Comprehensive Annual Financial Report - City of Santa Monica

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CITY OF SANTA MONICA, CALIFORNIA Notes to Basic Financial Statements, Continued For the fiscal year ended June 30, 2009 (4) POLLUTION REMEDIATION On December 1, 2006 the City entered into a settlement agreement with a consortium of oil companies in relation to methyl tertiary butyl ether (“MTBE”) contamination that had occurred at the City’s Charnock Well Field. The agreement called for the oil companies to pay the City $131.0 million in exchange for the obligation by the City to treat any water which does not meet applicable standards for MTBE, tertiary butyl alcohol (“TBA”) and related petroleum hydrocarbons promulgated by the California Department of Health Services. To meet this treatment obligation the City is constructing a remediation plant to filter the water using the proceeds of the settlement. The City measured the liability by the cost of construction/remediation contracts which include a contingency of 10% for unforeseen costs and therefore the City’s expected outlays are $85,481,000 which is the present value of the cost of the contracts plus the cost of the plant operations. The pollution remediation expenditures have no future value once the remediation is complete; therefore the City has recorded these amounts as remediation liability and expense. Because the MTBE remediation is fully funded by a settlement whose proceeds have already been received, $85,481,000 has been recognized as income during the year. Additionally, the City engages in an ongoing program of pollution remediation related to its various properties. Two such sites are currently undergoing remediation in the form of either soil or vaporous contaminant removal or containment. By State law these occurrences are required to be reported to California Department of Health Services. As of June 30, 2009, total remediation expenses of $92,315,000 have been recorded in the Statement of Activities and as a component of accrued liabilities on the Statement of Net Assets. (5) CASH AND INVESTMENTS Cash and investments as of June 30, 2009 are classified in the accompanying financial statements as follows: Statement of net assets: Cash and investments $ 598,738,328 Restricted cash and investments 17,523,919 Restricted cash with fiscal agent 27,484,796 Fiduciary funds: Restricted cash and investments 3,896,199 Total cash and investments $ 647,643,242 47
CITY OF SANTA MONICA, CALIFORNIA Notes to Basic Financial Statements, Continued For the fiscal year ended June 30, 2009 Cash and investments as of June 30, 2009 consist of the following: Cash on hand $ 56,680 Deposits with financial institutions (709,878) Investments 648,296,440 Total cash and investments $ 647,643,242 Investments Authorized by the California Government Code and the City’s Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code and the City’s investment policy. The table also identifies certain provisions of the California Government Code (or the City’s investment policy, if more restrictive) that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City’s investment policy. Authorized *Maximum *Maximum Investment types by investment *Maximum percentage Investment authorized by state law policy maturity of portfolio in one issuer Local agency bonds Yes 5 years None None U.S. Treasury obligations Yes 5 years None None U.S. agency securities Yes 5 years None 50% State of California obligations Yes 5 years None None CA Local Agency obligations Yes 5 Years None None Banker's acceptances Yes 180 days 10% 10% Commercial paper Yes 270 days 15% 10% Negotiable certificates of deposit Yes 5 years 30% 10% Repurchase agreements Yes 1 year None None Reverse repurchase agreements Yes 92 days 20% of base value None Corporate medium-term notes Yes 5 years 30% None Mutual funds Yes N/A 20% 10% Money market mutual funds Yes N/A 20% 10% Mortgage pass-through securities Yes 5 years 20% None Time deposits Yes 5 years None None Collateralized certificates of deposit Yes 5 years None None County pooled investment funds Yes N/A None None Local Agency Investment Fund (LAIF) Yes N/A None None JPA pools (other investment pools) Yes N/A None None * Based on state law requirements or investment policy requirements, whichever is more restrictive. 48
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Comprehensive Annual Financial Report - City of Santa Monica

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