Agenda packet — Brea City Council, January 20, 2026 (part 1 of 4)

City Council and Successor Agency
to the Brea Redevelopment
Agency Agenda
Closed Session - 5:30 p.m.

Study Session - 6:00 p.m.

General Session - 7:00 p.m.

Tuesday, January 20, 2026, 7:00 PM

COUNCIL CHAMBERS
1 Civic Center Circle
Brea, California 92821
Cecilia Hupp, Mayor Marty Simonoff, Mayor Pro Tem Christine Marick, Council Member Blair Stewart, Council Member Steven Vargas, Council Member This agenda contains a brief general description of each item Council will consider. The City Clerk has on file copies of written documentation relating to each item of business on this Agenda available for public inspection.

Contact the City Clerk’s Office at (714) 990-7756 or view the Agenda and related materials on the City’s website at www.cityofbrea.gov. Materials related to an item on this agenda submitted to the Council after distribution of the agenda packet are available for public inspection in the City Clerk’s Office at 1 Civic Center Circle, Brea, CA during normal business hours. Such documents may also be available on the City’s website subject to staff’s ability to post documents before the meeting.

Procedures for Addressing the Council
The Council encourages interested people to address this legislative body by making a brief presentation on a public hearing item when the Mayor calls the item or address other items under Matters from the Audience. State law generally prohibits the City Council from responding to or acting upon matters not listed on this agenda.

The Council encourages free expression of all points of view. To allow all persons the opportunity to speak, please keep your remarks brief. If others have already expressed your position, you may simply indicate that you agree with a previous speaker. If appropriate, a spokesperson may present the views of your entire group. Council rules prohibit clapping, booing or shouts of approval or disagreement from the audience. Please silence all cell phones and other electronic equipment while the Council is in session. Thank you.

Written comments may be submitted in advance of the meeting by emailing [email protected].

Written comments received by 3 p.m. on the day of the meeting will be provided to the Council, will be made available to the public at the meeting, and will be included in the official record of the meeting.

Special Accommodations
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk’s Office at (714) 990-7757. Notification 48 hours prior to the meeting will enable City staff to make reasonable arrangements to ensure accessibility. (28 CFR 35.102.35.104 ADA Title II) Important Notice
The City of Brea shows both live broadcasts and replays of City Council Meetings on Brea Cable Channel 3 and over the Internet at www.cityofbrea.gov. Your attendance at this public meeting may result in the recording and broadcast of your image and/or voice as previously described.

1. CLOSED SESSION - EXECUTIVE CONFERENCE ROOM 3RD FLOOR - 5:30 P.M.

1.A. Call to Order/Roll Call

1.B. Public Comment

1.C. Conference with City's Labor Negotiator Pursuant to Government Code §54957.6 Regarding the Brea Management Association (Non -Safety); Brea City Employees' Association (BCEA); Administrative and Professional Employees' Association (APEA); Brea Fire Association (BFA); Brea Fire Management Association (BFMA); Brea Police Association (BPA); and the Brea Police Management Association (BPMA); Executive and Part-Time Employees - Kristin Griffith, Negotiator.

1.D. Conference with Legal Counsel Pursuant to Government Code Section 54956.9(d)(4) - Anticipated Litigation. Initiation of Litigation: 3 potential cases.

2. STUDY SESSION - EXECUTIVE CONFERENCE ROOM 3RD FLOOR - 6:00 P.M.

2.A. Call to Order/Roll Call

2.B. Public Comment

2.C. Clarify Regular Meeting Topics

2.D. Mayor Appointments

2.E. Southern California Association of Governments (SCAG) Delegate and Alternate for the Regional Conference and General Assembly, scheduled for May 7-8, 2026

2.F. Council Member Reports/Requests

2.G. Study Session Adjournment

3. GENERAL SESSION - COUNCIL CHAMBERS PLAZA LEVEL - 7:00 P.M.

3.A. Call to Order/Roll Call

3.B. Pledge of Allegiance: Brea Girl Scout Troop 8108

3.C. Invocation: Pastor Rick Darden, Friends Community Church

3.D. Proclamation: International Holocaust Remembrance Day

3.E. Presentation: Visiting Student Delegation from Brea Sister City - Anseong Gyeonggi-do, Republic of Korea

3.F. Report - Prior Study Session

3.G. Community Announcements

3.H. Matters from the Audience

3.I. Response to Public Inquiries

4. PUBLIC HEARINGS
This portion of the meeting is for matters that legally require an opportunity for public input.

Audience participation is encouraged and is limited to 5 minutes per speaker.

4.A. Approval of the Applications for Participation in the Community Development Block Grant (CDBG) Program for Fiscal Years 2026-27, 2027-28, and 2028-29 for Housing Rehabilitation and Public Facilities and Improvements
— 1. Open and conduct a public hearing;
— 2. Adopt Resolution No. 2026-01 approving Fiscal Years 2026-27, 2027-28, and 2028-29 applications to the County of Orange for Community Development Block Grant (CDBG) funding for Housing Rehabilitation;
— 3. Adopt Resolution No. 2026-02 approving Fiscal Years 2026-27 application to the County of Orange for Community Development Block Grant (CDBG) funding for Public Facilities & Improvements;
— 4. If awarded, authorize the City Manager, on behalf of the City Council, to execute forthcoming grant agreements with the County of Orange; and — 5. If awarded, amend the Fiscal Year 2026-27 budget for Fund 290 Community Development Block Grant (CDBG) in the amount of the approved project(s).

4.B. Public Hearing for the Establishment of the Short-Term Rental Pilot Program Fees — 1. Open and conduct a public hearing;
— 2. Approve a California Environmental Quality Act (CEQA) Exemption Determination; and — 3. Adopt Resolution No. 2026-03 to establish a short-term rental application license fee.

Revenues generated from the short-term rental license fees are deposited into the General Fund (110) and are intended to offset the City’s costs associated with administering and enforcing the short-term rental program.

5. ADMINISTRATIVE ITEM
This agenda category is for City Council consideration of a wide variety of topics related to the City's operations. Public comments regarding items in this section should be presented during "Matters from the Audience."

5.A. City of Brea Annual Comprehensive Financial Report and Related Audit Reports for the Fiscal Year Ended June 30, 2025
— 1. Receive and file the City's Annual Comprehensive Financial Report (ACFR) and the related audit reports for the fiscal year ended June 30, 2025.

6. CONSENT CALENDAR
The City Council/Successor Agency approves all Consent Calendar matters with one motion unless Council/Agency or Staff requests further discussion of a particular item. Items of concern regarding Consent Calendar matters should be presented during “Matters from the Audience."

6.A. December 16, 2025 Regular City Council Meeting Minutes — 1. Approve.

6.B. Adopt Resolutions Authorizing the Director of Public Works to Prepare and File Reports Relating to Annual Maintenance Assessment in Landscape and Lighting Maintenance Districts 1 through 7 — 1. Adopt Resolution No. 2026-04 - 2026-10 authorizing the Director of Public Works to prepare the Annual Maintenance Assessment Report for each Landscape and Lighting Maintenance District to present at the City Council meeting on April 21, 2026. There is no fiscal impact to the General Fund.

6.C. Second Reading of Ordinance No. 1271, an Ordinance of the City of Brea Extending the Term of a Pipeline Franchise Granted to Cardinal Pipeline, L.P., Repealing Ordinance No. 1268, and Approve a CEQA Exemption Determination
— 1. Waive full reading and adopt Ordinance No. 1271, "An Ordinance of the City Council of the City of Brea extending the term of a pipeline franchise granted to Cardinal Pipeline, L.P. and repealing Ordinance No. 1268," by title only, and approve a California Environmental Quality Act (CEQA) exemption determination;
— 2. Appropriate any revenues received as part of this franchise in the Fiscal Year 2025-26 Operating Budget; and
— 3. Authorize the City Clerk to accept a new faithful performance bond upon final adoption of the Ordinance.

6.D. Second Reading and Adoption of Ordinance No. 1270, an Ordinance Establishing Standards and Procedures for a Pilot Short-Term Rental Program, Adding Chapter 5.32 "Short-Term Rentals" to the Brea City Code, and Approving a CEQA Exemption Determination — 1. Find Ordinance No. 1270 exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061 (b)(3) of the CEQA Guidelines; and — 2. Waive full reading of and adopt Ordinance No. 1270 titled "An Ordinance of the City Council of the City of Brea Establishing Standards and Procedures for a Pilot Short-Term Rental Program, Adding Chapter 5.32 Regarding Short-Term Rentals to the Brea City Code, and Approving a CEQA Exemption Determination"

6.E. Resolution of Intent to Conduct a Public Hearing to Grant Crimson California Pipeline, L.P., a Franchise to Operate and Maintain Existing Pipelines in the City — 1. Adopt Resolution No. 2026-11 noticing a Public Hearing for February 17, 2026, to consider granting Crimson California Pipeline, L.P., a franchise to operate and maintain existing pipelines in the City. There is no fiscal impact to the General Fund.

6.F. 2026 Legislative Platform
— 1. Adopt the 2026 City of Brea Legislative Platform to coincide with the current legislative session. There is no fiscal impact associated with the adoption of the 2026 Brea Legislative Platform.

6.G. Monthly Report of Investments for the City of Brea for Period Ended December 31, 2025 — 1. Receive and file.

6.H. December Outgoing Payment Log and City Disbursement Registers for December 12, 19, and 26, 2025 and January 9, 2026
— 1. Receive and file.

7. CITY/SUCCESSOR AGENCY - CONSENT

7.A. Monthly Report of Investments for the Successor Agency to the Brea Redevelopment Agency for Period Ended December 31, 2025
— 1. Receive and file.

7.B. Successor Agency Disbursement Register for January 9, 2026 — 1. Receive and file.

8. ADMINISTRATIVE ANNOUNCEMENTS

8.A. City Manager

8.B. City Attorney

8.C. Council Requests

9. COUNCIL ANNOUNCEMENTS

9.A. Council Announcements

10. ADJOURNMENT

10.A. Meeting Adjournment
Date Posted: January 15, 2026
CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 2E.

Southern California Association of Governments (SCAG) Delegate and Alternate for the Regional Conference and General Assembly, scheduled for May 7-8, 2026

TO PREPARED BY
Honorable Mayor and City Council Members Victoria Popescu, City Clerk

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Kristin Griffith, City Manager Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following action:

1. Appoint a Delegate and Alternate to represent the City of Brea during the annual Southern California Association of Governments (SCAG) Regional Conference and General Assembly.

BACKGROUND/DISCUSSION
Founded in 1965, the Southern California Association of Governments ("SCAG") is a Joint Powers Authority under California state law, established as an association of local governments and agencies that voluntarily convene as a forum to address regional issues.

The SCAG region encompasses six counties (Imperial, Los Angeles, Orange, Riverside, San Bernardino and Ventura) and 191 cities in an area covering more than 38,000 square miles. The agency develops long-range regional transportation plans including sustainable communities strategy and growth forecast components, regional transportation improvement programs, regional housing needs allocations and a portion of the South Coast Air Quality management plans.

SCAG is governed by the General Assembly, which includes at least one official delegate from each of SCAG’s member cities, one from each county in the SCAG region, and one from each member county transportation commission. A regular meeting of the General Assembly is held once a year and serves as a forum to identify and address policy matters. Each year, the Brea City Council appoints a Delegate and Alternate to represent the City at the Regional Conference and General Assembly. This year's meeting will taking place May 7-8, 2026 in Palm Desert, California.

FISCAL IMPACT/SUMMARY
There is no fiscal impact to the General Fund related to this item.

CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 4A.

Approval of the Applications for Participation in the Community Development Block Grant (CDBG) Program for Fiscal Years 2026-27, 2027-28, and 2028-29 for Housing Rehabilitation and Public Facilities and Improvements

TO PREPARED BY
Honorable Mayor and City Council Members Jaquelyn Salgado, Community Development Specialist

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Jason Killebrew, Assistant City Manager/Community
Development Director
Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following actions:

1. Open and conduct a public hearing;

2. Adopt a Resolution (Attachment A) approving Fiscal Years 2026-27, 2027-28, and 2028-29 applications to the County of Orange for Community Development Block Grant (CDBG) funding for Housing Rehabilitation;

3. Adopt a Resolution (Attachment B) approving Fiscal Years 2026-27 application to the County of Orange for Community Development Block Grant (CDBG) funding for Public Facilities & Improvements;

4. If awarded, authorize the City Manager, on behalf of the City Council, to execute forthcoming grant agreements with the County of Orange; and

5. If awarded, amend the Fiscal Year 2026-27 budget for Fund 290 Community Development Block Grant (CDBG) in the amount of the approved project(s).

BACKGROUND/DISCUSSION
The Federal Department of Housing and Urban Development (HUD) distributes funds under the Community Development Block Grant (CDBG) Program, which was established by the Housing and Community Development Act of 1974 to provide housing and other assistance to low-income persons. The County of Orange administers CDBG Program funds for Cities under 50,000 in population.

The City has been successful in receiving CDBG grants to implement:

The Single Family Rehabilitation Program
Alley improvements identified in the Neighborhood Enhancement Plan Capital improvements to Pioneer Hall and the Senior Center.

Project eligibility is limited as the County only funds what is deemed “high priority projects,” including:

Park and Recreation Facilities
Senior Centers
Homeless Facilities
Neighborhood Facilities
Water Sewer Improvements
Street and Lighting Improvements
Sidewalk Improvements
Housing Rehabilitation that strengthens, preserves, and enhances the physical character and quality of life in Orange County’s low-and moderate-income neighborhoods, including the housing stock.

The City has received CDBG funding annually for the past 51 years for housing rehabilitation of single-family homes owned by low-income residents. Qualified homeowners must meet federally prescribed requirements to participate in the CDBG Program. Each year, between five (5) to eight (8) homes are improved, and many neighborhoods in Brea have been enhanced.

Public Facility and Improvement (PF&I) projects being proposed as part of the FY 2026-27 application process will consist of one primary project and one waitlisted project. Primary projects will be funded based on eligible applications passing the County’s threshold review and proceeding to preliminary award. Waitlisted projects will be funded at the discretion of the County based on availability of funding following the award of primary project applications.

On November 5, 2025, the County released application packages for Fiscal Years 2026-27, 2027-28, and 2028-29 CBDG Program funding and required that completed applications be submitted by December 5, 2025. Given the relatively short application window, and in an effort for the City to continue to receive CDBG funds, staff submitted completed applications to the County by the December 5, 2025 deadline. Due to time constraints, staff was unable to bring the application to the City Council prior to submittal.

HUD and the County require the City Council to conduct a public hearing regarding this item. The public hearing notice was posted in the local newspaper on January 1, 2026. As of the completion of this report, no public comments were received. The public hearing notice is provided as Attachment C.

As a result of past City Council direction, staff recommends City Council approval, by separate resolution, the City’s participation in the CDBG grant programs, including the following, but not limited to:

Housing Rehabilitation Program
The application for Fiscal Years 2026-27, 2027-28, and 2028-29 will be dedicated to single-family rehabilitation in the form of low-interest loans and grants to correct health, safety, and building code violations. Through the program, participants can finance many home repairs, such as leaks, termite damage, electrical repairs, roof repairs or replacement, damaged windows, doors, or screens, exterior painting, providing accessibility ramps, railing and grab bars, smooth and even floors, etc., to move about their residences, without obstacles. Program success is measured by enhancing participants’ ability to move freely and safely within their homes and by overall improvement in their quality of life.

If approved, the majority of the funds would be utilized for single-family home loans and mobile home grants. The remaining funds would be used to perform inspections of the project sites, contract document preparation, and coordinating contractors and construction work. The recipients of the loans and grants must be low-income households, which are defined as single-family residence homeowners earning 80% or less of the County median income and mobile homeowners earning 50% or less of the County median income. The requested grant amount for the three-year grant cycle is $180,000 per year.

Public Facilities and Improvements
The primary project proposed for Fiscal Year 2026-27 involves the acquisition of a backup power generator to support the Brea Community Center, a designated emergency shelter and cooling center for the City of Brea. This facility plays a critical role in the City’s emergency response infrastructure, providing refuge and essential services during evacuations, extreme heat events, and other disaster scenarios. The generator will ensure uninterrupted power supply during utility outages, enabling the continued operation of vital systems such as lighting, HVAC, refrigeration, medical equipment, and communication networks. This investment will significantly enhance the City’s disaster preparedness and response capabilities, particularly for vulnerable populations including low- and moderate-income residents, seniors, and individuals experiencing homelessness—groups that are disproportionately impacted by climate-related emergencies and power disruptions.

The waitlisted project proposed for Fiscal Year 2026-27 will include the resurfacing of the parking lot of the Brea Senior Center, a vital community facility that provides essential services, programs, and social engagement opportunities for the senior population of the City of Brea. The scope of work may include the removal of deteriorated asphalt, grading and preparation of the sub-base, application of new asphalt surfacing, and the restriping of parking spaces to improve traffic flow and ensure compliance with accessibility standards for the State of California. This improvement will enhance the safety, accessibility, and overall usability of the facility’s parking area, directly supporting the mobility needs of older adults who rely on the Brea Senior Center for health services, recreational activities, educational workshops, fitness programs, and community events. By investing in this infrastructure upgrade, the City of Brea aims to ensure that seniors can continue to safely access the Brea Senior Center and maintain their well-being, active participation, and independence through the services provided by this facility.

As part of the County’s requirements, the resolutions proposed for adoption authorize the Mayor, or his/her designee, to execute for and on behalf of the City of Brea, the necessary agreements and/or any other documents or instruments required for participation in the Urban Counties Program for acceptance of the CDBG funds under Bind No. 012-000089-NC. Staff recommends that the City Manager execute the forthcoming agreements or implementing documents as the Mayor’s designee.

Staff recommend the City Council adopt the attached Resolutions approving two CDBG applications (Attachments D and E); authorize budget amendments, as necessary; and authorize the City Manager to execute forthcoming grant agreements with the County.

FISCAL IMPACT/SUMMARY
The CDBG application for the Single-Family Housing Rehabilitation Program is a multi-year application (Fiscal Years 2026-27, 2027-28, and 2028-29) with a request of $180,000 for each year, with no match required. Applying for and accepting the grant award will have no impact on the General Fund (110). Appropriations to the CDBG Fund (290) for Fiscal Years 2026-27, 2027-28, and 2028-29 will not be required as these funds are already budgeted for annually as part of the normal operating budget process.

The CDBG application for Public Facilities and Improvements is a single-year application (Fiscal Year 2026-27) and is requesting $200,000 for the primary project and an additional $200,000 for a waitlisted project, each with no match required. Appropriations to the CDBG Fund (290) will be required to complete either or both of the proposed projects, if approved by the County. These funds would be reimbursed through CDBG funding as projects are completed.

Attachments
Attachment A - Resolution Housing Rehab CDBG Grant Application.pdf Attachment B - Resolution PFI CDBG Grant Application.pdf Attachment C - Public Hearing Notice - CDBG Grant Application 2026-2029.pdf Attachment D - OC Housing Rehabilitation Application FY 2026-27,2027-28,2028-29.pdf Attachment E - OC PF&I Application FY 2026-27.pdf
RESOLUTION NO. _______

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BREA
APPROVING THE CITY’S PARTICIPATION IN THE FISCAL YEARS
2026-27, 2027-28 AND 2028-29 COMMUNITY DEVELOPMENT BLOCK

GRANT PROGRAM (CDBG) WITH THE COUNTY OF ORANGE
A. RECITALS:
(i) The City of Brea has filed an application with the County of Orange for Community Development Block Grant (“CDBG”) funding under the Housing and Community Development Act of 1974 (“HCD Act”), and the Cranston/Gonzales National Affordable Housing Act of 1990, as amended.
(ii) The HCD Act authorizes cities under 50,000 in population to enter into cooperation agreements with the county in which they are located for the purpose of undertaking essential housing and community development activities. (iii) The federal government requires participating cities to provide certifications that CDBG funds will be obtained and utilized pursuant to federal law and policy. (iv) The City of Brea has submitted an application under FY 2026-27, FY 2027- 28 AND FY 2028-29 FOR HOUSING REHABILITATION AND REQUEST FOR APPLICATION RFA NO. 012-000089-NC.
(v) The City adopted certain projects as described in the project summary section of the application before filing the application with the County of Orange for CDBG funds under the HCD Act.
(vi)The City Council desires to accept the award of CDBG funds and to authorize the execution of the necessary agreements, contracts and amendments and other corresponding documentation.

B. RESOLUTION:

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BREA RESOLVES AND ORDERS AS FOLLOWS:

1. The City of Brea hereby accepts the award of CDBG funds through the County of Orange’s Urban Counties Program, which will be used to support the City of Brea’s Housing Rehabilitation Single-Family Rehabilitation Program Project under RFA No. 012-000089-NC.

2. The City of Brea authorizes the Mayor or his/her designee to execute, for and on behalf of the City of Brea, the necessary agreements(s) and/or any other documents or instruments required by the County of Orange and/or the United States Department of Housing and Urban Development for participation in the Urban Counties Program and/or for acceptance of the CDBG funds under RFA No. 012-0000893-NC.

APPROVED AND ADOPTED this 20th day of January 2026.

Cecilia Hupp, Mayor
ATTEST:

Victoria Popescu, City Clerk
I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the foregoing Resolution was adopted at a regular meeting of the Council of the City of Brea, held on the 20th day of January 2026 by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

Dated:

Victoria Popescu, City Clerk
RESOLUTION NO. _______

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BREA
APPROVING THE CITY’S PARTICIPATION IN THE FISCAL YEAR
2026-27COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
(CDBG) WITH THE COUNTY OF ORANGE
A. RECITALS:
(i) The City of Brea has filed an application with the County of Orange for Community Development Block Grant (“CDBG”) funding under the Housing and Community Development Act of 1974 (“HCD Act”), and the Cranston/Gonzales National Affordable Housing Act of 1990, as amended.
(ii) The HCD Act authorizes cities under 50,000 in population to enter into cooperation agreements with the county in which they are located for the purpose of undertaking essential housing and community development activities. (iii) The federal government requires participating cities to provide certifications that CDBG funds will be obtained and utilized pursuant to federal law and policy. (iv) The City of Brea has submitted an application under FY 2026-27 for Public Facilities and Improvements Request for Applications # 012-000089-NC. (v) The City adopted certain projects as described in the project summary section of the application before filing the application with the County of Orange for CDBG funds under the HCD Act.
(vi)The City Council desires to accept the award of CDBG funds and to authorize the execution of the necessary agreements, contracts and amendments and other corresponding documentation.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BREA RESOLVES AND ORDERS AS FOLLOWS:

1. The City of Brea hereby accepts the award of CDBG funds through the County of Orange’s Urban Counties Program, which will be used to support the City of Brea’s Public Facilities and Improvements Brea Community Center Backup Generator Project and the Senior Center Parking Lot Resurfacing Project under RFA No. 012-000089-NC.

APPROVED AND ADOPTED this 20th day of January 2026.

Cecilia Hupp, Mayor
ATTEST:

Victoria Popescu, City Clerk
B. RESOLUTION:
foregoing Resolution was adopted at a regular meeting of the Council of the City of Brea, held on the 20th day of January 2026 by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

Dated:

Victoria Popescu, City Clerk
I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the 3197328.2

CITY OF BREA

PUBLIC HEARING NOTICE
NOTICE IS HEREBY GIVEN that the Brea City Council will conduct a public hearing on Tuesday, January 20, 2026, at 7:00 pm, or as soon thereafter as the matter can be heard, in the Council Chambers of the Civic and Cultural Center, 1 Civic Center Circle, Brea, California, to consider the adoption of resolutions approving the City’s Fiscal Years 2026-27, 2027-28 and 2028-29 Grant Application to the County of Orange for the Community Development Block Grant Program (CDBG).

FURTHER INFORMATION may be obtained at the Office of the City Clerk or by calling (714) 990-7756.

ALL INTERESTED PARTIES are invited to attend such hearing and provide comments on the item.

If you challenge this matter in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the Office of the City Clerk at, or prior to, the public hearing.

Dated: December 22, 2025
Victoria Popescu
City Clerk of City of Brea
Publish: December 22, 2025

OC Housing & Community Development Public Facilities &
Improvements Application
PF&I - FY 2026-27
F: SIGNATURES AND ASSURANCES

1. Non-Discrimination: This agency will, through all possible means, ensure equal opportunity for all persons to receive services, to participate in the volunteer structure, and to be employed regardless of age, handicap, national background, race, religion, or sex.

An existing sectarian nature of the agency shall not suffer impairment under this agreement, but participation in religious observances, rituals or services will not be required as a condition of receiving food, services, or shelter paid for by this grant.

2. Accountability: We commit this agency, of a grant is received, to provide all reports to the County of Orange as required; to expend monies only on eligible cost' to keep complete documentation (copies of all canceled checks, invoices, receipts, etc.) on all expenditures for a minimum of three years; to spend all funds and close out the program on the required date; to return any unused funds to the County of Orange; to cooperate with monitoring or site visits, and; to provide complete documentation of expenses to the County of Orange, if requested, by the required date.

3. Non-collusion: This Application is genuine, and not sham or collusive, nor made in the interest or on behalf of any person not herein named; the Applicant has not directly induced or solicited any other Applicant to put in a sham Application, or any other person, firm or corporation to refrain from submitting an Application; the Applicant has not in any manner sought by collusion to secure for him/herself an advantage over any other applicant.

We affirm that all information in this Application is true and correct to the best of our knowledge and that the Applicant under our authority will execute its responsibility under the proposed contract and fully adhere to all other applicable rules and regulations possible.

First Authorized Person Signature
Cecilia Hupp
Print First Authorized Person's Name
Kristin Griffith
Print Second Authorized Person's Name
OC Community Resources
RFA Bid ti 012-000089-NC
Page17of57
Date
Mayor
Title
City Manager
Title

PF & I APPL/CATION

RESOLUTION NO. _______

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF BREA RESOLVES AND ORDERS AS FOLLOWS:

APPROVED AND ADOPTED this 20th day of January 2026.

Cecilia Hupp, Mayor
ATTEST:

Victoria Popescu, City Clerk
B. RESOLUTION:
foregoing Resolution was adopted at a regular meeting of the Council of the City of Brea, held on the 20th day of January 2026 by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

Dated:

Victoria Popescu, City Clerk
I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the

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9 Exhibit B
CITY of BREA
Communication
January 20, 2026
Item No. xx.

Adoption of Resolutions approving the applications for participation in the Community Development Block Grant (CDBG) Program for Fiscal Years 2026-27, 2027-28, and 2028-29 for Housing Rehabilitation and Public Facilities and Improvements on behalf of the City of Brea.

TO PREPARED BY
Honorable Mayor and City Council Members Anthony Godoy, Community Services Senior Management Analyst, and Jaquelyn Salgado,
Community Development Specialist

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Jason Killebrew, Assistant City Manager/Community
Development Director, and Carrie Hernandez,
Community Services Director
Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following actions:

1. After a Public Hearing, adopt a Resolution (Attachment A) approving Fiscal Years 2026-27, 2027-28, and 2028-29 applications to the County of Orange for Community Development Block Grant (CDBG) funding for Housing Rehabilitation;

2. After a Public Hearing, adopt a Resolution (Attachment B) approving Fiscal Years 2026-27 application to the County of Orange for Community Development Block Grant (CDBG) funding for Public Facilities & Improvements;

3. Authorize the City Manager, on behalf of the City Council of the City of Brea, to execute forthcoming grant agreements with the County of Orange; and

4. If awarded, amend the Fiscal Year 2026-27 budget for Fund 290 Community Development Block Grant (CDBG) in the amount of the approved project(s).

BACKGROUND/DISCUSSION
The Federal Department of Housing and Urban Development (HUD) distributes funds under the Community Development Block Grant (CDBG) Program, which was established by the Housing and Community Development Act of 1974 to provide housing and other assistance to low-income persons. The County administers CDBG Program funds for Cities under 50,000 in population.

The City has been very successful in receiving CDBG grants to implement the:
• Single Family Rehabilitation Program
• Alley improvements identified in the Neighborhood Enhancement Plan • Capital improvements to Pioneer Hall and the Senior Center.

Exhibit C
Project eligibility is limited as the County only funds what is deemed “high priority projects,” including:
• Park and Recreation Facilities
• Senior Centers
• Homeless Facilities
• Neighborhood Facilities
• Water Sewer Improvements
• Street and Lighting Improvements
• Sidewalk Improvement
• Housing Rehabilitation that strengthens, preserves, and enhances the physical character and quality of life in Orange County’s low-and moderate-income neighborhoods, including the housing stock.

The City has received CDBG funding annually for the past 51 years for housing rehabilitation of singlefamily homes owned by low-income residents. Qualified homeowners must meet federally prescribed requirements to participate in the Program. Each year, five (5) to eight (8) homes are improved, and many neighborhoods in Brea have been enhanced.

Public Facility and Improvement (PF&I) projects being proposed as part of the FY 2026-27 application process will consist of one primary project and one waitlisted project. Primary projects will be funded based on eligible applications passing the County of Orange’s threshold review and proceeding to preliminary award. Waitlisted projects will be funded at the discretion of the County of Orange based on a rating of the past three-year performance of the jurisdictions requesting funding, and the availability of funds remaining.

On November 5, 2025, the County released application packages for Fiscal Years 2026-27, 2027-28, and 2028-29 CBDG Program funding, and required that completed applications be submitted by December 5, 2025. Given the relatively short application window, and in an effort for the City to continue to receive CDBG funds, staff submitted completed applications to the County of Orange by the December 5, 2025, deadline. Due to time constraints, staff was unable to bring the application to the Finance Committee or the City Council prior to submittal.

The Public Hearing scheduled for January 20, 2026, is being conducted to conform to HUD and County requirements to give the public an opportunity to participate in the application process. As a result of past City Council direction, staff recommends City Council approval, by separate resolution, the City’s participation in the CDBG grant programs detailed below:

Housing Rehabilitation Program
The application for Fiscal Years 2026-27, 2027-28, and 2028-29 will be dedicated to single-family rehabilitation in the form of low-interest loans and grants to correct health, safety, and building code violations. Through the Program, participants can finance many home repairs, such as leaks, termite damage, electrical repairs, roof repairs or replacement, damaged windows, doors, or screens, exterior painting, providing accessibility ramps, railing and grab bars, smooth and even floors, etc., to move about their residences, without obstacles. Program success is measured by enhancing participants’ ability to move freely and safely within their homes and by overall improvement in their quality of life.

The majority of the funds would be utilized for single-family home loans and mobile home grants. The remaining funds would be used for delivery expenses to perform inspections of the project sites, contract document preparation, and coordinating contractors and construction work. The recipients of the loans and grants must be low-income households, which are defined as single-family residence homeowners earning 80% or less of the County median income and mobile homeowners earning 50% or less of the County median income. The requested grant amount for the three-year grant cycle is $180,000 per year.

Public Facilities and Improvements
The primary project proposed for Fiscal Year 2026-27 involves the acquisition of a backup power generator to support the Brea Community Center, a designated emergency shelter and cooling center for the City of Brea. This facility plays a critical role in the City’s emergency response infrastructure, providing refuge and essential services during evacuations, extreme heat events, and other disaster scenarios. The generator will ensure uninterrupted power supply during utility outages, enabling the continued operation of vital systems such as lighting, HVAC, refrigeration, medical equipment, and communication networks. This investment will significantly enhance the City’s disaster preparedness and response capabilities, particularly for vulnerable populations including low- and moderateincome residents, seniors, and individuals experiencing homelessness—groups that are disproportionately impacted by climate-related emergencies and power disruptions.

The waitlisted project proposed for Fiscal Year 2026-27 will include the resurfacing of the parking lot of the Brea Senior Center, a vital community facility that provides essential services, programs and social engagement opportunities for the senior population of the City of Brea. The scope of work may include the removal of deteriorated asphalt, grading and preparation of the sub-base, application of new asphalt surfacing, and the re-striping of parking spaces to improve traffic flow and ensure compliance with accessibility standards for the State of California. This improvement will enhance safety, accessibility and overall usability of the facility’s parking area, directly supporting the mobility needs of older adults who rely on the Brea Senior Center for health services, recreational activities, educational workshops, fitness programs and community events. By investing in this infrastructure upgrade, the City of Brea aims to ensure that seniors can continue to safely access the Brea Senior Center and maintain their well-being, active participation and independence through the services provided by this facility.

COMMISSION/COMMITTEE RECOMMENDATION
The Finance Committee reviewed staff’s recommendation at the January 13, 2026, meeting and recommended moving the items to City Council for approval.

FISCAL IMPACTS/SUMMARY
The CDBG application for the Single-Family Housing Rehabilitation Program is a multi-year application (Fiscal Years 2026-27, 2027-28, and 2028-29) with a request of $180,000 for each Program year, with no match required. Applying for and accepting the grant award will have no impact on the General Fund (110). Appropriations to the CDBG Fund (290) for Fiscal Years 2026-27, 2027-28, and 2028-29, as these funds are already budgeted for annually as part of the normal operating budget process.

The CDBG application for Public Facilities and Improvements is a single-year application (Fiscal Year 2026-27) and is requesting $200,000 for the primary project and an additional $200,000 for a waitlisted project, each with no match required. Appropriations to the CDBG Fund (290) will be required to complete either or both of proposed projects if approved by the County of Orange. These funds will be reimbursed though CDBG funding as projects are completed.

Staff recommends the adoption of the attached Resolutions approving the two applications.

RESPECTFULLY SUBMITTED:

Kristin Griffith, City Manager
Prepared by: Jaquelyn Salgado, Community Development Specialist, and Anthony Godoy, Community Services Senior Management Analyst
Concurrence: Jason Killebrew, Assistant City Manager/Community Development Director, and Carrie Hernandez, Community Services Director

CITY OF BREA

PUBLIC HEARING NOTICE
NOTICE IS HEREBY GIVEN that the Brea City Council will conduct a public hearing on Tuesday, January 20, 2026, at 7:00pm, or as soon thereafter as the matter can be heard, in the Council Chambers of the Civic and Cultural Center, 1 Civic Center Circle, Brea, California, to consider the adoption of a resolution approving the City’s Fiscal Years 2026-27, 2027-28 and 2028-29 Grant Application to the County of Orange for the Community Development Block Grant Program (CDBG).

FURTHER INFORMATION may be obtained at the Office of the City Clerk or by calling (714) 990-7756.

ALL INTERESTED PARTIES are invited to attend said hearing and express opinions on the matter outlined above.

If you challenge this ordinance in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the Office of the City Clerk at, or prior to, the public hearing.

Dated: December 4, 2025
Victoria Popescu
City Clerk of City of Brea
Publish: December 22, 2025
Exhibit D
CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 4B.

Public Hearing for the Establishment of the Short-Term Rental Pilot Program Fees

TO PREPARED BY
Honorable Mayor and City Council Members Joselyn Magana, Management Analyst

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Jason Killebrew, Assistant City Manager/Community
Development Director
Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following actions:

1. Open and conduct a public hearing;

2. Approve a California Environmental Quality Act (CEQA) Exemption Determination (Attachment A); and

3. Adopt Resolution No. 2026-03 (Attachment A) to establish a short-term rental application license fee.

BACKGROUND/DISCUSSION
On December 16, 2025, the Brea City Council conducted a public hearing regarding introducing an ordinance for a limited, regulated, short-term rental pilot program (“short-term rental pilot program”). The ordinance incorporates prior City Council feedback related to license and program availability, program procedures, and revocation criteria.

Notable provisions include setting a horizon date for the short-term rental pilot program of December 31, 2029; requiring an application process with a home inspection for building and fire code compliance; and stringent enforcement mechanisms to deter violations. Additional information regarding proposed Ordinance No. 1270 can be found in the December 16, 2025 staff report, included as Attachment B of this report.

On January 20, 2026, the City Council will conduct the second reading and consider the adoption of Ordinance No. 1270. This report is a continuation of those efforts, as it intends to establish the associated application fee for the short-term rental pilot program by resolution. To support this effort, staff will utilize the City's existing vendor, TruePoint Solutions, to assist with the development of the online application.

The resolution establishes a non-refundable short-term rental application fee of $1,000 for a new or renewal license in the pilot program. The proposed fee is intended solely to recover the City’s costs associated with administering and enforcing the short-term rental program and does not exceed the cost of providing these services. The fee accounts for services including building code compliance verification, home inspection services, application processing, compliance monitoring, and other related administrative tasks occurring both prior and following license issuance. These costs were calculated using the recently adjusted user fees and charges adopted by City Council on December 16, 2025, based on the City’s Comprehensive User Fee Study prepared by Willdan Financial Services.

Per Government Code, a public hearing is required to be conducted for this item. The public hearing notice was posted in the local newspaper on January 1, 2026. As of the completion of this report, no public comments were received. The public hearing notice is provided as Attachment C.

As a result of past City Council direction, staff recommends that the City Council take the following actions: (1) conduct a public hearing; (2) approve a California Environmental Quality Act (CEQA) Exemption Determination; and (3) adopt Resolution No. 2026-XX to establish a short-term rental application license fee.

FISCAL IMPACT/SUMMARY
Revenues generated from the short-term rental license fees are deposited into the General Fund (110) and are intended to offset the City’s costs associated with administering and enforcing the short-term rental program.

Adoption of the proposed non-refundable application fee of $1,000 is anticipated to generate up to $100,000 annually during the duration of the pilot program. This figure assumes the issuance of the maximum 100 short-term rental licenses authorized under Ordinance No. 1270.

Attachments
Attachment A: Resolution
Attachment B: December 16, 2025 Staff Report - Ordinance No. 1270 Attachment C: Public Hearing Notice
January 20, 2026
RESO. 2026-XX
1 RESOLUTION NO. 2026-____

A RESOLUTION OF THE BREA CITY COUNCIL ESTABLISHING

SHORT-TERM RENTAL LICENSING FEES AND APPROVING A CEQA

EXEMPTION
A. RECITALS:
i. WHEREAS, on January 20th, 2026, the City Council adopted Ordinance No. 1270 which adopted a short-term rental ordinance;
ii. WHEREAS, it is determined necessary to adopt a new application fee for the review and processing of a short-term rental licensing to aid in recovering costs incurred by the City in processing such applications, including building code compliance verification, home inspection services, compliance monitoring, and other related administrative tasks; iii. WHEREAS, California Government Code Section 66000 et seq. authorizes the City to adopt fees for municipal services, provided such fees do not exceed the estimated reasonable cost to the City for providing the services; iv. WHEREAS, City staff has conducted a cost study in order to ascertain the minimum cost of providing the residential short-term rental licensing services and program administration described herein;
v. WHEREAS, on January 20th, 2026, the City Council conducted a duly noticed public hearing concerning the fee established in this Resolution; and vi. WHEREAS, All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

January 20, 2026
RESO. 2026-XX
2 NOW, THEREFORE, be it found, determined and resolved, by the City Council of the City of Brea as follows:

1. All facts set forth in the Recitals, Part A, of this Resolution are true and correct.

2. The City Council hereby approves and adopts a short-term license fee in the amount of $1,000.

3. The short-term rental fee established by this Resolution shall replace and supersede any existing fees that may conflict with or be inconsistent with such license fee; provided, however, that nothing in this Resolution shall affect any fee for services performed by the City prior to this Resolution becoming effective.

4. The City Council finds and determines that there is no possibility that the adoption of this Resolution will have a significant effect on the environment. Accordingly, this Resolution is not subject to the requirements of the California Environmental Quality Act (“CEQA”) pursuant to Section 15061(b)(3) of the CEQA Guidelines.

APPROVED AND ADOPTED this 20th day of January, 2026.
____________________________________
Cecilia Hupp, Mayor
ATTEST: _________________________________
Victoria Popescu, City Clerk
I, Victoria Popescu, City Clerk of the City of Brea, California, do hereby certify that the foregoing Resolution was adopted by the City Council of the City of Brea, California, at its regular meeting held on the 20th day of January 2026, by the following vote:

AYES: COUNCIL MEMBERS:

January 20, 2026
RESO. 2026-XX
3 NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated: January 20, 2026
_________________________________
Victoria Popescu, City Clerk
CITYof BREA
City Council Regular Meeting
Communication
December 16, 2025
Item No. 413.

An Ordinance Establishing Standards and Regulations for a Pilot Short -Term Rental Program, Adding Chapter 5. 32 " Short -Term Rentals" to the Brea City Code, and Approving a CEQA Exemption Determination

TO PREPARED BY
Honorable Mayor and City Council Members Joselyn Magana, Management Analyst

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Jason Killebrew, Assistant City Manager/ Community
Development Director
Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following actions:

1. Waive full reading and introduce Ordinance No. 1270 titled " An Ordinance of the City Council of the City of Brea Establishing Standards and Regulations for a Pilot Short -Term Rental Program, Adding Chapter 5. 32 Short -Term Rentals' to the Brea City Code, and Approving a CEQA Exemption Determination" ( Attachment A);

2. Approve a California Environmental Quality Act ( CEQA) Exemption Determination ( Attachment A); and

3. Schedule adoption of the aforementioned Ordinance at the next regular City Council meeting.

BACKGROUND/ DISCUSSION
On May 6, 2025, the Brea City Council conducted a workshop to review the City of Brea' s budget for Fiscal Years 2025- 26 and 2026- 27. As part of the budget workshop, the City Council directed the evaluation of certain programs, including the " consideration of short- term rentals and other business opportunities" ( Attachment B). Currently, Chapter 20. 71 (" Short -Term Residential Rentals") of the Brea City Code ( BCC) prohibits residential short- term rentals in the City.

On June 17, 2025, the Brea City Council adopted the annual budgets for Fiscal Years 2025- 26 and 2026- 27, which included setting their Top Priorities and Projects for those years. Included in the City Council' s Top Priorities and Projects is for City staff to " identify creative ways to enhance City revenues and reduce costs".

In June 2025, City staff also reviewed the Orange County Grand Jury report entitled " Long -Term Solutions to Short - Term Rentals", which consists of findings and recommendations pertaining to municipal short- term rental policies.

Specifically, the Orange County Grand Jury identified major, upcoming events happening in the Southern California region, such as the 2026 FIFA World Cup and the 2028 Olympic and Paralympic Games, which are expected to generate additional tourism to the region and an increasing demand for lodging in Brea. City staff is also aware of development projects in nearby cities, such as Disneyland Forward and the OC Vibe, that are also anticipated to increase local tourism. The Orange County Grand Jury therefore recommended that the City of Brea review and update its ordinance( s) in anticipation of the upcoming major events by December 31, 2025. In response to the Orange County Grand Jury' s recommendations, as well as the City Council' s prior direction, staff conducted a review of BCC Chapter 20. 71 to reassess the City' s prohibition of short- term rentals.

On July 15, 2025, staff presented their assessment of and recommendation for the consideration of a short- term rental program intended to update BCC Chapter 20. 71 to the Brea City Council at a Study Session Meeting Attachment C). Staff shared six prospective policies for a short- term rental program, each with varying license caps and regulations. Ultimately, staff recommended the policy option with a limited license availability and comprehensive regulations to establish a well -managed program. The regulations proposed that participants in the short- term rental program must submit and pay for an application, pass a home inspection, and pay Transient Occupancy Tax ( TOT). The regulations also set host and guest requirements and identified ineligible units. City Council discussed additional program regulations and directed staff to develop guidelines for a limited, regulated, short- term rental pilot program with a limited number of licenses and operational standards targeting potential noise and parking impacts. Additionally, the City Council also requested that staff notify homeowner associations ( HOAs) and hotel operators in Brea of the proposed short- term rental pilot program to establish stakeholder awareness and feedback.

On August 19, 2025, City staff prepared a letter containing a brief questionnaire for the HOAs within the City Attachment D). The letter identified the City' s intent to review and possibly introduce a limited, regulated, shortterm rental pilot program and requested that the HOAs share any feedback on the proposed changes. Staff received three responses opposing an amendment to BCC Chapter 20. 71 ( Attachment E). The responses expressed concerns about potential impacts on neighborhoods, specifically noise and parking. As such, City staff amended the proposed guidelines to require HOA authorization of a short- term rental property before issuing any short- term rental license to a property owner. As part of the outreach process, a prominent hotel operator indicated no concerns related to allowing short- term rentals in the City of Brea.

At the September 16, 2025 City Council Study Session Meeting, staff presented a draft proposal for the limited, regulated, short- term rental pilot program ( Attachment F). The draft proposal incorporated prior City Council feedback related to license and program availability, approval procedures, and revocation criteria. Notable provisions included setting a horizon date for the pilot program of December 31, 2029; requiring an application process with a home inspection for building and fire code compliance; and stringent enforcement mechanisms to deter violations. To mitigate noise and parking impacts, the proposal indicated a limit to the number of daytime and overnight guests based on the number of bedrooms on the property and designating on -site parking only. During the Study Session Meeting, the City Council requested that staff establish geographic boundaries to guide license distribution and expressed support for a lottery -based allocation system to ensure fairness. With this additional feedback, the City Council directed staff to prepare a final version of the ordinance for review and consideration.

The following sections provide a summary of the proposed limited, regulated, short- term rental pilot program and the provisions of proposed Ordinance No. 1270, which, if approved, would be codified in BCC Chapter 5. 32 Attachment A) and supersede BCC Chapter 20. 71. The ordinance establishes standards, regulations, and operational requirements to ensure that short- term rentals operate in a manner that protects the health, safety, and welfare of Brea residents, businesses, and visitors.

The following section outlines key program regulations and operational requirements for property owners under the proposed short-term rental program.

Program Regulations
The proposed short- term rental program outlines the initiative as a limited -term pilot program, expiring on December 31, 2029, unless otherwise extended or modified by the City Council.

To manage community impacts, the total number of licensed short- term rentals will be capped at one hundred 100), allocated as follows: twenty- five ( 25) in the Northwest sector of the City of Brea, fifty ( 50) in the Southwest sector, and twenty- five ( 25) in the East sector (Attachment G). This approach will promote equitable distribution throughout the City.

Only property owners ( no renters) are eligible for the program. Property owners may hold no more than two 2) short- term rental licenses, based on the number of dwelling units on the property, as shown in Table

5. 32. 040. C. 1.

Table 5. 32. 040. C. 1

SHORT- TERM RENTAL LICENSE ISSUANCE
Number of Units Per Property Maximum Number of Short -Term Rentals Up to49
50 or more
Licenses
2 The proposed short-term rental program would prohibit short-term rentals in accessory dwelling units (ADUs) and junior accessory dwelling units ( JADUs), affordable housing units under the City' s proprietorship, and recreational vehicles.

Property owners intending to operate a short- term rental must submit an application containing all the requested information.

License holders whose licenses have been revoked during their participation in the pilot program are ineligible to reapply for the remaining duration of the program.

Property owners located within an HOA community would be required to obtain HOA approval prior to obtaining a license to operate a short-term rental.

Property owners seeking a short- term rental license must obtain a business license and meet the City' s insurance requirements.

The property would be subject to a building, fire, and health and safety inspection prior to license approval.

The property must have adequate on -site parking available, as overnight street parking for occupants of the short-term rental is prohibited.

Operational Requirements for License Holders
License holders must comply with all applicable local and State laws and are responsible for preventing disturbances to the community. Operational requirements include, but are not limited to:

Restricting outdoor activity and noise between 10: 00 p. m. and 7: 00 a. m., and displaying the required postage for outdoor activity
Displaying the short- term rental license number assigned by the City in rental listing advertisements Preserving the property' s residential character
Properly storing trash containers
Complying with the City' s TOT requirements
Ensuring a minimum renter age of 25 years
Maintaining renter records and providing them to the City upon request Designating a 24- hour contact person required to respond to guest and City inquiries Requiring a two -night consecutive stay, minimum, per renter Requiring the renter to complete and acknowledge the City' s Good Neighbor Policy and occupant rules prior to check -in
The proposed overnight occupancy will be limited to the number of bedrooms in the dwelling unit, as depicted in Table 5. 32. 050. C. 1. Guests under twelve ( 12) years of age are excluded from the maximum occupancy limits.

Table 5. 32. 050. C. 1

OVERNIGHT MAXIMUM OCCUPANCY LIMITS
Bedrooms Occupancy
0 2
1 4
2 6
3 8
4 10
5 or more 12
As a result of past City Council direction, staff recommends that the City Council take the following actions: ( 1) waive full reading and introduce Ordinance No. 1270 titled " An Ordinance of the City Council of the City of Brea Establishing Standards and Regulations for a Pilot Short -Term Rental Program, Adding Chapter 5. 32 ` Short -Term Rentals' to the Brea City Code; and Approving a CEQA Determination" ( Attachment A); ( 2) approve a California Environmental Quality Act ( CEQA) Exemption Determination ( Attachment A); and ( 3) schedule adoption of the Ordinance as mentioned above at the next regular City Council meeting.

This Ordinance has been noticed in accordance with the City' s public noticing requirements, which involved publication in the local newspaper. The public hearing notice for this ordinance is provided as Attachment H. As of the preparation of this report, no public comments have been received by staff.

FISCAL IMPACT/ SUMMARY
The estimated annual revenue impact on the General Fund ( 110) associated with the adoption of Ordinance No. 1270 is approximately $ 507, 340.

The short- term rental program is anticipated to generate up to $ 100, 000 in annual application fee revenue. The proposed application fee is $ 1, 000 per license, and the ordinance authorizes up to 100 short- term rental licenses.

The proposed application fee reflects the estimated reasonable cost to the City for providing services related to the administration of the program, along with building code compliance verification, home inspection services, application processing, compliance monitoring, and other related administrative tasks.

In addition, annual Transient Occupancy Tax ( TOT) revenue is estimated to be $ 407, 340. These projections are based on:
186 nightly rate*
A two -night stay ( per the City' s requirement)
An occupancy rate of 60 percent ( approximately 219 nights per year)** 100 licensed properties
The City' s current TOT rate of 10 percent
Average nightly rate across listings on major online booking platforms for comparable short- term rentals in the area.

Industry sources indicate that average occupancy rates for short-term rentals in California range from 50 to 70 percent. Staff calculations were made using an average rate of 60 percent.

The proposed application fee and TOT administration will be introduced as a separate resolution for City Council consideration and adoption at the second reading of Ordinance No. 1270, scheduled for the next regular City Council Meeting.

Attachments
Attachment A: Ordinance
Attachment B: Budget Adoption Staff Report
Attachment C: July 15 Presentation
Attachment D: HOA Letter
Attachment E: HOA Responses
Attachment F: September 16 Draft Proposal
Attachment G: Short -Term Rental Map
Attachment H: Public Hearing Notice
ORDINANCE NO. 1270

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BREA

ESTABLISHING STANDARDS AND PROCEDURES FOR A PILOT
SHORT- TERM RENTAL PROGRAM, ADDING CHAPTER 5. 32

REGARDING SHORT- TERM RENTALS TO THE BREA CITY CODE, AND

APPROVING A CEQA EXEMPTION DETERMINATION
THE CITY COUNCIL OF THE CITY OF BREA DOES ORDAIN AS FOLLOWS:

A. RECITALS:
i) On July 15, 2025, the City Council conducted a Study Session and directed staff to develop a limited -term pilot short-term rental program with a restricted number of licenses.
ii) On August 19, 2025, City staff conducted community outreach by notifying homeowner associations and hotel operators regarding the City's proposed short-term rental program and requested feedback related to operational impacts. iii) On September 16, 2025, City Council conducted a Study Session and directed staff to include geographic boundaries to guide license distribution and implement a lottery -based allocation system.
iv) On December 16, 2025, the City Council conducted a duly noticed public hearing concerning the addition of a new Chapter 5. 32 to Title 5 of the Brea City Code regarding short term rentals, as set forth in this ordinance. v) The City Council finds that unregulated short-term rentals may result in significant impacts to residential neighborhoods, including noise, parking, and transient 1 , 2026
ORD. 1270
occupancy activity, and that a regulatory framework is necessary to protect the public health, safety, and welfare while preserving housing availability. vi) It is the intent of the City Council in adopting this ordinance adding a new Chapter 5. 32 to Title 5 of the Brea City Code to codify and implement a pilot short-term rental program that will expire on December 31, 2029, unless the City Council acts otherwise to extend or modify its provisions.
vii) All legal prerequisites for the adoption of this ordinance have occurred.

B. ORDINANCE:

SECTION 1. The City Council hereby finds that the facts set forth in the Recitals, Part A of this ordinance, are true and correct.

SECTION 2. Division II ( Business Regulations) of Title 5 ( Business Licenses and Regulations) of Part I ( Municipal Code) of the Brea City Code is amended by adding a new Chapter 5. 32 to read as follows:

CHAPTER 5. 32 — Short -Term Rentals
Chapter 5. 32: General Provisions
Section

5. 32. 010 Intent and Purpose

5. 32. 020 Definitions

5. 32. 030 Authorized Agent or Representative

5. 32. 040 License Requirement

5. 32. 050 Inspections
2 , 2026
ORD. 1270

5. 32. 060 Operational Requirements

5. 32. 070 Hosting Platform Requirement

5. 32. 080 Prohibited Activities

5. 32. 090 License Nontransferable/ No Property Rights

5. 32. 100 License Approval, Denial, and Revocation

5. 32. 110 Appeal Procedure

5. 32. 120 Recordkeeping

5. 32. 130 Requirements Not Exclusive

5. 32. 140 Violations and Penalties

5. 32. 010 INTENT AND PURPOSE.

A. The purpose of this chapter is to establish a short-term rental pilot program containing regulations for the use of privately -owned residential dwellings as short-term rentals, minimize the secondary impacts of such uses on surrounding residential neighborhoods, and to ensure the collection and payment of applicable transient occupancy taxes.

B. This chapter does not provide any owner of a residential property with the right or privilege to violate any private conditions, covenants, and restrictions applicable to the owner's property that may prohibit the use of such owner's residential property for short-term rental purposes as defined in this chapter.

C. The city reserves the right to change the regulations provided in this chapter at any time, including discontinuing the issuance of short-term rental unit licenses, notwithstanding any impacts to existing or future short3 , 2026 ORD. 1270
term license holders. Anyone accepting a short- term rental license pursuant to this chapter acknowledges and accepts that possibility.

D. The program shall commence following the effective date of this chapter and shall expire on December 31, 2029, unless otherwise extended and/ or modified by the City Council by amending this ordinance.

5. 32. 020 DEFINITIONS.

For the purposes of this chapter, the following definitions shall apply, unless the context clearly indicates a different meaning or construction.

APPLICANT. The property owner applying for a new or renewal shortterm rental license.

ACCESSORY DWELLING UNIT. Same definitions specified in Section 91I1I1IIM1
ACCESSORY DWELLING UNIT, JUNIOR. Also referred to as " Junior Accessory Dwelling Unit" in this chapter. Same definitions specified in Section 20. 00. 070. B.

CONTRACT. An agreement or evidence of any tenancy that allows or provides for the short-term rental of a property.

DIRECTOR. The Director of Community Development or a designee.

GOOD NEIGHBOR POLICY. Guidelines approved and updated from time -to -time by the Director, for conduct, consideration, and respect pertaining to the use and occupancy of short-term rentals consistent with the intent and purpose of this chapter.
4 , 2026
ORD. 1270
HEARING OFFICER. An appointed person by the City Manager or designee who shall preside at the hearing and hear all facts and testimony presented and deemed appropriate.

HOSTING PLATFORM. An individual or entity that facilitates online short- term rental bookings in exchange for a fee or other compensation, either directly or indirectly, by conducting transactions through various means. Examples include, but not limited to, Airbnb and VRBO.

LOCAL CONTACT PERSON. A person designated by the owner or the owner' s authorized agent or representative who is a resident of Brea and is available twenty-four ( 24) hours per day, seven days per week for the purpose of: (1) responding in person within thirty ( 30) minutes to complaints regarding the condition, operation or conduct of occupants of the short-term rental unit; and ( 2) taking remedial action to resolve any such complaints. A designated local contact person must obtain a business license required by Sections 5. 00.030 and 5. 04. 010 of the Brea City Code.

MANAGING AGENCY OR AGENT. A person, firm, or agency
representing the owner of the short-term rental unit, or a person, firm, or agency owning or operating more than one ( 1) short- term rental.

MULTI -FAMILY RENTAL HOUSING. A complex, structure, or a portion of a structure zoned, used, and/ or designated as rental dwellings that include two ( 2) or more independent dwelling units. This includes, but is not limited to, duplexes, triplexes, apartments, and townhouses.

OCCUPANT. Any person( s) occupying the short-term rental at any time. 5 , 2026
ORD. 1270
OWNER. A person( s), corporation( s) or other legal entity( ies) that hold( s) record legal and/ or equitable title to the property used as a shortterm rental.

PROPERTY. A residential legal lot of record on which a short- term rental unit is located.

DWELLING UNIT. A residential unit, such as a single-family unit, multifamily rental housing, including a duplex, triplex, or condominium.

RESPONSIBLE PERSON. An occupant of a short- term rental who is at least twenty- five ( 25) years of age and who is legally responsible for compliance of all occupants of the unit and/or their guests with all provisions of this chapter and the Brea City Code.

SECTOR. A sector is one of the three geographic divisions of the City established for the purpose of license distribution, as shown in the City's Sector Map adopted by Ordinance No. 1270.

SHORT-TERM RENTAL. A privately -owned residential dwelling unit, or portion thereof unless otherwise prohibited, that is offered or provided to a guest by an owner for thirty consecutive nights or less. The term, " shortterm rental", shall not include hotels, motels, inns, timeshares, or bed and breakfasts.

SHORT- TERM RENTAL LICENSE or LICENSE. A license, with a license number, issued by the city to allow short- term rental units.

TRANSIENT OCCUPANCY TAX. The tax levied by the city pursuant to Chapter 3. 16 of the Brea City Code.
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5. 32. 030 AUTHORIZED AGENT OR REPRESENTATIVE.

An owner may authorize an agent or representative to comply with the requirements of this chapter on behalf of the owner (" owner' s agent"), unless the requirement is to be fulfilled solely by the owner.

Notwithstanding, the owner shall not be relieved from any personal liability for noncompliance with any provisions of this chapter or with any applicable laws, rule and regulation pertaining to the use and occupancy of the subject short- term rental, regardless of whether such noncompliance was committed by the owner's agent or the occupants of the owner's short-term rental or their guests. Failure of an owner's agent to comply with this chapter shall be deemed non- compliance by the owner.

5. 32. 040 LICENSE REQUIREMENT.

A. No person shall operate a short- term rental unless a license has been obtained in accordance with this chapter.

B. A license obtained under this chapter does not constitute a vested right, shall not run with the land, and shall be personal and limited to the owner listed on the application.

C. Any license issued pursuant to this chapter shall be valid for a period of one ( 1) year from the date of issuance and shall be subject to annual renewal for the duration of the pilot program, which requires submittal of a renewal license to the city.
7 , 2026
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D. The short- term rental license application and annual renewal application shall be accompanied by an application fee in the amount established by resolution of the City Council.

E. Eligibility Requirements. The following requirements must be met at the time of short- term rental application submittal:

1. The applicant shall not be a lessee or a sub -lessee. All applications submitted shall be submitted by the owner of the residential dwelling unit or the owner' s agent.

2. The following types of dwelling units are prohibited to be used as a short- term rental unit:
i. Accessory dwelling units and junior accessory dwelling units ii. Recreational vehicles
iii. Affordable housing units under the City' s proprietorship.

3. No owner shall be granted a license for more than one shortterm rental within the city, except as otherwise provided herein.

4. There shall only be one ( 1) short- term rental license issued per property except in multi -family rental housing ( i. e. apartments, condominiums or townhomes) the number of short- term rental licenses allowed shall be as follows in Table 5. 32. 040. C. 1:
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Table 5. 32. 040. C. 1

SHORT- TERM RENTAL LICENSE ISSUANCE
Number of Units Per Property Maximum Number of Short -Term Rental Licenses
Up to 49 1
50 or more 2

5. The dwelling unit or property used as a short-term rental property shall not be subject of any active or pending code enforcement actions or violations pursuant to the Brea City Code, including, but not limited to, zoning, building, and fire codes.

F. Application for License. The owner shall submit the following information and/ or documents as part of their application or renewal application for a short- term rental, including but not limited to:

1. The name, address, and telephone number of the owner of the short- term rental and the local contact person, if different from the owner.

2. A copy of the owner' s current state issued driver' s license or identification card.

3. The address of the short- term rental property, including a diagram identifying the location of the short-term rental structure and the location of the required parking.

4. The number of bedrooms and the applicable occupancy limit of the short-term rental.
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5. A photo of the short-term rental structure to allow the city to visually identify the unit.

6. Signed acknowledgment form confirming that city staff shall conduct building, fire, and safety inspection to verify compliance with the operational requirements of this chapter. License approval shall be contingent upon passing the inspection.

7. The uniform resource locator ( URL) ( i. e. website address) for any and all anticipated advertisements of the short-term rental property.

8. An executed document, approved as to form by the City Attorney, by which the Applicant agrees to indemnify and hold harmless the city, its officers, employees and agents from any claim, demand, or judgment in favor of any person, arising out of activities or inactivity of the applicant with respect to the operations of the short- term rental.

9. A completed Transient Occupancy Tax registration form.

10. Proof of general liability insurance that covers the rental of the property as a short-term rental in the aggregate sum of not less than one million dollars ($ 1, 000, 000). Alternatively, the owner can provide evidence that each rental occurs through a platform that provides equal or greater insurance coverage. Proof of insurance shall be provided at the time of both initial license and renewal license issuance and shall remain in effect for the duration of the annual license. Failure to maintain liability insurance shall result in the revocation of the license.
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11. If a short-term rental is located on a property in any area governed by a homeowners' association or community association and subject to covenants, conditions, and restrictions, the applicant shall submit a letter from the associations' governing board stating that the and the rules and regulations of the association do not prohibit short- term rentals from operating, including the short- term rental proposed by the Applicant.

12. The short- term rental license application shall be accompanied by a consent to inspection form signed by the owner of the property by which the owner agrees and consents to a building, fire, and health and safety inspection as further described under Section 5. 32. 050 of this chapter, in addition to the payment of inspection fee in the amount established by resolution of the City Council.

13. Proof of current City of Brea business license.

G. Maximum Number of Short -Term Rental Licenses.

1. The total number of licensed short-term rentals operating in the city at any given time shall not exceed one hundred ( 100), allocated as follows: twenty-five ( 25) in the Northwest sector, fifty (50) in the Southwest sector, and twenty- five ( 25) in the East sector.

2. Short-term rental licenses shall be issued on a lottery -based system within each sector. A licensed short- term rental business that ceases operation shall notify city staff in writing within thirty (30) days. Upon such notice, or upon license revocation, the license shall be returned to the available allocation for that sector.
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3. Each property owner shall not operate more than one ( 1) short- term rental in the city, except as otherwise provided herein.

4. When the maximum number of short- term rental licenses has been issued within a sector, the city shall establish and maintain a waitlist.

When a space becomes available in the designated sector, licenses may be issued as they become available.

H. Short -Term Rental License Waitlist.

1. All short- term rental license applications, which have been deemed complete, shall be placed on the short- term rental waitlist in the order of the application' s filing date. Placement on the waitlist does not guarantee that a license will be issued during the pilot program.

2. The City shall notify applicants of license availability in the order of the application' s filing date.

5. 32. 050 INSPECTIONS.

A. Prior to the issuance of a new short- term rental license or a renewal short-term rental license, the city shall conduct a building, fire, and health and safety inspection of the short-term rental for compliance with this chapter.

B. Such inspection shall be conducted within thirty ( 30) days of receipt of a completed application.
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C. No license shall be issued if the inspection finds that any of the following conditions exist:

1. The dwelling unit does not have functioning smoke and carbon monoxide detectors, electricity, or plumbing.

2. The structure has been modified in a way that required a building license from the city, but such building license was not obtained.

3. The city determines that there are conditions present on the property that would present a danger to the health, safety, or welfare of the occupants and/ or the public.

5. 32. 060 OPERATIONAL REQUIREMENTS.

A. Compliance by owner, agents, and occupants. The owner and/or owner' s agent shall ensure the property used as a short- term rental is used in a manner that complies with all applicable laws, rules, and regulations pertaining to its use and occupancy, including applicable codes regarding fire, building and safety, and shall further ensure the occupants of the shortterm rental do not create noise in violation of Chapter 8. 20 of the Brea City Code or other disturbances, engage in disorderly conduct, or violate any applicable laws, rule, or regulation pertaining to the use and occupancy of the subject short- term rental.

B. Overnight maximum occupancy limits

1. The owner shall limit overnight occupancy of the short-term rental to a specific number of occupants as set forth in Table 5. 32. 050. C. 1 below.
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2. Children twelve ( 12) years of age or younger are not counted towards the occupant maximum.

3. As used in this section, overnight occupancy shall mean during the hours of 10: 00 p. m. through 8: 00 a. m. of the following day.

Table 5. 32. 050. C. 1

OVERNIGHT MAXIMUM OCCUPANCY LIMITS
Bedrooms
Occupancy
0 2
1 4
2 6
3 8
4 10
5 or more 12
C. Overnight stay. The minimum overnight stay per responsible person shall be no less than two ( 2) consecutive nights.

D. Minimum age of the responsible person. The owner shall not rent a short- term rental to a person that is under the age of twenty- five ( 25).

E. Maintenance of rental contracts. Owners shall maintain all short-term rental contracts ( in electronic or paper form) for a period of four ( 4) years from the date of occupancy. The exact number of occupants shall be included in the contract as well as all city code requirements regulating occupancy limits, noise, outdoor amplified music prohibition, public nuisance, parking, trash, prohibition of commercial activities, and other 14 , 2026
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code requirements related to the use and occupancy of the short-term rental. The owner shall share all contracts upon the city' s request.

F. Prior to occupancy. Prior to occupancy of a short-term rental by occupants, the owner or owner' s agent or representative shall advise of or require the following from the responsible person:

1. Provide the responsible person with the local contact person' s contact information. The local contact person is required to be available twenty four (24) hours per day.

2. Obtain from the responsible person an "informational form," in the form provided by the City, which contains, but not limited to, the following:
person
i. Name
ii. Address
iii. Telephone number
iv. Copy of the valid governmental identification of responsible V. List of all the names of all occupants of the short- term rental vi. List of all vehicle information and license plate numbers of the responsible person, occupants, and guests
vii. Signed copy of the city's Good Neighbor Policy prior to or during check -in.
15 , 2026
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viii. Signed acknowledgment statement, in which the responsible person understands that he or she is legally responsible for compliance by all occupants of the short-term rental and their guests.

3. Applicants for the short- term rental license shall review and acknowledge receipt of a copy of the city's Good Neighbor Policy. In addition, the applicant shall provide a brochure or document intended to remind occupants of short- term regulations.

G. The owner of the short-term rental shall ensure that the property complies with all applicable codes regarding fire, building, health and safety, zoning and all other laws and regulations.

H. 24- Hour Availability.

1. During the period of a short-term rental, the owner, owner's agent, and/ or owner's local contact person shall be available twenty-four 24) hours per day, seven ( 7) days per week to respond to complaints regarding the condition, operation, or conduct of the occupants, including responding in person at the location of the short-term rental.

2. The local contact person' s response to complaints may be made by telephone, text message and/ or in person, however, in no event shall the response time exceed fifteen ( 15) minutes if responding by telephone or text or forty-five ( 45) minutes if an in -person response is required because of the severity of the complaint.

3. In all circumstances, complaints that the occupants of the short- term rental have created unreasonable or unlawful noise or 16 , 2026
ORD. 1270
disturbances in violation of Chapter 8. 20 of the City Code or provisions of this chapter or are engaging in disorderly conduct, requires an in -person response by the local contact person.

I. Outdoor Activities. Occupants of the short- term rental shall be prohibited from using all outdoor amenities ( i. e. pool/ spa) and/ or engaging in outdoor games or any outdoor activities that create noise between the hours of 10: 00 p. m. to 7: 00 a. m. all days of the week. A sign stating these restrictions must be clearly visible near any such outdoor amenities and posted on all interior doors leading to the outdoor amenities.

J. Parking. Property owners shall provide adequate on -site parking. For the purposes of this subsection, " adequate on -site parking" shall be determined by dividing the total number of occupants commensurate with the approved number of bedrooms and provided in Table 5. 32.0050. C. 1 by four ( 4), such that the ratio of the maximum allowed number of overnight occupants to on -site parking spots does not exceed four to one ( 4: 1). For example, a residential dwelling with five (5) bedrooms may permissibly host a total number of ten ( 10) to twelve ( 12) overnight occupants and therefore requires three ( 3) on -site parking spots. On -site parking shall be on an approved driveway, garage, and/ or carport areas. Overnight street parking is not licensed.

K. Trash Containers. Trash and refuse shall not be left stored within public view, except in proper containers for the purpose of collection by the city' s authorized waste hauler on scheduled trash collection days. The 17 , 2026
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owner of the short-term rental shall provide sufficient trash collection containers and service to meet the demand of the occupants.

L. The short- term rental license number assigned by the city shall be displayed on any hosting platform' s website where said short- term rental is advertised. Each short- term rental shall have a unique license number.

M. Retention of Residential Character. The owner of a short- term rental shall not change the residential character or the outside appearance of the residence, either by the use of colors, materials, lighting or/and advertising mechanism.

N. Required Information for advertisements.

1. The owner shall include the current license registration number on or in any advertisement appearing in any newspaper, magazine, brochure, television, internet website, etc., that promotes the availability or the existence of the short-term rental in a place or location deemed acceptable by the license administrator in the following format:
i. " City of Brea — Short- term Rental License No. "
ii. In the case of the audio -only advertising of the same, the license number shall be read as part of the advertising.

2. Each of the following shall be clearly identified in any advertisement:
i. Maximum occupancy.
ii. The number of bedrooms.
iii. Maximum number of vehicles allowed.
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iv. Photo of the front of the short- term rental.

O. Transient Occupancy Tax. The owner and/or the owner's agent shall comply with all provisions of Chapter 3. 16 of the City Code concerning transient occupancy taxes including, but not limited to, submission of a return in accordance with § 3. 16. 070, which shall be filed even if the shortterm rental unit was not rented during each such reporting period.

5. 32. 070 HOSTING PLATFORM REQUIREMENTS.

A. Subject to applicable laws, Hosting Platforms shall disclose to the city on a quarterly basis each short- term rental listing located in the city, the names of the persons responsible for each such listing, the address of each such listing, the length of stay for each such listing, and the price paid for each stay.

B. Hosting platforms shall require owners to include the city -issued license registration number in their listing( s), in a format designated by the city. Hosting platforms shall not complete any booking transaction for unlicensed short- term rentals in the city.

C. Prior to an owner listing a short- term rental location within the city through a hosting platform, the hosting platform shall provide a notice to such owner with the following information:

Chapter 5. 32 of the Brea City Code prohibits the short-term rental of residential property within the City of Brea unless the City has issued both a business license and a short-term 19 , 2026
ORD. 1270
rental license to the owner, and the owner pays the transient occupancy tax."
D. The provisions of this section shall be interpreted in accordance with otherwise applicable state and federal law(s) and will not apply if determined by the city to be in violation of, or preempted by, and such law(s).

5. 32. 080 PROHIBITED ACTIVITIES.

A. A person who is renting a short-term rental is prohibited from subleasing such dwelling unit, or any portion thereof, to any other person or entity.

B. Commercial activities and special events, including but not limited to, weddings, receptions, large parties and sales events are prohibited on the property used as a short- term rental.

C. Hosting platforms are prohibited from facilitating the short-term vacation rental of unlicensed and illegal businesses. Hosting platforms shall not facilitate the evading of relevant taxes and regulations required of any short- term rental.

D. Hosting platforms are prohibited from advertising a short-term rental located within the city that is not licensed pursuant to this chapter.

E. Owners and/ or owner' s agent of an unlicensed short- term rental are prohibited from operating in the city and are prohibited from being marketed as short- term rentals available within the city. Any owner and/ or owner' s 20 , 2026
ORD. 1270
agent found to be operating a short-term rental without a valid license shall be subject to all applicable fines and penalties.

5. 32. 090 LICENSE NONTRANSFERABLE/ NO PROPERTY RIGHTS.

A license granted pursuant to this chapter shall not be transferable to another person, entity, assessor' s parcel number or to another property owner. In addition, the issuance of a license or renewal license does not give the owner any vested property rights and any such license shall not run with the land or property to which it applies. All new property owners shall obtain a new license to continue with short- term rental operations.

5. 32. 100 LICENSE APPROVAL, DENIAL, AND REVOCATION.

A. Decision Authority.

1. The Community Development Director has the authority to deny and/ or or revoke a short- term rental license in accordance with this section.

2. The Director' s decision to deny a short- term rental license application shall take effect immediately, unless a timely appeal is filed pursuant to section 5. 32. 110 of this chapter. Unless successfully appealed, the Director' s decision to revoke a short- term rental license shall take effect upon 30 days' notice to the owner of the Director' s decision.

B. License Approval. If, as a result of the investigation conducted by the city, the applicant is found to satisfy all of the requirements of this chapter and no grounds for denial exist, the associated short-term rental license 21 , 2026
ORD. 1270
application shall be approved, and a license ( or a renewal license) shall be issued to the applicant unless the maximum number of licenses as specified in Section 5. 32. 040 has been issued.

C. License Denial.

1. The applicant shall be denied the short- term rental license, including a renewal license, if any of the following findings are made:
i. The information contained in the application or supplemental information requested is false or misleading in any material detail. ii. The owner failed to provide a complete application, after having been notified of the requirement to produce documents or additional information within ten ( 10) calendar days.
iii. The owner is delinquent in payment of any city taxes, fees, assessments, fines, or penalties.
iv. If the owner has had a prior short-term rental license revoked or has been cited for violating any provision of the City Code related to shortterm rentals in the city within the past twelve ( 12) months. [ BUT SEE D. 2, BELOW]
V. The owner has failed to pay any previous administrative fines, remediate any other violations, and/ or complete any other alternative disposition associated with a previous violation of this chapter related to the operation of a short- term rental.
vi. If, at the time the license application is being submitted, the city has commenced any enforcement proceedings against the owner with 22 , 2026
ORD. 1270
respect to the property for which the owner seeks a license or a renewal of a license.
vii. The property does not comply with all applicable codes regarding zoning, fire, building and safety as specified under Section

5. 32. 050 of this chapter, and other relevant laws, ordinances, or regulations including any conditions placed on the license by the city. viii. The license cap has been reached.

2. Applicants who are denied a license solely based on the license cap shall have an option to join the waitlist.

D. License Revocation.

1. The Director shall hold a hearing on whether to revoke a shortterm rental upon at least 10- days written notice to the owner. A short- term rental license shall be revoked if, based on substantial evidence presented at such hearing, the Director makes any of the following findings:
i. The short- term rental has operated in violation of Section

5. 32. 050, 5. 32. 060, or 5. 32. 080 of this chapter
ii. Operation of the short-term rental has caused or substantially contributed to the violation of any other applicable law or in a manner injurious of or threatening to the public health and safety.

2. An owner whose license is revoked is prohibited from applying for a new short-term rental license for the duration of the pilot program.

3. City shall provide owner notice of license revocation that includes the findings the Director relied on to make their decision to revoke 23 , 2026
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the license. City shall mail notice of revocation to the owner's address as listed on the short- term rental application and to the address of the local contact person listed on the license application.

4. The owner shall have ten ( 10) days from the date the notice was sent to appeal the decision pursuant to Section 5. 32. 110 before the Director' s decision becomes final.

5. 32. 110 APPEAL PROCEDURE.

A. Any interested party may appeal the Director' s decision to approve, deny, or revoke a short- term rental license; provided that the Director' s decision to deny a license application on the grounds that the license cap has been reached shall be final and not appealable. All appeals under this section shall be heard by the Hearing Officer. Any appeal filed by a person who is neither the license applicant nor the owner of the subject property must be accompanied by a written statement describing the legal grounds for the appeal and the factual basis for their standing as an interested party for purposes of the appeal.

B. Time for Filing of Appeal. An appeal must be filed within ten ( 10) calendar days after the date of action by the Director.

C. Filing of Appeal.

1. Appeals must be filed with the City Clerk together with the required appeal fee as set forth in the current schedule of fees adopted.

2. If the information included with an appeal is found by the City Clerk to be deficient, the City Clerk shall notify the appellant as to the 24 , 2026
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particulars of the deficiencies. If such deficiencies are not corrected within ten ( 10) calendar days of such notice, the appeal shall be deemed withdrawn.

D. Effect of Timely Appeal.

1. The filing of a timely appeal shall suspend the decision of the Director until the final determination on the appeal or dismissal thereof.

2. No person shall commence operation or continue to operate a short- term rental until the final determination is made on the appeal.

E. Notice of Hearing. A notice of such hearing shall be given to the owner/applicant of the short-term rental license, in writing and mailed at least ten ( 10) calendar days prior to the date of the hearing addressed to the address listed on the short- term rental application. The notice shall state the grounds for denial or revocation, and the time and place where such hearing will be held.

F. Public Hearing

1. At the time and place set for public hearing, the Hearing Officer shall hear and determine all the facts and evidence relevant to the applicant and the contents of the application.

2. At the conclusion of the hearing, the Hearing Officer may affirm, modify, or reverse the Director's decision. The Hearing Officer shall render a written decision within ten ( 10) calendar days from the date of the hearing where the decision on the appeal was made

3. The action of the Hearing Officer shall be final and conclusive. 25 , 2026
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5. 32. 120 RECORDKEEPING.

Each owner shall maintain all written records related to the use and occupancy of the short-term rental, including, but not limited to, compliance with the operation requirements and standards set forth in section 5. 32. 060, for a period of four ( 4) years for the purpose of inspection or audit to determine that the objective and conditions of this Chapter are being fulfilled.

5. 32. 130 REQUIREMENTS NOT EXCLUSIVE.

The requirements of this Chapter shall be in addition to any license, permit or fee required under any other provision of the Brea City Code. The issuance of any license pursuant to this Chapter shall not relieve any person of the obligation to comply with all other provisions of the Brea Municipal Code pertaining to the use and occupancy of the Short -Term Rental or the property on which it is located.

5. 32. 140 VIOLATIONS AND PENALTIES.

A. Violations of this chapter shall be subject to enforcement as provided in Chapter 1. 04 of the City Code in addition to, and not in lieu of, any and all other legal remedies available to the City, whether criminal or civil or in law or equity.

B. Each and every day such a violation exists shall constitute a separate and distinct violation of this chapter.

C. It shall be unlawful to aid or abet any violation of this chapter." 26 , 2026
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SECTION 3. The new Chapter 5. 32 added to Title 5 of the Brea City Code by this ordinance shall expire and of be of no further effect on December 31, 2029, unless otherwise extended or modified by the City Council. No later than October 31, 2029, the Community Development Director shall provide the City Council with an evaluation of program performance, compliance, revenue generation, and end neighborhood impacts to determine whether continued implementation is warranted.

SECTION 4. CEQA. Pursuant to the California Environmental Quality Act CEQA") ( Public Resources Code § 21000 et seq.) and the State of California Guidelines for Implementation of the California Environmental Quality Act (" CEQA Guidelines") ( 14 C. C. R. § 15000 et seq.), the City Council finds and determines that adoption of this ordinance is exempt from CEQA review pursuant to statutory and categorical exemptions including California Code of Regulations Title 14, Section 15061( b)( 3). The City Clerk shall file a Notice of Exemption for adoption of this ordinance in accordance with CEQA.

SECTION 5. Severability. If any section, subsection, sentence, clause, phrase, or portion of this ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council declares that it would have adopted this ordinance and each section, subsection, sentence, clause, phrase, or portion thereof irrespective of the fact that any one or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional.

SECTION 6. This ordinance shall become effective thirty ( 30) days after its adoption in accordance with the provisions of California law. 27 , 2026
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SECTION 7. The City Clerk shall certify to the passage of this ordinance.

APPROVED AND ADOPTED this day of , 2026.

ATTEST:

Cecilia Hupp, Mayor
Victoria Popescu, City Clerk
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I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the foregoing ordinance was introduced at a regular meeting of the City Council of the City of Brea held on the day of 2026, and was finally passed at a regular meeting of the City Council of the City of Brea held on the day of 2026, by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:
29 DATED:

Victoria Popescu, City Clerk
2026
2026
ORD. 1270
CITYof BREA
Communication
June 17, 2025
Item No. 3A.

Adoption of the FY 2025- 27 Biennial Operating and Capital Improvement Program ( CIP) Budget

TO PREPARED BY
Honorable Mayor and City Council Members Alicia Brenner, Budget Manager

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Monica Lo, Administrative Services Director Kristin Griffith, City Manager

RECOMMENDATION
Adopt Fiscal Year 2025- 27 Proposed Biennial Operating Budget as presented in the Fiscal Year 2025- 27 Operating Budget document and adopt Resolution No. 2025- XX approving the Fiscal Year 2025- 27 Operating Budget and appropriating funds for the City of Brea FY 2025- 27 Operating Program and Adopt Resolution No. 2025- XX approving the Fiscal Year 2025- 26 Appropriation Limit; and Adopt Resolution No. 2025- XX adopting the Proposed Fiscal Year 2025- 27 Biennial Capital Improvement Program ( CIP) Budget and appropriating funds for the projects and purposes as presented in the Proposed Fiscal Year 2025- 27 Biennial CIP Budget.

BACKGROUND/ DISCUSSION
A Budget Workshop was held on May 6, 2025 for City Council to preview and provide guidance on the Biennial FY 2025- 27 Operating Budget and Capital Improvement Program ( CIP) Budget. Below provides an overview of the proposed budget for both the City Operating and Capital Improvement Program budget that was affirmed at the Budget Workshop for FY 2025-27.

City' s Operating Budget
The Proposed Fiscal Year 2025- 27 operating budget document and budget resolution are provided as Attachment Al & A2, which contains an overview message from the City Manager, summary schedules, the fund balances of each operating fund, a comprehensive review of revenues, and expenditure breakdowns by department ( please see attachment). As part of this budget cycle, staff focused on long- term and strategic considerations as the organization adapts to changes in the economy as well as within the organization. The budget is the financial plan for the City of Brea for the next two fiscal years and does not constitute a mandate to spend, only the authority to do so.

This budget message provides a comprehensive overview of the City' s General Fund budget representing efforts to align resources with operating expenditures while continuing to provide core services to the community during the next two fiscal years. The City' s operating budget was developed after considerable review and a commitment to the City Council' s top priorities and projects. The process and approach staff used to develop this biennial budget reflects cautiously optimistic projections for both revenues and expenditures, but again, these assumptions are based on very finite information in a changing economic environment.

Staff will continue to monitor several unknowns including economic uncertainty at both the State and Federal level, increases in the cost -of -living, continued demand for fixed asset replacement needs, economic pressures that may impact the City' s sales tax base and CalPERS projected rate increases. Looking forward, staff will continue with strong communication at all levels as more information becomes available.

Revenues
For FY 2025- 26, the total General Fund revenues are budgeted at $ 74, 422, 625 which includes $ 2, 788, 339 in estimated excess General Fund reserves from the prior year that are above the City' s 25% reserve policy limit. For FY 2026- 27, the total General Fund revenues are budgeted at $ 77, 472, 773. Which includes excess General Fund reserves anticipated from the prior fiscal year in the amount of $ 3, 997, 142.

Sales tax revenue is the City' s single largest revenue source representing approximately 37% of the FY 2025- 27 budget. Sales tax revenues are projected to increase by 5. 0% over the FY 2024- 25 year- end estimate for the next two years with an average growth of 1. 7% for the remaining three years covering FY 2027- 28 through FY 2029- 30. This assumption includes preliminary sales tax growth related to new development.

Property taxes are the second- largest revenue source representing 22% of the FY 2025- 27 budget. Property tax revenues are anticipated to grow by 4. 0% over the FY 2024- 25 year- end estimate and future years beyond FY 2026- 27 remain conservative at 2%. They will be adjusted as more information becomes available regarding development projects within the community and as construction begins to break ground.

Expenditures
Total General Fund expenditures in FY 2025- 26 are budgeted at $ 72, 330, 689 and $ 76, 432, 821 for FY 2026-

27. This budget retains core service levels to the community and represents a 3. 3% increase in budgeted expenditures when compared to the FY 2024- 25 year- end expenditures ( exclusive of transfers -out). The proposed budget includes temporary and one- time budget changes presented at the Budget Workshop on May 6, 2025.

It is also important to note that employees continue to contribute toward their retirement in accordance with the provision of Memorandums of Understanding ( MOUs). All employees contribute 100% of the employee cost of retirement. The City has met its goal to have all City employees contribute the full cost per the current pension reform legislation. In addition, most employees are contributing more than the employee portion and are cost -sharing the normal employer cost.

Five Year Projections
Each year, the City' s General Fund revenues and expenditures are projected for five years. The five- year projection is a planning tool and reflects staff' s best -educated estimates. It does not represent approved or authorized deficit spending, rather it depicts what could occur if the City were to choose not to make the necessary adjustments to operate within a balanced budget. The five- year projections allow us to take a glimpse at potential future budget impacts so that we can make the necessary adjustments to maintain a balanced budget.

These five- year projections and budget assumptions, from FY 2025- 26 through FY 2029- 30, are attached to this budget document. It is noted that the assumptions include all negotiated labor agreements for FY 2025-

26. The projections also assume major revenue sources, including sales tax and property tax, to be increased based upon preliminary development assumptions through FY 2026- 27 and remain conservative thereafter.

With the use of Excess General Fund reserves above the current 25% policy limit, the organization is able to maintain a balanced budget for the next two fiscal years. The temporary and one- time budget changes proposed as part of this budget are folded back into the projections starting in Year 3 and represent a preliminary budget shortfall in the longer term. Work is underway to close this budget shortfall and will continue as more information becomes available, staff will work with City Council to identify longer -term resolutions. As previously noted, future -year projections are estimates and are provided solely for informational purposes. Staff will continue to monitor and adjust projections as new information develops for a balanced budget including CaIPERS retirement costs.

Funds
Decision packages are requests for new programs, new personnel, and/ or new equipment. The decision packages for FY 2025- 27 were presented to the City Council at the Budget Workshop on May 6, 2025, to receive input and identify department needs for the coming two fiscal years. The City Council reviewed decision package requests and recommended that staff include them in the FY 2025- 27 budget. Below is a summary of the recommended decision packages that are incorporated in the budget. o The City' s Community Benefit and Economic Development Fund ( 140) includes the purchase of a new software (" Placer.ai") that will provide staff with critical market insight and foot -traffic analysis data to enhance community development efforts within the City. This fund was established to assist with legacy projects as well as provide funding for the attraction and retention of business and economic development.
o The Public Safety Augmentation Fund ( 172) is restricted for public safety related costs and includes operating and capital related costs for fire safety equipment. This includes replacement of resuscitation and cardiac monitor equipment, replacement of the Fire Department' s multi -band portable radios, upgrade of exhaust system and alerting system at various fire stations, purchase of fire turnouts, and a tablet command mobile incident management platform.
o Facility and equipment replacements, such as fitness equipment, facility tables and chairs, parking lot landscaping, HVAC equipment, and gym floor refinishing will be funded by the Community Center Replacement ( 181) Fund.
o The Fixed Asset Replacement Program Fund ( 182) will provide funding for the replacement of equipment and facilities at the City' s Curtis Theatre. This includes replacement of drapes and projectors, as well as stage lighting.
o The Water Utility Fund ( 420) will provide funding for a new full- time Water Quality Specialist position and the purchase of one vehicle to support the increased regulatory demands from the State Water Resources Control Board ( SWRCB). This includes increased compliance in the areas of cross - connection control and urban water education.
o Replacement of network switches and the network access control system will be funded from the City' s External IT Services Fund ( 460) as the equipment is beyond its useful lifecycle. o The Information Technology Fund ( 475) will provide funding for the replacement of desktop, mobile computer, and peripherals throughout the City to maintain operational efficiency and safeguard the City' s digital infrastructure.
o Purchase of tools and equipment to outfit the two Type 1 Fire Engines is recommend from the City' s Fire Impact Fees Fund ( 542) which is restricted for eligible fire costs that mitigate future impacts that development has on fire services.

Appropriation Limit
In November 1979, the voters of the State of California approved Proposition 4, commonly known as the Gann Initiative." The Proposition created Article XIII B of the State Constitution placing various limits on the appropriations of state and local governments. The law requires the governing body of each local jurisdiction to establish annually by resolution, the Appropriations Limit for the upcoming budget year.

In effect, the law requires that expenditures subject to the limit cannot exceed the prior year' s expenditures after adjusting for inflation and population changes. In June 1990, Proposition 111 was enacted which modified the formula to allow the Appropriations Limit to be more responsive to local growth issues. Prop. 111 allowed the City of Brea to modify its limit to take into consideration the change in the County or City population, whichever is greater. The Appropriations Limit applies to all taxes levied by and for a municipality.

In addition, user fees are excluded from the formula. The Appropriations Limit also excludes the following activities: Successor Agency to the Brea Redevelopment Agency Funds, Enterprise Funds, certain Capital Improvement Funds, and funds received from special assessment districts.

Brea' s appropriations that are " subject to the limit" have traditionally been much lower than the limitation established by Article XIII B. This year' s Appropriations Limit has been calculated to be $ 145, 222, 222. FY 2025- 26 budgeted revenues subject to the calculated Appropriations Limit are provided in Attachment B of the proposed resolution
Summary
As we reflect on the last two years, the organizational and economic landscape has changed in Brea. Major initiatives moving forward include the launch of the City' s new in- house Ambulance Program, the purchase of new and replacement fire vehicles, and the construction of the Arovista Park Modernization Capital Improvement project.

While development remains constant with the prospect of new growth; economic pressures have constrained sales tax revenue growth, creating some uncertainty for the organization. That, coupled with rising CalPERS costs, have created fiscal challenges as we look ahead in the longer term. Though uncertainty and fiscal challenges remain throughout this budget process, the organization has responded and remains steadfast.

Balancing this biennial budget required a strategic approach across the organization, including the careful allocation of resources and the implementation of creative solutions to reduce expenditures, streamline operations, and enhance revenues over the two- year period. The budget savings changes discussed at the Budget Workshop on May 6, 2025 are included in the proposed operating budget with continued discussions underway. Longer -term resolutions are under evaluation and are highlighted below:
o Evaluation of lease agreements at the Civic & Cultural Center; o Evaluation of subsidies provided to other agencies, user groups, and/ or events; o Evaluation of oil franchise fees and cell tower lease agreements; o Evaluation of market outreach to film industry;
o Updates to the Brea Mall Message Board signage revenue projections; o Consideration of short- term rentals and other business opportunities; and o Consideration of business license tax and transient occupancy tax (TOT) updates.

The use of excess General Fund reserves above the City' s policy limit of 25% will help the organization maintain service levels to the community as the organization regains momentum in the coming fiscal years.

This fund balancing strategy will avoid making severe service reductions until the organization has an opportunity to better understand the changing economic environment.

Staff will also continue to closely monitor actual versus projected revenues and opportunities for vacancy savings that will assist in providing firmer estimates as we navigate the next two fiscal years. Staff is committed to providing budget updates to the City Council as the financial picture changes.

Overall it is important to note that Brea is paying all of its obligations on time; is setting aside funding for ongoing capital facility and equipment replacement; and is funding a robust Capital Improvement Program CIP) to adequately maintain City infrastructure.

The organization will make every effort to continue to build prudent reserves and strategic savings programs to insulate the City from a downturn in the economy and minimize organizational disruption. The City Council is also committed to pension modifications and plans to continue setting aside money in an irrevocable trust fund, administered through Public Agency Retirement Services ( PARS), that is specifically designed to help stabilize pension costs. This, combined with continued efforts to promote pension modifications at the legislation front, are steps in the right direction.

The entire organization is determined to preserve core City services. Staff will continue to diligently monitoring long- term economic uncertainties that could impact Brea' s budget picture. These include:
o Uncertainty at the State and Federal level;
o Increases in the cost -of -living ( inflation);
o Fixed asset replacement needs;
o Economic pressures impacting the City' s sales tax base; and o CalPERS projected rate increases.

City staff uses a variety of tools, such as strategically evaluating vacancies and consolidation of functions, to structurally close the budget gap when needed. Additionally, staff continues to research new and innovative ways of doing business. Presenting the City Council with the FY 2025-27 biennial budget is simply one of the many projects that City staff has completed during FY 2024- 25. Working within the City Council priorities and under their direction, City staff was able to complete a substantial list of accomplishments, which are found in the department summary sections of the budget.

We would like to thank the City Council for their patience and leadership during this period. Though the development of the FY 2025- 27 budget is complete, the work will continue as we enter a new phase of data gathering and forecasting to match our new economic reality.

City' s Capital Improvement Program ( CIP) Budget
The Proposed Fiscal Year 2025- 27 Biennial Capital Improvement Program ( CIP) Budget and budget resolution is provided as Attachment C1 & C2 and formally adopts the City' s seven- year CIP Budget and appropriates funding for the first two years of the seven year capital improvement plan. The CIP budget reflects the City Council' s commitment to enhancing existing infrastructure, providing new infrastructure for a safe environment, and enhancing the quality of life in the community. The remaining five years of the CIP budget are not a commitment of funds but rather a long- range planning tool for subsequent investment in the City' s infrastructure. Staff recommends the adoption of the CIP Budget as presented.

The CIP Budget is divided into several categories: Street Improvements, Storm Drain Improvements, Traffic Safety Enhancements, Water Improvements, Sewer Improvements, Facility Improvements, and Golf Course Improvements.

There are 30 projects proposed for funding in the FY 2025- 2027 CIP Budget. A detail sheet has been prepared for each proposed project included within the seven- year CIP Budget that contains a description of the project, the amount of funding required, and the source of funds. The following are highlights of the FY 2025- 2027 Biennial CIP Budget:

Street Improvements - The projects included in this section of the proposed CIP Budget continue emphasizing street pavement rehabilitation per the City' s Pavement Management Plan ( PMP). The PMP is updated every two ( 2) years for arterial roads and every six ( 6) years for local roads, as the Orange County Transportation Authority requires. Work continues on designing and constructing several large street/ roadway improvement projects that are being carried forward from the previous fiscal year. Some examples of this include Walnut Way Street Improvements ( CIP 7326) and Birch Street Improvements from S. Associated to Valencia ( CIP 7329).

Requested appropriations for the FY 2025- 2027 CIP include funding for our annual Traffic Calming Improvements ( CIP 7219), Citywide Slurry Seal ( CIP 7312) and Citywide Sidewalk Replacement ( CIP 7313) projects, as well as the design and construction budget for Palm Street Paving Improvements ( CIP 7334) and Tanglewood Street Paving Improvements ( CIP 7337).

Storm Drain Improvements - Requested appropriations for the FY 2025- 2027 CIP include design phase funding for an update to the Storm Drain Master Plan ( CIP 7330).

Traffic Safety Enhancements - In conjunction with Street Improvement projects, the projects included within the Traffic Safety Enhancements section of the proposed CIP Budget improve the driving experience in Brea by easing congestion and improving traffic flow. The City has partnered with OCTA and multiple local municipalities to progress OCTA' s Regional Traffic Signal Synchronization Program ( RTSSP). This partnership has led to the introduction of the Kraemer Blvd. Regional Traffic Signal Synchronization ( CIP 7720) and the State College Blvd. Regional Traffic Signal Synchronization ( CIP 7721) projects.

Requested appropriations for the FY 2025- 2027 CIP include funding for annual Traffic Signal Controller Upgrade ( CIP 7218), Transportation Improvement Nexus Program Update ( CIP 7718), and the two aforementioned RTSSP projects.

Water Improvements - A significant focus of the proposed CIP Budget is on proposed improvements to the City' s water infrastructure. The design phases of Enterprise Tract Water Improvements ( CIP 7462) and the Candlewood Tract Water Main Replacement ( CIP 7465) continue to progress, while the design phase of Lotus Water Line Improvements ( CIP 7479) has been completed.

Requested appropriations for the FY 2025- 2027 CIP include design phase funding for Candlewood Tract Water Main Replacement ( CIP 7465), Olinda Village Water Line Improvements ( CIP 7482), Replace Generator at Berry Street Booster Pump Station ( CIP 7483), and design and construction phase funding for Thompson Oil Site Hydrant Improvements ( CIP 7494).

Sewer Improvements - Another focus area of the proposed FY 2025- 2027 CIP Budget is the proposed improvements to the City' s sanitary sewer infrastructure. Requested appropriations for the FY 2025- 2027 CIP include funding for our annual Sewer Mainline Relining ( CIP 7617) project and design phase funding for the Carbon Canyon Access Road Phase 1- 3 ( CIP 7632) project.

Facility Improvements - Work continues on the design of several significant projects from FY 2024- 2025.

The Brea PD Integrated Crime Center ( ICC) Citywide Camera Network ( CIP 7719) is progressing through various phases, and the Arovista Park Modernization Project ( CIP 7978) is progressing through the construction phase of the park improvements on the east side of Brea Creek.

Requested appropriations for the FY 2025- 2027 CIP include funding for the Police Department Space Plan Improvements ( CIP 7992), Wildcatters Park Storage Building Improvements ( CIP 7997), the Public Works Standard Plans Update ( CIP 7998), as well as various other citywide facility improvements.

Golf Course Improvements - In Fiscal Year 2024- 2025 various improvements were made at both Birch Hills and Brea Creek Golf Courses, including the Brea Creek Golf Course Netting Extension Project. Requested Appropriations for the FY 2025- 2027 CIP include funding for the construction of cart path, driving range, storage shed, and HVAC improvements at the Birch Hills Golf Course ( CIP 7968).

In conclusion, with continued prudent fiscal management and project coordination, Brea' s Fiscal Year 2025- 2027 Biennial CIP Budget will support a variety of projects to sustain the quality of our infrastructure, and continue the goals of enhancing the quality of life in the community, ensuring a safe environment, and promoting transportation improvements in the City.

FISCAL IMPACT/ SUMMARY
The expenditures for all funds included in the Proposed Biennial Operating Budget is $ 134, 193, 644 for FY 2025- 26 and $ 137, 820, 595 for FY 2026- 27 ( exclusive of transfers - out).

The proposed FY 2025- 27 Biennial Capital Improvement Program Budget is $ 15, 135, 000 and includes $ 9, 285, 000 for FY 2025- 2026 and $ 5, 850, 000 for FY 2026- 2027. Funding sources include the Fixed Asset Replacement Fund; Gas Tax Fund; Measure M Fund; RMRA; Water Fund; Sewer Fund; Golf Course Fund; Storm Drain Fund; Traffic Impact Fund; Federal Grants; State Grants; County Grants, and other miscellaneous contributions.

Attachments
Attachment Al - 25- 27 Proposed City of Brea Operating Budget Attachment A2 - Operating Budget Resolution
Attachment B - 25- 26 Appropriation Limit Resolution and Exhibit Attachment C1 - Proposed FY 2025- 27 CIP Budget
Attachment C2 - CIP Budget Resolution
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Short -Term Rentals Overview
Defined as the a residential dwelling,
is available for rent or to rent ( by way
other means, whether oral or written)
compensation or any consideration.

Current Municipal Code
CITYofBREA
a dwelling unit, or a room in a dwelling,
of a rental agreement, lease, license or
for less than 30 consecutive days, for
Section 20. 71. 030 ( Short -Term Residential Rentals)
that
any
It shall be unlawful for any person to offer or make available for rent or to rent ( by way of a rental agreement, lease, license, or any other means, whether oral or written), for compensation or any consideration, a residential dwelling, a dwelling unit or a room in a dwelling for less than thirty ( 30) consecutive days.

Adopted by City Council on September 04, 2018
July 15, 2025 2
City Budget and Council Priorities
FY 25- 27 City Council Top Priorities and Projects
Identify creative ways to enhance City revenues and reduce costs City Council Budget Adoption Workshop on June 17
Explore new business opportunities such as short-term rentals Upcoming Opportunities
Disneyland Forward
FIFA World Cup 2026
2028 Olympics
OCVibe
CITYofBREA
July 15, 2025 3
Policy Considerations CITY
Maintain current
prohibition of
STRs for stays of
3o days or less
Establish new
ordinance
allowing for
STRs
Determine a
max number of
permits for
issuance
Establish new
ordinance
allowing for
STRs
Infinite number
of permits for
issuance
Core Regulations Core Regulations
Establish new
ordinance
allowing for
STRs
Determine a
max number of
permits for
issuance
Expanded
Regulations
Establish new
ordinance
allowing for
STRs
Infinite number
of permits for
issuance
Expanded
Regulations
Update
ordinance to
prohibit all STRs
regardless of
stay duration
July 15, 2025 4
Consideration of Staff Recommended Regulations
Maintaining an active business license - Permit Fee: $ 1, 000 CITYofBREA
Permits are non- transferrable to new property owner( s) Host Requirements:

Submitting an STR application and - Must be available by phone within 30 minutes should an issue arise paying a TBD fee - Host must own the property; no renters can host Must be free of any building violations and code enforcement issues for over 1 year
Homeowner Association approval — if applicable
Guest/ Occupant Requirements:
25 Years or Older
Passing a home inspection - Parking
On -site only; no overnight street parking allowed
Guest license plate( s) must be given to property owner Two -night stay, minimum
Paying Transient Occupancy Tax - Ineligible Units
TOT) - Affordable Housing Units
Accessory Dwelling Units (ADUs)
July 15, 2025 5
Consideration of Regulations
Permit Limit
Maximum number of permits for issuance
Distance between short-term rental properties
Approval authority
Revocation Criteria
Limitations on the number of permits issued per property owner Number of days property is available to rent
Seasonal ( 18o Days) vs Annual ( 365 Days)
CITYofBREA
July 15, 2025 6
Revenue Projections: Transient Occupancy Tax
50 Permits $ 125, 550 $ 209, 250
too Permits $ 251, 100
150 Permits $ 376, 650
200 Permits $ 502, 200
418,500
627, 750
837, 000
254 588
509475
763 J63
1, o18,350
Average Cost of Two -Night Stay in Brea: $ 465
Total TOT Revenue = Number of Units x ( Stays for Unit x Occupancy Rate) x Average Cost of Stay x TOT Rate TOT Rate: io% (Current Rate)
CITYofBREA
424 313
848, 625
12272 938
1 697 250
July 15, 2025 7
Orange County Grand Jury Report
Report issued on May 16
Long Term Solutions to Short -Term Rentals: Ci of Brea
CITYofBREA
F1: Despite increasing media coverage of Online F3: Even with robust Code Enforcement, a city's Booking Agencies ( OBAs), STRs are not a new statutory ban on STRs is not enough to keep STRs phenomenon in Orange County. from operating.

F2: The steady growth of STR usage in the last decade
raises concerns of potential public nuisance.

F4: City leaders have no regular communication with
each other concerning STR issues limiting
opportunities to develop strategies and expertise to
improve service.

July 15, 2025 8
Orange County Grand Jury Report
Report issued on May 16
Long Term Solutions to Short -Term Rentals: Citv of Brea R1: Cities should review and begin to update
ordinances to keep up with the rapidly changing
nature of court findings and legislation related to
STRs, by December 31, 2025, and no less frequently
than every three years thereafter.

R2: Cities should consider developing a plan for
upcoming major events that are expected to create a
surge in demand for STRs and its associated Transient
Occupancy Tax (TOT), by December 31, 2025, and no
less frequently than every two years thereafter.

CITYofBREA
R3: City leaders should have regular discussions with
each other to share STR management strategies on a
biannual basis commencing no later than January 1,
2026.

July 15, 2025 9
Proposed Timeline of Next Steps
July 2025 - Introduction of STIR Policy Considerations
CITYofBREA
September/ October 2025 - Planning Commission review of draft Ordinance/ recommendation to the City Council
November/ December 2025 - City Council review/ First reading of the Ordinance December 2025/ January 2026 - City Council Adoption of the Ordinance February 2026 - STIR Ordinance Effective
30 days from the adoption date
July 15, 2025 10
CITYOfBREA
Questions
and
City Council Direction
July 15, 2025 11
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I Civic Center Circle
Brea, California 92821- 5732
11 Pog41FD iEBRUPRy1
August
RE: Notice of Review — Short -Term Rental Regulations
Dear
The City of Brea is currently reviewing Brea Municipal Code Chapter 20. 71: Short -Term Residential Rentals, which currently prohibits short- term rentals from operating within the City' s limits. Under Section 20.71. 030, a " short-term rental" is defined as:
a residential dwelling, a dwelling unit, or a room in a dwelling, that is availablefor rent or to rent (by way ofa rental agreement, lease, license, or any other means, whether oral or written), for less than 30 consecutive days for any compensation or any consideration.

The City of Brea is potentially considering an amendment to Brea Municipal Code to potentially allow a limited, regulated, short-term rental pilot program. As part ofthis consideration, the City is seeking feedback from homeowner association ( HOA) representatives regarding this potential, short-term rental pilot and ask for your response to the following questions:

1. Are short-term rentals currently addressed in your HOA' s Covenants, Conditions and Restrictions CC& Rs)?

2. What challenges or opportunities do you believe could arise from allowing short-term rentals?

3. How do you feel the City should address these challenges or opportunities? Please submit your input regarding this topic by 5: 30 p. m. on Monday, September 15 to:

Joselyn Magana, Management Analyst
Email: joselynmAcityofbrea.gov
Phone: ( 714) 990- 7788
The City of Brea values your feedback which will help guide the City of Brea' s assessment ofthis potential pilot program.

Sincerely,
Jason Killebrew
Community Development Director/ Assistant City Manager
City of Brea
9= 5, 524 PM Mail - Magana, Joselyn - Oubock
a Outlook
Re: Brea Corsican Villas HOA-Short Term Rental Regulations From Magana Jocelyn < joselynm@cityofbrea. gov>
Date Toe 9/ 9/ 2025 8:34 AM
To
Hi_
Thank you for your response - this is the City's acknowledgment that we have received Brea Corsican Villa' s feedback.

Have a great day!

JOSELYN MAGAAA
Management Analyst I
Community Development Deparbnent I Economic Development P: T1499o-]188 I E: joselynm@cilymxea. gov I W: w wcdyoPorea my Brea Civic S Cultural Center 1 1 Civic Center Carle I Brea, California 92821 The City of Brea is dedicated Im to building a top employee experience. 3 -
From
Sent: Thursday, September 4, 2025 4: 58 PM
To: Magana, loselyn <[email protected]>
Subject: Brea Corsican Villas HOA- Short Term Rental Regulations Hi Joselyn,
Hope your week is going well! Please we the feedback below and have a wonderful day! 1- No restrictions, as the association relied on the City code (Board never thought they would have to amend their governing documents)
2-Short-lens rentals within homeowners associations create challenges that negatively impact both property values and quality of life for residents. They typically lead to increased trash, noise, and parking issues, while also diminishing the sense of security in the community —since neighbors are constantly changing and residents don't know who is staying nearby. In addition, short-term renters tend to use community amenities such as pools, tennis courts, and playgrounds more heavily, resulting in additional maintenance costs for the association. Because these guests are not invested in the longterm wellbeing of the community, they often show less care or concern for potential damage or misuse of common areas.

Altogether, these factor: disrupt the stability and cohesion of the neighborhood and can ultimately make the community less desirable, lowering home values over time.
3- Leave the code as is

MANAGEMENT COMPANY
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f * inn
https:// outlook. office365. com/ mail/ id/ AAkALgAAAAAAHYQDEapmEc2byACgAC% 2FEWgOAE9rOGdvDG02FH420Pn7bXQACmGSjzgAA 2/ 2 9= 5, 525 PM Mail - Magana, Joselyn - Oubwk
Outlook
Re: response
From Magana, Joselyn <[email protected]>
Date rue 9/ 2/ 2025 12:05 PM
To
Hi-,
Thank you for your response.

The City has made note ofthe Brea Downtown Collection' s feedback, and will update the address on file.

Respectfully,

JOSELYN MAGANA
Management Analyst I
Community Development Department I Economic Development P: 714- 990-7788 1 E: joselynm@cityofbrea. gov I W: w . cityofbrea. gov Brea Civic & Cultural Center 1 1 Civic Center Circle I Brea, California 92821 The City of Brea is dedicated 0
to building a top employee experience.

Our Team'
From:

Sent: Tuesday, September 2, 2025 10: 00 AM
To: Magana, Joselyn < joselynm@cityofbma. gov>
Subject: response
Joselynn:

Thank you for the letter about short term rentals. Brea Downtown Collection does not allow them and we don' t think the city should either.

They cause more problems and when the rental people leave the leave mostly destruction.

Brea Dowtown Collection
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Thanks Diane
hftps Houllaak ogice365 wM it/ tl/AAkALgAAAgAAHYODEa EabyACgAC% FE gME9NO vDO 2FH4MPn7bXOACk91Le 22 David E. Cane
By
SEP 2 2 2025
Cane & Harkins LLP
September 15, 2025 File 23107- 001

VIA E-MAIL
joselynm@cityolbrea. gov
City of Brea
Community Development Department
Attention: Ioseyln Magana, Management Analyst
One Civic Center Circle
Brea, CA 92821
Re: Country Road Homeowners Association
Subject: Comments Regarding Consideration of Amending Short -Term Leasing Restriction Under Brea Municipal Code Chapter 20.715 Section 20.71. 030 Dear Ms. Magma:

Cane & Harkins LLP serves as corporate counsel for the Country Road Homeowners Association.

Inthat capacity, wewere requested to respond to yourrecent correspondence to the Association requesting comments on the city' s plan to consider amending the short-term leasing restrictionunderBrea Municipal Code Chapter 20.71, Section 20. 71. 030. The following responds to your questions:

I. Are Short-Temr Rentals Addressed in the Association' s CC& Rs? The Association' s CC& Rs ( i) require the Lots to be used for " residential purposes," ( ii) restrict use ofthe Lots for temporary purposes, and (iii) restrict use ofthe Lots for commercial purposes. Therefore, as the Association deems short-term rentals to be a temporary, nonresidential, commercial use ofthe Lots, the Association requires that the Lots may not be leased for less than thirty (30) consecutive days.

2. Problems With Allowing Short -Term Rentals?
As we presumethe city is aware, many othercitieshave adopted similarrestrictions against short-term leasing ofproperties, because they have found that short -teen rentals are associated with well - documented negative secondary impacts which have a detrimental effect on public health, safety, and welfare, including, without limitation, increased traffic, excessive noise, disorderly conduct, overcrowding, vandalism, parking problems, litter and accumulation ofrefuse, crime, and the overall degradation of a neighborhood' s residential character and quality. Also, short-term rentals have the detrimental effect of exacerbating the limited housing supply by removing housing stock that otherwise would be available for long-term rental or ownership by permanent residents.

Ms. Magana
City of Brea
September 15, 2025

Page 2 ends

Therefore, the Association maintains that allowing short- term rentals will subvert the residential character of the community and would have a severely detrimental impact on residents' quiet enjoyment of their Lots and on property values. In this regard, persons who engage in short-term vacation rentals have no investment in the community and no reason to have concern for, or to be considerate of, maintaining harmony with, and being respectful to, residents of neighboring properties.

How Should the City Address The Challenges of Short -Term Rentals? The Association urges the city not to amend or otherwise modify Section 20. 71. 030, because the city' s restriction, combined with the Association' s restrictions in the CC& Rs, helps promote compliance with the reasonable limitation that properties in a residential community should not be leased for less than thirty ( 30) consecutive days, and thereby helps ( i) preserve the residential character of communities, ( ii) avoid the inherent detrimental impacts of short- term rentals, ( iii) promote greaterhousing stock for permanent residents, and ( iv) promote property values in residential communities.

Conclusion.

The Association appreciates the city' s consideration of the foregoing and trusts the city will continue to maintain the reasonable limitation on short-term leasing of residential properties in the city Very truly yours,

CANE & HARKINS LLP
lsl jwne.6 e. y 7v
James C. Harkins, IV
JCH
cc: Board of Directors
Chapter 20. 71

SHORT- TERM RENTALS

20. 71. 010 Intent and Purpose
A. The purpose of this chapter is to establish a short-term rental pilot program containing regulations for the use of privately -owned residential dwellings as Short - Term Rentals ( STR), minimize the secondary impacts of such uses on surrounding residential neighborhoods, and to ensure the collection and payment of applicable transient occupancy taxes.

C. The City reserves the right to change the regulations provided in this chapter at any time, including discontinuing the issuance of short-term rental unit permits, notwithstanding any impacts to existing or future short-term permit holders. Anyone accepting a short- term rental permit pursuant to this chapter acknowledges and accepts that possibility.

D. The program shall commence following the effective date of the short-term rental ordinance and shall expire on December 31, 2029, unless otherwise extended and/ or modified by the City Council by amending this ordinance.

20. 71. 020 DEFINITIONS
For the purposes of this chapter, the following definitions shall apply, unless the context clearly indicates a different meaning or construction.

APPLICANT. The property owner applying for a new or renewal short-term rental permit.

ACCESSORY DWELLING UNIT. Same definitions specified in Section 20. 00. 070. B.

ACCESSORY DWELLING UNIT, JUNIOR. Also referred to as " Junior Accessory Dwelling Unit" in this chapter. Same definitions specified in Section 20. 00. 070. B.

CONTRACT. An agreement or evidence of any tenancy that allows or provides for the short-term rental of a property.

GOOD NEIGHBOR POLICY. A document prepared by the City, as may be revised from time to time, that summarizes the general rules of conduct, consideration, and respect pertaining to the use and occupancy of short-term rentals.

HOSTING PLATFORM. An individual or entity that facilitates short-term rental bookings in exchange for a fee or other compensation, either directly or indirectly, by conducting transactions through various means. Examples include, but not limited to, Airbnb and VRBO.

LOCAL CONTACT PERSON. A person designated by the owner or the owner' s authorized agent or representative who is a resident of Brea and is available twentyfour (24) hours per day, seven days per week for the purpose of: ( 1) responding in person within thirty ( 30) minutes to complaints regarding the condition, operation or conduct of occupants of the short-term rental unit; and ( 2) taking remedial action to resolve any such complaints. A designated local contact person must obtain a business license required by Sections 5. 00. 030 and 5. 04. 010 of the Brea City Code.

MANAGING AGENCY OR AGENT. A person, firm, or agency representing the owner of the short-term rental unit, or a person, firm, or agency owning or operating more than one ( 1) short-term rental.

MULTI -FAMILY RENTAL HOUSING. A complex, structure, or a portion of a structure zoned, used, and/ or designated as rental dwellings that includes two ( 2) or more independent dwelling units. This includes, but is not limited to duplexes, triplexes, apartments, and townhouses.

OCCUPANT. Any person( s) occupying the short-term rental unit at any time.

OWNER. A person( s), corporation( s) or other legal entity( ies) that hold( s) record legal and/ or equitable title to the property used as a short-term rental.

PROPERTY. A residential legal lot of record on which a short-term rental unit is located.

RESIDENTIAL DWELLING UNIT. A residential unit, such as a single-family unit, multi -family rental housing, including a duplex, triplex, or condominium.

RESPONSIBLE PERSON. An occupant of a short-term rental who is at least twentyfive (25) years of age and who is legally responsible for compliance of all occupants of the unit and/ or their guests with all provisions of this Chapter and the Brea City Code.

SHORT-TERM RENTAL. A privately -owned residential dwelling unit, or portion thereof unless otherwise prohibited, that is offered or provided to a guest by an owner for thirty consecutive nights or less. The term, " short-term rental", shall not include hotels, motels, inns, timeshares, or bed and breakfasts.

SHORT-TERM RENTAL PERMIT or PERMIT. A permit, with a permit number, issued by the City to allow short-term rental units.

TRANSIENT OCCUPANCY TAX. The tax levied by the City pursuant to Chapter 3. 16 of the Brea City Code.

20. 71. 030 AUTHORIZED AGENT OR REPRESENTATIVE
A. An Owner may authorize an agent or representative to comply with the requirements of this chapter on behalf of the owner ("owner' s Agent"), unless the requirement is to be fulfilled solely by the owner. Notwithstanding, the owner shall 2 not be relieved from any personal liability for noncompliance with any provisions of this Chapter or with any applicable laws, rule and regulation pertaining to the use and occupancy of the subject short-term rental, regardless of whether such noncompliance was committed by the owner's agent or the occupants of the owner' s short-term rental or their guests. Failure of an owner' s agent to comply with this Chapter shall be deemed non- compliance by the owner.

20. 71. 040 PERMIT REQUIREMENT
A. No person shall operate a short-term rental unless a permit has been obtained in accordance with this chapter.

B. A permit obtained under this chapter does not constitute a vested right, shall not run with the land, and shall be personal and limited to the owner listed on the application.

C. Any permit issued pursuant to this chapter shall be valid for a period of one ( 1) year from the date of issuance and shall be subject to annual renewal for the duration of the pilot program, which requires submittal of a renewal permit to the City.

D. The short- term rental permit application and annual renewal application shall be accompanied by an application fee in the amount established by resolution of the City Council.

E. Eligibility Requirements. The following requirements must be met at the time of short- term rental application submittal:

1. The applicant shall not be a lessee or a sub -lessee. All applications submitted shall be submitted by the owner of the residential dwelling unit or the owner' s agent.

2. The following types of dwelling units are prohibited to be used as a shortterm rental unit:
i. Accessory dwelling units and junior accessory dwelling units ii. Mobile home, house trailer on a residential lot, or within a mobile home iii. Recreational vehicles
iv. Housing units within the affordable housing program

3. No owner shall be granted a permit for more than one short-term rental within the City.

4. There shall only be one short-term rental permit issued per property except in multi -family single lot subdivisions (i. e. apartments, condominiums or townhomes) the number of short-term rental permits allowed shall be as follows in Table 20. 71. 040. C. 1:
3 Table 20. 71. 040. C. 1

SHORT- TERM RENTAL PERMIT ISSUANCE
Number of Units Per Property Maximum Number of Short -Term Rental Permits
Up to 3 1
4 or more 3

5. The dwelling unit or property used as a short-term rental property shall not be the subject of any active or pending code enforcement actions or violations pursuant to the City' s Municipal Code, including, but not limited to, zoning, building, and fire codes.

F. Application for Permit. The owner shall submit the following information and/or documents as part of their application or renewal application for a short- term rental:

1. The name, address, and telephone number of the owner of the short- term rental and the local contact person.

2. A copy of the owner' s current state issued driver' s license or identification card.

3. The address of the short-term rental property, including a diagram identifying the location of the short-term rental structure and the location of the required parking.

4. The number of bedrooms and the applicable occupancy limit of the shortterm rental.

5. A photo of the short-term rental structure to allow the City to visually identify the unit.

6. Signed acknowledgment form confirming that City staff shall conduct building, fire, and safety inspection to verify compliance with the operational requirements of this chapter. Permit approval shall be contingent upon passing the inspection.

7. The uniform resource locator ( URL) ( i. e. website address) for any and all anticipated advertisements of the short-term rental of the property.

8. An executed document, approved as to form by the City Attorney, by which the Applicant agrees to indemnify and hold harmless the City, its officers, employees and agents from any claim, demand, or judgment in favor of any person, arising out of activities or inactivity of the Applicant with respect to the operations of the short-term rental.

9. A completed and approved Business License application.

10. A completed Transient Occupancy Tax registration form. 4 G

11. Proof of general liability insurance that covers the rental of the property as a short-term rental in the aggregate sum of not less than one million dollars 1, 000, 000). Alternatively, the owner can provide evidence that each rental occurs through a platform that provides equal or greater insurance coverage. Proof of insurance shall be provided at the time of both initial permit and renewal permit issuance and shall remain in effect for the duration of the annual permit. Failure to maintain liability insurance shall result in the revocation of the permit.

12. If a short-term rental is located on a property in any area governed by a homeowners' association or community association and subject to Covenants, Conditions, and Restrictions (" CC& Rs"), the Applicant shall submit a letter from the associations' governing board stating that the CC& Rs and the rules and regulations of the association do not prohibit short-term rentals from operating, including the short-term rental proposed by the Applicant.

13. The short-term rental permit application shall be accompanied by a consent to inspection form signed by the owner of the property by which the owner agrees and consents to a building, fire, and health and safety inspection as further described under Section 20. 71. 050 of this chapter, in addition to the payment of inspection fee in the amount established by resolution of the City Council.

Maximum Number of Short -Term Rental Permits.

1. The total number of short-term rental permits issued in the City shall not exceed one hundred ( 100).

2. Short-term rental permits shall be issued on a first -come, first -served basis.

A permitted short-term business that ceases operation shall notify City staff within thirty ( 30) days of ceasing operation.

3. Each property owner shall not operate more than one ( 1) short-term rental in the City.

4. When the maximum number of short-term rental permits has been issued, the City shall establish and maintain a waitlist from which permits may be issued as they become available.

Short -Term Rental Permit Waitlist.

1. All short-term rental permit applications, which have been deemed complete, shall be placed on the short-term rental waitlist in the order of the application' s filing date. Placement on the waitlist does not guarantee that a permit will be issued during the pilot program.

2. The City shall notify applicants of permit availability in the order of the application' s filing date.

21. 71. 050 INSPECTIONS
5 A. Prior to the issuance of a new short-term rental permit or a renewal short-term rental permit, the City shall conduct a building, fire, and health and safety inspection of the short-term rental for compliance with this Chapter.

B. Such inspection shall be conducted within thirty (30) days of receipt of a completed application.

C. No permit shall be issued if the inspection finds that any of the following conditions exist:

1. The dwelling unit does not have functioning smoke and carbon monoxide detectors, electricity, or plumbing.

2. The structure has been modified in a way that required a building permit from the City, but such building permit was not obtained.

3. The City determines that there are conditions present on the property that would present a danger to the health, safety, or welfare of the occupants and/ or the public.

20. 71. 060 OPERATIONAL REQUIREMENTS
A. Compliance by owner, agents, and occupants. The owner and/or owner's agent shall ensure the property used as a short- term rental is used in a manner that complies with all applicable laws, rules, and regulations pertaining to its use and occupancy, including applicable codes regarding fire, building and safety, and shall further ensure the occupants of the short-term rental do not create noise in violation of Chapter 8. 20 of the Brea Municipal Code or other disturbances, engage in disorderly conduct, or violate any applicable laws, rule, or regulation pertaining to the use and occupancy of the subject short-term rental.

B. Overnight maximum occupancy limits

1. The owner shall limit overnight occupancy of the short-term rental to a specific number of occupants as set forth in Table 20. 71. 050. C. 1 below.

2. Children twelve ( 12) years of age or younger are not counted towards the occupant maximum.

3. As used in this section, overnight occupancy shall mean during the hours of 10: 00 p. m. through 8: 00 a. m. of the following day.

Table 20. 71. 050. C. 1

OVERNIGHT MAXIMUM OCCUPANCY LIMITS
Occupancy
Bedrooms
2 0
4 1
6 2
8 3
10 4
0 5 or more
12 C. Minimum age of the responsible person. The owner shall not rent a short-term rental to a person that is under the age of 25.

D. Minimum stay. The minimum stay duration shall be no less than two nights.

E. Maintenance of rental contracts. Owners shall maintain all short- term rental contracts ( in electronic or paper form) for a period of three years from the date of occupancy. The exact number of occupants shall be included in the contract as well as all City municipal code requirements regulating occupancy limits, noise, outdoor amplified music prohibition, public nuisance, parking trash, no commercial activities, and other code requirements related to the use and occupancy of the short-term rental. The owner shall share all contracts upon the City' s request.

F. Prior to occupancy. Prior to occupancy of a short-term rental by occupants, the owner or owner's agent or representative shall advise of or require the following from the responsible person:

1. Provide the responsible person with the local contact person' s contact information. The local contact person is required to be available 24 hours.

2. Obtain from the responsible person an " informational form," in the form provided by the City, which contains, but not limited to, the following:
i. Name
ii. Address
iii. Telephone number
iv. Copy of the valid governmental identification of responsible person
v. List of all the names of all occupants of the short- term rental vi. List of all vehicle information and license plate numbers of the responsible person, occupants, and guests
vii. Signed copy of the City' s Good Neighbor Policy prior to or during check -in.
viii. Signed acknowledgment statement, in which the responsible person understands that he or she is legally responsible for compliance by all occupants of the short-term rental and their guests.

3. Applicants for the short-term rental permit shall review and acknowledge receipt of a copy of the good neighbor policy. In addition, the applicant shall provide a brochure or document intended to remind occupants of short-term regulations.

G. The owner of the short-term rental shall ensure that the property complies with all applicable codes regarding fire, building, health and safety, zoning and all other laws and regulations.

H. 24- Hour Availability.

1. During the period of a short-term rental, the owner, owner' s agent, and/ or owner' s local contact person shall be available twenty-four (24) hours per day, seven ( 7) days per week to respond to complaints regarding the condition, operation, or conduct of the occupants, including responding in person at the location of the short-term rental.

2. The local contact person' s response to complaints may be made by telephone, text message and/or in person, however, in no event shall the response time exceed fifteen ( 15) minutes if responding by telephone or text or forty-five ( 45) minutes if an in -person response is required because of the severity of the complaint.

3. In all circumstances, complaints that the occupants of these short-term rental has created unreasonable or unlawful noise or disturbances in violation of Chapter 8. 20 of the Municipal Code or provisions of this Chapter or is engaging in disorderly conduct, requires an in -person response by the local contact person.

I. Outdoor Activities. Occupants of the short-term rental shall be prohibited from using all outdoor amenities ( i. e. pool/ spa) and/ or engaging in outdoor games or any outdoor activities that create noise between the hours of 10: 00 p. m. to 7: 00 a. m. all days of the week. A sign stating these restrictions must be clearly visible near any such outdoor amenities and posted on all interior doors leading to the outdoor amenities.

J. Trash Containers. Trash and refuse shall not be left stored within public view, except in proper containers for the purpose of collection by the City' s authorized waste hauler on scheduled trash collection days. The owner of the short-term rental shall provide sufficient trash collection containers and service to meet the demand of the occupants.

K. The short-term rental permit license number assigned by the City shall be displayed on any hosting platform' s website where said short-term rental is advertised. Each short- term rental shall have a unique permit number.

L. Retention of Residential Character. The owner of a short-term rental shall not change the residential character of the outside appearance of the residence, either by the use of colors, materials, lighting or/and advertising mechanism.

M. Parking. On -site parking shall be on an approved driveway, garage, and/ or approved parking structure.

N. Required Information for advertisements.

1. The owner shall include the current permit registration number on or in any advertisement appearing in any newspaper, magazine, brochure, television, internet website, etc., that promotes the availability or the existence of the short-term rental in a place or location deemed acceptable by the permit administrator in the following format:
i. " City of Brea — Short- term Rental Permit No. "
0 ii. In the case of the audio -only advertising of the same, the permit number shall be read as part of the advertising.

2. The following shall be clearly identified in any advertisement:
a. Maximum Occupancy
b. The number of bedrooms
C. Maximum number of vehicles allowed
d. Photo of the front of the short-term rental
O. Transient Occupancy Tax. The owner and/ or the owner's agent shall comply with all provisions of Chapter 3. 16 of the Municipal Code concerning transient occupancy taxes including, but not limited to, submission of a return in accordance with 3. 16. 070, which shall be filed even if the short- term rental unit was not rented during each such reporting period.

20. 71. 70 HOSTING PLATFORM REQUIREMENTS
Subject to applicable laws, Hosting Platforms shall disclose to the City on a quarterly basis each short-term rental listing located in the City, the names of the persons responsible for each such listing, the address of each such listing, the length of stay for each such listing, and the price paid for each stay.

A. Hosting platforms shall require owners to include the City -issued permit registration number in their listing( s), in a format designated by the City. Hosting platforms shall not complete any booking transaction unpermitted short-term rentals in the City.

B. Prior to an owner listing a short-term rental location within the City through a hosting platform, the hosting platform shall provide a notice to such owner with the following information:

1. " Chapter 20. 71 of the City of Brea' s Municipal Code prohibits the shortterm rental of residential property within the City of Brea unless the City has issued both a business license and a short-term rental permit, and the owner pays the transient occupancy tax."
C. The provisions of this section shall be interpreted in accordance with otherwise applicable state and federal law( s) and will not apply if determined by the City to be in violation of, or preempted by, and such law(s).

20. 71. 080 PROHIBITED ACTIVITIES
A. A person who is renting a short-term rental is prohibited from subleasing such dwelling unit, or any portion thereof, to any other person or entity.

B. Commercial activities and special events, including but not limited to, weddings, receptions, large parties and sales events are prohibited on the property used as a short- term rental.

C. Hosting Platforms are prohibited from facilitating the short-term vacation rental of unlicensed, unpermitted, and illegal businesses. Hosting Platforms shall not process transactions for properties that are not licensed and permitted by the 0 City. Hosting Platforms shall not facilitate the evading of relevant taxes and regulations required of any short-term rental.

D. Hosting Platforms are prohibited from advertising a short-term rental located within the City that is not licensed and permitted pursuant to this Chapter.

E. Owners and/ or owner' s agent of an unlicensed short-term rental are prohibited from operating in the City and are prohibited from being marketed as short-term rentals available within the City. Any owner and/ or owner's agent found to be operating a short-term rental without a valid permit shall be subject to all applicable fines and penalties.

20. 71. 090 PERMIT NONTRANSFERABLE/ NO PROPERTY RIGHTS
A permit granted pursuant to this Chapter shall not be transferable to another person, entity, assessor' s parcel number or to another property owner. In addition, the issuance of a permit or renewal permit does not give the owner any vested property rights and any such permit shall not run with the land or property to which it applies. All new property owners shall obtain a new permit to continue with short-term rental operations.

20. 71. 100 PERMIT APPROVAL, DENIAL, AND REVOCATION
A. Decision Authority.

1. The Director has the authority to approve, deny, or revoke a short- term rental permit.

2. The Director' s decision on short- term rental permits shall take effect immediately, unless timely appeal is filed pursuant to Section 20. 71. 110 of this chapter.

B. Permit Approval. If, as a result of the investigation conducted by the City, the applicant is found to satisfy all of the requirements of this chapter and no grounds for denial exist, the associated short- term permit application shall be approved, and a permit (or a renewal permit) shall be issued to the applicant unless the maximum number of permits as specified in Section 20. 71. 040 have been issued.

C. Permit Denial

1. The applicant shall be denied the short-term rental permit, including a renewal permit, if any of the following findings are made:
i. The information contained in the application or supplemental information requested is false or misleading in any material detail. ii. The owner failed to provide a complete application, after having been notified of the requirement to produce documents or additional information within ten ( 10) calendar days.
iii. The owner is delinquent in payment of any city taxes, fees, assessments, fines, or penalties.
iv. If the owner has had a prior short-term rental permit revoked or has been cited for violating any provision of the Municipal Code related to short-term rentals in the City within the past twelve ( 12) months. 10 v. The owner has failed to pay any previous administrative fines, remediate any other violations, and/ or complete any other alternative disposition associated with a previous violation of this chapter related to the operation of a short- term rental.
vi. If, at the time the permit application is being submitted, the City has commenced any enforcement proceedings against the owner with respect to the property for which the owner seeks a permit or a renewal of a permit.
vii. The property does not comply with all applicable codes regarding zoning, fire, building and safety as specified under Section 20. 71. 050 of this chapter, and other relevant laws, ordinances, or regulations including any conditions placed on the permit by the City. viii. The permit cap has been reached.

2. Applicants who are denied a permit solely based on the permit cap shall have an option to join the waitlist.

D. Permit Revocation

1. A short-term rental permit shall be revoked if any of the following findings are made:
a. If any of the applicable conditions listed under subsection B. 1 of this section exist.
b. Any violation of Sections 20. 71. 050, 20. 71. 060, and/ or 20. 71. 080 is found.
c. Any violation of any other law exists on the premises of the short-term rental, for the conditions as may be shown to be injurious to the public health and safety.

2. An owner whose permit is revoked is prohibited from applying for a new shortterm rental permit for the duration of the pilot program.

20. 71. 110 APPEAL PROCEDURE
A. Decision Authority. The Director's decision to deny or revoke short-term rental permit is appealable to the Hearing Officer.

1. No appeal may be filed if the ground of the permit denial is due to the permit cap.

B. Appellants. The applicant of the short-term rental permit may file an appeal.

C. Time for Filing of Appeal. An appeal must be filed within ten ( 10) calendar days after the date of action by the Director.

D. Filing of Appeal.

1. Appeals must be filed with the City Clerk together with the required appeal fee as set forth in the current schedule of fees adopted.
11 2. If the information included with an appeal is found by the City Clerk to be deficient, the City Clerk shall notify the appellant as to the particulars of the deficiencies. If such deficiencies are not corrected within ten ( 10) calendar days of such notice, the appeal shall be deemed withdrawn.

E. Effect of Timely Appeal.

1. The filing of a timely appeal shall suspend the decision of the Director until the final determination on the appeal or dismissal thereof.

2. No person shall commence operation or continue to operate a short-term rental until the final determination is made on the appeal.

F. Notice of Hearing. A notice of such hearing shall be given to the applicant of the short-term rental permit, in writing and mailed at least ten ( 10) calendar days prior to the date of the hearing addressed to the address listed on the short-term rental application. The notice shall state the grounds for denial or revocation, and the time and place where such hearing will be held.

G. Public Hearing.

1. At the time and place set for public hearing, the Hearing Officer shall hear and determine all the facts and evidence relevant to the applicant and the contents of the application.

2. At the conclusion of the hearing, the Hearing Officer may affirm, modify, or reverse the Director' s decision. The Hearing Officer shall render a written decision within ten ( 10) calendar days form the date of the hearing where the decision on the appeal was made.

3. The action of the Hearing Officer shall be final and conclusive.

20. 71. 120 VIOLATIONS AND PENALTIES
A. Fees. The City Council shall establish fees, fines, penalties, and other charges for violation of this Chapter by resolution, which may be amended from time to time.

B. Operating a short-term rental without a valid permit is prohibited. Advertising shall be understood as evidence of operation. Additional evidence of operation may include, but not limited to guest testimony, online reviews, rental agreements or any other information deemed relevant by the City.

C. Violation( s) of any provision of this chapter shall constitute a misdemeanor and shall be punishable by a fine not -to -exceed one thousand dollars ($ 1, 000) or by imprisonment for a period not -to -exceed six (6) months, or by both such fine and imprisonment. Each and every day such a violation exists shall constitute a separate and distinct violation of this chapter.

D. In addition to the foregoing, a violation of any provision of this chapter shall constitute a public nuisance pursuant to Chapter 15. 212 and shall be subject to abatement by the city by means of a civil action or administrative abatement 12 pursuant to this code, and each day such condition continues it shall be regarded as a new and separate offense.

E. The remedies provided for in this section are in addition to, and not in lieu of, all other legal remedies, criminal or civil, which may be pursued by the City to address any violation of this chapter.

20. 71. 130 RECORDKEEPING
Each owner shall maintain all written records related to the use and occupancy of the short-term rental, including, but not limited to compliance with the operation requirements and standards set forth in section 21. 070. 060, for a period of three ( 3) years for the purpose of inspection or audit to determine that the objective and conditions of this Chapter are being fulfilled.

20. 71. 140 REQUIREMENTS NOT EXCLUSIVE
The requirements of this Chapter shall be in addition to any license, permit or fee required under any other provision of the Brea Municipal Code. The issuance of any permit pursuant to this Chapter shall not relieve any person of the obligation to comply with all other provisions of the Brea Municipal Code pertaining to the use and occupancy of the Short -Term Rental or the property on which it is located. 13 Short -Term Rental License M a p
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BREA CITY COUNCIL

PUBLIC HEARING NOTICE
NOTICE IS HEREBY GIVEN that on Tuesday, December 16, 2025 at 7: 00 p. m., or as soon thereafter as the matter can be heard, the Brea City Council will conduct a public hearing in the Council Chambers of the Brea Civic & Cultural Center, 1 Civic Center Circle, Brea, California, for the purpose of considering the following:

An Ordinance of the City Council of the City of Brea Adopting Title 5. 32:

Short -Term Rentals.

The project has been assessed in accordance with the California Environmental Quality Act (CEQA) Guidelines and the environmental regulations of the City. The proposed ordinance is exempt from the requirements of CEQA pursuant to Section 15061( b)( 3) of the CEQA Guidelines.

ALL INTERESTED PERSONS are invited to attend said hearing and express opinions on the matters outlined above. Further information may be obtained by calling the Economic Development Division at ( 714) 990- 7788 or by emailing business@cityofbrea. net.

If you challenge any action taken by the City Council at this public hearing in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this Notice, or in written correspondence, delivered to the Office of the City Clerk at, or prior to, the public hearing.

Dated: November 25, 2025
Victoria Popescu, City Clerk

CITY OF BREA

PUBLIC HEARING NOTICE
NOTICE IS HEREBY GIVEN that the Brea City Council will conduct a Public Hearing on Tuesday, January 20th, 2026, at 7:00 p.m., or as soon thereafter as the matter can be heard in the Council Chambers of the Brea Civic and Cultural Center, 1 Civic Center Circle, Brea, California 92821, in accordance with State Law and the Brea Municipal Code, for the purpose of considering the following:

The proposed adoption of a resolution to establish short-term rental license fees within the Community Development Department. Such fees have been determined to recover, but do not exceed, the City’s cost for providing such services.

ALL INTERESTED PERSONS are invited to attend said hearing and express opinions on the matters outlined above. More information may be obtained by contacting the Community Development Department at (714) 990-7788.

If you challenge any action taken by the City Council at this public hearing in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence, delivered to the Office of the City Clerk, at or prior to, the public hearing.

DATED: December 22, 2025
Victoria Popescu, City Clerk
CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 5A.

City of Brea Annual Comprehensive Financial Report and Related Audit Reports for the Fiscal Year Ended June 30, 2025

TO PREPARED BY
Honorable Mayor and City Council Members Mary Ann Alcancia, Financial Services Manager

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Monica Lo, Administrative Services Director Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends the City Council take the following action:

Receive and file the City's Annual Comprehensive Financial Report (ACFR) and the related audit reports for the fiscal year ended June 30, 2025.

BACKGROUND/DISCUSSION
Each year, the City of Brea issues an Annual Comprehensive Financial Report (Attachment A), which provides a detailed summary of the City's financial transactions for the fiscal year. The report has been prepared in conformity with accounting principles generally accepted in the United States of America and audited by a firm of licensed certified public accountants in accordance with generally accepted auditing standards in the United States of America.

For the fiscal year ended June 30, 2025, the City's independent auditor, LSL, LLP has completed its audit of the City's financial statements and has issued an unmodified, or 'clean' opinion, and in their opinion, the financial statements fairly presents, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2025, and the respective changes in financial position, and, where applicable, cash flows, thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America. This marks the second consecutive year that LSL, LLP was engaged to provide auditing services for the City.

Financial Highlights
The City's overall net position decreased by $15 million from $344.4 million to $329.4 million as of June 30, 2025.

The decline was primarily driven by a $22.9 million reduction in the governmental activities' net position, primarily due to an increase in pension-related expenses and an increase in compensated absences. The increase in compensated absences resulted from the implementation of the Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences, which required governments to record the estimated sick leave balances as liabilities, as well as related payroll liabilities, in addition to vacation leave balances. Offsetting the decrease, the City's business-type activities had a total increase of $7.9 million, mainly due to revenues in the Water Utility Fund and Sewer Utility Fund exceeding their respective expenses.

The City's capital assets increased by $4.4 million primarily due to additions to construction in progress for major projects such as the Arovista Park Modernization Project, the Integrated Crime Center (ICC), and various projects currently in different phases of construction throughout the City.

The City's long-term liabilities include $182.6 million in net pension and post-employment benefit liabilities in addition to $55.6 million of outstanding bonds, leases, and other long-term liabilities.

As of June 30, 2025, the General Fund's ending fund balance of $54.5 million included a reserve of $11.7 million deposited in the City's pension rate stabilization program with the Public Agency Retirement Services (PARS).

Related Audit Reports
Audit Communication Letter (Statement on Auditing Standards (SAS) 114 Report) The Statement on Auditing Standards (SAS) 114 was issued by the American Institute of Certified Public Accountants (AICPA) to establish a two-way communication between the independent auditors and those charged with governance (i.e. City Council). SAS 114 requires that the City's auditor communicate, either orally or in writing, certain information to an audit committee or another designated party that performs oversight on the financial reporting and auditing process.

The City's Finance Committee has been identified by the City Council to receive and review the report on the annual audit from the City's independent auditor and to review and make recommendations to the City Council to receive and file the report. The Audit Communication Letter dated December 8, 2025 (Attachment B) and issued as part of the annual audit did not identify any significant difficulties or disagreements with management that arose during the course of the audit, nor did it identify any uncorrected misstatements. This letter indicates a 'clean report' for the fiscal year ended June 30, 2025.

In addition, before the start of the audit, the auditors met with members of the City's Finance Committee to discuss the planning of the audit.

Article XIII-B Limit on Appropriations Calculation Report This report (Attachment C) communicates the result of the auditors' testing of the City's computation of the statutory appropriation limitation. No exceptions were noted in this report, and the City is well within the constraints of the statutory limit provided by state law.

Single Audit Report
Since the City's federal award programs (Single Audit) did not exceed the $750,000 threshold, the audit was not required, and the Single Audit report was not issued for the Fiscal Year Ended June 30, 2025.

FISCAL IMPACT/SUMMARY
The City's annual audit for the fiscal year ended June 30, 2025 (FY 2024-25) has been completed. The City's independent auditor has issued an unmodified opinion on the City's ACFR, which is the highest level of assurance an entity can receive from its independent auditors (a 'clean audit'). There were no findings or questioned costs as a result of their audit for FY 2024-25. The total cost of the audit services for FY 2024-25 is $87,764 and has been appropriated during the budget process.

Attachments
Attachment A - City of Brea Annual Comprehensive Financial Report Fiscal Year Ended June 30, 2025.pdf Attachment B - City of Brea FY 2024-25 Audit Communication Letter.pdf Attachment C - City of Brea FY 2024-25 Gann Limit AUP Report.pdf

CITY OF BREA
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
ANNUAL

COMPREHENSIVE

FINANCIAL REPORT
WWW.LSLCPAS.COM

CITY OF BREA, CALIFORNIA
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Prepared by:

Administrative Services Department

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3 CITY OF BREA, CALIFORNIA
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents
INTRODUCTORY SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Transmittal Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 List of Principal Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Organizational Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Certificate of Achievement for Excellence in Financial Reporting (GFOA) . . . . . . . . . . . . . . . . . . . . . . . . . . 21 FINANCIAL SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Management’s Discussion and Analysis (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Basic Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Government-Wide Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 Statement of Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Statement of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Reconciliation of the Balance Sheet of Governmental Funds to the Government-Wide Statement of Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Statement of Revenues, Expenditures and Changes in Fund Balances . . . . . . . . . . . . . . . . . . . 56 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Proprietary Fund Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Statement of Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Statement of Revenues, Expenses and Changes in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . 63 Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Fiduciary Fund Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Statement of Fiduciary Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Statement of Changes in Fiduciary Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Notes to the Basic Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Page
4 Table of Contents
FINANCIAL SECTION (continued)
Page
Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 Schedule of Changes in the Net Pension Liability and Related Ratios - Miscellaneous Plan . . . . . 122 Schedule of Changes in the Net Pension Liability and Related Ratios - Safety Plan . . . . . . . . . . . . 124 Schedule of Proportionate Share of Net Pension Liability - Safety Plan . . . . . . . . . . . . . . . . . . . . . . . 126 Schedule of Plan Contributions - Miscellaneous and Safety Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Schedule of Plan Contributions - OPEB Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budgetary and Actual 131 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 Affordable Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 Housing Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Notes to Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budgetary and Actual . . 140 Capital Improvement Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Nonmajor Governmental Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Combining Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances . . . . . . . . . 150 Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budgetary and Actual . 155 Gas Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 Narcotics Enforcement Asset Seizure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Air Quality Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Park Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Measure M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Community Development Block Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 Blackstone CFD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 La Floresta CFD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Taylor - Morrison CFD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164 Central Park Village CFD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166 National Opioid Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 Organized Retail Theft Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 Capital and Mitigation Improvement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Storm Drain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170 Nonmajor Enterprise Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 Combining Statement of Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Statement of Revenues, Expenses and Changes in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . 173 Combining Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 5 Table of Contents
Page
Internal Service Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 Combining Statement of Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 Combining Statement of Revenues, Expenses and Changes in Net Position . . . . . . . . . . . . . . . 177 Combining Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 Fiduciary Funds - Custodial Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 Combining Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180 Combining Statement of Change in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 STATISTICAL SECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 Financial Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Net Position by Component, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 Changes in Net Position, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 Fund Balance - Governmental Funds, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 Changes in Fund Balances - Governmental Funds, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . 192 Revenue Capacity Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Assessed Value and Estimated Actual Value of Taxable Property, Last Ten Fiscal Years . . . . . . . . . 194 Direct and Overlapping Property Tax Rates, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . 195 Principal Property Tax Rates, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 Property Tax Levies and Collections, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Taxable Sales by Category, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198 Debt Capacity Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Ratio of Outstanding Debt by Type, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Ratio of Net General Bonded Debt Outstanding, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . 201 Direct and Overlapping Governmental Activities Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 Legal Debt Margin, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Pledged Revenue Coverage, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 Demographic and Economic Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205 Demographic and Economic Statistics, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Principal Employers, Current and Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 Operating Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208 Full Time Equivalent City Government Employees by Function, Last Ten Fiscal Years . . . . . . . . . . 209 Operating Indicators, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210 Capital Assets Statistics, Last Ten Fiscal Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211 6 THIS PAGE INTENTIONALLY LEFT BLANK
7 INTRODUCTORY SECTION
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9 Transmittal Letter
December 8, 2025
Honorable Mayor, Members of the City Council, and Citizens of the City of Brea:

We are pleased to submit to you the Annual Comprehensive Financial Report (ACFR) of the City of Brea, a California City, for the fiscal year ending June 30, 2025. This report has been prepared in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States of America by a firm of licensed certified public accountants.

This report consists of management’s representations concerning the finances of the City of Brea. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Brea has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that financial statements will be free from material misstatement.

As management, we assert that, to the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and component units of the City of Brea. All disclosures necessary to enable the reader to gain an understanding of the City’s financial activities have been included.

LSL, LLP, a firm of licensed certified public accountants, has audited the City of Brea’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City of Brea for the fiscal year ended June 30, 2025, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation.

The independent auditor concluded that there was a reasonable basis for rendering an unmodified opinion that the City of Brea’s financial statements for the fiscal year ended June 30, 2025, are fairly presented in all material respects in conformity with accounting principles generally accepted in the United States of America. The independent auditors’ report is presented as the first component of the financial section of this report.

Generally Accepted Accounting Principles (GAAP) require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City of Brea’s MD&A can be found immediately following the report of the independent auditors.
10 CITY OF BREA PROFILE
The City of Brea, a diverse residential and business community, is located at the most northern tip of Orange County at the juncture of three counties with access to major airports, popular regional attractions, beaches, deserts and mountains. Nestled among the hillsides, just 25 miles southeast of Los Angeles, Brea is home to more than 47,900 residents and hosts a daytime working population of more than 125,000.

The City has major retail centers featuring one of the county’s most prominent shopping centers, the Brea Mall.

Other premier shopping centers include the Brea Union Plaza, Downtown Brea, the Brea Marketplace, the Village at La Floresta, Brea Imperial Center, and a host of other retail and service businesses. Brea is also a center for companies such as ViewSonic Corporation, EVGA Corporation, American Financial Network, Inc., California Roadside Service, Kirkhill Aircraft Part Co. and Flexfit LLC. Several companies’ corporate headquarters are located within Brea, including Beckman-Coulter, and Suzuki Motor of America.

Although Brea is a major retail and business hub, it maintains a balance with nature, preserving its hillside and canyon areas, which also contribute to Brea’s quality of life. Brea is home to one of the nation’s largest outdoor sculpture collections, with currently 191 pieces of sculpture created to date, an art gallery and a performing arts theatre. Brea has long been recognized for its vision and innovation. It possesses a focused economic development strategy, designed to ensure a well-balanced, economically viable community which includes a wide range of housing, beautiful parks and excellent schools.

Brea provides an excellent portfolio of responsive municipal services. The City operates as a “full-service city,” providing a full range of services including police and fire protection, water and sanitation services, construction and maintenance of streets and infrastructure, as well as recreational and cultural services. Besides serving its own residential and business customers, Brea has a tradition of entrepreneurial ventures providing services to numerous other public agencies such as information technology and printing services.

The City of Brea operates under the Council-Manager form of government and is governed by a five-member City Council elected at large, serving staggered four-year terms. Council elections are held in November of evennumbered years in conjunction with statewide general elections.

The budget serves as the foundation for the City of Brea’s financial planning and control. The budget is adopted on a biennial basis by the City Council in June of each odd year. The budget team, with the approval of the City Manager, develops budget guidelines in January. The various City departments then submit revenue estimates and expenditure appropriation requests for the period that begins July 1 of each odd year. Budget meetings are held with each department, which leads to the development of the proposed budget. The City Manager then presents the proposed budget document to the City Council, which is discussed with the City Council in public workshops in mid-May. Formal public hearings are held in early June with final approval by City Council on or before June 30 of each odd year. At the conclusion of the first year, the budget team prepares a report on the progress of the first half of the biennial budget cycle. The City Manager formally reviews the report with the City Council. The City Council adopts budget adjustments as needed. The level of budgetary control is established at the fund level for all funds.
11 LOCAL ECONOMIC FACTORS
Brea encompasses about 8,300 acres or 13 square miles of land. The City’s land use is distributed as follows:

The current land use mix produces General Fund revenues of approximately $87.8 million. Sales taxes, property taxes and franchise taxes account for the top three sources of revenue. These revenue sources account for

56.8% of the total amount of General Fund revenues. The remaining revenues account for 43.2% of the total and are represented by a broad range of sources.
12 Sales Tax
Sales tax represents the single largest source of General Fund revenue at $25 million. It is derived from the major economic categories as listed in the following chart. The general consumer goods category, including department stores, apparel stores and general merchandise, makes up 26% of the total sales tax generated. This sector includes the regional Brea Mall, which is one of the largest malls in Orange County. The second largest economic sector being business and industry. Overall, Brea’s sales tax on a per capita basis consistently outperforms other municipalities, a strong indicator that the City imports sales tax dollars from surrounding communities.

Property Taxes
Brea is a very diverse community as previously indicated in the land use chart. General Fund property taxes represent $21.9 million or 25% of General Fund revenues. Assessed valuation of all property (including the former Brea Redevelopment Agency) in Brea is $13.7 billion, an increase of 4.15% over the prior fiscal year. The valuation is split between residential at 60%, commercial/industrial at 36%, and the remaining 4% for other miscellaneous uses. Of the City’s 18,719 dwelling units, 62.2% are single-family units, 32.4% are multi-family units and 5.4% are mobile homes. Housing costs in Brea continue to rank among the highest in North Orange County. Brea, like other cities in Orange County, is experiencing an increase in housing prices. The median price of a single-family home increased to $1,090,000, up from $1,040,000, which is a 4.8% rise compared to the previous fiscal year.

Vehicle License Fees (VLF)
When a vehicle is registered in California, a license fee is charged by the State of California. This fee includes a small administrative fee and a property tax in-lieu fee. The in-lieu fee is based on depreciated value of the vehicle and declines over the useful life of the vehicle. The in-lieu fee, while collected by the State Department of Motor Vehicles, belongs to local government (cities and counties). It is allocated based on a per capita basis. 13 Beginning in January 2005, the Vehicle License Fee was permanently reduced to 0.65% from 2.0% of the vehicle’s fair market value. Any loss to cities by this rate reduction at that time was made up, dollar for dollar, with an allocation from the County’s Educational Revenue Augmentation Fund (ERAF) property tax account with two payments, due on or before January 31st and May 1st of each year. This allocation will grow with any corresponding growth in the City’s secured property tax valuation.

Franchise Taxes
The franchise revenue received by the City is based on adopted City ordinances and contractual agreements.

Public utilities (electric and gas) account for 38.7% of the $3.1 million in annual franchise tax revenue. The remaining 61.3% of this revenue includes franchise fees for oil pipelines, cable television, and other non-city utilities.

ECONOMIC OUTLOOK
Development within Brea continues and remains active with large-scale projects underway including the Brea Mall Mixed Use Project which will redevelop a 15.5-acre portion of the current Brea Mall providing new retail, restaurants, residential and commercial opportunities for the community including a state-of-the-art fitness center.

Demolition started and construction of various buildings have begun including a new mall entrance. Construction is underway on the landscaping and outdoor plaza. The residential apartment building is anticipated to begin grading operations by the end of the year. The project is a multi-phased effort and is anticipated all new retail restaurants, and the fitness center will be available to the public by summer 2026.

Brea Plaza, a vibrant shopping center located along Imperial Highway, between the 57 Freeway and Associated Road, is also undergoing a remodel that will modernize the area located in the northwest corner of the shopping center. This project has demolished the previous theater building and added an expanded ground floor retail space, as well as a new second-floor commercial space with an outdoor balcony area to the renovated building.

Construction is anticipated to be completed by December 2025.

Development improvements are also being made to the Gaslight Square site located on Imperial Highway west of State Route 57 which is a mixed-use site that demolished a portion of the project site to add a new 2,000 square foot drive through restaurant with an outdoor seating area and a 6,000 square foot commercial building consisting of a bank, restaurant and fitness studio. Construction of the shell has been finalized and tenant improvements are underway.
14 New development within the City provides an opportunity to generate additional revenue that will assist the City in tempering the increasing cost of goods and services that have remained constant these past few years following the COVID-19 pandemic. Though the organization has been able to pivot and think strategically when navigating a rapidly changing economic environment, the organization continues to maintain and enhance core service levels to the community. To allow flexibility and responsiveness within the organization, the City Manager’s authority as it relates to the budget appropriation carryovers has been expanded to allow the ability to carryover available appropriation from one year to another year for a new expenditure so long as the total appropriation per expenditure does not exceed the City Manager’s authority limit of $50,000. This will provide the organization with the ability to respond and adapt quicker.

In addition, the use of excess General Fund reserves above the City’s policy limit of 25% helps the organization maintain service levels to the community as the organization regains momentum in the coming fiscal years. This fund balance strategy will avoid making severe service reductions until the organization has an opportunity to better understand the changing economic environment.

Staff also continue to closely monitor actual versus projected revenues and opportunities for vacancy savings that will assist in providing more firm estimates as the organization navigates the next two fiscal years. Staff are committed to providing budget updates to the City Council as the financial picture changes.

Overall, it is important to note that Brea is paying all of its obligations on time; is setting aside funding for ongoing capital facility and equipment replacement; and is funding a robust Capital Improvement Program (CIP) to adequately maintain City infrastructure.

The organization will make every effort to continue to build prudent reserves and strategic savings programs to insulate the city from a downturn in the economy and minimize organizational disruption. The City Council is also committed to pension modifications and plans to continue setting aside money in an irrevocable trust fund, administered through the Public Agency Retirement Services (PARS), that is specifically designed to help stabilize pension costs. This, combined with continued efforts to promote pension modifications at the legislation front is steps in the right direction.

The entire organization continues to work hard to preserve core City services. Staff will continue to be diligent in monitoring long-term economic uncertainties that could impact Brea’s budget picture. These include:
• Uncertainty at the State and Federal level;
• Increases in the cost of living (inflation);
• Capital assets replacement needs;
• Economic pressures impacting the City’s sales tax base; and • CalPERS projected rate increases
City staff use a variety of tools, such as looking strategically at vacancies and consolidation of functions to structurally close the budget gap when needed. Staff continue to research new and innovative ways of doing business.

LONG-TERM FINANCIAL PLANNING
Brea Forward Strategy Team
Representatives from all City departments meet to discuss strategic planning issues. Over 40 City staff members work collaboratively on an ongoing basis to focus on identifying and evaluating changing City needs. As needed, this group is also instrumental in tackling economic impacts on the City’s Budget. Brea Forward meets as needed to address changes to the organization that may be necessary to financially sustain the City over the course of the next several fiscal years and beyond.
15 Capital Improvement Program (CIP) Budget
The goal of the seven-year CIP is to enhance the quality of life in the community, ensure a safe environment and to promote transportation improvement in the City. The CIP budget for fiscal year 2025-27 reflects the City Council’s commitment to this goal by enhancing existing infrastructure and providing new infrastructure to aid service delivery to the community. The remaining six years of the CIP are not a commitment of actual funds, but rather a long-range planning tool for subsequent investments in the City’s infrastructure. The CIP is divided into six categories: streets, traffic safety, water, storm drain, sewer, and facility improvements.

Community Center Reserves
Funds are set aside annually for the future replacement of the Community Center facility and equipment.

Ongoing review of facility and equipment needs allows the City to manage and plan for expenditures in a more proactive manner. The balance in Community Center Reserves on June 30, 2025, was $807,181.

Capital Asset Replacement Reserves
Funds are set aside annually for the replacement of City-owned infrastructure, facilities and capital assets. In addition to a fixed annual contribution, an assessment is made at the end of each fiscal year to determine whether an additional contribution can be made based upon a review of General Fund excess revenues over expenditures. The balance in Capital Asset Replacement Reserves on June 30, 2025, was $3,969,621.

Pension Rate Stabilization Program
On November 17, 2015, the City of Brea established a pension rate stabilization program with Public Agency Retirement Services (PARS) to reduce the future unfunded pension liability for current and future retirement costs for both safety and non-safety employees. The City’s initial contribution of $6,000,000 from the General Fund was made during FY 2015-16. During FY 2018-19, the City’s Enterprise Funds contributed an additional $756,800 for a total contribution of $6,756,800. The balance as of June 30, 2025, including interest earned to date was $11,711,522.

MAJOR INITIATIVES
Revenue Enhancement Initiatives
Balancing the City’s biennial budget requires a strategic approach across the organization, including the careful allocation of resources and the implementation of creative solutions to reduce expenditures, streamline operations, and enhance revenues over the two-year period and beyond. At the City Council and Executive Offsite Meeting on January 28, 2025 and at the May 6, 2025 Budget Workshop, longer-term revenue considerations were discussed. This included directions to explore the following initiatives:
• Evaluation of lease agreements at the Civic & Cultural Center; • Evaluation of subsidies provided to other agencies, user groups, and/or events; • Evaluation of oil franchise fees and cell tower lease agreements; • Evaluation of market outreach to film industry;
• Updates to the Brea Mall Message Board signage revenue projections; • Consideration of short-term rentals and other business opportunities; and • Consideration of business license tax and transient occupancy tax (TOT) updates.

Staff are diligently working on evaluating these revenue initiatives and as information becomes available it will be brought to City Council for consideration and approval. 16 State Route 57/Lambert Road Interchange Improvements Starting in August 2019, the City in conjunction with Caltrans began construction on a new eastbound to northbound loop on-ramp and modify the spacing between the existing SR-57 on and off ramps to improve traffic flow on Lambert Road. The project budget is $100 million with more than 90% of the funding from grants; federal funding of $74 million and $18 million from the Orange County Transportation Authority (OCTA). The remainder is funded by the City with Traffic Impact Fees. Caltrans is the lead agency for environmental and implementation while the City of Brea is the lead for the Right-of-Way and Design.

Arovista Park Modernization Project
The City embarked on the modernization of a 30+ year old park in its historic south Brea neighborhood. With key pedestrian connections to the downtown via the Tracks at Brea trail system, and adjacent to the Brea Senior Center, Brea Creek Golf Course and local schools, this 14-acre site serves as a primary location for multigenerational recreational uses for the community. The City is also adding the first all-accessible playground in North Orange County which will provide an opportunity for children and adults of all ages and all abilities to have a safe space to play and enjoy the outdoors. The construction of Arovista Park East (Phase One) began in May 2024 and is anticipated to be completed in 2026 with a project budget of $24.1 million.

In-House Ambulance Program
In order to enhance service to the Brea community, the Brea Fire Department developed an in-house ambulance program. Rather than contracting with a private ambulance company, the fire department will own and operate the ambulances, and the ambulance operators/Emergency Medical Technicians (EMTs) on the ambulances will be City employees. The in-house ambulance program is fully implemented. As part of the development of this program, the City entered a contract with a third party ambulance billing provider. As of July 1, 2024, the City has taken over the billing component of ambulance transportation.

Integrated Crime Center (ICC)
The ICC at the Brea Police Department is a modern, technology-based system that is designed to change the paradigm in crime prevention, management, and resolution. Equipped with advanced tools such as video management systems, video analytics, Automated License Plate Readers (LPR), Unmanned Aerial Systems (UAS), and a Drone as a First Responder Program (DFR), the ICC provides first responders with real-time, critical information while generating investigative leads. To further extend the system, the City of Brea has hired a company that will design the fiber network required for a citywide camera system. This will be used as the foundation for construction bids that were solicited in January 2025, expanding ICC's reach and effectiveness and enhancing public safety and community engagement.

AWARDS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Brea for its Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2024. This was the 35th consecutive year that the City of Brea has achieved this prestigious award. To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized annual comprehensive financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe our current annual comprehensive financial report continues to conform to the Certificate of Achievement Program’s requirements and we are submitting it to GFOA to determine its eligibility for another certificate. 17 ACKNOWLEGMENTS
The preparation of the Annual Comprehensive Financial Report on a timely basis was made possible by the dedicated service of Mary Ann Alcancia, Financial Services Manager, Ana Conrique, Principal Accountant and the entire staff of the Administrative Services Department. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report.

We also would like to thank our independent auditing firm, LSL, LLP for their expertise and advice in the preparation of this year’s financial report.

In closing, without the leadership and support of the City Council of the City of Brea, preparation of this report would not have been possible.

Sincerely,

Kristin Griffith Monica Lo
City Manager Director of Administrative Services
18 List of Principal Officials
19 Organizational Chart
20 Certificate of Achievement for Excellence in Financial Reporting (GFOA) 21 THIS PAGE INTENTIONALLY LEFT BLANK
22 FINANCIAL SECTION
23 INDEPENDENT AUDITORS’ REPORT
To Honorable Mayor and Members of the City Council
City of Brea, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brea, California, (hereafter, the City) as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2025, and the respective changes in financial position, and, where applicable, cash flows thereof, for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter
Change in Accounting Principle
As described in Note 18 to the financial statements, in 2025, the City adopted new accounting guidance, GASB Statement No. 101, Compensated Absences. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
24 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, and required pension and other post-employment benefits schedules as listed on the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

To Honorable Mayor and Members of the City Council
City of Brea, California
25 Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying combining and individual fund financial statements and schedules (supplementary information) are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditors’ report thereon.

Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 8, 2025, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.

Irvine, California
December 8, 2025
To Honorable Mayor and Members of the City Council
City of Brea, California
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27 MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
Financial Highlights for Year Ended June 30, 2025
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29 This section of the City of Brea’s Annual Comprehensive Financial Report (ACFR) presents management’s discussion and analysis of the City’s financial performance during the fiscal year that ended on June 30, 2025.

This analysis should be read in conjunction with the Transmittal Letter at the front of this report and the accompanying Basic Financial Statements.

FINANCIAL HIGHLIGHTS
Long-Term Economic Resource (Government-wide) Focus – Economic resources are differentiated from financial resources in that the economic measurement focus measures changes in net position as soon as the event occurs regardless of the timing of related cash flows. Therefore, this measurement focus includes both current spendable resources and fixed non-spendable assets, and long-term claims against these assets. The resulting net position utilizing this measurement focus provides one measure of the City’s overall long-term financial condition.
• The assets and deferred outflows of the City exceeded liabilities and deferred inflows at the close of the most recent fiscal year resulting in a net position of $329.4 million. • The City’s total net position decreased overall by $15 million, of which $22.9 million is related to a decrease in governmental activities, while $7.9 million is related to an increase in business-type activities.

The decrease in net position is primarily related to pension expenses and implementation of GASB Statement No. 101, Compensated Absences (GASB 101), as discussed further in this document. Of the $7.9 million increase in business-type activities, $4.3 million is related to the Water Utility fund revenues exceeding expenditures, $2.7 million is related to the Sewer Utility fund revenues exceeding expenditures and $1.7 million relating to activities in Nonmajor Enterprise Funds. Approximately $700 thousand decreased the business-type activities net position as a result of GASB 101. • The City’s noncurrent liabilities of $238.2 million primarily include $161.6 million in net pension liabilities, $21 million in other post-employment (OPEB) liabilities and $55.6 million of outstanding bonded debt, leases, subscription IT liabilities, compensated absences, and claims. Total capital assets, net of depreciation and amortization, represents $360.3 million of the $559.3 million in total assets. A significant portion of the capital assets have been funded through bond financing from the former Brea Redevelopment Agency.

Short-Term Financial Resource (Fund) Focus – The financial resources focus measures inflows of current spendable assets. The resulting net difference between current financial assets and current financial liabilities, otherwise known as fund balance (or net working capital in the private sector), is to measure the City’s ability to finance activities in the near term.
• At the close of the current fiscal year, the City’s Governmental Funds reported a combined ending fund balance of $103.1 million, an increase of $3.1 million, which is largely due to the changes in the nonmajor governmental funds increase of $4.1 million and offset by a $1 million decrease in the capital improvements fund as a result of more capital expenditures for fiscal year ended June 30, 2025. Of the total combined fund balance of $103.1 million for governmental funds, $63.6 million was restricted, $7.5 million was assigned, $1.6 million committed and $30.4 million was unassigned. • The General Fund reported a decrease of about $500 thousand primarily due to a one-time revenue of $6.5 million from the Olinda Alpha Landfill and a full year of revenue from the advanced life support services resulting in a $2 million increase in charges for services. Additionally, there was also an increase of a combined $1 million from other charges for services and investment income. The increase in revenue was offset by an increase of $4.6 million in public safety expenses related to an increase in salaries and benefits, as well as $6 million spent on the modernization of Arovista Park resulting in a total ending fund balance of $54.5 million. Of the total ending fund balance, $7.5 million was assigned, $14 million was restricted, $1.6 million was committed and $31.4 million was unassigned. The unassigned balance is available for future appropriations.

MANAGEMENT’S DISCUSSION AND ANALYSIS
30 OVERVIEW OF THE FINANCIAL STATEMENTS
The Basic Financial Statements are comprised of three components: 1) Government-wide Financial Statements, 2) Fund Financial Statements and 3) Notes to the Financial Statements. The Management’s Discussion and Analysis is intended to be an introduction to the Basic Financial Statements. Required supplementary information is included in addition to the basic financial statements.

BASIC FINANCIAL STATEMENTS
Government-wide Financial Statements – The Government-wide Financial Statements are intended to provide a “Big Picture” view of the City as a whole using accounting methods similar to those used by private sector companies. The statement of net position includes all of the City’s assets (including non-spendable assets like streets and roads) and any deferred outflows, liabilities (including long-term liabilities that may be paid over twenty or more years) and any deferred inflows of resources. All of the current year revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid.

Government-wide Financial Statements report the City’s net position and how they have changed. Net position – the difference between the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources– is one way to measure the City’s financial health, or position. Over time, increases or decreases in the City’s net position are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, one should also consider additional non-financial factors such as changes in the City’s property tax base and the condition of the City’s roads.

The City’s Government-wide Financial Statements are divided into two categories:

Governmental Activities – This statement depicts the extent to which programs are self-supporting and the net amount provided by property taxes and other general revenues. Most of the City’s basic services are included in this category, such as public safety, community development, community services, public works, and general administration. Taxes and charges for services finance most of these activities.

Business-type Activities – The City’s business enterprises include water utility, sewer utility, urban runoff, sanitation, information technology external support to public agencies and golf course activities.

The City charges fees to customers to recover the cost of providing these services.

Fund Financial Statements – Funds are accounting devices that the City uses to track and control resources intended for specific purposes. The Fund Financial Statements provide more detailed information about the City’s most significant funds (major funds) but not the City as a whole. Some funds are required by State and Federal law or by bond covenants. Other funds are utilized simply to control and manage resources intended for particular purposes.

The City utilizes three broad categories of funds:

Governmental Funds – Governmental Funds are used to account for essentially the same functions reported as Government Activities in the Government-wide Financial Statements. However, unlike the Government-wide Financial Statements, Governmental Fund Financial Statements utilize the financial resources measurement focus and thus concentrate 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. Consequently, the Governmental Fund Financial Statements provide a detailed short-term view that helps a reader determine whether there are more or fewer financial resources that can be spent in the near future to finance City programs. 31 Proprietary Funds – Services for which the City charges customers a fee is generally reported in Proprietary Funds (Enterprise Funds and Internal Service Funds). Like the Government-wide Financial Statements, these funds provide both long and short-term financial information utilizing the economic resources measurement focus.

The City’s Enterprise Funds (water, utility, sewer utility, urban runoff, sanitation, information technology external support to public agencies and golf course activities) are individual funds represented in the combined presentation of Business-type Activities in the Government-wide Financial Statements. The individual fund presentation provides more detailed information about each business segment, its operating statements, and statements of cash flow. The City also uses Internal Service Funds that are utilized to report and allocate the cost of certain centrally managed and operated activities (risk management, vehicle replacement, information technology, and building occupancy). Because the Internal Service Funds primarily serve the government, they are reported with Governmental Activities rather than the Business-type Activities in the Government-wide Financial Statements.

Fiduciary Funds – The City utilizes Fiduciary Funds to account for assets held by the City in a trustee capacity, or as an agent for other governmental entities, private organizations, or individuals. All of the City’s fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes in fiduciary net position. These activities are excluded from the City’s Government-wide Financial Statements because the City cannot use these assets to finance its operations.

Notes to the Basic Financial Statements – The financial statements also include the Notes to the Basic Financial Statements that provide important narrative details about the information contained in the financial statements. Information contained in the Notes to the Basic Financial Statements is critical to a reader’s full understanding of the Government-wide and Fund Financial Statements.

Supplementary Information – In addition to the required elements of the Basic Financial Statements, we have also included a Supplementary Information section, which includes budgetary and combining schedules that provide additional details about the City’s non-major Governmental Funds, Enterprise Funds, Internal Service Funds, and Fiduciary Funds.

GOVERNMENT-WIDE FINANCIAL ANALYSIS
The government-wide financial statements provide long-term and short-term information about the City’s overall financial condition. This analysis addresses the financial statements of the City as a whole. Our analysis focuses on the net position (Table 1) and changes in net position and changes in net position (Table 2) of the City’s governmental activities and business-type activities.
32 Net Position – Net position may serve over time as a useful indicator of a government’s financial position. The City’s combined net position for the year ended June 30, 2025, was $329.4 million of which $318.8 million was the net investment in capital assets such as construction in progress, equipment, buildings and infrastructure. Of the remaining total, $67.1 million was restricted to specific law, contracts or other agreements such as affordable housing, public safety, capital projects and debt service. The remaining deficit of $56.5 million was unrestricted.

Net Investment of Capital Assets – The largest component of the $559.3 million in total assets is the City’s investment in capital assets (e.g., land, buildings, infrastructure, and equipment), representing $360.3 million or

64.4% of total assets.

Noncurrent Liabilities –Of the $238.2 million in long-term (non-current) liabilities, $55.6 million represents outstanding bonded debt, leases, SBITA, claims, and compensated absences, $161.6 million represents net pension liability, and $21 million represents the City’s total OPEB liability. During the fiscal year ended June 30, 2025, noncurrent liabilities decreased by $2.2 million. This increase includes a 3% decrease in net pension liabilities, a 4.3% decrease in OPEB liability, and a 7.2% increase related to the bonds, leases, SBITA, claims and compensated absences primarily due to the implementation of GASB 101. Governments are now required to account for the estimated sick leave balances and related payroll liabilities in addition to the accrued vacation as part of compensated absences. Please refer to Notes 9,10, and 18 to the basic financial statements for additional information.
33 The following table indicates the changes in net position for governmental and business-type activities:

The City’s total revenues for the fiscal year ended June 30, 2025, were $142.3 million. The majority of the revenues consists of $48 million (33.7%) from fees charged for services, and $63.1 million (44.4%) in taxes revenue. Overall, revenues for the fiscal year ended June 30, 2025 increased by $12 million, a 9.3% increase from the prior year.
• Charges for services increased by $5 million, primarily due to the recent cost recovery from the Water Fund of about $2 million as well as an increase in the General Fund of about $2 million due to the advanced life support services provided by the Fire and Rescue Department. • Capital grants and contributions decreased by $2.5 million, partly due to a $1 million reduction of grants related to the COVID-19 funding and another $1 million decrease in County grants supporting capital projects.
34 • Total taxes increased by $564 thousand mainly attributable to a $1 million increase in property taxes offset by a $789 thousand decrease in sales taxes.
• Use of money and property increased $2.2 million (35%) mainly due to the increase in investment income as a result of favorable market rates.

The City’s total expenses were $152.9 million, comprised of $9.9 million (6.5%) for general government, $80.5 million (52.7%) for public safety, $15 million (9.7%) for public works, $11.1 million (7.2%) for community services, $5.8 million (3.8%) for community development and $30.6 million (20.1%) for business-type activities. Total expenses increased $6.7 million from the prior year. Of the total increase, majority pertain to an $8 million increase in expenses for public safety, an increase of $4.7 million in public works, and an increase of $1.8 million in water expenses. These were offset by a decrease in expenses in the general government and community development of $3.3 million and $4.6 million, respectively. Please refer to Note 10 to the financial statements and the required supplementary information for additional information on the City’s pension expense.

Brea is a full-service city providing residents, businesses and visitors with the following functional services:

General Government is comprised of two departments (City Council/City Manager and Administrative Services) providing general governance, executive management, legal services, communication and marketing, human resources, records management, information technology, accounting, budget, treasury, utility billing, purchasing and reprographics.

Public Safety is comprised of two departments (Police Services and Fire Services) providing general law enforcement, public safety dispatch, fire suppression, fire prevention, paramedic services and emergency preparedness.

Community Development is comprised of two divisions (Planning & Building Services and Economic Development Services) providing planning, zoning and building services, redevelopment services, economic development and housing services.

Community Services is overseen by one department and includes recreation, arts and human services, and the community center.

Public Works is overseen by one department and includes engineering and construction of public facilities, parks, streets and related infrastructure, traffic engineering as well as the maintenance of all public facilities, parks, streets and related infrastructure.

Business-type activities is comprised of two departments (Public Works and Administrative Services) providing five activities to residential and business customers (water utility, sewer utility, urban runoff, sanitation services, information technology external support to public agencies and golf course activities). 35 Governmental Activities – Table 3 presents the cost of each of the City’s five largest programs – general government, public safety, community development, community services and public works. Each program’s net cost (total expenses less revenues generated by the activities) is also presented below. The net cost shows the extent to which the City’s general taxes support each of the City’s programs.

The net cost of services indicates that the overall cost of government is more than the revenues generated to support it. See the Statement of Activities for further detail on program revenues and general revenues.

Overall program expenses have increased from prior year by $6.1 million and an increase in net cost of services by $4.8 million due to the significant increase in pension expense as previously discussed. Please refer to Note 10 to the financial statements and the required supplementary information for additional information on the City’s pension expense.
36 37
Major Governmental Activities in the current fiscal year included the following:

Revenues
• The City’s total governmental activities included program and general revenues of $103 million. Charges for services were $10.7 million (10.4%), both operating and capital grants and contributions were $9.3 million (9%), taxes were $63.1 million (61.3%) and other revenues were $19.9 million (19.3%).

Expenses
• In the current year, expenses for all Governmental Activities totaled $122.3 million. Of this amount, 8.1% was spent on general government, 65.9% on public safety (including both police and fire), 9.1% on community services, 4.7% on community development, and 12.2% on public works.

Business-type Activities – Business-type Activities increased the City’s net position by $8.6 million, primarily due to the changes in the net position of the water utility, sewer utility, urban runoff, sanitation, information technology external support to public agencies and golf course activities. These activities are financed mainly by fees charged to external parties for goods and services.

Business-type Activities in the current fiscal year included the following:

The Water Utility experienced an increase in net position of $4.3 million. Of the $18.5 million in water related expenses, 45.0% was for the purchase of water, 26.1% was for maintenance and other operating expenses,

16.4% was related to depreciation expense, and 12.5% for personnel costs. Water rates were adjusted in June 2023, with subsequent CPI increases, to fund ongoing operations, recapture the bond coverage ratio, and provide funding for planned capital improvements to the water utility system. 38 The Sewer Utility had an increase in net position of $2.8 million. The increase in net position was primarily due to operating income of $2.2 million, which was mainly due to a decrease in personnel services related to the pension and OPEB liabilities.

FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to highlight available financial resources and to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds – Utilizing the financial resources measurement focus, the City’s Governmental Funds provide information on near-term inflows and outflows, and balances of spendable resources. This information is useful in assessing the City’s financing requirements. In particular, unassigned 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 June 30, 2025, the City’s governmental funds reported a total combined fund balance of $103.1 million, an increase of $3 million from the prior year. Approximately 61.7% of the City’s governmental funds ending fund balances, or $63.6 million was restricted fund balance and is legally restricted by external parties. The remaining $39.5 million is nonspendable, committed, assigned and unassigned fund balance, which is available for spending at the government’s discretion. Please refer to Note 13 to financial statements for additional details on fund balance classifications.

The General Fund ended the fiscal year with a fund balance of $54.5 million, which is a net decrease of $500 thousand, which is explained on page 30. The General Fund’s unassigned fund balance of $31.4 million is available for future appropriations.

The Affordable Housing Fund ended the fiscal year with a fund balance of $4.6 million, all of which is restricted for affordable housing activities.

The Low and Moderate Income Housing Asset Fund ended the fiscal year with a fund balance of $19.4 million all of which is restricted for low and moderate income housing activities.

The City’s Capital Projects Fund ended the fiscal year with a fund balance of $5 million, a decrease of $1 million.

This decrease was primarily due to expenditures on capital projects and improvements. The $5 million fund balance is restricted for future capital projects.

Proprietary Funds – The City’s Proprietary Funds (Enterprise and Internal Service Funds) presented in the Fund Financial Statements section basically provide the same type of information in the Government-wide Financial Statements, but include individual segment information.

The Water Utility Fund ended the fiscal year with a net position of $96.7 million. The increase in net position was primarily due to revenues over expenses of $4.3 million. Of the $96.7 million in net position, $69.9 million is net investment in capital assets, $2.9 million is restricted for debt service and $23.9 million is unrestricted. Amounts have been allocated or encumbered for capital projects currently under construction. Please refer to the Capital Asset Table 7 below for additional discussion.

The Sewer Utility Fund ended the fiscal year with $27.2 million in net position, an increase of $2.7million. The increase in net position was primarily due to a decrease of $1 million in expenses as compared to prior year, while revenue slightly increased. Of the $27.2 million in net position $19.4 million is net investment in capital assets and $7.6 million is unrestricted. Amounts have been allocated or encumbered for capital projects currently under construction. Please refer to the Capital Asset Table 7 below for additional discussion. 39 GENERAL FUND BUDGETARY HIGHLIGHTS
Variances to Original Budget
Differences between the General Fund original budget revenues and the final amended budget were decreased by $842 thousand and are briefly summarized as follows:
• Overall increase in taxes of $200 thousand was primarily due to increase in real property tax transfer revenue that was received more than projected.
• Overall increase in intergovernmental revenues of $578 thousand is primarily attributed to State and Federal reimbursement received throughout the fiscal year. This includes Cal-OES reimbursement for various Fire Strike Team responses such as the Park Fire in Chico, the Lake Fire in Santa Barbara County and the Airport Fire in Trabuco Canyon.
• Overall increase in other revenues of $64 thousand was primarily due to recovery of property damage costs associated with various traffic accidents reimbursed by insurance policyholders and/or responsible parties.

Differences between the General Fund original budget expenditures for other financing sources (uses) and the final amended budget were increased by $15.3 million and was mainly attributed to funding various equipment and capital improvement projects including the modernization of Arovista Park.

Variances with Final Budget
Differences between the General Fund final budget revenues and actual resources were $283 thousand more than anticipated. The major variance was attributed to investment income being higher than expected offset by a shortfall in taxes revenue.

Differences between the General Fund final budget expenditures and actual expenditures were $4.7 million less than anticipated. The variance is primarily attributed to salaries and benefits savings as well as the continuation of projects including the General Plan Update effort and the new in-house Ambulance Services Program in the Fire Services Department.
40 CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
The City’s investment in capital assets for governmental and business-type activities as of June 30, 2025, amounts to $360.3 million (net of accumulated depreciation and amortization). This investment includes a broad range of capital assets such as land, structures and improvements, furniture, machinery and equipment, park facilities, roads, sidewalks, water system, storm drains, sound walls, and bridges. The total net increase (including additions and deletions) of $4.4 represents a 1.2% increase from the previous fiscal year.

The increase of $5.2 million for governmental activities was due to the net increase of $9.2 million of various projects to construction-in-progress (CIP) and remaining reduction due to accumulated depreciation to various pavement, traffic and street improvement projects. The $722 thousand decrease in Business-Type Activities is due to an increase of $2.9 million continuous water infrastructure improvement projects that are ongoing throughout the City and the related depreciation of about $3.7 million.

Additional information on the City’s capital assets can be found in Note 8 to the basic financial statements. 41 Long-Term Debt
At the end of the current fiscal year, the City had total long-term debt outstanding for bonds, leases, SBITAS, claims and compensated absences of $55.6 million for all governmental and business-type activities.

Additional information on the City’s long-term debt can be found in Note 9 to financial statements.

FACTORS AFFECTING NEXT YEAR’S BUDGET
The fiscal year 2025-27 biennial General Fund budgeted revenues are $74.4 million for fiscal year 2025-26 and budgeted expenditures are $72.3 million.

A brief summary of the factors considered when preparing year one of the fiscal year 2025-27 budget are summarized below:
• Sales tax revenue is the City’s single largest revenue source representing approximately 37% of the FY 2025-27 General Fund budget. Sales tax revenues are projected to increase on average 6% over the FY 2024-25 actuals for the next two years with an average growth of 1.7% for the remaining three years covering FY 2027-28 through FY 2029-30. This assumption includes preliminary sales tax growth related to new development including the Brea Mall Mixed Use Project and is subject to change as more information becomes available.
• General Fund property taxes are the second-largest revenue source representing 22% of the FY 2025-27 budget. Property tax revenues are anticipated to grow by 4.0% over the FY 2024-25 year-end estimate and future years beyond FY 2026-27 remain conservative at 2%. They will be adjusted as more information becomes available regarding development projects within the community and as construction begins to break ground.
• The FY 2025-27 General Fund Operating Budget also takes into consideration the use of excess General Fund reserves above the City’s policy limit of 25% and transfers from other funds to assist the organization in maintaining service levels to the community as the organization regains momentum in the coming fiscal years. This fund balancing strategy will avoid making severe service reductions until the organization has an opportunity to better understand the changing economic environment. 42 • In addition, staff continues to explore new revenue opportunities with City Council, including but not limited, to short-term rental opportunities, economic development incentive initiatives, cell tower lease opportunities and evaluation of various tax updates to transient occupancy tax (“hotel tax”) and business license tax. These efforts will help maintain long-term financial perspective and will be included in the budget as decisions are approved by City Council.

CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the City’s Administrative Services Department, 1 Civic Center Circle, Brea, CA 92821, at (714) 990-7676. 43 BASIC FINANCIAL STATEMENTS
44 GOVERNMENT-WIDE FINANCIAL STATEMENTS
45 Statement of Net Position
ASSETS
Cash and investments $ 93,527,716 $ 32,311,269 $ 125,838,985 Receivables (net of uncollectibles)
Accounts 4,024,316 4,460,240 8,484,556
Taxes 276,741 - 276,741
Accrued interest 4,283,269 - 4,283,269
Due from other governments 6,041,329 30,320 6,071,649
Notes and loans 16,180,432 - 16,180,432
Lease receivables 5,444,120 - 5,444,120
Internal balances 534,494 (534,494) -
Restricted assets
Cash and investments 13,988,708 1,232,246 15,220,954
Cash and investments with fiscal agent 32 2,314,289 2,314,321 Land held for resale 800,000 - 800,000
Prepaid items 8,247 992 9,239
Capital assets (not being depreciated) 94,348,716 51,698,888 146,047,604 Capital assets (net of accumulated depreciation/amortization) 128,293,287 85,994,063 214,287,350 Equity in California Domestic Water Company - 14,031,086 14,031,086 Total assets 367,751,407 191,538,899 559,290,306

DEFERRED OUTFLOWS OF RESOURCES
Deferred amount on refunding - 847,286 847,286
Pension-related 41,906,298 1,236,547 43,142,845
OPEB-related 1,801,182 336,135 2,137,317
Total deferred outflows of resources 43,707,480 2,419,968 46,127,448

LIABILITIES
Accounts payable 5,412,811 5,078,954 10,491,765
Due to other governments 1,517,014 - 1,517,014
Accrued liabilities 1,762,772 115,299 1,878,071
Accrued interest 14,720 614,261 628,981
Deposits payable 858,702 304,650 1,163,352
Unearned revenue 7,332,223 - 7,332,223
Noncurrent liabilities
Due within one year
Bonds, notes, leases, SBITA, claims, and compensated absences 5,455,690 1,973,830 7,429,520 Net OPEB liability 1,149,744 111,152 1,260,896
Due in more than one year
Net Pension Liability 153,813,029 7,759,470 161,572,499 Net OPEB Liability 16,829,372 2,910,289 19,739,661
Bonds, notes, leases, SBITA, claims and compensated absences 10,510,858 37,717,071 48,227,929 Total liabilities 204,656,935 56,584,976 261,241,911

DEFERRED INFLOWS OF RESOURCES
Pension-related 3,592,540 - 3,592,540
OPEB-related 5,319,911 619,338 5,939,249
Lease-related 5,207,862 - 5,207,862
Total deferred inflows of resources 14,120,313 619,338 14,739,651

NET POSITION
Net investment in capital assets 219,132,101 99,637,427 318,769,528 Restricted
General government 9,426,090 - 9,426,090
Public safety 5,409,975 - 5,409,975
Community development 41,365,676 - 41,365,676
Public works 7,362,536 - 7,362,536
Debt service - 3,546,535 3,546,535
Unrestricted (90,014,739) 33,570,591 (56,444,148)
Total net position $ 192,681,639 $ 136,754,553 $ 329,436,192 Primary Government
Governmental
Activities
Business-Type
Activities Total

CITY OF BREA, CALIFORNIA
Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements 46

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47 Statement of Activities
Functions/Programs
Primary government
Governmental activities
General government $ 9,926,499 $ 889,491 $ 1,264,861 $ - Public safety 80,540,696 3,201,002 2,415,704 2,500
Community development 5,782,006 3,190,648 1,915,194 238,371 Community services 11,071,303 3,076,354 950,341 -
Public works 14,899,504 385,375 1,347,775 1,128,679
Interest on long-term debt 38,743 - - -
Total governmental activities 122,258,751 10,742,870 7,893,875 1,369,550 Business-type activities
Water utility 19,479,790 22,726,227 - -
Sewer utility 1,681,230 3,883,048 - -
Urban runoff 694,518 586,250 - -
Sanitation 4,036,613 4,065,871 11,360 -
Information technology 543,209 824,287 - -
Golf course 4,155,846 5,145,808 - -
Total business-type activities 30,591,206 37,231,491 11,360 - Total primary government $ 152,849,957 $ 47,974,361 $ 7,905,235 $ 1,369,550 General revenues
General revenues
Property taxes
Transient occupancy taxes
Sales taxes
Franchise taxes
Other taxes
Rental income
Use of money and property
Other
Gain (loss) on sale of capital assets
Total general revenues
Change in net position
Net position-beginning
Restatement - change in accounting principle
Net position-beginning, as restated
Net position-ending
Program Revenues
Expenses
Charges for
Services
Operating
Contributions
and Grants
Capital
Contributions
and Grants

CITY OF BREA, CALIFORNIA
Statement of Activities
For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 48 $ (7,772,147) $ - $ (7,772,147)
(74,921,490) - (74,921,490)
(437,793) - (437,793)
(7,044,608) - (7,044,608)
(12,037,675) - (12,037,675)
(38,743) - (38,743)
(102,252,456) - (102,252,456)
- 3,246,437 3,246,437
- 2,201,818 2,201,818
- (108,268) (108,268)
- 40,618 40,618
- 281,078 281,078
- 989,962 989,962
- 6,651,645 6,651,645
(102,252,456) 6,651,645 (95,600,811)
25,241,367 - 25,241,367
2,620,969 - 2,620,969
26,338,645 - 26,338,645
3,089,030 - 3,089,030
5,817,622 - 5,817,622
3,003,790 - 3,003,790
6,518,112 1,904,400 8,422,512
10,323,383 - 10,323,383
76,655 68,514 145,169
83,029,573 1,972,914 85,002,487
(19,222,883) 8,624,559 (10,598,324)
215,584,772 128,828,332 344,413,104
(3,680,250) (698,338) (4,378,588)
211,904,522 128,129,994 340,034,516
$ 192,681,639 $ 136,754,553 $ 329,436,192
Net (Expenses) Revenues and
Changes in Net Position
Primary Government
Governmental
Activities
Business-Type
Activities Total
See accompanying Notes to the Basic Financial Statements 49

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50 Major Governmental Funds
General Fund
The General Fund is used to account for resources which are dedicated to governmental operations of the City, and not required to be accounted for in another fund.

Affordable Housing Fund
This fund is used to account for revenues received and expenditures made for the development of low to moderate income housing. The primary source of revenue is fees collected from developers.

Housing Successor Fund
The Housing Successor Fund is used to account for revenues received and expenditures made for affordable housing. The primary sources of revenue are from loan repayments generated from the use of the former Brea Redevelopment Agency’s Low- and Moderate-Income Housing Funds.

Capital Improvements Fund
The Capital Improvements Fund is used to account for the costs of constructing street improvements, parks and other public improvements not normally included within the other capital projects funds. Financing is provided by Federal and State Grant Revenues and interfund transfers from nonmajor special revenue funds and General Fund.

Nonmajor Governmental Funds
Nonmajor governmental funds are those governmental funds which do not meet the criteria of a major fund. For reporting purposes in this section, they are combined together as nonmajor governmental funds.

See accompanying Notes to the Basic Financial Statements 51 Balance Sheet
Special Revenue Funds
Capital
Projects Fund
General
Affordable
Housing
Housing
Successor
Capital
Improvements
ASSETS
Cash and investments $ 36,357,072 $ 10,510,070 $ 5,173,206 $ 8,478,066 Receivables (net of uncollectibles)
Accounts 3,677,598 - 54,477 -
Taxes 247,557 - - -
Interest 983,652 - 3,299,617 -
Notes and loans - 101,276 14,562,142 -
Leases 5,444,120 - - -
Due from other funds 1,120,450 - - -
Prepaid items 8,247 - - -
Land held for resale - - 800,000 -
Due from other governments 3,649,604 - - 749,353
Restricted assets
Cash and investments 13,988,708 - - -
Cash and investments with fiscal agent 32 - - -
Total assets $ 65,477,040 $ 10,611,346 $ 23,889,442 $ 9,227,419

LIABILITIES
Accounts payable $ 1,128,282 $ 1,270 $ 374,435 $ 3,005,671 Accrued liabilities 1,590,348 - 3,784 9,989
Unearned revenues 62,117 6,028,492 - 458,978
Deposits payable 857,785 - 917 -
Due to other governments - - - -
Due to other funds - - - -
Total liabilities 3,638,532 6,029,762 379,136 3,474,638

DEFERRED INFLOWS OF RESOURCES
Deferred amounts related to leases 5,207,862 - - -
Unavailable revenues 2,169,909 - 4,147,631 748,648
Total deferred inflows of resources 7,377,771 - 4,147,631 748,648

FUND BALANCES (DEFICITS)
Nonspendable 8,247 - - -
Restricted 13,988,740 4,581,584 19,362,675 5,004,133
Committed 1,578,689 - - -
Assigned 7,475,407 - - -
Unassigned 31,409,654 - - -
Total fund balances (deficits) 54,460,737 4,581,584 19,362,675 5,004,133 Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 65,477,040 $ 10,611,346 $ 23,889,442 $ 9,227,419

CITY OF BREA, CALIFORNIA
Balance Sheet
Governmental Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements 52 Total
Nonmajor
Funds
Total
Governmental
Funds
ASSETS
Cash and investments $ 20,927,330 $ 81,445,744
Receivables (net of uncollectibles)
Accounts 181,930 3,914,005
Taxes 29,184 276,741
Interest - 4,283,269
Notes and loans 1,517,014 16,180,432
Leases - 5,444,120
Due from other funds - 1,120,450
Prepaid items - 8,247
Land held for resale - 800,000
Due from other governments 1,637,814 6,036,771
Restricted assets
Cash and investments - 13,988,708
Cash and investments with fiscal agent - 32
Total assets $ 24,293,272 $ 133,498,519

LIABILITIES
Accounts payable $ 408,774 $ 4,918,432
Accrued liabilities 56,459 1,660,580
Unearned revenues 782,636 7,332,223
Deposits payable - 858,702
Due to other governments 1,517,014 1,517,014
Due to other funds 1,120,450 1,120,450
Total liabilities 3,885,333 17,407,401

DEFERRED INFLOWS OF RESOURCES
Deferred amounts related to leases - 5,207,862
Unavailable revenues 715,896 7,782,084
Total deferred inflows of resources 715,896 12,989,946

FUND BALANCES (DEFICITS)
Nonspendable - 8,247
Restricted 20,627,145 63,564,277
Committed - 1,578,689
Assigned - 7,475,407
Unassigned (935,102) 30,474,552
Total fund balances (deficits) 19,692,043 103,101,172
Total liabilities, deferred inflows of resources, and fund balances (deficits) $ 24,293,272 $ 133,498,519

CITY OF BREA, CALIFORNIA
Balance Sheet (Continued)
Governmental Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements 53

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54 Reconciliation of the Balance Sheet of Governmental Funds to the Government-Wide Statement of Net Position Amounts reported for governmental activities in the Statement of Net Position are different because:

Total fund balances - governmental funds $ 103,101,172
Capital assets, net of accumulated depreciation/amortization, used in governmental activities are not financial resources and, therefore, are not reported in the funds. 214,942,584
Differences between expected and actual experiences, assumption changes and net differences between projected and actual earnings, and contributions subsequent to the measurement date for the postretirement benefits (pension and OPEB) are recognized as deferred outflows of resources and deferred inflows of resources on the Statement of Net Position.

Deferred outflows-pension related $ 40,877,372
Deferred outflows-OPEB related 1,599,290
Deferred inflows-pension related (3,592,540)
Deferred inflows-OPEB related (4,930,803)
Total deferred outflows and inflows related to post-employment benefits 33,953,319 Other long-term assets that are not available to pay for current period expenditures and, therefore, are either labeled unavailable or not reported in the funds.

Long-term receivables 7,782,084
Internal service funds provide services to other funds on a costreimbursement basis. The assets, deferred outflows of resources, liabilities, and deferred inflows of resources of the internal service funds are included in governmental activities in the Statement of Activities. 6,314,732 Long-term liabilities that are not due and payable in the current period, and therefore, are not reported in the funds.

Lease revenue bonds (2,220,000)
Leases and SBITA payable (257,297)
Compensated absences (6,910,895)
Accrued interest payable on long-term debt (14,720)
Net pension liability (147,356,408)
Net OPEB liability (16,236,354)
Total long-term liabilities (172,995,674)
Governmental funds report the effect of premiums, discounts, and refundings and similar items when debt is first issued, whereas, these amounts are deferred and amortized in the Statement of Activities.

Bond premiums (416,578)
Net position of governmental activities $ 192,681,639

CITY OF BREA, CALIFORNIA
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements 55 Statement of Revenues, Expenditures and Changes in Fund Balances Special Revenue Funds
Capital
Projects Fund
General
Affordable
Housing
Housing
Successor
Capital
Improvements

REVENUES
Taxes $ 54,251,895 $ - $ - $ -
Licenses and permits 393,256 - - -
Intergovernmental 16,864,156 - - 1,227,635
Charges for services 6,498,550 - - 307,687
Investment income, net 3,640,643 566,690 298,438 411,471 Fines and forfeitures 323,014 - - -
Rental income 3,003,790 - - -
Other revenues 2,835,238 155,345 126,226 -
Total revenues 87,810,542 722,035 424,664 1,946,793

EXPENDITURES
Current
General government 8,797,691 24,740 12,638 86,925
Public safety 50,908,623 - - -
Community services 10,079,172 - - -
Community development 3,289,247 15,240 630,425 -
Public works 7,577,676 - - 493,231
Capital outlay 1,025,597 - - 10,866,620
Debt service
Principal 144,239 - - -
Interest and fiscal charges 94,636 - - -
Total expenditures 81,916,881 39,980 643,063 11,446,776 Excess (deficiency) of revenues
over (under) expenditures 5,893,661 682,055 (218,399) (9,499,983)

OTHER FINANCING SOURCES (USES)
Transfers in 600,000 - - 8,493,963
Transfers out (7,315,226) - - -
Proceeds from sale of capital assets 88,838 - - -
Leases and SBITAs issuance proceeds 231,951 - - -
Total other financing sources (uses) (6,394,437) - - 8,493,963 Net change in fund balances (500,776) 682,055 (218,399) (1,006,020) Fund balances-beginning 54,961,513 3,899,529 19,581,074 6,010,153 Fund balances (deficit)-ending $ 54,460,737 $ 4,581,584 $ 19,362,675 $ 5,004,133

CITY OF BREA, CALIFORNIA
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 56 Total
Nonmajor
Funds
Total
Governmental
Funds

REVENUES
Taxes $ 3,038,116 $ 57,290,011
Licenses and permits - 393,256
Intergovernmental 4,150,600 22,242,391
Charges for services - 6,806,237
Investment income, net 920,241 5,837,483
Fines and forfeitures - 323,014
Rental income - 3,003,790
Other revenues 2,987,228 6,104,037
Total revenues 11,096,185 102,000,219

EXPENDITURES
Current
General government 330,075 9,252,069
Public safety 1,853,965 52,762,588
Community services 129,140 10,208,312
Community development 1,133,079 5,067,991
Public works 1,310,654 9,381,561
Capital outlay 602,114 12,494,331
Debt service
Principal - 144,239
Interest and fiscal charges - 94,636
Total expenditures 5,359,027 99,405,727
Excess (deficiency) of revenues
over (under) expenditures 5,737,158 2,594,492

OTHER FINANCING SOURCES (USES)
Transfers in 56,000 9,149,963
Transfers out (1,684,737) (8,999,963)
Proceeds from sale of capital assets - 88,838
Leases and SBITAs issuance proceeds - 231,951
Total other financing sources (uses) (1,628,737) 470,789 Net change in fund balances 4,108,421 3,065,281
Fund balances-beginning 15,583,622 100,035,891
Fund balances (deficit)-ending $ 19,692,043 $ 103,101,172

CITY OF BREA, CALIFORNIA
Statement of Revenues, Expenditures and Changes in Fund Balances (Continued) For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 57 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Amounts reported for governmental activities in the Statement of Activities are different because:

Net change in fund balances - total governmental funds: $ 3,065,281 Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation/amortization expense. This is the amount by which capital outlays exceeded depreciation/amortization expense in the current period.

Capital outlay $ 12,426,121
Depreciation/amortization expense (7,584,098)
Total adjustment 4,842,023
Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.

Earned but unavailable grant revenues 285,255
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to increase/(decrease) net position.

Loss/(gain) on disposal of capital assets 3,583
Bond and other debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position.

Repayment of bond and other debt principal is an expenditure in the governmental funds, but repayment reduces long-term liabilities in the Statement of Net Position.

Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities.

Leases and subscriptions issued (231,951)
Lease and subscription payments 144,239
Amortization of bond premiums and discounts 47,658
Total adjustment (40,054)
Internal service funds provide services to other funds on a cost-reimbursement basis.

The net revenue of certain activities of internal service funds is reported with governmental activities. (1,433,639)
Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.

Accrued interest on long-term debt 12,359
Compensated absences (455,875)
Changes in pension liabilities and related deferred outflows and inflows of resources (26,266,280) Changes in OPEB liabilities and related deferred outflows and inflows of resources 764,464 Total adjustment (25,945,332)
Change in net position of governmental activities $ (19,222,883)

CITY OF BREA, CALIFORNIA
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities
For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 58 Proprietary Fund Financial Statements
59 Major Enterprise Funds
Water Utility Fund
The Water Utility Fund is a major fund used to account for the operations of the City’s water utility, which are operated in a manner similar to a private enterprise. The costs (expenses, including depreciation) of providing these services to the general public on a continuing basis are financed or recovered primarily through user charges.

Sewer Utility Fund
The Sewer Utility Fund is a major fund used to account for the operations of the City’s sewer distribution lines, which are operated in a manner similar to a private enterprise. The costs (expenses, including depreciation) of providing these services to the general public on a continuing basis are financed or recovered primarily through user charges.

Nonmajor Enterprise Funds
Nonmajor enterprise funds are those enterprise funds which do not meet the criteria of a major fund. For reporting purposes in this section, they are combined together as nonmajor enterprise funds.

Governmental Activities
Internal Services Funds
The Internal Services Funds are used to allocate the cost of providing goods and services by one department to another department on a cost reimbursement basis.

See accompanying Notes to the Basic Financial Statements 60

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61 Statement of Net Position
ASSETS
Current assets
Cash and investments $ 16,815,487 $ 8,758,178 $ 6,737,604 $ 32,311,269 $ 12,081,972 Receivables (net of uncollectibles)
Accounts 3,287,046 420,009 753,185 4,460,240 110,311
Due from other governments - - 30,320 30,320 4,558
Prepaid expenses - - 992 992 -
Restricted
Cash and investments 618,712 226,516 387,018 1,232,246 - Cash and investments with fiscal agent 2,314,289 - - 2,314,289 - Total current assets 23,035,534 9,404,703 7,909,119 40,349,356 12,196,841 Noncurrent
Capital assets, net of depreciation and amortization 107,907,244 19,424,626 10,361,081 137,692,951 7,699,419 Equity in California Domestic Water Company (CDWC) 14,031,086 - - 14,031,086 - Total noncurrent assets 121,938,330 19,424,626 10,361,081 151,724,037 7,699,419 Total assets 144,973,864 28,829,329 18,270,200 192,073,393 19,896,260

DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on refunding 847,286 - - 847,286 -
Deferred pension related items 661,035 156,574 418,938 1,236,547 1,028,926 Deferred OPEB related items 156,723 54,431 124,981 336,135 201,892 Total deferred outflows of resources 1,665,044 211,005 543,919 2,419,968 1,230,818

LIABILITIES
Current liabilities
Accounts payable 3,870,085 171,599 1,037,270 5,078,954 494,379 Accrued liabilities 64,139 16,617 34,543 115,299 102,192 Accrued interest 614,261 - - 614,261 -
Deposits payable 304,650 - - 304,650 -
Claims and judgments, due within one year - - - - 2,070,685 Compensated absences, due within one year 195,358 32,427 46,045 273,830 136,727 Bonds, notes, leases, and SBITAs, due within one year 1,700,000 - - 1,700,000 31,605 Net OPEB Liability, due within one year 55,079 22,389 33,684 111,152 86,628 Total current liabilities 6,803,572 243,032 1,151,542 8,198,146 2,922,216 Noncurrent liabilities
Claims and judgments, due in more than one year - - - - 3,618,009 Compensated absences, due in more than one year 371,902 75,098 67,261 514,261 235,776 Bonds, notes, leases, and SBITAs, due in more than one year 37,202,810 - - 37,202,810 68,976 Net pension liability 4,148,070 982,519 2,628,881 7,759,470 6,456,621 Net OPEB liability 1,175,960 417,222 1,317,107 2,910,289 1,656,134 Total noncurrent liabilities 42,898,742 1,474,839 4,013,249 48,386,830 12,035,516 Total liabilities 49,702,314 1,717,871 5,164,791 56,584,976 14,957,732

DEFERRED INFLOWS OF RESOURCES
Deferred OPEB related items 282,386 107,457 229,495 619,338 389,108 Total deferred inflows of resources 282,386 107,457 229,495 619,338 389,108

NET POSITION
Net investment in capital assets 69,851,720 19,424,626 10,361,081 99,637,427 7,598,838 Restricted for debt service 2,933,001 226,516 387,018 3,546,535 - Unrestricted 23,869,487 7,563,864 2,671,734 34,105,085 (1,818,600) Total net position $ 96,654,208 $ 27,215,006 $ 13,419,833 137,289,047 $ 5,780,238 Adjustment to report the cumulative internal balance for the net effect of the activity between the internal service funds and the enterprise funds over time (534,494)
Net position of business-type activities $ 136,754,553
Business-Type Activities
Governmental
Activities
Water Utility Sewer Utility
Nonmajor
Enterprise
Funds
Total
Enterprise
Funds
Internal
Service Funds

CITY OF BREA, CALIFORNIA
Statement of Net Position
Proprietary Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements 62 Statement of Revenues, Expenses and Changes in Net Position Connection fees 137,875 31,946 - 169,821 -
Fines and forfeitures 300,133 58,440 86,263 444,836 -
Other revenues 127,902 878 99,389 228,169 57,196
Total operating revenues 22,726,227 3,883,048 10,622,216 37,231,491 12,183,929

OPERATING EXPENSES
Personnel services 2,294,646 11,216 1,391,975 3,697,837 3,783,226 Maintenance and operations 4,817,516 1,051,826 7,912,733 13,782,075 6,624,246 Cost of purchased water 8,317,133 - - 8,317,133 -
Claims and judgments - - - - 2,801,446
Depreciation and amortization 3,034,822 566,061 90,093 3,690,976 1,052,284 Total operating expenses 18,464,117 1,629,103 9,394,801 29,488,021 14,261,202 Operating income (loss) 4,262,110 2,253,945 1,227,415 7,743,470 (2,077,273)

NONOPERATING REVENUES (EXPENSES)
Intergovernmental revenues - - 11,360 11,360 -
Interest income 1,003,504 496,915 403,981 1,904,400 674,854 Interest expense (1,085,985) - (205) (1,086,190) (4,124) Change in equity in CDWC 76,079 - - 76,079 -
Gain on disposal of capital assets 68,514 - 9,000 77,514 12,973 Total nonoperating revenues (expenses) 62,112 496,915 424,136 983,163 683,703 Income (loss) before capital contributions and transfers 4,324,222 2,750,860 1,651,551 8,726,633 (1,393,570) Transfers out - - - - (150,000)
Change in net position 4,324,222 2,750,860 1,651,551 8,726,633 (1,543,570) Net position-beginning 92,723,218 24,622,178 11,915,356 7,573,390 Restatement - change in accounting principle (393,232) (158,032) (147,074) (249,582) Net position-beginning, as restated 92,329,986 24,464,146 11,768,282 7,323,808 Net position-ending $ 96,654,208 $ 27,215,006 $ 13,419,833 $ 5,780,238 Adjustment for the net effect of the current year activity between the internal service funds and the enterprise funds (102,074) Changes in net position of business-type activities $ 8,624,559 Business-Type Activities
Governmental
Activities
Water Utility Sewer Utility
Nonmajor
Enterprise
Funds
Total
Enterprise
Funds
Internal
Service Funds

OPERATING REVENUES
Charges for services $ 22,160,317 $ 3,791,784 $ 10,436,564 $ 36,388,665 $ 12,126,733

CITY OF BREA, CALIFORNIA
Statement of Revenues, Expenses and Changes in Net Position Proprietary Funds
For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 63 Statement of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 22,536,625 $ 3,918,014 $ 10,507,930 $ 36,962,569 $ 12,277,532 Payments to suppliers and service providers (12,713,848) (909,003) (7,848,187) (21,471,038) (8,307,640) Payments to employees for salaries and benefits (2,446,292) (666,712) (1,737,555) (4,850,559) (3,624,981) Net cash provided by (used for)
operating activities 7,376,485 2,342,299 922,188 10,640,972 344,911

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES
Transfers to other funds - - - - (150,000)
Operating grants and contributions - - 150,023 150,023 - Net cash provided by (used for) noncapital financing
activities - - 150,023 150,023 (150,000)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition and construction of capital assets (2,164,497) (485,798) (333,197) (2,983,492) (1,266,406) Principal paid on capital debt (1,615,000) - (7,381) (1,622,381) (53,725) Interest paid on capital debt (1,264,302) - (205) (1,264,507) (4,124) Proceeds from sales of assets 83,514 - 9,000 92,514 38,457 Net cash provided by (used for) capital and related
financing activities (4,960,285) (485,798) (331,783) (5,777,866) (1,285,798)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 1,003,516 496,915 403,981 1,904,412 659,776 Purchase of investments - - (992) (992) -
Net cash provided by (used for) investing activities 1,003,516 496,915 402,989 1,903,420 659,776 Net increase (decrease) in cash and cash
equivalents 3,419,716 2,353,416 1,143,417 6,916,549 (431,111) Cash and cash equivalents-beginning 16,328,772 6,631,278 5,981,205 28,941,255 12,513,083 Cash and cash equivalents-ending $ 19,748,488 $ 8,984,694 $ 7,124,622 $ 35,857,804 $ 12,081,972 Business-Type Activities
Governmental
Activities
Water Utility Sewer Utility
Nonmajor
Enterprise
Funds Totals
Internal
Service Funds

CITY OF BREA, CALIFORNIA
Statement of Cash Flows
Proprietary Funds
For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 64

RECONCILIATION OF CASH AND CASH

EQUIVALENTS TO THE STATEMENT OF NET

POSITION
Cash and investments $ 16,815,487 $ 8,758,178 $ 6,737,604 $ 32,311,269 $ 12,081,972 Restricted cash and investments 618,712 226,516 387,018 1,232,246 - Cash and investments with fiscal agent 2,314,289 - - 2,314,289 - Total cash and cash equivalents $ 19,748,488 $ 8,984,694 $ 7,124,622 $ 35,857,804 $ 12,081,972

RECONCILIATION OF OPERATING INCOME (LOSS)

TO NET CASH PROVIDED BY (USED FOR)

OPERATING ACTIVITIES
Operating income (loss) $ 4,262,110 $ 2,253,945 $ 1,227,415 $ 7,743,470 $ (2,077,273) Adjustments to reconcile operating income (loss) to
net cash provided by (used for) operating activities
Depreciation/amortization expense 3,034,822 566,061 90,093 3,690,976 1,052,284 (Increase) decrease in accounts receivable (204,839) 34,966 (114,286) (284,159) 93,603 (Increase) decrease in prepaid items - - - - 4,620
Increase (decrease) in accounts payable 420,801 142,823 64,546 628,170 247,690 Increase (decrease) in accrued liabilities 6,153 (7,925) (3,641) (5,413) 11,999 Increase (decrease) in deposits payable 15,237 - - 15,237 - Increase (decrease) in compensated absences 13,810 (109,637) (126,847) (222,674) 3,593 Increase (decrease) in claims and judgments - - - - 865,742 Increase (decrease) in net pension liability (131,305) (521,552) (190,370) (843,227) 206,037 Increase (decrease) in net OPEB liability (40,304) (16,382) (24,722) (81,408) (63,384) Total adjustments 3,114,375 88,354 (305,227) 2,897,502 2,422,184 Net cash provided by (used for) operating activities $ 7,376,485 $ 2,342,299 $ 922,188 $ 10,640,972 $ 344,911

SCHEDULE OF NON-CASH NONCAPITAL,

CAPITAL, AND INVESTING ACTIVITIES
Acquisition of subscription assets $ - $ - $ - $ - $ 162,166 Loss on disposal of assets - - - - 16,866
Amortization on bond discount/(premium) - (203,057) - (203,057) - Business-Type Activities
Governmental
Activities
Water Utility Sewer Utility
Nonmajor
Enterprise
Funds Totals
Internal
Service Funds

CITY OF BREA, CALIFORNIA
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 65 Fiduciary Fund Financial Statements
66 Private Purpose Trust Fund
Private Purpose Trust Fund, a type of fiduciary fund, is used to account for assets held by the City as Successor Agency of the former Brea Redevelopment Agency.

Custodial Funds
Custodial Funds, a type of fiduciary fund, are used to account for assets held by the City as an agent for other governmental entities, private organizations, or individuals. 67 Statement of Fiduciary Net Position
Private
Purpose
Trust Fund
Successor
Agency of the
Former RDA
Custodial
Funds
ASSETS
Cash and investments $ 1,136,317 $ 8,495,297
Receivables
Accounts 942,965 4,000
Property taxes - 7,517
Accrued interest 4,266 49,599
Due from other governments - 52,045
Restricted assets
Cash and investments with fiscal agent 12,292,217 703,994 Capital assets (net of accumulated depreciation) - 361,395 Total assets 14,375,765 9,673,847

DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on refunding 1,764,657 -
Total deferred outflows of resources 1,764,657 -

LIABILITIES
Accounts payable - 446,132
Accrued liabilities - 7,997
Accrued interest 1,091,444 -
Unearned revenue - 185,217
Due to other governments - 31,877
Long-term liabilities
Due in one year 10,795,000 -
Due in more than one year 66,959,857 -
Total liabilities 78,846,301 671,223

NET POSITION
Restricted for
Individuals, organizations, and other governments - 9,002,624 Unrestricted (62,705,879) -
Total net position (deficit) $ (62,705,879) $ 9,002,624

CITY OF BREA, CALIFORNIA
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements 68 Statement of Changes in Fiduciary Net Position
Private
Purpose
Trust Fund
Successor
Agency of the
Former RDA
Custodial
Funds

ADDITIONS
Contributions
Taxes and special assessments $ 13,488,452 $ 976,877
Employee or member contributions - 2,003,784
Interest and changes in fair value of investments 311,268 506,378 Miscellaneous 516,966 1,181,545
Total additions 14,316,686 4,668,584

DEDUCTIONS
Administrative expenses - 7,172,790
Contractual services 12,685 -
Interest expense 2,915,633 336,869
Debt service payments for Community Facilities Districts - 550,000 Transfer of funds to the City of Whittier - 40,644
Total deductions 2,928,318 8,100,303
Net increase (decrease) in fiduciary net position 11,388,368 (3,431,719) Net position (deficit)-beginning (74,094,247) 12,434,343 Net position (deficit)-ending $ (62,705,879) $ 9,002,624

CITY OF BREA, CALIFORNIA
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For The Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 69

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70 Notes to the Basic Financial Statements
71 The financial statements of the City of Brea, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting policies of the City of Brea are described below.

A. Description of the Reporting Entity
The City of Brea was incorporated on February 23, 1917, under the general laws of the State of California. The City operates under the Council-Manager form of government and provides the following services: public safety (police and fire), highways and streets, cultural recreation, public improvements, planning and zoning, and general administrative services.

The accounting policies of the City conform to accounting principles generally accepted in the United States of America as applicable to governments.

As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Brea and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization, or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable for an organization if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of its relationship with the City are such that its exclusion would cause the City's financial statements to be misleading or incomplete.

Based upon the above criteria, the component units of the City are the Brea Public Financing Authority, the Brea Community Benefit Financing Authority, and the Midbury Assessment Authority.

Since City Council serves as the governing board for these component units, all of the City's component units are considered to be blended component units. Blended component units, although legally separate entities, are in substance, part of the City's operations, so data from these units is combined therein. A brief description of each component unit follows:

Brea Public Financing Authority
The Brea Public Financing Authority (“Authority”) was created by a joint exercise of powers agreement between the City of Brea and the former Redevelopment Agency of the City of Brea on November 17, 1987. In April 1988, the Brea-Olinda Unified School District became an associate member of the Authority. The purpose of the Brea Public Financing Authority is to provide, through the issuance of debt, financing necessary for various capital improvements. The Brea Public Financing Authority is administered by the Board who are the members of the City Council and the Mayor. The Brea Public Financing Authority's primary source of income is installment sale and lease payments received from the City, which will be used to meet the debt service requirements on debt issues. The Brea Public Financing Authority does not have taxing power. Separate financial statements are not prepared for the Brea Public Financing Authority. The activities of the Brea Public Financing Authority are accounted for in the Water Utility Fund.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
72 Brea Community Benefit Financing Authority
The Brea Community Benefit Financing Authority was created by a joint exercise of powers agreement between the City of Brea and the Industrial Development Authority of the City of Brea on July 22, 2014. The purpose of the Brea Community Benefit Financing Authority is to provide, though the issuance of debt, financing for various capital improvements. The Brea Community Benefit Financing Authority is administered by the Board who are the members of the City Council and the Mayor. The Brea Community Benefit Financing Authority’s primary source of income is installment sale payments from the City, which will be used to meet the debt service requirements on debt issues. Separate financial statements are not prepared for the Brea Community Benefit Financing Authority.

Midbury Assessment Authority
The Midbury Assessment Authority (“Authority”) was created by a joint exercise of powers agreement between the City of Brea, Los Angeles County, and Orange County on May 18, 1999. The purpose of the authority is to provide a means for each party to the agreement to contribute money to street improvement projects, to form an assessment district and to levy an assessment to finance the balance of the projects. The Authority is administered by the Board who are the members of the City Council and the Mayor. The Authority’s primary source of income is from new assessments that result in additional taxes. Separate financial statements are not prepared for the Midbury Assessment Authority. There were no activities recorded for the Midbury Assessment Authority during the fiscal year as the project has been completed and is in the dissolution process.

B. Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Fiduciary activities of the City are not included in these statements.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

The fund financial statements provide information about the government’s funds, including its fiduciary funds and blended component units. Separate statements for each fund category – governmental, proprietary, and fiduciary are presented.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 73 Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, with the exception of sales tax revenues and certain revenues related to refuse revenue sharing which are considered available if collected within 90 days of year end. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.

The City’s fiduciary funds consist of custodial funds and a private purpose trust fund. Custodial funds are used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private purpose trust funds. Private purpose trust funds and custodial funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting.

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.

The City reports the following major governmental funds:
• The General Fund is the City's primary operating fund. It accounts for all general revenues of the City not specifically levied or collected for other City funds and for expenditures related to the rendering of general services by the City. The General Fund is used to account for all resources not required to be accounted for in another fund.
• The Affordable Housing Fund is used to account for revenues received and expenditures made for the development of low to moderate income housing. The primary source of revenue is fees collected from developers.
• The Housing Successor Fund accounts for the housing assets as a result of the dissolution of the former Brea Redevelopment Agency. Resources generated from these assets are to be used for low to moderate income housing purposes. The primary sources of revenue are from loan repayments generated from the use of the former Brea Redevelopment Agency’s Low and Moderate Income Housing Funds. • The Capital Improvements Capital Projects Fund accounts for the costs of constructing street improvements, parks and other public improvements not normally included within the other Capital Projects Funds. Financing is provided by federal, state and county grant revenues and interfund transfers from the General Fund and special revenue funds.

The City reports the following major proprietary funds:
• The Water Utility Fund accounts for the City’s water utility operations, which are financed and operated in a manner similar to a private enterprise. The cost (expenses, including depreciation) of providing these services to the users on a continuing basis is financed or recovered primarily through user charges. • The Sewer Utility Fund accounts for the operations of the City’s sewer distribution lines, which are operated in a manner similar to a private enterprise. The costs (expenses, including depreciation) of providing these services to the users on a continuing basis are financed or recovered primarily through user charges.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 74 Additionally, the City reports the following fund types:
• Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted or committed to expenditures for specified purposes. • Capital Projects Funds are used to account for financial resources used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). • Internal Service Funds account for financial transactions related to repairs, replacement, and maintenance of City-owned buildings and vehicles and to account for the City's self-insurance programs and operations of the internal information technology services program. These services are provided to other departments or agencies of the City on a cost reimbursement basis.
• Custodial Funds account for assets held by the City in a custodial capacity as a trustee or as a custodian.

These assets include deposits from assessment district’s property owners. • Private-Purpose Trust Fund accounts for the assets, deferred outflows or resources, and liabilities of the former redevelopment agency and the allocated revenue to pay estimated installment payments of enforceable obligations until the obligations of the former redevelopment agency are paid in full and assets have been liquidated.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government’s proprietary funds' function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Residual net position balances in internal service funds are allocated back to the governmental and enterprise funds that they originally charged.

Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations.

The principal operating revenues of the enterprise funds and of the internal service funds are charges to customers for sales and services. Operating expenses for proprietary funds and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, Net Position, and Fund Balances Cash and Investments
Cash includes demand deposits, certificates of deposits and savings account balances. The California Government Code and the City of Brea's investment policy permit the City of Brea to invest in various instruments and pools. Investments are reported in the accompanying balance sheet at fair value, except for investments that are reported at cost because they are not transferable, and they have terms that are not affected by changes in market interest rates.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 75 The City reports its investments at fair value in the balance sheet. Interest earnings, realized gains and losses and, changes in the fair value of investments are recognized as revenue from the use of money and property in the operating statement. Highly liquid money market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are reported at fair value. Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

The City pools cash and investments of all funds except for assets held by fiscal agents. Each fund's share in this pool is displayed in the accompanying financial statements as cash and investments. Investment income earned by the pooled investments is allocated to the various funds based on each fund's average cash and investment balance.

The City applies GASB Statement No. 72, Fair Value Measurements and Application for determining fair value measurements, applying fair value to investments, and disclosures related to the fair value hierarchy. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

For purposes of the statement of cash flows, cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near its maturity that they present insignificant risk of changes in value because of changes in interest rates. Cash equivalents also represent the proprietary funds' share in the cash and investment pool of the City of Brea. Cash equivalents have an original maturity date of three months or less from the date of purchase. For financial statement presentation purposes, cash and cash equivalents are shown as both restricted and unrestricted cash.

Restricted Cash and Investments
Certain proceeds of debt issues, as well as certain resources set aside for its repayment, are classified as restricted assets on the balance sheet because its use is limited by applicable bond covenants.

Additionally, the City has established participation in both the Public Agency Retirement Services (PARS) PostEmployment Benefits Trust Program and the Post-Retirement Health Care Trust Program as tax-exempt trusts within the meaning of Section 115 of the IRS Code. The balances and activities of the Trusts are irrevocably dedicated to funding future obligations to CalPERS and OPEB liabilities. The assets will benefit the City through reduced future cash flow demands on the City's General fund resources and continue to be assets of the City.

These amounts are reflected as restricted cash and investments.

Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are 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 non-current 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."
The amounts recorded as a receivable due from other governments include sales taxes, property taxes and grant revenues collected or provided by federal, state, county and city governments and unremitted to the City as of June 30, 2025. The County of Orange assesses, bills, and collects property taxes for the City.

Lease receivables are recorded by the City as the present value of future lease payments expected to be received from the lessee during the lease term, reduced by any provision for estimated uncollectible amounts. Lease receivables are subsequently reduced over the life of the lease as cash is received in the applicable reporting period. The present value of future lease payments to be received are discounted based on the interest rate the City charges the lessee.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 76 Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide, fund financial statements and the business-type activities via the consumption method.

Land Held for Resale
The former Brea Redevelopment Agency acquired land that was primarily used to develop blighted properties.

However, the land was transferred to the City. The City records these parcels as land held for resale in its financial statements. The property is being carried at cost or, if lower, the estimated net realizable value upon entering into an agreement to sell the property. The City disposed of all these parcels as required by the Dissolution Act. The City as the Housing Successor to the Brea Redevelopment Agency (Housing Successor) acquired one of these parcels from the Successor Agency.

Capital Assets
Capital assets, which include property, plant, equipment, right to use leased assets, right to use subscription assets, intangible assets, and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets and infrastructure are defined by the City as assets with an initial, individual cost of more than $10,000 and $100,000, respectively and an estimated useful life in excess of four years. Except for right to use lease assets, such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation.

Right to use leased assets are recognized at the lease commencement date and represent the City’s right to use an underlying asset for the lease term. Right to use leased assets are measured at the initial value of the lease liability plus any payments made to the lessor before commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term, plus any initial direct costs necessary to place the lease asset into service. Right to use leased assets are amortized over the shorter of the lease term or useful life of the underlying asset using the straight-line method.

Right to use subscription IT assets (SBITA) are recognized at the subscription commencement date and represent the City's right to use the underlying IT asset for the subscription term. Right to use subscription IT assets are measured at the initial value of the subscription liability plus any payments made to the vendor at the commencement of the subscription term, less any subscription incentives received from the vendor at or before the commencement of the subscription term, plus any capitalizable initial implementation costs necessary to place the subscription asset into service. Right to use subscription IT assets are amortized over the shorter of the subscription term or useful life of the underlying asset using the straight-line method. The amortization period varies from 3 to 5 years.

The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend assets lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 77 Land and construction in progress are not depreciated. Property, plant and equipment of the primary government and its component units are depreciated using the straight-line method over the following estimated useful lives:

Asset Years
Buildings and improvements 40 - 50
Computers 4 - 5
Equipment 4 - 10
Improvements 10 - 50
Infrastructure 40 - 50
Software 5 - 10
Vehicles 4 - 10
The City classifies certain water rights as intangible assets with an indefinite useful life as there are no legal, contractual, or other factors that limit the benefits associated with the water rights.

Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position reports a separate section for deferred outflows of resources. Deferred outflows of resources represent a consumption of net assets that applies to future periods and so will not be recognized as an outflow of resources (expense/ expenditure) until then. The City has three items that qualify for reporting in this category. One is deferred charges on refunding reported in the governmentwide statement of net position and the proprietary funds statement of net position. Deferred charges on refunding results from the difference in the carrying value of refunded debt and its reacquisition price at the time of refunding. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt.

The other items are deferred pension and OPEB related items reported in the government-wide statement of net position and the proprietary funds statement of net position.

In addition to liabilities, the balance sheet or statement of net position reports a separate section for deferred inflows of resources. Deferred inflows of resources represent an acquisition of net assets that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time. The City reports four items as deferred inflows of resources. First, unavailable revenues arise only under a modified accrual basis of accounting, and accordingly, is reported only in the governmental funds balance sheet. These amounts reflect resources that have been earned but not received within the period of availability. Therefore, this does not provide an available financial resource in the current period, and the recognition is deferred until these criteria have been met, as unavailable revenues. The second and third items are deferred pension and OPEB related items reported in the government-wide statement of net position and the proprietary funds statements of net position. The fourth item is related to deferred inflows related to lease receivables. The revenues associated with the deferred inflows of resources are recognized systematically over the term of the lease.

Compensated Absences
The City recognizes a liability for compensated absences for leave time that (1) has been earned for services previously rendered by employees, (2) accumulates and is allowed to be carried over to subsequent years, and (3) is more likely than not to be used as time off or settled (for example paid in cash to the employee) during or upon separation from employment. Based on the criteria listed, two types of leave qualify for liability recognition for compensated absences – vacation and sick leave. The liability for compensated absences is reported as incurred in the financial statements. The liability for compensated absences includes salary-related benefits, where applicable.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 78 Vacation
Permanent City employees earn from 10 to 20 vacation days a year, depending upon their length of employment.

The City’s policy permits employees to accumulate earned but unused vacation benefits, which are eligible for payment at the employee’s current pay rate upon separation from employment.

Sick Leave
Permanent City employees earn 12 sick days a year. The City’s policy permits employees to accumulate earned but unused sick leave. Any unused sick leave is forfeited; converted to CalPERS service credits; or for certain employees, transferred to a retiree health savings account upon termination of employment. A liability for estimated value of sick leave that will be used by employees as time off is included in the liability for compensated absences.

Long-Term Obligations
In the government-wide financial statements, proprietary fund financial statements, and in the fiduciary funds financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, proprietary fund type statement of net position, or the statement of fiduciary net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

Lease liabilities represent the City’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments expected to be made during the lease term. The present value of lease payments is discounted based on a borrowing rate determined by the City.

Subscription liabilities represent the City's obligation to make subscription payments arising from the subscription contract. Subscription liabilities are recognized at the subscription commencement date based on the present value of future subscription payments expected to be made during the subscription term. The present value of subscription payments is discounted based on a borrowing rate determined by the City.

In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Debt service expenditures including principal and interest payments are reported as expenditures.

Claims and Judgments
The City records a liability for litigation, judgments and claims when it is probable that an asset has been impaired or a liability has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. This liability is recorded in the Internal Service Funds that account for the City's selfinsurance activities.

Other Postemployment Benefits (OPEB)
OPEB expense, deferred outflows/inflows of resources related to OPEB, and an implied subsidy payment were used to measure the net OPEB liability. The City does not provide any cash subsidy towards the benefit. The value of the trust as of the June 30, 2025 fiscal year end was $426,016. The General Fund is used to liquidate the governmental fund OPEB liability.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 79 Net Pension Liability
For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. CalPERS audited financial statements are publicly available reports that can be obtained at CalPERS’ website. The General Fund is used to liquidate the governmental fund net pension liability.

Fund Balances
In the governmental fund financial statements, fund balances are classified as follows:

Nonspendable Fund Balance – This amount indicates the portion of funds balances which cannot be spent because they are either not in spendable form such as prepaid items, inventories, land held for resale or loans/ notes receivable, or legally or contractually required to be maintained intact, such as the principal portion of an endowment. Only the General Fund may report nonspendable fund balance for lease receivables and land held for resale.

Restricted Fund Balance – This amount indicates the portion of fund balances which has been restricted in one of two ways a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or b) imposed by law through constitutional provisions or enabling legislation.

Long-term interfund receivables and land held for resale in governmental funds other than the General Fund are included within restricted fund balance.

Committed Fund Balance – This amount indicates the portion of fund balances which can only be used for specific purposes pursuant to a formal resolution of the City Council.

Assigned Fund Balance – This amount indicates the portion of fund balances which is constrained by the City’s intent to be used for specific purpose, but is neither restricted nor committed. The Administrative Services Director is authorized to determine and define the amount of assigned fund balances, which was established by City Council through resolution.

Unassigned Fund Balance – This includes the excess residual amounts in the General Fund and the residual deficit of all other governmental funds which have not been restricted, committed, or assigned to specific purposes.

The City Council, as the City's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to the adoption of a resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the adoption of another resolution.

City Council action to commit fund balance needs to occur within the fiscal reporting period; however, the amount can be determined subsequently. Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 80 Net Position
In the governmental-wide and proprietary fund financial statements, net position is classified as follows:

Net Investment in Capital Assets – This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the assets.

Restricted Net Position – This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments. As of June 30, 2025, $65,300,921 of net position is restricted by enabling legislation.

Unrestricted Net Position – This amount is the remaining net position that does not meet the definition of “net investment in capital assets” or “restricted net position.” Sometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

E. Property Taxes
Property tax revenue is recognized on the modified accrual basis that is, in the fiscal year for which the taxes have been levied, providing they become available. Available means when due, or past due and receivable within the current period and collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period. The County of Orange collects property taxes for the City. Tax liens attach annually on the first day in January the preceding fiscal year for which the taxes are levied. Taxes are levied on both real and personal property, as it exists on that date. The tax levy covers the fiscal period July 1 to June 30. All secured personal property taxes and one-half of the taxes on real property are due November 1; the second installment is due February 1. All taxes are delinquent, if unpaid, on December 10 and April 10, respectively. Unsecured personal property taxes become due on the first of March each year and are delinquent, if unpaid, on August 31.

F. New GASB Pronouncements Effective during Fiscal Year The following Government Accounting Standards Board (GASB) pronouncement was effective for and implemented for the fiscal year ended June 30, 2025:

GASB Statement No. 101, Compensated Absences
The requirements of this Statement will improve financial reporting by implementing a unified recognition and measurement model that will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. Establishing the unified model will result in consistent application to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave. This Statement will also result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 81 GASB Statement No. 102, Certain Risk Disclosures
The requirements of this Statement will improve financial reporting by providing users of financial statements with essential information that currently is not often provided. The disclosures will provide users with timely information regarding certain concentrations or constraints and related events that have occurred or have begun to occur that make a government vulnerable to a substantial impact. As a result, users will have better information with which to understand and anticipate certain risks to a government’s financial condition.

Management has assessed the impact of this Statement on the City's financial statements and determined that it did not have a material impact.

G. New GASB Pronoucements Effective in Future Fiscal Years GASB Statement No. 103, Financial Reporting Model Improvements The requirements of this Statement will improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability.

The Statement requires that the information presented in MD&A be limited to the related topics discussed in five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long-Term Financing Activity, and (5) Currently Known Facts, Decisions, or Conditions.

This Statement describes unusual or infrequent items as transactions and other events that are either unusual in nature or infrequent in occurrence. Furthermore, governments are required to display the inflows and outflows related to each unusual or infrequent item separately as the last presented flow(s) of resources prior to the net change in resource flows in the government-wide, governmental fund, and proprietary fund statements of resource flows.

This Statement also requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses. Operating revenues and expenses are defined as revenues and expenses other than nonoperating revenues and expenses.

Nonoperating revenues and expenses are defined as (1) subsidies received and provided, (2) contributions to permanent and term endowments, (3) revenues and expenses related to financing, (4) resources from the disposal of capital assets and inventory, and (5) investment income and expenses. In addition to the subtotals currently required in a proprietary fund statement of revenues, expenses, and changes in fund net position, this Statement requires that a subtotal for operating income (loss) and noncapital subsidies be presented before reporting other nonoperating revenues and expenses.

This Statement requires governments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. If the readability of those statements would be reduced, combining statements of major component units should be presented after the fund financial statements.

This Statement requires governments to present budgetary comparison information using a single method of communication—RSI. Governments also are required to present (1) variances between original and final budget amounts and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in notes to RSI.

The requirements of this Statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 82 GASB Statement No. 104, Disclosure of Certain Capital Assets The requirements of this statement will provide users of government financial statements with essential information about certain types of capital assets. This Statement requires certain types of capital assets to be disclosed separately in the capital assets note disclosures required by Statement 34. Lease assets recognized in accordance with Statement No. 87, Leases, and intangible right-to-use assets recognized in accordance with Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, should be disclosed separately by major class of underlying asset in the capital assets note disclosures. Subscription assets recognized in accordance with Statement No. 96, Subscription-Based Information Technology Arrangements, also should be separately disclosed. In addition, this Statement requires intangible assets other than those three types to be disclosed separately by major class.

This Statement also requires additional disclosures for capital assets held for sale. A capital asset is a capital asset held for sale if (a) the government has decided to pursue the sale of the capital asset and (b) it is probable that the sale will be finalized within one year of the financial statement date. This Statement requires that capital assets held for sale be evaluated each reporting period. Governments should disclose (1) the ending balance of capital assets held for sale, with separate disclosure for historical cost and accumulated depreciation by major class of asset, and (2) the carrying amount of debt for which the capital assets held for sale are pledged as collateral for each major class of asset.

The requirements of this Statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter.

NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
A. Deficit Fund Balances or Net Position
The following individual nonmajor funds have a deficit at June 30, 2025:

Deficit Fund Balances:

Community Development Block Grant Special Revenue Fund $ 157,687 Organized Retail Theft Grant Special Revenue Fund 777,415 Deficit Net Position:

Sanitation Enterprise Fund 158,790
Information Technology External Support Enterprise Fund 1,550,585 Information Technology Internal Service Fund 1,829,190
Building Occupancy Internal Service Fund 378,424
For the Community Development Block Grant special revenue fund, the City expects to eliminate these deficits with anticipated future revenues from grants and program income. The deficit in the Organized Retail Theft special revenue fund is due to timing of the collection of revenues. For the Information Technology and Building Occupancy internal service funds and Information Technology External Support and Sanitation enterprise funds, the deficits are the result of pension and OPEB liabilities, which will be eliminated through future charges.

At June 30, 2025, the Successor Agency of the Former RDA private purpose trust fund had a deficit net position amount of $62,705,879. The deficit balance will be eliminated with future property tax revenue.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
504
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 83 As of June 30, 2025, cash and investments are classified in the accompanying financial statements as follows:

Statement of
Net Position
Statement of
Fiduciary
Net Position Total
Cash and investments $ 125,838,985 $ 9,631,614 $ 135,470,599 Restricted assets:

Cash and investments 15,220,954 - 15,220,954
Cash and investments with fiscal agents 2,314,321 12,996,211 15,310,532 Total cash and investments $ 143,374,260 $ 22,627,825 $ 166,002,085 Cash and investments as of June 30, 2025 consisted of the following:

Cash on hand $ 10,845
Deposits with financial institutions 4,886,737
Total cash 4,897,582
Investments 130,573,017
Restricted cash and investments 15,220,954
Cash and investments with fiscal agents 15,310,532
Total investments 161,104,503
Total cash and investments $ 166,002,085
The City of Brea maintains a cash and investment pool that is available for use for all funds. Each fund type's position in the pool is reported on the combined balance sheet as cash and investments. The City has adopted an investment policy, which authorizes it to invest in various investments.

A. Deposits
The carrying amount of the City’s cash deposits was $4,886,737 at June 30, 2025. Bank balances were $5,050,566 at that date. The $163,829 difference represents outstanding checks and other reconciling items.

The California Government Code requires California banks and savings and loan associations to secure a City’s deposits by pledging government securities with a value of 110% of a City’s deposits. California law also allows financial institutions to secure a City’s deposits by pledging first trust deed mortgage notes having a value of 150% of a City’s total deposits. The City Treasurer may waive the collateral requirement for deposits that are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state-chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking.

The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an “Agent of Depository” has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local government agency.

CITY OF BREA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 3 - CASH AND INVESTMENTS
84 B. Investments
Investments Authorized by the California Government Code and the City’s Investment Policy Funds of the City, other than bond proceeds and cash deposits held in restricted accounts, may be invested in any instrument allowable under current legislation of the State of California (Government Code Section 53600 et sec.) so long as the investment is appropriate and consistent with the City’s investment policy. The following investments are authorized:

Authorized Investment Type Credit Ratings
Maximum
Maturity
Maximum
Percentage
Amount of
Portfolio
Maximum
Investment in
One Issuer
U.S. Treasury Obligations (Bills, Notes ad Bonds) N/A 5 years No limit No limit U.S. Government Sponsored Enterprise Securities* N/A 5 years No limit No limit Banker's Acceptances N/A 180 days 40% 30%
Commercial Paper A-1/A 270 days 25% 10%
Repurchase Agreements N/A 1 year No limit No limit
Certificates of Deposit N/A 5 years 30% No limit
Negotiable Certificates of Deposit N/A 5 years 30% No limit Passbook Savings Accounts/Interest Bearing Investment N/A N/A No limit No limit Medium Term Corporate Notes A 5 years 30% No limit
Bank Money Market Accounts AAA 5 years 20% 10%
California Local Agency Investment Fund** N/A N/A LAIF limit No limit County of Orange Investment Fund (County Pool)** N/A N/A No limit No limit Asset Backed Securities AA 5 years 10% No limit
Supranationals AA 5 years 15% 5%
*Maximum of 5% in callable bonds issued by such agencies **State and County investment pools together cannot exceed 60% of the maturity value of the portfolio at the time of purchase, and no more than 40% of the maturity value at the time of purchase can be deposited in any one particular pool.

Provisions of Government Code Section 53601 are to be adhered to at all times. Additionally, the City will use the guidelines established by the joint committee of the California Municipal Treasurers Association and the California Society of Municipal Finance Officers as the basis for investing in government investment pools.

For purposes of complying with legal investment limitations, the percentages referenced above refer to the maturity value of the portfolio at the time of purchase.

Investments Authorized by Debt Agreements
The above investments do not address investment of debt proceeds held by a bond trustee. Investments of debt proceeds held by a bond trustee are governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the City’s investment policy.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 3 - CASH AND INVESTMENTS (CONTINUED)
85 Investments in State Investment Pool
The City is a voluntary participant in the California Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer’s Office audits the fund annually. Each City may invest up to $75,000,000. The fair value of the position in the investment pool is the same as the value of the pool shares. The balance available for withdrawal on demand is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is not rated and not registered with the Securities and Exchange Commission (SEC).

Restricted Cash & Investments
The City has established a Section 115 Trust to accumulate resources for future contributions to CalPERS. As of June 30, 2025, the City reported $13,411,063 in restricted cash and investments. As of June 30, 2025, the City had $12,178,817 of restricted cash and investments reported in the general fund and $1,232,246 held in the business-type funds in a Section 115 Trust and an OPEB Trust for future pension and OPEB contributions. In January 2016 and amended August 2021, the City adopted an investment policy for the Section 115, which authorized the following investments:
◦ Debt obligations of the U.S. Government, its agencies, and Government Sponsored Enterprises ◦ Mortgage-Backed Securities
◦ Asset Backed Securities
◦ Collateralized Mortgage Obligations
◦ Commercial Mortgage-Backed Securities
◦ Corporate Debt Securities issued by the U.S. or foreign entities including, but not limited to, limited partnerships, equipment trust certificates and enhanced equipment trust certificates The portfolio will maintain a minimum weighted average quality of A- at all times. Individual securities shall have a minimum quality rating of Baa3 by Moody’s or BBB- by Standard & Poor’s (S&P).

C. Risk Disclosures
Disclosures Relating to Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual rating as of year-end for each investment type.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 3 - CASH AND INVESTMENTS (CONTINUED)
86 Investment Type
Minimum
Legal Rating Not Rated AAA/A-1 AA+ AA- AA
U.S. Treasury Obligations N/A $ - $ - $ 34,876,366 $ - $ - U.S. Government Sponsored Enterprise Securities N/A - 13,372,235 8,990,553 1,018,380 3,069,355 Corporate Bonds A - 439,641 - 4,005,603 1,644,039
Money Market Mutual Funds AAA - 2,054,346 - - -
Asset-Backed Securities AA - 9,405,196 - - -
California Local Agency Investment Fund N/A 34,057,318 - - - - Supranationals AA - 2,799,557 - - -
Restricted Cash and Investments - Section 115 Trust
U.S. Government Sponsored Enterprise Securities N/A 2,714,616 - - - - Corporate Bonds BBB- 360,943 261,692 - 14,629 24,708
Foreign Issues 20,478 - - - -
Money Market Mutual Funds N/A 8,773,868 - - - -
Restricted Cash and Investments with Fiscal Agents
Money Market Mutual Funds N/A 15,310,532 - - - -
Total $ 61,237,755 61,237,755 $ 28,332,667 $ 43,866,919 $ 5,038,612 $ 4,738,102 Investment Type
Minimum
Legal Rating A+ A A- BBB+/BB+ Total
U.S. Treasury Obligations N/A $ - $ - $ - $ - $ 34,876,366 U.S. Government Sponsored Enterprise Securities N/A 3,298,006 1,022,740 3,048,660 - 33,819,929 Corporate Bonds A 4,665,947 3,813,860 801,106 - 15,370,196 Money Market Mutual Funds AAA - - - - 2,054,346
Asset-Backed Securities AA - - - - 9,405,196
California Local Agency Investment Fund N/A - - - - 34,057,318 Supranationals AA - - - - 2,799,557
Restricted Cash and Investments - Section 115 Trust
U.S. Government Sponsored Enterprise Securities N/A - - - - 2,714,616 Corporate Bonds BBB- 40,843 256,199 218,104 619,742 1,796,860 Foreign Issues - 25,360 39,213 40,668 125,719
Money Market Mutual Funds N/A - - - - 8,773,868
Restricted Cash and Investments with Fiscal Agents
Money Market Mutual Funds N/A - - - - 15,310,532
Total $ 8,004,796 $ 5,118,159 $ 4,107,083 $ 660,410 $ 161,104,503 Certain investment types that are currently rated A- were originally rated A or better upon the original purchase of the investments. The investment ratings were subsequent downgraded; however, the City has chosen to retain the investments to maturity.

Custodial Credit Risk
The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City uses a third-party investment manager to manage its investments and has authority from City Council to execute purchases and sales of investments according to the parameters in its investment policy without the approval of management. Investments are held by another third-party custodian designated by the City.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 3 - CASH AND INVESTMENTS (CONTINUED)
87 Concentration of Credit Risk
The City’s investment policy imposes restrictions for certain types of investments with any one issuer. Investments in any one issuer that represents 5% or more of the total City’s investments are as follows:

Issuer Investment Type Amount
% of Total
Investments
Freddie Mac Multifamily Structured Pass-Through Certificate Agency mortgage-backed security $ 11,652,617 9.26 % U.S. Treasury Obligation U.S. Treasury Obligation 34,876,366 31.23 % Interest Rate Risk
The City's investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The City’s investment policy states that at least 25% of the City’s portfolio will mature in one year or less. The only allowable exception to these maturity limits will be the investment for the bond proceeds for the Reserve Fund and/or the Section 115 trust.

As of June 30, 2025, the City had the following investments and original maturities:

Investment Maturities (in Years)
Investment Type
12 months
or less 12 to 24 months 25 to 60 months
More than
60 months Total
Investments held by City
U.S. Treasury Obligations $ 3,005,655 $ 5,408,661 $ 26,462,050 $ - $ 34,876,366 U.S. Government Sponsored Enterprise
Securities 2,344,678 2,037,451 29,437,800 - 33,819,929
Corporate Bonds 2,615,842 3,232,224 9,522,130 - 15,370,196 Money Market Mutual Funds 2,054,346 - - - 2,054,346
Asset-Backed Securities 30,219 581,481 8,793,496 - 9,405,196 California Local Agency Investment Fund 34,057,318 - - - 34,057,318 Supranationals 2,799,557 - - - 2,799,557
Restricted Cash and Investments- Section
115 Trust
U.S. Government Sponsored Enterprise
Securities - - 62,006 2,652,610 2,714,616
Corporate Bonds 52,479 106,188 801,724 836,469 1,796,860 Foreign Issues - - 46,055 79,664 125,719
Money Market Mutual Funds 8,773,868 - - - 8,773,868
Restricted Cash and Investments with Fiscal
Agents
Money Market Mutual Funds 15,310,532 - - - 15,310,532
$ 71,044,494 $ 11,366,005 $ 75,125,261 $ 3,568,743 $ 161,104,503

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 3 - CASH AND INVESTMENTS (CONTINUED)
88 Fair Value Measurement and Application
The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset.

Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

When quoted prices in active market are available, investments are classified within Level 1. For investments classified within Level 2, the City’s custodians generally use asset market prices derived from closing bid prices as of the last business day of the month as supplied by Interactive Data, broker-dealer quotes and matrix pricing.

The City does not have any investments classified with Level 3. Deposits and withdrawals in money market mutual funds and governmental investment pools, such as LAIF are made on the basis of $1, but are recorded on an amortized cost basis which approximates fair value. Accordingly, the fair value measurement of these types of investments is based on an uncategorized input not defined as a Level 1, Level 2, or Level 3 input.

The City has the following recurring fair value measurements as of June 30, 2025:

Investment Type Total
Investments not
subject to
hierarchy Level 2
U.S. Treasury Obligations $ 34,876,366 $ - $ 34,876,366 U.S. Government Sponsored Enterprise Securities
Securities 33,819,929 - 33,819,929
Corporate Bonds 15,370,196 - 15,370,196
Money Market Mutual Funds 2,054,346 2,054,346 -
Asset-Backed Securities 9,405,196 - 9,405,196
California Local Agency Investment Fund 34,057,318 34,057,318 - Supranationals 2,799,557 - 2,799,557
Restricted Cash and Investments- Section 115 Trust
U.S. Government Sponsored Enterprise Securities 2,714,616 - 2,714,616 Corporate Bonds 1,796,860 - 1,796,860
Foreign Issues 125,719 - 125,719
Money Market Mutual Funds 8,773,868 8,773,868 -
Restricted Cash and Investments with Fiscal Agents
Money Market Mutual Funds 15,310,532 15,310,532 -
Total $ 161,104,503 $ 60,196,064 $ 100,908,439

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 3 - CASH AND INVESTMENTS (CONTINUED)
89 The City purchases 85.2% of its water for the Water Utility fund operations through the California Domestic Water Company (CDWC). CDWC is a private mutual water company, organized as a not-for-profit under Section Code 501(c)(12), which provides water primarily to wholesale customers in east Whittier, La Habra and Brea.

CDWC has a wholly owned subsidiary, Cadway Inc. (Cadway), which owns and leases certain water rights to CDWC. Both CDWC and Cadway participate in the Pellissier Co-Tenancy. Cadway is treated as a C Corporation for federal and state tax purposes.

Separately prepared consolidated financial statements of CDWC include both CDWC and Cadway, Inc., and may be obtained from the City.

The CDWC Rules and Regulations for Water Service (CDWC Rules and Regulations), which are adopted by the CDWC Board of Directors and last updated on June 7, 2019, describe how CDWC administers, processes and provides water service including sections outlining provisions for the ownership and entitlements of common Stock and Class A Preferred Stock shares. Additionally, this document outlines the provisions under which CDWC will deliver water based on shareholders ownership of prescriptive pumping rights in the Main San Gabriel Basin as well as excess water.

The City holds 1,502.72 acre feet of water rights in the Main San Gabriel Basin which are capitalized at cost, and reported as “water rights” within capital assets. Each year, these water rights are temporarily leased to CDWC in order for CDWC to deliver water to the City based on its ownership. For the year ended June 30, 2025, based on the limits set by the Main San Gabriel Basin Water Master, the City was able to purchase 0.80958 acre feet of water per acre foot of water rights owned, or 1,216.57 acre feet at a cost of $334,991.

The City also holds 687.85 shares of Class A preferred stock which are reported at cost as “water rights” within capital assets. During December 2011, the City was issued 664.14 shares of preferred stock for $8,141,812 to secure the City’s claim to the 664.10 acre feet of water rights from CDWC. During May 2013, the City was issued another 23.75 shares of preferred stock for $302,592 to secure the City’s claim to another 23.75 acre feet of water rights from CDWC. This resulted in a total of 687.85 shares of preferred stock for a total of $8,444,404 used to secure an equal amount of water delivered pursuant to water rights. There is an immaterial difference of 0.04 shares between the City’s records and CDWC records.

As a preferred stock shareholder in CDWC, the City is entitled to a certain number of acre feet of water based on the number of preferred stock shares owned and the operating safe yield in the basin. This water is purchased at the same cost as water purchased using water rights owned by the City. For the current fiscal year, the City was entitled to purchase 0.80958 acre feet of water per acre foot of water rights owned, or 556.87 acre feet at the common stock entitlement rate for a total cost of $153,063.

In November 2022, the City purchased an additional 112 shares of CDWC common stock for $15,250 per share for a total cost of $1,708,000 to increase the City’s rights to access water.

As of June 30, 2025, the City holds 2,320.50 shares of Common Stock in the CDWC. The City values its common stock holdings using the equity method of investment as the City holds approximately 27.93% of the total shares outstanding. The City reported an increase of $76,079 as the change in equity for the year ended June 30, 2025.

As a common stock shareholder in CDWC, the City is entitled to purchase a certain amount of water based on the number of common stock shares owned. For the year ended June 30, 2025, the City was entitled to purchase

1.60 acre feet of water per common stock share owned or 3,712.80 acre feet at the common stock entitlement rate, for a total cost of $1,478,208.

Additionally, the City leased 196.50 shares of common stock from other shareholders during the fiscal year. This entitled the City to purchase an additional 314.40 acre feet at the common stock entitlement rate for a total cost of $123,498 for a combined total of $1,601,706 at the common stock entitlement rate.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 4 - CALIFORNIA DOMESTIC WATER COMPANY (CDWC)
90 During the year ended June 30, 2025, the City also purchased 3,257.03 acre feet for $3,871,802 from CDWC in excess of its entitlement. Other amounts paid to CDWC for the year ended June 30, 2025, including annual common stock assessments and readiness-to-serve charges totaled $1,125,090.

During the year ended June 30, 2025, the City paid $7,086,053 to CDWC for purchases of water during the year.

NOTE 5 - NOTES, LOANS, AND DEFERRED LOANS RECEIVABLE
Notes and loans receivable consist of rehabilitation loans made from Community Development Block Grant (“CDBG”) and HOME grant funds to low income individuals that need assistance in rehabilitating their homes or mobile homes to meet current code standards. Amounts are due from the proceeds only upon the sale or transfer of the property. Loans made to mobile home owners are forgiven if the owner lives in the property 5 years or more. Repayments received by the City from homeowners are remitted to the County. Thus, the City has offset the notes and loans receivable balance with a liability due to other governments on the accompanying balance sheet. Additionally, the Affordable Housing Trust reports home buyer assistance loans to low and moderate income individuals to assist in purchasing a home. Homebuyer assistance loans repayment begins 5 years after the loan was originated, and is repaid over a 30 year period. Notes and loans receivable from each of these funds are comprised of the following at June 30, 2025:

CDBG Fund $ 1,498,773
HOME Grant Fund 18,241
Affordable Housing Fund 101,276
Total notes and loans receivable $ 1,618,290
The City (through the former redevelopment agency) has made long term loans to various developers and organizations to stimulate low and moderate income housing projects and to low and moderate income individuals to rehabilitate their homes to meet current code standards or to assist them in purchasing a home. Some assistance given gave the City rights to receive “silent seconds” on property when sold to a low and moderate income individual. These “silent seconds” gave the City the right to a portion of the proceeds from the sale of the property. Collection terms of these loans vary and range from 5 years to 55 years. The majority of loans made to developers will be repaid from residual receipts and from monies earned on the property once they are built.

Home buyer assistance loans begin repayment after 5 years and will be repaid over a 30-year period.

For the remainder of loans and notes receivable, the City has classified fund balance as “restricted” indicating that these resources are not current available resources.

The outstanding balance of these notes and loans are reported in the Housing Successor Fund and are comprised of the following at June 30, 2025:

Home Buyer Assistance Loans $ 3,226,805
Rehabilitation Loans 92,959
Developer/Organization Loans:

Acacia Apartments 1,214,545
Birch Hills Affordable Apartments 4,750,000
Bonterra Apartments 1,001,019
Imperial Apartments 2,853,000
La Habra Housing 597,814
South Walnut Bugalows 826,000
Total notes and loans receivable in the Housing Successor Fund $ 14,562,142

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 4 - CALIFORNIA DOMESTIC WATER COMPANY (CDWC) (CONTINUED) 91 As of year-end June 30, 2025, the City had entered into various lease agreements as the lessor where it had leased its land and buildings, ranging from two years to 75 years. As of June 30, 2025, the outstanding leases receivable total $5,444,120. These leases require the various lessees to make periodic payments to the City, and range in interest rates from 0.727% to 3.451%. The offsetting entry to the leases receivable is a deferred inflows and the value of the deferred inflows at June 30, 2025 is $5,207,862. The City will be systematically recognizing revenue over the terms of the leases. The City recognized $253,452 in lease revenue during the fiscal year.

Fiscal Year Principal Interest Total Payments
2026 $ 195,422 $ 138,505 $ 333,927
2027 167,661 133,928 301,589
2028 146,325 129,898 276,223
2029 99,816 126,350 226,166
2030 75,567 124,165 199,732
2031 - 2035 408,442 590,218 998,660
2036 - 2040 464,551 534,109 998,660
2041 - 2045 528,368 470,292 998,660
2046 - 2050 600,951 397,709 998,660
2051 - 2055 683,506 315,154 998,660
2056 - 2060 768,978 221,682 990,660
2061 - 2065 750,367 117,628 867,995
2066 - 2070 455,759 44,241 500,000
2071 - 2072 98,407 1,594 100,001
$ 5,444,120 $ 3,345,473 $ 8,789,593
NOTE 7 - INTERFUND RECEIVABLES, PAYABLES, ADVANCES AND TRANSFERS The composition of interfund balances as of June 30, 2025, is as follows:

Due From
Other Funds
Due to Other Funds General Fund
Nonmajor Governmental Funds $ 1,120,450
Total $ 1,120,450
The balances due among the General Fund and Nonmajor Governmental Funds for $1,120,450 were related to Community Development Block Grant Fund (CDBG) and Organized Retail Theft Grant Fund having negative cash and represents a short-term cash flow borrowing between the General Fund and the Nonmajor Governmental Funds.

A. Transfers In/Out from Other Funds
Transfers In
Transfers Out General Fund
Capital
Improvement
Fund
Nonmajor
Governmental
Funds Total
General Fund $ - $ 7,259,226 $ 56,000 $ 7,315,226
Internal Service Funds 150,000 - - 150,000
Nonmajor Governmental Funds 450,000 1,234,737 - 1,684,737 Total $ 600,000 $ 8,493,963 $ 56,000 $ 9,149,963

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 6 - LEASE RECEIVABLES
92 1. The General Fund transferred $7,259,226 to the Capital Improvement Fund for various capital improvement program projects.

2. The General Fund transferred $56,000 to the Nonmajor Governmental Funds for capital improvement projects.

3. The Internal Service Funds transferred $150,000 to the General Fund for capital improvement projects.

4. The Nonmajor Governmental Funds transferred $450,000 to the General Fund for the street maintenance program.

5. Nonmajor Governmental Funds transferred $1,234,737 to the Capital Improvements Fund for various capital improvement program projects.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 7 - INTERFUND RECEIVABLES, PAYABLES, ADVANCES AND TRANSFERS (CONTINUED) 93 Summary of changes in capital assets for the year ended June 30, 2025 is as follows:

Beginning Ending
Balance Transfers Additions Deletions Balance
Governmental activities
Capital assets, not being depreciated/amortized
Land $ 62,092,796 $ - $ - $ - $ 62,092,796
Construction-in-progress 23,081,404 (2,146,179) 11,320,695 - 32,255,920 Total capital assets, not being depreciated/amortized 85,174,200 (2,146,179) 11,320,695 - 94,348,716 Capital assets, being depreciated
Structures and improvements 124,490,421 - 60,330 - 124,550,751 Equipment 23,283,396 565,721 2,079,552 (1,532,293) 24,396,376 Infrastructure 162,278,489 1,580,458 - - 163,858,947
Total capital assets, being depreciated 310,052,306 2,146,179 2,139,882 (1,532,293) 312,806,074 Less accumulated depreciation
Structures and improvements (64,694,664) - (2,321,986) - (67,016,650) Equipment (16,354,550) - (1,692,422) 1,479,867 (16,567,105) Infrastructure (96,945,175) - (4,413,443) - (101,358,618) Total accumulated depreciation (177,994,389) - (8,427,851) 1,479,867 (184,942,373) Right-to-use assets
Equipment 136,966 - 204,864 (52,189) 289,641
Subscription IT asset 343,666 - 202,913 - 546,579
Total capital assets being amortized 480,632 - 407,777 (52,189) 836,220 Less accumulated amortization for
Equipment (69,592) - (31,297) 52,189 (48,700)
Subscription IT asset (180,700) - (177,234) - (357,934) Total accumulated amortization (250,292) - (208,531) 52,189 (406,634) Total capital assets, being depreciated/amortized, net 132,288,257 2,146,179 (6,088,723) (52,426) 128,293,287 Total governmental activities capital assets $ 217,462,457 $ - $ 5,231,972 $ (52,426) $ 222,642,003 Beginning Ending
Balance Transfers Additions Deletions Balance
Business-type activities
Capital assets, not being depreciated/amortized
Land $ 11,628,748 $ - $ - $ - $ 11,628,748
Water rights - fee title 23,931,020 - - - 23,931,020
Water rights - preferred stock 8,444,404 - - - 8,444,404 Construction-in-progress 4,774,981 - 2,919,735 - 7,694,716 Total capital assets, not being depreciated/amortized 48,779,153 - 2,919,735 - 51,698,888 Capital assets, being depreciated/amortized
Structures and improvements 4,651,539 - - - 4,651,539
Equipment 924,984 - 63,757 (94,114) 894,627
Infrastructure 159,557,093 - - - 159,557,093
Subscription IT asset 14,859 - - - 14,859
Total capital assets, being depreciated/amortized 165,148,475 - 63,757 (94,114) 165,118,118 Less accumulated depreciation/amortization
Structures and improvements (565,945) - (59,209) - (625,154) Equipment (554,328) - (67,625) 79,112 (542,841)
Infrastructure (74,384,530) - (3,556,713) - (77,941,243) Subscription IT asset (7,388) - (7,429) - (14,817)
Total accumulated depreciation/amortization (75,512,191) - (3,690,976) 79,112 (79,124,055) Total capital assets, being depreciated/amortized, net 89,636,284 - (3,627,219) (15,002) 85,994,063 Total business-type activities capital assets $ 138,415,437 $ - $ (707,484) $ (15,002) $ 137,692,951

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 8 - CAPITAL ASSETS
94 The City has a total $32,375,424 in water rights. As described in Note 4, $8,444,404 of the water rights are held as Class A Preferred Stock in California Domestic Water Company. The remaining $23,931,020 of water rights are held in the name of the City. Combined, the rights held by the City allow the City to purchase 1,662.59 acre feet of water annually at a set rate of $272.69 per acre foot. Refer to Note 4 for further details of transactions with California Domestic Water Company.

Depreciation/amortization expense was charged to functions/programs of the primary government as follows:

Governmental Activities
City
General government $ 407,743
Public Safety 775,188
Community Services 489,268
Public Works 5,911,899
Total City 7,584,098
Internal Service
Information Technology 207,840
Vehicle Maintenance 700,338
Building Occupancy 144,106
Total Internal Service 1,052,284
Total Governmental Activities $ 8,636,382
Business-Type Activities
Water Utility $ 3,034,822
Sewer Utility 566,061
Urban Runoff 1,750
Information Technology 7,429
Golf 80,914
Total Business-Type Activities $ 3,690,976

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 8 - CAPITAL ASSETS (CONTINUED)
95 A. Governmental Activities Long-Term Liabilities
A summary of changes in governmental activities long-term liabilities for the year ended June 30, 2025, is noted below:

Beginning Amount
Balance Ending Due Within
As Restated Additions Deletions Balance One Year
Lease Revenue Bonds
2021 Refunding Lease Revenue Bonds $ 2,220,000 $ - $ - $ 2,220,000 $ - Leases 69,538 204,864 (31,095) 243,307 55,051
Subscription IT Liabilities 124,129 157,310 (166,868) 114,571 45,595 Compensated Absences* 6,823,931 459,467 - 7,283,398 3,284,359 Claims and Judgements 4,822,952 2,768,785 (1,903,043) 5,688,694 2,070,685 Totals $ 14,060,550 $ 3,590,426 $ (2,101,006) $ 15,549,970 $ 5,455,690 Unamortized Bond Premium 416,578
$ 15,966,548
*Compensated absences presented as a net change in accordance with GASB No. 101, Compensated Absences. 2021 Refunding Lease Revenue Bonds
In July 2021, the Brea Public Financing Authority issued the 2021 Refunding Lease Revenue Bonds in the amount of $2,220,000. The proceeds were used to refund the outstanding principal balance of the 2010 Lease Revenue Bonds and pay costs of issuance of the 2021 bonds. The bonds bear an interest rate of 4% and mature April 1, 2036. Installment payments are due annually beginning April 1, 2028, ranging from $105,000 to $455,000. The Bonds are payable from lease payments made by the City for the leasing of certain real property pursuant to the lease agreement dated July 1, 2021.

The debt service schedule of the 2021 Refunding Lease Revenue Bonds are as follows:

Year Ending
June 30, Principal Interest Total
2026 $ - $ 88,800 $ 88,800
2027 - 88,800 88,800
2028 335,000 88,800 423,800
2029 370,000 75,400 445,400
2030 410,000 60,600 470,600
2031-2035 945,000 121,400 1,066,400
2036 160,000 6,400 166,400
Total $ 2,220,000 $ 530,200 $ 2,750,200

1. Leases
As of year-end June 30, 2025, the City has entered into various lease agreements as the lessee for the use of various pieces of equipment, for terms of five years. As of June 30, 2025, the value of the lease liability outstanding is $243,307. The city is required to make monthly fixed payments, and these leases have interest rates ranging from 0.727% to 3.305%.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 9 - LONG-TERM DEBT
96 The future principal and interest lease payments as of June 30, 2025, were as follows:

Year Ending
June 30, Principal Interest Total
2026 $ 55,051 $ 6,101 $ 61,152
2027 58,795 4,681 63,476
2028 51,265 2,987 54,252
2029 43,182 1,678 44,860
2030 35,014 456 35,470
Total $ 243,307 $ 15,903 $ 259,210

2. Subscription Liabilities
As of June 30, 2025, the City had various SBITA contracts. The City is required to make principal and interest payments ranging from $10,247 to $24,508 through June 2028. The subscription liability was valued using discount rates between 1.85% - 3.59% based on the City’s incremental borrowing rate at the inception of the subscriptions.

Remaining principal and interest payments on subscriptions are as follows:

Year Ending
June 30, Principal Interest Total
2026 $ 45,595 $ 3,163 $ 48,758
2027 33,664 1,825 35,489
2028 35,312 934 36,246
Total $ 114,571 $ 5,922 $ 120,493
B. Business-Type Activities Long – Term Liabilities
A summary of changes in business-type activities long-term debt for the year ended June 30, 2025 is noted below:

Beginning Amount
Balance Ending Due Within
As Restated Additions Deletions Balance One Year
Water Revenue Bonds
2014 Water Revenue Bonds $ 445,000 $ - $ (445,000) $ - $ - 2019 Water Revenue Bonds 20,075,000 - (950,000) 19,125,000 1,010,000 2020 Water Revenue Bonds 17,155,000 - (220,000) 16,935,000 690,000 Subscription IT Liabilities 7,381 - (7,381) - -
Compensated Absences* 1,010,764 - (222,673) 788,091 273,830 Totals $ 38,693,145 $ - $ (1,845,054) 36,848,091 $ 1,973,830 Unamortized Bond Premium 2,842,810
$ 39,690,901
*Compensated absences presented as a net change in accordance with GASB No. 101, Compensated Absences.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 9 - LONG-TERM DEBT (CONTINUED)
97 3. Water Revenue Bonds
2014 Water Revenue Refunding Bonds
In August 2014, the Brea Community Benefit Financing Authority issued $18,555,000 of 2014 Water Revenue Bonds. The proceeds were used to repay interfund loans made by the City of Brea to its Water Utility Fund from other available funds for the purchase of water rights completed in May 2014 for the benefit of the City’s water system. Proceeds were also used to pay cost of issuance expenses.

The bonds consisted of $9,440,000 serial bonds maturing in the years 2015 to 2034, payable July 1 in annual installments of $255,000 to $700,000 and bear interest at 3.25% to 5.00%. Bonds maturing July 1, 2039, in the amount of $4,005,000 are term bonds and bear interest at 5.00%. Bonds maturing July 1, 2044, in the amount of $5,110,000 are term bonds and bear interest at 5.00%. The 2014 Water Revenue Bonds were partially refunded by the 2020 Water Revenue Refunding Bonds. As of June 30, 2025, these bonds were fully paid off. 2019 Water Revenue Refunding Bonds
In August 2019, the City of Brea issued $23,475,000 of 2019 Water Revenue Refunding Bonds with interest rates ranging from 3.0% to 4.0%. The proceeds from the bonds were used to current refund all of the remaining outstanding 2009 Water Revenue Bonds and advance refund 2010 Series B Water Revenue Bonds. Interest on the Water Revenue Refunding Bonds is payable semi-annually on July 1 and January 1 of each year until 2039.

Principal matures annually on July 1. The outstanding balance at June 30, 2025, was $19,125,000. 2020 Water Revenue Refunding Bonds
In October 2020, the City of Brea issued $17,960,000 of 2020 Water Revenue Refunding Bonds with interest rates ranging from 0.391%% to 3.212%. The proceeds from the bonds were used to current refund a portion of the remaining outstanding 2014 Water Revenue Bonds. Interest on the Water Revenue Refunding Bonds is payable semi-annually on July 1 and January 1 of each year until 2044. Principal matures annually on July 1 in amounts ranging from $220,000 to $1,090,000. The net proceeds of $17,864,812 (including an underwriter’s discount of $95,188) were deposited in an irrevocable trust with an escrow agent to provide funds to refund the 2014 bonds in full and to provide funds for the future debt service payment on the 2014 bonds. As a result, the 2014 bonds are partially defeased, and the liability for those bonds has been removed from the statement of net position. The outstanding balance at June 30, 2025 was $16,935,000.

Water Revenue Bonds Debt Coverage Requirement
The City has covenanted that gross revenues (including interest revenue and connection fees), less operation and maintenance costs as defined in the bond document, shall be at least 1.25 times the sum of all debt service on all parity obligations. Gross revenues for the year ended June 30, 2025, were $22,726,225. Operation and maintenance costs for the year ended June 30, 2025, were $15,429,295, excluding depreciation. Total debt service for the fiscal year ended was $2,899,946. This resulted in a debt coverage ratio of 2.52 for the year ended June 30, 2025.

4. Pledged Revenues
Future net revenues of the Water Utility Fund for each year’s debt service payment are pledged until the extinguishment of the debt in 2044 and are not available for other uses. Remaining principal and interest payments on this debt as of June 30, 2025 was $46,951,181.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 9 - LONG-TERM DEBT (CONTINUED)
98 The debt service schedules of these Water Revenue Bonds are as follows:

Year Ending
June 30, Principal Interest Total
2026 $ 1,700,000 $ 1,199,946 $ 2,899,946
2027 1,770,000 1,139,925 2,909,925
2028 1,850,000 1,074,515 2,924,515
2029 1,930,000 1,003,629 2,933,629
2030 2,010,000 927,583 2,937,583
2031-2035 11,130,000 3,524,575 14,654,575
2036-2040 10,545,000 1,600,076 12,145,076
2041-2045 5,125,000 420,932 5,545,932
Total $ 36,060,000 $ 10,891,181 $ 46,951,181
C. Debt Without Government Commitment Assessment District Bonds The special assessment bonds are secured by valid assessment liens upon certain lands within the special assessment district and are not direct liabilities of the City and, accordingly, are not included in the accompanying general purpose financial statements. The City has no obligation beyond the balances in the designated custodial funds for any delinquent assessment district bond payments. If delinquencies occur beyond the amounts held in the reserve funds created from bond proceeds, the City has no duty to pay the delinquency out of any available funds of the City. Neither the full faith and credit nor taxing power of the City is pledged to the payment of the bonds. The City acts solely as an agent for those paying assessments and for the bondholders.

In November 2017, the City of Brea issued on behalf of the Community Facilities District No. 2008-2 (Brea Plaza Area Public Improvements) $8,555,000 aggregate principal of 2017 Special Tax Refunding Bonds to advance refund in full the Community Facilities District No. 2008-2 (Brea Plaza Area Public Improvements) 2009 Special Tax Bonds. The bonds were issued pursuant to the Mello-Roos Community Facilities Act of 1982 and are payable from the proceeds of an annual special tax levied on property within the District. The bonds mature from 2018 to 2039, with remaining annual installments ranging from $255,000 to $575,000. The remaining interest rates on the bonds range from 2.000% to 4.000%. The outstanding balance at June 30, 2025, was $6,755,000.

In August 2019, the Brea Public Financing Authority issued Local Agency Revenue Refunding Bonds, Series 2019, in the amount of $6,820,000, for and on behalf of the City of Brea Community Facilities District No. 1997-1 (Olinda Heights Public Improvements). The purpose of the bonds is to acquire two series of bonds: (i) $2,505,000 aggregate principal amount to be issued by the City of Brea for the Communities Facilities District No. 1997-1; and (ii) $4,315,000 aggregate principal amount 2019 Special Tax Refunding Bonds to be issued by the Brea Olinda Unified School District for the Brea Olinda Unified School District Community Facilities District No. 95-1 (Olinda Heights). A portion of the proceeds was for a current refunding of the 2005 Series A Local Agency Revenue Bonds. The bonds mature from 2020 to 2035, with remaining annual installments ranging from $215,000 to $680,000 per year. The interest rates on the bonds range from 4.000% to 5.000%. The outstanding balance at June 30, 2025 was $4,255,000.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 9 - LONG-TERM DEBT (CONTINUED)
99 A. CalPERS Safety and Miscellaneous Employees’ Plans The City contributes to the pension plans offered by the California Public Employees Retirement System (CalPERS). The City’s employees participate in separate cost-sharing Safety (police and fire) and Miscellaneous (agent-multiple employer) defined benefit pension plans. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS 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 CalPERS’ annual financial report may be obtained from its executive office: 400 P Street, Sacramento, California 95814.

B. Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees or beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.

The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Miscellaneous Plan’s provisions and benefits in effect at June 30, 2025 are summarized as follows:

Miscellaneous Plan
Tier 1* Tier 2 PEPRA (Tier 3)
Hire Date
Prior to
September 17, 1999
September 17, 1999 to
December 31, 2012 and
Non-PEPRA hired on or after
January 1, 2013
January 1, 2013
and after
Benefit Formula 2.0% @ 55 2.0% @ 55 2.0% @ 62
Benefit Vesting Schedule 5 years service 5 years service 5 years service Benefit Payments Monthly for life Monthly for life Monthly for life Retirement Age Minimum 50 years Minimum 50 years Minimum 52 years Monthly Benefits, as a % of 1.426% - 2.418%
50 years - 63 years
respectively

1.426% - 2.418%
50 years - 63 years
respectively

1.000% - 2.500%
52 years - 67+ years
respectively
eligible Compensation
Required Employee Contribution Rates 7.080% 7.080% 6.250% Required Employer Contribution Rates 9.960% 9.960% 6.326% *Closed to new entrants
C. Employees Covered
At the June 30, 2023 valuation, the following employees were covered by the benefit terms of the Miscellaneous Plan:

Miscellaneous
Plan
Inactive employees or beneficiaries currently receiving benefits 351 Inactive employees entitled to but not yet receiving benefits 348 Active Employees 187
886

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN
100
D. Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

The employer contributions to the Miscellaneous Plan during the year ended June 30, 2025 was $4,788,000.

E. Actuarial Methods and Assumptions Used to Determine Total Pension Liability The Miscellaneous Plan’s total pension liability in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions:

Miscellaneous
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions
Discount Rate 6.90%
Inflation 2.30%
Salary Increases Varies by Age and Service
Payroll Growth 2.80%
Investment Rate of Return

6.80%% Net of Pension Plan Investment Includes
Inflation
Mortality Table** Derived using CalPERS' Membership Data for all Funds **The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
101
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. The expected real rates of return by asset class are as follows:

These geometric rates of return net of administrative expenses are summarized in the following table:

Asset Class
New Strategic
Allocation Real Return (1), (2)
Global Equity - Cap Weighted 30.00% 4.54%
Global Equity - Non-Cap Weighted 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
Mortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage (5.00)% (0.59)%
100.00%
(1) An Expected Inflation of 2.30% used for this period. (2) Figures are based on the 2022 Asset Liability Management Study.

F. Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that the City’s contributions will be made at rates equal to the difference between actuarially determined contributions rates and the employee rate. Based on those assumptions, each pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing of the plans, the tests revealed the assets would not run out. Therefore, the current 6.90% discount rate is appropriate and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 6.90% is applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained at CalPERS’ website.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
102
G. Changes in the Net Pension Liability
Increase (Decrease)
Total Pension Plan Fiduciary Net Pension
Liability Net Position Liability/(Asset)
Miscellaneous (a) (b) (c) = (a) - (b)
Balance at June 30, 2023 (measurement date) $ 174,828,327 $ 127,453,799 $ 47,374,528 Changes recognized for the
measurement period:

Service cost 2,655,175 - 2,655,175
Interest on total pension liability 11,852,881 - 11,852,881 Differences between expected and
actual experience 239,349 - 239,349
Contributions-employer - 5,105,584 (5,105,584)
Contributions-employee - 1,262,034 (1,262,034)
Net investment income - 12,221,313 (12,221,313)
Benefit payments, including refunds of
employee contributions (9,228,776) (9,228,776) -
Administrative expense - (103,710) 103,710
Net changes during 2023-24 5,518,629 9,256,445 (3,737,816) Balance at June 30, 2024 (measurement date) $ 180,346,956 $ 136,710,244 $ 43,636,712 H. Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability, calculated using the discount rate of 6.90%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1% point lower (5.90%) or 1% point higher (7.90%) than the current rate:

Current
1% Decrease Discount Rate 1% Increase
(5.90%) (6.90%) (7.90%)
Plan's net pension liability/(asset) $ 66,682,558 $ 43,636,712 $ 24,552,379 Detailed information about the Miscellaneous Plan’s fiduciary net position is available in the separately issued CalPERS financial reports. See CalPERS’ website for additional information.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
103
I. Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2025, the City recognized pension expense of $6,343,373 for the Miscellaneous Plan. As of June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
Miscellaneous Plan of Resources of Resources
Contributions subsequent to the measurement date $ 4,788,000 $ - Differences between expected and actual experience 302,107 - Net difference between projected and actual
earnings on pension plan investments 1,863,825 -
Miscellaneous Plan Total $ 6,953,932 $ -
Amounts reported as deferred outflows of resources and deferred inflows of resources are amortized in pension expense for the year the gain or loss occurs, except for contributions subsequent to the measurement period of $4,788,000 for the Miscellaneous Plan, which will be recognized as a reduction of the net pension liability during the fiscal year ending June 30, 2026. The amortization period differs depending on the source of the gain or loss.

Differences between projected and actual investment earnings are amortized on a 5-year straight-line basis and all other amounts are amortized over the average expected remaining service lives of all members that are provided with benefits. As of the June 30, 2024 measurement date, the expected average remaining service lifetime is 2.4 years for the Miscellaneous Plan. Deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Miscellaneous Plan
Deferred
Outflows/(Inflows)
Year Ending June 30, of Resources
2026 $ 71,567
2027 3,379,362
2028 (577,925)
2029 (707,072)
Total $ 2,165,932
Beginning in the measurement period ended June 30, 2021, the City’s Safety Plan was converted from an agent multiple-employer defined benefit plan to the cost-sharing defined benefit plan.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
104
The Safety Plan's provisions and benefits in effect at June 30, 2025, are summarized as follows:

Safety Plan
Tier 1* Tier 2* Tier 3 PEPRA (Tier 4)
Hire Date
Prior to
June 30, 1984
On June 30, 1984
and prior to
September 17, 2011
September 17, 2011 to
December 31, 2012
and Non-PEPRA hired
on or after June 1, 2013
January 1, 2013
and after
Benefit Formula 3.0% @ 50 3.0% @ 50 2.0% @ 50 2.7% @ 57 Benefit Vesting Schedule 5 years service 5 years service 5 years service 5 years service Benefit Payments Monthly for life Monthly for life Monthly for life Monthly for life Retirement Age Minimum 50 years Minimum 50 years Minimum 50 years Minimum 50 years Monthly Benefits, as a % of 3.00% 3.00% 2.00% - 2.70% 2.00% - 2.70% Eligible Compensation
Required Employee Contribution Rates 8.99% 8.99% 8.99% 13.75% Required Employer Contribution Rates 24.06% 24.06% 24.06% 17.08% *Closed to new entrants
J. Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

The employer contributions to the Safety Plan during the year ended June 30, 2025 was $13,554,001.

K. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2025, based on the measurement date of June 30, 2024, the City reported a net pension liability of $117,935,787 for its proportionate share of the PERF C Cost Sharing Plan.

The City's net pension liability is measured as the proportionate share of net pension liability. The net pension liability is measured as of June 30, 2024, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2023, rolled forward to June 30, 2024. The City's proportion of the net pension liability based on a projection of the City's long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The City's proportionate share of the net pension liability for the PERF C Cost Sharing Plan measured as of June 30, 2024 and 2025 was 1.59430% and 1.61759%, respectively.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
105
For the year ended June 30, 2025, the City recognized pension expense of $38,509,478 for the Safety Plan. As of June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
Safety Plan of Resources of Resources
Contributions subsequent to the
measurement date $ 13,554,001 $ -
Changes of assumptions 2,905,695 -
Differences between expected and
actual experience 9,624,609 312,937
Changes in employer's proportion - 2,749,253
Differences between employer's
contributions and proportionate
share of contributions 4,404,127 530,350
Net difference between projected
and actual earnings on pension
plan investments 5,700,481 -
Total $ 36,188,913 $ 3,592,540
Amounts reported as deferred outflows of resources and deferred inflows of resources are amortized in pension expense for the year the gain or loss occurs, except for contributions subsequent to the measurement period of $13,554,001, which will be recognized as a reduction of the net pension liability during the fiscal year ending June 30, 2026. The amortization period differs depending on the source of the gain or loss. Differences between projected and actual investment earnings are amortized on a 5-year straight-line basis and all other amounts are amortized over the average expected remaining service lives of all members that are provided with benefits. As of the June 30, 2024 measurement date, the expected average remaining service lifetime is 3.8 years for the Safety Plan. Deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows:

Safety Plan
Deferred
Outflows/(Inflows)
Year Ending June 30, of Resources
2026 $ 6,914,492
2027 13,910,797
2028 167,525
2029 (1,950,442)
Total $ 19,042,372

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
106
L. Actuarial Methods and Assumptions Used to Determine Total Pension Liability The Safety Plan’s total pension liability in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions:

Safety
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions
Discount Rate 6.90%
Inflation 2.30%
Salary Increases Varies by Age and Service
Payroll Growth 2.80%
Investment Rate of Return 6.80% Net of Pension Plan Investment Includes Inflation Mortality Table** Derived using CalPERS' Membership Data for all Funds **The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

Changes of assumptions – Noted no changes.

M. Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City's proportionate share of the net pension liability for the Safety Plan, calculated using the discount rate of 6.90%, as well as what the City's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 - percentage point lower or 1 - percentage point higher than the current rate:
1% Decrease
(5.90%)
Current Discount
Rate (6.90%)
1% Increase
(7.90%)
City's proportionate share of the net pension liability $ 163,427,267 $ 117,935,787 $ 80,730,152 N. Summary of Miscellaneous Plan and Safety Plan Amounts Net Pension Liability
Deferred Outflows of
Resources
Deferred
Inflows of
Resources Expenses
Miscellaneous Plan $ 43,636,712 $ 6,953,932 $ - $ 6,343,373 Safety Plan 117,935,787 36,188,913 3,592,540 38,509,478 Total $ 161,572,499 $ 43,142,845 $ 3,592,540 $ 44,852,851

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 10 - DEFINED BENEFIT PENSION PLAN (CONTINUED)
107
A. Plan Description
In addition to providing pension benefits, the City provides medical insurance for certain employees after they separate from the City, through an agent multiple employer defined benefit plan (Plan) as provided under the City’s contractual agreements with members from each bargaining unit. Members who retire from the City on or after attaining the age of 50 with at least five years of service are eligible for these benefits.

B. Benefits Provided
The City opened a trust starting fiscal year 2025. Asset information can be found in the PARS “Public Agencies Post-Employment Benefits Trust Schedule of Changes in Fiduciary Net Position by Subaccount” (audited asset statement) for the year ended June 30, 2024.

C. Employees Covered by Benefit Terms
Inactive members currently receiving benefits 228
Inactive members entitled to but not yet receiving benefits 104 Active members 229
Total 561
D. Net OPEB Liability
The City’s net OPEB liability of $21,000,557 was measured as of June 30, 2024, and was determined by an actuarial valuation as of June 30, 2023. A summary of principal assumptions and methods used to determine the net OPEB liability is shown below.

Actuarial Assumptions and Other Inputs – The net OPEB liability in the June 30, 2023 actuarial valuation was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement:

Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 3.93%
Inflation 2.50%
Payroll Growth 2.75%
Mortality (1)
Healthcare Trend Rate Non-Medicare - 8.5% for 2025, decreasing to an ultimate rate of 3.45% in 2076
Medicare (Non-Kaiser) - 7.50% for 2025, decreasing to an ultimate rate of 3.45% in 2076
Medicare (Kaiser) - 6.25% for 2025, decreasing to an
ultimate rate of 3.45% in 2076
PEMHCA 3.50% annually
Participation at Retirement Actives: 60%
Retirees: 100% if covered, 5% re-elect at age 65 if waved and under 65
(1) Mortality projected fully generational with Scale MP-2021.

E. Changes of Assumptions
For the June 30, 2024 measurement date, the discount rate was changed from 3.65% to 3.93%.

CITY OF BREA

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2025
NOTE 11 - OTHER POST-EMPLOYMENT BENEFITS
108
F. Change in the Net OPEB Liability
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
(a) (b) (c) = (a) - (b)
Balance at June 30, 2024 $ 21,951,211 $ - $ 21,951,211
Changes recognized for the
measurement period
Service cost 606,145 - 606,145
Interest on net OPEB liability 800,332 - 800,332
Changes of assumptions (670,222) - (670,222)
Contributions-employer - 1,699,267 (1,699,267)
Net investment income - 1,051 (1,051)
Benefit payments, including refunds of
employee contributions (1,260,893) (1,260,893) -
Administrative expense - (13,409) 13,409
Net changes during 2024-25 (524,638) 426,016 (950,654)
Balance at June 30, 2025 $ 21,426,573 $ 426,016 $ 21,000,557 Sensitivity of the net OPEB Liability to Changes in the Discount Rate – The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is 1 percentage-point lower (2.93%) or 1 percentage-point higher (4.93%) than the current discount rate:

Discount Rate -1% Current Discount Discount Rate +1%
(2.93%) Rate (3.93%) (4.93%)
Plan's net OPEB liability/(asset) $ 23,569,830 $ 21,000,557 $ 18,871,371 Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates – The following presents the Net OPEB liability of the City, as well as what the City’s Net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates:
1% Current Healthcare 1%
Decrease Trend Rate Increase
Plan's net OPEB liability/(asset) $ 19,848,371 $ 21,000,557 $ 22,945,235

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 11 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
109
G. OPEB Expense and Deferred Outflow/Inflows of Resources Related to OPEB For the year ended June 30, 2025, the City recognized OPEB expense of $387,535. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Amount paid by the employer from OPEB as the benefits come due subsequent to the measurement date $ 1,296,791 $ -
Changes of assumptions 840,526 4,495,165
Differences between expected and actual experience - 1,444,084 Total $ 2,137,317 $ 5,939,249
The $1,296,791 reported as deferred outflows of resources related to benefits paid subsequent to the measurement date will be recognized as a reduction of the Net OPEB liability in the year ended June 30, 2026.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ending June 30, Amortization
2026 $ (879,240)
2027 (1,620,365)
2028 (1,409,574)
2029 (827,416)
2030 (301,200)
Thereafter (60,928)
Total $ (5,098,723)

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 11 - OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
110
The City is a member of the California Insurance Pool Authority (CIPA). CIPA, a consortium of 14 cities in Los Angeles County and Orange County, California, was established to pool resources, share risks, purchase excess insurance and to share costs for professional risk management and claims administration.

At June 30, 2025, the City was self-insured for workers' compensation up to $500,000 per occurrence and general liability and auto liability insurance up to $350,000 per occurrence. The coverage for general and auto liability extends to $20,000,000 per occurrence with a $20,000,000 annual pooled aggregate. Member agencies may be assessed the difference between funds available and the $20,000,000 annual pooled aggregate in proportion to its annual premium. There have been no significant reductions in pooled or insured liability coverage from coverage in the prior year.

At June 30, 2025, $5,688,694 has been accrued for general liability and workers' compensation claims in the Risk Management Internal Service Fund. These amounts represent estimates of amounts to be paid for reported claims and incurred but not yet reported claims based upon past experience, modified for current trends and information. While the ultimate amount of losses incurred through June 30, 2025, is dependent on future developments, based upon information from the City Attorney, the City's claims administrators and others involved with the administration of the programs, City management believes the accrual is adequate to cover such losses.

During the past three fiscal years, none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage.

Changes in the claims liability amounted to the following for the years ended June 30:

Claims and Judgements at June 30, 2023 $ 5,708,005
Claims Payments (1,816,455)
Claims Incurred and Changes in Estimates 931,402
Claims and Judgements at June 30, 2024 4,822,952
Claims Payments (1,903,043)
Claims Incurred and Changes in Estimates 2,768,785
Claims and Judgements at June 30, 2025 $ 5,688,694

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
NOTE 12 - SELF-INSURANCE PROGRAM
111
Fund balances in the governmental funds as of June 30, 2025, have been classified as follows:

Special Revenue Funds
Capital
Projects Fund
General
Affordable
Housing
Housing
Successor
Capital
Improvements
Total
Nonmajor
Funds
Total
Governmental
Funds
Nonspendable
Prepaid items $ 8,247 $ - $ - $ - $ - $ 8,247
Total nonspendable 8,247 - - - - 8,247
Restricted
Prop 172 1,322,963 - - - - 1,322,963
COPS 313,589 - - - - 313,589
Lighting and Maintenance Districts 600,241 - - - - 600,241 Low and Moderate Income Housing Asset - 4,581,584 19,362,675 - - 23,944,259 Gas Tax - - - - 7,231,645 7,231,645
Narcotic Enforcement Asset Seizure - - - - 452,180 452,180 Air Quality Improvement - - - - 291,802 291,802
Park Development - - - - 2,463,312 2,463,312
Measure M - - - - 3,938,091 3,938,091
Blackstone CFD - - - - 2,627,999 2,627,999
La Floresta CFD - - - - 525,219 525,219
Taylor-Morrison CFD - - - - 148,118 148,118
Central Park Village CFD - - - - 250,401 250,401
National Opioid Settlement - - - - 704,659 704,659
Capital and Mitigation Improvement - - - - 1,621,000 1,621,000 Storm Drain - - - - 372,719 372,719
Capital Projects - - - 5,004,133 - 5,004,133
Pension Stabilization 11,751,947 - - - - 11,751,947
Total restricted 13,988,740 4,581,584 19,362,675 5,004,133 20,627,145 63,564,277 Committed
General Plan Maintenance Fee 1,561,209 - - - - 1,561,209 Brea War Memorial 17,480 - - - - 17,480
Total committed 1,578,689 - - - - 1,578,689
Assigned to
Community Benefit and Economic Development 1,143,030 - - - - 1,143,030 OPEB 606,373 - - - - 606,373
Community Center 807,181 - - - - 807,181
Capital Asset Replacement 3,969,621 - - - - 3,969,621
Encumbrances 949,202 - - - - 949,202
Total assigned 7,475,407 - - - - 7,475,407
Unassigned
General Fund 31,409,654 - - - - 31,409,654
Nonmajor Governmental Funds (deficit) - - - - (935,102) (935,102) Total unassigned 31,409,654 - - - (935,102) - 30,474,552 Total fund balances (deficits) $ 54,460,737 $ 4,581,584 $ 19,362,675 $ 5,004,133 $ 19,692,043 $ 103,101,172

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 13 - FUND BALANCE CLASSIFICATION
112
The following material construction and other significant commitments existed at June 30, 2025:

Project
Contract
Amount
Expenditures to
date as of June
30, 2025
Remaining
Commitment
Capital Improvements Fund
57 Freeway & Lambert Road $ 511,830 $ 457,599 $ 54,231
Imperial/SR57 Interchange 688,720 487,264 201,456
Citywide Slurry Seal Program 389,830 378,902 10,928
Birch St Improv Associated To Valencia 1,277,599 840,781 436,818 ICC Citywide Camera Network 259,880 225,592 34,288
Arovista Park Modernization 19,505,419 8,589,884 10,915,535 Total $ 22,633,278 $ 10,980,022 $ 11,653,256
Encumbrances
Encumbrance accounting is utilized to the extent necessary to assure effective budgetary control and accountability and to facilitate effective cash planning and control. At year end, the amount of encumbrances expected to be honored upon performance by the vendor in the next year were as follows:

Fund Encumbrances
General Fund $ 1,968,638
Low and Moderate Income Housing Fund 9,961
Capital Improvements Fund 12,378,647
Nonmajor Funds 602,238
Total $ 14,959,484
NOTE 15 - CONTINGENCIES
The City is a defendant in several pending lawsuits of a nature common to many similar jurisdictions. City management estimates that the potential claims against the City not covered by insurance resulting from such litigation would not materially affect the financial position of the City.

The City incurs various costs under federal and state grant reimbursement programs and records the related revenue and receivables for grant claims. Such grant claims are subject to final audit by federal and state agencies.

NOTE 16 - JOINTLY GOVERNED ORGANIZATIONS
Orange County City Managers Association (OCCMA)
The City is a member of the Orange County City Managers Association (OCCMA). OCCMA is an organization that provides a platform for City Managers to learn best practices, collaborate and share ideas. The City was appointed to serve as Treasurer and assumed administrative responsibilities of OCCMA. Therefore, OCCMA activities are reported as a custodial fund of the City. For the fiscal year ended June 30, 2025, the City received $2,328 for assisting with Treasury functions.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 14 - CONSTRUCTION AND OTHER SIGNIFICANT COMMITMENTS 113
North Orange County Public Safety Collaboration (NOC)
The City is a member of the North Orange County Public Safety Collaborative (NOC), along with 11 other cities.

The NOC was established to spend state funds in accordance with Assembly Bill (AB) 97, an act of the State Legislature to address youth violence prevention and intervention in K-12 schools; promote and enhance the successful reentry of offenders into the community and to address homeless outreach and intervention efforts.

Beginning July 1, 2022, the City was appointed as the fiscal agent for the $8,000,000 grant to continue the NOC efforts through June 30, 2026, of which, the City receives $800,000 for grant administration during the grant period.

Integrated Law and Justice Agency of Orange County (ILJAOC) The City is a member of the Integrated Law and Justice Agency of Orange County (ILJAOC), along with 24 other cities and local law enforcement agencies. The purpose of ILJAOC is to facilitate and share criminal justice information and data among the member agencies. The Agency has a twelve-member Board of Directors. The City was appointed to serve as Treasurer/Controller and assumed administrative responsibilities of ILJAOC.

Therefore, the activities of ILJAOC are reported as a custodial fund of the City. During the year ended June 30, 2025, ILJAOC paid $67,321 to the City for its share of operating and replacement costs. The City paid $21,468 in membership fees to ILJAOC. Separately prepared financial statements for ILJAOC are available on the City’s website.

NOTE 17 - SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY On December 29, 2011, the California Supreme Court upheld Assembly Bill X1 26 (the Bill) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On August 25, 2011, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City resolution number 2011-085.

Each year, the successor agency is allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full, and all assets have been liquidated.

Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012. After the date of dissolution, the assets and activities of the dissolved redevelopment agency are reported in a fiduciary fund (private purpose trust fund) in the financial statements of the City.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
NOTE 16 - JOINTLY GOVERNED ORGANIZATIONS (CONTINUED)
114
A. Cash and Investments
Cash and investments reported in the accompanying financial statements consisted of the following:

Cash and Investments $ 1,136,317
Cash and Investments with Fiscal Agents 12,292,217
Total cash and investments $ 13,428,534
B. Long-Term Debt
A description of long-term debt outstanding (excluding defeased debt) of the Successor Agency as of June 30, 2025, follows:

Amount
Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Tax Allocation Bonds
2003 Tax Allocation Bonds $ 17,125,412 $ 897,861 $ - $ 18,023,273 $ - 2013 Tax Allocation Bonds 20,765,000 - (6,610,000) 14,155,000 6,920,000 2016 Tax Allocation Bonds Series A 3,305,000 - (1,085,000) 2,220,000 1,120,000 2016 Tax Allocation Bonds Series B 490,000 - (160,000) 330,000 165,000 2017 Tax Allocation Bonds Series A 33,589,618 - (760,000) 32,829,618 795,000 2017 Tax Allocation Bonds Series B 10,110,000 - (1,750,000) 8,360,000 1,795,000 Subtotal $ 85,385,030 $ 897,861 $ (10,365,000) $ 75,917,891 $ 10,795,000 Unamortized Bond Discounts and Premiums 1,836,966
Total $ 77,754,857

1. Tax Allocation Bonds
2003 Tax Allocation Bonds
In July 2003, the former Brea Redevelopment Agency issued $120,497,866 principal amount of 2003 Redevelopment Project AB Tax Allocation Bonds. The proceeds were used to: 1) current refund the Brea Redevelopment Agency 1993 Tax Allocation Refunding Bonds, 2) pay the costs of additional redevelopment activities with respect to Project Area AB, 3) pay the cost of a reserve fund security instrument, and 4) pay costs of issuance related to the bonds.

Bonds in the years 2014 to 2026 are current interest bonds payable with no annual installments, while bonds maturing in the years 2028 to 2030 are capital appreciation bonds payable August 1 in annual installments of $2,151,714 to $1,801,707. Bonds maturing in the years 2027, 2031 and 2032, in the amount of $16,475,000 are term bonds.

The current interest bonds bear interest at 4.450% due February 1 and August 1, of each year. The term bonds bear interest at 4.45% and are due August 1, 2032. The capital appreciation bonds have a face value of $22,640,000. By its nature, there are no regular interest payments associated with capital appreciation bonds.

The "interest" on the debt results from the difference between the amounts paid by the investors when the debt was issued and the significantly larger value at maturity. The $22,640,000 of face value capital appreciation bonds were initially recorded at the amount of proceeds received, $5,987,866. Each year, the outstanding balance is increased for the accretion of interest associated with the bonds.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 17 - SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY (CONTINUED) 115
A financial guaranty insurance policy has been issued and, accordingly, no cash reserve balance is required.

Bond payments are secured by a first pledge on all of the tax revenues on parity with the 2013 and 2017 bonds.

In November 2017, the Successor Agency to the Brea Redevelopment Agency issued 2017 Tax Allocation Refunding Bonds, Series A of which a portion of the proceeds was used to redeem the term bonds portion of the outstanding balance of the 2003 Tax Allocation Bonds. Upon issuance of the 2017 A Bonds, a portion of the sale proceeds was transferred to the 2003 Escrow fund. On the redemption date, moneys deposited in the escrow fund were used to pay the redemption price for the refunded bonds totaling $16,475,000. As a result, except for the capital appreciation bonds, the liability for the term bonds has been removed. During fiscal year 2024-2025, the outstanding balance was increased for the accretion of interest associated with the bonds. The outstanding balance of the capital appreciation bonds at June 30, 2025, was $18,023,273. 2013 Tax Allocation Refunding Bonds
In December 2013, the Successor Agency to the Brea Redevelopment Agency issued its $96,620,000 Successor Agency to the Brea Redevelopment Agency Redevelopment Project AB 2013 Tax Allocation Refunding Bonds to refund the outstanding balance of the Brea Redevelopment Agency 2001 Tax Allocation Refunding Bonds, Series A in the amount of $36,205,000 and to refund the current interest bonds and term bonds outstanding of the 2003 Tax Allocation Bonds in the amount of $68,390,000. Upon issuance of the 2013 Bonds, a portion of the sale proceeds of the 2013 Bonds was transferred to the 2001A Escrow Fund and to the 2003 Escrow Fund. On the Redemption Date, moneys deposited in the Escrow Funds were used to pay the redemption price for the Refunded Bonds.

Bonds maturing in the years 2014 to 2026 are payable on August 1, of each year with remaining principal retirements ranging from $1,500,000 to $7,150,000. The remaining interest rates on the bonds is between 3.50% to 5.00%.

A financial guaranty insurance policy has been issued and, accordingly, no cash reserve balance is required.

Bond payments are secured by a first pledge on all tax revenues on parity with the 2003 and 2017 Tax Allocation Bonds. The outstanding balance at June 30, 2025, was $14,155,000. 2016 Tax Allocation Refunding Bonds, Series A and B
In November 2016, the Successor Agency to the Brea Redevelopment Agency issued its 2016 Tax Exempt Tax Allocation Refunding Bonds, Series A and 2016 Taxable Tax Allocation Refunding Bonds, Series B in the amount of $10,425,000 and $1,540,000 respectively. The proceeds of the bonds were used to currently refund the Public Financing Authority’s outstanding 2008 Tax Exempt Tax Allocation Revenue Bonds, Series A in the amount of $12,260,000 and to advance refund the outstanding 2008 Tax Allocation Revenue Bonds, Series B in the amount of $1,450,000.

The Series A Serial Bonds totaling $10,425,000 have remaining principal repayments ranging from $1,055,000 to $1,120,000 with interest rates ranging from 2.00% to 4.00%. The outstanding balance at June 30, 2025 was $2,220,000.

The Series B Serial Bonds totaling $1,540,000 have remaining principal repayment ranging from $155,000 to $165,000 with interest rates ranging from 1.25% to 4.00%. The outstanding balance at June 30, 2025 was $330,000.

A financial guaranty insurance policy has been issued and, accordingly, no cash reserve balance is required.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 17 - SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY (CONTINUED) 116
2017 Tax Allocation Refunding Bonds, Series A and B
In November 2017, the Successor Agency to the to the Brea Redevelopment Agency issued its 2017 Tax Exempt Tax Allocation Refunding Bonds, Series A and 2017 Taxable Tax Allocation Refunding Bonds, Series B in the amount of $32,838,802 and $13,070,000 respectively. The proceeds of the bonds were used to currently refund the term bonds portion of the former Brea Redevelopment Agency 2003 Tax Allocation Bonds in the amount of $16,475,000 and to advance refund the former Brea Redevelopment Agency’s outstanding 2011 Tax Exempt Tax Allocation Bonds, Series A in the amount of $27,019,865 and 2011 Taxable Tax Allocation Bonds, Series B in the amount of $9,940,000.

The Series A Serial Bonds totaling $19,315,000 have principal repayments ranging from $50,000 to $6,665,000 with interest rates at 5.000% for all bonds.

The Series A Convertible Capital Appreciation Bonds have a face value of $16,080,000. By its nature, there are no regular interest payments associated with capital appreciation bonds. The “interest” on the debt results from the difference between the amounts paid by the investors when the debt was issued and the significantly larger value at maturity. The $16,080,000 of face value capital appreciation bonds were initially recorded at the amount of proceeds received, $13,523,802. Each year, the outstanding balance is increased for the accretion of interest associated with the bonds.

The outstanding balance of the Series A Bonds at June 30, 2025 was $32,829,618.

The Series B Serial Bonds totaling $9,330,000 have principal repayments ranging from $385,000 to $1,795,000 with interest rates ranging from 1.500% to 3.000%.

The Series B Term Bonds totaling $3,740,000 have payments due in 2032 for $2,665,000 with interest at 3.375% and in 2036 for $1,075,000 with interest at 3.625%.

The outstanding balance of the Series B Bonds at June 30, 2025 was $8,360,000.

A financial guaranty insurance policy has been issued and, accordingly, no cash reserve balance is required.

Bond payments are secured by a first pledge on all tax revenues on parity with the 2003 and 2013 bonds.

The debt service schedules of these Tax Allocation Bonds are as follows:

Year Ending June 30, Principal Interest Total
2026 $ 10,795,000 $ 2,412,156 $ 13,207,156
2027 9,890,000 1,988,538 11,878,538
2028 8,100,000 1,597,563 9,697,563
2029 8,460,012 2,631,260 11,091,272
2030 7,324,015 2,894,401 10,218,416
2031-2035 28,268,864 5,767,112 34,035,976
2036-2040 3,080,000 152,448 3,232,448
Totals $ 75,917,891 $ 17,443,478 $ 93,361,369

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 17 - SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY (CONTINUED) 117

2. Pledged Revenues – Tax Allocation Bonds
The Successor Agency to the to the Brea Redevelopment Agency pledged, as security for bonds issued, either directly or through the Financing Authority, a portion of tax increment revenue (including Low and Moderate Income Housing set-aside and pass through allocations) that it receives. The bonds issued were to provide financing for various capital projects, accomplish Low and Moderate Income Housing projects and to defease previously issued bonds. Assembly Bill X1 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency.

Total principal and interest remaining on the debt is $93,361,369, with annual debt service requirements indicated above. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of indebtedness incurred by the dissolved redevelopment agency was $13,488,452 and the debt service obligation was $13,280,633.

3. Non-Commitment Multifamily Housing Revenue Bonds
In July 2010, the Successor Agency to the to the Brea Redevelopment Agency, on behalf of Tonner Hills Housing Partners, LP (the “Borrower”), was authorized to issue $5,858,319 and $7,741,681 Brea Redevelopment Agency Multifamily Housing Revenue Bonds (Tonner Hills Apartment Homes) 2010 Series A-1 and A-2, respectively, for the purpose of providing funding necessary for the acquisition, construction and equipping of a 94-unit multifamily rental housing project in the City. The Agency and the Borrower also entered into a non-interest bearing loan agreement in amount of $1,200,000. These bonds are not the obligations of the Agency and will be paid solely from future rent revenue. The outstanding balance is determined when a construction draw requisition is submitted to the bank for payment, limited up to the authorized amounts for each of the series. Currently, the bonds are only paying interest to bondholders for debt service payments. When the bonds are converted, then the Borrower will pay principal and interest per bond conversion. The outstanding balance at June 30, 2025, was $3,137,590 for Series A-1.

H. Insurance
The Successor Agency of the former Redevelopment Agency is covered under the insurance policy of the City of Brea at June 30, 2025.

I. Deficit Net Position
As of June 30, 2025, the Agency had a deficit net position of $62,705,879. This will be reduced with future receipt of distributions from the Redevelopment Property Tax Trust Fund from the County.

NOTE 18 - ADJUSTMENTS AND RESTATEMENTS OF BEGINNING BALANCES Change in Accounting Principle
During the current year, the City implemented GASB Statement No. 101, Compensated Absences. In addition to the value of unused vacation time owed to employees upon separation of employment, the City now recognizes an estimated amount of sick leave earned as of year-end that will be used by employees as time off in future years as part of the liability for compensated absences. The effects of the change in accounting principle are summarized below in the “Restatement - GASB 101 implementation” column in the table below.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 17 - SUCCESSOR AGENCY OF THE FORMER REDEVELOPMENT AGENCY (CONTINUED) 118
June 30, 2024
As Previously
Reported
Restatement
GASB 101
implementation
June 30, 2024
Restated
Internal service funds
Vehicle Replacement $ 7,186,287 $ (141,380) $ 7,044,907 Building Occupancy 27,313 (108,202) (80,889)
Total internal service funds $ 7,213,600 $ (249,582) $ 6,964,018 Government-wide
Governmental activities $ 207,586,819 $ (3,430,668) $ 204,156,151 Internal service funds 7,997,953 (249,582) 7,748,371
Total government-wide $ 215,584,772 $ (3,680,250) $ 211,904,522 Proprietary funds
Major funds
Water Utility $ 92,723,218 $ (393,232) $ 92,329,986
Sewer Utility 24,622,178 (158,032) 24,464,146
Nonmajor funds 11,915,356 (147,074) 11,768,282
Total proprietary funds $ 129,260,752 $ (698,338) $ 128,562,414 NOTE 19 - SUBSEQUENT EVENTS
The City evaluated subsequent events for recognition and disclosure through December 8, 2025, the date on which these financial statements were available to be issued. Management concluded that no material subsequent events have occurred since June 30, 2025 that required recognition or disclosure in these financial statements.

CITY OF BREA, CALIFORNIA
Notes to the Basic Financial Statements
For The Year Ended June 30, 2025
NOTE 18 - ADJUSTMENTS AND RESTATEMENTS OF BEGINNING BALANCES 119

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120
Required Supplementary Information
121
Schedule of Changes in the Net Pension Liability and Related Ratios - Miscellaneous Plan 2025 2024 2023 2022
Measurement Date 6/30/2024 6/30/2023 6/30/2022 6/30/2021

TOTAL PENSION LIABILITY
Service cost $ 2,655,175 $ 2,570,196 $ 2,507,756 $ 2,292,411 Interest on total pension liability 11,852,881 11,511,001 11,062,559 10,893,584 Changes of benefit terms - 238,052 - -
Changes of assumptions - - 4,989,438 -
Difference between expected and actual experience 239,349 1,787,357 (1,925,595) 230,181 Benefit payments, including refunds of employee contributions (9,228,776) (9,587,727) (8,667,849) (8,108,945) Net change in total pension liability 5,518,629 6,518,879 7,966,309 5,307,231 Total pension liability-beginning 174,828,327 168,309,448 160,343,139 155,035,908 Total pension liability-ending (a) 180,346,956 174,828,327 168,309,448 160,343,139

PLAN FIDUCIARY NET POSITION
Contributions-employer 5,105,584 4,957,441 4,491,118 4,297,066 Contributions-employee 1,262,034 1,058,108 1,028,136 1,029,029 Net investment income 12,221,313 7,733,265 (10,262,883) 25,693,669 Benefit payments, including refunds of employee contributions (9,228,776) (9,587,727) (8,667,849) (8,108,945) Net plan to plan resource movement - - - -
Administrative expense (103,710) (90,730) (85,268) (113,962) Other miscellaneous income/(expense) - - - -
Net change in fiduciary net position 9,256,445 4,070,357 (13,496,746) 22,796,857 Plan fiduciary net position-beginning 127,453,799 123,383,442 136,880,188 114,083,331 Plan fiduciary net position-ending (b) 136,710,244 127,453,799 123,383,442 136,880,188 Net pension liability/(asset) (a) - (b) $ 43,636,712 $ 47,374,528 $ 44,926,006 $ 23,462,951 Plan fiduciary net position as a percentage of the total pension liability 75.80% 72.90% 73.30% 85.40%
Covered-employee payroll $ 16,471,311 $ 15,436,610 $ 12,313,380 $ 15,083,837 Plan net pension liability/(asset) as a percentage of coveredemployee payroll 264.93% 306.90% 364.90% 155.60% Notes to Schedule of Changes in the Net Pension Liability and Related Ratios:

Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date. However, offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary.

Changes of Assumptions: There were no assumption changes in 2023 or 2024. Effective with the June 30, 2021, valuation date (June 30, 2022, measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. In addition, demographic assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates June 30, 2017, through June 30, 2021, and

7.65% for measurement dates June 30, 2015, through June 30, 2016.

CITY OF BREA, CALIFORNIA
Schedule of Changes in the Net Pension Liability and Related Ratios Miscellaneous Plan
As of June 30, for the Last Ten Fiscal Years
122
2021 2020 2019 2018 2017 2016
6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 $ 2,377,727 $ 2,331,399 $ 2,447,787 $ 2,355,806 $ 2,046,427 $ 2,062,984 10,517,185 10,290,427 9,781,021 9,338,038 9,044,787 8,692,445 - - - - - -
- - (670,255) 7,763,702 - (2,142,611)
(2,276,288) 1,588,377 1,347,129 (972,574) (950,961) (1,784,268) (7,527,291) (6,867,189) (6,401,688) (6,040,591) (5,294,666) (5,086,167) 3,091,333 7,343,014 6,503,994 12,444,381 4,845,587 1,742,383 151,944,575 144,601,561 138,097,567 125,653,186 120,807,599 119,065,216 155,035,908 151,944,575 144,601,561 138,097,567 125,653,186 120,807,599 3,946,996 3,351,489 2,943,356 2,810,705 2,403,298 2,132,083 1,078,029 1,063,078 1,141,012 1,135,787 1,071,389 1,087,960 5,601,590 6,920,527 8,532,272 10,371,791 510,663 2,130,803 (7,527,291) (6,867,189) (6,401,688) (6,040,591) (5,294,666) (5,086,167) - - 8,966 (68,950) - -
(156,681) (76,178) (157,356) (137,174) (57,456) (106,071) - 248 (298,822) - - -
2,942,643 4,391,975 5,767,740 8,071,568 (1,366,772) 158,608 111,140,688 106,748,713 100,980,973 92,909,405 94,276,177 94,117,569 114,083,331 111,140,688 106,748,713 100,980,973 92,909,405 94,276,177 $ 40,952,577 $ 40,803,887 $ 37,852,848 $ 37,116,594 $ 32,743,781 $ 26,531,422

73.60% 73.10% 73.80% 73.10% 73.90% 78.00%
$ 15,618,412 $ 15,187,853 $ 15,773,914 $ 16,716,903 $ 15,474,119 $ 15,043,603 262.20% 268.70% 240.00% 222.00% 211.60% 176.40%
123
Schedule of Changes in the Net Pension Liability and Related Ratios - Safety Plan 2021 2020 2019 2018
Measurement Date 6/30/2020 6/30/2019 6/30/2018 6/30/2017

TOTAL PENSION LIABILITY
Service cost $ 3,203,351 $ 3,263,982 $ 3,257,422 $ 3,216,910 Interest on total pension liability 18,915,355 18,359,943 17,527,382 16,994,058 Changes of assumptions - - (743,259) 14,075,011
Difference between expected and actual experience (31,244) 3,599,666 (224,664) (2,374,086) Benefit payments, including refunds of employee contributions (14,387,531) (13,201,232) (12,285,824) (11,322,632) Net change in total pension liability 7,699,931 12,022,359 7,531,057 20,589,261 Total pension liability-beginning 270,173,742 258,151,383 250,620,326 230,031,065 Total pension liability-ending (a) 277,873,673 270,173,742 258,151,383 250,620,326

PLAN FIDUCIARY NET POSITION
Contributions-employer 7,928,182 6,943,831 6,122,219 5,562,362 Contributions-employee 1,219,554 1,090,070 1,117,627 1,103,737 Net investment income 8,890,536 11,226,191 13,829,770 16,755,962 Benefit payments, including refunds of employee contributions (14,387,531) (13,201,232) (12,285,824) (11,322,632) Net plan to plan resource movement - - (9,613) 68,950
Administrative expense (249,637) (122,130) (254,161) (223,176) Other miscellaneous income/(expense) - 399 (482,656) -
Net change in fiduciary net position 3,401,104 5,937,129 8,037,362 11,945,203 Plan fiduciary net position-beginning 177,078,406 171,141,277 163,103,915 151,158,712 Plan fiduciary net position-ending (b) 180,479,510 177,078,406 171,141,277 163,103,915 Net pension liability/(asset) (a) - (b) $ 97,394,163 $ 93,095,336 $ 87,010,106 $ 87,516,411 Plan fiduciary net position as a percentage of the total pension liability 65.00% 65.50% 66.30% 65.10%
Covered-employee payroll $ 11,736,459 $ 11,724,815 $ 11,688,892 $ 10,703,998 Plan net pension liability/(asset) as a percentage of coveredemployee payroll 829.80% 794.00% 744.40% 817.60% Notes to Schedule of Changes in the Net Pension Liability and Related Ratios:

Benefit Changes: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the measurement date. However, offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the valuation date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary.

Changes of Assumptions: None in 2020-2022. In 2019, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Assumptions December 2017. There were no changes in the discount rate. In 2017, the discount rate was reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.50% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2015, amounts reported were based on the 7.50% discount rate. 1 Fiscal year 2015 was the first year of GASB Statement No. 68 implementation. 2 Fiscal year 2022, the City's safety plan was transferred to the CalPERs Cost-Sharing Safety Plan

CITY OF BREA, CALIFORNIA
Schedule of Changes in the Net Pension Liability and Related Ratios Safety Plan
As of June 30, for the Last Ten Fiscal Years1
124
2017 2016 2015
6/30/2016 6/30/2015 6/30/2014
$ 2,745,588 $ 2,865,433 $ 3,080,297
16,654,242 16,223,231 15,749,580
- (3,994,113) -
(2,403,349) (2,307,435) -
(11,396,941) (10,585,623) (10,108,174)
5,599,540 2,201,493 8,721,703
224,431,525 222,230,032 213,508,329
230,031,065 224,431,525 222,230,032
4,627,179 3,591,767 3,655,839
973,955 1,084,088 1,024,137
746,473 3,517,885 24,058,889
(11,396,941) (10,585,623) (10,108,174)
- - -
(95,259) (175,877) -
- - -
(5,144,593) (2,567,760) 18,630,691
156,303,305 158,871,065 140,240,374
151,158,712 156,303,305 158,871,065
$ 78,872,353 $ 68,128,220 $ 63,358,967

65.70% 69.60% 71.50%
$ 10,168,516 $ 9,980,447 $ 9,919,059
775.70% 682.60% 638.80%
125
Schedule of Proportionate Share of Net Pension Liability - Safety Plan Proportionate Share Plan's Fiduciary
Proportion of the Proportionate of the Net Pension Net Position as a Reporting Date 1 Net Pension Share of Net Liability as a % of % of the Total as of June 30, Liability Pension Liability Covered Payroll Covered Payroll Pension Liability Safety Plan
2025 1.6176% $ 117,935,787 $ 16,388,159 719.6% 64.59%
2024 1.5943% 119,172,727 13,841,154 861.0% 62.70%
2023 1.6399% 112,689,685 14,012,786 804.2% 71.40%
2022 2.1028% 73,798,584 11,367,662 649.2% 63.1%
Notes to Schedule of Proportionate Share of the Net Pension Liability:

Benefit Changes: None
Changes of Assumptions: None
1 The proportions and proportionate share of the net pension liability are measured as of one year behind the reporting date.

Refer to notes to basic financial statements.
2 Fiscal year 2022 was the first year of the City's cost-sharing safety plan.

CITY OF BREA, CALIFORNIA
Schedule of Proportionate Share of Net Pension Liability As of June 30, for the Last Ten Fiscal Years 2
126
Schedule of Plan Contributions - Miscellaneous and Safety Plans Miscellaneous Plan
2025 $ 4,788,000 $ 4,788,000 $ - $ 15,061,990 31.8%
2024 4,223,828 4,223,828 - 14,464,071 29.2%
2023 4,086,520 4,086,520 - 12,712,806 32.1%
2022 3,707,509 3,707,509 - 12,313,380 30.1%
2021 3,578,109 3,578,109 - 15,083,837 23.7%
2020 3,228,649 3,228,649 - 15,618,412 20.7%
2019 2,802,915 2,802,915 - 15,187,853 18.5%
2018 2,433,536 2,433,536 - 15,773,914 15.4%
2017 2,279,397 2,279,397 - 16,716,903 13.6%
2016 2,403,298 2,403,298 - 15,474,119 15.5%
Safety Plan
2025 $ 13,554,001 $ 13,554,001 $ - $ 18,212,969 74.4%
2024 11,850,759 11,850,759 - 16,388,159 72.3%
2023 11,215,589 11,215,589 - 13,841,154 81.0%
2022 10,200,946 10,200,946 - 14,012,786 72.8%
2021 9,453,973 9,453,973 - 11,367,662 83.2%
2020 8,657,724 8,657,724 - 11,736,459 73.8%
2019 7,500,416 7,500,416 - 11,724,815 64.0%
2018 6,573,125 6,573,125 - 11,688,892 56.2%
2017 5,863,082 5,863,082 - 10,703,998 54.8%
2016 4,627,179 4,627,179 - 10,168,516 45.5%
Fiscal Year Actuarially Actual Contribution Contribution as a Ending Determined Employer Deficiency Covered % of Covered June 30, Contribution Contributions (Excess) Payroll Payroll Notes to Schedule of Plan Contributions
Miscellaneous and Safety Plans
Actuarial cost method Entry Age Normal Cost Method
Amortization method Level Percent of Payroll
Asset valuation method Fair value
Inflation 2.30%
Salary increases Varies by Entry Age and Service
Payroll growth 2.80%
Investment rate of return 6.80%, net of pension plan investment and administrative expenses, includes inflation.

Retirement age The probabilities of retirement are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

Mortality The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

CITY OF BREA, CALIFORNIA
Schedule of Plan Contributions - Miscellaneous and Safety Plans As Of June 30, For The Last Ten Fiscal Years
127
Schedule of Plan Changes in Net OPEB Liability and Related Ratios 2025 2024 2023 2022
Measurement Date 6/30/2024 6/30/2023 6/30/2022 6/30/2021

TOTAL OPEB LIABILITY
Service cost $ 606,145 $ 723,690 $ 994,959 $ 1,123,147
Interest on total pension liability 800,332 881,363 638,376 679,725 Changes of assumptions (670,222) (1,561,914) (4,765,135) (1,005,114) Difference between expected and actual experience - (1,632,463) - (628,511) Benefit payments, including refunds of employee contributions (1,260,893) (1,266,048) (1,242,198) (1,244,546) Net change in total OPEB liability (524,638) (2,855,372) (4,373,998) (1,075,299) Total OPEB liability-beginning 21,951,211 24,806,583 29,180,581 30,255,880 Total OPEB liability-ending (a) $ 21,426,573 $ 21,951,211 $ 24,806,583 $ 29,180,581

PLAN FIDUCIARY NET POSITION
Contributions-employer 1,699,267 - - -
Contributions-employee - - - -
Net investment income 1,051 - - -
Benefit payments, including refunds of employee contributions (1,260,893) - - - Net plan to plan resource movement - - - -
Administrative expense (13,409) - - -
Other miscellaneous income/(expense) - - - -
Net change in fiduciary net position 426,016 - - -
Plan fiduciary net position-beginning - - - -
Plan fiduciary net position-ending (b) 426,016 - - -
Net OPEB liability/(asset) (a) - (b) $ 21,000,557 $ 21,951,211 $ 24,806,583 $ 29,180,581 Plan fiduciary net position as a percentage of the total OPEB liability 2% -% -% -%
Covered payroll $ 40,147,129 $ 27,929,541 $ 27,218,064 $ 26,326,166 Plan net OPEB liability/(asset) as a percentage of covered payroll 52.31% 78.60% 91.10% 110.80%
Notes to Schedule of Changes in the Net OPEB Liability and Related Ratios:

Benefit Changes: None
Changes in Assumptions: Discount rate was updated based on municipal bond rate as of the measurement date. 1 Fiscal year 2018 was the first year of implementation; therefore, only eight years are shown.

A trust was established during fiscal year 2025. As such, a schedule of fiduciary net position will be presented going forward.

CITY OF BREA, CALIFORNIA
Schedule of Changes in the Net OPEB Liability and Related Ratios As of June 30, For the Last Ten Fiscal Years1
128
2021 2020 2019 2018
6/30/2020 6/30/2019 6/30/2018 6/30/2017
$ 787,934 $ 849,287 $ 882,455 $ 1,020,496
884,296 1,000,101 936,624 801,573
4,760,345 976,091 (908,163) (2,488,279)
- (2,073,628) - -
(1,308,694) (1,225,956) (1,170,100) (1,146,800)
5,123,881 (474,105) (259,184) (1,813,010)
25,131,999 25,606,104 25,865,288 27,678,298
$ 30,255,880 $ 25,131,999 $ 25,606,104 $ 25,865,288
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
- - - -
$ 30,255,880 $ 25,131,999 $ 25,606,104 $ 25,865,288
-% -% -% -%
$ 27,571,820 $ 27,001,678 $ 27,465,185 $ 33,837,681
109.70% 93.10% 93.20% 76.40%
129
Schedule of Plan Contributions - OPEB Plan
Fiscal Year Actuarially Actual Contribution Contribution as a Ending Determined Employer Deficiency Covered % of Covered June 30, Contribution Contributions (Excess) Payroll Payroll 2025 $ 1,688,375 $ 1,296,791 $ 391,584 $ 40,147,129 3.2% 2024 1,699,267 1,699,267 - 27,929,541 6.1%
2023 1,266,048 1,266,048 - 27,218,064 4.7%
2022 1,247,940 1,247,940 - 26,326,166 4.7%
2021 1,249,898 1,249,898 - 27,571,820 4.5%
2020 1,314,118 1,314,118 - 27,001,678 4.9%
2019 1,230,660 1,230,660 - 27,465,185 4.5%
1 Historical information is required only for the measurement periods for which GASB 75 is applicable. Fiscal year 2018 was the first year of implementation. Future years' information will be displayed up to 10 years as information becomes available.

Notes to Schedule of Plan Contributions - OPEB Plan
*Actuarial methods and assumptions used to set the actuarially determined contribution for Fiscal Year 2024 were from the June 30, 2023 actuarial valuation.

Methods and assumptions used to determine contributions Discount Rate 6.25%
General Inflation 2.50% annually
Mortality, Retirement, Disability, Termination CalPERS 2000-2019 Experience Study Mortality Improvement Mortality projected fully generational with Scale MP-2021

CITY OF BREA, CALIFORNIA
Schedule of Plan Contributions - OPEB Plan
As of June 30, For the Last Ten Fiscal Years1
130
SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGETARY AND ACTUAL
131
General
Licenses and permits 403,429 403,429 393,256 (10,173)
Intergovernmental 16,053,355 16,631,852 16,864,156 232,304 Charges for services 5,866,802 5,866,802 6,498,550 631,748 Investment income, net 1,134,876 1,134,876 3,640,643 2,505,767 Fines and forfeitures 495,988 495,988 323,014 (172,974) Rental income 3,021,299 3,021,299 3,003,790 (17,509)
Other revenues 3,664,069 3,727,966 2,835,238 (892,728)
Total revenues 86,684,826 87,527,220 87,810,542 283,322

EXPENDITURES
Current
General government
City management 3,654,764 3,877,401 3,371,764 505,637
Administrative services 5,622,566 5,831,821 5,425,927 405,894 Public safety
Police 29,833,042 30,140,167 29,679,245 460,922
Fire 20,585,322 21,584,096 21,229,378 354,718
Community services 9,444,404 9,847,029 10,079,172 (232,143) Community development 3,559,428 4,986,765 3,289,247 1,697,518 Public works 7,970,810 8,403,838 7,577,676 826,162
Capital outlay 706,818 1,781,788 1,025,597 756,191
Debt service
Principal - - 144,239 (144,239)
Interest and fiscal charges 177,600 177,600 94,636 82,964 Total expenditures 81,554,754 86,630,505 81,916,881 4,713,624 Excess (deficiency) of revenues
over (under) expenditures 5,130,072 896,715 5,893,661 4,996,946

OTHER FINANCING SOURCES (USES)
Transfers in 3,754,276 3,999,364 600,000 (3,399,364)
Transfers out (4,801,600) (20,322,277) (7,315,226) 13,007,051 Proceeds from sale of capital assets 8,659 8,659 88,838 80,179 Leases and SBITAs issuance proceeds - - 231,951 231,951 Total other financing sources (uses) (1,038,665) (16,314,254) (6,394,437) 9,919,817 Net change in fund balances $ 4,091,407 $ (15,417,539) (500,776) $ 14,916,763 Fund balances-beginning 54,961,513
Fund balances-ending $ 54,460,737
Original Final
Actual
Amounts
Variance
with
Final Budget
Positive
(Negative)

REVENUES
Taxes $ 56,045,008 $ 56,245,008 $ 54,251,895 $ (1,993,113)

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual General
For The Year Ended June 30, 2025
132
Affordable Housing
Original Final
Actual
Amounts
Variance
with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ - $ 8,688,491 $ - $ (8,688,491)
Investment income, net 73,200 73,200 566,690 493,490
Other revenues 122,954 122,954 155,345 32,391
Total revenues 196,154 8,884,645 722,035 (8,162,610)

EXPENDITURES
Current
General government 3,600 3,600 24,740 (21,140)
Community development 27,432 9,115,923 15,240 9,100,683 Total expenditures 31,032 9,119,523 39,980 9,079,543
Net change in fund balances $ 165,122 $ (234,878) 682,055 $ 916,933 Fund balances-beginning 3,899,529
Fund balances-ending $ 4,581,584

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Affordable Housing
For The Year Ended June 30, 2025
133
Housing Successor
Original Final
Actual
Amounts
Variance
with
Final Budget
Positive
(Negative)

REVENUES
Investment income, net 103,000 103,000 298,438 195,438
Other revenues 41,900 41,900 126,226 84,326
Total revenues 144,900 144,900 424,664 279,764

EXPENDITURES
Current
General government 6,200 6,200 12,638 (6,438)
Community development 327,084 2,794,528 630,425 2,164,103 Total expenditures 333,284 2,800,728 643,063 2,157,665
Net change in fund balances $ (188,384) $ (2,655,828) (218,399) $ 2,437,429 Fund balances-beginning 19,581,074
Fund balances-ending $ 19,362,675

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Housing Successor
For The Year Ended June 30, 2025
134
Notes to Required Supplementary Information
135
General Budget Policies
The City adheres to the following procedures in establishing the budgetary data reflected in its financial statements:

1. The City adopted biennial budget covering the annual periods from July 1, 2023 through June 30, 2024 and July 1, 2024 through June 30, 2025.

2. In May of the budget cycle, the City Manager submits to the City Council a proposed financial plan with a biennial operating budget for the upcoming fiscal years commencing July 1. The operating budget includes proposed expenditures and the sources of financing.

3. Public hearings are conducted at City Council meetings to obtain taxpayer comments.

4. On or before July 1 of each odd year, the financial plan for the two fiscal years is adopted by Council action.

5. The City Manager is authorized to transfer funds appropriated with respect to those classifications designated as other services and material and supplies within the same fund. The City Manager may transfer appropriated funds from any classification within other expenditure categories to the capital outlay classification within the same fund only; however, any revisions that alter the total expenditures of any fund must be approved by the City Council. Activities of the General Fund, Special Revenue Funds and Capital Projects Funds are included in the biennial budget. As an additional internal control mechanism, projectlength financial plans are adopted for the Capital Improvement Program.

6. Formal budgetary integration is employed as a management control device during the two fiscal years for the governmental funds.

7. Legally adopted biennial budgets for all governmental funds are established on a basis consistent with generally accepted accounting principles (GAAP). For the current fiscal year, the HOME Program special revenue fund had not adopted budget.

NOTE 2 - EXCESS OF EXPENDITURES OVER APPROPRIATION
For purposes of evaluating legal compliance at the budgetary level of control (that is, the level at which expenditures cannot legally exceed the appropriated amount), control is established at the department level within the General Fund and at the fund level for total expenditures and transfers out for all other budgeted funds.

Excess of expenditures over appropriations per activity is as follows:

Fund Final Budget Expenditures Excess
Major Funds
General Fund
Community services $ 9,847,029 $ 10,079,172 $ (232,143) Debt service
Principal retirement - 144,239 (144,239)
Affordable Housing Fund
General government 3,600 24,740 (21,140)
Housing Successor
General government 6,200 12,638 (6,438)

CITY OF BREA, CALIFORNIA
Notes To Required Supplementary Information
For The Year Ended June 30, 2025
NOTE 1 - BUDGETARY INFORMATION
136

THIS PAGE INTENTIONALLY LEFT BLANK
137
Supplementary Information
138

THIS PAGE INTENTIONALLY LEFT BLANK
139
Capital Projects Fund
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budgetary and Actual Capital Improvements Fund
The Capital Improvements Fund is used to account for the costs of constructing street improvements, parks and other public improvements not normally included within the other Capital Projects Funds. Financing is provided by Federal, State, and County grant revenues and interfund transfers from the special revenue funds and General Fund.
140
Capital Improvement Fund
Original Final
Actual
Amounts
Variance
with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ - $ 11,361,768 $ 1,227,635 $ (10,134,133) Charges for services 31,758 31,758 307,687 275,929
Investment income, net 64,390 64,390 411,471 347,081
Other revenues 16,600 59,408 - (59,408)
Total revenues 112,748 11,517,324 1,946,793 (9,570,531)

EXPENDITURES
Current
General government 100,386 100,386 86,925 13,461
Public works 412,238 737,272 493,231 244,041
Capital outlay 7,555,000 56,580,368 10,866,620 45,713,748 Total expenditures 8,067,624 57,418,026 11,446,776 45,971,250 Excess (deficiency) of revenues
over (under) expenditures (7,954,876) (45,900,702) (9,499,983) 36,400,719

OTHER FINANCING SOURCES (USES)
Transfers in 7,755,000 45,728,512 8,493,963 (37,234,549) Transfers out (300,000) (4,700,524) - 4,700,524
Total other financing sources (uses) 7,455,000 41,027,988 8,493,963 (32,534,025) Net change in fund balance $ (499,876) $ (4,872,714) (1,006,020) $ 3,866,694 Fund balances-beginning 6,010,153
Fund balances-ending $ 5,004,133

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Capital Improvements
For The Year Ended June 30, 2025
141
Nonmajor Governmental Funds
Nonmajor Governmental Funds
Nonmajor Special Revenue Funds
Special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt services or capital projects.

The City of Brea has the following nonmajor Special Revenue Funds:

Gas Tax Fund
This fund is used to account for revenues received and expenditures made for street improvements and street maintenance. Financing is provided by the City’s share of state gasoline taxes made pursuant to the California State Constitution and authorized by the State Legislature.

Narcotics Enforcement Asset Seizure Fund
This fund is used to account for revenues seized by the Police Department during narcotic investigations.

Air Quality Improvement Fund
This fund is used to account for revenues received from vehicle registration fees and restricted for improvement of air quality.

Park Development Fund
This fund is used to account for revenues received and expenditures made for park development and improvement. The primary source of revenue is park development fees collected from developers under the State of California’s Quimby Act.

Measure M Fund
This fund is used to account for ½ cent sales tax restricted for expenditure for road maintenance and street expenditures.

Community Development Block Grant Fund
This fund is used to account for the revenues received and expenditures made for the City’s Community Development Block Grant Program. Financing is provided under an agreement with the County of Orange whereby the City is a secondary recipient of funds made available from the U.S. Department of Housing and Urban Development under the Housing and Community Development Act of 1974 and 1977.

HOME Program Fund
This fund is used for the revenues received and expenditures made for housing rehabilitation. Financing is provided under an agreement with the County of Orange whereby the City is a secondary recipient of funds made available from the U.S. Department of Housing and Urban Development.

Blackstone Community Facilities District (CFD) 2008-1 Fund The fund is used to account for the collection of special taxes and expenditures for police, fire, maintenance and general city services including park maintenance and open space.

La Floresta CFD 2011-1 Fund
This fund is used to account for the collection of special taxes and expenditures for police, fire, maintenance and general city services.
142
Taylor-Morrison CFD 2013-1 Fund
This fund is used to account for the collection of special taxes and expenditures for police, fire, maintenance and general city services.

Central Park Village CFD 2013-2 Fund
This fund is used to account for the collection of special taxes and expenditures for police, fire, maintenance and general city services.

Development Fund
This fund is used to account for the receipt and expenditure of developer fees. There was no adopted budget for the fund.

National Opioid Settlement Fund
This fund is used to account for revenues received from the State of California and are restricted for future opioid remediation and reimbursement of past opioid-related expenditures. There was no adopted budget for the fund.

Organized Retail Theft Grant Fund
This fund is used to account for the receipts and expenditures related to the Organized Retail Theft Prevention Grant Program with the State of California.

Nonmajor Capital Funds
Capital projects funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction of capital facilities and other assets.

The City of Brea has the following Nonmajor Capital Projects Funds Capital and Mitigation Improvement Fund
This fund is used to account for the revenues received and expenditures made for the City Council-designated Capital Improvement Projects, as well as the implementation of measures designed to mitigate impacts related to development, and the operation of government facilities, including, but not limited to: traffic, noise, aesthetics, and open space preservation. Financing is provided by the July 14, 2009 Agreement between the City and County of Orange regarding the extension of the Olinda Alpha Landfill.

Storm Drain Fund
This fund is used to account for the financing and construction of storm drains throughout the City. Financing is provided by storm drain assessment fees.

Nonmajor Governmental Funds
143
Combining Balance Sheet
Receivables (net of uncollectibles)
Accounts - - - -
Taxes - - - -
Notes and loans - - - -
Due from other governments 223,895 137,983 16,612 -
Total assets $ 7,231,645 $ 475,444 $ 308,414 $ 2,463,312

LIABILITIES
Accounts payable $ - $ 23,264 $ - $ -
Accrued liabilities - - - -
Unearned revenues - - - -
Due to other governments - - - -
Due to other funds - - - -
Total liabilities - 23,264 - -

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - - 16,612 -
Total deferred inflows of resources - - 16,612 -

FUND BALANCES (DEFICITS)
Restricted 7,231,645 452,180 291,802 2,463,312
Unassigned - - - -
Total fund balances (deficits) 7,231,645 452,180 291,802 2,463,312 Total liabilities, deferred inflows of resources,
and fund balances (deficits) $ 7,231,645 $ 475,444 $ 308,414 $ 2,463,312 Special Revenue Funds
Gas Tax
Narcotics
Enforcement
Asset Seizure
Air Quality
Improvement
Park
Development
ASSETS
Cash and investments $ 7,007,750 $ 337,461 $ 291,802 $ 2,463,312

CITY OF BREA, CALIFORNIA
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2025
144
Receivables (net of uncollectibles)
Accounts - - - -
Taxes - - - 21,675
Notes and loans - 1,498,773 18,241 -
Due from other governments 244,112 102,564 - -
Total assets $ 3,939,030 $ 1,601,337 $ 18,241 $ 2,645,002

LIABILITIES
Accounts payable $ 725 $ 22,754 $ - $ 1,461
Accrued liabilities 214 - - 15,542
Unearned revenues - - - -
Due to other governments - 1,498,773 18,241 -
Due to other funds - 237,497 - -
Total liabilities 939 1,759,024 18,241 17,003

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - - - -
Total deferred inflows of resources - - - -

FUND BALANCES (DEFICITS)
Restricted 3,938,091 - - 2,627,999
Unassigned - (157,687) - -
Total fund balances (deficits) 3,938,091 (157,687) - 2,627,999 Total liabilities, deferred inflows of resources,
and fund balances (deficits) $ 3,939,030 $ 1,601,337 $ 18,241 $ 2,645,002 Special Revenue Funds
Measure M
Community
Development
Block Grant
HOME
Program
Blackstone
CFD
ASSETS
Cash and investments $ 3,694,918 $ - $ - $ 2,623,327

CITY OF BREA, CALIFORNIA
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
June 30, 2025
145
Receivables (net of uncollectibles)
Accounts - - - -
Taxes 6,415 48 1,046 -
Notes and loans - - - -
Due from other governments - - - -
Total assets $ 540,394 $ 149,130 $ 253,145 $ 1,053,242

LIABILITIES
Accounts payable $ 384 $ - $ - $ 256,087
Accrued liabilities 14,791 1,012 2,744 14,519
Unearned revenues - - - 782,636
Due to other governments - - - -
Due to other funds - - - -
Total liabilities 15,175 1,012 2,744 1,053,242

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - - - -
Total deferred inflows of resources - - - -

FUND BALANCES (DEFICITS)
Restricted 525,219 148,118 250,401 -
Unassigned - - - -
Total fund balances (deficits) 525,219 148,118 250,401 - Total liabilities, deferred inflows of resources,
and fund balances (deficits) $ 540,394 $ 149,130 $ 253,145 $ 1,053,242 Special Revenue Funds
La Floresta
CFD
Taylor -
Morrison CFD
Central Park
Village CFD Development
ASSETS
Cash and investments $ 533,979 $ 149,082 $ 252,099 $ 1,053,242

CITY OF BREA, CALIFORNIA
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
June 30, 2025
146
Receivables (net of uncollectibles)
Accounts 181,930 - - -
Taxes - - - -
Notes and loans - - - -
Due from other governments - 912,648 - -
Total assets $ 708,569 $ 912,648 $ 1,621,000 $ 372,719

LIABILITIES
Accounts payable $ 451 $ 103,648 $ - $ -
Accrued liabilities 3,459 4,178 - -
Unearned revenues - - - -
Due to other governments - - - -
Due to other funds - 882,953 - -
Total liabilities 3,910 990,779 - -

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - 699,284 - -
Total deferred inflows of resources - 699,284 - -

FUND BALANCES (DEFICITS)
Restricted 704,659 - 1,621,000 372,719
Unassigned - (777,415) - -
Total fund balances (deficits) 704,659 (777,415) 1,621,000 372,719 Total liabilities, deferred inflows of resources,
and fund balances (deficits) $ 708,569 $ 912,648 $ 1,621,000 $ 372,719 Special Revenue Funds Capital Projects Funds
National
Opioid
Settlement
Organized
Retail Theft
Grant
Capital and
Mitigation
Improvement Storm Drain
ASSETS
Cash and investments $ 526,639 $ - $ 1,621,000 $ 372,719

CITY OF BREA, CALIFORNIA
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
June 30, 2025
147
Receivables (net of uncollectibles)
Accounts 181,930
Taxes 29,184
Notes and loans 1,517,014
Due from other governments 1,637,814
Total assets $ 24,293,272

LIABILITIES
Accounts payable $ 408,774
Accrued liabilities 56,459
Unearned revenues 782,636
Due to other governments 1,517,014
Due to other funds 1,120,450
Total liabilities 3,885,333

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues 715,896
Total deferred inflows of resources 715,896

FUND BALANCES (DEFICITS)
Restricted 20,627,145
Unassigned (935,102)
Total fund balances (deficits) 19,692,043
Total liabilities, deferred inflows of resources,
and fund balances (deficits) $ 24,293,272
Total
Nonmajor
Funds
ASSETS
Cash and investments $ 20,927,330

CITY OF BREA, CALIFORNIA
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
June 30, 2025
148

THIS PAGE INTENTIONALLY LEFT BLANK
149
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Special Revenue Funds
Gas Tax
Narcotics
Enforcement
Asset Seizure
Air Quality
Improvement
Park
Development

REVENUES
Taxes $ - $ - $ - $ -
Intergovernmental 2,646,199 137,983 63,213 -
Investment income, net 356,208 20,651 16,089 129,471
Fines and forfeitures - - - -
Other revenues - - - 5,775
Total revenues 3,002,407 158,634 79,302 135,246

EXPENDITURES
Current
General government 13,626 1,175 601 5,262
Public safety - 188,541 - -
Community services - - - -
Community development - - - -
Public works - - - 2,951
Capital outlay - - - -
Total expenditures 13,626 189,716 601 8,213
Excess (deficiency) of revenues
over (under) expenditures 2,988,781 (31,082) 78,701 127,033

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers out (917,570) - - (19,107)
Total other financing sources (uses) (917,570) - - (19,107) Net change in fund balances 2,071,211 (31,082) 78,701 107,926 Fund balances (deficit)-beginning 5,160,434 483,262 213,101 2,355,386 Fund balances (deficit)-ending $ 7,231,645 $ 452,180 $ 291,802 $ 2,463,312

CITY OF BREA, CALIFORNIA
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds
For the Year Ended June 30, 2025
150
Special Revenue Funds
Measure M
Community
Development
Block Grant
HOME
Program
Blackstone
CFD

REVENUES
Taxes $ 1,373,630 $ - $ - $ 895,789
Intergovernmental - 237,970 - -
Investment income, net 82,287 - - 144,348
Fines and forfeitures - - - -
Other revenues - - - -
Total revenues 1,455,917 237,970 - 1,040,137

EXPENDITURES
Current
General government - - - 6,061
Public safety - - - 570,723
Community services - - - -
Community development - 178,959 - -
Public works 33,454 - - 312,551
Capital outlay - - - -
Total expenditures 33,454 178,959 - 889,335
Excess (deficiency) of revenues
over (under) expenditures 1,422,463 59,011 - 150,802

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers out (467,045) (60,573) - -
Total other financing sources (uses) (467,045) (60,573) - - Net change in fund balances 955,418 (1,562) - 150,802
Fund balances (deficit)-beginning 2,982,673 (156,125) - 2,477,197 Fund balances (deficit)-ending $ 3,938,091 $ (157,687) $ - $ 2,627,999

REVENUES
Taxes $ 568,431 $ 54,170 $ 146,096 $ -
Intergovernmental - - - -
Investment income, net 29,201 8,167 13,586 -
Fines and forfeitures - - - -
Other revenues 1,589 - - 2,378,789
Total revenues 599,221 62,337 159,682 2,378,789

EXPENDITURES
Current
General government 1,164 326 501 296,227
Public safety 578,443 44,966 115,388 205,914
Community services - - - -
Community development - - - 954,120
Public works 39,170 - - 922,528
Capital outlay - - - -
Total expenditures 618,777 45,292 115,889 2,378,789
Excess (deficiency) of revenues
over (under) expenditures (19,556) 17,045 43,793 -

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers out - - - -
Total other financing sources (uses) - - - -
Net change in fund balances (19,556) 17,045 43,793 -
Fund balances (deficit)-beginning 544,775 131,073 206,608 - Fund balances (deficit)-ending $ 525,219 $ 148,118 $ 250,401 $ -

CITY OF BREA, CALIFORNIA
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2025
152
Special Revenue Funds Capital Projects Funds
National
Opioid
Settlement
Organized
Retail Theft
Grant
Capital and
Mitigation
Improvement Storm Drain

REVENUES
Taxes $ - $ - $ - $ -
Intergovernmental 107,760 957,475 - -
Investment income, net 27,975 (12,123) 83,749 20,632
Fines and forfeitures - - - -
Other revenues 601,075 - - -
Total revenues 736,810 945,352 83,749 20,632

EXPENDITURES
Current
General government 1,249 - 2,980 903
Public safety - 149,990 - -
Community services 129,140 - - -
Community development - - - -
Public works - - - -
Capital outlay - 602,114 - -
Total expenditures 130,389 752,104 2,980 903
Excess (deficiency) of revenues
over (under) expenditures 606,421 193,248 80,769 19,729

OTHER FINANCING SOURCES (USES)
Transfers in - - 56,000 -
Transfers out - (220,442) - -
Total other financing sources (uses) - (220,442) 56,000 - Net change in fund balances 606,421 (27,194) 136,769 19,729 Fund balances (deficit)-beginning 98,238 (750,221) 1,484,231 352,990 Fund balances (deficit)-ending $ 704,659 $ (777,415) $ 1,621,000 $ 372,719

CITY OF BREA, CALIFORNIA
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2025
153
Total
Nonmajor
Funds

REVENUES
Taxes $ 3,038,116
Intergovernmental 4,150,600
Investment income, net 920,241
Fines and forfeitures -
Other revenues 2,987,228
Total revenues 11,096,185

EXPENDITURES
Current
General government 330,075
Public safety 1,853,965
Community services 129,140
Community development 1,133,079
Public works 1,310,654
Capital outlay 602,114
Total expenditures 5,359,027
Excess (deficiency) of revenues
over (under) expenditures 5,737,158

OTHER FINANCING SOURCES (USES)
Transfers in 56,000
Transfers out (1,684,737)
Total other financing sources (uses) (1,628,737)
Net change in fund balances 4,108,421
Fund balances (deficit)-beginning 15,583,622
Fund balances (deficit)-ending $ 19,692,043

CITY OF BREA, CALIFORNIA
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2025
154
SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – BUDGETARY AND ACTUAL
Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budgetary and Actual 155
Gas Tax
Original Final
Actual
Amounts
Variance
with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ 2,570,120 $ 2,570,120 $ 2,646,199 $ 76,079 Investment income, net 60,240 60,240 356,208 295,968
Total revenues 2,630,360 2,630,360 3,002,407 372,047

EXPENDITURES
Current
General government 3,700 3,700 13,626 (9,926)
Total expenditures 3,700 3,700 13,626 (9,926)
Excess (deficiency) of revenues
over (under) expenditures 2,626,660 2,626,660 2,988,781 362,121

OTHER FINANCING SOURCES (USES)
Transfers out (4,655,000) (6,498,748) (917,570) 5,581,178 Total other financing sources (uses) (4,655,000) (6,498,748) (917,570) 5,581,178 Net change in fund balances $ (2,028,340) $ (3,872,088) 2,071,211 $ 5,943,299 Fund balances-beginning 5,160,434
Fund balances-ending $ 7,231,645

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Gas Tax
For The Year Ended June 30, 2025
156
Narcotics Enforcement Asset Seizure
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ 5,000 $ 5,000 $ 137,983 $ 132,983
Investment income, net 4,500 4,500 20,651 16,151
Total revenues 9,500 9,500 158,634 149,134

EXPENDITURES
Current
General government 550 550 1,175 (625)
Public safety 198,000 282,495 188,541 93,954
Total expenditures 198,550 283,045 189,716 93,329
Net change in fund balances $ (189,050) $ (273,545) (31,082) $ 242,463 Fund balances-beginning 483,262
Fund balances-ending $ 452,180

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Narcotics Enforcement Asset Seizure
For the Year Ended June 30, 2025
157
Air Quality Improvement
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ 56,000 $ 72,211 $ 63,213 $ (8,998)
Investment income, net 3,450 3,450 16,089 12,639
Total revenues 59,450 75,661 79,302 3,641

EXPENDITURES
Current
General government 500 500 601 (101)
Total expenditures 500 500 601 (101)
Excess (deficiency) of revenues
over (under) expenditures 58,950 75,161 78,701 3,540

OTHER FINANCING SOURCES (USES)
Transfers out (60,000) (290,000) - 290,000
Total other financing sources (uses) (60,000) (290,000) - 290,000 Net change in fund balances $ (1,050) $ (214,839) 78,701 $ 293,540 Fund balances-beginning 213,101
Fund balances-ending $ 291,802

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Air Quality Improvement
For the Year Ended June 30, 2025
158
Park Development
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Investment income, net $ 6,700 $ 6,700 $ 129,471 $ 122,771 Other revenues - - 5,775 5,775
Total revenues 6,700 6,700 135,246 128,546

EXPENDITURES
Current
General government 2,700 2,700 5,262 (2,562)
Public works - 2,951 2,951 -
Total expenditures 2,700 5,651 8,213 (2,562)
Excess (deficiency) of revenues
over (under) expenditures 4,000 1,049 127,033 125,984

OTHER FINANCING SOURCES (USES)
Transfers out - (2,069,208) (19,107) 2,050,101
Total other financing sources (uses) - (2,069,208) (19,107) 2,050,101 Net change in fund balances $ 4,000 $ (2,068,159) 107,926 $ 2,176,085 Fund balances-beginning 2,355,386
Fund balances-ending $ 2,463,312

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Park Development
For the Year Ended June 30, 2025
159
Measure M
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Taxes $ 1,477,968 $ 1,477,968 $ 1,373,630 $ (104,338)
Investment income, net 46,300 46,300 82,287 35,987
Total revenues 1,524,268 1,524,268 1,455,917 (68,351)

EXPENDITURES
Current
General government 1,650 1,650 - 1,650
Public works 83,862 98,862 33,454 65,408
Total expenditures 85,512 100,512 33,454 67,058
Excess (deficiency) of revenues
over (under) expenditures 1,438,756 1,423,756 1,422,463 (1,293)

OTHER FINANCING SOURCES (USES)
Transfers out (300,000) (1,452,347) (467,045) 985,302
Total other financing sources (uses) (300,000) (1,452,347) (467,045) 985,302 Net change in fund balances $ 1,138,756 $ (28,591) 955,418 $ 984,009 Fund balances-beginning 2,982,673
Fund balances-ending $ 3,938,091

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Measure M
For the Year Ended June 30, 2025
160
Community Development Block Grant
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ 180,000 $ 660,000 $ 237,970 $ (422,030) Total revenues 180,000 660,000 237,970 (422,030)

EXPENDITURES
Current
Community development 180,000 354,577 178,959 175,618
Total expenditures 180,000 354,577 178,959 175,618
Excess (deficiency) of revenues
over (under) expenditures - 305,423 59,011 (246,412)

OTHER FINANCING SOURCES (USES)
Transfers out - (300,000) (60,573) 239,427
Total other financing sources (uses) - (300,000) (60,573) 239,427 Net change in fund balances $ - $ 5,423 (1,562) $ (6,985) Fund deficit-beginning (156,125)
Fund deficit-ending $ (157,687)

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Community Development Block Grant
For the Year Ended June 30, 2025
161
Blackstone CFD
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Taxes $ 896,187 $ 896,187 $ 895,789 $ (398)
Investment income, net 28,000 28,000 144,348 116,348
Total revenues 924,187 924,187 1,040,137 115,950

EXPENDITURES
Current
General government 1,800 1,800 6,061 (4,261)
Public safety 496,071 496,071 570,723 (74,652)
Public works 460,272 476,272 312,551 163,721
Total expenditures 958,143 974,143 889,335 84,808
Net change in fund balances $ (33,956) $ (49,956) 150,802 $ 200,758 Fund balances-beginning 2,477,197
Fund balances-ending $ 2,627,999

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Blackstone CFD
For the Year Ended June 30, 2025
162
La Floresta CFD
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Taxes $ 549,123 $ 549,123 $ 568,431 $ 19,308
Investment income, net 8,900 8,900 29,201 20,301
Other revenues - - 1,589 1,589
Total revenues 558,023 558,023 599,221 41,198

EXPENDITURES
Current
General government 2,130 2,130 1,164 966
Public safety 487,967 487,967 578,443 (90,476)
Public works 49,548 49,548 39,170 10,378
Total expenditures 539,645 539,645 618,777 (79,132)
Net change in fund balances $ 18,378 $ 18,378 (19,556) $ (37,934) Fund balances-beginning 544,775
Fund balances-ending $ 525,219

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual La Floresta CFD
For the Year Ended June 30, 2025
163
Taylor - Morrison CFD
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Taxes $ 54,284 $ 54,284 $ 54,170 $ (114)
Investment income, net 1,500 1,500 8,167 6,667
Total revenues 55,784 55,784 62,337 6,553

EXPENDITURES
Current
General government 160 160 326 (166)
Public safety 38,972 38,972 44,966 (5,994)
Total expenditures 39,132 39,132 45,292 (6,160)
Net change in fund balance $ 16,652 $ 16,652 17,045 $ 393 Fund balances-beginning 131,073
Fund balances-ending $ 148,118

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Taylor - Morrison CFD
For the Year Ended June 30, 2025
164
Central Park Village CFD
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Taxes $ 145,835 $ 145,835 $ 146,096 $ 261
Investment income, net 2,400 2,400 13,586 11,186
Total revenues 148,235 148,235 159,682 11,447

EXPENDITURES
Current
General government 180 180 501 (321)
Public safety 98,431 98,431 115,388 (16,957)
Public works 248 248 - 248
Total expenditures 98,859 98,859 115,889 (17,030)
Net change in fund balances $ 49,376 $ 49,376 43,793 $ (5,583) Fund balances-beginning 206,608
Fund balances-ending $ 250,401

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Central Park Village CFD
For the Year Ended June 30, 2025
165
Development
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Other revenues $ - $ - $ 2,378,789 $ 2,378,789
Total revenues - - 2,378,789 2,378,789

EXPENDITURES
Current
General government - - 296,227 (296,227)
Public safety 52,531 52,531 205,914 (153,383)
Community development 150,004 150,004 954,120 (804,116) Public works 213,129 213,129 922,528 (709,399)
Total expenditures 415,664 415,664 2,378,789 (1,963,125) Net change in fund balances $ (415,664) $ (415,664) - $ 415,664 Fund balances-beginning -
Fund balances-ending $ -

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Development
For the Year Ended June 30, 2025
166
National Opioid Settlement
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ - $ - $ 107,760 $ 107,760
Investment income, net - - 27,975 27,975
Other revenues - 403,465 601,075 197,610
Total revenues - 403,465 736,810 333,345

EXPENDITURES
Current
General government - - 1,249 (1,249)
Community services 119,776 130,576 129,140 1,436
Total expenditures 119,776 130,576 130,389 187
Net change in fund balances $ (119,776) $ 272,889 606,421 $ 333,532 Fund balances-beginning 98,238
Fund balances-ending $ 704,659

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual National Opioid Settlement
For the Year Ended June 30, 2025
167
Organized Retail Theft Grant
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Intergovernmental $ 791,169 $ 4,015,759 $ 957,475 $ (3,058,284) Investment income, net - - (12,123) (12,123)
Total revenues 791,169 4,015,759 945,352 (3,070,407)

EXPENDITURES
Current
Public safety 511,202 662,764 149,990 512,774
Capital outlay 279,967 638,914 602,114 36,800
Total expenditures 791,169 1,301,678 752,104 549,574
Excess (deficiency) of revenues
over (under) expenditures - 2,714,081 193,248 (2,520,833)

OTHER FINANCING SOURCES (USES)
Transfers out - (1,979,633) (220,442) 1,759,191
Total other financing sources (uses) - (1,979,633) (220,442) 1,759,191 Net change in fund balances $ - $ 734,448 (27,194) $ (761,642) Fund deficit-beginning (750,221)
Fund deficit-ending $ (777,415)

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Organized Retail Theft Grant
For the Year Ended June 30, 2025
168
Capital and Mitigation Improvement
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Investment income, net $ 21,700 $ 21,700 $ 83,749 $ 62,049 Total revenues 21,700 21,700 83,749 62,049

EXPENDITURES
Current
General government 4,100 4,100 2,980 1,120
Total expenditures 4,100 4,100 2,980 1,120
Excess (deficiency) of revenues
over (under) expenditures 17,600 17,600 80,769 63,169

OTHER FINANCING SOURCES (USES)
Transfers in 56,000 56,000 56,000 -
Transfers out - (1,321,949) - 1,321,949
Total other financing sources (uses) 56,000 (1,265,949) 56,000 1,321,949 Net change in fund balances $ 73,600 $ (1,248,349) 136,769 $ 1,385,118 Fund balances-beginning 1,484,231
Fund balances-ending $ 1,621,000

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Capital and Mitigation Improvement
For the Year Ended June 30, 2025
169
Storm Drain
Original Final
Actual
Amounts
Variance with
Final Budget
Positive
(Negative)

REVENUES
Investment income, net $ 7,000 $ 7,000 $ 20,632 $ 13,632 Total revenues 7,000 7,000 20,632 13,632

EXPENDITURES
Current
General government 400 400 903 (503)
Total expenditures 400 400 903 (503)
Net change in fund balance $ 6,600 $ 6,600 19,729 $ 13,129 Fund balances-beginning 352,990
Fund balances-ending $ 372,719

CITY OF BREA, CALIFORNIA
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Storm Drain
For the Year Ended June 30, 2025
170
Nonmajor Enterprise Funds
Nonmajor Enterprise Funds
Urban Runoff Fund
The fund is used to account for the City’s urban runoff operations, which are financed and operated in a manner similar to a private enterprise. The costs (expenses, including depreciation) of providing these services to the general public on a continuing basis are financed or recovered primarily through user charges.

Sanitation Fund
The fund is used to account for the City’s refuse collection and street sweeping operations, which are operated in a manner similar to a private enterprise. User charges finance the operations of this fund.

Information Technology External Support Fund
This fund is used to account for the operations of the Information Technology Division’s contractual information technology services to other agencies. The costs (expenses including depreciation) of providing these services to participating cities on a continuing basis are financed or recovered primarily through user charges.

Golf Course Fund
This fund is used to account for the operations of the Birch Hills and Brea Creek Golf Courses. 171
Combining Statement of Net Position
Receivables (net of uncollectibles)
Accounts 62,789 643,702 46,694 - 753,185
Due from other governments - - 30,320 - 30,320
Prepaid expenses - 992 - - 992
Restricted
Cash and investments 28,476 - 358,542 - 387,018
Total current assets 328,376 1,182,790 722,561 5,675,392 7,909,119 Noncurrent
Capital assets, net of depreciation and amortization 441,187 11,268 42 9,908,584 10,361,081 Total noncurrent assets 441,187 11,268 42 9,908,584 10,361,081 Total assets 769,563 1,194,058 722,603 15,583,976 18,270,200

DEFERRED OUTFLOWS OF RESOURCES
Deferred pension related items 85,413 116,841 194,956 21,728 418,938 Deferred OPEB related items 3,711 23,954 96,987 329 124,981 Total deferred outflows of resources 89,124 140,795 291,943 22,057 543,919

LIABILITIES
Current liabilities
Accounts payable 6,629 436,708 5,618 588,315 1,037,270
Accrued liabilities 6,647 13,648 11,807 2,441 34,543
Compensated absences, due within one year - 13,331 32,714 - 46,045 Net OPEB Liability, due within one year 5,314 8,810 19,414 146 33,684 Total current liabilities 18,590 472,497 69,553 590,902 1,151,542 Noncurrent liabilities:

Compensated absences, due in more than one year - 16,214 51,047 - 67,261 Net pension liability 535,976 733,189 1,223,372 136,344 2,628,881 Net OPEB liability 38,745 221,735 1,056,627 - 1,317,107 Total noncurrent liabilities 574,721 971,138 2,331,046 136,344 4,013,249 Total liabilities 593,311 1,443,635 2,400,599 727,246 5,164,791

DEFERRED INFLOWS OF RESOURCES
Deferred OPEB related items 14,955 50,008 164,532 - 229,495 Total deferred inflows of resources 14,955 50,008 164,532 - 229,495

NET POSITION
Invested in capital assets 441,187 11,268 42 9,908,584 10,361,081 Restricted for debt service 28,476 - 358,542 - 387,018
Unrestricted (219,242) (170,058) (1,909,169) 4,970,203 2,671,734 Total net position $ 250,421 $ (158,790) $ (1,550,585) $ 14,878,787 $ 13,419,833 Urban
Runoff Sanitation
Information
Technology
External
Support Golf Course
Total
Nonmajor
Enterprise
Funds
ASSETS
Current assets
Cash and investments $ 237,111 $ 538,096 $ 287,005 $ 5,675,392 $ 6,737,604

CITY OF BREA, CALIFORNIA
Combining Statement of Net Position
Nonmajor Enterprise Funds
June 30, 2025
172
Statement of Revenues, Expenses and Changes in Net Position Fines and forfeitures 9,330 76,933 - - 86,263
Other revenues - 99,389 - - 99,389
Total operating revenues 586,250 4,065,871 824,287 5,145,808 10,622,216

OPERATING EXPENSES
Personnel services 467,331 460,492 276,240 187,912 1,391,975 Maintenance and operations 222,037 3,567,961 237,391 3,885,344 7,912,733 Depreciation and amortization 1,750 - 7,429 80,914 90,093 Total operating expenses 691,118 4,028,453 521,060 4,154,170 9,394,801 Operating income (loss) (104,868) 37,418 303,227 991,638 1,227,415

NONOPERATING REVENUES (EXPENSES)
Intergovernmental revenues - 11,360 - - 11,360
Interest income 21,409 32,346 53,606 296,620 403,981
Interest expense - - (205) - (205)
Gains on disposal of capital assets 9,000 - - - 9,000
Total nonoperating revenues (expenses) 30,409 43,706 53,401 296,620 424,136 Change in net position (74,459) 81,124 356,628 1,288,258 1,651,551 Net position-beginning 324,880 (232,697) (1,767,356) 13,590,529 11,915,356 Restatement - change in accounting principle - (7,217) (139,857) - (147,074) Net position-beginning, as restated 324,880 (239,914) (1,907,213) 13,590,529 11,768,282 Net position-ending $ 250,421 $ (158,790) $ (1,550,585) $ 14,878,787 $ 13,419,833 Urban
Runoff Sanitation
Information
Technology
External
Support Golf Course
Total
Nonmajor
Enterprise
Funds

OPERATING REVENUES
Charges for services $ 576,920 $ 3,889,549 $ 824,287 $ 5,145,808 $ 10,436,564

CITY OF BREA, CALIFORNIA
Statement of Revenues, Expenses and Changes in Net Position Nonmajor Enterprise Funds
For the Year Ended June 30, 2025
173
Combining Statement of Cash Flows
Payments to suppliers and service providers (230,021) (3,501,713) (234,883) (3,881,570) (7,848,187) Payments to employees for salaries and benefits (409,283) (516,482) (724,247) (87,543) (1,737,555) Net cash provided by (used for) operating activities (52,922) (20,048) (181,537) 1,176,695 922,188

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES
Operating grants and contributions - 11,360 138,663 - 150,023 Net cash provided by (used for) noncapital
financing activities - 11,360 138,663 - 150,023

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition and construction of capital assets (321,929) (11,268) - - (333,197) Principal paid on capital debt - - (7,381) - (7,381)
Interest paid on capital debt - - (205) - (205)
Proceeds from sales of assets 9,000 - - - 9,000
Net cash provided by (used for) capital and related
financing activities (312,929) (11,268) (7,586) - (331,783)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 21,409 32,346 53,606 296,620 403,981 Purchase of investments - (992) - - (992)
Net cash provided by (used for) investing activities 21,409 31,354 53,606 296,620 402,989 Net increase (decrease) in cash and cash
equivalents (344,442) 11,398 3,146 1,473,315 1,143,417
Cash and cash equivalents-beginning 610,029 526,698 642,401 4,202,077 5,981,205 Cash and cash equivalents-ending $ 265,587 $ 538,096 $ 645,547 $ 5,675,392 $ 7,124,622

RECONCILIATION OF OPERATING INCOME (LOSS)

TO NET CASH PROVIDED BY (USED FOR)

OPERATING ACTIVITIES
Operating income (loss) $ (104,868) $ 37,418 $ 303,227 $ 991,638 $ 1,227,415 Adjustments to reconcile operating income (loss) to
net cash provided by (used for) operating activities:

Depreciation/amortization expense 1,750 - 7,429 80,914 90,093 (Increase) decrease in accounts receivable 132 (67,724) (46,694) - (114,286) Increase (decrease) in accounts payable (7,984) 66,248 2,508 3,774 64,546 Increase (decrease) in accrued liabilities 333 1,923 (7,978) 2,081 (3,641) Increase (decrease) in compensated absences - 3,576 (130,423) - (126,847) Increase (decrease) in net pension liability 61,603 (55,043) (295,401) 98,471 (190,370) Increase (decrease) in net OPEB liability (3,888) (6,446) (14,205) (183) (24,722) Total adjustments 51,946 (57,466) (484,764) 185,057 (305,227) Net cash provided by (used for) operating activities $ (52,922) $ (20,048) $ (181,537) $ 1,176,695 $ 922,188 Business-Type Activities
Urban
Runoff Sanitation
Information
Technology
External
Support Golf Course Totals

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 586,382 $ 3,998,147 $ 777,593 $ 5,145,808 $ 10,507,930

CITY OF BREA, CALIFORNIA
Combining Statement of Cash Flows
Nonmajor Enterprise Funds
For the Year Ended June 30, 2025
174
Internal Service Funds
Internal Service Funds
Risk Management Fund
This fund is used to account for the costs of operating a self-insurance program for general liability, workers’ compensation, long-term disability and unemployment compensation. Such costs to other departments are billed at a predetermined rate set annually during the budget process.

Information Technology Fund
This fund is used to account for the operations of the City’s internal information technology division. Such costs are billed to the departments and/or division based upon a predetermined rate set during the budget process.

Vehicle Maintenance Fund
This fund was created to account for the costs of operating a maintenance facility for automotive equipment used by other City departments. Such costs to other departments are billed at a predetermined cost per mile charge that includes depreciation. This charge is set annually during the budget process. The Vehicle Maintenance Fund is responsible for financing replacement vehicles, as necessary.

Building Occupancy Fund
This fund is used to account for the costs of operating a building maintenance program for City facilities. Such costs to other departments are billed at a predetermined rate set annually during the budget process. 175
Combining Statement of Net Position
Cash and investments $ 7,012,637 $ 1,416,584 $ 2,575,461 $ 1,077,290 $ 12,081,972 Receivables (net of uncollectibles)
Accounts 108,277 42 1,992 - 110,311
Due from other governments - - 4,558 - 4,558
Total current assets 7,120,914 1,416,626 2,582,011 1,077,290 12,196,841 Noncurrent
Capital assets, net of depreciation and amortization - 409,916 6,542,684 746,819 7,699,419 Total noncurrent assets - 409,916 6,542,684 746,819 7,699,419 Total assets 7,120,914 1,826,542 9,124,695 1,824,109 19,896,260

DEFERRED OUTFLOWS OF RESOURCES
Pension-related 104,875 454,455 205,657 263,939 1,028,926 OPEB-related 13,034 119,601 31,668 37,589 201,892
Total deferred outflows of resources 117,909 574,056 237,325 301,528 1,230,818

LIABILITIES
Current liabilities
Accounts payable 21,436 84,200 219,370 169,373 494,379
Accrued liabilities 9,057 39,743 25,253 28,139 102,192
Claims and judgments, due within one year 2,070,685 - - - 2,070,685 Compensated absences, due within one year - - 60,915 75,812 136,727 Subscription liability, due within one year - 31,605 - - 31,605 Current Net OPEB Liability 8,496 40,024 16,225 21,883 86,628 Total current liabilities 2,109,674 195,572 321,763 295,207 2,922,216 Noncurrent liabilities
Claims and judgments, due in more than one year 3,618,009 - - - 3,618,009 Compensated absences, due in more than one year - - 129,545 106,231 235,776 SBITA Lease Liabilities - Non-Current - 68,976 - - 68,976 Net pension liability 658,107 2,851,759 1,290,515 1,656,240 6,456,621 Net OPEB liability 93,748 941,229 285,153 336,004 1,656,134 Total noncurrent liabilities 4,369,864 3,861,964 1,705,213 2,098,475 12,035,516 Total liabilities 6,479,538 4,057,536 2,026,976 2,393,682 14,957,732

DEFERRED INFLOWS OF RESOURCES
OPEB-related 23,960 172,252 82,517 110,379 389,108
Total deferred inflows of resources 23,960 172,252 82,517 110,379 389,108

NET POSITION
Net investment in capital assets - 309,335 6,542,684 746,819 7,598,838 Unrestricted 735,325 (2,138,525) 709,843 (1,125,243) (1,818,600) Total net position $ 735,325 $ (1,829,190) $ 7,252,527 $ (378,424) $ 5,780,238 Risk
Management
Information
Technology
Vehicle
Replacement
Building
Occupancy
Total Internal
Service
Funds
ASSETS
Current assets

CITY OF BREA, CALIFORNIA
Combining Statement of Net Position
Internal Service Funds
June 30, 2025
176
Combining Statement of Revenues, Expenses and Changes in Net Position Charges for services $ 3,681,925 $ 2,486,832 $ 3,097,686 $ 2,860,290 $ 12,126,733 Other revenues 40,547 42 14,123 2,484 57,196
Total operating revenues 3,722,472 2,486,874 3,111,809 2,862,774 12,183,929

OPERATING EXPENSES
Personnel services 351,310 1,526,954 868,998 1,035,964 3,783,226 Maintenance and operation 2,109,875 975,377 1,495,772 2,043,222 6,624,246 Claims and judgments 2,801,446 - - - 2,801,446
Depreciation/Amortization - 207,840 700,338 144,106 1,052,284 Total operating expenses 5,262,631 2,710,171 3,065,108 3,223,292 14,261,202 Operating income (loss) (1,540,159) (223,297) 46,701 (360,518) (2,077,273)

NONOPERATING REVENUES (EXPENSES)
Interest income 385,558 78,002 148,311 62,983 674,854
Interest expense - (4,124) - - (4,124)
Gain on disposal of capital assets 365 - 12,608 - 12,973 Total nonoperating revenues (expenses) 385,923 73,878 160,919 62,983 683,703 Income (loss) before capital contributions and
transfers (1,154,236) (149,419) 207,620 (297,535) (1,393,570) Transfers out (150,000) - - - (150,000)
Change in net position (1,304,236) (149,419) 207,620 (297,535) (1,543,570) Net position-beginning 2,039,561 (1,679,771) 7,186,287 27,313 7,573,390 Restatement - change in accounting principle - - (141,380) (108,202) (249,582) Net position-beginning, as restated 2,039,561 (1,679,771) 7,044,907 (80,889) 7,323,808 Net position-ending $ 735,325 $ (1,829,190) $ 7,252,527 $ (378,424) $ 5,780,238 Risk
Management
Information
Technology
Vehicle
Replacement
Building
Occupancy
Total Internal
Service
Funds

OPERATING REVENUES

CITY OF BREA, CALIFORNIA
Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds
For the Year Ended June 30, 2025
177
Combining Statement of Cash Flows
Payments to suppliers and service providers (4,032,911) (906,583) (1,322,717) (2,045,429) (8,307,640) Payments to employees for salaries and benefits (360,520) (1,530,060) (730,601) (1,003,800) (3,624,981) Net cash provided by (used for) operating activities (684,070) 50,189 1,165,247 (186,455) 344,911

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES
Transfers to other funds (150,000) - - - (150,000)
Net cash provided by (used for) noncapital financing
activities (150,000) - - - (150,000)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition and construction of capital assets - (36,987) (1,169,089) (60,330) (1,266,406) Principal paid on capital debt - (53,725) - - (53,725)
Interest paid on capital debt - (4,124) - - (4,124)
Proceeds from sales of assets 365 - 38,092 - 38,457
Net cash provided by (used for) capital and related
financing activities 365 (94,836) (1,130,997) (60,330) (1,285,798)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest on investments 385,558 62,924 148,311 62,983 659,776 Net cash provided by (used for) investing activities 385,558 62,924 148,311 62,983 659,776 Net increase (decrease) in cash and cash equivalents (448,147) 18,277 182,561 (183,802) (431,111) Cash and cash equivalents-beginning 7,460,784 1,398,307 2,392,900 1,261,092 12,513,083 Cash and cash equivalents-ending $ 7,012,637 $ 1,416,584 $ 2,575,461 $ 1,077,290 $ 12,081,972

RECONCILIATION OF OPERATING INCOME (LOSS)

TO NET CASH PROVIDED BY (USED FOR)

OPERATING ACTIVITIES
Operating income (loss) $ (1,540,159) $ (223,297) $ 46,701 $ (360,518) $ (2,077,273) Adjustments to reconcile operating income (loss) to
net cash provided by (used for) operating activities:

Depreciation/amortization expense - 207,840 700,338 144,106 1,052,284 (Increase) decrease in accounts receivable (13,111) (42) 106,756 - 93,603 (Increase) decrease in prepaid items - 4,620 - - 4,620
Increase (decrease) in accounts payable 12,668 64,174 173,055 (2,207) 247,690 Increase (decrease) in accrued liabilities 754 3,309 7,497 439 11,999 Increase (decrease) in compensated absences - - 581 3,012 3,593 Increase (decrease) in claims and judgments 865,742 - - - 865,742 Increase (decrease) in pension and related items (3,748) 22,870 142,190 44,725 206,037 Increase (decrease) in OPEB and related items (6,216) (29,285) (11,871) (16,012) (63,384) Total adjustments 856,089 273,486 1,118,546 174,063 2,422,184 Net cash provided by (used for) operating activities $ (684,070) $ 50,189 $ 1,165,247 $ (186,455) $ 344,911

SCHEDULE OF NON-CASH NONCAPITAL, CAPITAL,

AND INVESTING ACTIVITIES
Acquisition of subscription assets $ - $ 162,166 $ - $ - $ 162,166 Loss on disposal of assets - 16,866 - - 16,866
Risk
Management
Information
Technology
Vehicle
Replacement
Building
Occupancy Totals

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 3,709,361 $ 2,486,832 $ 3,218,565 $ 2,862,774 $ 12,277,532

CITY OF BREA, CALIFORNIA
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2025
178
Fiduciary Funds - Custodial Funds
Fiduciary Funds - Custodial Funds
Hillside Open Space Education Coalition
This fund is used to account for the funds received to educate the public as to the importance of hillside preservation.

Brea Plaza Community Facilities District 2008-02 Fund
This fund is used to account for the collection and payment to the holders of the 2017 Special Tax Bonds.

Downtown Community Facilities District 1996-1 Fund
This fund is used to account for the collection and payment to the holders of the 2014 Special Tax Bonds.

Olinda Heights Community Facilities District 1997-1 Fund This fund is used to account for the collection and payment to the holders of the 2005 Special Tax Bonds.

North Orange County Public Safety Collaborative (NOC) Fund This fund is used to account for the state funds related to NOC. The City acts as the fiduciary for the NOC.

Integrated Law and Justice Agency of Orange County (ILJAOC) Fund This fund is used to account for the collections and payments related to a joint venture agreement with several other public agencies of Orange County. The City acts as a treasurer for the ILJAOC.

Orange County City Managers Association (OCCMA) Fund
This fund is used to account for the collections and payments related to the OCCMA. The City acts as the treasurer for the OCCMA.
179
Combining Balance Sheet
Hillside Open
Space
Education
Coalition Brea Plaza Downtown Olinda Heights
ASSETS
Cash and investments $ - $ 550,099 $ 1,686 $ 435,581
Receivables
Accounts - - - -
Taxes - - - 7,517
Due from other governments - - - -
Restricted assets
Cash and investments with fiscal agent - 703,950 - 44
Capital assets (net of accumulated depreciation) - - - - Total assets - 1,254,049 1,686 443,142

LIABILITIES
Accounts payable - 90 - -
Accrued liabilities - 661 - 1,140
Unearned revenue - - - -
Total liabilities - 751 - 1,140

NET POSITION
Restricted for
Individuals, organizations, and other governments - 1,253,298 1,686 442,002 Total net position $ - $ 1,253,298 $ 1,686 $ 442,002

CITY OF BREA, CALIFORNIA
Combining Statement of Fiduciary Net Position
Fiduciary Funds - Custodial Funds
June 30, 2025
180

NOC ILJAOC OCCMA
Total
Custodial
Funds
ASSETS
Cash and investments $ 2,896,561 $ 4,527,763 $ 83,607 $ 8,495,297 Receivables
Accounts - - 4,000 4,000
Taxes - - - 7,517
Accrued interest - 49,599 - 49,599
Due from other governments - 52,045 - 52,045
Restricted assets
Cash and investments with fiscal agent - - - 703,994
Capital assets (net of accumulated depreciation) - 361,395 - 361,395 Total assets 2,896,561 4,990,802 87,607 9,673,847

LIABILITIES
Accounts payable 358,105 85,029 2,908 446,132
Accrued liabilities 6,196 - - 7,997
Unearned revenue - 169,617 15,600 185,217
Due to other governments - 31,877 - 31,877
Total liabilities 364,301 286,523 18,508 671,223

NET POSITION
Restricted for
Individuals, organizations, and other governments 2,532,260 4,704,279 69,099 9,002,624 Total net position $ 2,532,260 $ 4,704,279 $ 69,099 $ 9,002,624

CITY OF BREA, CALIFORNIA
Combining Statement of Fiduciary Net Position (CONTINUED) Fiduciary Funds - Custodial Funds
June 30, 2025
181
Combining Statement of Change in Net Position
Hillside Open
Space
Education
Coalition Brea Plaza Downtown
Olinda
Heights

ADDITIONS
Contributions
Property taxes $ - $ 575,131 $ - $ 401,746
Employee or member contributions - - - 23,114
Interest and changes in fair value of investments - 61,112 (249) - Miscellaneous - - - -
Total additions - 636,243 (249) 424,860

DEDUCTIONS
Administrative - 33,888 - 57,922
Interest expense - 267,869 - 69,000
Debt service payments for Community Facilities Districts - 270,000 - 280,000 Transfer of funds to the City of Whittier 40,644 - - -
Total deductions 40,644 571,757 - 406,922
Net increase (decrease) in fiduciary net position (40,644) 64,486 (249) 17,938 Net position-beginning 40,644 1,188,812 1,935 424,064
Net position-ending $ - $ 1,253,298 $ 1,686 $ 442,002

CITY OF BREA, CALIFORNIA
Combining Statement of Changes in Fiduciary Net Position Fiduciary Funds - Custodial Funds
For the Year Ended June 30, 2025
182

NOC ILJAOC OCCMA
Total
Custodial
Funds

ADDITIONS
Contributions
Property taxes $ - $ - $ - $ 976,877
Employee or member contributions 154,500 1,780,540 45,630 2,003,784 Interest and changes in fair value of investments 205,890 235,263 4,362 506,378 Miscellaneous - 1,135,010 46,535 1,181,545
Total additions 360,390 3,150,813 96,527 4,668,584

DEDUCTIONS
Administrative 3,918,048 3,102,058 60,874 7,172,790
Interest expense - - - 336,869
Debt service payments for Community Facilities Districts - - - 550,000 Transfer of funds to the City of Whittier - - - 40,644
Total deductions 3,918,048 3,102,058 60,874 8,100,303
Net increase (decrease) in fiduciary net position (3,557,658) 48,755 35,653 (3,431,719) Net position-beginning 6,089,918 4,655,524 33,446 12,434,343 Net position-ending $ 2,532,260 $ 4,704,279 $ 69,099 $ 9,002,624

CITY OF BREA, CALIFORNIA
Combining Statement of Changes in Fiduciary Net Position (Continued) Fiduciary Funds - Custodial Funds
For the Year Ended June 30, 2025
183

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184

STATISTICAL SECTION
This part of the City of Brea’s annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City's overall financial health.

Contents
Financial Trends
These schedules contain trend information to help the reader understand how the City's financial performance and well-being have changed over time.

Revenue Capacity
These schedules contain information to help the reader assess the factors affecting the City's ability to generate its property and sales taxes.

Debt Capacity
These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and the City's ability to issue additional debt in the future.

Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take place.

Operating Information
These schedules contain information about the City's operations and resources to help the reader understand how the City's financial information relates to the services the City provides and the activities it performs.

Sources - Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year.
185

THIS PAGE INTENTIONALLY LEFT BLANK
186
Financial Trends
187
Net Position by Component, Last Ten Fiscal Years
188
Changes in Net Position, Last Ten Fiscal Years
189
190
Fund Balance - Governmental Funds, Last Ten Fiscal Years 191
Changes in Fund Balances - Governmental Funds, Last Ten Fiscal Years 192
Revenue Capacity Information
193
Assessed Value and Estimated Actual Value of Taxable Property, Last Ten Fiscal Years 194
Direct and Overlapping Property Tax Rates, Last Ten Fiscal Years 195
Principal Property Tax Rates, Last Ten Fiscal Years
196
Property Tax Levies and Collections, Last Ten Fiscal Years 197
Taxable Sales by Category, Last Ten Fiscal Years
198
Debt Capacity Information
199
Ratio of Outstanding Debt by Type, Last Ten Fiscal Years 200
Ratio of Net General Bonded Debt Outstanding, Last Ten Fiscal Years 201
Direct and Overlapping Governmental Activities Debt
202
Legal Debt Margin, Last Ten Fiscal Years
203
Pledged Revenue Coverage, Last Ten Fiscal Years
204
Demographic and Economic Information
205
Demographic and Economic Statistics, Last Ten Fiscal Years 206
Principal Employers, Current and Ten Fiscal Years
207
Operating Information
208
Full Time Equivalent City Government Employees by Function, Last Ten Fiscal Years 209
Operating Indicators, Last Ten Fiscal Years
210
Capital Assets Statistics, Last Ten Fiscal Years
211
LSLCPAS.COM
December 8, 2025
To the Honorable Mayor and Members of the City Council
City of Brea, California
1 Civic Center Cir.

Brea, CA 92821
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Brea, California (hereafter, the City) for the year ended June 30, 2025. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 21, 2025. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. As described in Note 18 to the financial statements, the City changed accounting policies related to compensated absences by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 101, Compensated Absences, in fiscal year 2025.

Accordingly, the cumulative effect of the accounting change as of the beginning of the year is reported in the Statement of Activities. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events.

Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City’s financial statements were:

Management’s estimates of the net pension liability and the net other post-employment benefits liability are based on actuarial valuations. We evaluated the methods, assumptions, and data used to develop the net pension liability and the net other post-employment benefits liability in determining that they are reasonable in relation to the financial statements taken as a whole.

The financial statement disclosures are neutral, consistent, and clear.

Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.

To the Honorable Mayor and Members of the City Council
City of Brea, California
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management.

Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.

Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations
We have requested certain representations from management that are included in the management representation letter dated December 8, 2025.

Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Matters
We applied certain limited procedures to management’s discussion and analysis, the budgetary comparison schedules for the General Fund and major special revenue funds, and the required pension and other postemployment benefits schedules, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.

We were engaged to report on the combining and individual fund statements and schedules which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

To the Honorable Mayor and Members of the City Council
City of Brea, California
We were not engaged to report on the introductory and statistical sections of the Annual Comprehensive Financial Report, which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Future GASB Pronouncements
The following Government Accounting Standards Board (GASB) pronouncements will be effective for the following fiscal years’ audits and should be reviewed for proper implementation by management:

Fiscal Year 2025-2026
GASB Statement No. 103, Financial Reporting Model Improvements.

GASB Statement No. 104, Disclosure of Certain Capital Assets.

Future Projects
Comprehensive Project, Revenue and Expense Recognition.

Major Project, Going Concern Uncertainties and Severe Financial Stress.

Major Project, Infrastructure Assets.

Practice Issue, Subsequent Events.

Restriction on Use
This information is intended solely for the information and use of the City Council and management of the City and is not intended to be, and should not be, used by anyone other than these specified parties.

Very truly yours,
Irvine, California

LSLCPAS.COM
INDEPENDENT ACCOUNTANTS’ REPORT ON AGREED-UPON

PROCEDURES APPLIED TO APPROPRIATIONS LIMIT WORKSHEETS
To the Honorable Mayor and Members of the City Council
City of Brea, California
We have performed the procedures enumerated below on the accompanying Appropriations Limit Worksheet No. 6 (or other alternative computation) of the City of Brea, California, for the year ended June 30, 2025. These procedures are the responsibility of the City, which were agreed to by the City of Brea and the League of California Cities (as presented in the publication entitled Agreed-Upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution), were performed solely to assist the City of Brea in meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution. The City of Brea's management is responsible for the Appropriations Limit Worksheet No. 6 (or other alternative computation).

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of recomputing the Appropriations Limit Worksheet No. 6 (or other alternative computation). This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures performed and our findings were as follows:

1. We obtained the completed Worksheets No. 1 through No. 7 (or other alternative computations) and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the City Council.

Finding: No exceptions were noted as a result of our procedures.

2. For the accompanying Appropriations Limit Worksheet No. 6, we multiplied line A, last year's limit, by line D, ratio of change and compared the resulting amount to line E, this year's limit.

Finding: No exceptions were noted as a result of our procedures.

3. We compared the current year information presented in the accompanying Appropriations Limit Worksheet No. 6 to the other worksheets described in No. 1 above.

Finding: No exceptions were noted as a result of our procedures.

4. We compared the prior year appropriations limit presented in the accompanying Appropriations Limit Worksheet No. 6 to the prior year appropriations limit adopted by the City Council for the prior year.

Finding: No exceptions were noted as a result of our procedures.

To the Honorable Mayor and Members of the City Council
City of Brea, California
We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the AICPA. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriations Limit Worksheet No. 6 (or other alternative computation). Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information of the City Council and management of the City of Brea and is not intended to be, and should not be, used by anyone other than these specified parties.

Brea, California
May 2, 2025
To the Honorable Mayor and Members of the City Council
City of Brea, California

CITY OF BREA
2024-2025

APPROPRIATIONS LIMIT CALCULATION
A. 2023-2024 APPROPRIATIONS LIMIT: $ 131,042,354
B. 2024-2025 CHANGE IN PER CAPITA PERSONAL
INCOME: 3.62%
C. 2024-2025 CHANGE IN POPULATION: 0.31%
D. RATIO OF CHANGE (1.0362 x 1.0031) x 1.0394
E. 2024-2025 APPROPRIATIONS LIMIT: $ 136,205,423
($131,042,354 x 1.0394)
CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 6A.

December 16, 2025 Regular City Council Meeting Minutes

TO PREPARED BY
Honorable Mayor and City Council Members Christina Dizol, Deputy City Clerk

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Kristin Griffith, City Manager Kristin Griffith, City Manager

RECOMMENDATION
Approve.

Attachments
12-16-2025 - Draft Minutes.pdf
** The following document is a draft of the minutes and the not the official approved minutes **
Minutes for the City Council Regular Meeting
1 Civic Center Circle, Brea, California 92821
December 16, 2025
Roll Call: (The following members were in attendance)
Cecilia Hupp, Mayor
Marty Simonoff, Mayor Pro Tem
Christine Marick, Council Member
Blair Stewart, Council Member
Steve Vargas, Council Member

1. CLOSED SESSION - EXECUTIVE CONFERENCE ROOM 3RD FLOOR - 5:30 P.M.

1.A. Call to Order/Roll Call
Mayor Hupp called the Closed Session to order at 5:30 p.m. All members were present.

1.B. Public Comment
None.

1.D. Conference with Legal Counsel Pursuant to Government Code Section 54956.9(d)(4) - Anticipated Litigation. Initiation of Litigation: 2 potential cases.

Mayor Hupp adjourned the Closed Session at 6:14 p.m.

2. STUDY SESSION - EXECUTIVE CONFERENCE ROOM 3RD FLOOR - 6:00 P.M.

2.A. Call to Order/Roll Call
Mayor Hupp called the Study Session to order at 6:15 p.m. All members were present.

2.B. Public Comment
None.

2.C. Clarify Regular Meeting Topics
None.

2.D. Overnight Parking Permit Policy & Procedure Manual Update Community Development Manager Furio provided a presentation and spoke about the item's background, types of parking permits, on-site parking, parking exemptions, and qualifications. She reviewed the proposed manual updates and staff recommendations.

Assistant City Manager/Community Development Director Killebrew responded to questions regarding parking permit qualifications and community outreach.

City Council discussed the proposed permit types and appeal process.

2.E. Cultural Arts Commission Unscheduled Vacancy Recruitment City Clerk Popescu reported that there is an unscheduled vacancy on the Cultural Arts Commission due to the resignation of Cultural Arts Commissioner Beverly Falco. She provided the recruitment timeline and application process.

Council agreed to designate Council Member Stewart and Mayor Hupp to the Interview Committee.

2.F. Council Member Reports/Requests
None.

2.G. Study Session Adjournment
Mayor Hupp adjourned the Study Session at 6:30 p.m.

3. GENERAL SESSION - COUNCIL CHAMBERS PLAZA LEVEL - 7:00 P.M.

3.A. Call to Order/Roll Call
Mayor Hupp called the General Session to order at 7:00 p.m. All members were present.

3.B. Pledge of Allegiance
Boy Scout Troop 707 led the Pledge of Allegiance.

3.C. Invocation: Pastor Dave Tebay, Calvary Community Church Pastor Dave Tebay, Calvary Community Church, led the Invocation.

3.D. Commendation: Outgoing Cultural Arts Commissioner - Beverly Falco Mayor Hupp presented outgoing Cultural Arts Commissioner Beverly Falco a Commendation recognizing her service and contribution to the community.

3.E. Report - Prior Study Session
City Manager Griffith provided a report on the prior Study Session.

3.F. Community Announcements
Council Member Marick announced that there will be no proactive enforcement of street sweeping or overnight parking violations from December 20, 2025 through January 4, 2026 to help accommodate additional visitors over the holidays.

Mayor Pro Tem Simonoff announced that due to the holidays, there will be no trash collection on Thursday, December 25 and Thursday, January 1. He indicated that services will be delayed by one day the remainder of those weeks. He also announced there will be no street sweeping December 24, 2025 through January 4, 2026. Finally, he stated that real holiday trees will be collected curbside December 26, 2025 through January 16, 2026 and for additional information on tree disposals, residents can contact Republic Services at (714) 238-2444 or visit republicservices.com.

3.G. Matters from the Audience
Ted Gribble, Orange County Model Engineers, spoke about the non-profit organization, Orange County Model Engineers, announced free public train rides; and invited residents to attend their Christmas event.

Bev Perry spoke in support of Economic Development Agreement with Dwight Manley.

Keith Fullington spoke about digital name plates displayed on the dais, street improvements on Birch Street, requested additional music events in the Downtown area, and expressed concerns with traffic on Lambert Road.

Doug Green, North Hills Church, presented the City with food fundraiser proceeds raised during the Concerts in the Park series and spoke positively about the relationship between the Brea Ministerial Association and City of Brea.

Brent Ferraco spoke about recent interactions with Brea Police Department and requested body camera footage.

3.H. Response to Public Inquiries
None.

4. PUBLIC HEARINGS

4.A. Consider Adopting a Resolution Establishing and Adjusting Certain User Fees and Charges Based Upon the City's Comprehensive User Fee Study
Budget Manager Brenner introduced the item and provided background information on prior discussions related to adjusting certain user fees and changes based upon the City's Comprehensive User Fee Study.

Tony Trasher, Willdan Financial Services, provided a presentation on the different types of user fees and the importance of updating them. He also provided an overview of the steps of the study, scope of study, and policy considerations.

Mayor Hupp opened the Public Hearing.

Ted Gribble expressed concerns with the proposed increase in fees.

Seeing no further members of the public wishing to speak, Mayor Hupp closed the Public Hearing.

Tony Trasher and Budget Manager Brenner answered questions by Council regarding the approval process and proposed rate adjustments specific to the Planning and Building Department.

A motion was made by Council Member Stewart and seconded by Council Member Marick to adopt Resolution No. 2025-068 to establish and adjust certain user fees and charges based upon the City's Comprehensive User Fee Study prepared by Willdan Financial Services. Motion passed 5-0-0-0 (Ayes: Hupp, Simonoff, Marick, Stewart, Vargas).

Mayor Hupp recessed the meeting at 7:41 p.m.

Mayor Hupp reconvened the meeting at 7:44 p.m.

Council Member Stewart left the dais.

4.B. An Ordinance Establishing Standards and Regulations for a Pilot Short-Term Rental Program, Adding Chapter 5.32 "Short-Term Rentals" to the Brea City Code, and Approving a CEQA Exemption Determination
Management Analyst Magaña provided a presentation on the item and discussed the items history. She reviewed the proposed Ordinance, license distribution, fiscal impact and noticing and CEQA requirements, and recommendations.

Mayor Hupp opened the Public Hearing.

Dylan Cardiff spoke in support of the item and the need for flexible housing within the City.

Glen Vodhandle expressed concerns regarding the application process and fees.

Matt spoke in opposition to the item and expressed concerns about the potential increase in trash, noise and traffic complaints.

Seeing no further members of the public wishing to speak, Mayor Hupp closed the Public Hearing.

In response to Council questions, Assistant City Manager/Community Development Director Killebrew and Management Analyst Magaña provided clarification regarding current enforcement process for illegal short term properties, parking requirements, organics composting violations, proposed application fees, recommended term for the pilot program, and noncompliance enforcement.

Motion was made by Mayor Pro Tem Simonoff and seconded by Council Member Vargas to waive full reading of and introduce Ordinance No. 1270 titled "An Ordinance of the City Council of the City of Brea Establishing Standards and Regulations for a Pilot Short-Term Rentals' to the Brea City Code, and Approving a CEAQ Exemption Determination"; and approve a California Environmental Quality Act (CEQA Exemption Determination; and schedule adoption of the aforementioned Ordinance at the next regular City Council meeting. Motion passed 4-0-1-0 (Ayes: Hupp, Simonoff, Marick, Vargas. Absent: Stewart).

4.C. Economic Development Agreement between the City of Brea and Dwight Manley, as Trustee of the DVQ Revocable Trust, for Costco Wholesale Corporation Assistant City Manager/Community Development Director Killebrew introduced the item and discussed community population, redevelopment, operational goals, efforts to promote economic development, business attraction, and stated that the proposed agreement is not a planning application.

Community Development Manager Furio provided a presentation and background information on the Economic Development Agreement. She reviewed the financial forecast, public benefits, next steps, and staff recommendations.

Dwight Manley, applicant, spoke about the redevelopment of Downtown Brea throughout the years and provided background information on the project.

Mayor Hupp opened the Public Hearing.

City Clerk Popescu stated the City received written public comments as well as three (3) phone calls expressing opposition to the item.

Mark Strom, Gary Eychaner, Ray Gayk, David Cain, Kevin Wilson, Alan Tsuyuki, David Wright, Robert Carroll, Mary Martinez, Linda Kriener spoke in opposition to the item citing noise, traffic, and quality of life concerns.

Glen Vodhanel and Mr. Walker spoke in support for the agreement citing increase to sales tax revenue.

Dwight Manley, applicant, responded to public comments regarding economics, sales tax, and community impact.

City Attorney Boga provided procedural guidance.

Mayor Hupp closed the public hearing.

Assistant City Manager/Community Development Director Killebrew provided clarification regarding the project planning application process and review. He also answered questions by Council regarding project alternatives, zoning requirements, property privilege, specific site plan requirements, independent analyst, and sales tax revenue.

Council asked questions of the applicant regarding independent analyst and potential Costco agreement.

Assistant City Manager/Community Development Director Killebew and Community Development Manager Furio answered questions regarding public noticing, traffic impacts, sales tax revenue, return on investment, economic impact, and community benefits.

Council discussed discount cash flow, sales tax revenue, and Development Agreement benefits.

A motion was made by Council Member Vargas and seconded by Mayor Pro Tem Simonoff to adopt an Economic Development Agreement between the City of Brea and Dwight Manley, as Trustee of the DVQ Revocable Trust, for Costco Wholesale Corporation; and authorize the City Manager to make non-substantive edits. Motion Passed 3-1-1-0 (Ayes:

Hupp, Simonoff, Vargas; Noes: Marick; Absent: Stewart).

5. CONSENT CALENDAR
Mayor Hupp requested the Consent Calendar be voted on prior to the Public Hearings.

A motion was made by Mayor Pro Tem Simonoff and seconded by Council Member Marick to approve Consent Calendar Items 5A - 5N. Motion passed 5-0-0-0 (Ayes: Hupp, Simonoff, Marick, Stewart, and Vargas).

5.A. December 2, 2025 Regular City Council Meeting Minutes The City Council approved the December 2, 2025 Regular City Council Meeting Minutes as written.

5.B. Waive Full Reading of and Introduce Ordinance No. 1271, an Ordinance of the City of Brea Extending the Term of a Pipeline Franchise Granted to Cardinal Pipeline, L.P., Repealing Ordinance No. 1268, and Approve a CEQA Exemption Determination
The City Council waived the full reading of and introduced Ordinance No. 1271, "An Ordinance of the City Council of the City of Brea extending the term of a pipeline franchise granted to Cardinal Pipeline, L.P. and repealing Ordinance No. 1268," by title only, and approved a California Environmental Quality Act (CEQA) exemption determination; and appropriated any revenues received as part of this franchise in the Fiscal Year 2025-26 Operating Budget; and authorized the City Clerk to accept a new faithful performance bond upon final adoption of the Ordinance.

5.C. Orange County Transportation Authority Annual Measure M2 Expenditure Report The City Council adopted Resolution No. 2025-069 concerning the Orange County Transportation Authority Annual Measure M2 Expenditure Report.

5.D. Professional Services Agreement for Municipal Traffic Engineering Services The City Council approved a Professional Services Agreement with LG2WB Engineers, Inc. dba Linscott, Law, & Greenspan, Engineers in the annual amount not to exceed $150,000 per year for a period of two (2) years, with three (3) optional one (1) year extensions; and authorized the City Manager to approve and execute extension(s).

5.E. Amendments for Additional As-Needed Arovista Park Services The City Council approved Amendment No. 2 with Geocon West, Inc. in the amount not-toexceed $100,000 resulting in a total contract amount not-to-exceed $518,000 for as-needed materials testing, soils inspection and special inspections; and approved Amendment No. 1 with Shucri Yaghi Consulting Engineers, Inc. in the amount not-to-exceed $92,300 resulting in a total contract amount not-to-exceed $140,300 for as-needed structural engineering services; and approved Amendment No. 3 with BKF Engineers in the amount not-to-exceed $30,000 resulting in a total contract amount not-to-exceed $104,100 for as-needed civil engineering services; and approved Amendment No. 1 with Telacu Construction Management in the amount not-to-exceed $80,000 resulting in a total contract amount not-to-exceed $889,479 for as-needed construction management services.

5.F. Site Transfer Agreement of Activated Snorkel Station Heli-Hydrant Land with Sycamore Development Brea 265 LLC
The City Council approved the Site Transfer Agreement of Activated Snorkel Station Heli-Hydrant Land with Sycamore Development Brea 265 LLC; and authorized the Mayor to execute the Site Transfer Agreement upon completion of the legal description of the property; and authorized the City Manager to execute any non-monetary amendments and ancillary documents subsequently required for implementation of the Site Transfer Agreement.

5.G. Acceptance of Final Parcel Map No. 2019-118 for Property Located at 1660 North Puente Street
The City Council accepted final Parcel Map No. 2019-118; and accepted the Subdivision Monument Bond for the setting of final monuments; and authorized the City Clerk to release a Subdivision Monument Bond upon further notification from the Public Works Department.

5.H. Award Annual Pavement Striping Maintenance Contract to Superior Pavement Markings, LLC The City Council awarded a contact to Superior Pavement Markings, LLC for as-needed traffic striping and pavement markings in the amount not to exceed $60,000 per year, for a period of three (3) base years; and authorized the City Manager to approve up to four (4) additional one (1) year extensions.

5.I. Award Annual Slurry Seal Program Contract to Doug Martin Contracting Company, Inc The City Council awarded a contact to Doug Martin Contracting Company, Inc. for as-needed Citywide Slurry Seal Program in the amount not to exceed $200,00 per year, for a period of three (3) base years; and authorized the City Manager to approve up to four (4) additional one (1) year extensions.

5.J. Award Citywide Graffiti Removal Services Contract to Urban Graffiti Enterprises, Inc.

The City Council awarded a contract to Urban Graffiti Enterprises, Inc. for graffiti removal services in the amount of $41,400 per year, for a period of three (3) base years; and authorized the City Manager to approve up to four (4) additional one (1) year extensions.

5.K. Acceptance of Contract Extension for Citywide Tree Maintenance to West Coast Arborists, Inc.

The City Council approved a fifth amendment to the agreement for Tree Maintenance Services with West Coast Arborists, Inc. for an additional five (5) years; and authorized the City Manager to approve up to five (5) one (1) year extensions.

5.L. Amendment to Military Leave Supplemental Pay and Benefit Plan The City Council adopted Resolution No. 2025-070, a Resolution of the City Council of the City of Brea enacting revised provisions relating to wage and benefits continuation for City employees who are members of the Military Reserve called to active duty and repealing Resolution No. 90- 159.

5.M. Monthly Report of Investments for the City of Brea for Period Ended November 30, 2025 The City Council received and filed the monthly Report of Investments for the period ended November 30, 2025.

5.N. November Outgoing Payment Log and City Disbursement Registers for November 28 and December 5, 2025
The City Council received and filed the November Outgoing Payment Log and City Disbursement Registers for November 28 and December 5, 2025.

6. CITY/SUCCESSOR AGENCY - CONSENT
Motion was made by Mayor Pro Tem Simonoff and seconded by Council Member Vargas to approve City/Successor Agency Consent Item 6A. Motion passed 4-0-1-0 (Ayes: Hupp, Simonoff, Marick, and Vargas. Absent: Stewart).

6.A. Monthly Report of Investments for the Successor Agency to the Brea Redevelopment Agency for Period Ended November 30, 2025
The City Council, as the Successor Agency, received and filed the Monthly Report of Investments for the Successor Agency to the Brea Redevelopment Agency for period ended November 30, 2025.

7. ADMINISTRATIVE ANNOUNCEMENTS

7.A. City Manager
None.

7.B. City Attorney
None.

7.C. Council Requests
None.

8. COUNCIL ANNOUNCEMENTS

8.A. Council Announcements
None.

9. ADJOURNMENT

9.A. Meeting Adjournment
Mayor Hupp adjourned the General Session at 10:15 p.m.

CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 6B.

Adopt Resolutions Authorizing the Director of Public Works to Prepare and File Reports Relating to Annual Maintenance Assessment in Landscape and Lighting Maintenance Districts 1 through 7

TO PREPARED BY
Honorable Mayor and City Council Members Matthew Cuevas, Senior Management Analyst

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Michael Ho, Public Works Director Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following action:

1. Adopt resolutions authorizing the Director of Public Works to prepare the Annual Maintenance Assessment Report for each Landscape and Lighting Maintenance District to present at the City Council meeting on April 21, 2026.

BACKGROUND/DISCUSSION
The Landscape and Lighting Act of 1972 requires that a report be created each year detailing the proposed improvements, maintenance costs and assessments for each Maintenance District. The Act further requires that the administrative body adopt resolutions ordering creation of the reports.

The Public Works Department typically prepares resolutions each January which set a future City Council meeting date to present the Annual Maintenance Assessment Report for each maintenance district. After adoption of the attached resolutions, the Department will then schedule meetings with property owners from each district to solicit input on upcoming district budgets and assessments. After property owner input is received, the Annual Maintenance Assessment Report is created and presented to the City Council for review and approval.

The Annual Maintenance Assessment Report for each Maintenance District is scheduled to be presented to City Council at the April 21, 2026, meeting at which time a Public Hearing date will be recommended prior to approval of the assessment for each District. Attached for the City Council's consideration are the resolutions authorizing the Director of Public Works to prepare the reports.

FISCAL IMPACT/SUMMARY
This action does not require any expenditures; therefore, there will be no impact to the General Fund. The attached resolutions establish the meeting date for the City Council to consider the Annual Maintenance Assessment Report for Maintenance Districts 1 through 7 for Fiscal Year 2026-2027.

Attachments
Resolution - LLMD 1
Resolution - LLMD 2
Resolution - LLMD 3
Resolution - LLMD 4
Resolution - LLMD 5
Resolution - LLMD 6
Resolution - LLMD 7
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC WORKS

TO PREPARE TO FILE A REPORT RELATED TO

MAINTENANCE OF PUBLIC IMPROVEMENTS IN CITY OF

BREA LANDSCAPING AND LIGHTING ASSESSMENT
DISTRICT NO. 1 AND ANY ASSESSMENTS THEREON
FOR FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Landscaping and Lighting Assessment District No. 1.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Landscaping and Lighting Assessment District No. 1. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

2. The Director of Public Works is ordered and directed to prepare an annual report as specified in California Streets and Highways Code Section 22622 with respect to City of Brea Landscaping and Lighting Assessment District No. 1 for fiscal year 2026-2027.

3. The City Clerk shall certify to the adoption of this Resolution.

APPROVED AND ADOPTED this 20th day of January 2026.
__________________________________________
Cecilia Hupp, Mayor
ATTEST:______________________________
Victoria Popescu, City Clerk
I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the foregoing Resolution was adopted at a regular meeting of the Council of the City of Brea, held on the 20th day of January 2026 by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC

WORKS TO PREPARE TO FILE A REPORT RELATED

TO MAINTENANCE OF PUBLIC IMPROVEMENTS IN

CITY OF BREA LIGHTING ASSESSMENT DISTRICT
NO. 2 AND ANY ASSESSMENTS THEREON FOR
FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Lighting Assessment District No. 2.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Lighting Assessment District No. 2. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND
RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

2. The Director of Public Works is ordered and directed to prepare an annual report as specified in California Streets and Highways Code Section 22622 with respect to City of Brea Lighting Assessment District No. 2 for fiscal year 2026-2027.

3. The City Clerk shall certify to the adoption of this Resolution.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC WORKS

TO PREPARE TO FILE A REPORT RELATED TO

MAINTENANCE OF PUBLIC IMPROVEMENTS IN CITY OF

BREA LANDSCAPING AND LIGHTING ASSESSMENT
DISTRICT NO. 3 AND ANY ASSESSMENTS THEREON
FOR FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Landscaping and Lighting Assessment District No. 3.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Landscaping and Lighting Assessment District No. 3. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

3. The City Clerk shall certify to the adoption of this Resolution.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC

WORKS TO PREPARE TO FILE A REPORT RELATED

TO MAINTENANCE OF PUBLIC IMPROVEMENTS IN

CITY OF BREA LIGHTING ASSESSMENT DISTRICT
NO. 4 AND ANY ASSESSMENTS THEREON FOR
FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Lighting Assessment District No. 4.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Lighting Assessment District No. 4. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

2. The Director of Public Works is ordered and directed to prepare an annual report as specified in California Streets and Highways Code Section 22622 with respect to City of Brea Lighting Assessment District No. 4 for fiscal year 2026-2027.

3. The City Clerk shall certify to the adoption of this Resolution.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC WORKS

TO PREPARE TO FILE A REPORT RELATED TO

MAINTENANCE OF PUBLIC IMPROVEMENTS IN CITY OF

BREA LANDSCAPING AND LIGHTING ASSESSMENT
DISTRICT NO. 5 AND ANY ASSESSMENTS THEREON
FOR FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Landscaping and Lighting Assessment District No. 5.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Landscaping and Lighting Assessment District No. 5. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

3. The City Clerk shall certify to the adoption of this Resolution.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC WORKS

TO PREPARE TO FILE A REPORT RELATED TO

MAINTENANCE OF PUBLIC IMPROVEMENTS IN CITY OF

BREA LANDSCAPING AND LIGHTING ASSESSMENT
DISTRICT NO. 6 AND ANY ASSESSMENTS THEREON
FOR FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Landscaping and Lighting Assessment District No. 6.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Landscaping and Lighting Assessment District No. 6. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

3. The City Clerk shall certify to the adoption of this Resolution.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
RESOLUTION NO. 2026-

A RESOLUTION OF THE COUNCIL OF THE CITY OF

BREA ORDERING THE DIRECTOR OF PUBLIC WORKS

TO PREPARE TO FILE A REPORT RELATED TO

MAINTENANCE OF PUBLIC IMPROVEMENTS IN CITY OF

BREA LANDSCAPING AND LIGHTING ASSESSMENT
DISTRICT NO. 7 AND ANY ASSESSMENTS THEREON
FOR FISCAL YEAR 2026-2027
A. RECITALS:
(i) This Council heretofore adopted a resolution forming City of Brea Landscaping and Lighting Assessment District No. 7.
(ii) California Streets and Highway Code Section 22622 provides that this Council shall adopt a resolution generally describing any proposed new improvements or substantial changes in existing improvements in such a district and ordering the Director of Public Works to prepare and file a report related to annual maintenance and assessments in such a district.
(iii) No new improvements or substantial changes in existing improvements are proposed for said Landscaping and Lighting Assessment District No. 7. (iv) All legal prerequisites to the adoption of this Resolution have occurred.

B. RESOLUTION:

NOW, THEREFORE, BE IT FOUND, DETERMINED AND RESOLVED by the City Council of the City of Brea as follows:

1. In all respects as set forth in the Recitals, Part A, of this resolution.

3. The City Clerk shall certify to the adoption of this Resolution.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAINED: COUNCIL MEMBERS:

Dated:_____________________________
______________________________
Victoria Popescu, City Clerk
CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 6C.

Second Reading of Ordinance No. 1271, an Ordinance of the City of Brea Extending the Term of a Pipeline Franchise Granted to Cardinal Pipeline, L.P., Repealing Ordinance No. 1268, and Approve a CEQA Exemption Determination

TO PREPARED BY
Honorable Mayor and City Council Members Matthew Cuevas, Senior Management Analyst

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Michael Ho, Public Works Director Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends the City Council take the following actions:

1. Waive full reading of and adopt Ordinance No. 1271, "An Ordinance of the City Council of the City of Brea extending the term of a pipeline franchise granted to Cardinal Pipeline, L.P. and repealing Ordinance No. 1268," by title only, and approve a California Environmental Quality Act (CEQA) exemption determination; and

2. Appropriate any revenues received as part of this franchise in the Fiscal Year 2025-26 Operating Budget; and

3. Authorize the City Clerk to accept a new faithful performance bond upon final adoption of the Ordinance.

BACKGROUND/DISCUSSION
The attached Ordinance No. 1271 supersedes Ordinance No. 1268 due to an inadvertent error in the title of Ordinance No. 1268. The prior ordinance noted Cardinal California Pipeline, L.P. in the title and as the applicant.

The correct applicant name and title is Cardinal Pipeline, L.P. (See Exhibit C for revisions to the Ordinance). Upon final adoption of Ordinance No. 1271, the prior Ordinance No. 1268 shall be repealed and be of no further force or effect.

Cardinal Pipeline, L.P. (“Cardinal”) submitted an application requesting that a previously granted pipeline franchise be extended to continue operating and maintaining an existing petroleum pipeline in the City. The California Public Utilities Code (“CPUC”) and Brea City Code (“BCC”) require any person, firm, or corporation utilizing City property to convey petroleum or similar products to have a valid franchise with the City of Brea.

In consultation with the City Attorney's office, staff has determined that Cardinal's application is for the extension of an existing pipeline franchise and not to construct, build, and operate an entirely new pipeline within the City.

Therefore, the City Council is not required to adopt a Resolution of Intent to Grant or conduct a Public Hearing and can introduce the draft Ordinance for first reading. The extension of this pipeline franchise is exempt from the California Environmental Quality Act of 1970 (CEQA) under Section 15301 ("Existing Facilities") of the CEQA Guidelines, and this Categorical Exemption has been incorporated by reference in the draft Ordinance (“Exhibit B”).

Staff recommends waiving the second reading of the Ordinance at the next regularly scheduled City Council meeting.

If the Ordinance is adopted at that time, then both the Ordinance and franchise would become effective 30 days later. The term of the franchise would be for 10 years. Cardinal would be the franchisee for 2,754 linear feet of 8- inch diameter proprietary pipeline along Brea Canyon Road and Orangewood Drive. Attached is a map (Exhibit "A") depicting the location of the pipeline in the City. Upon final adoption of the Ordinance by the City Council, Cardinal will submit a $100,000 faithful performance bond referencing the new Ordinance No. 1271. The California Public Utilities Commission regulates pipeline activity and establishes the rates charged for pipeline franchises. The rates for a non-public utility, or proprietary, pipeline franchise are also incorporated into the Brea City Code under Chapter 8.42: Pipeline Franchises (“Table A”). The annual payments are based on a formula associated with the internal diameter and length of the pipelines subject to annual Consumer Price Index (“CPI”) adjustments. The franchise fees for the pipeline depicted in Exhibit A have been paid through 2024 under Ordinance No. 1160. If the Ordinance is adopted, the annual base franchise fee is estimated at $1,339.94, and a one-time base granting fee of $7,747.50, for Fiscal Year 2025-2026. Both base fees have been adjusted by the annual CPI; therefore, there will be a positive fiscal impact to the General Fund.

Table A: Pipeline Franchise Rates - Proprietary
Internal Diameter of
Pipeline (inches)
Length of Pipeline per
Lineal Foot
Base Rate per
Lineal Foot Base Franchise Rate*
8" 2,754 $0.471 $1,339.94
One-time Base
Granting Fee $7,500 $7,747.50
Estimated FY 25-
26 Franchise Fee $9,087.44
*Includes 3.3% CPI
increase for 2025

COMMISSION/COMMITTEE RECOMMENDATION
The staff report was reviewed by the Finance Committee at their October 28, 2025, meeting and recommended for City Council approval.

FISCAL IMPACT/SUMMARY
Cardinal Pipeline, L.P. ("Cardinal") has submitted an application requesting that a previous pipeline franchise be extended to operate and maintain an existing petroleum pipeline in the City of Brea. The pipeline franchise has been determined to be exempt from CEQA requirements according to Section 15301 of CEQA guidelines. Upon the City Council's final adoption of the Ordinance ("Exhibit B"), appropriate all franchise fee revenues in the estimated amount of $9,087.44 in the Fiscal Year 2025-2026 Operating Budget. Furthermore, staff is recommending the second reading be waived for the adoption of the Ordinance.

Attachments
Exhibit A - Pipeline Map.pdf
Exhibit B - Ordinance No. 1271.pdf
Exhibit C - Redline for Ordinance.pdf
Cardinal Pipeline - Proprietary Pipelines
Legend
Menchego Gathering Line - 8" - 2,754ft
0 500 1,000
Feet
Paragon Partners Ltd.
1 Ord No. 1271
January 20, 2026
3194038.2
ORDINANCE NO. 1271

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BREA

EXTENDING THE TERM OF A PIPELINE FRANCHISE GRANTED TO
CARDINAL PIPELINE, L.P. AND REPEALING ORDINANCE NO. 1268 THE CITY COUNCIL OF THE CITY OF BREA DOES ORDAIN AS FOLLOWS:

SECTION 1. On or about March 6, 2012, in accordance with the provisions of Chapter 8.42 of the Brea City Code, the City Council adopted its Ordinance No. 1160, granting a franchise to Cardinal Pipeline, L. P., a California limited partnership ('Franchisee"), for a term of 10 years from the effective date of that Ordinance, to maintain, operate, renew, repair, remove or abandon in place existing pipes and pipelines for the collection, transportation or distribution of oil, gas, gasoline, petroleum, wet gas, hydrocarbon substances, water, waste water, mud, steam, and other liquid and gaseous substances which are not more hazardous than the aforementioned substances, together with all existing manholes, valves, appurtenances and service connections necessary or convenient for the operation of such pipes or pipelines including existing conduits, cathodic protection devices, wires, cables and other appurtenances necessary or convenient for the exercise of the Franchisee's business, in, under, along or across those streets within the City of Brea as depicted in Exhibit "A" attached hereto and incorporated by reference herein (the "Franchise").

SECTION 2. The City Council hereby extends the Franchise for a term of ten (10) years commencing on January 20, 2026. This extension is subject to, and conditioned upon the Franchisee's compliance with, all provisions of this Ordinance and Chapter 8.42 2 Ord No. 1271
January 20, 2026
3194038.2
of Title 8 of the Brea City Code, which Chapter is incorporated by reference herein. This Ordinance supersedes Ordinance No. 1268, which is repealed and shall be of no further force or effect.

SECTION 3. To the extent not contrary to Applicable Law, as defined in Chapter

8.42 of Title 8 of the Brea City Code, the City Council may from time to time amend this Ordinance or Chapter 8.42 of Title 8 and such amendments shall apply to the Franchisee to the extent such amendments are of general application to oil pipeline franchises in the City of Brea. Each and every provision of Chapter 8.42 of Title 8 of the Brea City Code shall apply to the Franchise.

SECTION 4. The City Council finds that the extension of the Franchise ("Project") was reviewed in accordance with the California Environmental Quality Act of 1970 (“CEQA”) and the Guidelines thereunder, and that there is no substantial evidence that the Project will have a significant effect on the environment. The City Council further finds that the Project is exempt from CEQA pursuant to Section 15301 ("Existing Facilities") of the CEQA Guidelines, and that this Categorical Exemption, incorporated herein by reference, reflects the independent judgment of the City Council. Based thereon, the City Council hereby adopts the Categorical Exemption for the Project.

SECTION 5. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by the decision or legislation of any court of competent jurisdiction, or by reason of preemptive legislation, such decision or legislation shall not affect the validity of the remaining portions thereof. 3 Ord No. 1271
January 20, 2026
3194038.2
The City Council declares that it would have passed this Ordinance, and each section, subsection, sentence, clause and phrase thereof, irrespective of the fact that one or more of the sections, subsections, sentences, clauses, or phrases thereof is declared invalid or unconstitutional.

SECTION 6. The City Clerk shall certify to the adoption of this Ordinance.

APPROVED AND ADOPTED this 20th day of January, 2026.
________________________________
Cecilia Hupp, Mayor
ATTEST: ________________________________
Victoria Popescu, City Clerk
4 Ord No. 1271
January 20, 2026
3194038.2
I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the foregoing Ordinance was introduced at a regular meeting of the City Council of the City of Brea held on the 16th day of December, 2025, and was finally passed at a regular meeting of the City Council of the City of Brea held on the 20th day of January, 2026, by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

DATED: ____________________, 2026
________________________________
Victoria Popescu, City Clerk
5 Ord No. 1271
January 20, 2026
3194038.2
EXHIBIT “A”
1 Ord No. 1268_____
_______, 2025January 20, 2026
3194038.2
ORDINANCE NO. 1268____

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BREA

EXTENDING THE TERM OF A PIPELINE FRANCHISE GRANTED TO
CARDINAL CALIFORNIA PIPELINE, L.P. AND REPEALING
ORDINANCE NO. 1268
THE CITY COUNCIL OF THE CITY OF BREA DOES ORDAIN AS FOLLOWS:

SECTION 1. On or about March 6, 2012, in accordance with the provisions of Chapter 8.42 of the Brea City Code, the City Council adopted its Ordinance No. 1160, granting a franchise to Cardinal California Pipeline, L. P., a California limited partnership ('Franchisee"), for a term of 10 years from the effective date of that Ordinance, to maintain, operate, renew, repair, remove or abandon in place existing pipes and pipelines for the collection, transportation or distribution of oil, gas, gasoline, petroleum, wet gas, hydrocarbon substances, water, waste water, mud, steam, and other liquid and gaseous substances which are not more hazardous than the aforementioned substances, together with all existing manholes, valves, appurtenances and service connections necessary or convenient for the operation of such pipes or pipelines including existing conduits, cathodic protection devices, wires, cables and other appurtenances necessary or convenient for the exercise of the Franchisee's business, in, under, along or across those streets within the City of Brea as depicted in Exhibit "A" attached hereto and incorporated by reference herein (the "Franchise").

SECTION 2. The City Council hereby extends the Franchise for a term of ten (10) years commencing on _______, 2025 .January 20, 2026. This extension is subject to, and conditioned upon the Franchisee's compliance with, all provisions of this Ordinance 2 Ord No. 1268_____
_______, 2025January 20, 2026
3194038.2
and Chapter 8.42 of Title 8 of the Brea City Code, which Chapter is incorporated by reference herein. This Ordinance supersedes Ordinance No. 1268, which is repealed and shall be of no further force or effect.

SECTION 3. To the extent not contrary to Applicable Law, as defined in Chapter

SECTION 5. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by the decision or legislation of any court of competent jurisdiction, or by reason of preemptive legislation, such decision or legislation shall not affect the validity of the remaining portions thereof. 3 Ord No. 1268_____
_______, 2025January 20, 2026
3194038.2
The City Council declares that it would have passed this Ordinance, and each section, subsection, sentence, clause and phrase thereof, irrespective of the fact that one or more of the sections, subsections, sentences, clauses, or phrases thereof is declared invalid or unconstitutional.

SECTION 6. The City Clerk shall certify to the adoption of this Ordinance.

APPROVED AND ADOPTED this __ day of __________, 20256.
________________________________
Blair StewartCecilia Hupp, Mayor
ATTEST: ________________________________
Victoria Popescu, City Clerk
4 Ord No. 1268_____
_______, 2025January 20, 2026
3194038.2
I, Victoria Popescu, City Clerk of the City of Brea, do hereby certify that the foregoing Ordinance was introduced at a regular meeting of the City Council of the City of Brea held on the ___ day of ___________, 2025, and was finally passed at a regular meeting of the City Council of the City of Brea held on the ____ day of ___________, 2025, by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

DATED: ____________________, 2025
________________________________
Victoria Popescu, City Clerk
5 Ord No. 1268_____
_______, 2025January 20, 2026
3194038.2
EXHIBIT “A”
CITYof BREA
City Council Regular Meeting
Communication
January 20, 2026
Item No. 6D.

Second Reading and Adoption of Ordinance No. 1270, an Ordinance Establishing Standards and Procedures for a Pilot Short-Term Rental Program, Adding Chapter 5.32 "Short-Term Rentals" to the Brea City Code, and Approving a CEQA Exemption Determination

TO PREPARED BY
Honorable Mayor and City Council Members Joselyn Magana, Management Analyst

DEPARTMENT HEAD APPROVAL CITY MANAGER APPROVAL
Jason Killebrew, Assistant City Manager/Community
Development Director
Kristin Griffith, City Manager

RECOMMENDATION
Staff recommends that the City Council take the following actions:

1. Find Ordinance No. 1270 exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061 (b)(3) of the CEQA Guidelines (Attachment A); and

2. Waive full reading of and adopt Ordinance No. 1270 titled "An Ordinance of the City Council of the City of Brea Establishing Standards and Procedures for a Pilot Short-Term Rental Program, Adding Chapter 5.32 Regarding Short-Term Rentals to the Brea City Code, and Approving a CEQA Exemption Determination" (Attachment A).

BACKGROUND/DISCUSSION
On May 6, 2025, the Brea City Council conducted a workshop to review the City of Brea's budget for Fiscal Years 2025-26 and 2026-27. As part of the budget workshop, the City Council directed the evaluation of certain programs, including the "consideration of short-term rentals and other business opportunities" (Attachment B). Currently, Chapter 20.71 ("Short-Term Residential Rentals") of the Brea City Code (BCC) prohibits residential short-term rentals in the City.

On June 17, 2025, the Brea City Council adopted the annual budgets for Fiscal Years 2025-26 and 2026-27, which included setting their Top Priorities and Projects for those years. Included in the City Council's Top Priorities and Projects is for City staff to "identify creative ways to enhance City revenues and reduce costs".

In June 2025, City staff also reviewed the Orange County Grand Jury report entitled "Long-Term Solutions to ShortTerm Rentals", which consists of findings and recommendations pertaining to municipal short-term rental policies.

Specifically, the Orange County Grand Jury identified major, upcoming events happening in the Southern California region, such as the 2026 FIFA World Cup and the 2028 Olympic and Paralympic Games, which are expected to generate additional tourism to the region and an increasing demand for lodging in Brea. City staff is also aware of development projects in nearby cities, such as DisneylandForward and the OC Vibe, that are also anticipated to increase local tourism. The Orange County Grand Jury therefore recommended that the City of Brea review and update its ordinance(s) in anticipation of the upcoming major events by December 31, 2025. In response to the Orange County Grand Jury's recommendations, as well as the City Council's prior direction, staff conducted a review of BCC Chapter 20.71 to reassess the City's prohibition of short-term rentals.

On July 15, 2025, staff presented their assessment of and recommendation for the consideration of a short-term rental program intended to update BCC Chapter 20.71 to the Brea City Council at a Study Session Meeting (Attachment C). Staff shared six prospective policies for a short-term rental program, each with varying license caps and regulations. Ultimately, staff recommended the policy option with a limited license availability and comprehensive regulations to establish a well-managed program. The regulations proposed that participants in the short-term rental program must submit and pay for an application, pass a home inspection, and pay Transient Occupancy Tax (TOT). The regulations also set host and guest requirements and identified ineligible units. City Council discussed additional program regulations and directed staff to develop guidelines for a limited, regulated, short-term rental pilot program with a limited number of licenses and operational standards targeting potential noise and parking impacts. Additionally, the City Council also requested that staff notify homeowner associations (HOAs) and hotel operators in Brea of the proposed short-term rental pilot program to establish stakeholder awareness and feedback.

On August 19, 2025, City staff prepared a letter containing a brief questionnaire for the HOAs within the City (Attachment D). The letter identified the City's intent to review and possibly introduce a limited, regulated, shortterm rental pilot program and requested that the HOAs share any feedback on the proposed changes. Staff received three responses opposing an amendment to BCC Chapter 20.71 (Attachment E). The responses expressed concerns about potential impacts on neighborhoods, specifically noise and parking. As such, City staff amended the proposed guidelines to require HOA authorization of a short-term rental property before issuing any short-term rental license to a property owner. As part of the outreach process, a prominent hotel operator indicated no concerns related to allowing short-term rentals in the City of Brea.

At the September 16, 2025 City Council Study Session Meeting, staff presented a draft proposal for the limited, regulated, short-term rental pilot program (Attachment F). The draft proposal incorporated prior City Council feedback related to license and program availability, approval procedures, and revocation criteria. Notable provisions included setting a horizon date for the pilot program of December 31, 2029; requiring an application process with a home inspection for building and fire code compliance; and stringent enforcement mechanisms to deter violations. To mitigate noise and parking impacts, the proposal indicated a limit to the number of daytime and overnight guests based on the number of bedrooms on the property and designating on-site parking only. During the Study Session Meeting, the City Council requested that staff establish geographic boundaries to guide license distribution and expressed support for a lottery-based allocation system to ensure fairness. With this additional feedback, the City Council directed staff to prepare a final version of the ordinance for review and consideration.

The following sections provide a summary of the proposed limited, regulated, short-term rental pilot program and the provisions of proposed Ordinance No. 1270, which, if approved, would be codified in BCC Chapter 5.32 (Attachment A) and supersede BCC Chapter 20.71. The ordinance establishes standards, regulations, and operational requirements to ensure that short-term rentals operate in a manner that protects the health, safety, and welfare of Brea residents, businesses, and visitors.

Following the first reading of Ordinance No. 1270 at the December 16, 2025 City Council Meeting, staff has made targeted revisions to clarify the Transient Occupancy Tax (TOT) collection. Revisions were made to Sections

5.32.060, 5.32.070, and 5.32.120 to outline requirements for hosting platforms that process bookings and payments to collect and remit TOT on behalf of short-term rental operators (Attachment I).

The next section outlines key program regulations and operational requirements for property owners under the proposed short-term rental program.

Program Regulations
The proposed short-term rental program outlines the initiative as a limited-term pilot program, expiring on December 31, 2029, unless otherwise extended or modified by the City Council.

To manage community impacts, the total number of licensed short-term rentals will be capped at one hundred (100), allocated as follows: twenty-five (25) in the Northwest sector of the City of Brea, fifty (50) in the Southwest sector, and twenty-five (25) in the East sector (Attachment G). This approach will promote equitable distribution throughout the City.

Only property owners (no renters) are eligible for the program. Property owners may hold no more than two (2) short-term rental licenses, based on the number of dwelling units on the property, as shown in Table 5.32.040. C.1.

Table 5.32.040. C.1

SHORT-TERM RENTAL PERMIT ISSUANCE
Number of Units Per Property Maximum Number of ShortTerm Rental Permits
Up to 49 1
50 or more 2
The proposed short-term rental program would prohibit short-term rentals in accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs), affordable housing units under the City's proprietorship, and recreational vehicles.

Property owners intending to operate a short-term rental must submit an application containing all the requested information.

License holders whose licenses have been revoked during their participation in the pilot program are ineligible to reapply for the remaining duration of the program.

Property owners located within an HOA community would be required to obtain HOA approval prior to obtaining a license to operate a short-term rental.

Property owners seeking a short-term rental license must obtain a business license and meet the City's insurance requirements.

The property would be subject to a building, fire, and health and safety inspection prior to license approval.

The property must have adequate on-site parking available, as overnight street parking for occupants of the short-term rental is prohibited.

Restricting outdoor activity and noise between 10:00 p.m. and 7:00 a.m., and displaying the required postage for outdoor activity
Displaying the short-term rental license number assigned by the City in rental listing advertisements Preserving the property's residential character
Properly storing trash containers
Complying with the City's TOT requirements
Ensuring a minimum renter age of 25 years
Maintaining renter records and providing them to the City upon request Designating a 24-hour contact person required to respond to guest and City inquiries Requiring a two-night consecutive stay, minimum, per renter Requiring the renter to complete and acknowledge the City's Good Neighbor Policy and occupant rules prior to check-in
The proposed overnight occupancy will be limited to the number of bedrooms in the dwelling unit, as depicted in Table 5.32.050. C.1. Guests under twelve (12) years of age are excluded from the maximum occupancy limits.

Table 5.32.050. C.1

OVERNIGHT MAXIMUM OCCUPANCY LIMITS
Bedrooms Occupancy
0 2
1 4
2 6
3 8
4 10
5 or more 12
As a result of past City Council direction, staff recommends that the City Council take the following actions: (1) waive full reading and introduce Ordinance No. 1270 titled "An Ordinance of the City Council of the City of Brea Establishing Standards and Regulations for a Pilot Short-Term Rental Program, Adding Chapter 5.32 'Short-Term Rentals' to the Brea City Code; and Approving a CEQA Determination" (Attachment A); (2) approve a California Environmental Quality Act (CEQA) Exemption Determination (Attachment A); and (3) schedule adoption of the Ordinance as mentioned above at the next regular City Council meeting.

This Ordinance has been noticed in accordance with the City's public noticing requirements, which involved publication in the local newspaper. The public hearing notice for this ordinance is provided as Attachment H. As of the preparation of this report, no public comments have been received by staff.

FISCAL IMPACT/SUMMARY
The estimated annual revenue impact on the General Fund (110) associated with the adoption of Ordinance No. 1270 is approximately $507,340.

The short-term rental program is anticipated to generate up to $100,000 in annual application fee revenue. The proposed application fee is $1,000 per license, and the ordinance authorizes up to 100 short-term rental licenses.

In addition, annual Transient Occupancy Tax (TOT) revenue is estimated to be $407,340. These projections are based on:
$186 nightly rate*
A two-night stay (per the City's requirement)
An occupancy rate of 60 percent (approximately 219 nights per year)** 100 licensed properties
The City's current TOT rate of 10 percent
*Average nightly rate across listings on major online booking platforms for comparable short-term rentals in the area.
**Industry sources indicate that average occupancy rates for short-term rentals in California range from 50 to 70 percent. Staff calculations were made using an average rate of 60 percent.

Brea City CouncilJanuary 20, 2026

Brea City Council
January 20, 2026