City of Desert Hot Springs
AGENDA
REGULAR MEETING OF THE CITY COUNCIL
and the City Council Serving as the Successor Agency to the Former Redevelopment Agency Board
Tuesday, September 15, 2026
4:30 PM - Closed Session
5:30 PM - Presentations
6:00 PM - Regular Session
Council Chambers/City Hall
11-999 Palm Drive
Desert Hot Springs, California, 92240
Public Participation Options
City Council meetings are held in person, but you can watch the meeting via live stream or participate through the following options below:
Live Stream: YouTube | City Website
Via Email: Send your comments by email to [email protected]. Emails received by 2:00 PM the day of the meeting will be part of the record and distributed to the City Council. Emails received after 2:00 PM, during or after the meeting, will be distributed as soon as practicable and retained for the record.
In-Person Public Comment:
• General Public Comment (Non-Agenda Items) – Upon arrival, please complete a speaker card and submit to the City Clerk.
• Agenda Items – Speaker cards are not necessary to complete if you are speaking on an agenda item.
Online Public Comment: Virtual participation is conducted via Zoom. Use the raise hand feature to request to speak. Meeting online link: https://us02web.zoom.us/j/82878637372 Live Captions and Translation
Scan the QR Code or visit the url to view live English and Spanish closed captions or listen to interpretation audio.
URL: https://attend.wordly.ai/join/LJWJ-2975
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: (City of Desert Hot Springs v. Renato De La Rosa et al., Case No. PSC1802371)
2. CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION
(Paragraph (1) of subdivision (d) of Section 54956.9)
Name of case: (City of Desert Hot Springs v. Irene Valenti et al., Case No. PSC1802698)
3. CONFERENCE WITH REAL PROPERTY NEGOTIATORS
Pursuant to Government Code Section 54956.8:
Property: 65311 San Jacinto Lane
Agency Negotiator: Doria Wilms, City Manager
Jennifer Mizrahi, City Attorney
Negotiating Parties: Edrick Pineda
Under Negotiation: Price and Terms
4. CONFERENCE WITH LEGAL COUNSEL—ANTICIPATED
LITIGATION
(Paragraph (2) of subdivision (d) of Section 54956.9)
There is a significant exposure to litigation based on the receipt of what appears to be a claim pursuant to the Government Claims Act or some other written communication from a potential plaintiff threatening litigation, which claim or communication is available for public inspection pursuant to Section 54957.5 of the Government Code.
5. CONFERENCE WITH LEGAL COUNSEL- ANTICIPATED LITIGATION Initiation of litigation pursuant to paragraph (4) of subdivision (d) of Section 54956.9: (1 potential case)
6. PUBLIC EMPLOYEE PERFORMANCE EVALUATION
(Gov. Code Sec. 54957(b))
Title: City Manager
RECESS
PRESENTATIONS - 5:30 P.M.
Introduction and Swearing-In of New Police Officers
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
CONFLICT OF INTEREST & LEVINE ACT DISCLOSURES
PUBLIC HEARINGS:
7. Rental Registration Permit Fees
Michael Miller, Code Compliance Officer
Recommendation:
1) Staff Report;
2) Entertain questions of Staff from City Council;
3) Open the Public Hearing;
4) Take public testimony from those in favor;
9 - 16
5) Take public testimony from those opposed;
6) Take public testimony of those in a neutral position; 7) Close the Public Hearing;
8) City Council discussion and questions to Staff; and
9) Adopt a Resolution of the City Council of the City of Desert Hot Springs, California, Adopting the New User Fees Related to Rental Registration Permits and the Nexus Study Prepared Therefor.
Staff Report - SR-26-189 - Pdf
8. Zoning Amendment 26-1. An Ordinance to Rezone Land Designated Commercial Business Park (C-BP) Zoning Along Highway 62 Between North Indian Canyon Drive and Interstate 10 and North of Pierson Boulevard to the Commercial Highway (C-H) Zone.
Patricia Villagomez, Planning Manager
Recommendation:
1) Staff Report;
2) Entertain questions of Staff from the City Council;
3) Open the Public Hearing;
4) Take public testimony from those in favor
5) Take public testimony from those in opposition;
6) Take public testimony from those in a neutral position; 7) Close the Public Hearing;
8) City Council discussion; and
9) Introduce for first reading and by title only: "An ordinance to rezone land designated Commercial Business Park (C-BP) Zoning along Highway 62 between North Indian Canyon Drive and Interstate 10 and North of Pierson Boulevard to Commercial Highway (C-H)." Staff Report - SR-26-177 - Pdf
17 - 56
ADMINISTRATIVE CALENDAR:
9. Audited Financial Statements for Fiscal Year 2024-2025 Geoffrey Buchheim, Administrative Services Director
Recommendation: Receive and file.
Staff Report - SR-26-197 - Pdf
57 - 236
10. Amendment to Resolution No. 2017-096 Regarding Facility Use Agreements and Fees for City-Owned Facilities
Roberta Crncic, Recreation and Community Services Director Recommendation:
Adopt a Resolution of the City Council amending Resolution No. 2017- 096 to update the process for Facility Use Permits and/or Non-Exclusive License Agreements for City owned, operated, or controlled facilities; establish that applicable facility use fees shall be in accordance with the City’s adopted Fee Schedule; and authorize the City Manager, or designee, to approve fee reductions or waivers under certain circumstances.
237 - 246
Staff Report - SR-26-205 - Pdf
11. Desert Nights on the BLVD. Season 2 Professional Services Agreement with Take Five Entertainment
Roberta Crncic, Recreation and Community Services Director Recommendation:
Authorize the City Manager to enter into a Professional Services Agreement with Take Five Entertainment to produce 12 monthly outdoor concerts, five local band performances, and provide monthly marketing and promotional services for Desert Nights on the BLVD. from October 2026 through September 2027.
Staff Report - SR-26-204 - Pdf
247 - 288
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.
12. Pension Liability and Surplus Allocation Policy
Geoffrey Buchheim, Administrative Services Director
Recommendation:
1) Adopt a resolution of the City Council of the City of Desert Hot Springs adopting the Pension Liability and Surplus Allocation Policy; and 2) Authorize a transfer in the amount of $155,302 from the General Fund, fund balance to the City’s Section 115 Trust with Public Agency Retirement Services (PARS)
Staff Report - SR-26-206 - Pdf
289 - 295
13. Resolution Adopting a Records Retention Schedule
Jerryl Soriano, City Clerk
Recommendation:
Adopt a Resolution of the City Council of the City of Desert Hot Springs, California, adopting a Records Retention Schedule, authorizing destruction of certain city records and rescinding Resolution 2017-098.
Staff Report - SR-26-207 - Pdf
297 - 379
14. Professional Services Agreement Amendment - The Mural Supply Co (Downtown Arts and Cultural District)
Jocelyn Kane, Economic Development Manager
Recommendation:
Authorize the City Manager to execute an Amendment to the Professional Services Agreement with The Mural Supply Co. for the Curation of Phase Two of the Downtown Mural Program extending the term to June 30, 2027.
381 - 385
Staff Report - SR-26-211 - Pdf
15. Renewal and Expansion of the Art Enrichment Program at the Desert Hot Springs Senior Center
Roberta Crncic, Recreation and Community Services Director Recommendation:
Authorize the City Manager to execute a Professional Services Agreement with Sallé Kirby to continue and expand the Art Enrichment Program at the Desert Hot Springs Senior Center for the 2026–2027 program year, in an amount not to exceed $35,520.00.
Staff Report - SR-26-208 - Pdf
387 - 419
16. Contracts Management Report as of August 31, 2026
Viviana Gonzalez-Osorio, Management Analyst
Recommendation:
Receive and file.
Staff Report - SR-26-196 - Pdf
421 - 424
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.
October 6 City Council Regular Meeting 6:00 p.m.
October 8 Public Safety Commission 6:00 p.m.
October 13 Planning Commission 6:00 p.m.
October 20 City Council Regular Meeting 6:00 p.m.
________________________________________________________________________________
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.
Disclosure of Campaign Contributions (Levine Act - Government Code Section 84308) Pursuant to Government Code section 84308, members of the City Council are disqualified and not able to participate in any agenda item involving contracts (other than competitively bid contracts, labor contracts, or personal employment contracts with City employees), franchises, discretionary land use permits and other entitlements if the Councilmember received more than $500 in campaign contributions from the applicant or contractor, an agent of the applicant or contractor, or any financially interested participant who actively supports or opposes the City’s decision on the agenda item in the previous 12 months. Members of the City Council who have received, and applicants, contractors or their agents who have made, campaign contributions totaling more than $500 to a Councilmember in the previous 12 months are required to disclose that fact for the official record of the subject agenda item and shall not make, participate in making, or in any way attempt to use their official position to influence the subject agenda item. Disclosures must include the amount of the campaign contribution and identify the recipient persons and may be made either in writing to the City Clerk prior to the subject hearing or by verbal disclosure at the time of the hearing.
SR-26-189
City of Desert Hot Springs
City Council
AGENDA ITEM REPORT
To: City Council
Date: September 15, 2026
Department: Code & Cannabis Compliance
Prepared by: Michael Miller, Code Compliance Officer
Subject: Rental Registration Permit Fees
RECOMMENDATION:
1) Staff Report;
2) Entertain questions of Staff from City Council;
3) Open the Public Hearing;
4) Take public testimony from those in favor;
5) Take public testimony from those opposed;
6) Take public testimony of those in a neutral position; 7) Close the Public Hearing;
8) City Council discussion and questions to Staff; and
9) Adopt a Resolution of the City Council of the City of Desert Hot Springs, California, Adopting the New User Fees Related to Rental Registration Permits and the Nexus Study Prepared Therefor.
BACKGROUND:
The California Constitution allows municipalities to recover reasonable costs borne from providing certain services to certain individuals. The City is permitted to charge fees based on “costs reasonably borne” by the City. However, the fees may not exceed the costs of providing the service. “Costs reasonably borne” is intended to include all appropriations by an entity for the appropriate costs for the continuation of the service over time. This includes ongoing expenses such as operating costs and an allocation for overhead and administration. The types of costs include salaries and wages; employee fringe benefits; maintenance and operations costs; overhead costs; general City and department and/or divisional overhead costs. Without corresponding user fees, these services would be funded by tax revenues. In June 2020, the City adopted its current user fee schedule based on the User Fee Study completed in April 2020.
DISCUSSION:
On July 7, 2026, City Council adopted and approved the Rental Registration Program ordinance, adding Chapter 5.58 to Title 5 of the Desert Hot Springs Municipal Code. Per this new regulation, an application and inspection fee is required to recover some of the City cost of operating the program.
The following Nexus Study and Fee is set by resolution:
Item Number: 7.
SR-26-189
User Fee Calculation - Rental Registration
Position
Fully
Burdened
Hourly Rate
Hours Per
Year
Registrations
Per Year
Hours Per
Registration
Annual Staff
Cost
Code
Compliance
Officer
$ 140.16 2,000 1,300 1.538461538 $280,320.00
Management
Analyst $ 174.58 400 1,300 0.307692308 $ 69,832.00
Administrative
Assistant $ 94.88 800 1,300 0.615384615 $ 75,904.00
Compliance
Manager $ 265.65 80 1,300 0.061538462 $ 21,252.00
(Percentages for Fringe Benefits, Maintenance & Operations Costs, and Overhead Costs are per the Fully Allocated Hourly Rate Detail Report calculated as part of the user fee study in August 2020)
Total Staff costs per each property registration - Calculation Total Annual Staff
Costs = $447,308.00
Estimated # of
registrations each year = 1,300
Total Staff cost per
each registration = $344.08
(There are an estimated 6500 Rental properties in the city, and all are expected to be inspected at least once over the next 5 years. 6500 / 5 = 1300 inspections each year)
Staff Cost per each additional unit inspected (Multi-Family Residential) - Calculation Multi-Unit Properties Fully Burdened
Hourly Rate Hours per unit Cost per each additional unit Code Officer Time 140.16 0.5 $70.08
Proposed Fee Schedule
Percentage of Recovered
Costs
Per Property (or APN) $100.00 29.06%
Per additional unit inspected
(properties with 10 or more
units)
$5.00 7.13%
Staff recommends that the City Council implement a partially recovered fee of $100.00 per property or APN plus $5.00 per additional unit inspected (properties with 10 or more units) for cost recovery.
This partial recovery aims to promote compliance and alleviate the financial burden on property owners, reflecting the City Council's primary focus on successfully launching the program and ensuring compliance.
Item Number: 7.
SR-26-189
FISCAL IMPACT:
As these are new fees, the fiscal impact will be an increase in user fee revenues for the City.
Currently the City has an estimated 6,500 rental properties which will generate over $65,000 in user fee revenue over a 5 year period.
STRATEGIC ALIGNMENT:
This initiative supports the following goals of the City's Strategic Plan:
Goal 6: Community Beautification
Focused execution of beautification efforts city-wide via enforcement measures and the abatement of illegal dumping.
ATTACHMENTS:
1) Resolution - LTR Nexus Study and Fee
2) Rental Registration Nexus
Item Number: 7.
RESOLUTION NO. 2026-_______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
DESERT HOT SPRINGS, COUNTY OF RIVERSIDE, STATE
OF CALIFORNIA, ADOPTING APPLICATION FEES
RELATED TO THE “RENTAL REGISTRATION PROGRAM”
AND THE NEXUS STUDY PREPARED THEREFOR
WHEREAS, the City Council of the City of Desert Hot Springs has adopted Municipal Code Ordinance. 5.58 “Rental Registration Program” to Title 5 “Business licenses and Regulations of the Desert Hot Springs Municipal Code (“DHSMC”), and, WHEREAS, the Residential Rental Registration Program is intended to promote compliance with applicable health, safety, housing, building, electrical, mechanical, plumbing, fire, and property-maintenance requirements; and WHEREAS, Desert Hot Springs Municipal Code Section 5.58.040.C authorizes the City Council to establish fees for registration, inspection, reinspection, and related Program services by resolution; and
WHEREAS, the fees established by this Resolution are intended to recover a portion of the City’s reasonable costs of administering and enforcing the Program, including application processing, database management, notices, inspections, compliance monitoring, and related administrative services; and WHEREAS, the proposed fee will cover approximately 29-percent of the operating cost and that the implementation and administration of the program, and the fee and cost recovery level, is necessary and in the public interest to encourage inspections and registration; and
WHEREAS, the City Council has considered the staff report, any applicable fee study or cost-recovery analysis, public testimony, and all other information presented at the public meeting for this Resolution.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DESERT HOT SPRINGS DOES RESOLVE AS FOLLOWS:
Section 1. Findings
The foregoing recitals are true and correct and are incorporated into this Resolution by this reference.
The City Council finds that the fees established by this Resolution do not exceed the reasonable estimated cost of providing the respective Program services for which each fee is charged.
Item Number: 7.
Section 2. Acceptance of Fee Study
The City Council hereby accepts the Residential Rental Registration Program Fee and Cost-Recovery Study attached as Exhibit A and incorporated into this Resolution by this reference.
Section 3. Adoption of Fee Schedule
The City Council hereby adopts the Residential Rental Registration Program Fee Schedule attached as Exhibit B and incorporated into this Resolution by this reference.
The fees listed in Exhibit B apply to all properties and rental units subject to the Program, unless exempt under the DHSMC or other applicable law.
Section 4. Payment Requirement
All applicable Program fees must be paid when a registration application or renewal application is submitted, unless otherwise specified in Exhibit A or approved in writing by the City Manager/Compliance Manager/Designee.
No initial inspection, renewal inspection, reinspection, registration approval, or renewal approval shall be scheduled or finalized until all applicable fees have been paid.
Section 5. Use of Revenue
Revenue collected under this Resolution shall be used solely to recover the City’s reasonable costs of administering and enforcing the Residential Rental Registration and Inspection Program, including registration processing, inspections, reinspection, compliance activities, notices, data management, customer service, and related administrative costs.
The fees are regulatory fees and are not intended to generate revenue beyond the reasonable cost of providing Program services.
Section 6. Nonrefundable Fees
Unless otherwise required by law or expressly authorized by the City Manager or designee, fees paid under this Resolution are non-refundable, including fees associated with an application that is withdrawn, denied, incomplete, abandoned, or otherwise not approved.
Section 7. Future Fee Adjustments
Item Number: 7.
The City Council may amend the fees established by this Resolution by a subsequent resolution, following any notice, hearing, cost-analysis, or other procedure required by applicable law.
Section 8. Effective Date
This Resolution shall take effect on September 15, 2026, and the fees established by this Resolution shall apply to Program applications and services submitted, scheduled, or provided on or after that date.
Section 9. Severability
If any section, subsection, sentence, clause, phrase, or portion of this Resolution is held invalid or unenforceable by a court of competent jurisdiction, that decision shall not affect the validity of the remaining portions of this Resolution. The City Council declares that it would have adopted this Resolution and each section, subsection, sentence, clause, phrase, and portion of it irrespective of the fact that any one or more portions may be declared invalid or unenforceable.
PASSED, APPROVED, AND ADOPTED by the City Council of the City of Desert Hot Springs, California, on this 15 day of September, 2026, by the following vote:
AYES:
NAYES:
ABSENT:
ABSTAIN:
ATTEST: APPROVED:
_______________________________ ______________________________ Jerryl Soriano, City Clerk Scott Matas, Mayor
APPROVED AS TO FORM:
_______________________________
Jennifer Mizrahi, City Attorney
Item Number: 7.
Exhibit A
Exhibit B
Position
Fully Burdened
Hourly Rate
Hours
Per Year
Registrations
Per Year
Hours Per
Registration
Annual Staff
Cost
Code
Compliance
Officer $ 140.16 2000 1300 1.538461538 $ 280,320.00
Management
Analyst $ 174.58 400 1300 0.307692308 $ 69,832.00
Administrative
Assistant $ 94.88 800 1300 0.615384615 $ 75,904.00
Compliance
Manager $ 265.65 80 1300 0.061538462 $ 21,252.00
Total annual staff cost $ 447,308.00
Estimated # of Rental Properties = 6500
Estimated # of registrations completed per year = 1300
Total Annual Staff Cost / Estimated Registrations
Completed each year.
= Total Staff costs per
each property
registration
$447,308.00 / 1300 = $344.08
Multi-Unit Properties
Fully Burdened
Hourly Rate
Hours per
unit Cost per each additional Unit
Code Officer Inspect. Time 140.16 0.5 $ 70.08
Proposed Fee
Schedule Percentage of Recovered Costs
Per APN $100.00 29.06%
Per additional unit (properties
with 10 or more units). $5.00 7.13%
Item Number: 7.
Nexus Study: Rental Registration Fee
Position Fully Burdened Hourly Rate Hours Per Year Registrations Per Year Hours Per Registration Annual Staff Cost Code Compliance Officer $ 140.16 2000 1300 1.538461538 $ 280,320.00 Management Analyst $ 174.58 400 1300 0.307692308 $ 69,832.00 Administrative Assistant $ 94.88 800 1300 0.615384615 $ 75,904.00 Compliance Manager $ 265.65 80 1300 0.061538462 $ 21,252.00 Total annual staff cost $ 447,308.00
Estimated # of Rental Properties 6500
Estimated # of registrations completed per year 1300 Total Staff costs per each property registration $ 344.08 Multi Unit Properties
Fully Burdened Hourly Rate Hours per unit
Cost per each
additional Unit
Code Officer Inspection Time 140.16 0.5 $ 70.08
Proposed Fee Schedule Percentage of Recovered Costs
Per APN $100.00 29.06%
Per additional unit (properties with 10 or more units). $5.00 7.13% Fully Burdened Hourly Rate Calculation Fringe Benefits
Maintenance & Operations
Cost Overhead Costs
Position Salary Hourly Rate 46.72% 18.68% 173.23% Total Compliance Manager 78.45 36.65 14.65 135.9 $ 265.65
Management Anaylst 51.56 24.09 9.63 89.31 $ 174.58
Admin Assistant 28.02 13.09 5.23 48.54 $ 94.88
Compliance Officer I 41.39 19.34 7.73 71.7 $ 140.16
(Percentages for Fringe Benefits,
Maintenance & Operations Costs, and
Overhead Costs are per the Fully
Allocated Hourly Rate Detail Report
calculated as part of the user fee study
in August 2020)
Staff recommends that the City
Council implement a partially
recovered fee for cost recovery.
This partial recovery aims to
promote compliance and
alleviate the financial burden on
property owners, reflecting the
City Council's primary focus on
successfully launching the
program and ensuring
compliance.
Item Number: 7.
SR-26-177
City of Desert Hot Springs
City Council
AGENDA ITEM REPORT
To: City Council
Date: September 15, 2026
Department: Community Development
Prepared by: Patricia Villagomez, Planning Manager
Subject: Zoning Amendment 26-1. An Ordinance to Rezone Land Designated Commercial Business Park (C-BP) Zoning Along Highway 62 Between North Indian Canyon Drive and Interstate 10 and North of Pierson Boulevard to the Commercial Highway (C-H) Zone.
RECOMMENDATION:
1) Staff Report;
2) Entertain questions of Staff from the City Council;
3) Open the Public Hearing;
4) Take public testimony from those in favor
5) Take public testimony from those in opposition;
6) Take public testimony from those in a neutral position; 7) Close the Public Hearing;
8) City Council discussion; and
9) Introduce for first reading and by title only: "An ordinance to rezone land designated Commercial Business Park (C-BP) Zoning along Highway 62 between North Indian Canyon Drive and Interstate 10 and North of Pierson Boulevard to Commercial Highway (C-H)." BACKGROUND:
Pursuant to the authority granted to the City of Desert Hot Springs (“City”) by Article XI, Section 7 of the California Constitution, the City has the police power to regulate the use of land and property within the City in a manner designed to promote public convenience and general prosperity, as well as public health, welfare and safety. Adoption and enforcement of comprehensive zoning regulations and other land use regulations lies within the City’s police power.
On June 3, 2025, the City Council approved a Strategic Plan envisioning the promotion of tourism through the development of new businesses along Highway 62, north of the Interstate 10 freeway and south of North Indian Canyon Drive (“HWY 62 Corridor”) and north of Pierson Boulevard. To achieve the goal of making HWY 62 the “Tourism Gateway” for the City, the Strategic Plan calls for “[i]ntense and focused efforts to identify strategically important sites/properties, property owners and capital partners to attract and retain commercial development along the HWY 62”. Efforts to promote tourism are important for the economic well-being of the City, its residents and visitors. The HWY 62 Corridor will play a critical role in bringing tourists to shop, dine, socialize, and experience the offerings of the City. HWY 62 is also designated a scenic corridor by the State of California.
Item Number: 8.
SR-26-177
The City Council anticipated that some people or entities may be seeking to establish uses that are not compatible with the vision that the City Council has for the HWY 62 Corridor given the Commercial-Business Park zoning designation. If certain uses were permitted to be established in the HWY 62 Corridor without appropriate regulation, such uses might conflict with the Strategic Plan goals or conflict with surrounding uses. Under the C-BP zoning, such uses that could conflict include data centers, light manufacturing, and warehouses.
In response, on October 21, 2025, the City Council adopted the underlying ordinance titled, “Urgency Interim Ordinance Of The City Council Of The City Of Desert Hot Springs Adopting A Moratorium On The Issuance Of Any License, Permit, Or Entitlement That Is A Use Other Than The Ones Listed In This Ordinance For Any Business Located In The Commercial Business Park (C-BP) Zoning District Along Highway 62 Between North Indian Canyon Drive And Interstate 10” (“Underlying Ordinance”).
On November 4, 2025, the City Council held a duly noticed public hearing on the Underlying Ordinance that extended it 22 months and 15 days from November 4, 2025. The moratorium gave City staff time to analyze the current zoning, examine alternatives, and recommend appropriate zoning, uses, regulations, and development standards for the HWY 62 Corridor.
Therefore, the City drafted the proposed Ordinance to change the zoning. On August 11th, 2026, in a Regular Meeting the Planning Commission made a recommendation to the City Council to approve the Ordinance.
DISCUSSION:
ANALYSIS
The Commercial - Business Park (C-BP) zoning district at HWY 62 encompasses a total of 231.3 aces. Of that total, approximately 152.5 acres are on the west side of HWY 62 and 78.8 acres are on the east side of HWY 62. The area is bounded by Residential Medium (R-M) zoning on the west and east side, Specific Plan designations to the north, and unincorporated county area to the south. The large, master-planned community of Skyborne lies to the east and is under development. Other large residential developments such as Highland Falls to the west have their entitlements but remain undeveloped. Caltrans plans to install a traffic signal at HWY 62 and Pierson Boulevard and the engineering for the signal is underway.
The General Plan designation for the area is "Commercial" in the General Plan Land Use Map. The Zoning designation of Commercial- Business Park (C-BP) is one of five commercial zones allowed in the Commercial Land Use designation. Commercial Highway (C-H) is another designated zoning district that includes freeway oriented uses such as lodging, fuel stations, restaurants, and retail but excludes uses like data centers, light manufacturing, and warehouses. A C-H zoning designation is more consistent with the City's Strategic Plan, and it is more consistent with other highway frontage zoning at Palm Drive and Indian Canyon along the I-10 whereby the C-H zoning is adjacent to the freeway. For these reasons, Staff is recommending the area be rezoned from C-BP to C-H.
The drivers for how much Commercial Highway uses the market will support is dependent on the amount of residential that exists in the area to support it, how much traffic traverses HWY 62 (either commuter or tourist traffic to and from the hi-desert), and the draw of tourists destinations within Desert Hot Spring such as the hotels, spas, resorts, and downtown. Longer term, the area would be a good candidate for a Specific Plan which could introduce more mixed-use development including residential.
Item Number: 8.
SR-26-177
Notices of the potential rezoning action were mailed via certified mail to all the affected property owners and surrounding properties on June 11, 2026, which was prior to the Planning Commission recommendation on this Project. The project was noticed to neighboring property owners within a 300-foot radius of the project site Wednesday, August 26th, 2026, and was also advertised in the Desert Star Weekly, noticing requirements
The Planning Commission held its hearing in August and recommended to the City Council that it adopt the Ordinance to rezone the area currently designated Commercial Business Park (C-BP) in the Zoning Map to Commercial Highway (C-H) at HWY 62 and Pierson Boulevard. The area included in the rezoning is depicted on the following exhibits: Attachment 2: Current Zoning and Attachment 3:
Proposed Zoning.
FISCAL IMPACT:
There is no costs associated with the rezoning.
ENVIRONMENTAL ANALYSIS:
This action is exempt under the California Environmental Quality Act pursuant to Title 14 California Code of Regulations Section 15061(b)(3), "Common Sense Exemption." Projects proposed for development in this area would be subject to CEQA at the time of development.
OPTIONAL:
Zoning Ordinance Amendment Findings:
1. That the proposed amendment is internally consistent with the General Plan; The proposed Ordinance which changes the zoning is internally consistent with the General Plan in that the General Plan Land Use designation for the area is Commercial and the CommercialHighway Zoning Districts is one of five allowable zoning districts permitted in the Commercial General Plan Land Use designation. Staff Recommends this finding.
2. That the proposed Ordinance which changes the zoning would not be detrimental to the public interest, health, safety, convenience, or welfare of the City; The rezoning would not be detrimental to the public interest, health, safety, convenience, or welfare of the City as the Commercial-Highway Zoning District is less intensive than the Commercial-Business Park zoning. Staff recommends this finding.
STRATEGIC ALIGNMENT:
This initiative supports the following goals of the City's Strategic Plan:
Goal 1: Freeway Corridor
Take urgent and intentional steps to improve infrastructure and attract high quality development along the city’s freeway corridors, focusing on the highest and best use of land and zoning designations.
ATTACHMENTS:
1) Ordinance
Item Number: 8.
SR-26-177
2) Exhibit A - Current Zoning
3) Exhibit B - Proposed Zoning
4) URGENCY Interim Ordinance Extension Moratorium HWY 62 5) Table 17.12.01 to URGENCY Interim Moratorium
6) Section 65858(e) Report to the Extension Ordinance
7) 2025-2027 City of Desert Hot Springs Strategic Plan
Item Number: 8.
ORDINANCE NO. _____
AN ORDINANCE TO REZONE LAND DESIGNATED
COMMERCIAL BUSINESS PARK (C-BP) ZONING ALONG
HIGHWAY 62 BETWEEN NORTH INDIAN CANYON DRIVE AND
INTERSTATE 10 AND NORTH OF PIERSON BOULEVARD TO
THE COMMERCIAL HIGHWAY (C-H) ZONE
WHEREAS, the City of Desert Hot Springs (“City”) has a responsibility to plan and regulate the use of property within the City’s jurisdictional boundaries; and WHEREAS, pursuant to the authority granted to the City by Article XI, Section 7 of the California Constitution, the City has the police power to regulate the use of land and property within the City in a manner designed to promote public convenience and general prosperity, as well as public health, welfare and safety; and WHEREAS, adoption and enforcement of comprehensive zoning regulations and other land use regulations lies within the City’s police power; and WHEREAS, on June 3, 2025, the City Council approved a Strategic Plan envisioning the promotion of tourism through the development of new businesses along Highway 62, north of the Interstate 10 freeway and south of North Indian Canyon Drive (“HWY 62 Corridor”) and north of Pierson Boulevard; and WHEREAS, to achieve the goal of making HWY 62 the “Tourism Gateway” for the City, the Strategic Plan calls for “[i]ntense and focused efforts to identify strategically important sites/properties, property owners and capital partners to attract and retain commercial development along the HWY 62”; and
WHEREAS, efforts to promote tourism are important for the economic well-being of the City, its residents and visitors; and
WHEREAS, the HWY 62 Corridor will play a critical role in bringing tourists to shop, dine, socialize, and share in the collective experience of living in the City; and WHEREAS, HWY 62 is also designated a scenic corridor by the State of California; and
WHEREAS, the City Council anticipated that some people or entities may be seeking to establish uses that are not compatible with the vision that the City Council has for the HWY 62 Corridor given the Commercial-Business Park zoning designation; and
WHEREAS, if certain uses were permitted to be established in the HWY 62 Corridor without appropriate regulation, such uses might conflict the Strategic Plan Item Number: 8.
goals or conflict with surrounding uses. Under the C-BP zoning, such uses that could conflict include data centers, light manufacturing, and warehouses; and WHEREAS, in response, on October 21, 2025, the City Council adopted an ordinance titled, “Urgency Interim Ordinance Of The City Council Of The City Of Desert Hot Springs Adopting A Moratorium On The Issuance Of Any License, Permit, Or Entitlement That Is A Use Other Than The Ones Listed In This Ordinance For Any Business Located In The Commercial Business Park (C-BP) Zoning District Along Highway 62 Between North Indian Canyon Drive And Interstate 10”, and ultimately adopted an extension thereto; and
WHEREAS, this gave City staff time to analyze the current zoning, examine alternatives, and recommend appropriate zoning, uses, regulations, and development standards for the HWY 62 Corridor; and
WHEREAS, pursuant to the reasons in the Staff Report accompanying this Ordinance, as well as the findings herein, Council hereby adopts this Ordinance amending the Zoning Map to rezone the area currently designated Commercial Business Park (C-BP) in the Zoning Map to Commercial Highway (C-H) at HWY 62 and Pierson Boulevard; and
WHEREAS, the City Council finds this Ordinance is for the convenience and general welfare of the City; and
WHEREAS, the proposed adoption of this Ordinance is compatible with the general objectives of the General Plan, in that the subject uses and standards conform goals, policies and standards of the General Plan; and WHEREAS, the City’s Planning Commission held a public hearing on August 11, 2026, considered this Ordinance, and made a positive recommendation to the City Council; and
WHEREAS, on September 15th, 2026, the City Council concluded a duly noticed public hearing and considered this Ordinance.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DESERT HOT SPRINGS DOES ORDAIN AS FOLLOWS:
Section 1. RECITALS.
The Recitals are true and correct and are hereby incorporated by this reference.
Section 2. EVIDENCE
That the City Council has considered all of the evidence submitted into the Item Number: 8.
administrative record, which includes, but is not limited to, the following:
(a) The City’s Municipal Code and its General Plan, including updates; (b) The documents that consist of the proposed Ordinance; (c) All of the environmental documents;
(d) Testimony and/or comments from all persons including the applicant and its representatives submitted to the City in both written and oral form at, or prior to, the public hearing conducted at the Planning Commission; (e) Planning Commission’s recommendation; and
(f) Public comments, both written and oral, received and/or submitted at, or prior to the City Council’s consideration of this Ordinance.
Section 3. AMENDING THE ZONING MAP FROM “RESIDENTIAL HIGH (RH)” TO “RESIDENTIAL MEDIUM (R-M)” “ZONING MAP” “Zoning Map” shall be amended as follows:
Item Number: 8.
Item Number: 8.
Section 4. ENVIRONMENTAL FINDINGS
This proposed Ordinance is exempt under the California Environmental Quality Act pursuant to Title 14 California Code of Regulations Section 15061(b)(3), "Common Sense Exemption." Projects proposed for development in this area would be subject to CEQA at the time of development.
Section 5. GENERAL PLAN CONSISTENCY FINDINGS
The City Council finds the Zoning Map Amendment will be compatible with the general objectives of the General Plan, in that the subject uses would be conditionally permitted in residential land use districts, similar to other permitted and conditionally permitted uses, and in that the use will be subject to strict review and conditions.
Section 6. GENERAL FINDINGS
IN addition to the findings in this Ordinance, and the findings in the Staff Report, the City Council finds this Ordinance is not detrimental to the public interest, health, safety, convenience, or welfare of the City.
Section 7. SEVERABILITY
The City Council declares that, should any provision, section, paragraph, sentence or word of this Ordinance be rendered or declared invalid by any final court action in a court of competent jurisdiction or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences or words of this Ordinance as hereby adopted shall remain in full force and effect.
Section 8. AMENDING OF BAIL SCHEDULE
The City Attorney’s Office is hereby directed to determine whether this Ordinance necessitates amendment of the City’s Bail Schedule and to cause such necessary amendments to be made and filed with the local branches of the Superior Court of the County of Riverside.
Section 9. EXECUTION AND CERTIFICATION
The City Clerk is directed to do all things necessary to cause the execution of this Ordinance immediately upon its adoption and shall thereafter certify to the passage of this Ordinance and cause the same to be published according to law.
Section 10. EFFECTIVE DATE
This ordinance shall take effect thirty (30) days after its second reading by the City Council.
Item Number: 8.
[END OF PAGE]
Item Number: 8.
The foregoing Ordinance was approved and adopted at a meeting of the City Council held on ______________________, 2026, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
Jerryl Soriano, City Clerk
Scott Mattas, Mayor
APPROVED AS TO FORM:
Jennifer A. Mizrahi,
City Attorney
C:\Users\JMizrahi\Desktop\Drafts\DHS\136. Draft Zoning Ordinance for Hwy 62 MAP ONLY.docx Item Number: 8.
Exhibit A
Current Zoning
HWY 62 at Pierson Boulevard
Item Number: 8.
Exhibit B
Proposed Zoning
HWY 62 at Pierson Boulevard
Item Number: 8.
ORDINANCE NO. ___
AN EXTENSION OF URGENCY INTERIM ORDINANCE OF THE CITY
COUNCIL OF THE CITY OF DESERT HOT SPRINGS ADOPTING A
MORATORIUM ON THE ISSUANCE OF ANY LICENSE, PERMIT, OR
ENTITLEMENT THAT IS A USE OTHER THAN THE ONES LISTED IN THIS
ORDINANCE FOR ANY BUSINESS LOCATED IN THE COMMERCIAL
BUSINESS PARK (C-BP) ZONING DISTRICT ALONG HIGHWAY 62
BETWEEN NORTH INDIAN CANYON DRIVE AND INTERSTATE 10
WHEREAS, pursuant to the authority granted the City of Desert Hot Springs (“City”) by Article XI, Section 7 of the California Constitution, the City has the police power to regulate the use of land and property within the City in a manner designed to promote public convenience and general prosperity, as well as public health, welfare and safety; and WHEREAS, adoption and enforcement of comprehensive zoning regulations and other land use regulations lies within the City’s police power; and WHEREAS, the City Council approved a Strategic Plan envisioning the promotion of tourism through the development of new business along Highway 62, north of the Interstate 10 freeway and south of North Indian Canyon Road (“HWY 62 Corridor”); and WHEREAS, to the achieve the goal of making HWY 62 the “Tourism Gateway” for the City, the Strategic Plan calls for the “[i]ntense and focused efforts to identify strategically important sites/properties, property owners and capital partners to attract and retain commercial development along the HWY 62”; and
WHEREAS, efforts to promote tourism are important for the economic well-being of the City, its residents and visitors; and
WHEREAS, the HWY 62 Corridor will play a critical role in bringing tourists to shop, socialize, and share in the collective experience of living in the City; and WHEREAS, in the process of such rehabilitation and revitalization, the City needs time to examine the uses it deems appropriate for the HWY 62 Corridor to achieve economic prosperity; and
WHEREAS, properties along the HWY 62 Corridor include large parcels zoned Commercial Business Park (C-BP); and
WHEREAS, several people and business entities have expressed an interest in applying for entitlements, permits and licenses within the HWY 62 Corridor, and some uses expressed may be inappropriate to achieve the City’s goals of promoting tourism and economic prosperity; and
WHEREAS, although there are several uses allowed within the City’s Commercial Business Park (C-BP) zoning district, certain uses are currently allowed within Commercial Business Park (C-BP) zoning districtmay not be suited for the HWY 62 Corridor, or portions Item Number: 8.
thereof, because HWY 62 is a prominent welcoming area for all City residents and visitors since it is within close proximity to both the Interstate 10 and Highway 62; and WHEREAS, the City Council anticipates that some people or entities may be seeking to establish uses that are not compatible with the vision that the City Council has for HWY 62 Corridor before a non-urgency ordinance would become effective; and WHEREAS, if certain uses were permitted to be established in the HWY 62 Corridor without appropriate regulation, such uses might be established in areas that could conflict the Strategic Plan goals (which was made available for review by the City Council by the office of the City Clerk and a copy of which was made available for review), conflict with surrounding uses, or be detrimental to the public health, safety and welfare; and if such uses were allowed to proceed as allowed under the current zoning, such uses could conflict with, and defeat the purpose of the City Council objectives to promote tourism and economic development; and WHEREAS, City staff needs time to develop appropriate zoning regulations, uses, and development standards for the HWY 62 Corridor; and
WHEREAS, the local police power includes broad authority to determine, for purposes of public health, safety, and welfare, the appropriate uses of land within a local jurisdiction's borders; and
WHEREAS, the City Council desires, on an urgency basis, to temporarily allow only certain businesses within the HWY 62 Corridor; and
WHEREAS, pursuant to Government Code Section 65858(d), ten days prior to the expiration of this interim ordinance or any extension, the City Council shall issue a written report describing the measures taken to alleviate the condition which led to the adoption of this ordinance (“65858(d) Report”); and
WHEREAS, on October 21, 2025, the City Council adopted the underlying ordinance titled, “Urgency Interim Ordinance Of The City Council Of The City Of Desert Hot Springs Adopting A Moratorium On The Issuance Of Any License, Permit, Or Entitlement That Is A Use Other Than The Ones Listed In This Ordinance For Any Business Located In The Commercial Business Park (C-BP) Zoning District Along Highway 62 Between North Indian Canyon Drive And Interstate 10” (“Underlying Ordinance”); and
WHEREAS, the Underlying Ordinance is set to expire 45 days from October 21, 2025; and
WHEREAS, on November 4, 2025, the City Council held a duly noticed public hearing on this current Ordinance which would extend the Underlying Ordinance 22 months and 15 days from November 4, 2025; and
WHEREAS, the City Council deems it necessary to extend the adopted ordinance by 22 months and 15 days; and
WHEREAS, California Government Code Section 65858 provides the statutory authority and time limits for interim ordinances prohibiting any uses which may be in conflict with a contemplated general plan, specific plan or a zoning proposal which the City plans to consider, study or intends to study within a reasonable time; and Item Number: 8.
WHEREAS, Government Code section 36937 provides that the City may adopt an ordinance that takes effective immediately when adopted for the immediate preservation of the public peace, health or safety, providing the ordinance contains a declaration of the facts constituting the urgency, and is passed by a four-fifths vote of the city council.
NOW, THEREFORE, BE IT ORDAINED by the City Council of the City of Desert Hot Springs as follows:
Section 1. RECITALS
That the foregoing recitals are true and correct and are herein adopted by this reference.
Section 2. EVIDENCE
That the City Council has considered all of the evidence at its meeting, which includes, but is not limited to, the following:
(a) The City's General Plan, including updates;
(b) The City’s Municipal Code;
(c) Strategic Plan;
(d) The staff report; and
(e) The public comments, both written and oral, received and/or submitted at, or prior to the City Council's consideration of this extension of urgency interim ordinance.
Section 3. FINDINGS
That based on the foregoing recitals and evidence, the City Council finds as follows:
(a) The recitals of this ordinance are hereby incorporated in this Section as findings. (b) State law protects local licensing practices, zoning ordinances, and other local actions taken pursuant to the City’s constitutional police power. (c) The local police power includes broad authority to determine, for purposes of public health, safety, and welfare, the appropriate uses of land within a local jurisdiction's borders. (d) The City needs to properly plan and develop the zoning, uses, regulations, and development standards that will be within the HWY 62 Corridor.
Section 4. CONCLUSIONS
That based on the foregoing recitals, evidence and findings, the City Council concludes as follows:
(a) It is necessary to temporarily suspend the processing of any application or approval of any permit, entitlement or license, for any kind business in the HWY 62 Corridor and marked by a cross-out in Exhibit A (attached hereto and incorporated herein) to allow adequate time for the City to consider, study, and enact regulations for the HWY 62 Corridor, so that the City Council can properly consider the best uses and proper development standards for the HWY 62 Corridor.
(b) A temporary moratorium will provide the City with time to consider, study, draft, and adopt proper zoning, uses, development standards and regulations regarding the HWY 62 Corridor in a manner that are consistent with the General Plan and Municipal Code, compatible with surrounding neighborhoods, and in the best interests of the residents of the City.
Section 5. INTERIM MORATORIUM IMPOSED
Item Number: 8.
For a period of 22 months and 15 days from November 4, 2025, commencing on the date of adoption of this Ordinance, no use permit, variance, building permit, or any other entitlement for use shall be accepted, processed, approved or issued for the establishment or operation of, and no person shall otherwise establish, a use that is not specifically enumerated in Exhibit A of this Ordinance within the HWY 62 Corridor.
Section 6. URGENT NEED
Based on the foregoing recitals, evidence, findings and conclusions which are all deemed true and correct, this interim ordinance is urgently needed for the immediate preservation of the public safety, health, and welfare.
Section 7. REPORT
Pursuant to Government Code Section 65858(e), ten (10) days prior to the expiration of this interim ordinance or any extension, the City Council shall issue a written report describing the measures taken to alleviate the condition which led to the adoption of this ordinance, which is attached hereto as Exhibit B.
Section 8. ENVIRONMENTAL FINDINGS
The City Council finds that adoption of this urgency interim ordinance is exempt from the provisions of the California Environmental Quality Act pursuant to Title 14 California Code of Regulations section 15061, subsection (b)(3), in that the proposed ordinance involves a proactive measure to prohibit certain uses within the HWY 62 Corridor and does not have the potential to significantly impact the environment.
Section 9. SEVERABILITY
That should any provision, section, paragraph, sentence or word of this ordinance be rendered or declared invalid by any final court action in a court of competent jurisdiction or by reason of any preemptive legislation, the remaining provisions, sections, paragraphs, sentences or words of this ordinance as hereby adopted shall remain in full force and effect.
Section 10. AMENDING OF BAIL SCHEDULE
That the City Attorney’s Office is hereby directed to determine whether this ordinance necessitates amendment of the City’s Bail Schedule and to cause such necessary amendments to be made and filed with the local branches of the Superior Court of the County of Riverside.
Section 11. EFFECTIVE DATE
That this interim ordinance is an urgency ordinance for the immediate preservation of the public health and safety and it shall be passed and become effective immediately upon its introduction pursuant to California Government Code Section 36937.
Section 12. EXPIRATION
Item Number: 8.
Unless extended in accordance with California Government Code Section 65858, this ordinance shall be of no further force or effect after 22 months and 15 days from the date of its adoption.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
Item Number: 8.
PASSED AND ADOPTED by at least four-fifths of the City Council of the City of Desert Hot Springs at a regular meeting held on the ___ day of ______, 2025 by the following vote:
Ayes:
Noes:
Abstain:
Absent:
_______________________________
Scott Matas, Mayor
ATTEST:
____________________________________
Jerryl Soriano, City Clerk
APPROVED AS TO FORM:
____________________________________
Jennifer Mizrahi, City Attorney
Item Number: 8.
PIERSON
BLVD
H
WY
62 Moratorium Area
Legend
Item Number: 8.
Chapter 17.12 COMMERCIAL DISTRICTS
§ 17.12.020 Permitted uses.
A. Table 17.12.01 lists the uses permitted in each of the Commercial and Visitor-Serving Districts utilizing the following key:
"P" Use is permitted by right. (A Development Permit may be required for a new use or structure or expa "A" Use is accessory to an established primary use.
"AUP" Use requires an Administrative Use Permit.
"CUP" Use requires a Conditional Use Permit.
"TUP" Use requires a Temporary Use Permit.
"—" Use is prohibited.
B. Land uses listed in Table 17.12.01 use definitions from the North American Industry Classification System (NAICS) unless otherwise defined specifically by this title. The individual land uses permitted in each of the Mixed-Use Districts are grouped in Table 17.14.01 using the major land use categories of Commercial, Industrial, Institutional, Residential and Other.
TABLE 17.12.01
PERMITTED USES - COMMERCIAL AND VISITOR SERVING DISTRICTS
COMMERCIAL DISTRICTS
USE C-N C-G C-D C-H C-BP CODE SECTION
BUSINESS, FINANCIAL, AND PROFESSIONAL OFFICE
Automated Teller Machines
(ATMs) — Drive-Up
AUP AUP AUP AUP AUP
Business Support Services P P P P P
Check Cashing and/or
Payday Loans
— CUP — — —
Financial Institutions and
Related Services (without
drive-through facilities)
P P P P P
Financial Institutions and
Related Services (with drivethrough facilities)
AUP P — P P
Office, Business and
Professional
P P P P P
EATING AND DRINKING ESTABLISHMENTS
Bars, Lounges, Nightclubs,
and Tasting Rooms*
— CUP CUP CUP CUP 17.12.190
Food Preparation/Catering
(no on-site sales or service)
AUP P P P P
Food Preparation/Catering
(with on-site sales or service)
AUP P P P P
Restaurant — Full or Limited
Service, Serving Alcohol*
AUP AUP AUP AUP AUP 17.12.190
Restaurant — Full or Limited
Service, No Alcohol Sales
P P P P P
Item Number: 8.
TABLE 17.12.01
PERMITTED USES - COMMERCIAL AND VISITOR SERVING DISTRICTS
COMMERCIAL DISTRICTS
USE C-N C-G C-D C-H C-BP CODE SECTION
Restaurant with DriveThrough Facilities*P P — P P 17.12.230 Snack Bar A A A A A
Mobile Food Vending Vehicle
Parks
— AUP AUP AUP AUP 17.12.360
Mobile Food Vending Vehicle
Parks — Ancillary
— AUP AUP AUP AUP 17.12.360
INDUSTRY, MANUFACTURING AND PROCESSING, AND WAREHOUSING Brewery, Winery, or Distillery — CUP CUP CUP CUP
Data Centers — — — — P
Hazardous Waste Facilities — — — — —
Food Processing — — — — AUP
Furniture and Fixtures
Manufacturing, Cabinet
Shops, and Woodworking
Shops (wholesale sales only)
— — — — P
Laboratory — Medical,
Analytical, Research, Testing
— — — — AUP
Laundries and Dry-Cleaning
Plants
— — — — —
Manufacturing — Heavy — — — — —
Manufacturing — Light — — — — CUP
Recycling
Small Collection Facility* — AUP — AUP AUP 17.12.290
Large Collection Facility* — CUP — CUP CUP 17.12.290
Light Processing* — — — — — 17.12.290
Heavy Processing* — — — — — 17.12.290
Reverse Vending Machine A A A A A
Research and Development — — — — P
Storage — Outdoor — — — — CUP
Warehouse, Wholesaling and
Distribution
— — — — CUP
LODGING
Hotel and Motel (without spa) — CUP CUP P CUP
Spa Resort — — CUP CUP CUP
Emergency Shelter/Low
Barrier Navigation Center
— — — — CUP
Camping/Glamping — — — — —
MARIJUANA/CANNABIS USES
Marijuana/Cannabis
Nonstorefront Retail
— — — — CUP1,2 1 In Industrial Cannabis
Overlay Zone, marijuana
Item Number: 8.
TABLE 17.12.01
PERMITTED USES - COMMERCIAL AND VISITOR SERVING DISTRICTS
COMMERCIAL DISTRICTS
USE C-N C-G C-D C-H C-BP CODE SECTION
Marijuana/Cannabis
Distribution
— — — — CUP1,2
Marijuana/Cannabis
Cultivation
— — — — CUP1,2
Marijuana/Cannabis Lounge CUP CUP CUP CUP CUP
Marijuana/Cannabis Hotel
Facilities
CUP CUP — CUP CUP
Marijuana/Cannabis
Manufacturing
— — — — CUP1
use cannot be a stand-alone
use and must in center with
other retail/commercial
uses.
2 In Overlay Zone use
Ch. 17.180 as default
regulations.
Marijuana/Cannabis
Storefront Retail
CUP CUP CUP CUP CUP 17.180.040
Marijuana/Cannabis Testing
Facilities
P P P P P 17.180.070
MEDICAL-RELATED AND CARE USES
Ambulance Fleet — AUP AUP — AUP
Clinic and Urgent Care — AUP AUP AUP AUP
Day Care Center* CUP CUP — — — 17.12.220
Therapy and Rehabilitation
Facilities
P CUP P AUP P
Hospital — CUP CUP CUP CUP
Office, Medical and Dental
Office
P P P P P
Residential Care Facilities
(commercial assisted living,
nursing home)
CUP CUP CUP — —
PUBLIC AND ASSEMBLY USES
Cultural Institutions AUP P P P P
Event Facility, Event Center,
Event Venue
— P AUP AUP AUP
Public Assembly Facilities — CUP CUP CUP CUP
Religious Assembly Facilities — CUP CUP CUP CUP
Schools, Private CUP CUP CUP — CUP
Trade and Vocational
Schools
— CUP CUP P P
Tutoring and Education
Centers
P P P P P
RECREATION AND ENTERTAINMENT
Art Gallery P P P P P
Arcade/Electronic Game
Center
CUP AUP AUP AUP AUP
Item Number: 8.
TABLE 17.12.01
PERMITTED USES - COMMERCIAL AND VISITOR SERVING DISTRICTS
COMMERCIAL DISTRICTS
USE C-N C-G C-D C-H C-BP CODE SECTION
Commercial Recreation —
Indoors
CUP P P P P
Commercial Recreation —
Outdoors
CUP CUP CUP CUP CUP
Entertainment, Indoor
(motion picture theaters,
performance theatres, dance
halls and similar)
AUP AUP AUP P P
Health/Fitness Facilities
Health/Fitness Facilities —
Small
AUP P P P P
Health/Fitness Facilities —
Large
CUP AUP CUP AUP AUP
RESIDENTIAL USES
Accessory Dwelling Unit — — — — —
Dwelling, Multifamily* — — AUP — — 17.12.280
Dwelling, Single-Family* — — — — — 17.12.330
Live/Work Unit* — — P — — 17.12.340
Home Occupations — — — —
Single Room Occupancy
(SRO)*
— — — — —
Supportive Housing (senior
citizens/congregate care
housing)*
CUP AUP CUP — — 17.08.260
Transitional Housing — — — — —
RETAIL USES
Alcohol Beverage Sales
For Off-Site Consumption* CUP CUP CUP CUP CUP 17.12.190 For On-Site or Off-Site
Consumption, in Conjunction
with an Allowed Use*
— CUP CUP CUP CUP 17.12.190
Building Materials and
Services, Indoor
— P P P P
Building Materials and
Services, Outdoor
— CUP — P AUP
Convenience Store with
Alcohol Sales*
CUP CUP CUP CUP CUP 17.12.190 17.12.210
Convenience Store, No
Alcohol Sales*
AUP P AUP P P 17.12.210
Farmers' Market TUP TUP TUP TUP TUP
Grocery Store P P P P P
Indoor Retail Concessions* — P P P P 17.12.240
Item Number: 8.
TABLE 17.12.01
PERMITTED USES - COMMERCIAL AND VISITOR SERVING DISTRICTS
COMMERCIAL DISTRICTS
USE C-N C-G C-D C-H C-BP CODE SECTION
Mini-Mall (Strip mall)* — P — P P 17.12.270
Nurseries and Garden
Centers
— P AUP P P
Outdoor Temporary and/or
Seasonal Sales
TUP TUP TUP TUP TUP
Recreational Equipment
Rentals — Indoor Only
P P P P P
Retail Sales — General P P P P P
Retail Sales — Restricted
(firearm and ammunition
stores, pawn shops, and
jewelry/gold exchanges)
— CUP CUP CUP CUP
Vehicle Sales and Rental* — CUP — CUP CUP 17.12.200
Large Vehicle, Construction,
and Heavy Equipment Sales,
Service, and Rental
— CUP — — CUP
SERVICE USES
Animal Care, Services
Animal Boarding/Kennels,
Grooming
AUP P AUP P P
Veterinary Services, Large
Animal
— P — P P
Veterinary Services, Small
Animal
AUP P P P P
Funeral Parlors and
Interment Services
— AUP CUP — AUP
Instructional Services P P P P P
Maintenance and Repair
Services — Indoor
P P P P P
Moving Companies, Storage
Allowed
— — — — AUP
Personal Services, General P P P P P
Personal Services, Restricted
(massage establishments,
day spa with massage)
CUP CUP CUP CUP CUP
Recording Studio — AUP AUP AUP P
Social Service Facilities — P — P P
Storage
Personal — CUP — — CUP 17.16.080
Outdoor Recreational Vehicle
Storage
— — — — CUP
Vehicle Repair and Services
Service/Fueling Station* CUP CUP — AUP CUP 17.12.310
Item Number: 8.
TABLE 17.12.01
PERMITTED USES - COMMERCIAL AND VISITOR SERVING DISTRICTS
COMMERCIAL DISTRICTS
USE C-N C-G C-D C-H C-BP CODE SECTION
Vehicle Washing/Detailing A AUP AUP AUP AUP
Vehicle Service, Minor — AUP — P P
Vehicle Service, Major — — — CUP
TRANSPORTATION, COMMUNICATION, AND INFRASTRUCTURE USES
Car Sharing — Parking AUP AUP AUP AUP AUP
Parking Facility — Temporary TUP TUP TUP TUP TUP
Utility Facilities — Staffed — AUP AUP AUP AUP
Utility Facility — Unstaffed AUP AUP — AUP AUP
Vehicle Charging Stations —
Commercial
AUP P P P P
Vehicle Storage — — — — CUP
Wireless Telecommunication
Facilities — Minor
AUP AUP AUP AUP AUP
Wireless Telecommunication
Facilities — Major
CUP CUP CUP CUP CUP
Wireless Telecommunication
Facilities, Satellite Dish
Antenna
P P P P P
OTHER USES
Caretaker Quarters — A — — A
Donation Boxes — Outdoors — — — — CUP
Other Drive-Through or
Drive-Up Facilities
AUP AUP — AUP AUP
Vending Machine A A A A A
Note:
*Specific standards apply.
(Prior code § 159.06.020; Ord. 524 § 5, 2010; Ord. 610 5-2-17; Ord. 712 6-2-20; Ord. 727 1-19-21; Ord. 728 1-19- 21; Ord. 762 6-21-22; Ord. 793, 11/7/2023)
Item Number: 8.
EXHIBIT A
GOVERNMENT CODE SECTION 65858(d) REPORT
Public report regarding the status of the City of Desert Hot Springs an
EXTENSION OF THE URGENCY INTERIM ORDINANCE OF THE CITY COUNCIL OF
THE CITY OF DESERT HOT SPRINGS ADOPTING A MORATORIUM ON THE
ISSUANCE OF ANY LICENSE, PERMIT, OR ENTITLEMENT THAT IS A USE OTHER
THAN THE ONES LISTED IN THIS ORDINANCE FOR ANY BUSINESS LOCATED IN
THE COMMERCIAL BUSINESS PARK (C-BP) ZONING DISTRICT ALONG HIGHWAY 62 BETWEEN NORTH INDIAN CANYON DRIVE AND INTERSTATE 10 On October 21, 2025, the City Council of the City of Desert Hot Springs adopted Interim Urgency Ordinance No. _____ (“Underlying Ordinance”). That Underlying Ordinance initiated a 45-day moratorium on certain uses for any business located in the area along Highway 62, north of the Interstate 10 freeway and south of North Indian Canyon Road (“HWY 62 Corridor”).
The City desires that the HWY 62 Corridor area is being used in a manner consistent with the Strategic Plan, which envisions the promotion of tourism through the development of new business. Accordingly, the City needs to study the land uses for the HWY 62 Corridor in order ensure that the uses comply with the vision of the City Council. The Underlying Ordinance was enacted to ensure protection of the public health, safety and welfare related to the use and long-term goals of the City in reference to the HWY 61 Corridor. Pursuant to Government Code Section 65858(d), the City prepared this report to describe the measures taken to alleviate the conditions that led to the adoption of the Underlying Ordinance.
RESEARCH
Staff has been engaged in preparation of analyzing the uses in the HWY 62 Corridor to ensure compliance with the Strategic Plan, including research and analysis related to potential commercial, tourism, and mixed-use uses in the HWY 62 Corridor. City Council expressed a desire to limit the uses as in the Underlying Ordinance, preserving the HWY 62 Corridor for future tourism promotion, which may include mixed-use, and general commercial uses, in compliance with the General Plan. During the research associated with these efforts, staff and the environmental consulting firm will be evaluating the environmental impacts that changes in land-use designation(s), uses and development standards during this time. Further, the uses as amended mentioned in the Underlying Ordinance are not being approved within the HWY 62 Corridor, until such time that the City Council can review, deliberate, and consider the long-term goals, polices, outlook for the area in question and adopt new zoning regulations and development standards to accomplish that goal. Moreover, new legislation from the State of California such as AB 98 provides restrictions on certain uses like logistics and warehouses near residential areas. The Commercial - Business Park (CB-P) zoning in the HWY 62 Corridor is surrounded by Residential Medium (RM) zoning.
The Underlying Ordinance was adopted to allow staff sufficient time to conduct research, prepare environmental studies and reports, conduct zoning analysis, traffics analysis, etc. in review and preparation of the potential impacts on HWY 62 Corridor.
The interim prohibition adopted by the City Council on October 21, 2025, will expire on Item Number: 8.
December 5, 2025. Since it is infeasible for the studies and decisions to take place prior to then, it is recommended that the City Council extend the Underlying Ordinance for an additional Twenty Two months and Fifteen days. Consistent with California Government Code Section 65858(c), the City Council finds that there is a current and immediate threat to the public health, safety, or welfare, and the approval of additional permits or entitlements for commercial those uses mentioned in the Underlying Ordinance would increase that threat to public health, safety, or welfare.
Item Number: 8.
1 STRATEGIC PLAN
2025 – 2027
Item Number: 8.
2 STRATEGIC PLAN
To build on the City of Desert Hot Springs's achievements, the 2025-2027 Strategic Plan sets forth strategic goals and actionable items to guide budget preparation, performance, program evaluation, and resource allocation. Developed in collaboration with the City Council, staff, and community members, this plan aims to address the needs of our growing city through deliberate and measurable steps for the efficient execution of its goals. Staff will provide regular updates on implementing this plan over the next two years.
VISION
The City of Desert Hot Springs is a world-class
health and wellness destination based
upon its famous miracle waters, unique
desert ecosystem, spectacular mountain
views, and natural environment.
MISSION
City of Desert Hot Springs’ public servants
are committed to maintaining fiscally
responsible operations. They achieve this by
implementing streamlined processes that
maximize efficiency and reduce
unnecessary government bureaucracy. At
the same time, they provide exceptional
levels of customer service and
professionalism to enhance the quality of
life and promote growth and prosperity for
our residents and businesses
ETHICS
City officials and employees uphold the
highest levels of ethics, personal integrity
and honesty in all interactions to maintain
public trust and confidence.
CORE VALUES
Fiscal Responsibility, Exceptional Customer
Service, Efficiency and Elimination of
Bureaucracy, Collaboration, Honesty and
Integrity, Community Engagement and
Involvement, Trust and Transparency.
Item Number: 8.
3 GOALS AND AREAS OF FOCUS
FREEWAY COORIDOR
Take urgent and intentional steps to improve
infrastructure and attract high-quality
development along the city’s freeway corridors,
focusing on the highest and best use of land
and zoning designations.
HOTEL/SPA ZONE
Double Transient Occupancy Tax in 10 years.
DOWNTOWN DISTRICT
Revitalize the Downtown Art and Culture District
to attract events, promote business
development and enrich the art and culture
experience for Desert Hot Springs residents and
visitors.
PUBLIC SAFETY – STAFFING & COMMUNITY
POLICING
Enhance the quality of life for our residents and
staff by establishing appropriate law
enforcement staffing levels and implementing
community policing initiatives.
PUBLIC SAFETY – QUALITY OF LIFE
Balance the needs of the unhoused with the
quality-of-life needs of the overall community.
COMMUNITY BEAUTIFICATION
Focused execution of beautification efforts citywide via enforcement measures and the abatement of illegal dumping.
COMMUNITY PARKS
Provide maintenance and strategic upgrades
at existing parks while pursuing creative ways to
expand park offerings via pockets parks and
securing grant funding to plan for and build out
parks in the Parks Master Plan.
COMMUNITY SERVICES, ENGAGEMENT &
QUALITY OF LIFE
Provide for high-quality programs, events and
activities that promote and provide community
engagement, pride, quality of life services and
arts and culture in the City of Desert Hot Springs.
ANIMAL CARE AND CONTROL
Provide exceptionally high levels of customer
service to the city residents while ensuring the
highest levels of humane treatment of all
animals in the care of the city’s Animal Care
and Control.
STREET/ROAD INFRASTRUCTURE
Intense focus on fiscal and operational needs to
ensure the city can meet the growing demands
of the community by maintaining existing
street/road infrastructure while planning for
long-term growth and development.
FINANCIAL & OPERATIONS
Continue to provide fiscally sound operations
via the ongoing evaluation of city processes
and operational needs to maximize efficiency,
streamline processes and cut bureaucracy,
when possible, to deliver outstanding customer
service and professionalism in all interactions
with residents and the public.
Item Number: 8.
4 ACTION ITEMS
Area of Focus #1 – FREEWAY COORIDOR
GOAL: Take urgent and intentional steps to improve infrastructure and attract high quality development along the city’s freeway corridors, focusing on the highest and best use of land and zoning designations.
Action Items:
a. 1-10 and Indian, 1-10 and Palm Drive and HWY 62
i. Take all steps necessary with CVWD, MSWD and other partners and agencies to strongly advocate for the execution of a Shared Service Agreement between CVWD and MSWD for sewer services to kick start development along the 1-10 corridor and Palm Drive from Dillon to the 1-10.
ii. Prioritize additional hotel, and commercial development along the 1-10 and Indian corridor to serve anticipated workforce in the industrial area. iii. 1-10 and Palm Drive – Intense and focused efforts to identify strategically important sites/properties, property owners and capital partners to attract and retain commercial development along the 1-10 and Palm Drive corridor once service agreement is in place with the water agencies.
iv. HWY 62 – Tourism Gateway into the City.
1. Coordinate with CalTrans to install City of Desert Hot Springs Signage along HWY frontage of HWY 62
2. Intense and focused efforts to identify strategically important sites/properties, property owners and capital partners to attract and retain commercial development along the HWY 62 corridor
3. Installation of an entry monument sign on Pierson Blvd. near HWY 62 Area of Focus #2 – HOTEL/SPA ZONE
GOAL: Double Transient Occupancy Tax in 10 years.
Action Items:
a. Focused and deliberate efforts to attract Hotel developers and entrepreneurs to the City of Desert Hot Springs via attendance at events, trade shows and conferences. b. Explore the hiring of a Tourism Development Liaison on contract to kick start these efforts for the City’s attendance at these events.
c. Evaluate the STVR regulations via the City Council Subcommittee to determine if any changes are necessary.
d. Preservation of the “Spa Zone”
Item Number: 8.
5 i. Explore alternate zoning/Miracle Hill Oasis overlay to prohibit development of anything other than hotel/restaurants in a very segmented section of the existing spa zone where the hottest mineral waters are located, while preserving the existing “Spa Zone” which allows for both housing and hotel development. ii. Evaluate the existing Spa Revitalization TOT Incentives via the City Council Subcommittee to better attract hotel developers and entrepreneurs to develop ground up construction of hotels or revitalize existing hotels. iii. Explore signage and focused beautification efforts of the Spa Zone to enhance the tourist experience in the City.
iv. Focused Tourism Advertising, Marketing and Promotion
1. Intense marketing of “Miracle Hill Oasis” as a destination in collaboration with the hoteliers via the city’s contract with JNS Next and Visit Greater Palm Springs.
2. Partner with Hoteliers to incorporate “Miracle Hill Oasis” brand into their Hotel/Spa experience. Example: Miracle Hill Oasis robes, eye masks, swag, update spa/hot water maps, maps of the murals, hiking trail maps, restaurant maps directing tourists to “The Downtown District”. Branding should be everywhere in the spa zone in collaboration with the existing hoteliers.
3. Explore programs and collaborations with partners and agencies to capitalize on opportunities for those seeking Health and Wellness experiences via hiking and the city’s proximity to Sand to Snow National Monument, Joshua Tree National Park and the city’s Hot Mineral and Drinking Water.
4. Refresh branding with JNS Next to better reflect “Desert Hot Springs – Miracle Hill Oasis” as a unique Health and Wellness destination in the valley, while still partnering with Visit Greater Palm Springs as a regional partner.
Area of Focus #3 – DOWNTOWN DISTRICT
GOAL: Revitalize the Downtown Art and Culture District to attract events, promote business development and enrich the art and culture experience for both Desert Hot Springs residents and visitors.
Action Items:
a. Activate downtown events, in a phased approach, focusing on the West-Cactus segment, for residents and tourists, as a means of bringing foot traffic to existing business and spurring other economic development activities.
i. Activate temporary Event Spaces in the Downtown, while the City executes on the larger plan of executing streetscapes, placemaking, road diets and permanent event space in the downtown.
Item Number: 8.
6 ii. Submit the up to $15 million-dollar AHSC Grant application for Downtown Street Scape, Road Diet, Permanent Event Space, Placemaking and Transit HUB project in collaboration with Abode Affordable Housing Developer.
iii. Activate a Monthly Concert series via a contract with Take 5 Entertainment. Staff will work to incorporate downtown businesses while activating non-competing Food Trucks and other local vendors during this event.
iv. Evaluation and reimagining of Friday Nights on Pierson. Explore name, frequency, location in the downtown, and feasibility of its long term success. v. Continue to work with The Palm Springs Cultural Center to facilitate a Certified Farmers Market on Sunday mornings in the downtown area. b. Downtown Art and Murals
i. Work with Known Gallery to execute Phase two of the Downtown Art and Mural Project, capitalizing on the initial internationally known artists via intense advertising and promotion in conjunction with Known Gallery/The Seventh Letter/The Mural Supply Co.
v. Encourage and implement Art Walks, Cultural Events and Paint Nights in the downtown.
vi. Engage the youth and local artists to participate in the continued incorporation of Art and Culture in the Downtown.
c. Downtown Beautification
i. Institute a more aggressive Vacant Property Registration Program to encourage rental of vacant commercial properties in the downtown and other city locations. ii. Downtown Sign Program – Initiate a downtown signage program. iii. Initiate Downtown Small Business Grant program for signage, façade and landscaping assistance to beautify downtown and activate spaces for EcDev initiatives and purposes.
iv. Collaborate with vacant parcel owners to clean lots, clear/grub and lay ground cover in Public Right of Way to provide clean, esthetically pleasing areas ready for EcDev opportunities.
v. Initiate Downtown Branding/Social Media to create “The Downtown District” as a destination.
1. Partner with downtown small business stakeholders and the community to name the downtown.
2. Partner with downtown small businesses to incorporate “The Downtown District” brand in their storefronts. Example: create posters and maps of the murals and hang in EVERY business in the downtown.
Downtown branded trash cans, benches, handouts. Downtown branding should be everywhere in the downtown area in
collaboration with the existing businesses.
3. Visible Banners, signage, and temp screenings where needed to create esthetically pleasing spaces in the downtown.
II. Encourage the activation of parking lots and vacant parcels by landowners to create esthetically pleasing spaces downtown.
Item Number: 8.
7 Area of Focus #4 – PUBLIC SAFETY- STAFFING AND COMMUNITY
POLICING
GOAL: Enhance the quality of life for our residents and staff by establishing appropriate law enforcement staffing levels and implementing community policing initiatives.
Action Items:
a. Implement a police recruitment and over hiring process to always ensure proper staffing levels.
b. Conduct a P.O.S.T. Evaluation to ensure the proper operational structure for the Police Department and hire accordingly.
c. Establish a Council policy on Police Staffing levels based on P.O.S.T. recommendation. d. Organize, train and cultivate a culture in the Police Department to facilitate Community Policing.
e. Commitment to complete the Public Safety Annex Complex, which includes exploring grants to fund the improvements that are necessary at Fire Station 37 that were removed due to construction costs.
f. Work with CalFire to explore the continued programming and utilization of the Medic Squad in perpetuity.
g. Enhance traffic enforcement and control along main corridors of the city, utilizing the Motor Officer as much as possible in these efforts.
h. Balance Social Media efforts highlighting both information on significant events AND at minimum two positive police stories or press releases per week.
Area of Focus #5 – PUBLIC SAFETY – QUALITY OF LIFE
GOAL: Balance the needs of the unhoused with the quality-of-life needs and concerns of the broader community.
Action Items:
a. Continue with dedicated team comprised of Law Enforcement, Code Enforcement, and SWAG to provide resources and services to the unhoused population while continuing to enforce a zero-tolerance policy for any criminal activity. b. Continue to work with property owners to institute and enforce 602 No Trespassing letters and abate encampments in collaboration with private property owners and in the public right of way per ordinance.
Item Number: 8.
8 c. Explore ERF Funding with CVAG, Riverside County and CVCC so long as the efforts and other agencies align with and are not in contradiction to the City’s efforts to provide services and address homelessness.
Area of Focus #6 – COMMUNITY BEAUTIFICATION
GOAL: Focused execution of beautification efforts city-wide via enforcement measures and the abatement of illegal dumping.
Action Items:
a. Intense education to residents on programs available via Desert Valley Disposal and other partner agencies to abate illegal dumping.
b. Continue to partner with Desert Valley Disposal on illegal dumping program which is instituted now in the DVD Franchise Agreement.
i. Work with DVD to institute a SFR and multi-family fee to abate the long-standing issue of illegal dumping that occurs following the turnover of renters in SFR and multi-family units in the City.
ii. Advertise steep fines for illegal dumping (signage at frequent illegal dumping sites, educational billboards, information on bulky item pick-up dates in City newsletter/magazine)
iii. Strict enforcement for offenders of illegal dumping. c. Continue Code Enforcement measures in the main corridor of the City to ensure businesses, shopping centers and vacant property owners are abiding by the Municipal Code.
d. Facilitate quarterly meetings with shopping center owners and property managers to establish strong working relationships to progress the city’s goals and vision. e. Institute a Rental Registration Program to abate long standing issues with substandard living conditions of rental properties caused by absentee/irresponsible property owners.
Area of Focus #7 – COMMUNITY PARKS
GOAL: Provide maintenance and strategic upgrades at existing parks while pursuing creative ways to expand park offerings via pocket parks and securing grant funding to plan for and build out parks in the Parks Master Plan.
Action Items:
a. Parks Master Plan – Identify next 4 parks from the Parks Master Plan i. Secure funding and develop plans for identified parks to ensure shovel ready projects to aggressively pursue grant funding.
b. Pocket Parks – institute pocket park program in existing LMD’s/DAD’s c. Wardman Park – Old Boys and Girls Club – pursue grant funding for batting cages/rehabilitation of the building.
Item Number: 8.
9 i. Secure temp screening around fencing to hide drained pool. ii. Install new bleachers at the Little League Field
Area of Focus #8 – COMMUNITY SERVICES, ENGAGEMENT AND
QUALITY OF LIFE
GOAL: Provide for high-quality programs, events and activities that promote and provide community engagement, pride, quality of life services and arts and culture in the City of Desert Hot Springs.
Action Items:
a. Complete pool repairs at the John Furbee Aquatic Center and the installation of the Splash Pad following the 2025 swim season.
b. Explore funding mechanisms as a means of transitioning the John Furbee Aquatic Center to year-round swim commencing with the 2026 swim season. c. Expand Veteran services in the City of Desert Hot Springs via a lease agreement with Riverside County Veteran Services to relocate their Coachella Valley offices to the Lozano Center.
d. Expand youth activities and services at the Health and Wellness Center e. Explore funding and provide options to the City Council for the expansion of Senior Center services at the Old Library on the Senior Center campus. i. Give notice to entities utilizing space on the Senior Center campus to maximize space on the complex for Senior Services.
ii. Create a non-profit to better facilitate funding opportunities for Senior Services, Recreation activities, including Little League and youth sports and the animal sanctuary.
f. Provide intense Community engagement and outreach to the residents of Desert Hot Springs, with particular focus on “humanizing” City Hall as a means of encouraging pride, engagement and participation with city initiatives and goals. g. Conduct Education Events, Informational Townhalls and opportunities for engagement to bring City information to the residents.
h. Provide Civics Academy twice a year to the residents of Desert Hot Springs. i. Focused efforts to Improve the City’s Regional Image i. Establish better relationships with regional partners and media. ii. Increase staff participation and engagement regionally. iii. Ensure the City is proactively telling “its story” rather than allowing the City to be defined by outdated stigma and history.
Area of Focus #9 – ANIMAL CARE AND CONTROL
Item Number: 8.
10 GOAL: Provide exceptionally high levels of customer service to the city residents while ensuring the highest levels of humane treatment of all animals in the care of the city’s Animal Care and Control.
Action Items:
a. Maintain adequate staffing levels of Animal Control Officers and Kennel Technicians. b. Hire an Administrative Assistant for Animal Care and Control c. Conduct trainings at all staff levels, including management, to improve customer service to the residents and partners of the City of Desert Hot Springs. d. Create and incorporate an aggressive adoption program to improve capacity and quality of life for the animals in the care of animal care and control. e. Build out a strong volunteer program and empower them to assist with dog walking, socialization and general care of the animals at Animal Care and Control. f. Explore strategic partnership with Greater Palm Springs Animal Allies for the Animal Sanctuary, similar to the Animal Hospital.
g. Provide intense and comprehensive education and information to the residents via social media.
h. Facilitate partnerships with regional organizations to facilitate affordable immunization and spay and neuter clinics for the residents of Desert Hot Springs.
Area of Focus #10 – STREET/ROAD INFRASTRUCTURE
GOAL: Intense focus on fiscal and operational needs to ensure the city can meet the growing demands of the community by maintaining existing street/road infrastructure while planning for long-term growth and development.
Action Items:
a. Develop a more comprehensive street repaving program, focusing on most severe streets. b. Prioritize routine repairs of potholes in a proactive manner. c. Indian/Little Morongo-20th Avenue Road Infrastructure i. Plan for alternate paths of ingress/egress around the industrial area. ii. Explore funding mechanisms including EIFD’s, Bonds and Grants to plan for and execute infrastructure improvements that will be necessary to keep pace with the anticipated growth of the Indian/Little Morongo-20th Ave industrial zone. d. Plan for alternate freeway access at Little Morongo, via the submittal of an application for a new on-ramp at Little Morongo and the 1-10.
e. Continue to collaborate with Caltrans on the Stop Light at HWY 62 and Pierson to ensure project stays on track and is completed as planned and promised by CalTrans. f. Prioritize funding to install the Stop Light at Palm Drive and Park Lane. g. Plan for creative alternative paths of travel to relieve traffic on Palm Drive and Indian Canyon. (Example: Explore funding mechanism to pave Little Morongo to Varner/20th/Freeway)
Item Number: 8.
11 Area of Focus #11 – FINANCIAL AND OPERATIONS
GOAL: Continue to provide fiscally sound operations via the ongoing evaluation of city processes and operational needs to maximize efficiency, streamline processes and eliminate bureaucracy, when possible, to deliver outstanding customer service and professionalism in all interactions with residents and the public.
Action Items:
a. Explore the potential and feasibility of adjusting some City Hall operations to a Monday through Friday public schedule, with a continued commitment to supporting the 4/10 work schedule for staff.
b. Ensure staff is providing “exceptionally high levels of customer service” in all interactions, embodying the “we don’t operate government as usual” culture the city has become synonymous with.
c. Facilitate biennial Strategic Planning Sessions with the community, City Council and Staff. d. Add a “Strategic Plan Integration” section to each Agenda item to track all Council Actions and how they align with the Strategic Plan.
e. Institute internal Employee Performance evaluations to align with measurable goals and benchmarks based on Strategic Planning goals and priorities. f. Update the City’s internal Procurement Process and continue instituting best practices. g. Explore Planet Bid (or something similar) for all RFP/RFQ listings to ensure listings are spread far and wide resulting in a more competitive bidding process for all City projects. h. Establish an employee recognition program quarterly, with the winner of the annual Rotary Big Heart Award being selected from the pool of “Employee of the Quarter” recipients. i. Re-Establish and refresh the City’s L.E.A.D Program to promote an internal collaborative culture that spans across departments and discourages departmental silos. j. Review and update Compensation and Benefits Profile document for Non-Represented Employees and Department Heads.
k. Ensure city-wide and department specific mandated safety training programs are followed and expanded upon to ensure staff safety and to mitigate risks. l. Continue 10-year Financial Forecasting with updates to the City Council. m. Conduct finance policy reviews and update every 5 years. n. Work toward applying for the Audited Financial Reporting Award through GFOA. o. Create an Unfunded Liability policy and establish a plan to fund the unfunded pension trust account via PARS commencing in the FY 27 budget cycle.
p. Currently, the city can fund two months of operational expenses via emergency reserve fund balance. Create a policy to fund two months’ worth of operational expenses via the unassigned fund balance as per GFOA recommendations.
Item Number: 8.
12 Item Number: 8.
SR-26-197
City of Desert Hot Springs
City Council
AGENDA ITEM REPORT
To: City Council
Date: September 15, 2026
Department: Administrative Services
Prepared by: Geoffrey Buchheim, Administrative Services Director Subject: Audited Financial Statements for Fiscal Year 2024-2025 RECOMMENDATION:
Receive and file.
DISCUSSION:
The City is required to complete an independent annual audit every year. The Fiscal Year 2024-2025 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 2024-2025 for the City of Desert Hot Springs, the Compliance as the Housing Successor for the Desert Hot Springs Housing Authority for the Fiscal Year 2024-2025, and Report on Applying Agreed-Upon Procedures to Utility User Tax for Fiscal Year Ended June 30, 2025, and the Report on Applying Agreed-Upon Procedures to Appropriations Limit Schedule for Fiscal Year Ended June 30, 2025.
The Audited Financial Statements for Fiscal Year 2024-2025 were delayed due to a staff member in the Finance Department out on extended leave, a serious error in the capital asset module of the City’s financial management system, and staff absences and changes within The Pun Group.
Despite these unfortunate events, the auditors returned an unmodified opinion of the City’s financial statements as of June 30, 2025. An unmodified opinion in an audit is a clean report issued by an auditor stating that the City’s financial statements are fairly presented in accordance with generally accepted accounting principles. There were two instances of restatement of the City’s net position as of June 30, 2024, which are as follows:
• Implementation of Governmental Accounting Standards Board (GASB) Statement No. 101 - GASB Statement 101 is a change in the reporting of compensated absences, including vacation, sick leave, and other paid time off. This change in accounting principle resulted in a restatement of the Governmental Activities beginning balance in the amount of ($541,135). • Error corrections
- The RCTC Loan Capital Funds was restated by $658,820 to correct prior year expenses of road repairs that were previously recorded in the American Rescue Act Fund. The adjustment did not impact the beginning net position of the Governmental Activities Item Number: 9.
SR-26-197
Neither of the above matters modify the auditors’ opinion of the financial statements.
FISCAL IMPACT:
There is no fiscal impact due to this action.
STRATEGIC ALIGNMENT:
This initiative supports the following goals of the City's Strategic Plan:
Goal 11: Financial and Operations
Continue to provide fiscally sound operations via the ongoing evaluation of city processes and operational needs to maximize efficiency, streamline processes and eliminate bureaucracy, when possible, to deliver outstanding customer service and professionalism in all interactions with residents and the public.
ATTACHMENTS:
1) Independent Auditor’s Reports and Basic Financial Statements FY 2024-25 2) Independent Auditor’s Reports and Basic Financial Statements - FY 2024-25 3) Independent Auditor’s Reports and Basic Financial Statements - FY 2024-25 4) Independent Accountant’s Report on Applying Agreed-Upon Procedures to Appropriations Limit Schedule - FY 2024-25
5) Audited Financials Presentation - FY 2024-25
Item Number: 9.
City of Desert Hot Springs
Desert Hot Springs, California
Independent Auditor’s Reports and
Basic Financial Statements
For the Year Ended June 30, 2025
Item Number: 9.
Item Number: 9.
City of Desert Hot Springs
Basic Financial Statements
For the Year Ended June 30, 2025
Table of Contents
Page
Independent Auditor’s 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 ........................................................................................................................... 21 Statement of Activities ............................................................................................................................... 22 Fund Financial Statements:
Governmental Fund Financial Statements:
Balance Sheet ....................................................................................................................................... 26 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ..................................................................... 29 Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................... 30 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position .................................................................... 32 Proprietary Fund Financial Statements:
Statement of Net Position ..................................................................................................................... 35 Statement of Revenues, Expenses, and Changes in Net Position......................................................... 36 Statement of Cash Flows ...................................................................................................................... 37 Fiduciary Fund Financial Statements:
Statement of Fiduciary Net Position .................................................................................................... 41 Statement of Changes in Fiduciary Net Position .................................................................................. 42 Notes to the Basic Financial Statements ........................................................................................................... 47 Required Supplementary Information (Unaudited):
Budgetary Comparison Schedules:
General Fund .............................................................................................................................................. 89 Public Safety Special Revenue Fund .......................................................................................................... 90 American Rescue Act Special Revenue Fund ............................................................................................ 91 Housing Authority Special Revenue Fund ................................................................................................. 92 Capital Improvement Deposits Special Revenue Fund .............................................................................. 93 Notes to the Budgetary Comparison Schedules ................................................................................................ 95 Schedule of the City’s Proportionate Share of the Net Pension Liabilities and Related Ratios ............................................................................................................................................. 96 Schedule of the City’s Contributions – Pensions .............................................................................................. 98 Item Number: 9.
City of Desert Hot Springs
Basic Financial Statements
For the Year Ended June 30, 2025
Table of Contents (Continued)
Page
Supplementary Information:
Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:
Debt Service Fund ................................................................................................................................................. 103 Capital Improvement Capital Projects Fund ............................................................................................. 104 RCTC Loan Capital Projects Fund ........................................................................................................... 105 Nonmajor Governmental Funds:
Combining Balance Sheet ..................................................................................................................................... 109 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ................................ 113 Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual Nonmajor Special Revenue Funds:
Special Gas Tax Special Revenue Fund ...................................................................................... 117 SB1 Road Maintenance and Rehabilitation Special Revenue Fund ............................................ 118 Municipal Lighting / Landscaping Assessment District Special Revenue Fund ......................... 119 Measure A Special Revenue Fund ............................................................................................... 120 Air Quality Control Special Revenue Fund ................................................................................. 121 Art in Public Places Special Revenue Fund ................................................................................. 122 Quimby Act Special Revenue Fund............................................................................................. 123 Drainage Assessment District Special Revenue Fund ................................................................. 124 County Service Area 152 (CSA-152) Special Revenue Fund ..................................................... 125 Cabot's Museum Special Revenue Fund ...................................................................................... 126 Supplemental Law Enforcement Service (SLESF) Special Revenue Fund ................................. 127 Abandoned Vehicle Abatement Special Revenue Fund .............................................................. 128 Community Development Block Grant (CDBG) Special Revenue Fund ................................... 129 Department of Cannabis Control Special Revenue Fund ............................................................ 130 Assessment District 91-1 Capital Projects Fund .......................................................................... 131 Internal Service Funds:
Combining Statement of Net Position ...................................................................................................... 135 Combining Statement of Revenues, Expenses, and Changes in Net Position .......................................... 136 Combining Statement of Cash Flows ....................................................................................................... 137 Custodial Funds:
Combining Statement of Fiduciary Net Position ...................................................................................... 141 Combining Statement of Changes in Fiduciary Net Position ................................................................... 142 Item Number: 9.
6 Hutton Centre Drive, Suite 1200
Santa Ana, California 92707
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and the 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 financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Desert Hot Springs, California (the “City”), as of and for the year ended June 30, 2025, and the related notes to the basic 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, 2025, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (“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 Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Emphasis of Matters
Change in Accounting Principle - Implementation of GASB 101 As discussed in Notes 1 and 15 to the basic financial statements, the City adopted new accounting guidance, Governmental Accounting Standards Board (“GASB”) Statement No. 101, Compensated absences. The adoption of this standard resulted in the restatement of the City’s net position as of June 30, 2024. Our opinion is not modified with respect to this matter.
Restatement due to Error Corrections
As discussed in Note 15 to the basic financial statements, the City recorded restatement due to error corrections in the Governmental Funds in the amount of $658,820 to correct prior year expenditures. Our opinion is not modified with respect to this matter.
Item Number: 9.
To the Honorable Mayor and the Members of the City Council of the City of Desert Hot Springs
Desert Hot Springs, California
2 Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS 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.
Item Number: 9.
To the Honorable Mayor and the Members of the City Council of the City of Desert Hot Springs
Desert Hot Springs, California
3 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 Liability and Related Ratios, and the Schedules of 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 the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the Required Supplementary Information in accordance with 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.
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 July 30, 2026 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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
July 30, 2026
Item Number: 9.
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Item Number: 9.
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, 2025.
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, 2025. 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 details that are 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 details to support the basic financial statements themselves.
Fiscal Year 2024-2025 Highlights
The City’s total net position was $80,563,126 as of June 30, 2025. General Fund Revenues totaled $27,924,201.
General Fund Expenditures totaled $27,147,690.
Public Safety Fund Revenues totaled $18,047,549.
Public Safety Fund Expenditures totaled $18,108,181.
The fund balance in the General Fund increased by $776,511 for a total of $8,275,072. The increase in the fund balance of the General Fund was due to significant development related fees for several large developments in the City which include the Amazon warehouse and new residential developments from Lennar Homes. The City also received a boost in revenues from the passage of Measure P, a 1% Transaction and Use Tax that went into effect on April 1, 2025.
The City has an Emergency Reserve in place for economic contingency that is set at 17% of the General Fund annual appropriations which is funded by cannabis tax revenues and a 20% reserve in place for the General Fund of which 15% is for natural or fiscal emergencies and 5% is for future operations and capital use for a total of $4,164,727 in reserves.
The City’s Tax revenue received in 2024-2025 (not including cannabis related taxes) was up 7% over the prior fiscal year due to the addition of the Measure P 1% Transaction & Use Tax. Marijuana related taxes decreased by $229,564 from FY 2023-2024 to FY 2024-2025. o The retail tax decreased by $462,958 from the prior year, which is a 31% decrease. This is due to the City Council lowering the retail cannabis tax from 10% to 5%. The City Council lowered the tax rate in order to assist the retail cannabis facilities with falling cannabis prices and potential excise tax increases from the State.
o The cultivation tax increased by $233,394 from the prior year, which is an 8% increase. The increase has been due to additional cannabis cultivation facilities opening in the City.
Item Number: 9.
6 The City’s cannabis tax revenue used to be the General Fund’s largest single source of revenue at 27% of total revenues. Since the decline in the cannabis wholesale prices, the cannabis tax revenues for the City have declined by 22% since it’s high point in FY21-22. In order to make up for this lost revenue, the City put forward a 1% Transaction & Use Tax which was approved by voters in November 2024. The Transaction and Use Tax started April 1, 2025, and brought in an additional $1.1 million for the last quarter of FY24-25. It is anticipated that the tax will provide $4.8 million annually.
Over the past year, the Recreation Department has expanded its programming, offering a broader range of recreational and educational opportunities for residents of all ages. These programs have not only enriched the quality of life for Desert Hot Springs residents but also strengthened the sense of community and inclusion that defines our city.
The Senior Center experienced a steady rise in memberships and participation, reflecting the department’s commitment to providing engaging, social, and wellness-based activities for older adults. New art, fitness, and enrichment programs have been especially popular, fostering a strong sense of connection and belonging among senior residents.
The Desert Hot Springs Recreation Center achieved Autism Certification, ensuring that both the facility and staff are equipped to provide inclusive and supportive programs for participants of all abilities. This milestone demonstrates the department’s dedication to accessibility, understanding, and excellence in service delivery. The Furbee Aquatic Center will be undergoing major renovations that includes the addition of a new splash pad, creating an exciting space for families to enjoy for years to come. These upgrades demonstrate the City’s ongoing commitment to meeting community needs while providing a safe, enjoyable, and family-friendly environment for all. Funding for this project comes from an agreement with Riverside County to pre-fund the City’s future Community Development Block Grant allocations to start the project now instead of waiting. In order to ease the burden of over 5,500 calls each year for Fire Station 37, the City is continuing the construction of Fire Station 98. This station will house the City’s new medical unit as well as a new Quint fire truck and it is expected to open for operations in January 2026. The City has been awarded two significant grants for the Hacienda Avenue street improvements and the construction of the Eagles Sports Park which will contain the City’s first sports complex. The City has started a Futures Leaders Program for high school students with City staff acting as mentors for the students.
The City continues with its Ethics and Harassment Prevention trainings as well as keeping staff updated on the National Incident Management System and California’s Standardized Emergency Management System trainings.
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 an 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 the 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 an 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.
Item Number: 9.
7 The government-wide financial statements can be found on pages 21-22 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.
The City maintains eight (8) major individual governmental funds; the General Fund (which is consolidated with the Health and Wellness Facility and the Marijuana Reserve Fund), Public Safety Fund, American Rescue Act Fund, Housing Authority Fund, Capital Improvement Deposits Fund, the Debt Service Fund, the Capital Improvement Fund, and RCTC Loan 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 15 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.
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 (20), Measure A Fund, Air Quality Control Fund, Art in Public Places Fund, Quimby Act Fund, Drainage Assessment Districts Funds (17), 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), 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 26-32 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.
Item Number: 9.
8 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 35-37 of this report and the internal service funds can be found on pages 134-136 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 41-42 of this report.
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 47-85 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 88-98 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 108-130 of this report.
Government-wide Financial Analysis
The City’s Transient Occupancy Tax is down 3% or $133,000 from FY24-25. This is due to stricter short-term vacation rental regulations that were adopted in FY23-24. The new regulations limited the number of short-term rentals in certain neighborhoods and required a 500-foot radius between short-term rental properties. This caused the number of shortterm rentals to decrease resulting in lower Transient Occupancy Tax revenue. The City Council has decided that some of the regulations were too strict and the City is in the process of changing the regulations, specifically changing the distance requirement to 150 feet between short-term rental properties. In FY23-24, the City Council permanently reduced the cannabis cultivation tax to $5.75 per square foot to assist the struggling cannabis cultivation facilities. Then in the Spring of 2025, City Council reduced the Retail Cannabis Tax from 10% down to 5% in order to assist dispensaries with declining cannabis prices, potential excise tax increases from the State, and from competition with the illegal market. During FY24-25, the City received a large boost in development revenues from the construction of a new Amazon warehouse as well as Lennar Homes building large residential developments in the Skyborne residential neighborhood and the Rancho Descanso neighborhood.
Other major revenue changes occurred during fiscal year 2024-2025 in the following areas:
Charges for Services increased significantly in FY24-25. Development fees which include building permits, plan check fees, engineering fees, and development impact fees received a healthy boost from the construction of a 650,000 square foot warehouse for Amazon as well as almost 300 residential properties built by Lennar Homes during the fiscal year.
Item Number: 9.
9 Sales taxes increased by over 21% in FY24-25. The Bradley Burns Sales Tax increased by 3% over the previous year while the most significant increase was the addition of the 1% Transaction and Use Tax which started April 1, 2025.
Due to the reduction in the Retail Cannabis Tax to 5%, cannabis tax revenues decreased from $4,410,030 in FY 2023-2024 to $4,180,466 in FY 2024-2025. Public Safety Parcel Tax increased from $2,901,257 in FY 2023-2024 to $3,030,818 in FY 2024-2025 approximately a 4% increase over the prior year.
Utility User Taxes increased from $4,904,387 in FY 2023-2024 to $5,387,042 in FY 2024-2025 approximately a 10% 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.
Over the past year, considerable development has been occurring in the City:
Construction of the first Maverick gas station in the Coachella Valley was completed and opened for operations in November 2024.
Construction of a 650,000 square foot Amazon logistics center began with a completion date in February 2026. Currently the City has 63 cannabis facilities that employ 5,067 people. There is 506,322 square feet of cannabis cultivation space with 14,858 additional square feet being developed. The City is also experiencing growth in the residential sector:
o 286 new homes were built by Lennar in the Skyborne development and the company will start construction in the next village of Skyborne with another 200 new homes soon. o There are also 1,100 new homes in the pipeline to be developed.
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 $80,563,126 as of June 30, 2025, in the Governmental activities (the City does not have any Business-type activities).
Item Number: 9.
10 The largest portion of the City's net position, $60,610,736, 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. 2025 2024* 2025 2024*
Current and other assets $ 58,106,429 $ 66,100,763 $ 58,106,429 $ 66,100,763 Capital assets 89,895,347 80,720,159 89,895,347 80,720,159 Total assets $ 148,001,776 $ 146,820,922 $ 148,001,776 $ 146,820,922 Deferred outflow of resources $ 5,308,793 $ 7,772,217 $ 5,308,793 $ 7,772,217 Total deferred outflow of resources $ 5,308,793 $ 7,772,217 $ 5,308,793 $ 7,772,217 Current liabilities $ 15,835,117 $ 19,886,650 $ 15,835,117 $ 19,886,650 Long-term liabilities 55,142,958 60,103,953 55,142,958 60,103,953 Total liabilities $ 70,978,075 $ 79,990,603 $ 70,978,075 $ 79,990,603 Deferred inflow of resources $ 1,769,368 $ 3,139,264 $ 1,769,368 $ 3,139,264 Total deferred inflow of resources $ 1,769,368 $ 3,139,264 $ 1,769,368 $ 3,139,264 Net position
Invested in capital assets $ 60,610,736 $ 52,424,852 $ 60,610,736 $ 52,424,852 Restricted 28,670,526 32,454,887 28,670,526 32,454,887
Unrestricted (8,718,136) (13,416,467) (8,718,136) (13,416,467) Total net position $ 80,563,126 $ 71,463,272 $ 80,563,126 $ 71,463,272 * Note: a change in accounting estimate is treated prospectively, prior periods are not restated due to GASB 101 implementation.
Governmental activities Total
Table 1
City of Desert Hot Springs
Net Position
June 30, 2025
An additional portion of the City’s net position, $28,670,526, represents resources that are subject to external restrictions on how they may be used. The unrestricted portion of the net position is negative $8,708,528.
Item Number: 9.
11 2025 2024 2025 2024
Revenues
Program revenues:
Charges for services $ 13,158,693 $ 5,345,097 $ 13,158,693 $ 5,345,097 Operating grants and contributions 14,300,814 14,922,019 14,300,814 14,922,019 Capital grants and contributions 4,448,794 13,520,919 4,448,794 13,520,919 General revenues
Property taxes 2,834,219 2,834,690 2,834,219 2,834,690
Sales taxes 7,267,676 5,991,148 7,267,676 5,991,148
Transient occupancy taxes 4,273,160 4,406,302 4,273,160 4,406,302 Other taxes 6,515,637 7,044,768 6,515,637 7,044,768
Investment income 994,428 1,081,167 994,428 1,081,167
Miscellaneous 639,138 964,884 639,138 964,884
Total revenues $ 54,432,559 $ 56,110,994 $ 54,432,559 $ 56,110,994 Program expenses
General government $ 10,566,185 $ 10,836,693 $ 10,566,185 $ 10,836,693 Public safety 20,799,263 19,598,305 20,799,263 19,598,305 Public works 5,425,367 6,698,339 5,425,367 6,698,339
Economic development 1,975,950 3,198,429 1,975,950 3,198,429 Culture and leisure 4,529,919 3,012,296 4,529,919 3,012,296 Interest and fiscal charges 1,494,886 1,414,875 1,494,886 1,414,875 Total expenses $ 44,791,570 $ 44,758,937 $ 44,791,570 $ 44,758,937 Change in net position 9,640,989 11,352,057 9,640,989 11,352,057 Net position – beginning of year 71,463,272 60,111,215 71,463,272 60,111,215 Change in accounting principle (541,135) - (541,135) -
Net position – end of year $ 80,563,126 $ 71,463,272 $ 80,563,126 $ 71,463,272 * Note: a change in accounting estimate is treated prospectively, prior periods are not restated due to GASB 101 implementation Governmental activities Total
Table 2
City of Desert Hot Springs
Changes in Net Position
June 30, 2025
Governmental Activities
The City’s governmental activities total revenues were over $54 million, while the total cost of all programs and services was approximately $44 million. Operating grants and contributions were the largest source of revenue at $14,300,814 (26% of the total revenue of governmental activities). Charges for services were the second largest resource at $13,158,693 (24% of the total revenue of the governmental activities). Sales taxes were the third largest revenue source at $7,267,676 (13% of the total revenue of governmental activities).
Public Safety expenses of $20,799,263 comprise the largest component of government activities (46% of the total cost of governmental activities).
General Government expenses of $10,566,185 (which includes City Council, City Manager, City Attorney, City Clerk, Finance, Information Systems and Non-Departmental) were the second largest governmental activities (24% of the total cost of governmental activities).
Item Number: 9.
12 Public Works expenses of $5,425,367 were the third largest governmental activities (12% of the total cost of governmental activities).
Culture and Leisure expenses of $4,529,919 were the fourth largest governmental activities (10% of the total cost of governmental activities).
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 2024-2025, the total fund balance was $8,275,072.
The General Fund balance increased by $776,511 in 2024-2025. The key factor was the increased development fees and the new 1% Transaction & Use tax that started on April, 1, 2025.
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.
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. For FY2024-2025, the City used this funding for the purchase of the Quint fire truck and construction of the Police Department Annex building.
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 apartment complexes and single-family houses throughout the City, and vacant residential property to be used to develop lowincome housing. During FY2024-2025, the Housing Authority Fund spent over $154,000 on administrative costs. As of June 30, 2025, the fund balance is $5,926,996.
Capital Improvement Deposits Funds
This is a series of funds that accounts for the proceeds of development impact fees. The proceeds from these fees are to be used for capital improvement projects needed as the City grows due to new developments. During FY2024-2025, the City spent $177,255 on projects in the city. The fund balance at June 30, 2025 is $8,055,980.
Item Number: 9.
13 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 the utility user tax and transfers from other funds. For this fiscal year, $1,035,000 was paid for the required principal payment and $1,471,146 was paid out in interest expense. The fund balance at June 30, 2025 was $7,707,652.
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 FY2024-2025, the City spent $10,388,602 on capital projects. The fund ended the fiscal year with a negative balance which will be offset by reimbursement from grant proceeds.
RCTC Loan Fund
This fund was created to track the $7.5 million loan provided from the Riverside County Transportation Commission (RCTC) for the repair of three roads damaged by Tropical Storm Hillary in August 2023. The City spent over $9 million to repair the roads to have them reopened by the 270 day deadline as required by reimbursement from FHWA and CalOES. The City has submitted all required documentation and will be receiving a full reimbursement for the cost of the repairs. As the City receives the reimbursement, it will repay the RCTC loan. Any additional funding for the cost of repairs over the $7.5 million loan is covered by other funds. As of June 30, 2025, the loan from RCTC has been repaid.
Capital Assets
At the end of FY 2024-2025, the City has invested over $89 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. 2025 2024 2025 2024
Land $ 2,958,094 $ 2,958,094 $ 2,958,094 $ 2,958,094
Construction in progress 20,256,979 18,521,974 20,256,979 18,521,974 Building and improvements, net of depreciation 30,505,571 31,921,660 30,505,571 31,921,660 Machinery and equipment, net of depreciation 3,315,480 3,748,332 3,315,480 3,748,332 Vehicles, net of depreciation 2,090,000 921,641 2,090,000 921,641 Infrastructure, net of depreciation 30,426,289 22,057,132 30,426,289 22,057,132 Right of use - leased vehicles 262,756 342,743 262,756 342,743 Right of use - subscription asset 80,178 248,583 80,178 248,583 Total $ 89,895,347 $ 80,720,159 $ 89,895,347 $ 80,720,159 Governmental activities Total
Table 3
City of Desert Hot Springs
Capital Assets
June 30, 2025
For more information on Capital Asset Activity, please see Capital Assets page 65 and page 66.
Item Number: 9.
14 Long-Term Debt
As of June 30, 2025, the City had total long-term liabilities outstanding of $41,919,573 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. During FY24-25, the City paid off the $3.75 million loan from RCTC using reimbursements from the State and Federal Governments. For more detailed information on each long-term debt liability, please see Note (6) on pages 66-72. 2025 2024* 2025 2024*
2020 Certificates of Participation $ 4,235,000 $ 4,440,000 $ 4,235,000 $ 4,440,000 Lease Revenue Bonds Series 2017A 12,545,000 12,890,000 12,545,000 12,890,000 Lease Revenue Bonds Series 2018 6,035,000 6,180,000 6,035,000 6,180,000 Lease Revenue Bonds Series 2021A 13,460,000 13,700,000 13,460,000 13,700,000 Taxable Lease Revenue Bonds Series 2021A-T 940,000 1,040,000 940,000 1,040,000 Bond premium - 2017A 130,307 136,512 130,307 136,512
Bond premium - 2018 227,032 237,252 227,032 237,252
Bond premium - 2021A 209,628 217,658 209,628 217,658
Capital lease payment 31,167 215,225 31,167 215,225
RCTC Loan - 3,750,000 - 3,750,000
Lease liabilities 285,603 355,385 285,603 355,385
Subscription liabilities - 120,608 - 120,608
Claims and judgments payable 788,443 636,696 788,443 636,696 Compensated absences 2,470,376 2,136,187 2,470,376 2,136,187 Pension-related debt 562,017 796,609 562,017 796,609
Total $ 41,919,573 $ 46,852,132 $ 41,919,573 $ 46,852,132 * 2024 balances were restated due to GASB 101 implementation and change in claim estimates. (see Note 15 for details.) Governmental activities Total
Table 4
City of Desert Hot Springs
Long-Term Liabilities
June 30, 2025
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 starting in 2023, the cannabis tax revenues have been in decline. In order to assist the cannabis facilities in the city, the City Council made changes to the cannabis tax calculations. In FY23-24, the City Council reduced the cultivation tax rate to $5.75 per square foot and in FY24-25, the retail cannabis tax was reduced to 5%.
Dispensary Cultivation Dispensary Cultivation Total Total 2025 2025 2024 2024 2025 2024
Marijuana Dispensary Revenue $ 1,039,150 $ 1,502,108 $ 1,039,150 $ 1,502,108 Marijuana Cultivation Revenue $ 3,141,316 $ 2,907,922 3,141,316 2,907,922 Total $ 1,039,150 $ 3,141,316 $ 1,502,108 $ 2,907,922 $ 4,180,466 $ 4,410,030 Table 5
City of Desert Hot Springs
Marijuana Dispensary and Cultivation Revenue Comparison As of June 30, 2025
Item Number: 9.
15 Economic Factors
Development activity had several increases due to additional commercial projects and housing developments within the City as discussed previously.
For FY 2024-2025, the Sales Tax and Utility User Tax revenues continue to grow due to increased development. The City is still experiencing a steady growth in population and is considered the “Fastest Growing City in the Coachella Valley”. From 2010-2020, the City experienced a massive 25.3% population increase. Since then, the annual rate of growth has been 3.2% culminating in its current population level of 34,338 residents. There has been significant growth in assessed values in the City with a 7.6% assessed value growth rate from FY2023-2024 to FY2024-2025.
Home prices have grown nearly 200% since 2011, however, when the interest rates increased, home prices declined but over the last 2 years, they are leveling out with slight increases or decreases every quarter. The median home sales price had a decrease of 3% between June 30, 2024 and June 30, 2025. The average home price in the City was $382,072 and the median home price was $387,000 as of June 30, 2025, making the City one of the more affordable housing options in the Coachella Valley. The City has reserves of 15% of annual general fund appropriations for natural and fiscal emergencies and 5% 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 on June 30, 2025, was $4,164,727.
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: 9.
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Item Number: 9.
BASIC FINANCIAL STATEMENTS
17 Item Number: 9.
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18 Item Number: 9.
GOVERNMENT-WIDE
FINANCIAL STATEMENTS
19 Item Number: 9.
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20 Item Number: 9.
Primary Government
Governmental
Activities
ASSETS
Current assets:
Cash and cash equivalents $ 29,821,000
Receivables, net 14,208,575
Prepaid items 159,094
Deposits 5,112
Property held for resale 85,089
Total current assets 44,278,870
Noncurrent assets:
Restricted cash and investments 11,378,949
Abatements receivable 2,448,610
Capital assets:
Capital assets, not being depreciated 23,215,073
Capital assets, being depreciated, net 66,337,340
Intangible capital assets, being amortized, net 342,934 Total capital assets 89,895,347
Total noncurrent assets 103,722,906
Total assets 148,001,776
DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on refunding 299,894
Pension related 5,008,899
Total deferred outflows of resources 5,308,793
LIABILITIES
Current liabilities:
Accounts payable and other liabilities 7,244,341
Deposits 3,822,687
Interest payable 411,197
Unearned revenue 1,773,139
Long-term debt - due within one year 2,583,753
Total current liabilities 15,835,117
Noncurrent liabilities:
Long-term debt - due in more than one year 39,335,820
Net pension liability 15,807,138
Total noncurrent liabilities 55,142,958
Total liabilities 70,978,075
DEFERRED INFLOWS OF RESOURCES
Pension related 1,769,368
Total deferred inflows of resources 1,769,368
NET POSITION
Net investment in capital assets 60,610,736
Restricted for:
Furbee settlement 455,254
Public safety 470,224
Public works/projects 10,970,738
Lighting/Landscaping/Drainage 1,806,018
Housing and economic development 5,933,491
Debt service 7,707,652
Culture and leisure 1,655,542
Assessment District 91-1 126,861
Total restricted 28,670,526
Unrestricted (deficit) (8,718,136)
Total net position $ 80,563,126
City of Desert Hot Springs
Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 21 Item Number: 9.
Net (Expense)
Operating Capital Total Revenue and
Charges for Grants and Grants and Program Change in
Functions/Programs Expenses Services Contributions Contributions Revenues Net Position Governmental activities:
General government $ 10,566,185 $ 336,541 $ 15,500 $ 3,167,778 $ 3,519,819 $ (7,046,366) Public safety 2,193,443 20,799,263 6,887,282 307,848 9,388,573 (11,410,690) Public works 4,528,163 5,425,367 6,802,143 973,168 12,303,474 6,878,107 Economic development 1,305,846 1,975,950 493,632 - 1,799,478 (176,472) Culture and leisure 4,794,700 4,529,919 102,257 - 4,896,957 367,038 Interest and fiscal charges - 1,494,886 - - - (1,494,886) Total primary government $ 44,791,570 $ 13,158,693 $ 14,300,814 $ 4,448,794 $ 31,908,301 (12,883,269) General Revenues:
Taxes:
Property taxes 2,834,219
Sales and use taxes 7,267,676
Dispensary taxes 1,039,150
Cultivator taxes 3,141,316
Motor vehicle in-lieu taxes 101,410
Franchise taxes 2,233,761
Transient occupancy taxes 4,273,160
Total taxes 20,890,692
Investment income 994,428
Other revenue 639,138
Total general and other revenues 22,524,258
Change in net position 9,640,989
Net Position:
Beginning of year, as previously reported 71,463,272
Change in accounting principles (541,135)
Beginning of year, as restated (Note 15) 70,922,137
End of year $ 80,563,126
Program Revenues
City of Desert Hot Springs
Statement of Activities
For the Year Ended June 30, 2025
Primary Government
Governmental Activities
See accompanying Notes to the Basic Financial Statements. 22 Item Number: 9.
FUND FINANCIAL STATEMENTS
Governmental Fund Financial Statements
Proprietary Fund Financial Statements
Fiduciary Fund Financial Statements
23 Item Number: 9.
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24 Item Number: 9.
RCTC Loan Capital Projects Fund - To account for a loan received from the Riverside County Transportation Commission ("RCTC") and grants from the Federal Emergency Management Agency ("FEMA") and Caltrans. Expenditures are restricted to construction, improvement, and maintenance activities related to storm damage repairs from Tropical Storm Hilary.
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 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.
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.
Debt Service Fund - To account for the debt service payments on the City's Lease Revenue Bonds and Certificate of Participation twice annually.
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.
Public Safety Special Revenue Fund - To account for and report special taxes and grants for community safety expenditures including Police, Fire and Animal Control.
25 Item Number: 9.
Capital
General Public American Housing Improvement
Fund Safety Rescue Act Authority Deposits
ASSETS
Cash and investments $ 5,173,822 $ 700,000 $ 1,941,308 $ 2,503,944 $ 8,076,954 Restricted cash and investments - 455,254 - - -
Receivables:
Accounts 4,925,837 1,050,265 - - 24,953
Interest 12,227 - 5,666 6,167 18,716
Due from other governments 46,409 - - - -
Notes - - - 3,334,172 -
Abatements 2,448,610 - - - -
Prepaid items 107,245 51,849 - - -
Deposits 5,112 - - - -
Due from other funds - 2,231,275 - - -
Property held for resale - - - 85,089 -
Total assets $ 12,910,772 $ 4,297,133 $ 1,946,974 $ 5,929,372 $ 8,120,623
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities $ 2,113,923 $ 1,149,266 $ 617,578 $ 2,376 $ 46,685 Deposits payable 377,998 1,810,201 - - -
Due to other funds - - - - -
Unearned revenue 32,500 230,080 1,110,559 - -
Total liabilities 4,154,204 1,559,764 1,728,137 2,376 46,685 Deferred inflows of resources:
Unavailable revenue 481,496 2,690,166 - - 17,958
Total deferred inflows of resources 481,496 2,690,166 - - 17,958 Fund balances:
Nonspendable 112,357 51,849 - - -
Restricted 455,254 218,837 - 5,926,996 8,055,980
Committed 4,164,727 - - - -
Assigned 938,290 - - - -
Unassigned 2,604,444 (4,646) - - -
Total fund balances 8,275,072 47,203 218,837 5,926,996 8,055,980 Total liabilities, deferred inflows of
resources, and fund balances $ 12,910,772 $ 4,297,133 $ 1,946,974 $ 5,929,372 $ 8,120,623 (Continued)
Special Revenue Funds
City of Desert Hot Springs
Balance Sheet
Governmental Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 26 Item Number: 9.
Nonmajor Total
Debt Service Capital Governmental Governmental
Fund Improvement RCTC Loan Funds Funds
ASSETS
Cash and investments $ 1,693,847 $ 796,558 $ - $ 7,744,835 $ 28,631,268 Restricted cash and investments 7,379,122 3,544,573 - - 11,378,949 Receivables:
Accounts - 2,695,074 1,562,553 502,594 10,761,276
Interest 6,867 - - 17,075 66,718
Due from other governments - - - - 46,409
Notes - - - - 3,334,172
Abatements - - - - 2,448,610
Prepaid items - - - - 159,094
Deposits - - - - 5,112
Due from other funds - 2,462,365 - - 4,693,640
Property held for resale - - - - 85,089
Total assets $ 7,707,652 $ 10,870,754 $ 1,562,553 $ 8,264,504 $ 61,610,337
LIABILITIES, DEFERRED INFLOWS OF
RESOURCES AND FUND BALANCES
Liabilities:
Accounts payable and accrued liabilities $ - $ 2,673,480 $ 1,226 $ 624,170 $ 7,228,704 Deposits payable 1,634,488 - - - 3,822,687
Due to other funds 3,038,741 - 1,527,220 127,679 4,693,640 Unearned revenue 400,000 - - 1,773,139 -
Total liabilities 7,746,709 - 1,528,446 751,849 17,518,170 Deferred inflows of resources:
Unavailable revenue - 2,367,938 1,562,553 209,302 7,329,413 Total deferred inflows of resources 2,367,938 - 1,562,553 209,302 7,329,413 Fund balances:
Nonspendable - - - 164,206 -
Restricted 7,707,652 - 6,761,061 - 29,125,780
Committed 756,107 - 542,292 - 5,463,126
Assigned - - - 938,290 -
Unassigned - (1,528,446) - 1,071,352 -
Total fund balances 7,707,652 756,107 (1,528,446) 7,303,353 36,762,754 Total liabilities, deferred inflows of
resources, and fund balances $ 7,707,652 $ 10,870,754 $ 1,562,553 $ 8,264,504 $ 61,610,337 (Concluded)
City of Desert Hot Springs
Balance Sheet (Continued)
Governmental Funds
June 30, 2025
Capital Projects Funds
See accompanying Notes to the Basic Financial Statements. 27 Item Number: 9.
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28 Item Number: 9.
Total Fund Balances - Total Governmental Funds $ 36,762,754 Amounts reported for governmental activities in the statement of net position are different because:
Nondepreciable assets $ 23,215,073
Depreciable assets, net of $281,253 reported in Internal Service Funds 66,056,087 Intangible assets, net of $262,756 reported in Internal Service Funds 89,351,338 80,178 (411,197)
299,894
(37,777,017)
(566,967)
(40,514,466) (2,470,376)
5,008,899
(15,807,138)
(12,567,607) (1,769,368)
7,329,413
612,891
Net position of governmental activities $ 80,563,126
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.
City of Desert Hot Springs
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2025
Capital assets used in governmental activities are not financial resources and are not reported in the funds:
Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period and, accordingly are not reported as fund liabilities. All liabilities, both current and long-term are reported in the Statement of Net Position.
Accrued interest payable for the current portion of interest due on long-term debt has not been reported in the governmental funds.
Amount reported in government-wide statement of position:
Long-term debt, net of $316,770 reported in Internal Service Funds 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.
Net pension liability and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:
Pension related deferred outflows of resources
Net pension liability
Pension related deferred inflows of resources
Compensated absences
Unamortized deferred loss on refunding
Unamortized bond premium
See accompanying Notes to the Basic Financial Statements. 29 Item Number: 9.
Capital
General Public American Housing Improvement
Fund Safety Rescue Act Authority Deposits
REVENUES:
Taxes $ 20,850,307 $ 6,716,399 $ - $ - $ -
Permits and fees 1,453,791 5,100,189 - - 5,885,773
Intergovernmental 156,798 479,907 3,151,341 - -
Licenses 18,357 249,801 - - -
Investment earning - 386,312 93,230 30,161 62,528
Miscellaneous 439,333 757,685 - - -
Total revenues 8,784,678 27,824,201 3,244,571 30,161 5,948,301 EXPENDITURES:
Current:
General government - 7,767,924 96,720 - -
Public safety 17,938,002 1,444,071 - - -
Public works - 816,280 - - 40,773
Economic development - 1,808,989 - 154,928 -
Culture and leisure - 2,936,139 - - -
Capital outlay 170,179 319,232 3,054,622 - 136,482
Debt service:
Principal retirement - 120,608 - - -
Interest and fiscal charges 2,924 - - - -
Total expenditures 15,216,167 18,108,181 3,151,342 154,928 177,255
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES 12,608,034 (9,323,503) 93,229 (124,767) 5,771,046 OTHER FINANCING SOURCES (USES):
Transfers in 100,000 9,262,871 - - -
Transfers out (11,931,523) - - (100,000) -
Total other financing sources (uses) (11,831,523) 9,262,871 - (100,000) - NET CHANGES IN FUND BALANCES 776,511 (60,632) 93,229 (124,767) 5,671,046 FUND BALANCES (DEFICIT):
Beginning of year, as previously reported 7,498,561 107,835 125,608 6,051,763 - Change in the financial reporting entity
(nonmajor to major fund) - - - 2,384,934 -
Error corrections - - - - -
Beginning of year, as restated (Note 15) 7,498,561 107,835 125,608 6,051,763 2,384,934 End of year $ 8,275,072 $ 47,203 $ 218,837 $ 5,926,996 $ 8,055,980 (Continued)
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, 2025
See accompanying Notes to the Basic Financial Statements. 30 Item Number: 9.
Nonmajor Total
Debt Service Capital Governmental Governmental
Fund Improvement RCTC Loan Funds Funds
REVENUES:
Taxes $ 1,923,713 $ - $ - $ 1,193,725 $ 30,684,144
Permits and fees - - - 336,647 12,776,400
Intergovernmental 1,200,516 - 5,478,902 3,730,080 14,197,544 Licenses - - - 22,205 290,363
Investment earning 98,016 654,468 - 93,950 1,418,665
Miscellaneous - - - - 1,197,018
Total revenues 1,298,532 2,578,181 5,478,902 5,376,607 60,564,134 EXPENDITURES:
Current:
General government - 8,000 - - 7,872,644
Public safety - - - 42,806 19,424,879
Public works 12,475 - 8,010 3,598,904 4,476,442
Economic development - - - - 1,963,917
Culture and leisure - - - 399,305 3,335,444
Capital outlay 10,376,127 - - 938,904 14,995,546
Debt service:
Principal retirement - 1,035,000 3,750,000 4,905,608 -
Interest and fiscal charges 1,471,146 - - 1,474,070 -
Total expenditures 2,514,146 10,388,602 3,758,010 4,979,919 58,448,550
EXCESS OF REVENUES OVER
(UNDER) EXPENDITURES 64,035 (9,090,070) 1,720,892 396,688 2,115,584 OTHER FINANCING SOURCES (USES):
Transfers in 696,489 11,505,303 328,164 1,461,572 23,354,399 Transfers out (10,805,303) - (517,573) - (23,354,399)
Total other financing sources (uses) (10,108,814) 11,505,303 328,164 943,999 - NET CHANGES IN FUND BALANCES (10,044,779) 2,415,233 2,049,056 1,340,687 2,115,584 FUND BALANCES (DEFICIT):
Beginning of year, as previously reported 17,752,431 (1,659,126) (2,918,682) 8,347,600 35,305,990 Change in the financial reporting entity
(nonmajor to major fund) - - (2,384,934) - -
Error corrections - (658,820) - (658,820) -
Beginning of year, as restated (Note 15) 17,752,431 (1,659,126) (3,577,502) 5,962,666 34,647,170 End of year $ 7,707,652 $ 756,107 $ (1,528,446) $ 7,303,353 $ 36,762,754 (Concluded)
City of Desert Hot Springs
Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Governmental Funds
For the Year Ended June 30, 2025
Capital Projects Funds
See accompanying Notes to the Basic Financial Statements. 31 Item Number: 9.
Net Change in Fund Balances - Total Governmental Funds: $ 2,115,584 Amounts reported for governmental activities in the Statement of Activities are different because:
$ 14,995,546
(5,682,543)
9,349,804 36,801
(334,189)
5,140,200
5,145,986 5,786
24,455
7,311 (17,144)
(598,942)
(6,402,968)
358,403
Change in net position of governmental activities $ 9,640,989 Amortization of premium/discount
Amortization of deferred charges on refunding
Principal repayments of long-term debt, net of $253,840 reported in Internal Service Funds Internal service funds were used by management to charge the costs of certain activities, such as insurance to individual funds. The net gain of the internal service funds was report with governmental activities.
Unavailable revenue is not recognized as revenue in the governmental funds since the revenue is not available to fund expenditures of the current year.
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 $1,700,447 pension contribution made after measurement date.
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.
Capital outlay, net of $91,244 reported in Internal Service Funds 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 and Changes in Net Position For the Year Ended June 30, 2025
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:
Net effect on disposal of capital assets, net of $36,801 reported in Internal Service Fund Depreciation and amortization, net of $229,059 reported in Internal Service Fund 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.
Repayment of bond principal was an expenditure in the governmental funds, but the repayment reduced longterm liabilities in the Government-Wide Statement of Net Position.
Accrued interest for long-term debt
See accompanying Notes to the Basic Financial Statements. 32 Item Number: 9.
PROPRIETARY FUND
FINANCIAL STATEMENTS
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.
33 Item Number: 9.
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34 Item Number: 9.
Governmental
Activities
Internal
Service Funds
ASSETS
Current assets:
Cash and investments $ 1,189,732
Total current assets 1,189,732
Noncurrent assets:
Capital assets, being depreciated, net 281,253
Intangible capital assets, being amortized, net 262,756 Total capital assets 544,009
Total noncurrent assets 544,009
Total assets 1,733,741
LIABILITIES
Current liabilities:
Accounts payable 15,637
Claims payable - due within one year 394,221
Financing purchase payable - due within one year 31,167 Lease liabilities - due within one year 76,754
Total current liabilities 517,779
Noncurrent liabilities:
Claims payable - due in more than one year 394,222
Lease liabilities - due in more than one year 208,849
Total noncurrent liabilities 603,071
Total liabilities 1,120,850
NET POSITION
Net investment in capital assets 227,239
Unrestricted 385,652
Total net position $ 612,891
City of Desert Hot Springs
Statement of Net Position
Proprietary Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 35 Item Number: 9.
Governmental
Activities
Internal
Service Funds
OPERATING REVENUES:
Charges for services $ 783,716
Insurance recovery 82,661
Total operating revenues 866,377
OPERATING EXPENSES:
Insurance claims 211,139
Depreciation and amortization 229,059
Other expense 33,863
Total operating expenses 474,061
OPERATING INCOME 392,316
NONOPERATING REVENUES (EXPENSES):
Interest expense (33,913)
Gain on sale of property 36,801
Total nonoperating revenues (expenses) 2,888
Change in net position 395,204
NET POSITION:
Beginning of year 217,687
End of year $ 612,891
City of Desert Hot Springs
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 36 Item Number: 9.
Governmental
Activities
Internal
Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts from use departments $ 783,716
Receipts from insurance recovery 82,661
Payments for vendor for goods and services (33,863)
Payments for insurance claims (59,392)
Net cash provided by operating activities 773,122
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Acquisition and construction of capital assets (91,244) Principal paid on long-term liabilities (253,840)
Interest paid on long-term liabilities (33,913)
Proceed from the sales of capital assets 36,801
Net cash (used in) capital and
related financing activities (342,196)
Net increase in cash and investments 430,926
CASH AND CASH EQUIVALENTS:
Beginning of year 758,806
End of year $ 1,189,732
RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Operating income $ 392,316
Adjustments to reconcile operating income to
net cash provided by provided by operating activities:
Amortization and depreciation expenses 229,059
Changes in assets and liabilities:
Increase/(decrease) in claims payable 151,747
Total adjustments 151,747
Net cash provided by operating activities $ 773,122
City of Desert Hot Springs
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 37 Item Number: 9.
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38 Item Number: 9.
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. 39 Item Number: 9.
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40 Item Number: 9.
Successor
Agency Private -
Purpose Trust Custodial
Fund Funds
ASSETS
Current assets:
Cash and investments $ 1,842,164 $ 3,722,135
Accounts receivable 121,234 -
Interest receivable 8,209 2,204
Total current assets 3,851,578 1,844,368
Noncurrent assets:
Investments with fiscal agents 314,793 -
Notes receivable - 16,294
Total noncurrent assets 314,793 16,294
Total assets 4,166,371 1,860,662
DEFERRED OUTFLOWS OF RESOURCES
Deferred loss on refundings - 954,422
Total deferred outflows of resources - 954,422
LIABILITIES
Current liabilities:
Accounts payable 76,399 234
Due to other governments 11,087 -
Deposits payable 244,703 -
Interest payable - 207,288
Bonds payable - due within one year - 1,066,360
Total current liabilities 332,189 1,273,882
Noncurrent liabilities:
Bonds payable - due in more than one year - 14,968,512
Total noncurrent liabilities - 14,968,512
Total liabilities 332,189 16,242,394
NET POSITION (DEFICIT)
Restricted for:
Successor Agency - (13,427,310)
Individuals, organization, and other governments 3,834,182 - Total net position (deficit) $ (13,427,310) $ 3,834,182 City of Desert Hot Springs
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 41 Item Number: 9.
Successor
Agency Private -
Purpose Trust Custodial
Fund Funds
ADDITIONS:
Redevelopment Property Tax Trust Fund $ 1,745,650 $ -
Assessment revenue collected 962,261 -
Use of money and property 94,707 10,172
Miscellaneous - -
Total additions 1,056,968 1,755,822
DEDUCTIONS:
Interest expense 152,308 596,839
Administration 46,121 286,083
Payment of special assessment district expenses 167,462 - Payment of other organization expenses 76,175 -
Total deductions 442,066 882,922
Change in net position 614,902 872,900
NET POSITION (DEFICIT):
Beginning of year 3,219,280 (14,300,210)
End of year $ (13,427,310) $ 3,834,182
City of Desert Hot Springs
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 42 Item Number: 9.
43 NOTES TO THE BASIC
FINANCIAL STATEMENTS
Item Number: 9.
44 This page intentionally left blank.
Item Number: 9.
City of Desert Hot Springs
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
45 Page
Note 1 – Summary of Significant Accounting Policies ........................................................................................... 47 A. Financial Reporting Entity ............................................................................................................................. 47 B. Basis of Accounting and Measurement Focus ............................................................................................... 48 C. Cash, Cash Equivalents and Investments ....................................................................................................... 51 D. Cash and Investments with Fiscal Agents ...................................................................................................... 51 E. Fair Value Measurements ............................................................................................................................... 51 F. Prepaid Items .................................................................................................................................................. 52 G. Interfund Transactions .................................................................................................................................... 52 H. Property Held for Resale ................................................................................................................................ 52 I. Capital Assets ................................................................................................................................................. 52 J. Interest Payable .............................................................................................................................................. 53 K. Unearned Revenue ......................................................................................................................................... 53 L. Compensated Absences .................................................................................................................................. 53 M. Pension ........................................................................................................................................................... 53 N. Deferred Outflows/Inflows of Resources ....................................................................................................... 54 O. Long-Term Debt ............................................................................................................................................. 54 P. Lease Liabilities ............................................................................................................................................. 54 Q. Subscription Liabilities................................................................................................................................... 55 R. Claims and Judgments .................................................................................................................................... 55 S. Property Taxes ................................................................................................................................................ 56 T. Net Position .................................................................................................................................................... 56 U. Fund Balances ................................................................................................................................................ 56 V. Use of Estimates ............................................................................................................................................. 57 W. Implementation of New GASB Pronouncement ............................................................................................ 57 Note 2 – Cash and Investments ................................................................................................................................ 58 A. Demand Deposits ........................................................................................................................................... 58 B. Investments ..................................................................................................................................................... 59 C. Fair Value Measurements ............................................................................................................................... 60 D. Risk Disclosures ............................................................................................................................................. 61 E. Investments in Local Agency Investment Fund ............................................................................................. 62 Note 3 – Notes Receivable ......................................................................................................................................... 62 Note 4 – Interfund Transactions .............................................................................................................................. 63 A. Due From/To Other Funds ............................................................................................................................. 63 B. Transfers In/Out ............................................................................................................................................. 63 Note 5 – Capital Assets .............................................................................................................................................. 64 Item Number: 9.
City of Desert Hot Springs
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2025
46 Page
Note 6 – Long-Term Liabilities ................................................................................................................................ 65 A. Governmental Activities................................................................................................................................. 65 B. Fiduciary Activities ........................................................................................................................................ 71 Note 7 – Non-City Obligation Debt .......................................................................................................................... 72 Note 8 – Risk Management ....................................................................................................................................... 72 A. Coverage ......................................................................................................................................................... 72 B. Claims Activity .............................................................................................................................................. 73 C. Adequacy of Protection .................................................................................................................................. 73 Note 9 – Defined Benefit Pension Plan .................................................................................................................... 73 A. General Information about the Pension Plan .................................................................................................. 73 B. Pension Liabilities, Pension Expenses, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions .................................................................................................... 76 Note 10 – Classification of Fund Balances .............................................................................................................. 80 Note 11 – Net Investments in Capital Assets ........................................................................................................... 82 Note 12 – Contingencies and Commitments ........................................................................................................... 83 A. Lawsuits ......................................................................................................................................................... 83 B. Federal and State Grant Programs .................................................................................................................. 83 Note 13 – Individual Fund Disclosure ..................................................................................................................... 83 Note 14 – Subsequent Event ..................................................................................................................................... 83 Note 15 – Restatements ............................................................................................................................................. 84 Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
47 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: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
48 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
49 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Government-Wide Financial Statements (Continued)
The following interfund activities have been eliminated:
Due from/to other funds
Transfers in/out
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 is to account for the State and Local Agency Coronavirus Relief Funds provided to the City from the American Recovery Act.
Housing Authority Special Revenue Fund – This fund is to account for and report funds set aside for development and improvements of the City’s housing activity and operations.
Capital Improvement Deposits Special Revenue Fund – This fund is 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
50 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements (Continued)
Debt Service Fund – This fund was established to account for the debt service payments of the City.
Capital Improvement Capital Projects Fund – This fund is to account for and report expenditures related to various capital projects identified in the City's 5-year CIP plan.
RCTC Loan Capital Project Fund – This fund is to account for a loan received from the Riverside County Transportation Commission ("RCTC") and grants from the Federal Emergency Management Agency ("FEMA") and Caltrans. Expenditures are restricted to construction, improvement, and maintenance activities related to storm damage repairs from Tropical Storm Hilary.
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.
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 using the "economic resources" measurement focus and 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
51 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Fiduciary Fund Financial Statements (Continued)
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 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 Measurements
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
52 Note 1 – Summary of Significant Accounting Policies (Continued) E. Fair Value Measurements (Continued)
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).
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
53 Note 1 – Summary of Significant Accounting Policies (Continued) I. Capital Assets (Continued)
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.
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. A liability is recognized for leave that is attributable to services already rendered and that is more likely than not to be used for time off or otherwise paid or settled. The liability is measured using the employee’s pay rate as of the end of the reporting period and includes applicable salary related payments. 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
54 Note 1 – Summary of Significant Accounting Policies (Continued) M. Pension (Continued)
The following timeframes are used for pension reporting:
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
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.
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
55 Note 1 – Summary of Significant Accounting Policies (Continued) P. Lease Liabilities (Continued)
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. 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”).
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
56 Note 1 – Summary of Significant Accounting Policies (Continued) 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 and amortization, 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.
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
57 Note 1 – Summary of Significant Accounting Policies (Continued) U. Fund Balances (Continued)
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.
W. Implementation of New GASB Pronouncement
During fiscal year ended June 30, 2025, the City has implemented the following new GASB Pronouncements:
GASB Statement No. 101 – In June 2022, the GASB issued Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. Implementation of this Statement resulted in a restatements of the beginning fund balance as of July 1, 2024, as presented in Note 15.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
58 Note 1 – Summary of Significant Accounting Policies (Continued) W. Implementation of New GASB Pronouncement (Continued) GASB Statement No. 102 – In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures.
The objective of this Statement is to provide users of government financial statements with information about risks related to a government’s vulnerabilities due to certain concentrations or constraints that is essential to their analyses for making decisions or assessing accountability. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter. The City has evaluated its exposure to financial risk stemming from concentrations and constraints and determined that none exist.
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, 2025:
Government-Wide Statement of
Statement of Fiduciary
Net Position Net Position Total
Cash and investments $ 29,821,000 $ 5,564,299 $ 35,385,299 Restricted cash and investment
with fiscal agent 11,378,949 314,793 11,693,742
Total cash and investments $ 41,199,949 $ 5,879,092 $ 47,079,041 Cash and investments consisted of the following at June 30, 2025:
Cash and Investments:
Petty cash $ 8,000
Demand deposits 19,495,917
Restricted cash - demand deposits 455,254
Investments 27,119,870
Total cash and investments $ 47,079,041
A. Demand Deposits
The carrying amounts of the City’s demand deposits were $19,951,171 at June 30, 2025. Bank balances at that date were $20,079,858, 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.
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”).
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
59 Note 2 – Cash and Investments (Continued)
A. Demand Deposits (Continued)
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
Authorized Investment Type Maturity Portfolio* One Issuer* U.S. Treasury securities 5 years 80% None
U.S. agency and U.S. government sponsored
enterprise securities 5 years 80% None
Bankers' acceptance 180 days 40% 30%
Commercial paper 270 days 25% 10%
Negotiable certificate of deposit 5 years 30% None
Medium term notes 5 years 30% 5%
Money market mutual funds None 20% 10%
Local Agency Investment Fund (LAIF) None 100% 50 Million/account 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: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
60 Note 2 – Cash and Investments (Continued)
C. Fair Value Measurements
At June 30, 2025, 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, 2025:
Quoted Prices in
Active Markets for Significant Other
Identical Assets Observable Inputs
Investment Type Value (Level 1) (Level 2)
Investments:
U.S. Treasury bonds/notes $ 1,419,080 $ 1,419,080 $ -
U.S. government sponsored - -
enterprise securities - 3,179,055 3,179,055
Corporate notes and asset back securities - 1,557,867 1,557,867 Negotiable certificates of deposit - 1,979,575 1,979,575 Foreign notes - 40,437 40,437
Municipal Bonds - 523,393 523,393
Investments held with fiscal agents:
U.S. government agency bonds - 979,906 979,906
Total investments subject to fair value measurement 1,419,080 9,679,313 $ $ 8,260,233 Investments measured at amortized cost:
Local Agency Investment Fund (LAIF) 7,048,403
Money market funds 133,570
Investments held with fiscal agents:
Money market funds 10,258,584
Total investments $ 27,119,870
Fair Value Measurement
Level 2 investments are valued based on institutional bond quotes or matrix pricing.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
61 Note 2 – Cash and Investments (Continued)
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, 2025, 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 Investments:
U.S. Treasury bonds/notes $ 1,419,080 $ 379,055 $ 356,296 $ 243,146 $ 188,914 $ 251,669 U.S. government sponsored
enterprise securities 3,179,055 571,204 1,368,097 935,167 304,587 - Money market funds 133,570 133,570 - - - -
Corporate notes and asset back securities 1,557,867 51,281 307,849 644,355 332,014 222,368 Negotiable certificates of deposit 1,979,575 237,643 314,355 453,046 - 974,531 Municipal Bonds 523,393 408,768 - 114,625 - -
Foreign notes 40,437 - 15,131 - - 25,306
LAIF 7,048,403 7,048,403 - - - -
Investments with Fiscal Agent:
Money market funds 10,258,584 10,258,584
U.S. government agency bonds 979,906 270,333 463,905 - 245,668 - Total investments $ 27,119,870 $ 18,950,073 $ 3,234,401 $ 1,937,293 $ 1,278,561 $ 1,719,542 Investment Maturities (in Years)
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 Investments:
U.S. Treasury bonds/notes $ 1,419,080 None Aaa 9%
U.S. government sponsored
enterprise securities 3,179,055 None Aaa 20%
Money market funds 133,570 Aaa Aaa N/A
Corporate notes and asset back securities 1,557,867 AA Aaa/Aa/A 10% Negotiable certificates of deposit 1,979,575 None A1 12% Municipal Bonds 523,393 None A2 3%
Foreign notes 40,437 AA Aaa 0%
LAIF 7,048,403 None Not Rated 44%
Investments with Fiscal Agent:
Money market funds 10,258,584 N/A Aaa N/A
U.S. government agency bonds 979,906 N/A Aaa N/A
Total investments $ 27,119,870
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
62 Note 2 – Cash and Investments (Continued)
D. Risk Disclosures (Continued)
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, 2025 at amortized cost, which approximates fair value.
Note 3 – Notes Receivable
Notes receivable, which amounted to $3,334,172, is reported in the Housing Authority Special Revenue Fund as follows:
Housing Rehabilitation Loan Program $ 384,172
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 3,334,172 $
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, 2025 was $384,172.
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
63 Note 4 – Interfund Transactions
A. Due From/To Other Funds
At June 30, 2025, the City had the following short-term interfund receivable/payable:
Debt Service
Due To Other Funds General Fund Fund Total
Capital Improvement Capital Projects Fund $ 2,103,596 $ 935,145 $ 3,038,741 RCTC Loan Capital Projects Fund 1,527,220 - 1,527,220
Nonmajor Governmental Funds - 127,679 127,679
Total $ 2,231,275 $ 2,462,365 $ 4,693,640
Due From Other Funds
The interfund balances resulted from temporary reclassifications made at June 30, 2025 to cover cash shortfalls.
B. Transfers In/Out
For the year ended June 30, 2025, the City had the following transfers in/out which arise in the normal course of operations:
Capital
Public Safety Improvement RCTC
General Special Revenue Debt Service Capital Projects Capital Projects Nonmajor Transfers Out Fund Fund Fund Fund Fund Governmental Total General Fund $ - $ 9,067,466 $ 374,321 $ 700,000 $ 328,164 $ 1,461,572 $ 11,931,523 Capital Improvement Deposits
Special Revenue Fund - 100,000 - - - - 100,000
Debt Service Fund - - - 10,805,303 - - 10,805,303
Nonmajor Governmental Funds 195,405 - 322,168 - - - 517,573 Total $ 100,000 $ 9,262,871 $ 696,489 $ 328,164 11,505,303 $ $ 1,461,572 $ 23,354,399 Transfers In
The transfer of $9,067,466 from General Fund to the Public Safety Special Revenue Fund was to fund public safety expenditures in excess of available revenue. The transfers of $374,321 to the Debt Service Fund was to fund debt service payments. The transfers of $700,000 to the Capital Improvement Capital Projects Fund was to fund capital projects. The transfers of $328,164 to the RCTC Capital Projects Fund was to cover Storm Hilary project expenses not covered by federal grants. The transfers of $1,461,572 from General Fund to the Nonmajor Governmental Funds were budgeted transfers to provide funding for the operational expenditures of nonmajor special revenue funds.
The transfer of $100,000 from the Capital Improvement Deposits Special Revenue Fund 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 $10,805,303 from the Debt Service Fund to the Capital Improvements Fund was to fund capital projects.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
64 Note 4 – Interfund Transactions (Continued)
B. Transfers In/Out (Continued)
The transfers of $195,405 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.
Note 5 – Capital Assets
A summary of changes in the capital assets for the governmental activities for the year ended June 30, 2025 is as follows:
Balance Balance
July 1, 2024 Additions Deletions Transfers June 30, 2025 Nondepreciable assets:
Land $ 2,958,094 $ - $ - $ - $ 2,958,094
Construction in progress 18,521,974 12,261,947 (10,526,942) - 20,256,979 Total nondepreciable assets 21,480,068 12,261,947 (10,526,942) - 23,215,073 Depreciable assets:
Building and improvements 49,215,988 247,051 - (73,200) 49,389,839 Machinery and equipment 14,820,333 223,517 (399,792) 73,200 14,717,258 Vehicles 4,280,912 1,709,969 (429,445) 5,561,436 -
Infrastructure 50,382,186 644,306 10,526,942 - 61,553,434 Total capital assets, being depreciated 118,699,419 2,824,843 (829,237) 10,526,942 131,221,967 Less accumulated depreciation:
Building and improvements (17,294,328) (1,592,139) - 2,199 (18,884,268) Machinery and equipment (11,072,001) (727,370) 399,792 (2,199) (11,401,778) Vehicles (3,359,271) (541,610) 429,445 (3,471,436) -
Infrastructure (28,325,054) (2,802,091) - (31,127,145) - Total accumulated depreciation (60,050,654) (5,663,210) 829,237 (64,884,627) - Total depreciable assets, net 58,648,765 (2,838,367) 10,526,942 - 66,337,340 Intangible assets:
Right of use - leased vehicles 399,998 - - - 399,998
Right to use - subscription asset 533,038 - - - 533,038 Total intangible assets, being amortized 933,036 - - - 933,036 Less accumulated amortization:
Right of use - leased vehicles (57,255) (79,987) - - (137,242) Right to use - subscription asset (284,455) (168,405) - (452,860) Total accumulated amortization (341,710) (248,392) - - (590,102) Total amortizable assets, net 591,326 (248,392) - - 342,934 Governmental activities capital assets, net $ 80,720,159 $ 9,175,188 $ - $ - $ 89,895,347 Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
65 Note 5 – Capital Assets (Continued)
Depreciation and amortization expense was charged to functions/programs of governmental activities for the year ended June 30, 2025 as follows:
General government $ 2,912,761
Public safety 600,962
Public works 1,207,522
Culture and leisure 961,298
Internal service fund 229,059
Total depreciation expense $ 5,911,602
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, 2025 is as follows:
Balance
July 1, 2024 Balance Due within Due in more
(as restated) Additions Deletions June 30, 2025 One Year One Year 2020 Certificates of Participation $ 4,440,000 $ - $ (205,000) $ 4,235,000 $ 210,000 $ 4,025,000 Lease Revenue Bonds Series 2017A - 12,890,000 (345,000) 12,545,000 360,000 12,185,000 Lease Revenue Bonds Series 2018 - 6,180,000 (145,000) 6,035,000 150,000 5,885,000 Lease Revenue Bonds Series 2021A - 13,700,000 (240,000) 13,460,000 250,000 13,210,000 Taxable Lease Revenue Bonds
Series 2021A-T - 1,040,000 (100,000) 940,000 105,000 835,000 Subtotal - 38,250,000 (1,035,000) 37,215,000 1,075,000 36,140,000 Add/(less) deferred amounts:
Bond premium - 2017A - 136,512 (6,205) 130,307 6,205 124,102 Bond premium - 2018 - 237,252 (10,220) 227,032 10,220 216,812 Bond premium - 2021A - 217,658 (8,030) 209,628 8,030 201,598 Total bonds payable - 38,841,422 (1,059,455) 37,781,967 1,099,455 36,682,512 Santander finance purchase - 215,225 (184,058) 31,167 31,167 - RCTC Loan - 3,750,000 (3,750,000) - - -
Lease liabilities - 355,385 (69,782) 285,603 76,754 208,849 Subscription liabilities - 120,608 (120,608) - - -
Claims and judgments payable 636,696 444,753 (293,006) 788,443 394,221 394,222 Compensated absences 2,136,187 * 334,189 2,470,376 741,113 1,729,263 Pension-related debt 796,609 - (234,592) 562,017 241,043 320,974 Total $ 46,852,132 $ 778,942 $ (5,711,501) $ 41,919,573 $ 2,583,753 $ 39,335,820 * The change in the compensated absences liability is presented as a net change.
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 payments to the Authority, which are payable from Gas Tax revenues and Measure A receipts. The outstanding balance of the defeased 2012A Certificates at June 30, 2025 was $4,235,000.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
66 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
California Communities Transportation Revenue (Installment Sale) Certificates of Participation, Series 2020 (T.R.I.P. – Total Road Improvement Program) – Original Issue $5,310,000 (Continued) 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.
At June 30, 2025, the outstanding balance of the 2020 Certificates was $4,235,000. The annual debt service requirements on the 2020 Certificates are as follows:
Year Ending June 30, Principal Interest Total
2026 $ 210,000 $ 113,669 $ 323,669
2027 210,000 110,724 320,724
2028 210,000 107,360 317,360
2029 220,000 103,330 323,330
2030 220,000 98,888 318,888
2031-2035 1,190,000 414,830 1,604,830
2036-2040 1,365,000 234,107 1,599,107
2041-2042 610,000 29,790 639,790
Total $ 4,235,000 $ 1,212,698 $ 5,447,698
Lease Revenue Bonds, Series 2017A
In March 2017, the Desert Hot Springs Public Financing Authority (the “Authority”) issued the Lease Revenue Bonds, Series 2017A (the “Tax-Exempt Bonds”) in amount of $13,895,000. 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 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
67 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Lease Revenue Bonds, Series 2017A (Continued)
At June 30, 2025, the outstanding balance of the Tax-Exempt Bonds was $12,545,000. The annual debt service requirements on the Bonds are as follows:
Tax Exempt Bonds
Year Ending June 30, Principal Interest Total
2026 $ 360,000 $ 503,406 $ 863,406
2027 375,000 487,206 862,206
2028 395,000 470,331 865,331
2029 415,000 448,606 863,606
2030 440,000 423,706 863,706
2031-2035 2,440,000 1,882,788 4,322,788
2036-2040 2,935,000 1,393,613 4,328,613
2041-2045 3,555,000 763,800 4,318,800
2046-2047 1,630,000 98,400 1,728,400
Total $ 12,545,000 $ 6,471,856 $ 19,016,856
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, 2025, the outstanding balance of the 2018 bonds were $6,035,000. The annual debt service requirements on the 2018 bonds are as follows:
Year Ending June 30, Principal Interest Total
2026 $ 150,000 $ 262,356 $ 412,356
2027 160,000 254,856 414,856
2028 165,000 246,856 411,856
2029 175,000 238,606 413,606
2030 185,000 229,856 414,856
2031-2035 1,070,000 1,003,625 2,073,625
2036-2040 1,340,000 730,950 2,070,950
2041-2045 1,635,000 432,600 2,067,600
2046-2048 1,155,000 93,600 1,248,600
Total $ 6,035,000 $ 3,493,305 $ 9,528,305
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
68 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
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 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.
At June 30, 2025, the outstanding balance of the Tax-Exempt Bonds and the Taxable Bonds were $13,460,000 and $940,000, respectively. The annual debt service requirements on the Bonds are as follows:
Tax Exempt Bonds Taxable Bonds Total
Year Ending June 30, Principal Interest Principal Interest Interest 2026 $ 250,000 $ 406,513 $ 105,000 $ 32,900 $ 439,413
2027 265,000 396,513 105,000 29,225 425,738
2028 275,000 385,913 110,000 25,550 411,463
2029 280,000 374,913 115,000 21,700 396,613
2030 290,000 363,713 120,000 17,675 381,388
2031-2035 1,930,000 1,628,363 385,000 27,125 1,655,488
2036-2040 2,725,000 1,241,894 - - 1,241,894
2041-2045 3,785,000 974,138 - - 974,138
2046-2050 2,885,000 286,138 - - 286,138
2051 775,000 21,313 - - 21,313
Total $ 13,460,000 $ 6,079,411 $ 940,000 $ 154,175 $ 6,233,586 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
69 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Santander Purchase Financing Agreement (Continued)
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, 2025, the outstanding balance of the purchase financing agreement were $31,167. The annual debt service requirements on the purchase financing agreement are as follows:
Year Ending June 30, Principal Interest Total
2026 $ 31,167 $ 106 $ 31,273
RCTC Loan
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 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. The City shall receive two disbursements of $3,750,000 from the RCTC, the sum not to exceed $7,500,000. The loan is payable over a period of 2 years at an interest rate of 4%. This loan is to be repaid by the City immediately upon reimbursement of the Federal Highway Administration’s payment to the City. During the year ended June 30, 2025, the loan was fully paid off.
Lease Liabilities
On October 20, 2022, the City entered into a 61-month lease agreement with Enterprise Fleet Management for 4 vehicles. The City added 5 additional leased vehicles during the fiscal year 2023-2024, for a total of 8 vehicles.
Total monthly lease payment in the amount of $8,343. 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, 2025 was in the amount of $285,603.
Future lease payments under the lease payable are as follows:
Year Ending June 30, Principal Interest Total
2026 $ 76,754 $ 23,359 $ 100,113
2027 84,444 15,670 100,114
2028 82,829 7,346 90,175
2029 41,576 1,452 43,028
Total $ 285,603 $ 47,827 $ 333,430
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
70 Note 6 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Subscription Liabilities
As of June 30, 2025, the City had three active subscriptions. The subscriptions have payments that range from $58,532 to $65,000 and interest rates that range from 2.19 percent to 2.50 percent. During the year ended June 30, 2025, the subscription liabilities were fully paid off.
Claims and Judgments Payable
The claims and judgments payable at June 30, 2025 was in the amount of $788,443. 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 that is more likely than not to be paid at June 30, 2025 was in the amount of $2,470,376.
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.
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, 2025 totaled $562,017 for the Safety Plan. The future payment requirements are as follows:
Year Ending June 30, Safety Total
2026 $ 241,043 $ 241,043
2027 247,672 247,672
2028 73,302 73,302
Total $ 562,017 $ 562,017
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
71 Note 6 – Long-Term Liabilities (Continued)
B. Fiduciary Activities
A summary of changes in long-term liabilities for the fiduciary fund for the year ended June 30, 2025 is as follows:
Balance Balance Due within Due in more
July 1, 2024 Additions Deletions June 30, 2025 One Year One Year 2017 Tax Allocation Refunding Bonds $ 15,595,000 $ - $ (925,000) $ 14,670,000 $ 970,000 $ 13,700,000 Subtotal 15,595,000 - (925,000) 14,670,000 970,000 13,700,000 Add/(less) deferred amounts:
Bond premium - 2017 Tax
Allocation Refunding Bonds 1,461,232 - (96,360) 1,364,872 96,360 1,268,512 Total bonds payable 1,461,232 - (96,360) 1,364,872 96,360 1,268,512 Total $ 17,056,232 $ - $ (1,021,360) $ 16,034,872 $ 1,066,360 $ 14,968,512 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, 2025 was $14,670,000. The annual debt service requirements on these bonds are as follows:
Year Ending June 30, Principal Interest Total
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 1,105,000 462,638 1,567,638
2030 1,165,000 405,888 1,570,888
2031-2035 5,750,000 1,158,488 6,908,488
2036-2040 3,630,000 267,869 3,897,869
Total $ 14,670,000 $ 3,986,471 $ 18,656,471
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
72 Note 7 – Non-City Obligation Debt
Community Facilities District No. 2006-1 Tax Refunding Bonds, Series 2020 – Original Issue $2,600,000 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 $1,995,206. The bond proceeds, in conjunction with special tax collections, will be used to finance certain public facilities and development impact 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, 2025 was $1,599,606.
Community Facilities District No. 2006-1 Tax Refunding Bonds, Series 2023 – Original Issue $1,970,000 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 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. The outstanding balance for Improvement Area 1 Special Tax Bonds, Series 2023, at June 30, 2025 was $1,900,000.
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 $50,000 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 $100,000 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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
73 Note 8 – Risk Management (Continued)
A. Coverage (Continued)
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 $200,000,000 limit of coverage, including $2,500,000 for flood, with a $10,000 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. 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 $18,000,000 limit of coverage, with a $50,000 deductible per claim. The City’s deadly weapon response coverage with limits of $500,000 per occurrence and $2,500,000 in the aggregate, with a $10,000 deductible per event. 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.
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, 2025, the amount of these liabilities was $788,443 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 Incurred
Ended Beginning during the Claims Ending
June 30, Balance Fiscal Year Payments Balance
2023 $ 581,380 $ 39,484 $ (250,982) $ 369,882
2024 369,882 617,411 (350,597) 636,696
2025 636,696 444,753 (293,006) 788,443
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
74 Note 9 – Defined Benefit Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Employees Covered by Benefit Terms
At valuation date of June 30, 2023, the following employees were covered by the benefit terms:
Classic 2nd Tier PEPRA Classic 2nd Tier PEPRA
Active employees 11 11 65 2 3 23
Transferred and terminated employees 17 2 14 17 5 7
Separated 30 4 26 12 - 11
Retired Employees and Beneficiaries 59 2 6 71 1 5
Total 117 19 111 102 9 46
Miscellaneous Plans Safety Police Plans
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
75 Note 9 – Defined Benefit Pension Plan (Continued)
A. General Information about the Pension Plan (Continued) Benefit Provided (Continued)
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 percent.
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, 2024, the contribution rates were as follows:
Required employee Required employer
contribution rates contribution rates
Miscellaneous Plan Rate 8.00% 15.95%
Miscellaneous Plan Rate 2nd Tier 7.00% 10.10%
PEPRA Miscellaneous Plan Rate 7.75% 7.68%
Safety Plan Rate 9.00% 30.32%
Safety Plan Rate 2nd Tier 9.00% 26.44%
PERPA Safety Plan Rate 15.75% 15.58%
Cost-sharing Rate Plans
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
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
Actuarial Methods and Assumptions Used to Determine Total Pension Liability The June 30, 2023 valuation was rolled forward to determine June 30, 2024 total pension liability based on the following actuarial methods and assumptions:
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate 6.90%
Price Inflation Salary Increases 2.30%
Salary Increases
Mortality Rate Table1
Post Retirement Benefit Increase The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter
Entry Age Actuarial Cost Method
Varies by Entry Age and Service
Derived using CalPERS’ Membership Data for all Funds
1The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website.
Change of Assumption
In 2024, there were no changes in assumptions.
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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
77 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)
Long-term Expected Rate of Return (Continued)
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.
Discount Rate
The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, 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 periods of projected benefit payments to determine the total pension liability.
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%)
Miscellaneous $ 7,439,461 $ 4,496,445 $ 2,073,910
Safety $ 17,083,283 $ 11,310,693 $ 6,589,525
Plan's Net Pension Liability/(Asset)
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
78 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)
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 Plan Fiduciary Net Pension
Pension Liability Net Position Liability/(Asset)
Miscellaneous
Balance at: 6/30/23 (Valuation date) $ 20,013,232 $ 15,373,357 $ 4,639,875 Balance at: 6/30/24 (Measurement date) 21,809,747 17,313,302 4,496,445 Net Changes during 2023-2024 1,796,515 1,939,945 (143,430) Safety
Balance at: 6/30/23 (Valuation date) $ 40,351,099 $ 28,706,394 $ 11,644,705 Balance at: 6/30/24 (Measurement date) 42,259,380 30,948,687 11,310,693 Net Changes during 2023-2024 1,908,281 2,242,293 (334,012) Increase (Decrease)
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, 2023). 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, 2024). 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, 2024 less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2023-2024).
(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.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
79 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) (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, 2023 0.03719% 0.09334%
June 30, 2024 0.03708% 0.09327%
Change - Increase (Decrease) -0.00012% -0.00008%
The amortization period differs depending on the source of the gain or loss. 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 2023-2024 measurement period is 3.8 years, which was obtained by dividing the total service years of 630,177 (the sum of remaining service lifetimes of the active employees) by 166,163 (the total number of participants: active, inactive, and retired). Inactive employees and retirees have remaining service lifetimes equal to 0. Total future service is based on the members’ probability of decrementing due to an event other than receiving a cash refund.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
80 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) For the year ended June 30, 2025, the City recognized pension credit for the miscellaneous plan in the amount of $53,255 credit and pension expense for the safety plan in the amount of $2,352,644. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred outflows Deferred inflows Deferred outflows Deferred inflows of Resources of Resources of Resources of Resources
Contribution after measurement date $ 466,313 $ - $ 1,234,134 $ - Changes of assumptions - 115,569 278,672 -
Difference between expected and actual
experience (15,170) 388,758 923,055 (30,012)
Difference between projected and actual
earning on pension plan investments - 258,856 546,707 - Differences in proportions (1,459,605) - 46,942 (169,975) Difference between City contributions and
proportionate share of contributions - 223,447 526,446 (94,606) Total $ 1,452,943 $ (1,474,775) $ 3,555,956 $ (294,593) Miscellaneous Safety
Deferred outflows of resources related to pensions resulting from the City’s contributions made subsequent to the measurement date in the amount of $466,313 and $1,234,134 for the miscellaneous and safety plans, respectively, will be recognized as a reduction of the collective net pension liability in the year ending June 30, 2026. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:
Measurement Period
Ended June 30, Miscellaneous Safety
2025 $ (630,510) $ 770,642
2026 211,050 1,388,250
2027 20,020 55,395
2028 (88,705) (187,058)
2029 - -
Thereafter - -
$ (488,145) $ 2,027,229
Deferred Outflows/ (Inflows) of Resources
Note 10 – Classification of Fund Balances
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 City Council also designated a reserve for future capital use of 5% of General Fund budgeted operational appropriations.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
81 Note 10 – Classification of Fund Balances (Continued) The City Council adopted resolution No. 2015-050 to commit 25% of cannabis tax revenue for the emergency reserve capped at 17% of the Consolidated General Fund’s annual appropriation. 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.
The assigned fund balance totaling $938,290 is being held in the General Fund to fund the operations of the City for the fiscal year ending 2024 -2025. 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.
At June 30, 2025, fund balances are classified as follows:
Capital
General Public American Housing Improvement
Fund Safety Rescue Act Authority Deposits
Nonspendable:
Prepaid items $ 112,357 $ 51,849 $ - $ - $ -
Total restricted 112,357 51,849 - - -
Restricted:
Furbee settlement 455,254 - - - -
Housing and economic
development - - 5,926,996 - -
Public safety - 218,837 - - -
Public works/projects - - - 8,055,980 -
Culture and leisure - - - - -
Debt service - - - - -
Lighting/landscaping/drainage - - - - -
Assessment district 91-1 - - - - -
Total restricted 455,254 218,837 - 5,926,996 8,055,980
Committed:
Natural or fiscal emergency 2,339,708 - - - -
Reserve for future capital use 779,903 - - - -
Art in public places - - - - -
Cabot's museum - - - - -
Emergency reserve 1,045,116 - - - -
Capital projects - - - - -
Total committed 4,164,727 - - - -
Assigned:
Operations 938,290 - - - -
Total assigned 938,290 - - - -
Unassigned (deficit) 2,604,444 (4,646) - - -
Total fund balances $ 8,275,072 $ 47,203 $ 218,837 $ 5,926,996 $ 8,055,980 (Continued)
Special Revenue Funds
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
82 Note 10 – Classification of Fund Balances (Continued) Debt Service Capital Governmental
Fund Improvement RCTC Loan Funds Total
Nonspendable:
Prepaid items $ - $ - $ - $ - $ 164,206
Total restricted - - - 164,206 -
Restricted:
Furbee settlement - - - 455,254 -
Housing and economic
development - - - 6,495 5,933,491
Public safety - - 251,387 - 470,224
Public works/projects - - 2,914,758 - 10,970,738
Culture and leisure - - 1,655,542 - 1,655,542
Debt service 7,707,652 - - 7,707,652 -
Lighting/Landscaping/Drainage - - 1,806,018 - 1,806,018 Assessment District 91-1 - - 126,861 - 126,861
Total restricted 7,707,652 - 6,761,061 - 29,125,780
Committed:
Natural or Fiscal Emergency - - - 2,339,708 -
Reserve for Future Capital Use - - - 779,903 -
Art in public places - - 455,443 - 455,443
Cabot's Museum - - 86,849 - 86,849
Emergency Reserve - - - 1,045,116 -
Capital projects 756,107 - - 756,107 -
Total committed 756,107 - 542,292 - 5,463,126
Assigned:
Operations - - - 938,290 -
Total assigned - - - 938,290 -
Unassigned (deficit) - (1,528,446) - 1,071,352 -
Total fund balances $ 7,707,652 $ 756,107 $ (1,528,446) $ 7,303,353 $ 36,762,754 (Concluded)
Capital Projects Funds
Note 11 – Net Investments in Capital Assets
The net investment in capital assets for governmental activities is calculation as follows:
Governmental
Activities
Total capital assets, net $ 89,895,347
Unspent capital debt proceed 8,514,232
Deferred loss on refunding debt 299,894
Capital related debt (38,098,737)
Net investment in capital assets $ 60,610,736
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
83 Note 12 – 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. 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 13 – Individual Fund Disclosure
Fund with deficit fund balances at June 30, 2025 are as follows:
Deficit
RCTC Loan Capital Projects Fund $ (1,528,446)
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, 2025.
Expenditures
in Excess of
Appropriations Expenditures Appropriations
Debt Service Fund $ 2,398,894 $ 2,514,146 $ (115,252)
RCTC Loan Capital Projects Fund 3,758,010 47,295 (3,710,715) Nonmajor Governmental Funds:
Special Gas Tax Special Revenue Fund 744,966 679,470 (65,496) Air Quality Control Special Revenue Fund 43,374 35,730 (7,644) Abandoned Vehicle Abatement Special Revenue Fund 42,806 41,000 (1,806) Department of Cannabis Control Special Revenue Fund 251,880 - (251,880) Note 14 – Subsequent Event
On June 2, 2026, the City Council authorized the issuance of Community Facilities District No. 2025-1 Improvement Area No. 1 Special Tax Bonds, Series 2026, in an amount not to exceed $10 million to finance public improvements within the District. The bonds are payable solely from special taxes levied within the District and are not a general obligation of the City.
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
84 Note 15 – Restatements
During fiscal year 2025, changes in accounting principle restatements and error corrections of beginning net position and fund net position are as follows:
June 30, 2024 Changes Within the
As Previously Financial Reporting GASB 101 June 30, 2024 Reported Entity Implementation Error Corrections As Restated Government-Wide
Governmental Activities $ 71,463,272 $ - $ (541,135) $ - $ 70,922,137 Governmental Funds:
Major Funds:
General Fund $ 7,498,561 $ - $ - $ - $ 7,498,561
Pulic Safety Special
Revenue Fund 107,835 - - - 107,835
American Rescue Act Special
Revenue Fund 125,608 - - - 125,608
Housing Authority Special
Revenue Fund 6,051,763 - - 6,051,763 -
Capital Improvement Deposits
Special Revenue Fund 2,384,934 - - 2,384,934 -
Debt Service Fund 17,752,431 - - 17,752,431 -
Capital Improvement
Capital Projects Fund (1,659,126) - - (1,659,126) -
RCTC Loan Capital
Projects Fund (2,918,682) - - (658,820) (3,577,502)
Nonmajor Funds 8,347,600 (2,384,934) - 5,962,666 -
Total Governmental Funds $ 35,305,990 $ - $ - $ (658,820) $ 34,647,170 Changes Within the Financial Reporting Entity
The Capital Improvement Deposits Special Revenue Fund changed from a Nonmajor Fund to a Major Fund (2,384,934).
Implementation of GASB Statement No. 101, Compensated Absences Effective for the fiscal year ended June 30, 2025, the City implemented GASB Statement No. 101, Compensated Absences. This statement establishes accounting and financial reporting standards for compensated absences, including vacation, sick leave, and other paid time off. The implementation of GASB 101 resulted in a change in accounting principle, and prior year amounts have been restated accordingly.
Under GASB 101, a liability must be recognized for leave that is attributable to services already rendered, accumulates and carries forward to future periods, and is more likely than not to be used or paid. This represents a shift from previous guidance, particularly in how likelihood and eligibility are assessed.
The Governmental Activities beginning balance is restated in the amount of ($541,135).
Item Number: 9.
City of Desert Hot Springs
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
85 Note 15 – Restatements (Continued)
Error Corrections
The RCTC Loan Capital Projects Fund was restated by $658,820 to correct prior year expenses that were previously recorded in the American Rescue Act Special Revenue Fund. The correction also resulted in correcting accounts receivable and unavailable revenue in the same account. Therefore, this adjustment does not impact the beginning net position of the Governmental Activities.
Item Number: 9.