Carmel-by-the-Sea City Council
March 24, 2026

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL AGENDA
Contact: 831.620.2000 www.ci.carmel.ca.us
Mayor Dale Byrne
Councilmembers Jeff Baron, Hans Buder, Bob Delves, and
Alissandra Dramov
All meetings are held in the City Council Chambers
East Side of Monte Verde Street
Between Ocean and 7th Avenues
Special Meeting
Tuesday, March 24, 2026
4:00 PM

HYBRID MEETING ATTENDANCE OPTIONS
This meeting will be held in person and via teleconference ("hybrid"). The public is welcome to attend the meeting in person or remotely via Zoom, however, the meeting will proceed as normal even if there are technical difficulties accessing Zoom. The City will do its best to resolve any technical issues as quickly as possible. To view or listen to the meeting from home, you may also watch the live stream on the City's YouTube page at: https://www.youtube.com/@CityofCarmelbytheSea/streams. To participate in the meeting via Zoom, copy and paste the link below into your browser. https://ci-carmel-ca-us.zoom.us/j/88610357139
Webinar ID: 886 1035 7139
Passcode: 758920
Dial-in: (253) 215-8782

HOW TO OFFER PUBLIC COMMENT
The public may give public comment at this meeting in person, or use the Zoom teleconference module, provided that there is access to Zoom during the meeting. Zoom comments will be taken after the inperson comments. The public can also email comments to [email protected]. Comments must be received at least 2 hours before the meeting in order to be provided to the legislative body. Comments received after that time and up to the beginning of the meeting will be made part of the record.

PUBLIC COMMENT GUIDELINES FOR SPECIAL MEETINGS
During Special City Council Meetings, public comments are permitted on items listed on the agenda. After each item on the agenda is introduced, the Mayor will invite public comment on that item. Each speaker has 3 minutes to speak unless otherwise adjusted by the Mayor. While stating your name is optional, it helps to identify speakers in the meeting minutes. Remote or in-person participants who do not comply with the requirements of the Brown Act will be muted.

CALL TO ORDER AND ROLL CALL - 4:00 p.m.

EXTRAORDINARY BUSINESS

ORDERS OF BUSINESS
Orders of Business are agenda items that require City Council discussion, debate, direction to staff, and/or action.

1) Resolution 2026-022 receiving the Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2025
2) Receive a presentation on the updated Council Strategic Priorities list following the January 22nd workshop, and provide direction to staff
3) Receive a presentation on the Five-Year Financial Forecast and provide direction to staff
4) Receive a presentation on the proposed FY 26-27 CIP Program and Five-Year plan and provide direction to staff
RECESS
The City Council will take a 30-minute break around 6:30 p.m. if needed.

ADJOURNMENT
This agenda was posted at City Hall, Monte Verde Street between Ocean Avenue and 7th Avenue, Harrison Memorial Library, located on the NE corner of Ocean Avenue and Lincoln Street, the Carmel-bythe-Sea Post Office, 5th Avenue between Dolores Street and San Carlos Street, and the City's webpage (http://www.ci.carmel.ca.us) in accordance with applicable legal requirements.

CORRESPONDENCE RECEIVED AFTER THE POSTING OF THE AGENDA Any correspondence or supplemental materials related to items on this agenda that are received after the agenda has been posted will be distributed to the City Council and made available for public review at City Hall (Monte Verde Street between Ocean and Seventh Avenues) during regular business hours.

Written comments emailed to the City Clerk will not be read aloud, but will be posted online with the related agenda at: https://carmelbytheseaca.portal.civicclerk.com/.

SPECIAL NOTICES TO PUBLIC
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 831-620-2000 at least 48 hours prior to the meeting to ensure that reasonable arrangements can be made to provide accessibility to the meeting (28CFR

35.102-35.104 ADA Title II).

CITY OF CARMEL-BY-THE-SEA
City Council
Staff Report
March 24, 2026

ORDERS OF BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Jayme Fields, Finance Manager
APPROVED BY: Brandon Swanson, Acting City Administrator SUBJECT: Resolution 2026-022 receiving the Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2025 RECOMMENDATION:

Adopt Resolution 2026-022 receiving the Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2025.

BACKGROUND / SUMMARY:

This item is on the Council's agenda to receive the Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2025 (Fiscal Year 2024-2025). The ACFR includes the City's audited basic financial statements and the independent auditor's report. It also includes a narrative on the City’s financial activities known as the Management Discussion and Analysis and a statistical section pertaining to financial trends, revenue capacity, debt capacity, demographic and economic information and operating information.

State law requires that the accounts and fiscal affairs of all municipal entities be examined annually by an independent certified public accountant. The City has retained an independent auditor, Chavan and Associates, LLP, to audit the City’s financial statements. The audit was performed in accordance with auditing standards generally accepted in the United States, including financial auditing standards issued by the Comptroller General of the United States, in order to determine if the City’s financial statements were misstated or misrepresented, either due to fraud or error. Chavan and Associates, LLP, has issued an unmodified opinion that the financial statements for the year ended June 30, 2025, are fairly presented in conformity with

generally accepted accounting principles (GAAP).

As part of the audit process, Chavan and Associates, LLP, also test the City’s internal controls over financial reporting and compliance and reports on the outcome of these tests (“findings”) as part of the Communication Letter. There are different categories of findings, including a material weakness, meaning that a deficiency, or a combination of deficiencies, in internal controls exists and that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, detected or corrected on a timely basis. No material weaknesses or other findings were identified as part of the audit. Sheldon Chavan of Chavan and Associates LLP will give a presentation on the Fiscal Year 2024-2025 audit as part of the Council's March 24, 2026 special meeting.

The Fiscal Year 2024-2025 ACFR was prepared using guidelines issued by the Government Finance Officers Association of the United States and Canada (GFOA) as part of its Certificate of Achievement for Excellence in Financial Reporting Program.

The intent of this program is to encourage state and local governments to prepare reports that exceed the minimum requirements of generally accepted accounting principles in order to produce a readable and efficiently organized document intended to allow greater public transparency and full disclosure of the City’s financial health.

The City received a Certificate of Achievement for its Fiscal Year 2023-2024 and the Fiscal Year 2024-2025 ACFR has been submitted to the GFOA for consideration of a new Certificate of Achievement
FISCAL IMPACT:

There is no fiscal impact associated with receiving the ACFR. The cost for the audit for fiscal year 2024-2025 is included within the adopted budget for a not to exceed amount of $40,000.

PRIOR CITY COUNCIL ACTION:

There is no prior action taken on this item.

ATTACHMENTS:

1. Resolution 2026-022

2. 2024-25 City of Carmel-by-the-Sea ACFR_C&ALLP

3. Governance Audit Letter FY25_C&ALLP

4. Management Letter FY25_C&ALLP

ATTACHMENT 1

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
RESOLUTION NO. 2026-022

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA RECEIVING THE

ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) FOR THE FISCAL YEAR ENDING JUNE 30, 2025
WHEREAS, State law requires that all accounts and fiscal affairs of municipal entities be examined annually by an independent certified public accountant; and WHEREAS, the City retained the independent auditing firm of Chavan and Associates, LLP to audit the City’ s financial statements; and
WHEREAS, the audit was performed in accordance with auditing standards generally accepted in the United States, including financial auditing standards issued by the Comptroller General of the United States, in order to determine if the City’s financial statements were misstated or misrepresented, either due to fraud or error; and
WHEREAS, Chavan and Associates, LLP has issued an unmodified opinion that the financial statements for the fiscal year ending June 30, 2025 (“Fiscal Year 2024-2025)” are fairly presented in conformity with generally accepted accounting principles; and WHEREAS, the audited financial statements are a component of the Annual Comprehensive Financial Report (ACFR); and
WHEREAS, the ACFR is a report that goes beyond minimum requirements of generally accepted accounting principles and was prepared using the guidelines developed by the Government Finance Officers Association (GFOA) for its Certificate of Achievement for Excellence in Financial Reporting program in order to produce a readable and efficiently organized document intended to allow greater public transparency and full disclosure of the City’s financial health.

NOW THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF CARMEL-BYTHE-SEA DOES HEREBY:

Receive the Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ending June 30, 2025.

PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA this 24th day of March, 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED: ATTEST:

______________________________ ___________________________________

Resolution No. 2026-xxx

Dale Byrne, Mayor Nova Romero, MMC, City Clerk

Annual Comprehensive Financial Report
City of Carmel-by-the-Sea
California
Fiscal Year Ended June 30, 2025
ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

City of Carmel-by-the-Sea
California
Annual Comprehensive Financial Report
For the Fiscal Year Ended June 30, 2025
Prepared by the Finance Department
ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

CITY OF CARMEL-BY-THE-SEA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2025

TABLE OF CONTENTS

INTRODUCTORY SECTION
Transmittal Letter ............................................................................................................... 1 Principal Officials.............................................................................................................. 11 Organizational Chart .......................................................................................................... 12 GFOA Certificate ............................................................................................................... 13

FINANCIAL SECTION
Independent Auditor’s Report............................................................................................. 16 Management’s Discussion and Analysis (Required Supplementary Information) ................. 21 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position......................................................................................... 38 Statement of Activities.............................................................................................39 Fund Financial Statements
Governmental Funds:

Balance Sheet ..................................................................................................... 42 Reconciliation of the Government Funds Balance Sheet
to the Government-Wide Financial Statement of Net Position......................... 43 Statement of Revenues, Expenditures and Changes in Fund Balances .................. 44 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities .................................................................................. 45 Proprietary Funds:

Statement of Net Position ................................................................................... 46 Statement of Revenues, Expenses, and Changes in Fund Net Position.................. 47 Statement of Cash Flows..................................................................................... 48

Notes to the Basic Financial Statements ........................................................................49

REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP Basis):

General Fund ........................................................................................................... 85 Measure C Sales Tax Fund ....................................................................................... 86 Harrison Memorial Library Fund.............................................................................. 87 Schedule of Pension Contributions ..................................................................................... 88 Schedule of Proportionate Share of Net Pension Liability ................................................... 89 Schedule of Total OPEB Liability ......................................................................................90 ATTACHMENT 2

CITY OF CARMEL-BY-THE-SEA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2025

SUPPLEMENTARY INFORMATION
Combining Nonmajor Governmental Funds:

Combining Balance Sheet.............................................................................................. 94 Combining Statement of Revenues, Expenditures and Changes in Fund Balances........... 96 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual (GAAP Basis):

Gas Tax Fund ........................................................................................................ 98 Transportation Safety Fund ................................................................................... 99 COPS Grant Fund................................................................................................100 Parking In-Lieu Fun ............................................................................................101 Asset Seizure Fun................................................................................................102 Debt Service Fund...............................................................................................103 Schedule of Revenues, Expenditures and Changes in Fund Balances – Capital Projects - Budget and Actual (GAAP Basis) ...............................................104 Combining Internal Service Funds:

Combining Statement of Net Position ..........................................................................106 Combining Statement of Revenues, Expenses and Changes in Fund Net Position .........107 Combining Statement of Cash Flows ........................................................................... 108

STATISTICAL SECTION
Net Position by Component................................................................................................... 113 Changes in Net Position ........................................................................................................ 115 Fund Balances of Governmental Funds.................................................................................. 117 Changes in Fund Balances of Governmental Funds................................................................ 119 General Governmental Tax Revenues by Source .................................................................... 121 General Fund Tax Revenues by Source.................................................................................. 122 Net Assessed Value of Taxable Property ............................................................................... 123 Direct and Overlapping Property Tax Rates........................................................................... 124 Principal Property Tax Owners ............................................................................................. 125 Property Tax Levies and Collections..................................................................................... 126 Ratios of Outstanding Debt by Type...................................................................................... 127 Ratios of Net General Bonded Debt Outstanding ................................................................... 128 Computation of Direct and Overlapping Debt ........................................................................ 129 Legal Debt Margin Information............................................................................................. 131 Pledged Revenue Coverage ................................................................................................... 132 Demographic and Economic Statistics................................................................................... 133 Principal Employers.............................................................................................................. 134 Number of City Employees by Department............................................................................ 135 Operating Indicators by Function .......................................................................................... 136 Capital Asset Statistics by Function ...................................................................................... 137

OTHER INDEPENDENT AUDITOR REPORTS
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards........................................................ 140 ATTACHMENT 2

TRANSMITTAL LETTER
ATTACHMENT 2

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ATTACHMENT 2

CITY OF CARMEL-BY-THE-SEA
P.O. BOX CC
CARMEL-BY-THE-SEA, CA 93921
March 17, 2026
Honorable Mayor Dale Byrne
Members of the Carmel-by-the-Sea City Council, and
Citizens of Carmel-by-the-Sea
SUBJECT: Annual Comprehensive Financial Report – June 30, 2025 The Annual Comprehensive Financial Report (ACFR) for the City of Carmel-by-the-Sea for the fiscal year ended June 30, 2025 is hereby submitted.

REPORT PURPOSE AND ORGANIZATION
In accordance with State law, which requires that the accounts and fiscal affairs of all municipal entities be examined annually by an independent certified public accountant, the City of Carmel-by-the-Sea retained an independent auditor, Chavan and Associates, LLP, to audit the City’s financial statements. Chavan and Associates, LLP, has issued an unmodified opinion that the financial statements for the year ended June 30, 2025, are fairly presented in conformity with generally accepted accounting principles (GAAP). This opinion, along with the basic financial statements, are submitted as the Annual Comprehensive Financial Report (ACFR) for the City for the fiscal year ended June 30, 2025. The information included in the financial section of this report fulfills the above requirement.

This report consists of City management’s representations regarding the finances of the City of Carmel-by-theSea. Management assumes full responsibility for the completeness, data accuracy, and fairness of the information presented, including all footnotes and disclosures. Management believes the data presented are accurate in all material respects and presented in a manner designed to fairly set forth the financial position and results of operations of the City.

To provide a reasonable basis for making these representations, City management has established a comprehensive framework of internal controls that is designed to both protect the City’s assets from loss, theft or misuse and to compile sufficiently reliable information for the preparation of the City’s financial statements in conformity with generally accepted accounting principles.

Because the cost of internal controls should not exceed their benefits, the City’s internal controls have been designed to provide reasonable, rather than absolute, assurance that the financial statements are free from material misstatements. The audit is intended to provide users with reasonable assurance that the information presented is free from material misstatements. As management, we assert that to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

Generally accepted accounting principles require management to provide a narrative introduction, overview, and analysis that accompanies the basic financial statements in a format known as the Management’s Discussion and Analysis (MD&A). This letter of transmittal is intended to augment the MD&A and is meant to be read in conjunction with the MD&A. The MD&A can be found in the Financial Section of this document, immediately following the report of the independent auditor.

ATTACHMENT 2

CITY OF CARMEL-BY-THE-SEA PROFILE
Located 120 miles south of San Francisco on the Monterey Peninsula, the City of Carmel-by-the-Sea is a coastal village with a population of 3049 that is renowned for its natural beauty, including a white sand beach, urban forest of over 10,000 public trees comprised of Monterey pines, live oaks, and Monterey cypress and natural parklands all within a one-square-mile, built-out community. In addition to recreational opportunities afforded by such scenery, the City is also known for its architecture and dining and shopping opportunities, which may be found in the walkable downtown area. In addition to many City sponsored events like the City Halloween Parade, Sandcastle Contest and Pumpkin Roll, other special events also occur throughout the year and cultural activities abound, including at such venues as the Sunset Center performing arts center and the Forest Theater, an outdoor amphitheater.

The median age of the City’s residents is 68.9 years. Nearly 76% of the population age 25 or older have a bachelor’s degree. The City’s median household income is $115,729. The Carmel area offers outstanding educational opportunities through the Carmel Unified School District as well as institutions of higher learning on the Monterey Peninsula including the Monterey Peninsula College, the Middlebury Institute for International Studies, California State University Monterey Bay, and the Hopkins Marine Station operated by Stanford University.

Form of Government
The City of Carmel-by-the-Sea was incorporated on October 31, 1916. As a General Law City, Carmel-by-theSea operates under a Council-City Manager (City Administrator) style of government and derives its power from the California Constitution and laws enacted by the State legislature.

All legislative power is held by the publicly elected, five-member City Council that consists of the Mayor and four Councilmembers. The Mayor serves a two-year term while Council members serve a four-year term, with overlapping terms with municipal elections occurring in November of each even numbered year. City Council is the policy making legislative body of the City and it adopts the annual budget, enacts ordinances, and approves major contracts, acquisitions and leases. The Council appoints the City Administrator to serve as the City’s chief administrative officer.

The City Administrator is responsible for the enforcement of City laws and ordinances; ensuring that the orders of the City Council are executed; for supporting Council, which includes the preparation of agendas and the maintenance of records; and overseeing the City’s day-to-day operations. This includes oversight of the departments of Community Planning and Building, Library, Community Activities, Public Safety and Public Works. The City Administrator also directs the centralized administrative functions of the City Clerk, Finance, Human Resources and Information Technology.

City Services
The City provides a variety of services to residents, businesses and visitors to the village of Carmel-by-the-Sea.

Administration provides oversight of daily City functions and financial activity. Community Planning and Building provides building safety services, code compliance and planning functions while Community Activities and Library manage new and ongoing special events and provide library services at two branch locations. Public Safety services related law enforcement, and crime prevention are provided by the Police Department, while fire and ambulance services are provided through a contract with the City of Monterey. Public Works is responsible for facility and vehicle maintenance, development and management of capital projects; construction, improvement and repair of streets, sidewalks, pathways and storm drain systems and maintaining the Village forest, parks and shoreline areas.

ATTACHMENT 2

The ACFR includes all financial activities of the City. Financial data for all funds through which services are provided by the City have been included in this report using criteria adopted by the Governmental Accounting Standards Board (GASB), which is the authoritative body establishing U.S. Generally Accepted Accounting Principles (GAAP) for local governments.

Budgetary Policy and Control
The accounts of the City are organized into funds. A fund is an independent fiscal and accounting entity with a self-balanced set of accounts. The minimum number of funds is maintained consistently with legal and managerial requirements. Annually appropriated budgets are legally adopted on a budgetary basis for the governmental fund types and are controlled on a fund and departmental level. These funds are used to account for most of the City’s general government activities. Governmental fund types use the flow of current financial resources, measurement focus, and the modified-accrual basis of accounting and budgeting. Expenditures are recognized as encumbrances when a commitment is made. Unencumbered appropriations lapse at year-end.

The goal of the City Administrator is to present a balanced budget to the City Council for review and adoption.

A balanced budget is a budget in which funding sources meet or exceed uses. Available funding sources shall be at least equal to recommended appropriations. As a general rule, the year-end undesignated General Fund balance should not be used to fund ongoing operations.

As set in the Carmel Municipal Code prior to the beginning of each fiscal year, the City Council shall adopt a budget for expenditures and anticipated revenues. On or before 15 February of each year, the City Administrator will present to the City Council a proposed budget schedule. The City Administrator prepares and submits to the City Council a proposed operating and capital budget for the forthcoming fiscal year. The City Council shall adopt the budget by 1 July.

The City Administrator shall have the right to approve the transfer of appropriations within a departmental budget; however, no additional positions shall be created without the authorization of the City Council. All transfers of appropriations between departments, or in regard to capital items or projects, shall be approved by the City Council. The City Administrator shall be charged with the responsibility of controlling the expenditures for all departments in accordance with the approved budget. A report on current year revenues, expenditures, and fund balances shall be maintained.

FACTORS AFFECTING FINANCIAL CONDITION
This brief narrative on the local economy, City financial policies and major initiatives outlined within the annual budget are intended to provide context to the MD&A and financial statements.

Local Economy
The City’s three major sources of General Fund revenue include Property Tax, Sales and Use Tax, and Transient Occupancy Tax. As shown on the chart on the next page entitled “City’s Major Revenues Historical Trend”, property taxes have historically been a strong component to the City’s financial health. Property tax revenue reached $9.15 million, a 4.3% increase over the prior fiscal year. Revenue generated from sales and use taxes has become increasingly important to the City, especially after the passage of a local 1% sales tax measure by Carmel voters in 2012 and the subsequent approval of a new 1.5% sales tax for 20 years in March 2020. Sales and use tax revenue for fiscal year 2024-2025 (“24/25”) totaled $10.87 million, a 7.9% increase over the prior fiscal year.

Transient occupancy taxes (“TOT”) have also significantly contributed to the City’s revenues, rising to $9.60 million in fiscal year 24/25, a 11.4% increase over the prior year.

ATTACHMENT 2

The City’s three major revenue sources also illustrate the unique opportunities attributed to the City of Carmelby-the-Sea. Located within one square mile, the City is considered to be built out, limiting the availability of new housing stock. This limited supply, coupled with a high demand for housing driven by the City’s desirability as a place to live and proximity to the San Francisco metropolitan area, contributes to a healthy real estate market and thus the stability and strength of property tax revenues.

Many of the features that contribute to residential quality of life, such as a temperate climate, natural beauty, architecture, unique design standards and cultural, dining and shopping opportunities also attract visitors. The variety of restaurants and other dining options located within the City’s boundary as well as art galleries, jewelry and clothing retailers contribute to shopping opportunities for residents and visitors alike. Similarly, visitors have many lodging options to choose from when staying overnight within the City. The lodging establishments charge a 10% Transient Occupancy Tax for stays of 30 days or less, which is remitted to the City.

On November 6, 2012, the Carmel electorate approved a temporary 1% transaction and use tax (“sales tax”) for ten years to raise revenue for general purposes, known as Measure D. The advent of Measure D increased the viability of sales tax as the City’s top major revenue sources, as shown in the chart “City’s Major Revenues Historical Trend” below. On March 3, 2020, the Carmel electorate voted and approved Measure C to increase the sales tax rate to 1.5%. The timing of Measure C helped minimize the effects of reduced sales tax revenue suffered during the pandemic, allowing the City to survive and recover to pre-pandemic levels. Sales tax revenue has been the largest source of revenue for the City over the last four fiscal years.

While fiscal year 2020 was on track to meet revenue projections, the City’s economic forecast for two of its major revenue streams quickly began to change as news regarding the coronavirus (“COVID-19”) emerged. Travel restrictions coupled with decreased consumer spending and demand, particularly in the areas of travel and leisure, resulted in the underperformance of sales tax and TOT in fiscal year 20/21. TOT returned to pre-COVID levels in fiscal year 21/22, a tribute to Carmel’s claim as a unique travel destination. The economy has changed over the past fiscal year, with consumer spending higher across the City’s three major pillars of tax revenue. In fiscal year 24/25, Property tax reached a high of $9.15 million, TOT reached a high of $10.87 million, and Sales and Use tax reached a high of $9.60 million.
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
City's Major Revenues Historical
TOT Sales Tax Property Tax
ATTACHMENT 2

Property Taxes
The desirability of Carmel-by-the-Sea as a place to reside, coupled with its limited housing stock, contributes to a strong local real estate market. Property tax revenue totaled $5.60 million in fiscal year 15/16, increasing on average by 5.6% over the past 9 years, reaching $9.15 million in fiscal year 24/25. Local Property taxes grew at rates of 7.8% and 4.3% in fiscal year 23/24 and fiscal year 24/25, respectively, as the average home price continued to rise.

The median home price in Monterey County peaked in October 2023 at $1.12 million, with an average median price of $956,000 and $934,000 for fiscal years 23/24 and 24/25, respectively. Opposite to the County’s median home price decrease of 2% over the prior fiscal year, the City has enjoyed a 4.3% growth in property taxes in that same period, largely due to increases in home values and home sales.

Sales and Use Taxes
The majority of the City’s sales and use taxes are attributed to businesses within the categories known as general consumer goods and restaurants. The City receives a portion (1%) of the statewide sales tax, known as BradleyBurns tax, as well as revenue from a local sales tax. The Carmel electorate approved a local 1% sales tax measure in November 2012. Sales tax has steadily increased each year since 2013 to reach approximately $10.87 million in 24/25. As explained in more detail within the Transient Occupancy Tax narrative below, the City faced a decline in the number of visitors due to COVID-19 for the last quarter of fiscal year 19/20, which also impacted sales tax.

Sales tax in 2020 totaled approximately $4.80 million. On March 3, 2020, the Carmel voters approved Measure C, increasing the sales tax rate by 1.5%. The timing of Measure C helped minimize the effects of reduced sales suffered during the pandemic, allowing the City to survive and recover to pre-pandemic levels by fiscal year 20/21.

In fiscal year 2022, the City of Carmel-by-the-Sea experienced a surge in sales and use tax revenue, a reflection of “revenge” consumer spending and relief from the consumer goods shortages and logistic nightmares brought out during COVID-19. Sales and use tax revenue increased again in fiscal year 24/25 with revenue of $10.87 million, an increase of 7.85% over 23/24.
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Property Tax Trend
Property Tax
ATTACHMENT 2

Visitors to the City were more generous with their spending compared to what has been seen in the rest of the state at the end of fiscal year 24/25. This allowed both the restaurant and general consumer goods groups to report their eighth consecutive quarter of gains. Carmel’s Bradley-Burns tax receipts from April through June were

10.5% above the second sales period in 2024. Net of aberrations, taxable sales for all Monterey County grew

7.4% over the comparable period while those of the Central Coast region were up 2.5%. Spending on general consumer goods was especially strong in fiscal year 24/25, particularly for jewelry, family apparel, and women’s apparel. Restaurants also did well, posting consecutive growth throughout the fiscal year. $0
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sales and Use Tax Trend
Sales Tax
Pools, 17%
Other, 6%
Consumer Goods, 41%
Restaurants, 37%
Revenue by Business Group
ATTACHMENT 2

Transient Occupancy Taxes
Transient occupancy taxes (“TOT”) of $5.89 million was included in citywide revenues in fiscal year 15/16. TOT grew on average by 6.9% over the next 9 fiscal years until reaching $9.60 million in fiscal year 24/25 with expected strong performance on the horizon. TOT revenue appears to have recovered from the coronavirus pandemic that started in 19/20. Local hotels had experienced an immediate decline in occupancy due to international travel restrictions and Monterey County issued a shelter in place (“SIP”) order on March 17, 2020, followed by a statewide SIP issued by Governor Newsom on March 19, 2020. As a result, TOT revenue declined by $1.77 million from 18/19 to 19/20, a decrease of 25.7%. The City began to see an increase in TOT starting in 20/21 with a 45.9% increase in 21/22 ($2.45 million) as more travelers sought to escape to Carmel. TOT increased by $979,811 in 24/25, an 11.4% increase from 23/24.

Relevant Financial Policies
Financial and Budget Policies
The City Council adopted Council Policy C94-01: Financial and Budget Policies to provide direction to help ensure sound fiscal planning and the management of fiscal integrity. The policies pertain to capital and operating budgets, fund balance, debt management and investments. On June 2, 2025, the City Council adopted amendments that reorganize the policies for consistency, clarify Capital Improvements, and establish new budgetary and reserve policy limits. The fiscal year 24/25 budget was adopted under the Policy C94-01 dated September 1, 2020 and the fiscal year 24/25 financial statements were adjusted after the adoption of the amendments.

Highlights of policy guidelines include the following:

Capital
 In the fiscal year 24/25 Adopted Budget, total capital outlays were budgeted at $12,184,000 at the beginning of the fiscal year, representing 39% of revenues compared to the minimum required budget of 10% (per the new budget policy adopted on June 2, 2025 during the current fiscal year), as the City budgeted to use reserves in order to catch-up on CIP needs. Excluding Vehicle and Equipment acquisitions of $570,000 and paving projects of $2,810,000, capital expenses were budgeted at approximately $8,804,000 or 28% of total budgeted revenue. Actual capital expenditures totaled $3,870,000. $0
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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Transient Occupancy Tax Trend
TOT
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 The new capital reserve policy adopted June 2, 2025 allows CIP projects that have not been completed to be carried over into the subsequent fiscal year, requiring that a reserve be maintained for the balance of the uncompleted projects. The previously required reserve, equal to 20% of estimated five-year CIP expenditures, is now included in the City’s overall General Fund reserve of 50% of operating expenditures. The CIP fund balance reserved for carryover CIP project balances was 4,700,000 at the end of fiscal year 24/25.
 The Vehicle and Equipment (V&E) Replacement Fund reserve is maintained at a target of 10% of the total fleet replacement value. At the end of fiscal year 24/25, the V&E reserve balance is $960,000 with total unrestricted net position of $1.82 million.

Operating
 In the fiscal year 24/25 Adopted Budget, total expenditures excluding CIP were budgeted at $31,310,000 at the beginning of the fiscal year representing 100% of revenues compared to the maximum budget of 90%for non-CIP expenditures (per the new budget policy adopted on June 2, 2025 during the current fiscal year), as the City budgeted to use reserves to catch-up on CIP needs while maintaining current operating service levels.
 Due to the above CIP catch-up, the fiscal year 24/25 Adopted Budget did not project a balanced budget.

Ongoing expenses were not funded with one-time revenues. At fiscal year-end, governmental fund sources were greater than uses by $7,872,643.

Fund Balance
 General Fund reserves shall be maintained at no less than 50% of annual projected operating expenditures after the adoption of Policy C94-01 amendments on June 2, 2025. The General Fund Reserve balance is $15,997,900, or 51% of annual projected operating expenditures, at the end of fiscal year 24/25.

Major Initiatives
Continued Investment in Protecting Natural Resources and Critical Infrastructure The fiscal year 23/24 Adopted Budget allocated $10.9 million in funding for capital projects and vehicle and equipment purchases intended to rehabilitate City facilities; address sidewalks and street improvements; enhance public safety and protect and preserve the natural environment. The fiscal year 23/24 budget recognizes the importance of investing our “green” infrastructure by including $1 million for projects pertaining to the Urban Forest master plan, Mission Trail Nature Preserve tank and well demo, coastal engineering study, North Dunes restoration including split rail fencing and signage, and shoreline infrastructure repairs. Additional capital funding included the Police building project, drainage design, City Hall roof replacement, Harrison Memorial Library painting, and Sunset Center cottage windows, ongoing implementation of accessibility improvements at various City facilities, an electric sweeper, two forestry electric trucks, and an electric vehicle for Police administration.

Revenue Enhancement and Stability
On November 6, 2012, the Carmel electorate approved a temporary 1% transaction and use tax (“sales and use tax”) known as Measure D. Measure D sunset in 2023. Recognizing the importance of this revenue to the City’s financial health, the City Council began discussions regarding the renewal of Measure D well ahead of the sunset date. Council drafted a new sales tax initiative to replace the existing Measure D and increase the local sales tax by 0.50%. On March 3, 2020, Carmel voters approved Measure C, which authorizes a 1.5% tax for 20 years for general City purposes. The criticality of Measure C to both the City’s short and long-term fiscal sustainability immediately became apparent with the emergence of the coronavirus pandemic in the spring of 2020. As the new sales tax rate became effective on July 1, 2020, the additional 0.50% tax rate mitigated projected decreases in visitor-driven sales tax performance. In addition, online purchases are subject to local sales tax and this type of spending greatly increased during the pandemic.

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Addressing Pension Liabilities
The California Public Employees’ Retirement System (“CalPERS”) is the largest pension fund in the country, managing investments for nearly 2 million members on behalf of the state, schools and other public agencies. The City is a participating member of CalPERS and has two primary CalPERS plans, one for miscellaneous members and one for safety members.

Annually, the City makes a payment to CalPERS that consists of (1) the annual cost for current employees (“normal cost”) and (2) the unfunded accrued liability (“UAL”). The UAL is the actuarial liability less the actuarial value of the assets. In other words, it is the difference between what CalPERS needs in order to pay for retirement benefits when people retire and the value of assets that CalPERS currently has on hand to pay for the estimated costs of the retirement benefits. Similar to other public agencies, the City’s pension costs have risen.

The UAL for the City is $29,600,000, based on the valuation date of June 30, 2023, as measured through June 30, 2024.

The City has historically used a combination of strategies to help mitigate the costs associated with pension liability, such as the:
• Issuance of pension obligation bonds;
• Negotiation of employee contributions toward the employer’s cost of pensions; and • Prepaying the annual UAL payment in order to save interest.

In January 2019, Council endorsed the City’s participation in a Pension Rate Stabilization Program to pre-fund pension obligations and authorized staff to issue a request for proposals for a Section 115 Trust Administrator. A Section 115 Trust is a tax-exempt investment vehicle authorized by the Internal Revenue Services to prefund government expenses, such as retirement plan benefits. Funds placed within the trust can remain within the trust until such time that the City chooses to draw on its assets to pay an annual benefit obligation (i.e. make either an annual and/or additional payment to CalPERS) or seek reimbursement for a pension-related expense. Other benefits associated with the establishment of a trust include (1) greater investment flexibility and risk diversification compared to the City’s general investment options and (2) City oversight of investment and control over the risk tolerance of its investment portfolio as compared to investments managed by CalPERS. On August 2, 2021, Council authorized the adoption of a Section 115 Trust known as the Public Agencies Post-Employment Benefits Trust administered by the Public Agency Retirement Services (PARS) and authorized the City’s participation within this program. Subsequently, on September 7, 2021, Council authorized City staff to make an initial deposit of $1 million into the Trust. $1 million annual deposits are to be made over the next five years in the Section 115 Trust. The City deposited the fourth annual $1 million tranche into the Section 115 Trust in fiscal year 24/25.

AWARDS
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 Carmel-by-the-Sea for its comprehensive annual financial report for the fiscal year ended June 30, 2024. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual 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 that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

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ACKNOWLEDGEMENTS
As a result of the professionalism and dedication of the Finance Division staff, the City continues to make strides in updating and enhancing its financial policies, procedures and systems, and its financial reporting capabilities, as evidenced by the production of this annual comprehensive financial report. The preparation of this report also required the involvement of many City departments in gathering statistics, as well as the guidance and support of the City’s independent auditor, and we extend our appreciation to these individuals for the assistance provided.

The annual comprehensive financial report is a document that strives to achieve transparency and full disclosure in financial reporting. As such, the preparation of this document would not be possible without the support of the City Council. We wish to acknowledge the City Council’s leadership and commitment to organizational excellence, public transparency and sound fiscal management.

Brandon Swanson Jayme Fields
Acting City Administrator Finance Manager
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CITY OF CARMEL-BY-THE-SEA

PRINCIPAL OFFICERS
Fiscal Year 2024-2025
City Council
Dale Byrne, Mayor, Term: December 2024 – December 2026
Bob Delves, Mayor Pro Tempore, Term: December 2024 – December 2028 Jeff Baron, Councilmember, Term: December 2018 – December 2026 Alissandra Dramov, Councilmember, Term: November 2022 - December 2026 Hans Buder, Councilmember, Term: December 2024 - December 2028 City Administrator
Chip Rerig
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CITY OF CARMEL-BY-THE-SEA

ORGANIZATIONAL CHART
Fiscal Year 2024-2025
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Carmel-by-the-Sea
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2024
Executive Director/CEO
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FINANCIAL SECTION
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16450 Monterey Road, Ste. #5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the
City Council of the City of Carmel-By-The-Sea
Carmel-by-the-Sea, California
Report on the Financial Statements
Opinion
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Carmel-By-The-Sea (the “City"), as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise 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, each major fund, and the aggregate remaining fund information of the City of Carmel-By-The-Sea, 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 Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) 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 Auditor’s 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.

Responsibilities of Management for the Financial Statements City 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.

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16450 Monterey Road, Ste. #5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
Auditor’s 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 auditor’s 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 GAAS 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 GAAS and GAGAS, 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 other required supplementary information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, 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 ATTACHMENT 2

16450 Monterey Road, Ste. #5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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 combining and individual fund financial statements, schedules, and other information listed in the supplementary information section of the table of contents 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 GAAS. In our opinion, the combining and individual fund financial statements and schedules are 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 comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s 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 March 17, 2026 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 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 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 the City’s internal control over financial reporting and compliance.

March 17, 2026
Morgan Hill, California
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MANAGEMENT’S DISCUSSION

AND ANALYSIS
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City of Carmel-by-the-Sea Management’s Discussion and Analysis

INTRODUCTION
As management of the City of Carmel-By-The-Sea, we offer readers of the City’s financial statements this narrative overview and analysis of financial activities of the City of Carmel-By-The-Sea for the fiscal year that ended on June 30, 2025. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in the other sections of the attached audited financial statements, required supplemental information and other supplemental information. The required components of the report are listed below.

Required Components of the Annual Financial Report
FISCAL YEAR 2024/25 FINANCIAL HIGHLIGHTS
Government-Wide Highlights
 The assets and deferred outflows of resources of the City of Carmel-by-the-Sea exceeded liabilities and deferred inflows of resources at the close of the fiscal year by $55.61 million (net position). Of this amount, net position included $36.65 million classified as net investment in capital assets; $2.40 million as restricted; and $16.56 million as unrestricted net position.  The City’s pension liability in accordance with GASB 68 as of June 30, 2025 was $29.60 million vs. $29.20 million in the prior fiscal year.
 The City of Carmel-by-the-Sea’s total net position increased by $6.03 million from last fiscal year mostly due to an increase current assets of $6.80 million, and an increase in general revenues of $2.89 million.

Management’s
Discussion & Analysis
Government-Wide
Financial Statements
Fund
Financial Statements
Notes to the
Financial Statements
Basic
Financial Statements
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City of Carmel-by-the-Sea Management’s Discussion and Analysis Fund Highlights
 At the close of Fiscal Year 24/25 the City reported a combined fund balance in its governmental funds of $44.61 million, an increase of $8.60 million in comparison with the prior year. Approximately 38% or $17.06 million was classified as unassigned fund balance and was available for spending at the government’s discretion, which increased by $5.16 million over the prior year.  At the end of the current fiscal year, unrestricted fund balance (the total of the committed, assigned, and unassigned components of fund balance) for the general fund was $33.05 million, or 135% of total general fund expenditures, prior to transfers, versus $17.15 million and 76% in the prior year.  The City’s long-term liabilities decreased by $159 thousand primarily as the result of increases to employee benefit liabilities totaling $361 thousand, offset by decreases to long-term debt of $520 thousand.
 The City’s net capital assets increased by 3% or $1.17 million primarily as a result of new construction, offset by depreciation during the year.

OVERVIEW OF THE FINANCIAL STATEMENTS
The discussion and analysis are intended to serve as an introduction to the City of Carmel-by-the-Sea’s financial statements. The City of Carmel-by-the-Sea’s basic financial statements are comprised of (1) Government-wide Financial Statements (2) Fund Financial Statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves.

Government-Wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the City of Carmel-by-the-Sea’s finances, in a manner similar to a private-sector business. Government-wide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. Government-wide financial statements consist of the Statement of Net Position and the Statement of Activities.

The Statement of Net Position presents financial information on all of the City of Carmel-by-the-Sea’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Carmel-by-the-Sea is improving or deteriorating.

The Statement of Activities presents information showing how the City of Carmel-by-the-Sea’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. This is consistent with a full accrual concept, which may result in the reporting of revenues and expenses in the current fiscal year, with cash flows occurring in future fiscal periods (e.g. uncollected revenues and earned but not used vacation leave).

Both of the government-wide financial statements distinguish functions of the City of Carmel-by-the-Sea that are principally support by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (businesstype activities). An overview of the City’s functions associated with each classification is listed below.

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City of Carmel-by-the-Sea Management’s Discussion and Analysis Governmental Activities – All of the City's basic services are considered to be governmental activities. This includes general government, public safety, public works, library, and community planning and building.

These services are supported by general City revenues such as taxes, and by specific program revenues such as development and general government program fees. The City also operates three internal service funds, which are combined with the governmental funds and reported as governmental activities. See the table of contents for reference to the government-wide financial statements pages within this report.

Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Fund financial statements provide detailed information about each of the City's most significant funds, called major funds. Major funds are presented individually, with all nonmajor funds summarized and presented only in a single column. Subordinate schedules present the detail of these nonmajor funds. Major funds present the major activities of the City for the fiscal year and may change from year to year as a result of changes in the pattern of the City's activities. The City's funds are segregated into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental Funds
Governmental funds are used to account for essentially the same function reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. This represents a modified accrual basis of accounting, with capital assets, long-lived assets, and long-term liabilities excluded from the financial statements. Such information may be useful in evaluating the City's near-term financing requirements.

Because the focus of governmental funds is narrower than that of government-wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities.

The City maintains eleven governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the Measure C Sales Tax Fund, the Capital Projects Fund and the Harrison Memorial Library Fund. These funds are considered to be major funds. Data from the other governmental funds are combined into a single aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements in the combining and individual fund statements and schedules section of this report.

The City of Carmel-by-the-Sea adopts an annual budget for its governmental funds. Budgetary comparison statements have been provided to demonstrate compliance with this budget. See the table of contents for where the basic governmental fund financial statements can be found this report.

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City of Carmel-by-the-Sea Management’s Discussion and Analysis Proprietary Funds
Internal service funds are an accounting mechanism used to accumulate and allocate costs internally among the City of Carmel-by-the-Sea’s various functions. The City uses internal service funds to account for the management of its retained risks associated with liability, self-insurance, workers’ compensation and other post-employment benefits (OPEB). The City also uses an internal service fund, the Vehicle & Equipment Replacement Fund, to manage the costs of various equipment purchased, maintained and utilized to operate City services for various departments. Because these internal services predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the Government-Wide Financial Statements.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The internal service funds are combined into a single aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds are provided in the form of combining statements in the combining and individual fund statements and schedulessection of this report. See the table of contents for where the proprietary fund financial statements can be found this report.

NOTES TO THE FINANCIAL STATEMENTS
Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found immediately following the fund financial statements.

OTHER INFORMATION
In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information concerning the City of Carmel-by-the-Sea’s budgetary information for the General Fund and Major Special Revenue Funds, and the City’s funding progress for its employee pension and OPEB benefit obligations. The page numbers for the required supplementary information can be found in the table of contents.

The combining statements referred to earlier in connection with nonmajor governmental funds and internal service funds are presented immediately following the required supplementary information. The page numbers for the combining and individual fund statements and schedules can be found in the table of contents.

An un-audited statistical section provides historical and current data on financial trends, revenue and debt capacity, demographic and economic information, and operating information. The table contents list the page numbers for where this information can be found.

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City of Carmel-by-the-Sea Management’s Discussion and Analysis

GOVERNMENT-WIDE FINANCIAL ANALYSIS
Over time, net position may serve as an indicator of a government’s financial position. In the case of the City of Carmel-by-the-Sea, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $49.58 million at the close of the Fiscal Year. This represents an increase of $6.03 million over the prior year.

The following table summarizes the City’s ending net position:

A significant portion, $36.65 million, of the City's net position reflects its investment in capital assets, (e.g., land, buildings, general government infrastructure, equipment, etc.), less accumulated depreciation and any outstanding debt that was used to acquire or construct those assets. Capital assets represent infrastructure which provide services to citizens and are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate the liabilities.

An additional $2.40 million of the City of Carmel-by-the-Sea’s net position represents resources that are subject to external restrictions on how they may be used. The remaining balance of $16.56 million is classified as unrestricted. The City participates in the CalPERS Miscellaneous and Safety pension plans. GASB 68 impacted local governments by requiring them to report a proportional share of their pension plan’s net pension liabilities on financial statements. As of June 30, 2025, the City’s proportionate share of the CalPERS pension liability was $29.60 million. See note 7 for detailed information related to the Plans, along with the required supplementary information section of this report.

Increase
2025 2024 (Decrease)
Assets
Current and other assets $ 49,960,232 $ 43,166,255 $ 6,793,977 Capital assets 40,707,674 39,535,950 1,171,724
Total Assets $ 90,667,906 $ 82,702,205 $ 7,965,701
Deferred Outflows of Resources $ 9,515,106 $ 11,802,249 $ (2,287,143) Liabilities
Current and other liabilities $ 3,790,175 $ 2,553,119 $ 1,237,056 Noncurrent liabilities 37,351,111 38,319,743 (968,632)
Total Liabilities $ 41,141,286 $ 40,872,862 $ 268,424
Deferred Inflows of Resources $ 3,436,009 $ 4,053,488 $ (617,479) Net Position
Net investment in capital assets $ 36,648,844 $ 34,957,532 $ 1,691,312 Restricted 2,396,571 4,614,831 (2,218,260)
Unrestricted 16,560,302 10,005,741 6,554,561
Total Net Position $ 55,605,717 $ 49,578,104 $ 6,027,613 Governmental Activities
Table 1 - Net Position
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City of Carmel-by-the-Sea Management’s Discussion and Analysis At the end of the current fiscal year, the City of Carmel-by-the-Sea is able to report a positive balance for the government as a whole. The reasons for the overall financial changes are discussed in the following sections for governmental activities.

Governmental Activities
As shown in the Statement of Changes in Net Position schedule below, the change in net position for governmental activities decreased by $688 thousand. This decrease is largely due to an increase of $1.14 million in general government expenses, $1.81 million in public safety expenses, and $555 thousand in public works expenses. These increases were mostly due to pension expense adjustments and deferrals that create inconsistencies in the expenses from year to year. Total revenues from governmental activities increased by $2.86 million from the prior year. The net change in expenses from the prior year was an increase of $3.54 million.

With total revenues for the fiscal year at $38.15 million and total expenses at $32.84 million, the change in net position for current activity was $5.31 million. An analysis of the changes in revenues and expenses is as follows:

Increase
Functions/Programs 2025 2024 (Decrease)
Program Revenues
Charges for services $ 2,998,667 $ 2,975,335 $ 23,332
Operating grants and contributions 1,090,077 1,064,653 25,424 Capital grants and contributions 177,951 263,557 (85,606) Total Program Revenues 4,266,695 4,303,545 (36,850)
General Revenues
Taxes 31,360,896 29,166,647 2,194,249
Intergovernmental 811,711 837,891 (26,180)
Investment earnings 1,530,758 613,944 916,814
Other revenues 180,912 372,760 (191,848)
Total General Revenues 33,884,277 30,991,242 2,893,035
Expenses
General government 8,212,478 7,076,239 1,136,239
Community Planning and Building 1,817,807 1,888,267 (70,460) Public Safety 12,144,337 10,332,228 1,812,109
Public Works 7,017,740 6,462,552 555,188
Library 2,210,464 2,145,612 64,852
Community Activities 211,811 173,958 37,853
Economic Reviltalization 1,151,514 1,127,937 23,577
Interest 72,768 87,779 (15,011)
Total Expenses 32,838,919 29,294,572 3,544,347
Increase / (Decrease) in Net Position 5,312,053 6,000,215 (688,162) Prior Period Restatement 715,560 - 715,560
Net Position, Beginning of Year 49,578,104 43,577,889 6,000,215 Net Position, End of Year $ 55,605,717 $ 49,578,104 $ 6,027,613 Governmental Activities
Table 2 - Statement of Changes in Net Position
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City of Carmel-by-the-Sea Management’s Discussion and Analysis Governmental Revenues
The following chart summarizes the changes in revenues by category during the fiscal year:

Significant changes in governmental revenues consisted of the following:
 Property taxes increased by $377 thousand, or approximately 4%, over the prior year due to continued strength in the real estate market resulting from the desirability of Carmel-by-the-Sea as a place to reside, coupled with its limited housing stock.
 Travel and tourism continued to be strong. Sales and use taxes increased by $791 thousand, or approximately 8%. Transient occupancy taxes increased by $980 thousand, or approximately 11%, over the prior year due to increases in both the number of visitors and the average daily room rates charged by lodging operators.
 Investment earnings increased by $884 thousand, or approximately 163%, mostly from better returns related to investments and increased fair values.

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City of Carmel-by-the-Sea Management’s Discussion and Analysis Governmental Expenses
The following chart summarizes the changes in expenses by category during the fiscal year:

Significant changes in governmental expenses include increases to general government, public safety and public works expenses of $ 1.14 million, $1.81 million and $555 thousand, respectively. The increases in were mostly due a need for increased services and pension costs.

FINANCIAL ANALYSIS OF THE CITY’S GOVERNMENTAL FUNDS
As noted earlier, the City of Carmel-by-the-Sea uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements.

In particular, the unassigned fund balance may serve as a useful measure of a government’s net resources available for discretionary use as they represent the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the City itself, or a group or individual that has been delegated authority to assign resources for particular purposes by the City of Carmel-by-the-Sea’s Council.

ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis The following is a summary of the changes in fund balance of the major and other (nonmajor) governmental funds:

Overall fund balance increased by $8.59 million mostly due to an increase in total revenues of $3.37 million, driven by an increase in taxes of $2.19 million. The fund balance of the City’s General Fund increased by $16.48 million, mostly due to transfers in from the Measure C Sales Tax fund, Capital Projects fund and other funds of $16.85 million. The fund balance in the Measure C Sales Tax Fund decreased by $2.15 million due to transfers into the General Fund. The fund balance in the Capital Projects fund decreased by $6.39 million mostly from transfers made to the General Fund to pay for capital projects. The fund balance in the Library Fund increased by $67 thousand as revenues increased by $52 thousand and expenses decreased by $9 thousand from the prior year.

Combined Funds – Components of Fund Balance
As of June 30, 2025, the City of Carmel-by-the-Sea’s reported combined fund balances of $44.61 million, which represents a $8.59 million increase over the prior year. Approximately 38%, or $17.06 million, was classified as unassigned fund balance, which is available for spending at the government’s discretion. The remainder of the fund balance was either committed, restricted, or assigned. The restricted balance of $6.84 million reflects fund that are legally required to remain intact, $15 thousand was classified as nonspendable for prepaid items, while the remainder of $20.70 million represents funds that were assigned to a particular purpose by the City Council or management given legal authority by the Council.

General Fund – Components of Fund Balance
The general fund is the chief operating fund of the City of Carmel-by-the-Sea. At the end of the current fiscal year, the unassigned fund balance of the general fund was $17.06 million, and the total fund balance increased to $37.51 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total general fund expenditures. The total general fund expenditures prior to transfers were $29.84 million. Unassigned fund balance represents approximately 62% of the total general fund expenditures, while total fund balance represents approximately 135% of total general fund expenditures.

Harrison
Measure C Capital Memorial Other
General Sales Tax Projects Library Governmental
Fund Fund Fund Fund Funds Total
Total Revenues $ 29,835,547 $ 6,913,837 $ 177,952 $ 463,835 $ 668,761 $ 38,059,932 Total Expenditures 27,711,042 - 3,528,318 396,662 510,631 32,146,653 Revenues Over (Under) Expenditures 2,124,505 6,913,837 (3,350,366) 67,173 158,130 5,913,279 Other Financing Sources (Uses) 9,350 - - - - 9,350
Transfers in 16,845,181 - 2,121,161 - 510,631 19,476,973 Transfers out (2,494,135) (9,066,376) (5,164,793) - (801,655) (17,526,959) Net change in fund balances 16,484,901 (2,152,539) (6,393,998) 67,173 (132,894) 7,872,643 Beginning of year 20,306,904 2,152,539 11,096,555 1,453,651 1,008,641 36,018,290 Prior Period Restatement 715,560 - - - - 715,560
End of year $ 37,507,365 $ - $ 4,702,557 $ 1,520,824 $ 875,747 $ 44,606,493 Major Funds
Table 3 - Summary of Changes in Fund Balance - Governmental Funds ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis The following charts provide an annual comparison of the fund balance components included in the general fund and the other governmental funds.

The assigned fund balance in other governmental funds was from the Capital Projects Fund which had $4.70 million in fund balance assigned for capital projects.

ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis FINANCIAL ANALYSIS OF CITY’S INTERNAL SERVICE FUNDS
The following is a summary of the changes in fund balance of the City’s internal service funds:

CAPITAL ASSETS
The City of Carmel-by-the-Sea’s investment in capital assets includes land, buildings, systems, improvements, machinery, equipment, facilities, roads, and other similar assets and infrastructure. The following table summarizes the City’s capital assets at the end of the year:

The City reported depreciation expense of $2.63 million for fiscal year 2024/25 as compared to $2.16 million for fiscal year 2023/24.

See Note 5 in the notes to financial statements section for additional information.

Vehicle
Workers OPEB & Equipment
Compensation Reserve Replacement
Fund Fund Fund Total
Total Revenues $ 63,017 $ - $ 5,000 $ 68,017
Total Expenditures 69,051 - 329,750 398,801
Revenues Over (Under) Expenditures (6,034) - (324,750) (330,784) Nonoperating Revenue (Expense) 32,967 71,593 10,105 114,665 Transfers in - - 424,515 424,515
Transfers out (329,352) (1,888,772) (156,405) (2,374,529) Net change in fund balances (302,419) (1,817,179) (46,535) (2,166,133) Beginning of year 302,419 1,817,179 3,565,080 5,684,678 End of year $ - $ 3,518,545 - $ $ 3,518,545
Table 4 - Summary of Changes in Net Position - Internal Service Funds Increase
2025 2024 (Decrease)
Land $ 5,692,634 $ 5,101,641 $ 590,993
Construction in Progress 3,157,238 1,784,310 1,372,928
Buildings and improvements 14,001,986 13,845,546 156,440 Infrastructure 16,359,965 17,288,278 (928,313)
Vehicles 939,393 850,671 88,722
Technology/Hardware and Software 191,874 133,183 58,691 Subscription based assets 208,029 263,386 (55,357)
Machinery and equipment 156,555 268,935 (112,380)
Total Capital Assets, Net $ 40,707,674 $ 39,535,950 $ 1,171,724 Table 5 - Capital Assets at Year End - Net
Governmental Activities
ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis

DEBT ADMINISTRATION (LONG-TERM LIABILITIES)
During the year, Long-Term Liabilities from governmental activities decreased by $159 thousand primarily due debt service payments as shown below and described in the financial highlights section.

The following table summarizes the City’s debt at the end of the year:

See Note 6 in the notes to financial statements section for additional information.

GENERAL FUND BUDGETARY HIGHLIGHTS
Changes from the City's General Fund original budget to the final budget are detailed in the Required Supplementary Information section along with a comparison to actual activity for the year ended. In Fiscal Year 24/25, the City originally estimated a decrease of $8.24 million in fund balance. However, the City ended the year with a surplus of revenues over expenditures of $2.12 million and an overall increase to fund balance of $17.20 million after net transfers of $14.36 million.

Revenues
The General Fund adopted and final revenue budgets were $24.82 and $25.38 million, with actual revenues recorded at $29.84 million. This $4.45 million difference was primarily from increased transient occupancy tax collections which were $1.63 million over budget and taxes overall which were $2.32 million over budget.

Expenditures
The General Fund adopted expenditure budget was $30.66 million and the final budget was $31.17 million.

The actual expenditures totaled $27.71 million, which resulted in a net difference of $3.46 million. Most of the savings can be attributed to salary and benefit savings.

Increase
2025 2024 (Decrease)
Sunset Center LRB $ 3,165,000 3,540,000 (375,000)
Sunset Center LRB Premium 577,933 650,175 (72,242)
Financed Purchases 107,473 132,334 (24,861)
Subscription Liabilities 208,424 255,909 (47,485)
Compensated Absences 938,430 888,842 49,588
Net Pension Liability 29,598,050 29,203,964 394,086
Claims Liability 575,000 575,000 -
Total OPEB Liability 2,990,609 3,073,522 (82,913)
Total Long-Term Liabilities $ 38,160,919 $ 38,319,746 $ (158,827) Table 6 - Outstanding Long-Term Liabilities
Governmental Activities
ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis

ECONOMIC OUTLOOK
Summary
The City’s primary revenue sources include property taxes, sales and use taxes, and transient occupancy taxes. The desirability of Carmel-by-the-Sea as a place to reside and visit drives the overall increase to the City’s revenue in fiscal year 24/25. Property tax revenue continues to steadily grow year over year as limited stock drives home prices higher. After experiencing a slight decline in fiscal year 19/20, sales taxes and transient occupancy taxes are currently outperforming budget expectations, reaching all-time highs.

These increases are the result of increased travel-related spending and consumer spending shifting back to consumer goods, causing an increase in sales and use tax revenue for the City over last fiscal year.

Restaurants and general consumer goods (retail) are the City’s leading drivers of sales and use tax revenue.

The City has recovered and surpassed pre-pandemic tourism and related spending levels. Projections for the City’s three major revenues total $28.7 million, or 82%, of the $34.9 million in estimated total citywide revenues for fiscal year 25/26. Projections for the three major revenues increase $2.7 million over the fiscal year 24/25 Adopted Budget, primarily driven by continued strong performance in transient occupancy taxes as well as increases in property and sales and use taxes. While the approaching fiscal year reflects increased revenue receipts, the economic outlook assumes the leveling off of sales and use taxes, anticipating only a conservative 2% growth over prior year revenues as consumers sort through higher prices in the market.

Similarly, the City is cautiously projecting growth in transient occupancy taxes (TOT) as the total occupied rooms is slightly lower than at this time last year (a decrease of 1.9%) while the average daily room rate is trending 6.8% higher than the same period in the prior year.

Planned expenditures also increase in the fiscal year. City staffing levels fell from 97.25 to 90.50 full-time equivalents (FTE) in fiscal year 25/26 due to the City transferring its Ambulance staffing to the City of Monterey. The budgeted cost of staffing decreased from $16 million to $15 million due to a reduction in employees as well as a change in how the City forecasts salaries and benefits.

Even with lower staffing levels, the City faces rising personnel costs primarily attributed to pension-related expenses. In addition to its annual contributions toward retirement costs for existing employees, the City makes an annual required payment to the California Public Employees’ Retirement System (CalPERS) for the City’s unfunded actuarial liability (“UAL”). The UAL payment for the upcoming fiscal year is approximately $2.7 million. To help address its pension obligations, the City established a Section 115 Trust with an initial investment of $1 million in fiscal year 21/22 and has made an additional $1 million contribution each fiscal year thereafter.

The City’s ability to provide ongoing funding into the trust while maintaining an annual balanced budget is contingent on (1) revenues sustaining annual growth over the next several years and (2) controlling increases in Citywide expenses, particularly regarding salary and benefits and capital outlay. Inflation also affects the ability to reduce costs for staffing, services and supplies.

Outlook for Major Revenues
Property Taxes
Located within one square mile, the City’s land capacity for new housing is limited, which curtails the availability of housing stock. This limited supply, coupled with a high demand for housing driven by the City’s desirability as a place to live and close proximity to the San Francisco metropolitan area, contributes to a healthy real estate market and thus the stability and strength of property tax revenues.

ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis Unlike sales tax and transient occupancy tax, the fiscal year 25/26 budget assumed incremental growth in property tax and continued resiliency. The median home price in Monterey County decreased 10.4% when compared to last year while the number of sales increased. Similarly, the median home sales price for December 2025 decreased while the number of sales increased. The upward pressure in mortgage rates continues to impact home prices in the County while available inventory is another large factor in the City.

Carmel has a consistently strong property tax base. While fiscal year 25/26 property tax revenue outpaces projections, annual growth of 2% is conservatively realistic. Historically, the City’s annual increase in property taxes over the last ten years averages 6.1%. The financial forecast assumes 2% annual growth over the next several years.

Sales and Use Taxes
Many of the features that contribute to residential quality of life, such as a temperate climate, natural beauty, architecture and unique design standards, and cultural, dining and shopping opportunities, also attract visitors. The variety of restaurants and other dining options located within the City, as well as art galleries, jewelry and clothing retailers contributes to shopping opportunities for residents and visitors alike.

Restaurants and general consumer goods (retail) are the City’s leading drivers of sales and use tax revenue.

Projections statewide for the restaurant category anticipate growth of 1.7% in fiscal year 25/26 and 2.8% in fiscal year 26/27, as ever-increasing menu prices statewide have increased 3.7% over the past year. Fine dining has seen a decrease of 4.8% in sales while casual dining has increased 2.3% as consumers seek value for their dining experience. General consumer goods are expected to grow at 1.0% in fiscal year 25/26, followed by an increase of 1.2% in fiscal year 26/27 on a statewide basis. On a local basis, the forecast is for continued growth as the current “K” shaped economy is showing strong markets where affordability is not an issue.

Transient Occupancy Taxes
Various lodging options are available to visitors and these lodging establishments charge a 10% transient occupancy tax for stays of 30 days or less. Transient occupancy taxes (TOT) are challenging to predict as they are based upon personal choices regarding travel, be it the decision on whether to travel, where to travel, and how much to spend on travel, such as the amount to pay for a hotel room. In addition to facing competition from other popular US destinations that neighbor the Monterey Peninsula to the north and south, the City also competes with other international destinations. On the other hand, given its proximity to San Francisco and location on the California central coast between San Francisco and Los Angeles the City is accessible to many visitors, including guests from California, other states and other countries. Thus, the City’s TOT is sensitive to changes in consumer spending, economic conditions, and, to some extent, statewide, national and international policies.

The annual TOT average daily percentage occupancy rate for the City increased 3.4% from fiscal year 23/24 to fiscal year 24/25. The City did see an 7% increase in the average daily room rate for the fiscal year as well. While the City of Carmel-by-the-Sea continues to be a world travel destination, if this trend continues, inflated prices may deter visitors. Therefore, the City remains cautious. The City’s financial forecast assumes a conservative reduction of 2% for fiscal year 25/26 over fiscal year 24/25 TOT actual revenue.

Outlook for Major Expenditures
Salaries and Benefits
The City’s largest annual expenditure is the cost of personnel. City budgeted staffing levels decreased 6.75 ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis FTE to 90.5 full-time equivalents (FTE) in fiscal year 25/26. This is mostly due to the City contracting with another local government agency for ambulance services starting Fall 2025. Correspondingly, the cost of staffing decreased from $16 million to $15.1 million due to decreases in staffing partially offset by increases in costs. Personnel costs are anticipated to steadily increase fiscal year over fiscal year even with no change to fiscal year 25/26 staffing levels.

Pension Costs
The City provides a defined pension plan through the California Public Employees’ Retirement System (CalPERS) for its full-time employees. As such, the City is responsible for contributing toward current employees’ retirement packages an amount determined by CalPERS based upon a percentage of salary (“employer contribution”). The employer contribution is included within the City’s overall budgeted salary and benefit costs. In addition, the City is obligated to make additional pension payments to CalPERS known as the unfunded actuarial liability (“UAL”). The UAL addresses any shortfall between the funding CalPERS needs to pay for retirement benefits when people retire compared to the funding that CalPERS currently has on hand to pay for the estimated costs of these benefits. The total UAL for the City is $29.5 million, based on the valuation date of June 30, 2023, as measured through June 30, 2024.

To help address its pension obligations, the City established a Section 115 Trust with an initial investment of $1 million into the trust. Current City Council wishes to provide funding of $1 million annually into the trust and contributed its fourth tranche in fiscal year 24/25. The City is on track to contribute the final $1 million tranche in fiscal year 25/26 unless City Council chooses to extend additional contributions into the future.

Other Operating Costs
In order to deliver services to the community, the City procures various types of goods and services. The category of services and supplies assumes 10.6% annual growth in fiscal year 25/26, due largely to the reclassification of ambulance service costs from salaries to outside services. Federal interest rates are easing and inflation is expected to remain around the Fed target of 2% in fiscal years 25/26 and 26/27. The City contracts for specialized professional services and costs trend upward based upon credentials, certifications and qualifications of the individuals providing the service. Moreover, City currently contracts with another governmental agency for fire and ambulance services that are subject to increase based upon salary and benefits, including pension. Overall costs across all sectors are significantly higher compared to prior fiscal years.

Capital Projects
The City’s capital expenditures are budgeted at $7.8 million in fiscal year 25/26. In future years, in accordance with the City’s financial policies, capital outlay expenses should at a minimum be 10% of projected total revenue, or at least $3.5 million annually based upon current revenue assumptions.

However, the City’s Five-Year Capital Improvement Plan totals $54 million over the next five fiscal years.

Similar to service and supplies, inflation and other market-based conditions drive the availability of contractors and costs to implement public works projects, subject to prevailing wage. In addition, deferring building and infrastructure maintenance drives long-term costs for repair and replacement.

Debt Service
On September 30, 2020, the City refinanced the 2010 Refunding Lease Revenue Bond related to improvements at the Sunset Center (the Sunset Theater Project). Annual future debt service payment is approximately $509,100 for fiscal year 25/26 through bond maturity on November 1, 2032.

ATTACHMENT 2

City of Carmel-by-the-Sea Management’s Discussion and Analysis

REQUEST FOR FINANCIAL INFORMATION
This Annual Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. If you have any questions about this report, need additional financial information, or would like to obtain component unit financial statements, contact the City of Carmel-by-the-Sea-by-the-Sea Finance Department, P.O. Box CC, Carmel-by-the-Sea, CA 93921, or visit the City’s web page at http://ci.carmel.ca.us/carmel.

ATTACHMENT 2

BASIC FINANCIAL STATEMENTS
ATTACHMENT 2

City of Carmel-By-The-Sea
Statement of Net Position
June 30, 2025
Governmental
ASSETS Activities
Current Assets:

Cash and investments $ 43,587,631
Receivables:

Accounts 3,877,399
Due from other governments 1,565,574
Other assets 929,628
Total Current Assets 49,960,232
Noncurrent Assets:

Capital Assets:

Nondepreciable 8,849,872
Depreciable, net of accumulated depreciation 31,857,802 Total Capital Assets - Net 40,707,674
Total Assets $ 90,667,906

DEFERRED OUTFLOWS OF RESOURCES
OPEB Adjustments $ 452,294
Pension Adjustments 9,062,812
Total Deferred outlows of Resources $ 9,515,106

LIABILITIES
Current Liabilities:

Accounts payable $ 1,618,527
Payroll related liabilities 848,422
Deposits and other liabilities 488,630
Interest payable 21,000
Claims payable - current portion 57,500
Compensated absences - current portion 215,000
Long-term debt - due within one year 537,308
Total Current Liabilities 3,790,175
Noncurrent Liabilities:

Long-term debt - due in more than one year 3,521,522
Claims payable 517,500
Compensated absences 723,430
Net pension liability 29,598,050
Total OPEB liability 2,990,609
Total Noncurrent Liabilities 37,351,111
Total Liabilities $ 41,141,286

DEFERRED INFLOWS OF RESOURCES
OPEB Adjustments $ 1,653,809
Pension Adjustments 1,782,200
Total Deferred Inflows of Resources $ 3,436,009

NET POSITION
Net investment in capital assets $ 36,648,844
Restricted for:

Transportation 46,425
Debt service 34,807
Library 1,520,824
Public parking 788,677
Asset seizure 5,838
Total Restricted 2,396,571
Unrestricted 16,560,302
Total Net Position $ 55,605,717
The accompanying notes are an integral part of these financial statements.

ATTACHMENT 2

City of Carmel-By-The-Sea
Statement of Activities
For the Year Ended June 30, 2025
Operating Capital
Charges for Grants and Grants and Governmental
Functions/Programs Expenses Services Contributions Contributions Total Activities Primary Government:

Governmental Activities:

General government $ 8,212,478 $ 202,299 $ 683,977 $ 177,951 $ 1,064,227 $ (7,148,251) Community Planning and Building 1,817,807 1,546,442 - - 1,546,442 (271,365) Public Safety 12,144,337 892,164 10,000 - 902,164 (11,242,173) Public Works 7,017,740 97,303 - - 97,303 (6,920,437)
Library 2,210,464 10,075 396,100 - 406,175 (1,804,289)
Community Activities 211,811 73,967 - - 73,967 (137,844) Economic Revitalization 1,151,514 176,417 - - 176,417 (975,097) Interest 72,768 - - - - (72,768)
Total Governmental Activities $ 32,838,919 $ 2,998,667 $ 1,090,077 $ 177,951 $ 4,266,695 (28,572,224) General Revenues:

Taxes:

Property taxes 9,147,435
Sales and use taxes 10,870,120
Transient occupancy taxes 9,559,155
Franchise taxes 1,017,268
Business license tax 766,918
Total taxes 31,360,896
Intergovernmental revenues not restricted to specific programs 811,711 Investment earnings 1,530,758
Other revenues 180,912
Total General Revenues 33,884,277
Change in Net Position 5,312,053
Net Position - Beginning of Year, as Previously Stated 49,578,104 Prior Period Restatement 715,560
Net Position - Beginning of Year, as Restated 50,293,664 Net Position - End of Year $ 55,605,717
The accompanying notes are an integral part of these financial statements.

Net (Expense)
Revenue and
Change in Net
Program Revenues Position
ATTACHMENT 2

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ATTACHMENT 2

MAJOR GOVERNMENTAL FUNDS
Fund Title Fund Description
General Fund This fund is used to account for all of the general operations and other financial transactions of the City, which are not accounted for by another fund.

Measure C Sales Tax This fund is used to account for the transaction and use tax increase to be used to maintain essential services, including fire, ambulance and police response times; fund capital needs, including streets, beach, parks, forest and trails; increase code compliance; maintain libraries, Sunset Center and other public facilities; address CalPERS pension liabilities and other debt; and provide other general City services.

Capital Projects This fund accounts for resources utilized, committed, assigned or restricted for capital projects.

Harrison Memorial Library This fund is used to account for activities associated with the Harrison Memorial Library.

ATTACHMENT 2

City of Carmel-By-The-Sea
Balance Sheet
Governmental Funds
June 30, 2025
Harrison
Measure C Capital Memorial Other Total
General Sales Tax Projects Library Governmental Governmental Fund Fund Fund Fund Funds Funds
ASSETS
Cash and investments $ 34,784,196 $ - $ 4,932,443 $ 1,542,495 $ 852,867 $ 42,112,001 Receivables:

Accounts 3,866,863 - 6,486 - - 3,873,349
Due from other governments - 1,398,826 - - 166,748 1,565,574 Due from other funds 1,415,493 - 127,201 - - 1,542,694
Other assets 14,936 - - - - 14,936
Total assets $ 40,081,488 $ 1,398,826 $ 5,066,130 $ 1,542,495 $ 1,019,615 $ 49,108,554

LIABILITIES AND FUND BALANCES
Liabilities:

Accounts payable $ 1,285,229 $ - $ 311,627 $ 21,671 $ - $ 1,618,527 Accrued liabilities 796,476 - 51,946 - - 848,422
Deposits 488,630 - - - - 488,630
Due to other funds - 1,398,826 - - 143,868 1,542,694
Unearned revenues 3,788 - - - - 3,788
Total liabilities 2,574,123 1,398,826 363,573 21,671 143,868 4,502,061 Fund Balances:

Nonspendable
Prepaid items 14,936 - - - - 14,936
Restricted:

Transportation - - - - 46,425 46,425
Debt service - - - - 34,807 34,807
Library - - - 1,520,824 - 1,520,824
Asset seizure - - - - 5,838 5,838
Public parking - - - - 788,677 788,677
Pensions 4,438,844 - - - - 4,438,844
Assigned:

Operational reserves 15,997,900 - - - - 15,997,900
Capital projects - - 4,702,557 - - 4,702,557
Unassigned 17,055,685 - - - - 17,055,685
Total fund balances 37,507,365 - 4,702,557 1,520,824 875,747 44,606,493 Total liabilities and
fund balances $ 40,081,488 $ 1,398,826 $ 5,066,130 $ 1,542,495 $ 1,019,615 $ 49,108,554 The accompanying notes are an integral part of these financial statements.

Major Funds
ATTACHMENT 2

City of Carmel-By-The-Sea
Reconciliation of the Government Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2025
Total Fund Balances - Total Governmental Funds $ 44,606,493 Amounts reported for governmental activities in the statement of net position were different because:

Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. The capital assets were adjusted as follows:

Capital assets 70,427,855
Less: accumulated depreciation (31,526,827)
Total Capital Assets 38,901,028
Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability in Governmental Funds Balance Sheet. (21,000) Internal service funds are used by management to charge the costs of stores, vehicle maintenance and various insurance costs to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position. 3,518,546
The differences from benefit plan assumptions and estimates versus actuals are not included in the plan's actuarial study until the next fiscal year and are reported as deferred inflows or deferred outflows of resources in the statement of net position. 6,079,096 Long-term obligations were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. The long-term liabilities were adjusted as follows:

Long-term debt (3,951,357)
Compensated absences (938,430)
Net pension obligation (29,598,050)
Total OPEB liability (2,990,609)
Total Long-Term Obligations (37,478,446)
Net Position of Governmental Activities $ 55,605,717
The accompanying notes are an integral part of these financial statements.

ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2025
Harrison
Measure C Capital Memorial Other Total
General Sales Tax Projects Library Governmental Governmental Fund Fund Fund Fund Funds Funds

REVENUES
Taxes:

Property taxes $ 9,147,435 $ - $ - $ - $ - $ 9,147,435
Sales and use taxes 3,956,283 6,913,837 - - - 10,870,120 Transient occupancy taxes 9,559,155 - - - - 9,559,155
Franchise taxes 1,017,268 - - - - 1,017,268
Business license tax 766,918 - - - - 766,918
Intergovernmental revenues 937,951 - 177,952 - 619,524 1,735,427 License and permits 1,483,379 - - - - 1,483,379
Contributions - - - 396,100 - 396,100
Fines and forfeitures 154,723 - - - - 154,723
Charges for services 1,118,785 - - 10,075 - 1,128,860
Interest 1,319,301 - - 57,660 49,237 1,426,198
Rents and concessions 198,436 - - - - 198,436
Other revenues 175,913 - - - - 175,913
Total Revenues 29,835,547 6,913,837 177,952 463,835 668,761 38,059,932

EXPENDITURES
Current:

General government 8,127,324 - - - - 8,127,324
Community Planning and Building 1,775,462 - - - - 1,775,462 Public Safety 9,977,934 - - - - 9,977,934
Public Works 5,208,059 - - - - 5,208,059
Library 1,230,263 - - 396,662 - 1,626,925
Community Activities 161,681 - - - - 161,681
Economic Reviltalization 1,156,297 - - - - 1,156,297
Capital outlay 9,350 - 3,528,318 - - 3,537,668
Debt service
Principal 56,835 - - - 375,000 431,835
Interest 7,837 - - - 135,631 143,468
Total Expenditures 27,711,042 - 3,528,318 396,662 510,631 32,146,653 Excess (Deficiency) of
Revenues over Expenditures 2,124,505 6,913,837 (3,350,366) 67,173 158,130 5,913,279

OTHER FINANCING SOURCES (USES)
Subscriptions 9,350 - - - - 9,350
Transfers in 16,845,181 - 2,121,161 - 510,631 19,476,973 Transfers out (2,494,135) (9,066,376) (5,164,793) - (801,655) (17,526,959) Total Other Financing Sources (Uses) 14,360,396 (9,066,376) (3,043,632) - (291,024) 1,959,364 Net Change in Fund Balances 16,484,901 (2,152,539) (6,393,998) 67,173 (132,894) 7,872,643 Fund Balances Beginning 20,306,904 2,152,539 11,096,555 1,453,651 1,008,641 36,018,290 Prior Period Restatement 715,560 - - - - 715,560
Fund Balances Beginning, Restated 21,022,464 2,152,539 11,096,555 1,453,651 1,008,641 36,733,850 Fund Balances Ending $ 37,507,365 $ - $ 4,702,557 $ 1,520,824 $ 875,747 $ 44,606,493 The accompanying notes are an integral part of these financial statements.

Major Funds
ATTACHMENT 2

City of Carmel-By-The-Sea
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities
For the Year Ended June 30, 2025
Net Change in Fund Balances - Total Governmental Funds $ 7,872,643 Amounts reported for governmental activities in the Statement of Activities and Changes in net position were different because:

Governmental Funds report capital outlay as expenditures. However, in the Government-Wide Statement of Activities and Changes in net position, the cost of those assets was allocated over their estimated useful lives as depreciation expense.

Capital additions 3,442,706
Depreciation expense (2,304,062)
Internal service funds are used by management to charge the costs of stores, vehicle maintenance, and various insurance costs to individual funds.

Net revenue (excess expenses) reported with governmental activities (2,166,133) Long-term compensated absences and claims payables were reported in the Government-Wide Statement of Activities, but they did not require the use of current financial resources and were not reported as expenditures in governmental funds.

Compensated absences (49,588)
In governmental funds, actual contributions to benefit plans are reported as expenditures in the year incurred. However, in the government-wide statement of activities, only the current year benefit expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred inflows and outflows of resources. (2,217,396)
Repayment of long-term debt was an expenditure in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of net position. 431,835 Long-term debt issued is reported as other financing sources in the governmental funds but is required to be converted to long-term debt in the statement of net position. (9,350) Certain expenses reported in the statement of activities do not require the use of current financial resources and are not reported as expenditures in the fund statements as follows:

Other postemployment benefits 236,556
Amortization of prepaid pension obligation premiums 72,242 Interest expense on long-term debt was reported in the Government-Wide Statement of Activities and Changes in net position, but it did not require the use of current financial resources. Therefore, interest expense was not reported as expenditures in governmental funds. The following amount represented the net change in accrued interest from and accreted interest from prior year. 2,600
Change in Net Position of Governmental Activities $ 5,312,053 The accompanying notes are an integral part of these financial statements.

ATTACHMENT 2

City of Carmel-By-The-Sea
Statement of Net Position
Proprietary Funds
June 30, 2025
Governmental
Activities -
Internal
Service Funds
ASSETS
Current assets:

Cash and investments $ 1,475,630
Accounts receivable 4,050
Other assets 914,692
Total current assets 2,394,372
Noncurrent Assets:

Capital assets - net 1,806,646
Total assets $ 4,201,018

LIABILITIES
Current liabilities:

Financed purchases - current $ 25,639
Claims payable - current 57,500
Total current liabilities 83,139
Non-current liabilities:

Financed purchases 81,834
Claims payable 517,500
Total non-current liabilities 599,334
Total liabilities $ 682,473

NET POSITION
Net Investment in capital assets $ 1,699,173
Unrestricted 1,819,372
Total net position $ 3,518,545
The accompanying notes are an integral part of these financial statements.

ATTACHMENT 2

City of Carmel-By-The-Sea
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the Year Ended June 30, 2025
Governmental
Activities -
Internal
Service Funds

OPERATING REVENUES
Charges for services $ 63,017
Other 5,000
Total operating revenues 68,017

OPERATING EXPENSES
Claims 69,051
Supplies and materials 2,762
Depreciation 326,988
Total operating expenses 398,801
Operating income (loss) (330,784)

NONOPERATING REVENUES(EXPENSES)
Gain (loss) on disposal of capital assets 14,247
Interest expense (4,142)
Investment earnings 104,560
Total nonoperating revenues(expenses) 114,665
Income (loss) before transfers (216,119)
Transfers in 424,515
Transfers out (2,374,529)
Transfers in and out, net (1,950,014)
Change in net position (2,166,133)
Total net position - beginning 5,684,678
Total net position - ending $ 3,518,545
The accompanying notes are an integral part of these financial statements.

ATTACHMENT 2

City of Carmel-By-The-Sea
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2025
Governmental
Activities -
Internal
Service Funds
Cash flows from operating activities:

Receipts from interfund services provided $ 75,967
Payments for claims (65,665)
Net cash provided (used) by operating activities 7,540
Cash flows from noncapital financing activities:

Interfund transactions (1,950,014)
Net cash provided (used) by noncapital financing activities (1,950,014) Cash flows from capital financing activities:

Principal payments on debt (24,861)
Interest payments on debt (4,142)
Purchases of property and equipment (345,821)
Net cash provided (used) by capital financing activities (374,824) Cash flows from investing activities:

Investment income received 104,560
Net cash provided (used) by investing activities 104,560 Net increase (decrease) in cash and cash equivalents (2,212,738) Cash and cash equivalents - beginning 3,688,368
Cash and cash equivalents - ending $ 1,475,630
Reconciliation of operating income to net cash provided (used) by operating activities:

Operating income (loss) $ (330,784)
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:

Depreciation 326,988
Change in operating assets and liabilities:

Accounts receivables 7,950
Other assets 3,386
Net cash provided (used) by operating activities $ 7,540 The accompanying notes are an integral part of these financial statements.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The basic financial statements of the City of Carmel-by-the-Sea, California, (the City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Boards (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below.

A. Financial Reporting Entity
The City of Carmel-by-the-Sea, California was incorporated on October 31, 1916, under the laws and regulations of the State of California (State). The City operates under a City Council/Manager form of government and provides the following services: general government, community planning and building, public safety (fire, police and ambulance), public works, library, economic revitalization and other community activities.

The City operates as a self-governing local government unit within the State. It has limited authority to levy taxes and has the authority to determine user fees for the services that it provides. The City’s main funding sources include sales taxes, other intergovernmental revenue from state and federal sources, user fees, and federal and state financial assistance. All property taxes are paid to Monterey County (County) as part of the revenue neutrality payment obligation. The financial statements do not reflect the amounts received on behalf of the City and retained by the County.

The financial reporting entity consists of (a) the primary government, the City, (b) organizations for which the primary government is financially accountable, and (c) other organizations for which the primary government is not accountable, but for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Financial accountability is defined as the appointment of a voting majority of the component unit’s board, and either (a) the City has the ability to impose its will on the organization, or (b) there is a potential for the organization to provide a financial benefit to or impose a financial burden on the City.

As required by US GAAP, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable. These component units are reported on a blended basis. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and so data from these units are combined with data of the primary government. The financial statements of the individual component units, if applicable as indicated below, may be obtained by writing to the City of Carmel-by-the-Sea, Finance Department, Post Office Box CC, Carmel-by-the-Sea, CA 93921.

The City’s reporting entity includes the following blended component units:
 Carmel Public Improvement Authority
 Harrison Memorial Library
The above component units are included in the City’s basic financial statements using the blended method since the component unit’s governing body is substantively the same as the governing body of the City and there is a financial benefit and a burden relationship between the City and the component units. There are no component units of the City that meet the criteria for discrete presentation.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
The City applies all applicable GASB pronouncements for certain accounting and financial reporting guidance. In December of 2010, GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements.

GASB 62 incorporates pronouncements issued on or before November 30, 1989 into GASB authoritative literature. In June of 2015, GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. GASB 76 supersedes Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. GASB 76 also amends GASB 62 and AICPA Pronouncements paragraphs 64, 74, and 82. The GAAP hierarchy sets forth what constitutes GAAP for all state and local governmental entities. It establishes the order of priority of pronouncements and other sources of accounting and financial reporting guidance that a governmental entity should apply. The sources of authoritative GAAP are categorized in descending order of authority as follows:
a. Officially established accounting principles—Governmental Accounting Standards Board (GASB) Statements (Category A)
b. GASB Technical Bulletins; GASB Implementation Guides; and literature of the AICPA cleared by the GASB (Category B).

If the accounting treatment for a transaction or other event is not specified by a pronouncement in Category A, a governmental entity should consider whether the accounting treatment is specified by a source in Category B.

B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled.

Government-Wide Financial Statements
The City's government-wide financial statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City. Fiduciary activities of the City are not included in 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. The City did not report any business-type activities for the year.

These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets, deferred outflows of resources, liabilities, deferred inflows of resources (including capital assets, as well as infrastructure assets, and long-term liabilities), are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. 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 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 clearly identifiable with a specific function or segment. In conformity with the City’s indirect cost allocation plan, certain indirect costs are included in the program expense reported for individual functions and activities. Certain types of ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
transactions are reported as program revenues for the City in three categories:
 Charges for services
 Operating grants and contributions
 Capital grants and contributions
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the fiduciary funds 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.

Certain eliminations have been made as prescribed by GASB Statement No. 34 in-regards-to interfund activities, payables, and receivables. All internal balances in the Statement of Net Position have been eliminated. Interfund services provided and used are not eliminated in the process of consolidation. The following interfund activities have been eliminated:
 Transfers in/Transfers out
 Internal Service Fund charges
Governmental Fund Financial Statements
Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net position as presented in these statements to the net position presented in the government-wide financial statements. The City has presented all major funds that met the applicable criteria.

All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets, deferred outflows of resources, current liabilities, and deferred inflows of resources are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.

Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally up to 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property tax, sales taxes, intergovernmental revenues, other taxes, interest revenue, rental revenue and certain charges for services. Fines, forfeitures, licenses and permits and parking meter revenues are not susceptible to accrual because they are usually not measurable until received in cash. Expenditures are recorded in the accounting period in which the related fund liability is incurred.

Unearned revenues arise when potential revenues do not meet both the "measurable" and "available" criteria for recognition in the current period. Unearned revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unearned revenue is removed from the combined balance sheet and revenue is recognized.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
The following funds are major funds:

General Fund
The General Fund is used to account for all of the general operations and other financial transactions of the City, which are not accounted for by another fund.

The Measure C Sales Tax Fund
The Measure C Sales Tax Fund used to account for the transaction and use tax increase to be used to maintain essential services, including fire, ambulance and police response times; fund capital needs, including streets, beach, parks, forest and trails; increase code compliance; maintain libraries, Sunset Center and other public facilities; address CalPERS pension liabilities and other debt; and provide other general City services.

Capital Projects Fund
This fund accounts for resources utilized, committed, assigned or restricted for capital projects.

Harrison Memorial Library Fund
This fund accounts for the contributions, revenues and resources used to operate the operate the Harrison Memorial Library.

Additionally, the City reports the following nonmajor fund types of governmental funds:

Special Revenue Funds
Special revenue funds account for and report the proceeds of specific revenue sources that are restricted, committed or assigned to specific purposes other than debt service or capital projects.

Debt Service Funds
Debt service funds account for the accumulation of resources for, and payment on, long-term obligation debt principal and interest.

Proprietary Funds
In the fund financial statements, proprietary funds are presented using the accrual basis of accounting.

Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the “economic resources measurement focus”. This means all assets, deferred outflows of resources, liabilities (whether current or noncurrent) and deferred inflows of resources associated with their activities are included on their balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net position.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal value. Non-operating revenues, such as subsidies, taxes, and investment earnings result from nonexchange transactions or ancillary activities. Amounts paid to acquire capital assets are capitalized as assets in the internal service funds financial statements.

The City’s internal service funds are proprietary funds. Internal service funds account for charges to City departments for services provided, on a cost reimbursement basis. The City has the following internal service funds:

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Worker's Compensation Fund
This fund accounts for workers compensation insurance provided to departments on a cost reimbursement basis.

OPEB Reserve Fund
This fund accounts for other postemployment benefits provided to departments on a cost reimbursement basis.

Vehicle & Equipment Replacement Fund
This fund is to set aside financial resources for future purchases of replacement equipment essential to the operations of the City.

C. Cash, Cash Equivalents and Investments
The City pools its available cash for investment purposes. The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. Cash and cash equivalents are combined with investments and displayed as Cash and Investments.

Deposit and Investment Risk Disclosures - In accordance with GASB Statement No. 40, Deposit and Investment Disclosures (Amendment of GASB Statement No. 3), certain disclosure requirements, if applicable, for Deposits and Investment Risks in the following areas: Interest Rate Risk, Overall Credit Risk, Custodial Credit Risk, Concentrations of Credit Risk, and Foreign Currency Risk. Other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end and other disclosures.

The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF), which has invested a portion of the pool funds in Structured Notes and Asset Backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as to change in interest rates.

Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction.

In determining this amount, three valuation techniques are available:
 Market approach - This approach uses prices generated for identical or similar assets or liabilities.

The most common example is an investment in a public security traded in an active exchange such as the NYSE.
 Cost approach - This technique determines the amount required to replace the current asset. This approach may be ideal for valuing donations of capital assets or historical treasures.  Income approach - This approach converts future amounts (such as cash flows) into a current discounted amount.

Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been maximized in fair value measures, and unobservable inputs have been minimized.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
D. Interfund Receivables and Payables
Items classified as interfund receivables/payables are referred to as “advances to/advances from other funds” or as “due to/from other funds”. Due to/from other funds include short-term lending/borrowing transactions between funds. This classification also includes the current portion of an advance to or from another fund. Advances to/advances from other funds represents non-current portions of any long-term lending/borrowing transactions between funds. This amount will be equally offset by a reserve of fund balance which indicates that it does not represent available financial resources and therefore, is not available for appropriation.

E. Receivables
In the fund financial statements, material receivables in governmental funds include revenue accruals such as property tax, sales tax, and intergovernmental subventions since they are usually both measurable and available. Non-exchange transactions collectible but not available, such as property tax, are deferred in the fund financial statements in accordance with the modified accrual basis, but not deferred in the government-wide financial statements in accordance with the accrual basis.

Interest and investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. The City’s experience is that all accounts receivable are collectible; therefore an allowance for doubtful accounts is unnecessary.

The County of Monterey is responsible for the collection and allocation of property taxes. Under California law, property taxes are assessed and collected by the County up to 1% of the full cash value of taxable property, plus other increases approved by the voters and distributed in accordance with statutory formulas. The City recognizes property taxes when the individual installments are due, provided they are collected within 60 days after year-end.

F. Capital Assets
The City's assets are capitalized at historical cost or estimated historical cost, if actual is unavailable, except for donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement that are reported at acquisition value rather than fair value. Policy has set the capitalization threshold for reporting at $5,000 for non-infrastructure capital assets and $25,000 for infrastructure capital assets.

Public domain (infrastructure) capital assets include roads, bridges, curbs and gutters, streets, sidewalks, drainage systems, and lighting systems.

The accounting treatment of property, plant and equipment (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.

Prior to July 1, 2003, governmental funds’ infrastructure assets were not capitalized, since then these assets have been valued at estimated historical cost.

Depreciation of all exhaustible capital assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Position. Depreciation is provided over the assets’ estimated useful lives using the straight-line method of depreciation. No ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
depreciation is recorded in the year of acquisition or in the year of disposition. In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements.

Intangible right-to-use assets are amortized over the shorter of the lease term or the useful life of the underlying asset, unless the lease contains a purchase option that the City has determined is reasonably certain of being exercised, then the lease asset is amortized over the useful life of the underlying asset. Intangible right-to-use subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying asset.

Depreciation and amortization is recorded on a straight-line basis over the useful lives of the assets as follows:

Buildings and improvements 20-50 Years
Improvements other than buildings 35 Years
Vehicles, machinery and equipment 5-20 Years
Infrastructure 20-50 Years
Technology/Hardware and Software 5-20 Years
G. Deferred Outflows/Deferred Inflows of Resources
Deferred outflows of resources are a consumption of net assets by the City that is applicable to a future reporting period; for example, prepaid items and deferred charges.

Deferred inflows of resources are an acquisition of net assets by the City that is applicable to a future reporting period; for example, unavailable revenue and advance collections.

H. Interest Payable
In the government-wide financial statements, interest payable of long-term debt is recognized as an incurred liability for governmental fund types. The City has not allocated the interest on long-term debt to departments.

In the fund financial statements, governmental fund types do not recognize the interest payable when the liability is incurred. Interest on long-term debt is recorded in the fund statements when payment is made.

I. Claims Payable
The City records a liability for claims, judgments, and litigation when it is probable that an asset has been impaired or a liability has been incurred prior to fiscal year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated.

J. 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 during or upon separation from employment. Based on the criteria listed, two types of leave qualify for liability ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
recognition for compensated absences – vacation and sick leave. The liability for compensated absences is reported as incurred in the government-wide and proprietary fund financial statements. The liability for compensated absences includes salary-related taxes and benefits, where applicable.

Employees accrue vacation, sick, holiday, and compensatory time off benefits as follows:

Vacation, Holiday and Compensatory Time
The City’s policy permits employees to accumulate earned but unused “time-off” benefits, which are eligible for payment at the employee’s current pay rate upon separation from employment. Also, annually an employee may elect to be compensated for up to 40 hours of unused annual leave. However, this is contingent upon the employee using at least 40 hours during the previous year and, the employee having a minimum balance of 80 annual leave hours after the payment.

Sick Leave
The City’s policy permits employees to accumulate earned but unused sick leave. A liability for the estimated value of sick leave that will be used by employees is included in the liability for compensated absences. Sick leave balances are not paid upon termination.

K. Long-Term Liabilities
In the government-wide financial statements and proprietary fund statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental or business-type activities.

Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Debt issuance costs are expensed in year incurred.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuance are reported as other financing sources while discounts on debt issuance reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

L. Subscription Based Information Technology Arrangements (SBITAs) The City recognizes subscription liabilities with an initial, individual value of $10,000 or more annually and $50,000 or more over the subscription contract. The City uses its estimated incremental borrowing rate to measure subscription liabilities unless it can readily determine the interest rate in the arrangement.

The City’s estimated incremental borrowing rate is based on its most recent public debt issuance.

M. Benefit Plans
Pension Expense
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s California Public Employees’ Retirement System (CalPERS) plans (the Plans) and additions to/deductions from the Plans’ 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 due and payable in accordance with the benefit terms. Investments are reported at fair value.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Other Postemployment Benefit (OPEB) Expense
For purposes of measuring the total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense information about the fiduciary net position of the City’s Retiree Benefits Plan (the OPEB Plan) and additions to/deductions from the OPEB Plan's fiduciary net position have been determined on the same basis as they are reported by the OPEB Plan. For this purpose, the OPEB Plan recognizes benefit payments when due and payable in accordance with the benefit terms.

N. Fund Balances
In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the City classifies governmental fund balances as follows:

Nonspendable
Nonspensable fund balance includes fund balance amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints.

Restricted
Restricted fund balance includes fund balance amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation.

Committed
Committed fund balance includes fund balance amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision-making authority and does not lapse at year-end. Committed fund balances are imposed by the City Council, the City’s highest level of decision-making authority, for specific purposes pursuant to constraints imposed by formal action taken such as resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to commit fund balance needs to occur within the fiscal reporting periods; however the amount can be determined subsequently.

Assigned
Assigned fund balance includes fund balance amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balances may be assigned by the City Council and the City Manager.

Unassigned
The Unassigned Fund Balance category represents fund balance which may be held for specific types of uses or stabilization purposes, but is not yet directed to be used for a specific purpose. The general fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than the general fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed, or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.

The detail of amounts reported for each of the above defined fund balance categories is reported in the governmental funds balance sheet and in the combining nonmajor fund balance sheets.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Flow Assumption / Spending Order Policy
When expenditures are incurred for purposes for which both restricted and unrestricted fund balance is available, the City considers restricted funds to be spent first. When expenditures are incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to be spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the City Council has directed otherwise.

O. Net Position
In the government-wide financial statements, net position is classified in the following categories:

Net Investment in Capital Assets
This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that are attributed to the acquisition, construction, or improvement of the assets. In addition, deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt also are included in the net investment in capital assets component of net position
Restricted Net Position
This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments.

Unrestricted Net Position
This amount is all net position that does not meet the definition of "net investment in capital assets" or "restricted net position."
The detail of amounts reported for each of the above defined net position categories is reported in the government-wide Statement of Net Position.

Use of Restricted/Unrestricted Net Position
When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the City's policy is to apply restricted net position first.

Interfund Transactions
Interfund services provided and used are accounted for as revenue, expenditures or expenses, as appropriate. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund are recorded as expenditures/expenses in the reimbursed fund. All other interfund transactions, except for interfund services provided and used and reimbursements, are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as transfers.

P. Property Taxes
County tax assessments include secured and unsecured property taxes and special assessments. "Unsecured" refers to taxes on personal property. These tax assessments are secured by liens on the property being taxed.

Secured property taxes are levied on or before the first day of July of each year. They become a lien on real property on January 1 proceeding the fiscal year for which taxes are levied. These taxes are ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
paid in two equal installments; the first is due November 1 and is delinquent with penalties after December 10; the second is due February 1 and delinquent with penalties after April 10. Secured property taxes, which are delinquent and unpaid as of June 30, are declared to be tax defaulted and are subject to redemption penalties, cost, and interest when paid. If the delinquent taxes are not paid at the end of five years, the property is sold at public auction and the proceeds are used to pay the delinquent amounts due. Any excess is remitted, if claimed, to the taxpayer. Additional tax liens are created when there is a change in ownership of property or upon completion of new construction. Tax bills for these new tax liens are issued throughout the fiscal year and contain various payments and delinquent dates, but are generally due within one year. If the new tax liens are lower, the taxpayer receives a tax refund rather than a tax bill. Unsecured personal property taxes are not a lien against real property. These taxes are due on January 1 each year and are delinquent, if unpaid, on August 31.

The County apportions secured property tax revenue in accordance with the alternate methods of distribution, the “Teeter Plan”, as described by Section 4717 of the California Revenue and Taxation code. Therefore, the City receives 100 percent of the secured property tax levies to which it is entitled, whether or not collected. Unsecured delinquent taxes are considered fully collectible.

Q. Budgetary Information
In accordance with applicable sections of the California Government Code and the Carmel-by-the-Sea Municipal Code, the City prepares and legally adopts an annual balanced budget on a basis consistent with accounting principles generally accepted in the United States of America. Annual appropriated budgets are adopted for the General Fund, Special Revenue Funds, Capital Projects Funds and the Debt Service Fund.

Budgetary control is legally maintained at the fund level for these funds. Department heads submit budget requests to the City Administrator. The City Administrator prepares an estimate of revenues and prepares recommendations for the next year’s budget. The preliminary budget may or may not be amended by the City Council and is adopted by resolution by the City Council on or before June 30 in accordance with the municipal code.

The City Council may amend the budget by motion during the fiscal year. Only the Council can authorize transfers between funds and approve inter-fund loans. The City Administrator is authorized to transfer budgeted amounts within a fund without formal council action or approval. The City Administrator is authorized to increase expenditures in relation to revenues in funds receiving assigned revenues without approval by the City Council.

Expenditures may not legally exceed appropriations at the fund level, which is the legal level of control.

Supplemental appropriations, which increase appropriations, may be made during the fiscal year.

Appropriations, except open project appropriations, and unexpended grant appropriations, lapse at the end of each fiscal year.

Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), the City is restricted as to the amount of annual appropriations from proceeds of taxes, and if proceeds of taxes exceed allowed appropriations, the excess must either be refunded to the State Controller or returned to the taxpayers through revised tax rates or revised fee schedules, or an excess in one year may be offset against a deficit in the following year. For the fiscal year ended June 30, 2025, based on calculations by City management, proceeds of taxes did not exceed appropriations.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
R. Encumbrances
Under encumbrance accounting, purchase orders, contract and other commitments for expenditures are recorded in order to reserve that portion of the applicable appropriation. Encumbrance accounting is employed as an extension of formal budgetary integration in all funds. All appropriations, except open project appropriations, and unexpended grant appropriations and encumbrances, lapse at year end. Valid outstanding encumbrances (those for which performance under the executory contract is expected in the next year) are re-appropriated and become part of the subsequent year’s budget pursuant to state regulations.

S. Unearned Revenue
Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied.

Grants and entitlements received before eligibility requirements are met are recorded as deferred inflows from unearned revenue. In the governmental fund financial statements, receivables associated with nonexchange transactions that will not be collected within the availability period have been recorded as deferred inflows from unavailable revenue.

T. Use of Estimates
The preparation of basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

U. Implemented New Accounting Pronouncements
GASB Statement No. 101, Compensated Absences
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.

This Statement requires that a liability for certain types of compensated absences - including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
of the liabilities. The implementation of this standard did not have a material impact on the City’s financial statements.

GASB Statement No. 102, Certain Risk Disclosures
This Statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this Statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.

If a government determines that those criteria for disclosure have been met for a concentration or constraint, it should disclose information in notes to financial statements in sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the government’s vulnerability to the risk of a substantial impact. The disclosure should include descriptions for (1) the concentration or constraint (2) each event associated with the concentration or constraint that could cause a substantial impact if the event had occurred or had begun to occur prior to the issuance of the financial statements (3) actions taken by the government prior to the issuance of the financial statements to mitigate the risk.

The implementation of this standard did not have a material impact on the City’s financial statements and management determined there were no were concentrations or constraints that make the City vulnerable to the risk of substantial impact.

V. Upcoming New Accounting Pronouncements
The City is currently analyzing its accounting practices to determine the potential impact on the financial statements of the following recent GASB Statements:

GASB Statement No. 103, Financial Reporting Model Improvements This Statement is to 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.

This Statement establishes new accounting and financial reporting requirements or modifies existing requirements related to (a) Management’s discussion and analysis (MD&A) (b) Unusual or infrequent items (c) Presentation of the proprietary fund statement of revenues, expenses, and changes in fund net position (d) Information about major component units in basic financial statements (5) Budgetary comparison information (6) Financial trend information in the statistical section. The requirements of this Statement are effective for fiscal years beginning after June 15, 2025, and all reporting periods thereafter.

GASB Statement No. 104, Disclosure of Certain 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 as-sets note disclosures. Subscription assets recognized in ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
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. Governments should consider relevant factors to evaluate the likelihood of the capital asset being sold within the established time frame. 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 - CASH AND INVESTMENTS
As of June 30, 2025, cash and investments were reported in the financial statements as follows:

Cash and investments $ 43,587,631
Total cash and investments $ 43,587,631
The following summarized cash and investments by type:

Cash on hand $ 1,545
Demand Deposits 5,514,022
Investments 33,633,220
Restricted cash with fiscal agent 4,438,844
Total cash and investments $ 43,587,631
The City follows the practice of pooling cash and investments of all funds except for funds required to be held by fiscal agents under provisions of bond indentures. Interest income earned on pooled cash and investments is allocated monthly to the various funds based on monthly cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.

A. Cash Deposits
The California Government Code requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest and places the City ahead of general creditors of the institution. The market value of pledged securities must equal at least 110 percent of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes that have a value of 150 percent of the City's total cash deposits. The City has waived the collateral requirements for cash deposits which are fully insured to $250,000 by the Federal Deposit Insurance Corporation (FDIC). The bank balances before reconciling items totaled $1,010,611 at June 30, 2025 and were different from carrying amounts due to deposits in transit and outstanding checks.

The amount uninsured was $760,611 which was collateralized by securities held by pledging financial institutions.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
B. Fair Value Measurements
GASB 72 established a hierarchy of inputs to the valuation techniques above. This hierarchy has three levels:
 Level 1 inputs are quoted prices in active markets for identical assets or liabilities.  Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable.
 Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal.

C. Investment Policies
City Investment Policy
The table below identifies the investment types that are authorized for the City by the California Government Code (or the City’s investment policy, where more restrictive). The table also identifies certain provisions of the California Government Code (or the City’s investment policy, where more restrictive) that address interest rate risk, credit risk, and concentration of credit risk.

This table does not address investments of debt proceeds held by bond trustees that are governed by the provisions of bond indentures of the City, rather than the general provisions of the California Government Code or the City’s investment policy.

Maximum
Maturity
Maximum
Percentage
of Portfolio
Maximum
Investment in
One Issuer
United States (U.S.) Treasury Issues 5 years None None
U.S. Government Agency Securities 5 years 50% 50%
California State and Local Bonds, Notes, & Warrants None None None Bankers Acceptance 180 days 40% 30%
Commercial Paper 270 days 15% 10%
Medium Term Corporate Notes 5 years 30% 30%
Negotiable Certificates of Deposit 5 years 30% 30%
Repurchase Agreements 92 days None None
Passbook Savings/Money Market None 20% 10%
Local Agency Investment Fund (LAIF) N/A None None
Federal Instrumentalities None None None
Authorized Investment Type
Authorized Investments - Debt Agreements
Investments held by bond fiscal agents (trustees) are governed by the provisions of the underlying indenture agreements rather than the general provisions of the City’s investment policy or California Government Code.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
The indenture agreements identify the following permitted investments:

Maximum
Maturity
Maximum
Percentage
of Portfolio
Maximum
Investment in
One Issuer
United States (U.S.) Treasury Issues None None None
U.S. Government Agency Securities None None None
Banker's Acceptance 360 days None None
Commercial Paper 270 days None None
Money Market Funds None None None
Investment Agreements None None None
Local Agency Bonds None None None
Medium Term Notes None None None
Negotiable Certificate of Deposits None None None
Local Agency Investment Fund (LAIF) N/A None None
Authorized Investment Type
D. External Investment Pool
The City's investments with LAIF at June 30, 2025, include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following:

Structured Notes
These are debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options.

Asset-Backed Securities
The bulk of asset-backed securities are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as CMO's) or credit card receivables.

LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The approved investments policy is listed on the LAIF website, located at http://www.treasurer.ca.gov/pmia-laif/.

D. Risk Disclosures
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the term of an investment’s maturity, the greater the sensitivity to changes in market interest rates. It is the City’s practice to manage its exposure to interest rate risk is by purchasing a combination of shorter and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for City’s operations.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of an investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization, Standards and Poor. As of June 30, 2025, the City’s investments were in compliance with the ratings required by the City’s investment policy, indenture agreements and Government Code.

Concentrations of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. As of June 30, 2025, the City had no investments in any one issuer (other than external investment pools which are exempt) that represented 5% or more of the total City investments.

Custodial Credit Risk
For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The California Government Code and the City's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments.

With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools (such as LAIF).

As of June 30, 2025, the City’s investments had the following maturities and ratings:
12 Months or
Less
13 to 24
Months
25 to 36
Months
37 to 48
Months Total Rating
Input
Levels
LAIF (state pool) $ 24,444,215 $ - $ - $ - $ 24,444,215 not rated n/a Money market funds 1,693,165 - - - 1,693,165 not rated n/a Bonds 881,606 - - - 881,606 AA+ 1
Certificate of deposits 1,234,000 1,476,004 1,725,013 2,179,217 6,614,234 not rated 1 Total Investments $ 28,252,986 1,476,004$ $ 1,725,013 $ 2,179,217 $ 33,633,220 Investment Type
NOTE 3 - ACCOUNTS RECEIVABLE
The following summarizes accounts receivable as of June 30, 2025:

Ambulance $ 460,570
Holstery Tax 1,813,697
Measure C 1,398,826
Garbage Franchise Tax 137,573
Sales and Use Tax 764,306
Business License Tax 720,030
Other Accruals 147,971
Total Accounts Receivable $ 5,442,973
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
NOTE 4 - INTERFUND TRANSACTIONS
A. Inter-fund Receivables and Payables
Amounts due to or due from other funds reflect inter-fund balances for services rendered or short-term loans expected to be repaid in the next fiscal year. Advances to or from other funds are long-term loans between funds that are to be repaid in their entirety over several years. As of June 30, 2025, the City reported the following interfund balances:

Due from Due to
Fund Other Funds Other Funds
General Fund $ 1,415,493 $ -
Measure C Sales Tax Fund - 1,398,826
Capital Projects Fund 127,201 -
Nonmajor Funds - 143,868
Total Due From/To Other Funds $ 1,542,694 $ 1,542,694
Transfers In/Out
With Council approval, resources may be transferred from one fund to another. Transfers may be made to pay for capital projects or capital outlays, lease or debt service payments, operating expenses, and to finance various programs accounted for in other funds in accordance with budgetary authorizations. The following summarizes transfers between funds during the fiscal year ended June 30, 2025:

Fund Transfer in Transfer out
General Fund $ 16,845,181 $ 2,494,135
Measure C Sales Tax Fund - 9,066,376
Capital Projects Fund 2,121,161 5,164, 793
Internal Service Funds 424,515 2,374,529
Nonmajor Funds 510,631 801,655
Total Transfers $ 19,901,488 $ 19,901,488
Funds were transferred from the General Fund and the Measure C Sales Tax Fund to the Capital Projects Fund for capital improvements. Internal service funds transfers were cost reimbursements not considered to be charges for services. Transfers to and from nonmajor funds were for debt service and operations.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
NOTE 5 - CAPITAL ASSETS
Capital assets for governmental activities consisted of the following as of June 30, 2025:

Balance Transfers/ Balance
Governmental Activities July 01, 2024 Additions Deletions June 30, 2025 Non-depreciable:

Land $ 5,101,641 $ 590,993 $ - $ 5,692,634
Construction in Progress 1,784,310 1,946,632 (573,704) 3,157,238 Total Non-Depreciable 6,885,951 2,537,625 (573,704) 8,849,872 Depreciable/Amortizable:

Buildings and improvements 27,173,600 859,207 - 28,032,807 Infrastructure 29,118,233 610,228 - 29,728,461
Vehicles 3,155,025 250,070 (79,686) 3,325,409
Technology/Hardware and Software 813,834 109,998 - 923,832 Subscription based assets 350,378 9,350 - 359,728
Machinery and equipment 3,125,266 - - 3,125,266
Total Depreciable/Amortizable 63,736,336 1,838,853 (79,686) 65,495,503 Less Accumulated Dep/Amort for:

Buildings and improvements (13,328,054) (702,767) - (14,030,821) Infrastructure (11,829,955) (1,538,541) - (13,368,496)
Vehicles (2,304,354) (161,348) 79,686 (2,386,016)
Technology/Hardware and Software (680,651) (51,307) - (731,958) Subscription based assets (86,992) (64,707) - (151,699) Machinery and equipment (2,856,331) (112,380) - (2,968,711) Total Accumulated Dep/Amort (31,086,337) (2,631,050) 79,686 (33,637,701) Total Depreciable Capital Assets - Net 32,649,999 (792,197) - 31,857,802 Total Governmental Capital Assets $ 39,535,950 $ 1,745,428 $ (573,704) $ 40,707,674 Capital assets for governmental activities related to internal service funds consisted of the following as of June 30, 2025:

Balance Transfers/ Balance
July 01, 2024 Additions Deletions June 30, 2025
Internal Service Funds (Inlcuded with Governmental Activities) Buildings and improvements $ 754,866 $ - - $ 754,866
Technology/Hardware and Software 710,844 109,998 - 820,842 Vehicle, Machinery and Equipment 2,124,508 250,070 (32,766) 2,341,812 Accumulated Depreciation (1,816,652) (326,988) 32,766 (2,110,874) Total Internal Service Funds - Net $ 1,773,566 $ 33,080 $ - $ 1,806,646 ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Depreciation expense was allocated to the following governmental activities:

General Government $ 52,778
Community Planning and Building 12,008
Public Safety 220,566
Public Works 1,741,410
Library 556,369
Community Activities 47,919
Total depreciation expense $ 2,631,050
NOTE 6 - NONCURRENT LIABILITIES
The City's noncurrent liabilities consisted of the following as of June 30, 2025:

Due
Beginning Ending Within One
Noncurrent Liabilities Balance Additions Deletions Balance Year Sunset Center LRB $ 3,540,000 $ - $ 375,000 $ 3,165,000 $ 380,000 Sunset Center LRB Premium 650,175 - 72,242 577,933 72,242 Financed Purchases 132,334 - 24,861 107,473 25,639
Subscription Liabilities 255,909 9,350 56,835 208,424 59,427 Compensated Absences 888,842 49,588 - 938,430 215,000
Net Pension Liability 29,203,964 10,511,446 10,117,360 29,598,050 - Claims Liability 575,000 343,628 343,628 575,000 57,500 Total OPEB Liability 3,073,522 1,766,914 1,849,827 2,990,609 - Total Noncurrent Liabilities $ 38,319,746 $ 12,680,926 $ 12,839,753 $ 38,160,919 $ 809,808 2020 Refunding Lease Revenue Bonds - Sunset Center
On September 23, 2020, the City issued $3,895,000 in 2020 Refunding Lease Revenue Bonds at a $866,901 premium with interest at 4%. The issuance costs were $183,992. The bonds were issued to refund the Sunset Center COPs and the aggregate difference in debt service between the refunding debt and the refunded debt was $1,042,418. The net savings on the defeasance totaled $128,099.

The annual debt service requirements were as follows:

Fiscal Year Ending June 30: Principal Interest Total
2026 380,000 126,600 $ 506,600
2027 405,000 111,400 516,400
2028 425,000 95,200 520,200
2029 440,000 78,200 518,200
2030 455,000 60,600 515,600
2031-2034 1,060,000 70,000 1,130,000
Total $ 3,165,000 $ 542,000 $ 3,707,000
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Financed Purchases
The City entered into a finance purchase agreement to buy Motorola radios for $203,021, including interest, at 3.13%, and principal. The payments commenced on July 1, 2022 and end on July 1, 2028. The annual debt service requirements were as follows:

Fiscal Year Ending June 30: Principal Interest Total
2026 $ 25,639 $ 3,364 $ 29,003
2027 26,442 2,561 29,003
2028 27,269 1,734 29,003
2029 28,123 880 29,003
Total $ 107,473 $ 8,539 $ 116,012
Subscription Based Information Technology Agreements
During the year, the City implemented GASB 96, Subscription Based Information Technology Arrangements (SBITAs). The following summarizes the City’s terms and conditions for its SBITAs as of June 30, 2025:

Terms Spring Brook AXON BWP GovInvest
Start 7/1/2022 1/1/2023 9/30/2023
End 7/1/2027 6/30/2032 9/26/2026
Annual Rate 2.52% 3.54% 2.52%
Principal Paid $ 53,038 $ 49,251 $ 48,786
Interest Paid $ 4,526 $ 10,077 $ 1,214
Lease Amortization $ 19,400 $ 8,943 $ 24,391
The following summarizes the City’s right of use assets and subscription liabilities:

Subscription Right of Use Assets Spring Brook AXON BWP GovInvest Total Beginning $ 107,281 $ 169,925 $ 73,172 $ 350,378
Additions 9,350 - - 9,350
Deletions - - - -
Ending 116,631 169,925 73,172 359,728
Accumulated Amortization (58,201) (44,717) (48,781) (151,699) Subscription ROA, Net $ 58,430 $ 125,208 $ 24,391 $ 208,029 Subscription Liabilities Spring Brook AXON BWP GovInvest Total Beginning $ 72,092 $ 135,645 $ 48,172 $ 255,909
Additions 9,350 - - 9,350
Principal Paid (18,079) (14,970) (23,786) (56,835)
Ending 63,363 120,675 24,386 208,424
Due Within One Year 19,541 14,970 24,386 58,897
Due in More Than One Year $ 43,822 $ 105,705 $ - $ 149,527 ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
The annual subscription payments are as follows:

For the Year
Ending June 30, Principal Interest Total
2026 $ 59,427 $ 6,487 $ 65,914
2027 37,141 4,830 41,971
2028 39,349 3,731 43,080
2029 17,207 2,569 19,776
2030 17,817 1,959 19,776
2031-2035 37,483 2,069 39,552
Total Debt Service $ 208,424 $ 21,645 $ 230,069
NOTE 7 - RISK MANAGEMENT
The City of Carmel-by-the-Sea (City) is a member of PRISM (Public Risk Innovation, Solutions, and Management) which is a shared risk pool. PRISM covers claims for the City for both Workers Compensation and General Liability. The City’s Liability Self Insured Retention ("SIR") is pre-funded through PRISM for eight quarters of payments made on behalf of City. Currently, the SIR fund for the City with PRISM is maintained at $8,183. If the pre-funded SIR balance drops below this amount, the City is billed by PRISM to replenish the fund to the $8,183 level. The City does not make claim payments, they are all issued by the city's third-party administrator from a PRISM account.

The City has three layers of Liability coverage through PRISM and under the first layer, the Primary General Liability layer, there is an SIR (Self Insured Retention) of $10,000 per claim. Thereafter, the next layer of coverage kicks in (General Liability 1 program) which carries an SIR of $100,000 which is satisfied by exhausting the coverage limit of $100,000 under the Primary Liability program. The maximum limit of coverage under the primary General Liability 1 program is $25 million. The third layer is another $25 million limit in the PRISM Optional Excess Liability program. The City’s total Liability insurance limit is $50 million.

For Workers Compensation, the City is a member of both the PRISM Primary Workers Compensation program and then, the PRISM Excess Workers Compensation program. The Primary Workers compensation program provides dollar 1 coverage to the City for Workers Compensation claims. In other words, City has no deductible or SIR. This layer of Workers Compensation coverage carries a maximum limit of $125,000 per occurrence. Thereafter, PRISM's excess coverage steps in and the SIR (Self Insured Retention) is $125,000 which again, is satisfied by exhausting the limits of coverage under the Primary Workers Compensation program. The upper limit of coverage under the Excess Workers Compensation program is "statutory". What this means is that regardless of the total cost of the claim, it is covered under the PRISM Excess Workers Compensation program. There is absolutely no monetary exposure to the City under these two Workers Compensation programs except for the premium costs to purchase this coverage. The City has had no settlements which exceeded insurance coverage in the last three fiscal years and no significant changes or reductions in insurance coverage during the current year.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
The following summarizes the change in the estimated workers compensation claims liability over the last two fiscal years:

Year Ended Year Ended
June 30, 2025 June 30, 2024
Beginning of year $ 575,000 $ 575,000
Increase (decrease) in current year claims 343,628 45,885 Changes in estimates (277,963) 1,004
Claims paid (65,665) (46,889)
Ending balance 575,000 575,000
Current portion (57,500) (57,500)
Non-current portion $ 517,500 $ 517,500
NOTE 8 - RETIREMENT PLANS
General Information about the Pension Plans
Plan Description
All qualified permanent and probationary employees are eligible to participate in the City’s Employee Pension Plan (the Plan) which is a cost-sharing multiple employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS). The plan includes different tiers for each class of employee under Miscellaneous and Safety provisions. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

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 and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. The cost-of-living adjustments for the Plans are applied as specified by the Public Employees’ Retirement Law.

The Plans’ provisions and benefits in effect at June 30, 2025, are summarized as follows:

Tier 1 Tier 2 PEPRA
Hire date < 4/15/2012 >= 4/15/2012 >= 1/1/2013
Benefit formula 2% @ 55 2% @ 60 2% @ 62
Benefit vesting schedule 5 Years 5 Years 5 Years
Benefit payments Monthly for Life Monthly for Life Monthly for Life Retirement age 55 60 62
Monthly benefits as a % of eligible compensatio2.0% t n o 2.5% 2.00% 2.00% Required employee contribution rates 7.00% 7.00% 7.75%
Required employer contribution rates 12.52% 10.15% 7.87% Miscellaneous
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
The Plans’ provisions and benefits in effect at June 30, 2025, are summarized as follows:

Tier 1 Tier 2 PEPRA
Hire date < 4/15/2012 >= 4/15/2012 >= 1/1/2013
Benefit formula 3% @ 50 2% @ 50 2.7% @ 57
Benefit vesting schedule 5 Years 5 Years 5 Years
Benefit payments Monthly for Life Monthly for Life Monthly for Life Retirement age 50 50 57
Monthly benefits as a % of eligible compensation 2.00% 2.00% 2.00% Required employee contribution rates 9.00% 9.00% 13.75% Required employer contribution rates 27.32% 20.09% 13.76% Safety
Employees Covered
At June 30, 2025, the following employees were covered by the benefit terms for the Plans:

Miscellaneous Safety Total
Active 57 16 73
Transferred 30 20 50
Separated 35 15 50
Retired 125 59 184
Total 247 110 357
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law 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 the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rates are 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.

For the year ended June 30, 2025, the following contributions were made:

Employer
Contributions
Miscellaneous $ 2,670,633
Safety 446,658
Total Employer Contributions $ 3,117,291
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2025, the City reported net pension liabilities for its proportionate shares of the net pension liability as follows:

Miscellaneous
Safety
Total
Proportionate Share of
Net Pension
Liability/(Asset)
$ 14,817,395
14,780,655
$ 29,598,050
The City’s net pension liability for the Plans is measured as the proportionate share of the net pension liability. The net pension liability of the Plans are measured as of June 30, 2024, and the total pension liability for the Plans used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2023 rolled forward to June 30, 2024 using standard update procedures. The City’s proportion of the net pension liability was 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 Plans as of June 30, 2024 and 2024 was as follows:

Miscellaneous Safety Combined Plans
Proportion - June 30, 2024 0.29815% 0.20033% 0.23954%
Proportion - June 30, 2025 0.30636% 0.20273% 0.24406%
Change - Increase/(Decrease) 0.00821% 0.00240% 0.00452% For the year ended June 30, 2025, the City recognized a pension expense of $5,196,928.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions $ 380,838 $ -
Differences between Expected and Actual Experience 1,281,100 49,988 Differences between Projected and Actual Investment Earnings 853,019 - Differences between Employer's Contributions and
Proportionate Share of Contributions 1,065,759 -
Change in Employer's Proportion - 291,026
Pension Contributions Made Subsequent to Measurement Date 2,670,633 - Total $ 6,251,349 $ 341,014
Miscellaneous
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions $ 364,165 $ -
Differences between Expected and Actual Experience 1,206,233 39,220 Differences between Projected and Actual Investment Earnings 714,430 - Differences between Employer's Contributions and
Proportionate Share of Contributions - 1,162,996
Change in Employer's Proportion 79,977 238,970
Pension Contributions Made Subsequent to Measurement Date 446,658 - Total $ 2,811,462 $ 1,441,186
Safety
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Changes of Assumptions $ 745,003 $ -
Differences between Expected and Actual Experience 2,487,333 89,207 Differences between Projected and Actual Investment Earnings 1,567,449 - Differences between Employer's Contributions and
Proportionate Share of Contributions 1,065,759 1,162,996 Change in Employer's Proportion 79,977 529,996
Pension Contributions Made Subsequent to Measurement Date 3,117,291 - Total $ 9,062,812 $ 1,782,199
Plan Total
The City reported $3,117,291 as deferred outflows of resources related to contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the year ended June ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
30, 2026.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Miscellaneous Safety Total
$ 1,150,831 $ 189,047 $ 1,339,878
2,224,736 1,201,965 3,426,701
156,455 (222,948) (66,493)
(292,320) (244,445) (536,765)
$ 3,239,702 $ 923,619 $ 4,163,321
Deferred Outflows/(Inflows) of
Fiscal Year Ending Resources
June 30:

Total
2027
2028
2029
2026
Actuarial Assumptions
The total pension liabilities in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions:

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%
Payroll Growth 2.80%
Projected Salary Increase (1)
Investment Rate of Return 6.8% (2)
Mortality (3)
(1) Varies by entry age and service
(2) Net of pension plan investment expenses, including inflation (3) Derived using CalPERS' membership data for all funds Discount Rate
The discount rate used to measure the total pension liability was 6.9%. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the Plan, CalPERS stress tested employer rate plans within the Plan that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested employer rate plans run out of assets. Therefore, the current 6.9% discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The stress test results are presented in a detailed report, GASB Statements 67 and 68 Crossover Testing Report for Measurement Date June 30, 2021 based on June 30, 2020 Valuations, that can be obtained from the CalPERS website.

According to Paragraph 30 of GASB 68, the long-term discount rate should be determined without ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
reduction for pension plan administrative expense. For the CalPERS Plan, the 6.9% investment return assumption used in this accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 6.9%. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. CalPERS checked the materiality threshold for the difference in calculation and did not find it to be a material difference.

In determining the long-term expected rate of return, CalPERS took into account both short- term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the Plan’s asset classes, expected compound (geometric) returns were calculated over the short-term (first 11 years) and the long-term (60 years) using a building-block approach. Using the expected nominal returns for both short-term and longterm, the present value of benefits was calculated for the Plan. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

Assumed Long-Term
Asset Expected Real
Asset Class (a) Allocation Return (1)(2)
Global Equity Cap Weighted 30.00% 4.54%
Global Equity NonCap 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%
Total 100.00%
(1) An expected inflation of 2.3% used for this period. (2) Figures are based on the 2021-22 Asset Liability Study.

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
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 Plans, calculated using the discount rate for the Plans, 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:

Miscellaneous Safety Total
1% Decrease 5.90% 5.90% 5.90%
Net Pension Liability $ 21,913,383 21,039,346 42,952,729 Current 6.90% 6.90% 6.90%
Net Pension Liability $ 14,817,395 14,780,655 29,598,050 1% Increase 7.90% 7.90% 7.90%
Net Pension Liability $ 8,976,351 9,661,927 18,638,278
Pension Plan Fiduciary Net Position
Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

NOTE 9 - OTHER POSTEMPLOYMENT BENEFITS PLAN
Plan Description and Benefits
The City of Carmel-by-the-Sea Retiree Healthcare Plan (Plan) is a single-employer defined benefit healthcare plan administered by the City. The Plan provides access to lifetime healthcare benefits to eligible retirees and their dependents. The City provides retiree medical benefits through the California Public Employees’ Retirement System healthcare program (PEMHCA). For eligible retirees, the City contributes not less than 5% of the active contribution times years in PEMHCA (max $100/month increase). For purposes of its contract with PEMHCA, the City uses a statutory schedule to determine its monthly contribution on behalf of each active employee. The statutory amount was $133 for 2018 and is indexed by the Medical CPI each year thereafter.

The City offers the same medical plans to its retirees and surviving spouses as to its active employees, with the exception that once a retiree becomes eligible for Medicare, he or she must join a Medicare HMO or a Medicare Supplement plan, with Medicare becoming the primary payer. Employees become eligible to retire and receive City-paid healthcare benefits upon attainment of age 50 and 5 years of service (age 52 for Miscellaneous PEPRA employees). The City contribution towards retiree health benefits is determined under the "equal contribution method" under PEMHCA, whereby the contribution is 100% of the City's statutory minimum contribution for active employees. No stand-alone financial are issued for this plan as it is not a trusted plan.

Employees Covered by Benefit Terms
At June 30, 2025, the benefit terms covered the following employees:

Active employees 76
Inactive employees 45
Total employees 121
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Contributions
The City makes contributions based on a pay-as-you go basis as approved by the authority of the City’s Board. Total benefit payments included in the measurement period were $140,592. The City’s contributions and benefit payments were 2% of covered payroll during the measurement period June 30, 2025. Employees are not required to contribute to the plan. There have been no assets accumulated in a trust to provide for the benefits of this plan.

Actuarial Assumptions
The following summarized the actuarial assumptions for the OPEB plan included in this fiscal year:

Valuation Date:

Measurement Date:

Actuarial Cost Method:

Amortization Period:

Actuarial Assumptions:

Discount Rate
Inflation
Payroll Increases
Trend Rate
Increased from

6.5%
Municipal Bond Rate
Mortality

7.90%
Entry-Age Normal Cost Method
June 30, 2025
June 30, 2025
20 years

2.30%

2.80%

4.71%

4.71%
2021 CalPERS Mortality for Safety Employees
2021 CalPERS Retiree Mortality for All Employees
2021 CalPERS Mortality for Miscellaneous and
Schools Employees
Increased from 3.97%
Discount Rate
The discount rate was based on the Bond Buyer 20-bond General Obligation Index.

Total OPEB Liability
The City's total OPEB liability was measured as of June 30, 2025 (measurement date) and was determined by an actuarial valuation as of June 30, 2025 (valuation date) for the fiscal year ended June 30, 2025 (reporting date).

ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
Changes in the Total OPEB Liability
The following summarizes the changes in the Total OPEB liability during the year:

Total OPEB
Liability
Balance at June 30, 2024 $ 3,073,522
Service cost 109,288
Interest in Total OPEB Liability 123,567
Actual and exp experience 309,886
Changes in assumptions (485,062)
Benefit payments (140,592)
Net changes (82,913)
Balance at June 30, 2025 $ 2,990,609
The City’s plan is nonfunded, meaning there have not been assets placed into an irrevocable trust, therefore the plan fiduciary net position is zero.

Deferred Inflows and Outflows of Resources
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 of
Resources
Deferred
Inflows of
Resources
Difference between actual and expected experience $ 397,465 $ 244,792 Change in assumptions 54,825 1,409,016
Totals $ 452,290 $ 1,653,808
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 Ended June 30,
2026 $ (328,819)
2027 (354,386)
2028 (269,795)
2029 (167,673)
2030 (43,963)
Thereafter (36,882)
Total $ (1,201,518)
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
OPEB Expense
The following summarizes the OPEB expense by source during the year ended June 30, 2025:

Service cost $ 109,288
Interest in TOL 123,567
Difference between actual and expected experience (38,154) Change in assumptions (290,666)
OPEB Expense $ (95,965)
The following summarizes changes in the net OPEB liability as reconciled to OPEB expense during the year ended June 30, 2025:
$ 2,990,609
(3,073,522)
(82,913)
Changes in deferred inflows 40,535
Employer contributions and implicit subsidy 140,591
OPEB Expense $ (95,965)
Total OPEB liability ending
Total OPEB liability begining
Change in total OPEB liability
Sensitivity to Changes in the Discount Rate
The total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher, is as follows:
1% Decrease 3.86% 1% Increase
Total OPEB Liability $ 3,300,526 $ 2,990,609 $ 2,726,312 Municipal Bond Rate
Sensitivity to Changes in the Healthcare Cost Trend Rates The total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower or one percentage point higher than current healthcare cost trend rates, is as follows:
1% Decrease 4.00% 1% Increase
Total OPEB Liability $ 2,889,032 $ 2,990,609 $ 3,107,938 Trend Rate
ATTACHMENT 2

City of Carmel-by-the-Sea
Notes to the Basic Financial Statements
June 30, 2025
NOTE 10 - COMMITMENTS AND CONTINGENCIES
A. Lawsuits
The City may be involved in certain matters of litigation that have arisen in the normal course of conducting City business. City management believes, based upon consultation with the City Attorney, that any cases, in the aggregate, are not expected to result in a material adverse financial impact on the City. Additionally, City management believes that the City's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize.

B. Federal and State Grant Programs
The City participates in Federal, State and County grant programs. These programs are audited by the City's independent accountants, if required, in accordance with the provisions of the Federal Single Audit Act Amendments of 1996 and applicable State requirements. For Federal programs, the City did not reach the level of qualifying expenditures during the current fiscal year that would require a single audit.

Expenditures which may be disallowed, if any, by the granting agencies, cannot be determined at this time. The City expects such amounts, if any, to be immaterial.

ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

REQUIRED SUPPLEMENTARY

INFORMATION
ATTACHMENT 2

This page is intentionally blank
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual (GAAP Basis)
General Fund
For the Year Ended June 30, 2025
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)

REVENUES
Taxes:

Property taxes $ 8,662,995 $ 9,018,742 $ 9,147,435 $ 128,693 Sales and use taxes 3,753,009 3,753,009 3,956,283 203,274 Transient occupancy taxes 7,543,234 7,932,702 9,559,155 1,626,453 Franchise fees 849,515 849,515 1,017,268 167,753
Business license tax 568,164 568,164 766,918 198,754
Intergovernmental revenues 596,951 596,951 937,951 341,000 License and permits 1,274,670 1,071,670 1,483,379 411,709 Fines and forfeitures 63,699 127,699 154,723 27,024
Charges for services 1,261,022 1,084,022 1,118,785 34,763 Interest 28,892 150,892 1,319,301 1,168,409
Rents and concessions 147,379 147,379 198,436 51,057
Other revenues 70,540 80,340 175,913 95,573
Total Revenues 24,820,070 25,381,085 29,835,547 4,454,462

EXPENDITURES
Current:

General government 8,294,517 8,273,652 8,127,324 146,328 Community Planning and Building 2,211,584 2,211,585 1,775,462 436,123 Public Safety 10,574,821 11,081,925 9,977,934 1,103,991 Public Works 6,538,001 6,538,003 5,208,059 1,329,944
Library 1,545,429 1,545,429 1,230,263 315,166
Community Activities 341,295 341,295 161,681 179,614
Economic Reviltalization 1,156,297 1,156,297 1,156,297 - Capital outlay - - 9,350 (9,350)
Debt service
Principal - 19,776 56,835 (37,059)
Interest - - 7,837 (7,837)
Total Expenditures 30,661,944 31,167,962 27,711,042 3,456,920 Excess (Deficiency) of Revenues over Expenditures (5,841,874) (5,786,877) 2,124,505 7,911,382

OTHER FINANCING SOURCES (USES)
Subscriptions - - 9,350 9,350
Transfers in 7,158,000 7,158,000 16,845,181 9,687,181
Transfers out (9,560,865) (9,560,865) (2,494,135) 7,066,730 Total Other Financing Sources (Uses) (2,402,865) (2,402,865) 14,360,396 16,753,911 Net Change in Fund Balance (8,244,739) (8,189,742) 16,484,901 24,665,293 Prior Period Restatement 715,560 715,560 715,560 -
Fund Balance Beginning 20,306,904 20,306,904 20,306,904 - Fund Balance Ending $ 12,777,725 $ 12,832,722 $ 37,507,365 $ 24,665,293 ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual (GAAP Basis)
Measure C Sales Tax Fund
For the Year Ended June 30, 2025
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)

REVENUES
Sales and use taxes $ 6,045,063 $ 6,045,063 $ 6,913,837 $ 868,774

OTHER FINANCING SOURCES (USES)
Transfers out (7,000,000) (7,000,000) (9,066,376) (2,066,376) Net Change in Fund Balance (954,937) (954,937) (2,152,539) (1,197,602) Fund Balance Beginning 2,152,539 2,152,539 2,152,539 -
Fund Balance Ending $ 1,197,602 $ 1,197,602 $ - $ (1,197,602) ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual (GAAP Basis)
Harrison Memorial Library Fund
For the Year Ended June 30, 2025
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)

REVENUES
Contributions $ 388,000 $ 388,000 $ 396,100 $ 8,100
Charges for services 7,000 7,000 10,075 3,075
Interest 33,500 33,500 57,660 24,160
Total Revenues 428,500 428,500 463,835 35,335

EXPENDITURES
Current:

Library 429,500 429,500 396,662 32,838
Total Expenditures 429,500 429,500 396,662 32,838
Net Change in Fund Balance (1,000) (1,000) 67,173 68,173 Fund Balance Beginning 1,453,651 1,453,651 1,453,651 -
Fund Balance Ending $ 1,452,651 $ 1,452,651 $ 1,520,824 $ 68,173 ATTACHMENT 2

City of Carmel-by-the-Sea
Schedule of Pension Contributions
June 30, 2025
Miscellaneous & Safety Plan
Plan Measurement Date 2015 2016 2017 2018 2019
Fiscal Year Ended 2016 2017 2018 2019 2020
Contractually Required Contributions $ 1,125,776 $ 1,279,565 $ 1,317,381 $ 1,566,319 $ 1,864,910 Contributions in Relation to
Contractually Required Contributions 1,125,776 1,279,565 1,317,381 1,566,319 1,864,910 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 5,193,071 $ 5,725,559 $ 5,897,326 $ 6,074,246 $ 6,591,573 Contributions as a % of Covered Payroll 21.68% 22.35% 22.34% 25.79% 28.29% Miscellaneous & Safety Plan
Plan Measurement Date 2020 2021 2022 2023 2024
Fiscal Year Ended 2021 2022 2023 2024 2025
Contractually Required Contributions $ 2,183,605 $ 2,378,458 $ 2,666,278 $ 2,693,948 $ 3,117,291 Contributions in Relation to
Contractually Required Contributions 2,183,605 2,378,458 2,666,278 2,693,948 3,117,291 Contribution Deficiency (Excess) $ - $ - $ - $ - $ -
Covered Payroll $ 6,772,841 $ 6,244,060 $ 7,251,994 $ 7,829,262 $ 8,156,804 Contributions as a % of Covered Payroll 32.24% 38.09% 36.77% 34.41% 38.22% Notes to Schedule:

Valuation Date: June 30, 2023
Assumptions Used: Entry Age Method used for Actuarial Cost Method Level Percentage of Payroll and Direct Rate Smoothing
Remaining Amortization Period no more than 26 years
Inflation Assumed at 2.30%
Investment Rate of Returns set at 6.8%
The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018, and then decreased to 6.90% in FY2022.

The CalPERS mortality assumptions was adjusted in fiscal year 2021.

The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing morality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.

ATTACHMENT 2

City of Carmel-by-the-Sea
Schedule of Proportionate Share of Net Pension Liability June 30, 2025
Miscellaneous and Safety Plan
Plan Measurement Date 2015 2016 2017 2018 2019
Fiscal Year Ended 2016 2017 2018 2019 2020
Proportion of Net Pension
Liability (Safety and Misc) 0.19035% 0.19840% 0.20075% 0.20672% 0.21144% Proportion of Net Pension
Liability (Misc Plan Only) 0.47624% 0.49419% 0.50503% 0.52858% 0.54105% Proportionate Share of
Net Pension Liability $ 13,065,617 $ 17,167,636 $ 19,908,483 $ 19,920,568 $ 21,666,416 Covered Payroll $ 4,894,966 $ 5,193,071 $ 5,725,559 $ 5,897,326 $ 6,074,246 Proportionate Share of NPL
as a % of Covered Payroll 266.92% 330.59% 347.71% 337.79% 356.69% Plan's Fiduciary Net Position
as a % of the TPL 81.88% 74.70% 73.44% 74.18% 72.78%
Miscellaneous and Safety Plan
Plan Measurement Date 2020 2021 2022 2023 2024
Fiscal Year Ended 2021 2022 2023 2024 2025
Proportion of Net Pension
Liability (Safety and Misc) 0.22373% 0.29520% 0.24382% 0.23409% 0.24406% Proportion of Net Pension
Liability (Misc Plan Only) 0.57710% 0.84081% 0.60188% 0.58403% 0.61196% Proportionate Share of
Net Pension Liability $ 24,342,598 $ 15,965,385 $ 28,163,296 $ 29,203,964 $ 29,598,050 Covered Payroll $ 6,591,573 $ 6,772,841 $ 6,244,060 $ 7,251,994 $ 7,829,262 Proportionate Share of NPL
as a % of Covered Payroll 369.30% 235.73% 451.04% 402.70% 378.04% Plan's Fiduciary Net Position
as a % of the TPL 71.13% 81.45% 68.49% 67.70% 69.92%
The CalPERS discount rate was increased from 7.50% to 7.65% in FY2016, to 7.15% in FY2018, and then decreased to 6.90% in FY2022.

The CalPERS mortality assumptions was adjusted in fiscal year 2021.

ATTACHMENT 2

City of Carmel-by-the-Sea
Retiree Health Care Plan
Schedule of Total OPEB Liability
June 30, 2025
Fiscal Year Ended 2018 2019 2020 2021 2022 2023 2024 2025 Total OPEB liability
Service cost $ 199,013 $ 193,586 $ 295,059 $ 348,597 $ 261,219 $ 197,644 $ 197,644 $ 109,288 Interest 134,202 146,765 143,565 105,930 90,758 133,373 121,752 123,567 Diff. bet. Expected/actual exper. (2,625) (2,524) 59,118 (823,299) - 205,046 (1,787) 309,886 Changes of assumptions (137,699) 192,779 256,216 21,493 (716,539) (1,013,678) (133,200) (485,062) Benefit payments (145,196) (159,107) (135,193) (152,834) (138,891) (135,560) (134,849) (140,592) Net change in Total OPEB Liability 47,695 371,499 618,765 (500,113) (503,453) (613,175) 49,560 (82,913) Total OPEB Liability - beginning 3,602,744 3,650,439 4,021,938 4,640,703 4,140,590 3,637,137 3,023,962 3,073,522 Total OPEB Liability - ending 3,650,439$ 4,021,938$ 4,640,703$ 4,140,590$ 3,637,137$ $ 3,023,962 $ 3,073,522 $ 2,990,609 Covered Employee Payroll 6,021,711$ 6,207,949$ 6,378,668$ 6,544,081$ 6,734,318$ $ 7,410,817 $ 7,614,614 $ 8,726,249 TOL as a % of covered emp. payroll 60.62% 64.79% 72.75% 63.27% 54.01% 40.80% 40.36% 34.27% Other Notes
No assets have been accumulated in a trust for the City's OPEB plan.

GASB 75 requires a schedule of contributions for the last ten fiscal years, or for as many years as are available if less than ten years are available. GASB 75 was adopted as of June 30, 2018.

In FY2023, the discount rate increased from 2.2% to 3.86%, the inflation rate decreased from 2.75% to 2.4%, the payroll rate decreased from 3% to 2.8%, and the trend rate changed from 8% to 4% from 2019 to 2023.

In FY2025, the discount rate increased to 4.71%, inflation decreased to 2.3%, and the health trend rate was 7.9%.

ATTACHMENT 2

SUPPLEMENTARY INFORMATION
ATTACHMENT 2

This page is intentionally blank
ATTACHMENT 2

COMBINING NONMAJOR GOVERNMENTAL FUNDS
Fund Title Fund Description
Gast Tax This fund is used to account for revenues collected in accordance with the Streets and Highway Code.

Transportation Safety This fund accounts for the expenditures related to resources provided for transportation safety as required by Measure X.

COPS Grant This fund accounts for the expenditures related to the COP's grant for public safety.

Parking in Lieu This fund is used to account for activities associate with parking in-lieu fees.

Asset Seizure This fund accounts for the expenditures related to asset seizures.

Debt Service This fund is used to account for activities related to the repayment of the Certificate of Participation, Pension Obligation Bond, and capital lease obligations.

ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2025
Gas Transportation COPS Parking
Tax Safety Grant In-Lieu
Fund Fund Fund Fund
ASSETS
Cash and investments $ 23,545 $ - $ - $ 788,677
Receivables:

Due from other governments 22,880 127,201 16,667 -
Total assets $ 46,425 $ 127,201 $ 16,667 $ 788,677

LIABILITIES AND FUND BALANCES
Liabilities:

Due to other funds $ - $ 127,201 $ 16,667 $ -
Total liabilities - 127,201 16,667 -
Fund Balances:

Restricted:

Transportation 46,425 - - -
Debt service - - - -
Asset seizure - - - -
Public parking - - - 788,677
Total fund balances 46,425 - - 788,677
Total liabilities and fund balances $ 46,425 $ 127,201 $ 16,667 $ 788,677 Cont'd
Special Revenue Funds
ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Balance Sheet
Nonmajor Governmental Funds
June 30, 2025
ASSETS
Cash and investments
Receivables:

Due from other governments
Total assets

LIABILITIES AND FUND BALANCES
Liabilities:

Due to other funds
Total liabilities
Fund Balances:

Restricted:

Transportation
Debt service
Asset seizure
Public parking
Total fund balances
Total liabilities and fund balances
Special Revenue
Funds Debt Service
Total
Asset Debt Nonmajor
Seizure Service Governmental
Fund Fund Funds
$ 5,838 $ 34,807 $ 852,867
- - 166,748
$ 5,838 $ 34,807 $ 1,019,615
$ - $ - $ 143,868
- - 143,868
- - 46,425
- 34,807 34,807
5,838 - 5,838
- - 788,677
5,838 34,807 875,747
$ 5,838 $ 34,807 $ 1,019,615
Concluded
ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Statement of Revenues, Expenditures
and Changes in Fund Balances
Nonmajor Governmental Funds
For the Year Ended June 30, 2025
Gas Transportation COPS Parking
Tax Safety Grant In-Lieu
Fund Fund Fund Fund

REVENUES
Intergovernmental revenues $ 176,920 $ 247,941 $ 194,663 $ - Interest 8,937 5,876 4,355 29,847
Total Revenues 185,857 253,817 199,018 29,847

EXPENDITURES
Debt service
Principal - - - -
Interest - - - -
Total Expenditures - - - -
Excess (Deficiency) of Revenues over Expenditures 185,857 253,817 199,018 29,847

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers out (308,355) (253,817) (239,483) -
Total Other Financing Sources (Uses) (308,355) (253,817) (239,483) - Net Change in Fund Balances (122,498) - (40,465) 29,847 Fund Balances Beginning 168,923 - 40,465 758,830
Fund Balances Ending $ 46,425 $ - $ - $ 788,677
Cont'd
Special Revenue Funds
ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Statement of Revenues, Expenditures
and Changes in Fund Balances
Nonmajor Governmental Funds
For the Year Ended June 30, 2025

REVENUES
Intergovernmental revenues
Interest
Total Revenues

EXPENDITURES
Debt service
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues over Expenditures

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances Beginning
Fund Balances Ending
Debt Service
Total
Asset Debt Nonmajor
Seizure Service Governmental
Fund Fund Funds
$ - $ - $ 619,524
222 - 49,237
222 - 668,761
- 375,000 375,000
- 135,631 135,631
- 510,631 510,631
222 (510,631) 158,130
- 510,631 510,631
- - (801,655)
- 510,631 (291,024)
222 - (132,894)
5,616 34,807 1,008,641
$ 5,838 $ 34,807 $ 875,747
Concluded
Special Revenue
Funds
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and
Changes in Fund Balances
Budget and Actual (GAAP Basis)
Nonmajor Governmental Funds
For the Year Ended June 30, 2025
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)

REVENUES
Intergovernmental revenues $ 408,116 $ 169,695 $ 176,920 $ 7,225 Interest - - 8,937 8,937
Total Revenues 408,116 169,695 185,857 16,162

EXPENDITURES
Debt service
Principal - - - -
Interest - - - -
Total Expenditures - - - -
Excess (Deficiency) of Revenues over Expenditures 408,116 169,695 185,857 16,162

OTHER FINANCING SOURCES (USES)
Transfers in - - - -
Transfers out (1,436,694) (574,678) (308,355) 266,323
Total Other Financing Sources (Uses) (1,436,694) (574,678) (308,355) 266,323 Net Change in Fund Balances (1,028,578) (404,983) (122,498) 282,485 Fund Balances Beginning 168,923 168,923 168,923 -
Fund Balances Ending $ (859,655) $ (236,060) $ 46,425 $ 282,485 Cont'd
Budgeted Amounts
Gas Tax Fund
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and
Changes in Fund Balances
Budget and Actual (GAAP Basis)
Nonmajor Governmental Funds
For the Year Ended June 30, 2025

REVENUES
Intergovernmental revenues
Interest
Total Revenues

EXPENDITURES
Debt service
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues over Expenditures

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances Beginning
Fund Balances Ending
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
$ - $ 238,421 $ 247,941 $ 9,520
- - 5,876 5,876
- 238,421 253,817 15,396
- - - -
- - - -
- - - -
- 238,421 253,817 15,396
- - - -
- (862,016) (253,817) 608,199
- (862,016) (253,817) 608,199
- (623,595) - 623,595
- - - -
$ - $ (623,595) $ - $ 623,595
Cont'd
Budgeted Amounts
Transportation Safety Fund
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and
Changes in Fund Balances
Budget and Actual (GAAP Basis)
Nonmajor Governmental Funds
For the Year Ended June 30, 2025

REVENUES
Intergovernmental revenues
Interest
Total Revenues

EXPENDITURES
Debt service
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues over Expenditures

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances Beginning
Fund Balances Ending
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
$ 158,000 $ 158,000 $ 194,663 $ 36,663
- - 4,355 4,355
158,000 158,000 199,018 41,018
- - - -
- - - -
- - - -
158,000 158,000 199,018 41,018
- - - -
(158,000) (158,000) (239,483) (81,483)
(158,000) (158,000) (239,483) (81,483)
- - (40,465) (40,465)
40,465 40,465 40,465 -
$ 40,465 $ 40,465 $ - $ (40,465)
Cont'd
Budgeted Amounts
COPS Grant Fund
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and
Changes in Fund Balances
Budget and Actual (GAAP Basis)
Nonmajor Governmental Funds
For the Year Ended June 30, 2025

REVENUES
Intergovernmental revenues
Interest
Total Revenues

EXPENDITURES
Debt service
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues over Expenditures

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances Beginning
Fund Balances Ending
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
$ - $ - $ - $ -
- - 29,847 29,847
- - 29,847 29,847
- - - -
- - - -
- - - -
- - 29,847 29,847
- - - -
- - - -
- - - -
- - 29,847 29,847
758,830 758,830 758,830 -
$ 758,830 $ 758,830 $ 788,677 $ 29,847
Cont'd
Budgeted Amounts
Parking In-Lieu Fund
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and
Changes in Fund Balances
Budget and Actual (GAAP Basis)
Nonmajor Governmental Funds
For the Year Ended June 30, 2025

REVENUES
Intergovernmental revenues
Interest
Total Revenues

EXPENDITURES
Debt service
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues over Expenditures

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances Beginning
Fund Balances Ending
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
$ - $ - $ - $ -
- - 222 222
- - 222 222
- - - -
- - - -
- - - -
- - 222 222
- - - -
- - - -
- - - -
- - 222 222
5,616 5,616 5,616 -
$ 5,616 $ 5,616 $ 5,838 $ 222
Cont'd
Budgeted Amounts
Asset Seizure Fund
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and
Changes in Fund Balances
Budget and Actual (GAAP Basis)
Nonmajor Governmental Funds
For the Year Ended June 30, 2025

REVENUES
Intergovernmental revenues
Interest
Total Revenues

EXPENDITURES
Debt service
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues over Expenditures

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances Beginning
Fund Balances Ending
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
$ - $ - $ - $ -
- - - -
- - - -
375,000 375,000 375,000 -
144,100 144,100 135,631 8,469
519,100 519,100 510,631 8,469
(519,100) (519,100) (510,631) 8,469
519,100 519,100 510,631 (8,469)
- - - -
519,100 519,100 510,631 (8,469)
- - - -
34,807 34,807 34,807 -
$ 34,807 $ 34,807 $ 34,807 $ -
Concluded
Budgeted Amounts
Debt Service Fund
ATTACHMENT 2

City of Carmel-By-The-Sea
Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual (GAAP Basis)
Capital Projects Fund
For the Year Ended June 30, 2025
Variance with
Budgeted Amounts Final Budget
Actual Positive
Original Final Amounts (Negative)

REVENUES
Intergovernmental revenues $ - $ - $ 177,952 $ 177,952
Other revenues - - - -
Total Revenues - - 177,952 177,952

EXPENDITURES
Capital outlay - 11,664,000 3,528,318 8,135,682
Total Expenditures - 11,664,000 3,528,318 8,135,682
Excess (Deficiency) of Revenues over Expenditures - (11,664,000) (3,350,366) 8,313,634

OTHER FINANCING SOURCES (USES)
Transfers in 10,478,459 10,478,459 2,121,161 (8,357,298) Transfers out - - (5,164,793) (5,164,793)
Total Other Financing Sources (Uses) 10,478,459 10,478,459 (3,043,632) (13,522,091) Net Change in Fund Balance 10,478,459 (1,185,541) (6,393,998) (5,208,457) Fund Balance Beginning 11,096,555 11,096,555 11,096,555 - Fund Balance Ending $ 21,575,014 $ 9,911,014 $ 4,702,557 $ (5,208,457) ATTACHMENT 2

INTERNAL SERVICE FUNDS
Fund Title Fund Description
Worker's Compensation This fund accounts for workers compensation insurance provided to departments on a cost reimbursement basis.

OPEB Reserve Fund This fund accounts for other postemployment benefits provided to departments on a cost reimbursement basis.

Vehicle & Equipment Replacement This fund is to set aside financial resources for future purchases of replacement equipment essential to the operations of the City.

ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Statement of Net Position
Internal Service Funds
June 30, 2025
Total
Vehicle Governmental
Workers OPEB & Equipment Activities -
Compensation Reserve Replacement Internal
Fund Fund Fund Service Funds
ASSETS
Current assets:

Cash and investments $ 575,000 $ - $ 900,630 $ 1,475,630 Accounts receivable - - 4,050 4,050
Other assets - - 914,692 914,692
Total current assets 575,000 - 1,819,372 2,394,372
Noncurrent assets:

Capital assets - net - - 1,806,646 1,806,646
Total assets $ 575,000 $ - $ 3,626,018 $ 4,201,018

LIABILITIES
Current liabilities:

Financed purchases - current $ - $ - $ 25,639 $ 25,639
Claims payable - current 57,500 - - 57,500
Total current liabilities 57,500 - 25,639 83,139
Noncurrent liabilities:

Financed purchases - - 81,834 81,834
Claims payable 517,500 - - 517,500
Total noncurrent liabilities 517,500 - 81,834 599,334
Total liabilities $ 575,000 $ - $ 107,473 $ 682,473

NET POSITION
Net investment in capital assets $ - $ - $ 1,699,173 $ 1,699,173 Unrestricted - - 1,819,372 1,819,372
Total net position $ - $ - $ 3,518,545 $ 3,518,545
ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Statement of Revenues, Expenses and Changes in Fund Net Position Internal Service Funds
For the Year Ended June 30, 2025
Total
Vehicle Governmental
Workers OPEB & Equipment Activities -
Compensation Reserve Replacement Internal
Fund Fund Fund Service Funds

OPERATING REVENUES
Charges for services $ 63,017 $ - $ - $ 63,017
Other - - 5,000 5,000
Total operating revenues 63,017 - 5,000 68,017

OPERATING EXPENSES
Claims 69,051 - - 69,051
Supplies and materials - - 2,762 2,762
Depreciation - - 326,988 326,988
Total operating expenses 69,051 - 329,750 398,801
Operating income (loss) (6,034) - (324,750) (330,784)

NONOPERATING REVENUES(EXPENSES)
Gain (loss) on disposal of capital assets - - 14,247 14,247 Interest expense - - (4,142) (4,142)
Investment income 32,967 71,593 - 104,560
Total nonoperating revenues(expenses) 32,967 71,593 10,105 114,665 Income (loss) before transfers 26,933 71,593 (314,645) (216,119) Transfers in - - 424,515 424,515
Transfers out (329,352) (1,888,772) (156,405) (2,374,529) Transfers in and out, net (329,352) (1,888,772) 268,110 (1,950,014) Change in net position (302,419) (1,817,179) (46,535) (2,166,133) Total net position - beginning 302,419 1,817,179 3,565,080 5,684,678 Total net position - ending $ - $ - $ 3,518,545 $ 3,518,545 ATTACHMENT 2

City of Carmel-By-The-Sea
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2025
Total
Vehicle Governmental
Workers OPEB & Equipment Activities -
Compensation Reserve Replacement Internal
Fund Fund Fund Service Funds
Cash flows from operating activities:

Receipts from interfund services provided $ 63,017 $ - $ 12,950 $ 75,967 Payments for claims (65,665) - - (65,665)
Net cash provided (used) by operating activities (2,648) - 10,188 7,540 Cash flows from noncapital financing activities:

Interfund transactions (329,352) (1,888,772) 268,110 (1,950,014) Net cash provided (used) by noncapital financing activities (329,352) (1,888,772) 268,110 (1,950,014) Cash flows from capital financing activities:

Principal payments on debt - - (24,861) (24,861)
Interest payments on debt - - (4,142) (4,142)
Purchases of property and equipment - - (345,821) (345,821) Net cash provided (used) by noncapital financing activities - - (374,824) (374,824) Cash flows from investing activities:

Investment income received 32,967 71,593 - 104,560
Net cash provided (used) by investing activities 32,967 71,593 - 104,560 Net increase (decrease) in cash and cash equivalents (299,033) (1,817,179) (96,526) (2,212,738) Cash and cash equivalents - beginning 874,033 1,817,179 997,156 3,688,368 Cash and cash equivalents - ending $ 575,000 $ - $ 900,630 $ 1,475,630 Reconciliation of operating income to net cash provided (used) by operating activities:

Operating income (loss) $ (6,034) $ - $ (324,750) $ (330,784) Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities:

Depreciation - - 326,988 326,988
Change in operating assets and liabilities:

Accounts receivable - - 7,950 7,950
Other assets 3,386 - - 3,386
Net cash provided (used) by operating activities $ (2,648) $ - $ 10,188 $ 7,540 ATTACHMENT 2

STATISTICAL SECTION
ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

Financial Trends
Revenue Capacity
Debt Capacity
Demographic and Economic Information
Operating Information
Sources: Unless otherwise noted, the information in these tables is derived from the comprehensive annual financial reports for the relevant year.

These tables offer demographic and economic indicators to help the reader understand the environment within which the city's financial activities take place.

These tables contain service and infrastructure data to help the reader understand how the information in the city's financial report relates to the services the city provides and the activities it performs.

These tables 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.

STATISTICAL SECTION
(Unaudited)
These tables contain trend information to help the reader understand how the city's financial performance and well-being have changed over time.

This part of the City of Carmel-by-the-Sea'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.

These tables contain information to help the reader assess the city's most significant local revenue source, the property tax.

ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 1
Net Position By Component
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Governmental activities:

Net investment in capital assets $ 36,006,046 $ 36,931,575 $ 35,216,550 $ 37,132,103 $ 36,611,510 $ 34,846,110 $ 33,545,605 $ 32,930,884 $ 34,957,532 $ 36,648,844 Restricted 3,584,687 5,027,082 2,628,238 2,817,741 3,310,294 4,748,736 6,773,624 5,536,383 4,614,831 2,396,571 Unrestricted (12,666,545) (14,167,354) (12,141,385) (12,645,571) (14,479,015) (11,775,303) (8,155,852) 5,110,622 10,005,741 16,560,302 Total governmental activities net position $ 26,924,188 $ 27,791,303 $ 25,703,403 $ 27,304,273 $ 25,442,789 $ 27,819,543 $ 32,163,377 $ 43,577,889 $ 49,578,104 $ 55,605,717 Source: City of Carmel-by-the-Sea Finance Department
$-
$10
$20
$30
$40
$50
$60
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Total Net Position
ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 2
Changes in Net Position
Last Ten Fiscal Years
2016 2017 2018 2019 2020
Expenses
Governmental activities:

General government $ 5,162,323 $ 4,981,304 $ 4,896,809 $ 5,906,304 $ 5,356,174 Community planning and building - 1,146,860 1,206,295 1,191,826 1,214,005 Public safety 6,445,695 7,281,137 7,771,104 8,390,616 9,166,804 Public works 1,454,895 2,605,036 2,950,423 4,162,376 4,410,995 Library - 1,144,883 1,303,989 1,894,410 2,011,886
Community activities - 446,445 153,224 283,512 256,698
Economic revitalization 306,505 1,110,857 1,125,261 1,144,022 1,081,813 Building maintenance 1,542,170 - - - -
Forest, parks and beach 558,592 - - - -
Culture and recreation 2,082,591 - - - -
Interest on long-term debt 336,551 322,181 319,974 283,606 268,721 Depreciation (Unallocated) 1,528,260 1,747,960 1,786,021 - - Total governmental activities expenses 19,417,582 20,786,663 21,513,100 23,256,672 23,767,096 Program Revenues
Governmental activities:

Charges for services:

General government 34,040 38,795 318,414 256,645 211,067 Community planning and building - - 1,167,308 1,454,523 1,112,512 Public safety 684,612 373,716 692,187 790,428 808,559
Public works 534,224 751,844 58,931 44,636 42,395
Library - - 14,794 10,097 11,793
Community activities - - 79,067 146,443 85,060
Economic revitalization - - 97,142 102,366 91,528
Forest, parks and beach - - - - -
Culture and recreation 20,326 31,817 - - -
Operating grants and contributions 668,239 675,765 681,240 865,370 695,186 Capital grants and contributions 327,029 166,726 - - -
Total governmental activities program revenues 2,268,470 2,038,663 3,109,083 3,670,508 3,058,100 Net (expense)/revenue:

Governmental activities (17,149,112) (18,748,000) (18,404,017) (19,586,164) (20,708,996) General Revenues and Other Changes in Net Assets
Governmental activities:

Taxes
Property taxes 5,598,743 5,825,889 6,192,126 6,524,331 6,690,948 Sales and use taxes 4,897,325 5,373,800 5,486,449 5,732,885 4,766,762 Transient occupancy taxes 5,890,538 6,112,347 6,329,074 6,882,015 5,115,271 Franchise taxes 587,514 672,554 637,136 636,397 632,833 Business license tax 626,625 649,525 544,392 594,941 592,466 Unrestricted grants and contributions 413,334 436,073 462,989 - 672,399 Unrestricted investment earnings 160,172 182,366 101,743 205,791 207,153 Gain (loss) on sale of assets - - (2,439,255) (160,794) - Miscellaneous or other revenues 1,963,750 362,561 212,820 12,928 169,680 Total governmental activities 20,138,001 19,615,115 17,527,474 20,428,494 18,847,512 Change in Net Position $ 2,988,889 $ 867,115 $ (876,543) $ 842,330 $ (1,861,484) Cont'd
Source: City of Carmel-by-the-Sea Finance Department
Note: In 2016 and 2018, the City changed the classification of its program expenses and revenues based on operations at the time.

ATTACHMENT 2

City of Carmel-by-the-Sea
Changes in Net Position
Last Ten Fiscal Years
Expenses
Governmental activities:

General government
Community planning and building
Public safety
Public works
Library
Community activities
Economic revitalization
Building maintenance
Forest, parks and beach
Culture and recreation
Interest on long-term debt
Depreciation (Unallocated)
Total governmental activities expenses
Program Revenues
Governmental activities:

Charges for services:

General government
Community planning and building
Public safety
Public works
Library
Community activities
Economic revitalization
Forest, parks and beach
Culture and recreation
Operating grants and contributions
Capital grants and contributions
Total governmental activities program revenues
Net (expense)/revenue:

Governmental activities
General Revenues and Other Changes in Net Assets
Governmental activities:

Taxes
Property taxes
Sales and use taxes
Transient occupancy taxes
Franchise taxes
Business license tax
Unrestricted grants and contributions
Unrestricted investment earnings
Gain (loss) on sale of assets
Miscellaneous or other revenues
Total governmental activities
Change in Net Position
Source: City of Carmel-by-the-Sea Finance Department
Note: In 2016 and 2018, the City changed the classification of its program expenses and revenues based on operations at the time.

TABLE 2
2021 2022 2023 2024 2025
$ 5,423,821 $ 6,494,737 $ 6,290,757 $ 7,076,239 $ 8,212,478 1,280,518 1,789,916 1,618,884 1,888,267 1,817,807
8,968,364 10,511,669 5,427,362 10,332,228 12,144,337
4,162,030 4,961,215 4,572,764 6,462,552 7,017,740
1,539,410 1,644,498 1,677,297 2,145,612 2,210,464
119,562 205,869 201,277 173,958 211,811
819,202 1,034,150 1,101,644 1,127,937 1,151,514
- - - - -
- - - - -
- - - - -
387,525 168,038 148,051 87,779 72,768
- - - - -
22,700,432 26,810,092 21,038,036 29,294,572 32,838,919
165,541 478,709 177,654 189,021 202,299
1,142,277 1,332,086 1,268,455 1,490,531 1,546,442
796,471 911,902 973,358 845,411 892,164
156,838 53,251 73,206 196,965 97,303
5,544 2,239 8,485 6,655 10,075
33,140 43,922 56,919 82,238 73,967
111,093 119,646 141,471 164,514 176,417
- - - - -
- - - - -
813,139 960,670 958,933 1,064,653 1,090,077
- - - 263,557 177,951
3,224,043 3,902,425 3,658,481 4,303,545 4,266,695
(19,476,389) (22,907,667) (17,379,555) (24,991,027) (28,572,224) 7,389,657 7,694,722 8,164,266 8,770,847 9,147,435
7,028,041 9,596,727 9,353,372 10,078,592 10,870,120
5,339,285 7,787,643 8,455,742 8,579,344 9,559,155
756,358 851,738 880,958 986,558 1,017,268
524,220 613,559 734,640 751,306 766,918
704,337 734,550 771,258 837,891 811,711
47,554 (126,009) 155,181 613,944 1,530,758
- - - - -
63,691 98,571 278,650 372,760 180,912
21,853,143 27,251,501 28,794,067 30,991,242 33,884,277
$ 2,376,754 $ 4,343,834 $ 11,414,512 $ 6,000,215 $ 5,312,053 Concluded
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 3
Fund Balances of Governmental Funds
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
General Fund
Restricted $ - $ - $ - $ - $ - $ - $ 942,628 $ 1,983,781 $ 3,124,794 $ 4,438,844 Nonspendable - - - - - - - 26,469 28,693 14,936
Committed 2,166,165 2,173,138 2,806,045 2,808,138 2,684,665 2,421,958 4,410,254 666,700 754,323 - Assigned 3,308,636 2,448,461 1,922,008 1,926,008 1,025,194 1,025,194 2,298,939 4,180,736 4,505,124 15,997,900 Unassigned 1,738,067 4,693,897 3,278,341 4,515,984 5,048,288 9,167,717 10,017,467 15,540,715 11,893,970 17,055,685 Total Fund Balance 7,212,868 9,315,496 8,006,394 9,250,130 8,758,147 12,614,869 17,669,288 22,398,401 20,306,904 37,507,365 Other Governmental Funds
Restricted $ 3,624,383 $ 5,065,310 $ 2,628,238 $ 2,817,741 $ 3,310,294 $ 4,748,736 $ 6,773,624 $ 5,536,383 $ 4,614,831 $ 2,396,571 Assigned 1,146,832 1,627,098 362,034 571,657 539,863 1,596,719 3,676,972 11,096,555 4,702,557 Unassigned (706,427) (1,264,197) (483) - - - - - - -
Total Fund Balance 4,064,788 3,801,113 4,254,853 3,179,775 3,881,951 5,288,599 8,370,343 9,213,355 15,711,386 7,099,128 Total Fund Balance $ 11,277,656 $ 13,116,609 $ 12,261,247 $ 12,429,905 $ 12,640,098 $ 17,903,468 $ 26,039,631 $ 31,611,756 $ 36,018,290 $ 44,606,493 Source: City of Carmel-by-the-Sea Finance Department
ATTACHMENT 2

Page Intentionally Left Blank
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 4
Last Ten Fiscal Years
2016 2017 2018 2019 2020
Revenues
Taxes $ 18,014,079 $ 19,041,911 $ 19,652,166 $ 20,370,569 $ 17,798,280 Intergovernmental revenues 294,952 365,304 454,997 1,088,044 1,126,260 License and permits 788,578 850,547 1,087,953 1,192,242 928,752 Contributions 314,600 323,495 318,398 314,450 241,324
Fines and forfeitures 111,930 87,154 91,813 121,470 72,152 Charges for services 712,321 440,439 1,070,999 1,261,169 1,193,992 Interest - - 58,055 167,544 178,244
Rents and concessions 163,875 182,367 100,899 185,156 130,792 Other revenues 389,136 1,979,561 211,153 158,029 206,908 Total revenues 21,139,081 20,789,471 23,270,778 23,046,433 24,858,673 Expenditures
General government 5,045,332 5,681,103 4,696,923 5,517,516 5,008,054 Community Planning and Building - - 1,128,977 1,116,689 1,094,736 Public Safety 6,264,950 7,033,862 7,024,092 7,617,310 7,774,916 Public Works 1,301,160 2,554,752 2,769,129 2,902,461 2,847,091 Library - - 1,217,687 1,258,390 1,344,340
Community Activities - - 141,378 179,426 209,554
Economic Revitalization 306,505 351,425 1,095,636 1,103,993 1,076,542 Building maintenance 1,525,038 1,138,983 - - -
Forest, parks and beach 547,211 108,764 - - -
Culture and recreation 2,054,872 1,448,129 - - -
Capital Outlay 4,439,279 1,877,053 1,833,014 3,778,271 869,596 Debt Service
Principal 898,379 914,105 934,860 950,770 971,460
Interest 337,915 323,649 302,202 286,606 272,721
Total expenditures 22,720,641 21,431,825 21,143,898 24,711,432 21,469,010 Excess of revenues
over (under) expenditures (1,931,170) 1,838,953 1,902,535 147,241 3,389,663 Other financing sources (uses)
Long-term debt issued - - - - -
Payments to refunded bonds escrow agent - - - - -
Interagency transfers in (out) - - 31,000 - -
Transfers in 6,483,069 3,405,710 13,924,490 4,581,594 3,188,456 Transfers out (6,483,069) (3,405,710) (16,713,387) (4,681,594) (3,385,956) Total other financing sources (uses) - - (2,757,897) (100,000) (197,500) Net change in fund balances $ (1,931,170) $ 1,838,953 $ (855,362) $ 47,241 $ 3,192,163 Total Expenditures $ 22,720,641 $ 21,431,825 $ 21,143,898 $ 24,711,432 $ 21,469,010 Capitalized Portion of Capital Outlay 4,311,179 1,870,844 1,900,132 3,533,858 918,075 Total Non-Capitalized Expenditures $ 17,038,681 $ 17,180,750 $ 18,409,462 $ 19,560,981 $ 19,243,766 Debt Service: Principal & Interest $ 1,236,294 $ 1,237,754 $ 1,237,062 $ 1,237,376 $ 1,244,181 Debt service as a percentage of noncapital
expenditures 7.3% 7.2% 6.7% 6.3% 6.5%
Source: City of Carmel-by-the-Sea Finance Department Cont'd Changes in Fund Balances of Governmental Funds
Note: In 2012 and 2018, the City changed the classification of its program expenditures and revenues based on operations at the time.

ATTACHMENT 2

City of Carmel-by-the-Sea
Last Ten Fiscal Years
Revenues
Taxes
Intergovernmental revenues
License and permits
Contributions
Fines and forfeitures
Charges for services
Interest
Rents and concessions
Other revenues
Total revenues
Expenditures
General government
Community Planning and Building
Public Safety
Public Works
Library
Community Activities
Economic Revitalization
Building maintenance
Forest, parks and beach
Culture and recreation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of revenues
over (under) expenditures
Other financing sources (uses)
Long-term debt issued
Payments to refunded bonds escrow agent
Interagency transfers in (out)
Transfers in
Transfers out
Total other financing sources (uses)
Net change in fund balances
Total Expenditures
Capitalized Portion of Capital Outlay
Total Non-Capitalized Expenditures
Debt Service: Principal & Interest
Debt service as a percentage of noncapital
expenditures
Source: City of Carmel-by-the-Sea Finance Department
Changes in Fund Balances of Governmental Funds
Note: In 2012 and 2018, the City changed the classification of its program expenditures and revenues based on operations at the time.

TABLE 4
2021 2022 2023 2024 2025
$ 21,037,561 $ 26,544,389 $ 27,588,978 $ 29,166,646 $ 31,360,896 1,212,506 1,323,845 1,414,091 1,542,641 1,735,427
889,822 1,276,260 957,429 1,359,671 1,483,379
304,972 371,377 316,100 359,903 396,100
48,947 55,506 108,144 180,843 154,723
1,204,113 1,448,681 1,420,281 1,140,295 1,128,860
40,033 (115,882) 139,827 541,826 1,426,198
138,138 132,551 148,896 164,514 198,436
193,575 127,327 200,996 235,097 175,913
25,069,667 31,164,054 32,294,742 34,691,436 38,059,932
5,083,467 5,990,601 6,806,933 7,002,824 8,127,324
1,172,337 1,550,702 1,939,088 1,845,642 1,775,462
7,833,156 8,236,353 8,866,616 9,057,317 9,977,934
2,635,206 3,184,957 3,880,769 5,192,057 5,208,059
917,694 929,258 1,356,896 1,598,147 1,626,925
82,366 136,788 216,366 163,054 161,681
808,540 1,033,307 1,130,510 1,134,030 1,156,297
- - - - -
- - - - -
- - - - -
98,907 149,872 1,199,077 2,823,048 3,537,668
640,000 660,000 715,013 446,242 431,835
406,525 199,212 178,189 157,524 143,468
19,678,198 22,071,050 26,289,457 29,419,885 32,146,653
5,391,469 9,093,004 6,005,285 5,271,551 5,913,279
4,761,901 - - 72,964 9,350
(4,890,000) - - - -
- - - - -
3,210,000 5,217,994 8,021,643 10,767,151 19,476,973
(3,210,000) (6,174,835) (8,454,803) (11,705,133) (17,526,959) (128,099) (956,841) (433,160) (865,018) 1,959,364
$ 5,263,370 $ 8,136,163 $ 5,572,125 $ 4,406,533 $ 7,872,643 $ 19,678,198 $ 22,071,050 $ 26,289,457 $ 29,419,885 $ 32,146,653 133,875 151,238 1,199,077 2,822,447 3,442,706
$ 21,177,574 $ 21,919,812 $ 25,090,380 $ 26,597,438 $ 28,703,947 $ 1,046,525 $ 859,212 $ 893,202 $ 603,766 $ 575,303

4.9% 3.9% 3.6% 2.3% 2.0%
Concluded
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 5
General Governmental Tax Revenues by Source
Last Ten Fiscal Years
Sales Transient Business
Property and Use Franchise Occupancy License Other Tax Total $ 5,598,743 $ 4,897,325 $ 587,514 $ 5,890,538 $ 626,625 $ 413,334 $ 18,014,079 $ 5,825,889 $ 5,373,800 $ 672,554 $ 6,112,347 $ 649,525 $ 407,796 $ 19,041,911 $ 6,192,126 $ 5,486,449 $ 637,136 $ 6,329,074 $ 544,392 $ 462,989 $ 19,652,166 $ 6,524,331 $ 5,732,885 $ 636,397 $ 6,882,015 $ 594,941 $ - $ 20,370,569 $ 6,690,948 $ 4,766,762 $ 632,833 $ 5,115,271 $ 592,466 $ - $ 17,798,280 $ 7,389,657 $ 7,028,041 $ 756,358 $ 5,339,285 $ 524,220 $ - $ 21,037,561 $ 7,694,722 $ 9,596,727 $ 851,738 $ 7,787,643 $ 613,559 $ - $ 26,544,389 $ 8,164,266 $ 9,353,372 $ 880,958 $ 8,455,742 $ 734,640 $ - $ 27,588,978 $ 8,770,847 $ 10,078,591 $ 986,558 $ 8,579,344 $ 751,306 $ - $ 29,166,646 $ 9,147,435 $ 10,870,120 $ 1,017,268 $ 9,559,155 $ 766,918 $ - $ 31,360,896 Source: City of Carmel-by-the-Sea Finance Department
Fiscal Year
Ended
June 30
2017
2019
2018
2020
2021
2016
2022
2023
2024
2025
$-
$5
$10
$15
$20
$25
$30
$35
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Year
General Governmental Tax Revenue by Year
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 6
General Fund Revenues by Source
Last Ten Fiscal Years
Fiscal Year
Ended June 30 Taxes
InterGovernmentalLicenses and
Permits
Fines and
Forfeitures
Charges for
Services
Interest, Rents
and
Concessions
Other
Revenues Total
2016 $ 15,124,699 $ 74,014 $ 553,602 $ 7,245 $ 57,818 $ 159,632 $ 389,136 $ 16,366,146 2017 $ 16,296,757 $ 136,367 $ 762,257 $ 8,422 $ 66,957 $ 170,631 $ 1,979,561 $ 19,420,952 2018 $ 16,753,721 $ 42,846 $ 1,087,953 $ 91,813 $ 1,056,205 $ 123,382 $ 211,133 $ 19,367,053 2019 $ 17,290,655 $ 583,573 $ 1,192,242 $ 121,470 $ 1,251,072 $ 309,418 $ 132,776 $ 20,881,206 2020 $ 17,798,280 $ 610,960 $ 928,752 $ 72,152 $ 1,177,695 $ 273,176 $ 165,131 $ 21,026,146 2021 $ 17,030,457 $ 693,873 $ 889,822 $ 48,947 $ 1,198,569 $ 164,929 $ 171,329 $ 20,197,926 2022 $ 20,573,925 $ 678,437 $ 1,276,260 $ 55,506 $ 1,446,442 $ 18,014 $ 127,327 $ 24,175,911 2023 $ 21,720,283 $ 832,011 $ 957,429 $ 108,144 $ 1,411,796 $ 259,500 $ 200,990 $ 25,490,153 2024 $ 22,780,525 $ 910,428 $ 1,359,671 $ 180,843 $ 1,133,640 $ 609,370 $ 159,305 $ 27,133,782 2025 $ 24,447,059 $ 937,951 $ 1,483,379 $ 154,723 $ 1,118,785 $ 1,517,737 $ 175,913 $ 29,835,547 Source: City of Carmel-by-the-Sea Finance Department
$-
$5
$10
$15
$20
$25
$30
$35
Millions
Total General Fund Revenues
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 7
Net Assessed Value of Taxable Property
Last Ten Fiscal Years
Total Total
Assessed Direct Tax
Secured Unsecured Value Rate
$ 3,569,065,524 $ 26,719,717 $ 3,595,785,241 1.00%
$ 3,766,258,441 $ 26,280,598 $ 3,792,539,039 1.00%
$ 3,999,182,757 $ 25,708,168 $ 4,024,890,925 1.00%
$ 4,220,683,852 $ 26,668,954 $ 4,247,352,806 1.00%
$ 4,446,041,301 $ 28,251,679 $ 4,474,292,980 1.00%
$ 4,686,463,940 $ 31,785,264 $ 4,718,249,204 1.00%
$ 4,933,554,941 $ 31,058,835 $ 4,964,613,776 1.00%
$ 5,322,503,952 $ 33,821,025 $ 5,356,324,977 1.00%
$ 5,680,286,869 $ 42,938,652 $ 5,723,225,521 1.00%
$ 6,039,769,140 $ 42,343,875 $ 6,082,113,015 1.00%
Notes:

Total Direct Tax Rate is from Table 8. Rates are based on a $100 of taxable value.

Exempt values are not included in Total.

Source: County of Monterey Assessors Office
2016
Fiscal Year
Ended
June 30
2023
2024
With the passage of a constitutional amendment (Proposition 13) and subsequently enacted State legislation, property is assessed according to a base year rather than on a percentage of market value. Accordingly, a reliable estimate of actual value of taxable property within the City is not possible. 2017
2018
2019
2020
2021
2022
2025
$-
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Billions
Total Assessed Value
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 8
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
(Rate per $100 of Taxable Value)
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Direct Rates: (1) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 Overlapping Rates: (2)
Carmel Unified 0.014 0.014 0.014 0.016 0.015 0.010 0.015 0.007 0.022 0.014 Monterey Peninsula Community College 0.022 0.022 0.022 0.021 0.021 0.027 0.032 0.030 0.029 0.022 Total Direct and Overlapping Rate 1.036 1.036 1.036 1.037 1.036 1.037 1.047 1.037 1.051 1.036 City Share of 1% Levy per Prop. 13 (3) 0.918 0.925 0.929 0.919 0.906 0.918 0.929 0.929 0.932 0.941 Notes:
1 2
3 Source: County of Monterey Assessors Office
Source: County of Monterey ACFR
The passage of a constitutional amendment (Proposition 13) in June 1978 limits the property tax rate to a base of $1.00 per $100.00. The $1.00 rate is levied by the County and apportioned to local agencies according to a formula prescribed by the California legislature.

Overlapping rates are those of entities that apply to property owners within the City of Pacific Grove. Not all overlapping rates apply to all property owners (e.g., the rates for school districts apply only to the proportion of the city's property owners whose property is located within the geographic boundaries of the school district).

This is the percentage of $1 countywide tax levy
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 9
Principal Property Tax Owners
Current Year and Nine Years Ago
Percentage Percentage
of Total of Total
Assessed Assessed Assessed Assessed
Tax Owner Valuation Rank Valuation Valuation Rank Valuation ESPERANZA CARMEL COMMERCIAL LLC $ 67,060,566 1 1.10% na na OWRF CARMEL LLC $ 63,911,159 2 1.05% $ 54,240,839 1 1.51% ESPERANZA CARMEL LLC $ 46,365,007 3 0.76% $ 8,709,860 9 0.24% HINES JEFFREY C $ 40,836,688 4 0.67% na na
PAUL ANDREW M $ 32,138,259 5 0.53% na na
LA PLAYA CARMEL HOTEL LLC $ 25,808,968 6 0.42% $ 16,723,574 3 0.47% GUNNER RICHARD V & MARGARET S GUNNER TRS $ 23,516,232 7 0.39% $ 19,743,122 2 0.55% LPP OCEAN PROP LLC $ 22,594,065 8 0.37% na na
LPP JUNIPERO PROP LLC $ 17,980,305 9 0.30% na na
CHARPIE RICHARD A TR ET AL $ 16,787,378 10 0.28% na na
LEVETT FAMILY PROPERTIES $ 11,961,481 4 0.33%
CYPRESS INN INVESTORS $ 11,866,491 5 0.33%
MOORE FAMILY TR $ 11,630,000 6 0.32%
CARMEL MOUNTAIN #8 ASSOCIATES $ 11,046,991 7 0.31%
SOLARI LARRY T TR & SOLARI DEIRDRE C TR $ 9,539,441 8 0.27% MARINA SQUARE PARTNERS LP $ 8,604,361 10 0.24%
Totals $ 356,998,627 5.87% 164,066,160 $ 4.56%
Total assessed value $ 6,082,113,015 $ 3,595,785,241
Source: County of Monterey Assessors Office
na = not available
2025 2016
ATTACHMENT 2

City of Carmel-by-the-Sea Table 10
Property Tax Levies and Collections
Last Ten Fiscal Years
Percent Supplemental Delinquent
Total Tax Current Tax of Levy Tax Tax Total
Levy Collections 1 Collected Collections Collections Collections $ 5,598,743 $ 5,453,176 93.6% $ 106,567 $ 80,397 $ 5,640,140 $ 5,825,889 $ 5,691,894 91.9% $ 124,505 $ 76,128 $ 5,892,528 $ 6,192,126 $ 6,049,707 92.7% $ 131,185 $ 80,213 $ 6,261,105 $ 6,524,331 $ 6,242,449 93.3% $ 107,412 $ 64,523 $ 6,414,384 $ 6,690,948 $ 7,219,695 97.7% $ 118,629 $ 71,261 $ 7,409,584 $ 7,389,657 $ 6,712,274 87.2% $ 144,856 $ 85,217 $ 6,942,347 $ 7,694,722 $ 7,612,601 93.2% $ 174,951 $ 83,468 $ 7,871,020 $ 8,164,266 $ 7,603,636 86.7% $ 198,307 $ 53,537 $ 7,855,480 $ 8,770,847 $ 8,169,333 89.3% $ 188,880 $ 128,327 $ 8,486,540 $ 9,147,435 $ 8,691,559 95.0% $ 131,489 $ 84,275 $ 8,907,323 Source: County of Monterey Auditor-Controller's Office
City of Carmel-by-the-Sea Finance Department
2025
Fiscal
Year
Ended
June 30
2019
2016
2017
2018
2021
2022
2023
2024
2020
$-
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Total Tax Collections
ATTACHMENT 2

City of Carmel-by-the-Sea Table 11
Ratios of Outstanding Debt By Type
Last Ten Fiscal Years
Pension Lease NGEN Total Median Percentage Debt
Obligation Revenue Public Safety Financed Outstanding Household of Household per Bonds Bonds Joint Agree Purchases SBITAs Debt Income Income Population Capita $ 4,420,000 $ 6,140,000 $ 246,246 $ - $ - $ 10,806,246 $ 81,607 0.76% 3,903 2,769 $ 3,825,000 $ 5,840,000 $ 227,141 $ - $ - $ 9,892,141 $ 87,532 0.88% 3,897 2,538 $ 3,220,000 $ 5,530,000 $ 207,281 $ - $ - $ 8,957,281 $ 87,532 0.98% 3,897 2,299 $ 2,605,000 $ 5,215,000 $ 186,511 $ - $ - $ 8,006,511 $ 87,532 1.09% 3,987 2,008 $ 1,980,000 $ 4,890,000 $ 157,741 $ - $ - $ 7,027,741 $ 98,638 1.40% 3,949 1,780 $ 1,340,000 $ 4,761,901 $ 165,051 $ - $ - $ 6,266,952 $ 98,188 1.57% 4,023 1,558 $ 680,000 $ 4,733,004 $ 165,051 $ - $ - $ 5,578,055 $ 101,696 1.82% 3,041 1,834 $ - $ 4,704,107 $ 15,033 $ 156,440 $ 159,154 $ 5,034,734 $ 100,365 1.95% 3,105 1,654 $ - $ 4,190,175 $ - $ 132,334 $ 255,909 $ 4,578,418 $ 126,406 2.68% 3,122 1,467 $ - $ 3,742,933 $ - $ 107,473 $ 208,424 $ 4,058,830 $ 115,729 2.85% 3,049 1,331

Source: City of Carmel-by-the-Sea Finance Department
Demographics from Table 16
2019
2020
2021
2022
2023
2024
2017
2018
Governmental Activities
2025
Fiscal Year
June 30
Ending
2016
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 12
Ratios of Net General Bonded Debt Outstanding
Last Ten Fiscal Years
Fiscal Less: Amount
Year General Lease Available Net Percentage Debt
Ended Obligation Revenue in Debt Obligation of Assessed Per Assessed June 30 Bonds Bonds Service Fund Total Value Capita Value Population 2016 $ 4,420,000 $ 6,140,000 $ 400,381 $ 10,159,619 0.28% 2,603 $ $ 3,595,785,241 3,903 2017 $ 3,825,000 $ 5,840,000 $ 400,582 $ 9,264,418 0.24% 2,377 $ $ 3,792,539,039 3,897 2018 $ 3,220,000 $ 5,530,000 $ 405,742 $ 8,344,258 0.21% 2,141 $ $ 4,024,890,925 3,897 2019 $ 2,605,000 $ 5,215,000 $ 402,335 $ 7,417,665 0.17% 1,860 $ $ 4,247,352,806 3,987 2020 $ 1,980,000 $ 4,890,000 $ 400,381 $ 6,469,619 0.14% 1,638 $ $ 4,474,292,980 3,949 2021 $ 1,340,000 $ 4,761,901 $ 393,132 $ 5,708,769 0.12% 1,419 $ $ 4,718,249,204 4,023 2022 $ 680,000 $ 4,733,004 $ 416,577 $ 4,996,427 0.10% 1,643 $ $ 4,964,613,776 3,041 2023 $ - $ 4,704,107 $ 26,805 $ 4,677,302 0.09% 1,506 $ $ 5,356,324,977 3,105 2024 $ - $ 4,190,175 $ 34,807 $ 4,155,368 0.07% 1,331 $ $ 5,723,225,521 3,122 2025 $ - $ 3,742,933 $ 34,807 $ 3,708,126 0.06% 1,216 $ $ 6,082,113,015 3,049 Source: California Department of Finance
City of Carmel-by-the-Sea Finance Department
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
General Bonded Debt Outstanding
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 13
Computation of Direct and Overlapping Debt
2024-2025 Assessed Value $ 6,082,113,015
Total Percentage Amount
Debt Applicable Applicable
Outstanding to City (1) to City
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:

Monterey Peninsula Community College District $ 90,860,629 11.763% $ 10,688,313 Carmel Unified School District 10,928,044 24.462% 2,673,180 - -
-
Total Direct and Overlapping Tax and Assessment Debt $ 101,788,673 $ 13,361,493 DIRECT AND OVERLAPPING GENERAL FUND DEBT:

Monterey County General Fund Obligations 100,144,997 6.476% 6,485,846 Monterey County Judgment Obligations 4,423,190 6.476% 286,466 Monterey County Water Resources Agency Gen Fund Debt 16,990,000 6.476% 1,100,350 City of Carmel-by-the-Sea General Fund Obligations 4,058,830 100.000% 4,058,830 Total Gross Direct and Overlapping General Fund Debt 11,931,492 TOTAL NET DIRECT AND OVERALAPPING GENERAL FUND DEBT $ 11,931,492 TOTAL DIRECT DEBT $ 4,058,830
TOTAL GROSS OVERLAPPING DEBT $ 21,234,155
TOTAL NET OVERLAPPING DEBT $ 21,234,155
GROSS COMBINED TOTAL DEBT 2
$ 25,292,985
NET COMBINED TOTAL DEBT $ 25,292,985
Notes:
(1)
(2)
Ratios to 2021-22 Assessed Valuation:

Direct Debt
Total Direct and Overlapping Tax and Assessment Debt 0.22% Total Direct Debt 0.07%
Gross Combined Total Debt 0.42%
Net Combined Total Debt 0.42%
Source: City of Carmel-by-the-Sea Finance Department
Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue, and tax allocation bonds and non-bonded capital lease obligations.

June 30, 2025
The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the district's total taxable assessed value.

ATTACHMENT 2

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ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 14
Legal Debt Margin Information
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Debt limit $ 134,841,947 $ 142,220,214 $ 150,933,410 $ 159,275,730 $ 167,785,987 $ 176,934,345 $ 186,173,017 200,862,187 214,620,957 228,079,238 Total net debt applicable to limit - - - - - - - - - -
Legal debt margin $ 134,841,947 $ 142,220,214 $ 150,933,410 $ 159,275,730 $ 167,785,987 $ 176,934,345 $ 186,173,017 $ 200,862,187 $ 214,620,957 $ 228,079,238 Total net debt applicable to the limit
as a percentage of debt limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Notes: Legal Debt Margin Calculation:

Total assessed value $ 6,082,113,015
Debt limit (3.75% of total assessed value) 228,079,238
Debt applicable to limit:

General obligation bonds -
Less: Amount available in debt service fund
Source: City of Carmel by the Sea Finance Department for repayment of bonds - Total net debt applicable to limit -
Legal debt margin $ 228,079,238
California Government Code, Section 43605, sets the debt limit at 15% of the total assessed valuation of all real personal property within the city, when assessed values were at 25% of full market value. This has changed to 100% of full market value, with the rate adjusting to 1/4 of 15%.

ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 15
Pledged-Revenue Coverage
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Sunset Center Certificates of Participation
General City Revenues $ 22,406,471 $ 21,653,778 $ 23,167,967 $ 24,061,114 $ 21,424,311 $ 26,120,715 $ 27,251,501 $ 28,794,067 $ 30,991,242 $ 33,884,277 Less: operating expenses (17,552,771) (18,716,522) (19,407,105) (20,069,662) (20,883,375) (18,148,230) (22,576,272) (20,889,985) (29,206,793) (32,766,151) Net available revenue 4,853,700 2,937,256 3,760,862 3,991,452 540,936 7,972,485 4,675,229 7,904,082 1,784,449 1,118,126 Debt service:

Principal 295,000 300,000 310,000 315,000 325,000 - - - 355,000 375,000 Interest 208,063 202,063 198,188 190,375 173,320 106,957 155,798 155,800 147,975 135,631 Total 503,063 502,063 508,188 505,375 498,320 106,957 155,798 155,800 502,975 510,631 Coverage 9.65 5.85 7.40 7.90 1.09 74.54 30.01 50.73 3.55 2.19 Pension Obligation Bonds
General City Revenues $ 22,406,471 $ 21,653,778 $ 23,167,967 $ 24,061,114 $ 21,424,311 $ 26,120,715 $ 27,251,501 $ 28,794,067 $ 30,991,242 $ 33,884,277 Less: operating expenses -17,552,771 (18,716,522) (19,407,105) (20,069,662) (20,883,375) (18,148,230) (22,576,272) (20,889,985) (29,206,793) (32,766,151) Net available revenue 4,853,700 2,937,256 3,760,862 3,991,452 540,936 7,972,485 4,675,229 7,904,082 1,784,449 1,118,126 Debt service:

Principal 585,000 595,000 605,000 615,000 625,000 640,000 660,000 680,000 - - Interest 112,443 105,131 96,206 85,120 71,892 57,666 40,414 21,080 - - Total 697,443 700,131 701,206 700,120 696,892 697,666 700,414 701,080 - - Coverage 6.96 4.20 5.36 4.91 0.78 11.43 6.67 11.27 - -
Combined coverage 4.04 2.44 3.11 2.85 3.31 3.31 5.46 9.22 3.55 2.19 Source: City of Carmel-by-the-Sea Finance Department
Details regarding the city's outstanding debt can be found in the notes to the financial statements. Operating expenses do not include interest or depreciation.

ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 16
Demographic and Economic Statistics
Last Ten Fiscal Years
Median Per Capita % of Population % of Population
Unemployment Household Family Median 25+ with High 25+ with Population1 Rate2
Income Income3Age School Diploma Bachelor's Degree
3,903 1.30% $ 81,607 $ 51,778 53.1 97.30% 63.70%
3,897 1.20% $ 87,532 $ 57,307 55.8 96.90% 64.70%
3,897 1.10% $ 87,532 $ 57,307 55.8 96.90% 64.70%
3,987 1.10% $ 87,532 $ 57,307 55.8 96.90% # 64.80%
3,949 2.80% $ 81,607 $ 51,778 61.3 97.30% 63.70%
4,023 1.80% $ 98,188 $ 53,961 59.6 82.72% 55.03%
3,041 1.00% $ 101,696 $ 55,889 65.0 95.80% 74.70%
3,105 1.20% $ 100,365 $ 76,590 63.6 95.80% 74.70%
3,122 1.30% $ 126,406 $ 84,508 65.0 95.50% 76.00%
3,049 4.30% $ 115,729 $ 87,422 68.9 95.80% 76.00%
Notes:

A For calendar year ending during the fiscal year.

B Total Personal Income is presented in thousands.

Source: 1
California Department of Finance
2 California Employment Development Department
3 U.S. Department of Commerce, Bureau of Economic Analysis 2025
2024
2018
2019
2020
2021
2022
2023
2017
Fiscal Year
Ended
June 30
2016
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%
Per Capita Personal Income
Unemployment Rate
Per Capita Personal Income and Unemployment Rate
Unemployment Rate2 Per Capita Family Income3
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 17
Principal Employers
Current Year and Nine Years Ago (1)
Percentage Percentage
Number of of Total Number of of Total
Employees Rank Employment Employees Rank Employment
Employer: .

La Playa Hotel 116 1 6.11% Unavailable 1 n/a
City of Carmel 84 2 4.42% Unavailable 2 n/a
La Bicyclette 72 3 3.79% Unavailable 3 n/a
Vesuvio 64 4 3.37% Unavailable 4 n/a
Little Napoli 63 5 3.32% Unavailable 5 n/a
Grasings 59 6 3.11% Unavailable 6 n/a
Alvarado Street Brewery & Bistro 50 7 2.63% Unavailable 7 n/a Casanova 49 8 2.58% Unavailable 8 n/a
Il Fornaio 48 9 2.53% Unavailable 9 n/a
Terry's Lounge 48 9 2.53% Unavailable 10 n/a
Totals 653 34.37% - -
Total employment 1,900 na
Notes: Due to the small size of the City, employee counts for prior years were not available through a database or third party.

Prior year information will be included as the City reports this information in forthcoming years.

Source: City of Carmel-by-the-Sea Finance Department
2025 2016
Fiscal Year Ended June 30
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 18
Number of City Employees by Department
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Departments:

General Government 17.60 18.60 16.20 15.70 15.66 15.00 15.00 15.00 15.00 15.00 Public Safety 30.70 30.70 31.70 32.00 32.00 25.00 24.00 24.00 24.00 22.00 Public Works 18.00 21.00 21.00 21.00 21.00 15.00 18.00 20.00 21.00 21.00 Community Activities 1.70 1.50 1.40 1.50 1.50 0.50 1.00 0.50 0.50 0.50 Library 12.40 12.40 12.80 14.00 13.98 5.50 11.00 10.50 10.50 14.50 Community Plng. and Bldg. 7.00 7.00 9.00 9.00 9.00 7.00 11.00 10.00 9.00 11.00 Totals 87.40 91.20 92.10 93.20 93.14 68.00 80.00 80.00 80.00 84.00 Source: City of Carmel-by-the-Sea Finance Department
0 10
20 30
40 50
60 70
80 90
100
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Fiscal Year
Total Number of City Employees
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 19
Operating Indicators By Function
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Function:

Police
Calls for service 14,360 13,701 12,674 13,252 11,385 8,778 8,959 9,709 10,587 10,602 Fire
Calls for service 925 856 843 1,006 803 754 794 951 821 924 Inspections 636 346 504 112 184 107 88 135 93 247
Public Works
Potholes patched 18 52 25 20 25 50 35 40 29
Tree permits Issued 166 90 177 216 183 305 242 183
Calls for service 300 250 500 750 433 1,455 6,935 7,834 7,140 Road asphalt used 48 34 28 32 44 28 43 62
Trees planted 32 82 82 59 57 139 254 216 92
Library
Circulation of library materials 114,137 106,976 99,802 104,456 104,456 84,810 55,414 127,777 164,719 156,306 Reference questions 20,233 19,252 16,276 15,789 15,789 13,579 9,062 14,199 16,074 20,622 Community Activities
Special Event permits 30 81 75 42 35 5 31 55 24 14
Community Development
Building Permits 422 416 580 590 677 446 411 458 502 497 Architectural Approvals 524 468 440 452 402 280 171 163 181 200 Administration
Business Licenses (All businesses) 1472 1615 1836 2187 2276 1,984 1,884 1,834 1,849 2,122 Public Records Requests (Calendar Yr) 127 160 184 187 199 248 101 215 125 118 Source: City of Carmel-by-the-Sea Departments
ATTACHMENT 2

City of Carmel-by-the-Sea TABLE 20
Capital Asset Statistics By Function
Last Ten Fiscal Years
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Function:

General Government
Number of buildings 1 1 1 1 1 1 1 1 1 1
Public Safety
Police
Stations 1 1 1 1 1 1 1 1 1 1
Parking meters 1 1 1 1 1 1 1 1 1 1
Fire stations 1 1 1 1 1 1 1 1 1 1
Public Works
Miles of paved streets 27 27 27 27 27 27 27 27 27 27
Parking lots 3 3 3 3 3 3 3 3 3 3
Fleet Vehicles (City-wide) 43 43 43 45 41 42 44 44 48 46 Recreation
Parks 10 10 10 10 10 10 10 10 10 10
Playgrounds 1 1 1 1 1 1 1 1 1 1
Tennis courts 2 2 2 2 2 2 2 2 2 2
Library
Library facilities 2 2 2 2 2 2 2 2 2 2
Source: City of Carmel-by-the-Sea Departments
ATTACHMENT 2

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ATTACHMENT 2

OTHER INDEPENDENT
AUDITOR’S REPORTS
ATTACHMENT 2

16450 Monterey Road, Ste. #5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
To the Honorable Mayor and Members of the
City Council of the City of Carmel-By-The-Sea
Carmel-by-the-Sea, California
We have audited, 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, the financial statements of the City of Carmel-By-The-Sea (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, and have issued our report thereon dated March 17, 2026.

Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses and significant deficiencies may exist that were not identified.

Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not ATTACHMENT 2

16450 Monterey Road, Ste. #5, Morgan Hill, CA 95037
Tel: 408-217-8749 • E-Fax: 408-872-4159
[email protected] • www.cnallp.com
express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

March 17, 2026
Morgan Hill, California
ATTACHMENT 2

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[email protected] • www.cnallp.com
Governance Letter
For the Fiscal Year Ended June 30, 2025
To the City Council of the
City of Carmel-By-The-Sea
We have audited the basic financial statements of the City of Carmel-By-The-Sea as of and for the year ended June 30, 2025, and have issued our report thereon dated March 16, 2026. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility under Generally Accepted Auditing Standards and Government Auditing Standards
As communicated in our engagement letter, our responsibility, as described by professional standards, is to form and express an opinion(s) about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.

Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the City of Carmel-By-The-Sea solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process.

However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.

Other Information in Documents Containing Audited Financial Statements Pursuant to professional standards, our responsibility as auditors for other information in documents containing City of Carmel-By-The-Sea’s audited financial statements does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information.

Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements.

ATTACHMENT 3

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Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, and our firm have complied with all relevant ethical requirements regarding independence.

Significant Risks Identified
We did not identify any significant risks that required special audit consideration.

Qualitative Aspects of the Authority’s Significant Accounting Practices Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City of Carmel-By-The-Sea is included in Note 1 to the financial statements. There have been no initial selection of accounting policies and no material changes in significant accounting policies or their application during June 30, 2025. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on 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 markedly from management’s current judgments.

The most sensitive accounting estimates affecting the financial statements include actuarial assumptions included in employee retirement plans that impact pension and other postemployment balances reported in the financial statements, and net present value calculations for right of use assets.

We evaluated the key factors and assumptions used to develop the identified estimates and determined that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

Financial Statement Disclosures
Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting City of Carmel-By-The-Sea’s financial statements relate to cash and investments, capital assets, pensions, and long-term liabilities.

ATTACHMENT 3

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Significant Unusual Transactions
For purposes of this communication, professional standards require us to communicate to you significant unusual transactions identified during our audit. No significant unusual transactions were identified as a result of our audit procedures that required the attention of management.

Identified or Suspected Fraud
We did not identify nor obtain information that indicates that fraud may have occurred.

Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. There were no material uncorrected financial statement misstatements identified.

In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures.

There were no material corrected financial statement misstatements identified as a result of our audit.

Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City of Carmel-By-The-Sea’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit.

Circumstances that Affect the Form and Content of the Auditor’s Report For purposes of this letter, professional standards require that we communicate any circumstances that affect the form and content of our auditor’s report. There were no circumstances that affect the form and content of our auditor’s report.

Representations Requested from Management
We have requested certain written representations from management, which are included in the attached letter dated March 16, 2026.

Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations ATTACHMENT 3

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with other accountants regarding auditing and accounting matters.

Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the City of Carmel-By-The-Sea, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the City, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City of Carmel-By-The-Sea’s auditors.

This report is intended solely for the information and use of the Board and management of the City of Carmel-By-The-Sea and is not intended to be and should not be used by anyone other than these specified parties.

March 16, 2026
Morgan Hill, California
ATTACHMENT 3

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[email protected] • www.cnallp.com
Management Letter
For the Fiscal Year Ended June 30, 2025
City of Carmel-By-The-Sea
City Council and Management
Carmel-By-The-Sea, California
In planning and performing our audit of the financial statements of City of Carmel-by-the-Sea as of and for the year ended June 30, 2025, 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, we considered City of Carmel-by-the-Sea’s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of City of Carmel-by-the-Sea’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Carmel-by-the-Sea’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A reasonable possibility exists when the likelihood of an event occurring is either reasonably possible or probable as defined as follows:
 Reasonably possible: The chance of the future event or events occurring is more than remote but less than likely.
 Probable: The future event or events are likely to occur.

Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this communication, which is an integral part of our audit, is to describe, for management and those charged with governance, the scope of our testing of internal control and ATTACHMENT 4

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the results of that testing. Accordingly, this communication is not intended to be and should not be used for any other purpose.

Respectfully,
March 16, 2026
Morgan Hill, California
ATTACHMENT 4

CITY OF CARMEL-BY-THE-SEA
City Council
Staff Report
March 24, 2026

ORDERS OF BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Brandon Swanson, Acting City Administrator APPROVED BY: Brandon Swanson, Acting City Administrator SUBJECT: Receive a presentation on the updated Council Strategic Priorities list following the January 22nd workshop, and provide direction to staff
RECOMMENDATION:

Receive a presentation on the updated Council Strategic Priorities list following the January 22nd workshop and provide direction to staff on priorities for the calendar year, 2026.

BACKGROUND / SUMMARY:

On January 22, 2026, the City Council held their annual workshop to review their list of strategic priority projects. This list is intended to provide the City Administrator with guidance on projects that should be completed or see meaningful progress made in the calendar year. The format of the meeting allows feedback from the public during the entire workshop. Throughout the meeting, Councilmembers provided direction about adding and removing projects, and feedback on the level of priority for a handful of projects (level 1, 2 or 3). The results of the January workshop have been marked up on the attached Strategic Priorities Spreadsheet so that the changes can be tracked (Attachment 1). In summary, the following actions were taken:
• 16 priority projects added
• 1 priority project canceled
• 6 priority projects marked as “Complete” and removed from the list • 5 titles modified to better represent Council’s objectives

At their February 3rd meeting, Council was presented with a marked-up list which captured their direction from that January workshop and asked to finalize the list, item by item. Due to a full agenda, Council was not able to make it through the entire list, and directed staff to return at an upcoming meeting to complete the task.

What is Council Being Asked to do on March 24th?
Council has been presented with a marked-up list which shows where decisions were made at the February 3rd meeting, and where direction is still needed. Council will begin at section "S-4 Preserve the Village Charachter". As a reminder, Council is being asked to review the remaining items on this list, and be prepared to:

1. Clarify any changes which were not accurately captured by staff

2. Assign a “priority level” to every project on the list – Level 1, 2 or 3. Level 1 being the highest.

3. Move some items from the active list to “Future Projects” to create a manageable list for 2026.
a. NOTE: The City Administrator’s recommendation is that the current list is too long for every item to be completed or see meaningful progress in 2026.

Council has also been provided with a “clean” version of the list which incorporates all the draft changes noted in the markup version (Attachment 2). This clean version is only being offered as a convenience for Council as a worksheet to prepare notes for the February 3rd meeting. It is not meant to imply that the draft changes are finalized.

Some Notes about the Priorities List
To assist in reviewing, here are a few notes about the list:
• There is a key at the top of the list showing how the colors relate to changes:
o Green = new item
o Pink = complete item
o Yellow = modified title
o Red = cancelled project
• For any item which the Council provided a “priority level” at the workshop, that number has been added in BOLD. The rest of the priorities are left blank for Council to fill in.
• Items elevated from the “future projects” list include a note showing which section they moved to.

Capacity Discussion
The ability to complete projects on the priorities list is directly related to the City’s