HomeMy WebLinkAbout07/02/2002, C7 - GASB 34 IMPLEMENTATION council M",D�-J_ 2_pZ
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CITY OF SAN LUIS OBB/ISSPPO
FROM: Bill Statler,Director of Finance lr`
Prepared By: Carolyn Dominguez, Accounting Manager
SUBJECT: GASB 34 IMPLEMENTATION
CAO RECOMMENDATION
1. Approve the GASB 34 Implementation Plan.
2. Award a contract to Harris &Associates for GASB 34 implementation assistance in an amount
not to exceed$29,500.
DISCUSSION
Overview
Implementing the Government Accounting Standards Board (GASB) Statement No. 34, Basic
Financial Statements—and Management Discussion and Analysis for State and Local
Governments (GASB 34) will require significant changes in how the City accounts for and
reports our financial assets and operations. Key changes are summarized in Attachment 1.
As approved in the 2001-03 Financial Plan, we contracted with Hams & Associates for
assistance in preparing an implementation plan to help ensure a successful conversion to this new
financial reporting model. We believe the proposed plan (Attachment 2) takes a sensible
approach in complying with GASB 34, and we recommend contracting with Harris & Associates
for"Phase II"implementation services in an amount not to exceed $29,500 (Attachment 3). This
compares favorably with the $50,000 budgeted for this work in the 2001-03 Financial Plan.
Background
On April 12, 2001, we presented to the Council an overview of the major changes reflected in
GASB 34, and the challenges ahead of us in implementing them. As summarized in Attachment
1, preparing an additional set of "government-wide" financial statements under full accrual
accounting and recording infrastructure assets (and depreciating them) are among the many
major changes we will need to incorporate into our Comprehensive Annual Financial Report for
the fiscal year ending June 30, 2003.
At the April 2001 study session, the Council endorsed moving forward in implementing GASB
34, and subsequently approved funding in the 2001-03 Financial Plan to help with this effort:
$15,000 in 2001-02 for implementation planning services; and $50,000 for implementation
assistance. In January 2002, we issued a request for proposals (RFP) for GASB 34 planning
services. Based on an in-depth review of the two proposals we received by an interdepartmental
team, the CAO awarded a contract to Harris & Associates for $14,770 in February 2002. As
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Council Agenda Report—GASB 34 Implementation
Page 2
approved in the 2001-03 Financial Plan, we had two main reasons for contracting for
professional assistance in preparing the implementation plan:
1. We wanted an independent look and assessment in evaluating our implementation options
and overall strategy.
2. We wanted a quality plan, and given our day-to-day workload and other priorities, we would
not be able to devote the time internally to do this.
Workscope
As set forth in the RFP, the purpose of the implementation plan is to cover the following key
issues regarding our GASB 34 accounting policies and financial reporting strategies.
Fixed Asset and Infrastructure.Resource Assessment
1. What databases regarding City general fixed assets and infrastructure do we already have in
place that will help us in meeting GASB 34 reporting requirements?
2. Depending on the strategy selected (see below),what additional data do we need to develop?
General Infrastructure Strategy
3. Should we take a"minimalist"approach in meeting the infrastructure reporting requirements,
keeping in mind that even the most meticulous database created to comply with "GAAP"
may not result in any meaningful financial information anyway? What would this minimalist
strategy look like?
4. Or should we use this opportunity to leverage our GIS to provide us with infrastructure
information we would like anyway? How much is this likely to cost for staff time and other
costs,both initially and in maintaining ongoing changes to database?
5. Given the age of our City and many of infrastructure assets, how far back should we go in
estimating their historic value?
6. In short, what makes the most sense from a cost-benefit perspective in reporting on our
infrastructure assets?
Modified Approach to Depreciating Infrastructure
7. Do we have "plans" that meet the criteria for the modified approach? What efforts would be
needed to amend (or develop) them to meet the criteria? And even if they meet the criteria
for the modified approach, should we use it?
Level of Inftastructure Detail
8. How detailed should we be in separating distinct components of major infrastructure assets?
For example, in classifying and costing the "street system," we could have one, "all-in" cost
for the.right-of-way, pavement, sidewalks, curbs, gutters, bridges, culverts, storm drains,
street signs, street lights, stop signs, street trees,parkway landscaping and traffic signals on a
"per meter/kilometer"basis; or each of these components could be separately identified (or in
some cases ignored as being immaterial).
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Council Agenda Report—GASB 34 Implementation
Page 3
9. In the case of street rights-of-way, which account for about 20% of the City's developed
property, how do we value this, given that these are easements rather than owned by the City
in fee? Or is this cost immaterial, especially since much of this was required long before the
20-year cut-off for GASB retroactive reporting?
Government-Wide Financial Statements
10. What's the best strategy for preparing the government-wide financial statements?
11. How should we present functional revenues and indirect costs?
12. What other issues do we need to consider in preparing the government-wide financial
statements?
Other Accounting Issues
13. What other key accounting and financial reporting issues do we need to consider in planning
for the implementation of GASB 34.
Implementation Schedule,Responsibilities and Budget
14. Identify due dates and staff responsibilities for the key tasks in implementing the plan.
15. Prepare implementation budget as needed for consultant assistance, software development,
data base creation, temporary staff or overtime.
Implementation Plan Findings
A team of City staff representing Public Works, Utilities, Administration and Finance worked
closely with Hams & Associates in addressing these GASB 34 implementation issues. The
following summarizes key plan findings and recommendations:
1. The City would be best served by using the "minimalist" approach in developing
infrastructure inventory categories to meet.GASB 34 reporting guidelines.
2. The "Basic Approach" (historical cost/depreciation) is recommended for valuing the City's
assets rather than the"Modified Approach"(condition assessment).
3. An implementation schedule including workload and responsibilities to meet the GASB 34
effective date, including a proposal from Harris & Associates to assist the City in the next
implementation steps of inventory, valuation and compliance.
In implementing the plan, we recommend contracting with Hams & Associates in amount not to
exceed$29,500 (Attachment 3).
CONCURRENCES
The GASB 34 review team concurs with the Implementation Plan recommendations. The team
further recommends contracting with Harris & Associates for the implementation phase of GASB
34 compliance. Harris & Associates is now very familiar with the City's financial records and
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Council Agenda Report—GASB 34 Implementation
Page 4
infrastructure data In addition, the implementation team was impressed with their overall
demonstrated level of expertise and professionalism while we worked on the plan.
FISCAL EVIPACT
The cost of the proposed implementation services is $29,500, which compares favorably with the
$50,000 approved for this work in the 2001-03 Financial Plan.
ALTERNATIVES
1. Issue an RFP for Implementation Services. This approach is not recommended. In the
process of developing the implementation plan, Harris & Associates has become familiar with
City operations and financial and infrastructure records. Further, we believe the proposed cost
is very reasonable, especially considering the amount of work they will be doing for us.
Moreover, it is highly unlikely that issuing an RFP for implementation services would result in a
more competitive proposal, since other.firms would have to add time and charges necessary to
become familiar with our City structure. From an expertise perspective, they are one of the
leading firms in the State in doing this type of work; and we were impressed with the Phase 1
they performed on our behalf.
2. Do Not Contract for Implementation Services. This approach is also not recommended.
Given day-to-day workloads and other priorities, we cannot devote the time internally to
successfully implement GASB 34 without assistance.
ATTACHMENTS
1. GASB 34 Summary
2. GASB 34 Implementation Plan
3. Agreement with Hams&Associates for GASB 34 Implementation Services
G:GASB 34 Reporting ModeVSI.G City Implementation Plan/Award Phase 2 Council Agenda Report
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city of Attachment -�-
san Luis oBispo
GASB STATEMENT NO. 34
WIIAT IS_GASB 34? statements financial statements under the new
!�/ model:
In June 1999, the Governmental Accounting
Standards Board (GASB which sets "generally MANAGEMENT'S DISCUSSION AND ANALYSIS
accepted accounting principles" (financial reporting
rules) for all state and local FINANCIAL STATEMENTS
governments—adopted the most
sweeping changes in financial Government-Wide(Full Accrual) Fund
reporting in its history. Governmental Activities Governmental(Modified Accrual)
-
Business-Type Activities Pmpdetary(Full Accrual)
(No Internal Service or Fiduciary Funds) Fiduciary(Full Accrual)
Known as Statement No. 34:
Basic Financial Statements—and
• —. Management's Discussion and Notes to the Financial Stateme�
Analysis for State and Local
Governments this represents a fundamental revision REQUIRED SUPPLEMENTAL INFORMATION
� P (Other Than MDBA)
of the current financial reporting model, which has
been in place since 1979. While there are a number
of significant changes (the Statement is 403 pages We already prepare a transmittal memorandum that
long),the major ones are: comprehensively discusses fiscal results as part of
our audited financial statements. However, as
Two Kinds of Financial Statements. Two distinct reflected above, "Management's Discussion and
forms of information will be provided in our basic Analysis" will become a required part of these
financial statements: statements.
7 Government-Wide Statements. These are Depreciation for Governmental Activities. Under
consolidated financial statements for all of the the current reporting model, depreciation is not
City's operations on a full accrual basis of recorded for "governmental" capital assets, such as
accounting. They will not be presented on a those purchased through the General Fund. The
fund basis; instead, fiscal operations will be traditional rationale for this is an appropriate focus
organized into two major activities: on "available spendable resources"—which is based
governmental and business-type. They will have on the simple fact that programs and projects cannot
a "net asset" focus, and exclude interfund be funded through the budget process based on the
transactions and fiduciary funds. Expenses current net value of fixed assets.. However, in order
(which may include allocated "indirect costs") to allocate the cost of these assets over their useful
will be shown both gross and net of related lives in the "Government-Wide" statements, the new
revenues such as fees and grants. model will require depreciation of general fixed
assets.
■ Fund Statements. In meeting stewardship and
accountability concerns, financial statements Biggest Change: Recording Infrastructure as
will also be presented on a fund basis much as Capital Assets—and Expensing Them Through
they are today, using a different basis of Depreciation. Current accounting principles do not
accounting than the government-wide statements require reporting the cost of infrastructure such as
for governmental funds. roads, bridges, storm drains, street lights and traffic
signals as capital assets—not because they aren't
Basic Financial Statements. The following major community investments, but because they are
summarizes the presentation of basic financial immovable, and only of value to the gov rnment.
ATTACHMENT 1
GASB Statement No. 34 Page 2
(Except in the oft-told tale,there really isn't much of However, it is clear that making these changes will
a market for the Brooklyn Bridge). require significant effort. For this reason, making
this conversion is a major objective for the
However, the new reporting model requires that Department of Finance for 2001-03; and as part of
infrastructure be reported at its "historical" (not the 2001-03 Financial Plan, the Council approved
current) value, and then depreciated like other assets $15,000 for planning assistance in 2001-02; and
as discussed above. There are several complicated $50,000 for implementation in 2002-03.
options for how to do this, including not depreciating
infrastructure assets at all if there is an adopted
WHY IlWPLEMENT I'I'.
"maintenance plan,"and assets are being maintained
in accordance with that plan.
There are two key reasons to implement GASB 34`.
IMPLEMENTATION
The new model is supported by a number of users
and professional associations. The National
As set forth in the following table, the effective date Association of State Auditors, Comptrollers and
for the new model varies depending on the financial Treasurers has endorsed the new model, and so have
size of the agency and its fiscal year. (The chart the credit rating agencies (who are the primary
assumes a fiscal year beginning July 1 and ending "users" of these reports). There are many public
June 30). works' officials who believe the new reporting
model will result in a better understanding of
Basic model infrastructure needs. And a number of well-
(Prospective Retroactive respected municipal finance professionals think the
Infrastructure Infrastructure P
Total Revenues Re ortin Re In new reporting model better tells a city's fiscal story,
Effective f&Fikal Year and is a significant improvement over the current
$100 million or more 2001-02 2006-06 model.
$10 to$100 million 2002-03 2006-07
Under$10 million 2003-04 Not Required It's "GAAP." This is probably the most compelling
reason for implementing the new model. GASB is
The City of San Luis Obispo falls into the "middle the acknowledged authoritative body in setting
tier,"with GASB 34 effective for us on July 1,2002. generally accepted accounting principles (GAAP)
for local and state agencies. Maintaining citizen
C O WHAT'S THE BIG DEAL? confidence in our stewardship of the assets entrusted
to us requires credibility and integrity in our
Under GASB 34, our basic financial statements will accounting and financial reporting systems. And
become longer and more complex—and thus more preparing audited financial statements in accordance
difficult to prepare and audit. This will be especially with industry standards is an essential foundation in
true when converting to the new model. This gaining andsustaining this trust.
increased difficulty and complexity directly translate
into increased costs—both one-time during For this reason, despite its reservations about some
implementation and ongoing thereafter. of the changes in the new model, the California
Society of Municipal Finance Officers (CSMFO),
Will the effort and cost be worth it? Goals for the which represents 1,200 local government finance
new model include: professionals throughout the State, has strongly
encouraged its members to implement GASB 34.
■ Improving financial reporting. C UNIIVIARY
■ Enhancing awareness of fiscal issues facing
states and local governments.
■ Recognizing the importance of adequately GASB 34 represents a major change in financial
maintaining infrastructure. reporting for local and state governments, and it will
take careful planning and adequate resources to
Only time will tell if the new model makes it easier successfully implement it.
or harder for statement users to understand a city's
fiscal situation, and to compare it with other cities. C7-6
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ATTACHMENT 2
June 3, 2002
Mr. William Statler Harris & Associates
Director of Finance
City of San Luis Obispo Program Managers
990 Palm Street Construction Managers
San Luis Obispo, CA 93401 Civil Engineers
Re: GASB 34 Implementation Plan
Dear Mr. Stater.
Transmitted herewith is the "GASB 34 Implementation Plan" for the City of San Luis
Obispo. This report represents Phase I of a two-phase approach." The Implementation
Plan evaluates the City's readiness for GASB 34 and provides specific strategies to
pursue in Phase II (Infrastructure Inventory and Valuation work)which will result in timely
compliance with GASB 34. This Phase I report also contains an Implementation
Schedule and Budget for Phase ll.
The Implementation Plan, we believe, is straightforward and provides the City with a
readily achievable and sensible "action plan" for GASB 34 compliance within a
reasonable time frame and at an affordable cost. Hams teamed with the accounting firm
of Glenn, Burdette, Phillips and Bryson to assist the City in transitioning its accounting
records to the preparation of government-wide financial statements.
We have enjoyed working with you, Carolyn Dominguez and other City staff on the
development and preparation of this Phase I Implementation Plan. We look forward to
working with you on Phase II of your GASB 34 project.
Sincerely,
m & sociates
Ro gh Dennis A. Anderson
P anager Project Manager
GAS 34 Group�anager
cc: Jeffrey M. Cooper, P.E., Vice President
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34 Executive Park, Suite 150 Irvine, California 92614-4705 949.655.3900 FAX 949.655.3995 irvine@harris-assoc.com
ATTACHMENT 2
City of San Luis Obispo-GAS6 34 June,2002
Phase I Implementation Plan Page 1
SUMMARY OF GASB 34 REQUIREMENTS AND DEADLINES
By release of Statement 34 on June 30, 1999, the Governmental Accounting Standards
Board, a national non-profit organization, now requires that states, local governments
and other public agencies annually report (full disclosure) the net value of all capital
assets, including infrastructure assets, in order to achieve GAAP (generally accepted
accounting principles). GASB 34 defines infrastructure assets as "...long-lived capital
assets that are stationary in nature and normally can be preserved for a significantly
greater number of years than most capital assets. Examples of infrastructure assets
include roads, bridges, tunnels, drainage systems, water and sewer systems, dams and
lighting systems..." In addition, land is to be valued. Fixed assets (generally building
contents, vehicles, furnishings and the like are not affected by GASB 34, but must be
reported under other GAAP requirements.
Basic Approach:
• Up-to-date inventories must-be accomplished/maintained
• Original acquisition costs or estimated costs must be applied
• Depreciation must be applied to historical values
Modified Approach:
• Up to date inventories must be accomplished/maintained
• Original acquisition costs or estimated costs must be applied
• Asset management systems must be put in place and include condition level
assessment and setting every three years with costs budgeted to match
condition level policies
GASB 34 requires compliance by certain dates based upon annual revenues of public
agencies. The City of San Luis Obispo is what is called a Phase II agency, which had
annual revenues of between $10 million and $100 million on July 1, 1999. This requires
that the City begin reporting assets for the fiscal year ending June 30, 2003. A four-year
"grace/transition period" is allowed for reporting "major general infrastructure assets"
under certain conditions. City staff has determined that it wants full compliance for all
assets by the June 30, 2003 date.
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QASan Luis Obispo\Revised Final Report-Phase I.doc IIS Harris &Associates
ATTACHMENT 2
City of San Luis Obispo-GASB 34 = June,2002
Phase I Implementation Plan Page 2
BACKGROUND AND INTRODUCTION
Harris & Associates was retained by the City of San Luis Obispo to prepare an
Implementation Plan as Phase I for compliance with GASB 34. This Plan represents the
first important step in assessing the City's capability to comply with GASB 34
requirements and developing detailed ,strategies for meeting GASB 34 deadlines. In
effect, it is to serve as the "action plan" for Phase II: Inventory, Valuation and
Compliance.
The City has determined that the Phase I Implementation Plan should address a number
of issues, as follows:
e Assessment of the adequacy and completeness of fixed assets and resources.
e Development of various options and strategies for compliance.
e Determination of using Depreciation methodologies or the Modified Approach for
report asset value.
s Determination of the level of effort/detail required for inventorying/valuing
infrastructure assets.
e Preparation of an Implementation Schedule and Responsibilities..
♦ Preparation of an Implementation Budget.
o Preparation of formats and related analysis for Government-Wide Financial
Statements.
We have teamed with the accounting firm of Glenn,. Burdette, Phillips and Bryson. This
firm will prepare the necessary analysis and document formats for the issues related to
Government-Wide Financial Statements.
The Implementation Plan that follows is formatted in similar fashion to the City's Phase I
Request for Proposal and our Response, in that under the major subject headings (as
referenced above), more specific issues will be addressed, analysis/findings will be
presented and recommendations will be provided.
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O:\San Luis Obispo\Revised Final Report-Phase I.doc =Harris &Associates
ATTACHMENT 2
City of San Luis Obispo-GASB J4 June,2002
Phase I Implementation Plan Page 3
FIXED ASSET & INFRASTRUCTURE RESOURCE ASSESSMENT
Fixed Assets and Infrastructure Assets to Be Reported
Based upon discussions with City staff and research performed for Phase I, we find the
major"categories" of assets that can/should be reported by the City:
Table 1 —Asset Categories
Public Utilities
Water
Wastewater
Transportation
Streets and Sidewalks
Bikeways
Creek & Flood Protection
Parkin
Transit
Leisure, Cultural &Social Services
Parks & Recreation
Golf
Public Art
Community Development
Open Space
Networks and Subsystems
Based upon our discussion and research, we find that the major asset categories can be
divided into the following Networks and Subsystems:
Table 2— Networks and Subsystems
ASSET
NETWORKS CATEGORIES SUBSYSTEMS
Public Utilities
Water Land Distribution
Buildings Water lines
Water System Pump stations
Storage tanks
Treatment facilities
Supply
Reservoirs
Water reuse system
Groundwater wells
Wastewater Land Collection
Buildings Sewer lines
Wastewater System Lift stations
Treatment facilities
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QASan Luis Obispo\Revised Final Report-Phase Ldoc M Harris & Associates
ATTACHMENT 2
City of San Luis Obispo-GASB s4 �' June,2002
Phase I Implementation Plan Page 4
Transportation
Streets and Sidewalks Land Pavement
Street System Curb, gutter& sidewalks
Street lights
Traffic signals
Bridges
Landscaped medians
Street trees
Bikeways Land Class 1 bicycle paths
Bikeway System
Creek & Flood Land Pipelines
Protection Storm Drain System Catch basins & outlets
Detention basins
Creek improvements
Parking Land Surface parking lots
Buildings Garages
Meters
Transit Land
Buildings
Leisure, Cultural&Social Services
Parks & Recreation Land Turf, irrigation & other land
Buildings improvements
Park Improvements Playground equipment
Swimming pool
Golf Land
Buildings
Course Improvements
Public Art Public Art
Community Development
Open Space Land Trails
Improvements
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ATTACHMENT 2
City of San Luis Obispo-GASB 34 June,2002
Phase I Implementation Plan Page 5
GENERAL INFRASTRUCTURE STRATEGY
Infrastructure Assets That Should Be Reported
Those assets (Networks and Subsystems) included on page 3.
Assessment of Adequacy/Completeness of Data on Infrastructure Assets
The following table summarizes the data sources and adequacy/completeness of
information and data available on the assets (both Network and Subsystem). This
assessment will provide the basis for evaluating level of effort to obtain, value and
maintain the data.
Table 3—Adequacy of Information
Networks Subsystems Data Adequacy
Public Utilities
Distribution Need dates and costs
Water System Supply Need dates and costs
Treatment Facilities Need dates and costs
Wastewater System Collection Partial dates, need costs
Treatment Facilities Need dates and costs
Transportation
Pavement Complete pavement management
system
Curb, Gutter& Sidewalk Need dates and costs
Streets and Sidewalks Traffic Signals Need dates and costs
Bridges Need dates and costs
Street Trees Need dates and costs
Street Lights Need dates and costs
Landscaped Medians Need inventory, dates, and costs
Bikeways Class 1 bicycle paths Need dates and costs
Pipelines Need dates and costs
Creek & Flood Protection Catch Basins, Outlets Need dates and costs
Creek Improvements Need inventory, dates, and costs
Detention Basins Need dates and costs
Surface Parking Lots Need dates and costs
Parking Garages Need dates and costs
Meters Need dates and costs
Transit I Need inventory, dates, and costs
Leisure, Cultural & Social Services
Turf, Irrigation, &Other Imp. Need dates and costs
Parks and Recreation Playground Equipment Need dates and costs
Swimming Pool Need dates and costs
Golf Need dates and costs
Public Art --Complete inventory
Community Development
Open Space Trails TNeed inventory, dates, and costs
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QASan Luis Obispo\Revised Final Report-Phase I.doc M Harris &Associates
ATTACHMENT 2
City of San Luis Obispo-GASB 34 June,2002
Phase I Implementation Plan Page 6
Minimalist vs. Meticulous Approach
Based upon our review of the information available and our assessment of the adequacy
and completeness of information (inventories and historical cost/acquisition dates,
including information gaps), we believe the City would be better served with a
"minimalist" approach similar to that utilized in the City of Palo Alto GASB 34 project. As
can be seen, certain assets have more complete information on them than others. From
our review of available materials, it would take substantial effort and perhaps double or
triols the cost were the City to retain a consultant to "generate" inventories and apply
valuations from exhaustive file research.
Table 4-Methodologies Suggested for Minimalist Approach
Networks Subsystems I Minimalist Approach
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Distribution Quantities collected. Research dates
based on Pressure Zones and CIP.
Water System Supply Quantities collected. Research dates
based on Pressure Zones and CIP.
Treatment Facilities Research date and cost from
improvement records.
.Collection Quantities collected. Research dates
Wastewater System based on Tract Maps and CIP.
Treatment Research date and cost from
improvement records.
;�
Trans o_rtatfo_n_. , x
— ..�._.�.-.Y,-_..
Pavement Only one calculation away from using
straight-line depreciation.
Curb, Gutter&Sidewalk Use dates from the pavement
management system that shows Initial
Construction. Research the remainder
based on Tract Maps. Estimate costs
using ENR Construction Cost Index.
Traffic Signals Quantities collected. Research dates
based on improvement plans. Estimate .
costs using ENR Construction Cost
Index.
Bridges Quantities collected. Research dates
Streets and Sidewalks based on improvement plans. Estimate
costs using ENR Construction Cost
Index.
Street Trees Quantities need to be verified.
Research dates based on improvement
plans and tract maps.
Street Lights Quantities collected. Research dates
based on improvement plans. Estimate
costs using ENR Construction Cost
Index.
Landscaped Medians Quantities need to be verified.
Research dates based on improvement
plans and tract maps.
EM
Q:\San Luis Obispo\Revised Final Report-Phase I.doc M Harris &Associates
ATTACHMENT 2
City of San Luis Obispo-GASB 34 June,2002
Phase I Implementation Plan Page 7
Bikeways Quantities collected. Research dates
based on Tract Maps and CIP.
Pipelines Quantities collected. Research dates
based on Tract Maps and CIP.
Catch Basins, Outlets Quantities collected. Research dates
Creek & Flood Protection based on Tract Maps and CIP.
Creek Improvements Research inventory and dates based on
Tract Maps and CIP.
Detention Basins Quantities collected. Research dates
based on Tract Maps and CIP.
Surface Parking Lots Research dates and costs from CIP.
Parking Garages Research dates and costs from CIP.
Meters Research dates and costs from CIP.
Transit Compile inventory, dates and costs
from improvements plans and CIP
Leisure, Cultural &Social:Services
Turf, Irrigation, &Other Research dates and costs from CIP.
Parks and Recreation Imp.
Playground Equipment Research dates and costs from CIP.
Swimming Pool Research dates and costs from CIP.
Golf Research dates and costs from CIP.
Public Art I Complete inventory
Community Development
Open Space Trails Research inventory and dates based on
Tract Maps, CIP and land dedications.
Cost Benefit of Higher Level of Effort
Our suggested approach would be to utilize existing inventories and cost data where
available and assume a moderate level of effort to gather acquisition and cost data.
Where required information is not available or cannot be uncovered without significant
effort, estimating techniques will be used to develop the needed information and
calculations. The recommended level of effort, in terms of hours and cost are shown in
the Implementation Budget section. A doubling or tripling or effort or cost, we believe,
would really not gain the City much in terms of GASB 34 compliance, since estimating
techniques are allowed under its provisions. Only if the City saw special benefit for its
own purposes (asset management, maintenance scheduling/costing, etc.) would this
effort and expense have a positive cost benefit.
Use of GASB 34 to Leverage the GIS to Produce Infrastructure Information
The majority of the City's assets already exist within the City's Geographic Information
System. The data collected for GASB 34 compliance could reside in the City's GIS
database, provided that the data was collected on a location-by-location basis using the
same limits defined within the GIS database. As indicated on Table 3, quantities of
assets are typically available; however, acquisition dates and costs are generally not and
will need to be estimated. Further, some location information would need to be
researched. This could result in a more extensive effort than is necessary for GASB 34
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ATTACHMENT 2
City of San Luis Obispo-GASB 34 June,2002
Phase 1 Implementation Plan Page 8
purposes, and it essentially means that GASB 34 will really not "drive" the GIS system
with this additional effort.
Initial and On-Going Time and Effort for Databases
A schedule of estimated hours for the initial database effort, by task, is shown in the
Implementation Budget. It appears that the initial effort will take approximately 300
hours.
It is difficult to estimate the on-going effort, but we believe it will take approximate 1-2
hours per infrastructure asset quarterly (4-8 hours per asset per year), or 80-160 hours
per year to maintain and update the data. This effort will include capturing data from
new construction projects; public art, land and building acquisitions; and demolitions,
vacations, and sales.
Pre vs. Post-July 1, 1980 Reporting
GASB 34 allows public agencies to retrospectively report the value of asset back to July
1, 1980. However, agencies may opt to report such values for assets installed or
constructed prior to that time. Our suggested approach the Phase II is to provide
relevant acquisition/cost information, depreciation calculations and Net Book Value on
each asset Subsystem, thereby giving the City the option to report values at the Network
or Subsystem level. Information sources as well as inventory and cost methodologies
and calculations will be provided. Additionally, each Subsystem will be evaluated in
terms of whether or not actual data or estimates can be provided that value the assets
prior to July 1, 1980. Where appropriate and relevant, the Final Report will disclose and
discuss the application of values prior or after this date for each Subsystem based upon
the availability of data or by way of reasonable estimation techniques. GASB 34 allows
this approach, and therefore, the City will be able to report either way (pre or post) by
Subsystem.
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I1
QASan Luis Obispo\Revised Final Report-Phase Ldoc M Harris & Associates
ATTACHMENT 2
City of San Luis Obispo-GAS834 June,2002
Phase I Implementation Plan Page 9
MODIFIED VS. BASIC APPROACH TO VALUING ASSETS
There are several key elements to examine in determining the feasibility of utilizing the
Modified Approach (asset management) vs. The Basic Approach (historical
cost/depreciation).
Internal Asset Management Application
The assets eligible for "asset management" application could include virtually all of the
infrastructure-type assets included in the Networks and Subsystems listed in Table 2.
There are software systems available that could assist the City in internally managing
these for the purposes of maintenance scheduling, costing, replacement and CIP
programming and budgeting. Additional detailed data would be needed to support and
make these systems fully operational and useful, which would include location,
acquisition and cost data. Some, but not all, of this information can be provided by the
"minimalist" approach to GASB 34; however, a more extensive effort, as mentioned
above, would be necessary.
Modified Approach: Condition Assessment Standards Required
The key issue is whether or not these software systems can provide the City with the
necessary information for use of the Modified Approach to comply with GASB 34. Our
experience with such systems indicates that only the Pavement Subsystem would be
eligible for the reporting under the Modified Approach. In addition to requiring an up-to-
date inventory of eligible infrastructure assets, GASB 34 states that the agency must
perform a condition assessment every three years. Further, "Condition assessments
should be documented in such a manner that they can be replicated. Replicable
condition assessments are those that are based on sufficiently understandable
and complete measurement methods such that different measurers using the
same methods would reach substantially similar results." In effect, the condition
assessment must rely on a "universal or industry" accepted standard. For the past
twenty (20) years, pavement condition assessment has utilized the universally accepted
standard of the Army Corp of Engineers pavement deterioration curve. There is no such
accepted standard for condition assessments of other infrastructure, such as storm drain
systems, water and sewer systems, etc. Therefore, we do not believe it is feasible to
report other infrastructure using the Modified Approach.
Modified Approach: Financial Commitment Implied or Required
GASB 34 requires that the agency estimate each year the annual amount to maintain
and preserve the eligible infrastructure assets at the condition level established and
disclosed by the government. In addition, governments are to document that "the
results of the three most recent complete condition assessments provide
reasonable assurance that the eligible infrastructure assets are being preserved
approximately at (or above) the condition level established and disclosed by the
government." Essentially, this would require that the City budget and expend funds to
maintain the Pavement Subsystem at an established PCI (Pavement Condition Index).
GASB 34 does allow agencies three(3) years to achieve this objective; one-third of the
assets may be assessed each year; and agencies may shift to the Basic Approach in the
third year if it cannot meet the rigors of the Modified Approach. The bottom line,
however, is that use of the Modified Approach either represents a financial commitment
C7-17
QASan Luis ObispoU2evised Final Report-Phase I.doc M Harris &Associates
ATTACHMENT 2
City of San Luis Obispo-GASB 34 June,2002
Phase I Implementation Plan Page 10
by an agency; or creates an "expectation" that funding will be budgeted and spent to
maintain assets at a specified condition.
With this in mind, we believe the City should determine from a policy perspective_
whether it wants to make such a commitment in reporting Pavement under the Modified
Approach. Such a commitment may require re-prioritizing funding. Also, it may have
some political implications in terms the condition levels) (high or low) established by the
City.
Hams has experience in preparing the necessary 'inventory, valuation, condition
assessment and costing scenarios for Pavement using the Modified Approach. Further,
we can prepare the necessary policy documents related to condition level setting.
Basic Approach: Depreciation Methodology
For those assets being valued using the Basic Approach, it is suggested that the
simplest form of depreciation be utilized: Straight-line depreciation. It is a very
understandable formula employing the actual/estimated cost, actual/estimated
acquisition date and useful life to achieve current Net Book Value. The formula is as
follows:
CEstimated Historical Cost = Annual Depreciation) x Current Age = Accumulated
Estimated Useful Life J Depreciation
Estimated Historical Cost Accumulated Depreciation = Net Book Value
C7-18
l�
Q:\San Luis Obispo\Revised Final Report-Phase l.doc ) Harris &Associates
ATTACHMENT 2
City of San Luis Obispo-GASB 34 June,2002
Phase I Implementation Plan Page
LEVEL OF INFRASTRUCTURE DETAIL
Level of Detail
GASB 34 allows agencies to .report at the Network or Subsystem level. In Table 2, we
suggested the breakout of Subsystems within the asset Networks. Phase II work would,
therefore at a minimum, provide acquisition, historical cost, depreciation and Net Book
Value information for assets on a Subsystem basis. The City can then determine if it
wants to report at that level. Based upon our preliminary review of City inventories and
records, the City's existing data is fairly detailed, but with missing data on acquisition
dates and actual historical costs. As mentioned earlier, our recommendation is that the
City take a "minimalist" approach in complying with GASB M.
Valuing Street Rights-Of-Way
Experience with other agencies indicates that street rights-of-way are typically dedicated
by developers as easements. Only a few cities accept street dedications in "fee simple."
Our approach, based upon approval from independent auditors for these agencies, is
not to value right-of-way easements. Technically, these streets are not owned by the
agency, since they are easements for ingress and egress. Underlying ownership still
resides with the abutting property owners who have reversionary rights in the event the
right-of-way is vacated by the agency. Only the value of improvements to the right-of-
way easements, such as pavement, sidewalk, curb and gutter, street trees, etc., should
be reported.
Fee simple dedications legally transfer all ownership to the agency and should be
reported as assets per GASB 34. The main issue related to .fee simple dedications is:
Does the agency have records sufficient to obtain acquisition/historical cost information,
or can it be reasonably estimated? In discussions with Engineering staff, it was
determined that less than 5% of the City's public right-of-way has been accepted in fee.
This may require a determination and sign-off from your auditor that this small amount of
asset quantity and potential value may not be "material" to the total of other assets of like
type.
Examples of cities not reporting the value of right-of-way easements: Cities of Lake
Elsinore, Palo Alto, Piedmont, Carson and Rancho Palos Verdes. We have found only
one City so far that accepts dedications in fee simple: City of Vacaville. In this case, the
city accepts the right of way portion by easement, requires developers to dedicate "in
fee" that portion of property from back of curb to property walls.
In short, we recommend not reporting the value of right-of-way easements, but reporting
the value of fee simple right-of-way if sufficient relevant data is available (or can be
estimated) and if it is determined to be material.
C7-19
QASan Luis Obispo\Revised Final Report-Phase Ldoc BE Hams & Associates
ATTAGB�ME�T 2
City of San Luis Obispo-GASB 34 June,2002
Phase I Implementation Plan Page 12
IMPLEMENTATION SCHEDULE
Implementation Schedule
Estiroated ICalendarWeeks
Task Description Duration 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 1 101 11 12
Task l Research Acquisition/Construction Dates 4 Weeks
Task 2 Research Ac ' 'bon/Construction Costs 4 Weeks
Task 3 Develop Estimating Methods/Review with Auditor 2 Weeks
Task 4 Determine Current R lacement Cost 2 Weeks
Task 5 ICalculate Current Valiation 2 Weeks ®®
Task 6 are Valuation Re
port 2 Weeks
IMPLEMENTATION BUDGET
Implementation Budget
Average
Description Hourly Rate Total by Task
$85/hr
Task 1 Research Acquisition/Construction Dates 80 $6,800
Task 2 Research Acquisition/Construction Costs 80 $6,800
Task 3 Develop Estimating Methods/Review with Auditor 20 $1,700
Task 4 Determine Current Replacement Cost 40 $3,400
Task 5 Calculate Current Value(Depreciation) 40 $3,400
Task 6 Prepare Valuation Report 40 $3,400
Total Hours 30.0
Total Cost $25,500
Contingency $4,000
Total Budget $291500
C7-20
Q:\San Luis ObispolRevised Final Report-Phase Lcloc M Harris &Associates
- ATTACHMENT 2
City of San Luis Obispo-GASB-34 June,2002
Phase I Implementation Plan Page 13
GOVERNMENT-WIDE FINANCIAL STATEMENTS
The following conclusions were reached with City staff regarding the accounting issues
inherent in the presentation and implementation of government-wide financial
statements for the City under GASB 34:
e What is the best strategy for preparing government-wide financial statements?
The City will use the "spreadsheet" approach to prepare the financial statements.
The City will solicit input from their auditors as.specific questions arise in the process
of taking information from the fund-based general ledger system to the entity-wide
format.
• How should the City present functional revenues and indirect costs?
GASB 34 provides options for presenting expenses between the "unallocated cost
method" and the "cost allocation method." We recommend that the City adopt the
"cost allocation, method" in their financial statements as it is our opinion that it
provides more information to the user of the statements as to the true costs of the
programs.
The City plans to present a separate column in the financial statements reflecting
allocations by functional category. In applying the allocations, it is anticipated that
most of the allocation methodology will correlate to the .Council adopted Cost
Allocation Plan. As questions arise in this process, the City will continue to seek
input from their external auditors.
• What other issues should the City consider in preparing and implementing
government-wide financial statements?
There are no specific issues to raise with the City at this time. 'We have been in
verbal communication throughout the project and will continue to apprise the City as
issues relevant to the City are brought up either internally or by other municipalities
involved in the implementation process.
C7-21
-21
QASan Luis ObispolRevised Rnal Report-Phase Ldoc EFM Harris & Associates
At.,4bhment3
AGREEMENT
THIS AGREEMENT is made and entered into in the City of San Luis Obispo on this day
of by and between the CITY OF SAN LUIS OBISPO, a municipal
corporation,hereinafter referred to as City,and HARRIS&ASSOCIATES,hereinafter referred to as Contractor.
WITNESSETH:
WHEREAS,the City wants to receive assistance in implementing Government Accounting Standards Board
(GASB)Statement No.34;and
WHEREAS, Contractor is qualified to perform this type of service and has submitted a proposal to do so
which has been accepted by City.
NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter
contained,the parties hereto agree as follows:
1. TERM. The term of this Agreement shall be from the date this Agreement is made and entered,as
first written above,until acceptance or completion of said services.
2. CITY'S OBLIGATIONS. For providing services as specified in this Agreement, City will pay
and Contractor,shall receive therefor compensation in a total sum not to exceed$29,500.
4. CONTRACTOR'S OBLIGATIONS. For and in consideration of the payments and agreements
hereinbefore mentioned to be made and performed by City, Contractor agrees with City to provide services as set
forth in the City of San Luis Obispo GASB 34 Implementation Plan, as summarized in Exhibit A attached hereto and
incorporated into this Agreement. Contractor further agrees to the contract performance terms as set forth in Exhibit
B attached hereto and incorporated into this Agreement
5. AMENDMENTS. Any amendment, modification or variation from the terms of this Agreement
shall be in writing and shall be effective only upon approval by the City Administrative Officer of the City.
6. COMPLETE AGREEMENT. This written Agreement, including all writings specifically
incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral
agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of
any force or effect, nor shall any such oral agreement,understanding, or representation be binding upon the parties
hereto.
C7-22
ATTACHMENT 3
Agreement Page 2
7. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage
prepaid by registered or certified mail addressed as follows:
City City Clerk
City of San Luis Obispo
990 Palm Street
San Luis Obispo,CA 93401
Contractor Harris&Associates
34 Executive Park,Suite 150
Irvine,CA.92614
8: AU'T'HORITY TO EXECUTE AGREEMENT. Both City and Contractor do covenant that each
individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute
Agreements for such party.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year
first above written.
ATTEST: CITY OF SAN LUIS OBISPO,A Municipal Corporation
By:
City Clerk Mayor
APPROVED AS TO FORM: CONTRACTOR
By:
n} ome
C7-23
City of San Luis Obispo-GASB s. —
June,2002
Phase I Implementation Plan Page 2
IMPLEMENTATION SCHEDULE ExhibitA.
Implementation Schedule
Estimated CalendazWeeks
Task D on Duration 1 2 3 4 5 6 7 8 9 10 11 12
ask 1 eseazch Ac uisition/Construction Dates 4 Weeks i ry
ask 2 esearch A uisition/Construction Costs 4 Weeks
ask 3 eve] Estimatin Methods/Review with Auditor 2 Weeks mm
ask 4 tennme Current R Iacerneat Cost 2 Weeks
Task 5 Calculate Current Value raiation 2 Weems
ask 6 a=are Valuation R ort 2 Weeks
IMPLEMENTATION BUDGET
Implementation Budget
Average
Description Hourly Rate Total by Task
$85/hr
Task 1 Research Acquisition/Construction Dates 80 $6,800
Task 2 Research Acquisition/Construction Costs 80 $6,800
Task 3 Develop Estimating Methods/Review with Auditor 20 $1,700
Task 4 Determine Current Replacement Cost 40 $3,400
Task 5 Calculate Current Value(Depreciation) 40 $3,400
Task 6 Prepare Valuation Report 40 $3,400
Total Hours 300
Total Cost $25,500
Contingency $4,000
Total Budget $29,500
C7-24
Harris & Associates
Exhibit B
CONTRACT PERFORMANCE TERMS
1. Business Tax. Contractor must have a valid City of San Luis Obispo business tax certificate
prior to execution of the contract. Additional information regarding the City's business tax
program may be obtained by calling(805) 781-7134.
2. Ability to Perform. Contractor warrants that it possesses, or has arranged through subcontracts,
all capital and other equipment, labor, materials, and licenses necessary to carry out and
complete the work hereunder in compliance with any and all federal, state, county, city, and
special district laws,ordinances, and regulations.
3. Laws to be Observed. Contractor shall keep itself fully informed of and shall observe and
comply with all applicable state and federal laws and county and City of San Luis Obispo
ordinances,regulations and adopted codes during its performance of the work.
4. Payment of Taxes. The contract prices shall include full compensation for all taxes that
Contractor is required to pay.
5. Permits and Licenses. Contractor shall procure all permits and licenses, pay all charges and
fees,and give all notices necessary.
6. Safety Provisions. Contractor shall conform to the rules and regulations pertaining to safety
established by OSHA and the California Division of Industrial Safety.
7. Public and Employee Safety. Whenever Contractor's operations create a condition hazardous to
the public or City employees, it shall, at its expense and without cost to the City, furnish, erect
and maintain such fences,temporary railings,barricades, lights, signs and other devices and take
such other protective measures as are necessary to prevent accidents or damage or injury to the
public and employees.
8. Preservation of City Property. Contractor shall provide and install suitable safeguards,
approved by the City, to protect City property from injury or damage. If City property is injured
or damaged as a result of Contractor's operations, it shall be replaced or restored at.Contractor's
expense. The facilities shall be replaced or restored to a condition as good as when the
Contractor began work.
9. Immigration Act of 1986. Contractor warrants on behalf of itself and all sub-contractors
engaged for the performance of this work that only persons authorized to work in the United
States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws
shall be employed in the performance of the work hereunder.
10. Contractor Non-Discrimination. In the performance of this work, Contractor agrees that it will
not engage in, nor permit such sub-contractors as it may employ, to engage in discrimination in
employment of persons because of age; race; color, sex, national origin or ancestry, sexual
orientation,or religion of such persons..
11. Work Delays. Should. Contractor be obstructed or delayed in the work required to be done
hereunder by changes in the work or by any default, act, or omission of the City, or by strikes,
fire, earthquake, or any other Act of God, or by the inability to obtain materials, equipment, or
labor due to federal government restrictions arising out of defense or war programs,then the time
C7-25
E><h►bit �
Exhibit B:Contract Performance Terms Page B-2
of completion may, at the City's sole option,be extended for such periods as may be agreed upon
by the City and the Contractor.
12. Payment Terms. The City's payment terms are 30 days from the receipt of an original invoice
and acceptance by the City of the services provided by Contractor(Net 30).
13. Inspection. Contractor shall furnish City with every reasonable opportunity for City to ascertain
that the services of Contractor are being performed in accordance with the requirements and
intentions of this contract. All work done and all materials furnished, if any, shall be subject to
the City's inspection and approval. The inspection of such work shall not relieve Contractor of
any of its obligations to fulfill its contract requirements.
14. Audit. The City shall have the option of inspecting and/or auditing all records and other written
materials used by Contractor in preparing its invoices to City as a condition precedent to any
payment to Contractor.
15. Interests of Contractor. Contractor covenants that it presently has no interest, and shall not
acquire any interest direct or indirect or otherwise,which would conflict in any manner or degree
with the performance of the work hereunder. Contractor further covenants that, in the
performance of this work,no sub-contractor or person having such an interest shall be employed.
Contractor certifies that no one who has or will have any financial interest in performing this
work is an officer or employee of the City. It is hereby expressly agreed that,in the performance
of the work hereunder, Contractor shall at all times be deemed an independent contractor and not
an agent or employee of the City.
16. Hold Harmless and Indemnification. Contractor agrees to defend, indemnify, protect and
hold the City and its agents, officers and employees harmless from and against any and all
claims asserted or liability established for damages or injuries to any person or property,
including injury to Contractor's employees, agents or officers which arise from or are
connected with or are caused or claimed to be caused by the acts or omissions of Contractor,
and its agents, officers or employees, in performing the work or services herein, and all
expenses of investigating and defending against same,provided, however, that Contractor's
duty to indemnify and hold harmless shall not include any claims or liability arising from the
established sole negligence or willful misconduct of the City,its agents, officers or employees.
17. Contract Assignment. Contractor shall not assign, transfer, convey or otherwise dispose of the
contract, or its right, title or interest; or its power to execute such a contract to any individual or
business entity of any kind without the previous written consent of the City.
18. Termination. If, during the term of the contract, the City determines that Contractor is not
faithfully abiding by any term or condition contained herein, the City may notify Contractor in
writing of such defect or failure to perform; which notice must give Contractor a 10 (ten)
calendar day notice of time thereafter in which to perform said work or cure the deficiency.
If Contractor has not performed the work or cured the deficiency within the ten days specified in
the notice, such shall constitute a breach of the contract and the City may terminate the contract
immediately by written notice to Contractor to said effect. Thereafter, neither party shall have
any further duties,obligations,responsibilities or rights under the contract.
In said event, Contractor shall be entitled to the reasonable value of its services performed from
the beginning date in which the breach occurs up to the day it received the City's Notice of
C7-26
Exhibit B:Contract Performance Terms Page B-3
Termination, minus any offset from such payment representing the City's damages from such
breach. "Reasonable value" includes fees or charges for goods or services as of the last
milestone or task satisfactorily delivered or completed by Contractor as may be set forth in the
Agreement payment schedule; compensation for any other work, services or goods performed or
provided by Contractor shall be based solely on the City's assessment of the value of the work-in-
progress in completing the overall workscope.
The City reserves the right to delay any such payment until completion or confirmed
abandonment of the project, as maybe determined in the City's sole discretion, so as to permit a .
full and complete accounting of costs. In no event, however, shall Contractor be-entitled to
receive in excess of the compensation quoted in its proposal.
19. Ownership of Materials. All original drawings, plan documents and other materials prepared
by or in possession of Contractor as part of the work or services under these specifications shall
become the permanent property of the City, and shall be delivered to the City upon demand.
20. Release of Reports and Information. Any reports, information, data, or other material given
to, prepared by or assembled by Contractor as part of the work or services under these
specifications shall be the property of City, and shall not be made available to any individual or
organization by Contractor without the prior written approval of the City.
21. Copies of Reports and Information. If the City requests additional copies of reports,drawings,
specifications, or any other material in addition to what Contractor is required to furnish in
limited quantities as part of the work or services under these specifications, Contractor shall
provide such additional copies as are requested, and City shall compensate Contractor for the
costs of duplicating of such copies at the Contractor's direct expense.
22. Required Deliverable Products. Contractor will provide:
a. Five copies of the final report that addresses all elements of the workscope. Any
documents or materials provided by Contractor will be reviewed by City staff and,where
necessary, Contractor will respond to staff comments and make such changes as deemed
appropriate.
b. One camera-ready original, unbound, each page printed on only one side, including any
original graphics in place and scaled to size,ready for reproduction.
C. When computers have been used to produce materials submitted to the City as a part of
the workscope, Contractor must provide the corresponding computer files to the City,
compatible with the following programs whenever possible:
• Word Processing. Word
• Spreadsheets Excel
• Desktop Publishing Coreldraw, Pagemaker
• Computer Aided Drafting(CAD) AutoCad
Computer files must be on 31/2", high-density, write-protected diskettes, formatted for
use on IBM-compatible systems. Each diskette must be clearly labeled and have a
printed copy of the directory.
C7-27
Exhibit B:Contract Performance Terms Page B-4
23. Insurance. Contractor shall procure and maintain for the duration of the contract insurance
against claims for injuries to persons or damages to property that may arise from or in connection
with the performance of the work hereunder by Contractor, its agents,representatives, employees
or sub-contractors.
a. Minimum scope of insurance. Coverage shall be at least as broad as;
• Insurance Services Office Commercial General Liability coverage (occurrence
form CG 0001).
• Insurance Services Office form number CA 0001 (Ed. 1/87) covering
Automobile Liability,code 1 (any auto).
Workers' Compensation insurance as required by the State of California and
Employer's Liability Insurance.
• Errors and Omissions Liability insurance as appropriate to Contractor's
profession.
b. Minimum limits of insurance. Contractor shall maintain limits no less than;
• General Liability: $1,000,000 per occurrence for bodily injury, personal injury
and property damage. If Commercial General Liability or other form with a
general aggregate limit is used, either the general aggregate limit shall apply
separately to this project/location or the general aggregate limit shall be twice
the required occurrence limit.
• Automobile Liability: $1,000,000 per accident for bodily injury and property
damage.
• Employer's Liability: $1,000,000 per accident for bodily injury or disease.
• Errors and Omissions Liability:.$1,000,000 per occurrence.
C. Deductibles and self-insured retentions. Any deductibles or self-insured retentions
must be declared to and approved by the City. At the option of the City, either: the
insurer shall reduce or eliminate such deductibles or self-insured retentions as respects
the City, its officers, officials, employees and volunteers; or Contractor shall procure a
bond guaranteeing payment of losses and related investigations, claim administration and
defense expenses.
d. Other insurance provisions. The general liability and automobile liability policies are to
contain,or be endorsed to contain,the following provisions:
• The City, its officers; officials, employees, agents and volunteers are to be
covered as insureds as respects: liability arising out of activities performed by or
on behalf of Contractor; products and completed operations of Contractor;
premises owned, occupied or used by Contractor; or automobiles owned, leased,
hired or borrowed by Contractor. The coverage shall contain no special
limitations on the scope of protection afforded to the City, its officers, official,
employees, agents or volunteers.
• For any claims related to this project, Contractor's insurance coverage shall be
primary insurance as respects the City, its officers; officials, employees,agents
and volunteers. Any insurance or self-insurance maintained by the City, its
C7-28
Exh�b�t 8
Exhibit B:Contract Performance Terms Page B-5
officers, officials, employees, agents or volunteers shall be excess of Contractor's
insurance and shall not contribute with it.
• Any failure to comply with reporting or other provisions of the policies including
breaches of warranties shall not affect coverage provided to the City, its officers,
officials,employees,agents or volunteers.
• Contractor's insurance shall apply separately to each insured against whom claim
is made or suit is brought, except with respect to the limits of the insurer's
liability.
• Each insurance policy required by this clause shall be endorsed to state that
coverage shall not be suspended, voided, canceled by either party, reduced in
coverage or in limits except after thirty (30) days' prior written notice by
certified mail,return receipt requested,has been given to the City.
e. Acceptability of insurers. Insurance is to be placed with insurers with a current A.M.
Best's rating of no less than ANLL
f. Verification of coverage. Contractor shall famish the City with a certificate of
insurance showing maintenance of the required insurance coverage. Original
endorsements effecting general liability and automobile liability coverage required by
this clause must also be provided. The endorsements are to be signed by a person
authorized by that insurer to bind coverage on its behalf. All endorsements are to be
received and approved by the City before work commences.
C7-29