City of Santa Cruz Annual Financial Report

Management's Discussion and Analysis
As management of the City of Santa Cruz we offer readers of the City’s financial statements this
narrative overview and analysis of the financial activities of the City of Santa Cruz for the fiscal year
ended June 30, 2004. We encourage readers to consider the information presented here in conjunction
with additional information that we have furnished in our letter of transmittal, which can be found on
page i of this report.
Financial Highlights – Primary Government
• Government-Wide Highlights:
Net Assets - The assets of the City of Santa Cruz exceeded its liabilities at the close of the fiscal
year by $392.9M. Of this amount, $70.5M was reported as unrestricted net assets and may be used
to meet the government’s ongoing obligations to citizens and creditors.
Changes in Net Assets - The City’s total net assets decreased by $2.3M in fiscal year 2004.
• Fund Highlights:
Governmental Funds – Governmental funds include general, special revenue, debt service, and
capital projects funds. As of the close of fiscal year 2004, the City’s governmental funds, including
the Redevelopment Agency Fund, reported a combined ending fund balance of $37.4M, which is
a decrease of $0.3M from the prior year. Approximately 52% of this amount, or $19.3M,
represents the unreserved fund balance available for appropriation. 65% of the unreserved fund
balance, or $12.6M, has been designated for various purposes.
General Fund – Total fund balance of the General Fund on June 30, 2004 was $18.0M, a decrease of
$0.2M from the prior year. Approximately 76% of this amount, or $13.6M, was unreserved. Of
the unreserved fund balance, $7.6M, or approximately 56%, is designated for various purposes.
These include $5.6M for the city public trust, and varying amounts for other activities. The
remaining unreserved balance of $6.0M, or 44% of unreserved fund balance, is undesignated.
Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the City’s basic financial
statements. The City’s basic financial statements comprise three components: 1) government-wide
financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report
also contains other supplementary information in addition to the basic financial statements themselves.
Government-wide Financial Statements. The government-wide financial statements are designed to

provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector
business. They are comprised of the statement of net assets and statement of activities and changes in net
assets.
The statement of net assets presents information on all of the City’s assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the City is improving or deteriorating.
The statement of activities and changes in net assets presents information showing how the City's net assets
changed during the most recent fiscal year. All changes in net assets are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus,
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revenues and expenses are reported in this statement for some items that will only result in cash flows in
future fiscal periods (e.g., interest expense due but unpaid).
Both of the above government-wide financial statements distinguish functions of the City that are
principally supported by taxes and intergovernmental revenues (governmental activities) from other
functions that are intended to recover all or a significant portion of their costs through user fees and
charges (business-type activities). The governmental activities of the City include general government,
public safety, public works, parks and recreation, library, transit, social services and community and
economic development. The business-type activities of the City include the four municipal utilities:
water, wastewater, storm water, and refuse and landfill operation; and also the self-supporting golf
course and parking enterprises.
Blended Component Units – Component units are legally separate entities that meet certain criteria and
would be misleading if their data were not included in this report. This report includes two separate
legal entities in this category; The City of Santa Cruz Redevelopment Agency, and The Santa Cruz Public
Improvement Financing Corporation. In this report all component units are blended with the primary
government because the governing boards are substantively the same as the primary government, and
the component units serve the primary government exclusively.
The government-wide financial statements can be found on pages 20-23 of this report.
Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control
over resources that have been segregated for specific activities or objectives. The City, like other state
and local governments, uses fund accounting to ensure and demonstrate compliance with finance-
related legal requirements. All of the funds of the City can be divided into three categories:
governmental funds, proprietary funds, and fiduciary funds.
The fund financial statements provide detail information about each of the City’s most significant funds,
called major funds. The concept of major funds, and the determination of which are major funds, was
established by GASB 34 and replaces the concept of combining like funds and presenting them in total.
Instead, each major fund is presented individually, with all nonmajor funds summarized and presented in
a single column. Individual fund data on the nonmajor funds is presented in the form of combining
statements and schedules on pages 108 through 111 of this report.
Governmental funds. Governmental funds are used to account for essentially the same functions reported
as governmental activities in the government-wide financial statements. However, unlike the government-
wide financial statements, governmental fund statements focus on near-term inflows and outflows of
spendable resources, as well as on balances of spendable resources available at the end of the fiscal year.
Such information may be useful in evaluating a government’s near-term financing requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government-wide financial statements. By doing
so, readers may better understand the long-term impact of the government’s near-term financing
decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues,
expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison
between governmental funds and governmental activities.
The City has nine governmental funds, of which two are considered major funds for presentation
purposes. Each major fund is presented separately in the governmental fund balance sheet and in the
governmental fund statement of revenues, expenditures, and changes in fund balances for the City’s two
major funds – the General Fund and the Redevelopment Agency Fund. Data from the other seven
governmental funds are combined into a single, aggregated presentation. The basic governmental fund
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financial statements can be found on pages 28 through 30 of this report. Individual fund data for each of
these non-major governmental funds is provided in the form of combining statements on pages 108
through 111 of this report.
Proprietary Funds – The City maintains two different types of proprietary funds – enterprise funds and
internal service funds. Enterprise funds are used to report the same functions presented as business-type
activities in the government-wide financial statements. The City uses enterprise funds to account for the
four municipal utilities; water, wastewater, storm water, and refuse and landfill operation; and also the
self-supporting golf and parking enterprises. Internal service funds are used to accumulate and allocate
costs internally among the City’s various functions. The City uses internal service funds to account for
its equipment operations and maintenance, stores inventory, telecommunications, and risk management
activities. Because these services predominantly benefit governmental rather than business-type
functions, they have been included within governmental activities in the governmental-wide financial
statements.
Proprietary funds provide the same type of information as the government-wide financial statements,
only in more detail. The fund financial statements for the proprietary funds provide separate
information for the four municipal utilities; water, wastewater, storm water, and refuse and landfill
operation; and also the self- supporting golf course and parking enterprises. Conversely, the internal
service funds are combined into a single aggregated column in the proprietary fund statements.
Individual fund data for the internal service funds is provided in the form of combining statements on
pages 126-128 of this report.
The basic proprietary fund financial statements can be found on page 34-43 of this report.
Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties
outside the government. Fiduciary funds are not reflected in the government-wide financial statements
because the resources of those funds are not available to support the City’s own programs.
Notes to the Financial Statements. The notes provide additional information that is essential to a full
understanding of the data provided in the government-wide and fund financial statements. The notes to
the financial statements can be found on pages 51-92 of this report.
Other Information. In addition to the basic financial statements and accompanying notes, this report
also presents certain required supplementary information concerning the City of Santa Cruz’s progress in
funding its obligation to provide pension benefits to its employees, as well as providing a budgetary
comparison schedule for the General Fund and the Redevelopment Agency Fund. Required
supplementary information can be found on pages 94-103 of this report.
Additional budgetary schedules for the General Fund and the combining statements referred to earlier in
connection with nonmajor governmental funds and internal service funds are presented immediately
following the required supplementary information. Combining and individual statements and schedules
can be found on pages 108-128 of this report.
Government-Wide Financial Analysis
Net Assets. As noted earlier, net assets may serve over time as a useful indicator of a government’s
financial position. In the case of the City of Santa Cruz, combined net assets (governmental and
business-type activities) totaled $392.9M at the close of the fiscal year ending June 30, 2004. This is a
decrease of $2.2M or 5.7% from the previous fiscal year.
By far the largest portion of the City’s net assets (79.2%) reflects its investment in capital assets (e.g.,
land, streets, bridges, water and sewer lines, buildings, machinery, and equipment), less any related debt
used to acquire those assets that is still outstanding. The City uses these capital assets to provide
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services to citizens; consequently, these assets are not available for future spending. Although the City’s
investment in its capital assets is reported net of related debt, it should be noted that the resources
needed to repay this debt must be provided from other sources, since the capital assets themselves
cannot be used to liquidate these liabilities.
An additional portion of the City’s net assets (2.9%) represents resources that are subject to external
restrictions on how they may be used. The remaining 17.9% or $70.5M of the City’s net assets, are
“unrestricted,” and may be used to meet the government’s ongoing obligations to citizens and creditors.
City of Santa Cruz's Net Assets

June 30, 2004
(amounts expressed in $ millions)
Governmental Business-Type
Activities Activities Total
2004 2003 2004 2003 2004 2003
Current assets $ 38.9 $ 39.2 $ 59.2 $ 57.4 $ 98.1 $ 96.6
Noncurrent assets 8.8 9.8 20.5 23.0 29.3 32.8
Capital assets 149.4 149.3 245.2 244.2 394.6 393.5
Total assets 197.1 198.3 324.9 324.6 522.0 522.9
Current liabilities 11.2 11.1 10.8 10.5 22.0 21.6

Noncurrent liabilities 25.7 23.8 81.4 82.3 107.1 106.1
Total liabilities 36.9 34.9 92.2 92.8 129.1 127.7
Net assets:
Invested in capital assets,
net of related debt 136.6 136.4 174.4 168.9 311.0 305.3
Restricted 11.4 10.4 - - 11.4 10.4
Unrestricted 12.2 16.6 58.3 62.9 70.5 79.5
Total net assets $ 160.2 $ 163.4 $ 232.7 $ 231.8 $ 392.9 $ 395.2
Changes in Net Assets. The City’s net assets decreased by $2.3M or 5.7%, from the prior fiscal year. In
fiscal year 2004, City expenses, which include both governmental and business-type activities, exceeded
program revenues by $50.6M, resulting in the use of $48.3M of general revenues and $2.3M of net assets.
The City’s expenses cover a range of services. The largest expense categories in the governmental
activities were public safety, parks and recreation and general government. Further analysis is provided
within the governmental and business-type activity sections.
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City of Santa Cruz Changes in Net Assets
Fiscal Year Ending June 30, 2004
2004 2003 2004 2003 2004 2003
Revenues:
Program revenues:
Charges for services $ 21.5 $ 20.6 $ 47.2 $ 44.0 $ 68.7 $ 64.6
Operating grants and contributions 3.1 4.0 0.1 0.1 3.2 4.1
Capital grants and contributions 4.9 5.8 3.4 2.3 8.3 8.1
Total program revenues 29.5 30.4 50.7 46.4 80.2 76.8
General revenues:
Property taxes 15.8 15.1 - - 15.8 15.1
Sales and use taxes 9.1 8.3 - - 9.1 8.3
Franchise taxes 3.3 3.1 - - 3.3 3.1
Transient occupancy taxes 3.0 2.9 - - 3.0 2.9
Utility users taxes 7.7 7.6 - - 7.7 7.6
Admissions taxes 1.7 1.6 - - 1.7 1.6
Other taxes 2.5 2.0 - - 2.5 2.0
Total taxes 43.1 40.6 - - 43.1 40.6
Unrestricted grants and contributions 2.6 4.5 - - 2.6 4.5
Unrestricted investment earnings 0.4 1.1 0.7 2.4 1.1 3.5
Gain (loss) on sale of assets 0.7 - - 0.1 0.7 0.1
Miscellaneous 0.7 0.7 0.1 0.6 0.8 1.3
Total revenues 77.0 77.3 51.5 49.5 128.5 126.8
Expenses:
General government 11.5 10.4 - - 11.5 10.4
Public safety 27.1 23.7 - - 27.1 23.7
Parks and recreation 13.0 12.3 - - 13.0 12.3
Library 8.7 8.4 - - 8.7 8.4
Public works 9.6 9.8 - - 9.6 9.8
Transit 0.6 0.6 - - 0.6 0.6
Community and economic development 7.1 8.3 - - 7.1 8.3
Social services 1.8 2.0 - - 1.8 2.0
Interest and charges on long term debt 1.1 1.0 - - 1.1 1.0
Water - - 13.7 14.0 13.7 14.0
Wastewater - - 15.5 14.8 15.5 14.8
Refuse - - 14.9 14.8 14.9 14.8
Parking - - 2.5 2.2 2.5 2.2
Storm water - - 1.9 2.2 1.9 2.2
Golf course - - 1.8 1.8 1.8 1.8
Total expenses 80.5 76.5 50.3 49.8 130.8 126.3
Increase (decrease) in net assets before
extraordinary items and transfers (3.5) 0.8 1.2 (0.3) (2.3) 0.5
Extraordinary item - insurance proceeds
due to fire loss - 0.5 - - - 0.5
Transfers 0.3 0.1 (0.3) (0.1) - -
Change in net assets (3.2) 1.4 0.9 (0.4) (2.3) 1.0
Net assets, beginning of year 163.5 162.1 231.3 231.7 394.8 393.8
Prior period adjustment (Note 16) (0.1) - 0.5 - 0.4 -
Net assets, beginning of year (as restated) 163.4 162.1 231.8 231.7 395.2 393.8
Net assets - end of year $ 160.2 $ 163.5 $ 232.7 $ 231.3 $ 392.9 $ 394.8
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Governmental Activities. Governmental activities decreased the City’s net assets by $3.2M. A
comparison of the cost of services by function for the City’s governmental activities is shown below,
along with the revenues used to cover the net expenses of the governmental activities.
Governmental Activities
2004 2003
Expenses net of program revenues:
General government $ (7.2) $ (6.4)
Public safety (23.3) (20.8)
Parks and recreation (8.0) (6.9)
Library (1.0) (1.4)
Public works (2.9) (1.9)
Transit - -
Community and economic development (5.7) (5.7)
Social services (1.8) (2.0)
Interest and fiscal charges on long-term debt (1.1) (1.0)
Total expenses net of program revenues -
governmental activities (51.0) (46.1)
General revenues, extraordinary items and transfers:

General revenues:
Property taxes 15.8 15.1
Sales and use taxes 9.1 8.3
Franchise taxes 3.3 3.1
Transient occupancy taxes 3.0 2.9
Utility users taxes 7.7 7.6
Admission taxes 1.7 1.6
Other taxes 2.5 2.0
Total taxes 43.1 40.6
Unrestricted grants and contributions 2.6 4.5
Unrestricted investment earnings 0.4 1.1
Gain on sale of assets 0.7 -
Miscellaneous 0.7 0.7
Extraordinary item - gain on insurance proceeds due to fire loss - 0.5
Transfers 0.3 0.1
Total general revenues, extraordinary items
and transfers 47.8 47.5
Change in govenmental activities net assets $ (3.2) $ 1.4
Governmental Expenses. Total governmental activity expenses were $80.5M in fiscal year 2004. The
largest expenses were incurred for public safety, parks and recreation, and general government. These
expenses do not include capital outlays, which are now reflected in the City’s capital assets.
Governmental Revenues. Per GASB 34, program revenues are derived directly from the program itself
or from parties outside the reporting government’s taxpayers or citizenry. They reduce the net cost of the
function to be financed from the government’s general revenues. Total program revenues from
governmental activities were $29.5M in fiscal year 2004. Governmental program revenues derive
primarily from charges for services, which include licenses and permits, planning fees, developer fees,
recreation charges, traffic and other fines and forfeitures, charges to the Library Joint Powers Authority
for personnel services provided, and several other revenues. Program revenues under the operating
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grants and contributions category include revenues restricted for specific purposes, such as gasoline tax
and other federal, state and local grants. Program revenues in the capital grants and contributions category
also include federal, state and local grants, but are restricted specifically to be used for capital projects or
acquisitions.
General revenues are all other revenues not categorized as program revenues, and include all taxes,
unrestricted grants, contributions and investment earnings, material gains on sales of capital assets, and
other miscellaneous revenues. Total general revenues from governmental activities were $47.5M in
fiscal year 2004. Taxes of $43.1M comprised 90.7% of the City’s general revenues for fiscal year 2004. The
largest single source of general revenues received during fiscal year 2004 was $15.8M of property taxes,
or 33.2% of general revenues, followed by $9.1M of sales and use taxes, or 19.1% of general revenues.
The largest sources of other taxes are franchise, transient occupancy, utility user’s taxes, and admissions
taxes.
EXPENSES & PROGRAM REVENUES- GOVERNMENTAL ACTIVITIES FISCAL YEAR 2004

(in millions)
$30
Millions
$25
$20
Revenues
$15
Expenses
$10
$5
$0
General Public Safety Parks & Library Public Transit Community Social Interest on
Government Recreation Works Devel. Services Long Term
Debt
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REVENUES BY SOURCE- GOVERNMENTAL ACTIVITIES FISCAL YEAR 2004
Other General
Revenues, 2%
Unrestricted Grants and
Contributions, 3%
Other Taxes, 3% Charges for Service,
29%
Admission Tax, 2%
Utility Users Tax, 10%
Transient Occupancy
Tax, 4%
Oper.Grants &
Contributions, 4%
Franchise Taxes, 4%
Sales & Use Taxes,
12%
Capital Grants &
Property Taxes, 21% Contributions, 6%
Business Type Activities. Net assets for business-type activities were $232.7M, an increase of $0.9M
from the prior fiscal year. Total program revenues for business-type activities were $50.7M. The largest
program revenues were charges for services of $47.2M. Other program revenues included operating
grants and contributions of $0.1M, and capital grants and contributions of $3.4M. Total expenses for the
business-type activities were $50.3M during fiscal year 2004.
EXPENSES & PROGRAM REVENUES- BUSINESS TYPE ACTIVITIES FISCAL YEAR 2004
(in millions)
$18
Millions
$16
$14
$12
$10
$8
$6
$4
$2
$-
Water Wastewater Refuse Parking Storm Water Golf Course
Revenues Expenses
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REVENUES BY SOURCE- BUSINESS TYPE ACTIVITIES FISCAL YEAR 2004
General Revenues,
1.6% Capital Grants &
Contributions, 6.5%
Oper. Grants &

Contributions, 0.3%
Charges for Service,

91.6%
Financial Analysis of Individual Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-
related legal requirements.
Governmental Funds - The focus of the City’s governmental funds is to provide information on near-
term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the
City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of
a government’s net resources available for spending at the end of the fiscal year.
As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund
balances of $37.4M. Approximately $19.3M of this amount constitutes unreserved fund balance, which is
available for spending at the government’s discretion. It should, however, be noted that 65% of the
unreserved fund balance, or $12.6M, has been designated for various purposes, such as debt service,
capital projects, public art, police programs and the City Public Trust, leaving $6.7M unreserved and
undesignated. The remaining fund balance of $18.1M is reserved to indicate that it is not available for
spending because it has already been legally committed.
General Fund – Total fund balance of the General Fund on June 30, 2004 was $18.0M, a decrease of
$0.2M from the prior year. Approximately 75.6% of this amount, or $13.6M, was unreserved. $7.6M, or
56.2% of the unreserved fund balance has been designated for specific uses. These include $5.6M for the
City Public Trust, and varying amounts for other activities, such as unemployment insurance, housing,
parks and recreation programs, and equipment and facilities maintenance. The remaining unreserved
balance of $6.0M, or 43.8% of unreserved fund balance, is undesignated.
As a measure of the general fund’s liquidity, it may be useful to compare unreserved fund balance, the
undesignated portion of the unreserved fund balance, and total fund balance to total fund expenditures.
Unreserved fund balance represents 22.7% of total general fund expenditures, including transfers out.
Unreserved and undesignated fund balance represents 10.0%, and total fund balance represents 30.1% of that
same amount.
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The 10% percent of total expenditures including transfers out that is represented by the undesignated,
unreserved fund balance is the City Council’s targeted minimum reserve level of 10% of the operating
budget for the General Fund.
Redevelopment Agency Fund – The City of Santa Cruz Redevelopment Agency is responsible for
redevelopment of areas identified under the Community Redevelopment Law as being blighted. The
Agency’s operations are funded primarily by the issuance of debt, which is expected to be repaid out of
property tax increment revenue generated by increases in property assessed values in the redevelopment
areas.
At the end of fiscal year 2004, the total fund balance of the Redevelopment Agency Fund was $11.0M, an
increase of $1.8M from the prior year, or 19.3%. Of that amount, $7.0M is reserved to indicate that it is
not available for spending because it has already been legally committed. The remainder of the
unreserved fund balance of $4.0M is designated for either debt service or capital projects.
The Redevelopment Agency Fund had revenues of $8.3M, including $8.0M of property tax increment
revenue. Expenditures in this fund amounted to $6.6M.
Proprietary Funds. The City’s proprietary funds provide the same type of information found in the
government-wide financial statements, but in more detail. They include both enterprise funds and
internal service funds. For the government-wide financial statements, the internal service funds are
consolidated with governmental activities, and the enterprise funds comprise the business-type
activities.
As discussed in the business-type activities section previously, the City’s net assets increased by $0.9M
as a result of operations in the enterprise funds. Net assets in the internal service funds decreased by
$5.2M. Substantial increases in claims payable in the Risk Management fund were the primary cause of
this decrease.
General Fund Budgetary Highlights
The final amended general fund budget, including transfers out and advances, totaled $65.5M, and
included amendments to the original budget resulting in a $0.4M decrease in operating expenditure
appropriations, a $0.3M increase in appropriations for transfers out, and a $0.5M increase in advances to
other funds. The principal amendments can be summarized as follows:
Operating Appropriations Reductions.

• $915K reduction to appropriations to implement Phase III budget reductions.
• $83K reduction to implement Phase IV budget reductions.
• $194K reduction for Library JPA personnel budget reductions.
• $147K reduction in social services program allocations.
• $41K reduction for police equipment moved to Police special revenue fund.
• $19K of other miscellaneous reductions.
Total operating appropriations reductions – ($1.399M)
Operating Appropriations Increases.

Appropriations Increases Offset by Grant Revenues.
• $21K for a FEMA grant used to purchase firefighting equipment.
• $27K for a Youth Development Alliance Grant for teen center staffing, computer equipment and
facility upgrade.
• $14K for OTS Seatbelt Mini-grant.
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• $61K for Homeland Security Overtime Grant.
• $70K for Jobs Housing Balance Incentive Program Grant to fund furnishings and equipment for
the new Beach Flats Community Center.
• $50K for expenditures related to an underage drinking grant.
• $20K to fund expenditures related to a Juvenile Accountability Incentive block grant for Beach
Flats.
• $39K for expenditures related to a Homeland Security equipment grant.
• $31K for expenditures related to a First Five grant.
Grant-related appropriations increases - $333K
Other Operating Appropriations Increases.

• $77K for implementation of a downtown permit parking program.
• $30K for police personnel services and structured activity at the Town Clock on New Year’s Eve.
• $15K for public opinion survey testing voter support for revenue ballot measure.
• $48K to fund the school crossing guard program from November 2003- June 2004.
• $30K to fund a utility users tax audit.
• $78K to fund special election costs.
• $20K to fund the beach shuttle program funded by the Storm Water enterprise fund.
• $23K for equipment needed to implement an automated time-keeping system.
• $106K to fund personnel cost overruns in the Fire Department.
• $37K to fund professional services for code enforcement funded by fines.
• $6K to appropriate parks and recreation donations.
• $125K from amount designated as the City Public Trust to fund the DeAnza Mobile Home
Hardship Fund.
• $11K from amount designated as the City Public Trust to fund the emergency winter shelter
program.
Total other operating appropriations increases - $606K
Total operating appropriations increases - $939K
Net operating appropriations reductions - ($460K)
Operating Transfers and Long-Term Advances Appropriations Increases.

• $47K to the General Capital Improvement capital projects fund for a street maintenance project
and public art costs.
• $292K to the Housing and Community Development special revenue fund from the housing in-
lieu reserve to fund a matching requirement of an Affordable Housing Trust grant.
• $530K from amounts designated as the City Public Trust as a long-term advance to the Housing
and Community Development special revenue fund for an additional match to the Affordable
Housing Trust grant.
Total operating transfers and long-term advances appropriations increases - $869K
These appropriations were offset by additional estimated revenue and transfers in of $1.1M.
Capital Assets and Debt Administration
Capital Assets. The City’s investment in capital assets for its governmental and business-type activities
as of June 30, 2004, amounts to $394.7M, net of accumulated depreciation of $228.6M. This investment in
capital assets includes land, land improvements, infrastructure, buildings, machinery and equipment,
lease improvements, software, and construction in progress. Infrastructure assets are items that are
normally immovable and of value only to the City such as roads, bridges, streets and sidewalks,
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drainage systems, lighting systems and similar items. The total additions to the City’s investment in
capital assets for the current fiscal year, after restatements and deletions, were $1.2M, net of accumulated
depreciation.
Major capital asset additions during the current fiscal included the following:
• Construction of the Nueva Vista Community Center for $735K

• East Cliff Bridge Seismic Retrofit for $525K.
• River Street improvements for street lighting, storm drains, and traffic lights for $1.0M.
• Potrero Street curb and gutter improvements for $2.1M.
• Mission Street undergrounding of street lighting for $500K.
• Water distribution system pipe replacement for $1.7M .
• Wastewater collection system pipe repair for $753K
• Water reservoir roof partial reconstruction for $2.2M.
• Wastewater facility odor control improvements for $2.0M.
Additional information on the City’s capital assets can be found in Note 5 on pages 69-72 of this report.
Capital Assets
(net of depreciation)
Governmental Activities Business-Type Activities
June 30 June 30 Total
2004 2003 2004 2003 2004 2003
Land $ 43.4 $ 42.9 $ 11.9 $ 11.9 $ 55.3 $ 54.8

Construction in progress 8.6 9.5 9.0 8.2 17.6 17.7
Land improvements 1.3 1.0 0.8 0.9 2.1 1.9
Infrastructure 67.7 67.5 98.9 95.4 166.6 162.9
Buildings 24.3 23.7 114.2 117.2 138.5 140.9
Machinery and equipment 3.0 3.6 10.0 10.3 13.0 13.9
Lease improvements 0.6 0.6 0.1 0.1 0.7 0.7
Software 0.5 0.4 0.3 0.2 0.8 0.6
Totals $ 149.4 $ 149.2 $ 245.2 $ 244.2 $ 394.6 $ 393.4
Debt Administration.
Long Term Debt - At the end of the current fiscal year, the City had $117.9M in long term debt
outstanding compared to $116.7M last year, a 1.0% net increase. Decreases in bonds, notes, loans and
leases payable due to retirement of debt were offset by increases in claims and judgments payable and
landfill closure costs liability. The debt associated with governmental activities increased by 7.9% from
$28.5M to $30.7M. Business-type activity debt was reduced by 1.2% from $88.2M to $87.2M. Major
increases in debt during the year include the issuance of certificates of participation to fund golf course
improvements ($5.3M) in the Golf Course enterprise fund, and an increase in workers’ compensation
claims liability of $3.7M.
The City currently has $7.2M in outstanding general obligation debt. This debt was approved by voters
in November 1998 and authorized an ad valorem tax override for acquisition of open space property,
improvements to fire stations, acquisition of a fire administrative headquarters building, and
construction of a community park. This tax override is currently assessed at $9 per $100,000 of assessed
value. The largest single debt obligation of the City is a note payable to the State of California for the
construction of secondary treatment improvements at the City's wastewater treatment plant. As of June
30, 2004 the outstanding balance on this note was $41.2M. The City has a corresponding note receivable
14
from the County of Santa Cruz for $19.4M. This note receivable relates to the County’s obligation
related to the construction of the treatment plant improvements. The chart below illustrates the changes
in bonds, notes, loans and leases payable for the year ending June 30, 2004.
Bonds, Notes, Loans and Leases Payable

Governmental Activities Business-Type Activities
June 30 June 30 Total
2004 2003 2004 2003 2004 2003
Certificates of participation $ 4.5 $ 4.6 $ 29.8 $ 28.0 $ 34.3 $ 32.6

Revenue bonds payable - - 4.8 5.0 4.8 5.0
General obligation bonds 7.2 7.2 - - 7.2 7.2
Notes payable 1.5 1.5 42.6 44.9 44.1 46.4
Notes payable-County-RDA 0.1 - - - 0.1 -
Tax allocation bonds payable 2.7 2.9 - - 2.7 2.9
Capital lease obligations 1.7 2.5 4.0 4.6 5.7 7.1
Other long-term liabilities 1.0 1.0 - - 1.0 1.0
Totals $ 18.7 $ 19.7 $ 81.2 $ 82.5 $ 99.9 $ 102.2
The City of Santa Cruz also has significant liabilities for claims and judgments, compensated absences
(accrued vacation pay), and landfill closure and post closure costs. The amounts and changes of these
liabilities are shown below.
Claims and Judgments, Compensated Absences, and Landfill Closure Costs Payable
June 30, 2004
June 30 Increase Percent Due in less Due in more
2004 2003 (Decrease) Change than one year than one year
Workers compensation claims payable $ 8.7 $ 5.0 $ 3.7 74.0% $ 1.7 $ 7.0
Liability claims payable 1.0 1.4 (0.4) -28.6% 0.3 0.7
Dental and vision insurance claims 0.1 0.1 - 0.0% 0.1 -
Total claims and judgments 9.8 6.5 3.3 50.8% 2.1 7.7
-
Compensated absences 2.9 3.0 (0.1) -3.3% 1.9 1.0
Closure and post closure landfill costs 5.3 5.0 0.3 6.0% - 5.3
Totals $ 18.0 $ 14.5 $ 3.5 24.1% $ 4.0 $ 14.0
Additional information on the City of Santa Cruz’s long term debt can be found in Note 6 to the financial
statements.
Economic Climate
The City of Santa Cruz, and Santa Cruz County for that matter, is closely tied to the regional economy of
the nine-county San Francisco Bay Area and to Silicon Valley in particular. Fiscal Year 2004 showed
signs of recovery at the national level, along with the Bay Area and Silicon Valley. Local private
employers include a diverse array of manufacturing, business services, retail, hotel and food services,
and biotechnology companies. In addition to the local private employers, the local economy also
benefits from the University of California Santa Cruz. The University is a major employer, and has
potential spin-off benefits from federal and state funded scientific research ventures including
biomedical research, technology research, and adaptive optics.
15
The state, and the bay area in particular, experienced modest growth in jobs, personal income, and
tourism in 2004 and the economy is expected to continue to improve during 2005, albeit modestly.
However, the bay area regional economic opportunities and challenges including continued job growth,
housing prices, interest rates, state and national economic issues will, of course, moderate the rate of
improvement.
Requests for Information
This financial report is designed to provide a general overview of the City’s finances for all of its citizens,
taxpayers, customers, investors and creditors. Questions concerning any of the information provided in
this report or requests for additional information should be addressed to the City of Santa Cruz, Finance
Department, 809 Center Street, Room 8, Santa Cruz, CA 95060.
16
BASIC FINANCIAL STATEMENTS
17
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18
GOVERNMENT-WIDE FINANCIAL STATEMENTS
19
City of Santa Cruz
Statement of Net Assets
June 30, 2004
Primary Government
ASSETS
Current assets:
Cash and cash equivalents $ 26,823,795 $ 38,411,240 $ 65,235,035
Restricted cash and cash equivalents 1,429,934 9,025,707 10,455,641
Restricted investments 64,492 1,528,191 1,592,683
Interest receivable 455,154 850,969 1,306,123
Taxes receivable 3,288,111 - 3,288,111
Accounts receivable - net 1,793,400 5,392,949 7,186,349
Short-term internal balances (521) 521 -
Due from other governments 3,312,703 2,142,780 5,455,483
Notes receivable - due within one year 210,895 472,936 683,831
Loans receivable - due within one year 91,728 - 91,728
Intergovernmental receivable - due within one year - 1,060,118 1,060,118
Prepaid items 142,020 65,013 207,033
Inventories 99,463 228,389 327,852
Deposits 1,188,478 - 1,188,478
Total current assets 38,899,652 59,178,813 98,078,465
Noncurrent assets:
Notes receivable - due in more than one year 7,708,815 1,013,736 8,722,551
Loans receivable - due in more than one year 1,060,140 - 1,060,140
Intergovernmental receivable - due in more than one year - 18,370,380 18,370,380
Deferred charges - 1,154,247 1,154,247
Long-term internal balances 34,285 (34,285) -
Capital assets:
Land 43,391,660 11,939,799 55,331,459
Land improvements 2,322,108 1,236,496 3,558,604
Infrastructure 160,705,554 164,722,864 325,428,418
Buildings 31,843,990 159,392,371 191,236,361
Machinery and equipment 9,225,617 18,667,397 27,893,014
Lease improvements 724,114 70,000 794,114
Software 1,021,592 418,237 1,439,829
Construction in progress 8,582,123 9,027,793 17,609,916
Total capital assets 257,816,758 365,474,957 623,291,715
Less accumulated depreciation (108,381,923) (120,258,358) (228,640,281)
Total capital assets, net 149,434,835 245,216,599 394,651,434
Total noncurrent assets 158,238,075 265,720,677 423,958,752
Total assets 197,137,727 324,899,490 522,037,217
See accompanying Notes to Basic Financial Statements.

20
City of Santa Cruz
Statement of Net Assets, Continued
June 30, 2004
Primary Government
LIABILITIES
Current liabilities:
Accounts payable and other current liabilities $ 4,442,737 $ 3,520,177 $ 7,962,914
Intergovernmental payable 323,072 - 323,072
Interest payable 324,574 1,438,808 1,763,382
Deferred revenue 969,705 50,597 1,020,302
Deposits payable 136,664 29,985 166,649
Claims and judgments payable - due within one year 2,188,200 - 2,188,200
Compensated absences payable - due within one year 1,417,740 522,260 1,940,000
Bonds, notes, loans and leases payable - due within one year 1,415,143 5,268,329 6,683,472
Total current liabilities 11,217,835 10,830,156 22,047,991
Noncurrent liabilities:
Claims and judgments payable - due in more than one year 7,644,100 - 7,644,100
Compensated absences payable - due in more than one year 708,869 261,130 969,999
Bonds, notes, loans and leases payable - due in more than one year 17,331,855 75,915,771 93,247,626
Landfill closure costs - 5,230,144 5,230,144
Total noncurrent liabilities 25,684,824 81,407,045 107,091,869
Total liabilities 36,902,659 92,237,201 129,139,860
NET ASSETS
Invested in capital assets, net of related debt 136,556,019 174,395,150 310,951,169

Restricted for:
Capital projects 4,262,875 - 4,262,875
Debt service 4,075,939 - 4,075,939
Public safety 108,835 - 108,835
Parks and recreation 86,623 - 86,623
Community and economic development 2,877,339 - 2,877,339
Unrestricted 12,267,438 58,267,139 70,534,577
Total net assets $ 160,235,068 $ 232,662,289 $ 392,897,357
Assets - Liab.& Net Assets $ - $ - $ -
Bal. Sheet Net Assets - IS Net Assets $ - $ - $ -

21
City of Santa Cruz
Statement of Activities and Changes in Net Assets
For the year ended June 30, 2004
Program Revenues
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Total
Primary government:
Governmental activities:
General government $ 11,451,699 $ 3,938,389 $ 129,711 $ 185,000 $ 4,253,100
Public safety 27,054,407 2,760,629 903,233 68,553 3,732,415
Parks and recreation 13,022,089 3,956,257 287,182 795,067 5,038,506
Library 8,697,195 7,672,089 - - 7,672,089
Public works 9,618,748 3,083,205 227,944 3,471,877 6,783,026
Transit 588,183 - 588,183 - 588,183
Community and economic development 7,140,903 110,889 1,029,108 344,260 1,484,257
Social services 1,803,125 - - - -
Interest and fiscal charges
on long-term debt 1,126,311 - - - -
Total governmental activities 80,502,660 21,521,458 3,165,361 4,864,757 29,551,576
Business-type activities:
Water 13,707,644 15,687,800 1,681 432,223 16,121,704
Wastewater 15,456,161 11,664,391 113,474 892,468 12,670,333
Refuse 14,924,093 14,583,240 23,360 62,721 14,669,321
Parking 2,471,710 2,478,911 - 4,750 2,483,661
Storm water 1,956,563 862,150 - 1,955,711 2,817,861
Golf course 1,811,128 1,933,684 - 43,128 1,976,812
Total business-type activities 50,327,299 47,210,176 138,515 3,391,001 50,739,692
Total primary government $ 130,829,959 $ 68,731,634 $ 3,303,876 $ 8,255,758 $ 80,291,268
General Revenues:
Taxes:
Property taxes
Sales and use taxes
Franchise taxes
Transient occupancy taxes
Utility users taxes
Admission taxes
Other taxes
Total taxes
Unrestricted grants and contributions
Unrestricted investment earnings
Gain (loss) on sale of assets
Miscellaneous
Transfers
Total general revenues and transfers
Change in net assets
Net assets - beginning of year, as restated (Note 16)
Net assets - end of year
22
Net (Expense) Revenue
and Changes in Net Assets
$ (7,198,599) $ - $ (7,198,599)
(23,321,992) - (23,321,992)
(7,983,583) - (7,983,583)
(1,025,106) - (1,025,106)
(2,835,722) - (2,835,722)
- - -
(5,656,646) - (5,656,646)
(1,803,125) - (1,803,125)
(1,126,311) - (1,126,311)
(50,951,084) - (50,951,084)
- 2,414,060 2,414,060
- (2,785,828) (2,785,828)
- (254,772) (254,772)
- 11,951 11,951
- 861,298 861,298
- 165,684 165,684
- 412,393 412,393
(50,951,084) 412,393 (50,538,691)
15,792,225 - 15,792,225
9,084,026 - 9,084,026
3,329,454 - 3,329,454
3,016,463 - 3,016,463
7,638,926 - 7,638,926
1,724,330 - 1,724,330
2,480,973 - 2,480,973
43,066,397 - 43,066,397
2,565,897 250 2,566,147
437,672 717,261 1,154,933
716,218 (11,712) 704,506
679,168 108,532 787,700
334,346 (334,346) -
47,799,698 479,985 48,279,683
(3,151,386) 892,378 (2,259,008)
163,386,454 231,769,911 395,156,365
$ 160,235,068 $ 232,662,289 $ 392,897,357
23
24
FUND FINANCIAL STATEMENTS
25
26
Governmental Fund Financial Statements
General Fund - The General Fund is used to account for sources and uses of financial resources traditionally
associated with governments, and which are not required to be accounted for in another fund.
Redevelopment Agency Fund - The Redevelopment Agency fund is used to account for all the activities of the
City of Santa Cruz Redevelopment Agency. This includes the accumulation of resources for and the payment
of interest and principal on debt issued to finance redevelopment activities, and general redevelopment
operations.
Other Governmental Funds - Other Governmental funds is the aggregate of all the non-major governmental
funds.
27
City of Santa Cruz
Balance Sheet
Governmental Funds
June 30, 2004
Major Funds Other Total

General Redevelopment Governmental Governmental
Fund Agency Funds Funds
ASSETS
Cash and cash equivalents $ 12,932,034 $ 7,286,389 $ 4,922,952 $ 25,141,375
Restricted cash and cash equivalents - 491,033 878,415 1,369,448
Restricted investments - 64,492 - 64,492
Interest receivable 78,486 72,225 286,028 436,739
Taxes receivable 2,518,907 251,767 517,437 3,288,111
Accounts receivable - net 745,175 24,941 235,112 1,005,228
Due from other governments 443,292 - 2,869,411 3,312,703
Due from other funds 73,315 - 7 73,322
Prepaid items 134,852 - 2,398 137,250
Deposits 200,973 - - 200,973
Notes receivable - net 2,658,942 4,064,512 1,196,256 7,919,710
Loans receivable - net - - 1,151,868 1,151,868
Advances to other funds 1,539,131 194,565 - 1,733,696
Total assets $ 21,325,107 $ 12,449,924 $ 12,059,884 $ 45,834,915
LIABILITIES AND FUND BALANCES

Liabilities:
Accounts payable and other current liabilities $ 2,587,366 $ 327,948 $ 1,233,981 $ 4,149,295
Due to other funds 187,109 - 24,630 211,739
Intergovernmental payable - - 323,072 323,072
Deferred revenue 462,614 24,941 1,426,591 1,914,146
Deposits payable 97,064 39,600 - 136,664
Advances from other funds - 1,046,611 652,800 1,699,411
Total liabilities 3,334,153 1,439,100 3,661,074 8,434,327
Fund Balances:
Reserved 4,388,586 7,023,267 6,668,015 18,079,868
Unreserved, designated, reported in:
General fund 7,638,171 - - 7,638,171
Redevelopment Agency fund 3,987,557 - 3,987,557
Special revenue funds - - 509,404 509,404
Debt service funds - - 457,945 457,945
Unreserved, undesignated, reported in:
General fund 5,964,197 - - 5,964,197
Special revenue funds - - 2,207,906 2,207,906
Capital projects funds - - (1,444,460) (1,444,460)
Total fund balances 17,990,954 11,010,824 8,398,810 37,400,588
Total liabilities and fund balances $ 21,325,107 $ 12,449,924 $ 12,059,884 $ 45,834,915

28
City of Santa Cruz
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Assets
June 30, 2004
Total Fund Balances - All Governmental Funds $ 37,400,588
Amounts reported for Governmental Activities in the Statement of Net Assets

were different because:
Capital assets used in governmental activities are not current financial

resources. Therefore, they are not reported in the Governmental Funds Government-
Balance Sheet. Except for the internal service funds reported below, the Wide Statement Internal Service
capital assets were adjusted as follows: of Net Assets Funds
Non-depreciable $ 51,973,783 $ - 51,973,783
Depreciable, net 97,461,052 (342,194) 97,118,858
Total capital assets $ 149,434,835 $ (342,194) 149,092,641
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. (324,574)
Internal Service Funds are used by management to charge the costs of certain
activities, such as insurance and equipment management, to individual
funds. The assets and liabilities of the Internal Service Funds are included in
governmental activities in the Government-Wide Statement of Net Assets.
Equipment Operations Fund 251,201
Stores Services Fund 175,682
Telecommunications Fund 414,031
Risk Management Fund (6,919,775)
Total internal service funds (6,078,861)
Other long-term assets are not available to pay for current-period

expenditures and, therefore, are deferred in the funds. 944,441
Long-term liabilities were not due and payable in the current period.
Therefore, they were not reported in the Governmental Funds Balance Sheet. Government-
Except for the internal service funds reported above, the long-term liabilities Wide Statement Internal Service
were adjusted as follows. of Net Assets Funds
Compensated absences payable - due within one year $ (1,417,740) $ 23,651 (1,394,089)
Compensated absences payable - due in more than one year (708,869) 11,825 (697,044)
Bonds, notes, loans and leases payable - due within one year (1,415,143) 25,663 (1,389,480)
Bonds, notes, loans and leases payable - due in more than one year (17,331,855) 13,301 (17,318,554)
Total long-term liabilities $ (20,873,607) $ 74,440 (20,799,167)
Net Assets of Governmental Activities $ 160,235,068

29
City of Santa Cruz
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
Major Funds
Other Total
General Redevelopment Governmental Governmental
Fund Agency Funds Funds
REVENUES:
Taxes $ 31,696,322 $ 8,008,622 $ 2,824,812 $ 42,529,756
Licenses and permits 529,649 - - 529,649
Intergovernmental 3,745,601 - 6,512,513 10,258,114
Charges for services 16,865,754 - 325,619 17,191,373
Fines and forfeitures 1,799,557 - 6,177 1,805,734
Use of money and property 2,086,163 207,607 51,937 2,345,707
Other revenues 418,764 94,314 78,934 592,012
Total revenues 57,141,810 8,310,543 9,799,992 75,252,345
EXPENDITURES:
General government 8,967,025 - - 8,967,025
Public safety 24,647,937 - 195,826 24,843,763
Parks and recreation 9,721,229 - - 9,721,229
Library 8,528,577 - - 8,528,577
Public works 3,989,048 - 550,144 4,539,192
Transit - - 588,183 588,183
Community and economic development 71,949 5,449,617 810,590 6,332,156
Social services 1,656,875 - 146,250 1,803,125
Capital outlay 1,251,162 53,495 8,248,516 9,553,173
Debt service:
Principal 295,835 832,589 590,513 1,718,937
Interest and fiscal charges 68,575 290,773 492,373 851,721
Total expenditures 59,198,212 6,626,474 11,622,395 77,447,081
REVENUES OVER (UNDER) EXPENDITURES (2,056,402) 1,684,069 (1,822,403) (2,194,736)
OTHER FINANCING SOURCES (USES):

Proceeds from asset disposition 756,823 - - 756,823
Transfers in 1,687,534 100,000 1,456,812 3,244,346
Transfers out (602,164) - (1,537,590) (2,139,754)
Total other financing sources (uses) 1,842,193 100,000 (80,778) 1,861,415
Net change in fund balances (214,209) 1,784,069 (1,903,181) (333,321)
FUND BALANCES:
Beginning of year 15,966,948 9,226,755 10,297,895 35,491,598
Prior period adjustment (Note 16) 2,238,215 - 4,096 2,242,311
Beginning of the year, as restated 18,205,163 9,226,755 10,301,991 37,733,909
End of year $ 17,990,954 $ 11,010,824 $ 8,398,810 $ 37,400,588
30
City of Santa Cruz
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes
in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Assets
Net Change in Fund Balances - All Governmental Funds $ (333,321)
Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were
different because:
Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of
Activities and Changes in Net Assets, the cost of those assets is allocated over their estimated useful lives as
depreciation expense. This was the amount of capital assets recorded in the current period. 7,410,171
Depreciation expense on capital assets was reported in the Government-Wide Statement of Activities and
Changes in Net Assets, but they did not require the use of current financial resources. Therefore, depreciation
expense was not reported as expenditures in governmental funds, except for the internal service funds
amount of $164,049 which are reported below. (6,262,588)
The net effect of transactions involving the deletions to capital assets is to decrease net assets. (834,878)
Revenues in the statement of activities that do not provide current financial resources are not reported as
revenues in the funds. 944,441
Some expenses reported in the Government-Wide Statement of Activities do not require the use of current
financial resources and, therefore, are not reported as expenditures in governmental funds. 151,178
Repayment of principal was an expenditure in governmental funds, but the repayment reduced long-term
liabilities in the Government-Wide Statement of Net Assets.
Long-term debt repayments 1,225,690
Certain payments on contractual obligations were classified as short-term principal repayments (debt service)
in the governmental funds, but are reclassified as "Community and economic development" expense in the
Government-Wide Statement of Activities and Changes in Net Assets. 493,247
Debt service principal payments were reclassified as "Community and economic development" expense in the
Government-Wide Statement of Activities and Changes in Net Assets. (493,247)
Accrued but unpaid and accreted interest on long-term debt was reported in the Government-Wide Statement
of Activities and Changes in Net Assets, but did not require the use of current financial resources. Therefore, it
was not reported as an expenditure in the governmental funds. The following amount represents the change
in accrued interest from the prior year. (271,807)
Internal service funds were used by management to charge the costs of certain activities, such as insurance and
equipment management, to individual funds. The net revenue of the internal service funds was reported with
governmental activities. (5,180,272)
Change in Net Assets of Governmental Activities $ (3,151,386)

31
32
Proprietary Fund Financial Statements
Water - Accounts for the activities of the City's water utility, which provides water delivery services to the
residents of the City and some residents of the County.
Wastewater - Accounts for the activities of the City's wastewater utility, which provides wastewater
collection and treatment services to the residents of the City and some residents of the County.
Refuse - Accounts for the activities of the City's refuse utility, which provides refuse pick-up services,
recycling services, and a sanitary landfill for residents of the City.
Parking - Accounts for the activities of the Downtown Parking District, which provides parking facilities in
the downtown area.
Storm Water - Accounts for storm water utility fees on properties within the City limits. These fees provide
funding for flood control improvements associated with the U.S. Army Corps of Engineers San Lorenzo River
Flood Control project, storm water pollution prevention programs, and measures to comply with the U.S.
Environmental Protection Agency Non-Point Pollution Discharge Emissions Standards Program (NPDES).
Golf Course - Accounts for the activities of the Delaveaga Golf Course, which provides recreational facilities
to the public.
Internal Service Funds - These funds are used to provide goods and services by one department or agency to
other departments or agencies of the City on a cost reimbursement basis.
33
City of Santa Cruz
Statement of Net Assets
Proprietary Funds
June 30, 2004
Major Funds
Water Wastewater Refuse Parking

ASSETS
Current assets:
Cash and cash equivalents $ 20,423,310 $ 7,654,663 $ 6,236,451 $ 2,176,297
Restricted cash and cash equivalents 82,352 504,357 4,879,053 199
Restricted investments - - 347,295 519,452
Interest receivable 165,811 555,943 64,265 28,825
Accounts receivable - net 3,441,800 887,655 908,564 21,418
Due from other governments 33,764 733,632 - -
Notes receivable - due within one year 362,500 110,436 - -
Intergovernmental receivable - due within one year - 1,060,118 - -
Due from other funds - 521 - -
Prepaid items 20,946 14,743 22,827 2,917
Inventories 228,389 - - -
Deposits - - - -
Total current assets 24,758,872 11,522,068 12,458,455 2,749,108
Noncurrent assets:
Notes receivable - due in more than one year 793,158 220,578 - -
Intergovernmental receivable - due in more than one year - 18,370,380 - -
Advances to other funds 37,480 122,800 - -
Deferred charges - 97,642 403,509 232,059
Capital assets:
Land 3,658,840 1,331,330 98,575 4,979,102
Land improvements 71,900 808,396 - 266,200
Infrastructure 46,149,261 49,980,385 18,938,549 1,189,967
Buildings 4,811,278 130,676,321 2,506,636 20,398,375
Machinery and equipment 5,630,172 2,779,124 9,613,282 123,698
Lease improvements - 70,000 - -
Software 183,106 125,861 99,336 9,934
Construction in progress 6,129,851 907,896 162,965 47,122
Total capital assets 66,634,408 186,679,313 31,419,343 27,014,398
Less accumulated depreciation (28,031,142) (60,400,302) (15,485,402) (6,049,939)
Total capital assets, net 38,603,266 126,279,011 15,933,941 20,964,459
Total noncurrent assets 39,433,904 145,090,411 16,337,450 21,196,518
Total assets 64,192,776 156,612,479 28,795,905 23,945,626

34
Major Funds Governmental
Activities
Internal
Storm Water Golf Course Total Service Funds
$ 1,462,453 $ 458,066 $ 38,411,240 $ 1,682,420

136 3,559,610 9,025,707 60,486
500,763 160,681 1,528,191 -
25,170 10,955 850,969 18,415
37,720 95,792 5,392,949 788,172
1,375,384 - 2,142,780 -
- - 472,936 -
- - 1,060,118 -
- - 521 187,102
184 3,396 65,013 4,770
- - 228,389 99,463
- - - 987,505
3,401,810 4,288,500 59,178,813 3,828,333
- - 1,013,736 -
- - 18,370,380 -
- - 160,280 -
258,954 162,083 1,154,247 -
8,822 1,863,130 11,939,799 -

- 90,000 1,236,496 -
48,464,702 - 164,722,864 -
- 999,761 159,392,371 -
- 521,121 18,667,397 1,010,887
- - 70,000 -
- - 418,237 336,296
1,478,876 301,083 9,027,793 -
49,952,400 3,775,095 365,474,957 1,347,183
(9,120,950) (1,170,623) (120,258,358) (1,004,989)
40,831,450 2,604,472 245,216,599 342,194
41,090,404 2,766,555 265,915,242 342,194
44,492,214 7,055,055 325,094,055 4,170,527
(Continued)
35
City of Santa Cruz
Statement of Net Assets, Continued
Proprietary Funds
June 30, 2004
Major Funds

LIABILITIES
Accounts payable and other current liabilities $ 1,633,152 $ 1,180,506 $ 351,064 $ 115,574
Due to other funds - - - -
Interest payable 8,658 1,106,349 165,458 52,808
Deferred revenue 29,500 - 21,097 -
Deposits payable 10,605 - - 19,380
Claims and judgments payable - due within one year - - - -
Compensated absences payable - due within one year 209,002 128,379 141,615 22,138
Bonds, notes, loans and leases payable -
due within one year 152,820 2,476,752 2,183,851 178,060
Total current liabilities 2,043,737 4,891,986 2,863,085 387,960
Advances from other funds - - - 194,565
Claims and judgments payable - due in more than one year - - - -
Compensated absences payable - due in more than one year 104,501 64,190 70,807 11,069
due in more than one year 919,165 43,758,928 14,205,570 6,534,227
Landfill closure costs - - 5,230,144 -
Total noncurrent liabilities 1,023,666 43,823,118 19,506,521 6,739,861
Total liabilities 3,067,403 48,715,104 22,369,606 7,127,821
NET ASSETS
Invested in capital assets, net of related debt 37,531,281 80,545,701 4,659,125 14,785,279
Restricted for:
Debt service - - - -
Unrestricted 23,594,092 27,351,674 1,767,174 2,032,526
Total net assets $ 61,125,373 $ 107,897,375 $ 6,426,299 $ 16,817,805

36
Activities
Internal
$ 63,496 $ 176,385 $ 3,520,177 $ 293,442

- - - 49,206
84,850 20,685 1,438,808 -
- - 50,597 -
- - 29,985 -
- - - 2,188,200
3,365 17,761 522,260 23,651
120,238 156,608 5,268,329 25,663

271,949 371,439 10,830,156 2,580,162
- - 194,565 -
- - - 7,644,100
1,683 8,880 261,130 11,825
6,090,123 4,407,758 75,915,771 13,301

- - 5,230,144 -
6,091,806 4,416,638 81,601,610 7,669,226
6,363,755 4,788,077 92,431,766 10,249,388
35,117,128 1,756,636 174,395,150 303,230
- - - 60,486
3,011,331 510,342 58,267,139 (6,442,577)
$ 38,128,459 $ 2,266,978 $ 232,662,289 $ (6,078,861)
(Concluded)
37
City of Santa Cruz
Statement of Revenues, Expenses and Changes in Net Assets
Proprietary Funds
Major Funds
OPERATING REVENUES:
Charges for services $ 15,515,274 $ 11,664,382 $ 14,583,240 $ 2,294,075

Use of property 6,750 - - 141,675
Other revenues 195,490 9,625 64,580 46,851
Total operating revenues 15,717,514 11,674,007 14,647,820 2,482,601
OPERATING EXPENSES:
Personnel services 5,944,645 4,289,870 5,177,126 906,656

Services, supplies, and other charges 6,324,098 5,565,502 6,381,588 723,476
Depreciation and amortization 1,400,848 4,150,247 2,533,292 503,693
Total operating expenses 13,669,591 14,005,619 14,092,006 2,133,825
Operating income (loss) 2,047,923 (2,331,612) 555,814 348,776
NONOPERATING REVENUES (EXPENSES):
Intergovernmental 221,157 1,005,866 23,360 249

Investment earnings 106,578 556,212 72,639 23,816
Interest expense and fiscal charges (38,053) (1,445,492) (806,780) (327,975)
Debt issuance costs - (5,050) (25,307) (9,910)
Gain (loss) on sale of capital assets (23,582) - 47,000 -
Total nonoperating revenues (expenses) 266,100 111,536 (689,088) (313,820)
Income (loss) before contributions and transfers 2,314,023 (2,220,076) (133,274) 34,956
Capital contributions 212,633 - - -

Transfers out (98,451) (31,216) (56,479) (7,716)
Total contributions and transfers 114,182 (31,216) (56,479) (7,716)
Change in net assets 2,428,205 (2,251,292) (189,753) 27,240
NET ASSETS:

Prior period adjustments (Note 16) 401,058 - - -
Beginning of the year, as restated 58,697,168 110,148,667 6,616,052 16,790,565
End of year $ 61,125,373 $ 107,897,375 $ 6,426,299 $ 16,817,805
38
Activities
Internal
$ 862,107 $ 1,738,820 $ 46,657,898 $ 7,318,370

- 2,040 150,465 -
144 193,657 510,347 499,225
862,251 1,934,517 47,318,710 7,817,595
143,820 753,650 17,215,767 1,453,630

246,052 949,290 20,190,006 10,623,546
1,212,486 47,870 9,848,436 164,049
1,602,358 1,750,810 47,254,209 12,241,225
(740,107) 183,707 64,501 (4,423,630)
1,950,502 41,672 3,242,806 -

27,146 5,195 791,586 10,887
(343,949) (55,342) (3,017,591) (2,783)
(10,256) (4,976) (55,499) -
- (35,130) (11,712) 5,500
1,623,443 (48,581) 949,590 13,604
883,336 135,126 1,014,091 (4,410,026)
- - 212,633 -
(126,383) (14,101) (334,346) (770,246)
(126,383) (14,101) (121,713) (770,246)
756,953 121,025 892,378 (5,180,272)
37,371,506 2,145,953 231,368,853 (875,697)

- - 401,058 (22,892)
37,371,506 2,145,953 231,769,911 (898,589)
$ 38,128,459 $ 2,266,978 $ 232,662,289 $ (6,078,861)
39
City of Santa Cruz
Statements of Cash Flows
Proprietary Funds
Major Funds

CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and users $ 13,732,414 $ 11,802,401 $ 14,595,028 $ 2,287,992
Cash received from interfund services provided 415,366 31,692 5,706 792
Cash payments to suppliers for goods and services (3,895,944) (3,636,552) (2,137,758) (535,402)
Cash payments to employees for services (5,941,509) (4,285,772) (5,214,484) (888,209)
Cash payments for interfund services used (1,800,716) (1,543,476) (3,944,205) (126,256)
Cash payments to other governments (113,388) (92,125) (122,507) (24,695)
Cash received from (payments to) others (5,597) 9,625 64,580 188,526
Net cash provided (used) by operating activities 2,390,626 2,285,793 3,246,360 902,748
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:
Transfers out (98,451) (31,216) (56,479) (7,716)

Advances from other funds - - - (35,303)
Receipts from other governments 297,633 2,550,060 15,529 249
Net cash provided (used) by noncapital financing activities 199,182 2,518,844 (40,950) (42,770)
CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES:
Proceeds from capital debt - - 2,405,137 -

Capital contributions 22,361 - - -
Purchase and construction of capital assets (6,488,941) (1,771,365) (212,638) (86,008)
Principal paid on capital debt (163,490) (2,415,224) (4,410,325) (177,925)
Interest paid on capital debt (39,747) (1,504,242) (866,267) (329,104)
Proceeds from sales of capital assets - - - -
Net cash provided (used) by capital and

related financing activities (6,669,817) (5,690,831) (3,084,093) (593,037)
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from collections of loans - 31,372 - -

Receipts from collections of interfund advances 7,778 - - -
Advances to other funds - (122,800) - -
Proceeds from sales and maturities of investments - - 565,000 -
Investment income received 128,860 67,502 119,167 49,757
Net cash provided (used) by investing activities 136,638 (23,926) 684,167 49,757
Net increase (decrease) in cash and cash equivalents (3,943,371) (910,120) 805,484 316,698
CASH AND CASH EQUIVALENTS:
End of year $ 20,505,662 $ 8,159,020 $ 11,115,504 $ 2,176,496
40
Activities
Internal
$ 854,841 $ 1,756,283 $ 45,028,959 $ 118,778

768 - 454,324 6,955,116
(147,758) (731,239) (11,084,653) (7,334,039)
(140,132) (750,881) (17,220,987) (1,458,347)
(74,594) (135,633) (7,624,880) (313,538)
(7,965) (2,249) (362,929) -
144 195,697 452,975 499,225
485,304 331,978 9,642,809 (1,532,805)
(126,383) (14,101) (334,346) (770,246)

- - (35,303) -
1,936,513 36,889 4,836,873 -
1,810,130 22,788 4,467,224 (770,246)
- 3,700,000 6,105,137 -
- - 22,361 -
(1,469,552) (248,227) (10,276,731) -
(115,226) (148,857) (7,431,047) (24,463)
(345,099) (176,127) (3,260,586) (2,783)
- 1,972 1,972 5,500
(1,929,877) 3,128,761 (14,838,894) (21,746)
- - 31,372 -
- - 7,778 -
- - (122,800) -
- - 565,000 -
52,060 10,644 427,990 10,499
52,060 10,644 909,340 10,499
417,617 3,494,171 180,479 (2,314,298)
1,044,972 523,505 47,256,468 4,057,204
$ 1,462,589 $ 4,017,676 $ 47,436,947 $ 1,742,906
(Continued)
41
City of Santa Cruz
Statements of Cash Flows, Continued
Proprietary Funds
Major Funds
RECONCILIATION OF OPERATING INCOME TO NET

CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income (loss) $ 2,047,923 $ (2,331,612) $ 555,814 $ 348,776

Adjustments to reconcile operating income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 1,400,848 4,150,247 2,533,292 503,693
Estimated closure/postclosure costs - - 216,245 -
Changes in assets and liabilities:
Accounts receivable (228,906) 395,211 17,494 (5,291)
Prepaid items (20,946) (14,743) (22,827) (2,917)
Inventories (29,149) - - -
Deposits - - - -
Notes and loans receivable (754,600) (225,500) - -
Accounts payable and other current liabilities 335,362 293,349 (39,127) 39,243
Due to other funds - - - -
Deferred revenue (382,738) - - -
Deposits payable (1,250) - - (2,120)
Claims and judgments payable - - - -
Compensated absences payable 24,082 18,841 (14,531) 21,364
Total adjustments 342,703 4,617,405 2,690,546 553,972
Net cash provided (used) by operating activities $ 2,390,626 $ 2,285,793 $ 3,246,360 $ 902,748
42
Activities
Internal
$ (740,107) $ 183,707 $ 64,501 $ (4,423,630)
1,212,486 47,870 9,848,436 164,049

- - 216,245 -
(6,498) 17,463 189,473 473,699

(184) (3,396) (65,013) (4,770)
- - (29,149) 20,507
- - - 18,789
- - (980,100) -
15,735 80,169 724,731 (427,388)
- - - (718,175)
- - (382,738) -
- - (3,370) -
- - - 3,368,831
3,872 6,165 59,793 (4,717)
1,225,411 148,271 9,578,308 2,890,825
$ 485,304 $ 331,978 $ 9,642,809 $ (1,532,805)
43
44
Fiduciary Fund Financial Statements
Private - Purpose Trust Funds:
Private-purpose trust funds are used to report the trust arrangements under which the principal and
income benefit the Library Joint Powers Authority.
Agency Funds:
Agency funds are used to account for resources held by the City in a custodial capacity. These funds
account for the receipt, temporary investment, and remittance of fiduciary resources to individuals,
private organizations, or other governments.
45
City of Santa Cruz
Statement of Fiduciary Net Assets
Fiduciary Funds
June 30, 2004
Private-
Purpose Agency
Trust Funds Funds
ASSETS
Cash and cash equivalents $ 517,541 $ 1,026,227

Investments - 100,000
Receivables:
Interest receivable 3,837 6,458
Taxes receivable - 533,783
Accounts receivable - 611,522
Due from other governments - 1,999
Prepaid items - 136
Total assets $ 521,378 $ 2,280,125
LIABILITIES
Accounts payable and other current liabilities $ - $ 943,651

Due to other governments - 679,339
Deferred revenue - 38,826
Deposits payable - 354,406
Payable to bondholders - 263,903
Total liabilities - $ 2,280,125
NET ASSETS
Held in trust for library programs $ 521,378

46
City of Santa Cruz
Statement of Changes in Fiduciary Net Assets
Fiduciary Funds
Private-
Purpose
Trust Funds
ADDITIONS:
Investment earnings $ 2,438
Total additions 2,438
DEDUCTIONS:
Library programs 10,001
Total deductions 10,001
Change in net assets (7,563)
NET ASSETS:
Beginning of year 528,941
End of year $ 521,378

47
48
City of Santa Cruz
Index to Notes to the Basic Financial Statements
Page
Note 1 - Summary of Significant Accounting Policies..................................................................................52
A. Reporting Entity..............................................................................................................................52
B. Basis of Accounting and Measurement Focus............................................................................52
C. Use of Restricted/Unrestricted Net Assets.................................................................................55
D. Cash, Cash Equivalents and Investments ...................................................................................55
E. Restricted Cash and Investments with Fiscal Agents................................................................56
F. Prepaid Items ..................................................................................................................................57
G. Inventories .......................................................................................................................................57
H. Interfund Transactions...................................................................................................................57
I. Capital Assets..................................................................................................................................57
J. Interest Payable...............................................................................................................................58
K. Deferred Revenue ...........................................................................................................................58
L. Compensated Absences .................................................................................................................59
M. Bond Premiums, Discounts, and Issuance Costs .......................................................................59
N. Long-Term Debt..............................................................................................................................59
O. Net Assets ........................................................................................................................................59
P. Fund Balances – Reservations and Designations .......................................................................60
Q. Property Taxes ................................................................................................................................60
R. Use of Estimates..............................................................................................................................60
S. Implementation of New GASB Pronouncements ......................................................................60
Note 2 - Cash Deposits and Investments .........................................................................................................60
A. Cash Deposits..................................................................................................................................60
B. Investments .....................................................................................................................................61
C. Derivatives.......................................................................................................................................63
D. Reconciliation to Cash, Cash Equivalents, and Investments....................................................64
Note 3 – Receivables ............................................................................................................................................65
Note 4 – Interfund Balances and Transactions ...............................................................................................66
A. Government-Wide Financial Statements ....................................................................................66

B. Fund Financial Statements ............................................................................................................67
49
City of Santa Cruz
Index to Notes to the Basic Financial Statements, Continued
Page
Note 5 – Capital Assets ........................................................................................................................................69
A. Government-Wide Financial Statements ....................................................................................69

B. Fund Financial Statements ............................................................................................................72
Note 6 – Long-Term Debt....................................................................................................................................72
A. Governmental Activities Long-Term Debt .................................................................................72

B. Proprietary Fund Obligations .......................................................................................................76
C. Defeased Debt .................................................................................................................................81
Note 7 – Risk Management and Self Insurance..............................................................................................81
Note 8 – Landfill Closure and Postclosure Costs ...........................................................................................84
Note 9 – Retirement Plans...................................................................................................................................85
A. Pension Plan ....................................................................................................................................85
Note 10 – Post-Employment Retirement Benefits ..........................................................................................86
Note 11 – Commitments and Contingencies ...................................................................................................86
Note 12 – Operating Leases ................................................................................................................................88
Note 13 – Reserved and Designated Fund Balances ......................................................................................89
Note 14 – Deficit Net Assets ...............................................................................................................................90
Note 15 – Prior Period Adjustments..................................................................................................................90
A. Government-Wide Financial Statements...................................................................................90

B. Fund Financial Statements...........................................................................................................91
Note 16 – Subsequent Events .............................................................................................................................91
50
NOTES TO BASIC FINANCIAL STATEMENTS
51
City of Santa Cruz
Notes to Basic Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Santa Cruz, California (City) have been prepared in conformity
with generally accepted accounting principles (GAAP) as applied to governmental agencies. The
Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing
governmental accounting and financial reporting principles. The more significant of the City’s accounting
policies are described below.
A. Reporting Entity
The City was incorporated as a town in 1866 under the laws of the State of California. It became a City in
1876. The City is a charter city administered under a council/manager form of government.
The financial statements present the City and its component units (legally separate entities for which the
City is considered to be financially accountable). Component units include those entities for which the
City may have governing authority or is in a relationship of financial benefit or burden. Component
units also include entities that are fiscally dependent upon the City. The financial activities of these
entities are integrally related to those of the City and, therefore, blended with those of the City. Blending
involves aggregating/merging component unit data and data from the City at the combined financial
statement level.
Based on the above criteria, the accompanying financial statements include the financial activities of the
following entities as blended component units. Separate financial statements of these entities alone can
be obtained from the Finance Department of the City.
City of Santa Cruz Redevelopment Agency - The City of Santa Cruz Redevelopment Agency (Agency) was
formed in 1956 to improve social, physical and economic conditions of the City by constructing a series
of commercial, residential and public buildings in the downtown area. The City's Council members are
the Agency's Directors and have full accountability for the Agency's fiscal matters.
Santa Cruz Public Improvement Financing Corporation - The Santa Cruz Public Improvement Financing
Corporation (Corporation) is a non-profit benefit corporation organized and operated under the laws of
the State of California. The primary purpose of the Corporation is to serve as a financing vehicle for the
City. The City Council has final responsibility for the operations of the Corporation.
B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for with a separate set of self-balancing
accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as
appropriate. Governmental resources are allocated to and accounted for in individual funds based
upon the purposes for which they are to be spent and the means by which spending activities are
controlled.
Government - Wide Financial Statements
The City’s Government-Wide Financial Statements include a Statement of Net Assets and a Statement of
Activities and Changes in Net Assets. These statements present summaries of governmental and
business-type activities for the City accompanied by a total column. Fiduciary activities of the City are
not included in these statements.
52
City of Santa Cruz
Notes to Basic Financial Statements, Continued
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
B. Basis of Accounting and Measurement Focus, Continued
These basic financial statements are presented on an “economic resources” measurement focus and the
accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets,
as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of
Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of
accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which the liability is incurred.
Certain types of transactions are reported as program revenues for the City in three categories:
¾ Charges for services

¾ Operating grants and contributions
¾ Capital grants and contributions
Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund
activities, payables and receivables. All internal balances in the Statement of Net Assets have been
eliminated except those representing balances between the governmental activities and the business-
type activities, which are presented as internal balances and eliminated in the total primary
government column. In the Statement of Activities and Changes in Net Assets, internal service fund
transactions have been eliminated; however, those transactions between governmental and business-
type activities have not been eliminated. The following interfund activities have been eliminated:
¾ Due to/from other funds

¾ Advances to/from other funds
¾ Transfers in/out
For its business type activities, the City applies all applicable GASB pronouncements currently in effect,
as well as Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting
Principles Board (APB) Opinions, and Accounting Research Bulletins (ARB) of the Committee on
Accounting Procedure that do not conflict with or contradict GASB pronouncements.
Governmental Fund Financial Statements
Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues,
Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds
aggregated. An accompanying schedule is presented to reconcile and explain the differences in net
assets as presented in these statements to the net assets presented in the Government-Wide Financial
Statements. The City has presented all major funds that met the applicable criteria.
All governmental funds are accounted for on a spending or "current financial resources" measurement
focus and the modified accrual basis of accounting. Accordingly, only current assets and current
liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in
Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures
and other financing uses) in net current assets. Under the modified accrual basis of accounting,
revenues are recognized in the accounting period in which they become both measurable and available
to finance expenditures of the current period.
53
City of Santa Cruz
Revenues are recorded when received in cash, except for that revenues subject to accrual (generally 60
days after year-end) are recognized when due. The primary revenue sources, which have been treated as
susceptible to accrual by the City, are property tax, sales tax, intergovernmental revenues and other
taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred.
Deferred revenues arise when potential revenues do not meet both the “measurable” and “available”
criteria for recognition in the current period. Deferred revenues also arise when the government receives
resources before it has a legal claim to them, as when grant monies are received prior to incurring
qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met or when
the government has a legal claim to the resources, the deferred revenue is removed from the Balance
Sheet and revenue is recognized.
The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is
provided to explain the differences created by the integrated approach of GASB Statement No. 34.
Proprietary Fund Financial Statements
Proprietary Fund Financial Statements include a Statement of Net Assets, a Statement of Revenues,
Expenses and Changes in Net Assets, and a Statement of Cash Flows for each major proprietary fund.
A separate column representing internal service funds is also presented in these statements. However,
internal service balances and activities have been combined with the governmental activities in the
Government-Wide Financial Statements.
Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual
basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included
on the Statement of Net Assets. The Statement of Revenues, Expenses and Changes in Net Assets
presents increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of
accounting, revenues are recognized in the period in which they are earned while expenses are
recognized in the period in which the liability is incurred. In these funds, receivables have been
recorded as revenue and provisions have been made for uncollectible amounts. In accordance with
GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Government
Entities that Use Proprietary Fund Accounting, the City applies all GASB pronouncements currently in
effect as well as FASB Statements and Interpretations, APB Opinions and ARB of the Committee on
Accounting Procedure that do not conflict with or contradict GASB pronouncements.
Operating revenues in the proprietary funds are those revenues that are generated from the primary
operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses
are those expenses that are essential to the primary operations of the fund. All other expenses are
reported as nonoperating expenses.
54
City of Santa Cruz
Fiduciary Fund Financial Statements
Fiduciary Fund Financial Statements include a Statement of Net Assets and a Statement of Changes in
Fiduciary Net Assets. The City's fiduciary funds represent agency funds and private-purpose trust
funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of
results of operations. The agency funds are accounted for using the accrual basis of accounting. The
private-purpose trust funds are used to account for resources legally held in trust for special purposes.
C. Use of Restricted/Unrestricted Net Assets
When an expense is incurred for purposes for which both restricted and unrestricted net assets are
available, the City’s policy is to apply restricted net assets first.
D. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. Investment income from this pool is allocated
to each fund based on its proportionate share of the pool. Cash and investments not pooled include
bond proceeds held by fiscal agents, and other amounts required to be segregated by bond indentures
or other regulations. Investment income from cash and investments with fiscal agents is credited
directly to the related fund.
Cash and cash equivalents are considered to be amounts in demand deposits, and short-term
investments with original maturity of three months or less from the date of acquisition. For purposes of
both the balance sheet and statements of cash flows, cash and cash equivalents includes not only
currency on hand, but deposits in the City’s cash and investment pool. These deposits have the same
characteristics for the participating funds as demand deposit accounts, in that the funds may deposit
additional cash at any time and also effectively withdraw cash at any time without prior notice or
penalty. Cash and cash equivalents also include restricted cash and money market funds held by fiscal
agents.
Investments include unpooled investments in securities having original maturities greater than three
months. In accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain
Investments and for External Investment Pools, both these investments and investments included in the
City’s cash and investment pool are stated at fair value, which is based on a quoted market price. This
includes all investments except the City’s investment in the California Local Agency Investment Fund
(LAIF). LAIF determines fair value on its investment portfolio based on market quotations for those
securities where market quotations are readily available and based on amortized cost or best estimate
for those securities where market value is not readily available. The City valued its investments in LAIF
as of June 30, 2004, by multiplying its account balance with LAIF times a fair value factor determined by
LAIF (.998384177). This fair value factor was determined by dividing all LAIF participants’ total
aggregate amortized cost by total aggregate fair value.
The investments made by the City treasurer are limited to those allowable under State statutes as
incorporated into the City’s Investment Policy, dated April 27, 2004, which is more conservative than
that allowed by State statute.
55
City of Santa Cruz
D. Cash, Cash Equivalents and Investments, Continued
The scope of the investment policy includes all activities of the City and the following reporting entities:
¾ City of Santa Cruz

¾ City of Santa Cruz Redevelopment Agency
¾ Santa Cruz Public Improvement Financing Corporation
Under provisions of this policy, the City is authorized to invest in the following types of investments:
¾ Bonds issued by the City. Purchases of this type shall not exceed five years to maturity, and 15%
of the cost value of the portfolio.
¾ U.S. Treasury bills, notes, bonds, or certificates of indebtedness, or those securities backed by the
full faith and credit of the U.S. Government with maturities not exceeding five years.
¾ Obligations, participations, or other instruments of, or issued by, a Federal Agency or a United
States Government-Sponsored Enterprise with maturities not to exceed five years.
¾ Money Market accounts deposited with a nationally or state-chartered bank.
¾ Bankers’ acceptances with a term not to exceed 180 days maturity and 40 percent of the City’s
portfolio.
¾ Nonnegotiable and nontransferable certificates of deposit issued by a nationally or state-
chartered bank, state or federal association, or by a state-licensed branch of a foreign bank.
Purchases of these certificates of deposit may not exceed 30% of the City’s portfolio and
purchases in a single issuer in this category shall not exceed 5% of the cost value of the portfolio.
¾ State of California Local Agency Investment Fund as long as the total amount of City and
Agency combined funds invested does not exceed the limit set by LAIF.
¾ Shares of beneficial interest issued by diversified management companies investing in
authorized securities and obligations (e.g., money market mutual funds).
¾ Repurchase agreements with primary dealers of the Federal Reserve with specific terms and
conditions. The market value of securities that underlie a repurchase agreement shall be valued
at 102% or greater of the funds borrowed against those securities and shall be valued daily by
the third party custodial agent. Securities that can be pledged for collateral consist only of
investments permitted within this policy with a maximum maturity of five years. Purchases
shall not exceed 90 days to maturity and 15% of the cost value of the portfolio.
Bond proceeds held by fiscal agents to be used only for specific capital outlay, payments of certain long-
term debt and maintaining required reserves are invested in accordance with the requirements and
restrictions of the City’s investment policy and as permitted by specific State statutes, applicable City
ordinance or resolution, and bond indenture requirements.
E. Restricted Cash and Investments with Fiscal Agents
Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and
for acquisition and construction of capital projects.
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City of Santa Cruz
F. Prepaid Items
Certain payments applicable to future accounting periods are recorded as prepaid items. Prepaid items
do not reflect current appropriable resources and, thus, an equivalent portion of fund balance is
reserved.
G. Inventories
Inventories consist of material and supplies which are stated at cost using the first-in, first-out method.
Inventories are recognized as expenditures when consumed rather than when purchased.
H. Interfund Transactions
Activity between funds that is representative of lending/borrowing arrangements outstanding at the

end of the fiscal year is referred to as either “due to/from other funds” (i.e., the current portion of
interfund loans) or “advances to/from other funds” (i.e., the long-term portion of interfund loans).
Any residual balances outstanding between the governmental activities and business-type activities are
reported in the Government-Wide Financial Statements as “internal balances.”
I. Capital Assets
Capital assets are defined by the City as assets having an estimated useful life in excess of one year, and
an initial, individual cost in excess of the capitalization thresholds described below:
Infrastructure $ 25,000
Buildings and lease improvements 10,000
Machinery and equipment 5,000
Software (if qualified) 5,000
All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not
available. Donated fixed assets are valued at their estimated fair market value on the date donated.
Assets acquired under capital leases are capitalized in accordance with generally accepted accounting
principles. Major outlays for capital assets and improvements are capitalized as projects are
constructed. Interest accrued during capital assets construction, if any, is capitalized for the business-
type activities and proprietary funds as part of the asset cost. The costs of normal maintenance and
repairs that do not add to the value of the asset or materially extend the asset’s useful life are not
capitalized. Capital assets are reported in the applicable governmental or business-type activities in the
Government-Wide Financial Statements.
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City of Santa Cruz
I. Capital Assets, Continued
Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows:
Land improvements 20 years

Buildings and lease improvements 15-50 years
Water tanks and water mains 30-50 years
Underground sewer lines 50 years
Other infrastructure 5-100 years
Machinery and equipment 5-20 years
Software(if qualified) 5 years
Assets are grouped by asset type into one of the following accounts – land, land improvements,
infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), buildings (and improvements),
machinery and equipment, lease improvements, software, and construction in progress.
The GASB Statement No. 34 requires the inclusion of infrastructure capital assets in local governments’
basic financial statements. In accordance with Statement No. 34, the City has included the value of all
infrastructure in the basic financial statements.
For all infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement
No. 34 for infrastructure reporting. Estimated historical costs were developed in one of three ways: (1)
historical records; (2) standard unit costs appropriate for the construction/acquisition date; or (3)
present cost indexed by a reciprocal factor of the price increase from the construction/acquisition date
to the current date. The accumulated depreciation, defined as the total depreciation from the date of
construction/acquisition to the current date on a straight line, unrecovered cost method was computed
using industry accepted life expectancies for each infrastructure subsystem. The book value was then
computed by deducting the accumulated depreciation from the estimated historical cost.
J. Interest Payable
In the Government-Wide Financial Statements, interest payable on long-term debt is recognized as the
liability is incurred for governmental fund types and proprietary fund types.
In the Fund Financial Statements, propriety fund types recognize the interest payable when the liability
is incurred.
K. Deferred Revenue
In the Government-Wide Financial Statements, deferred revenue is recognized for transactions for
which revenue has not yet been earned. Typical transactions recorded as deferred revenues in the
Government-Wide Financial Statements are long-term assessments, long-term loans receivable, and
prepaid charges for services.
In the Fund Financial Statements, deferred revenue is recorded when transactions have not yet met the
revenue recognition criteria based on the modified accrual basis of accounting. The City records
deferred revenue for transactions for which revenues have not been earned, or for which funds are not
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City of Santa Cruz
K. Deferred Revenue, Continued
available to meet current financial obligations. Typical transactions for which deferred revenue is
recorded are grants received but not yet earned or available, interest on interfund advances receivable,
long-term assessments and loans receivable.
L. Compensated Absences
The City has accumulated unpaid regular vacation leave (for all departments) which is accounted for in
accordance with GAAP. The maximum accumulation of vacation leave is limited to the total number of
hours accruable during two years. Employees are paid 100% of their accumulated vacation pay when
they terminate their employment for any reason. Employees are allowed a partial payoff of accumulated
sick leave up to a certain maximum amount.
M. Bond Premiums, Discounts, and Issuance Costs
For governmental type activities, bond premiums and discounts, as well as issuance costs, are
recognized during the current period. Bond proceeds are reported as other financing sources net of the
applicable premium or discount. Issuance costs, whether or not withheld from the actual net proceeds
received, are reported as debt service expenditures.
For business type activities, bond premiums and discounts, as well as issuance costs, are deferred and
amortized over the life of the bonds using a straight-line method. Bonds payable are reported net of the
applicable bond premium or discount. Issuance costs and costs in excess of net assets acquired are
reported as other assets in the accompanying financial statements.
N. Long-Term Debt
Government-Wide Financial Statements - Long-term debt and other long-term obligations are reported as
liabilities in the appropriate activities.
Fund Financial Statements - With the exception of advances from other funds, the governmental fund
financial statements do not present long-term liabilities. However, the long term debt is shown in the
Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Assets.
O. Net Assets
In the Government-Wide Financial Statements, net assets are classified in the following categories:
Invested in Capital Assets, net of Related Debt – This amount consists of capital assets net of accumulated
depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or
improvement of the assets.
Restricted Net Assets – This amount is restricted by external creditors, grantors, contributors, laws or
regulations of other governments.
Unrestricted Net Assets – This amount is all net assets that do not meet the definition of “invested in
capital assets, net of related debt” or “restricted net assets.”
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City of Santa Cruz
P. Fund Balances - Reservations and Designations
In the Fund Financial Statements, governmental funds report reservations of fund balances for amounts
that are not available for appropriation or are legally restricted by outside parties for use for a specific
purpose. Designations of fund balances represent tentative management plans that are subject to
change.
Q. Property Taxes
Assessed property values are determined annually by the County Assessor as of March 1, and become a
lien on real property at July 1. Taxes are due November 1 and February 1 and are delinquent if not paid
by December 10 and April 10, respectively. The County bills and collects property taxes and remits them
to the City under the State authorized method of apportioning taxes whereby all local agencies, including
cities, receive from the county their respective shares of the amount of ad valorem taxes collected.
Property tax revenues are recognized when levied provided the measurement and availability criteria
have been met.
R. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions. These estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. In
addition, estimates affect the reported amount of expenses. Actual results could differ from these
estimates and assumptions.
S. Implementation of New GASB Pronouncements
The City adopted new accounting standards in order to conform to the following Governmental
Accounting Standards Board Statements:
Statement No. 40, Deposit and Investment Risk Disclosures, an amendment of GASB Statement No. 3
GASB Statement No. 40 updates the custodial credit risk disclosure requirements of Statement No. 3
and establishes more comprehensive disclosure requirements addressing other common risks of
deposits and investments of state and local governments, such as credit risk, concentration of credit
risk, interest rate risk, and foreign currency risk.
2. CASH DEPOSITS AND INVESTMENTS
A. Cash Deposits
The carrying amounts of the City’s time and demand deposits were $2,265,415 at June 30, 2004. Bank
balances before reconciling items were $2,917,793. The total bank balance was collateralized or insured
with securities held by the pledging financial institutions in the City’s name as discussed below.
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City of Santa Cruz
2. CASH DEPOSITS AND INVESTMENTS, Continued
A. Cash Deposits, Continued
The California Government Code requires California banks and savings and loan associations to secure
the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in
this manner shall have the effect of perfecting a security interest in such collateral superior to those of a
general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.
The market value of pledged securities must equal at least 110% of the City's cash deposits. California
law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a
value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash
deposits, which are fully insured up to $100,000 by the Federal Deposit Insurance Corporation.
The carrying amount of the City’s time and demand deposits held by fiscal agents was $6 at June 30,
2004 and the bank balance was the same amount. This amount was fully insured.
B. Investments
As of June 30, 2004, the City had the following investments:
Investment Type Fair Value Maturity (Days)
U.S. Treasuries $ 2,092,190 851

U.S. Agencies 33,957,943 484
U.S. Treasury Money Market Mutual Funds 2,841,390 1
Local Agency Investment Fund 37,770,183 196
Total $ 76,661,706
Portfolio Weighted Average Maturity (Days) 334

Portfolio Weighted Average Maturity (Years) 0.92
Interest Rate Risk. The City assumes that callable U.S. Agencies will be called. As of June 30, 2004, the
portfolio contained $9,889,220 of callable U.S. Agencies, representing 12.90% of investments at June 30,
2004. The City’s Investment Policy (Policy) limits the purchase of callable U.S. Agency instruments to
discrete calls and those that pay 100% of the principal at the redemption date. In addition, purchases of
callable U.S. Agency instruments are not to exceed 30% of the value of the portfolio. The City is in
compliance with these provisions of the Policy.
In accordance with the Policy, the City manages its exposure to declines in fair values by limiting the
weighted average maturity of its investment portfolio to two and-one half (2 ½) years or less. The City
is in compliance with this provision of the Policy.
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City of Santa Cruz
B. Investments, Continued
Credit Risk. The City’s investments are rated by the nationally recognized statistical rating
organizations as follows:
Standard
Moody's & Poor's
U.S. Agencies
Federal Farm Credit Bank Aaa AAA

Federal Home Loan Bank Aaa AAA
Federal Home Loan Mortgage Corporation Aaa AAA
Federal National Mortgage Association Aaa AAA
Student Loan Marketing Association Aaa Not Rated
U.S. Treasury Money Market Mutual Funds
Blackrock Provident - Treasury Trust Fund Not Rated AAAm-G

Goldman Sachs - Treasury Only Aaa AAAm-G
Wells Fargo Treasury Plus Aaa AAA-m
External Pool
State of California - Local Agency Investment Fund Not Rated Not Rated
The City’s Policy requires that the management company of mutual funds must have attained the
highest ranking or the highest letter and numerical rating provided by not less than two nationally
recognized statistical rating organizations. The investment in Blackrock Provident U.S. Treasury
Money Market Mutual Fund is rated by only one nationally recognized statistical rating organization.
Blackrock Provident U.S. Treasury Money Market Mutual Fund is approved by the National
Association of Investors Corporation.
Concentration of Credit Risk. The City’s Policy states that not more than 25% of the portfolio shall be
invested in any one entity or any one instrument to protect the City from concentration of credit risk,
with the following exceptions: U.S. Treasury Obligations and the external investment pool (State of
California – Local Agency Investment Fund). In addition, purchases of mutual funds must not exceed
20% of the value of the portfolio. Purchases in a single mutual fund may not exceed 10% of the value of
the portfolio. The City is in compliance with these provisions of the Policy.
The following is a chart of investments that represents five (5) percent or more of the total investments:
Percentage of
U.S. Agencies Amount Invested Investments
Federal Farm Credit Bank $ 5,022,190 6.55%

Federal Home Loan Bank 11,520,453 15.03%
Federal Home Loan Mortgage Corporation 7,336,665 9.57%
Federal National Mortgage Association 8,068,015 10.52%
Total $ 31,947,323 41.67%
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City of Santa Cruz
B. Investments, Continued
The following is a chart of investments in money market mutual funds:
U.S. Treasury Money Market Percentage of

Mutual Funds Amount Invested Investments
Blackrock Provident - Treasury Trust Fund $ 947,306 1.24%

Goldman Sachs - Treasury Only 945,558 1.23%
Wells Fargo Treasury Plus 948,526 1.24%
Total $ 2,841,390 3.71%
C. Derivatives
During the year, the City held structured notes. Structured notes are debt securities (other than asset-
backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated
maturity) depend upon one or more indices and/or that have embedded forwards or options. They are
issued by corporations and by government-sponsored enterprises such as the Federal National
Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB). These securities could be
called prior to maturity, depending on changes in interest rates. As of June 30, 2004, the City held
$9,889,220 in callable securities, which amounted to approximately 12.90% of investments at June 30,
2004.
As of June 30, 2004, the City had $37,770,183 (estimated fair value) invested in LAIF accounts, which
had invested 1.603% of the pooled investments in structured notes and asset-backed securities. Asset-
backed securities entitle their purchasers to receive a share of the cash flows from a pool of assets such
as principal and interest repayments from a pool of mortgages or credit card receivables. The City’s
share of structured notes and asset-backed securities due to its holdings in LAIF amounted to
approximately 0.790% of investments at June 30, 2004.
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City of Santa Cruz
2. CASH DEPOSITS AND INVESTMENTS, Continued
D. Reconciliation to Cash, Cash Equivalents, and Investments
Deposits and investments at June 30, 2004 consisted of the following:
Current assets:
Cash & cash equivalents:
Pooled cash deposits $ 1,412,836
Other deposits and cash held by city 33,771
Cash held by fiscal agents available for debt service 6
Money market mutual funds available for debt service 1,365
Federal securities 34,357,450
State local agency investment fund 30,973,375
Total cash and cash equivalents 66,778,803
Restricted cash and cash equivalents:
Pooled cash deposits 715,760
Other cash deposits 103,048
Money market mutual funds held by fiscal agents 2,840,025
State local agency investment fund 6,796,808
Total restricted cash and cash equivalents 10,455,641
Investments:
Federal securities 100,000
Federal securities held by fiscal agents 1,592,683
Total investments 1,692,683

Total cash, cash equivalents, and investments $ 78,927,127
The following is a summary of cash, cash equivalents, and investments, including restricted cash and
investments with fiscal agents at June 30, 2004:
Government-Wide Statement of Net Assets Statement of

Governmental Business-Type Fiduciary
Activities Activities Total Net Assets Total
Current Assets
Unrestricted assets:
Cash and cash equivalents $ 26,823,795 $ 38,411,240 $ 65,235,035 $ 1,543,768 $ 66,778,803
Investments - - - 100,000 100,000
Total unrestricted assets 26,823,795 38,411,240 65,235,035 1,643,768 66,878,803
Restricted assets:
Cash and cash equivalents 1,429,934 9,025,707 10,455,641 - 10,455,641
Investments with fiscal agents 64,492 1,528,191 1,592,683 - 1,592,683
Total restricted assets 1,494,426 10,553,898 12,048,324 - 12,048,324

Grand Total $ 28,318,221 $ 48,965,138 $ 77,283,359 $ 1,643,768 $ 78,927,127
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City of Santa Cruz
3. RECEIVABLES
Government-Wide Statements
The following is a summary of receivables net of allowances for uncollectible amounts at June 30, 2004:
Government-Wide Statement of Net Assets Statement of

Governmental Business-Type Fiduciary
Activities Activities Total Net Assets Total
Interest receivable $ 455,154 $ 850,969 $ 1,306,123 $ 10,295 $ 1,316,418

Taxes receivable 3,288,111 - 3,288,111 533,783 3,821,894
Accounts receivable, net 1,793,400 5,392,949 7,186,349 611,522 7,797,871
Due from other governments 3,312,703 2,142,780 5,455,483 1,999 5,457,482
Notes receivable 7,919,710 1,486,672 9,406,382 - 9,406,382
Loans receivable 1,151,868 - 1,151,868 - 1,151,868
Intergovernmental receivable - 19,430,498 19,430,498 - 19,430,498
Total $ 17,920,946 $ 29,303,868 $ 47,224,814 $ 1,157,599 $ 48,382,413
Fund Financial Statements
At June 30, 2004, the Fund Financial Statements show the following notes, loans and intergovernmental
receivables:
Notes Receivable in the General Fund of $2,658,942 (offset by an allowance for uncollectible notes of
$362,845) consist of a note from Neary Lagoon Partners in the amount of $78,800, a promissory note to Santa
Cruz Shaffer Road Investors for housing developments in the amount of $407,800, a loan to the River Street
Shelter for repairs in the amount of $23,700, a loan to First Night Santa Cruz for $20,000, Harvey West
Assessment District notes in the amount of $92,700, employee computer loans in the amount of $89,740,
various notes for housing improvement activities in the Housing In-Lieu program of $264,045 and a note for
the sale of land to the Redevelopment Agency of the City of Scotts Valley in the amount of $2,045,002 . The
repayment of the Redevelopment Agency of the City of Scotts Valley note receivable consists of annual
principal and interest payments of $206,594 through June 1, 2018. The employee computer loan program
provides two-year loans to employees with a simple interest rate of 5%, payable through payroll deductions.
Some notes are secured by a deed of trust.
The Redevelopment Agency Fund notes receivable of $4,064,512 (net of an allowance of $483,740) consists of
loans for low/moderate income housing projects. There are two types of loan repayment for these notes: due
upon sale or transfer and lump sum payment at maturity. Interest rates range from 0% to 7%. The notes are
all secured by a deed of trust.
Notes receivable in the Parks and Recreation special revenue fund of $511,700 consist of a promissory note
for housing developments – development impact fees. There is no interest on this promissory note. Loan
repayment is deferred to a future date when monthly repayment will begin. The note is secured by a
personal guarantee of Santa Cruz Shaffer Road Investors, LP, a California limited partnership.
The notes receivable in the Housing and Community Development special revenue fund of $684,556 (net of
an allowance of $1,294,737) consist of loans for buildings damaged in the 1989 earthquake. There are two
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City of Santa Cruz
3. RECEIVABLES, Continued
types of loan repayments: monthly repayment and deferred to a future date when monthly repayment will
begin. The interest rate on these notes is 3%. The notes are all secured by a deed of trust.
Notes receivable in the enterprise funds consist of three notes, including two from governmental agencies
totaling $946,272. One is for water and sewer connection fees with monthly payments through the year 2010;
interest is at 5%. The other note is for the governmental agency's share of improvements to the City's
wastewater treatment plant with annual payments through the year 2006; interest is at 6.3%. Both notes are
unsecured. The third note receivable in the enterprise funds of $540,400 consists of a promissory note for
housing developments-development impact fees. Loan repayment is deferred to a future date when monthly
repayment will begin. There is no interest on this promissory note. The note is secured by a personal
guarantee of Santa Cruz Shaffer Road Investors, LP, a California limited partnership.
Loans Receivable in the other governmental funds of $1,151,868 (net of an allowance of $4,797,692) consists
of loans for rehabilitation of low/moderate income housing. The loans are made with Federal funds from
the Department of Housing and Urban Development (HUD). The City administers these funds for HUD.
There are four types of loan repayment: monthly installments, due upon sale or transfer, deferred to a future
date when monthly repayment will begin, and no repayment if the property remains in use for
low/moderate income housing for a specified time period. Interest rates range from 0% to 7%. The loans are
all secured by a deed of trust on the property being rehabilitated.
Intergovernmental Receivable included in the enterprise funds is a total of $19,430,498 ($18,370,380 due in
more than one year and $1,060,118 due within one year) due from the County of Santa Cruz for their share
of a State Water Resources Board loan for wastewater treatment plant upgrades. Payments of interest and
principal are due in annual installments of $1,604,172, with an interest rate of 2.8%. The final payment is
due August 1, 2018.
Allowance for uncollectible notes and loans - When considerable uncertainty exists as to the collectibility of
a note (as determined by management) due to the terms of the loan or other factors, it is offset by an
allowance for uncollectible notes.
4. INTERFUND BALANCES AND TRANSACTIONS
A. Government-Wide Financial Statements
Short-Term Internal Balances
At June 30, 2004, the City had the following short-term internal balances:
Internal Balances
Payable
Governmental
Activities
Internal Balances Receivable

Business-Type Activities $ 521
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City of Santa Cruz
4. INTERFUND BALANCES AND TRANSACTIONS, Continued
A. Government-Wide Financial Statements, Continued
Long-Term Internal Balances
At June 30, 2004, the City had the following long-term internal balances:
Internal Balances
Payable
Business-Type
Activities
Internal Balances Receivable

Governmental Activities $ 34,285
Transfers
At June 30, 2004, the City had the following transfers:

Transfers In
Governmental
Activities
Transfers Out
Business-Type Activities $ 334,346
B. Funds Financial Statements
Due to/from Other Funds
The City had the following due to/from other funds as of June 30, 2004:
Due from other funds
Non-major Wastewater Internal

Due to other funds
General Governmental Enterprise Service

Fund Funds Fund Funds Total
General Fund $ - $ 7 $ - $ 187,102 $ 187,109

Non-major Governmental Funds 24,109 - 521 - 24,630
Internal Service Funds 49,206 - - - 49,206
Total $ 73,315 $ 7 $ 521 $ 187,102 $ 260,945
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City of Santa Cruz
4. INTERFUND BALANCES AND TRANSACTIONS, Continued
B. Funds Financial Statements, Continued
Long-Term Advances
The City had the following long-term advances as of June 30, 2004:
Advances to Other Funds

Advances from Other Funds
Redevelopment Water Wastewater

General Agency Enterprise Enterprise
Fund Fund Fund Fund Total
Redevelopment Agency Fund $ 1,009,131 $ - $ 37,480 $ - $ 1,046,611

Non-Major Governmental Funds 530,000 - - 122,800 652,800
Parking Enterprise Fund - 194,565 - - 194,565
Total $ 1,539,131 $ 194,565 $ 37,480 $ 122,800 $ 1,893,976
Transfers In/Out
The City had the following transfers as of June 30, 2004:
Transfers In
Redevelopment Non-Major
General Agency Governmental
Fund Fund Funds Total
General Fund $ - $ - $ 602,164 $ 602,164

Non-major Governmental Funds 850,066 - 687,524 1,537,590
Transfers Out
Enterprise Funds:
Water 11,723 - 86,728 98,451
Wastewater 24,833 - 6,383 31,216
Refuse 8,833 - 47,646 56,479
Parking 1,333 - 6,383 7,716
Stormwater 20,000 100,000 6,383 126,383
Golf Course 500 - 13,601 14,101
Internal Service Funds 770,246 - - 770,246
Total $ 1,687,534 $ 100,000 $ 1,456,812 $ 3,244,346
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City of Santa Cruz
5. CAPITAL ASSETS
At June 30, 2004, the City’s capital assets consisted of the following:
Capital Assets:
Capital assets, not being depreciated:
Land $ 43,391,660 $ 11,939,799 $ 55,331,459
Construction in progress 8,582,123 9,027,793 17,609,916
Total capital assets, not being depreciated 51,973,783 20,967,592 72,941,375
Capital assets, being depreciated:
Land improvements 2,322,108 1,236,496 3,558,604
Infrastructure 160,705,554 164,722,864 325,428,418
Buildings 31,843,990 159,392,371 191,236,361
Machinery and equipment 9,225,617 18,667,397 27,893,014
Lease improvements 724,114 70,000 794,114
Software 1,021,592 418,237 1,439,829
Total capital assets, being depreciated 205,842,975 344,507,365 550,350,340
Total capital assets 257,816,758 365,474,957 623,291,715
Less accumulated depreciation:
Land improvements (993,164) (439,457) (1,432,621)
Infrastructure (92,937,238) (65,769,464) (158,706,702)
Buildings (7,517,899) (45,247,608) (52,765,507)
Machinery and equipment (6,257,745) (8,676,030) (14,933,775)
Lease improvements (149,085) (5,834) (154,919)
Software (526,792) (119,965) (646,757)
Total accumulated depreciation (108,381,923) (120,258,358) (228,640,281)
Total capital assets, net $ 149,434,835 $ 245,216,599 $ 394,651,434
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City of Santa Cruz
5. CAPITAL ASSETS
The following is a summary of capital assets for governmental activities:
Prior Period
Balance Adjustments Balance
July 1, 2003 Additions Deletions (Note 16) June 30, 2004
Governmental Activities:
Land $ 42,973,291 $ 431,380 $ (13,011) $ - $ 43,391,660
Construction in progress 9,497,439 6,210,238 (7,125,554) - 8,582,123
Total capital assets, not being depreciated 52,470,730 6,641,618 (7,138,565) - 51,973,783
Land improvements 1,910,787 411,321 - - 2,322,108
Infrastructure 156,088,484 4,942,042 (324,972) - 160,705,554
Buildings 30,521,860 1,334,130 (12,000) - 31,843,990
Machinery and equipment 9,370,286 136,979 (281,648) - 9,225,617
Lease improvements 724,114 - - - 724,114
Software 746,230 275,362 - - 1,021,592
Total capital assets, being depreciated 199,361,761 7,099,834 (618,620) - 205,842,975
Total capital assets 251,832,491 13,741,452 (7,757,185) - 257,816,758

Land improvements (915,262) (115,712) - 37,810 (993,164)
Infrastructure (88,634,963) (4,610,590) 308,315 - (92,937,238)
Buildings (6,845,091) (683,328) 10,520 - (7,517,899)
Machinery and equipment (5,781,832) (748,104) 272,191 - (6,257,745)
Lease improvements (69,992) (79,093) - - (149,085)
Software (336,982) (189,810) - - (526,792)
Total accumulated depreciation (102,584,122) (6,426,637) 591,026 37,810 (108,381,923)
Total capital assets, net $ 149,248,369 $ 7,314,815 $ (7,166,159) $ 37,810 $ 149,434,835
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City of Santa Cruz
5. CAPITAL ASSETS
Depreciation expense of the governmental activities for the year ended June 30, 2004 was $6,426,637 and
was distributed among City departments as follows.
General government:
City Council $ 7,346
City Clerk 19,018
Human Resources 2,588
Finance 205,696
Non-Departmental 109,335
Internal service funds 164,049
Total general government 508,032
Public safety:
Police 396,827
Fire 218,651
Total public safety 615,478
Parks and Recreation 1,951,867

Library 26,800
Public Works 3,229,173
Planning and Community Development 18,684
Redevelopment 76,603
Total depreciation expense $ 6,426,637
The following is a summary of capital assets for business-type activities:

Balance Balance
July 1, 2003 Additions Deletions June 30, 2004
Business-type Activities:
Land $ 11,933,799 $ 6,000 $ - $ 11,939,799
Construction in process 8,247,585 5,562,459 (4,782,251) 9,027,793
Total capital assets, not being depreciated 20,181,384 5,568,459 (4,782,251) 20,967,592
Land improvements 1,236,496 - - 1,236,496
Infrastructure 156,919,354 8,326,382 (522,872) 164,722,864
Buildings 158,974,375 434,196 (16,200) 159,392,371
Machinery and equipment 17,717,515 1,433,143 (483,261) 18,667,397
Lease improvements 70,000 - - 70,000
Software 263,064 155,173 - 418,237
Total capital assets, being depreciated 335,180,804 10,348,894 (1,022,333) 344,507,365
Total capital assets 355,362,188 15,917,353 (5,804,584) 365,474,957
Land improvements (381,534) (57,923) - (439,457)
Infrastructure (61,547,469) (4,501,647) 279,652 (65,769,464)
Buildings (41,768,887) (3,486,632) 7,911 (45,247,608)
Machinery and equipment (7,419,199) (1,723,313) 466,482 (8,676,030)
Lease improvements (2,801) (3,033) - (5,834)
Software (44,077) (75,888) - (119,965)
Total accumulated depreciation (111,163,967) (9,848,436) 754,045 (120,258,358)
Total capital assets, net $ 244,198,221 $ 6,068,917 $ (5,050,539) $ 245,216,599
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City of Santa Cruz
5. CAPITAL ASSETS
Business-type activities depreciation expense for the year ended June 30, 2004 is as follows:
Water $ 1,400,848
Wastewater 4,150,247
Refuse 2,533,292
Parking 503,693
Storm Water 1,212,486
Golf Course 47,870
Total depreciation expense $ 9,848,436
The funds financial statements do not present general government capital assets but they are shown in
the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net
Assets.
6. LONG-TERM DEBT
A. Governmental Activities Long-Term Debt
Classification
Amount Amount
Balance Accreted Balance Due Within Due in More
July 1, 2003 Interest Additions Retirements June 30, 2004 One Year Than One Year
Compensated absences $ 2,282,504 $ - $ - $ (155,895) $ 2,126,609 $ 1,417,740 $ 708,869

Claims and judgments 6,463,469 - 3,799,125 (430,294) 9,832,300 2,188,200 7,644,100
Certificates of participation 4,642,350 - - (128,689) 4,513,661 136,553 4,377,108
General obligation bonds 7,260,759 125,189 - (157,796) 7,228,152 168,798 7,059,354
Notes payable 1,500,000 - - - 1,500,000 166,200 1,333,800
Notes payable-County-RDA - - 249,412 (124,706) 124,706 124,706 -
Tax allocation bonds payable 2,880,000 - - (185,000) 2,695,000 190,000 2,505,000
Capital lease obligations 2,450,555 - - (685,339) 1,765,216 561,076 1,204,140
Other long-term liabilities 985,663 - 521,176 (586,576) 920,263 67,810 852,453
Total $ 28,465,300 $ 125,189 $ 4,569,713 $ (2,454,295) $ 30,705,907 $ 5,021,083 $ 25,684,824
Compensated absences and Claims and judgments
As shown in the table above, the total amount outstanding at June 30, 2004 was $2,126,609 for
compensated absences and $9,832,300 for claims and judgments. In prior years, compensated absences
have been liquidated by the general fund. Claims and judgments are paid by the separate internal
service funds for each liability.
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City of Santa Cruz
6. LONG-TERM DEBT, Continued
A. Governmental Activities Long-Term Debt, Continued
Certificates of Participation
Certificates of Participation payable at June 30, 2004, are comprised of the following individual issues:
Redevelopment Agency certificates of participation are part of the $2,080,000 Golf and Redevelopment
Agency Certificates described under enterprise debt below. The outstanding balance relating to the
Agency at June 30, 2004 was $333,661.
City of Santa Cruz issued certificates in April 2001, in the amount of $4,415,000, to be used for the Civic
Center Improvement Project. The certificates provide funds to finance the acquisition, construction and
improvement of the project. The obligation of the City to make the lease payments does not constitute a
debt of the City or the State of California or of any political subdivision thereof within the meaning of
any constitutional or statutory debt limit or restriction, and does not constitute an obligation for which
the City or the State or any political subdivision thereof is obligated to levy or pledge any form of
taxation. Annual payments are $75,000 - $270,000. The certificates bear interest at 4.6% - 5% and are
payable semi-annually on April 1 and October 1 of each year, commencing October 1, 2001. Principal is
payable annually on April 1 through the year 2031. The balance outstanding at June 30, 2004 was
$4,180,000.
The annual debt service requirements on the certificates of participation at June 30, 2004, were as
follows:
For the Year

Ending
June 30, Principal Interest Total
2005 $ 85,000 $ 203,135 $ 288,135
2006 85,000 199,225 284,225
2007 90,000 195,315 285,315
2008 95,000 191,175 286,175
2009 95,000 186,805 281,805
2010-2014 550,000 863,875 1,413,875
2015-2019 685,000 725,085 1,410,085
2020-2024 865,000 541,500 1,406,500
2025-2029 1,105,000 302,500 1,407,500
2030-2031 525,000 39,750 564,750
Total $ 4,180,000 $ 3,448,365 $ 7,628,365
General Obligation Bonds
In March 1999, the City issued $6,998,473 in general obligation bonds. The proceeds were used to
upgrade fire stations, acquire open space property, and construct a community park and a fire
administration facility. Annual payments ranging from $142,625 to $354,010 began September 1, 2000,
and continue through September 1, 2029; interest ranges from 3.5% to 8.0%. The bonds are subject to
early redemption at the option of the City beginning in 2008.
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City of Santa Cruz
The bonds are secured by and will be paid with annual ad valorem tax levies on all property subject to
taxation within the City. The bonds were issued in two series. Series A consisted of $4,500,000 of
general obligation bonds, and Series B consisted of $2,498,473 of general obligation bonds - capital
appreciation bonds. During fiscal year ended June 30, 2004, $157,796 principal payments were made on
the bonds. The carrying value of the Series B bonds was increased to $2,943,153 in order to reflect the
accreted interest due at June 30, 2004. The balance outstanding at June 30, 2004 was $7,228,152.
The annual debt service requirements on the general obligation bonds at June 30, 2004, were as follows:
For the Year

Ending
2005 $ 168,797 $ 227,352 $ 396,149
2006 177,616 227,434 405,050
2007 185,577 229,873 415,450
2008 193,004 233,546 426,550
2009 199,781 237,617 437,398
2010-2014 1,070,025 1,248,475 2,318,500
2015-2019 1,199,094 1,354,851 2,553,945
2020-2024 1,375,032 1,451,254 2,826,287
2025-2029 1,612,285 1,497,966 3,110,251
2030 354,009 307,991 662,000
Sub-total 6,535,219 7,016,360 13,551,579
Accreted Interest 692,933 - 692,933

Total $ 7,228,152 $ 7,016,360 $ 14,244,512
Notes Payable
In July 2001, the Redevelopment Agency received HELP Loan funds, from the State of California, to be
used to finance the acquisition, development, demolition of existing structures, and the construction of a
multifamily rental apartment complex in the Beach Target Area. The proceeds for the note are to be
repaid by July 2011 with an interest rate of 3%. The balance outstanding at June 30, 2004, was
$1,500,000.
In June 2004, the County entered into an agreement with RDA regarding pass-through on supplemental
property taxes. The agreement states that RDA will pay the County $124,706 before June 30, 2004 and
another $124,706 before June 2005. The County will in turn pay the RDA $24,941 for the Low/Mod Fund
within 15 days of the receipt of each payment.
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City of Santa Cruz
Tax Allocation Bonds
In September 1996, the Redevelopment Agency issued $3,755,000 in tax allocation bonds. The proceeds
were used to refinance a 1989 tax allocation bond issue and a 1990 certificate of participation issue. Both
issues were used for projects within the River/Mall Project Area. Annual payments of $65,000 - $310,000
will be made through October 2014; interest ranges from 3.6% to 5.5%. The bonds are subject to early
redemption at the option of the Agency beginning in 2005. The bonds are secured by and will be paid
with future property tax increment revenues of the River/Mall Project Area. The balance outstanding at
June 30, 2004 was $2,695,000.
The annual debt service requirements on the tax allocation bonds at June 30, 2004, were as follows:
For the Year

Ending
2005 $ 190,000 $ 134,305 $ 324,305
2006 200,000 125,185 325,185
2007 210,000 115,290 325,290
2008 220,000 104,645 324,645
2009 230,000 93,395 323,395
2010-2014 1,335,000 270,978 1,605,978
2015 310,000 8,525 318,525
Total $ 2,695,000 $ 852,323 $ 3,547,323
Lease Obligations
In December 1998, the City acquired a new telecommunications system under a capital lease agreement
payable in semi-annual installments of $87,706 through December 2005. The interest rate is 4.85%. This
lease has been allocated to the General Fund, all enterprise funds, the Equipment Services Internal
Service Fund, and the Agency. The balance outstanding at June 30, 2004 was $250,570.
In August 1999, the City acquired a new information technology system under a capital lease agreement
payable in semi-annual installments of $138,444 through August 2004 with an interest rate of 5%. The
lease has been allocated to the General Fund, the Water, Wastewater, and Refuse enterprise funds, and
the Agency. The balance outstanding at June 30, 2004 was $119,669.
In March 2000, the City acquired a new lift truck under a capital lease agreement payable in semi-annual
installments of $9,098 through March 2005 with an interest rate of 5.45%. The balance outstanding at
June 30, 2004 was $17,478.
In August 2001, the City acquired miscellaneous vehicles, equipment and computer software under a
capital lease agreement payable in semi-annual installments of $331,597 though August 2006, with an
interest rate of 4.46%. This lease has been allocated to the General Fund, the Water, Wastewater, Refuse
and Parking enterprise funds, and the Agency. The balance outstanding at June 30, 2004 was $679,459.
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City of Santa Cruz
In June 2002, the City acquired land under a capital lease agreement with Zion’s First National Bank in
the amount of $765,000. The agreement is payable in semi-annual installments of $61,362 through 2021,
with a 4.88% interest rate through January 2007 and a variable interest rate thereafter. From January
2007 through January 2021, the interest is to be recomputed, for each interest period, based on 90% of the
current Index Rate. The balance outstanding at June 30, 2004 was $698,040.
The annual debt service requirements on the capital leases at June 30, 2004, were as follows:
For the Year

Ending
2005 $ 578,552 $ 77,210 $ 655,762
2006 402,600 51,552 454,152
2007 171,978 34,901 206,879
2008 31,492 29,871 61,363
2009 33,029 19,448 52,477
2010-2014 190,654 124,741 315,395
2015-2019 242,017 64,489 306,506
2020-2021 114,894 8,432 123,326
Total $ 1,765,216 $ 410,644 $ 2,175,860
Other Long-Term Liabilities
The Redevelopment Agency is obligated under three separate Owner Participation Agreements (OPA)
for various portions of the $1,250,000 Chestnut Street Special Assessment District Debt. Under the first
OPA the Agency owes $334,224 as of June 30, 2004. Under the second OPA, the Agency owes $39,839.
Under a third OPA the Agency assumed responsibility for an additional 37.27% of the Special
Assessment Debt contingent upon the availability of tax increment. The Agency is liable for principal in
the amount of $546,200 and interest, currently estimated at $109,577. All amounts will be paid with
annual installments through 2011.
B. Proprietary Fund Obligations
A summary of long-term debt transactions of the City for the enterprise funds for the year ended June 30,
2004, is as follows:
Classification
Amount Amount
Balance Balance Due Within Due in More
July 1, 2003 Additions Retirements June 30, 2004 One Year Than One Year
Compensated absences $ 723,597 $ 74,323 $ (14,530) $ 783,390 $ 522,260 $ 261,130
Landfill closure costs 5,013,899 216,245 - 5,230,144 - 5,230,144
Certificates of participation 28,047,650 5,290,000 (3,506,311) 29,831,339 1,168,447 28,662,892
Revenue bonds payable 4,955,000 - (135,000) 4,820,000 140,000 4,680,000
Notes payable 44,883,261 - (2,289,687) 42,593,574 2,353,105 40,240,469
Lease obligations 4,624,099 815,137 (1,500,049) 3,939,187 1,606,777 2,332,410
Total $ 88,247,506 $ 6,395,705 $ (7,445,577) $ 87,197,634 $ 5,790,589 $ 81,407,045
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City of Santa Cruz
B. Proprietary Fund Obligations, Continued
Compensated absences
As shown in the table above, the total amount outstanding at June 30, 2004 was $783,390 for
compensated absences. In prior years, compensated absences have been liquidated primarily by
enterprise funds.
Landfill closure costs
As shown in the table above, the total amount outstanding at June 30, 2004 was $5,230,144 for landfill
closure costs. Refer to Note 8 for landfill closure details.
Certificates of Participation
Certificates of Participation payable at June 30, 2004, are comprised of the following individual issues:
Santa Cruz Landfill Certificates issued in 1993, in the amount of $5,535,000, had an outstanding balance
of $1,975,000 that was prepaid when the City issued 2004 Certificates of Participation on May 1, 2004, in
the amount of $5,290,000 to finance the acquisition and construction of improvements to the DeLaveaga
Golf Course and refinance and prepay $1,975,000 outstanding balance of Santa Cruz Landfill 1993
Certificates. Thus, the balance outstanding at June 30, 2004, was $0 for Santa Cruz Landfill Certificates.
Santa Cruz Golf and Redevelopment Agency Certificates, issued in November, 1998, in the amount of
$2,080,000, was used to refinance an issue used for improvements to the City's golf course and projects
within the City's redevelopment plan areas. Annual payments of $125,000 to $215,000 will be made
through May 2010; interest ranges from 3.5% to 4.25%. Annual debt service is covered by lease
payments made by the City and secured by covenants made by the City in a lease with the Corporation.
The balance outstanding relating to the Golf Course fund at June 30, 2004, was $831,339.
Santa Cruz Parking Certificates issued in November 1998, in the amount of $7,955,000, were used for the
construction of a second parking structure in the downtown area. The certificates are a liability of the
Parking Enterprise Fund. Annual payments are $155,000 - $445,000. The certificates bear interest at 3.5%
to 4.9%. Interest is payable semi-annually on May 1 and November 1 and principal is payable annually
on May 1 through the year 2019. The balance outstanding at June 30, 2004, was $6,705,000.
Santa Cruz Storm Water Certificates, issued in October 1999, in the amount of $6,665,000, was issued to
finance the City’s share of the San Lorenzo River Flood Control and Beautification Project and to repay
the Wastewater Enterprise Fund for earlier loans to rehabilitate and retrofit bridges across the San
Lorenzo River. Annual payments of $105,000 to $250,000 will be made through October 2019; interest
ranges from 4.0% to 5.6%. The balance outstanding at June 30, 2004, was $6,210,000.
Santa Cruz Refuse Certificates, issued in October 1999, in amount of $4,345,000, were issued to repay the
Wastewater Enterprise Fund for earlier loans to construct a tunnel at the City’s landfill and a leachate
line from the landfill to the City’s sewer treatment plant. Annual payments of $100,000 to $245,000 will be
made through October 2020; interest ranges from 4.0% to 5.625%. The balance outstanding at June 30,
2004, was $3,930,000.
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City of Santa Cruz
Santa Cruz Refuse Certificates issued in March 2001, in the amount of $7,500,000, were used in the
purchase of certain property and improvements, and to finance the acquisition, construction and
improvement of the project. The installment payments are payable solely from and secured by a first
pledge of certain revenues of the City’s Refuse Enterprise Fund. Annual payments are $45,000 to
$720,000. The certificates bear interest at 3.5% to 4.875%. Interest represented by the certificates will be
payable semi-annually on April 1 and October 1 of each year, commencing October 1, 2001. Principal is
payable annually on October 1 through the year 2021. The certificates are subject to optional and
mandatory prepayment. The balance outstanding at June 30, 2004, was $6,865,000.
City of Santa Cruz certificates were issued in June 2004, in the amount of $5,290,000. Proceeds of these
certificates provide funds to finance the acquisition, construction and improvement of new cart paths,
three new greens, 18 tee complexes, two restrooms, parking lot renovations, driving range
improvements and expansion of the barbecue area at the Santa Cruz Municipal Golf Course, as well as
to prepay 1993 Santa Cruz Landfill Certificates (see “Defeased Debt”). Annual payments are $275,000.
The certificates bear interest at 4.0% - 5.375% and are payable semi-annually on May 1 and November 1
of each year, commencing November 1, 2004. Principal is payable annually on May 1 through the year
2029. The City is obligated, subject to abatement, under the Lease Agreement to pay the lease payments
from any source of legally available funds. The City is currently liable and may become liable on other
obligations payable from general revenues, some of which may have a priority over the lease payments.
The balance outstanding at June 30, 2004 was $5,290,000.
The annual debt service requirements on the certificates of participation at June 30, 2004, were as
follows:
For the Year

Ending
2005 $ 1,168,447 $ 1,431,640 $ 2,600,087
2006 1,782,015 1,360,400 3,142,415
2007 1,862,015 1,287,024 3,149,039
2008 1,934,151 1,209,845 3,143,996
2009 1,446,288 1,132,970 2,579,258
2010-2014 4,493,423 5,024,113 9,517,536
2015-2019 5,455,000 3,850,616 9,305,616
2020-2024 6,285,000 2,290,911 8,575,911
2025-2029 4,970,000 964,983 5,934,983
2030 435,000 6,253 441,253
Total $ 29,831,339 $ 18,558,755 $ 48,390,094
Annual principal and interest requirements for the certificates of participation are apportioned to the
various funds based on the percentage share of certificate proceeds.
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City of Santa Cruz
Revenue Bonds Payable
Revenue Bonds payable at June 30, 2004, is comprised of a $5,660,000 1994 Series B Sewer Revenue Bond
payable in annual installments of $105,000 to $380,000 through November 2023; interest ranges from
5.0% to 5.7%. Annual debt service is payable solely from and secured by a lien on net revenues of the
City's sewer system. The City has formally agreed to raise sufficient net revenues to provide at least a
125% coverage of the annual debt service of this issue. The balance outstanding at June 30, 2004, was
$4,820,000.
The annual debt service requirements on the revenue bonds at June 30, 2004, were as follows:
For the Year

Ending
2005 $ 140,000 $ 264,732 $ 404,732
2006 150,000 257,483 407,483
2007 155,000 249,780 404,780
2008 165,000 241,537 406,537
2009 175,000 232,610 407,610
2010-2014 1,005,000 1,006,943 2,011,943
2015-2019 1,315,000 682,146 1,997,146
2020-2024 1,715,000 254,933 1,969,933
Total $ 4,820,000 $ 3,190,163 $ 8,010,163
Under conditions of the various revenue bond covenants, the Wastewater Enterprise Fund is required to
provide adequate cash and maintain adequate revenues to cover future bond payments. Cash and
investments set aside for this purpose is shown in the financial statements as restricted cash and
investments.
Notes Payable
State of California loans for the construction of a water main line north of the City. Proceeds for the note
were received in September 1995, to be repaid in semi-annual installments of $46,679, including interest
at 2.973%, through April 2016. This debt is recorded in the Water Enterprise Fund. The balance
outstanding at June 30, 2004, was $903,765.
State of California loans for the construction of secondary treatment improvements at the City's
wastewater treatment plant. Loan proceeds were received as the City incurred project expenditures.
Repayment began August 1999. Annual payments of $3,417,099, including interest at 2.8%, will be made
through August 2018. This debt is recorded in the Wastewater Enterprise Fund. The balance
outstanding at June 30, 2004, was $41,289,810.
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City of Santa Cruz
State of California loans for the construction of certain solid waste facilities to achieve or improve
compliance with state minimum standards. Proceeds were received in March 2001, and the loan is to be
repaid in $33,333 annual payments of principal through 2016. No interest is due on the principal
balance of the loan outstanding. This debt is recorded in the Refuse Enterprise Fund. The balance
outstanding at June 30, 2004, was $399,999.
The annual debt service requirements on the notes at June 30, 2004, were as follows:
For the Year

Ending
2005 $ 2,353,105 $ 1,182,437 $ 3,535,542
2006 2,418,132 1,117,407 3,535,539
2007 2,485,043 1,050,498 3,535,541
2008 2,553,788 981,752 3,535,540
2009 2,624,582 910,958 3,535,540
2010-2014 14,254,910 3,422,796 17,677,706
2015-2019 15,904,014 1,347,244 17,251,258
Total $ 42,593,574 $ 10,013,092 $ 52,606,666
Lease Obligations
The City leases equipment in the Refuse, Water, Wastewater, Parking, and Golf Course funds under
various capital lease agreements payable in semi-annual and annual installments through August 2006
with interest rates ranging from 4.5% to 5.9%. In December 2003, the City entered into an equipment
lease agreement in the amount of $656,182 payable in sixty months. The payments are due in ten
consecutive semi-annual payments, and each payment includes 3.13% interest per year on the unpaid
principal. In November 2002, the City entered into another equipment lease in the amount of $1,038,840
payable in sixty months. The payments are due in ten consecutive semi-annual payments, and each
payment includes 3.26% interest per year on the unpaid balance. The combined Refuse, Water,
Wastewater, Parking, and Golf Course funds balance outstanding at June 30, 2004, was $3,033,737.
In December 1998, the City acquired a new telecommunications system under a capital lease agreement
payable in semi-annual installments of $87,706 through December 2005 with an interest rate of 4.85%.
This lease has been allocated to the General Fund, all enterprise funds, the Equipment Operations
internal service fund, and the Agency. The balance outstanding at June 30, 2004, was $54,568.
In August 1999, the City acquired a new information technology system under a capital lease agreement
payable in semi-annual installments of $114,770 through August 2004 with an interest rate of 5%. The
lease has been allocated to the General Fund, the Water, Wastewater, and Refuse enterprise funds, and
the Agency. The balance outstanding at June 30, 2004, was $35,745.
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City of Santa Cruz
In January 2004, The City acquired four refuse trucks under a capital lease agreement payable in semi-
annual installments of $88,482 through February 2009 with an annual interest rate of 3.04%. This lease
has been allocated to the Refuse fund. The balance outstanding at June 30, 2004, was $815,137.
The annual debt service requirements on the lease obligations at June 30, 2004, were as follows:
For the Year

Ending
2005 $ 1,606,777 $ 117,108 $ 1,723,885
2006 951,068 52,606 1,003,674
2007 384,300 18,093 402,393
2008 181,903 2,919 184,822
2009 815,139 69,687 884,826
Total $ 3,939,187 $ 260,413 $ 4,199,600
C. Defeased Debt
On June 3, 2004, the City issued $5,290,000 in Certificates of Participation. $1,590,000 (par value) of these
certificates, with an interest rate of 4%, were used to advance refund $1,975,000 of outstanding 1993
Santa Cruz Landfill Certificates with an average interest rate of 5.64%. The net proceeds of $1,558,702
(after payment of $61,340 in underwriting fees and other issuance costs), plus an additional $435,462 of
1993 Santa Cruz Landfill Certificates Reserve Fund monies were deposited in an irrevocable trust with
an agent and invested in a federal money market fund to provide for debt service payments on the 1993
certificates, which were called on July 1, 2004. As a result, the 1993 Santa Cruz Landfill Certificates of
Participation are considered to be defeased and the liability for those certificates has been removed from
the Refuse enterprise fund statement of net assets.
The City completed the advance refunding to reduce its total debt service payments by $24,163, which
resulted in an economic gain (difference between present values of the old and new debt service
payments) of $6,654.
7. RISK MANAGEMENT AND SELF-INSURANCE
The City has an established Risk Management Fund (an internal service fund) to account for a self-insurance
program. Under this program, the City is completely self-insured for unemployment insurance, vision, and
dental insurance claims. For the period ending June 30, 2004, the City was self-insured for workers'
compensation up to $1,000,000 per occurrence and for general liability up to $1,000,000 per occurrence.
Claims in excess of these amounts are insured. The City has contracted with outside administrators to
administer the programs. There were no significant reductions in insurance coverage. Settlements have not
exceeded insurance coverage in any of the past three fiscal years.
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City of Santa Cruz
7. RISK MANAGEMENT AND SELF-INSURANCE, Continued
In January 1997, the City joined the Authority for California Cities Excess Liability (ACCEL). The Authority
for California Cities Excess Liability (ACCEL) is a joint powers authority organized under the provisions of
Section 6500 et. seq. of the California Government code. ACCEL was founded in 1986 to provide medium-
sized California cities self-funding for catastrophic losses. There are currently 12 members. ACCEL operates
a liability program which is subject to an annual independent financial audit and biennial actuarial study.
ACCEL is governed by a twelve member Board of Directors. Each member agency appoints a representative
to the Board of Directors. Each member of the Board of Directors has a single vote for policy and charter
changes.
At inception, ACCEL self-funded $9,000,000 excess of a $1,000,000 member self-insured retention. From
1998 to 2003, ACCEL was commercially insured.
For the fiscal year 2003-2004, the deposit rate was $0.60 per one-hundred dollars of payroll. ACCEL self-
funded $1,000,000 excess of a $1,000,000 member self-insured retention, and purchased a $20,000,000
commercial excess insurance policy, providing a total limit of $22,000,000 per occurrence. Members also had
the option of paying their administrative costs out of the $0.60 rate. The City of Santa Cruz elected this
option.
ACCEL’s day-to-day operations are administered by Driver Alliant Insurance Services contracted by ACCEL
to provide accounting, risk consulting, insurance brokerage, and program administration services. Driver’s
responsibility also includes the administration of policies as set forth by the ACCEL Joint Powers Authority
Agreement, By-laws, and by the Board of Directors.
ACCEL provides coverage above each member’s self-insured retention (SIR), subject to aggregate limit.
Historically, nine members (including the City of Santa Cruz) have $500,000 SIR and two members have
$1,000,000 SIR. As of July 1, 2003, all members have SIR of $1,000,000.
ACCEL provided an optional coverage of $500,000 excess of $500,000 per occurrence through 1989-90. This
coverage is no longer available.
Prior to July 1, 1990, ACCEL pooled losses incurred by its members up to $10,000,000. Effective July 1, 1990,
ACCEL created a reinsurance pool within the $9,000,000 excess of $1,000,000 layer by purchasing $5,000,000
excess of $5,000,000 coverage. On July 1, 1997, ACCEL further reduced its exposure and purchased coverage
of $17,000,000 excess of $3,000,000 coverage. Due to favorable market conditions, ACCEL purchased
coverage of $19,000,000 excess of $1,000,000 effective July 1, 1998. Six members with SIR of $500,000
purchased additional coverage of $500,000 excess of $500,000 (including the City of Santa Cruz). As of July 1,
2000, nine members purchased insurance of $19,500,000 excess of $1,000,000. ACCEL is fully insured
through June 30, 2003.
As of July 1, 2003, ACCEL purchased a reinsurance covering $20,000,000 excess of $2,000,000 and pooled
losses in the layer $1,000,000 excess of $1,000,000. All members have SIR of $1,000,000.
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City of Santa Cruz
ACCEL has a retrospective rating plan whereby all premiums collected, together with related investment
income earned, in excess of pooled losses and loss expenses for each program year will be returned to
members beginning five years after the end of the program year. Losses and loss expenses are allocated to
each member based on a weighted actual loss formula.
Prior to 1999, ACCEL coverage was limited to $9,000,000 ultimate net loss for each occurrence, in excess of
the retained limit, and $27,000,000 ultimate net loss in the aggregate for each member. Effective July 1, 1999,
through June 30, 2003, ACCEL purchased excess insurance up to $19,000,000 for losses in excess of $1,000,000
per occurrence ($500,000 depending on the member city). For the period July 1, 1999, through June 30, 2003,
no risk was transferred to the pool.
Summary audited financial information for ACCEL as of and for the year ended June 30, 2004, is as follows:
Assets
Cash and investments $ 18,526,012

Other assets 353,086
Total assets $ 18,879,098
Liabilities and Net Assets
Unpaid claims liability $ 2,359,272

Retrospectively rated refunds liability 16,260,573
Other liabilities 143,382
Total liabilities 18,763,227
Net assets 115,871

Total liabilities and net assets $ 18,879,098
Revenues
Premiums earned $ 4,382,170

Investment income 207,187
Administrative fees 330,500
Total revenues 4,919,857

Expenses
Loss provision and premiums paid 4,637,163

General and administrative 232,677
Total expenses 4,869,840
Net income 50,017
Net assets, beginning of year 65,854

Net assets, end of year $ 115,871
Complete financial statements for ACCEL can be obtained from Driver Alliant Insurance Services, 600
Montgomery Street, 9th Floor, San Francisco, CA 94111.
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City of Santa Cruz
Risk Management Fund revenues are primarily premium charges received from other funds and are planned
to match expenses of insurance premiums for coverage in excess of self-insured amounts, estimated
payments resulting from self-insurance programs, and operating expenses. Department charges are based
on historical experience. Claims known to be payable and the estimated liability for the balance, based on a
case-by-case review of all claims is recorded as claims payable. An additional estimate of the amount to be
paid for claims incurred, but not reported, is also recorded as claims payable. Changes in the Risk
Management Fund's claims liability amount for the years ended June 30, 2002 through 2004 are as follows:
CLAIMS PAYABLE
Beginning Claims Ending

Balance Incurred Payments Balance
June 30, 2002 $ 6,142,259 $ 2,667,515 $ (2,424,753) $ 6,385,021

June 30, 2003 6,385,021 2,672,607 (2,594,159) 6,463,469
June 30, 2004 6,463,469 7,217,089 (3,848,258) 9,832,300
The General Fund and Redevelopment Agency Fund typically have been used in prior years to liquidate the
liability for claims and judgments.
8. LANDFILL CLOSURE AND POSTCLOSURE COSTS
In accordance with requirements established by the California Integrated Waste Management Board, the
City has recognized a portion of the landfill's closure and postclosure care (closure) costs. These cost
estimates are based on the amount of landfill used to date. The total estimated costs are as follows:
Total estimated closure costs $ 4,186,403

Total estimated postclosure costs 8,121,986
Total estimated closure and postclosure costs $ 12,308,389
The City has increased the landfill’s capacity through excavations and plans to continue excavating in
future years to increase capacity. This effort has also increased the estimates of the closure and postclosure
costs. At June 30, 2004, the estimated landfill closure cost liabilities of $5,230,144 and estimated annual
landfill closure cost of $216,245 were calculated as follows:
Total estimated closure and postclosure costs $ 12,308,389

Percent of used capacity to total capacity 42.49%
5,229,834
Miscellaneous adjustments 310
Estimated total closure and postclosure costs liability 5,230,144
Previous closure costs accrued 5,013,899
2003-2004 expense for closure

and postclosure costs $ 216,245
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City of Santa Cruz
8. LANDFILL CLOSURE AND POSTCLOSURE COSTS, Continued
The landfill has an estimated remaining capacity of 6,029,272 cubic yards and has a current projected closure
date of January 2038.
Based upon the requirements of the California Integrated Waste Management Board, the City set aside
$165,951 to fund future closure and post closure costs for the year ended June 30, 2004 All cash is invested.
During the year, $16,714 was withdrawn from the post closure fund to provide for partial closure costs. The
market value of the invested cash at June 30, 2004 was $2,678,443, and is available to provide for closure and
postclosure costs. Total funds accumulated as of June 30, 2004, are comprised as follows:
Closure $ 1,233,317
Postclosure 1,445,126
Total $ 2,678,443
The estimated closure costs are current estimates based on data provided by an independent consultant
and are subject to changes in inflation, technological advancements, or regulatory changes.
9. RETIREMENT PLANS
A. Pension Plan
Plan Description
The City contributes to the California Public Employees' Retirement System (PERS); an agent
multiple-employer defined benefit pension plan. PERS provides retirement and disability benefits,
annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a
common investment and administrative agent for participating public entities within the State of
California. Benefit provisions and all other requirements are established by state statute and city
ordinance. Copies of PERS’ annual financial report may be obtained from their Executive Office located
at 400 P Street, Sacramento, CA 95814.
Funding Policy
City employees are required to contribute 9% for safety employees and 7% for all other employees of
their annual covered salary. The City employer is required to contribute at an actuarially determined
rate; the fiscal year 2004 rate is 5.020% for miscellaneous employees, 27.027% for police safety
employees, and 32.956% for fire safety employees of annual covered payroll. The contribution
requirements of City employees and the City employer are established and may be amended by PERS.
Annual Pension Cost
For fiscal year 2004, the City’s annual pension cost of $4,729,159 for PERS was equal to the City’s
required and actual contributions. The required contribution was determined as part of the June 30,
2003, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions
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City of Santa Cruz
9. RETIREMENT PLANS, Continued
A. Pension Plan, Continued
included (a) 7.75% investment rate of return (net of administrative expenses); (b) projected salary
increases ranging from 3.25% to 14.45% depending on age, service, and type of employment, and (c) 2%
per year cost-of-living adjustments. Both (a) and (b) included an inflation component of 3.0%. The
actuarial value of PERS assets was determined using techniques that smooth the effects of short-term
volatility in the market value of investments over a three-year period. PERS unfunded actuarial accrued
liability (or surplus) is being amortized as a level percentage of projected payroll on a closed basis. The
amortization period at June 30, 2003 was 17 years for public safety police employees, 17 years for public
safety fire employees, and 17 years for miscellaneous employees for prior and current service unfunded
liability.
Fiscal Annual Percentage Net

Year Pension of APC Pension
Ended Cost (APC) Contributed Obligation
June 30, 2002 $ 1,615,243 100% $ -

June 30, 2003 1,774,677 100% -
June 30, 2004 4,729,159 100% -
10. POST-EMPLOYMENT RETIREMENT BENEFITS
The City pays a portion of its retiree’s health insurance premium. All part-time and full-time regular
employees that meet certain requirements (continuous service with the City and minimum age) are eligible.
As of June 30, 2004, there were 123 employees eligible. The benefit will be provided until the retiree becomes
eligible for Medicare. The benefit is provided through the memorandum of understanding (MOU) the City
has entered into with each bargaining unit. The retirees are paid monthly by the City per the amount
specified in each MOU. The City paid $84,689 in post-employment retirement benefits to 58 participants for
the year ended June 30, 2004.
11. COMMITMENTS AND CONTINGENCIES
The City participates in a number of Federal assisted grant programs, of which the principal grants are the
Disaster Assistance Program, Community Development Block Grant, HOME grant program, various
Department of Justice and Department of Transportation grant programs. These programs are subject to
program compliance audits by the grantors or their representatives. The amount, if any, of expenditures,
which may be disallowed by the granting agencies upon audit, cannot be determined at this time although
the City expects such amounts to be immaterial.
There are a number of lawsuits presently against the City. While the ultimate outcome of these lawsuits is
not determinable, in the opinion of the City Attorney and City management, recovery from the City, if any,
would not have a material effect on the accompanying financial statements.
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City of Santa Cruz
11. COMMITMENTS AND CONTINGENCIES, Continued
The California Legislature granted tidal and submerged lands in trust to the City to be used for a number of
statewide purposes in furtherance of navigation, commerce and fisheries. In accordance with this legislation,
revenues derived from the Wharf are required to be used for purposes permitted under the grant statute.
The following schedule summarizes the major contractual commitments of the City as of June 30, 2004:
Major Commitments and Contracts for Professional Services:
Bridge seismic retrofits $ 224,872

Water quality and treatment master plan 172,045
North coast water system rehabilitation preliminary engineering 852,884

Integrated water plan 139,449
New water supply facility preliminary engineering 129,215
Habitat conservation plan and Endangered Species Act permit 238,400
Design services for DeLaveaga Golf Course renovation 113,686
Total Major Professional Services 1,870,551
Major Commitments and Contracts for Capital Projects:
Ocean View Park improvements 306,830

South of Laurel Park improvements 243,740
City initiated water main replacements 394,653
Recycling trucks 815,136
Depot Park construction 2,412,951
Felton Booster Pump Station Rehabilitation 3,328,938
County of Santa Cruz work related water system relocations 109,410
Water treatment, remote facilities control system modernization 1,104,958
Total Major Capital Projects 8,716,616
Total Other Commitments 4,139,054
Total Commitments and Contracts $ 14,726,221
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City of Santa Cruz
12. OPERATING LEASES
The City is obligated under various operating leases for the use of land, buildings, office space and
equipment. Lease expenditures, primarily for governmental funds, for the year ended June 30, 2004 were
$99,876. Future minimum lease payments required by lease agreements that have initial or remaining non-
cancelable lease terms in excess of one year as of June 30, 2004 are as follows:
Year Ending June 30 Balance
2005 $ 93,966
2006 60,246
2007 44,256
2008 44,256
2009 44,256
2010-2014 5,348
Total future minimum lease payments $ 292,328
The City leases (as lessor) office facilities, buildings, and wharf facilities under operating leases to various
entities and individuals. Total revenues from these leases for the year ending June 30, 2004 were $902,649.
The total cost of leased assets as of June 30, 2004 was $11,812,312, and the accumulated depreciation of those
assets that are depreciable amounted to $1,278,295. Future estimated revenues from these leases are as
follows:
Year Ending June 30 Amount
2004 $ 902,649
2005 884,113
2006 845,973
2007 755,752
2008 549,428
Future years 4,206,611
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City of Santa Cruz
13. RESERVED AND DESIGNATED FUND BALANCES
Fund balances at June 30, 2004, have been reserved and designated for the following purposes:
Redevelopment Special Debt Capital

General Agency Revenue Service Projects
Fund Fund Funds Fund Funds Total
Reserved for:
Encumbrances $ 449,427 $ 327,208 $ 459,478 $ - $ 3,921,143 $ 5,157,256
Noncurrent receivables and advances 3,755,252 4,234,136 1,836,424 - - 9,825,812
Prepaid items 134,852 - 2,398 - - 137,250
Debt service - 392,744 - - 290,822 683,566
Capital projects 49,055 307 - - 157,750 207,112
Low and moderate income housing - 2,068,872 - - - 2,068,872
Total reserved 4,388,586 7,023,267 2,298,300 - 4,369,715 18,079,868
Designated for:
Accrued compensated absences 1,390,405 - 3,683 - - 1,394,088
Debt service - 2,754,631 - 457,945 - 3,212,576
Capital projects - 1,232,926 - - - 1,232,926
City public trust 5,591,485 - - - - 5,591,485
Unemployment insurance 36,263 - - - - 36,263
Housing in-lieu program 455,884 - - - - 455,884
Parks and recreation programs 18,303 - - - - 18,303
Kiosk maintenance 19,420 - - - - 19,420
Museum building 27,412 - - - - 27,412
Street trees 21,367 - - - - 21,367
Equipment maintenance 41,795 - - - - 41,795
Youth/teen programs 25,842 - - - - 25,842
CPVAW 1,700 - - - - 1,700
Police programs - - 92,499 - - 92,499
Housing - - 405,505 - - 405,505
Public works programs 8,295 - - - - 8,295
Rental maintenance - - 7,717 - - 7,717
Total designated 7,638,171 3,987,557 509,404 457,945 - 12,593,077
Unreserved, Undesignated 5,964,197 - 2,207,706 - (1,444,460) 6,727,443
Total fund balances $ 17,990,954 $ 11,010,824 $ 5,015,410 $ 457,945 $ 2,925,255 $ 37,400,388
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City of Santa Cruz
14. DEFICIT NET ASSETS
The Risk Management internal service fund had deficit net assets of $6,919,775 as of June 30, 2004. This
deficit is due to estimated workers’ compensation claims liabilities in excess of cash and other assets
available in the fund. It is anticipated that this deficit will be made up in future years by increased
contributions from other City funds. The City is working to establish an actuarially approved plan to fund
the increased liability over a number of years. Net assets in the fund are designated for the following
insurance activities:
Net Assets
Workers' compensation insurance $ (7,418,337)

Liability insurance 276,086
Group health insurance 222,476
Total net assets $ (6,919,775)
15. PRIOR PERIOD ADJUSTMENTS
The City recorded the following prior period adjustments in the Government-Wide Financial Statements.
Adjustments to the Governmental Activities include a correction to accumulated depreciation and an
adjustment to prior year property tax revenues, due to an overpayment. The adjustment to the Business-
Type Activities is to recognize revenue earned but unavailable, which was previously deferred.
Accordingly, the net assets as of July 1, 2003, have been restated as follows:
Net Assets, Prior Period Adjustments

as Previously Deferred Accumulated Prior Year Tax Net Assets,
Government-Wide Financial Statements Reported Revenue Depreciation Overpayment As Restated
Governmental Activities:
Net assets $ 163,473,350 $ - $ 37,810 $ (124,706) $ 163,386,454
Total governmental activities 163,473,350 - 37,810 (124,706) 163,386,454
Business-Type Activities:
Net assets 231,368,853 401,058 - - 231,769,911
Total business-type activities 231,368,853 401,058 - - 231,769,911
Total government-wide $ 394,842,203 $ 401,058 $ 37,810 $ (124,706) $ 395,156,365
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City of Santa Cruz
15. PRIOR PERIOD ADJUSTMENTS, Continued
The City made an adjustment to the Water enterprise fund to recognize revenue earned but unavailable,
which was previously deferred.
Prior Period
Net Assets, Adjustments
as Previously Deferred Net Assets,
Reported Revenue As Restated
Major Enterprise Funds:

Water fund $ 58,296,110 $ 401,058 $ 58,697,168
Internal Service Funds:
Risk management fund $ (875,697) $ (22,892) $ (898,589)
The City recorded the following prior period adjustments to eliminate accumulated accrued
compensated absences liabilities from governmental funds, in accordance with GASB Interpretation
No. 6.
Prior Period
Fund Balances, Adjustments
as Previously Compensated Fund Balances,
Reported Absences As Restated
Major Fund:
General fund $ 15,966,948 $ 2,238,215 $ 18,205,163
Non-Major Governmental Funds:
State Highway fund 10,297,895 4,096 10,301,991
Total $ 26,264,843 $ 2,242,311 $ 28,507,154
16. SUBSEQUENT EVENTS
The Redevelopment Agency of the City of Santa Cruz issued Merged Earthquake Recovery and
Reconstruction Project Area 2004 Tax Allocation Bonds after the fiscal year end. On October 1, 2004, bonds
in amount of $5,245,000 were issued. The Tax Allocation Bonds were issued by the Agency to refund Tax
Allocation Refunding Bonds, Series 1996 in the amount of $2,571,680 and raise additional funds for
programs, projects and activities relating to Earthquake Recovery and Reconstruction Project, a designated
redevelopment project in the City. Annual principal payments of $120,000 - $305,000 will be made through
October 1, 2031; the interest rate ranges from 2.50% - 4.625%.
The 2004 Tax Allocation Bonds will be secured by a pledge of and first lien of the tax increment revenues
derived from the Redevelopment Project, net of certain amounts which are payable to other taxing agencies.
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City of Santa Cruz
16. SUBSEQUENT EVENTS, Continued
This Bond is not a debt of the City of Santa Cruz. The Official Statements contain more information
regarding 2004 Tax Allocation Bonds.
On July 28th, 2004 the City entered into a five year capital lease agreement to obtain financing in the
amount of $580,000 for the purchase of a seventy-five foot aerial fire truck to replace a 1979 Crown
Telesquirt unit. The first interest payment of $9,657 is due in February, 2005, with annual installment
payments of $125,781 beginning in August of 2005 and ending in August of 2009. Interest is at the rate of
3.33% and the payments will be made from the General Fund.
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REQUIRED SUPPLEMENTARY INFORMATION
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City of Santa Cruz
Required Supplementary Information
1. BUDGETARY INFORMATION
An annual budget is adopted by the City Council no later than the first regular meeting in July for the fiscal
year beginning July first. As part of the budget process, all City departments submit budget requests for the
next fiscal year. These requests are reviewed, and a final City Manager recommended budget showing
estimated revenues and expenditures of the City is prepared. This proposed budget is transmitted to the
City Council and made available to the public for review. Study sessions and a public hearing are
conducted before final adoption of the budget by the City Council.
The City Manager is authorized to approve appropriation transfers within any department up to a specified
amount; however, any new appropriation or appropriation transfer between departments requires approval
by the City Council. Several supplemental appropriations were necessary during the year and are reflected
in the budget amounts in the financial statements. Expenditures may not legally exceed appropriations at
the department level.
Under the City Charter, all unexpended appropriations shall lapse at the end of the fiscal year unless they
are lawfully committed, or are required by law to be continuously appropriated from year to year.
Lawfully committed amounts include amounts legally encumbered at year end. Encumbrance accounting,
under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded
in order to reserve that portion of the applicable appropriation, is employed as an extension of formal
budgetary integration in the governmental fund types. Encumbrances outstanding at year-end are reported
as reservation of fund balances since they do not constitute expenditures or liabilities, and re-appropriations
in the subsequent year provide authority to complete these transactions as expenditures.
In addition, project-length (or non-lapsing) budgets are adopted for capital improvement and other projects,
and grant-funded projects or programs that may not be completed within the fiscal year during which the
budget appropriation for the project or program originates. Under these circumstances, the appropriation
continues until project or program completion, or unless the appropriation is subsequently amended or
rescinded by the City Council.
In the Budgetary Comparison Schedules, the “Original Budget” column includes the final adopted budget
amounts, re-appropriations for prior year encumbrances, and continuing appropriations for project-length
budgets automatically carried over from prior years.
The City Charter requires the City Council, upon recommendation of the City Manager and after providing
sufficient funds to meet debt service and operating needs, to annually set aside in the enterprise funds an
amount to be used for the acquisition and betterment of plant facilities. Such amounts, if any, would be
shown in the financial statements as cash and investments held for betterment of plant facilities. No such
funds were set aside during the year ended June 30, 2004.
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City of Santa Cruz
Required Supplementary Information, Continued
1. BUDGETARY INFORMATION, Continued
Budgets are adopted each year for all general, special revenue, debt service, and capital projects funds.
These governmental fund budgets are prepared on a basis consistent with generally accepted accounting
principles (GAAP), except in the following areas:
¾ Budgetary basis revenues include repayments of loan principal. Budgetary basis expenditures
include loans made. On a GAAP basis both of these are considered as reclassifications of fund
balance (between reserved and unreserved fund balance).
¾ GAAP basis revenues include the fair value adjustment to investment earnings, which are not
included in the budgetary basis.
A reconciliation of differences between budgetary and GAAP revenues and expenditures follows the budget
comparison schedules.
95
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BUDGETARY SCHEDULES
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City of Santa Cruz
Budgetary Comparison Schedule, General Fund
Budgeted Amounts Actual Amounts Budget to GAAP Actual Amounts

Original Final (Budgetary Basis) Differences (GAAP Basis)
REVENUES:
Taxes $ 31,022,052 $ 31,052,552 $ 31,696,322 $ - $ 31,696,322

Licenses and permits 518,000 518,000 529,649 - 529,649
Intergovernmental 4,072,820 4,386,640 3,745,601 - 3,745,601
Charges for services:
External 6,119,700 6,656,511 6,495,280 - 6,495,280
Internal 3,083,364 3,282,839 3,236,648 - 3,236,648
Interagency 8,325,209 8,130,551 7,865,015 (731,189) 7,133,826
Subtotal charges for services 17,528,273 18,069,901 17,596,943 (731,189) 16,865,754
Fines and forfeitures 1,527,800 1,586,124 1,799,557 - 1,799,557

Use of money and property 2,356,929 2,428,929 2,292,772 (206,609) 2,086,163
Other revenues 181,798 222,298 354,708 64,056 418,764
Total revenues 57,207,672 58,264,444 58,015,552 (873,742) 57,141,810
EXPENDITURES:
Current:
General government 9,567,557 9,723,835 8,973,688 (6,663) 8,967,025
Public safety 25,584,933 25,642,920 24,647,937 - 24,647,937
Parks and recreation 10,738,683 10,364,822 9,721,229 - 9,721,229
Library 8,984,021 8,789,363 8,528,577 - 8,528,577
Public works 4,523,945 4,494,845 3,989,048 - 3,989,048
Community and economic development 1,026,753 1,026,753 803,138 (731,189) 71,949
Social services 1,806,950 1,659,513 1,656,875 - 1,656,875
Capital outlay 637,810 708,935 506,267 744,895 1,251,162
Debt service:
Principal 295,841 295,841 295,835 - 295,835
Interest and fiscal charges 68,581 68,581 68,575 - 68,575
Total expenditures 63,235,074 62,775,408 59,191,169 7,043 59,198,212
REVENUES OVER (UNDER) EXPENDITURES (6,027,402) (4,510,964) (1,175,617) (880,785) (2,056,402)

Proceeds from asset disposition 825,000 825,000 771,823 (15,000) 756,823
Loan principal receipts 472,422 442,422 455,427 (455,427) -
Advances to other funds (400,000) (930,000) (530,000) 530,000 -
Transfers in 1,714,665 1,744,665 1,687,534 - 1,687,534
Transfers out (1,416,348) (1,755,555) (602,164) - (602,164)
Total other financing sources (uses) 1,195,739 326,532 1,782,620 59,573 1,842,193
Net change in fund balances (4,831,663) (4,184,432) 607,003 (821,212) (214,209)
FUND BALANCES:
Beginning of the year, as restated 11,948,404 11,902,648 11,902,648 6,302,515 18,205,163
End of year $ 7,116,741 $ 7,718,216 $ 12,509,651 $ 5,481,303 $ 17,990,954
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City of Santa Cruz
General Fund
Reconciliation of Net Changes in Fund Balances - Budgetary to GAAP Basis:
Net Change in Fund Balances - Budgetary Basis $ 607,003
The amount reported in the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund
Balances was different because:
Interagency charges for personnel services provided to the redevelopment agency are a revenue and
expenditure on a budgetary basis, but are eliminated in the Statement of Revenues, Expenditures and Changes (731,189)
in Fund Balances because the redevelopment agency is part of the reporting entity. 731,189
Unrealized gains and losses on investments, which are considered a component of investment income in the
Statement of Revenues, Expenditures and Changes in Fund Balances, are not included as revenue on a
budgetary basis. (206,609)
Costs for a City Hall fire restoration project recorded on the fund statements were recorded in another fund for
budgetary purposes. (767,232)
The City budgets for loans and advance disbursements which will not be repaid within the current year.
Although these amounts are recorded as long-term receivables on the Governmental Funds Balance Sheet,
they are not available for appropriation. 559,000
Accrual basis insurance proceeds are unavailable for appropriation in the general fund. 49,056
On a budgetary basis, the City records loan principal receipts as revenue, but on a GAAP basis, the receipts
reduce receivables. (455,427)
Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances $ (214,209)
Reconciliation of Fund Balances - Budgetary to GAAP Basis:

Fund Balances - Ending - Budgetary Basis $ 12,509,651
Cumulative effect of unrealized gains and losses on investments (49,235)

Reserved and designated balances unavailable for appropriation 4,140,133
Designated for noncurrent component of compensated absences 1,390,405
Fund Balances - Ending - GAAP Basis $ 17,990,954
Ending budgetary fund balance includes the following amounts:

Committed for re-appropriation in the following year $ 1,974,184
Restricted or designated for special purposes 4,630,258
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City of Santa Cruz
Required Supplementary Information, continued
Budgetary Comparison Schedule, Redevelopment Agency

REVENUES:
Tax increment $ 7,470,900 $ 7,766,455 $ 8,008,622 $ - $ 8,008,622

Use of money and property 129,317 129,317 337,704 (130,097) 207,607
Other revenues 78,000 78,000 94,314 - 94,314
Total revenues 7,678,217 7,973,772 8,440,640 (130,097) 8,310,543
EXPENDITURES:
Current:
Community and economic development 7,509,408 8,283,980 5,449,617 - 5,449,617
Capital outlay 605,650 933,943 53,495 - 53,495
Debt service:
Principal 976,598 1,606,364 1,898,818 (1,066,229) 832,589
Interest and fiscal charges 283,861 295,411 279,288 11,485 290,773
Total expenditures 9,375,517 11,119,698 7,681,218 (1,054,744) 6,626,474
REVENUES OVER (UNDER) EXPENDITURES (1,697,300) (3,145,926) 759,422 924,647 1,684,069

Loan proceeds (short term) 1,750,000 2,135,000 735,000 (735,000) -
Long term advance proceeds 400,000 400,000 - - -
Transfers in - 100,000 100,000 - 100,000
Total other financing sources (uses) 2,179,303 2,689,244 920,303 (820,303) 100,000
Net change in fund balances 482,003 (456,682) 1,679,725 104,344 1,784,069
FUND BALANCES:
Beginning of the year 5,787,284 5,787,284 5,787,284 3,439,471 9,226,755

End of year $ 6,269,287 $ 5,330,602 $ 7,467,009 $ 3,543,815 $ 11,010,824
100
City of Santa Cruz
Redevelopment
Agency Fund

Net Change in Fund Balances - Budgetary Basis $ 1,679,725
On a budgetary basis, the Agency records loan principal receipts as revenue, but on a GAAP basis, these
receipts reduce receivables. (85,303)
Proceeds of both short term loans and long term advances from the City are considered budgetary resources,
but are not revenues on a GAAP basis. (735,000)
The Agency budgets for both short term and long term loan and advance principal repayments to the City, but
these payments are not considered expenditures on a GAAP basis. 1,066,229
Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances $ 1,784,069


Reserved balances unavailable for appropriation 3,581,947
All funds are reserved or designated for debt service, capital projects, or low and moderate income housing.
101
102
City of Santa Cruz
PUBLIC EMPLOYEE RETIREMENT SYSTEM (PERS)

SCHEDULE OF FUNDING PROGRESS
Miscellaneous Employees
Unfunded
(Overfunded)
Unfunded Actuarial
Entry Age (Overfunded) Liability as
Actuarial Actuarial Actuarial Actuarial Percentage of
Valuation Value of Accrued Accrued Funded Covered Covered
Date Assets Liability Liability Ratio Payroll Payroll
June 30, 2001 $ 133,168,501 $ 118,812,672 $ (14,355,829) 112.1% $ 32,933,995 (43.6)%

June 30, 2002 126,284,083 132,266,944 5,982,861 95.5% 36,176,758 16.5%
June 30, 2003 129,704,897 150,709,327 21,004,430 86.1% 35,526,589 59.1%
Police Safety Employees
Unfunded
(Overfunded)
Unfunded Actuarial
June 30, 2001 $ 37,447,028 $ 38,460,123 $ 1,013,095 97.4% $ 5,876,326 17.2%

June 30, 2002 36,269,237 47,708,054 11,438,817 76.0% 5,989,547 191.0%
June 30, 2003 37,575,286 51,345,793 13,770,507 73.2% 6,864,482 200.6%
Fire Safety Employees
Unfunded
(Overfunded)
Unfunded Actuarial
June 30, 2001 $ 25,085,532 $ 26,575,658 $ 1,490,126 94.4% $ 3,526,056 42.3%

June 30, 2002 23,762,235 33,592,121 9,829,886 70.7% 3,904,140 251.8%
June 30, 2003 24,552,182 35,788,814 11,236,632 68.6% 4,190,556 268.1%
103
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104
SUPPLEMENTARY INFORMATION
105
106
Non-Major Governmental Funds
Special Revenue Funds:

Police - Accounts for state and federal grants and other revenues restricted to be used for police
programs.
State Highway Funds - This fund is used to account for the City's apportionment of the State excise tax
on gasoline and other related grants or receipts that are restricted for the planning, construction and
maintenance of streets and roads. It is also used to account for a subvention of the State sales tax on
gasoline (Traffic Congestion Relief Funds) that are restricted for street and highway maintenance, and
rehabilitation and reconstruction of necessary associated facilities such as drainage and traffic control
devices.
Parks and Recreation - Accounts for tax and fee revenues restricted for parks and recreation use.
Housing and Community Development - Accounts for receipts and expenditures under the Housing and
Community Development Act, which includes Community Development Block Grant funds and HOME
program funds. It also is used to account for Red Cross housing reconstruction loan repayments and
income and related expenditures for a City-owned rental property.
Transportation Development Act Fund - This fund is used to account for receipts of State Transportation
Development Act (TDA) funds restricted to be used for specialized or unmet transit needs. Acting as the
public agency sponsor, the City contracts with non-profit agencies to meet these obligations.
Debt Service Fund:
General Obligation Bonds - This fund accounts for the debt service for a $7 million general obligation
bond issue approved by voters in November 1998. Funds for payment of principal and interest on the
bonds are generated by a property tax override assessment of $9.00 per $100,000 of assessed value.
Capital Projects Fund:
General Capital Improvement - This fund is used to account for capital improvements for which special
projects funds have not been established. A portion of the City's transient occupancy tax receipts,
combined with other funding sources, such as grants, provides funding for capital projects of general
benefit, such as storm drain improvements, or improvements to public buildings.
107
City of Santa Cruz
Combining Balance Sheet
June 30, 2004
Special Revenue
Housing and Transportation

State Parks and Community Development
Police Highway Recreation Development Act
ASSETS
Cash and cash equivalents $ 250,792 $ 543,101 $ 1,273,935 $ 1,319,778 $ -

Cash and cash equivalents - 115,943 - - -
Interest receivable 1,864 3,124 11,148 248,982 -
Taxes receivable - - - - -
Accounts receivable - net 2,323 105,525 - 7,210 -
Due from other governments - 1,039,590 - 180,369 -
Due from other funds - - 7 - -
Prepaid items 268 732 - 1,398 -
Notes receivable - net - - 511,700 684,556 -
Loans receivable - net - - - 1,151,868 -
Total assets $ 255,247 $ 1,808,015 $ 1,796,790 $ 3,594,161 $ -
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable and other current liabilities $ 3,492 $ 392,013 $ - $ 31,069 $ -
Due to other funds - - 315 11,236 -
Intergovernmental payable - - - 291,203 -
Deferred revenue 142,920 223,174 511,700 301,481 -
Advances from other funds - - - 530,000 -
Total liabilities 146,412 615,187 512,015 1,164,989 -
Fund Balances:
Reserved 6,529 300,685 - 1,991,086 -
Unreserved, designated 92,499 3,683 - 413,222 -
Unreserved, undesignated, reported in:
Special revenue funds 9,807 888,460 1,284,775 24,864 -
Capital projects funds - - - - -
Total fund balances 108,835 1,192,828 1,284,775 2,429,172 -
Total liabilities and fund balances $ 255,247 $ 1,808,015 $ 1,796,790 $ 3,594,161 $ -
108
Debt Service Capital Projects
General Total Other

General Capital Governmental
Obligation Bond Improvement Funds
$ 433,367 $ 1,101,979 $ 4,922,952

- 762,472 878,415
3,176 17,734 286,028
21,402 496,035 517,437
- 120,054 235,112
- 1,649,452 2,869,411
- - 7
- - 2,398
- - 1,196,256
- - 1,151,868
$ 457,945 $ 4,147,726 $ 12,059,884
$ - $ 807,407 $ 1,233,981
- 13,079 24,630
- 31,869 323,072
- 247,316 1,426,591
- 122,800 652,800
- 1,222,471 3,661,074
- 4,369,715 6,668,015
457,945 - 967,349
- - 2,207,906
- (1,444,460) (1,444,460)
457,945 2,925,255 8,398,810
$ 457,945 $ 4,147,726 $ 12,059,884
109
City of Santa Cruz
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Special Revenue
Housing and Transportation

State Parks and Community Development
Police Highway Recreation Development Act
REVENUES:
Taxes $ - $ - $ 357,305 $ - $ -
Intergovernmental 177,896 2,536,105 - 1,223,418 588,183
Charges for services 57,990 1,457 37,623 - -
Fines and forfeitures 6,177 - - - -
Use of money and property (1,271) 1,940 10,511 55,350 -
Other revenues - - - 15,413 -
Total revenues 240,792 2,539,502 405,439 1,294,181 588,183
EXPENDITURES:
Current:
Public safety 195,826 - - - -
Public works - 550,144 - - -
Transit - - - - 588,183
Community and economic development - - - 810,590 -
Social services - - - 146,250 -
Capital outlay 82,498 1,739,288 - 865,080 -
Debt service:
Principal - 16,563 - - -
Interest and fiscal charges - 1,633 - 12,860 -
Total expenditures 278,324 2,307,628 - 1,834,780 588,183
REVENUES OVER
(UNDER) EXPENDITURES (37,532) 231,874 405,439 (540,599) -
Transfers in - 11,750 - 292,000 -

Transfers out (412) - (678,963) - -
Total other financing sources (uses) (412) 11,750 (678,963) 292,000 -
Net change in fund balances (37,944) 243,624 (273,524) (248,599) -
FUND BALANCES:
Beginning of year 146,779 945,108 1,558,299 2,677,771 -

Prior period adjustment (Note 16) - 4,096 - - -
Beginning of the year, as restated 146,779 949,204 1,558,299 2,677,771 -
End of year $ 108,835 $ 1,192,828 $ 1,284,775 $ 2,429,172 $ -
110
Debt Service Capital Projects
General Total Other

General Capital Governmental
Obligation Bond Improvement Funds
$ 456,532 $ 2,010,975 $ 2,824,812

- 1,986,911 6,512,513
- 228,549 325,619
- - 6,177
1,712 (16,305) 51,937
- 63,521 78,934
458,244 4,273,651 9,799,992
- - 195,826
- - 550,144
- - 588,183
- - 810,590
- - 146,250
- 5,561,650 8,248,516
157,796 416,154 590,513

231,687 246,193 492,373
389,483 6,223,997 11,622,395
68,761 (1,950,346) (1,822,403)
- 1,153,062 1,456,812
- (858,215) (1,537,590)
- 294,847 (80,778)
68,761 (1,655,499) (1,903,181)
389,184 4,580,754 10,297,895

- - 4,096
389,184 4,580,754 10,301,991
$ 457,945 $ 2,925,255 $ 8,398,810
111
City of Santa Cruz
Schedule of Budget and Actual Revenues
General Fund
Variance with
Final Budget
Original Final Actual Amounts Positive
Budget Budget (Budgetary Basis) (Negative)
REVENUES:
Taxes:
Property $ 7,350,000 $ 7,350,000 $ 7,327,071 $ (22,929)
Sales and use 8,910,000 8,910,000 9,084,026 174,026
Business license 835,000 835,000 792,893 (42,107)
Franchise 3,279,680 3,279,680 3,329,454 49,774
Transient occupancy 1,000,000 1,000,000 1,005,487 5,487
Parking 200,000 200,000 221,133 21,133
Utility users 7,300,000 7,330,500 7,638,926 308,426
Admission 1,650,000 1,650,000 1,724,330 74,330
Property transfer 200,000 200,000 276,466 76,466
Business improvement 180,000 180,000 179,163 (837)
Other taxes 117,372 117,372 117,373 1
Total taxes 31,022,052 31,052,552 31,696,322 643,770

Licenses and permits:
Construction permits 506,500 506,500 509,841 3,341
Other licenses and permits 11,500 11,500 19,808 8,308
Total licenses and permits 518,000 518,000 529,649 11,649

Intergovernmental revenues:
Federal 193,194 383,423 219,270 (164,153)
State 3,850,026 3,955,117 3,499,251 (455,866)
Local 29,600 48,100 26,964 (21,136)
Other agencies - - 116 116
Total intergovernmental revenues 4,072,820 4,386,640 3,745,601 (641,039)
Charges for services:

General government:
Legislative 1,100 1,100 1,328 228
Management and support 600,000 547,291 538,262 (9,029)
Planning and zoning 593,350 1,168,781 845,459 (323,322)
Other general government 4,200 6,789 11,156 4,367
Public safety:
Police 891,950 891,950 1,130,311 238,361
Fire 326,000 337,000 300,281 (36,719)
Protective inspection 301,000 301,000 275,166 (25,834)
Parks and recreation:
Parks 37,000 37,000 43,209 6,209
Recreation 2,510,200 2,510,200 2,508,180 (2,020)
Other parks and recreation 4,000 4,000 - (4,000)
Subtotal of charges for services 5,268,800 5,805,111 5,653,352 (151,759)
112
City of Santa Cruz
Schedule of Budget and Actual Revenues, Continued
General Fund
Variance with
Final Budget
Original Final Actual Amounts Positive
Budget Budget (Budgetary Basis) (Negative)
Charges for services, Continued:
Subtotal from previous page $ 5,268,800 $ 5,805,111 $ 5,653,352 $ (151,759)
Public works:
Engineering 22,000 22,500 56,080 33,580
Transportation 821,000 821,000 777,888 (43,112)
Community and economic development:
Other community and economic development 7,900 7,900 7,960 60
Internal charges for services provided 3,083,364 3,282,839 3,236,648 (46,191)
Interagency personnel services charges:
Library 7,589,270 7,394,612 7,133,826 (260,786)
Redevelopment Agency 735,939 735,939 731,189 (4,750)
Subtotal interagency charges 8,325,209 8,130,551 7,865,015 (265,536)
Total charges for services 17,528,273 18,069,901 17,596,943 (472,958)
Fines and forfeitures:

Court and traffic fines 1,376,000 1,397,500 1,468,292 70,792
Other fines and forfeitures 151,800 188,624 331,265 142,641
Total fines and forfeitures 1,527,800 1,586,124 1,799,557 213,433

Use of money and property:
Investment income 644,029 644,029 511,520 (132,509)

Rents and royalties 1,712,900 1,784,900 1,781,252 (3,648)
Total use of money and property 2,356,929 2,428,929 2,292,772 (136,157)
Other revenues:
Contributions and donations 61,798 102,298 258,797 156,499
Other miscellaneous revenues 120,000 120,000 95,911 (24,089)
Total other revenues 181,798 222,298 354,708 132,410
Total revenues 57,207,672 58,264,444 58,015,552 (248,892)
OTHER FINANCING SOURCES:
Proceeds from asset dispositions 825,000 825,000 771,823 (53,177)

Loan and advance principal receipts 472,422 442,422 455,427 13,005
Transfers in 1,714,665 1,744,665 1,687,534 (57,131)
Total other financing sources 3,012,087 3,012,087 2,914,784 (97,303)
Total revenues and other financing sources $ 60,219,759 $ 61,276,531 $ 60,930,336 $ (346,195)
113
City of Santa Cruz
Schedule of Budget and Actual Expenditures and Other Financing Uses For Legally Adopted
Appropriations by Department - General Fund
Actual
Services, Supplies
Personnel and Other Debt Capital Actual Amounts
Services Charges Service Outlay (Budgetary Basis)
City Council $ 168,633 $ 147,978 $ - $ - $ 316,611

City Clerk 435,504 118,754 25,107 - 579,365
City Manager 523,762 139,681 - - 663,443
City Attorney 11,025 530,891 - - 541,916
Human Resources 510,842 315,138 - 44,056 870,036
Finance 2,334,970 720,027 - 67,958 3,122,955
Police 12,384,024 3,397,524 - 51,402 15,832,950
Fire 7,120,933 709,479 77,743 113,355 8,021,510
Parks and Recreation 7,084,130 3,111,752 - 85,885 10,281,767
Library 7,133,826 1,394,751 - - 8,528,577
Public Works 3,000,222 974,525 43,812 48,184 4,066,743
Planning and Community Development 2,108,002 376,011 11,107 746 2,495,866
Redevelopment Administration 731,189 132 - - 731,321
Non-Departmental 14,302 2,822,483 - - 2,836,785
Debt service - - 206,642 - 206,642
Capital projects - - - 94,682 94,682
Total expenditures 43,561,364 14,759,126 364,411 506,268 59,191,169
Advances to other funds - - - - 530,000

Transfers out - - - - 602,164
Total expenditures and other

financing uses $ 43,561,364 $ 14,759,126 $ 364,411 $ 506,268 $ 60,323,333
Budget to GAAP Differences:

See reconciliation in Required Supplementary Information Note 1.
114
Variance with
Final Budget -
Final Positive Budget to GAAP Actual Amounts
Budget (Negative) Differences (GAAP Basis)
$ 517,814 $ 201,203 $ (29,000) $ 287,611

628,550 49,185 - 579,365
703,398 39,955 - 663,443
546,027 4,111 - 541,916
995,817 125,781 767,232 1,637,268
3,237,700 114,745 - 3,122,955
16,754,725 921,775 - 15,832,950
8,060,466 38,956 - 8,021,510
10,982,640 700,873 - 10,281,767
8,789,363 260,786 - 8,528,577
4,597,459 530,716 - 4,066,743
2,956,002 460,136 - 2,495,866
736,039 4,718 (731,189) 132
2,870,625 33,840 - 2,836,785
206,645 3 - 206,642
192,138 97,456 - 94,682
62,775,408 3,584,239 7,043 59,198,212
930,000 400,000 (530,000) -

1,755,555 1,153,391 - 602,164
$ 65,460,963 $ 5,137,630 $ (522,957) $ 59,800,376
115
City of Santa Cruz
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
Police Special Revenue Fund

REVENUES:
Intergovernmental $ 99,106 $ 175,344 $ 177,896 $ - $ 177,896

Charges for services 70,000 70,000 57,990 - 57,990
Fines and forfeitures - - 6,177 - 6,177
Use of money and property 15,401 15,401 6,560 (7,831) (1,271)
Total revenues 184,507 260,745 248,623 (7,831) 240,792
EXPENDITURES:
Current:
Public safety:
Police 209,448 209,448 195,826 - 195,826
Capital outlay 15,170 93,327 82,498 - 82,498
Total expenditures 224,618 302,775 278,324 - 278,324
REVENUES OVER
(UNDER) EXPENDITURES (40,111) (42,030) (29,701) (7,831) (37,532)

Transfers out (500) (500) (412) - (412)
Total other financing sources (uses) (500) (500) (412) - (412)
Net change in fund balances (40,611) (42,530) (30,113) (7,831) (37,944)
FUND BALANCES:
Beginning of the year 140,273 140,273 140,273 6,506 146,779
End of year $ 99,662 $ 97,743 $ 110,160 $ (1,325) $ 108,835
Ending budgetary fund balance committed for re-appropriation in the following year $ 1,920
116
City of Santa Cruz
State Highway Special Revenue Fund

REVENUES:
Intergovernmental $ 5,747,999 $ 5,831,999 $ 2,536,105 $ - $ 2,536,105

Charges for services - - 1,457 - 1,457
Use of money and property - 20,000 5,246 (3,306) 1,940
Total revenues 5,747,999 5,851,999 2,542,808 (3,306) 2,539,502
EXPENDITURES:
Current:
Public works:
Transportation 612,363 612,363 550,144 - 550,144
Capital outlay 5,992,767 6,010,817 1,739,288 - 1,739,288
Debt service:
Principal 16,564 16,564 16,563 - 16,563
Total expenditures 6,623,328 6,641,378 2,307,628 - 2,307,628
REVENUES OVER
(UNDER) EXPENDITURES (875,329) (789,379) 235,180 (3,306) 231,874

Proceeds from asset disposition 300,000 300,000 - - -
Transfers in - 11,750 11,750 - 11,750
Total other financing sources (uses) 300,000 311,750 11,750 - 11,750
Net change in fund balances (575,329) (477,629) 246,930 (3,306) 243,624
FUND BALANCES:
Beginning of the year, as restated 944,345 943,392 943,392 5,812 949,204
End of year $ 369,016 $ 465,763 $ 1,190,322 $ 2,506 $ 1,192,828
117
City of Santa Cruz
Parks and Recreation Fund

REVENUES:
Taxes $ 400,000 $ 400,000 $ 357,305 $ - $ 357,305

Charges for services - - 37,623 - 37,623
Total revenues 433,000 433,000 434,431 (28,992) 405,439

Transfers out (1,309,374) (1,318,950) (678,963) - (678,963)
Total other financing sources (uses) (1,309,374) (1,318,950) (678,963) - (678,963)
Net change in fund balances (876,374) (885,950) (244,532) (28,992) (273,524)
FUND BALANCES:
Beginning of the year 1,537,112 1,537,112 1,537,112 21,187 1,558,299
End of year $ 660,738 $ 651,162 $ 1,292,580 $ (7,805) $ 1,284,775
118
City of Santa Cruz
Housing and Community Development Fund

REVENUES:
Intergovernmental $ 1,951,719 $ 1,951,719 $ 1,223,418 $ - $ 1,223,418

Other revenues - - 15,413 - 15,413
Total revenues 2,003,587 2,003,587 1,311,807 (17,626) 1,294,181
EXPENDITURES:
Current:
Community and economic development:
Housing and community development 1,382,334 1,391,807 809,209 - 809,209
Redevelopment 2,200 2,200 1,381 - 1,381
Social services:
CDBG social services 146,358 146,358 146,250 - 146,250
Capital outlay 1,756,477 1,750,380 865,080 - 865,080
Debt service:
Principal - 1,426 - - -
Interest and fiscal charges - 198 12,860 - 12,860
REVENUES OVER
(UNDER) EXPENDITURES (1,283,782) (1,288,782) (522,973) (17,626) (540,599)

Proceeds from long-term debt - 1,530,000 530,000 (530,000) -
Transfers in - 292,000 292,000 - 292,000
Total other financing sources (uses) 120,010 1,942,010 1,215,214 (907,801) 292,000
Net change in fund balances (1,163,772) 653,228 692,241 (925,427) (248,599)
FUND BALANCES:
Beginning of the year 434,132 434,132 434,132 2,243,639 2,677,771
End of year $ (729,640) $ 1,087,360 $ 1,126,373 $ 1,318,212 $ 2,429,172
119
City of Santa Cruz
Transportation Development Act

REVENUES:
Intergovernmental $ 592,903 $ 593,603 $ 588,183 $ - $ 588,183
Total revenues 592,903 593,603 588,183 - 588,183
EXPENDITURES:
Current:
Transit 592,903 593,603 588,183 - 588,183
REVENUES OVER
(UNDER) EXPENDITURES - - - - -
FUND BALANCES:
Beginning of the year - - - - -
End of year $ - $ - $ - $ - $ -
120
City of Santa Cruz
General Obligation Bond

REVENUES:
Taxes $ 428,915 $ 428,915 $ 456,532 $ - $ 456,532

Total revenues 437,415 437,415 462,231 (3,987) 458,244
EXPENDITURES:
Debt service:
Principal 157,797 157,797 157,796 - 157,796
REVENUES OVER
(UNDER) EXPENDITURES 45,313 45,313 72,748 (3,987) 68,761
FUND BALANCES:
Beginning of the year 386,412 386,412 386,412 2,772 389,184
End of year $ 431,725 $ 431,725 $ 459,160 $ (1,215) $ 457,945
121
City of Santa Cruz
General Capital Improvement Projects

REVENUES:
Taxes $ 2,000,000 $ 2,000,000 $ 2,010,975 $ - $ 2,010,975

Intergovernmental 7,333,860 7,619,857 1,986,911 - 1,986,911
Charges for services 220,000 220,000 228,549 - 228,549
Use of money and property 25,000 25,000 23,674 (39,979) (16,305)
Other revenues 86,600 86,600 63,521 - 63,521
Total revenues 9,665,460 9,951,457 4,313,630 (39,979) 4,273,651
EXPENDITURES:
Capital outlay 14,917,933 15,342,329 5,561,650 - 5,561,650

Debt service:
Principal 416,156 416,156 416,154 - 416,154
REVENUES OVER
(UNDER) EXPENDITURES (5,917,170) (6,055,569) (1,910,367) (39,979) (1,950,346)
Proceeds from asset disposition 66,667 66,667 - - -

Proceeds from long-term debt - 122,800 122,800 (122,800) -
Transfers in 2,884,094 2,959,747 1,153,062 - 1,153,062
Transfers out (825,000) (846,750) (858,215) - (858,215)
Total other financing sources (uses) 2,125,761 2,302,464 417,647 (122,800) 294,847
Net change in fund balances (3,791,409) (3,753,105) (1,492,720) (162,779) (1,655,499)
FUND BALANCES:
Beginning of the year 4,257,800 4,258,400 4,258,400 322,354 4,580,754
End of year $ 466,391 $ 505,295 $ 2,765,680 $ 159,575 $ 2,925,255
Ending budgetary fund balance committed for re-appropriation in the following year $ 2,222,949
122
City of Santa Cruz
Other
Governmental
Funds
Net Change in Fund Balances - Budgetary Basis $ (755,446)
Proceeds of long term advances from other funds are considered budgetary resources, but are not revenues
on a GAAP basis. (652,800)
On a budgetary basis, the City records loan principal receipts as revenue, but on a GAAP basis, these receipts
reduce receivables. (393,214)
Net Change in Fund Balances - Statement of Revenues, Expenditures and Changes in Fund Balances $ (1,903,181)


Noncurrent advances payable (652,800)
Reserved balances unavailable for appropriation 2,126,829
Designated for noncurrent component of compensated absences 3,683
123
124
INTERNAL SERVICE FUNDS
Equipment Operations - This fund is used to account for the expenses related to city-wide fleet operations
and maintenance activities, including vehicles, communications equipment, and other pooled equipment.
Internal contributions to support this fund are based on cost recovery through charges to user departments
and funds. These charges do not include the cost of equipment replacement.
Stores Services - Accounts for the costs of operating a centralized warehouse used by the City.
Telecommunications - This fund is used to account for the expenses related to the acquisition of
communications equipment and ongoing maintenance of the telephone network including the main
telephone switch, voice mail system, pagers, cell phones, and fax machines. Internal contributions to support
this fund are based on cost recovery through user departments and funds. These charges do not include the
cost of equipment replacement.
Risk Management - Accounts for the expenses of the City's insurance program, including costs related to
claims, administration, legal defense, and insurance premiums. Internal contributions to support this fund are
based on cost recovery through charges to departments and funds. The following insurance activities are
provided for in this fund:
Workers' Compensation Insurance
Liability Insurance
Group Health Insurance
125
City of Santa Cruz
Combining Statement of Net Assets
All Internal Service Funds
June 30, 2004
Equipment Stores Telecommun- Risk

Operations Services ications Management Total
ASSETS
Current assets:
Cash and cash equivalents $ 308,391 $ 83,261 $ 82,736 $ 1,208,032 $ 1,682,420
Restricted cash and cash equivalents - - 60,486 - 60,486
Interest receivable 2,811 497 823 14,284 18,415
Accounts receivable - net 57,349 - 730,823 788,172
Due from other funds 632 - 324 186,146 187,102
Prepaid items 2,879 - 136 1,755 4,770
Inventories - 99,463 - - 99,463
Deposits - - - 987,505 987,505
Total current assets 372,062 183,221 144,505 3,128,545 3,828,333
Noncurrent assets:
Capital assets:
Machinery and equipment 256,150 - 746,577 8,160 1,010,887
Software - - 336,296 - 336,296
Total capital assets 256,150 - 1,082,873 8,160 1,347,183
Less accumulated depreciation (236,632) - (766,589) (1,768) (1,004,989)
Total capital assets, net 19,518 - 316,284 6,392 342,194
Total noncurrent assets 19,518 - 316,284 6,392 342,194
Total assets 391,580 183,221 460,789 3,134,937 4,170,527
LIABILITIES
Accounts payable and other current liabilities 100,993 7,389 11,704 173,356 293,442
Due to other funds - 150 - 49,056 49,206
Claims and judgments payable - due within one year - - - 2,188,200 2,188,200
Compensated absences payable - due within one year 23,651 - - - 23,651
due within one year 2,575 - 23,088 - 25,663
Total current liabilities 127,219 7,539 34,792 2,410,612 2,580,162
Claims and judgments payable - due in more than one year - - - 7,644,100 7,644,100
Compensated absences payable - due in more than one year 11,825 - - - 11,825
due in more than one year 1,335 - 11,966 - 13,301
Total noncurrent liabilities 13,160 - 11,966 7,644,100 7,669,226
Total liabilities 140,379 7,539 46,758 10,054,712 10,249,388
NET ASSETS
Invested in capital assets, net of related debt 15,608 - 281,230 6,392 303,230
Restricted for:
Debt service - - 60,486 - 60,486
Unrestricted 235,593 175,682 72,315 (6,926,167) (6,442,577)
Total net assets $ 251,201 $ 175,682 $ 414,031 $ (6,919,775) $ (6,078,861)
126
City of Santa Cruz
Combining Statement of Revenues, Expenses and Changes in Net Assets

OPERATING REVENUES:
Charges for services - internal $ 2,143,660 $ 183,494 $ 186,384 $ 4,640,357 $ 7,153,895

Charges for services - external 95,650 - 51,300 17,525 164,475
Other revenues 2,665 94 - 496,466 499,225
Total operating revenues 2,241,975 183,588 237,684 5,154,348 7,817,595
OPERATING EXPENSES:
Personnel services 960,094 - 82,490 411,046 1,453,630

Services, supplies, and other charges 1,370,196 170,882 124,516 8,957,952 10,623,546
Depreciation and amortization 4,811 - 157,606 1,632 164,049
Total operating expenses 2,335,101 170,882 364,612 9,370,630 12,241,225
Operating income (loss) (93,126) 12,706 (126,928) (4,216,282) (4,423,630)
NONOPERATING REVENUES (EXPENSES):
Investment earnings 2,043 1,118 1,087 6,639 10,887

Interest expense and fiscal charges (279) - (2,504) - (2,783)
Gain (loss) on sale of capital assets 5,500 - - - 5,500
Total nonoperating revenues (expenses) 7,264 1,118 (1,417) 6,639 13,604
Income (loss) before transfers (85,862) 13,824 (128,345) (4,209,643) (4,410,026)
Transfers out (12,975) (1,976) (1,562) (753,733) (770,246)
Change in net assets (98,837) 11,848 (129,907) (4,963,376) (5,180,272)
NET ASSETS:
Beginning of year 350,038 163,834 543,938 (1,933,507) (875,697)

Prior period adjustment (Note 16) - - - (22,892) (22,892)
Beginning of the year, as restated 350,038 163,834 543,938 (1,956,399) (898,589)
End of year $ 251,201 $ 175,682 $ 414,031 $ (6,919,775) $ (6,078,861)
127
City of Santa Cruz
Combining Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers and users $ 49,953 $ - $ 51,300 $ 17,525 $ 118,778
Cash received from interfund services provided 2,143,660 183,494 186,384 4,441,578 6,955,116
Cash payments to suppliers for goods and services (1,060,839) (174,735) (122,919) (5,975,546) (7,334,039)
Cash payments to employees for services (964,811) - (82,490) (411,046) (1,458,347)
Cash payments for interfund services used (313,514) - (18) (6) (313,538)
Cash received from (payments to) others 2,665 94 - 496,466 499,225
Net cash provided (used) by operating activities (142,886) 8,853 32,257 (1,431,029) (1,532,805)
CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES:
Transfers out (12,975) (1,976) (1,562) (753,733) (770,246)
Net cash provided (used) by
noncapital financing activities (12,975) (1,976) (1,562) (753,733) (770,246)
CASH FLOWS FROM CAPITAL AND

RELATED FINANCING ACTIVITIES:
Purchase and construction of capital assets - - - - -
Principal paid on capital debt (2,455) - (22,008) - (24,463)
Interest paid on capital debt (279) - (2,504) - (2,783)
Proceeds from sales of capital assets 5,500 - - - 5,500
Net cash provided (used) by capital
and related financing activities 2,766 - (24,512) - (21,746)
CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income received 2,044 1,119 697 6,639 10,499
Net cash provided (used) by investing activities 2,044 1,119 697 6,639 10,499
Net increase (decrease) in cash and cash equivalents (151,051) 7,996 6,880 (2,178,123) (2,314,298)
CASH AND CASH EQUIVALENTS:

Beginning of year 459,442 75,265 136,342 3,386,155 4,057,204
End of year $ 308,391 $ 83,261 $ 143,222 $ 1,208,032 $ 1,742,906
RECONCILIATION OF OPERATING INCOME (LOSS) TO

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating income (loss) $ (93,126) $ 12,706 $ (126,928) $ (4,216,282) $ (4,423,630)
Adjustments to reconcile operating income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 4,811 - 157,606 1,632 164,049
Changes in current assets and liabilities:
Accounts receivable (45,697) - - 519,396 473,699
Prepaid items (2,879) - (136) (1,755) (4,770)
Inventories - 20,507 - - 20,507
Deposits - - - 18,789 18,789
Accounts payable and other current liabilities (1,278) (24,360) 1,715 (403,465) (427,388)
Due to other funds - - - (718,175) (718,175)
Claims and judgments payable - - - 3,368,831 3,368,831
Compensated absences payable (4,717) - - - (4,717)
Total adjustments (49,760) (3,853) 159,185 2,785,253 2,890,825
Net cash provided (used) by operating activities $ (142,886) $ 8,853 $ 32,257 $ (1,431,029) $ (1,532,805)
128
Private-Purpose Trust Funds
McCaskill Trust - Local History - is restricted in purpose to promulgate local history. The principal and
income benefit the Library Joint Powers Authority,
McCaskill Trust - Visually Impaired - is restricted in purpose to providing library materials for the visually
impaired. The principal and income benefit the Library Joint Powers Authority.
The Finkeldey Trust - is restricted in purpose for the acquisition of musical literature. The principal and
income benefit the Library Joint Powers Authority.
129
City of Santa Cruz
Combining Statement of Fiduciary Net Assets
June 30, 2004
McCaskill McCaskill Total

Trust - Local Trust - Visually Finkeldey Private-Purpose
History Impaired Trust Trust Funds
ASSETS
Cash and cash equivalents $ 257,443 $ 248,063 $ 12,035 $ 517,541

Receivables:
Interest receivable 1,901 1,841 95 3,837
Total assets 259,344 249,904 12,130 521,378
NET ASSETS
Held in trust for library programs $ 259,344 $ 249,904 $ 12,130 $ 521,378
130
City of Santa Cruz
Combining Statement of Changes in Fiduciary Net Assets
Total
McCaskill McCaskill Private-
Trust - Local Trust - Visually Finkeldey Purpose
History Impaired Trust Trust Funds
ADDITIONS:
Investment earnings $ 1,346 $ 1,017 $ 75 $ 2,438
Total additions 1,346 1,017 75 2,438
DEDUCTIONS:
Library programs 3,357 5,889 755 10,001
Total deductions 3,357 5,889 755 10,001
Change in net assets (2,011) (4,872) (680) (7,563)
NET ASSETS:
Beginning of year 261,355 254,776 12,810 528,941
End of year $ 259,344 $ 249,904 $ 12,130 $ 521,378
131
132
Agency Funds
Library Joint Powers Authority - Used to account for funds held by the City in an agency capacity
for the Library Joint Powers Authority, which was established to finance the operations of the former
City/County library system.
Trust Deposit Holding - This fund is used to hold cash deposits received from outside parties on a
temporary basis.
Payroll Payables - Used to account for cash transferred from various funds to pay for payroll
liabilities, which are paid out of this fund.
Special Assessments - Accounts for assets held by the City in an agency capacity for special
assessment districts. The City acts as agent for collection of principal and interest payments from the
property owners and remits these monies to the bondholders. If funds are not available, the City is
under no obligation to make bond payments from its own funds.
133
City of Santa Cruz
Combining Statement of Fiduciary Net Assets
Agency Funds
June 30, 2004
Library Trust Total

Joint Powers Deposit Payroll Special Agency
Authority Holding Payables Assessments Funds
ASSETS
Cash and cash equivalents $ - $ 359,668 $ 517,714 $ 148,845 $ 1,026,227

Investments - - - 100,000 100,000
Receivables:
Interest receivable 846 724 - 4,888 6,458
Taxes receivable 523,613 - - 10,170 533,783
Accounts receivable 611,522 - - - 611,522
Due from other governments 1,999 - - - 1,999
Prepaid Items 136 - - - 136
Total assets $ 1,138,116 $ 360,392 $ 517,714 $ 263,903 $ 2,280,125
LIABILITIES
Accounts payable and

other current liabilities $ 421,392 $ 4,545 $ 517,714 $ - $ 943,651
Due to other governments 679,339 - - - 679,339
Deferred revenue 37,385 1,441 - - 38,826
Deposits payable - 354,406 - - 354,406
Payable to bondholders - - - 263,903 263,903
Total liabilities $ 1,138,116 $ 360,392 $ 517,714 $ 263,903 $ 2,280,125
134
STATISTICAL SECTION
(Unaudited)
135
City of Santa Cruz
General Government Expenditures by Function
Last Ten Fiscal Years
Community &
Fiscal General Public Parks and Public Economic Social
Year Government Safety Recreation Library Works Development Services
1995 $ 6,157,369 $ 12,435,182 $ 6,445,713 $ 4,301,057 $ 4,048,288 $ - $ 1,040,356

1996 6,451,398 13,263,127 6,884,301 4,352,862 3,641,572 - 1,130,750
1997 6,801,244 15,178,609 7,082,558 4,615,242 3,748,918 - 1,164,564
1998 7,243,351 16,537,380 7,466,564 1,508,087 3,735,292 - 1,301,223
1999 8,307,129 17,583,619 7,680,937 1,435,457 4,449,857 - 1,355,280
2000 8,658,374 18,175,374 7,998,743 1,404,622 4,893,280 - 1,568,533
2001 9,453,886 19,590,258 8,649,498 1,423,006 4,930,360 107,797 1,797,776
2002 10,015,075 21,316,301 9,816,703 1,410,148 5,047,532 90,532 2,147,331
2003 9,673,413 22,599,713 9,773,346 8,412,201 5,016,269 450,594 1,826,306
2004 8,967,025 24,647,937 9,721,229 8,528,577 3,989,048 71,949 1,656,875
Notes:
This table includes expenditures of the General Fund.
Beginning in fiscal year 2003, the cost of personnel services provided to the Library Joint Powers Authority was
included in General Fund expenditures, as well as the cost of interfund personnel services provided.
Source: City of Santa Cruz Finance Department
136
Table 1
Earthquake Capital Debt

Damage Outlay Service Total
$ 1,519,780 $ 1,423,141 $ - $ 37,370,886

391,281 881,480 - 36,996,771
2,606,019 1,680,249 - 42,877,403
5,019,412 842,588 - 43,653,897
- 2,118,540 - 42,930,819
- 1,999,097 134,935 44,832,958
- 2,427,838 152,364 48,532,783
- 2,916,470 300,520 53,060,612
- 957,058 320,598 59,029,498
- 1,251,162 364,410 59,198,212
137
City of Santa Cruz
General Government Revenues by Source
Charges Fines Use of Money

Fiscal Licenses and Inter- for and and Other
Year Taxes Permits Governmental Services Forfeitures Property Revenues
1995 $ 23,041,822 $ 1,259,334 $ 2,205,598 $ 7,928,477 $ 1,130,147 $ 3,114,865 $ 244,273

1996 24,378,881 1,197,717 2,580,270 8,190,361 1,288,803 3,821,101 172,287
1997 25,857,144 1,335,623 3,296,590 8,450,778 1,169,823 4,057,707 219,250
1998 23,292,917 1,366,948 3,410,230 6,290,188 1,064,554 3,623,968 280,513
1999 24,918,906 1,397,862 4,170,892 6,729,820 1,397,833 3,794,000 213,496
2000 27,646,368 1,595,964 4,732,311 6,566,033 1,347,496 3,574,121 324,802
2001 30,258,503 1,342,471 5,281,661 7,009,901 1,286,990 4,152,368 327,692
2002 29,238,472 1,267,939 5,339,612 7,151,012 1,282,697 3,577,774 397,896
2003 30,027,154 614,012 4,788,035 16,693,936 1,555,481 2,252,373 308,104
2004 31,696,322 529,649 3,745,601 16,865,754 1,799,557 2,086,163 418,764
Notes:
This table includes revenue of the General Fund.
Beginning in fiscal year 2003, charges for personnel services provided to the Library Joint Powers Authority were
included in General Fund charges for services, as well as charges for interfund personnel services provided.Also, prior
to fiscal year 2003, business license taxes were shown in licenses and permits.
138
Table 2
Earthquake
Relief Total
$ 4,308,869 $ 43,233,385
75,524 41,704,944
654,926 45,041,841
- 39,329,318
- 42,622,809
- 45,787,095
- 49,659,586
- 48,255,402
- 56,239,095
- 57,141,810
139
City of Santa Cruz
Tax Revenues by Source
Fiscal Sales Transient Utility

Year Property and Use Franchise Occupancy Users Admission
1995 $ 8,121,277 $ 9,224,700 $ 1,563,467 $ 2,227,849 $ 5,810,555 $ 1,282,420

1996 8,434,673 9,672,987 1,660,067 2,570,636 6,022,023 1,528,661
1997 9,192,280 10,314,425 1,695,707 2,710,994 6,338,533 1,511,605
1998 9,784,131 7,191,934 1,736,039 2,716,397 6,557,490 1,539,111
1999 10,484,409 7,415,341 2,476,604 3,174,694 6,912,440 1,502,540
2000 12,176,209 8,857,748 2,771,014 3,541,396 7,149,619 1,583,897
2001 13,342,450 9,790,693 2,851,830 3,900,905 8,246,829 1,611,318
2002 14,944,971 9,126,341 2,996,907 3,131,378 7,627,331 1,612,526
2003 15,629,920 8,291,244 3,132,743 2,932,256 7,592,049 1,664,150
2004 15,792,225 9,084,026 3,329,454 3,016,463 7,638,926 1,724,330
Notes:
This table includes all governmental fund types.
Fiscal years 1995 through 1997 include half-cent sales tax override (Measure E) for earthquake repairs. The half-cent
override ended March 31, 1997.
Prior to fiscal year 2003, business license taxes were shown in permits and licenses.
Beginning with fiscal year 2003, business improvement taxes include the Co-op Retail Management Business Real
Property Improvement District.
140
Table 3
Park and
Business Property Business Recreation
Parking Improvement Transfer License Facilities
$ 141,982 $ 135,724 $ 96,318 $ - $ -

146,426 140,859 115,843 - -
158,576 168,736 136,174 - -
147,877 175,114 162,915 - -
192,352 167,500 186,624 - -
158,229 170,369 219,132 - -
178,373 183,711 200,041 - -
194,646 175,868 194,632 - -
199,371 273,965 191,042 784,446 551,514
221,133 296,536 276,466 792,893 357,305
141
City of Santa Cruz Table 4
Property Tax Levies and Collections
Outstanding
Total Delinquent
Percent Delinquent Total Collections as Outstanding Taxes as
Total Tax Current Tax of Levy Tax Tax as Percent of Delinquent Percent of
Fiscal Year Levy Collections Collected Collections Collections Current Levy Taxes Current Levy
1995 $ 7,853,836 $ 7,853,836 100.0% ** $ 7,853,836 100.0% ** **

1996 8,130,382 8,130,382 100.0% ** 8,130,382 100.0% ** **
1997 8,800,364 8,800,364 100.0% ** 8,800,364 100.0% ** **
1998 9,396,855 9,396,855 100.0% ** 9,396,855 100.0% ** **
1999 10,104,672 10,104,672 100.0% ** 10,104,672 100.0% ** **
2000 11,732,295 11,732,295 100.0% ** 11,732,295 100.0% ** **
2001 12,516,202 12,516,202 100.0% ** 12,516,202 100.0% ** **
2002 14,190,378 14,190,378 100.0% ** 14,190,378 100.0% ** **
2003 14,639,056 14,639,056 100.0% ** 14,639,056 100.0% ** **
2004 15,335,693 15,335,693 100.0% ** 15,335,693 100.0% ** **
Notes:
This table includes levies and collections for the Redevelopment Agency.
** Because it adopted a new method of distributing property taxes (commonly referred to as the "Teeter Plan"), the Count
is now responsible for all delinquent secured property taxes.
Source: County of Santa Cruz Auditor-Controller's Office
142
Assessed and Estimated Actual Value of Taxable Property
Secured Roll Unsecured Roll Total

Fiscal Year Assessed Value Assessed Value Assessed Value
1995 $ 2,825,998,829 $ 177,879,596 $ 3,003,878,425

1996 2,902,071,132 185,926,518 3,087,997,650
1997 3,027,381,953 176,491,197 3,203,873,150
1998 3,151,981,755 176,321,921 3,328,303,676
1999 3,297,460,618 186,050,833 3,483,511,451
2000 3,583,471,174 198,830,667 3,782,301,841
2001 3,844,483,638 207,913,809 4,052,397,447
2002 4,217,070,195 237,668,331 4,454,738,526
2003 4,443,604,163 237,898,436 4,681,502,599
2004 4,707,428,936 225,168,674 4,932,597,610
Notes:
This table has been adjusted to reflect fiscal year assessed values.
With the passage of a constitutional amendment (Proposition 13) and subsequently enacted State legislation,
property is assessed according to base year rather than on a percentage of market value. Accordingly, a reliable
estimate of actual value a taxable property within the City is not possible.
143
Property Tax Rates and Tax Levies - Direct and Overlapping Governments
Fiscal Year City School District County Totals
Tax Rates
1995 0.000 0.000 1.000 1.000
1996 0.000 0.000 1.000 1.000
1997 0.000 0.000 1.000 1.000
1998 0.000 0.000 1.000 1.000
1999 0.000 0.000 1.000 1.000
2000 0.009 0.039 1.000 1.048
2001 0.009 0.034 1.000 1.043
2002 0.009 0.034 1.000 1.043
2003 0.009 0.038 1.000 1.047
2004 0.009 0.037 1.000 1.046
Tax Levies
1995 $ - $ - $ 26,939,307 $ 26,939,307

1996 - - 28,350,522 28,350,522
1997 - - 29,362,800 29,362,800
1998 - - 30,864,164 30,864,164
1999 - 1,264,689 33,281,294 34,545,983
2000 291,566 1,263,453 32,396,229 33,951,248
2001 309,453 1,340,963 34,383,654 36,034,070
2002 333,401 1,444,739 37,044,583 38,822,723
2003 352,611 1,527,983 39,179,039 41,059,633
2004 374,721 1,540,518 41,635,632 43,550,871
The passage of a constitutional amendment (Proposition 13) in June 1978 limits the property rate to a base of $1.00 per
$100.00 plus the rates necessary to fund voter approved general obligation bonds. The $1.00 rate is levied by the County
and apportioned to local agencies according to a formula perscribed by the California legislature.
Source: Santa Cruz County Auditor - Controller
144
Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt Per Capita
Gross Debt Ratio of Net Net Bonded

Assessed Bonded Service Monies Net Bonded Bonded Debt to Debt per
Fiscal Year Population Value Debt Available Debt Assessed Value Capita
1995 52,677 $ 3,003,878,425 $ - $ - $ - - $ -

1996 52,731 3,087,997,650 - - - - -
1997 53,172 3,203,873,150 - - - - -
1998 53,172 3,328,303,676 - - - - -
1999 54,575 3,483,511,451 6,998,473 12 6,998,461 0.00201 128.24
2000 56,046 3,782,301,841 7,176,298 125,218 7,051,080 0.00186 125.81
2001 55,028 4,052,397,447 7,299,481 277,763 7,021,718 0.00173 127.60
2002 55,085 4,454,738,526 7,286,115 324,117 6,961,998 0.00156 126.39
2003 55,633 4,681,502,599 7,260,759 389,184 6,871,575 0.00147 123.52
2004 56,289 4,932,597,610 7,228,153 457,945 6,770,208 0.00137 120.28
Notes:
This table has been adjusted to reflect fiscal year assessed values.

City of Santa Cruz Finance Department
145
Computation of Legal Debt Margin
June 30, 2004
Total assessed value $ 4,932,597,610
Legal debt limit - 15% of total assessed valuation 739,889,642
Amount of debt applicable to debt limit:
Total bonded debt, general obligation $ 7,228,153
Less:
Assets in debt service fund 457,945
Total amount of debt applicable to debt limit 6,770,208
Legal debt margin $ 733,119,434
Notes:
Section 1418 of the Charter of the City of Santa Cruz limits general obligation bonds indebtedness to 15% of the total
assessed valuation of all real personal property within the City.
146
Ratio of Annual Debt Service Expenditures for General Bonded Debt to Current General Expenditures
Ratio of
Total Debt Service
Total Current to General
Fiscal Year Principal Interest Debt Service Expenditures Expenditures
1995 $ - $ - $ - $ 38,060,836 0.00%

1996 - - - 40,103,360 0.00%
1997 - - - 45,714,494 0.00%
1998 - - - 45,367,901 0.00%
1999 - - - 45,668,003 0.00%
2000 - 207,854 207,854 42,698,926 0.49%
2001 10,000 226,350 236,350 45,952,581 0.51%
2002 142,624 230,726 373,350 49,843,622 0.75%
2003 152,834 230,116 382,950 57,751,842 0.66%
2004 157,796 229,554 387,350 57,582,640 0.67%
Notes:
This table includes the General Fund.
General Obligation bonds were issued in fiscal year 1999, however no debt service payments were made. Debt service
payments began in fiscal year 2000.
Beginning in fiscal year 2003, the cost of personnel services provided to the Library Joint Powers Authority was included in
General Fund expenditures, as well as the cost of interfund personnel services provided.
147
Computation of Direct and Overlapping Debt
June 30, 2004
2003-2004 Assessed Valuation $ 4,932,597,610

Redevelopment Incremental Valuation: 769,034,401
Adjusted Assessed Valuation: $ 4,163,563,209
Net General Percentage Amount

Obligation Debt Applicable Applicable
Outstanding to City to City
DIRECT:
City of Santa Cruz $ 7,228,153 100.000% $ 7,228,153
Total direct $ 7,228,153 $ 7,228,153 (1)
OVERLAPPING:
Cabrillo Joint Community College District $ 27,561,421 20.219% $ 5,572,644
Santa Cruz High School District 29,048,066 53.668% 15,589,516
Santa Cruz Elementary School District 24,978,980 95.142% 23,765,501
Live Oak School District 597,519 4.556% 27,223
Scott's Valley Unified School District 2,721 0.013% -
City of Santa Cruz 1915 Act Bonds 1,955,000 100.000% 1,955,000
Santa Cruz County Certificates of Participation 15,504,598 20.495% 3,177,667
Cabrillo Joint Community College District Certificates of Participation 663,183 20.219% 134,089
Scotts Valley Unified School District Certificates of Participation 546 0.013% -
Santa Cruz City Schools Certificates of Participation 3,179,829 53.668% 1,706,551
Live Oak School District Certificates of Participation 182,240 4.556% 8,303
City of Santa Cruz General Fund Obligations 9,470,000 100.000% 9,470,000 (2)
Santa Cruz Consolidated Emergency Communication Center 1,058,418 100.000% 1,058,418

City of Santa Cruz Port District Certificates of Participation 22,714 71.766% 16,301
Monterey Bay Unified Air Pollution Control District Authority 281,492 7.227% 20,343
Total overlapping $ 114,506,727 $ 62,501,556 (3)
Combined Total Debt $ 121,734,880 $ 69,729,709
(1) Direct debt is reported at the accreted value

(2) Excludes issues self-supporting from enterprise revenues ($7,870,000)
(2) Includes $5,290,000 for Certificates of Participation that are primarily supported by enterprise revenue, however
obligated by the General Fund
(3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue, and tax allocation bonds and
non-bonded capital lease obligations
Ratios to 2003-04 Assessed Valuation:

Direct Debt ($7,228,153) 0.15%
Total Overlapping Tax and Assessment Debt 1.85%
Ratios to Adjusted Assessed Valuation:

Combined Direct Debt ($17,756,571) 0.43%
Combined Total Overlapping Tax and Assessment Debt 2.92%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/04: $0
Source: California Municipal Statistics, Inc.

148
Revenue Bond Coverage
Net Revenue Debt Service Requirements

Available
Gross for
Fiscal Year Revenue Expenses* Debt Service Principal Interest Total Coverage
1995 $ 9,529,175 $ 5,460,460 $ 4,068,715 $ 360,000 $ 1,353,835 $ 1,713,835 2.4

1996 10,129,068 5,599,960 4,529,108 380,000 1,332,735 1,712,735 2.6
1997 10,579,889 5,984,051 4,595,838 405,000 1,309,565 1,714,565 2.7
1998 10,730,501 6,054,987 4,675,514 725,000 1,274,454 1,999,454 2.3
1999 12,179,844 7,379,231 4,800,613 765,000 1,227,031 1,992,031 2.4
2000 12,846,315 7,856,133 4,990,182 115,000 296,608 411,608 12.1
2001 11,585,518 7,275,278 4,310,240 120,000 290,733 410,733 10.5
2002 12,146,047 8,929,861 3,216,186 125,000 284,608 409,608 7.9
2003 12,306,445 9,415,409 2,891,036 130,000 278,233 408,233 7.1
2004 12,230,219 9,855,372 2,374,847 135,000 271,608 406,608 5.8
* Total expenses exclusive of depreciation and bond interest.
149
Demographic Statistics
Per Capita
Fiscal Year Population Taxable Sales* Taxable Sales
1995 52,677 $ 445,385,000 $ 8,455

1996 52,731 499,232,000 9,468
1997 53,172 550,962,000 10,362
1998 53,172 680,283,000 12,794
1999 54,575 634,138,000 11,620
2000 56,046 725,287,000 12,941
2001 55,028 828,500,000 15,056
2002 55,085 809,628,000 14,698
2003 55,633 761,208,000 13,683
2004 56,289 761,986,000 13,537
* Calendar year ended during the fiscal year.
Source: State Board of Equalization
150
Principal Taxpayers
June 30, 2004
Percentage
2004 of Total
Assessed Assessed
Taxpayer Type of Business Valuation Valuation
Santa Cruz Seaside Co Entertainment $ 40,544,468 0.822%

Silicon Systems Inc Electronics 38,286,914 0.776%
Sequoia Equities-Cyress Point Etal Apartments 33,642,885 0.682%
Santa Cruz Hotel LLC Hotel 22,077,476 0.448%
Frederick Electronics Corp. Electronics 18,019,165 0.365%
Cooper House LLC Commercial Rentals 17,530,609 0.355%
Canfield Laurel & Pacific Ltd Partn Commercial Rentals 16,911,811 0.343%
The Price Company Commercial Rentals 15,186,194 0.308%
Scholz Management L P Apartments 14,525,619 0.294%
Encinal Partnership No 1 Commercial Rentals 13,663,777 0.277%
Totals $ 230,388,918 4.671%
Total assessed value $ 4,932,597,610
Notes:
Taxpayers and values presented in this table reflect the County's 2003-2004 Assessment Roll Reports.
The denominator is from Table 5, Total Assessed Value.
Source: County of Santa Cruz Assessor's Office
151
Property Value and Construction
Commercial Residential
Construction (1) Construction (1) Property Value (2)
Number Number Total Assessed

Fiscal Year of Units Value of Units Value Value
1995 9 $ 5,339,000 88 $ 10,762,000 $ 3,003,878,425

1996 5 3,332,000 93 13,428,000 3,087,997,650
1997 12 2,509,000 286 24,265,000 3,203,873,150
1998 27 26,685,000 85 12,183,000 3,328,303,676
1999 17 32,368,157 99 11,521,642 3,483,511,451
2000 12 2,916,634 46 9,168,875 3,782,301,841
2001 18 1,482,082 107 12,434,980 4,052,397,447
2002 7 4,299,498 79 12,376,653 4,454,738,526
2003 10 1,598,069 622 60,192,772 4,681,502,599
2004 11 3,348,691 94 13,046,637 4,932,597,610
Source: (1) City of Santa Cruz Building Inspector

(2) County of Santa Cruz Assessor's Office
152
Miscellaneous Statistical Data
June 30, 2004
Form of Government: Parks and Recreation: (continued)
Council/City Manager Special Facilities:

Archery Range
City incorporated March 31, 1866 Civic Auditorium
Present charter adopted March 12, 1948 Louden Nelson Community Center
Museum of Natural History
Lighthouse Museum
Number of Budgeted City Employees: Neary Lagoon Wildlife Habitat
(Regular positions only) Senior Center
Classified service 703 Teen Center
Exempt 122
Total Full Time Equivalent Positions 825 Libraries - (City-County):
Number of budgeted positions 116
Number of libraries:
Fire: Central Library 1
Number of budgeted positions 54 Branch libraries within city 2
Number of stations 3 Branch libraries in county 7
Bookmobile 1
Police:
Number of budgeted positions 128 Streets:
Vehicular patrol units 43 Miles of paved streets 136
Miles of alleys 13
Public Parking: Street lights 2,893
Number of lots 20
Number of spaces 5,124 Sewers:
Number of parking meters* 1,714 Miles of sanitary sewers 151
Miles of storm drains 50
Parks and Recreation:
Number of budgeted positions 101 Water:
Number of parks 30 Meters in service 23,724
Total acreage 1,970 Gallons - Average daily consumption (MGD) 10
Playgrounds in city parks 17 Miles of water mains 300
Public swimming pool 1 Fire hydrants 2,019
Tennis courts 7
Golf course 1
153
Insurance in Force
June 30 2004
Amount of
Type Insurer Property Covered Coverage
Liability (1) ACCEL Risk Pool, the All City operations $ 20,000,000
Insurance Company of the State (per occurrence)
of Pennsylvania, and Lexington
Insurance Company
Property (2) Various Insurance Companies Real Property and 750,000,000

Equipment
Loss of Income Various Insurance Companies City Hall and other 5,000,000
named locations
Boiler and Machinery Various Insurance Companies Machinery 100,000,000
Excess Workers' Compensation (3) California Public Entity N/A 45,000,000

Insurance Authority
Crime and Employee Hartford Fire Insurance Cash and Valuables 500,000
Dishonesty (2)
Notary Errors and Omissions Western Surety Company N/A 10,000

(per notary)
Notes: (1) Self-insured retention of $1,000,000 per occurrence

(2) Subject to various sub-limits and deductibles
(3) Self-insured retention of $500,000 per occurrence
Source: City of Santa Cruz Risk Manager
154

City of Santa Cruz Annual Financial Report

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City of Santa Cruz Annual Financial Report

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Management's Discussion and Analysis

Financial Highlights – Primary Government

Overview of the Financial Statements

Government-wide Financial Statements. The government-wide financial statements are designed to

Government-Wide Financial Analysis

City of Santa Cruz's Net Assets

Total assets 197.1 198.3 324.9 324.6 522.0 522.9

Current liabilities 11.2 11.1 10.8 10.5 22.0 21.6

Total liabilities 36.9 34.9 92.2 92.8 129.1 127.7

Total net assets $ 160.2 $ 163.4 $ 232.7 $ 231.8 $ 392.9 $ 395.2

General revenues, extraordinary items and transfers:

Change in govenmental activities net assets $ (3.2) $ 1.4

EXPENSES & PROGRAM REVENUES- GOVERNMENTAL ACTIVITIES FISCAL YEAR 2004

Oper. Grants &

Charges for Service,

Financial Analysis of Individual Funds

General Fund Budgetary Highlights

Operating Appropriations Reductions.

Total operating appropriations reductions – ($1.399M)

Operating Appropriations Increases.

Grant-related appropriations increases - $333K

Other Operating Appropriations Increases.

Total other operating appropriations increases - $606K

Total operating appropriations increases - $939K

Net operating appropriations reductions - ($460K)

Operating Transfers and Long-Term Advances Appropriations Increases.

Total operating transfers and long-term advances appropriations increases - $869K

Capital Assets and Debt Administration

• Construction of the Nueva Vista Community Center for $735K

Land $ 43.4 $ 42.9 $ 11.9 $ 11.9 $ 55.3 $ 54.8

Totals $ 149.4 $ 149.2 $ 245.2 $ 244.2 $ 394.6 $ 393.4

Bonds, Notes, Loans and Leases Payable

Certificates of participation $ 4.5 $ 4.6 $ 29.8 $ 28.0 $ 34.3 $ 32.6

Totals $ 18.7 $ 19.7 $ 81.2 $ 82.5 $ 99.9 $ 102.2

Totals $ 18.0 $ 14.5 $ 3.5 24.1% $ 4.0 $ 14.0

Requests for Information

Total current assets 38,899,652 59,178,813 98,078,465

Total capital assets 257,816,758 365,474,957 623,291,715

Less accumulated depreciation (108,381,923) (120,258,358) (228,640,281)

Total capital assets, net 149,434,835 245,216,599 394,651,434

Total noncurrent assets 158,238,075 265,720,677 423,958,752

Total assets 197,137,727 324,899,490 522,037,217

See accompanying Notes to Basic Financial Statements.

Total current liabilities 11,217,835 10,830,156 22,047,991

Total noncurrent liabilities 25,684,824 81,407,045 107,091,869

Total liabilities 36,902,659 92,237,201 129,139,860

Invested in capital assets, net of related debt 136,556,019 174,395,150 310,951,169

Assets - Liab.& Net Assets $ - $ - $ -

Bal. Sheet Net Assets - IS Net Assets $ - $ - $ -

See accompanying Notes to Basic Financial Statements.

See accompanying Notes to Basic Financial Statements.

Major Funds Other Total

LIABILITIES AND FUND BALANCES

See accompanying Notes to Basic Financial Statements.

Total Fund Balances - All Governmental Funds $ 37,400,588

Amounts reported for Governmental Activities in the Statement of Net Assets

Capital assets used in governmental activities are not current financial

Total capital assets $ 149,434,835 $ (342,194) 149,092,641

Interest payable on long-term debt does not require current financial

Total internal service funds (6,078,861)

Other long-term assets are not available to pay for current-period

Net Assets of Governmental Activities $ 160,235,068

See accompanying Notes to Basic Financial Statements.

REVENUES OVER (UNDER) EXPENDITURES (2,056,402) 1,684,069 (1,822,403) (2,194,736)