Desert Hot Springs City Council
June 4, 2024

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City of Desert Hot Springs

AMENDED AGENDA

REGULAR MEETING OF THE CITY COUNCIL
and the City Council Serving as the Successor Agency to the Former Redevelopment Agency Board
Tuesday, June 4, 2024
4:30 PM - Closed Session
5:15 PM - Presentations
6:00 PM - Regular Session
Council Chambers/City Hall
11-999 Palm Drive
Desert Hot Springs, California, 92240

Page
CLOSED SESSION - 4:30 P.M.

CALL TO ORDER

ROLL CALL

PUBLIC COMMENTS
At this time, item(s) on the Closed Session agenda may be discussed during Public Comments. PLEASE STATE YOUR NAME FOR THE RECORD.

CLOSED SESSION:

1. CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION
(Paragraph (1) of subdivision (d) of Section 54956.9)
Name of case: (Paula Terifaj v. City of Desert Hot Springs) Riverside County Superior Court Case Number: CVPS2304283)

2. CONFERENCE WITH LEGAL COUNSEL—ANTICIPATED

LITIGATION
Significant exposure to litigation pursuant to paragraph (2) of subdivision (d) of Section 54956.9: (One Two potential cases) RECESS
PRESENTATIONS - 5:15 P.M.

Retirement Recognition - Carol Morin, Mission Springs Water District
Indian Canyon Drive Update

REGULAR SESSION - 6:00 P.M.

CALL TO ORDER

ROLL CALL

INVOCATION

PLEDGE OF ALLEGIANCE

CITY ATTORNEY REPORT ON CLOSED SESSION

APPROVAL OF AGENDA
At this time the City Council may amend the order of the agenda, approve the Consent Calendar, remove items from the Consent Calendar for separate discussion and action, and add Urgency Items.

Urgency Items ("Added Starters"): The Brown Act, which governs public meetings, permits the City Council to take action on any item that does not appear on the agenda only if 2/3 of the City Council (if all are present) or all members of the City Council (if fewer than all members are present) determine there is a need to take immediate action on the item, and the need to take immediate action came to the City Council's attention after the agenda was posted.

PUBLIC COMMENTS
At this time, pursuant to the Brown Act, any person may comment on matters of general interest within the subject matter jurisdiction of the City Council, NOT listed on the agenda. Under the Brown Act, the City Council should not take action on or discuss matters raised during Public Comment portion of the agenda that are not listed on the agenda.

Comments are limited to the first ten (10) speakers at three (3) minutes per speaker. Speakers may not yield their time to others without consent of the Mayor. All comments are to be directed to the City Council and shall be devoid of any personal attacks. Members of the public are expected to maintain a professional, courteous decorum during public comments.

Please complete and submit a "speaker card" to the City Clerk. You will be asked to STATE YOUR NAME AND CITY OF RESIDENCE FOR THE RECORD.

CITY MANAGER REPORT

MAYOR AND COUNCIL MEMBER REPORTS
ADMINISTRATIVE CALENDAR:

3. Audited Financial Statements for Fiscal Year 2022-2023 Geoffrey Buchheim, Administrative Services Director
Recommendation: Receive and file.

Staff Report - SR-24-140 - Pdf
7 - 169

4. Presentation and Request for Support for Lift to Rise's 2024-26 Affordable Housing Action Plan
Erick Becerril, Housing & Community Program Manager
171 - 187

Recommendation:

Staff recommends that the City Council consider:
1) Receive and file the presentation on Lift to Rise's 2024-26 Affordable Housing Action Plan;
2) Support the goals and initiatives outlined in the Action Plan; and 3) Direct staff to collaborate with Lift to Rise and other community partners to advance affordable housing projects within Desert Hot Springs.

Staff Report - SR-24-141 - Pdf
CONSENT CALENDAR:

Matters on the "Consent Calendar" are considered routine and may be acted upon by one motion under "Approval of the Agenda." Individual items may also be removed by the City Council for separate discussion under "Approval of the Agenda." The title is deemed to be read and further reading waived on any ordinance listed on the Consent Calendar for second reading and adoption.

5. City Council Regular Meeting Minutes: May 21, 2024
Jerryl Soriano, City Clerk
Recommendation: Approve the Minutes as presented; or as corrected.

Staff Report - SR-24-144 - Pdf
189 - 200

6. Cooperative Agreement with the County of Riverside to Provide Fire Protection, Fire Prevention, Rescue, Fire Marshal, and Medical Emergency Services and with a Fuel Use Agreement.

Geoffrey Buchheim, Administrative Services Director
Recommendation:

Approve the Cooperative Agreement with the County of Riverside to provide fire protection, fire prevention, rescue, Fire Marshal, and Medical Emergency Services and a Fuel Use Agreement for a term of July 1, 2024 to June 30, 2029.

Staff Report - SR-24-136 - Pdf
201 - 237

7. Community Facilities District 2006-1 Improvement Area No. 1, Levy and Collection of Special Taxes for Fiscal Year 2024-25 Geoffrey Buchheim, Administrative Services Director
Recommendation:

Adopt a Resolution of the City Council Ordering the Levy and Collection of Special Taxes within Community Facilities District No. 2006-1 Improvement Area No. 1, for Fiscal Year 2024-25.

Staff Report - SR-24-138 - Pdf
239 - 247

8. Resolution Listing Projects to be Funded by Senate Bill 1 for Fiscal Year 2024-2025
Daniel Porras, Assistant City Manager
Recommendation:
249 - 254

Adopt a Resolution of the City Council listing projects to be funded in Fiscal Year 2024-2025 by Senate Bill 1 (SB1)– Road Maintenance Rehabilitation Account (RMRA) Funds with an estimated amount of $700,000.

Staff Report - SR-24-143 - Pdf

9. Approval of Side Letter Agreement to the Memorandum of Understanding (MOU) with the Desert Hot Springs Police Officers' Association (DHSPOA)
Frank Luckino, City Manager
Recommendation:
1) Approve the Side Letter Agreement to the MOU between the City of Desert Hot Springs and the DHPOA; and
2) Authorize the City Manager to execute the Side Letter Agreement on behalf of the City.

Staff Report - SR-24-142 - Pdf
255 - 259

10. Tow Franchise Services
Jim Henson, Police Chief
Recommendation:

Authorize the City Manager to execute a Towing Franchise Service Agreement with Aarco Towing to exclusively provide towing service per the Towing Franchise Agreement with substantive edits to be negotiated and approved by the City Manager and upon approval as to form by the City Attorney. These services will be provided within the city limits for the Police Department, as well as other City Departments on a as needed basis.

Staff Report - SR-24-135 - Pdf
261 - 280

11. Second Reading and Adoption of An Ordinance Amending Mobile Food Facility, Street Vendor, and Peddler Regulations.

Jerryl Soriano, City Clerk
Recommendation:

Approve Second Reading, read by title only and adopt: "An Ordinance of the City Council of the City of Desert Hot Springs, amending Title 5 "Business License and Regulations" of Chapter 5.28 "Sidewalk Vendors and Peddlers" and Chapter 5.52 "Mobile Food Facilities" of the Desert Hot Springs Municipal Code."
Staff Report - SR-24-139 - Pdf
281 - 307

PUBLIC COMMENTS
Opportunity is given to those members of the public who have NOT addressed the City Council on an item which is NOT on the agenda. Comments are limited to three (3) minutes per speaker. PLEASE STATE YOUR NAME AND CITY OF RESIDENCE FOR THE RECORD.

ADJOURN

UPCOMING MEETING DATES
*Please refer to the City website calendar at www.cityofdhs.org for meeting locations and the most up to date information.

June 11 Planning Commission 6:00 p.m.

June 13 Public Safety Commission 6:00 p.m.

June 18 City Council Regular Meeting CANCELED
________________________________________________________________________________________

NOTICES
In accordance with California Government Code Section 54957.5, any writing or document that is a public record, relates to an open session agenda item, and is distributed less than 72 hours prior to a regular meeting will be made available for public inspection in the Office of the City Clerk at City Hall during normal business hours at 11999 Palm Drive, Desert Hot Springs, CA 92240.

If, however, the document or writing is not distributed until the regular meeting to which it relates, then the document or writing will be made available to the public at the location of the meeting, as listed on this agenda at 11999 Palm Drive, Desert Hot Springs, CA 92240.

Americans with Disabilities Act
In an effort to comply with the requirements of Title 2 of the Americans with Disabilities Act of 1990, the City of Desert Hot Springs requires that any person in need of any type of special equipment, assistance, or accommodation(s) in order to communicate at a City public meeting, must inform the City Clerk a minimum of 72 hours prior to the scheduled meeting to enable the City to make reasonable arrangements.

SR-24-140
City of Desert Hot Springs
City Council

AGENDA ITEM REPORT
To: City Council
Date: June 4, 2024
Department: Administrative Services
Prepared by: Geoffrey Buchheim, Administrative Services Director Subject: Audited Financial Statements for Fiscal Year 2022-2023 RECOMMENDATION:

Receive and file.

DISCUSSION:

The City is required to complete an independent annual audit every year. The Fiscal Year 2022-2023 audit has been completed by the audit firm of The Pun Group, LLP. The audited financial reports include the Audited Financial Statements for the Fiscal Year 2022-2023 for the City of Desert Hot Springs, the Compliance as the Housing Successor for the Desert Hot Springs Housing Authority for the Fiscal Year 2022-2023, Report on Applying Agreed-Upon Procedures to Utility User Tax, Report on Compliance of the U.S. Department of Treasury Coronavirus State and Local Fiscal Recovery Funds Program and Report on applying agreed-upon procedures to appropriations limit schedule for Fiscal Year Ended June 30, 2023.

FISCAL IMPACT:

There is no fiscal impact due to this action.

ATTACHMENTS:
1) 2023 Independent Auditors Reports and Basic Financial Statements FINAL 2) 2023 Desert Hot Springs Housing Compliance Report FINAL 3) 2023 UUT Report FINAL
4) 2023 ACEE SLFRF Examination Report FINAL
5) 2023 GANN Report FINAL
Item Number: 3.

City of Desert Hot Springs
Desert Hot Springs, California
Independent Auditors’ Reports and
Basic Financial Statements
For the Year Ended June 30, 2023
Item Number: 3.

Item Number: 3.

City of Desert Hot Springs
Basic Financial Statements
For the Year Ended June 30, 2023
Table of Contents
Page
Independent Auditors’ Reports on the Audit of the Financial Statements ........................................................ 1 Management’s Discussion and Analysis (Required Supplementary Information) (Unaudited) ...................... 5 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position ........................................................................................................................... 19 Statement of Activities ............................................................................................................................... 20 Fund Financial Statements:

Governmental Fund Financial Statements:

Balance Sheet ....................................................................................................................................... 24 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ..................................................................... 27 Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................... 28 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities .................................................................................................................. 30 Proprietary Fund Financial Statements:

Statement of Net Position ..................................................................................................................... 33 Statement of Revenues, Expenses, and Changes in Net Position......................................................... 34 Statement of Cash Flows ...................................................................................................................... 35 Fiduciary Fund Financial Statements:

Statement of Fiduciary Net Position .................................................................................................... 39 Statement of Changes in Fiduciary Net Position .................................................................................. 40 Notes to the Basic Financial Statements ........................................................................................................... 45 Required Supplementary Information (Unaudited):

Budgetary Comparison Schedules:

General Fund .............................................................................................................................................. 83 Public Safety Special Revenue Fund .......................................................................................................... 84 American Recovery Act Special Revenue Fund ......................................................................................... 85 Housing Authority Special Revenue Fund ................................................................................................. 86 Notes to the Budgetary Comparison Schedules ................................................................................................ 87 Schedule of the City’s Proportionate Share of the Net Pension Liabilities and Related Ratios ............................................................................................................................................. 88 Schedule of the City’s Contributions – Pensions .............................................................................................. 90 Item Number: 3.

City of Desert Hot Springs
Basic Financial Statements
For the Year Ended June 30, 2023
Table of Contents (Continued)
Page
Supplementary Information:

Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:

Capital Improvement Capital Projects Fund ............................................................................................... 95 Debt Service Fund ................................................................................................................................................... 96 Nonmajor Governmental Funds:

Combining Balance Sheet ....................................................................................................................................... 99 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ................................ 104 Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual Nonmajor Special Revenue Funds:

Special Gas Tax Special Revenue Fund ...................................................................................... 109 SBI Road Maintenance and Rehabilitation Special Revenue Fund ............................................. 110 Municipal Lighting / Landscaping Assessment District Special Revenue Fund ......................... 111 Measure A Special Revenue Fund ............................................................................................... 112 Air Quality Control Special Revenue Fund ................................................................................. 113 Art in Public Places Special Revenue Fund ................................................................................. 114 Quimby Act Special Revenue Fund............................................................................................. 115 Drainage Assessment District Special Revenue Fund ................................................................. 116 County Service Area 152 (CSA-152) Special Revenue Fund ..................................................... 117 Cabot's Museum Special Revenue Fund ...................................................................................... 118 Supplemental Law Enforcement Service (SLESF) Special Revenue Fund ................................. 119 Abandoned Vehicle Abatement Special Revenue Fund .............................................................. 120 Community Development Block Grant Special Revenue Fund .................................................. 121 Capital Improvement Deposits Special Revenue Fund ............................................................... 122 Department of Cannabis Control Special Revenue Fund ............................................................ 123 Assessment District 91-1 Capital Projects Fund .......................................................................... 124 Internal Service Funds:

Combining Statement of Net Position ...................................................................................................... 127 Combining Statement of Revenues, Expenses, and Changes in Net Position .......................................... 128 Combining Statement of Cash Flows ....................................................................................................... 129 Custodial Funds:

Combining Statement of Fiduciary Net Position ...................................................................................... 133 Combining Statement of Changes in Fiduciary Net Position ................................................................... 134 Item Number: 3.

200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT AUDITORS’ REPORT
To the Honorable Mayor and Members of the City Council
of the City of Desert Hot Springs
Desert Hot Springs, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Desert Hot Springs, California (the “City”), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2023, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

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

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Item Number: 3.

To the Honorable Mayor and Members of the City Council
of the City of Desert Hot Springs
Desert Hot Springs, California

2 Auditors’ Responsibility for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

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

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

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Budgetary Comparison Schedules, the Schedule of the City’s Proportionate Share of the Net Pension Liabilities and Related Ratios, and the Schedule of the City’s Contributions – Pensions be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by Government Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Item Number: 3.

To the Honorable Mayor and Members of the City Council
of the City of Desert Hot Springs
Desert Hot Springs, California

3 Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Combining and Individual Fund Financial Statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Combining and Individual Fund Financial Statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 23, 2024 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Santa Ana, California
May 23, 2024
Item Number: 3.

4 This page intentionally left blank.

Item Number: 3.

5 Management’s Discussion and Analysis
(Unaudited)
The City of Desert Hot Springs is offering a narrative, overview and analysis of the financial activities for the fiscal year end June 30, 2023.

Overview of the Financial Statements
The City Executive Team of the City of Desert Hot Springs (City) offers readers of the City’s financial statements this narrative overview and analysis of the City’s financial activities for the fiscal year ended June 30, 2023. It has been designed in accordance with standards established by the Governmental Accounting Standards Board. Please read this overview in conjunction with the accompanying financial statements.

1. The Government-wide Financial Statements provide information about the overall financial condition of the City. The Statement of Net Position and the Statement of Activities and Changes in Net Position statements include all assets, deferred outflow and liabilities, deferred inflows of the City using the accrual basis of accounting, which is like the accounting used by most private sector companies.

2. The Fund Financial Statements provide additional information about the City’s major funds, how services were financed in the short term and fund balances available for financing future projects.

3. The Notes to the Financial Statements provide additional detail that is essential to a full understanding of the information provided in the government-wide and fund financial statements.

In addition to the basic financial statements and accompanying notes, this report also presents certain required and other supplementary information, including budgetary comparison information on the City’s General fund, which is intended to furnish additional detail to support the basic financial statements themselves.

Fiscal Year 2022-2023 Highlights
 The City’s total net position was $60,111,215 as of June 30, 2023;  Consolidated General Fund (including Public Safety Fund) Revenue totaled $29,857,607;  Consolidated General Fund Expenses totaled $32,635,976;  The fund balance in the Consolidated General Fund decreased by $4,655,537 for a total of $9,044,185;  The decrease in the fund balance of the Consolidated General Fund was due to a reduction in the Cannabis Cultivation Tax that occurred in the spring of 2023 as well as several one-time expenditures that included $1.8 million for abatement and demolition services of several large abandoned hotel sites that had become dangerous as well as capital asset expenditures which included the purchase of the old county library building.  The City has an Emergency Reserve in place for economic contingency that is set at 57% of the Consolidated General Fund annual appropriations which is funded by cannabis tax revenues and 20% reserve in place for the General Fund of which 25% is for natural or fiscal emergencies and 8% is for future operations and capital use for a total of $9,044,185 in reserves;
 The City’s Tax revenue received in 2022-2023 (not including cannabis related taxes) was up 9% over the prior fiscal year due to significant increases in Transient Occupancy Tax and Property Tax;  Marijuana related taxes decreased by $866,727 from FY 2021-2022 to FY 2022-2023 which is a decrease of 16% over the prior year;
 The City has completed the improvement projects for the Carl May Center and tenant improvements to the Police Department building using the proceeds from the Series 2021 Bonds;  The City has upgraded the fitness equipment in the gym at the Health & Wellness Center;  The City’s Recreation Department has expanded its recreation programs to meet the evolving needs and interests of the community;
 The City has implemented new technology for its recreation programs to streamline the registration process, communication, and program management;
 The Code Compliance Department amended the Short-term Vacation Rental Ordinances to better serve the needs of the community.

Item Number: 3.

6  Launched a residential and commercial beautification program to provide improvement grants to business owners and owner-occupied property owners;
 Approved an ordinance to help combat human trafficking by requiring massage establishment permits and strengthened regulations.
 The Police Department engaged Epic Recruiting to provide an intense recruiting campaign to fill vacant police officer positions with good quality candidates.
 The City’s new dispatch center officially opened in February 2023 and is the first in the State to operate with the NextGen 911 Cloud Based Dispatching System.
 The City’s Animal Control Facility was able to increase the number of kennels from 16 to 23.  The City completed the 8th Street Sidewalk Project which consisted of installation of sidewalks and ADA ramps on the north side of 8th Street connecting Palm Drive to Wardman Park.

Government-wide Financial Statements and Financial Analysis The Government-wide Financial Statements provide a broad overview of the City's activities and are comprised of the Statement of Net Position and the Statement of Activities.

The Statement of Net Position presents information about the financial position of the City on the accrual basis, like that used in the private sector. It shows the City’s assets, deferred outflow of resources, liabilities and deferred inflows of resources with the difference reported as net position. Over time, increases or decreases in the City’s net position are among indicators used to assess whether the financial condition of the City is improving or deteriorating. It is also important to consider other non-financial factors, such as changes in the City’s property tax values and sales tax outlets and the condition of the City’s infrastructure (i.e. parks and streets) to accurately assess the overall health of the City.

The Statement of Activities presents information about the City’s revenues and all its expenses, also on the accrual basis, and explains in detail the change in net position for the year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.

Both government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include General Government, Public Safety, Public Works, Economic Development and Culture and Leisure.

The government-wide financial statements can be found on pages 19-20 of this report.

Fund Financial Statements
A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other State and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.

Governmental Funds
Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements.

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

Item Number: 3.

7 The City maintains four (4) major individual governmental funds; the General Fund (which is consolidated with the Health and Wellness Facility and the Marijuana Reserve Fund), Public Safety Special Revenue Fund, American Recovery Act Special Revenue Fund, Housing Authority Special Revenue Fund, Capital Improvement Capital Projects Fund, and the Debt Service Fund. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund. Data from the other 16 non-major governmental funds are combined into a single, aggregate presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in the report.

For fiscal years 2018-2019 and 2019-2020, the City adopted a two-year budget for its General Fund and other funds.

Due to the uncertainty surrounding COVID-19, the City adopted a one-year budget for fiscal year 2020-2021. Starting with fiscal year 2021-2022, the City has reinstated the two year budget for the 2021-2022 and 2022-2023 fiscal years.

The following funds are included to make up the non-major governmental funds:

Special Revenue Funds: Special Gas Tax Fund, SB1 Road Maintenance and Rehab, Municipal Lighting and Landscaping Assessment Districts Funds, Measure A Fund, Air Quality Control Fund (AQMD), Art in Public Places Fund, Quimby Act Fund, Drainage Assessment Districts Funds, County Service Area 152 (CSA-152) Fund, Cabot’s Museum Fund, Supplement Law Enforcement Services Account Fund (SLESA), Abandoned Vehicle Abatement Fund, Community Development Block Grant Fund (CDBG), Capital Improvements Deposits Fund, and the Department of Cannabis Control Fund.

Capital Projects Funds: Assessment District 91-1 Fund
The basic governmental fund financial statements can be found on pages 24-30 of this report.

Proprietary Funds
Proprietary funds can be broken down into two different types. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the Health & Wellness Center Foundation acquisition of real property and completion of the buildings and improvements at the Health and Wellness facility center. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for the City’s risk management and equipment replacement activities associated with City vehicles. Because the vehicle services primarily benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements.

Internal service funds are used to allocate costs among the City’s various functions. The City has (3) internal service funds: equipment replacement, workers compensation insurance and general liability insurance.

The basic proprietary fund financial statements can be found on pages 33-35 of this report and the internal service funds can be found on pages 127-129 of this report.

Fiduciary Funds
Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of these funds are not available to support the City's own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

Currently the City has two separate Fiduciary Funds reporting financial inflows and outflows for the Successor Agency, which is a private purpose trust fund, and one Agency Fund. The Agency Fund includes various funding (Community Services Agency Funds and the Community Facilities District Skyborne Agency Funds) which is controlled primarily through legal agreements and applicable State and Federal laws.

The basic fiduciary fund financial statements can be found on pages 39-40 of this report.

Item Number: 3.

8 Notes to the Financial Statements
The notes provide additional information that is essential to a full understanding of the data provided in the governmentwide and fund financial statements. The notes to the basic financial statements can be found on pages 45-80 of this report.

Other Information
In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning budgetary comparisons for the general fund. Required supplementary information can be found on pages 83-96 of this report.

The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 99-108 of this report.

Government-wide Financial Analysis
Over the past year the City experienced a significant increase in tourists visiting the City which resulted in the Transient Occupancy Tax revenue reaching over the $4 million mark for the first time ever. However, the cannabis industry still continues to struggle which has resulted in reduced cannabis taxes for FY2022-2023. In 2023, the City Council temporarily reduced the cannabis cultivation tax in half to provide temporary relief for cultivation facilities. City staff is performing a review of the City’s cannabis regulations and cannabis industry and will provide recommendations for permanent changes to the City Council.

Other major revenue changes occurred during fiscal year 2022-2023 in the following areas;  Property Taxes increased from $1,898,981 in FY 2021-2022 to $2,270,974 in FY 2022-2023 approximately a 20% increase in tax revenue over the prior year. The increase was due to higher assessed property values from the development of vacant land in the City for houses, cannabis facilities, and other economic development.
 Transient Occupancy Taxes increased from $3,779,227 in FY 2021-2022 to $4,253,943 in FY 2022- 2023 approximately a 13% increase from the prior year. This increase is due increased tourism to the City as well as the opening of the new Azure Palm Hot Springs Resort.  Cannabis taxes decreased from $5,309,489 in FY 2021-2022 to $4,442,762 in FY 2022-2023, approximately a 16% decrease over the prior year. The decrease is due reduced sales for the struggling industry as well as the temporarily reduced cultivation tax rate.  Franchise Fees increased from $2,184,708 in FY 2021-2022 to $2,350,450 in FY 2022-2023 approximately an 8% increase over the prior year.
 Utility User Taxes increased from $3,867,467 in FY 2021-2022 to $4,630,368 in FY 2022-2023 approximately a 20% increase from the prior year.

The County has adopted the Alternative Method of Distribution of the Tax Levies and Collections and of the Tax Sale Proceeds (the “Teeter Plan”), as approved for in Section 4701 and following of the California Revenue and Taxation Code. Under the Teeter Plan, each participating local agency levying property taxes in the County, including the City, received the amount of uncollected taxes credited to its fund, in the same manner as of the account due from the taxpayers have been collected.

In January 2022, the City issued $15 million in Lease Revenue Bonds for City facility improvements and to explore the purchase of the vacant Animal Hospital on Palm Drive from the Coachella Valley Humane Society. During FY2022- 2023, the City has completed improvements to the Carl May Center and the Police Department building, however, with the significant increase in inflation, construction costs have increased to the level where the $15 million in bond proceeds will not be sufficient to cover the costs of the remaining projects. City staff is in the process of re-examining the remaining projects construction plans in order to scale back those projects and still meet the community’s needs.

The City is in negotiation with the Coachella Valley Humane Society for the Society to donate the Animal Hospital on Palm Drive and an animal sanctuary on Indian Canyon in unincorporated Riverside County to the City.

Item Number: 3.

9 The animal sanctuary will help the City expand its Animal Control Center operations. City staff is also seeking a veterinary organization to lease the vacant Animal Hospital in order to provide much needed veterinary services to the residents of Desert Hot Springs. Development within the City continues to grow as Lennar Homes has taken over the development agreement for the Skyborne residential development on the west side of the City and Amazon has purchased land off Indian Canyon near the I-10 Freeway to construct a several thousand square foot distribution warehouse.

The City continues to monitor the unfunded liability for CALPERS and pays all current contributions and unfunded liability contributions timely.

Net Position
As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $60,111,215 as of June 30, 2023, in the Governmental activities and Business-type activities.

The largest portion of the City's net position, $45,460,615, is its investment in capital assets (e.g., land, street infrastructure, buildings, machinery and equipment) less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens. Consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt will be provided from future revenues and the remaining net position, since the capital assets themselves cannot be used to liquidate these liabilities.

Table 1
City of Desert Hot Springs
Net Position
June 30, 2023
2023 2022 2023 2022 2023 2022
Current and other assets 55,447,599 $ 55,245,705 $ - $ - $ 55,447,599 $ 55,245,705 $ Capital assets 71,777,018 68,142,652 - - 71,777,018 68,142,652 Total assets 127,224,617 $ 123,388,357 $ - $ - $ 127,224,617 $ 123,388,357 $ Deferred outflow of resources 6,507,580 $ 4,208,413 $ - $ - $ 6,507,580 $ 4,208,413 $ Total deferred
outflow of resources 6,507,580 $ 4,208,413 $ - $ - $ 6,507,580 $ 4,208,413 $ Current liabilities 13,744,491 $ 10,724,266 $ - $ - $ 13,744,491 $ 10,724,266 $ Long-term liabilities 56,427,469 49,898,296 - - 56,427,469 49,898,296 Total liabilities 70,171,960 $ 60,622,562 $ - $ - $ 70,171,960 $ 60,622,562 $ Deferred inflow of resources 3,449,022 $ 5,851,790 $ - $ - $ 3,449,022 $ 5,851,790 $ Total deferred
inflow of resources 3,449,022 $ 5,851,790 $ - $ - $ 3,449,022 $ 5,851,790 $ Net position
Invested in capital assets 45,460,615 $ 41,885,440 $ - $ - $ 45,460,615 $ 41,885,440 $ Restricted 21,911,482 33,322,986 - - 21,911,482 33,322,986 Unrestricted (7,260,882) (14,086,008) - - (7,260,882) (14,086,008) Total net position 60,111,215 $ 61,122,418 $ - $ - $ 60,111,215 $ 61,122,418 $ Governmental activities Business-Type activities Total
An additional portion of the City’s net position, $21,911,482, represents resources that are subject to external restrictions on how they may be used. The unrestricted portion of the net position is negative $7,260,882.

Item Number: 3.

10 Table 2
City of Desert Hot Springs
Changes in Net Position
June 30, 2023
2023 2022 2023 2022 2023 2022
Revenues
Program revenues:

Charges for services 6,141,761 $ 5,945,888 $ - $ - $ 6,141,761 $ 5,945,888 $ Operating grants and contributions 10,482,045 8,023,631 - - 10,482,045 8,023,631 Capital grants and contributions 8,313,701 5,420,583 - - 8,313,701 5,420,583 General revenues
Property taxes 2,270,974 1,898,981 - - 2,270,974 1,898,981 Sales taxes 5,422,375 5,262,718 - - 5,422,375 5,262,718 Transient occupancy taxes 4,253,943 3,779,227 - - 4,253,943 3,779,227 Other taxes 6,826,596 7,528,954 - - 6,826,596 7,528,954 Investment income 618,222 - (220,735) - 618,222 (220,735) Miscellaneous 567,334 728,394 - - 567,334 728,394
Gain on sale of property - 15,285 - - - 15,285
Total revenues $ 38,382,926 44,896,951 $ - $ - $ 44,896,951 $ 38,382,926 $ Program expenses
General government 13,061,873 $ 8,549,464 $ - $ - $ 13,061,873 $ 8,549,464 $ Public safety 18,736,283 15,570,620 - - 18,736,283 15,570,620 Public works 6,567,896 4,214,584 - - 6,567,896 4,214,584 Economic development 3,359,964 2,683,300 - - 3,359,964 2,683,300 Culture and leisure 2,764,883 2,104,395 - - 2,764,883 2,104,395 Interest and fiscal charges 1,417,255 1,469,995 - - 1,417,255 1,469,995 Total expenses $ 34,592,358 45,908,154 $ - $ - $ 45,908,154 $ 34,592,358 $ Change in net position (1,011,203) 3,790,568 - - (1,011,203) 3,790,568 Net position – beginning of year 61,122,418 57,331,850 - - 61,122,418 57,331,850 Net position – end of year $ 61,122,418 60,111,215 $ - $ - $ 60,111,215 $ 61,122,418 $ Governmental activities Business-Type activities Total
The City’s governmental activities total revenues were over $44.9 million, while the total cost of all programs and services were approximately $45.9 million. Operating grants and contributions were the largest revenue source at $10,482,045 (23% of the total revenue of the governmental activities). Capital grants and contributions were the second largest resource at $8,313,701 (19% of the total revenue of the governmental activities). Other taxes were the third largest revenue source at $6,826,596 (15% of the total revenue of the governmental activities).

Governmental Activities
Public Safety expenses of $18,736,283 comprise the largest component of government activities (41% of the total cost of governmental activities).

General Government expenses of $13,061,873 (includes City Council, City Manager, City Attorney, City Clerk, Finance, Information Systems and Non-Departmental) were the second largest governmental activities (28% of the total cost of governmental activities).

Public Works expenses of $6,567,896 were the third largest governmental activities (14% of the total cost of governmental activities).

Economic Development expenses of $3,359,964 were the fourth largest governmental activities (7% of the total cost of governmental activities).

Item Number: 3.

11 Business-Type activities
With the unwinding the New Market Tax Credit financing and the dissolution of the Health & Wellness Foundation in FY2019-2020, the City does not have any Business-Type activities.

Financial Analysis of the City's Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds
The General Fund is the City’s chief operating fund. At the end of 2022-2023, the total fund balance was $9,044,185.

The General Fund balance decreased by $4,655,537 in 2022-2023. Key Factors were:
 The City’s Cannabis Tax decreased by over $866,000 from the previous year.  General Government expenses increased by $1.35 million due to emergency abatement and demolition expenses of abandoned properties.
 The General Fund transferred an additional $2.7 million to the Public Safety Fund and the City-wide Lighting & Landscaping Maintenance District Fund for additional expenses.  While FY2022-2023 contained several large one-time expenses for the General Fund, the cannabis industry continues to struggle which results in a lower collection rate of the cannabis taxes. The City is working on adjusting its cannabis ordinances to help ease the burden of the struggling cannabis facilities. This will most likely result in a lower tax rate so the City is re-evaluating its operations so that its expenditures are more sustainable in the long-run and will not rely on fund balance.

Public Safety Fund
The Public Safety Fund accounts for the community safety activities of the City including Police, Code Compliance, Dispatch, Fire and Animal Control. The major outside revenue sources for this fund are parcel taxes and utility user taxes. These taxes were enacted specifically for the support of public safety within the City. The single largest revenue source is an interfund transfer from the General Fund. The transfer from the General Fund is to support the operating expenses that exceed the revenues earned in taxes, fines, fees, and other revenue items. Since this fund has a majority of its support from the General Fund, fund balance is kept at a minimum. Expenditures increased for the 2022-2023 fiscal year by over $1,860,380. The increase was due to increased operating costs which included the opening of the new dispatch center. The additional expenses were covered by an increase in a transfer from the General Fund.

American Recovery Act Fund
This fund was established to account for the State and Local Agency Coronavirus Relief Funds provided to the City from the American Recovery Act. The City utilized $615,919 of this funding for FY2022-2023 for the acquisition of land.

Housing Authority Fund
This fund is to account for the assets of the former Redevelopment Agency Low to Moderate Income Housing Fund that was transferred to City. The assets consist of over $2.5 million in cash, $3.3 million in loans for housing developments and single-family houses throughout the City, and vacant residential property to be used to develop lowincome housing. During FY2022-2023, the Housing Authority Fund received over $1 million in repayment of the SERAF loan from the Successor Agency to the former Redevelopment Agency. As of June 30, 2023, the fund balance is $5,910,455.

Item Number: 3.

12 Capital Improvement Capital Projects Fund
This fund contains the expenses for all capital improvement projects that are not supported by restricted funds and has the expenses for the facilities improvements funded by the Series 2021 Bond proceeds. During FY2022-2023, the City spent $6,104,262 on capital projects. The fund ended the fiscal year with a negative balance which will be offset in the FY2023-2024 by reimbursements from the State of California Department of Transportation.

Debt Service Fund
This fund is to account for the debt service payments on the City’s Lease Revenue Bonds and Certificates of Participation. The debt service obligations are paid twice annually. The debt service obligations are funded by a utility user tax and transfers from other funds. For this fiscal year, $965,000 was paid for the required principal payment and $1,424,243 was paid out in interest expense. This fund also includes the proceeds and related expenses for the Series 2021 Bonds that were issued in January 2022 for $15,000,000 for the construction of a new fire station, police annex building, and improvements to the existing fire station and police department building. The fund balance at June 30, 2023 was $18,839,919.

Capital Assets
At the end of FY 2022-2023, the City had invested over $71 million in a broad range of capital assets, net of depreciation. The investment in capital assets includes land, right of way, buildings and improvements, machinery and equipment, streets and bridges and construction in progress. During FY2022-2023, the City implemented GASB 87 Accounting for Leases and GASB 96 Subscription-Based Information Technology Arrangements.

Table 3
City of Desert Hot Springs
Capital Assets
As of June 30, 2023
2023 2022 2023 2022 2023 2022
Land 2,958,094 $ 2,958,094 $ - $ - $ 2,958,094 $ 2,958,094 $ Construction in progress 13,393,933 7,695,430 - - 13,393,933 7,695,430 Depreciable assets, net of depreciation
Building and improvements 30,782,252 30,695,492 - - 30,782,252 30,695,492 Machinery and equipment 4,195,492 4,906,299 - - 4,195,492 4,906,299 Vehicles 1,072,507 1,260,664 - - 1,072,507 1,260,664
Infrastructure 18,833,724 20,245,850 - - 18,833,724 20,245,850 Intangible assets, net of ammortization
Right of use - leased vehicles 115,334 - - - 115,334 -
Right of use - subscription asset 425,682 380,823 - - 425,682 380,823 Total 71,777,018 $ 68,142,652 $ - $ - $ 71,777,018 $ 68,142,652 $ Governmental activities Business-Type activities Total
For more information on Capital Asset Activity, please see Capital Assets page 61.

Long-Term Debt
As of June 30, 2023, the City had total long-term liabilities outstanding of $43,532,472 in Certificates of Participation debt, Lease Revenue Bonds debt, capital leases, subscription liabilities, claims and judgments payable debt, compensated absences and Pension-related debt for the CalPERS Side Fund. For more detailed information on each long-term debt liability, please see Note (6) on pages 62-68.

Item Number: 3.

13 Table 4
City of Desert Hot Springs
Long-Term Liabilities
As of June 30, 2023
2023 2022 2023 2022 2023 2022
2020 Certificates of Participation 4,640,000 4,840,000 - - 4,640,000 4,840,000 Lease Revenue Bonds Series 2017A 13,220,000 13,475,000 - - 13,220,000 13,475,000 Taxable Lease Revenue Bonds Series 2017A-T - 60,000 - - - 60,000 Lease Revenue Bonds Series 2018 6,320,000 6,450,000 - - 6,320,000 6,450,000 Lease Revenue Bonds Series 2021A 13,935,000 14,255,000 - - 13,935,000 14,255,000 Taxable Lease Revenue Bonds Series 2021A-T 1,135,000 1,135,000 - - 1,135,000 1,135,000 Bond discount - 2017A-T - (114) - - - (114)
Bond premium - 2017A 142,717 148,922 - - 142,717 148,922 Bond premium - 2018 257,692 247,472 - - 247,472 257,692 Bond premium - 2021A 225,688 233,718 - - 225,688 233,718 Capital lease payment 394,332 568,621 - - 394,332 568,621 Lease liabilities 116,922 - - - 116,922 -
Subscription liabilities 238,361 194,813 - - 238,361 194,813 Claims and judgments payable 581,380 369,882 - - 369,882 581,380 Compensated absences 1,522,175 1,130,718 - - 1,522,175 1,130,718 Pension-related debt 1,024,923 1,291,849 - - 1,024,923 1,291,849 Total 43,532,472 $ 44,622,599 $ - $ - $ 43,532,472 $ 44,622,599 $ Governmental activities Business-Type activities Total
Cannabis Dispensary and Cultivation Revenues
The City collects taxes for the dispensary and cultivation of marijuana and marijuana products. In the past seven years the City has seen a steady increase in dispensary and cultivation tax revenues for the fiscal years 2015 through 2022, however in 2023, the City experienced a decline in cannabis taxes. For FY 2022-2023, the City received $866,727 less in cannabis dispensary and cultivation tax revenues over 2021-2022.

Table 5
City of Desert Hot springs
Marijuana Revenues
As of June 30, 2023
Dispensary Cultivation Dispensary Cultivation Total Total 2023 2023 2022 2022 2023 2022
Marijuana Dispensary Revenue 1,766,819 $ - $ 2,131,761 $ - $ 1,766,819 $ 2,131,761 $ Marijuana Cultivation Revenue - 2,675,943 - 3,177,728 2,675,943 3,177,728 Total 1,766,819 $ 2,675,943 $ 2,131,761 $ 3,177,728 $ 4,442,762 $ 5,309,489 $ Economic Factors
 Development activity had several increases due to additional commercial projects and housing developments within the City as discussed previously;
 For FY 2022-2023, Transient Occupancy Tax and Property Tax revenues continue to grow due to increased development and tourism.
 The City is still experiencing a steady growth in population and is considered the “Fastest Growing City in the Coachella Valley” with a population over 31,000 as of January 2022 and a growth rate of 7.5% since 2012;  There has been significant growth in assessed values in the City with a 79.5% assessed value growth rate since 2013 and a 7.6% average annual growth rate.

Item Number: 3.

14  Home prices have grown nearly 200% since 2011, however, with the increase in interest rates, home prices have started to decline in the City. The average home sales price has decreased by 10% between 6/30/2022 and 6/30/2023.
 The average home value in the City is $345,000 as of Jule 2023 and the City is one of the more affordable housing options in the Coachella Valley;
 The City has reserves of 25% of annual general fund appropriations for natural and fiscal emergencies and 8% for future operational and capital uses. Additionally, there is an emergency reserve set up for financial and economic uncertainty funded by 25% of the cannabis tax revenues to a cap of 17% of General Fund appropriations. The balance of the Emergency Reserve at June 30, 2023 was $5,118,215.

Request for Information
This financial report is designed to provide a general overview of the City of Desert Hot Springs’ finances for all of those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of Desert Hot Springs, Geoffrey Buchheim, Administrative Services Director, 11999 Palm Drive, Desert Hot Springs, CA 92240 or by telephone at 760- 329-6411 Ext 227.

Item Number: 3.

BASIC FINANCIAL STATEMENTS
15 Item Number: 3.

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16 Item Number: 3.

GOVERNMENT-WIDE

FINANCIAL STATEMENTS
17 Item Number: 3.

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18 Item Number: 3.

Primary Government
Governmental
Activities
Current assets:

Cash and investments $ 28,585,927
Receivables, net 10,460,849
Prepaid items 51,125
Property held for resale 85,090
Total current assets 39,182,991
Noncurrent assets:

Cash and investments with fiscal agents 16,264,608
Capital assets:

Capital assets, not being depreciated 16,352,027
Capital assets, being depreciated, net 54,883,975
Intangible capital assets, being amortized, net 541,016 Total capital assets 71,777,018
Total noncurrent assets 88,041,626
Total assets 127,224,617
Deferred loss on refunding 344,785
Pension related 6,162,795
Total deferred outflows of resources 6,507,580
Current liabilities:

Accounts payable and other liabilities 3,469,856
Deposits 2,294,661
Interest payable 435,028
Unearned revenues 5,312,833
Long-term debt - due within one year 2,232,113
Total current liabilities 13,744,491
Noncurrent liabilities:

Long-term debt - due in more than one year 41,300,359
Net pension liabilities 15,127,110
Total noncurrent liabilities 56,427,469
Total liabilities 70,171,960
Pension related 3,449,022
Total deferred inflows of resources 3,449,022
Net investment in capital assets 45,460,615
Restricted for:

Public safety 1,664,984
Street maintenance and capital improvement 5,779,877
Housing Authority 5,916,950
Debt service 4,885,615
Lighting/Landscaping/Drainage 1,229,622
Park development and improvement 1,676,553
Assessment District 91-1 123,880
Other 634,001
Total restricted 21,911,482
Unrestricted (deficit) (7,260,882)
Total net position $ 60,111,215
City of Desert Hot Springs
Statement of Net Position
June 30, 2023

NET POSITION

LIABILITIES
ASSETS

DEFERRED OUTFLOWS OF RESOURCES

DEFERRED INFLOWS OF RESOURCES
See accompanying Notes to the Basic Financial Statements. 19 Item Number: 3.

Net (Expense)
Charges Operating Capital Total Revenue and
for Grants and Grants and Program Change in
Functions/Programs Expenses Services Contributions Contributions Revenues Net Position General government 13,061,873 $ 272,459 $ - $ 629,696 $ 902,155 $ (12,159,718) $ Public safety 18,736,283 1,375,952 7,355,446 185,482 8,916,880 (9,819,403) Public works 6,567,896 782,869 1,649,524 7,498,523 9,930,916 3,363,020 Economic development 3,359,964 2,480,144 1,472,541 - 3,952,685 592,721 Culture and leisure 2,764,883 1,230,337 4,534 - 1,234,871 (1,530,012) Interest and fiscal charges 1,417,255 - - - - (1,417,255) Total governmental activities 45,908,154 6,141,761 10,482,045 8,313,701 24,937,507 (20,970,647) Total primary government $ 6,141,761 45,908,154 $ 10,482,045 $ 8,313,701 $ 24,937,507 $ (20,970,647) General revenues:

Taxes:

Property taxes 2,270,974
Sales taxes 5,422,375
Dispensary taxes 1,766,819
Cultivator taxes 2,675,943
Vehicle in-lieu taxes 33,384
Franchise taxes 2,350,450
Transient occupancy taxes 4,253,943
Total taxes 18,773,888
Investment income 618,222
Miscellaneous 567,334
Total general revenues 19,959,444
Change in net position (1,011,203)
Net position - beginning of year, as restated (Note 15) 61,122,418 Net position - end of year $ 60,111,215
Program Revenues
Primary Government
Governmental Activities
City of Desert Hot Springs
Statement of Activities
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 20 Item Number: 3.

FUND FINANCIAL STATEMENTS
Governmental Fund Financial Statements
Proprietary Fund Financial Statements
Fiduciary Fund Financial Statements
21 Item Number: 3.

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22 Item Number: 3.

GOVERNMENTAL FUND

FINANCIAL STATEMENTS
General Fund - As the City's primary operating fund, it accounts for and reports all financial resources of the City, except those required to be accounted for and reported in another fund.

Public Safety Special Revenue Fund - To account for and report special taxes and grants for community safety expenditures including Police, Fire and Animal Control.

Debt Service Fund - To account for the debt service payments on the City's Lease Revenue Bonds and Certificate of Participation twice annually.

American Recovery Act Special Revenue Fund - To account for the State and Local Agency Coronavirus Relief Funds provided to the City from the American Recovery Act.

Capital Improvement Capital Projects Fund - To account for and report expenditures related to various capital projects identified in the City's 5-year CIP plan.

Housing Authority Special Revenue Fund - To account for and report funds set aside for development and improvements of the City’s housing activity and operations. 23 Item Number: 3.

American
General Public Recovery Housing
Fund Safety Act Authority
ASSETS
Cash and investments 9,443,264 $ - $ 4,388,108 $ 2,467,436 $ Cash and investments with fiscal agents - - - -
Accounts receivable 2,493,293 2,583,594 - -
Interest receivable 14,239 - 5,601 3,757
Notes receivable - - - 3,354,172
Prepaid items 51,125 - - -
Due from other governments - - - -
Due from other funds 598,651 - - -
Property held for resale - - - 85,090
Total assets $ 2,583,594 12,600,572 $ 4,393,709 $ 5,910,455 $

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable 1,381,808 $ 985,843 $ 4,489 $ - $
Due to other funds - 813 - -
Deposits 2,013,042 63,631 - -
Unearned revenue - 86,702 4,368,518 -
Total liabilities 1,136,989 3,394,850 4,373,007 -
Deferred Inflows of Resources:

Unavailable revenues 247,394 1,360,748 - -
Fund Balances:

Nonspendable 51,125 - - -
Restricted 455,254 85,857 20,702 5,910,455
Committed 8,103,848 - - -
Assigned 348,101 - - -
Unassigned (deficit) - - - -
Total fund balances 85,857 8,958,328 20,702 5,910,455
Total liabilities, deferred inflows of
resources, and fund balances $ 2,583,594 12,600,572 $ 4,393,709 $ 5,910,455 $ Special Revenue Funds
City of Desert Hot Springs
Balance Sheet
Governmental Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 24 Item Number: 3.

Capital Improvement Nonmajor Total
Capital Projects Debt Service Governmental Governmental Fund Fund Funds Funds
ASSETS
Cash and investments 1,018,535 $ 1,530,424 $ 9,259,048 $ 28,106,815 $ Cash and investments with fiscal agents - 16,264,608 - 16,264,608 Accounts receivable 1,031,325 - 152,112 6,260,324
Interest receivable - 3,062 15,991 42,650
Notes receivable - - - 3,354,172
Prepaid items - - - 51,125
Due from other governments - - 803,506 803,506
Due from other funds - 1,041,825 - 1,640,476
Property held for resale - - - 85,090
Total assets $ 18,839,919 2,049,860 $ 10,230,657 $ 56,608,766 $

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable 220,903 $ - $ 808,051 $ 3,401,094 $
Due to other funds 1,410,969 - 228,694 1,640,476
Deposits 217,988 - - 2,294,661
Unearned revenue 200,000 - 657,613 5,312,833
Total liabilities - 2,049,860 1,694,358 12,649,064
Deferred Inflows of Resources:

Unavailable revenues 871,222 - 449,044 2,928,408
Fund Balances:

Nonspendable - 13,954,304 - 14,005,429
Restricted - 4,885,615 7,872,585 19,230,468
Committed - - 337,433 8,441,281
Assigned - - 3,803 351,904
Unassigned (deficit) (871,222) - (126,566) (997,788) - Total fund balances 18,839,919 (871,222) 8,087,255 41,031,294 Total liabilities, deferred inflows of
resources, and fund balances $ 18,839,919 2,049,860 $ 10,230,657 $ 56,608,766 $ City of Desert Hot Springs
Balance Sheet (Continued)
Governmental Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 25 Item Number: 3.

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26 Item Number: 3.

Total Fund Balances - Total Governmental Funds $ 41,031,294 Amounts reported for governmental activities in the Statement of Net Position are different because:

Capital assets, excluding the $612,634 from the Internal Service Funds, used in governmental activities are not financial resources and are not reported in the funds:

Capital assets, not being depreciated 16,352,027
Capital assets, being depreciated, net of $497,299 reported in Internal Service Funds 54,386,676 Intangible assets, being amortized, net of $115,334 reported in Internal Service Funds 71,164,385 425,682 Revenue reported as unavailable revenue in the governmental funds when it is not received soon enough after year-end to be considered available. The availability criteria does not apply to the Government-Wide Financial Statements and, therefore, the revenue is recognized when eligibility requirements are met and earned. 2,928,408
Interest expenses are recognized when due, and therefore, interest payable is not recorded in the governmental funds. (435,028)
Long-term liabilities, net of $811,136 reported in Internal Service funds were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds' Balance Sheet.

Deferred loss on refunding 344,785
Long-term liabilities (42,306,551) (42,651,336)
Net pension liability is not due and payable in the current period; therefore, is not reported in the governmental funds. Deferred outflows of resources and deferred inflows of resources related to pensions are also not reported in the governmental funds.

Deferred outflows of resources 6,162,795
Net pension liabilities (15,127,110)
Deferred inflows of resources (12,413,337) (3,449,022)
Internal service funds are used by management to charge the costs of general liability, workers' compensation and equipment replacement to individual funds. The assets and liabilities of the internal service fund are included in governmental activities in the Government-Wide Statement of Net Position. 142,044

Net Position of Governmental Activities $ 60,111,215
City of Desert Hot Springs
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 27 Item Number: 3.

American
General Public Recovery Housing
Fund Safety Act Authority
REVENUES:

Taxes 18,634,453 $ 6,080,172 $ $ - - $
Permits and fees 2,716,374 791,393 - -
Intergovernmental 19,528 189,065 1,095,947 615,918
Licenses 252,530 15,739 - -
Investment earning 151,216 - 14,597 39,286
Miscellaneous 437,913 569,224 - -
Total revenues 7,645,593 22,212,014 655,204 1,110,544
EXPENDITURES:

Current:

General government 7,713,039 - 16,659 -
Public safety 625,926 17,947,313 - -
Public works 870,925 - - -
Economic development 3,180,564 - - 144,004
Culture and leisure 1,495,494 - - -
Capital outlay 244,984 599,260 428,723 -
Debt service:

Principal retirement 127,795 - - -
Interest and fiscal charges 1,213 - - -
Total expenditures 18,376,036 14,259,940 615,919 144,004 REVENUES OVER (UNDER) EXPENDITURES (10,730,443) 7,952,074 39,285 966,540 OTHER FINANCING SOURCES (USES):

Proceed from sale of asset 171,343 - - -
Transfers in 10,585,473 100,000 - -
Transfers out - (12,733,984) - -
Total other financing sources (uses) 10,585,473 (12,462,641) - - NET CHANGES IN FUND BALANCES (144,970) (4,510,567) 39,285 966,540 FUND BALANCES (DEFICIT):

Beginning of year 230,827 13,468,895 (18,583) 4,943,915 End of year $ 85,857 8,958,328 $ 20,702 $ 5,910,455 $
Special Revenue Funds
City of Desert Hot Springs
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 28 Item Number: 3.

Capital Improvement Nonmajor Total
Capital Projects Debt Service Governmental Governmental Fund Fund Funds Funds
REVENUES:

Taxes $ - $ 1,183,722 1,559,726 $ 27,458,073 $
Permits and fees - 2,216,927 - 5,724,694
Intergovernmental 3,864,032 2,867,342 - 8,651,832
Licenses - - - 268,269
Investment earning - 46,322 538,308 789,729
Miscellaneous - - - 1,007,137
Total revenues 2,098,034 3,864,032 6,314,313 43,899,734 EXPENDITURES:

Current:

General government - 11,000 - 7,740,698
Public safety - 31,955 - 18,605,194
Public works 5,221 4,414,640 - 5,290,786
Economic development - - - 3,324,568
Culture and leisure - 310,602 - 1,806,096
Capital outlay 6,104,262 1,170,306 - 8,547,535
Debt service:

Principal retirement - - 965,000 1,092,795
Interest and fiscal charges - - 1,424,243 1,425,456
Total expenditures 2,400,243 6,109,483 5,927,503 47,833,128 REVENUES OVER (UNDER) EXPENDITURES (302,209) (2,245,451) 386,810 (3,933,394) OTHER FINANCING SOURCES (USES):

Proceed from sale of asset - - 171,343 -
Transfers in 519,988 1,182,556 14,340,003 1,951,986
Transfers out (1,018,535) - (14,340,003) (587,484)
Total other financing sources (uses) (498,547) 1,182,556 1,364,502 171,343 NET CHANGES IN FUND BALANCES (800,756) (1,062,895) 1,751,312 (3,762,051) FUND BALANCES (DEFICIT):

Beginning of year 19,640,675 191,673 6,335,943 44,793,345 End of year $ 18,839,919 (871,222) $ 8,087,255 $ 41,031,294 $ City of Desert Hot Springs
Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Governmental Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 29 Item Number: 3.

Net Change in Fund Balances - Total Governmental Funds $ (3,762,051) Amounts reported for governmental activities in the Statement of Activities are different because:

Acquisition of capital assets was reported as expenditures in the governmental funds. However, in the Government-Wide Statement of Activities, the cost of those assets was allocated over the estimated useful lives as depreciation expense. The following was the amount of capital assets recorded in the current period:

Capital outlay, net of $123,938 reported in Internal Service Funds 8,547,535 Depreciation expense on capital assets, net of internal service fund depreciation expense of $197,168 was reported in the Government-Wide Statement of Activities, but they did not require the use of current financial resources. Therefore, depreciation expense was not reported as an expenditure in the governmental funds. (4,839,939)
Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. 992,062
The fund financial statements record interest expenditures on the current financial resources measurement focus whereas the Government-Wide financial statements recognize interest expense on the accrual basis.

The reconciling amount was the change in accrued interest from the prior year. 9,928 Long-term compensated absences expense was reported in the Government-Wide Statement of Activities, but it did not require the use of current financial resources. Therefore, the decrease in long-term compensated absences was not reported as an expenditure in the governmental funds. (391,457) Repayment of bond principal was an expenditure in the governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position.

Principal repayments of long-term debt 1,092,795
Issuance of long-term debt (171,343)
Changes in pension-related debt 1,188,378 266,926
Amortization expense was reported in the Government-Wide Statement of Activities, but it did not require the use of current financial resources. Therefore, amortization expense was not reported as an expenditure in the governmental funds.

Amortization of premium/discount 24,341
Amortization of deferred charges on refunding 15,993 (8,348) Certain pension expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds, net of $2,481,450 pension contribution made after measurement date. (2,787,571) Internal service funds were used by management to charge the costs of certain activities, such as insurance to individual funds. The net loss of the internal service funds was reported with governmental activities. 15,919

Change in Net Position of Governmental Activities $ (1,011,203) City of Desert Hot Springs
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 30 Item Number: 3.

Internal Service Funds - To account for the City's risk management and equipment replacement activities, which are goods and services provided to other Funds of the City.

PROPRIETARY FUND

FINANCIAL STATEMENTS
31 Item Number: 3.

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32 Item Number: 3.

Governmental
Activities
Internal
Service Funds
ASSETS
Current assets:

Cash and investments $ 479,112
Accounts receivable 197
Total current assets 479,309
Noncurrent assets:

Capital assets, being depreciated, net 497,299
Intangible capital assets, being amortized, net 115,334 Total capital assets 612,633
Total noncurrent assets 612,633
Total assets 1,091,942

LIABILITIES
Current liabilities:

Accounts payable 68,762
Claims payable - due within one year 206,075
Financing purchase payable - due within one year 179,107 Lease liabilities - due within one year 19,757
Total current liabilities 473,701
Noncurrent liabilities:

Claims payable - due in more than one year 163,807
Financing purchase payable - due in more than one year 215,225 Lease liabilities - due in more than one year 97,165
Total noncurrent liabilities 476,197
Total liabilities 949,898

NET POSITION
Net investment in capital assets 101,379
Unrestricted 40,665
Total net position $ 142,044
City of Desert Hot Springs
Statement of Net Position
Proprietary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 33 Item Number: 3.

Governmental
Activities
Internal
Service Funds
OPERATING REVENUES:

Charges for services $ 417,804
Insurance recovery 197
Total operating revenues 418,001
OPERATING EXPENSES:

Insurance claims 148,540
Depreciation and amortization 197,168
Other expense 43,809
Total operating expenses 389,517
OPERATING (LOSS) 28,484
NONOPERATING REVENUES (EXPENSES):

Interest expense (17,720)
Gain on sale of property 5,155
Total nonoperating revenues (expenses) (12,565)
Change in net position 15,919
NET POSITION (DEFICIT):

Beginning of year 126,125
End of year $ 142,044
City of Desert Hot Springs
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 34 Item Number: 3.

Governmental
Activities
Internal
Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from use departments $ 417,804
Payments for vendor for goods and services (25,452)
Payments for insurance claims (313,112)
Net cash (used in) operating activities 79,240

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Principal paid on finance purchase and lease payable (181,305) Proceeds from sale of assets 5,155
Interest paid (17,720)
Net cash (used in) capital and related financing activities (193,870) Net increase in cash and investments (114,630)

CASH AND INVESTMENTS
Beginning of year 593,742
End of year $ 479,112

RECONCILIATION OF OPERATING (LOSS) TO NET
CASH (USED IN) OPERATING ACTIVITIES:

Operating (loss) $ 28,484
Adjustments to reconcile operating loss to
net cash used in operating activities:

Depreciation expense 197,168
(Increase) decrease in accounts receivable (197)
Increase (decrease) in accounts payable 65,283
Increase (decrease) in claims payable (211,498)
Total adjustments 50,756
Net cash (used in) operating activities $ 79,240
NONCASH ITEM FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Issuance of lease $ 123,938
Assets leased $ 123,938
City of Desert Hot Springs
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 35 Item Number: 3.

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36 Item Number: 3.

FIDUCIARY FUND

FINANCIAL STATEMENTS
Successor Agency Private-Purpose Trust Fund - To account for the balances and transactions of the Successor Agency to the former Redevelopment Agency of the City of Desert Hot Springs.

Custodial Funds - To account for assets held by the City in the capacity of agent for individuals. Custodial Fund spending is controlled primarily through legal agreements and applicable State and Federal laws. 37 Item Number: 3.

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38 Item Number: 3.

Successor
Agency Private -
Purpose Trust Custodial
Fund Funds
ASSETS
Current assets:

Cash and investments $ 2,854,406 2,118,592 $
Accounts receivable 17,382 -
Interest receivable 3,769 4,454
Total current assets 2,876,242 2,122,361
Noncurrent assets:

Investments with fiscal agents 112,551 2,126,639
Notes receivable - 16,294
Total noncurrent assets 112,551 2,142,933
Total assets 2,988,793 4,265,294

DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on refundings - 1,081,679
Total deferred outflows of resources - 1,081,679

LIABILITIES
Current liabilities:

Accounts payable 54,112 575
Deposits payable 229,524 -
Interest payable - 285,204
Bonds payable - due within one year 3,015,197 -
Total current liabilities 283,636 3,300,976
Noncurrent liabilities:

Bonds payable - due in more than one year 17,056,232 -
Total noncurrent liabilities - 17,056,232
Total liabilities 283,636 20,357,208

NET POSITION (DEFICIT)
Restricted for:

Successor Agency - (15,010,235)
Individuals, organization, and other governments - 2,705,157 Total net position (deficit) $ 2,705,157 (15,010,235) $ City of Desert Hot Springs
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 39 Item Number: 3.

Successor
Agency Private -
Purpose Trust Custodial
Fund Funds
ADDITIONS:

Redevelopment Property Tax Trust Fund 3,250,873 $ - $
Assessment revenue collected 809,631 -
Use of money and property 27,416 70,335
Total additions 837,047 3,321,208
DEDUCTIONS:

Interest expense 61,331 910,987
Administration - 269,937
Recognized obligation payments to City of Desert Hot Springs 1,095,947 - Payment of special assessment district expenses 133,599 - Payment of other organization expenses 13,663 -
Total deductions 208,593 2,276,871
Changes in net position 628,454 1,044,337
NET POSITION (DEFICIT):

Beginning of year 2,076,703 (16,054,572)
End of year $ 2,705,157 (15,010,235) $
City of Desert Hot Springs
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 40 Item Number: 3.

41 NOTES TO THE BASIC

FINANCIAL STATEMENTS
Item Number: 3.

42 This page intentionally left blank.

Item Number: 3.

City of Desert Hot Springs
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
43 Page
Note 1 – Summary of Significant Accounting Policies ........................................................................................... 45 A. Financial Reporting Entity ............................................................................................................................. 45 B. Basis of Accounting and Measurement Focus .............................................................................................. 46 C. Cash, Cash Equivalents and Investments ....................................................................................................... 48 D. Cash and Investments with Fiscal Agents ...................................................................................................... 49 E. Fair Value Measurement ................................................................................................................................ 49 F. Prepaid Items .................................................................................................................................................. 49 G. Interfund Transactions .................................................................................................................................... 49 H. Property Held for Resale ................................................................................................................................ 49 I. Capital Assets ................................................................................................................................................. 49 J. Interest Payable .............................................................................................................................................. 50 K. Unearned Revenue ......................................................................................................................................... 50 L. Compensated Absences .................................................................................................................................. 51 M. Pension ........................................................................................................................................................... 51 N. Deferred Outflows/Inflows of Resources ....................................................................................................... 51 O. Long-Term Debt ............................................................................................................................................. 51 P. Lease Liabilities ............................................................................................................................................. 52 Q. Subscription Liabilities................................................................................................................................... 52 R. Claims and Judgments .................................................................................................................................... 53 S. Property Taxes ................................................................................................................................................ 53 T. Net Position .................................................................................................................................................... 53 U. Fund Balances ................................................................................................................................................ 54 V. Use of Estimates ............................................................................................................................................. 54 W. Implementation of New GASB Pronouncement ............................................................................................ 55 Note 2 – Cash and Investments ................................................................................................................................ 55 A. Demand Deposits ........................................................................................................................................... 55 B. Investments ..................................................................................................................................................... 56 C. Fair Value Measurement ................................................................................................................................ 57 D. Risk Disclosures ............................................................................................................................................. 57 E. Investments in Local Agency Investment Fund ............................................................................................. 58 Note 3 – Notes Receivable ......................................................................................................................................... 59 Note 4 – Interfund Transactions .............................................................................................................................. 59 A. Due From/To Other Funds ............................................................................................................................. 59 B. Transfers In/Out ............................................................................................................................................. 60 Note 5 – Capital Assets .............................................................................................................................................. 61 Item Number: 3.

City of Desert Hot Springs
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2023
44 Page
Note 6 – Long-Term Liabilities ................................................................................................................................ 62 A. Governmental Activities................................................................................................................................. 62 B. Fiduciary Activities ........................................................................................................................................ 67 Note 7 – Non-City Obligation Debt .......................................................................................................................... 69 Note 8 – Risk Management ....................................................................................................................................... 69 A. Coverage ......................................................................................................................................................... 69 B. Claims Activity .............................................................................................................................................. 70 C. Adequacy of Protection .................................................................................................................................. 70 Note 9 – Defined Benefit Pension Plan .................................................................................................................... 70 A. General Information about the Pension Plan .................................................................................................. 70 B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions .................................................................................................... 72 Note 10 – Jointly Governed Organization ............................................................................................................... 77 Note 11 – Classification of Fund Balances .............................................................................................................. 77 Note 12 – Net Investments in Capital Assets ........................................................................................................... 78 Note 13 – Contingencies and Commitments ........................................................................................................... 79 A. Lawsuits ......................................................................................................................................................... 79 B. Federal and State Grant Programs .................................................................................................................. 79 Note 14 – Individual Fund Disclosure ..................................................................................................................... 79 Note 15 – Restatement of Beginning Net Position .................................................................................................. 79 Note 16 – Subsequent Events .................................................................................................................................... 80 Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023
45 Note 1 – Summary of Significant Accounting Policies
The basic financial statements of the City of Desert Hot Springs, California (the “City”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) as applied to governmental agencies. The Governmental Accounting Standards Board (“GASB”) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the significant accounting policies:

A. Financial Reporting Entity
The City was incorporated on September 17, 1963 as a charter city under the laws of the State of California and enjoys all the rights and privileges allowed by its charter. The City is governed by an elected five-member council.

In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The primary criteria for including a potential component unit within the reporting entity are the governing body’s financial accountability and a financial benefit or burden relationship and whether it is misleading to exclude. A primary government is financially accountable and shares a financial benefit or burden relationship, if it appoints a voting majority of an organization’s governing body and it is able to impose its will on the organization, or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government. A primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board, a governing board appointed by a higher level of government, or a jointly appointed board, and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government.

Blended Component Units:

Management determined that the following entities should be reported as blended component units based on the criteria above. Although the following is legally separate from the City, it has been “blended” as though it is part of the City because the component unit’s governing body is substantially the same as the City’s and there is a financial benefit or burden relationship between the City and the component unit; management of the City has operational responsibilities for the component unit; and/or the component unit provides services entirely, or almost entirely, to the City or otherwise exclusively, or almost exclusively, benefits the City, even though it does not provide services directly to it.

City of Desert Hot Springs Financing Corporation (the “Corporation”) – The Corporation is a nonprofit public benefit corporation formed for the purpose of providing public facility financing to the City. The Corporation’s Board of Directors is composed of the five elected City Council members. The Corporation may acquire, construct, rehabilitate, remodel, improve, install and finance or lease various facilities, land and equipment for the benefit of the City. The Corporation holds title to various parcels of land as security for the Certificates of Participation issued in its name. The City makes lease payments to the Corporation in an amount equal to the periodic principal and interest payments due on the Certificates.

The Corporation does not issue separate financial statements.

Desert Hot Springs Public Financing Authority (the “Authority”) – the Public Financing Authority was established pursuant to a Joint Exercise of Powers Agreement, dated May 1, 1993, between the City and the Redevelopment Agency of the City which has been succeeded by the Successor Agency of the City.

The Authority is governed by the Board of Directors. The Chairperson, Vice-Chairperson, Executive Director, and Secretary of the Authority consist of the Mayor, Mayor Pro Tem, City Manager, and City Clerk of the City, respectively. The Authority does not issue separate financial statements.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
46 Note 1 – Summary of Significant Accounting Policies (Continued) A. Financial Reporting Entity (Continued)
Blended Component Units (Continued):

Desert Hot Springs Housing Authority (the “Housing Authority”) – The Housing Authority was formed on January 18, 2011 and operates as a public authority whose primary goal is to provide decent, safe and sanitary housing in a suitable living environment for families that cannot afford private housing that comply with housing quality standards. The Housing Authority does not issue separate financial statements.

These component units are included in the primary government because of the significance of their financial and operational relationship and due to the governing bodies being appointed by the City Council or the same as City Council.

The City has no discretely presented component units.

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

Government-Wide Financial Statements
The Government-Wide Financial Statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned, while expenses are recognized in the period in which the liability is incurred. Fiduciary activities of the City are not included in these statements.

Certain types of transactions are reported as program revenues for the City in three categories:
 Charges for services
 Operating grants and contributions
 Capital grants and contributions
Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the statement of net position have been eliminated, except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the statement of activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated.

The following interfund activities have been eliminated:
 Due from/to other funds
 Transfers in/out
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
47 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements
All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets, current liabilities, and deferred inflows of resources, are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in fund balances. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.

An accompanying schedule is presented to reconcile and explain the differences in fund balances as presented in these statements to the net position presented in the government-wide financial statements.

Revenues are recognized as soon as they are both “measurable” and “available”. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For these purposes, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period.

The primary revenue sources, which have been treated as susceptible to accrual by the City, are property taxes, sales taxes, citations, intergovernmental revenues, other taxes and abatement receivables. Expenditures are recorded in the accounting period in which the related fund liability is incurred.

The City reports the following major governmental funds:

General Fund – This fund is the City’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund.

Public Safety Special Revenue Fund – This fund was established to account for special taxes and grants for public safety expenditures.

American Recovery Act Special Revenue Fund – This fund was established to account State and Local Agency Coronavirus Relief Funds provided to the City from the American Recovery Act.

Housing Authority Special Revenue Fund – To account for and report funds set aside for development and improvements of the City’s housing activity and operations.

Capital Improvement Capital Projects Fund – To account for and report expenditures related to various capital projects identified in the City's 5-year CIP plan.

Debt Service Fund – This fund was established to account for the debt service payments of the City.

Proprietary Fund Financial Statements
Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the statement of net position. The statement of revenues, expenses and changes in net position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned, while expenses are recognized in the period in which the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
48 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Proprietary Fund Financial Statements (Continued)
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the proprietary funds are charges to customers for sales and services. Operating expenses for the proprietary funds include the costs of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

The internal service funds are presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the government-wide financial statements. The City’s internal service funds include two individual funds which provide services directly to other City funds, which include risk management (combining general liability and workers’ compensation activities) and equipment replacement.

Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Net Position and a Statement of Changes in Fiduciary Net Position. The City’s fiduciary funds represent custodial funds and private purpose trust funds. Both custodial funds and the private purpose trust funds are accounted for on the full accrual basis of accounting where the assets associated with the activity are controlled by the City and the assets are not derived 1) solely from the government’s own-source revenues or 2) from government-mandated nonexchange transactions or voluntary nonexchange transactions.

Fiduciary fund types are accounted for according to the nature of the fund. The City’s private purpose trust fund is a fiduciary fund type used by the City to report assets, liabilities and activities of the Successor Agency to the former Redevelopment Agency of the City of Desert Hot Springs. The City’s custodial funds are used to account for assets for the benefit of organizations or other governments that are not part of the City. In addition, the assets are not derived from the City’s provisions of goods or services to those individuals, organizations, or other governments. These funds are used to account for money and property held by the City as trustee or custodian.

They are also used to account for various assessment districts for which the City acts as an agent for debt service activities or as agent for other foundations. The results of fiduciary fund type operations are presented in the Statement of Changes of Fiduciary Net Position.

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

Certain disclosure requirements for Deposits and Investment Risks were made in the following areas:
 Interest Rate Risk
 Credit Risk
 Overall
 Custodial Credit Risk
 Concentrations of Credit Risk
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
49 Note 1 – Summary of Significant Accounting Policies (Continued) C. Cash, Cash Equivalents and Investments (Continued)
In addition, other disclosures are specified, including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end, and other disclosures.

Highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value.

D. Cash and Investments with Fiscal Agents
Certain restricted cash and investments are held by fiscal agents for the redemption of bonded debt and for acquisition and construction of capital projects.

E. Fair Value Measurement
Investments, unless otherwise specified, recorded at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

The three levels of the fair value measurement hierarchy are described below:
 Level 1 – Inputs are unadjusted, quoted prices for identical assets and liabilities in active markets at the measurement date.
 Level 2 – Inputs, other than quoted prices included in Level 1, that are observable for the assets and liabilities through corroboration with market data at the measurement date.  Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets and liabilities at the measurement date.

F. Prepaid Items
Certain payments to vendors applicable to future accounting periods are recorded as prepaid items. Prepaid items do not reflect current appropriable resources and, thus, an equivalent portion of fund balance is nonspendable.

G. Interfund Transactions
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due from/to other funds” (i.e., current portion of interfund loans) and are eliminated in the government-wide financial statements as “interfund balances.” H. Property Held for Resale
Property held for resale is carried at the lower of cost or net realized value, but not greater than the estimated net realizable value.

I. Capital Assets
Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available.

Donated capital assets are valued at their acquisition value on the date donated. City policy has set the capitalization threshold for reporting capital assets at $5,000 (including infrastructure assets).

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
50 Note 1 – Summary of Significant Accounting Policies (Continued) I. Capital Assets (Continued)
The City established a threshold to recognize a right-to-use including lease asset or subscription-based information technology arrangements (“SBITA”) asset (“subscription assets”) in the government-wide financial statements and proprietary fund financial statements right-to-use asset over $5,000.

Lease assets are recorded at the amount of the initial measurement of the lease liabilities and adjusted by any lease payments made to the lessor at or before the commencement of the lease term, less any lease incentives received at or before the commencement of the lease term along with any initial direct costs that are ancillary charges necessary to place the lease assets into service. Lease assets are amortized using the straight-line method over the shorter of the lease term or the useful life of the underlying asset, unless the lease contains a purchase option that the City has determined is reasonably certain of being exercised. In this case, the lease asset is amortized over the useful life of the underlying asset.

Subscription assets are recorded at the amount of the initial measurement of the SBITA liabilities (“subscription liabilities”) and adjusted by any subscription payments to the SBITA vendor at or before the commencement of the subscription term, less any incentives received from the SBITA vendor at or before the commencement of the subscription term along with subscription implementation costs. Subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying IT assets.

All other capital assets used in operations are depreciated over their estimated useful using the straight-line method. The lives used for depreciation purposes are as follows:

Building and improvements 30 years
Vehicles, machinery and equipment 3-10 years
Infrastructure 20 years
The City defines infrastructure as the basic physical assets that allow the City to function. The assets include the streets, parks and recreation, lands and improvement system, storm water conveyance system, and buildings combined with the site amenities, such as parking and landscaped areas used by the City in the conduct of its business. Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land.

These subsystems were not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems.

J. Interest Payable
In the government-wide financial statements, interest payable on long-term debt is recognized, as the liability is incurred, for governmental activities. In the fund financial statements, only proprietary fund and private-purpose trust fund types recognize the interest payable when the liability is incurred.

K. Unearned Revenue
Unearned revenue is reported for transactions for which revenue has not yet been earned. Typical transactions recorded as unearned revenues are prepaid charges for services or advance grant with eligibility requirement.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
51 Note 1 – Summary of Significant Accounting Policies (Continued) L. Compensated Absences
Permanent City employees earn vacation and sick leave hours per pay period with rates depending on their length of employment. Upon separation from employment, the employees are paid for any unused vacation leave accrual balance. The City allows employees to accrue up to a maximum of 300 hours of vacation leave. There is no maximum on the number of sick leave hours that can be accrued. The compensated absences at June 30 is accrued when incurred in the government-wide financial statements. Compensated absences are primarily liquidated by the General Fund.

M. Pension
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

The following timeframes are used for pension reporting:

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.

N. Deferred Outflows/Inflows of Resources
The Statement of Net Position and Balance Sheet report separate sections for deferred outflows of resources, and deferred inflows of resources, when applicable.

Deferred Outflows of Resources represent a consumption of net assets that applies to future periods.

Deferred Inflows of Resources represent an acquisition of net assets that applies to future periods.

O. Long-Term Debt
In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the appropriate activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed when incurred.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
52 Note 1 – Summary of Significant Accounting Policies (Continued) O. Long-Term Debt (Continued)
In the fund financial statements, with the exception of advances from other funds, the governmental fund financial statements do not present long-term liabilities. Consequently, long term debt is shown as a reconciling item in the reconciliation of the governmental funds balance sheet to the government-wide statement of net position.

P. Lease Liabilities
The City recognizes lease liabilities with an initial, individual value of $5,000 or more with a lease term greater than one year in the government-wide and proprietary fund financial statements. Variable payments based on future performance of the lessee or usage of the underlying asset are not included in the measurement of the lease liability.

At the commencement of a lease, the City initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made.

Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments.  The City uses incremental borrowing rate provided by the financial institution or the current rate at the time a new lease is executed.
 The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise.
 Lease payments included in the measurement of the lease payable is composed of fixed payments to the lessor.

The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure any lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Q. Subscription Liabilities
The City recognizes subscription liabilities with an initial, individual value of $5,000 or more with a subscription term greater than one year in the government-wide and proprietary fund financial statements. Variable payments based on future performance of the City, usage of the underlying IT assets, or number of user seats are not included in the measurement of the subscription liability.

At the commencement of a subscription, the City initially measures the subscription liability at the present value of payments expected to be made during the subscription term. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made.

Key estimates and judgments related to subscription liabilities include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments.
 The City uses incremental borrowing rate provided by the financial institution at July 1, 2022 for existing subscription or the current rate at the time a new subscription is executed.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
53 Note 1 – Summary of Significant Accounting Policies (Continued) Q. Subscription Liabilities (Continued)
 The subscription term includes the noncancellable period of the SBITA. Subscription payments included in the measurement of the subscription liability are composed of fixed payments.

The City monitors changes in circumstances that would require a remeasurement of its SBITA and will remeasure any subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

R. Claims and Judgments
When it is probable that a claim or judgment liability has been incurred at year-end, and the amount of the loss can be reasonably estimated, the City records the estimated loss, net of any insurance coverage. The City is selfinsured and has insurance coverage in excess of the self-insured amounts as a member of the Public Entity Risk Management Authority (“PERMA”).

S. Property Taxes
Property taxes are levied on July 1 and are payable in two installments: November 1 and February 1 of each year.

Property taxes become delinquent on December 10 and April 10, for the first and second installments, respectively. The lien date is January 1. The County of Riverside, California (“County”) bills and collects property taxes and remits them to the City according to a payment schedule established by the County.

Property tax revenue is recognized in the fiscal year for which the taxes have been levied, provided the taxes are received within 60 days after the end of the fiscal year. Property taxes received after this date are not considered available as a resource that can be used to finance the current year operations of the City and, therefore, are not recorded as revenue until collected. No allowance for doubtful accounts was considered necessary.

T. Net Position
In the government-wide financial statements and proprietary fund financial statements, net position is classified as follows:

Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those assets, net of unspent debt proceeds, and the capital debt related deferred outflows and inflows of resources.

Restricted – This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.

Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the City’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
54 Note 1 – Summary of Significant Accounting Policies (Continued) U. Fund Balances
In the governmental fund financial statements, fund balances are classified as follows:

Nonspendable – Nonspendable fund balances are items that cannot be spent because they are not in spendable form, such as prepaid items and inventories, or items that are legally or contractually required to be maintained intact, such as principal of an endowment or revolving loan funds.

Restricted – Restricted fund balances encompass the portion of net fund resources subject to externally enforceable legal restrictions. This includes externally imposed restrictions by creditors, such as through debt covenants, grantors, contributors, laws or regulations of other governments, as well as restrictions imposed by law through constitutional provisions or enabling legislation.

Committed – Committed fund balances encompass the portion of net fund resources, the use of which is constrained by limitations that the government imposes upon itself at its highest level of decision making, normally the governing body, and that remain binding unless removed in the same manner. The City Council is considered the highest authority for the City. Adoption of a resolution by the City Council is required to commit resources or to rescind the commitment.

Assigned – Assigned fund balances encompass the portion of net fund resources reflecting the government’s intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for that purpose. The City Council has authorized the City Manager or designee for that purpose.

Unassigned – This amount is for any portion of the fund balances that do not fall into one of the above categories. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.

When expenditures are incurred for purposes for which both restricted and unrestricted fund balances are available, the City’s policy is to apply restricted fund balances first, then unrestricted fund balances as needed.

When expenditures are incurred for purposes where only unrestricted fund balances are available, the City uses the unrestricted resources in the following order, except for instances wherein an ordinance specifies the fund balance:
 Committed
 Assigned
 Unassigned
V. Use of Estimates
The preparation of the basic financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
55 Note 1 – Summary of Significant Accounting Policies (Continued) W. Implementation of New GASB Pronouncements
In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements (GASB Statement No. 96), to better meet the information needs of financial statement users by (a) establishing uniform accounting and financial reporting requirements for SBITAs; (b) improving the comparability of financial statements among governments that have entered into SBITAs; and (c) enhancing the understandability, reliability, relevance, and consistency of information about SBITAs. Under this Statement, a government is required to recognize a subscription liability and an intangible right-to-use subscription asset. The effective date of GASB Statement No. 96 is for fiscal years beginning after June 15, 2022. Implementation of this Statement resulted in restatement of beginning balance of capital assets (Note 5) and long-term debt liabilities (Note 6) at July 1, 2022.

Note 2 – Cash and Investments
The following is a summary of pooled cash and investments, including cash and investments with fiscal agents at June 30, 2023:

GovernmentWide Statement
of Net Position Fiduciary Fund
Governmental Statement of
Activities Net Position Total
Cash and investments 28,585,928 $ 4,972,998 $ 33,558,926 $ Cash and investments with fiscal agents 16,264,608 2,239,190 18,503,798 Total cash and investments 44,850,536 $ 7,212,188 $ 52,062,724 $ Cash and investments consisted of the following at June 30, 2023:

Cash and Investments:

Petty cash 8,000 $
Demand deposits 18,598,269
Restricted cash 455,254
Investments 33,001,201
Total cash and investments 52,062,724 $
A. Demand Deposits
The carrying amounts of the City’s demand deposits were $18,598,269 at June 30, 2023. Bank balances at that date were $18,010,426, the total amount of which was collateralized or insured with securities held by the pledging financial institutions in the City’s name as discussed below. The difference between the carrying amount and bank balances represents outstanding checks, deposits in transit, and other reconciling items.

The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
56 Note 2 – Cash and Investments (Continued)
A. Demand Deposits (Continued)
The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City’s deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation (“FDIC”).

The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the period-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.

B. Investments
Investments Authorized by the City’s Investment Policy
The City annually adopts an investment policy to provide guidelines for the deposit and investment of public monies. The investment policy was consistent with the terms and provisions of California Government Code Section 53600 et seq.

Maximum Maximum Percentage Maximum Investment
Authorized Investment Type Maturity * of Portfolio * in One Issuer * United States Treasury Notes 5 years 80% N/A
U.S. Sponsored Enterprise Securities 5 years 80% N/A
Bankers' Acceptances 180 days 40% 30%
Commercial paper 270 days 25% 10%
Negotiable Certificates of deposit 5 years 30% N/A
Local Agency Investment Fund ("LAIF") N/A No Limit $50 million Medium-term notes 5 years 30% N/A
Money Market Mutual Funds N/A 20% 10%
N/A - Not Applicable
* Excluding amounts held by bond trustees that are not subject to California Government Code restrictions.

Investments Authorized by Debt Agreement
Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City’s investment policy. Authorized investments held by bond trustee are the same as those authorized by the City’s investment policy identified above.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
57 Note 2 – Cash and Investments (Continued)
C. Fair Value Measurement
At June 30, 2023, investments are reported at fair value. The following table presents the fair value measurement of investments on a recurring basis and the levels within the fair value hierarchy in which the fair value measurements fall at June 30, 2023:

Investment Type Value
Observable Inputs
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Investments subject to fair value measurements:

Negotiable certificates of deposits 1,699,643 $ - $ 1,699,643 $ U.S. Treasury notes 1,536,691 1,536,691 -
U.S. government sponsored enterprise 2,259,504 - 2,259,504 Corporate notes and asset back securities 2,144,260 - 2,144,260 Foreign notes 254,967 - 254,967
Investments held with fiscal agents:

U.S. Treasury notes 2,551,689 2,551,689 -
U.S. government agency bonds 480,134 - 480,134
Total investments subject to fair value measurements 10,926,888 4,088,380 $ 6,838,508 $ Investments measured at amortized cost:

Local Agency Investment Fund (LAIF) 6,491,700
Money market funds 110,638
Investments held with fiscal agents:

Money market mutual funds 15,471,975
Total investments 33,001,201 $
Fair Value Measurement
Level 2 investments are valued based on institutional bond quotes or matrix pricing.

D. Risk Disclosures
Interest Rate Risk
As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy provides that, final maturities of securities cannot exceed five years. Specific maturities of investments depend on liquidity needs. At June 30, 2023, the City’s investments had the following maturities:

Investment Type Amount Less than 1 1 to 2 2 to 3 3 to 4 4 to 5 Local Agency Investment Fund (LAIF) 6,491,700 $ 6,491,700 $ - $ - $ - $ - $ Negotiable Certificates of deposits 1,699,643 443,463 756,290 214,554 285,336 - Money market funds 110,638 110,638 - - - -
US Treasury notes 1,536,691 158,462 731,715 378,249 - 268,265 U.S. government sponsored enterprise 2,259,504 636,319 791,783 445,121 47,778 338,503 Corporate notes and asset back securities 2,144,260 622,712 350,865 172,175 683,940 314,568 Foreign notes 254,967 87,671 167,296 - - -
Investments held with fiscal agents:

US Treasury notes 2,551,689 2,551,689 - - - -
Money market mutual funds 15,471,975 15,471,975 - - - - US government agency bonds 480,134 - - 247,506 - 232,628 Total 33,001,201 $ 26,574,629 $ 2,797,949 $ 1,457,605 $ 1,017,054 $ 1,153,964 $ Investment Maturities (in Years)
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
58 Note 2 – Cash and Investments (Continued)
D. Risk Disclosures (Continued)
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. To be eligible to receive City money, a bank, savings association, federal association, or federally insured industrial loan company shall have received an overall rating of not less than "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.

The City’s investments are rated by the nationally recognized statistical rating organizations as follows:

Percentage of
Investments
Minimum Legal with Credit
Investment Type Fair Value Credit Rating Credit Rating Rate Risk Local Agency Investment Fund (LAIF) 6,491,700 $ None Not Rated 46% Negotiable Certificates of deposits 1,699,643 None A1 12% Money market funds 110,638 Aaa Aaa N/A
US Treasury notes 1,536,691 None Aaa 11%
U.S. government sponsored enterprise 2,259,504 None Aaa 16% Corporate notes and asset back securities 2,144,260 AA Aaa/Aa/A 13% Foreign notes 254,967 AA Aaa 2%
Investments held with fiscal agents:

US Treasury notes 2,551,689 N/A Aaa N/A
Money market mutual funds 15,471,975 N/A Aaa N/A
US government agency bonds 480,134 N/A Aaa N/A
Total 33,001,201 $
Custodial Credit Risk
Custodial credit risk is the risk that, in the event of the failure of the counter party (e.g. broker-dealer) to a transaction, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government’s indirect investments in securities through these of mutual funds or government investment pools (such as LAIF).

E. Investments in Local Agency Investment Fund
The City is a participant in LAIF, which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. The City valued its investments in LAIF as of June 30, 2023 at amortized cost, which approximates fair value.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
59 Note 3 – Notes Receivable
Notes receivable, which amounted to $3,354,172, is reported in the Housing Authority Special Revenue Fund as follows:

Housing Rehabilitation Loan Program 404,172 $
Owner Participation and Loan Agreement:

Low Income Housing Project 500,000
Low and Moderate Income Housing Units 750,000
Multifamily Residential Housing 1,700,000
Total $ 3,354,172
The former Redevelopment Agency of the City of Desert Hot Springs (“Redevelopment Agency”) operated a housing rehabilitation loan program, which provides loans to borrowers who meet certain qualifications for the purpose of rehabilitating their homes. The loans are secured by a deed of trust and are normally repaid when the home changes ownership. The outstanding balance of the loan at June 30, 2023 was $404,172.

On June 7, 2006, the former Redevelopment Agency entered into an Owner Participation and Loan Agreement in the amount of $500,000 with a developer to provide funding for development of 34 low-income housing units. On October 6, 2009, the former Redevelopment Agency entered into another Owner Participation and Loan Agreement for $750,000 with a developer to provide funding for development of 60 low to moderate income housing units. On March 16, 2010, the former Redevelopment Agency entered into the third Owner Participation and Grant Agreement in the amount of $1,700,000 with a developer to provide funding for development of a 62-unit multifamily residential housing project. The term of these agreements is 55 years.

Note 4 – Interfund Transactions
A. Due From/To Other Funds
At June 30, 2023, the City had the following short-term interfund receivable/payable:

Due to Other Funds
General Fund Debt Service Fund Total
Public Safety Special Revenue Fund 813 $ - $ 813 $
Capital Improvement Capital Projects Funds 369,144 1,041,825 1,410,969 Nonmajor Governmental Funds 228,694 - 228,694
Internal Service Funds 507,638 - 507,638
Total $ 1,041,825 1,106,289 $ 2,148,114 $
Due from Other Funds
The interfund balances resulted from temporary reclassifications made at June 30, 2023 to cover cash shortfalls.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
60 Note 4 – Interfund Transactions (Continued)
B. Transfers In/Out
For the year ended June 30, 2023, the City had the following transfers in/out which arise in the normal course of operations:

Public Safety Capital Improvements Debt Nonmajor
General Special Revenue Capital Projects Service Governmental Transfers Out Fund Fund Fund Fund Funds Total
General Fund - $ 10,420,157 $ 164,021 $ 197,820 $ 1,951,986 $ 12,733,984 $ Debt Service Fund - - 1,018,535 - - 1,018,535
Nonmajor Governmental Funds 100,000 165,316 - 322,168 - 587,484 Total $ 10,585,473 100,000 $ 1,182,556 $ 519,988 $ 1,951,986 $ 14,340,003 $ Transfers In
The transfer of $10,420,157 from General Fund to the Public Safety Special Revenue Fund was to fund public safety expenditures during the year in which there were insufficient revenues to cover. The transfers of $164,021 to the Capital Improvements Fund was to fund capital projects. The transfers of $197,820 to the Debt Service Fund was to fund debt service payments. The transfers of $1,951,986 from General Fund to the Nonmajor Governmental Funds were budgeted transfers to provide funding for the expenditures of Citywide Lighting and Maintenance District and Cabot’s Museum.

The transfers of $1,018,535 from the Debt Service Fund to the Capital Improvements Fund was to fund capital projects.

The transfer of $100,000 from the Nonmajor Governmental Funds to the General Fund was a payment for the City Council adopted interfund loan agreement with the General Fund for the reimbursement of expenses related to the construction of the new City Hall.

The transfers of $165,316 from the Nonmajor Governmental Funds to the Public Safety Special Revenue Fund relates to assistance in funding public safety expenditures.

The transfers of $322,168 from the Nonmajor Government Funds to the Debt Service Fund was to fund debt service payments.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
61 Note 5 – Capital Assets
A summary of changes in the capital assets for the governmental activities for the year ended June 30, 2023 is as follows:

Balance
July 1, 2022 Balance
(As Restated) Additions Deletions Transfers June 30, 2023 Nondepreciable assets:

Land 2,958,094 $ - $ - $ - $ 2,958,094 $
Construction in progress 7,695,430 5,698,503 - - 13,393,933 Total nondepreciable assets 10,653,524 5,698,503 - - 16,352,027 Depreciable assets:

Building and improvements 44,981,783 1,581,330 - - 46,563,113 Machinery and equipment 14,470,423 54,793 - - 14,525,216 Vehicles 3,865,115 241,409 (96,253) - 4,010,271
Infrastructure 44,025,073 800,157 - - 44,825,230
Total capital assets, being depreciated 107,342,394 2,677,689 (96,253) - 109,923,830 Less accumulated depreciation:

Building and improvements (14,286,291) (1,494,570) - - (15,780,861) Machinery and equipment (9,564,124) (765,600) - - (10,329,724) Vehicles (2,604,451) (429,566) 96,253 - (2,937,764)
Infrastructure (23,779,223) (2,212,283) - - (25,991,506) Total accumulated depreciation (50,234,089) (4,902,019) 96,253 - (55,039,855) Total depreciable assets, net 57,108,305 (2,224,330) - - 54,883,975 Intangible assets:

Right of use - leased vehicles - 123,938 - - 123,938
Right to use - subscription asset 380,823 171,343 - - 552,166 Total intangible assets, being amortized 380,823 295,281 - - 676,104 Less accumulated amortization:

Right of use - leased vehicles - (8,604) - - (8,604)
Right to use - subscription asset - (126,484) - - (126,484) Total accumulated amortization - (135,088) - - (135,088) Total amortizable assets, net 380,823 160,193 - - 541,016 Governmental activities capital assets, net $ 3,634,366 68,142,652 $ - $ - $ 71,777,018 $ Governmental Activities
Depreciation and amortization expense was charged to functions/programs of governmental activities for the year ended June 30, 2023 as follows:

General government 2,967,379 $
Public safety 381,278
Public works 551,724
Culture and leisure 939,558
Internal service fund 197,168
Total depreciation expense $ 5,037,107
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
62 Note 6 – Long-Term Liabilities
A. Governmental Activities
A summary of changes in long-term liabilities for governmental activities for the year ended June 30, 2023 is as follows:

Balance
July 1, 2022 Balance Due within Due in more
(As Restated) Additions Deletions June 30, 2023 One Year than One Year 2020 Certificates of Participation 4,840,000 $ - $ (200,000) $ 4,640,000 $ 200,000 $ 4,440,000 $ Lease Revenue Bonds Series 2017A 13,475,000 - (255,000) 13,220,000 330,000 12,890,000 Taxable Lease Revenue Bonds
Series 2017A-T 60,000 - (60,000) - - -
Lease Revenue Bonds Series 2018 6,450,000 - (130,000) 6,320,000 140,000 6,180,000 Lease Revenue Bonds Series 2021A 14,255,000 - (320,000) 13,935,000 235,000 13,700,000 Taxable Lease Revenue Bonds
Series 2021A-T 1,135,000 - - 1,135,000 95,000 1,040,000 Subtotal 40,215,000 - (965,000) 39,250,000 1,000,000 38,250,000 Add/(less) deferred amounts:

Bond discount - 2017A-T (114) - 114 - - -
Bond premium - 2017A 148,922 - (6,205) 142,717 6,205 136,512 Bond premium - 2018 257,692 - (10,220) 247,472 10,220 237,252 Bond premium - 2021A 233,718 - (8,030) 225,688 8,030 217,658 Total bonds payable 40,855,218 - (989,341) 39,865,877 1,024,455 38,841,422 Santander finance purchase 568,621 - (174,289) 394,332 179,107 215,225 Lease liabilities - 123,938 (7,016) 116,922 19,757 97,165 Subscription liabilities 194,813 171,343 (127,795) 238,361 117,753 120,608 Claims and judgments payable 581,380 39,484 (250,982) 369,882 206,075 163,807 Compensated absences 1,130,718 965,119 (573,662) 1,522,175 456,653 1,065,522 Pension-related debt 1,291,849 72,520 (339,446) 1,024,923 228,313 796,610 Total $ 1,372,404 44,622,599 $ (2,462,531) $ 43,532,472 $ 2,232,113 $ 41,300,359 $ California Communities Transportation Revenue (Installment Sale) Certificates of Participation, Series 2020 (T.R.I.P. – Total Road Improvement Program) – Original Issue $5,310,000 In October 2020, the City entered into a trust agreement with the California Statewide Communities Development Authority (the “Authority”), and issued the Certificates of Participation, Series 2020 (the “2020 Certificates”) in the amount of $5,310,000. The purpose of the Certificates was to: 1) defeased the 2012A Certificates, and 2) pay the costs incurred in connection with the execution, sale, and delivery of the Certificates. The City makes installment sale payments to the Authority, which are payable from Gas Tax revenues and Measure A receipts.

The aggregate difference in debt service as result of the refinancing was $1,699,086 and economic gain on the refinancing was $873,318. The outstanding balance of the defeased 2012A Certificates at June 30, 2023 was $4,535,000.

The 2020 Certificates accrue interest at rates between 0.435% and 3.238%, payable semiannually on June 1 and December 1, and mature through June 1, 2042.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
63 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
At June 30, 2023, the outstanding balance of the 2020 Certificates was $4,640,000. The annual debt service requirements on the 2020 Certificates are as follows:

Year Ending June 30, Principal Interest Total
2024 200,000 $ 117,766 $ 317,766 $
2025 205,000 115,844 320,844
2026 210,000 113,669 323,669
2027 210,000 113,669 323,669
2028 210,000 107,360 320,724
2029-2033 1,140,000 468,897 1,602,813
2034-2038 1,285,000 314,909 1,601,240
2039-2042 1,180,000 97,140 1,599,253
Total 4,640,000 $ 1,449,254 $ 6,409,978 $
Lease Revenue Bonds, Series 2017A and the Taxable Lease Revenue Bonds, Series 2017A-T In March 2017, the Desert Hot Springs Public Financing Authority (the “Authority”) issued the Lease Revenue Bonds, Series 2017A (the “Tax-Exempt Bonds”) and the Taxable Lease Revenue Bonds, Series 2017A-T (the “Taxable Bonds” in amount of $13,895,000 and $1,105,000, respectively. The purpose of the bonds is to (i) current refund the Certificates of Participation (Interim Cash Flow Financing) and Judgment Obligation Bonds, (ii) finance a new City Hall, (iii) make a deposit into a debt service reserve fund and (iv) pay the costs of issuing the Bonds. The aggregate difference in debt service as result of refinancing were $477,856 for the Tax Exemption Bonds and $222,211 for the Taxable Bonds, and economic gain on the refinancing were $963,667 and $43,838, respectively.

The Bonds accrue interest at rates between 2.000% and 3.750%, payable semiannually on March 1 and September 1, commencing September 1, 2017 and the principals are due annually on March 1.

The Tax-Exempt Bonds maturing on or before March 1, 2027 are not subject to optional redemption prior to their stated maturity. The Tax-Exempt Bonds maturing on or after March 1, 2028 are subject to redemption, as a whole or in part at a redemption price equal to 100% of the principal amount of Tax-Exempt Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Taxable Bonds are not subject to optional redemption prior to their stated maturity.

At June 30, 2023, the outstanding balance of the Tax-Exempt Bonds was $13,220,000. The taxable bonds were paid off during the year ended June 30, 2023. The annual debt service requirements on the Bonds are as follows:

Year Ending June 30, Principal Interest Total
2024 330,000 $ 533,781 $ 863,781 $
2025 345,000 518,931 863,931 $
2026 360,000 503,406 863,406 $
2027 375,000 487,206 862,206 $
2028 395,000 470,331 865,331 $
2029-2033 2,265,000 2,053,369 4,318,369 $
2034-2038 2,725,000 1,605,744 4,330,744 $
2039-2043 3,290,000 1,032,000 4,322,000 $
2044-2047 3,135,000 319,800 3,454,800 $
Total 13,220,000 $ 7,524,568 $ 20,744,568 $
Tax Exempt Bonds
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
64 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Lease Revenue Bonds, Series 2018
In October 2018 the Authority issued the Lease Revenue Bonds, Series 2018 (the “2018 bonds”) in the amount of $6,850,000. The purpose of the bonds is to (i) finance a portion of the New City Hall being constructed by the City (ii) make a deposit into a debt service reserve fund for the Bonds, and (iii) pay the costs of issuing the bonds.

The bonds accrue interest at rates between 3.0% and 5.0%, payable semiannually on March 1 and September 1, commencing March 1, 2019. Principals are due annually commencing March 1, 2019 through March 1, 2048.

At June 30, 2023, the outstanding balance of the 2018 bonds were $6,320,000. The annual debt service requirements on the 2018 bonds are as follows:

Year Ending June 30, Principal Interest Total
2023 140,000 $ 276,606 $ 416,606 $
2024 145,000 269,606 414,606
2025 150,000 262,356 412,356
2026 160,000 254,856 414,856
2027 165,000 246,856 411,856
2028-2032 975,000 1,100,531 2,075,531
2033-2037 1,225,000 844,906 2,069,906
2038-2042 1,510,000 555,800 2,065,800
2043-2047 1,850,000 228,000 2,078,000
Total $ 4,039,517 6,320,000 $ 10,359,517 $
Lease Revenue Bonds, Series 2021A and the Taxable Lease Revenue Bonds, Series 2021A-T In August 2021, the Desert Hot Springs Public Financing Authority (the “Authority”) issued the Lease Revenue Bonds, Series 2021A (the “Tax-Exempt Bonds”) and the Taxable Lease Revenue Bonds, Series 2021A-T (the “Taxable Bonds” in amount of $14,835,000 and $1,135,000, respectively. The purpose of the bonds is to (i) finance the acquisition and construction of a new police facility and fire station and, as to the taxable bonds, to provide funds for capital improvement projects within the City, (ii) make a deposit into a debt service reserve fund and (iii) pay the costs of issuing the Bonds. The aggregate difference in debt service as result of refinancing were $477,856 for the Tax Exemption Bonds and $222,211 for the Taxable Bonds, and economic gain on the refinancing were $963,667 and $43,838, respectively.

The bonds accrue interest at rates between 3.0% and 4.0%, payable annually on March 1, commencing March 1, 2022. Principal payments for the Tax-Exempt Bonds and the Taxable Bonds due annually on March 1, commencing March 1, 2022 and March 1, 2024 through March 1, 2051 and March 1, 2033, respectively.

The Tax-Exempt Bonds maturing on or before March 1, 2031 are not subject to optional redemption prior to their stated maturity. The Tax-Exempt Bonds maturing on or after March 1, 2032 are subject to redemption, as a whole or in part at a redemption price equal to 100% of the principal amount of Tax-Exempt Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. The Taxable Bonds maturing on or after March 1, 2023 are subject to redemption, as a whole or in part at a redemption price equal to 100% of the principal amount of Taxable Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
65 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
At June 30, 2023, the outstanding balance of the Tax-Exempt Bonds and the Taxable Bonds were $13,935,000 and $1,135,000, respectively. The annual debt service requirements on the Bonds are as follows:

Year Ending June 30, Principal Interest Principal Interest Principal Interest 2024 235,000 $ 425,513 $ 95,000 $ 39,725 $ 330,000 $ 465,238 $ 2025 240,000 416,113 100,000 36,400 340,000 452,513
2026 250,000 406,513 105,000 32,900 355,000 439,413
2027 265,000 396,513 105,000 29,225 370,000 425,738
2028 275,000 385,913 110,000 25,550 385,000 411,463
2029-2033 1,520,000 1,757,963 620,000 66,500 2,140,000 1,824,463 2034-2038 2,570,000 1,399,544 - - 2,570,000 1,399,544
2039-2043 2,950,000 1,014,250 - - 2,950,000 1,014,250
2044-2048 3,375,000 593,450 - - 3,375,000 593,450
2049-2051 2,255,000 125,263 - - 2,255,000 125,263
Total $ 6,921,035 13,935,000 $ 1,135,000 $ 230,300 $ 15,070,000 $ 7,151,335 $ Tax Exempt Bonds Taxable Bonds Total
Santander Purchase Financing Agreement
On February 10, 2021, the City entered into a purchase financing agreement with Lease Servicing Center, Inc. dba NCL Government Capital for the Police Department vehicles. Interest on the vehicles is 2.73% monthly for a period of 4 years commencing on August 30, 2021.

In the event of default, the lender may, at its option, exercise any of one or more of the following remedies: (1) by written notice to the City, declare all amounts then due under the lease, (2) by written notice require the City to promptly return the equipment to the lender at the City’s expense, (3) exercise any other right, remedy or privilege which may be available to it under applicable laws of the State of California.

At June 30, 2023, the outstanding balance of the purchase financing agreement were $394,332. The annual debt service requirements on the purchase financing agreement are as follows:

Year Ending June 30, Principal Interest Total
2024 179,107 $ 8,535 $ 187,642 $
2025 184,058 3,584 187,642
2026 31,167 106 31,273
Total $ 12,225 394,332 $ 406,557 $
Lease Liabilities
On October 20, 2022, the City entered into a 61-month lease agreement with Enterprise Fleet Management for 4 vehicles for a total monthly lease payment in the amount of $ 1,443. Lease payments are due on the 1st of each month. Interest accrues at rates ranging from 2.82 percent to 3.45 percent annum. In the event of default, the lease shall be deemed terminated. Outstanding lease liabilities at June 30, 2023 was in the amount of $116,992.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
66 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Lease Liabilities (Continued)
Future lease payments under the lease payable are as follows:

Year Ending June 30, Principal Interest Total
2024 19,757 $ 12,881 $ 32,638 $
2025 22,251 10,387 32,638
2026 25,050 7,588 32,638
2027 28,203 4,435 32,638
2028 21,661 1,038 22,699
Total 116,922 $ 36,329 $ 153,251 $
Subscription Liabilities
The City entered into subscription agreements with various vendors for software. The agreements expire from April 30, 2024 to May 31, 2026 with interest rates ranging 2.19 percent to 2.85 percent. Outstanding subscription liabilities at June 30, 2023 was in the amount of $238,361.

The future subscription payments are as follows:

Year Ending June 30, Principal Interest Total
2024 117,753 $ 5,779 $ 123,532 $
2025 120,608 2,924 123,532
Total $ 8,703 238,361 $ 247,064 $
Claims and Judgments Payable
The claims and judgments payable at June 30, 2023 was in the amount of $369,882. The Risk Management Internal Service Fund has been used to liquidate the liability for claims and judgments payable. See Note 8 for details.

Compensated Absences
The City’s liability for vested and unpaid compensated absences (accrued vacation and sick pay) in the governmental activities was in the amount of $1,522,175 at June 30, 2023. The General Fund has been used to liquidate the majority of the liability for compensated absences.

Pension-Related Debt
As of June 30, 2003, the California Public Employees’ Retirement System (“CalPERS”) implemented a risk pool for the City’s multiple-employer public employee defined benefit pension plan. The City’s Miscellaneous and Safety Plans converted from agent multiple-employer plans to cost-sharing multiple employer plans. In addition to the actuarially determined contributions (see Note 9), the City is also required to make annual payments on a Side Fund, which was created when the City entered the risk pool to account for the difference between the funded status of the pool and the funded status of the City’s plans. The responsibility for funding the Side Fund is specific to the City and is not shared by all employers in the risk pool.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
67 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Pension-Related Debt (Continued)
The annual payments on the Side Fund represent principal and interest payments on the pension-related debt, which are included in the retirement expenditures in the City’s various functions.

The amount of pension-related debt outstanding at June 30, 2023 totaled $1,024,923 for the Safety Plan. The future payment requirements are as follows:

Year Ending June 30, Safety Total
2024 228,313 $ 228,313 $
2025 234,592 234,592
2026 241,043 241,043
2027 247,672 247,672
2028 73,303 73,303
$ 1,024,923 1,024,923 $
B. Fiduciary Activities
A summary of changes in long-term liabilities for the fiduciary fund for the year ended June 30, 2023 is as follows:

Balance Balance Due within Due in more
July 1, 2022 Additions Deletions June 30, 2023 One Year than One Year 2008 Tax Allocation Bonds A-1 3,965,000 $ - $ (1,915,000) $ 2,050,000 $ 2,050,000 $ - $ 2017 Tax Allocation Refunding Bonds 17,315,000 - (840,000) 16,475,000 880,000 15,595,000 Subtotal 21,280,000 - (2,755,000) 18,525,000 2,930,000 15,595,000 Add/(less) deferred amounts:

Bond discount - 2008 TAB A-1 (69,928) - 58,765 (11,163) (11,163) - Bond premium - 2017 Tax
Allocation Refunding Bonds 1,653,952 - (96,360) 1,557,592 96,360 1,461,232 Total bonds payable $ - 22,864,024 $ (2,792,595) $ 20,071,429 $ 3,015,197 $ 17,056,232 $ Tax Allocation Bonds Series 2008A-1 (Taxable) – Original Issue $19,965,000 In April 2008, the former Redevelopment Agency issued Tax Allocation Bonds, Series 2008A-1 (Taxable) (the “Series 2008A-1 Bonds”) in the amount of $19,965,000. The purpose of the Series 2008A-1 Bonds was to: 1) provide funds to finance redevelopment activities including, without limitation, the acquisition of property for the benefit of the Merged Project Area, 2) to fund the reserve account, and 3) to pay certain costs of issuance of the Series 2008A-1 Bonds.

The Series 2008A-1 Bonds are 7% term bonds due September 1, 2023, with interest payable semiannually on September 1 and March 1 of each year. The 2008A-1 Bonds are subject to optional redemption, on any date prior to their maturity, in whole or in part, with maturities to be designated by the Successor Agency, at a redemption price equal to 100 percent of the principal amount of such 2008A-1 Bonds plus the Make-Whole Premium, if any, plus the accrued interest, if any, thereon to the redemption date.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
68 Note 6 – Long-Term Liabilities (Continued)
B. Fiduciary Activities (Continued)
The Series 2008A-1 Bonds maturing on September 1, 2023 are also subject to redemption prior to their stated maturity, in part, pro rata, from sinking account installments deposited in the sinking account on September 1 of each year commencing September 1, 2009, at the principal amount thereof and interest accrued thereon to the date fixed for redemption, without premium.

The Series 2008A-1 Bonds agreement requires the Successor Agency to pledge its annual tax revenues in an amount equal to at least 135% of the annual debt service requirement each fiscal year, through final maturity of the Series 2008A-1 Bonds on September 1, 2023 or early retirement of the Series 2008A-1 Bonds, whichever occurs first. Revenues received by the Successor Agency from the RPTTF have been pledged for the payment of principal and interest on these bonds. Principal and interest paid for the current year amounted to $2,125,525 and total net revenue reported by the Successor Agency was $3,250,873. The ratio of net revenues to the debt service payments due during the year ended June 30, 2023 was 1.53 (153%).

The outstanding balance of the Series 2008A-1 Bonds at June 30, 2023 totaled to $2,050,000. The annual debt service requirements on the Series 2008A-1 Bonds are as follows:

Year Ending June 30, Principal Interest Total
2024 2,050,000 $ 71,750 $ 2,121,750 $
Tax Allocation Refunding Bonds, Series 2017 – Original Issue $20,020,000 In May 2017, the Successor Agency issued 2017 Subordinate Tax Allocation Refunding Bonds in the amount of $20,020,000. The purpose of the bonds was to current refund 2006 Tax Allocation Refunding Bonds, 2008 Tax Allocation Bonds A-2, and 2009 Tax Allocation Bonds, and to fund the reserve account by purchasing the reserve policy and to pay the costs of issuing the 2017 Bonds. The aggregate difference in debt service as result of the refinancing were $7,728,181 and economic gain on the refinancing were $3,736,520. The 2017 Bonds are secured by a pledge of, security interest in and lien on all of the Tax, including all of the Tax Revenues in the Redevelopment Obligation Retirement Fund.

The Bonds accrue interest at rates between 2.000% and 5.000%, payable semiannually on March 1 and September 1, commencing September 1, 2017 and the principals are due annually on September 1. The 2017 Bonds are subject to optional redemption and mandatory sinking account redemption prior to maturity.

The outstanding balance of the 2017 Bonds at June 30, 2023 was $16,475,000. The annual debt service requirements on these bonds are as follows:

Year Ending June 30, Principal Interest Total
2024 880,000 $ 690,112 $ 1,570,112 $
2025 925,000 644,988 1,569,988
2026 970,000 607,312 1,577,312
2027 1,000,000 567,763 1,567,763
2028 1,050,000 516,513 1,566,513
2029-2033 6,110,000 1,717,313 7,827,313
2034-2038 4,460,000 552,194 5,012,194
2039-2040 1,080,000 25,377 1,105,377
Total $ 5,321,570 16,475,000 $ 21,796,570 $
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
69 Note 7 – Non-City Obligation Debt
The City of Desert Hot Springs Community Facilities District No. 2006-1 (the “District”) issued Improvement Area 1 Special Tax Bonds, Series 2008A on October 16, 2008 in the amount of $2,600,000. The bond proceeds, in conjunction with special tax collections, will be used to finance certain public facilities and fees within the City necessary for the development of property within Improvement Area 1 of the District. The bonds do not constitute a debt or liability of the City as they are secured by the special tax revenues levied by the District on real property within the boundaries of the Improvement Area 1. In August 2010, the District issued $2,285,000 Improvement Area 1 Special Tax Refunding Bonds, Series 2010 and redeemed the Improvement Area 1 Special Tax Bonds, Series 2008A. In February 2020 the District issued the Area 1 Special Tax Refunding Bonds, Series 2020 and redeemed the Series 2010 bonds. The outstanding balance for the Improvement Area 1 Special Tax Refunding Bonds, Series 2020, at June 30, 2023 was $1,773,222.

Note 8 – Risk Management
A. Coverage
The City retains a level of risk for both general liability and workers’ compensation. The insurance coverage in excess of the self-insured amount is provided by the Public Entity Risk Management Authority (“PERMA”), a public entity risk pool consisting of cities and other public agencies in Southern California established under the provisions of California Government Code Section 65000 et seq. Costs are shared amongst the members based upon deposit premium contributions. PERMA publishes its own annual financial reports, which can be obtained from PERMA at 72-811 Highway 111 #1014, Palm Desert, CA 92260.

General Liability
The City is self-insured for the first $10,000 on each general liability claim against the City. The City pays an annual premium to PERMA for its excess general liability insurance coverage of $50,000,000, including errors and omissions and auto liability.

Workers’ Compensation and Employers’ Liability
The City is self-insured for the first $50,000 of each occurrence. The insurance coverage in excess of the selfinsured amount is provided by PERMA. As a member of PERMA, all participating members share any losses in excess of the City’s self-insured amount up to statutory limits for workers’ compensation and $5,000,000 per accident for employers’ liability.

Other Coverage
The City also has coverage for other risks of loss, including property insurance, auto physical damage insurance, crime coverage and employment practices liability. The City’s property insurance has a $100,000,000 limit of coverage, including $2,500,000 for flood, with a $5,000 deductible per occurrence, except for $100,000 for flood.

The City’s auto physical damage insurance has a $100,000,000 limit of coverage, with a $5,000 deductible for all vehicles, except for $10,000 for fire trucks valued over $200,000. The City’s crime coverage has limits of coverage of $5,000,000 with a $2,500 deductible. The City’s cyber liability has a $2,000,000 limit of coverage, including $250,000 for privacy notification costs, with a $50,000 deductible per claim. The City is self-insured for the first $25,000 of each occurrence for employment practices liability, with excess insurance coverage up to a $1,000,000 limit.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
70 Note 8 – Risk Management (Continued)
B. Claims Activity
Claims expenses and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. At June 30, 2023, the amount of these liabilities was $369,882 and was the City’s best estimate based on available information.

A summary of the changes in claims liabilities for the past three fiscal years is as follows:

Year Claims Claims Incurred Year
Ended Payable during the Claims Ended
June 30, July 1 Fiscal Year Payments June 30
2021 552,697 $ 423,770 $ (194,888) $ 781,579 $
2022 781,579 76,419 (276,618) 581,380
2023 581,380 39,484 (250,982) 369,882
C. Adequacy of Protection
During the past three fiscal (claims) years, none of the above programs of protection have had settlements or judgments that exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage from coverage in the prior year.

Note 9 – Defined Benefit Pension Plan
A. General Information about the Pension Plan
Plan Description
The City contributes to CalPERS, a cost-sharing multiple-employer defined benefit pension plan, for its miscellaneous and safety employees. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of CalPERS’ annual financial report may be obtained from its website at https://www.calpers.ca.gov/page/forms-publications.

Employees Covered by Benefit Terms
At valuation date of June 30, 2021, the following employees were covered by the benefit terms:
1st Tier 2nd Tier PEPRA 1st Tier 2nd Tier PEPRA
Active employees 12 7 43 3 3 20
Transferred and terminated employees 21 2 11 23 5 6
Separated 33 4 15 10 - 8
Retired Employees and Beneficiaries 57 2 2 67 1 3
Total 15 123 71 103 9 37
Miscellaneous Plans Safety Police Plans
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
71 Note 9 – Defined Benefit Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Benefit Provided
CalPERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. A classic CalPERS member becomes eligible for Service Retirement upon attainment of age 55 with at least 5 years of credited service. Public Employee Pension Reform Act (PEPRA) miscellaneous members become eligible for service retirement upon attainment of age 62 with at least 5 years of service. The service retirement benefit is a monthly allowance equal to the product of the benefit factor, years of service, and final compensation.

Following are the benefit provisions for each plan:
 Miscellaneous First Tier: 2.0% or 2.7% (at age 55) of the highest paid consecutive 12 months’ compensation
 Miscellaneous Second Tier: 2.0% (at age 60) of the highest paid consecutive 36 months’ compensation  Miscellaneous PEPRA: 2.0% (at age 62) of the highest paid consecutive 36 months’ compensation  Safety Police First Tier: 3.0% (at age 50) of the highest paid consecutive 12 months’ compensation  Safety Police Second Tier: 3.0% (at age 55) of the highest paid consecutive 36 months’ compensation  Safety PEPRA: 2.7% (at age 57) of the highest paid consecutive 36 months’ compensation Participant is eligible for non-industrial disability retirement if becomes disabled and has at least 5 years of credited service. There is no special age requirement. The standard non-industrial disability retirement benefit is a monthly allowance equal to 1.8% of final compensation, multiplied by service. Industrial disability benefits are not offered to miscellaneous employees.

An employee's beneficiary may receive the basic death benefit if the employee dies while actively employed. The employee must be actively employed with the City to be eligible for this benefit. An employee's survivor who is eligible for any other pre-retirement death benefit may choose to receive that death benefit instead of this basic death benefit. The basic death benefit is a lump sum in the amount of the employee's accumulated contributions, where interest is currently credited at 6 percent per year, plus a lump sum in the amount of one month's salary for each completed year of current service, up to a maximum of six months' salary. For purposes of this benefit, one month's salary is defined as the member's average monthly full-time rate of compensation during the 12 months preceding death.

Upon the death of a retiree, a one-time lump sum payment of $500 will be made to the retiree's designated survivor(s), or to the retiree's estate.

Benefit terms provide for annual cost-of-living adjustments to each employee’s retirement allowance. Beginning the second calendar year after the year of retirement, retirement and survivor allowances will be annually adjusted on a compound basis by 2%.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
72 Note 9 – Defined Benefit Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (“PERL”) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The Public agency cost-sharing plans covered by the miscellaneous risk pools, the Plan’s actuarially determined rate is based on the estimated amount necessary to pay the Plan’s allocated share of the risk pool’s costs of benefits earned by employees during the year, and any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ended June 30, 2022, the contribution rates were as follows:

Active Employee Employer
Contribution Rate Contribution Rate
Miscellaneous First Tier 8.000% 14.030%
Miscellaneous Second Tier 7.000% 8.630%
Miscellaneous PEPRA 6.750% 7.470%
Safety Police First Tier 9.000% 27.140%
Safety Police Second Tier 9.000% 24.220%
Safety Police PEPRA 15.000% 14.770%
Plans
B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
Actuarial Methods and Assumptions Used to Determine Total Pension Liability For the measurement period ended June 30, 2022 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2021 total pension liability. The June 30, 2022 total pension liability was based on the following actuarial methods and assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increases
Mortality Rate Table1
Post Retirement Benefit Increase
Entry Age Normal
Varies by Entry Age and Service
Derived using CalPERS’ Membership Data for all Funds.

Contract COLA up to 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.30% thereafter
1 The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
73 Note 9 – Defined Benefit Pension Plan (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)
Change of Assumption
Effective with the June 30, 2021 valuation date (2022 measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. Projected returns for all asset classes are estimated, combined with risk estimates, and are used to project compound (geometric) returns over the long term. The discount rate used to discount liabilities was informed by the long-term projected portfolio return. In addition, demographic assumptions and the inflation rate assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

Discount Rate
The discount rate used to measure the total pension liability was 6.90 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rated, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on plan investments was applied to all period of projected benefit payments to determine the total pension liability.

Long-term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points. The expected real rates of return by asset class are as follows:

Assumed Asset
Asset Class1 Allocation Real Return1,2
Global Equity - Cap-weighted 30.00% 4.54
Global Equity - Non-Cap-weighted 12.00% 3.84
Private Equity 13.00% 7.28
Treasury 5.00% 0.27
Mortgage-backed Securities 5.00% 0.50
Investment Grade Corporates 10.00% 1.56
High Yield 5.00% 2.27
Emerging Market Debt 5.00% 2.48
Private Debt 5.00% 3.57
Real Assets 15.00% 3.21
Leverage -5.00% (0.59)
100.00%
(1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021 Asset Liability Management study.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
74 Note 9 – Defined Benefit Pension Plan (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)
Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 6.90%, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90%) or 1 percentage-point higher (7.90%) than the current rate:

Discount Rate Current Discount Discount Rate
- 1% (5.90%) Rate (6.90%) + 1% (7.90%)
$ 4,224,808 6,710,799 $ 2,179,454 $
Safety Plan 16,234,313 $ 10,902,302 $ 6,544,587 $
Plan's Net Pension Liability/(Asset)
Miscellaneous Plan
Pension Plan Fiduciary Net Position
Detail information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report and can be obtained from CalPERS’ website under Forms and Publications.

Proportionate Share of Net Pension Liability and Pension Expense The following table shows the plan’s proportionate share of the risk pool collective net pension liability over the measurement period:

Plan Total
Pension
Plan Fiduciary
Net Net Pension
Liability Position Liability/(Asset)
Miscellaneous Plan
Balance at: 6/30/21 (Valuation date) 16,305,084 $ 14,423,728 $ 1,881,356 $ Balance at: 6/30/22 (Measurement date) 18,236,704 14,011,896 4,224,808 Net Changes during 2021-2022 1,931,620 (411,832) 2,343,452 Plan Total
Pension
Plan Fiduciary
Net Net Pension
Liability Position Liability/(Asset)
Safety Plan
Balance at: 6/30/21 (Valuation date) 36,044,471 $ 30,296,571 $ 5,747,900 $ Balance at: 6/30/22 (Measurement date) 38,610,221 27,707,919 10,902,302 Net Changes during 2021-2022 2,565,750 (2,588,652) 5,154,402 Increase (Decrease)
Increase (Decrease)
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
75 Note 9 – Defined Benefit Pension Plan (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability and Pension Expense (Continued) The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan’s proportionate share, total amounts of liabilities and assets are first calculated for the risk pool as a whole on the valuation date (June 30, 2021). The risk pool’s fiduciary net position (“FNP”) subtracted from its total pension liability (“TPL”) determines the net pension liability (“NPL”) at the valuation date.
(2) Using standard actuarial roll forward methods, the risk pool TPL is then computed at the measurement date (June 30, 2022). Risk pool FNP at the measurement date is then subtracted from this number to compute the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes the aggregate risk pool’s FNP at June 30, 2022 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2021-2022).
(3) The individual plan’s TPL, FNP and NPL are also calculated at the valuation date. TPL is allocated based on the rate plan’s share of the actuarial accrued liability. FNP is allocated based on the rate plan’s share of the market value assets.
(4) Two ratios are created by dividing the plan’s individual TPL and FNP as of the valuation date from (3) by the amounts in step (1), the risk pool’s total TPL and FNP, respectively. (5) The plan’s TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan’s FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5).

Deferred outflows of resources, deferred inflows of resources, and pension expense is allocate based on the City’s share of net pension liability at the measurement date.

The City’s proportionate share of the net pension liability was as follows:

Miscellaneous Safety
June 30, 2021 0.03479% 0.10628%
June 30, 2022 0.03658% 0.09439%
Change - (Decrease) 0.00179% -0.01189%
Plans
For the year ended June 30, 2023, the City recognized pension expense in the amounts of $4,590,702 and $678,316 for the miscellaneous and safety plans, respectively.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
76 Note 9 – Defined Benefit Pension Plan (Continued)
B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)
Proportionate Share of Net Pension Liability and Pension Expense (Continued) The amortization period differs depending on the source of the gain or loss for the miscellaneous and safety plans, respectively. The difference between projected and actual earnings is amortized over 5-years straight line.

All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive and retired) as of the beginning of the measurement period.

The expected average remaining service lifetime (“EARSL”) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired) in the risk pool. The EARSL for risk pool for the measurement period ending June 30, 2022 is 3.7 years, which was obtained by dividing the total service years of 574,665 (the sum of remaining service lifetimes of the active employees) by 153,587 (the total number of participants: active, inactive, and retired).

At June 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Deferred Deferred Deferred Deferred
outflows of inflows of outflows of inflows of outflows of inflows of Resources Resources Resources Resources Resources Resources Pension contribution made after
measurement date 978,819 $ - $ 1,502,631 $ - $ 2,481,450 $ - $ Changes of assumptions - (332,757) 1,099,282 - 1,099,282 (332,757) Difference between expected and actual
experience 43,677 (65,212) 451,206 (118,391) 494,883 (183,603) Difference between projected and actual
earning on pension plan investments - (594,825) 1,721,627 - 1,721,627 (594,825) Adjustment due to differences in
proportions - (1,777,316) 234,482 - 234,482 (1,777,316) Difference between City contributions
and proportionate share of
contributions 131,071 - - (560,521) 131,071 (560,521)
Total $ (2,770,110) 1,153,567 $ 5,009,228 $ (678,912) $ 6,162,795 $ (3,449,022) $ Miscellaneous Plan Safety Plan Total
Deferred outflows of resources related to pensions resulting from the City’s contributions made subsequent to the measurement date will be recognized as a reduction of the collective net pension liability in the year ending June 30, 2023. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Miscellaneous Safety
2023 (827,336) $ 804,332 $
2024 (835,280) 628,272
2025 (568,931) 344,865
2025 (363,815) 1,050,216
$ 2,827,685 (2,595,362) $
Year Ending Deferred Outflows/ (Inflows) of
June 30,
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
77 Note 10 – Jointly Governed Organization
Eastern Riverside County Interoperable Communications Authority The City is a member of the Eastern Riverside County Interoperable Communications Authority (“ERICA”), a Joint Powers Authority, created to establish and operate a consolidated communications system which provides emergency call receiving and dispatching services. Other members of ERICA include the Cities of Beaumont, Cathedral City, Indio, and Palm Springs. The members, including the City, are responsible for funding the operations of ERICA through annual assessments. The annual assessments are based on percentages calculated for each member. The City contributed $124,789 during the year ended June 30, 2023. The audited financial statements of ERICA can be obtained at 100 Civic Center Mall, Indio, CA 92201.

On April 10, 2009, ERICA and three member agencies, including Indio, Palm Springs, and the City, entered into a reimbursement agreement relating to a municipal financing purchase agreement with Motorola, Inc., in the aggregate principal amount of $5,557,603. The agreement obligates the three member agencies to pay 33.3% of the annual financing payments, as set forth in the municipal lease purchase agreement with Motorola, Inc. ERICA also entered into a reimbursement agreement with all member agencies, which obligates each member agency to pay 20% of the annual financing payments for a master logging recorder, in the aggregate principal amount of $202,489. The City made payments of $134,334 and $4,059 for the Motorola and Master Logging Recorder respectively during the year ended June 30, 2023.

The following represents the City’s obligation for future lease payments:

Year Ending June 30,
Motorola Lease
Reimbursement
Master Logging
Recorder
Reimbursement
Lease
Reimbursement
2024 134,334 $ 4,059 $ 138,393 $
Note 11 – Classification of Fund Balances
The City Council adopted resolution No. 2015-050 to commit 25% of cannabis tax revenue for emergency reserve.

The funds can only be used when the City is unable to pay for its general obligations within the next 60 days and that such condition jeopardizes the health, safety, or well-being of the residents of the City.

On August 21, 2018 the City Council approved the Comprehensive Financial Management Policies which included a Reserve for Natural or Fiscal Emergencies. The designated reserve is 15% of General Fund budgeted operational appropriations with the purpose of providing funding for natural or fiscal emergencies.

The assigned fund balance totaling $1,155,825 is being held in the General Fund to fund the operations of the City for the fiscal year ending 2022-2023. Assigned fund balances encompass the portion of the net fund resources reflecting the government’s intended use of resources. Assignment of resources can be done by the highest level of decision making or by a committee or official designated for the purpose. The City Council has authorized the City Manager or designee for that purpose.

Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
78 Note 11 – Classification of Fund Balances (Continued) At June 30, 2023, fund balances are classified as follows:

American Capital Debt Nonmajor
General Public Recovery Housing Improvement Service Governmental Fund Safety Act Authority Fund Fund Funds Total
Nonspendable:

Prepaid items 51,125 $ - $ - $ - $ - $ - $ - $ 51,125 $ Total nonspendable - 51,125 - - - - - 51,125
Restricted:

Furbee settlement 455,254 - - - - - - 455,254
Housing and economic
development - - - 5,910,455 - - 6,495 5,916,950
Public safety - 85,857 20,702 - - - 139,325 245,884
Public works/projects - - - - - - 4,756,543 4,756,543
Culture and leisure - - - - - - 1,676,553 1,676,553
Debt service - - - - - 4,885,615 - 4,885,615
Bond funded capital projects - - - - - 13,954,304 - 13,954,304 Lighting/Landscaping/
Drainage - - - - - - 1,169,789 1,169,789
Assessment District 91-1 - - - - - - 123,880 123,880
Total restricted 85,857 455,254 20,702 5,910,455 - 18,839,919 7,872,585 33,184,772 Committed:

Emergency Reserve 5,118,215 - - - - - - 5,118,215
Reserve for capital use 746,408 - - - - - - 746,408
Natural or Fiscal
Emergency Reserve 2,239,225 - - - - - - 2,239,225
Art in public place - - - - - - 268,581 268,581
Cabot's Museum - - - - - - 68,852 68,852
Total committed - 8,103,848 - - - - 337,433 8,441,281
Assigned:

Operations 348,101 - - - - - - 348,101
Cannabis control - - - - - - 3,803 3,803
Total assigned - 348,101 - - - - 3,803 351,904
Unassigned: - - - - (871,222) - (126,566) (997,788)
Total $ 85,857 8,958,328 $ 20,702 $ 5,910,455 $ (871,222) $ 18,839,919 $ 8,087,255 $ 41,031,294 $ Major Funds
Special
Revenue Funds
Note 12 – Net Investment in Capital Assets
The net investment in capital assets for governmental activities is calculation as follows:

Governmental
Activities
Total capital assets, net 71,777,018 $
Unspent capital debt proceed 13,954,304
Deferred loss on refunding debt 344,785
Capital related debt (40,615,492)
Net investment in capital assets 45,460,615 $
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
79 Note 13 – Contingencies and Commitments
A. Lawsuits
The City is presently involved in certain matters of litigation that have arisen in the normal course of conducting City business. City management believes, based upon consultation with the City Attorney, that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the City, except for the lawsuit described below. Additionally, City management believes that the City’s insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize.

B. Federal and State Grant Programs
The City participates in Federal and State grant programs. These programs were audited in accordance with the provisions of the Uniform Guidance and applicable State requirements. No cost disallowance is expected as a result of these audits; however, these programs are subject to further examination by the grantors. Expenditures which may be disallowed, if any, by the granting agencies, cannot be determined at this time. The City expects such amounts, if any, to be immaterial.

Note 14 – Individual Fund Disclosure
Fund with deficit fund balances at June 30, 2023 are as follows:

Deficit
County Service Area 152 Special Revenue Fund (126,566) $ Capital Improvement Capital Projects Fund (871,222)
The City plans to eliminate the deficit fund balances with future grant receipts billed but not yet received.

The following funds exceeded appropriation amounts for the year ended June 30, 2023.

Expenditures
in Excess of
Expenditures Appropriations Appropriations
General Fund 14,259,940 $ 13,080,843 $ (1,179,097) $
Air Quality Control Special Revenue Fund 39,637 39,000 (637) County Service Area 152 Special Revenue Fund 152,113 144,790 (7,323) Note 15 – Restatement of Beginning Net Position
Governmental
Activities
Net position as previously reported at July 1, 2022 60,936,408 $ Subscription assets 380,823
Subscription liabilities (194,813)
Net position as restated at July 1, 2022 61,122,418 $
Item Number: 3.

City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
80 Note 16 – Subsequent Events
As of December 1, 2023, the City of Desert Hot Springs issued Community Facilities District No. 2006-1 Improvement Area 1 Special Tax Bonds, Series 2023 in the amount $1,970,000 of with respect to Improvement Area 1 of the City of Desert Hot Springs Community Facilities District No. 2006-1. The Bonds will be used to (i) finance certain public improvements to be owned by the City; (ii) fund a reserve account for the Bonds; and (iii) pay costs of issuance for the Bonds. The Bonds are secured by Special Tax Revenues consisting primarily of a certain annual Special Tax to be levied according to a rate and method of apportionment approved by the City Council of the City on taxable parcels within Improvement Area 1 of the District and from certain other funds pledged under the Fiscal Agent Agreement.

On August 20, 2023, Tropical Storm Hilary hit the Coachella Valley and City suffered major impacts from flood damaged to one bridge and three major arterials in the city. On November 9, 2023, the Federal Highway Administration (“FHWA”) approved Emergency Relief Program funding to the City to repair the damaged facilities.

As of February 12, 2024, the City of Desert Hot Springs entered into a loan agreement with the Riverside County Transportation Commission (“RCTC”) for the Storm Damaged Road Repairs Project. This loan is to be repaid by the City immediately upon reimbursement of the FHWA’s payment to the City. The City shall receive two disbursements from the RCTC, the sum not to exceed $7,500,000. The loan shall bear interest at a rate of approximately 4%.

Item Number: 3.

REQUIRED SUPPLEMENTARY

INFORMATION (UNAUDITED)
81 Item Number: 3.

This page intentionally left blank.
82 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Taxes 20,125,904 $ 21,852,282 $ 18,634,453 $ (3,217,829) $ Permits and fees 2,590,000 3,260,887 2,716,374 (544,513) Intergovernmental 77,000 205,000 19,528 (185,472)
Licenses 180,000 230,000 252,530 22,530
Investment earning 50,100 50,100 151,216 101,116
Miscellaneous 563,860 648,860 437,913 (210,947)
Total revenues 26,247,129 23,586,864 22,212,014 (4,035,115) EXPENDITURES:

Current:

General government 6,276,982 6,791,109 7,713,039 (921,930) Public safety 565,309 596,349 625,926 (29,577)
Public works 747,806 855,706 870,925 (15,219)
Economic development 2,541,433 3,250,575 3,180,564 70,011 Culture and leisure 1,059,144 1,573,859 1,495,494 78,365 Capital outlay - 13,245 244,984 (231,739)
Debt service:

Principal retirement - - 127,795 (127,795)
Interest and fiscal charges - - 1,213 (1,213)
Total expenditures 13,080,843 11,190,674 14,259,940 (1,179,097) REVENUES OVER (UNDER) EXPENDITURES 13,166,286 12,396,190 7,952,074 (5,214,212) OTHER FINANCING SOURCES (USES):

Proceed from sale of asset - - 171,343 171,343
Transfers in 100,000 100,000 100,000 -
Transfers out (2,310,784) (2,309,668) (12,733,984) (10,424,316) Total other financing sources (uses) (2,209,668) (2,210,784) (12,462,641) (10,252,973) Net changes in fund balance $ 10,956,618 10,185,406 $ (4,510,567) (15,467,185) $ FUND BALANCE:

Beginning of year 13,468,895
End of year $ 8,958,328
Budget Amounts
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedules
For the Year Ended June 30, 2023
General Fund
83 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Taxes 5,691,075 $ 6,015,253 $ 6,080,172 $ 64,919 $
Permits and fees 375,500 376,000 791,393 415,393
Intergovernmental 128,747 103,448 189,065 85,617
Licenses 12,000 16,000 15,739 (261)
Miscellaneous 414,000 300,000 155,224 569,224
Total revenues 6,924,701 6,507,322 7,645,593 720,892
EXPENDITURES:

Current:

Public safety 16,554,473 20,108,698 17,947,313 2,161,385 Capital outlay 117,009 - (311,714) 428,723
Total expenditures 20,225,707 16,554,473 18,376,036 1,849,671 REVENUES OVER (UNDER) EXPENDITURES (13,301,006) (10,047,151) (10,730,443) 2,570,563 OTHER FINANCING SOURCES (USES):

Transfers in 150,200 150,200 10,585,473 10,435,273
Transfers out (193,348) (193,348) - 193,348
Total other financing sources (uses) (43,148) (43,148) 10,585,473 10,628,621 Net changes in fund balance $ (13,344,154) (10,090,299) $ (144,970) 13,199,184 $ FUND BALANCE:

Beginning of year 230,827
End of year $ 85,857
Budget Amounts
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Budgetary Comparison Schedules (Continued)
For the Year Ended June 30, 2023
Public Safety Special Revenue Fund
84 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental - $ 3,454,116 $ 615,918 $ (2,838,198) $ Investment earning - - 39,286 39,286
Total revenues 3,454,116 - 655,204 (2,798,912)
EXPENDITURES:

Current:

General government - 300,000 16,659 283,341
Capital outlay - 575,000 599,260 (24,260)
Total expenditures 875,000 - 615,919 259,081
REVENUES OVER (UNDER) EXPENDITURES $ 2,579,116 - $ 39,285 (2,539,831) $ FUND BALANCE (DEFICIT):

Beginning of year (18,583)
End of year $ 20,702
City of Desert Hot Springs
Budgetary Comparison Schedules (Continued)
American Recovery Act Special Revenue Fund
For the Year Ended June 30, 2023
Budget Amounts
Required Supplementary Information (Unaudited)
85 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 736,628 $ 1,095,947 $ 1,095,947 $ - $ Investment earning (loss) 1,000 1,000 14,597 13,597
Total revenues 1,096,947 737,628 1,110,544 13,597
EXPENDITURES:

Current:

Economic development 540,934 583,189 144,004 439,185
Total expenditures 583,189 540,934 144,004 439,185
REVENUES OVER EXPENDITURES 513,758 196,694 966,540 452,782 NET CHANGE IN FUND BALANCE $ 513,758 196,694 $ 966,540 452,782 $ FUND BALANCE:

Beginning of year 4,943,915
End of year $ 5,910,455
Budget Amounts
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
For the Year Ended June 30, 2023
Housing Authority Special Revenue Fund
Budgetary Comparison Schedules (Continued)
86 Item Number: 3.

The City adopts an annual budget prepared on the modified accrual basis for all of its governmental funds. Budgets are developed in accordance with U.S. GAAP. The City Council approves each year’s budget, submitted by the City Manager, prior to the beginning of the new fiscal year. Public hearings are conducted prior to its adoption by the City Council. Budgeted amounts transferred between accounts are approved by the Administrative Services Director. Budgeted amounts transferred between departments are approved by the City Manager. Supplemental appropriations, where required during the period, are approved by the City Council. The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the fund level. At fiscal year-end, all unencumbered operating budget appropriations lapse, with the exception of continuing appropriations. All adopted budgets are presented for the year ended June 30, 2023.

On June 1, 2022, the City Council approved and adopted the budget for fiscal year 2022-2023.

B. Continuing Appropriations
At fiscal year-end, all unencumbered appropriations lapse, however, certain unexpended capital funds are carried over into the next fiscal year’s budget.

C. Encumbrances
Encumbrances are estimations of costs related to unperformed contracts for goods and services. These commitments are recorded for budgetary control purposes in the General, special revenue, and similar governmental funds.

Encumbrances outstanding at year-end represent the estimated amount of the expenditure ultimately to result if unperformed contracts in-process at year-end are completed. They do not constitute expenditures or estimated liabilities.

A. General Budget Policies
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Notes to the Budgetary Comparison Schedules
For the Year Ended June 30, 2023
Budgetary Information
87 Item Number: 3.

June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 City's Proportion of the Net Pension Liability 0.036576% 0.034787% 0.033897% 0.033941% City's Proportionate Share of the Net Pension Liability $ 4,224,808 $ 1,881,356 $ 3,688,124 $ 3,477,949 City's Covered Payroll $ 4,937,410 $ 4,127,066 $ 3,761,101 $ 2,959,267 City's Proportionate Share of the Net Pension Liability as a Percentage of the Covered Payroll 85.57% 45.59% 98.06% 117.53% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Total Pension Liability 88.46% 88.46% 75.03% 74.42% June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 City's Proportion of the Net Pension Liability 0.094390% 0.106280% 0.088006% 0.086341% City's Proportionate Share of the Net Pension Liability $ 10,902,302 $ 5,747,900 $ 9,575,470 $ 8,847,411 City's Covered Payroll $ 2,954,027 $ 2,680,518 $ 2,589,732 $ 2,336,427 City's Proportionate Share of the Net Pension Liability as a Percentage of the Covered Payroll 369.07% 214.43% 369.75% 378.67% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Total Pension Liability 100.84% 100.84% 71.79% 72.27% 1 Historical information is presented only for measurement periods after GASB 68 is implemented.

California Public Employees' Retirement System ("CalPERS") Miscellaneous Plan California Public Employees' Retirement System ("CalPERS") Safety Plan Last Ten Fiscal Years
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Schedule of the City's Proportionate Share of the Net Pension Liabilities and Related Ratios For the Year Ended June 30, 2023
88 Item Number: 3.

June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 20141 City's Proportion of the Net Pension Liability 0.033931% 0.034925% 0.034970% 0.037816% 0.035817% City's Proportionate Share of the Net Pension Liability 3,269,715 $ 3,401,088 $ 3,025,986 $ 2,595,635 $ 2,228,699 $ City's Covered Payroll 2,388,548 $ 2,120,646 $ 1,539,232 $ 1,377,634 $ 1,617,185 $ City's Proportionate Share of the Net Pension Liability as a Percentage of the Covered Payroll 136.89% 160.38% 196.59% 188.41% 137.81% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Total Pension Liability 73.33% 69.89% 70.33% 73.82% 76.24% June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 20141 City's Proportion of the Net Pension Liability 0.086051% 0.083719% 0.084890% 0.090361% 0.090082% City's Proportionate Share of the Net Pension Liability 8,292,081 $ 8,302,607 $ 7,345,645 $ 6,202,312 $ 5,642,660 $ City's Covered Payroll 2,107,816 $ 1,834,204 $ 1,749,649 $ 1,523,928 $ 1,772,829 $ City's Proportionate Share of the Net Pension Liability as a Percentage of the Covered Payroll 393.40% 452.65% 419.84% 407.00% 318.29% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Total Pension Liability 72.00% 69.58% 69.57% 73.79% 73.76% Last Ten Fiscal Years
California Public Employees' Retirement System ("CalPERS") Miscellaneous Plan California Public Employees' Retirement System ("CalPERS") Safety Plan 1 Historical information is presented only for measurement periods after GASB 68 is implemented.

City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Schedule of the City's Proportionate Share of the Net Pension Liabilities and Related Ratios (Continued) For the Year Ended June 30, 2023
89 Item Number: 3.

Fiscal year 2022-23 2021-22 2020-21 2019-20 2018-19
Actuarially Determined Contribution 978,819 $ 793,811 $ 692,622 $ 611,957 $ 496,387 $ (793,811) (978,819) (692,622) (611,957) (496,387)
Contribution Deficiency (Excess) - $ - $ - $ - $ - $
Covered Payroll1
$ 4,937,410 5,075,657 $ 4,127,066 $ 3,761,101 $ 2,959,267 $

19.28% 16.08% 16.78% 16.27% 16.77%
Fiscal year 2022-23 2021-22 2020-21 2019-20 2018-19
Actuarially Determined Contribution 1,502,631 $ 1,348,612 $ 1,269,835 $ 1,093,535 $ 911,294 $ (1,348,612) (1,502,631) (1,269,835) (1,093,535) (911,294) Contribution Deficiency (Excess) - $ - $ - $ - $ - $
Covered Payroll1
$ 2,954,027 3,036,740 $ 2,680,518 $ 2,589,732 $ 2,336,427 $

49.48% 45.65% 47.37% 42.23% 39.00%
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Schedule of the City's Contributions - Pensions
For the Year Ended June 30, 2023
Last Ten Fiscal Years
California Public Employees' Retirement System ("CalPERS") Miscellaneous Plan Contribution in Relation to the Actuarially
Determined Contribution
Contributions as a Percentage of Covered Payroll
California Public Employees' Retirement System ("CalPERS") Safety Plan Changes of Assumptions: In 2022, the accounting discount rate reduced from 7.15 percent to 6.90 percent. In 2021, 2020, and 2019, no change in assumptions. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.

Contribution in Relation to the Actuarially
Determined Contribution
Contributions as a Percentage of Covered Payroll
1 Includes one year’s payroll growth using 2.80 percent payroll assumption for fiscal year 2022-23.

Notes to Schedule
90 Item Number: 3.

Fiscal year 2017-18 2016-17 2015-16 2014-15 2013-14
Actuarially Determined Contribution 423,598 $ 355,494 $ 313,565 $ 217,165 $ 310,127 $ (355,494) (423,598) (313,565) (217,165) (310,127)
Contribution Deficiency (Excess) - $ - $ - $ - $ - $
Covered Payroll $ 2,120,646 2,388,548 $ 1,539,232 $ 1,377,634 $ 1,617,185 $

17.73% 16.76% 20.37% 15.76% 19.18%
Fiscal year 2017-18 2016-17 2015-16 2014-15 2013-14
Actuarially Determined Contribution 769,408 $ 688,645 $ 639,246 $ 380,758 $ 765,202 $ (688,645) (769,408) (639,246) (380,758) (765,202)
Contribution Deficiency (Excess) - $ - $ - $ - $ - $
Covered Payroll $ 1,834,204 2,107,816 $ 1,749,649 $ 1,523,928 $ 1,772,829 $

36.50% 37.54% 36.54% 24.99% 43.16%
California Public Employees' Retirement System ("CalPERS") Miscellaneous Plan California Public Employees' Retirement System ("CalPERS") Safety Plan Changes of Assumptions: In 2022, the accounting discount rate reduced from 7.15 percent to 6.90 percent. In 2021, 2020, and 2019, no change in assumptions. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in the discount rate. In 2017, the accounting discount rate reduced from 7.65 percent to 7.15 percent. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5 percent (net of administrative expense) to 7.65 percent (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5 percent discount rate.

Notes to Schedule
Contributions as a Percentage of Covered Payroll
Contributions as a Percentage of Covered Payroll
Contribution in Relation to the Actuarially
Determined Contribution
Contribution in Relation to the Actuarially
Determined Contribution
Last Ten Fiscal Years
City of Desert Hot Springs
Required Supplementary Information (Unaudited)
Schedule of the City's Contributions - Pensions (Continued) For the Year Ended June 30, 2023
91 Item Number: 3.

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92 Item Number: 3.

SUPPLEMENTARY INFORMATION
93 Item Number: 3.

This page intentionally left blank.
94 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 1,427,760 $ 6,080,552 $ 3,864,032 $ (2,216,520) $ Total revenues 6,080,552 1,427,760 3,864,032 (2,216,520) EXPENDITURES:

Current:

Public works - - 5,221 (5,221)
Capital outlay 23,440,588 1,427,760 6,104,262 17,336,326 Total expenditures 23,440,588 1,427,760 6,109,483 17,331,105 REVENUES OVER (UNDER) EXPENDITURES (17,360,036) - (2,245,451) 15,114,585 OTHER FINANCING SOURCES:

Transfers in 200,000 164,021 1,182,556 1,018,535
Total other financing sources 164,021 200,000 1,182,556 1,018,535 NET CHANGE IN FUND BALANCE $ (17,196,015) 200,000 $ (1,062,895) 16,133,120 $ FUND BALANCE (DEFICIT):

Beginning of year 191,673
End of year $ (871,222)
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Capital Improvement Capital Projects Fund
For the Year Ended June 30, 2023
Budget Amounts
95 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Taxes 1,250,000 $ 1,755,000 $ 1,559,726 $ (195,274) $
Investment earning (loss) (15,500) (18,000) 553,808 538,308 Total revenues 1,739,500 1,232,000 2,098,034 358,534
EXPENDITURES:

Current:

General government 13,000 15,500 11,000 4,500
Debt service:

Principal retirement 645,000 645,000 965,000 (320,000)
Interest and fiscal charges 1,774,488 1,774,488 350,245 1,424,243 Total expenditures 2,434,988 2,432,488 2,400,243 34,745 REVENUES OVER (UNDER) EXPENDITURES (695,488) (1,200,488) (302,209) 393,279 OTHER FINANCING SOURCES (USES):

Transfers in 519,988 1,560,356 519,988 -
Transfers out (1,000,000) - (1,018,535) (18,535)
Total other financing sources (uses) (480,012) 1,560,356 (498,547) (18,535) NET CHANGES IN FUND BALANCE $ (1,175,500) 359,868 $ (800,756) 374,744 $ FUND BALANCE:

Beginning of year 19,640,675
End of year $ 18,839,919
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Debt Service Fund
For the Year Ended June 30, 2023
Budgeted Amounts
96 Item Number: 3.

SPECIAL REVENUE FUNDS:

County Service Area 152 (CSA-152) Special Revenue Fund - To account for funding received through the collection of property tax collected on parcels within the assessment district. Expenditures relate to the EPA requirements for storm water monitoring and the protection of the underground water for all cities in the County of Riverside.

Cabot's Museum Special Revenue Fund - To account for various fees and operational costs associated with a museum that was gifted to the City.

Drainage Assessment District Special Revenue Fund - To account for taxes assessed on property owners within the drainage assessment districts for the maintenance of the drainage systems.

NONMAJOR

GOVERNMENTAL FUNDS
Municipal Lighting / Landscaping Assessment District Special Revenue Fund - To account for street lighting activity and landscaping maintenance. Financing is provided by special assessments taxes against all parcels of real property within the City and landscape assessment district. Expenditures provide for street and palm tree lights citywide, maintenance of park buildings and equipment, and maintenance of all city parkland as designated.

SB1 Road Maintenance and Rehabilitation Special Revenue Fund - To account for revenue received from the State under the Road Repair and Accountability Act of 2017. The funding is used for street maintenance and rehabilitation needs.

Measure A Special Revenue Fund - To account for one-half cent sales tax collected in Riverside County and distributed to local agencies. Funds are restricted and can only be used for street maintenance and the construction of new streets.

Air Quality Control Special Revenue Fund - To account for resources designated by South Coast Air Quality Management District through the collection of motor vehicle registration fees in accordance with the California Assembly Bill 2766 (AB2766). These funds can be used for equipment, street sweeping and purchase of vehicles as related to the reduction of air pollution.

Art in Public Places Special Revenue Fund - To account for development fees paid in lieu of acquisition and installation of approved artworks in a development with expenditures restricted to acquisition, installation, maintenance and repair or artworks at approved sites.

Quimby Act Special Revenue Fund - To account for the accumulation of developer fees received under the provision of the Quimby Act for park development and improvements.

Special Gas Tax Special Revenue Fund - To account for street maintenance activity. The source of funds is the State gasoline tax and related sales tax under the Streets and Highways Code of the State of California. Expenditures are restricted to construction, improvement and maintenance of public streets. 97 Item Number: 3.

SPECIAL REVENUE FUNDS (Continued):

CAPITAL PROJECTS FUNDS:

NONMAJOR

GOVERNMENTAL FUNDS (CONTINUED)
Supplemental Law Enforcement Service (SLESF) Special Revenue Fund - To account for funds received in connection with the Citizens Option for Public Safety Program (COPS), which supplements expenditures for "front line municipal police services."
Abandoned Vehicle Abatement Special Revenue Fund - To account for a portion of DMV registration fees that the City receives from the Riverside County Abandoned Vehicle Abatement Service Authority as reimbursement to the City for costs incurred for the administration, removal, and abatement of nuisance vehicles within city limits.

Assessment District 91-1 Capital Projects Fund - To account for improvements to the Assessment District 91-1, which are financed from bond proceeds. Debt service payments are paid from special assessed revenues.

Community Development Block Grant (CDBG) Special Revenue Fund - To account for resources that are restricted for a wide variety of unique community development needs.

Capital Improvement Deposits Special Revenue Fund - To account for accumulated resources to be used to purchase the protection equipment and facilities, traffic signals, and parks. Financing is provided through a development fee on all new commercial and residential construction.

Department of Cannabis Control Special Revenue Fund - To account for State grant funds to help cannabis facilities fulfill the obligations to transition from State provisional cannabis permits to permanent cannabis permits. 98 Item Number: 3.

Municipal
Lighting /
SB1 Road Landscaping
Special Maintenance Assessment
Gas Tax and Rehabilitation District Measure A
ASSETS
Cash and investments - $ 855,063 $ 1,090,822 $ 630,729 $ Accounts receivable - - -
Interest receivable - 2,100 1,314 1,170
Due from other governments 72,628 65,232 79,496 128,954 Total assets $ 922,395 72,628 $ 1,171,632 $ 760,853 $

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable 31,978 $ 16,103 $ 347,840 $ 17,839 $
Due to other funds - - 143,975 -
Unearned revenue - - - -
Total liabilities 16,103 31,978 491,815 17,839
Unavailable revenue - - 59,833 -
Fund Balances:

Restricted 40,650 906,292 619,984 743,014
Committed - - - -
Assigned - - - -
Unassigned (deficit) - - - -
Total fund balances 906,292 40,650 619,984 743,014
Total liabilities, deferred inflows
of resources, and fund balances $ 922,395 72,628 $ 1,171,632 $ 760,853 $ (Continued)
Deferred Inflows of Resources:

Special Revenue
June 30, 2023
City of Desert Hot Springs
Nonmajor Governmental Funds
Combining Balance Sheet
99 Item Number: 3.

Art in Drainage
Air Quality Public Quimby Assessment
Control Places Act District
ASSETS
Cash and investments 15,584 $ 268,044 $ 1,673,753 $ 549,184 $ Accounts receivable - - -
Interest receivable - 537 2,800 1,087
Due from other governments 10,862 - - 24,793
Total assets $ 268,581 26,446 $ 1,676,553 $ 575,064 $

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable 8,147 $ - $ - $ 25,259 $
Due to other funds 17,805 - - -
Unearned revenue - - - -
Total liabilities - 25,952 - 25,259
Unavailable revenue - - - -
Fund Balances:

Restricted 494 - 1,676,553 549,805
Committed - 268,581 - -
Assigned - - - -
Unassigned (deficit) - - - -
Total fund balances 268,581 494 1,676,553 549,805
Total liabilities, deferred inflows
of resources, and fund balances $ 268,581 26,446 $ 1,676,553 $ 575,064 $ (Continued)
Deferred Inflows of Resources:

Special Revenue
June 30, 2023
City of Desert Hot Springs
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
100 Item Number: 3.

Supplemental
Law
County Enforcement Abandoned
Service Cabot's Service Vehicle
Area 152 Museum Fund Abatement
ASSETS
Cash and investments 1,248 $ 74,440 $ - $ 132,540 $
Accounts receivable 152,112 - - -
Interest receivable - - 25 -
Due from other governments - - - 65,295
Total assets $ 74,440 153,360 $ 25 $ 197,835 $

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable 60,900 $ 5,588 $ - $ 183 $
Due to other funds 66,914 - - -
Unearned revenue - - - -
Total liabilities 5,588 127,814 - 183
Unavailable revenue 152,112 - - 58,352
Fund Balances:

Restricted - - 25 139,300
Committed - 68,852 - -
Assigned - - - -
Unassigned (deficit) (126,566) - - -
Total fund balances 68,852 (126,566) 25 139,300
Total liabilities, deferred inflows
of resources, and fund balances $ 74,440 153,360 $ 25 $ 197,835 $ (Continued)
Deferred Inflows of Resources:

Special Revenue
June 30, 2023
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
City of Desert Hot Springs
101 Item Number: 3.

Capital Projects
Community Capital Department of Assessment
Development Improvement Cannabis District
Block Grant Deposits Control 91-1
ASSETS
Cash and investments 6,495 $ 3,177,212 $ 660,269 $ 123,665 $ Accounts receivable - - - -
Interest receivable - 5,596 1,147 215
Due from other governments 356,246 - - -
Total assets $ 3,182,808 362,741 $ 661,416 $ 123,880 $

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable 177,499 $ 116,715 $ - $ - $
Due to other funds - - - -
Unearned revenue - - 657,613 -
Total liabilities 116,715 177,499 657,613 -
Unavailable revenue 178,747 - - -
Fund Balances:

Restricted 6,495 3,066,093 - 123,880
Committed - - - -
Assigned - - 3,803 -
Unassigned (deficit) - - - -
Total fund balances 3,066,093 6,495 3,803 123,880
Total liabilities, deferred inflows
of resources, and fund balances $ 3,182,808 362,741 $ 661,416 $ 123,880 $ (Continued)
Deferred Inflows of Resources:

Nonmajor Governmental Funds
June 30, 2023
Special Revenue
City of Desert Hot Springs
Combining Balance Sheet (Continued)
102 Item Number: 3.

Total
Nonmajor
Governmental
Funds
ASSETS
Cash and investments $ 9,259,048
Accounts receivable 152,112
Interest receivable 15,991
Due from other governments 803,506
Total assets $ 10,230,657

LIABILITIES,

DEFERRED INFLOWS OF RESOURCES,

AND FUND BALANCES
Liabilities:

Accounts payable $ 808,051
Due to other funds 228,694
Unearned revenue 657,613
Total liabilities 1,694,358
Unavailable revenue 449,044
Fund Balances:

Restricted 7,872,585
Committed 337,433
Assigned 3,803
Unassigned (deficit) (126,566)
Total fund balances 8,087,255
Total liabilities, deferred inflows
of resources, and fund balances $ 10,230,657
(Concluded)
City of Desert Hot Springs
Combining Balance Sheet (Continued)
Nonmajor Governmental Funds
June 30, 2023
Deferred Inflows of Resources:
103 Item Number: 3.

Municipal
Lighting /
SB1 Road Landscaping
Special Maintenance Assessment
Gas Tax and Rehabilitation District Measure A
REVENUES:

Taxes $ - - $ 897,462 $ - $
Permits and fees - - - -
Intergovernmental 719,130 - 831,268 790,227
Investment earning 5,907 4,079 - 3,433
Total revenues 725,037 831,268 901,541 793,660
EXPENDITURES:

Current:

Public safety - - - -
Public works 680,825 608,641 2,359,030 282,475
Culture and leisure - - - -
Capital outlay - 47,062 219,971 191,145
Total expenditures 727,887 608,641 2,579,001 473,620

REVENUES OVER (UNDER)
EXPENDITURES (2,850) 222,627 (1,677,460) 320,040
OTHER FINANCING SOURCES (USES):

Transfers in 138,342 - 1,676,644 -
Transfers out (161,084) - - (161,084)
Total other financing sources (uses) - (22,742) 1,676,644 (161,084) NET CHANGES IN FUND BALANCES (2,850) 199,885 (816) 158,956 FUND BALANCES (DEFICIT):

Beginning of year 909,142 (159,235) 620,800 584,058
End of year $ 906,292 40,650 $ 619,984 $ 743,014 $
(Continued)
Special Revenue
City of Desert Hot Springs
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds
For the Year Ended June 30, 2023
104 Item Number: 3.

Art in Drainage
Air Quality Public Quimby Assessment
Control Places Act District
REVENUES:

Taxes $ - 42,993 $ - $ 243,267 $
Permits and fees 73,809 - 608,887 -
Intergovernmental - - - -
Investment earning 2,046 - 7,580 3,427
Total revenues 75,855 42,993 616,467 246,694
EXPENDITURES:

Current:

Public safety - - - -
Public works - 39,637 - 291,919
Culture and leisure 183,265 - - -
Capital outlay - - 38,889 -
Total expenditures 183,265 39,637 38,889 291,919

REVENUES OVER (UNDER)
EXPENDITURES (107,410) 3,356 577,578 (45,225)
OTHER FINANCING SOURCES (USES):

Transfers in - - - -
Transfers out - - - -
Total other financing sources (uses) - - - -
NET CHANGES IN FUND BALANCES (107,410) 3,356 577,578 (45,225) FUND BALANCES (DEFICIT):

Beginning of year 375,991 (2,862) 1,098,975 595,030
End of year $ 268,581 494 $ 1,676,553 $ 549,805 $
(Continued)
Special Revenue
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2023
City of Desert Hot Springs
105 Item Number: 3.

Supplemental
Law
County Enforcement Abandoned
Service Cabot's Service Vehicle
Area 152 Museum Fund Abatement
REVENUES:

Taxes $ - - $ - $ - $
Permits and fees - - - -
Intergovernmental - 127,426 165,270 56,522
Investment earning - - 52 -
Total revenues - 127,426 165,322 56,522
EXPENDITURES:

Current:

Public safety - - - 31,955
Public works - 152,113 - -
Culture and leisure 127,337 - - -
Capital outlay - - - -
Total expenditures 127,337 152,113 - 31,955

REVENUES OVER (UNDER)
EXPENDITURES (127,337) (24,687) 165,322 24,567
OTHER FINANCING SOURCES (USES):

Transfers in - 137,000 - -
Transfers out - - (165,316) -
Total other financing sources (uses) 137,000 - (165,316) - NET CHANGES IN FUND BALANCES 9,663 (24,687) 6 24,567
FUND BALANCES (DEFICIT):

Beginning of year 59,189 (101,879) 19 114,733
End of year $ 68,852 (126,566) $ 25 $ 139,300 $
(Continued)
City of Desert Hot Springs
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2023
Special Revenue
106 Item Number: 3.

Capital Projects
Community Capital Department of Assessment
Development Improvement Cannabis District
Block Grant Deposits Control 91-1
REVENUES:

Taxes $ - - $ - $ - $
Permits and fees 1,534,231 - - -
Intergovernmental - 177,499 - -
Investment earning 15,573 - 3,559 666
Total revenues 1,549,804 177,499 3,559 666
EXPENDITURES:

Current:

Public safety - - - -
Public works - - - -
Culture and leisure - - - -
Capital outlay 177,499 495,740 - -
Total expenditures 495,740 177,499 - -

REVENUES OVER (UNDER)
EXPENDITURES 1,054,064 - 3,559 666
OTHER FINANCING SOURCES (USES):

Transfers in - - - -
Transfers out - (100,000) - -
Total other financing sources (uses) (100,000) - - -
NET CHANGES IN FUND BALANCES 954,064 - 3,559 666
FUND BALANCES (DEFICIT):

Beginning of year 2,112,029 6,495 244 123,214
End of year $ 3,066,093 6,495 $ 3,803 $ 123,880 $
(Continued)
City of Desert Hot Springs
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2023
Special Revenue
107 Item Number: 3.

Total
Nonmajor
Governmental
Funds
REVENUES:

Taxes $ 1,183,722
Permits and fees 2,216,927
Intergovernmental 2,867,342
Investment earning 46,322
Total revenues 6,314,313
EXPENDITURES:

Current:

Public safety 31,955
Public works 4,414,640
Culture and leisure 310,602
Capital outlay 1,170,306
Total expenditures 5,927,503

REVENUES OVER (UNDER)
EXPENDITURES 386,810
OTHER FINANCING SOURCES (USES):

Transfers in 1,951,986
Transfers out (587,484)
Total other financing sources (uses) 1,364,502
NET CHANGES IN FUND BALANCES 1,751,312
FUND BALANCES (DEFICIT):

Beginning of year 6,335,943
End of year $ 8,087,255
(Concluded)
City of Desert Hot Springs
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Nonmajor Governmental Funds
For the Year Ended June 30, 2023
108 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 753,571 $ 753,571 $ 831,268 $ 77,697 $ Total revenues 753,571 753,571 831,268 77,697
EXPENDITURES:

Current:

Public works 639,702 583,185 608,641 31,061
Total expenditures 639,702 583,185 608,641 31,061
REVENUES OVER (UNDER) EXPENDITURES 113,869 170,386 222,627 108,758 OTHER FINANCING SOURCES (USES):

Transfers in 77,001 - 138,342 61,341
Transfers out (161,084) (161,084) (161,084) -
Total other financing (uses) (84,083) (161,084) (22,742) 61,341 NET CHANGE IN FUND BALANCE $ 29,786 9,302 $ 199,885 170,099 $ FUND BALANCE (DEFICIT):

Beginning of year (159,235)
End of year $ 40,650
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Special Gas Tax Special Revenue Fund
For the Year Ended June 30, 2023
109 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 571,702 $ 571,702 $ 719,130 $ 147,428 $ Interest 1,000 1,000 5,907 4,907
Total revenues 572,702 572,702 725,037 152,335
EXPENDITURES:

Current:

Public works 684,799 - 680,825 3,974
Capital outlay 89,139 307,534 47,062 260,472
Total expenditures 992,333 89,139 727,887 264,446
NET CHANGE IN FUND BALANCE $ (419,631) 483,563 $ (2,850) 416,781 $ FUND BALANCE:

Beginning of year 909,142
End of year $ 906,292
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) SB1 Road Maintenance and Rehabilitation Special Revenue Fund For the Year Ended June 30, 2023
Budget Amounts
110 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Taxes 894,110 $ 894,110 $ 897,462 $ 3,352 $
Interest 2,800 2,800 4,079 1,279
Total revenues 896,910 896,910 901,541 4,631
EXPENDITURES:

Current:

Public works 2,837,786 1,961,410 2,359,030 478,756
Capital outlay 124,172 - 219,971 (95,799)
Total expenditures 2,961,958 1,961,410 2,579,001 382,957 REVENUES OVER (UNDER) EXPENDITURES (2,065,048) (1,064,500) (1,677,460) 387,588 OTHER FINANCING SOURCES:

Transfers in 1,676,644 735,596 1,676,644 -
Total other financing sources 1,676,644 735,596 1,676,644 - NET CHANGE IN FUND BALANCE $ (388,404) (328,904) $ (816) 387,588 $ FUND BALANCE:

Beginning of year 620,800
End of year $ 619,984
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Municipal Lighting / Landscaping Assessment District Special Revenue Fund For the Year Ended June 30, 2023
111 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 515,000 $ 515,000 $ 790,227 $ 275,227 $ Interest 400 400 3,433 3,033
Total revenues 515,400 515,400 793,660 278,260
EXPENDITURES:

Current:

Public works 282,476 - 282,475 1
Capital outlay 448,791 98,200 191,145 257,646
Total expenditures 731,267 98,200 473,620 257,647
REVENUES OVER (UNDER) EXPENDITURES (215,867) 417,200 320,040 535,907 OTHER FINANCING (USES):

Transfers out (161,084) (161,084) (161,084) -
Total other financing (uses) (161,084) (161,084) (161,084) - NET CHANGE IN FUND BALANCE $ (376,951) 256,116 $ 158,956 535,907 $ FUND BALANCE:

Beginning of year 584,058
End of year $ 743,014
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Measure A Special Revenue Fund
For the Year Ended June 30, 2023
112 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Taxes 38,900 $ 38,900 $ 42,993 $ 4,093 $
Interest 100 100 - (100)
Total revenues 39,000 39,000 42,993 3,993
EXPENDITURES:

Current:

Public works 39,000 39,000 39,637 (637)
Total expenditures 39,000 39,000 39,637 (637)
NET CHANGE IN FUND BALANCE $ - - $ 3,356 3,356 $
FUND BALANCE (DEFICIT):

Beginning of year (2,862)
End of year $ 494
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Air Quality Control Special Revenue Fund
For the Year Ended June 30, 2023
113 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Permits and fees 50,000 $ 50,000 $ 73,809 $ 23,809 $
Interest 100 100 2,046 1,946
Total revenues 50,100 50,100 75,855 25,755
EXPENDITURES:

Current:

Culture and leisure 50,000 200,000 183,265 16,735
Total expenditures 200,000 50,000 183,265 16,735
NET CHANGE IN FUND BALANCE $ (149,900) 100 $ (107,410) 42,490 $ FUND BALANCE:

Beginning of year 375,991
End of year $ 268,581
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Art in Public Places Special Revenue Fund
For the Year Ended June 30, 2023
114 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Permits and fees 100,000 $ 600,000 $ 608,887 $ 8,887 $
Interest 500 500 7,580 7,080
Total revenues 600,500 100,500 616,467 15,967
EXPENDITURES:

Capital outlay 588,210 81,000 38,889 549,321
Total expenditures 588,210 81,000 38,889 549,321
NET CHANGE IN FUND BALANCE $ 12,290 19,500 $ 577,578 565,288 $ FUND BALANCE:

Beginning of year 1,098,975
End of year $ 1,676,553
Budgeted Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Quimby Act Special Revenue Fund
For the Year Ended June 30, 2023
115 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Taxes 212,184 $ 212,184 $ 243,267 $ 31,083 $
Interest 1,900 1,900 3,427 1,527
Total revenues 214,084 214,084 246,694 32,610
EXPENDITURES:

Current:

Public works 568,417 568,417 291,919 276,498
Total expenditures 568,417 568,417 291,919 276,498
NET CHANGE IN FUND BALANCE $ (354,333) (354,333) $ (45,225) 309,108 $ FUND BALANCE:

Beginning of year 595,030
End of year $ 549,805
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Drainage Assessment District Special Revenue Fund
For the Year Ended June 30, 2023
116 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 144,690 $ 144,690 $ 127,426 $ (17,264) $ Interest 100 100 - (100)
Total revenues 144,790 144,790 127,426 (17,364)
EXPENDITURES:

Current:

Public works 144,790 144,790 152,113 (7,323)
Total expenditures 144,790 144,790 152,113 (7,323)
NET CHANGE IN FUND BALANCE $ - - $ (24,687) (24,687) $
FUND BALANCE (DEFICIT):

Beginning of year (101,879)
End of year $ (126,566)
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) County Service Area 152 (CSA-152) Special Revenue Fund
For the Year Ended June 30, 2023
117 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
EXPENDITURES:

Current:

Culture and leisure $ 136,683 136,500 $ 127,337 $ 9,346 $ Total expenditures 136,683 136,500 127,337 9,346
OTHER FINANCING SOURCES:

Transfers in 137,183 137,000 137,000 (183)
Total other financing sources 137,183 137,000 137,000 (183) NET CHANGE IN FUND BALANCE $ 500 500 $ 9,663 9,163 $
FUND BALANCE: ,
Beginning of year 59,189
End of year $ 68,852
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Cabot's Museum Special Revenue Fund
For the Year Ended June 30, 2023
Budget Amounts
118 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 150,000 $ 150,000 $ 165,270 $ 15,270 $ Interest 200 200 52 (148)
Total revenues 150,200 150,200 165,322 15,122
OTHER FINANCING (USES):

Transfers out (150,200) (150,200) (165,316) (15,116)
Total other financing (uses) (150,200) (150,200) (165,316) (15,116) NET CHANGE IN FUND BALANCE $ - - $ 6 6 $
FUND BALANCE:

Beginning of year 19
End of year $ 25
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Supplemental Law Enforcement Service (SLESF) Special Revenue Fund For the Year Ended June 30, 2023
Budget Amounts
119 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 40,000 $ 40,000 $ 56,522 $ 16,522 $
Interest 100 100 - (100)
Total revenues 40,100 40,100 56,522 16,422
EXPENDITURES:

Current:

Public safety 40,000 40,000 31,955 8,045
Total expenditures 40,000 40,000 31,955 8,045
NET CHANGE IN FUND BALANCE $ 100 100 $ 24,567 24,467 $
FUND BALANCE:

Beginning of year 114,733
End of year $ 139,300
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Abandoned Vehicle Abatement Special Revenue Fund
For the Year Ended June 30, 2023
Budget Amounts
120 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Intergovernmental 291,000 $ 837,935 $ 177,499 $ (660,436) $ Total revenues 837,935 291,000 177,499 (660,436)
EXPENDITURES:

Capital outlay 837,935 291,000 177,499 660,436
Total expenditures 837,935 291,000 177,499 660,436
NET CHANGE IN FUND BALANCE $ - - $ - - $
FUND BALANCE:

Beginning of year 6,495
End of year $ 6,495
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Community Development Block Grant Special Revenue Fund
For the Year Ended June 30, 2023
Budget Amounts
121 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Permits and fees 545,000 $ 942,518 $ 1,534,231 $ 591,713 $ Interest 3,050 3,050 15,573 12,523
Total revenues 945,568 548,050 1,549,804 604,236
EXPENDITURES:

Capital outlay 180,000 1,030,961 535,221 495,740
Total expenditures 1,030,961 180,000 495,740 535,221
REVENUES OVER (UNDER) EXPENDITURES (85,393) 368,050 1,054,064 1,139,457 OTHER FINANCING (USES):

Transfers out (100,000) (100,000) (100,000) -
Total other financing (uses) (100,000) (100,000) (100,000) - NET CHANGE IN FUND BALANCE $ (185,393) 268,050 $ 954,064 1,139,457 $ FUND BALANCE:

Beginning of year 2,112,029
End of year $ 3,066,093
Budget Amounts
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Capital Improvement Deposits Special Revenue Fund
For the Year Ended June 30, 2023
122 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Interest - - 3,559 3,559
Total revenues - - 3,559 3,559
NET CHANGES IN FUND BALANCE $ - - $ 3,559 3,559 $
FUND BALANCE:

Beginning of year 244
End of year $ 3,803
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Department of Cannabis Control Special Revenue Fund
For the Year Ended June 30, 2023
Budget Amounts
123 Item Number: 3.

Actual Variance with
Original Final Amounts Final Budget
REVENUES:

Interest 200 $ 200 $ 666 $ 466 $
Total revenues 200 200 666 466
NET CHANGE IN FUND BALANCE $ 200 200 $ 666 466 $
FUND BALANCE:

Beginning of year 123,214
End of year $ 123,880
City of Desert Hot Springs
Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Continued) Assessment District 91-1 Capital Projects Fund
For the Year Ended June 30, 2023
Budget Amounts
124 Item Number: 3.

INTERNAL SERVICE FUNDS
The Internal Service Fund accounts for financing of goods and services provided by one department to other departments of the City on a cost-reimbursement basis.

Risk Management Fund - To account for payment of the City's different types of insurance for general liability, workers' compensation, property, automobile, and earthquake coverage.

Equipment Replacement Fund - To account for equipment purchases. 125 Item Number: 3.

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126 Item Number: 3.

Risk Equipment
Management Replacement Total
ASSETS
Current assets:

Cash and investments 420,090 $ 59,022 $ 479,112 $
Accounts receivable 197 - 197
Total current assets 420,287 59,022 479,309
Noncurrent assets:

Capital assets, being depreciated, net - 497,299 497,299 Intangible assets, being amortized, net - 115,334 115,334 Total capital assets - 612,633 612,633
Total assets 671,655 420,287 1,091,942

LIABILITIES
Current liabilities:

Accounts payable 50,405 18,357 68,762
Claims payable - due within one year 206,075 - 206,075
Financing purchase payable - due within one year - 179,107 179,107 Lease liabilities - due within one year - 19,757 19,757 Total current liabilities 256,480 217,221 473,701
Noncurrent liabilities:

Claims payable - due in more than one year 163,807 - 163,807 Financing purchase payable - due in more than one year - 215,225 215,225 Lease liabilities - due in more than one year - 97,165 97,165 Total noncurrent liabilities 312,390 163,807 476,197
Total liabilities 529,611 420,287 949,898

NET POSITION
Net investment in capital assets - 101,379 101,379
Unrestricted 40,665 - 40,665
Total net position $ 142,044 - $ 142,044 $
City of Desert Hot Springs
Combining Statement of Net Position
Internal Service Funds
June 30, 2023
127 Item Number: 3.

Risk Equipment
Management Replacement Total
OPERATING REVENUES:

Charges for services 167,456 $ $ 417,804 250,348 $
Insurance recovery 197 197 -
Total operating revenues 250,348 167,653 418,001
OPERATING EXPENSES:

Insurance and claims 148,540 148,540 -
Depreciation and amortization - 197,168 197,168
Other expense - 43,809 43,809
Total operating expenses 240,977 148,540 389,517
OPERATING INCOME (LOSS) 9,371 19,113 28,484
NONOPERATING EXPENSES:

Interest expense - (17,720) (17,720)
Gain on sale of property - 5,155 5,155
Total nonoperating expenses (12,565) - (12,565)
Changes in net position (3,194) 19,113 15,919
NET POSITION:

Beginning of year (19,113) 126,125 145,238
End of year $ 142,044 - $ 142,044 $
City of Desert Hot Springs
Combining Statement of Revenues, Expenses, and Changes in Net Position Internal Service Funds
For the Year Ended June 30, 2023
128 Item Number: 3.

Risk Equipment
Management Replacement Total
CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from use departments 167,456 $ 250,348 $ 417,804 $ Payments for vendor for goods and services - (25,452) (25,452) Payments for insurance claims (313,112) - (313,112)
Net cash provided by (used in) operating activities 224,896 (145,656) 79,240 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Principal paid on finance purchase and lease payable - (181,305) (181,305) Proceeds from sale of assets - 5,155 5,155
Interest paid (17,720) - (17,720)
Net cash (used in) capital and related financing activities (193,870) - (193,870) Net increase in cash and cash equivalents 31,026 (145,656) (114,630) CASH AND CASH EQUIVALENTS:

Beginning of year 565,746 27,996 593,742
End of year $ 59,022 420,090 $ 479,112 $

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Operating Income (loss) 19,113 $ 9,371 $ 28,484 $
Adjustments to reconcile operating income (loss) to
net cash provided by (used in) operating activities:

Depreciation 197,168 - 197,168
(Increase) decrease in accounts receivable (197) - (197) Increase (decrease) in accounts payable 46,926 18,357 65,283 Increase (decrease) in claims payable (211,498) - (211,498) Total adjustments (164,769) 215,525 50,756
Net cash provided by (used in) operating activities $ 224,896 (145,656) $ 79,240 $ NONCASH ITEM FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Issuance of lease $ 123,938 - $ 123,938 $
Assets leased $ (123,938) - $ (123,938) $
City of Desert Hot Springs
Combining Statement of Cash Flows
Internal Service Funds
For the Year Ended June 30, 2023
129 Item Number: 3.

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130 Item Number: 3.

Gang Task Force Fund - this fund was established to account for all revenues and expenses received from various agencies supporting the Gang Task Force. The City is only working with the task force to manage their funding for a period of time. The asset are accumulated for the benefit of he Gang Task Force and the Gang Task Force is not part of the City.

Community Facilities District Skyborne Fund - this fund was established to account for payments of principal and interest for the Community Facilities District municipal bonds related to the Skyborne area of the City.

CUSTODIAL FUNDS
Community Facilities District Fund - these funds are established to account for special tax funding that allows for the financing of the installation, operation and maintenance of public improvements. There are a total of 31 zones.

Community Services Fund - this fund was established to account for the Transportation Uniform Mitigation Fee & Multiple Species Habitat Conservation Plan pass-through deposits for permits. The City holding funds for permits per developer agreements and for cash payments in lieu of bonds for permit work and the deposits are returned to the developers upon issuance of the permits.
131 Item Number: 3.

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132 Item Number: 3.

Community
Community Facilities Community
Services District Facilities Gang Task
Fund Skyborne Fund District Fund Force Fund Total
ASSETS
Cash and investments 149,156 $ 587,892 $ 2,038,346 $ 79,012 $ 2,854,406 $ Cash with fiscal agent - 112,551 - - 112,551
Accounts receivable - 2,442 14,940 - 17,382
Interest receivable - 952 3,363 139 4,454
Total assets 703,837 149,156 2,056,649 79,151 2,988,793

LIABILITIES
Accounts payable 49,106 1,636 3,370 - 54,112
Deposits payable 97,759 112,892 18,873 - 229,524
Total liabilities 114,528 146,865 22,243 - 283,636

NET POSITION
Restricted for:

Individuals, organization and
other governments 2,291 $ 589,309 $ 2,034,406 $ 79,151 $ 2,705,157 $ City of Desert Hot Springs
Combining Statement of Fiduciary Net Position
Custodial Funds
June 30, 2023
133 Item Number: 3.

Community
Community Facilities Community
Services District Facilities Gang Task
Fund Skyborne Fund District Fund Force Fund Total
ADDITIONS:

Assessment revenue collected - $ 268,668 $ 540,963 $ - $ 809,631 $ Use of money and property 17,740 - 9,216 460 27,416
Total additions 268,668 17,740 550,179 460 837,047
DEDUCTIONS:

Interest expenses - 61,331 - - 61,331
Payment of special assessment
district expenses - 112,780 20,819 - 133,599
Payment of other organization
expense - - - 13,663 13,663
Total deductions 174,111 - 20,819 13,663 208,593
Change in net position 94,557 17,740 529,360 (13,203) 628,454 NET POSITION:

Beginning of year (15,449) 494,752 1,505,046 92,354 2,076,703 End of year $ 589,309 2,291 $ 2,034,406 $ 79,151 $ 2,705,157 $ City of Desert Hot Springs
Combining Statement of Changes in Fiduciary Net Position Custodial Funds
For the Year Ended June 30, 2023
134 Item Number: 3.

Desert Hot Springs Housing Authority
Desert Hot Springs, California
Compliance as the Housing Successor and
Independent Auditors’ Report
For the Year Ended June 30, 2023
Item Number: 3.

Desert Hot Springs Housing Authority
Table of Contents
Page
Independent Auditors’ Report:

Report on Compliance as the Housing Successor; Report on Internal Control Over Compliance; and Report on the Schedule of Excess Surplus ........................................................ 1 Schedule of Excess Surplus ........................................................................................................................................ 4 Schedule of Findings and Responses ......................................................................................................................... 5 Item Number: 3.

200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
REPORT ON COMPLIANCE AS THE HOUSING SUCCESSOR; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXCESS SURPLUS Independent Auditors’ Report
To the Board of Directors
of the Desert Hot Springs Housing Authority
Desert Hot Springs, California
Report on Compliance as the Housing Successor
Opinion on Compliance
We have audited the Desert Hot Springs Housing Authority’s (the “Housing Authority”), a component unit of the City of Desert Hot Springs, California (the “City”), compliance with the type of compliance requirements described in the California Health and Safety Code sections applicable to the former Redevelopment Agency’s Housing Successor (the “Housing Successor”) for the year ended June 30, 2023.

In our opinion, the Housing Authority complied, in all material respects, with the compliance requirements referred to above that are applicable to Housing Authority for the year ended June 30, 2023.

Basis for Opinion
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (“GAAS”); the standards applicable to financial audits contained in the Government Auditing Standards issued by the Comptroller General of the United States (“Government Auditing Standards”); and California Health and Safety Code sections applicable to the Housing Successor (the “Healthy and Safety Codes”). Our responsibilities under those standards and the Health and Safety Codes are further described in the Auditors’ Responsibilities for the Audit of Compliance section of our report.

We are required to be independent of the Housing Authority and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit does not provide a legal of the Housing Successor's compliance with the compliance requirements referred to above.

Responsibilities of Management for Compliance
Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the Housing Authority's government programs.

Item Number: 3.

To the Board of Directors
of the Desert Hot Springs Housing Authority
Desert Hot Springs, California

2 Auditors’ Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the Housing Authority’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Health and Safety Codes will always detect material noncompliance when it exists. The risk of not material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the Housing Authority's compliance with the requirements of the government program as a whole.

In performing an audit in accordance with GAAS, Government Auditing Standards, and the Health and Safety Codes, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the Housing Authority's compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.  Obtain an understanding of the Housing Authority's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Health and Safety Codes, but not for the purpose of expressing an opinion on the effectiveness of the Housing Authority's internal control over compliance. Accordingly, no such opinion is expressed.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit.

Other Matters
The results of our auditing procedures disclosed instances of noncompliance which are required to be reported in accordance with the Health and Safety Codes, and which are described in the accompanying schedule of findings and responses as item 2023-002. Our opinion on the Housing Authority is not modified with respect to these matters.

Government Auditing Standards requires the auditor to perform limited procedures on the Housing Authority’s response to the noncompliance findings identified in our compliance audit described in the accompanying schedule of findings and responses. The Housing Authority’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Report on Internal Control Over Compliance
Our consideration of internal control over compliance was for the limited purpose described in the “Auditors’ Responsibilities for the Audit of Compliance” section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be significant deficiencies.

Item Number: 3.

To the Board of Directors
of the Desert Hot Springs Housing Authority
Desert Hot Springs, California

3 A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and response as items 2023-002 to be significant deficiencies.

Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed.

Government Auditing Standards requires the auditor to perform limited procedures on Housing Authority's response to the internal control over compliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The Housing Authority's response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Health and Safety Codes.

Accordingly, this report is not suitable for any other purpose.

Report on the Schedule of Excess Surplus
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Desert Hot Springs, California as of and for the year ended June 30, 2023, and the related notes to the basic financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated May 23, 2024, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying the Schedule of Excess Surplus is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain other procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the Schedule of Excess Surplus is fairly stated in all material respects in relation to the basic financial statements as a whole.

Santa Ana, California
May 23, 2024
Item Number: 3.

Desert Hot Springs Housing Authority
Schedule of Excess Surplus
For the Year Ended June 30, 2023
4 Opening fund balance 4,943,915 $
Less: notes receivables (3,354,172)
Less: land held for resale (85,090)
Available housing funds 1,504,653
Limitation (greater of $1,000,000 or four years deposits) Aggregate amount deposited for last four years:
2021-2022 761,846
2020-2021 727,722
2019-2020 381,574
2018-2019 58,299
Total $ 1,929,441
Greater amount 1,929,441
Computed Excess Surplus $ (424,788)
Low and Moderate
Housing Funds
July 1, 2022
Item Number: 3.

Desert Hot Springs Housing Authority
Schedule of Findings and Responses
For the Year Ended June 30, 2023
5 Finding 2023-002 Internal Control Over Compliance and Compliance with Monitoring and Reporting of Affordable Housing
Criteria:

Pursuant to the Health and Safety Code Section 33418, an agency shall monitor, on an ongoing basis, any housing affordable to persons and families of low or moderate income developed or otherwise made available pursuant to any provisions of this part. As part of this monitoring, an agency shall require owners or managers of the housing to submit an annual report to the agency. Pursuant to the Health and Safety Code Section 34176.1(f), the housing successor shall conduct, and shall provide to its governing body, an independent financial audit of the Low and Moderate Income Housing Asset Fund within six months after the end of each fiscal year, which may be included in the independent financial audit of the host jurisdiction. If the housing successor is a city or county, it shall also include in its report pursuant to Section 65400 of the Government Code and post on its Internet Web site all of the following information pursuant to the Health and Safety Code Section 34176.1(f)(1) to (13) for the previous fiscal year.

Condition:

During our audit for the year ended June 30, 2023, we noted that the City has not monitored or reviewed the annual reports to be submitted by the owners or managers of the housing loans pursuant to the Health and Safety Code Section 33418(a) to (c). Further, during our audit for the year ended June 30, 2023, we noted that the City did not prepare a consolidated SB341 Report that includes all the required component pursuant to the Health and Safety Code Section 34176.1(f)(1) to (13).

Cause:

There were key staffing changes within the Housing Authority which caused the Housing Authority to not have enough capacity to manage the annual report or to prepare the SB341 report.

Effect or Potential Effect:

Without proper review over the annual reports, there is an increased risk of misinformation being reported or information being left out of the Housing Authority’s reports. Although the information pursuant to the Health and Safety Code Section 34176.1(f)(1) to (13) are available in the City’s basic financial statements, Desert Hot Springs Housing Authority Compliance Report, City’s website, or in the annual housing report, the disaggregated reporting increases the risk to not timely report all the required components or incomplete reporting.

Recommendation:

We recommend the City establish policies and procedures which assign specific staff to monitor the annual reports that are submitted. We further recommended, the City prepare a consolidated SB341 Report to include all the required components in one single report and submit the SB341 Report to the City Council within six months after the end of each fiscal year for approval and post on the City’s website.

View of Responsible Officials:

There were staffing challenges during the preparation of the SB341 report for fiscal year ending in 2023. The Administrative Services Director has begun working on the development of the SB341 report to include all the required components in one single report for the fiscal year ended June 2024, which is to be taken to the City Council by December 2024. As part of the year end closing meeting there will be task assignment to staff members to monitor the annual reports that are submitted.

Item Number: 3.

City of Desert Hot Springs
Desert Hot Springs, California
Independent Accountants’ Report on
Applying Agreed-Upon Procedures to
Utility User Tax
For the Year Ended June 30, 2023
Item Number: 3.

Item Number: 3.

200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT ACCOUNTANTS’ REPORT ON

APPLYING AGREED-UPON PROCEDURES
To the Honorable Mayor and Members of City Council
of the City of Desert Hot Springs
Desert Hot Springs, California
We have performed the procedures enumerated below on User Utility Tax (“UUT”) of the City of Desert Hot Springs, California (the “City”) for the year ended June 30, 2023. The City’s management is responsible for User Utility Tax.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose, which is to fulfill the requirement of the City’s Municipal Code Chapter 3.28 with respect to the accounting records of the UUT of the City and the service providers within the City that collect UUT (the “Service Providers”). This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings are as follows:

1. Recalculated 64.29% and 35.71% of the UUT are deposited in Public Safety Fund and Debt Service Fund, respectively, and reconciled the Schedule of UUT to the general ledger for the year ended June 30, 2023.

Results: See Exhibit A for recalculation of taxes remitted. Variance of $334 was noted between recalculation and trial balance. In addition, variances are also noted for the allocation of UUT between Public Safety Fund and Debt Service Fund in the amounts of $(93,994) and $93,660, respectively.

2. Selected one Service Provider from each category of services provided and 4 months per Service Provider and performed procedures below:

Category of Services
a. Telecommunications services user tax (3.28.020)
b. Electricity services user tax (3.28.030)
c. Water and Sewer services user tax (3.28.040)
d. Gas services user tax (3.28.050)
e. Video services user tax (3.28.060)
Procedures Performed:
a. Obtained from the City the UUT returns/remittance advices submitted by the Service Providers. b. Compared the tax return obtained from the City to the Schedule of UUT prepared by the City and the cash receipt record.
c. Identified the accuracy of the calculation for UUT remitted by performing recalculation. d. Verified whether the returns and tax were timely submitted and calculate late fees owed, if any.

Results: See Exhibit B for the results of the recalculation of UUT for the Service Providers selected for each category. See Exhibit C for the results of submission. Exceptions noted on the recalculation of UUT and submission test.

Item Number: 3.

To the Honorable Mayor and Members of City Council
of the City of Desert Hot Springs
Desert Hot Springs, California

2 3. Scanned the general ledger detail for Public Safety Fund and Debt Service Fund for expenditures incurred other than public safety or debt service purposes.

Results: No exceptions were noted as a result of the procedures.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on User Utility Tax. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of City Council and the management of the City and is not intended to be and should not be used by anyone other than those specified parties.

Santa Ana, California
May 23, 2024
Item Number: 3.

City of Desert Hot Springs
Agreed Upon Procedures Applied to Utility User Tax
Exhibit A – Tax Revenue Recalculation
For the Year Ended June 30, 2023
3 Category UUT Revenue
Electric 2,764,872 $
Gas 526,313
Telecommunications 301,371
Video 224,095
Water and Sewer 813,384
Total 4,630,035 $
Recalculation
Amount Reported in
Trial Balance Variance
Public Safety Fund - 64.29% $ 3,070,643 2,976,650 $ (93,993) $ Debt Service Fund - 35.71% 1,559,725 1,653,385 93,660
Total 4,630,035 $ 4,630,368 $ (333) $
Item Number: 3.

City of Desert Hot Springs
Agreed Upon Procedures Applied to Utility User Tax
Exhibit B – Service provider UUT Recalculation
For the Year Ended June 30, 2023
4 Recalculated Reported
Tax Exemption Taxable UUT UUT per
Month Ended Gross Revenue Claimed UUT Revenue @ 7% Tax Return Difference September 1, 2022 $ - 49,925 $ 49,925 $ 3,495 $ 3,495 $ - $ December 1, 2022 - 49,765 49,765 3,484 3,484 -
February 1, 2023 - 49,114 49,114 3,438 3,438 -
April 1, 2023 - 49,506 49,506 3,465 3,465 -
September 1, 2022 $ - 17,783 $ 17,783 $ 1,245 $ 1,245 $ - $ December 1, 2022 - 12,667 12,667 887 887 -
February 1, 2023 - 14,139 14,139 990 990 -
April 1, 2023 - 12,730 12,730 891 891 -
September 1, 2022 $ - 716,422 $ 716,422 $ 50,150 $ 50,150 $ - $ December 1, 2022 - 480,762 480,762 33,653 33,653 -
February 1, 2023 - 409,572 409,572 28,670 28,670 -
April 1, 2023 - 452,318 452,318 31,662 31,662 -
September 1, 2022 $ - - $ - $ - $ - $ - $
December 1, 2022 - - - - - -
February 1, 2023 - 270 270 19 19 -
April 1, 2023 - 21 21 1 1 -
September 1, 2022 $ - 1,811 $ 1,811 $ 127 $ 127 $ - $
December 1, 2022 - 2,538 2,538 178 178 -
February 1, 2023 - 2,118 2,118 148 148 -
April 1, 2023 - 2,707 2,707 189 189 -
Gas Service Provider
COMMERCE ENERGY, INC. - GAS
Video Service Provider
ZOOM VIDEO COMMUNICATIONS, INC.

Telecommunication Service Provider

TIME WARNER CABLE INFO SERVICES (CA) LLC
Electricity Service Provider
CALPINE ENERGY SOLUTIONS- ELECTRIC (Formerly Noble Americas) Water and Sewer Service Provider
Mission Springs Water District
Item Number: 3.

City of Desert Hot Springs
Agreed Upon Procedures Applied to Utility User Tax
Exhibit C – Submission
For the Year Ended June 30, 2023
5 Delinquent Delinquent Delinquent
Tax Return Tax Return Penalty Penalty Penalty
Month Due Date Filing Date Receipt Date On Time 15% (B) Paid Payable September 1, 2022 October 31, 2022 October 18, 2022 October 25, 2022 Yes $ - - $ - $ December 1, 2022 January 31, 2023 January 18, 2023 January 24, 2023 Yes - - - February 1, 2023 March 31, 2023 March 16, 2023 March 21, 2023 Yes - - - April 1, 2023 May 31, 2023 May 17, 2023 May 25, 2023 Yes - - - September 1, 2022 October 31, 2022 October 12, 2022 October 18, 2022 Yes $ - - $ - $ December 1, 2022 January 31, 2023 January 11, 2023 January 23, 2023 Yes - - - February 1, 2023 March 31, 2023 March 8, 2023 March 21, 2023 Yes - - - April 1, 2023 May 31, 2023 May 10, 2023 May 25, 2023 Yes - - - September 1, 2022 October 31, 2022 December 9, 2022 December 12, 2022 A $ - 7,523 $ 7,523 $ December 1, 2022 January 31, 2023 February 24, 2023 February 27, 2023 A - 5,048 5,048 February 1, 2023 March 31, 2023 May 11, 2023 May 22, 2023 A - 4,301 4,301 April 1, 2023 May 31, 2023 June 14, 2023 June 26, 2023 A - 4,749 4,749 September 1, 2022 October 31, 2022 October 11, 2022 October 11, 2022 Yes $ - - $ - $ December 1, 2022 January 31, 2023 January 30, 2023 January 30, 2023 Yes - - - February 1, 2023 March 31, 2023 March 10, 2023 March 15, 2023 Yes - - - April 1, 2023 May 31, 2022 May 9, 3034 May 13, 2023 Yes - - - September 1, 2022 October 31, 2022 October 7, 2022 October 25, 2022 Yes $ - - $ - $ December 1, 2022 January 31, 2023 January 6, 2023 January 23, 2023 Yes - - - February 1, 2023 March 31, 2023 March 8, 2023 March 21, 2023 Yes - - - April 1, 2023 May 31, 2022 May 10, 2023 May 22, 2023 Yes - - - Gas Service Provider
COMMERCE ENERGY, INC. - GAS
Video Service Provider
ZOOM VIDEO COMMUNICATIONS, INC.

Telecommunication Service Provider

TIME WARNER CABLE INFO SERVICES (CA) LLC
Electricity Service Provider
CALPINE ENERGY SOLUTIONS- ELECTRIC (Formerly Noble Americas) Water and Sewer Service Provider
Mission Springs Water District
A. Delinquent penalty was not submitted when the tax return and tax remittance were past due.

B. Municipal Code Section 3.28.070 Delinquency-Interest-Penalty.

Item Number: 3.

6 This page intentionally left blank. 11
Item Number: 3.

City of Desert Hot Springs
Desert Hot Springs, California
Report on Compliance for the U.S. Department of
Treasury Coronavirus State and Local Fiscal
Recovery Funds Program (“CSLFRF”) Requirements
for an Alternative CSLFRF Compliance Examination
Engagement
For the Year Ended June 30, 2023

Item Number: 3.

Item Number: 3.

200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
REPORT ON COMPLIANCE FOR THE U.S. DEPARTMENT OF TREASURY CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS PROGRAM (“CSLFRF”) REQUIREMENTS FOR

AN ALTERNATIVE CSLFRF COMPLIANCE EXAMINATION ENGAGEMENT Independent Accountants’ Report
To the Honorable Mayor and Members of the City Council
of the City of Desert Hot Springs
Desert Hot Springs, California
We have examined the City of Desert Hot Springs, California’s (the “City”) compliance with the compliance requirements “activities allowed or unallowed” and “allowable cost/cost principles” (the “specified requirements”) as described in Part IV “Requirements for an Alternative Compliance Examination Engagement for Recipients That Would Otherwise be Required to Undergo a Single Audit or Program-Specific Audit as a Result of Receiving Coronavirus State and Local Fiscal Recovery Funds” of the CSLFRF section of the 2023 OMB Compliance Supplement (referred to herein as “Requirements for an Alternative CSLFRF Compliance Examination Engagement”) during the year ended June 30, 2023. Management of the City is responsible for the City’s compliance with the specified requirements. Our responsibility is to express an opinion on the City’s compliance with the specified requirements based on our examination.

Our examination was conducted in accordance with attestation standards established by the AICPA; the standards applicable to attestation engagements contained in Government Auditing Standards, issued by the Comptroller General of the United States; and in the “Requirements for an Alternative CSLFRF Compliance Examination Engagement”.

Those standards and requirements require that we plan and perform the examination to obtain reasonable assurance about whether the City complied, in all material respects, with the specified requirements referenced above. An examination involves performing procedures to obtain evidence about whether the City complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material noncompliance, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion.

We are required to be independent and meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement.

Our examination does not provide a legal determination on the City’s compliance with the specified requirements.

In our opinion, the City complied, in all material respects, with the specified requirements referenced above during the year ended June 30, 2023.

Item Number: 3.

To the Honorable Mayor and Members of the City Council
of the City of Desert Hot Springs
Desert Hot Springs, California

2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we are required to report all deficiencies that are considered to be significant deficiencies or material weaknesses in internal control; fraud, and noncompliance with provisions of laws, regulations, contracts or grant agreements that have a material effect on the City’s compliance with the specified requirements and any other instances that warrant the attention of those charged with governance. We are also required to obtain and report the views of responsible officials concerning the findings, conclusions, and recommendations, as well as any planned corrective actions. We performed our examination to express an opinion on the City’s compliance with the specified requirements and not for the purpose of expressing an opinion on the internal control over the specified requirements or on compliance and other matters; accordingly, we express no such opinions. The results of our tests disclosed no matters that are required to be reported under Government Auditing Standards.

Intended Purpose
The purpose of this examination report is solely to express an opinion on whether the City complied, in all material respects with the specified requirements referenced above during the year ended June 30, 2023. Accordingly, this report is not suitable for any other purpose.

Santa Ana, California
May 23, 2024
Item Number: 3.

City of Desert Hot Springs
Desert Hot Springs, California
Independent Accountants’ Report on
Applying Agreed-Upon Procedures to
Appropriations Limit Schedule
For the Year Ended June 30, 2023
Item Number: 3.

200 E. Sandpointe Avenue, Suite 600
Santa Ana, California 92707
INDEPENDENT ACCOUNTANTS’ REPORT ON

APPLYING AGREED-UPON PROCEDURES
To the Honorable Mayor and Members of City Council
of the City of Desert Hot Springs
Desert Hot Springs, California
We have performed the procedures enumerated below on the appropriation limit of the City of Desert Hot Springs, California (the “City”) for the year ended June 30, 2023. The City’s management is responsible for the Appropriations Limit Schedule.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose in meeting the requirements of Section 1.5 of Article XIII-B of the California Constitution, which was agreed to by the City and the League of California Cities (as presented int eh publication entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution). This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings are as follows:

1. We obtained the completed worksheets used by the City to calculate its appropriations limit for the year ended June 30, 2023, and verified that the limit and annual calculation factors were adopted by resolution of the City Council. We also verified that the population and inflation options were selected by a recorded vote of the City Council.

Finding: No exceptions were noted as a result of our procedures.

2. For the accompanying Appropriations Limit Schedule, we added the prior year’s limit to the total adjustments, and verified the resulting amount to the current year’s limit.

Finding: Prior year’s limited was corrected to reflect the correctly calculated limit. No exceptions were noted as a result of our procedures.

3. We verified the current year information presented in the accompanying Appropriations Limit Schedule to corresponding information in worksheets used by the City.

Finding: No exceptions were noted as a result of our procedures.

4. We verified the appropriations limit presented in the accompanying Appropriations Limit Schedule to the appropriations limit adopted by the City Council.

Finding: No exceptions were noted as a result of our procedures.

Item Number: 3.

To the Honorable Mayor and Members of City Council
of the City of Desert Hot Springs
Desert Hot Springs, California

2 We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the accompanying Appropriations Limit Schedule.

Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of the City Council and the management of the City and is not intended to be and should not be used by anyone other than these specified parties.

Santa Ana, California
April 16, 2024
Item Number: 3.

City of Desert Hot Springs
Appropriations Limit Schedule
For the Year Ended June 30, 2023
See accompanying Notes to the Appropriations Limit Schedule. 3 Amount Source
A. Appropriations Limit FY 2021-2022 $ 37,433,751
Prior year appropriations
limit adopted by the City
B. Calculation Factors:
1) Inflation increase % 1.0755 California Department of Finance 2) Population Increase % 1.0007 California Department of Finance 3) Total adjustment % 1.0763 (B1 * B2)
C. Annual Adjustment Increase $ 2,856,195 {(B3-1) * A}
D. Other Adjustments
1) Loss responsibility (-) - N/A
2) Transfer to private (-) - N/A
3) Transfer to fees (-) - N/A
4) Assumed responsibility (+) - N/A
E. Total Adjustments $ 2,856,195 (C+D)
F. Appropriations Limit FY 2022-2023 $ 40,289,946 (A+E) Item Number: 3.

City of Desert Hot Springs
Notes to the Appropriations Limit Schedule
For the Year Ended June 30, 2023
4 Note 1 – Purpose of Limited Procedures Review
Under Article XIIIB of the California Constitution (the Gann Spending Limitation Initiative), California governmental agencies are restricted as to the amount of annual appropriations from proceeds of taxes. Effective for years beginning on or after July 1, 1990, under Section 1.5 of Article XIIIB, the annual calculation of the appropriations limit is subject to a limited procedures review in connection with the annual audit.

Note 2 – Method of Calculation
Under Section 10.5 of Article XIIIB, for fiscal years beginning on or after July 1990, the appropriations limit is required to be calculated based on the limit for the fiscal year 1986-87, adjusted for the inflation and population factors discussed in Notes 3 and 4 below.

Note 3 – Population Factors
A California governmental agency may use as its population factor either the annual percentage change of the jurisdiction’s own population or the annual percentage change in population of the county where the jurisdiction is located. The factor adopted by the City for the year ended June 30, 2023, represents the annual percentage change in population for the City of Desert Hot Springs.

Note 4 – Inflation Factors
A California governmental agency may use as its inflation factor either the annual percentage change in the 4th quarter per capita personal income (which percentage is supplied by the California Department of Finance) or the percentage change in the local assessment roll from the preceding year due to the change of local nonresidential construction. The factor adopted by the City for the year ended June 30, 2023, represents the annual percentage change for per capita personal income.

Note 5 – Other Adjustments
A California government agency may be required to adjust its appropriations limit when certain events occur, such as the transfer of responsibility for municipal services to, or from, another government agency or private entity. The City had no such adjustments for the year ended June 30, 2023.

Item Number: 3.