,002,841) (25,106,484) Other changes in fiduciary net position (520,140) (346,959) Net Change in Fiduciary Net Position (149,140) 61,113,948 Plan Fiduciary Net Position- Beginning 463,172,940 402,058,992 Plan Fiduciary Net Position- Ending(B) 463,023,800 463,172,940 Plan Net Pension Liability/(Asset)-Ending(A-B) $ 119,655,817 $ 107,134,719 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 79.46% 81.21% Covered Employee Payroll 92,240,000 95,493,743 Plan Net Pension Liability/(Asset) as a Percentage of covered Employee Payroll 129.72% 112.19% Notes to Schedule: Benefit Changes:The figures above do not include any liability impactthat may have resulted from plan changes which occurred after June 30, 2013. this applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit(a.d.a.Golden Handshakes). Changes in Assumptions:There were no changes in assumptions. 90 COUNTY OF BUTTE, CALIFORNIA COUNTY EMPLOYEE'S RETIREMENT PLAN (Defined Benefit Pension Plan) Schedule of Changes in Net Pension Liability and Related Ratios For the Fiscal Year Ended lune 30,2016 SAFETY PLAN 2016 2015 Total Pension Liability: Service cost $ 4,630,445 $ 4,896,054 Interest 11,705,847 11,071,603 Difference between expected and actual experience (1,153,098) - Changes in assumptions (3,063,979) - Benefit payments including refunds of employee contributions (6,490,975) (5,952,108) Net Change in Total Pension Liability 5,628,240 10,015,549 Total Pension Liability- Beginning 158,164,947 148,149,398 Total Pension Liability- Ending(A) 163,793,187 158,164,947 Plan Fiduciary Net Position: Contributions- Employer 4,084,403 3,736,119 Contributions- Employee 1,717,710 1,692,897 Net investment income 2,751,766 1.8,471.,003 Benefit payments including refunds of employee contributions (6,490,975) (5,952,108) Other changes in fiduciary net position (141,777) - Net Change in Fiduciary Net Position 1,921,127 17,947,911 Plan Fiduciary Net Position - Beginning 124,044,353 106,096,442 Plan Fiduciary Net Position- Ending(B) 125,965,480 124,044,353 Plan Net Pension Liability/(Asset)-Ending(A-B) $ 37,827,707 $ 34,120,594 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 76.91% 78.43% Covered Employee Payroll 18,457,545 18,120,594 Plan Net Pension Liability/(Asset) as a Percentage of covered Employee Payroll 204.949/o 188.30% Notes to Schedule: Benefit Changes:The figures above do not include any liability impact that may have resulted from plan changes which occurred after.iune 30, 2013. this applies forvoluntary benefit changes as well as any offers of Two Years Additional Service Credit(a.d.a.(3olden Handshakes). Changes in Assumptions:There were no changes in assumptions. 91 COUNTY OF BUTTE, CALIFORNIA County Employee's Retirement Plan (Defined Benefit Pension Plan) Schedule of Plan Contributions For the Fiscal Year Ended June 30,2016 Employer's Actuarially Contributions in Relation Contributions Covered Contributions as a Determined to Actually Required Deficiency Employee %of Covered Contributions Contribution (Excess) Payroll Employee Payroll 2016 Miscellaneous Plan $ 11,935,872 $ (11,935,872) $ - $ 92,240,000 12.32% Safety Plan 4,084,403 (4,084,403) - 18,457,545 22.3.3% Total $ 16,020,275 $ (16,020,275) - $17.0,697,545 14.47% 2015 Miscellaneous Plan $ 11,121,405 $ (11,121,405) $ - $ 95,493,743 11.65% Safety Plan 3,736,119 (3,736,119) - 18,752,360 19.92% Total $ 14,857,524 $ (14,857,524) - $114,246,103 13.00% Notes to Required Supplementary Information For the Fiscal Year Ended June 30, 2016 The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2014 —2015 were from the June 30, 2014 public agency valuations. Actuarial Cost Method For entry age normal Amortization Method/Period For details,see June 30, 2013 Funding Valuation Report. Asset Valuation Method Actuarial Value of Assets. For details see June 30,2013 Funding Valuation Report. Inflation 2.75% Salary Increases Varies by Entry Age and Service Payroll Growth 3.00% Investment Rate of Return 7.50% Net of Pension Plan Investment and Administrative Expenses; includes Inflation Retirement Age The probabilities of Retirement are based on the 2010 CalPERS Experience Study for the period of 1997 to 2007 Mortality The probabilities of mortality are based on the 2010 CalPERS Experience Study for the period of 1997 to 2007. Pre-retirement And Post-retirement mortality rates include 5 years of projected mortality improvements using Scale AA published by the Society of Actuaries 92 COUNTY OF BUTTE, CALIFORNIA Other Post-Employment Benefits(OPER) Plan Schedule of Funding Progress For the Fiscal Year Ended June 30,2016 Schedule Of Funding Progress Projected Unit Credit UAAL as a Actual Actuarial Actuarial Unfunded Percentage Valuation Value of Accrued AAL Funded Covered of Coverd Date Assets Liability (UAAL) Ratio Payroll Payroll July 1,2011 $ $ 38,478,208 $ 38,478,208 0% $ 106,227,594 36.22% July 1,2013 $ $ 47,629,292 $ 47,629,292 0% $ 110,918,547 42.94% July 1,2015 $ $ 63,812,459 $ 63,812,459 0% $ 114,246,103 55.86% Notes to Required Supplementary Information For the Fiscal Year Ended June 30, 2016 1. This information is intended to help users assess the County's OPEB plan's status on a going- concern basis, assess progress made in accumulating assets to pay benefits when due, and make comparisons with other public employers. 93 ® C & [ | F 0 R \ | & © Major Governmental Funds 94 COUNTY OF BUTTE General Fund The General Fund is the general operations fund of the County. It accounts for all financial activities except those required to be accounted for in another fund. The accompanying Budgetary Comparison Schedule represents the primary expenditure classification of services provided by the County through the General Fund. 95