APPENDIX
Fiscal Policies
Investment Policies
Citywide Reserve Policy – Fiscal Health
Plan
Financial Reporting and Transfer
Authority Policy
City Debt Policy
Debt Administration
Service Impacts
Accounting Systems and Budgetary
Control
List of Acronyms
Glossary
FISCAL POLICIES
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Fiscal Policies
This section of the budget document reiterates the fiscal policies that were reviewed, acknowledged, or approved/ adopted by the City Council. These policies form the overall framework within which the operating budget was formulated. The fiscal policies, most of which are already codified in one form or another, are not considered new or controversial, but are summarized here to assist you to better understand the basis for the resource allocation decisions that were made.
General
1. The City’s financial assets will be managed in a sound and prudent manner in order to ensure the continued viability of the organization.
2 A comprehensive operating and capital budget for all City funds will be developed annually and presented to the City Council for approval. The purpose of the annual budget will be to:
a) Identify community needs for essential services.
b) Identify the programs and specific activities required to provide these essential services. c) Establish program policies and goals that define the nature and level of program services required. d) Identify alternatives for improving the delivery of program services. e) Identify the resources required to fund identified programs and activities and enable accomplishment of program objectives.
f) Set standards to facilitate the measurement and evaluation of program performance. 3 The City’s annual operating budget will be balanced whereby planned expenditures do not exceed anticipated revenues.
4 Recurring revenues will fund recurring expenditures. One-time revenues will be used for capital, reserve augmentation, or other non-recurring expenditures.
5. Accounting systems will be maintained in accordance with Generally Accepted Accounting Principles. 6 Investment policy and practice will be in accordance with State statues that emphasize safety and liquidity over yield, including quarterly status reports to the City Council. ( Council Policy) 7 City operations will be managed, and budgets prepared with the goal of maintaining an available fund balance in the General Fund of no less than fifteen percent of the General Fund operating budget. (Council Policy) 8 General Fund fiscal status reports reflecting comparisons of actual and projected performance with budget allocations for both revenue and expenditures will be presented to the City Council on a quarterly basis. ( City Charter)
Revenue
1. The City will endeavor to maintain a diversified and stable revenue base in order to minimize the impact to programs from short-term economic fluctuations.
2 Revenue projections will be maintained for the current year and four future fiscal years, and estimates will be based on a conservative, analytical, and objective process. 3 In order to maintain flexibility, except as required by law or funding source, the City will avoid earmarking any restricted revenues for specific purpose or program.
4 The City has established user fees to best ensure that those who use a proprietary service pay for that service in proportion to the benefits received. With few exceptions, such as those services provided for low-income residents, fees have been set to enable the City to recover the full cost of providing those services. ( Citywide Cost Recovery Policy, Council Policy Number 159-03)
5. User fees will be reviewed and updated on an ongoing basis to ensure that program costs continue to be recovered and that the fees reflect changes in levels of service delivery. (Master Fee Schedule) City of Chula Vista
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6 The City will recover the cost of new facilities and infrastructure necessitated by new development consistent with State law and the City’s Growth Management Program. Development Impact Fees will be closely monitored and updated to ensure that they are maintained at a level adequate to recover costs. ( GMOC Ordinance) 7 When considering new development alternatives, the City will attempt to determine the fiscal impact of proposed projects, annexations, etc. and ensure that mechanisms are put in place to provide funding for any projected negative impacts on City operations. ( GMOC Ordinance)
Expenditures
1. Budgetary control will be exercised at the Department/ category level, meaning that each department is authorized to spend up to the total amount appropriated for that department within the expenditure categories of Personnel Costs, Supplies & Services, Other Charges, Utilities, and Capital. Transfers of appropriations between expenditure categories of up to $75,000 may be approved by the City Manager. Transfers of appropriations between expenditure categories in excess of $75,000, between departments, and transfers from CIP projects require City Council approval. ( City Charter & Council Policy)
2 Appropriations, other than for capital projects, remaining unspent at the end of any fiscal year will be canceled and returned to Available Fund Balance with the exception of any appropriations encumbered as the result of a valid purchase order or as approved for a specific project or purpose by the City Council or the City Manager.
Appropriations for capital projects will necessarily be carried over from year to year until the project is deemed to be complete ( Council Policy)
3 The City will establish and maintain equipment replacement and facility maintenance funds as deemed necessary to ensure that monies are set aside and available to fund ongoing replacement needs. 4 The City will attempt to compensate non-safety employees at rates above the middle of the labor market as measured by the median rate for similar jurisdictions. ( Council Policy) Capital Improvement Program ( CIP)
1. Major capital projects will be included in a CIP Budget reflecting a five- year period. The CIP budget will be updated annually and presented to City Council for approval. Resources will be formally appropriated ( budgeted) for the various projects on an annual basis in accordance with the five- year plan.
INVESTMENT POLICIES
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Investment Policies
1.0 Purpose:
This “ Investment Policy and Guidelines” ( the “ Investment Policy”) Policy is intended to provide guidelines for the prudent investment of the City of Chula Vista’s (the “City”) cash balances, and outline policies to assist in maximizing the efficiency of the City’ s cash management system, while meeting the daily cash flow demands of the City.
2.0 Policy:
The investment practices and policies of the City of Chula Vista are based upon state law and prudent money management
3.0 Scope:
This Investment Policy applies to all financial assets of the City of Chula Vista, as indicated in 3. 1 below. These funds are accounted for in the City’s Comprehensive Annual Financial Report.
3.1 Funds:
The Director of Finance/ Treasurer is responsible for investing the unexpended cash in the City Treasury for all funds, except for the employee’ s retirement funds, which are administered separately, and those funds which are managed separately by trustees appointed under indenture agreements. The Director of Finance/ Treasurer will strive to maintain the level of investment of this cash as close as possible to 100%. These funds are described in the City’s annual financial report and include:
General Fund
Special Revenue Funds
Capital Project Funds
Enterprise Funds
Fiduciary Funds
Any new fund created by the legislative body, unless specifically exempted This Investment Policy applies to all transactions involving the financial assets and related activity of the foregoing funds
Bond proceeds shall be invested in the investments permitted by the applicable bond documents. If the bond documents are silent as to the permitted investments, the bond proceeds will be invested in the securities permitted by this Policy. Notwithstanding the other provisions of this Policy, the percentage limitations listed elsewhere in this Policy do not apply to bond proceeds
4.0 Prudence:
The standard of prudence to be used by the Director of Finance/ Treasurer shall be the “prudent investor standard”.
This shall be applied in the context of managing an overall portfolio. The “ prudent investor standard” is applied to local agencies, pursuant to California Government Code Section 53600. 3 which provides, in pertinent part:
all governing bodies of local agencies or persons authorized to make investment decisions on behalf of those local agencies investing public funds pursuant to this chapter are trustees and therefore fiduciaries subject to the prudent investor standard. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency…”
4.1 Personal Responsibility:
The Director of Finance/ Treasurer, Assistant Director of Finance, Treasury Manager and Finance Manager as investment officers acting in accordance with written procedures and the Investment Policy and exercising due diligence, shall be relieved of personal responsibility for an individual security’ s credit risk or market price changes, City of Chula Vista
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provided deviations from expectations are reported to the City Council in a timely fashion and appropriate action is taken to control adverse developments.
5.0 Objective:
Consistent with this aim, investments are made under the terms and conditions of California Government Code Section 53600, et seq. Criteria for selecting investments and the absolute order of priority are:
5.1 Safety:
Safety of principal is the foremost objective of the investment program. Investments of the City of Chula Vista shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, diversification is required in order that potential losses on individual securities do not exceed the income generated from the remainder of the portfolio
5.2 Liquidity:
The City of Chula Vista’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated and to maintain compliance with any indenture agreement, as applicable. Liquidity is essential to the safety of principal.
5.3 Return on Investments:
The City of Chula Vista’s investment portfolio shall be designed with the objective of attaining a market- average rate of return throughout budgetary and economic cycles ( market interest rates), within the City’s Investment Policy’s risk parameters and the City’s cash flow needs. See also Section 16. 0.
6.0 Delegation of Authority:
The City Council delegates responsibility for the investment program to the Director of Finance/ Treasurer for a period of one year. Subject to review, the City Council may renew the delegation of authority each year. The Director of Finance/ Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls and written procedures to regulate the activities of subordinate officials. The responsibility for the day- to- day investment of City funds will be delegated to the Assistant Director of Finance or their designee. The Director of Finance/ Treasurer may delegate day-to-day investment decision making and execution authority to an investment advisor.
The advisor shall follow the Investment Policy and such other written instructions as are provided.
7.0 Ethics and Conflicts of Interest:
In addition to state and local statutes relating to conflicts of interest, all persons involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Employees and investment officers, including investment advisors, are required to file annual disclosure statements as required for “ public officials who manage public investments” [ as defined and required by the Political Reform Act and related regulations, including Government Code Sections 81000, et seq., and the rules, regulations and guidelines promulgated by California’ s Fair Political Practices Commission ( FPPC)].
8.0 Authorized Financial Dealers and Institutions:
For any transactions executed by the City, the City’s Director of Finance/ Treasurer will maintain a list of the financial institutions and brokers/ dealers authorized to provide investment and depository services and will perform an annual review of their financial condition. The City will utilize Moody’ s Securities or other such services to determine financially sound institutions with which to do business. The City shall annually send a copy of the current Investment Policy to all financial institutions and brokers/ dealers approved to do business with the City.
As far as possible, all money belonging to, or in the custody of, a local agency, including money paid to the City’s Director of Finance/ Treasurer or other official to pay the principal, interest, or penalties of bonds, shall be deposited for safekeeping in state or national banks, savings associations, federal associations, credit unions, or federally insured industrial loan companies in this state selected by the City’s Director of Finance/ Treasurer; or may be invested in the investments set forth in Section 9.0. To be eligible to receive local agency money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than City of Chula Vista
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satisfactory” in its most recent evaluation by the appropriate federal financial supervisory agency of its record of meeting the credit needs of California’ s communities, including low- and moderate- income neighborhoods.
To provide for the optimum yield in the investment of City funds, the City’s investment procedures shall encourage competitive bidding on transactions. Any transactions not executed directly with the issuer shall be made with approved brokers/ dealers. In order to be approved by the City, the broker/ dealer must meet the following criteria: ( i) the broker/ dealer must be a “primary” dealer or regional broker/ dealer that qualifies under Securities and Exchange Commission Rule 15C3- 1 (Uniform Net Capital Rule); (ii) the broker/ dealer must be experienced in institutional trading practices and familiar with the California Government Code as related to investments appropriate for the City; and iii) all other applicable criteria, as may be established in the investment procedures. All brokers/ dealers and financial institutions who desire to become qualified bidders for investment transactions must submit documents relative to eligibility including U4 form for the broker, proof of Financial Industry Regulatory Authority ( FINRA) certification and a certification of having read and understood the City’ s Investment Policy and agreeing to comply with the Investment Policy. The City’s Director of Finance/ Treasurer shall determine if they are adequately capitalized ( i.e., minimum capital requirements of $10,000,000 and five years of operation).
If the City has an investment advisor, the investment advisor may use its own list of authorized issuers and broker/ dealers to conduct transactions on behalf of the City
9.0 Authorized & Suitable Investments:
The City is authorized by California Government Code Section 53600, et. seq., to invest in specific types of securities.
Where this section specifies a percentage limitation for a particular security type, that percentage is applicable only on the date of purchase Credit criteria listed in this section refers to the credit rating at the time the security is purchased. If an investment’ s credit rating falls below the minimum rating required at the time of purchase, the Director of Finance/ Treasurer will perform a timely review and decide whether to sell or hold the investment.
Investments not specifically listed below are deemed inappropriate and prohibited:
A. BANKERS’ ACCEPTANCES. A maximum of 40% of the total portfolio may be invested in bankers’ acceptances.
The maximum maturity is 180 days. No more than 30% of the agency’s moneys may be invested in the bankers’ acceptances of any one commercial bank. See Government Code Section 53601( g).
B NEGOTIABLE CERTIFICATES OF DEPOSIT. A maximum of 30% of the total portfolio may be invested in negotiable certificates of deposit ( NCD’ s). The maximum maturity of a NCD issue shall be 5 years. These are issued by commercial banks and thrift institutions against funds deposited for specified periods of time and earn specified or variable rates of interest. Negotiable certificates of deposit ( NCD’ s) differ from other certificates of deposit by their liquidity. NCD’s are traded actively in secondary markets. See Government Code Section 53601( i).
C COMMERCIAL PAPER. A maximum of 40% of the total portfolio may be invested in commercial paper. No more than 10% of the City’s total investment assets may be invested in the commercial paper and the mediumterm notes of any single issuer. The maximum maturity is 270 days. Commercial paper of prime quality of the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either paragraph ( 1) or paragraph ( 2):
1) The entity meets the following criteria:
a Is organized and operating in the United States as a general corporation. b Has total assets in excess of five hundred million dollars ($ 500, 000, 000). c Has debt other than commercial paper, if any, that is rated in a rating category of “A” or higher, or the equivalent, by a NRSRO.
2) The entity meets the following criteria:
a Is organized within the United States as a special purpose corporation, trust, or limited liability company. b Has program wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond
c Has commercial paper that is rated in a rating category of “A-1” or higher, or the equivalent, by a NRSRO.
See Government Code Section 53601( h).
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D. BONDS ISSUED BY THE CITY OR ANY LOCAL AGENCY WITHIN THE STATE OF CALIFORNIA. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601( a) and 53601( e).
E OBLIGATIONS OF THE UNITED STATES TREASURY. United States Treasury Notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest. There is no limit on the percentage of the portfolio that can be invested in this category.
See Government Code Section 53601( b).
F FEDERAL AGENCIES. Federal agency or United States government- sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government- sponsored enterprises. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601( f).
G REPURCHASE AGREEMENT, maximum term 1 year. Investments in repurchase agreements may be made, on any investment authorized in this section, when the term of the agreement does not exceed 1 year. A Master Repurchase Agreement must be signed with the bank or broker/ dealer who is selling the securities to the City.
There is no limit on the percentage of the total portfolio that can be invested in this category. See Government Code Section 53601( j).
H. REVERSE- REPURCHASE AGREEMENTS ( Requires Council approval for each transaction). Per Government Code Section 53601( j), reverse repurchase agreements or securities lending agreements may be utilized only when all of the following conditions are met:
a) The security to be sold on reverse repurchase agreement or securities lending agreement has been owned and fully paid for by the local agency for a minimum of 30 days prior to sale b) The total of all reverse repurchase agreements and securities lending agreements on investments owned by the local agency does not exceed 20% of the base value of the total portfolio. c) The agreement does not exceed aterm of 92 days, unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security. d) Funds obtained or funds within the pool of an equivalent amount to that obtained from selling a security to a counter party by way of a reverse repurchase agreement or securities lending agreement, shall not be used to purchase another security with a maturity longer than 92 days from the initial settlement date of the reverse repurchase agreement or securities lending agreement, unless the reverse repurchase agreement or securities lending agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period between the sale of a security using a reverse repurchase agreement or securities lending agreement and the final maturity date of the same security.
e) Investments in reverse repurchase agreements, securities lending agreements, or similar investments in which the local agency sells securities prior to purchase with a simultaneous agreement to repurchase the security shall only be made with primary dealers of the Federal Reserve Bank of New York or with a nationally or state-chartered bank that has or has had a significant banking relationship with a local agency. f) For purposes of this policy, “significant banking relationship” means any of the following activities of a bank:
i Involvement in the creation, sale, purchase, or retirement of a local agency’s bonds, warrants, notes, or other evidence of indebtedness.
ii Financing of a local agency’s activities.
iii Acceptance of a local agency’s securities or funds as deposits.
I. MEDIUM- TERM CORPORATE NOTES. A maximum of 30% of the total portfolio may be invested in medium- term corporate notes, with a maximum remaining maturity of five years or less. Notes eligible for investment shall be rated in a rating category of “A,” its equivalent or better by a NRSRO. See Government Code Section 53601( k). No more than 10% of the City’s total investment assets may be invested in the commercial paper and the mediumterm notes of any single issuer J. NON-NEGOTIABLE CERTIFICATES OF DEPOSIT. The maximum maturity is 5 years. Certificates of deposit are required to be collateralized as specified under Government Code Section 53630 et seq. The City, at its discretion, may waive the collateralization requirements for any portion that is covered by Federal Deposit Insurance Corporation ( FDIC) insurance. There is no limit on the percentage of the portfolio that can be invested in this category
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K. OBLIGATIONS OF THE STATE OF CALIFORNIA. Including bonds payable solely out of revenues from a revenue producing property owned, controlled or operated by the state, or by a department, board, agency or authority of the state. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601( d).
L. OBLIGATIONS OF THE OTHER 49 STATES. Including bonds payable solely out of revenues from a revenue producing property owned, controlled or operated by any of these states, or by a department, board, agency or authority of the state. The maximum maturity is 5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601( d).
M. MONEY MARKET FUNDS. A maximum of 20% of the total portfolio may be invested in money market funds. No more than 10% of the agency’s funds may be invested in shares of beneficial interest of any one mutual fund.
Local agencies may invest in “shares of beneficial interest” issued by diversified management companies which invest in the securities and obligations as authorized by California Government Code Section 53601, subdivisions a) to (k), inclusive, and subdivisions ( m) to (q), inclusive. They must have the highest rating from two NRSRO’ s or have retained an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years of experience managing money market mutual funds and with assets under management in excess of $500,000,000. The purchase price of the shares may not include commission.
See Government Code Section 53601( l).
N San Diego County Treasurer’ s Pooled Money Fund. Also known as the San Diego County Investment Pool, the pool is a local government money fund created to invest the assets of the County of San Diego and other public agencies located within the County. The three primary objectives of the County Pool are to safeguard principal; to meet liquidity needs of Pool participants; and to achieve an investment return on the funds within the guidelines of prudent risk management. Investment in the County Pool is highly liquid, and the City may invest with no portfolio percentage limit. See Government Code Section 27133.
O. THE LOCAL AGENCY INVESTMENT FUND ( LAIF). LAIF is a special fund of the California State Treasury through which any local government may pool investments. The City may invest up to $75 million in this fund. Investments in LAIF are highly liquid and may be converted to cash within 24 hours. See Government Code Section 16429. 1.
P SHARES OF BENEFICIAL INTEREST ISSUED BY A JOINT POWERS AUTHORITY ( Local Government Investment Pools [ LGIP]). Per Government Code Section 53601( p), there is no limit on the percentage of the portfolio that can be invested in this category. LGIP’s organized pursuant to Government Code Section 6509. 7 that invests in the securities and obligations authorized in subdivisions ( a) to (q) of California Government Code Section 53601, inclusive. Each share will represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. To be eligible under this section the joint powers authority issuing the shares will have retained an investment adviser that meets all of the following criteria:
The adviser is registered or exempt from registration with the Securities and Exchange Commission.
The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions ( a) to (q) Government Code Section 53601, inclusive.
The adviser has assets under management in excess of five hundred million dollars ($ 500, 000, 000).
Q. ASSET BACKED SECURITIES ( ABS). A maximum of 20% of the total portfolio may be invested in ABS. The maximum maturity is five years. Securities eligible for investment under this subdivision not issued or guaranteed by issuers identified in subdivision E and F, shall be rated in a rating category of “ AA” or its equivalent or better by an NRSRO. ABS constitutes a mortgage pass-through security, collateralized mortgage obligation, mortgagebacked or other pay-through bond, equipment lease-backed certificate, consumer receivable pass- through certificate, or consumer receivable- backed bond. See Government Code Section 53601( o).
R. SUPRANATIONALS. A maximum of 30% of the portfolio may be invested in supranationals. The maximum maturity is five years. Securities eligible for purchase under this subdivision shall be United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by the International Bank for Reconstruction and Development, International Finance Corporation, or Inter-American Development Bank that are eligible for purchase and sale within the United States. Investments under this subdivision shall be rated in a rating category of “AA,” its equivalent or better by an NRSRO. See Government Code Section 53601( q).
S PLACEMENT SERVICE DEPOSITS. A maximum of 30% of the total portfolio may be invested in placement service deposits. The maximum maturity is 5 years. Deposits placed through a deposit placement service shall meet the requirements under Government Code Section 53601. 8 and 53635. 8. The full amount of the principal and City of Chula Vista
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the interest that may be accrued during the maximum term of each certificate of deposit shall at all times be insured by federal deposit insurance
T COLLATERALIZED BANK DEPOSITS. Notes, bonds, or other obligations that are at all times secured by a valid first priority security interest in securities of the types listed by California Government Code Section 53651 as eligible securities for the purpose of securing local agency deposits having a market value at least equal to that required by California Government Code Section 53652 for the purpose of securing local agency deposits. The securities serving as collateral shall be placed by delivery or book entry into the custody of a trust company or the trust department of a bank that is not affiliated with the issuer of the secured obligation. The maximum maturity is5 years. There is no limit on the percentage of the portfolio that can be invested in this category. See Government Code Section 53601( n) and 53630 et seq.
9.1 Investment Pools:
The City’s Director of Finance/ Treasurer or designee shall be required to investigate all local government investment pools and money market mutual funds prior to investing and performing at least a quarterly review thereafter while the City is invested in the pool or the money market fund. LAIF is authorized under provisions in Section 16429. 1 of the California Government Code as an allowable investment for local agencies even though some of the individual investments of the pool are not allowed as a direct investment by a local agency.
10.0 Portfolio Adjustments:
Should any investment listed in section 9.0 exceed a percentage- of-portfolio limitation due to an incident such as fluctuation in portfolio size, the affected securities may be held to maturity to avoid losses. When no loss is indicated, the Director of Finance/ Treasurer shall consider reconstructing the portfolio basing his or her decision on the expected length of time the portfolio will be unbalanced. If this occurs, the City Council shall be notified.
11.0 Collateralization:
Under provisions of the California Government Code, California banks, and savings and loan associations are required to secure the City’s deposits by pledging letters of credit issued by the Federal Home Loan Bank of San Francisco with a value of 105% of the principal and accrued interest, government securities with a value of 110% of principal and accrued interest or first trust deed mortgage notes having a value of 150% of the City’ s total deposits. Collateral will be handled as required by the California Government Code. The Director of Finance/ Treasurer, at his or her discretion, may waive the collateral requirement for deposits that are fully insured up to $250,000 by the Federal Deposit Insurance Corporation.
The market value of securities that underlay a repurchase agreement shall be valued at 102% or greater of the funds borrowed against those securities and the value shall be adjusted no less than quarterly. Since the market value of the underlying securities is subject to daily market fluctuations, the investments in repurchase agreements shall be in compliance ifthe value of the underlying securities is brought back up to 102% no later than the next business day.
Collateral will always be held by an independent third party. A clearly marked evidence of ownership ( safekeeping receipt) must be supplied to the City and retained. The right of collateral substitution is granted.
12.0 Safekeeping and Custody:
All City investments shall identify the City of Chula Vista as the registered owner, and all interest and principal payments and withdrawals shall indicate the City of Chula Vista as the payee. All securities shall be safe kept with the City itself or with a qualified financial institution, contracted by the City as a third party. All agreements and statements will be subject to review annually by external auditors in conjunction with their audit. In the event that the City has a financial institution hold the securities, a separate custodial agreement shall be required. All deliverable securities shall be acquired by the safekeeping institution on a “Delivery- Vs-Payment” ( DVP) basis. For Repurchase Agreements, the purchase may be delivered by book entry, physical delivery or by third-party custodial agreement consistent with the Government Code. The transfer of securities to the counter party bank’s customer book entry account may be used for book entry delivery.
13.0 Diversification:
The City’s investment portfolio will be diversified to avoid incurring unreasonable and avoidable risks associated with concentrating investments in specific security types, maturity segment, or in individual financial institutions.
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No more than 5% of the investment portfolio shall be in securities of any one issuer except for U.S. Treasuries, U.S.
Government Agency issues, and investment pools such as LAIF, the San Diego County Pool, money market funds, Joint Power Authorities ( JPA’s), and local government investment pools ( LGIP’s).
A. Credit risk, defined as the risk of loss due to failure of the insurer of a security, shall be mitigated by investing in those securities with an “A” or above rating and approved in the Investment Policy and by diversifying the investment portfolio so that the failure of any one issuer would not unduly harm the City’s cash flow.
B Market risk, defined as the risk of market value fluctuations due to overall changes in the general level of interest rates, shall be mitigated by implementing a long-term investment strategy. It is explicitly recognized herein, however, that in a diversified portfolio, occasional measured losses are inevitable and must be considered within the context of overall investment return. The City’s investment portfolio will remain sufficiently liquid to enable the City to meet all operating requirements which might be reasonably anticipated.
14.0 Maximum Maturities:
To the extent possible, the City will attempt to match its investments with anticipated cash flow requirements.
The City will not directly invest in securities maturing more than five ( 5) years from the date of purchase, unless the legislative body has granted express authority to make that investment either specifically, or as a part of an investment program approved by the City Council at least three ( 3) months prior to the investment.
15.0 Internal Control:
The Director of Finance/ Treasurer shall establish a system of internal controls designed to prevent loss of public funds due to fraud, employee error, or misrepresentation by third parties. No investment personnel, including an investment advisor, may engage in an investment transaction except as provided for under the terms of this Investment Policy and the procedure established by the Director of Finance/ Treasurer.
The external auditors shall annually review the investments with respect to the Investment Policy. This review will provide internal control by assuring compliance with policies and procedures for the investments that are selected for testing. Additionally, account reconciliation and verification of general ledger balances relating to the purchasing or maturing of investments and allocation of investments to fund balances shall be performed by the Finance Department and approved by the Director of Finance/ Treasurer. To provide further protection of City funds, written procedures prohibit the wiring of any City funds without the authorization of at least two of the following six designated City staff:
1. Director of Finance/ Treasurer
2 Assistant Director of Finance
3 Treasury Manager
4 Finance Manager
5. Revenue Manager
6 Budget and Analysis Manager
16.0 Performance Standards:
The investment portfolio shall be managed to attain a market- average rate of return throughout budgetary and economic cycles, taking into account the City’s investment risk constraints and cash flow. Investment return becomes a consideration only after the basic requirements of investment safety and liquidity have been met. In evaluating the performance of the City’s portfolio in complying with this policy, the City shall establish an appropriate performance benchmark and compare the return of its portfolio to the return of the benchmark.
17.0 Reporting:
The Director of Finance/ Treasurer shall submit a quarterly investment report to the City Council and City Manager within 45 days following the end of each quarter. This report will include the following elements:
Type of investment
Institutional issuer
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Purchase date
Date of maturity
Amount of deposit or cost of the investment
Face value of the investment
Current market value of securities and source of valuation Rate of interest
Interest earnings
Statement relating the report to its compliance with the Statement of Investment Policy or the manner in which the portfolio is not in compliance
Statement on availability of funds to meet the next six month’s obligations Monthly and year-to-date budget amounts for interest income Percentage of portfolio by investment type
Days to maturity for all investments
Comparative report on interest yields
Monthly transactions
Compare portfolio total return to market benchmark total return In addition, a commentary on capital markets and economic conditions may be included with the report.
18.0 Investment Policy Review and Adoption:
This Investment Policy shall be reviewed at least annually by the Director of Finance/ Treasurer to ensure its consistency with the overall objective of preservation of principal, liquidity, and return, and its relevance to current law and financial and economic trends. Each fiscal year, the Finance Director shall provide a copy of the City’s current Investment Policy and Guidelines to the City Council. By virtue of a resolution of the City Council of the City of Chula Vista, the Council shall acknowledge the receipt of the Policy for the respective fiscal year.
Council Policy 220-01, Last updated February 11, 2025 via Council Resolution 2025-020
CITYWIDE RESERVE
POLICY – FISCAL
HEALTH PLAN
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Citywide Reserve Policy – Fiscal Health Plan
The City Council amended the General Fund Reserves – Fiscal Health Plan policy on May 28, 2024 to consolidate various reserve policies into a single policy, under Citywide Reserve Policy – Fiscal Health Plan ( Resolution 2024- 112).
Purpose:
The purpose of this policy is to establish a citywide reserve policy for:
Establishing reserves, reserve levels, and methodology for calculating reserves for the General Fund and other funds
Use of reserves and the process of replenishment of any used reserves Background:
Public entities accumulate and maintain adequate reserves to help ensure both financial stability and the ability to provide core services during difficult times. Sufficient reserves create financial stability resulting in increased credit quality and allow the public entity to better weather downturns in the economy and the impacts of negative events, both major and minor. The establishment of prudent financial reserves is important to ensure the long-term fiscal health of the City
The Government Finance Officers Association ( GFOA), an international organization that promotes the professional financial management of governments for the public interest, recommends that governments formally adopt reserve policies that govern the amount of resources to be held in reserve and conditions under which reserves can be used.
GFOA recognizes that each government’ s situation is unique, and the reserve policies should be developed based upon its own specific circumstances.
Policy:
General Fund Operating Reserve Policy
The City’s General Fund is the primary operating fund of the City and source of funding for core services such as police, fire, public works, and recreation. The General Fund is used to account for the general operations of the City.
It is used to account for all financial resources, except those required to be accounted for in another fund.
The General Fund Reserve policy is established to ensure that the City’s finances are managed in a manner which will (1) continue to provide for the delivery of quality services, ( 2) maintain and enhance service delivery as the community grows in accordance with the General Plan, (3) minimize or eliminate the need to raise taxes and fees because of temporary revenue shortfalls, and ( 4) establish the reserves necessary to meet known and unknown future obligations and ability to respond to unexpected opportunities.
Fiscal stability is an important factor in operating a City. Establishing certain financial reserves protects the City against unexpected interruptions in revenues, vulnerability to Federal or State actions, adverse economic conditions, unpredictable one-time costs, and exposure to natural disasters and emergencies.
There are additional benefits to establishing a minimum General Fund reserve. Credit rating agencies carefully monitor levels of reserves in a government’ s General Fund to evaluate a government’ s continued creditworthiness.
A higher credit rating results in savings to the taxpayer when the City issues debt or participates in short- term borrowing. Finally, reserve levels are a crucial consideration in long- term financial planning.
GFOA recommends maintaining a minimum reserves in the General Fund of no less than 5% to 15% of general fund operating revenues, or no less than one to two months of regular general fund operating expenditures. A government’ s particular situation may require reserve levels in the general fund significantly in excess of these recommended minimum levels. Cities with higher reserve levels are better positioned to protect public services City of Chula Vista
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during economic downturns. GFOA recommends that in establishing a policy governing the level of reserves in the general fund, a government should consider a variety of factors, including:
The predictability of its revenues and the volatility of its expenditures ( i.e., higher levels of reserves may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile).
The availability of resources in other funds as well as the potential drain upon general fund resources from other funds ( i.e., the availability of resources in other funds may reduce the amount of reserves needed in the general fund, just as deficits in other funds may require that a higher level of reserves be maintained in the general fund).
Liquidity ( i.e., a disparity between when financial resources become available to make payments and the average maturity of related liabilities may require that a higher level of resources be maintained).
Designations ( i.e., governments may wish to maintain higher levels of reserves to compensate for any portion of fund balance already designated for a specific purpose).
This policy establishes three ( 3) distinct General Fund Reserves:
1. General Fund Operating Reserve – minimum 15%
2 Economic Contingency Reserve – minimum 5%
3 Catastrophic Event Reserve – minimum 3%
The total recommended minimum reserve level for the three categories combined is 23%.
General Fund Operating Reserve
The General Fund Operating Reserve represents unrestricted resources available for appropriations by the City Council to address extraordinary needs of an emergency nature.
The City shall maintain General Fund Operating Reserve levels of no less than 15% of the annual operating expenditure budget. This level of reserves represents approximately 1.8 months of General Fund operating expenditures. The reserves may be used to provide temporary financing for unanticipated extraordinary needs of an emergency nature, such as major storm drain repairs, litigation or settlement costs or an unexpected liability created by Federal or State legislative action.
If funds are appropriated ( spent) from the operating reserves due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the General Fund Operating Reserve to be deeply reduced, the City Manager and Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum 15% level.
Authorized use (mid-year appropriations) of the General Fund Operating Reserve will require approval by four/ fifths 4/ 5) vote of the City Council.
Economic Contingency Reserve
The Economic Contingency Reserve represents funds available for appropriation by the City Council to mitigate service impacts during a significant downturn in the economy which impacts City revenues such as sales tax, property tax, and transient occupancy tax.
The City shall maintain General Fund Economic Contingency Reserve levels of no less than 5% of the annual operating expenditure budget to provide for unexpected financial impacts related to a significant economic slowdown.
Funds may be appropriated from the Economic Contingency Reserves only after the City Manager and the Finance Director have prepared an analysis providing sufficient evidence that the remaining reserves are adequate to offset potential downturns in revenue sources and provide sufficient cash balance for the daily financial needs of the City for the remainder of the fiscal year. Once the analysis has been presented to the City Council, action to appropriate from the reserves will require a declaration that a fiscal emergency or extraordinary need exists and approval by four/ fifths ( 4/ 5) vote of the City Council.
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Proposed Budget FY 2026
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If the Economic Contingency Reserves should ever drop below the minimum reserve level, the City Manager and Finance Director will develop a plan to replenish the reserves. The plan will be included in the adoption of the City’s annual operating budget and Long- Term Financial Plan.
Catastrophic Event Reserve
The Catastrophic Event Reserve represents funds available for appropriation by the City Council to fund unanticipated expenses related to a major natural disaster in the City.
The City shall maintain a General Fund Catastrophic Event Reserve level of no less than 3% of the annual operating expenditure budget to fund unanticipated expenses related to an “ emergency” as defined in the City of Chula Vista Municipal Code, Chapter 2.14, Section 2.14.020. These funds are associated with the City’s Emergency Organization Department and Disaster Council. In the event that the City Council proclaims a local emergency, the Catastrophic Event Reserve can be utilized to fund response and recovery costs until reimbursements from federal and/ or state agencies can be recovered.
Authorized use of the Catastrophic Event Reserve will require a Proclamation of a Local Emergency by the City Council or Director of Emergency Services. In addition, authorized use (mid-year appropriations) of the Catastrophic Event Reserves will require approval by four/ fifths ( 4/ 5) vote of the City Council.
If the Catastrophic Event Reserve should ever drop below the minimum reserve level, the City Manager and Finance Director will develop a plan to replenish the reserves. The plan will be included in the adoption of the City’s annual operating budget and Long- Term Financial Plan.
Calculation of General Fund Reserves
The General Fund Reserve levels will be calculated using the prior year’s Adopted General Fund budgeted operating expenditures including transfers out related to debt service payments and reoccurring operating obligations. The General Fund Reserve levels will be calculated at the close of each fiscal year. The Finance Department shall provide a comprehensive reserve fund status report annually to the City Council along with the Annual Comprehensive Financial Report. Reserve levels will be evaluated annually in conjunction with the development of the City’s LongTerm Financial Plan and annual operating budget to ensure minimum reserve levels are maintained. There is no maximum reserve level as any additional reserves would provide a greater level of fiscal security.
Pension, Bond Call, and OPEB Reserve Fund Policy
The City provides its permanent employees with a defined benefit pension through the California Public Employees’ Retirement System ( CalPERS). The City, like most CalPERS participating agencies, continues to see significant increases in pension costs due to current and retired employees living longer, lower than anticipated investment returns by CalPERS, and CalPERS policies. In response to continued increases in pension cost, the City issued 350 million of Pension Obligation Bonds ( POB) in February 2021 to refinance & restructure its CalPERS Unfunded Actuarial Liability ( UAL). At the time of issuance. the POB resulted in the conversion of a 7.0% UAL interest debt with CalPERS to 2.54% interest debt on the POB.
The City utilized the restructuring to achieve several objectives including:
Developing a more manageable repayment schedule for this large pension liability will enhance budget predictability and enhance City’s ability to maintain service levels.
Prioritizing projected savings towards reserves to mitigate future impacts from pension increases.
At the time of issuance, the City’s POBs were projected to result in over $175 million of interest rate savings. Despite these significant savings and best efforts to manage pension costs, the City continues to see increases in pension costs, specifically in the UAL, resulting in higher contributions to CalPERS and burden on the General Fund, the City’ s primary operating fund. As of June 30, 2022, the total Miscellaneous plan UAL was $ 44 million and the total Safety plan UAL was $41 million.
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The City also provides certain Other Post-Employment Benefits ( OPEB) in the form of subsidized health care rates for tier 1 retirees. The City budgets the implied subsidy amounts on an annual basis. As of June 30, 2023, the total OPEB liability for the City is $27.7 million.
The Pension Reserve Fund, Bond Call Fund, and OPEB Reserve Fund are established to ensure the City has adequate reserves to fund future pension and OPEB liabilities.
This policy establishes three ( 3) distinct reserves:
1. Pension Reserve Fund – minimum 15%
2 Bond Call Fund
3 OPEB Reserve Fund
Pension Reserve Fund
The Pension Reserve Funds represent restricted fund balance and are established in the form of an irrevocable Section 115 Trust (Trust). Pension Reserve Fund funds are deposited in a Trust, and in accordance with IRS regulations, may only be withdrawn and used for the following purposes: ( 1) City’s annual UAL payment to CalPERS, ( 2) City’s annual normal cost payment to CalPERS, ( 3) reimbursement to the City for prior-year and current- year payments to CalPERS, and (4) Additional Discretionary Payments to CalPERS.
The City shall maintain a Pension Reserve Fund level of no less than 15% of the prior year’s Adopted General Fund budgeted operating expenditures to fund allowable pension costs.
Authorized use (mid-year appropriations) of the Pension Reserve Fund will require approval by four/ fifths ( 4/ 5) vote of the City Council. Ifthe Pension Reserve Fund should ever drop below the minimum reserve level due to a withdrawal from the Trust, the City Manager and Finance Director will develop a plan to replenish the reserves. The plan will be included in the adoption of the City’s Long- Term Financial Plan and annual operating budget. Ifthe Pension Reserve Fund should ever drop below the minimum reserve level due to short-term investment losses in the Trust, the City Manager and Finance Director will not be required to replenish the reserve.
Bond Call Fund and OPEB Reserve Fund
The Bond Call Fund represents funds available for appropriation by the City Council to be used to pay any outstanding debt prior to maturity that results in net annual savings. These funds will allow the City to accumulate funds to eliminate debt early. For example, beginning in June 2031, the POBs are eligible to be called, saving on interest costs and reducing future POB debt service payments. Authorized use ( mid- year appropriations) of Bond Call Fund will require approval by four/ fifths ( 4/ 5) vote of the City Council.
OPEB Reserve Funds represent funds available for appropriation by the City Council to provide funding for the City’s outstanding OPEB liability. OPEB Reserve Fund will be funded up to 75% of the outstanding OPEB liability in the most recent annual actuarial valuation, to ensure there are adequate reserves to fund this liability in future years.
Authorized use (mid- year appropriations) of OPEB Reserve Funds will require approval by four/ fifths ( 4/ 5) vote of the City Council
Funding the General Fund, Pension, Bond Call Fund, and OPEB Reserve Fund With the issuance of POBs, the City shall budget a minimum of 75% of the net annual savings ( POB Net Savings) determined at bond issuance for years 1-101) for bond fiscal years 3 through 10 as follows:
1. City’s annual UAL payment to CalPERS
2 Maintain the Pension Reserve Fund reserve level of 15% 3 Additional Discretionary Payment ( ADP) to reach a pension funding level of up to 95% for each plan 4 75% of all remaining POB Net Savings will be deposited to the Bond Call Fund
5. 25% of all remaining POB Net Savings will be deposited to the OPEB Reserve Fund. Once 75% funding of outstanding OPEB liability is achieved, all remaining POB Net Savings will be deposited into the Bond Call Fund. 1In years 1 and 2 all POB Net Savings were placed in the Pension Reserve Fund.
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Proposed Budget FY 2026
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Additional Discretionary Payment ( ADP) represents additional payments to CalPERS which would serve to reduce the City’s UAL resulting in ongoing savings in pension costs and reduction in future required contributions. CalPERS allows participating agencies to make ADP at any time and in any amount.
Surplus Funds available after closing the General Fund shall be allocated as follows:
1. Carried forward to maintain up to the following fiscal year’ s minimum reserve level for all three General Fund Reserves and Pension Reserve Fund (Section 115 Trust), in the funding order of General Fund Operating Reserve, Economic Contingency Reserve, Catastrophic Event Reserve, and Pension Reserve Fund 2 75% of all remaining Surplus Funds will be deposited to the Bond Call Fund 3 25% of all remaining Surplus Funds will be deposited to the OPEB Reserve Fund. Once 75% funding of outstanding OPEB liability is achieved, all remaining Surplus Funds will be deposited into the Bond Call Fund. 4 Should the OPEB Reserve Fund and Bond Call Fund be fully funded then any Surplus Funds will be added to the General Fund Operating Reserve.
Surplus Funds will be calculated at the close of each fiscal year and represent excess fund balance that is not otherwise designated and is available for appropriation. Special consideration shall be made by the City Manager and Finance Director each fiscal year when determining Surplus Funds to ensure any General Fund supported funds such as Workers Compensation and Public Liability Funds maintain adequate fund balances.
Calculation of Pension, Bond Call, and OPEB Reserve Fund Reserves The Pension, Bond Call, and OPEB Reserve levels will be calculated using the prior year’s Adopted General Fund budgeted operating expenditures including transfers out related to debt service payments and reoccurring operating obligations. The Pension, Bond Call, and OPEB Reserve levels will be calculated at the close of each fiscal year.
The Finance Department shall provide a comprehensive reserve fund status report, including five- year reserve fund balance projections, annually to the City Council along with the Annual Comprehensive Financial Report. Reserve levels will be evaluated annually in conjunction with the development of the City’s Long- Term Financial Plan and annual operating budget to ensure minimum reserve levels are maintained. There is no maximum reserve level as any additional reserves would provide a greater level of fiscal security.
Below is a graphical representation of the funding of the General Fund, Pension, Bond Call Fund, and OPEB Reserve Fund for the POB Net Savings and Surplus Funds:
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Proposed Budget FY 2026
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POB Net Savings
City of Chula Vista
Proposed Budget FY 2026
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Sewer Service Revenue Fund Reserve Policy
The City’ s Sewer Enterprise Funds account for specific services funded directly by fees and charges users of the City’ s sewer system. These funds are intended to be self-supporting as well as restricted and cannot be used for other City services. They account for revenues and expenses related to the City’ s sewer programs, including maintenance and expansion of the City’ s conveyance system and payment of San Diego Metro wastewater treatment costs.
The Sewer Service Revenue Fund accounts for revenue collected from monthly sewer service charges for all properties that are connected to the City’ s sewer system. These funds can only be used for sewer related operations and maintenance. The primary use of these funds is payment for the City’ s annual San Diego Metropolitan Sewer Capacity and to fund maintenance and operational costs associated with the sewer collection system.
The GFOA recommends enterprise funds maintain minimum reserve balances. A government’ s particular situation may require levels of reserves significantly in excess of their recommended minimum levels. Cities with higher reserve levels are better positioned to protect public services during economic downturns.
GFOA recommends that in establishing a policy governing the level of reserves or working capital in enterprise funds, a government should consider a variety of factors, including but not limited to the following:
The predictability of its revenues and the volatility of its expenditures ( i.e. higher levels of reserves may be needed if significant revenue sources are subject to unpredictable fluctuations or if operating expenditures are highly volatile).
Liquidity ( i.e. a disparity between when financial resources actually become available to make payments and the average maturity of related liabilities may require that a higher level of resources be maintained).
Designations ( i.e. governments may wish to maintain higher levels of reserves to compensate for any portion of available fund balance already designated for a specific purpose).
This policy establishes four (4) distinct Sewer Service Revenue Fund Reserves:
1. Working Capital and Rate Stabilization Reserve
2 Emergency Reserve
3 Vehicle Replacement Reserve
Surplus Funds
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Proposed Budget FY 2026
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Working Capital and Rate Stabilization Reserve
Working Capital and Rate Stabilization reserves in the Sewer Service Revenue Fund will be restricted to maintaining and operating the wastewater collection system and paying treatment charges to City of San Diego Metropolitan Wastewater (“ Metro”). The reserve will be funded from revenues accumulated in the Sewer Service Revenue Fund.
It is intended to accommodate any natural variability in revenues and expenditures, including potential disruptions of cash flows due to varied billing methodology, short- term fluctuations and annual cycles. The reserve will also assist in addressing shortfalls which may occur due to unanticipated cost increases in labor or energy and other consumption based goods and services, such as wastewater treatment services provided by Metro. The reserves represent unrestricted resources available for appropriation by the City Council addressing unforeseen needs for sewer services.
The Working Capital and Rate Stabilization Reserves will assist the City in addressing the following items:
Rate Stabilization – the reserves will allow the City the flexibility to “ smooth” rates and phase increases in over multiple years, which is prudent given the potential variability in the City’s payments to Metro.
Revenue Collection Fluctuations - the reserves will be used to protect the City from natural fluctuations in revenue and expenditure cycles which is prudent given that the City bills customers at different points in time but incurs expenses continuously throughout the year.
Rates of delinquencies – delays in collection of outstanding revenues.
Payroll cycles – the timing of a fixed cash requirement for payroll, as related to the timing of revenue cycles.
Unanticipated expenses - expenses whose characteristics make accurate estimation difficult, such as increases in wastewater treatment services provided by the City of San Diego, energy costs, labor benefits and other consumption based goods and services.
The City shall maintain a Sewer Revenue reserve equivalent to 90 days of operating expenditures and a Rate Stabilization reserve equivalent to 90 days of operating expenditures for a minimum combined total of 180 days and a maximum reserve balance of 125% of the minimum balance.
If funds are appropriated from the Sewer Revenue Working Capital and Rate Stabilization Reserves, the funds should be replenished in the budget process during subsequent fiscal years to the minimum reserve balance. If the magnitude of the event caused the Sewer Revenue Working Capital and a Stabilization Reserves to be less than 30 days of the operating and maintenance budget, the Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the 180 days minimum reserve balance.
Emergency Reserve
The Sewer Service Revenue Fund Emergency Reserve is necessary to secure funding for insurance deductibles, unforeseen liabilities/ litigation and settlement costs related to the City’ s wastewater system.
The City shall maintain a minimum Sewer Service Revenue Fund Emergency Reserve target level of 5% of the operating and maintenance budget and a maximum reserve balance of 125% of the minimum balance. If funds are appropriated from the Sewer Revenue Emergency Reserves due to unanticipated needs, the Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum reserve balance.
Vehicle Replacement Reserve
The Sewer Service Revenue Fund Vehicle Replacement Reserves represents monies set aside to fund the replacement of aging vehicles. The allocation is funded from revenues accumulated in the Sewer Service Revenue Fund.
The City shall maintain a minimum Sewer Service Fund Vehicle Replacement Reserve target of 2% of the operating and maintenance budget. This reserve will ensure that vehicles utilized for sewer operations are replaced as scheduled and available to deploy as needed.
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To achieve a minimum impact to cost of services and rates, funds will be included in the proposed budget on an annual basis as identified in the City’ s Vehicle Replacement schedule. The cost of replacing all the vehicles will be averaged over the lifespan of the existing fleet. This will generate a more normalized cost of services by evenly distributing revenue requirements on a year-to-year basis offsetting temporary cash flow deficiencies and avoid significant increases in rates charges to customers in the years the replacement cost are incurred.
Measure A Fund Reserve Policy
On June 15, 2018, Chula Vista voters approved Measure A Sales and Use Tax, a one-half (½) cent Public Safety General Transactions and Use Tax ( Sales Tax) in the City of Chula Vista. The Measure A Fund Reserve Policy is established to avoid any impacts to the General Fund due to temporary sales tax revenue shortfalls, and to establish the reserves necessary to meet known and unknown future obligations for the City’ s Police and Fire Departments.
This policy establishes a Measure A Fund Economic Contingency Reserve.
Measure A Fund Economic Contingency Reserve
The City shall maintain a Measure A Fund Economic Contingency Reserve levels of no less than 60 days approximately 16% of the annual operating budget) of operations to provide for unexpected financial impacts related to a significant economic slowdown. If funds are appropriated ( spent) from the operating reserves due to unanticipated needs, the funds should be replenished by that department in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Measure A Fund Economic Contingency Reserve to be deeply reduced, the City Manager and Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum level.
Authorized use (mid-year appropriations) of the Measure A Economic Contingency Reserve will require approval by a four/ fifths ( 4/ 5) vote of the City Council.
Calculation of Measure A Fund Economic Contingency Reserves The Measure A Fund Economic Contingency Reserve levels will be calculated using the prior year’ s Adopted Measure A Fund budgeted operating expenditures. The reserve level is defined as the number of days of operation in its normal course of business and shall be calculated based on the annual operating budget for the fiscal year, less any budgeted debt service. Reserves will be evaluated annually in conjunction with the development of the Annual Budget process. There is no maximum reserve level as any reserves above the required minimum would provide a greater level of fiscal security in the case of an unexpected economic slowdown. Any reserves above the required minimum could also be used to support public safety, consistent with the Measure A Public Safety Expenditure Plan through the application of Measure A sales tax revenues that will ensure the best return on investment in terms of staffing improvements for the improved deployment of resources and include the used of these non- recurring funds for one- time essential public safety purchases ( i.e., capital, consulting, software, etc.) Ambulance Transport System Enterprise Fund Reserve Policy On May 12, 2020, City Council approved Chula Vista Council Resolution No. 2020-102 directing the Fire Department to provide exclusive Emergency Medical Ambulance Transport Services ( ATS) within the City of Chula Vista, the City of Imperial Beach, and the Bonita Sunnyside Fire Protection district. In the resolution were revenue projections that included both a base rate and ancillary fees multiplied by the volume of transports to reach projected FY2022 revenues. The resolution adopted a rate of $2,800 as the “Base Cost of Service”. In addition, Resolution No. 2020- 103 authorized a purchase agreement with Republic EVS for purchase of 13 ambulances; Resolution No. 2020-104 authorized a purchase agreement with Stryker Medical for gurney systems; Resolution No. 2020- 105 authorized a sole source purchase agreement with Zoll Medical Corporation for cardiac monitors and auto pulse systems; and Resolution No. 2020-106 authorized a sole source purchase agreement with Motorola Solutions. These resolutions resulted in loan agreements in the amount of $ 4,493,100 with Banc of America Public Capital Corp, and an interfund loan in the amount of $4,881,710 from the Measure A available fund balance. These loans are being utilized to provide funding for all capital purchases and start- up costs associated with the Ambulance Transport Program.
The interfund loan from Measure A was agreed to be repaid within the first five ( 5) full years of operation of the ATS City of Chula Vista
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program at an interest rate equal to the City’s pooled investment rate of return, which was approximately 2.2% at the time the interfund loan was approved by City Council. The loan from Banc of America Public Capital Corp is repaid in semiannual payments with an annual interest rate of 1.00%.
This policy establishes a formal ATS Enterprise Fund Reserve Policy. The fund reserve policy is to provide guidance to City Council and staff in making financial decisions and aid in ensuring fiscal responsibility of the ATS Enterprise Fund. This policy establishes reserves that will position the Transport program to be able to weather significant economic downturns and more effectively manage uncertainties. Sufficient reserves create the financial stability necessary to meet debt obligations of the ATS Enterprise Fund, reduce the risk of impacting the General Fund, and support continuous provision of emergency services to our residents.
This policy establishes four (4) distinct ATS Enterprise Fund Reserves:
1. Debt Obligation Reserve – Minimum 1-year current debt obligation 2 Operating Reserve – Minimum 180 days operating expenses 3 Capital Replacement Reserve - Minimum $ 4 million in capital replacement reserve 4 Liability Insurance Reserve - Minimum $ 1 million liability insurance reserve Debt Obligation Reserve
The ATS Enterprise Fund will maintain a fund balance reserve equal to one fiscal year’ s debt obligation. This reserve is to ensure debt obligations are met to keep the City in good credit standing. In fiscal years with no current debt obligations, the debt obligation reserve will be used to bring other reserve balances to their stated policy levels. If all reserves have achieved minimum levels and no debt obligations exist, this reserve will be no longer be required and any funds will be release for other use at the discretion of the Fire Department.
If funds are appropriated ( spent) from the Debt Obligation Reserve due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Debt Obligation Reserve to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to incrementally replenish the reserve to the minimum one- year debt obligation level. The provided plan will align with the budget process or quarterly monitoring report, whichever occurs first.
Operating Reserve
An Operating Reserve represents unrestricted resources available for appropriations by City Council to address extraordinary needs of an emergency nature. The ATS Enterprise Fund will maintain an Operating Reserve of no less than 180 days of operating expenses. This will be calculated using the following fiscal year’ s adopted expense budget ( excluding debt service and transfers- out), with the maximum reserve amount of twelve months of operating expenses. The Fire Department reserves the right to maintain reserve balances at their discretion within the minimum and maximum thresholds of 180 days and up to twelve months of operating expenses.
If funds are appropriated ( spent) from the Operating Reserve due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Operating Reserve to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to replenish the reserves to the minimum operating balance.
Capital Reserve
The ATS Enterprise Fund will maintain four million dollars in reserves specified for various capital equipment replacement, as needed. This reserve is to ensure funds are available for various capital purchase needs as they arise. This reserve is also being created to provide relief from the need to obtain debt- based funding for capital or equipment needs. The Fire Department will reassess the need for capital reserve needs every three ( 3) years and incorporate necessary adjustments into the budget process to ensure reserve goals are met in a manner that are balanced with other budgetary priorities.
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Proposed Budget FY 2026
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If funds are appropriated from the Capital Reserve due to anticipated or unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance.
If the magnitude of the event caused the Capital Reserve to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to replenishment the reserves to the minimum balance.
The provided plan will align with the budget process or quarterly monitoring report, whichever occurs first.
Liability Insurance Reserves
The ATS Enterprise Fund will maintain one million dollars in reserves specified for meeting liability insurance needs as they arise. This reserve is to ensure claims can be addressed and fulfilled as they arise. The Fire Department will reassess the need for liability insurance reserve needs every three ( 3) years and incorporate necessary adjustments into the budget process to ensure reserve goals are met in a manner that are balanced with other budgetary priorities.
If funds are appropriated from the Liability Insurance Reserve due to anticipated or unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the Liability Insurance Reserve Reserves to be deeply reduced, the City Manager, Fire Chief and Finance Director shall provide the City Council with a plan to replenish the reserves to the minimum balance. The provided plan will align with the budget process or quarterly monitoring report, whichever occurs first.
Establishment of Reserves
The ATS Enterprise Fund program is currently in its third year of operation. To establish the reserves outlined above, until reserves are fully funded, all revenues in excess of expenses ( surplus) at year end will be used to fund reserves.
In determining the surplus, expenses will include any discretionary Measure A loan payment.
These reserves will be established as an equal 25% allocation to each reserve category of excess revenue at year end, after any discretionary Measure A loan payment.
The funding waterfall will be evaluated periodically and may be revised by the Finance Director in consultation with the Fire Chief
Council Policy 220-03, Last updated May 28, 2024 via Council Resolution 2024-112
FINANCIAL REPORTING
AND TRANSFER
AUTHORITY POLICY
City of Chula Vista
Proposed Budget FY 2026
Appendix FINANCIAL REPORTING AND TRANSFER AUTHORITY POLICY 385
Financial Reporting and Transfer Authority Policy
For government entities, a budget creates a legal framework for spending during the fiscal year. After the budget is approved by the City Council, there are circumstances which arise that could require adjustments to the approved budget. Council Policy 220-02 “Financial Reporting and Transfer Authority” was established in January of 1996 and allows for budget transfers and adjustments to be completed ( Resolution No. 18191). The Policy was established to clarify the authority for budget transfers which may be required to fund needed services in each City department within a given fiscal year. On November 8, 2022, the City Council adopted an update that increased the City Manager’ s allowable transfer amount from $15,000 to $75,000 and other minor language ( Resolution No. 2022-250). On October 17, 2023, additional minor language updates to clarified summary accounts” should be replaced with “ budget categories” to align with the current financial system ( Resolution No. 2023- 158).
Purpose:
To clarify the authority for budget transfers which may be required to fund needed services in each city department within a given fiscal year.
Background:
City Charter Section 505.c - the Finance Director shall… have control over all expenditures to ensure that budget appropriations are not exceeded.
Section 505.f - Submit to the City Council through the City Manager a quarterly statement of all receipts and disbursements in sufficient detail to show the exact financial condition of the City.
Policy:
Itis the intent of the City Council that the budget authorization be maintained and that transfers should be limited and used only when it is necessary to continue the effective operations of the City. This policy shall establish guidelines for determining the authority level of transfers within the departments.
It is the City Manager’ s responsibility to maintain the integrity of the adopted budget and to allow transfers only as a means for continuing the programs and policies of the City Council as approved via the budgetary process.
Department heads shall be held responsible to exercise adequate financial controls to ensure the accomplishment of scheduled work programs withing available appropriations. Departments shall maintain budgetary control at the budget category level rather than by line item to give flexibility of operations. Toward this end, the following guidelines are established:
1. Budgetary control shall be established at the budget category level, i.e. Personnel Services, Supplies & Services Utilities, etc., giving departments the flexibility to manage within broader limits, rather than controlling at the individual line item account level.
2 Council approval shall be required for all transfers of appropriations between departments, regardless of amount. 3 Council approval shall be required for transfers of appropriations which are greater than $75,000 between budget categories within a department.
4 The City Council delegates authority to the City Manager for approval of transfers of appropriations up to and including $ 75,000 between budget categories within the same department upon certification by Director of Finance that appropriations are available.
5. The City Council shall receive a quarterly status report [ required by Charter section 505(f)], from the Director of Finance which provides actual vs. budgetary comparisons by department, as well as projections for fiscal year.
This report will include a listing of any transfers within departments.
Council Policy 220-02. Last updated October 17, 2023 via Council Resolution 2023-158
CITY DEBT POLICY
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City Debt Policy
BACKGROUND
Debt, properly issued and managed, is a critical element in any financial management program. It assists in the City’ s effort to allocate limited resources to provide the highest quality of service to the public. The City understands that poor debt management can have ripple effects that hurt other areas of the City. On the other hand, a properly managed debt program promotes economic growth and enhances the vitality of the City of Chula Vista ( also referred to as, “ City”) for its residents and businesses.
This Debt Policy applies to any debt issued by the Successor Agency, the Chula Vista Public Financing Authority, the Chula Vista Municipal Financing Authority, any Mello-Roos Community Facilities District formed by the City, or any other entity for which the City Council serves as the governing body, as applicable.
PURPOSE
The purpose of the Debt Policy is to set forth the principles and objectives that should guide the City’s decisions in the responsible issuance and management of debt by the City. The main objectives are to establish conditions for the use of debt; to ensure that debt capacity and affordability are adequately considered; to minimize the City’s interest and issuance costs; to maintain the highest possible credit rating; to provide complete financial disclosure and reporting; and to maintain financial flexibility for the City. In addition, the Debt Policy is intended to comply with the requirements of California Government Code Section 8855( i), requiring any issuer of public debt to provide to the California Debt and Investment Advisory Commission ( CDIAC), no later than thirty days prior to the sale of any debt, a report of the proposed issuance, including certification that the issuer has adopted local debt policies concerning the use of debt and that the proposed debt issuance is consistent with those policies.
POLICY
GENERAL POLICIES
The Finance Team
All debt of the City of Chula Vista or its related entities shall be issued under the direction of the City Manager or Director of Finance / Treasurer, with the Mayor and City Council providing final approval at a public meeting. The City Manager or Director of Finance/ Treasurer will determine the composition of the “ Finance Team” involved in each issuance. The Finance Team shall consist of both City Staff and outside professionals. The Director of Finance/ Treasurer shall decide which City Staff and outside professionals, when utilized, to include on the Finance Team.
Critical outside professionals include:
Underwriter: For negotiated sales, the Underwriter purchases the City’s debt and sells it to investors.
Municipal Advisor: independent financial expert providing financial advice to the City on all aspects of debt.
Bond Counsel: legal counsel that prepares the resolutions, ordinances, agreements and other legal documents required.
Disclosure Counsel: provides legal advice on all disclosure documents and issues in connection to the financing.
May be same entity that provides Bond Counsel services.
Trustee: typically, a commercial bank or trust company responsible for the collection and repayment of principal and interest to bondholders, as well as administering the investment of reserve funds, accounting and disbursement of bond proceeds
Special Tax Consultant: provide special district expertise, statistics, data analysis, and disclosure support in the issuance of Special District debt (e.g. Mello-Roos Community Facilities District and assessment district debt).
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Selection of Outside Professionals
The selection of the Financing Team shall be based upon qualifications, experience, and cost; typically, through a formal Request for Proposal (“ RFP”) Process. Procurement of other services related to the issuance of debt shall be through a competitive bidding process whenever reasonable.
Depending on circumstances it may be advantageous for the City to participate in a pooled debt issuance with a number of local agencies where issue costs are shared and the Financing Team are pre-selected by the managing organization. Due to the overall cost savings involved, programs such as the California Statewide Communities Development Authority’ s “Tax and Revenue Anticipation Note” program are options for the City to consider.
Use of Debt
The City typically issues debt to fund long-term capital improvement projects and to refinance existing debt for debt service cost savings or other benefits. The City develops an annual capital improvement program (“ CIP”) budget. The City will consider the use of debt financing primarily for projects included in the CIP when the project’ s useful life will exceed the term of the financing and when ongoing resources are identified sufficient to fundthe debt service requirements. The CIP shall provide the basis for determining long-term capital needs of the City and may be supplemented with longer term capital plans or master plans when appropriate. As necessary, the Finance Department shall work with the various City departments to develop financial forecasts related to the CIP to identify the optimal method to finance the program, including pay- as- you- go (“ pay- go”) and/ or the issuance of debt obligations
Some exceptions to this CIP-driven focus are the issuance of debt such as Pension Obligation Bonds, where the financial benefits to pay the pension liability are estimated to be significantly greater than the costs and where the benefits are determined to be a financially prudent option; and short- term instruments such as tax and revenue anticipation notes, which are to be used for prudent cash management purposes.
If a department has any project which is expected to use debt financing, the department director is responsible for expeditiously providing the Finance Department with reasonable cost estimates, including specific revenue accounts that will provide payment for the debt service. This will allow the Finance Department to analyze the project’s potential impact on the City’s debt capacity and limitations
While the preferred means of financing projects is the pay- go method of using current revenues to pay for capital projects because it avoids financing costs, the City would be able to undertake capital projects under this method only if sufficient cash accumulates. Prudent use of debt financing rather than pay- go funding of capital projects distributes the cost of a project over its useful life, facilitates better allocation of resources, and increases financial flexibility. Debt can also be used in conjunction with pay- go financing to pay only a portion of the project using debt if insufficient funds are available from non- debt sources.
Below are the conditions under which debt may be a better choice for the City:
Low interest rates. Low interest rates mean a lower total cost of borrowing.
Soft construction market. The community can benefit if the City uses debt to build more assets while construction costs are low.
The asset has a long useful life. Assets that last a long time will benefit residents far into the future. It is fair for these future residents to help pay the cost of the asset by paying for some of the debt The City forecasts show that debt is affordable. Debt adds a long-term cost to the budget. However, the affordability of debt may be a more equitable method of funding the capital needs at the outset, and paying for the obligation over the long-term.
Use of debt is consistent with legal and other limits. Applicable federal, state and local law and this policy (unless any provision of this policy is waived by City Council) describe limits that the City must observe.
Bonded debt should not be issued for projects with minimal public benefit or support, or to finance normal operating expenses.
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There are many cases where debt is not the right financing tool. Below are important cases where debt should not be used:
Paying for ongoing public services. Ongoing public services benefit current residents, but debt will be paid by future residents
Life of the debt is longer than the life of the capital asset itfunds. If the debt lasts longer than the capital asset, then future residents will pay for an asset that they do not benefit from.
Cost of issuing debt is too high. The City has to pay certain costs and fees to issue debt These costs may outweigh the benefits that debt provides, especially for small capital projects.
Relationship of Debt to Capital Improvement Program and Budget The City intends to issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City’s CIP.
The City shall strive to fund the upkeep and maintenance of its infrastructure and facilities due to normal wear and tear through the expenditure of available operating revenues. The City shall seek to avoid the use of debt to fund infrastructure and facilities improvements that are the result of normal wear and tear, unless a specific revenue source has been identified for this purpose, such as Gas Tax.
The City shall integrate its debt issuances with the goals of its CIP by timing the issuance of debt to ensure that projects are available when needed in furtherance of the City’s public purposes.
The City shall seek to issue debt in a timely manner to avoid having to make unplanned expenditures for capital improvements or equipment from its General Fund.
Policy Goals Related to Planning Goals and Objectives
The City is committed to financial planning, maintaining appropriate reserve levels and employing prudent practices in governance, management and budget administration. The City intends to issue debt for the purposes stated in this Debt Policy and to implement policy decisions incorporated in the City’s annual operating budget.
Itis a policy goal of the City to protect taxpayers, ratepayers and residents by utilizing conservative financing methods and techniques to obtain the highest practical credit ratings ( if applicable) and the lowest practical borrowing costs.
The City will comply with applicable state and federal law as it pertains to the maximum term of debt and the procedures for levying and imposing any related taxes, assessments, rates and charges.
Except as described under the caption “ DEBT ISSUANCE” below, when refinancing debt, it shall be the policy goal of the City to realize, whenever practicable, minimum net present value debt service savings equal to or greater than 5% of the refunded principal amount.
TYPES OF DEBT INSTRUMENTS
In order to maximize the financial options available to benefit the public, it is the policy of the City to allow for the consideration of issuing all generally accepted types of debt, including, but not exclusively, the following:
General Obligation ( GO) Bonds: General Obligation Bonds are suitable for use in the construction or acquisition of improvements to real property that benefit the public at-large. Examples of projects include libraries, parks, and public safety facilities. Under current State law and the City Charter, GO bonds require a 2/ 3 vote of the electorate in order to pass
Revenue Bonds: Revenue Bonds are special obligations tied to a specific enterprise revenue stream where the projects financed clearly benefit or relate to the enterprise. An example of projects that would be financed bya Revenue Bond would be improvements to the sewer system, which would be paid back with money raised from the property owner’s sewer bills. Generally, no voter approval is required to issue this type of obligation but any rate setting process for the enterprise must comply with Proposition 218.
Lease Revenue Bonds ( LRB)/ Certificates of Participation ( COP): LRBs and COPs are used to allow the City to finance projects. The LRBs and the COPs are secured by a lease from the City pursuant to which lease payments City of Chula Vista
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are made and budgeted for annually in an appropriation typically from the General Fund. These lease financings do not constitute indebtedness under the State Constitution or the City Charter and do not require voter approval.
Special Assessment/ Special District Debt: the City will consider requests from developers for the use of debt financing secured by property- based assessments or special taxes in order to provide for necessary infrastructure for new development only under strict guidelines adopted by the City Council, which may include minimum value-to-lien ratios and maximum tax burdens. Examples of this type of debt are Assessment Districts ( AD) and Community Facilities Districts ( CFD) ( also known as Mello-Roos Districts). In order to protect bondholders and limit reputational risk to the City, the Rate and Method of Apportionment of Special Tax for any City CFD must include provisions that will result in maximum projected annual special tax revenues of not less than 110% of the projected annual gross debt service on any bonds of the CFD. The City will also comply with all State guidelines regarding the issuance of special district or special assessment debt. For further information, refer to the City of Chula Vista Policy No. 505-04, last updated October 24, 2023, titled “Statement of Goals and Policies Regarding Establishment of Community Facility Districts”.
Industrial Development Bonds: Industrial Development Bonds ( IDBs) are tax-exempt securities which can fund manufacturing businesses or energy development projects which provides apublic benefit. While the authorization to issue IDBs is provided by a state statute, the tax-exempt status of these bonds is derived from federal law (IRS Code Section 103( b) (2)).
Tax Allocation Bonds: Tax Allocation Bonds are special obligations that are secured by the allocation of tax increment revenues that were generated by increased property taxes in the designated redevelopment area.
Tax Allocation Bonds are not debt of the City. Due to changes in the law affecting California Redevelopment agencies with the passage of ABX1 26 as codified in the California Health and Safety Code, the City of Chula Vista Redevelopment Agency ( RDA) was dissolved as of February 1, 2012, and its operations substantially eliminated but for the continuation of certain enforceable RDA obligations to be administered by the City of Chula Vista Successor Agency. The terms of ABX1 26 require successor agencies to perform all obligations with respect to enforceable debt obligations, which include Tax Allocation Bonds.
Multi-Family Mortgage Revenue Bonds: The City Housing Authority is authorized to issue mortgage revenue bonds to finance the development, acquisition and rehabilitation of multi- family rental projects. The interest on the bonds can be exempt from federal and state taxation. As a result, bonds provide below market financing for qualified rental projects. In addition, the bonds issued can qualify projects for allocations of federal low-income housing tax credits, which can provide a significant portion of the funding necessary to develop affordable housing. For further information, refer to the Chula Vista Housing Authority – Multi-Family Administrative Bond Policies
HUD Section 108 Loan Guarantee Program: The U.S. Department of Housing and Urban Development ( HUD) Section 108 Loan Guarantee Program allows cities to use their annual Community Development Block Grant CDBG) entitlement grants to obtain federally guaranteed funds large enough to stimulate or pay for major community development and economic development projects. The program does not require a pledge of the City’s General Fund, only of future CDBG entitlements. By pledging future CDBG entitlement grants as security, the City can borrow at favorable interest rates because of HUD’s guarantee of repayment to investors.
Pension Obligation Bonds: Pension Obligation Bonds ( POB) are bonds ( usually taxable) which are issued to finance an unfunded pension liability of the entity.
Small-Equipment Lease Financing. The City may employ small equipment lease financing at the request of City departments after analysis and due-diligence review by the Finance Department. Requests from City departments must demonstrate the need ( e.g., legal, environmental, cash flow) for small equipment lease financing, and the City departments must provide realistic, projected drawdown schedules showing that borrowed funds will be spent in accordance with requirements of the Internal Revenue Service ( IRS), if applicable.
State and Federal Loans. From time-to-time, the State and the federal government offer loan programs for specified types of projects which may be at subsidized interest rates. The City may obtain such loans to be repaid from the revenues of the enterprise to which the financed project relates or from the City’ s General Fund, as City of Chula Vista
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applicable. Such loans may be structured as installment sale agreements, lease revenue bonds or such structure as the City may deem appropriate to comply with applicable law.
DEBT AFFORDABILITY AND LIMITATIONS
Debt capacity and affordability will be determined by conducting various analyses prior to the issuance of bonds.
The analysis of debt capacity should cover a broad range of factors including but not limited to the following:
Statutory or constitutional limitations affecting the amount that can be issued, such as legally authorized debt limits and tax or expenditure ceilings.
Other legal limitations, such as coverage requirements or additional bonds tests imposed by bond covenants.
Evaluation of trends relating to the government’ s financial performance, such as revenues and expenditures, net revenues available after meeting operating requirements, reliability of revenues expected to pay debt service and unreserved fund balance levels.
Debt service as a percentage of total General Fund revenues.
Assessed valuation of property within the City.
With respect to General Fund- backed obligations, the City will attempt to limit the total amount of annual debt service payments payable by the General Fund to no more than 10% of estimated total General Fund revenues. In addition, in analyzing the affordability of debt to be repaid from the General Fund, the City should take into consideration other long-term costs which are also paid from the General Fund, such as pension costs.
With respect to general obligation bonds, state law and the City’s Charter limit the amount of general obligation bonds to be issued to 15% or less of total assessed valuation within the City.
With respect to enterprise financings, in accordance with bond covenants, the revenues generated by the applicable enterprise should be sufficient to maintain the required coverage levels.
With respect to small-equipment lease financings, consideration should be given to the burden on the fund expected to repay the financing and the impact on the General Fund, if any.
An analysis using current market rates and conservative projections showing compliance with the debt affordability limitations included in this Debt Policy shall be conducted before the issuance of any debt with a maturity longer than two years from date of issue.
Data showing direct and overlapping debt levels for the City and surrounding agencies that affect the residents of the City shall be compiled for inclusion in the Annual Comprehensive Financial Report of the City.
DEBT STRUCTURING
In order to maximize financial flexibility in a constantly- changing debt market, the City shall be allowed to structure its debt issuances using generally accepted methods for municipalities The guiding principal shall be to structure debt issuances so that the City’s overall costs are minimized while still maintaining or increasing the City’s credit rating. Allowable structures include, but are not limited to the issuance of:
Serial and/ or Term Bonds: Serial Bonds are those in an issue that mature in consecutive years, whereas Term Bonds come due in a single maturity but are paid in part each year from sinking fund installments.
Fixed and Variable Rate Debt: Fixed rate debt is when an interest rate on a security does not change for the remaining life of the security, where variable rate debt or “floating rate” changes at intervals according to market conditions or a predetermined index or formula.
Capital Appreciation/ Zero Coupon Bonds: Capital Appreciation/ Zero Coupon Bonds are bonds sold at an original issue discount on which no periodic interest payments are made prior to maturity. Interest compounds semiannually at a stated interest rate. At maturity the original principal amount plus all accreted interest is paid to the investor.
Bonds with Capitalized Interest: Bonds with capitalized interest have a portion of the proceeds of an issue set aside to pay interest on the bonds for a specified period of time.
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Senior and Junior Lien Structures: Senior lien bonds have a priority claim against pledged revenues, while junior lien bonds have a subordinate claim against pledged revenues or other security.
Debt service should be structured so that annual combined principal and interest payments do not dramatically vary year over year resulting in greater budget stability. Limited exceptions from level debt service will be allowed for individual debt issues when level debt service is unsuitable; for instance in the case of some refunding of debt, or when a policy decision is made to use variable rate debt.
Redemption provisions should generally be included in most issuances, providing they are structured in a reasonable and cost-efficient manner as determined by the Director of Finance/ Treasurer, or designee.
Redemption options include but are not limited to:
Optional Redemption: a call or prepayment provision option that is given to the issuer, often only on or after a specified date.
Mandatory Redemption: a call or prepayment provision requiring the issuer to redeem or call the bond “in-whole” which is all at once, or “in part” which is only a portion on a scheduled basis.
Credit enhancement, such as letters of credit or bond insurance, may be purchased when the cost of enhancement is more than recovered by the debt service savings created. Entering into a financing utilizing letters of credit or insurance must be planned for and determined to be feasible by the Director of Finance/ Treasurer, or designee.
Maximum Maturity
Debt obligations shall have a maximum maturity of the earlier of:
the reasonably estimated useful life of the capital improvements being financed; or, thirty years; or,
in the event they are being issued to refinance outstanding debt obligations, the final maturity of the debt obligations being refinanced, unless a longer term is recommended by the Finance Team.
Such other terms which meet the financing goals of the debt issuance.
The term of any debt issued should not exceed the useful life the asset is funding. The average weighted bond maturities of all debt should be 25 years or less.
DEBT ISSUANCE
The City will strive to minimize borrowing costs by:
Seeking the highest credit rating possible;
Maintaining transparency and excellent communications with credit rating agencies regarding the City’s fiscal condition;
Purchasing bond insurance or taking action to upgrade the City’s current credit rating.
It shall be the policy of the City to allow the issuance of debt through public sale or private placement, and via competitive or negotiated sales underwriting methods. Consistent with the goal of minimizing costs, competitive sale shall be evaluated and utilized unless the Director of Finance/ Treasurer decides that a negotiated sale is warranted.
Factors that may impact this decision include:
Issuer/ Issue Recognition: competitive sales are easier for an issuer that investors and underwriters are familiar with. If extensive marketing is needed to educate the market about the issuer or the specific credit to be sold, a negotiated sale maybe more appropriate. Similarly, even ifthe issuer is well-known, if the issue itself has a “story” that needs to be told, a negotiated sale may be needed to enhance the marketing and acceptance of the debt.
Issue Size: very large or very small deals may benefit from a negotiated sale over a competitive sale.
Debt Type: GO bonds and other well-known debt structures are generally suitable for competitive sales. Others such as CFDs, variable rate, or innovative structures may benefit from a negotiated sale.
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Credit Ratings: issuers with high credit ratings and insured bonds lend themselves to competitive sales. Unrated or lower rated issues are often more suitable for negotiated sales.
Market Conditions and Sale Timing: during periods of stable interest rates, market timing is not as critical.
However, during times of market uncertainty when conditions are volatile, the timing of the sale becomes more critical. Bond refundings are often very interest rate sensitive in terms of potential level of savings or the general feasibility of the refunding. A negotiated sale provides more flexibility in terms of the structure and timing of the bond sale and may be more appropriate when issuing refunding bonds and when interest rates are volatile.
Refunding bonds are issued to retire all or a portion of an outstanding bond issue, typically to refinance at a lower interest rate and reduce debt service payment costs. Alternatively, a refunding transaction may be undertaken for reasons other than to achieve cost savings, such as to restructure debt service payments, to change the type of debt instruments being used, or to eliminate undesirable covenants. In any event, a present value savings analysis shall be prepared that identifies the financial effects of any refunding being considered.
The City will seek to issue refunding bonds with the minimum goal of 5% net present value savings of the principal amount of the refunded bonds. Anything less than an anticipated 5% savings will require additional analysis discussing the benefits of the refunding due to the cost associated with refunding debt, which may include benefits to the City apart from debt service savings ( including, but not limited to, eliminating restrictive or burdensome covenants or restructuring debt to shorten/ lengthen the term of the debt). Consideration shall be given to the benefit of delaying a refunding in a declining interest rate environment to capture maximum savings at the least cost.
A periodic review of the City’s outstanding debt will be performed by the Finance Department to identify potential refunding opportunities
DEBT MANAGEMENT PRACTICES
Internal Control Procedures
When issuing debt, in addition to complying with the terms of this Debt Policy, the City shall comply with any other applicable policies regarding initial bond disclosure, continuing disclosure, post-issuance compliance, and investment of bond proceeds. The Director of Finance/ Treasurer shall be the Officer of the City charged with primary responsibility for administering and implementing these internal control procedures The City will periodically review the requirements of and will remain in compliance with the following:
Any continuing disclosure undertakings under Rule 15c2-12 of the Securities and Exchange Commission ( SEC), Any federal tax compliance requirements, including without limitation arbitrage and rebate compliance, and The City’s investment policies as they relate to the investment of bond proceeds.
With respect to LRBs or COPs which involve the leasing of City property, the restrictions on the use of the leased property as set forth in the financing leases.
Disclosure
The City will comply with SEC Rule 15(c) 2-12 and provide timely disclosure of relevant information on an annual basis as well as any event notices as required. The City will fulfill its obligations as covenanted in all continuing disclosure undertakings associated with any outstanding debt obligations. Documents are distributed through the Electronic Municipal Market Access ( EMMA) website which can be viewed at any time by the public.
The City recognizes the importance of accuracy in disclosure documents and will strive to provide full and complete disclosure. To ensure accuracy of stated facts, directors of any department that originally provided or produced any data appearing in an offering document for the City’s debt will provide a written statement certifying the accuracy of their department’ s data along with a statement denying knowledge of any misstatements or material omissions in the remainder of the disclosure document. The City has adopted disclosure policies and procedures which set forth in greater detail the City’s processes with respect to producing information for offering documents and continuing disclosure filings.
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Arbitrage
In the past, agencies took advantage of their ability to borrow at tax-exempt rates and invest the proceeds at higher rates, thus earning positive arbitrage. Since 1986, the federal tax code requires issuers of long-term, tax-exempt debt to rebate positive arbitrage to the federal government under certain circumstances. The City will diligently monitor its compliance with all federal arbitrage regulations. Due to the complex nature of arbitrage calculations, the City may elect to hire an outside expert consultant to perform this function.
Compliance with Tax Law Provisions
The City will diligently monitor its compliance with all bond legal covenants, as well as federal and state requirements, with the assistance of its Finance Team and consultants. Furthermore, recognizing that the smallest of mistakes can lead to the appearance of conflicts of interest or wrongdoing, which in turn may lead to severe consequences, including criminal charges, the City will make every effort to ensure its debt financing conduct is above reproach.
Investment of Bond Proceeds
The City shall comply with all federal, state, and indenture restrictions, if any, regarding the use and investment of bond proceeds. Each issue shall detail allowable investments within the authorizing resolution or applicable financing documents, to which the City will adhere. Where not specifically spelled out, the City will apply the City investment policy guiding principal commonly referred to as “SLY:” Safety, Liquidity, and Yield, in that order of priority.
Records Retention
The City will retain records sufficient to demonstrate compliance with the requirements of federal and State law necessary to preserve the tax-exempt nature of any City debt for the period required by law, presently understood to be the life of the debt obligations or any succeeding refunding obligations plus 3 years Other Provisions
Bond proceeds, reserve, and repayment funds, should have separate accounting from operating or other funds, at a level distinct enough to facilitate arbitrage compliance calculations and ease of debt service and expenditure tracking. Whenever reasonably possible, proceeds of debt will be held by a third-party trustee and the City will submit written requisitions for such proceeds. The City will submit a requisition only after obtaining the signature of the City Manager or the Director of Finance/ Treasurer.
The maximum size of a debt service reserve funded from tax-exempt bond proceeds allowed under federal tax law, is the lesser of (1) ten percent ( 10%) of the issuance amount ( par); (2) one-hundred- twenty-five percent ( 125%) of the average annual debt service; or (3) maximum annual debt service. The City shall have the option to issue debt with a debt service reserve fund that is less than the maximum allowable or without a reserve.
The City Manager or the Director of Finance/ Treasurer shall have the authority to determine whether to establish a debt service reserve fund, the size of any debt service reserve fund, and the investments to be purchased within the reserve. Factors to consider include the cost of a debt service reserve fund over the life of the bonds compared to expected interest earnings, and bond pricing and credit rating impacts.
A debt service reserve may be funded with a surety policy when economically feasible, as determined by the Director of Finance/ Treasurer.
If any part of this Debt Policy conflict with federal or state laws, or the City of Chula Vista Municipal Code, or Charter, such provisions will take precedence over this Debt Policy.
RELATIONSHIP TO OTHER POLICIES
The City has adopted Policy No. 505-04, last updated October 24, 2023, titled “ Statement of Goals and Policies Regarding Establishment of Community Facility Districts” for the Use of The Mello-Roos Community Facilities Act of 1982, included as Exhibit A hereto. Special Tax Bonds issued on behalf of a CFD will also comply with these policy requirements, as applicable.
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WAIVERS OF DEBT POLICY
There will be circumstances from time to time when strict adherence to a provision of this Debt Policy is not possible or not in the best interest of the City
If the City Manager or Director of Finance/ Treasurer has determined that a waiver of one or more provisions of this Debt Policy should be considered by the City Council, it will include in the agenda bill the rationale for the waiver and the impact of the waiver on the proposed debt issuance and on taxpayers, if applicable.
Upon a majority vote of the City Council, one or more provisions of this Debt Policy may be waived for a debt financing.
The failure of a debt financing to comply with one or more provisions of this Debt Policy shall in no way affect the validity of any debt issued by the City in accordance with applicable laws.
Council Policy 220-05. Last updated November 12, 2024 via Council Resolution 2024-218.
DEBT ADMINISTRATION
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Debt Administration
Debt Portfolio
The City of Chula Vista periodically utilizes various mechanisms for borrowing to finance large capital assets such as infrastructure, buildings, and large equipment. The City’s Debt Portfolio is a summary of its outstanding bonded indebtedness by issuance. The purpose of this report is to provide Chula Vista citizens, investors, and the general public information on the City’s bonded indebtedness. Also included within the report are Redevelopment Agency/ Successor Agency obligations, and other City debt such as Special Tax District liabilities and HUD Section 108 Loan repayments
The City’s debt portfolio can be accessed at the following link:
www.chulavistaca. gov/ departments/ finance/ financial- reports Based on the estimated balances for the year ending June 30, 2025, the City and the former Redevelopment Agency Agency) borrowed funds through several long-term debt issues and held other obligations which are to be funded for a period of time exceeding one year. A summary of the City’s current debt obligations is categorized in the following table
Long Term Debt
Description Principal Interest Total
Outstanding
Principal
Balance
Final
Maturity Purpose
General Fund Obligations
2014 Refunding COP 45,920,000 22,832,196 68,752,196 24,645,000 2032 Police Facility Project 2015 Refunding COP 34,330,000 13,315,468 47,645,468 16,575,000 2034 Civic Center Project 2016 Refunding COP 8,600,000 4,309,945 12,909,945 8,600,000 2036 Civic Center Project 2016 Lease Revenue Refunding
Bonds 25,885,000 8,128,865 34,013,865 12,810,000 2033
Capital Lease Refunding
Project
2017 Lease Revenue Bonds 61,355,000 16,879,834 78,234,834 13,960,000 2027 Measure P Projects Lease Revenue Bonds Series 2017A 12,045,000 10,966,567 23,011,567 11,785,000 2049 CREBs ( Taxable) Lease Revenue Bonds Series 2017B 1,085,000 279,747 1,364,747 440,000 2029 CREBs ( Tax-Exempt) 2021 Taxable Pension Obligation
Bonds 350,025,000 134,166,096 484,191,096 316,505,000 2045 CalPERS UAL General Fund Subtotal 539,245,000 210,878, 718 750,123,718 405,320,000 RDA/ Successor Agency Bonded
Indebtedness
2016 Tax Allocation Refunding Bonds 29,315,000 12,279,980 41,594,980 14,940,000 2036 Refinance Tax Allocation
Bonds
RDA/ Successor Agency Subtotal 29,315,000 12,279, 980 41,594,980 14,940,000 Other Debt
HUD Section 108 Loan 5,886,000 862,631 6,748,631 2,702,000 2029 CDBG CIP Financed Purchases 8,199,092 Financed purchases
Notes/ Loan Payable 174,056 Various
Leases 1,003,367 Various
Subscriptions 3,215,188 Various
Miscellaneous Claims Payable 39,749,504 Various
Compensated Absences 11,140,531 Employee leave
Other Debt Subtotal 5,886,000 862,631 6,748,631 66,183,738 Total Long Term Debt 574,446,000 224,021, 329 798,467,329 486,443,738 City of Chula Vista
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Bond Ratings
Description Rating Agency Bond Rating
2014 Refunding COP Moody’s Aa3
2015 Refunding COP Moody’ s Aa3
2016 Refunding COP Moody’s Aa3
2016 Lease Revenue Refunding Bonds Standard & Poor’s AA2017 Lease Revenue Bonds Standard & Poor’s AALease Revenue Bonds Series 2D17A Standard & Poor’s AALease Revenue Bonds Series 2D17B Standard & Poor’s AA2021 Taxable Pension Obligation Bonds Standard & Poor’s AA 2016 Tax Allocation Refunding Bonds Standard & Poor’s A+ This section discusses the various types of long-term debt that the City has incurred. Bond financings, notes payable, financed purchases, and advances from other funds are the traditional forms of long-term debt that the City has incurred. However, also captured in this section are professional estimates derived from actuarial studies for workers compensation and general liability claims. In addition, the Finance Department provides an estimate of the City’s liability for compensated absences as of the end of each fiscal year. The following sections discuss the details of the City’s long-term debt
Tax Allocation Bonds ($ 14.9 million)
Tax Allocation Bonds ( TABs) are issued by the Agency and utilize tax increment revenue for debt service. The 2016 Tax Allocation Refunding Bonds ( TARBs) were issued to refund the 2006 Senior Tax Allocation Refunding Bonds, Series A, the 2006 Subordinate Tax Allocation Refunding Bonds, Series B and the 2008 Tax Allocation Refunding Bonds
Certificates of Participation / Lease Revenue Bonds ($ 88. 8 million) As of June 30, 2025, the City currently has three outstanding Certificates of Participation and four outstanding Lease Revenue Bonds. In February 2014, the Chula Vista Public Financing Authority ( CVPFA) issued the 2014 COP to refund the 2002 COP ( Police Facility Project), fund a reserve fund, and pay the costs incurred in connection with the execution and delivery of the Certificates. In September 2015, the CVPFA issued the 2015 COP to refund the 2004 COP ( Civic Center Project Phase I) and partially refund the 2006 COP ( Civic Center Project Phase II), fund a reserve fund, and pay the costs incurred in connection with the execution and delivery of the Certificates. In July 2016, the CVPFA issued the 2016 COP to refund the remaining 2006 COP ( Civic Center Project Phase II), fund a reserve fund and to pay the costs incurred in connection with the execution and delivery of the Certificates. In July 2016, the Chula Vista Municipal Financing Authority ( CVMFA) issued the 2016 Lease Revenue Refunding Bonds ( LRRB) to refund the 2010 COP ( Capital Facilities Refunding Projects) and to fund a reserve fund. In July 2017, the CVMFA issued the 2017 Lease Revenue Bonds ( LRB) to finance infrastructure, facilities and equipment and pay the costs incurred in connection with the issuance of the Bonds using Measure P Sales Tax as the dedicated revenue source for the debt service payments. In December 2017, the CVMFA issued the Lease Revenue Bonds Series 2017A and the Lease Revenue Bonds Series 2017B to finance photovoltaic energy systems at various City facilities, capitalize interest on the Bonds and pay the costs incurred in connection with the issuance of the Bonds.
Pension Obligation Bonds ($316.5 million)
In February 2021, the City of Chula Vista issued the Series 2021 Taxable Pension Obligation Bonds to pay all of the City’s currently unamortized, unfunded accrued actuarial liability to the California Public Employees Retirement System with respect to the City’s defined benefit retirement plans for City employees, to pay the premium fora municipal bond insurance policy for the Insured Bonds, and to pay costs of issuance of the Bonds.
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Bond Premium ($ 8.4 million)
The premium is composed of seven bond issuances. One premium is in connection with the 2014 COP refunding bonds. The original amount of the premium is $3,537,111 and will be amortized over the life of the bonds. The second premium is related to the 2015 COP refunding bonds. The original amount of the premium is $2,262,493 and will be amortized over the life of the bonds. The third premium is related to the 2016 COP refunding bonds. The original amount of the premium is $319,652 and will be amortized over the life of the bonds. The fourth premium is related to the 2016 LRRB. The original amount of the premium is $2,516,621 and will be amortized over the life of the bonds. The fifth premium is related to the 2016 TARBs. The original amount of the premium is $ 4, 687, 799 and will be amortized over the life of the bonds. The sixth premium is related to the 2017 LRB. The original amount of the premium is $10,008,509 and will be amortized over the life of the bonds. The seventh premium is related to the Lease Revenue Bonds Series 2017B. The original amount of the premium is $135,516 and will be amortized over the life of the bonds
Financed Purchases ($8.2 million)
In July 2013, the City Council authorized a 16-year lease purchase agreement with Banc of America Public Capital Corporation to fund various solar energy projects for City facilities. The original amount of the loan was $2,121,500 and will be repaid through future energy savings.
In August 2016, the City entered into a 10-year capital lease agreement with JP Morgan Chase Bank for the acquisition of one Pierce Aerial Ladder Truck. The original amount of the lease is $1,229,470.
In June 2017, the City entered into a 10-year Capital Lease Agreement with Motorola Solutions, Inc. for the acquisition of a PSA System. The original amount of the lease is $1,351,409.
In September 2018, the City entered into a 10-year Capital Lease Agreement with JP Morgan Chase Bank N.A. for one Pierce Arrow XT Triple Combination Pumper/ Fire Engine. The original amount of the loan was $720,786.
In July 2020, the City entered into a 5-year Capital Lease Agreement with Banc of America Public Capital Corporation for one Pierce Aerial Ladder Truck and one Pierce Arrow XT Triple Combination Pumper/ Fire Engine. The original amount of the loan was $2,273,805.
In July 2020, the City entered into a 5-year Capital Lease Agreement with Banc of America Public Capital Corporation for additional equipment related to the $2,273,805 lease agreement above. The original amount of the loan was 4,493,100.
In November 2022, the City entered into a 10-year Capital Lease Agreement with JP Morgan Chase Bank for two Pierce Arrow XT Pierce’s Ultimate Configuration ( PUC) Pumper and one Pierce Arrow XT 107’ Tractor Drawn Aerial TDA). The original amount of the loan was $3,986,967.
In December 2023, the City entered into a 5-year purchase agreement with Axon Enterprise, Inc. for body worn cameras. The original amount of the loan was $339,861.
In December 2023, the City entered into a 5-year purchase agreement with Axon Enterprise, Inc. for tasers. The original amount of the loan was $677,747.
In December 2023, the City entered into a 5-year purchase agreement with Axon Enterprise, Inc. for in-vehicle cameras. The original amount of the loan was $478,796.
In November 2024, the City entered into a 4-year lease purchase agreement with Lenovo Financial Services for mobile data computers. The original amount of the loan was $810,287.
Notes/ Loans Payable ($ 0.2 million)
In September 2007, the City Council authorized the City’s participation in the California Energy Commission and San Diego Gas and Electric On-Bill Financing program. The loans were to bridge the financial gap between energy conservation project capital costs and available rebates for energy conservation equipment. The original loan amount, which is paid in full, was $665,884 for the On-Bill Financing program. In fiscal year 2012 additional loans, totaling $ 3.7 million were entered into with the California Energy Commission.
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Proposed Budget FY 2026
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404
In December 2012, the City entered into a lease purchase agreement with Bank of America to purchase certain energy conservation equipment. The agreement would bridge the financial gap between the Municipal Streetlight Retrofit Project capital costs and the available rebates for energy conservation equipment. The original loan amount was $2.7 million.
CDBG Section 108 Loan ($ 2.7 million)
The City entered into a contract for Loan Guarantee Assistance with the U.S. Department of Housing and Urban Development ( HUD) as part of the Section 108 Loan Program in the amount of $9,500,000 in June 2008. The Section 108 Loan is an “advance” of future CDBG entitlement funds and as such is repaid with a portion of the City’s annual entitlement. Proceeds of the loan will be used to fund multiple capital improvement projects. Debt service payments will be made with future CDBG entitlements for 20 years.
On November 27, 2018, the City received notice from HUD regarding the opportunity to refinance the existing loan with a lower interest rate. On December 6, 2018, the City notified HUD of its election to redeem the current note. The City signed the agreement for the refinancing on January 23, 2019. This refinancing resulted in cost savings to the City from lower interest rates received during the remaining life of the loan.
Leases ($ 1.0 million)
Per GASB 87 Leases implementation in Fiscal Year 2021-2022, the City replaced capital leases with “ financed purchases” and “leases”. The balance shown above for leases represents the estimated balance through December 31, 2024, as of April 7, 2025. This total may increase if additional leases are identified and recorded during the 2nd January 1, 2025 – March 31, 2025) and 3rd quarter ( April 1, 2025 – June 30, 2025) of the fiscal year.
Subscriptions ($2.8 million)
Per GASB 96 Subscriptions- Based IT arrangements implementation in Fiscal Year 2022-2023, the City reports subscriptions as part of long-term debt. The balance shown above for subscription represents the estimated balance through December 31, 2024, as of April 7, 2025. This total may increase if additional subscriptions are identified and recorded during the 2nd (January 1, 2025 – March 31, 2025) and 3rd quarter ( April 1, 2025 – June 30, 2025) of the fiscal year.
Miscellaneous Claims Payable ($ 39.7 million)
The Miscellaneous Claims Payable represents the probable amount of loss as estimated by legal counsel and risk management staff due to worker’s compensation and general liability claims filed against the City.
Compensated Absences ($ 11.1 million)
The obligation for Compensated Absences represents the estimated dollar value of accumulated leave balances, primarily vacation leave, for employees that would have to be paid off if all permanent employees were terminated as of June 30, 2024.
Advances From Other Funds ($ 39.0 million)
Per Resolution 2015-035 of the City Council, interfund loans from the Transportation Development Impact Fee to the Fire Suppression System expansion component of the Public Development Impact Fee were consolidated into one loan totaling $10,500,000. The principal balance for the loan was $8,312,185 as of June 30, 2023. In accordance with Council Policy No. 220-06, approved via Resolution 2015-028, the financing costs shall be calculated using the City’s pooled investment earning rate on a quarterly basis.
City Council authorized a loan to Western PAD from Eastern PAD in the amount of $9,630,000 to acquire the 14.41 acre site located in the lower Sweetwater Valley owned by the Redevelopment Agency and $ 310,000 to acquire the 1.89 acre site located at Auto Park Place, Chula Vista. Per Resolution 2015-035 of the City Council, these loans were consolidated. The loan will be repaid as funds become available, either as a result of credit acquisitions by the Agency or the payment of PAD fees by developers in western Chula Vista; in conjunction with Council Policy No. 200-06, approved via Resolution 2015-028, the financing costs shall be calculated using the City’ s pooled investment City of Chula Vista
Proposed Budget FY 2026
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earning rate on a quarterly basis. The principal balance was $9,452,299 as of June 30, 2023. The Agency will ensure that PAD funds are repaid to fully fund the development of the park for which they were originally collected.
The City Council authorized and set terms for loans from the Trunk Sewer fund to Salt Creek for $16,848,381, to the Storm Drain fund for $744,612, and $803,331 from the Sewer Facility fund for capital improvement projects, via Resolution 2015-035. In accordance with Council Policy No. 220-06, approved via Resolution 2015-028, the financing costs shall be calculated using the City’s pooled investment earning rate on a quarterly basis. The principal balance was $18,881,379 on June 30, 2023, of which all $18,881,379 is outstanding from the Sewer Fund to the Sewer Development Impact Fees Fund and the portion due from the Sewer Fund to the Storm Drain Fund has been paid in full
On June 23, 2020, the City Council authorized a loan from the Measure A Fund to the Enterprise Transport Program Fund to cover start-up costs related to the new Ambulance Transport Services Program in the amount of 4,881,710, via Resolution 2020-152. The total loan utilized was only $ 3,209,31. The loan will be repaid from the final reimbursement under the City’ s expiring ambulance services contract plus revenues generated from the initial years of the Fire Department’ s Ambulance Services Operations, but no later than after 5 years of ambulance service operations. The principal balance was $2,318,434 as of June 30, 2023.
General Fund Long-Term Debt for Fiscal Year 2026
The General Fund’s annual debt service “ commitment” for the Certificates of Participation and the Lease Revenue Bonds and Pension Obligation Bonds in fiscal year 2026 is approximately $ 34. 2 million, or 11. 2% of the General Fund operating budget. However, it must be noted that although this amount is truly a General Fund commitment, only $23.9 million will actually be paid from General Fund resources, with the remaining amount paid from available development impact fees and residential construction tax. The $23.9 million represents approximately 7.8% of the General Fund operating budget. The $ 34.2 million represents ongoing level debt service payments as depicted in the following chart.
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Proposed Budget FY 2026
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Mi
l
l
i
o
n
s
Fiscal Years 2026 through 2046
Notes:
1) Total remaining annual debt service payments - principal and interest 2) Actual payments are funded by the General Fund, Development Impact Fee Funds, Residential Construction Tax, Gas Tax, City Jail, Advance Life Support Program, Federal Grants, Environmental Services, Chula Vista Housing Authority, Central Garage Fund, Development Services Fund and Sewer Service Fund, however all debt service obligations are backed by the General Fund. 3) The 2002 COP was refunded in FY2013 and became the 2014 Refunding COP. The 2004 COP was refunded and the 2006 was partially refunded and became the 2015 Refunding COP. The 2006 COP was refunded and became the 2016 Refunding COP. The 2010 COP was refunded and became the 2016 Lease Revenue Refunding Bonds.
Annual Debt Service Obligation of the General Fund
2014 Ref COP 2015 Ref COP 2016 Ref COP 2016 LRBB 2017 LRB 2017A LRB 2017B LRB 2021 POB
FY
2 0
2 6
FY
2 0
2 7
FY
2 0
2 8
FY
2 0
2 9
FY
2 0
3 0
FY
2 0
3 1
FY
2 0
3 2
FY
2 0
3 3
FY
2 0
3 4
FY
2 0
3 5
FY
2 0
3 6
FY
2 0
3 7
FY
2 0
3 8
FY
2 0
3 9
FY
2 0
4 0
FY
2 0
4 1
FY
2 0
4 2
FY
2 0
4 3
FY
2 0
4 4
FY
2 0
4 5
FY
2 0
4 6
0.00 5.00
10.00 15.00
20.00 25.00
30.00 35. 00
40. 00
SERVICE IMPACTS
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Proposed Budget FY 2026
Appendix SERVICE IMPACTS
409
Service Impacts
The service level impacts of an annual operating budget are the changes in the quantity and quality of the services provided by a City year over year. As economic cycles occur and City revenues rise and fall, it becomes a challenge to maintain service levels and implement a sustainable budget. In accordance with the City of Chula Vista’s budget priorities and Strategic Plan, the fiscal year 2026 Proposed Budget includes various changes in how services are funded and delivered. Departmental service impacts are highlighted in the Department Summary Reports section of this document under Significant Budget Adjustments & Service Impacts. Highlights of changes in services funding are described below.
Services Funding
In general, local governments provide many services to the general population at no charge, such as public safety, libraries, and roadways and park maintenance. These services are paid for with general revenues that the City receives, including taxes, charges for services, user fees and a variety of other smaller types of general revenues.
Tax Changes
Tax revenue is generally unrestricted and allocated to the City’s General Fund for programming expenditures. The City collects several types of tax revenue, such as property tax, sales tax, utility users’ tax, business license tax and transient occupancy tax. A discussion on the City’s major revenue sources, legislative factors and trends impacting these revenues is provided in the General Fund Revenue Summary section of this document There are no changes in tax rates planned for Fiscal Year 2026.
Fees Changes
Cities also offer many services that provide a specific benefit to the requesting party, for which a fee is assessed.
Development plans review, building inspections, golf greens, and public park space rentals are examples of some of the services the City provides that are paid for directly by the public—residents, non-residents, businesses, developers, etc.–based on receiving a specific benefit.
The City’s Master Fee Schedule was adopted to set the fees for a variety of services the City provides directly to the public. Fees levels are generally regulated by state laws (Propositions 13, 26 and 218) and the Citywide Cost Recovery Policy 159-03. City fees may not exceed the reasonable cost of providing a service/ benefit ( with exceptions) and are to be periodically reviewed in order to keep pace with changes in the cost of living ( Consumer Price Index) and methods or levels of service delivery. All changes to the Master Fee Schedule are approved by City Council.
The full Master Fee Schedule can be accessed at the following link: www.chulavistaca. gov/ departments/ finance/ master-fee-schedule
Changes made to the Master Fee Schedule and other charges for services during the Fiscal year 2025 and during the development of the Fiscal Year 2026 Proposed Budget are described in the table below.
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410
Description Change Fund Impact Justification
Development &
In-Lieu Fees
Varies; See Master Fee Schedule
Chapter 16: Development &
In-Lieu Fees
The City of Chula Vista has
experienced tremendous growth
in recent decades that brings
demand for additional public
facilities to meet the needs of
residents, workers, consumers, and
all those who visit our beautiful
City. To ensure new growth pays
its proportionate share of needed
expansions and upgrades to
infrastructure and facilities, the City
assesses Development Impact Fees
DIFs) and in-lieu fees on building
permits for new development in
the City
In California, the Mitigation Fee Act (Government
Code §§ 66000- 66025) and the Quimby Act
Government Code § 66477) allow the City to
assess development impact fees ( DIFs) and inlieu fees The fee rates are calculated to ensure that they are assessed proportional to the impact
created by new development, and the proceeds
from these fees can only be spent on expanding
or upgrading infrastructure that can be used by
the occupants of the new development in the
DIF’s “area of benefit.”
Several City administered DIF and in-lieu fees are
subject to an annual automatic rate increase, as
determined by a given published index. Fees are
calculated by identifying a connection between
the need for the new or expanded public facilities
paid for by the DIF and the forecasted impact
of growth in that DIF’s area of benefit. Fees are
adjusted annually, effective October 1, usually
using Engineering News Record’s (ENR) Historical
Construction Cost Indices ( CCI). DIFs may be
periodically reviewed and updated by City Council
to accommodate rising construction costs and
changes in growth or need for facilities.
Downtown Parking
District Meter
Rates
Parking meter rates in the
Downtown Parking District
were increased from $0.50 to
0.75 per hour on two-hour and
four-hour meters and from $0.25
to $0.50 per hour on ten-hour
meters ( Effective January 2,
2025).
Additional parking meter revenue
resulting from the rate increases
will be deposited within the Parking
Meter Fund to fund current year
operating and maintenance, and
capital expenses of the Downtown
Parking District.
Parking meter revenue provides resources
to support the annual operating and capital
expenses of the Downtown Parking District.
The last rate increase to parking meter rates in
the District was in 2007. In order to address the
projected fund deficits and maintain a positive
fund balance and adequate reserves in the
Parking Meter Fund, parking meter rates were
increased
Recreation Fees Master Fee Schedule Chapter 7
Recreation Fees: All General &
Program Fees and Facility User
Fees were increased by 16% in
Fiscal Year 2025.
City policy is to set fees given the
full cost of each service, allowing
optimum cost-recovery rates for
certain services and alleviating
unintended subsidization of
these services from General Fund
resources. Fee levels are set to
align with the reasonable cost
of providing the related services,
resulting in no net fund impact
The Citywide Cost Recovery Policy is to
periodically review fees to keep pace with
changes in the cost of living and methods or
levels of service delivery at least every five years.
These fee adjustments are necessary to align
with changes in the San Diego area’s Consumer
Price Index ( CPI) since the last fee update in
2021.
Sewer Service
Charge
Sewer Rates)
Rate increase of 5% starting July
1, 2024, and an increase of 5.5%
starting July 1, 2025.
Sewer Service Revenue and Trunk
Sewer Capital Funds will increase
revenues via rate increases through
FY 2025-26 to ensure sewer
expenses are covered and reserves
met
Based on an independent financial rate study
of the City’s sewer services, rate increases
are needed to fund the cost of operating and
maintaining the City’s sewer collection system,
investment in the infrastructure needed to provide
the service consistent with applicable federal,
state, and local laws, and to ensure adequate
financial reserves.
ACCOUNTING SYSTEMS
AND BUDGETARY
CONTROL
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Proposed Budget FY 2026
Appendix ACCOUNTING SYSTEMS AND BUDGETARY CONTROL
413
Budgetary Funds
FundsGovernmental Funds Proprietary
Enterprise
Funds
Internal
Service Funds
Debt Service
Funds
Capital Project
Funds
Special
Revenue Funds
General Fund
Sewer Funds
Development
Services Fund
Transport
Enterprise
Fiduciary Funds
Successor Agency to
the Chula Vista
Redevelopment
Agency
Fleet Fund
Measure A
Sales Tax
Fund
Measure P
Sales Tax
Fund
Housing
Authority
Successor
Agency
Housing Fund
Public
Liability
Trust Fund
Accounting Systems and Budgetary Control
The City of Chula Vista’s budget provides an overview of the fiscal and operational status of the City, highlighting policy issues, decisions, and changes in service levels. The budget is comprised of a series of funds used to account for revenues and expenditures. These funds are generally categorized as governmental or proprietary funds.
Funds Structure
Governmental funds include activities associated with the operations of the City such as the provision of library, recreation, and public safety services. Special revenue funds, capital project funds, debt service funds, and the City’s general fund are different types of governmental funds.
Proprietary funds are used to account for activities often found in the private sector including two fund types:
enterprise funds and internal service funds. Operations of the development service and sewer systems are accounted for as enterprise funds. Examples of functions accounted for by internal service funds include fleet management and workers’ compensation.
Fiduciary funds are used to account for resources held for the benefit of parties outside the City and are not available to support the City’s own programs. One fiduciary fund is budgeted to report assets, liabilities, and activities of the Successor Agency to the Chula Vista Redevelopment Agency.
Budget Book Organization
The budget document is organized around the following major funds – General Fund, Development Services Fund, Redevelopment Retirement Obligation Fund and Successor Agency to the Redevelopment Agency Funds, Sewer Funds, Fleet Service Funds, Capital Projects Funds, Debt Service Funds, and Other Funds. Details about each of these funds can be found in the corresponding sections of the document City of Chula Vista Fund Structure
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414
Each fund is considered an autonomous accounting entity. Funds are used to separate the various financial activities of the City and to demonstrate compliance with specific regulations, restrictions, or limitations. This may include demonstrating that restricted revenues are spent only for allowable purposes.
Basis of Accounting & Budgeting
The City’s accounting records and budget are prepared and maintained using a modified accrual basis of accounting– less unrealized gains or losses resulting from the change in fair value of investments– which follows the accounting practices for governmental units as recommended by the Governmental Accounting Standards Board. Basic City operations are accounted for in the City’s General Fund, with other activities accounted for in separate funds as required by law or determined by management discretion. Generally, revenues are recorded when measurable and available, and liabilities are recorded when incurred.
Internal Controls
In administering the City’s accounting systems, primary consideration is given to the adequacy of internal accounting controls, which include an array of administrative procedures. These controls are designed to provide reasonable, but not absolute, assurance regarding the safeguarding of assets against loss from unauthorized use or disposition, as well as the reliability of financial records for accurate and fair presentation of financial reports. The concept of reasonable assurance recognizes that the cost of specific controls should not exceed the benefits likely to be derived from exercising the controls, and that this evaluation necessarily involves estimates and judgments by management.
It is believed that the City’s internal accounting controls adequately safeguard City assets and provide reasonable assurance of proper recording of financial transactions.
Budgetary Control
The City Charter charges the Director of Finance with the responsibility to supervise and be responsible for the disbursement of all monies and have control over all expenditures to ensure that budget appropriations are not exceeded. The level of budgetary control, that is the level at which expenditures are not to exceed Council approved appropriations, is established at the department and expenditure category level ( e.g., personnel services, supplies and services, capital).
Budget Modifications
Any budget modification that would result in an appropriation increase requires City Council approval. The City Manager and Finance Director are jointly authorized to transfer up to $75,000 of appropriations between expenditure categories within a departmental budget. City Council approval via resolution is required for: 1) any appropriations transfer between departments; 2) appropriations transfers in excess of $75,000; and 3) appropriations transfers from CIP projects.
Encumbrances
An encumbrance ( commitment) accounting system is utilized as a technique to enhance budgetary control during the fiscal year. Appropriations encumbered ( committed) at year- end may be carried forward with City Manager approval and are available to be used for those commitments during the subsequent fiscal year. Unspent and unencumbered appropriations lapse at year-end and become generally available for re-appropriation the following fiscal year.
LIST OF ACRONYMS
City of Chula Vista
Proposed Budget FY 2026
Appendix LIST OF ACRONYMS
417
List of Acronyms
A
AA/ FS: Alternative Analyses/ Feasibility Study
AB: Assembly Bill
ABS: Asset Backed Securities
ACFR: Annual Comprehensive Financial Report
AD: Assessment Districts
ADA: Americans with Disabilities Act
ADP: Additional Discretionary Payment
ADR: Alternative Dispute Resolution
ADU: Accessory Dwelling Unit
ALS: Advanced Life Support
AMP: Asset Management Program
AMS: Asset Management System
ARPA: American Rescue Plan Act of 2021
ATGP: Active Transportation Grant Program
ATP: Active Transportation Program
ATS: Ambulance Transport System
AVPG: Autonomous Vehicles Proving Grounds
B
BLS: Basic Life Support
BFDIF: Bayfront Development Impact Fee
BMS: Building Management System
BRT: Bus Rapid Transit
BTA: Bicycle Transportation Account
C
CAD: Computer Aided Dispatch
CalPERS: California Public Employees Retirement System
CalRECYCLE: California Department of Resources Recycling and Recovery CALTRANS: California Department of Transportation
CAPPO: California Association of Public Purchasing Officers CA-TF8: California Task Force 8
CBAG: California Border Alliance Group
CCTV: Closed Circuit Television
CDBG: Community Development Block Grant
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Proposed Budget FY 2026
Appendix LIST OF ACRONYMS
418
CDTFA: California Department of Tax and Fee Administration CEQA: California Environmental Quality Act
CFAA: California Fire Assistance Agreement
CFD: Community Facility District
CIP: Capital Improvement Plan/ Project/ Program
CIPACE: Capital Improvement Budget & Project Management Database CMC: Certified Municipal Clerk
CMCP: Comprehensive Multimodal Corridor Plan
CMP: Corrugated Metal Pipe
COC: Citizens’ Oversight Committee
COP: Certificate of Participation
CPF: Community Purpose Facility
CPI: Consumer Price Index
CPI-U: Consumer Price Index for Urban Customers
CPUC: California Public Utilities Commission
CR: Congestion Relief
CREBS: Clean Renewable Energy Bonds
CVACF: Chula Vista Animal Care Facility
CVAS: Chula Vista Animal Services Department
CVEATC: Chula Vista Elite Athlete Training Center
CVPD: Chula Vista Police Department
CVPFA: Chula Vista Public Financing Authority
CWA: Clean Water Act
CY: Calendar Year
D
DAR: Direct Access Ramp
DCVA: Downtown Chula Vista Association
DFEH: Department of Fair Employment and Housing
DFR: Drone as First Responder
DHCP: Department of Housing and Community Development
DIF: Development Impact Fee
DMS: Drainage Management System
DVP: Delivery Versus Payment
E
ECDC: Emergency Communications & Data Center
EDD: California Employment Development Department
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Proposed Budget FY 2026
Appendix LIST OF ACRONYMS
419
EDU: Equivalent Dwelling Units
EEOC: U.S. Equal Employment Opportunity Commission
EIR: Environmental Impact Report
EMS: Emergency Medical Services
EMT: Emergency Medical Technicians
EOC: Emergency Operation Center
EPMC: Employer Paid Member Contribution
ERP: Enterprise Resource Planning
ESL: English as a Second Language
ETL: Extract, Transform, Load
EV: Electric Vehicle
EUC: Eastern Urban Center
F
FBI: Federal Bureau of Investigation
FCIP: Fire Company Inspection Program
FDIC: Federal Deposit Insurance Corporation
FEMA: Federal Emergency Management Agency
FF: Firefighters
FFN: Family, Friend, and Neighbor
FHWA: Federal Highway Administration
FLSA: Fair Labor Standards Act
FMS: Fleet Management System
FO: Functionally Obsolete
FOMC: Federal Open Market Committee
FPPC: Fair Political Practices Commission
FTE: Full-Time Equivalent
FY: Fiscal Year
G
GAAP: Generally Accepted Accounting Principles
GASB: Governmental Accounting Standards Board
GDP: Gross Domestic Product
GF: General Fund
GFOA: Government Finance Officers of America
GGMS: General Government Management System
GIS: Geographic Information System
GMOC: Growth Management Oversight Committee
City of Chula Vista
Proposed Budget FY 2026
Appendix LIST OF ACRONYMS
420
GO: General Obligation Bonds
GUC: General Use Certificates
GVRO: Gun Violence Restraining Order
H
HBP: Highway Bridge Program
HEV: Hybrid Electric Vehicle
HOV: High Occupancy Vehicle
HR: Human Resources
HRIS: Human Resources Information System
HSIP: Highway Safety Improvement Program
HUD: Housing and Urban Development
HUTA: Highway Users Tax Account
HVAC: Heating\ Ventilation\ Air Conditioning
I
IAF: Initial Attack Force
IDA: Industrial Development Authority
IDB: Industrial Development Bond
IPO: Initial Public Offering
ITS: Information Technology Services
J
JPA: Joint Power of Authority
L
LAIF: Local Agency Investment Fund
LAN: Local Area Network
LGIP: Local Government Investment Pools
LRB: Lease Revenue Bonds
LRRB: Lease Revenue Refunding Bonds
LRT: Light Rail Trolley
LTFP: Long-Term Financial Plan
M
MFA: Municipal Financing Authority
MGD: Million Gallons per Day
MOU: Memorandum of Understanding
MSCP: Multiple Species Conservation Plan
MTS: Metropolitan Transit System
City of Chula Vista
Proposed Budget FY 2026
Appendix LIST OF ACRONYMS
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MVLF: Motor Vehicle License Fee
N
NCD: Negotiable Certificate of Deposit
NEP: Neighborhood Reinvestment Program
NETOPS: Network Operations Division
NFIRS: National Fire Incident Reporting System
NOFA: Notice of Funding Availability
NPDES: National Pollutant Discharge Elimination System
NPU: Neighborhood Protection Unit
NRSRO: Nationally Recognized Statistical Rating Organization O
OPEB: Other Post-Employment Benefits
OSMS: Open Space Management System
P
PAD: Park Acquisition and Development
PARS: Public Agency Retirement Services
PCI: Pavement Condition Index
PERB: California Public Employment Relations Board
PF: Public Facilities
PFA: Public Financing Authority
PFDIF: Public Facilities Development Impact Fees
PHEV: Plug-In Hybrid Electric Vehicle
PID: Project Initiation Document
PIO: Public Information Specialist
PMS: Parks Management System
POB: Pension Obligation Bond
PPE: Personal Protective Equipment
PRF: Pension Reserve Fund
PSA: Public Service Announcements
PSU: Professional Standards Unit
R
RAISE: Rebuilding America Infrastructure with Sustainability and Equity RAC: Rubberized Asphalt Concrete
RCS: Regional Communications System
RCT: Residential Construction Tax
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Proposed Budget FY 2026
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RDA: Redevelopment Agency
RFP: Request for Proposals
RIM: Records and Information Management
RMA: Rate and Method of Apportionment
RMRA: Road Maintenance and Rehabilitation Account
RMS: Roadway Management System; Records Management System RORF: Redevelopment Obligation Retirement Fund
ROI: Return on Investment
RWQCB: Regional Water Quality Control Board
S
SA: Successor Agency
SANDAG: San Diego Association of Governments
SB: Senate Bill
SB2S: South Bay to Sorrento Study
SBBRT: South Bay Bus Rapid Transit
SDAR: San Diego Association of Realtors
SDFD: San Diego Fire Department
SDG& E: San Diego Gas & Electric
SEC: Securities Exchange Commission
SEFA: Single Audit of Federal Expenditures
SGIP: Smart Growth Initiative Program
SHA: State Highway Account
SR2S: Safe Routes to School
STEAM: Science, Technology, Engineering, Arts and Mathematics T
TAB: Tax Allocation Bond
TAG: Teen Advisory Group
TAP: Transportation Alternatives Program
TARB: Tax Allocation Refunding Bond
TDA: Transportation Development Act
TDIF: Transportation Development Impact Fee
TEFRA: Tax Equity and Fiscal Responsibility Act of 1982 TOT: Transient Occupancy Tax
TRANSNET: Transportation Sales Tax
TUT: Telephone Users’ Tax
City of Chula Vista
Proposed Budget FY 2026
Appendix LIST OF ACRONYMS
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U
UUT: Utility Users’ Tax
V
VLF: Vehicle License Fee
W
WAMP: Wastewater Asset Management Plan
WLAN: Wireless Local Area Networks
WMS: Wastewater Management System
WWMP: Wastewater Master Plan
WTDIF: Western Transportation Development Impact Fee
City of Chula Vista
Proposed Budget FY 2026 424
GLOSSARY
City of Chula Vista
Proposed Budget FY 2026
Appendix GLOSSARY
427
Glossary
A
Accrual Basis of Accounting – A method of accounting by which transactions are recognized when they occur, regardless of the timing of cash receipts and disbursements Accounting System – The collective set of records and procedures used to record, classify, and report information on the financial status and operations of the City.
Accounts Payable – Amounts owed by the City to external entities for goods and services received.
Accounts Receivable – Amounts due to the City from external entities for goods and services furnished.
Adopted Budget – The title of the budget following its formal adoption by resolution of the City Council.
Ad Valorem – In proportion to value, a basis for levy of taxes on property.
Amended Budget – The title of the budget version that includes all amendments to the Adopted Budget approved by Council throughout the fiscal year.
Amortization – Accounting technique used to spread out the costs for the use of a long-term asset over the expected period the long-term asset will provide value. Amortization schedules are used to present a repayment schedule on a specific maturity ( due) date.
Appropriation – A legislative act by the City Council authorizing the expenditure of a designated amount of public funds for a specific purpose.
Audit – An examination of City records and accounts by an external source to check their validity and accuracy.
B
Balanced Budget – The amount of budgeted expenditures is equal to or less than the amount of budgeted revenues plus other available sources. For budgeting purposes, the use of contingency reserves or use of fund balance will be considered revenue in defining a balanced budget.
Bond – A certificate of debt issued by a government or corporation guaranteeing payment of the original investment plus interest by a specified future date.
Bond Premium – Occurs when the interest rate on the bond (“ coupon rate”) is more than the market interest rate.
Investors are willing to pay more for the bond than its face value, creating a premium. The excess investors pay for the bond is classified as a premium and is amortized over the life of the bond.
Budget – A spending plan and policy guide comprising an itemized summary of the City’s probable expenditures and revenues for a given fiscal year.
C
Calendar Year ( CY) – The 12-month period from January through December.
Capital Assets – An asset with a useful life greater than three years.
Capital Expenditures – A specific undertaking involving procurement, construction or installation of facilities or related equipment which improves, preserves, enhances or modernizes the City’s provision of municipal services, has a useful life of at least five years, and costs in excess of $ 10, 000.
Capital Improvement Program – An ongoing five- year plan of single and multiple- year capital expenditures which is updated annually
Capital Improvement Project ( CIP) – Any major capital investment with a value of $50,000 or more and a minimum useful life of five years at a fixed location. CIPs may include construction or major repair of City buildings and facilities such as streets, roads, storm drains, traffic signals, parks, community centers, etc.
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Proposed Budget FY 2026
Appendix GLOSSARY
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Capital Project Funds – Funds that are utilized to account for resources used for the acquisition and construction of capital facilities by the City, with the exception of those assets financed by proprietary funds.
Clean Renewable Energy Bonds ( CREBs) – A certificate of debt issued by a government to finance renewable energy projects
Community Development Block Grant ( CDBG) Funds – Funds received from the federal government and expenditures as prescribed under the Community Development Grant Program.
D
Debt Service Funds – Funds used for payment of interest and principal toholders of the City’s various debt instruments.
Deferred Maintenance – A backlog of needed repairs to City facilities including facility maintenance, painting and structural repairs
Depreciation – The expense incurred with the expiration of a capital asset.
Direct Costs – Operational expenditures exclusive to a specific service or program.
Discretionary Revenue – Revenues that are generated by general or specific taxing authority such as Property or Sales Taxes.
E
Encumbrance – The designation or reserving of funds to buy an item or service.
Enterprise Funds – Funds established to account for specific services funded directly by fees and charges to users such as sewer services. These funds are intended to be self-supporting.
Expenditure – The actual outlay of monies set aside by appropriation for identified goods and services.
F
Fiduciary Funds – Used to account for resources held for the benefit of parties outside the government.
Fiscal Year (FY) – The twelve- month period beginning July 1st and ending June 30th of the subsequent calendar year.
Fringe Benefits – This consists of the costs to provide employee benefits that include the flexible benefit program, insurance, and retirement.
Full- time Equivalent Positions ( FTE) – The conversion of part-time, temporary, or volunteer positions to a decimal equivalent of a full-time position based on an annual amount of 2,080 hours worked.
Fund – A set of interrelated accounts to record revenues and expenditures.
Fund Balance – The excess of an entity’s assets over its liabilities. A negative fund balance is sometimes referred to as a fund deficit.
G
Generally Accepted Accounting Principles ( GAAP) – A uniform set of minimum standards for external financial accounting and reporting
Gann Appropriation Limit – A State of California mandated appropriation limit imposed on local jurisdictions.
General Fund – The City’s main operating fund that is used to pay for City services.
General Plan – The fundamental policy document that guides the City’s future growth and development.
General Revenue – See Discretionary Revenue.
Governmental Funds – Funds that are typically used to account for tax-supported activities. These include the general fund, special revenue funds, debt service funds, and capital project funds.
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Proposed Budget FY 2026
Appendix GLOSSARY
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Grants – A contribution by a government or other organization to provide funding for a specific project. Grants can either be classified as capital projects or programmatic, depending on the grant.
I
Indirect Cost – Costs that are essential to the operation of the City but not exclusive to any specific service or program.
Indirect costs are primarily associated with support departments such as City Clerk, City Attorney, Administration, Information Technology Services ( ITS), Human Resources, and Finance.
Infrastructure – Basic physical assets such as buildings, streets, sewers, and parks.
Interest Expense – Interest costs paid by the City of Chula Vista on loans and bonds.
Internal Service Funds – Funds that are used to finance and account for goods, special activities, and services performed by one City department for other City departments on a cost reimbursement basis L
Levy – To impose or collect a tax, special assessments, or charges for the support of City services.
Liability – Debt or other legal obligations arising out of past transactions that will be liquidated, renewed, or refunded at some future date
M
Major Fund – Funds whose revenues, expenditures/ expenses, assets or liabilities are at least 10% of the total for their fund category ( governmental or enterprise) and 5% of the aggregate of all governmental and enterprise funds in total. The general fund is always considered a major fund.
Memorandum of Understanding ( MOU) – A document detailing the outcomes of labor negotiations between the City and its various bargaining units.
Modified Accrual Basis of Accounting – A method of accounting in which revenues are recognized in the period they become available and measurable, and expenditures are recognized in the period the associated liability is incurred.
Municipal Code – A collection of ordinances approved by City Council.
N
Non- Capital Improvement Project Expenditures – Expenditures in this category are for large maintenance costs, studies, and various community outreach programs. By their nature, these maintenance upkeeps and programs are expended beyond a one-year period. Recording these types of expenditures in an operating type budget would skew the comparison of budgets from year to year, because of this, the City finds it more efficient to record these types of expenditures in the Non-Capital Improvement Project category.
Non- Major Fund – All funds which do not meet the criteria for a major fund. Major funds are funds where revenues, expenditures/ expenses, assets or liabilities are at least 10% of the total for their fund category ( governmental or enterprise) and 5% of the aggregate of all governmental and enterprise funds in total.
O
Operating Budget – Costs associated with the ongoing municipal services.
Ordinance – A formal legislative enactment by the City Council.
Other Expenditures – All budgeted expenditures that do not fall into one of the following primary expenditure categories: Personnel, Supplies and Services, Utilities, Transfers Out, CIP and Non-CIP Projects, and Capital.
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Proposed Budget FY 2026
Appendix GLOSSARY
430
P
Personnel Services Expenditures – Expenses related to employee compensation including salaries, wages, and benefits.
Program Revenue – Revenues generated by a given activity.
Proposed Budget – The title of the budget prior to its formal adoption by resolution of the City Council.
Proprietary Funds – Funds used to account for a government’ s business- type activities, which are supported, at least in part, by fees or charges.
R
Reserves – The portion of the General Fund balance set aside for contingencies.
Resolution – A special order of the City Council that requires less legal formality than an Ordinance.
Revenue – Funds received from various sources to finance expenditures.
S
Salary Savings – A budgeting tool, shown as negative expenses, which lowers the total Personnel Services budget based on the likelihood of unfilled positions during the year. The target amount varies based on vacancy trends, normal attrition, leaves of absence and under-filled positions.
Sewer Funds – Funds that account for revenues and expenditures related to the City’s sewer programs, including maintenance and expansion of the City’s conveyance system and payment of Metro Sewer treatment costs.
Special Revenue Funds – Funds that are used to account for proceeds derived from specific revenues sources, which are legally restricted to expenditures for special purposes. ( e.g., Transportation Funds, Parking Funds, Public Safety Funds)
Spending Plan – A preliminary budget approved by Council contingent upon subsequent adoption of appropriations.
Supplies and Services Expenditures – Expenditures for supplies required for the daily operation of the City and for contractual and professional services.
T
Transfers Out Expenditures – Expenditures in this category are the authorized exchanges of cash, positions, or other resources between organizational units.
U
Unfunded Accrued Liability – Expenditures related to the shortfall between what the City has in assets and what it will need in assets to fully pay out the benefits that it has promised to retirees under CalPERS.
Utilities Expenditures – Expenses related to the consumption of services including electricity, natural gas, water, and telephone services.
Y
Yield – The rate of return earned on an investment based on the price paid.