Item 9 Preliminary Official Statment Dated February 25, 1994

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NOTES TO THE FINANCIAL STATEMENTS (Continued) equity in the investment pool. Investment earnings are prorated to participating funds monthly on an average equity basis. Cash and investments held by the fiscal agent for the City's Deferred Compensation fund are recorded at market value. Investments held in the Treasurer's pool or by other fiscal agents are recorded at cost. Losses are not recorded when market value declines below cost,since declines are considered temporary and the City intends to hold the investments until maturity. Inventories. Inventories of materials and supplies are valued at average cost. Land Held for Resale. Land held for resale is carried at the lower of cost or market. General Fixed Assets. General fixed assets are recorded as expenditures of the various City funds at the time of purchase and are subsequently capitalized in the General Fixed Assets Account Group. Such assets include land, buildings,building improvements, furniture and equipment. The costs of roads, streets and sidewalks, bridges, curbs and gutters, drainage systems, lighting systems and similar assets are not capitalized. No depreciation is provided on general fixed assets. All fixed 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. (See Note 3E.) Proprietary Fund Types Fixed Assets. Fixed assets purchased for the Water and Regional Transportation Center Enterprise Funds are capitalized at cost, while contributed assets are recorded at fair market value at time received. Depreciation has been provided on a straight-line basis over the following useful lives: Buildings and Improvements 40-50 years Water Meters 30 years Water Mains and Hydrants 40-75 years Other Equipment 5-15 years The Refuse Collection and Sanitation Enterprise Funds have only a nominal amount of office equipment which is being depreciated on a straight-line basis over 3 to 10 years. Machinery and equipment in the Internal Service Funds are being depreciated over 3 to 20 years on a straight-line basis. (See Note 3F.) Claims and Judgments. When it is probable that a claim liability has been incurred at year end and the amount of the loss can be reasonably estimated, the City records in the Internal Service Funds the estimated loss net of any insurance coverage, under its self-insurance program. (See Note 8D.) The Redevelopment Agency is a defendant in various litigations arising from eminent domain proceedings. An estimated amount of $150,000 has been recorded in the General Long-Term Debt Account Group. In the opinion of Redevelopment Agency management, the ultimate outcome of these litigations will not have a material adverse effect on the financial position of the Redevelopment Agency or of the City. (See Note 3G). Long-Term I aces. Capitalized leases are recorded as liabilities in the Long-Term Debt Account Group and in the Proprietary Fund Types at the present value of the remaining minimum lease payments. The related fixed assets are recorded in the General Fixed Assets Account Group and in the Proprietary Fund Type. (See Note 3G). For leases accounted for under the operating method (e.g., vehicle lease arrangements), lease charges are expended/expensed as incurred. At June 30, 1993, the City has no non-cancellable operating lease commitments. Compensated Absences. In Governmental Fund Types, compensated absences (unpaid vacation and sick leave) are recorded as expenditures in the year paid, as it is the City's policy to liquidate any unpaid vacation or sick leave at June 30 from future resources rather than currently available expendable resources.